PRELIMINARY OFFICIAL STATEMENT DATED APRIL 28, 2021 fer, fer, NEW ISSUE – BOOK ENTRY ONLY RATINGS: Fitch: “AA-” S&P: “AA-” Statement
Interest on the Bonds (described herein) will not be excludable from gross income for federal income tax purposes. See “TAX MATTERS” herein. CITY OF EL PASO DOWNTOWN DEVELOPMENT CORPORATION $26,995,000*
diction in which such of such which in diction SPECIAL REVENUE REFUNDING BONDS, TAXABLE SERIES 2021 (DOWNTOWN BALLPARK VENUE PROJECT) o the time the Official Official the time o the Dated: Date of Delivery Due: August 15, as shown on page ii The $26,995,000* “City of El Paso Downtown Development Corporation, Special Revenue Refunding Bonds, Taxable Series 2021 (Downtown Ballpark Venue Project)” (the “Bonds”) are being issued by the City of El Paso Downtown Development Corporation (the “Corporation”) pursuant to the laws of the State of Texas (the “State”), including particularly Chapter 1207 of the Texas Government Code, as amended, a resolution adopted by the Board of Directors (the “Board”) of the Corporation on April 13, 2021 (the “Resolution”), an ordinance adopted by the City Council (the “City Council”) of the City of El Paso, Texas (the “City”) on April 13, 2021, and a Third Supplement to Trust Agreement, dated as of June 1, 2021 (the “Third Supplement”), between the Corporation and Wells Fargo Bank, National Association, Dallas, Texas, as trustee thereunder (the “Trustee”). In the Resolution, the Board delegated to certain officers (each, a “Pricing Officer”) of the Corporation authority to complete the sale of the Bonds. The terms of the sale of the Bonds will be set forth in an approval certificate of the Pricing Officer and included in the Third Supplement and a Bond Purchase Agreement between the Corporation and the underwriters of the Bonds shown below (the “Underwriters”). See “THE BONDS – Authority for Issuance” herein. The Third Supplement supplements the terms of the Trust Agreement Relating to the City of El Paso, Texas, Downtown Ballpark Venue Project Financing, dated as of August 1, 2013, as amended by a First Amendment to Trust Agreement dated as of October 15, 2013, and as supplemented by a First Supplement to Trust Agreement, dated as of May 1, 2016, and a Second Supplement to Trust Agreement, dated as of July 17, 2020 (collectively, as amended and supplemented the “Original Trust Agreement”), by and between the Corporation and the Trustee. The Third Supplement and the Original Trust Agreement are collectively referred to herein as the “Trust Agreement.” Interest on the Bonds, calculated on the basis of a 360-day year composed of twelve 30-day months, will accrue from their date of initial delivery to the Underwriters, and is payable on February 15 and August 15 of each year, commencing August 15, 2021, until stated maturity or prior redemption. The definitive Bonds will be issued as fully-registered obligations, initially registered in the name of Cede & Co., as nominee of The Depository Trust Company (“DTC”), New York, New York. DTC will act as securities depository for so long as the Bonds are maintained in DTC’s Book-Entry-Only System. Book-entry interests in the Bonds will be made available for purchase in principal amounts of $5,000 or any integral multiple thereof within a maturity. Purchasers of the Bonds (the “Beneficial Owners”) will not receive physical delivery of certificates representing their interest in the Bonds. So long as DTC or its nominee is the Registered Owner (defined herein) of the Bonds, the principal of and interest on the Bonds will be payable by the Trustee to the securities depository, which will in turn remit such principal and interest to its participants, which will in turn remit such principal and interest to the Beneficial Owners. See “REGISTRATION, TRANSFER AND EXCHANGE – Book-Entry- Only System” herein. The Corporation is issuing the Bonds to (i) refund a portion of the Corporation’s presently outstanding, tax-exempt, special revenue bonds for debt service savings (the “Refunded Obligations”), and (ii) pay costs of issuance. See “PLAN OF FINANCE – Purpose of the Bonds” and “SCHEDULE I – Schedule of Refunded Obligations” herein. The downtown ballpark venue which was originally financed in part with the proceeds of the Refunded Obligations (the “Project”) is a municipally-owned ballpark and related facilities within El Paso’s downtown area which currently serves as the home of the El Paso Chihuahuas (the “Team”), the ce. These securities maynot besold nor may offerstobuy be accepted prior t Triple A Minor League Professional Baseball Franchise of the San Diego Padres. Pursuant to the terms of the Master Lease Agreement, dated as of August 1, 2013, as amended by the First Amendment to Master Lease Agreement, dated as of May 1, 2016, and a Second Amendment to Master Lease Agreement, dated July 17, 2020 (collectively, as amended, the “Original Lease Agreement”), the Corporation obtained a leasehold estate in the Project from the City (the “Primary Lease”) and the solicitation of an offer to buy, nor shall there be any sale of these securities in any juris any in securities these of sale be any there shall nor buy, to offer an of solicitation the immediately subleased the Project back to the City (the “Sublease”). In connection with the issuance of the Bonds, the City and the Corporation have entered into a Third Amendment to Master Lease Agreement dated as of June 1, 2021 (the “Lease Amendment”). The Lease Amendment and the Original Lease Agreement are collectively referred to herein as the “Lease Agreement.” The principal of, premium, if any, and interest on the Bonds are secured by and payable from the “Trust Estate” created and existing under the Trust Agreement, which consists primarily of lease payments (the “Lease Payments”) to be made by the City to the Corporation pursuant to the terms of the Lease Agreement. The Lease Payments are due at such times and in such amounts as will be required to permit the Corporation’s timely payment of the principal of and interest on the Bonds. THE BONDS ARE PAYABLE SOLELY FROM LEASE PAYMENTS TO BE MADE BY THE CITY. THE BONDS SHALL NEVER CONSTITUTE AN INDEBTEDNESS OR GENERAL OBLIGATION OF THE CORPORATION, THE STATE, THE CITY, OR ANY OTHER POLITICAL SUBDIVISION OF THE STATE, WITHIN THE MEANING OF ANY CONSTITUTIONAL PROVISION OR STATUTORY LIMITATION WHATSOEVER, BUT THE BONDS SHALL BE A LIMITED OR SPECIAL OBLIGATION OF THE CORPORATION PAYABLE SOLELY FROM THE FUNDS PROVIDED THEREFOR AS PROVIDED IN THE TRUST AGREEMENT. NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF THE STATE, THE CITY, OR ANY OTHER POLITICAL SUBDIVISION OF THE STATE IS PLEDGED TO THE PAYMENT OF THE PRINCIPAL OF THE BONDS OR THE INTEREST OR ANY PREMIUM THEREON OR OTHER COSTS INCIDENT THERETO. NEITHER THE MEMBERS OF THE BOARD NOR ANY PERSON EXECUTING THE BONDS SHALL BE LIABLE PERSONALLY ON THE BONDS BY REASON OF THE ISSUANCE THEREOF. THE OBLIGATION OF THE CITY TO MAKE LEASE PAYMENTS IS A CURRENT EXPENSE OF THE CITY, PAYABLE SOLELY FROM FUNDS ANNUALLY APPROPRIATED BY THE CITY FOR SUCH USE FROM ANY UNENCUMBERED AND LAWFULLY AVAILABLE FUNDS TO THE PAYMENT THEREOF. THERE CAN BE NO ASSURANCE THAT THE CITY WILL ANNUALLY APPROPRIATE PAYMENTS UNDER THE LEASE AGREEMENT. IF THE LEASE AGREEMENT IS TERMINATED, THE CITY WILL HAVE NO FURTHER OBLIGATION TO MAKE LEASE PAYMENTS REGARDLESS OF WHETHER ANY BONDS REMAIN OUTSTANDING. THE LEASE AGREEMENT AND THE OBLIGATIONS OF THE CITY THEREUNDER DO NOT CONSTITUTE A PLEDGE, LIABILITY, OR A CHARGE UPON THE FUNDS OF THE CITY AND DO NOT CONSTITUTE A DEBT OR GENERAL OBLIGATION OF THE STATE, THE CITY, THE CORPORATION, OR ANY OTHER POLITICAL SUBDIVISION OF THE STATE. The agreements of the City, the Corporation, and others related to the Bonds are contained solely in the contracts described herein. Neither this Official Statement nor any other statement made in connection with the offer or sale of the Bonds is to be construed as constituting an agreement with the purchasers of the Bonds. INVESTORS SHOULD READ THE ENTIRE OFFICIAL STATEMENT, INCLUDING SCHEDULE I AND THE APPENDICES ATTACHED HERETO, TO OBTAIN INFORMATION ESSENTIAL TO MAKING AN INFORMED INVESTMENT DECISION. Ownership of the Bonds results in the assumption of certain risks by the holder thereof, some of which are described herein under the captions “INFECTIOUS DISEASE OUTBREAK – COVID-19” and “INVESTOR CONSIDERATIONS”.
SEE INSIDE COVER PAGE FOR STATED MATURITIES, PRINCIPAL AMOUNTS, MATURITY AMOUNTS, INTEREST RATES, OFFERING YIELDS, CUSIP NUMBERS, AND REDEMPTION PROVISIONS FOR THE BONDS The Bonds are offered for delivery, when, as, and if issued and received by the Underwriters and are subject to the approving opinion of the Attorney General of the State of Texas and the legal opinion of Norton Rose Fulbright US LLP, Dallas, Texas, as Bond Counsel. See “LEGAL MATTERS” herein. Certain legal matters will be passed upon for the Underwriters by their Counsel, Bracewell LLP, Austin, Texas. The Bonds are expected to be available for delivery through the services of DTC on or about June 8, 2021.
J.P. MORGAN CITIGROUP RAMIREZ & CO., INC. RAYMOND JAMES
This Preliminary Official Statement andthe information contained herein are subject to completion and amendment without noti or to offer sell an constitute Statement Official Preliminary this shall no circumstances Under form. in final is delivered solicitation or sale would be unlawful prior to registrationor qualification under the securities laws of such jurisdiction. ______* Preliminary, subject to change.
