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Home My WebLink About05853ORDINANCE NO. 5 8 5 3 AN ORDINANCE PLEDGING A PORTION OF THE SALES AND USE TAXES COLLECTED BY THE CITY PURSUANT TO SECTION 17, CHAPTER 4, TITLE XIV OF THE 1971 CODE OF ORDINANCES OF THE CITY, TOWARD PAYMENT OF THE PRINCIPAL OF, PREMIUM, IF ANY, AND INTEREST ON REVENUE BONDS OF THE URBAN RENEWAL AUTHORITY OF PUEBLO, COLORADO AND FOR THE PAYMENT OF OPERATION AND MAINTENANCE EXPENSES OF A CIVIC CENTER AND HOTEL COMPLEX WITHIN THE BOUNDARIES OF THE URBAN RENEWAL AUTHORITY OF PUEBLO, COLORADO; PLACING RESTRICTIONS ON THE USE OF THE PROCEEDS OF SUCH BONDS; PROVIDING FOR MUTUAL AGREEMENT BY THE CITY AND THE URBAN RENEWAL AUTHORITY FOR PLANNING, CONSTRUCTION, MANAGEMENT AND THE ANNUAL BUDGET FOR THE CIVIC CENTER AND HOTEL COMPLEX; AND PROVIDING OTHER MATTERS RELATING THERETO WHEREAS, the City of Pueblo, Colorado (the "City "), by Resolution No. 1133, adopted on March 9, 1959, created the Urban Renewal Authority of Pueblo, Colorado (the "Authority "), for the purpose of alleviating and correcting the blighted condition of certain areas of the City, in particular an area of downtown Pueblo; and WHEREAS, the Authority adopted an Urban Renewal Plan for the Phase One Urban Renewal Project for Downtown Pueblo (the "Phase One Urban Renewal Project ") in 1986, which was approved by the City in Resolution No. 5868, adopted on August 25, 1986; and WHEREAS, the Authority issued $9,950,000 in aggregate principal amount of its Tax Increment Revenue Bonds (Phase One Urban Renewal Project) Series 1986A (the "Series 1986A Bonds "), under and pursuant to an Indenture of Trust, dated as of August 15, 1986 (the "Original Indenture "), by and between the Authority and Colorado National Bank, as successor to The Central Bank and Trust Company, d /b /a Central Bank of Denver, as trustee, which was amended on July 15, 1988, August 15, 1989, and August 15, 1991, at which time the amended Original Indenture was restated as the First Supplemental Indenture of Trust (the Original Indenture as amended is defined as the "Indenture "), the proceeds of which were to be used to construct the Phase One Urban Renewal Project; and WHEREAS, the net proceeds of the Series 1986A Bonds were placed in escrow, and could not and cannot be released under the Indenture until the conditions set forth in Section 4.08 thereof are met; and 02/29763.2 WHEREAS, the conditions precedent to the release of the proceeds of the Series 1986A Bonds have not yet been met, and consequently the Phase One Urban Renewal Project has not been constructed; and WHEREAS, the Authority modified and amended the Phase One Urban Renewal Project and adopted the Urban Renewal Plan for the Amended Phase One Urban Renewal Project for downtown Pueblo (the "Amended Phase One Urban Renewal Project ") in 1988, which was approved by the City in Resolution No. 6148 adopted on February 22, 1988; and WHEREAS, the Authority modified the Amended Phase One Urban Renewal Project in 1991, which modification was approved by the City in Resolution No. 6796 adopted on July 22, 1991; and WHEREAS, the Amended Phase One Urban Renewal Project will be of great benefit to the residents of the City, and the City desires that the Amended Phase One Urban Renewal Project be constructed with the proceeds of the Series 1986A Bonds; and WHEREAS, the City Council (the "Council "), after consultation with the members of the Authority's Board of Commissioners, has determined that in order to amend the Indenture to allow for the release of the proceeds of the Series 1986A Bonds and the construction of the Amended Phase One Urban Renewal Project, an additional pledge of security for the payment of the principal of, premium, if any, and interest on the Series 1986A Bonds (and any bonds issued to refund them) is required; and WHEREAS, the City and the Authority therefore presented to the electorate of the City Questions B and C at the election held on November 2, 1993; and WHEREAS, the voters of the City at that election voted affirmatively in favor of both Question B and Question C; and WHEREAS, Question B authorizes the issuance of revenue bonds by the Authority in the amount of $9,500,000 and Question C authorizes Council to pledge 3.30% of the sales and use tax revenues of the City to pay (1) the principal of, premium, if any, and interest on revenue bonds of the Authority, and (2) the operation and maintenance expenses of a civic center and hotel complex within the boundaries of the Authority; and WHEREAS, the Council, after consultation with the Authority's Board of Commissioners, has determined that it is in the best interests of the inhabitants of the City to pledge such moneys toward the payment of revenue bonds to be issued by the Authority (the "Series 1994 Bonds "), the proceeds of which would be used to refund the Series 1986A Bonds, thus enabling the escrowed proceeds to be used to construct the Amended Phase One Urban Renewal Project and toward the payment of the operation and maintenance expenses of a civic center and hotel complex. 02/29763.2 2 NOW, THEREFORE, BE IT ORDAINED BY THE CITY COUNCIL OF PUEBLO: Section 1. All actions consistent with the provisions of this Ordinance heretofore taken by any of the officials of the City or the Council members directed toward the refunding of the Series 1986A Bonds and the construction and development of the Amended Phase One Urban Renewal Project improvements shall be, and the same hereby are, ratified, approved and confirmed. Section 2. Pursuant to Section 17 of Chapter 4, Title XIV of the 1971 Code of Ordinances of the City of Pueblo, the Council hereby pledges irrevocably (in accordance with the terms of this Ordinance) all of the moneys in the Collection Fee Fund (as defined in Section 14 -4 -17) from time to time for the purposes of (a) paying the principal of, premium, if any, and interest on the Series 1994 Bonds and any revenue bonds issued by the Authority to refund the Series 1994 Bonds (together, the "Bonds "), and (b) paying the operation and maintenance expenses of a civic center and hotel complex within the boundaries of the Authority. This pledge shall be irrevocable so long as the Series 1994 Bonds are outstanding, although excess moneys not necessary under the pledge may be returned to the City pursuant to the provisions of a cooperation agreement or similar document to be entered into by the City and the Authority. Section 3. (a) The Indenture and all other documents for the Series 1994 Bonds and the amended Indenture and other amended documents, if any, for the Series 1986A Bonds shall be subject to prior approval by Resolution of the City Council of the City and shall, when and where appropriate, contain covenants which restrict and prohibit the Authority, without prior consent by Resolution of the City Council of the City, from: (i) appropriating, encumbering, committing, expending or using for any purpose all or any part of the proceeds of the Series 1986A Bonds and the proceeds of the Series 1994 Bonds; (ii) entering into any commitment, contract or agreement with respect to or concerning the development, construction, operation or maintenance of all or any part of the Amended Phase One Urban Renewal Project; and (iii) making any appropriation or expenditure of, or adopting any annual budget for or with respect to the operation or maintenance of all or any part of the Amended Phase One Urban Renewal Project. (b) In addition, all contracts for the construction of all or any part of the Amended Phase One Urban Renewal Project which is funded in whole or in part by the proceeds of the Series 1986A Bonds shall be procured through competitive bidding procedures which allow competent and qualified local contractors and subcontractors a reasonable opportunity to participate in such competitive bidding. 02/29763.2 3 Section 4. The City Council of the City and the Board of Commissioners of the Authority shall mutually agree concerning (a) the planning of the Amended Phase One Urban Renewal Project, including its design and the specifications for its construction contracts, (b) the management of the civic center and hotel complex after it is constructed, and (c) the annual budget for the civic center and hotel complex. Section 5. Notwithstanding anything to the contrary in this Ordinance, the terms of this Ordinance shall terminate if the Authority does not issue the Series 1994 Bonds on or before August 15, 1994. Section 6. All bylaws, orders, resolutions and ordinances or parts of bylaws, orders, resolutions and ordinances, in conflict with this Ordinance, are hereby repealed. This repealer shall not be construed to revive any bylaw, order, resolution or ordinance, or part thereof, heretofore repealed. Section 7. If any section, paragraph, clause or provision of this Ordinance shall for any reason be held to be invalid or unenforceable, the invalidity or unenforceability of such section, paragraph, clause or provision shall not effect any remaining provisions of this Ordinance. INTRODUCED AND PRESENTED FOR A FIRST TIME ON DECEMBER 27, 1993, ORDERED PUBLISHED BY TITLE ONLY, PRESENTED A SECOND TIME AND FINALLY PASSED AND ADOPTED ON JANUARY 10, 1994. 02129763.2 INTRODUCED DECEMBER 27, 1993 By CHRIS WEAVER Councilperson APPROVED JANUARY 10, 1994 By �/ sident, City Council 4 [SEAL] ATTEST: Ci y Clerk ' APPROVED AS TO FORM BY CITY ATTORNEY: C ty Attorn 02/29763.2 NEW ISSUE — FULL BOOK ENTRY RATINGS: S &P: "AAA" Moody's: "Aaa" Fitch: "AAA" INSURANCE: AMBAC Indemnity Corporation In the opinion of Kutak Rock, Bond Counsel, under existing laws, regulations, rulings and judicial decisions and assuming compliance with certain covenants by the Authority set forth in the Indenture under which the Bonds are issued and in other documents, interest on the Series 1994A Bonds is excluded from gross income for federal income tax purposes, and, under existing laws of the State of Colorado, interest on the Series 1994A Bonds is excluded from gross income for Colorado income tax purposes; and interest on the Series 1994A Bonds is not a specific preference item or purposes of the federal and State of Colorado alternative minimum tax. The Series 1994A Bonds have been designated y the Authority as "qualified tax- exempt obligations" for purposes of Section 265(b)(3) of the Internal Revenue Code of 1986, as amended. See "TAX EXEMPTION" herein, which contains a discussion of additional federal tax consequences affecting some owners of the Series 1994A Bonds. $7,275,000 URBAN RENEWAL AUTHORITY OF PUEBLO, COLORADO Revenue Refunding Bonds (Phase One Urban Renewal Project) Series 1994A Dated: August 15, 1994 Due: December 1, as shown below The Urban Renewal Authority of Pueblo, Colorado (the "Authority "), Revenue Refunding Bonds (Phase One Urban Renewal Project), Series 1994A (the `Bonds "), are being issued as fully registered bonds and are initially to be registered in the name of "Cede & Co." as nominee for The Depository Trust Company, as securities depository for the Bonds. Purchases by beneficial owners are to be made in book -entry form in the denomination of $5,000 or any integral multiple thereof. Beneficial owners are not to receive certificates evidencing their interests in the Bonds. Interest on the Bonds is payable from the date of the Bonds, semiannually on June 1 and December 1 in each year commencing December 1, 1994, by check or draft mailed to the registered owners of the Bonds. Principal of the Bonds will be payable at the principal office of The Bank of Cherry Creek, N.A., in Denver, Colorado (the "Trustee "), which will initially act as trustee, bond registrar and paying agent for the Bonds. See "THE BONDS." MATURITY SCHEDULE $1,810,000 Serial Bonds Maturity Date (December 1) 1995 1996 1997 1998 1999 Principal Interest Price or Maturity Date Principal Amount Rate Yield (December 1) Amount Interest Rate Price or Yield $145,000 3.80% 100% 2000 $185,000 155,000 4.30 100 2001 190,000 160,000 4.55 100 2002 200,000 165,000 4.70 100 2003 210,000 175,000 4.85 100 2004 225,000 $1,325,000 5.80% Term Bonds Due December 1, 2009 — Price: 100% $995,000 6.05% Term Bonds Due December 1, 2012 — Price: 100% $1,190,000 6.101 Term Bonds Due December 1, 2015 — Price: 100% $1,955,000 6.15% Term Bonds Due December 1, 2019 — Price: 100 (Plus accrued interest from August 15, 1994) 5.00% 5.10 5.20 5.30 5.40 100% 100 100 100 100 The Bonds are subject to redemption prior to maturity at the option of the Authority as set forth in "THE BONDS — Prior Redemption." The Bonds also are subject to mandatory sinking fund redemption. See "THE BONDS — Prior Redemption." The Bonds are being issued by the Authority to provide funds (i) to refund a portion of the Authority's Tax Increment Revenue Bonds (Phase One Urban Renewal Project), Series 1986A, (ii) to acquire and construct certain public hotel/civic center improvements within the boundaries of the Authority's Phase One urban renewal area (the "Project "), (iii) to fund a reserve fund, and (iv) to pay certain costs associated with issuance of the Bonds and the 1994B Bonds (discussed herein). See "SOURCES AND USES OF FUNDS" and "THE INDENTURE." The Bonds are special, limited obligations of the Authority, payable from Pledged Revenues which consist primarily of a 3.3% portion of total City of Pueblo sales and use tax collections (which have been pledged to the Authority for the payment of debt service on the Bonds) and incremental property tax and sales tax revenues of the Authority, each as more fully described herein. See "SOURCES OF DEBT SERVICE PAYMENTS." The Bonds are secured by an irrevocable and first lien on the Trust Estate (as defined in the Official Statement). The Bonds do not constitute a general obligation debt or indebtedness, and are not considered or held to be a general obligation of the Authority, the City of Pueblo, the State of Colorado or any political subdivision thereof. Payment of the principal of and interest on the Bonds when due will he insured by a municipal bond insurance policy to be issued by AMBAC Indemnity Corporation simultaneously with the delivery of the Bonds. See "SOURCES OF DEBT SERVICE PAYMENTS — Bond Insurance." This cover page contains certain information for quick reference only. It is not a summary of the issue. Investors must read the entire Official Statement to obtain information essential to the making of an informed investment decision. The Bonds are offered when, as and if issued by the Authority, subject to the approval of Kutak Rock, Denver, Colorado, as Bond Counsel, and other conditions. Sherman & Howard L.L. C., Denver, Colorado, has acted as counsel to the Underwriter. Certain legal matters will be passed upon for the Authority by its counsel, Paul C. Benedetti, Esq., Boulder, Colorado. It is expected that the Bonds will be available for delivery on or about August 15, 1994, through the facilities of the Depository Trust Company. Lewis, de Rozario & Co. Incorporated Official Statement dated August 10, 1994 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 Authority or the Underwriter. Neither the delivery of this Official Statement nor any sale hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the Authority or others since the date hereof. This Official Statement does not constitute an offer to sell or solicitation of an offer to buy the Bonds in any jurisdiction in which it is unlawful to make such offer or solicitation. The information set forth in this Official Statement has been obtained from the Authority, from the sources referenced throughout this Official Statement and from other sources believed to be reliable. No representation or warranty is made, however, as to the accuracy or completeness of such information, and nothing contained herein, is or shall be relied upon as a guarantee of the Authority or the Underwriter. 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. 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. TABLE OF CONTENTS Page INTRODUCTION ............................... ..............................1 General.................................. ..............................1 New Information Since Date of Preliminary Official Statement .................... 1 Issuer................................... ..............................1 Purpose.................................. ..............................1 The Bonds; Redemption .................... ..............................2 Security................................. ..............................2 Bond Insurance ........................... ..............................3 Financial Statements ...................... ............................... 3 Authority for Issuance ..................... ............................... 4 Agents and Advisors ....................... ..............................4 Additional Information ..................... ..............................4 RISK FACTORS ................................ ..............................5 Limited Security for the Bonds ............... ..............................5 Business and Economic Factors May Affect the Ability of the Authority to Pay the Bonds .................... ..............................6 Changes May Occur in Tax Increment Financing or Property Tax Laws ............. 7 Collection of Property Taxes ................ ............................... 7 Assessment and Valuation of Real Property .... ............................... 8 SOURCES AND USES OF FUNDS ................ ............................... 9 General.................................. ..............................9 TheProject ............................... ..............................9 The Reserve Fund and Supplemental Reserve Fund ............................ 10 THE BONDS ................................... .............................11 Description of the Bonds; Limited Obligations . ............................... 11 Prior Redemption .......................... .............................12 Additional Bonds .......................... .............................14 Book -Entry Form .......................... .............................15 DEBT SERVICE REQUIREMENTS .............. ............................... 19 SOURCES OF DEBT SERVICE PAYMENTS ...... ............................... 20 Generally................................ .............................20 Pledged City Sales Tax Revenues ............. .............................20 Incremental Tax Revenues ................. ............................... 24 Estimated Debt Service Coverage ........... ............................... 25 Bond Insurance ........................... .............................26 (i) THEAUTHORITY .............................. .............................28 History and Organization .................. ............................... 28 Powers of the Authority ................... ............................... 29 Cooperation Agreements .................. ............................... 29 Governing Board .......................... .............................30 Legal Matters ............................. .............................32 The Phase One Project Area ............... ............................... 32 The Phase One Plan ........................ .............................33 Urban Renewal Activities Under the Phase One Plan .. . ....................... 33 Phase One Project Cooperation Agreement .... ............................... 34 Availability of Services ................... ............................... 35 Methods of Financing Urban Renewal Activities .............................. 36 ProjectArea Map .......................... .............................36 AUTHORITY FINANCIAL INFORMATION ....... ............................... 38 Budgetary Process and Financial Statements .. ............................... 38 History of Authority Revenues and Expenditures .............................. 38 Power of Authority to Incur Obligations ...... ............................... 39 Outstanding Obligations .................. ............................... 40 Mill Levies in the Phase One Project Area .... ............................... 40 OverlappingDebt .......................... .............................41 Property Tax Collections .................. ............................... 42 PROPERTY TAXATION AND ASSESSED VALUATION ........................... 43 Ad Valorem Property Taxes ............... ............................... 43 THE INDENTURE .............................. .............................47 Definitions............................... .............................47 Creation of Funds .......................... .............................53 Use of Moneys in Funds and Accounts ....... ............................... 53 Additional Debt and Subordinate Debt ....... ............................... 56 Investment of Moneys ...................... .............................58 Protection of Security and Rights of Bondholders; No Arbitrage; Use of Proceeds .... 58 Other Covenants ........................... .............................60 Supplemental Indentures .................... .............................60 Default and Remedies .................... ............................... 61 Defeasance............................... .............................62 THE LOCAL ECONOMY Population, Housing Units and Age Distribution ........... Income ............. ............................... Employment......... ............................... Retail Sales ......................................... Buildin Permit Activity ..................63 ..................63 ..................64 ..................66 g.. ............................... ...............68 ...............69 (ii) Foreclosure Activity .................... . ..... . .......................... 69 Services Available to City Residents ......... ............................... 70 Development Within the City .............. ............................... 70 CONSTITUTIONAL LIMITATIONS ............. ............................... 71 LITIGATION, SOVEREIGN IMMUNITY AND INSURANCE ........................ 72 Litigation................................ ............................. Sovereign Immunity ........................ .............................73 Insurance Coverage ........ .............. .............................74 TAX EXEMPTION .............................. .............................74 LEGALMATTERS .............................. .............................75 RATINGS........... ........................ .............................75 INDEPENDENT AUDITORS .................... ............................... 76 UNDERWRITING.............................. .............................76 OFFICIAL STATEMENT CERTIFICATION ....... ............................... 76 APPENDIX A -- AUDITED GENERAL PURPOSE FINANCIAL STATEMENTS OF THE CITY FOR THE YEAR ENDED DECEMBER 31, 1993 ..... A -1 APPENDIX B -- SPECIMEN MUNICIPAL BOND INSURANCE POLICY ............ B -1 (iii) OFFICIAL STATEMENT $7,275,000 URBAN RENEWAL AUTHORITY OF PUEBLO, COLORADO REVENUE REFUNDING BONDS (PHASE ONE URBAN RENEWAL PROJECT) SERIES 1994A INTRODUCTION General This Official Statement, which includes the cover page and appendix, provides information in connection with the offer and sale of the Urban Renewal Authority of Pueblo, Colorado, Revenue Refunding Bonds (Phase One Urban Renewal Project), Series 1994A, in the aggregate principal amount of $7,275,000 (the "Bonds ") to be issued by the Urban Renewal Authority of Pueblo, Colorado (the "Authority "), located in the City of Pueblo (the "City" or "Pueblo ") and the State of Colorado (the "State "). New Information Since Date of Preliminary Official Statement Certain information with respect to the Bonds has changed or has become available since July 22, 1994, the date of the Preliminary Official Statement. Such information primarily consists of changes in the use of moneys under the Indenture and the acquisition of a municipal bond insurance policy with respect to the Bonds. The information is presented in italics in the applicable sections of this Official Statement. See, among other sections, "SOURCES OF DEBT SERVICE PAYMENTS" and "THE INDENTURE ". Issuer The Authority is an independent body corporate and politic established in 1959 by the City Council (the "City Council ") of the City of Pueblo, Colorado, for the purpose of undertaking certain urban renewal activities within the City. See "THE AUTHORITY." The City is located approximately 110 miles south of Denver along Interstate Highway 25. The boundaries of the Authority are coterminous with the City. The Phase One Project Area (the "Phase One Project Area "), consists only of approximately nine acres within downtown Pueblo. Purpose The Bonds are being issued to provide funds (i) to refund a portion of the Authority's Tax Increment Revenue Bonds (Phase One Urban Renewal Project), Series 1986A (the "1986A Bonds "), (ii) to acquire and construct certain public hotel/civic center improvements including parking facilities and street and landscaping improvements, within the boundaries of the Phase One Project Area (collectively, the "Project "), (iii) to fund a reserve fund for the Bonds, and (iv) to pay certain costs associated with issuance of the Bonds and the Authority's Subordinate Revenue Refunding Bonds (Phase One Urban Renewal Project) Series 1994B (the "1994B Bonds ", discussed herein). See "SOURCES AND USES OF FUNDS" and "THE INDENTURE." The Bonds; Redemption The Bonds are being issued pursuant to a resolution to be adopted by the Authority (the "Resolution ") prior to issuance of the Bonds and pursuant to an Indenture of Trust, dated as of August 15, 1994 (the "Indenture "), between the Authority and The Bank of Cherry Creek, N.A., in Denver, Colorado, as trustee, paying agent and bond registrar (the "Trustee ") under authority granted by Title 31, Article 25, Part 1, Colorado Revised Statutes (the "Act "). The Bonds are issuable solely in book -entry form in the denomination of $5,000 and integral multiples thereof. The Bonds will be dated August 15, 1994, with interest payable on June 1 and December 1 of each year, commencing December 1, 1994 and principal payable on December 1 as set forth on the cover page of the Official Statement. See "THE BONDS" and "THE INDENTURE." The Bonds are subject to redemption prior to their maturities at the option of the Authority. The Bonds also are subject to mandatory sinking fund redemption. See "THE BONDS - Prior Redemption." Security The Bonds are special, limited obligations of the Authority, equally and ratably secured by an irrevocable pledge of and lien on, and payable solely from the trust estate (the "Trust Estate ") established pursuant to the Indenture. See "RISK FACTORS," "THE INDENTURE" and "SOURCES OF DEBT SERVICE PAYMENTS." The Trust Estate will consist of (1) "Pledged Revenues" which include (a) the Pledged Property Tax Revenues, (b) the Pledged Authority Sales Tax Revenues, (c) the Pledged City Sales Tax Revenues, (d) income from the investment and reinvestment of moneys in the Trust Funds (defined herein) and (2) all moneys and securities from time to time held by the Trustee under the terms of the Indenture in the Trust Funds (except for moneys, if any, on deposit with the Trustee for the partial redemption of the Bonds). See "SOURCES OF DEBT SERVICE PAYMENTS" and "THE INDENTURE." The 1994A Bonds do not constitute a debt general obligation or indebtedness, and are not considered or held to be a general obligation, of the Authority, the City, the State, or any political subdivision thereof. "Pledged Property Tax Revenues" means, for each Fiscal Year, that portion of ad valorem property taxes produced by the levy at the rates fixed each year by or for the governing bodies of the various taxing jurisdictions within or overlapping the Phase One Project Area upon that portion of the valuation for assessment of all taxable property with the Phase One Project Area which is in excess of the Property Tax Base Amount; provided, however, that such amount shall be reduced by any lawful collection fee charged by the County; and provided further, however, that in the event of a general reassessment of taxable property in the Phase One Project Area, the valuation -2- for assessment of taxable property within the Phase One Project Area shall be proportionately adjusted in accordance with such general reassessment. See "SOURCES OF DEBT SERVICE PAYMENTS -- Incremental Tax Revenues." However, not more than 25% of the debt service requirements of the Bonds shall be paid from Pledged Property Tax Revenues which accrue from any one Person (defined herein). See "THE INDENTURE- -Use of Moneys in Funds and Accounts - -Tax Increment Revenue Fund" and "THE INDENTURE -- Protection of Security and Rights of Bondholders; No Arbitrage; Use of Proceeds. " "Pledged Authority Sales Tax Revenues" means, for each Fiscal Year, all of the proceeds of the City's municipal sales tax (the "Sales Tax ") collected within the Phase One Project Area after deduction of the following amounts: (a) the proportional share of the reasonable and necessary costs and expenses of collecting and enforcing the Sales Tax attributable to the Phase One Project Area and (b) an amount equal to the Sales Tax base amount. See "SOURCES FOR PAYMENT OF DEBT SERVICE -- Incremental Tax Revenues." "Pledged City Sales Tax Revenues" means all of the proceeds of a 3.3% portion of the sales and use tax levied by the City (currently levied at the rate of 3.5 1 /6), as set forth in Section 14 -4 -17 of the City's Code of Ordinances (the "City Code "), which moneys are and/or have been deposited in the City's "Collection Fee Fund" and pledged to the payment of the Bonds as authorized by the City's electorate on November 2, 1993, and Ordinance No. 5853, passed and adopted on second reading by the City Council on January 10, 1994. See "SOURCES FOR PAYMENT OF DEBT SERVICE -- Pledged City Sales Tax Revenues." Bond Insurance Payment of the principal of and interest on the Bonds when due will be insured by a municipal bond insurance policy (the "Municipal Bond Insurance Policy') to be issued by AMBAC Indemnity Corporation (the "Insurer" or "AMBAC Indemnity') simultaneously with the delivery of the Bonds. See "SOURCES OF DEBT SERVICE PAYMENTS- -Bond Insurance. " The issuance of the Municipal Bond Insurance Policy gives the Insurer certain rights under the Indenture. Specifically, the Insurer is entitled to control and direct the enforcement of all rights and remedies under the Indenture on behalf of all registered owners of the Bonds. See "THE INDENTURE -- Default and Remedies. " Financial Statements Attached to this Official Statement as Appendix A are the City's audited general purpose financial statements as of and for the year ended December 31, 1993, including the opinion rendered thereon by McDonald, Holligan & McPherson, certified public accountants, Pueblo, Colorado. The Authority does not have separate audited financial statements; its financial statements are included as a part of the City's audit. See "AUTHORITY FINANCIAL INFORMATION." The financial statements of the City are presented for informational purposes only. Only that portion of 1192 the City's sales and use tax revenues comprising the Pledged City Sales Tax Revenues are pledged to the Authority for the payment of debt service on the Bonds. Investors may not look to any other funds of the City for payment of debt service on the Bonds Authority for Issuance The Bonds will be issued pursuant to the Constitution and laws of the State, particularly the Act, the Resolution and the Indenture. In addition, the issuance of the Bonds and the pledge of the Pledged City Sales Tax Revenues by the City to the Authority were authorized by the City's voters at an election held on November 2, 1993 (the "Election "). See "CONSTITUTIONAL LIMITATIONS." Agents and Advisors Kutak Rock, Denver, Colorado, has acted as bond counsel in connection with the issuance of the Bonds. Sherman & Howard L.L.C., Denver Colorado has acted as Underwriter's counsel. Paul C. Benedetti, Esq., Boulder, Colorado, has acted as counsel to the Authority. McDonald, Holligan & McPherson, Inc., independent certified public accountants, Pueblo, Colorado, have audited the City's financial statements which appear as Appendix A to this Official Statement. See "INDEPENDENT AUDITORS." The Bank of Cherry Creek, N.A., Denver, Colorado, will act as the trustee, paying agent and registrar for the Bonds (the "Trustee "). Lewis de Rozario & Co. Incorporated will act as the underwriter (the "Underwriter ") for the Bonds. Additional Information i This Introduction is only a brief summary of the provisions of the Bonds. the Indenture and other documents described in this Official Statement; a full review of the entire { Official Statement should be made by potential investors. Summary descriptions of the Authority, the City, the Bonds, the Indenture and other documents described in this Official Statement are qualified by reference to such documents. This Official Statement speaks only as of its date and the information contained herein is subject to change. Additional information is available from the following sources: The Urban Renewal Authority of Pueblo, Colorado c/o City of Pueblo One City Hall Place P.O. Box 1427 Pueblo, Colorado 81002 Attention: Chairman t -4- Further information may be obtained from the Underwriter: Lewis, de Rozario & Co. Incorporated 555 17th Street, Suite 3400 Denver, Colorado 80202 (303) 296 -0500 RISK FACTORS The payment by the Authority of the principal of and interest on the Bonds is subject to certain risks. Particular attention should be given to the factors described below which, among others, could affect the payment by the Authority of debt service on the Bonds, and which could also affect the market price of the Bonds to an extent that cannot be determined. This section of the Official Statement does not include all risks to which such repayment by the Authority is subject but is merely an attempt to summarize certain of such risks Each 2ptential purchaser of the Bonds should read this Official Statement in its entirety Limited Security for the Bonds The Bonds are special, limited obligations of the Authority and are payable solely from the Trust Estate pursuant to the Indenture. See "THE INDENTURE" and "SOURCES OF DEBT SERVICE PAYMENTS." The Bonds are not secured by an encumbrance or mortgage on any property of the Authority. Therefore, the security for the punctual payment of the Bonds is dependent upon the generation of the Pledged Revenues in an amount sufficient to meet the debt service requirements. The Bonds are payable solely from and secured by a first and prior lien (but not necessarily an exclusively first lien), upon the Pledged Revenues. The primary security for payment of the Bonds is the Pledged City Sales and Use Tax Revenues. The City currently levies its sales and use tax at the rate of 3.5 %. Of this amount, .5% of the sales and use tax is allocated specifically for economic development purposes. This .5 % has been specially approved by the City's voters and will end December 31, 1996 unless extended by the voters. To the extent the voters of the City do not continue the .5% portion of the sales and use tax or replace it with another sales and use tax of equal or greater amount, the Pledged City Sales and Use Tax Revenues will decline accordingly and may not be sufficient to pay debt service on the Bonds in a timely manner. In addition, the Bonds are secured by the Pledged Property Tax Revenues and the Pledged Authority Sales Tax Revenues (collectively, the "Incremental Tax Revenues. ") The Phase One Project Area currently generates no Pledged Authority Sales Tax Revenues. Pledged Property Tax Revenues currently are generated in an amount equal to approximately $30,000 per year. See "SOURCES OF DEBT SERVICE PAYMENTS -- Incremental Tax Revenues." The Authority expects that construction of the hotel contemplated by the Phase One Urban Renewal Plan (the -5- "Phase One Plan") (as discussed in "THE AUTHORITY - -The Phase One Plan") will increase the Incremental Tax Revenues. However, there can be no present assurance that the hotel will be built, or if built, that such increases will occur. Even if development does occur in the Phase One Project Area, continued generation of Pledged Property Tax Revenues will be dependent principally upon the amount of assessed valuation of taxable property in the Phase One Project Area and the ad valorem levies thereon imposed by certain overlapping taxing entities. Should the assessed value of taxable property in the Phase One Project Area materially decrease or should mill levies of overlapping taxing jurisdictions materially decrease (other than as a consequence of a general reassessment of properties within the Phase One Project Area), the Pledged Property Tax Revenues may not generate significant revenues. The Authority does not have the power to impose taxes, nor may the Authority or other persons compel any taxing jurisdiction to levy a property tax under the Act. See "AUTHORITY FINANCIAL INFORMATION -- Overlapping Debt" and "SOURCES OF DEBT SERVICE PAYMENTS." Furthermore, the Act limits the availability of Incremental Tax Revenues to the Authority to 25 years from the effective date of its urban renewal plan. See "THE AUTHORITY- - Methods of Financing Urban Renewal Activities." The Phase One Incremental Plan was first adopted on August 25, 1986. Accordingly, the Authority will not be able to rely on Incremental Tax Revenues as a revenue source after 2011. The Bonds will be secured solely by Pledged City Sales Tax Revenues after 2011. Business and Economic Factors May Affect the Ability of the Authority to Pay the Bonds Certain circumstances, many of which will be beyond the control of the Authority, may have an effect on the generation of Pledged Revenues in the City. Such circumstances may include, among others, general and local economic conditions (including cyclical trends in the construction industry, competition and interest rates), a decline in property valuations, and the rate of employment or economic growth within the Phase One Project Area, the City or the region. Sales Taxes Sales tax collections are subject to fluctuations in spending which determine the amount of sales taxes collected. This causes sales tax revenues to increase along with the increasing prices brought about by inflation, but also causes such revenues to be vulnerable to adverse economic conditions and reduced spending. Consequently, the rate of sales tax collections may be expected to correspond generally to economic cycles. Propga Tax Revenues The collection of Property Tax Pledged Revenues may be subject to the ability or inability of property owners in the Phase One Project Area to pay property taxes as they become due and the successful completion of buildings and development within the Phase One Project Area as planned. Much of the property in the Phase One Project Area is presently or will be, upon completion of the hotel /civic center contemplated by the Phase One Plan, commercial property. No representation can be made about the financial condition or stability of Sol the owners or tenants of the owners or tenants of commercial properties in the Phase One Project Area or their ability to pay property taxes levied on their properties. Nor can there be any assurance that any additional development will take place at a rate or level which would generate sufficient increases in assessed valuation and Pledged Property Tax Revenues to offset decreases in the tax increment, if any, after a general reassessment. See "Assessment and Valuation of Real Property" below, and "SOURCES OF DEBT SERVICE PAYMENTS." Changes May Occur in Tax Increment Financing or Property Tax Laws It is possible that legislation could be enacted in the State which would limit the availability of tax increment financing to entities such as the Authority, reduce or eliminate the property tax which taxing jurisdictions are permitted to impose, or limit the rates authorized to be imposed. Any one or more of such occurrences may have the effect of reducing the amount of Pledged Property Tax Revenues available to pay the principal of and interest on the Bonds. Certain political subdivisions are currently subject to existing limitations with respect to revenues or expenditures which may adversely affect the Pledged Revenues. See "CONSTITUTIONAL LIMITATIONS." Collection of Property Taxes The payment of property taxes does not constitute a personal obligation of each of the property owners within the Phase One Project Area. Instead, the obligation to pay property taxes is tied to the properties taxed, and if timely payment is not made, the obligation constitutes a lien against the specific properties. To the extent payment of property taxes depends upon the financial stability of property owners in the Phase One Project Area, no assurance can be given that timely payment will occur. The Authority has not undertaken any independent investigation of the financial condition of any property owners. To enforce the property tax liens, the Pueblo County Treasurer is obligated to foreclose on and cause the sale of the property that is subject to the delinquent taxes or fees, as provided by law. However, foreclosure is a time - consuming remedy which may extend more than one year. In addition, proceeds realized from a foreclosure sale, if any, may or may not be sufficient to cover the delinquent taxes or fees and there is no assurance that such property will sell at a foreclosure sale. Owners of the Bonds cannot foreclose on property within the Phase One Project Area or sell such property in order to pay the principal of or interest on their Bonds. In addition, the sales of property in the Phase One Project Area to enforce such liens could be delayed by bankruptcy laws and other laws affecting creditor's rights generally. During the pendency of any bankruptcy of any property owner in the Phase One Project Area, the parcels in the Phase One Project Area owned by such property owner could be sold only if the bankruptcy court approves the sale. There is no assurance that property taxes would be paid during the pendency of any bankruptcy; nor is it possible to predict the timeliness of such payment. If the property taxes are not paid over a period of years, the Authority's ability to pay principal and interest on the Bonds -7- could be affected. See "SOURCES OF DEBT SERVICE PAYMENTS " and "DEBT SERVICE REQUIREMENTS." Assessment and Valuation of Real Property The amount of Pledged Property Tax Revenues available in any given year is subject to the rate of increase or decrease in the assessed valuation of property within the Phase One Project Area above or below the property tax base amount and to increases or decreases in the total mill levy imposed by overlapping taxing entities. See "AUTHORITY FINANCIAL INFORMATION- - Overlapping Debt." Any additional increase in the assessed valuation of the property within the Project Area is in part dependent upon the development of property in the Phase One Project Area and the construction of new buildings and the use and occupancy of buildings in the Phase One Project Area. There can be no assurance that any additional development, redevelopment, construction or use will occur. The Act requires that in the event of a general reassessment of taxable property in the County which includes the Phase One Project Area, the portions of valuations for assessment of the pledged property tax base amount and the property tax increment will be proportionately adjusted in accordance with such reassessment. The Pledged Property Tax Revenues generated by the property tax increment are dependent upon the mill levies imposed by taxing jurisdictions which overlap the Project Area. The assessed value of taxing jurisdictions which are within or overlap the Project Area could decrease or increase as a result of reassessment or other factors. See "PROPERTY TAXATION AND ASSESSED VALUATION." In addition, taxing jurisdictions are subject, with certain exceptions, to limitations as to the amount of revenues which they may generate from their property tax mill levy. Generally, for the 1993 levy year, taxing jurisdictions other than the City and school districts may not generate property tax revenues in excess of 105.5% of the amount of such revenues generated in the 1992 levy year. In computing this limit, the increased assessed valuation attributable to new improvements constructed on property is excluded. School districts are subject to other limits imposed by State law. See "PROPERTY TAXATION AND ASSESSED VALUATION." In addition, a constitutional amendment adopted by the voters of the State in November, 1992 (the "Amendment ") may limit the ability of the overlapping taxing jurisdictions to increase their property tax revenues. See "CONSTITUTIONAL LIMITATIONS." If assessed valuations increase significantly, mill levies may be required to be reduced accordingly in order for the overlapping taxing jurisdictions to stay within their statutory revenue raising limits. No assurance can be given that any jurisdiction which overlaps the Project Area will in fact impose any particular mill levy in any year or that mill levies currently imposed by overlapping taxing entities will not decrease in the future. -8- SOURCES AND USES OF FUNDS General The sources and uses of funds, net of accrued interest, in connection with the Bonds, are set forth in the following table. Accrued interest, if any, from August 15, 1994 will be deposited in the Debt Service Fund (as defined herein). See "THE INDENTURE- -Flow of Funds." SOURCES OF FUNDS: Proceeds of the Bonds $ 7,275,000 Issuer Contribution (1) 502.197 Total Sources of Funds: $ USES OF FUNDS: Project Fund (2) $ 6,752,187 Reserve Fund (3) 568,020 Costs of Issuance (Including Underwriter's Discount and insurance premium)(4) 456.990 Total Uses of Funds: $ 77_7.197 (1) Consists of a portion of the Pledged City Sales Tax Revenues collected since November, 1993. Such funds are expected to be deposited into the Reserve Fund. (2) The Bond proceeds in the Project Fund and investment income thereon are expected to be used to finance the Project. See "The Project" below. (3) See "THE INDENTURE- -Use of Moneys in Funds and Accounts- Reserve Fund." (4) A portion of this amount ($135,036) will be used to pay the costs of issuance, underwriter's discount and original issue discount on the 1994B Bonds, which will be issued concurrently with the Bonds. The Project The Bonds are being issued to provide funds (i) to refund $7,275,000 of the 1986A Bonds (the "Refunded Bonds "), which are currently outstanding in the aggregate principal amount of $9,950,000, (ii) to acquire and construct certain public hotel/civic center improvements including parking facilities, street and landscaping improvements, within the boundaries of the Phase One Project Area (collectively, the "Project "), (iii) to fund a reserve fund for the Bonds, and (iv) to pay certain costs associated with issuance of the Bonds and the 1994B Bonds. 0 The Authority issued the 1986A Bonds to provide funds for the Project in the Phase One Project Area. The proceeds of the 1986A Bonds were placed in escrow and have remained in escrow pending a decision of the Authority to proceed with the Project. On August 15, 1994, the escrow account established for the 1986A Bonds will be dissolved. The Refunded Bonds will be paid from moneys on deposit in the escrow account. The proceeds of the Bonds are expected to be used to construct a public civic center in the Phase One Project Area. The Civic Center is expected to be comprised of a registration area, large and small meeting rooms and a kitchen facility. The Project also includes parking for the Civic Center, landscaping, street and public utility improvements. The cost of the Civic Center to be paid from Bond proceeds is expected to be approximately $6,752,187. The Authority has not yet hired architects, engineers or construction contractors for the Project. The Authority also expects to select a developer to construct a hotel within the Phase One Project Area. The Authority has not selected a developer for the hotel. If a developer is selected in the next several months, it is expected that the developer will be responsible for construction of the convention center as well as the hotel. If a developer is not selected, the Authority will supervise construction of the convention center. See "THE AUTHORITY- -Phase One Cooperation Agreement" for a description of development agreements required with developers. There is no assurance that the Authority will enter into a development agreement with any developer. The Reserve Fund and Supplemental Reserve Fund The Indenture creates a reserve fund for the purpose of securing the payment of the Bonds. The Reserve Fund will be maintained as a continuing reserve in an amount equal to the least of (a) ten percent of the aggregate principal amount of the outstanding Bonds, (b) the Maximum Annual Debt Service on the outstanding Bonds or (c) one hundred twenty -five percent of Average Annual Debt Service on the outstanding Bonds (the "Reserve Fund Requirement "). The Reserve Fund Requirement upon issuance of the Bonds will be $568,020. Approximately $502,197 of this amount will be deposited from a portion of the Pledged City Sales Tax Revenues collected since November, 1993. In the event the Authority issues Additional Debt (defined below), it will be required to make a deposit into the Reserve Fund in order to bring the balance in the Reserve Fund to the Reserve Fund Requirement. See "THE INDENTURE- -Use of Moneys in Funds and Accounts -- Reserve Fund." The Indenture also creates a supplemental reserve fund (the "Supplemental Reserve Fund "). The Indenture requires moneys on deposit in the City Sales Tax Revenue Fund (defined herein) to be transferred to the Supplemental Reserve Fund (after other required transfers described in "THE INDENTURE- -Use of Moneys in Funds and Accounts ") until the amount on deposit in the Supplemental Reserve Fund equals the Average Annual Debt Service in any fiscal year for all Bonds and subordinate lien bonds Outstanding (the "Supplemental Reserve Fund Requirements "). See "THE INDENTURE." -10- THE BONDS Description of the Bonds; Limited Obligations The Bonds will be issued pursuant to the Indenture, will be dated as of August 15, 1994 and will mature as set forth on the cover page of this Official Statement. The Bonds initially will be registered in the name of "Cede & Co.," as nominee for the Depository Trust Company, the securities depository for the Bonds. Purchases by beneficial owners of the Bonds are to be made in book -entry only form in denominations of $5,000 and integral multiples thereof. The purchasers of the Bonds will not receive certificates evidencing their interests in the Bonds. See 'Book -Entry Form" below. Principal of each Bond will be payable to the registered owner (initially Cede & Co.) as shown on the registration records of the Trustee upon maturity or prior redemption and upon presentation and surrender at the corporate trust office of the Trustee. Any Bond not paid upon presentation and surrender at or after maturity will continue to draw interest at the interest rate stated until the principal thereof is paid in full. Interest on the Bonds is payable on June 1 and December 1, commencing on December 1, 1994. Interest on each Bond will be paid by check or draft of the Trustee mailed by the Trustee on or before each interest payment date (or, if such interest payment date is not a business day, on or before the next succeeding business day), to the registered owner (initially Cede & Co.) of such Bond at his or her address as it appears on the registration records of the Trustee at the close of business on the fifteenth day of the calendar month next preceding each interest payment date (the "Record Date "). However, any such interest not so timely paid or duly provided for shall cease to be payable to the person who is the registered owner of the applicable Bonds on the Record Date and shall be payable to the registered owner thereof at the close of business on a Special Record Date for the payment of any such defaulted interest. Such Special Record Date shall be fixed by the Trustee whenever moneys become available for payment of the defaulted interest, and notice of the Special Record Date shall be given to the registered owners of the Bonds not less than ten (10) days prior to the Special Record Date by first -class mail to each such registered owner as shown on the registration books on a date selected by the Trustee, stating the date of the Special Record Date and the date fixed for the payment of such defaulted interest. The Bonds are special limited obligations of the Authority. The payment of the Bonds will not be secured by any encumbrance, mortgage or other pledge of any property except the Trust Estate, including Pledged Revenues. The Bonds do not constitute a general obligation or a debt or indebtedness of the Authority, the City or the State or any political subdivision thereof. -11- Prior Redemption Optional Prior Redemption The Bonds maturing on and after December 1, 2004 are subject to redemption, at the option of the Authority, in whole, or in part, as directed by the Authority, on December 1, 2003, and on any interest payment date thereafter, at the redemption prices (expressed as a percentage of principal amount of the Bonds to be redeemed) set forth below, plus accrued interest to the date of redemption: • �� . ice ��• �� December 1, 2003 and June 1, 2004 101% December 1, 2004 and thereafter 100 Mandatory Sinking Fund Redemption The Bonds maturing on December 1, 2009, December 1, 2012, December 1, 2015 and December 1, 2019 are subject to mandatory sinking fund redemption at a price equal to the principal amount thereof plus accrued interest to the redemption date. Bonds subject to mandatory sinking fund redemption will be selected by lot in such manner as the Trustee shall determine. As and for a sinking fund for the redemption of the Bonds maturing on December 1, 2009, the Authority will deposit in the Debt Service Fund created under the Indenture on or before December 1, 2005 and each December 1 thereafter, a sum which together with other available moneys in the Debt Service Fund is sufficient to redeem (after credit as provided below) the following principal amounts of the Bonds maturing on December 1, 2009: Year Principal Amount 2005 $235,000 2006 250,000 2007 265,000 2008 280,000 The remaining $295,000 of the Bonds maturing on December 1, 2009, will be paid upon presentation and surrender at maturity unless redeemed pursuant to optional redemption prior to maturity. As and for a sinking fund for the redemption of the Bonds maturing on December 1, 2012, the Authority will deposit in the Debt Service Fund created under the Indenture on or before December 1, 2010 and each December 1 thereafter, a sum which together with other available -12- moneys in the Debt Service Fund is sufficient to redeem (after credit as provided below) the following principal amounts of the Bonds maturing on December 1, 2012: Principal Year Amount 2010 $315,000 2011 330,000 The remaining $350,000 of the Bonds maturing on December 1, 2012, will be paid upon presentation and surrender at maturity unless redeemed pursuant to optional redemption prior to maturity. As and for a sinking fund for the redemption of the Bonds maturing on December 1, 2015, the Authority will deposit in the Debt Service Fund created under the Indenture on or before December 1, 2013 and each December 1 thereafter, a sum which together with other available moneys in the Debt Service Fund is sufficient to redeem (after credit as provided below) the following principal amounts of the Bonds maturing on December 1, 2015: Principal Year Amount 2013 $375,000 2014 395,000 The remaining $420,000 of the Bonds maturing on December 1, 2015, will be paid upon presentation and surrender at maturity unless redeemed pursuant to optional redemption prior to maturity. As and for a sinking fund for the redemption of the Bonds maturing on December 1, 2019, the Authority will deposit in the Debt Service Fund created under the Indenture on or before December 1, 2016 and each December 1 thereafter, a sum which together with other available moneys in the Debt Service Fund is sufficient to redeem (after credit as provided below) the following principal amounts of the Bonds maturing on December 1, 2019: Principal Year Amount 2016 $445,000 2017 475,000 2018 500,000 -13- The remaining $535,000 of the Bonds maturing on December 1, 2015, will be paid upon presentation and surrender at maturity unless redeemed