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03-35 EXHIBIT A FORM OF OFFICIAL NOTICE OF BOND SALE $ * CITY OF CLEARWATER, FLORIDA WATER AND SEWER REVENUE REFUNDING BONDS, SERIES 2003 NOTICE IS HEREBY GIVEN that electronic (as explained below) proposals will be received electronically via PARITY in the manner described below, until 11:00 a.m., Eastern Daylight Savings Time, on October 1, 2003. Bids must be submitted electronically via PARITY in accordance with this Notice of Bond Sale, until 11 :00 a.m., Clearwater, Florida time, but no bid will be received after the time for receiving bids specified above. To the extent any instructions or directions set forth in PARITY conflict with this Notice of Bond Sale, the terms of this Notice of Bond Sale shall control. For further information about PARITY, potential bidders may contact the financial advisor to the City, William R. Hough & Co., 100 Second Avenue South, Suite 800, St. Petersburg, Florida 33701, Attn: Kevin Conitz: (727) 895 8853, or PARITY at 40 West 23rd Street, 5th Floor, New York, New York 10010, telephone (212) 404-8102. In the event of a malfunction in the electronic bidding process, the bid date will automatically change to the next business day as confirmed in a communication through Thompson Municipal Market Monitor (TM3). Form of Series 2003 Bonds The Series 2003 Bonds will be issued in book entry only form, without coupons, in denominations of $5,000 or any integral multiples thereof, and shall be dated October 1, 2003. Principal ofthe Series 2003 Bonds shall be paid to the registered owners at the designated corporate trust office of Wells Fargo Bank, N.A. (the "Paying Agent" and "Registrar"), upon presentment and surrender ofthe Series 2003 Bonds. Interest on the Series 2003 Bonds shall be paid to the registered owners as shown on the registration books maintained by the Registrar, by check or draft mailed to each such owner's address as shown on the registration books maintained by the Registrar as ofthe fifteenth (15th) day of the calendar month preceding such interest payment date. Interest will be payable each June 1 and December 1, commencing June 1,2004. Interest will be calculated on the basis of a 360-day year of twelve 30-day months. For so long as The Depository Trust Company, New York, New York, or its nominee, Cede & Co. (collectively, "DTC") is the registered owner of the Series 2003 Bonds, payments of principal of, redemption premium, if any, and interest on the Series 2003 Bonds will be made directly to DTC. Disbursements of such payments to the DTC participants is the responsibility ofDTC and further disbursement of such payments from the DTC participants to the beneficial owners of the Series 2003 Bonds is the responsibility of the DTC participants. * Preliminary, subject to change A-I Initially one bond will be issued for each maturity ofthe Series 2003 Bonds in the aggregate principal amount of each such maturity and registered in the name of DTC. DTC, an automated clearing house for securities transactions, will act as securities depository for the Series 2003 Bonds. Purchases ofthe Series 2003 Bonds will be made in book-entry-only form (without certification). It shall be the responsibility ofthe Successful Bidder (as hereinafter defined) for the Series 2003 Bonds to furnish to DTC an underwriters' questionnaire and to the City the CUSIP numbers of the Series 2003 Bonds not less than seven (7) days prior to the Closing Date (as hereinafter defined). Maturity Schedule The Series 2003 Bonds will mature on December 1 ofthe following years in the following principal amounts: Maturity 2004 2005 2006 2007 2008 2009 2010 Series 2003 Bonds Principal Amount* 5,490,000.00 165,000.00 165,000.00 170,000.00 170,000.00 185,000.00 195,000.00 *Preliminary, subject to change Maturity Principal Amount* 2011 2012 2013 2014 2015 2016 2017 2018 195,000.00 210,000.00 220,000.00 230,000.00 240,000.00 250,000.00 260,000.00 270,000.00 The Series 2003 Bonds will be sold as serial bonds. Bidders will not be allowed to designate any maturities as one or more term bonds. The Series 2003 Bonds will not be subject to optional redemption prior to their respective maturity dates. Adiustment of Principal Amount After final computation ofthe bids, to achieve desired debt service levels, the City reserves the right either to increase or decrease any Principal Amount ofthe Series 2003 Bonds shown on the schedule of Principal Amounts set forth above (the "Maturity Schedule"), by an amount not to exceed five percent (5%) of the stated amount of each such Principal Amount on the Maturity Schedule and correspondingly adjust the issue size, all calculations to be rounded to the nearest $5,000. A-2 In the event of any such adjustment in the Series 2003 Bonds, no rebidding or recalculation of the bid submitted with respect to such Series 2003 Bonds will be required or permitted. Ifnecessary, the total purchase price ofthe Series 2003 Bonds will be increased or decreased in direct proportion to the ratio that the adjustment bears to the aggregate principal amount of the Series 2003 Bonds specified herein; and the Series 2003 Bonds of each maturity, as adjusted, will bear interest at the same rate and must have the same initial reoffering yields as specified in the bid of the Successful Bidder. However, the award will be made to the bidder whose bid produces the lowest true interest cost, calculated as specified below, solely on the basis ofthe bid for the Series 2003 Bonds offered pursuant to the Bid Maturity Schedule of the relevant series of Series 2003 Bonds, without taking into account any adjustment in the amount of Series 2003 Bonds set forth in the Bid Maturity Schedule. Basis of Award Proposals must be unconditional and only for all the Series 2003 Bonds. The purchase price bid for the Series 2003 Bonds may include a discount (including underwriters' discount and original issue discount) not to exceed two percent (2%) ofthe principal amount ofthe Series 2003 Bonds and shall specify how much of the discount is original issue discount. The purchase price bid may also include an original issue premium and shall specify how much of such purchase price is original issue premium. The Series 2003 Bonds will be insured by Financial Security Assurance. Inc. and the City will pay the bond insurance premium from Bond proceeds. The purchase price bid for the Series 2003 Bonds will not deduct the insurance premium. Only the final bid submitted by any bidder through Parity will be considered. The City reserves the right to determine the Successful Bidder for the Series 2003 Bonds, to reject any or all bids and to waive any irregularity or informality in any bid. The Series 2003 Bonds will be awarded to the bidder (herein referred to as the "Successful Bidder" as to the Series 2003 Bonds) offering such interest rate or rates and purchase price which will produce the lowest true interest cost to the City over the life of the Series 2003 Bonds. True interest cost for the Series 2003 Bonds (expressed as an annual interest rate) will be that annual interest rate being twice that factor of discount rate, compounded semiannually, which when applied against each semiannual debt service payment (interest, or principal and interest, as due) for the Series 2003 Bonds will equate the sum of such discounted semiannual payments to the bid price (inclusive of accrued interest). Such semiannual debt service payments begin on June 1,2004. The true interest cost shall be calculated from October 15,2003, the expected closing date ofthe Series 2003 Bonds (the "Closing Date") and shall be based upon the principal amounts of each serial maturity set forth in this Notice of Bond Sale and the bid price set forth in the Proposal for the Series 2003 Bonds submitted in accordance with the Notice of Bond Sale. In case of a tie, the City may select the Successful Bidder by lot. It is requested that each Proposal for the Series 2003 Bonds be accompanied by a computation of such true interest cost to the City under the term of the Proposal for Bonds, but such computation is not to be considered as part of the Proposal for Bonds. A-3 Interest Rates Permitted The Series 2003 Bonds shall bear interest expressed in multiples of one-eighth (1/8) or one- twentieth (1/20) of one percent. No coupon interest rate specified for any maturity ofthe Series 2003 Bonds may be less than one percent (1.0%) or more than five percent (5.0%). Should an interest rate be specified which results in annual interest payments not being equally divisible between the semiannual payments in cents the first semiannual payment will be reduced to the next lower cent and the second semiannual payment will be raised to the next higher cent. It shall not be necessary that all Series 2003 Bonds bear the same rate of interest, provided that all Series 2003 Bonds maturing on the same date shall bear the same rate of interest. A rate of interest based upon the use of split or supplemental interest payments or a zero rate of interest will not be considered. Pavine Aeent and Reeistrar The Paying Agent and Registrar for the Series 2003 Bonds is Wells Fargo Bank, N.A., through its designated office in Minneapolis, Minnesota. Security Principal of and interest on the Series 2003 Bonds to be issued pursuant to Ordinance No. 6915-01, as supplemented, and all required sinking fund, reserve and other payments shall be payable solely from the Net Revenues of Water and Sewer System ofthe City, together with the earnings thereon derived from the investment thereof in the Funds and Accounts established in the Ordinance and as more fully described in the Preliminary Official Statement. The Series 2003 Bonds do not constitute a general indebtedness of the City within the meaning of any constitutional, statutory or charter provision or limitation, and no Bondholder shall ever have the right to require or compel the exercise of the ad valorem taxing power of the City or taxation of any real or personal property therein for the payment of the principal of and interest on the Series 2003 Bonds or the making of any debt service fund, reserve or other payments provided for in the Resolution. Purpose Pursuant to the Ordinance, the Series 2003 Bonds are being issued to finance the refunding of the City's Water and Sewer Refunding Revenue Bonds, Series 1993, and pay the costs of issuing the Series 2003 Bonds, including the premium for a municipal bond insurance policy and to fund the reserve fund. Issuance of Series 2003 Bonds The Series 2003 Bonds will be issued and sold by the City of Clearwater, Florida, a municipal corporation organized and existing under the laws ofthe State ofF1orida. The Series 2003 A-4 Bonds are being issued pursuant to Ordinance No. 6915-01 enacted November 15, 2001 as supplemented by resolutions (collectively, the "Bond Ordinance") by the City of Clearwater, Florida (the "City") and pursuant to the provisions of Chapter 166, Florida Statutes, and other applicable provisions oflaw. Municipal Bond Insurance Policy A commitment to issue a municipal bond insurance policy guaranteeing payment of principal and interest on the Series 2003 Bonds has been obtained from Financial Security Assurance Inc. Proposals Proposals for the Series 2003 Bonds are desired on forms which will be furnished by PARITY, on behalf of the City, and be submitted electronically via PARITY. All bidders must submit a "Good Faith Deposit" in the amount of$1 00,000 (the "Deposit") in the form of a financial surety bond of Financial Security Assurance, Inc. (the "Financial Surety Bond"). Such Financial Surety Bond must be submitted to the City prior to the sale. The Financial Surety Bond must identify the Bidder whose Deposit is guaranteed by such Financial Surety Bond. The successful bidder is required to submit its good faith deposit by wire transfer not later than 2:00 p.m. eastern time, on the next business day following the award, as instructed by the City's Financial Advisor. If such deposit is not received by that time, the City shall make a claim under the Financial Surety Bond to satisfy the good faith deposit requirement. The check of the successful bidder or proceeds of a claim under the Financial Surety Bond, as applicable, will be deposited by the City in an interest-bearing account and be retained and applied towards the purchase price ofthe Series 2003 Bonds pending full performance by the successful bidder, or will be forfeited to the City and applied as full liquidated damages upon failure of the successful bidder to take up and pay for the Series 2003 Bonds. Any interest earned on the good faith deposit will be retained by and inure to the benefit of the City. If the Series 2003 Bonds are not delivered to the successful bidder within 30 calendar days from the date of sale, without fault upon the part of the successful bidder, such successful bidder shall not thereafter be obligated to take delivery of and pay for the Series 2003 Bonds and the good faith deposit amount will be promptly paid to the successful bidder or Financial Security Assurance, Inc., as applicable. Delivery and Payment It is anticipated that the Series 2003 Bonds in book entry only form will be available for delivery on October 15,2003, in New York, New York, at The Depository Trust Company, or some other date and place to be mutually agreed upon by the Successful Bidder and the City against the payment ofthe purchase price therefor including accrued interest calculated on a 360-day year basis, less the amount ofthe good faith check, in immediately available Federal Reserve funds without cost to the City. A-5 Closini! Documents The City will furnish to the Successful Bidder upon delivery of the Series 2003 Bonds the following closing documents in a form satisfactory to Bond Counsel: (1) signature and no-litigation certificate; (2) federal tax certificate; (3) certificate regarding information in the Official Statement; and (4) seller's receipt as to payment. A copy of the transcript of the proceedings authorizing the Series 2003 Bonds will be delivered to the Successful Bidder ofthe Series 2003 Bonds upon request. Copies of the form of such closing papers and certificates may be obtained from the City. Information Statement Section 218.38(1)(b)1, Florida Statutes requires that the City file, within 120 days after delivery ofthe Series 2003 Bonds, an information statement with the Division of Bond Finance of the State of Florida (the "Division") containing the following information: (a) the name and address of the managing underwriter, if any, connected with the Series 2003 Bonds; (b) the name and address of any attorney or financial consultant who advised the City with respect to the Series 2003 Bonds; and (c) any fee, bonus, or gratuity paid, in connection with the bond issue, by an underwriter or financial consultant to any person not regularly employed or engaged by such underwriter or consultant and (d) any other fee paid by the City with respect to the Series 2003 Bonds, including any fee paid to attorneys or financial consultants. The Successful Bidder will be required to deliver to the City at or prior to the time of delivery of the Series 2003 Bonds, a statement signed by an authorized officer containing the same information mentioned in (a) and (c) above. The Successful Bidder shall also be required, at or prior to the delivery ofthe Series 2003 Bonds, to furnish the City with such information concerning the initial prices at which a substantial amount ofthe Series 2003 Bonds of each maturity were sold to the public as the City shall reasonably request. Pursuant to Section 218.385(2) and (3) of the Florida Statutes, as amended, a truth-in- bonding statement will be required from each bidder as to the Series 2003 Bonds as part oftheir bid in the following form: "The City of Clearwater, Florida, is proposing to issue $ original aggregate principal amount of Water and Sewer Revenue Refunding Bonds, Series 2003, for the purpose ofpaying (i) the costs of refunding the City's Water and Sewer Refunding Revenue Bonds, Series 1993, (ii) the costs of issuing the Series 2003 Bonds, and (iii) the premium on the Bond Insurance Policy, all as further described in Ordinance No. 6915-01. The final maturity date of the Series 2003 Bonds is December 1, 2018, and the Series 2003 Bonds are expected to be repaid over a period of fifteen (15) years. At a forecasted average interest rate of _ % per annum, total interest paid over the life of the Series 2003 Bonds will be $ . The source of repayment or security for this proposal is the Net Revenues (as defined in the Ordinance) and moneys and investments held in the funds created under the said Ordinance. Authorizing the Series 2003 Bonds will result in $ not being available to finance the other capital projects ofthe City. This truth-in-bonding statement prepared pursuant to Section 218.385(2) and (3) ofthe Florida Statutes, as amended, is for informational purposes only and shall not affect or control the actual A-6 terms and conditions of the Series 2003 Bonds." Leeal Opinion The Successful Bidder will be furnished, without cost, with the approving opinion of Bryant Miller & Olive P.A., Tallahassee, Florida, to the effect that based on existing law, and assuming compliance by the City with certain covenants and requirements of the Internal Revenue Code of 1986, as amended (the "Code"), regarding use, expenditures, investment of proceeds and the timely payment of certain investment earnings to the United States Treasury, the interest on the Series 2003 Bonds is not includable in the gross income of individuals, however, interest on the Series 2003 Bonds will be included in the calculation ofthe alternative minimum tax liabilities of corporations. The Code contains other provisions that could result in tax consequences, upon which Bond Counsel renders no opinion, as a result of ownership of the Series 2003 Bonds or the inclusion in certain computations (including, without limitation, those related to the corporate alternative minimum tax and environmental tax) of interest that is excluded from gross income. Official Statement The Preliminary Official Statement, copies of which may be obtained as described below, is in a form "deemed final" by the City for purposes of SEC Rule 15c2-12(b)(1) (except for certain permitted omissions as described in such rule) but is subject to revision, amendment and completion in a final Official Statement. Upon the sale of the Series 2003 Bonds, the City will publish a final Official Statement in substantially the same form as the Preliminary Official Statement. Copies of the final Official Statement will be provided, at the City's expense, on a timely basis in such quantities as may be necessary for the Successful Bidder's regulatory compliance. It is not the intention or the expectation of the City to print the name(s) of the Successful Bidder as to the Series 2003 Bonds on the cover of the Official Statement. Continuine Disclosure The City has covenanted to provide ongoing disclosure in accordance with Rule 15c2-12 of the Securities and Exchange Commission. See "Appendix D -- Form of Continuing Disclosure Certificate" attached to the Preliminary Official Statement. CUSIP Number It is anticipated that CUSIP identification numbers will be printed on the Series 2003 Bonds, but neither the failure to print such number on any Series 2003 Bonds nor any error with respect thereto shall constitute cause for failure or refusal by the Successful Bidder to accept delivery of and pay for the Series 2003 Bonds in accordance with its agreement to purchase the Series 2003 Bonds. All expenses in relation to the printing of CUSIP numbers on the Series 2003 Bonds shall be paid for by the City; provided, however, that the CUSIP Service Bureau charge for the assignment of said number shall be the responsibility of and shall be paid for by the Successful Bidder. A-7 Copies of Documents Copies of the Preliminary Official Statement, this Official Notice of Bond Sale and the Official Bid Form and further information which may be desired, may be obtained from the City's Financial Advisor, William R. Hough & Co., 100 Second Avenue South, Suite 800, St. Petersburg, Florida 33701, Attn: Kevin Conitz: (727) 895 8853. Amendment and Notices Amendments hereto and notices, if any, pertaining to this offering shall be made through Thompson Municipal Market Monitor (TM3) or similar information distribution service. CITY OF CLEARWATER, FLORIDA /s/ Brian J. Aungst Mayor-Commissioner A-8 EXHffiIT B FORM OF SUMMARY NOTICE OF SALE CITY OF CLEARWATER, FLORIDA Water and Sewer Revenue Refunding Bonds Series 2003 NOTICE IS HEREBY GIVEN, that bids will be received by the City Manager and the Finance Director ofthe City of Clearwater, Florida, electronically through PARITY, subject to the provisions of the Official Notice of Bond Sale. Sale Date: Time: Bonds Dated: Maturities: Maturitv 2004 2005 2006 2007 2008 2009 2010 October 1,2003 11 :00 a.m., E.D.S.T. October 1, 2003 Payable December 1 in the years and amounts as follows: Series 2003 Bonds Principal Amount * 5,490,000.00 165,000.00 165,000.00 170,000.00 170,000.00 185,000.00 195,000.00 *Preliminary, subject to change Interest Payment Dates: Legal Opinion: Maturity Principal Amount* 2011 2012 2013 2014 2015 2016 2017 2018 195,000.00 210,000.00 220,000.00 230,000.00 240,000.00 250,000.00 260,000.00 270,000.00 Payable June 1 and December 1, commencing June 1,2004. Bryant Miller & Olive P.A., Tallahassee, Florida For copies ofthe Official Notice of Bond Sale and the Preliminary Official Statement ofthe City of Clearwater, Florida, please contact the City's Financial Advisor, William R. Hough & Co., 100 Second Avenue South, Suite 800, St. Petersburg, Florida 33701, Attn: Kevin Conitz: (727) 895 8853. The Preliminary Official Statement may be obtained after September 22,2003 electronically through Image Master Financial Publishing Inc. at www.munios.com. B-1 EXHIBIT C FORM OF PRELIMINARY OFFICIAL STATEMENT C-l ~ :..," ~~ =:: ......t ~ .... :q'"fj ~~ ~..~ C" ::- c- fi ~ ~ it ~ ;:. .~ ,: .-."- - ~ " 'l5 .;; ~ .~~ ~ ~ s'-. .~ 8 ~ ~ ~. ~ -~ ::-,1::.:= ~j ..c~ ~ ~ ~ ~ ~...... a-;~ ~~ i ~ l: ~. s - ~rn >-~ ~. c. ~ e ~ 0" ~~ g ~ q :~ ~ ~ ~ "',' 'S . ~~_. ~ a _ ~]1 .~ .... ~~"3 :;: 's ~ .~ r~ 'B) r~ ~ ~ '.~,..' ~~~ - ~ ~ e 2 ~ 2; --.s ])~ ~ r.; .~ ~ s ~ ~ '-:-, .S 2 e' a ~ -'.~::~ ~- .~ i: ~ '~ ~ ~ ,'~ ~ .2 ~ :s. ~ ~ ~ ~, ~ ~ ~. .::' ~ - E' S S ~ ,g .~ 6 '.:J ~ _~ ~ s" .~ ~ ~ ~~i t~~ s:: .~ c ~] ~ .~ ~ 1:: ~ ,~ ~ Preliminary Official Statement Dated September . 2003 NEW ISSUE - FULL BOOK-ENTRY Ratings: Fitch: "AAA" (Insured) "A" (Underlying) Moody's: "Aaa" (Insured) "A-2" (Underlying) (See "RATINGS," herein) In the opinion of Bond Counsel. assuming continuing compliance by the City with various covenants in the Ordinance (herein defined), under existing statutes, regulations and judicial decisions, the interest on the Series 2003 Bonds will be excluded from gross income for federal income tax purposes to the owners thereof The Series 2003 Bonds are, under existing laws and regulations, also exempt from intangible taxes imposed pursuant to Chapter 199, Florida Statutes. See "Tax Exemption" herein for a description of alternative minimum tax treatment and certain other tax consequences to owners of the Series 2003 Bonds. $8,415,000 * CITY OF CLEARWATER, FLORIDA Water and Sewer Revenue Refunding Bonds Series 2003 Dated: October 1, 2003 Due: December 1, as shown below The Water and Sewer Revenue Refunding Bonds, Series 2003 (the "Series 2003 Bonds") of the City of Clearwater, Florida (the "City") are being issued in fully registered form and, when initially issued, will be registered to Cede & Co., ao; nominee oIThe Depository Trust Company, New York, New York. Wells Fargo Bank, National Association, Minneapolis, Minnesota, is acting as the Paying Agent and Bond Registrar for the Series 2003 Bonds. The Series 2003 Bonds will be purchased in book-entry form only, in the denomination of $5,000 or any integral multiple thereof. There will be no physical delivery ofbond certificates to individual Bondholders. Interest on the Series 2003 Bonds will be payable semi-annually beginning on JWle I, 2004 and on each June I and December I thereafter. Principal of and premium, if any, on the Series 2003 Bonds will be payable at maturity or upon redemption prior to maturity. The Series 2003 Bonds are not subject to redemption prior to maturity. The Series 2003 Bonds are being issued for the purpose of (i) refimding and redeeming on December 1,2003, all of the Outstanding principal amount of the City's Water and Sewer Refunding Revenue Bonds, Series 1993, maturing after December 1,2003 (the "RefWlded Bonds"), (ii) funding a deposit to the Debt Service Reserve AccoWlt for the benefit of the Series 2003 Bonds and all Outstanding Parity Bonds, (iii) paying certain costs of issuance of the Series 2003 Bonds, including the mWlicipal bond insurance premium. The Series 2003 Bonds and the interest thereon are payable solely from the Net Revenues derived from the operation of the System, as further described herein. The lien of the Series 2003 Bonds on the Net Revenues is on a parity with the holders of the City's Outstanding Water and Sewer Revenue RefWlding Bonds, Series 1998 and the City's Outstanding Water and Sewer Revenue Bonds, Series 2002 (the "Parity Bonds"), as further described herein. The scheduled payment of principal of and interest on the Bonds when due will be guaranteed under an insurance policy to be issued concurrently with the delivery of the Bonds by FINANCIAL SECURITY ASSURANCE INC. For a discussion of the terms and provisions of such policy, including the limitations thereof, .see "MUNICIPAL BOND INSURANCE" herein. rFSA~. PRINCIPAL AMOUNTS, INTEREST RATES, MATURITIES, PRICES & YIELDS $8,415,000* Serial Bonds Maturing Maturing December 1 Principal December I Principal of the Year Amount Coupon Yield CUSIP of the Year Amount Coupon Yield CUSIP 2004 $5,490,000 2012 $210,000 2005 165,000 2013 220,000 2006 165,000 2014 230,000 2007 170,000 2015 240,000 2008 170,000 2016 250,000 2009 185,000 2017 260,000 2010 195,000 2018 270,000 2011 195,000 (Accrued interest to be added) ELECTRONIC BIDS FOR THE SERIES 2003 BONDS WILL BE ACCEPTED IN ACCORDANCE WITH THE OFFICIAL NOTICE OF SALE. The Series 2003 Bonds are offered when, as and if issued and accepted by the Underwriter subject to the approval of legality by Bryant Miller & Olive, P.A., Tallahassee, Florida, Bond CounseL Certain other legal matters will be passed upon for the City by Pamela K. Akin, Esquire, City Attorney, and by Nabors, Giblin & Nickerson, P.A., Tampa, Florida, Disclosure Counsel to the City. William R. Hough & Co., St. Petersburg, Florida is serving as Financial Advisor to the City. It is expected that the Series 2003 Bonds, in definitive book-entry form, will be available for delivery through DTC in New York, New York on or about October 15, 2003. October ,2003 ... Preliminary, subject to change. CITY OF CLEARWATER, FLORIDA ELECTED OFFICIALS MAYOR - COMMISSIONER Brian 1. Aungst, Sr. COMMISSIONERS Frank Hibbard Hoyt Hamilton Whitney Gray Bill Jonson APPOINTED OFFICIALS William B. Home, II, City Manager Pamela K. Akin, Esq., City Attorney Margaret L. Simmons, CPA, Financial Services Administrator BOND COUNSEL Bryant Miller & Olive, P.A. Tallahassee, Florida FINANCIAL ADVISOR William R Hough & Co. St. Petersburg, Florida REGISTRAR AND PAYING AGENT Wells Fargo Bank, National Association Minneapolis, Minnesota No dealer, broker, salesman or other person has been authorized to give any information or to make any representations, other than those contained in this Official Statement, in connection with the offering of the Series 2003 Bonds described herein, and if given or made, such infonnation or representations must not be relied upon as having been authorized by the City or the Underwriter. This Official Statement does not constitute an offer to sell the Series 2003 Bonds or a solicitation of an offer to buy nor shall there be any sale of the Series 2003 Bonds by any person in any jurisdiction in which it is unlawful for such person to make such offer, solicitation or sale. The information set forth herein has been furnished by the City and by other sources whichare believed to be reliable, but it is not guaranteed as to accuracy or completeness, and is not to be construed as a representation or contract, by the Underwriter. The information and expressions of opinion herein are subject to change without notice and neither the delivery of the Official Statement nor any sale made hereunder shall, under any circmnstances, create any implication that there has been no change in the affairs of the City since the date hereof IN CONNECTION WITH THE OFFERING, THE UNDERWRITER MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SERIES 1998 BONDS OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. The Series 2003 Bonds have not been registered with the Securities and Exchange Commission underthe Securities Act of 1933, as amended, nor has the Ordinance been qualified under the Trust Indenture Act of 1939, as amended, in reliance upon exemptions contained in such acts. The registration or qualification of the Series 2003 Bonds in accordance with applicable provisions of the securities laws of the States, if any, in which the Series 2003 Bonds have been registered or qualified and the exemption from registration or qualification in certain other states cannot be regarded as a recommendation thereof. Neither these States nor any of their agencies have passed upon the merits of the Series 2003 Bonds or the accuracy or completeness of this Official Statement. Any representation to the contrary may be a criminal offense. TABLE OF CONTENTS Page INTRODUCTORY STATEMENT. . . . . . .. 1 PLAN OF REFUNDING . . . . . . . . . . . . . .. 2 FUTURE FINANCING OF THE W ATERAND SEWER SYSTEM .................... 3 DESCRIPTION OF THE SERIES 2003 BONDS . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . .. 3 General . . . . . . . . . . . . . . . . . . . . . . . . .. 3 Book-Entry Only System. . . . . . . . . . . . . 4 SECURITY FOR THE SERIES 2003 BONDS .............. 8 Series 2003 Bonds Not a Debt ofthe City. . . . . . . . . . .. 9 Parity Bonds ..................... 10 MUNICIPAL BOND INSURANCE 10 DEBT SERVICE REQUIREMENTS ..... 12 SOURCES AND USES OF FUNDS ..... 13 THE WATER AND SEWER SYSTEM ... 13 Water System .................... 13 Sewer System . . . . . . . . . . . . . . . . . . .. 15 Water and Sewer Capital Improvements . . . . . . . . . . . . .. 17 RATES, FEES AND CHARGES ........ 18 FINANCIAL STATEMENTS .......... 20 INVESTMENT POLICY OF THE CITY .. 20 LITIGATION. . . . . . . . . . . . . . . . . . . . . .. 21 RAT]NGS . . . . . . . . . . . . . . . . . . . . . . . . .. 21 TAXEXEMPTION .................. 22 Federal Income Tax Matters ......... 22 LEGAL OPINIONS . . . . . . . . . . . . . . . . .. 23 ENFORCEABILITY OF REMEDIES .... 23 FINANCIAL ADVISOR .............. 23 VERIFICATION OF MATHEMATICAL COMPUTATIONS. . . . . . . . . . . . . . . . . . . 24 DISCLOSURE REQUIRED BY FLORIDA BLUE SKY REGULATIONS. . . . . . . . . .. 24 ADVISORS AND CONSULTANTS. . . .. 24 CONTINUING DISCLOSURE ..... . . .. 26 CERTIFICATE CONCERNING OFFICIAL STATEMENT. . . . . . . . . . . . . . . . . . . . . .. 26 MISCELLANEOUS . . . . . . . . . . . . . . . . .. 26 Appendices AppendixA General Description of the City and Selected Statistics Appendix B Excerpts from the City's Comprehensive Annual Financial Report for the Fiscal Year Ended September 30,2002 Appendix C Form of Ordinance 6915-01 and Resolution 03-35 Appendix D Form of Continuing Disclosure Agreement Appendix E Form of Bond COlUlsel Opinion Appendix F Form of Municipal Bond Insurance Policy OFFICIAL STATEMENT $8,415,000. CITY OF CLEARWATER, FLORIDA WATER AND SEWER REVENUE REFUNDING BONDS, SERIES 2003 INTRODUCTORY STATEMENT The purpose of1his Official Statement, which includes the cover page, the SwrunaryStatement and the Appendices, is to provide information concerning the City of Clearwater, Florida (the "City") and the City's $ 8,415, 000* Water and Sewer Revenue Refimding Bonds, Series 2003 (the "Series 2003 Bonds"). The Series 2003 Bonds are being issued for the purpose of (i) refunding and redeerning on December 1, 2003, all of the Outstanding principal amount of the City's Water and Sewer Refunding Revenue Bonds, Series 1993, maturing after December 1,2003 (the "Refunded Bonds")" (ii) funding a deposit to the Debt Service Reserve Account for the benefit of the Series 2003 Bonds and all Outstanding Parity Bonds, (iii) paying certain costs of issuance of the Series 2003 Bonds, including the municipal bond insurance premium. The Refunded Bonds (or Bonds refunded by the Refunded Bonds) funded the capital costs of the City's water and sewer system (the "System"). The Series 2003 Bonds and the interestthereon are payable solely from the Net Revenues derived from the operation of the System, as further described herein. After giving effect to the refimding of the Refunded Bonds, the lien of the Series 2003 Bonds on the Net Revenues is on a parity with the holders of the City's Outstanding Water and Sewer Revenue Refimding Bonds, Series 1998 (the "Parity Bonds"), as further described herein. The scheduled payment of principal of and interest on the Series 2003 Bonds when due will be guaranteed under an insurance policy to be issued concurrently with the deliveIy of the Series 2003 Bonds by Financial Security Assurance Inc., as described herein For a discussion of the terms and provisions of such policy, including the limitations thereof, see "MUNICIPAL BOND INSURANCE" herein. The Series 2002 Bonds will be issued pursuant to the authority of and in full compliance with (a) the charter of the City, (b) the Constitution and the laws of the State of Florida, particularly Chapter 166, Part II, Florida Statutes, and other applicable provisions oflaw, and (c) Ordinance No. 3674-84 enacted by the Issuer on August 2, 1984, as amended and supplemented in Ordinance 5355-93, enacted on April 15, 1993, as amended and supplemented in Ordinance 6311-98, enacted November 5, 1998 and as further amended and supplemented inOrdinance 6915-0 1, enacted November 15, 2001 (the "Ordinance") and as further supplemented by Resolution 03-35, adopted by the City on September 18, 2003 (the "Series 2003 Resolution"). Neither the Series 2003 Bonds nor the interest thereon constitute a general obligation or indebtedness of the City within the meaning of any constitutional, statutory or charter provision or limitation No owner or owners of any Series 2003 Bonds shall ever have the right to compel the exercise of the ad valorem taxing power of the City, or any other taxing power in any form on any real or personal property of the City, to pay the Series 2003 Bonds or the interest thereon. The City shall not be obligated to pay · Preliminary, subject to change. 1 the Series 2003 Bonds or any interest thereon except from the Net Revenues, in the manner provided in the Ordinance. A ReseIVe AccOlmt has been established for the benefit of the Series 2003 Bonds and the outstanding Parity Bonds (as herein defined). Upon issuance of the Series 2003 Bonds, the Reserve AccOlmt will be fimded in an amount equal to the Reserve Account Requirement for Series 2003 Bonds and the Outstanding Parity Bonds. The City covenants in the Ordinance to fix, establish and maintain such rates, and collect such fees, rentals and other charges for the services and facilities of the System (as herein defined) and revise the same from time to time whenever necessary as will always provide Gross Revenues in each Fiscal Year sufficient to pay (i) the Cost of Operation and Maintenance of the System in such Fiscal Year, (ii) 115% of the Bond Service Requirement for such Fiscal Year on the Outstanding Series 2003 Bonds and on all Outstanding Additional Bonds and Parity Bonds, plus (iii) 100% of all reserve and other payments required to be made pursuant to the Ordinance. The City may issue AdditionalBonds, payable on a parity from the Net Revenues with the Series 2003 Bonds and the Parity Bonds, for the purpose of refimding a part of the Outstanding Bonds, or financing the cost of extensions, additions and improvements to the System and for the acquisition and construction of, and extensions and improvements to, sewer and/or water systems which are to be consolidated with the System and operated as a single combined utility, provided that, among other requirements, certain earnings tests relating historical Net Revenues to the Maximum Bond Service Requirement of all Bonds outstanding after the issuance of such Additional Bonds can be met. Such historical Net Revenues may be adjusted by the Consulting Engineer as provided in the Ordinance. Definitions of certain words and terms having initial capitals used herein and in the Ordinance are contained in the "Conformed Copy of the Ordinance and Amendatory Ordinance" in Appendix C hereto. The references, excerpts and summaries of all documents referred to herein do not purport to be complete statements of the provisions of such documents, and reference is directed to all such documents for full and complete statements of all matters of fact relating to the Series 2003 Bonds, the security for the payment of the Series 2003 Bonds, and the rights and obligations of holders thereof. The information contained in this Official Statement involving matters of opinion or of estimates, whether or not so expressly stated, are set forth as such and not as representations of fact, and no representation is made that any of the estimates will be realized. Neither this Official Statement nor any statement which may have been made verbally or in writing is to be construed as a contract with the holders of the Series 2003 Bonds. PLAN OF REFUNDING In order to achieve debt service savings, from the proceeds of the Series 2003 Bonds, together with other moneys provided by the City, the City will deposit into an irrevocable escrow account (the "Escrow Fund") with Wells Fargo Bank, National Association, Minneapolis, Minnesota, as Escrow Agent, an amount sufficient to pay and redeem on December 1, 2003, all of the Outstanding principal amount of the City's Water and Sewer Refimding Revenue Bonds, Series 1993, maturing after December 1, 2003. 2 (the "Refunded Bonds"), together with premium and accrued interest, which Refunded Bonds are currently Outstanding in the aggregate principal amount of $8,290,000. FUTURE FINANCING OF THE WATER AND SEWER SYSTEM Burton& Associates, Jacksonville, Florida (the "Rate Consultant") conducted a rate study in 200 1 (the "Rate Study"), which consisted of a revenue sufficiency analysis for the period FY 2001 through FY 2006 (the "Forecast Period") to determine the projected costs of capital improvements to the System and to determine the adequacy of then-current rates to fund the System's projected costs during the Forecast Period. The Rate Study identified a need for approximately $158 million in capital projects for the System for fiscal years 2001 through 2006 to be funded with approximately $5.5 million of available operating revenues after funding debt service, $22.4 million of Renewal and Replacement Fund revenue and $130.1 millionofrevenue bond proceeds. Proceeds of the Series 2002 Bonds funded approximately $54 million of these capital projects and it is anticipated that the City will issue Bonds in 2004 to fund approximately $35,245,213 in additional projects and $41 million for additional projects in 2006. ~ee also, "SECURITY FOR THE SERIES 2003 BONDS - Parity Bonds"). DESCRIPTION OF THE SERIES 2003 BONDS General The Series 2003 Bonds will be dated October 1, 2003. The Series 2003 Bonds will bear interest at the rates and mature on December 1 in the amounts and at the times set forth on the cover page ofthis Official Statement. The Series 2003 Bonds are to be issued as fully registered bonds in denominations of $5,000 or integral multiples thereof Interest on the Series 2003 Bonds will be payable onJlUle 1, 2004 and semiannually thereafter on June 1 and December 1 of each year, by check or draft mailed to the registered owners, at their addresses as they appear on the registration books of the City maintained by the Bond Registrar, as of the 15th day (whether or not a business day) of the month preceding the interest payment date (the "Record Date"). Owners of$l ,000,000 or more in aggregate principal amount of Series 2003 Bonds may receive interest by wire transfer, at the Owner's expense, to a bank account designated in writing by the Owner not later than the Record Date. Principal of, and premium if any, are payable at maturity, or upon redemption prior to maturity, upon presentation and surrender thereof at the corporate trust office of the Paying Agent. Wells Fargo Bank, National Association, Minneapolis, Minnesota, is acting as Paying Agent and Bond Registrar for the Series 2003 Bonds. The Series 2003 Bonds will be initially issued in the form of a single fully registered Bond for each maturity of the Series 2003 Bonds. Upon initial issuance, the ownership of each such Series 2003 Bonds will be registered in the registration books kept by the Bond Registrar, in the name of Cede & Co., as nominee ofThe Depository Trust Company, New York, New York ("DTC"). While held in book-entry fonn, all payments of principal, interest and premium, if any, on the Series 2003 Bonds will be made to DTC or the DTC Nominee as the sole registered owner of the Series 2003 Bonds and payments to Beneficial Owners will be the responsibility of DTC and the DTC Participants as described below. See "Book-Entry Only System." 3 With respect to Series 2003 Bonds registered in the name of Cede & Co., as nominee of DTC, neither the City, nor the Paying Agent will have any responsibility or obligation to any DTC Participant or to any indirect DTC Participant. See "Book-EntIy Only System" for the definition of "DTC Participant." Without limiting the immediately preceding sentence, neither the City nor the Bond Registrar and the Paying Agent will have any responsibility or obligation with respect to: (i) the accuracy of the records of DTC or any DTC Participant with respect to any ownership interest in the Series 2003 Bonds; (ii) the delivery to any DTC Participant or any other person other thana registered owner, as shown in the registration books kept by the Bond Registrar, of any notice with respect to the Series 2003 Bonds, including any notice of redemption; or (iii) the payment to any DTC Participant or any other person, other thana registered owner, as shown in the registration books kept by the Bond Registrar, of any amoWlt with respect to principal of, premium, if any, or interest on the Series 2003 Bonds. The City, the Bond Registrar and the Paying Agent may treat and consider the person in whose name each Series 2003 Bonds is registered in the registration books kept by the Bond Registrar as the holder and absolute owner of such Bond for the purpose of payment of principal of, premium, if any, and interest with respect to such Bond, for the purpose of giving notices of redemption and other matters with respect to such Bond, for the purpose of registering transfers with respect to such Bond, and for all other purposes whatsoever. The Paying Agent will pay all principal of, premium, ifany, and interest on the Series 2003 Bonds only to or upon the order of the respective registered owners, as shown in the registration books kept by the Bond Registrar, or their respective attorneys duly authorized in writing, as provided in the Ordinance, and all such payments will be valid and effectual to satisfy and discharge the City's obligations with respect to payment of principal of, premium, if any, and interest on the Series 2003 Bonds to the extent of the sums so paid. No person other than a registered owner, as shown in the registration books kept by the Bond Registrar, will receive a certificated Bond evidencing the obligation of the City to make payments of principal of, premium, if any, and interest on the Series 2003 Bonds pursuant to the provisions of the Ordinance. Series 2003 Bonds Not Subject to Redemption The Series 2003 Bonds are not subject to redemption prior to maturity. Book-Entry Only System The Series 2003 Bonds will be available in book-entIy form only, in denominations of $5,000 or any integral multiple thereof Purchasers of the Series 2003 Bonds will not receive certificates representing their interests in the Series 2003 Bonds purchased. The Underwriter is to confinn original issuance purchases with statements containing certain terms of the Series 2003 Bonds purchased. The following information regarding The Depository Trust Company, New York, New York ("DTC") and the book-entry only system of registration has been obtained by the City from DTC. No representation is made by the City as to its accuracy or correctness. The Depository Trust Company ("DTC"), New York, New York, will act as securities depository for the Series 2003 Bonds. The Series 2003 Bonds will be issued as fully-registered securities registered in the name of Cede & Co. (DTC's partnership nominee) or such other name as may be requested by an authorized representative ofDTC. One fully-registered Series 2003 Bond will be issued for each maturity of the Series 2003 Bonds, as set forth on the inside cover page hereof, and will be deposited with DTC. 4 DTC, the world's largest depository, is a limited-purpose trust company organized illlderthe New York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code, and a "clearing agency" registered pursuant to the provisions of Section 17 A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 2 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments from over 85 cOillltries that DTC's participants ("Direct Participants") deposit with DTC. DTC also facilities the post- trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book -entry transfers and pledges between Direct Participants' accoilllts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation ("DTCC"). DTCC, in turn, is owned by a number of Direct Participants of DTC and Members of the National Securities Clearing Corporation, Govemment Securities Clearing Corporation, MBS Clearing Corporation, and Emerging Markets Clearing Corporation, (NSCC, GSCC, MBSCC, and EMCC, also subsidiaries of DTCC), as well as by the New York Stock Exchange, Inc., the American Stock Exchange LLC, and the National Association of Securities Dealers, Inc. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ("Indirect Participants"). DTC has Standard & Poor's highest rating: AAA. The DTC Rules applicable to its Participants area on file with the Securities and Exchange Commission. More information about DTC can be fOillld at www.dtcc.com. So long as the book -entry only system is in effect, beneficial interests in the Series 2003 Bonds will be available in book-entry form only, in the principal amount of $5,000 or any integral multiple thereof Purchasers of beneficial interests in the Series 2003 Bonds will not receive certificates representing their beneficial interests in the Series 2003 Bonds purchased. Each Underwriter is to confirm original issuance purchases ofbeneficial interests with statements containing certain terms of the Series 2003 Bonds in which such beneficial interests are purchased. Purchases of Series 2003 Bonds illlder the DTC system must be made by or through Direct Participants, which will receive a credit for the Series 2003 Bonds on DTC's records. The ownership interest of each actual purchaser of each Series 2003 Bonds ("Beneficial Owner") is in turn to be recorded on the Direct and Indirect Participants' records. Beneficial Owners will not receive written confirmation fromDTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Series 2003 Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in Series 2003 Bonds, except in the event that use of the book-entry system for the Series 2003 Bonds is discontinued. To facilitate subsequent transfers, all Series 2003 Bonds deposited by Direct Participants withDTC are registered in the name of DTC's partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative ofDTC. The deposit of Series 2003 Bonds with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial 5 ownership. DTC has no knowledge of the actual Beneficial Owners of the Series 2003 Bonds; DTC's records reflect only the identity of the Direct Participants to whose accounts such Series 2003 Bonds are credited, which mayor may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. ThePaying Agent will make payments of principal of, premitun, if any, and interest on the Series 2003 Bonds to DTC or such other nominee, as may be requested by an authorized representative or DTC, as registered owner of the Series 2003 Bonds. DTC's practice is to credit Direct Participants' aCCotUlts upon DTC's receipt of funds and corresponding detail information from the City and the Paying Agent, on payable date in accordance with their respective holdings shown on DTC's records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer formor registered in "street name," and will be the responsibility of such Participant and not ofDTC nor its nominee, the Paying Agent subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds, distributions, and dividend payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the City or the Paying Agent, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants. The City and the Paying Agent will send redemption notices to DTC. Ifless than all ofthe Series 2003 Bonds within an issue are being redeemed, DTC's practice is to detennine by lot the amount of interest of each Direct Participant in such issue to be redeemed. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to Series 2003 Bonds unless authorized bya Direct Participant inaccordance withDTC's Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the City as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.' s consenting or voting rights to those Direct Participants to whose accounts Series 2003 Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy). THE CITY AND THE PAYING AGENT WILL HAVE NO RESPONSIBILITY OR OBLIGATION TO THE BENEFICIAL OWNERS, DTC PARTICIPANTS OR THE PERSONS FOR WHOM DTC PARTICIPANTS ACT AS NOMINEES WITH RESPECT TO THE SERIES 2003 BONDS FOR THE ACCURACY OF RECORDS OF DTC, CEDE & CO. OR ANY DTC PARTICIPANT WITH RESPECT TO THE SERIES 2003 BONDS OR THE PROVIDING OF NOTICEORPA YMENTOF PRINCIPAL, ORINTEREST, OR ANY PREMIUM ON THE SERIES 2003 BONDS, TO DTC PARTICIPANTS OR BENEFICIAL OWNERS, OR THE SELECTION OF SERIES 2003 BONDS FOR REDEMPTION. The City and the Paying Agent cannot give any assurances that DTC, DTC Participants or others willdistributepayments of principal of, premiwn, if any, and interest on the Series 2003 Bonds paid to DTC 6 or its nominee, or any redemption or other notices, to the Beneficial Owners, or that they will do so on a timely basis or that DTC will serve or act in a manner described in this Official Statement. For every transfer and exchange of beneficial interests in the Series 2003 Bonds, the Beneficial Owner may be charged a sum sufficient to cover any tax, fee or other government charge that may be imposed in relation thereto. DTC may detennine to discontinue providing its services with respect to the Series 2003 Bonds at any time by giving notice to the City and the Paying Agent and discharging its responsibilities with respect thereto under applicable law. Under such circumstances, in the event that a successor depository is not obtained, Series 2003 Bonds are required to be printed and delivered. In addition, the City may determine to discontinue the use of book-entry transfers through DTC (or any successor securities depository). Under such circumstances, certificated Series 2003 Bonds are required to be delivered as described below. In the event that the book-entry only system is discontinued, the following provisions will govern the transfer and exchange of Series 2003 Bonds. The Series 2003 Bonds will be exchanged for an equal aggregate principal amount of corresponding bonds in other authorized denominations and of the same series and maturity, upon surrender thereof at the principal corporate trust office of the Bond Registrar. The transfer of any Series 2003 Bonds will be registered on the books maintained by the Bond Registrar for such purpose only upon the surrender thereof to the Bond Registrar with a duly executed written instnunent of transfer in form and with guaranty of signatures satisfactory to the Bond Registrar, containing written instructions as to the details of transfer of such Series 2003 Bonds, along with the social security number or federal employer identillcationnumber of such transferee. The City and the Bond Registrar may charge the registered owners a sum sufficient to reimburse them for any expenses incurred in making any exchange or transfer after the first such exchange or transfer following the delivery of the Series 2003 Bonds. The Bond Registrar or the City may also require payment from the registered owners or their transferees, as the case may be, of a sum sufficient to cover any tax, fee or other governmental charge that may be imposed in relation thereto. Such charges and expenses shall be paid before any such new Series 2003 Bonds shall be delivered. Neither the City nor the Bond Registrar shall be required to register the transfer or exchange of any Series 2003 Bonds during the period cornmencing on the fifteenth day (whether or not a business day) of the month next preceding an interest payment date and ending on such interest payment date or, in the case of any proposed redemption of a Series 2003 Bonds, after such Series 2003 Bonds or any portion thereof has been selected for redemption. 7 SECURITY FOR THE SERIES 2003 BONDS Net Revenues. The principal of and premium, ifany, and interest on the Series 2003 Bonds are payable solely from and secured by an irrevocable first lien upon and pledge of the Net Revenues (as hereinafter defined) derived and collected by the City from the operation of the water and sewer system of the City (the "System"), on a parity with the Parity Bonds. ''Net Revenues" are defined by the Ordinance to include all income or earnings, including any income from the investment of fimds, derived by the City from the operation of the System after deduction of current expenses, either paid or accrued, for the operation, maintenance and repair of the System, but not including reserves forrenewals and replacements, for extraordinary repairs or any allowance for depreciation. The Series 2003 Bonds do not constitute a general indebtedness of the City within the meaning of any constitutional, statutory or charter provision or limitation. The principal of and interest on the Series 2003 Bonds and all required reserve and other payments shall be made solely fromthe Net Revenues. The City shall never be required to levy ad valorem taxes on any property therein to pay the principal of and interest on the Series 2003 Bonds or to make any of the required debt service, reserve or other payments, and any failure to pay the Series 2003 Bonds shall not give rise to a lien upon any property of or in the City, except the Net Revenues. Rate Covenant. In the Ordinance, the City has covenanted to fix, establish and maintain such rates and collect such fees, rentals and other charges for the services and facilities of the System and revise the same from time to time whenever necessary, as will always provide Gross Revenues in each Fiscal Year sufficient to pay the Cost of Operation and Maintenance of the System in such Fiscal Year, one hundred fifteen per centwn (115%) of the Bond Service Requirement becoming due in such Fiscal Year on the Outstanding Parity Bonds, on the outstanding Bonds and on all outstanding Additional Bonds, plus one hundred per centwn (100%) of all reserve and other payments required to be made pursuant to this Ordinance and the Original Ordinance. Such rates, fees, rentals and other charges shall not be reduced so as to be insufficient to provide Gross Revenues for such pwposes. Reserve Account. The Ordinance creates a Reserve Account in a sum equal to and sufficient to pay the Maximum Bond Service Requirement on all outstanding Bonds becoming due in any ensuing Fiscal Year. The Reserve Account will be fully fimded after the issuance of the Series 2003 Bonds. No further payments will be required to be made into such Reserve Account as long as there shall remain on deposit therein a smn equal to the MaxirmnnBond Service Requirement on all outstanding Bonds becoming due in any ensuing Fiscal Year. Moneys in the Reserve Account shall be used only forthe pwpose of payment of maturing principal of or interest on the Bonds when the moneys in the Sinking Fund are insufficient therefor. Interest earnings on fimds held in the Reserve Account will be transferred to the Revenue Fund. In lieu of or in substitution for all or any part of the required deposits to the Reserve Account, the City may provide for the deposit of a surety bond or insurance policy from a reputable insurer in accordance with the provisions of the Ordinance. 8 Any withdrawals from the Reserve AccOlmt will be subsequently restored from the first moneys available in the Revenue Fund after all required current payments into the Sinking Fund and into the Reserve Account, including all deficiencies for prior payments, have been made in full. Additional Bonds. Additional Bonds, payable on a parity from the Net Revenues with the Series 2003 Bonds and the Parity Bonds, may be issued for the pwposes of refunding a part of the outstanding Bonds or financing the cost of extensions, additions and improvements to the System and for the acquisition and construction of, and extensions, additions and improvements to, sewer and/or water systems whichare to be consolidated with the System and operated as a single combined utility. Additional Bonds, other than for refimding pwposes, will be issued only upon compliance with all of the conditions set forth in the Ordinance, including the following: (1) There shall have been obtained and filed with the Clerk a certificate of the Finance Director stating: (a) that the books and records of the City relative to the System have been audited by qualified and recognized firm of independent certified public accountants; (b) based on such audited financial statement, that the amount of the adjusted Net Revenues derived for the Fiscal Year preceding the date of issuance of the proposed Additional Bonds or for any twelve (12) consecutive months during the eighteen (18) months immediately preceding the date of issuance of the Additional Bonds with respect to which such certificate is made, adjusted as herein below provided; and (c) based on such audited financial statement, that the aggregate amOlmt of such Net Revenues, as adjusted, for the period for which such Net Revenues are being certified is equal to not less than 120% of the Maxi-millll Bond Service Requirement becoming due in any Fiscal Year there-after on (i) all Parity Bonds and the Bonds issued under the Ordinance, if any, then Outstanding, and (ii) on the Additional Bonds with respect to which such certificate is made. (2) Upon recommendation of the Consulting Engineers, the Net Revenues certified pursuant to (b) in the previous paragraph may be adjusted by including: (a) 100% of the additional Net Revenues which inthe opinion of the Consulting Engineer would have been derived by the City from rate increases adopted before the Additional Bonds are issued, if such rate increases had been implemented before the commencement of the period for which such Net Revenues are being certified, and (b) 100% of the additional Net Revenues estimated by the Consulting Engineer to be derived during the first full twelve month period after the facilities of the System are extended, enlarged, improved or added to with the proceeds of the Additional Bonds with respect to which such certificate is made. The adjustments described in (b) of this paragraph may only be made if the Net Revenues as adjusted under (a) of the prior paragraph for the period for which such Net Revenues are being certified equals at least 1.00 times the Maximillll Bond Service Requirement becoming due in any Fiscal Year thereafter on (i) all Bonds then outstanding; and (ii) on the Additional Bonds with respect to which such certificate is made. See Appendix C, "Conformed Copy of the Ordinance and Amendatory Ordinance." See also "Parity Bonds" below under this principal caption. Series 2003 Bonds Not a Debt of the City The Series 2003 Bonds shall not constitute a general obligation or indebtedness of the City within the meaning of any constitutional, statutory or charter provision or limitation, and no Bondholder shall ever have the right to compel the exercise of the ad valorem taxing power of the City or taxation in any form of real or pers onal property therein for the payment of the 9 principal of and interest on the Series 2003 Bonds or to compel the City to pay such principal and interest from any other funds of the City except the Net Revenues. The Series 2003 Bonds shall not constitute a lien upon any property of or in the City, but shall constitute a lien only on the Net Revenues all in the manner provided in the Ordinance. Parity Bonds After giving effectto the refimding of the Refimded Bonds (see "PLAN OF REFUNDING"), there will remain Outstanding Wlder the Resolution, the City's Water and Sewer Revenue Bonds, Series 1998 (the "Series 1998 Bonds") ofwhich$55,254,825.30 CompoWld Accreted Value will remain outstanding as of December 1,2003 and the City's Water and Sewer Revenue Bonds, Series 2002 (the "Series 2002 Bonds") ofwhich$57,820,000 will remain Outstanding as of December 1, 2003. The Series 1998 Bonds and the Series 2002 Bonds rank on a parity with the Series 2003 Bonds as to the lien and pledge of the Net Revenues and hereinafter referred to collectively as the "Parity Bonds"). See also the information appearing Wlder the caption "FUTURE FINANCING OF TIIE WATER AND SEWER SYSTEM" concerning the anticipated issuance of additional parity Bonds in 2004 and 2006 to finance additional capital projects. MUNICIPAL BOND INSURANCE Bond Insurance Policy Concurrently with the issuance of the Bonds, Financial Security Assurance Inc. ("Financial Security") will issue its Municipal Bond Insurance Policy for the Series 2003 Bonds (the "Policy"). The Policy guarantees the scheduled payment of principal of and interest on the Series 2003 Bonds when due as set forth in the form of the Policy included as an exhibit to this Official Statement. The Policy is not covered by any insurance security or guaranty fimd established Wlder New York, Califomia, Connecticut or Florida insurance law. Financial Security Assurance Inc. Financial Security is a New York domiciled insurance company and a wholly owned subsidiary of Financial Security Assurance Holdings Ltd. ("Holdings"). Holdings is an indirect subsidiary of Dexia, S.A., a publicly held Be1giancoIporation. Dexia, S.A., through its bank subsidiaries, is primarily engaged in the business of public finance in France, Belgi.wn and other European cOWltries. No shareholder of Holdings or Financial Security is liable for the obligations of Financial Security. At JWle 30, 2003, Financial Security's total policyholders' surplus and contingency reserves were approximately $ 1 ,986,068,000 and its total Wlearned premium reserve was approximately $1,195,179,000 in accordance with statutory acCOWlting practices. At JWle 30, 2003, Financial Security's total shareholders' equity was approximately $2,152,547,000 and its total net Wlearned premium reserve was approximately $1,010,472,000 in accordance with generally accepted accoWlting principles. 10 The financial statements included as exhibits to the annual and quarterly reports filed by Holdings with the Securities and Exchange Commission are hereby incorporated herein by reference. Also incorporated herein by reference are any such financial statements so filed from the date of this Official Statement mtil the termination of the offering of the Series 2003 Bonds. Copies of materials incorporated by reference will be provided upon request to Financial Security Assurance Inc.: 350 Park Avenue, New York, New York 10022, Attention: Communications Department (telephone (212) 826-0100). The Policy does not protect investors against changes in market value of the Series 2003 Bonds, which market value may be impaired as a result of changes in prevailing interest rates, changes in applicable ratings or other causes. Financial Security makes no representation regarding the Series 2003 Bonds or the advisabilityofinvestinginthe Series 2003 Bonds. Financial Security makes no representation regarding the Official Statement, nor has it participated in the preparation thereof, except that Financial Security has provided to the Issuer the information presented WIder this caption for inclusion in the Official Statement. 11 Fiscal Year Ending September 30 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 Totals Parity Bonds $3,547,151.26 4,146,438.76 9,472,557.51 9,532,701.26 9,455,301.26 9,530,313.76 9,496,482.51 9,492,851.26 9,546,651.26 9,518,751.26 9,483,148.76 9,452,896.26 9,502,552.51 9,506,918.76 9,505,916.26 9,470,375.63 3,695,035.00 3,698,692.50 3,700,956.25 3,706,000.00 3,709,125.00 3,716,250.00 3,722,000.00 3,726,125.00 3,733,250.00 3,742,875.00 3,754,500.00 3,762,750.00 3,772,250.00 3.787.375.00 $192,888,192.03 DEBT SERVICE REQUIREMENTS Series 2003 Bonds Principal Interest Total 12 Parity and Series 2003 Bonds Total Debt Service Requirements SOURCES AND USES OF FUNDS SOURCES Principal Amount of Series 2003 Bonds Accrued Interest $8,415,000* Total Sources USES Deposit to Escrow Fund for Refunded Bonds Deposit to Reserve Account Deposit to Interest Account Costs ofIssuance including Underwriters Discount and Bond Insurance Premitun Total Uses * Preliminary, subject to change. THE WATER AND SEWER SYSTEM Water System Water Supply. Water supply for the area served by the System is currently derived from existing City wellfie1ds and by the purchase of water from Pinellas County. The City has a bulk water purchase agreement with Pinellas County that supplies up to 80 percent of the service area's water needs on an as needed basis. The City currently has fIfteen (15) production wells scattered throughout the service area, each equipped with automatic control systems. The City water system and the Pinellas County water system are interconnected at seven (7) locations. Under the City's contract with Pinellas County, Pinellas County agrees to supply the City with sufficient water for the designated service area, based on a formula set forth therein, and the City agrees to purchase a mininrnm of 1 ,460,000,000 gallons of water from Pinellas County within each calendar year. The current contract rate is approximately $1.79 per thousand gallons. The rate is set by the Board of County Commissioners and is based on a prorated share of revenue cost requirements of the Pinellas County water system including production and transmission costs required for the supply of water to the Pinellas County water users. Pinellas County obtains approximately 70 million gallons per day or 100% of its water supply from Tampa Bay Water, a Regional Water Supply Authority ("Tampa Bay Water") (the successor to West Coast Regional Water Supply Authority). It is entitled under contract to obtain 100% of its water needs per day from Tampa Bay Water. The City currently acquires approximately 10.5 to 11.0 million gallons per day from Pinellas County. 13 The City's water distribution system consists of approximately 515 miles of water mains ranging up to 20 inches in diameter. The distribution system contains numerous interconnections between piping, making larger size mains wmecessaryforexisting flow conditions. City water storage within the distribution system consists of a series of ground-level water storage pumping systems and elevated tank water storage. The City currently has four 5-milliongallon ground-level water storage reservoirs and three I-million gallon elevated water storage tanks. The City's elevated storage tanks are all steel vessels designed to ride on the distribution system. They provide immediate response to pressure and flow demands in the local areas. Raw water within the City of Clearwater has historically been of adequate quality to meet mininunn regulatory requirements and has received treatment only in the form of disinfection via chlorination with a limited amount of aeration for sulfide control. Additional treatment has been added in the form of corrosion control (polyphosphate). This type of treatment to date has been compatible with the quality of bulk water purchased from the County. Continual use of the City's wells has led to increasing mineralization of the City supply, but there has been no danger to public health. The following chart shows the average daily water flow on an annualized basis over the past six years: Source and Volume of Water Pumped (in million gallons per day, averaged over the Fiscal Year) FY City Wells County Total 1997 3.448 10.412 13.860 1998 3.140 11.540 14.680 1999 3.070 12.094 15.164 2000 3.047 11.528 14.575 2001 3.067 11.260 14.327 2002 2.258 11. 739 13.997 The table below illustrates the growth in number of customers over the past five years. 14 Historical Growth in Number of Water Customers (all figures are as of September of the year indicated) Year Water Customers 1997 38,294 1998 38,440 1999 39,931 2000 39,562 2001 40,167 2002 40,340 The ten largest water customers and their 2002 water use including water revenues received are shown in the table below: Ten Largest Water Customers Fiscal Year Ending September 30, 2002 Name of User 1. Church of Scientology 2. Pinellas County Schools 3. Morton Plant Hospital 4. Clearwater Housing Authority 5. Sheraton Sand Key 6. AGH Leasing LIP 7. Ultimar II Condo Assoc, Inc. 8. Lewis Real Estate, Inc. 9. Lane Clearwater LIP 10. Countryside Mall Total Source: City of Clearwater Water Used (in 100 Cubic Feet) 113,261 71,831 53,959 51,761 51,365 41,040 39,385 29,387 29,216 21.650 508,855 15 Revenues Produced $318,322 236,754 222,366 134,251 121,877 98,969 95,363 83,282 75,551 71.074 $1,457,809 Sewer System The City's sanitary sewage collection system is composed of slightly more than 321 miles of connector mains, utilizing 79 lift stations. Three treatment plants with a combined design capacity of28.5 mgd (million gallons per day) are on line and operational. These three plants are the Marshall Street Facility, the Northeast Facility and the East Facility. The wastewater pollution control plants, Marshall Street, constructed in the 1950's, East, constructed in the 1960's and Northeast, constructed in the 1970's, have been expanded several times to their current design capacities of ten million, five million and thirteen and one-half million gallons per day respectively. All three plants utilize Advanced Wastewater Treatment processes. Their current systems include nitrogen and phosphorous removal, anaerobic digestion, sludge thickening and provide highly treated reclaimed water for private, commercial and municipal use. The Marshall Street and Northeast plants also provide for sludge dewatering. The Northeast Biosolids Management Facility was constructed in 1994. It is designed to process thirty-three dry tons per day of sludge that meets EP A and Florida Department of Environmental Protection sludge criteria. 