MATURITY SCHEDULE CUSIP Prefix: 283738(1)
$26,995,000* CITY OF EL PASO DOWNTOWN DEVELOPMENT CORPORATION SPECIAL REVENUE REFUNDING BONDS, TAXABLE SERIES 2021 (DOWNTOWN BALLPARK VENUE PROJECT)
Principal Maturity Interest Initial CUSIP Principal Maturity Interest Initial CUSIP Amount (August 15) Rate Yield Suffix(1) Amount (August 15) Rate Yield Suffix(1) $ 315,000 2023 $2,095,000 2031 495,000 2024 2,155,000 2032 500,000 2025 2,215,000 2033 510,000 2026 2,285,000 2034 520,000 2027 2,360,000 2035 1,935,000 2028 2,445,000 2036 1,985,000 2029 2,525,000 2037 2,040,000 2030 2,615,000 2038
Redemption The Bonds are subject to redemption prior to stated maturity at the times, in the amounts, and at the prices described herein. See “THE BONDS – Redemption” herein.
* Preliminary subject to change
(1) CUSIP numbers are included solely for the convenience of owners of the Bonds. CUSIP is a registered trademark of the American Bankers Association. CUSIP data herein is provided by CUSIP Global Services, managed by S&P Global Market Intelligence on behalf of The American Bankers Association. This data is not intended to create a database and does not serve in any way as a substitute for the CUSIP Services. None of the City, the Corporation, the Financial Advisor, nor the Underwriters is responsible for the selection or correctness of the CUSIP numbers set forth herein.
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CITY OF EL PASO, TEXAS 300 N. Campbell El Paso, Texas 79901 (915) 541-4000
CITY COUNCIL Oscar Leeser, Mayor Peter Svarzbein Alexsandra Annello Cassandra Hernandez Joe Molinar Isabel Salcido Claudia Rodriguez Henry Rivera Cissy Lizarraga
CERTAIN ADMINISTRATIVE STAFF(1)
Name City Office Corporation Position Tommy Gonzalez City M anager Director Robert Cortinas Chief Financial Officer Treasurer Laura D. Prine City Clerk Secretary Karla Nieman City Attorney N/A Margarita Muñoz Comptroller Assistant Treasurer M aria Pasillas Tax Assessor/Collector N/A
(1) By virtue of their respective elected or appointed offices, certain City officials hold Board positions or corporate offices with the Corporation. See “THE CORPORATION.”
CONSULTANTS AND ADVISORS
Auditors ...... Moss Adams LLP Dallas, Texas
Bond Counsel ...... Norton Rose Fulbright US LLP Dallas, Texas
Financial Advisor ...... Hilltop Securities Inc. El Paso, Texas
For additional information regarding the City, please contact:
Robert Cortinas Maria Fernanda Urbina Chief Financial Officer Hilltop Securities Inc. City of El Paso, Texas or 221 N. Kansas, Suite 600 300 N. Campbell El Paso, Texas 79901 El Paso, Texas 79901 (915) 351-7228 (915) 212-1063
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USE OF INFORMATION IN THE OFFICIAL STATEMENT
For purposes of compliance with Rule 15c2-12, as amended, of the United States Securities and Exchange Commission (“Rule 15c2-12”) and in effect on the date of this Official Statement, this document constitutes an “official statement” of the Corporation with respect to the Bonds that has been deemed “final” by the Corporation as of its date, except for the omission of no more than the information permitted by Rule 15c2-12.
This Official Statement and the information contained herein are subject to completion and amendment. Under no circumstances will this Official Statement constitute an offer to sell or the solicitation of an offer to buy, nor will there be any sale of these securities in any jurisdiction in which such offer, solicitation, or sale would be unlawful prior to registration or qualification under the securities laws of such jurisdiction.
No dealer, broker, salesman, or other person has been authorized to give any information or to make any representation with respect to the Bonds, other than as contained in this Official Statement, and if given or made, such other information or representations must not be relied upon as having been authorized by the Corporation, the City, the Financial Advisor, or the Underwriters. The information set forth herein has been obtained from sources which are believed to be reliable but is not guaranteed as to accuracy or completeness and is not to be construed as a representation by the Financial Advisor or the Underwriters. The information and expressions of opinion herein are subject to change without notice, and neither the delivery of this Official Statement nor any sale made hereunder will, under any circumstances, create any implication that there has been no change in the information or opinions set forth herein after the date of this Official Statement.
THE BONDS ARE EXEMPT FROM REGISTRATION WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION AND CONSEQUENTLY HAVE NOT BEEN REGISTERED THEREWITH. THE REGISTRATION, QUALIFICATION, OR EXEMPTION OF THE BONDS IN ACCORDANCE WITH APPLICABLE SECURITIES LAW PROVISIONS OF THE JURISDICTIONS IN WHICH THE BONDS HAVE BEEN REGISTERED, QUALIFIED, OR EXEMPTED SHOULD NOT BE REGARDED AS A RECOMMENDATION THEREOF.
All information contained in this Official Statement is subject, in all respects, to the complete body of information contained in the original sources thereof and no guaranty, warranty, or other representation is made concerning the accuracy or completeness of the information herein. In particular, no opinion or representation is rendered as to whether any projection will approximate actual results, and all opinions, estimates and assumptions, whether or not expressly identified as such, should not be considered statements of fact.
IN CONNECTION WITH THE OFFERING OF THE BONDS, THE UNDERWRITERS MAY OVERALLOT OR EFFECT TRANSACTIONS THAT STABILIZE OR MAINTAIN THE MARKET PRICE OF THE BONDS AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANYTIME.
The Underwriters have provided the following sentence for inclusion in this Official Statement. The Underwriters have reviewed the information in this Official Statement in accordance with, and as part of, their responsibilities to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriters do not guarantee the accuracy or completeness of such information.
The Financial Advisor has provided the following sentence for inclusion in this Official Statement. The Financial Advisor has reviewed the information in this Official Statement in accordance with, and as part of, their responsibilities to the City and the Corporation and, as applicable, to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Financial Advisor does not guarantee the accuracy or completeness of such information.
The agreements of the City, the Corporation, and others related to the Bonds are contained solely in the contracts described herein. Neither this Official Statement nor any other statement made in connection with the offer or sale of the Bonds is to be construed as constituting an agreement with the purchasers of the Bonds. INVESTORS SHOULD READ THE ENTIRE OFFICIAL STATEMENT, INCLUDING ALL SCHEDULES AND APPENDICES ATTACHED HERETO, TO OBTAIN INFORMATION ESSENTIAL TO MAKING AN INFORMED INVESTMENT DECISION.
None of the City, the Corporation, the Financial Advisor, nor the Underwriters make any representation or warranty with respect to the information contained in this Official Statement regarding The Depository Trust Company (“DTC”) or its Book-Entry-Only System appearing under the caption “REGISTRATION, TRANSFER AND EXCHANGE – Book-Entry-Only System” as such information has been provided by the DTC.
The Trustee has not participated in the preparation of this Official Statement and assumes no responsibility for the accuracy or completeness of any information contained in this Official Statement or the related transactions and documents or for any failure by any party to disclose events that may have occurred and may affect the significance or accuracy of such information.
THIS OFFICIAL STATEMENT CONTAINS “FORWARD-LOOKING STATEMENTS” WITHIN THE MEANING OF SECTION 21E OF THE SECURITIES AND EXCHANGE ACT OF 1934, AS AMENDED. SUCH STATEMENTS MAY INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES, AND OTHER FACTORS WHICH MAY CAUSE THE ACTUAL RESULTS, PERFORMANCE, AND ACHIEVEMENTS TO BE DIFFERENT FROM FUTURE RESULTS, PERFORMANCE, AND ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. INVESTORS ARE CAUTIONED THAT THE ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE SET FORTH IN THE FORWARD-LOOKING STATEMENTS.