pursuant to optional redemption prior to maturity. On or before the 30th day prior to each such sinking fund payment date, the Trustee shall proceed to select the Bonds for redemption from such sinking fund on the next December 1, and on the 30th day prior to each sinking fund payment date give notice of such call as described below. Not less that 60 days prior to any sinking fund redemption date, the Authority may deliver to the Trustee for cancellation Bonds maturing on December 1, 2009, December 1, 2012, December 1, 2015 or December 1, 2019, as the case may be, in any principal amount constituting a multiple of $5,000, and which shall have been previously called for redemption and surrendered to the Authority other than through the operation of the sinking fund redemption provisions of the Indenture, or which shall have been purchased by the Authority in the open market, and the authority shall receive a credit against the next occurring appropriate sinking fund redemption requirement in an amount equal to the aggregate principal amount of such Bond so delivered to the Trustee. Notice and Effect of Redemption Notice of any prior redemption, identifying the Bonds or portions thereof to be redeemed, will be given by the Trustee by mailing a copy of the redemption notice by first -class, postage prepaid mail at least 30 days prior to the date fixed for redemption to the registered owner of each Bond to be redeemed, in whole or in part, at the address shown on the registration books maintained by the Trustee; provided, however, that failure to give such notice by mailing, or any defect therein, will not affect the validity of any proceedings for the redemption of any Bond or portion thereof with respect to which no failure has occurred. Any notice mailed as provided in the Indenture will be conclusively presumed to have been duly given, whether or not the registered owner actually receives the notice. Prior to the date fixed for redemption, funds will be deposited with the Trustee in the Debt Service Fund to pay, and the Trustee is authorized and directed by the Indenture to apply such funds to the payment of, the Bonds or portions thereof called for redemption, together with accrued interest thereon to the redemption date, and any required premium. Upon the giving of notice and the deposit of funds for redemption, interest on the Bonds or portions thereof thus called will no longer accrue after the date fixed for redemption. Additional Bonds The Bonds are special, limited obligations of the Authority, equally and ratably secured by an irrevocable pledge of and an irrevocable and first lien (but not necessarily an exclusively first lien) on, and payable solely from, the Trust Estate, including the Pledged Revenues. The Authority has the right, subject to specified conditions, to issue additional obligations on a parity with or subordinate to the Bonds. So long as the Bonds are outstanding, and so long as no Event of Default (defined herein) has occurred and is continuing pursuant to the Indenture, additional parity obligations ( "Additional Debt ") may be issued solely for the purpose of (a) refunding all or any portion of the Outstanding Bonds, and any Additional Debt (collectively, "Parity Debt "), (b) paying any cost or expenses of the Authority to be incurred in connection with the Project, (c) expanding -14- the Phase One Project Area and the Project, or either of them and (d) paying costs of issuance, capitalizing interest, establishing one or more reserve funds or paying other costs incurred in connection with the issuance of any such Additional Debt. Conditions to the issuance of Additional Debt include a report of a certified public accountant establishing that the Pledged Revenues deposited into the City Sales Tax Revenue Fund (defined herein) and the Tax Increment Revenue Fund (defined herein) during each of the past two fiscal years, were at least one hundred thirty-five percent (135 %) of the Maximum Annual Debt Service of the combination of (1) the Parity Bonds then Outstanding and (2) the Additional Debt proposed to be issued; provided, however, that any Parity Bonds to be refunded with the proceeds of such Additional Debt shall be excluded for purposes of such calculation; and provided further, that for purposes of the calculation, "Pledged City Sales Tax Revenues " shall not include moneys derived from any of the City's sales taxes which, by the terms of the then - current City ordinances, terminate prior to the final maturity of the proposed Additional Debt. See "THE INDENTURE- - Additional Debt and Subordinate Debt." No obligations of the Authority may have a lien on the Pledged Revenues which is superior to the lien thereon of the Bonds. The Authority currently expects to issue the 1994B Bonds in the aggregate principal amount of $2,225,000 concurrently with the Bonds for the purposes of making a conditional grant and/or a loan to the developer of the hotel and to provide funds for other capital improvements associated with the civic center. The 1994B Bonds will be secured by a lien on the Pledged Revenues which is subordinate to the lien thereon of the Bonds. See "AUTHORITY FINANCIAL INFORMATION." Book -Entry Form The Bonds will be available only in book -entry form in the principal amount of $5,000 or any integral multiple thereof. DTC will act as the initial securities depository for the Bonds. The ownership of one fully registered Bond for each maturity as set forth on the cover page of this Official Statement, each in the aggregate principal amount of such maturity, will be 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 Colorado and New York Uniform Commercial Codes, 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 participants (the "DTC Participants ") and to facilitate the clearance and settlement of securities transactions among DTC Participants in such securities through electronic book -entry changes in accounts of the DTC Participants, thereby eliminating the need for physical movement of security certificates. DTC 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 -15- banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a DTC Participant, either directly or indirectly (the "Indirect Participants "). Purchases of Bonds under the book -entry system may be made only through brokers and dealers who are, or act through, DTC Participants. Each DTC Participant will receive a credit balance in the records of DTC in the amount of such DTC Participant's ownership interest in the Bonds. The ownership interest of each actual purchaser of a Bond (the "Beneficial Owner ") will be recorded through the records of the DTC Participant or the Indirect 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 DTC Participants or Indirect 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 Indenture, except as specifically provided in the Indenture 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 THIS OFFICIAL STATEMENT TO THE REGISTERED OWNERS OF THE BONDS WILL MEAN CEDE & CO. AND WILL NOT MEAN THE BENEFICIAL OWNERS. The Authority and Trustee 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 or premium, if any, on the Bonds, selecting Bonds and portions thereof to be redeemed, giving any notice permitted or required to be given to registered owners under the Indenture, registering the transfer of Bonds, obtaining any consent or other action to be taken by registered owners and for all other purposes whatsoever, and will not be affected by any notice to the contrary. The Authority and the Trustee will not have any responsibility or obligation to any DTC Participant, any person claiming a beneficial ownership interest in the Bonds under or through DTC or any DTC Participant, Indirect Participant or other person not shown on the records of the Trustee as being a registered owner with respect to the accuracy of any records maintained by DTC, any DTC Participant or Indirect Participant regarding ownership interests in the Bonds; the payment by DTC, any DTC Participant, or Indirect Participant of any amount in respect of the principal of or interest or premium, if any, on the Bonds; the delivery to any DTC Participant, Indirect Participant or any Beneficial Owner of any notice which is permitted or required to be given to registered owners under the Indenture, or any consent given or other action taken by DTC as a registered owner. Neither DTC nor its nominee, Cede & Co., provides consents with respect to any security. Under its usual procedures, DTC mails an omnibus proxy to the issuer of the securities for which it is acting as securities depository as soon as possible after the establishment of a "record date" by the issuer for purposes of soliciting consents from the holders of such securities. The omnibus proxy assigns Cede & Co.'s voting rights to those DTC Participants having such securities credited to their accounts on such record date. -16- Principal of, and interest on, the Bonds will be paid to DTC or its nominee, Cede & Co., as registered owner of the Bonds. Disbursement of such payments to the DTC Participants is the responsibility of DTC and disbursement of such payments to the Beneficial Owners of the Bonds is the responsibility of the DTC Participants or the Indirect Participants. Upon receipt of any such payments, DTC's current practice is to immediately credit the accounts of the DTC Participants in accordance with their respective holdings shown on the records of DTC. Payments by DTC Participants and Indirect Participants to Beneficial Owners of the Bonds will be governed by standing instructions and customary practices, as is now the case with municipal securities held for the accounts of customers in bearer form or registered in "street name," and will be the responsibility of such DTC Participant or Indirect Participant and not of DTC, the Authority or the Trustee, subject to any statutory and regulatory requirements then in effect. As long as the DTC book -entry system is used for the Bonds, the Authority will give any notice required to be given to registered owners of Bonds only to DTC or its nominee. Any failure of DTC to advise any DTC Participant, of any DTC Participant to notify any Indirect Participant, of any DTC Participant or Indirect Participant to notify any Beneficial Owner, of any such notice and its content or effect will not affect the validity of any action premised on such notice. Conveyance of notices and other communications by DTC to DTC Participants, by DTC Participants to Indirect Participants and by DTC Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory and regulatory requirements as may be in effect from time to time. Beneficial Owners may desire to make arrangements with a DTC Participant or Indirect Participant so that all notices or other communications to DTC which affect such Beneficial Owners will be forwarded in writing by such DTC Participant or Indirect Participant. NEITHER THE AUTHORITY NOR THE TRUSTEE WILL HAVE ANY RESPONSIBILITY OR OBLIGATION TO SUCH DTC PARTICIPANTS, OR THE PERSONS FOR WHOM THEY ACT AS NOMINEES, WITH RESPECT TO THE PAYMENTS TO OR THE PROVIDING OF NOTICE FOR THE DTC PARTICIPANTS, THE INDIRECT 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 Authority or Trustee at any time. In addition, if the Authority determines that (i) DTC is unable to discharge its responsibilities with respect to the Bonds or (ii) continuation of the system of book -entry only transfers through DTC is not in the best interests of the Beneficial Owners of the Bonds or of the Authority, the Authority may thereupon 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, the Authority may within 90 days thereafter appoint a substitute securities depository which, in its opinion, is willing and able to undertake the functions -17- of DTC upon reasonable and customary terms. If a successor is not approved, Bond certificates will be delivered as described in the Indenture in the names of Beneficial Owners, Indirect Participants or DTC Participants. In the event the book -entry system is discontinued, the persons to whom Bond certificates are registered will be treated as registered owners for all purposes of the Indenture, including the giving to the Authority or the Trustee of any notice, consent, request or demand pursuant to the Indenture for any purpose whatsoever. In such event, the Bonds will be transferable to such registered owners, interest on the Bonds will be payable by check of the Trustee, as paying agent, mailed to such registered owners, and the principal of all Bonds will be payable at the principal corporate trust office of the Trustee, as paying agent. The foregoing material concerning DTC and DTC's book -entry system is based on information furnished by DTC. No representation is made by the Authority or the Underwriter as to the accuracy or completeness of such information. -18- DEBT SERVICE REQUIREMENTS The following schedule shows the debt service requirements for the Bonds. (1) Debt service includes the payment of interest on June I and the Fiscal Year payment of principal and interest on December 1 of each year. (2) Assumes that mandatory sinking fund redemptions are made as scheduled, but assumes that no optional redemptions are made. See "THE BONDS- -Prior Redemption." (3) Represents Maximum Annual Debt Service on the Bonds. Source: The Underwriter. -19- Total Debt Fiscal Year (ending December 31)(1) Princ' (2) IMAM Service EM01 1994 ---- $ 123,133 S 123,133 1995 $ 145,000 418,188 563,188 1996 155,000 412,678 567,678 1997 160,000 406,013 566,013 1998 165,000 398,733 563,733 1999 175,000 390,978 565,978 2000 185,000 382,490 567,490 2001 190,000 373,240 563,240 2002 200,000 363,550 563,550 2003 . 210,000 353,150 563,150 2004 225,000 342,020 567,020 2005 235,000 329,870 564,870 2006 250,000 316,240 566,240 2007 265,000 301,740 566,740 2008 280,000 286,370 566,370 2009 295,000 270,130 565,130 2010 315,000 253,020 569,020(3) 2011 330,000 233,963 563,963 2012 350,000 213,998 563,998 2013 375,000 192,823 567,823 2014 395,000 169,948 564,948 2015 420,000 145,853 565,853 2016 445,000 120,233 565,233 2017 475,000 92,865 567,865 2018 500,000 63,653 563,653 2019 535.000 32.903 567.903 Total $7,275,000 $6,987,775 $14,262,775 (1) Debt service includes the payment of interest on June I and the Fiscal Year payment of principal and interest on December 1 of each year. (2) Assumes that mandatory sinking fund redemptions are made as scheduled, but assumes that no optional redemptions are made. See "THE BONDS- -Prior Redemption." (3) Represents Maximum Annual Debt Service on the Bonds. Source: The Underwriter. -19- SOURCES OF DEBT SERVICE PAYMENTS Generally The Bonds are special, limited obligations of the Authority payable as to principal and interest solely from the Trust Estate. See "INTRODUCTION." The Trust Estate includes Pledged Revenues and the Trust Funds. The Trust Funds represent the amounts held by the Trustee in the Debt Service Fund, the City Sales Tax Revenue Fund, the Tax Increment Fund, the Project Fund, the Expense Fund, the Supplemental Reserve Fund, the Rebate Fund and the Operations and Maintenance Fund (collectively, the Trust Funds), each as described under "THE INDENTURE- - Use of Moneys in Funds and Accounts." Moneys in the Reserve Fund will be withdrawn and applied to pay the principal of or interest on the Bonds if Pledged Revenues deposited in the Debt Service Fund are insufficient for such purpose. Upon the withdrawal of any moneys from the Reserve Fund, the Reserve Fund must be replenished from any available Pledged Revenues. See "THE INDENTURE- -Use of Moneys in Funds and Accounts." The Pledged Revenues are comprised principally of a 3.3% portion of the total sales and use tax revenues of the City, which are generally described below, and income from the investment and reinvestment of the Trust Funds. See "INTRODUCTION" and "THE INDENTURE -- Definitions." The Pledged Revenues also include the Incremental Tax Revenues. Pledged City Sales Tax Revenues Authori , for In=sition of the Sales Tax The City imposes the Sales Tax pursuant to the City's Home Rule Charter (the "Charter ") and ordinances adopted by the City Council providing for the imposition, collection and enforcement of the Sales Tax (the "Sales Tax Ordinances"), which are codified in the City Code. Prior to January 1, 1985, the Town imposed the Sales Tax at the rate of 3% on retail sales. The Sales Tax was increased by the City Council to the current rate of 3.5% following voter approval at an election held in November, 1984. The additional .5% is required to be used for economic development projects. At elections held in 1986 and 1991, the City's electors approved the extension of the .5% Sales Tax until December 31, 1996. With the State's 3.0% sales tax and Pueblo County's I% sales tax, the sales taxes in effect within the City total 7.5 %. General Description of the Sales Tax The Sales Tax is levied and collected at the rate of 3.5% on the sale of tangible personal property at retail and the furnishing of certain services by retailers within the City. Transactions and Items Subject to Sales Tax - Pursuant to the Sales Tax Ordinances, taxable tangible personal property and services consist primarily of the same tangible personal property and services taxable by State statute, including but not limited to the following: corporeal personal property; lodging, telephone and telegraph service; gas, electric, and steam services; certain -20- meal service; and cover, door, and related charges. The Sales Taxis subject to certain exemptions. Specific exempt transactions include, but are not limited to, sales of food, sales to the United States government, the State, its departments or institutions, and the political subdivisions thereof; sales protected under federal law relating to interstate commerce; sales to charitable organizations for use in their exempt activities; sales of cigarettes; sales of newspapers; sales of prescription drugs and prosthetic devices; sales of therapeutic devices; certain sales relating to the monthly rental of rooms; sales made to public schools; sales and purchases of specified livestock; sales and purchases of feed for livestock and poultry; seeds and orchard trees; sales of straw and other bedding for the care of livestock; and sales of special fuel. All sales of personal property on which a specific ownership tax has been paid or. is payable are exempt from the Sales Tax as long as the purchaser is a non - resident of or has his principal place of business outside the City and such personal property is registered or required to be registered outside the limits of the City under State law. Manner of Collection and Administration Pursuant to the Sales Tax Ordinances, the City Finance Director is charged with the administration of the Sales Tax, including licensing, rulemaking, examination of returns, auditing and enforcement. The City Manager may delegate authority to any City employees in order to provide for the efficient administration of the Sales Tax. Any person engaged in the business of selling, at retail, tangible personal property subject to the Sales Tax must obtain a City sales tax license. The City Finance Director estimates that there are approximately 5,607 licensed businesses currently operating within the City. The Sales Tax must be collected on the total purchase price of taxable articles of tangible personal property or taxable services that are purchased or sold by or to a customer. Although ostensibly imposed on any vendor in business who sells such property or provides such services, the Sales Tax is in reality imposed on the customer or purchaser of such property or services. It is the obligation of the vendor to collect the Sales Tax from the purchaser or customer and thereafter to remit all such revenues to the City Finance Director. On or before the 20th day of the month, each vendor must file a return with the City Finance Director for the preceding month remitting the Sales Tax on the total price of all taxable tangible goods and taxable services. Enforcement and Remedies for Collection of DelinQuent Taxes The City Finance Director enforces the collection of the Sales Tax as specified in the Sales Tax Ordinances. Failure to file a return, as described above, failure to pay the Sales Tax, or being deficient in any amount due without reasonable cause will result in a penalty being added to the amount due. In the case of a failure to comply without a showing of reasonable cause, the vendor must pay a penalty equal to the greater of $15 or 10% of the amount of such deficiency. In addition, interest on the amount of such deficiency and penalty accrues at the rate of 1/2% per month (not to exceed 18 %) from the time the return and Sales Tax payment was due. If the deficiency is a result of fraud, the vendor is obligated to pay a penalty of 10% of the amount of the deficiency and penalty interest at the rate determined by the State Commissioner of Banking. -21- Failure to pay the Sales Tax and any interest or penalties thereon, when due, will result in a written notice of final determination, assessment, and demand for payment which shall be served upon the vendor by first -class mail. This assessment of the tax is due and payable twenty days after notice of its determination is given. Such notice informs the recipient that the Sales Tax constitutes a first and prior lien on the real and personal property of the taxpayer, which lien shall have precedence over other liens on tangible real and personal property, except as to liens for general taxes created by State law and valid mortgages or other prior liens of record, as specified in State statutes. After the filing of such notice and the lapse of the time provided for payment of taxes, the City Finance Director may issue a warrant for the distraint, seizure, and sale of the real and personal property of the taxpayer, as provided in the Sales Tax Ordinances. Histoa of Sales Tax Collections The following table sets forth a history of the City's Sales and Use Tax collections since 1988 and the amount which would have been generated by a 3.3% portion of such Sales Tax. (1) Represents collections through June 30, 1994. Comparison of Monthly Sales Tax Collections The following table sets forth a comparison of the City's monthly Sales Tax collections for 1992, 1993 and the first six months of 1994. Sales Tax collections are based upon a collection rate of 3.5 %. See "RISK FACTORS -- Limited Security For the Bonds." -22- Sales and Use Year Tax Collections 3.3% Portion % Increase 1988 19,015,140 627,499 - -- 1989 19,994,029 659,803 5.15% 1990 20,201,127 666,637 1.04 1991 20,553,856 678,277 1.75 1992 21,839,460 720,702 6.25 1993 24,289,820 801,564 11.22 1994(l) 12,878,374 439,489 - -- (1) Represents collections through June 30, 1994. Comparison of Monthly Sales Tax Collections The following table sets forth a comparison of the City's monthly Sales Tax collections for 1992, 1993 and the first six months of 1994. Sales Tax collections are based upon a collection rate of 3.5 %. See "RISK FACTORS -- Limited Security For the Bonds." -22- (1) The amount shown here does not include the collection of $325,217 in audit taxes which were collected in 1992. Accordingly, this figure differs slightly from collection numbers set forth elsewhere in this Official Statement. Principal Sales Tax Generators Set forth in the following table are the principal Sales Tax generators in the City as provided by the City Finance Director. The table is based on Sales Tax remittances in the City during the twelve -month period ended December 31, 1993. Because of the confidential nature of the gross sales of such entities, the amounts of each entity's gross sales and the Sales Taxes paid by each such entity cannot be divulged under penalty of law. According to the City Finance Director in the aggregate, the principal generators listed accounted for approximately 20% of the 1993 Sales Tax revenue. The City Finance Director expects that these generators and the Sales Tax revenue generated by each generally will be representative of Sales Tax generation data for 1994. Principal Generators of Sales Tax Revenues in 1993 1. Retail Store 2. Electric Utility 3. Retail Store 4. Telephone Utility 5. Gas Utility Source: City Finance Department. -23- 1994 im I January $2,783,322 $2,466,019 $2,256,941 February 1,891,419 1,527,373 1,483,636 March 1,803,601 2,239,069 1,599,416 April 2,273,740 1,959,245 1,807,076 May 2,000,325 1,882,348 1,645,641 June 2,125,967 1,900,607 1,811,377 July -- 2,152,114 1,886,365 August -- 1,879,264 1,787,254 September -- 2,102,184 1,871,679 October -- 2,197,064 1,921,395 November -- 1,948,567 1,774,788 December - 2,035,967 1,732.513 TOTAL $12,878,374 $24,289,821 $21,578,081(1) (1) The amount shown here does not include the collection of $325,217 in audit taxes which were collected in 1992. Accordingly, this figure differs slightly from collection numbers set forth elsewhere in this Official Statement. Principal Sales Tax Generators Set forth in the following table are the principal Sales Tax generators in the City as provided by the City Finance Director. The table is based on Sales Tax remittances in the City during the twelve -month period ended December 31, 1993. Because of the confidential nature of the gross sales of such entities, the amounts of each entity's gross sales and the Sales Taxes paid by each such entity cannot be divulged under penalty of law. According to the City Finance Director in the aggregate, the principal generators listed accounted for approximately 20% of the 1993 Sales Tax revenue. The City Finance Director expects that these generators and the Sales Tax revenue generated by each generally will be representative of Sales Tax generation data for 1994. Principal Generators of Sales Tax Revenues in 1993 1. Retail Store 2. Electric Utility 3. Retail Store 4. Telephone Utility 5. Gas Utility Source: City Finance Department. -23- Incremental Tax Revenues Incremental Proper Tax Revenues Property tax increment revenues are that portion, if any, of ad valorem property tax revenues in excess of those property tax revenues derived by applying prevailing mill levies to a "base" assessed valuation in the urban renewal area. The "base" valuation is the assessed valuation of the urban renewal area last certified by the county assessor prior to the effective date of the approval of the urban renewal plan. All ad valorem property tax revenues attributable to prevailing mill levies applied to the "base" valuation are collected and paid to the respective taxing entities having the authority to tax within the urban renewal area according to the rate of mill levy established by each such taxing entity. Property tax increment revenues are derived by applying the same rate of mill levy as established by such taxing entities to the increment, if any, of the assessed valuation which exceeds the "base" valuation. Property tax increment revenues are therefore subject to the rate of increase or decrease in the assessed valuation of property within the urban renewal area and to the total mill levy imposed by overlapping taxing entities. The Authority itself has no power to levy or assess any ad valorem taxes, nor may the Authority compel any taxing entity to levy any such property tax. In the event there is a general reassessment, including all or any part of the urban renewal area, any increase or decrease in assessed valuation which may occur will not be attributable entirely to the urban renewal area. Rather, such increase or decrease is proportionately allocated between the "base" valuation and the increment. The Phase One Plan was adopted on August 25, 1986 and amended on January 28, 1988 and July 22, 1991. The Phase One Plan supplemented and amended the Downtown Pueblo Amended Urban Renewal Plan adopted in May 1985. The Downtown Pueblo Amended Urban Renewal Plan contained the original authorization for property tax increment financing. Therefore, the base valuation of the Phase One Project Area is the assessed valuation of such area as certified by the Pueblo County Assessor as of January 1, 1985. The base valuation for the original Phase One Project Area is $0. The base valuation of the additional Phase One Project Area (on January 28, 1988) is $49,910. The annual assessed valuation of the Phase One Project Area, and thus the annual determination of the property tax increment, will be certified by the County Assessor no later than August 15 of each year. However, as to the property within the Phase One Project Area currently owned by the City, there will be no taxable property from which to receive incremental property tax revenues until such time as property within the Phase One Project Area is conveyed to nonexempt entities such as the proposed developers. The office building which has been developed in the Phase One Project Area has a 1993 assessed value of $214,180. See "THE AUTHORITY- -Phase One Cooperation Agreement." The following chart sets forth a history of the assessed valuation in the Phase One Project Area and shows the Property Tax Base Amount, the Property Tax Increment and revenues generated for the past five years. -24- (1) Of the total amount generated, a portion has been redistributed to the taxing entities overlapping the Authority in each fiscal year. Accordingly, the Authority should have received $15,920 for levy year 1989, $15,747 for levy year 1990, $34,566 for levy year 1991, and $34,566 for levy year 1992 and $35,244 for levy year 1993. However, the County Treasurer overpaid the Authority in each of levy years 1989 and 1990. Accordingly, the Authority actually received only $19,810 for levy year 1991 to compensate for past overpayments. Sources: Pueblo County Treasurer's Office. Incremental Sales Tax Revenues Sales tax increment revenues are that portion, if any, of municipal sales taxes in excess of the amount of such sales taxes collected within the boundaries of the urban renewal area during the twelve -month period ending on the last day of the month prior to the effective date of approval of the urban renewal plan. The sales tax base amount for the Phase One Project Area is $0. Therefore, all sales tax receipts hereafter received from the Phase One Project Area will constitute incremental sales tax revenues. For a discussion of the levy and collection of the City's Sales Tax, see "Pledged City Sales Tax Revenues." Estimated Debt Service Coverage The following table sets forth estimated debt service coverage based upon the maximum annual debt service on the Bonds and the Pledged Revenues collected in the years 1989- 1993: -25- Property Total Value Percent Levy Collection Tax Base in the Property Tax Revenues Increase in Year Year Amount Authority Increment Generated(l) vRe enues 1989 1990 $83,563 $262,890 $179,327 $23,338 -- 1990 1991 83,563 262,890 179,327 23,085 (1.08) 1991 1992 83,563 460,450 376,887 42,231 82.94 1992 1993 83,563 460,450 376,887 42,341 0.00 1993 1994 83,563 467,840 384,270 42,908 0.16 (1) Of the total amount generated, a portion has been redistributed to the taxing entities overlapping the Authority in each fiscal year. Accordingly, the Authority should have received $15,920 for levy year 1989, $15,747 for levy year 1990, $34,566 for levy year 1991, and $34,566 for levy year 1992 and $35,244 for levy year 1993. However, the County Treasurer overpaid the Authority in each of levy years 1989 and 1990. Accordingly, the Authority actually received only $19,810 for levy year 1991 to compensate for past overpayments. Sources: Pueblo County Treasurer's Office. Incremental Sales Tax Revenues Sales tax increment revenues are that portion, if any, of municipal sales taxes in excess of the amount of such sales taxes collected within the boundaries of the urban renewal area during the twelve -month period ending on the last day of the month prior to the effective date of approval of the urban renewal plan. The sales tax base amount for the Phase One Project Area is $0. Therefore, all sales tax receipts hereafter received from the Phase One Project Area will constitute incremental sales tax revenues. For a discussion of the levy and collection of the City's Sales Tax, see "Pledged City Sales Tax Revenues." Estimated Debt Service Coverage The following table sets forth estimated debt service coverage based upon the maximum annual debt service on the Bonds and the Pledged Revenues collected in the years 1989- 1993: -25- (1) Based upon Maximum Annual Debt Service of $568,020 in 2010. See "DEBT SERVICE REQUIREMENTS." (2) Based upon the City's estimated receipts of 1994 Pledged City Sales Tax Revenues of $854,000 and Pledged Property Tax Revenues of $30,000. Bond Insurance Payment Pursuant to Municipal Bond Insurance Poly AMBAC Indemnity has made a commitment to issue a municipal bond insurance policy (the "Municipal Bond Insurance Policy') relating to the Bonds effective as of the date of issuance of the Bonds. Under the terms of the Municipal Bond Insurance Policy, AMBAC Indemnity will pay to the United States Trust Company of New York in New York; New York or any successor thereto (the "Insurance Trustee') that portion of the principal of and interest on the Bonds which shall become Due for Payment but shall be unpaid by reason of Nonpayment by the Issuer (as such terms are defined in the Municipal Bond Insurance Policy). AMBAC Indemnity will make such payments to the Insurance Trustee on the later of the date on which such principal and interest becomes Due for Payment or within one business day following the date on which AMBAC Indemnity shall have received notice of Nonpayment from the Trustee /Paying Agent. The insurance will extend for the term of the Bonds, and, once issued, cannot be canceled by AMBAC Indemnity. The Municipal Bond Insurance Policy will insure payment only on stated maturity dates and on mandatory sinking fund installment dates, in the case of principal, and on stated dates for payment, in the case of interest. If the Bonds become subject to mandatory redemption and insufficient funds are available for redemption of all outstanding Bonds, AMBAC Indemnity will remain obligated to pay principal of and interest on outstanding Bonds on the originally scheduled interest and principal payment dates including mandatory sinking fund redemption dates. In the event of any acceleration of the principal of the Bonds, the insured payments will be made at such times and in such amounts as would have been made had there not been an acceleration. In the event the Trustee /Paying Agent has notice that any payment of principal of or interest on a Bond which has become Due for Payment and which is made to a Bondholder by or on behalf of the Issuer has been deemed a preferential transfer and theretofore recovered from its registered owner pursuant to the United States Bankruptcy Code in accordance with a final, nonappealable order of a court of competent jurisdiction, such registered owner will be entitled to -26- Total Pledged Maximum Annual Y-= Revenues Debt Service (1.,) Coverage 1989 $683,141 $568,020 1.20x 1990 689,722 568,020 1.21x 1991 698,087 568,020 1.23x 1992 751,762 568,020 1.32x 1993 836,131 568,020 1.47x 1994(2) 884,000 568,020 1.56x (1) Based upon Maximum Annual Debt Service of $568,020 in 2010. See "DEBT SERVICE REQUIREMENTS." (2) Based upon the City's estimated receipts of 1994 Pledged City Sales Tax Revenues of $854,000 and Pledged Property Tax Revenues of $30,000. Bond Insurance Payment Pursuant to Municipal Bond Insurance Poly AMBAC Indemnity has made a commitment to issue a municipal bond insurance policy (the "Municipal Bond Insurance Policy') relating to the Bonds effective as of the date of issuance of the Bonds. Under the terms of the Municipal Bond Insurance Policy, AMBAC Indemnity will pay to the United States Trust Company of New York in New York; New York or any successor thereto (the "Insurance Trustee') that portion of the principal of and interest on the Bonds which shall become Due for Payment but shall be unpaid by reason of Nonpayment by the Issuer (as such terms are defined in the Municipal Bond Insurance Policy). AMBAC Indemnity will make such payments to the Insurance Trustee on the later of the date on which such principal and interest becomes Due for Payment or within one business day following the date on which AMBAC Indemnity shall have received notice of Nonpayment from the Trustee /Paying Agent. The insurance will extend for the term of the Bonds, and, once issued, cannot be canceled by AMBAC Indemnity. The Municipal Bond Insurance Policy will insure payment only on stated maturity dates and on mandatory sinking fund installment dates, in the case of principal, and on stated dates for payment, in the case of interest. If the Bonds become subject to mandatory redemption and insufficient funds are available for redemption of all outstanding Bonds, AMBAC Indemnity will remain obligated to pay principal of and interest on outstanding Bonds on the originally scheduled interest and principal payment dates including mandatory sinking fund redemption dates. In the event of any acceleration of the principal of the Bonds, the insured payments will be made at such times and in such amounts as would have been made had there not been an acceleration. In the event the Trustee /Paying Agent has notice that any payment of principal of or interest on a Bond which has become Due for Payment and which is made to a Bondholder by or on behalf of the Issuer has been deemed a preferential transfer and theretofore recovered from its registered owner pursuant to the United States Bankruptcy Code in accordance with a final, nonappealable order of a court of competent jurisdiction, such registered owner will be entitled to -26- payment from AMBAC Indemnity to the extent of such recovery if sufflcientfunds are not otherwise available. The Municipal Bond Insurance Policy does not insure any risk other than Nonpayment, as defined in the Policy. Specifically, the Municipal Bond Insurance Policy does not cover: 1. payment on acceleration, as a result of a call for redemption (other than mandatory sinking fund redemption) or as a result of any other advancement of maturity. 2. payment of any redemption, prepayment or acceleration premium. 3. nonpayment of principal or interest caused by the insolvency or negligence of any Trustee or Paying Agent, if any. If it becomes necessary to call upon the Municipal Bond Insurance Policy, payment of principal requires surrender of Bonds to the Insurance Trustee together with an appropriate instrument of assignment so as to permit ownership of such Bonds to be registered in the name of AMBAC Indemnity to the extent of the payment under the Municipal Bond Insurance Policy. Payment of interest pursuant to the Municipal Bond Insurance Policy requires proof of Bondholder entitlement to interest payments and an appropriate assignment of the Bondholder's right to payment to AMBAC Indemnity. Upon payment of the insurance benefits, AMBAC Indemnity will become the owner of the Bond, appurtenant coupon, if any, or right to payment of principal or interest on such Bond and will be fully subrogated to the surrendering Bondholder's rights to payment. AMBAC Indemnity Corporation AMBAC Indemnity Corporation ('AMBAC Indemnity') is a Wisconsin- domiciled stock insurance corporation regulated by the Office of the Commissioner of Insurance of the State of Wisconsin and licensed to do business in 50 states, the District or Columbia, and the Commonwealth of Puerto Rico, with admitted assets of approximately $1,988, 000, 000 (unaudited) and statutory capital of approximately $1,148, 000, 000 (unaudited) as of March 31, 1994. Statutory capital consists of AMOAC Indemnity's policyholders'surplus and statutory contingency reserve. AMBAC Indemnity is a wholly owned subsidiary of AMBAC Inc., a 100% publicly -held company. Standard & Poor's Ratings Group, Moody's Investors Service and Fitch Investors Service, Inc. have each assigned a triple-A claims paying ability rating to AMBAC Indemnity. Copies of AMBAC Indemnity's financial statements prepared in accordance with statutory accounting standards are available from AMBAC Indemnity. The address of AMBAC Indemnity's administrative offices and its telephone number are One State Street Plaza, 17th Floor, New York, New York 10004 and (212) 668 -0340. AMBAC Indemnity has entered into pro rata reinsurance agreements under which a percentage of the insurance underwritten pursuant to certain municipal bond insurance programs -27- of AMBAC Indemnity has been and will be assumed by a number of foreign and domestic unaffiliated reinsurers. AMBAC Indemnity has obtained a ruling from the Internal Revenue Service to the effect that insuring of an obligation by AMBAC Indemnity will not affect the treatment for federal income tax purposes of interest on such obligation and that insurance proceeds representing maturing interest paid by AMBAC Indemnity under pol icy provisions substantially identical to those contained in its municipal bond insurance policy shall be treated for federal income tax purposes in the same manner as if such payments were made by the issuer of the Bonds. AMBAC Indemnity makes no representation regarding the Bonds or the advisability of investing in the Bonds and makes no representation regarding, nor has it participated in the preparation of, the Official Statement other than the information supplied by AMBAC Indemnity and presented under the heading "SOURCES OF DEBT SERVICE PAYMENTS- -Bond Insurance. " THE AUTHORITY History and Organization The Authority is an independent body corporate and politic established on March 9, 1959, by the City Council (the "City Council ") of the City of Pueblo, Colorado (the "City "), pursuant to the Act for the purpose of undertaking certain urban renewal activities within the City. The City is located approximately 110 miles south of Denver and, according to the 1990 census, is the fifth largest city in the State, following Denver, Colorado Springs, Aurora, and Lakewood in size, with an estimated 1993 population of 100,776. Historically, downtown Pueblo has been the business, commercial, and cultural center for the City and the regional trade and service center for a large portion of southern Colorado. Over the years the area has experienced a decline similar to the decline which has occurred in many other American cities. Retail outlets migrated to the peripheral areas, medical offices began to relocate near major hospitals, wholesaling and warehousing uses dispersed throughout the urban area, and the downtown area became less attractive as a residential center. In response to these and other factors, the City has undertaken plans, including the creation of the Authority, for urban renewal and redevelopment. The Authority's boundaries are coterminous with the City, although the Phase One Project Area (discussed below) encompasses only a nine -acre area within the downtown area of the City. The resolution establishing the Authority was adopted upon the finding and determination of the City Council that the urban renewal area constituted a blighted area within the City and that the acquisition, clearance, rehabilitation, conservation, and development or redevelopment of the designated area was necessary in the interest of public health, safety, morals, or welfare of City residents. -28- The City has established that the successful redevelopment of the Project Area is a matter of community importance. Accordingly, the City organized the Authority, adopted the Phase One Plan and assigned to the Authority certain development - related activities. The Authority generally is responsible for implementing the Phase One Plan, negotiating specific projects within the Project Area and providing some project funding within the Project Area. To date, the Authority has received revenues in the amount of $131,861 with which to undertake urban renewal activities directly. However, with the financial and administrative assistance of the City, the Authority has participated in the clearing and relocation of businesses and persons in the Phase One Project Area. Powers of the Authority Pursuant to the Act, the Authority is a separate public body politic and corporate and is authorized to exercise broad governmental powers in planning and implementing redevelopment projects. Its powers include the authority to acquire, rehabilitate, administer and sell or lease property. When necessary, the Authority may exercise the right of eminent domain to facilitate acquisition of property and has the power to issue obligations or incur other debt for the purpose of financing the cost of its redevelopment activities and operations. The Authority can cause pavements, sidewalks and other public facilities to be built and installed. The Authority can further prepare for use as a building site any real property which it owns or acquires. The Authority may pay, out of any funds made available to the Authority for such purposes, all or part of the value of land and the cost of buildings, facilities, structures or other improvements to be publicly owned and operated, provided that such improvements are of benefit to the Project Area. The Authority must sell or lease remaining property which the Authority acquires within the Project Area at fair value for redevelopment in conformity with the Phase One Plan, and may further specify a period within which such redevelopment must begin and be completed or may specify other requirements as it determines to be in the public interest. Cooperation Agreements Pursuant to the Act, any public body (defined as the State or any municipality, quasi - municipal corporation, board, commission, authority, or other political subdivision or public corporate body of the state) is entitled, within the scope of its own powers, to aid the Authority in the Authority's undertakings. Upon such terms as may be developed, such public body may sell, convey, lease, grant easements, licenses, or other rights or privileges in property of the public body to the Authority; incur expenses of any public improvement made by such public body in exercising these cooperative powers; do all things necessary to aid or cooperate with the Authority in planning and undertaking its activities; enter into agreements with respect to cooperative activities; cause public improvements, services, and facilities which the public body is entitled to undertake to be furnished or otherwise improved within the urban renewal area; plan, replan, zone, or rezone any -29- area under the jurisdiction of the public body; or cause administrative or other services to be furnished to the Authority. Governing Board The powers of the Authority are vested in its eleven member Board of Commissioners (the 'Board "). Commissioners hold meetings as necessary. Each commissioner serves a five -year term and is entitled to one vote on all questions before the Board when a quorum is present. Commissioners receive no compensation for services, but are entitled to necessary expenses incurred in the performance of their duties. The present commissioners, their length of service on the Board, principal occupations, and terms of office are as follows: -30- * Mr. Weaver is a broker at one of the firms which participated in the marketing of the Bonds. The Board is responsible for the overall management and administration of the affairs of the Authority and has all the powers necessary or convenient to carry out and effectuate the purposes and provisions of the Act. In addition, pursuant to the Act, any public body is entitled, within the scope of its own powers, to aid the Authority in the Authority's undertakings. The City has been instrumental in aiding the Authority, both through the provision of administrative services and support and through the sponsorship and financing of site purchase and preparation pursuant to the Phase One Plan. See "The Phase One Project Cooperation Agreement." The City currently -31- Length of Term Expires Service on Principal O ffice Name (February 1� Board OccuRation Chairman Joseph A. Fortino 1998 11 years Business Person Vice Chairman Gary L. Trujillo 1997 12 years Architect, Housing Authority Commissioner David A. Becker 1995 4 years Real Estate Commissioner Luis C. Cisneros 1997 2 years Teacher Commissioner Frank D. 1996 8 years Creditors Cowgill, Jr. Exchange, Inc. Commissioner Roland Faricy 1998 1 year Retired Business Person Commissioner Chris Weaver* 1998 1 year Stockbroker Commissioner Ernamarie 1996 14 years Community Williams Volunteer Commissioner Jerome Crane 1999 6 months Manager - Shopping Center Commissioner Ruth McDonald 1999 6 months Manager - Restaurant Commissioner Charles 1999 6 months West Plains Hernandez Energy * Mr. Weaver is a broker at one of the firms which participated in the marketing of the Bonds. The Board is responsible for the overall management and administration of the affairs of the Authority and has all the powers necessary or convenient to carry out and effectuate the purposes and provisions of the Act. In addition, pursuant to the Act, any public body is entitled, within the scope of its own powers, to aid the Authority in the Authority's undertakings. The City has been instrumental in aiding the Authority, both through the provision of administrative services and support and through the sponsorship and financing of site purchase and preparation pursuant to the Phase One Plan. See "The Phase One Project Cooperation Agreement." The City currently -31- provides the Authority with general administration, clerical support and planning services at no cost to the Authority. Legal Matters Counsel for the Authority states that as of the date hereof there are no suits or claims pending or, to the best of his knowledge, threatened against the Authority, or its officers and commissioners in such capacity. See "LITIGATION, SOVEREIGN IMMUNITY AND INSURANCE -- Litigation." The Phase One Project Area The City Council originally adopted the Phase One Plan on August 25, 1986. The Phase One Plan was amended on January 28, 1988 to add approximately 2.5 acres. The Phase One Plan, as amended, encompasses an area of approximately nine acres in downtown Pueblo (the "Phase One Project Area "). This area was originally included as part of the Union Avenue Project Urban Renewal Plan adopted by the City Council in 1961, the Downtown Pueblo Urban Renewal Plan adopted in 1980, and the Downtown Pueblo Amended Urban Renewal Plan adopted in 1985. The amended Phase One Plan modifies and amends all other urban renewal plans previously adopted and approved by the City as they apply to the Phase One Project Area. The provisions of the Downtown Pueblo Amended Urban Renewal Plan continue to apply to the balance of the area described in that plan. Pursuant to the Downtown Pueblo Amended Urban Renewal Plan, the City acquired title to the property in the original Phase One Project Area (approximately 6.5 acres) and has demolished and cleared the buildings that formerly occupied the property. Title to the additional 2.5 acres of property was acquired by the City pursuant to condemnation proceedings. All of the structures on that property have been demolished and cleared. The City has spent approximately $2 million to date to purchase and clear the land within the Phase One Project Area. One office building (approximately 30,000 square feet) has been developed in the Phase One Project Area. However, substantially all of the Phase One Project Area remains vacant, undeveloped land upon which the Authority intends to expend public funds and provide public facilities as described in the Phase One Plan to aid in the completion of the redevelopment, which is planned to include the construction of a hotel /convention center and appropriate parking facilities. The land within the Phase One Project Area is zoned as B -4, the highest business use designation for retail use. Existing zoning in the Phase One Project Area permits the land uses contained in the Phase One Plan. -32- The Phase One Plan The purpose of the Phase One Plan is to set forth an implementation strategy for the elimination or prevention of the designated blight, including financing alternatives which may include property and/or sales tax increment financing. The stated goals of the Phase One Plan include: to prevent the spread and development of blight; to stimulate economic development and reinvestment in a strategic area of the region; to complete the redevelopment of the urban renewal area in accordance with the urban renewal plan by the provision of public improvements, including but not limited to a parking structure and a convention center; to eliminate deteriorated or deteriorating structures and other conditions of blight in the Pueblo downtown area; to increase the tax base of the entire community; to further develop the tourist and convention industry of Pueblo; and to implement the goals and policies of the adopted Pueblo Regional Comprehensive Development Plan. Pursuant to the Act, it is required that the Phase One Plan conform to a general or master plan for the community as a whole. On March 24, 1980, the City Council adopted the Pueblo Regional Comprehensive Development Plan specifically addressing the planning and development concerns of downtown Pueblo. The goals of the urban renewal plan are designed to be consistent with the goals and policies of the Regional Plan, and the urban renewal activities set forth in the Phase One Plan are intended to further the goal of the Regional Plan for redevelopment and reinvestment in the downtown area of Pueblo. Urban Renewal Activities Under the Phase One Plan The following is a brief description of urban renewal project activities set out by the Phase One Plan and the current status of those activities. The implementation of the Phase One Plan is expected to be the responsibility of the Authority. However, the City and its various departments and agencies intend to be available, under cooperative agreements, to assist the Authority in the undertaking and implementation of the Phase One Project. Propga Acquisition - Real property to be acquired by the Authority consists of the approximately nine -acre Phase One Project Area currently owned by the City, which will be transferred to the Authority pursuant to the Phase One Project Cooperation Agreement (discussed below). The City has vacated certain streets and all alleys abutting the project site that are required for the Phase One Project. Property 1`. 