March 24, 2009 City Council Special Workshop Meeting 6:00 p.m. City Council Regular Meeting 7:00 p.m.

Transcription

1 March 24, 2009 City Council Special Workshop Meeting 6:00 p.m. City Council Regular Meeting 7:00 p.m.

2 COUNCIL WORKSHOP

3 Julie Masters, Mayor Charles Suderman Mary Dunbaugh Walter Wilson AGENDA City of Dickinson CITY COUNCIL SPECIAL WORKSHOP MEETING MARCH 24, 2009 Kerry Neves Louis Decker William H. King III, Mayor Pro Tem Julie M. Johnston, City Administrator NOTICE is hereby given of a SPECIAL WORKSHOP MEETING of the City Council for the City of Dickinson, County of Galveston, State of Texas, to be held on TUESDAY, MARCH 24, 2009, at 6:00 p.m. at: 1621 FM 517 East, Dickinson, Texas for the purpose of considering the following numbered items. The City Council of the City of Dickinson, Texas, reserves the right to meet in a closed session on any of the below items should the need arise and if applicable pursuant to authorization by Title 5, Chapter 551, of the Texas Government Code. ITEM 1.) CALL TO ORDER AND CERTIFICATION OF A QUORUM ITEM 2.) BRIEFING AND DISCUSSION CONCERNING: City Administrator s Briefing A. DISD Projects B. Development Projects C. Status of FY Audit D. Update on FEMA Reimbursements E. Review of FY Budgeted Revenues F. Budget Process for FY G. Grant Opportunities H. Final Product of The Economic Report ITEM 3.) ITEM 4.) BRIEFING AND DISCUSSION CONCERNING: Issues Related to Methods of Issuance of Public Securities by the City of Dickinson and Securities and Accounting Laws, Rules and Regulations Applicable thereto. ADJOURN CERTIFICATION This is to certify that a copy of the Notice of the City Council Workshop Meeting for TUESDAY, MARCH 24, 2009, was posted on the bulletin board at City Hall, 1621 FM 517 East, Dickinson, Texas, on this 19 th day of March, 2009, prior to 6:00 p.m. Carol L. McLemore, City Secretary In compliance with the Americans with Disabilities Act, the City of Dickinson will provide reasonable accommodations for disabled persons attending City Council Meetings. Requests should be received at least 24 hours prior to the scheduled meeting, by contacting the City Secretary s office at , or by FAX at March 24, 2009 City Council Workshop Page 1 of 1

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5 CITY OF DICKINSON, TEXAS CITY COUNCIL MEETING ATTENDANCE LIST MEETING DATE: MARCH 24, 2009 Workshop Meeting MAYOR/COUNCIL PRESENT ABSENT MAYOR JULIE MASTERS POS. 1: COUNCILMAN CHARLES SUDERMAN POS. 2: COUNCILWOMAN MARY DUNBAUGH POS. 3: COUNCILMAN WALTER WILSON POS. 4: COUNCILMAN KERRY NEVES POS. 5: COUNCILMAN LOUIS DECKER POS. 6: COUNCILMAN WILLIAM KING MAKE NOTE ON RECORDING: THE FOLLOWING ALSO ARE IN ATTENDANCE: ATTORNEY, Loren B. Smith CITY ADMINISTRATOR, Julie M. Johnston CITY SECRETARY, Carol L. McLemore

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7 ITEM 2 NOTES:

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11 Texas Municipal Reports All Rights Reserved FINANCIAL STATEMENT (As of December 31, 2007) Taxable Assessed Valuation, 2007 (100% of Market) $728,877,643* Total General Obligation Debt $11,854,000 Less: Self-Supporting Galveston WC & ID #1 952,295 Economic Development 703, GO Debt payable from Ad Valorem Taxes $10,198,619 Less: I&S Fund 1,977, Net Debt $8,221,613 ================== *Excludes $922,111 under review. Net Debt Per Net Assessed Valuation % Net Debt Per Sq mile - $548, Net Debt Per Capita - $ Net Assessed Valuation Per Capita - $40, Bureau of Census Pop: ,497; , Estimated Population - 17,898 Area: Sq miles PAYMENT RECORD Never defaulted. TAX DATA Tax Assessed Tax % Collections Year Year Valuation Rate Current Total Ended 2002 $533,558,204 $ /30/ ,039, /30/ ,231, /30/ ,454, /30/ ,359, /30/ ,877,643* (In process of collection) *Excludes $922,111 under review. Dickinson, City of (General Obligation Debt) Galveston County Tax Rate Distribution Operations $ $ $ $ I&S Totals $ $ $ $ Tax Rate Limitation: Article XI, Section 5 of Texas Constitution, applicable to cities of more than 5,000 population: $2.50 per $100 assessed valuation. City operates under a Home Rule Charter which adopts constitutional provisions. Municipal Sales Tax: The City has adopted the provisions of Article 1066c, VACS, Section 9. In addition some cities are subject to a property tax relief and/or an economic and industrial development tax. 1/2 of 1% increase effective October 1, 1999 for Dickinson Economic Development Corporation (4B). Net collections on calendar year basis are as follows: ,822, DETAILS OF GENERAL OBLIGATION DEBT Last Revised 07/09/2008 TMR # 1411 Page 1 of 5 Comb Tax & Rev C/O Ser 2000 Tax Treatment: BQ Original Issue Amount $3,000,000 Dated Date: 07/01/2000 Sale Date: 07/11/2000 Delivery Date: 08/09/2000 Sale Type: Competitive TIC: % Record Date: MSRB Bond Form: BE Denomination $5,000 Interest pays Semi-Annually: 09/01, 03/01 1st Coupon Date: 03/01/2001 Paying Agent: The Bank of New York Mellon Trust Company, N.A., Dallas, TX Bond Counsel: Mayor, Day, Caldwell & Keeton Financial Advisor: First Southwest Company, Houston, TX Lead Manager: Dain Rauscher Incorporated Joint Manager: PaineWebber Incorporated Joint Manager: Salomon Smith Barney Insurance: FGIC Use of Proceeds: Equipment, Police Station, Streets. Economic Development 27.79% Outstanding 12/31/2007 Call Option: Bonds maturing on 03/01/2010 to 03/01/2018 and 03/01/2020 callable in whole or in part on any date beginning par. The following term bonds are subject to mandatory sinking fund redemption each par as follows: Mty 03/01/2020: 255M-03/01/2019; 270M matures 03/01/2020. Security : Limited Tax and a Subordinate lien on the Surplus revenues of the Solid Waste Disposal system not to exceed $1,000 Orig Reoffering Maturity Amount Coupon Price/Yield 03/01/ , % 4.900% 03/01/ , % 4.950% 03/01/ , % % 03/01/ , % 5.050% 03/01/ , % 5.150% 03/01/ , % 5.250% 03/01/ , % 5.300% 03/01/ , % 5.375% 03/01/ , % 5.450% 03/01/ , % 5.500% 03/01/ , % 5.550% 03/01/2020T 525, % 5.600% $2,530,000 Term bonds maturing on 03/01/2020: Mandatory Redemption Date Principal Amount 03/01/2019 $255,000 03/01/2020 $270,000 Calendar Total % of Ad Val Equiv of Ad Year Rate Collected Tax Levy Val Tax Rate % $4,121, % $ ,560, ,107, Tax Notes Ser 2003 Tax Treatment: BQ Original Issue Amount $329,000 Dated Date: 05/15/2003 Sale Date: 05/13/2003 Delivery Date: 06/12/2003 DISCLAIMER. This Texas Municipal Report ("TMR") was prepared by employees of the Municipal Advisory Council of Texas ("MAC") for informational purposes only, and is not intended to be, and should not be considered as, a recommendation, endorsement or solicitation to buy or sell any security of the issuer to which it applies. The information set forth in this TMR has been obtained from the issuer and from sources believed to be reliable, but the MAC has not independently verified such information. The MAC specifically disclaims any responsibility for, and makes no representations, warranties or guarantees about, the completeness or accuracy of such information. In this connection, this TMR reflects information as of the date referred to in the TMR, as derived from filings received by the MAC from the issuer. This TMR will be updated in the ordinary course as filings are received from the issuer, but the MAC specifically disclaims any responsiblity for doing so. The reader of this TMR is advised to obtain current information from other sources before making any investment decision respecting the securities of this issuer.

12 Texas Municipal Reports All Rights Reserved Sale Type: Private Placement Record Date: OTHER Bond Form: FR Denomination $5,000 Interest pays Annually: 05/20, 05/20 1st Coupon Date: 05/20/2004 Paying Agent: MAXIM Bank, Dickinson, TX Bond Counsel: Andrews & Kurth Lead Manager: Local Bank Use of Proceeds: Public Works, Equipment, Building, Right of Way, Land Purchase, Vehicles. Call Option: Non Callable Orig Reoffering Maturity Amount Coupon Price/Yield 05/20/ , % N/A $29,000 Comb Tax & Rev C/O Ser 2006 Tax Treatment: BQ Original Issue Amount $2,830,000 Dated Date: 11/15/2006 Sale Date: 10/24/2006 Delivery Date: 11/30/2006 Sale Type: Competitive TIC: % Record Date: MSRB Bond Form: BE Denomination $5,000 Interest pays Semi-Annually: 09/01, 03/01 1st Coupon Date: 03/01/2007 Paying Agent: The Bank of New York Mellon Trust Company, N.A., Dallas, TX Bond Counsel: Andrews Kurth L.L.P. Financial Advisor: First Southwest Company, Houston, TX Lead Manager: Morgan Keegan & Co., Inc. Insurance: CIFG Dickinson, City of (General Obligation Debt) Galveston County Use of Proceeds: Fire Station, Public Facility. Call Option: Bonds maturing on 03/01/2016 and 03/01/2018 and 03/01/2021 and 03/01/2024 and 03/01/2027 callable in whole or in part on any date beginning par. The following term bonds are subject to mandatory sinking fund redemption each par as follows: Mty 03/01/2018: 130M-03/01/2017; 140M matures 03/01/2018. Mty 03/01/2021: 145M-03/01/2019; 155M-03/01/2020; 160M matures 03/01/2021. Mty 03/01/2024: 170M-03/01/2022; 180M-03/01/2023; 185M matures 03/01/2024. Mty 03/01/2027: 195M-03/01/2025; 205M-03/01/2026; 220M matures 03/01/2027. Security : Limited Tax and a subordinate lien on the net revenues of the Solid Waste Management System not to exceed $1,000 Orig Reoffering Maturity Amount Coupon Price/Yield 03/01/ , % 3.600% 03/01/ , % 3.625% 03/01/ , % 3.650% 03/01/ , % 3.700% 03/01/ , % 3.750% 03/01/ , % 3.800% 03/01/ , % 3.850% 03/01/ , % 3.900% Term bonds maturing on 03/01/2024: Mandatory Redemption Date Principal Amount 03/01/2022 $170,000 03/01/2023 $180,000 03/01/2024 $185,000 Term bonds maturing on 03/01/2027: Mandatory Redemption Date Principal Amount 03/01/2025 $195,000 03/01/2026 $205,000 03/01/2027 $220,000 Last Revised 07/09/2008 TMR # 1411 Page 2 of 5 03/01/ , % 3.950% 03/01/2018T 270, % 3.950% 03/01/2021T 460, % 4.050% 03/01/2024T 535, % 4.100% 03/01/2027T 620, % 4.150% $2,830,000 Term bonds maturing on 03/01/2018: Mandatory Redemption Date Principal Amount 03/01/2017 $130,000 03/01/2018 $140,000 Term bonds maturing on 03/01/2021: Mandatory Redemption Date Principal Amount 03/01/2019 $145,000 03/01/2020 $155,000 03/01/2021 $160,000 C/O Ser 2007 Tax Treatment: BQ Original Issue Amount $6,465,000 Dated Date: 05/15/2007 Sale Date: 05/08/2007 Delivery Date: 05/24/2007 Sale Type: Competitive TIC: % Record Date: MSRB Bond Form: BE Denomination $5, Interest pays Semi-Annually: 03/01, 09/01 1st Coupon Date: 09/01/2007 Paying Agent: The Bank of New York Mellon Trust Company, N.A., Houston, TX Bond Counsel: Andrews Kurth L.L.P. Financial Advisor: First Southwest Company, Houston, TX Lead Manager: Stifel Nicolaus & Company, Inc. Insurance: CIFG Use of Proceeds: Library. Other 14.73% Call Option: Bonds maturing on 03/01/2016 to 03/01/2024 and 03/01/2027 callable in whole or in part on any date beginning par. The following term bonds are subject to mandatory sinking fund redemption each par as follows: Mty 03/01/2027: 450M-03/01/2025; 475M-03/01/2026; 500M matures 03/01/2027. Security : Limited Tax and a Subordinate lien on the Net revenues of the Solid Waste Disposal system not to exceed $1,000 Orig Reoffering Maturity Amount Coupon Price/Yield DISCLAIMER. This Texas Municipal Report ("TMR") was prepared by employees of the Municipal Advisory Council of Texas ("MAC") for informational purposes only, and is not intended to be, and should not be considered as, a recommendation, endorsement or solicitation to buy or sell any security of the issuer to which it applies. The information set forth in this TMR has been obtained from the issuer and from sources believed to be reliable, but the MAC has not independently verified such information. The MAC specifically disclaims any responsibility for, and makes no representations, warranties or guarantees about, the completeness or accuracy of such information. In this connection, this TMR reflects information as of the date referred to in the TMR, as derived from filings received by the MAC from the issuer. This TMR will be updated in the ordinary course as filings are received from the issuer, but the MAC specifically disclaims any responsiblity for doing so. The reader of this TMR is advised to obtain current information from other sources before making any investment decision respecting the securities of this issuer.

13 Texas Municipal Reports All Rights Reserved 03/01/ , % 3.600% 03/01/ , % 3.600% 03/01/ , % 3.600% 03/01/ , % 3.600% 03/01/ , % 3.600% 03/01/ , % 3.620% 03/01/ , % 3.650% 03/01/ , % 3.680% 03/01/ , % 3.730% 03/01/ , % % 03/01/ , % % 03/01/ , % % 03/01/ , % % 03/01/ , % % 03/01/ , % 3.980% 03/01/ , % % 03/01/ , % 4.020% 03/01/2027T 1,425, % 4.060% $6,465,000 Term bonds maturing on 03/01/2027: Mandatory Redemption Date Principal Amount 03/01/2025 $450,000 03/01/2026 $475,000 03/01/2027 $500,000 GRAND TOTAL================================> $11,854,000 BOND DEBT SERVICE Period Ending Principal Interest Debt Service /30/ , , , /30/ , , , /30/ , , , /30/ , , , /30/ , , , /30/ , , , /30/ , , , /30/ , , , /30/ , , , /30/ , , , /30/ , , , /30/ , , , /30/ , , , /30/ , , , /30/ , , , /30/ , , , /30/ , , , /30/ , , , /30/ , , , /30/ , , , ,854, ,374, ,228, ============================================================= COMPUTED ON BASIS OF MANDATORY REDEMPTION DEBT SERVICE FUND MANAGEMENT INDEX Dickinson, City of (General Obligation Debt) Galveston County G.O. Debt Service Requirements for fiscal year-ending 09/30/2007 $500,638 I&S Fds all G.O. issues 09/30/2006 $1,373,034* 2006 I&S Fund Tax 90% 642,759 Economic Development 73,126 Galveston County WC & ID #1 66,286 SELF SUPPORTING DEBT Last Revised 07/09/2008 TMR # 1411 Page 3 of 5 *Excludes $977,205 from Dickinson Economic Development Corporation. The September 30, 2007 Audit reports the following General Obligation Debt being paid from revenues other than ad valorem taxes; thus considered self-supporting. Source Amount of Debt Other $952,295 Economic Development $703,087 STATEMENT OF REVENUES AND EXPENDITURES - ECONOMIC DEVELOPMENT CORPORATION Fiscal Year Ended Revenues: Sales Taxes $1,583,863 $1,663,762 $1,520,058 $1,332,946 Other Total $1,584,588 $1,663,762 $1,520,058 $1,332,946 Expenditures $1,924,489 $1,243,738 $1,049,454 $883,628 Available For Debt Service ($339,901) $420,024 $470,604 $449,318 Transfer to I&S Fund $ 0 $ (73,013) $ (73,013) $ (76,103) Beginning Bal 10/1 $2,143,939 $1,796,928 $1,399,337 $1,026,122 Ending Bal 9/30 $1,804,038 $2,143,939 $1,796,928 $1,399,337 GENERAL OBLIGATION BONDS AUTHORIZED BUT UNISSUED None PENSION FUND LIABILITY All qualified employees of the City are members of the Texas Municipal Retirement System. The City employees also participate in the U.S. Social Security program. Changes in Texas Municipal Retirement System (TMRS) Actuarial Method and Plan Assumptions In early 2007, TMRS informed each of the member cities that the current actuarial assumptions did not take into account updated service credits or cost of living increases which are granted to retirees. These benefits, which some cities adopted, have been historically funded on a pay-as-you-go basis. This has led to regular increases in member cities' rates and a decrease in the overall funding of the retirement system. TMRS announced that it intended to study the impact of these benefit components and make potential changes in the way benefits are being funded. After careful deliberation, the TMRS board approved several changes at its November and December meetings to the actuarial methods and plan assumptions. The board changed the actuarial method from unit credit to projected unit credit. Projected unit credit will allow the actuaries to consider the future financial impact of updated service credits and cost of living increases, and these benefits will begin to be pre-funded instead of funded on a pay-as-you-go basis. To mitigate the impact of this change, the board approved an eight year transition period. During this time, cities will be able to phase in the higher contribution rates instead of being required to fund these new rates immediately. Also, the board changed the amortization period from a 25-year open period to a 30-year closed period. Under a closed amortization period, contribution rates are higher, but a greater percentage of the unfunded balance is paid off each year. Finally, the board approved changes to the investment DISCLAIMER. This Texas Municipal Report ("TMR") was prepared by employees of the Municipal Advisory Council of Texas ("MAC") for informational purposes only, and is not intended to be, and should not be considered as, a recommendation, endorsement or solicitation to buy or sell any security of the issuer to which it applies. The information set forth in this TMR has been obtained from the issuer and from sources believed to be reliable, but the MAC has not independently verified such information. The MAC specifically disclaims any responsibility for, and makes no representations, warranties or guarantees about, the completeness or accuracy of such information. In this connection, this TMR reflects information as of the date referred to in the TMR, as derived from filings received by the MAC from the issuer. This TMR will be updated in the ordinary course as filings are received from the issuer, but the MAC specifically disclaims any responsiblity for doing so. The reader of this TMR is advised to obtain current information from other sources before making any investment decision respecting the securities of this issuer.

14 Texas Municipal Reports All Rights Reserved policy. TMRS has historically invested solely in fixed income investments. The board authorized the selection of an investment advisor to begin shifting a portion of investments into equity securities as a way to diversify the portfolio's holdings and earn higher returns than could be obtained with fixed income investments. TMRS will inform member cities of the financial impact of these changes in 2008 after completing its annual actuarial study of the plan. Contribution Rates (Percentage of gross covered salary) Employee: 7.00% 7.00% City: 9.27% 10.41% Actuarial Valuation as of 12/31/ /31/2006 Assets $4,985,075 $4,337,298 Accrued Liabilities $5,773,023 $5,009, Unfunded Liab. ($787,948) ($671,819) Funded Ratio 86.35% 86.59% Annual Covered Payroll N/A $2,709,123 Unfunded/Overfunded Liability as a % of Covered Payroll N/A 24.80% 2007 Source: Texas Municipal Retirement System 12/31/2007 CAFR 2006 Source: City of Dickinson 09/30/2007 Audit NON-FUNDED DEBT PAYABLE (As of September 30, 2007) The City reports additional debt in the principal amount of $61,755 under Emergency Medical Services and $518,132 under Govt Activities as follows: Amount Next Year's Reported Outstanding Requirements Under Capital Leases $61,755 $22,058 Emergency Medical Services Capital Leases 63,734 58,164 Govt Activities Compensated Absences 454,398 N/A Govt Activities ESTIMATED OVERLAPPING DEBT STATEMENT Net Debt Amount Taxing Body Amount As Of %Ovlpg Ovlpg Dickinson ISD 158,926,039 08/31/ ,692,470 Galveston Co 203,837,744 09/30/ ,010,823 Galveston WC&ID # 1 7,963,149 * 06/30/ ,226,386 Santa Fe ISD 13,870,255 08/31/ , Total Net Overlapping Debt: $61,219,568 Dickinson, City of 12/31/07 $9,173, Total Direct and Overlapping Debt: $70,393,475 Total Direct and Overlapping Debt % of A.V.: 9.66% Total Direct and Overlapping Debt % of Capita: $3,933 * Gross Debt ECONOMIC BACKGROUND Dickinson, City of (General Obligation Debt) Galveston County The City of Dickinson is located in Galveston County, 30 miles south of Houston, 20 miles north of Galveston and 10 miles south of Johnson Space Center, off of IH-45 and FM 517. The 2000 census population was 17,093, a 71.84% increase since FINANCE CONNECTED OFFICIALS Mayor Julie Masters 1621 FM 517 East Dickinson, Tx Last Revised 07/09/2008 TMR # 1411 Page 4 of 5 County Characteristics: Galveston County is located on the Gulf Coast and is traversed by I-45, State Highways 3, 6, and 146, and four farm-to-market roads. The economy is based on manufacturing, shipping, mineral production, tourism, and commercial fishing. The Texas Almanac designates rice, cattle, aquaculture, soybeans and corn as principal sources of agricultural income. The county seat is Galveston. Retail sales in 2005 totaled $2.58 billion. The 2000 census for the County was 250,158, an increase of 15.1% since The total 2005 Effective Buying Income was $5.56 billion.* A total of 78.1% of the households had Effective Buying Incomes in excess of $20,000, while 21.9% had incomes below $20,000.* The median income per household was $41,498, compared with the State median of $38,804.* The Texas Employment Commission reports 97,815 persons employed, earning $1 billion during the fourth quarter of Minerals produced in the County include oil, gas, clays, sand, and gravel. Texas A&M at Galveston, Galveston College, University of Texas Medical Branch, and College of the Mainland had a combined 2007 fall enrollment of 9,700. Combined, Galveston and Texas City ports handled 58.2 million tons of cargo in Galveston Island State Park attracted 217,747 visitors during the 2001 season. The County is home to Gulf Greyhound Park, a "World Class" greyhound race track completed in November 1992 at a cost of $45 million. The La Marque track is the largest in the nation based on the wagering handle. The capacity is approximately 15,200 patrons with seating for 8,100 patrons. Any data on population, value added by manufacturing or production of minerals or agricultural products are from US Census or other official sources. * Sales & Marketing Management: 2005 Survey of Buying Power; further reproduction not licensed. Principal Taxpayers 2007 AV % of AV 1. Conoco Phillips Company $9,577, % Oil & Gas 2. GTE Southwest Inc 6,538, % Telephone Utility 3. Texas-New Mexico Power Co. 6,484, % Electric Utility 4. Conoco Specialty Products 6,082, % Engineering 5. McRee Ford 5,598, % Auto Dealership 6. Dixie Partners II LP 3,916, % Shopping Center 7. Gay Pontiac GMC & Subaru Inc. 3,384, % Auto Dealership 8. SW Kirkwood LP 3,314, % Land/Improvements 9. Wall Homes Texas LLC 2,906, % Construction 10. Pine Forest Apartments Inc 2,504, % Apartments Total: $50,307, %* * Rounding differences DISCLAIMER. This Texas Municipal Report ("TMR") was prepared by employees of the Municipal Advisory Council of Texas ("MAC") for informational purposes only, and is not intended to be, and should not be considered as, a recommendation, endorsement or solicitation to buy or sell any security of the issuer to which it applies. The information set forth in this TMR has been obtained from the issuer and from sources believed to be reliable, but the MAC has not independently verified such information. The MAC specifically disclaims any responsibility for, and makes no representations, warranties or guarantees about, the completeness or accuracy of such information. In this connection, this TMR reflects information as of the date referred to in the TMR, as derived from filings received by the MAC from the issuer. This TMR will be updated in the ordinary course as filings are received from the issuer, but the MAC specifically disclaims any responsiblity for doing so. The reader of this TMR is advised to obtain current information from other sources before making any investment decision respecting the securities of this issuer.

15 Texas Municipal Reports All Rights Reserved Dickinson, City of (General Obligation Debt) Galveston County Last Revised 07/09/2008 TMR # 1411 Page 5 of 5 Phone: Fax: mayor@dickinson-tx.gov City Administrator Julie Johnston 1621 FM 517 East Dickinson, Tx Phone: Fax: jjohnston@ci.dickinson.tx.us Chief Financial Officer Usha Mathew 1621 FM 517 East Dickinson, Tx Phone: Fax: umathew@ci.dickinson.tx.us City Secretary Carol McLemore 1621 FM 517 East Dickinson, Tx Phone: Fax: cmclemore@ci.dickinson.tx.us Tax Assessor/Collector Cheryl Johnson Galveston County Tax Office 722 Moody 1st Floor Galveston, TX Phone: Fax: cheryl.e.johnson@co.galveston.tx.us Chief Appraiser Ken Wright Galveston Central Appraisal District 600 Gulf Fwy Texas City, TX Phone: Fax: gcad@galvestoncad.org KJR DISCLAIMER. This Texas Municipal Report ("TMR") was prepared by employees of the Municipal Advisory Council of Texas ("MAC") for informational purposes only, and is not intended to be, and should not be considered as, a recommendation, endorsement or solicitation to buy or sell any security of the issuer to which it applies. The information set forth in this TMR has been obtained from the issuer and from sources believed to be reliable, but the MAC has not independently verified such information. The MAC specifically disclaims any responsibility for, and makes no representations, warranties or guarantees about, the completeness or accuracy of such information. In this connection, this TMR reflects information as of the date referred to in the TMR, as derived from filings received by the MAC from the issuer. This TMR will be updated in the ordinary course as filings are received from the issuer, but the MAC specifically disclaims any responsiblity for doing so. The reader of this TMR is advised to obtain current information from other sources before making any investment decision respecting the securities of this issuer.

16 TAB 4

17 ADJOURN TIME: MOTION: SECOND: VOTE

18 FYI

19 FUTURE CITY COUNCIL AGENDA ITEMS April, /14/ /28/2008 May, /12/2009 Special Council Workshop o City Administrator s Briefing o Budget Workshop Regular Council Meeting o City Hall/Library Project o Update on Oleander Bridge Project o Update on Tanglebriar Drive Construction Project o Update on Dickinson Bayou Watershed Steering Committee o Second Reading of Ordinance Establishing Construction Speed Zone on FM 646 o First Reading of Ordinance Creating Library Advisory Board o Resolution Accepting Dedication of Street from DISD o First Reading of Ordinance to Name Newly Dedicated Street o Third Reading of Ordinance to Abandon Melvin Utley Drive o Presentation of Possible Solutions to Safety Concerns on Hughes Road Special Council Workshop o Quarterly Financial Report Regular Council Meeting o City Hall/Library Project o Update on Oleander Bridge Project o Update on Tanglebriar Drive Construction Project o Update on Dickinson Bayou Steering Watershed Committee o Presentation and Approval of FY Audit o Ordinance Approving Mid-Year FY Budget Amendments o Ordinance Approving Mid-Year DEDC FY Budget Amendments o Second Reading of Ordinance Creating Library Advisory Board o Second Reading of Ordinance Naming Newly Dedicated Street o Resolution Approving Agreement with North Galveston County Chamber of Commerce o Resolution Concerning Encroachment at New City Hall Special Council Workshop Future Agenda Items Page 1 of 3

20 05/26/2009 JUNE, /09/2009 o City Administrator s Briefing o Budget Workshop Regular Council Meeting o City Hall/Library Project o Update on Oleander Bridge Project o Update on Tanglebriar Drive Construction Project o Update on Dickinson Bayou Watershed Steering Committee o Approval of Agreement with Galveston County Tax Assessor/Collector o First Reading of Ordinance to Adopt Illegal Discharge Regulations o First Reading of Ordinance Amending Personnel Policy Workmen s Compensation o Resolution Approving Revisions to Purchasing Policies Special Council Workshop Regular Council Meeting o City Hall/Library Project o Update on Oleander Bridge Project o Update on Tanglebriar Drive Construction Project o Update on Dickinson Bayou Watershed Steering Committee o Reappointments to Dickinson Management District #1 Board of Directors o Resolution Approving Agreement with Spanish Interpreter for Court o Second Reading of Ordinance to Adopt Illegal Discharge Regulations o Second Reading of Ordinance Amending Personnel Policy Workmen s Comp Special Council Workshop o City Manager s Briefing o Budget Workshop Regular Council Meeting o City Hall/Library Project o Update on Oleander Bridge Project o Update on Tanglebriar Drive Construction Project o Update on Dickinson Bayou Watershed Committee o Appointments to Dickinson Economic Development Corporation 06/23/2009 Future Agenda Items Page 2 of 3

21 Special Council Workshop Regular Council Meeting o City Hall/Library Project o Update on Oleander Bridge Project o Update on Tanglebriar Drive Construction Project o Update on Dickinson Bayou Watershed Committee o Appointments to Dickinson Economic Development Corporation Future Agenda Items Page 3 of 3

22 REGULAR COUNCIL MEETING

23 Julie Masters, Mayor Charles Suderman Mary Dunbaugh Walter Wilson AGENDA City of Dickinson CITY COUNCIL REGULAR MEETING Kerry Neves Louis Decker William H. King III, Mayor Pro Tem Julie M. Johnston, City Administrator MARCH 24, 2009 NOTICE is hereby given of a REGULAR MEETING of the City Council for the City of Dickinson, County of Galveston, State of Texas, to be held on TUESDAY, MARCH 24, 2009, at 7:00 p.m. at: 1621 FM 517 East, Dickinson, Texas for the purpose of considering the following numbered items. The City Council of the City of Dickinson, Texas, reserves the right to meet in a closed session on any of the below items should the need arise and if applicable pursuant to authorization by Title 5, Chapter 551, of the Texas Government Code. ITEM 1.) ITEM 2.) ITEM 3.) ITEM 4.) CALL TO ORDER AND CERTIFICATION OF A QUORUM: Invocation and Pledge of Allegiance. PROCLAMATIONS AND COUNCIL COMMENTS: PUBLIC COMMENTS: At this time, any person with city-related business may speak to the Council. In compliance with the Texas Open Meetings Act, The City Council may not deliberate. Comments from the public should be limited to a maximum of three (3) minutes per individual speaker. CONSENT AGENDA: CONSIDERATION AND POSSIBLE ACTION: The following items are considered routine by the City Council and will be enacted by one motion. There will not be a separate discussion on these items unless a Council member requests, in which event, the item will be removed from the consent agenda and discussed after the consent agenda. A. Approval of Minutes of Regular Council Meeting of March 10, 2009 OLD BUSINESS ITEM 5.) CONSIDERATION AND POSSIBLE ACTION CONCERNING: Update on City Hall/Library Project including the following items: A. Schedule for Move To New Facilities and Dedication Ceremony B. Outstanding Items for Which City is Responsible on Project C. Project Items for Which City and Water Control and Improvement District No. 1 Anticipate Sharing Costs D. Landscaping for Project through Grant Awarded to Keep Dickinson Beautiful by Texas Department of Transportation E. Progress on Obtaining Quote for Signage March 24, 2009 Regular Council Meeting Page 1 of 4

24 F. Donation Policy Adopted by Resolution Number and Applicability to Donations to City Hall/Library Project ITEM 6.) ITEM 7.) ITEM 8.) ITEM 9.) CONSIDERATION AND POSSIBLE ACTION CONCERNING: Update on Oleander Bridge Construction Project CONSIDERATION AND POSSIBLE ACTION CONCERNING: Update on Tanglebriar Drive Street Construction Project CONSIDERATION AND POSSIBLE ACTION CONCERNING: Update on Activities of Dickinson Bayou Watershed Steering Committee CONSIDERATION AND POSSIBLE ACTION CONCERNING: Ordinance Number AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF DICKINSON, TEXAS, ALTERING THE PRIMA FACIE SPEED LIMITS ESTABLISHED FOR VEHICLES UNDER THE PROVISIONS OF SECTION OF THE TEXAS TRANSPORTATION CODE, UPON THE BASIS OF A TRAFFIC INVESTIGATION, ON CERTAIN STREETS AND HIGHWAYS OR PARTS THEREOF WITHIN THE CORPORATE LIMITS OF THE CITY OF DICKINSON, AS SET OUT IN THIS ORDINANCE, TO WIT: ESTABLISHING A SCHOOL ZONE ON HUGHES ROAD FROM A POINT 540 FEET WEST OF STATE HIGHWAY 3 TO 220 FEET EAST OF CIMMARON COUNTRY TRAILER PARK TO REDUCE THE SPEED LIMIT TO TWENTY (20) MILES PER HOUR WHEN THE TRAFFIC CONTROL DEVICE INSTALLED AT THAT LOCATION IS FLASHING; AUTHORIZING THE INSTALLATION OF SIGNAGE IN ACCORDANCE WITH THIS ORDINANCE; PROVIDING FOR THE INCORPORATION OF PREAMBLE; PROVIDING A PENALTY NOT TO EXCEED $ FOR THE VIOLATION OF THIS ORDINANCE; REPEALING ALL ORDINANCES OR PARTS OF ORDINANCES IN CONFLICT HEREWITH; PROVIDING FOR SEVERABILITY; AND PROVIDING AN EFFECTIVE DATE (Second of three readings) NEW BUSINESS ITEM 10.) CONSIDERATION AND POSSIBLE ACTION CONCERNING: Andrea Cooper, Texas PRIDE Crisis Counseling Program Presentation regarding a FEMA grant being implemented by Gulf Coast Center to provide crisis counseling for those affected by Hurricane Ike. ITEM 11.) CONSIDERATION AND POSSIBLE ACTION CONCERNING: Request from Patty Cowart, Judy Lyles and Fred Lyles for Repairs on Rice Road. ITEM 12.) CONSIDERATION AND POSSIBLE ACTION CONCERNING: Ordinance Number XXX-2009 AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF DICKINSON, TEXAS, ALTERING THE PRIMA FACIE SPEED LIMITS ESTABLISHED FOR VEHICLES UNDER THE PROVISIONS OF March 24, 2009 Regular Council Meeting Page 2 of 4

25 SECTIONS AND OF THE TEXAS TRANSPORTATION CODE, ON CERTAIN STREETS AND HIGHWAYS OR PARTS THEREOF WITHIN THE CORPORATE LIMITS OF THE CITY OF DICKINSON, AS SET OUT IN THIS ORDINANCE, TO WIT: ESTABLISHING A CONSTRUCTION SPEED ZONE ON FM 646 FROM THE INTERSECTION OF THE NORTHERN EDGE OF SECOND STREET TO THE INTERSECTION OF THE NORTHERN EDGE OF FM 517 WEST, A DISTANCE OF 6,170 FEET TO REDUCE THE SPEED LIMIT TO 45 MILES PER HOUR; AUTHORIZING THE INSTALLATION OF SIGNAGE IN ACCORDANCE WITH THIS ORDINANCE; PROVIDING FOR THE ALTERATION OF THE PRIMA FACIE SPEED LIMIT OF SAID STREET TO INCREASE TO 55 MILES PER HOUR UPON COMPLETION OF CONSTRUCTION; PROVIDING A PENALTY NOT TO EXCEED $ FOR THE VIOLATION OF THIS ORDINANCE; PROVIDING A REPEALER CLAUSE, A SEVERABILITY CLAUSE, AND AN EFFECTIVE DATE (First of three readings). ITEM 13.) CONSIDERATION AND POSSIBLE ACTION CONCERNING: Ordinance Number XXX-2009 AN ORDINANCE AUTHORIZING THE ISSUANCE OF CITY OF DICKINSON, TEXAS, CERTIFICATES OF OBLIGATION, SERIES 2009; AND CONTAINING OTHER MATTERS INCIDENT THERETO. ITEM 14.) CONSIDERATION AND POSSIBLE ACTION CONCERNING: Ordinance Number XXX-2009 AN ORDINANCE AUTHORIZING AND ORDERING THE ISSUANCE OF CITY OF DICKINSON, TEXAS, GENERAL OBLIGATION REFUNDING BONDS, SERIES 2009; AUTHORIZING DEFEASANCE OF CERTAIN BONDS, THE EXECUTION AND DELIVERY OF AN ESCROW AGREEMENT, THE PURCHASE OF CERTAIN SECURITIES AND THE USE OF CERTAIN FUNDS RELATED TO THE BONDS TO BE REFUNDED; AND MAKING OTHER PROVISIONS REGARDING SUCH BONDS, INCLUDING USE OF THE PROCEEDS THEREOF, AND MATTERS INCIDENT THERETO. ITEM 15.) CONSIDERATION AND POSSIBLE ACTION CONCERNING: Resolution Number XXX-2009 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF DICKINSON, TEXAS, APPROVING THE TERMS AND CONDITIONS OF AN INTERLOCAL COOPERATIVE PURCHASING AGREEMENT BY AND BETWEEN THE CITY OF DICKINSON, TEXAS AND THE CITY OF LEAGUE CITY, TEXAS; PROVIDING FOR THE INCORPORATION OF PREAMBLE; AUTHORIZING EXECUTION OF THE AGREEMENT BY THE CITY ADMINISTRATOR; AND PROVIDING AN EFFECTIVE DATE. ITEM 16.) CONSIDERATION AND POSSIBLE ACTION CONCERNING: Official Position Concerning Cypress Creek Development on FM 1266 in Galveston County. March 24, 2009 Regular Council Meeting Page 3 of 4

26 ITEM 17.) CONSIDERATION AND POSSIBLE ACTION CONCERNING: City of Dickinson s Participation in Galveston County Voluntary Buyout and Elevation Program. ITEM 18.) ADJOURN CERTIFICATION This is to certify that a copy of the Notice of the Regular City Council meeting for TUESDAY, MARCH 29, 2009, was posted on the bulletin board at City Hall, 1621 FM 517 East, Dickinson, Texas, on this 19 th day of March, 2009, prior to 6:00 p.m. Carol L. McLemore, City Secretary In compliance with the Americans with Disabilities Act, the City of Dickinson will provide reasonable accommodations for disabled persons attending City Council Meetings. Requests should be received at least 24 hours prior to the scheduled meeting, by contacting the City Secretary s office at , or by FAX at March 24, 2009 Regular Council Meeting Page 4 of 4

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28 City Council Meeting CALL TO ORDER Invocation Given by: Pledge of Allegiance Given by: Roll Call

29 CITY OF DICKINSON, TEXAS CITY COUNCIL MEETING ATTENDANCE LIST MEETING DATE: MARCH 24, 2009 Regular Meeting MAYOR/COUNCIL PRESENT ABSENT MAYOR JULIE MASTERS POS. 1: COUNCILMAN CHARLES SUDERMAN POS. 2: COUNCILWOMAN MARY DUNBAUGH POS. 3: COUNCILMAN WALTER WILSON POS. 4: COUNCILMAN KERRY NEVES POS. 5: COUNCILMAN LOUIS DECKER POS. 6: COUNCILMAN WILLIAM KING MAKE NOTE ON RECORDING: THE FOLLOWING ALSO ARE IN ATTENDANCE: ATTORNEY, Loren B. Smith CITY ADMINISTRATOR, Julie M. Johnston CITY SECRETARY, Carol L. McLemore

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35 Julie Masters, Mayor Charles Suderman Mary Dunbaugh Walter Wilson MINUTES City of Dickinson CITY COUNCIL REGULAR MEETING MARCH 10, 2009 Kerry Neves Louis Decker William H. King III, Mayor Pro Tem Julie M. Johnston, City Administrator The Dickinson City Council met in a duly called and announced REGULAR MEETING on TUESDAY, MARCH 10, The meeting was held in the City Council Chambers located at 1621 FM 517 East, Dickinson, Galveston County, Texas, and was held for the purpose of considering the following items: ITEM 1.) CALL TO ORDER AND CERTIFICATION OF A QUORUM Invocation and Pledge of Allegiance Mayor Julie Masters called the meeting to order at 7:03 p.m. Mayor Pro Tem King gave the Invocation and Girl Scout Troop 323 led the Pledge of Allegiance. City Secretary Carol McLemore called roll and certified a quorum. Council Members present were as follows: Mayor Julie Masters, Mayor Pro Tem William King and Council Members Charles Suderman, Mary Dunbaugh, Walter Wilson, Kerry Neves, and Louis Decker. Also present were City Attorney, Loren Smith, City Administrator Julie Johnston, Director of Public Works Kellis George, Fire Marshal Norman Hicks, Finance Director Mary Young, Building Official Kevin Byal, Captain Steve Krone and Development Coordinator Angela Forbes. ITEM 2.) PROCLAMATIONS AND COUNCIL COMMENTS: Mayor Masters read a proclamation recognizing the 97 th Anniversary of Girl Scouts and proclaiming the week of April 8, 2009 as Girl Scout Week in the City of Dickinson. Council commented on the following topics: Welcome to everyone present and thanks for coming. DCPAAA Fundraiser to purchase first aid kits for patrol cars Knights of Columbus Fish Fry on Fridays during Lent Dedication of new McAdams Junior High Campus Keep Dickinson Beautiful Fact-finding Meeting to research ways to clean the tributaries scheduled for Thursday, March 12 Annual Bayou Trash Bash scheduled for March 28 Shrine of True Cross 100 th Anniversary Celebration Welcome to new Building Official Kevin Byal New Dickinson Historical Posters recognizing Early Businesses and Families on sale at Depot Wilder Awards for DHS Posters 7 th Annual Wine and Roses DHS Fundraiser scheduled for April 24 March 10, 2009 Regular Council Minutes Page 1 of 7

36 Italian Festival scheduled for March 29 at the Depot March 2 DHS Membership Event at the Depot Congratulations DHS for Wilder Awards Congratulations to Girl Scouts Condolences to family of Bertha White DISD Spring Break next week Dedication of Greater New Hope Baptist Church Family Life Center scheduled for May 24 ITEM 3.) PUBLIC COMMENTS: Patrick Restivo, 9806 Sage Aspen, Houston, told Council that he had recently renewed his mobile home park permit and that he received very rude treatment at the front counter in City Hall. Mr. Restivo stated that it was not the first time that he had received rude treatment at City Hall. ITEM 4.) CONSENT AGENDA: CONSIDERATION AND POSSIBLE ACTION: The following items were considered routine by the City Council and were enacted by one motion. There was not a separate discussion on these items. A. Approval of Minutes of Special Council Workshop Meeting of February 24, B. Approval of Minutes of Regular Council Meeting of February 24, 3009 C. Approval of Resolution Number A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF DICKINSON, TEXAS, APPROVING THE TERMS AND CONDITIONS OF AN INTERLOCAL COOPERATION AGREEMENT BY AND BETWEEN THE CITY OF LEAGUE CITY AND THE CITY OF DICKINSON FOR THE USE OF A CMI-425 MIXER AND AN OPERATOR FOR THE PERIOD FROM MARCH 2009 THROUGH SEPTEMBER 30, 2009; AUTHORIZING EXECUTION OF THE AGREEMENT BY THE CITY ADMINISTRATOR; AND PROVIDING AN EFFECTIVE DATE. Councilman Wilson made a motion to approve the Consent Agenda. Mayor Pro Tem King seconded the motion. VOTE: 6 AYES (Suderman, Wilson, Dunbaugh, Neves, Decker and King) 0 NAYS MOTION PASSED. OLD BUSINESS March 10, 2009 Regular Council Meeting Minutes Page 2 of 7

37 ITEM 5.) CONSIDERATION AND POSSIBLE ACTION CONCERNING: City Hall/Library Project A. Phone System 1. Approval of Purchase of Phone Hardware and Installation for new City Hall and Library Complex and Police Station from Avaya through AT&T Business Communications Services in the amount of $84, through the State of Texas Department of Information Resources (DIR) Procurement Program. 2. Approval of Purchase of Power Over Ethernet (POE) Switches Required for Phone Hardware and Installation for new City Hall and Library Complex and Police Station from PC & Cable in the amount of $5, B. Approval of Purchase of Audio/Visual Equipment for new City Hall and Library Complex from Audio/Visual Technologies Group in the amount of $76, Pending Determination of Appropriate Procurement Method. C. Grounding of Buildings Fire Marshal Norman Hicks reviewed the quotes received on the phone system and audio/visual equipment for the new City Hall/Library Project. City Administrator Julie Johnston also discussed the procurement methods available for purchasing the audio/visual equipment. Discussion followed. Mr. Hicks also discussed the letter provided by Hall Barnum Luchessi concerning the measures taken to ground the two buildings. Councilwoman Dunbaugh made a motion to approve the purchase of the phone hardware and installation from AT&T Business Communications and POE switches from PC Cable for the new City Hall/Library Complex and Police Station as provided in Items A1 and A2. Mayor Pro Tem King seconded the motion. VOTE: 6 AYES (Suderman, Dunbaugh, Wilson, Neves, Decker and King) 0 NAYS MOTION PASSED. Mayor Pro Tem King made a motion to approve the purchase of Audio/Visual Equipment from Audio/Visual Technologies Group for the new City Hall/Library Complex as provided in Item B. Councilwoman Dunbaugh seconded the motion. VOTE: 5 AYES (Suderman, Dunbaugh, Wilson, Neves and King) 1 NAY (Decker) March 10, 2009 Regular Council Meeting Minutes Page 3 of 7

38 MOTION PASSED. ITEM 6.) CONSIDERATION AND POSSIBLE ACTION CONCERNING: Update on Oleander Bridge Project. Director of Public Works Kellis George provided a brief update on the project. ITEM 7.) CONSIDERATION AND POSSIBLE ACTION CONCERNING: Update on Tanglebriar Drive Construction Project. Director of Public Works Kellis George provided a brief update on the project. ITEM 8.) CONSIDERATION AND POSSIBLE ACTION CONCERNING: Postponement of Adoption of Ordinance Authorizing the Issuance of City of Dickinson, Texas, Certificates of Obligation, Series 2009, until March 24, Councilwoman Dunbaugh made a motion to postpone the adoption of an ordinance authorizing the issuance of City of Dickinson, Texas Certificates of Obligation, Series 2009, until the March 24 City Council meeting. Mayor Pro Tem King seconded the motion. VOTE: 6 AYES (Suderman, Dunbaugh, Wilson, Neves, Decker and King) 0 NAYS MOTION PASSED. ITEM 9.) CONSIDERATION AND POSSIBLE ACTON CONCERNING: Resolution Number A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF DICKINSON, TEXAS, APPROVING THE PRELIMINARY OFFICIAL STATEMENT AND AUTHORIZING DISTRIBUTION THEREOF RELATED TO THE CITY OF DICKINSON, TEXAS, CERTIFICATES OF OBLIGATION, SERIES 2009, AND THE CITY OF DICKINSON, TEXAS, GENERAL OBLIGATION REFUNDING BONDS, SERIES 2009; APPOINTING AN UNDERWRITER FOR SUCH OBLIGATIONS; APPOINTING A PAYING AGENT/REGISTRAR FOR SUCH OBLIGATIONS; MAKING VARIOUS FINDINGS AND PROVISIONS RELATED THERETO; AND PROVIDING AN EFFECTIVE DATE. Mayor Masters read the resolution by caption only. Councilwoman Dunbaugh made a motion to approve Resolution Number Mayor Pro Tem King seconded the motion. Phillip Martin with First Southwest discussed the preliminary official statement and answered questions from Council. March 10, 2009 Regular Council Meeting Minutes Page 4 of 7

39 VOTE: 4 AYES (Suderman, Dunbaugh, Wilson and King) 2 NAYS (Neves and Decker) MOTION PASSED. ITEM 10.) CONSIDERATION AND POSSIBLE ACTION CONCERNING: Resolution Number A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF DICKINSON, TEXAS, APPROVING THE TERMS AND CONDITIONS OF AN INTERLOCAL COOPERATION AGREEMENT BY AND BETWEEN THE CITY OF DICKINSON AND DICKINSON MANAGEMENT DISTRICT NO. 1 FOR THE PROVISION OF SERVICES BY THE CITY OF DICKINSON TO DICKINSON MANAGEMENT DISTRICT NO. 1 FOR FISCAL YEAR ; AUTHORIZING EXECUTION OF THE AGREEMENT BY THE MAYOR; AND PROVIDING AN EFFECTIVE DATE. Mayor Masters read the resolution by caption only. Councilman Wilson made a motion to approve Resolution Number Councilman Suderman seconded the motion. Councilman Wilson inquired about the additional $6,000 in fees to be paid by the Management District to the City for financial services. The City Administrator responded that the Management District had requested to pay additional fees to the City for the monthly services that will be provided by the City s Finance Department for reports and accounts payable/accounts receivable. Discussion followed. VOTE: 4 AYES (Suderman, Dunbaugh, King and Masters 3 NAYS (Wilson, Neves and Decker) MOTION PASSED. NEW BUSINESS ITEM 11.) CONSIDERATION AND POSSIBLE ACTION CONCERNING: Ordinance Number AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF DICKINSON, TEXAS, ALTERING THE PRIMA FACIE SPEED LIMITS ESTABLISHED FOR VEHICLES UNDER THE PROVISIONS OF SECTION OF THE TEXAS TRANSPORTATION CODE, UPON THE BASIS OF A TRAFFIC INVESTIGATION, ON CERTAIN STREETS AND HIGHWAYS OR PARTS THEREOF WITHIN THE CORPORATE LIMITS OF THE CITY OF DICKINSON, AS SET OUT IN THIS ORDINANCE, TO WIT: ESTABLISHING A SCHOOL ZONE ON HUGHES ROAD FROM A POINT 540 FEET WEST OF STATE HIGHWAY 3 TO 220 FEET EAST OF CIMMARON COUNTRY TRAILER PARK TO REDUCE THE SPEED LIMIT TO TWENTY (20) MILES PER HOUR WHEN THE TRAFFIC CONTROL DEVICE INSTALLED AT THAT LOCATION IS FLASHING; AUTHORIZING THE INSTALLATION OF SIGNAGE IN ACCORDANCE WITH THIS ORDINANCE; PROVIDING FOR THE March 10, 2009 Regular Council Meeting Minutes Page 5 of 7

40 INCORPORATION OF PREAMBLE; PROVIDING A PENALTY NOT TO EXCEED $ FOR THE VIOLATION OF THIS ORDINANCE; REPEALING ALL ORDINANCES OR PARTS OF ORDINANCES IN CONFLICT HEREWITH; PROVIDING FOR SEVERABILITY; AND PROVIDING AN EFFECTIVE DATE (First of three readings). Mayor Masters read the ordinance by caption only. Councilman Suderman made a motion to approve Ordinance Number on first reading. Councilman Decker seconded the motion. Discussion followed. VOTE: 6 AYES (Suderman, Dunbaugh, Wilson, Neves, Decker and King) 0 NAYS MOTION PASSED. ITEM 12.) CONSIDERATION AND POSSIBLE ACTION CONCERNING: Authorize Staff to request permission for the City of Dickinson to participate in Galveston County s Voluntary Buyout and Elevation Program. Councilman Wilson made a motion to grant permission to staff to participate in Galveston County s Voluntary Buyout and Elevation Program. Councilwoman Dunbaugh seconded the motion. VOTE: 6 AYES (Suderman, Dunbaugh, Wilson, Neves, Decker and King) 0 NAYS MOTION PASSED. ITEM 13.) EXECUTIVE SESSION: The City Council held a closed executive meeting pursuant to the provision of Chapter 551, Government Code, Vernon s Texas Codes annotated, in accordance with the authority contained in: A. Section Deliberation regarding Real Property Discussion regarding the purchase, exchange, lease or value of real property. B. Section Personnel Matters to deliberate the appointment, employment, evaluation, reassignment, duties, discipline or dismissal of the City Administrator. Mayor Masters recessed the meeting into Executive Session at 8:19 p.m. ITEM 14.) RECONVENE Mayor Masters reconvened the meeting at 11:07 p.m. ITEM 15.) CONSIDERATION AND POSSIBLE ACTION CONCERNING: Matters described in Agenda Item #13B above. March 10, 2009 Regular Council Meeting Minutes Page 6 of 7

41 ITEM 16.) ADJOURN Council took no action in this matter. Mayor Pro Tem King made a motion to adjourn the meeting at 11:07 p.m. Councilwoman Dunbaugh seconded the motion. VOTE: 6 AYES (Suderman, Dunbaugh, Wilson, Neves, Decker and King) 0 NAYS MOTION PASSED. PASSED, APPROVED AND ADOPTED this the 24 th day of March, ATTEST: Julie Masters, Mayor Carol L. McLemore City Secretary March 10, 2009 Regular Council Meeting Minutes Page 7 of 7

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43 CITY STAFF IS CURRENTLY PREPARING A LIST OF OUTSTANDING ITEMS FOR WHICH THE CITY WILL BE RESPONSIBLE. THIS LIST WILL BE DISTRIBUTED AT THE COUNCIL MEETING.

44 CITY STAFF IS CURRENTLY PREPARING A LIST OF PROJECT ITEMS FOR WHICH CITY AND WATER CONTROL AND IMPROVEMENT DISTRICT NO. 1 ANTICIPATE SHARING COSTS. THIS LIST WILL BE DISTRIBUTED AT THE COUNCIL MEETING.

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80 Dickinson City Council Agenda Item Data Sheet MEETING DATE March 10, 2009 TOPIC Ordinance Number AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF DICKINSON, TEXAS, ALTERING THE PRIMA FACIE SPEED LIMITS ESTABLISHED FOR VEHICLES UNDER THE PROVISIONS OF SECTION OF THE TEXAS TRANSPORTATION CODE, UPON THE BASIS OF A TRAFFIC INVESTIGATION, ON CERTAIN STREETS AND HIGHWAYS OR PARTS THEREOF WITHIN THE CORPORATE LIMITS OF THE CITY OF DICKINSON, AS SET OUT IN THIS ORDINANCE, TO WIT: ESTABLISHING A SCHOOL ZONE ON HUGHES ROAD FROM A POINT 540 FEET WEST OF STATE HIGHWAY 3 TO 220 FEET EAST OF CIMMARON COUNTRY TRAILER PARK TO REDUCE THE SPEED LIMIT TO TWENTY (20) MILES PER HOUR WHEN THE TRAFFIC CONTROL DEVICE INSTALLED AT THAT LOCATION IS FLASHING; AUTHORIZING THE INSTALLATION OF SIGNAGE IN ACCORDANCE WITH THIS ORDINANCE; PROVIDING FOR THE INCORPORATION OF PREAMBLE; PROVIDING A PENALTY NOT TO EXCEED $ FOR THE VIOLATION OF THIS ORDINANCE; REPEALING ALL ORDINANCES OR PARTS OF ORDINANCES IN CONFLICT HEREWITH; PROVIDING FOR SEVERABILITY; AND PROVIDING AN EFFECTIVE DATE. BACKGROUND The new McAdams Junior High opened on February 23, The City has received a request from Dickinson Independent School District to establish a 20 mph school zone along Hughes Road and parallel to McAdams Junior High. Dickinson Police Department has conducted a traffic study and, based on that study, recommends the establishment of the requested school zone. This agenda item will establish a 20 mph school zone on Hughes Road from a point 540 feet west of State Highway 3 to 220 feet east of Cimmaron Country Trailer Park. The school zone will be activated once the school zone signs have been installed and are flashing. RECOMMENDATION Staff recommends approval of the ordinance. ATTACHMENTS Ordinance Number ACTIONS TAKEN APPROVAL READINGS PASSED OTHER X YES NO X 1 st 2 nd 3 rd PAGE 1 OF 2

81 Dickinson City Council Agenda Item Data Sheet FUNDING ISSUES No impact on budget. Full Amount already budgeted. Funds to be transferred from Acct.# - - SUBMITTING STAFF MEMBER Kellis George, Director of Public Works CITY ADMINISTRATOR APPROVAL APPROVAL X YES NO ACTIONS TAKEN READINGS PASSED OTHER X 1 st 2 nd 3 rd PAGE 2 OF 2

82 ORDINANCE NUMBER AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF DICKINSON, TEXAS, ALTERING THE PRIMA FACIE SPEED LIMITS ESTABLISHED FOR VEHICLES UNDER THE PROVISIONS OF SECTION OF THE TEXAS TRANSPORTATION CODE, UPON THE BASIS OF A TRAFFIC INVESTIGATION, ON CERTAIN STREETS AND HIGHWAYS OR PARTS THEREOF WITHIN THE CORPORATE LIMITS OF THE CITY OF DICKINSON, AS SET OUT IN THIS ORDINANCE, TO WIT: ESTABLISHING A SCHOOL ZONE ON HUGHES ROAD FROM A POINT 540 FEET WEST OF STATE HIGHWAY 3 TO 220 FEET EAST OF CIMMARON COUNTRY TRAILER PARK TO REDUCE THE SPEED LIMIT TO TWENTY (20) MILES PER HOUR WHEN THE TRAFFIC CONTROL DEVICE INSTALLED AT THAT LOCATION IS FLASHING; AUTHORIZING THE INSTALLATION OF SIGNAGE IN ACCORDANCE WITH THIS ORDINANCE; PROVIDING FOR THE INCORPORATION OF PREAMBLE; PROVIDING A PENALTY NOT TO EXCEED $ FOR THE VIOLATION OF THIS ORDINANCE; REPEALING ALL ORDINANCES OR PARTS OF ORDINANCES IN CONFLICT HEREWITH; PROVIDING FOR SEVERABILITY; AND PROVIDING AN EFFECTIVE DATE. WHEREAS, Section of the Texas Transportation Code provides that, whenever the governing body of the City shall determine upon the basis of an engineering and traffic investigation that any prima facie speed therein set forth is greater or less than is reasonable or safe under conditions found to exist at any intersection or other place upon any part of a street or highway within the City, taking into consideration the width and condition of the pavement and other circumstances on such portion of said street or highway, as well as the usual traffic thereon, said governing body may determine and declare a reasonable and safe prima facie speed limit thereat or thereon by the passage of an ordinance, which shall be effective when appropriate signs giving notice thereof are erected at such intersection or other place or part of the street or highway; WHEREAS, the Dickinson Police Department has conducted a school speed zone study along Hughes Road near the new McAdams Junior High School within the City of Dickinson and, as a result of such speed zone study, has recommended to the City Council that a school zone be established for such area; and WHEREAS, the City Council of the City of Dickinson, Texas, finds that establishment of the requested school zone is in the best interest of the health, safety and welfare of the citizens; now, therefore, BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF DICKINSON, TEXAS: CITY OF DICKINSON, TEXAS ORDINANCE NUMBER Page 1 of 3

83 Section 1. The facts and recitations set forth in the preamble of this Ordinance are hereby found to be true and correct. Section 2. Upon the basis of an school speed zone study heretofore made as authorized by the provisions of , Texas Transportation Code, the following prima facie speed limits hereafter indicated for vehicles are hereby determined and declared to be reasonable and safe; and such speed limits are hereby fixed at the rate of speed indicated for vehicles traveling upon the named streets and highways, or parts thereof, described as follows: a. Along Hughes Road a school zone from a point 540 feet west of State Highway 3 to 220 feet east of Cimmaron Country Trailer Park, a distance of approximately 0.04 miles, the speed limit shall be 20 MPH WHEN FLASHING. Section 3. Any person violating any of the provisions of this ordinance shall be deemed guilty of a misdemeanor and upon conviction thereof shall be fined in any sum not more than Two Hundred Dollars ($200.00). Section 4. All provisions of the ordinances of the City of Dickinson in conflict with the provisions of this Ordinance are hereby repealed, and all other provisions of the Ordinances of the City of Dickinson not in conflict with the provisions of this Ordinance shall remain in full force and effect. Section 5. In the event any section, paragraph, subdivision, clause, phrase, provision, sentence, or part of this ordinance or the application of the same to any person or circumstance shall for any reason be adjudged invalid or held unconstitutional by a court of competent jurisdiction, it shall not affect, impair, or invalidate this ordinance as a whole or any part or provision hereof other than the part declared to be invalid or unconstitutional; and the City Council of the City of Dickinson, Texas, declares that it would have passed each and every part of the same notwithstanding the omission of any such part thus declared to be invalid or unconstitutional, or whether there be one or more parts. Section 6. This Ordinance shall be in full force and effect from and after its date of passage, in accordance with the law. DULY PASSED AND APPROVED on first reading this 10 th day of March, DULY PASSED AND APPROVED on second and final reading this day of, CITY OF DICKINSON, TEXAS ORDINANCE NUMBER Page 2 of 3

84 DULY PASSED, APPROVED AND ADOPTED on third and final reading this day of ATTEST: Julie Masters, Mayor City of Dickinson, Texas Carol L. McLemore, City Secretary City of Dickinson, Texas APPROVED AS TO FORM AND CONTENT: Loren B. Smith, City Attorney City of Dickinson, Texas CITY OF DICKINSON, TEXAS ORDINANCE NUMBER Page 3 of 3

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90 Dickinson City Council Agenda Item Data Sheet MEETING DATE March 24, 2009 TOPIC: ORDINANCE NUMBER XXX-2009 AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF DICKINSON, TEXAS, ALTERING THE PRIMA FACIE SPEED LIMITS ESTABLISHED FOR VEHICLES UNDER THE PROVISIONS OF SECTIONS AND OF THE TEXAS TRANSPORTATION CODE, ON CERTAIN STREETS AND HIGHWAYS OR PARTS THEREOF WITHIN THE CORPORATE LIMITS OF THE CITY OF DICKINSON, AS SET OUT IN THIS ORDINANCE, TO WIT: ESTABLISHING A CONSTRUCTION SPEED ZONE ON FM 646 FROM THE INTERSECTION OF THE NORTHERN EDGE OF SECOND STREET TO THE INTERSECTION OF THE NORTHERN EDGE OF FM 517 WEST, A DISTANCE OF 6,170 FEET TO REDUCE THE SPEED LIMIT TO 45 MILES PER HOUR; AUTHORIZING THE INSTALLATION OF SIGNAGE IN ACCORDANCE WITH THIS ORDINANCE; PROVIDING FOR THE ALTERATION OF THE PRIMA FACIE SPEED LIMIT OF SAID STREET TO INCREASE TO 55 MILES PER HOUR UPON COMPLETION OF CONSTRUCTION; PROVIDING A PENALTY NOT TO EXCEED $ FOR THE VIOLATION OF THIS ORDINANCE; PROVIDING A REPEALER CLAUSE, A SEVERABILITY CLAUSE, AND AN EFFECTIVE DATE. BACKGROUND Dannenbaum Engineering Corporation is the contractor hired by Galveston County and Texas Department of Transportation to construct the improvements to FM 646 from Highway 6 to IH-45. In January, Dannenbaum submitted a request for the City of Dickinson to establish a construction speed zone along that portion of FM 646 within the City limits. However, no engineering and traffic investigation was submitted with the request. APPROVAL YES NO Section of the Texas Transportation Code authorizes the City to alter prima facie speed limits on state highways under construction upon the basis of an engineering and traffic investigation. Until the week of March 2, 2009, the City could not identify authority to establish the requested construction speed zone without having an engineering and traffic investigation. Based on discussions with Texas Department of Transportation, such authority was finally identified. ACTIONS TAKEN READINGS PASSED OTHER 1 st 2 nd 3 rd PAGE 1 OF 2

91 Dickinson City Council Agenda Item Data Sheet Section provides that the City has the same authority as the Texas Transportation Commission in altering prima facie speed limits. Section (e) of the Texas Transportation Code provides that the Texas Transportation Commission shall follow the Procedure for Establishing Speed Zones as adopted by said Commission in conducting the engineering and traffic investigations related to altering prima facie speed limits. The Procedures for Establishing Speed Zones adopted by the Texas Transportation Commission provides that engineering and traffic investigations are not required for establishing construction speed zones. Therefore, an engineering and traffic investigation is not required in order for the City to establish the requested construction speed zone. The attached ordinance will establish a construction speed limit of 45 miles per hour along FM 646 from the intersection of the northern edge of Second Street to the intersection of the northern edge of FM 517 West, a distance of 6,170 feet, during the construction, and will raise the speed limit back to 55 miles per hour when the construction is completed. RECOMMENDATION Staff recommends approval ATTACHMENTS Ordinance Number XXX-2009 Letter from Dannenbaum Engineering on behalf of Texas Department of Transportation FUNDING ISSUES Not applicable Not budgeted Full Amount already budgeted. Funds to be transferred from Acct.# - - SUBMITTING STAFF MEMBER Julie M. Johnston, City Administrator CITY ADMINISTRATOR APPROVAL APPROVAL YES NO ACTIONS TAKEN READINGS PASSED OTHER 1 st 2 nd 3 rd PAGE 2 OF 2

92 ORDINANCE NUMBER XXX-2009 AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF DICKINSON, TEXAS, ALTERING THE PRIMA FACIE SPEED LIMITS ESTABLISHED FOR VEHICLES UNDER THE PROVISIONS OF SECTIONS AND OF THE TEXAS TRANSPORTATION CODE, ON CERTAIN STREETS AND HIGHWAYS OR PARTS THEREOF WITHIN THE CORPORATE LIMITS OF THE CITY OF DICKINSON, AS SET OUT IN THIS ORDINANCE, TO WIT: ESTABLISHING A CONSTRUCTION SPEED ZONE ON FM 646 FROM THE INTERSECTION OF THE NORTHERN EDGE OF SECOND STREET TO THE INTERSECTION OF THE NORTHERN EDGE OF FM 517 WEST, A DISTANCE OF 6,170 FEET TO REDUCE THE SPEED LIMIT TO 45 MILES PER HOUR; AUTHORIZING THE INSTALLATION OF SIGNAGE IN ACCORDANCE WITH THIS ORDINANCE; PROVIDING FOR THE ALTERATION OF THE PRIMA FACIE SPEED LIMIT OF SAID STREET TO INCREASE TO 55 MILES PER HOUR UPON COMPLETION OF CONSTRUCTION; PROVIDING A PENALTY NOT TO EXCEED $ FOR THE VIOLATION OF THIS ORDINANCE; PROVIDING A REPEALER CLAUSE, A SEVERABILITY CLAUSE, AND AN EFFECTIVE DATE. WHEREAS, the TXDOT has contracted for the improvement of FM 646 from Highway 6 to Interstate 45, and the construction activity along FM 646 has created road conditions that require that the maximum speed along such roadway be reduced; and WHEREAS, pursuant to Section of the Texas Transportation Code, the governing body of the City has the same authority as the Texas Transportation Commission to alter prima facie speed limits from the result of an engineering and traffic investigation for an officially designated or marked highway of the state highway system when the highway or part of the highway is under repair, construction or maintenance, with said reasonable and safe prima facie speed limit thereat or thereon being established by the passage of an ordinance and becoming effective when appropriate signs giving notice thereof are erected at such intersection or other place or part of the street or highway; and WHEREAS, Section (e) of the Texas Transportation Code provides that the Texas Transportation Commission shall follow the Procedure for Establishing Speed Zones as adopted by said Commission in conducting the engineering and traffic investigations related to altering prima facie speed limits; and WHEREAS, the Procedures for Establishing Speed Zones adopted by the Texas Transportation Commission provides that engineering and traffic investigations are not required for establishing construction speed zones; and WHEREAS, Dannenbaum Engineering, on behalf of Galveston County and the Texas Department of Transportation, has submitted a request to establish a construction speed zone along FM 646 from the northern edge of Second Street to the CITY OF DICKINSON, TEXAS ORDINANCE NUMBER XXX-2009 PAGE 1 of 3

93 intersection of the northern edge of FM 517 West within the City of Dickinson for such area until such time as the construction is completed; and WHEREAS, the City Council of the City of Dickinson, Texas, finds that establishment of the requested construction zone is in the best interest of the health, safety and welfare of the traveling public and the persons working along FM 646. NOW, THEREFORE, BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF DICKINSON TEXAS, THAT: Section 1. The facts and recitations set forth in the preamble of this Ordinance are hereby found to be true and correct. Section 2. Pursuant to the provisions of Sections and , Texas Transportation Code, the City Council has determined that the following prima facie speed limits hereafter indicated for vehicles upon such roads are hereby determined and declared to be reasonable and safe; and such speed limits are hereby fixed at the rate of speed indicated for vehicles traveling upon the named street and highway, or parts thereof, described as follows: Along FM 646 from the intersection of the northern edge of Second Street to the intersection of the northern edge of FM 517 West, a distance of 6,170 feet, the speed limit shall be 45 miles per hour. Section 3. Upon the completion of the construction activity on the aforementioned section of FM 646, the prima facie speed limit for vehicles traveling upon this section of FM 646 is determined and declared to be 55 miles per hour. Section 4. The City Administrator or his/her designated representative is hereby authorized and directed to place or cause to be placed appropriate traffic control devices to effectuate the establishment of the maximum prima facie speed limit as herein provided. Section 5. Any vehicle traveling at a speed in excess of the maximum prima facie speed limit herein established for the designated roads shall be prima facie evidence that the speed is not reasonable or prudent and that it is unlawful. No person shall drive a vehicle at a speed in excess of that which is reasonable and prudent under the circumstances existing. Section 6. Any person intentionally, knowingly, recklessly, or with criminal negligence violating any of the provisions of this ordinance shall be deemed guilty of a misdemeanor and upon conviction thereof shall be fined in any sum not more than Two Hundred Dollars ($200.00). Section 7. All provisions of the ordinances of the City of Dickinson in conflict with the provisions of this Ordinance are hereby repealed, and all other provisions of the CITY OF DICKINSON, TEXAS ORDINANCE NUMBER XXX-2009 PAGE 2 of 3