16 years: The following chart shows the average daily sewage flow on an annualized basis over the past five Fiscal Year 1998 1999 2000 2001 2002 Average Sewage Flow Annual A vg. Daily Flow In MGD 17.9 16.5 15.4 14.4 14.3 The following table illustrates the growth in nwnber of customers over the past five years. Historical Growth in Number of Sewer Customers* Sewer Year Customers 1998 33,174 1999 33,383 2000 33,075 2001 32,933 2002 33,215 * All figures are as of September 30 of the year indicated. 17 The ten largest sewer customers and their 2001 water use including sewer revenues received are shown in the table below: Ten Largest Sewer Customers Fiscal Year Ending September 30, 2002 Name of User 1. Church of Scientology 2. Pinellas County Schools 3. Morton Plant Mease Hospital 4. United Dominion Realty Trust 5. Clearwater Housing Authority 6. AGH Leasing LIP 7. Sheraton Sand Key 8. Lewis Real Estate, Inc. 9. Lane Clearwater LIP 10. Bay Aristocrat Village Sewer Used (in 100 Cubic Feet) 89,648 49,291 67,535 51,365 50,332 41,040 32,799 29,387 27,538 24.253 Total 463,188 Source: City of Clearwater Water and Sewer Capital Improvements Revenues Produced $ 270,190 263,643 241,242 148,558 143,880 117,400 95,663 83,710 79,054 68.908 $1,512,248 For the next five years the primary objectives of the capital improvement program are expansion of the reclaimed water program, continued renewal and replacement as needed of the water, wastewater collection and water pollution control systems and upgrading the water pollution control system to meet regulatory requirements. The budgeted fimding for fiscal years 2001 through 2006 to meet the capital improvement program objectives over that period is $157,610,000. 18 RATES, FEES AND CHARGES Current Rates, Fees and Charges The City uses a three-tiered rate structure for water and sewer usage. The base rate includes a minirmun usage for residential and nonresidential water rates. Any usage over the minimum is billed at one rate per 100 cubic feet up to a designated level and at a second rate for usage over that level. For irrigation, there is a base rate, with no minimum, and a charge per 100 cubic feet of water usage up to a designated level and a higher charge for usage over that amount. The sewer base rate includes a minimum usage and a fIxed charge per 100cubic feet of water usage over the basic allowance. The minimum usage and second tier usage level vary with the size of the meters. For Fiscal Year 2002 there were no changes to the three-tiered rate structure for water or sewer usage. Effective October 1, 2000 the basis for billing was converted from cubic feet to gallons. The following rates reflect an increase of 7% effective April 1 , 2002 for water and sewer services. Residential and October 1, October 1, October 1, October I October! 1 Nonresidential Water Rates (1) 1998(2) 1999 (2) 2000 (3) 2001 ill 2002 (3) Size of Meter Under 1 inch 7.08 7.08 7.53 8.07 8.64 1 inch 15.93 15.93 17.57 18.83 20.16 1.5 inch 237.39 237.39 251.00 269.00 288.00 2 inch 550.47 550.47 584.83 626.77 671.04 3 or 2 inch manifold 849.60 849.60 901.09 965.71 1,033.92 4 inch 1,635.48 1,635.48 1,734.41 1,858.79 1,990.08. 6 inch 4,200.21 4,200.21 4,455.25 4,774.75 5,112.00 8 inch 7,080.00 7,080.00 7530.00 8,070.00 8,640.00 (1) Rates in table are minimwn monthly charges per meter size as of the date indicated (2) Cubic Feet (3) Gallons Any usage over the mininn.nn is billed at one rate per 1,000 gallons up to a designated level and at a second rate for usage over that level. 19 Rates for Irrigation (Lawn) Meters (1) October 1, 1998 (2) October 1, 1999 ill October 1, 2000 (3) October 1, 2001 (3) April 1, 2002 (3) Size of Meter Under 1 inch 1 inch 1.5 inch 2 inch 3 or 2 inch manifold 4 inch 6 inch 2.52 2.52 2.69 2.88 3.08 7.57 7.57 8.07 8.64 9.24 37.85 37.85 40.35 43.20 46.20 105.99 105.99 112.99 120.96 129.36 209.45 209.45 223.27 239.04 255.64 403.76 403.76 430.41 460.80 492.80 1,218.85 1,218.85 1,299.29 1,391.04 1,487.64 (1) Rates in table are base rates with no minimum (2) Cubic feet (3) Gallons Since there is no minimum associated with the base rate, there is a charge per 1,000 gallons up to a designated level which starts immediately. There is a higher charge for usage above that amount. Sewer Rates (1) October 1, October 1, October 1, October 1, October 1, 1998 (2) 1999 (2) 2000 (3) 2001 (3) 2002 (3) Size of Meter Under 1 inch 9.44 9.72 10.38 11.10 11.88 1 inch 21.24 21.87 24.22 25.90 27.72 1.5 inch 316.24 325.62 346.00 370.00 396.00 2 inch 733.96 755.73 806.18 862.1 0 922.68 3 or 2 inch manifold 1,132.80 1,166.40 1,242.14 1,328.30 1,421.64 4 inch 2,180.64 2,245.32 2,239.86 2,556.70 2,736.36 6 inch 5,600.28 5,766.39 6,141.5 6,567.50 7,029.00 8 inch 9,440.00 9,720.00 10,380.00 11,100.00 11,880.00 Per 1,000 gallons of water used over that 2.36 2.43 3.46 3.70 3.96 allowed in minimum (1) Rates in table are minimum monthly charge per meter size as of date indicated (2) Cubic Feet (3) Gallons 20 Debt Service Coverage By Historical Net Revenues Fiscal Years Ended September 30 Net Revenues Available for Debt Service (1) 1998 1999 2000 $11,702,739 $11,044,714 $11,523,950 2001 2002 $12,149,447 $10,900,123 Annual Debt Service 7,174,738 6,583,179 6,286,403 6,278,690 6,282,880 Coverage 1.63 1.68 1.83 1.94 1.73 (1) Revenues used in calculation include interest earnings and exclude extraordinary gain and contributed revenues. Expenses used exclude depreciation (and similar non-cash expenses), amortization of bond discount and issue costs, bond interest, sinking fund and reserve requirements and extraordinary loss. Source: City of Clearwater. Rate Study and Rate Increases As a result of the Rate Study (see "FUTURE FINANCING OF THE WATER AND SEWER SYSTEM" above), the City enacted Ordinance No. 6695-01 on March 1, 2001 (the "Rate Ordinance"), which increased water and sewer rates by 7% on each of July 1,2001, April1, 2002, January 1,2003, October 1,2003 and October 1, 2004. Following the enactment of the Rate Ordinance the information in the analysis contained in the Rate Study was updated in a report dated July, 2001 (the Rate Study as so updated is herein referred to as the "Rate Study"). The Rate Study concludes that: "The analysis demonstrates that the 7% rate increases adopted by the City through FY 2005 are sufficient to provide fimding for all system requirements. In addition, an increase of approximately 7.25% will be required at the beginning ofFY 2006 to fimd expected costs during that year." FINANCIAL STATEMENTS The combined financial statements and Water and Sewer enterprise fimd financial statements of the City at September 30, 2002 and for the Fiscal Year then ended, appended hereto as Appendix B, have been excerpted from the financial statements contained in the City's Comprehensive Annual Financial Reports for the Fiscal Year ending September 30, 2002. INVESTMENT POLICY OF THE CITY Pursuant to the requirements of Section 218.45, Florida Statutes, the City adopted a written investment policy which applies to all fimds held by or for the benefit of the City Commission (except for proceeds ofbond issues which are deposited in escrow and debt service fimds and governed by their bond documents) and fimds of Constitutional Officers and other component units of the City. 21 The objectives of the investment policy, listed in order in order of importance, are: 1. Safety of principal 2. Provision of sufficient liquidity 3. Optimization of return within the constraints of safety and liquidity The investment policy limits the securities eligible for inclusion in the City's portfolio. The City will attempt to maintain a weighted average maturity of its investments at or below three years; however, the average maturity of investments may not exceed four years. To enhance safety, the investment policy requires the diversification of the portfolio to reduce the risk of loss resulting from over-concentration of assets in a specific class of security. The investment policy also requires the preparation of periodic reports for the City Commission of all outstanding securities by class or type, book value, income earned and market value as of the report date. Notwithstanding the foregoing, moneys held in the fimds and accounts established under the Ordinance may be invested only in Authorized Investments, as described in the Ordinance. LmGATION In the opinion of the City Attorney, no legal proceedings are pending or threatened that materially affect the City's ability to perform its obligations to the holders of the Series 2003 Bonds or that materially affect the Pledged Revenues. In the opinion of the City Attorney, there is no litigation or controversy of any nature now pending or, to the City's knowledge, threatened to restrain or enjoin the issuance, sale, execution or delivery of the Series 2003 Bonds or in any way contesting the validity of the Series 2003 Bonds or any proceedings of the City taken with respect to the authorization, sale or issuance of the Series 2003 Bonds or the pledge or application of any moneys provided for the payment of the Series 2003 Bonds. RATINGS Moody's Investors Service and FitchRatings have assigned ratings of "A" and "A-2,"respectively, to the Series 2003 Bonds without regard to the municipal bond insurance policy. It is anticipated that Moody's Investors Service and Fitch Ratings will assign ratings of"Aaa," and "AAA," respectively, to the Series 2003 Bonds, with the understanding that, upon delivery ofthe Series 2003 Bonds, the municipal bond insurance policy will be issued by Financial Security. Such ratings reflect only the views of such organizations and any desired explanation of the significance of such ratings should be obtained from the respective rating agency. Generally, a rating agency bases its rating on the information and materials furnished to it and on investigations, studies and asswnptions of its own. There is no assurance such ratings will continue for any given period of time or that such ratings will not be revised downward or withdrawn entirely by the rating agencies, if in the judgment of such rating agencies, circwnstances so warrant. Any such downward revision or withdrawal of such ratings may have an adverse effect on the market price of the Series 2003 Bonds. 22 TAX EXEMPTION Federal Income Tax Matters The Internal Revenue Code of 1986, as amended (the "Code") establishes certain requirements which must be met subsequent to the issuance and delivery of the Bonds in order that interest on the Bonds be and remain excluded from gross income for purposes of federal income taxation. Non-compliance may cause interest on the Bonds to be included in federal gross income retroactive to the date of issuance of the Bonds regardless of the date on which such non-compliance occurs or is ascertained. These requirements include, but are not limited to, provisions which prescribe yield and other limits within which the proceeds of the Bonds and the other amounts are to be invested and require that certain investment earnings on the foregoing must be rebated on a periodic basis to the Treasury Department of the United States. The County has covenanted in the Resolution to comply with such requirements in order to maintain the exclusion from federal gross income of the interest on the Bonds. In the opinion of Bond Counsel, assuming compliance with the aforementioned covenants, under existing laws, regulations, judicial decisions and rulings, interest on the Bonds is excluded from gross income of the holders thereof for purposes of federal income taxation. Interest on the Bonds is not an item of tax preference for purposes of the federal alternative mininunn tax imposed on individuals or corporations; however, interest on the Bonds may be subject to the alternative minimum tax when any Bond is held by a corporation. The alternative minimum taxable income of a corporation must be increased by 75% of the excess of such corporation's adjusted current earnings over its alternative mininunn taxable income (before this adjustment and the alternative tax net operating loss deduction). "Adjusted Current Earnings" will include interest on the Bonds. Except as described above, Bond Counsel will express no opinion regarding the federal income tax consequences resulting from the ownership of, receipt or accrual of interest on, or disposition of Bonds. Prospective purchasers of Bonds should be aware that the ownership of Bonds may result in collateral federal income tax consequences, including (i) the denial of a deduction for interest on indebtedness incurred or continued to purchase or cany Bonds, (ii) the reduction of the loss reserve deduction for property and casualty insurance companies by 15% of certain items, including interest on the Bonds, (ill) the inclusion of interest on the Bonds in earnings of certain foreign corporations doing business in the United States for purposes of a branch profits tax, (iv) the inclusion of interest on Bonds in passive income subject to federal income taxation of certain S corporations with Subchapter C earnings and profits at the close of the taxable year, and (v) the inclusion of interest on the Bonds in "modified adjusted gross income" by recipients of certain Social Security and Railroad Retirement benefits for purposes of determining whether such benefits are included in gross income for federal income tax purposes. PURCHASE, OWNERSHIP, SALE OR DISPOSITION OF THE BONDS AND THE RECEIPT OR ACCRUAL OF THEINTERESTTHEREONMA YHA VEADVERSEFEDERAL TAX CONSEQUENCES FOR CERTAIN INDIVIDUAL AND CORPORATE REGISTERED OWNERS. PROSPECTIVE REGISTERED OWNERS SHOULD CONSUL T WITH THEIR TAX SPECIALISTS FOR INFORMATION IN THAT REGARD. Dtning recent years legislative proposals have been introduced in Congress, and in some cases enacted that altered certain federal tax consequences resulting from the ownership of obligations that are similar to the Bonds. In some cases these proposals have contained provisions that altered these consequences on a retroactive basis. Such alteration of federal tax consequences may have affected the 23 market value of obligations similarto the Bonds. From time to time, legislative proposals are pending which could have an effect on both the federal tax consequences resulting from ownership of Bonds and their market value. No assurance can be given that legislative proposals will not be introduced or enacted that would or might apply to, or have an adverse effect upon, the Bonds. Florida Tax Matters On the date of delivery of the Bonds, Bond COl.UlSel will issue an opinion to the effect that lUlder existing statutes, regulations and judicial decisions, the Bonds and the income therefrom are exempt from taxation lUlder the laws of the State of Florida, except as to Florida estate taxes imposed by Chapter 198, Florida Statutes, as amended, and net income and franchise taxes imposed by Chapter 220, Florida Statutes, as amended. LEGAL OPINIONS Legal matters incident to the authorization, issuance and sale of the Series 2003 Bonds are subject to the approval of Bryant Miller & Olive, P.A., Tallahassee, Florida, Bond COlUlSel, whose approving opinion will be printed on the Series 2003 Bonds and will be in substantially the form set forth in APPENDIX E. Certain other legal matters will be passed upon for the City by Pamela K. Akin, Esquire, City Attorney and by Nabors, Giblin & Nickerson, P.A., Tampa, Florida, Disclosure COlUlSelto the City. ENFORCEABILITY OF REMEDIES The remedies available to the Holders of the Series 2003 Bonds upon an Event of Default lUlder the Ordinance are in many respects dependent upon judicial actions whichare often subject to discretion and delay. Under existing constitutional and statutory law and judicial decisions, the remedies specified by the Ordinance may not be readily available or may be limited. The various legal opinions to be delivered concurrently with the delivery of the Series 2003 Bonds will be qualified, as to the enforceability of the various legal instruments, by limitations imposed by bankruptcy, reorganization, insolvency or other similar laws affecting the rights of creditors enacted before or after such delivery. The remedies granted to the Bondholders lUlder the Ordinance do not include the power to accelerate the principal of the Series 2003 Bonds. FINANCIAL ADVISOR William R Hough & Co. served as independent financial advisor to the City with respect to the issuance and sale of the Series 2003 Bonds. The Financial Advisor assisted in the preparation of this Official Statement and in other matters relating to the planning, structuring and issuance of the Series 2003 Bonds. William R. Hough & Co. did not engage in any lUldetwriting activities with regard to the issuance and sale of the Series 2003 Bonds. The Financial Advisor is not obligated to lUldertake and has not lUldertaken to make an independent verification or to assume responsibility for the accuracy, completeness or fairness of the information contained in this Official Statement and is not obligated to review or ensure compliance with the lUldertaking by the City to provide continuing secondary market disclosure. William R. Hough & Co. may assist the City in bidding certain investments on behalf of the City which may result in additional fees being paid to William R Hough & Co. 24 VERIFICATION OF MATHEMATICAL COMPUTATIONS At the time of the delivery of the Series 2003, Bonds, Causey Demgen & Moore, Inc., Denver, Colorado, a firm of independent certified public accountants, will deliver a report on the mathematical accuracy of the computations contained in schedules provided to them and prepared by the Financial Advisor on behalf of the City relating to (1) the sufficiency of the anticipated cash and maturing principal amounts and interest on the Federal Securities to pay, when due, the principal, whether at maturity or upon prior redemption, interest and call premimn requirements of the Refunded Bonds and (2) the "yield" on the Series 2003 Bonds and on the Federal Securities considered by Bond Counsel in connection with their opinion that the Series 2003 Bonds are not "arbitrage bonds" within the meaning of Section 148 of the Internal Revenue Code of 1986, as amended. DISCLOSURE REQUIRED BY FLORIDA BLUE SKY REGULATIONS Section 517.051, Florida Statutes, as amended, and the regulations promulgated thereunder (the "Disclosure Act") require that the City make a full and fu.ir disclosure of any bonds or other debt obligations that it has issued or guaranteed and that are or have been in default as to principal or interest at any time after December 31, 1975 (including bonds or other debt obligations for which it has served only as a conduit issuer such as industrial development or private activity bonds issued on behalf of private businesses). The City is not and has not since December 31, 1975 been in default as to principal and interest on its bonds or other debt obligations (see, however, disclosure which is being made in the next paragraph related to conduit indebtedness). The City hereby makes the following disclosure regarding a default on an issue of industrial development bonds not related to any direct indebtedness of the City, as it is aware of a prior default in 1990 with respect to an issue of industrial revenue bonds for which the City served only as a conduit issuer. The City was not liable to pay the principal of or interest on such bonds except from payments made to it by the private company on whose behalf such bonds were issued and no funds of the City were used to pay such bonds or the interest thereon. Although the City is not aware of any other defaults with respect to bonds or other debt obligations as to which it has served only as a conduit issuer, it has not undertaken an independent review or investigation of such bonds or other debt obligations. 25 ADVISORS AND CONSULTANTS The City has retained advisors and consultants in connection with the issuance of the Series 2003 Bonds. These advisors and consultants are compensated from a portion of the proceeds of the Series 2003 Bonds, identified as "Costs ofIssuance" lUlder the heading "ESTIMATED SOURCES AND USES OF FUNDS" herein; and such compensation, is, in some instances, contingent upon the issuance of the Bonds and the receipt of the proceeds thereof 26 Financial Advisor. The City has retained William R Hough & Co., St. Petersburg, Florida, as Financial Advisor. The fees of the Financial Advisor will be paid from proceeds of the Series 2003 Bonds and such payment is contingent upon the issuance of the Series 2003 Bonds. Bond Counsel. Bryant Miller & Olive, P.A., Tallahassee, Florida represents the City as Bond COilllSel. The fees of Bond COilllSel will be paid from proceeds of the Bonds, and such payment is contingent upon the issuance of the Bonds. Disclosure Counsel. Nabors, Giblin & Nickerson, P.A., Tampa, Florida represents the City as Disclosure COilllSel. The fees of Disclosure Counsel will be paid from proceeds ofthe Bonds, and such payment is contingent upon the issuance of the Bonds. CONTINUING DISCLOSURE The City has covenanted for the benefit of the holders and beneficial owners of the Series 2003 Bonds to provide certain financial information and operating data relating to the City by not laterthanJlU1e 30 in each year commencing JlU1e 30, 2004 (the "Annual Report"), and to provide notices of the occurrence of certain enumerated events, if deemed by the City to be material. The Annual Report will be filed by the City with each Nationally Recognized Municipal Securities Information Repository ("NRMSIR"), and with the State of Florida Repository, if and when created. The notices of material events will be filed by the City with the NRMSIRand withthe State of Florida Repository, if and when created. The form of Continuing Disclosure Certificate containing the specific nature of the information to be contained in the Annual Report or the notices of material events appears in "APPENDIX F - FORM OF CONTINUING DISCLOSURE CERTIFICATE." These covenants have been made in order to assist the Underwriter in complying with S.E.e. Rule l5c2-l2(b )(5). The City has never failed to comply in all material respects with any previous lU1dertakings with regard to said Rule to provide annual reports or notices of material events. CERTIFICATE CONCERNING OFFICIAL STATEMENT Concurrently with the delivery of the Series 2003 Bonds, the City will furnish its certificate, executed by the Mayor or Vice-Mayor of the City, to the effect that, to the best of his or her knowledge, this Official Statement, as of its date and as of the date of delivery of the Series 2003 Bonds, does not contain any WItrue statements of material fact and does not omit to state a material fact which should be included herein for the purpose for which this Official Statement is to be used, or which is necessary to make the statements contained herein, in the light of the circumstances WIder which they were made, not misleading. MISCELLANEOUS The references, excerpts and summaries of all documents, resolutions and/or ordinances referred to herein do not purport to be complete statements of the provisions of such documents, resolutions and/or ordinances and reference is directed to all such documents, resolutions and/or ordinances for full and complete statements of all matters of fact relating to the Series 2003 Bonds, the security for and the 27 repayment of the Series 2003 Bonds and the rights and obligations of the Holders thereof. Copies of such documents, resolutions and ordinances may be obtained from the City Clerk's Office. So far as any statements made in this Official Statement involve matters of opinion or of estimates, whether or not expressly stated, they are set forth as such and not as representations of fact. No representation is made that any of such statements will be realized. Neither this Official Statement nor any statement which may have been orally or in writing is to be construed as a contract with the Holders of the Series 2003 Bonds. The execution and delivery of this Official Statement by the Mayor-Commissioner of the City has been duly authorized by the City Commission. CITY OF CLEARWATER, FLORIDA Brian 1. Aungst, Sr., Mayor-Commissioner William B. Horne, II, City Manager 28 APPENDIX A GENERAL INFORMATION REGARDING THE CITY APPENDIX A GENERAL INFORMATION RELATING TO THE CITY OF CLEARWATER, FLORIDA Location The City of Clearwater (the "City"), the COWlty seat of Pinellas COWlty (the fifth most populous COWlty in Florida), is geographically located in the middle of the west coast of Florida on the Gulf of Mexico. It is situated approximately 22 miles west of Tampa and 16 miles north of St. Petersburg. Standing on the highest coastal elevation of the State, the City limits comprise approximately 26.66 square miles ofland and 8.61 square miles of waterways and lakes. Clearwater Beach, a corporate part of the City, is a beach community connected to the mainland by Memorial Causeway, a four-lane, toll-free drive stretching almost two miles across the Intracoastal Waterway. Business on Clearwater Beach is mainly tourist oriented, with hotels, motels and gift shops. Many fine homes, apartments and condominiums offer pleasant, semi-tropical island accommodations to permanent residents and winter and summer visitors. History The area now known as Clearwater was first explored in 1528 by Panfile de Narvaez, a Spanish explorer who encoWltered a large tribe of Indians, which his anny drove out. The Indians recaptured their territory and held it Wltil the Seminole Wars of 183542. The Indians who inhabited this area are said to have called it "Pocotopaug,"meaning "clear water," for the many springs of clear, fresh water that bubbled along the shore and even below the waterline at low tide. Settlers began moving into the area aroWld the time of the Seminole Wars. After the wars ended, the territory was opened by the Federal government for homesteading Wlder the Armed Occupation Act. The first land title was granted in 1842. The early settlement, named "Clear Water Harbor," was incorporated in 1897. "Clear Water" later became one word and "Harbor" was dropped in 1906 when Pinellas COWlty was created by an act of the State Legislature. In May 1911, Clearwater became the COWlty Seat and Clearwater was chartered as a municipality on May 27, 1915. Government and Administration Clearwater has a commission-citymanager formof government. Four commissioners and a mayor- commissioner are elected at large to serve overlapping three-year terms. They appoint the city manager and the city attorney. All other administrative and professional positions are appointed by the city manager in accordance with the City's Civil Service System. A-I The City has approximately 1,835 employees, covered by the City's Civil Service law relating to recruitment, promotion, evaluation and discipline based on merit principles. Four employee unions represent the City's civil labor force: two units of the Fraternal Order of Police; one of the International Association of Fire Fighters; and one from the Communications Workers of America. Transportation Pinellas County and Clearwater are served by three major causeways and bridges over Tampa Bay, by U.S. 19 and 1-275 to the north and south, by 1-4 and U.S. 60 to the east. State Roads 590 and 686 also afford access to the City. Tampa International Airport, located approximately twenty miles from downtown Clearwater, provides air travel access with approximately 260 national and international flights daily. Limousine and taxi service to and from the airport is available from Clearwater and throughout Pinellas County. St. Petersburg/Clearwater International Airport, five miles from downtown Clearwater, offers regularly scheduled passenger service and charter and special group flights, on a more limited basis to both domestic and foreign destinations, particularly to Canada, Mexico, and Central and South America. The Executive Airpark, which is slightly over a mile from the downtown business section, provides service and maintenance for private plane owners. The airport has one 3,000 foot hard-surface nmway and facilities for visiting and locally based planes. The Port of Tampa (22 miles to the east) is the closest deep water port. The port is serviced by a variety of steamship agents and operators. The United States Coast Guard maintains an air station at the St. Petersburg/Clearwater International Airport, and a search and sea rescue cutter station on Clearwater Harbor opposite Sand Key. Gulf Coast Motor Lines provides service daily between Clearwater, St. Petersburg and Tampa and makes connections with Greyhound and Trailways Bus Lines in Tampa. Scenic tours are available via Gray Line out of Clearwater and St. Petersburg, and both Gray Line and Gulf Coast have buses for charter. Pinellas Suncoast Transit System maintains 54 routes in 19 municipalities in Pinellas COlmty. Utilities, Public Service and Community Facilities The City owns and operates its own water and wastewater collection systems. Water is obtained from 17 deep wells owned and operated by the City (approximately 20-25%) and from wholesale purchases from the Pinellas County Water System (approximately 75-80%). Total daily average is approximately 29 milliongallons per day. The wastewater collection program provides for the transmission of wastewater through the City's underground sewer mains, collectors and interceptor lines and for the maintenance, repair and replacement of 363 miles of sanitary sewer lines. The Department of Public Works maintains 304 miles of paved streets, 10.5 miles of unpaved streets, approximately 147 miles of storm sewer mains, and approximately 559 miles of water mains. A-2 Electric power is provided by Florida Power Corporation and telephone service is provided by Verizon of Florida, Inc. Time Wamer and Verizon provide cable television service under franchises with the City. Local editions of the daily S1. Petersburg Times and The Tampa Tribune, plus weekly newspapers from adjacent Dunedin, Largo, Seminole and Clearwater Beach are widely distributed. The Clearwater Public Library System consists of a main library and four branches which are spread evenly throughout the community for easy access. The City offers over 42 acres of public beach front, 1,130 acres of parks, 31 playgrounds, nwnerous athletic courts and fields, five swinnning pools, a 6,917 seat baseball and softball stadium, golf course, civic and recreational centers, 7.4 miles of recreational paths, boat ramps and a 209 slip yacht basin and marina. The Philadelphia Phillies conduct spring training at the municipal baseball stadiwn and have a long-term contract for fann chili training on Clearwater's specially constructed facilities during the Winter Instructional League Program. Clearwater is the home of the Clearwater Bombers, a national amateur fastpitch softball team. Tourism The State of Florida reported 75.5 million tourists came to Florida during the year 2002. This was an increase of8% ahead of the 69.8 million visitors for the year 2001 and nearly 4% better than the previous record 72.8 million visitors in 2000. Tourism is a $5.2 billion industry annually to the County. Pinellas County is ranked seventh of the top ten destinations in Florida and generated 5 million overnight guests and 7.5 millionday visitors in 2002. Clearwater's Fun 'N Sun Festival each spring attracts thousands of visitors. Education The Pinellas County School District is the seventh largest in the State and operates a total of 143 schools comprising elementary through high school, exceptional, alternative and vocational schools within the County and serves more than 110,000 students. During the 2001-2002 school year, Pinellas County Schools expects enrollment of more than 16,293 compared to 15,978 during the 2000-2001 school year with students attending 80 elementary, 23 middle and 16 high schools along with five exceptional education centers, two alternative schools and four charter schools. The district also operates three community schools, three adult education/leaming centers, two technical education centers and one secondary vocational center. Private schools and academies are also located within or near the City limits. In addition, S1. Petersburg College has a Clearwater campus. Eckerd College in S1. Petersburg, Beacon College in Largo, Stetson University College of Law in Gulfport, the University of South Florida and the University of Tampa in Tampa offer nearby college and post-graduate education. Industry, Commerce and Labor Light, clean industry is encouraged in Clearwater. In 1957, the City of Clearwater developed a 100 acre industrial park adjacent to the Clearwater Airpark (Executive Airport) and to the CSX A-3 Transportation Company. There is also a privately owned, 35 acre industrial park. Large industries located near Clearwater include Honeywell, General Electric, UNISYS, Concept and Hercules Defense Electronics Systems, Inc. During the 1999 fiscal year IMRglobal Corp. ("IMR") occupied its new world headquarters in downtown Clearwater. IMR represents an important step in revitalizing downtown Clearwater and attracting technology companies to the area. Pension Plan The Employees' Pension Plan and the Fireman's Pension Plan are self-administered by the City. City contributions for fiscal year ending 2002 were $4,439,829 to the Employees' Plan and $1,153,732 to the Fireman's Plan, and were in accordance with actuarially determined fimding requirements. In addition, supplemental pensions exist for certified Police Officers and Firefighters, fimded solely from excise taxes on certain insurance premiwns covering property in Clearwater, collected by the State and remitted to the City. Both plans require benefits to be adjusted to equal fimds assets provided by the defined contributions. [Remainder of page intentionally left blank] A-4 Demographic Information Last Ten Fiscal Years (a) (b) (c) (d) (e) Permanent Per Capita Median School Unemployment Year Population Income ~ Enrollment Rate (%) 1993 100,768 24,4 70 42.3 11,584 6.1 1994 100,604 Not avail. 42.9 10,043 5.5 1995 101,162 22,789 42.2 10,284 4.8 1996 101,867 24,696 42.1 11,906 4.2 1997 102,472 26,050 43.3 15,264 3.7 1998 102,874 27,311 43.6 13,714 2.9 1999 104,281 28,367 43.9 14,551 3.0 2000 104,454 30,633 44.2 15,978 2.7 2001 108,787 31,658 43.0 16,293 2.6 2002 109,231 27,704 43.0 17,047 3.9 Source: City of Clearwater, Florida Comprehensive Annual Financial Report for period ending September 30, 2002. (a) University of Florida, Bureau ofEconomic and Business Research, Florida Statistical Abstract 2002. (b) Data is for Pinellas County. Source is the University of Florida, Bureau of Economic and Business Research, Florida Statistical Abstract 2002. (c) University of Florida, Bureau of Economic and Business Research, Florida Statistical Abstract 2002. (d) Pinellas County School District. (e) University of Florida , Bureau ofEconomic and Business Research, Florida Statistical Abstract 2002, as of December 31 of the current fiscal year. NOTE: Data is for an unspecified point in each year, not specifically September 30. A-5 Property Values and Construction Last Ten Fiscal Years Commercial Construction Residential Construction Miscellaneous Construction(a) Fiscal Year Number of Number of Number of Total Assessed Year Permits Value Permits Value Permits Value Prooertv Value{b 1993 1,693 42,051,081 3,885 29,296,168 6,799 20,113,175 5,505,360,476 1994 1,831 37,164,437 3,882 49,950,413 6,063 17,922,023 5,572,851,512 1995 1,775 77,486,099 3,747 53,614,754 6,827 28,843,480 5,641,202,905 1996 1,898 42,360,262 4,224 26,854,040 6,825 24,898,425 5,733,193,387 1997 1,702 49,385,937 4,172 75,997,890 6,739 27,351,853 5,884,592,007 1998 1,455 54,732,371 4,978 47,045,558 5,266 17,820,469 6,049,571,226 1999 1,690 48,849,409 5,544 95,713,246 307 7,506,580 6,349,561,534 :> I 2000 2,698 176,0 I 0,021 5,573 30,814,807 35 229,870 6,555,350,175 0'1 2001 2,267 152,059,409 5,390 34,084,137 324 15,763,545 7,108,110,272 2002 2,129 106,306,523 5,418 36,614,757 191 4,634,345 7,858,986,677 Source: City of Clearwater, Florida Comprehensive Annual Financial Report for period ending September 30, 2002. (a) Includes institutions, churches, seawalls, pools and non-valued building permits. (b) Pinellas County Property Appraiser, values listed are for year of collections. (c) Includes balances in commercial, savings, savings and loan banking institutions for Pine lias County. Data from the Florida Bankers Association Branch Deposit Report of Florida Bank and Thrift Institutions. City of Clearwater, Florida Assessed and Estimated Actual property Valuations Last Ten Fiscal years Assessed Valuations (a) Percentages Assessed Values to Collection Non-Exempt Personal Other Total Total Total Estimated Yearly Increases Year Real Estate Property Property(b ) Taxable Exempt( c) --.AlL Market Taxable Total 1993 3,800,740,889 386,831,160 532,486 4,188,104,535 1,317,255,941 5,505,360,476 100.0 0.2 0.5 1994 3,789,902,836 390,841,880 569,338 4,181,314,054 1,391,537,458 5,572,851,512 100.0 (0.2) 1.2 1995 3,782,134,930 403,392,150 580.,731 4,186,107,811 1,455,095,094 5,641,202,905 100.0 0.1 1.2 1996 3,820,217,710 431,622,230 592,909 4,252,432,849 1,480,760,538 5,733,193,387 100.0 1.6 1.6 1997 3,918,747,480 457,182,870 628,698 4,376,559,048 1,508,032,959 5,884,592,007 100.0 2.9 2.6 1998 3,999,483,300 493,824,770 1,026,819 4,494,262,759 1,555,308,467 6,049,571,226 100.0 2.7 2.8 :> I 1999 4,153,719,690 537,808,800 870,404 4,692,398,894 1,657,162,640 6,349,561,534 100.0 4.4 5.0 -...) 2000 4,353,493,520 549,051,160 934,183 4,903,478,863 1,751,871,312 6,655,350,175 100.0 4.5 4.8 2001 4,657,074,110 550,845,380 867,947 5,208,787,437 1,899,322,835 7,108,110,272 100.0 6.2 6.8 2002 5,130,069,970 557,588,870 767,087 5,688,425,927 2,170,560,750 7,858,986,677 100.0 9.2 10.6 Source: City of Clearwater, Florida, Comprehensive Annual Financial Report for period ending September 30, 2001. (a) Pinellas County Property Appraiser (b) Railroad and Telegraph Companies (c) Includes governmental, educational, qualified religious, literary, scientific, and health care properties and special exemptions for individual property owners. Qualified property owners are entitled to a $25,000 Homestead Exemption based on residency requirement. Property Tax Levies and Collections Last Ten Fiscal Years Percent Percent of of Total Delinquent Current Percent of Delinquent Collections Outstanding Taxes to Fiscal Total Tax Levy Tax Total Tax To Current Delinquent Current Year Tax Levv Collections(a) Collected Collections Collections Levv Taxes Levv 1993 21,408,489 20,947,194 97.85 199,638 21,146,832 98.78 1,438,1l6 6.72 1994 21,281,744 21,154,946 99.40 603,226 21,758,172 102.24 946,874 4.45 1995 21,458,160 21,388,692 99.68 159,918 21,548,610 100.42 856,443 3.99 1996 21,761,730 21,675,311 99.60 73,731 21,749,042 99.94 868,209 3.99 >- 1997 22,410,181 22,281,502 99.43 80,253 22,361,755 99.78 914,383 4.08 I 00 1998 23,008,214 22,856,951 99.34 129,690 22,986,640 99.91 935,957 4.07 1999 23,951,878 23,854,396 99.59 226,812 24,081,208 100.54 806,626 3.37 2000 26,998,318 26,876,461 99.55 106,800 26,983,261 99.94 821,683 3.04 2001 28,664,112 28,567,429 99.66 77,716 28,645,145 99.93 840,651 2.93 2002 31,303,900 31,204,025 99.68 130,632 31,334,657 100.10 809,894 2.59 Source: City of Clearwater, Florida, Comprehensive Annual Financial Report for period ending September 30,2002. (a) Collections are reported at the gross amount before any discount allowances. Property Tax Rates - All Direct and Overlapping Governments (Per $1,000 of Assessed Value) Last Ten Fiscal Years Downtown County Emergency Fiscal Develop- School Transit Medical ~ ~ ment(a) Board County District Services QtOO: Total 1993 5.1158 1. 000 9.0000 5.417 .5893 .850 1.1820 23.1541 1994 5.1158 1.000 9.0820 5.429 .6697 .872 1.4221 23.5906 1995 5.1158 1.000 9.3590 5.585 .6697 .806 1.6308 24.1663 1996 5.1158 1. 000 9.3290 5.140 .6697 .752 1.6561 24.0366 1997 5.1158 1.000 9.1760 5.510 .697 .741 1.6561 23.8686 :> I 1998 5.1158 1. 000 9.1330 5.538 .6697 .713 1.6561 23.8256 \0 1999 5.1158 1. 000 9.1100 5.538 .6501 .713 1.6561 23.7830 2000 5.5032 1.000 8.6660 5.854 .6501 .647 1.6572 23.9775 2001 5.5032 1.000 8.4330 6.0040 .6501 .747 1.6562(b) 23.9935 2002 5.5032 1.000 8.4870 6.1410 0.6501 0.6600 1.6562 24.0975 Source: City of Clearwater, Florida, Comprehensive Annual Financial Report for period ending September 30, 2002. (a) A separate taxing district established by referendum which affects only downtown properties. (b) Other includes PineJIas County Planning Council (.0225); Juvenile Welfare Board (.8117); SW Florida Water Management District (.4220); Pinellas Anclote River Basin (.4000). City of Clearwater, Florida Principal Taxpayers* Year Ended September 30, 2001 Percentage to Total Assessed Assessed Taxpayers Type of Business Value* V alue Bellwether Prop. LP Ltd. Shopping Center $ 89,035,400 1.74% California State Teachers Apartment Complex 27,543,800 0.54 Taylor, John S. III Landowner 26,993,400 0.53 Excel Realty Trust, Inc. Shopping Center 25,084,500 0.49 Branch Sunset Association Shopping Center 24,959,200 0.49 Clearwater Land Co. Adult Congregate Facility 23,813,600 0.46 Sand Key Association Ltd. Hotel 23,485,800 0.46 Northwood Plaza Shopping Center 23,325,100 0.45 ZOM Bayside Arbors Ltd. Apartment Complex 22,685,800 0.44 Walmart Stores, Inc. Shopping Center 19.140.700 0.37 Subtotal 306,067,300 5.97 All Others 4.824.002.670 94.03 Total $5.130.069.970 100.00% * Based on non-exempt real property assessed taxable values. Source: City of Clearwater, Florida, Comprehensive Annual Financial Report for period ending September 30, 2002; Pinellas County Property Appraiser, 2001 tax rolls for2002 collections. A-I0 City of Clearwater, Florida Ratio of Net General Bonded Debt to Taxable Assessed Value and Net Bonded Debt Per Capita Last Ten Fiscal Years Ratio of Net Net Taxable Net General General Assessed General Bonded Debt Bonded Fiscal Valoe Bonded To Assessed Debt Year Population (000)(1) Debt Value Per Capita 1992 99,856 4,179,582 452,779 .01 4.53 1993 100,768 4,188,105 348,478 .01 3.46 1994 100,604 4,181,314 242,700 .01 2.39 1995 101,162 4,186,108 133,597 .00 1.30 1996 101,867 4,252,433 21,598 .00 0.21 1997 102,4 72 4,376,559 165,000 .00 1.61 1998 102,874 4,494,262 33,750 .00 0.33 1999 104,281 4,692,398 0 .00 0.00 2000 104,454 4,903,478 0 .00 0.00 2001 108,787 5,208,787 0 .00 0.00 2002 109,231 5,688,426 0 .00 0.00 Source: City of Clearwater, Florida, Comprehensive Annual Financial Report for period ending September 30, 2002. (1) Values listed are for year of collections. [Remainder of page intentionally left blank] A-II City of Clearwater, Florida Computation of Legal Debt Margin September 30, 2002 Assessed Valuation of Non-Exempt Real Estate(a) Times: Twenty Percent Limitation per City Charter Equals Legal Indebtedness Limitation $5,130,069,970 x .20 $ 1.026.013.994 Debt Subject to Indebtedness Limitation: Gross Debt Revenue Bonds: 1996A Gas System Revenue Bonds 1997 Gas System Revenue Bonds 1998 Gas System Revenue Bonds 1993 Water and Sewer Revenue Bonds 1998 Water and Sewer Revenue Bonds 2002 Water and Sewer Revenue Bonds 1999 Stormwater System.Revenue Bonds 2002 Stormwater System Revenue Bonds 2001 Infrastructure Sales Tax Revenue Bonds 2001 Improvement Revenue Refunding Bonds 2002 Spring Training Revenue Bonds Notes, Mortgages and Contracts Totals $8,360,000 12,375,000 7,895,000 19,435,000 52,301,781 58,680,000 7,275,000 24,685,000 46,445,000 11,360,000 14,810,000 14.031.247 $277.653.028 Legal Indebtedness Margin Source: Less Sinking Fund Assets 7,500 42,083 2,917 9,258,500 4,454,185 3,551,469 110,000 4,250,000 1,103,427 o $22.780.080 Net Debt Subject to Limitation 8,352,500 12,332,917 7,892,083 10,176,500 47,847,596 55,128,531 7,165,000 24,685,000 42,195,000 10,256,573 14,810,000 14.031.247 $254.872.948 $771.141.046 City of Clearwater, Florida, Comprehensive Annual Financial Report for period ending September 30, 2002. (a) Valuation listed is from 2000 tax year for 2001 collections. A-12 City of Clearwater, Florida Computation of Direct and Overlapping Debt September 30,2001 Net Debt Outstanding Percent AmOlmt Governmental Unit City of Clearwater $ 100% $ Pinellas Cmmty School Board $70,894,996 14% $9,925,299 (a) Applicable Net Debt Percentage is based on ratio of City to County Taxable values for 2002 collections ($5,130,069,970/$37,671,431,940 = 13.62%). A-13 APPENDIX B EXCERPTS FROM THE CITY'S COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2002 r ' Grant Thornton & l ) Accountants and Management Consultants r ~ < \ .' Reoort of Independent Certified Public Accountants f 1 i Honorable Mayor-Commissioner. City Commissioners and City Manager City of Clearwater, Florida l. ~ I We have audited the accompanying financial statements of the governmental activities, the business~ type activities, each major fund, and the aggregate remaining fund information of the City of Clearwater, Florida (the City), as of and for the year ended September 30, 2002. which collectively comprise the City's basic financial statements as listed in the table of contents. We have also audited the financial statements of each of the City's nonmajor governmental, non major enterprise, internal service and fiduciary funds presented as supplementary information in the accompanying combining and individual fund financial statements as of and for the year ended September 30, 2002, as listed in the table of contents. We did not audit the financial statements of the Clearwater Downtown Development Board, a component unit. Those financial statements were audited by other auditors whose report thereon has been furnished to us, and our opinion, insofar as it relates to the amounts included for the Clearwater Downtown Development Board, is based solely on the report of the other auditors. These financial statements are the responsibility of the City's management. Our responsibility is to express an opinion on these financial statements based on our audit. i . ~ ; ~ ~ \. -~, We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the ComptrOller General of the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the basic financial statements are free of material misstatement An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the. accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit and the report of other auditors provide a reasonable basis for our opinions. > , , l, In our opinion, based on our audit and the report of other auditors, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, the discretely presented component unit, each major fund. and the aggregate remaining fund information of the City of Clearwater, Florida as of September 30,2002, and the respective changes in financial position and cash flows, where applicable, thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of each nonmajor governmental, non major enterprise. internal service, and fiduciary fund of the City of Clearwater, Florida as of September 30, 2002,_ and the respective changes in financial position and cash flows, where applicable, thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America. As discussed in Note 1 to the basic financial statements. effective October 1, 2001, the City adopted Governmental Accounting Standards Board Statement (GASB) No. 34, Basic Financial Statements ~ and Management's Discussion and Analysis - for State and Local Governments, GASB Statement No. 37, Basic Financial Statements - and Management's Discussion and Analysis - for State and Local Governments: Omnibus, and GASB Statement No. 38, Certain Financial Statement Note Disclosures. i i 1 ' , I .; ~ I. ; i. i Suite 3850 , ,101 E. Kennedy Blvd . Tampa, FL 33602.5152 , ,T 813.229.7201 , - F 813.223.3015 , ,W www.grantthomton.com Grant Thornton LLP US Member of Grant Thornton Intemalional 1 In accordance with Government Auditing Standards, we have also issued a report dated January 10, 2003 on our consideration of the City's internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts and grants. That report is an integral part of an audit performed in accordance with Government Auditing standards and should be read in conjunction with this report in considering the results of our audit. The Managemenfs Discussion and Analysis and the pension plan required supplementary information on pages 3 and 73, respectively, are not a required part of the basic financial statements but are supplementary information required by the Governmental Accounting Standards Board. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the supplementary information. However, we did not audit the information and express no opinion on it. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City's basic financial statements: The introductory section and statistical tables are presented for purposes of additional analysis and are not a required part of the basic financial statements. The introductory section and statistical tables have not been subjected to the. auditing procedures applied in the audit of the basic financial statement, and accordingly, we express no opinion on them. The accompanying schedule of federal and state financial assistance for the year ended September 3D, 2002 is presented for purposes of additional analysis as required by U.S. Office of Management and BUdget Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations, Section 215.97, Florida Statutes and Chapter 10.550 rules of the Auditor General, and is not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated, in all material respects, in relation to the basic financial statements taken as a whole. ~ ~ LLfJ Tampa, Florida January 10, 2003 2 ;L; ~ ~ , 1 i l . , , '. j . 1 .i . , , . j ! 1 ; t ~ , :. j , t , j I ~ . j Ii i 1 r r ! ! I ' II Managemenfs Discussion and Analysis ! r i' , : I l Management's Discussion and Analysis provides the reader with a narrative overview and analysis of the City's financial activities for the fiscal year ended September 30, 2002. The Managemenfs Discussion and Analysis (MD & A) should be read In conjunction with the City's Transmittal Letter, which begins on page vII of this report. This is the first year the City of Clearwater has presented its basic financial statements under the new financial reporting model required by the Governmental Accounting Standards Board (GASS) Statement Number 34. Because this new reporting model changes . significantly not only the presentation of financial data, but also the manner in which the information is recorded, prior year comparative information for this reporting period's MD&A has not been included. This deficiency Is a transition issue and prior year comparative information will be provided in the future, effective with the fiscal year 2003 MD&A. r'r I : 11 ,.' t : Ii 1"; i I l Financial Highlights The City's assets exceeded its liabilities at the close of fiscal year 2002 by $410.8 million (net assets). Of this amount, $160.9 million (unrestricted net assets) may be used to meet the government's ongoing obligations to citizens and creditors. The City's total net assets increased by $33.7 million (or 8.9%). The governmental net assets increased by $20.2 million (or 12.6%) while the business-type net assets increased by $13.6 million (or 6.2%). A significant factor in the increase in govemmental net assets was current year grants and donations related to major construction projects of approximately $8.5 million as detailed In the Government- wide Financial Analysis that follows. The increase in business-type net assets is primarily due to rate increases for Stormwater and Water & Sewer utilities, along with contributions and grants from other governments and developers, as discussed In the following analysis of business-type activities. At September 30, 2002, the City's governmental funds reported combined ending fund balances of $102.9 million, an increase of $17.6 million (or 20.6%) in comparison with the prior year. Of this amount. $49.3 million (or 48.0%) Is available for spending at the governmenfs discretion (unreserved fund balance). - At September 30, 2002, unreserved fund balance for the General Fund was $12.7 million, or 15.8% of total general fund expenditures. Total actual revenues for the General Fund exceeded final budgeted revenues by $0.8 million, total actual expenditures were less than budgeted expenditures' by $2.1 million, for a combined savings of $2.9 million. , , ~ ! [ j r' ! l. j , f ! ; i ! l . r ~ 5 ! : l.~ LI r 1 ~ I U P d P i; L. Overview of the Financial Statements This discussion and analysis (MD&A) Is intended to serve as an introduction to the City of Clearwater's basic financial statements. The City's basic financial statements are comprIsed of three components: 1) government-wide financial statements, 2) fund financial statements, and 3) notes to the financial statements. This report also contains other supplementary Information in addition to the basic financial statements themselves. r -: ( r .J , U 3 Government-Wide Financial Statements The government-wide financial statements are the statement of net assets and the statement of activities. These statements report information .about the City as a whole using aCcounting methods similar to those used by private-sector businesses. Emphasis is placed on the net assets of govemmental activities and business-type activities, and the change in net assets. Governmental activities are principally supported by taxes and Intergovernmental revenues. Governmental activities include most of the City's basic services, including police, fire, public works. parks and recreation, and general administration. Business-type activities are intended to recover all or a significant portion of their costs through user fees and charges. The CIty's water and sewer system. stormwater system, gas system, solid waste, recycling, marine, aviation, convention center, and parking system operations are reported as business-type activities. · The statement of net assets presents information on all of the City's assets and liabilities, with the difference between the two reported as' net assets. Over time, increases or decreases in net assets may serve as a useful Indicator as to whether the financial position of the City is improving or deteriorating. Net assets are reported in three major categories: 1) invested in capital assets, net of related debt; 2) restricted; and 3) unrestricted. · The statement of actMties presents information showing how the City's net assets changed as a result of the year's activities. All changes in net assets are recorded in the period in which the underlying event takes place, which may differ from the period in which cash is received or disbursed. The Statement of Activities displays the expense of the City's various programs net of related revenues, as well as a separate presentation of revenues available for general purposes. The government-wide financial statements include not only the City of Clearwater itself (known as the primary govemmen~, but also the legally separate Downtown Development Board (DDB). The DDB, though legally separate, is included as a component unit because It was created by City ordinance and the City is thereby able to impose its will on the organization. In addition it is the opinion of the City's management that exclusion of the DDB from the City's financial statements would cause the financial statements to be Incol1'!plete. The Clearwater Redevelopment Agency (CRA), though also legally separate, is reported as part of the primary govemment due to the City Commission serving as the CRA's goveming board. Fund Financial Statements A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The fund financial statements provide detailed information about the City's major funds - not the City as a whole. Fund accounting helps to ensure and demonstrate compliance with finance-related legal requirements. Based on restrictions on the use of monies, the City has established many funds that account for the multitude of services provided to residents. These fund fmancial statemeotsfocus on the City's most significant funds: governmental, proprietary, and fiduciary. Governmental funds Governmental funds are used to report most of the City's basic services. These funds are used to account for essentially the same functions reported as governmental activities in the govemment- wide financial statements. The funds focus on the inflows and outflows of current resources and the balances of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating a government's near-term financing requirements. 4 -rl .: .. " l i r P ! ~ .~ t . > '11 I.; 1 i ~'1 n n j J i I 11 T J : j j j 11 ! I . 1 o I l ~ ;. j ~ , , I : i t i n J j -1 1 d r I , I 11 ~J l' I ! lJ 1 \ j [-r I l n I I I , Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. By doing so, readers may better understand the long-term impact of the govemmenfs near-term financing decisions. Both the govemmental fund balance sheet and the governmental fund statement of revenues, expenditures, and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental actMties. The City maintains fourteen Individual governmental funds. Information Is presented separately in the governmental funds balance sheet and in the governmental funds statement of revenues, expenditures, and changes in fund balances for the General, Special Development. and Capital Improvement funds, which are considered to be major funds. Data from the other eleven governmental funds are combined into a single aggregated presentation. Individual fund data for each of these nonmajor governmental funds Is provided in the form of combining statements in the supplementary information section of this report. f! I : I : t ~ r i I . I . I! r} ! : , ; ! ! i I. The City adopts annual appropriated budgets for the General. Special Development. and Community Redevelopment Agency funds. A budgetary comparison statement has been provided for these funds to demonstrate budgetary compliance. Proprietary funds The City maintains two different types of proprietary funds. Enterprise funds are used to report the same functions presented as business-type activities in the government-wide financial statements. The City uses enterprise funds to account for the fiscal activities related to water and sewer, gas, solid waste and stormwater utilities, along with recycling, marine, aviation, parking system, and convention center operations. Internal service funds are an accounting device used to accumulate and allocate costs internally among the City's various functions. Internal service funds that predominantly benefit governmental activities are the General Services and Central Insurance funds. These funds account for the City's building maintenance, custodial services, self-insurance program, risk management program, and employee group insurance, and have been aggregated and included . within the governmental activitIes In the government-wide financial statements. Internal service funds that predominantly benefit business-type activities (or enterprise funds) are the Garage and Administrative Services funds. These funds account for the City's vehicle acquisition and maintenance, and various support activities including data processing, legal, telecommunications, postal, and printing services. They have been aggregated and included within the business-type activities In the government-wide financial statements. f r l, , .;, I" t i r' , I . i 1 f T 1 ' Ii ! T I 1 ~ ~ I. l } Proprietary funds provide the same type of information as the government-wide financial statements, only In more detail. The proprietary fund financial statements provide separate Information for the Water and Sewer Utility, Gas Utility, Solid Waste Utility, and Stormwater Utility enterprise funds, which are considered to be major funds of the City. The remaining five non-major enterprise funds are combined into a single aggregated presentation In the proprietary fund financial statements. Similarly. governmental activity Internal service funds are aggregated into a single presentation, as are business-type activity internal service funds. IndMdual fund data for the non-major enterprise funds and the internal service funds is provided in the form of combining statements In the supplementary information section of this report. Fiduciary funds Rducfary funds are used to account for resources held for the benefit: of parties outside the government Aduciary funds are not reflected in the government-wide financial statements because the resources of the fiduciary funds are not available to support the City's own programs. The accounting used for fiduciary funds is similar to proprietary funds. r r il r- : l..L' 5 -. 1 .J. J -,: -~ " j Notes to the Financial Statements The notes to the financial statements provide additional information that is essential for a full understanding of the Infonnatlon provided In the government-wide and fund financial statements. The notes also present certain required supplementary information concerning the City's progress in funding its obligation to provide pension benefits to its employees. Other Information In addition to the basic financial statements and accompanying notes, this report also presents certain required supplementary information concerning the City's progress in funding its obligation to provide pension benefits to its employees. The combining statements referred to earlier In connection with non-major governmental funds, non- major enterprise funds, and Internal service funds, are presented immediately following the required supplementary information. .r ~ ."i t 1 1 .:: 1 p .i j p i 1 .~ "! Government-Wide Financial Analysis Because this is the first year to report under the new standard (GASB Statement 34), comparison to the prior year Is not feasible. In subsequent years, this section will discuss and analyze significant differences. .:. i . . \ ~ ;). ..: As noted earlier, net assets may serve over time as a useful indicator of a govemmenfs financial position. In the case of the City, assets exceeded liabilities by $410.8 million at the close of the fiscal year ended September 30. 2002. The City is able to report positive balances in all three categories of net assets, both for the government as a whole, as well as for its separate governmental and business-type activities. . I l I , j : .1 .. 1 1 I ': ~ ~ ; ., I f 1 " .i ~ ": ~ ; , j 1 ! : ; , J . i '.c j A large portion of the City's net assets (35.9%) reflects Its Investment In capital assets (e.g., land, land improvements, buildings, and equipment), less any related outstanding debt used to acquire Ii ; I I . j 6 r I I n [ I rl 1 t those assets. The City uses these capital assets to provide services to citizens, and consequently these assets are not available for future spending. Although the City's investment in capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other resources, since the capital assets themselves will not be used to liquidate these liabilities. An additional portion of the City's. net assets (24.9%) represents resources that are subject to external restrictions on how they may be used. The remaining balance of unrestricted net assets ($160.9 million) may be used to meet the government's ongoing obligations to citizens and creditors. Changes in Net Assets The following table reflects the changes in net assets for the year ended September 30, 2002. Since this is the first year the City has prepared financial statements following the GASB Statement 34 implementation, revenue and expense comparisons to 2001 are not available. In future years, when prior-year infonnation is available, a comparative analysis of government-wide data will be presented. Changes In Net Assets For the Year Ended September 30, 2002 Primary Govemment f'\ j ! t . , 1 I ; 1 j f1 Ii f 1 I L _ , \ . I ; t. r r i L Revenues Program revenues Charges for services Operating grants and contributions Capital grants and contributions General revenues: Property taxes Sales taxes Franchise fees and utility taxes Other taxes Other Total revenues Expenses General Government Public Safety Physical Environment Transportation Economic Environment Human Services Culture and Recreation Interest on Long-term Debt Water and Sewer Utility Gas Utility Solid Waste Utility Stormwater Utility Other T olal expenses Increase in net assets before transfers Transfers Increase in net assets Net assets - beginning Net assets - ending I f 11 r , , ' I i l~ ff l 1 f T t :. U rr f i L1 I T ~ f- U , I ~ ~ , i .1 f [ i. I U Govermental Activites $ 17,973,384 6,111,789 9,787,351 30,322,411 14,663,969 25,359,362 9,153,976 5,184,077 118,556,319 11,646,741 45,135,649 2,886,504 10,120.224 3,230,524 555,395 22,230,715 2,962,849 98,768,601 19,787,718 375,677 20,163,395 159,971,566 $180,134,961 7 Business-type Activities Total Component Unit Clearwater Downtown Development Board $ 98,504,808 $116,478,192 $ 6,111,789 2,882 4,300,651 14,088,002 3,083,160 105,888,619 37,470,508 23,573,611 14,397,892 5,458,556 11,057,400 91,957,967 13,930,652 (375,677) 13,554,975 217,082,039 $ 230,637,014 30,322,411 14.663,969 25,359,362 9,153,976 8,267,237 224,444,938 172,045 68,322 243,249 11,646,741 45,135,649 2,886,504 10,120.224 3,230,524 555,395 22,230,715 2,962,849 37.470,508 23.573,611 14,397,892 5,458,556 11 ,057,400 190,726,568 33,718,370 191,277 191,277 51,972 33,718,370 51,972 377,053,605 _. (3',337799) $410.771,975 ~ Governmental Activities The increase in governmental activities net assets totaled $20.2 million, or 60% of the total increase in net assets for the City. Key elements of this increase are as follows: · Contribution from Pine lias County of $5 million towards construction of the new Memorial Causeway Bridge. · Increase of approximately $3.8 million in the net pension asset due to legally required (per ordinance governing the plan) Employees' Pension Plan contributions in excess of actuarially required contributions. · Donations and grants for construction of the new Main & North Greenwood branch libraries of $2.4 million. · Contributions from Pinellas County and the State of Florida of $0.6 and $0.5 million, respectively, towards the construqtion of a new community sports complex to include a spring training stadium for the Philadelphia Phillies major league baseball organization. The cost of all Governmental activities this year was $98.7 million. However, as shown on the Statement of Activities, the amount that the City's taxpayers ultimately financed for these activities through taxes was only $64.8 million because some of the cost was paid for by those who directly benefited from the programs ($18.0 mlllion) or by other governments and organizations that subsidized certain programs with grants and contributions ($15.9 million). II Expenses . Revenues Expenses and Program Revenues. Governmental Activities For the Year Ended September 30, 2002 $50,000,000 $45,000,000 $40,000,000 $35,000.000 $30,000,000 $25,000,000 $20,000,000 $15,000,000 $10,000,000 $5,000.000 $0 ~ ~IJ. rf" # ~ .,t/' ~~ <:.I" ~0~# ~ ~~ .~l~ p ~~# r#'~ ,p" ~ 00 q,~ <<,~~ ,f"4f <<,~~ #~ b~ ~ !b~ .,? -<.: ~~ ~~ '6 t$' "cF 0~ 10 f!:' ~ o~ G q,~ cfJ ~ ~ ~ c; '6~ ,~ i L 8 rI It n \ j n , ~ Ii. Revenues by Sources ~ Governmental Activities For the Year Ended September 3D, 2002 1'l i 1 /1 Sales taxes 12% n ! 1 Property taxes 27"10 Franchise fees and utility taxes 21% r I , . j I.' , , . l J t ' ~ , ~ Capital grants and contributions 8% r' ; i f .' t. ' L Operating grants and contrIbutions 5% Charges for services 15% r r I ; it ., [ i i L l ! i ' i.. Business-type Activities Net assets for business-type activities increased from $217,082,039 to $230,637,014. This increase totaled $13.5 million, reflecting a 6.2% increase in business-type activities net assets and 40% of the total increase in net assets for the City. A major component of this increase was capital grants and contributions received from other governments and developers in the amounts of $2.3 million and $1.5 million for the water and sewer and stormwater utilities, respectively. These contributions must be used for capital purposes. Also contributing to the increase in business-type activities net assets was a $3.2 million increase in operating income over the previous year for the business-type activities of the major proprietary funds. Additional information regarding this increase in operating Income is provided in the proprietary fund discussion that follows. 9 $45,000,000 $40,000,000 $35,000,000 $30,000,000 $25,000.000 $20,000,000 $15,000,000 $10,000,000 $5,000,000 -; .~ ., (, !'" l Expenses and Program Revenue - Business-type Activities For the Year Ended September 30, 2002 .. , f $0 1 ~ .:. .i 'f .,. j ) ~\ 1 l . , '" j ~ ~ Water and Gas Utility Sewer Utility Solid Waste Stonnwater Utility Utility '!" l Other i , j '.' 1 ! , ,; ; ; j Revenues by Source - Business-type Activities For the Year Ended September 30,2002 , 1 Charges for services 93% i ; J. , > ; ~ - j Capital grants and contributions 4% ~ ~ ~ i i ~ 1 Other 3% 10 f" ! rl ! i r "j I r ! : i , Financial Analysis of the City's Funds J ~ I " I i \. ; As noted earlier, the City uses fund accounting to ensure and demonstrate compliance with finance- related legal requirements. Governmental Funds The focus of the City's governmental funds is to provide Information on near-term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the City's financing requirements. In particular, unreserved fund balance may serve as a useful measure of a governmenfs net resources available for spending at the end of the fiscal year. The City reports the General FUnd, Special Deve.lopment Fund, and Capital Improvement Fund as major governmental funds. The City's governmental funds for the year ended September 30, 2002, reflect a combined fund balance of $102.9 million, an increase 0'$17.6 million in comparison with the prior year. A total of $53.5 million, or 52%, of this represents unreserved fund balance, which is available for spending at the governmenfs discretion. The remainder of the fund balance Is reserved to indicate that it is not available for new spending because it has already been committed 1) to liquIdate construction contracts and purchase orders of the prior period ($35.0 million); 2) to pay debt service ($6.1 million); 3) for advances due from other funds ($2.0 million); or 4) for specific program purposes per grant restrictions ($6.2 million). The General Fund is the chief operating fund of the City. At September 30, 2002, unreserved fund balance of the General Fund totaled $12.7 million, with the remainder of the $15.7 million In fund balance reserved to Indicate it has already been committed for purchase orders of the prior period ($1.0 million) and for advances due from other funds ($2.0 million). As a measure of the general fund's liquidity it Is useful to compare unreserved fund balance to total fund expenditures. Unreserved fund balance represents 15.7010 of total general fund expenditures (before transfers) for the current fiscal year. IT I L r ~. i i . I . \ . I 1 " r ~ , ' ,f . t I , $ r T ! ; .~ 1. , Q. .