4anagement Properties purchased by the Authority may be temporarily managed and operated by the Authority until such time as these properties are conveyed or dedicated for uses in accordance with Phase One Plan. Relocation Plan - Pursuant to its authority under the Act and its own previously adopted relocation plan, the Authority and the City have assisted in the relocation of businesses and persons from the Phase One Project Area to new sites. Relocation activities have been completed. -33- Building Demolition. Clearance. and Site Preparation The City has completed demolition and removal of all structures that it has determined necessary for the redevelopment of the Phase One Project Area. The Authority will not undertake any further demolition, clearance, or site preparation activities. Zoning and Subdivision - The Authority and the City have caused the property in the Phase One Project Area to be zoned B -4. If required, the Authority, in cooperation with the City, will cause the real property within the Phase One Project Area to be rezoned and subdivided for the development and use of the Phase One Project in compliance with the Phase One Plan. Public Improvements and Public Facilities - The Authority, in cooperation with the City, will provide for the extension of utilities to the property lines of parcels to be sold for private redevelopment. The Authority also will construct public facilities necessary to carry out the Phase One Plan. These facilities include a convention center containing approximately 20,000- 30,000 square feet and parking facilities of appropriate size, as well as landscaping and adjacent street and right -of -way improvements. Property Disposition - The Authority will dispose of the real property in the Phase One Project Area for redevelopment in accordance with the provisions of the Phase One Plan and the Act. The Authority, in connection with the transfer of property, may impose restrictions on the use of property as provided for under the Act. To date, the Authority has transferred one parcel of real property within the Phase One Project Area for redevelopment. The developer of that parcel has constructed a three -story brick and glass office building of approximately 30,000 square feet. The building is fully occupied by West Plans Energy. The City expended approximately $100,000 of City moneys to pay the costs of relocating water and sewer services to the building and the costs of other infrastructure improvements, including street and access improvements, curbs, gutters and sidewalks. Purchasers of property within the Phase One Project Area will be required to develop the property in accordance with the provisions and standards of the Phase One Plan and be bound to comply with conditions placed upon them by the Authority under the terms established at the time of transfer of property. Phase One Project Cooperation Agreement On August 25, 1986, the Authority and the City entered into a cooperation agreement in connection with the Phase One Project (the "Phase One Project Cooperation Agreement "). Pursuant to such agreement, the City and the Authority have agreed, subject to the City Charter and applicable laws, to cooperate in the undertaking of the Phase One Plan. Under the agreement, the Authority has agreed to purchase the property comprising the Phase One Project Area, and, as agent for the City, to finance and construct a convention center and parking facilities within the Phase One Project Area. The purchase price of the property is to be $1.8 million or, if bonds issued by the Authority are insufficient to pay this amount, such lesser amount agreed to by the Authority and the -34- City. After construction, the Authority will retain title of such facilities and will provide for the management of the facilities. The Authority has further agreed to issue bonds sufficient to finance the Phase One Project and to seek one or more redevelopers to construct the private improvements contemplated by the Phase One Plan, consisting of a hotel and office building. The private improvements, as well as the construction and installation of the public improvements, will be undertaken by such redeveloper or redevelopers pursuant to development agreements with the Authority (the "Development Agreements "). The Authority entered into a Development Agreement with the developers of the West Plains Energy building; that Development Agreement terminated in July 1989. No Development Agreements are in effect as of the date of this Official Statement. The Authority expects to enter into negotiations toward a Development Agreement with a nationally recognized developer for the construction of the private facilities contemplated by the Phase One Plan. These facilities would include a hotel with approximately 183 rooms and associated facilities. If the Development Agreement is executed, the hotel facilities would be located next to (and possibly connected with) the publicly owned convention center. However, there is no guarantee that the Authority will reach a Development Agreement with a developer or that all of the conditions in any such Development Agreement will be met. Accordingly, there can be no assurance that a hotel will be constructed within the Phase One Project Area in the foreseeable future. Pursuant to the Cooperation Agreement, the City has agreed to cooperate with the Authority in the extension of utilities, the rezoning of properties, the vacating of streets and alleys, and the provision of City services and personnel. Further, the City has agreed to assist the Authority by pursuing lawful procedures and remedies in collecting any revenues for which it is responsible and which are pledged to the payment of debt service on bonds of the Authority. Availability of Services Development within the Phase One Project Area will be dependent upon the availability of utilities, services, and facilities. The City is a full service city providing a variety of services to residents including water and sewer service, police and fire protection, a municipal court system, street and road maintenance, and parks and recreation facilities throughout the City. According to Authority officials, no problems are anticipated in the delivery of such services to the Phase One Project Area; however, certain infrastructure improvements will be required including the relocation and upgrading of water and sewer lines at an estimated cost of $500,000. It is expected that this cost will be paid from Bond proceeds. Other facilities and services such as public transportation, public schools, hospital, telephone, and power utilities are readily available to the Phase One Project Area. -35- Methods of Financing Urban Renewal Activities Pursuant to authority granted by the Act, any urban renewal plan may contain a provision that ad valorem property taxes levied after the effective date of the approval of the urban renewal plan upon taxable property within the urban renewal area, or that municipal sales taxes collected within the urban renewal area, or both such taxes, will be divided for a period not to exceed 25 years after the effective date of the approval of such plan between the Authority and the taxing entities. Accordingly, the Incremental Tax Revenues are available to the Authority only through the year 2011. When collected, the amount allocable to the Authority, if any, is paid into the Tax Increment Fund, a special fund of the Authority to pay the principal of, interest on, and any premiums of bonds of, loans or advances to, or other indebtedness incurred by the Authority for financing or refinancing an urban renewal project within the urban renewal area. When such bonds, loans, advances, and indebtedness, if any, have been paid, all ad valorem property taxes or municipal sales tax collections or both, in the urban renewal area will be paid in the funds of the respective public bodies. As provided in the Phase One Plan, the Authority has pledged both property tax increment revenues and sales tax increment revenues (collectively, the "Incremental Tax Revenues ") from the Phase One Project Area to secure the payment of debt service on the Bonds. See "SOURCES FOR PAYMENT OF DEBT SERVICE" for a discussion of the Incremental Tax Revenues. Project Area Map Set forth below is a map of the Project Area. -36- CPT r' , I ss I M n a ll rfYtlfrYi mss is �s FT ~ a Ec S V \ J �, V r ` 1: I - Fc��] L � N t ®� �] Lr I �® Vic t OMA AVE olvcn St � 'r 0 C3 �I + I I� f f� URBAN RENEWAL AREA BOUNDARIES �••s�•�•�•un +f +� 1�'�� AMENDED PHASE I +' +, ,i� PROJECT CONVENTION + +,, ��••�' HOTEL •r•••`` �f ••�` CENTER SITE � +�•• MAP 1 DOWNTOWN URBAN RENEWAL AREA CITY OF PUEBLO, COLORADO '°° NO 'K° DEPARTMENT OF PLANNING AND DEVELOPMENT -37- AUTHORITY FINANCIAL INFORMATION Budgetary Process and Financial Statements The bylaws of the Authority require that the secretary of the Board prepare and submit to the Board an annual budget for the operation of the Authority and cause the books and accounts of the Authority to be audited annually. However, the City currently performs all general administration on behalf of the Authority. See "THE AUTHORITY -- Governing Board." The Authority covenants in the Indenture to at all times keep, or cause to be kept, proper and current books, records, and accounts in which complete and accurate entries are to be made of all transactions relating to the Pledged Revenues, and to prepare or cause to be prepared within 150 days after the close of each fiscal year a complete financial statement or statements for such year in reasonable detail covering the Pledged Revenues, certified by a certified public accountant or firm of certified public accountants selected by the Authority. Such financial statements may be combined with the financial statements of the City. See "AUTHORITY FINANCIAL INFORMATION -- History of Authority Revenues and Expenditures." History of Authority Revenues and Expenditures Set forth below is certain financial information relating to the Authority's revenues and expenditures for the five years ended December 31, 1993. The City has oversight responsibility for the operations of the Authority, and therefore the Authority's audited financial statements are included in the City's comprehensive annual financial reports as part of the City's capital projects and debt service funds. 51-11 Revenues Taxes Interest Miscellaneous(1) Total revenues Expenditures Current: Programs and Projects Capital Outlay Debt Service (Interest) Total expenditures Excess (deficiency) of revenues over expenditures Fund Balance - January 1(2) IM 1 99 1 M -- — -- -- $34,566 $790,399 $721,375 $676,127 $671,019 628,279 46.650 29,495 46.424 19.810 14.621 836,899 750,870 722,551 690,829 697,466 $51,568 $19,380 $52,800 $26,955 $10,986 607.500 721.375 693.391 646.750 646.750 659.068 740,7 746.191 673.705 719.655 177.831 10.115 (23.640) 17.124 (21.189) 10.039.908 10.217.739 10.227.854 10.204.214 10.221.338 Fund Balance - December 31(2) $10 17 7 $ 254 $1Q.22 $ 1U.22�1 338 $ 1Q,� 0 (1) Includes receipts of property tax revenues tmtil 1993. See "AUTHORITY FINANCIAL INFORMATION— Property Tax Collections." (2) Includes $9,950,000 of proceeds of the 1986A Bonds and accrued interest thereon in the escrow fund for the 1986A Bonds. Sources: City of Pueblo Comprehensive Annual Financial Reports, 1988 -1993. Power of Authority to Incur Obligations In order to finance urban renewal activities, the Authority is authorized by the Act to issue general obligation bonds to which the full faith, credit, and assets (acquired and to be acquired) of the Authority are irrevocably pledged; and special obligations payable solely from and secured by a pledge of any income, proceeds, revenues, or funds of the Authority derived or held by it in connection with the undertaking of any activity of the Authority, including the proceeds of property tax increment financing and sales tax increment financing. Obligations of the Authority are authorized by resolution of the Board which is irrepealable while the obligations are outstanding. The following information provided by the Authority as to other sources from which obligations of the Authority may be payable is presented to afford a more comprehensive summary of the overall financial operations of the Authority, but should not be construed as implying that such sources of revenue have been pledged to the payment of the Bonds or that such sources may be legally available for such payments. The Plan provides that the Authority may utilize sales tax increment financing as an additional source of revenues for urban renewal activities. The Authority receives no sales tax increment revenues at present; any such future sales tax revenues are pledged to pay debt service on -39- the Bonds. This financing mechanism allows the Authority to receive the portion of sales tax revenues collected in the Project Area which is in excess of sales tax revenues collected in the Project Area as of the effective date of the Plan. The Authority also has the power to issue special obligations payable from and secured by the pledge of any loans, grants, or contributions of funds made by the federal government or other source; and contingent special obligations payable solely from funds available to the Authority for the undertaking of the particular project, but payable only in the event such funds are or become available. Any of the foregoing obligations, except contingent special obligations, may be additionally secured by a mortgage of any urban renewal project or any part thereof, title to which is in the Authority, or of any other real or personal property or interests owned or to be acquired by the Authority. Outstanding Obligations As of the date of this Official Statement, the Authority has $9,950,000 aggregate principal amount of 1986A Bonds in escrow. On August 15, 1994, the escrow will dissolve, and all of the 1986A Bonds will be paid from the proceeds on deposit in the escrow account. The issuance of the Bonds will be considered a refunding of $7,275,000 of the 1986A Bonds and the issuance of the 1994B Bonds will be considered a refunding of $2,225,000 of the 1986A Bonds. Accordingly, upon issuance of the Bonds, it is expected that the Authority's outstanding obligations will consist of the Bonds and the 1994B Bonds. See "DEBT SERVICE REQUIREMENTS." Mill Levies in the Phase One Project Area Owners of property within the Project Area boundaries are obligated to pay taxes to various taxing entities in which their property is located. The County Assessor's office reports that there are five entities currently overlapping the Project Area. The following chart is a sample mill levy that may be imposed on certain property within the Project Area. -40- Sample Mill Levy Affecting Property Owners Within the Project Area Taxing Entity 1993 Mill Leyy(l ) Pueblo County 29.999 City of Pueblo 17.100 Pueblo Regional Library 3.509 School District 60 40.139 South East Water Conservancy District .969 TOTAL 91.716 (1) One mill equals 1 /10 of one percent. Mill levies certified in 1993 will be for the collection of property taxes in 1994. Source: Pueblo County Assessor's Office, Abstract of Assessment, 1993. Overlapping Debt Taxing jurisdictions within or overlapping the Project Area are authorized to incur general obligation debt and levy ad valorem property taxes for repayment of such debt within boundaries which overlap or partially overlap the boundaries of the Project Area as described in "Property Tax Increment Revenues" above. The following chart sets forth the total estimated portion of such outstanding debt chargeable to properties within the Phase One Project Area as of July 21, 1994. The estimated amounts set forth in the chart do not constitute obligations of the Authority, but rather represent obligations of the respective taxing jurisdictions to levy and collect ad valorem property taxes from property owners within their boundaries for the repayment of such debt. -41- Estimated Overlapping_ General Obligation Debt Estimated Portion of Outstanding Debt Attributable to Property 1993 General Within the Project Area(3) Total Assessed Obligation Overlapping Entity(1) Valuation(2) Debt Percentage Amount City of Pueblo $368,568,940 $12,415,000 0.05% $ 7,214.50 Pueblo County $606,949,250 $785,800 0.03 23.574.00 TOTAL OVERLAPPING DEBT $ 03 .788.50 (1) The following entities also overlap the Project Area but have no outstanding general obligation debt: Pueblo Regional Library District, Pueblo School District No. 60 and South East Water Conservancy District. (2) The 1993 assessed valuation figures were certified by the Pueblo County Assessor for the collection of ad valorem property taxes in 1994. (3) The percentage of each entity's outstanding debt attributable to the property within the Project Area is calculated by determining the proportionate amount of that entity that overlaps the Project Area and dividing the 1993 assessed valuation of the portion overlapping the Project Area by the total assessed valuation of such overlapping entity. The dollar amount attributable to the Project Area is calculated by multiplying the attributable percentage by the outstanding general obligation debt of the overlapping entity. (4) All of the City's general obligation debt is self - supporting; accordingly none of the $21,955,000 is attributable to the Project Area. Sources: Pueblo County Assessor's Office and individual entities. Property Tax Collections Set forth below is a five -year history of ad valorem property tax collections for the Authority: INTiMME Source: Pueblo County Treasurer's Office; Urban Renewal Authority of Pueblo, Colorado. -42- Total Tax Collections as Levy Collection Total a % of Tax Year Year Taxes Levied Levied 1989 1990 $23,338.32 100% 1990 1991 23,085.16 100 1991 1992 42,230.64 100 1992 1993 42,230.64 100 1993 1994 42,908.42 100 Source: Pueblo County Treasurer's Office; Urban Renewal Authority of Pueblo, Colorado. -42- PROPERTY TAXATION AND ASSESSED VALUATION Ad Valorem Property Taxes Prropuly Saject to Taxation - Both real and personal property are subject to taxation, but there are certain classes of property which are exempt. These include, but are not limited to, property of the United States of America; property of the State and its political subdivisions; public libraries; public school property; certain charitable property not used for profit; health care facilities; non - profit water companies; licensed, non -profit child care facilities; religious property; non -profit cemeteries; irrigation ditches, canals, and flumes used exclusively to irrigate the owner's land; household furnishings and personal effects not used to produce income; property used by a fraternal or veterans' organization; intangible personal property; and inventories of merchandise and materials, and supplies which are held for consumption by a business or are held primarily for sale; livestock; agricultural, and livestock products; agricultural equipment which is used on the farm or ranch in the production of agricultural products; and works of art on loan to a political subdivision, gallery or museum operated by a charitable organization. The State Board of Equalization supervises the administration of all laws concerning the valuation and assessment of taxable property and the levying of property taxes. Assessment of Proprty - The county assessor annually conducts appraisals in order to determine, on the basis of statutorily specified approaches, the statutory "actual" value of all taxable property within the county as of January 1 st. The statutory actual value of a property is not intended to represent current market value, but, with certain exceptions, is determined from a "base year" level of value and from manuals and associated data published by the State Property Tax Administrator for the base year. The statutory actual value for levy years 1989 and 1990 was based on the level of value for the period of one and one -half years immediately prior to July 1, 1988; and, for levy years 1991 and 1992 the level of value was the period of one and one -half years immediately prior to July 1, 1990. For levy years 1993 and 1994 the level of value has been and will be the period of one and one -half years immediately prior to July 1, 1992. The base year level of value will then advance every two years until the property tax year which commences January 1, 1997; the base year level of value will then advance one year annually. Oil and gas leaseholds and lands, producing mines and other lands producing nonmetallic minerals are valued based on production levels rather than by the base year method. The following table sets forth the State Property Appraisal System for property tax levy years 1991 through 1998: -43- Collection Levy Value Based on the Year Year Calculated As Of Market Period 1992 1991 July 1, 1990 Jan. 1, 1989 to June 30, 1990 1993 1992 July 1, 1990 Jan. 1, 1989 to June 30, 1990 1994 1993 July 1, 1992 Jan. 1, 1991 to June 30, 1992 1995 1994 July 1, 1992 Jan. 1, 1991 to June 30, 1992 1996 1995 July 1, 1994 Jan. 1, 1993 to June 30, 1994 1997 1996 July 1, 1994 Jan. 1, 1993 to June 30, 1994 1998 1997 July 1, 1996 Jan. 1, 1995 to June 30, 1996 1999 1998 July 1, 1997 July 1, 1996 to June 30, 1997 Assessed valuation, which represents the value upon which ad valorem property taxes are levied, is calculated by the county assessor as a percentage of statutory actual value. Colorado law required that residential real property and mobile home parks generally be assessed at 15% of statutory actual value for the 1989 and 1990 levy years, and effective for the 1991 levy year the percentage for determining the assessment of residential real property and mobile homes was reduced from 15% to 14.34% of statutory actual value. Such assessment rate has been further reduced from 14.34% to 12.86% of statutory actual value for the 1993 levy year. All other taxable property, with certain specified exceptions, is assessed at 29% of statutory actual value. Vacant land (other than agricultural land) which includes land upon which no buildings, structures or fixtures are located, but may include land with site improvements, is assessed at 29% of statutory actual value. To avoid extraordinary increases in residential real property taxes when the base year level of value is changed, the Colorado General Assembly is required by law to adjust the ratio of valuation for assessment of such residential property for each year in which a change in the base year level of value occurs based on an estimated target percentage. Such adjustment is constitutionally mandated to maintain the same percentage of the aggregate statewide valuation for assessment attributable to residential property which existed in the previous year, provided, however, Article X, Section 20, of the Colorado Constitution prohibits any valuation for assessment ratio increase for a property class without prior voter approval. Property owners are notified of the valuation of their land or improvements, or taxable personal property and certain other information related to the amount of property taxes levied, in accordance with certain statutory deadlines. Property owners are given the opportunity to object to increases in the actual value of such property, and may petition for a hearing thereon before the board of assessment appeals. Upon the conclusion of such hearings, the county assessor is required to complete the assessment roll of all taxable property, no later than August 25th each year, to prepare an abstract of assessment therefrom. The abstract of assessment and certain other required information is reviewed by the State Property Tax Administrator prior to October 15th of each year and, if necessary, the State Board of Equalization orders the county assessor to correct assessments. The valuation of property is subject to further review during various stages of the -44- assessment process at the request of the property owner, by the board of assessment appeals, the State courts or by arbitrators appointed by the Board of County Commissioners. On the report of an erroneous assessment, an abatement or refund may be made. Abatements or refunds of taxes are not made unless a petition therefor is filed within two years after January 1 of the year following the year in which the taxes were levied. Rebated or abated taxes are prorated among all taxing jurisdictions which levied a tax against the subject property. The assessed valuation of property within the Authority is required to be certified by the county assessor no later than August 25th each year. The Colorado General Assembly is required to cause a valuation for assessment study to be conducted each year in order to ascertain whether or not county assessors, statewide, have complied with constitutional and statutory provisions in determining statutory actual and assessed valuations for that year. The final study, including findings and conclusions, must be submitted to the Colorado General Assembly and the State Board of Equalization by September 15th of the year in which the study is conducted. Subsequently, the State Board of Equalization may order a county to conduct reappraisals and revaluations during the following levy year. Therefore, the Authority's assessed valuation may be subject to modification following any such annual assessment study. Taxation Procedure - Subject to the possible limitations of Article X, Section 20, of the Colorado Constitution (described under the caption "CONSTITUTIONAL LIMITATIONS "), based upon the valuation certified by the county assessor, the Board computes a rate of levy which, when levied upon every dollar of the valuation for assessment of taxable property within the Authority, and together with other legally available revenues, will raise the amount required in the upcoming fiscal year. The District subsequently certifies to the Board of County Commissioners the rate of levy sufficient to produce the needed funds. Such certification must be made no later than December 15th of the levy year for collection of taxes in the ensuing year. The Board of County Commissioners levies the tax on all taxable property within the District. By December 22nd of each year, the Board of County Commissioners must certify to the county assessor the levy for all taxing entities within the County. If the Board of County Commissioners fail to make such certification, it is the duty of the county assessor to extend the levies of the previous year. Further revisions to the assessed valuation of property may occur prior to the final step in the taxing procedure, which is the delivery by the county assessor of the tax list and warrant to the county treasurer for collection of the taxes. Tax levies may be adjusted again to ensure compliance with § 29 -1 -301 of Colorado Revised Statutes before the county treasurer sends tax bills to property owners for collection of taxes. Property Tax Collections - Taxes levied in one year are collected in the succeeding year. Thus, taxes certified in 1993 are being collected in 1994. Taxes are due on January 1 st in the year of collection; however, they may be paid in either one installment (not later than the last day of April) or in two equal installments (not later than the last day of February and June 15th) without interest or penalty. If the first installment is not paid on or before the last day of February, then interest accrues on the unpaid first installment at the rate of 1 % per month from March 1 st until the -45- date of payment unless the whole amount is paid by April 30th. If the second installment is not paid by June 15th, the unpaid installment will bear interest at the rate of I% per month from June 16th until the payment date. Notwithstanding the foregoing, if the full amount of taxes is to be paid in a single payment on or before the last day of April and is not so paid, the unpaid taxes will bear penalty interest at the rate of 1% per month accruing from the first day of May until the date of payment. The county treasurer collects current and delinquent property taxes, as well as any interest or penalty, and after deducting the statutory fee for such collection, remit the balance to the Authority on a monthly basis. The payments to each taxing entity must be made by the tenth of each month, and shall include all taxes collected through the fifth of the month. All taxes levied on property, together with interest thereon and penalties for default, as well as all other costs of collection, constitute a perpetual lien on and against the property taxed from January 1 st of the levy year until paid. Such lien is on a parity with the tax liens of other general taxes. It is the county treasurer's duty to enforce the collection of delinquent real property taxes by tax sale of such realty. Delinquent personal property taxes are enforceable by distraint, seizure and sale of the taxpayer's personal property. Tax sales of real property are held on or before the second Monday in December of the collection year, preceded by a notice of delinquency to the taxpayer and a minimum of four weeks of public notice of the impending public sale. Sales of personal property may be held at any time after October 1 st of the collection year following notice of delinquency and public notice of sale. There can be no assurance, however, that the value of property sold, in the event of foreclosure and sale by the county treasurer, would be sufficient to produce the amount required with respect to taxes levied by the Authority, taxes levied by overlapping taxing entities, as well as any interest or costs due thereon. Further, there can be no assurance that the property will be bid on and sold. If the property is not sold, then the county treasurer will remove the property from the tax rolls. Delinquent taxes are payable when the property is sold or redeemed. Property Tax Limitations - State law provides that taxes levied by counties, all cities and towns (not chartered as home rule) and various other special districts established by law, may not produce revenues greater than 105.5% of the revenues raised in the prior year (less the amount of revenue received by the taxing entity in the preceding year as taxes paid on any taxable property which had previously been omitted from the assessment roll of any year). In computing this limit, the increased assessed valuation attributable to new improvements constructed on property is excluded. Taxes levied to provide for the payment of principal of or interest on bonds or for the payment of certain other contractual obligations are not subject to such limitations. Counties, cities and towns may exceed such limits for certain one -time capital expenditures. If assessed valuation of jurisdictions subject to the ceilings increases, it may be necessary for such jurisdictions to decrease their tax rates in order to avoid violating the 105.5% revenue limitations. Such limitation does not apply to home rule cities and towns. -46- THEINDENTURE The following is a summary of certain provisions of the Indenture and is qualified in its entirety by reference to the Indenture. All capitalized terms used herein have the meanings assigned to them in the Indenture. For a description of certain other provisions of the Indenture, see "THE BONDS." Definitions "Additional Debt" means any note, bond, interim certificate or receipt, temporary note, certificate of indebtedness, debenture or other obligation issued by the Authority pursuant to the Indenture and having a claim upon the Trust Estate on a parity with the Bonds. " AMBAC Indemnity" or "Insurer" means AMBAC Indemnity Corporation, a Wisconsin - domiciled stock insurance company. "Authority Representative" means the Person at the time designated to act on behalf of the Authority by written certificate furnished to the Trustee containing the specimen signature of such Person and signed on behalf of the Authority by its duly authorized agent. Such certificate may designate an alternate or alternates. "Average Annual Debt Service" means for each Fiscal Year, the average annual Debt Service Requirement for the Parity Bonds from time to time Outstanding. "Bond Year" means the twelve (12) month period beginning on each August 15 and ending on August 14 of the following calendar year. "Bondholder" or "owner of the Bonds" means the Registered Owner of any Bond, as set forth on the records of the Bond Registrar pursuant to the Indenture. "City Sales Tax Revenue Fund" means the Trust Fund by that name established pursuant to the Indenture. "Code" means the Internal Revenue Code of 1986, as amended and the regulations, final, proposed and temporary, promulgated thereunder; any references herein to specific sections thereof shall be deemed to include any successor sections of a subsequent federal income tax statute or code. "Cooperation Agreements" means any one or more of the following as the context may require: (a) the Development Agreement; and -47- (b) the Cooperation Agreement, dated August 25, 1986 between the Authority and the City, and the Letters of Understanding from the Assessor and the Treasurer to the Authority, and any supplements or amendments thereto in accordance herewith. "Cost of Construction" shall mean all costs and expenses incurred in connection with the completion of the Phase One Project in accordance with the Phase One Plan and the Act, including but not limited to: (i) all costs which the Authority shall be required to pay, under the terms of any contract or contracts, for the acquisition, construction and completion of the Phase One Project, including all costs associated with the acquisition of real or personal property; (ii) obligations of the Authority incurred for labor, services and materials in connection with the acquisition, construction and completion of the Phase One Project, including reimbursement to the Authority or the City for all advances and payments made prior to or after delivery of the Bonds and the 1994B Bonds; (iii) the costs of performance or other bonds and any and all types of insurance that may be necessary or appropriate to have in effect during the course of construction of the Phase One Project; (iv) all costs of engineering, architectural, and other professional services, including the costs of the Authority for test borings, surveys, estimates, plans and specifications and preliminary investigations therefor, and for supervising construction, as well as for the performance of all other duties required by or consequent to the proper construction of the Phase One Project; (v) administrative costs and expenses, including, but not limited to, the fees and expenses of attorneys, accountants, appraisers, and financial and special consultants incurred in connection with the implementation of the Phase One Project; and (vi) any sums required to reimburse the City or any other Person for advances made by them for any of the above items or for any other costs incurred and for work done by them which are properly chargeable to the Phase One Project. "Debt Service Fund" means the Trust Fund by that name established pursuant to the Indenture. "Debt Service Requirement" means the aggregate amount of the principal of, premium, if any, and interest coming due on all Outstanding Bonds, Outstanding 1994B Bonds, Outstanding Additional Debt and an Outstanding Subordinate Debt during any Fiscal Year, whether by maturity, mandatory redemption, acceleration or otherwise. -48- "Developer" means one or more developers or redevelopers of real estate within the Phase One Project Area which may from time to time undertake such activity pursuant to one or more Development Agreements with the Authority, and the successors and assigns of such developers or redevelopers. "Developer Agreement" means one or more agreements from time to time entered into by the Authority with one or more developers and any agreements supplemental thereto entered into in accordance with the Indenture. "Expense Fund" means the Trust Fund by that name established pursuant to the Indenture. "Fiscal Year" means the fiscal year of the Authority, which currently begins on January 1 of each year and ends on December 31 of such year, or any other fiscal year of the Authority in the event the fiscal year of the Authority shall be modified. "Governmental Obligations" means direct general obligations of (including obligations issued or held in book -entry form on the books of) the Department of the Treasury of the United States of America. "Independent Counsel" means an attorney duly admitted to practice law before the highest court of any state and who is not a full -time employee, owner or director of the Authority, the City, a Developer or the Trustee. "Maximum Annual Debt Service" means, for any series of bonds, including the Bonds, the 1994B Bonds, Additional Debt and Subordinate Debt, the maximum annual scheduled Debt Service Requirement for such series of bonds during the period such bonds remain Outstanding. "Municipal Bond Insurance Policy" or "Policy" means the municipal bond insurance policy issued by the Insurer insuring the payment when due of the principal of an interest on the Bonds as provided therein. "Outstanding" or "Bonds Outstanding" means all Bonds which have been authenticated and delivered by the Trustee under the Indenture, except: (a) Bonds canceled after purchase in the open market or because of payment at or redemption prior to maturity; (b) Bonds paid or deemed to be paid in accordance with the provisions of the Indenture; and (c) Bonds in lieu of which others have been authenticated under the Indenture. -49- "Parity Bonds" means the Bonds and any Additional Debt issued under the Indenture. "Permitted Investments" means any of the following which at the time of investment are legal investments under the laws of the State for moneys proposed to be invested therein: (a) Governmental Obligations; or (b) obligations of any of the following federal agencies which obligations represent the full faith and credit of the United States of America, including: -- Export-Import Bank - -Farm Credit System Financial Assistance Corporation -- Farmers Home Administration -- General Services Administration - -U.S. Maritime Administration - -Small Business Administration -- Government National Mortgage Association (GNMA) - -U.S. Department of Housing & Urban Development (PHA's) -- Federal Housing Administration; (c) senior debt obligations rated "AAA" by Standard & Poor's Corporation ( "S &P ") and "Aaa" by Moody's Investors Service, Inc. ( "Moody's "), issued by the Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation; senior debt obligations of other government sponsored agencies must be approved by AMBAC Indemnity. (d) U.S. dollar denominated deposit accounts, federal funds and banker's acceptances with domestic commercial banks which have a rating on their short-term certificates of deposit on the date of purchase of "A -1" or "A -1 +" by S&P and "P -1" by Moody's and maturing no more than 360 days after the date of purchase where ratings on holding companies are not considered as the rating of the bank; (e) commercial paper which is rated at the time of purchase in the single highest classification, "A -1 +" by S &P and "P -1" by Moody's and which matures not more than 270 days after the date of purchase; (f) investments in a money market fund rated "AAAm" or "AAAm -G" or better by S &P; (g) pre - refunded municipal obligations defined as follows: -50- Any bonds or other obligations of any state of the United States of America or of any agency, instrumentality or local governmental unit of any such state which are not callable at the option of the obligor prior to maturity or as to which irrevocable instructions have been given by the obligor to call on the date specified in the notice; and (A) which are rated, based on the escrow, in the highest rating category of S &P and Moody's; or (B) (i) which are fully secured as to principal and interest and redemption premium, if any, by a fund consisting only of cash or obligations described in paragraph (a) above, which escrow may be applied only to the payment of such principal of and interest and redemption premium, if any, on such bonds or other obligations on the maturity date or dates thereof or the specified redemption date or dates pursuant to such irrevocable instructions, as appropriate, and (ii) which fund is sufficient, as verified by a nationally recognized independent certified public accountant, to pay principal of and interest and redemption premium, if any, on the Bonds or other obligations described in this paragraph on the maturity date or dates specified in the irrevocable instructions referred to above, as appropriate; (h) investment agreements approved in writing by AMBAC Indemnity, which writing is delivered to the Trustee, and is reasonably acceptable to the Trustee, with notice to S &P; and (i) other forms of investments (including repurchase agreements) permitted by applicable law and approved in writing by AMBAC Indemnity, which writing is delivered to the Trustee, with notice to S &P. "Person" means an individual, partnership, corporation, trust or unincorporated organization, or a government or agency, instrumentality, program, account, fund, political subdivision or corporation thereof. "Phase One Project" means undertakings and activities of the Authority for the elimination of blight and for the prevention of the development or the spread of slums and blight in accordance with the Phase One Plan and the Act, as generally described in Exhibit C to the Indenture. "Project Fund" means the Trust Fund by that name established pursuant to the Indenture. "Property Tax Base Amount" means $0 for the original Phase One Project Area and $49,910 for the additional Phase One Project Area added on January 28, 1988, or such other amount as shall be certified by the Assessor as the valuation for assessment of all taxable property within the Phase One Project Area last certified by the Assessor prior to the adoption of the Phase One Plan. -51- "Rebate Fund" means the Trust Fund by that name established pursuant to the Indenture. "Reserve Fund" means the Trust Fund by that name established pursuant to the Indenture, which Reserve Fund includes the Reserve Account for the Bonds (the "1994A Reserve Account "). "Reserve Fund Requirement" means, with respect to any series of bonds, including the Bonds, the 1994B Bonds and any Additional Debt, an amount equal to the least of (a) ten percent (10 %) of the principal amount of the bonds of such series, (b) the Maximum Annual Debt Service on the bonds of such series or (c) one hundred twenty -five percent (125 %) of Average Annual Debt Service on the bonds of such series. "Sales Tax" or "Sales Taxes" means the municipal sales tax established by the City as the same shall from time to time be in effect, pertaining to, including, without limitation, the sale, lease, rental, purchase or consumption of tangible personal property and taxable services, or any successor tax in the event that such taxes are replaced or superseded. "Sales Tax Base Amount" means $ -0- or such other amount as may be lawfully determined by the City to be the total collections of Sales Taxes within the Phase One Project Area for the twelve -month period immediately preceding the original adoption of the Phase One Plan. "Subordinate Debt" means any obligation issued or incurred by the Authority pursuant to the Indenture, and payable from the Trust Estate on a basis which is subordinate to the claim thereon which secures any Outstanding series of the Bonds or Additional Debt. "Subordinate Debt Fund" means the Trust Fund by that name established pursuant to the Indenture. "Supplemental Reserve Fund" means the Trust Fund by that name established pursuant to the Indenture, which Supplemental Reserve Fund includes the Supplemental Reserve Account for the Bonds (the "1994A Supplemental Reserve Account "). "Supplemental Reserve Fund Requirement" means the Average Annual Debt Service in any Fiscal Year for all Bonds, 1994B Bonds, Additional Debt and Subordinate Debt Outstanding. "Tax Increment Revenue Fund" means the Trust Fund by that name established pursuant to the Indenture. "Underwriter" means, with respect to the Bonds, Lewis, de Rozario & Co., Incorporated, or its successors, and, with respect to any Additional Debt, such purchaser or purchasers as the Authority may designate. -52- Creation of Funds Pursuant to the Indenture, the Authority will create and establish the following Trust Funds with respect to the Bonds with the Trustee; the Debt Service Fund; the City Sales Tax Revenue Fund; the Tax Increment Revenue Fund; the Reserve Fund, in which there will be established a Reserve Account for the Bonds; the Project Fund; the Rebate Fund; the Project Fund; the Expense Fund; the Supplemental Reserve Fund in which there will be established a Supplemental Reserve Account for the Bonds; and the Operations and Maintenance Fund. All Funds created by the Indenture will be held in the custody of the Trustee, but in the name of the Authority. Moneys and investments in each of the Trust funds will be used only and exclusively as provided in the Indenture. Use of Moneys in Funds and Accounts Debt Service Funds There shall be deposited in the Debt Service Fund (1) all accrued interest received, if any, at the time of issuance, sale and delivery of the Bonds, (2) all required transfers from the City Sales Tax Revenue Fund as specified in the Indenture, (3) all required transfers from the Tax Increment Revenue Fund pursuant to the Indenture, (4) all required transfers from the 1994A Reserve Account in the Reserve Fund pursuant to the Indenture, (5) all required transfers from the Supplemental Reserve Fund pursuant to the Indenture, and (6) all other moneys held or received by the Trustee under and pursuant to any of the provisions of the Indenture which are required or which are accompanied by directions not inconsistent with the provisions of the Indenture that such moneys are to be deposited in the Debt Service Fund, including, but not limited to, moneys which are deposited for payment of Additional Debt. Amounts on deposit in the Debt Service Fund shall be used solely to pay the Debt Service Requirement on the Bonds and Additional Debt as and when the same become due and/or for the purpose of redeeming the Bonds and Additional Debt in advance of their maturity in accordance with the Indenture. City Sales Tax Revenue Fund There shall be deposited in the City Sales Tax Revenue Fund, as and when received, and the City hereby agrees to deposit therein, all amounts constituting Pledged City Sales Tax Revenues. Amounts deposited in the City Sales Tax Revenue Fund shall be applied by the Trustee to the following purposes in the following order of priority on the last Business Day of each month in each Fiscal Year, commencing August 31, 1994: first, after credit for amounts already on deposit therein, there shall be transferred to the Debt Service Fund an amount equal to 1/4 of the amount of interest due on the Bonds on December 1, 1994, and thence each month thereafter, an amount equal to 1/6 of the amount of interest due on the Bonds on the next interest payment date plus 1/12 of the amount of principal due on the Bonds on the next December 1; second, there shall be transferred moneys to the 1994A Reserve Account of the Reserve Fund until the amount on deposit in the 1994A Reserve Account shall equal the appropriate Reserve Fund Requirement; third, -53- commencing in the month during which a certificate of occupancy is issued for the conference center which is part of the Phase One Project, an amount equal to $8,333 shall be transferred to the Operations and Maintenance Fund; fourth, after credit for amounts already on deposit therein, there shall be transferred into the debt service fund and the reserve account for the 1994B Bonds amounts required to be transferred pursuant to the Indenture; fifth, moneys shall be transferred pro rata according to the principal amount of Bonds and 1994B Bonds Outstanding, into the respective supplemental reserve accounts of the Supplemental Reserve Fund until the amount in each account equals the appropriate Supplemental Reserve Fund Requirement; sixth, moneys shall be transferred to the Subordinate Debt Fund to the extent necessary to pay principal of and interest on any Outstanding Subordinate Debt due on the next interest payment date for such Subordinate Debt, and seventh, any moneys remaining in the City Sales Tax Revenue Fund on each December 5 shall be returned to the City for any legal use. Tax Increment Revenue Fund There shall be deposited in the Tax Increment Revenue Fund, as and when received, all amounts constituting Pledged Property Tax Revenues, Pledged Authority Sales Tax Revenue, and income or other transfers from the Reserve Account for the Bonds, the 1994B Bond reserve account, the Supplemental Reserve Fund, and any other amounts deposited therein by the Authority. Amounts deposited in the Tax Increment Revenue Fund shall be applied by the Trustee to the following purposes in the following order of priority on the next to last Business Day of each month in each Fiscal Year, commencing August 30, 1994: first, after credit for amounts already on deposit therein, there shall be transferred to the Debt Service Fund an amount equal to 1/4 of the amount of interest due on the Bonds on December 1, 1994, and thence each month thereafter, an amount equal to 1/6 of the amount of interest due on the Bonds on the next interest payment date plus 1/12 of the amount of principal due on the Bonds on the next December l; second, there shall be transferred to the 1994A Reserve Account enough moneys so that the amount on deposit in the 1994A Reserve Account shall equal the appropriate Reserve Fund Requirement; third, after credit for amounts already on deposit therein there shall be transferred to the debt service fund and the reserve account for the 1994B Bonds the amounts required to be deposited therein pursuant to the Indenture; fourth, there shall be transferred pro rata according to the principal amount of Bonds and 1994B Bonds Outstanding, to the Supplemental Reserve Fund moneys until the amount on deposit in the 1994A Supplemental Reserve Fund shall equal the appropriate Supplemental Reserve Fund Requirement; and fifth, all remaining moneys shall be transferred to the Subordinate Debt Fund if any Subordinate Debt has been issued or, if no Subordinate Debt has been issued or to the extent that excess amounts exist in the Tax Increment Revenue Fund, the moneys shall be transferred to the Authority for any legal use in accordance with the Act. Notwithstanding the foregoing, not more than 25% of the combined debt service requirement of the Bonds and the 1994B Bonds shall be paid from Pledged Property Tax Revenues which accrue from any one Person. -54- Reserve Fund and Supplemental Reserve Fund In the event that five (5) days prior to any Bond payment date, the amount on deposit in the Debt Service Fund shall be less than the Debt Service Requirement for the Bonds coming due on such bond payment date, an amount equal to such deficiency shall be transferred first from the account of the Supplemental Reserve Fund established for the Bonds (to the extent available) and then, to the extent necessary, from the Reserve Account and the Supplemental Reserve Fund Account for the Bonds to the Debt Service Fund. The Trustee shall calculate the Reserve Fund Requirement for the 1994A Reserve Account and the 1994A Supplemental Account on the first business day succeeding each December 1 so long as any Bonds remain Outstanding. Any amounts on deposit in the Reserve Account for the Bonds in excess of the Reserve Fund Requirements shall be deposited in the Debt Service Fund. Amounts on deposit in the 1994A Reserve Account and the 1994A Supplemental Reserve Account may also be used for the purpose of redeeming the Bonds in whole, but not in part, in accordance with the Indenture. Project Fund Moneys in the Project Fund shall be disbursed by the Trustee to the Authority to pay the Cost of Construction, or to reimburse the City or the Authority for any Cost of Construction paid by the City or the Authority, upon receipt of a requisition signed by the Authority Representative (a) stating with respect to each disbursement to be made (i) the requisition number, (ii) the name and address of the Person to whom payment is due, (iii) the amount to be disbursed and (iv) that each obligation mentioned therein has been properly incurred, constitutes a Cost of Construction and is a proper charge against the Project Fund and has not been the basis of any previous disbursement; (b) specifying in reasonable detail the nature of the obligation; and (c) accompanied by a bill or statement of account for such obligation. All amounts on deposit in the Project Fund on the date a certificate is delivered by the Authority to the Trustee, certifying completion of the portion of the Phase One Project for which proceeds of the Bonds are available, shall be deposited in the Tax Increment Revenue Fund or, at the written direction of the authority, shall be applied proportionately to the redemption of the Bonds and the 1994B Bonds pursuant to the Indenture. Subordinate Debt Fund All amounts on deposit in the Subordinate Debt Fund shall be applied to the payment of any Subordinate Debt designated by the Authority in a written notice to the Trustee. Expense Fund Moneys on deposit in the Expense Fund shall be disbursed by the Trustee, at the direction of the Authority, to pay all costs incurred in connection with the issuance of the Bonds, including but not limited to the payment of the premium for the Policy, fees and expenses of the Underwriter, the Trustee and the Authority, as well as the fees and disbursements of bond counsel and underwriter's counsel, all printing and other expenses incurred in connection with the issuance of the Bond, including fees and expenses in connection with the printing of the Bonds and the Official Statement in connection therewith, fees and expenses of the Underwriter subsequent to the issuance of the Bonds, as well as any other costs and expenses of the Authority -55- incurred in connection with the Phase One Project and any reimbursement or other payment by the Authority to the City for funds advanced to the Authority by the City. Rebate Fund The Authority shall make deposits to and the Trustee shall make the disbursements from the Rebate Fund in accordance with the Investment Instructions, and the Trustee shall invest the Rebate Fundpursuant to said Investment Instructions and shall deposit income from said investments immediately upon receipt thereof in the Rebate Fund, all as set forth in the Investment Instructions. The Authority shall at the end of five (5) years from the date of issuance of the Bonds and each five (5) years thereafter make the rebate deposit described in the Investment Instructions. To the extent necessary, moneys shall be transferred by the Trustee into the Rebate Fund from the following funds in the order set forth in the Indenture. Operations and Maintenance Fund Subject to the requirements of the Indenture, moneys in the Operations and Maintenance Fund shall be disbursed to the Authority to pay operations and maintenance expenses of the Phase One Project, but only upon delivery to the Trustee of a requisition signed by the Authority Representative (a) stating with respect to each disbursement to be made (i) the requisition number, (ii) the name and address of the Person to whom payment is due, (iii) the amount to be disbursed and (iv) that each obligation mentioned therein has been properly incurred, and has not been the basis of any previous disbursement; (b) specifying in reasonable detail the nature of the obligation; and (c) accompanied by a bill or statement of account for such obligation. Additional Debt and Subordinate Debt So long as no event of default has occurred and is at the time continuing under the Indenture, Additional Debt may be issued for any lawful purpose of the Authority, provided, however, that so long as any Bonds are Outstanding, Additional Debt shall be issued solely for the purpose of (a) refunding all or any portion of any series of Outstanding Parity Bonds, (b) paying any cost or expenses of the Authority to be incurred in connection with the Phase One Project, (c) expanding the Phase One Project Area and the Phase One Project, or either of them and (d) paying costs of issuance, capitalizing interest, establishing one or more reserve funds or paying other costs incurred in connection with the issuance of any such Additional Debt. The Additional Debt of each such series shall be authenticated by the Trustee and, upon payment to the Trustee of the proceeds of said sale of such Additional Debt, such Additional Debt shall be delivered by the Trustee to or upon the order of the original purchaser thereof, but only upon there being filed with the Trustee, such original purchaser, the Underwriter and the Authority: (a) original, executed counterparts of an indenture supplemental to this Indenture and a resolution supplementing or amending the Bond Resolution in order to cause the issuance of Additional Debt; and establishing the date or dates of the Additional Debt, the rate or rates of interest on Additional Debt, the time or times of payment of the interest -56- thereon and the principal thereof, and the redemption provisions, if any, with respect thereto, which shall be as provided in the supplemental indenture, rather than as provided in this Indenture, and may differ from the provisions with respect to the Bonds set forth in this Indenture; provided, however, that the bond payment dates of each series of Additional Debt shall be the same as the bond payment dates for the Bonds then Outstanding, if any; (b) a written opinion by an attorney, or firm of attorneys, of nationally recognized standing on the subject of municipal bonds and acceptable to the Authority, the Underwriter, the original purchaser of the Additional Debt and the Trustee, to the effect that the issuance of the Additional Debt and the execution thereof have been duly authorized, all conditions precedent to delivery thereof have been fulfilled, and that the exclusion from gross income for federal income tax purposes of the interest on the Bonds and any Additional Debt theretofore issued will not be adversely affected by the issuance of the proposed Additional Debt; (c) a certificate of the Authority Representative to the effect that the proceeds of the proposed Additional Debt will be used for a permissible undertaking under this Indenture, the Phase One Plan and the Act; (d) an opinion from the City Attorney to the effect that the City has duly authorized the continued pledge of the Pledged City Sales Tax revenues or, if appropriate, has not rescinded the pledge already in effect of the Pledged City Sales Tax Revenues to the payment of the Bonds, including such Additional Debt; (e) a report of certified public accountants addressed to the Authority, the