94 Ordinances of the City of Dickinson not in conflict with the provisions of this Ordinance shall remain in full force and effect. Section 8. In the event any section, paragraph, subdivision, clause, phrase, provision, sentence, or part of this ordinance or the application of the same to any person or circumstance shall for any reason be adjudged invalid or held unconstitutional by a court of competent jurisdiction, it shall not affect, impair, or invalidate this ordinance as a whole or any part or provision hereof other than the part declared to be invalid or unconstitutional; and the City Council of the City of Dickinson, Texas, declares that it would have passed each and every part of the same notwithstanding the omission of any such part thus declared to be invalid or unconstitutional, or whether there be one or more parts. Section 9. This Ordinance shall be in full force and effect from and after its date of passage, in accordance with the law. PASSED AND APPROVED on the first reading this day of, PASSED AND APPROVED on the second reading this day of, PASSED, APPROVED, AND ADOPTED on the third and final reading this day of, Julie Masters, Mayor City of Dickinson, Texas ATTEST: Carol L. McLemore, City Secretary City of Dickinson, Texas APPROVED AS TO FORM AND CONTENT: Loren B. Smith, City Attorney City of Dickinson, Texas CITY OF DICKINSON, TEXAS ORDINANCE NUMBER XXX-2009 PAGE 3 of 3

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97 Dickinson City Council Agenda Item Data Sheet MEETING DATE March 24, 2009 TOPIC: Ordinance Number XXX-2009 AN ORDINANCE AUTHORIZING THE ISSUANCE OF CITY OF DICKINSON, TEXAS, CERTIFICATES OF OBLIGATION, SERIES 2009; AND CONTAINING OTHER MATTERS INCIDENT THERETO BACKGROUND At its January 27, 2009 meeting, the Council authorized publication of a Notice of Intention to Issue Certificates of Obligation Series 2009 for the City Hall/Library Project and indicated that the ordinance authorizing the issuance of the Certificates would be adopted on March 10, The Notice was published in The Galveston Daily News on February 4 and February 11, During its March 10, 2009 meeting, the Council announced the postponement of the adoption of the ordinance authorizing the issuance of the Certificates until the March 24, 2009 meeting and approved the Preliminary Official Statement related to the Certificates of Obligation Series 2009 for the City Hall/Library Project. The next step in the financing process is to adopt an ordinance authorizing the issuance of the Certificates of Obligation through this agenda item. Once the Council approves the ordinance, the following events will occur prior to receiving the bond proceeds: Circulate the Official Statements by March 25, 2009 Submit transcript of proceedings to Attorney General s office by March 26, 2009 Comments due on Official Statements by March 30, 2009 Print and distribute Official Statements by April 1, 2009 Circulate draft closing memo by April 21, 2009 Closing on or before April 23, 2009 Following approval of this ordinance, no further action by the Council will be needed. Bond Counsel Margo White and Financial Advisors Drew Masterson and Joe Morrow will be present at the Council meeting to answer any further questions. RECOMMENDATION Staff recommends approval. APPROVAL YES NO ACTIONS TAKEN READINGS PASSED OTHER 1 st 2 nd 3 rd PAGE 1 OF 2

98 Dickinson City Council Agenda Item Data Sheet ATTACHMENTS Ordinance Number XXX-2009 Financing Scheduled Prepared by First Southwest Company FUNDING ISSUES None Not budgeted Full Amount already budgeted. Funds to be transferred from Acct.# - - SUBMITTING STAFF MEMBER CITY ADMINISTRATOR APPROVAL Julie M. Johnston, City Administrator APPROVAL YES NO ACTIONS TAKEN READINGS PASSED OTHER 1 st 2 nd 3 rd PAGE 2 OF 2

99 ORDINANCE AUTHORIZING ISSUANCE OF CITY OF DICKINSON, TEXAS, CERTIFICATES OF OBLIGATION, SERIES 2009 Dated March 1, 2009 CITY OF DICKINSON, TEXAS ORDINANCE NUMBER XXX-2009

100 TABLE OF CONTENTS Page ARTICLE I FINDINGS AND DETERMINATIONS... 1 Section 1.1: Findings and Determinations... 1 ARTICLE II DEFINITIONS AND INTERPRETATIONS... 2 Section 2.1: Definitions... 2 Section 2.2: Interpretations... 3 ARTICLE III TERMS OF THE CERTIFICATES... 3 Section 3.1: Amount, Purpose and Authorization... 3 Section 3.2: Designation, Date and Interest Payment Dates... 3 Section 3.3: Numbers, Denomination, Interest Rates and Maturities... 4 Section 3.4: Redemption Prior to Maturity... 4 Section 3.5: Manner of Payment, Characteristics, Execution and Authentication... 5 Section 3.6: Authentication... 5 Section 3.7: Ownership... 5 Section 3.8: Registration, Transfer and Exchange... 5 Section 3.9: Book-Entry Only System... 6 Section 3.10: Replacement Certificates... 8 Section 3.11: Cancellation... 9 ARTICLE IV FORM OF CERTIFICATES... 9 Section 4.1: Form of Certificates... 9 ARTICLE V SECURITY FOR THE CERTIFICATES... 9 Section 5.1: Pledge and Levy of Taxes and Revenues... 9 Section 5.2: Debt Service Fund Section 5.3: Further Proceedings ARTICLE VI CONCERNING THE PAYING AGENT/REGISTRAR Section 6.1: Acceptance Section 6.2: Trust Funds Section 6.3: Certificates Presented Section 6.4: Unclaimed Funds Held by the Paying Agent/Registrar Section 6.5: Paying Agent/Registrar May Own Certificates Section 6.6: Successor Paying Agents/Registrars ARTICLE VII PROVISIONS CONCERNING SALE AND APPLICATION OF PROCEEDS OF CERTIFICATES Section 7.1: Sale of Certificates Section 7.2: Approval, Registration and Delivery i CITY OF DICKINSON, TEXAS ORDINANCE NUMBER XXX-2009

101 Section 7.3: Offering Documents; Ratings Section 7.4: Application of Proceeds of Certificates; Appropriation Section 7.5: Tax Exemption Section 7.6: Qualified Tax-Exempt Obligations Section 7.7: Related Matters ARTICLE VIII CONTINUING DISCLOSURE UNDERTAKING Section 8.1: Annual Reports Section 8.2: Material Event Notices Section 8.3: Limitations, Disclaimers and Amendments Section 8.4: Availability of Information on and after July 1, Section 8.5: Definitions ARTICLE IX MISCELLANEOUS Section 9.1: Defeasance Section 9.2: Ordinance a Contract - Amendments Section 9.3: Legal Holidays Section 9.4: Power to Revise Form of Documents Section 9.5: No Recourse Against City Officials Section 9.6: Further Proceedings Section 9.7: Severability Section 9.8: Open Meeting Section 9.9: Repealer Section 9.10: Effective Date EXHIBIT A - FORM OF CERTIFICATE EXHIBIT B - FORM OF PAYING AGENT/REGISTRAR AGREEMENT EXHIBIT C - BOND PURCHASE AGREEMENT EXHIBIT D - PRELIMINARY OFFICIAL STATEMENT ii CITY OF DICKINSON, TEXAS ORDINANCE NUMBER XXX-2009

102 ORDINANCE NUMBER XXX-2009 AN ORDINANCE AUTHORIZING THE ISSUANCE OF CITY OF DICKINSON, TEXAS, CERTIFICATES OF OBLIGATION, SERIES 2009; AND CONTAINING OTHER MATTERS INCIDENT THERETO BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF DICKINSON, TEXAS: ARTICLE I FINDINGS AND DETERMINATIONS Section 1.1: and determines that: Findings and Determinations. The City Council hereby officially finds (a) The City of Dickinson, Texas (the City ), acting through its City Council, is authorized pursuant to and in accordance with the provisions of Texas Local Government Code, Chapter 271, Subchapter C, as amended (the Act ), to issue certificates of obligation to provide all or part of the funds to pay contractual obligations to be incurred for the construction of public works and the purchase of materials, supplies, equipment, machinery, buildings, land and rights-of-way for authorized needs and purposes and for the payment of contractual obligations for professional services, to wit (i) construction and equipment of a new City Hall and Library Complex, and (ii) professional services rendered in connection with the above listed project. (b) The City Council authorized the publication of a notice of intention to issue its City of Dickinson, Texas, Certificates of Obligation, Series 2009 (the Certificates ) to the effect that the City Council was tentatively scheduled to meet at 7:00 p.m. on March 10, 2009, at its regular meeting place to adopt an ordinance authorizing the issuance of the Certificates to be payable from (i) an ad valorem tax levied, within the limits prescribed by law, on the taxable property located within the City, and (ii) the revenues to be derived from the City s solid waste management system (the System ) after the payment of all operation and maintenance expenses thereof (the Net Revenues ) in an amount not to exceed $1,000, to the extent that ad valorem taxes are ever insufficient or unavailable for such purposes, provided that the pledge of Net Revenues is and shall be junior and subordinate in all respects to the pledge of Net Revenues to the payment of any obligation of the City, whether authorized heretofore or hereafter, which the City designates as having a pledge senior to the pledge of the Net Revenues to the payment of the Certificates. (c) Such notice was published at the times and in the manner required by the Act. (d) The City Council considered the issue of the Certificates at a regular meeting commencing at 7:00 p.m. on March 10, 2009, at its regular meeting place, and determined that the adoption of the ordinance should be postponed until the regular meeting at 7:00 p.m. on March 24, CITY OF DICKINSON, TEXAS ORDINANCE NUMBER XXX-2009

103 (e) No petition signed by at least five percent (5%) of the qualified voters of the City has been filed with or presented to any official of the City protesting the issuance of such Certificates on or before the date of passage of this Ordinance. (f) The City has determined that it is in the best interests of the City and that it is otherwise desirable to issue the Certificates to provide all or part of the funds to pay contractual obligations to be incurred for the purposes authorized by the Act. ARTICLE II DEFINITIONS AND INTERPRETATIONS Section 2.1: Definitions. As used herein, the following terms shall have the meanings specified, unless the context clearly indicates otherwise: Act shall mean Texas Local Government Code, Chapter 271, Subchapter C, as amended. Attorney General shall mean the Attorney General of the State of Texas. Certificate or Certificates shall mean any or all of the City of Dickinson, Texas, Certificates of Obligation, Series 2009, authorized by this Ordinance. City shall mean the City of Dickinson, Texas, and, where appropriate, its City Council. City Council shall mean the governing body of the City. Code shall mean the Internal Revenue Code of 1986, as amended. Comptroller shall mean the Comptroller of Public Accounts of the State of Texas. Debt Service Fund shall mean the fund by that name created pursuant to Section 5.2 hereof. Fiscal Year shall mean the City s then designated fiscal year, which currently is the twelve-month period beginning on the first day of October of a calendar year and ending on the last day of September of the next succeeding calendar year and each such period may be designated with the number of the calendar year in which such period ends. Interest Payment Date, when used in connection with any Certificate, shall mean September 1, 2009, and each March 1 and September 1 thereafter until maturity or earlier redemption of such Certificate. Issuance Date shall mean the date on which the Certificates are delivered to and paid for by the Purchaser. Ordinance shall mean this Ordinance and all amendments hereof and supplements hereto. 2 CITY OF DICKINSON, TEXAS ORDINANCE NUMBER XXX-2009

104 Outstanding, when used with reference to the Certificates, shall mean, as of a particular date, all Certificates theretofore and thereupon delivered pursuant to this Ordinance except: (a) any Certificates canceled by or on behalf of the City at or before such date; (b) any Certificates defeased pursuant to the defeasance provisions of this Ordinance or otherwise defeased as permitted by applicable law; and (c) any Certificates in lieu of or in substitution for which a replacement Certificate shall have been delivered pursuant to this Ordinance. Paying Agent/Registrar shall mean The Bank of New York Mellon Trust Company, National Association, and its successors in that capacity. Purchaser shall mean the entity or entities specified in Section 7.1 hereof. Record Date shall mean the close of business on the fifteenth calendar day of the month immediately preceding the applicable Interest Payment Date. Register shall mean the registration books for the Certificates kept by the Paying Agent/Registrar in which are maintained the names and addresses of, and the principal amounts registered to, each Registered Owner of Certificates. Registered Owner shall mean the person or entity in whose name any Certificate is registered in the Register. Section 2.2: Interpretations. All terms defined herein and all pronouns used in this Ordinance shall be deemed to apply equally to singular and plural and to all genders. The titles and headings of the articles and sections of this Ordinance have been inserted for convenience of reference only and are not to be considered a part hereof and shall not in any way modify or restrict any of the terms or provisions hereof. This Ordinance and all the terms and provisions hereof shall be liberally construed to effectuate the purposes set forth herein and to sustain the validity of the Certificates and the validity of the levy of ad valorem taxes to pay the principal of and interest on the Certificates. ARTICLE III TERMS OF THE CERTIFICATES Section 3.1: Amount, Purpose and Authorization. The Certificates shall be issued in fully registered form, without coupons, under and pursuant to the authority of the Act in the total authorized aggregate principal amount of ONE MILLION THIRTY FIVE THOUSAND AND NO/100 DOLLARS ($1,035,000) for the purpose of providing all or part of the funds to pay contractual obligations to be incurred for the purposes described in paragraph 1.1(a) hereof, and to pay the costs of issuing the Certificates. Section 3.2: Designation, Date and Interest Payment Dates. The Certificates shall be designated as the City of Dickinson, Texas, Certificates of Obligation, Series 2009, and shall be dated April 1, The Certificates shall bear interest at the rates set forth in Section 3.3 below, from the later of April 1, 2009, or the most recent Interest Payment Date to which interest has been paid or duly provided for, calculated on the basis of a 360-day year of twelve 3 CITY OF DICKINSON, TEXAS ORDINANCE NUMBER XXX-2009

105 30-day months, payable on September 1, 2009, and each March 1 and September 1 thereafter until maturity or earlier redemption. If interest on any Certificate is not paid on any Interest Payment Date and continues unpaid for thirty (30) days thereafter, the Paying Agent/Registrar shall establish a new record date for the payment of such interest, to be known as a Special Record Date. The Paying Agent/Registrar shall establish a Special Record Date when funds to make such interest payment are received from or on behalf of the City. Such Special Record Date shall be fifteen (15) days prior to the date fixed for payment of such past due interest, and notice of the date of payment and the Special Record Date shall be sent by United States mail, first class, postage prepaid, not later than five (5) days prior to the Special Record Date, to each affected Registered Owner as of the close of business on the day prior to mailing of such notice. Section 3.3: Numbers, Denomination, Interest Rates and Maturities. The Certificates shall be initially issued bearing the numbers, in the principal amounts and bearing interest at the rates set forth in the following schedule, and may be transferred and exchanged as set out in this Ordinance. The Certificates shall mature on March 1 in each of the years and in the amounts set out in such schedule. Certificates delivered in transfer of or in exchange for other Certificates shall be numbered in order of their authentication by the Paying Agent/Registrar, shall be in the denomination of $5,000 or integral multiples thereof and shall mature on the same date and bear interest at the same rate as the Certificate or Certificates in lieu of which they are delivered. Certificate Number Year of Maturity Principal Amount Interest Rate R $330,000 % R ,000 R ,000 Section 3.4: Redemption Prior to Maturity. (a) The Certificates are subject to redemption prior to maturity, at the option of the City, in whole or in part, on March 1, 2019, or any date thereafter, at par plus accrued interest to the date fixed for redemption. (b) Certificates may be redeemed in part only in integral multiples of $5,000. If a Certificate subject to redemption is in a denomination larger than $5,000, a portion of such Certificate may be redeemed, but only in integral multiples of $5,000. In selecting portions of Certificates for redemption, each Certificate shall be treated as representing that number of Certificates of $5,000 denomination which is obtained by dividing the principal amount of such Certificate by $5,000. Upon presentation and surrender of any Certificate for redemption in part, the Paying Agent/Registrar, in accordance with the provisions of this Ordinance, shall authenticate and deliver in exchange therefor a Certificate or Certificates of like maturity and interest rate in an aggregate principal amount equal to the unredeemed portion of the Certificate so surrendered. 4 CITY OF DICKINSON, TEXAS ORDINANCE NUMBER XXX-2009

106 (c) Notice of any redemption, identifying the Certificates or portions thereof to be redeemed, shall be sent by United States mail, first class, postage prepaid, to the Registered Owners thereof at their addresses as shown on the Register, not less than thirty (30) days before the date fixed for such redemption. By the date fixed for redemption, due provision shall be made with the Paying Agent/Registrar for the payment of the redemption price of the Certificates called for redemption. If such notice of redemption is given, and if due provision for such payment is made, all as provided above, the Certificates which are to be so redeemed thereby automatically shall be redeemed prior to their scheduled maturities, they shall not bear interest after the date fixed for redemption, and they shall not be regarded as being Outstanding except for the purpose of being paid with the funds so provided for such payment. Section 3.5: Manner of Payment, Characteristics, Execution and Authentication. The Paying Agent/Registrar is hereby appointed the paying agent for the Certificates. The Certificates shall be payable, shall have the characteristics and shall be executed, sealed, registered and authenticated, all as provided and in the manner indicated in the FORM OF CERTIFICATES set forth in Article IV of and Exhibit A to this Ordinance. If any officer of the City whose manual or facsimile signature shall appear on the Certificates shall cease to be such officer before the authentication of the Certificates or before the delivery of the Certificates, such manual or facsimile signature shall nevertheless be valid and sufficient for all purposes as if such officer had remained in such office. The approving legal opinion of Andrews Kurth LLP, Houston, Texas, Bond Counsel, may be printed on the back of the Certificates over the certification of the City Secretary, which may be executed in facsimile. CUSIP numbers also may be printed on the Certificates, but errors or omissions in the printing of either the opinion or the numbers shall have no effect on the validity of the Certificates. Section 3.6: Authentication. Except for the Certificates to be initially issued, which need not be authenticated by the Registrar, only such Certificates as shall bear thereon a certificate of authentication, substantially in the form provided in Article IV of and Exhibit A to this Ordinance, manually executed by an authorized representative of the Paying Agent/Registrar, shall be entitled to the benefits of this Ordinance or shall be valid or obligatory for any purpose. Such duly executed certificate of authentication shall be conclusive evidence that the Certificate so authenticated was delivered by the Paying Agent/Registrar hereunder. Section 3.7: Ownership. The City, the Paying Agent/Registrar and any other person may treat the person in whose name any Certificate is registered as the absolute owner of such Certificate for the purpose of making and receiving payment of the principal thereof and interest thereon and for all other purposes, whether or not such Certificate is overdue, and neither the City nor the Paying Agent/Registrar shall be bound by any notice or knowledge to the contrary. All payments made to the person deemed to be the Registered Owner of any Certificate in accordance with this Section shall be valid and effective and shall discharge the liability of the City and the Paying Agent/Registrar upon such Certificate to the extent of the sums paid. Section 3.8: Registration, Transfer and Exchange. The Paying Agent/Registrar is hereby appointed the registrar for the Certificates. So long as any Certificate remains Outstanding, the Paying Agent/Registrar shall keep the Register at its office in Dallas, Texas, in 5 CITY OF DICKINSON, TEXAS ORDINANCE NUMBER XXX-2009

107 which, subject to such reasonable regulations as it may prescribe, the Paying Agent/Registrar shall provide for the registration and transfer of the Certificates in accordance with the terms of this Ordinance. Each Certificate shall be transferable only upon the presentation and surrender thereof at the principal corporate trust office of the Paying Agent/Registrar, accompanied by an assignment duly executed by the Registered Owner or his authorized representative in form satisfactory to the Paying Agent/Registrar. Upon due presentation of any Certificate for transfer, the Paying Agent/Registrar shall authenticate and deliver in exchange therefor, within seventy-two (72) hours after such presentation, a new Certificate or Certificates, registered in the name of the transferee or transferees, in authorized denominations and of the same maturity and aggregate principal amount and bearing interest at the same rate as the Certificate or Certificates so presented and surrendered. All Certificates shall be exchangeable upon the presentation and surrender thereof at the principal corporate trust office of the Paying Agent/Registrar for a Certificate or Certificates of the same maturity and interest rate and in any authorized denomination, in an aggregate principal amount equal to the unpaid principal amount of the Certificate or Certificates presented for exchange. The Paying Agent/Registrar shall be and is hereby authorized to authenticate and deliver exchange Certificates in accordance with the provisions of this Section. Each Certificate delivered by the Paying Agent/Registrar in accordance with this Section shall be entitled to the benefits and security of this Ordinance to the same extent as the Certificate or Certificates in lieu of which such Certificate is delivered. All Certificates issued in transfer or exchange shall be delivered to the Registered Owners thereof at the principal corporate trust office of the Paying Agent/Registrar or sent by United States mail, first class, postage prepaid. The City or the Paying Agent/Registrar may require the Registered Owner of any Certificate to pay a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with the transfer or exchange of such Certificate. Any fee or charge of the Paying Agent/Registrar for such transfer or exchange shall be paid by the City. The Paying Agent/Registrar shall not be required to transfer or exchange any Certificate called for redemption in whole or in part during the forty-five (45) day period immediately prior to the date fixed for redemption; provided, however, that this restriction shall not apply to the transfer or exchange by the Registered Owner of the unredeemed portion of a Certificate called for redemption in part. Section 3.9: Book-Entry Only System. (a) The definitive Certificates shall be initially issued in the form of a separate single fully registered Certificate for each of the maturities thereof. Upon initial issuance, the ownership of each such Certificate shall be registered in the name of Cede & Co., as nominee of DTC, and except as provided in subsection (b) hereof, all of the Outstanding Certificates shall be registered in the name of Cede & Co., as nominee of DTC. Upon delivery by DTC to the Paying Agent/Registrar of written notice to the effect that DTC has determined to substitute a new nominee in place of Cede & Co., and subject to the provisions in this Ordinance with respect to interest checks being mailed to the Registered 6 CITY OF DICKINSON, TEXAS ORDINANCE NUMBER XXX-2009

108 Owner at the close of business on the Record Date, the word Cede & Co. in this Ordinance shall refer to such new nominee of DTC. With respect to Certificates registered in the name of Cede & Co., as nominee of DTC, the City and the Paying Agent/Registrar shall have no responsibility or obligation to any DTC Participant or to any person on behalf of whom such a DTC Participant holds an interest in the Certificates. Without limiting the immediately preceding sentence, the City and the Paying Agent/Registrar shall have no responsibility or obligation with respect to (a) the accuracy of the records of DTC, Cede & Co. or any DTC Participant with respect to any ownership interest in the Certificates, (b) the delivery to any DTC Participant or any other person, other than a holder of the Certificate, as shown on the Register, of any notice with respect to the Certificates, including any notice of redemption or (c) the payment to any DTC Participant or any other person, other than a holder of the Certificate, as shown in the Register of any amount with respect to principal of Certificates, premium, if any, or interest on the Certificates. Except as provided in subsection (c) of this Section 3.9, the City and the Paying Agent/Registrar shall be entitled to treat and consider the person in whose name each Certificate is registered in the Register as the absolute owner of such Certificate for the purpose of payment of principal of, premium, if any, and interest on Certificates, for the purpose of giving notices of redemption and other matters with respect to such Certificate, for the purpose of registering transfer with respect to such Certificate, and for all other purposes whatsoever. The Paying Agent/Registrar shall pay all principal of Certificates, premium, if any, and interest on the Certificates only to or upon the order of the respective owners, as shown in the Register as provided in this Ordinance, or their respective attorneys duly authorized in writing, and all such payments shall be valid and effective to fully satisfy and discharge the City's obligations with respect to payment of principal of, premium, if any, and interest on the Certificates to the extent of the sum or sums so paid. No person other than an owner shall receive a Certificate evidencing the obligation of the City to make payments of amounts due pursuant to this Ordinance. (b) Payments and Notices to Cede & Co. Notwithstanding any other provision of this Ordinance to the contrary, as long as any Certificates are registered in the name of Cede & Co., as nominee of DTC, all payments with respect to principal of, premium, if any, and interest on the Certificates, and all notices with respect to such Certificates shall be made and given, respectively, in the manner provided in the representation letter of the City to DTC. (c) Successor Securities Depository; Transfer Outside Book-Entry Only System. In the event that the City or the Paying Agent/Registrar determines that DTC is incapable of discharging its responsibilities described herein and in the representation letter of the City to DTC, and that it is in the best interest of the beneficial owners of the Certificates that they be able to obtain certified Certificates, the City or the Paying Agent/Registrar shall (a) appoint a successor securities depository, qualified to act as such under Section 17(a) of the Securities and Exchange Act of 1934, as amended, notify DTC of the appointment of such successor securities depository and transfer one or more separate Certificates to such successor securities depository or (b) notify DTC of the availability through DTC of Certificates and transfer one or more separate Certificates to DTC Participants having Certificates credited to their DTC accounts. In such event, the Certificates shall no longer be restricted to being registered in the Register in the name of Cede & Co., as nominee of DTC, but may be registered in the name of the successor 7 CITY OF DICKINSON, TEXAS ORDINANCE NUMBER XXX-2009

109 securities depository, or its nominee, or in whatever name or names holders of the Certificates transferring or exchanging Certificates shall designate, in accordance with the provisions of this Ordinance. Section 3.10: Replacement Certificates. Upon the presentation and surrender to the Paying Agent/Registrar of a damaged or mutilated Certificate, the Paying Agent/Registrar shall authenticate and deliver in exchange therefor a replacement Certificate, of the same maturity, interest rate and principal amount, bearing a number not contemporaneously outstanding. The City or the Paying Agent/Registrar may require the Registered Owner of such Certificate to pay a sum sufficient to cover any tax or other governmental charge that may be imposed in connection therewith and any other expenses connected therewith, including the fees and expenses of the Paying Agent/Registrar and the City. If any Certificate is lost, apparently destroyed or wrongfully taken, the City, pursuant to the applicable laws of the State of Texas and ordinances of the City, and in the absence of notice or knowledge that such Certificate has been acquired by a bona fide purchaser, shall execute, and the Paying Agent/Registrar shall authenticate and deliver, a replacement Certificate of the same maturity, interest rate and principal amount, bearing a number not contemporaneously outstanding, provided that the Registered Owner thereof shall have: (a) furnished to the City and the Paying Agent/Registrar satisfactory evidence of the ownership of and the circumstances of the loss, destruction or theft of such Certificate; (b) furnished such security or indemnity as may be required by the Paying Agent/Registrar and the City to save and hold them harmless; (c) paid all expenses and charges in connection therewith, including, but not limited to, printing costs, legal fees, fees of the Paying Agent/Registrar and any tax or other governmental charge that may be imposed; and (d) met any other reasonable requirements of the City and the Paying Agent/Registrar. If, after the delivery of such replacement Certificate, a bona fide purchaser of the original Certificate in lieu of which such replacement Certificate was issued presents for payment such original Certificate, the City and the Paying Agent/Registrar shall be entitled to recover such replacement Certificate from the person to whom it was delivered or any person taking therefrom, except a bona fide purchaser, and shall be entitled to recover upon the security or indemnity provided therefor to the extent of any loss, damage, cost or expense incurred by the City or the Paying Agent/Registrar in connection therewith. If any such mutilated, lost, apparently destroyed or wrongfully taken Certificate has become or is about to become due and payable, the City in its discretion may, instead of issuing a replacement Certificate, authorize the Paying Agent/Registrar to pay such Certificate. Each replacement Certificate delivered in accordance with this Section shall be entitled to the benefits and security of this Ordinance to the same extent as the Certificate or Certificates in lieu of which such replacement Certificate is delivered. 8 CITY OF DICKINSON, TEXAS ORDINANCE NUMBER XXX-2009

110 Section 3.11: Cancellation. All Certificates paid or redeemed in accordance with this Ordinance, and all Certificates in lieu of which exchange Certificates or replacement Certificates are authenticated and delivered in accordance herewith, shall be canceled and destroyed upon the making of proper records regarding such payment or redemption. The Paying Agent/Registrar shall periodically furnish the City with certificates of destruction of such Certificates. ARTICLE IV FORM OF CERTIFICATES Section 4.1: Form of Certificates. The Certificates, including the Form of Comptroller s Registration Certificate, Form of Paying Agent/Registrar Authentication Certificate, and Form of Assignment, shall be in substantially the form set forth in Exhibit A hereto, with such omissions, insertions and variations as may be necessary or desirable, and not prohibited by this Ordinance. ARTICLE V SECURITY FOR THE CERTIFICATES Section 5.1: Pledge and Levy of Taxes and Revenues. (a) To provide for the payment of principal of and interest on the Certificates, there is hereby levied, within the limits prescribed by law, for the current year and each succeeding year thereafter, while the Certificates or any part of the principal thereof and the interest thereon remain outstanding and unpaid, an ad valorem tax upon all taxable property within the City sufficient to pay the interest on the Certificates and to create and provide a sinking fund of not less than 2% of the principal amount of the Certificates or not less than the principal payable out of such tax, whichever is greater, with full allowance being made for tax delinquencies and the costs of tax collection, and such taxes, when collected, shall be applied to the payment of principal of and interest on the Certificates by deposit to the Debt Service Fund and to no other purpose. (b) The City hereby declares its purpose and intent to provide and levy a tax legally sufficient to pay the principal of and interest on the Certificates, it having been determined that the existing and available taxing authority of the City for such purpose is adequate to permit a legally sufficient tax. As long as any Certificates remain outstanding, all moneys on deposit in, or credited to, the Debt Service Fund shall be secured by a pledge of security, as provided by law for cities in the State of Texas. (c) In addition, pursuant to the authority of Chapter 1502, Texas Government Code, as amended, the City also hereby pledges the revenues to be derived from the City s solid waste management system, after the payment of all operation and maintenance expenses thereof (the Net Revenues ), in an amount not to exceed $1,000, to the payment of the principal of and interest on the Certificates, provided that the pledge of Net Revenues is and shall be junior and subordinate in all respects to the pledge of Net Revenues to the payment of any obligation of the City, whether authorized heretofore or hereafter, which the City designates as having a pledge senior to the pledge of the Net Revenues to the payment of the Certificates. The City also reserves the right to issue, for any lawful purpose at any time, in one or more installments, 9 CITY OF DICKINSON, TEXAS ORDINANCE NUMBER XXX-2009

111 bonds, certificates of obligation and other obligations of any kind, secured in whole or in part by a pledge of Net Revenues, that may be prior and superior in right to, on a parity with, or junior and subordinate to the pledge of Net Revenues securing the Certificates. (d) To pay the interest coming due on the Certificates prior to receipt of the taxes levied to pay such interest, there is hereby appropriated from current funds on hand, which are hereby certified to be on hand and available for such purpose, an amount sufficient to pay such interest, and such amount shall be used for no other purpose. Section 5.2: Debt Service Fund. The Certificates of Obligation, Series 2009, Debt Service Fund (the Debt Service Fund ) is hereby created as a special fund solely for the benefit of the Certificates. The City shall establish and maintain such fund at an official City depository and shall keep such fund separate and apart from all other funds and accounts of the City. Any amount on deposit in the Debt Service Fund shall be maintained by the City in trust for the Registered Owners of the Certificates. Such amount, plus any other amounts deposited by the City into such fund and any and all investment earnings on amounts on deposit in such fund, shall be used only to pay the principal of, premium, if any, and interest on the Certificates. Section 5.3: Further Proceedings. After the Certificates to be initially issued have been executed, it shall be the duty of the Mayor to deliver the Certificates to be initially issued and all pertinent records and proceedings to the Attorney General for examination and approval. After the Certificates to be initially issued shall have been approved by the Attorney General, they shall be delivered to the Comptroller for registration. Upon registration of the Certificates to be initially issued, the Comptroller (or a deputy lawfully designated in writing to act for the Comptroller) shall manually sign the Comptroller s registration certificate prescribed herein to be affixed or attached to the Certificates to be initially issued, and the seal of said Comptroller shall be impressed, or placed in facsimile, thereon. ARTICLE VI CONCERNING THE PAYING AGENT/REGISTRAR Section 6.1: Acceptance. The Bank of New York Mellon Trust Company, National Association, is hereby appointed as the initial Paying Agent/Registrar for the Certificates pursuant to the terms and provisions of the Paying Agent/Registrar Agreement by and between the City and the Paying Agent/Registrar. The Paying Agent/Registrar Agreement shall be substantially in the form attached hereto as Exhibit B, the terms and provisions of which are hereby approved, and the Mayor is hereby authorized to execute and deliver such Paying Agent/Registrar Agreement on behalf of the City in multiple counterparts and the City Secretary is hereby authorized to attest thereto and affix the City s seal. Such initial Paying Agent/Registrar and any successor Paying Agent/Registrar, by undertaking the performance of the duties of the Paying Agent/Registrar hereunder, and in consideration of the payment of any fees pursuant to the terms of any contract between the Paying Agent/Registrar and the City and/or the deposits of money pursuant to this Ordinance, shall be deemed to accept and agree to abide by the terms of this Ordinance. 10 CITY OF DICKINSON, TEXAS ORDINANCE NUMBER XXX-2009

112 Section 6.2: Trust Funds. All money transferred to the Paying Agent/Registrar in its capacity as Paying Agent/Registrar for the Certificates under this Ordinance (except any sums representing Paying Agent/Registrar s fees) shall be held in trust for the benefit of the City, shall be the property of the City and shall be disbursed in accordance with this Ordinance. Section 6.3: Certificates Presented. Subject to the provisions of Section 6.4, all matured Certificates presented to the Paying Agent/Registrar for payment shall be paid without the necessity of further instructions from the City. Such Certificates shall be canceled as provided herein. Section 6.4: Unclaimed Funds Held by the Paying Agent/Registrar. Funds held by the Paying Agent/Registrar that represent principal of and interest on the Certificates remaining unclaimed by the Registered Owner thereof after the expiration of three years from the date such funds have become due and payable (a) shall be reported and disposed of by the Paying Agent/Registrar in accordance with the provisions of Title 6 of the Texas Property Code, as amended, to the extent such provisions are applicable to such funds, or (b) to the extent such provisions do not apply to the funds, such funds shall be paid by the Paying Agent/Registrar to the City upon receipt by the Paying Agent/Registrar of a written request therefor from the City. The Paying Agent/Registrar shall have no liability to the Registered Owners of the Certificates by virtue of actions taken in compliance with this Section. Section 6.5: Paying Agent/Registrar May Own Certificates. The Paying Agent/Registrar in its individual or any other capacity, may become the owner or pledgee of Certificates with the same rights it would have if it were not the Paying Agent/Registrar. Section 6.6: Successor Paying Agents/Registrars. The City covenants that at all times while any Certificates are Outstanding it will provide a legally qualified bank, trust company, financial institution or other agency to act as Paying Agent/Registrar for the Certificates. The City reserves the right to change the Paying Agent/Registrar for the Certificates on not less than sixty (60) days written notice to the Paying Agent/Registrar, as long as any such notice is effective not less than 60 days prior to the next succeeding principal or interest payment date on the Certificates. Promptly upon the appointment of any successor Paying Agent/Registrar, the previous Paying Agent/Registrar shall deliver the Register or a copy thereof to the new Paying Agent/Registrar, and the new Paying Agent/Registrar shall notify each Registered Owner, by United States mail, first class, postage prepaid, of such change and of the address of the new Paying Agent/Registrar. Each Paying Agent/Registrar hereunder, by acting in that capacity, shall be deemed to have agreed to the provisions of this Ordinance. ARTICLE VII PROVISIONS CONCERNING SALE AND APPLICATION OF PROCEEDS OF CERTIFICATES Section 7.1: Sale of Certificates. The sale of the Certificates to SAMCO Capital Markets (the Purchaser ) at a price of the par value thereof plus a net premium of $, less an underwriting discount of $, plus accrued interest on the Certificates, is hereby approved, and delivery of the Certificates to the Purchaser, registered in its 11 CITY OF DICKINSON, TEXAS ORDINANCE NUMBER XXX-2009

113 name, shall be made upon payment therefor in accordance with the terms of sale and the terms and conditions of the Bond Purchase Agreement attached hereto as Exhibit C. It is hereby officially found, determined and declared that the foregoing price and terms are the most advantageous reasonably obtainable by the City. Section 7.2: Approval, Registration and Delivery. The Mayor is hereby authorized to have control and custody of the Certificates and all necessary records and proceedings pertaining thereto pending their delivery, and the Mayor and other officers and employees of the City are hereby authorized and directed to make such certifications and to execute such instruments as may be necessary to accomplish the delivery of the Certificates and to assure the investigation, examination and approval thereof by the Attorney General and the registration of the initial Certificates by the Comptroller. Upon registration of the Certificates, the Comptroller (or the Comptroller s certificates clerk or an assistant certificates clerk lawfully designated in writing to act for the Comptroller) shall manually sign the Comptroller s Registration Certificates prescribed herein to be attached or affixed to each Certificates initially delivered and the seal of the Comptroller shall be impressed or printed or lithographed thereon. Section 7.3: Offering Documents; Ratings. The City hereby approves the form and content of the Preliminary Official Statement, attached hereto as Exhibit D, relating to the Certificates, and hereby approves the preparation of the final Official Statement, in substantially the form of the Preliminary Official Statement, with such revisions as are necessary to reflect the terms of the sale of the Certificates, and ratifies and approves the distribution of such Preliminary Official Statement and approves the distribution of the final Official Statement and any addenda, supplement or amendment thereto, in the offer and sale of the Certificates and in the reoffering of the Certificates by the Purchaser, with such changes therein or additions thereto as the officials executing same may deem advisable, such determination to be conclusively evidenced by their execution thereof. The Mayor is hereby authorized and directed to execute, and the City Secretary is hereby authorized and directed to attest, the final Official Statement. It is further hereby officially found, determined and declared that the statements and representations contained in the Preliminary Official Statement and final Official Statement are true and correct in all material respects, to the best knowledge and belief of the City Council, and that, as of the date thereof, the Preliminary Official Statement was an official statement of the City with respect to the Certificates that was deemed final by an authorized official of the City except for the omission of no more than the information permitted by subsection (b)(1) of Rule 15c2-12 of the Securities and Exchange Commission. Further, the City Council hereby ratifies, authorizes and approves the actions of the Mayor, the City s financial advisor and other consultants in seeking a rating on the Certificates from Standard & Poor s Ratings Services and such actions are hereby ratified and confirmed. Section 7.4: Application of Proceeds of Certificates; Appropriation. Proceeds from the sale of the Certificates shall, promptly upon receipt by the City, be applied as follows: (1) Accrued interest shall be deposited into the Debt Service Fund created in Section 5.2 of this Ordinance; 12 CITY OF DICKINSON, TEXAS ORDINANCE NUMBER XXX-2009

114 (2) A portion of the proceeds shall be applied to pay expenses arising in connection with the issuance of the Certificates; and (3) The remaining proceeds shall be applied, together with other funds of the City, to provide funds to pay contractual obligations to be incurred for the purposes set forth in Section 3.1 of this Ordinance. Section 7.5: Tax Exemption. The City intends that the interest on the Certificates shall be excludable from gross income of the owners thereof for federal income tax purposes pursuant to Sections 103 and 141 through 150 of the Internal Revenue Code of 1986, as amended (the Code ), and all applicable temporary, proposed and final regulations (the Regulations ) and procedures promulgated thereunder and applicable to the Certificates. For this purpose, the City covenants that it will monitor and control the receipt, investment, expenditure and use of all gross proceeds of the Certificates (including all property the acquisition, construction or improvement of which is to be financed directly or indirectly with the proceeds of the Certificates) and take or omit to take such other and further actions as may be required by Sections 103 and 141 through 150 of the Code and the Regulations to cause interest on the Certificates to be and remain excludable from the gross income, as defined in Section 61 of the Code, of the owners of the Certificates for federal income tax purposes. Without limiting the generality of the foregoing, the City shall comply with each of the following covenants: (a) The City will use all of the proceeds of the Certificates to (i) provide funds to pay contractual obligations to be incurred for the purposes set forth in Section 3.1 hereof (the Project ), which Project will be owned and operated by the City, and (ii) to pay the costs of issuing the Certificates. The City will not use any portion of the proceeds of the Certificates to pay the principal of or interest or redemption premium on, any other obligation of the City or a related person. (b) The City will not directly or indirectly take any action, or omit to take any action, which action or omission would cause the Certificates to constitute private activity bonds within the meaning of Section 141(a) of the Code. (c) Principal of and interest on the Certificates will be paid solely from ad valorem taxes and Net Revenues collected by the City, investment earnings on such collections, and as available, proceeds of the Certificates. (d) Based upon all facts and estimates now known or reasonably expected to be in existence on the date the Certificates are delivered, the City reasonably expects that the proceeds of the Certificates will not be used in a manner that would cause the Certificates or any portion thereof to be an arbitrage bond within the meaning of Section 148 of the Code. (e) At all times while the Certificates are outstanding, the City will identify and properly account for all amounts constituting gross proceeds of the Certificates in accordance with the Regulations. The City will monitor the yield on the investments of the proceeds of the Certificates and, to the extent required by the Code and the Regulations, will restrict the yield on such investments to a yield which is not materially higher than the yield on the Certificates. To the extent necessary to prevent the Certificates from constituting arbitrage bonds, the City 13 CITY OF DICKINSON, TEXAS ORDINANCE NUMBER XXX-2009

115 will make such payments as are necessary to cause the yield on all yield restricted nonpurpose investments allocable to the Certificates to be less than the yield that is materially higher than the yield on the Certificates. (f) The City will not take any action or knowingly omit to take any action which, if taken or omitted, would cause the Certificates to be treated as federally guaranteed obligations for purposes of Section 149(b) of the Code. (g) The City represents that not more than fifty percent (50%) of the proceeds of the Certificates will be invested in nonpurpose investments (as defined in Section 148(f)(6)(A) of the Code) having a substantially guaranteed yield for four years or more within the meaning of Section 149(g)(3)(A)(ii) of the Code, and the City reasonably expects that at least eighty-five percent (85%) of the spendable proceeds of the Certificates will be used to carry out the governmental purpose of the Certificates within the three-year period beginning on the date of issue of the Certificates. (h) The City will take all necessary steps to comply with the requirement that certain amounts earned by the City on the investment of the gross proceeds of the Certificates, if any, be rebated to the federal government. Specifically, the City will (i) maintain records regarding the receipt, investment, and expenditure of the gross proceeds of the Certificates as may be required to calculate such excess arbitrage profits separately from records of amounts on deposit in the funds and accounts of the City allocable to other obligations of the City or moneys which do not represent gross proceeds of any obligations of the City and retain such records for at least six years after the day on which the last outstanding Certificate is discharged, (ii) account for all gross proceeds under a reasonable, consistently applied method of accounting, not employed as an artifice or device to avoid in whole or in part, the requirements of Section 148 of the Code, including any specified method of accounting required by applicable Regulations to be used for all or a portion of any gross proceeds, (iii) calculate, at such times as are required by applicable Regulations, the amount of excess arbitrage profits, if any, earned from the investment of the gross proceeds of the Certificates and (iv) timely pay, as required by applicable Regulations, all amounts required to be rebated to the federal government. In addition, the City will exercise reasonable diligence to assure that no errors are made in the calculations required by the preceding sentence and, if such an error is made, to discover and promptly correct such error within a reasonable amount of time thereafter, including payment to the federal government of any delinquent amounts owed to it, interest thereon and any penalty. (i) The City will not directly or indirectly pay any amount otherwise payable to the federal government pursuant to the foregoing requirements to any person other than the federal government by entering into any investment arrangement with respect to the gross proceeds of the Certificates that might result in a reduction in the amount required to be paid to the federal government because such arrangement results in a smaller profit or a larger loss than would have resulted if such arrangement had been at arm's length and had the yield on the Certificates not been relevant to either party. (j) The City will timely file or cause to be filed with the Secretary of the Treasury of the United States the information required by Section 149(e) of the Code with respect to the Certificates on such form and in such place as the Secretary may prescribe. 14 CITY OF DICKINSON, TEXAS ORDINANCE NUMBER XXX-2009

116 (k) The City will not issue or use the Certificates as part of an abusive arbitrage device (as defined in Section (a) of the Regulations). Without limiting the foregoing, the Certificates are not and will not be a part of a transaction or series of transactions that attempts to circumvent the provisions of Section 148 of the Code and the Regulations by (i) enabling the City to exploit the difference between tax-exempt and taxable interest rates to gain a material financial advantage, or (ii) increasing the burden on the market for tax-exempt obligations. (l) Proper officers of the City charged with the responsibility for issuing the Certificates are hereby directed to make, execute and deliver certifications as to facts, estimates or circumstances in existence as of the date of issuance of the Certificates and stating whether there are facts, estimates or circumstances that would materially change the City's expectations. On or after the date of issuance of the Certificates, the City will take such actions as are necessary and appropriate to assure the continuous accuracy of the representations contained in such certificates. (m) The covenants and representations made or required by this Section are for the benefit of the Certificate holders and any subsequent Certificate holder, and may be relied upon by the Certificate holders and any subsequent Certificate holder and bond counsel to the City. In complying with the foregoing covenants, the City may rely upon an unqualified opinion issued to the City by nationally recognized bond counsel that any action by the City or reliance upon any interpretation of the Code or Regulations contained in such opinion will not cause interest on the Certificates to be includable in gross income of the owners thereof for federal income tax purposes under existing law. Notwithstanding any other provision of this Ordinance, the City's representations and obligations under the covenants and provisions of this Section 7.5 shall survive the defeasance and discharge of the Certificates for as long as such matters are relevant to the exclusion of interest on the Certificates from the gross income of the owners for federal income tax purposes. Section 7.6: Qualified Tax-Exempt Obligations. The City hereby designates the Certificates as "qualified tax-exempt obligations" as defined in Section 265(b)(3) of the Code. With respect to such designation, the City represents the following: (a) that during the calendar year 2009, the City (including all entities which issue obligations on behalf of the City), has not designated nor will designate obligations, which when aggregated with the Certificates will result in more than $30,000,000 of "qualified tax-exempt obligations" being issued and (b) that the City has examined its financing needs for the calendar year 2009 and reasonably anticipates that the amount of bonds, leases, loans or other obligations, together with the Certificates and any other tax-exempt obligations heretofore issued by the City (plus those of all entities which issue obligations on behalf of the City) during the calendar year 2009, when the higher of the face amount or the issue price of each such tax-exempt obligation issued for the calendar year 2009 by the City is taken into account, will not exceed $30,000,000. Section 7.7: Related Matters. In order that the City shall satisfy in a timely manner all of its obligations under this Ordinance, the Mayor, the Mayor Pro-Tem, City Secretary and all other appropriate officers, agents, representatives and employees of the City are hereby 15 CITY OF DICKINSON, TEXAS ORDINANCE NUMBER XXX-2009

117 authorized and directed to take all other actions that are reasonably necessary to provide for the issuance and delivery of the Certificates, including, without limitation, executing and delivering on behalf of the City all certificates, consents, receipts, requests, notices, and other documents as may be reasonably necessary to satisfy the City s obligations under this Ordinance and to direct the transfer and application of funds of the City consistent with the provisions of this Ordinance. ARTICLE VIII CONTINUING DISCLOSURE UNDERTAKING Section 8.1: Annual Reports. The City shall provide annually to each NRMSIR and any SID, within six months after the end of each fiscal year, financial information and operating data with respect to the City of the general type included in the final Official Statement authorized by Section 7.3 of this Ordinance, being the financial information and operating data described in the Official Statement in Tables 1-6 and 8-14 and in Appendix B to the Official Statement. Any financial statements so to be provided shall be (1) prepared in accordance with the accounting principles described in Appendix B to the Official Statement and (2) audited, if the City commissions an audit of such statements and the audit is completed within the period during which they must be provided. If audited financial statements are not so provided, then the City shall provide audited financial statements for the applicable fiscal year to each NRMSIR and any SID, when and if audited financial statements become available. If the City changes its fiscal year, it will notify each NRMSIR and any SID of the change (and of the date of the new fiscal year end) prior to the next date by which the City otherwise would be required to provide financial information and operating data pursuant to this Section. The financial information and operating data to be provided pursuant to this Section may be set forth in full in one or more documents or may be included by specific reference to any document (including an official statement or other offering document, if it is available from the MSRB) that theretofore has been provided to each NRMSIR and any SID or filed with the SEC. Section 8.2: Material Event Notices. The City shall notify any SID and either each NRMSIR or the MSRB, in a timely manner, of any of the following events with respect to the Certificates, if such event is material within the meaning of the federal securities laws: (a) Principal and interest payment delinquencies; (b) Non-payment related defaults; (c) Unscheduled draws on debt service reserves reflecting financial difficulties; (d) Unscheduled draws on credit enhancements reflecting financial difficulties; (e) Substitution of credit or liquidity providers, or their failure to perform; (g) Adverse tax opinions or events affecting the tax-exempt status of the Certificates; (h) Modifications to rights of holders of the Certificates; 16 CITY OF DICKINSON, TEXAS ORDINANCE NUMBER XXX-2009

118 (i) Certificate calls; (j) Defeasances; (k) Release, substitution, or sale of property securing repayment of the Certificates; and (l) Rating changes. The City shall notify any SID and either each NRMSIR or the MSRB, in a timely manner, of any failure by the City to provide financial information or operating data in accordance with Section 8.1 of this Ordinance by the time required by such Section. Section 8.3: Limitations, Disclaimers and Amendments. The City shall be obligated to observe and perform the covenants specified in this Article for so long as, but only for so long as, the City remains an obligated person with respect to the Certificates within the meaning of the Rule, except that the City in any event will give the notice required by Section 8.2 of any Certificate calls and defeasance that cause the City to be no longer such an obligated person. The provisions of this Article are for the sole benefit of the holders and beneficial owners of the Certificates, and nothing in this Article, express or implied, shall give any benefit or any legal or equitable right, remedy, or claim hereunder to any other person. The City undertakes to provide only the financial information, operating data, financial statements, and notices which it has expressly agreed to provide pursuant to this Article and does not hereby undertake to provide any other information that may be relevant or material to a complete presentation of the City s financial results, condition, or prospects or hereby undertake to update any information provided in accordance with this Article or otherwise, except as expressly provided herein. The City does not make any representation or warranty concerning such information or its usefulness to a decision to invest in or sell Certificates at any future date. UNDER NO CIRCUMSTANCES SHALL THE CITY BE LIABLE TO THE HOLDER OR BENEFICIAL OWNER OF ANY CERTIFICATE OR ANY OTHER PERSON, IN CONTRACT OR TORT, FOR DAMAGES RESULTING IN WHOLE OR IN PART FROM ANY BREACH BY THE CITY, WHETHER NEGLIGENT OR WITHOUT FAULT ON ITS PART, OF ANY COVENANT SPECIFIED IN THIS ARTICLE, BUT EVERY RIGHT AND REMEDY OF ANY SUCH PERSON, IN CONTRACT OR TORT, FOR OR ON ACCOUNT OF ANY SUCH BREACH SHALL BE LIMITED TO AN ACTION FOR MANDAMUS OR SPECIFIC PERFORMANCE. No default by the City in observing or performing its obligations under this Article shall constitute a breach of or default under the Ordinance for purposes of any other provision of this Ordinance. Nothing in this Article is intended or shall act to disclaim, waive, or otherwise limit the duties of the City under federal and state securities laws. The provisions of this Article may be amended by the City from time to time to adapt the changed circumstances that arise from a change in legal requirements, a change in law, or a 17 CITY OF DICKINSON, TEXAS ORDINANCE NUMBER XXX-2009

119 change in the identity, nature, status, or type of operations of the City, but only if (1) the provisions of this Article, as so amended, would have permitted an underwriter to purchase or sell the Certificates in the primary offering of the Certificates in compliance with the Rule, taking into account any amendments or interpretations of the Rule to the date of such amendment, as well as such changed circumstances, and (2) either (a) the holders of a majority in aggregate principal amount (or any greater amount required by any other provision of this Ordinance that authorizes such an amendment) of the outstanding Certificates consent to such amendment or (b) a person that is unaffiliated with the City (such as nationally recognized bond counsel) determines that such amendment will not materially impair the interests of the holder and beneficial owners of the Certificates. If the City so amends the provisions of this Article, it shall include with any amended financial information or operating data next provided in accordance with Section 8.1 an explanation, in narrative form, of the reasons for the amendment and of the impact of any change in the type of financial information or operating data so provided. The City may also amend or repeal the provisions of this Article if the SEC amends or repeals the applicable provisions of the Rule or a court of final jurisdiction enters judgment that such provisions of the Rule are invalid, and the City also may amend the provisions of this Article in its discretion in any other manner or circumstance, but in either case only if and to the extent that the provisions of this sentence would not have prevented an underwriter from lawfully purchasing or selling Certificates in the primary offering of the Certificates, giving effect to (a) such provisions as so amended and (b) any amendments or interpretations of the Rule. Section 8.4: Availability of Information on and after July 1, NOTWITHSTANDING ANYTHING IN THIS ARTICLE VIII TO THE CONTRARY, ON AND AFTER JULY 1, 2009, THE CITY SHALL BE OBLIGATED TO PROVIDE THE INFORMATION DESCRIBED IN THIS ARTICLE VIII ONLY TO THE MSRB VIA EMMA. Section 8.5: Definitions. As used in this Article, the following terms have the meanings ascribed to such terms below: EMMA means the electronic municipal market access system of the MSRB. MSRB means the Municipal Securities Rulemaking Board. NRMSIR means each person whom the SEC or its staff has determined to be a nationally recognized municipal securities information repository within the meaning of the Rule from time to time. Rule means SEC Rule 15c2-12, as amended from time to time. SEC means the United States Securities and Exchange Commission. SID means any person designated by the State of Texas or an authorized department, officer, or agency thereof as, and determined by the SEC or its staff to be, a state information depository within the meaning of the Rule from time to time. 18 CITY OF DICKINSON, TEXAS ORDINANCE NUMBER XXX-2009

120 ARTICLE IX MISCELLANEOUS Section 9.1: Defeasance. The City may defease the provisions of this Ordinance and discharge its obligations to the Registered Owners of any or all of the Certificates to pay the principal of and interest thereon in any manner now or hereafter permitted by law, including by depositing with the Paying Agent/Registrar, a trust company or commercial bank other than the Paying Agent/Registrar, or with the Comptroller of Public Accounts of the State of Texas either: (a) cash in an amount equal to the principal amount of such Certificates and premium, if any, and interest thereon to the date of maturity or redemption; or (b) pursuant to an escrow or trust agreement, cash and/or (i) direct noncallable obligations of United States of America, including obligations that are unconditionally guaranteed by the United States of America; (ii) noncallable obligations of an agency or instrumentality of the United States, including obligations that are unconditionally guaranteed or insured by the agency or instrumentality and that are rated as to investment quality by a nationally recognized investment rating firm not less than AAA or its equivalent; or (iii) noncallable obligations of a state or an agency or a county, municipality, or other political subdivision of a state that have been refunded and that are rated as to investment quality by a nationally recognized investment rating firm not less than AAA or its equivalent, which, in the case of (i), (ii) or (iii), may be in book-entry form, and the principal of and interest on which will, when due or redeemable at the option of the holder, without further investment or reinvestment of either the principal amount thereof or the interest earnings thereon, provide money in an amount which, together with other moneys, if any, held in such escrow at the same time and available for such purpose, shall be sufficient to provide for the timely payment of the principal of and interest thereon to the date of maturity or earlier redemption; provided, however, that if any of the Certificates are to be redeemed prior to their respective dates of maturity, provision shall have been made for giving notice of redemption as provided in this Ordinance. Upon such deposit, such Certificates shall no longer be regarded to be Outstanding or unpaid. Any surplus amounts not required to accomplish such defeasance shall be returned to the City. Section 9.2: Ordinance a Contract - Amendments. This Ordinance shall constitute a contract with the Registered Owners from time to time, be binding on the City, and shall not be amended or repealed by the City so long as any Certificate remains Outstanding except as permitted in this Section. The City may, without the consent of or notice to any Registered Owners, from time to time and at any time, amend this Ordinance in any manner not detrimental to the interests of the Registered Owners, including the curing of any ambiguity, inconsistency, or formal defect or omission herein. In addition, the City may, with the consent of Registered Owners who own in the aggregate 51% of the principal amount of the Certificates then Outstanding, amend, add to, or rescind any of the provisions of this Ordinance; provided that, without the consent of all Registered Owners of Outstanding Certificates, no such amendment, addition, or rescission shall (i) extend the time or times of payment of the principal of and interest on the Certificates, reduce the principal amount thereof, the redemption price, or the rate 19 CITY OF DICKINSON, TEXAS ORDINANCE NUMBER XXX-2009

121 of interest thereon, or in any other way modify the terms of payment of the principal of or interest on the Certificates, (ii) give any preference to any Certificate over any other Certificate, or (iii) reduce the aggregate principal amount of Certificates required to be held by Registered Owners for consent to any such amendment, addition, or rescission. Section 9.3: Legal Holidays. In any case where the date interest accrues and becomes payable on the Certificates or principal of the Certificates matures or the date fixed for redemption of any Certificates or a Record Date shall be in the City a Saturday, Sunday, legal holiday or a day on which banking institutions are authorized by law to close, then payment of interest or principal need not be made on such date, or the Record Date shall not occur on such date, but payment may be made or the Record Date shall occur on the next succeeding day which is not in the City a Saturday, Sunday, legal holiday or a day on which banking institutions are authorized by law to close with the same force and effect as if (i) made on the date of maturity or the date fixed for redemption and no interest shall accrue for the period from the date of maturity or redemption to the date of actual payment or (ii) the Record Date had occurred on the fifteenth calendar day of that month. Section 9.4: Power to Revise Form of Documents. Notwithstanding any other provision of this Ordinance, the Mayor is hereby authorized to make or approve such revisions, additions, deletions, and variations to this Ordinance and in the form of the documents attached hereto as exhibits as, in the judgment of the Mayor, and in the opinion of Bond Counsel to the City, may be necessary or convenient to carry out or assist in carrying out the purposes of this Ordinance, the Preliminary Official Statement, the final Official Statement, or as may be required for approval of the Certificates by the Attorney General of Texas; provided, however, that any changes to such documents resulting in substantive amendments to the terms and conditions of the Certificates or such documents shall be subject to the prior approval of the City Council. Section 9.5: No Recourse Against City Officials. No recourse shall be had for the payment of principal of or interest on any Certificates or for any claim based thereon or on this Ordinance against any official of the City or any person executing any Certificates. Section 9.6: Further Proceedings. The Mayor, Mayor Pro-Tem, City Secretary and other appropriate officials of the City are hereby authorized and directed to do any and all things necessary and/or convenient to carry out the terms of this Ordinance. Section 9.7: Severability. If any Section, paragraph, clause or provision of this Ordinance shall for any reason be held to be invalid or unenforceable, the invalidity or unenforceability of such Section, paragraph, clause or provision shall not affect any of the remaining provisions of this Ordinance. Section 9.8: Open Meeting. It is hereby found, determined and declared that a sufficient written notice of the date, hour, place and subject of the meeting of the City Council at which this Ordinance was adopted was posted at a place convenient and readily accessible at all times to the general public at City Hall 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 Ordinance 20 CITY OF DICKINSON, TEXAS ORDINANCE NUMBER XXX-2009

122 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. Section 9.9: Repealer. All orders, resolutions and ordinances, or parts thereof, inconsistent herewith are hereby repealed to the extent of such inconsistency. Section 9.10: Effective Date. This Ordinance shall be in force and effect from and after its passage on the date shown below. [Signature page follows.] 21 CITY OF DICKINSON, TEXAS ORDINANCE NUMBER XXX-2009

123 DULY PASSED AND APPROVED this the 24th day of March, ATTEST: Julie Masters, Mayor City of Dickinson, Texas Carol L. McLemore, City Secretary City of Dickinson, Texas APPROVED AS TO FORM AND CONTENT: Loren B. Smith, City Attorney City of Dickinson, Texas S-1 CITY OF DICKINSON, TEXAS ORDINANCE NUMBER XXX-2009

124 EXHIBIT A FORM OF CERTIFICATE UNITED STATES OF AMERICA STATE OF TEXAS CITY OF DICKINSON, TEXAS, CERTIFICATE OF OBLIGATION SERIES 2009 NUMBER DENOMINATION R- 1 $ REGISTERED REGISTERED INTEREST RATE 2 : DATED DATE: MATURITY DATE 2 : CUSIP 2 : % April 1, 2009 March 1, REGISTERED OWNER: PRINCIPAL AMOUNT: DOLLARS THE CITY OF DICKINSON, TEXAS, a municipal corporation of the State of Texas (the City ), for value received, hereby promises to pay to the Registered Owner identified above or its registered assigns, on the Maturity Date specified above (or on earlier redemption as herein provided), upon presentation and surrender of this Certificate at the principal corporate trust office of The Bank of New York Mellon Trust Company, National Association, or its successor (the Paying Agent/Registrar ), the principal amount identified above (or so much thereof as shall not have been paid or deemed to have been paid upon prior redemption) payable in any coin or currency of the United States of America which on the date of payment of such principal is legal tender for the payment of debts due to the United States of America, and to pay interest thereon at the rate shown above, calculated on a basis of a 360-day year composed of twelve 30- day months, from the later of the Dated Date identified above or the most recent interest payment date to which interest has been paid or duly provided for. 3 Interest on this Certificate is payable 1 Initial Certificate shall be numbered T-1. 2 Omitted from initial Certificate. 3 The first sentence of the initial Certificate shall read as follows: THE CITY OF DICKINSON, TEXAS, a municipal corporation of the State of Texas (the City ), for value received, hereby promises to pay to the Registered Owner identified above or its registered assigns, on March 1 of each of the years and in the principal amounts set forth in the following schedule: [Insert information regarding years of maturity, principal amounts and interest rates from Section 3.3 of the Ordinance.] (or on earlier redemption as herein provided), upon presentation and surrender of this Certificate at the principal corporate trust office of The Bank of New York Mellon Trust Company, National Association, or its successor (the Paying Agent/Registrar ), the principal amounts identified above (or so much thereof as shall not have been paid or deemed to have been paid upon prior redemption) payable in any coin or currency of the United States of America which on the date of payment of such principal is legal tender for the payment of debts due to the United States of America, and to pay interest thereon at the rate shown above, calculated on a basis of a 360-day year composed of twelve 30-day months, A-1 CITY OF DICKINSON, TEXAS ORDINANCE NUMBER XXX-2009

125 on September 1, 2009, and each March 1 and September 1 thereafter until maturity or earlier redemption of this Certificate, by check sent by United States mail, first class, postage prepaid, by the Paying Agent/Registrar to the Registered Owner of record as of the close of business on the fifteenth calendar day of the month immediately preceding the applicable interest payment date, as shown on the registration books kept by the Paying Agent/Registrar. Any accrued interest payable at maturity or earlier redemption shall be paid upon presentation and surrender of this Certificate at the principal corporate trust office of the Paying Agent/Registrar. THIS CERTIFICATE IS ONE OF A DULY AUTHORIZED SERIES OF CERTIFICATES (the Certificates ) in the aggregate principal amount of $1,035,000 issued pursuant to an ordinance adopted by the City Council of the City on March 24, 2009 (the Ordinance ) for the purpose of providing all or part of the funds to pay contractual obligations to be incurred for the construction of public works and the purchase of materials, supplies, equipment, machinery, buildings, land and rights-of-way for authorized needs and purposes and for the payment of contractual obligations for professional services, to wit (i) construction and equipment of a new City Hall and Library Complex, and (ii) professional services rendered in connection with the above listed projects. REFERENCE IS HEREBY MADE TO THE FURTHER PROVISIONS OF THIS CERTIFICATE SET FORTH ON THE REVERSE HEREOF, WHICH PROVISIONS SHALL HAVE THE SAME FORCE AND EFFECT AS IF SET FORTH AT THIS PLACE. 4 THIS CERTIFICATE shall not be valid or obligatory for any purpose or be entitled to any benefit under the Ordinance unless this Certificate is authenticated by the Paying Agent/Registrar by due execution of the authentication certificate endorsed hereon. 5 from the later of the Dated Date identified above or the most recent interest payment date to which interest has been paid or duly provided for. 4 This paragraph shall be omitted from the initial Certificate and any other Certificate for which text does not appear on the back of a printed certificate. 5 In the initial Certificate, this paragraph shall read: THIS CERTIFICATE shall not be valid or obligatory for any purpose or be entitled to any benefit under the Ordinance unless this Certificate is registered by the Comptroller of Public Accounts of the State of Texas by due execution of the registration certificate endorsed hereon. A-2 CITY OF DICKINSON, TEXAS ORDINANCE NUMBER XXX-2009

126 IN WITNESS WHEREOF, the City has caused its corporate seal to be impressed or placed in facsimile hereon and this Certificate to be signed by the Mayor, countersigned by the City Secretary by their manual, lithographed or printed facsimile signatures. CITY OF DICKINSON, TEXAS (SEAL) Mayor COUNTERSIGNED: City Secretary * * * * [REVERSE OF CERTIFICATE] THE CITY RESERVES THE RIGHT, at its option, to redeem, prior to their maturity, Certificates, in whole or in part, on March 1, 2019, or any date thereafter, at par plus accrued interest to the date fixed for redemption. THE CERTIFICATES MAY BE REDEEMED IN PART only in integral multiples of $5,000. If a Certificate subject to redemption is in a denomination larger than $5,000, a portion of such Certificate may be redeemed, but only in integral multiples of $5,000. In selecting portions of Certificates for redemption, each Certificate shall be treated as representing that number of Certificates of $5,000 denomination which is obtained by dividing the principal amount of such Certificate by $5,000. Upon surrender of any Certificate for redemption in part, the Paying Agent/Registrar, in accordance with the provisions of the Ordinance, shall authenticate and deliver in exchange therefor a Certificate or Certificates of like maturity and interest rate in an aggregate principal amount equal to the unredeemed portion of the Certificate so surrendered. NOTICE OF ANY SUCH REDEMPTION, identifying the Certificates or portions thereof to be redeemed, shall be sent by United States mail, first class, postage prepaid, to the Registered Owners thereof at their addresses as shown on the books of registration kept by the Paying Agent/Registrar, not less than thirty (30) days before the date fixed for such redemption. By the date fixed for redemption, due provision shall be made with the Paying Agent/Registrar for the payment of the redemption price of the Certificates called for redemption. If such notice of redemption is given, and if due provision for such payment is made, all as provided above, the Certificates which are to be so redeemed thereby automatically shall be redeemed prior to their scheduled maturities, they shall not bear interest after the date fixed for redemption, and they A-3 CITY OF DICKINSON, TEXAS ORDINANCE NUMBER XXX-2009

127 shall not be regarded as being outstanding except for the purpose of being paid with the funds so provided for such payment. THIS CERTIFICATE IS TRANSFERABLE only upon presentation and surrender at the principal corporate trust office of the Paying Agent/Registrar, accompanied by an assignment duly executed by the Registered Owner or its authorized representative, subject to the terms and conditions of the Ordinance. THIS CERTIFICATE IS EXCHANGEABLE at the principal corporate trust office of the Paying Agent/Registrar for a Certificate or Certificates of the same maturity and interest rate and in the principal amount of $5,000 or any integral multiple thereof, subject to the terms and conditions of the Ordinance. THE PAYING AGENT/REGISTRAR is not required to accept for transfer or exchange any Certificate called for redemption, in whole or in part, during the forty-five (45) day period immediately prior to the date fixed for redemption; provided, however, that such limitation shall not apply to the transfer or exchange by the Registered Owner of an unredeemed portion of a Certificate called for redemption in part. THE CITY OR PAYING AGENT/REGISTRAR may require the Registered Owner of any Certificate to pay a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with the transfer or exchange of a Certificate. Any fee or charge of the Paying Agent/Registrar for a transfer or exchange shall be paid by the City. THE REGISTERED OWNER of this Certificate by acceptance hereof, acknowledges and agrees to be bound by all the terms and conditions of the Ordinance. IT IS HEREBY DECLARED AND REPRESENTED that this Certificate has been duly and validly issued and delivered; that all acts, conditions and things required or proper to be performed, exist and to be done precedent to or in the issuance and delivery of this Certificate have been performed, exist and have been done in accordance with law; that the Certificates do not exceed any constitutional or statutory limitation; and that annual ad valorem taxes sufficient to provide for the payment of the interest on and principal of this Certificate, as such interest comes due and such principal matures, have been levied and ordered to be levied, within the limits prescribed by law, against all taxable property in the City and have been irrevocably pledged for such payment. IT IS FURTHER DECLARED AND REPRESENTED that the revenues to be derived from the City s solid waste management system, after the payment of all operation and maintenance expenses thereof (the Net Revenues ), in an amount not to exceed $1,000, are pledged to the payment of the principal of and interest on the Certificates, provided that the pledge of Net Revenues is and shall be junior and subordinate in all respects to the pledge of Net Revenues to the payment of any obligation of the City, whether authorized heretofore or hereafter, which the City designates as having a pledge senior to the pledge of the Net Revenues to the payment of the Certificates. The City also reserves the right to issue, for any lawful purpose at any time, in one or more installments, bonds, certificates of obligation and other obligations of any kind, secured in whole or in part by a pledge of Net Revenues, that may be prior and superior in right to, on a parity with, or junior and subordinate to the pledge of Net Revenues securing the Certificates. A-4 CITY OF DICKINSON, TEXAS ORDINANCE NUMBER XXX-2009

