HomeMy WebLinkAbout7882RESOLUTION NO. 7882
A RESOLUTION CONCERNING THE PROPOSED CITY OF PUEBLO,
COLORADO, WATER REVENUE BONDS, SERIES 1996, IN AN ORIGINAL
PRINCIPAL AMOUNT OF APPROXIMATELY $3,681,000 AND IN AN
ACCRETED VALUE AT MATURITY OF UP TO $5,500,000; AUTHORIZING
THE OFFICIAL NOTICE OF BOND SALE WITH RESPECT TO SAID
BONDS; PRESCRIBING CERTAIN DETAILS CONCERNING SAID
PROPOSED SALE AND SAID BONDS; AND PROVIDING THE EFFECTIVE
DATE OF THIS RESOLUTION.
WHEREAS, the City of Pueblo, Colorado, in the County of Pueblo and State of Colorado
(the "City "), is a municipal corporation duly organized and existing as a home rule city pursuant
to Article XX of the Constitution of the State of Colorado (the "Constitution ") and the home rule
charter of the City (the "Charter "); and
WHEREAS, the City Council of the City (the "Council ") deems it advisable and necessary
to issue water revenue bonds of the City for the benefit of the Board of Water Works of the City
(the "Board ") in an original principal amount of approximately $3,681,000 and an accreted value
at maturity of up to $5,500,000 (the "Accreted Value at Maturity "), designated Water Revenue
Bonds, Series 1996 (the "Bonds "), and has been requested by the Board to issue the Bonds, to
provide funds with which to defray in whole or in part the cost of acquiring, constructing and
replacing water system improvements for the City, and to pay necessary incidental and
appurtenant expenses in connection therewith, including the costs of issuance of the Bonds.
NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF
PUEBLO THAT:
Section 1. The City hereby deems it to be in the best interest of the City that the Bonds
be, and the same hereby are ordered to be, publicly sold, and the Council shall cause sealed bids
to be received and to be opened publicly for the purchase of the Bonds on June 10, 1996 at the
hour of 10:00 a.m., local time.
Section 2. The President of the City Council (the "President ") and the Finance Director
of the City (the "Finance Director ") together are hereby authorized and directed to provide for
the publication of the Official Notice of Bond Sale in the Pueblo Chieftain at such times as they
deem adequate to give reasonable notice of the proposed sale, but no less than once after the date
hereof and at least five days prior to the public sale date. The Official Notice of Bond Sale shall
be in substantially the following form, with such changes therein, including but not limited to
changes in dates, principal amounts and maturities and completions thereto, including the
identification of the bond insurer, as shall be deemed to be in the best interest and to the best
advantage of the City, the execution of such notice by the President and the Finance Director to
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indicate conclusively the Council's approval of any and all such changes for purposes of this
Resolution:
[Form of Official Notice of Bond Sale]
OFFICIAL NOTICE OF BOND SALE
CITY OF PUEBLO, COLORADO
Acting on Behalf of
THE BOARD OF WATER WORKS
OF PUEBLO, COLORADO
WATER REVENUE BONDS
SERIES 1996
(Payable from pledged net revenues of the Board of Water Works of Pueblo, Colorado)
PUBLIC NOTICE IS HEREBY GIVEN that the City Council of the City of Pueblo (the
"Council" and "City," respectively), in the County of Pueblo and State of Colorado, acting on
behalf of the Board of Water Works of Pueblo, Colorado (the "Board "), will, on Monday, the
10th day of June 1996, at the hour of 10:00 a.m., local time, at the offices of the Board located
at 319 West Fourth Street, Pueblo, Colorado 81003, receive sealed bids and publicly open the
same for the purchase of the bonds of the City, particularly described below:
BOND PROVISIONS
Issue
The City will issue its "Water Revenue Bonds, Series 1996," in the form of capital
appreciation bonds having an aggregate Accreted Value at Maturity of $5,110,000 (the "Bonds "),
subject to adjustment as set forth herein, pursuant to an ordinance to be adopted by the City (the
"Ordinance ").
Form, Dates and Maturities
The Bonds subject to this Official Notice of Bond Sale will be issued as fully registered
bonds and shall be executed and delivered only in global book -entry form registered in the name
of Cede & Co., as nominee of The Depository Trust Company ( "DTC "), New York, New York,
acting as securities depository of the Bonds. The Bonds may be purchased in the denominations
of $5,000 Accreted Value at Maturity and any integral multiples thereof. The Bonds will be dated
their date of delivery, which is expected to be July 11, 1996. The capital appreciation bonds will
be compounded each May 1 and November 1, beginning November 1, 1996. The Bonds will
mature on November 1 in each of the designated Accreted Values at Maturity and years as
follows:
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Date Maturing Accreted Value
(November 1) at Maturity
2001 $1,400,000
2002 3,710,000
Book -Entry
The City, after consultation with its financial advisor, will make arrangements for custodial
deposit of the Bonds with DTC, New York, New York. The Bonds will therefore be registered
in the name of Cede & Co., as nominee of DTC, which will act as securities depository for the
Bonds. Ownership interest in the Bonds will be transferred only pursuant to the
"Book- Entry -Only- System" of DTC in a denomination of $5,000 Accreted Value at Maturity or
any integral multiple thereof. After the initial deposit of the Bonds with DTC, they may not be
removed from such custodial deposit, transferred or exchanged except as provided in the
Ordinance.
Original Principal Amounts
(a) Please bid one original principal amount per $5,000 Accreted Value at
Maturity for each maturity of the Bonds.
(b) Each original principal amount should be stated in dollars and cents.
(c) Please also, for informational purposes only, include the yield for each
maturity resulting from the original principal price bid.
(d) The City and the Board reserve the right to adjust the Accreted Value at
Maturity for the Bonds maturing on November 1, 2002 by up to 10% up or down.
Purpose of Issue
The Bonds are authorized to be issued to finance (a) the acquisition, construction and
replacement of water system improvements and (b) to meet necessary incidental and appurtenant
costs and expenses in connection with these purposes, including, without limitation, the costs of
issuance of the Bonds.
Redemption
The Bonds will not be subject to redemption prior to maturity.
Place of Payment
The Accreted Value at Maturity of the Bonds will be payable to the registered owner
(Cede & Co.) upon presentation and surrender of the Bonds at the principal office of The Bank
of Cherry Creek, N.A., as paying agent, or its successor or assignee (the "Paying Agent "). All
payments shall be made in lawful money of the United States of America.
Security
The Bonds will be payable from and will constitute a first and prior (but not exclusive) lien
on, all Net Revenue (hereinafter defined) of the Board and moneys on deposit in the Bond Fund
established by the Ordinance. Net Revenue means the Board's Gross Revenue (as defined in the
Ordinance) less the Board's Operation and Maintenance Expenses (as defined in the Ordinance).
The Board has covenanted to set its rates, fees and charges for use of its water system at a level
sufficient so that Net Revenue each fiscal year equals not less than 110% of the amount necessary
to pay when due (a) the Accreted Value at Maturity of the Bonds coming due during such fiscal
year; and (b) the principal of and interest on any Parity Lien Bonds coming due during such fiscal
year. The Board has further covenanted to set its rates, fees and charges for use of its water
system at a level sufficient so that Net Revenue each fiscal year equals not less than 100% of the
principal of and interest on any and all bonds or indebtedness coming due such fiscal year on
which the Board is required to make payments from the revenues of the System. There are
presently outstanding $16,075,000 of general obligation water bonds of the City which are
additionally secured by a pledge of the Net Revenue, which pledge is on a parity with the pledge
securing the Bonds.
The Series 1996 Bonds shall not constitute a debt or other indebtedness or multi - fiscal
year direct or indirect debt or other financial obligation of the City within the meaning of
any constitution, charter or statutory provision or limitation; the Series 1996 Bonds shall not
be payable from the proceeds of general property taxes; and the Series 1996 Bonds shall not
be considered or held to be general obligations of the City. The Series 1996 Bonds are special
revenue obligations of the City, payable and collectible solely out of and secured by a pledge
of the Net Revenue of the Board.
The scheduled payment of the Accreted Value at Maturity on the Bonds when due will be
guaranteed under an insurance policy to be issued concurrently with the delivery of the Bonds by
MBIA Insurance Corporation.
Authorization
The Bonds are to be issued under the Constitution of the State of Colorado, the Charter
of the City and the Ordinance.
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TERMS OF SALE
Bid Proposals
Any bidder is required to submit an unconditional and written bid for the entire issue of
Bonds, specifying the original principal amount for each $5,000 Accreted Value at Maturity, for
each maturity. The City and the Board reserve the right to adjust the Accreted Value at Maturity
for the Bonds maturing on November 1, 2002 by up to 10% up or down. The Board and the City
intend to make the adjustment in order to achieve a total purchase price of approximately
$3,680,000. Each bidder must use the Official Bid Form available from the City. Each bid shall
also set forth, for informational purposes only, the yield for each maturity of Bonds. Each bid
must be in a sealed envelope addressed to: Mr. Jerry Cantrell, Board of Water Works of the City
of Pueblo, 319 West Fourth Street, Pueblo, Colorado 81003.
Good Faith Deposit
A good faith deposit (the "Deposit ") in the form of a certified or cashier's check or a
financial surety bond (the "Financial Surety Bond ") in the amount of $75,000, payable to the
order of the City of Pueblo, Colorado, is required for each bid to be considered. If a check is
used, it must accompany each bid. If a Financial Surety Bond is used, it must be from an
insurance company licensed to issue such a bond in the State of Colorado, and such bond must
be submitted to the City or its financial advisor prior to the opening of the bids. The Financial
Surety Bond must identify each bidder whose Deposit is guaranteed by such Financial Surety
Bond. If the Bonds are awarded to a bidder utilizing a Financial Surety Bond, then that purchaser
(the "Purchaser ") is required to submit its Deposit to the City or its financial advisor in the form
of a cashier's check (or wire transfer such amount as instructed by the City or its financial
advisor) not later than 3:30 p.m. MDT on the next business day following the award. If such
Deposit is not received by that time, the Financial Surety Bond may be drawn by the City to
satisfy the Deposit requirement. No interest on the Deposit will accrue to the Purchaser. The
Deposit of the Purchaser will either be applied to the purchase price of the Bonds or returned to
the Purchaser on the closing date upon payment of the full purchase price of the Bonds. In the
event the Purchaser fails to honor its accepted bid, the Deposit will be retained by the City.
Deposits of all bidders other than the Purchaser shall be promptly returned to each such bidder.
Tax Status
Kutak Rock, Denver, Colorado, bond counsel, will opine that, under existing laws,
regulations, rulings and judicial decisions, the original issue discount on the Bonds (a) is not
includible in gross income for federal income tax purposes or for Colorado income tax purposes,
(b) is not includible in alternative minimum taxable income for the purpose of the Colorado
alternative minimum tax and (c) is not a specific preference item for purposes of the alternative
minimum tax provisions contained in the Internal Revenue Code of 1986, as amended (the
"Code "); however, such opinion will also state that original issue discount on the Bonds will be
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included in the adjusted current earnings of certain corporations, and such corporations are
required to include in the calculation of alternative minimum taxable income 75 % of the excess
of each such corporation's adjusted current earnings over its alternative minimum taxable income
(determined without regard to this adjustment and prior to reduction for certain net operating
losses) and that the opinion described in clause (a) above is subject to continuing compliance by
the City and the Board with the covenants regarding federal tax law contained in the Ordinance
and the Resolution, respectively, authorizing the Bonds and that failure to comply with such
covenants could cause the accrual of original issue discount on the Bonds to be so included in
federal and Colorado gross income retroactive to the date of issue of the Bonds. Bond counsel's
opinion will also state that the accrual or receipt of original issue discount on the Bonds may
otherwise affect the federal income tax liability of the recipient and that the extent of these other
tax consequences will depend upon the recipient's particular tax status or other items of income
or deduction. If, prior to the delivery of the Bonds to the successful bidder therefor, the income
received by private owners of obligations of the same type and character as the Bonds shall be
includible in gross income for federal or State of Colorado purposes, the successful bidder, at its
election made prior to the tender by the City of the Bonds for delivery, may be relieved of any
obligation under the contract to purchase the Bonds. In such case, the contract to purchase the
Bonds shall terminate, and the Deposit accompanying the Purchaser's bid will be returned to the
Purchaser upon written request therefor. Any such option shall be exercised by a letter addressed
to the of Finance Director and bond counsel, and deposited in the United States mails, as
first -class mail, postage prepaid.
Sale Reservations
The City reserves the privilege:
(a) of waiving any irregularity or informality in any bid;
(b) of rejecting any and all bids for the Bonds; and
(c) of reoffering the Bonds for sale in any manner permitted by law.
Basis of Award
The Bonds, subject to such sale reservations, shall be sold to the responsible bidder making
the best bid for the Bonds to the best advantage of the City. The best bid shall be determined by
comparison of the original principal amounts bid for the Bonds for each bid received, and by the
use of the City's discretion. The City and the Board reserve the right to adjust the Accreted Value
at Maturity for the Bonds maturing on November 1, 2002 by up to 10% up or down in order to
produce a total purchase price for the Bonds of approximately $3,680,000. An award will be
made (if any is made) to the responsible bidder submitting the bid that results, after any such
adjustment, in the highest total purchase price for the Bonds. If there are two or more equal bids
for the Bonds and such equal bids are the best bids received, the Council shall determine in its
discretion which bid will be accepted.
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Time of Award
The City shall open the bids at the time hereinabove specified. It intends to take action
upon determining the best bid and to award the Bonds or reject all bids for the Bonds by action
of the City Council at a meeting to be held not later than 24 hours after the expiration of the time
for opening bids. A verbal award will be made as soon as possible after the final structure has
been set.
Offering Price and Yields
On the date herein stated for opening bids, the successful bidder shall notify Jerry Cantrell
in writing of:
(a) the initial offering price of the Bonds to the public (excluding bond brokers
and other intermediaries) at which a substantial portion of the Bonds of each maturity are
sold, and
(b) the initial offering yield to maturity for each maturity of the Bonds in a
stated percentage for the Council's use in making any necessary arbitrage bond investment
yield calculations for federal income tax purposes. In addition, prior to delivery of the
Bonds the successful bidder will be required to sign and deliver an exhibit to the no
arbitrage certificate of the City with respect to the public offering price and yield of the
Bonds in form and substance required by bond counsel.
Manner and Time of Delivery
The Deposit of the successful bidder shall be credited to the Purchaser at the time of
delivery of the Bonds (without accruing interest). If the successful bidder for the Bonds fails or
neglects to complete the purchase of the Bonds on the date the Bonds are made ready and are
tendered by the City for delivery, the amount of this Deposit shall be forfeited (as liquidated
damages for noncompliance with the bid) to the City, except as hereinafter provided. In that
event, the City may reoffer the Bonds for sale. The Purchaser shall not be required to accept
delivery of any of the Bonds if they are not tendered for delivery within 60 days from the date
herein stated for opening bids, and, if the Bonds are not so tendered within said period of time,
the Deposit shall be returned to the Purchaser upon its written request. Unless the City shall
otherwise notify the Purchaser, the Bonds will be tendered to the Purchaser for delivery on
July 11, 1996.
Payment and Place of Delivery
The successful bidder shall be required to make payment of the balance due for the Bonds
by wire transfer in immediately available funds to an account designated by the City. Such
balance of the purchase price, including any premium, must be paid in such immediately available
funds and not by any waiver of interest, nor by any other concession as a substitution for such
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immediately available funds. The successful bidder shall be required to accept delivery of the
Bonds at the office of DTC in New York, New York.
CUSIP Numbers
CUSIP numbers shall be printed on the Bonds at the expense of the City. If an incorrect
number is imprinted on any Bond or if a number is not printed thereon, any such error or
omission shall not constitute cause for the successful bidder to refuse delivery of any Bond.
Legal Opinion, Bonds and Transcript
The legality of the Bond issue will be approved by the firm of Kutak Rock, Suite 2900,
717 Seventeenth Street, Denver, Colorado 80202, whose unqualified approving opinion, together
with the Bonds, a certified transcript of the proceedings, including a certificate stating that there
is no litigation pending affecting the validity of the Bonds as of the date of their delivery, and
other closing documents, will be furnished to the Purchaser without charge by the City.
Financial Advisor
Piper Jaffray Inc. is acting as financial advisor to the Board and the City in connection
with the issuance of the Bonds. Pursuant to its contract with the Board, it is authorized to submit
a bid to purchase the Bonds.
Rule 15c2 -12 Compliance
The City will enter into a written agreement or contract, constituting an undertaking to
provide ongoing disclosure about the Board and the City, for the benefit of the registered owners
of the Bonds on or before the date of delivery of the Bonds as required by Section (b)(5)(1) of
Securities and Exchange Commission Rule 15c2 -12 (17 CFR § 240.15c2 -12) (the "Rule "), which
undertaking shall be a part of the Ordinance and in the form summarized in the Preliminary
Official Statement. The form of the Preliminary Official Statement has been approved by the
Board. The City is in full compliance with each and every undertaking previously entered into by
it pursuant to the Rule.
The Preliminary Official Statement which will be delivered pursuant to the sale of the
Bonds is, except for Permitted Omissions (as defined below), final as of its date, within the
meaning of the Rule, and the information therein is accurate and complete except for the Permitted
Omissions. "Permitted Omissions" shall mean the offering prices, interest rates, selling
compensation, delivery date, ratings, any other terms required by the City to be specified in the
competitive bid, the identify of the underwriters and other terms of the Bonds depending on such
matters, all with respect to the Bonds.
To enable the successful bidder to comply with the Rule, after the award of the Bonds and
within seven business days following receipt by the City of written advice from the successful
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bidder of the full name or names of the successful bidder (if the same cannot be readily
ascertained from the Official Bid Form submitted thereby), the offering prices of the Bonds and
the amount of selling compensation realized, the City will furnish thereto, in reasonable quantities
as requested, copies of a final Official Statement. Failure by the successful bidder to provide (or
delay by the successful bidder in providing) such information will prevent the City from
furnishing such Official Statement as described above, and the City shall not be responsible or
liable in any manner for the accuracy of the information provided by the successful bidder or
failure to furnish such Official Statement as described above which results from a failure by the
successful bidder to provide the aforementioned information within the time specified.
Information
This Official Notice of Bond Sale, and a Preliminary Official Statement relating to the
Bonds, may be obtained from Mr. Jerry Cantrell, Board of Water Works of the City of Pueblo,
319 Fourth Street, Pueblo, Colorado 81003, (719) 584 -0250, or from Mr. James Manire, Piper
Jaffray Inc., Suite 2100, 1050 17th Street, Denver, Colorado 80265, (303) 820 -5825.
By order of the City Council of the City of Pueblo, Colorado, dated this 4th day of June,
1996.
[CITY SEAL]
By'A�
P esident, City Council
By CU
Finance Director
[End of Form of Official Notice of Bond Sale]
Section 3. Bids for the Bonds shall be opened at the time, place and manner provided in
the Official Notice of Bond Sale as herein prescribed.
Section 4. The Council hereby approves the distribution and use in connection with the
offering of the Bonds of the Preliminary Official Statement in substantially the form presented to
the Council at this meeting, with such changes therein, if any, as are approved by the Finance
Director and the City Attorney.
Section 5. The Official Bid Form in substantially the following form is hereby approved,
with such changes thereto as the President of the City Council and the Finance Director shall
approve consistent with changes to the Official Notice of Bond Sale:
02/103624.1
[Form of Official Bid Form]
OFFICIAL BID FORM
CITY OF PUEBLO, COLORADO
Acting on Behalf of
THE BOARD OF WATER WORKS
OF PUEBLO, COLORADO
WATER REVENUE BONDS
SERIES 1996
Mr. Jerry Cantrell
Board of Water Works of
the City of Pueblo
319 Fourth Street
Pueblo, Colorado 81003
Dear Mr. Cantrell:
For $5,110,000 Accreted Value at Maturity (subject to adjustment as provided in the
Official Notice of Bond Sale) of the legally issued City of Pueblo, Colorado, acting on behalf of
the Board of Water Works of Pueblo, Colorado, Water Revenue Bonds, Series 1996 (the
"Bonds "), described in the Official Notice of Bond Sale dated May , 1996, included with the
Preliminary Official Statement of the City of Pueblo, Colorado (the "City") pertaining to the
Bonds, which Notice is by reference made a part hereof, we will pay the City the following
purchase price set forth in the following table for each $5,000 Accreted Value at Maturity for said
Bonds:
Maturity Accreted Value Purchase Purchase Price per
(November 1) at Maturity Price Per Maturity $5,000
2001 $1,400,000 $ $
2002 3,710,000 $ $
Total: $
(l) The City and the Board reserve the right to adjust the Accreted Value at Maturity for
the Bonds maturing on November 1, 2002 by up to 10% up or down; it is the Board's
and the City's intention to make the adjustment in order to achieve a total purchase price
of approximately $3,680,000.
(2) Our calculation of yield to maturity (which is not a part of this bid) is based upon the
reoffering yield of the Bonds to the public assuming a delivery date of July 11, 1996.
02/103624.1
The total interest cost for the Bonds pursuant to this bid is
Prior to our accepting delivery of said Bonds, you agree to furnish a certified transcript
of all legal proceedings requisite to their issuance and delivery, including a signature and
no- litigation certificate in the customary form evidencing the legality of the Bonds and the security
provisions relating thereto in form satisfactory to Kutak Rock, Denver, Colorado, whose
unqualified approving legal opinion in the customary form shall accompany the Bonds at delivery.
You also agree to provide us with a reasonable quantity of final Official Statements within seven
business days from the date this bid is accepted, and we hereby request of such final Official
Statements.
The Bonds are to be delivered to us on or about July 11, 1996.
The cost of typing the Bonds for delivery in book -entry only form at The Depository Trust
Company and the fees of Kutak Rock will be paid by the City.
Unless we have provided for use of a Financial Surety Bond to evidence our good faith
deposit, we herewith hand you a cashier's check or certified check for $75,000 as evidence of our
good faith in complying with the terms and conditions of this proposal which is to apply as partial
payment (without interest thereon) for said Bonds when the legality of same has been approved,
and to be forfeited as fully liquidated damages should we fail or refuse to take up said Bonds as
above provided. Said check is to be returned to us (without interest thereon) if this proposal is
not accepted, or if the above attorneys should decline to approve the legality or tax - exempt status
of the issue and as otherwise described in the Official Notice of Bond Sale. If in lieu of said
check, we furnished a Financial Surety Bond, we agree to furnish the required deposit no later
than 3:30 p.m. M.S.T. on the day following acceptance of our bid, in accordance with the Official
Notice of Bond Sale. This offer is for immediate acceptance unless otherwise specified above.
We understand that Piper Jaffray Inc. is acting as financial advisor to the City and the
Board in connection with the issuance of the Bonds and that, pursuant to its contract with the
Board, the financial advisor is authorized to submit a bid to purchase the Bonds.
Dated this day of June 1996.
Respectfully submitted,
(Firm Name)
By
Name:
Title:
02/103624.1
Telephone:
The foregoing proposal is accepted by the City Council as the governing body of the City
this 10th day of June 1996.
RIM
President, City Council
[End of Form of Official Bid Form]
Section 6. The President of the City Council and the Finance Director and the Board's
financial advisor are hereby authorized and directed to take all other action necessary or
appropriate to effectuate the provisions of this resolution. All action heretofore taken (not
inconsistent with this resolution) is hereby ratified, approved and confirmed.
Section 7. If any section, paragraph, clause or provision of this resolution 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 resolution.
Section 8. This resolution shall take effect immediately upon its introduction and passage.
[The Remainder of This Page Intentionally Left Blank]
02/103624.1
INTRODUCED, READ, PASSED AND ADOPTED this 28th day of May, 1996.
BY: Charles Jones
Councilperson
[CITY SEAL:? APPROVED: -.le
Pres ent, City Council
Attest:
By CL
Cit Jerk
02/103624.1
NEW ISSUE
BOOK -ENTRY ONLY
RATINGS: Moody's: "Aaa"
Standard & Poor's: "AAA"
(See "MISCELLANEOUS- Ratings ")
INSURANCE: MBIA Insurance Corporation
In the opinion of Bond Counsel, under existing statutes, regulations, rulings and judicial decisions and assuming compliance with certain
covenants described in "LEGAL MATTERS- Opinion of Bond Counsel" herein, original issue discount on the Bonds (i) is excluded from gross income
of the recipients thereof for purposes of federal income taxation, (ii) is not treated as a specific preference item for purposes of the fi , deral alternative
minimtan tax imposed on individuals and corporations, and (iii) is exempt from Colorado income tax. See the caption 'LEGAL MATTERS- Opinion
of Bond Counsel" herein for a description of certain provisions of law which may affect the federal and state tax treatment of inuerest on the Bonds.
$3 1 977 9 956.15
CITY OF PUEBLO, COLORADO
Acting on Behalf of the
BOARD OF WATER WORKS OF PUEBLO, COLORADO
WATER REVENUE BONDS
SERIES 1996
Dated: Date of Issuance
Due: November 1, as shown below
The City of' Pueblo, Colorado, Water Revenue Bonds, Series 1996 (the "Bonds "), comprised of $3,977,956.15 of Capital Appreciation
Bonds, are being issued by the City of Pueblo, Colorado (the "City ") on behalf of the Board of Water Works of Pueblo, Colorado (the "Board "), in
fully registered form and will be registered initially in the name of "Cede & Co." as nominee for The Depository Trust Company, New York, New
York ( "DTC "), which will act as securities depository for the Bonds. Beneficial ownership interests in the Bonds may be acquired in denominations
of $5,000 in Accreted Value at Maturity (as defined herein) at maturity or integral multiples thereof through brokers and dealers who are, or who act
through, Participants in the DTC system, as described herein. Such beneficial ownership interests will be recorded on a computerized book -entry sys-
tem operated by DTC and such Participants. Beneficial owners will not receive certificates evidencing their interests in the Bonds so long as DTC or
a successor securities depository acts as the securities depository with respect to the Bonds. So long as Cede & Co. is the registered owner of the
Bonds, payments of Accreted Value at Maturity on the Bonds will be made by The Bank of Cherry Creek, N.A., or its successor, as Paying Agent for
the Bonds, directly to DTC, which will remit such payments to the DTC Participants (as defined herein) for subsequent distribution to the Beneficial
Owners (as defined herein). See the caption "THE BONDS" in this Official Statement.
The difference between the original principal amount set forth on this front cover and the Accreted Value at Maturity of any Bond is origi-
nal issue discount, which will be treated as interest payable only upon the maturity of the Bond. So long as DTC or its nominee is the registered owner
of the Bonds, payments of Accreted Value at Maturity on the Bonds, as well as notices and other communications made by or on behalf of the City
pursuant to the authorizing bond ordinance (the 'Bond Ordinance ''), will be made directly to DTC or its nominee only. See the captions "INTRO-
DUCTION" and "THE BONDS" in this Official Statement.
The scheduled payment of Accreted Value at Maturity on the Bonds when due will be guaranteed under an insurance policy to be issued
concurrently with the delivery of the Bonds by MBIA Insurance Corporation.