~ The fund balance of the City's General Fund Increased by $2.8 million during the current fiscal year. This increase was the composite result of actual revenues for the General Fund exceeding final budgeted revenues by $0.8 million and total actual expenditures less than budgeted expenditures by $2.1 million. The favorable results were spread across numerous revenue and expenditure categories. 1 \ f! l .; The fund balance of the Special Development Fund decreased from $8.2 million to $6.9 million during the current fiscal year. A key factor in the decrease was a decrease in interest earnings on investments of approximately $1.2 million. This decrease was a result of a significant decrease in interest rates during the current fiscal year, as well as a decrease in cash balances in the Special Development Fund. ! 'j' f, ~ u r' The Capital Improvement Fund has a total fund baJance of approximately $34.6 million. The fund had a minimal current year Increase in fund balance of $0.1 million , . . .1 t. ..~ f ~ 11 Proprietary Funds = j The City's proprietary funds provide the same type of information found in the government-wide financial statements, but In more detail. The City reports the Water and Sewer Utility Fund, the Gas Utility Fund, the Solid Waste Utility Fund, and the Stormwater Utility fund as major funds. The Water and Sewer Utility Fund realized a $2.4 million increase in net assets. Operating revenues Increased 5.9% over the previous year, partially offset by a 3.8% increase in operating expenses. A rate increase effective October 1, 2001 contributed to the increase in operating revenues. A significant contribution to the Increase In net assets was receipt of $2.3 million in capital grants and contributions that must be used for capital purposes. The Gas Utility Fund realized a $2.6 million increase in net assets. Operating revenues actually decreased by 12.2% over the prior year due to depressed gas prices, but a 16.0% decrease In operating expenses resulted in a $0.5 million improvement in operating incom~ over the prior year. The Solid Waste Utility Fund realized a $1.5 million increase in net assets. Operating revenues Increased by 2.0% while operating expenses decreased by O.~k. The Stormwater Utility Fund realized an Increase In net assets of approximately $4.1 million. Operating revenues increased by 33.9% as a result of a 4.4% rate increase effective October 1, 2001, and an additional 35.0"04 rate increase effective January 1, 2002. The increase in operating revenues was partially offset by a 5.4% increase in operating expenses. Unrestricted net assets and changes in net assets 9f the proprietary funds for the current fiscal year follow: ! ! , I i. J , , , ,1 ~ 'l Fund Water and Sewer Utility Gas Utility Solid Waste Utility Stormwater Utility Other funds Totals Unrestricted Net Assets $19,788.491 9,498,817 6,426,639 7,888,733 10,873,333 $54,476,013 Change in Net Assets $ 2,401,311 2,623,123 1,517,507 4,066,075 2,352,206 $12,960,222 General Fund Budgetary Highlights Differences between the original budget for General Fund expenditures and the final amended budget were relatively minor ($149,500 decrease). Key elements of this decrease are as follows: · $102,612 increase in general govemment budgeted expenditures, primarily due to an Increase in outside legal counsel fees. · $214,830 decrease In public safety budgeted expenditures, primarily due to approximately $200,000 of Fire Department budget that was moved to the interfund transfer out category. this budget transfer was made to provide capital improvement project funding for the purchase of land for a proposed fire station. · Total actual revenues for the General Fund exceeded final budgeted revenues by $0.8 million and total actual expenditures were less than budgeted expenditures by $2.1 million. The budget savings occurred over numerous revenue and expenditure categories. 12 CapRal Assets Capital assets Include land, buildings and building Improvements, improvements other than buildings, and machinery and equipment. Capital assets also include Infrastructure assets added during the current fiscal year only. Infrastructure assets acquired prior to fISCal 2002 will be added when the City retroactively Implements the Infrastructure portion of the new financial reporting model in fiscal 2006. The infrastructure asset category includes long-lived capital assets, typically stationary In nature, such as roads, sidewalks, and bridges. At September 3D, 2002, the City had Investments In capital assets totaling $418,171,045 (net of accumulated depreciation). City of Clearwater, Florida Capital Assets. September 30, 2002 Net capital assets for the City's governmental activities increased from $116.7 million to $130.5 million, reflecting an increase of $13.8 million for the current fiscal year. Key components of this increase include: · Acquisition of land in the amount of $3.9 million for a new community sports complex to Include a spring training stadium for the Philadelphia Phillies major league baseball organization. · Expenditures of $3.5 million towards construction of a new North Greenwood recreation center and aquatics complex, currently classified as construction in progress. · Expenditures of $3.7 million towards construction of a new main library, currently classified as construction in progress. · A total of $1.2 million In construction in progress expenditures towards the construction of a new Sand Key fire station. · A total of $1.0 million In construction in progress expenditures towards completion of a new North Greenwood branch library. n i i { 1 ['( r' 1 i . ! Capital Asset and Debt Administration f1 {: 1"', I . I i r r [ : f' " I 1 J" Governmental Activities $ 40,913,067 27,638,084 37,443,985 11,828,096 1,076,247 11 ;550, n5 $ 130,450.254 Land Buildings Improvements Other than Buildings Machinery and Equipment Infrastructure Construction In progress Total · Net of accumulated depreciation ,. , . ' i j; r ; I : . , , , ,. , ; ; I ; f.. ..~ fl" I ; It 11 P 11 u ! ' I t U f ~ I.. LA Business-type Activities $ 19,878,550 15,967,876 188,580,263 16,088,995 47,205,107 $ 287,720,791 Total $ 60,791,617 43,605,960 226,024,248 27,917,091 1,076,247 58,755,882 $ 418,171,045 Net capital assets for the City's business~type actMtles Increased by $33.1 million from $254.6 million to $287,7 million during the current fiscal year. A key component was an increase of $21.8 mil/ion in water and sewer system construction in progress, primarily due to system improvements funded from the Water and Sewer Revenue Bonds, Series'2002. These improvements Include expansion of the reclaimed water program; continued renewal and replacement as needed of the water, wastewater i J 13 '~''l 1 collection, and water pollution control systems; and upgrading of the water pollution control system to meet regulatory requirements. 'l' Additional information on the City's capital assets can be found in Note III.C on pages 51-53 of this report. Long-term debt The City's total long-term debt increased by $98.2 million, from $193.7 million to $291.9 million, or an increase of 51 % for the current fiscal year. Key factors in this increase included: · Current year issuance of $58,680,000 Water and Sewer Revenue Bonds, Series 2002, to pay for the costs of expansion of the City's water and sewer system. · Issuance during the current year of $24,685,000 Stormwater Revenue Bonds, Series 2002, to pay for the costs of capital Improvements to the City's stormwater management system. · Current year issuance of $14,810,000 Spring Training Facility Revenue Bonds, Series 2002, to finance a portion of the cost of the acquisition, construction, rehabilitation, and equipping of a community sports complex and spring training facility to be used by the Philadelphia Phillles major league baseball team. " The City's bonded debt as of September 30, 2002, consists entirely of revenue bonds (secured solely by specified revenue sources) with no general obligation debt or special assessment debt outstanding. Governmental activities revenue bonds totaled $73.2 million while business-type activities totaled $185.7 million. During the current fiscal year the City issued Improvement Revenue Refunding Bonds, Series 2001, to refinance previously outstanding special revenue bonds that primarily financed governmental activities. The result is expected to be a decrease in future debt service payments of $958,000. All revenue bond issues of the City have been rated either AAA by Standard & Poor's or Fitch, or Aaa by Moody's. The City's Charter limits legal Indebtedness to twenty percent of the assessed valuation of non- exempt real estate. The current debt limitation is in excess of $1.0 billion, which is signifICantly in excess of the City's legal indebtedness at September 30, 2002. Additional information on the City's long-term debt can be found in Note III (F) on pages 57-61 of this report. Economic Factors And Year 2003 Budgets and Rates Factors considered in preparing the City of Clearwater's budget for fIScal year 2003 Included: · The unemployment rate for the Tampa Bay metropolitan area for September 2002 was 4.4%, an increase of 0.4% from the 4.00'" rate for September 2001. The national rate for September 2002 was 5.6% versus 4.9% for September 2001. · Total taxable assessed values for the City of Clearwater increased 9.2% for fiscal 2002. · A Florida Power Company rate decrease of 9% effective May 2002 will result in an estimated $1 million decrease In City franchise fee and utility tax revenues for fiscal 2003. 14 if n 11 · Health insurance cost increases for City employees are expected to Impact the fiscal 2003 budget by over $1.5 million, of which approximately $741,000 Impacts the General Fund. fl i ;\ The fiscal 2003 City property tax millage was increased from 5.5032 mills to 5.753 mills, an increase of .2498 mills or 4.5%. This increase will generate an estimated $1.3 million In additional property tax revenues for fiscal 2003, which will assist In offsetting the anticipated loss In franchise fees and utility tax revenues discussed previously. Budgeted Water and Sewer utility revenues for 2003 reflect a 7% rate increase effective January 1, 2003, while fiscal 2003 budgeted Stormwater utility revenues reflect a 17% rate increase effective October 1, 2002. f1 { j rr i l Contacting the City's Financial Management r r I l ; This financial report is designed to provide a general overview of the City's finances for all those with an interest in its finances and to show the CIty's accountability for the money it receives. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to The City of Clearwater, Finance Department, 100 S. Myrtle Avenue, Clearwater, Florida 33756.5520. r ! u /1 I . u f ! \,1 f' I ' tj rr U f! 1\ u r I u _. ~ i ! i l ,.i. , r 1 i , U r t ; 1.1 ( : ~ L_. 15 .', i .'i"l '1' ",~ _ i ~ ~ .. f This Page Intentionally Left Blank 16 fr I i l i (") \ i , /- r! ( r t j 11 i : '\ 1 n U f I . I I '. [ l ( ~. ! . , i.l { T . L i. Basic Financial Statements , ' I . I i l I (1 i . tl r 1 I i l. j r r i \ l.. r r u P i 1 U r: 1 :\ U. f 1 Ll ., 17 City of Clearwater, Florida . ' Statement of Net Assets September 30, 2002 . . Primary Government Component Unit ',1 ) Clearwater Downtown \"l Governmental Business-type Development Activities Activities Total Board : i ASSETS Cash and cash equivalents $ 137,996,235 $ 32,031,063 $ 170,027,298 $ 143,104 J "1 Restricted cash and investments 6,090,652 6,090,652 l j Investments 664,499 864,499 Total receivables (net) 44,709,170 8,080,242 52,789,412 205,957. f ~ Internal balances (21,351,074) 8,840,232 (12,510,842) Due from other governments 5,232,453 535,595 5,768,048 , , Prepaid items 1,539,086 4,891 1,543,977 Inventories 17,430 1,241,106 1,258,536 P Deferred charges 644,901 1,739,727 2,384,628 i Net pension asset 15,125,562 6,320,420 21,445,982 "; I , . Restricted assets: Cash and cash equivalents 70,346,294 70,346,294 ' , Investments 2,926,200 2,926,200 Internal balances 12,510,842 12,510,842 Other 91,989 91,989 Capital assets: Land 40,913,067 19,878,550 60,791,617 Buildings 27,638,084 15,967,876 43,605,960 . , Improvements other than buildings 37,443,985 188,580,263 226,024,248 ::-' ~ Machinery and equipment 11,828,096 16,088,995 27,917,091 Infrastructure 1,076,247 1,076,247 '; ~ Construction in progress 11,550,775 47 ,205,107 58,755,882 Total assets 315,228,516 438,480,044 753,708,560 349,061 , I . LIABILITIES . I , ; Accounts payable and other current liabilities 4,243,455 3,122,335 7,365,790 332 - , Accrued liabilities 1,183,801 507,475 1,691,276 Accrued interest payable 772,803 91,383 864,186 Due to other governments 526,583 526,583 ;. , Deposits 5,342 126,039 131,381 Deferred revenue and liens 33,960,364 15,392 33,975,756 205,957 Payable from restricted assets: Construction contracts payable 1,394,554 1,394.554 Accrued interest payable 1,232,234 1,232,234 Customers deposlts 3,822,095 3,822,095 Non-:eurrent liabilities due within one year: Compensated absences 575,889 174,684 750,573 Loans and leases payable 1,314,392 3,076,018 4,390,410 7,848 Revenue bonds payable 5,596,132 7.068,868 12,665.000 Long-term debt and liabilities: Compensated absences 5,243,966 1,590,647 6,834,613 loans and leases payable 2,624,777 7,016,060 9,640,837 86,331 Revenue bonds payable 67.605,773 178,605,246 246,211,019 Claims payable 11,440,278 11.440,278 Total liabilities 135,093,555 207 ,843,030 342,936.585 300,468 NET ASSETS Invested In capital assets (net of related debt) 53,954,081 93,694,326 147,648,407 Restricted for: Capital projects 29,706,614 6,137,391 35,844,005 Debt service 6,074,104 12,748,561 18,822,665 Renewal and replacement 14,518,247 14,518,247 Employees' pension benefits 15,125,562 6,320,420 21,445,982 Other purposes 11,546,171 11,546,171 Unrestricted 63,728.429 97,218,069 160.946,498 48,593 Total net assets $ 180,134,961 $ 230,637,014 $ 410,771,975 $ 48,593 The notes to the financial statements are an Integral part of this statement. 18 r"'C"-&"~,,,,,, ...... ~'" ,........""....~.. ~-'--...- 4.w~.....,_..~' .....-..... \.......''''-<'''l '''',''",."",,,.,,,, "'.'.'" 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City of ClealWater, Florida : i Balance Sheet Governmental Funds ~ -~ September 30, 2002 :. ~ Special Capital Other Totals General Development Improvement Governmental Governmental , 1 !, Fund Fund Fund Funds Funds ASSETS " j Cash on hand and in banks $ 20,680 $ $ $ 100 $ 20,780 Equity In pooled cash and investments 11,238,047 5,270,645 63,341,349 37,747,027 117,597,068 ~ .~ Receivables (net where applicable, of alloWances 6 J for estimated uncollectible amounts): Accounts and contracts 306,523 306,523 11 Mortgages, notes and other loans 10,000 .8,905,947 8,915,947 , . ;' Improvement liens 86,801 86,801 ' J Rehabilitation advances 82,626 82,626 ~ 1 Property taxes 31,548,425 2,013,000 33,561,425 - . Other 1,454,648 180,000 109,202 1,743,850 i j Due from other funds (deficit in pooled cash) 264,514 264,514 Due from other governmental entitles 2,337,360 2, 125,137 769,956 5,232,453 r j investments 664,499 864,499 ; j Land held for resale 998,342 998,342 Inventories, at cost 17,430 17,430 ~ ~ Advances to other funds 2,000,000 2,000,000 T ota! assets $ 48,923,113 $ 9,418,782 $ 63,872,664 $ 49,477,699 $ 171,692,258 LIABILITIES Accounts and con1tacts payable $ 162,454 $ $ 1 ,186,483 $ 1,657,907 $ 3,006,844 , '.. i Accrued payroll 1,121,359 26,911 1,148,270 Accrued Interest payable 28,032 28,032 Due to other funds 24,925 28,016,807 134,966 28,176,698 Due to other funds (deficit In pooled cash) 264,514 264,514 Due to other governmental entities 3,663 522,548 372 526,583 Deposits 5,342 5,342 Construction escrows 1,093,924 1,093,924 Deferred revenue 31,852,141 2,013,000 95,223 33,960,364 Deferred assessment liens 86,801 86,801 Advances from other funds 49,850 492.524 542,374 Total liabilities 33,219,734 2,535,548 29,290,091 3,794,373 68,839,746 FUND BALANCES Reserved for: Encumbrances 1,019,607 14,369,954 19,576,986 34,966,547 Debt service requirements 6,074,104 6,074,104 Advances and notes 2,000,000 10,000 8,481,986 10,491,986 Grant programs 2,016,840 2,016,840 Unreserved, reported In: General fund 12,683,772 12,683,772 Special revenue funds 6,873,234 4.462.750 11,335,984 Debt service funds 1,802,529 1.802.529 CapItal projects funds 20,212,619 3,268,131 23,480,750 Total fund balances 15,703,379 6.883,234 34,582,573 45.683,326 102,852,512 Total liabilities and fund balances $ 48,923,113 $ 9,418,782 $ 63,872,664 $ 49,477,699 $ 171,692.258 Tile notes to the fmancial statements are an integral part of this statement. 20 r-l I , I : \. I ( , j i i l; I ' ; . 1. _ ~ f : ! , l j, r ' , , t .; , ~ ! ! ~ j I) ! 1 l : U t t Lj if It V..3- r r ~ " U [ I ;;, ~ U r r .1 L.~ L: f ~ L..~ r'r I 1 ( j r .~ I ' 1 i ~ ., , , I . I . 1 i City of Clearwater, florida Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net Assets September 30, 2002 f r i 1 Total fund balances of governmental funds Capital assets used in governmental activities are not flnanclal resources, therefore, are not reported in the funds. The cost of the assets is $1 n ,284,898, and the accumulated depreciation Is $46,834,644. Total capital assets for governmental activities Less: Land Included In governmental funds as ULand Held for Resale" The net pension asset related to governmental activities does not represent financial resources and is not reported In the funds. Accrued general long-term debt interest expenses are not financial uses and, therefore, are not reported in the funds. Special assessment liens receivable are not financial resources in the current period and, therefore, are reported as deferred revenues In the funds. The assets and liabilities of the General Services and Central Insurance internal service funds (funds used to charge the costs of certain activities to individual funds) are included in the governmental activities in the statement of net assets. Net assets of General Services and Central Insurance Intemal service funds Less: Capital assets included In total governmental capital assets above Less: Net pension asset included in total governmental net pension asset above Add: Capital lease purchases payable included in total governmental below Add: Compensated absences included In total governmental below Add: Adjustment to reflect the consolidation of internal service fund activities related to enterprise funds Interest revenues are not recognized in the current period because the resources are not available, therefore. are not reported In the funds. Long-term liabilities, including bonds payable, are not due and payable in the current period and accordingly are not reported in the funds. long-term liabilities at year-end consist of: Bonds payable Less: Deferred charge on refunding (to be amortized as Interest expense) Less: Deferred charge for Issuance costs (to be amortized over rife of debt) Less: Issuance discount (to be amortized as Interest expense) Add: Issuance premium (to be amortized as a reduction of Interest expense) Capital lease purchases payable Compensated absences Total nat assets of governmental activities Tha notes to the financial statements are an integral part of this statement. 21 $ 130,450,254 (998,342) 15,437.496 (177.618) (394,351 ) 25,682 97,313 678,453 (72,510,958) 414,182 644,901 46,321 (1,151,450) (3,939,169) (5,819,855) $102,852,512 129,451,912 15,125,562 (744,771) 86,801 15,666,975 11,998 (82,316,028) $180,134,961 r " ! . i; r i ! ! L j I ~ ! ' I : I 1 r' 1 , i \ ,..; f T i l i i : ~, ,J r 1 .. $. j f' L .j: "1 I [ r: , I t 1 rl i I { 1 r i \ j . L, , . , ' i ~ ; \ ! J"r j , ( ! city of Clearwater, Florida Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds . to the Statement of Activities For the Year Ended September 30, 2002 Net change In fund balances - total govemmental funds Amounts reported for govemmental activities in the Statement of Activities are different because: Govemmental funds report capital outlays as expenditures while governmental actlvilles report depreciation expense to aUocate those costs over the life of the assets. This Is the amount by which capital outlays exceeded depreciation in the current period. Expenditures for capital assets Less current year depreciation In the Statement of Activities the loss on disposition of capital assets Is reported. The loss Is not a use of current resources and thus Is not reported In the funds. Loan proceeds provide current flJ1anclal resources to governmental funds; however issuing debt Increases long-tenn liabilities in the S1atement of Net Assets. In the current year these amounts are: Revenue bOlld proceeds CapItal tease proceeds Some expenditures and other financing sources (uses) of the govemmental funds are deferred and amortized in relation to the related debt in the Statement of Activities: Net discount (premium) on revenue bonds Issued during current year Issuance cosls for revenue bonds Issued during current year Loss on current year refunding Repayment of long term debt principal is an expenditure in the governmental funds, however the repayment reduces long-term liabilities in the Statement of Net Assets. Current year amounts are: Revenue bond principal payments Capital lease principal payments Principal pOrtiOll of payment to escrow agent for refunding of bonds 446,768 1,304,501 9,679,761 Net pension asset is not a current f1nancIaJ resources and consequently Is not reported In the funds. However It is an asset In the S1atemeot of Net Assets. Current year change in the net pension asset Some expenses reported in the Statement of ActIvities do not require the use of current financial resources and therefore are not reported as expenditures In the governmental funds. Current year change in compensated absences Amortization of deferred charge on refunding Amortization of Issuance costs Amortization of bond discounts and premiums Accrued Interest expense Special assessment revenues are deferred until collected In the goverrvnenlal funds. The revenues collected In the current year were prior year revenues In the Statement of ActivItIes. Interest revenues will not be coDected for several months after the fiscal year and are not accrued In the governmental funds. (270,983) (28,244) (90,494) 169,252 (642,659) The net revenues of internal service funds (funds used to charge the costs of certain activities to individual funds) for govemmental activities are reported In the Statement of Activities but not in the governmental funds. Total net assets of governmental activities The notes to the financial statements are an integral part of this statement 23 $17,553,027 11,431,030 3,794,596 (863,128) (18,098) 11 ,998 684,552 $20,163,395 City of Clearwater, Florida :1 ) Statement of Revenues, Expenditures, and Changes In Fund Balances - Budget and Actual (Non-GAAP Budgetary Basis) General Fund For the Year Ended September 30, 2002 Variance with i j BUdgeted Amounts Final Budget Actual Positive ''; l Original Final Amounts (Negative) i REVENUES Taxes $ 45,n2,600 $ 46,078,360 $ 45,909,106 $ (169,254) Licenses, permits, and fees 3,182,360 3,132,360 3,283,304- 150,944 1;- ". Intergovernmental 21,549,590 21,628,240 22,456.903 828,663 , Charges for services 9,739,320 9,676,760 9,852,250 175,490 :J.. i. Fines and forfeitures 1,595.880 1,741,640 1,763,054 21,414 Interest income 882,760 882,760 763,919 (118,841) 1 \ Miscellaneous 891.S4{) 956.470 828.978 (127.492) , Total revenues 83,613,850 84,096.590 64,857,514 . 760,924 ' ; EXPENDITURES Current: n 1 General government i .~ City Commission 267,400 250,780 217,879 32,901 City Manager 683,380 683,380 641,122 42,258 Legal 1,259,130 1,437,120 1 ,421,575 15,545 71 City Clerk 1,155,280 1,125,280 932,979 192,301 Public Communications and Mad<eting 885.600 880,850 752,687 128,163 . ~ Finance 1,923,780 1,883, 780 1,787,562 96,218 i. J Human Resources 1,096,250 1,163,530 1,114,726 48,804 Non-Departmental 1,305,280 1.305,200 1,293,975 11 ,225 ; ~ Public Works Administration 71,475 71,547 69,341 2,206 i i Planning 1 ;043,070 998,070 897,683 100,387 , i Internal Audit 122,880 114,600 101.484 13,116 Office of Management & Budget 267,020 269,020 272,114 (3,094) Total general govemment 10,080,545 10,183,157 9,503,127 680,030 ~ 1 ; ! Public safety I ; I Police 26,973,660 26,973,480 26,424,346 549,134 Fire 14,378,900 14,164,250 13,973,671 190,579 Development Services 2,686,287 2,686,287 2,596,272 90,015 i 1 Total public safety 44,038,847 43,824,017 42,994,289 829,728 i , l Physical environment Public Works Administration 1.929.817 1,931,747 1,872,179 59,568 Total physical environment 1.929,817 1,931,747 1,872,179 59.568 Transportation Public Works Administration 6.046,257 6,052.306 5.865,674 186,632 Total transportation 6,046,257 6,052,306 5.865,674 186.632 : ; Economic environment Economic Development 1,476,470 1,394,110 1,340,806 53.304 Development Services 160,734 160,733 155,348 5.385 Total economic environment 1.637 .204 1,554,843 1.496.154 58,689 Human services Human relations 488,430 488.430 448,703 39.727 Total human services 488,430 488.430 448,703 39.727 Culture and recreation Parks and Recreation 14,126,020 14,158,120 13,968,172 189,948 Library 3,891,890 3,891,890 3,809,106 82,784 Marine 492,390 497,390 500,500 (3,110) Total culture and recreation 18,510,300 18,547,400 18,2n,n8 269,622 Total expendtures (budgetary basis) 82,731,400 82,581,900 80.457,904 2,123.996 I j Excess of revenues over expenditures (budgetary basis) 882,450 1,514,690 4,399,610 2,884.920 OTHER FINANCING SOURCES (USES) Transfers in 4,382.790 4,442,390 4,628.931 186.541 , , Transfers out (5,578,240) (6,335,850) (6,163.998) 171 ,852 ; I Total other financing sources (uses) (budgetary basis) (1,195,450) (1,893,460) (1 ,535,067) 358,393 L 1 Excess (defICiency) of revenues and other financing sources over expenditures and other financing uses (budgetary basis) (313,000) (378,nO) 2,864,543 3.243,313 Encumbered purchase orders, beginning of year (1,052,477) (1,052,477) Encumbered purchase orders. end of year 1,019,607 1,019.607 Excess (deficiency) of revenues and other f1n= sources over expenditures and other financing uses ( basis) . (313,000) (378,nO) 2,831 ,673 3,210,443 Fund balances - beginning, as restated (see Note II . C) 12,871,706 12,871,706 12,871,706 l j Fund balances. ending $ 12,558,706 $ 12,492,936 $ 15,703,379 $ 3,210,443 The notes to the financial statements are an integral part of this statement 24 r ) n I : I I 1 i rl 1 I I i fi , t r 1 I : \, j (""]' Ii r) l, ( , ! ' \ 1 ii l I l . I' ~ ; i j ( '~ 1 : U f r U f 1 I i l.; n l I LJ I r f ~ [ 1 U r 1 l ~ U f 1 \ : 'l." ( 7 1- ! L; r ~. i i "-__..1. City of Clearwater, Florida Statement of Revenues, Expenditures, and Changes In Fund Balances - Budget and Actual (GAAP Basis) Special Development Fund For the Year Ended September 3D, 2002 The notes to the financial statements are an integral part of this statement. 25 City of. Clearwater, Aorida Statement of Net Assets Proprietary Funds September 30, 2002 ASSETS Current assets: Cash on hand and In banks Equity In pooled cash and investments Accounts and oontracts receivable: Billed Unbilled charges estimated Water and Sewer UWily $ 400 $ 10,734,957 2,084,139 1,400,100 3,484,239 (242,238) 3,242,001 2,537,004 432,097 533,521 4,891 17,484,871 Less: Allowance for uncollectable accounts Total receivables, net Due from other funds Que from other govemmental ent/ties Inventories, at cost Prepaid expenses and other assets Total current assets Noncurrent assets: Restricted: Equity In pooled cash and investments Interest receivable Due from other funds Investments Other Deferred charges Advances to other funds Net pension asset Capital assets: Land and other nOl1depreclable assets Capital assets, net of accumulated depreciation Total noncurrent assets Total assets 59.121,612 3,547,576 2,916,713 86,196 981,123 1,921,307 41,310,216 138,118,555 248,003,298 265,488,169 The notes to the tinanclaJ statements are an Integral part of lhIs statement 26 1,644,280 311,888 1,044,652 327,265 33,988,n2 37,316,8n 47,385,694 764,321 1,113,370 i j 1,041,913 2,459,795 5,379,399 15,236,060 ! \ . , i j .' ~ l , , I 1 i , .i 27 City of Clearwater, Florida Statement of Net Assets (Continued) Proprietary Funds September 30, 2002 ~ '1 Business-type Enterprise Water and Sewer Gas Solid Waste UtIlity Utility Utility LIABILmES Current liabilities: Aocounts and contracts payable 1,024,376 832,581 354,560 Aocrued payroll 152,440 80,672 89,349 Aocrued interest payable 56,703 34,680 Accrued compensated absences 455,817 298,343 370,647 Due to other funds 82,474 Deposits Deferred revenue and liens Current portion of Iong-tenn liabDitles: Revenue bonds 905,000 5n,500 Notes, loan pool agreement and acquisition contracts 112,468 39,371 Total current liabilities (payable from current assets) 2,706,804 1,823,776 936,401 Current liabilities (payable from restrioted assets): Construction contracts payable 918,656 Accrued Interest payable 835,616 122,661 22,383 Notes, loan pool agreement and acquisition contracts Current portion of long-term liabilities, revenue bonds 4,525,000 52,500 Customer deposits 1,888,655 1,169,119 764,321 Total current liabilities payable from restricted assets 8,167,927 1,344,280 786,704 Total current liabilities 10,874,731 3,168,056 1,723,105 Noncurrent liabilities: Revenue bonds (net of unamortized discounts and deferred amount on refunding) 121,559,184 26,463,537 Notes, loan pool agreement and acquisition contracts 362,580 46,826 . Advances from other funds 824,737 Ciaims payable Total non-current liabilities 121,921,764 26,463,537 871,563 TotalllabUltles 132,796,495 29,631,593 2,594,668 Net assets: Invested in capital assets (net of related debt) 79.572,957 6,910,632 3,415,511 Restricted for: Revenue bond debt selVice and sinking fund requirements 12.739,153 Revenue bond renewal and replacement requirements 14,218,247 300,000 Capital projects 1,685,872 Water and sewer Impact fees 4,451,519 Employees' pension benefits 1,921,307 1,044,652 1,113,370 Unrestricted 19,788,491 9,498,817 6,426,639 Total net assets $ 132,691,674 $ 17,754,101 $ 12,641,392 Adjustment to reflect. the consolidation of lntemal service fund activlties related to enterprise funds. Net assets of business-type activities The notes to theflnancial statements are an integrai part of this statement. 28 rUt I . I i \ ~ r 1 ! j r] !. ; l i rl , , I : r ! I , n I . < t f ., j , , .' f i [ j (; i J l, ( , l .i f ; i , . 'i... 1 f-' l , r ) [ : t i i ~ i :: ~ ;. (' ~ .1 : I ; Li I r. tJ ! j U , t" ( ~ Activities Funds stormwater UUlity 42,898 32,276 119,395 174,369 368,938 475,898 251,049 125,000 851,947 1,220,885 31,366,361 479,027 31,845,388 33,066,273 19,094,757 $ 387,321 7,888,733 27,370,811 $ Other Funds 717,372 47,684 137,853 59,602 126.039 15,392 7,956 152,555 1,264,453 525 3,636 15,912 20,073 1,284,626 76,163 421,207 4,119,204 4,616,574 5,901,100 16,841,818 511,415 10,873,333 28,235,974 9,408 Total 2,971,787 402,421 91,383 1,382,055 142,076 126,039 15,392 1,490,456 478,763 7,100,372 1,394,554 1,232,234 3,636 4,718,412 3,822,095 11,170,931 18,271,303 179,465,245 1,309,640 4,943,941 185,718,826 203,990,129 125,835,675 $ 12,748,561 14,518,247 1,685,872 4,451,519 4,978.065 54,476,013 218,693.952 $ 11,943,D62 230,637,014 29 Governmental ActIvities - Internal Service Funds 142,687 35,531 97,313 4,511 280,042 280,042 21,171 11,440,278 11,461,449 11,741,491 151,936 394,351 14.891,209 15,437,496 $ Business-type Activities - Internal Service Funds 150,548 105,054 383,276 300,000 2,589,109 3,527,987 3,527,987 5,710,931 271,070 6,982,001 9,509,988 7,015,749 1,342,355 4,263,411 12.621,515 '~ -'10 ~, ~ City of Clearwater, Florida Statement of Revenues, Expenses, and Changes In Fund Net Assets Proprietary Funds } '\ For the Year Ended September 30, 2002 ~ ~ Business-type i 1 Enterprise i I Water and Sewer Gas Solid Waste ~, :~ y Utility UtIlity Utility , ~, ! Operating revenues: ' . Sales to customers $ 37,172,766 $ 25,028,261 $ 15,818,099 ! , J Service charges to customers 476.818 1,495,353 103,825 User charges to customers , \ Billings to departments . j . j Rentals " / Total operating revenues 37,649,584 26,523,614 15,921,924 .. , Operating expenses: , t ; Personai services 6,971,988 3,719,794 4,306,332 Purchases for resale 7,516,678 10,639,840 9,050 1 'J Operating materials and supplies 1,881,033 170,862 328,626 ! J Transportation 673,673 462,294 2.702,492 Utility service 1,581,141 70,503 56,768 Dumping charges 45 4,691,486 Depreciation 4,935,681 1,277,342 220,499 Intertund administrative charges 4,923,010 1,811,020 1,162,770 Other current charges: Professional fees 1,180,074 88,831 14,244 Advertising 1,112,239 5,093 Corrvnunlcations 111,940 137,953 54.226 Printing and binding 6,007 Insurance 243,800 101,760 120,500 Repairs and maintenance 2,675,400 226,836 68,171 Rentals 52.388 1,750 Miscellaneous 268,730 100,800 38,426 Data processing charges 384,900 297,890 129.580 Taxes 1,543,544 Provision for estimated uncollectable accounts 139,522 101,037 43,519 Total other current charges 5,004,366 3,771,305 475,509 Total operating expenses 33,487,570 21,923.005 13,953,532 Operating income (loss) 4.162,014 4,600,609 1,968,392 The notes to the financial statements are an Integral part of this statement. 30 f" \ ( r"j < J f 1 i : l ) fJ [., I ! Activities 1 J . \ i Funds Governmental Business-type Activities . Activities . {l Stormwater Other Intemal Service Internal Service 1 j UUllty Funds Total Funds Funds r 1 $ 6,719,943 $. 2,267,604 $ 87,006,673 $ $ 11. .. ~ 30,838 185,144 2,291,978 [ ! 5,338,519 5,338,519 ! 14,530,532 15,981,253 i. j 3,050,343 3,050,343 6,750,781 10,841,610 97,687,513 14,530,532 15,981,253 f ' i J \ ; 1,547,271 2,319,847 18,865,232 1,783,n4 5,134,656 f 1 2,209,698 20,375,266 1,966,455 ! i 130,773 429,812 2,941,106 205,649 276,595 '- .~. 471,197 344,628 4,654,284 97,059 86,854 (' 321,529 2,029,941 353,016 90,983 ! f 4,691,531 l.' 977,183 1,304,825 8,715,530 19,021 3,620,735 r .~- 1,273,460 1,504,800 10,675,060 257,560 1 ' ~ * i I 1.. ~ 148,473 1,en,653 3,109,275 57,055 362,342 35,485 1,152,817 150 525 I i 17,686 74,479 396,284 50,734 1,315,805 r : 6,670 12,677 2,016 42,148 I ; 48,400 125,780 640,260 12,572,840 923,964 Ii 165,n2 201,754 3,339,933 587,132 593,841 ( .; 164,377 218,515 8,856 145,843 U 60,843 67,549 538,348 50,044 135,982 n 63,350 85,570 961,290 57,160 358,180. t ; 18,445 1,581,989 6,248 Ll 30,352 23,549 337,979 I I 534,876 2,481,311 12,267,367 13,383,987 3,884,878 , , 4,934,760 10,916,450 85,215,317 16,842,506 15,318,716 L 1,816,021 (74,840) 12,472,196 (1,311,974) 662,537 -.. (Continued) ., "J 31 ~, J '1"1 City of Clearwater, Florida Statement of Revenues, Expenses, and Changes in Fund Net Assets (Continued) Proprietary Funds For the Yesr Ended September 30, 2002 '~ 1 .~ ; Business-type Enterprise ~. ..\ { i" NonoperaUng revenues (expenses): Earnings on investments Interest expense Amortlzatlon of bond discount and Issue costs Gain (loss) on exchange of assets Other Total nonoperating revenue (expenses) Income before contributions and transfers Water and Sewer Utility 1,713,005 (3,576,551) (282,822) (45,669) 89,423 . (2, 102,614) 2,059,400 2,311,690 Capital grants and contributions Transfers In Transfers out (1,969,779) 341,911 Changes in net assets Total net assets. beginning, as previously reported, before adjustment for GASa 34 implementation Adjustment for implementation of GASe 34 . elimination of contributed capital Adjustment for change in accounting principle - change In capitalization thresholds Total net assets. beginning, as restated Total net assets - ending 2,401,311 56,135,028 74,424,378 (269,043) 130,290,363 132,691,674 $ $ (1,057,838) (660,340) (1,057,838) (660,340) 2,623,123 1,517,507 , ) 14,800,787 12,026,840 Gas Utility 327,827 (1,473,183) (121,886) (19,041) 366,635 (919,648) 3,680,961 691,537 (361 ,346) 15,130,978 17,754,101 $ '- .: Solid Waste Utlllty ;: '~. i. i 349,693 (78,621) ~ l .l j (229,288) 167,671 209,455 2,177,841 ': 1 . ; .i. 1 : 1 , j 220,454 (1,123,409) 11,123,885 12,641,392 u Adjustment to reflect the consolidatbn of IntemaI service fund acllvltles related to enterprise funds. Change In net assets of business-type ~ (page 19) ! , . 1 i i .J The notes to the financial statemenlS are an integral part of this statement 32 .j : 1 . I , ( ... J ,.J' ; ... 33 City of Clearwater, Florida : ~' Statement 01 Cash Flows Proprietary Funds '1 For the Year Ended September 30, 2002 Business-type Enterprise r .:. Water and Sewer Gas Solid Waste UtIlity UtIlity UtIRty y ~! CASH FLOWS FROM OPERATING ACTIVIl1ES i) Cash received from customers $ 37,568,185 $ 25,863,699 $ 16.071,288 Cash received from other funda .. -. , Cash payments to suppliers (16,694,239) (13,948,055) (5,211.552) Cash payments to employees (7,551.374) (4,282,768) (4,564,498) ~ J Cash payments to other funds (6,769,751) (2,944,000) (4.169,668) ! , Other revenues 89,423 366.635 167.671 ; Net cash prOVided by operating activities 6,642,244 5,055.511 2.293,341 ~. } CASH FLOWS FROM NON CAPITAL ~,. ~ FINANCING ACTlVrTlES Operating transfers In ~ i . ; Operating transfers out (2,015,448) (1.057,838) (660,339) Interest paid ~. , Receipt of cash on loans toIfrom other funds ~ j Payment of cash on loans tolfrom other funds (1.004.123) (89,979) (253,850) Net cash provided (used) by " 1 noncapltal financing activities (3,019,571) (1,147.817) (914,189) i .:. ~ CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES , Principal payments on debt (5,224,870) (610,000) (37,295) I Interest paid (1,587.607) (1,497,947) (92,143) .. i Acquisition of fixed assets (20,847,468) (1,981.295) (t 46,425) Sale of fixed assets Proceeds from issuance of debt 58.561,536 Payment of bond issue costs (523,228) Capital contributed by: .. , Other governmental entitles 2.030,099 Property owners Developers 270,340 Net cash provided (used) for capital and related financing activities 32,678,802 (4,069,242) (275,863) CASH FLOWS FROM INVESTING ACTIVITIES Interest on investments 2,036,106 327,827 349,693 Net cash provided by Investing activities 2,036,106 327.827 349,693 Net increase (decrease) In cash and cash equivalents 38.337,58t 166,279 1,452,982 Cash and cash equivalents at beginning of year 31,519.388 3,240.602 6,045,369 Cash and cash equivalents at end of year $ 69.856.969 $ 3,406.881 $ 7,498,351 Cash and cash equlvalents classified as: Cash on hand and In banks $ 400 $ 700 $ 200 Equity In pooled cash and investments 10,734.957 1,781,901 8,733,830 ~ 1 Restricted equity In pooled cash and Investments 59.121.612 1,844,280 764,321 Total cash and cash equivalents $ 69,856.969 $ 3,406.881 $ 7.498,351 [ { " Lj The notes to the financial statements are an integral part of this statement 34 City of Clearwater, Aorlda Statement of Cash Flows (Continued) Proprietary Funds For the Year Ended September 30, 2002 Water and Sewer Utility Gas UOllty Reconciliation of operating Incoma to nat cash provided by operating activities: Operating income (ioss) $ 4,162,014 $ 4,600,609 $ Adjustments to reconcile operating Income (loss) to net cash provided by operating activities: Other revenue from nonoperating section of income statement 89,423 366,635 Depreciation 4,935,681 1,277.342 Non-cash land rental expense ProvisIon for uncollectible accounts 139,522 101,037 Capitalized labor and interest (120,728) (351,4$3) Construction In process reclassified as expense 300 Change In assets and liabilities: (Increase) decrease in accounts receivable 55,335 42,855 (Increase) in amount due from other governments (156,961) (Increase) decrease in inventory (86,616) 11.353 (Increase) in prepaid expenses (227) Increase (decrease) In accounts and contracts payable (1,916,883) (38,354) Increase (decrease) in deposits 20.227 58,947 Increase (decrease) in deferred revenue (761,716) (Increase) in net pension asset (514,645) (282,804) Increase (decrease) in accrued payroll 35,802 31.040 Total adjustments 2,480,230 454.902 Net cash provided by operating activities $ 6,642,244 $ 5,055.511 $ Business-type Enterprise .~ , Solid Waste UtIlity 1,968,392 167,671 220,499 (23,641) 160.002 2,062 56,522 (297,363) 39, t 97 324.949 2,293,341 Noncash Investing, capital and financing activities: Gaiil (loss) on exchange of assets $ (45,669) $ (19,041) $ Land contribulion to generaJ government BSSets $ $ $ 229,288 Change i1 fair value of Investments $ (142,028) $ $ Contributed utirdias from developelS $ $ $ The notes to the financIal statements are an Integral part of this statement 36 ( I rI r I Activities Funds Governmental Business-type Activities - Activities - rl Stormwater Other Internal Service Internal Service I I utility Funds Total Funds Funds , j f I $ 1,816,021 $ (74,840) $ 12,472,196 $ (1,311,974) $ 662,537 f1 f! I i l J 15,801 552,863 1,192,393 182,430 977,183 1,304,825 8,715,530 19,021 3,620,735 11 136,499 136,499 , i l.1 30,362 (1,209) 246,061 (472,181) ! ~ 300 I i ; (234,007) (62,07l) (37,886) 76 (156,961) fl (10,423) (85,686) (109,910) (227) (422,690) 42,898 (62.848) (1,973,125) t ,986,092 (434,175) f ' (11,461) 124,235 Ii 12,632 (749,084) (112,001) (140,001) (1,346,814) (106,962) (351,683) 22,990 6,372 135,401 (10,185) 36,882 r1 , I 743,216 1,725, 178 5,728,475 1.465,076 2,944,355 t 1 .. f 1 $ 2,559,237 $ 1,650,338 $ 18,200,671 $ 153,102 $ 3,606,892 i I. f ~ U 11 $ (67,039) $ 62,316 $ (69,433) $ $ (134,n1) ! ; < 1 $ $ $ 229,288 $ $ U $ $ (43) $ (142,071) $ $ II $ 11 ,250 $ $ 11,250 $ $ U f t ~ i l.~ r T ~ : i f , i 1....1 r f ; . i_j 37 The notes to the financial statements are an integral part of this statement 38 11 J ; t I City of Clearwater, Florida Statement Changes In Fiduciary Net Assets Fiduciary Funds For the Year Ended September 30, 2002 f : l ; ri I : f 1 ) . \. ; ADDITIONS Contributions: Contributions from employer Contributions from employees State of Florida Total contributions Investment Income (loss): Net appreciation (depreciation) in fair value of inves1ments Interest Dividends () \ f ( j r' i . ( ; ( , ! , \ l ! ' j y , i , Less investment expenses: Inves1ment management I oustodlan fees Net Investment Income (loss) Total additions (reductions) r : [ . t . ~ DEDUCTIONS Benefits and withdrawal payments: Benefits Withdrawal payments Total benefits and withdrawal payments Income (loss) before administrative expenses Administrative expenses Net increase (decrease) Net assets held in trust for pension benefits: Beginning of year End of year r , ~ ~ r [ Ii r J i. ; ( , ~ t. ,i f" "') ~ ! L I! ;~ j The notes to the financial etatements are an integral part of this statement .~ r . . t..'"' 39 Penelon Trust Funds $ 5,593,561 5,069,687 l,3n.299 12,040.547 (40,705,797) 10,578,980 1,689.384 (28.437,433) 1,921.382 (30,358,815) (18,318,268) 14,086,011 549,742 14,635.753 (32,954,021 ) 333,842 (33,287,863) . 435,933,960 $ 402,646,097 , : City of Clearwater, Florida Notes to the Financial Statements September 30, 2002 n Note I - Summary of Significant Accounting Policies The City of Clearwater, Florida (the City) was Incorporated in 1923 per Chapter 9710, Special Laws of Florida, as amended. The City Is a Florida municipal corporation governed by a five member City Commission including a mayor-commissioner. The City has an estimated population of 109,OOO'and is located In the four-county Tampa-St. Petersburg-Clearwater Metropolitan Statlstical Area (MSA), which has an estimated population of 2,414,900. The financial statements of the City of Clearwater, Florida reporting entity (City) have been prepared in accordance with generally accepted accounting principles (GAAP) as applied to governmental units. The Governmental Accounting Standards Soard (GASS) is the standard-setting body for governmental accounting and financial reporting. Pronouncements of the Rnancial Accounting Standards Board (FASS) issued after November 30, 1989, are not applied in the preparation of the financial statements of the proprietary fund types in accordance with GASS Statement Number 20. The GASS. periodically updates Its codification of the existing Governmental Accounting and Financial Reporting standards which, along with subsequent GASB pronouncements (Statements and Interpretations), constitutes GAAP for governmental units. The City's more significant accounting policies are described below. In June 1999, the GASB . unanimously approved "Basic Financial Statements and Management DIscussion and Analysis for State and Local Governments" (Statement #34). this statement results in the most significant change in governmental financial reporting in over twenty years and is scheduled for a phased implementation (based on the size of the government) starting with fiscal years ending 2002. As part of this Statement, there are new reporting requirements for governments' infrastructure (roads, bridges, etc). This requirement permits an optional four-year delay for retroactive implementatlon of the infrastructure reporting requirements to fiscal 2006. The City has elected to implement the basic model for fiscal year 2002 and will defer implementation of the retroactive Infrastructure reporting to fiscal year 2006. A. Financial Reporting Entity In evaluating the City as a reporting entity, management has Included in the accompanying financial statements the City of Clearwater (the primary government).and its component units, entities for which the government is considered to be financially accountable. The City has adhered to the standards set forth In GASB Statement No. 14 in reporting the primary government (including blended component units), discretely presented component units, the reporting entity,.and related organizations. Blended Component Units - Component units that meet the criteria for blended presentation in accordance with GASS Statement Number 14 are reported in a manner similar to that of the primary government Itself. Accordingly, throughout this report, data presented for the primary government includes data of the following blended component unit. The Clearwater Redevelopment Agency (eRA), created by authority of Florida Statute Chapter 163, Part III, and City of Clearwater Resolution 81-68, although it is legally separate, is reported as if it were part of the City (blended component unit) due to the City Commission serving as the governing board of the CRA. Separate fInancial statements for the CRA are not available. However fll1anclal statements for the CRA are included in the City's comprehensive annual financial report as a governmental special revenue fund. Discretely Presented Component Units - Component units that meet the criteria for discrete presentation in accordance with GASB Statement Number 14 are presented in a separate component units column in the government-wide financial statements in order to clearly distinguish the balances and transactions of the component unit from those of the primary government. The discretely presented component unit listed below Is reported separately in the financial statements and in the related notes and required supplementary Information. The Clearwater Downtown Development Board (DDS) was created by authority of Florida Statutes 70-635 and 77-637, and City Ordinance 5347-93, but is legally separate from the City and governed by a separate board. The DDB was created by City ordinance and the City is thereby able to impose its will on the organization. Additionally the exclusion of the DDS's activities from the City's financial statements would, in the opinion of the City's management, cause the financial statements to be incomplete. Consequently the DDB is reported In a separate column in the government- wide financial statements as a discretely presented component unit of the financial reporting entity, In accordance with GASB Statement No. 14. The DDS's financial statements have been Incorporated Into the CIty's comprehensive annual financial report as a governmental discretely presented component unit. Separate financial statements for the DDB can be obtained from the City's Finance Department located at 100 S. Myrtle Avenue, Clearwater, Florida. 40 l.. r. , I ! : ~ i 1 f! 1 i [ r I ( i f r ~ i I ! f ; ~ l I r , t \; f ' t; f ' ! I , , I , I : \ i ( : , r r ~ i l lr,..I ~ I L. J, ~ I i I l' !. .. r' 1 i ! [ I City of Clearwater, Florida Notes to the Financial Statements September 30, 2002 B. Basic Financial Statements Under the New Financial Reporting Model During the fiscal year ended September 30, 2002 the City Implemented the new financial reporting model as of result of the following Statements of the Governmental Accounting Standards Board (GASB): GASB Statement No. 34, Basic Financial Statement-and Managemenfs Discussion and Analysis-for State and Local Govemments; GASB Statement No. 36, Recipient Reporting for Certain Shared Nonexchange . Revenues, an amendment of GASB . Statement No. 33; GASB Statement No. 37, Basic Financial Statements-and Managemenfs Discussion and Analysis-for State and Local Governments: Omnibus, an amendment of GASB Statements No. 21 and No. 34; and GASs Statement No. 38, Certain Financial Statement Note Disclosures. The City's Basic Financial Statements contain three components: government-wide financial statements, fund financial statements, and notes to the financial statements. 1. Government-wide financial stalements~ The government-wide financial statements report Information on all of the nonflduclary activities of the primary government and Its component units using the accrual basis of accounting, which is similar to the accounting used by prlvate-sector businesses. For the most part, the effect of interfund activity has been removed from these statements. Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from business-type activities, which rely to a significant extent on fees and charges for support. Likewise, the primary government is reported separately from the legally separate component unit for which the primary government is financially accountable. The statement of net assets presents information on all of the assets and liabilities of the City. The difference between assets and liabilities is reported as net assets. Changes in net assets may serve as an indicator of whether the financial position of the City is improving or deteriorating. The statement of activities demonstrates the degree to which the direct expenses of a given function or segment are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. Program revenues include 1) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function or segment and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment. The operating grants include operating-specific and discretionary (either operating or capital) grants while the capital grants column reflects capital-specific grants. Taxes and other items not properly Included among program revenues are reported Instead as general revenues. All revenues and expenses are reported as soon as the underlying transaction has occurred, regardless of when cash is received or paid. As a general rule the effect of interfund activity has been eliminated from the government-wide financial statements. Exceptions to this general rule are payments-In-lieu of taxes and other quasi-external charges between enterprise funds and various other functions of the government. Elimination of these charges would distort the direct costs and program revenues reported for the various functions concerned. i ,,~ 2. Fund financial statements. Separate financial statements are provided for governmental funds, proprietary funds, and fiduciary funds, even- though the latter are excluded from the government-wide financial statements. The fund financial statements are, in substance, very similar to the financial statements presented in the previous financial reporting model. A new emphasis is on the major funds in either the governmental or business-type categories. Major Individual governmental funds and major Individual enterprise funds are reported as separate columns in the fund financial statements. Non-major funds (by category) are summarized into a single column. The City reports the following major governmental funds: The General Fund is the government's primary operating fund. It accounts for all financial resources of the general government, except those required to be accounted for in another fund. The Special Development fund is a special revenue fund used to account for impact fees, prC?f)erty taxes for road improvements, local option gas taxes, Infrastructure taxes, and other revenues which are restricted legally or by City Commission policy to be used for specific capital Improvement projects. j 41 City of Clearwater, Florida Notes to the Financial Statements September 30, 2002 The Capital Improvement Fund is used to provide combined accounting presentation for all City capital improvement projects except those financed from proprietary funds or bond proceeds where bond ordinance provisions require the segregation of bond proceeds in separate funds. The City reports the following major proprietary funds: The Water and Sewer Utility enterprise fund is used to account for the financing, construction, operation, and" maintenance of the water and sewer services of the City from charges made to users of the service. The Gas Utility enterprise fund is used to account for the financing, construction, operation, and maintenance of the gas service of the City from charges made to the users of the service. The Solid Waste Utility enterprise fund is used to account for the financing, construction. operation, and maintenance of the solid waste service of the City from charges made to the users of the service. The Stormwater Utility enterprise fund is used to account for the financing, construction, operation, and maintenance of the stormwater management system of the City from charges assessed against each developed property. Proprietary fund13 distinguish operatIng revenues and expenses from nonoperating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with the proprietary fund's principal ongoing operations. Operating expenses for proprietary funds include the cost of sales and service, administrative expenses, and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses. Additionally, the City reports the following fund types: Internal service funds account for fleet management, information technology, telephone, graphics, employee relations, facilities management, radio communications, insurance, and risk management services provided to other City departments on a cost reimbursement basts. The Garage and Administrative Services internal service funds primarily benefit enterprise funds and are therefore included as business-type activities in the government-wide financial statements. The remaining internal service funds. the General Services and Central Insurance. funds, primarily benefit governmental funds and are consequently Included as governmental activities. Pension trust funds account for the financial operation and condition of the Employees' Pension Plan, the Firemen's Relief and Pension Plan, the Police Supplemental Pension Plan, and the Firefighters Supplemental Pension Plan. The Treasurer's Escrow Agency Fund accounts for the receipt, custody, and expenditure of monies held temporarily in an agency capacity for other parties. The pension trust funds and the agency fund are fiduciary funds used to account for resources held for the benefit of parties outside the government. Rduciary funds are not included in the government-wide financial statements because the resources of these funds are not available to support the City's own programs. C. Measurement Focus, Basis of Accounting, and Financial Statement Presentation The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting, as are the proprietary fund and fiduciary fund financial statements. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Property taxes are recognized as revenues in the year for which they are levied. Grants and similar items are recognized as revenue as soon as ail eligibility requirements imposed by the provider have been met. Governmental fund financial statements are reported USing the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the City considers revenues to be available if they are collected within 90 clays 01 the end of the current fiscal year. Expencfltures generally are recorded when a liability is Incurred, as under accrual accounting. However, debt service expenditures, as well as expenditures related to compensated absences and claims and Judgments, are recorded only when payment is due. 42 :~' -l , i ~ 1 ; '} , ; ':?4 -, : i j r ~~ ~ ; . J 1 ~ , l .1 I , , ! i i ~ i '~ ~ ~ j , 1 ; J ; 1 1 J ~ I I U i ~ , i T 1 l j r 1 i i !. .J , 1 i l ; j , t , i .t.. j ( J I j rr { i , , .1 1 I ' t J [1 U [1 ! : i i [ 1 . . ~ , I ' \. ~ f r l, ! ~ t i r T ~ ~ U ! r I . L r I II r · .. i 1 ' L.I IT } J H r r I; U n 1 : U ; i ...1 j. City of Clearwater, Florida Notes to the Financial Statements September 30, 2002 Property taxes, franchise taxes, licenses, and interest associated with the current fiscal period are all considered susceptible to accrual and so have been recognized as revenues of the current fiscal period for the governmental funds. All other revenue items are considered to be measurable and available only when cash Is received by the government. . D. Assets, LiabiliUes, and Net Assets or Equity 1. Deposits, pooled cash, and investments Investments with original maturities of three months or less are considered to meet the definition of cash equivalents. The majority of the investments In which the City's funds have equity are held by the City's consolidated pool of cash and investments. The City utilizes the consolidated cash pool to account for cash and investments of all City funds other than those that are required by ordinance to be physically segregated. The consolidated cash pool concept allows each particIpating fund to benefrt from the economies of sCale and improved yield that are inherent to a larger Investment pool. Formal accounting records detail the individual equities of the participating funds. The cash pool utOizes a single checking account for all City receipts and disbursements. Since fund equities In this cash management pool have the general characteristics of demand deposits in that additional funds may be deposited at any time and also funds may be withdrawn at any time without prior notice or penalty, each fund's equity account is considered a cash equivalent regardless of the maturities of investments held by the pool. All individual fund cash equity in a deficit (overdraft) posltion with respect to the consolidated cash pool is reclassified at year-end to short-term interfund payables to the Capital Improvement Fund. The Capital Improvement Fund is the fund selected by management to reflect the offsetting interfund receivables In such cases. The City has an agreement with Its depository bank to provide that all excess cash Is swept daily and automatically into an overnight money market account which pays interest at 14 basis points (0.14%) less than the daily federal funds rate (1.75% at September 30, 2002), with no requirement for a minimum compensating balance. This account is collateralized through the State of Florida Public Deposits Program. Under City Charter and the current Investment Policy, adopted by the City Commission on September 7, 1995, consolidated cash pool investments are limited to the following: United States Government Securities, Certificates of Deposit in Local Banks, Repurchase Agreements, Savings Account In local Banks, Federal Government Agency Securities, Municipal Bonds (other than City of Clearwater issues), State of Florida Bonds, and Municipal Bonds issue!:! by counties in Florida. The City utilizes a very conservative investment philosophy when it invests its pooled cash funds in that the return of the principal is more important than the return .QD the principal. The City does not actively trade its portfolio and generally holds investments until maturity. Through the use of a Iaddered approach to maturities and by timing maturities to cash needs, the City does not anticipate selling investments to meet cash flow requirements. Under the City's Investment Policy, a performance measure standard has been established. The performance measure chosen Is a weighted average of: the overnight interest rate; and three month, six month, one year, and three year Treasury rates respectively. For the fiscal year ended September 30, 2002, the performance measure weighted average is 2.20%. The actual pooled cash earnings performance, before bank charges, was 4.85%. Investments being held outside of the consolidated cash pool include escrowed debt service investments and employee retirement Investments. Permissible escrowed debt service investments are specifICally defined In each individual debt Instrument, but generally follow the same limitations which apply to consolidated cash pool investments. The City maintains four different employee retirement programs, and each one has its own list of permitted investments. Generally, each plan allows the same type of investments as the consolidated cash pool, but additionally allows some portIon of Its assets to be invested in stocks, bonds, and notes of corporations listed on one or more of the recognIzed national stock exchanges. 43 City of Clearwater, Florida Notes to the Financial Statements September 30, 2002 2. Receivables andpayables Activity between funds that are representative of lendinglborrowlng arrangements outstanding at the end of the fiscal year are referred to as either "due tolfrom other funds" (l.e. the current portion of interfund loans) or "advances to/from other funds" (I.e. the non-current portion of interfund loans). All other outstanding balances between funds are reported as "due tolfrom other funds. II Any residual balances outstanding between the governmental activities and business-type activities are reported in the govemment-wide financial statements as "internal balances". Advances between funds, as reported in the fund financial statements, are offset by a fund balance reserve account In applicable governmental funds to Indicate that they are not available for appropriation and are not expendable available financial resources. All trade and property tax receivables are shown net of an allowance for uncollectibles. Trade accounts receivable less than 60 days are included in the trade accounts receivable allowance for uncollectibles at the flve.year average loss experience rate of 4.agok. Trade accounts receivable in excess of 60 days are reserved at 40%. The property tax receivable allowance for uncollectibles is 10% of the current year portion of the receivable, and 30%,50%, 70%, 90%, and 95% for the receivable portions attributable to the prior five years respectively (fiscal 2001 thru 1997), and 100% of the receivable attributable to fiscal years 1996 and prior. Property tax revenue is recognized in the fiscal year for which the taxes are levied, provided the avallability test is met, In conformance with NCGA Interpretation No.3, Property taxes for the following fiscal year are levied by commission action in September of each year.:- This levy Is apportioned to property owners based on the previous January 1 assessed values. Tax bills are mailed out on or about November 1, andthe collection period runs from November 1 through March 31. On April 1, unpaid property taxes are considered delinquent and become a lien. Tax certificates are sold in June for real property with delinquent taxes. Since taxes are not collected prior to November 1, the City does not record revenue for advance collections. Uncollected taxes receivable at year-end are recorded, with an appropriate allowance for estimated uncollectible amounts. The net amount deemed to be collectible but not current (not expected to be collected within sixty days after the close of the fiscal year) is shown as a deferred revenue in the appropriate fund. Additionally, taxes assessed for the following fiscal year are recorded as a receivable and a deferred revenue in accordance with Governmental Accounting Standards Board Statement No. 33. All delinquent property taxes, except those levied specifICally for the restricted purposes of financing activities accounted for in the Special Development Fund, are recorded in the General Fund. Property tax revenues are recognized in the General Fund and the required transfers to the appropriate debt service or pension fund are recorded as operating transfers from the General Fund. The City is permItted by State law to levy ten mills without referendum. Additional millage not subject to the ten mill limitation Is authorized if approved by referendum. The tax rate of 5.5032 mills for the year ended September 30, 2002 was unchanged from the September 30, 2001 rate. 3. Inventories and prepaid Items Inventories of proprietary funds are stated at cost and valued on the first-in first-out (FIFO) basis. In governmental funds, the majority of Inventory items are accounted for under the purchases method, which provides that expenditures are recognized when the inventory item is purchased. The only governmental fund inventory that is accounted for under the consumption method is the Genel'al Fund inventory of items for resale at the fishing pier. Under the consumption method, the expenditure is recognized when the inventory item is sold (or consumed). Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid Items in both government-wide and fund financial statements. . 44 ~..~: :1 i n 1 ~ 1'1 i ,j r1 1 ,j .~ " :: i :: ! .~ j 11 \ ~ , ~ ~ J ~l i i i j , 1 . i j 1 , . ~ ~ u , , r i ~ J ~ 1, , ~ i. ; r 1 ! t I . \ l j ! 1 i ~ i l , 1 LI 11 ~ I ~ i L J , J r" ! ! ; i I J , , I i I' l I f 1 1 : i j 11 j : (. f , . l ! :. ~ ! t j f' i t ; f r 1: i . , i ! : f ' ~ ;'. ;r.,,', , , , . , L E r i i , . l. .1 l ! } i: [ i ! ~ ~ t u f T ~ } '~ tJ 11 tl f .. , ~ ; L:, r r ~j. I r .~ - City of Clearwater, Florida Notes to the Financial Statements September 30, 2002 4. Restricted assets Certain resources of the City's enterprise funds are classified as restricted assets. Restr~ed assets include: Water and Sewer improvement charges restricted by the authorizing ordinances to the construction of additions and improvements to the water and sewer systems, and assets of the Water & Sewer Utility, Gas Utility, Stormwater Utility, and Parking System funds restricted under the provisions of authorizing ordinances for revenue bonds to the payment of future revenue bond debt service, system construction, and renewals and replacements. 5. Capital assets Capital assets, which Include properly, plant, equipment, and certain infrastructure assets, (e.g. roads, bridges, and similar items) are reported In the applicable governmental or business-type actMtles columns in the government-wide financial statements. However Infrastructure assets are only reported for the current fiscal year. The City has chosen to defer implementation of retroactive infrastructure reporting to fiscal year 2005/2006 per the current year Implementation of GASB Statement #34. Capital assets are defined by the City as assets with an Initial individual cost of more than $5,000 (amount not rounded) and an estimated useful life in excess of five years. Individual assets that cost less than $5,000, but that operate as part of a network system, will be capitalized in the aggregate, using the group method, if the estimated average useful life of the Individual asset is five years or more. Additionally, higher thresholds for capitalization apply to the following categories: land Improvements, $50,000; buildings, building improvements, and utility systems, $100,000; and infrastructure, $500,000. Capital assets are recorded at historical cost or estimated historical cost if purchased or constructed. Donated capital assets are recorded at estimated fair market value at the date of donation. The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend asset lives are not capitalized. Major outlays for capital assets and improvements are capitalized as projects are constructed. Interest Incurred during the construction phase of capital assets of business-type activities is included as part of the capitalized value of the assets constructed. The total interest expense Incurred by the City during the current fiscal year was $6,448,996. Of this. amount, $160,073, $769,723, and $60,471 were included as part of the cost of capital assets under construction in connection with stormwater, water & sewer, and gas system projects, respectively. Property, plant, and equipment of the primary government, as well as the component units, as applicable, are depreciated using the straight-line method over the following estimated useful lives: ~ Years Buildings & building improvements Public domain infrastructure Utility system Infrastructure Land Improvements Machinery & equipment Vehicles 1 ()..4() 20-40 25-40 5-50 5-33 5-10 6. Compensated absences It is the City's policy to permit employees to accumulate earned but unused vacation and sick pay benefits. Generally employees may accumulate vacation time not exceeding 360 hours and sick leave not exceeding 1,560 hours. Upon retirement from City service a qualified employee is paid for all vacation time not exceeding 360 hours and one-half of accumulated unused sick leave. not exceeding 1,560 hours (i.e. maximum pay-out of 780 hours). The City accrues for all earned but unused vacation pay up to the -cap. of 360 hours, and the portion of unused sick leave estimated to be payable upon retirement. The current portion of compensated absences is the amount estimated to be used In the following year. 7. Long-term obligations In the government-wide financial statements, and proprietary fund types In the fund financial statements, long-term debt and other long-term obOgations are reported as nabiUties in the applicable governmental actMties, business-type 45 :'! City of Clearwater, Florida Notes to the Financial Statements September 30, 2002 ~"l , ; ~ J' activities, or proprietary fund type statement of net assets. Bond premiums and discounts, as well as issuance costs, are deferred and amortized over the life of the bonds using the straight-line method. Bonds payable are reported net of the applicable bond premium or discount Bond issuance costs are reported as deferred charges and amortized over the term of the related debt In the fund financIal statements, governmental fund types recognize bond premiums and discounts, as well as bOnd Issuance costs, during the current period. The face amount of debt issued Is reported as other financing sources. . Premiums received on debt issuances are reported as other financing sources while discounts on debt Issuances are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures. 8. Fund equity In the fund financial statements, governmental funds report reservations of fund balance for amounts that are not available for appropriation or are legally restricted by outside parties for use for a specific purpose. Designations of fund balance represent tentative management plans that are subject to change. Note 11- Stewardship, Compliance, and Accountability A. Budgets and budgetary accounting Annual budgets are legally adopted for the City's General Fund, the Special Development Special Revenue Fund, and the Community Redevelopment Agency Special Revenue Fund. The City of Clearwater observed the following procedures in establishing the budgetary data for the General Fund and Special Development Fund. as reflected in the financial statements: On June 15, 2001. the City Manager submitted to the Clearwater City Commission proposed budgets for the fiscal year commencing October 1, 2001 and ending September 30, 2002. Public Hearings were held on September 6, 2001, and September 20, 2001, at the Clearwater Commission Chambers to obtain ciUzen comments. On September 20, 2001, official budgets were legally adopted by Ordinance No. 6842-01. Subsequent quarterly budget amendments were adopted on April 4, 2002, (Ordinance 6956-02) and July 18, 2002 (Ordinance 6995-02). The final amended budget was adopted October 3, 2002 (Ordinance 7009-02). The budget for. the Special Development Fund is adopted on a basis consistent with GMP, and appropriations lapse at year-end. Appropriations for open encumbered purchase orders at year-end in the General Fund do not lapse, but rather continue until Uquldated or otherwise cancelled by City Commission action. On the General Fund budgetary comparison statements, actual expenditures have been adjusted to include end-of-year encumbrances and to exclude begimlng-of-year encumbrances to provide for a meaningful comparison. Except for the treatment of encumbrances and certain transactions relating to Interfund loans, the General Fund Budget is adopted on a basis consistent with GAAP, and all non-encumbered appropriations lapse at year-end. The level of budgetary control established by the legislative body, the level on which expenditures may not legally exceed appropriations, is the individual fund. In accordance with provisions of Ordinance 5025-90 and with Section 2.519(4) of the Clearwater Code, the City Manager may transfer part or all of any unencumbered appropriation balance among programs within an operating fund, provided such action does not result in the discontinuance of a program. Such transfers must be included In the next budget review presented to the City Commission. Upon detailed written request by the CIty Manager, the City COl'Mllsslon may by ordinance transfer part or all of any unencumbered appropriation balance from one fund to another. As. established by administrative policy, department directors may transfer money from one operating code to another within a program without a formal written amendment. Formal requests for budget amendments from department directors are required for transfers in capital expenditures, transfers, and reserves. Thus, certain object classifications within departmental and/or program budget appropriations are subject to administratively imposed controls, In addition to the legal controls imposed by City Commission action described above. The annual budget for the Community Redevelopment Agency is adopted by the trustees of that agency in accordance with state law. The current year budget was officially adopted on June 18, 2001. The budget Is adopted on a basis consistent with GAAP, the level of budgetary control Is the total fund, and appropriations lapse at year-end. l. 46 fl l ! r: fr I [ , , 1 ! f 1 l J l J I I ( 1 II ( 1 \ I. , ,. 