128 REFERENCE IS HEREBY MADE TO THE ORDINANCE, a copy of which is filed with the Paying Agent/Registrar, for the full provisions thereof, to all of which the Registered Owners of the Certificates assent by acceptance of the Certificates. * * * FORM OF COMPTROLLER S REGISTRATION CERTIFICATE The following form of Comptroller s Registration Certificate shall be attached or affixed to each of the Certificates initially delivered: THE STATE OF TEXAS OFFICE OF THE COMPTROLLER OF PUBLIC ACCOUNTS REGISTER NO. I hereby certify that this certificate has been examined, certified as to validity and approved by the Attorney General of the State of Texas, and that this certificate has been registered by the Comptroller of Public Accounts of the State of Texas. WITNESS MY SIGNATURE AND SEAL OF OFFICE this. [SEAL] Comptroller of Public Accounts of the State of Texas A-5 CITY OF DICKINSON, TEXAS ORDINANCE NUMBER XXX-2009

129 * * * FORM OF PAYING AGENT/REGISTRAR S AUTHENTICATION CERTIFICATE The following form of authentication certificate shall be printed on the face of each of the Certificates other than those initially delivered: AUTHENTICATION CERTIFICATE This Certificate is one of the Certificates described in and delivered pursuant to the within-mentioned Ordinance; and, except for the Certificates initially delivered, this Certificate has been issued in exchange for or replacement of a Certificate, Certificates, or a portion of a Certificate or Certificates of an issue which originally was approved by the Attorney General of the State of Texas and registered by the Comptroller of Public Accounts of the State of Texas. By: Authorized Signature Date of Authentication: A-6 CITY OF DICKINSON, TEXAS ORDINANCE NUMBER XXX-2009

130 * * * * FORM OF ASSIGNMENT The following form of assignment shall be printed on the back of each of the Certificates: ASSIGNMENT For value received, the undersigned hereby sells, assigns and transfers unto (Please print or type name, address, and zip code of Transferee) (Please insert Social Security or Taxpayer Identification Number of Transferee) the within certificate and all rights thereunder, and hereby irrevocably constitutes and appoints attorney to transfer such certificate on the books kept for registration thereof, with full power of substitution in the premises. DATED: Signature Guaranteed: Registered Owner NOTICE: Signature must be guaranteed by a member firm of the New York Stock Exchange or a commercial bank or trust company. NOTICE: The signature above must correspond to the name of the Registered Owner as shown on the face of this certificate in every particular, without any alteration, enlargement or change whatsoever. A-7 CITY OF DICKINSON, TEXAS ORDINANCE NUMBER XXX-2009

131 EXHIBIT B FORM OF PAYING AGENT/REGISTRAR AGREEMENT B-1 CITY OF DICKINSON, TEXAS ORDINANCE NUMBER XXX-2009

132 PAYING AGENT/REGISTRAR AGREEMENT THIS PAYING AGENT/REGISTRAR AGREEMENT dated as of March 1, 2009 (together with any amendments or supplements hereto, the Agreement ), is entered into by and between the City of Dickinson, Texas (the Issuer ), and The Bank of New York Mellon Trust Company, National Association, as paying agent/registrar (together with any successor in such capacity, the Bank ). WITNESSETH: WHEREAS, the Issuer has duly authorized and provided for the issuance of a series of certificates of obligation entitled City of Dickinson, Texas, Certificates of Obligation, Series 2009 (the Certificates ), issued as fully registered Certificates, and a series of bonds entitled City of Dickinson, Texas, General Obligation Refunding Bonds, Series 2009 (the Bonds and, together with the Certificates, the Obligations ), issued as fully registered Bonds; WHEREAS, all things necessary to make the Obligations the valid obligations of the Issuer, in accordance with their terms, will be done upon the issuance and delivery thereof; WHEREAS, the Issuer and the Bank wish to provide the terms under which the Bank will act as Paying Agent to pay the principal of and interest on the Obligations, in accordance with the terms thereof, and under which the Bank will act as Registrar for the Obligations; and WHEREAS, the Issuer and the Bank have duly authorized the execution and delivery of this Agreement; and all things necessary to make this Agreement the valid agreement of the parties, in accordance with its terms, have been done. NOW, THEREFORE, it is mutually agreed as follows: Section Appointment. ARTICLE ONE APPOINTMENT OF BANK AS PAYING AGENT AND REGISTRAR The Issuer hereby appoints the Bank to act as Paying Agent with respect to the Obligations, to pay to the Registered Owners of the Obligations, in accordance with the terms and provisions of this Agreement and the ordinances authorizing the issuance of the Obligations (the Ordinances ), the principal of and interest on all or any of the Obligations. The Issuer hereby appoints the Bank as Registrar with respect to the Obligations. As Registrar for the Obligations, the Bank shall keep and maintain for and on behalf of the Issuer books and records as to the ownership of said Obligations and with respect to the transfer and exchange thereof as provided herein and in the Ordinances. The Bank hereby accepts its appointment, and agrees to act as Paying Agent and Registrar with respect to the Obligations. HOU:

133 Section Compensation. As compensation for the Bank's services as Paying Agent/Registrar, the Issuer hereby agrees to pay the Bank the fees and amounts set forth in Schedule A attached hereto. In addition, the Issuer agrees to reimburse the Bank upon its request for all reasonable expenses, disbursements and advances incurred or made by the Bank in accordance with any of the provisions hereof (including the reasonable compensation and the expenses and disbursements of its agents and counsel). Section Definitions. ARTICLE TWO DEFINITIONS For all purposes of this Agreement, except as otherwise expressly provided or unless the context otherwise requires: Bank means The Bank of New York Mellon Trust Company, National Association, and its successors and assigns. Bond or Bonds means any one or all of the City of Dickinson, Texas, General Obligation Refunding Bonds, Series 2009, authorized by the Bond Ordinance. Bond Ordinance means the ordinance of the Issuer approved by its governing body on March 24, 2009, pursuant to which the Bonds are issued. Certificate or Certificates means any one or all of the City of Dickinson, Texas, Certificates of Obligation, Series 2009 authorized by the Certificate Ordinance. Certificate Ordinance means the ordinance of the Issuer approved by its governing body on March 24, 2009, pursuant to which the Certificates are issued. Issuer means the City of Dickinson, Texas. Ordinances means, together, the Certificate Ordinance and the Bond Ordinance. Paying Agent means the Bank when it is performing the function of paying agent. Person means any individual, corporation, partnership, joint venture, associations, joint stock company, trust, unincorporated organization or government or any agency or political subdivision of a government or any entity whatsoever. Registered Owner means the Person in whose name any Obligation is registered in the books of registration maintained by the Bank under this Agreement. Registrar means the Bank when it is performing the function of registrar. HOU:

134 All other capitalized terms shall have the meanings assigned to them in the Ordinances or the recital paragraphs of this Agreement. ARTICLE THREE DUTIES OF THE BANK Section Initial Delivery of the Obligations. The Obligations will be initially registered and delivered by the Bank to the purchaser designated by the Issuer as set forth in the Ordinances. If such purchaser delivers a written request to the Bank not later than five business days prior to the date of initial delivery, the Bank will, on the date of initial delivery, exchange the Obligations initially delivered for Obligations of authorized denominations, registered in accordance with the instructions in such request and the Ordinances. Section Duties of Paying Agent. As Paying Agent, the Bank shall, provided adequate funds have been provided to it for such purpose by or on behalf of the Issuer, timely pay on behalf of the Issuer the principal of and interest on each Obligation in accordance with the provisions of the Ordinances. Since the issue will be Depository Trust Company (DTC) eligible, the Paying Agent shall comply with all eligibility requirements as outlined and agreed upon in the eligibility questionnaire. Section Duties of Registrar. The Bank shall provide for the proper registration of the Obligations and the timely exchange, replacement and registration of transfer of the Obligations in accordance with the provisions of the Ordinances. Any changes to Registered Owners for such exchange, replacement and registration shall be made by the Bank only in accordance with the Ordinances. The Bank will maintain the books of registration in accordance with the Bank's general practices and procedures in effect from time to time; provided, however, that the Bank agrees to comply with the terms of , , and of the Texas Government Code, as amended. Section Unauthenticated Obligations. The Issuer shall provide an adequate inventory of unauthenticated Obligations to facilitate transfers. The Bank covenants that it will maintain such unauthenticated Obligations in safekeeping and will use reasonable care in maintaining such Obligations in safekeeping, which shall be not less than the care it maintains for debt securities of other government entities or corporations for which it serves as registrar, or which it maintains for its own bonds. HOU:

135 Section Reports. Upon request of the Issuer, the Bank will provide to the Issuer reports, which will describe in reasonable detail all transactions pertaining to the Obligations and the books of registration for the period of time specified by the Issuer. The Issuer may also inspect and make copies of the information in the books of registration and such other documents related to the Obligations and in the Bank's possession at any time the Bank is customarily open for business, provided that reasonable time is allowed the Bank to provide an up-to-date listing or to convert the information into written form. The Bank will not release or disclose the content of the books of registration to any person other than to, or at the written request of, an authorized officer or employee of the Issuer, except upon receipt of a subpoena, court order or as otherwise required by law. Upon receipt of a subpoena, court order or other lawful request, the Bank will notify the Issuer immediately so that the Issuer may contest the subpoena, court order or other request if it so chooses. Section Canceled Obligations. All Obligations surrendered for payment, redemption, transfer, exchange or replacement, if surrendered to the Bank, shall be promptly cancelled by it and, if surrendered to the Issuer, shall be delivered to the Bank and, if not already cancelled, shall be promptly cancelled by the Bank. The Issuer may at any time deliver to the Bank for cancellation any Obligations previously authenticated and delivered which the Issuer may have acquired in any manner whatsoever. The Obligations shall be treated in accordance with the Bank s retention policy. Section Reliance on Documents, Etc. (a) The Bank may conclusively rely, as to the truth of the statements and correctness of the opinions expressed therein, on certificates or opinions furnished to the Bank by the Issuer. (b) The Bank shall not be liable to the Issuer for actions taken under this Agreement as long as it acts in good faith and exercises due diligence, reasonableness and care, as prescribed by law, with regard to its duties hereunder. (c) This Agreement is not intended to require the Bank to expend its own funds for performance of any of its duties hereunder. (d) The Bank may exercise any of the powers hereunder and perform any duties hereunder either directly or by or through agents or attorneys. Section Money Held by Bank. Money held by the Bank hereunder shall be held in trust for the benefit of the Registered Owners of the Obligations and the Bank shall have a fiduciary responsibility as to such funds. The Bank shall be under no obligation to pay interest on any money received by it hereunder. HOU:

136 All money deposited with the Bank hereunder shall be secured in the manner and to the fullest extent required by law for the security of funds of the Issuer. Any money deposited with the Bank for the payment of the principal of or interest on any Obligations and remaining unclaimed by the Registered Owner after the expiration of three years from the date such funds have become due and payable shall be reported and disposed of by the Bank in accordance with the provisions of Texas law including, to the extent applicable, Title 6 of the Texas Property Code, as amended. To the extent such provisions of the Property Code do not apply to the funds, such funds shall be paid by the Bank to the Issuer upon receipt of a written request therefor from the Issuer. The Bank shall have no liability to the Registered Owners of the Obligations by virtue of actions taken in compliance with the foregoing provision. Section 3.09 Transfer of Funds at Closing The Bank is authorized to transfer funds relating to the closing and initial delivery of the Obligations in the manner described in the closing memorandum or letter approved by the City, as prepared by the City s financial advisor or other agent. The Bank may act on a facsimile transmission of the closing memorandum or letter to be followed by an original of the closing memorandum or letter signed by the financial advisor or the City. Section May Own Obligations. ARTICLE FOUR MISCELLANEOUS PROVISIONS The Bank, in its individual or any other capacity, may become the owner or pledgee of Obligations with the same rights it would have if it were not the Paying Agent and Registrar for the Obligations. Section Amendment. This Agreement may be amended only by an agreement in writing signed by both of the parties hereof. Section Assignment. This Agreement may not be assigned by either party without the prior written consent of the other. Section Notices. Any request, demand, authorization, direction, notice, consent, waiver or other document provided or permitted hereby to be given or furnished to the Issuer or the Bank shall be mailed or delivered to the Issuer or the Bank, respectively, at the addresses shown herein, or such other address as may have been given by one party to the other by 15 days' written notice. HOU:

137 Section Effect of Headings. The Article and Section headings herein are for convenience only and shall not affect the construction hereof. Section Successors and Assigns. All covenants and agreements herein by the Issuer and the Bank shall bind their successors and assigns, whether so expressed or not. This Agreement shall not be assigned by the Bank without the prior written consent of the Issuer. Any company into which the Bank may be merged or converted or with which it may be consolidated or any company resulting from any merger, conversion or consolidation to which it shall be a party or any company to which the Bank may sell or transfer all or substantially all of its corporate trust business, provided such company shall be a national banking association or a bank or trust company duly organized under the laws of any state of the United States and shall be authorized by law to perform all the duties imposed upon it by this Agreement shall be the successor to the Bank without the execution or filing of any paper or the performance of any further act. In case any Obligation shall have been registered, but not delivered, by the Bank then in office, any successor by merger, conversion, or consolidation to such authenticating Bank may adopt such registration and deliver the Obligation so registered with the same effect as if such successor Bank had itself registered such Obligations. Section Severability. If any provision of this Agreement shall be invalid or unenforceable, the validity and enforceability of the remaining provisions hereof shall not in any way be affected or impaired. Section Benefits of Agreement. Nothing herein, express or implied, shall give to any Person, other than the parties hereto and their successors hereunder, any benefit or any legal or equitable right, remedy or claim hereunder. Section Ordinances Govern Conflicts. This Agreement and the Ordinances constitute the entire agreement between the parties hereto relative to the Bank acting as Paying Agent and Registrar and if any conflict exists between this Agreement and the Ordinances, the Ordinances shall govern. The Bank agrees to be bound by the terms of the Ordinances with respect to the Obligations. Section Term and Termination. This Agreement shall be effective from and after its date and may be terminated for any reason by the Issuer or the Bank at any time upon 60 days' written notice; provided, however, that no such termination shall be effective until a successor has been appointed and has accepted the duties of the Bank hereunder. In the event of early termination, regardless of circumstances, the Bank shall deliver to the Issuer or its designee all funds, Obligations and all books and HOU:

138 records pertaining to the Bank's role as Paying Agent and Registrar with respect to the Obligations, including, but not limited to, the books of registration. Section Governing Law. This Agreement shall be construed in accordance with and shall be governed by the laws of the State of Texas. Section Interpleader. The Issuer and the Bank agree that the Bank may seek adjudication of any adverse claim, demand, or controversy over its person as well as funds on deposit hereunder, in either the District Court of Harris County, Texas or the United States Federal District Court for the Southern District of Texas, waive personal service of any process, and agree that service of process by certified or registered mail, return receipt requested, to the address set forth herein shall constitute adequate service. The Issuer and the Bank further agree that the Bank has the right to file a Bill of Interpleader in any Texas court of competent jurisdiction, at the expense of the Issuer, to determine the rights of any person claiming any interest hereunder. HOU:

139 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. CITY OF DICKINSON, TEXAS By: Mayor ATTEST: ADDRESS: 2716 FM 517 East Dickinson, Texas City Secretary (SEAL) S-1 HOU:

140 THE BANK OF NEW YORK MELLON TRUST COMPANY, NATIONAL ASSOCIATION By: Title: ADDRESS: Attention: 2001 Bryan Street, 8th Floor Dallas, Texas Global Corporate Trust Department S-2 HOU:

141 HOU: SCHEDULE A

142 EXHIBIT C BOND PURCHASE AGREEMENT C-1 CITY OF DICKINSON, TEXAS ORDINANCE NUMBER XXX-2009

143 PURCHASE AGREEMENT $1,035,000 CITY OF DICKINSON, TEXAS CERTIFICATES OF OBLIGATION, SERIES 2009 March 24, 2009 The Honorable Mayor and Members of the City Council City of Dickinson 2716 FM 517 East Dickinson, Texas Ladies and Gentlemen: SAMCO Capital Markets, Inc. (the "Underwriter"), and not acting as a fiduciary or agent for you, offers to enter into the following agreement (the or this "Agreement") with the City of Dickinson, Texas (the "Issuer") which, upon the Issuer's written acceptance of this offer, will be binding upon the Issuer and upon the Underwriter. This offer is made subject to the Issuer's written acceptance hereof on or before 10:00 P.M., Central Time, on March 24, 2009, and, if not so accepted, will be subject to withdrawal by the Underwriter upon written notice delivered to the Issuer at any time prior to the acceptance hereof by the Issuer. Terms not otherwise defined in this Agreement shall have the same meanings set forth in the Certificate Ordinance (as defined herein) or in the Official Statement (as defined herein). 1. Purchase and Sale of the Certificates. Subject to the terms and conditions and in reliance upon the representations, warranties and agreements set forth herein, the Underwriter hereby agrees to purchase from the Issuer, and the Issuer hereby agrees to sell and deliver to the Underwriter, all, but not less than all, of the Issuer's Certificates of Obligation, Series 2009 (the "Certificates"). Inasmuch as this purchase and sale represents a negotiated transaction, the Issuer understands, and hereby confirms, that the Underwriter is not acting as fiduciaries of the Issuer, but rather is acting solely in its capacity as Underwriter for its own account. The principal amount of the Certificates to be issued, the dated date therefor, the maturities, optional and sinking fund redemption provisions and interest rates per annum are set forth in Schedule I hereto. The Certificates shall be as described in, and shall be issued and secured under and pursuant to the provisions of the ordinance authorizing the issuance and sale of the Certificates adopted by the City Commission of the Issuer on March 24, 2009 (the "Certificate Ordinance"). The purchase price for the Certificates shall be $ (representing the par amount of the Certificates, less an underwriting discount of $ ) plus interest accrued on the Certificates from the dated date of the Certificates to the Closing Date (as hereinafter defined). Delivered to the Issuer herewith as a good faith deposit is a check payable to the order of the Issuer in clearing house funds in the amount of $ (the "Check"). In the event the Issuer accepts this Agreement, the Check shall be held uncashed by the Issuer until the time of Closing, at

144 which time the Check shall be returned uncashed to the Underwriter. In the event that the Issuer does not accept this Agreement, the Check will be immediately returned to the Underwriter. Should the Issuer fail to deliver the Certificates at the Closing, or should the Issuer be unable to satisfy the conditions of the obligations of the Underwriter to purchase, accept delivery of and pay for the Certificates, as set forth in this Agreement (unless waived by the Underwriter), or should such obligations of the Underwriter be terminated for any reason permitted by this Agreement, the Check shall immediately be returned to the Underwriter. In the event that the Underwriter fails (other than for a reason permitted hereunder) to purchase, accept delivery of and pay for the Certificates at the Closing as herein provided, the Check shall be cashed and the amount thereof retained by the Issuer as and for fully liquidated damages for such failure of the Underwriter and, except as set forth in Sections 8 and 10 hereof, no party shall have any further rights against the other hereunder. The Underwriter and the Issuer understand that in such event the Issuer's actual damages may be greater or may be less than such amount. Accordingly, the Underwriter hereby waives any right to claim that the Issuer's actual damages are less than such amount, and the Issuer's acceptance of this Agreement shall constitute a waiver of any right the Issuer may have to additional damages from the Underwriter. The Underwriter hereby agrees not to stop or cause payment on the Check to be stopped unless the Issuer has breached any of the terms of this Agreement or unless an event of termination has occurred as set forth in Section 7 hereof. 2. Public Offering. The Underwriter agrees to make a bona fide public offering of all of the Certificates at a price not to exceed the public offering price set forth on page 2 of the Official Statement and may subsequently change such offering price without any requirement of prior notice. The Underwriter may offer and sell Certificates to certain dealers (including dealers depositing Certificates into investment trusts) and others at prices lower than the public offering price set forth on page 2 of the Official Statement, provided that on or before the Closing, the Underwriter shall execute and deliver to Bond Counsel an Issue Price Certificate prepared by Bond Counsel. 3. The Official Statement. (a) The Certificates have been offered pursuant to the Preliminary Official Statement dated March 17, 2009, including the cover page and Appendices thereto, of the Issuer relating to the Certificates (the "Preliminary Official Statement"). The Preliminary Official Statement, as amended to reflect the information indicated on Schedule I hereto, and as it may otherwise be amended or supplemented in accordance with this Agreement is hereinafter called the "Official Statement." (b) The Preliminary Official Statement has been prepared for use by the Underwriter in connection with the public offering, sale and distribution (including in an electronic format) of the Certificates. The Issuer hereby represents and warrants that the Preliminary Official Statement was deemed final by the Issuer as of its date, except for the omission of such information which is dependent upon the final pricing of the Certificates for completion, all as permitted to be excluded by Section (b)(1) of Rule 15c2-12 under the Securities Exchange Act of 1934 (the "Rule"). (c) The Issuer hereby authorizes the Official Statement and the information therein contained to be used by the Underwriter in connection with the public offering and 2

145 the sale of the Certificates. The Issuer consents to the use by the Underwriter prior to the date hereof of the Preliminary Official Statement in connection with the public offering of the Certificates. The Issuer shall provide, or cause to be provided, to the Underwriter as soon as practicable after the date of the Issuer's acceptance of this Agreement (but, in any event, not later than within seven business days after the Issuer's acceptance of this Agreement and in sufficient time to accompany any confirmation that requests payment from any customer) copies of the Official Statement which is complete as of the date of its delivery to the Underwriter in such quantity as the Underwriter shall reasonably request in order for the Underwriter to comply with Section (b)(4) of the Rule and the rules of the Municipal Securities Rulemaking Board. The Issuer hereby confirms that it does not object to the distribution of the Official Statement, in its final form, in electronic form. (d) If, after the date of this Agreement to and including the date the Underwriter is no longer required to provide an Official Statement to potential customers who request the same pursuant to the Rule (the earlier of (i) 90 days from the "end of the underwriting period" (as defined in the Rule) and (ii) the time when the Official Statement is available to any person from a nationally recognized municipal securities information repository, but in no case less than 25 days after the "end of the underwriting period" for the Certificates), the Issuer becomes aware of any fact or event which might or would cause the Official Statement, as then supplemented or amended, to contain any untrue statement of a material fact or to omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading, or if it is necessary to amend or supplement the Official Statement to comply with law, the Issuer will notify the Underwriter (and for the purposes of this clause provide the Underwriter with such information as it may from time to time reasonably request), and if, in the reasonable opinion of the Underwriter, such fact or event requires preparation and publication of a supplement or amendment to the Official Statement, the Issuer will prepare and furnish, at the Issuer's own expense (in a form and manner approved by the Underwriter), a reasonable number of copies of either amendments or supplements to the Official Statement so that the statements in the Official Statement as so amended and supplemented will not contain any 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 not misleading or so that the Official Statement will comply with applicable laws. If such notification shall be subsequent to the Closing, the Issuer shall furnish such legal opinions, certificates, instruments and other documents as the Underwriter may deem reasonably necessary to evidence the truth and accuracy of such supplement or amendment to the Official Statement. (e) The Underwriter hereby agrees to promptly file the Official Statement with a nationally recognized municipal securities information repository. Unless otherwise notified in writing by the Underwriter, the Issuer can assume that the "end of the underwriting period" for purposes of the Rule is the date of the Closing. 4. Representations, Warranties, and Covenants of the Issuer. The Issuer hereby represents and warrants to and covenants with the Underwriter that: 3

146 (a) The Issuer is a home rule municipality and a body corporate and politic of the State of Texas (the "State") duly created, organized and existing under the laws of the State and its home rule charter, and has full legal right, power and authority under Subchapter C of Chapter 271, Texas Local Government Code, as amended (the "Act"), and at the date of the Closing will have full legal right, power and authority under the Act and the Certificate Ordinance (i) to enter into, execute and deliver this Agreement, the Certificate Ordinance, which shall contain the Undertaking as defined in Section 6(h)(3) hereof, and all documents required hereunder and thereunder to be executed and delivered by the Issuer (this Agreement and the Certificate Ordinance are hereinafter referred to as the "Issuer Documents"), (ii) to sell, issue and deliver the Certificates to the Underwriter as provided herein, and (iii) to carry out and consummate the transactions described in the Issuer Documents and the Official Statement, and the Issuer has complied, and will at the Closing be in compliance in all respects, with the terms of the Act and the Issuer Documents as they pertain to such transactions; (b) By all necessary official action of the Issuer prior to or concurrently with the acceptance hereof, the Issuer has duly authorized all necessary action to be taken by it for (i) the adoption of the Certificate Ordinance and the issuance and sale of the Certificates, (ii) the approval of the Official Statement, (iii) the approval, execution and delivery of, and the performance by the Issuer of the obligations on its part, contained in the Certificates and the Issuer Documents and (iv) the consummation by it of all other transactions described in the Official Statement and the Issuer Documents and any and all such other agreements and documents as may be required to be executed, delivered and/or received by the Issuer in order to carry out, give effect to, and consummate the transactions described herein and in the Official Statement; (c) The Certificates, when issued, delivered and paid for, in accordance with the Issuer Documents, will constitute legal, valid and binding obligations of the Issuer entitled to the benefits of the Certificate Ordinance and will be enforceable in accordance with their terms, subject to sovereign immunity and bankruptcy, insolvency, reorganization, moratorium and other similar laws and principles of equity relating to or affecting the enforcement of creditors' rights; upon the issuance, authentication and delivery of the Certificates as aforesaid, the Certificates will be payable from an annual ad valorem tax levied against all taxable property in the Issuer, within the limits prescribed by law, and the revenues to be derived from the City=s solid waste management system (the ASystem@) after the payment of all operation and maintenance expenses thereof (the ANet Revenues@) in an amount not to exceed $1,000 as set forth in the Certificate Ordinance; (d) To the best of its knowledge, the Issuer is not in material breach of or default in any material respect under any applicable constitutional provision, law or administrative regulation of the State or the United States, or any applicable judgment or decree, relating to the issuance of such Certificates or any loan agreement, indenture, bond, note, resolution, agreement or other instrument to which the Issuer is a party or to which the Issuer is or any of its property or assets are otherwise subject, and no event has occurred and is continuing which constitutes or with the passage of time or the giving of notice, or both, would constitute a default or event of default by the Issuer under any of the foregoing; and the 4

147 execution and delivery of the Certificates and the Issuer Documents and the adoption of the Certificate Ordinance and compliance with the provisions on the Issuer's part contained therein will not conflict with or constitute a material breach of or default under any constitutional provision, any administrative regulation relating to the issuance of the Certificates, or any judgment, decree, loan agreement, indenture, bond, note, resolution, agreement or other instrument to which the Issuer is a party or to which the Issuer is or to which any of its property or assets are otherwise subject; (e) All authorizations, approvals, licenses, permits, consents and orders of any governmental authority, legislative body, board, agency or commission having jurisdiction of the matter which are required for the due authorization of, which would constitute a condition precedent to, or the absence of which would materially adversely affect the due performance by the Issuer of its obligations under the Issuer Documents and the Certificates have been duly obtained, except for (i) such approvals, consents and orders as may be required under the Blue Sky or securities laws of any jurisdiction in connection with the offering and sale of the Bonds and (ii) approval by the Office of the Attorney General of the State (the "Attorney General") and registration of the Certificates by the Office of the Comptroller of the State (the "Comptroller"), and the Issuer shall timely cause a transcript of proceedings to be filed with the Attorney General in form and substance consistent with the administrative rules of the Public Finance Division of the Attorney General, which will permit the review of such transcript and the approval of the Certificates by the Attorney General, and the registration of the Certificates by the Comptroller on or before the Closing Date, as required by Section 6(h)(9) hereof, but subject to the discretion of the Attorney General with respect to the issuance of his approving opinion; (f) The Certificates and the Certificate Ordinance conform to the descriptions thereof contained in the Official Statement under the caption "THE OBLIGATIONS"; the proceeds of the sale of the Certificates will be applied generally as described in the Official Statement under the caption "USES OF PROCEEDS"; and the Undertaking conforms to the description thereof contained in the Official Statement under the caption "CONTINUING DISCLOSURE OF INFORMATION"; (g) Except as otherwise set forth in the Official Statement, there is no litigation, action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court, government agency, public board or body, pending or, to the best knowledge of the Issuer, threatened against the Issuer, affecting the existence of the Issuer or the titles of its officers to their respective offices, or affecting or seeking to prohibit, restrain or enjoin the sale, issuance or delivery of the Certificates or the collection of ad valorem taxes for the payment of principal of and interest on the Certificates pursuant to the Certificate Ordinance or in any way contesting or affecting the validity or enforceability of the Certificates, the Issuer Documents, or contesting the exclusion from gross income of interest on the Certificates for federal income tax purposes, or contesting in any way the completeness or accuracy of the Preliminary Official Statement or the Official Statement or any supplement or amendment thereto, or contesting the powers of the Issuer or any authority for the issuance of the Certificates, the adoption of the Certificate Ordinance or the execution and delivery of the Issuer Documents, nor, to the best knowledge of the Issuer is there any basis therefor, 5

148 wherein an unfavorable decision, ruling or finding would materially adversely affect the validity or enforceability of the Certificates or the Issuer Documents; (h) As of the date thereof, the Preliminary Official Statement did not contain any 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; provided that for the purpose of this Agreement and any certificate delivered by the Issuer in accordance herewith, the Issuer makes no representations with respect to the descriptions in the Preliminary Official Statement or the Official Statement of The Depository Trust Company, New York, New York, or its bookentry-only system; (i) At the time of the Issuer's acceptance hereof and (unless the Official Statement is amended or supplemented pursuant to Section 3(d) of this Agreement) at all times subsequent thereto during the period up to and including the date of Closing, the Official Statement does not and will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; (j) If the Official Statement is supplemented or amended pursuant to Section 3(d) of this Agreement, at the time of each supplement or amendment thereto and (unless subsequently again supplemented or amended pursuant to such paragraph) at all times subsequent thereto during the period up to and including the date of Closing the Official Statement as so supplemented or amended will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which made, not misleading; (k) The Issuer will apply, or cause to be applied, the proceeds from the sale of the Certificates as provided in and subject to all of the terms and provisions of the Certificate Ordinance and will not take or omit to take any action which action or omission will adversely affect the exclusion from gross income for federal income tax purposes of the interest on the Certificates; (l) The Issuer will furnish such information and execute such instruments and take such action in cooperation with the Underwriter may reasonably request (A) to (y) qualify the Certificates for offer and sale under the Blue Sky or other securities laws and regulations of such states and other jurisdictions in the United States as the Underwriter may designate and (z) determine the eligibility of the Certificates for investment under the laws of such states and other jurisdictions and (B) to continue such qualifications in effect so long as required for the distribution of the Certificates (provided, however, that such actions shall be at no expense to the Issuer and the Issuer will not be required to qualify as a foreign corporation or to file any general or special consents to service of process under the laws of any jurisdiction) and will advise the Underwriter immediately of receipt by the Issuer of any notification with respect to the suspension of the qualification of the Certificates for sale in any jurisdiction or the initiation or threat of any proceeding for that purpose; 6

149 (m) The financial statements of, and other financial information regarding, the Issuer in the Official Statement fairly present the financial position and results of the Issuer as of the dates and for the periods therein set forth. Prior to the Closing, there will be no adverse change of a material nature in such financial position, results of operations or condition, financial or otherwise, of the Issuer from that described in the Official Statement. Except as may otherwise be described in the Official Statement, the Issuer is not a party to any litigation or other proceeding pending or, to its knowledge, threatened which, if decided adversely to the Issuer, would have a materially adverse effect on the financial condition of the Issuer; (n) Prior to the Closing the Issuer will not offer or issue any certificates, notes or other obligations for borrowed money (except in the ordinary course of business), without the prior approval of the Underwriter, which approval shall not be unreasonably withheld; (o) Any certificate, signed by any official of the Issuer authorized to do so in connection with the transactions described in this Agreement, shall be deemed a representation and warranty by the Issuer to the Underwriter as to the statements made therein; and (p) To the best knowledge and belief of the Issuer, the Official Statement contains information, including financial information or operating data, as required by the Rule. Except as may otherwise be disclosed in the Official Statement, the Issuer has complied in all material respects with any undertaking specified in the Rule within the last five years. 5. Closing. (a) At 10:00 A.M. Central Time, on April 23, 2009, or at such other time and date as shall have been mutually agreed upon by the Issuer and the Underwriter(the "Closing"), the Issuer will, subject to the terms and conditions hereof, deliver the Certificates to the Underwriter, duly executed and authenticated, together with the other documents hereinafter mentioned, and the Underwriter will, subject to the terms and conditions hereof, accept such delivery and pay the purchase price of the Certificates as set forth in Section 1 of this Agreement in immediately available funds payable to the order of the Issuer. Payment for the Certificates shall be made at the offices of the Paying Agent/Registrar for the Certificates, or such other place as shall have been mutually agreed upon by the Issuer and the Underwriter. The initial Certificate shall be registered in the name of the Underwriter. (b) Delivery of the Certificates shall be made through The Depository Trust Company, New York, New York, utilizing the book-entry-only form of issuance. The definitive Certificates shall be delivered in definitive fully registered form, bearing CUSIP numbers without coupons, with one Certificate for each maturity of the Certificates, registered in the name of Cede & Co., all as provided in the Certificate Ordinance, and shall be made available to the Underwriter at least one business day before the Closing for purposes of inspection at the offices of DTC or, if the Certificates are to be held in 7

150 safekeeping for DTC by the Paying Agent/Registrar pursuant to DTC's FAST system, at the designated payment office of the Paying Agent/Registrar. In addition, the Issuer and the Underwriter agree that there shall be a preliminary closing held at the offices of Bond Counsel commencing at least 24 hours prior to the Closing; provided, however, that such preliminary closing shall not be required if Bond Counsel provides a complete Transcript of Proceedings acceptable to the Underwriter relating to the Certificates to the counsel for the Underwriter at least 24 hours prior to the Closing. 6. Closing Conditions. The Underwriter has entered into this Agreement in reliance upon the representations, warranties and agreements of the Issuer contained herein, and in reliance upon the representations, warranties and agreements to be contained in the documents and instruments to be delivered at the Closing and upon the performance by the Issuer of its obligations hereunder, both as of the date hereof and as of the date of the Closing. Accordingly, the Underwriter's obligations under this Agreement to purchase, to accept delivery of and to pay for the Certificates shall be conditioned upon the performance by the Issuer of its obligations to be performed hereunder and under such documents and instruments at or prior to the Closing, and shall also be subject to the following additional conditions, including the delivery by the Issuer of such documents as are enumerated herein, in form and substance reasonably satisfactory to the Underwriter: (a) The representations and warranties of the Issuer contained herein shall be true, complete and correct in all material respects on the date hereof and on and as of the date of the Closing, as if made on the date of the Closing; (b) The Issuer shall have performed and complied with all agreements and conditions required by this Agreement to be performed or complied with by it prior to or at the Closing; (c) At the time of the Closing, (i) the Issuer Documents and the Certificates shall be in full force and effect, and shall not have been amended, modified or supplemented, and the Official Statement shall not have been supplemented or amended, except in any such case as may have been agreed to by the Underwriter; and (ii) all actions of the Issuer required to be taken by the Issuer shall be performed in order for Bond Counsel and other counsel to deliver their respective opinions referred to hereafter; (d) At or prior to the Closing, the Certificate Ordinance shall have been duly approved by the governing body of the Issuer in accordance with law and the Issuer shall have duly executed and delivered and the paying/agent registrar shall have duly authenticated the Certificates; (e) [Reserved]; (f) The Issuer shall not have failed to pay principal or interest when due on any of its outstanding obligations for borrowed money; 8

151 (g) All steps to be taken and all instruments and other documents to be executed, and all other legal matters in connection with the transactions described in this Agreement shall be reasonably satisfactory in legal form and effect to the Underwriter; (h) At or prior to the Closing, the Underwriter shall have received one copy of each of the following documents: (1) The Official Statement, and each supplement or amendment thereto, if any, executed on behalf of the Issuer by the Mayor and City Secretary, or such other officials as may have been agreed to by the Underwriter, or a conformed copy thereof, and the reports and audits referred to or appearing in the Official Statement; (2) A copy of each of the executed Issuer Documents; (3) The Certificate Ordinance shall include a continuing disclosure undertaking of the Issuer which satisfies the requirements of section (d)(2) of the Rule (the "Undertaking"), with such supplements or amendments as may have been agreed to by the Underwriter; (4) The approving opinion of Bond Counsel with respect to the Certificates, in substantially the form and substance attached to the Official Statement as Appendix C; (5) a supplemental opinion of Bond Counsel, addressed to the Issuer and the Underwriter, which provides that the Underwriter may rely upon the opinion of Bond Counsel delivered in accordance with the provisions of paragraph 6(h)(4) hereof, and opining to the effect that: (i) the Certificates are exempted securities within the meaning of Section 3(a)(2) of the Securities Act of 1933, as amended (the "1933 Act"), and the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"), and it is not necessary, in connection with the offering and sale of the Certificates, to register the Certificates under the 1933 Act or to qualify the Certificate Ordinance under the Trust Indenture Act; and (ii) such firm has reviewed the statements and information contained in the Official Statement under the captions and subcaptions ATHE OBLIGATIONS@ (except for the information under the subcaptions ABOOK-ENTRY-ONLY SYSTEM@ and AUSE OF PROCEEDS@), ATAX EXEMPTION,@ ATAX TREATMENT OF ORIGINAL ISSUE DISCOUNT AND PREMIUM OBLIGATIONS,@ AQUALIFIED TAX-EXEMPT OBLIGATIONS,@ ACONTINUING DISCLOSURE OF INFORMATION@ (except for the subcaption ACOMPLIANCE WITH PRIOR UNDERTAKINGS@), AOTHER INFORMATION - REGISTRATION AND QUALIFICATION OF OBLIGATIONS FOR SALE,@ AOTHER 9

152 INFORMATION - LEGAL INVESTMENTS AND ELIGIBILITY TO SECURE PUBLIC FUNDS IN TEXAS,@ and AOTHER INFORMATION B LEGAL MATTERS@ (except for the last sentence of the first paragraph thereof),@and such firm is of the opinion that the information relating to the Certificates and the Certificate Ordinance contained under such captions and subcaptions is a fair and accurate summary of the information purported to be shown and that the information and descriptions contained under such captions and subcaptions relating to the provisions of applicable State and federal laws are correct as to matters of law; (6) An opinion of McCall, Parkhurst & Horton L.L.P., as counsel for the Underwriter, dated the date of the Closing, addressed to the Underwriter, substantially in the form attached hereto as Exhibit A; (7) A certificate, dated the date of Closing, of the Mayor and the City Administrator to the effect that (i) the representations and warranties of the Issuer contained herein are true and correct in all material respects on and as of the date of Closing as if made on the date of Closing; (ii) except as described in the Official Statement, no litigation or proceeding or tax challenge against the Issuer is pending or, to their knowledge, threatened in any court or administrative body nor, to their knowledge, is there a basis for litigation which would (a) contest the right of the members or officials of the Issuer to hold and exercise their respective positions, (b) contest the due organization and valid existence of the Issuer, (c) contest the validity, due authorization and execution of the Certificates or the Issuer Documents, (d) attempt to limit, enjoin or otherwise restrict or prevent the Issuer from functioning and collecting revenues, including payments on the Certificates, pursuant to the Certificate Ordinance, or the levy, assessment or collection of the ad valorem taxes and System revenues for the payment of the principal of and interest on the Certificates, or the pledge thereof; or (e) contest the accuracy, completeness or the fairness of the Preliminary Official Statement or the Official Statement; (iii) the Certificate Ordinance, which authorized the execution and delivery of the Official Statement, the Certificates and the other Issuer Documents and the performance of the obligations of the Issuer thereunder, has been duly adopted by the Issuer, is in full force and effect and has not been modified, amended or repealed, (iv) to the best of their knowledge, no event affecting the Issuer has occurred since the date of the Official Statement which should be disclosed in the Official Statement for the purpose for which it is to be used or which it is necessary to disclose therein in order to make the statements and information therein, in light of the circumstances under which made, not misleading in any respect as of the time of Closing, and the information contained in the Official Statement is correct in all material respects and, as of the date of the Official Statement did not, and as of the date of the Closing does not, contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements made therein, in the light of the circumstances under which they were made, not misleading, and (v) there has not been any materially adverse change in the financial condition of the Issuer 10

153 since September 30, 2007, the latest date as of which audited financial information is available; (8) A certificate of the Issuer in form and substance satisfactory to Bond Counsel and counsel to the Underwriter setting forth the facts, estimates and circumstances in existence on the date of the Closing, which establish that it is not expected that the proceeds of the Certificates will be used in a manner that would cause the Certificates to be "arbitrage bonds" within the meaning of Section 148 of the Internal Revenue Code of 1986, as amended (the "Code"), and any applicable regulations (whether final, temporary or proposed), issued pursuant to the Code; (9) The approving opinion of the Attorney General and the registration certificate of the Comptroller in respect of the Certificates; (10) Evidence satisfactory to the Underwriter that the Certificates have been rated "A+"by Standard & Poor's, a Division of The McGraw-Hill Companies, Inc. ("S&P"), and that such rating is in effect as of the date of Closing; and (11) Such additional legal opinions, certificates, instruments and other documents as the Underwriter or counsel to the Underwriter may reasonably request to evidence the truth and accuracy, as of the date hereof and as of the date of the Closing, of the Issuer's representations and warranties contained herein and of the statements and information contained in the Official Statement and the due performance or satisfaction by the Issuer on or prior to the date of the Closing of all the respective agreements then to be performed and conditions then to be satisfied by the Issuer. All of the opinions, letters, certificates, instruments and other documents mentioned above or elsewhere in this Agreement shall be deemed to be in compliance with the provisions hereof if, but only if, they are in form and substance reasonably satisfactory to the Underwriter. If the Issuer shall be unable to satisfy the conditions to the obligations of the Underwriter to purchase, to accept delivery of and to pay for the Certificates contained in this Agreement, or if the obligations of the Underwriter to purchase, to accept delivery of and to pay for the Certificates shall be terminated for any reason permitted by this Agreement, this Agreement shall terminate and neither the Underwriter nor the Issuer shall be under any further obligation hereunder, except that the representations, warranties and obligations of the Issuer and the Underwriter set forth in Sections 4 and 8 hereof shall continue in full force and effect and the Check shall be returned to the Underwriter. 7. Termination. The Underwriter shall have the right to cancel its obligation to purchase the Certificates if, between the date of this Agreement and the Closing, the market price or marketability of the Certificates shall be materially adversely affected, in the reasonable judgment of the Underwriter, by the occurrence of any of the following: 11

154 (a) legislation shall be enacted by or introduced in the Congress of the United States or recommended to the Congress for passage by the President of the United States, or the Treasury Department of the United States or the Internal Revenue Service or any member of the Congress or favorably reported for passage to either House of the Congress by any committee of such House to which such legislation has been referred for consideration, a decision by a court of the United States or of the State or the United States Tax Court shall be rendered, or an order, ruling, regulation (final, temporary or proposed), press release, statement or other form of notice by or on behalf of the Treasury Department of the United States, the Internal Revenue Service or other governmental agency shall be made or proposed, the effect of any or all of which would be to impose, directly or indirectly, federal income taxation upon interest received on obligations of the general character of the Certificates as described in the Official Statement, or other action or events shall have transpired which may have the purpose or effect, directly or indirectly, of changing the federal income tax consequences of any of the transactions described herein; (b) legislation introduced in or enacted (or resolution passed) by the Congress or an order, decree, or injunction issued by any court of competent jurisdiction, or an order, ruling, regulation (final, temporary, or proposed), press release or other form of notice issued or made by or on behalf of the Securities and Exchange Commission, or any other governmental agency having jurisdiction of the subject matter, to the effect that obligations of the general character of the Certificates, including any or all underlying arrangements, are not exempt from registration under or other requirements of the 1933 Act, or that the Certificate Ordinance is not exempt from qualification under or other requirements of the Trust Indenture Act, or that the issuance, offering, or sale of obligations of the general character of the Certificates, including any or all underlying arrangements, as described herein or in the Official Statement or otherwise, is or would be in violation of the federal securities law as amended and then in effect; (c) any state blue sky or securities commission or other governmental agency or body in any jurisdiction in which more than ten percent (10%) of the Certificates have been offered and sold shall have withheld registration, exemption or clearance of the offering of the Certificates as described herein, or issued a stop order or similar ruling relating thereto; (d) a general suspension of trading in securities on the New York Stock Exchange or the American Stock Exchange, the establishment of material restrictions (not in force as of the date hereof) upon trading securities generally by any governmental authority or any national securities exchange, or a general banking moratorium declared by federal, State of New York, or State officials authorized to do so; (e) a national securities exchange or any governmental authority shall impose, as to the Certificates or as to obligations of the general character of the Certificates, any material restrictions not now in force, or increase materially those now in force, with respect to the extension of credit by, or the charge to the net capital requirements of, the Underwriter; 12

155 (f) any amendment to the federal or Texas Constitution or action by any federal or Texas court, legislative body, regulatory body, or other authority materially adversely affecting the tax status of the Issuer, its property, income, securities (or interest thereon), or the validity or enforceability of the assessments or the levy and collection of ad valorem taxes or the collection of the revenues pledged to pay principal of and interest on the Certificates; (g) any event occurring, or information becoming known which, in the reasonable judgment of the Underwriter, makes untrue in any material respect any statement or information contained in the Official Statement, or has the effect that the Official Statement contains any untrue statement of material fact or omits 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; (h) there shall have occurred since the date of this Agreement any materially adverse change in the affairs or financial condition of the Issuer; (i) since the date of this Agreement the United States shall have become engaged in hostilities which have resulted in a declaration of war or a national emergency or there shall have occurred any other outbreak or escalation of hostilities or a national or international calamity or crisis, financial or otherwise; (j) any fact or event shall exist or have existed that, in the reasonable judgment of the Underwriter, requires or has required an amendment of or supplement to the Official Statement; (k) there shall have occurred any downgrading or published negative credit watch or similar published information from a rating agency that at the date of this Agreement has published a rating (or has been asked to furnish a rating on the Certificates) on any of the Issuer's debt obligations that are secured in a like manner as the Certificates, which action reflects a change or possible change, in the ratings accorded any such obligations of the Issuer (including any rating to be accorded the Certificates); (l) [Reserved]; or (m) the purchase of and payment for the Certificates by the Underwriter, or the resale of the Certificates by the Underwriter, on the terms and conditions herein provided shall be prohibited by any applicable law, governmental authority, board, agency or commission, which prohibition shall occur subsequent to the date hereof and shall not be due to the malfeasance, misfeasance or nonfeasance of the Underwriter. With respect to the condition described in subparagraph (m) above, the Underwriter is not aware of any current, pending or proposed law or government inquiry or investigation as of the date of execution of this Agreement which would permit the Underwriter to invoke their termination rights hereunder. 13

156 8. Expenses. (a) The Underwriter shall be under no obligation to pay, and the Issuer shall pay, any expenses incident to the performance of the Issuer's obligations hereunder, including, but not limited to (i) the cost of preparation and printing of the Certificates, (ii) the cost of preparation, printing and distribution of the Preliminary Official Statement, the Official Statement or any supplement or addendum thereto; (iii) the fees and disbursements of Bond Counsel and counsel to the Issuer; (iv) the fees and disbursements of the Financial Advisor to the Issuer; (v) the fees and disbursements of any engineers, accountants, and other experts, consultants or advisers retained by the Issuer; and (vi) the fee for bond ratings. (b) The Underwriter shall pay (i) the cost of preparation and printing of this Agreement, the Blue Sky Survey, if any, and Legal Investment Memorandum, if any; (ii) all advertising expenses in connection with the public offering of the Certificates; and (iii) all other expenses incurred by them in connection with the public offering of the Certificates, including the fees and disbursements of counsel retained by the Underwriter. 9. Notices. Any notice or other communication to be given to the Issuer under this Agreement may be given by delivering the same in writing at the address for the Issuer set forth above, and any notice or other communication to be given to the Underwriter under this Agreement may be given by delivering the same in writing to SAMCO Capital Markets, Inc., 1700 Pacific, Suite 2000, Dallas, Texas Attention: Mike Hamilton. 10. Parties in Interest. This Agreement as heretofore specified shall constitute the entire agreement between the Issuer and the Underwriter and is made solely for the benefit of the Issuer and the Underwriter (including successor or assign of the Underwriter) and no other person shall acquire or have any right hereunder or by virtue hereof. This Agreement may not be assigned by the Issuer. All of the Issuer's representations and warranties contained in this Agreement shall remain operative and in full force and effect, regardless of (i) any investigations made by or on behalf of of the Underwriter; (ii) delivery of and payment for the Certificates pursuant to this Agreement; and (iii) any termination of this Agreement. 11. Effectiveness. This Agreement shall become effective upon the acceptance hereof by the Issuer and shall be valid and enforceable at the time of such acceptance. 12. Choice of Law. This Agreement shall be governed by and construed in accordance with the laws of the State. 13. Severability. If any provision of this Agreement shall be held or deemed to be or shall, in fact, be invalid, inoperative or unenforceable as applied in any particular case in any jurisdiction or jurisdictions, or in all jurisdictions because it conflicts with any provisions of any Constitution, statute, rule of public policy, or any other reason, such circumstances shall not have the effect of rendering the provision in question invalid, inoperative or unenforceable in any other case or circumstance, or of rendering any other provision or provisions of this Agreement invalid, inoperative or unenforceable to any extent whatever. 14

157 14. Business Day. For purposes of this Agreement, "business day" means any day on which the New York Stock Exchange is open for trading. 15. Section Headings. Section headings have been inserted in this Agreement as a matter of convenience of reference only, and it is agreed that such section headings are not a part of this Agreement and will not be used in the interpretation of any provisions of this Agreement. 16. Counterparts. This Agreement may be executed in several counterparts each of which shall be regarded as an original (with the same effect as if the signatures thereto and hereto were upon the same document) and all of which shall constitute one and the same document. 17. No Personal Liability. None of the members of the City Council, nor any officer, agent, or employee of the Issuer, shall be charged personally by the Underwriter with any liability, or be held liable to the Underwriter under any term or provision of this Agreement, or because of execution or attempted execution, or because of any breach or attempted or alleged breach, of this Agreement. 18. Status of the Underwriter. It is understood and agreed that for all purposes of this Agreement and the transactions described herein the Underwriter has, in its role as Underwriter, acted solely as an independent contractor and has not acted as financial or investment advisors, fiduciaries or agents to or for the Issuer, whether directly or indirectly through any person. The Issuer recognizes that the Underwriter expects to profit from the acquisition and potential distribution of the Certificates. [Remainder of page intentionally left blank] 15

158 If the Issuer agrees with the foregoing, please sign the enclosed counterpart of this Agreement and return it to the Underwriter. This Agreement shall become a binding agreement between the Issuer and the Underwriter, and shall be dated as of the date, when at least the counterpart of this Agreement shall have been signed by or on behalf of each of the parties hereto. Respectfully submitted, SAMCO Capital Markets, Inc. By: Title: Managing Director Date: ACCEPTANCE ACCEPTED pursuant to a motion adopted by the City Council of the City of Dickinson, Texas, on March 24, By: Title: Mayor Signature Page for Purchase Agreement relating to $1,035,000 (estimated) City of Dickinson, Texas Certificates of Obligation, Series 2009

159 SCHEDULE I SCHEDULE OF MATURITIES, INTEREST RATES AND REDEMPTION PROVISIONS The Certificates are dated April 1, 2009 and shall accrue interest from such date. Maturity June 1 Principal Amount ($) Interest Rate (%) Approximat e Yield (%) The Certificates maturing on and after March 1, 2020, are subject to redemption at the option of the Issuer on March 1, 2019, or any date thereafter at a redemption price equal to the principal amount thereof plus accrued interest to the date of redemption. The Certificates scheduled to mature on June 1 in the years are subject to scheduled mandatory redemption prior to maturity, at a price equal to the principal amount thereof, plus accrued interest to the redemption date, on the dates and in the respective principal amounts, set forth in the following schedule: Σ 17

160 Σ 18

161 EXHIBIT A Form of Opinion of McCall, Parkhurst & Horton L.L.P., as Counsel to the Underwriter (date) SAMCO Capital Markets, Inc Pacific, Suite 2000 Dallas, Texas Re: $1,035,000 City of Dickinson, Texas Certificates of Obligation, Series 2009 Ladies and Gentlemen: We have acted as counsel for you as the underwriter of the Certificates described above (the "Certificates"), issued under and pursuant to an ordinance (the "Ordinance") of City of Dickinson, Texas (the "Issuer"), authorizing the issuance of the Certificates, which Certificates you are purchasing pursuant to a Purchase Agreement dated March 24, All capitalized undefined terms used herein shall have the meaning set forth in the Purchase Agreement. In connection with this opinion letter, we have considered such matters of law and of fact, and have relied upon such certifications and other information furnished to us, as we have deemed appropriate as a basis for our opinion set forth below. We are not expressing any opinion or views herein on the authorization, issuance, delivery, validity of the Certificates and we have assumed, but not independently verified, that the signatures on all documents and Certificates that we have examined are genuine. Based on and subject to the foregoing, we are of the opinion that, under existing laws, the Certificates are not subject to the registration requirements of the Securities Act of 1933, as amended, and the Ordinance is not required to be qualified under the Trust Indenture Act of 1939, as amended. Because the primary purpose of our professional engagement as your counsel was not to establish factual matters, and because of the wholly or partially nonlegal character of many of the determinations involved in the preparation of the Official Statement dated March 24, 2009 (the "Official Statement") and because the information in the Official Statement included under the headings "THE OBLIGATIONS B Book-Entry-Only System,""TAX MATTERS," and "CONTINUING DISCLOSURE OF INFORMATION B Compliance with Prior Agreements," and the Appendices thereto were prepared by others who have been engaged to review or provide such information, we are not passing on and do not assume any responsibility for the information contained under such headings and in the appendices, and, except as set forth in the last sentence of this paragraph, we are not passing on and do not assume any responsibility for the accuracy, completeness or fairness of other statements contained in the Official Statement (including any appendices, schedules and exhibits thereto) and we make no representation that we have independently verified the accuracy, completeness or fairness of such statements. In the course of Α 19

162 our participation in the preparation of the Official Statement as your counsel, we had discussions with representatives of the Issuer, including its Financial Advisor and Bond Counsel, regarding the contents of the Official Statement. In the course of such activities, no facts came to our attention which would lead us to believe that the Official Statement (except for the financial statements and other financial and statistical data contained therein, the information set forth under the headings "THE OBLIGATIONS B Book-Entry-Only System,""TAX MATTERS," and "CONTINUING DISCLOSURE OF INFORMATION B Compliance with Prior Agreements," and the Appendices thereto, as to which we express no opinion), as of its date contained any untrue statement of a material fact or omitted to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. This opinion letter may be relied upon by only you and only in connection with the transaction to which reference is made above and may not be used or relied upon by any other person for any purposes whatsoever without our prior written consent. Respectfully, Α 20

163 EXHIBIT D PRELIMINARY OFFICIAL STATEMENT D-1 CITY OF DICKINSON, TEXAS ORDINANCE NUMBER XXX-2009

164 This Preliminary Official Statement and the information contained herein are subject to completion or amendment. These securities may not be sold nor may offers to buy be accepted prior to the time the Official Statement is delivered in final form. Under no circumstances shall this Preliminary Official Statement constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of these securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. NEW ISSUE - Book-Entry-Only PRELIMINARY OFFICIAL STATEMENT DATED MARCH 17, 2009 Ratings: S&P: Applied For See ("OTHER INFORMATION - RATINGS" herein) In the opinion of Bond Counsel, interest on the Obligations is excludable from gross income for federal income tax purposes under existing law, subject to the matters described under TAX EXEMPTION herein, and is not includable in the alternative minimum taxable income of individuals. See TAX EXEMPTION for a discussion of the opinion of Bond Counsel, including the alternative minimum tax on corporations. The City has designated the Obligations as qualified tax-exempt obligations. See QUALIFIED TAX-EXEMPT OBLIGATIONS. Dated Date: April 1, 2009 THE OBLIGATIONS WILL BE DESIGNATED AS "QUALIFIED TAX-EXEMPT OBLIGATIONS" FOR FINANCIAL INSTITUTIONS CITY OF DICKINSON, TEXAS (Galveston County, Texas) $2,370,000 GENERAL OBLIGATION REFUNDING BONDS SERIES 2009 $1,035,000 CERTIFICATES OF OBLIGATION SERIES 2009 Due: March 1, as shown on the inside cover The $2,370,000 City of Dickinson, Texas General Obligation Refunding Bonds, Series 2009 (the Bonds ), and the $1,035,000 City of Dickinson, Texas, Certificates of Obligation, Series 2009 (the Certificates ), are being issued by the City of Dickinson, Texas (the City ), pursuant to the terms of two separate ordinances adopted by the governing body of the City. The Bonds and the Certificates are referred to herein collectively as the Obligations. PAYMENT TERMS... Interest on the Obligations will accrue from April 1, 2009, (the "Dated Date") and will be payable March 1 and September 1 of each year commencing September 1, 2009 and will be calculated on the basis of a 360-day year consisting of twelve 30-day months. The definitive Obligations 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 Obligations may be acquired in denominations of $5,000 or integral multiples thereof. No physical delivery of the Obligations will be made to the beneficial owners thereof. Principal of, premium, if any, and interest on the Obligations will be payable by the Paying Agent/Registrar to Cede & Co., which will make distribution of the amounts so paid to the participating members of DTC for subsequent payment to the beneficial owners of the Obligations. See "THE OBLIGATIONS - BOOK-ENTRY-ONLY SYSTEM" herein. The initial Paying Agent/Registrar is The Bank of New York Mellon Trust Company, N.A., Dallas, Texas, (see "THE OBLIGATIONS - PAYING AGENT/REGISTRAR"). AUTHORITY FOR ISSUANCE OF THE BONDS... The Bonds are issued pursuant to the general laws of the State, particularly Chapter 1207, Texas Government Code, as amended, and an ordinance passed by the City Council of the City (see THE OBLIGATIONS - AUTHORITY FOR ISSUANCE OF THE BONDS ). AUTHORITY FOR ISSUANCE OF THE CERTIFICATES... The Certificates are issued pursuant to the general laws of the State, particularly Subchapter C of Chapter 271, Texas Local Government Code, as amended; and an ordinance passed by the City Council of the City (see THE OBLIGATIONS - AUTHORITY FOR ISSUANCE OF THE CERTIFICATES ). PURPOSE... Proceeds from the sale of the Certificates will be used (i) for the construction and equipment of a city hall and library complex, and (ii) to pay the costs of issuance of the Certificates. Proceeds of the Bonds will be used to (i) refund certain obligations of the City described in Schedule I (the Refunded Obligations ), and (ii) to pay the costs incurred in connection with the issuance of the Bonds. SEE INSIDE COVER PAGE FOR MATURITY SCHEDULE OPTIONAL REDEMPTION... The City reserves the right, at its option, to redeem Obligations having stated maturities on and after March 1, 2020, in whole or in part in principal amounts of $5,000 or any integral multiple thereof, on March 1, 2019, or any date thereafter, at the par value thereof plus accrued interest to the date of redemption (see "THE OBLIGATIONS - OPTIONAL REDEMPTION"). MANDATORY SINKING FUND REDEMPTION... In addition to the foregoing optional redemption provision, if principal amounts designated in the serial maturity schedules on the inside cover page are combined to create Term Bonds or Certificates, as the case may be, each such Term Bond or Certificate shall be subject to mandatory sinking fund redemption commencing on March 1 of the first year which has been combined to form such Term Bond or Certificate and continuing on March 1 in each year thereafter until the stated maturity date of that Term Bond or Certificate, and the amount required to be redeemed in any year shall be equal to the principal amount for such year set forth in the respective serial maturity schedule on the inside cover page. See THE OBLIGATIONS - MANDATORY SINKING FUND REDEMPTION. LEGALITY... The Obligations are offered for delivery when, as and if issued and received by the underwriter listed below (the Underwriter )and subject to the approving opinion of the Attorney General of Texas and the opinion of Andrews Kurth LLP, Houston, Texas, Bond Counsel. See APPENDIX C - "FORM OF BOND COUNSEL'S OPINION". Certain other matters will be passed upon for the Underwriter by McCall, Parkhurst & Horton L.L.P., Dallas, Texas, as Counsel to the Underwriter. DELIVERY... It is expected that the Obligations will be available for delivery through The Depository Trust Company on or about April 7, SAMCO CAPITAL MARKETS

165 MATURITY SCHEDULES $2,370,000 General Obligation Refunding Bonds, Series 2009 Initial Initial Maturity Principal Interest Reoffering CUSIP Maturity Principal Interest Reoffering CUSIP March 1 Amount Rate Yield Number (1) March 1 Amount Rate Yield Number (1) 2010 $ 90,000 % % 2020 $ 115,000 (2 ) % % , ,000 (2 ) , ,000 (2 ) , ,000 (2 ) , ,000 (2 ) ,000 **** **** , ,000 (2 ) , ,000 (2 ) , ,000 (2 ) ,000 (2) (Accrued Interest from April 1, 2009 to be added) $1,035,000 Certificates of Obligation, Series 2009 Initial Maturity Principal Interest Reoffering CUSIP March 1 Amount Rate Yield Number (1) 2028 $ 330,000 (2) % % ,000 (2) ,000 (2) (Accrued Interest from April 1, 2009 to be added) (1) CUSIP is a registered trademark of the American Bankers Association. CUSIP data herein is provided by Standard and Poor's CUSIP Service Bureau, A Division of the McGraw-Hill Companies, Inc. This data is not intended to create a database and does not serve in any way as a substitute for the CUSIP Services. (2) The City reserves the right at its option, to redeem Obligations having stated maturities on and after March 1, 2020, in whole or in part in principal amounts of $5,000 or any integral multiple thereof, on March 1, 2019 or any date there after, at the par value thereof plus accrued interest to the date of redemption (see THE OBLIGATIONS OPTIONAL REDEMPTION ). 2

166 For purposes of compliance with Rule 15c2-12 of the Securities and Exchange Commission (the Rule ), this document, as the same may be supplemented or amended from time to time, may be treated as an Official Statement of the City with respect to the Obligations described herein which has been deemed final by the City as of the date hereof (or of any such supplement or amendment) except for the omission of no more than the information permitted by subsection (b)(1) of the Rule. No dealer, broker, salesman or other person has been authorized by the City,, the City s Financial Advisor or the Underwriter to give any information, or to make any representations 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, the City s Financial Advisor or the Underwriter. This Official Statement does not constitute an offer to sell Obligations in any jurisdiction to any person to whom it is unlawful to make such offer in such jurisdiction. Certain information set forth herein has been obtained from the City and other sources which are believed to be reliable but is not guaranteed as to accuracy or completeness, and is not to be construed as a representation by the Financial Advisor or the Underwriter. 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. IN CONNECTION WITH THE OFFERING OF THE OBLIGATIONS, THE UNDERWRITER MAY OVER ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICES OF THE OBLIGATIONS AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. TABLE OF CONTENTS MATURITY SCHEDULES...2 OFFICIAL STATEMENT SUMMARY...4 SELECTED FINANCIAL INFORMATION...5 GENERAL FUND CONSOLIDATED STATEMENT SUMMARY...5 CITY OFFICIALS, STAFF AND CONSULTANTS...6 ELECTED OFFICIALS...6 SELECTED ADMINISTRATIVE STAFF...6 CONSULTANTS AND ADVISORS...6 INTRODUCTION...7 HURRICANE IKE...7 PLAN OF FINANCING...7 THE OBLIGATIONS...8 TAX INFORMATION...12 TABLE 1 - VALUATION, EXEMPTIONS AND GENERAL OBLIGATION DEBT...15 TABLE 2 - TAXABLE ASSESSED VALUATIONS BY CATEGORY...16 TABLE 3 - VALUATION AND GENERAL OBLIGATION DEBT HISTORY...17 TABLE 4 - TAX RATE, LEVY AND COLLECTION HISTORY...17 TABLE 5 - TEN LARGEST TAXPAYERS...17 TABLE 6 - TAX ADEQUACY...18 TABLE 7 - ESTIMATED OVERLAPPING DEBT...18 DEBT INFORMATION...19 TABLE 8 - PRO-FORMA GENERAL OBLIGATION DEBT SERVICE REQUIREMENTS...19 TABLE 9 - INTEREST AND SINKING FUND BUDGET PROJECTION...20 TABLE 10 - AUTHORIZED BUT UNISSUED GENERAL OBLIGATION DEBT...20 FINANCIAL INFORMATION...21 TABLE 12 - CHANGE IN NET ASSET TABLE 12-A - GENERAL FUND REVENUES AND EXPENDITURE HISTORY TABLE 13 - MUNICIPAL SALES TAX HISTORY INVESTMENTS TABLE 14 - CURRENT INVESTMENTS TAX EXEMPTION TAX TREATMENT OF ORIGINAL ISSUE DISCOUNT AND PREMIUM OBLIGATIONS DISCOUNT OBLIGATIONS PREMIUM OBLIGATIONS QUALIFIED TAX-EXEMPT OBLIGATIONS CONTINUING DISCLOSURE OF INFORMATION OTHER INFORMATION RATINGS LITIGATION REGISTRATION AND QUALIFICATION OF OBLIGATIONS FOR SALE LEGAL INVESTMENTS AND ELIGIBILITY TO SECURE PUBLIC FUNDS IN TEXAS LEGAL MATTERS AUTHENTICITY OF FINANCIAL DATA AND OTHER INFORMATION FINANCIAL ADVISOR UNDERWRITING FORWARD-LOOKING STATEMENTS DISCLAIMER APPENDICES SCHEDULE OF REFUNDED OBLIGATIONS... I GENERAL INFORMATION REGARDING THE CITY... A EXCERPTS FROM THE ANNUAL FINANCIAL REPORT... B FORM OF BOND COUNSEL'S OPINION... C The cover page hereof, this page, the appendices included herein and any addenda, supplement or amendment hereto, are part of the Official Statement. 3

167 OFFICIAL STATEMENT SUMMARY This summary is subject in all respects to the more complete information and definitions contained or incorporated in this Official Statement. The offering of the Obligations to potential investors is made only by means of this entire Official Statement. No person is authorized to detach this summary from this Official Statement or to otherwise use it without the entire Official Statement. THE CITY... The City of Dickinson is a political subdivision and municipal corporation of the State, located in Galveston County. The City covers approximately 15 square miles (see "INTRODUCTION - DESCRIPTION OF CITY"). THE BONDS... The Bonds are issued as $2,370,000 General Obligation Refunding Bonds, Series The Bonds are issued as serial bonds, maturing March 1 in each of the years and in the amounts shown on the inside cover page hereof. (see "THE OBLIGATIONS -DESCRIPTION OF THE OBLIGATIONS ) THE CERTIFICATES... The Certificates are issued as $1,035,000 Certificates of Obligation, Series The Certificates are issued as serial certificates, maturing March 1 in each of the years and in the amounts shown on the inside cover page hereof. (see "THE OBLIGATIONS -DESCRIPTION OF THE OBLIGATIONS") PAYMENT OF INTEREST... Interest on the Obligations accrues from April 1, 2009, and is payable September 1, 2009, and each March 1 and September 1 thereafter until maturity or prior redemption (see "THE OBLIGATIONS - DESCRIPTION OF THE OBLIGATIONS," "- OPTIONAL REDEMPTION," and - MANDATORY SINKING FUND REDEMPTION ). AUTHORITY FOR ISSUANCE OF THE BONDS... The Bonds are issued pursuant to the general laws of the State, particularly Chapter 1207, Texas Government Code, as amended, and an ordinance passed by the City Council of the City (see THE OBLIGATIONS AUTHORITY FOR ISSUANCE OF THE BONDS ). SECURITY FOR THE BONDS... The Bonds constitute direct obligations of the City, payable from the levy and collection of a direct and continuing ad valorem tax, within the limits prescribed by law, on all taxable property located within the City (see THE OBLIGATIONS SECURITY OF SOURCE OF PAYMENT ). AUTHORITY FOR ISSUANCE OF THE CERTIFICATES... The Certificates are issued pursuant to the general laws of the State, particularly Subchapter C of Chapter 271, Texas Local Government Code, as amended; and an ordinance passed by the City Council of the City (see THE OBLIGATIONS - AUTHORITY FOR ISSUANCE OF THE CERTIFICATES ). SECURITY FOR THE CERTIFICATES... The Certificates constitute direct obligations of the City, payable from a combination of (i) the levy and collection of a direct and continuing ad valorem tax, within the limits prescribed by law, on all taxable property located within the City, and (ii) a subordinate lien on and pledge of $1,000 of the surplus revenues derived from the City s Solid Waste Management System (see THE OBLIGATIONS - SECURITY OF SOURCE OF PAYMENT ). QUALIFIED TAX-EXEMPT OBLIGATIONS... The City will designate the Obligations as "Qualified Tax-Exempt Obligations" for financial institutions (see "QUALIFIED TAX EXEMPT OBLIGATIONS"). REDEMPTION... The City reserves the right, at its option, to redeem Obligations having stated maturities on and after March 1, 2020, in whole or in part in principal amounts of $5,000 or any integral multiple thereof, March 1, 2019, or any date thereafter, at the par value thereof plus accrued interest to the date of redemption. See THE OBLIGATIONS OPTIONAL REDEMPTION. Additionally, the Obligations may be subject to mandatory redemption in the event the underwriter elected to aggregate one or more maturities as a Term Certificate or Bond, as the case may be, (see "THE OBLIGATIONS - MANDATORY SINKING FUND REDEMPTION"). TAX EXEMPTION... In the opinion of Bond Counsel, interest on the Obligations is excludable from gross income for federal income tax purposes under existing law, subject to the matters described under the caption "TAX EXEMPTION" herein, and is not includable in the alternative minimum taxable income of individuals. See TAX EXEMPTION for a discussion of the opinion of Bond Counsel, including the alternative minimum tax on corporations. The City has designated the Obligations as qualified tax-exempt obligations (see "QUALIFIED TAX EXEMPT OBLIGATIONS"). USE OF PROCEEDS... Proceeds from the sale of the Certificates will be used (i) for the construction and equipment of a city hall and library complex, and (ii) to pay the costs of issuance of the Certificates. Proceeds of the Bonds will be used to (i) refund the Refunded Obligations, and (ii) to pay the costs incurred in connection with the issuance of the Bonds. RATINGS... The presently outstanding tax supported debt of the City is rated "A" by Standard & Poor's Ratings Services, A Division of The McGraw-Hill Companies, Inc. ("S&P"). Application for contract ratings on the Obligations has been made to S&P (see "OTHER INFORMATION - RATINGS"). BOOK-ENTRY-ONLY SYSTEM... The definitive Obligations will be initially registered and delivered only to Cede & Co., the nominee of DTC pursuant to the Book-Entry-Only System described herein. Beneficial ownership of the Obligations may be acquired in denominations of $5,000 or integral multiples thereof. No physical delivery of the Obligations will be made to the beneficial owners thereof. Principal of, premium, if any, and interest on the Obligations will be payable by the Paying Agent/Registrar to Cede & Co., which will make distribution of the amounts so paid to the participating members of DTC for subsequent payment to the beneficial owners of the Obligations (see "THE OBLIGATIONS - BOOK-ENTRY-ONLY SYSTEM"). PAYMENT RECORD... The City has never defaulted in payment of its general obligation tax debt. 4