A41364
MATURITY SCHEDULE
Maturity
Accreted Value
(November 1)
at Maturity
2001
$1,400,000
2002
4,035,000
Reoffering Price Per $100 Yield to
of Accreted Value at Maturity Maturity
77.349 4.90%
73.241 5.00
The Bonds are special revenue obligations of the City, payable solely from the Net Revenue derived by the Board from its operation of the
Pueblo waterworks system, all as more particularly set forth herein and in the authorizing Bond Ordinance. The Bonds constitute an irrevocable and
first lien upon the Net Revenue, but not an exclusive first lien. The City has outstanding $16,075,00 of general obligation bonds issued on behalf of
the Board, which general obligation bonds are additionally secured by a lien on the Net Revenue on a parity with the Bonds. THE BONDS DO NOT
CONSTITUTE A DEBT OR INDEBTEDNESS OF THE CITY WITHIN THE MEANING OF THE CITY CHARTER OR THE COLORADO CON-
STITUTION, AND SHALL NOT BE CONSIDERED OR HELD TO BE A GENERAL OBLIGATION OF THE CITY. See the caption "THE
BONDS - Security for the Bonds" in this Official Statement.
THE BONDS ARE NOT SUBJECT TO REDEMPTION PRIOR TO MATURITY.
This cover page contains certain information for quick reference only. It is not a summary of this issue. Each investor must read this entire
Official Statement to obtain information essential to the making of an informed investment decision.
The Bonds are being offered pursuant to a public sale, subject to the approval of legality and certain other matters by Kutak Rock, as Bond
Counsel, and subject to certain other conditions. Certain legal matters will be passed upon for the City by Thomas E. Jagger, Esq., and for the Board
by Peterson, Fonda, Farley, Mattoon. Crockenherg & Garcia, P.C. It is expected that the Bonds will be available for delivery through the facilities of
DTC in New York, New York, on or ahout July 11, 1996.
PAINEWEBBER INCORPORATED
Datc: Junc 10, 1996
CITY COUNCIL
Fay Kastelic, President
Samuel Corsentino, Vice President
Patrick Avalos
Cathy Garcia
Al Gurule
Charles Jones
John Verna
CITY OFFICIALS
Lewis A. Quigley, City Manager
Billy G. Martin, Director of Finance
CITY ATTORNEY
Thomas E. Jagger, Esq.
BOARD OF WATER WORKS
Kevin F. McCarthy, President
Verdon L. Johnson, Secretary- Treasurer
Vera Ortegon, Vice President
Michael W. Stillman, Vice President
David F. Trujillo, Vice President
BOARD OFFICIALS
Alan C. Hamel, Executive Director
Jerry J. Cantrell, Director of Administrative Services
GENERAL COUNSEL
Peterson, Fonda, Farley,
Mattoon, Crockenberg & Garcia, P.C.
INDEPENDENT AUDITORS
Schmidt, McCormack & Associates, Inc.
PAYING AGENT AND REGISTRAR
The Bank of Cherry Creek, N.A.
FINANCIAL ADVISOR
Piper Jaffray Inc.
Denver, Colorado
BOND COUNSEL
Kutak Rock
Denver, Colorado
No dealer, salesman, or other person has been authorized to give any information or to make any
representation, other than the information contained in this Official Statement, in connection with the
offering of the Bonds, and, if given or made, such information or representation must not be relied upon
as having been authorized by the City, the Board, the Financial Advisor or the Underwriter. The
information in this Official Statement is subject to change without notice, and neither the delivery of this
Official Statement nor any sale hereunder will, under any circumstances, create any implication that there
has been no change in the affairs of the City, the Board, the Financial Advisor or the Underwriter since
the date hereof. This Official Statement does not constitute an offer or solicitation in any jurisdiction in
which such offer or solicitation is not authorized, or in which any person making such offer or solicitation
is not qualified to do so, or to any person to whom it is unlawful to make such offer or solicitation. The
information set forth herein has been obtained from the City, the Board and other sources which are
believed to be reliable, but it is not guaranteed as to accuracy or completeness by, and is not to be
construed as a representation by the Financial Advisor or the Underwriter.
THE BONDS HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION BY REASON OF CERTAIN EXEMPTIONS CONTAINED IN THE SECURITIES ACT
OF 1933, AS AMENDED. IN MAKING AN INVESTMENT DECISION INVESTORS MUST RELY
ON THEIR OWN EXAMINATION OF THE BOARD, THE BONDS AND THE TERMS OF THE
OFFERING, INCLUDING THE MERITS AND RISKS INVOLVED. THESE SECURITIES HAVE
NOT BEEN RECOMMENDED BY ANY FEDERAL OR STATE SECURITIES COMMISSION OR
REGULATORY AUTHORITY. FURTHERMORE, THE FOREGOING AUTHORITIES HAVE NOT
CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY OF THIS DOCUMENT
AND ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE PRICES AT WHICH THE BONDS ARE OFFERED TO THE PUBLIC BY THE
UNDERWRITER (AND THE YIELDS RESULTING THEREFROM) MAY VARY FROM THE
INITIAL PUBLIC OFFERING PRICES APPEARING ON THE COVER PAGE HEREOF. IN
ADDITION, THE UNDERWRITER MAY ALLOW CONCESSIONS OR DISCOUNTS FROM SUCH
INITIAL PUBLIC OFFERING PRICES TO DEALERS AND OTHERS. IN CONNECTION WITH
THE OFFERING OF THE BONDS, THE UNDERWRITER MAY EFFECT TRANSACTIONS THAT
STABILIZE OR MAINTAIN THE MARKET PRICE OF THE BONDS AT A LEVEL ABOVE THAT
WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF
COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
THE CITY HAS ENTERED INTO AN UNDERTAKING FOR THE BENEFIT OF THE
OWNERS OF THE BONDS TO SEND CERTAIN FINANCIAL INFORMATION AND OPERATING
DATA TO CERTAIN INFORMATION REPOSITORIES ANNUALLY AND TO PROVIDE NOTICE
TO THE MUNICIPAL SECURITIES RULEMAKING BOARD OR TO CERTAIN INFORMATION
REPOSITORIES OF CERTAIN EVENTS, PURSUANT TO THE REQUIREMENTS OF SECTION
(b)(5)(i) OF RULE 15c2 -12 OF THE SECURITIES AND EXCHANGE COMMISSION.
M
TABLE OF CONTENTS
Page
INTRODUCTION ................... ............................... 1
THEBONDS ...................... ............................... 4
Description ................... ............................... 4
Application of Bond Proceeds ....... ............................... 5
Security for the Bonds ............ ............................... 5
BondOrdinance ................ ............................... 6
Book - Entry -Only System ......... ............................... 12
Constitutional Amendment Limiting Taxes and Spending .................... 13
DEBT SERVICE REQUIREMENTS ....... ............................... 15
Annual Debt Service Requirements for the Bonds and the Outstanding Parity
Lien Bonds ............ ............................... 15
Historical Coverage ............ ............................... 15
MUNICIPAL BOND INSURANCE ....... ............................... 16
DEBT SERVICE RESERVE FUND SURETY BOND ........................... 17
THE BOARD OF WATER WORKS ....... ............................... 18
General.................... ............................... 18
Administration ................ ............................... 19
Board Employees .............. ............................... 20
Retirement Plan ............... ............................... 20
THE SYSTEM
Water Facilities ..............................................
WaterSupply ................ ...............................
Neater Treatment .............................................
Water Distribution ............ ............................... .
Capital Improvements ............ ...............................
Effects of Environmental Regulations ............................... .
SYSTEM FINANCIAL INFORMATION
Customer Information .......... ............................... .
WaterRates ................. ...............................
Contract Water Sales ........... ............................... .
Historical System Financial Information ...............................
Management's Explanation of Terms .................................
THECITY ....................... ...............................
General.................... ...............................
20
20
21
22
23
23
24
24
24
26
27
28
29
29
29
In
City Council ................. ............................... 30
City Employees ............... ............................... 30
Municipal Services ............. ............................... 31
Capital Improvements ........... ............................... 31
Economic and Demographic Information .............................. 31
CITY FINANCIAL OPERATIONS ....... ............................... 36
Historical General Fund Operations ... ............................... 36
Debt Structure ................ ............................... 38
LEGAL MATTERS ................. ............................... 38
Pending and Threatened Litigation Involving the Board and the City ............. 38
Opinion of Bond Counsel ......... ............................... 39
No Litigation Certificate .......... ............................... 40
MISCELLANEOUS ................. ............................... 41
Rating ..................... ............................... 41
Undertaking to Provide Ongoing Disclosure ............................ 41
Underwriting ................. ............................... 41
Independent Accountants ......... ............................... 42
LegalMatters ................ ............................... 42
Additional Information ........... ............................... 42
Official Statement Certification ..... ............................... 43
APPENDIX A— Undertaking to Provide Ongoing Disclosure A -1
APPENDIX B— Audited Financial Statements of the Board as of and for the
Year Ended December 31, 1995 .............................. B -1
APPENDIX C— Specimen Insurance Policy .. ............................... C -1
APPENDIX D —Table of Accreted Values ... ............................... D -1
APPENDIX E —Form of Debt Service Reserve Fund Surety Bond ................... E -1
IV
INTRODUCTION
This Official Statement is furnished to prospective purchasers of $3,977,956.15 Water Revenue
Bonds, Series 1996 (the "Bonds "), issued by the City of Pueblo, Colorado (the "City "), acting on behalf
of the Board of Water Works of Pueblo, Colorado (the "Board "). The offering of the Bonds is made only
by way of this Official Statement, which supersedes any other information or materials used in connection
with the offer or sale of the Bonds. Accordingly, prospective purchasers should read this entire Official
Statement before making an investment decision.
The information set forth in this Official Statement has been obtained from the Board and the City
and from other sources believed to be reliable but is not guaranteed as to accuracy or completeness. This
Official Statement contains, in part, estimates and matters of opinion which are not intended as statements
of fact, and no representation or warranty is made as to the correctness of such estimates and opinions,
or that they will be realized. This Official Statement is dated as set forth on the cover page hereof and
the information contained herein is subject to change.
The following introductory material is only a brief description of and is qualified by the more
complete information contained throughout this Official Statement. A full review should be made of the
entire Official Statement and the documents summarized or described herein. Detachment or other use
of this "INTRODUCTION" without the entire Official Statement, including the cover page and appended
information, is unauthorized.
The City ..... The City of Pueblo, Colorado is a home rule municipality located in south central
Colorado, approximately 120 miles south of Denver and 45 miles south of Colorado
Springs. The City has a 1995 estimated population of approximately 101,534. See
the captions "THE CITY" and the preceding "REGIONAL MAP" in this Official
Statement.
The Board .... The Board operates the City's municipal water works system (the "System "), which
provides services to the residents of the City and adjacent areas. The System
currently serves approximately 102,329 persons. See the caption "THE SYSTEM"
in this Official Statement. The City's home rule charter (the "Charter ") provides
that title to the properties of the System is in the City, but that the entire control,
management and operation of the System is exercised by the Board, over which the
City Council shall have no jurisdiction or control, and further, that the City shall
adopt all ordinances requested by the Board which shall be reasonably necessary to
assist the Board in the management of the System. In addition, the Charter
provides that the Board "shall have and exercise all powers which are granted to
cities of the first class by the Constitution and Laws of the State of Colorado,"
except the power to tax.
The Board operates as an "enterprise" (as that term is defined in Article X,
Section 20 of the Colorado Constitution), which is comprised of the business
represented by all of the System's water facilities and properties, now owned or
hereafter acquired, whether situated within or without the City's boundaries,
including all present or future improvements, extensions, enlargements,
betterments, replacements or additions thereof or thereto (the "Enterprise ").
Security ...... The Bonds are special revenue obligations of the City, payable solely from the City
of Pueblo, Colorado, Water Revenue Bond Fund (the "Bond Fund "), into which the
Board has covenanted and agreed to deposit monthly, beginning in November of
2000, from the revenues derived from the operation of the Enterprise after
deduction of operations and maintenance costs (the "Net Revenue "), amounts
sufficient to pay the debt service on the Bonds when the same become due and
payable.
The Bonds constitute an irrevocable and first lien upon the Net Revenue, but not
an exclusive first lien. There are presently outstanding $16,075,000 in aggregate
principal amount of general obligation bonds of the City issued on behalf of the
Board, which general obligation bonds are additionally secured by the Net Revenue
on a parity with the Bonds. Subject to express conditions, obligations in addition
to the Bonds may be issued and made payable from the Net Revenue, which
obligations may have a lien which is subordinate and junior to the lien of the Bonds
(the "Subordinate Lien Bonds ") or, subject to additional express conditions, may
have a lien on the Net Revenue which is on a parity with the lien of the Bonds (the
"Parity Lien Bonds "), in accordance with the provisions of the Bond Ordinance.
See the caption "THE BONDS — Security for the Bonds" in this Official Statement.
Alunicipal Bond
Insurance ..... MBIA Insurance Corporation (the "Bond Insurer "), has committed to issue,
effective as of the date of issuance of the Bonds, a policy of insurance guaranteeing
the payment, when due, of the Accreted Value at Maturity of the Bonds. The
insurance extends over the life of the issue and cannot be canceled by the Bond
Insurer. Payment under the policy is subject to the conditions described under the
caption "MUNICIPAL BOND INSURANCE" in this Official Statement. In
addition, the Bond Insurer will issue a Debt Service Reserve Fund Surety Bond in
an amount equal to the maximum annual debt service on the Bonds. See the
caption "DEBT SERVICE RESERVE FUND SURETY BOND."
Purpose ...... The Bonds are being issued to finance the acquisition, construction and replacement
of water system improvements and the costs of issuance of the Bonds as described
under the caption "THE BONDS - Application of Bond Proceeds" in this Official
Statement.
Payment
Provisions .... The Accreted Value of the Bonds is payable to the registered owners thereof only
upon the maturity of the Bonds, at the principal operations office of The Bank of
Cherry Creek, N.A., as paying agent (the "Paying Agent "), presently located at
3033 East 1st Avenue, Denver, Colorado 80206. "Accreted Value" means, with
respect to each $5,000 in Accreted Value at Maturity of a Capital Appreciation
Bond (for purposes of this definition, each 15,000 Accreted Value at Maturity "):
(a) as of the dated date of the Capital Appreciation Bonds and each May 1 and
November 1 thereafter (each, an "Interest Accrual Date "), the amount set forth on
Appendix D hereto as the Accreted Value of such $5,000 Accreted Value at
Maturity as of such Interest Accrual Date; and (b) as of any date (for purposes of
this clause (b), such "Calculation Date ") other than an Interest Accrual Date, the
sum of (i) the Accreted Value determined under (a) above as of the most recent
Interest Accrual Date plus (ii) the amount determined pursuant to the following
formula: (A -B)(X /180), where "A" is the Accreted Value determined under (a)
above as of the Interest Accrual Date immediately following such Calculation Date;
"B" is the Accreted Value determined under (a) above as of the most recent Interest
Accrual Date; and "X" is the number of days by which such Calculation Date
follows the most recent Interest Accrual Date, determined as if each month in such
period contains 30 days.
Book - Entry -only
Registration ... The Bonds will be issued in fully registered form and will be registered initially in
the name of "Cede & Co." as nominee for The Depository Trust Company, New
York, New York ( "DTC "), a securities depository. Beneficial ownership interests
in the Bonds may be acquired in principal denominations of $5,000 of Accreted
Value at Maturity or integral multiples thereof through brokers and dealers who
are, or who act through, participants in the DTC system (the "Participants "). Such
beneficial ownership interests will be recorded on the records of the Participants.
Persons for whom Participants acquire interests in the Bonds (the "Beneficial
Owners ") will not receive certificates evidencing their interests in the Bonds so long
as DTC or a successor securities depository acts as the securities depository with
respect to the Bonds. So long as DTC or its nominee is the registered owner of the
Bonds, payments of Accreted Value at Maturity on the Bonds, as well as notices
and other communications made by or on behalf of the City pursuant to the Bond
Ordinance, will be made to DTC or its nominee only. Disbursement of such
payments, notices, and other communications by DTC to Participants, and by
Participants to the Beneficial Owners, is the responsibility of DTC and the
Participants pursuant to rules and procedures established by such entities. See the
caption "THE BONDS — Book - Entry -Only System" in this Official Statement for
a discussion of the operating procedures of the DTC system with respect to
payments, registration, transfers, notices, and other matters.
Prior
Redemption ... The Bonds are not subject to redemption prior to maturity, either on an optional
basis or pursuant to a mandatory sinking fund redemption.
Registration and
Denominations . The Bonds are issued in fully registered form. The Bonds are issued in
denominations of $5,000 each of Accreted Value at Maturity or integral multiples
thereof.
Exchange and
Transfer ..... While the Bonds remain in book - entry -only form, transfer and ownership by
Beneficial Owners may be made as described under the caption "THE
BONDS — Book - Entry -Only System" in this Official Statement. In the event that
DTC ceases to act as securities depository for the Bonds, the Bond Ordinance
provides for transfer of the Bonds by the Paying Agent pursuant to term and
provisions specified therein.
Tax Status .... In the opinion of Bond Counsel, under existing statutes, regulations, rulings and
judicial decisions and assuming compliance with certain covenants, original issue
discount on the Bonds (i) is excluded from gross income of the recipients thereof
for purposes of federal income taxation, (ii) is not treated as a specific preference
item for purposes of the federal alternative minimum tax imposed on individuals
and corporations, and (iii) is exempt from Colorado income tax. See "LEGAL
MATTERS — Opinion of Bond Counsel" in this Official Statement for a description
of certain provisions of law which may effect the federal and State tax treatment of
interest on the Bonds.
Authority for
Issuance ..... The Bonds are issued in conformity with the Constitution and laws of the State of
Colorado and with the Charter, and pursuant to an authorizing ordinance (the "Bond
Ordinance ") adopted by the City at the direction of the Board and an authorizing
resolution (the "Bond Resolution ") adopted by the Board acting as the governing
body of the Enterprise.
Delivery
Information ... The Bonds are offered when, as, and if issued by the City and accepted by the
Underwriter, subject to: prior sale; the approving legal opinion of Bond Counsel;
and certain other matters. It is expected that the Bonds will be available for
delivery on or about July 11, 1996, against payment therefor.
Financial
Statements .... Appended hereto are the audited general purpose financial statements of the Board
as of and for the year ended December 31, 1995, being the most recent audited
financial statements available for the Board.
All of the summaries of the statutes, resolutions, ordinances, opinions, contracts, agreements,
financial and statistical data, and other related reports and documents described in this Official Statement
are subject to the actual provisions of such documents. The summaries do not purport to be complete
statements of such provisions and reference is made to such documents, copies of which are either
publicly available or available upon request and the payment of a reasonable copying, mailing, and
handling charge from: Board of Water Works of Pueblo, Colorado, 319 West 4th Street, Pueblo,
Colorado 81003, telephone: (719) 584 -0250; or Piper Jaffray Inc., 1050 Seventeenth Street, Suite 2100,
Denver, Colorado 80265, telephone: (303) 820 -5700.
THE BONDS
Description
The Bonds are special revenue obligations of the City, acting on behalf of the Board. The
maturities, Accreted Values at Maturity and yields for the Bonds are set forth on the cover page hereof.
Provisions regarding payment of Accreted Value at Maturity, anticipated delivery, and certain other
matters are set forth in the "INTRODUCTION." For a complete statement of the details and conditions
of the Bond issue, reference is made to the authorizing Bond Ordinance, copies of which are available
from the Financial Advisor upon written request prior to delivery of the Bonds.
4
Application of Bond Proceeds
The Project. The Bond Ordinance and the Bond Resolution provide that the net proceeds of the
Bonds shall be used to finance the Project, which is defined as the acquisition, construction,
reconstruction, improvement, betterment, or extension of the City's water facilities, including without
limitation the acquisition of property, the construction and replacement of storage tanks and water lines,
and all necessary or appropriate appurtenances, property rights, and equipment, including but not limited
to offices. Title to the Project, when completed, shall be in the City, as is the case with all of the
properties of the System. For the anticipated water improvements of the Board see "THE SYSTEM —
Water System Capital Improvements."
Application of Bond Proceeds. The estimated application of the proceeds of the Bonds is as
follows:
Project costs ............................... $3,900,000.00
Bond issuance costs, including insurance and
surety bond premiums ..................... 77,956.15
Total $ 3.977,956.15
Security for the Bonds
Special Obligations. The Bonds are special revenue obligations of the City, payable only out of
the Bond Fund, into which the Board covenants to deposit monthly, beginning in November of 2000, the
Net Revenue in amounts sufficient to pay when due the Accreted Value at Maturity of the Bonds. The
Bonds shall constitute an irrevocable and first lien upon the Net Revenue, but not necessarily an exclusive
such lien, and the Net Revenue is pledged to the payment of the Bonds.
The registered owners of the Bonds may not look to any general or other fund of the City for the
payment of the Accreted Value at Maturity of the Bonds, except the funds and accounts pledged thereto
by the Bond Ordinance. THE BONDS DO NOT CONSTITUTE A DEBT OR INDEBTEDNESS OF
THE CITY WITHIN THE MEANING OF THE CHARTER OR THE STATE CONSTITUTION, AND
SHALL NOT BE CONSIDERED OR HELD TO BE A GENERAL OBLIGATION OF THE CITY.
Net Revenue. Net Revenue is defined in the Bond Ordinance as Gross Revenue less Operation
and Maintenance Expenses. Defined terms in the Bond Ordinance material to said definition are as
follows:
Gross Revenue means all income and revenues directly or indirectly derived by the Board from
the operation and use of the System, or any part thereof, including without limitation, any rates, fees,
plant investment fees, standby charges, availability fees, tolls, and charges for the services furnished by,
or the use of, the System, and all income attributable to any past or future dispositions of property or
rights or related contracts, settlements, or judgments held or obtained in connection with the System or
its operations, and including investment income accruing from moneys held to the credit of the Water
Revenue Fund; provided however, that there shall be excluded from Gross Revenue any moneys
borrowed and used for providing Capital Improvements; any money and securities, and investment
income therefrom, in any refunding fund, escrow account, or similar account pledged to the payment of
any bonds or other obligations; and any moneys received as grants or appropriations from the United
States, the State of Colorado, or other sources, the use of which is limited or restricted by the grantor
or donor to the provision of Capital Improvements or for other purposes resulting in the general
unavailability thereof, except to the extent any such moneys shall be received as payments for the use of
the System, services rendered thereby, the availability of any such service, or the disposal of any
commodities therefrom.
Capital Improvements means the acquisition of land, easements, facilities, and equipment (other
than ordinary repairs and replacements), and the construction or reconstruction of improvements,
betterments, and extensions, for use by or in connection with the System.
Operation and Maintenance Expenses means all reasonable and necessary current expenses of the
Board, paid or accrued, for operating, maintaining, and repairing the System, including without limitation
legal and overhead expenses of the Board directly related to the administration of the System, insurance
premiums, audits, charges of depository banks and paying agents, professional services, salaries and
administrative expenses, labor, and the cost of materials and supplies for current operation; provided
however, that there shall be excluded from Operation and Maintenance Expenses any allowance for
depreciation, payments in lieu of taxes or franchise fees, legal liabilities not based on contract, expenses
incurred in connection with Capital Improvements, payments due in connection with any bonds or other
obligations issued to provide Capital Improvements, and charges for the accumulation of reserves.
System means all of the water facilities and properties owned by the City and operated by the
Board, now owned or hereafter acquired, whether situated within or without the City's boundaries,
including all present or future improvements, extensions, enlargements, betterments, replacements, or
additions thereof or thereto.
Future Changes in Laws. Various Colorado laws and constitutional provisions apply to the
imposition and collection of rates, fees, and charges for use of the System, and to the financing of the
Board's utility operations. Other state and federal laws, constitutional provisions, and regulations apply
to the obligations created by the issuance of the Bonds. There is no assurance that there will not be any
change in, interpretation of, or addition to the applicable laws, provisions, and regulations which would
have a material effect, directly or indirectly, on the affairs of the Board and the imposition, collection,
and expenditure of Gross Revenue.
Bond Ordinance
Flow of Funds. Pursuant to the Bond Ordinance, the Board is required to apply the Net Revenue
monthly, in the following order of priority: (i) to the credit of the Bond Fund the amounts discussed
below; (ii) to repay the Bond Insurer for any amount drawn down from the Debt Service Reserve Fund
Surety Bond; (iii) to the credit of any other fund or account hereafter established for the payment of the
principal of, premium if any, and interest on any subordinate lien obligations; and (iv) to the credit of
any other fund or account as may be designated by the Board.
Bond Fund. Moneys in the Bond Fund must be used solely for the purpose of paying the
Accreted Value at Maturity of the Bonds and the principal of, premium if any, and interest on any Parity
Lien Bonds. The Bond Ordinance requires that there shall be deposited by the Board on the 25th day of
each month one -sixth (1/6) of the interest due on any then outstanding current interest Parity Lien Bonds
on the next succeeding interest payment date and one - twelfth (1/12) of the principal due on any then
outstanding current interest Parity Lien Bonds on the next succeeding principal payment date. For capital
appreciation Parity Lien Bonds, such as the Bonds, the Bond Ordinance requires that the Board shall
0
deposit one - twelfth (1/12) of the Accreted Value at Maturity of such capital appreciation bonds on the
25th date of each month, beginning twelve months prior to the maturity date of such capital appreciation
Parity Lien Bonds. Such payments shall commence November 25, 2000 for the Bonds. The Bond Fund
shall be maintained with the Board. Moneys in the Bond Fund will be transferred to the Paying Agent,
as necessary, at least five days prior to the payment date for such bonds.
Any investment income earned on amounts credited to the Bond Fund will be credited to the Bond
Fund. For purposes of making the deposits described above, any investment income so credited to the
Bond Fund will be deemed the deposit of Net Revenue to the Bond Fund.
Reserve Fund. Moneys in the Reserve Fund shall be used to pay Accreted Value at Maturity on
the Bonds in the event of a deficiency in the Paying Agent Bond Fund. On the date of delivery of the
Bonds, a Debt Service Reserve Fund Surety Bond issued by the Bond Insurer in a face amount equal to
the maximum annual debt service on the Bonds will constitute the Reserve Fund. Prior to any draws on
the Debt Service Reserve Fund Surety Bond, the Paying Agent shall deliver to the Bond Insurer a
Demand For Payment in the form attached as an exhibit to the Financial Guaranty Agreement at least
three days prior to the date on which funds are required.
If at any time any amounts are drawn upon the Debt Service Reserve Fund Surety Bond or
withdrawn from the Reserve Fund, or if on any valuation date there is any deficiency in the Reserve
Fund, then during each month thereafter, after the deposits to the Bond Fund, there is to be deposited,
in the following order of priority, (i) to the credit of the Bond Insurer an amount equal to one -sixth of
such amount drawn upon the Debt Service Reserve Fund Surety Bond and (ii) to the credit of the Reserve
Fund an amount equal to one -sixth of such amount so withdrawn or of such deficiency, until the Debt
Service Reserve Fund Surety Bond has been reinstated in its full amount or the amount on deposit in the
Reserve Fund shall be equal to the Reserve Fund Requirement.
In addition to, and after the deposits required from the Revenue Fund described above, there shall
be deposited with the Bond Insurer an amount representing interest due on amounts, if any, advanced
under the Debt Service Reserve Fund Surety Bond pursuant to the terms and conditions of the Financial
Guaranty Agreement.