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TABLE OF CONTENTS
INTRODUCTION ...... 1 Operating Fund ...... 19 INFECTIOUS DISEASE OUTBREAK – COVID-19 ...... 1 No Additional Unrelated Obligations ...... 20 PLAN OF FINANCE ...... 2 THE FINANCING DOCUMENTS ...... 20 Purposes of the Bonds ...... 2 The Lease Agreement ...... 20 Refunded Obligations ...... 2 The Trust Agreement ...... 23 Sources and Uses of Proceeds ...... 3 INVESTOR CONSIDERATIONS ...... 27 General Overview ...... 3 General ...... 27 THE CITY ...... 4 Hotel Occupancy Tax Rate ...... 27 The City ...... 4 Nonappropriation ...... 27 THE DOWNTOWN BALLPARK VENUE PROJECT ...... 4 Appropriation Budget Covenant ...... 27 Plan for Downtown Revitalization ...... 4 No Reserve Fund ...... 28 Triple-A Baseball as Additional Tool For Downtown Damage or Destruction Risk ...... 28 Revitalization ...... 5 City’s Power of Eminent Domain ...... 28 Semi-Professional Soccer as an Remedies ...... 28 Additional Tool for Downtown Revitalization ...... 5 Inability to Re-lease, or Delay in Re-leasing, the Project ...... 28 Economic Impact of Triple-A Baseball ...... 5 Other Obligations of the City ...... 29 Non-Quantitative Impacts of Triple A Baseball ...... 5 Securities Law ...... 29 The Team Lease ...... 5 Noncompliance with Arbitrage Provisions; Occurrence of Non-Relocation Agreement ...... 7 Taxability ...... 29 The Project ...... 7 Forward-Looking Statements Disclaimer ...... 29 Downtown Location ...... 8 DEBT SERVICE REQUIREMENTS ...... 30 THE CORPORATION ...... 8 Table 4 – Pro-Forma Debt Service Requirements...... 30 THE CITY’S HOTEL OCCUPANCY TAX ...... 9 ANNUAL BUDGET PROCESS ...... 31 General ...... 9 Budget Process ...... 31 Source of Payment of the Lease Payments ...... 9 CITY REVENUES AND EXPENSES ...... 32 Description of Hotel Occupancy Tax ...... 9 General Fund ...... 32 City HOT Levy, Limitations on Use ...... 9 Table 5 – Statement of Revenues, Expenditures and Changes in HOT Receipts ...... 10 General Fund Balances ...... 32 Table 1 – Historical Hotel Occupancy Tax Revenues – 7% Municipal Sales Taxes ...... 33 Collection Rate ...... 10 Table 6 – Municipal Sales Tax ...... 33 Table 2 – Additional Hotel Occupancy Tax Revenues – 2% INVESTMENTS ...... 33 Collection Rate ...... 10 Legal Investments ...... 33 Table 3 – El Paso Hotel Occupancies and Average Daily Investment Policies ...... 33 Rates/History ...... 10 Current Investments ...... 34 CERTAIN PROJECTED SOURCES OF REVENUE ...... 11 LITIGATION ...... 34 Estimated Cash Flow and Debt Service Coverage Table ...... 12 CITY PENSION AND OTHER POSTEMPLOYMENT THE BONDS ...... 13 RETIREMENT BENEFIT LIABILITIES ...... 34 Authority for Issuance ...... 13 Pension Plans ...... 34 General Description of the Bonds ...... 13 Other Post Employment Benefits ...... 44 Record Date for Interest Payment ...... 13 Compensated Absence Liability ...... 46 Additional Bonds ...... 13 TAX MATTERS ...... 47 Redemption ...... 14 REGISTRATION AND QUALIFICATION OF BONDS FOR Defeasance ...... 14 SALE ...... 49 Trustee as Paying Agent and Bond Registrar ...... 15 LEGAL INVESTMENTS AND ELIGIBILITY TO SECURE Successor Trustee ...... 15 PUBLIC FUNDS IN TEXAS ...... 49 Ownership ...... 15 LEGAL MATTERS ...... 49 Payment Record ...... 15 RATINGS ...... 50 REGISTRATION, TRANSFER AND EXCHANGE ...... 16 CONTINUING DISCLOSURE OF INFORMATION ...... 51 Book-Entry-Only System ...... 16 Annual Reports ...... 51 Future Registration ...... 17 Notice of Certain Events ...... 51 Limitation on Transfer of Bonds ...... 17 Availability of Information ...... 52 Replacement Bonds ...... 17 Limitations and Amendments ...... 52 SECURITY FOR THE BONDS AND REMEDIES IN THE EVENT Compliance with Prior Undertakings ...... 52 OF NONAPPROPRIATION ...... 18 VERIFICATION OF ARITHMETICAL AND MATHEMATICAL General ...... 18 COMPUTATIONS ...... 52 Trust Estate ...... 18 FINANCIAL ADVISOR ...... 52 Lease Payments ...... 18 UNDERWRITING ...... 53 Limited Nature of Obligations of the Corporation ...... 19 AUTHORIZATION OF THE OFFICIAL STATEMENT ...... 53 Remedies For Failure to Appropriate ...... 19
SCHEDULE OF REFUNDED OBLIGATIONS ...... SCHEDULE I CITY OF EL PASO, TEXAS – GENERAL DEMOGRAPHIC AND ECONOMIC INFORMATION ...... APPENDIX A SELECTED PROVISIONS OF THE FINANCING DOCUMENTS ...... APPENDIX B SELECTED PORTIONS OF THE CITY’S COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE FISCAL YEAR ENDED AUGUST 31, 2020 ...... APPENDIX C FORM OF BOND COUNSEL OPINION ...... APPENDIX D
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PRELIMINARY OFFICIAL STATEMENT RELATING TO THE
CITY OF EL PASO DOWNTOWN DEVELOPMENT CORPORATION $26,995,000* SPECIAL REVENUE REFUNDING BONDS, TAXABLE SERIES 2021 (DOWNTOWN BALLPARK VENUE PROJECT)
INTRODUCTION
This Official Statement, including the cover page, Schedule I, and the Appendices hereto, of the City of El Paso Downtown Development Corporation (the “Corporation”) provides certain information in connection with the sale of its $26,995,000* “City of El Paso Downtown Development Corporation Special Revenue Refunding Bonds, Taxable Series 2021 (Downtown Ballpark Venue Project)” (the “Bonds”). This Official Statement describes the Bonds, the Trust Agreement (defined herein) and the Lease Agreement (defined herein), as well as certain other information about the Corporation, the Project (defined herein), and the City of El Paso, Texas (the “City”), as the Sublessee (defined herein) of the Project. The Trust Agreement and the Lease Agreement are collectively referred to herein as the “Financing Documents”. Defined terms used herein without definition shall have the respective meanings ascribed thereto in the Trust Agreement. See “SELECTED PROVISIONS OF THE FINANCING DOCUMENTS” attached hereto as Appendix B. All descriptions of documents contained herein are only summaries and are qualified in their entirety by reference to each such document. Copies of such documents may be obtained, upon request, from the City’s Office of the Comptroller, 300 N. Campbell, El Paso, Texas 79901 and, during the offering period, from the City’s Financial Advisor, Hilltop Securities Inc., 221 N. Kansas, Suite 600, El Paso, Texas 79901, by electronic mail or by physical delivery upon payment of reasonable copying, mailing, and handling charges.
This Official Statement speaks only as of its date, and the information contained herein is subject to change. A copy of the final Official Statement will be filed with the Municipal Securities Rulemaking Board (“MSRB”) through its Electronic Municipal Market Access (“EMMA”) system. See “CONTINUING DISCLOSURE OF INFORMATION” herein for a description of the City’s and the Corporation’s respective undertakings to provide certain information on a continuing basis.
Ownership of the Bonds results in the assumption of certain risks by the holder thereof, some of which are described herein under the captions “INFECTIOUS DISEASE OUTBREAK – COVID-19” and “INVESTOR CONSIDERATIONS”.
INFECTIOUS DISEASE OUTBREAK – COVID-19
The outbreak of the novel coronavirus disease 2019 (“COVID-19”), a respiratory disease caused by a new strain of coronavirus and deemed a pandemic by the World Health Organization (the “Pandemic”), is currently affecting many parts of the world, including the United States and Texas. On January 31, 2020, the Secretary of the United States Health and Human Services Department declared a public health emergency for the United States and on March 13, 2020, the President of the United States declared the outbreak of COVID-19 in the United States a national emergency. Subsequently, the President’s Coronavirus Guidelines for America and the United States Centers for Disease Control and Prevention called upon Americans to take actions to slow the spread of COVID-19 in the United States, including to avoid discretionary travel and close social contact.
On March 13, 2020, the Governor of Texas (the "Governor") declared a state of disaster for all counties in Texas in response to COVID-19. Pursuant to Chapter 418 of the Texas Government Code, the Governor has broad authority to respond to disasters, including suspending any regulatory statute prescribing the procedures for conducting state business or any order or rule of a state agency that would in any way prevent, hinder, or delay necessary action in coping with the disaster, and issuing executive orders that have the force and effect of law. The Governor has since issued a number of executive orders relating to COVID-19 preparedness and mitigation. On March 2, 2021, the Governor issued Executive Order GA-34, effective March 10, 2021, which among other things rescinds and supersedes various prior executive orders and provides that in all counties not in an "area with high hospitalizations" (as defined in Executive Order GA-34) (i) there are no COVID-19 related operating limits for any business or other establishment and (ii) no person may be required by any jurisdiction to wear or to mandate the wearing of a face covering. In "areas with high hospitalizations" a county judge may impose COVID-19 related mitigation strategies, including reinstituting business occupancy limits, subject to certain limitations. El Paso County is not currently an "area with high hospitalizations." The Governor retains the right to impose additional restrictions on activities. Additional information regarding executive orders issued by the Governor is accessible on the website of the Governor at https://gov.texas.gov. Neither the information on nor accessed through such website of the Governor is incorporated by reference, either expressly or by implication, into this Official Statement.
The financial and operating data contained herein are the latest available, but are as of dates and for periods that may not reflect the economic impact of the Pandemic and measures instituted to slow it. Accordingly, they are not indicative of the current financial condition or future prospects of the City. The City’s hotel occupancy has declined due to COVID-19 and significant reductions in non-essential travel. The reduction in hotel occupancy directly reduces the Hotel Occupancy Tax (HOT) revenue collected by the City.
______* Preliminary, subject to change.
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The City currently has a hold on sales, advertising and marketing efforts to promote travel to the City, which is in alignment with CDC guidelines not to encourage non-essential travel at this time. Current and next fiscal year budgets have been adjusted for the estimated reduced HOT funding.
While the City’s hotel occupancy has fallen from mid 70-percentile to 30-percentile, the City is seeing higher occupancy than most other cities and is beginning to increase weekly from the lowest point in late March 2020.
The City continues to monitor the spread of COVID-19 and is working with local, state, and national agencies to address the potential impact of the Pandemic upon the City. While the potential impact of the Pandemic on the City cannot be quantified at this time, the continued outbreak of COVID-19 could have an adverse effect on the City’s operations and financial condition, and the effect could be material.
CARES ACT GRANT
The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) established the Coronavirus Relief Fund (the “Fund”) which is to be used to cover costs that are necessary expenditures incurred by states and certain local governments due to the public health emergency with respect to COVID-19. On April 23, 2020, the City received $118,956,278.90 from the Fund. Such funds are required to be used to pay for expenditures made to respond to the public health emergency, including direct medical or public health needs, providing economic support to those suffering from employment or business interruptions due to COVID-19-related business closures and payroll expenses for public safety, public health, health care, human services, and similar employees whose services are substantially dedicated to mitigating or responding to COVID-19. Funds may not be used to cover shortfalls in government revenue when that revenue would have been used to cover expenditures that would not otherwise qualify under the CARES Act.
PLAN OF FINANCE
Purpose of the Bonds
The Corporation is issuing the Bonds to (i) refund a portion of the Corporation’s presently outstanding, tax-exempt, special revenue bonds for debt service savings (the “Refunded Obligations”) (see “Schedule I – Schedule of Refunded Obligations” for a detailed listing of the Refunded Obligations and their call date) and (ii) pay costs of issuance.
Refunded Obligations
The principal and interest due on the Refunded Obligations are to be paid on the scheduled payment and redemption dates of such Refunded Obligations, from funds to be deposited pursuant to a certain Escrow Agreement (the “Escrow Agreement”) between the Corporation and Wells Fargo Bank, National Association, Dallas, Texas, as escrow agent (the “Escrow Agent”). The Financing Documents provide that from the proceeds of the sale of the Bonds received from the Underwriters and available City funds, if any, the Corporation will deposit with the Escrow Agent an amount which, together with the Escrowed Securities (defined below) purchased with a portion of the Bond proceeds and the interest to be earned on such Escrowed Securities, will be sufficient to accomplish the discharge and final payment of the Refunded Obligations on the redemption date. Such funds will be held by the Escrow Agent in a special escrow account (the “Escrow Fund”) and used to purchase securities authorized by State law to defease the Refunded Obligations (the “Escrowed Securities”). Under the Escrow Agreement, the Escrow Fund is irrevocably pledged to the payment of the principal of and interest on the Refunded Obligations.