168 SELECTED FINANCIAL INFORMATION Ratio Tax Fiscal Taxable General Debt to Year Estimated Taxable Assessed Obligation Per Capita Taxable Percent of Ended City Assessed Valuation ("G.O.") G.O. Assessed Total Tax 9/30 Population (1) Valuation (2) Per Capita Tax Debt Tax Debt Valuation Collections ,093 $ 574,513,234 $ 33,611 $ 3,256,200 $ % 99.33% , ,465,794 35,129 2,983, % 99.99% , ,668,542 36,896 2,741, % 99.34% , ,359,355 40,330 5,485, % % , ,759,890 42,693 11,415, % 97.00% (5 ) , ,209,563 44,884 12,420,000 (3) 727 (3) (3) (4) 1.62% (1) Source: 2000 U.S. Census-Population held constant for the years 2004 through (2) As reported by the Galveston County Appraisal District on the City s annual State Property Tax Board Reports; subject to change during the ensuing year. (3) Projected, excludes the Refunded Obligations. Includes the Obligations and self-supporting debt. (4) In process of collection. (5) Unaudited. GENERAL FUND CONSOLIDATED STATEMENT SUMMARY For Fiscal Year Ended September 30, 2008 (1 ) Beginning Balance $ 4,149,619 $ 2,938,578 $ 2,907,408 $ 2,434,001 $ 2,137,429 Total Revenue 10,196,570 10,599,736 10,381,160 9,429,497 8,642,193 Total Expenditures 10,916,865 9,651,711 9,662,879 9,186,290 8,587,127 Other Financing Sources (Uses) (980,731) 263,016 (687,111) 230, ,506 Ending Balance $ 2,448,593 $ 4,149,619 $ 2,938,578 $ 2,907,408 $ 2,434,001 (1) Unaudited. For additional information regarding the City, please contact: Julie M. Johnston City Administrator City of Dickinson 2716 FM 517 East Dickinson, Texas (281) Phone (281) Fax or Drew Masterson or Joe Morrow First Southwest Company 1021 Main Street, Suite 2200 Houston, Texas (713) Phone (713) Fax 5

169 CITY OFFICIALS, STAFF AND CONSULTANTS ELECTED OFFICIALS Length of Term Expires City Council Title Service May Julie Masters Mayor 4 years 2011 William King III Mayor Pro Tem 5 years 2010 Charles Suderman Council Member 4 years 2011 Mary Dunbaugh Council Member 5 years 2010 Walter Wilson Council Member 1 year 2011 Kerry Neves Council Member 11 years 2010 Louis Decker Council Member 12 years 2011 SELECTED ADMINISTRATIVE STAFF Name Title Service to City Total Governmental Service Julie M. Johnston City Administrator 2 years 14 years Carol McLemore City Secretary 2 years 29 years CONSULTANTS AND ADVISORS Auditors... Null-Lairson P.C. Houston, Texas Bond Counsel... Andrews Kurth LLP Houston, Texas Financial Advisor...First Southwest Company Houston, Texas 6

170 PRELIMINARY OFFICIAL STATEMENT RELATING TO $2,370,000 $1,035,000 GENERAL OBLIGATION REFUNDING BONDS SERIES 2009 INTRODUCTION CERTIFICATES OF OBLIGATION SERIES 2009 This Official Statement, which includes the Appendices hereto, provides certain information regarding the issuance of $2,370,000 City of Dickinson, Texas, General Obligation Refunding Bonds, Series 2009, and the $1,035,000 City of Dickinson, Texas, Certificates of Obligation, Series Capitalized terms used in this Official Statement, except as otherwise indicated herein, have the same meanings assigned to such terms in the ordinances authorizing the issuance of the Bonds (the Bond Ordinance ) and the Certificates (the Certificate Ordinance ), and together with the Bond Ordinance, the Ordinances, respectively. There follows in this Official Statement descriptions of the Obligations and certain information regarding the City and its finances. All descriptions of documents contained herein are only summaries and are qualified in their entirety by reference to each such document. Copies of such documents may be obtained from the City's Financial Advisor, First Southwest Company, Houston, Texas. DESCRIPTION OF THE CITY... The City is a political subdivision and municipal corporation of the State, duly organized and existing under the laws of the State, including the City's Home Rule Charter. The City was incorporated on August 22, 1977, and first adopted its Home Rule Charter on January 17, The City operates under a Mayor/Council form of government with a City Council comprised of the Mayor and six Councilmembers who serve staggered two-year terms. The City Administrator is the chief administrative officer for the City. Some of the services that the City provides are: public safety (police and fire protection), highways and streets, culture-recreation, planning, and general administrative services. The 2000 Census population for the City was 17,093. The City covers approximately 15 square miles located in Galveston County, Texas. HURRICANE IKE In September 2008, Hurricane Ike, struck the southeast Texas coast (the Hurricane ) and caused significant damage to a number of cities in Galveston County, especially to residential areas and commercial properties in the City. As a result of the damage caused by the Hurricane, a number of businesses and employers in the City were negatively affected. The damage caused by the Hurricane has not had significant impact on assessed valuations within the City as compared with prior years. However, additional hurricanes striking the area of the City in the future could result in further negative impacts to the City. PLAN OF FINANCING A portion of the proceeds of the Bonds will be used to currently refund the City s Combination Tax and Revenue Certificates of Obligation, Series 2000, described in Schedule I (the Refunded Obligations ). The Refunded Obligations and interest due thereon will be paid on the redemption date from funds to be deposited with The Bank of New York Mellon Trust Company, National Association (the Escrow Agent ), to the escrow fund (the Escrow Fund ) created under the escrow agreement to be entered into by the City and the Escrow Agent (the Escrow Agreement ). The Bond Ordinance provides that from the proceeds of the sale of the Bonds to the Underwriter, there will be deposited with the Escrow Agent the amount necessary to accomplish the discharge and final payment of the Refunded Obligations. Such funds will be held in cash in the Escrow Fund. The Escrow Funds are irrevocably pledged to the payment of principal of and interest on the Refunded Obligations. By the deposit of the cash with the Escrow Agent pursuant to the Escrow Agreement, the City will have effected the defeasance of the Refunded Obligations, pursuant to the terms of the ordinance authorizing the issuance of the Refunded Obligations and in accordance with applicable law, including Chapter 1207, Texas Government Code, as amended. It is the opinion of Bond Counsel that, as a result of such defeasance, the Refunded Obligations will no longer be payable from ad valorem taxes but will be payable solely from the cash held for such purpose by the Escrow Agent, and that the Refunded Obligations will be defeased and are not to be included in or considered to be indebtedness of the City for the purpose of any limitation of indebtedness or taxation or for any other purpose. The City has covenanted to make timely deposits into the Escrow Fund, from lawfully available funds, of additional funds in the amounts required to pay the principal of and interest on the Refunded Obligations should, for any reason, the cash balances on deposit in the Escrow Fund be insufficient to make such payments. 7

171 THE OBLIGATIONS DESCRIPTION OF THE OBLIGATIONS... The Obligations are dated April 1, 2009, and mature on March 1 in each of the years and in the amounts shown on the inside cover page hereof. Interest will be computed on the basis of a 360-day year of twelve 30-day months, and will be payable on March 1 and September 1, commencing September 1, 2009, until maturity or earlier redemption. The definitive Obligations will be issued only in fully registered form in any integral multiple of $5,000 for any one maturity and will be initially registered and delivered only to Cede & Co., the nominee of The Depository Trust Company ("DTC") pursuant to the Book-Entry-Only System described herein. No physical delivery of the Obligations will be made to the beneficial owners thereof. Principal of, premium, if any, and interest on the Obligations will be payable by the Paying Agent/Registrar to Cede & Co., which will make distribution of the amounts so paid to the participating members of DTC for subsequent payment to the beneficial owners of the Obligations. See "THE OBLIGATIONS - BOOK- ENTRY-ONLY SYSTEM" AUTHORITY FOR ISSUANCE OF THE BONDS... The Bonds are issued pursuant to the general laws of the State, particularly Chapter 1207, Texas Government Code, as amended, and the Bond Ordinance. AUTHORITY FOR ISSUANCE OF THE CERTIFICATES... The Certificates are being issued pursuant to the Constitution and general laws of the State of Texas, particularly Subchapter C of Chapter 271, Texas Local Government Code (the Certificate of Obligation Act of 1971), as amended; and the Certificate Ordinance. SECURITY AND SOURCE OF PAYMENT... The Obligations are payable from and secured by a continuing direct annual ad valorem tax levied by the City, within limits prescribed by law, on all taxable property located within the City. The Dickinson Economic Development Corporation (the Corporation ), created by the City pursuant to Article , Texas Revised Civil Statutes, as amended, to promote economic development within the City, is the beneficiary of a one-half of one percent sales and use tax levied within the City. TAX RATE LIMITATION... All taxable property within the City is subject to the assessment, levy and collection by the City of a continuing, direct annual ad valorem tax sufficient to provide for the payment of principal of and interest on all ad valorem tax debt which tax must be levied within the limits prescribed by law. Article XI, Section 5, of the Texas Constitution is applicable to the City, and limits its maximum ad valorem tax rate to $2.50 per $100 Taxable Assessed Valuation for all City purposes. The Home Rule Charter of the City adopts the constitutionally authorized maximum tax rate of $2.50 per $100 Taxable Assessed Valuation. Administratively, the Attorney General of the State of Texas will permit allocation of $1.50 of the $2.50 maximum tax rate for all debt service for obligations payable from ad valorem taxes, as calculated at the time of issuance. OPTIONAL REDEMPTION... The City reserves the right, at its option, to redeem Obligations having stated maturities on and after March 1, 2020, in whole or in part in principal amounts of $5,000 or any integral multiple thereof, on March 1, 2019, or any date thereafter, at the par value thereof plus accrued interest to the date of redemption. If less than all of the Obligations are to be redeemed, the City may select the series and maturities of Obligations to be redeemed. If less than all the Obligations of any series and maturity are to be redeemed, the Paying Agent/Registrar (or DTC while the Obligations are in Book-Entry-Only form) shall determine by lot the Obligations, or portions thereof, within such maturity to be redeemed. If an Obligation (or any portion of the principal sum thereof) shall have been called for redemption and notice of such redemption shall have been given, such Obligation (or the principal amount thereof to be redeemed) shall become due and payable on such redemption date and interest thereon shall cease to accrue from and after the redemption date, provided funds for the payment of the redemption price and accrued interest thereon are held by the Paying Agent/Registrar on the redemption date. MANDATORY SINKING FUND REDEMPTION... In addition to the foregoing optional redemption provision, if principal amounts designated in the serial maturity schedule on the inside cover page are combined to create Term Bonds or Certificates, as the case may be, such Term Bonds or Certificates shall be subject to mandatory sinking fund redemption commencing on March 1 of the first year which has been combined to form such Term Bond or Certificate, and continuing on March 1 in each year thereafter until the stated maturity date of that Term Bond or Certificate, and the amount required to be redeemed in any year shall be equal to the principal amount for such year set forth in the serial maturity schedule on the inside cover page. Term Bonds or Certificates to be redeemed in any year by mandatory sinking fund redemption shall be redeemed at par and shall be selected by lot from and among the Term Bonds or Certificates then subject to redemption. The City, at its option, may credit against any mandatory sinking fund redemption requirement Term Bonds or Certificates of the maturity then subject to redemption which have been purchased and canceled by the City or have been redeemed and not theretofore applied as a credit against any mandatory sinking fund redemption requirement. NOTICE OF REDEMPTION... Not less than 30 days prior to a redemption date for the Obligations, the City shall cause a notice of redemption to be sent by United States mail, first class, postage prepaid, to the registered owners of the Obligations to be redeemed, in whole or in part, at the address of the registered owner appearing on the registration books of the Paying Agent/Registrar at the close of business on the business day next preceding the date of mailing such notice. ANY NOTICE SO MAILED SHALL BE CONCLUSIVELY PRESUMED TO HAVE BEEN DULY GIVEN, WHETHER OR NOT THE REGISTERED OWNER RECEIVES SUCH NOTICE. NOTICE HAVING BEEN SO GIVEN, THE OBLIGATIONS CALLED FOR REDEMPTION SHALL BECOME DUE AND PAYABLE ON THE SPECIFIED REDEMPTION DATE, AND NOTWITHSTANDING THAT ANY CERTIFICATE OR PORTION THEREOF HAS NOT BEEN SURRENDERED FOR PAYMENT, INTEREST ON SUCH CERTIFICATE OR PORTION THEREOF SHALL CEASE TO ACCRUE. 8

172 DEFEASANCE... The Ordinances provide for the defeasance of the Obligations when the payment of the principal of and premium, if any, on the Obligations, plus interest thereon to the due date thereof (whether such due date be by reason of maturity, redemption, or otherwise), is provided by irrevocably depositing, in trust (1) cash and/or (2) Defeasance Securities, certified by an independent public accounting firm of national reputation to mature as to principal and interest in such amounts and at such times to insure the availability, without reinvestment, of sufficient money to make such payment, and all necessary and proper fees, compensation and expenses of the paying agent(s) for the Obligations. For purposes of this paragraph, Defeasance Securities means (a) direct, noncallable obligations of the United States of America, including obligations that are unconditionally guaranteed by the United States of America, (b) noncallable obligations of an agency or instrumentality of the United States of America, including obligations that are unconditionally guaranteed or insured by the agency or instrumentality and that are rated as to investment quality by a nationally recognized investment rating firm not less than AAA or its equivalent, and (c) noncallable obligations of a state or an agency or a county, municipality, or other political subdivision of a state that have been refunded and that rated as to investment quality by a nationally recognized investment rating firm not less than AAA or its equivalent. Following such deposit, the City may (i) substitute other permitted Defeasance Securities for the Defeasance Securities originally deposited, (ii) reinvest uninvested moneys deposited to effect such defeasance, and (iii) withdraw for the benefit of the City moneys in excess of the amount required to effect such defeasance; provided that, following any such substitution, reinvestment or withdrawal, the remaining cash and investments held in such escrow shall be sufficient to provide for the timely payment of the principal of and interest on such Obligations to their date of maturity or prior redemption. BOOK-ENTRY-ONLY SYSTEM... This section describes how ownership of the Obligations is to be transferred and how the principal of, premium, if any, and interest on the Obligations are to be paid to and credited by The Depository Trust Company ("DTC"), New York, New York, while the Obligations are registered in its nominee name. The information in this section concerning DTC and the Book-Entry-Only System has been provided by DTC for use in disclosure documents such as this Official Statement. The City believes the source of such information to be reliable, but takes no responsibility for the accuracy or completeness thereof. The City cannot and does not give any assurance that (1) DTC will distribute payments of debt service on the Obligations, or redemption or other notices, to DTC Participants, (2) DTC Participants or others will distribute debt service payments paid to DTC or its nominee (as the registered owner of the Obligations), or redemption or other notices, to the Beneficial Owners, or that they will do so on a timely basis, or (3) DTC will serve and act in the manner described in this Official Statement. The current rules applicable to DTC are on file with the Securities and Exchange Commission, and the current procedures of DTC to be followed in dealing with DTC Participants are on file with DTC. The Depository Trust Company ( DTC ), New York, NY, will act as securities depository for the Obligations (herein, the Securities ). The Securities will be issued as fully-registered securities registered in the name of Cede & Co. (DTC s partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully-registered Security certificate will be issued for each issue and maturity of the Securities, each in the aggregate principal amount of such maturity, and will be deposited with DTC. DTC, the world s largest depository, is a limited-purpose trust company organized under the New York Banking Law, a banking organization within the meaning of the New York Banking Law, a member of the Federal Reserve System, a clearing corporation within the meaning of the New York Uniform Commercial Code, and a clearing agency registered pursuant to the provisions of Section 17A of the Securities Exchange Act of DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-u.s. equity issues, corporate and municipal debt issues, and money market instruments from over 100 countries that DTC s participants ( Direct Participants ) deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-u.s. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation ( DTCC ). DTCC, is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its registered subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-u.s. securities brokers and dealers, banks, trust companies, and clearing companies that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ( Indirect Participants ). DTC has Standard & Poor s highest rating: AAA. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at Purchases of Securities under the DTC system must be made by or through Direct Participants, which will receive a credit for the Securities on DTC s records. The ownership interest of each actual purchaser of each Security ( Beneficial Owner )is in turn to be recorded on the Direct and Indirect Participants records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Securities are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in Securities, except in the event that use of the book-entry system for the Securities is discontinued. To facilitate subsequent transfers, all Securities deposited by Direct Participants with DTC are registered in the name of DTC s partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of Securities with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Securities; DTC s records reflect only the identity of the Direct Participants to whose 9

173 accounts such Securities are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of Securities may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Securities, such as redemptions, tenders, defaults, and proposed amendments to the Security documents. For example, Beneficial Owners of Securities may wish to ascertain that the nominee holding the Securities for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of notices be provided directly to them. Redemption notices shall be sent to DTC. If less than all of the Securities within an issue are being redeemed, DTC s practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to Securities unless authorized by a Direct Participant in accordance with DTC s Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to City 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 accounts Securities are credited on the record date (identified in a listing attached to the Omnibus Proxy). Redemption proceeds, distributions, and dividend payments on the Securities will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC s practice is to credit Direct Participants accounts upon DTC s receipt of funds and corresponding detail information from City or Agent, on payable date in accordance with their respective holdings shown on DTC s records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in street name, and will be the responsibility of such Participant and not of DTC nor its nominee, Agent, or City, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds, distributions, and dividend payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of City or Agent, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants. DTC may discontinue providing its services as depository with respect to the Securities at any time by giving reasonable notice to Issuer or Agent. Under such circumstances, in the event that a successor depository is not obtained, Security certificates are required to be printed and delivered. City may decide to discontinue use of the system of book-entry transfers through DTC (or a successor securities depository). In that event, Security certificates will be printed and delivered. The information in this section concerning DTC and DTC s book-entry system has been obtained from sources that City believes to be reliable, but City takes no responsibility for the accuracy thereof. USE OF CERTAIN TERMS IN OTHER SECTIONS OF THIS OFFICIAL STATEMENT In reading this Official Statement it should be understood that while the Obligations 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 Obligations, but (i) all rights of ownership must be exercised through DTC and the Book-Entry Only System, and (ii) except as described above, notices that are to be given to registered owners under the Ordinances will be given only to DTC. 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 to be construed as a representation by the City, the City s Financial Advisor or the Underwriter. EFFECT OF TERMINATION OF BOOK-ENTRY ONLY SYSTEM In the event that the Book-Entry Only System is discontinued by DTC or the use of the Book-Entry Only System is discontinued by the City, printed certificates will be issued to the holders and the Obligations will be subject to transfer, exchange and registration provisions as set forth in the Ordinances and summarized under "THE OBLIGATIONS - Transfer, Exchange and Registration" below. PAYING AGENT/REGISTRAR... The initial Paying Agent/Registrar is The Bank of New York Mellon Trust Company, N.A., Dallas, Texas. In the Ordinances, the City retains the right to replace the Paying Agent/Registrar. The City covenants to maintain and provide a Paying Agent/Registrar at all times until the Obligations are duly paid and any successor Paying Agent/Registrar must be a bank, trust company, financial institution, or other agency duly qualified and legally authorized to serve as and perform the duties and services of Paying Agent/Registrar for the Obligations. Upon any change in the Paying Agent/Registrar for the Obligations, the City will promptly cause a written notice thereof to be sent to each registered owner of the Obligations by United States mail, first class, postage prepaid, which notice will also include the address of the new Paying Agent/Registrar. TRANSFER, EXCHANGE AND REGISTRATION... In the event the Book-Entry-Only System should be discontinued, the Obligations may be transferred and exchanged on the registration books of the Paying Agent/Registrar only upon presentation and surrender thereof to the 10

174 Paying Agent/Registrar and such transfer or exchange will be without expense or service charge to the registered owner, except for any tax or other governmental charges required to be paid with respect to such registration, exchange and transfer. Obligations may be assigned by the execution of an assignment form on the respective Obligations or by other instrument of transfer and assignment acceptable to the Paying Agent/Registrar. New Obligations will be delivered by the Paying Agent/Registrar, in lieu of the Obligations being transferred or exchanged, at the corporate trust office of the Paying Agent/Registrar, or sent by United States mail, first class, postage prepaid, to the new registered owner or his designee. To the extent possible, new Obligations issued in an exchange or transfer of Obligations will be delivered to the registered owner or assignee of the registered owner in not more than three business days after the receipt of the Obligations to be canceled, and the written instrument of transfer or request for exchange duly executed by the registered owner or his duly authorized agent, in form satisfactory to the Paying Agent/Registrar. New Bonds or Certificates registered and delivered in an exchange or transfer will be in any integral multiple of $5,000 for any one maturity and for a like aggregate principal amount as the Obligations surrendered for exchange or transfer. See "THE OBLIGATIONS - BOOK-ENTRY-ONLY SYSTEM" herein for a description of the system to be utilized initially in regard to ownership and transferability of the Obligations. Neither the City nor the Paying Agent/Registrar will be required to transfer or exchange any Obligation called for redemption, in whole or in part, within 45 days of the date fixed for redemption; provided, however, such limitation of transfer will not be applicable to an exchange by the registered owner of the uncalled balance of an Obligation. RECORD DATE FOR INTEREST PAYMENT... The record date ( Record Date ) for determining the person to whom the interest is payable on the Obligations on any interest payment date means the close of business on the fifteenth day of the preceding month. In the event of a non-payment of interest on a scheduled payment date, and for 30 days thereafter, a new record date for such interest payment (a Special Record Date ) will be established by the Paying Agent/Registrar, if and when funds for the payment of such interest have been received from the City. Notice of the Special Record Date and of the scheduled payment date of the past due interest (a Special Payment Date, which will be 15 days after the Special Record Date) will be sent at least five days prior to the Special Record Date by United States mail, first class, postage prepaid, to the address of each Holder of a Obligation appearing on the registration books of the Paying Agent/Registrar at the close of business on the day next preceding the date of mailing of such notice. BONDHOLDERS REMEDIES... The Ordinances do not provide for the appointment of a trustee to represent the interests of the Obligations holders upon any failure of the City to perform in accordance with the terms of the Ordinances or upon any other condition and, in the event of any such failure to perform, the registered owners would be responsible for the initiation and cost of any legal action to enforce performance of the Ordinances. Furthermore, the Ordinances do not establish specific events of default with respect to the Obligations and, under State law, there is no right to the acceleration of maturity of the Obligations upon the failure of the City to observe any covenant under the Ordinances. A registered owner of Obligations could seek a judgment against the City if a default occurred in the payment of principal of or interest on any such Obligations; however, such judgment could not be satisfied by execution against any property of the City and a suit for monetary damages could be vulnerable to the defense of sovereign immunity. A registered owner s only practical remedy, if a default occurs, is a mandamus or mandatory injunction proceeding to compel the City to levy, assess and collect an annual ad valorem tax sufficient to pay principal of and interest on the Obligations as it becomes due or perform other material terms and covenants contained in the Ordinances. In general, Texas courts have held that a writ of mandamus may be issued to require a public official to perform legally imposed ministerial duties necessary for the performance of a valid contract, and Texas law provides that, following their approval by the Attorney General and issuance, the Obligations are valid and binding obligations for all purposes according to their terms. However, the enforcement of any such remedy may be difficult and time consuming and a registered owner could be required to enforce such remedy on a periodic basis. The City is also eligible to seek relief from its creditors under Chapter 9 of the U.S. Bankruptcy Code ( Chapter 9 ). Although Chapter 9 provides for the recognition of a security interest represented by a specifically pledged source of revenues, the pledge of taxes in support of a general obligation of a bankrupt entity is not specifically recognized as a security interest under Chapter 9. Chapter 9 also includes an automatic stay provision that would prohibit, without Bankruptcy Court approval, the prosecution of any other legal action by creditors or Obligation holders of an entity which has sought protection under Chapter 9. Therefore, should the City avail itself of Chapter 9 protection from creditors, the ability to enforce would be subject to the approval of the Bankruptcy Court (which could require that the action be heard in Bankruptcy Court instead of other federal or state court); and the Bankruptcy Code provides for broad discretionary powers of a Bankruptcy Court in administering any proceeding brought before it. The opinion of Bond Counsel will note that all opinions relative to the enforceability of the Ordinances and the Obligations are qualified with respect to the customary rights of debtors relative to their creditors, including rights afforded to creditors under the Bankruptcy Code. The Ordinance constitutes a contract with the Registered Owners from time to time, is binding on the City, and will not be amended or repealed by the City so long as any Bond remains Outstanding except as permitted in this paragraph. The City may, without the consent of or notice to any Registered Owners, from time to time and at any time, amend the Ordinance in any manner not detrimental to the interests of the Registered Owners, including the curing of any ambiguity, inconsistency, or formal defect or omission herein. In addition, the City may, with the consent of Registered Owners who own in the aggregate 51% of the principal amount of the Bonds then Outstanding, amend, add to, or rescind any of the provisions of the Ordinance; provided that, without the consent of all Registered Owners of Outstanding Bonds, no such amendment, addition, or rescission shall (i) extend the time or times of payment of the principal of and interest on the Bonds, reduce the principal amount thereof, the redemption price, or the rate of interest thereon, or in any other way modify the terms of payment of the principal of or interest on the Bonds, (ii) give any preference to any Bond over any other Bond, or (iii) reduce the aggregate principal amount of Bonds required to be held by Registered Owners for consent to any such amendment, addition, or rescission. 11

175 USES OF PROCEEDS The proceeds from the sale of the Bonds will be applied approximately as follows: Use of Funds Cash Deposit to Escrow Fund Cost of Issuance Total Bonds The proceeds from the sale of the Certificates will be applied approximately as follows: Use of Funds Construction Fund Deposit Cost of Issuance Total Certificates TAX INFORMATION AD VALOREM TAX LAW... The appraisal of property within the City is the responsibility of the Galveston County Appraisal District (the "Appraisal District"). Excluding agricultural and open-space land, which may be taxed on the basis of productive capacity, the Appraisal District is required under the Property Tax Code to appraise all property within the Appraisal District on the basis of 100% of its market value and is prohibited from applying any assessment ratios. In determining market value of property, different methods of appraisal may be used, including the cost method of appraisal, the income method of appraisal and market data comparison method of appraisal, and the method considered most appropriate by the chief appraiser is to be used. State law further limits the appraised value of a residence homestead for a tax year to an amount that would not exceed either the lesser of (1) the property's market value for the most recent tax year in which it was appraised or (2) the sum of (a) 10% of the property's appraised value for the preceding tax year, plus (b) the property's appraised value for the preceding tax year, plus (c) the market value of all new improvements to the property. The value placed upon property within the Appraisal District is subject to review by an Appraisal Review Board, consisting of three members appointed by the Board of Directors of the Appraisal District. The Appraisal District is required to review the value of property within the Appraisal District at least every three years. The City may require annual review at its own expense, and is entitled to challenge the determination of appraised value of property within the City by petition filed with the Appraisal Review Board. Reference is made to the V.T.C.A., Property Tax Code, for identification of property subject to taxation; property exempt or which may be exempted from taxation, if claimed; the appraisal of property for ad valorem taxation purposes; and the procedures and limitations applicable to the levy and collection of ad valorem taxes. Article VIII of the State Constitution ("Article VIII") and State law provide for certain exemptions from property taxes, the valuation of agricultural and open-space lands at productivity value, and the exemption of certain personal property from ad valorem taxation. Under Section 1-b, Article VIII, and State law, the governing body of a political subdivision, at its option, may grant: (1) An exemption of not less than $3,000 of the market value of the residence homestead of persons 65 years of age or older and the disabled from all ad valorem taxes thereafter levied by the political subdivision; (2) An exemption of up to 20% of the market value of residence homesteads. The minimum exemption under this provision is $5,000. In the case of residence homestead exemptions granted under Section 1-b, Article VIII, ad valorem taxes may continue to be levied against the value of homesteads exempted where ad valorem taxes have previously been pledged for the payment of debt if cessation of the levy would impair the obligation of the contract by which the debt was created. State law and Section 2, Article VIII, mandate an additional property tax exemption for disabled veterans or the surviving spouse or children of a deceased veteran who died while on active duty in the armed forces; the exemption applies to either real or personal property with the amount of assessed valuation exempted ranging from $5,000 to a maximum of $12,000. Under Article VIII and State law, the governing body of a county, municipality or city, may freeze the total amount of ad valorem taxes levied on the residence homestead of a disabled person or persons 65 years of age or older to the amount of taxes imposed in the year such residence qualified for such exemption. Also, upon receipt of a petition signed by five percent of the registered voters of the county, municipality or city, an election must be held to determine by majority vote whether to establish such a limitation on taxes paid on residence homesteads of persons 65 years of age or who are disabled. Upon providing for such exemption, such freeze on ad valorem taxes is transferable to a different residence homestead and to a surviving spouse living in such homestead who is disabled or is at least 55 years of 12

176 age. If improvements (other than maintenance or repairs) are made to the property, the value of the improvements is taxed at the then current tax rate, and the total amount of taxes imposed is increased to reflect the new improvements with the new amount of taxes then serving as the ceiling on taxes for the following years. Once established, the tax rate limitation may not be repeated or rescinded. Article VIII provides that eligible owners of both agricultural land (Section 1-d) and open-space land (Section 1-d-1), including open-space land devoted to farm or ranch purposes or open-space land devoted to timber production, may elect to have such property appraised for property taxation on the basis of its productive capacity. The same land may not be qualified under both Section 1-d and 1-d-1. Nonbusiness personal property, such as automobiles or light trucks, are exempt from ad valorem taxation unless the governing body of a political subdivision elects to tax this property. Boats owned as nonbusiness property are exempt from ad valorem taxation. Article VIII, Section 1-j, provides for "freeport property" to be exempted from ad valorem taxation. Freeport property is defined as goods detained in Texas for 175 days or less for the purpose of assembly, storage, manufacturing, processing or fabrication. Decisions to continue to tax may be reversed in the future; decisions to exempt freeport property are not subject to reversal. In addition, Article VIII, Section 1-n of the Texas Constitution provides for an exemption from taxation for "goods-in-transit," which are defined as personal property acquired or imported into the state and transported to another location inside or outside the state within 175 days of the date the property was acquired or imported into the state. The exemption excludes oil, natural gas, petroleum products, aircraft and special inventory, including motor vehicle, vessel and out-board motor, heavy equipment and manufactured housing inventory. After holding a public hearing, a taxing unit may take action by January 1 of the year preceding a tax year to tax goods-in-transit during the following tax year. A taxpayer may obtain only a freeport exemption or a goods-intransit exemption for items of personal property. Article VIII, Section 1-l provides for an exemption from taxation of all or part of real and personal property owned and used wholly or partly as a facility, device, or method for the control of air, water, or land pollution. A person is not entitled to such exemption solely on the basis that the person manufactures or produces a product or provides a service that prevents, monitors, controls, or reduces air, water, or land pollution. Property used for residential purposes, or for recreational, park, or scenic uses is ineligible for such exemption. The City and the other taxing bodies within its territory may agree to jointly create tax increment financing zones, under which the tax values on property in the zone are "frozen" at the value of the property at the time of creation of the zone. The City also may enter into tax abatement agreements to encourage economic development. Under the agreements, a property owner agrees to construct certain improvements on its property. The City in turn agrees not to levy a tax on all or part of the increased value attributable to the improvements until the expiration of the agreement. The abatement agreement could last for a period of up to 10 years. The Property Tax Code provides that certain cities and counties in the State may submit a proposition to the voters to authorize an additional one-half cent sales tax on retail sales of taxable items for the purposes of reducing the ad valorem tax rate. If the additional tax is levied, the effective tax rate and the rollback tax rate calculations are required to be offset by the revenue that will be generated by the sales tax in the current year. Reference is made to the Property Tax Code for definitive requirements for the levy and collection of ad valorem taxes and the calculation of the various defined tax rates. PROPERTY ASSESSMENT AND TAX PAYMENT... Property within the City is generally assessed as of January 1 of each year. Business inventory may, at the option of the taxpayer, be assessed as of September 1. Oil and gas reserves are assessed on the basis of a valuation process which uses an average of the daily price of oil and gas for the prior year. Taxes become due October 1 of the same year, and become delinquent on February 1 of the following year. Taxpayers 65 years old or older are permitted by State law to pay taxes on homesteads in four installments with the first due on February 1 of each year and the final installment due on August 1. PENALTIES AND INTEREST... Charges for penalty and interest on the unpaid balance of delinquent taxes are made as follows: Cumulative Cumulative Month Penalty Interest Total February 6% 1% 7% March April May June July After July, penalty remains at 12%, and interest increases at the rate of 1% each month. In addition, if an account is delinquent in July, an attorney's collection fee of up to 20% of the delinquent tax penalty and interest may be added to the total tax penalty and interest charge. Under certain circumstances, taxes which become delinquent on the homestead of a taxpayer 65 years old or older incur a penalty of 8% per annum with no additional penalties or interest assessed. In general, property subject to the City's lien may be sold, in whole or in parcels, pursuant to court order to collect the amounts due. Federal law does not allow for the collection of penalty and interest against an estate in bankruptcy. Federal bankruptcy law provides that an automatic stay of action by creditors and other entities, including governmental units, goes into effect with the filing of any petition in bankruptcy. The automatic stay prevents governmental units from foreclosing on property and prevents liens for post-petition taxes from attaching to property and obtaining secured creditor status unless, in either case, an order 13

177 lifting the stay is obtained from the bankruptcy court. In many cases post-petition taxes are paid as an administrative expense of the estate in bankruptcy or by order of the bankruptcy court. CITY APPLICATION OF TAX CODE... The City grants an exemption to the market value of the residence homestead of persons 65 years of age or older of $10,000; the disabled are also granted an exemption of $10,000. The City has not granted an additional exemption of 20% of the market value of residence homesteads. The City has adopted the tax freeze for citizens who are disabled or are 65 years of age or older. Ad valorem taxes are levied by the City against the exempt value of residence homesteads for the payment of debt. The City does not tax nonbusiness personal property. The Galveston Tax Office collects taxes for the City. The City does not permit split payments, and discounts are not allowed. The City does not tax freeport property. The City has not taken action to tax goods-in-transit for the 2009 tax year. The City does not collect the additional one-half cent sales tax for reduction of the ad valorem tax rate. The City has adopted a tax abatement policy. See Table 1 for a listing of the amounts of the exemptions described above. 14

178 TABLE 1 - VALUATION, EXEMPTIONS AND GENERAL OBLIGATION DEBT 2008/2009 Market Valuation Established by Galveston County Appraisal District (excluding totally exempt property) $ 788,802,627 Less Exemptions/Reductions at 100% Market Value: Over 65 $ 11,490,388 Disabled Persons 1,353,346 Disabled Veteran 911,500 House Bill 366 1,853 Pollution 384,130 Prorated Exempt Property 110,666 Cap Adjustment 1,383,101 Productivity Loss 5,958,080 $ 21,593, /2009 Taxable Assessed Valuation $ 767,209,563 General Obligation Debt as of January 1, 2009 Outstanding Tax Debt $ 9,015,000 (1) The Bonds 2,370,000 The Certificates 1,035,000 $ 12,420,000 Less: Self Supporting Debt (2) Galveston WC & ID #1 $ 951,317 Economic Development Corporation 625,275 Total Self-Supported Debt $ 1,576,592 Net General Obligation Debt Payable from Ad Valorem Taxes $ 10,843,408 Interest and Sinking Fund as of December 31, 2008 $ 1,885,212 (3) Ratio General Obligation Tax Debt to Taxable Assessed Valuation 1.62% 2009 Estimated Population - 19,500 Per Capita Taxable Assessed Valuation - $39,344 Per Capita Gross General Obligation Debt Payable from Ad Valorem Taxes - $637 Per Capita Net General Obligation Debt Payable from Ad Valorem Taxes - $556 (1) Excludes the Refunded Obligations. (2) General obligation debt in the amounts shown for which repayment could be provided from revenues of the Citys Economic Development Corporation and the Galveston Water Control & Improvements District #1. It is the City s current policy to provide for a portion of these payments from the Corporation and the District; this policy is subject to change in the future, either by discretion of the City Council or reduction of sales tax revenues. See TABLE 13 MUNICIPAL SALES TAX HISTORY (3) Unaudited. 15

179 TABLE 2 - TAXABLE ASSESSED VALUATIONS BY CATEGORY Taxable Appraised Value for Fiscal Year Ended September % of % of % of Category Amount Total Amount Total Amount Total Real, Residential, Single-Family $ 571,910, % $ 541,971, % $ 501,441, % Real, Residential, Multi-Family 20,298, % 19,911, % 19,930, % Real, Vacant Lots/Tracts 23,672, % 24,346, % 30,925, % Real, Acreage (Land Only) 8,691, % 8,729, % 9,332, % Real, Farm and Ranch Improvements 3,134, % 3,092, % 2,570, % Real, Commercial & Industrial 79,344, % 74,156, % 70,976, % Real and Intangible Personal Utilities 18,277, % 18,758, % 18,480, % Tangible Personal, Commercial & Industrial 39,112, % 37,388, % 37,544, % Tangible Personal, Other 6,071, % 5,947, % 6,065, % Real Property Inventory 8,134, % 8,144, % 5,847, % Special Inventory 10,154, % 9,838, % 9,523, % Total Appraised Value Before Exemptions $ 788,802, % $ 752,285, % $ 712,639, % Less: Total Exemptions/Reductions 21,593,064 22,525,123 23,279,821 Taxable Assessed Value $ 767,209,563 $ 729,759,890 $ 689,359,355 Taxable Appraised Value for Fiscal Year Ended September % of % of Category Amount Total Amount Total Real, Residential, Single-Family $ 460,513, % $ 430,404, % Real, Residential, Multi-Family 18,712, % 18,536, % Real, Vacant Lots/Tracts 22,965, % 15,382, % Real, Acreage (Land Only) 9,567, % 11,467, % Real, Farm and Ranch Improvements 2,547, % 2,473, % Real, Commercial & Industrial 66,909, % 66,239, % Real and Intangible Personal Utilities 18,093, % 19,640, % Tangible Personal, Commercial & Industrial 37,221, % 39,176, % Tangible Personal, Other 6,436, % 5,702, % Real Property Inventory 1,097, % 1,545, % Special Inventory 9,132, % 10,162, % Total Appraised Value Before Exemptions $ 653,197, % $ 620,731, % Less: Total Exemptions/Reductions 22,528,503 20,265,859 Taxable Assessed Value $ 630,668,542 $ 600,465,794 NOTE: Valuations shown are certified taxable assessed values reported by the Galveston County Appraisal District to the State Comptroller of Public Accounts. Certified values are subject to change throughout the year as contested values are resolved and the Appraisal District updates records. 16

180 TABLE 3 - VALUATION AND GENERAL OBLIGATION DEBT HISTORY G.O. Ratio of Fiscal Taxable Tax Debt G.O. Tax Debt Year Taxable Assessed Outstanding to Taxable G.O. Ended Estimated Assessed Valuation at End Assessed Tax Debt 9/30 Population (1) Valuation (2) Per Capita of Year Valuation Per Capita ,093 $ 574,513,234 $ 33,611 $ 3,256, % $ , ,465,794 35,129 2,983, % , ,668,542 36,896 2,741, % , ,359,355 40,330 5,485, % , ,759,890 42,693 11,415, % , ,209,563 44,884 12,420,000 (3) 1.62% (3) 727 (3) (1) Source: 2000 U.S. Census-Population held constant for the years 2004 through (2) As reported by the Galveston County Appraisal District on City's annual State Property Tax Board Reports; subject to change during the ensuing year. (3) Projected, excludes the Refunded Obligations and includes the Obligations and self-supporting debt TABLE 4 - TAX RATE, LEVY AND COLLECTION HISTORY Fiscal Year General Interest and % Current % Total Ended 9/30 Tax Rate Fund Sinking Fund Tax Levy Collections Collections 2004 $ $ $ $ 2,249, % 99.33% ,488, % 99.99% ,740, % 99.34% ,816, % % ,981, % (2) 97.00% (2) ,134,818 (1) (1) (1) In process of collection. (2) Unaudited. TABLE 5 - TEN LARGEST TAXPAYERS 2008/2009 % of Total Taxable Taxable Assessed Assessed Name of Taxpayer Nature of Property Valuation Valuation Calumet Penreco LLC Chemical $ 9,419, % Conoco Specialty Products Inc. Engineering 8,874, % GTE Southwest Inc. Telephone 6,906, % McRee Ford Inc. Retail- Automotive 5,752, % Texas- New Mexico Power Co Utility 5,485, % Dixie Partners II LP Shopping Center 4,043, % SW Kirkwood LP Developer 3,584, % Gay Pontiac GMC & Subaru Inc Retail- Automotive 3,173, % Insite Dickinson Storage LP Storage 2,992, % Pine Forest Apartments Inc. Developer 2,669, % $ 52,900, % GENERAL OBLIGATION DEBT LIMITATION... No general obligation debt limitation is imposed on the City under current State law or the City's Home Rule Charter (see "THE OBLIGATIONS-TAX RATE LIMITATION"). 17

181 TABLE 6 - TAX ADEQUACY Average Annual General Obligation Debt Service Requirements ( ) $ 852,016 $ Tax Rate at 97% Collection Produces $ 852,101 Average Annual General Obligation Less Self-Supporting Debt Service Requirements ( ) $ 742,742 $ Tax Rate at 97% Collection Produces $ 743,449 Maximum Annual General Obligation Debt Service Requirements (2009) $ 927,835 $ Tax Rate at 97% Collection Produces $ 928,009 Maximum Annual General Obligation Less Self-Supporting Debt Service Requirements (2023) $ 751,031 $ Tax Rate at 97% Collection Produces $ 751,635 (1) (2) (1) (2) (1) Projected, excludes the Refunded Obligations and includes the Obligations and self-supporting debt (2) Projected, excludes the Refunded Obligations and includes the Obligations. TABLE 7 - ESTIMATED OVERLAPPING DEBT Expenditures of the various taxing entities within the territory of the City are paid out of ad valorem taxes levied by such entities on properties within the City. Such entities are independent of the City and may incur borrowings to finance their expenditures. This statement of direct and estimated overlapping ad valorem tax debt ("Tax Debt") was developed from information contained in "Texas Municipal Reports" published by the Municipal Advisory Council of Texas. Except for the amounts relating to the City, the City has not independently verified the accuracy or completeness of such information, and no person should rely upon such information as being accurate or complete. Furthermore, certain of the entities listed may have issued additional Tax Debt since the date hereof, and such entities may have programs requiring the issuance of substantial amounts of additional Tax Debt, the amount of which cannot be determined. The following table reflects the estimated share of overlapping Tax Debt of the City. Total City's Authorized 2008/2009 G.O. Debt Estimated Overlapping but Unissued Taxable 2008/2009 as of % G.O. Debt Debt as Assessed Value Tax Rate 1/15/2009 Applicable As of 1/15/09 As of 1/15/09 City of Dickinson $ 767,209,563 $ $ 12,420,000 (1) % $ 12,420,000 Dickinson ISD 2,240,873, ,926, % 55,506,470 47,500,000 Galveston County 20,333,507, ,837, % 8,010,823 - Galveston Co. WCID #1 807,438, ,029, % 5,496,140 - Total Direct and Overlapping Debt $ 81,433,434 $ 47,500,000 (1) $ - Ratio of Direct and Overlapping Debt to Taxable Assessed Valuation 10.61% Per Capita Overlapping Debt $ 4,764 Total Direct and Overlapping G.O. Debt $ 81,433,434 (1) Projected, excludes the Refunded Obligations and includes the Obligations and self-supporting debt 18

182 DEBT INFORMATION TABLE 8 - PRO-FORMA GENERAL OBLIGATION DEBT SERVICE REQUIREMENTS Fiscal Year Less: Less: Net Debt Ending Outstanding Refunded The Bonds (2 ) The Certificates (2 ) Self-Supporting Service 9/30 Debt (1) Debt Service Principal Interest Total Principal Interest Total Debt Requirement 2009 $ 922,581 $ 59,978 $ 42,791 $ 42,791 $ 22,440 $ 22,440 $ 217,866 $ 709, , ,205 $ 90,000 84, ,683 44,880 44, , , , , ,000 82, ,533 44,880 44, , , , , ,000 80, ,033 44,880 44, , , , , ,000 77, ,470 44,880 44, , , , , ,000 74, ,508 44,880 44, , , , , ,000 71, ,208 44,880 44, , , , , ,000 67, ,758 44,880 44, , , , , ,000 64, ,158 44,880 44, , , , , ,000 60, ,708 44,880 44, , , , , ,000 57, ,218 44,880 44, , , , , ,000 53, ,020 44,880 44, , , ,600-35,000 49,945 84,945 44,880 44,880 75, , ,948-30,000 48,613 78,613 44,880 44,880 75, , ,958-25,000 47,485 72,485 44,880 44,880 75, , ,766-25,000 46,460 71,460 44,880 44,880 75, , , ,948 45,948 44,880 44,880 75, , , ,948 45,948 44,880 44,880 75, , , ,948 45,948 44,880 44,880 75, , ,000 38, ,723 $ 330,000 37, , , ,000 23, , ,000 23, , , ,000 7, , ,000 8, , ,060 $ 16,280,439 $ 3,057,691 $ 2,370,000 $ 1,216,520 $ 3,586,520 $ 1,035,000 $ 900,075 $ 1,935,075 $ 2,404,024 $ 16,340,320 (1) "Outstanding Debt" does not include lease/purchase obligations. (2) Average life of the issue years. Interest on the Obligations has been estimated for the purpose of illustration. 19

183 TABLE 9 - INTEREST AND SINKING FUND BUDGET PROJECTION Tax Obligation Net Debt Service Requirements, Fiscal Year Ending $ 709,969 Interest and Sinking Fund, $ 1,885,212 (2) Interest and Sinking Fund Tax 97% Collection 797,344 Estimated Interest 1,000 2,683,556 Estimated Interest and Sinking Fund Balance, $ 1,973,587 (1) (1) Fiscal Year 2009 Debt Service Requirements include the Obligations and exclude the Refunded Obligations and self-supporting debt. (2) Unaudited. TABLE 10 - AUTHORIZED BUT UNISSUED GENERAL OBLIGATION DEBT The City has no authorized but unissued general obligation debt at this time. ANTICIPATED ISSUANCE OF GENERAL OBLIGATION DEBT... The City does not anticipate the issuance of additional general obligation debt within the next twelve months. PENSION FUND... The City provides pension benefits for all of its full-time employees through the Texas Municipal Retirement System ("TMRS"), a State-wide administered pension plan. The City makes annual contributions to the plan equal to the amounts accrued for pension expense. (For more detailed information concerning the retirement plan, see APPENDIX B, "EXCERPTS FROM THE CITY S ANNUAL FINANCIAL REPORT" - Note # 9.) OTHER POST-EMPLOYMENT BENEFITS... The City does not offer any post employment benefits. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 20

184 FINANCIAL INFORMATION TABLE 12 - CHANGE IN NET ASSET For Fiscal Year Ended September 30, Revenues: 2008 (1) Property Taxes $ 2,983,043 $ 2,830,436 $ 2,749,902 $ 2,540,346 $ 2,280,297 Sales, Franchise & Local Taxes 4,211,890 4,132,269 4,313,838 4,039,039 3,674,750 Program Revenues 2,808,154 2,497,363 2,598,243 3,393,372 2,990,858 Interest on Investments 483, , , , Other 1,360,640 1,815,563 1,782, , ,710 Total Revenues $ 11,847,699 $ 11,925,823 $ 11,779,281 $ 10,275,908 $ 9,127,713 Expenses: Administrative $ 628,165 $ 470,253 $ 446,721 $ 522,065 $ 644,923 Finance 306, , , , ,538 Information Technology 167, , , , ,605 Community Development 290, , , , ,957 Municipal Courts 250, , , , ,790 Law Enforcement 3,554,445 2,993,138 2,943,381 2,724,287 2,622,031 Emergency Management 1,064,534 52, ,779 81,093 53,448 Emergency Medical Services ,000 72,168 - Public Safety 476, , , , ,718 Public Works 2,420,080 1,565,557 1,731,389 1,771,151 1,706,913 Parks and Recreation , ,239 Railroad Depot , Drainage 353, , , , ,205 Economic Development Contractual Payments 2,343,418 2,100,116 2,519,205 1,927,147 1,568,975 Library 245, , , , ,947 Historical Society 66,135 51,121 32,936 31,909 - Interest Expense 949, , , , ,836 Total Expenses $ 13,117,541 $ 9,603,627 $ 10,040,462 $ 9,342,341 $ 8,857,125 Excess (Deficit) of Revenues Over Expenditures (1,269,842) 2,322,196 1,738, , ,588 Special Items: Increase in Reserves for Special Purposes $ - $ 112,948 $ (3,340) $ 68,463 $ 33,682 Operating Transfers In (Out) - 138,800 (190,689) 73,013 76,103 Developer Contribution ,481 5,587, ,294 Gain (Loss) on the Sale of Land - - (8,256) - (8,494) Transfer of Land ,379 - Total Other Financing Sources (Uses) $ - $ 251,748 $ 46,196 $ 5,760,827 $ 471,585 Excess (Deficiency) of Revenues and Other Financing Sources Over Expenditures and Other Uses $ (1,269,842) $ 2,573,944 $ 1,785,015 $ 6,694,394 $ 742,173 (2) (2) Net Assets at Beginning of Year $ 23,759,333 $ 21,185,389 $ 19,400,374 $ 12,525,818 $ 11,592,585 Net Assets at End of Year $ 22,489,491 $ 23,759,333 $ 21,185,389 $ 19,220,212 $ 12,334,758 (1) Unaudited. (2) Restated. 21

185 TABLE 12-A - GENERAL FUND REVENUES AND EXPENDITURE HISTORY For Fiscal Year Ended September 30, Revenue: 2008 (1) Property Tax $ 2,200,265 $ 2,127,370 $ 2,038,979 $ 1,884,942 $ 1,831,159 Sales Tax 3,242,805 3,215,721 3,377,940 3,086,179 2,706,277 Franchise and Local Tax 877, , , , ,473 Licenses & Permits 251, , , , ,375 Court Fines and Fees 705, , , , ,351 Charges for Services 1,293, , , , ,170 Drainage Fees - (2 ) 341, , , ,063 Investment Revenue 215, , , ,558 - Hotel Taxes 91,179 28,801 29,100 30,244 - Intergovernmental 1,313,186 1,593,394 1,373,511 1,096, ,559 Miscellaneous Income 5,371 21,601 32,727 59, ,766 Total Revenues $ 10,196,570 $ 10,599,736 $ 10,381,160 $ 9,429,497 $ 8,642,193 Expenditure: Administration $ 511,986 $ 367,373 $ 374,471 $ 449,815 $ 461,061 Finance 280, , , , ,538 Community Development 266, , , , ,957 Municipal Court 229, , , , ,417 Law Enforcement 2,991,250 2,906,702 2,767,987 2,585,915 2,394,016 Parks & Recreation , ,239 Public Safety & Code Enforcement 399, , , , ,952 Emergency Management 975,383 52, ,779 81,093 53,448 Emergency Medical Services ,168 - Public Works 1,343,147 1,281,168 1,175,123 1,227,376 1,257,872 Information Technology 147, , , , ,605 Drainage 315, , , , ,580 Library 225, , , , ,947 Economic Development 2,147,165 2,100,116 1,996,402 1,874,270 1,568,975 Capital Outlay 1,023,281 1,085,411 1,360,034 1,074, ,520 Railroad Depot , Historical Society 60,581 51,121 32,936 31,909 - Total Expenditures $ 10,916,865 $ 9,651,711 $ 9,662,879 $ 9,186,290 $ 8,587,127 Excess (Deficit) of Revenues Over Expenditures (720,295) 948, , ,207 55,066 Other Financing sources (Uses): (205,822) 124,910 (976) - - Proceeds from Financing , ,200 - Special Item-Land Sale ,506 Developer Contribution , Operating Transfer In - 149,306-56,000 - Operating Transfer (Out) (774,909) (11,200) (838,312) - - Total Other Financing Sources (Uses) $ (980,731) $ 263,016 $ (687,111) $ 230,200 $ 241,506 Excess (Deficiency) of Revenues and Other Financing Sources Over Expenditures and Other Uses (1,701,026) 1,211,041 31, , ,572 Fund Balance, Beginning of Year 4,149,619 2,938,578 2,907,408 2,434,001 2,137,429 Fund Balance, End of Year $ 2,448,593 $ 4,149,619 $ 2,938,578 $ 2,907,408 $ 2,434,001 (1) Unaudited. (2) Drainage Fees included in Charges for Services. 22

186 TABLE 13 - MUNICIPAL SALES TAX HISTORY The City has adopted the Municipal Sales and Use Tax Act, VTCA, Tax Code, Chapter 321, which grants the City the power to impose and levy a 1% Local Sales and Use Tax within the City; the proceeds are credited to the General Fund and are not pledged to the payment of the Obligations. Collections and enforcements are effected through the offices of the Comptroller of Public Accounts, State of Texas, who remits the proceeds of the tax, after deduction of a 2% service fee, to the City monthly. On May 2, 1998, the voters of the City approved the imposition of an additional sales and use tax of one-half of one percent (½ of 1%) to promote economic development within the City. The sales tax increase went into effect October 1, This one-half of one percent sales and use tax is for the benefit of the Dickinson Economic Development Corporation (the Corporation ), created by the City pursuant to Article , Texas Revised Civil Statutes, as amended, and having the authority to promote economic development within the City. The City has entered into a Sales Tax Remittance Agreement with the Corporation which provides for the payment of a certain portion of such tax revenues to the City to be used by the City to pay a portion of the debt service on the Obligations. Dickinson Management District No. 1 ( DMD1 ) was created by Senate Bill No. 1866, Acts of the 79th Texas Legislature, Regular Session, codified as Chapter 3853, Texas Special District Local Laws Code ( Chapter 3853 ), and is governed by Chapter 375, Texas Local Government Code. Chapter 3853 authorizes the DMD1 to levy a sales and use tax in the DMD1 boundaries, subject to authorization by the City Council of the City of Dickinson. On September 23, 2008, by Resolution Number , the City Council of the City consented to the creation and activation of Dickinson Management District No. 1 ( DMD1 ) and further authorized the DMD1 to adopt, impose and collect an additional one-half cent (½ of 1%) sales and use tax to finance services and improvements undertaken by DMD1 in accordance with Chapter 3853 and Chapter 375, Texas Local Government Code. The DMD1 sales and use tax is only authorized through December 31, 2011, unless the City grants further authorization to extend such tax by City ordinance or resolution. The sales tax increase went into effect January 1, This one-half of one percent sales and use tax is for the benefit of the DMD1. Fiscal Year Total % of Equivalent of Ended Sales Tax Ad Valorem Ad Valorem Per 9-30 Collected (1) Tax Levy Tax Rate Capita (2) 2004 $ 2,706, % $ $ ,086, ,377, ,215, ,934,846 (3 ) (1) Source: The City. (2) Source: 2000 U.S. Census-Population held constant for the years 2004 through (3) Unaudited. The sales tax breakdown for the City is as follows: Economic Development ½ Dickinson Management District No. 1 ½ (1) City Sales & Use Tax 1 State Sales & Use Tax 6 ¼ Total 8 ¼ (1) Dickinson Management District sales tax effective through December 31, FINANCIAL POLICIES The accounts of the City are organized on the basis of funds and account groups, each of which is considered a separate accounting entity. The operations of each fund are accounted for with a separate set of self-balancing accounts. Funds are segregated according to their intended purpose and divided into departments to aid financial management in the demonstration of legal compliance with contractual provisions. Account groups are a reporting device to account for certain assets and liabilities not recorded in those funds because they do not directly affect net expandable, available financial resources. The accounting and financial reporting treatment applied to a fund is determined by its measurement focus. All Governmental funds are accounted for using a current financial resources measurement focus. With this measurement focus, only current assets and current liabilities generally are included on the balance sheet. Operating statements of these funds present increases (i.e., revenues and other financing sources) and decreases (i.e., expenditures and other financing uses) in net current assets. The City utilizes the modified accrual basis accounting in the Governmental Fund types. Revenues are recognized in the accounting period in which they become both measurable and available. Measurable means the amount of the transaction can be determined. Available 23

187 means collectible within the current period or soon enough thereafter to pay liabilities of the current period. Property taxes are considered available if collected within 60 days after year-end. All other revenues are considered available if collected within one year. Revenues susceptible to accrual are property taxes, gross receipt taxes, franchise fees and sales tax collected and held by the state on behalf of the City. Revenues for fines and forfeitures are not susceptible to accrual because they are not measurable until received in cash. Expenditure driven grants are recognized when due, and compensated absences expected to be liquidated with expendable available financial resources. Following is a description of the various funds. General Fund... The General Fund is used to account for all financial transactions not properly includable in other funds. The principal sources of revenues include local property taxes, sales and franchise fees, licenses and permits, fines and forfeitures, and charges for services. Expenditures include general administration, finance, public works, community development, library, municipal court, and public safety Special Revenue Fund... The Special Revenue Fund is used to account for proceeds from specific revenue sources, expenditures of which are designated for special purposes by the City. Debt Service Fund... The Debt Service Fund is used to account for the payment of interest and principal on all general long-term debt of the City. The primary source of revenue for debt service is local property taxes. Capital Projects Fund...The Capital Projects Fund is used to account for the construction or acquisition of major capital items through the issuance of debt. This fund is not budgeted on an annual basis but rather for the life of the project. All expenditures are expected to be paid out of proceeds from the issuance of debt. Budgets... Annual appropriated budgets are adopted for the General, Special Revenue, and Debt Service Funds using the same basis of accounting as for financial reporting. Prior to August 1, the City Administrator submits to the City Council proposed expenditures requests and proposed means for financing them. A public hearing is conducted to obtain taxpayer comments. Prior to September 30, the budget is legally enacted through passage of an ordinance. Estimated expenditures shall in no case exceed proposed revenues plus cash on hand. Management may transfer unused appropriations to any item required within the same department. During the year, no significant supplemental appropriations were necessary. INVESTMENTS The City invests its investable funds in investments authorized by Texas law in accordance with investment policies approved by the Board of Trustees of the City. Both state law and the City s investment policies are subject to change. LEGAL INVESTMENTS... Under current Texas law, the City is authorized to invest in (1) obligations of the United States or its agencies and instrumentalities, (2) direct obligations of the State of Texas or its agencies and instrumentalities, (3) collateralized mortgage obligations directly issued by a federal agency or instrumentality of the United States, the underlying security for which is guaranteed by an agency or instrumentality of the United States, (4) other obligations, the principal of and interest on which are unconditionally guaranteed or insured by, or backed by the full faith and credit of, the State of Texas or the United States or their respective agencies and instrumentalities, (5) obligations of states, agencies, counties, cities, and other political subdivisions of any state rated as to investment quality by a nationally recognized investment rating firm not less than A or its equivalent, (6) Certificates issued, assumed or guaranteed by the State of Israel; (7) certificates of deposit and share certificates issued by, or invested by an investing entity through, a depository institution that has its main office or a branch office in the State of Texas, that are guaranteed or insured as required by, or otherwise meet the requirements of, the Texas Public Funds Investment Act (Chapter 2256, Texas Government Code, as amended); (8) fully collateralized repurchase agreements that have a defined termination date, are fully secured by obligations described in clause (1), and are placed through a primary government securities dealer or a financial institution doing business in the State of Texas, (9) securities lending programs if (i) the securities loaned under the program are collateralized, a loan made under the program allows for termination at any time and a loan made under the program is either secured by (a) obligations that are described in clauses (1) through (6) above, (b) irrevocable letters of credit issued by a state or national bank that is continuously rated by a nationally recognized investment rating firm at not less than A or its equivalent or (c) cash invested in obligations described in clauses (1) through (6) above, clauses (11) through (13) below, or an authorized investment pool; (ii) securities held as collateral under a loan are pledged to the City and held in the City s name; (iii) a loan made under the program is placed through either a primary government securities dealer or a financial institution doing business in the State of Texas; and (iv) the agreement to lend securities has a term of one year or less, (10) certain bankers acceptances with the remaining term of 270 days or less, if the short-term obligations of the accepting bank or its parent are rated at least A-1 or P-1 or the equivalent by at least one nationally recognized credit rating agency, (11) commercial paper with a stated maturity of 270 days or less that is rated at least A-1 or P-1 or the equivalent by either (a) two nationally recognized credit rating agencies or (b) one nationally recognized credit rating agency if the paper is fully secured by an irrevocable letter of credit issued by a U.S. or state bank, (12) no-load money market mutual funds registered with the Securities and Exchange Commission that have a dollar-weighted average stated maturity of 90 days or less and include in their investment objectives the maintenance of a stable net asset value of $1 for each share, (13) no-load mutual funds registered with the Securities and Exchange Commission that have an average weighted maturity of less than two years, invest exclusively in obligations described in this paragraph and are continuously rated as to investment quality by at least one nationally recognized investment rating firm of no less than AAA or its equivalent, and (14) guaranteed 24

188 investment contracts that have a defined termination date and are secured by obligations described in clause (1) above in an amount at least equal to the amount of Certificate proceeds invested under such contract. The City may invest in such obligations directly or through government investment pools that invest solely in such obligations provided that the pools are rated no lower than AAA or AAA-m or an equivalent by at least one nationally recognized rating service. The City is specifically prohibited from investing in: (1) obligations whose payment represents the coupon payments on the outstanding principal balance of the underlying mortgage-backed security collateral and pays no principal; (2) obligations whose payment represents the principal stream of cash flow from the underlying mortgage-backed security and bears no interest; (3) collateralized mortgage obligations that have a stated final maturity of greater than 10 years; and (4) collateralized mortgage obligations the interest rate of which is determined by an index that adjusts opposite to the changes in a market index. INVESTMENT POLICIES... Under Texas law, the City is required to invest its funds under written investment policies that primarily emphasize safety of principal and liquidity; that address investment diversification, yield, maturity, and the quality and capability of investment management; and that includes a list of authorized investments for City funds, maximum allowable stated maturity of any individual investment and the maximum average dollar-weighted maturity allowed for pooled fund groups. All City funds must be invested consistent with a formally adopted "Investment Strategy Statement" that specifically addresses each funds investment. Each Investment Strategy Statement will describe its objectives concerning: (1) suitability of investment type, (2) preservation and safety of principal, (3) liquidity, (4) marketability of each investment, (5) diversification of the portfolio, and (6) yield. Under Texas law, City investments must be made "with judgment and care, under prevailing circumstances, that a person of prudence, discretion, and intelligence would exercise in the management of the person s own affairs, not for speculation, but for investment, considering the probable safety of capital and the probable income to be derived." At least quarterly the investment officers of the City shall submit an investment report detailing: (1) the investment position of the City, (2) that all investment officers jointly prepared and signed the report, (3) the beginning market value, any additions and changes to market value and the ending value of each pooled fund group, (4) the book value and market value of each separately listed asset at the beginning and end of the reporting period, (5) the maturity date of each separately invested asset, (6) the account or fund or pooled fund group for which each individual investment was acquired, and (7) the compliance of the investment portfolio as it relates to: (a) adopted investment strategy statements and (b) state law. No person may invest City funds without express written authority from the Board of Trustees. ADDITIONAL PROVISIONS... Under Texas law the City is additionally required to: (1) annually review its adopted policies and strategies; (2) require any investment officers with personal business relationships or relatives with firms seeking to sell securities to the entity to disclose the relationship and file a statement with the Texas Ethics Commission and the Board of Trustees; (3) require the registered principal of firms seeking to sell securities to the City to: (a) receive and review the City s investment policy, (b) acknowledge that reasonable controls and procedures have been implemented to preclude imprudent investment activities, and (c) deliver a written statement attesting to these requirements; (4) perform an annual audit of the management controls on investments and adherence to the City s investment policy; (5) provide specific investment training for the Treasurer, Chief Financial Officer and investment officers; (6) restrict reverse repurchase agreements to not more than 90 days and restrict the investment of reverse repurchase agreement funds to no greater than the term of the reverse repurchase agreement; (7) restrict its investment in mutual funds in the aggregate to no more than 15 percent of its monthly average fund balance, excluding Obligation proceeds and reserves and other funds held for debt service, and to invest no portion of Obligation proceeds, reserves and funds held for debt service, in mutual funds; and (8) require local government investment pools to conform to the new disclosure, rating, net asset value, yield calculation, and advisory board requirements. TABLE 14 - CURRENT INVESTMENTS As of January 31, 2009, the City's investable funds were invested in the following categories: Book Market Type of Investments Value Percent Value Money Market Funds $ 275, % $ 275,766 TexPool 7,831, % 7,831,427 TexSTAR 1,788, % 1,788,026 Bank Deposits and CD's 1,331, % 1,331,309 $ 11,226, % $ 11,226,528 25