Maintenance of Rates and Coverage. The Board covenants that it will establish, maintain,
enforce, and collect rates, fees, plant investment fees, availability fees, tolls, and charges for services
furnished by or for the use of the System to create Gross Revenue each fiscal year sufficient to pay
Operation and Maintenance Expenses and to create Net Revenue in an amount equal to not less than
110% of the amount necessary to pay when due (i) the Accreted Value at Maturity of the Bonds coming
due during such fiscal year and (ii) the principal of and interest on any Parity Lien Bonds coming due
during such fiscal year. The Board shall also establish, maintain, enforce, and collect rates, fees, plant
investment fees, availability fees, tolls, and charges for services furnished by or the use of the System
to create Gross Revenue each fiscal year sufficient to pay Operation and Maintenance Expenses and to
create Net Revenue in an amount equal to not less than 100% of the principal of and interest on any and
all bonds and indebtedness coming due during such fiscal year on which the Board is required to make
payments from the Net Revenue of the System. In the event that the Gross Revenue at any time is not
sufficient to comply with the covenants above, the Board shall increase such rates, fees, plant investment
fees, availability fees, tolls, and charges to an extent which will ensure such compliance and all of the
payments and accumulations required by the Bond Ordinance and the Bond Resolution.
Additional Covenants and Agreements. Pursuant to the Bond Resolution and the Bond Ordinance,
the Board and the City irrevocably covenant and agree that so long as any of the Bonds remain
outstanding:
(a) The Board will continue to operate and manage the System in an efficient and
economical manner and keep and maintain separate accounts of the receipts and expenses thereof
in such manner that the Gross Revenue, the Operations and Maintenance Expenses and the Net
Revenue may at all times be readily and accurately determined.
(b) The Board and City will not sell or alienate any of the property constituting any
part or all of the System in any manner or to any extent as might materially adversely affect the
payment of the Bonds.
(c) There shall be charged against all purchasers of service from the System such
rates, charges and other amounts as shall produce revenues from the System adequate to meet the
requirements of the Resolution.
(d) The Board shall cause all rates, fees and service charges appertaining to the
System to be collected as soon as reasonable, shall prescribe and enforce rules and regulations
for the payment thereof and for the connection of properties with and the disconnection of
properties from the System, and shall provide methods of collection and penalties, including but
not limited to denial of service for nonpayment of such rates, fees and service charges, to the end
that Net Revenue of the System shall be adequate to meet the requirements of the Resolution.
(e) The Board will promptly render bills for services furnished by or for the use of
the System, shall use all legal means to assure prompt payment thereof, shall take such action as
may be necessary to make delinquent rates, fees, tolls, and charges of the System a lien upon the
real property served, and to the extent permitted by law, shall discontinue service to any user
who becomes delinquent in the payment of such charges until the delinquency and all interest,
costs and expenses incident thereto have been paid in full.
(f) At least once a year in the time and manner provided by law, the Board will
cause an audit to be performed of the records relating to the revenues and expenditures of the
System. In addition, at least once a year in the time and manner provided by law, the Board will
cause a budget to be prepared and adopted. Copies of the budget and the audit will be filed and
recorded in the places, time, and manner provided by law.
(g) The Board in its own name or in cooperation with the City, will carry worker's
compensation, public liability and other forms of insurance on insurable System property, in such
amounts as is customarily carried on prudently operated systems of similar character and size.
(h) The Board will promptly transmit Net Revenue of the System and such additional
funds at such times and in such amounts as shall be sufficient to pay promptly (i) the Accreted
Value at Maturity of the Series 1996 Bonds, and (ii) all costs and expenses incurred in connection
with the issuance of the Series 1996 Bonds including the preparation, publication and issuance
of supplements or amendments to the Official Statement. Such Net Revenue of the System and
additional funds will be included in the annual appropriation and budget resolutions of the Board.
(i) The Board has and will continue to maintain the System as an "enterprise" within
the meaning Article X, Section 20 of the Colorado Constitution for its 1996 fiscal year.
Specifically, but not by way of limitation, the Board has covenanted and agreed that the System
shall not receive 10% or more of its annual revenue in grants from all Colorado state and local
governments combined during its 1996 fiscal year.
0) The Board will comply with the letter of investment instructions delivered to the
City on the date of issue of the Series 1996 Bonds with respect to the application and investment
of the Series 1996 Bond proceeds.
(k) The Board will cause all proceeds derived from the sale of the Series 1996 Bonds
to be expended in compliance with the Ordinance.
(1) The Board will promptly prepare and provide to the City and to certain
information repositories named in the Ordinance all information required to be prepared and
provided by the City pursuant to its "undertaking" in the Ordinance.
Additional Obligations. The Bond Resolution and the Bond Ordinance provide that no additional
bonds, notes, interim securities, or other obligations shall be issued payable from the Net Revenue and
having a lien thereon which is superior to the lien of the Bonds. The Board or the City, at the direction
of the Board, may issue Parity Lien Bonds upon compliance with the following conditions:
(a) the Board is then and as of the date of issuance of the Parity Lien Bonds will be,
in substantial compliance with all of the covenants of the Bond Resolution and the Bond
Ordinance, and no event of default (as defined therein) shall have occurred and be continuing;
(b) the Board is then and as of the date of issuance of the Parity Lien Bonds will be,
current in the accumulation of all amounts required to be then accumulated in the Bond Account
as required by the Bond Ordinance; and
(c) the Net Revenue for the fiscal year immediately preceding the date of issuance
of such Parity Lien Bonds is sufficient to pay an amount representing 110% of the Average
Annual Debt Service Requirements for the Bonds, any outstanding Parity Lien Bonds and the
Parity Lien Bonds proposed to be issued. For purposes of such test, the Net Revenue may be
increased if there has been adopted a schedule of increases in rates, fees, plant investment fees,
availability fees, tolls, and charges during or since the preceding fiscal year by adding to the
actual revenues for said preceding fiscal year, an estimated sum equal to 100% of the estimated
increase in revenues which would have been realized during said preceding fiscal year, had such
increase been in effect during all of said preceding fiscal year.
(d) the Net Revenue for the fiscal year immediately preceding the date of issuance
of such Parity Lien Bonds is sufficient to pay an amount representing 100 % of the average annual
debt service requirements for any and all outstanding bonds or indebtedness on which the Board
is required to make payments from the Net Revenue of the System. For purposes of such test,
the Net Revenue may be increased if there has been adopted a schedule of increases in rates, fees,
plant investment fees, availability fees, tolls, and charges during or since the preceding fiscal year
by adding to the actual revenues for said preceding fiscal year, an estimated sum equal to 100%
of the estimated increase in revenues which would have been realized during said preceding fiscal
year, had such increase been in effect during all of said preceding fiscal year; and
(e) the Board establishes a reserve fund for such proposed Parity Lien Bonds in a
amount equal to the lesser of (i) 10% of the principal amount of such proposed Parity Lien Bonds
and (ii) the maximum annual debt service on such proposed Parity Lien Bonds.
A written certificate by the President of the Board or the Board's Executive Director that the
conditions set forth in paragraphs (a) and (e) above have been met, and a written certificate by a Certified
Public Accountant or Consulting Engineer that the conditions set forth in paragraphs (b), (c) and (d)
above have been met, shall conclusively determine the right of the Board or the City to authorize, issue,
sell, and deliver the proposed Parity Lien Bonds.
The City's presently outstanding General Obligation Water Refunding Bonds, Series 1991,
General Obligation Water Refunding Bonds, Series 1984B, and General Obligation Water Refunding
Bonds, Series 1984A, which, upon the issuance of the Series 1996 Bonds, will be outstanding in the
collective aggregate principal amount of $16,075,000, constitute Parity Lien Bonds with respect to the
Bonds.
So long as no event of default shall have occurred and be continuing under the Bond Resolution
or the Bond Ordinance, the Board or the City, at the Board's request, may issue additional obligations
(the "Subordinate Lien Bonds ") having a lien on the Net Revenue subordinate to the lien of the Bonds
and any Parity Lien Bonds if the Net Revenue for the fiscal year immediately preceding the date of
issuance of such Subordinate Lien Bonds is sufficient to pay an amount representing not less than 100%
of the average annual debt service requirements for any and all outstanding bonds which require payments
from the Net Revenue of the System, including the proposed Subordinate Lien Bonds. For purposes of
such test, the Net Revenue may be increased if there has been adopted a schedule of increases in rates,
fees, plant investment fees, availability fees, tolls, and charges during or since the preceding fiscal year
by adding to the actual revenues for said preceding fiscal year, an estimated sum equal to 100% of the
estimated increase in revenues which would have been realized during said preceding fiscal year, had such
increase been in effect during all of said preceding fiscal year. A written certificate by a Certified Public
Accountant or Consulting Engineer that the condition set forth above has been met, shall conclusively
determine the right of the Board or the City to authorize, issue, sell, and deliver such Subordinate Lien
Bonds.
Events of Default and Remedies. The Bond Ordinance provides that the occurrence or existence
of any one or more of the following events shall be an event of default thereunder: (a) payment of the
Accreted Value at Maturity of any Bond is not made by the City (without regard to payments made by
the Bond Insurer under the Policy) when due; (b) there is an Event of Default under the Bond Resolution;
(c) the City defaults in the performance of any other of its covenants in the Bond Ordinance (other than
a default pursuant to the City's "undertaking "), and such default continues for 60 days after written notice
specifying such default and requiring the same to be remedied is given to the City by the registered
owners of 25 % in aggregate principal amount of the Bonds then outstanding; provided that, so long as
it is not in default of its obligations under the Policy, the Bond Insurer shall be deemed a registered
owner of the Bonds for purposes of such notice; or (d) the City files a petition under the federal
bankruptcy laws or other applicable bankruptcy laws seeking to adjust the obligations represented by the
Bonds. Upon the occurrence and continuance of an Event of Default, the registered owner of any Bond,
or a trustee therefor, may protect and enforce the rights of any registered owner by proper legal or
10
equitable remedy deemed most effectual including mandamus, specific performance of any covenants,
injunctive relief, or requiring the Board to act as if it were the trustee of an express trust, or any
combination of such remedies. All proceedings shall be maintained for the equal benefit and protection
of all registered owners. The foregoing rights are in addition to any other right, and the exercise of any
right by any registered owner shall not be deemed a waiver of any other right.
Amendments to Bond Ordinance. The Bond Ordinance provides that the City may, without the
consent of or notice to the registered owners of the Bonds, (but so long as it is not in default of its
obligations under the Policy, only after the prior written consent of the Bond Insurer), adopt amendments
or supplements to the Bond Ordinance, which amendments or supplements shall thereafter form a part
hereof, for any one or more of the following purposes: (a) to cure any ambiguity, to cure, correct or
supplement any formal defect or omission or inconsistent provision contained in the Bond Ordinance, to
make any provision necessary or desirable due to a change in law, to make any provisions with respect
to matters arising under the Bond Ordinance, or to make any provisions for any other purpose, if such
provisions are necessary or desirable and do not materially adversely affect the interests of the registered
owners of the Bonds; (b) to subject to the Bond Ordinance or pledge to the payment of the Bonds
additional revenues, properties or collateral; and (c) to grant or confer upon the registered owners any
additional rights, remedies, powers or authority that may be lawfully granted to or conferred upon the
registered owners. Except for the foregoing, the registered owners of not less than seventy -five percent
(75 %) in aggregate Accreted Value at Maturity of the Bonds then outstanding shall have the right, from
time to time, to consent to and approve the adoption by the City of such ordinances amendatory or
supplemental thereto as shall be deemed necessary or desirable by the City for the purpose of modifying,
altering, amending, adding to, or rescinding, in any particular, any of the terms or provisions contained
in the Bond Ordinance; provided however, that without the consent of the registered owners of all the
Bonds affected thereby, nothing shall permit, or be construed as permitting: (a) a change in the terms of
the maturity of any Bond, in the Accreted Value at Maturity of any Bond, or in the terms of prior
redemption of any Bond; (b) an impairment of the right of the registered owners to institute suit for the
enforcement of any payment of the Accreted Value at Maturity of the Bonds when due; (c) the creation
of a lien upon the Net Revenue ranking prior to the lien of the Bonds; (d) a privilege or priority of any
Bond over any other Bond; or (e) a reduction in the percentage in Accreted Value at Maturity of the
Bonds the consent of whose registered owners is required for any such amendatory or supplemental
ordinance.
Bond Ordinance Irrepealable. The Bond Ordinance provides that after any of the Bonds are
issued, such ordinance shall remain irrepealable, but amendable, until the Bonds shall have been fully
paid, satisfied, and discharged.
Limitations on Remedies Available to Registered Owners. There is no bond trustee or similar
person to monitor or enforce the provisions of the Bond Ordinance or the Bond Resolution and registered
owners of the Bonds should be prepared to enforce such provisions themselves if the need to do so arises.
In the event of a default in the payment of the Accreted Value at Maturity of the Bonds, there is no
provision for acceleration of maturity of the principal of the Bonds. Consequently, the remedies of
registered owners of the Bonds (consisting primarily of an action in the nature of mandamus requiring
the City and certain other public officials to perform the terms of the Bond Ordinance) may have to be
enforced from year to year.
The enforceability of the rights and remedies of the registered owners of the Bonds, and the
obligations incurred by the Board in issuing the Bonds, are subject to the following: the federal
11
bankruptcy code and applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
relating to or affecting the enforcement of creditors' rights generally, now or hereafter in effect; usual
equity principles which may limit the specific enforcement under state law of certain remedies; the
exercise by the United States of America of the powers granted to it by the federal Constitution; and the
reasonable and necessary exercise, in certain exceptional situations, of the police power inherent in the
sovereignty of the State of Colorado and its governmental bodies in the interest of serving a significant
and legitimate public purpose. Bankruptcy proceedings, or the exercise of powers by the federal or state
government, if initiated, could subject the registered owners of the Bonds to judicial discretion and
interpretation of their rights in bankruptcy or otherwise, and consequently may entail risks of delay,
limitation or modification of their rights.
Book - Entry -Only System
The Bonds will initially be issued exclusively in "book- entry" form. DTC will act as securities
depository for the Bonds. One fully registered Bond for each maturity, in the aggregate Accreted Value
at Maturity, will be initially registered in the name of Cede & Co. as nominee for DTC.
DTC is a limited - purpose trust company organized under the laws of the State of New York, a
member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York
Commercial Code, and a "clearing agency" registered pursuant to the provisions of Section 17A of the
Securities Exchange Act of 1934, as amended. DTC was created to hold securities of its participations
(the "Participations ") and to facilitate the clearance and settlement of securities transactions among the
Participants through electronic book -entry changes in accounts of the Participants, thereby eliminating
the need for physical movement of certificates. The Participants include securities brokers and dealers,
banks, trust companies, clearing corporations, and certain other organizations, some of whom (and /or
their representatives) own DTC. Access to the DTC system is also available to others such as banks,
brokers, dealers and trust companies that clear through or maintain a custodial relationship with a
Participant.
Ownership interests in the Bonds may be purchased by or through Participants. Such Participants
and the persons for whom they acquire interests in the Bonds as nominees will not receive certificated
Bonds, such each such Participant will receive a credit balance in the records of DTC in the amount of
such Participant's interest in the Bonds, which will be confirmed in accordance with DTC's standard
procedures.
The ownership interest of each actual purchaser of the Bond (the "Beneficial Owner ") will be
recorded through the records of the Participant. Beneficial Owners are to receive a written confirmation
of their purchase providing certain details of the Bonds acquired. Transfers of ownership interests in the
Bonds will be accomplished only by book entries made by DTC and, in turn, by Participants who act on
behalf of the Beneficial Owners. Beneficial Owners of the Bonds will not receive nor have the right to
receive physical delivery of Bonds, and will not be or be considered to be registered owners under the
Bond Ordinance, except as specifically provided in the Bond Ordinance in the event the book -entry
system is discontinued.
SO LONG AS CEDE & CO., AS NOMINEE OF DTC, IS THE REGISTERED OWNER OF
THE BONDS, REFERENCES IN THE BOND ORDINANCE AND THIS OFFICIAL STATEMENT
TO THE REGISTERED OWNERS OF THE BONDS WILL MEAN CEDE & CO. AND WILL NOT
MEAN THE BENEFICIAL OWNERS.
12
The City and the Registrar and Paying Agent may treat DTC (or its nominee) as the sole and
exclusive owner of the Bonds registered in its name for the purpose of payment of the principal of or
interest on the Bonds, selecting Bonds or portions thereof to be redeemed, giving any notice permitted
or required to be given to registered owners under the Bond Ordinance and for all other purposes
whatsoever, and will not be affected by any notice to the contrary. The City and the Registrar and
Paying Agent will not have any responsibility or obligation to any Participant or any Beneficial Owner
with respect to: the accuracy of any records maintained by DTC or any Participant regarding ownership
interests in the Bonds; the payment by DTC or any Participant of any amount in respect of the principal
of or interest on the Bonds; the delivery to any Participant or any Beneficial Owner of any notice which
is permitted or required to be given to registered owners under the Bond Ordinance, or any consent given
or other action taken by DTC as a registered owner.
The aggregate Accreted Value at Maturity for the Bonds will be paid to DTC or its nominee,
Cede & Co., as registered owner of the Bonds. Disbursement of such payments to the Participants is the
responsibility of DTC and disbursement of such payments to the Beneficial Owners of the Bonds is the
responsibility of the Participants.
NEITHER THE CITY NOR THE REGISTRAR AND PAYING AGENT WILL HAVE ANY
RESPONSIBILITY OR OBLIGATION TO THE PARTICIPANTS, OR THE PERSONS FOR WHOM
THEY ACT AS NOMINEES, WITH RESPECT TO THE PAYMENTS TO OR THE PROVIDING OF
NOTICE FOR THE PARTICIPANTS OR THE BENEFICIAL OWNERS OF THE BONDS.
For every transfer and exchange of a beneficial ownership interest in the Bonds, a Beneficial
Owner may be charged a sum sufficient to cover any tax, fee or other governmental charge that may be
imposed in relation thereto.
DTC may determine to discontinue providing its service with respect to the Bonds at any time
by giving reasonable notice to the City or the Registrar and Paying Agent at any time. In addition, the
City may terminate the services of DTC with respect to the Bonds. If for any such reason the system
of book -entry transfers through DTC is discontinued, certificated Bonds will be delivered as described
in the Bond Ordinance to the Beneficial Owners; provided, however, that in the case of any such
discontinuance the City may within 90 days thereafter appoint a substitute securities depository which,
in its opinion, is willing and able to undertake the functions of DTC upon reasonable and customary
terms. In the event the book -entry system is discontinued, the persons to whom Bonds are delivered will
be treated as "registered owners" for all purposes of the Bond Ordinance.
The foregoing material concerning DTC and DTC's book -entry system are based on information
furnished by DTC. No representation is made by the City as to the accuracy or completeness of such
information. The City is not responsible for DTC's relationship with Participants, its rules and
procedures or for Participants' relationships to their customers or the Participants' rules and procedures.
Constitutional Amendment Limiting Taxes and Spending
A citizen - initiated amendment which added Article X Section 20 ( "TABOR ") to the State
constitution was approved by the voters at the State's general election on November 3, 1992. The
provisions of the TABOR amendment, at least in part, are ambiguous. TABOR applies to the State and
any local governments, including the City (but excluding "enterprises" as defined in the TABOR), and
among other things, provides significant restrictions regarding spending and borrowing.
13
Pursuant to TABOR an enterprise means "a government -owned business authorized to issue its
own revenue bonds and receiving under 10% of annual revenue in grants from all Colorado state and
local governments combined." In the opinion of the Board's general counsel, the Board constitutes an
"enterprise" under the provisions of TABOR and, as such, is currently exempt from the requirements and
limitations imposed by TABOR. In the Bond Resolution, the Board covenants that the Enterprise shall
at all times and in all ways conduct its affairs so as to continue to qualify as an "enterprise" within the
meaning of Article X, Section 20, Colorado Constitution. It is possible, however, that the Board could
fail to maintain its "enterprise" status in the future, for whatever reason.
If the System is not maintained as an "enterprise," certain restrictions that are established in
TABOR regarding spending and revenue increases and borrowing will apply to the operation of the
System. Such restrictions can be disregarded only with voter approval (which approval may be sought
only on limited dates). TABOR limits the annual percentage increase in the local government's "fiscal
year spending," with certain adjustments, to inflation (defined as the Denver - Boulder consumer price
index) in the prior calendar year plus "local growth." Local growth is defined as the net percentage
change in actual value of all real property in the local government from construction of improvements
and additions to taxable real property less destruction of improvements and deletions to taxable real
property. Fiscal year spending includes all local government's expenditures and reserve increases and
excludes reserve transfers or expenditures, refunds made in the current or next fiscal year, gifts, federal
funds, collections for another government, pension contributions by employees and pension fund earnings,
damage awards, and property sales. Any revenue collected in excess of the limit on spending and
property tax revenue is required to be refunded during the next fiscal year. Debt service changes,
reductions, refunds, and voter - approved revenue changes are dollar amounts that are exceptions to, and
not part of, any local government base.
Individual or class actions may be filed to enforce the provisions of TABOR. Revenue collected,
kept or spent illegally since four full fiscal years before a lawsuit is filed must be refunded with 10%
annual simple interest from the initial conduct. Successful plaintiffs are allowed costs and reasonable
attorney fees.
14
DEBT SERVICE REQUIREMENTS
Annual Debt Service Requirements for the
Bonds and the Outstanding Parity Lien Bonds
The following table indicates the annual debt service requirements on the Bonds and the City's
outstanding Parity Lien Bonds.
(" The Parity Lien Bonds are also secured by the full faith and credit of the City.
Historical Coverage
The following table sets forth the Board's historical Net Revenue for its fiscal years ended
December 31, 1991 through December 31, 1995, inclusive, the maximum future annual debt service
requirement on the Bonds and all outstanding Parity Lien Bonds and the Board's debt service coverage
assuming all such bonds were outstanding in such fiscal years.
Historical Debt Service Coverage Chart
(in thousands)
Operating Revenue
Less Operating Expenses
Excess of Operating Revenues over
Operating Expenses
Plus (Less) Non - Operating Revenue
(Expenses)
Excess of Revenues over Expenses
Plus Depreciation
Plus Interest Expense
Net Revenue
Maximum Annual Debt Service
Coverage Ratio
1991
1992
Series 1991
Series 1984B
1995
Year
The Bonds
Bonds
Bonds
Total
1996
$ 0
$2,206,052
$1,451,250
$3,657,302
1997
0
1,167,296
2,576,563
3,743,859
1998
0
1,882,123
1,874,687
3,756,810
1999
0
3,753,565
0
3,753,565
2000
0
3,747,276
0
3,747,276
2001
1,400,000
2,352,547
0
3,752,547
2002
4,035,000
0
0
3,710,000
$5,291
$5.435.000
$15,108.859
$5,902,500
$26,446.359
(" The Parity Lien Bonds are also secured by the full faith and credit of the City.
Historical Coverage
The following table sets forth the Board's historical Net Revenue for its fiscal years ended
December 31, 1991 through December 31, 1995, inclusive, the maximum future annual debt service
requirement on the Bonds and all outstanding Parity Lien Bonds and the Board's debt service coverage
assuming all such bonds were outstanding in such fiscal years.
Historical Debt Service Coverage Chart
(in thousands)
Operating Revenue
Less Operating Expenses
Excess of Operating Revenues over
Operating Expenses
Plus (Less) Non - Operating Revenue
(Expenses)
Excess of Revenues over Expenses
Plus Depreciation
Plus Interest Expense
Net Revenue
Maximum Annual Debt Service
Coverage Ratio
1991
1992
1993
1994
1995
$14,319
$14,247
$14,554
$14,617
$14,917
( 11,218)
(11,448)
(11,383
1� 1,764)
(12,103
3,101
2,799
3,171
2,853
2,814
1( ,774)
1( ,341)
1( ,298)
1( ,194)
(993)
1,327
1,458
1,873
1,659
1,821
2,339
2,200
2,154
2,176
2,202
2,168
1,589
1,494
1,387
1,268
$5,834
$5,247
$5,521
$5,222
$5,291
$4,035
$4,035
$4,035
$4,035
54,035
145%
130%
137%
129%
131%
15
MUNICIPAL BOND INSURANCE
The following information has been furnished by MBIA Insurance Corporation (the "Bond
Insurer ") for use in this Official Statement. Reference is made to Appendix C for a specimen of the Bond
Insurer's policy.
The Bond Insurer's policy unconditionally and irrevocably guarantees the full and complete
payment required to be made by or on behalf of the Issuer to the Paying Agent or its successor of an
amount equal to (a) the accreted value at maturity of the Bonds as such payments shall become due but
shall not be so paid (except that in the event of any acceleration of the due date of such principal by
reason of acceleration resulting from default or otherwise, the payments guaranteed by the Bond Insurer's
policy shall be made in such amounts and at such times as such payments of accreted value would have
been due had there not been any such acceleration); and (b) the reimbursement of any such payment
which is subsequently recovered from any owner of the Bonds pursuant to a final judgment by a court
of competent jurisdiction that such payment constitutes an avoidable preference to such owner within the
meaning of any applicable bankruptcy law (a "Preference ").
The Bond Insurer's policy does not insure against loss of any prepayment premium which may
at any time be payable with respect to any Bond. The Bond Insurer's policy does not, under any
circumstance, insure against loss relating to: (a) optional or mandatory redemptions (other than mandatory
sinking fund redemptions); (b) any payments to be made on an accelerated basis; (c) payments of the
purchase price of Bonds upon tender by an owner thereof; or (d) any Preference relating to (a) through
(c) above. The Bond Insurer's policy also does not insure against nonpayment of principal of or interest
on the Bonds resulting from the insolvency, negligence or any other act or omission of the Paying Agent
or any other paying agent for the Bonds.
Upon receipt of telephonic or telegraphic notice, such notice subsequently confirmed in writing
by registered or certified mail, or upon receipt of written notice by registered or certified mail, by the
Bond Insurer from the Paying Agent or any owner of a Bond, the payment of an insured amount for
which is then due, that such required payment has not been made, the Bond Insurer on the due date of
such payment or within one business day after receipt of notice of such nonpayment, whichever is later,
will make a deposit of funds, in an account with State Street Bank and Trust Company, N.A., in
New York, New York, or its successor, sufficient for the payment of any such insured amounts which
are then due. Upon presentment and surrender of such Bonds or presentment of such other proof of
ownership of the Bonds, together with any appropriate instruments of assignment to evidence the
assignment of the insured amounts due on the Bonds as are paid by the Bond Insurer, and appropriate
instruments to effect the appointment of the Bond Insurer as agent for such owners of the Bonds in any
legal proceeding related to payment of insured amounts on the Bonds, such instruments being in a form
satisfactory to State Street Bank and Trust Company, N.A., State Street Bank and Trust Company, N.A.
shall disburse to such owners or the Paying Agent payment of the insured amounts due on such Bonds,
less any amount held by the Paying Agent for the payment of such insured amounts and legally available
therefor.
The Bond Insurer, formerly known as Municipal Bond Investors Assurance Corporation, is the
principal operating subsidiary of MBIA Inc., a New York Stock Exchange listed company. MBIA Inc.
is not obligated to pay the debts of or claims against the Bond Insurer. The Bond Insurer is domiciled
in the State of New York and licensed to do business in all 50 states, the District of Columbia, the
Commonwealth of Puerto Rico, the Commonwealth of the Northern Mariana Islands, the Virgin Islands
16
of the United States and the Territory of Guam. The Bond Insurer has one European branch in the
Republic of France.
As of December 31, 1995, the Bond Insurer had admitted assets of $3.8 billion (audited), total
liabilities of $2.5 billion (audited) and total capital and surplus of $1.3 billion (audited) determined in
accordance with statutory accounting practices prescribed or permitted by insurance regulatory authorities.
As of March 31, 1996, the Bond Insurer had admitted assets of $4.0 billion (unaudited), total liabilities
of $2.7 billion (unaudited) and total capital and surplus of $1.3 billion (unaudited) determined in
accordance with statutory accounting practices prescribed or permitted by insurance regulatory authorities.