'r . . , . , ' I ' t ~ r ' i . I I U City of Clearwater, Florida Notes to the Financial Statements September 30, 2002 Budget. amounts presented In the accompanying financial stat$ments reflect all amendments adopted by the City Commission and the governing boards of component units. All amendments were adopted in conformance with legal requirements. Individual amendments, as well as the net effects of all amendments during the fiscal year, were not material in relation to the original appropriations for the govemmenJal funds in the aggregate. - . The Clearwater City Commission also adopts budgets for the Enterprise Funds, aU Internal Service Funds, the Capital Projects Funds, the Special Programs Fund, and the Local Housing Assistance Trust Fund. Budgetary comparisons for the Enterprise and Internal Service funds are not required by NCGA Statement No. 1 for the general purpose financial . statements and are not incJuded in this report. Budgets for the Capital Projects Fun~, the Special Programs Fund, and the Local Housing Assistance Trust Fund are adopted on a multi-year completed program basis, where budgetary appropriations do not lapse at year-end, but may extend across two or more fiscal years. A comparison of annual results with these budgets would not be meaningful and is therefore not included In this report. All City Commission adopted budgets are integrated into the formal accounting system to allow for monthly comparison of projected and actual experience in all funds for which budgets are adopted. The annual budget for the Clearwater Downtown Development Board (DDB), a discretely presented component unit of the City, is adopted by the members of that board in accordance with state law. The current year budget was officially adopted on September 13, 2001. Separate financial statements for the DDS can be obtained from the City's Finance Department located at 100 S. Myrtle Avenue, Clearwater, Florida. B. Excess of expenditures over appropriations The Community Redevelopment Agency Special Revenue Fund had intertund "transfers out" in excess of appropriations in the amount of $210,939 due to unbucJgeted transfers to capital projects funds. c. Re-statement of prior year balances The following require restatement of prior year balances. All restatement amounts are detailed In the table below. 1 r I ! 1. Elimination of contributed capital category ..1 f ! I t U r 1 jl t 1 I' II ~ ( .. ~ The implementation of Governmental Accounting Standards Board Statement No. 34 (GASB 34) required the elimination of the contributed capital equity category and the reclassification of prior contnbuted capital balances as net assets. 2. Adjustment to fixed asset balances due to new capitalization policy Effective October 1 , 2001, the City Implemented a new capitalization policy that included increased thresholds for capitalization of fixed assets. This required a prior period restatement to reflect a decrease in general government capital assets and proprietary fund net assets for the previously capitaflZed assets that do not meet the revised capitalization thresholds. r f 3. Adjustments to general fixed asset balances per GASB 34 Implementation u r 1 I: U , I ! l t. l ..... J ... ,. if Li The City's current year Implementation of GASB 34 resulted in a comprehensive reconciliation of fixed asset activity for prior years. This reconciliation process Identified bui/dlngs and Improvements other than buildings that erroneously remained In the fixed asset balances though the assets were previously disposed of. The balances have been adjusted to reflect the deletion of these fixed assets. 4. Elimination of expendable trust fund The implementation of GASB 34 eliminated the fiduciary fund category expendable trust funds. In prior years the City reported an expendable trust fund, the Rehabilitation Loan Fund. The City has merged the Rehabilitation loan Fund net assets with the Special Programs Special Revenue Fund for current year reporting in compliance with the GASB 34 requirements. 47 48 II t i ["1 fr ! I t J r -. tl rr t I f I I' l j r : , ) f ' l .~ r I , , f ! ! ' '..1 r ; l : l.l r 1 t; .G, 1 r r ,- r u f f j ~ l. J ii ~- ; ., 1 ~. tl' f f It L.; ! r , I l . 'I,:. U ,. ~ : ~ i u City of Clearwater, Florida Notes to the Financial Statements Septernber30,2002 Note 11I- Detailed Notes on All Funds A. Deposits and Investments Investments with original maturities of three months or less are considered to meet the definition of cash equivalents. The majority of the Investments in which the City's proprietary funds have equity are held by the City's consolidated pool of cash and Investments. Since fund equitieS In this cash management pool have the general characteristics of demand deposits in that additional funds may be deposited at any time and also funds may be withdrawn at any time without prior notice or penalty, each fund's equity account is considered a cash equivalent regardless of the maturities of Investments held by the pool. Funds which have deficit (overdraft) positions within the consolidated pool report the deficits as interfund payables to the City's Capital Improvement Fund. Governmental Accounting Standards Board (GASB) Statement Number 3 requires certain disclosures for deposits and investments, Including managemenfs determination of custodial credit risk, defined as follows: For deposits, the bank balance must be categorized as follows: Category 1 : Insured or collateralized with securities held by the City or its agent in the City's name. Category 2: Collateralized with securities held by the pledging financial institution's trust department or agent in the City's name. Category 3: Uncollateralized. For investments other than deposits, the following. categories apply: Category 1: Insured or registered, or held by the City or its agent in the City's name. Category 2: Uninsured and unregistered, held by the counterparty's (purchasing agenfs) trust department or . agent in the City's name. Category 3: Uninsured and unregistered, held by the counterparty, Its trust department, or agent, but not in the City's name. As described above, the City's depository banking agreement provides for the investment of all excess cash daily into a collateralized repurchase agreement, whereby all deposits deemed to be collected are automatically deposited. City deposits consist of relatively small cash balances held by Debt Service Trustees and Employee Retirement Custodians. The bank balances equal the carrying amount for these deposits, and managemenfs classification of custodial credit risk is indicated In the table below. Because these amounts are part of the trustee's and custodian's composite account, they are classified along with investments on the balance sheet. Managed mutual funds and guaranteed investment contracts are not susceptible to classification by risk category and are disclosed but not categorized pursuant to GASB Statement 3. Management has classified all other investments into Category 1, with the exception of certain employee retirement Investments that are being held by the financial institution also serving as investment manager, and certain escrowed debt service investments that are being held by the financial institution from which they were purchased. The carrying value for all Investments is fair value in accordance with GASa Statement 31. 49 City of Clearwater, Florida Notes to the Financial Statements September 30, 2002 Summary of deposits and investments, including managemenf~ assessment of custodial credit risk, follows: Investment Credit Risk Category Cash On Hand and In Banks Consolidated Cash Pool and Component Unit Deposits and Investments: Cash in Banks U.S. Treasury Notes and Bills U.S. Agency Securities Money Market Mutual Fund Accrued Interest on Investments Less Outstanding Checks at 9/30/02 Total Cash Pool and Component Unit Equity * (includes Fiduciary funds cash pool assets) II L Construction and Debt Service Deposits and Investments: U.S. Treasury Notes and Bills Corporate Bonds $ Fair Deposit Credit Value Risk Category 48,847 1 I. II. 3,480,424 25,516,841 203,937,574 20,099,804 2,260,040 t,355,001 ) 2 0,939,682 1 1 1 nla nla nla 1 1 2,916.713 873,986 3,790,699 17,926,696 1 136,428,021 119,758.246 40,368.959 11,302,973 9,453,117 29,449,239 32,227,992 396,915,243 ~ 651,694,471 IV. Employee Retirement Deposits and Investments: Money Market Accounts Domestic Equity Securities U.S. Government Bonds Domestic Corporate Bonds Mortgage Backed Bonds Asset Backed Bonds International Equity Mutual Fund Stock Mutual Fund Total Employee Retirement Investments Total Deposits and Investments, All Funds 1 1 1 1 1 nla nla · At September 30, 2002, the carrying amount of the primary govemmenfs deposits totaled ($1,017,681) and the bank balance was $3,328,032. The carrying amount of the component unit's deposits totaled $143,104, while the bank balance was $152,392. B. Receivables TI 1 ~ ~ ~ n n it J 1""1 ~ ; .1 r 1 .i j' II r1 : I j J .1 1 ., .;. ": !. ~ j 1) I : ~ , I 11 , 1 ,l ""'; 1 , , I 7 '~ . t ~ ., 1 i J Receivables as of year end for the City's indMdual major funds and nonmajor, internal service, and fiduciary funds in the ! aggregate, including the applicable allowances for uncollectible accounts, are segregated on the fund financial J statements. The Mortgages, Notes, and Other Loans amount of $8,915,947 reported on the Governmental Funds balance.sheet includes $8,491,986 of Iong-tenn loans receivable that are not expected to be collected In the next year. 50 r i l City of Clearwater, Florida rl Notes to the Financial Statements I 1 September 30, 2002 II r'~ 1 ! I i fr c. Capital assets i j Capital asset activity for the year ended September 30., 2002 was as follows: r ~ Beginning Ending j , li Balance Increases Decreases Balance Governmental Activities: r r Capital assets, not being depreciated: I ! Land $ 36,766,859 $ 4,319,194 $ 172,986 $ 40.,913,0.67 . , . Construction in progress 759,064 10.,791,711 11,550.,775 r ~ Total capital assets, not being depreciated 37,525,923 . 15,110.,905 172,986 52,463,842 Capital assets, being depreciated: l ; Buildings 38,519,374 1,751,332 2,154,461 38,116,245 Improvements other than buildings 52,0.55,559 399,827 52,455,386 , ! Machinery and equipment 31,925,006 2,385,417 1,137,245 33,173,178 [ ' t : Infrastructure 1 ,0.76,247 1,0.76,247 , , Total capital assets, being depreciated 122,499,939 5,612,823 3,291,70.6 124,821,0.56 r 1', Less accumulated depreciation for: ! . , , . Buildings (10.,692,981 ) (1,244,155) (1,458,975) (10.,478,161 ) , , Improvements other than buildings (12,402,412) (2,60.8,989) (15,0.11,40.1) ( T MaChinery and equipment (20.,252,653) (1,999,131) (90.6,70.2) (21,345;0.82) ~ Infrastructure ~ . - - j ! , I T otai accumulated depreciation (43,348,0.46) (5,852,275) (2,365,677) (46,834,644) , , Total capital assets, being depreciated, net 79,151,893 (239,452) 926,0.29 77,986,412 \ ' i .~ Governmental activities capital assets, net $ 116,677,816 $ 14,871,453 $ 1,0.99,0.15 $ 130.,450.,254 Beginning Ending Balance Increases Decreases Balance BUSiness-type activities: Capital assets, not being depreciated: Land $ 10.,982,922 $ 9,124,916 $ 229,288 $ 19,878,550. . . Construction in progress 21,800,312 27,70.3,743 2,298,948 47,20.5,10.7 ! Total capital assets, not being depreciated 32,783,234 36,828,659 2,528,236 67,083,657 t Capital assets, being depreciated: Buildings 23,047,480. 387,760. 23,435,240. Improvements other than buildings 287,953,866 6,20.1,491 10.,388 294,144,969 Machinery and equipment 45,883,274 5,195,676 5,844,865 45,234,0.85 Total capital assets, being depreciated 356,884,620. 11,784,927 5,855,253 362,814,294 Less accumulated depreciation for: Buildings (6,470.,739) l.. Improvements other than buildings (98,191,373) Machinery and equipment ~30.,392,0.45~ Total accumulated depreciation { 35,0.54,157 Total capital assets, being depreciated, net 221,830,463 Business-type activities capital assets, net $ 254,613.697 $ 36,137,426 $ 287,720,791 51 City of Clearwater, Florida Notes to the Financial Statements September 30,2002 Depreciation expense was charged to functions I programs of the primary government as follows: Governmental activities: General government Public safety Physical environment Transportation, Including depreciation of general infrastructure assets Culture and recreation Capital assets held by the govemmenfs governmental internal service funds are charged to the various functions based on their usage of the assets Total depreciation expense - governmental activities $ 888,286 1,173,888 43,645 2,200,955 1,526,479 19,021 $ 5,852,274 Business-type activities: Water and sewer utility Gas utility Solid waste utility Stormwater utility Other Capital assets held by the government's business-type internal service funds are charged to the various activities based on their usage of the assets Total depreciation expense - business-type activities Construction commitments At September 30, 2002, material outstanding construction commitments were as follows: ~ Fund Community sports complex Capital Improvements Community sports complex Spring Training Facirtty Revenue Bonds Construction New main library Capital Projects New maln library 2001 Sales Tax Revenue Bonds Construction Water treatment facilities 2002 Water and Sewer Revenue Bonds Construction Sewer system pump staUon replacements 2002 Water and Sewer Revenue Bonds Construction Town Lake 2002 Stormwater Revenue Bonds Construction Kapok flood resolution 2002 Stormwater Revenue Bonds Construction Fire aerial equipment Capital Improvements Traffic calming Capital Improvements Beach streetscape Capital Improvements North Greenwood corridor enhancements Capital Improvements long Center expansion Capital Improvements Water system renewal & replacement Capltallmprovements T ota! Construction Commitments 52 $ 4,935,681 1,277,342 220,499 977,183 1,304,825 $ 3,620,735 12,336,265 Construction Commitments Outstandill9 $ 6,290,950 11,209,050 8,209,395 7,527,000 4,813,133 1,663,684 1,635,948 1,596,613 879,011 554,969 990,579 789,877 989,600 744.756 $ 47 894.565 ~ I 1 ! 1 r ~ 1 .", ; i. ;. n J ~ iJ i I. I ! 1 J , , 1 ~ d .f" "1 "j i ! J 1 ! , j \ J l ~ , , l J i 1 1 j I 1 , f .j ) , ! ! . ! , , ~ 1 ~ U 1 i i j I ] 1 ] f I t 1 i 1 U 11 I 1 ..1 I 1 _ J r-l I I ! i fl ! ! rUT I ' , I Ii ! r \ : I j r; I ' l \ r ' , , I , L , 1 , t 1.., ~ I' . ' L " r ! j ; t ; [-J :1. 1 , rJ Ii r f 1 ; i I ! : i, . ~ ~ r. U f , ~ ~. ;. i u { . r J Ll City of Clearwater, Florida Notes to the Financial Statements September 30, 2002 Contributed Property: As of September 30, 2002, water lines having an estimated cost of $5,141,044-, sanitary sewer lines having an estimated cost of $7,754,629, storm sewers having an estimated cost of $3,919,827, and land (for water quality and habitat restoration) having an estimated cost of $922,900 are reflected in the balances of the proprietary fIXed . assets. Assets Recorded Under Caoital Leases: Assets recorded under capital leases and the accumulated amortization thereon (for proprietary fund assets) have been Included under the appropriate categories in the summaries and schedules presented previously in this note in combination with similar information for owned assets. D. Interfund receivables, payables, and transfers 1. Interfund Balances As mentioned in Note (1 C), IndMdual fund deficits in the consolidated cash pool have been reclassified as of September 30, 2002, as Interfund loans from the Capital Improvement Fund, which was selected by management for this purpose. This reclassification results in a corresponding reduction in the cash equity in the Capital Improvement Fund, offset by an increase In interfund receivables. The amounts of the reclassified cash pool deficits, as well as other individual fund interfund payable and receivable balances (current), at September 30, 2002, were as follows: Fund General Fund Special Revenue Fund: Community Redevelopment Agency Capital Project Fund: Capital Improvement Enterprise Funds: Water and Sewer Utility Gas Utility Solid Waste Utility Recycling Utility Stormwater UtHity Marine and Aviation Parking System Intemai ~eMce t-unas: Garage Administrative Services General Services Central Insurance Deficit in Pooled Cash $ Other Receivables $ 264,514 $ 6,084,580 5,733,792 1,685,872 1,001,672 2,536,612 989,073 9,114,166 179,526 295,321 304,567 627,593 28,6.18,774 $ 264,514 53 Deficit in Pooled Cash $ 264,514 $ 264,514 Other Payables $ 24,925 134,966 28,016,807 82,474 59,602 300,000 $ 28,618,774 City of Clearwater, Florida Notes to the Financial Statements September 30, 2002 Individual interfund advances (long-term) at September 30, 2002, follow: Advances to Advances from Fund Other Funds Other Funds General Fund $ 2,000,000 $ 49,850 Special Revenue Fund: Community Redevelopment Agency 492,524 Enterprise Funds: Solid Waste Utility 824,737 Marine and Aviation 119,204 Parking System 4,000,000 Internal Service Funds: Administrative Services 271,070 Central Insurance 3,757,385 $ 5,757,385 $ 5,757,385 Descriptions of long-term interf~nd loans: An interfund . loan at the cash pool Interest rate from the Central Insurance Fund to the Community Redevelopment Agency Fund for the purchase of a land parcel for resale to a developer. The initial loan amount was $1,171,328 and commenced during the fiscal year ended September 30, 2000. An internal twenty year loan from the Central Insurance Fund to the Solid Waste Utnity Fund for the construction of administrative, container maintenance, and truck wash facilities. in addition to a paved yard for use by all cost centers of the Solid Waste Fund. The loan provides for 20 annual payments of $82,474 together with interest at the cash-pool rate, due on September 30 of each year, commencing September 30, 1994. The cost of the construction was $1,686,759. An internal five-year construction loan in the amount of $298,011 from the Central Insurance Fund to the Marine and Aviation Fund for construction of two aircraft T -hangars and one corporate hangar at Clearwater Airpark. The loan provides for payments due on September 30 of each year, bearing interest at the cash-pool interest rate and commencing September 30, 2001. Internal loans of $2,000,000 each from the General Fund and the Central Insurance Fund, at the cash-pool interest rate, to the Parking Fund to fund a contingency reserve per the terms of a development agreement. The Parking Fund is contributing an additional $2,000,000 to fund a total contingency of $6,000,000 for the repurchase of.a land parcel If the proposed development does not occur by March 2006. The loans commenced on September 30, 2002. . An internal five-year loan from the Central InSurance Fund to the Administrative Services Fund for the purchase and installation of a new Utility Customer Service system. The loan provides for fIVe annual payments of $300,000 plus interest at the cash-pool rate, due on September 30 of each year. The loan commenced on September 30,2000. .. I J I I i 54 .l 1"1 ; ~ J i f1 l ~ n ~ .~ 1 .'! , " 1 1 [ J i! : \ 1 I 1 1 i I i., ..~ ~ "' : I .:. j 11 i j "'1 ~ i f' , , ( t h , . -., ,,~ , ) - I , j ) ] ,. j n n f"l [ r t J l f",1 l ,.. r ,; Ii 1I r' I : i i ! I l f ( 1 r r U I, r ~ 1 u r r I! l.. [l r f It u U L.. r r I. , [ L.i. City of Clearwater, Florida Notes to the Financial Statements September 30, 2002 2. Interfund transfers Interfund transfers for the year ended September 30, 2002, consisted of the following: Transfers to General Fund from: Capital Improvements Fund $ 41,199 Water & Sewer Utlllty Enterprise Fund 1,557,250 Gas Utility Enterprise Fund 1,016,354 Solid Waste Utility Enterprise Fund 660,340 Stormwater Utnity Enterprise Fund 216,240 Nonmajor governmental funds 906,060 Nonmajor enterprise funds 231,490 Total 4,628,933 Transfers to Special Development Fund from: 100,000 Capital Improvements Fund Transfers to Capital Improvements Fund from: General Fund 2,618,810 Special Development Fund 11,071,705 Nonmajor governmental funds 214,905 Total 13,905,420 Transfers to Nonmafor governmental funds from: General Fund . 3,152,117 Special Development Fund 1,060,593 Capital Improvements Fund 132,330 Gas Utility Enterprise Fund 4,709 Nonmajor governmental funds 259,668 Internal service funds 80,000 Total 4,689,417 Transfers to Stormwater System Enterprise Fund from: 1,584,060 Special Development Fund Nonmajor g9vernmental funds 7,000 Total 1,591,060 Transfers to Nonmajor enterprise funds from: General Fund 178,670 Special Development Fund 1,500,000 Total 1,618,610 Transfers to Internal service funds from: General Fund 214,401 Capital Improvements Fund 138,811 Water & Sewer Utility Enterprise Fund 412,529 Gas Utility Enterprise Fund 36,775 Stormwater Utility Enterprise Fund 231,617 Internal service funds 25,683 Total 1,059,876 Totallntertund transfers :Ii 27,653,376 Transfers are primarily used to 1) transfer revenues that have been collected In the required fund per state law to the funds and activities that state law allows for expenditures; 2) transfer of .payment in lieu of taxes" contributions from the utility funds to the General Fund; 3) transfer funding from governmental funds to debt service and capital Improvements funds; and 4) transfer matching funds from the General Fund to various grant programs. 55 City of Clearwater, Florida Notes to the Financial Statements September 30, 2002 E. Leases The City purchases various equipment for governmental and business-type activities under lease purchase agreements. . Obligations under lease purchase agreements are recorded at the present value of their future minimum lease payments as of date of inception. leased equipment which has been capitalized as of September 30, 2002: Governmental Business-type Activities Act1vitles Equipment Less: Accumulated Depreciation Total $ 6,218,052 (1,981,n3) $ 4,236,279 $ 16,246.635 . (5,428,206) $ 10,818,429 The future minimum lease payments under capital lease purchase agreements are as follows as of September 30, 2002: Governmental Business-type year Ending Sept 30 Activities Activities 2003 $ 1,473,548 $ 3,428,n2 2004 1,371,457 2,901,837 2005 906,510 2,431,294 2006 414,246 1,481,610 2007 69,765 601,116 2008 1,326 31 ,025 4,236,852 10,875,654 Deduction of the amount of imputed Interest necessary to reduce net minimum lease payments to present value (297,683) (783,576) $ 3,939,169 $ 10,092,078 The City also leases personal computers under a three-year operating lease that Is cancelable on an annual basis. Total lease payments for fIScal year ended September 30, 2002, totaled $134,109. 56 T"~ ...: ~ ,--, ~ ~ ~.. .~ 11 rl J I ~' 1 , .1 j r' 1 : j J ,. l . . .; j ; j , I ! ! " I , 1 i .1 " I .. ; - 1 I i I i , 1 I " t ; i. r..j L [ l .' I f Il 11 [ r . 1 [ 1 r ! d u T r I l l2 If Ll [ 1 I' ~ l. 1,.,toi f r- L.i ["[ City of Clearwater, Florida Notes to the Financial Statements September 30, 2002 f1 F. Long-term debt r r l } 1. Revenue Bonds , , { 1 l.t $46,445,000 Infrastructure Sales Tax Revenue Bonds, Series 2001, with $5,100,000 of principal due December 1, 2002, to $6,620,000 due December 1, 2009; interest at 4.0ook to 5.00%. $11,470,000 Improvement Revenue Refunding Bonds, Series 2001, due in annual installments of $355,000 due February 1, 2003, to $820,000 due February 1, 2026; interest at. 3.00% to 5.25%. $104,042 of the bonds ot;rtstandlng as of September 30, 2002, are reported in the Parking System Enterprise Fund per the financing of parking system assets. Please reference 1he revenue bonds for business-type activities below. $14,810,000 Spring Training Facility Revenue Bonds, Series 2002, due in annual Installments of $165,000 due March 1, 2003, to $470,000 due March 1, 2031, with a maximum principal of $845,000 due March 1, 2021; Interest at 2.00% to 5.38%. Total revenue bonds for governmental activities $53,445,000 Water and Sewer Refunding Revenue Bonds, Series 1993; due In annual installments of $5,430,000 due December 1, 2002, to $295,000 due December 1, 2018, with a maxImum principal of $5,715,000 due December 1,2003; interest at 5.000/0 to 5.63%. r r ! ' L " L $43,642,690 Water and Sewer Refunding Revenue Bonds, Series 1998, capital appreciation bonds with total maturity amount of $81,785,000; $460,000 of capital appreciation serial bonds due December 1, 2004, to $5,780,000 due December 1, 2018, with a maximum principal of $5,875,000 due December 1, 2011; Interest at 4.20% to 5.22%. The balance outstanding as of September 30, 2002, Includes capital appreciation bond accreted Interest of $8,659,091. $58,680,000 Water and Sewer Revenue. Bonds, Series 2002, due in annual installments of $860,000 due December 1, 2003, to $3,695,000 due December 1, 2032; interest at 3.25% to 5.00%. $8,815,000 Gas System Revenue Bonds, Serles 1996A, due In annual installments of $90,000 due September 1, 2003, to $395,000 due September 1, 2021; Interest at 4.90% to 5.80%. $14,605,000 Gas System Revenue Bonds and Gas System Revenue Refunding Bonds, Series 1997 A & Series 19978, due in annual Installments of $505,000 due September 1, 2003, to $2,065,000 due September 1, 2027; Interest at 4.200Aa to 5.30%. $8,020,000 Gas System Revenue Refunding Bonds, Series 1998; due in annual installments of $35,000 due September 1, 2003, to $50,000 due September 1, 2013; interest at 3.65% to 4.7ooAa; additional annual Installments of $595,000 due September 1, 2014, to $920,000 due September 1, 2023; Interest at 4.70% to 5.00%. $7,500,000 Stormwater System Revenue Bonds, Series 1999, with $125,000 of principal due . November 1, 2002, to $490,000 due November 1, 2029; interest at 4.00% to 5.75%. $24,685,000 Stormwater Revenue Bonds, Series 2002, due in annual installments of $440,000 due November 1, 2003, to $1,530,000 due November 1, 2032; interest at 3.00% to 5.00%. $11,470,000 Improvement Revenue Refunding Bonds, Series 2001, due In annual installments of $110,000 due February 1, 2002, to $820,000 due February 1 J 2026; interest at 3.00% to 5.25%. A total of $11.255,958 of the bonds has been allocated to the general government activities per above. 57 $ 46,445,000 11,255,958 14.810,000 72.510.958 19,435,000 52,301,781 58,680,000 8,360,000 12,375,000 7,895,000 7,275,000 24,685,000 104.042 City of Clearwater, Florida Notes to the Financial Statements September 30, 2002 Total revenue bonds for business-type activities Total revenue bonds 191.110.823 $263.621.781 2. Restrictive covenants and collateral requirements The Infrastructure Sales Tax Revenue Bonds are limited obligations of the City payable solely from and secured by a . ,lien upon and a pledge of the City's share of the proceeds derived by Pinellas County from the levy and collection of the one~cent discretionary Infrastructure sales tax pursuant to Section 212.055(2), Florida Statutes, as amended (the Sales Tax Revenues) and, until applied in accordance with the provisions of the Ordinance, all moneys, including Investments thereof, in the funds and accounts established by the Ordinance, other than the Rebate Fund (collectively the "Pledged Revenues"). The pledge of the Sales Tax Revenues does not constitute a lien upon any property of the City. The covenants of the ordinance authorizing the bonds Include, among other things, an obligation of the City to do all things necessary on Its part to continue the levy and collection of the Sales Tax Revenues ,at the maximum rate permitted by and in compliance with Chapter 166, Part II, Aorida statutes, as amended, Chapter 212, Part I, Rorida Statutes, as amended, and other applicable provisions of law (the "Acf'), and any successor provision of the law. The City further covenants to proceed diligently to perform legally and effectively all steps required on Its partin the levy and collection of the Sales Tax Revenues and shall exercise all legally avaUable remedies to enforce such collections now or hereafter available under State law. The Improvement Revenue Refunding Bonds are limited obligations of the City payable sofely from and secured by a lien upon and a pledge of the Public Service Tax as authorized by Section 166.231, Florida Statutes, as amended. The pledge of the Public Service Tax does not constitute a lien upon any property of the City. The covenants of the ordinance authorizing the bonds include, among other things, an obligation of the City to do all things necessary on its part to continue the levy and collection of the Public Service Tax at the rate permitted by and in compliance with Section 166.231, Florida Statutes, and Article III. Chapter 44, Code of Ordinances of the Issuer, and any successor provision of law. The Public Service tax is a revenue of the General Fund. The Spring Training Facility Revenue Bonds are special, limited obligations of the City, payable solely from and secured by a lien upon and pledge of the (i) payments received by the City from the State of Florida pursuant to Section 212.20, Florida Statutes (State Payments); and (II) payments received by the City from Pine lias County, Florida pursuant to the InterlocalAgreement dated December 1, 2000 (County payments). . The pledge of the State Payments and County Payments does not constitute a lien upon any property of the City. Furthermore, neither the City, Pinellas County, the State of Florida, nor any political subdMsion thereof has pledged its faith or credit or taxing power to the payment of the bonds. The Water and Sewer Refunding Revenue Bonds, Series 1993 and Series 1998, and the Water and Sewer Revenue Bonds, Series 2002, are limited obligations of the City payable solely from and secured by a lien upon and pledge of the net revenues of the City's water and sewer system (System). The pledge of the System's net revenues does not constitute a lien upon any property of the City. The covenants of the ordinances authorlzlng the bonds include, among other things, an obligation of the City to fIX and maintain such rates, and colleCt such fees, rentals and other charges for the s9IVlces and facilities of the System and revise the same from time to time whenever necessary which will provide gross revenues in each fiscal year sufficient to pay the cost of operation and maintenance of the system; one hundred fifteen percent (115%) of the bond service requirement becoming due in such fiscal year on the outstanding bonds; plus one hundred percent (100%) of all reserve and other payments requIred to be made pursuant to the ordinances authorizing the bonds. The City further covenants that such rates, fees, rentals and other charges will not be reduced so as to render them insufficient to provide gross revenues for such purpose. The Gas System Revenue Bonds, Series 1996A; Gas System Revenue Bonds Series 1997 A; Gas System Revenue Refunding Bonds, Serles 1997B; and Gas System Revenue Refunding Bonds, Series 1998;.are limited obligations of the City payable solely from and secured by a lien upon and pledge of the net revenues of the City's gas system (System). The pledge of the System's net revenues does not constitute a lien upon any property of the City. The covenants of the ordinances authorizing the bonds Include, among other things, an obligation of the City to fix, establish, revise from time to tlme whenever necessary, maintain and collect always, such fees, rates, rentals and other charges for the use of the product, services and facilities of the System which will always provide revenues in each year sufficient to pay, and out of such funds pay, 100% of the cost of operations and maintenance of the system 58 '!-J .: . G -;: i i. , '; ~. , J ~ ~ '1'. 1 .; i , 1 , , , 1 i _ .J " ! ; . i " 'I ; i. 1 1 ! _ I '. , j ! , , , I j j : 1 :. i [, I 1 .<' 1 h I f I l I If 1 1 I :l City of Clearwater, Florida Notes to the Financial. Statements September 30, 2002 :r '[ in such year and all reserve and other payments provided for in the ordinances authorizing the bonds, along with one hundred twenty five percent (125%) of the bond service requirement due in such year on all outstanding bonds. The Stormwater System Revenue aonds, Series 1999; and the Stormwater Revenue Bonds, Series 2002; are limited obligations ofthe City payable solely from and secured by a lien upon and pledge of the net revenues of the City's stormwater management system (System). The pledge of the System's net revenues does not constitute a lien upon any property of the City. The covenants of the ordinances authorizing the bonds include, among other things, an obligation of the City to fIX, revise from time to time whenever necessary, and maintain and collect always such fees, rates, rentals and other charges for use of the products, services, and facilities which will always provide net revenues . in each year sufficient to pay one hundred fifteen percent (115%) of the bond service requirement becoming due in such fiscal year on the outstanding bonds. The City further covenants that such rates, fees, rentals and other charges will not be reduced so as to render them Insufficient to provide revenues for such purpose. . Annual debt service requirements to maturity for revenue bonds are as follows: Revenue Bonds Governmental Activities Business-type Activities Principal Interest Principal Interest $ 5,596,132 $ 3,019,735 $ 3,690,878 $ 8,430,983 6,065.179 2,796,166 5,185,012 8,798,192 6,273,477 2,534,986 5,400,129 8,546,648 6,491,170 2,235,993 5,661,286 8,242,209 6,685.000 1,945,793 5,908,385 8,019,911 23,520.000 6,033,086 33,329,833 36,197,155 5,355.000 3,936,689 41,952,497 27,589.244 6,195,000 2,482,086 33,642,803 17,656,493 4,580,000 1,083,244 27.365,000 11,161,214 1,750,000 194,038 23,750,000 4,279,460 5,225,000 128,713 $72,510,958 $26,261.816 $191,110,823 $139,050,222 ., 1 Year Ending September 30 2003 2004 2005 2006 2007 2008~2012 2013-2017 2018-2022 2023-2027 2028-2032 203S.2037 Totals 3. Advance refunding of bonds On October 15, 2001, the City Issued $11.47 million In Improvement Revenue Refunding Bonds, Series 2001 with an average interest rate of 4.9 percent to advance refund $415,000 of outstandlng Public Service Tax and Bridge Revenue Bonds, Series 1985, with an average interest rate of 9.1 percent, and to advance refund $9.n million of outstanding Improvement Revenue Bonds, Series 1995, with an average interest rate of 5.9 percent. The net proceeds of $10.8 million, (after payment of $233,000 in underwriting fees, insurance, and other issuance costs and $867,000 deposited to the Reserve Fund) plus an additional $395,000 of debt service reserve transfers from refunded bonds, were deposited in an irrevocable trust with an escrow agent to provide for all future debt service payments on the 1985 and 1995 Series bonds. As a result, the Public Service Tax and Bridge Revenue Bonds, Series 1985, and the Improvement Revenue Bonds, Series 1995, are considered to be defeased and the liability for the bonds has been removed from the government-wide statement of net assets. The reacquisition price exceeded the net carrying amount of the old debt by $445,844. This. difference, reported In the accompanying financial statements as a deduction from bonds payable, is being charged to. operations through the year 2025 using the effective-interest method. The City completed the advance refunding to reduce its total debt service payments over the next 24 years by $958,000 and to obtain an economic gain (difference between the present values of the old and new debt service payments) of $460,000. In prior fiscal years, the City entered into various advance-refunding transactions related to certain at Its bonded debt A portion of the proceeds of the refunding bond Issues was placed in trust and used to purchase securities of the United States. Government and related agencies at various interest rates and maturilies sufficient to meet all debt service requirements of the refunded debt, of which $64,040,000 was outstanding at September 30, 2002. These assets are administered by trustees and are restricted to use for retirement of the refunded debt The liability for the refunded bonds and the related securities and escrow accounts are not included In the accompanying financial statements as the City defeased its obligation for payment of the refunded bonded debt upon completion of the refunding transactions. 59 City of Clearwater, Florida Notes to the Financial Statements September 30, 2002 :: -~ ~-l The following schedule reflects the outstanding principal on refunded bonds as of September 30: Governmental Activities: Utility Revenue Certificates, 1975 Utilities Tax and Bridge Revenue Bonds, Series 1977 Utilities Tax Bonds, Series 1977 Special Obligation bonds, Series, 1978A Utility Revenue Bonds, 1978 Public Service Tax and Bridge Revenue Bonds, Series 1985 Community Redevelopment Agency Bonds, Series 1986 Improvement Revenue Bonds, Series 1995 Total Governmental Activities Business-type Activities: Public Service Tax and Bridge Revenue Bonds, Serles 1985 Water and Sewer Revenue Bonds, Series 1988A Water and Sewer Revenue Bonds, Series 1988B Gas System Revenue Bonds 1991A Gas System Revenue Bonds 1994A Total Business-type Activities Total $ 1,200,000 ; 1 1,370,000 . - 2,380,000 20,000 "~ ~ 13,490,000 , 521,600 1,030,000 r l 9,580,000 29,591,600 I j 793,400 ~ l 15,320,000 .\. j 4,705,000 5,520,000 . , 8,110,000 < l 34,448,400 $ 64,040,000 . I ;' ; . .i 4. New debt issues . / New debt issues during the current fiscal year, other than debt refundings described above, are described below. On July 1, 2002, the City issued $58,680,000 Water and Sewer Revenue Bonds, Series 2002, to pay for the costs of expansion of the City's water and sewer system. These bonds were issued at an average Interest rate of 4.67% with a final maturity of December 1, 2032. On September 1, 2002, the City issued $24,685,000 Stonnwater Revenue Bonds, Series 2002, to pay for the costs of capital improvements to the City's stormwater management system. The bonds were issued at an average rate 4.32% with a final maturity of November 1, 2032. On September 1, 2002, the City issued $14,810,000 Spring Training Facility Revenue Bonds, Series 2002, to finance a portion of the cost of the acquisition, construction, rehabilitation, and equipping of a spring training facility to be used by the Philadelphia Phillies major league baseball team. The bonds were issued at an average rate of 4.49% with a final maturity of March 1, 2031. .' 1 .{ I ~ 1 , , ., i ; . . . . j J 60 l "r 61 City of Clearwater, Florida Notes to the Financial Statements September 30, 2002 . ; G. Segment infonnation Generally accepted accounting principles require segment <fJSCIosure for nonmajor enterprise funds with revenue bonds outstanding. The following condensed statements are presented for the Parking System enterprise fund to satisfy this disclosure requirement. :,:'i -~ ~ Parking Condensed Statement of Net Assets System , , ; : Assets: Current assets $ 2,467,698 .;. '" Due from other funds 1,614,166 Restricted assets 7,525,860 :" i Net pension asset 143,086 '. , Capital assets 3,552,786 Total assets 15,303,596 , , Liabilities: . . Current liabilities 255,199 ; ~ Currentllabllities payable from restricted assets 16,437 Noncurrent liabilities , Revenue bonds payable 76,163 Notes, loan pool agreement and acquisition contracts 411,401 Advances from other funds 4,000,000 ' , Total noncurrent liabilities 4,487,564 , Total liabilities 4,759,200 i. ,i Net assets: Invested in capital assets (net of related debt) 3,065,222 Restricted assets 152,494 .. .i Unrestricted 7,326,680 Total net assets $ 10,544,396 ' \ Condensed Statement of Revenues,Expenses,andChanges Parking Parking , ) in Net Assets System Condensed Statement of Cash Flows System Operating revenues $ 4,052,060 . . Depreciation expense (785,050) Net cash provided (used) by: Other operating expenses (2,241,976) Operating activities $ 1,368,020 . Operating Income 1,025,034 Noncapltal financing activities (2,155,655) Nonoperating revenues (expenses): Capital and related financing activities (311,975) Earnings on Investments 239,651 InveSting activities 239,651 ' ' Interest expense (31,597) Net Increase (decrease) (859,959) , I Other 41,193 Beginning cash and cash equivalents 3,240,532 Transfers in from other funds 1,500,000 Ending cash and cash equivalents $ 2,380,573 Change in net assets 2,n4,281 Beginning net assets, as restated 7,nO,115 Ending het assets $ 10,544,396 62 .f 1 " l : r-r I ] r [ l ) r! .\ . I J r : ~. ~ r; { ; \1 ~ r" f ' t ; r r l ! , . f f oj [ J f ' , tI (-"f 11 it (r l i \.... Ii 1 ) \ ) rr l,' t., f ! IJ' City of Clearwater, Florida Notes to the Financial Statements September 30, 2002 H. Restricted assets 1. Water and Sewer Utility Fund Assets in the Water and Sewer Utility Fund restricted for construction Include: Water Improvement charges, the use of which is restricted by the authorizing ordinance to the construction of additions and improvements to the water system; assets remaining at September 30, 2002, are: Equity in Pooled Cash and Investments Due from Other Funds Sewer Improvement charges, the use of which is restricted by the authorizing ordinance to the construction of additions and Improvements to the sewer system; assets remaining at September 30, 2002, are: Equity In Pooled Cash and Investments Due from Other Funds Assets of the Water and Sewer Utility Fund restricted under the provisions of the ordinances authorizing the issuance of Water and Sewer Revenue Bonds consisted of the following at September 30, 2002: Water and Sewer Revenue Bonds Debt Service: Equity in Pooled Cash and Investments Investments (U;S. Government Securities) Accrued Interest Receivable on Investments Water and Sewer Revenue Bonds Renewals and Reolacements: Equity in Pooled Cash and Investments Due from Other Funds Water and Sewer Revenue Bonds Construction: Equity In Pooled Cash and Investments Assets of the Water and Sewer Utility Fund restricted by agreement with other governmental entities for improvements to the water system: Due from Other Funds $ 931,637 513,135 3,519,883 601,827 15,557,592 2,916,713 86,196 8,224,696 2,428,013 28,999,149 4,601 Assets of the Water and Sewer Utility Fund representing Customers' Deposits and therefore restricted, consisting entirely of Equity in Pooled Cash and Investments 1.888,655 Total restricted assets - Water and Sewer Utility Fund S65.672 097 2. Gas Utility Fund Assets in the Gas UtIlity Fund restricted under the provisions of the ordinance authorizing the issuance of revenue bonds consisted of the following at September 30, 2002: Gas Svstem Revenue Bonds Debt Service: Equity in Pooled Cash and Investments Renewals and Replacements: Equity in Pooled Cash and Investments $175,161 300.000 S 475.161 Assets of the Gas Utility Fund representing Customers' Deposits and therefore restricted, amounted to $1,169,119 at September 30, 2002, consisting entirely of Equity in Pooled Cash and Investments. 3. Solid Waste Utility Fund Restricted assets in the Solid Waste UtIlity Fund designated for construction represent customer deposits in the amount of $764,321 at September 30, 2002, and consisted entirely of Equity in Pooled Cash and Investments. , r 63 City of Clearwater, Florida Notes to the Financial Statements September 30, 2002 4. Stormwater Utility Fund Assets In the Stormwater Utlllty Fund restricted under the provisions of the ordinances for the issuance of revenue bonds consisted of the following at September 30, 2002: Stormwater System Revenue Bonds Series 1999 Debt Service: Equity in Pooled Cash and Investments Construction: Equity in Pooled Cash and Investments Stormwater Revenue Bon9s - Series 2002 Debt Service: Equity In Pooled Cash and Investments Construction: Equity in Pooled Cash and Investments Contributions from the Special Development Fund of proceeds from the Local Option Sales Tax, designated as Penny for Pinellas, restricted by voter referendum and terms of interlocal agreements between Pinellas County and the municipalities receMng tax proceeds to the construction of specific infrastructure capital improvements; assets remaining at September 30. 2002. are: Due From Other Funds Contributions from the Special Development Fund include proceeds restricted by City Commission policy for improvements to the storrnwater drainage system within the City; assets remaining at September 30, 2002, are: Due From Other Funds 5. Parking System Assets in the Parking System restricted under the provisions of the ordinance authorizing the issuance of the Public Service Tax and Bridge Revenue Bonds as of September 30, 2002, consists of: Equity in Pooled Cash and Investments Investments Assets in the Parking System restricted under the provisions of a.development agreement between Clearwater Seashell Resort LC and the City of Clearwater as of September 30, 2002, consist of: Due From Other Funds Contributions from the Special Development Fund Include proceeds restricted by City Commission policy for Improvements to the stormwater drainage system within the City; assets remaining at September 30, 2002, are: Due From Other Funds Total restricted assets - Parking System Fund Note IV - Other Information $ 278,205 2,576,989 220,294 11,814,872 1,379,206 84.060 S;16 353 626 $ 16,373 9,487 6,000,000 1.500,000 S; 7.525.860 ~ i n ~~. 1 : 1 :-;: I "r ~ :. j " I J j . ! . , , .\ ;j \1 . ~ . i , i .; i 1 ~ A. Risk management The City Is self-Insured within certain parameters for losses arising from claims for general liability, auto liability, pOlice professional liability, public official's liability, property damage, and workers' compensation. Insurance coverage. has been maintained by the City to pay for or Indemnify the City for losses in excess of certain specific retentions and up to specified maximum limits in the case of claims for liabiUty, property damage, and workers' compensation.. The liability and workers compensation excess coverage is $7,000,000 per occurrence (no aggregate applicable) with self.insured retention of $500,000. The property damage excess coverage is $240,000,000 at ninety percent of total Insurable value with a $500,000 self. insured retention. Settled claims have not exceeded excess coverage in any of the past three years. 64 (' \ . j f-'[ _.J f' ! j r-r r: 1 j fr , \ \' r ' \ : l l n j : , .- '1. : f ~ 1 : 1. .\ I r ~ ( 1 ~ U /- , "~ : , - L, fT ~ I L f j , t I ; ~ ) r [ - ' I.J q L r -~. U I T ~ : tJ ; i ~ ~ a__4" i _ City of Clearwater, Florida Notes to the Financial Statements September 30, 2002 The transactions _ relating to the self.lnsurance program are accounted for In the Central Insurance Fund, an Internal Service Fund. The billings by the Central Insurance Fund to the various operating funds (the Interfund premiums) are based on actuarial estimates of the amounts needed to pay prior and current year claims. The claims liability reported at September 30, 2002, Is based on the requirements of Governmental Accounting Standards Board Statement No. 10, whIch requires that a liability for claims be reported if information prior to the Issuance of the financial statements Indicates that it is probable that a liability has been incurred at the date of the financial statements and the amount of the loss can be reasonably estimated. Changes In the claims liability amounts In fiscal years 2001 and 2002 were: Self Insurance $ 10,883,393 Balance at October 1, 2000 Current year claims and changes In estimates Claim payments Balance at September 30, 2001 Current year claims and changes In estimates Claim payments Balance at September 30, 2002 629,391 (2,175,488) 9,337,296 6,464,068 (4,361,086) $ 11,440,278 B. Statements of cash flows For purposes of the statements of cash flows, Investments with original maturities of three months or less are considered to meet the definition of cash equivalents. The majority of the Investments In which the CIty's proprietary funds have equity are held by the City's consolidated pool of cash and Investments. Since fund equities In this cash management pool have the general characteristics of demand deposits in that additional funds may be deposited at any time and also funds may be withdrawn at any time without prior notice or penalty, each funds equity account is considered a cash equivalent regardless of the maturities of Investments held by the pool. Funds with deficit (overdraft) positions within the consolidated pool report the deficits as Interfund payables to the City's Capital Improvement Fund. C. Capitalization of interest Interest costs incurred in enterprise funds during construction are capitalized, net of Interest income from the proceeds of related tax.exempt debt if applicable, as part of the cost of the related assets of the respective enterprise funds. Interest costs on long.term debt incurred and capitalized during the year ended September 30, were as follows: Total Interest Interest Costs Net Interest Costs Incurred Capitalized Expense $ 4,346,274 $ 769,723 $ 3,576,551 1,533,654 60,471 1,473,183 78,621 78,621 569,068 160,073 408,995 43,831 43,831 $ 6,571,448 $ 990,267 $ 5,581,181 Business-type ActiviUes: Water & Sewer Utility Fund Gas Utility Fund Solid Waste Utility Fund Stormwater Utility Fund Non.major Enterprise Funds Total business-type activities D. Use of estimates The preparation of financial statements In conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from the estimates. 65 City of Clearwater, Florida Notes to the Financial Statements September 30, 2002 E. Employee retirement systems and pension plans 1. Defined benefit pension plans The City contributes to two separate single-employer, self-administered defined benefit pension plans covering approximately three-fourths of all City employees. The Employees' Pension Plan covers all permanent, full-time City employees who successfully pass the required physical examination, except for firefighters employed prior to July 1, 1963, and certain nonclassified (primarily managerial) employees. The Firemen's Relief and Pension Plan covered eligible firefighters hired prior to July 1, 1963, and is closed to new entrants. Neither of these plans Issues a stand-aJone financial report. As indicated, both plans are self-administered, and the costs of administering the plans are paid from the respective plan assets. The Employees' Pension Plan is authorized by and operates under the provisions of Sections 2.391 through 2.411 of the Municipal Code of the City of Clearwater. Plan. provisions have been duly approved as required by the voters in referendums, the most recent of which was held on March 14, 2000. The plan provisions were changed effective January 1, 2000 to provide a 1.5% cost of living Increase, an additional normal retirement age of 65 with 10 years of service, plus additional eligibilities and benefits for police and firefighters. The nonnal retirement benefit is a monthly benefit equal to 2. 3/4% of average monthly compensation for the final 5 years of service multiplied by the number of years of service to date of retirement. The minimum benefit under the plan is $300 per month. Eligibility for normal retirement occurs upon completion of at least 10 years of service and the attainment of age 65, or completion of at least 20 years of service and the attainment of age 55, or completion of 30 years of service, for employees engaged in non.hazardous duty. For those engaged in hazardous duty, eligibility occurs upon completion of 20 years of service. The normal monthly benefits are payable for the life of the participant and continue, after the participant's death, to be paid at the same amount for 5 years to eligible surviving beneficiaries; after 5 years, the survivor annuity is reduced to fifty percent (50%) of the original amount. The plan provides for an annual cost of living Increase of up to one and one-half percent (1-1/2%). The plan also provides for disability and death benefits, vesting after completion of 10 years of service and the refund of employee contributions in case of a non-vested termination. There are seven other benefit payment options that are computed to be the actuarial equivalent of the normal benefit. Covered employees contribute 8% of their compensation. It is the city's obligation to provide a sufficient additional contribution to maintain the actuarial soundness of the fund but, in any event, not less than 7% of participating employee's compensation per the ordinance governing the plan. The Firemen's Relief and Pension Plan is authorized and operated under the provisions of SUbpart B, Article I (Laws of Florida, Chapter 30658, 1955 and amendments), Sections 1 through 27 of the Municipal Charter and Related Law of the City of Clearwater and Chapter 26, Article III, Sections 26.50 through 26.52 of the Municipal Code of the City of Clearwater. The normal retirement benefit is a monthly benefit in the amount of 50% of the prevailing wage at the date of retirement of the lowest rank held by the participant during the three years immediately preceding retirement plus 2% of such prevailing wage for each year of service in excess of 20 years up to a maximum of 60%. Participants retiring at the age of 65 years are entitled to a benefit of 60% of the prevailing wage of the lowest rank held by the participant during the three years immediately preceding retirement. The ending rate of pay specified above may not exceed the. highest rate of pay for the rank of Captain. Eligibility for normal retirement occurs upon completion of 20 years of service or attainment of age 65. The monthly benefits are payable for the life of the participant and continue, after the participant's death, to be paid to certain eligible surviving beneficiaries at an amount that Is one-half of the amount received by the participant. Benefits are also provided for children of the deceased participant who are less than 18 years of age SUbject to certain limitations as to amount. The plan also provides for disability and death benefits and for vesting upon completion of at least 12 years of service. The plan provides for post retirement cost of living increases equal to the increase In the prevailing wage for the rank at whfch the participant retired with a limitation for those retiring on or after January 1, 1972, of 100010 of the Initial pension benefit for total cost of IMng Increases. Participating employees are required to contribute 6% of their salaries up to the equivalent of the salary of a fireman holding the rank of Captain. The City Is required to contribute a sufficient additional amount to maintain the actuarial soundness of the plan for a period of 35 years commencing January 1, 1972; this contribution is based upon, but not limited to, the amount of property tax that a levy of 0.6 mills would produce. 66 ;-.' .~ ...; :. ~ '! ~ t! , \ .. ~ .1 . , i .l ~ t , ~ .L. , f : I . i i i i { ~ , ; 1.- \. i . 1 '. t. f ( - ( . i , I' , , , r ,. ! .~.. i , i - l,i ! ' ~ ~' t .. r 1 , ; t i \. .i l ., ,., City of Clearwater, Florida Notes to the Financial Statements September 30, 2002 t".i r '~ As of the January 1, 2001, actuary valuation date (upon which the current fiscal year funding is based), the membership of. the plans is as follows: Retirees and beneficiaries currently rec~Mng benefits Terminated employees entitled to benefits but not yet receiving them Active employees: Fully vested Nonvested Total number of participants Employees' Pension Plan 533 40 Firemen's Relief Pension Plan 48 711 827 2,111 48 For the fiscal year ended September 30, 2002, the covered payroll for the Employees' Pension Fund is $61,154,840. The City's total payroll for the same period is $71,987,553. Annual pension cost and contributions information for the last three fiscal years follows: Employees' Pension Fund Year Annual (a) Net Ended Required Employer Percent Pension Sept 30 Contribution Contributions Contributed Asset 2000 $ 0 $ 4,419,723 N/A $ 12,442,354 2001 $ 174,377 $ 4,255,484 2440% $15,845,929 2002 $ 0 $ 4,439,829 (b) N/A $ 21,445,982 (a) The actuarlally determined contribution requirements for the City's fiscal year ended September 30, 2002, are based on actuarial valuations as of January 1, 2001. Since the City's contributions are made during its fiscal year (which commences nine months after the date of the actuarial valuation), the City, with approval of State regulatory authorities, is following the practice of adding Interest to its required contnbutions at the assumed rate of return on investments for a period of one year. (b) Actual contributions for fiscal 2002 totaled $4,439,829, as required by the ordinance governing the pension plan. See Note E Firemen's Relief Pension Fund Year Ended Sept 30 2000 2001 2002 Annual (a) Required Contribution $ 1,046,856 $ 1,098,990 $ 1,153,732 Employer Contributions $ 1,046,856 $ 1,098,990 $ 1,153,732 Percent Contributed 1 COOk 100% 100% a) The actuarlally determined contribution requirements for the City's fiscal year ended September 30, 2002, are based on actuarial valuations as of January 1, 2001. Since the City's contributions are made during its fiscal year (which commences nine months after the date of the actuarial valuation), the City, with approval of State regulatory authorities, is following the practice of adding Interest to its required contnbutions at the assumed rate of return on investments for a period of one year. The net pension asset at transition (Qctober 1. 1997) was determined in accordance with GASB Statement No. 27, NAccounting for Pensions by State and Local Governmental Employees". The amount of the pension asset at transition was $3,503,365. 67 City of Clearwater, Florida Notes to the Financial Statements September 30, 2002 The Employees' Pension Fund net pension asset at September 30, 2002 totaled $21,445,982. It was comprised of the following components: Annual required contributions (ARC) Interest on the net pension asset Adjustment to annual contribution Annual pension cost Fisoal2002 employer contributions Increase In net pension asset Net pension asset beginning of year Net pension asset end of year $ (1,932,864) (1,109,215) 1,881,855 (1,160,224) 4,439,829 5,600,053 15,845,929 $ 21,445,982 Each pension fund is accounted for as a pension trust fund; therefore each is accounted for in substantially the same manlier as proprietary funds with a ucapital maintenance" measurement focus and the accrual basis of accounting. Fund assets, primarily investments, are valued at fair value for balance sheet purposes, In accordance with GASB No. 25. Investment values are determined using the estimated fair value determined by averaging est/mated fair values obtained from three or more nationally recognized brokers. As of September 30, 2002, neither the Employees' Pension Fund nor the Firemen's Relief and Pension fund held investments (other than U.S. Government or U.S. Government guaranteed obligations) in any one organization comprising 5% or more of the net assets available for benefits. Significant actuarial assumptions utilized in the actuarial valuations as of January 1, 2001, are as follows: Employees' Pension Plan (1) Assumed rate of return on investments of 7.0% per annum. (2) Projected salary increase at a rate of 5% per year, including both cost-of-livlng adjustments of 3% and merit or seniority increases at 2%. (3) Mortality based on the 1983 Group Annuity Mortality Table for males with females ages set back six (6) years. (4) Pr&retirement withdrawals assumed to occur per standard scales of moderate turnover rates (Scale 255) for males and heavy turnover rates (Scala 355) for famaJes. {5} Pre-retirement incidence of disability Is assumed to occur In accordance with a standard scale of moderate disability rates (Class 1, 1952 Inter-COmpany); rates for famales assumed to be twice that for males. Aremen's Relief and Pension Plan (1) Assumed rate of return on Investments of 5.5% compounded annually. (2) Assumed benefits grow at an annually compounded rate of 2%. (3) Mortality based on the 1983 Group Annuity Mo1taJity Table for retired participants; assumed disabled participants will experience mortality according to PBGC Tables 3 and 4 for males and females, respectively. (4) Assumed no withdrawals wiD occur. (5) Assumed probability of an active participant becoming disabled is zero (no active participants). (6) Assumed value of one mill of ad valorem tax will Increase at rate of 5% per year. As a result of a voter referendum on March 14, 2000, the Employees Pension Plan was mocflfled to provide for a 1.5% cost of living increase, an additional retirement age of 65 with 10 years of service, plus additional eligibility and benefits for police and firefighters effective Janu~ry 1, 2000. There were no changes in assumptions affecting. the January 1, 2001 actuarial valuation for either the Employees' Pension Plan or the Firemen's Relief and Pension Plan. 68 ':'":0. : ) '-. ~'~ ~ ,~ t"1 ... .;- :f":; : j ~~ 1 1 "~ d " i. I , l f i . j ~ j - , , ~ I. i ; ) ~ . i . I , , , I l ( ". ,; i .1 f ", ,; ! {: f ' j , t .= r ., , , I . t I. I , l . \., r ~ ; i . I , , , , \. ~ , ; ~ i l ~ "(.J r I ' \ ; r) I . 1 't. ~ 1 (I ~ 1 ~,) 1- ~ " f ' l ...~ ., r ., I , i I City of Clearwater, Florida Notes to the Financial Statements September 30, 2002 It is the City's policy to fund pension costs accrued as determined on an actuarial basis. Annual required contributions (ARC) for the Employees' Pension Fund are calculated using the Entry Age Normal with Frozen Initial Liability method. The initial unfunded actuarial accrued liability determined at JUly 1, 1963, is being amortized over a 40-year period; changes made in 1979 and subsequent years which have had the,effect of either increasing or decreasing the actuarial liability are being amortized over a 30-year period from their effective dates In accordance with State law. Annual required contributions (ARC) for the Firemen's Relief and Pension Fund are based on a variation of the aggregate actuarial cost method, under which the unfunded portion of the present value of the projected benefits is allocated over . the present value of a 6.0% per year Increasing annuity for the remaining years in the 35-year funding period which began January 1, 1972, pursuant to an agreement between the City and the Plan participants. For this purpose, the unfunded actuarial liability is determined after consideration of the available assets at the valuation date. The increasing fixed schedule produced by this method was established in 1988 and will be modified in the future only to the extent that a current valuation Indicates a higher required cost level, or if the resulting cost level exceeds 60% of a mill in a current year. Under the non-standard cost method used for this plan (due to the fact that there are no longer any active employees), all liabilities are unfunded acluarlalliabilitles and are being amortized according to the cost method. The net pension asset for the Employees' Pension Plan, representing excess contributions as calculated per GASa 27 requirements, is identical In amount to the plan .credit balance".as disclosed In prior years. A total of $14,731,211 of the current net pension asset balance is attributable to governmental funds and therefore is not reflected in the governmental fund financial statements in accordance with the modified accrual basis of accounting. The remaining $6,714,771 attributable to proprietary funds is reflected in the proprietary fund financial statements on the accrual basis of accounting. Governmental Accounting Standards Board Statement Nos. 25 and 27 require the presentation, as supplementary information, of certain 6-year historical trend Information. These disclosures are presented on pages 73-75 of this report. 2. Police Supplemental Pension Fund A supplemental defined contribution pension plan exists for all eligible policemen which is funded by earmarked revenues received from the State and Is administered by the City. The revenues received from the State are allocated among eligible police officers on the basis of clays employed as Clearwater Police Officers. These revenues, which, comprise the plan contributions, amount to $770,578 in the year ended September 30, 2002, and are obtained from an eighty-five one hundredths of one percent (.85)% excise tax on the gross receipts from premiums collected on casualty insurance policies covering property within the City's corporate limits. The current year contributions represent 5.2% of current year covered payroll. The fair value of investments at September 30, 2002, totaled $9,329,372. The Police Supplemental Pension Fund is authorized by and operates under the provisions of Sections 2.471 through 2.480 of the Municipal Code of the City of Clearwater and Chapter 185 of Florida StaMes. Under the plan provisions, the total monies received during each fiscal year, after payment or provision for all costs and expenses of management and operation of the plan, are allocated to participants on the basis of the total number of shares to which each participant is entitled. Each partiCipant Is entitled to one share in the fund for each day of service as a police officer of the City. All police officers, as defined in Section 26.70(g) of the Code of Ordinances of the City of Clearwater, who are elected, appointed, or employed full-time by the City are eligible to participate in the plan. There are no employee contributions to the supplemental plan. Benefits are fully vested for a lump sum distribution after twenty years from the date of hire, with provision for partial vesting after ten or more years under the plan. Accumulated benefits are payable In full in case of death while employed by the City or in case of total and permanent job-related disability. Non-vested participants' account values upon termination of employment during any fISCal year are added to the monies received during that fiscal year for allocation to the remaining participants In the plan on the basis of total days worked. For the fiscal year ended September 30, 2002, the payroll of the covered officers' was $14,850,669; the City's total payroll for the same period was $71,987,553. Since the entitlement to benefits is based entirely upon the aOocation of monies received by the plan to the participants' share accounts, there is no actuarial liability on the part of either the State or the City. 69 City of Clearwater, Florida Notes to the Financial Statements 'September 30, 2002 3. Firefighters Supplemental Pension Fund A supplemental defined contribution pension plan exists for all eligible firemen, which is funded by earmarked revenues received from the State and is administered by the City. The revenues received from the State are allocated among eligible firemen on the basis of days worked. during the previous year. These revenues, which comprise the plan contributions, amounted to.$594,442 in the year ended September 30,2002, and are obtained from a one and eighty-five one hundredths percent (1.85%) excise tax on the gross receipts from premiums collected on property insurance policies covering property within the City's corporate Omits. The contributions represent 6.7gok of current year covered payroll. The. fair value of investments at September 30,2002, totaled $8,470,023. As the plan is described as a money purchase pension plan, whereby contributions are allocated based on the number of days worked during the fIScal year ended September 30, and interest earnings allocated based on the beginning balances in each participanfs account, there is no actuarial liability on the part of the State or City. The Firefighters Supplemental Pension Fund is authorized by and operates under the provisions of Sections 2.441 through 2.450 of the Municipal Code of the City of Clearwater and Chapter 175 of Florida Statutes. Eligibility requires two years of credited calendar year service as a firefighter with concurrent participation In the Employees' Pension Plan. .There is no employee contribution to the supplemental plan, and benefits are vested for a lump sum distribution at ten years unless there Is early retirement, disability or death. Non-vested participants' account values upon termination of emploYf!lent are reallocated among the remaining participants on the basis of days worked during the previous year. For the fiscal year ended September 30, 2002, the covered payroll was $8,757,987 the City's total payroll for the same period was $71,987,553. 4. 