Samuel Klein and Company, Certified Public Accountants, in conjunction with Public Finance Partners LLC will verify at the time of delivery of the Bonds to the Underwriters the mathematical accuracy of the schedules that demonstrate the Escrowed Securities will mature and pay interest in such amounts which, together with uninvested funds in the Escrow Fund, will be sufficient to pay, when due, the principal of and interest on the Refunded Obligations. Such maturing principal of and interest on the Escrowed Securities will not be available to pay the Bonds (see “OTHER INFORMATION - Verification of Arithmetical and Mathematical Computations”).
By the deposit of the Escrowed Securities and cash with the Escrow Agent pursuant to the Escrow Agreement, the Corporation will effect the defeasance of all of the Refunded Obligations in accordance with the law. It is the opinion of Bond Counsel that as a result of such defeasance and in reliance upon the report of Samuel Klein and Company, Certified Public Accountants, in conjunction with Public Finance Partners LLC, the Refunded Obligations will be outstanding only for the purpose of receiving payments from the Escrowed Securities and any cash held for such purpose by the Escrow Agent and such Refunded Obligations will not be deemed as being outstanding debt obligations of the Corporation nor for the purpose of applying any limitation on the issuance of debt.
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Sources and Uses of Proceeds
The proceeds from the sale of the Bonds, together with lawfully available funds of the City, if necessary, are expected to be expended as follows: Sources of Funds Principal Amount of the Bonds $ - [Net] Reoffering Premium - Total Sources of Funds $ -
Uses of Funds: Deposit to Escrow Account $ - Underwriters' Discount - Costs of Issuance/Rounding - Total Uses of Funds $ -
General Overview
The City created the Corporation for the purposes described under “THE CORPORATION.”
The City and the Corporation entered into the Master Lease Agreement, dated as of August 1, 2013, as amended by a First Amendment to Master Lease Agreement dated as of May 1, 2016, and a Second Amendment to Master Lease Agreement, dated July 17, 2020 (collectively, as amended, the “Original Lease Agreement”), under which the City leased to the Corporation, for nominal rent, the Project in exchange for the Corporation’s agreement to accomplish the purposes described in the Lease Agreement (the “Primary Lease”). In return, the Corporation immediately subleased the Project back to the City (the “Sublease”), for rent paid by the City in the form of lease payments (the “Lease Payments”) in an amount sufficient to pay the debt service on all outstanding Parity Bonds (defined herein). In connection with the issuance of the Bonds, the City and the Corporation will enter into a Third Amendment to Master Lease Agreement dated as of June 1, 2021 (the “Lease Amendment”). The Lease Amendment and the Original Lease Agreement are collectively referred to herein as the “Lease Agreement.”
The Project was planned, designed and constructed pursuant to a Ballpark Development Agreement between the City and Mountain Star Sports Group, LLC – El Paso Baseball Club Series (the “Developer”). The City has leased the Project to the Developer as tenant pursuant to a Ballpark Lease Agreement dated October 11, 2012 among the City, the Developer and Mountain Star Sports Group, LLC (the “Company”), as amended on June 18, 2013 (collectively, the “Team Lease”). The rental income, including the Lease Payments from the Lease Agreement, has been assigned to the Trustee (defined herein) and held in the Trust Estate (defined herein) created under the Trust Agreement and will serve as the primary security for the Bonds. The leasehold interests conveyed to the City and the Corporation are described in the Lease Agreement and the leasehold interest conveyed to the Developer is described in the Team Lease. The Lease Agreement and the Trust Agreement (defined below) are collectively referred to herein as the “Financing Documents” and are described in greater detail under “THE FINANCING DOCUMENTS” herein. Excerpts of each are attached hereto as Appendix B. Pursuant to the Sublease, the City’s Lease Payments thereunder are due at such times and in such amounts as will be required to permit the Corporation’s timely payment of the principal of, and interest on the Bonds (such Lease Payments being due on the fifth day of the month in which such debt service payments are also due; see “SECURITY FOR THE BONDS AND REMEDIES IN THE EVENT OF NONAPPROPRIATION – Lease Payments” herein); however, the City has no obligation to appropriate any funds to pay Lease Payments regardless of the amount or source of funds that are lawfully available to be appropriated in any Fiscal Year. See “SECURITY FOR THE BONDS AND REMEDIES IN THE EVENT OF NONAPPROPRIATION” and “INVESTOR CONSIDERATIONS” herein.
Under the Primary Lease, the obligation to pay the costs of operating and maintaining the Project for its intended purpose is retained by the City, as lessor, with such payment obligation being subject to annual Appropriation (as defined in the Lease Agreement) by the City.
Sources of income and/or funds available to the City to make Lease Payments and pay Operating Expenses (defined herein) include (but are not limited to) receipts derived from the collection of (i) a special venue project hotel occupancy tax equal to 2% of the price paid for the use or possession, or right of use or possession, of rooms ordinarily used for sleeping at any hotel in the City (the “Additional Tax”); (ii) with respect to any outstanding taxable Parity Bonds only, including the Bonds, the Team Payments; (iii) the 1% general sales and use tax levied by the City, (iv) transfers from City-owned utility systems, and (v) any and all other lawfully available funds. See “CERTAIN PROJECTED SOURCES OF REVENUE.”
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THE CITY
The City
The City was incorporated in 1873 and is a political subdivision and municipal corporation of the State of Texas (the “State”) duly organized and existing under the laws of the State, including the City’s Home Rule Charter (the “City Charter”). The City operates under a Council Manager form of government. City Council Members serve staggered four year terms. The Mayor also serves a four year term. Each elected official may serve no more than two consecutive terms. The City provides the following services: public safety (police and fire protection), highways and streets, water and sanitary sewer utilities, health and social services, cultural-recreation, airport, public transportation, public improvements, planning and zoning, and general administrative services. The City covers approximately 247 square miles. The 2010 Census population for the City was 649,121, while the estimated population for 2021 is 691,610.
Additional information with respect to the City, including financial information, is provided herein and in APPENDIX A attached hereto. Selected portions of the City’s Annual Financial Report for the Fiscal Year ended August 31, 2020 are attached as APPENDIX C hereto.
THE DOWNTOWN BALLPARK VENUE PROJECT
Plan for Downtown Revitalization
As part of its comprehensive plan, the City Council adopted the “El Paso Downtown 2015 Plan” (the “Downtown Plan”) in 2006 which described detailed goals, policies and guidelines for the future of the downtown of the City (“Downtown”), including specific land use patterns and program implementation. This revitalization plan had begun as a private sector project but the City adopted and modified the plan after citizen input and public meetings. The Downtown Plan established redevelopment and incentive areas; created districts (including an “entertainment district” in which the Project is located), each with different focus and objectives; provided land use framework to guide types of land uses; established flexible uses, building types, building height and massing; provided development guidelines and standards; identified public realm investments to connect and enhance new development; created implementation options; and provided relief for project impacts. The stated objectives of the Downtown Plan included creating a dynamic, mixed-use Downtown inviting to all El Pasoans; introducing new investments that are catalysts for all Downtown; and creating opportunities for private investment.
The Downtown Plan also called for the creation of incentive programs and the establishment of a tax increment reinvestment zone district for part of the Downtown Plan area. “Tax Increment Reinvestment Zone #5” was created in December 2006 and expanded in December 2007 as private investment took root in the Downtown area. TIRZ #5 is an economic development tool which is intended to help Downtown redevelopment pay for itself. Tax increment revenues generated by TIRZ #5 are not pledged as security for the Bonds. In 2007 and 2008, various incentive programs were created to help property owners invest in their buildings and remove barriers to investing. Incentives include adopting more flexible building codes, new zoning districts and direct grants.
In addition, in March of 2012, the City Council unanimously adopted a detailed comprehensive plan (“Plan El Paso”) built around the principles of smart growth and green development which also gave priority to reinvestment in Downtown El Paso. In discussing Downtown, Plan El Paso emphasizes that the City’s character is found in its compact, connected, walkable historic neighborhoods with Downtown being the most important of these neighborhoods since it is the central gathering place for the entire City. Plan El Paso encouraged the restoration and reuse of Downtown’s historic buildings and emphasized the importance of increased connectivity, public space, civic space and great streets.
As a result of both the private and the public sector’s efforts, there have been several significant recent public and private developments in the downtown El Paso area. Since 2015, the City of El Paso has helped stimulate over $329 million in private investment for the upgrade and renovation of much of the downtown footprint. This was achieved via targeted incentives and served to activate over 280 new residential units and 875 new high-level hotel rooms. The City also incentivized the activation of over 300,000 square feet of new and rehabilitated office/retail space to accommodate the expanded demand for downtown commercial space. A landmark development in relation to new office space is the almost-completed $85 million, 18-story WestStar Tower. This is the first high-rise to be constructed in El Paso since the mid 1970’s and upon completion, it will add 262,000 square feet of “Class A” office space, 13,000 square feet of ground floor retail space and 753 new parking spaces. Another significant result of the expanded economic concentration in downtown is the City’s incentive-associated renovation of five historic downtown properties, four of which are on the National Register of Historic Places. Moreover, since 2015, the City of El Paso has directly invested over $126 million in completed downtown capital improvement projects. These include the City’s new 4.8 mile Streetcar system which connects our Downtown to the University of Texas at El Paso, the comprehensive remodeling of the historic San Jacinto central plaza and the activation of the unique 3-D touch Digital Wall, one of only four on the planet. The synergy created by this expanded activity in downtown has also encouraged the expansion of the area’s pedestrian-centered infrastructure. This includes upgraded pedestrian pathways and the lauded, multi-block “Paseo de las Luces” public infrastructure improvements which function to beautifully connect downtown El Paso with the central business district of Ciudad Juarez, Mexico. These noteworthy actions have stimulated similar investments within neighboring Ciudad Juarez, Mexico. A new residential portfolio has consequently sprouted in downtown which now boasts innovative developments like the Roderick Artspace, a multi-story modern facility that provides over 8,000 square feet of new art gallery and live-work art space for El Paso’s burgeoning downtown art scene. The past five years have been groundbreaking for downtown El Paso and with an additional $241 million programmed for future projects, impressive continual growth can be expected.