All information regarding the Bond Insurer, a wholly owned subsidiary of MBIA Inc., including the
financial statements of the Bond Insurer for the year ended December 31, 1995, prepared in accordance
with generally accepted accounting principles, included in the Annual Report on Form 10 -K of MBIA
Inc. for the year ended December 31, 1995 is hereby incorporated by reference into this Official
Statement and shall be deemed to be a part hereof. Any statement contained in a document incorporated
by reference herein shall be modified or superseded for purposes of this Official Statement to the extent
that a statement contained herein or in any other subsequently filed document which also is incorporated
by reference herein modifies or supersedes such statement. Any statement so modified or superseded
shall not be deemed, except as so modified or superseded, to constitute a part of this Official Statement.
Furthermore, copies of the Bond Insurer's year end financial statements prepared in accordance
with statutory accounting practices are available from the Bond Insurer. A copy of the Annual Report
on Form 10 -K of MBIA Inc. is available from the Bond Insurer or the Securities and Exchange
Commission. The address of the Bond Insurer is 113 King Street, Armonk, New York 10504.
Moody's Investors Service ( "Moody's ") rates the claims - paying ability of the Bond Insurer "Aaa. "
Standard & Poor's Ratings Services, a division of The McGraw -Hill Companies, Inc.
( "Standard & Poor's "), rates the claims - paying ability of the Bond Insurer "AAA."
Fitch Investors Service, L.P. rates the claims - paying ability of the Bond Insurer "AAA."
Each rating of the Bond Insurer should be evaluated independently. The ratings reflect the
respective rating agency's current assessment of the creditworthiness of the Bond Insurer and its ability
to pay claims on its policies of insurance. Any further explanation as to the significance of the above
ratings may be obtained only from the applicable rating agency.
The above ratings are not recommendations to buy, sell or hold the Bonds, and such ratings may
be subject to revision or withdrawal at any time by the rating agencies. Any downward revision or
withdrawal of any of the above ratings may have an adverse effect on the market price of the Bonds.
The Bond Insurer does not guarantee the market price of the Bonds nor does it guarantee that the ratings
on the Bonds will not be revised or withdrawn.
DEBT SERVICE RESERVE FUND SURETY BOND
Application has been made to the MBIA Insurance Corporation (the "Bond Insurer ") for a
commitment to issue a surety bond (the "Debt Service Reserve Fund Surety Bond "). The Debt Service
Reserve Fund Surety Bond will provide that upon notice from the Paying Agent to the Bond Insurer to
the effect that insufficient amounts are on deposit in the Paying Agent Bond Fund to pay the accreted
17
value at maturity of the Bonds, the Bond Insurer will promptly deposit with the Paying Agent an amount
sufficient to pay the accreted value at maturity of the Bonds or the available amount of the Debt Service
Reserve Fund Surety Bond, whichever is less. Upon the later of: (a) three (3) days after receipt by the
Bond Insurer of a Demand for Payment in the form attached to the Debt Service Reserve Fund Surety
Bond, duly executed by the Paying Agent; or (b) the payment date of the Bonds as specified in the
Demand for Payment presented by the Paying Agent to the Bond Insurer, the Bond Insurer will make a
deposit of funds in an account with State Street Bank and Trust Company, N.A., in New York,
New York, or its successor, sufficient for the payment to the Paying Agent, of amounts which are then
due to the Paying Agent (as specified in the Demand for Payment) subject to the Surety Bond Coverage.
The available amount of the Debt Service Reserve Fund Surety Bond is the initial face amount
of the Debt Service Reserve Fund Surety Bond less the amount of any previous deposits by the Bond
Insurer with the Paying Agent which have not been reimbursed by the City. The City and the Bond
Insurer have entered into a Financial Guaranty Agreement dated July 11, 1996 (the "Agreement ").
Pursuant to the Agreement, the City is required to reimburse the Bond Insurer, within one year of any
deposit, the amount of such deposit made by the Bond Insurer with the Paying Agent under the Debt
Service Reserve Fund Surety Bond. Such reimbursement shall be made only after all required deposits
to the Paying Agent Bond Fund have been made.
Under the terms of the Agreement, the Paying Agent is required to reimburse the Bond Insurer,
with interest, until the face amount of the Debt Service Reserve Fund Surety Bond is reinstated before
any deposit is made to the general fund. No optional redemption of the Bonds may be made until the
Bond Insurer's Debt Service Reserve Fund Surety Bond is reinstated. The Debt Service Reserve Fund
Surety Bond will be held by the Paying Agent in the Reserve Fund and is provided as an alternative to
the City's depositing funds equal to the Reserve Fund Requirement for outstanding Bonds. The Debt
Service Reserve Fund Surety Bond will be issued in the face amount equal to Maximum Annual Debt
Service for the Bonds, will be non - cancelable and the premium therefor will be fully paid by the City at
the time of delivery of the Bonds.
THE BOARD OF WATER WORKS
General
The Board was formed in 1957 as a result of the consolidation of the Pueblo Water Works and
the Pueblo Water Works District No. 2, the two previous providers of water service in the City.
Pursuant to the Charter, the entire control, management and operation of the City's municipal waterworks
System are vested in the Board, although title to the properties of the System is held by the City.
Pursuant to the Charter, the Board has the independent authority to exercise all powers granted to first -
class cities under the Constitution and laws of Colorado.
The City Council has no jurisdiction or control over the Board, and it is required to adopt all
ordinances requested by the Board which are reasonably necessary to assist the Board in management of
the System and its property or to enable the Board to purchase or condemn additional water rights or
property of any kind needed to supply water to the City.
The Board may not enter into any contract or make any purchase involving an expenditure of
more than $1,000 until it advertises a proposal for bids for the contract or purchase at least ten days prior
18
to awarding the contract or making the purchase. This restriction does not apply to contracts for
personal, professional or technical services not lending themselves to competitive bidding.
Administration
The Board consists of five members, all of whom are elected at large by the residents of the City
for staggered six -year terms. The current members of the Board, their Board offices, the year of
commencement of their terms and expiration of their current terms, and their principal occupations are
as follows:
Expiration of
The Executive Director of the Board is Alan C. Hamel. Mr. Hamel has held this position since
September 1982. Prior to becoming Executive Director, he was Operations Manager for the Board of
Water Works from March 1982 until September 1982, and Division Manager of Transmission and
Distribution for the Board from 1973 to 1982. Mr. Hamel received a B.S. in Business Administration
from the University of Southern Colorado in 1966 and holds a Class III Colorado Water Distribution
Certification.
The Water Board's operation is divided into three primary segments: Administrative Services,
Operations and Water Resources. Biographical information on the Directors, Managers and key
employees is presented below.
Jerry J. Cantrell, is the Director of Administrative Services, having held that position since March
1991. Prior to becoming Administrative Services Director, Mr. Cantrell was Finance Division Manager
for the Board from November 1973 to March 1991. Mr. Cantrell received an A.A. degree in Business
from Cowley County Community Jr. College in 1963 and a B.A. in Business from Southwestern College
in 1966.
Terry R. Book, has been Director of Operations since March 1991. Previously, Mr. Book was
the Division Manager of Transmission and Distribution and Engineering from 1982 to 1991 and he was
Civil Engineer for the Board from 1978 to 1982. Mr. Book graduated from Colorado State University
19
Years on
Term
Member and Office
the Board
(December 31)
Principal Occupation
Kevin F. McCarthy
8
2001
Regional Manager of Loewen, Colorado
(President)
Verdon L. Johnson
28
1997
Owner, Johnson's Sporting Goods
(Secretary- Treasurer)
Vera Ortegon
1
2001
Executive Director, ProActive Health
(Vice President)
Care Institute
Michael W. Stillman
16
1997
Vice President, National Material
(Vice President)
Trading, Western Region
David F. Trujillo
2
1999
Director of Community and Special
(Vice President)
Projects, University of Southern Colorado
The Executive Director of the Board is Alan C. Hamel. Mr. Hamel has held this position since
September 1982. Prior to becoming Executive Director, he was Operations Manager for the Board of
Water Works from March 1982 until September 1982, and Division Manager of Transmission and
Distribution for the Board from 1973 to 1982. Mr. Hamel received a B.S. in Business Administration
from the University of Southern Colorado in 1966 and holds a Class III Colorado Water Distribution
Certification.
The Water Board's operation is divided into three primary segments: Administrative Services,
Operations and Water Resources. Biographical information on the Directors, Managers and key
employees is presented below.
Jerry J. Cantrell, is the Director of Administrative Services, having held that position since March
1991. Prior to becoming Administrative Services Director, Mr. Cantrell was Finance Division Manager
for the Board from November 1973 to March 1991. Mr. Cantrell received an A.A. degree in Business
from Cowley County Community Jr. College in 1963 and a B.A. in Business from Southwestern College
in 1966.
Terry R. Book, has been Director of Operations since March 1991. Previously, Mr. Book was
the Division Manager of Transmission and Distribution and Engineering from 1982 to 1991 and he was
Civil Engineer for the Board from 1978 to 1982. Mr. Book graduated from Colorado State University
19
in 1973 with a B.S. in Civil Engineering. He is a Registered Professional Engineer in Colorado and
holds a Class III Colorado Water Distribution Certification.
Roger L. O'Hara, has been Water Resources Manager for the Board since June 1985.
Previously, Mr. O'Hara held the positions of Civil Engineer and Engineering Division Manager from
November 1977 to June 1985. Mr. O'Hara graduated from the University of Oklahoma in 1969, and
he is a Registered Professional Engineer in Colorado.
Other key Staff personnel include:
James D. Hurt, Division Manager of Treating, Pumping & Laboratory since 1982 has been
employed by the Board since 1964. He attended Southern Colorado State College and currently holds
a Colorado Class A Water Treatment Certification and Class III Colorado Water Distribution
Certification.
James M. Blasing, has been employed by the Water Board since October 1972. Mr. Blasing has
held a number of positions during his tenure, including Service Worker; Assistant Supervisor of
Transmission & Distribution; Supervisor, Transmission & Distribution and in March 1991, he became
the Division Manager of Transmission and Distribution. He holds a B.A. in Education from Southern
Colorado State College, 1972 and a Masters in Public Administration from the University of Colorado,
Colorado Springs, 1983. He also holds a Class III Colorado Water Distribution Certification.
Charles W. Arnot, is Human Resource Manager for the Board of Water Works. He has been
employed by the Board since 1972. Mr. Arnot attended the University of Denver from 1964 through
1968 and later attended Southern Colorado State College majoring in accounting.
Board Employees
The Board employs a total of 118 persons. Approximately 73% of the Board's employees are
unionized and represented by the American Federation of State, County and Municipal Employees, Local
1045. The working policy agreement with this union will expire at the end of 1996. The Board believes
its employee relations are good.
Retirement Plan
Employees of the Board who have at least three years of service and who are at least 25 years
of age are eligible to participate in the Retirement Plan for Employees of the Board of Water Works of
Pueblo, Colorado (the "Plan "). See Notes 1, 2 and 3 to the Financial Statements which are attached
hereto as Appendix B.
THE SYSTEM
Water Facilities
The System is made up of approximately 491 miles of main, varying in size from four inches to
48 inches, and is subject to only minor seepage losses. The Board has budgeted about $879,300 for
improvement and replacement of its distribution system for the 1996 fiscal year. Since the 1985 fiscal
20
year, the Board has expended an average of $1,373,000 annually for improvement and replacement of
water distribution facilities. See "Water Distribution."
The system has raw water storage capacity of 26,500 acre -feet in Clear Creek Reservoir and Twin
Lakes, both located several miles south of Leadville, Colorado. Additionally, the Board has 5,000
acre -feet of water storage in Turquoise Reservoir west of Leadville, Colorado, and annually purchases
storage in Pueblo Reservoir, west of the City, in varying quantities. Fifteen treated water storage
facilities have a total capacity of approximately 50.8 million gallons. See "Water Supply" and "Water
Distribution. "
The Board operates the Whitlock Plant, which is located north of the Arkansas River at 9th Street
and Adee Avenue Extended. This facility was constructed and began treatment of the City's water in
1977. The maximum capacity of the Whitlock Plant is currently 80 million gallons per day ( "mgd ").
See "Water Treatment.
Water Supply
The following table sets forth the Board's developed annual water supply available at the Board's
intake in a drought year, based upon either average historical yields, potential entitlement, or firm
contract.
Water Supply
Quantity
Source "' (Acre -Feet)
Arkansas River
38,619
Hobson Ranch
1,485
Booth - Orchard Grove
9,000
West Pueblo Ditch
550
Columbine, Ewing, Wurtz and Wurtz
Extension Transmountain Ditches
6,123
Homestake Project
2,500
Busk Ivanhoe
2,600
Twin Lakes
11,500
Fryingpan- Arkansas Project
7,200
Clear Creek Reservoir
5,030
Total
84,607
(') This table does not include an undeveloped supply at the Board's Leadville
Ranch or an additional estimated 19,750 acre -feet of water available from the reuse
of transmountain water.
Source: The Board of Water Works
The Arkansas River, Hobson Ranch, Booth Orchard and Leadville Ranch water rights are direct
flow rights. Direct flow rights must be used at the time they become available and cannot be stored.
Historically, the Board has not made use of all of its direct flow water rights, particularly during winter
months. The Board's other water supplies are transmountain water and may be stored by the Board for
21
future use and reuse. The Board has the right to store 15,000 acre -feet of water in Twin Lakes as a
result of ownership of its Twin Lakes shares. In addition, the Board owns 11,500 acre -feet of storage
in Clear Creek Reservoir and 5,000 acre -feet in Turquoise Reservoir. The City has also been allocated
31,200 acre -feet of storage in the Fryingpan- Arkansas System for its Fryingpan- Arkansas project water.
The above - mentioned water supplies, will supply the needs in a drought year for a population of 350,000
with associated commercial and industrial developments.
In 1995, total consumption (both potable and nonpotable) by the Board's customers amounted to
about 24,703 acre -feet. Available unused water supplies (other than direct flow rights) generally are
stored for future use or sold to third parties.
The Board anticipates its water supplies are sufficient to cover projected needs well beyond the
year 2020, based upon assumed continued population growth at historical rates. If growth exceeds
historical averages or if environmental regulations or unexpected conditions limit available water supply,
the Board's ability to satisfy water demand could be adversely affected. See the "Effects of
Environmental Regulations" herein.
Water Treatment
The Whitlock Plant consists of raw water intake structures, primary and secondary settling basins,
connecting piping, flumes and control gates, chemical feed equipment, chemical storage facilities, filters,
settled water and treated water pumps, sludge lagoons and laboratory facilities.
The basic treatment processes are presedimentation, chemical coagulation, flocculation -
sedimentation, disinfection, filtration and fluoridation. Raw water is taken in from the Arkansas River
two miles above the Whitlock Plant, and return flow goes into the Arkansas River. Activated carbon is
first added to the raw water for taste and odor control and for organics removal. The water then goes
into a primary sedimentation reservoir for initial settling, and from there it flows through a connecting
flume and metering device (where several chemicals are injected for flocculation and disinfection
purposes), to the flocculation (turbidity removal) and mixing basins, and then to sedimentation basins.
Additional chemicals may be added for algal or odor control. The final steps include filtration,
postchlorination and fluoridation. The maximum day treatment capacity of the Whitlock Plant is 80 mgd,
which should meet the City's treatment needs through approximately 2010.
The Colorado Department of Health has the authority to enforce standards as to the quality of
water supplied. The Board's quality control laboratory has obtained State and Federal certification for
chemical and bacterial analysis of public drinking water supplies. In order to monitor the Board's
treatment processes, approximately 180 distribution and 720 process samples per month are collected and
examined by the Board's laboratory personnel. This testing by the Board has not revealed any violations
of the requirements of the Safe Drinking Water Act of 1974 or the Federal Safe Drinking Water Act of
1986 and its amendments.
A United States Geological Service study indicated that uranium mining in the drainage basin of
the Arkansas River has caused moderately high radiation levels in certain tributaries of the Arkansas
River; however, the radiation level of the Arkansas River is below the maximum allowed under the
Federal Safe Drinking Water Act. The Board expects that any additional water treatment costs resulting
from such uranium would be imposed upon the mining companies involved.
22
Water Distribution
The Arkansas River flows through the City generally from west to east, and its flood plain has
the lowest elevation in the City, with terrain rising from the Arkansas River to the north and south. As
the City has expanded, the higher elevations away from the Arkansas River have been developed. Due
to the topography of the area, the System's water distribution facilities are divided into seven pressure
zones in order to provide satisfactory service to the Board's customers. Each zone includes an area
within certain elevations, and water pressure generally is maintained between 40 to 110 pounds per square
inch. The System's distribution facilities consist of four primary pump stations, five secondary (booster)
pump stations, 15 treated water storage facilities, and almost 500 miles of transmission and distribution
mains.
Capital Improvements
The Board retains the engineering firm of Black & Veatch, Consulting Engineers, of Kansas City,
Missouri, to assist the Board in maintaining and renovating the System. In 1990, Black & Veatch
prepared a comprehensive study of the System (the "Study ") which included recommendations to the
Board for specific projects constituting a long -term expansion, maintenance and renovation plan. Black &
Veatch also maintains a computer model of the System for study purposes.
Pursuant to the Study, the Board, since the date of the Study, has annually budgeted specific
amounts for capital improvements, in accordance with the Study's recommendations. Funds for capital
improvements are derived from current revenues, and in recent years, declines in revenues have caused
the Board to postpone certain capital improvements; however, the Board does not believe that such
postponements have had any significant adverse impact on the System or that substantially greater
expenditures will be required in future years because of such postponements.
Since 1990, the Board has spent an annual average of $2,381,000 on capital improvements. The
projected capital improvement budgets for fiscal years 1996 through 2000 are set forth below. Since the
Board is nearing completion of the major portions of its water main improvement and replacement
program, the amounts projected for capital expenditures in future years are less than the historical
averages.
TABLE I
System Capital Improvement Program
Capital
Improvements "' 1996 1997
Equipment $ 465,525 $291,600
Improvements /Replacements 1,246,000 900,000
Expansion 198,000 85,000
Total $ 1,909,525 $ 1,276,600
1998 1999 2000
$ 240,200 $ 356,500 $ 261,000
1,253,000 1,095,000 1,440,000
373,000 81,000 334,000
$ _1,866,200 $ 1,532,500 $ 2,035,000
"' Capital Improvements are anticipated to be funded from revenues of the System.
Source: The Board of Water Works
23
In addition, the Board faces the potential expenditure of up to $17,000,000 in the next ten (10)
years to deal with the impacts of current and future regulations, including, but not limited to, the Surface
Water Treatment Rule, the Enhanced Surface Water Treatment Rule and the Disinfection /Disinfectant
Byproducts Rule. The Board is currently investigating methods of lowering the cost of this compliance.
It is anticipated that a portion or all of the necessary expenditure could be funded by issuance of
additional debt.
Effects of Environmental Regulations
Various environmental laws, regulations and legal proceedings at both the state and federal levels
could affect future operations of the System. Generally, the environmental requirements relate to
environmental impact, land use, appropriation of water, and water quality. The Board's ability to use
and develop water rights in the future may be affected by environmental requirements.
Water rights of the Board also might be affected by legal actions presently being pursued in the
Colorado water courts in which claims of vested rights to water flowing in and through National Forest
and federal lands are asserted by certain federal agencies. If successful, these actions could prevent or
reduce the amount of water diverted under water rights belonging to the Board and other water users.
The Board intends to vigorously pursue its rights to divert the water subject to these claims. Should the
Board fail in its defense against these claims, however, the effect on the Board's water rights would not
be material.
The June 1982 adoption and the July 1990 Revision of the Arkansas River Basin's Stream
Classifications and Standards set the Arkansas River upstream of Pueblo's intake to cold water class 1
aquatic life, recreation class 1 and water supply uses. This requires that any discharge to the Arkansas
River must meet these high standards and must not degrade the water quality. This benefits the Board
in its treatment process. Treatment plant expansions and modifications made in the last 10 years are
adequate to treat the City's drinking water to meet all federal and State mandated regulations.
SYSTEM FINANCIAL INFORMATION
The Bonds are secured by and payable solely from the Net Revenue. See "THE
BONDS — Security for the Bonds." Set forth hereafter is a description of water system customer
information and historical and budgeted financial information for the Utility Fund.
Customer Information
The System presently provides water to approximately 34,745 customers, comprised of the City's
population plus a small number of persons living in areas outside the City limits. The System's largest
customers for treated water are the Colorado Mental Health Institute and the Minnequa Plant of CF &I
Steel Corporation which is located outside of the City. The System's largest customer, and only major
raw water customer, is the Comanche Plant of Public Service Company of Colorado. See "Contract
Water Sales" hereafter.
During the past five years, the number of water customers has increased slightly and total treated
water usage has reflected prevailing weather conditions. Peak system demand of 56,410,000 gallons
occurred on July 19, 1994. The following table sets forth the number of water customers, annual water
usage, total gallons of water pumped, percentage of unaccounted for water, average gallons of water
24
pumped per day, gallons of water pumped on the peak day, all for treated water, and average rainfall
for the calendar years indicated:
TABLE II
Water Customer Information
The following table sets forth the 10 largest users of treated water, their annual consumption for
1995 and the revenue derived from each entity in 1995.
TABLE III
Largest System Customers- Treated Water
Twelve Months Ended December 31, 1995
Total
Percent of
Average
Percent
Billed
Water
Percent
Pumped
Peak Day
Average
Consumption
Pumped
Unaccounted
Per Day
Pumpage
Rainfall
Year Customers (000s gal.)
000s gal.
Water
000s al.
(000s gal.)
Inches
140,688
0.019
189,486
1.7
City of Pueblo
1991 34,036 7,813,952
8,488,690
7.9%
23,257
54,590
14.26
1992 34,178 7,767,999
8,417,040
7.7
23,060
55,540
12.34
1993 34,390 7,680,043
8,294,910
7.4
22,726
56,140
14.51
1994 34,578 7,628,752
8,342,001
8.5
22,855
56,410
15.41
1995 34,745 7,555,717
8,049,590
6.1
22,054
54,810
15.40
(" The unaccounted for water includes water used or lost in seepage,
system storage, fire protection, street
cleaning and water distribution system flushing.
0.7
Colorado State Fair Authority
49,355
0.007
' Reported by the United States Weather Bureau as measured at Pueblo Municipal Airport.
0.6
Source: The Board of Water Works
1,008.287
0.135
$ 1,366,327
12.3
The following table sets forth the 10 largest users of treated water, their annual consumption for
1995 and the revenue derived from each entity in 1995.
TABLE III
Largest System Customers- Treated Water
Twelve Months Ended December 31, 1995
(" Based on total consumption of 7,555,717,000 gallons.
«' Based on total billings in 1995 of $11,131,013.
Source: The District
25
Total
Percent of
Percent
Consumption
Total
Amount
of Total
Name
000s al.
Consumption
Billed
Revenue
CF &I Steel Corporation
200,217
0.026%
$277,610
2.5%
Colorado Mental Health Institute
140,688
0.019
189,486
1.7
City of Pueblo
130,659
0.017
162,183
1.5
University of Southern Colorado
121,095
0.016
159,467
1.4
School District 60
95,791
0.013
138,352
1.2
Pueblo Housing Authority
75,971
0.010
112,826
1.0
St. Mary Corwin Hospital
72,151
0.010
95,557
0.9
Pueblo Country Club
64,375
0.009
86,013
0.8
B.F. Goodrich
57,985
0.008
77,497
0.7
Colorado State Fair Authority
49,355
0.007
67,336
0.6
Total
1,008.287
0.135
$ 1,366,327
12.3
(" Based on total consumption of 7,555,717,000 gallons.
«' Based on total billings in 1995 of $11,131,013.
Source: The District
25
The Board projects that it has sufficient water to meet the needs of the area served beyond the
year 2020, based on retention of all present water resource entitlements and in light of present population
projections (which have been based on historic population growth). See "Water Supply" and "Effects
of Environmental Regulations" herein.
Water Rates
Water rates for treated water in effect as of January 1, 1996 are set forth below. The rates are
established by the Board after recommendations of its staff are considered. Scheduled rates charged for
water are subject only to the approval of the Board. Minimum monthly charges for users within and
outside the City for up to the first 2,000 gallons used are set forth in the following table.
TABLE IV
Minimum Monthly Charge
(Effective January 1, 1996)
Meter Size
Within the City
Outside the City
3/4"
5.95
$ 8.93
1"
7.59
11.39
1 -1/2"
12.64
18.98
2"
20.21
30.33
3"
37.92
56.89
4"
56.88
85.31
6"
94.77
142.16
8"
126.38
189.55
") Rates are reviewed on an annual basis and are designed to cover the
operating expenses, debt service and capital expenditures for the System.
Rates were increased 4.4% in 1996.
Source: The Board of Water Works
In addition to the minimum monthly charge, $1.36 is charged to customers in the City (or $2.03
for users outside the City) for each 1,000 gallons used in excess of the first 2,000 gallons. The charge
per acre -foot for raw water is $326.45; however, the major user of raw water has a multiple -year contract
at a lower rate per acre -foot.
The Board imposes water tap fees, plant water investment fees, water meter set fees and water
main extension fees to partially compensate the Board for the costs of providing service to new areas.
Water tap fees are based on the costs of the labor, equipment and material involved and presently range
from $81.00 for a 3/4" tap to $1,603.00 for a 16" x 12" tap. The plant water investment fees for
customers seeking service through new taps are based on the size of meters and currently range from
$1,965.00 for 3/4" meters to $507,510.00 for 8" meters. Water meter set fees are based on costs of
material, equipment, labor and outside service and generally range from $231.00 for 3/4" meters to
810,952.00 for 8" meters, with credits ranging from $31.00 to $4,500.00 available for certain existing
meters. Water main extension fees are based on main size and now generally range from $12.69 to
26
$42.98 per lineal foot, with a unit cost of $27.78 and with actual cost of asphalt pavement or concrete
replacement to be paid by the applicant. Rates for multifamily housing facilities generally provide for
lower charges and fees for each additional dwelling unit after the first.
Contract Water Sales
The Board provides raw water to the Comanche Plant of the Public Service Company of Colorado
pursuant to a multiple -year contract originally entered into in 1972. The contract calls for the Board to
supply raw water to Public Service Company in minimum amounts of 7,300 acre -feet annually during
calendar years 1996 through 2000, and then decreasing to 6,600 acre -feet in each year beginning in 2001
and continuing through 2006. The minimum annual contract amount decreases in steps thereafter,
reaching 4,800 acre -feet in 2015, the final year of the present contract. The maximum required supply
available to the Comanche Plant under the contract is 125 % of the minimum amounts. The charge for
water under the contract is $293.33 per acre -foot. The Public Service Company is required to pay for
the annual minimum amount of water under the contract whether or not it actually requires use of that
water.
[The remainder of this page is left blank intentionally]
27
Historical System Financial Information
A summary of the Board's Statements of Revenues, Expenses and Retained Earnings for the
Fiscal Years ended December 31, 1991 -95 is presented below.
TABLE V
History of Revenues, Expenses and Retained Earnings
The General Fund balances on December 31, 1993 and January 1, 1994 differ because of a prior period adjustment made to
reflect the Board's implementation of a Governmental Accounting Standards Board Statement relating to compensated absences.