Trustee and the Underwriter establishing to the reasonable satisfaction of the Authority, the Trustee and the Underwriter that the Pledged Revenues deposited in the City Sales Tax Revenue Fund and the Tax Increment Revenue Fund during each of the past two (2) Fiscal Years, were at least one hundred thirty-five percent (135 %0) of the Maximum Annual Debt Service of the combination of (1) the Parity Bonds then Outstanding and (2) the Additional Debt proposed to be issued; provided, however, that any Parity Bonds to be refunded with the proceeds of any such Additional Debt shall be excluded for purposes of such calculation; and provided further, that for purposes of the calculation, "Pledged City Sales Tax Revenues" shall not include moneys derived from any of the City's sales taxes which, by the terms of the then current City ordinances, terminate prior to the final maturity of the proposed Additional Debt; and (f) a written order to the Trustee by the Authority to authenticate and deliver the Additional Debt to the original purchaser therein identified upon payment to the Trustee of a specified sum plus accrued interest. At such time as any Additional Debt shall be issued, the Authority shall deposit or cause to be deposited in a new, appropriate account within the Reserve Fund an amount sufficient -57- to make the amount on deposit in the new reserve account equal to the Reserve Fund Requirement for the series of such Additional Debt. Each series of Additional Debt issued pursuant to the Indenture shall be equally and ratably secured under this Indenture with the Bonds only and all other series of Additional Debt, if any, theretofore issued pursuant to the Indenture, without preference, priority or distinction of any such bonds over any other thereof, with such provisions as set forth in the Indenture. Notwithstanding anything contained in this Indenture to the contrary, the Authority may issue or incur Subordinate Debt from time to time as determined by the Authority without the consent of or notice to the Registered Owners of the Bonds at the time Outstanding or any other Person. Subordinate Debt shall have no claim for payment upon the Trust Estate except for such amounts, if any, as may be deposited in the Subordinate Debt Fund. Payment of such Subordinate Debt shall be subordinate to payment of the Bonds and all Additional Debt. Any such Subordinate Debt shall be issued by the Authority only upon the deposit into an appropriate reserve account of the appropriate Reserve Fund Requirement for such series of Subordinate Debt. Investment of Moneys Any moneys held as part of any Trust Fund shall be invested and reinvested by the Trustee in accordance with the provisions of the Indenture. Any such investments shall be held by or under the control of the Trustee. The Trustee shall sell and reduce to cash a sufficient amount of such investments whenever the cash balance in any Trust Fund is insufficient to make a required payment from such Trust Fund or upon the written direction of the Authority. Protection of Security and Rights of Bondholders; No Arbitrage; Use of Proceeds The Authority covenants and agrees to preserve and protect the security of the Bonds and the rights of the Registered Owners under the Indenture and to defend such rights under all claims and demands of all Persons. Without limiting the generality of the foregoing, the Authority covenants and agrees to contest or cause to be contested by court action or otherwise (a) any claim made in any action or proceeding to which the Authority is a party that the Act is unconstitutional or that the Pledged Revenues or Trust Funds pledged hereunder cannot be paid to or by the Authority for the debt service on the Bonds, or any other action affecting the validity of the Bonds or diluting the security therefor, and (b) any assertion by the United States of America or any department or agency thereof or any other Person that the interest received by the Bondholders is taxable under federal income tax laws. The Authority covenants and agrees to knowingly take no action which would result in (i) the Pledged Revenues being withheld from the Trustee, or (ii) the interest received by the Registered Owners becoming taxable under federal income tax laws. The Authority covenants to the Bondholders in the Indenture that it reasonably anticipates and expects that the proceeds of any Bonds will not be used in a manner as to cause the Bonds to be "arbitrage bonds" within the meaning of Section 148 of the Code, and applicable -58- regulations adopted thereunder by the Internal Revenue Service, and the Authority hereby assumes the obligation to comply with such Section 148 and such regulations throughout the term of the Bonds. The Authority represents, covenants and warrants to the Bondholders in the Indenture that the weighted average maturity of the Series 1994 Bonds does not and shall not exceed one hundred and twenty percent (120 %) of the average reasonably expected economic life of the Phase One Project. The Authority covenants in the Indenture not to allow twenty -five percent (25 %) or more of the Debt Service Requirements of the Series 1994 Bonds in any Fiscal Year to be secured or paid, directly or indirectly, by any Person other than a governmental unit. Examples of circumstances where payments will be considered to be so made are set out in the Indenture. The Authority further covenants that not more than five percent (5 %) of the gross proceeds of the Series 1994 Bonds will be used, directly or indirectly, to make or finance loans to Persons other than governmental units. The Authority hereby covenants not to allow twenty -five percent (25%) or more of the Debt Service Requirements of the Bonds and the 1994B Bonds in any Fiscal Year to be, directly or indirectly: (a) secured by any interest in property used or to be used in a private trade or business; (b) secured by any interest in payments in respective property used or to be used in a private trade or business; or (c) to be derived from payments in respective property, or borrowed money, used or to be used in a private trade or business. Property will be considered used in a private trade or business if used in a trade or business carried on by an entity other than a governmental unit or an organization which is described in Section 501(c)(3) of the Code and is exempt from taxation under Section 501(a) of the Code. An underlying arrangement to provide security for, or the source of, the payment of principal or interest on the Bonds and the 1994E Bonds may result from separate agreements between the parties or may be determination the basis of all of the facts and circumstances surrounding the issuance of the Bonds and the 1994B Bonds. The property which is the security for, or the source of, the payment of either the principal or interest on the Bonds and the 1994B Bonds need not be property acquired with the proceeds of the Bonds and the 1994B Bonds. For example, this covenant may be breached if the Bonds and the 1994B Bonds are secured by unimproved land or investment securities used, directly or indirectly, in any trade or business carried on by any private business user. Payments made by private business users do not include that portion of any payment that is properly allocable to ordinary and necessary expenses (within the meaning of Section 162 of the Code) directly attributable to the operation and -59- maintenance of the property financed with proceeds of the Bonds and the 1994B Bonds used by such person. In addition, incidental uses a facility financed with the proceeds of the Bonds and the 1994B Bonds will be disregarded to the extent that the proceeds applied to such incidental use do not exceed 2- 1 12%of the proceeds of the Bonds and the 1994B Bonds. Similarly, proceeds of the Bonds and the 1994B Bonds used to finance qualified improvements to governmentally -owned facilities (within the meaning of I.R.S. notice 87 -69) will not be treated as proceeds to be used for private business use. Other Covenants The Indenture contains other covenants by the Authority with respect to the Bonds and the Phase One Project. The Authority covenants that (a) it shall promptly pay the Debt Service Requirement on every Bond issued under the Indenture, (b) it will faithfully perform at all times any and all covenants, undertakings, stipulations and provisions set forth in the Indenture and (c) it will execute, acknowledge and deliver or cause to be done, executed, acknowledged and delivered, such indentures supplemental to the Indenture. In addition, the Authority agrees that it will keep proper and current books and records relating to the Phase One Project, the Phase One Plan, the Pledged Revenues, the Cooperation Agreements and the Trust Estate and will cause complete financial statements to be prepared within 150 days after the close of each fiscal year. The Authority agrees that it shall not request any disbursement from the Project Fund or the Operations and Maintenance Fund unless and until the City has consented, either specifically or generically, by resolution of the City Council to such appropriation or expenditure or to the annual budget or commitment, contract or agreement which obligates or permits such appropriation or expenditure. The Authority agrees that it will not enter into any commitment, contract or agreement with respect to or concerning the development, construction, operation or maintenance of all or any part of the Phase One Project or the Phase One Plan without the prior consent of the City by resolution of the City Council. Supplemental Indentures The Authority and the Trustee may, without consent of, or notice to, any of the Bondholders, enter into an indenture or indentures supplemental to the Indenture for any one or more of the following purposes: (a) to cure any ambiguity or formal defect or omission in the Indenture; (b) to grant to the Trustee additional rights and powers for the benefit of the Bondholders; (c) to subject to the Indenture additional revenues, properties or collateral; (d) to modify, amend or supplement the Indenture to permit the qualification of it under the Trust Indenture Act of 1939, as amended, or any similar federal statute or to permit qualification of the Bonds for sale under the securities laws of any of the states of the United States; (e) to provide for issuance of Additional Debt; (f) to evidence the appointment of a separate or co- Trustee under the Indenture or the succession of a new Trustee; or (g) to make any other amendment to the terms and provisions of the Indenture as, in the judgment of the Trustee, is not materially adverse to the interests of the registered owners of the Bonds. m Except for the above - described types of amendments, the registered owners of not less than two- thirds (2/3) in aggregate principal amount of the Outstanding Bonds will have the right, from time to time, to consent to and approve the execution by the Authority and the Trustee of supplemental indentures that may be deemed necessary or desirable by the Authority for the purpose of modifying, altering, amending, adding to or rescinding, in any particular, any of the terms or provisions set forth in the Indenture. However, no supplemental indenture may be entered into which will permit (a) an extension of the maturity of the principal of, or the interest on, any Bond, or (b) a reduction in the principal amount of, or any redemption premium on, any Bond or the rate of interest on any Bond, or (c) a privilege or priority of any Bond or Bonds over any other Bond or Bonds, or (d) a reduction in the aggregate principal amount of the Bonds required for consent to such supplemental indentures, or (e) the creation of any lien on the Trust Estate or any part thereof which is prior or superior to the lien of the Bonds, without the consent of the registered owners of all Bonds Outstanding. Any provision of this Indenture expressly recognizing or granting rights in or to AMBAC Indemnity may not be amended in any manner which affects the rights ofA MBA C Indemnity hereunder without the prior written consent of AMBAC Indemnity. Unless otherwise provided in this Section, AMBAC Indemnity's consent shall be required in addition to Bondholder consent, when required, for the following purposes: (i) execution and delivery of any supplemental Indenture or any amendment, supplement or change to or modification of the Indenture; (ii) removal of the Trustee or Paying Agent and selection and appointment of any successor trustee or paying agent; and (iii) initiation or approval of any action not described in (i) or (ii) above which requires Bondholder consent. Default and Remedies Events of Default. Under the Indenture, an Event of Default will exist whenever (a) there is a default in the due and punctual payment of interest on any Bond or any Additional Debt, (b) there is a default in the due and punctual payment of the principal or premium, if any, of any Parity Bond whether at the stated maturity thereof, or upon proceedings for prior redemption thereof, (c) there is a default in the due and punctual payment of the interest, principal or premium, if any, on the 1994B Bonds or Subordinate Debt whether at the stated maturity or upon prior redemption, (d) the Authority defaults in the performance or observance of any other of the covenants, agreements or conditions contained in the Indenture or in the Cooperation Agreement and fails to remedy the same after notice thereof has been given, or (e) the Authority or the City has filed a petition or answer under the federal bankruptcy laws or seeks reorganization; provided, however that any Event of Default under clause (c) above will not be considered an Event of Default for purposes of Parity Debt. During the continuation of an Event of Default, other than under clause (c) of the preceding paragraph, the Trustee may, and upon the written request of the Registered Owners of not less than twenty -five percent (25%) in aggregate principal amount of 1994A Bonds and -61- Additional Debt shall by notice in writing delivered to the Authority, declare the principal of all Outstanding Bonds and Additional Debt and the interest accrued thereon immediately due and payable, and such principal and interest shall thereupon become and be immediately due and payable. Other Remedies. Upon the occurrence of an event of default, the Trustee may pursue any available remedy at law or in equity to enforce the payment of the principal of, premium, if any and interest on the Outstanding Bonds. If an event of default shall have occurred and be continuing and if requested to do so by the registered owners of at least twenty -five percent (25 %) in aggregate principal amount of Outstanding Bonds, and upon indemnification as set forth in the Indenture, the Trustee is obligated to exercise such one or more of the rights and powers conferred by the Indenture as the Trustee shall deem most expedient in the interests of the registered owners of the Bonds. Any reorganization or liquidation plan with respect to the Authority must be acceptable to AMBAC Indemnity. In the event of any reorganization or liquidation, AMBAC Indemnity shall have the right to vote on behalf of all Registered Owners of Bonds absent a default by AMBAC Indemnity under the applicable Municipal Bond Insurance Policy insuring such Bonds. Anything in this Indenture to the contrary notwithstanding, upon the occurrence and continuance of an Event of Default as defined herein, AMBAC Indemnity shall be entitled to control and direct the enforcement of all rights and remedies granted to the Registered Owners of the Bonds or the Trustee for the benefit of the Registered Owners of the Bonds under this Indenture, including, without limitation: (i) the right to accelerate the principal of the Bonds as described in this Indenture, and (ii) the right to annul any declaration of acceleration, and AMBAC Indemnity shall also be entitled to approve all waivers of events of default. Defeasance When all principal of and interest due or to become due on the Bonds and all sums of money due or to become due to the Trustee have been duly paid, the pledge and lien of all obligations under the Indenture will be discharged and such issue will no longer be deemed to be outstanding within the meaning of the Indenture. Such due payment will be deemed to have been made when (a) the Authority has irrevocably set aside exclusively for such payment (i) moneys sufficient to make such payment, (ii) Government Obligations maturing as to principal and interest in such amounts and at such times as will insure the availability of sufficient moneys to make such payment, or (iii) a combination of such cash and Government Obligations, and (b) all necessary and proper fees, compensation and expenses of the Trustee pertaining to the Bonds with respect to which such deposit is made shall have been paid or the payment thereof provided for to the satisfaction of the Trustee. Notwithstanding anything herein to the contrary, in the event that the principal and/or interest due on the Bonds shall be paid by AMBAC Indemnity pursuant to the Municipal Bond Insurance Policy, the Bonds shall remain Outstanding for all purposes, not be defeased or -62- otherwise satisfied and not be considered paid by the Issuer, and the assignment and pledge of the Trust Estate and all covenants, agreements and other obligations of the Issuer to the registered owners shall continue to exist and shall run to the benefit of AMBAC Indemnity, and AMBAC Indemnity shall be subrogated to the rights of such registered owners. THE LOCAL ECONOMY The information presented under this heading is provided to give prospective investors an overview of the general economic conditions in and surrounding the Authority. Inclusion of information about the surrounding area does not imply that such information applies to the Authority. The information presented has been obtained from the sources indicated and represents the most current information available from such sources. The information presented under this heading is not to be relied upon as a representation or guarantee of the Authority. Population, Housing Units and Age Distribution The following chart sets forth certain comparative population data for the City, the County and the State of Colorado. Population City of Pueblo Pueblo County State of Colorado Total Percent Total Percent Total Percent Ye r Increase Populati Increase Po lnu ation Increase 1980 101,686 -- 125,972 -- 2,907,856 -- 1990 98,640 (3.08)% 123,051 (2.37)% 3,310,849 13.6% 1991 100,152 1.53 124,966 1.55 3,332,631 0.7 1992 100,242 0.08 125,077 0.08 3,365,756 1.0 1993 100,776 0.53 125,743 0.53 3,398,290 1.0 (1) 1991 through 1993 figures are estimates. Sources: State of Colorado, Department of Local Affairs, Division of Local Government. -63- The following table sets forth a comparative age distribution profile for the City, the County, the State of Colorado, and the United States populations as of December 31, 1992. Aize Distribution Pueblo Pueblo County Colorado U.S. 0 -17 26.4% 26.6% 26.4% 25.9% 18 -24 9.0 8.7 9.7 10.2 25 -34 14.3 14.1 17.6 16.4 35 -49 20.3 21.0 24.4 22.0 50 and Older 30.0 29.6 21.9 25.5 Source: Sales &:.Marketing Management Survey oY f Buying Power ower August 30, 1993. Income 'Me following two tables reflect Median Household Effective Buying Income ( "EBI ") for the years 198 &.through 1992, and also the percentage of households by EBI groups for 1992 as reported in Sales and Marketing Management: Annual Survey of Buying Power EBI, a classification developed by Sales and Marketing Management is personal income (defined below) less personal tax and nontax payments. Deductions are made for federal, state and local taxes, nontax paymentsssuch as fines and penalties, and personal contributions for social insurance. The resulting figure -is -- -known as "disposable personal income." -64- (1) The 1991 -92 Median Household EBI figures have been based on the 1994 United States Census Data, while figures for previous years were based on 1980 United States Census Data. The change in the benchmark population figures should be taken into account when comparing 1991 -92 figures with those from previous years. Source: Sales & Marketing Management Annual Survey of Being Power 1989 -1993. The following chart sets forth the percent of households, by EBI groups as of December 31, 1992. Percent of Households by City of Pueblo Groups Year Pueblo Count Colorado United States 1988 $17,553 $18,213 $24,375 $24,488 1989 19,116 19,850 26,370 25,976 1990 20,394 21,167 28,558 27,912 1991 22,527 23,527 32,129 32,073 1992(1) 22,617 23,627 32,758 33,178 (1) The 1991 -92 Median Household EBI figures have been based on the 1994 United States Census Data, while figures for previous years were based on 1980 United States Census Data. The change in the benchmark population figures should be taken into account when comparing 1991 -92 figures with those from previous years. Source: Sales & Marketing Management Annual Survey of Being Power 1989 -1993. The following chart sets forth the percent of households, by EBI groups as of December 31, 1992. Percent of Households by -65- Effective Bugg Income Groups City of Pueblo United Pueblo County Colorado States EBI Group Households Households Households Households Less than $10,000 21.4% 19.9% 11.3% 12.6% $10,000 - 19,999 23.0 22.3 16.9 16.4 $20,000 - 34,999 27.9 28.2 25.4 23.8 $35,000 - 49,999 15.2 16.2 19.6 18.9 $50,000 and Over 12.5 13.4 26.8 28.3 Source: Sales & Marketing Management 1993 Survey of Buying Power August 30, 1993. -65- The following chart shows annual per capita personal income levels of Pueblo County residents compared to statewide and nationwide averages. Annual Per Capita Personal Income (1) 1988 1989 1990 1991 19922 Pueblo County. $12,358 $13,240 $14,045 $14,977 15,863(l) Colorado 16,540 17,767 18,818 19,740 20,666 United States 16,610 17,690 18,567 19,163 20,105 Source: U.S. Department of Commerce, Regional Economic Information System, Bureau of Economic Analysis. Employment The following table, derived from information supplied by the Colorado Department of Labor and Employment, presents information on the employment within the County, the State, and the United States, for the period indicated. Labor Force and Percent Unemployed Source: State:of Colorado, Division of Employment and Training, Labor Market Information, Colorado Labor Force Review The following table sets forth the number of individuals employed within selected County industries which are covered by unemployment insurance. The largest employment sector .. County State United States Labor Percent Labor Percent Percent Year Fo= Unemployed Force Unemployed Unemployed 1989 49,334 1,695,000 5.8% 5.3% 1990 52,171 6.7 1,769,000 4.9 5.5 1991 51,830' 7.1 1,790,000 5.0 6.7 1992 52,112 8.8 1,828,000 5.9 7.4 1993 52,994 7.7 1,904,000 5.2 6.8 Month of February 1993 51,3.26 9.8 1,838,874 6.5 7.7 1994 54,84 8.7 1,937,144 6.4 6.5 Source: State:of Colorado, Division of Employment and Training, Labor Market Information, Colorado Labor Force Review The following table sets forth the number of individuals employed within selected County industries which are covered by unemployment insurance. The largest employment sector .. in the County is services, followed, in order, by government, retail trade and manufacturing. For the twelve -month period ended December 31, 1992, total average employment in the County increased 2.0% as compared to the same twelve -month period ending December 31, 1991, while total average wages increased by 3.4 %. s s. I M _ Agriculture, Forestry and Fisheries ..................... Mining ........................ Construction .................... Manufacturing .................. Transportation, Communication and Public Utilities ............. Wholesale Trade ................ Retail Trade .................... Finance, Insurance and Real Estate ................... Services ....................... Government .................... Total M M 122Q 1991 IM 251 293 289 294 349 33 17 21 40 26 1,747 1,756 1,872 1,925 1,994 4,707 5,031 5,707 5,555 5,348 1,506 1,669 1,711 1,721 1,621 1,126 1,124 1,140 1,204 1,192 8,919 8,883 9,288 9,263 9,452 1,664 1,732 1,683 1,664 1,623 9,539 10,154 11,563 11,517 12,180 .474 9,800 9,868 9.594 _9,448 �$�9 0.459 4 14 4 Source: State of Colorado, Department of Labor and Employment, Labor Market Information Section. -67- Retail Sales The following chart sets forth figures for gross retail sales (taxable and nontaxable) as reported for sales tax collections. Retail sales are calculated by subtracting sales to other licensed dealers for the purpose of resale (wholesale sales) from total receipts from all sales, both taxable and nontaxable (gross sales). Gross retail sales are defined by the State for its own purposes; gross retail sales are not intended to be, nor do they actually, reflect actual Sales Tax collections within the City. Gross Retail Sales -68- Percent Percent City of (Increase/ County of (Increase/ Year Pueblo De r a Pueblo Decrease 1989 $1,237,244,074 -- $1,312,388,373 -- 1990 1,234,158,303 (0.25)% 1,302,504,215 (0.76)% 1991 1,200,003,412 (2.77) 1,296,145,971 (0.49) 1992 1,296,470,521 8.03 1,389,938,282 7.23 1993 1,456,700,855 12.35 1,561,650,788 12.35 1994(1) 344,343,762 -- 372,461,191 -- (1) Figs reflects retail sales from June 1 through March 1994. Source: State_of Colorado, Department of Revenue. -68- Building Permit Activity The following chart shows historical building permit activity for new structures in the City. (1) Reflects permits issued from January 1 through June 30, 1994. Source: City of Pueblo, Regional Building Department. Foreclosure Activity As set forth in the table below, there was a material increase in the number of foreclosures filed in the County in 1987 and 1988. History of Foreclosures - Pueblo County Number of Percent Year Foreclosures Filed Increase (Decrease) 1989 420 -- 1990 312 (25.72)% 1991 281 (9.94) 1992 230 (18.15) 1993 142 (38.27) Source: Pueblo County Public Trustee. .• History of Building Activity for New Structures within the City Commercial _ Single Family Multi - Family Year Permits Value Units Value Units Value 1989 28 $7,980,120 69 $3,427,484 18 $ 668,582 1990 29 3,785,127 66 3,517,240 36 2,193,064 1991 25 4,520,971 60 3,307,625 46 1,608,870 1992 25 4,430,218 96 11,281,768 16 1,128,779 1993 36 8,308,018 128 14,297,198 19 3,651,167 1994(1) 17 17,346,041 86 9,026,382 25 2,294,267 (1) Reflects permits issued from January 1 through June 30, 1994. Source: City of Pueblo, Regional Building Department. Foreclosure Activity As set forth in the table below, there was a material increase in the number of foreclosures filed in the County in 1987 and 1988. History of Foreclosures - Pueblo County Number of Percent Year Foreclosures Filed Increase (Decrease) 1989 420 -- 1990 312 (25.72)% 1991 281 (9.94) 1992 230 (18.15) 1993 142 (38.27) Source: Pueblo County Public Trustee. .• Services Available to City Residents Police and Fire Protection The City police department and the Pueblo County sheriffs department provide City residents with police protection. Fire protection service also is provided by the City. Parks and Recreation Currently there are an estimated 110 parks within the County. Lake Pueblo State Park has 60 miles of shoreline for boating, fishing and swimming, while hiking and fishing can be found in the nearby San Isabel National Forest. Education The public school system is governed by two school districts with more than 22,500 students in 30 elementary, 11 middle and 6 high schools. School District 60 services students living within the city limits and School District 70 services students in Pueblo County. In addition to the public school system, Pueblo offers two institutions for higher education. Pueblo Community College ( "PCC ") is a two year vocational training school offering programs at the secondary, post - secondary and adult levels. PCC's courses lead to associate degrees or certificates of completion in diverse areas of study with a 1993 enrollment of 4,000 students. The University of Southern Colorado ( "USC ") is a regional university with a polytechnic emphasis. USC's four colleges offers 32 undergraduate and 6 graduate degree programs with a current enrollment of 4,500 students of which 3,940 are full -time students. Transportation Air service is provided by the Pueblo Airport which is served by United Express and Continental Express. Railroads serving Pueblo are the Santa Fe, Burlington Northern, and Denver and Rio Grande Western (freight service only). Bus service is provided by Texas-New Mexico and Oklahoma Coaches and Greyhound. Also available is the City bus service, Pueblo City Transportation, which offers a full schedule of busing routes throughout the City. City Cab Company provides Pueblo with taxi cab service. Other Services Electrical and gas service is provided by Public Service Company of Colorado, San - Isabel Electric and West Plains Energy. Telephone service is available through US West Communications, Inc. Pueblo water customers receive service from the City's Board of Water Works. The utility is operated by a staff of 118 employees. St. Mary Corwin Hospital is the major medical' facility located within the City. Development. Within the City Also in the planning stages is the estimated $9 million Historic Arkansas River Project which is- planned to transform a mile -long stretch of road into a river walk. As part of the project, shops,,restaurants, an outdoor theater, apartments and offices would border a man-made river and small lake. A walkingibike trail would run the length of the river. -70- Ground breaking ceremonies took place in February 1994 for the new $6.5 million 8,200 -seat coliseum at the Colorado State Fair. It will be the biggest indoor arena. between Denver and Albuquerque. The currently unnamed arena will hold approximately 8,000 people for concerts and half that for rodeos. The arena is anticipated to be completed by November of 1994. In addition, ongoing building projects in the City continue, such as construction of the Union Plaza senior apartments, a senior resource center and a host of other apartment renovations. CONSTITUTIONAL LIMITATIONS At the general election on November 3, 1992, the voters of Colorado approved a constitutional amendment which constitutes Article X, Section 20, of the Colorado Constitution (the "Amendment "). In general the Amendment provides that it was effective December 31, 1992, and restricts the ability of the State and local governments to increase revenues and spending and to impose taxes. The Amendment appears to apply to the State and all local governments ( "local governments "); however, it is unclear the extent to which the Amendment affects urban renewal authorities, such as the Authority. Enterprises, defined as government -owned businesses authorized to issue revenue bonds and receiving under 10% of annual revenue in grants from all state and local governments combined, are excluded from the provisions of the Amendment. Some provisions of the Amendment are unclear and will probably require judicial interpretation. The Amendment limits percentage increases in government spending and property tax revenues. The Amendment requires that district property tax revenues yield no more than the prior year's revenues adjusted for inflation, voter approved changes and local growth. As defined in the Amendment, "inflation" means the percentage change in the United States Bureau of Labor Statistics Consumer Price Index for Denver - Boulder, all items, all urban consumers, or its successor index. For a school district, "local growth" means the net change in its student enrollment. Pursuant to the Amendment, local government spending is limited by a similar formula, and State spending is limited by inflation plus the percentage change in State population in the prior calendar year. The initial bases for local government spending and revenue limits are 1992 fiscal year spending and 1991 property taxes collected in 1992. For each year after 1992, the bases for future. spending and revenue limits are the previous year's fiscal year spending and the property taxes for the year prior to the previous year which are collected in the previous year. Revenues collected in excess of permitted spending must be rebated unless the local government's voters approve an increase in spending. As discussed below, assuming revenues are available, debt service can be paid without regard to any spending limits. Debt service changes, reductions and voter - approved revenue changes are excluded from the calculation bases. Among other provisions, the Amendment requires local governments to establish emergency reserve funds. The reserve fund must consist of at least 1% of fiscal year spending in 1993, 2% in 1994, and 3% in each year thereafter. The Amendment allows local governments to -71- impose emergency taxes (other than property taxes) if certain conditions are met. Local governments are not allowed to use emergency reserves or taxes to compensate for economic conditions, revenue shortfalls, or district salary or benefit increases. The Amendment requires voter approval prior to imposing new taxes, increasing a tax rate, increasing a mill levy above that for the prior year, increasing a valuation of assessment ratio for a property class, extending an expiring tax, or implementing a tax policy change directly causing a net tax revenue gain to any district. The terms of the Amendment specify that this provision was effective November 4, 1992, although there is litigation (herein described) which asserts that the Amendment was not effective until after the 1992 mill levy was established. Except for bond refinancing at lower interest rates or adding employees to existing pension plans, the Amendment specifically prohibits the creation of multiple - fiscal year debt or indirect debt or other financial obligations without voter approval or without present cash reserves held for all future payments. Although it is not clear that the terms of the Amendment apply to the Authority, the City's electors approved the issuance of the Bonds at the Election. As described above, the Amendment generally requires a governmental entity to obtain voter approval for any increase in its property tax mill levy. However, a Colorado district court has ruled that it is possible to increase a mill levy to pay bonds which have been approved prior to the adoption of the Amendment. The district court's decision is being appealed. Elections to obtain voter approval may be held only in November. If the assessed valuation of taxable real property in the Authority should decline, the terms of the Amendment would cause the property tax revenues of the Authority to decrease unless an election was held in each of the overlapping taxing jurisdictions to increase property tax revenue. The Amendment also prohibits new or increased real property transfer tax rates, new State real property taxes and local government income taxes. The Amendment allows local governments to enact exemptions and credits to reduce or end business personal property taxes; provided, however, the local governments' spending is reduced by the amount saved by such action. With the exception of K -12 public education and federal programs, the Amendment also allows local governments (subject to certain notice and phase -out requirements) to reduce or end subsidies to any program delegated for administration by the general assembly; provided, however, the local governments' spending is reduced by the amount saved by such action. LITIGATION, SOVEREIGN IMMUNITY AND INSURANCE Litigation The Authority's attorney states that, except as previously described in this Official Statement, as of the date hereof, to the best of his knowledge, there is no pending or threatened litigation which would restrain or enjoin the issuance of the Bonds, the construction of the Project, -72- the collection of the Pledged City Sales Tax Revenues, collection of the Incremental Tax Revenues, or the performance of the Phase One Plan. It is the opinion of the City Attorney that, except as previously described in this Official Statement, as of the date hereof, no litigation before any court naming the City or the Authority as a party is pending or, to his knowledge, threatened in any way seeking to restrain or to enjoin the issuance, sale or delivery of the Bonds, the collection or application of the Pledged City Sales Tax Revenues or the pledge of the Pledged City Sales Tax Revenues to the payment of the Bonds. Sovereign Immunity The Colorado Governmental Immunity Act, Title 24, Article 10, Part 1, Colorado Revised Statues (the "Immunity Act "), provides that a political subdivision of the State, such as the Authority, may avail itself of the defense of sovereign immunity for actions in tort, except in certain circumstances. Under the Immunity Act, a political subdivision may not claim sovereign immunity and is liable for its acts, and those of its agents, for injuries resulting from, among other things: the operation of a non - emergency motor vehicle owned or leased by the political subdivision; the operation and maintenance of any public water, gas, sanitation, electrical, power, . or swimming facility; a "dangerous condition" of any public building or facility; or a "dangerous condition" which interferes with the movement of traffic on any public highway, road, street, or sidewalk within the political subdivision. For liability actions that are excepted from the defense of sovereign immunity, the Authority's exposure is limited to $150,000 for injury to any one person in any single occurrence, and $600,000 for injury to two or more persons in any single occurrence. The Authority may not be held liable for punitive or exemplary damages. The Authority may also be liable for the costs of defense, payment of judgments, and the settlement of claims against its public employees. Generally, the Authority is liable for injuries arising from an act or omission of a public employee occurring during the performance of his duties and within the scope of his employment, except when the defense of sovereign immunity is available to the Authority. However, certain exceptions, such as willful and wanton conduct by the employee, may limit the Authority's liability. The Authority 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 suits filed pursuant to 42 U.S.C. § 1983 alleging the deprivation of federal constitutional or statutory rights of an individual. -73- Insurance Coverage The City is insured as a member of the Colorado Intergovernmental Risk Sharing Agency ( "CIRSA "), a property and liability insurance pool established for Colorado municipalities on January 1, 1982. CIRSA provides liability coverage, including errors and omissions, property coverage and specific catastrophe coverage, which are renewable annually on January 1st. An actuarial estimate is made each year of claims expected and a "loss fund" is established in that amount. If the value of the loss fund is exceeded by claims submitted in any year, aggregate supplemental coverage takes effect. The City's insurance coverage is annually renewable with the current term ending December 31, 1994. The Authority is covered under the City's contract with CIRSA. In 1988, the City implemented a comprehensive program to manage its property, liability and work related injury risks. This program involved hiring a full time Risk Manager to perform active claims management, the retention of the first $150,000 of risk per occurrence for the property and liability insurance claims, the purchase of excess insurance coverage for claims resulting in losses greater than $150,000, and implementation of a safety program. TAX EXEMPTION In the opinion of Kutak Rock, Bond Counsel, to be delivered at the time of original issuance of the Bonds, under existing laws, regulations, rulings and judicial decisions, interest on the Bonds is not includible in gross income for federal or State of Colorado income tax purposes. 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 on obligations, such as the Bonds. The Authority has covenanted in the Resolution and in other documents to comply with certain guidelines designed to assure that interest on the Bonds will not become includible in gross income. Failure to comply with these covenants may result in interest on the Bonds being included in federal and Colorado 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 interest on the Bonds is not a specific preference item for purposes of the alternative minimum tax provisions set forth in the Internal Revenue Code of 1986, as amended (the "Code "), or for State of Colorado alternative minimum tax purposes; however, for certain corporations interest on the Bonds is included in the "adjusted current earnings" (i.e., alternative minimum taxable income as adjusted for certain items, including those items that would be included in the calculation of a corporation's earnings and profits under Subchapter C of the Code), 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 -74- 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 interest on the Bonds is excluded from gross income for federal income tax purposes, the accrual or receipt of interest on the Bonds may otherwise affect the federal income tax liability of the recipient. The 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, foreign corporations operating branches in the United States and corporations subject to the environmental tax imposed by Section 59A of the Code), property or casualty insurance companies, banks, thrifts or other financial institutions, or certain recipients of Social Security or Railroad Retirement benefits are advised to consult their tax advisors as to the tax consequences of purchasing or holding the Bonds. Bond Counsel is of the opinion that because the Authority has properly designated the Bonds as "qualified tax- exempt obligations" within the meaning of Section 265 of the Code, any banks, thrift institutions or other financial institutions owning the Bonds may be able to avoid the loss of 100% of any otherwise available interest deduction attributable to such institution's tax - exempt holdings. LEGAL MATTERS The validity and enforceability of the Bonds are to be approved by the law firm of Kutak Rock, Denver, Colorado, as Bond Counsel, whose approving opinion will be printed on the Bonds. Bond Counsel's opinion will state that the obligations of the Authority are subject to the reasonable exercise in the future by the State and its governmental bodies of the police power inherent in the sovereignty of the State and to the exercise by the United States of the powers delegated to it by the federal constitution. Certain legal matters also will be passed on by Sherman & Howard L.L.C., Denver, Colorado, as counsel to the Underwriter and by Paul C. Benedetti, Esq., as counsel to the Authority. RATINGS Standard & Poor's Rating Group, ( "Standard & Poor's "), Moody's Investors Service ( "Moody's ") and Fitch Investors Service ( "Fitch ") have assigned their municipal bond ratings of "AAA," "Aaa" "AAA," respectively to this issue of Bonds with the understanding that upon delivery of the Bonds, a policy insuring the payment when due of the principal of and interest on the Bonds will be issued by AMBAC Indemnity. Such ratings reflect only the views of the respective rating agencies. An explanation of the significance of such rating, if received, may be obtained from Standard & Poor's at the following address: 25 Broadway, New York, New York 10004; from -75- APPENDIX A AUDITED GENERAL PURPOSE FINANCIAL STATEMENTS OF THE CITY AS OF AND FOR THE YEAR ENDED DECEMBER 31,1993 A -1 McDONALD, HOLLIGAN & McPHERSON, INC. CERTIFIED PUBLIC ACCOUNTANTS SUITE 740, THATCHER BUILDING P. O. BOX 918 INDEPENDENT AUDITORS' REPORT City Council City of Pueblo, Colorado PUEBLO, COLORADO 81002 TELEPHONE 719 - 543 -0516 We have audited the accompanying general purpose financial statements of the City of Pueblo, Colorado as of December 31, 1993, and for the year then ended. These general purpose financial statements are the responsibility of the City of Pueblo, Colorado 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 .City of Pueblo, Colorado as of December 31, 1993, and the results of its operations and cash flows of its proprietary fund types for the year 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 combining, individual fund, account group financial statements and schedules listed in the table of contents are presented for purposes of additional analysis and are not a required part of the general purpose financial statements of the City of Pueblo, Colorado. Such information has been subjected to the auditing procedures applied in the audit of the general purpose financial statements and, in our opinion, is fairly presented in all material respects in relation to the general purpose financial statements taken as a whole. March 31, 1994 -1- GENERAL PURPOSE FINANCIAL STATEMENTS CITY OF PUEBLO, COLURADU COMBINED BALANCE SHEET ALL FUND TYPES AND ACCOUNT GROUPS DECEMBER 31, 1993 ASSETS AND OTHER DEBITS Cash and cash equivalents Investments Receivables - Taxes Accounts Special assessments Notes Allowance for uncol- lectible accounts Accrued interest Due from other funds Due from other govern- ments /agencies Inventories Prepaid items Property, plant and equipment, net Deferred issue costs Restricted assets Investment in risk pool Other debits - Amount available in debt service fund Amount to be provided for retirement of general long -term debt TOTAL ASSETS Governmental Fund Types Special Debt Capital General Revenue Service Proiects Proprietary Fund Types Enterprise $ 761,421 $ 50 $ - $ 2,211,901 $ 37,756 2,510,286 - 267,935 4,615,325 11,932,594 6,379,333 - - - - 243,385 72,321 - 7,580 550,090 - - 24,262 - - - 42,398 - 4,496,265 - ( 61,116) - - - ( 59,267) 47,310 - 5,885 71,645 172,540 4,123,678 1,081,928 - 373,088 591,508 - 3,608,238 - 632,949 143,969 89,163 - - - 306,129 36,561 - - - 11,539 - - - - 65,033,126 - - - - 614,049 - - - - 15,716,509 $ 14,130.021 $ 4.804 ,935 $ 298.082 $ 12.408,753 $ 95.050.542 , -2- Proprietary Fiduciary Fund Fund Types Types Trust internal and Service Aczency Account Groups General General Fixed bong -Term Assets Debt Totals - Memorandum Only - Primary Government Component Units Totals - Memorandum Only - Reporting Entity $ 300 $ 5 $ - $ - $ 3,011,433 $ 11,503 $ 3,022,936 - 4,420,235 - - 23,746,375 100,000 23,846,375 - - - - 6,379,333 - 6,379,333 - 25,294 - - 898,670 71,315 969,985 - - - - 24,262 - 24,262 240,000 2,248,590 - - 7,027,253 212,020 7,239,273 - (2,248,590) - - (2,368,973) - (2,368,973) - 40,669 - - 338,049 242,531 580,580 650,146 979,307 - - 7,799,655 - 7,799,655 - - - - 4,385,156 370,079 4,755,235 127,730 - - - 523,022. - 523,022 - - - - 48,100 - 48,100 58,235 - 106,960,795 - 172,052,156 629,712 172,681,868 - - - - 614,049 - 614,049 - - - - 15,716,509 9,950,138 25,666,647 801,995 - - - 801,995 - 801,995 - - - 216,960 216,960 - 216,960 20,450.483 20,450.483 20,450.483 $ 1,878.406 $ 5.465.510 $ 106.960,795 $ 20.667,443 $ 261.664,487 $ 11.587,298 $ 273,251,785 -2- CITY OF PUEBLO, COLORADO COMBINED BALANCE SHEET ALL FUND TYPES AND ACCOUNT GROUPS DE ER 31, 1993 Proprietar: Fund Governmental Fund Types Types Special Debt Capital General Revenue Service Proiects Enteroris�: LIABILITIES, EQUITIES AND OTHER CREDITS LIABILITIES Accounts payable $ 283,921 $ 269,396 $ - $ 438,068 $ 245,44-c Accrued compensated absences 150,000 - - - 574,615 Accrued expenses 118,035 - - - - Accrued interest payable - - - - 230,125 Payroll withholdings 525,749 - - - Deferred revenue 6,333,911 2,536,773 10,951 420,431 176,581 Due to other funds 3,360,034 716,717 70,171 510,765 2,113,746 Due to other entities 137,198 - - - - Deposits - - - - - General obligation bonds payable - - - - - Revenue bonds payable - - - - 13,410,000 Certificates of partici- pation payable - - - - 4,317,101; Capital leases payable - - - - - Special assessment bonds payable - - - - - Notes /other debt payable - - - - 59,376 Estimated claims payable - - - - - Bonds payable from restricted assets - - - - 15,955,000 Unamortized discount - - - - ( 203,7491 Deferred compensation benefits payable - - - - TOTAL LIABILITIES $ 10,908,848 $ 3.522.886 $ 81.122 $ 1.369.2.64 $ 36.878,23° EQUITY AND OTHER CREDITS Investment in general fixed assets $ - $ - $ - $ - $ - Contributed capital - - - - 48,797,769 Retained earnings - Unreserved (deficit) - - - - 9,374,534 Fund balances - Reserved for encumbrances 43,066 265,516 - 4,728,764 - Reserved under indenture of trust /escrow agreement - - - 596,000 - Reserved for operations and debt service - 62,708 216,960 - - Reserved for emergencies 247,901 - - 200,000 - Reserved for inventories 89,163 - - - - Reserved for prepaid expenses 36,561 - - - _ Reserved for notes receivable - - - 4,496,265 - Unreserved - Designated for subsequent years' expenditures 815,377 - - - _ Other designations 61,389 - - - _ Undesignated (deficit) 1.927.716 953.825 1,018.460 TOTAL EQUITY (DEFICIT) AND OTHER CREDITS $ 3,221,173 $ 1.282,049 $ _ 216.960 $ 11,039,489 $ 58,172,302 TOTAL LIABILITIES, EQUITIES AND OTHER CREDITS $ 14.130.021 $ _4 804 9?5 $ 298.082 $ 12.408,753 $ 95,050,542 The accompanying notes are an integral part of this statement. -3- Proprietary Fiduciary Fund Fund Types Tunes Trust Internal and Service Aaenmr Account Groups General General Fixed Long -Term Assets Debt Totals - Memorandum Only - Primary Government Totals - Memorandum Only - Reporting Entity $ 87,472 $ 4,918 $ - $ - $ 1,329,220 $ 48,605 $1,377,825 66,057 - - 3,954,129 4,744,801 - 4,744,801 - - - - 118,035 - 118,035 - - - - 230,125 - 230,125 - - - - 525,749 - 525,749 - 186,680 - - 9,665,327 486,013 10,151,340 246,138 782,084 - - 7,799,655 - 7,799,655 - - - - 137,198 - 137,198 - 787,654 - - 787,654 - 787,654 - - - 12,395,000 12,395,000 - 12,395,000 - - - - 13,410,000 - 13,410,000 - - - 2,905,000 7,222,100 - 7,222,100 - - - 244,380 244,380 - 244,380 - - - 20,000 20,000 - 20,000 - - - 1,148,934 1,208,310 - 1,208,310 1,007,451 - - - 1,007,451 - 1,007,451 - - - - 15,955,000 9,950,000 25,905,000 • - - - ( 203,749) - ( 203,749) 2,147,430 2,147,430 2,147,430 $ 1,407,118 $ 3,908,766 $ $ 20,667,443 $ 78,743,686 $ 10,484,61.8 $ 89,228,304 $ - $ - $106,960,795 $ 886,807 - - ( 415,519) - - 38,815 - 1,517,929 $ 471,288 $ 1,556,744 $ 106,960,795 $ $106,960,795 $ 49,684,576 8,959,015 5,076,161 596,000 - 279,668 - 447,901 - 89,163 - 36,561 - 4,496,265 Component Units 629,712 $107,590,507 - 49,684,576 - 8,959,015 - 5,076,161 - 596,000 - 279,668 - 447,901 - 89,163 - 36,561 - 4,496,265 815,377 - 815,377 61,389 - 61,389 _ 5,417,930 472,968 5,890,898 $ 182,920,801 $ 1,102,680 $ 184.023,481 $ 1,878,406 $ - S - ,4 6 5,.5 10 20 67 443 $ 106,960,795 $ , $ 261,664,487 $ 11,587,298 $ 273,251,785 -3- CITY OF PUEBLO, COLORADO COMBINED STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE ALL GOVERNMENTAL FUND TYPES AND EXPENDABLE TRUST FUNDS YEAR ENDED DECEMBER 31, 1993 REVENUES Governmental Fund Types Special General Revenue Taxes $34,251,562 $ - State and federal grants - 5,723,347 Licenses and permits 100,982 - Other agencies 815,444 583,070 Charges for services 205,158 - Fines and forfeits 560,099 - Interest i::come 127,032 - Project income - 40,118 Other 211,763 2,500 "TOTAL REVENUES $ 36,272,040 $ 6,349,035 EXPENDITURES Current - General government $ 3,787,287 $ - Public safety 15,363,067 - Parks and recreation 2,095,696 - Transportation 2,288,916 - Public works 2,976,653 - Programs and projects - 3,725,182 Insurance and contingencies 347,587 - Intergovernmental 1,565,497 - Other services and charges - - Capital outlay - 79,005 Debt service - Principal retirement - 220,000 Interest and fiscal charges - 41,782 TOTAL EXPENDITURES $ 28,424,703 $ 4,065,969 EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES OTHER FINANCING SOURCES (USES) Transfers from other funds Transfers to other funds TOTAL OTHER FINANCING SOURCES (USES) EXCESS (DEFICIENCY) OF REVENUES AND OTHER FINANCING SOURCES OVER EXPENDITURES AND OTHER FINANCING USES FUND BALANCE, JANUARY 1 RESIDUAL EQUITY TRANSFERS FUND BALANCE, DECEMBER 31 $ 7,847,337 $ 2,283,066 $ 2,954,257 $ 1,612,248 ( 10,071,539 ) (3,447,402 $ (7,117,282 ) $ (1.835,154 ) $ 730,055 $ 447,912 2,791,067 894,128 ( 299,949 ( 59,991 $ 3,221,173 $ 1,282,049 The accompanying notes are an integral part of this statement. -4- Governmental Fund Types Debt Capital Service Projects Fiduciary Fund Typ es Expendable Trust Totals - Memorandum Only - Primary Government Component Units Totals - Memorandum Only - Reporting Entitv $ - $ - $ - $34,251,562 $ 34,566 $34,286,128 ( 579.838 - 505,290 627,428 6,856,065 1,771,134 8,627,199 $ _( 653.636 - - - 100,982 - 100,982 $ 1,731,246 - - - 1,398,514 - 1,398,514 - - - 205,158 - 205,158 - ( 676.286 - - - 560,099 - 560,099 20,659 374,455 75,737 597,883 649,422 1,247,305 - - 292,275 332,393 638,062 970,455 11.101 7,602 20,431 253,397 43,701 297.098 $ 31.760 $ 887,347 $ 1,015,871 $ 44.556,053 $ 3,136,885 $ 47,692,938 $ - $ - $ - $ 3,787,287 $ - $ 3,787,287 - - - 15,363,067 - 15,363,067 - - - 2,095,696 - 2,095,696 - - - 2,288,916 - 2,288,916 - - - 2,976,653 - 2,976,653 - - 392,862 4,118,044 2,193,439 6,311,483 - - - 347,587 - 347,587 - - - 1,565,497 - 1,565,497 5,536 - - 5,536 - 5,536 - 4,171,046 128,856 4,378,907 192,187 4,571,094 507,943 - - 727,943 - 727,943 1,231.667 - 1.273,449 646.750 1,920,199 $ 1.745,146 $ 4,171,046 $ 521,718 $ 38,928,582 $ 3,032.376 $ 41,960.958 $ (1,713,386 ) $ (3,283,699 ) $ 494,153 $ 5,627,471 $ 104,509 $ 5,731,980 $ 1,720,937 $ 4,668,748 $ 285,552 $11,241,742 $ - $11,241,742 _( 100,000 ( 579.838 ( 939,188 ( 15.137,967 ) - ( 15.13 .967 $ 1.620,937 $ 4.088,910 $ _( 653.636 $ _(3.896,225 ) $ - $ _(3.896.225 ) $( 92,449) $ 805,211 $( 159,483) $ 1,731,246 $ 104,509 $ 1,835,755 309,409 10,244,615 2,022,236 16,261,455 368,459 16,629,914 - ( 10.337 ( 306.009 ( 676,286 - ( 676.286 $ 216,960 $ 11,039.489 $ 1,556.744 $ 17,316.415 $ 472.968 $ 17.789.383 -4- CITY OF PUEBLO, COLORADO COMBINED STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL GENERAL, SPECIAL REVENUE AND DEBT SERVICE FUNDS YEAR ENDED DECEMBER 31, 1993 REVENUES Taxes State and federal grants Licenses and permits Other agencies Charges for services Fines and forfeits Interest Other TOTAL REVENUES EXPENDITURES Current - General government Public safety Parks and recreation Transportation Public works Programs and projects Insurance and contingencies Intergovernmental Capital outlay Debt service - Principal retirement Interest, fiscal and other charges TOTAL EXPENDITURES EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES OTHER FINANCING SOURCES (USES) Transfers from other funds Transfers to other funds TOTAL OTHER FINANCING SOURCES (USES) EXCESS (DEFICIENCY) OF REVENUES AND OTHER FINANCING SOURCES OVER EXPENDITURES AND OTHER FINANCING USES FUND BALANCE JANUARY 1 RESIDUAL EQUITY TRANSFERS FUND BALANCE DECEMBER 31 General Fund Variance Favorable Bu et Actual (Unfavorable) $31,055,250 98,800 761,413 252,200 713,000 112,961 153,700 $ 33,147,324 $34,251,562 100,982 815,444 205,158 560,099 127,032 211,763 $ 36,272.040 $ 3,196,312 2,182 54,031 ( 47,042) ( 152,901) 14,071 58,063 $ 3,951,512 15,366,298 2,303,246 2,245,824 3,073,050 507,000 1,712,273 $ 29.159,203 $ 3,988,121 .