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Triple-A Baseball as an Additional Tool for Downtown Revitalization
Triple-A baseball is the highest classification of minor-league teams affiliated with Major League Baseball franchises. There are only 30 cities in the nation that host Triple-A baseball teams. On February 12, 2021, Major League Baseball announced new league alignments for all affiliated Minor League Baseball clubs effective as of the 2021 season, including Triple-A baseball. Under this system, the Triple-A class was divided into two leagues: Triple-A East, consisting of 20 teams aligned into three divisions (Midwest, Northeast, and Southeast); and Triple-A West, consisting of 10 teams aligned into two divisions (East and West). The Project is the home stadium of the El Paso Chihuahuas (the “Team”), the Triple-A affiliate of the San Diego Padres, which participates in the Triple-A West league.
Because of the coronavirus pandemic, the 2020 minor league baseball season was cancelled for the first time in its history. For 2021, the Team is scheduled to play 142-games, including 70 home games which is comparable to its pre-pandemic home game schedule; however, Major League Baseball may make additional changes to the minor league schedule for the health and safety of players, coaches, and training staffs. Historically, average attendance at Team home games was approximately 7,200 attendees. Pre-pandemic, the average Chihuahua baseball game attendee spent approximately $32 per game which, at 70 home games, amounts to more than $16,125,000 in total seasonal baseball event revenue. Triple-A baseball and Team events have historically represented a substantial amount of market exposure and quantifiable spending power injected into the El Paso area as a positive result of the Project’s existence.
Semi-Professional Soccer as an Additional Tool for Downtown Revitalization
The Project is also the home stadium of El Paso Locomotive FC, the City’s independent United Soccer League (USL)-affiliated, pre-professional soccer team. The USL is the largest and fastest-growing professional soccer organization in North America. There are currently 35 cities in the nation that host USL soccer teams. This pre-professional soccer league is comprised of two conferences, the Western Conference with 18 teams and the Eastern Conference with 17 teams. Pre-professional soccer provides 17 home games per season at the Project site.
Economic Impact of Triple-A Baseball and Pre-Professional Soccer
Games and other team events of the El Paso Chihuahuas and the El Paso Locomotive FC continue to represent a tremendous economic development opportunity for the City of El Paso and should continue to be the catalyst for development within the Downtown area. Upon activation of semi-professional sports teams, many cities experience considerable growth in and around the ball park location. El Paso has proven to be no exception. Historically, pre-pandemic, the combined direct spending that occurs within the ballpark amounts to over $19,600,000, per season. This figure reflects funds generated from game-related ticket, concessions and merchandise sales. Typically, the surrounding hotel proprietors also benefit from sport game activity. The additional value of the positive spillover effects that support the surrounding restaurant, retail, parking and entertainment establishments can be qualitatively inferred from the notable aforementioned economic development investment, both public and private, that has poured into Downtown El Paso since the activation of the Project. While the potential long-term effect of COVID- 19 on the Project cannot be predicted at this time, the City expects that the Project will continue to be an economic driver for the El Paso Downtown area as the country and the region recover from the pandemic.
Non-Quantitative Impacts of Triple A Baseball
The City believes that there are additional benefits of Triple-A baseball which are more difficult to quantify. Such benefits include enhanced affordable entertainment alternatives for families in the local area; increased civic and community pride; and opportunities for growth in the existing complementary entertainment areas. In addition, Triple-A baseball has promoted a more positive self-image for the City and increase its national exposure and reputation. Professional sports venues are widely considered important assets and attractions for tourism and business development.
The Team Lease
Pursuant to the Team Lease, the City leased the Project to the Developer and the Developer pays to the City fixed annual rent and certain other fees as specified in the Team Lease. Unless sooner terminated pursuant to its terms, the initial term of the Team Lease (the “Initial Term”) begins on the date a certificate of occupancy is issued for the Project (and the Project is tendered to the Developer by the City) and ends on September 30 (or such later date as is reasonably necessary to accommodate any Team ballpark events) of that year in which the thirtieth (30th) full baseball season after the commencement date has occurred. In addition, the Developer has the option to extend the Initial Term for three (3) consecutive additional periods of five (5) years each.
Under the terms of the Team Lease, the Developer as Tenant will pay to the City the “Team Payments”, which consist of a “Fixed Rental” fee, certain “Parking Fees” based on Project parking usage and “Ticket Fees” based on the number of tickets sold for various events held at the Project. The Company unconditionally and irrevocably guarantees to the City the due, punctual and full payment and performance of all covenants, agreements, obligations and liabilities of the Developer under the Team Lease.
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Operating, Maintenance & Capital Expenses. Except as otherwise provided in the Team Lease, the Developer is responsible for all aspects of operating the Project and the “Routine Maintenance” of the Project and shall be responsible for all operating expenses and costs for the Project, including all direct or indirect expenses associated with the Team or Project events. “Routine Maintenance” is defined as all work (including all labor, supplies, materials and equipment) that is of a routine nature and is reasonably necessary for the cleaning and routine care of and preventative maintenance and repair for any property, structures, surfaces, facilities, fixtures, equipment, furnishings, improvements and components that form any part of the Project or the Project surface parking in a manner reasonably consistent with the standards at other comparable facilities; provided however, Routine Maintenance shall not include capital improvements. The City is responsible for the installation, repair and replacement of all capital improvements to the Project and, as noted below, a portion of the Fixed Rental is required to be set aside in a reserve fund to help the City satisfy this obligation. With respect to the utilities associated with the Project, (i) the City contracts and pays for electric service to the Project, subject to reimbursement by the Developer for 100% of the costs for such services; (ii) the Developer is responsible for contracting and paying for all water and sewer costs at the Project, subject to City’s reimbursement of fifty percent (50%) of these annual water and sewer costs; and (iii) and the Developer is responsible for contracting and paying costs and fees for all other utilities to the Project during the term of the Team Lease.
Fixed Rental. Initially, the Fixed Rental amount is established at $400,000 a year for the first five calendar years of the Initial Term and then increases at the rate of 10% every fifth year for the remainder of the Initial Term. Namely, for the sixth through tenth calendar years of the Initial Term, the Fixed Rental amount will be $440,000 per calendar year; for the 11th through 15th calendar years of the Initial Term, the amount will be $484,000 per calendar year; for the 16th through 20th calendar years of the Initial Term, the amount will be $532,400 per calendar; for the 21st through 25th calendar years of the Initial Term, the amount will be $585,640 per calendar year; and for each calendar year thereafter throughout the remaining Initial Term, the amount will be $644,204 per calendar year. Commencing with the third full payment of the Fixed Rental amount and continuing throughout the term of the Team Lease, the City is obligated to deposit seventy-five percent (75%) of each Fixed Rental payment into a “Capital Repairs Reserve Fund” up to a total not-to-exceed deposit of One Hundred Fifty Thousand and No/100 Dollars ($150,000.00) per year. The City may only use amounts in the Capital Repairs Reserve Fund for capital improvements for the Project and is currently funded at $59,921.29 as of March 31, 2021. The Fixed Rental amount is not contingent on any attendance numbers.
Parking Fees. Under the terms of the Team Lease, the “Parking Fee” is a seasonal parking fee for each parking space requested by the Team in certain existing City-owned parking garages which are located close to the Project. Such Parking Fees are calculated as follows: (i) for each of the first five calendar years of the Initial Term, $1.00 for each parking space requested by Team multiplied times the number of Season Parking Events during the applicable period; (ii) for each calendar year during the sixth through tenth calendar years of the Initial Term, $1.10 for each parking space requested by Team multiplied times the number of Season Parking Events during the applicable period; (iii) for each calendar year during the 11th through 15th calendar years of the Initial Term, $1.21 for each parking space requested by Team multiplied times the number of Season Parking Events during the applicable period; (iv) for each calendar year during the 16th through 20th calendar years of the Initial Term, $1.33 for each parking space requested by Team multiplied times the number of Season Parking Events during the applicable period; (v) for each calendar year during the 21st through 25th calendar years of the Initial Term, $1.46 for each parking space requested by Team multiplied times the number of Season Parking Events during the applicable period; and (vi) for each calendar year thereafter throughout the remaining Initial Term, $1.60 for each parking space requested by Team multiplied times the number of Season Parking Events during the applicable period.
Split Parking Revenues. In addition, the City and the Developer have agreed to split certain additional parking revenues (the “Split Revenues”), fifty percent (50%) to City and fifty percent (50%) to the Developer, at other offsite City garage facilities for certain hours associated with events to be held at the Project.
Ticket Fees. Under the terms of the Team Lease, the “Ticket Fee” is a fixed admission surcharge of (i) Fifty Cents ($0.50) for each ticket sold for each Ballpark Event during each of the first five calendar years of the Initial Term; (ii) Fifty-Five Cents ($0.55) for each ticket sold for each Ballpark Event during each of the sixth through tenth calendar years of the Initial Term; (iii) Sixty-One Cents ($0.61) for each ticket sold for each Ballpark Event during each of the 11th through 15th calendar years of the Initial Term; (iv) Sixty-Seven Cents ($0.67) for each ticket sold for each Ballpark Event during each of the 16th through 20th calendar years of the Initial Term; (iv) Seventy-Three Cents ($0.73) for each ticket sold for each Ballpark Event during each of the 21st through 25th calendar years of the Initial Term; and (vi) Eighty Cents ($0.80) for each ticket sold for each Ballpark Event during each calendar year thereafter throughout the remaining Initial Term.
Revenue Cap. Under the terms of the Team Lease, the Parking Fees, Split Revenues and Ticket Fees are subject to a contractual limitation which caps the amount of revenues which the City can receive from such sources. Such revenue cap is set forth in the Team Lease as follows: (i) $655,000 per calendar year for the first five calendar years of the Initial Term; (ii) $745,000 per calendar year for the sixth through tenth calendar years of the Initial Term; (iii) $840,000 per calendar year for the 11th through 15th calendar years of the Initial Term; (iv) $940,000 per calendar year for the 16th through 20th calendar years of the Initial Term; and (v) $1,040,000 per calendar year for each calendar year thereafter throughout the Initial Term. None of the City’s revenue projections assume revenues at or near the cap.