Source; The Board's Audited Annual Financial Reports, 1991 -1995
28
1991
1992
1993
1994
1995
General
Revenues
$14,318,759
$14,247,434
$14,554,081
$14,617,049
$14,917,499
Operating expenses - personnel
services and operation and
maintenance
Administration
172,905
348,220
379,232
427,827
426,668
Administrative services
648,151
857,058
869,775
888,299
951,973
Meter services
371,138
--
--
--
--
Treating, pumping and laboratory
2,737,777
2,641,350
2,514,564
2,713,781
2,746,368
Transmission, distribution and
engineering
1,563,810
2,199,056
2,238,836
2,250,893
2,398,177
Purchasing, personnel and
maintenance
479,712
--
--
--
--
Water resources
638,312
813,632
758,531
718,708
790,333
Plant -at -large
2.266,410
2,388,365
2,468,233
2,527,078
2.587.213
8,878,215
9,247,681
9,229,171
9,526,586
9,900,732
Depreciation
2,339,979
2,200,450
2,154,267
2,176,106
2,202,587
Loss on abandonment of assets
-
-
61,856
--
Total general expenses
11,218,194
11,448,131
11,383,438
11,764,548
12,103319
Net operating revenue
3,100,565
2,799,303
3,170,643
2,852,501
2,814.180
Nonoperating Revenues
Sales of assets
2,566
--
6,867
4,100
14,141
Interest income
398,910
256,329
197,992
213,591
279,676
401,476
256,329
204,859
217,691
293,817
Nonoperating Expenses
Interest expense
Meter deposits
7,081
8,122
8,334
13,800
7,876
Bonded indebtedness
2,168,909
1,589,929
1,494,748
1,387,907
1,268,814
Capital lease
--
--
--
10,559
10,134
2,175,990
1.598,051
1,503,082
1,412,266
1,286, 824
Total nonoperating revenues
(expenses)
(1,774,514)
(1,341,722)
(1,298,223)
(1,194,575)
(993,007)
Net Revenue Before Extraordinary
Item
1,326,051
1,457,581
1,872,420
1,657,926
1,821,173
Extraordinary Item
Loss resulting from refunding of
bonded indebtedness
(1,057,451)
-
--
Net Revenue
1,326,051
400,130
1,872,420
1,657,926
1,821,173
Retained Earnings, January 1
61,119,421
62,445,472
62,845,602
64,599,348
66.257,274
Retained Earnings, December 31
$ 62,445,472
$ 62,845,602
$ 64,718,022 (l)
$ 66,257,274
$ 68,078,447
The General Fund balances on December 31, 1993 and January 1, 1994 differ because of a prior period adjustment made to
reflect the Board's implementation of a Governmental Accounting Standards Board Statement relating to compensated absences.
Source; The Board's Audited Annual Financial Reports, 1991 -1995
28
Management's Explanation of Terms
"Revenues" are comprised of the following:
1. Water Sales General Customers. Generally, changes in revenues from sales of treated
water are directly related to the amount and timing of rainfall affecting usage for residential irrigation of
lawns, the largest single use of water from the System.
2. Water Sales- Comanche. The Board has a long -term water supply contract with Public
Service Company of Colorado ( "PSCo ") for PSCo's Comanche generating facility which requires
payment by PSCo whether or not water is used. See the title "Contract Water Sales" under this caption.
3. Water Sales - Untreated. From time to time the Board sells excess water to the highest
bidder (generally agricultural users). The revenues fluctuate depending on the amount of the excess and
general market conditions for water sales.
4. Taps and Meters, Material Sales, Main Assessments and Plant Water Investment Fees.
These revenue categories are directly proportional to new construction and have remained relatively low
as a result of a relatively slow rate of growth in the Pueblo area over the last several years.
5. Interestlncome. These amounts result from investment of reserves and excesses of cash
flow over current expenditures.
6. Other. These amounts result from collections from the City for billing of the City's
sanitary sewer fees and from miscellaneous reimbursements of construction and similar projects for others
which are not budgeted.
Under "expenses," the following terms have these meanings:
1. Administration, Administrative Services and Meter Services. These amounts consist
primarily of salaries and expenses of personnel conducting these services and remain fairly stable
regardless of the City's water demand.
2. Treating and Pumping and Laboratory. These amounts consist primarily of the cost of
chemicals for treating the water and the cost of power for operating the System. These amounts increase
as the demand for water increases. Also included are assessments for improvements to certain storage
and transmission facilities in which the Board has an ownership interest.
THE CITY
General
The City was incorporated in 1885 and is one of the original home rule cities under the
Constitution of Colorado. It is an incorporated municipality, a body politic and corporate, existing under
the laws of Colorado. Because the City is a "home rule" city, the City's Charter governs all local and
municipal matters. State law applies to matters of local or municipal concern only to the extent not
superseded by the Charter or ordinances of the City. The Constitution of Colorado reserves to the City
certain powers, including the power to issue, refund and liquidate all kinds of municipal obligations and
the power to assess property in the City, and to levy and collect taxes on such property, for municipal
purposes.
29
The City is located in the south - central portion of the State, approximately 120 miles south of
Denver and 45 miles south of Colorado Springs. Interstate Highway 25 and Colorado State Highway 50
intersect at the City. The City is the population center of the County with a 1995 population of
approximately 101,534 residents.
City Council
The governing body of the City consists of the seven members of the City Council. Four of these
members of the City Council are elected by district and three are elected from the City at large. The
members of the City Council are elected for staggered four -year terms at the general municipal election
held in November in odd numbered years. The members of the City Council elect the President of the
City Council, who is the presiding officer and is recognized as head of the City government for
ceremonial purposes. The President of the City Council votes like other members of the City Council,
has no veto power, and has no special administrative duties. The President and members of the City
Council, the date of expiration of their current terms, and their principal occupations are, respectively,
as follows:
Member
Expiration of Term
Occupation
Fay B. Kastelic, President
Samuel J. Corsentino, Vice President
Patrick Avalos
Cathy Garcia
Al Gurule
Charles Jones
John Verna
December 31, 1997
December 31, 1997
December 31, 1997
December 31, 1999
December 31, 1999
December 31, 1997
December 31, 1999
Retired
Retired
Attorney
Manager, Blood Center
Business owner
Real estate
Retired
All legislative powers of the City are held by the City Council except as provided in the Charter.
The affirmative vote of four members of the City Council is required for the adoption of any ordinance.
The Charter provides for voter referenda and initiatives, pursuant to which voters can require the City
Council to submit ordinances to the voters at special or general city elections.
The City Council appoints all boards and commissions, unless otherwise required by law, and
it appoints the City Manager. The City Manager is the executive head of the government of the City and
is responsible for the enforcement of the City's laws and ordinances. The City Manager also administers
the operation of all the departments and divisions of the City, including the Finance, Public Safety, Parks
and Recreation, Personnel, Public Works, Purchasing and Transportation Departments. The City
Manager has the authority to appoint directors of all departments of the City, including the City Attorney.
City Employees
The City has a total of approximately 688 full -time employees. Three unions represent
approximately 580 City employees: The National Association of Government Employees Local R9 -45,
The International Association of Firefighters and The International Brotherhood of Police Officers
Local 537. The City considers its employee relations to be good.
Ut
Municipal Services
The City provides its citizens with fire and police protection, streets and highways, public works
and improvements, parks and recreation services, health and sanitation services, social services, planning
and zoning and general administrative services. Water services are provided by the Board. See the
"THE BOARD OF WATER WORKS" and "THE SYSTEM." Gas and electric services in the City are
provided by private companies.
The City owns and operates Pueblo Memorial Airport and a separately incorporated bus company
providing services within the City. The airport facility currently is operated on a self sustaining basis
with the exception of an annual City subsidy which was $1,310,000 for 1994 and $1,289,500 (unaudited)
for 1995. The bus company operations are subsidized by the City and the federal government, with
subsidies from the City's general fund and the federal government being $696,747 (unaudited) and
$627,247 (unaudited), respectively, for 1995.
Capital Improvements
The City annually budgets and expends funds on capital improvements for street construction,
replacement and addition of traffic control devices, improvements and acquisitions of recreational
facilities, and other similar improvements. Capital improvements ordinarily are funded from the City's
general funds. The City estimates that expenditures for such capital improvements will be approximately
$30 million in 1996.
Economic and Demographic Information
The following information is provided to give prospective investors an overview of the general
economic conditions existing in the area within which the City is located. The statistics presented below
have been obtained from the referenced sources and represent the most current information available from
those sources. The statistics have not been adjusted to reflect economic trends, notably inflation. The
following information is not to be relied upon as a representation or guarantee of the City, the Financial
Advisor or the Underwriter.
[The remainder of this page is left blank intentionally]
31
Population and Median Age. The following table sets forth population statistics for the City of
Pueblo, Pueblo County, and Colorado.
TABLE VI
Population
Source: U.S. Department of Commerce, Bureau of the Census
(" Estimated.
According to the United States Census Bureau, Pueblo County's median age in 1980 was 29.9
years as compared with 34.7 years in 1990, while the City of Pueblo also had a median age of 29.9 in
1980 compared with 34.5 for 1990. The State's median age for the same period increased from 28.6 in
1980 to 31.4 years in 1990, with the median age of the United States being 30.0 and 33.0 years in 1980
and 1990, respectively.
Income. The following tables set forth historical median household effective buying income, the
percentage of households by classification of effective buying income ( "EBI ") levels, and per capita
personal income. The County's per capita income level over the five year period shown has consistently
been lower than the state levels.
TABLE VII
City of
Percent
Pueblo
Percent
1990
Percent
Year
Pueblo
Change
County
Change
Colorado
Change
1950
63,685
--
90,188
--
1,325,089
--
1960
91,181
43.2%
118,707
31.6%
1,753,947
32.4%
1970
97,774
7.2
118,238
(0.4)
2,207,259
25.9
1980
101,686
4.0
125,972
6.5
2,889,964
30.9
1990
98,640
(3.0)
123,051
(2.3)
3,294,394
14.0
1994
100,737
2.1
127,399
3.5
3,655,647
11.0
Source: U.S. Department of Commerce, Bureau of the Census
(" Estimated.
According to the United States Census Bureau, Pueblo County's median age in 1980 was 29.9
years as compared with 34.7 years in 1990, while the City of Pueblo also had a median age of 29.9 in
1980 compared with 34.5 for 1990. The State's median age for the same period increased from 28.6 in
1980 to 31.4 years in 1990, with the median age of the United States being 30.0 and 33.0 years in 1980
and 1990, respectively.
Income. The following tables set forth historical median household effective buying income, the
percentage of households by classification of effective buying income ( "EBI ") levels, and per capita
personal income. The County's per capita income level over the five year period shown has consistently
been lower than the state levels.
TABLE VII
Source: "Survey of Buying Power," Sales & Marketing Management, 1991 -1995
32
Median Household Effective Buying Income
1990
1991
1992
1993
1994
City of Pueblo
$20,390
$22,257
$22,617
$23,816
$25,447
Pueblo County
21,167
23,257
23,627
24,900
26,684
Colorado
28,558
32,129
32,758
34,797
36,770
United States
27,912
32,073
33,178
35,056
37,070
Source: "Survey of Buying Power," Sales & Marketing Management, 1991 -1995
32
TABLE VIII
Percent of Households by
Effective Buying Income Groups - 1994
Source: "Survey of Buying Power," Sales & Marketing Management, August 1995
School Enrollment. The following table presents a five year history of school enrollment for
Pueblo School District No. 60, the primary school district serving the City.
TABLE IX
District Enrollment 1990 -1994
Percent
School Year Enrollment Chanee
1991 -92
Less than
$10,000-
$20,000-
$35,000-
$50,000-
1993 -94
10 000
519.999
$34,999
$49,999
and Over
1995 -96
18,123
0.4
City of Pueblo
19.0%
20.9%
25.6%
17.0%
17.5%
Pueblo County
17.5
20.2
25.9
17.1
18.7
Colorado
9.9
14.9
22.8
19.3
33.1
United States
11.1
14.7
21.4
18.7
34.1
Source: "Survey of Buying Power," Sales & Marketing Management, August 1995
School Enrollment. The following table presents a five year history of school enrollment for
Pueblo School District No. 60, the primary school district serving the City.
TABLE IX
District Enrollment 1990 -1994
Percent
School Year Enrollment Chanee
1991 -92
18,338
--
1992-93
18,290
(0.3) %
1993 -94
18,051
(1.3)
1994 -95
18,050
(0.0)
1995 -96
18,123
0.4
Source: Colorado Department of Education
Housing Stock. According to the 1990 Census, Pueblo County had a total of 50,872 housing
units in 1990 compared to a total of 49,095 housing units in 1980, for a 10 -year increase of 4 %. The
City of Pueblo experienced a 2% increase in housing units for the same period, increasing from 40,012
in 1980 to 40,862 in 1990.
[The remainder of this page is left blank intentionally]
33
Building Permit Activity. Set forth in the following table is historical building permit activity
for new structures in the City of Pueblo.
TABLE X
Building Permit Activity for New Structures in the City of Pueblo
Source: Pueblo Regional Building Department
Non - Residential
Permits
Valuation
Residential
Year
Permits
Valuation
1991
106
$ 4,916,495
1992
112
12,410,547
1993
148
18,940,365
1994
184
19,490,848
1995
225
23,762,345
Source: Pueblo Regional Building Department
Non - Residential
Permits
Valuation
25
$ 4,520,971
26
4,430,218
36
8,308,018
34
19,261,971
43
23,130,840
Foreclosure Activity. As set forth in the following table, there has been a significant decrease
in the number of foreclosures filed in Pueblo County over the past five years.
TABLE XI
History of Foreclosures
Number of
Year Foreclosures Filed Percent Change
1991
281
--
1992
230
(18.2)%
1993
142
(38.3)
1994
119
(16.2)
1995
107
(10.1)
Source: Pueblo County Public Trustee
Source: State of Colorado, Department of Revenue, Sales Tax Statistics, 1991 -1995
34
Retail Sales. The retail trade sector employs a large portion of the county's work force and is
important
to the area's economy.
The following table sets forth retail
sales figures
as reported by the
State for
the City of Pueblo, Pueblo County and Colorado.
TABLE XII
Retail Sales
City of
Percent Pueblo
City as %
Year
Pueblo
Change County
of County
Colorado
1991
$1,200,003,412
-- $1,296,145,971
92.6%
$48,816,463,701
1992
1,296,470,521
8.0% 1,389,938,282
93.3
53,943,839,811
1993
1,456,700,855
12.4 1,561,650,788
93.3
59,857,733,952
1994
1,678,037,089
15.2 1,803,600,158
93.0
66,890,482,983
1995
1,842,222,530
9.8 1,978,712,090
93.1
69,722,025,166
Source: State of Colorado, Department of Revenue, Sales Tax Statistics, 1991 -1995
34
Employment. The following tables set forth employment statistics by industry and the most
recent historical labor force estimates for Pueblo County.
TABLE XIII
Total Business Establishments and Employment - Pueblo County
Unemployment rates have been generally decreasing since 1992 in Pueblo County as well as
throughout the State.
TABLE XIV
Labor Force Estimates
Year
1991
1992
1993
1994
1995
1996
Pueblo County
Quarter Ended
Quarter Ended
Percent
Labor Force
Unemployed
September 30, 1994
September 30, 1995
12 -Month Change
9.3
52,877
Average
54,777
Average
57,972
Average
Industry"'
Units
Employment
Units
Employment
Units
Employment
Agriculture,
Forestry &
Fisheries
42
442
45
503
3
61
Mining
6
26
4
22
(2)
(4)
Construction
277
2,807
308
2,823
31
16
Manufacturing
104
5,352
104
5,198
0
(154)
Transportation,
Communication
& Public Utilities
111
1,810
124
1,786
13
(24)
Wholesale Trade
132
1,285
132
1,356
0
71
Retail Trade
762
11,109
793
12,079
31
970
Finance, Insurance
& Real Estate
220
1,840
233
1,874
13
34
Services
996
12,783
1,017
13,410
21
627
Nonclassifiable
2
8
2
2
0
(6)
Government
70
9,462
70
9,788
0
326
Total
2.722
46,924
2,832
48,841
LL10
1917
Information provided herein reflects only those employers who are subject to state unemployment
insurance law.
Source: Colorado Department
of Labor & Employment,
Labor
Market Information
Unemployment rates have been generally decreasing since 1992 in Pueblo County as well as
throughout the State.
TABLE XIV
Labor Force Estimates
Year
1991
1992
1993
1994
1995
1996
Pueblo County
Percent
Labor Force
Percent
Labor Force
Unemployed
51,952
7.6%
52,329
9.3
52,877
8.3
54,777
5.8
57,972
5.9
58,067
6.0
Colorado
'" Labor force estimates through February 29, 1996.
Source: Colorado Department of Labor & Employment, Labor Market Information
35
Percent
Labor Force
Unemployed
1,781,764
5.1 %
1,819,606
6.0
1,900,187
5.3
1,999,316
4.2
2,088,993
4.2
2,109,607
4.1
'" Labor force estimates through February 29, 1996.
Source: Colorado Department of Labor & Employment, Labor Market Information
35
The following table sets forth selected major employers within Pueblo County. No independent
investigation has been made of and there can be no representation as to the stability or financial condition
of the entities listed below, or the likelihood that they will maintain their status as major employers in
the County.
TABLE XV
Selected Major Employers in Pueblo County
Firm
Estimated
Number of
Product or Service Employees
Pueblo School District No. 60
Oregon Steel
St. Mary- Corwin Hospital
Colorado Institute of Mental Health
Parkview Hospital
Matrixx
Pueblo County
Trane Company
City of Pueblo
Pueblo School District No. 70
Target Distribution
"" As of January 1996.
12 ' Excludes part -time employees.
Source: Pueblo Chamber of Commerce
Public education
1,606
Steel wire, pipe and rails
1,546
Medical and health care
1,400
Public mental health care
1,217
Medical and health care
1,200
Telemarketing
1,200
County government
875
Commercial air conditioners
650
City government
650
Public education
640
Retail distribution center
600
CITY FINANCIAL OPERATIONS
Historical General Fund Operations
Set forth hereafter is a five -year comparative statement of revenues, expenditures, and changes
in fund balances for the City's general fund.
[The remainder of this page is left blank intentionally.]
36
TABLE XVI
History of Revenues, Expenditures, and Changes in Fund Balances
Expenditures
Current:
General government
3,447,564
4,120,091
3,787,287
3,950,781
1995
Public safety
1991
1992
1993
1994
(unaudited)
Revenues
2,322,935
2,217,197
2,095,696
2,127,277
2,222,072
Taxes
$30,097,135
$30,820,157
$34,251,562
$36,361,127
$38,317,897
Licenses and permits
109,076
125,138
100,982
119,807
122,231
Other agencies
779,041
763,223
815,444
878,416
934,754
Charges for services
197,725
327,959
205,158
224,897
247,147
Fines and forfeits
662,680
695,593
560,099
568,266
661,491
Interest income
192,458
86,079
17,032
113,564
185,905
Other
160,767
132,532
211,763
288,322
124,388
Total revenues
32,198,882
32,950,681
36,272,040
38,554,399
40,593,813
Expenditures
Current:
General government
3,447,564
4,120,091
3,787,287
3,950,781
4,192,743
Public safety
15,265,597
14,915,703
15,363,067
16,438,142
15,733,635
Parks and recreation
2,322,935
2,217,197
2,095,696
2,127,277
2,222,072
Transportation
2,239,079
2,149,787
2,288,916
2,388,450
2,327,179
Public works
3,204,734
2,881,900
2,976,653
3,236,648
2,923,309
Insurance and contingencies
619,648
1,349,469
347,587
473,891
1,787,175
Inter-, ovemmental
1,594,839
1,480,118
1,565,497
1,545,528
1,759,181
Debt service:
Principal retirement
73,684
-0-
-0-
-0-
-0-
Interest and fiscal charges
5,492
-0-
-0-
-0-
-0-
Total expenditures
28,773,572
29,114,265
28,424,703
30,160,717
30,945,294
Excess (deficiency) of
revenues over expenditures
3,425,310
3,836,416
7,847,337
8,393,682
9.648,519
Other financing sources (uses)
Transfers from other funds
3,387,361
3,477,436
2,954,257
2,716,406
2,915,099
Transfers to other funds
(7,447,410)
(7,720,987)
(10,071,539)
(10,210,785)
(10,811,336)
Proceeds from capital lease
-0-
335,206
-0-
-0-
-0-
Total
(4,060,049
(3,908,345)
(7,117,282)
(7,494,379)
(7,896,237
Excess (deficiency) of revenue
and other financing sources
over expenditures and other financing
(uses)
(634,739)
(71,929)
730,055
899,303
1,752,282
Fund balance, beginning of year
3,336,383
3,029,252
2,791,067
3,371,173 °
4,206,213
Residual equity transfers in (out)
327,608
16( 6,256)
29( 9,949)
6( 4,263)
--
Fund balance, end of year
$ 3,029.252
$ 2,791,067
$ 3,221,173 ( ' )
$ 4,206,213 ''' -)
$ 5.957,684
" The General Fund balances on December 31, 1993 and January
1, 1994 differ because of a prior period adjustment
made to reflect
the City's implementation of a Governmental
Accounting Standards Board Statement relating to
compensated absences.
('-' This amount includes $1,066,426 which the
City has determined exceeded its 1994 spending limit
under the Amendment.
At the City's
November election, the City's electors authorized
retention
of these funds for the purchase of emergency vehicles, storm
drainage and
road improvements.
Source: City of Pueblo, Financial Statements
and Auditor's
Reports, 1991 -1994, and City of Pueblo Finance Department
37
Debt Structure
Required Elections. Enterprises are excluded from the provisions of TABOR. See "THE
BONDS — Constitutional Amendment Limiting Taxes and Spending." With respect to other City financial
matters, Article X, Section 20 of the Colorado Constitution requires that, except for refinancing bonded
debt at a lower interest rate, the City must have voter approval in advance for the creation of any
multiple - fiscal year direct or indirect City debt or other financial obligation whatsoever without adequate
present cash reserves pledged irrevocably and held for payments in all future fiscal years.
Limitation on Indebtedness. The Charter provides that the City may not issue bonds payable out
of general property taxes if the aggregate amount of such indebtedness of the City (after giving effect to
the indebtedness to be incurred) would exceed 10% of the assessed valuation of the taxable property
within the City as shown by the last assessment for City purposes. Excluded from the computation of
indebtedness for the purpose of this limitation are general obligation bonds or other evidences of
indebtedness issued by the City for the acquisition, extension or improvement of water or the System,
local improvement district bonds. The City's current debt limit is $36,533,264 and the amount of
outstanding debt applicable to the limit (after deductions allowed by law) as of June 13, 1996 is
$23,600,000, leaving a legal debt margin of $12,933,264.
Outstanding Financial Obligations. The following table summarizes the general debt and revenue
bond obligations of the City as of June 13, 1996.
TABLE XVII
Outstanding City Financial Obligations
Outstanding
Description of Obligation Amount
Limited Tax General Obligation Bonds, Series 1996
$12,850,000
General Obligation Street and Bridge Refunding Bonds, Series 1992
2,045,000
General Obligation Water Refunding Bonds, Series 1991
11,575,000
Capital Improvement Revenue Bonds, Series 1988
524,525
General Obligation Refunding Bonds, Series 1987A
8,500,000
General Obligation Street and Bridge Bonds, Series 1987B
205,000
General Obligation Water Refunding Bonds, Series 1984B
4,500,000
Sewer Revenue Crossover Refunding Bonds, Series 1986
11,195,000
Total
$51,394,525
LEGAL MATTERS
Pending and Threatened Litigation Involving the Board and the City
Sovereign Immunity. The Governmental Immunity Act of 1972, Title 24, Article 10, Part 1,
C.R.S. (the "Act "), provides that, with certain specified exceptions, sovereign immunity acts as a bar to
any action against a public entity, such as the City, for injuries which lie in tort or could lie in tort.
The Act provides that sovereign immunity does not apply to injuries occurring as a result of
certain specified actions or conditions. In such instances, the public entity may be liable for injuries
38
arising from an act or omission of the public entity, or an act or omission of its public employees, which
are not willful and wanton, and which occur during the performance of their duties and within the scope
of their employment. The maximum amounts that may be recovered under the Act, whether from one
or more public entities and public employees, are as follows: (a) for any injury to one person in any
single occurrence, the sum of $150,000; (b) for an injury to two or more persons in any single
occurrence, the sum of $600,000; except in such instance, no person may recover in excess of $150,000.
Suits against both the City and a public employee do not increase such maximum amounts which may be
recovered. For injuries occurring prior to July 1, 1986, sovereign immunity limits are deemed to be
waived to the extent that the City's insurance covers such injury. With regard to injuries occurring on
and after such date, the City may, by resolution, increase any maximum amount that may be recovered
from the City for the type of injury described in the resolution. The City has not adopted such a
resolution to date. The City may not be held liable either directly or by indemnification for punitive or
exemplary damages. In the event that the City is required to levy an ad valorem property tax to
discharge a settlement or judgment, such tax may not exceed a total of ten mills per annum for all
outstanding settlements or judgments.
The City may be subject to civil liability and may not be able to claim sovereign immunity for
actions founded upon various federal laws. Examples of such civil liability include, but are not limited
to, suits filed pursuant to 42 U.S.C. §1983 alleging the deprivation of federal constitutional or statutory
rights of an individual. In addition, the City may be enjoined from engaging in anti - competitive practices
which violate the antitrust laws. However, effective July 1, 1986, the Act provides that it applies to any
action brought against a public entity or a public employee in any Colorado state court having jurisdiction
over any claim brought pursuant to any federal law, if such action lies in tort or could lie in tort.
Pending and Threatened Litigation. The General Counsel to the Board states that as of the date
hereof, to the best of their knowledge there are no suits or claims pending or threatened against the Board
or its officials in such capacity which if resolved against the Board would result in a material adverse
effect upon the Board's financial condition.
Opinion of Bond Counsel
Legal matters relating to the authorization, issuance, and sale of the Bonds, as well as the
treatment of original issue discount on the Bonds for purposes of federal and State of Colorado income
taxation, are subject to the approving legal opinion of Kutak Rock, Denver, Colorado, as Bond Counsel.
Such opinion will be dated as of and delivered along with the Bonds at closing.
The difference between the Accreted Value at Maturity of the Capital Appreciation Bonds (for
purposes of this paragraph, the "OID Bonds ") and the initial public offering prices of the OID Bonds
constitutes original issue discount. Original issue discount is treated as compounding semiannually at a
rate determined by reference to the yield to maturity of the OID Bonds on days determined by reference
to the maturity date of such OID Bonds. The amount treated as original issue discount on each OID Bond
for a particular semiannual accrual period is equal to: (a) the product of (i) the yield to maturity for the
principal payment due to the owner of such OID Bond (determined by compounding at the close of each
accrual period) and (ii) the amount that would have been the tax basis of such OID Bond at the beginning
of the particular accrual period if held by the original purchaser less (b) the amount of any portion of the
interest paid on such OID Bond during such accrual period. The tax basis of an OID Bond is determined
by adding to the initial public offering price of such OID Bond the sum of the amounts which have been
treated as original issue discount for such purposes during all prior periods. If an OID Bond is sold
39
between semiannual compounding dates, original issue discount which would have accrued for that
semiannual compounding period is apportioned in equal amounts among the days in such compounding
period. Owners of OID Bonds (including purchasers of OID Bonds in the secondary market) should
consult their tax advisors with respect to the determination of original issue discount accrued with respect
to OID Bonds as of any date and with respect to the federal, state and local tax consequences of owning
OID Bonds.