401 (a) Defined Contribution Plan For all management employees not covered under either of the defined benefit pension plans, the City provides pension benefits through a 401 (a) defined contribution plan. In a defined contribution plan, benefits depend solely on amounts contributed to the plan plus investment earnings. Employees are participants from the date of employment and are fully vested upon enrollment The plan is totally contributory on the part of the City in an amount equal to 15% of compensation on behalf of the City Manager and the City Attorney; 12% of compensation on behalf of the Chief of Police; and 6% of compensation on behalf of all other management contract employees and assistant city attorneys. The City makes bi-weekly contributions to the Trust throughout the plan year to meet its funding obligations under the plan. The International City Management Association Retirement Corporation (ICMA-RC), the trustee for the defined annuity, offers participants a variety of Investment options. The City's total payroll for the fiscal year ended September 30, 2002, was $71,987,553. The Plan members' payroll for the same period totaled $3,458,985. The City's contribution, using the above referenced formula, totaled $247,410. The assets of the trust, at market value, totaled $1,184,818 at September 30, 2002. 5. Deferred Compensation Plan The City offers its employees a deferred compensation plan created in accordance with Internal Revenue Code Section 457. The plan, available to all City employees, permits .them to defer a portion of their salary until future years. Participation in the plan Is optional. The deferred compensation is not available to employees until termination, retirement, death, or unforeseeable emergency. EffectiVe January 1, 1997, Federal legislation converted the Section 457 deferred compensation assets from City assets to employee assets. As a result of these changes, plan assets are no longer subject to the claims of the City's general creditors. The City has previously reported the assets and associated liabilities of the deferred compensation plan in the City's financial statements as an agency fuld. Effective with the change in legislation these assets are no longer City assets and the fiduciary responsibUity has been transferred to the third party plan administrator. Consequently, effective with fiscal 1997, these assets are no longer reported In the accompanying financial statements, in compliance with Governmental Accounting Standards Board Statement No. 32. 70 { 1 ; l T 1 , ; , 1 J) ,;.., rf \ ' i , I, j () ! fJ l ) f -: \ i i 1 (: f ; , , r . , , . t; I : I i j' i I ~ i '\. i ,-. I L . i ' i ; \". .) I ; , , I .~ City of Clearwater, Florida Notes to the Financial Statements September 30, 2002 F. Contingencies and Commitments / PACT. Inc. PACT, Inc. is a nonprofit corporation formed in 1978, for the purpose of financing, constructing, and operating a performing arts center. Per a Guaranty Agre$ment dated May 18, 2001, the City guaranteed $1,000,0000 on.a $5,000,000 mortgage note for PACT, Inc., used to refinance a previous mortgage with a similar City guarantee. City management does not consider it probable that this guarantee will be called, and, accordingly, no amounts have yet been accrued or otherwise recorded In the accompanying financial statements to reflect this possibility. Contingent Loan Guarantee On March 30, 1992, the City Commission approved a contingent loan guarantee of $1,000,000 on a $2,500,000 note for the Chi Chi Rodriguez Youth Foundation, Inc. The proceeds of the note were used to refinance existing foundation debt incurred to construct a golf course on a parcel of City owned land. Subsequently, the note was refinanced with Variable Rate Demand Revenue Bonds (Chi Chi Rodriquez Youth Foundation ProJect), Series 1998, on August 1,1998. In the event of default, the City is obligated to contribute $1,000,000 out of legally available non-ad valorem revenues. In addition, the City has the option to retire the entire unpaid balance and assume ownership and operation of the golf course facility. At the present time, management expects the foundation to meet all debt service payments and does not consider it likely that the City's guarantee will be invoked. Soil and groundwater contamination site The City owns a property, currently used by the City Gas Division as its administrative offices and operating facility, that has been identified as having soil' and groundwater impacts in a June 1990 report prepared by a United States Environmental Protection Agency contractor. The contamination allegedly resulted from the prior operation of a manufactured gas plant. Contamination assessment activities by the City were initiated during 1995 and a draft Contamination Assessment Report was submitted to the Florida Department of Environmental Protection (FOEP) on December 29,1999. On March 20, 2000, FDEP requested further assessment be undertaken. On July 25, 2000, FOEP approved the City's proposed scope of work for adcfrtional on and off-site assessment activities. Additional field activIties were initiated In December 2000. As of this date, all additional work has been completed. The supplemental contamination assessment results were submitted to FOEP as part of the May 2001 and July 2001 site status reports. The cost of this additional work, Including preparation and submittal of the May and July 2001 site status reports, was approximately $39,462. On May 16, 2002, the City received a letter from FDEP requiring additional fieldwork to better define the soil and groundwater contamination on the site. In September 2002, Clearwater Gas met with FDEP to discuss their May 16th letter and the future of the gas plant site. In that meeting, it was agreed the City would Install seven (7) new monitoring wells arid drill twelve (12) soli samples around the perimeter of the site. This additional work will be performed in early 2003, at an estimated cost of $70,000. Approximately $487,500 has been recovered from City insurance pOlicies to be applied to any required remediation. Letter of Credit Guarantee - soil contamination sites The City has provided a standby letter of credit In the amount of $463,040 to the Florida Department of Environmental Protection (FOEP). The Letter of Credit is required by FDEP for the City's approximate 41% share of the remediation costs for three City-owned petroleum contamination sites under FDEP's "Pre-approved Advance Cleanup (PAC) program. The PAC program awards state funds to assist with remediation of petroleum contaminated sites. The City has available fUnds set aside to fully fund the City's commitment of $463,040 under the PAC agreements. 71 City of Clearwater, florida Notes to the Financial Statements September 30, 2002 Contractual Commitment - Water and Sewer Utility Under the terms of a 30-year contract between the City and Plnellas County, which Is effective through September 30, 2005. the City is required to purchase a minimum of 4 million gallons of water per day on an annual average basis from the County within each calendar year, with a maximum amount of water available to the City of 10 million gallons per day on an annual average basis. Effective October 1, 1995, the rate, which is set by the Plnellas County Board of County Commissioners (BOCC), was $1.7902 per 1,000 gallons, including a $.60 per 1,000 gallon surcharge for funding capital projects. On November 19, 2002, the BOCC approved the following rate increases: $1.9334 effective January 1, 2003; $2.0881 effective October 1, 2003; $2.2969 effective October 1, 2004; $2.5266 effective October 1, 2005; and $2.7792 effective October 1,2006. The cost of water purchased from the County during fiscal years 2001 and 2002 was $7,305,983 and $7.516,678, respectively. Contractual Commitment - Parking System Under the terms of a development agreement, the City has committed to repurchase a beach land parcel at the appraised amDunt not to exceed $6,000,000, if the developer is unable to proceed with the development project by March 2006. A contingency reserve has been established In the Parking System fund in the amount of $6,000,000 as of September 30, 2002. i. Grant Revenues During fiscal year 2002 and prior fiscal years, the City received revenues and contributions related to grants from the Southwest Water Management District, the State of Florida, and the federal government. These grants are for specific purposes and are subject to review and audit by ttie grantor agencies. Such audits could result in requests for , reimbursement for expenditures disallowed under the terms of the grants. Based upon prior experience, City management believes such disallowances, if any, will not be significant. . . G. Pending Litigation In the normal course of operations the City is a defendant in various legal actions, the ultimate resolution of which is not expected to have a material effect on the financial statements, other than for amounts which have been reselVed and recorded as liabilities in the Central Insurance Fund. H~ Conduit debt The CIty has one Issue of conduit debt outstanding as follows: Original Issue Description I PUI:pose Amount Amount Amount Outstanding Outstanding . ; at 9130101 at QJ30102 $ 3,090,000 $ 3,040,000 Drew Gardens Refunding Bonds I Residential rental facility $ 3,425,000 The bonds do not constitute a debt, liability, or obligation of the City of Clearwater, the State of Florida, or any political subdivision thereof and accordingly have not been reported In the accompanying financial statements. 72 ! ~ .; i 'i ~ . " .,., i . ,. ) : , , ;. j ".1. ~ I \ :' C I - j for . .' " I : 1 [ \ ; fT I . j : ! .' r .) ( J n , { 1 l'r , I . ! ~ I. l , i . f i j : i . ( ! ( . \ t; r ' ! j .\.. ; I' . j ( , l: t .;. ,. '~ ~ L: City of ClealWater, Florida Defined Benefit Pension Plans Required Supplementary Information. Unaudited Page 1 of 3 Schedules of Funding Progress: Employees Pension Fund Actuarial Actuarial Actuarial Unfunded AAL Valuation Value of Accrued L1abDity Unfunded Funded Covered as a Percentage Date Assets (AAL) - Entry Age AAL Ratio Payroll .. of Covered Payroll (a) (b) (Ira) (aIb) (e) ((b-a) Ie) 1/1/1997 $ 272,346,200 $ 297,892,502 $ 25,546,302 91% $ 44,955,345 57% 1/11.1998 $ 308,596,133 $ 333,250,492 $ 24,654,359 93% $ 47,281,198 52% 1/111999 $ 354,088,751 $ 377,788,731 $ 23,699,980 94% $ 49,666,523 48% 1/1/2000 $ 414,826.422 $ 490,426,940 $ 75,600,518 85% $ 50,937,403 148% 1/1/2001 $ 461,724,610 $ 535,672,208 $ 73,947,598 86% $ 54,864,584 135% 1/1/2002 $ 491,859,015 $ 533,191,487 $ 41,332,472 92% $ 58,929,582 70% Firefighters Relief and Pension Fund Actuarial Actuarial Actuarial Unfunded AAL Valuation Value of Accrued Uability Unfunded Funded Covered as a Percentage Date Assets (AAL) - Entry Age AAL Ratio Payroll .. of Covered Payroll (a) (b) (Ira) (aIb) (c) ((b-a) Ie) 1/111997 $ 3,407,925 $ 11,014,979 $ 7,607,054 31% $ 49,044 15511% 1/1/1998 $ 3,626,850 $ 10,565,127 $ 6,938,2n 34% $ 50,573 13719% 1/1/1999 $ 3,963,395 $ 10,473,888 $ 6.510,493 38% $ 15,605 41721% 1/1/2000 $ 4,092,298 $ 9,746,671 $ 5,654,373 42% $ N/A 1/112001 $ 4,668,572 $ 9,527,303 $ 4,858,731 49% $ N1A 1/1/2002 $ 5,213,993 $ 8,907,427 $ 3,693,434 59% $ N/A , : ~ * Covered payroll is for the calendar year period used for the actuarial valuation. ; '.,j \. i. (" ~ 73 ~ l Page 2 of 3 '. ; City of Clearwater, Florida Defined Benefit Pension Plans Required Supplementary Information - Unaudited ;+" "! Schedules of Employer Contributions: Employees' Pension Fund Year Annual (a) Ended Required Percent Sept. 30, Contribution Contributed 1997 $ 4,398,790 76% 1998 $ 3,080,802 119% 1999 $ 840,558 464% 2000 $ N/A 2001 $ 174,377 2440% 2002 $ N/A ,; i (b) (c) (a) The actuarJally determined contribution requirements for the City's fiscal year ended September SO, 2002 are based on actuarial valuations as of January 1, 2001. Since the CIty's contributions are made during Its fiscal year, which commences nine months after the date of the actuarial valuations, the City, with approval of State regulatory authorities, is following the practice of adding Interest to Its required contributions at the assumed rate of return on Investments for a period of one year. I . , (b) The contribution Is less than the annual required contribution due to contributions in excess of required prior to fiscal 1997. (c) Actual contribution for fiscal 2002 was $4,439,829, as required by City pension ordinance. See Note E (1) . Firemen's Relief Pension Fund . ; Year Ended Sept. 30, 1997 1998 1999 2000 2001 2002 Annual (a) Required Contribution $ 910,559 $ 955,920 $ 1.003,758 $ 1,046,856 $. 1,098,990 $ 1,153,732 Percent Contributed 100% 100% 100% 100% 100% 100% . , , (a) The actuarlally determined contribution requirements for the City's fiscal year ended September 30, 2002 are based on actuarial valuations as of January 1, 2001. Since the City's contributions are made during Its fiscal year, which commences nine months after the date of the actuarial valuations, the City, with approval of State regulatory authorities, is following the practice of adding Interest to Its required contributions at the assumed rate of return on investments for a period of nine months. 74 ,." - ~ u r-1 J ~ \ , n ! j (1 I , I i I I ! ! , i ~ 1 r' ( : r' , r 1 ; '1... ~" r . ! , l.: i r j I ' { 1 } r 1 . I' , . 1 l i. ~ r ! ! 1.,. ' I: \ ~j Page 3 013 City of Clearwater, Florida Defined Benefit Pension Plans Required Supplementary Information - Unaudited Notes To Schedules Of Required Pension Supplementary Information' Annual required contributions for the Employees' Pension Fund are calculated using the Entry Age Nonna! with Frozen loJUal Uability method. The Initial unfunded actuarial accrued liability determined at July 1, 1963 is being amortized over a 4O-year period; changes made in 1979 and subsequent years which have had the effeCt of either Increasing or decreasing the actuarial liability are being amortized over a 3O-year period from thelr effective dates In aocordance with State law. . Annual required contributions for the Firemen's Relief and Pension Fund are based on the aggregate actuarial cost method, under which the unfunded portion of the present value of the projected benefits is allocated over the present value of a 6.0% per year increasing annuity for the remaining years In the 35-year funding period which begin January 1. 1972, pursuant to an agreement between the City and the Plan participants. For this purpose, the unfunded actuarial liability is determined after consideration of the available assets at the valuation date. The Increasing fixed schedule produced by this method was established in 1988 and will be rnod'JfIed In the future only to the extent that a current valuation indicates a higher required cost level, or If the resulting cost level exceeds 600k of a mill in a current year. The actuarially determined contribution requirements for the City's fiscal year ended September 30, 2002, are based on actuarial valuations as of January 1, 2001. Since the City's contributions are made during its fiscal year, which commences nine months after the date of the actuarial valuations, the City, with approval of State regulatory authorities, Is following the practice of adding interest to its required contributions at the assumed rate of return on investments for a period of one year in the case of the Employees' Pension Fund and for nine months In the case of the Firemen's Relief and Pension Fund. Significant actuarial assumptions utilized in the. actuarial valuations as of January 1, 2001, in the determination of the annual required contribution are as follows: Employees' Pension Fund (1) Assumed rate of return on investments of 7.0% per annum. (2) Projected salaJy Increase at a rate of 5% per year, Inclucling cost-of-living adjustments of 3% and merit or seniority increases at 2%. (3) Mortality based on the 1983 Group Annuity Mortality Table for Males with female ages set back 6 years. (4) Pre-retirement withdrawals assumed to occur in accordance with standard scales of moderate tumover rates (Scale 255) for males and heavy turnover rates (Scale 355) for females. (5) Pre-retirement Incidence of disability assumed to occur In accordance with a standard scale of moderate dlsablDty rates (Class 1, 1952 Inter-Company); rates for females assumed to be twice that for males. (6) Assumed inflation rate of 3% Firemen's Relief and Pension Fund (1) Assumed rate of return on investments of 5.5% compounded annually. (2) Assumed benefits grow at annually compounded rate of 2% reJated to cost of IMng adjustments only. (3) Mortality based on the 1983 Group Annuity Mortality Table for both active and retired; assumed disabled participants will experience mortality according to PBGe Tables 3 & 4 for males and females, respectively. (4) Assumed no withdrawals will occur. (5) No active participants (6) Assumed value of one mill of ad valorem tax will increase at rate of 5% per year. (7) Assumed inflation rate of 3% Significant changes affecting the presented 6-yeartrend Information Include: (1) The actuarial valuation of the Rremen's Relief and Pension Fund as of January 1, 1999 reflected several changes in actuarial assumptions. An Investment yield of 5.5% for both pre and post retirement was assumed whereas the prior valuation assumed 6.5%. AddiUonaJly, benefit Increases of 2.0% were assumed while the previous assumption was 4.0%. The Impact of these changes increased the unfunded actuarial accrued Uablllty by $212,878. 75 ..... i ~ ': o '1'1 '" u n \; li .n ;:[ 1 j " ~ J it !'1 .:"! i ~u This Page Intentionally Left Blank -, ; 1 11 q ~./ - ; ''I' ! ,iJ. t\ : i lj , 1 ~ ! ", ; io.J ; I ~J. ; ; , i. ...} 76 (1 Ii' f1 l ~ ("\ f} i ; l j \1 t ! (1 , l ~ r ' ! (, r ' '': ; r I t ~ L f -: t. r ~ ; ~ i ,~ ;: j. { i' L.i f l Li ~ t' i ' ~ I lj ( ; L Nonmajor Governmental Funds Special Revenue Funds Special revenue funds are used to account for specifIC revenues that are legally restricted to expenditures for particular purposes. Special Programs Fund - to account for grants and contributions. the use of which is restricted for certain programs. Community Redevelopment Agency Fund - to account for receipt, custody, and expenditure of property tax increment funds associated with related redevelopment projects. Local Housing Assistance Trust Fund - to account for monies allocated to the City under the Local Housing Assistance grant program. 77 Debt Service Funds Debt service funds provide separate accounting records for all debt Interest, principal, and reserve requirements for general government long-term. Debt of proprietary funds is serviced through restricted accounts maintained within the Individual enterprise or internal service fund associated with the debt Improvement Revenue Bonds Debt Service Fund - to account for the advance monthly accumulation of resources by transfer of Public Service Tax revenues from the General Fund and the payment of currently maturing Installments of principal and interest during eaCh fiscal year. Improvement Revenue Refunding Bonds Debt Service Fund - to account for the advance monthly accumulation of resources by transfer of pUblic service tax and communications services tax revenues from the General Fund and the payment of currently maturing installments of principal and interest during each fiscal year. Infrastructure Sales Tax Revenue Bonds Debt Service Fund - to account for the advance monthly accumulation of resources by transfer of sales tax revenues from the Special Development Special Revenue Fund and the payment of currently maturing installments of principal and interest during each fiscal year. Public Service Tax & Bridge Revenue Bonds Debt Service Fund - to account for the advance monthly accumulation of resources by transfer of public service tax revenues from the General Fund and the payment of currently maturing installments of principal and interest during each fiscal year. Notes and Mortgages Debt Service Fund - to account for the advance monthly accumulation of resources by transfer of General Revenues from the General and Special Revenue Funds and the payment of currently maturing installments of principal and Interest on the various note and mortgage obligations of the governmental funds during each fiscal year. Spring Training Facility Revenue Bonds Debt Service Fund - to account for the advance monthly accumulation of resources by transfer of sales tax revenues from the Special Development Special Revenue Fund and the payment of currently maturing installments of principal and Interest during each fiscal year. 78 1)"1 '!, .; '!l . ;" ! I ; ) , , i j ; I i . ) , l :', ,} T ~ , l _, .i r ('\ i; ("I \. j C'f I \ l) n r! L n ., I i , i i [: 1 . 1 .\. .; r' II L f r Lt u f r d r > 'l I ; U f 'f i ; I L..i r ~ ; l_~. r l i ' l . '1;,..,( t :. !' . c. >l...., ~ Capital Projects Funds Capital projects funds are used to account for resources to be used for the acquisition or construction of major capital improvement projects, other' than those financed by proprietary funds. A major capital improvement project Is a property acquisition, a major construction undertaking, or a major improvement to an existing facility or property, with a cost greater than $25,000 and a minimum useful life of at least five years. Sales Tax Revenue Construction Fund - to provide separate accounting records for the financing and construction of the entryway and roundabout at Clearwater Beach, a new Main Ubrary, and a new Memorial Causeway Bridge. Community Sports Complex Construction Fund - to provide separate accounting records for the financing and construction of a new community sports complex including a new spring training facility to be used by the Philadelphia Phlllles major league baseball organization. 79 ': 1 City of Clearwater, Florida Combining Balance Sheet f1 Nonmajor Govemmental Funds September 30, 2002 r ~ Special Revenue Funds , , i < ,,- , ,- Community Local Housing I Special Redevelopment Assistance .~ J Programs Agency Trust Total ASSETS Cash on hand and in banks $ $ 100 $ $ 100 Equity in pooled cash and investments 4,625,208 1 ,691,027 6,316,235 Receivables: Mortgage notes 4,682,649 4,223,298 8,905,947 Rehab advances 48,882 33,744 82,626 Other 15,023 94,179 109,202 Investments Due from other governments - grants _ 656,591 113,365 769,956 Land held 10r resale 84,701 913,641 998,342 Total assets $ 10,113,054 $ 1,007,920 $ 6,061,434 $ 17,182,408 LIABILITIES Accounts and contracts payable $ 81,509 $ $ 9,152 $ 90,661 Accrued interest purchased Accrued payroll 26,911 26,911 Due to other governmental entitles 372 372 Construction escrows 312,371 781,553 1,093,924 Due to other funds 134,966 134,966 Due to other funds (deficit In pooled cash) 264,514 264,514 Advances from other funds 492,524 492,524 Deferred revenue 958 94,179 86 95,223 TotalllabUlties - 422,121 986,183 790,791 2,199,095 FUND BALANCES Reserved for: Encumbrances 21,737 21,737 Advances and notes 4,258,688 4,223,298 8,481,986 Grant programs 2,016,840 2,016,840 Debt service: ,- Current requirements. principal Current requirements. Interest Future requirements Unreserved, undesignated 3,415,405 1,047,345 4.462,750 Total fund balances 9,690,933 21,737 5,270,643 14,983,313 T otalllablllties and fund balances $ 10,113,054 $ 1,007,920 $ 6,061,434 $ 17,182,408 The notes to the financlai statements are an Integral part of this statement. 80 J 81 ; "J . , fl , , City of Clearwater, florida : ; Combining Statement of Revenues, expenditures, and Change. in Fund Balances NonmaJor Governmental Funds Of"'} For the Year Ended September 30, 2002 ~ i Special Revenue Funds ~ i Community Local Housing Improvement .i ,s Special Redevelopment AssIstance Improvement Revenue Programs Agency Trust Total Revenue Bonds Refunding Bonds '.~ ~ i REVENUES d Intergovernmental $ 3.210,310 is 373.583 $ 1,188,126 is 4,772,019 $ $ $ Charges for seNices 576.714 576.714 ,r ) Fines and forfeitures 500,987 500,987 Interest Income 233,730 50,123 78,176 362,029 1,209 50,672 , i , Miscellaneous 1 ,660,880 234,348 1 ,895,228 Total revenues: 6,182,621 658,054 1,266,302 8,106,977 1 ,209 50,672 ! 1 , j EXPENDITURES , d Current: General government 159,515 159,515 , ! Public safely 2,472,483 2,472,483 ; Physical environment 927.341 927,341 , j Economlc environment 1,021,787 309,160 315,783- 1,646,730 Human seNices 126.936 126,936 - } Culture and recreation 1.432,848 t,432,848 Debt seNice: ~ j Princlpal 283,487 89,542 Interest & liscal charges 2,925 382,129 Bond Issuance costs 147,065 Capital oullay 417.168 417,188 Total eKpenditures 6.658,078 309,160 3t5.783 7,183,021 288,412 618,736 Excess (deficiency) of revenues over I (under) expenditures (375,457) 348,894 950,519 923.956 (285,203) (668,064) OTHER FINANCING SOURCES (USES~ Transfers in 1,Ot2,587 334,783 1,347,370 64.545 705,251 Transfers out (569,64:3) (664,253) (tOO.125) (1 ,334,021 ~ Long term debt Issued Proceeds of refunding bonds 11,345,499 Premlum (discount) on revenue bonds Issued (49, t29) Payment to refunded bond escrow agent (10,270,682) Total other fmanclng sources (uses) 442,944 (329,470) (100,125> 13,349 64,545 1,730,939 Net change in fund balances 67,487 19,424 850,394 937,305 (220,658) t,t82,875 Fund balances - beglMing. as restated 9,623.446 2,313 4,420.249 14,046,008 220,658 Fund balances. ending $ 9,690,933 $ 21,737 $ 5,270.843 $ 14,983,313 $ $ 1,162,875 $ " The notes to the financial statements are an Integral part of this statement. 82 { 1 r; I i ( j f' ; (H ~ Debt Service Funds Capital Project Funds I I Total l Infrastructure Publl~ ServIce Notes Spring TrainIng Community Nonmajor Ssles Tax Tax & BrIdge and FaclUty Sales Tax SpOIlS Governmental < .. , I Revenue Bonds Revenue Bonds Mortgages Revenue Bonds Total Revenue Complex Total Funds 5,000.000 $ $ $ 1,087,654 $ 6,087.654 $ $ $ $ 10.859,673 576,714 500.987 176,280 2,010 60,271 290,442 1.065,005 1,065,005 1,717,476 4,000 4,000 1.899,228 r ; 5.178,280 2.010 1,147.925 6,378.096 1.069,005 1,069.005 15,554,078 , t 159.515 2,472.483 927,341 1,646,730 i I 126,936 I 18,913 18,913 1,451,761 {...;' 73.739 1,304,501 1,751.269 1,751,269 1,873,463 1,340 20t.321 2,46t,198 2,461.198 3.185 208,746 358.996 358,996 . 3.401.374 4.117.620 7,518.994 7.938, t82 1 ,876.668 75.079 1.505.822 208,746 4.571 ,463 3.401.374 4,138,533 7.W,907 19.292.391 ! I 3,299,612 (73,089) (1,505,822) 939.179 1,806.633 (2,332.369) (4,136.533) (6,468.902) (3,738,313) I \. " 1,060,593 5,836 1,505,822 3,342,047 4.689.417 (53,812) (53,612) (1.387,833) 216,438 215,438 14,594.562 14,594,662 14,810,000 11,345.499 11.345,499 I (49,129) 530.013 530,013 480.884 I (10,270.682) (t O,270,682) Ii 1,060.593 (47,776) 1,505,822 216.438 4.529.1561 16.124,575 15,124,575 19,887.465 r ; 4,360,205 (120,845) 1,154,617 6,336,194 (2,332,369) 10,988,042 8,666,673 15,929,172 L: 651,024 120,845 647.912 1,540,439 14,157,707 14.167.707 29,754,154 4,911.229 $ $ $ 1,802,529 $ 7.876.633 $ 11,835,338 $ 10,988.042 $ 22,823.380 $ 45.683,326 l. .1 83 ,.' ~ , .. .1 ! -" '1 n This Page Intentionally Left Blank 84 ."~. Cl t. i rI 1T I ) r.~ i , l i r I L; r '. \ I ~ f' ( ! -i ~ t ; I . L City of Clearwater, Florida Schedule of Revenues, Expenditu~, and Changes In Fund Balances - Budget and Actual (GAAP Basis) Community Redevelopment Agency For the Year Ended September 30, 2002 Variance with Budgeted Amounts Final Budget Actual Positive Original Rnal Amounts (Negative) REVENUES Intergovernmental $ 332,520 $ 373,583 $ 373,583 $ Interest income 15,000 15,000 50,123 35,123 Miscellaneous 112,911 118,362 234,348 115,986 Total revenues 460,431 506,945 658,054 151,109 EXPENDITURES Current. Economic environment 236,393 388,414 309,160 79,254 Total expenditures 236,393 388,414 309,160 79,254 Excess of revenues over expenditures 224,038 118,531 348,894 230,363 OTHER FINANCING SOURCES (USES) Transfers In 304,784 334,783 334,783 Transfers out (528,822) (453,314) (664,253) (210,939) Total other financing sources (uses) (224,038) (118,531) (329,470) (210,939) Excess of revenues and other sources over expenditures and other uses 19,424 19,424 Fund balances. beginning, as restated (see Note II . C) 2,313 2,313 2,313 Fund balances. ending $ 2,313 $ 2,313 $ 21,737 $ 19,424 The notes to the financial statements are an Integral part of this statement. 85 ":,.'"':1 .., 0" '1; d This Page Intentionally Left Blank 86 [l ! 1 { , I ; t J 'f .~ J I I ! t ..: I'" i : t ! I \ i . l.i ! . . I to l r ' i , , , r ' ; l ; ( ! L ! ' i to r 7' i ~ t ; \. , L L: ~ ! i; , ' U r ' i ! l. ., j NonmaJor Enterprise Funds Enterprise funds are used to account for the financing, acquisition, operation, and maintenance of governmental facilities that are supported primarily by user charges. 'Recycling Utility Fund -. to account for the financing, processing, operation and maintenance of the City's recycling service from charges made to users of the services and funds received from the sale of recyclable commodities processed to meet market requirements. The service area extends beyond the City limits Marine & Aviation Fund - to account for the financing, operation and maintenance of the City marina and associated real property on Clearwater Beach from rents collected from users; and to account for the City's airpark operations. Parking System Fund . to account for the financing, construction, operation and maintenance of the City's parking system, including on- and off-street parking on Clearwater Beach and Downtown Clearwater, from parking charges. Harborview Center Fund . to account for the operation of the City's convention center and related facilities. 87 City of Clearwater, Florida Combining Statement of Net Assets NonmajorEnbHprtseFunds " September 30, 2002 , . Recyellng Marine &. Par1dng Harborvlew UUlltv AvlaUon System Center Total 'G ASSETS l. J Current assets: Cash on hand and In banks $ $ 817 $ ~06() $ tOO $ 22,967 Equity in pooled cash and Investments 1,439,611 471.487 2,342, 150 108,064 4,361,312 Accounts and contracts receivable: . ~- Billed 68.653 196,257 264,910 Unbilied charges estimated 134,325 134,325 ~., 1 202,978 196,257 399,235 Less: Allowance for uncollectable accounts (3,780) (3,7aO) " , T olal receivables. net 199,198 196,257 395.455 . Due from other funds t,067,672 989,073 1,614,166 3,670,911 Due from other govemmental enlitfes 103,498 103,498 ~. j Inventories, at cost 28,409 26,409 Total current assets 2.706.481 1 ,487.766 4,081,864 304.421 8.580,552 ".' ) Noncurrent assets: Restricted: Equity In pooled cash and investments 16,373 16,373 Investments 9,487 9,487 \ i Due from other funds 7.500,000 7,500,000 i , } Net pension asset 221,364 146,975 143,086 511,415 Capl1al assets: Land and other nondepreciable assets 1,106,482 926,000 2,032,462 Capital assets, net of accumulated depreciation 1,182,031 1 ,991,944 2,446,304 9,868,766 15.486,765 Total noncurrent assets 1,403.385 2,138.619 11,221,732 10,792,788 25.556,522 T olal assets 4,109,886 3,626,405 15,303,696 11.097,207 34.137,074 LtABtLITIES Current liabilities: Accounts and contracts payable t8,835 42,266 36,710 619,561 717,372 Accrued payroll 16,879 15,085 15,720 47.684 Accrued compensated absences 53,797 48,753 37,303 137.853 Due to other funds 59,602 59,602 Deposits 18,813 2,083 105,163 126,039 Deferred revenue and liens 2.892 12,500 15.392 Current portion of long-term liabilities: Revenue bonds 7.956 7,956 Notes, loan pool agreement and acqulsltlon contracts 152,555 152,555 Total current liabilities (payable from current assets) 89,511 182,519 255.199 737,224 1 .264,453 Current liabilities (payable from restricted assets): Accrued interest payable 525 525 Noles, loan pool agreement and acqulslllon contracts 3,636 3,636 Current portion of long-term IlabUities, revenue bonds 15,912 15,912 Total current iiabifities payable from restricted assets 3.636 16.437 20,073 T olal current liabilities 93, 147 182,519 271,636 737 ,224 1.284,526 Noncurrent llablJitles: Revenue bonds (net of unamortized discounts and deferred amount on refunding) 76,163 76,163 Notes. loan pool agreement and acquisition contracts 9.808 41 t,40t 42t,207 Advances from otherfunds 119.204 4.000,000 4,119,204 Total non-<:urrantllabllitles 9.806 119,204 4.487,584 4,616,574 Total liabilities 102,953 301.723 4,759,200 737 ,224 5,901,100 Net assets: Invested In capital assets (nelof relaled debt) t ,168.589 1,991,644 2,888,799 10,792.786 16,841,818 Restrlctedfor: Revenue bond debt service and sinklng fund requirements 9,408 9,408 Employees' pension benefits 221,364 t46,975 143,086 511,415 Unrestricted 2.818,970 1,186,063 7,503,103 (432,803) to,873,333 T olal net assets $ 4,006,913 $ 3,324,682 $ 10,544,396 $ 10,369,983 $ 28,235.974 The notes to the financial statements are an Integral pari at this statement. 88 r1 city of Clearwater, Florida Combining Statement of Revenues, Expenses, and Changes in Fund Net Assets L j NonmaJor Enterprise Funds For the Year Ended September 30, 2002 (' 1 1 ' Recycling Marine &: Parking Harborvlew { ; UtIlity Aviation System Center Totals Operating revenues: [' Sales to customers $ 743,826 $ 1,523,778 $ $ $ 2,267,604 \ Service charges to custoiners 9,844 175,300 185,144 I J User charges to customers 1,417,480 55,704 3,865,335 5,338,519 Rentals 1,167,188 11,425 1,871,730 3,050,343 Total operating revenues 2, 171,150 2,746,670 4,052,060 1,871,730 10,841,610 Operating expenses: { Personal services 808,586 745,183 766,078 2,319,847 I Purchases for resale 187,317 1,135,044 887,337 2,209,698 i . l . Operating materials and supplies 49,595 186,504 163,745 29,968 429,812 Transportation 253,440 6,476 58,665 26,047 344,628 r Utility service 6,882 146,467 39,741 128,439 321,529 : Dumping charges 0 DeprecIation 226,158 295,782 229,709 553,176 1,304,825 (, t Interfund administrative charges 439,860 262,990 785,050 16,900 1,504,800 j Other current charges: i ,. Professional fees 61,557 740,373 875,723 1,677,653 AdVertIsing 367 18,895 1,290 14,933 35,485 Communications 7,059 25,322 14,190 27,908 74,479 Printing and binding 1,799 870 4,001 6,670 Insurance 39,150 43,380 22,380 20,870 125,780 , . Repairs and maintenance 5,701 105,678 16,120 74,255 201,754 ! Rentals 2,054 1,154 160,097 1,072 164,377 i ! , ,: Miscellaneous 10,422 42,120 198 14,809 67,549 Data processing charges 27,980 29,070 28,520 85,570 Taxes 236 18,209 18,445 Provision for estimated uncollectable accounts 4,298 19,251 23,549 Total other current charges 97,031 329,211 984,038 1,071,031 2,481,311 f 7 Total operating expanses 2,068,869 3,107,657 3,027,026 2,712,898 10,916,450 I \. Operating income (loss) 102,281 (360,987) 1,025,034 (841,168) (74,840) ~ " Nonoperating revenues (expenses): I; EarnIngs on Investments 94,786 43,905 239,651 31,660 410,002 Ii Interest expense (493) (11,717) (31,597) (24) (43,831) Amortization of bond discount and Issue costs (1,484) (1,484) ,., Gain (loss) on exchange of assets (4.380) 68,676 (1,980) 62,316 ~. Other 508,043 44,657 163 552,863 t ~ L1 Total nonoperating revenue (expanses) 89,913 608,907 249,247 31,799 979,866 Income (loss) before transfers 192,194 247,920 1,274,281 (809,369) 905,026 ( ! Transfers in 1,500,000 178,670 1,678,670 i ; I.., Transfers out (115,490) (116,000) (231,490) ( , Changes In net assets 76,704 131,920 2,774,281 (630,699) 2,352.206 I Total net assets. beginning, as previously reported, i t..... before adjustment for GASB 34 implementation 3,810,361 2,224,970 6,647,249 (3,056,705) 9,625,875 Adjustment for implementation of GASB 34 - elimination of contributed capital 251,057 1,533,095 1,135,005 14,134,472 17,053,629 Adjustment for change In accounting principle - change In capitalization thresholds (131,209) (565,303) (12,139) (87 ,085) (795,736) Total net assets - beginning, as restated 3,930,209 3,192,762 7,nO,115 10,990,682 25,883,768 ; Total net assets. ending $ 4,006,913 $ 3,324,682 $ 10,544,396 $ 10,359,983 $ 28,235,974 The notes to the financial statements are an integral part of this statement 89 City of Clearwater, Florida Combining Statement of Cash Flows NonmaJor Enterprise Funds ".-1 For the Year Ended september 30, 2002 Recycling MlII'lne& Parking Harborvlew ~ ~ Utility Aviation System . Center Totals 'n ,. CASH FLOWS FROM OPERAnNG , l ACTIVITIES Cash received from customers $ 2, 134,962 $ 2,747,082 $ 4,052,311 $ 1,840.828 $ 10,775,203 ~,. ~ Cash received from other funds Cash payments to suppliers (326,9S7) (2,151.644) (l,015,797) (1,912,613) (5,406,911 ) -.;. I Cash payments to employeee (884,11 B) (774,825) (814,533) (::1,453,476) Cash payments to other funds (739,509) (106.047) (898,B18) (73,167) (1,Bt7,341) , ~ , < Other revenues 508,043 44,657 t63 652,863 Net cash provlded (used) by operating activities 204,398 222,609 1,368,020 (144,689) 1,650.338 ~ ~. CASH FLOWS FROM NONCAPITAL 'i ':. . , ; FINANCING ACTIVITIES , j Operallng transfers In 68,676 1,500,000 178,670 1,747,346 Operatlng transfers out (115,490) (116,OOO) (1,980) (233,470) , \ Interest paid (24) (24) j ! Receipt of cash on loans to/from other funds 357,746 4,321,369 4,679,115 J .i Payment 01 cash on loans tollfom other lunds (521,714) (7,975,044) (6,496,758) Nel cash provided (used) by { 1. noncapltal financing activities 242,256 (569,038) (2, 155,655) 178,646 (2,303,791) , ~ I I , ) CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES 'I Principal payments on debt (1,902) (198,356) (200,258) Interest paid (493) (11,716) (36,533) (48.744) Acquisition of lixed assets (512,667) (68.676) (79,06&) (7.549) (667,878) Sale of fixed assets 2,051 1,980 4.031 Proceeds from Issuance of debt 13,442 13,442 Net cash (used) for capital and related financing activities (497,587) (82,296) (311,975) (7,549) (899.407) CASH FLOWS FROM INVESnNG ACnVITIES Interest on Investments 94,786 43,905 239,651 31.660 410,002 Net cash provided by Investing activltles 94,786 43.905 239,651 31,660 410,002 Net increase (decrease) in cash and cash equivalents 43,853 (384.820) (859,959) 68,068 (1,142,858) Cash and cash equivalents at beglnnlng of year 1,395.768 857,124 3,240,532 50,096 5,543,510 Cash and cash equivalents at end of year $ 1,439,611 $ 472,304 $ 2,380,573 $ 108.164 $ 4,400,652 , j Cash and cash equivalents classified as: Cash on hand and in banks $ $ 817 $ 22,050 $ 100 $ 22,967 Equity in pooled cash and Investments 1 ,439,611 471,487 2,342, 150 108,064 4,361,312 Restricted equity in pooled cash and investments 16,373 16,373 Total cash and cash equivalents $ 1,439,611 $ 472,304 $ 2,380,573 $ 108,164 $ 4,400,652 The notes to the financial statements are an integral part of this statemenl , .. . 90 ("' \ l [ . f"i , \ fj r-i \. ! f^\ l i f ' L f i I t. ~ r , I ! i t 1 r 1 i I, f ;: t ( i j ! \. U ( , f ~ \, ~ J f i LJ r ! f i City of Clearwater, Florida Combining Statement of Cash Flows Nonmajor Enterprise Funds For the Year Ended September 30, 2002 Recycling Utility Marine & Aviation Parking SysIem Harborvlew Center Totals Reconciliation of operating Income to net cash provided by operating actiVities: Operating income $ t02,281 $ (360,987) $ 1,026,034 $ (841,168) $ (74,840) Adjustments to Reconcile Operating Income to Net Cash Provided by Operating Activities: Other Revenue from Nonoperating Section of Income Statement 508,043 44,657 163 552,863 Depreciation 226,158 295,782 229,709 653,176 1,304,825 Non-cash land rental expense 136,499 136,499 Provision lor uncollectible accounts (1,209) (1,209) Change In assets and lIabnitles; (Increase) In accounts receivabie (30,661 ) (31,410) (62,071) (Increase) in Inventory (10,423) (10,423) Increase (decrease) in accounts and contracts payable (38,639) (160,576) (19,675) 174,042 (62,846) Increase (decrease) In deposits 412 tt9 (11,992) (11,461) Increase in deferred revenue 132 t 2,600 12,632 (Increase) in net pension asset (61,041) (38,640) (40,320) (140,001) Increase (decrease) in accrued payroll 5,509 8,996 (8, t 35) 6,372 Tolal adjustments 102,117 683,596 342,986 696.479 1,725,178 Net cash provided by operating activIties $ 204,398 $ 222,609 $ 1,368,020 $ (144,689) $ t,650,33B Noncash Investing, capital and financing activities: GaIn (loss) on exchange of assets $ (4,380) $ 68,676 $ (t,980) $ $ 62,316 Change In fair value of investments $ $ $ (43) $ $ (43) The notes to the lirlaOCial statements are an integral part of this statement 91 J. ( f 1 ; . . T""1 .. ; f 1 , ., .;:, " .':" " , , . , i j r ) , ; ~j "~ , l 1 ..J This Page Intentionally Left Blank r 1 ~ f I J 92 lJ ("1 \ : n \ J rI (. i r-1 I i \ , ( . i ; f . ~ ". i (, {' ~ ! - ! , , , , /-,- t; r : Li j : t ; Ii , \ : tJ E' f i ;. \ 1.: s; ~ Internal Service Funds Internal service funds are used to account for services and commodities furnished by a designated department to other departments within the City or to other govemments on a cost reimbursement basis. Garage Fund . to account for the cost of automotive and other motorized equipment of the City. The acquisition cost of new or upgraded equipment is financed through user departments and the asset value is simultaneously contributed to the Garage Fund. The cost of replacement of existing equipment is financed by the Garage Fund. Administrative Services Fund - to account for various support activities including information technology, printing, mailing, and telephone services. The cost for these services is charged to user departments based on the cost of providing units of service. General Services Fund - to account for various support activities including building maintenance and custodial services for all City departments and facilities. The cost for these services is charged to user departments based on the cost of providing units of service. Central Insurance Fund - to account for the City's limited self.insurance program wherein all funds are assessed charges based on damage claims incurred and on managemenfs assessment of indMdual funds' risk exposure. All claims and premiums are paid out of this fund, together with other costs necessary to administer the program. Medical insurance premiums are also paid from this fund. 93 ~ : '. , -;. ~ City of Clearwater, Florida n Combining Statement of Net Assets l.i Internal Service Funds September 30,2002 n Governmental Business-type 1 i Genel'lll Central Activities Garage Administrative Activities Services Insurance Total Fund Services Total f1 , ASSETS i j Current assels: Cash on hand and In banks $ $ $ $ $ 1,900 $ 1,900 r-i . , Equity in pOOled cash and investments 654,513 19,723,874 20.378.387 3,874,374 930.670 4,605,244 i ; t J Due from other funds 304.567 627.593 932,160 179,626 295,321 474,847 Inventories, at cost 185,675 185,676 .f ., Prepalcl expenses and other assets 1.639.086 1 ,539.086 Total current assets 959,080 21.890.653 22,849,633 4,239.475 1.228.091 5,467.566 Noncurrent assets: Interest recel~ble 5,793 5.793 '1 1 Advances to ottter funds 3,757,385 3,757,386 i Net pension asset 314,768 79,593 394,351 475,308 867.047 1,342,355 ( J Capital assets: land and other nondepreciable assets 696,681 696.681 Capital assets, net of accumulated depreciation 136.495 41.123 1n,618 12.059,915 2,559,193 14,619.108 Total noncurrent assets 451,253 3,878,101 4,329.354 13.237,697 3.426.240 16,663.937 Total assets 1.410.333 25,768,654 27,178,987 17,4n,172 4.654,331 22,131,503 , 1 LlABIUTIES j Currentlfabllllles: Accounts and contracts payable 339 142,348 142,687 117,446 33,102 150,648 Accrued payroll 26,658 8,873 35,531 35,996 69,058 105,054 Accl\led compensated absences 72, no 24,543 97,3t3 107,939 275,337 383.276 Cueto other funds 300.000 300,000 Current portion of long-tenn Uabllllles: Notes, loan pool agreement and acquisItJon contracts 4,511 4,511 2.354.083 235,026 2,689,109 Total current Iiabilltles(payable from current assets) 104.278 175,764 280,042 2,615,464 912.623 3.527,987 Noncurrent liabilities: NOles,loan pool agreement and acquIsition contracts 21,171 21,171 6.241,315 469.616 6,710,931 Advances from other funds 271,070 271,070 Claims payable 11.440,278 11,440,278 \ Total noncurrent liabilities 21,17t 11,440.278 11,461,449 5,241,315 740,686 5,982,001 Total liabilities 125.449 11,616,042 11.741,491 7,856,779 1 ,653,209 9,609.988 NET ASSETS Invested in capital assets (net of related debt) 110,813 41,123 151.936 5,161,198 1,854,551 7,015,749 , Restricted for employees' pension benefits 314,768 79,693 394,351 475,308 867,047 1 ,342,356 Unrestricted 869,313 14,031.896 14.891.209 3.983,867 279,624 4,263,411 Total net assets $ 1,284,884 $ 14,15'2,612 $ 15,437,496 $ 9,620.393 $ 3,001,122 $ 12,621,515 I ..1 The notes to the financial statements are an integral part 01 this statement 94 The notes to the financial statements ate an integral part of this statement 95 The notes to the financial statements _ an Integral part of this statement c j 96 f .j n f j l! r 1 i i , I I. J f i I i \. ..~ r t I {. ; '- . r '. I t. . r I I 7 ; \ J ( , I ! ! 1 { i L; r , J 1 I ~ L) f i 1 ~ [ r-; City of Clearwater, Florida Combining Statement of Cash Flows Internal Service Funds For the Year Ended September 3D, 2002 Governmental Busil18&s-type General Central ActIvities Garage Administrative Activities Services Insurance Total Fund services Total Reconciliation of operating Income'to net cash provided by operallng actIvltfes: Operating income Ooss) $ 199,708 $ (1,611.882) $ (1,311,974) $ (118,434) $ 780,971 $ 882,637 Adjust:nents to reconcile op8rating income to mll cash provided by operaling ectIvilles: Other revenue from nonoperaling section of Income statement 182,427 3 182,430 Depreciation t 2,452 6.669 19,021 3.095.639 525,096 3,620,735 Change in assets and liabmties: Decrease in accounts receivable 76 76 (Increase) in inventory (J 09,91 0) (109,910) (Increase) decrease in prepaid expenses 142 (423,032) (422,890) Increase (decrease) In accounts snd contracts payable (16,478) 2.002,570 1,986,002 (439,750) 5,675 (434,175) (Increase) In net pension asset (8t,761) (25;20t) (106,962) (117.601) (234,082) (351,683) Increase (decrease) In accrued payroll 5,tl1 (15,296) (10.185) 23.327 13,555 36,882 Total adjustments (80,534) 1.545,610 1,465.076 2,634,132 310,223 2,944,355 Net cash provIded by operating ectIvltles $ 119,174 $ 33,928 $ 159.102 $ 2,616,698 $ 1.091, t94 $ 3,606,892 Noncash Investing, capital and financing activities: Gain (loss) on exchange of assets $ $ $ $ 198,077 $ (330,848) $ (134.771 ) The notes to the financial statements are an integral part oIlhis statement 97 :;:r-1 1\ ~ j r ~ j . : ; 1 J 11 .... _1 Ii '\ 1 4 , J ! 1 , I ~ j This Page Intentionally Left Blank , 1 :.. .J < 1 ; ~ .~ I 1 ) .-., i ; } .! T , I l , J : f " ! , , ':: t . j ~ 1 , , : 1 i. ) ~ I . J i i i ,j 98 r \ fJ r --] II f") rJ I ; t i f j r I . , f ' J ! 1 ! t .i r' ~ . 1 , f ! U ( ~ f {; l ! ,- - . f r , , l.i } 1 I ; i f .1 ff , , \....,J ,J Fiduciary Funds FIduciary Funds are used to account for resources that are managed in a trustee capacity or as an agent for other parties or funds. Employees' Pension Fund - to acoount for the financial operation and condition of the major employee retirement system. Firemen's Relief and Pension Fund - to account for the financial operation and condition of the Firemen's Relief and Pension Fund, closed to new members in 1962, containing 48 retired members and no active members. Police Supplemental Pension Fund - to account for the financial operation and condition of a supplemental pension plan funded by the State for swom police officers. Firefighters Supplemental Pension Fund - to account for the financial operation and condition of a supplemental pension plan funded by the State for firefighters. Treasurer's Escrow Agency Fund - to account for the receipt, custody, and expenditure of funds held temporarily in trust for other parties. 99 City of Clearwater, Florida Combining statement of Flduolary Net Assets Fiduciary Funds September 30, 2002 Defined Benefit Pension Trust Funds Defined Contribution Pension Trust Funds Police Areflghters Supplemental Supplemental Emplovees' Rremen's Totals ASSETS Cash on hand and in banks Equity in pooled cash and Investments $ $ $ 17,948 $ $ 17,948 697,627 3,397,492 4,095,119 377,817.701 1,280.143 9,329,372 8,470,023 396,897,295 1,907,068 50,761 43,265 2,001,094 41,643 41,643 1,907 .068 60,761 84,908 2,042,737 380,422,452 4,677,635 9,398,081 8,654.931 403,053,099 407,002 407,002 407,002 407,002 Managed investment accounts, at fair value Receivables: Interest and dividends Due from others Total recelvables Total assets L1ABI UTI ES Accounts payable TotalUabllities NET ASSETS Net assets held In trust for pension benefits (8 schedule of funding progress for each plan Is presented on page 75) $ 380,016.450 $ 4.677.635 $ 9,398.081 $ 8,654,931 $ 402,646,097 The. notes to the financial statements are an Integral part of this statement 100 :r 1 n ~ -l f 1 i :' ~ i f 1 i i j ~ 1 i j t 1 , ~ ; ) , 1 \ : .i If I ~ ~ 11 , [ j ; . I l..;i i .J j I 11 101 ,~. '1 '. i n ~ J City of ClearWater, Florida Statement of Changes In Assets and liabilities Agency Fund For the Year Ended September 30, 2002 y .~ i: 1 )- ; j Balance Balance October 1, September 30, 2001 Additions Deductions 2002 TREASURER"S ESCROW FUND ASSETS Equity In pooled cash and Investments $ 180,536 278,548 174,922 $ 284.162 LIABILITIES Deposits: Property owners $ 21,944 $ 21,944 Developers 15,558 100,000 115,558 other miscellaneous payables: Special purpose funds 8.097 1,275 1,450 7,922 other 134,937 177,273 173,472 138,738 Total Uabilities $ 180,536 278,548 174,922 $ 284,162 r' ~ ~ i ~ .i " l ; 1 ";i, 1 , 1. I. , ; ..: : ! 1 ~ i ! ~ : j ;j , ! ! j i i I ~ ..1 r \ . I , I i I l j The notes to the fmancial statements are an integral part of Ihls statement i ) : ~ j j 102 rl t J rJ r[ t 1 fJ "-r I i \ j r-, I' I ' I ! l 1 (1 I ! l ! I) ~ ~ l__.~ Capital Assets Used in the Operation of Governmental Funds IT l : f f ~ i j' i U r 1 i i ., I [ l ) I 1 L1 ( [ U r ~ ! ( U ri i 1 i.J 1 ~ \ : ! . L.' ! i lJ. r : ~ ' (I.... ~ 103 IT , :, .,;. :1 q 11 ! j j j n if ,f\ U .f'1 ! } d 11 i ) This Page Intentionally Left Blank '1 i ! L j ,,: I , i .: i L.i o 1 . I .j ! , ~ .: l ~ l .! 1 , ; I , ., ~~ , : i .. I U 1 .J 104 /"1 I , I : I. ! r-' i : I \ I i city of ClealWater, Florida Capital Assets Used In the Operation of Governmental Funds Comparative Schedules By Source 1 September 30, 2002 and 2001 [I rJ r l l I' I - t 2002 2001 88 restated 2 Schedule of (;Ien......1 Fixed A......ts. Land $ 39,914,725 $ 35,595,531 Buildings 37,933,961 38,337,060 Improvements Other Than Buildings 62,455,386 52,055,559 Equipment 33,070,403 31,828,879 Infrastructure 1,076,247 Construction In Progress 11.5SO,n5 759.064 $ 176,001,487 $ 158.576,113 [ ! I ! I , l i t 1 f l i r 1 I . I ( /' SoumRA of Investments in GAnem I FiXed A_l'l' General Fund Revenue $ 124,200,861 $ 114,631,019 General Obligation Bonds 6,297,870 6,297,870 Revenue Bonds 13,111,869 6,685,490 Notes, Mortgages and Other Obligations 4,910,150 4,496,562 Special Assessments 2,012, 192 2,012,192 Federal and Stale Grants 10,435,417 9,530,732 Gifts 6,414,522 6,303,843 Contributions from Developers 7,539,144 7,559,143 Undetermined Investments Prior to July 1,1954 1,079,462 1.079.462 $ 176,001.487 $ 158,576,113 ti ; j l,l , 1 I ! U ~ 1 if ~ j [\ I ! l j ,- , i ; ! i 'LJ ! 1 i ! ~ ~ t.J , This schedule presents only the oapital asset balances related to govemmentaJ funds. Accordingly, the capital assets reported In Internal eervlce funds are excluded from 1he above lII'IIOWI1B. 2 Effective October 1, 2001, the City Implemented a new capllaBzatlon poley that resulted In a prior period adjustment to record a wrltedown of fixed assets. See Note II-C on page 47. The notes to the financial statements are an Integral part of this statement 105, 106 , I....; I 1 ! i ' I l 1 ! 1 ( ~ ! i l j r: \ ; l i. II ) 1..: t. f ; L, 'l..l .f! (1 I i I i fI I . J ; , , fi Function and Activity FIXed Assets Unailocated By Function General Government Legislative Executive Rnanclal & Administrative Legal Planning Comprehensive Planning Other Genelal Government ( } t ( i . I [ l ) Pu bile Safely: Law Enforcement Are Control Protective Inspections Emergency and DIsaster Relief Ambulance and Rescue Services Physical Environment: Solid Waste I Recyling ConselVation and Resource Management Other Physical Environment Transportation: Road and Slreet Facilities Airports Parking Other Transportation Service Economic Environment Employment OpportunIty and Development Indusby Development Housing and Urban Development Other Economic Environment Human ServIces: Other Human SelVices Culture and Recreation: libraries Parks & Recreation Cultural Services Cultural Centers Special Recreation Facilities Total Conslruction in Progress City of Clearwater, Rorlda Capital Assets Used In the Operation of Governmental Funds Schedule of Changes By Function and Activity , For the Year Ended September 30, 2002 Restated 2 General fixed Assets 10/01101 General fixed Assets 10101101 PrIor PerIod Restatement $ 34,325.399 $ (16,181,1m $ 18.144.222 $ Additions $ . $ 18.144.222 25,166 640,801 t.179,515 256,966 6,285 22,435 26.812.065 28,943.233 12,960,341 6,652,368 245,265 450,005 1.481,635 21.789.614 59.445 105,155 569.218 733;818 71 ,604,842 531,092 1,394,945 792.160 74.323,039 14,629 2.089,530 1.322,207 34,738 3.481,104 62.379 t4,801.054 25,317 (JJ57 1,704 58,997 1.911.740 42,088,752 205.727.338 759,064 (21,635) (165,554) (62,021) (90,802) (11,949) (1,054,237) (1,406.198) (4,839,360) (2,561 ,534) (57,164) (46,137) (144,571) (7.648,766) (43,505) (14.614) ~~:~:~ (15,982,604) (351,623) (1,358,957) (247,420) (17.940,604) (14,629) (660,704) (623,460) (1.613) (1 ,300.4061 (39,002) 219,983 (3,147,522) (1,704) (213,489) (201.424) (3.159,156) (47,910,289) 3,531 475,247 1,117,494 166.164 6,285 10,468 25.757,828 27,537,035 8,120.981 4,090,834 188,101 403,868 1,337.064 14.140,848 1~,940 90,541 392.357 498.838 55,622,238 179,469 35,988 544,740 56.382.435 1,428,826 698,747 33.125 2,160.698 23.m 15,021,037 22, 169,735 28,508 1.710.316 38.929,596 157,817,049 759.064 18.021 14.474 175.025 207,520 529,683 680,335 9,319 22.742 1.442.279 2,551 2,551 1,460,572 1,200 .1.461,n2 861,751 2,009,087 3.940.409 8.811,247 9,925,369 10.791,711 General Fixed Assets Deductions 9130102 (11,768) (198,319) (21.370) (8,321) (376.254) (612.032) (85,836) (14,346) (18,855) (117,0371 (8,350) (179,469) (43 849~ (231 :668 (2,326,481) (4,508) (2.330.969) (3,291,706) 3,531 481,500 935,649 144,794 6,285 4,165 25.556.599 27.132,523 8,555,028 4,956,823 180,585 403,868 1.359.808 15,466,090 15,940 90,541 394.908 501.389 57,074,460 35,988 502.091 57,612,539 1,428,825 698,747 33.125 2.160,698 23.377 13,556,327 24,174,314 28,508 5,650,725 43.409.874 164,450,712 $ 206.486.402 $ (47,910,289) $ 158,576,113 $20,717.080 $ (3.291,706) $ 176.001.487 11.550,775 1 This schedule presents only the cap/tal asset balances related to goverMlel1ta1 funds. Accordingly, Ile capital assets reported In Internal service funds are excluded from the above amounts. 2 Effecllve Oclober " 2001 the CnY Implemented a new capItaIIzaIIon policy that resulted in a prior period reslalement to record a wriledown of fixed assets. See Note lIaC on page 47. The notes to the financial statements are an integral part of this statement. 107 APPENDIX C FORM OF ORDINANCE 6915-01 AND RESOLUTION 03-35 ORDINANCE NO. 6915-01 AN ORDINANCE PROVIDING FOR WATER AND SEWER REVENUE BONDS, SERIES [TO BE DETERMINED] OF THE CITY OF CLEARWATER, FLORIDA, TO BE ISSUED IN ONE OR MORE SERIES OVER ONE OR MORE YEARS; TO FINANCE OR REFINANCE THE COST OF DESIGN, ACQUISITION, CONSTRUCTION OR RECONSTRUCTION OF IMPROVEMENTS TO THE CITY'S WATER AND SEWER SYSTEM; PROVIDING FOR THE PAYMENT OF THE BONDS FROM THE NET REVENUES OF THE CITY'S W ATERAND SEWER SYSTEM AND CERTAIN OTHER MONEYS PLEDGED THEREFOR; PROVIDING FOR THE RIGHTS OF THE HOLDERS OF SUCH BONDS; AMENDINGORDINANCENO. 3674-84, ORDINANCENO. 5355- 93 AND ORDINANCE NO. 6311-98 WHICH AUTHORIZED THE PARITY BONDS TO ALLOW DELNERY OF ADDITIONAL BONDS PARITY CERTIFICATE BY FINANCIAL SERVICES ADMINISTRA TOR; MAKING CERTAIN OTHER COVENANTS AND AGREEMENTS IN CONNECTION THEREWITH; PRO- VIDING CERTAIN OTHER MATIERS IN CONNECTION THEREWITH; AND PROVIDING AN EFFECTNE DATE. BE IT ORDAINED BY THE CITY COMMISSION OF THE CITY OF CLEARWATER, FLORIDA: SECTION 1. AUTHORITY FOR TillS ORDINANCE. This Ordinance is enacted pursuant to Chapter 166, Part II, Florida Statutes, and other applicable provisions of law and pursuant to Section 16R of Ordinance No. 3674-84, as amended and supplemented (the "Original Ordinance") and is supplemental to the Original Ordinance. SECTION 2. DEFINITIONS. The following terms shall have the following meanings herein, w1less the text otherwise expressly requires. Words importing singular number shall include the plural number in each case and vice versa, and words importing persons shall include fInns and corporations. "Accreted Value" shall mean, as of any date of computation with respect to any Capital Appreciation Bond, an amolUlt equal to the principalamolUlt of such Capital Appreciation Bond (the princi- pal amolUlt at its initial offering) plus the interest accrued on such Capital Appreciation Bond from the date of delivery to the original purchasers thereof to the Interest Payment Date next preceding the date of computation or the date of computation if an Interest Payment Date, such interest to accrue at a rate not 1 exceeding the legal rate, compounded semi-annually, plus, with respect to matters related to the payment upon redemption or acceleration of the Capital Appreciation Bonds, if such date of computation shall not be an Interest Payment Date, a portion of the difference between the Accreted Value as of the immediately preceding Interest Payment Date and the Accreted Value as of the immediately succeeding Interest Payment Date, calculated based on the asswnption that Accreted Value accrues during any semi-annual period in equal daily amounts on the basis of a 360 day year consisting of 12 months of 30 days each. "Act" shall mean Chapter 166, Part II, Florida Statutes, and other applicable provisions oflaw. "AdditionalBonds" shallmeanBonds issued incompliance with the terms, conditions and limitations contained herein and in Section l6R of the Original Ordinance, which (i) shall have a lien on the Pledged Revenues equal to that of the Bonds, (ii) shall be payable from the Pledged Revenues on a parity with the Bonds, and (iii) rank equally in all other respects with the Bonds. "Amortization Installments" with respect to any Term Bonds ofa Series, shall mean an amount or amounts so designated which is or are established for the Term Bonds of such Series by subsequent resolution of the Issuer and established with respect to such Term Bonds, provided that (i) each such installment shall be deemed to be due on such interest or principal maturity date of each applicable year as is fIxed by subsequent resolution of the Issuer and shall be a multiple of$5,000 principal amount (or $5,000 Maturity Amount, in the case of Capital Appreciation Term Bonds), and (ii) the aggregate of such installments for such series shall equal the aggregate principal amount (or Maturity Amount, in the case of Capital Appreciation Term Bonds) of Term Bonds of such Series authenticated and delivered on original issuance. "Authorized Investments" shall mean, with respect to a Series of Bonds, any of the following if and to the extent the same are at the time legal for investment of municipal funds: (1) Bonds or other obligations which as to principal and interest constitute direct obligations of, or are unconditionally guaranteed by, the United States of America, including any of the federal agencies and federally sponsored entities set forth in clause (3) hereinafter to the extent guaranteed by the United States of America. In the event these securities are used for defeasance, they shall be non-callable and non-prepayable; (2) Obligations of any of the following federal agencies or federally sponsored entities which obligations represent the full faith and credit (guaranteed obligations) of the United States of America, in the event these securities are used for defeasance, they shall be non-callable and non-prepayable, (including but not limited to) the following: a. Export-Import Bank; b. Fann Credit System Financial Assistance Corporation; 2 c. Rural Economic Corrnnunity Development Administration (formerly the Farmers Home Administration); d. General Services Administration; e. U.S. Maritime Administration; f Small Business Administration; g. Government National Mortgage Association (GNMA); h. U.S. Department of Housing & Urban Development (PHA's); L Federal Housing Administration; and J. Federal Financing Bank (3) Direct obligations of any of the following federal agencies or federally sponsored entities which are not fully guaranteed by the full faithand credit of the United States of America, inthe event these securities are used for defeasance, they shall be non-callable and non-prepayable: a. Federal National Mortgage Association (FNMA); b. Federal Home Loan Mortgage Corporation (FHLMC); c. Resolution Funding Corporation (REFCORP); d. Student Loan Marketing Association (SLMA); e. Federal Home Loan Bank Systems (FHLB); and f Obligations of other Government Sponsored Agencies (approved by the Insurer). The following obligations may be used as Permitted Investments for all purposes other than defeasance investments in refunding escrow accounts. (4) Commercial paper which is rated at the time of purchase in the highest classification (without regard to qualifier), "A-l "by S&P and "P-l "by Moody's and which matures not more than 270 days after the date of purchase. (5) Investment agreements the provider of which is rated in one of the two highest rating categories, without regard to qualifiers, by two Rating Agencies under which the provider agrees to periodically deliver, on a delivery versus payment basis, such securities as are described in clauses (1-4) above, (6) Investment agreements the provider of which is rated in one of the two highest rating categories, without regard to qualifiers, by two Rating Agencies and which are continuously and fully secured by such securities as are described in clauses (1-3) above, which securities shall have a market value at all times at least equal to 102% of the principal amount invested under the investment agreement (marked to market at least weekly). 3 (7) The pooled investment program of the State of Florida administered by the State Board of Administration, known as the Local Government Swplus Funds Trust Fund, established pursuant to Chapter 218, Part IV, Florida Statutes, as amended. (8) Other fonns of investments (including repurchase agreements) approved in writing by the Bond Insurer with notice to Standard & Poor's. With respect to any Series of Bonds issued hereunder, such additional investments as are approved by subsequent resolution of the Issuer adopted prior to the issuance of such Series of Bonds. "Bond Insurance Policy" shall mean the mwricipal bond new issue insurance policy issued by a Bond Insurer that guarantees payment of principal of and interest on the Bonds or any Additional Parity Bonds. "Bond Insurer" shall mean the provider of a Bond Insurance Policy for a Series of Bonds so designated in a supplemental resolution of the Issuer. "Bondholder" shall mean a registered owner of a Bond as shown on the registration books of the Registrar. "Bond Service Requirement" for any Fiscal Year, as applied to the Bonds of any series, shall mean the SlUl1 of (1) the amount required to pay the interest becoming due on the Bonds of such series during the Fiscal Year, except to the extent that such interest shall have been provided by payments into the Sinking Fund out of bond proceeds for a specific period of time or by payments of investment income into the Sinking Fund from the Bond Service Account or any subaccounts therein. Whenever such income is applied in calculating a Bond Service Requirement for any purpose, such income shall also be excluded in the computation of Gross Revenues for such purpose. (2) the amount required to pay the principal of Serial Bonds of such series maturing in such Fiscal Year. (3) the Amortization Installments for Tenn Bonds of such series for such Fiscal Year. (4) in the event the Issuer has purchased or entered into an agreement to purchase Federal Securities or Authorized Investments from moneys in the Bond Service Account, then the income received or to be received on such Federal Securities or Authorized Investments from the date of acquisition thereofto the date of maturity thereof, unless otherwise designated for other purposes, shall be taken into consideration in calculating the payments which will be required to be made into 4 the Sinking Fund and the Bond Service Account therein. Whenever such income is applied in calculating a Bond Service Requirement for any purpose, such income shall also be excluded in the computation of Gross Revenues for such pmpose. "Bonds" shall mean the Parity Bonds, Series 2001 Bonds, and any Additional Bonds permitted to be issued hereunder from time to time in accordance with the provisions hereof "Capital Appreciation Bonds" shall mean Bonds the interest on which is payable only at maturity or redemption, as determined by subsequent resolution. "Capital Appreciation Term Bonds" shall mean Capital Appreciation Bonds of a series all of which shall be stated to mature on one date, which shall be subject to retirement by operation of the Bond Amortization Account, and the interest on which is payable only at maturity or redemption. "City Manager" shall mean the City Manager of the Issuer. "Clerk" shall mean the City Clerk of the Issuer. "Consulting Engineers" shall mean such qualified and recognized consulting engineers, having a favorable repute for skill and experience in the construction and operation of such facilities as the System, at the time retained by the Issuer to perform the acts and carty out the duties as herein provided for Consulting Engineers. "Cost of Operation and Maintenance" of the System shall mean the current expenses, paid or accrued, of operation, maintenance and repair of the System as calculated in accordance with sound accounting practice, but shall not include any reserves for renewals and replacements, for extraordinary repairs or any allowance for depreciation or amortization. "County" shall mean Pinellas County, Florida, a political subdivision of the State. "Federal Securities" shall mean only direct obligations of, or obligations fully guaranteed as to principal and interest by, the United States of America. "Finance Director" shall mean the Financial Services Administrator of the Issuer or her designee. "Fiscal Year" shall mean the period commencing on October I of each year and ending on the succeeding September 30, or such other period as is at the time prescribed by law. "Gross Revenues" shall mean all income or earnings, including any income from the investment of funds as herein provided, derived by the Issuer from the operation of the System. 5 "Increased Capacity Requirements" means any increased demand upon or usage of the capital facilities of the System resulting from additional connections thereto, or from substantial changes to or in the use of properties connected thereto. "Issuer" or the "City" shall mean the City of Clearwater, Florida. "Maturity AmOlUlt" means the amolUlt payable upon the stated maturity of a Capital Appreciation Bond equal to the original principal amolUlt thereof plus all accrued interest thereon from the date of issue to the date of maturity. ''Maximum Bond Service Requirement" shall mean, as of any particular date of calculation, the greatest amolUlt of aggregate Bond Service Requirement for the then current or any future Fiscal Year. "Mayor-Commissioner" shall mean the Mayor-Commissioner or the Vice Mayor of the City Commission of the Issuer, or such other person as may be duly authorized by the Mayor-Commissioner to act on his or her behalf. ''Net Revenues" of the System shall mean the Gross Revenues after deduction of the Cost of Operation and Maintenance. "Original Ordinance" shall mean Ordinance No. 3674-84, as amended and supplemented, of the Issuer, authorizing the Parity Bonds. "Parity Bonds" shall mean the Issuer's outstanding Water and Sewer Refunding Revenue Bonds, Series 1993 and Water and Sewer Refunding Revenue Bonds, Series 1998. "Paying Agent" shall mean any paying agent for Bonds appointed by or pursuant to a supplemental resolution and its successors or assigns, and any other Person which may at any time be substituted in its place pursuant to a supplemental resolution. "Payment Date" shall mean, with respect to payment to the Bondholders of principal or interest on the Bonds, or with respect to the mandatory amortization of Term Bonds, the date upon which payment of such principal, interest or Amortization Installment is required to be made to the Paying Agent. "Person" shall mean an individual, a corporation, a partnership, an association, a joint stock company, a trust, any unincorporated organization or governmental entity. "Pledged Revenues" shall mean the Net Revenues. "Project Costs" shall mean all costs authorized to be paid from the Construction FlUld pursuant to Section 17 hereof to the extent pennitted lUlder the laws of the State. It is intended that this definition be 6 broadly construed to encompass all costs, expenses and liabilities of the Issuer related to the Project which on the date of this Ordinance or in the future shall be permitted to be funded with the proceeds of any Series of Bonds pursuant to the laws of the State. "Projects" sha11 meanthe design, acquisition, constructionorreconstructionofcapitalimprovements to the System undertaken by the City from time to time, all as may be designated by subsequent resolution of the Issuer adopted with respect to any Series of Bonds. "Put Bonds" sha11 mean the Term Bonds so designated by resolution or ordinance of the Issuer at or prior to the time the Bonds of any series are sold. "Registrar" sha11 mean any registrar for the Bonds appointed by or pursuant to supplemental resolution and its successors and assigns, and any other Person which may at any time be substituted in its place pursuant to supplemental resolution. "Reserve Requirement" sha11 be such amount as determined by subsequent Resolution of the Issuer relating to a specific Series of Bonds adopted prior to the issuance of such Bonds, which may not exceed the lesser of (i) the Maximum Bond Service Requirement, (ii) 125% of the average annual Bond Service Requirement or (iii) the largest amount as shall not adversely affect the exclusion of interest on the Bonds from gross income for Federal income tax. purposes. "Serial Bonds" sha11 mean any Bonds for the payment of the principal of which, at the maturity thereof, no AmortizationInstallments are required to be made prior to the stated date of maturity of such Serial Bonds. "Series" or "Series of Bonds" or "Bonds of a Series" shall mean all Bonds designated as being of the same Series issued and delivered on original issuance in a simultaneous transaction, and any Bonds thereafter delivered in lieu thereof or in substitution therefor pursuant to this Ordinance. "System" sha11 mean the complete combined and consolidated water system and sanitary sewer system of the Issuer now owned by the Issuer, or hereafter constructed or acquired by the Issuer, together with all lands or interests therein, including plants, buildings, machinery, franchises, pipes, mains, fixtures, equipment and all property, real or personal, tangible or intangible, now or hereafter owned or used in cormection therewith, and including any undivided or partial ownership interests therein. "Term Bonds" shall mean the Bonds of a series all of which shall be stated to mature on one date and which shall be subject to retirement by operation of the Bond Amortization Account. "2001 Bonds" shall mean the Series ofBonds initially issued Wlder this Ordinance and designated as Series 2001 Bonds. 