189 TAX EXEMPTION In the opinion of Andrews Kurth LLP, Houston, Texas, Bond Counsel, interest on the Obligations (1) is excludable under Section 103 of the Internal Revenue Code of 1986, as amended (the Code ), from gross income of the owners thereof for federal income tax purposes and (2) is not includable in the alternative minimum taxable income of individuals or corporations, except as described below. The foregoing opinions of Bond Counsel are based on the Code and the regulations, rulings and court decisions thereunder in existence on the date of issue of the Obligations. Such authorities are subject to change and any such change could prospectively or retroactively result in the inclusion of the interest on the Obligations in gross income of the owners thereof or change the treatment of such interest for purposes of computing alternative minimum taxable income. In rendering its opinions, Bond Counsel has assumed continuing compliance by the City with certain covenants of the Ordinances and has relied on representations by the City with respect to matters solely within the knowledge of the City, which Bond Counsel has not independently verified. The covenants and representations relate to, among other things, the use of Obligation proceeds and any facilities financed therewith, the source of repayment of the Obligations, the investment of Obligation proceeds and certain other amounts prior to expenditure, and requirements that excess arbitrage earned on the investment of Obligation proceeds and certain other amounts be paid periodically to the United States and that the City file an information report with the Internal Revenue Service. If the City should fail to comply with the covenants in the Ordinances, or if its representations relating to the Obligations that are contained in the Ordinances should be determined to be inaccurate or incomplete, interest on the Obligations could become taxable from the date of delivery of the Obligations, regardless of the date on which the event causing such taxability occurs. Interest on all tax-exempt obligations, such as the Obligations, owned by a corporation (other than an S corporation, a regulated investment company, a real estate investment trust (REIT), a real estate mortgage investment conduit (REMIC) or a financial asset securitization investment trust (FASIT)) will be included in such corporation s adjusted current earnings for purposes of calculating such corporation s alternative minimum taxable income. A corporation s alternative minimum taxable income is the basis on which the alternative minimum tax imposed by the Code is computed. Except as stated above and set forth below under TAX TREATMENT OF ORIGINAL ISSUE DISCOUNT AND PREMIUM OBLIGATIONS, Bond Counsel will express no opinion as to any federal, state or local tax consequences resulting from the ownership of, receipt or accrual of interest on or acquisition or disposition of the Obligations. Bond Counsel s opinion is not a guarantee of a result, but represents its legal judgment based upon its review of existing statutes, regulations, published rulings and court decisions and the representations and covenants of the City described above. No ruling has been sought from the Internal Revenue Service (the Service ) with respect to the matters addressed in the opinion of Bond Counsel, and Bond Counsel s opinion is not binding on the Service. The Service has an ongoing program of auditing the tax-exempt status of the interest on municipal obligations. If an audit of the Obligations is commenced, under current procedures the Service is likely to treat the City as the taxpayer, and the owners of the Obligations may have no right to participate in the audit process. In responding to or defending an audit of the tax-exempt status of the interest on the Obligations, the City may have different or conflicting interests from the owners of the Obligations. Public awareness of any future audit of the Obligations could adversely affect the value and liquidity of the Obligations during the pendency of the audit, regardless of its ultimate outcome. Under the Code, taxpayers are required to provide information on their returns regarding the amount of tax-exempt interest, such as interest on the Obligations, received or accrued during the year. Prospective purchasers of the Obligations should be aware that the ownership of tax-exempt obligations, such as the Obligations, may result in collateral federal income tax consequences to, among others, financial institutions, property and casualty insurance companies, certain foreign corporations doing business in the United States, certain S corporations with Subchapter C earnings and profits, individual recipients of Social Security or Railroad Retirement benefits, taxpayers who are deemed to have incurred or continued indebtedness to purchase or carry tax-exempt obligations and individuals otherwise eligible for the earned income credit. Such prospective purchasers should consult their owner tax advisors as to the consequences of investing in the Obligations. TAX TREATMENT OF ORIGINAL ISSUE DISCOUNT AND PREMIUM OBLIGATIONS DISCOUNT OBLIGATIONS Some of the Obligations may be offered at initial offering prices which are less than the stated redemption prices at maturity of such Obligations. If a substantial amount of any maturity of the Obligations is sold to members of the public (which for this purpose excludes bond houses, brokers and similar persons or entities acting in the capacity of wholesalers or underwriters) at such initial offering price, an initial owner who purchases the Obligations of that maturity (the Discount Obligations ) will be considered to have original issue discount for federal income tax purposes equal to the difference between (a) the stated redemption price payable at the maturity of such Discount Obligation and (b) the initial offering price to the public of such Discount Obligation. Under existing law, such original issue discount will be treated for federal income tax purposes as additional interest on an obligation and such initial owner will be entitled to 26

190 exclude from gross income for federal income tax purposes that portion of such original issue discount deemed to be earned (as discussed below) during the period while such Discount Obligation continues to be owned by such initial owner. Except as otherwise provided herein, the discussion regarding interest on the Obligations under the caption TAX EXEMPTION generally applies to original issue discount deemed to be earned on a Discount Obligation while held by an owner who has purchased such Obligation at the initial offering price in the initial public offering of the Obligations and that discussion should be considered in connection with this portion of the Official Statement. In the event of a redemption, sale, or other taxable disposition of a Discount Obligation prior to its stated maturity, however, any amount realized by such initial owner in excess of the basis of such Discount Obligation in the hands of such owner (increased to reflect the portion of the original issue discount deemed to have been earned while such Discount Obligation continues to be held by such initial owner) will be includable in gross income for federal income tax purposes. Because original issue discount on a Discount Obligation will be treated for federal income tax purposes as interest on a Obligation, such original issue discount must be taken into account for certain federal income tax purposes as it is deemed to be earned even though there will not be a corresponding cash payment. Corporations that purchase Discount Obligations must take into account original issue discount as it is deemed to be earned for purposes of determining alternative minimum tax. Other owners of a Discount Obligation may be required to take into account such original issue discount as it is deemed to be earned for purposes of determining certain collateral federal tax consequences of owning a Obligation. See TAX EXEMPTION for a discussion regarding the alternative minimum taxable income consequences for corporations and for a reference to collateral federal tax consequences for certain other owners. The characterization of original issue discount as interest is for federal income tax purposes only and does not otherwise affect the rights or obligations of the owner of a Discount Obligation or of the City. The portion of the principal of a Discount Obligation representing original issue discount is payable upon the maturity or earlier redemption of such Obligation to the registered owner of the Discount Obligation at that time. Under special tax accounting rules prescribed by existing law, a portion of the original issue discount on each Discount Obligation is deemed to be earned each day. The portion of the original issue discount deemed to be earned each day is determined under an actuarial method of accrual, using the yield to maturity as the constant interest rate and semi-annual compounding. The federal income tax consequences of the purchase, ownership, redemption, sale or other disposition of Discount Obligations by an owner that did not purchase such Obligations in the initial public offering and at the initial offering price may be determined according to rules which differ from those described above. All prospective purchasers of Discount Obligations should consult their tax advisors with respect to the determination for federal, state and local income tax purposes of interest and original issue discount accrued upon redemption, sale or other disposition of such Discount Obligations and with respect to the federal, state, local and foreign tax consequences of the purchase, ownership, redemption, sale or other disposition of such Discount Obligations. PREMIUM OBLIGATIONS Some of the Obligations may be offered at initial offering prices which exceed the stated redemption prices payable at the maturity of such Obligations. If a substantial amount of any maturity of the Obligations is sold to members of the public (which for this purpose excludes bond houses, brokers and similar persons or entities acting in the capacity of wholesalers or underwriters) at such initial offering price, each of the Obligations of such maturity ( Premium Obligations ) will be considered for federal income tax purposes to have bond premium equal to the amount of such excess. The basis for federal income tax purposes of a Premium Obligation in the hands of an initial purchaser who purchases such Obligation in the initial offering must be reduced each year and upon the sale or other taxable disposition of the Obligation by the amount of amortizable bond premium. This reduction in basis will increase the amount of any gain (or decrease the amount of any loss) recognized for federal income tax purposes upon the sale or other taxable disposition of a Premium Obligation by the initial purchaser. Generally, no corresponding deduction is allowed for federal income tax purposes, for the reduction in basis resulting from amortizable bond premium. The amount of bond premium on a Premium Obligation which is amortizable each year (or shorter period in the event of a sale or disposition of a Premium Obligation) is determined under special tax accounting rules which use a constant yield throughout the term of the Premium Obligation based on the initial purchaser s original basis in such Obligation. The federal income tax consequences of the purchase, ownership, redemption, sale or other disposition by an owner of Obligations that are not purchased in the initial offering or which are purchases at an amount representing a price other than the initial offering prices for the Obligations of the same maturity may be determined according to rules which differ from those described above. Moreover, all prospective purchasers of Obligations should consult their tax advisors with respect to the federal, state, local and foreign tax consequences of the purchase, ownership, redemption, sale or other disposition of Premium Obligations. QUALIFIED TAX-EXEMPT OBLIGATIONS Section 265 of the Code provides, in general, that interest expenses incurred to acquire or carry tax-exempt obligations is not deductible from the gross income of the holder. For certain holders that are financial institutions within the meaning of such section, complete disallowance of such expense would apply to taxable years beginning after December 31, 1986, with respect to tax-exempt obligations acquired after August 7, Section 265(b) of the Code provides an exception to this rule for interest expense incurred by financial institutions to carry tax-exempt obligations (other than private activity Obligations which are designated by an issue as qualified tax-exempt obligations ). An 27

191 issuer may only designate an issue as an issue of qualified tax-exempt obligations where less than $10 million of tax-exempt obligations are issued by the issuer during the calendar year in which the issue so designated is issued. The City will designate the Obligations as qualified tax-exempt obligations. Further, the City will represent that it has or will take such action necessary for the Obligations to constitute qualified tax-exempt obligations. Notwithstanding the designation of the Obligations as qualified tax-exempt obligations, financial institutions acquiring the Obligations will be subject to a twenty percent (20%) disallowance of interest expenses allocable to the Obligations. CONTINUING DISCLOSURE OF INFORMATION In the Ordinances, the City has made the following agreement for the benefit of the holders and beneficial owners of the Obligations. The City is required to observe the agreement for so long as it remains obligated to advance funds to pay the Obligations. Under the agreement, the City will be obligated to provide certain updated financial information and operating data annually, and timely notice of specified material events, to certain information vendors. Information that is filed with information vendors will be available to securities brokers and others who subscribe to receive the information from the vendors. ANNUAL REPORTS... The City will provide certain updated financial information and operating data to certain information vendors annually. The information to be updated includes all quantitative financial information and operating data with respect to the City of the general type included in this Official Statement under Tables numbered 1 through 6, 8 through 10, and 12 through 14 and in Appendix B. The City will update and provide this information within six months after the end of each fiscal year. The City will provide the updated information to each nationally recognized municipal securities information repository ("NRMSIR") and to the Texas Municipal Advisory Council, the state information depository ("SID") designated by the State of Texas and approved by the staff of the United States Securities and Exchange Commission (the "SEC"). The City 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 information will include audited financial statements, if the City commissions an audit and it is completed by the required time. If audited financial statements are not available by the required time, the City will provide unaudited financial information and operating data which is customarily prepared by the City by the required time and audited financial statements when and if such audited financial statements become available. Any such financial statements will be prepared in accordance with the accounting principles described in Appendix A or such other accounting principles as the City may be required to employ from time to time pursuant to state law or regulation. The City s current fiscal year end is September 30. Accordingly, it must provide updated information by March 31 in each year, unless the City changes its fiscal year. If the City changes its fiscal year, it will notify each nationally recognized municipal securities information repository ( NRMSIR ) and the SID of the change. MATERIAL EVENT NOTICES... The City will also provide timely notices of certain events to certain information vendors. The City will provide notice of any of the following events with respect to the Obligations, if such event is material to a decision to purchase or sell Obligations: (1) principal and interest payment delinquencies; (2) non-payment related defaults; (3) unscheduled draws on debt service reserves reflecting financial difficulties; (4) unscheduled draws on credit enhancements reflecting financial difficulties; (5) substitution of credit or liquidity providers, or their failure to perform; (6) adverse tax opinions or events affecting the tax-exempt status of the Obligations; (7) modifications to rights of holders of the Obligations; (8) Obligation calls; (9) defeasances; (10) release, substitution, or sale of property securing repayment of the Obligations; and (11) rating changes. In addition, the City will provide timely notice of any failure by the City to provide information, data, or financial statements in accordance with its agreement described above under Annual Reports. The City will provide each notice described in this paragraph to the SID and to either each NRMSIR or the Municipal Securities Rulemaking Board ( MSRB ). AVAILABILITY OF INFORMATION FROM NRMSIRS AND SID... The City has agreed to provide the foregoing information only to NRMSIRs, the MSRB and the SID. The information will be available to holders of Obligations 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 and approved by the SEC staff as a qualified State information depository (the SID ). The address of the Municipal Advisory Council is 600 West 8th Street, P. O. Box 2177, Austin, Texas , and its telephone number is 512/ The MAC has also received SEC approval to operate and has begun to operate, a central post office for information filings made by municipal issuers, such as the City. A municipal issuer may submit its information filings with the central post office, which then transmits such information to the NRMSIRs and the appropriate SID for filing. This central post office can be accessed and utilized at ( DisclosureUSA ). The City may utilize DisclosureUSA for the filing of information relating to the Obligations. The SEC has approved amendments to the Rule, to become effective July 1, 2009, to designate the MSRB as the sole NRMSIR. To make such continuing disclosure information available to investors free of charge, the MSRB has established the Electronic Municipal Market Access ("EMMA") system. The City will be required to file its continuing disclosure information using the EMMA system beginning on July 1, Investors will be able to access continuing disclosure information filed with the MSRB at 28

192 LIMITATIONS AND AMENDMENTS... The City has agreed to update information and to provide notices of material events only as described above. The City has not agreed to provide other information that may be relevant or material to a complete presentation of its financial results of operations, condition, or prospects or agreed to update any information that is provided, except as described above. The City makes no representation or warranty concerning such information or concerning its usefulness to a decision to invest in or sell Obligations at any future date. The City disclaims any contractual or tort liability for damages resulting in whole or in part from any breach of its continuing disclosure agreement or from any statement made pursuant to its agreement. Holders or beneficial owners of Obligations may seek as their sole remedy a writ of mandamus to compel the City to comply with its agreement. No default by the City with respect to its continuing disclosure agreement shall constitute a breach of or default under the Ordinance for purposes of any other provision of the Ordinance. Nothing in this paragraph is intended or shall act to disclaim, waive, or otherwise limit the duties of the City under federal and state securities laws. The City's undertakings and agreements are subject to appropriation of necessary funds and to applicable legal restrictions. The City may amend its continuing disclosure agreement from time to time to adapt to changed circumstances that arise from a change in legal requirements, a change in law, or a change in the identity, nature, status, or type of operations of the City, if (i) the agreement, as amended, would have permitted an underwriter to purchase or sell Obligations in the offering described herein in compliance with the Rule, taking into account any amendments or interpretations of the Rule to the date of such amendment, as well as such changed circumstances, and (ii) either (a) the holders of a majority in aggregate principal amount of the outstanding Obligations consent to the amendment or (b) any person unaffiliated with the City (such as nationally recognized bond counsel) determines that the amendment will not materially impair the interests of the holders and beneficial owners of the Obligations. The City may also amend or repeal the provisions of this continuing disclosure agreement if the SEC amends or repeals the applicable provisions of the SEC Rule 15c2-12 or a court of final jurisdiction enters judgment that such provisions of the SEC Rule 15c2-12 are invalid, but only if and to the extent that the provisions of this sentence would not prevent an underwriter from lawfully purchasing or selling Obligations in the primary offering of the Obligations. If the City so amends the agreement, it has agreed to include with the next financial information and operating data provided in accordance with its agreement described above under Annual Reports an explanation, in narrative form, of the reasons for the amendment and of the impact of any change in the type of financial information and operating data so provided. COMPLIANCE WITH PRIOR UNDERTAKINGS... For the past five years, the City has complied in all material respects with all continuing disclosure agreements made by it in accordance with SEC Rule 15c2-12. RATINGS OTHER INFORMATION The uninsured tax supported debt of the City is rated "A+ by Standard & Poor s Rating Services, a division of the McGraw-Hill Companies, Inc ( S&P ). Application for contract ratings on the Obligations has been made to S&P. An explanation of the significance of such rating may be obtained from the company furnishing the rating. The rating reflects only the view of such organization and the City makes no representation as to the appropriateness of the rating. There is no assurance that such rating will continue for any given period of time or that it will not be revised downward or withdrawn entirely by such rating company, if in the judgment of the company, circumstances so warrant. Any such downward revision or withdrawal of such rating may have an adverse effect on the market price of the Obligations. LITIGATION The City is not a party to any litigation or other proceeding pending or to its knowledge, threatened, in any court, agency or other administrative body (either state or federal) which, if decided adversely to the City, would have a material adverse effect on the condition of the City (financial or otherwise). REGISTRATION AND QUALIFICATION OF OBLIGATIONS FOR SALE The sale of the Obligations has not been registered under the Federal Securities Act of 1933, as amended, in reliance upon the exemption provided thereunder by Section 3(a)(2); and the Obligations have not been qualified under the Securities Act of Texas in reliance upon various exemptions contained therein; nor have the Obligations been qualified under the securities acts of any jurisdiction. The City assumes no responsibility for qualification of the Obligations under the securities laws of any jurisdiction in which the Obligations may be sold, assigned, pledged, hypothecated or otherwise transferred. This disclaimer of responsibility for qualification for sale or other disposition of the Obligations shall not be construed as an interpretation of any kind with regard to the availability of any exemption from securities registration provisions. LEGAL INVESTMENTS AND ELIGIBILITY TO SECURE PUBLIC FUNDS IN TEXAS Section of the Public Security Procedures Act (Chapter 1201, Texas Government Code) provides that the Obligations are negotiable instruments, investment securities governed by Chapter 8, Texas Business and Commerce Code, and are legal and authorized investments for insurance companies, fiduciaries, and trustees, and for the sinking funds of municipalities or other political subdivisions or public agencies of the State of Texas. With respect to investment in the Obligations by municipalities or other political subdivisions or public agencies of the State of Texas, the Public Funds Investment Act, Chapter 2256, Texas Government Code, requires that the Obligations be 29

193 assigned a rating of "A" or its equivalent as to investment quality by a national rating agency. See "OTHER INFORMATION - RATINGS" herein. In addition, various provisions of the Texas Finance Code provide that, subject to a prudent investor standard, the Obligations are legal investments for state banks, savings banks, trust companies with at capital of one million dollars or more, and savings and loan associations. The Obligations are eligible to secure deposits of any public funds of the State, its agencies, and its political subdivisions, and are legal security for those deposits to the extent of their market value. No review by the City has been made of the laws in other states to determine whether the Obligations are legal investments for various institutions in those states. LEGAL MATTERS The City will furnish a complete transcript of proceedings incident to the authorization and issuance of the Obligations, including the unqualified approving legal opinion of the Attorney General of Texas approving the Initial Obligations and to the effect that the Obligations are valid and legally binding special obligations of the City, and based upon examination of such transcript of proceedings, the approving legal opinion of Andrews Kurth LLP, Houston, Texas, Bond Counsel, to the effect that the interest on the Obligations will be excludable from gross income for federal income tax purposes under Section 103(a) of the Code, subject to the matters described under TAX EXEMPTION herein, including the alternative minimum tax on corporations. The form of Bond Counsel s opinion is attached hereto as Appendix C. The legal fee to be paid to Bond Counsel for services rendered in connection with the issuance of the Obligations is contingent upon the sale and delivery of the Obligations. The legal opinions of Bond Counsel will accompany the Obligations deposited with DTC or will be printed on the definitive Obligations in the event of the discontinuance of the Book-Entry-Only System. Certain matters will be passed upon for the Underwriter by their counsel, McCall, Parkhurst & Horton L.L.P., Dallas, Texas. Bond Counsel was engaged by, and only represents, the City. Except as noted below, Bond Counsel did not take part in the preparation of the Official Statement, and such firm has not assumed any responsibility with respect thereto or undertaken independently to verify any of the information contained therein, except that, in its capacity as Bond Counsel, such firm has reviewed the information describing the Obligations in the Official Statement under the captions THE OBLIGATIONS (except for the information under the subcaptions BOOK-ENTRY-ONLY SYSTEM and USE OF PROCEEDS ), TAX EXEMPTION, TAX TREATMENT OF ORIGINAL ISSUE DISCOUNT AND PREMIUM OBLIGATIONS, QUALIFIED TAX-EXEMPT OBLIGATIONS, CONTINUING DISCLOSURE OF INFORMATION (except for the subcaption COMPLIANCE WITH PRIOR UNDERTAKINGS ), OTHER INFORMATION - REGISTRATION AND QUALIFICATION OF OBLIGATIONS FOR SALE, OTHER INFORMATION - LEGAL INVESTMENTS AND ELIGIBILITY TO SECURE PUBLIC FUNDS IN TEXAS, and OTHER INFORMATION LEGAL MATTERS (except for the last sentence of the first paragraph thereof), and such firm is of the opinion that the information relating to the Obligations and the Ordinances contained therein fairly and accurately describes the laws and legal issues addressed therein and, with respect to the Obligations, such information conforms to the Ordinances. The various legal opinions to be delivered concurrently with the delivery of the Obligations express the professional judgment of the attorneys rendering the opinions as to the legal issues explicitly addressed therein. In rendering a legal opinion, the attorney does not become an insurer or guarantor of that expression of professional judgment, of the transaction opined upon, or of the future performance of the parties to the transaction, nor does the rendering of an opinion guarantee the outcome of any legal dispute that may arise out of the transaction. AUTHENTICITY OF FINANCIAL DATA AND OTHER INFORMATION The financial data and other information contained herein have been obtained from City records, audited financial statements and other sources which are believed to be reliable. There is no guarantee that any of the assumptions or estimates contained herein will be realized. All of the summaries of the statutes, documents and ordinances contained in this Official Statement are made subject to all of the provisions of such statutes, documents and ordinances. These summaries do not purport to be complete statements of such provisions and reference is made to such documents for further information. Reference is made to original documents in all respects. FINANCIAL ADVISOR First Southwest Company is employed as Financial Advisor to the City in connection with the issuance of the Obligations. The Financial Advisor's fee for services rendered with respect to the sale of the Obligations is contingent upon the issuance and delivery of the Obligations. First Southwest Company, in its capacity as Financial Advisor, does not assume any responsibility for the information, covenants and representations contained in any of the legal documents with respect to the federal income tax status of the Obligations, or the possible impact of any present, pending or future actions taken by any legislative or judicial bodies. The Financial Advisor to the City has provided the following sentence for inclusion in this Official Statement. The Financial Advisor has reviewed the information in this Official Statement in accordance with, and as part of, its responsibilities to the City and, as applicable, to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Financial Advisor does not guarantee the accuracy or completeness of such information. UNDERWRITING The Underwriter has agreed, subject to certain conditions, to purchase the Obligations from the City, at an underwriting discount of $. The Underwriter will be obligated to purchase all of the Obligations if any Obligations are purchased. The Obligations to be offered to the public may be offered and sold to certain dealers (including the Underwriter and other dealers depositing Obligations into investment trusts) at prices lower than the public offering prices of such Obligations, and such public offering prices may be changed, from time to time, by the Underwriter. 30

194 FORWARD-LOOKING STATEMENTS DISCLAIMER The statements contained in this Official Statement, and in any other information provided by the City, that are not purely historical, are forward-looking statements, including statements regarding the City's expectations, hopes, intentions, or strategies regarding the future. Readers should not place undue reliance on forward-looking statements. All forward-looking statements included in this Official Statement are based on information available to the City on the date hereof, and the City assumes no obligation to update any such forward-looking statements. The City's actual results could differ materially from those discussed in such forward-looking statements. The forward-looking statements included herein are necessarily based on various assumptions and estimates and are inherently subject to various risks and uncertainties, including risks and uncertainties relating to the possible invalidity of the underlying assumptions and estimates and possible changes or developments in social, economic, business, industry, market, legal, and regulatory circumstances and conditions and actions taken or omitted to be taken by third parties, including customers, suppliers, business partners and competitors, and legislative, judicial, and other governmental authorities and officials. Assumptions related to the foregoing involve judgments with respect to, among other things, future economic, competitive, and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond the control of the City. Any of such assumptions could be inaccurate and, therefore, there can be no assurance that the forward-looking statements included in this Official Statement will prove to be accurate. The Ordinances will approve the form and content of this Official Statement, and any addenda, supplement or amendment thereto, and authorize its further use in the reoffering of the Obligations by the Underwriter. ATTEST: Mayor City of Dickinson, Texas City Secretary 31

195 Schedule I SCHEDULE OF REFUNDED OBLIGATIONS Combination Tax & Revenue Certificates of Obligaion, Series 2000 Maturity Interest Par Call Call March 1 Rate Amount Date Price % $150,000 03/01/ % ,000 03/01/ ,000 03/01/ ,000 03/01/ ,000 03/01/ ,000 03/01/ ,000 03/01/ ,000 03/01/ ,000 03/01/ ,000 03/01/ ,000 03/01/ $2,255,000 32

196 APPENDIX A GENERAL INFORMATION REGARDING THE CITY

197 THE CITY The City is located in Galveston County, 30 miles south of Houston, 20 miles north of Galveston and 10 miles south of Johnson Space Center. The City provides basic municipal services to its citizens including fire and police protection, ambulance service, library services, and development services. EDUCATION Dickinson Independent School District ( Dickinson ISD ) features a strong, diversified curriculum, a relatively small enrollment and an excellent student-to-teacher ratio of 16 to 1. All of the district s schools are located near the educational, cultural and recreational opportunities of Houston, NASA and Galveston Bay. HIGHER EDUCATION UH-Clear Lake is an upper-level institution located in the south side of Houston on 524 acres adjacent to NASA s Lyndon B. Johnson Space Center. With a fall 2008 enrollment of 7,658 students, UHCL offers junior, senior and master s level classes leading to 4 undergraduate degrees in 38 fields of study and 5 master s degrees in 47 fields of study through four schools. UHCL is committed to maintaining solid academic programs largely through its emphasis on teaching excellence. All of the university s professors hold doctorates or the highest possible degree in their respective fields. The College of the Mainland, a junior college located on a 200-acre campus in Texas City, is less than ten miles from the City near the intersection of FM 1764 and State Highway 3. HEALTHCARE AND FACILITIES The greater Houston-Galveston region is noted for the availability of exceptional hospital and medical care. The League City Clear Lake area is served by two modern hospitals with Life Flight capability and 40 medical groups/clinics. The City is also close to Mainland Medical Center in Texas City. Over 200 physicians, surgeons and general practice physicians, and 132 dentists have practices in the region and cover a wide range of specialties. TRANSPORTATION The City has convenient access to several interstate and major US highways. Interstate Highway 45 passes directly through the City giving access to other transportation routes such as Interstate Highway 10, US Highways 59 and 290, and State Highways 288, 225 and 146. The City also has access to four public airports: Houston Bush Intercontinental Airport (69 miles), Hobby Airport (40 miles), Ellington Field (25 miles), and Scholes Airport Galveston (14 miles). The area s trucking industry is wellintegrated with the Port of Houston, the public airports, and the mainline railroads serving the area. Each draws from the others while supporting the others. The Houston Airport System is 9 th largest in the United States and 12 th largest in the world. The Houston Bush Intercontinental Airport ranks 11 th in the U.S. for international passengers. The City is served by Union Pacific Railroad who operates one main line through the City with daily service. JOHNSON SPACE CENTER The Johnson Space Center of the National Aeronautics and Space Administration ( NASA ), which is currently responsible for NASA s space shuttle and space station projects, is an important part of the area economy, both as an employer of more than 3,200 employees and as an attraction for the location of 590 contractors who subcontract approximately 11,500 employees locally. TOP AREA EMPLOYERS GTE Best Way Entex Penreco Texas New Mexico Power Company Federal Express Dickinson ISD A - 1

198 THE COUNTY The City lies within Galveston County which is located on the upper Texas coast of the Gulf of Mexico. The County comprises a land area of 430 square miles, including Galveston Island, the Mainland and Bolivar Peninsula. The official establishment of Galveston County dates back to May 15, 1838, when Sam Houston, the President of the Republic of Texas, approved an article passed by the Congress, establishing the County of Galveston. The 2000 census was 250,158. Galveston County has a diversified economy based on manufacturing, oil and gas production, shipping, agriculture, commercial fishing and tourism. The Galveston County Mainland area is the center of one of the most important industrial concentrations on the Gulf Coast of Texas. Major industries located at Texas City and La Marque include Union Carbide Chemical Company, Amoco Oil Company, Texas City Refining Company, Sterling Chemicals Inc., Gulf Chemical and Metallurgical Corporation, Amoco Chemical Corporation, General Analine (GAF) and others. The County profits from year-round recreational opportunities including sailing, fishing, camping, golfing, swimming and water skiing. The Texas City Dike which extends five miles into Galveston Bay offers beach, boat launching, fishing pier, bait, camping and motel accommodations and other service facilities. The County is home to the world s largest dog racing complex. The site consists of 100 acres and includes a clubhouse with fullservice dining. The track seats 8,000 people and has a total capacity of 12,000. Construction of the $40-million facility was completed in the fall of 1992 and races began immediately. The track created 800 permanent jobs. A - 2

199 APPENDIX B EXCERPTS FROM THE CITY OF DICKINSON, TEXAS ANNUAL FINANCIAL REPORT For the Year Ended September 30, 2008 The information contained in this Appendix consists of excerpts from the City of Dickinson, Texas Annual Financial Report for the Year Ended September 30, 2008, and is not intended to be a complete statement of the City's financial condition. Reference is made to the complete Report for further information.

200 APPENDIX C FORM OF BOND COUNSEL'S OPINION

201 CITY OF DICKINSON, TEXAS COMBINATION TAX & REVENUE CERTIFICATES OF OBLIGATION AND GENERAL OBLIGATION REFUNDING BONDS SERIES 2009 FINANCING SCHEDULE *** As of March 19, 2009*** Jan-09 Feb-09 Mar-09 Apr-09 S M T W T F S S M T W T F S S M T W T F S S M T W T F S Completion Date Event Responsibility Thurs Jan 22 Circulate draft of Preliminary Official Statement (POS) FA Tues Jan 27 City Council Meeting: Authorize publication of Notice of Intent for Certificates of Obligation City, BC Thurs Jan 29 Comments due on draft of POS FWG Mon Feb 2 Circulated 2 nd draft of POS FA Week of Feb 2 Publish 1 st Notice of Intent for Certificates of Obligation City Mon Feb 9 Comments due on 2 nd draft of POS Week of Feb 9 Publish 2 nd Notice of Intent for Certificates of Obligation City Tues March 3 Mail credit packages to rating agencies and insurance companies FA Week of March 9 Ratings Calls FWG Mon March 9 Circulate final draft of POS FWG Tues March 10 City Council Meeting: Approve POS subject to changes, appoints Paying Agent/Registrar City Mon March 16 Comments due on final draft of POS FWG Receive Ratings from Agencies FA Tues March 17 Print and distribute POS FA Tues March 24 City Council Meeting: Award obligations to Underwriter(s), adopt Ordinance and authorize preparation of Official Statement (OS) City Wed March 25 Circulate draft of OS FA Thurs March 26 Submit transcript of proceedings to Attorney General BC Mon March 30 Comments due on OS FWG, IP Wed April 1 Print and distribute OS FA, IP Thurs April 16 Circulate draft closing memo FA Thurs April 23 Closing FWG, IP

202 Symbol Key FWG Finance Working Group... Includes the City, BC, & FA City City of Dickinson - - BC Bond Counsel... Andrew Kurth LLP FA Financial Advisor... First Southwest Company UW Underwriter... Samco Capital Markets UWC Underwriter Counsel... McCall, Parkhurst & Horton L.L.P. * This Financing Schedule is subject to change.

203 TAB 14

204 Dickinson City Council Agenda Item Data Sheet MEETING DATE March 24, 2009 TOPIC: Ordinance Number XXX-2009 ORDINANCE AUTHORIZING AND ORDERING THE ISSUANCE OF CITY OF DICKINSON, TEXAS, GENERAL OBLIGATION REFUNDING BONDS, SERIES 2009; AUTHORIZING DEFEASANCE OF CERTAIN BONDS, THE EXECUTION AND DELIVERY OF AN ESCROW AGREEMENT, THE PURCHASE OF CERTAIN SECURITIES AND THE USE OF CERTAIN FUNDS RELATED TO THE BONDS TO BE REFUNDED; AND MAKING OTHER PROVISIONS REGARDING SUCH BONDS, INCLUDING USE OF THE PROCEEDS THEREOF, AND MATTERS INCIDENT THERETO BACKGROUND Current market conditions provide an opportunity for the City to refund some of its outstanding obligations to achieve debt service savings. The obligations to be refunded are outstanding Combination Tax and Revenue Certificates of Obligation, Series During its March 10, 2009 meeting, the Council approved the Preliminary Official Statement related to the General Obligation Refunding Bonds, Series 2009, for the refunding of the outstanding Combination Tax and Revenue Certificates of Obligation, Series The next step in the financing process is to adopt an ordinance authorizing the issuance of the Bonds through this agenda item. Once the Council approves the ordinance, the following events will occur prior to receiving the bond proceeds: Circulate the Official Statements by March 25, 2009 Submit transcript of proceedings to Attorney General s office by March 26, 2009 Comments due on Official Statements by March 30, 2009 Print and distribute Official Statements by April 1, 2009 Circulate draft closing memo by April 21, 2009 Closing on April 23, 2009 Payment and discharge of Certificates of Obligation, Series 2000 on April 24, 2009 APPROVAL YES NO ACTIONS TAKEN READINGS PASSED OTHER 1 st 2 nd 3 rd PAGE 1 OF 2

205 Dickinson City Council Agenda Item Data Sheet Following approval of this ordinance, no further action by the Council will be needed. Bond Counsel Margo White and Financial Advisors Drew Masterson and Joe Morrow will be present at the Council meeting to answer any further questions. RECOMMENDATION Staff recommends approval. ATTACHMENTS Ordinance Number XXX-2009 Financing Schedule Prepared by First Southwest Company FUNDING ISSUES None Not budgeted Full Amount already budgeted. Funds to be transferred from Acct.# - - SUBMITTING STAFF MEMBER CITY ADMINISTRATOR APPROVAL Julie M. Johnston, City Administrator APPROVAL YES NO ACTIONS TAKEN READINGS PASSED OTHER 1 st 2 nd 3 rd PAGE 2 OF 2

206 ORDINANCE NUMBER XXX-2009 AN ORDINANCE AUTHORIZING AND ORDERING THE ISSUANCE OF CITY OF DICKINSON, TEXAS, GENERAL OBLIGATION REFUNDING BONDS, SERIES 2009; AUTHORIZING DEFEASANCE OF CERTAIN BONDS, THE EXECUTION AND DELIVERY OF AN ESCROW AGREEMENT, THE PURCHASE OF CERTAIN SECURITIES AND THE USE OF CERTAIN FUNDS RELATED TO THE BONDS TO BE REFUNDED; AND MAKING OTHER PROVISIONS REGARDING SUCH BONDS, INCLUDING USE OF THE PROCEEDS THEREOF, AND MATTERS INCIDENT THERETO BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF DICKINSON, TEXAS: ARTICLE I. FINDINGS AND DETERMINATIONS Section 1.1.: and determines that: Findings and Determinations. The City Council hereby officially finds (a) (b) (c) (d) (e) The City of Dickinson, Texas (the City ), acting through its City Council, has heretofore issued, assumed or undertaken and there remain outstanding the obligations described in Schedule I attached hereto (the Refunded Obligations ). The City is authorized by Chapter 1207, Texas Government Code, as amended, to issue refunding bonds for the purpose of refunding the Refunded Obligations. The City desires to refund the Refunded Obligations in advance of their maturities, which will benefit the City by reducing total debt service. The City is authorized by Chapter 1207, Texas Government Code, as amended, to accomplish such refunding by depositing directly with any place of payment for the Refunded Obligations proceeds from the sale of the refunding bonds authorized herein, together with any other legally available funds, which may be invested in direct noncallable obligations of, or obligations the principal of and interest on which are unconditionally guaranteed by, the United States of America, which shall mature and/or bear interest payable at such times and in such amounts as will be sufficient to provide for the scheduled payment of the Refunded Obligations, and such deposit shall constitute the making of firm banking and financial arrangements for the discharge and final payment of the Refunded Obligations. The City desires to enter into an escrow agreement with The Bank of New York Mellon Trust Company, National Association, Dallas, Texas, as escrow agent, as authorized in Chapter 1207, Texas Government Code, as amended, pursuant to CITY OF DICKINSON, TEXAS ORDINANCE NUMBER XXX-2009

207 which a portion of the proceeds of the refunding bonds herein authorized, and other legally available funds of the City, if any, will be deposited, invested and applied in a manner independently certified and verified to be sufficient to provide for the full and timely payment of all principal of, premium, if any, and interest on the Refunded Obligations. (f) (g) The City desires to authorize the purchase of certain direct obligations of the United States of America with a portion of the proceeds of the refunding bonds herein authorized for deposit into such escrow fund. Upon the issuance of the refunding bonds herein authorized and the creation of the escrow fund and the making of the deposits of the securities and other legally available funds of the City, as provided for in the escrow agreement and as authorized herein, the Refunded Obligations shall no longer be regarded as being outstanding, except for the purpose of being paid pursuant to such escrow agreement. ARTICLE II. DEFINITIONS AND INTERPRETATIONS Section 2.1.: Definitions. As used herein, the following terms shall have the meanings specified, unless the context clearly indicates otherwise: Act shall mean Chapter 1207, Texas Government Code, as amended. Attorney General shall mean the Attorney General of the State of Texas. Bond or Bonds shall mean any or all of the City of Dickinson, Texas, General Obligation Refunding Bonds, Series 2009, authorized by this Ordinance. City shall mean the City of Dickinson, Texas and, where appropriate, its City Council. City Council shall mean the governing body of the City. Comptroller shall mean the Comptroller of Public Accounts of the State of Texas. DTC shall mean The Depository Trust Company, New York, New York, or any successor securities depository. DTC Participant shall mean brokers and dealers, banks, trust companies, clearing corporations and certain other organizations on whose behalf DTC was created to hold securities to facilitate the clearance and settlement of securities transactions among DTC Participants. Debt Service Fund shall mean the General Obligation Refunding Bonds, Series 2009 Debt Service Fund established by the City pursuant to Section 5.2 hereof. 2 CITY OF DICKINSON, TEXAS ORDINANCE NUMBER XXX-2009

208 Escrow Agent shall mean The Bank of New York Mellon Trust Company, National Association, Dallas, Texas and its successors in that capacity. Escrow Agreement shall mean the agreement between the City and the Escrow Agent relating to the escrow of funds and securities to pay the Refunded Obligations. Escrow Fund shall mean the fund created in Section 3.1 of the Escrow Agreement to be administered by the Escrow Agent pursuant to the provisions of the Escrow Agreement. Fiscal Year shall mean the City s then designated fiscal year, which currently is the twelve-month period beginning on the first day of October of a calendar year and ending on the last day of September of the next succeeding calendar year and each such period may be designated with the number of the calendar year in which such period ends. Interest Payment Date, when used in connection with any Bond, shall mean September 1, 2009, and each March 1 and September 1 thereafter until maturity or earlier redemption of such Bond. Ordinance shall mean this Ordinance and all amendments hereof and supplements hereto. Outstanding, when used with reference to the Bonds, shall mean, as of a particular date, all Bonds theretofore and thereupon delivered pursuant to this Ordinance except: (a) any Bonds canceled by or on behalf of the City at or before such date; (b) any Bonds defeased pursuant to the defeasance provisions of this Ordinance or otherwise defeased as permitted by applicable law; and (c) any Bonds in lieu of or in substitution for which a replacement Bond shall have been delivered pursuant to this Ordinance. Owner shall have the meaning set forth under the definition of Registered Owner. Paying Agent/Registrar shall mean The Bank of New York Mellon Trust Company, National Association, Dallas, Texas, and its successors in that capacity. Paying Agent/Registrar Agreement shall mean the agreement between the City and the Paying Agent/Registrar setting forth the duties and obligations of the Paying Agent/Registrar with respect to the Bonds. Purchaser shall have the meaning given to such term in Section 7.1 hereof. Record Date shall mean the close of business on the fifteenth calendar day of the month next preceding the applicable Interest Payment Date. Refunded Obligations shall mean those obligations described in Schedule I attached hereto, which are being refunded and defeased with the proceeds of the Bonds and other legally available funds of the City, if any. 3 CITY OF DICKINSON, TEXAS ORDINANCE NUMBER XXX-2009

209 Register shall mean the registration books for the Bonds kept by the Paying Agent/Registrar in which are maintained the names and addresses of, and the principal amounts registered to, each Registered Owner of Bonds. Registered Owner or Owner shall mean the person or entity in whose name any Bond is registered in the Register. Section 2.2.: Interpretations. All terms defined herein and all pronouns used in this Ordinance shall be deemed to apply equally to singular and plural and to all genders. The titles and headings of the articles and sections of this Ordinance have been inserted for convenience of reference only and are not to be considered a part hereof and shall not in any way modify or restrict any of the terms or provisions hereof. This Ordinance and all the terms and provisions hereof shall be liberally construed to effectuate the purposes set forth herein and to sustain the validity of the Bonds and the validity of the levy of ad valorem taxes to pay the principal of and interest on the Bonds. ARTICLE III. TERMS OF THE BONDS Section 3.1.: Amount, Purpose and Authorization. (a) The Bonds shall be issued in fully registered form, without coupons, under and pursuant to the authority of the Act in the total authorized aggregate principal amount of TWO MILLION THREE HUNDRED SEVENTY THOUSAND AND NO/100 DOLLARS ($2,370,000) for the purpose of refunding the Refunded Obligations and paying the costs of issuing the Bonds and refunding the Refunded Obligations. (b) It is hereby found and determined that the refunding of the Refunded Obligations and the issuance of the Bonds will benefit the City by reducing total debt service, and that such benefit is sufficient consideration for the issuance of the Bonds. (c) The City hereby acknowledges that the refunding of the Refunded Obligations and the issuance of the Bonds will result in a gross savings to the City of $ and a present value savings of $. Section 3.2.: Designation, Date and Payment Date. The Bonds shall be designated as the City of Dickinson, Texas, General Obligation Refunding Bonds, Series 2009, and shall be dated April 1, The Bonds shall bear interest from the later of April 1, 2009, or the most recent Interest Payment Date to which interest has been paid or duly provided for, at the rate set forth in Section 3.3 below, calculated on the basis of a 360-day year of twelve 30-day months, payable on March 1 and September 1 of each year, commencing September 1, 2009 until maturity or earlier redemption. Section 3.3.: Number, Denomination, Interest Rate and Maturity. (a) The Bonds shall be initially issued bearing the numbers, in the principal amounts and bearing interest at the rates set forth in the following schedule, and may be transferred and exchanged as set out in this Ordinance. The Bonds shall mature on March 1 in the principal amounts set out in such schedule. Bonds delivered in transfer of or in exchange for other Bonds shall be numbered in order of their authentication by the Paying Agent/Registrar, shall be in the denomination of 4 CITY OF DICKINSON, TEXAS ORDINANCE NUMBER XXX-2009

210 $5,000 or integral multiples thereof and shall mature on the same date and bear interest at the same rate as the Bond or Bonds in lieu of which they are delivered. Bond Number Maturity (March 1) Principal Amount Interest Rate R $ 90,000 % R ,000 R ,000 R ,000 R ,000 R ,000 R ,000 R ,000 R ,000 R ,000 R ,000 R ,000 R ,000 R ,000 R ,000 *** *** *** *** R ,000 R ,000 R ,000 Section 3.4.: Redemption Prior to Maturity. (a) The Bonds maturing on and after March 1, 2020, are subject to redemption prior to maturity, at the option of the City, in whole or in part, on March 1, 2019, or any date thereafter, at par plus accrued interest to the date fixed for redemption. (b) The Bonds maturing on March 1, 20 (the "Term Bonds") are subject to mandatory sinking fund redemption in the following amounts (subject to reduction as hereinafter provided), on the following dates, in each case at a redemption price equal to the principal amount of the Bonds or the portions thereof so called for redemption plus accrued interest to the date fixed for redemption: TERM BONDS MATURING MARCH 1, 20 Mandatory Redemption Date (March 1) Principal Amount Redemption Price 100% CITY OF DICKINSON, TEXAS ORDINANCE NUMBER XXX-2009

211 The particular Term Bonds to be redeemed shall be selected by the Registrar by lot or other customary random selection method, on or before January 15 of each year in which Term Bonds are to be mandatorily redeemed. The principal amount of Term Bonds to be mandatorily redeemed in each year shall be reduced by the principal amount of such Term Bonds that have been optionally redeemed on or before January 15 of such year and which have not been made the basis for a previous reduction. (c) Bonds may be redeemed in part only in integral multiples of $5,000. If a Bond subject to redemption is in a denomination larger than $5,000, a portion of such Bond may be redeemed, but only in integral multiples of $5,000. In selecting portions of Bonds for redemption, each Bond shall be treated as representing that number of Bonds of $5,000 denomination which is obtained by dividing the principal amount of such Bond by $5,000. Upon presentation and surrender of any Bond for redemption in part, the Paying Agent/Registrar, in accordance with the provisions of this Ordinance, shall authenticate and deliver in exchange therefor a Bond or Bonds of like maturity and interest rate in an aggregate principal amount equal to the unredeemed portion of the Bond so surrendered. (d) Notice of any redemption, identifying the Bonds or portions thereof to be redeemed, shall be sent by United States mail, first class, postage prepaid, to the Registered Owners thereof at their addresses as shown on the Register, not less than thirty (30) days before the date fixed for such redemption. By the date fixed for redemption, due provision shall be made with the Paying Agent/Registrar for the payment of the redemption price of the Bonds called for redemption. If such notice of redemption is given, and if due provision for such payment is made, all as provided above, the Bonds which are to be so redeemed thereby automatically shall be redeemed prior to their scheduled maturities, they shall not bear interest after the date fixed for redemption, and they shall not be regarded as being Outstanding except for the purpose of being paid with the funds so provided for such payment. Section 3.5.: Manner of Payment, Characteristics, Execution and Authentication. The Paying Agent/Registrar is hereby appointed the paying agent for the Bonds. The Bonds shall be payable, shall have the characteristics and shall be executed, sealed, registered and authenticated, all as provided and in the manner indicated in the FORM OF BOND set forth in Article IV of and Exhibit A to this Ordinance. If any officer of the City whose manual or facsimile signature shall appear on the Bonds shall cease to be such officer before the authentication of the Bonds or before the delivery of the Bonds, such manual or facsimile signature shall nevertheless be valid and sufficient for all purposes as if such officer had remained in such office. The approving legal opinion of Andrews Kurth LLP, Houston, Texas, Bond Counsel, may be printed on the back of the Bonds over the certification of the City Secretary, which may be executed in facsimile. CUSIP numbers also may be printed on the Bonds, but errors or omissions in the printing of either the opinion or the numbers shall have no effect on the validity of the Bonds. Section 3.6.: Authentication. Except for the Bond to be initially issued, which need not be authenticated by the Paying Agent/Registrar, only such Bonds as shall bear thereon a certificate of authentication, substantially in the form provided in Article IV of and Exhibit A to 6 CITY OF DICKINSON, TEXAS ORDINANCE NUMBER XXX-2009

212 this Ordinance, manually executed by an authorized representative of the Paying Agent/Registrar, shall be entitled to the benefits of this Ordinance or shall be valid or obligatory for any purpose. Such duly executed certificate of authentication shall be conclusive evidence that the Bond so authenticated was delivered by the Paying Agent/Registrar hereunder. Section 3.7.: Ownership. The City, the Paying Agent/Registrar and any other person may treat the person in whose name any Bond is registered as the absolute owner of such Bond for the purpose of making and receiving payment of the principal thereof and interest thereon and for all other purposes, whether or not such Bond is overdue, and neither the City nor the Paying Agent/Registrar shall be bound by any notice or knowledge to the contrary. All payments made to the person deemed to be the Registered Owner of any Bond in accordance with this Section shall be valid and effective and shall discharge the liability of the City and the Paying Agent/Registrar upon such Bond to the extent of the sums paid. Section 3.8.: Registration, Transfer and Exchange. The Paying Agent/Registrar is hereby appointed the registrar for the Bonds. So long as any Bond remains Outstanding, the Paying Agent/Registrar shall keep the Register at its office in Dallas, Texas, in which, subject to such reasonable regulations as it may prescribe, the Paying Agent/Registrar shall provide for the registration and transfer of the Bonds in accordance with the terms of this Ordinance. Each Bond shall be transferable only upon the presentation and surrender thereof at the principal corporate trust office of the Paying Agent/Registrar, accompanied by an assignment duly executed by the Registered Owner or his authorized representative in form satisfactory to the Paying Agent/Registrar. Upon due presentation of any Bond for transfer, the Paying Agent/Registrar shall authenticate and deliver in exchange therefor, within seventy-two (72) hours after such presentation, a new Bond or Bonds, registered in the name of the transferee or transferees, in authorized denominations and of the same maturity and aggregate principal amount and bearing interest at the same rate as the Bond or Bonds so presented and surrendered. All Bonds shall be exchangeable upon the presentation and surrender thereof at the principal corporate trust office of the Paying Agent/Registrar for a Bond or Bonds, in any authorized denomination, in an aggregate principal amount equal to the unpaid principal amount of the Bond or Bonds presented for exchange. The Paying Agent/Registrar shall be and is hereby authorized to authenticate and deliver exchange Bonds in accordance with the provisions of this Section. Each Bond delivered by the Paying Agent/Registrar in accordance with this Section shall be entitled to the benefits and security of this Ordinance to the same extent as the Bond or Bonds in lieu of which such Bond is delivered. All Bonds issued in transfer or exchange shall be delivered to the Registered Owners thereof at the principal corporate trust office of the Paying Agent/Registrar or sent by United States mail, first class, postage prepaid. The City or the Paying Agent/Registrar may require the Registered Owner of any Bond to pay a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with the transfer or exchange of such Bond. Any fee or charge of the Paying Agent/Registrar for such transfer or exchange shall be paid by the City. 7 CITY OF DICKINSON, TEXAS ORDINANCE NUMBER XXX-2009

213 Section 3.9.: Book-Entry Only System. (a) The definitive Bonds shall be initially issued in the form of a single fully registered Bond for each of the maturities thereof. Upon initial issuance, the ownership of each such Bond shall be registered in the name of Cede & Co., as nominee of DTC, and except as provided in subsection (b) hereof, all of the Outstanding Bonds shall be registered in the name of Cede & Co., as nominee of DTC. Upon delivery by DTC to the Paying Agent/Registrar of written notice to the effect that DTC has determined to substitute a new nominee in place of Cede & Co., the word Cede & Co. in this Ordinance shall refer to such new nominee of DTC. With respect to Bonds registered in the name of Cede & Co., as nominee of DTC, the City and the Paying Agent/Registrar shall have no responsibility or obligation to any DTC Participant or to any person on behalf of whom such a DTC Participant holds an interest in the Bonds. Without limiting the immediately preceding sentence, the City and the Paying Agent/Registrar shall have no responsibility or obligation with respect to (a) the accuracy of the records of DTC, Cede & Co. or any DTC Participant with respect to any ownership interest in the Bonds, (b) the delivery to any DTC Participant or any other person, other than a Bondholder, as shown on the Register, of any notice with respect to the Bonds, or (c) the payment to any DTC Participant or any other person, other than a Bondholder, as shown in the Register of any amount with respect to principal of Bonds, premium, if any, or interest on the Bonds. Except as provided in subsection (c) of this Section, the City and the Paying Agent/Registrar shall be entitled to treat and consider the person in whose name each Bond is registered in the Register as the absolute owner of such Bond for the purpose of payment of principal of, premium, if any, and interest on Bonds, for the purpose of giving notices of redemption, if any, and other matters with respect to such Bond, for the purpose of registering transfer with respect to such Bond, and for all other purposes whatsoever. The Paying Agent/Registrar shall pay all principal of Bonds only to or upon the order of the respective owners, as shown in the Register as provided in this Ordinance, or their respective attorneys duly authorized in writing, and all such payments shall be valid and effective to fully satisfy and discharge the City s obligations with respect to payment of principal of, premium, if any, and interest on the Bonds to the extent of the sum or sums so paid. No person other than an owner shall receive a Bond evidencing the obligation of the City to make payments of amounts due pursuant to this Ordinance. (b) Payments and Notices to Cede & Co. Notwithstanding any other provision of this Ordinance to the contrary, as long as any Bonds are registered in the name of Cede & Co., as nominee of DTC, all payments with respect to principal of, premium, if any, and interest on the Bonds, and all notices with respect to such Bonds shall be made and given, respectively, in the manner provided in the representation letter of the City to DTC. (c) Successor Securities Depository; Transfer Outside Book-Entry Only System. In the event that the City or the Paying Agent/Registrar determines that DTC is incapable of discharging its responsibilities described herein and in the representation letter of the City to DTC, and that it is in the best interest of the beneficial owners of the Bonds that they be able to obtain certificated Bonds, the City or the Paying Agent/Registrar shall (a) appoint a successor securities depository, qualified to act as such under Section 17(a) of the Securities and Exchange Act of 1934, as amended, notify DTC of the appointment of such successor securities depository 8 CITY OF DICKINSON, TEXAS ORDINANCE NUMBER XXX-2009

214 and transfer one or more separate Bonds to such successor securities depository or (b) notify DTC of the availability through DTC of Bonds and transfer one or more separate Bonds to DTC Participants having Bonds credited to their DTC accounts. In such event, the Bonds shall no longer be restricted to being registered in the Register in the name of Cede & Co., as nominee of DTC, but may be registered in the name of the successor securities depository, or its nominee, or in whatever name or names Bondholders transferring or exchanging Bonds shall designate, in accordance with the provisions of this Ordinance. Section 3.10.: Replacement Bonds. Upon the presentation and surrender to the Paying Agent/Registrar of a damaged or mutilated Bond, the Paying Agent/Registrar shall authenticate and deliver in exchange therefor a replacement Bond, of the same maturity, interest rate and principal amount, bearing a number not contemporaneously outstanding. The City or the Paying Agent/Registrar may require the Registered Owner of such Bond to pay a sum sufficient to cover any tax or other governmental charge that may be imposed in connection therewith and any other expenses connected therewith, including the fees and expenses of the Paying Agent/Registrar and the City. If any Bond is lost, apparently destroyed or wrongfully taken, the City, pursuant to the applicable laws of the State of Texas and ordinances of the City, and in the absence of notice or knowledge that such Bond has been acquired by a bona fide purchaser, shall execute, and the Paying Agent/Registrar shall authenticate and deliver, a replacement Bond of the same maturity, interest rate and principal amount, bearing a number not contemporaneously outstanding, provided that the Registered Owner thereof shall have: (a) (b) (c) (d) furnished to the City and the Paying Agent/Registrar satisfactory evidence of the ownership of and the circumstances of the loss, destruction or theft of such Bond; furnished such security or indemnity as may be required by the Paying Agent/Registrar and the City to save and hold them harmless; paid all expenses and charges in connection therewith, including, but not limited to, printing costs, legal fees, fees of the Paying Agent/Registrar and any tax or other governmental charge that may be imposed; and met any other reasonable requirements of the City and the Paying Agent/Registrar. If, after the delivery of such replacement Bond, a bona fide purchaser of the original Bond in lieu of which such replacement Bond was issued presents for payment such original Bond, the City and the Paying Agent/Registrar shall be entitled to recover such replacement Bond from the person to whom it was delivered or any person taking therefrom, except a bona fide purchaser, and shall be entitled to recover upon the security or indemnity provided therefor to the extent of any loss, damage, cost or expense incurred by the City or the Paying Agent/Registrar in connection therewith. If any such mutilated, lost, apparently destroyed or wrongfully taken Bond has become or is about to become due and payable, the City in its discretion may, instead of issuing a replacement Bond, authorize the Paying Agent/Registrar to pay such Bond. 9 CITY OF DICKINSON, TEXAS ORDINANCE NUMBER XXX-2009

215 Each replacement Bond delivered in accordance with this Section shall be entitled to the benefits and security of this Ordinance to the same extent as the Bond or Bonds in lieu of which such replacement Bond is delivered. Section 3.11.: Cancellation. All Bonds paid in accordance with this Ordinance, and all Bonds in lieu of which exchange Bonds or replacement Bonds are authenticated and delivered in accordance herewith, shall be canceled and destroyed upon the making of proper records regarding such payment. The Paying Agent/Registrar shall periodically furnish the City with certificates of destruction of such Bonds. ARTICLE IV. FORM OF BONDS The Bonds, including the Form of Comptroller s Registration Certificate, Form of Paying Agent/Registrar Authentication Certificate and Form of Assignment, shall be in substantially the form shown in Exhibit A, with such omissions, insertions and variations as may be necessary or desirable and not prohibited by this Ordinance. ARTICLE V. SECURITY FOR THE BONDS Section 5.1.: Pledge and Levy of Taxes. (a) To provide for the payment of principal of and interest on the Bonds, there is hereby levied, within the limits prescribed by law, for the current year and each succeeding year thereafter, while the Bonds or any part of the principal thereof and the interest thereon remain outstanding and unpaid, an ad valorem tax upon all taxable property within the City sufficient to pay the interest on the Bonds and to create and provide a sinking fund of not less than 2% of the principal amount of the Bonds or not less than the principal payable out of such tax, whichever is greater, with full allowance being made for tax delinquencies and the costs of tax collection, and such taxes, when collected, shall be applied to the payment of principal of and interest on the Bonds by deposit to the Debt Service Fund and to no other purpose. (b) The City hereby declares its purpose and intent to provide and levy a tax legally sufficient to pay the principal of and interest on the Bonds, it having been determined that the existing and available taxing authority of the City for such purpose is adequate to permit a legally sufficient tax. As long as any Bonds remain outstanding, all moneys on deposit in, or credited to, the Debt Service Fund shall be secured by a pledge of security, as provided by law for cities in the State of Texas. (c) To pay the interest coming due on the Bonds prior to receipt of the taxes levied to pay such interest, there is hereby appropriated from current funds on hand, which are hereby certified to be on hand and available for such purpose, an amount sufficient to pay such interest, and such amount shall be used for no other purpose. 10 CITY OF DICKINSON, TEXAS ORDINANCE NUMBER XXX-2009

216 Section 5.2.: Debt Service Fund. The General Obligation Refunding Bonds, Series 2009 Debt Service Fund (the Debt Service Fund ) is hereby created as a special fund solely for the benefit of the Bonds. The City shall establish and maintain such fund at an official City depository and shall keep such fund separate and apart from all other funds and accounts of the City. Any amount on deposit in the Debt Service Fund shall be maintained by the City in trust for the Registered Owners of the Bonds. Such amount, plus any other amounts deposited by the City into such fund and any and all investment earnings on amounts on deposit in such fund, shall be used only to pay the principal of, premium, if any, and interest on the Bonds. Section 5.3.: Further Proceedings. After the Bonds to be initially issued have been executed, it shall be the duty of the Mayor to deliver the Bonds to be initially issued and all pertinent records and proceedings to the Attorney General for examination and approval. After the Bonds to be initially issued shall have been approved by the Attorney General, they shall be delivered to the Comptroller for registration. Upon registration of the Bonds to be initially issued, the Comptroller (or a deputy lawfully designated in writing to act for the Comptroller) shall manually sign the Comptroller s registration certificate prescribed herein to be affixed or attached to the Bonds to be initially issued, and the seal of said Comptroller shall be impressed, or placed in facsimile, thereon. ARTICLE VI. CONCERNING THE PAYING AGENT/REGISTRAR Section 6.1.: Acceptance. The Bank of New York Mellon Trust Company, National Association, Dallas, Texas, is hereby appointed as the initial Paying Agent/Registrar for the Bonds pursuant to the terms and provisions of the Paying Agent/Registrar Agreement by and between the City and the Paying Agent/Registrar. The Paying Agent/Registrar Agreement shall be substantially in the form attached hereto as Exhibit B, the terms and provisions of which are hereby approved, and the Mayor is hereby authorized to execute and deliver such Paying Agent/Registrar Agreement on behalf of the City in multiple counterparts and the City Secretary is hereby authorized to attest thereto and affix the City s seal. Such initial Paying Agent/Registrar and any successor Paying Agent/Registrar, by undertaking the performance of the duties of the Paying Agent/Registrar hereunder, and in consideration of the payment of any fees pursuant to the terms of any contract between the Paying Agent/Registrar and the City and/or the deposits of money pursuant to this Ordinance, shall be deemed to accept and agree to abide by the terms of this Ordinance. Section 6.2.: Trust Funds. All money transferred to the Paying Agent/Registrar in its capacity as Paying Agent/Registrar for the Bonds under this Ordinance (except any sums representing Paying Agent/Registrar s fees) shall be held in trust for the benefit of the City, shall be the property of the City and shall be disbursed in accordance with this Ordinance. Section 6.3.: Bonds Presented. Subject to the provisions of Section 6.4, all matured Bonds presented to the Paying Agent/Registrar for payment shall be paid without the necessity of further instructions from the City. Such Bonds shall be canceled as provided herein. 11 CITY OF DICKINSON, TEXAS ORDINANCE NUMBER XXX-2009

217 Section 6.4.: Unclaimed Funds Held by the Paying Agent/Registrar. Funds held by the Paying Agent/Registrar that represent principal of and interest on the Bonds remaining unclaimed by the Registered Owner thereof after the expiration of three years from the date such funds have become due and payable (a) shall be reported and disposed of by the Paying Agent/Registrar in accordance with the provisions of Title 6 of the Texas Property Code, as amended, to the extent such provisions are applicable to such funds, or (b) to the extent such provisions do not apply to the funds, such funds shall be paid by the Paying Agent/Registrar to the City upon receipt by the Paying Agent/Registrar of a written request therefor from the City. The Paying Agent/Registrar shall have no liability to the Registered Owners of the Bonds by virtue of actions taken in compliance with this Section. Section 6.5.: Paying Agent/Registrar May Own Bonds. The Paying Agent/Registrar in its individual or any other capacity, may become the owner or pledgee of Bonds with the same rights it would have if it were not the Paying Agent/Registrar. Section 6.6.: Successor Paying Agents/Registrars. The City covenants that at all times while any Bonds are Outstanding it will provide a legally qualified bank, trust company, financial institution or other agency to act as Paying Agent/Registrar for the Bonds. The City reserves the right to change the Paying Agent/Registrar for the Bonds on not less than sixty (60) days written notice to the Paying Agent/Registrar, as long as any such notice is effective not less than 60 days prior to the payment date for the Bonds. Promptly upon the appointment of any successor Paying Agent/Registrar, the previous Paying Agent/Registrar shall deliver the Register or a copy thereof to the new Paying Agent/Registrar, and the new Paying Agent/Registrar shall notify each Registered Owner, by United States mail, first class, postage prepaid, of such change and of the address of the new Paying Agent/Registrar. Each Paying Agent/Registrar hereunder, by acting in that capacity, shall be deemed to have agreed to the provisions of this Ordinance. ARTICLE VII. PROVISIONS CONCERNING SALE AND DELIVERY OF BONDS; Section 7.1.: Sale and Delivery of Bonds; Insurance. The sale of the Bonds is hereby awarded to SAMCO Capital Markets (the Purchaser ) at a price of the par value thereof, plus a net premium of $, less an underwriter s discount of $, plus accrued interest to their date of delivery, and delivery of the Bonds to the Purchaser shall be made upon payment therefor in accordance with the terms of sale and the terms and conditions of the Bond Purchase Agreement attached hereto as Exhibit C. It is officially found, determined and declared that the foregoing price and terms are the most advantageous reasonably obtainable by the City. Section 7.2.: Approval, Registration and Delivery. The Mayor is hereby authorized to have control and custody of the Bonds and all necessary records and proceedings pertaining thereto pending their delivery, and the Mayor and other officers and employees of the City are hereby authorized and directed to make such certifications and to execute such instruments as may be necessary to accomplish the delivery of the Bonds and to assure the investigation, 12 CITY OF DICKINSON, TEXAS ORDINANCE NUMBER XXX-2009

218 examination and approval thereof by the Attorney General and the registration of the initial Bonds by the Comptroller. Upon registration of the Bonds, the Comptroller (or the Comptroller s certificates clerk or an assistant certificates clerk lawfully designated in writing to act for the Comptroller) shall manually sign the Comptroller s Registration Certificates prescribed herein to be attached or affixed to each Certificates initially delivered and the seal of the Comptroller shall be impressed or printed or lithographed thereon. Section 7.3.: Offering Documents; Ratings. The City hereby approves, ratifies and confirms the form and contents of the Preliminary Official Statement, attached hereto as Exhibit D, and hereby approves the preparation of the final Official Statement, in substantially the form of the Preliminary Official Statement, with such revisions as are necessary to reflect the terms of the sale of the Bonds, and ratifies and approves the distribution of such Preliminary Official Statement and approves the distribution of the final Official Statement and any addenda, supplement or amendment thereto, in the offer and sale of the Bonds and in the reoffering of the Bonds by the Purchaser, with such changes therein or additions thereto as the officials executing same may deem advisable, such determination to be conclusively evidenced by their execution thereof. The Mayor is hereby authorized and directed to execute, and the City Secretary is hereby authorized and directed to attest, the final Official Statement. It is further hereby officially found, determined and declared that the statements and representations contained in the Preliminary Official Statement and final Official Statement are true and correct in all material respects, to the best knowledge and belief of the City Council, and that, as of the date thereof, the Preliminary Official Statement was an official statement of the City with respect to the Bonds that was deemed final by an authorized official of the City except for the omission of no more than the information permitted by subsection (b)(1) of Rule 15c2-12 of the Securities and Exchange Commission. Further, the City Council hereby ratifies, authorizes and approves the actions of the Mayor, the City s financial advisor and other consultants in seeking ratings on the Bonds from Standard & Poor s Ratings Group and such actions are hereby ratified and confirmed. Section 7.4.: Application of Proceeds of Bonds. (a) Proceeds from the sale of the Bonds shall, promptly upon receipt by the City, be applied as follows: (1) A portion of the proceeds shall be applied to pay expenses arising in connection with the issuance of the Bonds and the refunding of the Refunded Obligations; (2) The remaining proceeds shall be applied to (i) establish the Escrow Fund to refund the Refunded Obligations, as more fully provided below, and (ii) to the extent not otherwise paid, to pay all expenses arising in connection with the issuance of the Bonds, the establishment of the Escrow Fund and the refunding of the Refunded Obligations; and (3) Any proceeds from the sale of the Bonds remaining after making all the foregoing deposits and payments shall be deposited into the Debt Service Fund and used to pay debt service on the Bonds. 13 CITY OF DICKINSON, TEXAS ORDINANCE NUMBER XXX-2009

219 (b) From the existing debt service funds for the Refunded Obligations there shall be transferred to the Escrow Fund the amount of $ and to the Debt Service Fund $. Section 7.5.: Tax Exemption. The City intends that the interest on the Bonds shall be excludable from gross income of the owners thereof for federal income tax purposes pursuant to Sections 103 and 141 through 150 of the Internal Revenue Code of 1986, as amended, (the Code ) and all applicable temporary, proposed and final regulations (the Regulations ) and procedures promulgated thereunder and applicable to the Bonds. For this purpose, the City covenants that it will monitor and control the receipt, investment, expenditure and use of all gross proceeds of the Bonds (including all property, the acquisition, construction or improvement of which is to be financed directly or indirectly with the proceeds of the Bonds) and take or omit to take such other and further actions as may be required by Sections 103 and 141 through 150 of the Code and the Regulations to cause the interest on the Bonds to be and remain excludable from the gross income, as defined in Section 61 of the Code, of the owners of the Bonds for federal income tax purposes. Without limiting the generality of the foregoing, the City shall comply with each of the following covenants: (a) The City shall not use, permit the use of or omit to use Gross Proceeds or any other amounts (or any property the acquisition, construction or improvement of which is to be financed directly or indirectly with Gross Proceeds) in a manner which, if made or omitted, respectively, would cause the interest on any Bond to become includable in the gross income, as defined in section 61 of the Code, of the owner thereof for federal income tax purposes. Without limiting the generality of the foregoing, unless and until the City shall have received a written opinion of counsel nationally recognized in the field of municipal bond law to the effect that failure to comply with such covenant will not adversely affect the exemption from federal income tax of the interest on any Bond, the City shall comply with each of the specific covenants in this Section. (b) Except as permitted by section 141 of the Code and the regulations and rulings thereunder, the City shall, at all times prior to the last stated maturity of the Bonds, (1) exclusively own, operate, and possess all property the acquisition, construction, or improvement of which is to be financed directly or indirectly with Gross Proceeds of such series of the Bonds (including property financed with Gross Proceeds of the Refunded Bonds or notes or bonds refunded by the Refunded Bonds and not use or permit the use of such Gross Proceeds or any property acquired, constructed, or improved with such Gross Proceeds in any activity carried on by any person or entity other than a state or local government, unless such use is solely as a member of the general public, or (2) not directly or indirectly impose or accept any charge or other payment for use of Gross Proceeds of such series of the Bonds or any property the acquisition, construction or improvement of which is to be financed directly or indirectly with such Gross Proceeds (including property financed with Gross Proceeds of the Refunded Bonds or notes or bonds refunded by the Refunded Bonds other than taxes of general application and interest earned on investments acquired with such Gross Proceeds pending application for their intended purposes. 14 CITY OF DICKINSON, TEXAS ORDINANCE NUMBER XXX-2009

220 (c) Except to the extent permitted by section 141 of the Code and the regulations and rulings thereunder, the City shall not use Gross Proceeds of the Bonds to make or finance loans to any person or entity other than a state or local government. For purposes of the foregoing covenant, Gross Proceeds are considered to be loaned to a person or entity if (1) property acquired, constructed or improved with Gross Proceeds (including property financed with Gross Proceeds of the Refunded Bonds or notes or bonds refunded by the Refunded Bonds is sold or leased to such person or entity in a transaction which creates a debt for federal income tax purposes, (2) capacity in or service from such property is committed to such person or entity under a take-or-pay, output, or similar contract or arrangement, or (3) indirect benefits, or burdens and benefits of ownership, of such Gross Proceeds or such property are otherwise transferred in a transaction which is the economic equivalent of a loan. (d) Except to the extent permitted by section 148 of the Code and the regulations and rulings thereunder, the City shall not, at any time prior to the earlier of the final stated maturity or final payment of the Series 2004A Bonds, the Series 2004B Bonds, and, after the Conversion Date, the Series 2004C Bonds, directly or indirectly invest Gross Proceeds of such Bonds in any Investment (or use such Gross Proceeds to replace money so invested), if as a result of such investment the Yield of all Investments allocated to such Gross Proceeds whether then held or previously disposed of, exceeds the Yield on the Series 2004A Bonds, the Series 2004B Bonds, and, after the Conversion Date, the Series 2004C Bonds. (e) Based on all of the facts and estimates now known or reasonably expected to be in existence on the date the Bonds are delivered, the City reasonably expects that the proceeds of the Bonds and the Refunded Obligations (to the extent any of such proceeds remain unexpended) will not be used in a manner that would cause the Bonds or the Refunded Obligations or any portion thereof to be arbitrage bonds within the meaning of Section 148 of the Code. (f) At all times while the Bonds are outstanding, the City will identify and properly account for all amounts constituting gross proceeds of the Bonds in accordance with the Regulations. The City will monitor the yield on the investments of the proceeds of the Bonds and, to the extent required by the Code and the Regulations, will restrict the yield on such investments to a yield which is not materially higher than the yield on the Bonds. To the extent necessary to prevent the Bonds from constituting arbitrage bonds, the City will make such payments as are necessary to cause the yield on all yield-restricted nonpurpose investments allocable to the Bonds to be less than the yield that is materially higher than the yield on the Bonds; (g) Except to the extent permitted by Section 149(b) of the Code and the regulations and rulings thereunder, the City will not take any action or omit to take any action, if taken or omitted, would cause the Bonds to be treated as federally guaranteed obligations within the meaning of Section 149(b) of the Code and the regulations and rulings thereunder; (h) The City represents that not more than fifty percent (50%) of the proceeds of any new money portion of the Bonds or any new money issue refunded by, the Refunded Bonds was invested in nonpurpose investments (as defined in Section 148(f)(b)(A) of the Code) having a substantially guaranteed yield for four years or more within the meaning of Section 149(g)(3)(A)(ii) of the Code, and the City reasonably expects regarding the Bonds, and expected 15 CITY OF DICKINSON, TEXAS ORDINANCE NUMBER XXX-2009