In the opinion of Kutak Rock, Bond Counsel, to be delivered at the time of original issuance of
the Bonds, under existing laws, regulations and judicial decisions, original issue discount on the Bonds
is not includible in gross income for federal income tax purposes. Such original issue discount also is
exempt from Colorado income tax.
The Internal Revenue Code of 1986, as amended (the "Tax Code ") imposes various restrictions,
conditions and requirements relating to the exclusion from gross income for federal tax purposes of
interest, including original issue discount, on obligations such as the Bonds. The Board and the City have
covenanted to comply with certain guidelines designed to assure that original issue discount on the Bonds
will not become includible in gross income. Failure to comply with these covenants may result in
original issue discount on the Bonds being included in gross income from the date of issue of the Bonds.
The opinion of Bond Counsel assumes compliance with the covenants.
Bond Counsel has opined that original issue discount on the Bonds is not a specific preference
item for purposes of the alternative minimum tax provisions contained in the Tax Code; however, original
issue discount on the Bonds will be included in adjusted current earnings of certain corporations, and such
corporations are required to include in the calculation of alternative minimum taxable income 75 % of the
excess of a corporation's adjusted current earnings over its alternative minimum taxable income
(determined without regard to this adjustment and prior to reduction for certain net operating losses).
Although Bond Counsel has rendered an opinion that original issue discount on the Bonds is
excluded from gross income for federal income tax purposes, the accrual or receipt of original issue
discount on the Bonds may otherwise affect the federal income tax liability of the recipient. The nature
and extent of these other tax consequences will depend upon the recipient's particular tax status or other
items of income or deduction. Bond Counsel expresses no opinion regarding any such consequences.
Purchasers of the Bonds, particularly purchasers that are corporations (including S corporations and
foreign corporations operating branches in the United States and corporations subject to the environmental
tax imposed by Section 59A of the Tax Code), property and casualty insurance companies, banks, thrifts
or other financial institutions, certain recipients of Social Security or Railroad Retirement benefits, or
taxpayers who may be deemed to have incurred (or continued) indebtedness to purchase or carry
tax - exempt obligations, are advised to consult their tax advisors as to the tax consequences of purchasing
or holding the Bonds.
Prospective investors should consult with their own tax advisors regarding the applicability of
such provisions to their particular circumstances.
No Litigation Certificate
The Underwriter's purchase of the Bonds is conditioned on, among other things, receipt from the
General Counsel to the Board and the General Counsel to the City and certain Board and City officials
40
of opinions and certifications at closing that there is no litigation then pending, or to their knowledge
threatened, affecting the validity of or security for the Bonds.
MISCELLANEOUS
Rating
Standard & Poor's Ratings Services ( "Standard & Poor's "), a division of The McGraw -Hill
Companies, Inc. and Moody's Investors Service ( "Moody's ") have each assigned their municipal bond
ratings as set forth on the cover hereof to this issue of Bonds with the understanding that upon delivery
of the Bonds, a policy insuring the principal of and interest on the Bonds will be issued by MBIA
Insurance Corporation. Such ratings reflect only the view of the rating agencies and any desired
explanation of the significance of such ratings should be obtained from Standard & Poor's at Standard
& Poor's Ratings Services, a division of The McGraw -Hill Companies, Inc., 25 Broadway, New York,
New York 10004 and from Moody's at 99 Church Street, New York, New York 10007. Generally, a
rating agency bases its rating on the information and materials furnished to it and on investigations,
studies and assumptions of its own. There is no assurance that the ratings will continue for any given
period of time or that the ratings will not be revised downward or withdrawn entirely by such rating
agencies, if, in the judgment of such agencies, circumstances so warrant. Any such downward revision
or withdrawal of the ratings indicated above may have an adverse effect on the market price of the Bonds.
Undertaking to Provide Ongoing Disclosure
Pursuant to the requirements of Section (b)(5)(i) of the Securities and Exchange Commission Rule
15c2 -12 (17 CFR Part 240, § 240.15c2 -12) (the "Rule "), the Board has covenanted for the benefit of the
holders of the Bonds to provide certain financial information and other operating data (the "Undertaking ")
to nationally recognized municipal securities information repositories. For a description of the Board's
Undertaking, see Appendix A hereto.
The Board's Undertaking is its first such undertaking under the Rule. A failure by the Board to
comply with the Undertaking will not constitute an Event of Default under the Bond Resolution or the
Bond Ordinance (although Bondholders will have the remedy of specific performance). Nevertheless,
such a failure must be reported in accordance with the Rule and must be considered by any broker, dealer
or municipal securities dealer before recommending the purchase or sale of the Bonds in the secondary
market. Consequently, such a failure may adversely affect the transferability and liquidity of the Bonds
and their market price.
Underwriting
The Bonds are being sold by the City at an original principal price of $3,977,956.15 to
PaineWebber Incorporated, as Underwriter pursuant to a purchase contract entered into between that firm
and the City. The Underwriter is reoffering the Bonds to the public at the prices set forth on the cover
hereof, which sum to $4,038,160.35. Expenses associated with the issuance of the Bonds are being paid
from the proceeds of the issue. The right of the Underwriter to receive compensation in connection with
the issue is contingent upon the actual sale and delivery of the Bonds. The Underwriter has initially
offered the Bonds to the public at the prices or yields set forth on the cover page of this Official
Statement. Such prices or yields, as the case may be, may subsequently change without any requirement
41
of prior notice. The Underwriter reserves the right to join with dealers and other investment banking
firms in offering the Bonds to the public.
Independent Accountants
The audited financial statements of the Board as of and for the year ended December 31, 1995,
appended to this Official Statement as Appendix B, have been audited by Schmidt, McCormack &
Associates, Inc., of Pueblo, Colorado, independent certified public accountants, as stated in their report
appearing therein.
Legal Matters
Legal matters incident to the authorization, issuance and sale by the City of the Bonds and with
regard to the tax - exempt status thereof are subject to the unqualified approving opinion of Kutak Rock,
Denver, Colorado, Bond Counsel. Copies of such opinion will be available at the time of the delivery
of the Bonds. Certain legal matters will be passed upon for the Underwriter by Kutak Rock, Denver,
Colorado, for the City by Thomas E. Jagger, Esq., its general counsel, and for the Board by Peterson,
Fonda, Farley, Mattoon, Crockenberg & Garcia, P.C., its general counsel. As is common in the
industry, payment of the fees of Kutak Rock is contingent upon the issuance of the Bonds. The various
legal opinions to be delivered concurrently with the delivery of the Bonds express the professional
judgment of the attorneys rendering the opinions as to the legal issues explicitly addressed therein. By
rendering a legal opinion, the opinion giver does not become an insurer or guarantor of that expression
of professional judgment, of the transaction opined upon, or of the future performance of 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.
Additional Information
The references in this Official Statement to the Bond Resolution, the Bond Ordinance, statutes,
resolutions, contracts, and other documents are brief outlines or partial excerpts of certain provisions of
those documents. These outlines or excerpts do not purport to be complete, and reference is made to the
documents for full and complete statements of their provisions. All estimates used in this Official
Statement, including estimates of expected construction costs, are intended only as estimates and not as
representations.
Copies of statutes, resolutions, ordinances, opinions, contracts, agreements, financial and
statistical data, and other related reports and documents described in this Official Statement are either
publicly available or available upon request and the payment of a reasonable copying, mailing, and
handling charge from: Board of Water Works of Pueblo, Colorado, 319 West 4th Street, Pueblo,
Colorado 81003, telephone: (719) 584 -0250; or Piper Jaffray Inc., 1050 Seventeenth Street, Suite 2100,
Denver, Colorado 80265, telephone: (303) 820 -5700.
42
Official Statement Certification
The preparation of this Official Statement and its distribution have been authorized by the Board
and the City. This Official Statement is hereby duly approved by the Board and the City as of the date
on the cover page hereof. This Official Statement is not to be construed as an agreement or contract
between the Board or the City and the purchasers or the owners of any Bond.
BOARD OF WATER WORKS OF PUEBLO,
COLORADO
By
President
CITY OF PUEBLO, COLORADO
President, City Council
43
[This Page Intentionally Left Blank]
APPENDIX A
UNDERTAKING TO PROVIDE ONGOING DISCLOSURE
Pursuant to the requirements of Section (b)(5)(i) of the Securities and Exchange Commission Rule
15c2 -12 (17 CFR Part 240, § 240.15c2 -12) (the "Rule "), the Board and the City have covenanted for the
benefit of the holders of the Bonds to provide certain financial information and other operating data (the
"Undertaking ") to nationally recognized municipal securities information repositories ( "NRMSIRs ") as
follows:
Definitions. The Bond Ordinance contains the following provisions:
The City, as an "obligated person" within the meaning of the Rule, undertakes to provide the
following information:
(a) Annual Financial Information; and
(b) Material Event Notices.
The term "Annual Financial Information" shall mean the financial information, which shall be
based on financial statements prepared in accordance with generally accepted accounting principles
( "GAAP "), and operating data of the type contained in the Official Statement, including audited financial
statements and financial information and operating data relating to the Board, the Board's general fund,
and its outstanding debt and other obligations. The term "Material Event Notices" shall mean written
or electronic notice of a Material Event. The term "Material Event" shall mean any of the following
events, if material, with respect to the Bonds: (i) Principal and interest payment delinquencies;
(ii) Non - payment related defaults; (iii) Unscheduled draws on debt service reserves reflecting financial
difficulties; (iv) Unscheduled draws on credit enhancements reflecting financial difficulties;
(v) Substitution of credit or liquidity providers or their failure to perform; (vi) Adverse tax opinions or
events affecting the tax - exempt status of the Bonds; (vii) Modifications to rights of owners of the Bonds;
(viii) Calls of Bonds; (ix) Defeasances of Bonds; (x) Release, substitution, or sale of property securing
repayment of the Bonds; and (xi) Rating changes.
The City shall while any Bonds are Outstanding provide, or cause the Board to provide, Annual
Financial Information within 188 days after the end of the Board's fiscal year, beginning with the Board's
fiscal year ending December 31, 1996, to each then existing NRMSIR and the SID, if any, such Annual
Financial Information while any Bonds are Outstanding. It shall be sufficient if the City provides, or
causes the Board to provide, to each then existing NRMSIR and the SID, if any, the Annual Financial
Information by specific reference to documents previously provided to each NRMSIR and the SID, if any,
or filed with the Securities and Exchange Commission and, if such a document is a final official statement
within the meaning of the Rule, available from the MSRB. The term " NRMSIR" shall mean shall mean
a nationally recognized municipal securities information repository, as recognized from time to time by
the Securities and Exchange Commission for the purposes referred to in the Rule. The NRMSIRs as of
the date of this Ordinance are as follows: Kenny Information Systems, 65 Broadway -16th Floor, New
York, New York 10006 -2503; Thompson Financial Services, Attention: Municipal Disclosure, 395
Hudson Street, New York, New York 10014 -3669; Disclosure Inc., 5161 River Road, Bethesda,
Maryland 20816 -1584; Moody's NRMSIR, 99 Church Street, New York, New York 10007; Bloomberg
A -1
Municipal Repositories, P.O. Box 840, Princeton, New Jersey 08542 -0840; and R. R. Donnelley Financial
Municipal Securities Disclosure Archive, 55 Main Street, Hudson, Massachusetts 01749. The term
"SID" shall mean any state information depository as operated or designated by the State of Colorado as
such for the purposes referred to in the Rule. As of the date of undertaking, no SID exists within the
State. The term "MSRB" shall mean the Municipal Securities Rulemaking Board. The current address
of the MSRB is 1640 King Street, #300, Alexandria, Virginia 22314.
If a Material Event occurs while any Bonds are Outstanding, the City shall promptly provide to
the MSRB and the SID, if any, such Material Event Notice. Each Material Event Notice shall be so
captioned and shall prominently state the date, title, and CUSIP numbers of the Bonds.
Unless otherwise required by law and subject to technical and economic feasibility, the City shall
employ such methods of information transmission as shall be reasonably requested or recommended by
the designated recipients of the City's information.
The undertaking will be in effect from the date of delivery of the Bonds until the earliest of
(a) the date the Accreted Value at Maturity on the Bonds has been legally defeased pursuant to the terms
of this Ordinance; (b) the date that the City and the Board shall no longer constitute an "obligated person"
within the meaning of the Rule; or (c) the date on which those portions of the Rule which required this
written undertaking are held to be invalid by a court of competent jurisdiction in a non - appealable action,
have been repealed retroactively or otherwise do not apply to the Bonds.
The undertaking may be amended without the consent of the registered owners of the Bonds, in
compliance with the Rule and any interpretive guidance related to the Rule. The Paying Agent shall
provide notice of such amendment to each NRMSIR.
Any failure by the City to perform in accordance with the undertaking shall not constitute an
"Event of Default" under the Ordinance, and the rights and remedies provided by the Ordinance upon
the occurrence of an "Event of Default" shall not apply to any such failure. The registered owners of
Bonds may enforce specific performance of the undertaking by any available judicial proceeding. Unless
otherwise required by law, no owner of a Bond shall be entitled to damages for the City's non - compliance
with its obligations under the undertaking.
A -2
APPENDIX A
UNDERTAKING TO PROVIDE ONGOING DISCLOSURE
Pursuant to the requirements of Section (b)(5)(i) of the Securities and Exchange Commission Rule
15c2 -12 (17 CFR Part 240, § 240.15c2 -12) (the "Rule "), the Board and the City have covenanted for the
benefit of the holders of the Bonds to provide certain financial information and other operating data (the
"Undertaking ") to nationally recognized municipal securities information repositories ( "NRMSIRs ") as
follows:
Definitions. The Bond Ordinance contains the following provisions:
The City, as an "obligated person" within the meaning of the Rule, undertakes to provide the
following information:
(a) Annual Financial Information; and
(b) Material Event Notices.
The term "Annual Financial Information" shall mean the financial information, which shall be
based on financial statements prepared in accordance with generally accepted accounting principles
( "GAAP "), and operating data of the type contained in the Official Statement, including audited financial
statements and financial information and operating data relating to the Board, the Board's general fund,
and its outstanding debt and other obligations. The term "Material Event Notices" shall mean written
or electronic notice of a Material Event. The term "Material Event" shall mean any of the following
events, if material, with respect to the Bonds: (i) Principal and interest payment delinquencies;
(ii) Non - payment related defaults; (iii) Unscheduled draws on debt service reserves reflecting financial
difficulties; (iv) Unscheduled draws on credit enhancements reflecting financial difficulties;
(v) Substitution of credit or liquidity providers or their failure to perform; (vi) Adverse tax opinions or
events affecting the tax - exempt status of the Bonds; (vii) Modifications to rights of owners of the Bonds;
(viii) Calls of Bonds; (ix) Defeasances of Bonds; (x) Release, substitution, or sale of property securing
repayment of the Bonds; and (xi) Rating changes.
The City shall while any Bonds are Outstanding provide, or cause the Board to provide, Annual
Financial Information within 188 days after the end of the Board's fiscal year, beginning with the Board's
fiscal year ending December 31, 1996, to each then existing NRMSIR and the SID, if any, such Annual
Financial Information while any Bonds are Outstanding. It shall be sufficient if the City provides, or
causes the Board to provide, to each then existing NRMSIR and the SID, if any, the Annual Financial
Information by specific reference to documents previously provided to each NRMSIR and the SID, if any,
or filed with the Securities and Exchange Commission and, if such a document is a final official statement
within the meaning of the Rule, available from the MSRB. The term " NRMSIR" shall mean shall mean
a nationally recognized municipal securities information repository, as recognized from time to time by
the Securities and Exchange Commission for the purposes referred to in the Rule. The NRMSIRs as of
the date of this Ordinance are as follows: Kenny Information Systems, 65 Broadway -16th Floor, New
York, New York 10006 -2503; Thompson Financial Services, Attention: Municipal Disclosure, 395
Hudson Street, New York, New York 10014 -3669; Disclosure Inc., 5161 River Road, Bethesda,
Maryland 20816 -1584; Moody's NRMSIR, 99 Church Street, New York, New York 10007; Bloomberg
A -1
APPENDIX B
AUDITED FINANCIAL STATEMENTS OF THE BOARD
AS OF AND FOR THE YEAR ENDED DECEMBER 31, 1995
[This Page Intentionally Left Blank]
APPENDIX B
SCHMIDT, McCORMACK & ASSOCIATES, INC.
119 COLORADO AVENUE / PUEBLO, COLORADO 61004 / 543 -2066
CERTIFIED PUBLIC ACCOUNTANTS
INDEPENDENT AUDITORS' REPORT
The Board of Water Works
Pueblo, Colorado
We have audited the accompanying general purpose financial statements of the Board
of Water Works of Pueblo, Colorado as of and for the years ended December 31, 1995
and 1994, as listed in the table of contents. These general purpose financial
statements are the responsibility of the Board's management. Our responsibility
is to express an opinion on these general purpose financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the general purpose financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the general purpose financial statements. An audit also
includes assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall general purpose financial statement
presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the general purpose financial statements referred to above present
fairly, in all material respects, the financial position of the Board of Water Works
of Pueblo, Colorado as of December 31, 1995 and 1994 and the results of its
operations and cash flows for the years then ended in conformity with generally
accepted accounting principles.
Our audit was made for the purpose of forming an opinion on the general purpose
financial statements taken as a whole. The accompanying financial information listed
as supplementary information in the table of contents is presented for the purpose of
additional analysis and is not a required part of the general purpose financial
statements of the Board of Water Works of Pueblo, Colorado. The information has been
subjected to the auditing procedures applied in the audit of the general purpose
financial statements and, in our opinion, is fairly stated in all material respects
in relation to the general purpose financial statements taken as a whole.
SCHMIDT, McCORMACK & ASSOCIATES, INC.
Certified Public Accountants
January 23, 1996
B -1
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B -2
BOARD OF WATER WORKS OF PUEBLO, COLORADO
STATEMENT OF REVENUES, EXPENSES AND RETAINED EARNINGS
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
GENERAL
Revenues
Operating expenses -- personnel services
and operation and maintenance
Administration
Administrative services
Treating, pumping and laboratory
Transmission, distribution and engineering
Water resources
Plant -at -large
Depreciation
Loss on abandonment of assets
Total general expenses
Net operating revenue
NONOPERATING REVENUES AND (EXPENSES)
NET REVENUE
RETAINED EARNINGS, JANUARY 1
RETAINED EARNINGS, DECEMBER 31
1995 1994
5 14.917.499 S 14.617.049
426,668
427,827
951,973
888,299
2,746,368
2,713,781
2,398,177
2,250,893
790,333
718,708
2,587,213 2,527,078
9,900,732 9,526,586
2,202,587 2,176,106
- 61,856
12,103,319 11,764,548
2,814,180 2,852,501
( 993,007 ( 1,194,575
1,821,173 1,657,926
66,257,274 64,599,348
S 68,078,447 S 66,257,274
The accompanying notes are an integral part of the financial statements
B -3
BOARD OF WATER WORKS OF PUEBLO, COLORADO
STATEMENT OF CONTRIBUTED EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
1995 1994
BALANCE, JANUARY 1
ADD
Contributions to utility plant construction
from various improvement districts and
developer installed facilities
BALANCE, DECEMBER 31
$ 7,336,559 S 7,069,585
257,617 266,974
$ 7,594,176 S 7,336,559
The accompanying notes are an integral part of the financial statements
B -4
BOARD OF WATER WORKS OF PUEBLO, COLORADO
STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
CASH FLOWS FROM OPERATING ACTIVITIES
Net operating revenue
Adjustments to reconcile net operating revenue
to net cash provided by operating activities
Depreciation
Loss on abandonment of assets
Amortization of bond issue expense
Amortization of deferred revenue
Changes in assets and liabilities
(Increase) decrease in accounts receivable
(Increase) decrease in inventories
(Increase) decrease in prepaid insurance
(Increase) decrease in advances for employees
Increase (decrease) in accrued sick leave
and vacation payroll
Increase (decrease) in accrued payroll taxes
on accrued sick leave and vacation payroll
Increase (decrease) in deferred revenue
increase (decrease) in other deferred credits
Increase (decrease) in deferred compensation
benefits payable
Increase (decrease) in accounts payable
Increase (decrease) in customer meter deposits
Increase (decrease) in accrued liabilities
Net cash provided by operating
activities
CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES
Interest paid on meter deposits
CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES
Acquisition and construction of capital assets
Proceeds from sale of assets
Payments on capital lease obligation
Principal payments on general obligation bonds
Interest payments on general obligation bonds
Interest on capital lease obligation
Payment to State of Colorado of matured bonds
and coupons
Net cash provided by (used for) capital
and related financing activities
Igg5 1QQa
S 2,814,180 S 2,852,501
2,202,587 2,176,106
-
61,856
107,681
107,681
( 23,400)
( 23,175)
( 52,140)
31,155
( 30,881)
34,126
( 35)
( 142)
1,300
1,861
60,493 100,740
4,628
7,706
( 207,272)
( 1,420)
( 7,596)
( 9,914)
706,709
369,599
116,493
( 256,745)
7,924
( 18,554)
10,239
1,976
5,710,910 5,435,357
( 7,876 ( 13,800
(1,984,185)
18,066
( 30,064)
(2,385,000)
(1,289,683)
( 10,134)
(1,999,468)
4,100
( 23,453)
(2,270,000)
(1,407,012)
( 10,559)
( 44,850
(5,681,000 (5,751,242
(Continued)
The accompanying notes are an integral part of the financial statements
B -5
BOARD OF WATER WORKS OF PUEBLO, COLORADO
STATEMENT OF CASH FLOWS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
CASH FLOWS FROM INVESTING ACTIVITIES
Interest received on investments
Cash investment of funds designated for deferred
compensation benefits
Net cash provided by investing
activities
NET INCREASE (DECREASE) IN CASH
CASH AT BEGINNING OF YEAR
CASH AT END OF YEAR
CASH AT END OF YEAR REPRESENTED BY
Cash on hand and in banks
Certificates of deposit
United States Treasury bills
Total
1995 1994
S 271,489 S 228,488
( 706,709 ( 369,599
( 435,220 ( 141,111
( 413,186) ( 470,796)
5,774,336 6,245,132
S 5,361,150 S 5,774,336
S 274,184 S 325,126
900,000 250,000
4,186,966 5,199,210
S 5,361,150 S 5,774,336
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING, CAPITAL AND FINANCING ACTIVITIES
Contributions to utility plant from various developer installed facilities for
1995 and 1994 were S 257,617 and S 266,974, respectively.
During 1995 water rights valued at S 12,000 were acquired in a noncash transaction
for supplying water to the seller indefinitely.
Fixed asset acquisitions in 1994 acquired through a capitalized lease obligation
amounted to $ 151,983.
The accompanying notes are an integral part of the financial statements
B -6
BOARD OF WATER WORKS OF PUEBLO, COLORADO
STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
CASH FLOWS FROM OPERATING ACTIVITIES
Net operating revenue
Adjustments to reconcile net operating revenue
to net cash provided by operating activities
Depreciation
Loss on abandonment of assets
Amortization of bond issue expense
Amortization of deferred revenue
Changes in assets and liabilities
(Increase) decrease in accounts receivable
(Increase) decrease in inventories
(Increase) decrease in prepaid insurance
(Increase) decrease in advances for employees
Increase (decrease) in accrued sick leave
and vacation payroll
Increase (decrease) in accrued payroll taxes
on accrued sick leave and vacation payroll
Increase (decrease) in deferred revenue
increase (decrease) in other deferred credits
Increase (decrease) in deferred compensation
benefits payable
Increase (decrease) in accounts payable
Increase (decrease) in customer meter deposits
Increase (decrease) in accrued liabilities
Net cash provided by operating
activities
CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES
Interest paid on meter deposits
CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES
Acquisition and construction of capital assets
Proceeds from sale of assets
Payments on capital lease obligation
Principal payments on general obligation bonds
Interest payments on general obligation bonds
Interest on capital lease obligation
Payment to State of Colorado of matured bonds
and coupons
Net cash provided by (used for) capital
and related financing activities
1995 1994
S 2,814,180 S 2,852,501
2,202,587 2,176,106
-
61,856
107,681
107,681
23,400)
( 23,175)
52,140)
31,155
30,881)
34,126
35)
( 142)
1,300
1,861
60,493 100,740
4,628
7,706
( 207,272)
( 1,420)
( 7,596)
( 9,914)
706,709
369,599
116,493
( 256,745)
7,924
( 18,554)
10,239
1,976
5,710,910 5,435,357
( 7,876 ( 13,800
(1,984,185)
18,066
( 30,064)
(2,385,000)
(1,289,683)
( 10,134)
(1,999,468)
4,100
( 23,453)
(2,270,000)
(1,407,012)
( 10,559)
( 44,850
(5,681,000 (5,751,242
(Continued)
The accompanying notes are an integral part of the financial statements
B -5
BOARD OF WATER WORKS OF PUEBLO, COLORADO
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
Note 1 - Following is a summary of significant accounting policies:
The Board of Water Works of Pueblo, Colorado is elected by the citizens
served by the system, and it operates a municipal water works system that
provides water service to the City of Pueblo, Colorado and adjacent areas.
The City's charter provides that title to the properties of the system is
in the name of the City of Pueblo, Colorado, but that the entire control,
management and operation of the system shall be exercised by the Board of
Water Works of Pueblo, Colorado, over which the City Council shall have no
jurisdiction or control. In addition, the charter provides that the City
of Pueblo, Colorado shall adopt all ordinances requested by the Board of
Water Works which shall be reasonably necessary in the management of the
system.
In November, 1995, voters approved an amendment to the Charter of the City
of Pueblo, Colorado that makes explicit the fact that the Board of Water
Works of Pueblo, Colorado does not have directly or indirectly, the right
to levy taxes. Throughout its history, the Board never levied taxes,
always operating from revenues raised from the sale of water to the citizens
of Pueblo and to industries and farmers.
By removing the authority to levy taxes, the voters affirmed the enterprise
status of the Board of Water Works of Pueblo, Colorado in relation to
Amendment One, also known as the Taxpayer's Bill of Rights (TABOR). Amendment
One was never intended to apply to enterprise activities such as the Board
of Water Works but some confusion existed as to whether a governmental
entity having the ability to levy a tax could also be considered an exempt
entity under TABOR provisions. The Board's status is now very clear
following the citizens affirmative vote.
In evaluating how to define the Board of Water Works of Pueblo, Colorado,
for financial reporting purposes, management has considered all potential
component units. The decision to include a potential component unit in the
reporting entity was made by applying the criteria set forth in generally
accepted accounting principles. The basic - but not the only - criterion
for including a potential component unit within the reporting entity is the
governing body's ability to exercise oversight responsibility. The most
significant manifestation of this ability is financial interdependency.
Other manifestations of the ability to exercise oversight responsibility
include, but are not limited to, the selection of governing authority, the
designation of management, the ability to significantly influence operations
and accountability for fiscal matters. A second criterion used in evaluating
potential component units is the scope of public service. Application of
this criterion involves considering whether the activity benefits the
government and /or its citizens, or whether the activity is conducted within
the geographic boundaries of the government and is generally available to
its citizens. A third criterion used to evaluate potential component units
for inclusion or exclusion from the reporting entity is the existence of
special financing relationships, regardless of whether the government is
B -7
BOARD OF WATER WORKS OF PUEBLO, COLORADO
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
able to exercise oversight responsibilities. Based upon the application of
these criteria, there are no "component unit entities" as defined in the
National Council on Governmental Accounting Statement 7, where the Board
had to consider whether to include or exclude specific entities from the
financial reporting entity. However, the Board is a member of a joint
venture with the City of Aurora, Colorado in the Busk - Ivanhoe Water System.