$ 7,847,337 $ 3,859,216 $ 3,787,287 15,363,067 2,095,696 2,288,916 2,976,653 347,587 1,565,497 $ 28.424,703 $ 734.500 $ 3.124,716 $ 164,225 3,231 207,550 ( 43,092) 96,397 146,776 159,413 4,016,812 2,954,257 (1,062,555) (9,688,162 ( 10,081,825 ) ( 393.663 $ (5,671,350 ) $ (7,127,568 ) $ (1,456,218 ) $(1,683,229) $ 719,769 $ 2,402,998 ii 1,683,229 3,300,124 1,616,895 ( 289,663 ( 289,663 $ - 9 3,730,230 $ 3.70,230 The accompanying notes are an integral part of this statement. -5- Special Revenue Funds Variance Favorable Budget Actual (Unfavorable) 4,454,747 3,127,865 500,000 533,160 40,000 243,090 625.000 362.562 $ 5.619.747 $ 4,266,677 (1,326,882) 33,160 203,090 ( 262,438 $ (1.353,070 ) 7,698,197 5,375,049 2,323,148 1,519,247 1,216,407 302,840 $ 9.217.444 $ 6,591,456 $ 2,625.988 $(3,597,697) $(2,324,779) $ 1,272,918 5,226,278 5,401,294 175,016 (3,399,273 (3,312,970 86,303 $ 1,827,005 $ 2,088,324 $ 261,319 (1,770,692) ( 236,455) 1,534,237 1,770,692 7,413,979 5,643,287 $ - $ 7,177,524 $ 7,177,524 Cont Id. -5- CITY OF PUEBLO, COLORADO COMBINED STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL GENERAL, SPECIAL REVENUE AND DEBT SERVICE FUNDS YEAR ENDED DECEMBER 31, 1993 Debt Service Funds Variance Favorable Budget Actual (Unfavorable REVENUES Taxes $ - $ - $ - State and federal grants - - - Licenses and permits - - - Other agencies - - - Charges for services - - - Fines and forfeits - - - Interest - 12,238 12,238 Other - TOTAL REVENUES $ - $ 12,238 $ 12,238 EXPENDITURES Current - General government $ - $ - $ - Public safety Parks and recreation - - - Transportation - - - Public works - - - Programs and projects - - - insurance and contingencies - - - Intergovernmental - - - Capital outlay - - - Debt service - Principal retirement 497,942 497,943 ( 1) Interest, fiscal and other charges 1.321,002 1,136,438 184,564 TOTAL EXPENDITURES $ 1,818,944 $ 1,634,381 $ 184.563 EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES $ _(1,818,944 ) $ (1.622,143 ) $ 196,801 OTHER FINANCING SOURCES (USES) Transfers from other funds $ 1,818,944 $ 1,622,798 $( 196,146) Transfers to other funds TOTAL OTHER FINANCING SOURCES (USES) $ 1,818,944 $ 1,622,798 $ 196, 146) EXCESS (DEFICIENCY) OF REVENUES AND OTHER FINANCING SOURCES OVER { EXPENDITURES AND OTHER FINANCING USES $ - $ 655 $ 655 FUND BALANCE JANUARY 1 - 519 519 RESIDUAL EQUITY TRANSFERS 11.065 1 1,065 FUND BALANCE DECEMBER 31 $ - c 2 2,239 $ 12,239 Total (Memorandum Only) Variance Favorable Budget Actua (Unfavorable) $31,055,250 4,454,747 98,800 1,261,413 252,200 713,000 152,961 778,700 $34,251,562 3,127,865 100,982 1,348,604 205,158 560,099 382,360 574,325 $ 3,196,312 (1,326,882) 2,182 87,191 ( 47,042) ( 152,901) 229,399 204,375 $ 1,783,884 $ 38,767,071 $ 3,951,512 15,366,298 2,303,246 2,245,824 3,073,050 7,698,197 507,000 1,712,273 1,519,247 497,942 1,321,002 $ 40,195,591 $(1,428,520) $ 40,550,955 $ 3,787,287 15,363,067 2,095,696 2,288,916 2,976,653 5,375,049 347587 1,565, 1,216,407 497,943 1,136,438 $ 36,650,540 $ 3,900,415 11,062,034 9,978,349 ( 13,087,435 ) ( 13,394,795 ) $ ( 2,025,401 $ ( 3,416,446 $(3,453,921) 3,453,921 $ 483,969 10,714,622 ( 278,598 $ 10,919,993 $ 164,225 3,231 207,550 ( 43,092) 96,397 2,323,148 146,776 159,413 302,840 ( 1) 184,564 $ 3,545,051 $ 5,328,935 (1,083,685) ( 307,360 $ (1,391,045 ) $ 3,937,890 7,260,701 ( 278,598 $ 10.919,993 -6- CITY OF PUEBLO, COLORADO COMBINED STATEMENT OF REVENUES, EXPENSES AND CHANGES IN RETAINED EARNINGS ALL PROPRIETARY FUND TYPES YEAR ENDED DECEMBER 31, 1993 OPERATING REVENUES Charges for services TOTAL OPERATING REVENUES OPERATING EXPENSES Salaries Compensated absences Contract fees and salaries Pension Fringe benefits Merchandise and supplies Advertising Travel Insurance Professional services Repairs and maintenance Depreciation Utilities and communications Loss on disposal of equipment Claims and judgments Other services and charges TOTAL OPERATING EXPENSES OPERATING INCOME (LOSS) NONOPERATING REVENUES (EXPENSES) Grants Interest income Interest and fiscal charges Other TOTAL NONOPERATING REVENUES (EXPENSES) INCOME (LOSS) BEFORE OPERATING TRANSFERS OPERATING TRANSFERS IN OPERATING TRANSFERS OUT NET INCOME (LOSS) RETAINED EARNINGS (DEFICIT) JANUARY 1 RESIDUAL EQUITY TRANSFER RETAINED EARNINGS (DEFICIT) DECEMBER 31 Proprietary Fund Types Total Internal (Memorandum Enterprise Service onl $ 7,908,662 $ 1,372,065 $ 9,280,727 $ 7,908,662 $ 1,372,065 $ 9,280,727 $ 3,910,854 43,089 450,842 472,905 469,321 605,072 44,442 15,481 274,256 449,602 548,369 1,887,482 681,709 15,544 52,563 $ 9,921,531 $ 482,494 47,603 69,526 752,906 597 24,555 19,764 i7,85.6 900 1,740,619 54.072 $ 4,393,348; 43,089 450,842 520,508 538,847 1,357,978 44,442 16,078 274,256 449,602 572,924 1,907,246 699,565 16,444 1,740,619 106,635 $ 13,132,423 $ (2,012,869 ) $ 614,667 1,611,219 (2,997,592) 10,882 $ ( 760,824 $ (2,773,693 ) $ 2,982,225 ( 632,000 $ 3,210,892 $ (1,838,827 ) 20,906 $ 20,906 $ (1,817,921 ) $ 1,546,000 $ (3,85,696 ) $ 614,667 1,611,219 (2,997,592) 31,788 $ ( 739,918 $ (4,591,614 ) $ 4,528,225 ( 632,000 $( 423,468) $( 271,921) $( 695,389) 9,805,197 ( 7,195 ( 143,598) 9,661,599 _( 7,195 $ 9,374,534 $ ( 415,514 $ 8,959,015 The accompanying notes are an integral part of this statement. -7- CITY OF PUEBLO, COLORADO COMBINED STATEMENT OF CASH FLOWS ALL PROPRIETARY FUND TYPES YEAR ENDED DECEMBER 31, 1993 INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS CASH FLOWS FROM OPERATING ACTIVITIES Operating income (loss) Adjustments to reconcile operating income (loss) to net cash provided by operating activities - Depreciation Loss on disposal of equipment Change in assets and liabilities - Accounts receivable Due from general fund Due from federal government Due from other funds Inventories Prepaid expenses Investment in risk pool Accounts payable and accrued expenses Due to general fund Deferred revenues Other NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES Operating grants received Operating transfers in Operating transfers out NET CASH PROVIDED BY NONCAPITAL FINANCING ACTIVITIES CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Acquisition and construction of capital assets Principal paid on revenue bonds Interest paid on revenue bonds Residual equity transfer Proceeds from sale of equipment Principal paid on certificates of participation bonds payable Interest paid on certificates of participation bonds payable Principal paid on other debt NET CASH (USED) BY CAPITAL AND Proprietary Fund Types Total Internal (Memorandum Enterprise Service Onl $(2,012,869) $(1,838,827) $(3,851,696) 1,887,482 15,544 19,764 900 1,907,246 16,444 24,963) 154,737) 136,142 315,943) 16,948) 2,924) 166,920 892,723 81,156 ( 597, 617) 15,243) 23,147) 780,348 51,514 20,906 24,963) 752,354) 136,142 315,943) 32,191) 2,924) 23,147) 947,268 944,237 81,156 20,906 $ 651,583 $ (1.601,402 ) $ ( 949.819 $ 614,667 $ - $ 614,667 2,982,225 1,546,000 4,528,225 ( 632,000 - ( 632,000 $ 2,964,892 $ 1,546,000 $ 4,510,892 $( 978,827) $( 4,598) $( 983,425) ( 800,000) - ( 800,000) (2,491,385) - (2,491,385) 366,000 - 366,000 21,300 - 21,300 ( 203,700) - ( 203,700) ( 332,414) - ( 332,414) ( 22.984 - ( 22,984 RELATED FINANCING ACTIVITIES $ (4,442,010 ) $ 4,598 $ _(4,446.608 ) Cont'd. The accompanying notes are an integral part of this statement. -8- CITY OF PUEBLO, COLORADO COMBINED STATEMENT OF CASH FLOWS ALL PROPRIETARY FUND TYPES YEAR ENDED DECEMBER 31, 1993 INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS CASH FLOWS FROM INVESTING ACTIVITIES - Acquisition of investments Proceeds from maturities of investments Payments received on notes receivable Interest received NET CASH PROVIDED BY INVESTING ACTIVITIES NET (DECREASE) IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR CASH AND CASH EQUIVALENTS AT END OF YEAR NONCASH INVESTING, CAPITAL AND FINANCING ACTIVITIES Property and equipment contributed Property and equipment contributed to other funds Assets contributed by other funds, net of liabilities assumed Proprietary Fund Types Total Internal (Memorandum Enterprise Service Onl $( 807,087) $ - $( 807,087) 32,000 - 32,000 - 60,000 60,000 1.607,413 1.6 7,413 $ 832,326 $ 60,000 $ 892,326 $ 6,791 $ - $ 6,791 30,965 300 31,265 $ 37,756 $ 300 $ 38,056 $ 1,325,028 $ 74 $ 1,325,102 $ 27,471 $ $ 27,471 $ - $ 762,214 $ 762,214 The accompanying notes are an integral part of this statement. -9- NOTES TO FINANCIAL STATEMENTS CITY OF PUEBLO, COLORADO NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1993 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The City of Pueblo, Colorado is incorporated as a home rule city under the Constitution of the State of Colorado. The City operates under a council - manager form of government and provides the following services as authorized by its charter: public safety (police and fire) , highways and streets, sanitation, social services, culture- recreation, public improvements, planning and zoning, and general administrative services. The financial statements of the City of Pueblo, Colorado have been prepared in accordance with generally accepted accounting principles (GAAP) as applied to government units. The Governmental Accounting Standards Board (GASB) is the accepted standard - setting body for establishing governmental accounting and financial reporting principles. The more significant of the government's accounting policies are described below. A. The Financial Reporting Entity As required by GAAP, the accompanying financial statements present the City of Pueblo, Colorado (the primary government) and its component units. The component units discussed in Note 2 are included in the City's reporting entity because of the significance of their operational or financial relationships with the City. B. Fund Accounting The government uses funds and. account groups to report its financial position and the results of its operations. Fund accounting is designed to,' demonstrate legal compliance and to aid financial management by segregating transactions related to certain government functions or activities. A fund is a separate accounting entity with a self - balancing set of accounts. An account group, on the other hand, is a financial reporting device designed to provide accountability for certain assets and liabilities that are not recorded in the funds because they do not directly affect net expendable available financial resources. Funds are classified into three categories: governmental, proprietary and' fiduciary. Each category, in turn, is divided into separate 'fund types ". Governmental funds are used to account for all or most of a government's! general activities, including the collection and disbursement of earmarked monies (special revenue funds) , the acquisition or construction of general, fixed assets (capital projects funds), and the servicing of general long- term debt (debt service funds) . The general fund is used to account for all activities of the general government not accounted for in some other fund. Proprietary funds are used to account for-activities similar to those found in the private sector, where the determination of net income is necessary or useful for sound financial administration. Goods or services from such activities can be provided either to outside parties (enterprise funds) or to other departments or agencies primarily within the government (internal service funds). -10- CITY OF PUEBLO, COLORADO NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1993 OTE 1 - SUbDIARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd.) Fiduciary funds are used to account for assets held on behalf of outside parties, including other governments, or on behalf of other funds withir. the government. When these assets are held under the terms of a formal trust agreement, either a pension trust fund, a nonexpendable trust fund or an expendable trust fund is used. The terms " nonexpendable" and "expendable" refer to whether or not the government is under an obligation to maintain the trust principal. Agency funds generally are used tc account for assets that the government holds on behalf of others as their agent. C. Basis of Accounting The accounting and financial reporting treatment applied to a fund i determined by its measurement focus. All governmental funds and expendable: trust funds are accounted for using a current financial resources measurement focus. With this measurement focus, only current assets ane current liabilities generally are included on the balance sheet. Operatin; statements of these funds present increases (i.e., revenues and other financing sources) and decreases (i.e., expenditures and other financinc uses) in net current assets. All proprietary funds are accounted for using a flow of economic resource measurement focus. With this measurement focus, all assets and all liabilities associated with the operation of these funds are included on the balance sheet. Fund equity (i.e., net total assets) is segregated into contributed capital and retained earnings components. Proprietary fund - type operating statements present increases (e.g., revenues) and decrease; (e.g. expenses) in net total assets. The modified accrual basis of accounting is used by all governmental fun - `_ types, expendable trust funds and agency funds. Under the modified accrual basis of accounting, revenues are recognized when susceptible to accrual (i.e., when they become both measurable and available). "Measurable" mean: the amount of the transaction can be determined and "available" means collectible within the current period or soon enough thereafter to be used to pay liabilities of the current period. Expenditures are recorded whey_ the related fund liability is incurred. Principal and interest on genera's long -term debt are recorded as fund liabilities when due or when amounts have been accumulated in the debt service fund for payments to be made early in the following year. Those revenues susceptible to accrual are property taxes, franchise taxes, special assessments, interest revenue and charges for 'services. Fines, permits and parking meter revenues are not susceptible to accrual because generally they are not measurable until received in cash. The accrual basis of accounting is utilized by proprietary fund types. Under this method, revenues are recorded when earned and expenses are recorded at the time liabilities are incurred. -11- CITY OF PUEBLO, COLORADO NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1993 NOTE 1 - SUb91ARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd.) The government reports deferred revenue on its combined balance sheet. Deferred revenues arise when potential revenue does not meet both the "measurable" and "available" criteria for recognition in the current period. Deferred revenues also arise when resources are received by the government before it has a legal claim to them, as when grant monies are received prior to the incurrence of qualifying expenditures. In- subsequent periods, when both revenue recognition criteria are met, or when the government has a legal claim to the resources, the deferred revenue is recognized as revenue. D. Budget and Budgetary Accounting Budgetary comparisons are included in the general purpose financial statements for the general fund, certain special revenue funds and all debt service funds except special assessments. These funds represent the governmental fund types for which an annual budget has been adopted. The budget presentation for the special revenue funds includes only the capital improvement fund, health and human services fund, community development fund, highway users fund, airport special tax fund, 1992 sales and use tax fund, and Pueblo Zoo fund. The remaining special revenue funds generally consist' of federally - funded projects for which annual appropriations are not made by City Council but are governed by project budgets established by the appropriate funding agency. In addition, Council also adopts budgets for all proprietary fund types. All budgets adopted by City Council, including the proprietary fund types, use the modified accrual basis of accounting. Expenditure estimates in the annual budgets are enacted into law through the passage of an appropriation ordinance. The City Manager may at any time transfer any unencumbered appropriation balance or portion thereof from one classification of expenditure to another within the same department, office or agency. The Council may,.by resolution, transfer any unencumbered appropriation balance or portion thereof from one department, office or agency to another. City Council may amend the original adopted budget during the year by passing a new ordinance to reflect current needs, and during 1993 the expenditure estimates were amended. These amendments were made in accordance with the City Charter and involved immaterial supplemental appropriations. For each legally adopted annual operating budget, budgetary control exists at the department or total fund level. That is to say, total expenditures for each department or fund cannot legally exceed total appropriations for that department or fund. Encumbrance accounting, under which purchase orders, contracts, and other commitments for the expenditure of monies. are recorded in order to reserve that portion of the applicable appropriation, is employed as an extension of the formal budgetary integration in the general fund, special revenue funds, and capital projects funds. Encumbrances outstanding at year end are reported as reservations of fund balances since they do not constitute expenditures or liabilities. In addition, appropriations lapse at year end. -12- CITY OF PUEBLO, COLORADO NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1993 NOTE 1 - SMOSARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd.) E. Post - Employment Benefits Under the Consolidated Omnibus Budget Reconciliation Act (COBRA) , the Citt . provides health care benefits to eligible former employees and eligibl, dependents. Certain requirements are outlined by the federal government for this coverage. The entire cost is borne by the insured and the plan is offered for a duration of 18 months after the termination date. As such,, there is no associated cost to the City under this program. The City does not provide any other post - employment benefits. F. Cash and Investments Cash and cash equivalents, as reported on the combined balance sheet, include interest and noninterest bearing demand deposits and money market: funds. Investments, as reported on the combined balance sheet, include al. certificates of deposit, U.S. Treasury and agency securities, equit securities, money market mutual funds and a single premium deferre-' annuity. Investments are stated at cost or amortized cost, except for the investments in the deferred compensation fund which are reported at marke value. G. Inventories Inventory in the general fund is, recorded at the lower of cost (first-in. first -out) or market and consists of expendable supplies. The cost is recorded as an expenditure when consumed, rather than when purchased. Inventories in proprietary funds are recorded at the lower of cost (first - in, first -out) or market. H. Due To /Due From Other Funds During the course of operations, numerous transactions occur betwee individual funds for goods provided or services rendered. Then: receivables and payables are classified as "due from other funds" or "due to other funds" on the balance sheet. I. Fixed Assets General fixed assets are not capitalized in the funds used to acquire os construct them. Instead, capital acquisition and construction are reflected as expenditures in governmental funds, and the related assets are reported in the general fixed assets account group. All purchased fixes. assets are valued at cost where historical records are available and at a-. estimated historical cost where no historical records exist. Donated fixes: assets are valued at their estimated fair market value on the date received. -13- CITY OF PUEBLO, COLORADO NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1993 NOTE 1 - SMOSARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd.) Public domain ( "infrastructure ") general fixed assets consisting of roads, bridges, curbs and gutters, streets and sidewalks, drainage systems, and lighting systems are not capitalized along with other general fixed assets. No depreciation has been provided on general fixed assets. Fixed asset additions in the proprietary fund types are recorded at cost, or, if contributed property, at their estimated fair value at the time of contribution. Costs of normal maintenance and repairs that do not add to the value of the asset or materially extend asset lives are not capitalized while renewals and betterments are capitalized. Net interest expense on proprietary fund fixed assets acquired with tax - exempt debt is capitalized. The amount of interest to be capitalized is calculated by offsetting interest expense incurred from the date of the borrowing until completion of the project with interest earned on invested proceeds over the same period. Depreciation of all exhaustible fixed assets used by proprietary funds is charged as an expense against their operations. Accumulated depreciation is reported on proprietary fund balance sheets. Depreciation has been provided over the estimated useful lives using the straight -line method. The estimated useful lives are as follows: Buildings 50 years Improvements 20 -50 years Equipment 5 -10 years J. Restricted - Assets Restricted assets represent amounts held in escrow for the purpose of generating sufficient revenues to satisfy the debt service requirements of the applicable bonds. K. Compensated Absences Vested or accumulated vacation leave that is expected to be liquidated with expendable available financial resources is reported as an expenditure and a fund liability of the governmental fund that will pay it. Amounts of vested or accumulated vacation leave that are not expected to be liquidated with expendable available financial resources are reported in the general long -term debt group. No expenditure is reported for these amounts. Vested or accumulated sick leave of proprietary funds is recorded as an expense and liability of those funds as the benefits accrue to employees. In accordance with the provisions of Statement of Financial Accounting Standards No. 43, Accounting for Compensated Absences no liability is- recorded for nonvesting accumulating rights to receive sick pay benefits. However, a liability is recognized for accumulating sick leave benefits that is estimated will be taken as "terminal leave" prior to retirement. -14- CITY OF PUEBLO, COLORADO NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1993 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd.) L. Long -Term Obligations Long -term debt is recognized as a liability of a governmental fund whe:: due, or when resources have been accumulated in debt service funds, if applicable, for payment early in the following year. For other long - terr . obligations, only that portion expected to be financed from expendable, available financial resources is reported as a fund liability of a governmental fund. The remaining portion of such obligations is reporter:. in the general long -term debt account group. Long -term liabilities financed from proprietary fund operations are accounted for in those funds. M. Fund Equity Contributed capital is recorded in proprietary funds that have received capital grants or contributions from developers, customers or other funds. Reserves represent those portions of fund equity not appropriable fox expenditures or legally segregated for a specific future use. Designated, fund balances represent tentative plans for future use of financial resources. N. Bond Discount and Issue Costs In governmental fund types, bond discounts and issue costs are recognized in the current period. Bond discounts and issue costs for proprietary funs types are deferred and amortized over the term of the bonds using the bond - outstanding method, which approximates the interest method. Bond discounts are presented as a reduction of the face amount of bonds payable, whereas issue costs are recorded as deferred charges. 0. Interfund Transactions Quasi - external transactions are accounted for as revenues, expenditures or expenses. Transactions that constitute reimbursements to a fund for expenditures /expenses initially made from it that are properly applicable to another fund are recorded as expenditures/ expenses in the reimbursing fund and as reductions of expenditures /expenses in the fund that is reimbursed. All other interfund transactions, except quasi- external transactions and reimbursements, are reported as transfers. Nonrecurring or nonroutine permanent transfers of equity are reported as residual equity transfers. All other interfund transfers are reported as operating transfers. P. Property Tax Revenues Property taxes were levied on December 15 based on the assessed value of property as certified by the County Assessor by the previous September 15. Assessed values are a percentage of actual values. A reevaluation_ of all property must be made every two years. The last reevaluation date was January 1, 1993 for the 1991 base year specified by stare law. -15- CITY OF PUEBLO, COLORADO NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1993 NOTE 1 - SUWAARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd.) The taxes levied on December'15, 1993 reflect 1993 property taxes that will be collected in 1994 by the Pueblo County Treasurer. Taxes collected by the Treasurer are remitted to the City on a monthly basis. These taxes are due January 2, 1994 and may be paid in two installments (February 28 and June 15) or they may be paid in full April 30. Taxes not paid in accordance with this schedule accrue interest and penalty charges and are subject to liens if not paid by November. Q. Memorandum Only - Total Columns Total columns on the general purpose financial statements are captioned "memorandum only" to indicate that they are presented only to facilitate financial analysis. Data in these columns do not present financial position, results of operations or cash flows in conformity with generally accepted accounting principles. Neither is such data comparable to a consolidation. Interfund eliminations have not been made in the aggregation of this data. R. Statement of Cash Flows For purposes of the combined statement of cash flows, all highly liquid investments with a maturity of three months or less when purchased are considered cash equivalents. NOTE 2 - COMPONENT UNITS The following. narrative provides a brief description of the City's component units: BLENDED COMPONENT UNITS Pueblo Transportation Co. - The Pueblo Transportation Co. was a private, for- profit corporation that was acquired by the City during the 1950 City Council is the governing body for the Pueblo Transportation Co. and appoints the Transportation Co.'s management. The Pueblo Transportation Co. operates the city -wide bus system. Pueblo Municipal Property Corporation (PMPC) - Pueblo Municipal Property Corporation is the financing vehicle created by City Council to facilitate the construction and operation of a municipal golf course known as Walking Stick golf course. PMPC is a nonprofit public benefit corporation that leases the golf course to the City under an annually renewable lease - purchase agreement. PMPC issued $4,580,000 of certificates of participation, the proceeds of which were used for the construction of the golf course. The lease payments made by - the City to PMPC are used to retire the certificates of participation. Upon retirement of the certificates of participation, title to the golf course will pass to the City. City Council appoints 3 of the 5 voting members of the Corporation's governing body. -16- CITY OF PUEBLO, COLORADO NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1993 NOTE 2 - COMPONENT UNITS (Cont'd.) Pueblo Municipal Building Corporation (PMBC) - Pueblo Municipal Building Corporation is another financing vehicle created by City Council t- facilitate the acquisition of certain property around the present locatio: of City Hall and construct a new public works facility. PMBC is a nonprofit public benefit corporation which issued $565,000 of certificates of participation in 1990 to acquire the site. During 1992, PMBC issue6 $2,960,000 of certificates of participation, the proceeds of which were used to retire the existing indebtedness and construct the new public works facility. PMBC is leasing the site and the facility to the City under aa: annually renewable lease- purchase agreement. The lease payments made b the City to PMBC will be used to retire the certificates of participation:. Upon retirement of the certificates of participation, title will pass t.- the City. PMBC also issued $168,600 of certificates of participatioT. during 1991 to acquire golf carts to be used at Walking Stick golf course. The City is leasing the golf carts from PMBC under an annually renewable lease - purchase agreement. The lease payments made by the City are beinc used to retire the certificates of participation and upon retirement, titic will pass to the City. All of the members of PMBC's governing body are appointed by City Council and the governing body includes council members. DISCRETELY PRESENTED COMPONENT UNITS The component units columns in the combined financial statements include. the financial data of the City's other component units. They are reported in a separate column to emphasize that they are legally separate from the City. Pueblo Urban Renewal Authority - The Pueblo Urban Renewal Authority was created in 1959 under the provisions of Colorado law. The Authority was virtually inactive until 1986, at which time the City and the Authority entered into a cooperation agreement whereby the Authority acquired certain properties from the City in order to facilitate the building of a convention center and parking structure on a portion of the property and sell the remaining portion to a developer for the purpose of building e hotel. In November 1993, the voters within the City approved the issuanc= of $9,500,000 of tax- increment revenue bonds of the Urban Renewal Authorit% for the purpose of constructing a civic center and hotel complex within th's Authority's boundaries. The governing body of the Authority is appointed by City Council. Pueblo County Headstart Parents Inc - Pueblo County Headstart Parents, Inc. is a nonprofit, charitable corporation which operates various programs principally for the benefit of preschool aged children. In implementing these programs, the City is the grantee and recipient of various federal and state grants for the benefit of Headstart Parents, Inc. The City is not involved in the selection of the governing body. -17- CITY OF PUEBLO, COLORADO NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1993 NOTE 2 - COMPONENT UNITS (Cont'd.) The following presents condensed financial statements for each of the discretely presented component units. Financial statements of the individual component units are included in the City's CAFR under the caption "Component Units ". CONDENSED BALANCE SHEETS DECEMBER 31, 1993 ASSETS Current assets Property and equipment Restricted assets TOTAL ASSETS LIABILITIES Current liabilities Bonds payable Total Liabilities EQUITY Investment in general fixed assets Fund.,balances Total Equity TOTAL LIABILITIES AND EQUITY Pueblo Urban Renewal Authority $ 505,102 61,919 9,950.138 $ 10.517.159 Pueblo County Headstart Parents. Inc. Total $ 502,346 $ 1,007,448 567,793 629,712 9,950.138 $ 1,070.139 $ 11.587,298 $ 256,091 $ 278,527 $ 534,618 9,950,000 - 9,950,000 $ 10,206,091 $ 278,527 $ 10,484,618 $ 61,919 $ 567,793 $ 629,712 249,149 223,819 472.968 $ 311.068 $ 791,612 $ 1,102,680 $ 10,517,159 $ _1,070,139 $ 11,587,298 -18- CITY OF PUEBLO, COLORADO NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1993 NOTE 2 - COMPONENT UNITS (Cont'd.) CONDENSED STATEMENTS OF REVENUES, EXPENDITURES AND CHANGES IN EQUITY YEAR ENDED DECEMBER 31, 1993 Excess (deficiency) of revenues over expenditures $( 22,189) $ 126,698 $ 104,509 Equity, beginning of year 271,338 97,121 368,459 Equity, end of year $ 249,149 $ 223,819 $ 472,968 ADMINISTRATIVE OFFICES Pueblo Urban Renewal Authority Pueblo County Headstart Parents, Inc. #1 City Hall Place 1745 Acero Pueblo, Colorado Pueblo, Colorado NOTE 3 - CASH, CASH EQUIVALENTS AND INVESTMENTS Cash and cash equivalents and investments are summarized as follows: Cash on hand $ 6,290 Demand deposits 791,833 Money market funds 2,213.310 $ 3,011,433 Investments - Certificates of deposit $ 6,205,237 U.S. Treasury bills 9,102,187 U.S. Treasury notes 103,030 U.S. Treasury strips 999,454 U.S. agency securities 2,566,654 Single premium deferred annuity 1,784,361 Mutual funds 168,666 Equity securities 669,356 $21,598,945 Cash and investments in deferred compensation plans 2,147,430 $ 23,746,375 -19- Pueblo Urban Pueblo County Renewal Headstart Authority Parents, Inc. Total Revenues $ 697,466 $ 2,439,419 $ 3,136,885 Expenditures - Operating and other 10,986 2,182,453 2,193,439 Capital outlay 61,919 130,268 192,187 Debt services 646,750 - 646,750 Excess (deficiency) of revenues over expenditures $( 22,189) $ 126,698 $ 104,509 Equity, beginning of year 271,338 97,121 368,459 Equity, end of year $ 249,149 $ 223,819 $ 472,968 ADMINISTRATIVE OFFICES Pueblo Urban Renewal Authority Pueblo County Headstart Parents, Inc. #1 City Hall Place 1745 Acero Pueblo, Colorado Pueblo, Colorado NOTE 3 - CASH, CASH EQUIVALENTS AND INVESTMENTS Cash and cash equivalents and investments are summarized as follows: Cash on hand $ 6,290 Demand deposits 791,833 Money market funds 2,213.310 $ 3,011,433 Investments - Certificates of deposit $ 6,205,237 U.S. Treasury bills 9,102,187 U.S. Treasury notes 103,030 U.S. Treasury strips 999,454 U.S. agency securities 2,566,654 Single premium deferred annuity 1,784,361 Mutual funds 168,666 Equity securities 669,356 $21,598,945 Cash and investments in deferred compensation plans 2,147,430 $ 23,746,375 -19- CITY OF PUEBLO, COLORADO NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1993 NOTE 3 - CASE, CASE EQUIVALENTS AND INVESTMENTS (Cont'd.) DEPOSITS At December 31, 1993, the carrying amount of the City's deposits, includinc certificates of deposit, was $6,997,070 and the bank balance wai $8,142,782. Of the bank balance, $600,000 was covered by federal depository insurance and $7,542,782 was collateralized in single financial institution collateral pools maintained by the individual financial institutions that hold these deposits. Colorado law requires that ; depository institutions must apply for and be designated as an eligible public depository before the institution can accept public fund monies. The depository institution must pledge eligible collateral as security fox all public deposits held by that institution that are not insured bl depository insurance. The market value of the collateral that eacY.'. institution pledges as security must be equal to at least 102% of the total uninsured deposits held by that institution. Generally, the eligible collateral in the collateral pools is held by the depository institution or its agent in the name of the depository institution. The City's deposits are categorized as either (1) insured or collateralized?,:. with securities held by the City or by its agent in the City's name, (2) collateralized with securities held by the pledging financial institution's trust department or agent in the City's name, (3) uncollateralized which includes any bank balance that is collateralized with securities held by, the pledging financial institution, or by its trust department or agent but', not in the City's name. Estimated Category Bank Market j i 2 3 Balance Value Demand deposits and certificates of deposit $ 600.000 $ - $ 7,542.782 $ 8,142,782 $ 8.142,782 $ 600.000 $ - $ 7.542.782 $ 8.142.782 $ 8,142 782 INVESTMENTS The City has adopted, by resolution, the provisions of Colorado Revised Statutes 24 -75 -601 which is entitled "Concerning Investment in Securities by Public Entities ". This law, among other things, outlines the. of securities that public entities in Colorado may acquire and-'hold as investments. These include U.S. government and agency securities, certain bonds of political subdivisions, bankers acceptances, commercial paper, local government investment pools, repurchase. agreements, money market funds and guaranteed insurance contracts. The statute also includes a provision limiting any investment to a five year maturity unless the governing body authorizes a longer period. -20- CITY OF PUEBLO, COLORADO NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1993 NOTE 3 - CASE, CASE EQUIVALENTS AND INVESTMENTS (Cont Id.) The City's investments are categorized to give an indication of the level of credit risk assumed by'the City. These credit risk categories are (1) insured or registered, or securities held by the City or its agent in the City's name; (2) uninsured and unregistered, with securities held by the counterparty's agent in the City's name; (3) uninsured and unregistered with securities: held by the counterparty, or held by the counterparty's agent but not in the City's name. Cash and cash• equivalents and investments for. the discretely presented component, units are summarized as follows: Cash on hand Demand deposits Investments Certificate Hof deposit $ 750 10.753 $ 11.503 $ 100.000 $ 100.000 At December 31; 1993, the carrying amount of the discretely presented component units deposits, including the certificate of deposit, was $110,753 and ;-the bank balance was $122,202•. All of the bank balance was covered by federal depository insurance. -21- Estimated Category Carrying Market 1 2 3 Value Value U.S. Treasury bills $ - $ - $ 9,102,187 $ 9,102,187 $ 9,160,803 U.S. Treasury notes - - 103,030 103,030 119,850 U.S. Treasury strips - - 999,454 999,454 1,026,138 U.S. Agency securities - - 2,566,654 2,566,654 2,610,711 Equity securities - - 669.356 669.356 738.902 $13,440,681 $13,440,681 $13,656,404 Mutual funds - - - 2,381,976 2,381,976 Single premium deferred annuity - - - 1,784,361 1,784,361 Investments in deferred compen- sation plans - - - 2.147.430 2,147,430 $ 13.440,681 $ 19.754.448 $ 19.970.171 Cash and cash• equivalents and investments for. the discretely presented component, units are summarized as follows: Cash on hand Demand deposits Investments Certificate Hof deposit $ 750 10.753 $ 11.503 $ 100.000 $ 100.000 At December 31; 1993, the carrying amount of the discretely presented component units deposits, including the certificate of deposit, was $110,753 and ;-the bank balance was $122,202•. All of the bank balance was covered by federal depository insurance. -21- CITY OF PUEBLO, COLORADO NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1993 NOTE 4 - RECEIVABLES Receivables at December 31, 1993 consist of the following: Special Debt Capital General Revenue Service Projects Receivables Taxes $ 6,379,333 $ - $ - $ - Accounts 243,385 72,321 - 7,580 Special assessments - - 24,262 - Notes - 42,398 - 4,496,265 Accrued interest 47.310 - 5.885 71.645 $ 6,670,028 $ 114,719 $ 30,147 $ 4,575,490 Less allowance for uncollectible accounts ( 61.116 NET $ 6.608.912 $ 114,719 $ 30.147 $ 4.575.490 Internal Trust and Enterprise Service Agency Total Receivables - Taxes $ - $ - $ - $ 6,379,333 Accounts 550,090 - 25,294 898,670 Special assessments - - - 24,262 Notes - 240,000 2,248,590 7,027,253 Accrued interest 172.540 - 40.669 338.049 $ 722,630 $ 240,000 $ 2,314,553 $14,667,567 Less allowance for uncollectible accounts ( 59.267 - (2.248.590 (2.368.973 NET $ 663.363 $ 240.000 $ 65.963 $ 12.298.594 Notes receivable are summarized as follows: Advances made under home rehabilitation grant program; monthly payments ranging from $95 to $109 over terms ranging from 15 to 20 years; collateralized by rehabilitated residences $ 42.398 Noninterest bearing demand note from Pueblo Development Foundation (PDF) ; secured' by deed, of trust on property located at 1228 E. Orman; payable in the amount of $8,333 per month beginning June 1994, and due in full by July 1999; the note also includes a provision whereby PDF is required to forward to the City any monies received by PDF upon the sale of the underlying collateral $ 548,547 -22- CITY OF PUEBLO, COLORADO NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1993 NOTE 4 - RECEIVABLES (Cont'd.) 7.5% demand note from PDF; secured by deed of trust on real estate located at airport industrial park; payable in monthly installments of $7,159 including interest; due August 1, 2000 440,908 $1,500,000 7.0% note from American Standard, Inc.; collateralized by equipment and machinery; payable in quarterly installments of $75,000 plus interest; due March 1, 1997 1,050,000 $450,000 8.5% note from William R. Shero; secured by deed of trust; payable in monthly installments of $3,905 including interest; due May, 2002 435,457 Noninterest bearing advance from PDF for construction of shell building; payable only upon sale or lease to third party; title transfers to the City if property not sold or leased within 36 months 356,689 $800,000 noninterest bearing note from Qual -Med, Inc.; secured by deed of trust; payable in monthly install - ments of $6,667; due July, 2002 680,000 Noninterest bearing note from PDF; secured by deed of trust on real estate located at airport industrial park; payable March 10, 1994 950,000 Noninterest bearing advance from Pacific Aero Manufacturing, Inc.; payable March 1, 1994 34.664 $ 4.496.265 $360,000 unsecured noninterest bearing note from Sangre de Cristo Arts and Conference Center; due in annual installments of $60,000 to December 1998 $ 240.000 Notes receivable from loans made under a housing rehabilitation program 2.248.590 $ 7.027.253 The loans made under the housing and rehabilitation program are only partially repayable based on the participant's income level and other criteria. However, if the property is sold or the participant is no longe-- living in the rehabilitated residence, the total loan becomes due. As such, the gross amount of the notes receivable is reduced to an estimate of the net realizable value by an allowance-for uncollectible accounts of $2,248,590. The difference becween the gross amount of notes due and the net realizable value is recorded as deferred revenue. -23- CITY OF PUEBLO, COLORADO NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1993 NOTE 4 - RECEIVABLES (Cont'd.) Receivables at December 31, 1993 for the discretely presented component units consist of the following: Pueblo Urban Renewal Authority Accounts Notes Accrued interest $ 42,908 212,020 242.531 $ 497.459 Notes receivable are summarized as follows: Pueblo County Headstart Parents. Inc. Total $ 28,407 $ 28.407 Noninterest bearing note from Ross Investment Group - Pueblo, Ltd. from Pueblo Urban Renewal Authority; due in 10 annual installments beginning September 1993; secured by deed of trust on land NOTE 'S - DUE FROM /DUE TO OTHER FUNDS $ 716,717 70,171 510,765 2,113,746 246,138 466.141 A summary of the individual interfund receivables and payables is as follows: Due From Due To Other Funds Other Funds General Fund - Special Revenue Debt Service Capital Projects Enterprise Internal Service Trust and Agency Special Revenue Funds - Health and Human Services Community Development Highway Users E1 Pueblo Heritage Collection Fee Police and Fire Department Grants Urban Transportation Planning Pueblo Zoo Home Grant Planning grants D.O.T. Projects Colorado Aviation Grant -24- $ 4.123.678 $ 71,315 212,020 242.531 $ 525.866 $ 212.020 $ 1,081,928 373,088 275,565 650,146 979.307 $ 3.360.034 Due From Due To Other Funds Other Funds $ 16,924 988,146 62,708 1,348 6,304 6,439 59 $ 1.081.928 200,644 2-5,726 141,177 88,592 260,578 $ 716.717 CITY OF PUEBLO, COLORADO NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1993 NOTE 5 - DUE FROM /DUE TO OTHER FDNDS Enterprise Funds City Park Golf Course Due From Due To Memorial Airport Other Funds Other Funds Debt Service Funds - 57,908 - Special assessments $ - $ 70.171 Sewer User $ - $ 70.171 Capital Projects Funds - 60,091 - Capital Improvement $ 266,511 $ - Fountain Creek Flood Plain - 214,196 Senior Center 106,577 - Airport Special Tax Fund - 297 1992 Sales and Use Tax Fund - 80,512 Airport Development - 40,902 Land, Water Conservation - 4 13,687 Street and Bridge - 122,887 Public Works 8.284 $ 373,088 $ 510,765 Enterprise Funds City Park Golf Course $ - $ 216,386 Memorial Airport 102,056 - Ice Arena 57,908 - Pueblo Transportation Co. 55,510 - Sewer User - 426,147 Swimming Pools 60,091 - Mountain View Cemetery 315,943 447,991 Pueblo Municipal Property Corporation - 1,023,222 Airport Improvement Trust $ 591,508 $ 2,113.746 Internal Service Funds - 104,351 - Self- insurance $ 565,970 $ - City shops - 246,138 Transportation services 84.176 for the $ 650.146 $ 246,138 Trust and Agency Housing Rehabilitation Program $ 96,605 $ - Parking Facilities 81,239 - Mountain View Cemetery Endowment - 520,960 Conservation Trust - 253,690 Pre -Need Cemetery Services - 7,271 South Landfill Trust 44,388 - Restoration of Carousel - 163 Pueblo Beautiful Endowment 707 - Airport Improvement Trust 79,894 - Park land Escrow 104,351 - Deposits and Clearing 572,123 $ 979,307 $ 782.084 Included in the caption "due from other governments /agencies" for the discretely presented component units is $119,993 which is due from the primary government. -25- CITY OF PUEBLO, COLORADO NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1993 NOTE 6 - PROPERTY, PLANT AND EQUIPKENT The following is a summary of changes in the General Fixed Assets account group for the year ended December 31, 1993: Land Buildings Improvements other than buildings Machinery and equipment Accumulated depreciation $ 731,929 8,942,17 70,771,653 6,641,206 $ 87,086,960 (22,053,834 $ 65,033,126 $ 58,235 239,128 $ 239,128 ( 180,893 NOTE 7 - RESTRICTED ASSETS Restricted assets are summarized as follows: Sewer User Enterprise Fund $4,000,000 maturity value U.S. Treasury strips acquired September 30, 1986 and due November 15, 1995; acquisition cost was $2,095,840 $1,725,000 maturity value U.S. Treasury - strips acquired September 30, 1986 and.due November 15, 1995; acquisition cost was $903,831 Estimated Carrying Market Value Value $ 3,502,920 $ 3,706,252 1,510,634 1,598,321 -26- Balance Balance January 1, December 31, 1993 Additions Deletions 1993 Land $ 10,878,402 $ 481,330 $ 200,258 $ 11,159,474 Buildings 11,485,698 97,507 - 11,583,205 Improvements 73,802,124 416,110 - 74,218,234 Machinery and equipment 8,466,563 1,109,797 574,187 9,002,173 Construction in progress - 997,709 - 997,709 $ 104,632.787 $ 3,102,453 $ 774,445 $ 106,960,795 A summary of proprietary fund -type fixed assets at December 31, 1993 is as follows: Internal Enterprise Service Land Buildings Improvements other than buildings Machinery and equipment Accumulated depreciation $ 731,929 8,942,17 70,771,653 6,641,206 $ 87,086,960 (22,053,834 $ 65,033,126 $ 58,235 239,128 $ 239,128 ( 180,893 NOTE 7 - RESTRICTED ASSETS Restricted assets are summarized as follows: Sewer User Enterprise Fund $4,000,000 maturity value U.S. Treasury strips acquired September 30, 1986 and due November 15, 1995; acquisition cost was $2,095,840 $1,725,000 maturity value U.S. Treasury - strips acquired September 30, 1986 and.due November 15, 1995; acquisition cost was $903,831 Estimated Carrying Market Value Value $ 3,502,920 $ 3,706,252 1,510,634 1,598,321 -26- CITY OF PUEBLO, COLORADO NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1993 NOTE 7 - RESTRICTED ASSETS (Cont'd.) Carrying Value Estimated Market Valu $1,733,000 maturity value U.S. Treasury strips acquired September 30, 1986 and due November 15, 1995; acquisition cost was $908,023 $8,816,000 par value U.S. Treasury note; coupon rate is 9.5k and was acquired on September 30, 1986 and matures on November 15, 1995 1,526,714 9.176.241 1,605,734 9.656,279 $ 15.716.509 $ 16.566.586 In 1986, the City issued $11,600,000 of sewer revenue crossover refundinc bonds for the purpose of advance refunding $15,955,000 of the 198: refunding sewer revenue bonds maturing after January 1, 1996. Since a crossover refunding does not result in a defeasance of debt on the issue date, both the new debt and old debt are recorded as debt until the- crossover date, which in this case is June 1, 1996. At that time, the investments in the escrow account should be sufficient to retire the old debt. The investments reported above in the sewer user enterprise fun- represent the carrying value of the escrow account that is servicing the crossover refunding bonds. The City's restricted assets are categorized as uninsured and unregistered for which the .securities are held by the counterparty's trust department, but not in the city's name. Restricted assets for the discretely presented component units are as follows: Carrying Value Pueblo Urban Renewal Authority 6.508 collateralized repurchase agreement due August 15, 1994; secured by open market U.S. Treasury securities that are marked to market on a weekly basis and collateral held by trustee on behalf of the Authority but not in the Authority's name; carrying value approximates market value $ 9.950.138 -27- CITY OF PUEBLO, COLORADO NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1993 NOTE 7 - RESTRICTED ASSETS (Cont'd.) As disclosed in Note 2, the Pueblo Urban Renewal Authority was inactive until August 1986 when the Authority and the City entered into cooperation agreement whereby the Authority would acquire certair properties from the City for the purpose of building a convention center and parking structure. Based on this agreement, the Authority issuec $9,950,000 of short series tax increment revenue bonds. The proceeds, however, were not used for acquisition or construction since the Authority was not able to obtain a private developer to construct a hotel adjacent tc the convention center and parking structure. As such, the proceeds were placed in escrow and invested in a certificate of deposit whereby the interest earnings from the certificate would be sufficient to service the tax increment bonds. The bonds and certificate were scheduled to mature or August 15, 1988 if the Authority was unable to obtain a developer for the hotel. Since the Authority was not able to obtain a developer for the hotel, the tax increment bonds were remarketed in 1988 for an additional one year period. In August, 1989, the Authority again remarketed the tax increment revenue bonds for an additional two year period expiring August 15, 1991. In August, 1991, the Authority again remarketed the tax increment revenue bonds for an additional three year period expiring August 15, 1994. Interest on the bonds is paid from the interest earnings on the above repurchase agreement. In November 1993, the electorate authorized the issuance of $9,500,000 of tax increment revenue bonds to construct and equip a civic center. It is anticipated that a portion of the proceeds will be loaned to the private hotel developer. NOTE 8 - RISK MANAGM4ENT In 1993, the City established an internal service fund titled "self - insurance fund" to account for virtually all of the City's risk management activities. These risk management activities include the City's self - insured workmen's compensation plan, along with the .City's participation in the property and casualty pool of the Colorado Inter Governmental Risk Sharing Agency (CIRSA) which is a separate and independent governmental public entity .risk pool formed through intergovernmental agreement by member municipalities to provide defined liability and property coverages. Even though the fund is labeled "self - insurance fund ", the full faith and credit remains with the City and, thus, risk is not transferred to this fund. As such, payments received by this fund are accounted for as operating transfers. The self- insured workmen's compensation plan provides coverage up to $350,000 per occurrence with the self - insurance fund purchasing commercial insurance for claims in excess of that amount. During 1993, self- insured claims totalled $1,257,023, which included approximately $690,817 of estimated incurred but not reported claims which have been recognized as an expense and liability of the fund and included in the estimated claims payable caption. -28- CITY OF PUEBLO, COLORADO NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1993 NOTE 8 - RISK MANAGEMENT (Cont ' d . ) Membership in CIRSA provides the City with an equity interest which can be used to reduce future premiums or can be withdrawn upon discontinuing membership. As such, the caption labeled "investment in risk pool's represents the City's equity interest in CIRSA's property and casualty and worker's compensation pool. During 1993, the City incurred property and casualty expenses totalling $483,596 which includes approximately $108,000 .for excess insurance premiums, $137,000 in administrative expenses, and $238,596 in deductible claims and other insurance premiums. All of these expenses were charged to the self- insurance fund. NOTE 9 - LONG-TERM DEBT The following changes occurred in long -term liabilities reported in the general long -term debt account group: Balance Balance January 1, December 31, General obligation - Refunding, series 1985 Refunding, series 1987A Street and bridge bond, series 1987B Street and bridge refunding series 1992 Certificates of participation Pueblo Municipal Building Corp. Capital leases 1993 Iss ued Retired 1993 $ 1,265,000 $ - $ 265,000 $ 1,000,000 8,800,000 - 5,000 8,795,000 605,000 - 105,000 500,000 2.100.000 - - 2,100,000 $ 12,770,000 $ - $ 375.000 $ 12,395,000 $ 2,960,000 $ - $ 55.000 $ 2,905,000 $ 305.485 $ - $ 61.105 $ _ 244,380 $ 30,000 $ - $ 10.000 $ 20,000 Special assessments Notes /other debt - Howery property $ Section 108 of Housing and Community Develop- ment Act loan guarantee assistance notes 465,000 - 220,000 245,000 Colorado State Fair - 1,00.0.000 100.000 900.000 $ 475,771 $ 1.000,000 $ 326.837 $ 1,148,934 10,171 $ - $ 6,837 $ 3,934 Accrued compensated absences 3,916,329 295,258„ 257,458 3,954,129 $ 20,457,585 $ 1,295,258 $ 1,085,400 $ 20,867,443 -29- CITY OF PUEBLO, COLORADO NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1993 NOTE 9 - LONG -TERM DEBT (Cont'd.) The following changes occurred in long -term liabilities reported in the enterprise funds: Balance January 1, 1993 Revenue - Sewer series 1985 Sewer refunding, series 1986 Certificates of participation - Pueblo Municipal Property Corp. Pueblo Municipal Building Corp. Bonds payable from restricted assets - Sewer series 1986 crossover refunding Balance December 31, Issue Retired 1993 $ 2,610,000 $ - $ 800,000 $ 1 11,600.000 11,600,000 $ 14,210,000 $ - $ 800.000 $ 13,410.000 $ 4,430,000 $ - $ 160,000 $ 4,270,000 90,800 - 43,700 47,100 $ 4,520,800 $ - $ 203,700 $ 4,317,100 bonds $ 15,955,000 $ - $ - $ 15,955,000 $ 34,685,800. $ - $ -1..,003. 