221 on the Issue Date of the Refunded Bonds, that at least eighty-five percent (85%) of the Net Sale Proceeds (as defined in Section (b) of the Regulations) proceeds of the Refunded Bonds would be used to carry out the governmental purpose of the Refunded Bonds within the three years of the Issue Date of the such Bonds. (i) The City will take all necessary steps to comply with the requirement that certain amounts earned by the City on the investment of the gross proceeds of the Bonds, if any, be rebated to the federal government. Specifically, the City will (i) account for, and maintain records regarding, the receipt, expenditure and investment of the gross proceeds of the Bonds as may be required to calculate such excess arbitrage profits separately from records of amounts on deposit in the funds and accounts of the City allocable to other obligations of the City or moneys which do not represent gross proceeds of any obligations of the City and retain such records for at least six years after the date on which the last outstanding Bond is discharged or the Final Computation Date (as defined in Section of the Regulations), (ii) account for all gross proceeds under a reasonable, consistently applied method of accounting, not employed as an artifice or device to avoid, in whole or in part, the requirements of Section 148 of the Code, including any specified method of accounting required by applicable Regulations to be used for all or a portion of the gross proceeds, (iii) calculate, at such times as are required by applicable Regulations, the amount of excess arbitrage profits, if any, earned from the investment of the gross proceeds of the Bonds and (iv) timely pay, as required by applicable Regulations, all amounts required to be rebated to the federal government. In addition, the City will exercise reasonable diligence to assure that no errors are made in the calculations required by the preceding sentence and, if such an error is made, to discover and promptly correct such error within a reasonable amount of time after discovery thereof, including payment to the federal government of any delinquent amounts owed to it, including interest thereon and penalty. (j) Except to the extent permitted by Section 148 of the Code, and the regulations and rulings thereunder, the City will not indirectly pay any amount otherwise payable to the federal government pursuant to the foregoing requirements to any person other than the federal government by entering into any investment arrangement with respect to the gross proceeds of the Bonds that might result in a reduction in the amount required to be paid to the federal government because such arrangement results in smaller profit or a larger loss than would have resulted if such arrangement had been at arm s length and had the yield on the issue not been relevant to either party (k) The City will timely file or cause to be filed with the Secretary of the Treasury of the United States the information required by Section 149(e) of the Code with respect to the Bonds on such form and in such place as the Secretary may prescribe. (l) The City will not issue or use the Bonds as part of an abusive arbitrage device (as defined in Section (a) of the Regulations). Without limiting the foregoing, the Bonds are not and will not be a part of a transaction or series of transactions that attempts to circumvent the provisions of Section 148 of the Code and the Regulations, by (i) enabling the City to exploit the difference between tax-exempt and taxable interest rates to gain a material financial advantage, or (ii) increasing the burden on the market for tax-exempt obligations. 16 CITY OF DICKINSON, TEXAS ORDINANCE NUMBER XXX-2009

222 (m) Proper officers of the City charged with the responsibility for issuing the Bonds are hereby directed to make, execute and deliver certifications as to facts, estimates or circumstances in existence as of the Issue Date and stating whether there are facts, estimates or circumstances that would materially change the City s expectations. On or after the Issue Date, the City will take such actions as are necessary and appropriate to assure the continuous accuracy of the representations contained in such certificates. (n) The covenants and representations made or required by this Section are for the benefit of the Bond holders and any subsequent Bond holder, and may be relied upon by the Bondholder and any subsequent Bondholder and bond counsel to the City. In complying with the foregoing covenants, the City may rely upon an unqualified opinion issued to the City by nationally recognized bond counsel that any action by the City or reliance upon any interpretation of the Code or Regulations contained in such opinion will not adversely affect the excludability of interest on the Bonds from gross income for federal income tax purposes under existing law. Notwithstanding any other provision of this Ordinance, the City s representations and obligations under the covenants and provisions of this Section shall survive the defeasance and discharge of the Bonds for as long as such matters are relevant to the exclusion of interest on the Bonds from the gross income of the owners for federal income tax purposes. Section 7.6.: Escrow Agreement. The discharge and defeasance of the Refunded Obligations shall be effectuated pursuant to the terms and provisions of the Escrow Agreement to be entered into by and between the City and the Escrow Agent, which shall be substantially in the form attached hereto as Exhibit E, the terms and provisions of which are hereby approved, subject to such insertions, additions and modifications as shall be necessary (a) to carry out the program designed for the City by its financial advisor, (b) to comply with all applicable laws and regulations relating to the refunding of the Refunded Obligations, (c) to minimize the City s cost of refunding and (d) to carry out the other intents and purposes of this Ordinance, and the Mayor is hereby authorized to execute and deliver such Escrow Agreement on behalf of the City in multiple counterparts and the City Secretary is hereby authorized to attest thereto and affix the City s seal. Section 7.7.: Reserved. Section 7.8.: Related Matters. In order that the City shall satisfy in a timely manner all of its obligations under this Ordinance, the Mayor, City Secretary and all other appropriate officers, agents, representatives and employees of the City are hereby authorized and directed to take all other actions that are reasonably necessary to provide for the issuance and delivery of the Bonds, including, without limitation, executing and delivering on behalf of the City all certificates, consents, receipts, requests, notices, and other documents as may be reasonably necessary to satisfy the City s obligations under this Ordinance and to direct the transfer and application of funds of the City consistent with the provisions of this Ordinance. 17 CITY OF DICKINSON, TEXAS ORDINANCE NUMBER XXX-2009

223 ARTICLE VIII. CONTINUING DISCLOSURE UNDERTAKING Section 8.1.: Annual Reports. The City shall provide, upon request to any person or, at the option of the City, at least annually to any SID, financial information and operating data with respect to the City of the general type included in the final Official Statement authorized by Section 7.3 of this Ordinance, being the information described in Exhibit F hereto. The City shall update such information within six months after the end of each fiscal year. Any financial statements so to be provided shall be (1) prepared in accordance with the accounting principles described in Exhibit F hereto and (2) audited, if the City commissions an audit of such statements and the audit is completed within the period during which they must be provided. If audited financial statements are not so provided, then the City shall provide unaudited financial statements for the applicable fiscal year to any SID, and audited financial statements, when and if audited financial statements become available. If the City changes its fiscal year, it will notify any SID of the change (and of the date of the new fiscal year end) prior to the next date by which the City otherwise would be required to provide financial information and operating data pursuant to this Section. The financial information and operating data to be provided pursuant to this Section may be set forth in full in one or more documents or may be included by specific reference to any document (including an official statement or other offering document, if it is available from the MSRB) that theretofore has been provided to any SID or filed with the SEC. Section 8.2.: Material Event Notices. The City shall notify any SID and either each NRMSIR or the MSRB, in a timely manner, of any of the following events with respect to the Bonds, if such event is material within the meaning of the federal securities laws: (a) (b) (c) (d) (e) (f) (g) (h) (i) (j) Principal and interest payment delinquencies; Non-payment related defaults; Unscheduled draws on debt service reserves reflecting financial difficulties; Unscheduled draws on credit enhancements reflecting financial difficulties; Substitution of credit or liquidity providers, or their failure to perform; Adverse tax opinions or events affecting the tax-exempt status of the Bonds; Modifications to rights of holders of the Bonds; Bond calls; Defeasances; Release, substitution, or sale of property securing repayment of the Bonds; and 18 CITY OF DICKINSON, TEXAS ORDINANCE NUMBER XXX-2009

224 (k) Rating changes. The City shall notify any SID and either each NRMSIR or the MSRB, in a timely manner, of any failure by the City to provide financial information or operating data in accordance with Section 8.1 of this Ordinance by the time required by such Section. Section 8.3.: Limitations, Disclaimers and Amendments. The City shall be obligated to observe and perform the covenants specified in this Article for so long as, but only for so long as, the City remains an obligated person with respect to the Bonds within the meaning of the Rule, except that the City in any event will give the notice required by Section 8.2 of any Bond calls and defeasance that cause the City to be no longer such an obligated person. The provisions of this Article are for the sole benefit of the holders and beneficial owners of the Bonds, and nothing in this Article, express or implied, shall give any benefit or any legal or equitable right, remedy, or claim hereunder to any other person. The City undertakes to provide only the financial information, operating data, financial statements, and notices which it has expressly agreed to provide pursuant to this Article and does not hereby undertake to provide any other information that may be relevant or material to a complete presentation of the City s financial results, condition, or prospects or hereby undertake to update any information provided in accordance with this Article or otherwise, except as expressly provided herein. The City does not make any representation or warranty concerning such information or its usefulness to a decision to invest in or sell Bonds at any future date. UNDER NO CIRCUMSTANCES SHALL THE CITY BE LIABLE TO THE HOLDER OR BENEFICIAL OWNER OF ANY BOND OR ANY OTHER PERSON, IN CONTRACT OR TORT, FOR DAMAGES RESULTING IN WHOLE OR IN PART FROM ANY BREACH BY THE CITY, WHETHER NEGLIGENT OR WITHOUT FAULT ON ITS PART, OF ANY COVENANT SPECIFIED IN THIS ARTICLE, BUT EVERY RIGHT AND REMEDY OF ANY SUCH PERSON, IN CONTRACT OR TORT, FOR OR ON ACCOUNT OF ANY SUCH BREACH SHALL BE LIMITED TO AN ACTION FOR MANDAMUS OR SPECIFIC PERFORMANCE. No default by the City in observing or performing its obligations under this Article shall constitute a breach of or default under the Ordinance for purposes of any other provision of this Ordinance. Nothing in this Article is intended or shall act to disclaim, waive, or otherwise limit the duties of the City under federal and state securities laws. The provisions of this Article may be amended by the City from time to time to adapt the changed circumstances that arise from a change in legal requirements, a change in law, or a change in the identity, nature, status, or type of operations of the City, but only if (1) the provisions of this Article, as so amended, would have permitted an underwriter to purchase or sell the Bonds in the primary offering of the Bonds in compliance with the Rule, taking into account any amendments or interpretations of the Rule to the date of such amendment, as well as such changed circumstances, and (2) either (a) the holders of a majority in aggregate principal 19 CITY OF DICKINSON, TEXAS ORDINANCE NUMBER XXX-2009

225 amount (or any greater amount required by any other provision of this Ordinance that authorizes such an amendment) of the Outstanding Bonds consent to such amendment or (b) a person that is unaffiliated with the City (such as nationally recognized bond counsel) determines that such amendment will not materially impair the interests of the holder and beneficial owners of the Bonds. If the City so amends the provisions of this Article, it shall include with any amended financial information or operating data next provided in accordance with Section 8.1 an explanation, in narrative form, of the reasons for the amendment and of the impact of any change in the type of financial information or operating data so provided. The City may also amend or repeal the provisions of this Article if the SEC amends or repeals the applicable provisions of the Rule or a court of final jurisdiction enters judgment that such provisions of the Rule are invalid, and the City also may amend the provisions of this Article in its discretion in any other manner or circumstance, but in either case only if and to the extent that the provisions of this sentence would not have prevented an underwriter from lawfully purchasing or selling Bonds in the primary offering of the Bonds, giving effect to (a) such provisions as so amended and (b) any amendments or interpretations of the Rule. Section 8.4.: Availability of Information on and after July 1, NOTWITHSTANDING ANYTHING IN THIS ARTICLE VIII TO THE CONTRARY, ON AND AFTER JULY 1, 2009, THE CITY SHALL BE OBLIGATED TO PROVIDE THE INFORMATION DESCRIBED IN THIS ARTICLE VIII ONLY TO THE MSRB VIA EMMA. Section 8.5.: Definitions. As used in this Article, the following terms have the meanings ascribed to such terms below: EMMA means the electronic municipal market access system of the MSRB. MSRB means the Municipal Securities Rulemaking Board. NRMSIR means each person whom the SEC or its staff has determined to be a nationally recognized municipal securities information repository within the meaning of the Rule from time to time. Rule means SEC Rule 15c2-12, as amended from time to time. SEC means the United States Securities and Exchange Commission. SID means any person designated by the State of Texas or an authorized department, officer, or agency thereof as, and determined by the SEC or its staff to be, a state information depository within the meaning of the Rule from time to time. ARTICLE IX. MISCELLANEOUS Section 9.1.: Defeasance. The City may defease the provisions of this Ordinance and discharge its obligations to the Registered Owners of any or all of the Bonds to pay the principal of and interest thereon in any manner now or hereafter permitted by law, including by 20 CITY OF DICKINSON, TEXAS ORDINANCE NUMBER XXX-2009

226 depositing with the Paying Agent/Registrar, a trust company or commercial bank other than the Paying Agent/Registrar, or with the Comptroller of Public Accounts of the State of Texas either: (a) (b) cash in an amount equal to the principal amount of such Bonds plus interest thereon to the date of maturity or earlier redemption; or pursuant to an escrow or trust agreement, cash and/or (i) direct noncallable obligations of United States of America, including obligations that are unconditionally guaranteed by the United States of America; (ii) noncallable obligations of an agency or instrumentality of the United States, including obligations that are unconditionally guaranteed or insured by the agency or instrumentality and that are rated as to investment quality by a nationally recognized investment rating firm not less than AAA or its equivalent; or (iii) noncallable obligations of a state or an agency or a county, municipality, or other political subdivision of a state that have been refunded and that are rated as to investment quality by a nationally recognized investment rating firm not less than AAA or its equivalent, which, in the case of (i), (ii) or (iii), may be in book-entry form, and the principal of and interest on which will, when due or redeemable at the option of the holder, without further investment or reinvestment of either the principal amount thereof or the interest earnings thereon, provide money in an amount which, together with other moneys, if any, held in such escrow at the same time and available for such purpose, shall be sufficient to provide for the timely payment of the principal of and interest thereon to the date of maturity or earlier redemption; provided, however, that if any of the Bonds are to be redeemed prior to their respective dates of maturity, provision shall have been made for giving notice of redemption as provided in this Ordinance. Upon such deposit, such Bonds shall no longer be regarded to be Outstanding or unpaid. Any surplus amounts not required to accomplish such defeasance shall be returned to the City. Section 9.2.: Legal Holidays. In any case where the date interest accrues and becomes payable on the Bonds or principal of the Bonds matures or a Record Date shall be in the City a Saturday, Sunday, legal holiday or a day on which banking institutions are authorized by law to close, then payment of interest or principal need not be made on such date, or the Record Date shall not occur on such date, but payment may be made or the Record Date shall occur on the next succeeding day which is not in the City a Saturday, Sunday, legal holiday or a day on which banking institutions are authorized by law to close with the same force and effect as if (i) made on the date of maturity and no interest shall accrue for the period from the date of maturity to the date of actual payment or (ii) the Record Date had occurred on the last day of that calendar month. Section 9.3.: No Recourse Against City Officials. No recourse shall be had for the payment of principal of or interest on any Bonds or for any claim based thereon or on this Ordinance against any official of the City or any person executing any Bonds. 21 CITY OF DICKINSON, TEXAS ORDINANCE NUMBER XXX-2009

227 Section 9.4.: Further Proceedings. The Mayor, City Secretary and other appropriate officials of the City are hereby authorized and directed to do any and all things necessary and/or convenient to carry out the terms of this Ordinance. The Mayor, City Secretary and other appropriate officials of the City are each hereby authorized to execute, attest and impress the City s seal to such other agreements, assignments, bonds, certificates, contracts, documents, licenses, instruments, releases, financing statements, letters of instruction, notices of acceptance, notices of final payment, written requests and other documents, and to take all actions and to do all things whether or not mentioned herein, as may be necessary or convenient to carry out or assist in carrying out the purposes of this Ordinance and the Bonds. Section 9.5.: Severability. If any Section, paragraph, clause or provision of this Ordinance shall for any reason be held to be invalid or unenforceable, the invalidity or unenforceability of such Section, paragraph, clause or provision shall not affect any of the remaining provisions of this Ordinance. Section 9.6.: Open Meeting. It is hereby found, determined and declared that a sufficient written notice of the date, hour, place and subject of the meeting of the City Council at which this Ordinance was adopted was posted at a place convenient and readily accessible at all times to the general public at City Hall 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 Ordinance 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. Section 9.7.: Repealer. All orders, resolutions and ordinances, or parts thereof, inconsistent herewith are hereby repealed to the extent of such inconsistency. Section 9.8.: Effective Date. This Ordinance shall be in force and effect from and after its passage on the date shown below. Section 9.9.: Power to Revise Form of Documents. Notwithstanding any other provision of this Ordinance, the Mayor, City Secretary and other appropriate officials of the City are each hereby authorized to make or approve such revisions, additions, deletions and variations in the form of the documents attached hereto as exhibits as, in the judgment of the Mayor, City Secretary and other appropriate officials of the City, and in the opinion of Bond Counsel to the City, as may be necessary or convenient to carry out or assist in carrying out the purposes of this Ordinance, the Preliminary Official Statement, and the final Official Statement; provided, however, that any changes to such documents resulting in substantive amendments to the terms and conditions of the Bonds or such documents shall be subject to the prior approval of the City Council. Section 9.10.: Ordinance a Contract - Amendments. This Ordinance shall constitute a contract with the Registered Owners from time to time, be binding on the City, and shall not be amended or repealed by the City so long as any Bond remains Outstanding except as permitted in this Section. The City may, without the consent of or notice to any Registered Owners, from time to time and at any time, amend this Ordinance in any manner not detrimental to the interests of 22 CITY OF DICKINSON, TEXAS ORDINANCE NUMBER XXX-2009

228 the Registered Owners, including the curing of any ambiguity, inconsistency, or formal defect or omission herein. In addition, the City may, with the consent of Registered Owners who own in the aggregate 51 % of the principal amount of the Bond then Outstanding, amend, add to, or rescind any of the provisions of this Ordinance; provided that, without the consent of all Registered Owners of Outstanding Bonds, no such amendment, addition, or rescission shall (i) extend the time or times of payment of the principal of and interest on the Bonds, reduce the principal amount thereof or the rate of interest thereon, or in any other way modify the terms of payment of the principal of or interest on the Bonds, (ii) give any preference to any Bond over any other Bond, or (iii) reduce the aggregate principal amount of Bonds required to be held by Registered Owners for consent to any such amendment, addition, or rescission. 23 CITY OF DICKINSON, TEXAS ORDINANCE NUMBER XXX-2009

229 PASSED AND APPROVED March 24, Julie Masters, Mayor City of Dickinson, Texas Carol L. McLemore, City Secretary City of Dickinson, Texas (SEAL) Schedule I Refunded Obligations Exhibit A Form of Bond Exhibit B Form of Paying Agent/Registrar Agreement Exhibit C Bond Purchase Agreement Exhibit D Preliminary Official Statement Exhibit E Escrow Agreement Exhibit F Description of Annual Financial Information S-1 CITY OF DICKINSON, TEXAS ORDINANCE NUMBER XXX-2009

230 ATTEST: APPROVED AS TO LEGALITY: Carol L. McLemore, City Secretary City of Dickinson, Texas Loren B. Smith, City Attorney City of Dickinson, Texas S-2 CITY OF DICKINSON, TEXAS ORDINANCE NUMBER XXX-2009

231 SCHEDULE I REFUNDED OBLIGATIONS Combination Tax and Revenue Certificates of Obligations, Series 2000 Maturity Date Interest Rate Par Amount Call Date Price 03/01/ % $150,000 04/24/ % 03/01/ ,000 04/24/ /01/ ,000 04/24/ /01/ ,000 04/24/ /01/ ,000 04/24/ /01/ ,000 04/24/ /01/ ,000 04/24/ /01/ ,000 04/24/ /01/ ,000 04/24/ /01/ ,000 04/24/ /01/ ,000 04/24/ Schedule I 1 CITY OF DICKINSON, TEXAS ORDINANCE NUMBER XXX-2009

232 EXHIBIT A FORM OF BOND [FRONT OF BOND] UNITED STATES OF AMERICA STATE OF TEXAS CITY OF DICKINSON, TEXAS, GENERAL OBLIGATION REFUNDING BOND SERIES 2009 NUMBER PRINCIPAL AMOUNT R- 1 $ REGISTERED REGISTERED INTEREST RATE 2 : DATED DATE: MATURITY DATE 2 : CUSIP 2 : % April 1, 2009 March 1, REGISTERED OWNER: PRINCIPAL AMOUNT: DOLLARS THE CITY OF DICKINSON, TEXAS, a home rule municipality of the State of Texas (the City ), for value received, hereby promises to pay to the Registered Owner identified above or its registered assigns, on the maturity date specified above (or on earlier redemption as herein provided), upon presentation and surrender of this Bond at the principal corporate trust office of The Bank of New York Mellon Trust Company, National Association, Dallas, Texas, or its successor (the Paying Agent/Registrar ), the principal amount identified above, payable in any coin or currency of the United States of America which on the date of payment of such principal is legal tender for the payment of debts due to the United States of America, and to pay interest thereon at the rate shown above, calculated on a basis of a 360-day year composed of twelve 30-day months, from the later of the Dated Date identified above or the most recent interest payment date to which interest has been paid or duly provided for. 3 Interest on this Bond is 1 Initial Bond shall be numbered T-1. 2 Omitted from initial Bond. 3 The first sentence of the initial Certificate shall read as follows: THE CITY OF DICKINSON, TEXAS, a home rule municipality of the State of Texas (the City ), for value received, hereby promises to pay to the Registered Owner identified above or its registered assigns, on March 1 of each of the years and in the principal amounts set forth in the following schedule: [Insert information regarding years of maturity, principal amounts and interest rates from Section 3.3 of the Ordinance.] (or on earlier redemption as herein provided), upon presentation and surrender of this Bond at the principal corporate trust office of The Bank of New York Mellon Trust Company, National A-1 CITY OF DICKINSON, TEXAS ORDINANCE NUMBER XXX-2009

233 payable on September 1, 2009, and each March 1 and September 1 thereafter until maturity of this Bond, by check sent by United States mail, first class, postage prepaid, by the Paying Agent/Registrar to the Registered Owner of record as of the close of business on the last business day of the month next preceding the applicable interest payment date, as shown on the registration books kept by the Paying Agent/Registrar. Any accrued interest payable at maturity shall be paid upon presentation and surrender of this Bond at the office of the Paying Agent/Registrar. REFERENCE IS HEREBY MADE TO THE FURTHER PROVISIONS OF THIS BOND SET FORTH ON THE REVERSE HEREOF, WHICH PROVISIONS SHALL HAVE THE SAME FORCE AND EFFECT AS IF SET FORTH AT THIS PLACE. 4 IN WITNESS WHEREOF, the City has caused its corporate seal to be impressed or placed in facsimile hereon and this Bond to be signed by the Mayor, countersigned by the City Secretary by their manual, lithographed or printed facsimile signatures. CITY OF DICKINSON, TEXAS Mayor (SEAL) COUNTERSIGNED: City Secretary * * * [REVERSE OF BOND] THIS BOND IS ONE OF A DULY AUTHORIZED SERIES OF BONDS (the Bonds ) in the aggregate principal amount of $2,370,000 issued pursuant to an ordinance adopted by the Association, or its successor (the Paying Agent/Registrar ), the principal amounts identified above (or so much thereof as shall not have been paid or deemed to have been paid upon prior redemption) payable in any coin or currency of the United States of America which on the date of payment of such principal is legal tender for the payment of debts due to the United States of America, and to pay interest thereon at the rate shown above, calculated on a basis of a 360-day year composed of twelve 30-day months, from the later of the Dated Date identified above or the most recent interest payment date to which interest has been paid or duly provided for. 4 This paragraph shall be omitted from the initial Bond and any other Bond for which text does not appear on the back of a printed certificate. A-2 CITY OF DICKINSON, TEXAS ORDINANCE NUMBER XXX-2009

234 City Council of the City on March 24, 2009 (the Ordinance ) for the purpose of refunding certain outstanding obligations (the Refunded Obligations ) of the City under and pursuant to the authority of Chapter 1207, Texas Government Code, as amended. Proceeds of the Bonds will also be used to pay the costs of issuing the Bonds and refunding the Refunded Obligations. THIS BOND shall not be valid or obligatory for any purpose or be entitled to any benefit under the Ordinance unless this Bond is authenticated by the Paying Agent/Registrar by due execution of the authentication certificate endorsed hereon. 5 THE CITY RESERVES THE RIGHT, at its option, to redeem, prior to their maturity, Bonds maturing on or after March 1, 2020, in whole or in part, on March 1, 2019, or any date thereafter, at par plus accrued interest to the date fixed for redemption. BONDS MATURING ON March 1, 20 (the "Term Bonds") are subject to mandatory sinking fund redemption in the following amounts (subject to reduction as hereinafter provided), on the following dates, in each case at a redemption price equal to the principal amount of the Bonds or the portions thereof so called for redemption plus accrued interest to the date fixed for redemption: TERM BONDS MATURING MARCH 1, 20 Mandatory Redemption Date (March 1) Principal Amount Redemption Price 100% THE PARTICULAR TERM BONDS to be redeemed shall be selected by the Registrar by lot or other customary random selection method, on or before January 15 of each year in which Term Bonds are to be mandatorily redeemed. The principal amount of Term Bonds to be mandatorily redeemed in each year shall be reduced by the principal amount of such Term Bonds that have been optionally redeemed on or before January 15 of such year and which have not been made the basis for a previous reduction. 5 In the initial Certificate, this paragraph shall read: THIS BOND shall not be valid or obligatory for any purpose or be entitled to any benefit under the Ordinance unless this Bond is registered by the Comptroller of Public Accounts of the State of Texas by due execution of the registration certificate endorsed hereon. A-3 CITY OF DICKINSON, TEXAS ORDINANCE NUMBER XXX-2009

235 THE BONDS MAY BE REDEEMED IN PART only in integral multiples of $5,000. If a Bond subject to redemption is in a denomination larger than $5,000, a portion of such Bond may be redeemed, but only in integral multiples of $5,000. In selecting portions of Bonds for redemption, each Bond shall be treated as representing that number of Bonds of $5,000 denomination which is obtained by dividing the principal amount of such Bond by $5,000. Upon surrender of any Bond for redemption in part, the Paying Agent/Registrar, in accordance with the provisions of the Ordinance, shall authenticate and deliver in exchange therefor a Bond or Bonds of like maturity and interest rate in an aggregate principal amount equal to the unredeemed portion of the Bond so surrendered. NOTICE OF ANY SUCH REDEMPTION, identifying the Bonds or portions thereof to be redeemed, shall be sent by United States mail, first class, postage prepaid, to the Registered Owners thereof at their addresses as shown on the books of registration kept by the Paying Agent/Registrar, not less than thirty (30) days before the date fixed for such redemption. By the date fixed for redemption, due provision shall be made with the Paying Agent/Registrar for the payment of the redemption price of the Bonds called for redemption. If such notice of redemption is given, and if due provision for such payment is made, all as provided above, the Bonds which are to be so redeemed thereby automatically shall be redeemed prior to their scheduled maturities, they shall not bear interest after the date fixed for redemption, and they shall not be regarded as being outstanding except for the purpose of being paid with the funds so provided for such payment. THIS BOND IS TRANSFERABLE only upon presentation and surrender at the principal corporate trust office of the Paying Agent/Registrar, accompanied by an assignment duly executed by the Registered Owner or its authorized representative, subject to the terms and conditions of the Ordinance. THIS BOND IS EXCHANGEABLE at the principal corporate trust office of the Paying Agent/Registrar for a Bond or Bonds of the same maturity and interest rate and in the principal amount of $5,000 or any integral multiple thereof, subject to the terms and conditions of the Ordinance. THE CITY OR PAYING AGENT/REGISTRAR may require the Registered Owner of any Bond to pay a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with the transfer or exchange of a Bond. Any fee or charge of the Paying Agent/Registrar for a transfer or exchange shall be paid by the City. THE REGISTERED OWNER of this Bond by acceptance hereof, acknowledges and agrees to be bound by all the terms and conditions of the Ordinance. IT IS HEREBY DECLARED AND REPRESENTED that this Bond has been duly and validly issued and delivered; that all acts, conditions and things required or proper to be performed, exist and to be done precedent to or in the issuance and delivery of this Bond have been performed, exist and have been done in accordance with law; that the Bonds do not exceed any constitutional or statutory limitation; and that annual ad valorem taxes sufficient to provide for the payment of the interest on and principal of this Bond, as such interest comes due and such A-4 CITY OF DICKINSON, TEXAS ORDINANCE NUMBER XXX-2009

236 principal matures, have been levied and ordered to be levied, within the limits prescribed by law, against all taxable property in the City and have been irrevocably pledged for such payment. REFERENCE IS HEREBY MADE TO THE ORDINANCE, a copy of which is filed with the Paying Agent/Registrar, for the full provisions thereof, to all of which the Registered Owners of the Bonds assent by acceptance of the Bonds. * * * FORM OF COMPTROLLER S REGISTRATION CERTIFICATE The following form of Comptroller s Registration Certificate shall be attached or affixed to each of the Bonds initially delivered: OFFICE OF THE COMPTROLLER OF PUBLIC ACCOUNTS REGISTER NO. THE STATE OF TEXAS I hereby certify that this Bond has been examined, certified as to validity and approved by the Attorney General of the State of Texas, and that this Bond has been registered by the Comptroller of Public Accounts of the State of Texas. WITNESS MY SIGNATURE AND SEAL OF OFFICE this. (SEAL) Comptroller of Public Accounts of the State of Texas * * * A-5 CITY OF DICKINSON, TEXAS ORDINANCE NUMBER XXX-2009

237 FORM OF PAYING AGENT/REGISTRAR S AUTHENTICATION CERTIFICATE The following form of authentication certificate shall be printed on the face of each of the Bonds other than those initially delivered: AUTHENTICATION CERTIFICATE This Bond is one of the Bonds described in and delivered pursuant to the withinmentioned Ordinance; and, except for the Bonds initially delivered, this Bond has been issued in exchange for or replacement of a Bond, Bonds, or a portion of a Bond or Bonds of an issue which originally was approved by the Attorney General of the State of Texas and registered by the Comptroller of Public Accounts of the State of Texas. as Paying Agent/Registrar By: Authorized Signature: Date of Authentication: * * * A-6 CITY OF DICKINSON, TEXAS ORDINANCE NUMBER XXX-2009

238 FORM OF ASSIGNMENT The following form of assignment shall be printed on the back of each of the Bonds: ASSIGNMENT For value received, the undersigned hereby sells, assigns and transfers unto (Please print or type name, address and zip code of Transferee) (Please insert Social Security or Taxpayer Identification Number of Transferee) the within Bond and all rights thereunder, and hereby irrevocably constitutes and appoints attorney to transfer the within Bond on the books kept for registration thereof, with full power of substitution in the premises. DATED: Signature Guaranteed: Registered Owner NOTICE: Signature must be guaranteed by a member firm of the New York Stock Exchange or a commercial bank or trust company. NOTICE: The signature above must correspond to the name of the registered owner as shown on the face of this Bond in every particular, without any alteration, enlargement or change whatsoever. A-7 CITY OF DICKINSON, TEXAS ORDINANCE NUMBER XXX-2009

239 EXHIBIT B FORM OF PAYING AGENT/REGISTRAR AGREEMENT CITY OF DICKINSON, TEXAS ORDINANCE NUMBER XXX-2009

240 PAYING AGENT/REGISTRAR AGREEMENT THIS PAYING AGENT/REGISTRAR AGREEMENT dated as of March 1, 2009 (together with any amendments or supplements hereto, the Agreement ), is entered into by and between the City of Dickinson, Texas (the Issuer ), and The Bank of New York Mellon Trust Company, National Association, as paying agent/registrar (together with any successor in such capacity, the Bank ). WITNESSETH: WHEREAS, the Issuer has duly authorized and provided for the issuance of a series of certificates of obligation entitled City of Dickinson, Texas, Certificates of Obligation, Series 2009 (the Certificates ), issued as fully registered Certificates, and a series of bonds entitled City of Dickinson, Texas, General Obligation Refunding Bonds, Series 2009 (the Bonds and, together with the Certificates, the Obligations ), issued as fully registered Bonds; WHEREAS, all things necessary to make the Obligations the valid obligations of the Issuer, in accordance with their terms, will be done upon the issuance and delivery thereof; WHEREAS, the Issuer and the Bank wish to provide the terms under which the Bank will act as Paying Agent to pay the principal of and interest on the Obligations, in accordance with the terms thereof, and under which the Bank will act as Registrar for the Obligations; and WHEREAS, the Issuer and the Bank have duly authorized the execution and delivery of this Agreement; and all things necessary to make this Agreement the valid agreement of the parties, in accordance with its terms, have been done. NOW, THEREFORE, it is mutually agreed as follows: Section Appointment. ARTICLE ONE APPOINTMENT OF BANK AS PAYING AGENT AND REGISTRAR The Issuer hereby appoints the Bank to act as Paying Agent with respect to the Obligations, to pay to the Registered Owners of the Obligations, in accordance with the terms and provisions of this Agreement and the ordinances authorizing the issuance of the Obligations (the Ordinances ), the principal of and interest on all or any of the Obligations. The Issuer hereby appoints the Bank as Registrar with respect to the Obligations. As Registrar for the Obligations, the Bank shall keep and maintain for and on behalf of the Issuer books and records as to the ownership of said Obligations and with respect to the transfer and exchange thereof as provided herein and in the Ordinances. The Bank hereby accepts its appointment, and agrees to act as Paying Agent and Registrar with respect to the Obligations. HOU:

241 Section Compensation. As compensation for the Bank's services as Paying Agent/Registrar, the Issuer hereby agrees to pay the Bank the fees and amounts set forth in Schedule A attached hereto. In addition, the Issuer agrees to reimburse the Bank upon its request for all reasonable expenses, disbursements and advances incurred or made by the Bank in accordance with any of the provisions hereof (including the reasonable compensation and the expenses and disbursements of its agents and counsel). Section Definitions. ARTICLE TWO DEFINITIONS For all purposes of this Agreement, except as otherwise expressly provided or unless the context otherwise requires: Bank means The Bank of New York Mellon Trust Company, National Association, and its successors and assigns. Bond or Bonds means any one or all of the City of Dickinson, Texas, General Obligation Refunding Bonds, Series 2009, authorized by the Bond Ordinance. Bond Ordinance means the ordinance of the Issuer approved by its governing body on March 24, 2009, pursuant to which the Bonds are issued. Certificate or Certificates means any one or all of the City of Dickinson, Texas, Certificates of Obligation, Series 2009 authorized by the Certificate Ordinance. Certificate Ordinance means the ordinance of the Issuer approved by its governing body on March 24, 2009, pursuant to which the Certificates are issued. Issuer means the City of Dickinson, Texas. Ordinances means, together, the Certificate Ordinance and the Bond Ordinance. Paying Agent means the Bank when it is performing the function of paying agent. Person means any individual, corporation, partnership, joint venture, associations, joint stock company, trust, unincorporated organization or government or any agency or political subdivision of a government or any entity whatsoever. Registered Owner means the Person in whose name any Obligation is registered in the books of registration maintained by the Bank under this Agreement. Registrar means the Bank when it is performing the function of registrar. HOU:

242 All other capitalized terms shall have the meanings assigned to them in the Ordinances or the recital paragraphs of this Agreement. ARTICLE THREE DUTIES OF THE BANK Section Initial Delivery of the Obligations. The Obligations will be initially registered and delivered by the Bank to the purchaser designated by the Issuer as set forth in the Ordinances. If such purchaser delivers a written request to the Bank not later than five business days prior to the date of initial delivery, the Bank will, on the date of initial delivery, exchange the Obligations initially delivered for Obligations of authorized denominations, registered in accordance with the instructions in such request and the Ordinances. Section Duties of Paying Agent. As Paying Agent, the Bank shall, provided adequate funds have been provided to it for such purpose by or on behalf of the Issuer, timely pay on behalf of the Issuer the principal of and interest on each Obligation in accordance with the provisions of the Ordinances. Since the issue will be Depository Trust Company (DTC) eligible, the Paying Agent shall comply with all eligibility requirements as outlined and agreed upon in the eligibility questionnaire. Section Duties of Registrar. The Bank shall provide for the proper registration of the Obligations and the timely exchange, replacement and registration of transfer of the Obligations in accordance with the provisions of the Ordinances. Any changes to Registered Owners for such exchange, replacement and registration shall be made by the Bank only in accordance with the Ordinances. The Bank will maintain the books of registration in accordance with the Bank's general practices and procedures in effect from time to time; provided, however, that the Bank agrees to comply with the terms of , , and of the Texas Government Code, as amended. Section Unauthenticated Obligations. The Issuer shall provide an adequate inventory of unauthenticated Obligations to facilitate transfers. The Bank covenants that it will maintain such unauthenticated Obligations in safekeeping and will use reasonable care in maintaining such Obligations in safekeeping, which shall be not less than the care it maintains for debt securities of other government entities or corporations for which it serves as registrar, or which it maintains for its own bonds. HOU:

243 Section Reports. Upon request of the Issuer, the Bank will provide to the Issuer reports, which will describe in reasonable detail all transactions pertaining to the Obligations and the books of registration for the period of time specified by the Issuer. The Issuer may also inspect and make copies of the information in the books of registration and such other documents related to the Obligations and in the Bank's possession at any time the Bank is customarily open for business, provided that reasonable time is allowed the Bank to provide an up-to-date listing or to convert the information into written form. The Bank will not release or disclose the content of the books of registration to any person other than to, or at the written request of, an authorized officer or employee of the Issuer, except upon receipt of a subpoena, court order or as otherwise required by law. Upon receipt of a subpoena, court order or other lawful request, the Bank will notify the Issuer immediately so that the Issuer may contest the subpoena, court order or other request if it so chooses. Section Canceled Obligations. All Obligations surrendered for payment, redemption, transfer, exchange or replacement, if surrendered to the Bank, shall be promptly cancelled by it and, if surrendered to the Issuer, shall be delivered to the Bank and, if not already cancelled, shall be promptly cancelled by the Bank. The Issuer may at any time deliver to the Bank for cancellation any Obligations previously authenticated and delivered which the Issuer may have acquired in any manner whatsoever. The Obligations shall be treated in accordance with the Bank s retention policy. Section Reliance on Documents, Etc. (a) The Bank may conclusively rely, as to the truth of the statements and correctness of the opinions expressed therein, on certificates or opinions furnished to the Bank by the Issuer. (b) The Bank shall not be liable to the Issuer for actions taken under this Agreement as long as it acts in good faith and exercises due diligence, reasonableness and care, as prescribed by law, with regard to its duties hereunder. (c) This Agreement is not intended to require the Bank to expend its own funds for performance of any of its duties hereunder. (d) The Bank may exercise any of the powers hereunder and perform any duties hereunder either directly or by or through agents or attorneys. Section Money Held by Bank. Money held by the Bank hereunder shall be held in trust for the benefit of the Registered Owners of the Obligations and the Bank shall have a fiduciary responsibility as to such funds. The Bank shall be under no obligation to pay interest on any money received by it hereunder. HOU:

244 All money deposited with the Bank hereunder shall be secured in the manner and to the fullest extent required by law for the security of funds of the Issuer. Any money deposited with the Bank for the payment of the principal of or interest on any Obligations and remaining unclaimed by the Registered Owner after the expiration of three years from the date such funds have become due and payable shall be reported and disposed of by the Bank in accordance with the provisions of Texas law including, to the extent applicable, Title 6 of the Texas Property Code, as amended. To the extent such provisions of the Property Code do not apply to the funds, such funds shall be paid by the Bank to the Issuer upon receipt of a written request therefor from the Issuer. The Bank shall have no liability to the Registered Owners of the Obligations by virtue of actions taken in compliance with the foregoing provision. Section 3.09 Transfer of Funds at Closing The Bank is authorized to transfer funds relating to the closing and initial delivery of the Obligations in the manner described in the closing memorandum or letter approved by the City, as prepared by the City s financial advisor or other agent. The Bank may act on a facsimile transmission of the closing memorandum or letter to be followed by an original of the closing memorandum or letter signed by the financial advisor or the City. Section May Own Obligations. ARTICLE FOUR MISCELLANEOUS PROVISIONS The Bank, in its individual or any other capacity, may become the owner or pledgee of Obligations with the same rights it would have if it were not the Paying Agent and Registrar for the Obligations. Section Amendment. This Agreement may be amended only by an agreement in writing signed by both of the parties hereof. Section Assignment. This Agreement may not be assigned by either party without the prior written consent of the other. Section Notices. Any request, demand, authorization, direction, notice, consent, waiver or other document provided or permitted hereby to be given or furnished to the Issuer or the Bank shall be mailed or delivered to the Issuer or the Bank, respectively, at the addresses shown herein, or such other address as may have been given by one party to the other by 15 days' written notice. HOU:

245 Section Effect of Headings. The Article and Section headings herein are for convenience only and shall not affect the construction hereof. Section Successors and Assigns. All covenants and agreements herein by the Issuer and the Bank shall bind their successors and assigns, whether so expressed or not. This Agreement shall not be assigned by the Bank without the prior written consent of the Issuer. Any company into which the Bank may be merged or converted or with which it may be consolidated or any company resulting from any merger, conversion or consolidation to which it shall be a party or any company to which the Bank may sell or transfer all or substantially all of its corporate trust business, provided such company shall be a national banking association or a bank or trust company duly organized under the laws of any state of the United States and shall be authorized by law to perform all the duties imposed upon it by this Agreement shall be the successor to the Bank without the execution or filing of any paper or the performance of any further act. In case any Obligation shall have been registered, but not delivered, by the Bank then in office, any successor by merger, conversion, or consolidation to such authenticating Bank may adopt such registration and deliver the Obligation so registered with the same effect as if such successor Bank had itself registered such Obligations. Section Severability. If any provision of this Agreement shall be invalid or unenforceable, the validity and enforceability of the remaining provisions hereof shall not in any way be affected or impaired. Section Benefits of Agreement. Nothing herein, express or implied, shall give to any Person, other than the parties hereto and their successors hereunder, any benefit or any legal or equitable right, remedy or claim hereunder. Section Ordinances Govern Conflicts. This Agreement and the Ordinances constitute the entire agreement between the parties hereto relative to the Bank acting as Paying Agent and Registrar and if any conflict exists between this Agreement and the Ordinances, the Ordinances shall govern. The Bank agrees to be bound by the terms of the Ordinances with respect to the Obligations. Section Term and Termination. This Agreement shall be effective from and after its date and may be terminated for any reason by the Issuer or the Bank at any time upon 60 days' written notice; provided, however, that no such termination shall be effective until a successor has been appointed and has accepted the duties of the Bank hereunder. In the event of early termination, regardless of circumstances, the Bank shall deliver to the Issuer or its designee all funds, Obligations and all books and HOU:

246 records pertaining to the Bank's role as Paying Agent and Registrar with respect to the Obligations, including, but not limited to, the books of registration. Section Governing Law. This Agreement shall be construed in accordance with and shall be governed by the laws of the State of Texas. Section Interpleader. The Issuer and the Bank agree that the Bank may seek adjudication of any adverse claim, demand, or controversy over its person as well as funds on deposit hereunder, in either the District Court of Harris County, Texas or the United States Federal District Court for the Southern District of Texas, waive personal service of any process, and agree that service of process by certified or registered mail, return receipt requested, to the address set forth herein shall constitute adequate service. The Issuer and the Bank further agree that the Bank has the right to file a Bill of Interpleader in any Texas court of competent jurisdiction, at the expense of the Issuer, to determine the rights of any person claiming any interest hereunder. HOU:

247 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. CITY OF DICKINSON, TEXAS By: Julie Masters, Mayor ATTEST: ADDRESS: 2716 FM 517 East Dickinson, Texas Carol L. McLemore, City Secretary (SEAL) S-1 HOU:

248 THE BANK OF NEW YORK MELLON TRUST COMPANY, NATIONAL ASSOCIATION By: Title: ADDRESS: Attention: 2001 Bryan Street, 8th Floor Dallas, Texas Global Corporate Trust Department S-2 HOU:

249 HOU: SCHEDULE A

250 EXHIBIT C BOND PURCHASE AGREEMENT C-1 CITY OF DICKINSON, TEXAS ORDINANCE NUMBER XXX-2009

251 BOND PURCHASE AGREEMENT CITY OF DICKINSON, TEXAS GENERAL OBLIGATION REFUNDING BONDS, SERIES 2009 March 24, 2009 The Honorable Mayor and Members of the City Council City of Dickinson 2716 FM 517 East Dickinson, Texas Ladies and Gentlemen: SAMCO Capital Markets, Inc.(the "Underwriter") acting on its own behalf and not acting as a fiduciary or agent for you, offers to enter into the following agreement (the or this "Agreement") with the City of Dickinson, Texas (the "Issuer") which, upon the Issuer's written acceptance of this offer, will be binding upon the Issuer and upon the Underwriter. This offer is made subject to the Issuer's written acceptance hereof on or before 10:00 P.M., Central Time, on March 24, 2009, and, if not so accepted, will be subject to withdrawal by the Underwriter upon written notice delivered to the Issuer at any time prior to the acceptance hereof by the Issuer. Terms not otherwise defined in this Agreement shall have the same meanings set forth in the Bond Ordinance (as defined herein) or in the Official Statement (as defined herein). 1. Purchase and Sale of the Bonds. Subject to the terms and conditions and in reliance upon the representations, warranties and agreements set forth herein, the Underwriter hereby agrees to purchase from the Issuer, and the Issuer hereby agrees to sell and deliver to the Underwriter, all, but not less than all, of the Issuer's General Obligation Refunding Bonds, Series 2009 (the "Bonds"). Inasmuch as this purchase and sale represents a negotiated transaction, the Issuer understands, and hereby confirms, that the Underwriter is not acting as a fiduciary of the Issuer, but rather is acting solely in its capacity as Underwriter for its own account. The principal amount of the Bonds to be issued, the dated date therefor, the maturities, optional redemption provisions and interest rates per annum are set forth in Schedule I hereto. The Bonds shall be as described in, and shall be issued and secured under and pursuant to the provisions of the ordinance authorizing the issuance and sale of the Bonds adopted by the City Council of the Issuer on March 24, 2009 (the "Bond Ordinance"). The purchase price for the Bonds shall be $ (representing the par amount of the Bonds, plus an original issue premium of $ on the Bonds, less an underwriting discount of $ plus accrued interest on the Bonds from the dated date of the Bonds to the date of the Closing (as hereinafter defined) in the amount of $ ). Delivered to the Issuer herewith as a good faith deposit is a check from the Underwriter payable to the order of the Issuer in clearing house funds in the amount of $ (the "Check"). In the event the Issuer accepts this Agreement, the Check shall be held uncashed by the Issuer until 1

252 the time of Closing, at which time the Check shall be returned uncashed to the Underwriter. In the event that the Issuer does not accept this Agreement, the Check will be immediately returned to the Underwriter. Should the Issuer fail to deliver the Bonds at the Closing, or should the Issuer be unable to satisfy the conditions of the obligations of the Underwriter to purchase, accept delivery of and pay for the Bonds, as set forth in this Agreement (unless waived by the Underwriter), or should such obligations of the Underwriter be terminated for any reason permitted by this Agreement, the Check shall immediately be returned to the Underwriter. In the event that the Underwriter fails (other than for a reason permitted hereunder) to purchase, accept delivery of and pay for the Bonds at the Closing as herein provided, the Check shall be cashed and the amount thereof retained by the Issuer as and for fully liquidated damages for such failure of the Underwriter and, except as set forth in Sections 8 and 10 hereof, no party shall have any further rights against the other hereunder. The Underwriter and the Issuer understand that in such event the Issuer's actual damages may be greater or may be less than such amount. Accordingly, the Underwriter hereby waives any right to claim that the Issuer's actual damages are less than such amount, and the Issuer's acceptance of this Agreement shall constitute a waiver of any right the Issuer may have to additional damages from the Underwriter. The Underwriter hereby agrees not to stop or cause payment on the Check to be stopped unless the Issuer has breached any of the terms of this Agreement or unless an event of termination has occurred as set forth in Section 7 hereof. 2. Public Offering. The Underwriter agrees to make a bona fide public offering of all of the Bonds at a price not to exceed the public offering price set forth on the cover of the Official Statement and may subsequently change such offering price without any requirement of prior notice. The Underwriter may offer and sell Bonds to certain dealers (including dealers depositing Bonds into investment trusts) and others at prices lower than the public offering price set forth on the cover of the Official Statement, provided that on or before the Closing, the Underwriter shall execute and deliver to Bond Counsel an Issue Price Certificate prepared by Bond Counsel. 3. The Official Statement. (a) The Bonds have been offered pursuant to the Preliminary Official Statement dated March 17, 2009, including the cover page and Appendices thereto, of the Issuer relating to the Bonds (the "Preliminary Official Statement"). The Preliminary Official Statement, as amended to reflect the information indicated on Schedule I hereto, and as it may otherwise be amended or supplemented in accordance with this Agreement is hereinafter called the "Official Statement." (b) The Preliminary Official Statement has been prepared for use by the Underwriter in connection with the public offering, sale and distribution (including in an electronic format) of the Bonds. The Issuer hereby represents and warrants that the Preliminary Official Statement was deemed final by the Issuer as of its date, except for the omission of such information which is dependent upon the final pricing of the Bonds for completion, all as permitted to be excluded by Section (b)(1) of Rule 15c2-12 under the Securities Exchange Act of 1934 (the "Rule"). (c) The Issuer hereby authorizes the Official Statement and the information therein contained to be used by the Underwriter in connection with the public offering and 2

253 the sale of the Bonds. The Issuer consents to the use by the Underwriter prior to the date hereof of the Preliminary Official Statement in connection with the public offering of the Bonds. The Issuer shall provide, or cause to be provided, to the Underwriter as soon as practicable after the date of the Issuer's acceptance of this Agreement (but, in any event, not later than within seven business days after the Issuer's acceptance of this Agreement and in sufficient time to accompany any confirmation that requests payment from any customer) copies of the Official Statement which is complete as of the date of its delivery to the Underwriter in such quantity as the Underwriter shall reasonably request in order for the Underwriter to comply with Section (b)(4) of the Rule and the rules of the Municipal Securities Rulemaking Board. The Issuer hereby confirms that it does not object to the distribution of the Official Statement, in its final form, in electronic form. (d) If, after the date of this Agreement to and including the date the Underwriter is no longer required to provide an Official Statement to potential customers who request the same pursuant to the Rule (the earlier of (i) 90 days from the "end of the underwriting period" (as defined in the Rule) and (ii) the time when the Official Statement is available to any person from a nationally recognized municipal securities information repository, but in no case less than 25 days after the "end of the underwriting period" for the Bonds), the Issuer becomes aware of any fact or event which might or would cause the Official Statement, as then supplemented or amended, to contain any untrue statement of a material fact or to omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading, or if it is necessary to amend or supplement the Official Statement to comply with law, the Issuer will notify the Underwriter (and for the purposes of this clause provide the Underwriter with such information as it may from time to time reasonably request), and if, in the reasonable opinion of the Underwriter, such fact or event requires preparation and publication of a supplement or amendment to the Official Statement, the Issuer will prepare and furnish, at the Issuer's own expense (in a form and manner approved by the Underwriter), a reasonable number of copies of either amendments or supplements to the Official Statement so that the statements in the Official Statement as so amended and supplemented will not contain any 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 not misleading. If such notification shall be subsequent to the Closing, the Issuer shall furnish such legal opinions, certificates, instruments and other documents as the Underwriter may deem reasonably necessary to evidence the truth and accuracy of such supplement or amendment to the Official Statement. (e) The Underwriter hereby agrees to promptly file the Official Statement with a nationally recognized municipal securities information repository. Unless otherwise notified in writing by the Underwriter, the Issuer can assume that the "end of the underwriting period" for purposes of the Rule is the date of the Closing. 4. Representations, Warranties, and Covenants of the Issuer. The Issuer hereby represents and warrants to and covenants with the Underwriter that: (a) The Issuer is a home rule municipality and a body corporate and politic of the State of Texas (the "State") duly created, organized and existing under the laws of the State 3

254 and its home rule charter, and has full legal right, power and authority under Chapter 1331, Texas Government Code, as amended (the "Act"), and at the date of the Closing will have full legal right, power and authority under the Act and the Bond Ordinance (i) to enter into, execute and deliver this Agreement, the Bond Ordinance, which shall contain the Undertaking as defined in Section 6(i)(3) hereof, and all documents required hereunder and thereunder to be executed and delivered by the Issuer (this Agreement, the Escrow Agreement and the Bond Ordinance are hereinafter referred to as the "Issuer Documents"), (ii) to sell, issue and deliver the Bonds to the Underwriter as provided herein, and (iii) to carry out and consummate the transactions described in the Issuer Documents and the Official Statement, and the Issuer has complied, and will at the Closing be in compliance in all respects, with the terms of the Act and the Issuer Documents as they pertain to such transactions; (b) By all necessary official action of the Issuer prior to or concurrently with the acceptance hereof, the Issuer has duly authorized all necessary action to be taken by it for (i) the adoption of the Bond Ordinance and the issuance and sale of the Bonds, (ii) the approval, execution and delivery of, and the performance by the Issuer of the obligations on its part, contained in the Bonds and the Issuer Documents and (iii) the consummation by it of all other transactions described in the Official Statement and the Issuer Documents and any and all such other agreements and documents as may be required to be executed, delivered and/or received by the Issuer in order to carry out, give effect to, and consummate the transactions described herein and in the Official Statement; (c) The Bonds, when issued, delivered and paid for, in accordance with the Issuer Documents, will constitute legal, valid and binding obligations of the Issuer entitled to the benefits of the Bond Ordinance and will be enforceable in accordance with their terms, subject to sovereign immunity and bankruptcy, insolvency, reorganization, moratorium and other similar laws and principles of equity relating to or affecting the enforcement of creditors' rights; upon the issuance, authentication and delivery of the Bonds as aforesaid, the Bonds will be payable from an annual ad valorem tax levied against all taxable property in the Issuer, within the limits prescribed by law, as set forth in the Bond Ordinance; (d) The Issuer is not in material breach of or default in any material respect under any applicable constitutional provision, law or administrative regulation of the State or the United States, or any applicable judgment or decree, relating to the issuance of such Bonds or any loan agreement, indenture, bond, note, resolution, agreement or other instrument to which the Issuer is a party or to which the Issuer is or any of its property or assets are otherwise subject, and no event has occurred and is continuing which constitutes or with the passage of time or the giving of notice, or both, would constitute a default or event of default by the Issuer under any of the foregoing; and the execution and delivery of the Bonds and the Issuer Documents and the adoption of the Bond Ordinance and compliance with the provisions on the Issuer's part contained therein will not conflict with or constitute a material breach of or default under any constitutional provision, any administrative regulation relating to the issuance of the Bonds, or any judgment, decree, loan agreement, indenture, bond, note, resolution, agreement or other instrument to which the Issuer is a party or to which the Issuer is or to which any of its property or assets are otherwise subject; 4

255 (e) All authorizations, approvals, licenses, permits, consents and orders of any governmental authority, legislative body, board, agency or commission having jurisdiction of the matter which are required for the due authorization of, which would constitute a condition precedent to, or the absence of which would materially adversely affect the due performance by the Issuer of its obligations under the Issuer Documents and the Bonds have been duly obtained, except for such approvals, consents and orders as may be required under the Blue Sky or securities laws of any jurisdiction in connection with the offering and sale of the Bonds and the approval by the Office of the Attorney General of the State (the "Attorney General") and registration of the Bonds by the Office of the Comptroller of the State (the "Comptroller"), and the Issuer shall timely cause a transcript of proceedings to be filed with the Attorney General in form and substance consistent with the administrative rules of the Public Finance Division of the Attorney General, which will permit the review of such transcript and the approval of the Bonds by the Attorney General, and the registration of the Bonds by the Comptroller on or before the Closing Date, as required by Section 6(i)(9) hereof, but subject to the discretion of the Attorney General with respect to the issuance of his approving opinion; (f) The Bonds and the Bond Ordinance conform to the descriptions thereof contained in the Official Statement under the caption "THE OBLIGATIONS"; the proceeds of the sale of the Bonds will be applied generally as described in the Official Statement under the caption "THE OBLIGATIONS B Uses of Proceeds"; and the Undertaking conforms to the description thereof contained in the Official Statement under the caption "CONTINUING DISCLOSURE OF INFORMATION"; (g) Except as otherwise set forth in the Official Statement, there is no litigation, action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court, government agency, public board or body, pending or, to the best knowledge of the Issuer, threatened against the Issuer, affecting the existence of the Issuer or the titles of its officers to their respective offices, or affecting or seeking to prohibit, restrain or enjoin the sale, issuance or delivery of the Bonds or the collection of ad valorem taxes for the payment of principal of and interest on the Bonds pursuant to the Bond Ordinance or in any way contesting or affecting the validity or enforceability of the Bonds, the Issuer Documents, or contesting the exclusion from gross income of interest on the Bonds for federal income tax purposes, or contesting in any way the completeness or accuracy of the Preliminary Official Statement or the Official Statement or any supplement or amendment thereto, or contesting the powers of the Issuer or any authority for the issuance of the Bonds, the adoption of the Bond Ordinance or the execution and delivery of the Issuer Documents, nor, to the best knowledge of the Issuer is there any basis therefor, wherein an unfavorable decision, ruling or finding would materially adversely affect the validity or enforceability of the Bonds or the Issuer Documents; (h) As of the date thereof, the Preliminary Official Statement did not contain any 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; provided that for the purpose of this Agreement and any 5

256 certificate delivered by the Issuer in accordance herewith, the Issuer makes no representations with respect to the descriptions in the Preliminary Official Statement or the Official Statement of The Depository Trust Company, New York, New York, or its bookentry-only system; (i) At the time of the Issuer's acceptance hereof and (unless the Official Statement is amended or supplemented pursuant to Section 3(d) of this Agreement) at all times subsequent thereto during the period up to and including the date of Closing, the Official Statement does not and will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; (j) If the Official Statement is supplemented or amended pursuant to Section 3(d) of this Agreement, at the time of each supplement or amendment thereto and (unless subsequently again supplemented or amended pursuant to such paragraph) at all times subsequent thereto during the period up to and including the date of Closing the Official Statement as so supplemented or amended will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which made, not misleading; (k) The Issuer will apply, or cause to be applied, the proceeds from the sale of the Bonds as provided in and subject to all of the terms and provisions of the Bond Ordinance and will not take or omit to take any action which action or omission will adversely affect the exclusion from gross income for federal income tax purposes of the interest on the Bonds; (l) The Issuer will furnish such information and execute such instruments and take such action in cooperation with the Underwriter as the Underwriter may reasonably request (A) to (y) qualify the Bonds for offer and sale under the Blue Sky or other securities laws and regulations of such states and other jurisdictions in the United States as the Underwriter may designate and (z) determine the eligibility of the Bonds for investment under the laws of such states and other jurisdictions and (B) to continue such qualifications in effect so long as required for the distribution of the Bonds (provided, however, that such actions shall be at no expense to the Issuer and the Issuer will not be required to qualify as a foreign corporation or to file any general or special consents to service of process under the laws of any jurisdiction) and will advise the Underwriter immediately of receipt by the Issuer of any notification with respect to the suspension of the qualification of the Bonds for sale in any jurisdiction or the initiation or threat of any proceeding for that purpose; (m) The financial statements of, and other financial information regarding, the Issuer in the Official Statement fairly present the financial position and results of the Issuer as of the dates and for the periods therein set forth. Except as may otherwise be described in the Official Statement, the Issuer is not a party to any litigation or other proceeding pending or, to its knowledge, threatened which, if decided adversely to the Issuer, would have a materially adverse effect on the financial condition of the Issuer; 6

257 (n) Prior to the Closing the Issuer will not offer or issue any bonds, notes or other obligations for borrowed money without the prior approval of the Underwriter, which approval shall not be unreasonably withheld; (o) Any certificate, signed by any official of the Issuer authorized to do so in connection with the transactions described in this Agreement, shall be deemed a representation and warranty by the Issuer to the Underwriter as to the statements made therein; and (p) To the best knowledge and belief of the Issuer, the Official Statement contains information, including financial information or operating data, as required by the Rule. Except as may otherwise be disclosed in the Official Statement, the Issuer has complied in all material respects with any undertaking specified in the Rule within the last five years. 5. Closing. (a) At 10:00 A.M. Central Time, on April 23, 2009, or at such other time and date as shall have been mutually agreed upon by the Issuer and the Underwriter (the "Closing"), the Issuer will, subject to the terms and conditions hereof, deliver the Bonds to the Underwriter, duly executed and authenticated, together with the other documents hereinafter mentioned, and the Underwriter will, subject to the terms and conditions hereof, accept such delivery and pay the purchase price of the Bonds as set forth in Section 1 of this Agreement in immediately available funds payable to the order of the Issuer. Payment for the Bonds shall be made at the offices of the Paying Agent/Registrar for the Bonds, or such other place as shall have been mutually agreed upon by the Issuer and the Underwriter. The initial Bonds shall be registered in the name of the Underwriter. (b) Delivery of the Bonds shall be made through The Depository Trust Company, New York, New York, utilizing the book-entry-only form of issuance. The definitive Bonds shall be delivered in definitive fully registered form, bearing CUSIP numbers without coupons, with one Bond for each maturity of the Bonds, registered in the name of Cede & Co., all as provided in the Bond Ordinance, and shall be made available to the Underwriter at least one business day before the Closing for purposes of inspection at the offices of DTC or, if the Bonds are to be held in safekeeping for DTC by the Paying Agent/Registrar pursuant to DTC's FAST system, at the designated payment office of the Paying Agent/Registrar. In addition, the Issuer and the Underwriter agree that there shall be a preliminary Closing held at the offices of Bond Counsel commencing at least 24 hours prior to the Closing; provided, however, that such preliminary Closing shall not be required if Bond Counsel provides a complete Transcript of Proceedings relating to the Bonds to the counsel for the Underwriter at least 24 hours prior to the Closing. 6. Closing Conditions. The Underwriter has entered into this Agreement in reliance upon the representations, warranties and agreements of the Issuer contained herein, and in reliance upon the representations, warranties and agreements to be contained in the documents and 7

258 instruments to be delivered at the Closing and upon the performance by the Issuer of its obligations hereunder, both as of the date hereof and as of the date of the Closing. Accordingly, the Underwriter's obligations under this Agreement to purchase, to accept delivery of and to pay for the Bonds shall be conditioned upon the performance by the Issuer of its obligations to be performed hereunder and under such documents and instruments at or prior to the Closing, and shall also be subject to the following additional conditions, including the delivery by the Issuer of such documents as are enumerated herein, in form and substance reasonably satisfactory to the Underwriter: (a) The representations and warranties of the Issuer contained herein shall be true, complete and correct in all material respects on the date hereof and on and as of the date of the Closing, as if made on the date of the Closing; (b) The Issuer shall have performed and complied with all agreements and conditions required by this Agreement to be performed or complied with by it prior to or at the Closing; (c) At the time of the Closing, (i) the Issuer Documents and the Bonds shall be in full force and effect, and shall not have been amended, modified or supplemented, and the Official Statement shall not have been supplemented or amended, except in any such case as may have been agreed to by the Underwriter; and (ii) all actions of the Issuer required to be taken by the Issuer shall be performed in order for Bond Counsel and other counsel to deliver their respective opinions referred to hereafter; (d) At or prior to the Closing, the Bond Ordinance shall have been duly approved by the governing body of the Issuer in accordance with law and the Issuer shall have duly executed and delivered and the paying/agent registrar shall have duly authenticated the Bonds; (e) [Reserved]; (f) At the time of the Closing, there shall not have occurred any change in the condition, financial or otherwise, or in the revenues or operations of the Issuer, from that set forth in the Official Statement that in the reasonable judgment of the Underwriter, is material and adverse and that makes it, in the reasonable judgment of the Underwriter, impracticable to market the Bonds on the terms and in the manner described in the Official Statement; (g) The Issuer shall not have failed to pay principal or interest when due on any of its outstanding obligations for borrowed money; (h) All steps to be taken and all instruments and other documents to be executed, and all other legal matters in connection with the transactions described in this Agreement shall be reasonably satisfactory in legal form and effect to the Underwriter; (i) At or prior to the Closing, the Underwriter shall have received one copy of each of the following documents: 8

259 (1) The Official Statement, and each supplement or amendment thereto, if any, executed on behalf of the Issuer by the Mayor and City Secretary, or such other officials as may have been agreed to by the Underwriter, or a conformed copy thereof, and the reports and audits referred to or appearing in the Official Statement; (2) A copy of each of the executed Issuer Documents; (3) The Bond Ordinance shall include a continuing disclosure undertaking of the Issuer which satisfies the requirements of section (d)(2) of the Rule (the "Undertaking"), with such supplements or amendments as may have been agreed to by the Underwriter; (4) The approving opinion of Bond Counsel with respect to the Bonds, in substantially the form and substance attached to the Official Statement as Appendix C; (5) a supplemental opinion of Bond Counsel, addressed to the Issuer and the Underwriter, which provides that the Underwriter may rely upon the opinion of Bond Counsel delivered in accordance with the provisions of paragraph 6(i)(4) hereof, and opining to the effect that: (i) the Bonds are exempted securities within the meaning of Section 3(a)(2) of the Securities Act of 1933, as amended (the "1933 Act"), and the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"), and it is not necessary, in connection with the offering and sale of the Bonds, to register the Bonds under the 1933 Act or to qualify the Bond Ordinance under the Trust Indenture Act; and (ii) such firm has reviewed the statements and information contained in the Official Statement under the captions and subcaptions ATHE OBLIGATIONS@ (except for the information under the subcaptions ABOOK-ENTRY-ONLY SYSTEM@ and AUSE OF PROCEEDS@), ATAX EXEMPTION,@ ATAX TREATMENT OF ORIGINAL ISSUE DISCOUNT AND PREMIUM OBLIGATIONS,@ AQUALIFIED TAX-EXEMPT OBLIGATIONS,@ ACONTINUING DISCLOSURE OF INFORMATION@ (except for the subcaption ACOMPLIANCE WITH PRIOR UNDERTAKINGS@), AOTHER INFORMATION - REGISTRATION AND QUALIFICATION OF OBLIGATIONS FOR SALE,@ AOTHER INFORMATION - LEGAL INVESTMENTS AND ELIGIBILITY TO SECURE PUBLIC FUNDS IN TEXAS,@ and AOTHER INFORMATION B LEGAL MATTERS@ (except for the last sentence of the first paragraph thereof),@and such firm is of the opinion that the information relating to the Bonds and the Bond Ordinance contained under such captions is a fair and accurate summary of the information purported to be shown and that the information and descriptions contained under such captions relating to the 9

260 provisions of applicable state and federal laws are correct as to matters of law; (6) An opinion of McCall, Parkhurst & Horton L.L.P., as counsel for the Underwriter, dated the date of the Closing, addressed to the Underwriter, substantially in the form attached hereto as Exhibit A; (7) A certificate, dated the date of Closing, of the Mayor and the City Administrator of the Issuer to the effect that (i) the representations and warranties of the Issuer contained herein are true and correct in all material respects on and as of the date of Closing as if made on the date of Closing; (ii) except as described in the Official Statement, no litigation or proceeding or tax challenge against the Issuer is pending or, to their knowledge, threatened in any court or administrative body nor, to their knowledge, is there a basis for litigation which would (a) contest the right of the members or officials of the Issuer to hold and exercise their respective positions, (b) contest the due organization and valid existence of the Issuer, (c) contest the validity, due authorization and execution of the Bonds or the Issuer Documents, (d) attempt to limit, enjoin or otherwise restrict or prevent the Issuer from functioning and collecting ad valorem tax revenues, including payments on the Bonds, pursuant to the Bond Ordinance, or the levy, assessment or collection of the ad valorem taxes for the payment of the principal of and interest on the Bonds, or (e) contest the accuracy, completeness or the fairness of the Preliminary Official Statement or the Official Statement; (iii) the Bond Ordinance, which authorized the execution, delivery and/or performance of the Official Statement, the Bonds and the other Issuer Documents, has been duly adopted by the Issuer, is in full force and effect and has not been modified, amended or repealed, (iv) to the best of their knowledge, no event affecting the Issuer has occurred since the date of the Official Statement which should be disclosed in the Official Statement for the purpose for which it is to be used or which it is necessary to disclose therein in order to make the statements and information therein, in light of the circumstances under which made, not misleading in any respect as of the time of Closing, and the information contained in the Official Statement is correct in all material respects and, as of the date of the Official Statement did not, and as of the date of the Closing does not, contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements made therein, in the light of the circumstances under which they were made, not misleading, and (v) there has not been any materially adverse change in the financial condition of the Issuer since September 30, 2007, the latest date as of which audited financial information is available; (8) A certificate of the Issuer in form and substance satisfactory to Bond Counsel and counsel to the Underwriter setting forth the facts, estimates and circumstances in existence on the date of the Closing, which establish that it is not expected that the proceeds of the Bonds will be used in a manner that would cause the Bonds to be "arbitrage bonds" within the meaning of Section 148 of the Internal 10