This joint venture is governed equally by both parties. The Board's portion
of their on -going financial responsibility is reported as water rights
maintenance in their financial statements. This joint venture is considered
a separate entity and, accordingly, has not been included in these financial
statements. Complete financial statements for the Busk- Ivanhoe Water System
can be obtained from the Board of Water Works of Pueblo, Colorado.
The accompanying summary of the Board of Water Works of Pueblo, Colorado's
more significant accounting policies is presented to assist the reader in
interpreting the financial statements and other data in this report. These
policies, as presented, should be viewed as an integral part of the
accompanying financial statements.
The Board of Water Works of Pueblo, Colorado is operated as an enterprise
fund. Enterprise funds are used to account for operations (a) that are
financed and operated in a manner similar to private business - where the
intent of the governing body is that the costs (expenses, including
depreciation) of providing goods or services to the general public on a
continuing basis be financed or recovered, primarily through user charges,
or (b) where the governing body has decided that periodic determination of
revenues earned, expenses incurred, and /or net revenue, financial position
and cash flows is appropriate for capital maintenance, public policy,
management control, accountability or other purposes. The acquisition,
maintenance and improvement of the physical plant facilities required to
provide these goods or services are financed from existing cash resources,
the issuance of bonds, Federal or State grants, etc. The generally accepted
accounting principles here are those applicable to similar businesses in the
private sector and, therefore, assets and liabilities, and revenues and
expenses are recognized on the accrual basis of accounting; thus, revenues
are recognized when earned and expenses are recorded when incurred.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements
and reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
The Board of Water Works of Pueblo, Colorado annually adopts a budget for
the following year. This process begins in early August when each of the
division managers prepare their budget requests. These requests are
reviewed and adjusted in meetings between the division managers and the
Director of Administrative Services. After all division budget requests
are completed, the Director of Administrative Services prepares a
B -s
BOARD OF WATER WORKS OF PUEBLO, COLORADO
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
preliminary budget for the entire entity and submits it to the Executive
Director for his review and input in relation to anticipated revenues and
the Board's five -year plan. In early October, the preliminary budget is
submitted to the Board for its input, and it is also made available for
public inspection at that time. The final budget, including all of the
appropriate resolutions, is usually adopted at the Board's November meeting,
and it is then submitted to the State of Colorado Department of Local Affairs.
The actual results of operations are presented in accordance with generally
accepted accounting principles which differ in certain respects from those
practices used in the preparation of the budget. For purposes of preparing
budget comparisons in this report, actual results of operations have been
adjusted to a basis consistent with the budgeted revenues and expenditures.
Investments are recorded at cost. Adjustments, if applicable, are made to
cost, for any premium or discount, which is amortized over the maturity of
the investment. For purposes of the statement of cash flows, the Board of
Water Works of Pueblo, Colorado considers all certificates of deposit and
United States Treasury bills to be cash equivalents.
Inventories are carried at lower of cost or market on a first -in, first -out
basis.
In 1995 and 1994, approximately 930 of the Board's services were provided to
customers in the City of Pueblo, Colorado, including the Airport Industrial
Park, and adjacent areas in Pueblo County. The majority of its clients are
residential users, commercial customers make up the balance. The risk of
loss on the accounts receivable is the balance due at time of default.
However, through the use of customer deposits and the ability to place a
lien on property for payment of amounts owed to the Board, credit losses,
historically, have not been significant.
The Board received approximately 1600 of its operating revenues from one
contract for non - potable water in 1995 and 1994.
The allowance for doubtful accounts is computed at one percent of customer
receivables at year end.
Classified plant in service is stated at:
(a) Appraisal value for assets in service prior to June 30, 1962.
(b) Cost for assets placed in service since June 30, 1962.
(c) Assets are capitalized in accordance with the dollar limit
stated in the statutes of the State of Colorado.
Depreciation of plant in service is computed on the straight -line method
based on estimated service lives of properties by classes. Estimated
useful lives used in computing depreciation are as follows:
B -9
BOARD OF WATER WORKS OF PUEBLO, COLORADO
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
Years
Structures and improvements, reservoirs,
intakes and mains 50
Pumping equipment 40
Meters, valves, hydrants, taps, water
treating equipment and wells 25
Heavy equipment, office furniture and
equipment, computer equipment, pump
plant computer, cathodic protection
for lines and tanks, miscellaneous
departmental equipment 10
Transportation equipment 4
The Board has established a retirement plan for the benefit of all eligible
employees. The contribution to the plan is approximately the amount of the
normal cost as determined by actuarial calculation and is recorded as an
expense in the year paid. In addition, the Board has established two
deferred compensation plans.
Unamortized debt expense is being amortized over the period of the related
bond issue.
The following are recorded as contributions in the contributed equity
section of the balance sheet:
(a) Receipts of Federal and State grants for acquisitions of fixed
assets in prior years.
(b) Contributions from customers or developers for the acquisition
of fixed assets and developer installed facilities.
The sewer use fee charged by the City of Pueblo, Colorado is billed and
collected by the Board of Water Works and remitted to the City on a
monthly basis. The uncollected sewer fees charged to customers are carried
as a receivable, and unremitted and uncollected sewer fees are carried as a
liability on the balance sheet.
Unbilled revenue which results from cycle billing practices is recorded in
the following year.
Deferred revenue, related to acquisition of water rights in 1990 and 1995,
is being amortized over forty years.
The Board of Water Works of Pueblo, Colorado and Local 1045 of the American
Federation of State, County and Municipal Employees (AFL -CIO) have adopted
a working policy for the period of January 1, 1994 through December 31,
1995. Approximately 73% of the Board's employees are members of Local 1045.
An agreement for 1996 has also been reached.
The Board has obtained several annual and long -term special use permits with
the U. S. Forest Service to allow them to operate on Federal lands in
connection with the operation and maintenance of their water collection
system.
B -lo
BOARD OF WATER WORKS OF PUEBLO, COLORADO
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
Note 2 - Defined Benefit Pension Plan
A. Plan Description
The Board contributes to a defined benefit, single - employer retirement
plan. The Board makes payments to a deposit administration fund in amounts
necessary to fund the plan as actuarially determined on a bi- annual basis.
Employee contributions are not required subsequent to January 1, 1975.
Covered compensation is the amount of compensation paid to participating
employees excluding overtime, bonuses and other extra compensation. The
total amount of covered compensation for the year ended March 31, 1995,
the latest year for which plan information is available, was S 3,951,316,
and total compensation for the same period was $ 4,348,637.
Effective April 1, 1993, each regular full -time employee who has reached
age twenty -five is eligible to participate on the later of April 1, 1993
or April lst coincident with or following the completion of six months of
regular full -time employment. A participant is eligible for a vested
benefit, payable at age 65, after five years of credited service. The vested
benefit is equal to the accrued benefit, considering service and compensation,
at the date of termination. If the participant has at least fifteen years
of credited service, payments may commence the first of any month following
the participant's fifty -fifth birthday but are reduced for early retirement.
Board employees who retire at or after age 65 are entitled to the normal
retirement benefit for life which is equal to the sum of the accrued benefit
as of April 1, 1985, increased by 5 %, plus 2.1% of the employee's monthly
earnings in effect at the beginning of each plan year subsequent to April 1,
1985. Effective April 1, 1991, the 2.110' was increased to 2.3% of the
employee's monthly earnings in effect at the beginning of each plan year.
The minimum benefit is $ 100 per month after fifteen years of service. A
participant is eligible for early retirement at or after age 55 provided
fifteen years of credited service have been completed. The annuity
commencing at age 65 is determined as of normal retirement considering
service and compensation to termination of employment. If payments commence
prior to age 65, the benefit is reduced by 5% for each year by which payments
commence prior to normal retirement date.
A participant is eligible for a disability payment payable at age 65, after
five years of credited service. The disability benefit is equal to the
projected benefit at the normal retirement date, considering increases in
future earnings based upon job classification and service to the normal
retirement date.
The spouse of a participant who has completed five years of credited service,
and dies while in active employment, or after having completed such service
requirement but before the normal retirement date, is eligible to receive a
benefit, payable for life, equal to fifty percent of the accrued benefit at
date of death. If the spouse is more than five years younger than the
participant, the benefit is reduced by 1 1/2% for each year in excess of
five years to reflect the difference in age. Such death benefit commences
B -11
BOARD OF WATER WORKS OF PUEBLO, COLORADO
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
on the first day of the month coincident with or following the date the
member would have attained age 55 or date of death if later. In lieu of the
above monthly benefit, the spouse is entitled to a single sum amount, equal
to the actuarial equivalent of the above monthly benefit, payable as soon
as practicable following the member's death.
The Board established an early retirement window program whereby, effective
April 1, 1993, employees who were 59 1/2 years of age with fifteen years of
credited service in the plan were eligible to retire with no reduction in
accrued pension benefits. In addition, this early retirement window program
provided an additional five years of credited service based upon the April 1,
1992 annual pension benefit calculation, a supplemental bridge payment of
S 200 per month for those under age 62, up to the month they turn age 62,
and continuation in the Board's medical insurance plan at the Board's expense
until age 65 or the completion of three years of retirement in accordance
with the previously established supplemental retirement benefit described in
Note 3. The early retirement benefits are funded through the pension plan
while the costs of the medical insurance are funded through general
operations.
B. Funding Status
The amount shown below as the "pension benefit obligation" is a standardized
disclosure measure of the present value of pension benefits, adjusted for
the effects of projected salary increases and step -rate benefits, estimated
to be payable in the future as a result of employee service to date. The
measure is intended to help users assess the funding status of the plan on
a going- concern basis, assess progress made in accumulating sufficient
assets to pay benefits when due and make comparisons among employers. The
measure is the actuarial present value of credited projected benefits and
is independent of the funding method used to determine contributions to the
plan.
The pension benefit obligation was computed as part of an actuarial valuation
performed as of April 1, 1995. Significant actuarial assumptions used include
(a) rate of return on the investment of present and future assets of 7.5o per
annum compounded annually, (b) projected salary increases of 4% per year
attributable to inflation and (c) no post- retirement benefits.
Assets in excess of the pension benefit obligation applicable to the plan
were S 358,082 for the plan year ending March 31, 1995 as follows:
B -12
BOARD OF WATER WORKS OF PUEBLO, COLORADO
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
Pension benefit obligation:
Retirees and beneficiaries currently receiving benefits
Terminated vested employees not yet receiving benefits
Current employees- -
Accumulated employee contributions including allocated
investment income
Employer financed vested
Employer financed non - vested
Total pension benefit obligation
Net assets available for benefits (market value)
Assets in excess of the pension benefit obligation
S 1,270,458
271,796
51,282
2,139,478
1,379,584
5,112,598
5,470,680
S 358,082
The change in plan provisions regarding eligibility for coverage, described
in the second paragraph of the plan description section, caused a S 27,899
increase in the benefit obligation as of April 1, 1995.
C. Actuarially Determined Contribution Requirements
The plan's funding policy provides for actuarially determined periodic
contributions in amounts that will provide for sufficient assets to be
available to pay benefits when due. The costs are determined using the
aggregate actuarial cost method. Under this method, the normal cost is
computed as a level percentage of pay. No benefits are projected to be
greater than the dollar limitation currently imposed by Section 415(b)(1)(A)
of the Internal Revenue Code, in accordance with the requirements of Section
404(j) of the Code. No actuarial accrued liability is held for non - vested,
inactive participants who have a break in service, or for non - vested
participants who have quit or been terminated, even if a break in service
had not occurred as of the valuation date. The wages used in the projection
of benefits and liabilities were April 1, 1995 rates of pay.
The significant actuarial assumptions used to compute the actuarially
determined contribution requirements are the same as those used to compute
the pension benefit obligation as described in section B above.
The total contribution requirement for the year beginning April 1, 1995 of
S 226,292 will be made in accordance with actuarially determined requirements
computed through an actuarial valuation. The contribution is approximately
5.7% of current covered payroll. In addition, various individuals are
included in a supplemental benefit funded through a separate trustee at the
cost of $ 28,835.
B -13
BOARD OF WATER WORKS OF PUEBLO, COLORADO
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
D. Trend Information
Trend information gives an indication of the progress made in accumulating
sufficient assets to pay benefits when due. Plan data can be found on
Schedule One of the Board's financial report. For the plan year ended
March 31, 1995, assets were sufficient to fund the pension benefit
obligation. Unfunded pension benefit obligation represented (9.06)°C of the
annual payroll for employees covered by the plan. Showing unfunded pension
benefit obligation as a percentage of annual covered payroll approximately
adjusts for the effects of inflation for analysis purposes.
Note 3 - In addition to providing pension and deferred compensation benefits, the
Board began providing certain health insurance benefits for retired employees
effective September 18, 1990. Substantially all of the Board's employees,
who retire after this date and meet certain requirements, are eligible for
the benefit. The individual must be retired, not terminated, be at least 62
years of age and have a minimum of fifteen years of service. The maximum
monthly benefit is S 511, and the maximum benefit period is three years. The
Board recognizes the cost of providing this benefit by expensing the payments.
During 1995, five individuals took advantage of this benefit at a cost of
S 18,870 to the Board.
Note 4 - Cash received by the Board of Water Works of Pueblo, Colorado is deposited
in various banks, and savings and loan associations or used to purchase
other investments.
Investments
Colorado statutes specify in which instruments the units of local government
may invest. These allowable investments include:
Certificates of deposit
Obligations of the United States or obligations unconditionally
guaranteed by the United States
Investment of funds under the Board's deferred compensation plan
placed with a third party administrator
The Board of Water Works' investments are categorized below to give an
indication of the level of security assumed at year -end:
Category 1 - Investments that are insured or registered or for which the
securities are held by the Board or its agent in the Board's
name.
Category 2 - Uninsured and unregistered investments for which the securities
are held by the broker's or dealer's trust department or agent
in the Board's name.
B -14
BOARD OF WATER WORKS OF PUEBLO, COLORADO
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
Category 3 - Uninsured and unregistered investments
are held by the broker or dealer, or by
agent but not in the Board's name.
U. S. Treasury
bills
Deposits with
third party
administrators
under the Board's
deferred
compensation
plans
Total
Deposits
Category
1 2 3
for which the securities
its trust department or
Carrying Market
Amount V;; 11
$ 4,186,966 $ - $ - $ 4,189,666 S 4,185,392
- 2,199,597 2,199,597 2,199,597
S 4,186,966 S - S 2,199,597 S 6,389,263 S 6,384,939
The Colorado Public Deposit Protection Act and the Savings and Loan
Association Public Deposit Protection Act require that all units of local
government deposit cash in eligible public depositories. Eligibility is
determined by state legislators. Amounts on deposit in excess of Federal
insurance must be collateralized. The eligible collateral is determined by
the Public Deposit Protection Act and the Savings and Loan Association
Public Deposit Protection Act. These acts allow the institution to create
a single collateral pool for all public funds. The pool is to be maintained
by another institution or held in trust for all the uninsured public deposits
as a group. The market value of the collateral must be at least equal to
1020 of the uninsured deposits.
At December 31, 1995 and 1994, the Board's cash deposits had a bank and
corresponding carrying balance of S 1,174,184 and S 575,126 respectively,
as summarized below. All the deposits are stated at cost with accrued
interest shown under a separate caption on the balance sheet.
Cash on hand
Insured (FDIC)
Uninsured
Collateral securities held by financial
institution's trust department or agent
Total deposits
Total deposits represented by
Cash on hand and in banks
Certificates of deposit
1995 1994
$ 4,400 $ 3,400
302,214 231,497
867.570 340.229
$ 1,174,184 S 575,126
$ 274,184 $ 325,126
900,000 250,000
S 1,174,184 $ 575,126
B -15
BOARD OF WATER t.ORKS OF PUEBLO, COLORADO
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
Note 5 - The Board has entered into refunding transactions whereby refunding bonds
have been issued to facilitate the retirement of the Board's obligation with
respect to certain bonds already outstanding. On November 1, 1974, the 1963,
1972, 1973 and May 1, 1974 issues were refunded into the S 21,950,000 1974
refunding issue. On April 15, 1984, the 1974 refunding issue, 1975 and 1982
issues were refunded into the S 24,115,000 1984 refunding issue. On
January 14, 1992, the 1984A refunding and 1986 issues were refunded into the
S 20,005,000 1991 refunding issue. Bond issue costs of S 303,653 were
incurred and are being amortized over the term of the bonds. The proceeds
of the refunding issues have been placed in irrevocable escrow accounts
and invested in direct obligation securities of the United States Government
that, together with interest earned thereon, will provide amounts sufficient
for future payments of interest and principal on the issues being refunded.
Refunded bonds are not included in the Board's outstanding long -term debt
since the Board legally satisfied its obligation with respect to those
issues through consummation of the refunding transaction described in this
note. As of December 31, 1995 and 1994, the remaining amount outstanding
on the bonds refunded on November 1, 1974 is $ - and S 1,105,000, and
the amounts outstanding on the bonds refunded on April 15, 1984 is S 1,650,000
and S 3,825,000. Unclaimed principal and interest payments of S 44,850 on
the refunded February 1, 1963 general obligation bond issue were remitted
to the State of Colorado under the guidelines of the Great Colorado Payback
program in 1994.
In connection with the issuance of various bonds, the Board incurred bond
issue costs in the amount of $ 1,134,479. The costs are being amortized
over the life of the bonds. The remaining unamortized expense at
December 31, 1995 and 1994 is S 591,553 and S 699,234.
The total amount of general obligation bonds payable at December 31, 1995
is $ 17,300,000. See Schedules Eight and Nine.
Changes in long -term debt during 1995 are summarized as follows:
B -16
Balance
Balance
January 1,
December 31,
1995 Additions
Retired
1995
1984 Refunding Issue
Series B
S 5,000,000 $ -
$ -
$ 5,000,000
1991 Refunding Issue
14,685,000 -
2,385,000
12,300,000
Obligation under
capital lease
128,530 -
30,064
98,466
Total
$ 19,813,530 $ -
$ 2,415,064
$ 17,398,466
B -16
BOARD OF WATER WORMS OF PUEBLO, COLORADO
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
Note 6 - In 1990 and 1995, the Board acquired water rights from the State of Colorado
and the City of Pueblo, Colorado, respectively, in exchange for supplying a
certain amount of water each future year. The deferred income is being
amortized over a forty -year period.
In 1992, the Board acquired water rights from two individuals in exchange
for supplying a certain amount of water each future year. The value of
these water rights, as well as those acquired in 1990 and 1995 from the
State of Colorado and the City of Pueblo, Colorado were valued based upon
the amount paid for similar rights acquired from a separate entity in a cash
transaction.
At December 31, 1995 and 1994, the Board was holding S 352 and S 7,083,
respectively in insurance proceeds pending repair of the administration
building and Board vehicles.
In addition, at December 31, 1994 the Board held S 865 received from
workmen's compensation.
Note 7 - Effective July 1, 1984, all full -time employees accumulate paid sick leave
at the rate of twelve hours per month. All employees who, at that date, had
accumulated in excess of 720 hours were, at their option, paid for the excess
hours. Any employee who did not select the optional pay -off at July 1, 1984
can do so at a later date. At termination, employees are paid for any
accumulated sick pay. The liability for accumulated sick pay at December 31,
1995 and 1994 is $ 1,378,142 and $ 1,318,936.
Employees are entitled to vacation with pay for the twelve -month period
following their date of hire (anniversary date) according to the following
scale:
Years Of
Service
Hours
1 to
5
96
6 to
10
120
11 to
15
144
16 and
over
168
Each employee may carry over a maximum of 80 hours of vacation time from
any previous anniversary year to the following anniversary year. At the
employee's request, a payoff for a maximum of 56 hours of accumulated
vacation leave can be made during the anniversary year. The vacation hours
are valued at the employee's regular straight rate of pay in effect at the
time. In addition, each employee receives eight hours of personal holiday
each anniversary year which is not available for carryover. The liability
for accumulated vacation pay at December 31, 1995 and 1994 is S 334,380 and
$ 333,093.
Note 8 - Accounts payable are comprised of outstanding bills and purchase orders for
expenses, materials and fixed assets related to the budget for the years
ended December 31, 1995 and 1994. Included in outstanding bills and purchase
orders at December 31, 1995 and 1994 is $ 406,780 and $ 414,516 respectively,
owed to the City of Pueblo, Colorado for collection of the City's sewer fee
and $ - and $ 2,314 respectively, owed to the Great Colorado Payback.
B -17
BOARD OF WATER WORKS OF PUEBLO, COLORADO
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
Note 9 - The Board of Water Works of Pueblo, Colorado offers its employees deferred
compensation plans created in accordance with Internal Revenue Code
Section 457. The plans permit these employees to defer a portion of their
salary to future years. Participation in the plan is optional. The
deferred compensation is not available to the employees until termination,
retirement, death or unforeseeable emergency.
All amounts of compensation deferred under the plan, all property and
rights purchased with those amounts, and all revenue attributable to those
amounts, property or rights are (until paid or made available to the
employee or other beneficiary) solely the property and rights of the
Board of Water Works of Pueblo, Colorado, subject only to the claims of
the Board's general creditors. Participants' rights under the plans are
equal to those of general creditors of the Board in an amount equal to the
fair market value of the deferred account for each participant.
The Board has no liability for losses under the plans but does have the duty
of due care that would be required of an ordinary prudent investor. The
Board believes that it is unlikely that it will use the assets to satisfy
the claims of general creditors in the future.
Investments are managed by the plan's trustees under one of several
investment options, or a combination thereof. The choice of the
investment option(s) is made by the participants.
Note 10 - During 1995, reclassifications of the cost of various assets were made to
the beginning balances to better reflect their use.
Note 11 - Because accounting principles applied for purposes of developing data on a
budgetary basis differ from those used to present financial statements in
conformity with generally accepted accounting principles, a reconciliation
for the year ended December 31, 1995 is presented below:
Deficiency of revenues under expenses and expenditures
as presented in the schedule of revenues, expenses
and expenditures as compared with budget
Adjustments
Capital expenditures
Long -term debt payments
Obligation under capital lease
Depreciation
Net revenue
S( 767,399)
2,376,095
2,385,000
30,064
(2,202,587)
S 1,821,173
B -18
BOARD OF WATER WORKS OF PUEBLO, COLORADO
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
Note 12 - The Board has entered into an agreement for the lease of computer hardware.
The terms of the agreement provide an option to purchase the equipment at
any time during the five -year lease term. The lease meets the criteria
of a capital lease as defined by Statement of Financial Accounting Standards
No. 13, "Accounting for Leases ", which defines a capital lease generally as
one which transfers benefits and risks of ownership to the lessee. As such,
$ 151,983 has been capitalized as computer equipment at December 31, 1994.
The following is a schedule of the future minimum lease payments under the
capitalized lease discussed above, together with the present value of the net
minimum lease payments as of December 31, 1995.
Year Endinq December 31,
1996 $ 37,104
1997 37,104
1998 37,104
Total minimum lease payments 111,312
Less amount representing interest ( 12,846
Present value of net minimum lease payments S 98,466
Note 13 - At December 31, 1995, the Board had two uncompleted construction contracts
as follows:
Projected
Remaining
Construction
Pro ect Title Committed
Cathodic Protection Design and Engineering 21,428
Conveyance Flume and Replacement 652,195
S 673,623
Note 14 - At December 31, 1994, the Board of Water Works of Pueblo, Colorado was a
defendant, along with numerous others, in a lawsuit in which the plaintiff
was seeking declaratory and injunctive relief as well as monetary damages
for deprivation of ditch easements, decreed water rights and delay or denial
of a special use permit. This suit was dismissed by the court against all
defendants, including the Board, in 1995.