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The following chart summarizes the City’s sources of Team revenues for the last five years:
Source of Team Payments 2016 2017 2018 2019 2020 (1) Fixed Rental (excluding capital improvements) $ 400,000 $ 250,000 $ 250,000 $ 290,000 $ 290,000 Parking Revenues (including additional parking fee) 77,318 147,688 115,859 138,436 16,060 Ticket Fees 250,197 258,657 224,041 279,534 17,863 Sales Tax 149,356 150,449 119,213 186,227 22,498 Subtotal 876,871 806,794 709,113 894,197 346,421 Contributions to the Capital Repairs Reserve Fund - 150,000 150,000 150,000 150,000 Totals 876,871 956,794 859,113 1,044,197 496,421
(1) Because of the coronavirus pandemic, the 2020 minor league baseball season was cancelled for the first time in its history. See “INFECTIOUS DISEASE OUTBREAK -- COVID-19.”
See “CERTAIN PROJECTED SOURCES OF REVENUE” for certain additional revenue sources which may be available for payment of debt service.
Non-Relocation Agreement
As a material inducement for the City to enter into the Development Agreement and the Team Lease, concurrently with the execution of the Development Agreement, the City, the Company and the Developer entered into a non-relocation agreement (“NR Agreement”) to assure that the Developer will continuously maintain and operate the Project as home field to the Team for the term of the Team Lease. Pursuant to the NR Agreement, the Developer and the Company covenanted (a) to maintain its franchise and principal business office in the City, (b) not to enter into an agreement, contract, or request or application to Major League Baseball to (i) relocate the Developer’s franchise outside of the City or (ii) except as otherwise permitted, play any regular season or playoff home game in any location other than the Project. The Developer and Company also agreed not to cause, permit, apply for or seek approval from, nor participate in, any negotiations with any third parties, including Major League Baseball, with respect to any agreement, legislation, or financing which contemplates or could result in violation of the aforementioned covenants (together such covenants being the “Non-Relocation Covenants”). The PCL has acknowledged the NR Agreement and affirmed by signature that the Non Relocation Covenants do not violate current PCL rules or regulations.
Under the terms of the NR Agreement, in the event of any actual or threatened breach by the Developer or the Company of any one of the Non-Relocation Covenants (i) the City is entitled to seek and obtain, a temporary restraining order, together with temporary, preliminary and permanent injunctive or other equitable relief, from any court of competent jurisdiction, to restrain or enjoin any actual or threatened breach by the Developer or the Company of any Non-Relocation Covenant without the necessity of posting a bond or other security and without any further showing of irreparable harm, balance of harms, consideration of the public interest or the inadequacy of monetary damages as a remedy. The NR Agreement also states the administration of an order for injunctive relief would not be impractical and, in the event of any breach of any Non-Relocation Covenant by the Developer or the Company, the balance of hardships would weigh in favor of entry of injunctive relief; and the City may enforce any Non-Relocation Covenant contained in this NR Agreement through specific performance. If the City is unable to obtain specific performance or declaratory relief or injunctive relief, the City has the right to institute any and all proceedings or claims permitted by law or equity to recover any and all amounts necessary to compensate the City for all damages proximately caused by the Developer’s or the Company’s breach under the NR Agreement.
The NR Agreement also grants the City a right of purchase. If the Developer or the Company attempts, directly or indirectly, to, or does, relocate the Team in violation of any provision of the NR Agreement, the City has the right to purchase, or identify a qualified potential purchaser to purchase, the Team (and all associated Team operations) at fair market value, as determined by the NR Agreement.
Unless the Team Lease expires or is terminated for reasons other than a default by the Developer as tenant under the terms of the Team Lease, the Developer or Company has no right to terminate the NR Agreement.
The Project
The Project was constructed as a first class, state-of-the-art ballpark facility with a total seating capacity of approximately 9,500, including an estimated twenty (20) to twenty-five (25) private suites, and three hundred and twenty two (322) club seats. In addition, the Project includes a water feature, a picnic area, outfield party deck, a retail store, office space for the Team, and customary furniture, fixtures and equipment.
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Downtown Location
The Project was constructed in Downtown El Paso on the site of the City’s former City Hall. While the site location was not without controversy, the City definitively chose the site after contracting with an urban planning firm to identify sites for three major sports facilities (Triple-A Baseball, MLS Soccer and a multi-purpose events arena) within the Downtown area. The key objectives of the study were to minimize takings of private properties (e.g., prioritize city-owned properties), facilitate fast track development, especially for the Triple-A facility and support the continuing improvements in Downtown El Paso and create synergies between uses. Such objectives are consistent with the City’s Downtown Plan which was adopted by City Council in 2006. See “THE DOWNTOWN BALLPARK VENUE PROJECT – Plan for Downtown Revitalization” above.
As a result of the urban planning study, the former City Hall site was determined to be the best location for a Triple-A baseball stadium because (i) the size of the site could accommodate baseball in the required orientation; (ii) the adjacent historic sites add critical authenticity to the facility—a hallmark of successful new ballparks; (iii) location at the entry to Downtown provides an opportunity for iconic architecture; (iv) strong synergies with the City’s existing Convention Center; (v) the former City Hall was not a State or National historic landmark and was in need of extensive repairs; (vi) such site selection allowed for relocation of City Hall operations to more of a Government Center area of Downtown; (vii) the site could work with the proposed Team relocation timeline; and (viii) other sites which would be consistent with the City’s Downtown Plan would have had significant size, schedule, and acquisition/price constraints. Comparable downtown stadiums analyzed included Redhawks Field, Oklahoma City, OK; Aces Ball Park in Reno, NV; and Canal Park, Akron, OH.
THE CORPORATION
The Corporation is a public, nonprofit corporation created and organized by the City under Subchapter D of Chapter 431, Texas Transportation Code, as amended (“Chapter 431”), by resolution adopted by the City Council on December 18, 2012. The Corporation has and may exercise all of the powers prescribed by Chapter 431, Chapter 394, Texas Local Government Code, as amended (“Chapter 394”), and the Texas Nonprofit Corporation Law, as defined in Section 1.008 of the Texas Business Organizations Code, as amended (Chapter 431, Chapter 394 and the Texas Nonprofit Corporation Law are referred to collectively as the “LGC Act”).
The Corporation’s Articles of Incorporation limit the Corporation’s corporate purpose to aiding, assisting, and acting for and on behalf of the City in the performance of the City’s governmental functions, including, but not limited to: (A) providing a means to develop, implement and finance, or otherwise pay or reimburse, the costs of a multipurpose coliseum, stadium or other type of arena or facility that is planned for use for one or more professional or amateur sports events, including minor league baseball games and related infrastructure as defined in Chapter 334, Local Government Code, as amended (collectively referred to in this Section as the “Project”) and all of the costs of such Project (as used in this Section, the “Project Costs”); (B) issuing bonds and/or notes for the financing of such Project Costs; and (C) leasing, selling, granting, transferring, or otherwise conveying all or a portion of the ownership interest in such projects as permitted by applicable law.
Pursuant to its bylaws, the Corporation is governed by a 9-member board of directors (the “Board”), whose members (the “Members”) are the members of the City Council, including the Mayor of the City. The term of service of each Member is coterminous with his or her term on the City Council. The Members serve in such capacity without compensation, except that they are reimbursed for their actual expenses incurred in the performance of their official duties.
The Board shall meet in accordance with and file notice of each meeting of the Board for the same length of time and in the same manner and location as is required of a City under the Open Meetings Act provisions of the Texas Government Code. The Corporation, the Board, and any committee of the Board exercising the powers of the Board are subject to the Texas Public Information Act.
In addition, the Executive Director of the Corporation shall at all times be the person serving as the City Manager of the City. The Treasurer of the Corporation shall at all times be the person serving in the capacity of the Chief Financial Officer of the City and the Secretary of the Corporation shall at all times be the person serving as the City Clerk of the City.
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THE CITY’S HOTEL OCCUPANCY TAX
General
The City’s hotel occupancy tax (“HOT”) is comprised of two components, the general HOT, imposed and collected at the rate of 7% of the price paid for a room in a hotel, and a special HOT which can only be used for the Project (the “Additional Tax”), imposed and collected at the rate of 2% of the price paid for a room in a hotel. The use of revenues from each of such HOT is restricted by statute to specific purposes. State law requires that revenue from the general HOT be used only to promote tourism and the convention and hotel industry (both operational and capital expenditures). The Additional Tax which was approved at an election held in the City on November 6, 2012 (the “Election”) may only be used to (i) reimburse or pay the costs of planning, acquiring, establishing, developing, constructing, or renovating the Project; (ii) pay the principal of, interest on, and other costs relating to bonds or other obligations issued by the City for the Project or to refund such bonds, notes, or other obligations; or (iii) pay the costs of operating or maintaining the Project.
Source of Payment of the Lease Payments
The City has, and plans to continue to pay the Lease Payments and the Operating Expenses related to the Project that the City is obligated to pay under the Primary Lease from revenues derived principally, but not solely, from its imposition and collection of the Additional Tax. Although payment of the Lease Payments from the Additional Tax is still technically subject to appropriation, the Additional Tax can only be used to support the Project. In addition, all Team Payments may only be used to make payments for the benefit of the holders of the $15,660,000 Special Revenue Bonds, Taxable Series 2013B (Downtown Ballpark Venue Project) (the “Taxable Series 2013B Bonds”) and any other Outstanding Taxable Parity Bonds, including the Bonds. See “CERTAIN PROJECTED SOURCES OF REVENUE.”