261 Revenue Code of 1986, as amended (the "Code"), and any applicable regulations (whether final, temporary or proposed), issued pursuant to the Code; (9) The approving opinion of the Attorney General and the registration certificate of the Comptroller in respect of the Bonds; (10) Evidence satisfactory to the Underwriter that the Bonds have been rated "A+" by Standard & Poor's, a Division of The McGraw-Hill Companies, Inc. ("S&P"), and that all such ratings are in effect as of the date of Closing; and (11) Such additional legal opinions, certificates, instruments and other documents as the Underwriter or counsel to the Underwriter may reasonably request to evidence the truth and accuracy, as of the date hereof and as of the date of the Closing, of the Issuer's representations and warranties contained herein and of the statements and information contained in the Official Statement and the due performance or satisfaction by the Issuer on or prior to the date of the Closing of all the respective agreements then to be performed and conditions then to be satisfied by the Issuer. All of the opinions, letters, certificates, instruments and other documents mentioned above or elsewhere in this Agreement shall be deemed to be in compliance with the provisions hereof if, but only if, they are in form and substance reasonably satisfactory to the Underwriter. If the Issuer shall be unable to satisfy the conditions to the obligations of the Underwriter to purchase, to accept delivery of and to pay for the Bonds contained in this Agreement, or if the obligations of the Underwriter to purchase, to accept delivery of and to pay for the Bonds shall be terminated for any reason permitted by this Agreement, this Agreement shall terminate and neither the Underwriter nor the Issuer shall be under any further obligation hereunder, except that the representations, warranties and obligations of the Issuer and the Underwriter set forth in Sections 4 and 8 hereof shall continue in full force and effect and the Check shall be returned to the Underwriter. 7. Termination. The Underwriter shall have the right to cancel its obligation to purchase the Bonds if, between the date of this Agreement and the Closing, the market price or marketability of the Bonds shall be materially adversely affected, in the reasonable judgment of the Underwriter, by the occurrence of any of the following: (a) legislation shall be enacted by or introduced in the Congress of the United States or recommended to the Congress for passage by the President of the United States, or the Treasury Department of the United States or the Internal Revenue Service or any member of the Congress or favorably reported for passage to either House of the Congress by any committee of such House to which such legislation has been referred for consideration, a decision by a court of the United States or of the State or the United States Tax Court shall be rendered, or an order, ruling, regulation (final, temporary or proposed), press release, statement or other form of notice by or on behalf of the Treasury Department 11

262 of the United States, the Internal Revenue Service or other governmental agency shall be made or proposed, the effect of any or all of which would be to impose, directly or indirectly, federal income taxation upon interest received on obligations of the general character of the Bonds as described in the Official Statement, or other action or events shall have transpired which may have the purpose or effect, directly or indirectly, of changing the federal income tax consequences of any of the transactions described herein; (b) legislation introduced in or enacted (or resolution passed) by the Congress or an order, decree, or injunction issued by any court of competent jurisdiction, or an order, ruling, regulation (final, temporary, or proposed), press release or other form of notice issued or made by or on behalf of the Securities and Exchange Commission, or any other governmental agency having jurisdiction of the subject matter, to the effect that obligations of the general character of the Bonds, including any or all underlying arrangements, are not exempt from registration under or other requirements of the 1933 Act, or that the Bond Ordinance is not exempt from qualification under or other requirements of the Trust Indenture Act, or that the issuance, offering, or sale of obligations of the general character of the Bonds, including any or all underlying arrangements, as described herein or in the Official Statement or otherwise, is or would be in violation of the federal securities law as amended and then in effect; (c) any state blue sky or securities commission or other governmental agency or body in any jurisdiction in which more than ten percent (10%) of the Bonds have been offered and sold shall have withheld registration, exemption or clearance of the offering of the Bonds as described herein, or issued a stop order or similar ruling relating thereto; (d) a general suspension of trading in securities on the New York Stock Exchange or the American Stock Exchange, the establishment of material restrictions (not in force as of the date hereof) upon trading securities generally by any governmental authority or any national securities exchange, or a general banking moratorium declared by federal, State of New York, or State officials authorized to do so; (e) a national securities exchange or any governmental authority shall impose, as to the Bonds or as to obligations of the general character of the Bonds, any material restrictions not now in force, or increase materially those now in force, with respect to the extension of credit by, or the charge to the net capital requirements of, the Underwriter; (f) any amendment to the federal or Texas Constitution or action by any federal or Texas court, legislative body, regulatory body, or other authority materially adversely affecting the tax status of the Issuer, its property, income, securities (or interest thereon), or the validity or enforceability of the assessments or the levy and collection of ad valorem taxes to pay principal of and interest on the Bonds; (g) any event occurring, or information becoming known which, in the reasonable judgment of the Underwriter, makes untrue in any material respect any statement or information contained in the Official Statement, or has the effect that the Official Statement contains any untrue statement of material fact or omits to state a material fact required to be 12

263 stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; (h) there shall have occurred since the date of this Agreement any materially adverse change in the affairs or financial condition of the Issuer; (i) since the date of this Agreement the United States shall have become engaged in hostilities which have resulted in a declaration of war or a national emergency or there shall have occurred any other outbreak or escalation of hostilities or a national or international calamity or crisis, financial or otherwise; (j) any fact or event shall exist or have existed that, in the reasonable judgment of the Underwriter, requires or has required an amendment of or supplement to the Official Statement; (k) there shall have occurred any downgrading or published negative credit watch or similar published information from a rating agency that at the date of this Agreement has published a rating (or has been asked to furnish a rating on the Bonds) on any of the Issuer's debt obligations that are secured in a like manner as the Bonds, which action reflects a change or possible change, in the ratings accorded any such obligations of the Issuer (including any rating to be accorded the Bonds); (l) [Reserved]; or (m) the purchase of and payment for the Bonds by the Underwriter, or the resale of the Bonds by the Underwriter, on the terms and conditions herein provided shall be prohibited by any applicable law, governmental authority, board, agency or commission, which prohibition shall occur subsequent to the date hereof and shall not be due to the malfeasance, misfeasance or nonfeasance of the Underwriter. With respect to the condition described in subparagraph (m) above, the Underwriter is not aware of any current, pending or proposed law or government inquiry or investigation as of the date of execution of this Agreement which would permit the Underwriter to invoke its termination rights hereunder. 8. Expenses. (a) The Underwriter shall be under no obligation to pay, and the Issuer shall pay, any expenses incident to the performance of the Issuer's obligations hereunder, including, but not limited to (i) the cost of preparation and printing of the Bonds, (ii) the cost of preparation, printing and distribution of the Preliminary Official Statement, the Official Statement or any supplement or addendum thereto; (iii) the fees and disbursements of Bond Counsel and counsel to the Issuer; (iv) the fees and disbursements of the Financial Advisor to the Issuer; (v) the fees and disbursements of any engineers, accountants, and other experts, consultants or advisers retained by the Issuer; and (vi) the fee for bond ratings. 13

264 (b) The Underwriter shall pay (i) the cost of preparation and printing of this Agreement, the Blue Sky Survey, if any, and Legal Investment Memorandum, if any; (ii) all advertising expenses in connection with the public offering of the Bonds; and (iii) all other expenses incurred by them in connection with the public offering of the Bonds, including the fees and disbursements of counsel retained by the Underwriter. 9. Notices. Any notice or other communication to be given to the Issuer under this Agreement may be given by delivering the same in writing at the address for the Issuer set forth above, and any notice or other communication to be given to the Underwriter under this Agreement may be given by delivering the same in writing to SAMCO Capital Markets, Inc., 1700 Pacific, Suite 2000, Dallas, Texas Attention: Mike Hamilton. 10. Parties in Interest. This Agreement as heretofore specified shall constitute the entire agreement between the Issuer and the Underwriter and is made solely for the benefit of the Issuer and the Underwriter (including successors or assigns of the Underwriter) and no other person shall acquire or have any right hereunder or by virtue hereof. This Agreement may not be assigned by the Issuer. All of the Issuer's representations and warranties contained in this Agreement shall remain operative and in full force and effect, regardless of (i) any investigations made by or on behalf of any of the Underwriter; (ii) delivery of and payment for the Bonds pursuant to this Agreement; and (iii) any termination of this Agreement. 11. Effectiveness. This Agreement shall become effective upon the acceptance hereof by the Issuer and shall be valid and enforceable at the time of such acceptance. 12. Choice of Law. This Agreement shall be governed by and construed in accordance with the laws of the State. 13. Severability. If any provision of this Agreement shall be held or deemed to be or shall, in fact, be invalid, inoperative or unenforceable as applied in any particular case in any jurisdiction or jurisdictions, or in all jurisdictions because it conflicts with any provisions of any Constitution, statute, rule of public policy, or any other reason, such circumstances shall not have the effect of rendering the provision in question invalid, inoperative or unenforceable in any other case or circumstance, or of rendering any other provision or provisions of this Agreement invalid, inoperative or unenforceable to any extent whatever. 14. Business Day. For purposes of this Agreement, "business day" means any day on which the New York Stock Exchange is open for trading. 15. Section Headings. Section headings have been inserted in this Agreement as a matter of convenience of reference only, and it is agreed that such section headings are not a part of this Agreement and will not be used in the interpretation of any provisions of this Agreement. 16. Counterparts. This Agreement may be executed in several counterparts each of which shall be regarded as an original (with the same effect as if the signatures thereto and hereto were upon the same document) and all of which shall constitute one and the same document. 14

265 17. No Personal Liability. None of the members of the City Council, nor any officer, agent, or employee of the Issuer, shall be charged personally by the Underwriter with any liability, or be held liable to the Underwriter under any term or provision of this Agreement, or because of execution or attempted execution, or because of any breach or attempted or alleged breach, of this Agreement. 18. Status of the Underwriter. It is understood and agreed that for all purposes of this Agreement and the transactions described herein the Underwriter has, in its role as underwriter, acted solely as an independent contractor and has not acted as a financial or investment advisor, fiduciary or agent to or for the Issuer, whether directly or indirectly through any person. The Issuer recognizes that the Underwriter expects to profit from the acquisition and potential distribution of the Bonds. [Remainder of page intentionally left blank]

266 If the Issuer agrees with the foregoing, please sign the enclosed counterpart of this Agreement and return it to the Underwriter. This Agreement shall become a binding agreement between the Issuer and the Underwriter when at least the counterpart of this Agreement shall have been signed by or on behalf of each of the parties hereto. Respectfully submitted, SAMCO Capital Markets, Inc. By: Authorized Officer ACCEPTANCE ACCEPTED pursuant to a motion adopted by the City Councilof the City of Dickinson, Texas, on March 24,2009. By: Title: Mayor 16

267 SCHEDULE I SCHEDULE OF MATURITIES, INTEREST RATES AND REDEMPTION PROVISIONS $2,370,000,000 Current Interest Bonds The Bonds are dated April 1, 2009 and shall accrue interest from such date. Maturity Sept. 1 Principal Amount ($) Approximate Yield (%) Interest Rate (%) The Bonds maturing on and after March 1, 2020, are subject to redemption at the option of the Issuer on March 1, 2019, or any date thereafter at a redemption price equal to the principal amount thereof plus accrued interest to the date of redemption. The Bonds scheduled to mature on June 1 in the years are subject to scheduled mandatory redemption prior to maturity, at a price equal to the principal amount thereof, plus accrued interest to the redemption date, on the dates and in the respective principal amounts, set forth in the following schedule: (1) Final Maturity Σ 1

268 EXHIBIT A Form of Opinion of McCall, Parkhurst & Horton L.L.P., as Counsel to the Underwriter April 23, 2009 SAMCO Capital Markets, Inc Pacific, Suite 2000 Dallas, Texas Re: $2,370,000 City of Dickinson, Texas General Obligation Refunding Bonds, Series 2009 Ladies and Gentlemen: We have acted as counsel for you as the underwriter of the Bonds described above (the "Bonds"), issued under and pursuant to an ordinance (the "Ordinance") of City of Dickinson, Texas (the "Issuer"), authorizing the issuance of the Bonds, which Bonds you are purchasing pursuant to a Bond Purchase Agreement dated March 24, All capitalized undefined terms used herein shall have the meaning set forth in the Bond Purchase Agreement. In connection with this opinion letter, we have considered such matters of law and of fact, and have relied upon such certifications and other information furnished to us, as we have deemed appropriate as a basis for our opinion set forth below. We are not expressing any opinion or views herein on the authorization, issuance, delivery, validity of the Bonds and we have assumed, but not independently verified, that the signatures on all documents and Bonds that we have examined are genuine. Based on and subject to the foregoing, we are of the opinion that, under existing laws, the Bonds are not subject to the registration requirements of the Securities Act of 1933, as amended, and the Ordinance is not required to be qualified under the Trust Indenture Act of 1939, as amended. Because the primary purpose of our professional engagement as your counsel was not to establish factual matters, and because of the wholly or partially nonlegal character of many of the determinations involved in the preparation of the Official Statement dated August 18, 2009 (the "Official Statement") and because the information in the Official Statement included under the headings "THE OBLIGATIONS B Book-Entry-Only System,""TAX MATTERS," and "CONTINUING DISCLOSURE OF INFORMATION B Compliance with Prior Agreements," and the Appendices thereto were prepared by others who have been engaged to review or provide such information, we are not passing on and do not assume any responsibility for the information contained under such headings and in the appendices, and, except as set forth in the last sentence of this paragraph, we are not passing on and do not assume any responsibility for the accuracy, completeness or fairness of other statements contained in the Official Statement (including any Α 2

269 appendices, schedules and exhibits thereto) and we make no representation that we have independently verified the accuracy, completeness or fairness of such statements. In the course of our participation in the preparation of the Official Statement as your counsel, we had discussions with representatives of the Issuer, including its Financial Advisor and Bond Counsel, regarding the contents of the Official Statement. In the course of such activities, no facts came to our attention which would lead us to believe that the Official Statement (except for the financial statements and other financial and statistical data contained therein, the information set forth under the headings "THE OBLIGATIONS B Book-Entry-Only System,""TAX MATTERS," and "CONTINUING DISCLOSURE OF INFORMATION B Compliance with Prior Agreements," and the Appendices thereto, as to which we express no opinion), as of its date contained any untrue statement of a material fact or omitted to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. This opinion letter may be relied upon by only you and only in connection with the transaction to which reference is made above and may not be used or relied upon by any other person for any purposes whatsoever without our prior written consent. Respectfully, Α 3

270 EXHIBIT D PRELIMINARY OFFICIAL STATEMENT D-1 CITY OF DICKINSON, TEXAS ORDINANCE NUMBER XXX-2009

271 This Preliminary Official Statement and the information contained herein are subject to completion or amendment. These securities may not be sold nor may offers to buy be accepted prior to the time the Official Statement is delivered in final form. Under no circumstances shall this Preliminary Official Statement constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of these securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. NEW ISSUE - Book-Entry-Only PRELIMINARY OFFICIAL STATEMENT DATED MARCH 17, 2009 Ratings: S&P: Applied For See ("OTHER INFORMATION - RATINGS" herein) In the opinion of Bond Counsel, interest on the Obligations is excludable from gross income for federal income tax purposes under existing law, subject to the matters described under TAX EXEMPTION herein, and is not includable in the alternative minimum taxable income of individuals. See TAX EXEMPTION for a discussion of the opinion of Bond Counsel, including the alternative minimum tax on corporations. The City has designated the Obligations as qualified tax-exempt obligations. See QUALIFIED TAX-EXEMPT OBLIGATIONS. Dated Date: April 1, 2009 THE OBLIGATIONS WILL BE DESIGNATED AS "QUALIFIED TAX-EXEMPT OBLIGATIONS" FOR FINANCIAL INSTITUTIONS CITY OF DICKINSON, TEXAS (Galveston County, Texas) $2,370,000 GENERAL OBLIGATION REFUNDING BONDS SERIES 2009 $1,035,000 CERTIFICATES OF OBLIGATION SERIES 2009 Due: March 1, as shown on the inside cover The $2,370,000 City of Dickinson, Texas General Obligation Refunding Bonds, Series 2009 (the Bonds ), and the $1,035,000 City of Dickinson, Texas, Certificates of Obligation, Series 2009 (the Certificates ), are being issued by the City of Dickinson, Texas (the City ), pursuant to the terms of two separate ordinances adopted by the governing body of the City. The Bonds and the Certificates are referred to herein collectively as the Obligations. PAYMENT TERMS... Interest on the Obligations will accrue from April 1, 2009, (the "Dated Date") and will be payable March 1 and September 1 of each year commencing September 1, 2009 and will be calculated on the basis of a 360-day year consisting of twelve 30-day months. The definitive Obligations 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 Obligations may be acquired in denominations of $5,000 or integral multiples thereof. No physical delivery of the Obligations will be made to the beneficial owners thereof. Principal of, premium, if any, and interest on the Obligations will be payable by the Paying Agent/Registrar to Cede & Co., which will make distribution of the amounts so paid to the participating members of DTC for subsequent payment to the beneficial owners of the Obligations. See "THE OBLIGATIONS - BOOK-ENTRY-ONLY SYSTEM" herein. The initial Paying Agent/Registrar is The Bank of New York Mellon Trust Company, N.A., Dallas, Texas, (see "THE OBLIGATIONS - PAYING AGENT/REGISTRAR"). AUTHORITY FOR ISSUANCE OF THE BONDS... The Bonds are issued pursuant to the general laws of the State, particularly Chapter 1207, Texas Government Code, as amended, and an ordinance passed by the City Council of the City (see THE OBLIGATIONS - AUTHORITY FOR ISSUANCE OF THE BONDS ). AUTHORITY FOR ISSUANCE OF THE CERTIFICATES... The Certificates are issued pursuant to the general laws of the State, particularly Subchapter C of Chapter 271, Texas Local Government Code, as amended; and an ordinance passed by the City Council of the City (see THE OBLIGATIONS - AUTHORITY FOR ISSUANCE OF THE CERTIFICATES ). PURPOSE... Proceeds from the sale of the Certificates will be used (i) for the construction and equipment of a city hall and library complex, and (ii) to pay the costs of issuance of the Certificates. Proceeds of the Bonds will be used to (i) refund certain obligations of the City described in Schedule I (the Refunded Obligations ), and (ii) to pay the costs incurred in connection with the issuance of the Bonds. SEE INSIDE COVER PAGE FOR MATURITY SCHEDULE OPTIONAL REDEMPTION... The City reserves the right, at its option, to redeem Obligations having stated maturities on and after March 1, 2020, in whole or in part in principal amounts of $5,000 or any integral multiple thereof, on March 1, 2019, or any date thereafter, at the par value thereof plus accrued interest to the date of redemption (see "THE OBLIGATIONS - OPTIONAL REDEMPTION"). MANDATORY SINKING FUND REDEMPTION... In addition to the foregoing optional redemption provision, if principal amounts designated in the serial maturity schedules on the inside cover page are combined to create Term Bonds or Certificates, as the case may be, each such Term Bond or Certificate shall be subject to mandatory sinking fund redemption commencing on March 1 of the first year which has been combined to form such Term Bond or Certificate and continuing on March 1 in each year thereafter until the stated maturity date of that Term Bond or Certificate, and the amount required to be redeemed in any year shall be equal to the principal amount for such year set forth in the respective serial maturity schedule on the inside cover page. See THE OBLIGATIONS - MANDATORY SINKING FUND REDEMPTION. LEGALITY... The Obligations are offered for delivery when, as and if issued and received by the underwriter listed below (the Underwriter )and subject to the approving opinion of the Attorney General of Texas and the opinion of Andrews Kurth LLP, Houston, Texas, Bond Counsel. See APPENDIX C - "FORM OF BOND COUNSEL'S OPINION". Certain other matters will be passed upon for the Underwriter by McCall, Parkhurst & Horton L.L.P., Dallas, Texas, as Counsel to the Underwriter. DELIVERY... It is expected that the Obligations will be available for delivery through The Depository Trust Company on or about April 7, SAMCO CAPITAL MARKETS

272 MATURITY SCHEDULES $2,370,000 General Obligation Refunding Bonds, Series 2009 Initial Initial Maturity Principal Interest Reoffering CUSIP Maturity Principal Interest Reoffering CUSIP March 1 Amount Rate Yield Number (1) March 1 Amount Rate Yield Number (1) 2010 $ 90,000 % % 2020 $ 115,000 (2 ) % % , ,000 (2 ) , ,000 (2 ) , ,000 (2 ) , ,000 (2 ) ,000 **** **** , ,000 (2 ) , ,000 (2 ) , ,000 (2 ) ,000 (2) (Accrued Interest from April 1, 2009 to be added) $1,035,000 Certificates of Obligation, Series 2009 Initial Maturity Principal Interest Reoffering CUSIP March 1 Amount Rate Yield Number (1) 2028 $ 330,000 (2) % % ,000 (2) ,000 (2) (Accrued Interest from April 1, 2009 to be added) (1) CUSIP is a registered trademark of the American Bankers Association. CUSIP data herein is provided by Standard and Poor's CUSIP Service Bureau, A Division of the McGraw-Hill Companies, Inc. This data is not intended to create a database and does not serve in any way as a substitute for the CUSIP Services. (2) The City reserves the right at its option, to redeem Obligations having stated maturities on and after March 1, 2020, in whole or in part in principal amounts of $5,000 or any integral multiple thereof, on March 1, 2019 or any date there after, at the par value thereof plus accrued interest to the date of redemption (see THE OBLIGATIONS OPTIONAL REDEMPTION ). 2

273 For purposes of compliance with Rule 15c2-12 of the Securities and Exchange Commission (the Rule ), this document, as the same may be supplemented or amended from time to time, may be treated as an Official Statement of the City with respect to the Obligations described herein which has been deemed final by the City as of the date hereof (or of any such supplement or amendment) except for the omission of no more than the information permitted by subsection (b)(1) of the Rule. No dealer, broker, salesman or other person has been authorized by the City,, the City s Financial Advisor or the Underwriter to give any information, or to make any representations 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, the City s Financial Advisor or the Underwriter. This Official Statement does not constitute an offer to sell Obligations in any jurisdiction to any person to whom it is unlawful to make such offer in such jurisdiction. Certain information set forth herein has been obtained from the City and other sources which are believed to be reliable but is not guaranteed as to accuracy or completeness, and is not to be construed as a representation by the Financial Advisor or the Underwriter. 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. IN CONNECTION WITH THE OFFERING OF THE OBLIGATIONS, THE UNDERWRITER MAY OVER ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICES OF THE OBLIGATIONS AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. TABLE OF CONTENTS MATURITY SCHEDULES...2 OFFICIAL STATEMENT SUMMARY...4 SELECTED FINANCIAL INFORMATION...5 GENERAL FUND CONSOLIDATED STATEMENT SUMMARY...5 CITY OFFICIALS, STAFF AND CONSULTANTS...6 ELECTED OFFICIALS...6 SELECTED ADMINISTRATIVE STAFF...6 CONSULTANTS AND ADVISORS...6 INTRODUCTION...7 HURRICANE IKE...7 PLAN OF FINANCING...7 THE OBLIGATIONS...8 TAX INFORMATION...12 TABLE 1 - VALUATION, EXEMPTIONS AND GENERAL OBLIGATION DEBT...15 TABLE 2 - TAXABLE ASSESSED VALUATIONS BY CATEGORY...16 TABLE 3 - VALUATION AND GENERAL OBLIGATION DEBT HISTORY...17 TABLE 4 - TAX RATE, LEVY AND COLLECTION HISTORY...17 TABLE 5 - TEN LARGEST TAXPAYERS...17 TABLE 6 - TAX ADEQUACY...18 TABLE 7 - ESTIMATED OVERLAPPING DEBT...18 DEBT INFORMATION...19 TABLE 8 - PRO-FORMA GENERAL OBLIGATION DEBT SERVICE REQUIREMENTS...19 TABLE 9 - INTEREST AND SINKING FUND BUDGET PROJECTION...20 TABLE 10 - AUTHORIZED BUT UNISSUED GENERAL OBLIGATION DEBT...20 FINANCIAL INFORMATION...21 TABLE 12 - CHANGE IN NET ASSET TABLE 12-A - GENERAL FUND REVENUES AND EXPENDITURE HISTORY TABLE 13 - MUNICIPAL SALES TAX HISTORY INVESTMENTS TABLE 14 - CURRENT INVESTMENTS TAX EXEMPTION TAX TREATMENT OF ORIGINAL ISSUE DISCOUNT AND PREMIUM OBLIGATIONS DISCOUNT OBLIGATIONS PREMIUM OBLIGATIONS QUALIFIED TAX-EXEMPT OBLIGATIONS CONTINUING DISCLOSURE OF INFORMATION OTHER INFORMATION RATINGS LITIGATION REGISTRATION AND QUALIFICATION OF OBLIGATIONS FOR SALE LEGAL INVESTMENTS AND ELIGIBILITY TO SECURE PUBLIC FUNDS IN TEXAS LEGAL MATTERS AUTHENTICITY OF FINANCIAL DATA AND OTHER INFORMATION FINANCIAL ADVISOR UNDERWRITING FORWARD-LOOKING STATEMENTS DISCLAIMER APPENDICES SCHEDULE OF REFUNDED OBLIGATIONS... I GENERAL INFORMATION REGARDING THE CITY... A EXCERPTS FROM THE ANNUAL FINANCIAL REPORT... B FORM OF BOND COUNSEL'S OPINION... C The cover page hereof, this page, the appendices included herein and any addenda, supplement or amendment hereto, are part of the Official Statement. 3

274 OFFICIAL STATEMENT SUMMARY This summary is subject in all respects to the more complete information and definitions contained or incorporated in this Official Statement. The offering of the Obligations to potential investors is made only by means of this entire Official Statement. No person is authorized to detach this summary from this Official Statement or to otherwise use it without the entire Official Statement. THE CITY... The City of Dickinson is a political subdivision and municipal corporation of the State, located in Galveston County. The City covers approximately 15 square miles (see "INTRODUCTION - DESCRIPTION OF CITY"). THE BONDS... The Bonds are issued as $2,370,000 General Obligation Refunding Bonds, Series The Bonds are issued as serial bonds, maturing March 1 in each of the years and in the amounts shown on the inside cover page hereof. (see "THE OBLIGATIONS -DESCRIPTION OF THE OBLIGATIONS ) THE CERTIFICATES... The Certificates are issued as $1,035,000 Certificates of Obligation, Series The Certificates are issued as serial certificates, maturing March 1 in each of the years and in the amounts shown on the inside cover page hereof. (see "THE OBLIGATIONS -DESCRIPTION OF THE OBLIGATIONS") PAYMENT OF INTEREST... Interest on the Obligations accrues from April 1, 2009, and is payable September 1, 2009, and each March 1 and September 1 thereafter until maturity or prior redemption (see "THE OBLIGATIONS - DESCRIPTION OF THE OBLIGATIONS," "- OPTIONAL REDEMPTION," and - MANDATORY SINKING FUND REDEMPTION ). AUTHORITY FOR ISSUANCE OF THE BONDS... The Bonds are issued pursuant to the general laws of the State, particularly Chapter 1207, Texas Government Code, as amended, and an ordinance passed by the City Council of the City (see THE OBLIGATIONS AUTHORITY FOR ISSUANCE OF THE BONDS ). SECURITY FOR THE BONDS... The Bonds constitute direct obligations of the City, payable from the levy and collection of a direct and continuing ad valorem tax, within the limits prescribed by law, on all taxable property located within the City (see THE OBLIGATIONS SECURITY OF SOURCE OF PAYMENT ). AUTHORITY FOR ISSUANCE OF THE CERTIFICATES... The Certificates are issued pursuant to the general laws of the State, particularly Subchapter C of Chapter 271, Texas Local Government Code, as amended; and an ordinance passed by the City Council of the City (see THE OBLIGATIONS - AUTHORITY FOR ISSUANCE OF THE CERTIFICATES ). SECURITY FOR THE CERTIFICATES... The Certificates constitute direct obligations of the City, payable from a combination of (i) the levy and collection of a direct and continuing ad valorem tax, within the limits prescribed by law, on all taxable property located within the City, and (ii) a subordinate lien on and pledge of $1,000 of the surplus revenues derived from the City s Solid Waste Management System (see THE OBLIGATIONS - SECURITY OF SOURCE OF PAYMENT ). QUALIFIED TAX-EXEMPT OBLIGATIONS... The City will designate the Obligations as "Qualified Tax-Exempt Obligations" for financial institutions (see "QUALIFIED TAX EXEMPT OBLIGATIONS"). REDEMPTION... The City reserves the right, at its option, to redeem Obligations having stated maturities on and after March 1, 2020, in whole or in part in principal amounts of $5,000 or any integral multiple thereof, March 1, 2019, or any date thereafter, at the par value thereof plus accrued interest to the date of redemption. See THE OBLIGATIONS OPTIONAL REDEMPTION. Additionally, the Obligations may be subject to mandatory redemption in the event the underwriter elected to aggregate one or more maturities as a Term Certificate or Bond, as the case may be, (see "THE OBLIGATIONS - MANDATORY SINKING FUND REDEMPTION"). TAX EXEMPTION... In the opinion of Bond Counsel, interest on the Obligations is excludable from gross income for federal income tax purposes under existing law, subject to the matters described under the caption "TAX EXEMPTION" herein, and is not includable in the alternative minimum taxable income of individuals. See TAX EXEMPTION for a discussion of the opinion of Bond Counsel, including the alternative minimum tax on corporations. The City has designated the Obligations as qualified tax-exempt obligations (see "QUALIFIED TAX EXEMPT OBLIGATIONS"). USE OF PROCEEDS... Proceeds from the sale of the Certificates will be used (i) for the construction and equipment of a city hall and library complex, and (ii) to pay the costs of issuance of the Certificates. Proceeds of the Bonds will be used to (i) refund the Refunded Obligations, and (ii) to pay the costs incurred in connection with the issuance of the Bonds. RATINGS... The presently outstanding tax supported debt of the City is rated "A" by Standard & Poor's Ratings Services, A Division of The McGraw-Hill Companies, Inc. ("S&P"). Application for contract ratings on the Obligations has been made to S&P (see "OTHER INFORMATION - RATINGS"). BOOK-ENTRY-ONLY SYSTEM... The definitive Obligations will be initially registered and delivered only to Cede & Co., the nominee of DTC pursuant to the Book-Entry-Only System described herein. Beneficial ownership of the Obligations may be acquired in denominations of $5,000 or integral multiples thereof. No physical delivery of the Obligations will be made to the beneficial owners thereof. Principal of, premium, if any, and interest on the Obligations will be payable by the Paying Agent/Registrar to Cede & Co., which will make distribution of the amounts so paid to the participating members of DTC for subsequent payment to the beneficial owners of the Obligations (see "THE OBLIGATIONS - BOOK-ENTRY-ONLY SYSTEM"). PAYMENT RECORD... The City has never defaulted in payment of its general obligation tax debt. 4

275 SELECTED FINANCIAL INFORMATION Ratio Tax Fiscal Taxable General Debt to Year Estimated Taxable Assessed Obligation Per Capita Taxable Percent of Ended City Assessed Valuation ("G.O.") G.O. Assessed Total Tax 9/30 Population (1) Valuation (2) Per Capita Tax Debt Tax Debt Valuation Collections ,093 $ 574,513,234 $ 33,611 $ 3,256,200 $ % 99.33% , ,465,794 35,129 2,983, % 99.99% , ,668,542 36,896 2,741, % 99.34% , ,359,355 40,330 5,485, % % , ,759,890 42,693 11,415, % 97.00% (5 ) , ,209,563 44,884 12,420,000 (3) 727 (3) (3) (4) 1.62% (1) Source: 2000 U.S. Census-Population held constant for the years 2004 through (2) As reported by the Galveston County Appraisal District on the City s annual State Property Tax Board Reports; subject to change during the ensuing year. (3) Projected, excludes the Refunded Obligations. Includes the Obligations and self-supporting debt. (4) In process of collection. (5) Unaudited. GENERAL FUND CONSOLIDATED STATEMENT SUMMARY For Fiscal Year Ended September 30, 2008 (1 ) Beginning Balance $ 4,149,619 $ 2,938,578 $ 2,907,408 $ 2,434,001 $ 2,137,429 Total Revenue 10,196,570 10,599,736 10,381,160 9,429,497 8,642,193 Total Expenditures 10,916,865 9,651,711 9,662,879 9,186,290 8,587,127 Other Financing Sources (Uses) (980,731) 263,016 (687,111) 230, ,506 Ending Balance $ 2,448,593 $ 4,149,619 $ 2,938,578 $ 2,907,408 $ 2,434,001 (1) Unaudited. For additional information regarding the City, please contact: Julie M. Johnston City Administrator City of Dickinson 2716 FM 517 East Dickinson, Texas (281) Phone (281) Fax or Drew Masterson or Joe Morrow First Southwest Company 1021 Main Street, Suite 2200 Houston, Texas (713) Phone (713) Fax 5

276 CITY OFFICIALS, STAFF AND CONSULTANTS ELECTED OFFICIALS Length of Term Expires City Council Title Service May Julie Masters Mayor 4 years 2011 William King III Mayor Pro Tem 5 years 2010 Charles Suderman Council Member 4 years 2011 Mary Dunbaugh Council Member 5 years 2010 Walter Wilson Council Member 1 year 2011 Kerry Neves Council Member 11 years 2010 Louis Decker Council Member 12 years 2011 SELECTED ADMINISTRATIVE STAFF Name Title Service to City Total Governmental Service Julie M. Johnston City Administrator 2 years 14 years Carol McLemore City Secretary 2 years 29 years CONSULTANTS AND ADVISORS Auditors... Null-Lairson P.C. Houston, Texas Bond Counsel... Andrews Kurth LLP Houston, Texas Financial Advisor...First Southwest Company Houston, Texas 6

277 PRELIMINARY OFFICIAL STATEMENT RELATING TO $2,370,000 $1,035,000 GENERAL OBLIGATION REFUNDING BONDS SERIES 2009 INTRODUCTION CERTIFICATES OF OBLIGATION SERIES 2009 This Official Statement, which includes the Appendices hereto, provides certain information regarding the issuance of $2,370,000 City of Dickinson, Texas, General Obligation Refunding Bonds, Series 2009, and the $1,035,000 City of Dickinson, Texas, Certificates of Obligation, Series Capitalized terms used in this Official Statement, except as otherwise indicated herein, have the same meanings assigned to such terms in the ordinances authorizing the issuance of the Bonds (the Bond Ordinance ) and the Certificates (the Certificate Ordinance ), and together with the Bond Ordinance, the Ordinances, respectively. There follows in this Official Statement descriptions of the Obligations and certain information regarding the City and its finances. All descriptions of documents contained herein are only summaries and are qualified in their entirety by reference to each such document. Copies of such documents may be obtained from the City's Financial Advisor, First Southwest Company, Houston, Texas. DESCRIPTION OF THE CITY... The City is a political subdivision and municipal corporation of the State, duly organized and existing under the laws of the State, including the City's Home Rule Charter. The City was incorporated on August 22, 1977, and first adopted its Home Rule Charter on January 17, The City operates under a Mayor/Council form of government with a City Council comprised of the Mayor and six Councilmembers who serve staggered two-year terms. The City Administrator is the chief administrative officer for the City. Some of the services that the City provides are: public safety (police and fire protection), highways and streets, culture-recreation, planning, and general administrative services. The 2000 Census population for the City was 17,093. The City covers approximately 15 square miles located in Galveston County, Texas. HURRICANE IKE In September 2008, Hurricane Ike, struck the southeast Texas coast (the Hurricane ) and caused significant damage to a number of cities in Galveston County, especially to residential areas and commercial properties in the City. As a result of the damage caused by the Hurricane, a number of businesses and employers in the City were negatively affected. The damage caused by the Hurricane has not had significant impact on assessed valuations within the City as compared with prior years. However, additional hurricanes striking the area of the City in the future could result in further negative impacts to the City. PLAN OF FINANCING A portion of the proceeds of the Bonds will be used to currently refund the City s Combination Tax and Revenue Certificates of Obligation, Series 2000, described in Schedule I (the Refunded Obligations ). The Refunded Obligations and interest due thereon will be paid on the redemption date from funds to be deposited with The Bank of New York Mellon Trust Company, National Association (the Escrow Agent ), to the escrow fund (the Escrow Fund ) created under the escrow agreement to be entered into by the City and the Escrow Agent (the Escrow Agreement ). The Bond Ordinance provides that from the proceeds of the sale of the Bonds to the Underwriter, there will be deposited with the Escrow Agent the amount necessary to accomplish the discharge and final payment of the Refunded Obligations. Such funds will be held in cash in the Escrow Fund. The Escrow Funds are irrevocably pledged to the payment of principal of and interest on the Refunded Obligations. By the deposit of the cash with the Escrow Agent pursuant to the Escrow Agreement, the City will have effected the defeasance of the Refunded Obligations, pursuant to the terms of the ordinance authorizing the issuance of the Refunded Obligations and in accordance with applicable law, including Chapter 1207, Texas Government Code, as amended. It is the opinion of Bond Counsel that, as a result of such defeasance, the Refunded Obligations will no longer be payable from ad valorem taxes but will be payable solely from the cash held for such purpose by the Escrow Agent, and that the Refunded Obligations will be defeased and are not to be included in or considered to be indebtedness of the City for the purpose of any limitation of indebtedness or taxation or for any other purpose. The City has covenanted to make timely deposits into the Escrow Fund, from lawfully available funds, of additional funds in the amounts required to pay the principal of and interest on the Refunded Obligations should, for any reason, the cash balances on deposit in the Escrow Fund be insufficient to make such payments. 7

278 THE OBLIGATIONS DESCRIPTION OF THE OBLIGATIONS... The Obligations are dated April 1, 2009, and mature on March 1 in each of the years and in the amounts shown on the inside cover page hereof. Interest will be computed on the basis of a 360-day year of twelve 30-day months, and will be payable on March 1 and September 1, commencing September 1, 2009, until maturity or earlier redemption. The definitive Obligations will be issued only in fully registered form in any integral multiple of $5,000 for any one maturity and will be initially registered and delivered only to Cede & Co., the nominee of The Depository Trust Company ("DTC") pursuant to the Book-Entry-Only System described herein. No physical delivery of the Obligations will be made to the beneficial owners thereof. Principal of, premium, if any, and interest on the Obligations will be payable by the Paying Agent/Registrar to Cede & Co., which will make distribution of the amounts so paid to the participating members of DTC for subsequent payment to the beneficial owners of the Obligations. See "THE OBLIGATIONS - BOOK- ENTRY-ONLY SYSTEM" AUTHORITY FOR ISSUANCE OF THE BONDS... The Bonds are issued pursuant to the general laws of the State, particularly Chapter 1207, Texas Government Code, as amended, and the Bond Ordinance. AUTHORITY FOR ISSUANCE OF THE CERTIFICATES... The Certificates are being issued pursuant to the Constitution and general laws of the State of Texas, particularly Subchapter C of Chapter 271, Texas Local Government Code (the Certificate of Obligation Act of 1971), as amended; and the Certificate Ordinance. SECURITY AND SOURCE OF PAYMENT... The Obligations are payable from and secured by a continuing direct annual ad valorem tax levied by the City, within limits prescribed by law, on all taxable property located within the City. The Dickinson Economic Development Corporation (the Corporation ), created by the City pursuant to Article , Texas Revised Civil Statutes, as amended, to promote economic development within the City, is the beneficiary of a one-half of one percent sales and use tax levied within the City. TAX RATE LIMITATION... All taxable property within the City is subject to the assessment, levy and collection by the City of a continuing, direct annual ad valorem tax sufficient to provide for the payment of principal of and interest on all ad valorem tax debt which tax must be levied within the limits prescribed by law. Article XI, Section 5, of the Texas Constitution is applicable to the City, and limits its maximum ad valorem tax rate to $2.50 per $100 Taxable Assessed Valuation for all City purposes. The Home Rule Charter of the City adopts the constitutionally authorized maximum tax rate of $2.50 per $100 Taxable Assessed Valuation. Administratively, the Attorney General of the State of Texas will permit allocation of $1.50 of the $2.50 maximum tax rate for all debt service for obligations payable from ad valorem taxes, as calculated at the time of issuance. OPTIONAL REDEMPTION... The City reserves the right, at its option, to redeem Obligations having stated maturities on and after March 1, 2020, in whole or in part in principal amounts of $5,000 or any integral multiple thereof, on March 1, 2019, or any date thereafter, at the par value thereof plus accrued interest to the date of redemption. If less than all of the Obligations are to be redeemed, the City may select the series and maturities of Obligations to be redeemed. If less than all the Obligations of any series and maturity are to be redeemed, the Paying Agent/Registrar (or DTC while the Obligations are in Book-Entry-Only form) shall determine by lot the Obligations, or portions thereof, within such maturity to be redeemed. If an Obligation (or any portion of the principal sum thereof) shall have been called for redemption and notice of such redemption shall have been given, such Obligation (or the principal amount thereof to be redeemed) shall become due and payable on such redemption date and interest thereon shall cease to accrue from and after the redemption date, provided funds for the payment of the redemption price and accrued interest thereon are held by the Paying Agent/Registrar on the redemption date. MANDATORY SINKING FUND REDEMPTION... In addition to the foregoing optional redemption provision, if principal amounts designated in the serial maturity schedule on the inside cover page are combined to create Term Bonds or Certificates, as the case may be, such Term Bonds or Certificates shall be subject to mandatory sinking fund redemption commencing on March 1 of the first year which has been combined to form such Term Bond or Certificate, and continuing on March 1 in each year thereafter until the stated maturity date of that Term Bond or Certificate, and the amount required to be redeemed in any year shall be equal to the principal amount for such year set forth in the serial maturity schedule on the inside cover page. Term Bonds or Certificates to be redeemed in any year by mandatory sinking fund redemption shall be redeemed at par and shall be selected by lot from and among the Term Bonds or Certificates then subject to redemption. The City, at its option, may credit against any mandatory sinking fund redemption requirement Term Bonds or Certificates of the maturity then subject to redemption which have been purchased and canceled by the City or have been redeemed and not theretofore applied as a credit against any mandatory sinking fund redemption requirement. NOTICE OF REDEMPTION... Not less than 30 days prior to a redemption date for the Obligations, the City shall cause a notice of redemption to be sent by United States mail, first class, postage prepaid, to the registered owners of the Obligations to be redeemed, in whole or in part, at the address of the registered owner appearing on the registration books of the Paying Agent/Registrar at the close of business on the business day next preceding the date of mailing such notice. ANY NOTICE SO MAILED SHALL BE CONCLUSIVELY PRESUMED TO HAVE BEEN DULY GIVEN, WHETHER OR NOT THE REGISTERED OWNER RECEIVES SUCH NOTICE. NOTICE HAVING BEEN SO GIVEN, THE OBLIGATIONS CALLED FOR REDEMPTION SHALL BECOME DUE AND PAYABLE ON THE SPECIFIED REDEMPTION DATE, AND NOTWITHSTANDING THAT ANY CERTIFICATE OR PORTION THEREOF HAS NOT BEEN SURRENDERED FOR PAYMENT, INTEREST ON SUCH CERTIFICATE OR PORTION THEREOF SHALL CEASE TO ACCRUE. 8

279 DEFEASANCE... The Ordinances provide for the defeasance of the Obligations when the payment of the principal of and premium, if any, on the Obligations, plus interest thereon to the due date thereof (whether such due date be by reason of maturity, redemption, or otherwise), is provided by irrevocably depositing, in trust (1) cash and/or (2) Defeasance Securities, certified by an independent public accounting firm of national reputation to mature as to principal and interest in such amounts and at such times to insure the availability, without reinvestment, of sufficient money to make such payment, and all necessary and proper fees, compensation and expenses of the paying agent(s) for the Obligations. For purposes of this paragraph, Defeasance Securities means (a) direct, noncallable obligations of the United States of America, including obligations that are unconditionally guaranteed by the United States of America, (b) noncallable obligations of an agency or instrumentality of the United States of America, including obligations that are unconditionally guaranteed or insured by the agency or instrumentality and that are rated as to investment quality by a nationally recognized investment rating firm not less than AAA or its equivalent, and (c) noncallable obligations of a state or an agency or a county, municipality, or other political subdivision of a state that have been refunded and that rated as to investment quality by a nationally recognized investment rating firm not less than AAA or its equivalent. Following such deposit, the City may (i) substitute other permitted Defeasance Securities for the Defeasance Securities originally deposited, (ii) reinvest uninvested moneys deposited to effect such defeasance, and (iii) withdraw for the benefit of the City moneys in excess of the amount required to effect such defeasance; provided that, following any such substitution, reinvestment or withdrawal, the remaining cash and investments held in such escrow shall be sufficient to provide for the timely payment of the principal of and interest on such Obligations to their date of maturity or prior redemption. BOOK-ENTRY-ONLY SYSTEM... This section describes how ownership of the Obligations is to be transferred and how the principal of, premium, if any, and interest on the Obligations are to be paid to and credited by The Depository Trust Company ("DTC"), New York, New York, while the Obligations are registered in its nominee name. The information in this section concerning DTC and the Book-Entry-Only System has been provided by DTC for use in disclosure documents such as this Official Statement. The City believes the source of such information to be reliable, but takes no responsibility for the accuracy or completeness thereof. The City cannot and does not give any assurance that (1) DTC will distribute payments of debt service on the Obligations, or redemption or other notices, to DTC Participants, (2) DTC Participants or others will distribute debt service payments paid to DTC or its nominee (as the registered owner of the Obligations), or redemption or other notices, to the Beneficial Owners, or that they will do so on a timely basis, or (3) DTC will serve and act in the manner described in this Official Statement. The current rules applicable to DTC are on file with the Securities and Exchange Commission, and the current procedures of DTC to be followed in dealing with DTC Participants are on file with DTC. The Depository Trust Company ( DTC ), New York, NY, will act as securities depository for the Obligations (herein, the Securities ). The Securities will be issued as fully-registered securities registered in the name of Cede & Co. (DTC s partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully-registered Security certificate will be issued for each issue and maturity of the Securities, each in the aggregate principal amount of such maturity, and will be deposited with DTC. DTC, the world s largest depository, is a limited-purpose trust company organized under the New York Banking Law, a banking organization within the meaning of the New York Banking Law, a member of the Federal Reserve System, a clearing corporation within the meaning of the New York Uniform Commercial Code, and a clearing agency registered pursuant to the provisions of Section 17A of the Securities Exchange Act of DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-u.s. equity issues, corporate and municipal debt issues, and money market instruments from over 100 countries that DTC s participants ( Direct Participants ) deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-u.s. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation ( DTCC ). DTCC, is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its registered subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-u.s. securities brokers and dealers, banks, trust companies, and clearing companies that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ( Indirect Participants ). DTC has Standard & Poor s highest rating: AAA. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at Purchases of Securities under the DTC system must be made by or through Direct Participants, which will receive a credit for the Securities on DTC s records. The ownership interest of each actual purchaser of each Security ( Beneficial Owner )is in turn to be recorded on the Direct and Indirect Participants records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Securities are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in Securities, except in the event that use of the book-entry system for the Securities is discontinued. To facilitate subsequent transfers, all Securities deposited by Direct Participants with DTC are registered in the name of DTC s partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of Securities with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Securities; DTC s records reflect only the identity of the Direct Participants to whose 9

280 accounts such Securities are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of Securities may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Securities, such as redemptions, tenders, defaults, and proposed amendments to the Security documents. For example, Beneficial Owners of Securities may wish to ascertain that the nominee holding the Securities for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of notices be provided directly to them. Redemption notices shall be sent to DTC. If less than all of the Securities within an issue are being redeemed, DTC s practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to Securities unless authorized by a Direct Participant in accordance with DTC s Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to City 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 accounts Securities are credited on the record date (identified in a listing attached to the Omnibus Proxy). Redemption proceeds, distributions, and dividend payments on the Securities will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC s practice is to credit Direct Participants accounts upon DTC s receipt of funds and corresponding detail information from City or Agent, on payable date in accordance with their respective holdings shown on DTC s records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in street name, and will be the responsibility of such Participant and not of DTC nor its nominee, Agent, or City, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds, distributions, and dividend payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of City or Agent, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants. DTC may discontinue providing its services as depository with respect to the Securities at any time by giving reasonable notice to Issuer or Agent. Under such circumstances, in the event that a successor depository is not obtained, Security certificates are required to be printed and delivered. City may decide to discontinue use of the system of book-entry transfers through DTC (or a successor securities depository). In that event, Security certificates will be printed and delivered. The information in this section concerning DTC and DTC s book-entry system has been obtained from sources that City believes to be reliable, but City takes no responsibility for the accuracy thereof. USE OF CERTAIN TERMS IN OTHER SECTIONS OF THIS OFFICIAL STATEMENT In reading this Official Statement it should be understood that while the Obligations 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 Obligations, but (i) all rights of ownership must be exercised through DTC and the Book-Entry Only System, and (ii) except as described above, notices that are to be given to registered owners under the Ordinances will be given only to DTC. 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 to be construed as a representation by the City, the City s Financial Advisor or the Underwriter. EFFECT OF TERMINATION OF BOOK-ENTRY ONLY SYSTEM In the event that the Book-Entry Only System is discontinued by DTC or the use of the Book-Entry Only System is discontinued by the City, printed certificates will be issued to the holders and the Obligations will be subject to transfer, exchange and registration provisions as set forth in the Ordinances and summarized under "THE OBLIGATIONS - Transfer, Exchange and Registration" below. PAYING AGENT/REGISTRAR... The initial Paying Agent/Registrar is The Bank of New York Mellon Trust Company, N.A., Dallas, Texas. In the Ordinances, the City retains the right to replace the Paying Agent/Registrar. The City covenants to maintain and provide a Paying Agent/Registrar at all times until the Obligations are duly paid and any successor Paying Agent/Registrar must be a bank, trust company, financial institution, or other agency duly qualified and legally authorized to serve as and perform the duties and services of Paying Agent/Registrar for the Obligations. Upon any change in the Paying Agent/Registrar for the Obligations, the City will promptly cause a written notice thereof to be sent to each registered owner of the Obligations by United States mail, first class, postage prepaid, which notice will also include the address of the new Paying Agent/Registrar. TRANSFER, EXCHANGE AND REGISTRATION... In the event the Book-Entry-Only System should be discontinued, the Obligations may be transferred and exchanged on the registration books of the Paying Agent/Registrar only upon presentation and surrender thereof to the 10

281 Paying Agent/Registrar and such transfer or exchange will be without expense or service charge to the registered owner, except for any tax or other governmental charges required to be paid with respect to such registration, exchange and transfer. Obligations may be assigned by the execution of an assignment form on the respective Obligations or by other instrument of transfer and assignment acceptable to the Paying Agent/Registrar. New Obligations will be delivered by the Paying Agent/Registrar, in lieu of the Obligations being transferred or exchanged, at the corporate trust office of the Paying Agent/Registrar, or sent by United States mail, first class, postage prepaid, to the new registered owner or his designee. To the extent possible, new Obligations issued in an exchange or transfer of Obligations will be delivered to the registered owner or assignee of the registered owner in not more than three business days after the receipt of the Obligations to be canceled, and the written instrument of transfer or request for exchange duly executed by the registered owner or his duly authorized agent, in form satisfactory to the Paying Agent/Registrar. New Bonds or Certificates registered and delivered in an exchange or transfer will be in any integral multiple of $5,000 for any one maturity and for a like aggregate principal amount as the Obligations surrendered for exchange or transfer. See "THE OBLIGATIONS - BOOK-ENTRY-ONLY SYSTEM" herein for a description of the system to be utilized initially in regard to ownership and transferability of the Obligations. Neither the City nor the Paying Agent/Registrar will be required to transfer or exchange any Obligation called for redemption, in whole or in part, within 45 days of the date fixed for redemption; provided, however, such limitation of transfer will not be applicable to an exchange by the registered owner of the uncalled balance of an Obligation. RECORD DATE FOR INTEREST PAYMENT... The record date ( Record Date ) for determining the person to whom the interest is payable on the Obligations on any interest payment date means the close of business on the fifteenth day of the preceding month. In the event of a non-payment of interest on a scheduled payment date, and for 30 days thereafter, a new record date for such interest payment (a Special Record Date ) will be established by the Paying Agent/Registrar, if and when funds for the payment of such interest have been received from the City. Notice of the Special Record Date and of the scheduled payment date of the past due interest (a Special Payment Date, which will be 15 days after the Special Record Date) will be sent at least five days prior to the Special Record Date by United States mail, first class, postage prepaid, to the address of each Holder of a Obligation appearing on the registration books of the Paying Agent/Registrar at the close of business on the day next preceding the date of mailing of such notice. BONDHOLDERS REMEDIES... The Ordinances do not provide for the appointment of a trustee to represent the interests of the Obligations holders upon any failure of the City to perform in accordance with the terms of the Ordinances or upon any other condition and, in the event of any such failure to perform, the registered owners would be responsible for the initiation and cost of any legal action to enforce performance of the Ordinances. Furthermore, the Ordinances do not establish specific events of default with respect to the Obligations and, under State law, there is no right to the acceleration of maturity of the Obligations upon the failure of the City to observe any covenant under the Ordinances. A registered owner of Obligations could seek a judgment against the City if a default occurred in the payment of principal of or interest on any such Obligations; however, such judgment could not be satisfied by execution against any property of the City and a suit for monetary damages could be vulnerable to the defense of sovereign immunity. A registered owner s only practical remedy, if a default occurs, is a mandamus or mandatory injunction proceeding to compel the City to levy, assess and collect an annual ad valorem tax sufficient to pay principal of and interest on the Obligations as it becomes due or perform other material terms and covenants contained in the Ordinances. In general, Texas courts have held that a writ of mandamus may be issued to require a public official to perform legally imposed ministerial duties necessary for the performance of a valid contract, and Texas law provides that, following their approval by the Attorney General and issuance, the Obligations are valid and binding obligations for all purposes according to their terms. However, the enforcement of any such remedy may be difficult and time consuming and a registered owner could be required to enforce such remedy on a periodic basis. The City is also eligible to seek relief from its creditors under Chapter 9 of the U.S. Bankruptcy Code ( Chapter 9 ). Although Chapter 9 provides for the recognition of a security interest represented by a specifically pledged source of revenues, the pledge of taxes in support of a general obligation of a bankrupt entity is not specifically recognized as a security interest under Chapter 9. Chapter 9 also includes an automatic stay provision that would prohibit, without Bankruptcy Court approval, the prosecution of any other legal action by creditors or Obligation holders of an entity which has sought protection under Chapter 9. Therefore, should the City avail itself of Chapter 9 protection from creditors, the ability to enforce would be subject to the approval of the Bankruptcy Court (which could require that the action be heard in Bankruptcy Court instead of other federal or state court); and the Bankruptcy Code provides for broad discretionary powers of a Bankruptcy Court in administering any proceeding brought before it. The opinion of Bond Counsel will note that all opinions relative to the enforceability of the Ordinances and the Obligations are qualified with respect to the customary rights of debtors relative to their creditors, including rights afforded to creditors under the Bankruptcy Code. The Ordinance constitutes a contract with the Registered Owners from time to time, is binding on the City, and will not be amended or repealed by the City so long as any Bond remains Outstanding except as permitted in this paragraph. The City may, without the consent of or notice to any Registered Owners, from time to time and at any time, amend the Ordinance in any manner not detrimental to the interests of the Registered Owners, including the curing of any ambiguity, inconsistency, or formal defect or omission herein. In addition, the City may, with the consent of Registered Owners who own in the aggregate 51% of the principal amount of the Bonds then Outstanding, amend, add to, or rescind any of the provisions of the Ordinance; provided that, without the consent of all Registered Owners of Outstanding Bonds, no such amendment, addition, or rescission shall (i) extend the time or times of payment of the principal of and interest on the Bonds, reduce the principal amount thereof, the redemption price, or the rate of interest thereon, or in any other way modify the terms of payment of the principal of or interest on the Bonds, (ii) give any preference to any Bond over any other Bond, or (iii) reduce the aggregate principal amount of Bonds required to be held by Registered Owners for consent to any such amendment, addition, or rescission. 11

282 USES OF PROCEEDS The proceeds from the sale of the Bonds will be applied approximately as follows: Use of Funds Cash Deposit to Escrow Fund Cost of Issuance Total Bonds The proceeds from the sale of the Certificates will be applied approximately as follows: Use of Funds Construction Fund Deposit Cost of Issuance Total Certificates TAX INFORMATION AD VALOREM TAX LAW... The appraisal of property within the City is the responsibility of the Galveston County Appraisal District (the "Appraisal District"). Excluding agricultural and open-space land, which may be taxed on the basis of productive capacity, the Appraisal District is required under the Property Tax Code to appraise all property within the Appraisal District on the basis of 100% of its market value and is prohibited from applying any assessment ratios. In determining market value of property, different methods of appraisal may be used, including the cost method of appraisal, the income method of appraisal and market data comparison method of appraisal, and the method considered most appropriate by the chief appraiser is to be used. State law further limits the appraised value of a residence homestead for a tax year to an amount that would not exceed either the lesser of (1) the property's market value for the most recent tax year in which it was appraised or (2) the sum of (a) 10% of the property's appraised value for the preceding tax year, plus (b) the property's appraised value for the preceding tax year, plus (c) the market value of all new improvements to the property. The value placed upon property within the Appraisal District is subject to review by an Appraisal Review Board, consisting of three members appointed by the Board of Directors of the Appraisal District. The Appraisal District is required to review the value of property within the Appraisal District at least every three years. The City may require annual review at its own expense, and is entitled to challenge the determination of appraised value of property within the City by petition filed with the Appraisal Review Board. Reference is made to the V.T.C.A., Property Tax Code, for identification of property subject to taxation; property exempt or which may be exempted from taxation, if claimed; the appraisal of property for ad valorem taxation purposes; and the procedures and limitations applicable to the levy and collection of ad valorem taxes. Article VIII of the State Constitution ("Article VIII") and State law provide for certain exemptions from property taxes, the valuation of agricultural and open-space lands at productivity value, and the exemption of certain personal property from ad valorem taxation. Under Section 1-b, Article VIII, and State law, the governing body of a political subdivision, at its option, may grant: (1) An exemption of not less than $3,000 of the market value of the residence homestead of persons 65 years of age or older and the disabled from all ad valorem taxes thereafter levied by the political subdivision; (2) An exemption of up to 20% of the market value of residence homesteads. The minimum exemption under this provision is $5,000. In the case of residence homestead exemptions granted under Section 1-b, Article VIII, ad valorem taxes may continue to be levied against the value of homesteads exempted where ad valorem taxes have previously been pledged for the payment of debt if cessation of the levy would impair the obligation of the contract by which the debt was created. State law and Section 2, Article VIII, mandate an additional property tax exemption for disabled veterans or the surviving spouse or children of a deceased veteran who died while on active duty in the armed forces; the exemption applies to either real or personal property with the amount of assessed valuation exempted ranging from $5,000 to a maximum of $12,000. Under Article VIII and State law, the governing body of a county, municipality or city, may freeze the total amount of ad valorem taxes levied on the residence homestead of a disabled person or persons 65 years of age or older to the amount of taxes imposed in the year such residence qualified for such exemption. Also, upon receipt of a petition signed by five percent of the registered voters of the county, municipality or city, an election must be held to determine by majority vote whether to establish such a limitation on taxes paid on residence homesteads of persons 65 years of age or who are disabled. Upon providing for such exemption, such freeze on ad valorem taxes is transferable to a different residence homestead and to a surviving spouse living in such homestead who is disabled or is at least 55 years of 12

283 age. If improvements (other than maintenance or repairs) are made to the property, the value of the improvements is taxed at the then current tax rate, and the total amount of taxes imposed is increased to reflect the new improvements with the new amount of taxes then serving as the ceiling on taxes for the following years. Once established, the tax rate limitation may not be repeated or rescinded. Article VIII provides that eligible owners of both agricultural land (Section 1-d) and open-space land (Section 1-d-1), including open-space land devoted to farm or ranch purposes or open-space land devoted to timber production, may elect to have such property appraised for property taxation on the basis of its productive capacity. The same land may not be qualified under both Section 1-d and 1-d-1. Nonbusiness personal property, such as automobiles or light trucks, are exempt from ad valorem taxation unless the governing body of a political subdivision elects to tax this property. Boats owned as nonbusiness property are exempt from ad valorem taxation. Article VIII, Section 1-j, provides for "freeport property" to be exempted from ad valorem taxation. Freeport property is defined as goods detained in Texas for 175 days or less for the purpose of assembly, storage, manufacturing, processing or fabrication. Decisions to continue to tax may be reversed in the future; decisions to exempt freeport property are not subject to reversal. In addition, Article VIII, Section 1-n of the Texas Constitution provides for an exemption from taxation for "goods-in-transit," which are defined as personal property acquired or imported into the state and transported to another location inside or outside the state within 175 days of the date the property was acquired or imported into the state. The exemption excludes oil, natural gas, petroleum products, aircraft and special inventory, including motor vehicle, vessel and out-board motor, heavy equipment and manufactured housing inventory. After holding a public hearing, a taxing unit may take action by January 1 of the year preceding a tax year to tax goods-in-transit during the following tax year. A taxpayer may obtain only a freeport exemption or a goods-intransit exemption for items of personal property. Article VIII, Section 1-l provides for an exemption from taxation of all or part of real and personal property owned and used wholly or partly as a facility, device, or method for the control of air, water, or land pollution. A person is not entitled to such exemption solely on the basis that the person manufactures or produces a product or provides a service that prevents, monitors, controls, or reduces air, water, or land pollution. Property used for residential purposes, or for recreational, park, or scenic uses is ineligible for such exemption. The City and the other taxing bodies within its territory may agree to jointly create tax increment financing zones, under which the tax values on property in the zone are "frozen" at the value of the property at the time of creation of the zone. The City also may enter into tax abatement agreements to encourage economic development. Under the agreements, a property owner agrees to construct certain improvements on its property. The City in turn agrees not to levy a tax on all or part of the increased value attributable to the improvements until the expiration of the agreement. The abatement agreement could last for a period of up to 10 years. The Property Tax Code provides that certain cities and counties in the State may submit a proposition to the voters to authorize an additional one-half cent sales tax on retail sales of taxable items for the purposes of reducing the ad valorem tax rate. If the additional tax is levied, the effective tax rate and the rollback tax rate calculations are required to be offset by the revenue that will be generated by the sales tax in the current year. Reference is made to the Property Tax Code for definitive requirements for the levy and collection of ad valorem taxes and the calculation of the various defined tax rates. PROPERTY ASSESSMENT AND TAX PAYMENT... Property within the City is generally assessed as of January 1 of each year. Business inventory may, at the option of the taxpayer, be assessed as of September 1. Oil and gas reserves are assessed on the basis of a valuation process which uses an average of the daily price of oil and gas for the prior year. Taxes become due October 1 of the same year, and become delinquent on February 1 of the following year. Taxpayers 65 years old or older are permitted by State law to pay taxes on homesteads in four installments with the first due on February 1 of each year and the final installment due on August 1. PENALTIES AND INTEREST... Charges for penalty and interest on the unpaid balance of delinquent taxes are made as follows: Cumulative Cumulative Month Penalty Interest Total February 6% 1% 7% March April May June July After July, penalty remains at 12%, and interest increases at the rate of 1% each month. In addition, if an account is delinquent in July, an attorney's collection fee of up to 20% of the delinquent tax penalty and interest may be added to the total tax penalty and interest charge. Under certain circumstances, taxes which become delinquent on the homestead of a taxpayer 65 years old or older incur a penalty of 8% per annum with no additional penalties or interest assessed. In general, property subject to the City's lien may be sold, in whole or in parcels, pursuant to court order to collect the amounts due. Federal law does not allow for the collection of penalty and interest against an estate in bankruptcy. Federal bankruptcy law provides that an automatic stay of action by creditors and other entities, including governmental units, goes into effect with the filing of any petition in bankruptcy. The automatic stay prevents governmental units from foreclosing on property and prevents liens for post-petition taxes from attaching to property and obtaining secured creditor status unless, in either case, an order 13

284 lifting the stay is obtained from the bankruptcy court. In many cases post-petition taxes are paid as an administrative expense of the estate in bankruptcy or by order of the bankruptcy court. CITY APPLICATION OF TAX CODE... The City grants an exemption to the market value of the residence homestead of persons 65 years of age or older of $10,000; the disabled are also granted an exemption of $10,000. The City has not granted an additional exemption of 20% of the market value of residence homesteads. The City has adopted the tax freeze for citizens who are disabled or are 65 years of age or older. Ad valorem taxes are levied by the City against the exempt value of residence homesteads for the payment of debt. The City does not tax nonbusiness personal property. The Galveston Tax Office collects taxes for the City. The City does not permit split payments, and discounts are not allowed. The City does not tax freeport property. The City has not taken action to tax goods-in-transit for the 2009 tax year. The City does not collect the additional one-half cent sales tax for reduction of the ad valorem tax rate. The City has adopted a tax abatement policy. See Table 1 for a listing of the amounts of the exemptions described above. 14

285 TABLE 1 - VALUATION, EXEMPTIONS AND GENERAL OBLIGATION DEBT 2008/2009 Market Valuation Established by Galveston County Appraisal District (excluding totally exempt property) $ 788,802,627 Less Exemptions/Reductions at 100% Market Value: Over 65 $ 11,490,388 Disabled Persons 1,353,346 Disabled Veteran 911,500 House Bill 366 1,853 Pollution 384,130 Prorated Exempt Property 110,666 Cap Adjustment 1,383,101 Productivity Loss 5,958,080 $ 21,593, /2009 Taxable Assessed Valuation $ 767,209,563 General Obligation Debt as of January 1, 2009 Outstanding Tax Debt $ 9,015,000 (1) The Bonds 2,370,000 The Certificates 1,035,000 $ 12,420,000 Less: Self Supporting Debt (2) Galveston WC & ID #1 $ 951,317 Economic Development Corporation 625,275 Total Self-Supported Debt $ 1,576,592 Net General Obligation Debt Payable from Ad Valorem Taxes $ 10,843,408 Interest and Sinking Fund as of December 31, 2008 $ 1,885,212 (3) Ratio General Obligation Tax Debt to Taxable Assessed Valuation 1.62% 2009 Estimated Population - 19,500 Per Capita Taxable Assessed Valuation - $39,344 Per Capita Gross General Obligation Debt Payable from Ad Valorem Taxes - $637 Per Capita Net General Obligation Debt Payable from Ad Valorem Taxes - $556 (1) Excludes the Refunded Obligations. (2) General obligation debt in the amounts shown for which repayment could be provided from revenues of the Citys Economic Development Corporation and the Galveston Water Control & Improvements District #1. It is the City s current policy to provide for a portion of these payments from the Corporation and the District; this policy is subject to change in the future, either by discretion of the City Council or reduction of sales tax revenues. See TABLE 13 MUNICIPAL SALES TAX HISTORY (3) Unaudited. 15

286 TABLE 2 - TAXABLE ASSESSED VALUATIONS BY CATEGORY Taxable Appraised Value for Fiscal Year Ended September % of % of % of Category Amount Total Amount Total Amount Total Real, Residential, Single-Family $ 571,910, % $ 541,971, % $ 501,441, % Real, Residential, Multi-Family 20,298, % 19,911, % 19,930, % Real, Vacant Lots/Tracts 23,672, % 24,346, % 30,925, % Real, Acreage (Land Only) 8,691, % 8,729, % 9,332, % Real, Farm and Ranch Improvements 3,134, % 3,092, % 2,570, % Real, Commercial & Industrial 79,344, % 74,156, % 70,976, % Real and Intangible Personal Utilities 18,277, % 18,758, % 18,480, % Tangible Personal, Commercial & Industrial 39,112, % 37,388, % 37,544, % Tangible Personal, Other 6,071, % 5,947, % 6,065, % Real Property Inventory 8,134, % 8,144, % 5,847, % Special Inventory 10,154, % 9,838, % 9,523, % Total Appraised Value Before Exemptions $ 788,802, % $ 752,285, % $ 712,639, % Less: Total Exemptions/Reductions 21,593,064 22,525,123 23,279,821 Taxable Assessed Value $ 767,209,563 $ 729,759,890 $ 689,359,355 Taxable Appraised Value for Fiscal Year Ended September % of % of Category Amount Total Amount Total Real, Residential, Single-Family $ 460,513, % $ 430,404, % Real, Residential, Multi-Family 18,712, % 18,536, % Real, Vacant Lots/Tracts 22,965, % 15,382, % Real, Acreage (Land Only) 9,567, % 11,467, % Real, Farm and Ranch Improvements 2,547, % 2,473, % Real, Commercial & Industrial 66,909, % 66,239, % Real and Intangible Personal Utilities 18,093, % 19,640, % Tangible Personal, Commercial & Industrial 37,221, % 39,176, % Tangible Personal, Other 6,436, % 5,702, % Real Property Inventory 1,097, % 1,545, % Special Inventory 9,132, % 10,162, % Total Appraised Value Before Exemptions $ 653,197, % $ 620,731, % Less: Total Exemptions/Reductions 22,528,503 20,265,859 Taxable Assessed Value $ 630,668,542 $ 600,465,794 NOTE: Valuations shown are certified taxable assessed values reported by the Galveston County Appraisal District to the State Comptroller of Public Accounts. Certified values are subject to change throughout the year as contested values are resolved and the Appraisal District updates records. 16