B -19
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B -20
Schedule Two
BOARD OF WATER WORKS OF PUEBLO, COLORADO
SCHEDULE OF REVENUES, EXPENSES AND EXPENDITURES
AS COMPARED WITH BUDGET
FOR THE YEAR ENDED DECEMBER 31, 1995
OPERATING REVENUES -- SCHEDULE THREE
NONOPERATING REVENUES
Interest income
Sale of assets
Contribution from prior years
Total revenues
EXPENSES AND EXPENDITURES
Personnel services -- Schedule Four
Administration
Administrative services
Treating, pumping and laboratory
Transmission, distribution and
engineering
Water resources
Plant -at -large
Total
Operation and maintenance -- Schedule Four
Administration
Administrative services
Treating, pumping and laboratory
Transmission, distribution and
engineering
Water resources
Plant -at -large
Total
Capital expenditures -- Schedule Six
Administration
Administrative services
Treating, pumping and laboratory
Transmission, distribution and
engineering
Water resources
Total
Debt retirement
Interest on meter deposits, bonds and
capital lease -- Schedule Five
Long -term debt payments on bonds
Lease obligation
Total
Total expenses and expenditures
Actual
Over (Under)
Actual Budget Budget
5 14,917,499 S 15,157,627 S( 240,128)
279,676
97,900
181,776
14,141
5
9,141
-
1,775,330
(1,775,330
15,211,316
17,035,857
(1,824,541
297,057
303,750
( 6,693)
682,450
711,300
( 28,850)
1,084,250
1,115,950
( 31,700)
2,094,667
2,140,850
( 46,183)
168,280
174,300
( 6,020)
1,805,369
1,896,350
( 90,981
6,132,073
6,342,500
( 210,42,
129,611
182,770
( 53,159)
269,523
307,505
( 37,982)
1,662,118
1,713,325
( 51,207)
303,510
326,075
( 22,565)
622,053
671,300
( 49,247)
781,844
717,225
64,619
3,768,659
3,918,200
( 149,541
6,262
10,700
( 4,438)
30,047
128,300
( 98,253)
936,875
998,300
( 61,425)
1,184,353
1,719,475
( 535,122)
218,558
235,700
( 17,142
2,376,095
3,092,475
( 716,380
1,286,824
1,297,682
( 10,858)
2,385,000
2,385,000
-
30,064
-
30,064
3,701,888
3,682,682
19,206
15,978,715
17,035,857
(1,057,142
DEFICIENCY OF REVENUES UNDER EXPENSES AND
EXPENDITURES
S ( 767,399 S - S ( 767,399
B -21
Schedule Three
BOARD OF WATER WORKS OF PUEBLO, COLORADO
SCHEDULE OF OPERATING REVENUES AS COMPARED WITH BUDGET
FOR THE YEAR ENDED DECEMBER 31, 1995
B -22
Actual
Over (Under)
OPERATING REVENUES
Actual
Budget
Budget
Water sales to general customers
(net of allowances)
S 11,131,013
S 11,560,320
S(429,307)
Water sales to Comanche Plant
2,317,307
2,317,307
-
Untreated water sales
269,118
290,000
( 20,882)
Water sales to City of Aurora, Colorado
200,000
200,000
-
Taps and meters
49,131
46,000
3,131
Material sales (net)
72,671
41,500
31,171
Main assessments
29,639
40,800
( 11,161)
Fire protection -- public
100,699
103,400
( 2,701)
Discounts
567
4,900
( 4,333)
Rental income
5,408
5,200
208
Turn -on fees
24,360
28,000
( 3,640)
Check processing
3,775
3,400
375
Field collection
1,230
1
230
Interest earned on service accounts
944
1
( 856)
Miscellaneous
5,851
15,000
( 9,149)
Plant water investment fee
473,482
270,600
202,882
Insurance recovery
235
5
( 4,765)
Comanche operations and maintenance
reimbursement
4,800
4,800
-
Chemical sales
-
100
( 100)
Meter test fee
-
300
( 300)
Sewer billing cost reimbursement
225,984
217,300
8,684
Laboratory fees
1,285
900
385
Total operating revenues
S 14,917,499
S 15,157,627
S (240,128 )
B -22
Schedule Four
Page One
BOARD OF WATER WORKS OF PUEBLO, COLORADO
SCHEDULE OF OPERATING EXPENSES AS COMPARED WITH BUDGET
FOR THE YEAR ENDED DECEMBER 31, 1995
OPERATING EXPENSES Actual
Administration division
Personnel services
Managerial 224,940
Supervision and specialists 65,277
Miscellaneous 6,840
Total
Operation and maintenance
Outside services
Office supplies
Maintenance
In- service training
Subscriptions and membership dues
Consulting
Total
Total division
Administrative services division
Personnel services
Managerial
Supervision and specialists
Skills and trades
Miscellaneous
Overtime
Total
Operation and maintenance
Outside services
Office supplies
Maintenance
In- service training
Subscriptions and membership dues
Janitor supplies
Safety
Advertising
Total
Total division
297,057
50,925
4,122
2,395
14,755
27,678
29,736
129,611
$ 426,668
S 58,030
216,796
385,806
20,387
1,431
682,450
137,867
41,677
65,748
12,489
2,865
1,042
2,705
5,130
269,523
S 951,973
Actual
Over (Under)
Budget Budget
$ 230,100
S( 5,160)
66,650
( 1,373)
7,000
( 160
303,750
( 6,693
69,850
(18,925)
3,000
1,122
3,525
( 1,130)
25,600
(10,845)
25,795
1,883
55,000 (25,264)
182,770 (53,159
S 486,520 S (59,852 )
$ 57,900
$ 130
237,150
(20,354)
400,550
(14,744)
13,550
6,837
2,150
( 719)
711,300 (28,850
165,660 (27,793)
40,175
1,502
72,450
( 6,702)
14,750
( 2,261)
5,470
( 2,605)
2,500
( 1,458)
4,000
( 1,295)
2,500
2,630
307,505 (37,982
S 1,018,805 S (66,832 )
B -23
Schedule Four
Page Two
BOARD OF WATER WORKS OF PUEBLO, COLORADO
SCHEDULE OF OPERATING EXPENSES AS COMPARED WITH BUDGET
FOR THE YEAR ENDED DECEMBER 31, 1995
OPERATING EXPENSES -- CONTINUED
Treating, pumping and laboratory division
Personnel services
Managerial
Supervision and specialists
Skills and trades
Miscellaneous
Overtime
Total
Operation and maintenance
Outside services
Office supplies
Maintenance
In- service training
Subscriptions and membership dues
Tool replacement
Tanks and grounds
Chemicals
Laboratory
Power and diesel
Janitorial
Safety
Communications
Engineering consulting
Total
Total division
1,084,250 1,115,950 (31,700
42,184
46,525
Actual
2,654
2,850
Over (Under)
Actual
Budget
Budget
6,568
11,200
( 4,632)
$ 56,627
S 57,950
S( 1,323)
298,307
302,300
( 3,993)
671,335
696,750
(25,415)
12,315
21,350
( 9,035)
45,666
37,600
8,06E
1,084,250 1,115,950 (31,700
42,184
46,525
( 4,341)
2,654
2,850
( 196)
237,898
175,400
62,498
6,568
11,200
( 4,632)
1,252
850
402
6,013
5
1,013
31,849
35,000
( 3,151)
382,896
414,000
(31,104)
40,030
40,000
30
886,989
960,000
(73,011)
3,435
1
2,435
2,446
2,000
446
5,652
5,000
652
12,252
14,500
( 2,248)
1,662,118 1,713,325 (51,207
S 2,746,368 S 2,829,275 S (82,907 )
B -24
Schedule Four
Page Three
BOARD OF WATER WORKS OF PUEBLO, COLORADO
SCHEDULE OF OPERATING EXPENSES AS COMPARED WITH BUDGET
FOR THE YEAR ENDED DECEMBER 31, 1995
OPERATING EXPENSES -- CONTINUED
Transmission, distribution and
engineering division
Personnel services
Managerial
Supervision and specialists
Skills and trades
Miscellaneous
Overtime
Total
Operation and maintenance
Outside services
Office supplies
Maintenance
In- service training
Subscriptions and membership dues
Tool replacement
Equipment repair
Barricades
Mains maintenance
Meter maintenance
Hydrant maintenance
Valve maintenance
Meter shop supplies
Gasoline and oil
Janitor supplies
Auto and truck
Safety
Cathodic protection maintenance
Engineering consulting
Service lines
Freight
Total
Total division
Artiial
S 54,630
250,024
1,690,435
34,341
65,237
2,094,667
5,634
9,434
34,138
10,898
1,184
6,289
4,151
1,452
42,101
1,749
6,838
5,520
4,623
41,922
1,219
120,443
2,624
80
1,076
898
1,237
303,510
S 2,398,177
Actual
Over (Under)
Budget Budget
S 55,850
S( 1,220)
255,450
( 5,426)
1,719,550
(29,115)
40,000
( 5,659)
70,000
( 4,763)
2,140,850 (46,183
8,300
8,100
33,375
10,900
2,300
6,500
7,000
2,000
55,000
3,000
6,500
8,000
7,000
43,000
1,500
115,000
4,600
1,000
2,000
1,000
2,666)
1,334
763
2)
1,116)
211)
2,849)
548)
12,899)
1,251)
338
2,480)
2,377)
1,078)
281)
5,443
1,976)
920)
1,076
1,102)
237
326,075
$ 2,466,925
(22,565)
S (68,748 )
B -25
Schedule Four
Page Four
BOARD OF WATER
SCHEDULE OF OPERATING
FOR THE YEAR
OPERATING EXPENSES -- CONTINUED
Water resources division
Personnel services
Managerial
Supervision and specialists
WORKS OF PUEBLO, COLORADO
EXPENSES AS COMPARED WITH BUDGET
ENDED DECEMBER 31, 1995
Total
Operation and maintenance
Outside services
Office supplies
Maintenance
In- service training
Subscriptions and membership dues
Tool replacement
Clear Creek Reservoir maintenance
Wurtz Ditch maintenance
Wurtz Extension maintenance
Ewing Ditch maintenance
Columbine Ditch maintenance
Snowplowing operations
Annual transmountain maintenance
Ranch irrigation maintenance
Dwelling maintenance
Leadville utilities
Comanche return flow maintenance
Homestake (Aurora) maintenance
Twin Lakes water rights maintenance
Busk - Ivanhoe water rights maintenance
Water storage and transportation
Consulting services
Total
Total division
B -26
Actual
Over (Under)
Actual Budget Budget
S 58,168 S
58,100
110,112
116,200
168,280
174,300
21,793
23,725
1,440
2,100
3,317
3,550
14,611
15,600
13,410
19,800
1,187
1,500
11,079
11,100
1,021
1,200
965
1,200
1
1,200
918
1,200
16,380
16,000
22,069
25,000
84
1,200
1,326
1,375
517
2,500
48
1,000
7,500
7,500
172,500
172,500
80,000
110,000
46,323
51,050
204,547 201,000
622,053 671,300
S 790,333 S 845,600
S 68
( 6,088
( 6,020
1,932)
660)
233)
989)
6,390)
313)
21)
179)
235)
132)
282)
380
2,931)
1,116)
49)
1,983)
952)
(30,000)
( 4,727)
3,547
(49,247)
5 (55,267 )
Schedule Four
Page Five
BOARD OF WATER WORKS OF PUEBLO, COLORADO
SCHEDULE OF OPERATING EXPENSES AS COMPARED WITH BUDGET
FOR THE YEAR ENDED DECEMBER 31, 1995
OPERATING EXPENSES -- CONTINUED
Plant -at -large division
Personnel. services
Pension and deferred compensation
Health insurance
Life insurance
F. I. C. A.
Workmen's compensation
Sick and vacation pay
Dental plan
Disability insurance
Total
Operation and maintenance
Outside services
Maintenance
Postage
Equipment lease /rental
Utilities
Insurance -- property
Collection expense
Amortization of bond issue expense
Cash short
Uninsured small claims
Bad debts
Contingency
Total
Total division
Actual
Over (Under)
Actual Budaet Budget
S 421,567 $ 437,050 S(15,483)
505,252
504,000
1,252
52,970
45,200
7,770
351,613
350,000
1,613
99,202
112,800
(13,598)
294,218
366,000
(71,782)
54,185
54,200
( 15)
26,362
27,100
( 738)
1,805,369 1,896,350 (90,981
246,803
187,250
59,553
13,403
12,550
853
128,786
129,000
( 214)
6,644
41,750
(35,106)
103,191
107,750
( 4,559)
171,014
182,600
(11,586)
373
1
( 627)
107,681
-
107,681
168
300
( 132)
1,249
1,500
( 251)
2,532
-
2,532
-
53,525
(53,525)
781,844 717,225 64,619
S 2,587,213 S 2,613,575 S (26,362 )
B -27
Schedule Five
BOARD OF WATER WORKS OF PUEBLO, COLORADO
SCHEDULE OF NONOPERATING REVENUES AND EXPENSES
AS COMPARED WITH BUDGET
FOR THE YEAR ENDED DECEMBER 31, 1995
NONOPERATING REVENUES
Interest income
Sales of assets
NONOPERATING EXPENSES
Interest expense
Meter deposits
Bonded indebtedness
Capital lease
Total nonoperating revenues
and (expenses)
Actual
Over (Under)
Actual Budget Budget
$ 279,676 S 97,900 S 181,776
14,141 5,000 9,141
293,817 102,900 190,917
7,876 8,000 ( 124)
1,268,814 1,289,682 ( 20,868)
10,134 - 10,134
1,286,824 1,297,682 ( 10,858
S ( 993,007 S (1,194,782 ) S 201,775
B -28
Schedule Six
Page One
BOARD OF WATER WORKS OF PUEBLO, COLORADO
SCHEDULE OF CAPITAL EXPENDITURES AS COMPARED WITH BUDGET
FOR THE YEAR ENDED DECEMBER 31, 1995
ADMINISTRATION Actual Budget
Office furniture S 182 S -
Computer equipment 6,080 7,100
Improvement -- building - 3,600
Total administration
6,262
10.700
ADMINISTRATIVE SERVICES
Office furniture
Office equipment
Computer equipment
Total administrative services
TREATING, PUMPING AND LABORATORY
Office furniture
Computer equipment
Communication equipment
Heavy equipment
Laboratory equipment
Treating equipment
Pumping equipment
Buildings and improvements
Treating and pumping improvements
Expansion -- treating and pumping
Total treating, pumping and laboratory
TRANSMISSION, DISTRIBUTION AND ENGINEERING
Office furniture
Office equipment
Computer equipment
Heavy equipment
Transportation equipment
Building and improvements
Cathodic protection improvement
Mains improvement
Valves improvement
Meters improvement
Fire hydrants improvement
Taps improvement
Building and improvements expansion
Mains expansion
Valves expansion
Meters expansion
Fire hydrants expansion
Taps expansion
Total transmission, distribution and
engineering
3,523
515
26,009
30,047
491
7,166
4,089
1,530
15,696
13,678
20,404
90,929
782,892
936,875
155
1,060
12,820
24,311
57,947
21,843
147,455
618,673
16,972
172,842
29,824
2,366
3,508
7,261
48,319
4,526
14,471
1,184,353
6,800
1,650
119,850
128,300
700
6,800
1,000
2,000
40,000
18,000
72,600
135,200
672,000
50.000
E
850
3,800
11,000
19,025
87,000
320,000
210,000
713,000
11,800
212,000
39,000
2,000
24,000
6,000
40,000
12,000
8,000
1,719,475
Actual
Over (Under)
Budget
S 182
( 1,020)
( 3,600
( 4,438)
( 3,277)
( 1,135)
( 93,841)
( 98,253
209)
366
3,089
470)
24,304)
4,322)
.52,196)
44,271)
110,892
50,000)
( 61,425
( 695)
( 2,740)
1,820
5,286
( 29,053)
(298,157)
( 62,545)
( 94,327)
5,172
( 39,158)
( 9,176)
366
3,508
( 24,000)
1,261
8,319
( 7,474)
6,471
(535,122
B -29
Schedule Six
Page Two
BOARD OF WATER WORKS OF PUEBLO, COLORADO
SCHEDULE OF CAPITAL EXPENDITURES AS COMPARED WITH BUDGET
FOR THE YEAR ENDED DECEMBER 31, 1995
WATER RESOURCES
Computer equipment
Communication equipment
Buildings and improvements
Clear Creek Reservoir
Ranch property ditch improvements
Transmountain ditch improvements
Total water resources
Total capital expenditures
Actual
Over (Under)
Actual Budget Budget
$ 3,668 $ 5,600 $( 1,932)
4,030 5,600 ( 1,570)
- 9,000 ( 9
210,310 200,000 10,310
550 10,500 ( 9,950)
- 5,000 ( 5
218,558 235,700 ( 17,142
$ 2,376,095 $ 3,092,475 S (716,380 )
B -30
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B -31 G
B -33
Schedule Nine
BOARD OF WATER WORKS OF
PUEBLO, COLORADO
SCHEDULE OF FUTURE DEBT SERVICE REQUIREMENTS
DECEMBER 31,
1995
Obligation Under
Year Ending
Capital Lease
General Obligation
Bonds
December 31,
Principal Interest
Principal
interest
Total
1996
30,197 $ 6,908
$ 2,505,000
$ 1,152,301
S 3,694,406
1997
32,750 4,355
2,785,000
958,859
3,780,964
1998
35,519 1,581
3,040,000
716,810
3,793,910
1999
- -
3,265,000
488,565
3,753,565
2000
- -
3,455,000
292,275
3,747,275
2001
- -
2,250,000
102,547
2,352,547
Total
$ 98,466 $ 12,844
S 17,300,000
S 3,711,357
S 21,122.667
B -33
[This Page Intentionally Left Blank]
APPENDIX C
SPECIMEN INSURANCE POLICY
[This Page Intentionally Left Blank]
APPENDIX C
MBL4
FINANCIAL GUARANTY INSURANCE POLICY
M 31A Insurance Corporation
Armonk, New York 10504
Policy No. [NUMBER]
MBIA Insurance Corporation (the 'Inane'), in consideration of the payment of the premium and subject to the terms of this policy, hereby
unconditionally and irrevocably guarantees to any owner, as hereinafter defined, of the following described obligations, the full and complete payment
required to be made by or on behalf of the Issuer to [PAYING AGEN ITRUSTEE] or its successor ( the "Paying Agent") of an amount equal to n the
principal of (either at the stated maturity or by any advwoement of maturity pursuant to a mandatory sinking fiord payment) and interest on, the
Obligations (as that term.is defined below) as such payments shall become due but shall not be so paid (except that in the event of any acceleration of
the due date of such principal by reason of mandatory or optional redemption or acceleration resulting from default or otherwise, other than any
advancement o €maturity pursuant to a mandatary Micng fiord payment, the payments g hereby shall be made in such amounts and at such
times as such payments of principal would have been due bad there not been any such accekra6m� and (u) the reimbursement of any such payment
which is subseT=dy recovered from any owner ptrsuaat to a final judgment by a court of competent jurisdirarm that such payment constMites an .
avoidable prefermce to such owner . within the meaning of any applicable bankzuptcy law. The amounts referred to in clauses n and (u) of the
preceding sentence shall be referred to herein collectively as the "Insured Amounts." "Obligations ".shall mean: .
[PAR]
[LEGAL NAME OF ISSUE]
Upon receipt of telephonic or telegraphic notice, such notice subsequently confirmed in writing by registered or certified mail, or upon receipt of wTiuum
notice by registered or certified mail, by the Insurer from the Paying Agent or any owner of an Obligation the payment of an Insured Amount for which
is then due, that such required payment has not been made, the Insurer on the due date of such payment or within one business day after receipt of notice
of such nonpayment, w l is later, will make a deposit of fiords, in an account with State Street Bank and Trust Company, N.A., in New York,
New York, or its successor, sufficient for the payment of any such Insured Amounts which are their due. Upon presentment and surrender of such
Obligations or presentment of such other proof of ownersthp of the Obligations, together with any appropriate instruments of assignment to evidence
the assignment of the Insured Amounts due on the Obligations as am paid by the Insurer, and appropriate instruments to effect the appointment of the
Insurer as agent for such owners of the Obligations in any legal proceeding related to payment of Insured Amounts on the Obligations, such instruments
being in a form satisfactory to State Street Bank and Trust Company, N-A, State Street Bank and Trust Company, NA shall disburse to such owners,
or the Paying Agent payment of the Insured Amounts due on such Obligations, less any amount held by the Paying Agent for the payment of such
Insured Amounts and legally available therefor. This policy does not insure against loss of any prepayment premium which may at any time be payable
,Mth respect to any Obligation.
As used herein, the term "o Amer" shall mean the registered owTher of any Obligation as indicated in the books maintained by the Paying Agent, the
Issuer, or any designee of the Issuer for such purpose. The term owner shall not include the Issuer or any party whose agreement with the Issuer
constitutes the underlying security for the Obligations.
Any service of process on the Insurer may be made to the his= at its offices located at 113 King Street, Armonk, New York 10504 and such service
of process shall be valid and binding.
This policy is non-cancellable for any reason. The premium on this policy is not refundable for any reason including the payment prior to maturity of
the Obligations.
IN WrlNESS WHEREOF, the Insurer has caused this policy to be executed in facsimile on its behalf by its duly authorized officers, this [DAY] day of
[MONTK YEAR].
MBIA Insurance Corporation
Attest: Preside.
'"' � IC / 4PA I
Assistant Secretary
SID -R-6
4,95 C -1
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APPENDIX D
TABLE OF ACCRETED VALUES
ACCRETION DATE 11/01/2001 11/01/2002
07/11/1996
3,867.45
3,662.05
11/01/1996
3,925.08
3,717.73
05/01/1997
4,021.25
3,810.68
11/01/1997
4,119.77
3,905.95
05/01/1998
4,220.71
4,003.60
11/01/1998
4,324.12
4,103.70
05/01/1999
4,430.06
4,206.29
11/01/1999
4,538.60
4,311.46
05/01/2000
4,649.79
4,419.25
11/01/2000
4,763.71
4,529.73
05/01/2001
4,880.43
4,642.98
11/01/2001
5,000.00
4,759.06
05/01/2002
-
4,878.04
11/01/2002
-
5,000.00
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APPENDIX E
FORM OF DEBT SERVICE RESERVE FUND SURETY BOND
[This Page Intentionally Left Blank]
APPENDIX E
DEBT SERVICE RESERVE
SURETY BOND
I'N BIA Insurance Corporation
Armonk, New York 10504
Surety Bond No. )DO XXX
MBIA Insurance Corporation (the "Insurer) (the " Insurer "), in consideration of the payment of the premium
and subject to the terms of this Surety Bond, hereby unconditionally and irrevocably guarantees the full and
complete payments that are to be applied to payment d principal of and interest on the Obligations (as hereinafter
defined) and that are required to be made by or on behalf of [Name of Issuer] (the "Issuer ") under the [Title of the
Document] (the "Document ") to [Name of Paying Agent], (the "Paying .Agent "), as such payments are due but shall
not be so paid, in connection with the issuance by the Issuer of [Title of the Obligations], [if parity " together with
any bonds issued on a parity therewith,'] (the "Obligations "), provided, that the amount available hereunder for,
payment pursuant to any one Demand for Payment (as hereinafter defined) shall not exceed [a: FIXED
COVERAGE [Dollar Amount of Coverage] (the "Surety Bond Limit "); provided, further, that the amount available
at any particular time to be paid to the Paying Agent under the terms hereof (the "Surety Bond Coverage ") shall be
reduced and may be reinstated from time to time as set forth herein.] or [b: VARIABLE COVERAGE the annual
amount set forth for the applicable bond year on Exhibit A attached hereto (the "Surety Bond Limit "); provided,
further, that the amount available at any particular time to be paid to the Paying Agent under the terms hereof (the
"Surety Bond Coverage ") shall be reduced and may be reinstated from time to time as set forth herein.]
1. As used herein, the term "Oamer" shall mean the registered owner of any Obligation as indicated in the books
maintained by the applicable paying agent, the Issuer or any designee of the Issuer for such purpose. The term
"Owner" shall not include the Issuer or any person or entity whose obligation or obligations by agreement
constitute the underlying security or source of payment for the Obligations.
2. Upon the later of (i) three (3) days after receipt by the Insurer of a demand for payment in the form attached
hereto as Attachment 1 (the "Demand for Payment "), duly executed by the Paying Agent; or (ii) the payment date
of the Obligations as specified in the Demand for Payment presented by the Paying Agent to the Insurer, the
Insurer will make a deposit of funds in an account with State Street Bank and Trust Company, N.A., in New York,
New York, or its successor, sufficient for the payment to the Paying Agent, of amounts that are then due to the
Paying Agent (as specified in the Demand for Payment) subject to the Surety Bond Coverage.
3. Demand for Payment hereunder may be made by prepaid telecopy, telex, TWX or telegram of the executed
Demand for Payment c% the Insurer. If a Demand for Payment made hereunder does not, in any instance, conform
to the terms and conditions of this Surety Bond, the Insurer shall give notice to the Paying Agent, as promptly as
reasonably practicable, that such Demand for Payment was not effected in accordance with the terms and
conditions of this Surety Bond and briefly state the reason(s) therefor. Upon being notified that such Demand for
Payment was not effected in accordance with this Surety Bond, the Paying Agent may attempt to correct any such
nonconforming Demand for Payment if, and to the extent that, the Paying Agent is entitled and able to do so.
4. The amount payable by the Insurer under this Surety Bond pursuant to a particular Demand for Payment shall
be limited to the Surety Bond Coverage. The Surety Bond Coverage shalt be reduced automatically to the extent of
each payment made by the Insurer hereunder and will be reinstated to the extent of each reimbursement of the
Insurer pursuant to the provisions of Article II of the Financial Guaranty Agreement dated the date hereof between
the Insurer and the [Issuer or Obligor] (the "Financial Guaranty Agreement "); provided, [ANNUAL PRENIIUM
OPTION: that no premium is due and unpaid on this Surety Bond and] that in no event shall such reinstatement
exceed the Surety Bond Limit. The Insurer gill notify the Paying Agent, in writing within five (5) days of such
reimbursement, that the Surety Bond Coverage has been reinstated to the extent of such reimbursement pursuant to
the Financial Guaranty Agreement and such reinstatement shall be effective as of the date the Insurer gives such
notice. The notice to the Paying Agent will be substantially in the form attached hereto as Attachment 2.
5. Any service of process on the Insurer or notice to the Insurer may be made to the Insurer at its offices located
at 113 King Street, Armonk, New York 10504 and such service of process shall be valid and binding.
6. The term of this Surety Bond shall expire [ANNUAL PR.EMTUM OPTION: ,unless cancelled pursuant to
paragraph 9 hereof,] on the earlier of (i) [MATURITY DATE] (the maturity date of the Obligations being
currently issued), or (ii) the date on which the Issuer has made all payments required to be made on the Obligations
pursuant to the Document.
E -1
7. The premium payable on this Surety Bond is not refundable for any reason, including the payment prior to
maturity of the Obligations.
8. [OPTIONAL FIRST SENTENCE: This Surety Bond shall be governed by and interpreted under the laws of
the State of (STATE)]. Any suit hereunder in connection with any payment may be brought only by the Paying
Agent within [1 or 3 years] after (i) a Demand for Payment, with respect to such payment, is made pursuant to the
terms of this Surety Bond and the Insurer has failed to make such payment, or (ii) payment would otherwise have
been due hereunder but for the failure on the part of the Paying Agent to deliver to the Insurer a Demand for
Payment pursuant to the terms of this Surety Bond, whichever is earlier.
[NOS. 9 and 11 are OPTIONAL]
9. Subject to the terms of the Document, the Issuer shall have the right, upon 30 days prior written notice to the
Insurer and the Paying Agent, to terminate this Surety Bond. In the event of a failure by the Issuer to pay the
premium due on this Surety Bond pursuant to the terms of the Financial Guaranty Agreement, the Insurer shall
have the right upon [No. of days] days prior written notice to the Issuer and the Paying Agent to cancel this Surety
Bond. No Demand for Payment shall be made subsequent to such notice of cancellation unless payments are due
but shall not have been so paid in connection with the Obligations.
10. There shall be no acceleration payment due under this Policy unless such acceleration is at the sole option of
the Insurer.
11. This policy is not covered by the Property /Casualty Insurance Security Fund specified in Article 76 of the
New York Insurance Law.
In witness whereof, the Insurer has caused this Surety Bond to be executed in facsimile on its behalf by its duly
authorized officers, this [DATE] day of [MONTH,YEAR]
In witness «hereof, the Insurer has caused this Surety Bond to be executed in facsimile on its behalf by its duly
authorized officers, this day of October, 1995
SB- DSRF- 9[STATE CODE]
4/95
N BIA Insurance
E -2
Surety Bond No. }C{}CKX{
Bond Year Maximum Annual Debt Service
199 to 199 S
199 to 199
199 to 199
F- 3
Attachment 1
Surety Bond No.X
DEMAND FOR PAYMENT
, 19
MBIA Insurance Corporation
113 King Street
Armonk, New York 10504
Attention: President
Reference is made to the Surety Bond No. X (the "Surety Bond ") issued by the MBIA Insurance
Corporation (the "Insurer "). The terms which are capitalized herein and not otherwise defined have the meanings
specified in the Surety Bond unless the context otherwise requires.
The Paring Agent hereby certifies that:
(a) In accordance with the provisions of the Document (attached hereto as Exhibit A), payment is due to the
Ov ners of the Obligations on (the "Due Date ") in an amount equal to (the "Amount
Due ").
(b) The amounts legally available to the Paying Agent on the Due Date will be $ less than the Amount
Due (the "Deficiency ").
(c) The Paying Agent has not heretofore made demand under the Surety Bond for the Amount Due or any
portion thereof.
The Paying Agent hereby requests that payment of the Deficiency (subject to the Surety Bond Coverage) be
made by the Insurer under the Surety Bond and directs that payment under the Surety Bond be made to the
follovving account by bank wire transfer of federal or other immediately available funds in accordance with the
terms of the Surety Bond:
[Paying Agent's Account]
Any Person Who Knowingly And With Intent To Defraud Any Insurance Company Or Other
Person Files An Application For Insurance Or Statement Of Claim Containing Any Materially
False Information, Or Conceals For The Purpose Of Misleading, Information Concerning Any
Fact Material Thereto, Commits A Fraudulent Insurance Act, Which Is A Crime, And Shall Also
Be Subject To A Civil Penalty Not To Exceed Five Thousand Dollars And The Stated Value Of
The Claim For Each Such Violation.
[PAYING AGENT]
By
Its
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Attachment 2
Surety Bond No. XX XXX
NOTICE OF REINSTATEMENT
,19
[Paying Agent]
[Address]
Reference is made to the Surety Bond No. XXXXXX (the "Surety Bond ") issued by the MBIA Insurance
Corporation (the "Insurer "). The terms which are capitalized herein and not otherwise defined have the meanings
specified in the Surety Bond unless the context otherwise requires.
The Insurer hereby delivers notice that it is in receipt of payment from the Obligor pursuant to Article H of the
Financial Guaranty Agreement and as of the date hereof the Surety Bond Coverage is $
AI BIA Insurance Corporation
President
Attest:
Assistant Secretary
E -5