Description of Hotel Occupancy Tax
Pursuant to the provisions of the Hotel Occupancy Tax Act, Chapter 351 of the Texas Tax Code (the “HOT Act”), the City is authorized to impose the Hotel Occupancy Tax on persons, based upon the price paid, for the use or possession, or right of use or possession, of rooms ordinarily used for sleeping at any hotel in the City. Currently, the Hotel Occupancy Tax may be imposed only for rooms for which the cost of occupancy is at the rate of $2 or more per day. The municipal Hotel Occupancy Tax of the City currently equals 9% of the consideration paid to the hotel for the right to use or possess the room. To be subject to the Hotel Occupancy Tax, the occupant’s use, possession, or right to the use or possession of the sleeping room must be for a period of less than 30 consecutive days (a “Permanent Resident”). Other provisions of the Texas Tax Code authorize the State, and counties meeting certain specified qualifications, to impose similar hotel occupancy taxes; therefore the total hotel occupancy tax in the City for all entities including the City is 17.5%. Under the HOT Act, “hotel” means any building or buildings in which the public may, for consideration, obtain sleeping accommodations. The term includes hotels, motels, tourist homes, tourist houses, tourist courts, lodging houses, inns, rooming houses, bed and breakfasts, or other buildings where rooms are furnished for a consideration, but does not include hospitals, sanitariums, or nursing homes. The term also includes a short-term rental, which means the rental of all or part of a residential property to a person who is not considered a Permanent Resident. The consideration paid for the room, for purposes of the HOT Act, includes the cost of the room only if the room is one ordinarily used for sleeping, and does not include the cost of any food served or personal services rendered to the occupant of such room not related to the cleaning and readying of such room for occupancy. Certain housing facilities owned or leased and operated by an institution of higher education are excluded. Hotels and other eligible vendors of sleeping accommodations are required to collect the Hotel Occupancy Tax at the time the room charges are received from patrons. The Hotel Occupancy Tax collections for the City are to be turned over to the City with reporting forms in the next succeeding month. Penalties and interest are imposed by the City for delinquent payments and the HOT Act provides for enforcement of collection of the Hotel Occupancy Tax.
City HOT Levy, Limitations on Use
City Levy. The City currently levies a HOT at the aggregate rate of 9% of the price paid for a room in a hotel. Of the City’s 9% Hotel Occupancy Tax, 4.5% is shared by Destination Marketing/Facility Operations (3% is for Destination Marketing/Facility Operations and 1.5% Dedicated to Destination Marketing), 2.5% to the City of El Paso - Debt Service/Capital and 2% is the Additional Tax described in this Official Statement.
The City is authorized to levy the Additional Tax pursuant to the Venue Project Act and the Election. The Additional Tax is dedicated to support the Project. By City ordinance, the Additional Tax must be collected on every occupancy occurring on or after January 1, 2013. The City has covenanted that it will collect the Additional Tax for so long as any bonds or other obligations that are issued for the purpose of financing a portion of the costs of the Project, and any bonds refunding or refinancing those bonds or other obligations, are outstanding and unpaid.
Limited Expenditures of HOT Revenues. State law requires that revenue from the general HOT be used only to promote tourism and the convention and hotel industry (both operational and capital expenditures), with not more than 15% of collections for history and preservation programs and restoration projects and not more than 15% for the arts. Further limitations are imposed on the use of the Additional Tax, restricting the use thereof to the purposes authorized by the voters in the Election, particularly, the planning, acquisition, establishment, development, construction and financing of the Project and the payment of certain revenue and/or revenue and refunding bonds in relation thereto (a permitted use of which includes the Lease Payments). Should the City ever want to use the Additional Tax for any other purposes, the voters of the City would have to approve such change in use at a subsequent election.
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HOT Receipts
Pursuant to the Election, the voters of the City authorized the City to provide for the planning, acquisition, establishment, development, construction and financing of the Project. In connection therewith, the City has imposed the Additional Tax on the occupancy of a room in hotels located within the City, at a maximum rate of two percent (2%) of the price paid for a room starting as of January 1, 2013.
Table 1 – Historical Hotel Occupancy Tax Revenues – 7% Collection Rate
Fiscal Year Ended Total % Increase/ 31-Aug Collected Decrease 2011 8,621,061 2.98% 2012 8,962,467 3.96% 2013 8,923,275 -0.44% 2014 9,220,438 3.33% 2015 10,279,997 11.49% 2016 11,888,101 15.64% 2017 10,406,384 -12.46% 2018 11,881,715 14.18% 2019 11,947,337 0.55% 2020 9,066,185 (1) -24.12% (1)(2) 2021 2,499,775 -72.43% ______(1) See “INFECTIOUS DISEASE OUTBREAK – COVID-19.” (2) Collections as of February 28, 2021. Percentage change (increase/decrease) is a comparison to prior year. Source: City of El Paso, Office of the Comptroller.
Table 2 – Additional Hotel Occupancy Tax Revenues – 2% Collection Rate
Fiscal Year Projected Actual Ended 8-31 Collections (1) Collections 2017 3,396,600 3,008,830 2018 2,973,253 3,388,750 2019 3,413,525 3,406,074 2020 2,590,339 2,598,606 (2) (2)(3) 2021 2,500,000 714,208 ______(1) Estimated, based upon historical HOT collections at 7%. For illustrative purposes only. (2) See “INFECTIOUS DISEASE OUTBREAK – COVID-19.” (3) Collections through February 28, 2021. Source: City of El Paso, Office of the Comptroller.
Table 3 - El Paso Hotel Occupancies and Average Daily Rates/History
Average Daily Calendar Room % Increase/ Room % Increase/ Hotel % Increase/ Year Count Decrease (1) Rate Decrease (1) Occupancy Decrease (1) 2016 9,324 -0.72% 80.96 2.33% 67.4% -0.59% 2017 8,944 -4.08% 80.80 -0.20% 67.3% -0.15% 2018 9,158 2.39% 81.03 0.28% 73.3% 8.92% 2019 9,214 0.61% 83.83 3.46% 76.5% 4.37% (2) (2) 2020 9,657 4.81% 72.96 -12.97% 55.2% -27.84% ______Source: El Paso Convention and Visitors Bureau. (1) Percentage change (increase/decrease) is a comparison to prior year (2) See “INFECTIOUS DISEASE OUTBREAK – COVID-19.”
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CERTAIN PROJECTED SOURCES OF REVENUE
The table on the following page sets forth certain estimates of the Additional Tax, Team Payments and other sources of revenue which constitute Appropriated Funds that may be appropriated by the City to pay debt service on Parity Bonds (for the periods indicated) which have been prepared by the City. See “SECURITY FOR THE BONDS AND REMEDIES IN THE EVENT OF NONAPPROPRIATION”. The Projected Additional Tax revenue numbers assume that such tax will grow at a rate of three percent (3%) annually over the period shown. Since 2011, the City’s year-to-year change in its general HOT collections have ranged from a high of approximately 15.64% to a low of approximately -72.43% with the average percentage change being approximately -5.21%. Historical collections of the City’s general HOT are not necessarily indicative of future collections of the Additional Tax. For 2021, the City’s collections of the Additional Tax have been on pace to meet the projections set forth below. The City believes such projections to be reasonable. For further information with respect to the City’s HOT, see “THE CITY’S HOTEL OCCUPANCY TAX.”
The projected Team Payments are comprised of a Fixed Rental amount (which is specified in the Team Lease), parking revenues (which are calculated on Project parking usage) and a ticket fee surcharge (which is paid on each ticket sold for events held at the Project). A description of the Team Lease provisions which set forth the method of calculating such revenues as well as the City’s assumptions with respect to such revenue projections are set forth above in “THE DOWNTOWN BALLPARK VENUE PROJECT—The Team Lease.”
Based on such projections, the table on the following page has been compiled to show estimated coverage of debt service for the Bonds and all other Parity Bonds. The projected debt service requirements and, consequently, debt service coverage are calculated based on the assumption that the 8/15/2023 maturity of both the Corporation’s Special Revenue Bonds, Series 2013A (Downtown Ballpark Venue Project) (the “Series 2013A Bonds”) and the Corporation’s Special Revenue Refunding Bonds, Series 2020 (the “Series 2020 Bonds”) in the amount of $5,170,000 will be refinanced on 8/15/2023 with maturities through 8/15/2043 at a rate of 5.00%. The Corporation and the City cannot predict the actual interest rate of such refunding and actual results may differ materially from such assumption. No adjustments have been made for operating, maintenance or capital expenses of the Project. For a discussion of the parties responsible for such expenses, see “THE DOWNTOWN BALLPARK VENUE PROJECT – The Team Lease – Operating, Maintenance and Capital Expenses” and “THE FINANCING DOCUMENTS – The Lease Agreement – Trustee Fees and Operating Expenses.”
These projections are necessarily based on various assumptions and estimates and are inherently subject to various risks and uncertainties, including risks and uncertainties relating to the possible invalidity of the underlying assumptions and estimates. The Corporation’s and the City’s actual results could differ materially from those presented in such projections. Forecasted results will differ from actual results especially when the forecast is over several years because events and circumstances frequently do not occur as expected and those differences may be material. See “INFECTIOUS DISEASE OUTBREAK – COVID-19” and “INVESTOR CONSIDERATIONS - Forward-Looking Statements Disclaimer” herein.