7 "2001 Project" shall mean the Project or Projects authorized to be financed with the proceeds of the Series 2001 Bonds as identified by subsequent resolution of the Issuer adopted prior to the issuance of the Series 2001 Bonds, consisting of design, acquisition, construction or reconstruction of capital improvements to the System undertaken by the City from time to time, a portion of the cost of which are to be paid from the proceeds of the Series 2001 Bonds SECTION 3. FINDINGS. It is hereby ascertained, determined and declared that: A. The Issuer now owns, operates and maintains the System and is empowered to maintain, operate, improve and extend such system and regulate and fix reasonable rates and charges for the services furnished thereby. B. The Issuer derives Gross Revenues from rates, fees and charges made and collected for the services and facilities of the System supplying water and sanitary sewerage services and the Gross Revenues are not pledged or encwnbered in any manner, except for payment of the Parity Bonds. C. Any Series of Bonds and the project to be fimded with the proceeds of such Series of Bonds, shall be issued and such projects shall be undertaken upon approval by subsequent resolution of the Issuer as provided by law. The proceeds of any Series of Bonds shall be applied as provided in a supplemental ordinance or resolution. D. Section 16R of the Original Ordinance provides for the issuance of Additional Bonds under the terms, limitations and conditions provided therein. E. The Issuer has complied, or will comply prior to the delivery of the Bonds, with all the terms, conditions and restrictions contained in Section 16R of the Original Ordinance. The Issuer is therefore legally entitled to issue the Bonds as Additional Bonds within the authorization contained in the Original Ordinance and the covenants in the Original Ordinance shall apply to the Bonds. F. The Bonds herein authorized shall be ona parity and rank equally, as to lien on and source and security for payment from the Pledged Revenues and in all other respects, with the Parity Bonds. G. The estimated Pledged Revenues will be sufficient to pay all of the principal of and interest on the Bonds, as the same become due, and to make all required sinking fimd, reserve and other payments required under this Ordinance and the Original Ordinance. H. The principal of and interest on the Bonds and all required sinking fimd, reserve and other payments shall be made solely from the Pledged Revenues as herein provided. The Issuer shall never be required to levy ad valorem taxes on any property therein to pay the principal of and interest on the Bonds or to make any of the required sinking fimd, reserve or other payments, and any failure to pay the Bonds shall not give rise to a lien upon any property of or in the Issuer, except the Pledged Revenues. 8 I. The total indebtedness of the Issuer, within the meaning of the Issuer's charter, does not exceed twenty per centum (20%) of the current assessed valuation of all real property located in the Issuer, and will not exceed such amount after issuance of the Bonds. SECTION 4. AUTHORIZATION OF SERIES 2001 BONDS. There is hereby authorized the issuance of the initial Series of Bonds hereunder to be designated the Series 2001 Bonds, in a principal amount of not to exceed $62,000,000, subject to such tenns and conditions as set forth herein and in subsequent Resolutions of the Issuer adopted prior to the issuance of the 2001 Bonds. The proceeds of which shall be used to pay the costs of capital improvements to the System, the costs of issuing the 2001 Bonds, including any municipal bond insurance, and to fimd a debt seIVice reserve fimd. SECTION 5. ORDINANCE TO CONSTITUTE CONTRACT. In consideration of the acceptance of the Bonds by the Bondholders fromtime to time, this Ordinance shall be deemed to be and shall constitute a contract betweenthe Issuer and such Bondholders. The covenants and agreements herein set forth to be performed by the Issuer shall be for the equal benefit, protection and security of the legal Bondholders of any and all of such Bonds, all of which shall be of equal rank and without preference, priority or distinction of any of the Bonds over any other thereof, except as expressly provided therein and herein. SECTION 6. AUTHORIZATION OF BONDS. Subject and pursuant to the provisions hereof and as shall be described in subsequent resolutions of the Issuer to be adopted prior to the issuance of any Series of Bonds, obligations of the Issuer to be known as "Water and Sewer [Refimding] Revenue Bonds, Series [To Be Determined]" are authorized to be issued in one or more series (including Additional Bonds) from time to time. The aggregate principal amount of the Bonds which may be executed and delivered under this Ordinance is not limited except as is or may hereafter be provided in Section 17T hereof or as limited by the Act, by law or Section l6R of the Original Ordinance. SECTION 7. DESCRIPTION OF BONDS. The Bonds shall be issued in fully registered fonn; may be Capital Appreciation Bonds, Capital Appreciation Term Bonds, Variable Rate Bonds, Serial Bonds or Term Bonds; shall be dated; shall be nwnbered consecutively from one upward in order of maturity preceded by the letter "R"; shall be in the denomination of $5,000 each, or integral multiples thereof for the Serial Bonds and in $5,000 Maturity Amounts for the Capital Appreciation Bonds or in $5,000 multiples thereof, or such other denominations as shall be approved by the Issuer ina supplemental resolution prior to the delivery of a Series omonds; shall have such Paying Agent. and Registrar; shall bear interest at such rate or rates not exceeding the maximwn rate allowed by State law, the actual rate or rates to be approved by the governing body of the Issuer prior to or upon the sale of the Bonds; such interest to be payable at such times as are fixed by supplemental resolution of the Issuer and shall mature annually on such date in such years and in such amounts as will be fixed by supplemental resolution of the Issuer prior to or upon the sale of any series of Bonds; and may be issued with variable, adjustable, convertible or other rates with original issue discounts and/or original issue premium; all as the Issuer shall provide herein or hereafter by supplemental resolution. 9 Each Series of Bond shall bear interest from the interest payment date next preceding the date on which it is authenticated, unless authenticated on an interest payment date, in which case it shall bear interest from such interest payment date, or, unless authenticated prior to the first interest payment date, in which case it shall bear interest from its date; provided, however, that if at the time of authentication payment of any interest which is due and payable has not been made, such Series of Bond shall bear interest from the date to which interest shall have been paid. The Capital Appreciation Bonds shall bear interest only at maturity or upon redemption prior to maturity in the amount determined by reference to the Accreted Value of such Bonds. The principal of and the interest redemption premiwn, if any, on the Bonds shall be payable in any coin or currency of the United States of America which on the respective dates of payment thereofis legal tender for the payment of public and private debts. The interest on any Bonds (other than. Capital Appreciation Bonds) shall be payable by the Paying Agent on each interest payment date to the person appearing on the registration books of the Issuer hereinafter provided for as the registered Holder thereof, by check or draft mailed to such registered Holder at his address as it appears on such registration books or by wire transfer to Holders of $1 ,000,000 or more in principal amount of the Bonds. Payment of the principal of all Bonds and the Accreted Value with respect to the Capital Appreciation Bonds shall be made upon the presentation and surrender of such Bonds as the same shall become due and payable. Notwithstanding any other provisions of this section, the Issuer may, at its option, prior to the date of issuance of any Series of Bonds, elect to use an immobilization system or pure book-entry system with respect to issuance of such Series of Bonds, provided adequate records will be kept with respect to the ownership of such Series of Bonds issued in book-entry form or the beneficial ownership ofbonds issued in the name of a nominee. As long as any Bonds are outstanding in book-entry form the provisions of this Ordinance inconsistent with such system of book -entry registration shall not be applicable to such Bonds. The details of any altemative system of issuance, as described in this paragraph, shall be set forth in a resolution of the Issuer duly adopted at or prior to the sale of such Series of Bonds. SECTION 8. EXECUTION OF BONDS. The Bonds shall be executed in the name of the Issuer by the Mayor-Commissioner and City Manager and attested by the City Clerk, and approved as to form, sufficiency and correctness by the City Attorney, either manually or with his or her facsimile signature, and the official seal of the Issuer or a facsimile thereof shall be affixed thereto or reproduced thereon. The facsimile signature of such officers may be imprinted or reproduced on the Bonds. The Certificate of Authentication of the Bond Registrar shall appear on the Bonds, and no bond shall be valid or obligatory for any pwpose or be entitled to any security or benefit under this Ordinance unless such certificate shall have been duly executed on such Bond. The authorized signature for the Bond Registrar shall be either manual or facsimile; provided, however, that at least one of the signatures appearing on the Bonds shall at all times be a manual signature. In case any officer whose signature shall appear on any Bonds shall cease to be such officer before the delivery of such Bonds, such signature or facsimile shall nevertheless be valid and sufficient for all pwposes the same as if he had remained in office until such 10 delivery. Any Bond may be signed and sealed on behalf of the Issuer by such person who at the actual time of the execution of such Bonds shall hold the proper office with the Issuer, although at the date of enactment of this Ordinance such person may not have held such office or may not have been so authorized. SECTION 9. AUTHENTICATION OF BONDS. Only such of the Bonds as shall have endorsed thereon a certificate of authenti cation substantially in the form hereinbelow set forth, duly executed by the Registrar, as authenticating agent, shall be entitled to any benefit or security under this Ordinance. No Bond shall be valid or obligatory for any purpose unless and until such certificate of authentication shall have been duly executed by the Registrar, and such certificate of the Registrar upon any such Bond shall be conclusive evidence that such Bond has been duly authenticated and delivered under this Ordinance. The. Registrar's certificate of authentication on any Bond shall be deemed to have been duly executed if signed by an authorized officer of the Registrar, but it shall not be necessary that the same officer sign the certificate of authentication of all of the Bonds that may be issued hereunder at anyone time. SECTION 10. NEGOTIABILITY. Subject to the provisions hereof respecting registration and transfer, the Bonds shall be and shall have all the qualities and incidents of negotiable instrwnents under the laws of the State of Florida, and each successive holder, in accepting any of the Bonds, shall be conclusively deemed to have agreed that the Bonds shall be and have all of such qualities and incidents of negotiable instrwnents under the Uniform Commercial Code - Investment Securities of the State of Florida. SECTION 11. REGISTRATION, EXCHANGE AND TRANSFER. ThereshallbeaBond Registrar for the Bonds which may be the Issuer or a designated bank or trust company located within or without the State of Florida. The Bond Registrar shall maintain the registration books of the Issuer and be responsible for the transfer and exchange of the Bonds. The Issuer shall, prior to the proposed date of delivery of the Bonds, by resolution designate the Bond Registrar and Paying Agent. The Bond Registrar shall maintain the books for the registration of the transfer and exchange of the Bonds in compliance with the Florida Registered Public Obligations Act and the system of registration as established by the Issuer pursuant thereto. Bonds may be transferred uponthe registrationbooks, upon delivery to the Registrar, together with written instructions as to the details of the transfer of such Bonds, along with the social security number or federal employer identification number of such transferee and, if such transferee is a trust, the name and social security or federal employer identification numbers of the settlor and beneficiaries of the trust, the date of the trust and the name of the trustee. No transfer of any Bond shall be effective until entered on the registration books maintained by the Bond Registrar. Upon surrender for transfer or exchange of any Bond, the Issuer shall execute and the Bond Registrar shall authenticate and deliver in the name of the registered owner or the transferee or transferees, as the case may be, a new fully registered Bond or Bonds of authorized denominations of the same maturity and interest rate for the aggregate principal amount which the registered owner is entitled to receive at the earliest practicable time in accordance with the provisions of this Ordinance. The Issuer or the Bond 11 Registrar may charge the owner of such Bond for every such transfer or exchange an amount sufficient to reimburse them for their reasonable fees and for any tax, fee, or other governmental charge required to be paid with respect to such transfer, and may require that such charge be paid before any such new Bond shall be delivered. All Bonds presented for transfer, exchange, redemption or payment (if so required by the Bond Registrar), shan be accompanied by a written instrwnent or instrwnents of transfer or authorization for exchange, in form and with guaranty of signature satisfactory to the Bond Registrar, duly executed by the registered holder or by his duly authorized attorney in fact or legal representative. All Bonds delivered upon transfer or exchange shall bear interest from the preceding interest payment date so that neither gain nor loss in interest shall result from the transfer or exchange. New Bonds delivered upon any transfer or exchange shall be valid obligations of the Issuer, evidencing the same debt as the Bond surrendered, shall be secured by this Ordinance and shall be entitled to all of the security and the benefits hereof to the same extent as the Bonds surrendered. The Issuer and the Bond Registrar may treat the registered owner of any Bond as the absolute owner thereoffor all purposes, whether or not such Bonds shall be overdue, and shall not be bound by any notice to the contrary. Notwithstanding the foregoing provisions of this section, the Issuer reserves the right, on or prior to the delivery of the Bonds to amend or modify the foregoing provisions relating to the registration of the Bonds by resolution or ordinance in order to comply with all applicable laws, rules, and regulations of the United States and/or the State of Florida relating thereto. In addition, pursuant to a resolution adopted prior to the issuance of a Series of Bonds, the Issuer may establish a book-entry-only system of registration for such Series Bonds, the provisions of which shall be deemed to modify any inconsistent provisions of this Ordinance. SECTION 12. BONDS MUTILATED, DESTROYED, STOLEN OR LOST. In case any Bond shall become mutilated, or be destroyed, stolen or lost, the Issuer may in its discretion issue and deliver a new Bond of like tenor as the Bond so mutilated, destroyed, stolen or lost, in exchange and substitution for such mutilated Bond upon surrender and cancellation of such mutilated Bond or in lieu of and substitution for the Bond destroyed, stolen or lost, and upon the holder furnishing the Issuer proof of his ownership thereof and satisfactory indemnity and complying with such other reasonable regulations and conditions as the Issuer may prescribe and paying such expenses as the Issuer may incur. All Bonds so surrendered shall be canceled by the Registrar for the Bonds. If any of the Bonds shall have matured or be about to mature, instead of issuing a substitute Bond, the Issuer may pay the same, upon being indemnified as aforesaid, and if such Bonds be lost, stolen or destroyed, without surrender thereof Any such duplicate Bonds issued pursuant to this section shall constitute original, additional contractual obligations on the part of the Issuer whether or not the lost, stolen or destroyed Bonds be at 12 any time found by anyone, and such duplicate Bonds shall be entitled to equal and proportionate benefits and rights as to lien on the source and security for payment from the fimds, as hereinafter pledged, to the same extent as all other Bonds issued hereunder. SECTION 13. PROVISIONS FOR REDEMPTION. Each Series of Bonds shall be redeemable as provided by subsequent resolution of the Issuer applicable to each such Series of Bonds. Bonds in denominations greater than an authorized denomination (or authorized Maturity Amount in the case of Capital Appreciation Bonds) shall be deemed to be an equivalent number of Bonds in the denomination of an authorized denomination or Maturity Amount. If a Bond is of a denomination or Maturity Amount larger than an authorized denomination or Maturity Amount, a portion of such Bond may be redeemed, in the amount of an authorized denomination or Maturity Amount or integral multiples thereof Notice of such redemption, identifying the Bonds or portions thereof called for redemption (i) shall be filed with the paying agents and any Registrar; and (ii) shall be mailed by the Registrar, fIrst-class mail, postage prepaid, to all registered owners of the Bonds to be redeemed not more than sixty (60) days and not less than thirty (30) days prior to the date fixed for redemption at their addresses as they appear on the registration books to be maintained in accordance with the provisions hereof Failure to give such notice by mailing to any owner of Bonds, or any defect therein, shall not affect the validity of any proceeding for the redemption of other Bonds. Notice having been mailed and filed in the manner and under the conditions hereinabove provided, the Bonds or portions of Bonds so called for redemption shall, on the redemption date designated in such notice, become and be due and payable at the redemption price provided for redemption of such Bonds or portions of Bonds onsuchdate. On the date so designated for redemption, notice having been mailed and filed and moneys for payment of the redemption price being held in separate accounts in trust for the holders of the Bonds or portions thereof to be redeemed, all as provided in this Ordinance, interest on the Bonds or portions of Bonds so called for redemption shall cease to accrue, such Bonds and portions of Bonds shall cease to be entitled to any lien, benefit or security under this Ordinance, and the holders or Registered Owners of such Bonds or portions of Bonds, shall have no rights in respect thereof, except the right to receive payment of the redemption price thereof Upon surrender of any Bond for redemption in part only, the Issuer shall issue and deliver to the registered owner thereof, the costs of which shall be paid by the registered owner, a new Bond or Bonds of authorized denominations or Maturity Amounts in aggregate principal amount equal to the unredeemed portion surrendered. In addition to the foregoing notice, further notice may be given by the Issuer as set out below (provided such additional notice is not required as a condition to redeeming Bonds), but no defect in said further notice nor any failure to give all or any portion of such further notice shall in any manner defeat the effectiveness of a call for redemption if notice thereof is given as above prescribed. 13 (I) Each further notice of redemption given hereunder shall contain the informationrequired above for an official notice of redemption plus (i) the CUSIP numbers of all Bonds being redeemed; (ii) the date of issue of the Bonds as originally issued; (iii) the rate of interest bome by each Bond being redeemed; (iv) the maturity date of each Bond being redeemed; and (v) any other descriptive information needed to identify accurately the Bonds being redeemed. (2) Each further notice of redemption shall be sent at least 35 days before the redemption date by registered or certified mail or overnight delivery service to all registered securities deposi- tories then in the business of holding substantial amounts of obligations of types similar to the type of which the Bonds consist (such depositories now being Depository Trust Company of New York, New York, Midwest Securities Trust Company of Chicago, Illinois, Pacific Securities Depository Trust Company of San Francisco; California, and Philadelphia Depository Trust Company of Philadelphia, Pennsylvania) and to one or more national information services that disseminates notices of redemption of obligations such as the Bonds. (3) Each such further notice shall be published one time in the Bond Buyer ofN ew York, New York or, if such publication is impractical or unlikely to reach a substantial number of the Holders of the Bonds, in some other financial newspaper or journal which regularly carries notices of redemption of obligations similar to the Bonds, such publication to be made at least 30 days prior to the date fixed for redemption. SECTION 14. FORM OF BONDS. The text of the Bonds shall be in substantially the form attached hereto as Exhibit B, with such omissiom, insertions and variations as may. be necessary and desirable and authorized and permitted by this Ordinance or by any subsequent ordinance or resolution adopted prior to the issuance thereof, or as may be necessary if the Bonds or a potion thereof are issued as Capital Appreciation Bonds, Capital Appreciation Term Bonds, Variable Rate Bonds or as may be necessary to comply with applicable laws, rules and regulations of the United States and of the State in effect upon the issuance thereof The text of any Series of Bonds, other than the Bonds shall be as determined by supplemental ordinance or resolution of the Issuer. SECTION 15. BONDS NOT DEBT OF ISSUER. The Bonds shall not be or constitute general indebtedness of the Issuer within the meaning of any constitutional or statutory provision or limitation, but shall be payable solely from and secured by a prior lien upon and pledge of the Pledged Revenues herein provided. No Bondholder shall ever have the right to compel the exercise of the ad valorem taxing power of the Issuer or taxation in any form of any real property therein to pay the Bonds or the interest thereon or be entitled to payment of such principal and interest from any other fimds of the Issuer except from the Pledged Revenues in the manner provided herein. SECTION 16. PLEDGED REVENUES. Until payment has been provided for as herein permitted, the payment of the principal of and interest on the Bonds shall be secured forthwith equally and ratably by an irrevocable lien on the Pledged Revenues prior and superior to all other liens or 14 encumbrances on such Pledged Revenues and the Issuer does hereby irrevocably pledge such Pledged Revenues to the payment of the principal of and interest on the Bonds, the reserves therefor, and for all other required payments. The Pledged Revenues shall immediately be subject to the lien of this pledge without any physical delivery thereof or further act, and the lien of this pledge shall be valid and binding as against all parties having claims of any kind in tort, contract or otherwise against the Issuer. All fimds and accounts created pursuant hereto shall be held by the Finance Director (or such other officer of the Issuer as shall be approved by the City Commission) as trust fimds for payment of the Bonds. SECTION 17. COVENANTS OF THE ISSUER. Until all principal of and interest on the Bonds shall have been paid or provided for as herein permitted, the Issuer covenants with the Bondholders as follows: A REVENUE FUND. The entire Gross Revenues shall upon receipt thereof be deposited in the Revenue Fund created and established by the Original Ordinance. Such Revenue Fund shall constitute a trust fimd for the purposes herein provided and shall be kept separate and distinct from all other fimds of the Issuer and used only for the purposes and in the manner herein provided. B. CONSTRUCTION FUND. The Construction Fund to be held by the Issuer and to the credit of which deposits shall be made as required by Section 17 hereofis hereby created. Within suchfimd there shall be maintained separate accounts for each Series of Bonds and furthermore be maintained separate accounts for capitalized interest fimded from the proceeds of any Series of Bonds. C. DISBURSEMENTS FROM CONSTRUCTION FUND. Moneys on deposit from time to time in the Construction Fund shall be used to payor reimburse the following Project Costs: (I) Costs incurred directly or indirectly for or in connection with a Project or a proposed or future Project including, but not limited to, those for preliminary planning and studies, archi- tectural, legal, financial, engineering and supervisory services, labor, services, materials, equipment, acquisitions, land, rights-of-way, improvements and installation; (2) Premiums attributable to all insurance required to be taken out and maintained during the period of construction with respect to a Project to be acquired or constructed, the premium on each surety bond, if any, required with respect to work on such facilities, and taxes, assessments and other charges hereof that may become payable during the period of construction with respect to such a Project; (3) Costs incurred directly or indirectly in seeking to enforce any remedy against a contractor or subcontractor in respect of any default under a contract relating to a Project or costs incurred directly or indirectly in defending any claim by a contractor or subcontractor with respect to a Project; 15 (4) Financial, legal, accounting, appraisals, title evidence and printing and engraving fees, charges and expenses, and all other such fees, charges and expenses incurred in connection with the authorization, sale, issuance and delivery of such Series of Bonds; (5) Interest fimded fromBond proceeds, ifany, for a reasonable period of time, which shall be deposited in the Construction Fund and shall be used as provided ina supplemental resolution of the Issuer; (6) Any other incidental and necessary costs including without limitationanyexpenses, fees and charges relating to the acquisition, construction or installation of a Project, and the making of extraordinary repairs, renewals and replacements, decommissioning or retirement of any portion of , including the cost of temporary employees of the Issuer retained to carry out duties in connection with the acquisition, construction or erection of a Project; (7) Costs incurred directly or indirectly in placing any Project in operation in order that completion of such Project may occur; (8) Any other costs authorized pursuant to a supplemental resolution of the Issuer and permitted under the laws of the State; and (9) Reimbursements to the Issuer for any of the above items theretofore paid by or on behalf of the Issuer. D. DISPOSITION OF REVENUES. All fimds at any time remaining on deposit inthe Revenue Fund shall be disposed of on or before the twentieth day of each month, commencing in the monthimmedi- ately following the delivery of the 200 I Bonds, for so long as any Bonds remain Outstanding, only in the following manner and in the following order of priority: (1) Funds shall first be used for deposit into the Operation and Maintenance Fund, which was established by the Original Ordinance, of such sums as are necessary for the Cost of Operation and Maintenance, for the next ensuing month. (2) A sum as shall be determined by supplemental resolution of the Issuer shall be deposited into the Construction Fund and used for the purpose of paying Project Costs. (3) From the moneys remaining in the Revenue Fund, the Issuer shall next deposit into the Sinking Fund created by the Original Ordinance, such sums as will be sufficient to pay ( a) one-sixth (1/6) of all interest becoming due on the Bonds on the next semi-annual interest payment date; (b) commencing in the first month which is twelve (12) months or six (6) months prior to the first annual or semi-annual maturity date, respectively, of any Serial Bonds, one-twelfth (1/12) or one-sixth (1/6), respectively, of the amount of Serial Bonds which will become due and payable on the next 16 annual or semiannual principal maturity date, respectively, and (c) one-twelfth (1/12) of the Amortization Installment required to be made on the next annual payment date or one-sixth (1/6) of the Amortization Installment required to be made on the next semi-annual payment date into a "Bond Amortization Account", created and established in the Sinking Fund by the Original Ordinance. Such payments shall be credited to a separate special account for each series of Term Bonds outstanding, and if there shall be more than one stated maturity for Term Bonds of a series, then into a separate special account in the Sinking Fund for each such separate maturity of Term Bonds. The fimds and investments in each such separate account shall be pledged solely to the payment of principal of the Term Bonds of the series or maturity within a series for which it is established and shall not be available for payment, purchase or redemption of Term Bonds of any other series or within a series, or for transfer to the Sinking Fund to make up any deficiencies in required payments therein. The Amortization Installments may be due either annually or semiannually, but in any event, the required payments as set forth above shall be made monthly commencing in the first month which is six (6) months or twelve (12) months, as the case may be, prior to the date on which the Amortization Installment is required to be made pursuant to (c) above. Upon the sale of any series of Term Bonds, the Issuer shall by resolution, establish the amounts and maturities of such Amortization Installments for each series, and ifthere shall be more thanone maturity of Term Bonds within a series, the AmortizationInstallments for the Term Bonds of each maturity. In the event the moneys deposited for retirement of a maturity ofTenn Bonds are required to be invested, in the manner provided below, the Amortization Installments may be stated in terms of either the principal amount of the investments to be purchased on, or the cumulative amounts of the principal amount of investments required to have been purchased by, the payment date of such Amortization Installment. Moneys on deposit in each of the separate special accounts in the Bond Amortization Account shall be used for the open market purchase or the redemption of Term Bonds of the series or maturity of Term Bonds within a series for which such separate special account is established or may remain in said separate special account and be invested until the stated date of maturity of the Term Bonds. The resolution establishing the Amortization Installments for any series or maturity of Term Bonds may limit the use of moneys to anyone or more of the uses set forth in the preceding sentence and may specify the type or types of investments permitted hereunder to be purchased. (4) Moneys remaining in the Revenue Fund shall next be applied by the Issuer to maintain a Reserve Account, which Reserve Account was created and established by the Original Ordinance, in a sum equal to the Reserve Requirement, all or a portion of which sum may be initially provided from the proceeds of the sale of the Bonds and/or other moneys of the Issuer. The Issuer shall thereafter deposit into said Reserve Account an amount equal to one-twelfth (1/12) of twenty per cent (20%) of the difference between the amount, if any, so deposited upon the deli- 17 very of the Bonds and the amount of the Reserve Requirement on all outstanding Bonds. No further payments shall be required to be made into such Reserve Account when there has been deposited therein and as long as there shall remain on deposit therein a sum equal to the Maximum Bond Service Requirement on all outstanding Bonds becoming due in any ensuing Fiscal Year. Any withdrawals from the Reserve Account shall be subsequently restored from the first moneys available in the Revenue Fund after all required current payments into the Sinking Fund and into the Reserve Account, including all deficiencies for prior payments, have been made in full. Moneys in the Reserve Account shall be used only for the purpose of the payment of maturing principal (including Amortization Installments) of or interest on the Bonds when the moneys in the Sinking Fund are insufficient therefor, and for no other purpose. Upon the issuance by the Issuer of any Additional Bonds under the terms, limitations and conditions provided in this Ordinance and the Original Ordinance, the payments into the Reserve Account shall be increased so that the amount on deposit therein shall be equal to the Maximum Bond Service Requirement on all Bonds outstanding and to be outstanding. Whenever the amount on deposit in the Reserve Account exceeds the Reserve Requirement on all Bonds then outstanding, the excess may be withdrawn and deposited into the Sinking Fund. The Issuer shall not be required to make any further payments into the Sinking Fund or into the Reserve Account when the aggregate amount of moneys inthe Sinking Fund and the Reserve Account are at least equal to the aggregate principal amount of Bonds then outstanding, plus the amount of interest then due or thereafter to become due on the Bonds then outstanding. Notwithstanding the foregoing provisions, in lieu of the required deposits of Revenues into the Reserve Account, the Issuer may cause to be deposited into the Reserve Account a surety bond or an insurance policy issued by a reputable and recognized insurer for the benefit of the Bondholders in an amount equal to the difference between the Maximum Bond . Service Requirement and the sums then on deposit in the Reserve Account, if any, which surety bond or insurance policy shall be payable (upon the giving of notice as required thereunder) on any interest payment date on which a deficiency exists which cannot be cured by fimds in any other account held pursuant to this Ordinance and the Original Ordinance and available for such pwpose. The insurer providing such surety bond or insurance policy shall be an insurer whose municipal bond insurance policies insuring the payment, when due, of the principal of and interest on municipal bond issues results in such issues being rated in the highest rating category by Standard & Poor's Corporation or Moody's Investors Service, Inc., or their successors. If a disbursement is made from a surety bond or an insurance policy provided pursuant to this paragraph, the Issuer shall be obligated to either reinstate the maximum limits of such surety bond or insurance policy immediately following such disbursement or to deposit into the Reserve Account, as herein provided. in this 18 paragraph for restoration of withdrawals from the Reserve Account, fimds in the amount of the disbursement made under such policy, or a combination of such altematives. (5) The Issuer shall next apply and deposit the moneys in the Revenue Fund into the Renewal and Replacement Fund created by the Original Ordinance. The Issuer shall deposit into such Renewal and Replacement Fund an amount equal to one-twelfth (1/12) of five per centum (5%) of the Gross Revenues of the System for the previous Fiscal Year, or such other amount as is certified as necessary for the purposes of the Renewal and Replacement Fund by the Consulting Engineer and as approved by the City Commission. The moneys in said Renewal and Replacement Fund shall be used only for the purpose of paying the cost of extensions, enlargements or additions to or the replacement of capital assets of the System and emergency repairs thereto. Such moneys on deposit in such Fund shall also be used to supplement the Reserve Account ifnecessary in order to prevent a default in the payment of the principal of and interest on the Bonds. (6) To the extent junior lien bonds are issued and outstanding (which subordinated bonds the Issuer reserves the right to issue), the Issuer shall next apply moneys in the Revenue Fund to the payment of principal of, redemption premium, if any, and interest on such subordinated debt of the Issuer. (7) The balance of any moneys remaining in the Revenue Fund after the above required payments have been made may either be deposited into either the Renewal and Replacement Fund or the Sinking Fund, or may be used for the purchase or redemption of Bonds, or may be used by the Issuer for any lawful purpose of the Issuer. E. INVESTMENT OF FUNDS. The Operation and Maintenance Fund, the Sinking Fund, the Reserve Account, the Renewal and Replacement Fund, the Revenue Fund, the Construction Fund, and any other special fimds herein and in the Original Ordinance established and created shall constitute trust fimds for the purposes provided herein for such fimds. All such fimds shall be continuously secured in the same manner as state and municipal deposits are required to be secured by the laws of the State of Florida. Moneys on deposit in any of such fimds and accounts may be invested and reinvested in Authorized Investments. Investments made with moneys in the Construction Fund, the Revenue Fund, the Operation and Maintenance Fund, and the Sinking Fund (except the Bond Amortization Account therein), must mature not later than the date that such moneys will be needed. Investments made with moneys in the accounts inthe Bond AmortizationAccount, in the Reserve Account and in the Renewaland Replacement Fund must mature, in the case of the accounts in the Bond Amortization Account not later than the stated date of maturity of each respective AmortizationInstallment of the Term Bonds to be retired from the sub-accounts inthe Bond AmortizationAccount fromwhichthe investment is made, in the case of the Reserve Account not later than the final maturity of any Bonds then outstanding, and in the case of the Renewal and Replacement Fund, not later than such date as shall be determined by the Issuer. Any and all income 19 received by the Issuer from all such investments shall be deposited into the Revenue Fund, except however, that investment income earned in the Bond Amortization Account may be retained therein or deposited into the Sinking Fund and used to pay maturing principal of and interest on the Bonds, at the option of the Issuer. The cash required to be accounted for in each of the foregoing fimds and accounts established herein may be deposited in a single bank account, and fimds allocated to the various accounts established herein may be invested in a common investment pool, provided that adequate accounting records are maintained to reflect and control the restricted allocation of the cash on deposit therein and such investments for the various pwposes of such fimds and accounts as herein provided. The designation and establishment of the various fimds in and by this Ordinance shall not be construed to require the establishment of any completely independent, self-balancing fimds as such term is commonly defined and used in governmental accounting, but rather is intended solely to constitute an earmarking of certain revenues and assets of the System for certain purposes and to establish certain priorities for application of such revenues and assets as herein provided. F. OPERATION AND MAINTENANCE. The Issuer will maintain the System and all parts thereof in good condition and will operate the same in an efficient and economical manner, making such expenditures for equipment and for renewals, repairs and replacements as may be proper for the economical operation and maintenance thereof G. RATE ORDINANCE. The Issuer has enacted or will enact a rate ordinance and thereby will fix, establish and maintain such rates and will collect such fees, rentals and other charges for the services and facilities of the System and revise the same from time to time whenever necessary, as will always provide Gross Revenues in each Fiscal Year sufficient to pay the Cost of Operation and Maintenance of the System in such Fiscal Year, one hundred fifteen per centum (115%) of the Bond Service Requirement becoming due in such Fiscal Year on the outstanding Parity Bonds, on the outstanding Bonds and on all outstanding Additional Bonds, plus one hundred per centum (100%) of all reserve and other payments required to be made pursuant to this Ordinance and the Original Ordinance. Such rates, fees, rentals and other charges shall not be reduced so as to be insufficient to provide Gross Revenues for such pwposes. H. BOOKS AND RECORDS. The Issuer shall keep books and records of the System, which books and records shall be kept separate and apart from all other books, records and accounts of the Issuer, and Bondholders shall have the right at all reasonable times to inspect all records, accounts and data of the Issuer relating thereto. I. ANNUAL AUDIT. The Issuer shall also, at least once a year, cause the books, records and accounts relating to the System to be properly audited by a recognized independent finnof certified public accountants and shall make generally available the report of such audits to any Bondholder. 20 J. NO MORTGAGE OR SALE OF THE SYSTEM. The Issuer irrevocably covenants, binds and obligates itself not to sell, lease, encumber or in any manner dispose of the System as a whole until all of the Bonds shall have been paid in full as to both principal and interest, or payment shall have been duly provided for under this Ordinance. The foregoing provision notwithstanding, the Issuer may sell or dispose of, for fair market value, any properties or parts of the System whichthe Consulting Engineer shall certifY in writing are not necessary for the continued operation of the System and that the sale or disposal of which will not adversely affect the Gross Revenues to be derived from the System to such an extent that the Issuer will fail to comply with the covenants contained herein, including Section 17(G) of this Ordinance and the Original Ordinance. The proceeds derived from any sale or disposal of any properties or parts of the System as provided for in the above paragraph shall, in the discretion of the Issuer, be (I) deposited in the Renewal and Replacement Fund and used exclusively for the purpose of paying the cost of extensions, enlargements or additions to, or the replacement of capital assets of the System and for unusual or extraordinary repairs thereto, or for the construction or acquisition of additions, extensions and improvements to the System, or (2) for the purchase or retirement of the Bonds then outstanding. However, if the Consulting Engineer certifies that proceeds are necessary for the purposes stated in part (I) above, such proceeds shall remain in the Renewal and Replacement Fund until such certified requirements are satisfied, and the proceeds shall not be used for any other pwpose allowed by this Ordinance or the Original Ordinance. K. INSURANCE. The Issuer will make adequate provision to maintain fire and windstorm insurance on all buildings and structures and properties of the System which are subject to loss through fire or windstorm, public liability insurance, and other insurance of such types and in such amounts as are normally carried in the operationofsimilarpublic and private utility systems within the State of Florida. Any such insurance shall be placed with nationally recognized and reputable insurors or under State approved and authorized self insurance programs or any combination of both and shall be carried for the benefit of the Bondholders. All monies received for losses under any such insurance, except public liability, are hereby pledged by the Issuer as security for the Bonds, until and unless such proceeds are used to remedy the loss or damage for which such proceeds are received, either by repairing the property damaged or replacing the property destroyed within ninety (90) days from the receipt of such proceeds. L. NO FREE SERVICE. The Issuer will not render or cause to be rendered any free services of any nature by its System, nor will any preferential rates be established for users of the same class. This covenant shall not prevent individual contracts with other governmental entities for the wholesale delivery of services of the System. The Issuer, including its departments, agencies and instrwnentalities, shall avail itself of the facilities or services provided by the System or any part thereof, and the same rates, fees or charges applicable to other customers receiving like services under similar circumstances shall be charged to the Issuer and any such department, agency or instrumentality. Such charges shall be paid as they accrue, and the Issuer shall transfer from its general fimds sufficient sums to pay such charges. The reve- nues so received shall be deemed to be Gross Revenues derived from the operation of the System and shall 21 be deposited and accounted for in the same manner as other Gross Revenues derived from such operation of the System. M. MANDA TORY CONNECTION. To the full extent permitted by law the Issuer will adopt and keep in force and effect an ordinance requiring that all improved premises with respect to which water or sewer services from the System are available shall connect such premises to the System and shall obtain available water and sewer services only from the System. N. ENFORCEMENT OF COLLECTIONS. The Issuer will diligently enforce and collect all fees, rentals or other charges for the services and facilities of the System and take all steps, actions and proceedings for the enforcement and collection of such fees, rentals or other charges which shall become delinquent to the full extent permitted or authorized by the Act and by the laws of the State of Florida. The Issuer will, under reasonable rules and regulations, shut off and discontinue the supplying of the water service and the sewer service of the System for the nonpayment of fees, rentals or other charges for said water service or said sewer service, or either of them, and will not restore said water service or sewer service, or either of them, until all delinquent charges for both water service and sewer service, together with interest and reasonable penalties, have been paid in full. O. REMEDIES. Any Bondholder, or any trustee acting for the Bondholders may, either at law or inequity, by suit, action, mandamus or other proceedings in any court of competent jurisdiction, protect and enforce any and all rights, including the right to the appointment of a receiver, existing under the laws of the State of Florida, or granted and contained herein, and may enforce and compel the performance of all duties herein required or by any applicable statutes to be performed by the Issuer or by any officer thereof Nothing herein, however, shall be construed to grant to any Bondholders any lien on any real property of the Issuer. P. CONSULTING ENGINEERS. The Issuer will retain an independent consulting engineer or engineering firm having a favorable reputation for skill and experience for the design, construction and operation of systems of comparable size and character as the System, for the purpose of providing the Issuer competent engineering counsel in connection with the making of the capital improvements. The Issuer may, however, employ additional engineers at any time with relation to specific engineering and operation problems arising in connection with the System. Q. CITY MANAGER REPORTS. On an annual basis, within 45 days of the receipt of the annual audit of the System provided for above, the Issuer shall cause to be prepared by the City Manager a report or survey of the System with respect to the management of the properties thereof, the sufficiency of the rates and charges for services, the proper maintenance of the properties of the System and the necessity for capital improvements and recommendations therefor. Such a report or survey shall also show 22 any failure of the Issuer to perform or comply with the covenants herein contained, including those contained in subsection I above. In the event that such annual report reflects that the rates and charges for services are insufficient to protect the rights of the Bondholders, then the Issuer shall take such steps as are required by law to raise the rates and charges for services. In the event that the annual report indicated that the rates and charges for services should be increased substantially pro rata as to all classes of service, then, to the full extent permitted by law, the Issuer shall raise the rates and charges for services without the necessity for notice or public hearing. R. NO COMPETING SYSTEM. To the full extent permitted by law the Issuer will not grant or cause, consent to, or allow the granting of any franchise or permit to any person, finn, corporation or body or agency or instrwnentality whatsoever for the furnishing of water or sanitary sewerage services to or within the service area of the System, if determined by the Consulting Engineers to be materially competitive with the System and adversely affecting the Gross Revenues derived from the operation thereof S. ISSUANCE OF OTHER OBLIGATIONS. The Issuer shall issue no bonds or obligations of any kind or nature payable from or enjoying a lien on the Pledged Revenues if such obligations have priority over the Bonds with respect to payment or lien, nor shall the Issuer create or cause or permit to be created any debt, lien, pledge, assignment, encumbrance or other charge on a parity with the lien of the Bonds upon said Pledged Revenues. Notwithstanding any other provision in this Section, the Issuer may issue Additional Bonds under the conditions and in the manner provided herein. Any obligations of the Issuer, other than the Bonds, which are payable from the Pledged Revenues shall contain an express statement that such obligations are junior and subordinate in all respects to the Bonds as to lien on and source and security for payment from such Pledged Revenues. T. ISSUANCE OF ADDITIONAL BONDS. Additional Bonds, payable ona parityfromthe Pledged Revenues with the Parity Bonds and the Bonds, shall be issued only for the purposes of refimding a part of the outstanding Bonds or financing the cost of extensions, additions and improvements to the System and for the acquisition and construction of, and extensions, additions and improvements to, sewer and/or water systems which are to be consolidated with the System and operated as a single combined utility. Additional Bonds, other than for refimding pmposes, shall be issued only upon compliance with all of the following conditions: (1) There shall have been obtained and filed with the Clerk a certificate of the Finance Director stating: (a) that the books and records of the Issuer relative to the System have been audited by qualified and recognized firm of independent certified public accountants; (b) based on such audited financial statement, that the amount of the adjusted Net Revenues derived for the Fiscal Year preceding the date of issuance of the proposed Additional Bonds or for any twelve (12) consecutive months during the eighteen (18) months immediately preceding the date of issuance of the Additional Bonds with respect 23 to which such certificate is made, adjusted as herein below provided; and ( c) based on such audited financial statement, that the aggregate amount of such Net Revenues, as adjusted, for the period for which such Net Revenues are being certified is equal to not less than 120% of the Maximum Bond Service Requirement becoming due in any Fiscal Year thereafter on (i) all Parity Bonds and the Bonds issued under this Ordinance, if any, then Outstanding, and (ii) on the Additional Bonds with respect to which such certificate is made. (2) Upon recommendation of the Consulting Engineers, the Net Revenues certified pursuant to (b) in the previous paragraph may be adjusted for purposes of this Subsection by including: ( a) 100% of the additional Net Revenues which in the opinion of the Consulting Engineer would have been derived by the Issuer from rate increases adopted before the Additional Bonds are issued, if such rate increases had been implemented before the commencement of the period for which such Net Revenues are being certified, and (b) 100% of the additional Net Revenues estimated by the Consulting Engineer to be derived during the first full twelve month period after the facilities of the System are extended, enlarged, improved or added to with the proceeds of the Additional Bonds with respect to which such certificate is made. The adjustments described in Section 17(T)(2)(b) may only be made if the Net Revenues as adjusted under Section 17(T)(2)(a) for the period for which such Net Revenues are being certified equals at least 1.00 times the Maximum Bond Service Requirement becoming due in any Fiscal Year thereafter on (i) all Bonds then outstanding; and (ii) on the Additional Bonds with respect to which such certificate is made. (3) AdditionalBonds shall be deemed to have been issued pursuant to this Ordinance the same as the Outstanding Bonds, and all of the other covenants and other provisions of this Ordinance and the Original Ordinance (except as to details of such Additional Bonds inconsistent therewith) shall be for the equal benefit, protection and security of the Holder of all Bonds issued pursuant to this Ordinance and the OriginalOrdinance. Except as provided in Section 17(T) hereof, all Bonds, regardless of the time or times of their issuance, shall rank equally with respect to their lien on the Pledged Revenues and their sources and security for payment therefrom without preference of any Bonds over any other. (4) In the event that the total amount of Bonds herein authorized to be issued are not issued simultaneously, such Bonds which are subsequently issued shall be subject to the conditions of Section 17(T) hereof (5) The Issuer need not comply with the provisions of paragraph 1 of this Section 17(T) if and to the extent the Additional Bonds to be issued are refimding bonds, and if the Issuer shall cause to be delivered a certificate of the Finance Director setting forth the annual debt service (i) for the Bonds then Outstanding and (ii) for all Series of Bonds to be immediately Outstanding thereafter and stating that the Bond Service Requirement in any year pursuant to (ii) above is not greater than the Bond Service Requirement in the corresponding year set forth pursuant to (i) above. 24 (6) The Issuer shall not be in default in the carrying out of any of the obligations assumed under this Ordinance and no event of default shall have occurred under this Ordinance and shall be continuing, and all payments required by this Ordinance to be made into the fimds and accounts established hereunder shall have been made to the full extent required. (7) The resolution authorizing the issuance of a Series of Additional Bonds shall recite that all of the covenants contained herein will be applicable to such Additional Bonds. U. MAINTENANCE OF SYSTEM. The Issuer willmaintainthe System in good condition and continuously operate the same in an efficient manner and at a reasonable cost. SECTION 18. TAX COMPLIANCE. A. In General. The Issuer at all times while the Bonds and the interest thereon are outstanding will comply with all applicable provisions of the Internal Revenue Code of 1986, as amended (the "Code") and any valid and applicable rules and regulations promulgated thereunder (the "Regulations") in order to ensure that the interest on the Bonds will be excluded from gross income for federal income tax purposes. B. Rebate. (I) The Issuer shall either make or cause an independent finn of certified public accountants or tax compliance frrm to make and promptly provide to the Issuer the rebate calculations required by the Code and Regulations, on which the Issuer may conclusively rely in taking action under this Section. The Issuer shall make deposits to and disbursements from separate accounts to the extent required by the Code and Regulations and shall otherwise maintain full and complete accounting records of receipts and disbursements of, and investment purchases and sales allocated to, the "gross proceeds" subject to the rebate requirements of the Code and Regulations. The requirements of this Subsection 18B may be superseded or amended by new calculations accompanied by an opinion of bond counsel addressed to the Issuer to the effect that the use of the new calculations are incompliance withthe Code and Regulations and will not cause the interest on the Bonds to become included in gross income for Federal income tax purposes. (2) The Issuer shall either make or cause an independent finn of certified public accountants or tax compliance firm to annually make and promptly forward to the Issuer after the end of the Bond Year and within the time required by the Code and the Regulations the computation of the rebate deposit required by the Code, on which the Issuer may conclusively rely in taking action under this SubsectionB. Records of the determinations required by this Subsection B and the Code and Regulations shall be retained by the Issuer until six (6) years after the Bonds are no longer outstanding. (3) Within the time required by the Code and Regulations following the end of the fifth Bond Year, as defined in the Code, and every five (5) years thereafter, the Issuer shall pay to the United States of America ninety percent (90%) of the rebate amounts calculated as of such 25 payment date, as shown by the computations of the Issuer or the certified public accountants or tax compliance firm, and one hundred percent (100%) of the earnings on such rebate amounts as of such payment date. Not later than sixty (60) days after the final retirement of each applicable series of Bonds, the Issuer shall pay to the United States of America one hundred percent (100%) of the balance remaining of the rebate amount and the earnings thereon. Each payment required to be paid to the United States of America pursuant to this Subsection B shall be filed with the Internal Revenue Service Center, Ogden, Utah 84201. Each payment shall be accompanied by a copy of the Form 8038 originally filed with respect to each applicable series of Bonds and a statement swnmarizing the determination of the amount to be paid to the United States of America. SECTION 19. DEFAULTS; EVENTS OF DEFAULT AND REMEDIES. Except as provided below, if any of the following events occur it is hereby defined as and declared to be and to constitute an "Event of Default": (A) Default in the due and punctual payment of any interest on the Bonds; (B) Default in the due and punctual payment of the principal of and premium, if any, or Accreted Value on any Bond, at the stated maturity thereof, or upon proceedings for redemption thereof; (C) Default in the performance or observance of any other of the covenants, agreements or conditions on the part of the Issuer contained in this Ordinance or in the Bonds and the continuance thereof for a period of thirty (30) days after written notice to the Issuer given by the Holders of not less than twenty-five percent (25%) of aggregate principal amount of Bonds then Outstanding (provided, however, that with respect to any obligation, covenant, agreement orconditionwhichrequires performance by a date certain, if the Issuer performs such obligation, covenant, agreement or condition within thirty (30) days of written notice as provided above, the default shall be deemed to be cured); (D) Failure by the Issuer promptly to remove any execution, garnishment or attachment of such consequence as will materially impair its ability to carry out its obligations hereunder; (E) Any act ofbankruptcy or the rearrangement, adjustment or readjustment of the obligations of the Issuer under the provisions of any bankruptcy or moratorium laws or similar laws relating to or affecting creditors' rights. The term "default" shall meandefault by the Issuer in the performance or observance of any of the covenants, agreements or conditions on its part contained in this Ordinance, any supplemental resolution or in the Bonds, exclusive of any period of grace required to constitute a default or an "Event of Default" as hereinabove provided. For purposes of Section 19(A) and (B) hereof, no effect shall be given to any payments made under any Bond Insurance Policy. 