700 $ 33,682,100 The following changes occurred in long -term liabilities reported with the discretely presented component units: Balance Balance January 1, December 31, 1993 Issued Retired 1993 Pueblo Urban Renewal Authority short -term series tax increment revenue bonds $ 9.950.000 $ - $ - $ 9.950.000 The following is a description of each individual issue: General Obligation $2,255,000 1985 series general obligation bonds; interest rate ranges from 6.8% to annual installments ranging from $553,363 including interest; due November 1, 1995, serviced by 1985 series debt service fund refunding 3.5 %; due in to $554,106 debt is being $ 1,000,000 -30- CITY OF PUEBLO, COLORADO NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1993 NOTE 9 - LONG -TERM DEBT (Cont'd.) $8,805,000 1987A series general obligation refunding bonds; interest rate ranges from 6.3% to 8.251; due in annual installments including interest ranging from $683,555 to $1,242,270 through November, 2006; debt is being serviced by 1987A series debt service fund 8,795,000 $605,000 1987B series general obligation street and bridge refunding bonds; interest rate ranges from 6.0% to 7.4 due in annual installments ranging from $284,063 to $288,757 including interest through 1997; debt is being serviced by 1987B series debt service fund 500,000 $2,100,000 1992 series general obligation street and bridge refunding bonds; interest rate ranges from 3.6% to 6.0%, due in semi - annual installments ranging from $47,584 to $147,875 including interest through November 1, 2006; debt is serviced by 1992 series street and bridge debt service fund 2.100.000 $ 12.395.000 Certificates of Participation $2,960,000 of certificates of participation issue of Pueblo Municipal Building Corporation; interest rate ranges from 4.25% to 7.25 %; due in annual install- ments including interest ranging from $234,775 to $525,525 through December, 2015; debt is serviced by Pueblo Municipal Building Corporation debt service fund $ 2,905,000 $4,580,000 of certificates of participation issue of Pueblo Municipal Property Corporation; interest rate ranges from 6.4% to 7.3 %; due in annual installments including interest ranging from $334,750 to $485,150 through June 1, 2008; debt is serviced by Pueblo Municipal Property Corporation enterprise fund 4,270,000 $168,600 of 1991 certificates of participation issue of Pueblo Municipal Building Corporation; interest rate of 8 %; due in an annual installment of approximately $50,868 including interest on December 1, 1994; debt is serviced by Pueblo Municipal Property Corporation enterprise fund 47_,100 $ 7.222.100 Capital Lease $335,206 of obligations under capital lease; interest rate of 5.94°x: payable in semi - annual installments of $39,182 including interest through March 1997; debt is serviced by the data processing lease debt service fund $ 244.380 -31- CITY OF PUEBLO, COLORADO NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1993 NOTE 9 - LONG -TERM DEBT (Cont'd.) Special Assessments various special assessment bonds; interest rate ranges from 7.5t to 11.5 %; due in annual principal payments ranging from $5,000 to $15,000 through 1996; debt is serviced by special assessment debt service fund. The City is obligated to retire this debt. There is no requirement for a reserve or sinking fund in the event of default by the property owners Notes /Other Debt $42,500 12.51 note to Howery; principal and interest of $4,083 due June 1994; debt is serviced by Howery property debt service fund $1,165,000 Section 108 Housing and Community Development Act loan guarantee assistance notes; due in annual principal installment of $245,000 in August, 1994; interest rate ranges from 7.95$ to 9.081; debt is serviced by Community Development special revenue fund $1,000,000 commitment to the Colorado State Fair for construction of arena;.committed to pay $100,000 annually through 2002; commitment is serviced by the general fund and is subject to annual appropriation by City Council Revenue $22,805,000 series 1985 sewer revenue refunding bonds; interest rate ranges from 5.5k to 9.25k; due in annual installments ranging from $2,454,913 to $2,458,090 including interest through December 1, 1995; debt is being serviced by sewer user enterprise fund; $15,955,000 of the total issue is reflected on the combined balance sheet under the caption "bonds payable from restricted assets "; debt is serviced by sewer user enterprise fund $11,600,000 series 1986 sewer revenue crossover refunding bonds; interest rate ranges from 6.9% to 9.3%; due in annual installments of $418,735 which represents interest only payments until June 1, 1996; due in annual principal and interest installments ranging from $1,649,793 to $3,295,020 beginning June 1, 1996 through December 1, 2004; debt is serviced by sewer user enterprise fund $ 20,000 $ 3,934 245,000 900,000 $ 1,148,934 1,810,000 11,600,000 $ 13,410,000 -32- CITY OF PUEBLO, COLORADO NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1993 NOTE 9 - LONG -TERM DEBT (Cont'd.) Bonds Payable From Restricted Assets $22,805,000 series 1985 sewer revenue refunding bonds; interest rate ranges from 5.5% to 9.25 %; due in annual installments ranging from $2,450,425 to $5,014,338 including interest beginning June 1, 1996 through December 1, 2004; debt is serviced by sewer user enterprise fund $ 15.955.000 TOTAL $ 50.395.414 The following is a description of the individual issue for the discrete!" presented component unit: Bonds Payable From Restricted Assets $9,950,000 of 6.501 short -term series tax increment revenue bonds; interest only payments to August 15, 1994, with entire balance due at that time; debt is serviced by the Pueblo Urban Renewal Authority $ 9.950.000 Presented below is a summary of the debt service requirements to maturity, including interest of $31,311,134. Certificates General of Capital Year Obligation Revenue Participation Lease 1994 $ 1,535,927 $ 3,295,560 $ 866,041 $ 78,363 1995 1,551,477 3,292,383 817,192 78,363 1996 1,538,123 1,648,498 812,433 78,363 1997 1,531,750 1,640,495 721,175 39,182 1998 1,530,082 1,647,788 723,430 - 1999 -2003 7,613,250 8,227,706 3,600,797 - 2004 -2008 4,129,981 3,295,020 3,602,960 - 2009 -2013 - - 1,185,500 - 2014 -2015 - 764.825 $19,430,590 $23,047,450 $13,094,353 $ 274,271 Less: interest (7,035.590 (9.637,450 (5.872.253 29.891 NET $ 12.395.000 $ 13.410.000 $ 7.222.100 $ 244.380 -33- CITY OF PUEBLO, COLORADO NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1993 NOTE 9 - LONG - TERM! DEBT (Cont' d. ) Bonds Payable From Special Notes /Other Restricted Year Assessments Debt Assets 1994 1995 1996 1997 1998 1999 -2003 2004 -2008 2009 -2013 2014 -2015 Less: interest NET $ - $ 381,177 $ - 15,000 100,000 - 5 100,000 2,454,200 - 100,000 2,454,225 - 100,000 2,457,075 - 400,000 12,278,869 - - 5,014,338 $ 20,000 $ 1,181,177 $24,658,707 ( 32.243 (8,703.707 Total $ 6,157,068 5,854,415 6,636,617 6,486,827 6,458,375 32,120,622 16,042,299 1,185,500 764.825 $81,706,548 ( 31.311,134 ) $ 20.000 $ 1,148.934 $ 15.955.000 $ 50.395.414 The certificates of participation of Pueblo Municipal Property Corporation represent assignments of proportionate interests in rights to receive payments pursuant to an annually renewable golf course lease purchase and sublease agreement dated January 1, 1989, between the City and Pueblo Municipal Property Corporation. The proceeds were used to acquire, construct and equip a public golf course known as Walking Stick Golf Course. The principal and interest on the certificates is payable solely from annually appropriated base rentals paid by the City to PMPC. The certificates shall never constitute or give rise to a general obligation or other indebtedness of the City within the meaning of any constitutional, statutory or other charter debt limitation. All of the payment obligations of the City are subject to annual appropriation by City Council. The 1991 certificates of participation issue of Pueblo Municipal Building Corporation (PMBC) represent assignments of proportionate interests in rights to receive payments pursuant to an annually renewable equipment lease purchase agreement dated May 23, 1991 between the City and PMBC. The proceeds were used to acquire approximately 50 golf carts for use at Walking Stick Golf Course. The principal and interest on the certificates is payable solely from annually appropriated lease rentals paid by the City to PMBC. The certificates shall never constitute or give rise to a general obligation or other indebtedness of the City within the meaning of any constitutional, statutory or other charter debt limitation. All of the payment obligations of the City are subject to annual appropriation by City Council. -34- CITY OF PUEBLO, COLORADO NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1993 NOTE 9 - LONG-TERM DEBT (Cont'd.) The 1992 certificates of participation issue of PMBC represent assignments of proportionate interests in rights to receive payments pursuant to a:. annually renewable public works lease purchase agreement dated July 1, 199: between the City and PMBC. The proceeds were used to retire PMBC': existing indebtedness and to construct a public works facility. Th principal and interest on the certificates is payable solely from annually appropriated lease rentals to be paid by the City to PMBC. The certificates shall never constitute or give rise to a general obligation o= other indebtedness of the City within the meaning of any constitutional statutory or other charter limitation. All of the payment obligations of the City are subject to annual appropriation by City Council. The Section 108 Housing and Community Development Act loan guarantee assistance notes are secured by grants which have been made to the City o= will be made to the City in future years under Section 106 of Title I o the Act if the City is eligible. The notes are not general obligations of the City and do not constitute nor give rise to a pecuniary liability o`_ the City or a charge against its general credit or taxing power. The amount of general obligation long -term debt that can be incurred by the City is limited by its Charter. General obligation debt can't exceed 101- of assessed valuation. At December 31, 1993, the debt limit wa: $36,856,894 and the debt margin was $24,165,540. NOTE 10 - DEFERRED COMPENSATION PLANS The City offers its employees three deferred compensation plans created in accordance with Internal Revenue.Code Section 457. The plans, available to all City employees, permit them to defer a portion of their salary until future years. Participation in the plans is optional. The deferred compensation is not available to employees until termination, retirement, death or unforeseeable emergency. All amounts of compensation deferred under the plans, all property and rights purchased with those amounts, and all income 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 City subject only to the claims of the government's general creditors. Participants' rights under the plan are equal to those of general creditors of the City in an amount equal to the fair market value of the deferred account for each participant. The City 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 plans' trustee under one of four investment options, or a combination thereof. The choice of. the investment options is made by the participants. -35- CITY OF PUEBLO, COLORADO NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1993 NOTE 11 - FUND EQUITY Certain portions of fund equity have been reserved that represent funds not available for appropriation in the subsequent year. In addition, the City has designated portions of their unreserved fund equity for certain subsequent years' expenditures which can be appropriated in future years. The following is a description of these reserves and designations at December 31, 1993: RESERVATIONS OF RETAINED EARNINGS No part of retained earnings of the sewer user enterprise fund has been reserved because the City purchased approximately $4,100,000 face value surety bonds to replace the required reserves. The acquisition of these surety bonds stipulated certain requirement as follows: 1. Sewer charges must be at least 120 of annual debt service. 2. The City must create a restricted fund and make monthly deposits of $17,200 into this fund beginning in 1996. 3. investments in the sewer user fund are restricted to an approved list provided by the insurance underwriter. No part of retained earnings of Pueblo Municipal Property Corporation enterprise fund is reserved because City Council, as part of the adopting ordinance when the certificates of participation were issued, established a line of credit for the trustee and mortgage holder for the benefit of the City totalling $456,000. RESERVATIONS OF FUND BALANCE Reserve for encumbrances Encumbrances outstanding at year end are reported as reservations of fund balances since they do not constitute expenditures or liabilities. Reserve under indenture of trust /escrow agreement This caption is summarized as follows: Reserve under indenture of trust $ 296,000 Reserve for escrow agreement 300.000 $ 596.000 The reserve under indenture of trust represents the portion of the proceeds used to establish a reserve fund as required under the indenture of trust upon issuance of the 1992 certificates of participation of Pueblo Municipal Building Corporation. The reserve for escrow agreement represents the amount allocated by the City pursuant to an agreement upon -the acquisition of certain property. This agreement is for a period of five years and its purpose is to indemnify the previous property owner from environmental claims in exchange for the property owner's gift of the property to the City. -36- CITY OF PUEBLO, COLORADO NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1993 NOTE 11 - FUND EQUITY (Cont'd.) Reserve for operations and debt service This category is summarized as follows: Collection fee special revenue fund $ 62,708 Debt service funds 216.960 $ 279,668 The reserve for operations and debt service of the collection fee special revenue fund represents the 3 3/10% of sales tax collections from Novembea 3, 1993 to December 31, 1993 that was previously retained by vendors but will now be retained by the City for the purpose of providing additiona: security for operations and debt service of the Pueblo Urban Renewa: Authority's civic center and hotel project. As previously noted, the bond:i for this project were approved by the electorate on November 2, 1993, alone with authorizing the City to retain the vendors fee as noted above. The reserve for debt service in the debt service funds represents the amount available for future interest and principal payments on the genera obligation bonds. Reserve for emergencies This represents it of the City's approximate 1993 fiscal year spending aL that term as defined in the Colorado Constitution. Under these provisions of the Constitution, these reserves can be used for declared emergencie: only and the City must accumulate in these reserve accounts 3t or more of its fiscal year spending by December 31, 1995. Reserve for inventory A reserve equal to the inventory on hand at December 31, 1993 is provided to indicate that they do not represent available spendable resources. Reserve for prepaid expenses A reserve equal to the payments made in 1993 for 1994 expenditures is provided to indicate that they do not represent available spendable resources. Reserve for notes receivable Noncurrent portion of long -term notes receivable are offset equally by a fund balance reserve account which indicates they do not constitute. expendable available financial resources and therefore, are not available for appropriation. UNRESERVED FUND BALANCES- DESIGNATIONS The City designates certain portions of its unreserved fund balances fo; future expenditures based on City Council plans for future use. These designations, however, are only estimates and may change due to u :foreseer. circumstances. -37- CITY OF PUEBLO, COLORADO NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1993 NOTE it - FOND EQUITY (Cont'd.) Designated for subsequent years' expenditures This amount represents the portion of fund balance that was used to balance the relationship between revenues and other financing sources and expenditures and other financing uses in developing and adopting the 1994 budget. Other designations Other designations totalling $61,389 in the general fund are for employee benefits. DEFICIT FUND /RETAINED EARNINGS BALANCES The following is a summary of individual funds fund /retained earnings balances at December 31, 1993: Special Revenue Funds - Community Development E1 Pueblo Heritage Capital Projects Funds - Fountain Creek Floodplain Airport Development Enterprise Funds - Memorial Airport Ice Arena Pueblo Transportation Co. Swimming pools Mountain view Cemetery Pueblo Municipal Property Corporation Internal Service Funds - Self- insurance City shops Trust and Agency Funds - Restoration of carousel PRIOR PERIOD ADJUSTMENTS 6 1 deficit 2,297 25,726 214,196 31,865 3,347,313 396,974 3,110,466 173,197 33,408 403,917 226,607 284,030 158 adjustments Increase (Decrease) The following is a summary of individual fund prior period which affect retained earnings balances at January 1, 1993: As previously As Reported Restated Enterprise - City Park Golf Course Pueblo Municipal Property Corporation $ 1,086,907 $ 1,004,907 $( 82,000) ( 463.,921) ( 469,961) ( 6,040) which had These prior period adjustments were made to reflect the recognition of membership revenues over the period of availability which generally covers the period from May 1 to April 30. The effect of this correction was to decrease net income by these amounts for the year ended December 31, 1992. -38- CITY OF PUEBLO, COLORADO NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1993 NOTE 12 - CONTRIBUTED CAPITAL During 1993, contributed capital increased by the following amounts: Internal Enterprise Service Funds Funds Tota Balance January 1, 1993 $47,106,742 $ 124,520 $47,231,262 Capital grants 1,691 - 1,691 Residual equity transfers from other funds Property and equipment contributed by other funds Other assets contributed by other funds Balance, December 31, 1993 City Park Golf Co urse $ 897,136 NOTE 13 - SEGMENT INFORMATION FOR ENTERPRISE FUNDS The City maintains eight enterprise funds which provide golf, airport, ice rink facilities, transportation, sewer, swimming pool and cemetery services. Segment information for the year ended December 31, 1993 is as follows: Operating revenues Operating expenses excluding depreciation Depreciation Operating income (loss) Nonoperating revenues (expenses) - Grants Interest income Other Interest and fiscal charges Income (loss) before operating transfers Operating transfers in (out), net NET INCOME (LOSS) 365,999 - 365,999 1,323,337 73 1,323,410 762.214 1 762.214 $ 48.797.769 $ 886.607 $ 49.684.576 Memorial Airport $ 498,947 Ice Arena $ 122,261 Pueblo Transpor- tation Co. $ 268,030 694,257 1,578,441 341,116 1,537,114 83.941 476.926 36.456 132.628 $ 118,938 $(1,556,420) $( 255,311) $(1,401,712) - - - 614,667 15,824 4,462 - 611 - - 10,882 $ 134,762 $(1,551,958) $( 255,311) $( 775,552) ( 402.000 1.237.000 265.000 605.435 $ _( 267.238 $ ( 314.959 $ 9.689 $ ( 170,117 -39- CITY OF PUEBLO,'COLORADO NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1993 NOTE 13 - SEGMENT INFORMATION FOR ENTERPRISE FUNDS (Cont'd.) -40- City Park Pueblo Golf Memorial Ice Transpor- Course Airport Arena tation Co. Current capital contributions $ 6,873 $ 499,857 $ 20,000 $ 1,691 Property, plant and equipment - net 1,047,865 15,435,030 970,847 2,272,615 Revenue bonds payable - - - - Net additions - Property and equipment 82,910 513,274 21,632 6,957 Revenue bonds reduction - - - - Net working capital 116,981 225,220 58,139 ( 69,655) EQUITY 1,164,846 15,660,250 1,028,986 2,202,960 TOTAL ASSETS 1,537,698 15,768,965 1,039,512 2,564,841 Pueblo Mountain Municipal Sewer Swimming View Property User Pools Cemetery Corn, Operating revenues $ 5,337,254 $ 86,506 $ 72,768 $ 625,760 Operating expenses excluding depreciation 2,776,415 354,896 277,872 473,938 Depreciation 973,410 34,354 11,794 137,973 Operating income (loss) $ 1,587,429 $( 302,744) $( 216,898) $ 13,849 Nonoperating revenues (expenses) - Grants - - - - Interest income 1,590,313 9 - - Other, - - - - Interest and fiscal charges (2,647,787 - - ( 349.805 Income (loss) before operating transfers $ 529,955 $( 302,735) $( 216,898) $( 335,956)1' Operating transfers in (out), net ( 230,000 257,847 214,943 402,000 NET INCOME (LOSS) $ 299,955 $ ( 44,888 $ -( 1,955 $ 66,044 -40- CITY OF PUEBLO, COLORADO NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1993 NOTE 12 - CONTRIBUTED CAPITAL During 1993, contributed capital increased by the following amounts: Internal Enterprise Service Funds Funds Total Balance January 1, 1993 $47,106,742 $ 124,520 $47,231,262 Capital grants 1,691 - 1,691 Residual equity transfers from other funds Property and equipment contributed by other funds Other assets contributed by other funds Balance, December 31, 1993 City Park Golf Course $ 897,136 NOTE 13 - SEGMENT INFORMATION FOR ENTERPRISE FONDS The City maintains eight enterprise funds which provide golf, airport, ice rink facilities, transportation, sewer, swimming pool and cemetery services. Segment information for the year ended December 31, 1993 is as follows: Operating revenues .Operating expenses excluding depreciation Depreciation Operating income (loss) Nonoperating revenues (expenses) - Grants Interest income Other Interest and fiscal charges Income (loss) before operating transfers Operating transfers in (out), net NET INCOME (LOSS) 365,999 - 365,999 1,323,337 73 1,323,410 762.214 1 762.214 $ 48.797.769 $ 886.607 $ 49.684.576 Memorial Ai=ort $ 498,947 Ice Arena $ 122,261 Pueblo Transpor- tation Co. $ 268,030 694,257 1,578,441 341,116 1,537,114 83,941 476.926 36.456 132.628 $ 118,938 $(1,556,420) $( 255,311) $(1,401,712) - - - 614,667 15,824 4,462 - 611 10,882 $ 134,762 $(1,551,958) $( 255,311) $( 775,552) ( 402.000 1.237,000 265,000 605.435 $ ( 267.238 $ ( 314,958 $ 9.689 $ ( 170.117 -39- CITY OF PUEBLO, COLORADO NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1993 TOTE 13 - SEGMENT INFORMATION FOR ENTERPRISE FUNDS (Cont'd.) Sewer User :urrent capital contributions $ 809,412 $ ?roperty, plant and equipment - net 39,580,209 Zevenue bonds payable 29;365,000 vet additions - Property and equipment 1,222,702 Revenue bonds reduction 800,000 Net working capital 10,229,566 EQUITY 37,613,770 TOTAL ASSETS. 67,815,623 Swimming Pools 245,000 653,558 223,881 61,981 715,539 717,095 Operating revenues Operating expenses, excluding depreciation Depreciation Operating income (loss) Nonoperating revenues (expenses) - Grants Interest income Other Interest and fiscal charges Income (loss) before operating transfers Operating transfers in (out), net NET INCOME (LOSS) Current capital contributions Property, plant and equipment, net Revenue bonds payable Net additions - Property & equipment Revenue bonds reduction Net working capital EQUITY TOTAL ASSETS -41- Mountain View Cemetery $ 100,999 $ 213,962 Pueblo Municipal Property Corp. 7,195 4,859,040 4,317,100 79,973 7,858 203,700 ( 71,288) (1,314,682) 142,674 ( 356,722) 593,443 5,013,365 Total $ 7,908,662 8,034,049 1.887.482 $ (2,012,869) 614,667 1,611,219 10,882 (2.997.592 $(2,773,693) 2.350.225 $ ( 423.468 $ 1,691,027 65,033,126 33,682,100 2,159,187 1,003,700 9,236,262 58,172,303 95,050,542 CITY OF PUEBLO, COLORADO NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1993 NOTE 14 - OTHER REPORTING ENTITY DISCLOSDRES JOINT VENTURES PUEBLO REGIONAL BUILDING DEPARTMENT The City is a participant with the County of Pueblo, Colorado in a joint venture known as the Pueblo Regional Building Department. The Department's purpose is to enforce building codes and license contractors throughout the City and County. The governing body is composed of seven members, three of which are appointed by the City, are appointed by the County, and one member is jointly appointed. The Department is required to submit monthly reports of revenues and expenditures to the City and County and their annual budget is subject to the approval of the City and County. In addition, the agreement stipulates that if allocated expenses exceed revenues for either the City or County, the Department can assess the City or County for the deficit. Complete financial statements for the Department can be obtained from the Department's Administrative Office at 316 W. 15th, Pueblo, Colorado. PUEBLO CITY - COUNTY HEALTH DEPARTMENT The Pueblo City - County Health Department is also a joint venture between the City of Pueblo and the County of Pueblo. The Department was created in 1952 for the purpose of providing public health care services to the residents of the City and County. Approximately 45% of the Department's revenues are composed of subsidies from the City of Pueblo and County of Pueblo, with the City's totalling $596,580 for 1993. The governing body of the Department is composed of five members, two of which are appointed by the City of Pueblo, two are appointed by the County of Pueblo, and one member is jointly appointed. The governing body of the Department appoints the administrator and the administrator appoints all other personnel. The joint venture agreement requires that the governing body of the Department submit a proposed annual operating budget to the City and County for their approval. Based upon the proposed budget, the City and County individually determine the amount of their respective annual subsidies for the Department. The joint venture agreement also stipulates that the participants shall endeavor to appropriate funds to the Department that are reasonable, fair and equitable to all parties. Complete financial statements for the City- County Health Department can be obtained from their administrative office located at 151 Central Main, Pueblo, Colorado. -42- CITY OF PUEBLO, COLORADO NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1993 NOTE 14 - OTHER REPORTING ENTITY DISCLOSURES (Contd.) RELATED ORGANIZATIONS PUEBLO AREA COUNCIL OF GOVERNMENTS (PACOG) PACOG was formed in 1971 to serve as an interlocal advisory board through which local government entities may be aided in dealing with issues of common interest that transcend geographic borders to include comprehensive regional planning process. PACOG's governing body i:. composed of 13 members, of which 7 are appointed by City Council. Th= City's accountability is limited to maintaining the accounting records and making these appointments. During 1993, the City appropriated $3,600 t- PACOG. PUEBLO HOUSING AUTHORITY The governing body of the Pueblo Housing Authority is composed of fiv- members, all of whom are appointed by City Council. The City'E accountability for the Housing Authority does not extend beyond makinc these appointments. UNDIVIDED INTEREST PUEBLO COMBINED DISPATCH CENTER The Pueblo Combined Dispatch Center was created in - 1992 by intergovernmental agreement with the County of Pueblo, Colorado to provide dispatch operations throughout the City and County with one system. The Center began operations in 1993 with the City incurring 62t of the cost and the County incurring the remaining 38%. The agreement did not create G separate legal entity. As such, the City has reported its share of the Center's expenses within the general fund. NOTE is - PENSION PLANS The City participates in four retirement plans as follows: Fire and Police Pension Association (FPPA) The Fire and Police Pension Association (FPPA) was created by Colorado statute effective January 1, 1980. Effective January 1, 1981, thz fiduciary responsibilities of investment, accountability and custody of both the City's fire and police pension funds were transferred to FPPA. The terms of the state -wide plan differentiate between those hired before April 8, 1978 (old hires) and those hired after April 8, 1978 (new hires) . The plan stipulates that all full -time paid firemen and policemen are covered by the death and disability provisions of the plan and all ner• hires are covered by the retirement provisions of the state -wide plan. The old hires have the option of being covered by the retirement provisions of the state -wide plan or the retirement provisions of the old plans. As such, the following disclosures are presented as old hire -fire old -hire- police and new hire -fire and police These plans represent three of the four retirement plans in which the City participates. -43- CITY OF PUEBLO, COLORADO NOTES TO FINANCIAL STATEMNTS DECEMBER 31, 1993 NOTE 15 - PENSION PLANS (Cont'd.) A. Plan Description Both the Old Hire -Fire and Old Hire- Police plans are agent multiple. employer Public Employee Retirement Systems (PERS). Full time police officers and firemen employed as of April 7, 1978 are eligible tc participate in these plans. For the year ended December 31, 1993, the City's payroll for Old Hire -Fire employees was $2,496,072; the Old Hire. Police payroll was $3,516,851. Total payroll for the City of Pueblo fo3 the same period was $21,595,800. Employees covered by both the Old Hire Fire and Old Hire - Police plans are required to contribute 8%- of theiz annual salary to the System. The City is required to contribute the balance necessary to fund the system based on actuarial computation: specified by statute. Old Hire -Fire employees may retire upon reaching age 50 and completing 2C years of service. Participants are entitled to a monthly pension equal tc one -half of their monthly salary at the date of retirement. The plan alsc provides a post - retirement death benefit. The plan also includes a rank escalation clause which, based on the City's interpretation, provides foz an increase in the participant's monthly pension in proportion to increases in pay for the participant's rank at retirement. Old Hire - Police employees may retire upon reaching age 55 and completing 2E years of service. The annual pension is equal to 2t of the participant's highest annual compensation multiplied by years of service up to 25 years plus Ik of highest annual compensation for each year of service in excess of 25 years. A police officer terminating employment with 25 years of service before. attaining age 55 will be eligible for a pension calculated as described above, upon reaching age 55. If a police officer terminates employment with less than 25 years of service, participant's contributions are refunded without interest. The plan also includes a rank escalatior clause which, based on the City's interpretation, provides for an increase t in the participant's pension in proportion to increases in pay for the 1. participant's rank at retirement. r B. Funding Status and Progress The amounts shown below, as "pension. benefit obligation" for the Old Hire- ' Fire and Old Hire - Police plans are a standardized disclosure measure of the a present value of pension benefits, adjusted for the effects of projected salary increases, 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 System(s) 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. -44- CITY OF PUEBLO, COLORADO NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1993 NOTE 15 - PENSION PLANS (Cont'd.) The "pension benefit obligations" presented below are as of January 1, 1993, for both the Old Hire -Fire and Old Hire- Police Significant assumptions used in the actuarial valuations for both plans include (a) a rate of return on the investment of present and future assets of 7 1 /2t per year compounded annually, (b) earnings progression rate of 5o per year for inflation plus 1 /2t per year for each 5 years of employment, (c) cost of. living escalators of 4.5% per year compounded annually for benefits accrued prior to January 1, 1980, and 3k per year thereafter which is the maximun . permitted by law, and (d) 4.5t per year for rank escalation. The pension benefit obligation for each of the plans is as follows: Old Hire Old Hire Fire Poliaft Total Pension benefit obligation - Retirees and beneficiaries currently receiving benefits $22,550,413 $15,305,643 $37,856,056 Terminated vested employees not yet receiving benefits - 815,444 815,444 Current employees - Accumulated employee contributions 2,439,769 3,253,211 5,692,980 Employer financed vested 3,040,627 5,595,551 8,636,178 Employer financed nonvested 13.068.740 11.656.213 24.724.953 TOTAL PENSION BENEFIT OBLIGATION $41,099,549 $36,626,062 $77,725,611 Net assets available for benefits, at market 21.209.373 41.052.068 62.261.441 Unfunded (surplus) pension benefit obligation $ 19,890.176 $ (4,426.006 ) $ 15.464.170 C. Actuarially Determined Contribution Requirements and Contributions Made The System's funding policy provides for actuarially computed contributions funded on a monthly basis. Under the unit credit actuarial cost method with service prorate, the normal cost is computed as the actuarial present value of benefits expected to be accrued in the year beginning on th- valuation date. The contributions for 1993 were computed to pay norma -. cost and amortize the unfunded actuarial accrued liability over 37 years from 1989. Significant actuarial assumptions used to compute the actuarially determined contribution requirement are the same as those uses, to compute the pension benefit obligation as described in B above. -45- CITY OF PUEBLO, COLORADO NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1993 NOTE 15 - PENSION PLANS (Cont'd.) Contributions to the System for 1993 totalled $1,454,632 for the Old Hire - Fire and $562,696 for the Old Hire - Police These contributions were made in accordance with actuarially determined requirements computed by actuarial valuation performed as of January 1, 1993. Additional contribution information includes: Old Hire- Old Hire - Fire Police Normal cost $ 429,624 $ 455,221 . of covered payroll 17.212$ 12.944. Amortization of Unfunded Actuarial Accrued Liabilities 1,025,008 107,475 . of covered payroll 41.064% 3.056% City of Pueblo contribution 1,254,945 281,348 k of covered payroll 50.28. 8.0. Employee contribution .199,687 281,348 . of covered payroll 8.0% 8.0. Every year FPPA distributes state funds to assist old hire police and fire pension.plans in reducing their unfunded liabilities. This distribution is made in accordance with state law and requires that such plans meet certain employer/ employee contribution criteria. The main criterion is that the contribution be increased by a certain percent over the previous year until the plan is actuarially sound. In 1993, the unfunded liabilities in the City of Pueblo's Old Hire -Fire plans were reduced by a $698,865 distribution of state funds. D. Trend Information Trend information gives an indication of the progress made in accumulating sufficient assets to pay benefits when due. For the most recent plan years, the following trend information is available and applies. Old Hire -Fire January 1, January 1, January 1, 1993 1992 1991 Net assets available for benefits $21,209,373 $18,576,112 $14,398,932 Pension benefit obligation 41,099,549 39,279,508 37,065,132 Percentage funded Assets in excess (deficiency) of pension benefit obligation Annual covered payroll Unfunded pension benefit obligation as a percent of covered payroll 51.6 47.3 38.9$ (19,890.,175) (20,703,396) (22,666,200) 2,496,072 -46- 796.9. 2,535,783 816.5. 2,564,411 883.9. CITY OF PUEBLO, COLORADO NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1993 NOTE 15 - PENSION PLANS (Cont'd.) _ Old Hire - Police January 1, January 1, January 1, 1993 1992 1991 Net assets available for benefits $41,052,068 Pension benefit obligation 36,626,062 Percentage funded 112.1 Assets in excess (deficiency) of pension benefit obligation 4,426,006 Annual covered payroll 3,516,851 Unfunded pension benefit obligation as a percent of covered payroll N/A $37,342,273 34,713,673 107.6$ 2,628,600 3,545,914 N/A $30,978,856 31,339,156 98.91 ( 360,300) 3,748,638 9.6% In addition, for the three years ended December 31, 1991, 1992 and 1993, the City's contributions to the System(s), all made in accordance with actuarially determined requirements, were 39.48 %, 43.957% and 50.28% for the Old Hire -Fire and 8.0 %, 8.0%, and 8.0% for the Old Hire - Police Ten- year trend information may be found on page 123 of the City's comprehensive annual financial report. New Hire Fire and Police All full -time fire and police employees hired after April 8, 197E participate in the Fire and Police Pension Association of Colorado New Hire Pension Fund which is a cost - sharing, multiple employer public employee retirement system. The payroll for employees covered by the System for the year ended December 31, 1993 was $3,830,607; the City's total payroll was $21,595,800 for the same time period. Full time police officers and firemen employed subsequent to April 8, 197='S are eligible to participate in the plan. Employees hired prior to April 8 1978 may elect coverage under the terms of the new hire plan if their employer is affiliated with FPPA. The City is affiliated with FPPA and certain old hires d:.d make this election in 1981. Any member may retire from further service and be eligible for a normal retirement pension at any time after age 55 and at least 25 years of service. The annual normal pension is equal to 2% of the average of the highest three years' base salary multiplied by the years of service prior to age 60. in addition, participants are 100$ vested after 10 years of service. If a participant; terminates employment prior to retirement,. the participant may elect tr; leave contributions with the plan and become eligible for retiremen-: pension at age 55 or the participant may elect to receive the contributions in a -lump sum including interest at 5 %. An early retirement benefit is available after completion of 30 years of service and upon reaching age 5 in the amount of the normal retirement reduced by 1/2 of it for each mont:: the benefit commences prior to age 60. -47- CITY OF PUEBLO, COLORADO NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1993 NOTE 15 - PENSION PLANS (Cont'd.) Employees are required to contribute 8% of their annual salary to the System. The City is required by state statute to contribute an amount at least equal to the employee rate. The contribution requirement for the year ended December 31, 1993 was $612,894, of which equal amounts of $306,447 were contributed by the City of Pueblo and the employees, both representing 8t of covered payroll. The "pension benefit obligation" is a standardized .disclosure measure of the present value of pension benefits, adjusted for the effects of projected salary increases estimated to be payable in the future as a result of employee service to date. The measure is the actuarial present value of credited projected benefits and is intended to help users of financial statements assess the Plan's funding status on a going - concern basis, assess progress made in accumulating sufficient assets to pay benefits when due, and make comparisons among public employee retirement systems. This PERS does not make separate measurements of assets and pension benefit obligations for individual employers. The pension benefit obligation at January 1, 1993 for the system as a whole, determined through an actuarial valuation performed as of that date, was $72,547,248. The net assets..available for benefits on that date, valued at market, was $103,311,819, leaving an excess of net assets available for benefits over the pension benefit obligation of $30,764,571. The City's 1993 contribution of $306,447 represents 6W of total contributions required of participating entities. Ten year historical trend information showing the System's progress in accumulating sufficient assets to pay benefits when due is presented in the System's December 31, 1993 financial report. Public Employees' Retirement Association (PERA) All full -time employees of the City, except firemen, uniformed police, and employees of the Pueblo Transportation Company, participate in the state- wide Public Employees Retirement Association (PERA), a multiple - employer, cost - sharing public employee retirement system. The payroll for employees covered by the system for the year ended December 31, 1993 was $9,606,936; the City's total payroll for the year ended December 31, 1993 was $21,595,800. Members are eligible for service retirement benefits upon reaching (a) age 65 with five or more years of credited service, (b) age 60 with 20 or more years of credited service, (c) age 55 with 30 or more years of service, or by (d) earning 35 or more years of credited service. Such benefits are equivalent to 2.5 percent of their Highest Average Salary ( "HAS ") during their highest paid three years of service (defined as three periods of 12 consecutive months) prior to retirement for each year of service up to 20 years, and 1.25 percent for each year over 20 years. The maximum benefit available is 75 percent of their HAS. The Plan also permits reduced service retirement at age 55 with 20 or more years of credited service, or at age 60 with five or more years of credited service. Members may elect to receive their benefits in the form of single or joint life payments. -48- CITY OF PUEBLO, COLORADO NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1993 NOTE 15 - PENSION PLANS (Cont'd.) The Plan also provides for disability retirement and survivor benefits. Members who become permanently disabled with at least five years of earned service since the beginning of the most recent period of membership car receive disability benefits that are based on service credit projected tc 20 years or age 65, whichever is first. The HAS calculation is the same as that used for service retirement. If an active member dies after accumulating at least one year of service credit, a benefit based upon the accumulated credited service as of the time of death and the number and relationship of family survivors is payable to such survivors. Employer and employee contributions are defined by state statute based upor actuarial valuations performed annually. The contribution requirement for the year ended December 31, 1993 was $1,729,212, which consisted of $960,673 from the City and $768,539 from employees; these contributions- represented 10.01 and 8.0t of covered payroll, respectively. 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 estimated to be payable in the future as a result of member service to date. The measure is the actuarial present value of credited projected benefits and is intended to (a) help users assess the Plan's funding status on a going - concern basis, (b) assess progress bein4 made in accumulating sufficient assets to pay benefits when due and (c`. allow for comparisons among public employee retirement plans. The Syster does not make separate measurements of assets and pension benefit obligation for individual employers. The pension benefit obligation at December 31, 1992 for the system as a whole, determined by an actuaria- valuation performed as of that date, was approximately $11,335,282,000. The System's net assets available for benefits on that date, valued at market, were approximately $12,181,802,000, leaving assets in excess of pension benefit obligation of $846,520,000. The City's 1993 contribution represented .2 percent of total contributions of all participating entities. Ten year historical trend information showing the System's progress in accumulating sufficient assets to pay benefits when due is presented in the System's December 31, 1992, comprehensive annual financial report, whic`: is the latest information available. -49- CITY OF PUEBLO, COLORADO NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1993 NOTE 16 - OPERATING TRANSFERS IN /OUT Operating transfers between fund types are as follows: $ 15.769.967 $ 15.769.967 NOTE 17 - BUDGET REPORTING RECONCILIATION The accompanying combined statement of revenues, expenditures and changes in fund. balance - budget and actual - general, special revenue and debt '+ service funds presents comparisons of the legally adopted budget with actual data only for certain special revenue and debt service funds as described in Note 1(D). As described in Note 1(D), the combined statement of revenues, expenditures and changes in fund balance - budget and actual - general, special revenue and debt service funds includes the capital improvement fund, airport special tax fund and 1992 sales and use tax fund. For GAAP basis reporting, these three funds are included with the capital" projects funds in the combined statement of revenues, expenditures and changes in fund balance. In addition, the revenues, other financing sources, expenditures and other financing uses reported on the combined! budget and actual statement do not include amounts that were budgeted in prior years in the capital improvement fund, community development fund, airport special tax fund, and 1992 sales and use tax fund. Other differences exist in the general fund and debt service funds as reported below. I A reconciliation of the resultant basis, timing and perspective differences' in revenues, expenditures, other financing sources (uses), beginning fund balance and ending fund balance for the general fund, special revenue funds and debt service funds is presented below: -50- Operating Operating Transfers Transfers In Out General $ 2,954,257 $10,071,539 Special revenue ..1,612,248 3,447,402 Debt service 1,720,937 100,000 Capital projects 4,668,748 579,838 Enterprise 2,982,225 632,000 Internal service 1,546,000 - Trust and agency 285.552 939.188 $ 15.769.967 $ 15.769.967 NOTE 17 - BUDGET REPORTING RECONCILIATION The accompanying combined statement of revenues, expenditures and changes in fund. balance - budget and actual - general, special revenue and debt '+ service funds presents comparisons of the legally adopted budget with actual data only for certain special revenue and debt service funds as described in Note 1(D). As described in Note 1(D), the combined statement of revenues, expenditures and changes in fund balance - budget and actual - general, special revenue and debt service funds includes the capital improvement fund, airport special tax fund and 1992 sales and use tax fund. For GAAP basis reporting, these three funds are included with the capital" projects funds in the combined statement of revenues, expenditures and changes in fund balance. In addition, the revenues, other financing sources, expenditures and other financing uses reported on the combined! budget and actual statement do not include amounts that were budgeted in prior years in the capital improvement fund, community development fund, airport special tax fund, and 1992 sales and use tax fund. Other differences exist in the general fund and debt service funds as reported below. I A reconciliation of the resultant basis, timing and perspective differences' in revenues, expenditures, other financing sources (uses), beginning fund balance and ending fund balance for the general fund, special revenue funds and debt service funds is presented below: -50- CITY OF PUEBLO, COLORADO NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1993 NOTE 17 - BUDGET REPORTING RECONCILIATION (Cont'd.) General Fund Other Financing Beginning Ending Sources Fund Fund Revenues Expenditures (Us esl Balance Balance GAAP BASIS $36,272,040 $28,424,703 $(7,117,282) $2;791,067 $ 3,221,173 ADJUSTMENTS Residual equity transfer considered an operating transfer for budgetary purposes - - ( 10,286) - - Write off-of insurance company deposit in prior year not considered an expenditure for budgetary purposes - - - 569,057 569,057 Collection on long -term note in prior year that was contributed to another fund in 1993 - - - ( 60.000 ( 60.000 BUDGET BASIS $ 36,272,040 $ 28.424.703 $ (7,127,568 ) $ 3.300,124 $ _3.730,230 -51- CITY OF PUEBLO, COLORADO NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1993 NOTE 17 - BUDGET REPORTING RECONCILIATION (Cont'd.) Special Revenue Funds Other Financing Beginning Ending Sources Fund Fund Revenues Expenditures (Uses) Balance Balance GAAP BASIS $ 6,349,035 $ 4,065,969 $(1,835,154) $ 894,128 $ 1,282,049 41.314:44U �r Funds treated as capital projects funds for GAAP 630,652 4,660,803 4,204,425 9,101,027 9,275,301 Funds not budgeted (1,623,144) (1,740,257) ( 378,692) 125,006 ( 76,582) Funds for which projects were budgeted in prior years and other. adjustments (1,089,866 l 395,059 97,745 (2,706,182 (3,303,244 BUDGET BASIS $ 4,266,677 $ 6,591,456 $ 2,088,324 $ 7,413,979 $ 7,177,524 Debt Service Funds Other Financing Beginning Ending Sources Fund Fund Revenues Expenditures Uses Balance Balance GAAP BASIS $ 31,760 $ 1,745,146 $ 1,620,937 $ 309,409 $ 216,960 ADJUSTMENTS Funds not budgeted - Special assessments ( 19,522) ( 12,626) 100,000 Street and bridge series 1992 - ( 98,139) ( 98,139) Residual equity transfer - - BUDGET BASIS $ 12,238 $ 1,634,381 $ 1,622,798 ( 297,825) ( 204,721) ( 11,065 $ 519 $ 12,239 -52- CITY OF PUEBLO, COLORADO NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1993 NOTE 18 - EXCESS OF ACTUAL EXPENDITURES AND OTHER FINANCING USES OVER BUDGETED EXPENDITURES AND OTHER FINANCING USES The following departments within the general fund incurred actual expenditures and other financing uses in excess of budgeted expenditures and other financing uses: Actual Over Actual - Budget Budget General fund - Fire department $ 6,081,340 $ 5,957,205 $ 124,135 Transportation 2,288,916 2,245,824 43,092 Transfers to other funds 10,081,825 9,688,162 393,663 NOTE 19 - CONTINGENCIES AND COWITMENTS The following is a summary of the more significant contingencies and commitments that existed at December 31, 1993: Under the terms of federal and state grants, periodic audits are required and certain costs may be questioned as not being appropriate expenditures under the terms of the grants. Such audits could lead to reimbursement tc the grantor agencies. During 1987 one such audit was performed by the Office of Inspector General /Office of Audits, U.S. Department of Commerce relative to EDA Grant No. 05- 19- 02137. The grant, not to exceed $1,272,000, was awarded on Julv 19, 1984, and was to assist in reducing severe unemployment by providing funds for public improvements to support a new manufacturing facility anc for future industrial development. The federal funds provided under the grant were $1,059,945. The audit reported that the City, while implementing the grant, violated federal regulations, the grant terms and conditions, and the intent of the amended Public Works and Economic Development Act of 1965. These alleged violations related to job relocation issues and individual financial interests of a person asserted to be an agent for the City. City officials strongly disagree with and dispute the findings and the matter has not yet been resolved. In March 1993, the Public Employees Retirement Association of Colorado (PERA) filed a complaint against.the City alleging (1) that the City faile "_ to withhold employee contributions and make employer contributions foz three named and unnamed employees during specified periods and (2) the City is obligated to make both the required employee and employer contributions retroactively to the date membership should have been provided, until the date of compliance, with interest assessed. on all such contributions. The City intends to vigorously defend the action and while there is a likelihood of an unfavorable outcome, it is not possible to estimate the amount or range of potential loss. -53- CITY OF PUEBLO, COLORADO NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1993 NOTE 19 - CONTINGENCIES AND (Cont Id.) In November, 1992, the voters of the State of Colorado passed an amendment to the constitution of the State of Colorado which is commonly known as the "Tabor" amendment. The stated purpose of the amendment was to limit the growth of state and local government. The amendment outlines spending limits, revenue limits, debt provisions, and election provisions that must be adhered to by the City. In compliance with the amendment, the City has estimated that their 1993 revenue exceeded the allowed increase over the base year by approximately $700,000. In accordance with the provisions of the amendment, the City requested the voters allow retention of this excess by the City to be used for the acquisition of police and fire department equipment. In November 1993, the electorate agreed to allow the City to retain this excess. In accordance with Governmental Accounting Standards Board Statement No. 1, the City has recognized as an expenditure and a liability in the General Fund the accrued vacation and sick pay that is expected to be liquidated with available spendable resources. The remaining amount of the unpaid vacation and sick pay attributable to governmental funds has been recognized in the General Long -Term Debt Account Group. The unpaid vacation and sick pay attributable to proprietary funds has been accrued in its entirety. The following is a summary of the total unpaid vacation and sick pay that existed at December 31, 1993: General Fund $ 150,000 Enterprise Funds - Memorial Airport 95,212 Pueblo Transportation Co. 227,615 Sewer User 251,788 Internal Service Funds - City Shops 66,057 General Long -Term Debt 3.954.129 TOTAL $ 4.744.801 The total amount of $4,744,801 consists of $1,877,558 vacation pay and r $2,867,243 sick pay. In prior years, the City has defeased various bond issues by issuing new debt with the proceeds of the new debt being used to purchase U.S. government securities. The U.S. government securities acquired were placed in an irrevocable trust such that the investments and earnings from the securities are sufficient to fully service the defeased debt until the debt is called or matures. For financial reporting purposes, the debt has been considered defeased and therefore removed as a liability from the City's general long -term debt account group or the applicable enterprise fund if the defeased debt was a revenue bond. As of December 31, 1993, the amount of defeased debt outstanding but not reported on the general purpose financial statements totalled $32,029,000, including $16,805,000 of sewer revenue bonds. -54- CITY OF PUEBLO, COLORADO NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1993 COTE 19 - CONTINGENCIES AND COMITMENTS (Cont'd.) The Pueblo Board of Water Works was created in 1954 upon the adoption of the Charter of the City of Pueblo, Colorado. All general obligation water• bonds represent legally valued debt obligations of the City. These bond: are characterized as contingent liabilities only since the general obligation water bonds are also secured by a pledge of the net revenues of the water works system and the user fees for the water works system are established by an independently elected five member board. Since inception, the City has never provided funding for bonded debt service. At December 31, 1993, $21,955,000 of general obligation water refunding bonds were outstanding. -55- COMPONENT UNITS PUEBLO URBAN RENEWAL AUTHORITY - To account for the activity.of the Authority regarding urban renewal and the proposed convention center. PUEBLO COUNTY HEADSTART PARENTS, INC. - To account for the activities of the nonprofit corporation which provides child care, nutrition, and preschool services to eligible recipients within the City. Financing is provided by federal grants, state grants and program fees. CITY OF PUEBLO, COLORADO COMPONENT UNITS COMBINING BALANCE SHEET DECEMBER 31, 1993 Tota ASSETS Cash Investments Restricted assets Accounts receivable Notes receivable Accrued interest receivable Due from primary government Due from state grants Due from federal grants Property and equipment TOTAL ASSETS $ 11,503 100,000 9,950,138 71,315 212,020 242,531 119,993 18,474 231,612 629.712 $ 11.587.298 Pueblo Urban Renewal Authority 9,950,138 42,908 212,020 242,531 7,643 61.919 $ 10.517.159 $ 61,919 249,149 $ 311.068 $ 11,503 100,000 28,407 112,350 18,474 231,612 567.793 LIABILITIES AND EQUITY Liabilities - Accounts payable Deferred revenue Tax increment bonds payable Total Liabilities Equity - Investment in general fixed assets Fund balance Total Equity TOTAL LIABILITIES AND EQUITY $ 48,605 486,013 9.950.000 $ 10.484.618 $ 629,712 472.968 $ 1.102.680 $ 1,163 254,928 9.950.000 $ 10.206.091 Pueblo County Headstart Parents. Ir.. $ 1.070.139 $ 47,442 231,085 $ 278.527 $ 567,793 223.819 $ 791.612 $ 11.587.298 $ 10.517.159 $ 1.070.139 -151- CITY OF PUEBLO, COLORADO COMPONENT UNITS COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE YEAR ENDED DECEMBER 31, 1993 REVENUES Property taxes Federal grants State grants In -kind contributions and project income Interest Other revenues TOTAL REVENUES EXPENDITURES Current programs and projects Capital outlay Debt service - Interest TOTAL EXPENDITURES EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES FUND BALANCE, January 1 FUND BALANCE, December 31 $ 34,566 1,464,033 307,101 638,062 649,422 43,701 $ 3.136,885 $ 2,193,439 192,187 646.750 $ 3.032.376 $ 104,509 368.459 $ 472.968 Pueblo Urban Renewal Authority $ 34,566 648,279 14,621 $ 697.466 $ 10,986 61,919 646.750 $ 719.655 Pueblo County Headstart Parents. Inc 1,464,033 307,101 638,062 1,143 29.080 $ 2.439.419 $ 2,182,453 130,268 1 is $ 2.312.721 V -152- $( 22,189) 271.338 $ 249.149 $ 126,698 1 97.121 $ 223.819 ��. AMBAC Indemnity Corporation Municipal Bond Insurance Policy c'o CT Corporation Systems as East Mifflin St., Madison, Wisconsin 53703 Administrative Office: One State Street Plaza, New York, NY 10004 Telephone: (212) 668 -0340 Issuer: policy Number. Bonds: Premium: AMBAC Indemnity Corporation (AMBAC) A Wisconsin Stock Insurance Company in consideration of the payment of the premium and subject to the terms of this Policy, hereby agrees to pay t nited States Trust Company of New York, as trustee, or its successor (the "Insurance Trustee "), for the benefit of Bon olde t t portion of the prin- cipal of and interest on the above - described debt obligations (the "Bonds') which shall become Due y all be unpaid by reason of Nonpayment by the Issuer. AMBAC will make such payments to the Insurance Trustee within one (1) business da g n . t n A AC of Nonpay- ment. Upon a Bondholder's presentation and surrender to the Insurance Trustee of sit u id ds purse nt coupons, un- canceled,and in bearer form and free of any adverse claim, the Insurance Trust bu t e B lder the face amount of principal and interest which is then Due for Payment but is unpaid. Upon su is a en AM 1 become the owner of the surrendered Bonds and coupons and shall be fully subrogated to all of t on er n is a nt. In cases where the Bonds are issuable only in a form whereby princi p b to ndholders or their assigns, the Insurance Trustee shall disburse principal to a Bondholder as of 'd at d surrender to the Insurance Trustee of the unpaid Bond, uncanceled and free of any adverse claim, a er i ins of assignment, in form satisfactory to the Insurance Trustee, duly executed by the Bondholder or I s a d representative, so as to permit ownership of such Bond to be registered in the name of AMBAC or it n se h e rids are issuable only in a form whereby interest is payable to registered Bondholders or their assi ns, th Ins nce st a disburse interest to a Bondholder as aforesaid only uVn presentation to the Insurance Trustee of p a th laima th n entitled to the payment of interest on the Bond and delivery to the Insurance Trustee of an in t of si ment i for satisfactory to the Insurance Trustee, duly executed by the claimant Bondholder or such Bondholder ul aut 'ze rep a e, transferring to AMBAC all rights under such Bond to receive tht interest in respect of which th ' u ce me ade. AMBAC shall be subrogated to all the Bondholders rights to payment on registered Bonds t e ext t f t ins a disbursements so made. In the event the trustee or yi ag t r e n as notice that any payment of principal of or interest on a Bond which has become Due for Paym is a to a o older by or on behalf of the Issuer of the Bonds has been deemed a preferential transfer and theret ve f its regist d owner pursuant to the United States Bankruptcy Code in accordance with a final, nonappealable or r a co f m tent jurisdiction, such registered owner will be entitled to payment from AMBAC to the extent of such recovery s tent fu re or otherwise available. As used herein, the o h der means any person other than the Issuer who, at the time of Nonpayment, is the owner of a Bond or of a coupon appertai ond. As used herein, "Due for Payment ", when referring to the principal of Bonds, is when the stated maturity date or a ma edemption date for the application of a required sinking fund installment has been reached and does not refer to any earlier date on which payment is due by reason of call for redemption (other than by application of required sinking fund installments), acceleration or ocher advancement of maturity; and, when referring to interest on the Bonds, is when the stated date for payment of interest has been reached. As used herein, "Nonpayment" means the failure of the Issuer to have provided sufficient funds to the paying agent for payment in full of all principal of and interest on the Bonds which are Due for Payment. This Policy is noncancelable. The premium on this Policy is not refundable for any reason, including payment of the Bonds prior to maturity. This Policy does not insure against loss of any prepayment or other acceleration payment which at any time may become due in respect of any Bond, other than at the sole option of AMBAC, nor against any risk other than Nonpayment. In witness whereof, AMBAC has caused this Pbhcy to be affixed with a facsimile of its corporate seal and to be signed by its duly authorized officers in facsimile to become effective as its original seal and signatures and binding upon AMBAC by virtue of the counter- signature of its duly authorized representative. irt �,r ` � �+ o/ r 0 President �+ _ Secretary {! 