287 TABLE 3 - VALUATION AND GENERAL OBLIGATION DEBT HISTORY G.O. Ratio of Fiscal Taxable Tax Debt G.O. Tax Debt Year Taxable Assessed Outstanding to Taxable G.O. Ended Estimated Assessed Valuation at End Assessed Tax Debt 9/30 Population (1) Valuation (2) Per Capita of Year Valuation Per Capita ,093 $ 574,513,234 $ 33,611 $ 3,256, % $ , ,465,794 35,129 2,983, % , ,668,542 36,896 2,741, % , ,359,355 40,330 5,485, % , ,759,890 42,693 11,415, % , ,209,563 44,884 12,420,000 (3) 1.62% (3) 727 (3) (1) Source: 2000 U.S. Census-Population held constant for the years 2004 through (2) As reported by the Galveston County Appraisal District on City's annual State Property Tax Board Reports; subject to change during the ensuing year. (3) Projected, excludes the Refunded Obligations and includes the Obligations and self-supporting debt TABLE 4 - TAX RATE, LEVY AND COLLECTION HISTORY Fiscal Year General Interest and % Current % Total Ended 9/30 Tax Rate Fund Sinking Fund Tax Levy Collections Collections 2004 $ $ $ $ 2,249, % 99.33% ,488, % 99.99% ,740, % 99.34% ,816, % % ,981, % (2) 97.00% (2) ,134,818 (1) (1) (1) In process of collection. (2) Unaudited. TABLE 5 - TEN LARGEST TAXPAYERS 2008/2009 % of Total Taxable Taxable Assessed Assessed Name of Taxpayer Nature of Property Valuation Valuation Calumet Penreco LLC Chemical $ 9,419, % Conoco Specialty Products Inc. Engineering 8,874, % GTE Southwest Inc. Telephone 6,906, % McRee Ford Inc. Retail- Automotive 5,752, % Texas- New Mexico Power Co Utility 5,485, % Dixie Partners II LP Shopping Center 4,043, % SW Kirkwood LP Developer 3,584, % Gay Pontiac GMC & Subaru Inc Retail- Automotive 3,173, % Insite Dickinson Storage LP Storage 2,992, % Pine Forest Apartments Inc. Developer 2,669, % $ 52,900, % GENERAL OBLIGATION DEBT LIMITATION... No general obligation debt limitation is imposed on the City under current State law or the City's Home Rule Charter (see "THE OBLIGATIONS-TAX RATE LIMITATION"). 17

288 TABLE 6 - TAX ADEQUACY Average Annual General Obligation Debt Service Requirements ( ) $ 852,016 $ Tax Rate at 97% Collection Produces $ 852,101 Average Annual General Obligation Less Self-Supporting Debt Service Requirements ( ) $ 742,742 $ Tax Rate at 97% Collection Produces $ 743,449 Maximum Annual General Obligation Debt Service Requirements (2009) $ 927,835 $ Tax Rate at 97% Collection Produces $ 928,009 Maximum Annual General Obligation Less Self-Supporting Debt Service Requirements (2023) $ 751,031 $ Tax Rate at 97% Collection Produces $ 751,635 (1) (2) (1) (2) (1) Projected, excludes the Refunded Obligations and includes the Obligations and self-supporting debt (2) Projected, excludes the Refunded Obligations and includes the Obligations. TABLE 7 - ESTIMATED OVERLAPPING DEBT Expenditures of the various taxing entities within the territory of the City are paid out of ad valorem taxes levied by such entities on properties within the City. Such entities are independent of the City and may incur borrowings to finance their expenditures. This statement of direct and estimated overlapping ad valorem tax debt ("Tax Debt") was developed from information contained in "Texas Municipal Reports" published by the Municipal Advisory Council of Texas. Except for the amounts relating to the City, the City has not independently verified the accuracy or completeness of such information, and no person should rely upon such information as being accurate or complete. Furthermore, certain of the entities listed may have issued additional Tax Debt since the date hereof, and such entities may have programs requiring the issuance of substantial amounts of additional Tax Debt, the amount of which cannot be determined. The following table reflects the estimated share of overlapping Tax Debt of the City. Total City's Authorized 2008/2009 G.O. Debt Estimated Overlapping but Unissued Taxable 2008/2009 as of % G.O. Debt Debt as Assessed Value Tax Rate 1/15/2009 Applicable As of 1/15/09 As of 1/15/09 City of Dickinson $ 767,209,563 $ $ 12,420,000 (1) % $ 12,420,000 Dickinson ISD 2,240,873, ,926, % 55,506,470 47,500,000 Galveston County 20,333,507, ,837, % 8,010,823 - Galveston Co. WCID #1 807,438, ,029, % 5,496,140 - Total Direct and Overlapping Debt $ 81,433,434 $ 47,500,000 (1) $ - Ratio of Direct and Overlapping Debt to Taxable Assessed Valuation 10.61% Per Capita Overlapping Debt $ 4,764 Total Direct and Overlapping G.O. Debt $ 81,433,434 (1) Projected, excludes the Refunded Obligations and includes the Obligations and self-supporting debt 18

289 DEBT INFORMATION TABLE 8 - PRO-FORMA GENERAL OBLIGATION DEBT SERVICE REQUIREMENTS Fiscal Year Less: Less: Net Debt Ending Outstanding Refunded The Bonds (2 ) The Certificates (2 ) Self-Supporting Service 9/30 Debt (1) Debt Service Principal Interest Total Principal Interest Total Debt Requirement 2009 $ 922,581 $ 59,978 $ 42,791 $ 42,791 $ 22,440 $ 22,440 $ 217,866 $ 709, , ,205 $ 90,000 84, ,683 44,880 44, , , , , ,000 82, ,533 44,880 44, , , , , ,000 80, ,033 44,880 44, , , , , ,000 77, ,470 44,880 44, , , , , ,000 74, ,508 44,880 44, , , , , ,000 71, ,208 44,880 44, , , , , ,000 67, ,758 44,880 44, , , , , ,000 64, ,158 44,880 44, , , , , ,000 60, ,708 44,880 44, , , , , ,000 57, ,218 44,880 44, , , , , ,000 53, ,020 44,880 44, , , ,600-35,000 49,945 84,945 44,880 44,880 75, , ,948-30,000 48,613 78,613 44,880 44,880 75, , ,958-25,000 47,485 72,485 44,880 44,880 75, , ,766-25,000 46,460 71,460 44,880 44,880 75, , , ,948 45,948 44,880 44,880 75, , , ,948 45,948 44,880 44,880 75, , , ,948 45,948 44,880 44,880 75, , ,000 38, ,723 $ 330,000 37, , , ,000 23, , ,000 23, , , ,000 7, , ,000 8, , ,060 $ 16,280,439 $ 3,057,691 $ 2,370,000 $ 1,216,520 $ 3,586,520 $ 1,035,000 $ 900,075 $ 1,935,075 $ 2,404,024 $ 16,340,320 (1) "Outstanding Debt" does not include lease/purchase obligations. (2) Average life of the issue years. Interest on the Obligations has been estimated for the purpose of illustration. 19

290 TABLE 9 - INTEREST AND SINKING FUND BUDGET PROJECTION Tax Obligation Net Debt Service Requirements, Fiscal Year Ending $ 709,969 Interest and Sinking Fund, $ 1,885,212 (2) Interest and Sinking Fund Tax 97% Collection 797,344 Estimated Interest 1,000 2,683,556 Estimated Interest and Sinking Fund Balance, $ 1,973,587 (1) (1) Fiscal Year 2009 Debt Service Requirements include the Obligations and exclude the Refunded Obligations and self-supporting debt. (2) Unaudited. TABLE 10 - AUTHORIZED BUT UNISSUED GENERAL OBLIGATION DEBT The City has no authorized but unissued general obligation debt at this time. ANTICIPATED ISSUANCE OF GENERAL OBLIGATION DEBT... The City does not anticipate the issuance of additional general obligation debt within the next twelve months. PENSION FUND... The City provides pension benefits for all of its full-time employees through the Texas Municipal Retirement System ("TMRS"), a State-wide administered pension plan. The City makes annual contributions to the plan equal to the amounts accrued for pension expense. (For more detailed information concerning the retirement plan, see APPENDIX B, "EXCERPTS FROM THE CITY S ANNUAL FINANCIAL REPORT" - Note # 9.) OTHER POST-EMPLOYMENT BENEFITS... The City does not offer any post employment benefits. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 20

291 FINANCIAL INFORMATION TABLE 12 - CHANGE IN NET ASSET For Fiscal Year Ended September 30, Revenues: 2008 (1) Property Taxes $ 2,983,043 $ 2,830,436 $ 2,749,902 $ 2,540,346 $ 2,280,297 Sales, Franchise & Local Taxes 4,211,890 4,132,269 4,313,838 4,039,039 3,674,750 Program Revenues 2,808,154 2,497,363 2,598,243 3,393,372 2,990,858 Interest on Investments 483, , , , Other 1,360,640 1,815,563 1,782, , ,710 Total Revenues $ 11,847,699 $ 11,925,823 $ 11,779,281 $ 10,275,908 $ 9,127,713 Expenses: Administrative $ 628,165 $ 470,253 $ 446,721 $ 522,065 $ 644,923 Finance 306, , , , ,538 Information Technology 167, , , , ,605 Community Development 290, , , , ,957 Municipal Courts 250, , , , ,790 Law Enforcement 3,554,445 2,993,138 2,943,381 2,724,287 2,622,031 Emergency Management 1,064,534 52, ,779 81,093 53,448 Emergency Medical Services ,000 72,168 - Public Safety 476, , , , ,718 Public Works 2,420,080 1,565,557 1,731,389 1,771,151 1,706,913 Parks and Recreation , ,239 Railroad Depot , Drainage 353, , , , ,205 Economic Development Contractual Payments 2,343,418 2,100,116 2,519,205 1,927,147 1,568,975 Library 245, , , , ,947 Historical Society 66,135 51,121 32,936 31,909 - Interest Expense 949, , , , ,836 Total Expenses $ 13,117,541 $ 9,603,627 $ 10,040,462 $ 9,342,341 $ 8,857,125 Excess (Deficit) of Revenues Over Expenditures (1,269,842) 2,322,196 1,738, , ,588 Special Items: Increase in Reserves for Special Purposes $ - $ 112,948 $ (3,340) $ 68,463 $ 33,682 Operating Transfers In (Out) - 138,800 (190,689) 73,013 76,103 Developer Contribution ,481 5,587, ,294 Gain (Loss) on the Sale of Land - - (8,256) - (8,494) Transfer of Land ,379 - Total Other Financing Sources (Uses) $ - $ 251,748 $ 46,196 $ 5,760,827 $ 471,585 Excess (Deficiency) of Revenues and Other Financing Sources Over Expenditures and Other Uses $ (1,269,842) $ 2,573,944 $ 1,785,015 $ 6,694,394 $ 742,173 (2) (2) Net Assets at Beginning of Year $ 23,759,333 $ 21,185,389 $ 19,400,374 $ 12,525,818 $ 11,592,585 Net Assets at End of Year $ 22,489,491 $ 23,759,333 $ 21,185,389 $ 19,220,212 $ 12,334,758 (1) Unaudited. (2) Restated. 21

292 TABLE 12-A - GENERAL FUND REVENUES AND EXPENDITURE HISTORY For Fiscal Year Ended September 30, Revenue: 2008 (1) Property Tax $ 2,200,265 $ 2,127,370 $ 2,038,979 $ 1,884,942 $ 1,831,159 Sales Tax 3,242,805 3,215,721 3,377,940 3,086,179 2,706,277 Franchise and Local Tax 877, , , , ,473 Licenses & Permits 251, , , , ,375 Court Fines and Fees 705, , , , ,351 Charges for Services 1,293, , , , ,170 Drainage Fees - (2 ) 341, , , ,063 Investment Revenue 215, , , ,558 - Hotel Taxes 91,179 28,801 29,100 30,244 - Intergovernmental 1,313,186 1,593,394 1,373,511 1,096, ,559 Miscellaneous Income 5,371 21,601 32,727 59, ,766 Total Revenues $ 10,196,570 $ 10,599,736 $ 10,381,160 $ 9,429,497 $ 8,642,193 Expenditure: Administration $ 511,986 $ 367,373 $ 374,471 $ 449,815 $ 461,061 Finance 280, , , , ,538 Community Development 266, , , , ,957 Municipal Court 229, , , , ,417 Law Enforcement 2,991,250 2,906,702 2,767,987 2,585,915 2,394,016 Parks & Recreation , ,239 Public Safety & Code Enforcement 399, , , , ,952 Emergency Management 975,383 52, ,779 81,093 53,448 Emergency Medical Services ,168 - Public Works 1,343,147 1,281,168 1,175,123 1,227,376 1,257,872 Information Technology 147, , , , ,605 Drainage 315, , , , ,580 Library 225, , , , ,947 Economic Development 2,147,165 2,100,116 1,996,402 1,874,270 1,568,975 Capital Outlay 1,023,281 1,085,411 1,360,034 1,074, ,520 Railroad Depot , Historical Society 60,581 51,121 32,936 31,909 - Total Expenditures $ 10,916,865 $ 9,651,711 $ 9,662,879 $ 9,186,290 $ 8,587,127 Excess (Deficit) of Revenues Over Expenditures (720,295) 948, , ,207 55,066 Other Financing sources (Uses): (205,822) 124,910 (976) - - Proceeds from Financing , ,200 - Special Item-Land Sale ,506 Developer Contribution , Operating Transfer In - 149,306-56,000 - Operating Transfer (Out) (774,909) (11,200) (838,312) - - Total Other Financing Sources (Uses) $ (980,731) $ 263,016 $ (687,111) $ 230,200 $ 241,506 Excess (Deficiency) of Revenues and Other Financing Sources Over Expenditures and Other Uses (1,701,026) 1,211,041 31, , ,572 Fund Balance, Beginning of Year 4,149,619 2,938,578 2,907,408 2,434,001 2,137,429 Fund Balance, End of Year $ 2,448,593 $ 4,149,619 $ 2,938,578 $ 2,907,408 $ 2,434,001 (1) Unaudited. (2) Drainage Fees included in Charges for Services. 22

293 TABLE 13 - MUNICIPAL SALES TAX HISTORY The City has adopted the Municipal Sales and Use Tax Act, VTCA, Tax Code, Chapter 321, which grants the City the power to impose and levy a 1% Local Sales and Use Tax within the City; the proceeds are credited to the General Fund and are not pledged to the payment of the Obligations. Collections and enforcements are effected through the offices of the Comptroller of Public Accounts, State of Texas, who remits the proceeds of the tax, after deduction of a 2% service fee, to the City monthly. On May 2, 1998, the voters of the City approved the imposition of an additional sales and use tax of one-half of one percent (½ of 1%) to promote economic development within the City. The sales tax increase went into effect October 1, This one-half of one percent sales and use tax is for the benefit of the Dickinson Economic Development Corporation (the Corporation ), created by the City pursuant to Article , Texas Revised Civil Statutes, as amended, and having the authority to promote economic development within the City. The City has entered into a Sales Tax Remittance Agreement with the Corporation which provides for the payment of a certain portion of such tax revenues to the City to be used by the City to pay a portion of the debt service on the Obligations. Dickinson Management District No. 1 ( DMD1 ) was created by Senate Bill No. 1866, Acts of the 79th Texas Legislature, Regular Session, codified as Chapter 3853, Texas Special District Local Laws Code ( Chapter 3853 ), and is governed by Chapter 375, Texas Local Government Code. Chapter 3853 authorizes the DMD1 to levy a sales and use tax in the DMD1 boundaries, subject to authorization by the City Council of the City of Dickinson. On September 23, 2008, by Resolution Number , the City Council of the City consented to the creation and activation of Dickinson Management District No. 1 ( DMD1 ) and further authorized the DMD1 to adopt, impose and collect an additional one-half cent (½ of 1%) sales and use tax to finance services and improvements undertaken by DMD1 in accordance with Chapter 3853 and Chapter 375, Texas Local Government Code. The DMD1 sales and use tax is only authorized through December 31, 2011, unless the City grants further authorization to extend such tax by City ordinance or resolution. The sales tax increase went into effect January 1, This one-half of one percent sales and use tax is for the benefit of the DMD1. Fiscal Year Total % of Equivalent of Ended Sales Tax Ad Valorem Ad Valorem Per 9-30 Collected (1) Tax Levy Tax Rate Capita (2) 2004 $ 2,706, % $ $ ,086, ,377, ,215, ,934,846 (3 ) (1) Source: The City. (2) Source: 2000 U.S. Census-Population held constant for the years 2004 through (3) Unaudited. The sales tax breakdown for the City is as follows: Economic Development ½ Dickinson Management District No. 1 ½ (1) City Sales & Use Tax 1 State Sales & Use Tax 6 ¼ Total 8 ¼ (1) Dickinson Management District sales tax effective through December 31, FINANCIAL POLICIES The accounts of the City are organized on the basis of funds and account groups, each of which is considered a separate accounting entity. The operations of each fund are accounted for with a separate set of self-balancing accounts. Funds are segregated according to their intended purpose and divided into departments to aid financial management in the demonstration of legal compliance with contractual provisions. Account groups are a reporting device to account for certain assets and liabilities not recorded in those funds because they do not directly affect net expandable, available financial resources. The accounting and financial reporting treatment applied to a fund is determined by its measurement focus. All Governmental funds are accounted for using a current financial resources measurement focus. With this measurement focus, only current assets and current liabilities generally are included on the balance sheet. Operating statements of these funds present increases (i.e., revenues and other financing sources) and decreases (i.e., expenditures and other financing uses) in net current assets. The City utilizes the modified accrual basis accounting in the Governmental Fund types. Revenues are recognized in the accounting period in which they become both measurable and available. Measurable means the amount of the transaction can be determined. Available 23

294 means collectible within the current period or soon enough thereafter to pay liabilities of the current period. Property taxes are considered available if collected within 60 days after year-end. All other revenues are considered available if collected within one year. Revenues susceptible to accrual are property taxes, gross receipt taxes, franchise fees and sales tax collected and held by the state on behalf of the City. Revenues for fines and forfeitures are not susceptible to accrual because they are not measurable until received in cash. Expenditure driven grants are recognized when due, and compensated absences expected to be liquidated with expendable available financial resources. Following is a description of the various funds. General Fund... The General Fund is used to account for all financial transactions not properly includable in other funds. The principal sources of revenues include local property taxes, sales and franchise fees, licenses and permits, fines and forfeitures, and charges for services. Expenditures include general administration, finance, public works, community development, library, municipal court, and public safety Special Revenue Fund... The Special Revenue Fund is used to account for proceeds from specific revenue sources, expenditures of which are designated for special purposes by the City. Debt Service Fund... The Debt Service Fund is used to account for the payment of interest and principal on all general long-term debt of the City. The primary source of revenue for debt service is local property taxes. Capital Projects Fund...The Capital Projects Fund is used to account for the construction or acquisition of major capital items through the issuance of debt. This fund is not budgeted on an annual basis but rather for the life of the project. All expenditures are expected to be paid out of proceeds from the issuance of debt. Budgets... Annual appropriated budgets are adopted for the General, Special Revenue, and Debt Service Funds using the same basis of accounting as for financial reporting. Prior to August 1, the City Administrator submits to the City Council proposed expenditures requests and proposed means for financing them. A public hearing is conducted to obtain taxpayer comments. Prior to September 30, the budget is legally enacted through passage of an ordinance. Estimated expenditures shall in no case exceed proposed revenues plus cash on hand. Management may transfer unused appropriations to any item required within the same department. During the year, no significant supplemental appropriations were necessary. INVESTMENTS The City invests its investable funds in investments authorized by Texas law in accordance with investment policies approved by the Board of Trustees of the City. Both state law and the City s investment policies are subject to change. LEGAL INVESTMENTS... Under current Texas law, the City is authorized to invest in (1) obligations of the United States or its agencies and instrumentalities, (2) direct obligations of the State of Texas or its agencies and instrumentalities, (3) collateralized mortgage obligations directly issued by a federal agency or instrumentality of the United States, the underlying security for which is guaranteed by an agency or instrumentality of the United States, (4) other obligations, the principal of and interest on which are unconditionally guaranteed or insured by, or backed by the full faith and credit of, the State of Texas or the United States or their respective agencies and instrumentalities, (5) obligations of states, agencies, counties, cities, and other political subdivisions of any state rated as to investment quality by a nationally recognized investment rating firm not less than A or its equivalent, (6) Certificates issued, assumed or guaranteed by the State of Israel; (7) certificates of deposit and share certificates issued by, or invested by an investing entity through, a depository institution that has its main office or a branch office in the State of Texas, that are guaranteed or insured as required by, or otherwise meet the requirements of, the Texas Public Funds Investment Act (Chapter 2256, Texas Government Code, as amended); (8) fully collateralized repurchase agreements that have a defined termination date, are fully secured by obligations described in clause (1), and are placed through a primary government securities dealer or a financial institution doing business in the State of Texas, (9) securities lending programs if (i) the securities loaned under the program are collateralized, a loan made under the program allows for termination at any time and a loan made under the program is either secured by (a) obligations that are described in clauses (1) through (6) above, (b) irrevocable letters of credit issued by a state or national bank that is continuously rated by a nationally recognized investment rating firm at not less than A or its equivalent or (c) cash invested in obligations described in clauses (1) through (6) above, clauses (11) through (13) below, or an authorized investment pool; (ii) securities held as collateral under a loan are pledged to the City and held in the City s name; (iii) a loan made under the program is placed through either a primary government securities dealer or a financial institution doing business in the State of Texas; and (iv) the agreement to lend securities has a term of one year or less, (10) certain bankers acceptances with the remaining term of 270 days or less, if the short-term obligations of the accepting bank or its parent are rated at least A-1 or P-1 or the equivalent by at least one nationally recognized credit rating agency, (11) commercial paper with a stated maturity of 270 days or less that is rated at least A-1 or P-1 or the equivalent by either (a) two nationally recognized credit rating agencies or (b) one nationally recognized credit rating agency if the paper is fully secured by an irrevocable letter of credit issued by a U.S. or state bank, (12) no-load money market mutual funds registered with the Securities and Exchange Commission that have a dollar-weighted average stated maturity of 90 days or less and include in their investment objectives the maintenance of a stable net asset value of $1 for each share, (13) no-load mutual funds registered with the Securities and Exchange Commission that have an average weighted maturity of less than two years, invest exclusively in obligations described in this paragraph and are continuously rated as to investment quality by at least one nationally recognized investment rating firm of no less than AAA or its equivalent, and (14) guaranteed 24

295 investment contracts that have a defined termination date and are secured by obligations described in clause (1) above in an amount at least equal to the amount of Certificate proceeds invested under such contract. The City may invest in such obligations directly or through government investment pools that invest solely in such obligations provided that the pools are rated no lower than AAA or AAA-m or an equivalent by at least one nationally recognized rating service. The City is specifically prohibited from investing in: (1) obligations whose payment represents the coupon payments on the outstanding principal balance of the underlying mortgage-backed security collateral and pays no principal; (2) obligations whose payment represents the principal stream of cash flow from the underlying mortgage-backed security and bears no interest; (3) collateralized mortgage obligations that have a stated final maturity of greater than 10 years; and (4) collateralized mortgage obligations the interest rate of which is determined by an index that adjusts opposite to the changes in a market index. INVESTMENT POLICIES... Under Texas law, the City is required to invest its funds under written investment policies that primarily emphasize safety of principal and liquidity; that address investment diversification, yield, maturity, and the quality and capability of investment management; and that includes a list of authorized investments for City funds, maximum allowable stated maturity of any individual investment and the maximum average dollar-weighted maturity allowed for pooled fund groups. All City funds must be invested consistent with a formally adopted "Investment Strategy Statement" that specifically addresses each funds investment. Each Investment Strategy Statement will describe its objectives concerning: (1) suitability of investment type, (2) preservation and safety of principal, (3) liquidity, (4) marketability of each investment, (5) diversification of the portfolio, and (6) yield. Under Texas law, City investments must be made "with judgment and care, under prevailing circumstances, that a person of prudence, discretion, and intelligence would exercise in the management of the person s own affairs, not for speculation, but for investment, considering the probable safety of capital and the probable income to be derived." At least quarterly the investment officers of the City shall submit an investment report detailing: (1) the investment position of the City, (2) that all investment officers jointly prepared and signed the report, (3) the beginning market value, any additions and changes to market value and the ending value of each pooled fund group, (4) the book value and market value of each separately listed asset at the beginning and end of the reporting period, (5) the maturity date of each separately invested asset, (6) the account or fund or pooled fund group for which each individual investment was acquired, and (7) the compliance of the investment portfolio as it relates to: (a) adopted investment strategy statements and (b) state law. No person may invest City funds without express written authority from the Board of Trustees. ADDITIONAL PROVISIONS... Under Texas law the City is additionally required to: (1) annually review its adopted policies and strategies; (2) require any investment officers with personal business relationships or relatives with firms seeking to sell securities to the entity to disclose the relationship and file a statement with the Texas Ethics Commission and the Board of Trustees; (3) require the registered principal of firms seeking to sell securities to the City to: (a) receive and review the City s investment policy, (b) acknowledge that reasonable controls and procedures have been implemented to preclude imprudent investment activities, and (c) deliver a written statement attesting to these requirements; (4) perform an annual audit of the management controls on investments and adherence to the City s investment policy; (5) provide specific investment training for the Treasurer, Chief Financial Officer and investment officers; (6) restrict reverse repurchase agreements to not more than 90 days and restrict the investment of reverse repurchase agreement funds to no greater than the term of the reverse repurchase agreement; (7) restrict its investment in mutual funds in the aggregate to no more than 15 percent of its monthly average fund balance, excluding Obligation proceeds and reserves and other funds held for debt service, and to invest no portion of Obligation proceeds, reserves and funds held for debt service, in mutual funds; and (8) require local government investment pools to conform to the new disclosure, rating, net asset value, yield calculation, and advisory board requirements. TABLE 14 - CURRENT INVESTMENTS As of January 31, 2009, the City's investable funds were invested in the following categories: Book Market Type of Investments Value Percent Value Money Market Funds $ 275, % $ 275,766 TexPool 7,831, % 7,831,427 TexSTAR 1,788, % 1,788,026 Bank Deposits and CD's 1,331, % 1,331,309 $ 11,226, % $ 11,226,528 25

296 TAX EXEMPTION In the opinion of Andrews Kurth LLP, Houston, Texas, Bond Counsel, interest on the Obligations (1) is excludable under Section 103 of the Internal Revenue Code of 1986, as amended (the Code ), from gross income of the owners thereof for federal income tax purposes and (2) is not includable in the alternative minimum taxable income of individuals or corporations, except as described below. The foregoing opinions of Bond Counsel are based on the Code and the regulations, rulings and court decisions thereunder in existence on the date of issue of the Obligations. Such authorities are subject to change and any such change could prospectively or retroactively result in the inclusion of the interest on the Obligations in gross income of the owners thereof or change the treatment of such interest for purposes of computing alternative minimum taxable income. In rendering its opinions, Bond Counsel has assumed continuing compliance by the City with certain covenants of the Ordinances and has relied on representations by the City with respect to matters solely within the knowledge of the City, which Bond Counsel has not independently verified. The covenants and representations relate to, among other things, the use of Obligation proceeds and any facilities financed therewith, the source of repayment of the Obligations, the investment of Obligation proceeds and certain other amounts prior to expenditure, and requirements that excess arbitrage earned on the investment of Obligation proceeds and certain other amounts be paid periodically to the United States and that the City file an information report with the Internal Revenue Service. If the City should fail to comply with the covenants in the Ordinances, or if its representations relating to the Obligations that are contained in the Ordinances should be determined to be inaccurate or incomplete, interest on the Obligations could become taxable from the date of delivery of the Obligations, regardless of the date on which the event causing such taxability occurs. Interest on all tax-exempt obligations, such as the Obligations, owned by a corporation (other than an S corporation, a regulated investment company, a real estate investment trust (REIT), a real estate mortgage investment conduit (REMIC) or a financial asset securitization investment trust (FASIT)) will be included in such corporation s adjusted current earnings for purposes of calculating such corporation s alternative minimum taxable income. A corporation s alternative minimum taxable income is the basis on which the alternative minimum tax imposed by the Code is computed. Except as stated above and set forth below under TAX TREATMENT OF ORIGINAL ISSUE DISCOUNT AND PREMIUM OBLIGATIONS, Bond Counsel will express no opinion as to any federal, state or local tax consequences resulting from the ownership of, receipt or accrual of interest on or acquisition or disposition of the Obligations. Bond Counsel s opinion is not a guarantee of a result, but represents its legal judgment based upon its review of existing statutes, regulations, published rulings and court decisions and the representations and covenants of the City described above. No ruling has been sought from the Internal Revenue Service (the Service ) with respect to the matters addressed in the opinion of Bond Counsel, and Bond Counsel s opinion is not binding on the Service. The Service has an ongoing program of auditing the tax-exempt status of the interest on municipal obligations. If an audit of the Obligations is commenced, under current procedures the Service is likely to treat the City as the taxpayer, and the owners of the Obligations may have no right to participate in the audit process. In responding to or defending an audit of the tax-exempt status of the interest on the Obligations, the City may have different or conflicting interests from the owners of the Obligations. Public awareness of any future audit of the Obligations could adversely affect the value and liquidity of the Obligations during the pendency of the audit, regardless of its ultimate outcome. Under the Code, taxpayers are required to provide information on their returns regarding the amount of tax-exempt interest, such as interest on the Obligations, received or accrued during the year. Prospective purchasers of the Obligations should be aware that the ownership of tax-exempt obligations, such as the Obligations, may result in collateral federal income tax consequences to, among others, financial institutions, property and casualty insurance companies, certain foreign corporations doing business in the United States, certain S corporations with Subchapter C earnings and profits, individual recipients of Social Security or Railroad Retirement benefits, taxpayers who are deemed to have incurred or continued indebtedness to purchase or carry tax-exempt obligations and individuals otherwise eligible for the earned income credit. Such prospective purchasers should consult their owner tax advisors as to the consequences of investing in the Obligations. TAX TREATMENT OF ORIGINAL ISSUE DISCOUNT AND PREMIUM OBLIGATIONS DISCOUNT OBLIGATIONS Some of the Obligations may be offered at initial offering prices which are less than the stated redemption prices at maturity of such Obligations. If a substantial amount of any maturity of the Obligations is sold to members of the public (which for this purpose excludes bond houses, brokers and similar persons or entities acting in the capacity of wholesalers or underwriters) at such initial offering price, an initial owner who purchases the Obligations of that maturity (the Discount Obligations ) will be considered to have original issue discount for federal income tax purposes equal to the difference between (a) the stated redemption price payable at the maturity of such Discount Obligation and (b) the initial offering price to the public of such Discount Obligation. Under existing law, such original issue discount will be treated for federal income tax purposes as additional interest on an obligation and such initial owner will be entitled to 26

297 exclude from gross income for federal income tax purposes that portion of such original issue discount deemed to be earned (as discussed below) during the period while such Discount Obligation continues to be owned by such initial owner. Except as otherwise provided herein, the discussion regarding interest on the Obligations under the caption TAX EXEMPTION generally applies to original issue discount deemed to be earned on a Discount Obligation while held by an owner who has purchased such Obligation at the initial offering price in the initial public offering of the Obligations and that discussion should be considered in connection with this portion of the Official Statement. In the event of a redemption, sale, or other taxable disposition of a Discount Obligation prior to its stated maturity, however, any amount realized by such initial owner in excess of the basis of such Discount Obligation in the hands of such owner (increased to reflect the portion of the original issue discount deemed to have been earned while such Discount Obligation continues to be held by such initial owner) will be includable in gross income for federal income tax purposes. Because original issue discount on a Discount Obligation will be treated for federal income tax purposes as interest on a Obligation, such original issue discount must be taken into account for certain federal income tax purposes as it is deemed to be earned even though there will not be a corresponding cash payment. Corporations that purchase Discount Obligations must take into account original issue discount as it is deemed to be earned for purposes of determining alternative minimum tax. Other owners of a Discount Obligation may be required to take into account such original issue discount as it is deemed to be earned for purposes of determining certain collateral federal tax consequences of owning a Obligation. See TAX EXEMPTION for a discussion regarding the alternative minimum taxable income consequences for corporations and for a reference to collateral federal tax consequences for certain other owners. The characterization of original issue discount as interest is for federal income tax purposes only and does not otherwise affect the rights or obligations of the owner of a Discount Obligation or of the City. The portion of the principal of a Discount Obligation representing original issue discount is payable upon the maturity or earlier redemption of such Obligation to the registered owner of the Discount Obligation at that time. Under special tax accounting rules prescribed by existing law, a portion of the original issue discount on each Discount Obligation is deemed to be earned each day. The portion of the original issue discount deemed to be earned each day is determined under an actuarial method of accrual, using the yield to maturity as the constant interest rate and semi-annual compounding. The federal income tax consequences of the purchase, ownership, redemption, sale or other disposition of Discount Obligations by an owner that did not purchase such Obligations in the initial public offering and at the initial offering price may be determined according to rules which differ from those described above. All prospective purchasers of Discount Obligations should consult their tax advisors with respect to the determination for federal, state and local income tax purposes of interest and original issue discount accrued upon redemption, sale or other disposition of such Discount Obligations and with respect to the federal, state, local and foreign tax consequences of the purchase, ownership, redemption, sale or other disposition of such Discount Obligations. PREMIUM OBLIGATIONS Some of the Obligations may be offered at initial offering prices which exceed the stated redemption prices payable at the maturity of such Obligations. If a substantial amount of any maturity of the Obligations is sold to members of the public (which for this purpose excludes bond houses, brokers and similar persons or entities acting in the capacity of wholesalers or underwriters) at such initial offering price, each of the Obligations of such maturity ( Premium Obligations ) will be considered for federal income tax purposes to have bond premium equal to the amount of such excess. The basis for federal income tax purposes of a Premium Obligation in the hands of an initial purchaser who purchases such Obligation in the initial offering must be reduced each year and upon the sale or other taxable disposition of the Obligation by the amount of amortizable bond premium. This reduction in basis will increase the amount of any gain (or decrease the amount of any loss) recognized for federal income tax purposes upon the sale or other taxable disposition of a Premium Obligation by the initial purchaser. Generally, no corresponding deduction is allowed for federal income tax purposes, for the reduction in basis resulting from amortizable bond premium. The amount of bond premium on a Premium Obligation which is amortizable each year (or shorter period in the event of a sale or disposition of a Premium Obligation) is determined under special tax accounting rules which use a constant yield throughout the term of the Premium Obligation based on the initial purchaser s original basis in such Obligation. The federal income tax consequences of the purchase, ownership, redemption, sale or other disposition by an owner of Obligations that are not purchased in the initial offering or which are purchases at an amount representing a price other than the initial offering prices for the Obligations of the same maturity may be determined according to rules which differ from those described above. Moreover, all prospective purchasers of Obligations should consult their tax advisors with respect to the federal, state, local and foreign tax consequences of the purchase, ownership, redemption, sale or other disposition of Premium Obligations. QUALIFIED TAX-EXEMPT OBLIGATIONS Section 265 of the Code provides, in general, that interest expenses incurred to acquire or carry tax-exempt obligations is not deductible from the gross income of the holder. For certain holders that are financial institutions within the meaning of such section, complete disallowance of such expense would apply to taxable years beginning after December 31, 1986, with respect to tax-exempt obligations acquired after August 7, Section 265(b) of the Code provides an exception to this rule for interest expense incurred by financial institutions to carry tax-exempt obligations (other than private activity Obligations which are designated by an issue as qualified tax-exempt obligations ). An 27

298 issuer may only designate an issue as an issue of qualified tax-exempt obligations where less than $10 million of tax-exempt obligations are issued by the issuer during the calendar year in which the issue so designated is issued. The City will designate the Obligations as qualified tax-exempt obligations. Further, the City will represent that it has or will take such action necessary for the Obligations to constitute qualified tax-exempt obligations. Notwithstanding the designation of the Obligations as qualified tax-exempt obligations, financial institutions acquiring the Obligations will be subject to a twenty percent (20%) disallowance of interest expenses allocable to the Obligations. CONTINUING DISCLOSURE OF INFORMATION In the Ordinances, the City has made the following agreement for the benefit of the holders and beneficial owners of the Obligations. The City is required to observe the agreement for so long as it remains obligated to advance funds to pay the Obligations. Under the agreement, the City will be obligated to provide certain updated financial information and operating data annually, and timely notice of specified material events, to certain information vendors. Information that is filed with information vendors will be available to securities brokers and others who subscribe to receive the information from the vendors. ANNUAL REPORTS... The City will provide certain updated financial information and operating data to certain information vendors annually. The information to be updated includes all quantitative financial information and operating data with respect to the City of the general type included in this Official Statement under Tables numbered 1 through 6, 8 through 10, and 12 through 14 and in Appendix B. The City will update and provide this information within six months after the end of each fiscal year. The City will provide the updated information to each nationally recognized municipal securities information repository ("NRMSIR") and to the Texas Municipal Advisory Council, the state information depository ("SID") designated by the State of Texas and approved by the staff of the United States Securities and Exchange Commission (the "SEC"). The City 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 information will include audited financial statements, if the City commissions an audit and it is completed by the required time. If audited financial statements are not available by the required time, the City will provide unaudited financial information and operating data which is customarily prepared by the City by the required time and audited financial statements when and if such audited financial statements become available. Any such financial statements will be prepared in accordance with the accounting principles described in Appendix A or such other accounting principles as the City may be required to employ from time to time pursuant to state law or regulation. The City s current fiscal year end is September 30. Accordingly, it must provide updated information by March 31 in each year, unless the City changes its fiscal year. If the City changes its fiscal year, it will notify each nationally recognized municipal securities information repository ( NRMSIR ) and the SID of the change. MATERIAL EVENT NOTICES... The City will also provide timely notices of certain events to certain information vendors. The City will provide notice of any of the following events with respect to the Obligations, if such event is material to a decision to purchase or sell Obligations: (1) principal and interest payment delinquencies; (2) non-payment related defaults; (3) unscheduled draws on debt service reserves reflecting financial difficulties; (4) unscheduled draws on credit enhancements reflecting financial difficulties; (5) substitution of credit or liquidity providers, or their failure to perform; (6) adverse tax opinions or events affecting the tax-exempt status of the Obligations; (7) modifications to rights of holders of the Obligations; (8) Obligation calls; (9) defeasances; (10) release, substitution, or sale of property securing repayment of the Obligations; and (11) rating changes. In addition, the City will provide timely notice of any failure by the City to provide information, data, or financial statements in accordance with its agreement described above under Annual Reports. The City will provide each notice described in this paragraph to the SID and to either each NRMSIR or the Municipal Securities Rulemaking Board ( MSRB ). AVAILABILITY OF INFORMATION FROM NRMSIRS AND SID... The City has agreed to provide the foregoing information only to NRMSIRs, the MSRB and the SID. The information will be available to holders of Obligations 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 and approved by the SEC staff as a qualified State information depository (the SID ). The address of the Municipal Advisory Council is 600 West 8th Street, P. O. Box 2177, Austin, Texas , and its telephone number is 512/ The MAC has also received SEC approval to operate and has begun to operate, a central post office for information filings made by municipal issuers, such as the City. A municipal issuer may submit its information filings with the central post office, which then transmits such information to the NRMSIRs and the appropriate SID for filing. This central post office can be accessed and utilized at ( DisclosureUSA ). The City may utilize DisclosureUSA for the filing of information relating to the Obligations. The SEC has approved amendments to the Rule, to become effective July 1, 2009, to designate the MSRB as the sole NRMSIR. To make such continuing disclosure information available to investors free of charge, the MSRB has established the Electronic Municipal Market Access ("EMMA") system. The City will be required to file its continuing disclosure information using the EMMA system beginning on July 1, Investors will be able to access continuing disclosure information filed with the MSRB at 28

299 LIMITATIONS AND AMENDMENTS... The City has agreed to update information and to provide notices of material events only as described above. The City has not agreed to provide other information that may be relevant or material to a complete presentation of its financial results of operations, condition, or prospects or agreed to update any information that is provided, except as described above. The City makes no representation or warranty concerning such information or concerning its usefulness to a decision to invest in or sell Obligations at any future date. The City disclaims any contractual or tort liability for damages resulting in whole or in part from any breach of its continuing disclosure agreement or from any statement made pursuant to its agreement. Holders or beneficial owners of Obligations may seek as their sole remedy a writ of mandamus to compel the City to comply with its agreement. No default by the City with respect to its continuing disclosure agreement shall constitute a breach of or default under the Ordinance for purposes of any other provision of the Ordinance. Nothing in this paragraph is intended or shall act to disclaim, waive, or otherwise limit the duties of the City under federal and state securities laws. The City's undertakings and agreements are subject to appropriation of necessary funds and to applicable legal restrictions. The City may amend its continuing disclosure agreement from time to time to adapt to changed circumstances that arise from a change in legal requirements, a change in law, or a change in the identity, nature, status, or type of operations of the City, if (i) the agreement, as amended, would have permitted an underwriter to purchase or sell Obligations in the offering described herein in compliance with the Rule, taking into account any amendments or interpretations of the Rule to the date of such amendment, as well as such changed circumstances, and (ii) either (a) the holders of a majority in aggregate principal amount of the outstanding Obligations consent to the amendment or (b) any person unaffiliated with the City (such as nationally recognized bond counsel) determines that the amendment will not materially impair the interests of the holders and beneficial owners of the Obligations. The City may also amend or repeal the provisions of this continuing disclosure agreement if the SEC amends or repeals the applicable provisions of the SEC Rule 15c2-12 or a court of final jurisdiction enters judgment that such provisions of the SEC Rule 15c2-12 are invalid, but only if and to the extent that the provisions of this sentence would not prevent an underwriter from lawfully purchasing or selling Obligations in the primary offering of the Obligations. If the City so amends the agreement, it has agreed to include with the next financial information and operating data provided in accordance with its agreement described above under Annual Reports an explanation, in narrative form, of the reasons for the amendment and of the impact of any change in the type of financial information and operating data so provided. COMPLIANCE WITH PRIOR UNDERTAKINGS... For the past five years, the City has complied in all material respects with all continuing disclosure agreements made by it in accordance with SEC Rule 15c2-12. RATINGS OTHER INFORMATION The uninsured tax supported debt of the City is rated "A+ by Standard & Poor s Rating Services, a division of the McGraw-Hill Companies, Inc ( S&P ). Application for contract ratings on the Obligations has been made to S&P. An explanation of the significance of such rating may be obtained from the company furnishing the rating. The rating reflects only the view of such organization and the City makes no representation as to the appropriateness of the rating. There is no assurance that such rating will continue for any given period of time or that it will not be revised downward or withdrawn entirely by such rating company, if in the judgment of the company, circumstances so warrant. Any such downward revision or withdrawal of such rating may have an adverse effect on the market price of the Obligations. LITIGATION The City is not a party to any litigation or other proceeding pending or to its knowledge, threatened, in any court, agency or other administrative body (either state or federal) which, if decided adversely to the City, would have a material adverse effect on the condition of the City (financial or otherwise). REGISTRATION AND QUALIFICATION OF OBLIGATIONS FOR SALE The sale of the Obligations has not been registered under the Federal Securities Act of 1933, as amended, in reliance upon the exemption provided thereunder by Section 3(a)(2); and the Obligations have not been qualified under the Securities Act of Texas in reliance upon various exemptions contained therein; nor have the Obligations been qualified under the securities acts of any jurisdiction. The City assumes no responsibility for qualification of the Obligations under the securities laws of any jurisdiction in which the Obligations may be sold, assigned, pledged, hypothecated or otherwise transferred. This disclaimer of responsibility for qualification for sale or other disposition of the Obligations shall not be construed as an interpretation of any kind with regard to the availability of any exemption from securities registration provisions. LEGAL INVESTMENTS AND ELIGIBILITY TO SECURE PUBLIC FUNDS IN TEXAS Section of the Public Security Procedures Act (Chapter 1201, Texas Government Code) provides that the Obligations are negotiable instruments, investment securities governed by Chapter 8, Texas Business and Commerce Code, and are legal and authorized investments for insurance companies, fiduciaries, and trustees, and for the sinking funds of municipalities or other political subdivisions or public agencies of the State of Texas. With respect to investment in the Obligations by municipalities or other political subdivisions or public agencies of the State of Texas, the Public Funds Investment Act, Chapter 2256, Texas Government Code, requires that the Obligations be 29

300 assigned a rating of "A" or its equivalent as to investment quality by a national rating agency. See "OTHER INFORMATION - RATINGS" herein. In addition, various provisions of the Texas Finance Code provide that, subject to a prudent investor standard, the Obligations are legal investments for state banks, savings banks, trust companies with at capital of one million dollars or more, and savings and loan associations. The Obligations are eligible to secure deposits of any public funds of the State, its agencies, and its political subdivisions, and are legal security for those deposits to the extent of their market value. No review by the City has been made of the laws in other states to determine whether the Obligations are legal investments for various institutions in those states. LEGAL MATTERS The City will furnish a complete transcript of proceedings incident to the authorization and issuance of the Obligations, including the unqualified approving legal opinion of the Attorney General of Texas approving the Initial Obligations and to the effect that the Obligations are valid and legally binding special obligations of the City, and based upon examination of such transcript of proceedings, the approving legal opinion of Andrews Kurth LLP, Houston, Texas, Bond Counsel, to the effect that the interest on the Obligations will be excludable from gross income for federal income tax purposes under Section 103(a) of the Code, subject to the matters described under TAX EXEMPTION herein, including the alternative minimum tax on corporations. The form of Bond Counsel s opinion is attached hereto as Appendix C. The legal fee to be paid to Bond Counsel for services rendered in connection with the issuance of the Obligations is contingent upon the sale and delivery of the Obligations. The legal opinions of Bond Counsel will accompany the Obligations deposited with DTC or will be printed on the definitive Obligations in the event of the discontinuance of the Book-Entry-Only System. Certain matters will be passed upon for the Underwriter by their counsel, McCall, Parkhurst & Horton L.L.P., Dallas, Texas. Bond Counsel was engaged by, and only represents, the City. Except as noted below, Bond Counsel did not take part in the preparation of the Official Statement, and such firm has not assumed any responsibility with respect thereto or undertaken independently to verify any of the information contained therein, except that, in its capacity as Bond Counsel, such firm has reviewed the information describing the Obligations in the Official Statement under the captions THE OBLIGATIONS (except for the information under the subcaptions BOOK-ENTRY-ONLY SYSTEM and USE OF PROCEEDS ), TAX EXEMPTION, TAX TREATMENT OF ORIGINAL ISSUE DISCOUNT AND PREMIUM OBLIGATIONS, QUALIFIED TAX-EXEMPT OBLIGATIONS, CONTINUING DISCLOSURE OF INFORMATION (except for the subcaption COMPLIANCE WITH PRIOR UNDERTAKINGS ), OTHER INFORMATION - REGISTRATION AND QUALIFICATION OF OBLIGATIONS FOR SALE, OTHER INFORMATION - LEGAL INVESTMENTS AND ELIGIBILITY TO SECURE PUBLIC FUNDS IN TEXAS, and OTHER INFORMATION LEGAL MATTERS (except for the last sentence of the first paragraph thereof), and such firm is of the opinion that the information relating to the Obligations and the Ordinances contained therein fairly and accurately describes the laws and legal issues addressed therein and, with respect to the Obligations, such information conforms to the Ordinances. The various legal opinions to be delivered concurrently with the delivery of the Obligations express the professional judgment of the attorneys rendering the opinions as to the legal issues explicitly addressed therein. In rendering a legal opinion, the attorney does not become an insurer or guarantor of that expression of professional judgment, of the transaction opined upon, or of the future performance of the parties to the transaction, nor does the rendering of an opinion guarantee the outcome of any legal dispute that may arise out of the transaction. AUTHENTICITY OF FINANCIAL DATA AND OTHER INFORMATION The financial data and other information contained herein have been obtained from City records, audited financial statements and other sources which are believed to be reliable. There is no guarantee that any of the assumptions or estimates contained herein will be realized. All of the summaries of the statutes, documents and ordinances contained in this Official Statement are made subject to all of the provisions of such statutes, documents and ordinances. These summaries do not purport to be complete statements of such provisions and reference is made to such documents for further information. Reference is made to original documents in all respects. FINANCIAL ADVISOR First Southwest Company is employed as Financial Advisor to the City in connection with the issuance of the Obligations. The Financial Advisor's fee for services rendered with respect to the sale of the Obligations is contingent upon the issuance and delivery of the Obligations. First Southwest Company, in its capacity as Financial Advisor, does not assume any responsibility for the information, covenants and representations contained in any of the legal documents with respect to the federal income tax status of the Obligations, or the possible impact of any present, pending or future actions taken by any legislative or judicial bodies. The Financial Advisor to the City has provided the following sentence for inclusion in this Official Statement. The Financial Advisor has reviewed the information in this Official Statement in accordance with, and as part of, its responsibilities to the City and, as applicable, to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Financial Advisor does not guarantee the accuracy or completeness of such information. UNDERWRITING The Underwriter has agreed, subject to certain conditions, to purchase the Obligations from the City, at an underwriting discount of $. The Underwriter will be obligated to purchase all of the Obligations if any Obligations are purchased. The Obligations to be offered to the public may be offered and sold to certain dealers (including the Underwriter and other dealers depositing Obligations into investment trusts) at prices lower than the public offering prices of such Obligations, and such public offering prices may be changed, from time to time, by the Underwriter. 30

301 FORWARD-LOOKING STATEMENTS DISCLAIMER The statements contained in this Official Statement, and in any other information provided by the City, that are not purely historical, are forward-looking statements, including statements regarding the City's expectations, hopes, intentions, or strategies regarding the future. Readers should not place undue reliance on forward-looking statements. All forward-looking statements included in this Official Statement are based on information available to the City on the date hereof, and the City assumes no obligation to update any such forward-looking statements. The City's actual results could differ materially from those discussed in such forward-looking statements. The forward-looking statements included herein are necessarily based on various assumptions and estimates and are inherently subject to various risks and uncertainties, including risks and uncertainties relating to the possible invalidity of the underlying assumptions and estimates and possible changes or developments in social, economic, business, industry, market, legal, and regulatory circumstances and conditions and actions taken or omitted to be taken by third parties, including customers, suppliers, business partners and competitors, and legislative, judicial, and other governmental authorities and officials. Assumptions related to the foregoing involve judgments with respect to, among other things, future economic, competitive, and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond the control of the City. Any of such assumptions could be inaccurate and, therefore, there can be no assurance that the forward-looking statements included in this Official Statement will prove to be accurate. The Ordinances will approve the form and content of this Official Statement, and any addenda, supplement or amendment thereto, and authorize its further use in the reoffering of the Obligations by the Underwriter. ATTEST: Mayor City of Dickinson, Texas City Secretary 31

302 Schedule I SCHEDULE OF REFUNDED OBLIGATIONS Combination Tax & Revenue Certificates of Obligaion, Series 2000 Maturity Interest Par Call Call March 1 Rate Amount Date Price % $150,000 03/01/ % ,000 03/01/ ,000 03/01/ ,000 03/01/ ,000 03/01/ ,000 03/01/ ,000 03/01/ ,000 03/01/ ,000 03/01/ ,000 03/01/ ,000 03/01/ $2,255,000 32

303 APPENDIX A GENERAL INFORMATION REGARDING THE CITY

304 THE CITY The City is located in Galveston County, 30 miles south of Houston, 20 miles north of Galveston and 10 miles south of Johnson Space Center. The City provides basic municipal services to its citizens including fire and police protection, ambulance service, library services, and development services. EDUCATION Dickinson Independent School District ( Dickinson ISD ) features a strong, diversified curriculum, a relatively small enrollment and an excellent student-to-teacher ratio of 16 to 1. All of the district s schools are located near the educational, cultural and recreational opportunities of Houston, NASA and Galveston Bay. HIGHER EDUCATION UH-Clear Lake is an upper-level institution located in the south side of Houston on 524 acres adjacent to NASA s Lyndon B. Johnson Space Center. With a fall 2008 enrollment of 7,658 students, UHCL offers junior, senior and master s level classes leading to 4 undergraduate degrees in 38 fields of study and 5 master s degrees in 47 fields of study through four schools. UHCL is committed to maintaining solid academic programs largely through its emphasis on teaching excellence. All of the university s professors hold doctorates or the highest possible degree in their respective fields. The College of the Mainland, a junior college located on a 200-acre campus in Texas City, is less than ten miles from the City near the intersection of FM 1764 and State Highway 3. HEALTHCARE AND FACILITIES The greater Houston-Galveston region is noted for the availability of exceptional hospital and medical care. The League City Clear Lake area is served by two modern hospitals with Life Flight capability and 40 medical groups/clinics. The City is also close to Mainland Medical Center in Texas City. Over 200 physicians, surgeons and general practice physicians, and 132 dentists have practices in the region and cover a wide range of specialties. TRANSPORTATION The City has convenient access to several interstate and major US highways. Interstate Highway 45 passes directly through the City giving access to other transportation routes such as Interstate Highway 10, US Highways 59 and 290, and State Highways 288, 225 and 146. The City also has access to four public airports: Houston Bush Intercontinental Airport (69 miles), Hobby Airport (40 miles), Ellington Field (25 miles), and Scholes Airport Galveston (14 miles). The area s trucking industry is wellintegrated with the Port of Houston, the public airports, and the mainline railroads serving the area. Each draws from the others while supporting the others. The Houston Airport System is 9 th largest in the United States and 12 th largest in the world. The Houston Bush Intercontinental Airport ranks 11 th in the U.S. for international passengers. The City is served by Union Pacific Railroad who operates one main line through the City with daily service. JOHNSON SPACE CENTER The Johnson Space Center of the National Aeronautics and Space Administration ( NASA ), which is currently responsible for NASA s space shuttle and space station projects, is an important part of the area economy, both as an employer of more than 3,200 employees and as an attraction for the location of 590 contractors who subcontract approximately 11,500 employees locally. TOP AREA EMPLOYERS GTE Best Way Entex Penreco Texas New Mexico Power Company Federal Express Dickinson ISD A - 1

305 THE COUNTY The City lies within Galveston County which is located on the upper Texas coast of the Gulf of Mexico. The County comprises a land area of 430 square miles, including Galveston Island, the Mainland and Bolivar Peninsula. The official establishment of Galveston County dates back to May 15, 1838, when Sam Houston, the President of the Republic of Texas, approved an article passed by the Congress, establishing the County of Galveston. The 2000 census was 250,158. Galveston County has a diversified economy based on manufacturing, oil and gas production, shipping, agriculture, commercial fishing and tourism. The Galveston County Mainland area is the center of one of the most important industrial concentrations on the Gulf Coast of Texas. Major industries located at Texas City and La Marque include Union Carbide Chemical Company, Amoco Oil Company, Texas City Refining Company, Sterling Chemicals Inc., Gulf Chemical and Metallurgical Corporation, Amoco Chemical Corporation, General Analine (GAF) and others. The County profits from year-round recreational opportunities including sailing, fishing, camping, golfing, swimming and water skiing. The Texas City Dike which extends five miles into Galveston Bay offers beach, boat launching, fishing pier, bait, camping and motel accommodations and other service facilities. The County is home to the world s largest dog racing complex. The site consists of 100 acres and includes a clubhouse with fullservice dining. The track seats 8,000 people and has a total capacity of 12,000. Construction of the $40-million facility was completed in the fall of 1992 and races began immediately. The track created 800 permanent jobs. A - 2

306 APPENDIX B EXCERPTS FROM THE CITY OF DICKINSON, TEXAS ANNUAL FINANCIAL REPORT For the Year Ended September 30, 2008 The information contained in this Appendix consists of excerpts from the City of Dickinson, Texas Annual Financial Report for the Year Ended September 30, 2008, and is not intended to be a complete statement of the City's financial condition. Reference is made to the complete Report for further information.

307 APPENDIX C FORM OF BOND COUNSEL'S OPINION

308 EXHIBIT E ESCROW AGREEMENT CITY OF DICKINSON, TEXAS ORDINANCE NUMBER XXX-2009

309 EXHIBIT F DESCRIPTION OF ANNUAL FINANCIAL INFORMATION The following information is referred to in Section 8.1 of this Ordinance. Annual Financial Statements and Operating Data The financial information and operating data with respect to the City to be provided annually in accordance with such Section are as specified (and included in the Appendix or under the headings of the Official Statement referred to) below: 1. The portions of the audited financial statements of the City appended to the Official Statement as Exhibit B, but for the most recently concluded fiscal year, and, to the extent that such statements are not completed and available, unaudited financial statements for such fiscal year. 2. The quantitative and financial information and operating data presented in the Official Statement in Tables 1-6, 8-10 and Accounting Principles The accounting principles referred to in such Section are the accounting principles described in the notes to the financial statements referred to in paragraph 1 above. CITY OF DICKINSON, TEXAS ORDINANCE NUMBER XXX-2009

310 CITY OF DICKINSON, TEXAS COMBINATION TAX & REVENUE CERTIFICATES OF OBLIGATION AND GENERAL OBLIGATION REFUNDING BONDS SERIES 2009 FINANCING SCHEDULE *** As of March 19, 2009*** Jan-09 Feb-09 Mar-09 Apr-09 S M T W T F S S M T W T F S S M T W T F S S M T W T F S Completion Date Event Responsibility Thurs Jan 22 Circulate draft of Preliminary Official Statement (POS) FA Tues Jan 27 City Council Meeting: Authorize publication of Notice of Intent for Certificates of Obligation City, BC Thurs Jan 29 Comments due on draft of POS FWG Mon Feb 2 Circulated 2 nd draft of POS FA Week of Feb 2 Publish 1 st Notice of Intent for Certificates of Obligation City Mon Feb 9 Comments due on 2 nd draft of POS Week of Feb 9 Publish 2 nd Notice of Intent for Certificates of Obligation City Tues March 3 Mail credit packages to rating agencies and insurance companies FA Week of March 9 Ratings Calls FWG Mon March 9 Circulate final draft of POS FWG Tues March 10 City Council Meeting: Approve POS subject to changes, appoints Paying Agent/Registrar City Mon March 16 Comments due on final draft of POS FWG Receive Ratings from Agencies FA Tues March 17 Print and distribute POS FA Tues March 24 City Council Meeting: Award obligations to Underwriter(s), adopt Ordinance and authorize preparation of Official Statement (OS) City Wed March 25 Circulate draft of OS FA Thurs March 26 Submit transcript of proceedings to Attorney General BC Mon March 30 Comments due on OS FWG, IP Wed April 1 Print and distribute OS FA, IP Thurs April 16 Circulate draft closing memo FA Thurs April 23 Closing FWG, IP

311 Symbol Key FWG Finance Working Group... Includes the City, BC, & FA City City of Dickinson - - BC Bond Counsel... Andrew Kurth LLP FA Financial Advisor... First Southwest Company UW Underwriter... Samco Capital Markets UWC Underwriter Counsel... McCall, Parkhurst & Horton L.L.P. * This Financing Schedule is subject to change.

312 TAB 15

313 Dickinson City Council Agenda Item Data Sheet MEETING DATE March 24, 2009 TOPIC: Resolution Number XXX-2009 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF DICKINSON, TEXAS, APPROVING THE TERMS AND CONDITIONS OF AN INTERLOCAL COOPERATIVE PURCHASING AGREEMENT BY AND BETWEEN THE CITY OF DICKINSON, TEXAS AND CITY OF LEAGUE CITY, TEXAS; PROVIDING FOR THE INCORPORATION OF PREAMBLE; AUTHORIZING EXECUTION OF THE AGREEMENT BY THE CITY ADMINISTRATOR; AND PROVIDING AN EFFECTIVE DATE. BACKGROUND The City has entered into Interlocal Agreements with other governmental entities that enable it to realize cost savings in purchasing products and services and assists the City in complying with state purchasing laws and competitive bidding requirements. The City is interested in purchasing audio/visual system and equipment for the new City Hall and Library from Audio Visual Technologies Group, Inc. ( AVTG ). AVTG currently has a contract in place with the City of League City that utilizes a beneficial pricing structure that will allow the City to purchase the audio/visual system and equipment that meets its needs. Purchase of the audio/visual equipment was approved by the City Council at its March 10, 2009 meeting, and Dickinson Economic Development Corporation has approved the funding for the purchase. I advised Council during the March 10 meeting that staff would bring forward an Interlocal Agreement with League City for this purchase. In order for the City to purchase the system through the contract in place with the City of League City, both cities must enter into an Interlocal Agreement for purchasing. This agenda item seeks approval of such an Interlocal Agreement to provide a vehicle for staff to proceed with the purchase. RECOMMENDATION Staff recommends approval APPROVAL YES NO ACTIONS TAKEN READINGS PASSED OTHER 1 st 2 nd 3 rd PAGE 1 OF 2

314 Dickinson City Council Agenda Item Data Sheet ATTACHMENTS Resolution Number XXX-2009 Copy of quote from Audio Visual Technologies Group, Inc. for audio/visual equipment for City Hall and Library Project FUNDING ISSUES Not applicable Not budgeted Full Amount already budgeted. Funds to be transferred from Acct.# - - SUBMITTING STAFF MEMBER CITY ADMINISTRATOR APPROVAL Julie M. Johnston, City Administrator APPROVAL YES NO ACTIONS TAKEN READINGS PASSED OTHER 1 st 2 nd 3 rd PAGE 2 OF 2

315 RESOLUTION NUMBER XXX-2009 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF DICKINSON, TEXAS, APPROVING THE TERMS AND CONDITIONS OF AN INTERLOCAL COOPERATIVE PURCHASING AGREEMENT BY AND BETWEEN THE CITY OF DICKINSON, TEXAS AND THE CITY OF LEAGUE CITY, TEXAS; PROVIDING FOR THE INCORPORATION OF PREAMBLE; AUTHORIZING EXECUTION OF THE AGREEMENT BY THE CITY ADMINISTRATOR; AND PROVIDING AN EFFECTIVE DATE. WHEREAS, the Interlocal Cooperation Act, Chapter 791 of the Texas Government Code, authorizes governmental entities to contract with each other to perform government functions and services including administrative functions normally associated with the operation of government such as purchasing of necessary materials and supplies; and WHEREAS, cities cannot normally obtain the best possible purchase price for materials and supplies acting individually and without cooperation; and WHEREAS, the City Council of the City of Dickinson finds that Dickinson s best interests are served by entering into Interlocal Cooperation Agreements with other local governmental entities in the region; and WHEREAS, the City Council has before it the proposed Interlocal Cooperation Agreement by and between the City of Dickinson, Texas ( Dickinson ), and the City of League City, Texas ( League City ), attached hereto as Exhibit A and incorporated herein by reference, which provides the terms and conditions for cooperative purchasing by League City and Dickinson (hereinafter called "Agreement"); and WHEREAS, upon full review and consideration of the Agreement and all related matters, the City Council finds that the proposed Agreement is in the best interest of the City and its citizens and is mutually satisfactory for the purchase of certain materials and supplies; and WHEREAS, the City Council desires to approve the terms and conditions of the Agreement, and to authorize the City Administrator to execute the Agreement on behalf of the City of Dickinson. NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF DICKINSON, TEXAS, THAT: Section 1. The above and foregoing preamble is true and correct and is incorporated herein and made a part hereof for all purposes. CITY OF DICKINSON, TEXAS RESOLUTION NUMBER XXX-2009 Page 1

316 Section 2. The City Council, after review of the terms and conditions of the Agreement, hereby approves the attached Interlocal Cooperative Purchasing Agreement between the City of Dickinson, Texas and the City of League City, Texas. Section 3. The City Council also authorizes the City Administrator to execute on behalf of the City of Dickinson the Agreement and all other documents in connection therewith. Section 4. passage. This Resolution shall become effective immediately upon its DULY PASSED AND APPROVED this the day of, ATTEST: Julie Masters, Mayor City of Dickinson, Texas Carol L. McLemore, City Secretary City of Dickinson, Texas APPROVED AS TO FORM AND CONTENT: Loren B. Smith, City Attorney City of Dickinson, Texas CITY OF DICKINSON, TEXAS RESOLUTION NUMBER XXX-2009 Page 2

317 EXHIBIT A TO RESOLUTION NUMBER XXX-2009

318 INTERLOCAL COOPERATIVE PURCHASING AGREEMENT STATE OF TEXAS COUNTY OF GALVESTON BETWEEN CITY OF DICKINSON, TEXAS AND CITY OF LEAGUE CITY, TEXAS THIS AGREEMENT is made on the day of, 2009, between the City of Dickinson, Texas, and the City of League City, Texas; each referred to herein as Participating Governments. WHEREAS, the respective Participating Governments are authorized by the Interlocal Cooperation Act, V.T.C.A. Government Code, Chapter 791, to enter into joint contracts and agreements for the performance of governmental functions and services including administrative functions normally associated with the operation of government such as purchasing of necessary materials and supplies; WHEREAS, it is the desire of the aforesaid Participating Governments to comply with and further the policies and purpose of the Interlocal Cooperation Act; and WHEREAS, the Participating Governments cannot normally obtain the best possible purchase price for materials and supplies acting individually and without cooperation; and WHEREAS, it is deemed in the best interest of all Participating Governments that said governments do enter into a mutually satisfactory agreement for the purchase of certain materials and supplies; and WHEREAS, the parties, in performing governmental functions or in paying for the performance of governmental functions hereunder shall make that performance or those payments from current revenues legally available to that party. NOW, THEREFORE, the parties hereto, in consideration of the mutual covenants and conditions contained herein and pursuant to the authority permitted under the Interlocal Cooperation Act, promise and agree as follows: I. Purpose The purpose of this Agreement is to authorize participation of the City of Dickinson, Texas in various City of League City, Texas contracts for the purchase of various goods and services. Participation in this cooperative program will be highly beneficial to the taxpayers of the City of Dickinson through anticipated savings to be realized. INTERLOCAL COOPERATIVE PURCHASING AGREEMENT Page 1

319 II. Duration of Agreement This Agreement shall be in effect from the date of execution until terminated in writing by either party to the agreement. III. Relationship of Parties It is agreed that the City of Dickinson, Texas in receiving products and/or services specified in this agreement, shall act as an independent purchaser and shall have control of its needs and the manner in which they are acquired. Neither the City of Dickinson, Texas its agents, employees, volunteer help nor any other person operating under this contract shall be considered an agent or employee of City of League City, Texas and shall not be entitled to participate in any pension plans or other benefits that City of League City, Texas provides its employees. City of League City, Texas shall notify all participating entities of available contracts to include terms of contract, commodity cost, contact names and addresses. City of League City, Texas shall keep Participating Governments informed of all changes to the Cooperative Purchasing list of contracts. Nothing in this agreement shall prevent any Participating Government from accepting and awarding bids for commodities subject to this agreement individually and in its own behalf. Julie M. Johnston, City Administrator, is hereby designated as the official representative to act for the City of Dickinson, Texas in all matters relating to this agreement. IV. Purchase of Goods and Services All products and services shall be procured by City of League City, Texas in accordance with procedures governing competitive bids and competitive proposals. The Participating Government will be able to purchase from those contracts established by City of League City, Texas where notice has been given in the specifications and a successful bidder has accepted terms for Cooperative Purchasing Agreements for local governments. The Participating Governments hereto agree that the ordering of products and services through this agreement shall be their individual responsibility and that the successful bidder or bidders shall bill each Participating Government directly. INTERLOCAL COOPERATIVE PURCHASING AGREEMENT Page 2

320 The Participating Governments agree to pay successful bidders directly for all products or services received from current revenues available for such purchase. Each Participating Government shall be liable to the successful bidder only for products and services ordered by and received by it, and shall not by the execution of this agreement assume any additional liability. City of League City, Texas does not warrant and is not responsible for the quality or delivery of products or services from successful bidder. The Participating Government shall receive all warranties provided by successful bidder for the products or services purchased. In the event that any dispute arises between individual Participating Government and a successful bidder, the same shall be handled by and between the Participating Government body and the bidder. IN WITNESS WHEREOF, the parties hereto have caused this agreement to be executed by their authorized officers thereon the day and the year first above written. CITY OF DICKINSON, TEXAS CITY OF LEAGUE CITY, TEXAS By: Julie M. Johnston By: Chris Reed City Administrator City Administrator INTERLOCAL COOPERATIVE PURCHASING AGREEMENT Page 3

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