26 Any Holder of Bonds issued under the provisions hereof or any trustee acting for the Holders of such Bonds, may either at law or in equity, by suit, action, mandamus or other proceedings in any court of competent jurisdiction, protect and enforce any and all rights, including the right to the appointment of a receiver, existing under State or federal law, or granted and contained herein, and may enforce and compel the performance of all duties required herein or by any applicable law to be performed by the Issuer or by any officer thereof Nothing herein, however, shall be construed to grant to any Holder of the Bonds any lien on any property of the Issuer, except the Pledged Revenues. The foregoing notwithstanding: (i) No remedy conferred upon or reserved to the Bondholders is intended to be exclusive of any other remedy, but each remedy shall be cumulative and shall be in addition to any other remedy given to the Bondholders hereunder. (ii) No delay or omission to exercise any right or power accruing upon any default or Event of Default shall impair any such right or power or shall be construed to be a waiver of any such default or acquiescence therein, and every such right and power may be exercised as often as may be deemed expedient. (iii) No waiver of any default or Event of Default hereunder by the Bondholders shall extend to or shall affect any subsequent default or Event of Default or shall impair any rights or remedies consequent thereon. (iv) Acceleration of the payment of principal of and interest on the Bonds shall not be a remedy hereunder in the case of an Event of Default. Upon the occurrence of an Event of Default, and upon the filing of a suit or other commencement of judicial proceedings to enforce the rights of the Bondholders under this Ordinance, the Bondholders shall be entitled, as a matter of right, to the appointment of a receiver or receivers of the Project and the fimds pending such proceedings, with such powers as the court making such appointment shall confer. Notwithstanding any provision of this Ordinance to the contrary, for all purposes of this Section 21, except the giving of notice of any Event ofDefault to the Holder of the Bonds, the Bond Insurer shall be deemed to be the Holder of the Bonds it has insured. On the occurrence of an Event of Default, to the extent such rights may then lawfully be waived, neither the Issuer nor anyone claiming through or under it, shall set up, claim or seek to take advantage of any stay, extension or redemption laws now or hereafter in force, in order to prevent or hinder the enforcement of this Ordinance, and the Issuer, for itself and all who may claim through or under it, hereby 27 waives, to the extent it may lawfully do so, the benefit of all such laws and all right of redemption to which it may be entitled. Within 30 days of knowledge thereof, both the Issuer and the Paying Agent shall provide notice to the Bond Insurer of the occurrence of any Event of Default. The Bond Insurer shall be included as a party in interest and as a party entitled to (i) notifY the Issuer or any Paying Agent of the occurrence of an Event of Default and (ii) request the Issuer or any Paying Agent to intervene in judicial proceedings that affect the Bonds or the security therefor. The Issuer and any Paying Agent are required to accept notice of default from the Bond Insurer. Anything in this Ordinance to the contrary notwithstanding, upon the occurrence and continuance of an Event of Default, the Bond Insurer, if any for a Series of Bonds shall be entitled to control and direct the enforcement of all rights and remedies granted to the Bondholders under this Ordinance for such Series of Bonds and the Bond Insurer shall also be entitled to approve all waivers of events of default. SECTION 20. AMENDING AND SUPPLEMENTING OF ORDINANCE WITHOUT CONSENT OF HOLDERS OF BONDS. The Issuer, from time to time and at any time and without the consent or concurrence of any Holder of any Bonds, may enact an ordinance amendatory hereof or supplemental hereto, if the provisions of such supplemental ordinance shall not adversely affect the rights of the Holders of the Bonds then Outstanding, for anyone or more of the following purposes: (A) To make any changes or corrections in this Ordinance as to whichthe Issuer shall have been advised by counsel that are required for the purpose of curing or correcting any ambiguity or defective or inconsistent provisions or omission or mistake or manifest error contained in this Ordinance, or to insert in this Ordinance such provisions clarifying matters or questions arising under this Ordinance as are necessary or desirable; (B) To add additional covenants and agreements of the Issuer for the purpose offurther securing the payments of the Bonds; (C) To surrender any right, power or privilege reserved to or conferred upon the Issuer by the terms of this Ordinance; (D) To confirm as further assurance any lien, pledge or charge or the subjection to any lien, pledge or charge, created or to be created by the provisions of this Ordinance; (E) To grant to or confer upon the Holders any additional right, remedies, powers, authority or security that lawfully may be granted to or conferred upon them; (F) To assure compliance with federal "arbitrage" provisions in effect from time to time; 28 (G) To provide such changes as may be necessary in order to adjust the terms hereof so as to facilitate the issuance of Variable Rate Bonds or Option Bonds; and (H) To modify any of the provisions of this Ordinance in any other aspects provided that such modifications shall not be effective until after the Bonds Outstanding at the time such supplemental ordinance is adopted shall cease to be Outstanding, or until the holders thereof consent thereto pursuant to Section 21 hereof, and any Bonds issued subsequent to any such modification shall contain a specific reference to the modifications contained in such supplemental ordinance. Except for supplemental resolutions providing for the issuance of a Series of Bonds pursuant hereto, the Issuer shall not enact any supplemental ordinance authorized by the foregoing provisions of this Section unless in the opinion of Bond Counsel the enactment of such supplemental ordinance is permitted by the foregoing provisions of this section. SECTION 21. AMENDMENT OF ORDINANCE WITH CONSENT OF HOLDERS OF BONDS. Except as provided in Section 20 hereof, no material modification or amendment of this Ordinance or of any resolution supplemental hereto shall be made without the consent in writing of the Holders of fifty-one percent or more in the principal amount of the Bonds of each Series so affected and then Outstanding. For purposes of this Section, to the extent any Bonds are insured by a policy of municipal bond insurance or are secured by a letter of credit and such Bonds are then rated in as high a rating category as the rating category in which such Bonds were rated at the time of initial issuance and delivery thereof by either Standard & Poor's Corporation or Moody's Investors Service, or successors and assigns, then the consent of the issuer of such municipal bond insurance policy or the issuer of such letter of credit shall be deemed to constitute the consent of the Holder of such Bonds. No modification or amendment shall permit a change in the maturity of such Bonds or a reduction in the rate ofinterestthereon or in the amount of the principal obligation thereof or affecting the promise of the Issuer to pay the principal of and interest on the Bonds as the same shall become due from the Pledged Revenues or reduce the percentage of the Holders of the Bonds required to consent to any material modification or amendment hereof without the consent of the Holder or Holders of all such obligations. For purposes of the immediately preceding sentence, the issuer of a municipal bond insurance policy or a letter of credit shall not consent on behalf of the Holders of the Bonds. No amendment or supplement pursuant to this Section 21 (but not including Section 20 hereof) shall be made without the consent of the Bond Insurer, if any. SECTION 22. DEFEASANCE. The covenants and obligations of the Issuer shall be defeased and discharged under terms of this Ordinance as follows: (A) If the Issuer shall payor cause to be paid, or there shall otherwise be paid, to the Holders of all Bonds the principal, redemption premium, if any, and interest due or to become due thereon, at the times and in the manner stipulated herein, then the pledge of the Pledged Revenues and all covenants, agreements and other obligations of the Issuer to the Bondholders, shall thereupon cease, terminate and become void and be discharged and satisfied. If the Issuer shall payor cause to be paid, or there shall 29 otherwise be paid, to the Holders of any Outstanding Bonds the principal or redemption premium, if any, and interest due or to become due thereon, at the times and in the manner stipulated herein, such Bonds shall cease to be entitled to any lien, benefit or securityunder this Ordinance, and all covenants, agreements and obligations of the Issuer to the Holders of such Bonds shall thereupon cease, terminate and become void and be discharged and satisfied. (B) The Bonds, redemption premium if any, and interest due or to become due for the payment or redemption of which moneys shall have been set aside and shall be held in trust (through deposit by the Issuer of fimds for such payment or redemption or otherwise) at the maturity or redemption date thereof shall be deemed to have been paid within the meaning and with the . effect expressed in paragraph (A) of this Section 22. Subject to the provisions of paragraph (C) and (D) of this Section 22, any Outstanding Bonds shall prior to the maturity or redemption date thereof be deemed to have been paid within the meaning and with the effect expressed in paragraph (A) of this Section if(i) in case any of said Bonds are to be redeemed on any date prior to their maturity, the Issuer shall have given to the escrow agent instructions accepted in writing by the escrow agent to notifY Holders of Outstanding Bonds in the manner required herein of the redemption of such Bonds on said date and (ii) there shall have been deposited with the escrow agent either moneys in an amount which shall be sufficient, or Federal Securities (including any Federal Securities issued or held in book-entry form on the books of the Department of the Treasury of the United States) the principal of and the interest on which when due will provide moneys which, together with the moneys, if any, deposited with the escrow agent at the same time, shall be sufficient, to pay when due the principal of or premium, if any, and interest due and to become due on said Bonds on or prior to the redemption date or maturity date thereof, as the case may be. (C) For pwposes of determining whether Variable Rate Bonds shall be deemed to have been paid prior to the maturity or redemption date thereof, as the case may be, by the deposit of moneys, or Acquired Obligations and moneys, ifany, in accordance with paragraph B of this Section 22, the interest to come due on such Variable Rate Bonds on or prior to the maturity date or redemption date thereof, as the case may be, shall be calculated at the maximum rate pennitted by the terms thereof; provided, however, that if on any date, as a result of such Variable Rate Bonds having borne interest at less than such maximum rate for any period, the total amount of moneys and Acquired Obligations on deposit with the escrow agent for the payment of interest on such Variable Rate Bonds is in excess of the total amount which would have been required to be deposited with the escrow agent on such date in respect of such Variable Rate Bonds in order to satisfY the second sentence of paragraph (B) of this Section 22, the escrow agent shall, if requested by the Issuer, pay the amount of such excess to the Issuer free and clear of any trust, lien, pledge or assignment securing the Bonds or otherwise existing under this Ordinance. (D) Option Bonds shall be deemed to have been paid in accordance with the second sentence of paragraph (B) of this Section 22 only if, in addition to satisfying the requirements of clauses (i) and (ii) of such sentence, there shall have been deposited with the escrow agent moneys in an amount which shall be sufficient to pay when due the maximum amount of principal of and redemption premium, if any, and interest on such Bonds which could become payable to the Holders of such Bonds upon the exercise of 30 any options provided to the Holders of such Bonds; provided, however, that if, at the time a deposit is made with the escrow agent pursuant to paragraph (B) of this Section, the options originally exercisable by the Holder of an Option Bond are no longer exercisable, such Bond shall not be considered an Option Bond for purposes of this paragraph (D). If any portion of the moneys deposited with the escrow agent for the payment of the principal of and redemption premium, if any, and interest on Option Bonds is not required for such purpose, the escrow agent shall, ifrequested by the Issuer, pay the amount of such excess to the Issuer free and clear of any trust, lien, security interest, pledge or assignment securing said Bonds or otherwise existing under the Resolution. SECTION 23. SALE OF THE BONDS. The Bonds shall be issued and sold at public or negotiated sale at one time or in installments from time to time and at such price or prices as shall be consistent with the provisions of the requirements of this Ordinance and other applicable provisions oflaw as set forth in a supplemental resolution of the Issuer adopted before the issuance of any Series of Bonds. SECTION 24. CAPITAL APPRECIATION BONDS. For the purposes of (i) receiving payment of the redemption price if a Capital Appreciation Bond is redeemed prior to maturity, (ii) receiving payment of a Capital Appreciation Bond if the principal of all Bonds is declared immediately due and payable under the provisions of the Ordinance, (iii) computing the amount of the Maximum Bond Service Requirement, and (iv) computing the percentage of Bonds held by the registered owner of a Capital Appreciation Bond in giving to the Issuer or the Trustee any notice, consent, request or demand pursuant to the Ordinance for any purpose whatsoever, the principal amount of a Capital Appreciation Bond shall be deemed to be its Accreted Value. SECTION 25. AMENDING PRIOR ORDINANCES. In accordance with Section 21 of Ordinance No. 3674-84, which permits amendments and modifications of such Ordinance which are not material modifications or amendments thereof, but with the consent of the respective Bond Insurer for the Parity Bonds, Section 16R of Ordinance No. 3674-84, Ordinance No. 5355-93 and Ordinance No. 6311-98 is hereby amended by deleting in its entirety paragraph (1) thereof and replacing such paragraph with the following new paragraph (1): (1) There shall have been obtained and filed with the Clerk a certificate of the Finance Director stating: (a) that the books and records of the Issuer relative to the System have been audited by qualified and recognized firm of independent certified public accountants; (b) based on such audited financial statement, that the amount of the adjusted Net Revenues derived for the Fiscal Year preceding the date of issuance of the proposed Additional Bonds or for any twelve (12) consecutive months during the eighteen (18) months immediately preceding the date of issuance of the Additional Bonds with respect to which such certificate is made, adjusted as herein below provided; and (c) based on such audited financial statement, that the aggregate amount of such Net Revenues, as adjusted, for the period for which such Net Revenues are being certified is equal to not less than 120% of the Maximum Bond Service Requirement becoming due in any Fiscal Year 31 thereafter on (i) all Parity Bonds and the Bonds issued under this Ordinance, if any, then Outstanding, and (ii) on the Additional Bonds with respect to which such certificate is made SECTION 26. SEVERABILITY OF INVALID PROVISIONS. Ifanyone or more of the covenants, agreements or provisions herein contained shall be held contrary to any express provisions of law or contrary to the policy of express law, though not expressly prohibited, or against public policy, or shall for any reason whatsoever be held invalid, then such covenants, agreements or provisions shall be rruIl and void and shall be deemed separable from the remaining covenants, agreements or provisions and shall in no way affect the validity of any of the other provisions hereof or of the Bonds issued hereunder. SECTION 27. REPEALING CLAUSE. All ordinances or resolutions or parts thereof of the Issuer in conflict with the provisions herein contained are, to the extent of such conflict, hereby superseded and repealed. SECTION 28. EFFECTIVE DATE. This Ordinance shall take effect immediately upon its passage. SECTION 29. PUBLIC NOTICE. Notice of the proposed enactment of this Ordinance has been properly advertised in a newspaper of general circulation in accordance with Chapter 166.041, Florida Statutes. PASSED ON FIRST READING ,2001 PASSED ON SECOND READING AND FINAL READING AND ADOPTED AS AMENDED. ,2001 Mayor-Commissioner Attest: City Clerk Approved as to Form, Sufficiency and Correctness: City Attorney 32 RESOLUTION NO. 03-35 A RESOLUTION PROVIDING FOR THE AUTHORIZATION OF NOT TO EXCEED $9,500,000 WATER AND SEWER REVENUE REFUNDING BONDS, SERIES 2003; PROVIDING FOR THE PUBLIC SALE OF SAID BONDS; SEITlNG FORTH THE FORM OF THE NOTICE OF BOND SALE AND SUMMARY NOTICE OF BOND SALE RELATING TO THE SALE OF SUCH BONDS; DIRECTING PUBLICATION OF THE SUMMARY NOTICE OF SALERELATING TO SUCH BONDS; PROVIDING FOR THE OPENING OF BIDS RELATING TO THE SALE OF THE BONDS; SETTING FORTH THE FORM OF OFFICIAL NOTICE OF SALE AND BID FORMS; PROVIDING THAT SUCH BONDS SHALL BE ISSUED IN FULL BOOK ENTRY FORM; APPROVING THE FORM OF A PRELIMINARY OFFICIAL STATEMENT; PROVIDING FOR COMPLIANCE WITH A CONTINUING DISCLOSURE CERTIFICATE; DESIGNATING A REGISTRAR AND PAYING AGENT; PROVIDING FOR AN ESCROW DEPOSIT AGREEMENT AND APPOINTING AN ESCROW AGENT; AUTHORIZING THE PURCHASE OF MUNICIPAL BOND INSURANCE; PROVIDING CERTAIN OTHER MATTERS IN CONNECTION THEREWITH; AND PROVIDING AN EFFECTIVE DATE. WHEREAS, the City of Clearwater, Florida (the "Issuer") has by Ordinance No. 3674- 84 enacted by the Issuer on August 2, 1984, as amended and supplemented in Ordinance 5355- 93, enacted on April 15, 1993, as amended and supplemented in Ordinance 6311-98, enacted November 5, 1998 and as further amended and supplemented in Ordinance 6915-0 I, enacted November 15, 200 I (collectively, the "Bond Ordinance") authorized the issuance of City of Clearwater, Florida, Water and Sewer Revenue Bonds, Series [to be determined] in one or more series from time to time; NOW, THEREFORE, BE IT RESOLVED BY THE CITY COMMISSION OF THE CITY OF CLEARWATER, FLORIDA, as follows: SECTION 1. AUTHORIZATION OF BONDS AND SERIES DESIGNATION. The Water and Sewer Revenue Refimding Bonds, Series 2003 being offered pursuant to the Bond Ordinance and this resolution are hereby designated as the not to exceed $9,500,000 City of Clearwater, Florida, Water and Sewer Revenue Bonds, Series 2003 (the "Series 2003 Bonds"), which Series 2003 Bonds are hereby authorized to be issued. The proceeds of the Series 2003 Bonds shall be used to refimd the Issuer's outstanding Water and Sewer Refunding Revenue Bonds, Series 1993 maturing on and after December 1, 2004 (the 'Refimded Bonds'1, pay the cost of issuing the 2003 Bonds, including any municipal bond insurance, and to fimd a debt service reserve fimd. SECTION 2. PUBLIC SALE. There is hereby authorized to be sold pursuant to a public sale not to exceed $ 9,500,000 City of Clearwater, Florida, Water and Sewer Revenue Refimding Bonds, Series 2003. Resolution No. 03-35 1 SECTION 3. SALE OF SERIES 2003 BONDS; REDEMPTION AND MATURITY PROVISIONS. The Finance Director is hereby directed to arrange for the sale of the Series 2003 Bonds utilizing the electronic bid process ofP ARITY through the publication of the Summary Notice of Sale of the Bonds in a newspaper regularly distributed in the City of Clearwater and in The Bond Buyer, such publications to be on such date as shall be deemed by the Finance Director to be in the best interest of the Issuer and such publications to be not less than ten (10) calendar days prior to the date of sale as required by Section 218.385(1), Florida Statutes; and to publish such Notice in such other newspapers on such dates as may be deemed appropriate by the Finance Director. The Series 2003 Bonds shall be subject to optional redemption and shall bear maturities and sinking fimd amortizations as shall be subsequently determined by the Financial Director, upon advice of the City's financial advisor and based on market conditions existing at the time, prior to the publication of the Summary Notice of Sale as hereinafter approved. Proposals for purchase of the Series 2003 Bonds will be received electronically via PARITY as provided in the Official Notice of Sale, from the time that the Notice of Bond Sale is published until 11:00 a.m., Clearwater, Florida time, on such date and time as may be established by the Finance Director of the City or her designee, and if such date is subject to change, communicated through Thompson Municipal Market Monitor (TM3) not less than twenty- four (24) hours prior to the time bids are to be received for the purchase ofthe City of Clearwater, Florida, Water and Sewer Revenue Bonds, Series 2003; provided that if the internet is not working on the designated bid date, the bid date shall be automatically changed to the next business day, and the City will communicate a confirmation of this change in bid date through Thompson Municipal Market Monitor (TM3), all as provided in the Notice of Sale (the "Bid Date"). SECTION 4. CREATION OF ACCOUNT IN THE CONSTRUCTION FUND AND USE OF FUNDS. There is hereby created with the Construction Fund separate subaccounts namely, the Series 2003 Cost ofIssuance Account. Moneys held in the Series 2003 Cost ofIssuance Account shall be used to pay the costs of issuing and delivering the Series 2003 Bonds. SECTION 5. DISPOSITION OF PROCEEDS OF SERIES 2003 BONDS. The proceeds from the sale of the Series 2003 Bonds shall be deposited as follows: (a) An amount equal to the accrued interest on the Series 2003 Bonds shall be deposited into the Interest Account in the Bond Service Funds; (b) An amount determined by the Finance Director to be necessary to pay the costs of issuing the Series 2003 Bonds, including the premium due to the Bond Insurer, shall be deposited into the Series 2003 Cost of Issuance Account in the Construction Fund to pay such costs; (c) An amount determined by the Finance Director in comultation with the City's Financial Advisor to be deposited under the Escrow Deposit Agreement (hereinafter approved), which together with certain Resolution No. 03-35 2 fimds currently held by the Issuer in the Sinking Fund for the Refimded Bonds, will provide sufficient fimds to defease the Refunded Bonds; (d) An amount determined by the Finance Director to be necessary to increase the amount in the Reserve Fund so that the amount on deposit therein equals the Reserve Requirement; and (e) The remaining proceeds of the Series 2003 Bonds representing a rounding amount shall be deposited into the Bond Service Fund for the Series 2003 Bonds. SECTION 6. APPROVAL OF FORMS. The Notice of Bond Sale and Summary Notice of Sale of the Bonds to be submitted for purchase of the Series 2003 Bonds shall be in substantially the forms annexed hereto, as Exhibits A and B, respectively, together with such changes as shall be deemed necessary or desirable by the Finance Director depending on the bidding method selected in accordance with Section 3 hereof, incorporated herein by reference. The form of the Official Bid Form shall be provided by the internet auction website selected by the Finance Director, and shall be reasonably satisfactory to the Finance Director. SECTION 7. BOOK ENTRY ONLY BONDS. It is in the best interest of the City andthe residents and inhabitants thereof that the Series 2003 Bonds be issued utilizing a pure book-entry system of registration. In furtherance thereof, the City has previously executed and delivered a Blanket Letter of Representations with the DepositoryTrust Company. For so long as the Series 2003 Bonds remain in such book entry only system of registration, in the event of a conflict between the provisions of the Bond Ordinance and of the Blanket Letter of Representations, the terms and provisions of the Blanket Letter of Representations shall prevail. SECTION 8. ESCROW DEPOSIT AGREEMENT The form of Escrow Deposit Agreement to be used in connection with the defeasance and redemption of the Refimded Bonds attached hereto as Exhibit 'F" and incorporated herein by reference is hereby approved. The Mayor-Commissioner, or in his absence the Vice Mayor, the City Manager and the City Clerk are hereby authorized to execute such Escrow Deposit Agreement in substantially the form attached as Exhibit "F" upon the approval of the City Attorney as to form and legal sufficiency, with such additional changes, insertions and omissions therein as do not change the substance thereof and as may be approved by the said officers of the Issuer executing the same, such execution to be conclusive eviden::e of such approval. The Finance Director is hereby authorized to solicit offers from financial institutions to serve as Escrow Agent under the Escrow Deposit Agreement for the Refimded Bonds, and the Finance Director is hereby authorized to select the firm with the lowest bid to serve in such capacity. SECTION 9. PRELIMINARY OFFICIAL STATEMENT AND OFFICIAL STATEMENT. The City Manager and Finance Director are authorized and directed to cause a Preliminary Official Statement to be prepared in substantially the form attached hereto as Exhibit C, with such changes, insertions and omissions as shall be approved by the City Manager and Finance Director, ResolutionNo. 03-35 3 containing a copy of the attached Notice of Bond Sale and to furnish a copy of such Preliminary Official Statement to interested bidders. The City Manager and Finance Director are authorized to deem final the Preliminary Official Statement prepared pursuant to this Section for purposes of Rule 15c2-12 (the "Rule") of the Securities and Exchange Commission. Upon the award of the Series 2003 Bonds to the successful bidder, the City shall also make available a reasonable number of copies of the Preliminary Official Statement to such bidder, who may mail such Preliminary Official Statements to prospective purchasers at the bidder's expense. Following the award of the Series 2003 Bonds, the City Manager and the Finance Director shall cause to be prepared a final Official Statement dated as of the Bid Date, reflecting such changes in the Preliminary Official Statement as may be necessary to reflect the purchaser's bid. The Mayor-Commissioner and City Manager are hereby authorized to execute and delivery such final Official Statement, with such changes, insertions and omissions as may be approved by such officers. SECTION 10. CONTINUING DISCLOSURE. The City hereby covenants and agrees that, in order to provide for compliance by the City with the secondary market disclosure requirements of the Rule, that it will comply with and carry out all of the provisions of that certain Continuing Disclosure Certificate in substantially the form attached hereto as Exhibit D, to be executed by the City and dated the date of issuance and delivery of the Series 2003 Bonds, as it may be amended from time to time in accordance with the terms thereof (the "Continuing Disclosure Certificate"). Notwithstanding any other provision of this Resolution, failure of the City to comply with such Continuing Disclosure Certificate shall not be considered an event of default; however, any Bondholder may take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the City to comply with its obligations under this Section. SECTION 11. REGISTRAR AND PAYING AGENT. Wells Fargo Bank, N.A., Minneapolis, Minnesota is hereby appointed as Registrar and Paying Agent for the Series 2003 Bonds. SECTION 12. MUNICIPAL BOND INSURANCE POLICIES. Pursuant to the Bond Ordinance, Financial Security Assurance Inc. ("FSA") has been selected to provide its Municipal Bond Insurance Policy (the "Policy") as the Bond Insurance Policy (as defined in the Bond Ordinance) as additional security for payment of principal and interest on the Series 2003 Bonds. Selection ofFinancial Security Assurance Inc., a New York domiciled insurance company as the Bond Insurer (as defined in the Bond Ordinance) is hereby ratified and confirmed and payment for such Bond Insurance Policy from proceeds of the Series 2003 Bonds is hereby authorized. The Issuer hereby accepts the terms, conditions and agreements relating to the Bond Insurance Policy in accordance with the Municipal Bond Insurance Corrnnitment attached hereto as Exhibit E and incoIpOrated herein. A statement of insurance is hereby authorized to be printed on or attached to the Series 2003 Bonds for the benefit and information of the holders of the Series 2003 Bonds. In addition to the covenants and agreements of the City previously contained in the Bond Ordinance regarding the rights of the Bond Insurer, which are hereby incoIpOrated herein, the City hereby makes the additional covenants and agreements substantially in the form attached hereto as Exhibit "G" for the benefit Resolution No. 03-35 4 of the Bond Insurer and the Holders of the Series 2003 Bonds while the Bond Insurance Policy insuring the Series 2003 Bonds are in full force and effect: SECTION 13. AWARD OF BIDS. The Finance Director is hereby authorized to accept the bids for the Series 2003 Bonds. The City Manager and the Finance Director are hereby authorized to award the sale of the Series 2003 Bonds on their determination of the best bid submitted in accordance with the terms of the Notice of Bond Sale provided for herein so long as the true interest cost rate shall not exceed 4.0% on the Series 2003 Bonds and a net present value savings on refimding the Refimded Bonds of not less than 2 %. The City Manager and the Finance Director are hereby authorized to award the sale of the Series 2003 Bonds as set forth above or to reject all bids for the Series 2003 Bonds. Such award shall be final. SECTION 14. PRIOR RESOLUTIONS. To the extent the provisions of this Resolution are inconsistent with the provisions of Resolution No. 02-30, adopted by the City Commission of the City on June 20, 2002 with respect to the Series 2002 Bonds, Resolution No. 98-54, adopted by the City Commission of the City on November 5, 1998, with respect to the Series 1998 Bonds and Resolution No. 93-26, adopted by the City Commission of the City on April 15, 1993, with respect to the Series 1993 Bonds, provisions of this Resolution shall control and supercede the inconsistent provisions of such Resolutions. Resolution No. 03-35 5 SECTION 15. EFFECTIVE DATE. This resolution shall take effect immediately upon adoption. Passed and adopted by the City Commission of the City of Clearwater, Florida, this _ day of ,2003. CITY OF CLEARWATER, FLORIDA Brian 1. Aungst, Mayor-Commissioner Approved as to form: Attest: Pamela K Akin, City Attorney Cynthia E. Goudeau, City Clerk Resolution No. 03-35 6 EXHIBIT A FORM OF OFFICIAL NOTICE OF BOND SALE $ * CITY OF CLEARWATER, FLORIDA WATER AND SEWER REVENUE REFUNDING BONDS, SERIES 2003 NOTICE IS HEREBY GIVEN that electronic (as explained below) proposals will be received electronically viaP ARITY in the manner described below, until II :00 a.m., Eastern Daylight Savings Time, on October I, 2003. Bids must be submitted electronically via PARITY in accordance with this Notice of Bond Sale, until 11:00 a.m., Clearwater, Florida time, but no bid will be received after the time for receiving bids specified above. To the extent any instructions or directions set forth in PARITY conflict with this Notice of Bond Sale, the terms of this Notice of Bond Sale shall control. For further information aboutP ARITY, potential bidders may contact the financial advisor to the City, William R. Hough & Co., 100 Second Avenue South, Suite 800, St. Petersburg, Florida 33701, Attn: Kevin Conitz: (727) 895 8853, or PARITY at 40 West 23rd Street, 5th Floor, New York, New York 10010, telephone (212) 404-8102. In the event of a malfimction in the electronic bidding process, the bid date will automatically change to the next business day as confirmed in a communication through Thompson Municipal Market Monitor (TM3). Form of Series 2003 Bonds The Series 2003 Bonds will be issued in book entry only form, without coupons, in denominations of $5,000 or any integral multiples thereof, and shall re dated October I, 2003. Principal of the Series 2003 Bonds shall be paid to the registered owners at the designated corporate trust office of Wells Fargo Bank, N.A. (the "Paying Agent" and "Registrar"), upon presentment and surrender of the Series 2003 Bonds. Interest on the Series 2003 Bonds shall be paid to the registered owners as shown on the registration books maintained by the Registrar, by check or draft mailed to each such owner's address as shown on the registration books maintained by the Registrar as of the fifteenth (15th) day of the calendar month preceding such interest payment date. Interest will be payable each June 1 and December I, commencing June 1, 2004. Interest will be calculated on the basis of a 360-day year of twelve 30-day month;. For so long as The Depository Trust Company, New York, New York, or its nominee, Cede & Co. (collectively, "DTC") is the registered owner of the Series 2003 Bonds, payments of principal of, redemption premium, if any, and interest on the Series 2003 Bonds will be made directly to DTC. Disbursements of such payments to the DTC participants is the responsibility of DTC and further disbursement of such payments from the DTC participants to the beneficial owners of the Series 2003 Bonds is the responsibility of the DTC participants. * Preliminary, subject to change A-I Initially one bond will be issued for each maturity of the Series 2003 Bonds in the aggregate principal amount of each such maturity and registered in the name of DTC. DTC, an automated clearing house for securities transactions, will act as securities depository for the Series 2003 Bonds. Purchases of the Series 2003 Bonds will be made in book-entry-only form (without certification). It shall be the responsibility of the Successful Bidder (as hereinafter defined) for tre Series 2003 Bonds to furnish to DTC an underwriters' questionnaire and to the City the CUSIP numbers of the Series 2003 Bonds not less than seven (7) days prior to the Closing Date (as hereinafter defined). Maturity Schedule The Series 2003 Bonds will mature on December I of the following years in the following principal amounts: Series 2003 Bonds Maturity 2011 2012 2013 2014 2015 2016 2017 2018 Principal Amount* Maturity 2004 2005 2006 2007 2008 2009 2010 Principal Amount* *Preliminary, subject to change The Series 2003 Bonds will be sold as serial bonds. Bidders will not be allowed to designate any maturities as one or more term bonds. Adjustment of Principal Amount After final computation of the bids, to achieve desired debt service levels, the City reserves the right either to increase or decrease any Principal Amount of the Series 2003 Bonds shown on the schedule of Principal Amounts set forth above (the "Maturity Schedule"), by an amount not to exceed five percent (5%) of the stated amount of each such Principal Amount on the Maturity Schedule and correspondingly adjustthe issue size, all calculations to be rounded to the nearest $5,000. In the event of any such adjustment in the Series 2003 Bonds, no rebidding or recalculation of the A-2 bid submitted with respect to such Series 2003 Bonds will be required or permitted. Ifnecessary, the total purchase price of the Series 2003 Bonds will be increased or decreased in direct proportion to the ratio that the adjustment bears to the aggregate principal amount of the Series 2003 Bonds specified herein; and the Series 2003 Bonds of each maturity, as adjusted, will bear interest at the same rate and must have the same initial reoffering yields as specified in the bid of the Successful Bidder. However, the award will be made to the bidder whose bid produces the lowest true interest cost, calculated as specified below, solely on the . basis of the bid for the Series 2003 Bonds offered pursuant to the Bid Maturity Schedule of the relevant series of Series 2003 Bonds, without taking into account any adjustment in the amount of Series 2003 Bonds set forth in the Bid Maturity Schedule. Basis of Award Proposals must be unconditional and only for all the Series 2003 Bonds. The purchase price bid fur the Series 2003 Bonds may include a discount (including underwriters' discount and original issue discount) not to exceed two percent (2%) of the principal amount of the Series 2003 Bonds and shall specify how much of the discount is original issue discount. The purchase price bid may also include an original issue premium and shall specify how much of such purchase price is original issue premium. The Series 2003 Bonds will be insured by Financial Security Assurance. Inc. and the City will pay the bond insurance premium from Bond proceeds. The purchase price bid for the Series 2003 Bonds will not deduct the insurance premium. Only the final bid submitted by any bidder through Parity will be considered. The City reserves the right to determine the Successful Bidder for the Series 2003 Bonds, to reject any or all bids and to waive any irregularity or informality in any bid. The Series 2003 Bonds will be awarded to the bidder (herein referred to as the "Successful Bidder" as to the Series 2003 Bonds) 0 ffering such interest rate or rates and purchase price which will produce the lowest true interest cost to the City over the life of the Series 2003 Bonds. True interest cost for the Series 2003 Bonds (expressed as an annual interest rate) will be that armual interest rate being twice that factor of discount rate, compounded semiannually, which when applied against each semiannual debt service payment (interest, or principal and interest, as due) for the Series 2003 Bonds will equate the sum of such discomted semiannual payments to the bid price (inclusive of accrued interest). Such semiannual debt service payments begin on June I, 2004. The true interest cost shall be calculated from October 15, 2003, the expected closing date of the Series 2003 Bonds (the "Closing Date") and shall be based upon the principal amounts of each serial maturity set forth in this Notice of Bond Sale and the bid price set forth in the Proposal for the Series 2003 Bonds submitted in accordance with the Notice of Bond Sale. In case ofa tie, the City may select the Successful Bidder by lot. It is requested that each Proposal for the Series 2003 Bonds be accompanied by a computation of such true interest cost to the City under the term of the Proposal for Bonds, but such computation is not to be considered as part of the Proposal for Bonds. Interest Rates Permitted The Series 2003 Bonds shall bear interest expressed in multiples of one-eighth (118) or one- twentieth (1/20) of one percent. No coupon interest rate specified for any maturity of the Series 2003 Bonds may be less than one percent (1.0%) or more than five percent (5.0%). Should an interest rate be A-3 specified which results in annual interest payments not being equally divisible between the semiannual payments in cents the first semiannual payment will be reduced to the next lower cent and the second semiannual payment will be raised to the next higher cent. It shall not be necessary that all Series 2003 Bonds bear the same rate of interest, provided that all Series 2003 Bonds maturing on the same date shall bear the same rate of interest. A rate of interest based upon the use of split or supplemental interest payments or a zero rate of interest will not be considered. Pavine Aeent and Reeistrar The Paying Agent and Registrar for the Series 2003 Bonds is Wells Fargo Bank, N.A., through its designated office in Minneapolis, Minnesota. Security Principal of and interest on the Series 2003 Bonds to be issued pursuant to Ordinance No. 6915- 01, as supplemented, and all required sinking fimd, reserve and other payments shall be payable solely from the Net Revenues of Water and Sewer System of the City, together with the earnings thereon derived from the investment thereof in the Funds and Accounts established in the Ordinance and as more fully described in the Preliminary Official Statement. The Series 2003 Bonds do not constitute a general indebtedness of the City within the meaning of any constitutional, statutory or charter provision or limitation, and no Bondholder shall ever have the right to require or compel the exercise of the ad valorem taxing power of the City or taxation of any real or personal property therein for the payment of the principal of and interest on the Series 2003 Bonds or the making of any debt service fimd, reserve or other payments provided for in the Resolution. Purpose Pursuant to the Ordinance, the Series 2003 Bonds are being issued to finance the refimding of the City's Water and Sewer Refimding Revenue Bonds, Series 1993, and pay the costs of issuing the Series 2003 Bonds, including the premium for a municipal bond insurance policy and to fimd the reserve fimd. Issuance of Series 2003 Bonds The Series 2003 Bonds will be issued and sold by the City of Clearwater, Florida, a municipal corporation organized and existing under the laws of the State of Florida. The Series 2003 Bonds are being issued pursuant to Ordinance No. 6915-01 enacted November 15, 2001 as supplemented by resolutions (collectively, the "Bond Ordinance") by the City of Oearwater, Florida (the "City") and pursuant to the provisions of Chapter 166, Florida Statutes, and other applicable provisions of law. A-4 Municiual Bond Insurance Policy A commitment to issue a municipal bond insurance policy guaranteeing payment of principal and interest on the Series 2003 Bonds has been obtained from Financial Security Assurance Inc. Prouosals Proposals for the Series 2003 Bonds are desired on forms which will be furnished by PARITY, on behalf of the City, and be submitted electronically via PARITY. All bidders must submit a "Good Faith Deposit" in the amount of $100,000 (the "Deposit") in the form of a financial surety bond of Financial Security Assurance, Inc. (the "Financial Surety Bond"). Such Financial Surety Bond must be submitted to the City prior to the sale. The Financial Surety Bond must identify the Bidder whose Deposit is guaranteed by such Financial Surety Bond. The successful bidder is required to submit its good faith deposit by wire transfer not later than 2:00 p.m. eastem time, on the next business day following the award, as instructed by the City's Financial Advisor. If such deposit is not received by that time, the City shall make a claim under the Financial Surety Bond to satisfy the good faith deposit requirement. The check of the successful bidder or proceeds of a claim under the Financial Surety Bond, as applicable, will be deposited by the City in an interest-bearing account and be retained and applied towards the purchase price of the Series 2003 Bonds pending full performance by the successful bidder, or will be forfeited to the City and applied as full liquidated damages upon failure of the successful bidder to take up and pay for the Series 2003 Bonds. Any interest earned on the good faith deposit will be retained by and inure to the benefit of the City. If the Series 2003 Bonds are not delivered to the successful bidder within 30 calendar days from the date of sale, without fault upon the part of the successful bidder, such successful bidder shall not thereafter be obligated to take delivery of and pay for the Series 2003 Bonds and the good faith deposit amount will be promptly paid to the successful bidder or Financial Security Assurance, Inc., as applicable. Delivery and Payment It is anticipated that the Series 2003 Bonds in book entry only form will be available for delivery on October 15, 2003, in New York, New York, at The Depository Trust Company, or some other date and place to be mutually agreed upon by the Successful Bidder and the City against the payment of the purchase price therefor including accrued interest calculated on a 360-day year basis, less the amount of the good faith check, in immediately available Federal Reserve fimds without cost to the City. Closine Documents The City will furnish to the Successful Bidder upon delivery of the Series 2003 Bonds the following closing documents in a form satisfactory to Bond Counsel: (1) signature and no-litigation certificate; (2) federal tax certificate; (3) certificate regarding information in the Official Statement; and (4) seller's receipt as to payment. A copy of the transcript of the proceedings authorizing the Series 2003 Bonds will be A-5 delivered to the Successful Bidder of the Series 2003 Bonds upon request. Copies of the form of such closing papers and certificates may be obtained from the City. Information Statement Section 218.38(1)(b) I, Florida Statutes requires that the City file, within 120 days after delivery of the Series 2003 Bonds, an information statement with the Division of Bond Finance of the State of Florida (the "Division") containing the following information: (a) the name and address of the managing underwriter, if any, connected with the Series 2003 Bonds; (b) the name and address of any attorney or financial consultant who advised the City with respect to the Series 2003 Bonds; and ( c) any fee, bonus, or gratuity paid, in connection with the bond issue, by an underwriter or financial consultant to any person not regularly employed or engaged by such underwriter or consultant and (d) any other fee paid by the City with respect to the Series 2003 Bonds, including any fee paid to attorneys or financial consultants. The Successful Bidder will be required to deliver to the City at or prior to the time of delivery of the Series 2003 Bonds, a statement signed by an authorized officer containing the same information mentioned in (a) and (c) above. The Successful Bidder shall also be required, at or prior to the delivery of the Series 2003 Bonds, to furnish the City with such information concerning the initial prices at which a substantial amount of the Series 2003 Bonds of each maturity were sold to the public as the City shall reasonably request. Pursuant to Section 218.385(2) and (3) of the Florida Statutes, as amended, a truth-in-bonding statement will be required from each bidder as to the Series 2003 Bonds as part of their bid in the following fonn: "The City of Clearwater, Florida, is proposing to issue $ original aggregate principal amount of Water and Sewer Revenue Refimding Bonds, Series 2003, fur the pmpose of paying (i) the costs of refimding the City' s Water and Sewer Refimding Revenue Bonds, Series 1993, (ii) the costs of issuing the Series 2003 Bonds, and (iii) the premium on the Bond Insurance Policy, all as further described in Ordinance No. 6915-01. The final maturity date of the Series 2003 Bonds is December I, 2018, and the Series 2003 Bonds are expected to be repaid over a period of fifteen (15) years. At a forecasted average interest rate of _% per annum, total interest paid over the life of the Series 2003 Bonds will be $ . The source of repayment or security for this proposal is the Net Revenues (as defined in the Ordinance) and moneys and investments held in the fimds created under the said Ordinance. Authorizing the Series 2003 Bonds will result in $ not being available to finance the other capital projects of the City. This truth- in- bonding statement prepared pursuant to Section 218.385(2) and (3) of the Fbrida Statutes, as amended, is for informational pwposes only and shall not affect or control the actual terms and conditions of the Series 2003 Bonds." A-6 Leeal Opinion The Successful Bidder will be furnished, without cost, with the approving opinion of Bryant MiIIcr& Olive P.A., Tallahassee, Florida, to the effect that based on existing law, and assuming compliance by the City with certain covenants and requirements of the Internal Revenue Code of 1986, as amended (the "Code"), regarding use, expenditures, investment of proceeds and the timely payment of certain investment earnings to the United States Treasury, the interest on the Series 2003 Bonds is not includable in the gross income of individuals, however, interest on the Series 2003 Bonds will be included in the calculation of the alternative minimum tax liabilities of corporations. The Code contains other provisions that could result in tax consequences, upon which Bond Counsel renders no opinion, as a result of ownership of the Series 2003 Bonds cr the inclusion in certain computations (including, without limitation, those related to the corporate alternative minimum tax and environmental tax) of interest that is excluded from gross income. Official Statement The Preliminary Official Statement, copies of which may be obtained as described below, is in a form "deemed final" by the City for pwposes of SEC Rule 15c2-12(b)(I) (except for certain permitted omissions as described in such rule) but is subject to revision, amendment and completion in a final Official Statement. Upon the sale of the Series 2003 Bonds, the City will publish a final Official Statement in substantially the same form as the Preliminary Official Statement. Copies of the final Official Statement will be provided, at the City's expense, on a timely basis in such quantities as may be necessary for the Successful Bidder's regulatory compliance. It is not the intention or the expectation of the City to print the name(s) of the Successful Bidder as to the Series 2003 Bonds on the cover of the Official Statement. Continuine Disclosure The City has covenanted to provide ongoing disclosure in accordance with Rule 15c2-12 of the Securities and Exchange Commission. See "Appendix D -- Form of Continuing Disclosure Certificate" attached to the Preliminary Official Statement. CUSIP Number It is anticipated that CUSIP identification numbers will be printed on the Series 2003 Bonds, but neither the failure to print such number on any Series 2003 Bonds nor any error with respect thereto shall constitute cause for failure or refusal by the Successful Bidder to accept delivery of and pay for the Series 2003 Bonds in accordance with its agreement to purchase the Series 2003 Bonds. All expenses in relation to the printing of CUSIP numbers on the Series 2003 Bonds shall be paid for by the City; provided, however, that the CUSIP Service Bureau charge for the assignment of said number shall be the responsibility of and shall be paid for by the Successful Bidder. A-7 Copies of Documents Copies of the Preliminary Official Statement, this Official Notice of Bond Sale and the Official Bid Form and further information which may be desired, may be obtained from the City's Financial Advisor, William R. Hough & Co., 100 Second Avenue South, Suite 800, St. Petersburg, Florida 33701, Attn: Kevin Conitz: (727) 895 8853. Amendment and Notices Amendments hereto and notices, if any, pertaining to this offering shall be made through Thompson Municipal Market Monitor (TM3) or similar information distribution service. CITY OF CLEARWATER, FLORIDA Isl Brian 1. Aungst Mayor-Commissioner A-8 EXHIBIT B FORM OF SUMMARY NOTICE OF SALE CITY OF CLEARWATER, FLORIDA Water and Sewer Revenue Refunding Bonds Series 2003 NOTICE IS HEREBY GIVEN, that bids will be received by the City Manager and the Finance Director of the City of Clearwater, Florida, electronically through PARITY, subject to the provisions of the Official Notice of Bond Sale. Sale Date: October I, 2003 Time: II :00 a.m., E.D.S.T. Bonds Dated: October I, 2003 Maturities: Payable December I in the years and amounts as follows: Series 2003 Bonds Maturity 2004 2005 2006 2007 2008 2009 2010 Principal Amount* Maturity 2011 2012 2013 2014 2015 2016 2017 2018 Principal Amount* *Preliminary, subject to change Interest Payment Dates: Payable June 1 and December I, commencing June 1,2004. Legal Opinion: Bryant Miller & Olive P.A., Tallahassee, Florida For copies of the Official Notice of Bond Sale and the Preliminary Official Statement of the City of Clearwater, Florida, please contact the City's Financial Advisor, William R. Hough & Co., 100 Second Avenue South, Suite 800, St. Petersburg, Florida 33701, Attn: Kevin Conitz: (727) 895 8853. The Preliminary Official Statement may be obtained after September 22, 2003 electronically through Image B-1 Master Financial Publishing Inc. at www.munios.com. B-2 EXHIBIT C FORM OF PRELIMINARY OFFICIAL STATEMENT C-I EXHIBIT D CONTINUING DISCLOSURE CERTIFICATE D-I EXHIBIT E COMMITMENT FOR MUNICIPAL BOND INSURANCE POLICY E-I EXHIBIT F ESCROW DEPOSIT AGREEMENT F-I EXHIBIT G ADDITIONAL COVENANTS WITH BOND INSURER (a) "Insurance Policy" shall be defined as follows: ''the insurance policy issued by the Insurer guaranteeing the scheduled payment of principal of and interest on the Bonds when due". "Insurer" shall be defined as follows: "Financial Security Assurance Inc., a New York stock insurance company, or any successor thereto or assignee thereof'. (b) For transactions with a debt service reserve fimd, the prior written consent of the Insurer shall be a condition precedent to the deposit of any credit instrwnent provided in lieu of a cash deposit into the Debt Service Reserve Fund. Notwithstanding anything to the contrary set firth in the Resolution, amounts on deposit in the Debt Service Reserve Fund shall be applied solely to the payment of debt service on the Bonds. (c) The Insurer shall be deemed to be the sole holder of the Insured Bonds for the purpose of exercising any voting right or privilege or giving any consent or direction or taking any other action that the holders of the Bonds insured by it are entitled to take pursuant to the section or the article of the Resolution pertaining to defaults and remedies. Remedies of the Bondholders to include mandamus. (d) If acceleration is permitted under the Resolution, the maturity of Bonds insured by the Insurer shall not be accelerated without the consent of the Insurer and in the event the maturity of the Bonds is accelerated, the Insurer may elect, in its sole discretion, to pay accelerated principal and interest accrued, on such principal to the date of acceleration (to the extent unpaid by the Issuer). Upon payment of such accelerated principal and interest accrued to the acceleration date as provided above, the Insurer's obligations under the Insurance Policy with respect to such Bonds shall be fully discharged. (e) No grace period for a covenant default shall exceed 30 days, nor be extended for more than 60 days, without the prior written consent of the Insurer. No grace period shall be permitted for payment defaults. (f) The Insurer shall be included as a third party beneficiary to Resolution No. 03- 35 and the Bond Ordinance with respect to the Series 2003 Bonds. (g) Upon the occurrence of an extraordinary optional or special or extraordinary mandatory redemption in part, the selection of Bonds to be redeemed shall be subject to the approval of the Insurer. The exercise of any provision of the Resolution which permits the purchase of Bonds in lieu of redemption shall require approval of the Insurer wherein any Bond so purchased is not extinguished. (h) No modification or amendment to Resolution 03-35 and the Bond Ordinance with respect to the Series 2003 Bonds or any other transaction document including any underlying security agreement G-l (each a "Related Document") may become effective except upon obtaining the prior written consent of the Insurer. Copies of any modification or amendment to such Resolution and Bond Ordinanceor any other Related Document shall be sent to Standard & Poor's Credit Market Services ("S&P") and Moody's Investors Service, Inc. ("Moody's") at least 10 days prior to the effective date thereof (i) The rights granted to the Insurer under Resolution No 03 - 35 and the Bond Ordinance with respect to the Series 2003 Bonds or any other Related Document to request, consent to or direct any action are rights granted to the Insurer in consideration of its issuance of the Insurance Policy. Any exercise by the Insurer of such rights is merely an exercise of the Insurer's contractual rights and shall not be 90nstrued or deemed to be taken for the benefit or on behalf of the Bondholders nor does such action evidence any position of the Insurer, positive or negative, as to whether Bondholder consent is required in addition to consent of the Insurer. G) Only (1) cash, (2) non-callable direct obligations of the United States of America ("Treasuries"), (3) evidences of ownership of proportionate interests in future interest and principal payments on Treasuries held by a bank or trust company as custodian, under which the owner of the investment is the real party in interest and has the right to proceed directly and individually against the obligor and the underlying Treasuries are not available to any person claiming through the custodian or to whom the custodian may be obligated, (4) pre-refimded municipal obligations rated "AAA" and "Aaa" by S&P and Moody's, respectively or (5) securities eligible for "AAA" defeasance under then existing criteria of S & P or any combination thereof, shall be authorized to be used to effect defeasance of the Bonds unless the Insurer otherwise approves. To accomplish defeasance the Issuer shall cause to be delivered (i) a report of an independent firm of nationally recognized certified public accountants or such other accountant as shall be acceptable to the Insurer ("Accountant") verifying the sufficiency of the escrow established to pay the Bonds in full on the maturity or redemption date (''Verification''), (ii) an Escrow Deposit Agreement (which shall be acceptable in form and substance to the Insurer), and (iii) an opinion of nationally recognized bond counsel to the effect that the Bonds are no longer "Outstanding" under the Resolution; each Verification and defeasance opinion shall be acceptable in form and substance, and addressed, to the Issuer and the Insurer. The Insurer shall be provided with final drafts of the above-referenced documentation not less than five business days prior to the fimding of the escrow. Bonds shall be deemed "Outstanding" under the Bond Ordinance unless and until they are in fact paid and retired or the above criteria are met. (k) Amounts paid by the Insurer under the Insurance Policy shall not be deemed paid for purposes of the Resolution and shall remain Outstanding and continue to be due and owing until paid by the Issuer in accordance with the Resolution. The Resolution shall not be discharged unless all amounts due or to become due to the Insurer have been paid in full or duly provided for. (1) The Issuer to covenant and agree to take such action (including, as applicable, filing of UCC financing statements and continuations thereof) as is necessary from time to time otherwise preserve the priority of the pledge of Trust Estate under applicable law. (m) Claims Upon the Insurance Policy and Payments by and to the Insurer. G-2 If, on the third Business Day prior to the related scheduled interest payment date or principal payment date ("Payment Date") there is not on deposit with the Paying Agent, after making all transfers and deposits required under the Resolution, moneys sufficient to pay the principal of and interest on the Bonds due on such Payment Date, the Paying Agent shall give notice to the Bond Insurer and to its designated agent (if any) (the "Insurer's Fiscal Agent") by telephone or telecopy of the amount of such deficiency by 12:00 noon, New York City time, on such Business Day. If, on the second Business Day prior to the related Payment Date, there continues to be a deficiency in the amount available to pay the principal of and interest on the Bonds due on such Payment Date, the Paying Agent shall make a claim under the Insurance Policy and give notice to the Insurer and the Insurer's Fiscal Agent (if any) by telephone of the amount of such deficiency, and the allocation of such deficiency between the amount required to pay interest on the Bonds and the amount required to pay principal of the Bonds, confirmed in writing to the Insurer and the Insurer's Fiscal Agent by 12:00 noon, New York City time, on such second Business Day by filling in the form of Notice of Claim and Certificate delivered with the Insurance Policy. In the event the claim to be made is for a mandatory sinking fimd redemption installment, upon receipt of the moneys due, the Paying Agent shall authenticate and deliver to affected Bondholders who surrender their Bonds a new Bond or Bonds in an aggregate principal amount equal to the unredeemed portion of the Bond surrendered. The Paying Agent shall designate any portion of payment of principal on Bonds paid by the Insurer, whether by virtue of mandatory sinking fimd redemption, maturity or other advancement of maturity, on its books as a reduction in the principal amount of Bonds registered to the then current Bondholder, whether DTC or its nominee or otherwise, and shall issue a replacement Bond to the Insurer, registered in the name of Financial Security Assurance Inc., in a principal amount equal to the amount of principal so paid (without regard to authorized denominations); provided that the Paying Agent's failure to so designate any payment or issue any replacement Bond shall have no effect on the amount of principal or interest payable by the Issuer on any Bond or the subrogation rights of the Insurer. The Paying Agent shall keep a complete and accurate record of all fimds deposited by the Insurer into the Policy Payments Account (defined below) and the allocation of such fimds to payment of interest on and principal paid in respect of any Bond. The Insurer shall have the right to inspect such records at reasonable times upon reasonable notice to the Paying Agent. Upon payment of a claim under the Imurance Policy the Paying Agent shall establish a separate special purpose trust account for the benefit of Bondholders referred to herein as the "Policy Payments Account" and over which the Paying Agent shall have exclusive control and sole right of withdrawal. The Paying Agent shall receive any amount paid under the Insurance Policy in trust on behalf of Bondholders and shall deposit any such amount in the Policy Payments Account and distribute such amount only for purposes of making the payments for which a claim was made. Such amounts shall be disbursed by the Paying Agent to Bondholders in the same manner as principal and interest payments are to be made with respect to the Bonds under the sections hereof regarding payment of Bonds. It shall not be necessary for such payments to be made by checks or wire transfers separate from the check or wire transfer used to pay debt service with other fimds available to make such payments. Notwithstanding anything to the contrary otherwise set forth in the Resolution and to the extent permitted by law, in the event amounts paid under the Insurance Policy are applied to claims for payment of principal of or interest on the Bonds, interest on such principal of and interest on such Bonds shall accrue and be payable from the date of such payment at the G-3 greater of (i) the per annum rate of interest, publicly announced from time to time by JP Morgan Chase Bank or its successor at its principal office in the City of New York, as its prime or base lending rate plus 3%, and (ii) the then applicable rate of interest on the Bonds provided that in no event shall such late exceed the maximum rate permissible under applicable usury or similar laws limiting interest rates. Funds held in the Policy Payments Account shall not be invested by the Paying Agent and may not be applied to satisfY any costs, expenses or liabilities of the Paying Agent. Any fimds remaining in the Policy Payments Account following a Bond payment date shall promptly be remitted to the Insurer. (n) The Insurer shall, to the extent it makes any payment of principal of (or, in the case of Capital Appreciation Bonds, accreted value) or interest on the Bonds, become subrogated to the rights of the recipients of such payments in accordance with the terms of the Insurance Policy. The obligations to the Insurer shall survive discharge or termination of the Related Documents. (0) The Issuer shall payor reimburse the Insurer any and all charges, fees, costs and expenses which the Insurer may reasonably payor incur in connection with (i) the administration, enforcement, defense or preservation of any rights or security in any Related Document; (ii) the pursuit of any remedies under the Resolution or any other Related Document or otherwise afforded by law or equity, (iii) any amendment, waiver or other action with respect to, or related to, the Resolution or any other Related Document whether or not executed or completed, (iv).the violation by the Issuer of any law, rule or regulation, or any judgment, order or decree applicable to it or (v) any litigation or other dispute in connection with the Resolution or any other Related Document or the transactions contemplated thereby, other than amounts resulting from the failure of the Insurer to honor its obligations under the Insurance Policy. The Insurer reserves the right to charge a reasonable fee as a condition to executing any amendment, waiver or consent proposed in respect of the Resolution or any other Related Document. (P) The application offimds realized upon default shall be applied to payment of expenses of the Issuer or rebate only after the payment of debt service due and past due on the Bonds, together with replenishment of the Debt Service Reserve Fund. (q) The Insurer shall be entitled to pay principal (or, in the case of Capital Appreciation Bonds, accreted value) or interest on the Bonds that shall become Due for Payment but shall be unpaid by reason of Nonpayment by the Issuer (as such terms are defined in the Insurance Policy) and any amounts due on the Bonds as a result of acceleration of the maturity thereof in accordance with the Resolution, whether or not the Insurer has received a Notice of Nonpayment (as such terms are defined in the Insurance Policy) or a claim upon the Insurance Policy. (r) The notice address of the Insurer is: Financial Security Assurance Inc., 350 Park Avenue, New York, New York 10022-6022, Attention: Managing Director-Surveillance, Re: Policy No. , Telephone: (212) 826-0100; Telecopier: (212) 339-3556. In each case in which notice or other communication refers to an Event of Default, then a copy of such notice or other communication shall also be sent to the attention of the General Counsel and shall be marked to indicate "URGENT MATERIAL ENCLOSED." (s) The Insurer shall be provided with the following information: G-4 (i) Annual audited financial statements within 150 days after the end of the Issuer's fiscal year (together with a certification of the Issuer that it is not aware of any default or Event of Default under the Resolution), and the Issuer's annual budget within 30 days after the approval thereof together with such other information, data or reports as the Insurer shall reasonably request from time to time; (ii) Notice of any draw upon the Debt Service Reserve Fund within two Business Days after knowledge thereof other than (i) withdrawals of amounts in excess of the Debt Service Reserve Requirement and (ii) withdrawals in connection with a refimding of Bonds; (Iii) Notice of any default known to the Issuer within five Business Days after knowledge thereof; (iv) Prior notice of the advance refimding or redemption of any of the Bonds, including the principal amount, maturities and CUSIP numbers thereof; (v) Notice of the resignation or removal of the Paying Agent and Bond Registrar and the appointment of, and acceptance of duties by, any successor thereto; (vi) Notice of the commencement of any proceeding by or against the Issuer commenced under the United States Bankruptcy Code or any other applicable bankruptcy, insolvency, receivership, rehabilitation or similar law (an "Insolvency Proceeding"); (vii) Notice of the making of any claim in connection with any Insolvency Proceeding seeking the avoidance as a preferential transfer of any payment of principal of, or interest on, the Bonds; (viii) A full original transcript of all proceedings relating to the execution of any amendment or supplement to the Related Documents; and (ix) All reports, notices and correspondence to be delivered to Bondholders under the terms of the Related Documents. (t) Notwithstanding satisfaction of other conditions to the issuance of Additional Bonds contained in the Resolution, no such issuance may occur (1) should any Event of Default (or any event which, once all notice or grace periods have passed, would constitute an Event of Default) have occurred and be continuing unless such default shall be cured upon such issuance and (2) unless the Debt Service Reserve Fund is fully fimded at its requirement (including the new issue) upon the issuance of such Additional Bonds, in either case unless otherwise permitted by the Insurer. (u) No contract shall be entered into nor any action taken by which the rights of the Insurer or security for or sources of payment of the Bonds may be impaired or prejudiced in any material respect except upon obtaining the prior written consent of the Insurer. (v) If the puceeds of the Bonds include a refimding there shall be delivered an opinion of Bond Counsel addressed to the Insurer (or a reliance letter relating thereto) or a certificate of discharge of the trustee for the Refimded Bonds to the effect that, upon the making of the required deposit to the escrow, the legal defeasance of the Refimded Bonds shall have occurred. G-5 APPENDIX D FORM OF CONTINUING DISCLOSURE AGREEMENT CONTINUING DISCLOSURE CERTIFICATE This Continuing Disclosure Certificate (the "Disclosure Certificate") is executed and delivered by the City of Clearwater, Florida (the "Issuer") in connection with the issuance of its $[Bond Amount] Water and Sewer System Revenue Bonds, Series 2003 (the "Series 2003 Bonds"). The Series 2002 Bonds are being issued pursuant to Ordinance No. 3674-84 enacted by the Issuer on August 2, 1984, as amended and supplemented in Ordinance 5355-93, enacted on April 15, 1993, as amended and supplemented in Ordinance 6311-98, enacted November 5, 1998 and as fiuther amended and supplemented in Ordinance 6915-01, enacted November 15,2001 (the "Ordinance") and as further supplemented by Resolution 03-35, adopted by the City on September 18, 2003 (the "Series 2003 Resolution"). The Issuer covenants and agrees as follows: SECTION 1. PURPOSE OF DISCLOSURE CERTIFICATE. This Disclosure Certificate is being executed and delivered by the Issuer for the benefit of the Series 2003 Bondholders and in order to assist the original underwriters of the Series 2003 Bonds in complying with Rule 15c2-12(b)(5) promulgated by the Securities and Exchange Commission ("SEC") pursuant to the Securities Exchange Act of 1934 (the "Rule"). SECTION 2. PROVISION OF ANNUAL INFORMATION. Except as otherwise provided herein, the Issuer shall provide to all of the nationally recognized municipal securities information repositories described in Section 4 hereof (the ''NRMSIRs''), and to any state information depository that is established within the State of Florida (the "SID"), on or before June 30 of each year, commencing June 30, 2004, the information set forth below in this Section 2. Notwithstanding the immediately preceding sentence, to the extent any such information does not become available to the Issuer before June 30 of any year, the Issuer shall provide such information when it becomes available, but no later than one year following the end of the Issuer's Fiscal Year. (A) the Issuer's Comprehensive AnnualFinancial Report for the immediately preceding Fiscal Year (the "CAFR"), which shall include the audited financial statements of the Issuer for the immediately preceding Fiscal Year prepared inaccordance with Generally Accepted Accounting Principles, as modified by applicable State of Florida requirements and the governmental accounting standards promulgated by the Government Accounting Standards Board; provided, however, if the audited financial statements of the Issuer are not completed prior to April 30 of any year, the Issuer shall provide unaudited fmancial statements on such date and shall provide the audited financial statements as soon as practicable following their completion; and (B) to the extent not set forth in the CAFR, additional financial information and operating data of the type included with respect to the Issuer in the final official statement prepared in connection with the sale and issuance of the Series 2003 Bonds (as amended, the "Official Statement"), as set forth below: I I. Updates of the historical financial information set forth in the Official Statement under the principal captions "THE W A TERAND SEWER SYSTEM" and "RATES, FEES AND CHARGES" for the then-immediately preceding five fiscal years. 2. Description of any additional indebtedness payable in whole or in part from the Net Revenues (as defined in the Ordinance). 3. Any other financial information or operating data of the type includedinthe Official Statement which would be material to a holder or prospective holders of the Series 2003 Bonds. For purposes of this Disclosure Certificate, "Fiscal Year" means the period commencing on October I and ending on September 30 of the next succeeding year, or such other period of time provided by applicable law. SECTION 3. REPORTING SIGNIFICANT EVENTS. The Issuer shall provide to the NRMSIRs or the Municipal Securities Rulemaking Board (the "MSRB") and to the SID, on a timely basis, notice of any of the following events, if such event is material with respect to the Series 2003 Bonds or the Issuer's ability to satisfy its payment obligations with respect to the Series 2003 Bonds: (A) Principal and interest payment delinquencies; (B) Non-payment related defaults; (C) Unscheduled draws on the debt service reserve fimd reflecting financial difficulties; (D) Unscheduled draws on credit enhancement reflecting financial difficulties; (E) Substitution of credit or liquidity providers, or their failure to perform; (F) Adverse tax opinions or events affecting the tax-exempt status of the Series 2003 Bonds; (G) Modifications to rights of Series 2003 Bondholders; (H) Redemptions; (1) Defeasances; (1) Release, substitution, or sale of property securing repayment of the Series 2003 Bonds; (K) Rating changes; and 2 (L) Notice of any failure on the part of the Issuer or any other Obligated Person (as defined herein) to meet the requirements of Section 2 hereof The Issuer may from time to time, in its discretion, choose to provide notice of the occurrence of certain other events, in addition to those listed in this Section 3, if; in the judgment of the Issuer, such other events are material with respect to the Series 2003 Bonds, but the Issuer does not specifically undertake to commit to provide any suchadditionalnotice of the occurrence of any material event except those events listed above. Whenever the Issuer obtains knowledge of the occurrence of a significant event described in this Section 3, the Issuer shall as soon as possible determine if such event would be material under applicable federal securities law to holders of Series 2003 Bonds, provided, that any event under clauses (D), (E), (F), (K) or (L) above will always be deemed to be material. SECTION 4. NRMSIRs. The NRMSIRs to which the Issuer shall provide the information described in Sections 2 and 3 above, to the extent required, shall be the following organizations, their successors and assigns: (A) Bloomberg Municipal Repository 100 Business Park Drive Skillman, New Jersey 08558 Phone: (609) 279-3225 Fax: (609) 279-5962 Email: Munis@Bloomberg.com DPC Data Inc. One Executive Drive Fort Lee, NJ 07024 Phone: (201) 346-0701 Fax: (201) 947-0107 Email: nrmsir@dpcdata.com FT Interactive Data Attn: NRMSIR 100 William Street New York, New York 10038 Phone: (212) 771-6999 Fax: (212) 771-7390 (Secondary Market Information) (212) 771-7391 (Primary Market Information) Email: NRMSIR@FTID.com 3 Standard & Poor's 1. 1. Kenny Repository 55 Water Street 45th Floor New York, NY 10041 Phone: (212) 438-4595 Fax: (212) 438-3975 Email: nrmsir_repository@sandp.com (B) Any NRMSIRs that are established subsequently and approved by the SEe. (C) A list of the names and addresses of all designated NRMSIRs as of any date may currently be obtained by calling the SEC's Fax on Demand Service at 202/942-8088 and requesting document number 0206 or by visiting the SEC's website at "www.sec.gov/info/municipal/nrmsir.". SECTION 5. NO EVENT OF DEFAULT. Notwithstanding any other provision in the Ordinance to the contrary, failure of the Issuer to comply with the provisions of this Disclosure Certificate shall not be considered an event of default under the Ordinance; provided, however, any Series 2003 Bondholder may take such actions as may be necessary and appropriate, including pursuing an action for mandamus or specific performance, as applicable, by court order, to cause the Issuer to comply with its obligations hereunder. For pwposes of this Disclosure Certificate, "Series 2003 Bondholder" shall mean any person who (A) has the power, directly or indirectly, to vote or consent with respect to, or to dispose of ownership of, any Series 2003 Bonds (including persons holding Series 2003 Bonds through nominees, depositories or other intermediaries), or (B) is treated as the owner of any Series 2003 Bond for federal income tax pwposes. SECTION 6. INCORPORATION BYREFERENCE. Any or all of the information required herein to be disclosed may be incorporated by reference from other documents, including official statements or debt issues of the Issuer of related public entities, which have been submitted to each of the NRMSIRs and the SID, if any, or the SEe. If the document incorporated by reference is a final official statement, it must be available from the MSRB. The Issuer shall clearly identifY each document incorporated by reference. SECTION 7. DISSEMINATION AGENTS. The Issuer may, from time to time, appoint or engage a dissemination agent to assist it in canying out its obligations under this Disclosure Certificate, and may discharge any such agent, with or without appointing a successor disseminating agent. SECTION 8. TERMINATION. TheIssuer'sobligationsunderthisDisclosureCertificateshall terminate upon (A) the legal defeasance, prior redemption or payment in full of all of the Series 2003 Bonds, or (B) the termination of the continuing disclosure requirements of the Rule by legislative, judicial or administrative action. 