0 \��'� Effective Date: Authorized Representative UNITED STATES TRUST COMPANY OF NEW YORK acknowledges that it has agreed to perform the duties of Insurance Trustee under this Policy. Form • ti66-000318 /921 Au��,�r� LIMITED OFFERING MEMORANDUM DATED AUGUST 10, 1994 NEW ISSUE NOT RATED In the opinion ofKutakRock, Bond Counsel, underexisting laws, regulations, rulings andjudicialdecisions and assuming compliance with certain covenants by the Authority set forth in the Indenture under which the Bonds are issued and in other documents, interest on the Series 1994B Bonds is excluded from gross income for federal income tax purposes, and, under existing laws ofthe State of Colorado, interest on the Series 1994B Bonds is excluded from gross income for Colorado income tax purposes; and interest on the Series 1994B Bonds is not a specificpreference itemforpurposes ofthefederal andState ofColorado alternative minimum tax. The Series 1994B Bonds have been designatedby theAuthorityas "qualified tax - exempt obligations "forpurposes ofSection265(b)(3) ofthe Internal Revenue Code of] 986, as amended. See "TAX EXEMPTION" herein, which contains a discussion of additional federal tax consequences affecting some owners of the Series 1994B Bonds. $2,225,000 URBAN RENEWAL AUTHORITY OF PUEBLO, COLORADO Subordinate Revenue Refunding Bonds (Phase One Urban Renewal Project) Series 1994B Originally Dated: August 15, 1994 Due: December 1, 2019 Short Term Interest Rate: 5.05% Mandatory Call on Priced to Yield: 6.10% December 1, 1996 The Urban Renewal Authority of Pueblo, Colorado (the "Authority "), Subordinate Revenue Refunding Bonds (Phase One Urban Renewal Project), Series 1994B (the "Bonds "), are being issued as fully registered bonds in the denomination of $100,000 plus whole increments of $5,000. Interest on the Bonds is payable from the date of the Bonds, semiannually on June 1 and December 1 in each year commencing December 1, 1994, by check or draft mailed to the registered owners of the Bonds. Principal ofthe Bonds will be payable at the principal office of The Bank of Cherry Creek, N.A., in Denver, Colorado, which will initially act as trustee, bond registrar and paying agent for the Bonds (the "Trustee "). See "THE BONDS." The Bonds will be sold only to Accredited Investors (as defined herein). In addition. no Bond may be registered for transfer except to a Qualified Institutional Buyer or an Accredited Investor (each as defined herein). See "The BONDS -- Registration, Transfer and Exchange" and "THE INDENTURE -- Definitions. From the date of issue to and including December 1, 1996, the Bonds will bear interest at the interest rate set forth above, payable as described above. Upon satisfaction of the conditions for the remarketing of the Bonds, the Bonds may be remarketed as long -term bonds on December 1, 1995, June 1, 1996 or December 1, 1996 (each a "Conversion Date "). If the Bonds are not remarketed on or before December 1, 1996, they are subject to mandatory extraordinary redemption on that date. See "THE BONDS - -Prior Redemption -- Extraordinary Mandatory Redemption" and %- Remarketing of the Bonds." After any Conversion Date, the Bonds are subject to redemption prior to maturity at the option of the Authority as set forth in "THE BONDS -- Prior Redemption" and also are subject to mandatory sinking fund redemption. See "THE BONDS - -Prior Redemption." The Bonds are being issued to provide funds (i) to refund a portion of the Authority's Tax Increment Revenue Bonds (Phase One Urban Renewal Project), Series 1986A (the "1986A Bonds ") and (ii) to provide a grant and/or loan to a developer for the payment of certain costs associated with the construction of the hotel portion of a hotel /civic center project within the boundaries of the Phase One Project Area, to pay certain of the costs ofother related improvements including parking facilities and landscaping improvements and to provide funds for other capital improvements associated with the civic center (colletively, the "Project "). See" SOURCES AND USES OF FUNDS" and "THE INDENTURE." The Bonds are special, limited obligations of the Authority, payable from Pledged Revenues which consist primarily of a 3.3% portion of total City of Pueblo sales and use tax collections (which have been pledged to the Authority for the payment of debt service on the Bonds) and incremental property tax and sales revenues of the Authority, each as more fully described herein. See "RISK FACTORS" and "SOURCES OF DEBT SERVICE PAYMENTS." The Bonds are secured by an irrevocable and first lien on the Trust Estate (as defined herein). The Bonds do not constitute a general obligation debt or indebtedness, and are not considered or held to be a general obligation of the Authority, the City of Pueblo, the State of Colorado or any political subdivision thereof. Until a Conversion Date, the proceeds of the Bonds will be deposited in the Escrow Fund and will be invested by the Trustee solely in certain obligations permitted by the Indenture. The funds in the Escrow Fund are expected to be invested in a repurchase agreement for direct obligations ofthe United States ofAmerica between the Trustee and Morgan Stanley &Co.Incorporated. See "SOURCES OF DEBT SERVICE PAYMENTS - -The Escrow Fund." As verified by Causey, Demgen &Moore, certified public accountants, Denver, Colorado, the cash flow to be provided by the investments in the Escrow Fund will be sufficient to pay when due the interest on Bonds and the principal amount thereof on theirmaturity date or mandatory repurchase date, as applicable. See "SOURCES OF DEBT SERVICE PAYMENTS- -The Escrow Fund." This cover page contains certain information for quick reference only. It is not a summary of the issue. Investors must read the entire Limited Offering Memorandum to obtain information essential to the making of an informed investment decision. The Bonds are offered when, as and if issued by the Authority, subject to the approval of Kutak Rock, Denver, Colorado, as Bond Counsel, and other conditions. Sherman & Howard L.L.C., Denver, Colorado, has acted as counsel to the Underwriter. Certain legal matters will be passed upon for the Authority by its counsel, Paul C. Benedetti, Esq., Boulder, Colorado. It is expected that the Bonds will be available for delivery on or about August 15, 1994, in Denver, Colorado. Lewis, de Rozario & Co. Incorporated 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 Limited Offering Memorandum, 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 Authority or the Underwriter. Neither the delivery of this Limited Offering Memorandum nor any sale hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the Authority or others since the date hereof. This Limited Offering Memorandum does not constitute an offer to sell or solicitation of an offer to buy the Bonds in any jurisdiction in which it is unlawful to make such offer or solicitation. The information set forth in this Limited Offering Memorandum has been obtained from the Authority, from the sources referenced throughout this Limited Offering Memorandum and from other sources believed to be reliable. No representation or warranty is made, however, as to the accuracy or completeness of such information, and nothing contained herein, is or shall be relied upon as a guarantee of the Authority or the Underwriter. This Limited Offering Memorandum 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. 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. TABLE OF CONTENTS Page INTRODUCTION............................... ..............................1 General.................................. ..............................1 Document Incorporated by Reference ......... ............................... 1 Issuer................................... ..............................1 Purpose.................................. ..............................2 The Bonds; Redemption; Limited Offering ..... ............................... 2 Security................................. ..............................2 Authority for Issuance ..................... ............................... 4 Agents and Advisors ....................... ..............................4 Additional Information ..................... ..............................4 RISK FACTORS ................................ ..............................5 Limited Security for the Bonds .............. ............................... 5 Business and Economic Factors May Affect the Ability of the Authority to Pay the Bonds .................... ..............................6 Changes May Occur in Tax Increment Financing or Property Tax Laws ............. 7 Collection of Property Taxes ................ ............................... 7 Assessment and Valuation of Real Property .... ............................... 7 SOURCES AND USES OF FUNDS .................... General...... ............................... The Project ... ............................... The Reserve Fund and Supplemental Reserve Fund . ...........................9 ...........................9 ...........................9 ..........................10 THEBONDS ................................... .............................10 Description of the Bonds; Limited Obligations . ............................... 11 Prior Redemption .......................... .............................11 Remarketing of the Bonds ................. ............................... 13 Additional Bonds .......................... .............................14 Registration, Transfer and Exchange ......... ............................... 15 DEBT SERVICE REQUIREMENTS .............. ............................... 16 SOURCES OF DEBT SERVICE PAYMENTS ...... ............................... 17 Generally................................ .............................17 The Escrow Fund .......................... .............................17 PledgedRevenues ......................... .............................18 Estimated Debt Service Coverage ........... ............................... 18 THE AUTHORITY AND AUTHORITY FINANCIAL INFORMATION ................ 19 (i) PROPERTY TAXATION, ASSESSED VALUATION AND LOCAL ECONOMY ........ 19 THEINDENTURE .............................. .............................19 Definitions ............................... .............................19 Creation of Funds .......................... .............................26 Use of Moneys in Funds and Accounts ....... ............................... 26 Investment of Moneys ...................... .............................29 Protection of Security and Rights of Bondholders; No Arbitrage; Use of Proceeds .... 30 Other Covenants ........................... .............................31 Supplemental Indentures .................... .............................32 Default.................................. .............................32 Defeasance ............................... .............................33 CONSTITUTIONAL LIMITATIONS, LITIGATION, SOVEREIGN IMMUNITY AND INSURANCE .............................. 33 TAX EXEMPTION .............................. .............................34 LEGAL MATTERS .............................. .............................35 NORATINGS .................................. .............................36 INDEPENDENT AUDITORS AND FINANCIAL STATEMENTS ..................... 36 UNDERWRITING .............................. .............................36 LIMITED OFFERING MEMORANDUM CERTIFICATION ......................... 37 (ii) LIMITED OFFERING MEMORANDUM $2,225,000 URBAN RENEWAL AUTHORITY OF PUEBLO, COLORADO SUBORDINATE REVENUE REFUNDING BONDS (PHASE ONE URBAN RENEWAL PROJECT) SERIES 1994B INTRODUCTION General This Limited Offering Memorandum, which includes the cover page, provides information in connection with the offer and sale of the Urban Renewal Authority of Pueblo, Colorado, Subordinate Revenue Refunding Bonds (Phase One Urban Renewal Project), Series 1994B, in the aggregate principal amount of $2,225,000 (the "Bonds ") to be issued by the Urban Renewal Authority of Pueblo, Colorado (the "Authority "), located in the City of Pueblo (the "City" or "Pueblo ") and the State of Colorado (the "State "). This Limited Offering Memorandum describes only the terms of the Bonds in effect during such time as the Bonds are secured by the Escrow Fund (described herein) and is not intended to describe the terms of the Bonds applicable upon the occurrence of the Conversion Date (defined herei . See "THE BONDS," "SOURCES OF DEBT SERVICE PAYMENTS" and "THE INDENTURE." Document Incorporated by Reference Certain portions of the Official Statement ( "the 1994A Official Statement ") related to the Authority's Revenue Refunding Bonds (Phase One Urban Renewal Project), Series 1994A (the 1994A Bonds" or the "Superior Lien Bonds "), dated August 10, 1994, are incorporated into this Limited Offering Memorandum by reference. Such portions of the 1994A Official Statement are more specifically referenced in the appropriate sections of this Limited Offering Memorandum. It is imperative that investors obtain and make a review of the designated portions of the 1994A Official Statement in order to make an informed investment decision with respect to the Bonds Issuer The Authority is an independent body corporate and politic established in 1959 by the City Council (the "City Council ") of the City of Pueblo, Colorado, for the purpose of undertaking certain urban renewal activities within the City. See "THE AUTHORITY." The City is located approximately 110 miles south of Denver along Interstate Highway 25. The boundaries of the Authority are coterminous with the City. The Phase One Project Area (the "Phase One Project Area ") consists only of approximately nine acres within downtown Pueblo. Purpose The Bonds are being issued to provide funds (i) to refund a portion of the Authority's Tax Increment Revenue Bonds (Phase One Urban Renewal Project), Series 1986A (the "1986A Bonds ") and (ii) to provide a grant and/or a loan to a developer for the payment of certain costs associated with the construction of the hotel portion of a hotel/civic center project within the boundaries of the Phase One Project Area, to pay certain of the costs of other related improvements including parking facilities and landscaping improvements and to provide funds for other capital improvements associated with the civic center (collectively, the "Project "). See "SOURCES AND USES OF FUNDS" and "THE INDENTURE." The Bonds; Redemption; Limited Offering The Bonds are being issued pursuant to a resolution to be adopted by the Authority (the "Resolution ") prior to issuance of the Bonds and pursuant to an Indenture of Trust, dated eof August 15, 1994 (the "Indenture "), between the Authority and The Bank of Cherry Creek, N.A., in Denver, Colorado, as trustee, paying agent and bond registrar (the "Trustee ") under authority granted by Title 31, Article 25, Part 1, Colorado Revised Statutes (the "Act "). The Bonds are issuable only as fully registered bonds in the denomination of $100,000 plus multiples of $5,000. The Bonds will be dated August 15, 1994, with interest payable on June 1 and December 1 of each year, commencing December 1, 1994 and principal payable on December 1 as set forth on the cover page of this Limited Offering Memorandum. See "THE BONDS" and "THE INDENTURE." The Bonds are subject to redemption prior to their maturities at the option of the Authority. The Bonds also are subject to mandatory sinking fund redemption. The Bonds also are subject to extraordinary mandatory redemption. See "THE BONDS- -Prior Redemption." The Bonds will be sold only to Accredited Investors (defined herein). In addition, no Bond may be registered for transfer except to a Qualified Institutional Investor or an Accredited Investor (each as defined herein). See "THE BONDS -- Registration, Transfer and Exchange." Security The Bonds are special, limited obligations of the Authority, equally and ratably secured by an irrevocable pledge of and lien on, and payable solely from the trust estate (the "Trust Estate ") established pursuant to the Indenture. The lien of the Bonds on the Pledged Revenues is subordinate to the lien thereon of the 1994A Bonds, which will be issued concurrently with the Bonds, in the aggregate principal amount of $7,275,000. See "RISK FACTORS," "THE INDENTURE" and "SOURCES OF DEBT SERVICE PAYMENTS." The Trust Estate will consist of (1) "Pledged Revenues" which include (a) the Pledged Property Tax Revenues, (b) the Pledged Authority Sales Tax Revenues, (c) the Pledged City Sales Tax Revenues, (d) income from the investment and reinvestment of moneys in the Trust Funds IYZ (defined herein) and (2) all moneys and securities from time to time held by the Trustee under the terms of the Indenture in the Trust Funds (except for moneys, if any, on deposit with the Trustee for the partial redemption of the Bonds). See "SOURCES OF DEBT SERVICE PAYMENTS" and "THE INDENTURE." The 1994B Bonds do not constitute a general obligation indebtedness, and are not considered or held to be a general obligation, of the Authority, the City, the State, or any political subdivision thereof. Prior to the Conversion Date (defined herein), the Bonds also will be secured by the Escrow Fund established by the Indenture, which will be used to pay the principal of and interest then due on the Bonds (final payment in full) in the event no Conversion Date (defined herein) has occurred on or before December 1, 1996. See "THE BONDS- -Prior Redemption," "SOURCES OF DEBT SERVICE PAYMENTS" and "THE INDENTURE." "Pledged Property Tax Revenues" means, for each Fiscal Year, that portion of ad valorem property taxes produced by the levy at the rates fixed each year by or for the governing bodies of the various taxing jurisdictions within or overlapping the Phase One Project Area upon that portion of the valuation for assessment of all taxable property with the Phase One Project Area which is in excess of the Property Tax Base Amount; provided, however, that such amount shall be reduced by any lawful collection fee charged by the County; and provided further, however, that in the event of a general reassessment of taxable property in the Phase One Project Area, the valuation for assessment of taxable property within the Phase One Project Area shall be proportionately adjusted in accordance with such general reassessment. See "SOURCES OF DEBT SERVICE PAYMENTS." However, notwithstanding the foregoing, not more than 25% of the debt service on the 1994A Bonds and the Bonds may be paid from Pledged Property Tax Revenues which accrue from any one Person (defined herein). See "THE INDENTURE -- Protection of Security and Rights of Bondholders; No Arbitrage; Use of Proceeds." "Pledged Authority Sales Tax Revenues" means, for each Fiscal Year, all of the proceeds of the City's municipal sales tax (the "Sales Tax ") collected within the Phase One Project Area after deduction of the following amounts: (a) the proportional share of the reasonable and necessary costs and expenses of collecting and enforcing the Sales Tax attributable to the Phase One Project Area and (b) an amount equal to the Sales Tax base amount. See "SOURCES FOR PAYMENT OF DEBT SERVICE." "Pledged City Sales Tax Revenues" means all of the proceeds of a 3.3% portion of the sales and use tax levied by the City (currently levied at the rate of 3.5 %), as set forth in Section 14 -4 -17 of the City's Code of Ordinances (the "City Code "), which moneys are and/or have been deposited into the City's "Collection Fee Fund" and pledged to the payment of the Bonds as authorized by the City's electorate on November 2, 1993, and Ordinance No. 5853, passed and adopted on second reading by the City Council on January 10, 1994. See "SOURCES FOR PAYMENT OF DEBT SERVICE." -3- Authority for Issuance The Bonds will be issued pursuant to the Constitution and laws of the State, particularly the Act, the Resolution and the Indenture. In addition, the issuance of the Bonds and the pledge of the Pledged City Sales Tax Revenues by the City to the Authority were authorized by the City's voters at an election held on November 2, 1993 (the "Election "). See "CONSTITUTIONAL LIMITATIONS, SOVEREIGN IMMUNITY AND INSURANCE." Agents and Advisors Kutak Rock, Denver, Colorado, has acted as bond counsel in connection with the issuance of the Bonds. Paul C. Benedetti, Esq., Boulder, Colorado, has acted as counsel to the Authority. Sherman & Howard L.L.C., Denver, Colorado, has acted as Underwriter's counsel. McDonald, Holligan & McPherson, independent certified public accountants, Pueblo, Colorado, have audited the City's financial statements which appear as Appendix A to this Official Statement. See "INDEPENDENT AUDITORS AND FINANCIAL STATEMENTS." The Bank of Cherry Creek, N.A., Denver, Colorado, will act as the trustee, paying agent and registrar for the Bonds (the "Trustee "). Lewis, de Rozario & Co. Incorporated will act as the underwriter (the "Underwriter ") for the Bonds. Additional Information This Introduction is only a brief summary of the provisions of the Bonds, the Indenture and other documents described in this Limited Offering Memorandum: a full review of the entire Limited Offering Memorandum should be made by potential investors. Summary descriptions of the Authority, the City, the Bonds, the Indenture and other documents described in this Limited Offering Memorandum are qualified by reference to such documents. This Limited Offering Memorandum speaks only as of its date and the information contained herein is subject to change. Additional information is available from the following sources: The Urban Renewal Authority of Pueblo, Colorado c/o City of Pueblo One City Hall Place P.O. Box 1427 Pueblo, Colorado 81002 Attention: Chairman Further information may be obtained from the Underwriter: Lewis, de Rozario & Co. Incorporated 555 17th Street, Suite 3400 Denver, Colorado 80202 (303) 296 -0500 -4- RISK FACTORS The payment by the Authority of the principal of and interest on the Bonds is subject to certain risks. Particular attention should be given to the factors described below which, among others, could affect the payment by the Authority of debt service on the Bonds, and which could also affect the market price of the Bonds to an extent that cannot be determined. This section of the Limited Offering Memorandum does not include all risks to which such repayment by the Authority is subject, but is merely an attempt to summarize certain of such risks. Each potential purchaser of the Bonds should read this Limited Offering Memorandum in its entirety and should obtain and read the designated sections of the 1994A Official Statement Limited Security for the Bonds The Bonds are special, limited obligations of the Authority and are payable solely from the Trust Estate pursuant to the Indenture. See "THE INDENTURE" and "SOURCES OF DEBT SERVICE PAYMENTS." The Bonds are not secured by an encumbrance or mortgage on any property of the Authority. Therefore, the security for the punctual payment of the Bonds is dependent upon the generation of the Pledged Revenues in an amount sufficient to meet the debt service requirements. The Bonds are payable solely from and secured by a lien upon the Pledged Revenues which is subordinate to the lien thereon of the Superior Lien Bonds. The primary security for payment of the Bonds is the Pledged City Sales Tax Revenues. The City currently levies its sales and use tax at the rate of 3.5 %. Of this amount, .5% of the sales and use tax is allocated specifically for economic development purposes. This .5% has been specially approved by the City's voters and will end December 31, 1996 unless extended by the voters. To the extent the voters of the City do not continue the .5% portion of the sales and use tax or replace it with another sales and use tax of equal or greater amount, the Pledged City Sales Tax Revenues will decline accordingly and may not be sufficient to pay debt service on the Bonds in a timely manner. In addition, the Bonds are secured by the Pledged Property Tax Revenues and the Pledged Authority Sales Tax Revenues (collectively, the "Incremental Tax Revenues. ") The Phase One Project Area currently generates no Pledged Authority Sales Tax Revenues. Pledged Property Tax Revenues currently are generated in an amount equal to approximately $30,000 per year. See "SOURCES OF DEBT SERVICE PAYMENTS." The Authority expects that construction of the hotel contemplated by the Phase One Urban Renewal Plan (the "Phase One Plan") (as discussed in "THE AUTHORITY AND AUTHORITY FINANCIAL INFORMATION ") will increase the Incremental Tax Revenues. However, there can be no present assurance that the hotel will be built, or if built, that such increases will occur. Even if development does occur in the Phase One Project Area, continued generation of Pledged Property Tax Revenues will be dependent principally upon the amount of assessed valuation of taxable property in the Phase One Project Area and the ad valorem levies thereon -5- imposed by certain overlapping taxing entities. Should the assessed value of taxable property in the Phase One Project Area materially decrease or should mill levies of overlapping taxing jurisdictions materially decrease (other than as a consequence of a general reassessment of properties within the Phase One Project Area), the Pledged Property Tax Revenues may not generate significant revenues. The Authority does not have the power to impose taxes, nor may the Authority or other persons compel any taxing jurisdiction to levy a property tax under the Act. See "THE AUTHORITY AND AUTHORITY FINANCIAL INFORMATION" and "SOURCES OF DEBT SERVICE PAYMENTS." Furthermore, the Act limits the availability of Incremental Tax Revenues to the Authority to 25 years from the effective date of its urban renewal plan. See "THE AUTHORITY AND AUTHORITY FINANCIAL INFORMATION." The Phase One Incremental Plan was first adopted on August 25, 1986. Accordingly, the Authority will not be able to rely on Incremental Tax Revenues as a revenue source after August 25, 2011. Business and Economic Factors May Affect the Ability of the Authority to Pay the Bonds Certain circumstances, many of which will be beyond the control of the Authority, may have an effect on the generation of Pledged Revenues in the City. Such circumstances may include, among others, general and local economic conditions (including cyclical trends in the construction industry, competition and interest rates), a decline in property valuations, and the rate of employment or economic growth within the Phase One Project Area, the City or the region. Sales Taxes Sales tax collections are subject to fluctuations in spending which determine the amount of sales taxes collected. This causes sales tax revenues to increase along with the increasing prices brought about by inflation, but also causes such revenues to be vulnerable to adverse economic conditions and reduced spending. Consequently, the rate of sales tax collections may be expected to correspond generally to economic cycles. Property Tax Revenues The collection of Property Tax Pledged Revenues may be subject to the ability or inability of property owners in the Phase One Project Area to pay property taxes as they become due and the successful completion of buildings and development within the Phase One Project Area as planned. Much of the property in the Phase One Project Area is presently or will be, upon completion of the hotel/convention center contemplated by the Phase One Plan, commercial property. No representation can be made about the financial condition or stability of the owners or tenants of the owners or tenants of commercial properties in the Phase One Project Area or their ability to pay property taxes levied on their properties. Nor can there be any assurance that any additional development will take place at a rate or level which would generate sufficient increases in assessed valuation and Pledged Property Tax Revenues to offset decreases in the tax increment, if any, after a general reassessment. See "Assessment and Valuation of Real Property" below, and "SOURCES OF DEBT SERVICE PAYMENTS." Changes May Occur in Tax Increment Financing or Property Tax Laws It is possible that legislation could be enacted in the State which would limit the availability of tax increment financing to entities such as the Authority, reduce or eliminate the property tax which taxing jurisdictions are permitted to impose, or limit the rates authorized to be imposed. Any one or more of such occurrences may have the effect of reducing the amount of Pledged Property Tax Revenues available to pay the principal of and interest on the Bonds. Certain political subdivisions are currently subject to existing limitations with respect to revenues or expenditures which may adversely affect the Pledged Revenues. See "CONSTITUTIONAL LIMITATIONS, LITIGATION, SOVEREIGN IMMUNITY AND INSURANCE." Collection of Property Taxes The payment of property taxes does not constitute a personal obligation of each of the property owners within the Phase One Project Area. Instead, the obligation to pay property takes is tied to the properties taxed, and if timely payment is not made, the obligation constitutes a lien against the specific properties. To the extent payment of property taxes depends upon the financial stability of property owners in the Phase One Project Area, no assurance can be given that timely payment will occur. The Authority has not undertaken any independent investigation of the financial condition of any property owners. To enforce the property tax liens, the Pueblo County Treasurer is obligated to foreclose on and cause the sale of the property that is subject to the delinquent taxes or fees, as provided by law. However, foreclosure is a time- consuming remedy which may extend more than one year. In addition, proceeds realized from a foreclosure sale, if any, may or may not be sufficient to cover the delinquent taxes or fees and there is no assurance that such property will sell at a foreclosure sale. Owners of the Bonds cannot foreclose on property within the Phase One Project Area or sell such property in order to pay the principal of or interest on their Bonds. In addition, the sales of property in the Phase One Project Area to enforce such liens could be delayed by bankruptcy laws and other laws affecting creditor's rights generally. During the pendency of any bankruptcy of any property owner in the Phase One Project Area, the parcels in the Phase One Project Area owned by such property owner could be sold only if the bankruptcy court approves the sale. There is no assurance that property taxes would be paid during the pendency of any bankruptcy; nor is it possible to predict the timeliness of such payment. If the property taxes are not paid over a period of years, the Authority's ability to pay principal and interest on the Bonds could be affected. See "SOURCES OF DEBT SERVICE PAYMENTS " and "DEBT SERVICE REQUIREMENTS." Assessment and Valuation of Real Property The amount of Pledged Property Tax Revenues available in any given year is subject to the rate of increase or decrease in the assessed valuation of property within the Phase One Project -7- Area above or below the property tax base amount and to increases or decreases in the total mill levy imposed by overlapping taxing entities. See "THE AUTHORITY AND AUTHORITY FINANCIAL INFORMATION." Any additional increase in the assessed valuation of the property within the Project Area is in part dependent upon the development of property in the Phase One Project Area and the construction of new buildings and the use and occupancy of buildings in the Phase One Project Area. There can be no assurance that any additional development, redevelopment, construction or use will occur. The Act requires that in the event of a general reassessment of taxable property in the County which includes the Phase One Project Area, the portions of valuations for assessment of the pledged property tax base amount and the property tax increment will be proportionately adjusted in accordance with such reassessment. The Pledged Property Tax Revenues generated by the property tax increment are dependent upon the mill levies imposed by taxing jurisdictions which overlap the Project Area. The assessed value of taxing jurisdictions which are within or overlap the Project Area could decrease or increase as a result of reassessment or other factors. See "PROPERTY TAXATION, ASSESSED VALUATION AND LOCAL ECONOMY." In addition, taxing jurisdictions are subject, with certain exceptions, to limitations as to the amount of revenues which they may generate from their property tax mill levy. Generally, for the 1993 levy year, taxing jurisdictions other than the City and school districts may not generate property tax revenues in excess of 105.5% of the amount of such revenues generated in the 1992 levy year. In computing this limit, the increased assessed valuation attributable to new improvements constructed on property is excluded. School districts are subject to other limits imposed by State law. See "PROPERTY TAXATION, ASSESSED VALUATION AND LOCAL ECONOMY." In addition, a constitutional amendment adopted by the voters of the State in November, 1992 (the "Amendment ") may limit the ability of the overlapping taxing jurisdictions to increase their property tax revenues. See "CONSTITUTIONAL LIMITATIONS, LITIGATION, SOVEREIGN IMMUNITY AND INSURANCE." If assessed valuations increase significantly, mill levies may be required to be reduced accordingly in order for the overlapping taxing jurisdictions to stay within their statutory revenue raising limits. No assurance can be given that any jurisdiction which overlaps the Phase One Project Area will in fact impose any particular mill levy in any year or that mill levies currently imposed by overlapping taxing entities will not decrease in the future. ,5:11 SOURCES AND USES OF FUNDS General The sources and uses of funds, net of accrued interest, in connection with the Bonds, are set forth in the following table. Accrued interest, if any, from August 15, 1994 will be deposited in the Debt Service Fund (as defined herein). Approximately $135,036, representing the costs of issuing the Bonds, including Underwriter's discount and original issue discount of $49,550.75, will be paid from a portion of the proceeds of the 1994A Bonds. See "THE INDENTURE- -Use of Moneys in Funds and Accounts." Amount SOURCES OF FUNDS: Proceeds of the Bonds $ 2.225.000 USES OF FUNDS: Escrow Fund (1) $ 2 2. 25.000 (1) The Bond proceeds in the Escrow Fund and investment income thereon are expected to be deposited into the Project Fund and used to finance the costs of the Project prior to December 1, 1996. If no Conversion Date has occurred on or before that date, the Bond proceeds on deposit in the Escrow Fund will be used to pay the Bonds in full on December 1, 1996. See "The Project" below and "THE BONDS -- Extraordinary Mandatory Redemption." The Project The Bonds are being issued to provide funds (i) to refund $2,225,000 of the 1986A Bonds (the "Refunded Bonds "), which are currently outstanding in the aggregate principal amount of $9,950,000 and (ii) to provide a grant and/or a loan to a developer for the payment of certain costs associated with the construction of the hotel portion of a hotel/civic center within the boundaries of the Phase One Project Area, to pay certain of the costs of other related improvements including parking facilities and landscaping improvements and to provide funds for other capital improvements associated with the civic center (collectively, the "Project "). The Authority issued the 1986A Bonds to provide funds for the Project in the Phase One Project Area. The proceeds of the 1986A Bonds were placed in escrow and have remained in escrow pending a decision of the Authority to proceed with the Project. On August 15, 1994, the escrow account established for the 1986A Bonds will be dissolved. The Refunded Bonds will be paid from moneys on deposit in the escrow account for the 1986A Bonds. &2 The proceeds of the Bonds are expected to be used to provide funds for a grant and/or a loan (in the amount of $2.1 million or 25% of the net proceeds of the Bonds and the 1994A Bonds, whichever amount is less) to be made to a developer of the hotel portion of a hotel/civic center project in the Phase One Project Area. The Project also includes funds for the costs of certain related improvements, including landscaping and parking improvements and funds for the payment of the costs associated with the civic center portion of the Project. The Authority expects to use the net proceeds of the 1994A Bonds to construct the civic center portion of the project within the Phase One Project Area. The Authority has not selected a developer for the hotel. If a developer is selected in the next several months, it is expected that the developer will be responsible for construction of the civic center as well as the hotel. However, there is no assurance that the Authority will enter into a development agreement with any developer. If no developer is selected or if no certificate of occupancy has been issued for the hotel prior to December 1, 1996, the proceeds of the Bonds on deposit in the Escrow Fund on that date will be used to pay the principal of and interest on the Bonds on that date. The Reserve Fund and Supplemental Reserve Fund The Indenture creates a reserve fund (the "Reserve Fund ") for the purpose of securing the payment of the Bonds. After the Conversion Date, the account within the Reserve Fund for the Bonds (the "1994B Reserve Account ") will be maintained as a continuing reserve in an amount equal to the least of (a) 10% of the aggregate principal amount of the outstanding Bonds, (b) the Maximum Annual Debt Service on the outstanding Bonds or (c) one hundred twenty -five percent of Average Annual Debt Service on the outstanding Bonds (the "Reserve Fund Requirement "). The Reserve Fund Requirement will be calculated upon the Conversion Date and is expected to be funded from funds on deposit in the Escrow Fund. The Bonds will not be secured by the Reserve Fund until after the Conversion Date. See "THE INDENTURE- -Use of Moneys in Funds and Accounts -- Reserve Fund." The Indenture also creates a supplemental reserve fund, including an account therein for the Bonds (the "Supplemental Reserve Fund" and the "1994B Supplemental Reserve Account," respectively). The Indenture requires moneys on deposit in the City Sales Tax Revenue Fund (defined herein) to be transferred to the Supplemental Reserve Fund (after other required transfers described in "THE INDENTURE- -Use of Moneys in Funds and Accounts ") until the amount on deposit in the Supplemental Reserve Fund equals the Average Annual Debt Service in any fiscal year for all Bonds and subordinate lien bonds Outstanding (the "Supplemental Reserve Fund Requirements "). See "THE INDENTURE." KII! THE BONDS Description of the Bonds; Limited Obligations The Bonds will be issued pursuant to the Indenture, will be dated as of August 15, 1994 and will mature as set forth on the cover page of this Limited Offering Memorandum. Principal of each Bond will be payable to the registered owner as shown on the registration records of the Trustee (the "Registered Owner" or 'Bondholder ") upon maturity or prior redemption and upon presentation and surrender at the corporate trust office of the Trustee. Any Bond not paid upon presentation and surrender at or after maturity will continue to draw interest at the interest rate stated until the principal thereof is paid in full. Interest on the Bonds is payable on June 1 and December 1, commencing on December 1, 1994. Interest on each Bond will be paid by check or draft of the Trustee mailed by the Trustee on or before each interest payment date (or, if such interest payment date is not a business day, on or before the next succeeding business day), to the registered owner of such Bond at his or her address as it appears on the registration records of the Trustee at the close of business on the fifteenth day of the calendar month next preceding each interest payment date (the "Record Date "). However, any such interest not so timely paid or duly provided for shall cease to be payable to the person who is the registered owner of the applicable Bonds on the Record Date and shall be payable to the registered owner thereof at the close of business on a date ( "the Special Record Date ") for the payment of any such defaulted interest. Such Special Record Date shall be fixed by the Trustee whenever moneys become available for payment of the defaulted interest, and notice of the Special Record Date shall be given to the registered owners of the Bonds not less than ten (10) days prior to the Special Record Date by first -class mail to each such registered owner as shown on the registration books on a date selected by the Trustee, stating the date of the Special Record Date and the date fixed for the payment of such defaulted interest. The Bonds are special limited obligations of the Authority. The payment of the Bonds will not be secured by any encumbrance, mortgage or other pledge of any property except the Trust Estate, including Pledged Revenues. The Bonds do not constitute a general obligation or a debt or indebtedness of the Authority, the City or the State or any political subdivision thereof. Prior Redemption Optional Prior Redemption After the Conversion Date, the Bonds maturing on and after December 1, 2004 are subject to redemption, at the option of the Authority, in whole, or in part, as directed by the Authority, on December 1, 2003, and on any interest payment date thereafter, at the redemption prices (expressed as a percentage of principal amount of the Bonds to be redeemed) set forth below, plus accrued interest to the date of redemption: Redemption Dates Redemption Prices December 1, 2003 and June 1, 2004 101% December 1, 2004 and thereafter 100 -11- Mandatory Sinking Fund Redem to ion The Bonds will be subject to mandatory sinking fund redemption on and after the Conversion Date, as set forth on the certificate required to be submitted to the Trustee by the Remarketing Agent pursuant to the Indenture at a price equal to the principal amount thereof plus accrued interest to the redemption date. The Indenture requires that the Bonds be remarketed at the lowest interest rates per annum which will allow an approximately level debt service schedule from the Conversion Date through the final maturity date of December 1, 2019, with such serial bonds and term bonds as the Remarketing Agent and the Authority agree upon. Bonds subject to mandatory sinking fund redemption will be selected by lot in such manner as the Trustee shall determine. On or before the 30th day prior to each such sinking fund payment date, the Trustee shall proceed to select the Bonds for redemption from such sinking fund on the next December 1, and on the 30th day prior to each sinking fund payment date give notice of such call as described below. Not less that 60 days prior to any sinking fund redemption date, the Authority may deliver to the Trustee for cancellation, Bonds in any principal amount constituting a multiple of $5,000, and which shall have been previously called for redemption and surrendered to the Authority other than through the operation of the sinking fund redemption provisions of the Indenture, or which shall have been purchased by the Authority in the open market, and the Authority shall receive a credit against the next occurring appropriate sinking fund redemption requirement in an amount equal to the aggregate principal amount of such Bond so delivered to the Trustee. Extraordinary Mandatory Redemption The Bonds are subject to extraordinary mandatory redemption on December 1, 1995, June 1, 1996 or December 1, 1996, in whole or in part, in denominations of $500,000 or more, at a redemption price of 100% of par and accrued interest to the redemption date. All of the Bonds will be subject to extraordinary mandatory redemption, in whole, on December 1, 1996 unless the Bonds have been remarketed prior to such date pursuant to the Indenture. See " -- Remarketing of the Bonds" below. Notice and Effect of Redemption Notice of any prior redemption, identifying the Bonds or portions thereof to be redeemed, will be given by the Trustee by mailing a copy of the redemption notice by first -class, postage prepaid mail at least 30 days prior to the date fixed for redemption to the registered owner of each Bond to be redeemed, in whole or in part, at the address shown on the registration books maintained by the Trustee; provided, however, that failure to give such notice by mailing, or any defect therein, will not affect the validity of any proceedings for the redemption of any Bond or portion thereof with respect to which no failure has occurred. Any notice mailed as provided in the Indenture will be conclusively presumed to have been duly given, whether or not the registered owner actually receives the notice. Prior to the date fixed for redemption, funds will be deposited with the Trustee in the Debt Service Fund to pay, and the Trustee is authorized and directed by the Indenture to apply such funds to the payment of, the Bonds or portions thereof called for redemption, together with accrued interest thereon to the redemption date, and any required premium. Upon the giving of notice and -12- the deposit of funds for redemption, interest on the Bonds or portions thereof thus called will no longer accrue after the date fixed for redemption. Remarketing of the Bonds The Bonds may be remarketed to long term bonds, at the option of the Authority, on December 1, 1995, June 1, 1996 or December 1, 1996 (each a "Conversion Date "), whereupon the Bonds are subject to extraordinary mandatory redemption as described in "THE BONDS- -Prior Redemption -- Extraordinary Mandatory Redemption." The Authority has appointed Lewis, de Rozario & Co. Incorporated as the Remarketing Agent. The procedure for the remarketing is as follows: If the Authority intends to seek a disbursement from the Escrow Fund on any potential Conversion Date, the Authority must provide a preliminary Feasibility Report to the Trustee, the Underwriter and the Remarketing Agent not later than 60 days preceding the proposed Conversion Date. The preliminary Feasibility Report must establish to the reasonable satisfaction of such parties that the Pledged Revenues after accounting for the payment of the debt service requirements of the 1994A Bonds and any additional debt issued on a parity with the 1994A Bonds (collectively, "Parity Bonds ") , by a date not later than two Fiscal Years subsequent to the proposed Conversion Date, shall be not less than 125% of the Average Annual Debt Service for the remarketed Bonds. The Remarketing Agent will then commence efforts to remarket the Bonds at the lowest interest rates per annum which will allow the remarketing of the Bonds at par or with a discount or premium not exceeding 2% and an approximately level debt service schedule from the Conversion Date through a final maturity date of December 1, 2019. On the Conversion Date, the Trustee must purchase all of the Bonds proposed for remarketing, but only from the proceeds of such remarketing. Not later than 20 days preceding the proposed Conversion Date, the Remarketing Agent must provide the Authority with an estimate of the interest rates the remarketed Bonds will bear, based upon the information in the Feasibility Report. Bonds will be remarketed in whole, or in denominations of $500,000 or integral multiples thereof. The Remarketing Agent shall give the Trustee notice of the maturities of the remarketed Bonds no later than 15 days prior to the proposed Conversion Date. All Bonds to be remarketed must be delivered to the Trustee on or prior to 9:00 a.m. on the Conversion Date. The Bonds will be purchased on the Conversion Date by the Trustee at a price equal to the par amount of the Bonds, plus accrued interest to the Conversion Date, but only from amounts derived from the remarketing of the Bonds by the Remarketing Agent and delivered to the Trustee. Any Bond not so delivered to the Trustee on or before the Conversion Date, and for which there has been irrevocably deposited in trust with the Trustee an amount sufficient to pay the purchase price for such Bonds (the "Untendered Bonds "), shall be deemed to have been purchased by the Trustee. No registered owner of an Untendered Bond shall be entitled to any payment (including any interest to accrue subsequent to the Conversion Date) other than the Bond purchase -13- price for such Bond as described above, and any Untendered Bond shall no longer be entitled to the benefits of the Indenture, except for the purpose of payment of the purchase price therefor. In the event the Remarketing Agent is unable to remarket all of the Bonds, the Remarketing Agent must notify the Trustee prior to 10:00 a.m., Denver time, three business days before the proposed Conversion Date. In such event, the Trustee shall rescind any notice of the remarketing or, if the Conversion Date was to be December 1, 1996, the Trustee shall, without making any prior claim or demand upon the Authority, draw moneys from the Escrow Fund so as to receive moneys necessary to pay in full on the Conversion Date the applicable mandatory redemption price for the Bonds. Although the Authority reasonably expects the conditions for the remarketing to occur, there can be no assurance such conditions will occur. If the remarketing does not occur, the Trustee will pay at maturity on December 1, 1996, all Bonds from the moneys on deposit in the Escrow Fund. See "SOURCES OF DEBT SERVICE PAYMENTS." Additional Bonds The Bonds are special, limited obligations of the Authority, equally and ratably secured by an irrevocable pledge of lien on, and payable solely from, the Trust Estate, including the Pledged Revenues, subject to the prior lien thereon of the Superior Lien Bonds. The Authority has the right, subject to specified conditions set forth in the Indenture, to issue additional obligations on a parity with the Superior Lien Bonds. The Indenture does not permit the issuance of any obligations on a parity with the Bonds. Subordinate bonds may be issued on the terms set forth in the Indenture. So long as the Superior Lien Bonds or the Bonds are outstanding, and so long as no Event of Default has occurred and is continuing pursuant to the Indenture, additional obligations ( "Additional Debt," and together with the Superior Lien Bonds, "Parity Bonds ") with a lien on the Pledged Revenues on a parity with the Superior Lien Bonds may be issued solely for the purpose of (a) refunding all or any portion of the Superior Lien Bonds or the Bonds, (b) paying any cost or expenses of the Authority to be incurred in connection with the Project or the construction of the civic center project as described in the 1994A Official Statement, (c) expanding the Phase One Project Area and the Project (as defined herein and as defined in the 1994A Official Statement), or either of them and (d) paying costs of issuance, capitalizing interest, establishing one or more reserve funds or paying other costs incurred in connection with the issuance of any such Additional Debt. Conditions to the issuance of Additional Debt include a report of a certified public accountant establishing that the Pledged Revenues deposited into the City Sales Tax Revenue Fund (defined herein) and the Tax Increment Revenue Fund (defined herein) during each of the past two fiscal years, were at least one hundred thirty-five percent (135 %) of the Maximum Annual Debt Service on the combination of (1) the Parity Bonds then Outstanding and (2) the Additional Debt proposed to be issued; provided, however, that any Parity Bonds to be refunded with the proceeds -14- of such Additional Debt shall be excluded for purposes of such calculation; and provided further that, for purposes of such calculation, "Pledged City Sales Tax Revenues" shall not include moneys derived from any of the City's sales taxes which, by the terms of the then current City ordinances, terminate prior to the final maturity of the proposed Additional Debt. See "RISK FACTORS- - Limited Security for the Bonds." See "THE INDENTURE -- Additional Debt and Subordinate Debt." The Authority expects to issue $7,275,000 aggregate principal amount of 1994A Bonds concurrently with the Bonds for the purpose of providing funds to construct a public civic center in the Phase One Project Area. The civic center is expected to be comprised of a registration area, large and small meeting rooms and a kitchen facility. The 1994A Bonds also will be used to construct parking, landscaping, street and public utility improvements, to fund the reserve account for the 1994A Bonds and to pay the costs of issuing the 1994A Bonds and the Bonds. Registration, Transfer and Exchange Books for the registration and transfer of the Bonds will be kept by the Trustee. Bonds may be exchanged at the principal corporate trust office of the Trustee for a like aggregate principal amount of Bonds of the same date, maturity, series, and interest rate of other authorized denominations. Bonds may also be transferred by the registered owners thereof at the principal corporate trust office of the Trustee duly endorsed for transfer or accompanied by an assignment, duly executed by the registered owner or his attorney -in -fact duly authorized in writing. Upon such transfer, a new Bond or Bonds of authorized denominations will be authenticated and delivered to the transferee. No Bond will be registered for transfer by the Trustee except to a Qualified Institutional Buyer or an Accredited Investor See "THE INDENTURE -- Definitions." The Trustee shall not be required to transfer or exchange any Bond during the period commencing on the Record Date and ending on the immediately following Bond Payment Date, nor to transfer or exchange any Bond after the mailing of notice calling such Bond or portion thereof for redemption has been given, nor during the period of 15 days next preceding the giving of such notice of redemption. The Trustee may require the payment by the registered owner requesting exchange or transfer of the fees and expenses of the Trustee incurred in connection therewith, and shall require the payment of any tax, fee, transfer or exchange, or other governmental charge required to be paid with respect to such exchange or transfer. -15- DEBT SERVICE REQUIREMENTS The following schedule shows the debt service requirements for the Bonds and the combined debt service requirements for the Bonds and the Superior Lien Bonds. The schedule shows debt service on the 1994B Bonds only through the mandatory redemption date of December 1, 1996. No representation is made as to the debt service payable on the 1994B Bonds after any Conversion Date. Fiscal 1994B 1994B 1994B Year (l Principal(2) Interest (2 Total Combined Debt Service Combined Superior Total Debt Lien Bonds Service 1994 -- $ 33,085 $ 33,085 $ 123,133 $ 156,218 1995 -- 112,363 112,363 563,188 675,551 1996 2,225,000 112,363 2,337,363 567,678 2,905,041 1997 -- -- -- 566,013 566,013 1998 -- -- -- 563,733 563,733 1999 -- -- -- 565,978 565,978 2000 -- -- -- 567,490 567,490 2001 -- -- -- 563,240 563,240 2002 -- -- -- 563,550 563,550 2003 -- -- -- 563,150 563,150 2004 -- -- -- 567,020 567,020 2005 -- -- -- 564,870 564,870 2006 -- -- -- 566,240 566,240 2007 -- -- -- 565,740 565,740 2008 -- -- -- 566,370 566,370 2009 -- -- -- 565,130 565,130 2010 -- -- -- 568,020 (3) 568,020 2011 -- -- -- 563,963 563,963 2012 -- -- -- 563,998 563,998 2013 -- -- -- 567,823 567,823 2014 -- -- -- 564,948 564,948 2015 -- -- -- 565,863 565,863 2016 -- -- -- 565,233 565,233 2017 -- -- -- 567,865 567,865 2018 -- -- -- 563,653 563,653 2019 567.903 567.903 $2,225,000 $ 257,811 $ 2,482,811 $14,262,783 $16,745,594 (1) Debt service includes the payment of interest on June 1 and the Fiscal Year payment of principal and interest on December 1 of each year. (2) Shows only principal and interest payable on the Bonds while the Bonds are secured by the Escrow Fund. See "THE BONDS - -Prior Redemption." (3) Represents Maximum Annual Debt Service on the 1994A Bonds. Source: The Underwriter. nil SOURCES OF DEBT SERVICE PAYMENTS Generally The Bonds are special, limited obligations of the Authority payable as to principal and interest solely from the Trust Estate. See "INTRODUCTION." The Trust Estate includes Pledged Revenues and the Trust Funds. The Trust Funds represent the amounts held by the Trustee in the Escrow Fund, the Debt Service Fund, the City Sales Tax Revenue Fund, the Tax Increment Fund, the Project Fund, the Expense Fund, the Reserve Fund, the Supplemental Reserve Fund, the Rebate Fund and the Operations and Maintenance Fund (collectively, the Trust Funds), each as described under "THE INDENTURE- -Use of Moneys in Funds and Accounts." After the Conversion Date, moneys in the Reserve Fund will be withdrawn and applied to pay the principal of or interest on the Bonds if Pledged Revenues deposited in the Debt Service Fund are insufficient for such purpose. Upon the withdrawal of any moneys from the Reserve Fund, the Reserve Fund must be replenished from any available Pledged Revenues. See "THE INDENTURE- -Use of Moneys in Funds and Accounts." Until December 1, 1996 or any prior Conversion Date, the Bonds also are secured by the Escrow Fund. See " -- The Escrow Fund" below. The Pledged Revenues are comprised principally of a 3.3% portion of the total Sales Tax revenues of the City, which are generally described in the 1994A Preliminary Official Statement, and income from the investment and reinvestment of the Trust Funds. See "INTRODUCTION" and "THE INDENTURE -- Definitions." The Pledged Revenues also include the Incremental Tax Revenues. The Escrow Fund General The Indenture establishes the Escrow Fund and, upon delivery of the Bonds, the gross proceeds of the Bonds will the deposited into the Escrow Fund. See "SOURCES AND USES OF FUNDS." Income from the investment of amounts on deposit in the Escrow Fund will be deposited to the Debt Service Fund and used to pay interest on the Bonds. The amounts on deposit in the Escrow Fund on December 1, 1996 will be applied to the payment of the principal of and interest on the Bonds if the conditions for the remarketing of the Bonds are not satisfied on or before that date. If the conditions for remarketing are satisfied prior to that date, the amounts on deposit in the Escrow Fund will be deposited into the Project Fund and used to pay the costs of the Project. Investment of the Escrow Fund Moneys in the Escrow Fund will be invested solely in investments permitted by the Indenture. See "THE INDENTURE -- Definitions." It is expected that the funds held in the Escrow Fund will be invested in a repurchase agreement (the "Repurchase Agreement ") between Morgan Stanley Co., Incorporated, as seller, the Trustee, as buyer, and the Bank of New York, as custodian, for direct obligations of the United States government in an -17- amount equal to 102% of the principal amount of the repurchase agreement. The securities will be held in a separate custodial account established for such purpose. As verified by Causey, Demgen & Moore, certified public accountants, Denver, Colorado, the cash flow to be provided by the investments in the Escrow Fund will be sufficient to pay when due the interest on the Bonds and the principal amount thereof on December 1, 1996, if no Conversion Date has occurred. Pledged Revenues The provisions of the 1994A Official Statement with respect to specific information concerning the Pledged Revenues is incorporated herein by reference. Such information is found in the 1994A Official Statement under the captions "SOURCES OF DEBT SERVICE PAYMENT- - Pledged City Sales Tax Revenues" and %- Incremental Tax Revenues." Investors must review such information to obtain a description of the Pledged Revenues Estimated Debt Service Coverage The following table sets forth estimated Pledged Revenues available to pay debt service on the Bonds after payment of the Superior Lien Bonds. The table is based upon the Maximum Annual Debt Service on the Superior Lien Bonds as compared to the Pledged Revenues collected in the years 1989 -1993: -18- Maximum Annual Amount Remaining Total Pledged Debt Service on for debt service Year Revenues 1994A Bonds (1) on 1994B Bonds 1989 $683,141 $568,020 $115,121 1990 689,722 568,020 121,792 1991 698,087 568,020 130,067 1992 751,762 568,020 183,742 1993 836,131 568,020 268,111 1994(2) 884,000 568,020 315,980 (1) See "DEBT SERVICE REQUIREMENTS." (2) Based upon the City's estimate of receipts of 1994 Pledged City Sales Tax Revenues of $854,000 and Pledged Property Tax Revenues of $30,000. -18- THE AUTHORITY AND AUTHORITY FINANCIAL INFORMATION The provisions of the 1994A Official Statement with respect to specific information concerning the Authority and its financial status are incorporated herein by reference. Such information is found in the 1994A Official Statement under the captions "THE AUTHORITY" and "AUTHORITY FINANCIAL INFORMATION." Investors must review such information to obtain a description of the organization, powers. agreements. urban renewal activities and financial information of the Authority PROPERTY TAXATION, ASSESSED VALUATION AND LOCAL ECONOMY The provisions of the 1994A Official Statement with respect to specific information concerning property taxes, assessed valuation and the local economy in the City and the Authority are incorporated herein by reference. Such information is found in the 1994A Official Statement under the captions "PROPERTY TAXATION AND ASSESSED VALUATION' and "THE LOCAL ECONOMY." Investors must review the 1994A Official Statement to obtain such information THE INDENTURE The following is a summary of certain provisions of the Indenture and is qualified in its entirety by reference to the Indenture. All capitalized terms used herein have the meanings assigned to them in the Indenture. For a description of certain other provisions of the Indenture, see "THE BONDS." Definitions "Additional Debt" means any note, bond, interim certificate or receipt, temporary note, certificate of indebtedness, debenture or other obligation issued by the Authority pursuant to the Indenture and having a claim upon the Trust Estate on a parity with the 1994A Bonds. "Authority Representative" means the Person at the time designated to act on behalf of the Authority by written certificate furnished to the Trustee containing the specimen signature of such Person and signed on behalf of the Authority by its duly authorized agent. Such certificate may designate an alternate or alternates. "Average Annual Debt Service" means for each Fiscal Year, the average annual Debt Service Requirement for the Bonds from time to time Outstanding. "Bond Payment Date" means each principal or interest payment date for the Bonds as set forth in the Indenture. -19- "Bond Year" means the twelve (12) month period beginning on each August 15 and ending on August 14 of the following calendar year. "Bondholder" or "owner of the Bonds" means the Registered Owner of any Bond, as set forth on the records of the Bond Registrar pursuant to the Indenture. "City Sales Tax Revenue Fund" means the Trust Fund by that name established pursuant to the Indenture. "Code" means the Internal Revenue Code of 1986, as amended and the regulations, final, proposed and temporary, promulgated thereunder; any references herein to specific sectiohs thereof shall be deemed to include any successor sections of a subsequent federal income tax statute or code. "Conversion Date" means any Bond Payment Date beginning on December 1, 1995, through and including, but not later than, December 1, 1996, or if such day shall not be a Business Day then the next succeeding Business Day, from and after which the interest rate on the Bonds is converted from the Initial Interest Rate to the remarketed interest rates set pursuant to the Indenture. "Cooperation Agreements" means any one or more of the following as the context may require: (a) the Development Agreement; and (b) the Cooperation Agreement, dated August 25, 1986 between the Authority and the City, and the Letters of Understanding from the Assessor and the Treasurer to the Authority, and any supplements or amendments thereto in accordance herewith. "Cost of Construction" shall mean all costs and expenses incurred in connection with the completion of the Phase One Project in accordance with the Phase One Plan and the Act, including but not limited to: (i) all costs which the Authority shall be required to pay, under the terms of any contract or contracts, for the acquisition, construction and completion of the Phase One Project, including all costs associated with the acquisition of real or personal property; (ii) obligations of the Authority incurred for labor, services and materials in connection with the acquisition, construction and completion of the Phase One Project, including reimbursement to the Authority or the City for all advances and payments made prior to or after delivery of the 1994A Bonds and the Bonds; -20- (iii) the costs of performance or other bonds and any and all types of insurance that may be necessary or appropriate to have in effect during the course of construction of the Phase One Project; (iv) all costs of engineering, architectural, and other professional services, including the costs of the Authority for test borings, surveys, estimates, plans and specifications and preliminary investigations therefor, and for supervising construction, as well as for the performance of all other duties required by or consequent to the proper construction of the Phase One Project; (v) administrative costs and expenses, including, but not limited to, the fees and expenses of attorneys, accountants, appraisers, and financial and special consultants incurred in connection with the implementation of the Phase One Project; and (vi) any sums required to reimburse the City or any other Person for advances made by them for any of the above items or for any other costs incurred and for work done by them which are properly chargeable to the Phase One Project. "Debt Service Fund" means the Trust Fund by that name established pursuant to the Indenture. "Debt Service Requirement" means the aggregate amount of the principal of, premium, if any, and interest coming due on all Outstanding 1994A Bonds, Outstanding Bonds, Outstanding Additional Debt and an Outstanding Subordinate Debt during any Fiscal Year, whether by maturity, mandatory redemption, acceleration or otherwise. "Developer" means one or more developers or redevelopers of real estate within the Phase One Project Area which may from time to time undertake such activity pursuant to one or more Development Agreements with the Authority, and the successors and assigns of such developers or redevelopers. "Developer Agreement" means one or more agreements from time to time entered into by the Authority with one or more developers and any agreements supplemental thereto entered into in accordance with the Indenture. "Expense Fund" means the Trust Fund by that name established pursuant to the Indenture. "Feasibility Consultant" means any financial feasibility consulting firm or public accounting firm appointed by the Authority, after consultation with the City, the Remarketing Agent and the Underwriter. -21- "Feasibility Report" means a projection of Pledged Revenues prepared by a Feasibility Consultant. "Feasibility Requirement" mans a projected level of Pledged Revenues, expressed as a coverage ratio, determined by the Feasibility Consultant in a manner acceptable to the Remarketing Agent and the Authority on or before sixty (60) days prior to the Conversion Date in a written certificate delivered to the Trustee and the Underwriter, which shall be that level of projected Pledged Revenues necessary, in the judgment of the Remarketing Agent, to allow the Bonds to be remarketed at par, giving due regard to the market conditions existing in the public municipal bond market at the time of such remarketing. The coverage ratio so selected shall demonstrate that the Pledged Revenues (after deducting amounts required to pay debt service on the Parity Bonds), by a date not later than two (2) Fiscal Years subsequent to the Conversion Date, shall be not less than one hundred twenty -five percent (125 %) of the Average Annual Debt Service Requirement for the remarketed Bonds. "Fiscal Year" means the fiscal year of the Authority, which currently begins on January 1 of each year and ends on December 31 of such year, or any other fiscal year of the Authority in the event the fiscal year of the Authority shall be modified. "Governmental Obligations" means direct general obligations of (including obligations issued or held in book -entry form on the books of) the Department of the Treasury of the United States of America. "Independent Counsel" means an attorney duly admitted to practice law before the highest court of any state and who is not a full -time employee, owner or director of the Authority, the City, a Developer or the Trustee. "Maximum Annual Debt Service" means, for any series of bonds, including the 1994A Bonds, the Bonds, Additional Debt and Subordinate Debt, the maximum annual scheduled Debt Service Requirement for such series of bonds during the period such bonds remain Outstanding. "Outstanding" or "Bonds Outstanding" means all Bonds which have been authenticated and delivered by the Trustee under the Indenture, except: (a) Bonds canceled after purchase in the open market or because of payment at or redemption prior to maturity; (b) Bonds paid or deemed to be paid in accordance with the provisions of the Indenture; and (c) Bonds in lieu of which others have been authenticated under the Indenture. -22- "Permitted Investments" means any of the following which at the time of investment are legal investments under the laws of the State for moneys proposed to be invested therein: (a) Governmental Obligations; or (b) Obligations of any of the following federal agencies which obligations represent the full faith and credit of the United States of America, including: -- Export-Import Bank - -Farm Credit System Financial Assistance Corporation -- Farmers Home Administration -- General Services Administration - -U.S. Maritime Administration - -Small Business Administration -- Government National Mortgage Association (GNMA) - -U.S. Department of Housing & Urban Development (FHA's) -- Federal Housing Administration; (c) Senior Debt Obligations rated "AAA" by Standard & Poor's Corporation ( "S &P ") and "AAA" by Moody's Investors Service, Inc. ( "Moody's ") issued by the Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation; senior debt obligations of other government sponsored agencies must be approved by AMBAC Indemnity. (d) U.S. dollar denominated deposit accounts, federal funds and banker's acceptances with domestic commercial banks which have a rating on their short term certificates of deposit on the date of purchase of "A -1" or "A -1 +" by S &P and "P -1" by Moody's and maturing no more than 360 days after the date of purchase, where ratings on holding companies are not considered as the rating of the bank; (e) commercial paper which is rated at the time of purchase in the single highest classification, "A -1 +" by S &P and "P -1" by Moody's, and which matures not more than 270 days after the date of purchase; (f) investments in a money market fund rated "AAAm" or "AAAm -G" or better by S &P; (g) pre - refunded municipal obligations defined as follows: Any bonds or other obligations of any state of the United States of America or of any agency, instrumentality or local governmental unit of any such state which are not callable at the option of the obligor prior to maturity or as to which irrevocable instructions -23- have been given by the obligor to call on the date specified in the notice; and (A) which are rated, based on an irrevocable escrow account or fund (the "escrow "), in the highest rating category of S &P and Moody's; or (B) (i) which are fully secured as to principal and interest and redemption premium, if any, by a fund consisting only of cash or obligations described in paragraph (a) above, which fund may be applied only to the payment of such principal of and interest and redemption premium, if any, on such bonds or other obligations on the maturity date or dates thereof or the specified redemption date or dates pursuant to such irrevocable instructions, as appropriate, and (ii) which fund is sufficient, as verified by a nationally recognized independent certified public accountant, to pay principal of and interest and redemption premium, if any, on the bonds or other obligations described in this paragraph on the maturity date or dates specified in the irrevocable instructions referred to above, as appropriate; (h) investment agreements approved in writing by AMBAC Indemnity, which writing is delivered to the Trustee, and is reasonably acceptable to the Trustee, with notice to S &P; (i) other forms of investments (including repurchase agreements) permitted by applicable law and approved in writing by AMBAC Indemnity, which writing is delivered to the Trustee, with notice to S &P. "Person" means an individual, partnership, corporation, trust or unincorporated organization, or a government or agency, instrumentality, program, account, fund, political subdivision or corporation thereof. "Project Fund" means the Trust Fund by that name established pursuant to the Indenture. "Property Tax Base Amount" means $0 for the original Phase One Project Area and $49,910 for the additional Phase One Project Area added on January 28, 1988, or such other amount as shall be certified by the Assessor as the valuation for assessment of all taxable property within the Phase One Project Area last certified by the Assessor prior to the adoption of the Phase One Plan. "Qualified Institutional Buyer" means a "Qualified Institutional Buyer" within the meaning of Rule 144A (the "Rule ") of the Securities and Exchange Commission adopted under the Securities Act of 1933. "Rebate Fund" means the Trust Fund by that name established pursuant to the Indenture. "Remarketed Bonds" means Bonds which have been remarketed by the Remarketing Agent pursuant to the Indenture and the Remarketing Agreement. -24- "Remarketing Agent" means the Underwriter and any successor Remarketing Agent appointed by the Authority at its discretion to act as remarketing agent under the Remarketing Agreement. "Remarketing Agreement" means the Remarketing Agreement date as of August 15, 1994, by and between the Authority and the Remarketing Agent. "Reserve Fund" means the Trust Fund by that name established pursuant to the Indenture, which Reserve Fund includes the Reserve Account for the Bonds (the "1994B Reserve Account "). "Reserve Fund Requirement" means, with respect to any series of bonds, including the 1994A Bonds, the Bonds and any Additional Debt, an amount equal to the least of (a) ten percent (10 %) of the principal amount of the bonds of such series, (b) the Maximum Annual Debt Service on the bonds of such series or (c) one hundred twenty -five percent (125 %) of Average Annual Dtbt Service on the bonds of such series. "Sales Tax" or "Sales Taxes" means the municipal sales and use tax established by the City as the same shall from time to time be in effect, pertaining to, including, without limitation, the sale, lease, rental, purchase or consumption of tangible personal property and taxable services, or any successor tax in the event that such taxes are replaced or superseded. "Sales Tax Base Amount" means $ -0- or such other amount as may be lawfully determined by the City to be the total collections of Sales Taxes within the Phase One Project Area for the twelve -month period immediately preceding the original adoption of the Phase One Plan. "Subordinate Debt" means any obligation issued or incurred by the Authority pursuant to the Indenture, and payable from the Trust Estate on a basis which is subordinate to the claim thereon which secures any Outstanding series of bonds. "Subordinate Debt Fund" means the Trust Fund by that name established pursuant to the Indenture. "Supplemental Reserve Fund" means the Trust Fund by that name established pursuant to the Indenture, which Supplemental Reserve Fund includes the Supplemental Reserve Account for the Bonds (the "1994B Supplemental Reserve Account "). "Supplemental Reserve Fund Requirement" means the Average Annual Debt Service in any Fiscal Year for all 1994A Bonds, Bonds, Additional Debt and Subordinate Debt Outstanding. "Tax Increment Revenue Fund" means the Trust Fund by that name established pursuant to the Indenture. -25- "Underwriter" means, with respect to the Bonds, Lewis, de Rozario & Co., Incorporated, or its successors, and, with respect to any Additional Debt, such purchaser or purchasers as the Authority may designate. Creation of Funds Pursuant to the Indenture, the Authority will create and establish the following Trust Funds with respect to the Bonds with the Trustee; the Debt Service Fund; the City Sales Tax Revenue Fund; the Tax Increment Revenue Fund; the Reserve Fund, in which there will be established the 1994B Reserve Account; the Rebate Fund; the Project Fund; the Expense Fund; the Supplemental Reserve Fund, in which there will be created the 1994B Supplemental Reserve Fund; the Escrow Fund, the Subordinate Debt Fund and the Operations and Maintenance Fund. All Funds created by the Indenture will be held in the custody of the Trustee, but in the name of the Authority. Moneys and investments in each of the Trust funds will be used only and exclusively as provide4 in the Indenture. Use of Moneys in Funds and Accounts Debt Service Funds There shall be deposited in the Debt Service Fund for the 1994B Bonds (1) all accrued interest received, if any, at the time of issuance, sale and delivery of the Bonds, (2) all required transfers from the Tax Increment Revenue Fund pursuant to the Indenture,(3) all required transfers from the City Sales Tax Revenue Fund as specified in the Indenture, (4) all required transfers from the 1994B Reserve Account in the Reserve Fund pursuant to the Indenture, (5) all required transfers from the 1994B Supplemental Reserve Fund pursuant to the Indenture, and (6) all other moneys held or received by the Trustee under and pursuant to any of the provisions of the Indenture which are required or which are accompanied by directions not inconsistent with the provisions of the Indenture that such moneys are to be deposited in the Debt Service Fund. Amounts on deposit in the Debt Service Fund shall be used solely to pay the Debt Service Requirement on the Bonds as and when the same become due and/or for the purpose of redeeming the Bonds in advance of their maturity in accordance with the Indenture. City Sales Tax Revenue Fund There shall be deposited in the City Sales Tax Revenue Fund, as and when received, and the City hereby agrees to deposit therein, all amounts constituting Pledged City Sales Tax Revenues. Amounts deposited in the City Sales Tax Revenue Fund shall be applied by the Trustee to the following purposes in the following order of priority on the last Business Day of each month in each Fiscal Year, commencing August 31, 1994: first, after credit for amounts already on deposit therein, all deposits required to be made to the debt service fund for the 1994A Bonds and the reserve account for the 1994A Bonds pursuant to the Indenture; second, commencing in the month during which a certificate of occupancy is issued for the conference center which is part of -26- the Phase One Project, an amount equal to $8,333 will be transferred to the Operations and Maintenance Fund; third, after credit for amounts already on deposit therein, there shall be transferred to the Debt Service Fund an amount equal to 1/4 of the amount of interest due on the Bonds on December 1, 1994, and thence each month thereafter, an amount equal to 1/6 of the amount of interest due on the Bonds on the next interest payment date plus 1/12 of the amount of principal due on the Bonds on the next December 1; fourth, there shall be transferred moneys to the 1994B Reserve Account until the amount on deposit in the 1994B Reserve Account shall equal the appropriate Reserve Fund Requirement; fifth, moneys shall be transferred pro rata according to the principal amounts of 1994A Bonds and Bonds outstanding into the appropriate accounts of the Supplemental Reserve Fund until the amount in each account equals the Supplemental Reserve Fund Requirement; sixth, moneys shall be transferred into the Subordinate Debt Fund to the extent necessary to pay principal of and interest on any Outstanding Subordinate Debt due on the next interest payment date for such Subordinate Debt; and seventh, any moneys remaining in the City Sales Tax Revenue Fund on each December 5 shall be returned to the City for any legal use. Tax Increment Revenue Fund There shall be deposited in the Tax Increment Revenue Fund, as and when received, all amounts constituting Pledged Property Tax Revenues, Pledged Authority Sales Tax Revenue, and income or other transfers from the reserve account for the 1994A Bonds, the 1994B Reserve Account, the 1994B Supplemental Reserve Account, and any other amounts deposited therein by the Authority. Amounts deposited in the Tax Increment Revenue Fund shall be applied by the Trustee to the following purposes in the following order of priority on the next to last Business Day of each month in each Fiscal Year, commencing August 30, 1994: first, after credit for amounts already on deposit therein, all deposits required to be made to the debt service fund for the 1994A Bonds and the reserve account for the 1994A Bonds pursuant to the Indenture; second, after credit for amounts already on deposit therein, there shall be transferred to the Debt Service Fund an amount equal to 1/4 of the amount of interest due on the Bonds on December 1, 1994, and thence each month thereafter, an amount equal to 1/6 of the amount of interest due on the Bonds on the next interest payment date plus 1/12 of the amount of principal due on the Bonds on the next December 1; third, there shall be transferred to the 1994B Reserve Account enough moneys so that the amount on deposit in the Reserve Account shall equal the appropriate Reserve Fund Requirement; fourth, there shall be transferred, pro rata according to the principal amounts of each series of bonds outstanding, to the Supplemental Reserve Fund moneys until the amount on deposit in the appropriate accounts of the Supplemental Reserve Fund shall equal the appropriate Supplemental Reserve Fund Requirement; and fifth, all remaining moneys shall be transferred to the Subordinate Debt Fund if any Subordinate Debt has been issued or, if no Subordinate Debt has been issued or to the extent that excess amounts exist in the Tax Increment Revenue Fund, the moneys shall be transferred to the Authority for any legal use in accordance with the Act. Notwithstanding the foregoing, not more than 25% of the debt service requirement of the Bonds and the 1994A Bonds shall be paid from Pledged Property Tax Revenues which accrue -27- from any one Person. See "Protection of Security and Rights of Bondholders; No Arbitrage; U9e of Proceeds" below. Reserve Fund and Supplemental Reserve Fund The Reserve Fund Requirement for the Bonds will be calculated upon the Conversion Date and is expected to be funded from fiind on deposit in the Escrow Fund. The Bonds will not be secured by the Reserve Fund until after tht Conversion Date. After the Conversion Date, in the event that five (5) days prior to any Bond payment date, the amount on deposit in the Debt Service Fund shall be less than the Debt Servica Requirement for the Bonds coming due on such bond payment date, an amount equal to such deficiency shall be transferred first from the account of the Supplemental Reserve Fund established for the Bonds (to the extent available) and then, to the extent necessary, from the Reserve Account for the Bonds to the Debt Service Fund. The Trustee shall calculate the Reserve Fund Requirement for the 1994B Reserve Account and the 1994B Supplemental Account on the first business stay succeeding each December 1 so long as any Bonds remain Outstanding. Any amounts on deposit in the 1994B Reserve Account in excess of the Reserve Fund Requirements shall be deposited in the Debt Service Fund. Amounts on deposit in the 1994B Reserve Account and the 1994B Supplemental Reserve Account may also be used for the purpose of redeeming the Bonds in whole, but not in part, in accordance with the Indenture. Project Fund Moneys in the Project Fund shall be disbursed by the Trustee to tht Authority to pay the Cost of Construction, or to reimburse the City or the Authority for any Cost of Construction paid by the City or the Authority, upon receipt of a requisition signed by the Authority Representative (a) stating with respect to each disbursement to be made (i) the requisition number, (ii) the name and address of the Person to whom payment is due, (iii) the amount to be disbursed and (iv) that each obligation mentioned therein has been properly incurred, constitutes a Cost of Construction and is a proper charge against the Project Fund and has not been the basis of any previous disbursement; (b) specifying in reasonable detail the nature of the obligation; and (c) accompanied by a bill or statement of account for such obligation. All amounts on deposit in the Project Fund on the date a certificate is delivered by the Authority to the Trustee, certifying completion of the portion of the Phase One Project for which proceeds of the Bonds are available, shall be deposited in the Tax Increment Revenue Fund or, at the written direction of the authority, shall be applied proportionately to the redemption of the Bonds and the 1994B Bonds pursuant to the Indenture. Subordinate Debt Fund All amounts on deposit in the Subordinate Debt Fund shall be applied to the payment of any Subordinate Debt designated by the Authority in a written notice to the Trustee. -28- Expense Fund Moneys on deposit in the Expense Fund shall be disbursed by the Trustee, at the direction of the Authority, to pay all costs incurred in connection with the issuance of the Bonds, including but not limited to the fees and expenses of the Underwriter, the Trustee and the Authority, as well as the fees and disbursements of bond counsel and underwriter's counsel, all printing and other expenses incurred in connection with the issuance of the Bonds, including fees and expenses in connection with the printing of the Bonds and the Official Statement in connection therewith, fees and expenses of the Underwriter, subsequent to the issuance of the Bonds, as well as any other costs and expenses of the Authority incurred in connection with the Phase One Project and any reimbursement or other payment by the Authority to the City for funds advanced to the Authority by the City. Rebate Fund The Authority shall make deposits to and the Trustee shall make the disbursements from the Rebate Fund in accordance with the Investment Instructions, and the Trustee shall invest the Rebate Fund pursuant to said Investment Instructions and shall deposit income from said investments immediately upon receipt thereof in the Rebate Fund, all as set forth in the Investment Instructions. The Authority shall at the end of five (5) years from the date of issuance of the Bonds and each five (5) years thereafter make the rebate deposit described in the Investment Instructions. To the extent necessary, moneys shall be transferred by the Trustee into the Rebate Fund from the following funds in the order set forth in the Indenture. Operations and Maintenance Fund Subject to the requirements of the Indenture, moneys in the Operations and Maintenance Fund shall be disbursed to the Authority to pay operations and maintenance expenses of the Phase One Project, but only upon delivery to the Trustee of a requisition signed by the Authority Representative (a) stating with respect to each disbursement to be made (i) the requisition number, (ii) the name and address of the Person to whom payment is due, (iii) the amount to be disbursed and (iv) that each obligation mentioned therein has been properly incurred, and has not been the basis of any previous disbursement; (b) specifying in reasonable detail the nature of the obligation; and (c) accompanied by a bill or statement of account for such obligation. Investment of Moneys Any moneys held as part of any Trust Fund shall be invested and reinvested by the Trustee in accordance with the provisions of the Indenture. Any such investments shall be held by or under the control of the Trustee. The Trustee shall sell and reduce to cash a sufficient amount of such investments whenever the cash balance in any Trust Fund is insufficient to make a required payment from such Trust Fund or upon the written direction of the Authority. KI Protection of Security and Rights of Bondholders; No Arbitrage; Use of Proceeds The Authority covenants and agrees to preserve and protect the security of the Bonds and the rights of the Registered Owners under the Indenture and to defend such rights under all claims and demands of all Persons. Without limiting the generality of the foregoing, the Authority covenants and agrees to contest or cause to be contested by court action or otherwise (a) any clam made in any action or proceeding to which the Authority is a party that the Act is unconstitutional or that the Pledged Revenues or Trust Funds pledged hereunder cannot be paid to or by the Authority for the debt service on the Bonds, or any other action affecting the validity of the Bonds or diluting the security therefor, and (b) any assertion by the United States of America or any department or agency thereof or any other Person that the interest received by the Bondholders is taxable unddt federal income tax laws. The Authority covenants and agrees to knowingly take no action which would result in (i) the Pledged Revenues being withheld from the Trustee, or (ii) the interest received by the Registered Owners becoming taxable under federal income tax laws. The Authority covenants to the Bondholders in the Indenture that it reasonably anticipates and expects that the proceeds of any Bonds will not be used in a manner as to cause the Bonds to be "arbitrage bonds" within the meaning of Section 148 of the Code, and applicable regulations adopted thereunder by the Internal Revenue Service, and the Authority hereby assumes the obligation to comply with such Section 148 and such regulations throughout the term of the Bonds. The Authority represents, covenants and warrants to the Bondholders in the Indenture that the weighted average maturity of the Series 1994 Bonds does not and shall not exceed one hundred and twenty percent (120 %) of the average reasonably expected economic life of the Phase One Project. The Authority covenants in the Indenture not to allow twenty -five percent (25 %) or more of the Debt Service Requirements of the Series 1994 Bonds in any Fiscal Year to be secured or paid, directly or indirectly, by any Person other than a governmental unit. Examples of circumstances where payments will be considered to be so made are set out in the Indenture. The Authority further covenants that not more than five percent (5 %) of the gross proceeds of the Series 1994 Bonds will be used, directly or indirectly, to make or finance loans to Persons other than governmental units. The Authority hereby covenants not to allow twenty -five percent (25 %) or more of the Debt Service requirements of the Bonds and the 1994B Bonds in any Fiscal Year to be, directly or indirectly: (a) secured by any interest in property used or to be used in a private trade or business; -30- (b) secured by any interest in payments in respective property used or to be used in a private trade or business; or (c) to be derived from payments in respective property, or borrowed money, used or to be used in a private trade or business. Property will be considered used in a private trade or business if used in a trade or business carried on by an entity other than a governmental unit or an organization which is described in Section 501(c)(3) of the Code and is exempt from taxation under Section 501(a) of the Code. An underlying arrangement to provide security for, or the source of, the payment of principal or interest on the Bonds and the 1994B Bonds may result from separate agreements between the parties or may be determination the basis of all of the facts and circumstances surrounding the issuance of the Bonds and the 1994B Bonds. The property which is the security for, or the source of, the payment of either the principal or interest on the Bonds and the 1994B Bonds need not be property acquired with the proceeds of the Bonds and the 1994B Bonds. For example, this covenant may be breached if the Bonds and the 1994B Bonds are secured by unimproved land or investment securities used, directly or indirectly, in any trade or business carried on by any private business user. Payments made by private business users do not include that portion of any payment that is properly allocable to ordinary and necessary expenses (within the meaning of Section 162 of the Code) directly attributable to the operation and maintenance of the property financed with proceeds of the Bonds and the 1994B Bonds used by such person. In addition, incidental uses a facility financed with the proceeds of the Bonds and the 1994B Bonds will be disregarded to the extent that the proceeds applied to such incidental use do not exceed 2 -1/2% of the proceeds of the Bonds and the 1994B Bonds. Similarly, proceeds of the Bonds and the 1994B Bonds used to finance qualified improvements to governmentally -owned facilities (within the meaning of I.R.S. notice 87 -69) will not be treated as proceeds to be used for private business use. Other Covenants The Indenture contains other covenants by the Authority with respect to the Bonds and the Phase One Project. The Authority covenants that (a) it shall promptly pay the Debt Service Requirement on every Bond issued under the Indenture, (b) it will faithfully perform at all times any and all covenants, undertakings, stipulations and provisions set forth in the Indenture and (c) it will execute, acknowledge and deliver or cause to be done, executed, acknowledged and delivered, such indentures supplemental to the Indenture. In addition, the Authority agrees that it will keep proper and current books and records relating to the Phase One Project, the Phase One Plan, the Pledged Revenues, the Cooperation Agreements and the Trust Estate and will cause complete financial statements to be prepared within 150 days after the close of each fiscal year. In the Indenture, the Authority agrees that it will not request any disbursement from the Project Fund or the Operations and Maintenance Fund unless and until the City has consented, either specifically or generically, by resolution of the City Council to such appropriation or expenditure or to the annual budget or commitment, contract or agreement which obligates or permits such appropriation or expenditure. The Authority agrees that it will not enter into any -31- commitment, contract or agreement with respect to or concerning the development, constructibn, operation or maintenance of all or any part of the Phase One Project of the Phase One Plan withbut the prior consent of the City by resolution of the City Council. Supplemental Indentures The Authority and the Trustee may, without consent of, or notice to, any of the 1994A and 1994B Bondholders (the 'Bondholders "), enter into an indenture or indentures supplemental to the Indenture for any one or more of the following purposes: (a) to cure any ambiguity or fornial defect or omission in the Indenture; (b) to grant to the Trustee additional rights and powers for tie benefit of the Bondholders; (c) to subject to the Indenture additional revenues, properties 8r collateral; (d) to modify, amend or supplement the Indenture to permit the qualification of it under the Trust Indenture Act of 1939, as amended, or any similar federal statute or to permit qualificatidh of the 1994A and 1994B Bonds for sale under the securities laws of any of the states of the United States; (e) to provide for issuance of Additional Debt; (f) to evidence the appointment of a separat or co- Trustee under the Indenture or the succession of a new Trustee; or (g) to make any other` amendment to the terms and provisions of the Indenture as, in the judgment of the Trustee, is not materially adverse to the interests of the registered owners of the 1994A and 1994B Bonds. Except for the above - described types of amendments, the registered owners of not less than two- thirds (2/3) in aggregate principal amount of the Outstanding 1994A and 1994B Bonds will have the right, from time to time, to consent to and approve the execution by the Authority and the Trustee of supplemental indentures that may be deemed necessary or desirable by the Authority for the purpose of modifying, altering, amending, adding to or rescinding, in any particular, any of the terms or provisions set forth in the Indenture. However, no supplemental indenture may be entered into which will permit (a) an extension of the maturity of the principal of, or the interest on, any 1994A or 1994B Bond, or (b) a reduction in the principal amount of, or any redemption premium on, any 1994A or 1994B Bond or the rate of interest on any 1994A or 1994B Bond, or (c) a privilege or priority of any 1994A or 1994B Bond or Bonds over any other 1994A or 1994B Bond or Bonds, or (d) a reduction in the aggregate principal amount of the Bonds required for consent to such supplemental indentures, or (e) the creation of any lien on the Trust Estate or any part thereof which is prior or superior to the lien of the 1994A or 1994B Bonds, without the consent of the registered owners of all 1994A or 1994B Bonds Outstanding. Default Events of Default. Under the Indenture, an Event of Default will exist whenever (a) there is a default in the due and punctual payment of interest on any 1994A Bond or any Additional Debt, (b) there is a default in the due and punctual payment of the principal or premium, if any, of any Parity Bond whether at the stated maturity thereof, or upon proceedings for prior redemption thereof, (c) there is a default in the due and punctual payment of the interest, principal or premium, if any, on the Bonds or Subordinate Debt whether at the stated maturity or upon prior redemption, (d) the Authority defaults in the performance or observance of any other of the -32- covenants, agreements or conditions contained in the Indenture or in the Cooperation Agreement and fails to remedy the same after notice thereof has been given, or (e) the Authority or the City has filed a petition or answer under the federal bankruptcy laws or seeks reorganization; provided, however that any Event of Default under clause (c) above will not be considered an Event of Default for purposes of Parity Debt. During the continuation of an Event of Default, other than under clause (c) of the preceding paragraph, the Trustee may, and upon the written request of the Registered Owners of not less than twenty -five percent (25 %) in aggregate principal amount of 1994A Bonds and Additional Debt shall by notice in writing delivered to the Authority, declare the principal of all Outstanding 1994A Bonds and Additional Debt and the interest accrued thereon immediately due and payable, and such principal and interest shall thereupon become and be immediately due and payable. Other Remedies. Upon the occurrence of an event of default, the Trustee may pursue any available remedy at law or in equity to enforce the payment of the principal of, premium, if any and interest on the Outstanding 1994A and Bonds. If an event of default shall have occurred and be continuing and if requested to do so by the registered owners of at least twenty -five percent (25 %) in aggregate principal amount of Outstanding 1994A Bonds and Bonds, and upon indemnification as set forth in the Indenture, the Trustee is obligated to exercise such one or more of the rights and powers conferred by the Indenture as the Trustee shall deem most expedient in the interests of the registered owners of the Bonds. Defeasance When all principal of and interest due or to become due on the Bonds and all sums of money due or to become due to the Trustee have been duly paid, the pledge and lien of all obligations under the Indenture will be discharged and such issue will no longer be deemed to be outstanding within the meaning of the Indenture. Such due payment will be deemed to have been made when (a) the Authority has irrevocably set aside exclusively for such payment (i) moneys sufficient to make such payment, (ii) Government Obligations maturing as to principal and interest in such amounts and at such times as will insure the availability of sufficient moneys to make such payment, or (iii) a combination of such cash and Government Obligations, and (b) all necessary and proper fees, compensation and expenses of the Trustee pertaining to the Bonds with respect to which such deposit is made shall have been paid or the payment thereof provided for to the satisfaction of the Trustee. CONSTITUTIONAL LIMITATIONS, LITIGATION, SOVEREIGN IMMUNITY AND INSURANCE The provisions of the 1994A Official Statement with respect to specific information concerning constitutional limitations, sovereign immunity and insurance with respect to the Bonds are incorporated herein by reference. Such information is found in the 1994A Official Statement -33- under the captions "CONSTITUTIONAL LIMITATIONS" and "LITIGATION, SOVEREIGN IMMUNITY AND INSURANCE." Investors must review the 1994A Official Statement to obtkin information with respect to these matters For a discussion of litigation, see "LEGAL MATTER." TAX EXEMPTION In the opinion of Kutak Rock, Bond Counsel, to be delivered at the time of original issuance of the Bonds, under existing laws, regulations, rulings and judicial decisions, interest on the Bonds is not includible in gross income for federal or State of Colorado income tax purposes. 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 on obligations, such as the Bonds. The Authority has covenanted in the Resolution and in other documents to comply with certain guidelines designed to assure that interest on the Bonds will not become includible in gross income. Failure to comply with these covenants may result in interest on the Bonds being included in federal and Colorado 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 interest on the Bonds is not a specific preference item for purposes of the alternative minimum tax provisions set forth in the Internal Revenue Code of 1986, as amended (the "Code "), or for State of Colorado alternative minimum tax purposes; however, for certain corporations interest on the Bonds is included in the "adjusted current earnings" (i.e., alternative minimum taxable income as adjusted for certain items, including those items that would be included in the calculation of a corporation's earnings and profits under Subchapter C of the Code), 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). Any difference between the initial public offering prices of the Bonds and their respective stated principal amounts constitutes original issue discount treated as interest which is excluded from gross income for federal income tax purposes subject to the caveats and provisions described above. In the case of a Registered Owner of a Bond, the amount of original issue discount which is treated as having accrued with respect to such Bond is added to the cost basis of the Registered Owner in determining, for federal income tax purposes, gain or loss upon disposition of a Bond (including its sale, redemption or payment at maturity). Amounts received upon disposition of a Bond which are attributable to accrued original issue discount will be treated as tax- exempt interest, rather than as taxable gain, for federal income tax purposes. -34- Original issue discount is treated as compounding semiannually, at the yield to maturity of each individual Bond, on days which are determined by reference to the maturity date of such Bond. The amount treated as original issue discount on a Bond for a particular semiannual accrual period is equal to (i) the product of (a) the yield to maturity for such Bond (determined by compounding at the close of each accrual period) and (b) the amount which would have been the tax basis for such Bond at the beginning of the particular accrual period if held by the original purchaser, (ii) less the amount of any interest payable for such Bond during the accrual period. The tax basis is determined by adding to the initial public offering price on such Bond the sum of the amounts which have been treated as original issue discount for such purposes during all prior periods. If a Bond is sold between semiannual compounding dates, original issue discount which would have accrued for that semiannual compounding period for federal income tax purposes is to be apportioned in equal amounts among the days in such compounding period. Although Bond Counsel has rendered an opinion that interest on the Bonds is excluded from gross income for federal income tax purposes, the accrual or receipt of interest on the Bonds may otherwise affect the federal income tax liability of the recipient. The 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, foreign corporations operating branches in the United States and corporations subject to the environmental tax imposed by Section 59A of the Code), property or casualty insurance companies, banks, thrifts or other financial institutions, or certain recipients of Social Security or Railroad Retirement benefits are advised to consult their tax advisors as to the tax consequences of purchasing or holding the Bonds. Bond Counsel is of the opinion that because the Authority has properly designated the Bonds as "qualified tax- exempt obligations" within the meaning of Section 265 of the Code, any banks, thrift institutions or other financial institutions owning the Bonds may be able to avoid the loss of 100% of any otherwise available interest deduction attributable to such institution's tax - exempt holdings. LEGAL MATTERS G eneral. The validity and enforceability of the Bonds are to be approved by the law firm of Kutak Rock, Denver, Colorado, as Bond Counsel, whose approving opinion will be printed on the Bonds. Bond Counsel's opinion will state that the obligations of the Authority are subject to the reasonable exercise in the future by the State and its governmental bodies of the police power inherent in the sovereignty of the State and to the exercise by the United States of the powers delegated to it by the federal constitution. Certain legal matters also will be passed on by Sherman & Howard L.L.C., Denver, Colorado, as counsel to the Underwriter and by Paul C. Benedetti, Esq. as counsel to the Authority. -35- Litigation The Authority's attorney states that, except as previously described in this Limited Offering Memorandum, as of the date hereof, to the best of his knowledge, there is no pending or threatened litigation which would restrain or enjoin the issuance of the Bonds, the construction of the Project, the collection of the Pledged City Sales Tax Revenues, collection of the Incremental Tax Revenues, or the performance of the Phase One Plan. It is the opinion of the City Attorney that, except as previously described in this Limited Offering Statement, as of the date hereof, no litigation before any court naming the City or the Authority as a party is pending or, to his knowledge, threatened in any way seeking to restrain or to enjoin the issuance, sale or delivery of the Bonds, the collection or application of the Pledged City Sales Tax Revenues or the pledge of the Pledged City Sales Tax Revenues to the payment of the Bonds. NO RATINGS The Authority has not applied for any ratings on the Bonds, nor does it intend to do so in the future. INDEPENDENT AUDITORS AND FINANCIAL STATEMENTS The audited general purpose financial statements of the City as of and for the year ended December 31, 1993, are included as Appendix A to the 1994A Official Statement as Appendix A, have been audited by McDonald, Holligan McPherson, Inc., independent certified public accountants, Pueblo, Colorado, as stated in their report appearing herein. Investors must review the 1994A Official Statement in order to review the audited general purpose financial statements of the City UNDERWRITING Lewis, de Rozario & Co. Incorporated (the "Underwriter ") has agreed to purchase the Bonds from the Authority under a Bond Purchase Agreement at a purchase price of $2,130,949.25 (representing the par amount of the Bonds less original issue discount of $49,550.75 and underwriting discount of $44,500, each of which will actually be paid from the proceeds of the 1994A Bonds) plus accrued interest. The Underwriter is committed to take and pay for all of the Bonds if any are taken. The Bond Purchase Agreement provides that the obligations of the Underwriter are subject to certain conditions. The Bonds are being offered for sale to the public at the prices shown on the cover of this Limited Offering Memorandum. 59r� No guarantee can be made that a secondary market for the Bonds will develop or be maintained by the Underwriter or others. Thus, prospective investors should be prepared to hold their Bonds to maturity. LIMITED OFFERING MEMORANDUM CERTIFICATION The preparation of this Limited Offering Memorandum and its distribution have been authorized by the Authority. This Limited Offering Memorandum is hereby duly approved by the Authority as of the date on the cover page hereof. URBAN RENEWAL AUTHORITY OF PUEBLO, COLORADO By /s/ Josh A. Fortino Chairman -37- D 0 Q6 3i 83 or 7r City of Pueblo OFFICE OF THE CITY ATTORNEY 127 Thatcher Building PUEBLO, COLORADO 81003 TO: Billy G. Martin, Director of Finance FROM: City Attorney RE: Urban Renewal Authority, Tax Increment Revenues DATE: September 9, 1994 In response to your letter of September 8, 1994 we submit the following: As we understand the bond documents relating to the Urban Renewal Authority of Pueblo, Colorado (the "Authority ") Series 1994 Bonds, all tax increment revenues including Pledged Property Tax Revenue (ad valorem property tax revenues) and Pledged Authority Sales Tax Revenues (sales tax revenue collected within the Phase One Project Area) are to be deposited with and held by The Bank of Cherry Creek, N.A., as Trustess (the "Trustee ") pursuant to the provisions of the Indenture of Trust dated as of August 15, 1994 between the Authority and the Trustee. We therefore recommend that the Authority notify the Pueblo County Treasurer (Aurilio Sisneros, Pueblo County Courthouse, 10th and Main Streets, Pueblo, Colorado 81003) that the tax increment ad valorem property tax revenue be distributed to the Trustee for the account of the Authority. By copy of this letter to William G. Gorham, Esq., we are requesting Kutak Rock as bond counsel to prepare such notice in order to meet and satisfy any specific language or requirements Kutak Rock may have in this matter. If either you or Bill Gorham have any questions, please call me. Very truly yours, Thom Jai e sm cc: Joseph A. Fortino, Chairman of the Urban Renewal Authority William G. Gorham, Esq.