4 SECTION 9. AMENDMENTS. Notwithstanding any other provision of this Disclosure Certificate, the Issuer may amend this Disclosure Certificate, and any provision may be waived, if such amendment or waiver is supported by an opinion of counsel that is nationally recognized in the area of federal securities laws, to the effect that such amendment or waiver would not, in and of itself, cause the undertakings herein to violate the Rule if such amendment or waiver had been effective on the date hereof but taking into account any subsequent change in or official interpretation of the Rule. SECTION 10. ADDITIONAL INFORMATION. Nothing in this Disclosure Certificate shall be deemed to prevent the Issuer from disseminating any other information, using the means of dissemination set forth in this Disclosure Certificate or any other means of communication, or including any other information in its annual information described in Section 2 hereof or notice of occurrence of a significant event described in Section 3 hereof, in addition to that which is required by this Disclosure Certificate. If the Issuer chooses to include any information in its annual information or notice of occurrence of a significant event in addition to that which is specifically.required by this Disclosure Certificate, the Issuer shall have no obligation under this Disclosure Certificate to update such information or include it in its future annual information or notice of occurrence of a significant event. SECTION 11. OBLIGATED PERSONS. If any person, other than the Issuer, becomes an Obligated Person (as defined in the Rule) relating to the Series 2003 Bonds, the Issuer shall use its best efforts to require such Obligated Person to comply with all provisions of the Rule applicable to such Obligated Person. Dated as of [ ], 2003 ATTEST: CITY OF CLEARWATER, FLORIDA City Clerk By: Mayor 5 APPENDIX E FORM OF BOND COUNSEL OPINION APPENDIX F FORM OF MUNICIPAL BOND INSURANCE POLICY EXHIBIT D CONTINUING DISCLOSURE CERTIFICATE D-I CONTINUING DISCLOSURE CERTIFICATE This Continuing Disclosure Certificate (the "Disclosure Certificate") is executed and delivered by the City of Clearwater, Florida (the "Issuer") in connection with the issuance of its $[Bond Amount] Water and Sewer System Revenue Bonds, Series 2003 (the "Series 2003 Bonds"). The Series 2002 Bonds are being issued pursuant to Ordinance No. 3674-84 enacted by the Issuer on August 2, 1984, as amended and supplemented in Ordinance 5355-93, enacted on April 15, 1993, as amended and supplemented in Ordinance 6311-98, enacted November 5, 1998 and as further amended and supplemented in Ordinance 6915-01, enacted November 15,2001 (the "Ordinance") and as further supplemented by Resolution 03 - 35, adopted by the City on September 18, 2003 (the "Series 2003 Resolution"). The Issuer covenants and agrees as follows: SECTION 1. PURPOSE OF DISCLOSURE CERTIFICATE. This Disclosure Certificate is being executed and delivered by the Issuer for the benefit of the Series 2003 Bondholders and in order to assist the original underwriters of the Series 2003 Bonds in complying with Rule 15c2-12(b)(5) promulgated by the Securities and Exchange Commission ("SEC") pursuant to the Securities Exchange Act of 1934 (the "Rule"). SECTION 2. PROVISION OF ANNUAL INFORMATION. Except as otherwise provided herein, the Issuer shall provide to all of the nationally recognized municipal securities information repositories described in Section 4 hereof (the ''NRMSIRs''), and to any state information depository that is established within the State of Florida (the "SID"), on or before June 30 of each year, commencing June 30,2004, the information set forth below in this Section 2. Notwithstanding the immediately preceding sentence, to the extent any such information does not become available to the Issuer before June 30 of any year, the Issuer shall provide such information when it becomes available, but no later than one year following the end of the Issuer's Fiscal Year. (A) the Issuer's Comprehensive Annual Financial Report for the immediately preceding Fiscal Year (the "CAFR"), which shall include the audited financial statements of the Issuer for the immediately preceding Fiscal Year prepared inaccordancewithGenerally Accepted Accounting Principles, as modified by applicable State of Florida requirements and the governmental accounting standards promulgated by the Government Accounting Standards Board; provided, however, if the audited financial statements of the Issuer are not completed prior to April 30 of any year, the Issuer shall provide unaudited fInancial statements on such date and shall provide the audited financial statements as soon as practicable following their completion; and (B) to the extent not set forth in the CAFR, additional financial information and operating data of the type included with respect to the Issuer in the final official staternent prepared in connection with the sale and issuance of the Series 2003 Bonds (as amended, the "Official Statement"), as set forth below: I I. Updates of the historical financial information set forth in the Official Statement under the principal captions "THE W A TERAND SEWER SYSTEM" and "RATES, FEES AND CHARGES" for the then-immediately preceding five fiscal years. 2. Description of any additional indebtedness payable in whole or in part from the Net Revenues (as defined in the Ordinance). 3. Any other financial information or operating data of the type inc1udedinthe Official Statement which would be material to a holder or prospective holders of the Series 2003 Bonds. For purposes of this Disclosure Certificate, "Fiscal Year" means the period commencing on October I and ending on September 30 of the next succeeding year, or such other period of time provided by applicable law. SECTION 3. REPORTING SIGNIFICANT EVENTS. The Issuer shall provide to the NRMSIRs or the Municipal Securities Rulemaking Board (the "MSRB") and to the SID, on a timely basis, notice of any of the following events, if such event is material with respect to the Series 2003 Bonds or the Issuer's ability to satisfY its payment obligations with respect to the Series 2003 Bonds: (A) Principal and interest payment delinquencies; (B) Non-payment related defaults; (C) Unscheduled draws on the debt service reserve fimd reflecting financial difficulties; (D) Unscheduled draws on credit enhancement reflecting financial difficulties; (E) Substitution of credit or liquidity providers, or their failure to perform; (F) Adverse tax opinions or events affecting the tax-exempt status of the Series 2003 Bonds; (G) Modifications to rights of Series 2003 Bondholders; (H) Redemptions; (1) Defeasances; (1) Release, substitution, or sale of property securing repayment of the Series 2003 Bonds; (K) Rating changes; and 2 (L) Notice of any failure on the part of the Issuer or any other Obligated Person (as defined herein) to meet the requirements of Section 2 hereof The Issuer may from time to time, in its discretion, choose to provide notice of the occurrence of certain other events, in addition to those listed in this Section 3, it: in the judgment of the Issuer, such other events are material with respect to the Series 2003 Bonds, but the Issuer does not specifically undertake to commit to provide any such additional notice of the occurrence of any material event except those events listed above. Whenever the Issuer obtains knowledge of the occurrence of a significant event described in this Section 3, the Issuer shall as soon as possible determine if such event would be material under applicable federal securities law to holders of Series 2003 Bonds, provided, that any event under clauses (D), (E), (F), (K) or (L) above will always be deemed to be material. SECTION 4. NRMSIRs. The NRMSIRs to which the Issuer shall provide the information described in Sections 2 and 3 above, to the extent required, shall be the following organizations, their successors and assigns: (A) Bloomberg Municipal Repository 100 Business Park Drive Skillman, New Jersey 08558 Phone: (609) 279-3225 Fax: (609) 279-5962 Email: Munis@Bloomberg.com DPC Data Inc. One Executive Drive Fort Lee, NJ 07024 Phone: (201) 346-0701 Fax: (201) 947-0107 Email: nrmsir@dpcdata.com FT Interactive Data Attn: NRMSIR 100 William Street New York, New York 10038 Phone: (212) 771-6999 Fax: (212) 771-7390 (Secondary Market Information) (212) 771-7391 (Primary Market Information) Emai1: NRMSIR@FTID.com 3 Standard & Poor's 1. 1. Kenny Repository 55 Water Street 45th Floor New York, NY 10041 Phone: (212) 438-4595 Fax: (212) 438-3975 Email: nrmsicrepository@sandp.com (B) Any NRMSIRs that are established subsequently and approved by the SEe. (C) A list of the names and addresses of all designated NRMSIRs as of any date may currently be obtained by calling the SEC's Fax on Demand Service at 202/942-8088 and requesting document number 0206 or by visiting the SEC's website at "www.sec.gov/info/municipal/nrmsir.". SECTION 5. NO EVENT OF DEFAULT. Notwithstanding any other provision in the Ordinance to the contrary, failure of the Issuer to comply with the provisions of this Disclosure Certificate shall not be considered an event of default under the Ordinance; provided, however, any Series 2003 Bondholder may take such actions as may be necessary and appropriate, including pursuing an action for mandamus or specific performance, as applicable, by court order, to cause the Issuer to comply with its obligations hereunder. For purposes of this Disclosure Certificate, "Series 2003 Bondholder" shall mean any person who (A) has the power, directly or indirectly, to vote or consent with respect to, or to dispose of ownership of, any Series 2003 Bonds (including persons holding Series 2003 Bonds through nominees, depositories or other intermediaries), or (B) is treated as the owner of any Series 2003 Bond for federal income tax purposes. SECTION 6. INCORPORATION BYREFERENCE. Any or all of the information required herein to be disclosed may be incorporated by reference from other documents, including official statements or debt issues of the Issuer of related public entities, which have been submitted to each of the NRMSIRs and the SID, if any, or the SEe. If the document incorporated by reference is a final official statement, it must be available from the MSRB. The Issuer shall clearly identifY each document incorporated by reference. SECTION 7. DISSEMINATION AGENTS. The Issuer may, from time to time, appointor engage a dissemination agent to asSist it in canying out its obligations under this Disclosure Certificate, and may discharge any such agent, with or without appointing a successor disseminating agent. SECTION 8. TERMINATION. The Issuer's obligations under this Disclosure Certificate shall terminate upon (A) the legal defeasance, prior redemption or payment in full of all of the Series 2003 Bonds, or (B) the termination of the continuing disclosure requirements of the Rule by legislative, judicial or administrative action. 4 SECTION 9. AMENDMENTS. Notwithstanding any other provision of this Disclosure Certificate, the Issuer may amend this Disclosure Certificate, and any provision may be waived, if such amendment or waiver is supported by an opinion of counsel that is nationally recognized in the area of federal securities laws, to the effect that such amendment or waiver would not, in and of itself, cause the undertakings herein to violate the Rule if such amendment or waiver had been effective on the date hereof but taking into account any subsequent change in or official interpretation of the Rule. SECTION 10. ADDITIONAL INFORMATION. Nothing in this Disclosure Certificate shall be deemed to prevent the Issuer from disseminating any otherinfonnation, using the means of dissemination set forth in this Disclosure Certificate or any other means of communication, or including any other information in its annual information described in Section 2 hereof or notice of occurrence of a significant event described in Section 3 hereof, in addition to that which is required by this Disclosure Certificate. If the Issuer chooses to include any information in its annual information or notice of occurrence of a significant event in addition to that which is specifically required by this Disclosure Certificate, the Issuer shall have no obligation under this Disclosure Certificate to update such information or include it in its future annual information or notice of occurrence of a significant event. SECTION 11. OBLIGATED PERSONS. If any person, other than the Issuer, becomes an Obligated Person (as defined in the Rule) relating to the Series 2003 Bonds, the Issuer shall use its best efforts to require such Obligated Person to comply with all provisions of the Rule applicable to such Obligated Person. Dated as of [ ], 2003 ATTEST: CITY OF CLEARWATER, FLORIDA By: Mayor City Clerk 5 APPENDIX E FORM OF BOND COUNSEL OPINION APPENDIX F FORM OF MUNICIPAL BOND INSURANCE POLICY EXHIBIT E COMMITMENT FOR MUNICIPAL BOND INSURANCE POLICY E-I PFSA MUNICIPAL BOND INSURANCE COMMITMENT FINANCIAL SECURITY ASSURANCE INC. ("Financial Security" or "FSA") hereby commits to issue its Municipal Bond Insurance Policy (the "Policy") relating to whole maturities of the debt obligations described in Exhibit A attached hereto (the "Bonds"), subject to the terms and conditions set forth in this Commitment, of which Commitment Exhibit A is an integrated part, or added hereto (the "Commitment"). To keep this Commitment in effect after the Expiration Date set forth in Exhibit A attached hereto, a request for renewal must be submitted to Financial Security prior to such Expiration Date. Financial Security reserves the right to refuse wholly or in part to grant a renewal. THE MUNICIPAL BOND INSURANCE POLICY SHALL BE ISSUED IF THE FOLLOWING CONDITIONS ARE SATISFIED: 1. The documents to be executed and delivered in connection with the issuance and sale of the Bonds shall not contain any untrue or misleading statement of a material fact and shall not fail to state a material fact necessary in order to make the information contained therein not misleading. 2. No event shall occur which would permit any underwriter or purchaser of the Bonds, otherwise required, not to be required to underwrite or purchase the Bonds on the date scheduled for the issuance and delivery thereof ("Closing Date"). 3. There shall be no material change in or affecting the Bonds (including, without limitation, the security for the Bonds) or the financing documents or the Official Statement (or any similar disclosure documents) to be executed and delivered in connection with the issuance and sale of the Bonds from the descriptions or forms thereof approved by Financial Security. 4. The Bonds shall contain no reference to Financial Security, the Policy or the insurance evidenced thereby except as may be approved by Financial Security. BOND PROOFS SHALL HAVE BEEN APPROVED BY FINANCIAL SECURITY PRIOR TO PRINTING. The Bonds shall bear a Statement of Insurance in the form provided by Financial Security. 5. Financial Security shall be provided with: (a) Executed copies of all financing documents, any disclosure document (the "Official Statement") and the various legal opinions delivered in connection with the issuance and sale of the Bonds (which shall be dated the Closing Date and which, except for the opinions of counsel relating to the adequacy of disclosure, shall be addressed to Financial Security or accompanied by a letter of such counsel permitting Financial Security to rely on such opinion as if such opinion were addressed to Financial Security), including, without limitation, the approving opinion of bond counsel. Each of the foregoing shall be in form and substance acceptable to Financial Security. Copies of all drafts of such documents prepared subsequent to the date of the Commitment Iblacklined to reflect all revisions from oreviouslv reviewed drafts) shall be furnished to Financial Security for review and approval. Final drafts of such documents shall be provided to Financial Security at least three (3) business days prior to the issuance of the Policy, unless Financial Security shall agree to some shorter period. (b) Evidence of wire transfer in federal funds of an amount equal to the insurance premium, unless alternative arrangements for the payment of such amount accepta ble to Financial Security have been made prior to the delivery date of the Bonds. (c) Standard & Poor's Credit Market Services, Moody's Investors Service Inc. and Fitch IBCA, Inc. will separately present bills for their respective fees relating to the Bonds. Payment of such bills should be made directly to such rating agency. Payment of the rating fee is not a condition to release of the Policy by Financial Security. 6. Promptly after the closing of the Bonds, Financial Security shall receive three completed sets of executed documents (one original and either (i) two photocopies (each unbound) or (ii) three compact discs). 7. The Official Statement shall contain the language provided by Financial Security and only such other references to Financial Security or otherwise as Financial Security shall supply or approve. FINANCIAL SECURITY SHALL BE PROVIDED WITH SIX PRINTED COPIES OF THE OFFICIAL STATEMENT. EXHIBIT A MUNICIPAL BOND INSURANCE COMMITMENT TERM SHEET Issuer: City of Clearwater, Florida Name of Bonds Insured: Water and Sewer Revenue Refunding Bonds, Series 2003 Principal Amount of Bonds Insured: Not to Exceed $8,530,000 Date of Commitment: August27,2003 Expiration Date: Friday, October 31,2003* Premium: .204% of total debt service on the Bonds Insured Additional Conditions: 1. The amortization schedule for, and final maturity date of, the Bonds shall be acceptable to Financial Security. 2. Receipt and satisfactory review of original bond ordinances and all amendments. 3. See attached Exhibits B-C. Terms used in this Commitment and not otherwise defined shall have the meanings ascribed to them in the document authorizing the issuance of and setting forth the terms for the Bonds described above (the "Resolution"). FINANCIAL SECURITY ASSURANCE INC. :fJ ::J L/t,lLl Authorized Officer *To keep the Commitment in effect to the Expiration Date set forth above, Financial Security must receive a duplicate of this Exhibit A executed by an authorized officer by the earlier of the date on which the Official Statement containing disclosure language about Financial Security is circulated and ten days from the date of this Commitment. The undersigned agrees that if the Bonds are insured by a policy of municipal bond insurance, such insurance shall be provided by Financial Security in accordance with the terms of the Commitment. CITY OF CLEARWATER, FLORIDA Authorized Officer L:ILEGAL IMUN ISlSTATESIFLI35062_ C.doc EXHIBIT B Page 1 of 1 OPINION REQUIREMENTS 1. Each of the Resolution, the Bonds and the other transaction documents (the "Related Documents") is a legal, valid and binding obligation of the parties thereto. has been duly authorized, executed and delivered and is enforceable in accordance with its terms. 2. There does not exist any action, suit, proceeding or investigation pending, or to the best of such counsel's knowledge, threatened which if adversely determined, could (i) materially adversely affect (a) the financial condition of the Issuer, (b) the ability of the Issuer to perform its obligations under the Related Documents, (c) the security for the Bonds, or (d) the transactions contemplated by the Related Documents or (ii) impair the ability of the Issuer to maintain and operate the System. 3. Nothing has come to the attention of disclosure counsel which would cause them to believe that the final Official Statement (excluding information provided by Financial Security), as of its date and the date of issuance of the Policy, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. 4. The Bonds are secured by a valid lien and security interest in the Net Revenues of the Issuer on a parity with all additional parity bonds issued pursuant to the Resolution. L:ILEGAL IMUN ISlSTA TESIFLI35062_ C.doc EXHIBIT C Page 1 of5 RESOLUTION REQUIREMENTS The Resolution shall incorporate the following requirements either in one section or article entitled "Provisions Relating to Bond Insurance" (or the like), the Drovislons of which section or article shall be stated in the Resolution to aovern, notwithstandina anythina to the contrary set forth In the Resolution, or individually in the appropriate sections: (a) "Insurance Policy" shall be defined as follows: "the insurance policy issued by the Insurer guaranteeing the scheduled payment of principal of and interest on the Bonds when due". "Insurer" shall be defined as follows: "Financial Security Assurance Inc., a New York stock insurance company, or any successor thereto or assignee thereof' . (b) For transactions with a debt service reserve fund, the prior written consent of the Insurer shall be a condition precedent to the deposit of any credit instrument provided in lieu of a cash deposit into the Debt Service Reserve Fund. Notwithstanding anything to the contrary set forth in the Resolution, amounts on deposit in the Debt Service Reserve Fund shall be applied solely to the payment of debt service on the Bonds. (c) The Insurer shall be deemed to be the ~ holder of the Insured Bonds for the purpose of exercising anyvoling right or privilege or giving any consent or direction or taking any other action that the holders of the Bonds insured by it are entitled to take pursuant to the section or the article of the Resolution pertaining to defaults and remedies. Remedies of the Bondholders to include mandamus. (d) If acceleration is permitted under the Resolution, the maturity of Bonds insured by the Insurer shall not be accelerated without the consent of the Insurer and in the event the maturity of the Bonds is accelerated, the Insurer may elect, in its sole discretion, to pay accelerated principal and interest accrued [or accreted, as applicable], on such principal to the date of acceleration (to the extent unpaid by the Issuer). Upon payment of such accelerated principal and interest accrued [or accreted, as applicable] to the acceleration date as provided above, the Insurer's obligations under the Insurance Policy with respect to such Bonds shall be fully discharged. (e) No grace period for a covenant default shall exceed 30 days, nor be extended for more than 60 days, without the prior written consent of the Insurer. No grace period shall be permitted for payment defaults. (f) The Insurer shall be included as a third party beneficiary to the Resolution. (g) Upon the occurrence of an extraordinary optional or special or extraordinary mandatory redemption in part, the selection of Bonds to be redeemed shall be subject to the approval of the Insurer. The exercise of any provision of the Resolution which permits the purchase of Bonds in lieu of redemption shall require approval of the Insurer wherein any Bond so purchased is not extinguished. (h) No modification or amendment to the Resolution or any other transaction document including any underlying security agreement (each a "Related Document") may become effective except upon obtaining the prior written consent of the Insurer. Copies of any modification or amendment to the Resolution or any other Related Document shall be sent to Standard & Poor's Credit Market Services and Moody's Investors Service, Inc. at least 10 days prior to the effective date thereof. (i) The rights granted to the Insurer under the Resolution or any other Related Document to request, consent to or direct any action are rights granted to the Insurer in consideration of its issuance of the Insurance Policy. Any exercise by the Insurer of such rights is merely an exercise of the Insurer's contractual rights and shall not be construed or deemed to be taken for the benefit or on behalf of the Bondholders nor does such action evidence any position of the Insurer, positive or negative, as to whether Bondholder consent is required in addition to consent of the Insurer. U) Only (1) cash, (2) non-callable direct obligations of the United States of America ("Treasuries"), (3) evidences of ownership of proportionate interests in future interest and principal payments on Treasuries held by a bank or trust company as custodian, under which the owner of the investment is the real party in interest and has the right to proceed directly and individually against the obligor and the underlying Treasuries are not available to any person claiming through the custodian or to whom the custodian may be obligated, (4) pre-refunded municipal obligations rated "AAA" and "Aaa" by S&P and Moody's, respectively or (5) securities eligible for "AAA" defeasance under then existing criteria of S & P or any combination thereof, shall be authorized to be used to effect defeasance of the Bonds unless the Insurer otherwise approves. To accomplish defeasance the Issuer shall cause to be delivered (i) a report of an independent firm of nationally recognized certified public accountants or such other accountant as shall be acceptable to the Insurer ("Accountant") verifying the sufficiency of the escrow established to pay the Bonds in full on the maturity or L:ILEGAL 1M UN ISISTA TESIF L135062_ C.doc EXHIBIT C Page 2 of5 redemption date ("Verification"), (ii) an Escrow Deposit Agreement (which shall be acceptable in form and substance to the Insurer), and (iii) an opinion of nationally recognized bond counsel to the effect that the Bonds are no longer "Outstanding" under the Resolution; each Verification and defeasance opinion shall be acceptable in form and substance, and addressed, to the Issuer and the Insurer. The Insurer shall be provided with final drafts of the above-referenced documentation not less than five business days prior to the funding of the escrow. Bonds shall be deemed "Outstanding" under the Resolution unless and until they are in fact paid and retired or the above criteria are met. (k) Amounts paid by the Insurer under the Insurance Policy shall not be deemed paid for purposes of the Resolution and shall remain Outstanding and continue to be due and owing until paid by the Issuer in accordance with the Resolution. The Resolution shall not be discharged unless all amounts due or to become due to the Insurer have been paid in full or duly provided for. (I) The Issuer to covenant and agree to take such action (including, as applicable, filing of UCC financing statements and continuations thereof) as is necessary from time to time otherwise preserve the priority of the pledge of Trust Estate under applicable law. (m) Claims Upon the Insurance Policy and Payments by and to the Insurer. If, on the third Business Day prior to the related scheduled interest payment date or principal payment date ("Payment Date") there is not on deposit with the Paying Agent, after making all transfers and deposits required under the Resolution, moneys sufficient to pay the principal of and interest on the Bonds due on such Payment Date, the Paying Agent shall give notice to the Bond Insurer and to its designated agent (if any) (the "Insurer's Fiscal Agent") by telephone or telecopy of the amount of such deficiency by 12:00 noon, New York City time, on such Business Day. If, on the second Business Day prior to the related Payment Date, there continues to be a deficiency in the amount available to pay the principal of and interest on the Bonds due on such Payment Date, the Paying Agent shall make a claim under the Insurance Policy and give notice to the Insurer and the Insurer's Fiscal Agent (if any) by telephone of the amount of such deficiency, and the allocation of such deficiency between the amount required to pay interest on the Bonds and the amount required to pay principal of the Bonds, confirmed in writing to the Insurer and the Insurer's Fiscal Agent by 12:00 noon, New York City time, on such second Business Day by filling in the form of Notice of Claim and Certificate delivered with the Insurance Policy. In the event the claim to be made is for a mandatory sinking fund redemption installment, upon receipt of the moneys due, the Paying Agent shall authenticate and deliver to affected Bondholders who surrender their Bonds a new Bond or Bonds in an aggregate principal amount equal to the unredeemed portion of the Bond surrendered. The Paying Agent shall designate any portion of payment of principal on Bonds paid by the Insurer, whether by virtue of mandatory sinking fund redemption, maturity or other advancement of maturity, on its books as a reduction in the principal amount of Bonds registered to the then current Bondholder, whether DTC or its nominee or otherwise, and shall issue a replacement Bond to the Insurer, registered in the name of Financial Security Assurance Inc., in a principal amount equal to the amount of principal so paid (without regard to authorized denominations); provided that the Paying Agent's failure to so designate any payment or issue any replacement Bond shall have no effect on the amount of principal or interest payable by the Issuer on any Bond or the subrogation rights of the Insurer. The Paying Agent shall keep a complete and accurate record of all funds deposited by the Insurer into the Policy Payments Account (defined below) and the allocation of such funds to payment of interest on and principal paid in respect of any Bond. The Insurer shall have the right to inspect such records at reasonable times upon reasonable notice to the Paying Agent. Upon payment of a claim under the hsurance Policy the Paying Agent shall establish a separate special purpose trust account for the benefit of Bondholders referred to herein as the "Policy Payments Account" and over which the /Paying Agent shall have exclusive control and sole right of withdrawal. The Paying Agent shall receive any amount paid under the Insurance Policy in trust on behalf of Bondholders and shall deposit any such amount in the Policy Payments Account and distribute such amount only for purposes of making the payments for which a claim was made. Such amounts shall be disbursed by the Paying Agent to Bondholders in the same manner as principal and interest payments are to be made with respect to the Bonds under the sections hereof regarding payment of Bonds. It shall not be necessary for such payments to be made by checks or wire transfers separate from the check or wire transfer used to pay debt service with other funds available to make such payments. Notwithstanding anything to the contrary otherwise set forth in the Resolution, and to the extent permitted by law, in the event amounts paid under the Insurance Policy are applied to claims for payment of principal of or interest on the Bonds, interest on such principal of and interest 0 n such Bonds shall accrue and L:\LEGAL\MUN IS\STA TES\F L\35062_ C.doc EXHIBIT C Page 3 of5 be payable from the date of such payment at the greater of (i) the per annum rate of interest, publicly announced from time to time by JPMorgan Chase Bank or its successor at its principal office in the City of New York, as its prime or base lending rate plus 3%, and (ii) the then applicable rate of interest on the Bonds provided that in no event shall such rate exceed the maximum rate permissible under applicable usury or similar laws limiting interest rates. Funds held in the Policy Payments Account shall not be invested by the Paying Agent and may not be applied to satisfy any costs, expenses or liabilities of the Paying Agent. Any funds remaining in the Policy Payments Account following a Bond payment date shall promptly be remitted to the Insurer. (n) The Insurer shall, to the extent it makes any payment of principal of (or, in the case of Capital Appreciation Bonds, accreted value) or interest on the Bonds, become subrogated to the rights of the recipients of such payments in accordance with the terms of the Insurance Policy. The obligations to the Insurer shall survive discharge or termination of the Related Documents. (0) The Issuer shall payor reimburse the Insurer any and all charges, fees, costs and expenses which the Insurer may reasonably payor incur in connection with (i) the administration, enforcement, defense or preservation of any rights or security in any Related Document; (ii) the pursuit of any remedies under the Resolution or any other Related Document or otherwise afforded by law or equity, (iii) any amendment, waiver or other action with respect to, or related to, the Resolution or any other Related Document whether or not executed or completed, (iv) the violation by the Issuer of any law, rule or regulation, or any judgment, order or decree applicable to it or (v) any litigation or other dispute in connection with the Resolution or any other Related Document or the transactions contemplated thereby, other than amounts resulting from the failure of the Insurer to honor its obligations under the Insurance Policy. The Insurer reserves the right to charge a reasonable fee as a condition to executing any amendment, waiver or consent proposed in respect of the Resolution or any other Related Document. (p) The application of funds realized upon default shall be applied to payment of expenses of the Issuer or rebate only after the payment of debt service due and past due on the Bonds, together with replenishment of the Debt Service Reserve Fund. (q) The Insurer shall be entitled to pay principal (or, in the case of Capital Appreciation Bonds, accreted value) or interest on the Bonds that shall become Due for Payment but shall be unpaid by reason of Nonpayment by the Issuer (as such terms are defined in the Insurance Policy) and any amounts due on the Bonds as a result of acceleration of the maturity thereof in accordance with the Resolution, whether or not the Insurer has received a Notice of Nonpayment (as such terms are defined in the Insurance Policy) or a claim upon the Insurance Policy. (r) The notice address of the Insurer is: Financial Security Assurance Inc., 350 Park Avenue, New York, New York 10022-6022, Attention: Managing Director - Surveillance, Re: Policy No. _' Telephone: (212) 826-0100; Telecopier: (212) 339-3556. In each case in which notice or other communication refers to an Event of Default, then a copy of such notice or other communication shall also be sent to the attention of the General Counsel and shall be marked to indicate "URGENT MATERIAL ENCLOSED." (s) The Insurer shall be provided with the following information: (i) Annual audited financial statements within 150 days after the end of the Issuer's fiscal year (together with a certification of the Issuer that it is not aware of any default or Event of Default under the Resolution), and the Issuer's annual budget within 30 days after the approval thereof together with such other information, data or reports as the Insurer shall reasonably request from time to time; (ii) Notice of any draw upon the Debt Service Reserve Fund within two Business Days after knowledge thereof other than (i) withdrawals of amounts in excess of the Debt Service Reserve Requirement and (ii) withdrawals in connection with a refunding of Bonds; (iii) Notice of any default known to the Issuer within five Business Days after knowledge thereof; (iv) Prior notice of the advance refunding or redemption of any of the Bonds, including the principal amount, maturities and CUSIP numbers thereof; (v) Notice of the resignation or removal of the Paying Agent and Bond Registrar and the appointment of, and acceptance of duties by, any successor thereto; L: ILEGALIM U N IS\STA TESIF LI35062_ C.doc EXHIBIT C Page 4 of 5 (vi) Notice of the commencement of any proceeding by or against the Issuer commenced under the United States Bankruptcy Code or any other applicable bankruptcy, insolvency, receivership, rehabilitation or similar law (an "Insolvency Proceeding"); (vii) Notice of the making of any claim in connection with any Insolvency Proceeding seeking the avoidance as a preferential transfer of any payment of principal of, or interest on, the Bonds; (viii) A full original transcript of all proceedings relating to the execution of any amendment or supplement to the Related Documents; and (ix) All reports, notices and correspondence to be delivered to Bondholders under the terms of the Related Documents. (t) Notwithstanding satisfaction of other conditions to the issuance of Additional Bonds contained in the Resolution, no such issuance may occur (1) should any Event of Default (or any event which, once all notice or grace periods have passed, would constitute an Event of Default) have occurred and be continuing unless such default shall be cured upon such issuance and (2) unless the Debt Service Reserve Fund is fully funded at its requirement (including the new issue) upon the issuance of such Additional Bonds, in either case unless otherwise permitted by the Insurer. (u) No contract shall be entered into nor any action taken by which the rights of the Insurer or security for or sources of payment of the Bonds may be impaired or prejudiced in any material respect except upon obtaining the prior written consent of the Insurer. (v) If the proceeds of the Bonds include a refunding there shall be delivered an opinion of Bond Counsel addressed to the Insurer (or a reliance letter relating thereto) or a certificate of discharge of the trustee for the Refunded Bonds to the effect that, upon the making of the required deposit to the escrow, the legal defeasance of the Refunded Bonds shall have occurred. L:ILEGAL 1M UN ISlSTA TESIFLI35062_ C.doc PROCEDURES FOR PREMIUM PAYMENT TO FINANCIAL SECURITY ASSURANCE INC. Financial Security's issuance of its municipal bond insurance policy at bond closing is contingent upon payment and receipt of the premium. NO POLICY MAY BE RELEASED UNTIL PAYMENT OF SUCH AMOUNT HAS BEEN CONFIRMED. Set forth below are the procedures to be followed for confirming the amount of the premium to be paid and for paying such amount: Confirmation of Amount to be Paid: Upon determination of the final debt service schedule, fax such schedule to Financial Security Attention: Pam Peters, Director Phone No. (212) 339-3553 Fax No. (212) 339-3450 Confirm with the individual in our underwriting department that you are in agreement with respect to par and premium on the transaction prior to the closing date. Payment Date: Date of Delivery of the insured bonds. Method of Payment: Wire transfer of Federal Funds. Wire Transfer Instructions: Bank: ABA#: Accl. Name: Account No.: Policy No.: The Bank of New York 021 000 018 Financial Security Assurance Inc. 8900297263 [To Be Assigned] CONFIRMATION OF PREMIUM WIRE NUMBER AT CLOSING Financial Security will accept as confirmation of the premium payment a wire transfer number and the name of the sending bank, to be communicated on the closing date to Vanessa Edwards-EI, Paralegal Documentation and Closing Coordinator, (212) 339-0864. EXHIBIT F ESCROW DEPOSIT AGREEMENT F-I ESCROW DEPOSIT AGREEl\1ENT This ESCROW DEPOSIT AGREEl\1ENT, dated as of October 1,2003, by and between the CITY OF CLEARWATER, FLORIDA, a municipal corporation of the State of Florida (the "Issuer"), and [BANK], a [national banking association] organized under the laws of the United States of America, as Escrow Holder (the "Escrow Holder"); WITNESSETH: WHEREAS, the Issuer has previously authorized and issued obligations of the Issuer as hereinafter set forth defined as the "Refunded Bonds", as to which the Aggregate Debt Service (as hereinafter defined) is set forth on Schedule A; and WHEREAS, the Issuer has determined to provide for payment of the Aggregate Debt Service of the Refunded Bonds by depositing with the Escrow Holder pursuant to the provisions hereof, cash and Federal Securities (as defined herein), the principal of and interest on which will be at least equal to the Aggregate Debt Service; and WHEREAS, in order to obtain the funds needed for such purpose, the Issuer has authorized and is, concurrently with the delivery of this Agreement, issuing the Series 2003 Bonds more fully described herein; and WHEREAS, the Issuer has determined that the amount to be on deposit from time to time in the Escrow Account, as defined herein, will be sufficient to pay the Aggregate Debt Service; NOW THEREFORE, in consideration of the mutual covenants and agreements herein contained, the Issuer and the Escrow Holder agree as follows (provided however that the Escrow Holder in agreeing to the foregoing shall not be held or deemed responsible in any manner whatsoever for the recitals rnade herein or in the Ordinance, or the adequacy or sufficiency of the Escrow Requirernent): Section 1. Definitions. As used herein, the following terms mean: (a) "Aggregate Debt Service" means, as of any date, the sum of all present and future Annual Debt Service payments then remaining unpaid with respect to the respective Series of the Refunded Bonds. (b) "Agreement" means this Escrow Deposit Agreement. (c) "Annual Debt Service" means, with respect to the redemption date for the Refunded Bonds, the principal of, prernium, and interest on the respective Series of the Refunded Bonds coming due on the redemption date as shown on Schedule A attached hereto. (d) "Bonds" or "Series 2003 Bonds" means the Gas System Revenue Refunding Bonds, Series 2003 of the Issuer, authorized by the Ordinance, as herein defined. (e) "Call Date" shall have the meaning set forth in the Issuer's Irrevocable Instruction and Authorization to Redeem Bonds. (f) "Escrow Account" means the account established and held by the Escrow Holder pursuant to this Agreement, in which cash and investments will be held for payment of the Refunded Bonds. (g) "Escrow Holder" means [BANK], [CITY], [STATE], a national banking association organized under the laws of the United States of America. (h) "Escrow Requirement" means, as of any date of calculation, the sum of an amount in cash and principal amount of Federal Securities in the Escrow Account which, together with the interest due on the Federal Securities, will be sufficient to pay, as the installrnents thereof becorne due, the Aggregate Debt Service. (i) "Federal Securities" means direct obligations of the United States of Arnerica and obligations the principal of or interest on which are fully guaranteed by the United States of America, none of which permit redemption prior to maturity at the option of the obligor. (j) "Irrevocable Instruction and Authorization to Redeem Bonds" means a certificate executed by the Issuer which provides for redemption of certain of the Refunded Bonds on the Call Date, irrevocably instructs the Escrow Holder to give notice of such redernption and directs the paying agent for the Refunded Bonds to pay the Refunded Bonds and the interest thereon upon surrender thereof at maturity or on their Call Date, whichever is earlier. (k) "Issuer" means the City of Clearwater, Florida. (1) "Ordinance" means Ordinance No. 5118-91 enacted by the Issuer on August 15, 1991, as amended and supplemented in Ordinance 7191-03, enacted on 2003, as amended and supplemented. (m) "Paying Agent" shall mean the Paying Agent for the Refunded Bonds. (n) "Refunded Bonds" shall mean the Series 1996A Bonds maturing on and after September 1, 2004. (0) "Series 1996A Bonds" shall mean the Issuer's Gas System Revenue Bonds, Series 1996A, dated July 1, 1996. Section 2. Deposit of Funds. The Issuer hereby deposits $ with the Escrow Holder in immediately available funds, to be held in irrevocable escrow by the Escrow Holder and applied solely as provided in this Agreement. The Issuer represents that: 2 (a) Such funds are all derived as follows: (1) $ from the net proceeds of the Bonds; and (2) $ payment of the Refunded Bonds. transferred from the Sinking Fund held for the (b) Such funds, when applied pursuant to Section 3 below, will at least equal the Escrow Requirement as of the date hereof. Section 3. Use and Investment of Funds. The Escrow Holder acknowledges receipt of $ and agrees: (a) to hold the funds in irrevocable escrow during the term of this Agreement, (b) to deposit the sum of $ , representing the $ of funds from the Sinking Fund for the Refunded Bonds and $ from the proceeds of the Bonds, in cash from the amount received by the Issuer in the Escrow Account, and, hold such funds in cash until the Decernber 1, 2003 redemption date of the outstanding Series 1993 Bonds, (c) to immediately invest $ of such funds derived from the proceeds of the Bonds by the purchase of the Federal Securities set forth on Schedule B-1 attached hereto, and to immediately invest $ of such funds by the purchase of the Federal Securities set forth on Schedule B-2, and (d) to deposit in the Escrow Account, as received, the receipts of maturing principal of and interest on the Federal Securities in the Escrow Account. Section 4. Payment of Refunded Bonds. (a) Refunded Bonds. On the redemption date for each respective series of Refunded Bonds, the Escrow Holder shall pay to the Paying Agent for the Refunded Bonds, from the cash on hand in the Escrow Account, a sum sufficient to pay the Annual Debt Service for the respective series of Refunded Bonds corning due on such date, as shown on Schedule A and as dernonstrated on Exhibit C hereto. (b) Surplus. On the last redemption date for the Refunded Bonds, after making the payments from the Escrow Account described in Subsection 4(a), the Escrow Holder shall pay to the Issuer any remaining cash in the Escrow Account in excess of the Escrow Requirement, to be used for any lawful purpose of the Issuer. (c) Priority of Payments. The holders of the Refunded Bonds shall have an express first lien on the funds and Federal Securities in the Escrow Account until such funds and Federal 3 Securities are used and applied as provided in this Agreement. If the cash on hand in the Escrow Account is ever insufficient to make the payments required under Subsection 4(a), all of the payments required under Subsection 4(a) shall be made when due before any payments shall be made under Subsections 4(b). (d) Fees and Expenses of Escrow Holder. On the date hereof, the Escrow Holder acknowledges receipt of its fees to serve as Escrow Holder in the amount of $500, and agrees to invoice the Issuer for reimbursement of any out of pocket expenses incurred by the Escrow Holder in performing its services hereunder, and further acknowledges that the Escrow Holder does not have a lien on or claim against any funds held hereunder for reimbursement of such expenses. Section 5. Reinvestment. (a) Except as provided in Section 3 hereof, and in this Section, the Escrow Holder shall have no power or duty to invest any funds held under this Agreement or to sell, transfer or otherwise dispose of or rnake substitutions of the Federal Securities held hereunder. (b) At the written request of the Issuer and upon compliance with the conditions hereinafter stated, the Escrow Holder shall sell, transfer, otherwise dispose of or request the redemption of any of the Federal Securities acquired hereunder and shall either apply the proceeds thereof to the full discharge and satisfaction of the Refunded Bonds or substitute other Federal Securities for such Federal Securities. The Issuer will not request the Escrow Holder to exercise any of the powers described in the preceding sentence in any manner which would cause any Bonds to be "arbitrage bonds" within the meaning of the Internal Revenue Code of 1986, as amended, and the Regulations thereunder. The transactions may be effected only if (i) an independent certified public accountant shall certify to the Escrow Holder that the cash and principal amount of Federal Securities remaining on hand after the transactions are completed, together with the interest due thereon, will be not less than the Escrow Requirement, and (ii) the Escrow Holder shall receive an unqualified opinion from a nationally recognized bond counsel or tax counsel to the effect that the transactions will not cause such Bonds to be "arbitrage bonds" within the meaning of the Internal Revenue Code of 1986, as amended, and the regulations thereunder in effect on the date of the transactions and applicable to transactions undertaken on such date. Section 6. No Redemption or Acceleration of Maturity. Except as provided in the Irrevocable Instruction and Authorization to Redeem Bonds, the Issuer will not accelerate the maturity or due date of the Refunded Bonds. Section 7. Responsibilities of Escrow Holder. The Escrow Holder and its respective successors, assigns, agents and servants shall not be held to any personal liability whatsoever, in tort, contract, or otherwise, in connection with the execution and delivery of this Agreement, the establishment of the Escrow Account, the acceptance of the funds deposited therein, the purchase of the Federal Securities, the retention of the Federal Securities or the proceeds thereof or any payment, transfer or other application of money or securities by the Escrow Holder in any non- 4 negligent act, non-negligent ornission or non-negligent error of the Escrow Holder made in good faith in the conduct of its duties. The Escrow Holder shall, however, be liable to the Issuer for its negligent or willful acts, omissions or errors which violate or fail to comply with the terms of this Agreement. The duties and obligations of the Escrow Holder shall be determined by the express provisions of this Agreement. The Escrow Holder may consult with counsel, who may or may not be counsel to the Issuer, and in reliance upon the opinion of such counsel shall have full and complete authorization and protection in respect of any action taken, suffered or ornitted by it in good faith in accordance therewith. Whenever the Escrow Holder shall deem it necessary or desirable that a matter be proved or established prior to taking, suffering or ornitting any action under this Agreement, such matter may be deemed to be conclusively established by a certificate signed by an authorized officer of the Issuer. The Escrow Holder has no duty to determine or inquire into the happening or occurrence of any event or contingency where the performance or the failure of performance of the Issuer with respect to arrangements or contracts with others, the Escrow Holder's sole duty and responsibility hereunder being to safeguard the Escrow Account and dispose of and deliver the same strictly in accordance with this Agreement. Section 8. Resignation of Escrow Holder. The Escrow Holder may resign and thereby become discharged frorn the duties and obligations hereby created, by notice in writing given to the Issuer and published once in a newspaper of general circulation published in the territorial limits of the Issuer, and in a daily newspaper of general circulation or a financial journal published or circulated in the Borough of Manhattan, City and State of New Yark, not less than sixty (60) days before such resignation shall take effect. Such resignation shall take effect immediately upon the appointment of a successor Escrow Holder hereunder and payments of all amounts due the resigning Escrow Holder. Section 9. Removal of Escrow Holder. (a) The Escrow Holder may be rernoved at any time by an instrument or concurrent instruments in writing, executed by the holders of not less than fifty-one per centum (51 %) in aggregate principal amount of each series of Refunded Bonds then outstanding, such instruments to be filed with the Issuer, and notice in writing given by such holders to all of the registered holders of each series of the Refunded Bonds and published once in a newspaper of general circulation published in the territorial lirnits of the Issuer, and in a daily newspaper of general circulation or a financial journal published or circulated in the Borough of Manhattan, City and State of New York, not less than sixty (60) days before such removal is to take effect as stated in such instrument or instruments. A photographic copy of any instrument filed with the Issuer under the provisions of this paragraph shall be delivered by the Issuer to the Escrow Holder. (b) The Escrow Holder may also be removed at any time for any breach of trust or for acting or proceeding in violation of, or for failing to act or proceed in accordance with, any provisions of this Agreement with respect to the duties and obligations of the Escrow Holder, by the Issuer or by the holders of not less than twenty-five per centum (25%) in aggregate principal amount of each series of the Refunded Bonds then outstanding. 5 (c) No such removal shall take effect until a successor Escrow Holder shall be appointed hereunder. Section 10. Successor Escrow Holder. (a) If at any time hereafter the Escrow Holder shall resign, be removed, be dissolved or otherwise become incapable of acting, or shall be taken over by any governmental official, agency, department or board, the position of Escrow Holder shall thereupon become vacant. If the position of Escrow Holder shall become vacant for any of the foregoing reasons or for any other reason, the Issuer shall appoint a successor Escrow Holder to fulfill the duties of Escrow Holder hereunder. The Issuer shall publish notice of any such appointment once in each week for four (4) successive weeks in a newspaper of general circulation published in the territorial limits of the Issuer and in a daily newspaper of general circulation or a financial journal published or circulated in the Borough of Manhattan, City and State of New York, and, before the second publication of such notice shall mail a copy thereof to the original purchaser or purchasers of the Refunded Bonds. (b) At any time within one year after such vacancy shall have occurred, the holders of a majority in principal amount of each series of Refunded Bonds then outstanding, by an instrument or concurrent instruments in writing, executed by all such bondholders and filed with the governing body of the Issuer, may appoint a successor Escrow Holder, which shall supersede any Escrow Holder theretofore appointed by the Issuer. Photographic copies of each such instrument shall be delivered promptly by the Issuer, to the predecessor Escrow Holder and to the Escrow Holder so appointed by the bondholders. (c) If no appointment of a successor Escrow Holder shall be made pursuant to the foregoing provisions of this section, the holder of any Refunded Bonds then outstanding, or any retiring Escrow Holder may apply to any court of competent jurisdiction to appoint a successor Escrow Holder. Such court may thereupon, after such notice, if any, as such court may deem proper and prescribe, appoint a successor Escrow Holder. Section 11. Term. This Agreement shall commence upon its execution and delivery and shall terminate when the Refunded Bonds have been paid and discharged in accordance herewith, and all amounts held by the Escrow Holder hereunder have been applied in accordance herewith. Section 12. Severability. If anyone or more of the covenants or agreements provided in this Agreement on the part of the Issuer or the Escrow Holder to be performed should be determined by a court of competent jurisdiction to be contrary to law, such covenant or agreements herein contained shall be null and void and shall be severed from the remaining covenants and agreernents and shall in no way affect the validity of the rernaining provisions of this Agreement. 6 Section 13. Counterparts. This Agreement may be executed in several counterparts, all or any of which shall be regarded for all purposes as duplicate originals and shall constitute and be but one and the same instrument. Section 14. Governing Law. This Agreement shall be construed under the laws of the State of Florida. Section 15. Security for Accounts and Funds. All accounts and funds maintained or held pursuant to this Agreement shall be continuously secured in the same rnanner as other deposits of municipal funds are required to be secured by the laws of Florida. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly authorized officers and their official seals to be hereunto affixed as of the date first above written. THE CITY OF CLEARWATER, FLORIDA (SEAL) Mayor-Commissioner ATTEST: City Clerk City Manager Approved as to Form, Sufficiency and Correctness: City Attorney 7 (SEAL) [BANK], as Escrow Holder By: Its: 8 Schedule A (Aggregate Debt Service; Serni-Annual Debt Service; Annual Debt Service; Description of Refunded Bonds) Series 1996A Bonds Payment Date Principal Prernium Interest Total Debt Service September 1, 2004 $ $ $ $ Schedule B-1 (Federal Securities for Investment) Maturity Bond Type Principal Coupon Yield Purchase Price -- Schedule B-2 (Federal Securities for Investment) Maturi ty Bond Type Principal Coupon Yield Purchase Price Schedule C Escrow Cash Flow Date Principal Rate Interest Transfer Receipts Disbursements Cash Balance . EXHIBIT G ADDITIONAL COVENANTS WITH BOND INSURER (a) "Insurance Policy" shall be defined as follows: "the insurance policy issued by the Insurer guaranteeing the scheduled payment of principal of and interest on the Bonds when due". "Insurer" shall be defined as follows: "Financial Security Assurance Inc., a New York stock insurance cornpany, or any successor thereto or assignee thereof'. (b) F or transactions with a debt service reserve fund, the prior written consent ofthe Insurer shall be a condition precedent to the deposit of any credit instrument provided in lieu of a cash deposit into the Debt Service Reserve Fund. Notwithstanding anything to the contrary set forth in the Resolution, amounts on deposit in the Debt Service Reserve Fund shall be applied solely to the payment of debt service on the Bonds. (c) The Insurer shall be deemed to be the sole holder of the Insured Bonds for the purpose of exercising any voting right or privilege or giving any consent or direction or taking any other action that the holders ofthe Bonds insured by it are entitled to take pursuant to the section or the article of the Resolution pertaining to defaults and remedies. Remedies of the Bondholders to include mandamus. (d) If acceleration is permitted under the Resolution, the maturity of Bonds insured by the Insurer shall not be accelerated without the consent of the Insurer and in the event the maturity of the Bonds is accelerated, the Insurer may elect, in its sole discretion, to pay accelerated principal and interest accrued, on such principal to the date of acceleration (to the extent unpaid by the Issuer). Upon payment of such accelerated principal and interest accrued to the acceleration date as provided above, the Insurer's obligations under the Insurance Policy with respect to such Bonds shall be fully discharged. (e) No grace period for a covenant default shall exceed 30 days, nor be extended for more than 60 days, without the prior written consent ofthe Insurer. No grace period shall be permitted for payment defaults. (f) The Insurer shall be included as a third party beneficiary to Resolution No. 03-35 and the Bond Ordinance with respect to the Series 2003 Bonds. (g) Upon the occurrence of an extraordinary optional or special or extraordinary mandatory redemption in part, the selection of Bonds to be redeerned shall be subject to the approval of the Insurer. The exercise of any provision of the Resolution which permits the purchase of Bonds in lieu of redemption shall require approval of the Insurer wherein any Bond so purchased is not extinguished. (h) No modification or amendment to Resolution 03-35 and the Bond Ordinance with respect to the Series 2003 Bonds or any other transaction document including any underlying security agreement (each a "Related Document") may become effective except upon obtaining the prior written consent of the Insurer. Copies of any rnodification or amendment to such G-I Resolution and Bond Ordinance or any other Related Document shall be sent to Standard & Poor's Credit Market Services ("S&P") and Moody's Investors Service, Inc. ("Moody's") at least I 0 days prior to the effective date thereof. (i) The rights granted to the Insurer under Resolution No 03-35 and the Bond Ordinance with respect to the Series 2003 Bonds or any other Related Document to request, consent to or direct any action are rights granted to the Insurer in consideration of its issuance of the Insurance Policy. Any exercise by the Insurer of such rights is merely an exercise of the Insurer's contractual rights and shall not be construed or deemed to be taken for the benefit or on behalf of the Bondholders nor does such action evidence any position of the Insurer, positive or negative, as to whether Bondholder consent is required in addition to consent of the Insurer. (j) Only (1) cash, (2) non-callable direct obligations of the United States of America ("Treasuries"), (3) evidences of ownership of proportionate interests in future interest and principal payments on Treasuries held by a bank or trust company as custodian, under which the owner of the investment is the real party in interest and has the right to proceed directly and individually against the obligor and the underlying Treasuries are not available to any person claiming through the custodian or to whom the custodian may be obligated, (4) pre- refunded municipal obligations rated "AAA" and "Aaa" by S&P and Moody's, respectively or (5) securities eligible for "AAA" defeasance under then existing criteria of S & P or any combination thereof, shall be authorized to be used to effect defeasance ofthe Bonds unless the Insurer otherwise approves. To accomplish defeasance the Issuer shall cause to be delivered (i) a report ofan independent firm of nationally recognized certified public accountants or such other accountant as shall be acceptable to the Insurer ("Accountant") verifying the sufficiency of the escrow established to pay the Bonds in full on the maturity or redemption date ("Verification"), (ii) an Escrow Deposit Agreement (which shall be acceptable in form and substance to the Insurer), and (iii) an opinion of nationally recognized bond counsel to the effect that the Bonds are no longer "Outstanding" under the Resolution; each Verification and defeasance opinion shall be acceptable in form and substance, and addressed, to the Issuer and the Insurer. The Insurer shall be provided with final drafts of the above-referenced documentation not less than five business days prior to the funding ofthe escrow. Bonds shall be deerned "Outstanding" under the Bond Ordinance unless and until they are in fact paid and retired or the above criteria are met. (k) Amounts paid by the Insurer under the Insurance Policy shall not be deerned paid for purposes ofthe Resolution and shall remain Outstanding and continue to be due and owing until paid by the Issuer in accordance with the Resolution. The Resolution shall not be discharged unless all amounts due or to becorne due to the Insurer have been paid in full or duly provided for. (1) The Issuer to covenant and agree to take such action (including, as applicable, filing ofUCC financing statements and continuations thereof) as is necessary frorn time to time otherwise preserve the priority ofthe pledge of Trust Estate under applicable law. (m), Claims Upon the Insurance Policy and Payments by and to the Insurer. If, on the third Business Day prior to the related scheduled interest payment date or principal G-2 payment date ("Payment Date") there is not on deposit with the Paying Agent, after making all transfers and deposits required under the Resolution, moneys sufficient to pay the principal of and interest on the Bonds due on such Payment Date, the Paying Agent shall give notice to the Bond Insurer and to its designated agent (ifany) (the "Insurer's Fiscal Agent") by telephone ortelecopyof the amount of such deficiency by 12:00 noon, New York City time, on such Business Day. If, on the second Business Day prior to the related Payment Date, there continues to be a deficiency in the amount available to pay the principal of and interest on the Bonds due on such Payment Date, the Paying Agent shall make a claim under the Insurance Policy and give notice to the Insurer and the Insurer's Fiscal Agent (if any) by telephone ofthe amount of such deficiency, and the allocation of such deficiency between the amount required to pay interest on the Bonds and the amount required to pay principal of the Bonds, confirmed in writing to the Insurer and the Insurer's Fiscal Agent by 12:00 noon, New York City time, on such second Business Day by filling in the form of Notice of Claim and Certificate delivered with the Insurance Policy. In the event the claim to be made is for a mandatory sinking fund redernption installment, upon receipt of the rnoneys due, the Paying Agent shall authenticate and deliver to affected Bondholders who surrender their Bonds a new Bond or Bonds in an aggregate principal amount equal to the umedeemed portion of the Bond surrendered. The Paying Agent shall designate any portion of payment of principal on Bonds paid by the Insurer, whether by virtue of mandatory sinking fund redemption, maturity or other advancement of maturity, on its books as a reduction in the principal amount of Bonds registered to the then current Bondholder, whether DTC or its nominee or otherwise, and shall issue a replacement Bond to the Insurer, registered in the name of Financial Security Assurance Inc., in a principal amount equal to the amount of principal so paid (without regard to authorized denominations); provided that the Paying Agent's failure to so designate any payment or issue any replacement Bond shall have no effect on the amount of principal or interest payable by the Issuer on any Bond or the subrogation rights of the Insurer. The Paying Agent shall keep a complete and accurate record of all funds deposited by the Insurer into the Policy Payments Account (defined below) and the allocation of such funds to payment of interest on and principal paid in respect of any Bond. The Insurer shall have the right to inspect such records at reasonable times upon reasonable notice to the Paying Agent. Upon payment of a claim under the Insurance Policy the Paying Agent shall establish a separate special purpose trust account for the benefit of Bondholders referred to herein as the "Policy Payments Account" and over which the Paying Agent shall have exclusive control and sole right of withdrawal. The Paying Agent shall receive any amount paid under the Insurance Policy in trust on behalf of Bondholders and shall deposit any such amount in the Policy Payments Account and distribute such amount only for purposes of making the payments for which a claim was made. Such amounts shall be disbursed by the Paying Agent to Bondholders in the same manner as principal and interest payments are to be made with respect to the Bonds under the sections hereof regarding payment of Bonds. It shall not be necessary for such payments to be made by checks or wire transfers separate from the check or wire transfer used to pay debt service with other funds available to make such payments. Notwithstanding anything to the contrary otherwise set forth in the Resolution and to the extent permitted by law, in the event amounts paid under the Insurance Policy are applied to claims for payment of principal of or interest on the Bonds, interest on such principal of and interest on such Bonds shall accrue and be payable from the date of such payment at the greater of (i) the per annum rate of interest, publicly announced from time to time by JP Morgan Chase Bank or its G-3 successor at its principal office in the City of New York, as its prime or base lending rate plus 3%, and (ii) the then applicable rate of interest on the Bonds provided that in no event shall such rate exceed the maximum rate permissible under applicable usury or sirnilar laws limiting interest rates. Funds held in the Policy Payments Account shall not be invested by the Paying Agent and may not be applied to satisfy any costs, expenses or liabilities of the Paying Agent. Any funds remaining in the Policy Payments Account following a Bond payment date shall promptly be remitted to the Insurer. (n) The Insurer shall, to the extent it makes any payment of principal of (or, in the case of Capital Appreciation Bonds, accreted value) or interest on the Bonds, become subrogated to the rights of the recipients of such payments in accordance with the terms of the Insurance Policy. The obligations to the Insurer shall survive discharge or termination of the Related Documents. (0) The Issuer shall payor reimburse the Insurer any and all charges, fees, costs and expenses which the Insurer may reasonably payor incur in connection with (i) the administration, enforcernent, defense or preservation of any rights or security in any Related Document; (ii) the pursuit of any remedies under the Resolution or any other Related Document or otherwise afforded by law or equity, (iii) any amendment, waiver or other action with respect to, or related to, the Resolution or any other Related Document whether or not executed or completed, (iv).the violation by the Issuer of any law, rule or regulation, or any judgment, order or decree applicable to it or (v) any litigation or other dispute in connection with the Resolution or any other Related Document or the transactions contemplated thereby, other than amounts resulting from the failure of the Insurer to honor its obligations under the Insurance Policy. The Insurer reserves the right to charge a reasonable fee as a condition to executing any amendment, waiver or consent proposed in respect of the Resolution or any other Related Document. (p) The application of funds realized upon default shall be applied to payment of expenses ofthe Issuer or rebate only after the payment of debt service due and past due on the Bonds, together with replenishment of the Debt Service Reserve Fund. (q) The Insurer shall be entitled to pay principal (or, in the case of Capital Appreciation Bonds, accreted value) or interest on the Bonds that shall become Due for Payment but shall be unpaid by reason of Nonpayment by the Issuer (as such terms are defined in the Insurance Policy) and any amounts due on the Bonds as a result of acceleration of the maturity thereof in accordance with the Resolution, whether or not the Insurer has received a Notice of Nonpayment (as such terms are defined in the Insurance Policy) or a claim upon the Insurance Policy. (r) The notice address of the Insurer is: Financial Security Assurance Inc., 350 Park Avenue, New York, New York 10022-6022, Attention: Managing Director-Surveillance, Re: Policy No. , Telephone: (212) 826-0100; Telecopier: (212) 339-3556. In each casein which notice or other communication refers to an Event of Default, then a copy of such notice or other communication shall also be sent to the attention ofthe General Counsel and shall be marked to indicate "URGENT MATERIAL ENCLOSED." G-4 (8) The Insurer shall be provided with the following information: (i) Annual audited financial statements within 150 days after the end of the Issuer's fiscal year (together with a certification of the Issuer that it is not aware of any default or Event of Default under the Resolution), and the Issuer's annual budget within 30 days after the approval thereof together with such other information, data or reports as the Insurer shall reasonably request from time to time; (ii) Notice of any draw upon the Debt Service Reserve Fund within two Business Days after knowledge thereof other than (i) withdrawals of amounts in excess of the Debt Service Reserve Requirement and (ii) withdrawals in connection with a refunding of Bonds; (iii) Notice of any default known to the Issuer within five Business Days after knowledge thereof; (iv) Prior notice of the advance refunding or redemption of any of the Bonds, including the principal amount, maturities and CUSIP nurnbers thereof; (v) Notice ofthe resignation or removal ofthe Paying Agent and Bond Registrar and the appointment of, and acceptance of duties by, any successor thereto; (vi) Notice of the commencement of any proceeding by or against the Issuer commenced under the United States Bankruptcy Code or any other applicable bankruptcy, insolvency, receivership, rehabilitation or similar law (an "Insolvency Proceeding"); (vii) Notice of the making of any claim in connection with any Insolvency Proceeding seeking the avoidance as a preferential transfer of any payment of principal of, or interest on, the Bonds; (viii) A full original transcript of all proceedings relating to the execution of any amendment or supplement to the Related Documents; and (ix) All reports, notices and correspondence to be delivered to Bondholders under the terms of the Related Docurnents. (t) Notwithstanding satisfaction of other conditions to the issuance of Additional Bonds contained in the Resolution, no such issuance may occur (1) should any Event of Default (or any event which, once all notice or grace periods have passed, would constitute an Event of Default) have occurred and be continuing unless such default shall be cured upon such issuance and (2) unless the Debt Service Reserve Fund is fully funded at its requirement (including the new issue) upon the issuance of such Additional Bonds, in either case unless otherwise permitted by the Insurer. (u) No contract shall be entered into nor any action taken by which the rights of the Insurer or security for or sources of payment of the Bonds may be impaired or prejudiced in any material respect except upon obtaining the prior written consent ofthe Insurer. (v) Ifthe proceeds ofthe Bonds include a refunding there shall be delivered an opinion of Bond Counsel addressed to the Insurer (or a reliance letter relating thereto) or a certificate of discharge of the trustee for the Refunded Bonds to the effect that, upon the making of the required deposit to the escrow, the legal defeasance of the Refunded Bonds shall have occurred. G-5