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Estimated Cash Flow and Debt Service Coverage Table (assumes future refinancing of a portion of Series 2013A and Series 2020 Bonds)
Projected Other Revenues Total Debt Debt FYE Additional Team Required for Debt Total S ervice S ervice 31-Aug Tax (1) Payments (2) Service (3) Revenues Requirements (4) Coverage 2021 $ 2,020,154 $ 580,000 $ 1,045,000 $ 3,645,154 $ 3,644,400 1.00 x 2022 3,309,713 725,000 - 4,034,713 3,504,776 1.15 x 2023 3,706,879 754,000 - 4,460,879 3,676,600 1.21 x 2024 3,790,283 830,908 - 4,621,191 4,173,062 1.11 x 2025 3,875,565 832,570 - 4,708,135 4,314,391 1.09 x 2026 3,962,765 834,235 - 4,797,000 4,428,304 1.08 x 2027 4,061,834 835,903 - 4,897,737 4,547,001 1.08 x 2028 4,153,225 837,575 - 4,990,800 4,658,815 1.07 x 2029 4,246,673 923,008 - 5,169,681 4,810,059 1.07 x 2030 4,374,073 924,854 - 5,298,927 4,983,338 1.06 x 2031 4,505,295 926,704 - 5,431,999 5,115,657 1.06 x 2032 4,649,465 928,557 - 5,578,022 5,262,595 1.06 x 2033 4,788,949 930,414 - 5,719,363 5,296,993 1.08 x 2034 4,932,617 1,025,316 - 5,957,933 5,612,781 1.06 x 2035 5,080,596 1,027,367 - 6,107,963 5,729,318 1.07 x 2036 5,233,013 1,029,422 - 6,262,435 5,872,452 1.07 x 2037 5,390,004 1,031,481 - 6,421,485 6,039,251 1.06 x 2038 5,551,704 1,033,544 - 6,585,248 6,239,036 1.06 x 2039 5,676,617 1,138,965 - 6,815,582 3,728,938 1.83 x 2040 5,804,341 1,141,243 - 6,945,584 3,724,600 1.86 x 2041 5,934,939 1,143,525 - 7,078,464 3,730,275 1.90 x 2042 6,068,475 1,145,812 - 7,214,287 3,730,838 1.93 x 2043 6,205,016 1,148,104 - 7,353,120 3,725,838 1.97 x $ 107,322,195 $ 21,728,507 $ 1,045,000 $ 130,095,702 $ 106,549,317
(1) Fiscal Year 2021-2043 Additional Tax projected by City Staff. (2) Includes Fixed Rental payments, Parking Fees, Split Parking Revenues, Ballpark General Sales Tax and Ticket Fees (DEDICATED SOLELY TO BALLPARK). (3) Payable from any unencumbered and lawfully available funds of the City (NOT DEDICATED SOLELY TO BALLPARK). (4) Includes the Bonds and all other Parity Bonds. Excludes the Refunded Obligations. Preliminary, subject to change. Assumes that the Non- Callable Maturities of Series 2013A & Series 2020 Bonds due on August 15, 2023 in the amount of $5,170,000 will be refunded with maturities through August 15, 2043 at a rate of 5.00%. The City cannot predict the actual interest rate of such refunding bonds and the actual results may differ materially from such assumption.
Source: City of El Paso, Office of the Comptroller.
Other Lawfully Available Revenue. The City reasonably believes that the Project will generate additional sales tax revenues which would not have otherwise been collected by the City. To the extent that revenues from the Additional Tax and Team Payments are not sufficient to pay the Lease Payments, the City is planning on using such revenues, as well as other lawfully available funds, to pay the Lease Payments, subject to annual Appropriation. Revenues from ad valorem taxes are not lawfully available to support the Project. Although the Total Projected Revenues and revenues directly associated with Project development may exceed the amount of projected debt service, the City anticipates that in certain years it will have to Appropriate money from other lawfully available funds which are not related to the Project to pay the Lease Payments. The Lease Agreement provides a method by which the City may reimburse itself for any such payments. See “THE FINANCING DOCUMENTS – The Lease Agreement – City Reimbursement of Appropriated Funds.”
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THE BONDS
Authority for Issuance The Bonds are being issued by the Corporation pursuant to the Constitution and general laws of the State, including particularly Chapter 1207 of the Texas Government Code, as amended, a resolution adopted by the Board on April 13, 2021 (the “Resolution”), an ordinance adopted by the City Council of the City on April 13, 2021, and the Third Supplement To Trust Agreement Relating to the City of El Paso, Texas Downtown Ballpark Venue Project Financing Between the Corporation and Wells Fargo Bank, National Association as trustee (the “Trustee”), dated as of June 1, 2021 (the “Third Supplement”). In the Resolution, the Board delegated to certain officers (the “Pricing Officers”) of the Corporation authority to complete the sale of the Bonds. The terms of the sale of the Bonds will be set forth in an approval certificate of the Pricing Officer and included in the Third Supplement and a Bond Purchase Agreement between the Corporation and the initial purchasers of the Bonds (the “Underwriters”). The Third Supplement supplements the terms of the Trust Agreement relating to the City of El Paso, Texas, Downtown Ballpark Venue Project Financing, dated as of August 1, 2013, as amended by a First Amendment to the Trust Agreement dated as of October 15, 2013, and as supplemented by a First Supplement to Trust Agreement, dated as of May 1, 2016, and a Second Supplement to Trust Agreement, dated as of July 17, 2020 (collectively, as amended and supplemented, the “Original Trust Agreement”), by and between the Corporation and the Trustee. The Third Supplement and the Original Trust Agreement are collectively referred to herein as the “Trust Agreement.”
General Description of the Bonds Interest on the Bonds, calculated on the basis of a 360-day year composed of twelve 30-day months, will accrue from their date of initial delivery to the Underwriters, and is payable on February 15 and August 15 of each year, commencing on August 15, 2021, until stated maturity or prior redemption. The Bonds will be issued only as fully-registered bonds. The Bonds will be issued in principal amounts of $5,000 or any integral multiple thereof within a stated maturity. In the event the Bonds are no longer held in the Book-Entry-Only System described herein, interest on the Bonds will be payable by check mailed on or before each Bond Payment Date (as defined in the Trust Agreement) by the Trustee to the registered owner (the “Registered Owner”, the “Owner”, or the “Bondholder”) at the last known address as it appears on the Bond registration books maintained by the Trustee (the “Bond Register”) on the Record Date (defined herein) or by such other customary banking arrangement acceptable to the Trustee and the Registered Owner to whom interest is to be paid; provided, however, that such person shall bear all risk and expense of such other arrangements. In the event the Bonds are no longer held in the Book-Entry-Only System described herein, principal of Bonds will be payable only upon presentation of such Bonds at the corporate trust office of the Trustee at stated maturity or upon prior redemption. So long as the Bonds are registered in the name of Cede & Co. or other nominee for The Depository Trust Company (“DTC”), all payments on the Bonds will be made as described in “REGISTRATION, TRANSFER AND EXCHANGE - Book-Entry-Only System” herein. If the date for any payment due on any Bond is a Saturday, Sunday, legal holiday, or day on which banking institutions in the city in which the designated corporate trust office of the Trustee is located are authorized by law or executive order to close, then the date for such payment shall be the next succeeding day which is not such a day. The payment on such date shall have the same force and effect as if made on the original date payment was due. Record Date for Interest Payment The date for determining the party to whom interest on a Bond is payable on any Bond Payment Date is the last Business Day of the preceding month, as specified in the Trust Agreement (the “Record Date”). In the event of a nonpayment of interest on a scheduled payment date, and for thirty days thereafter, a new record date for such interest payment (a “Special Record Date”) will be established by the Trustee, if and when funds for the payment of such interest have been received from the Corporation. Notice of the Special Record Date and of the scheduled payment date of the past due interest (which is 15 days after the Special Record Date) must be sent at least five business days prior to the Special Record Date by United States mail, first-class postage prepaid, to the address of each Registered Owner appearing on the Bond Register at the close of business on the last business day next preceding the date of mailing of such notice. Additional Bonds Right to Issue Additional Bonds. The Corporation has reserved the right and power at any time and from time to time, and in one or more series or issues, to authorize, issue and deliver, at the request of the City, additional parity lease revenue bonds or other obligations (herein called “Additional Bonds”), in accordance with law, in any amounts, for the purpose of (i) completing the Project, if necessary, and/or (ii) refunding any Parity Bonds then outstanding. Such Additional Bonds, if and when authorized, issued and delivered in accordance with the provisions of the Trust Agreement, will be secured by and made payable equally and ratably on a parity with the outstanding Parity Bonds from the Trust Estate (including but not limited to the Lease Payments made by the City, as Sublessee, pursuant to the Sublease, as modified pursuant to clause (2) in the paragraph below). The Payment Account established pursuant to the Trust Agreement will secure and be used to pay all Additional Bonds as well as the outstanding Parity Bonds, all on a parity lien basis. The Corporation does not have the right to issue bonds or other obligations which have a lien on the Trust Estate prior and superior to that securing the Parity Bonds. As used herein, “Parity Bonds” is defined as the Series 2013A Bonds, Taxable Series 2013B Bonds, Special Revenue Refunding Bonds, Series 2016 (Downtown Ballpark Venue Project), Series 2020 Bonds and any Additional Bonds.
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Conditions Precedent to Issuance of Additional Bonds. The Corporation may not issue Additional Bonds unless the following conditions have all been met: (1) the laws of the State effective at the time of the authorization of such Additional Bonds shall permit their issuance, and, if required by law, the Attorney General of Texas shall have approved the issuance of such Additional Bonds; (2) to the extent necessary, the Financing Documents shall have been amended appropriately to provide for the issuance of such Additional Bonds, including but not limited to amending the Lease Agreement, if necessary, to provide for the payment by the City of Lease Payments under the Sublease to include payment of debt service related to such issue of Additional Bonds, subject to annual Appropriation (as defined in the Lease Agreement) by the City Council of the City; (3) the principal of such Additional Bonds shall be scheduled to be paid or mature only on August 15 of the years in which such principal is scheduled to be paid or mature, and all interest thereon shall be payable only on February 15 and August 15; (4) the Chair of the Board and the Executive Director of the Corporation shall execute a written certificate to the effect that the Trust Agreement and the Lease Agreement are in full force and effect, and no Event of Default exists in connection therewith; and (5) the Mayor, City Manager and the Chief Financial Officer of the City shall execute a written certificate to the effect that the Lease Agreement is in full force and effect, and no Event of Default exists in connection therewith and (6) if there are any Tax-Exempt Parity Bonds Outstanding at the time of the proposed issuance of Additional Bonds, the Corporation must obtain an opinion of Bond Counsel to the effect that the issuance of the Additional Bonds will not have an adverse effect on the tax exempt status of the Outstanding Tax-Exempt Parity Bonds.
Redemption Optional Redemption for Bonds. The Bonds maturing on and after August 15, 2031 are subject to redemption, at the request and option of the Corporation, in whole or in part in principal amounts of $5,000 or any integral multiple thereof, on August 15, 2030, or any date thereafter, at the par value thereof plus accrued interest to the date of redemption.
Extraordinary Optional Redemption of Parity Bonds in Whole Upon Exercise of Prepayment Option Due to Casualty Loss or Condemnation. In the event the City exercises its option to prepay Lease Payments upon a casualty loss or condemnation of the Project and the payment by the City to the Trustee of the Prepayment Option Price, the Bonds will be subject to extraordinary optional redemption prior to their respective stated maturities, in whole but not in part, on the next succeeding Bond Payment Date for which notice can be given in accordance with the terms of the Trust Agreement, at a redemption price equal to 100% of the Outstanding principal amount of the Bonds being redeemed plus accrued interest to the date of redemption.
Notice of Redemption. If any of the Bonds are called for redemption, the Trustee will give written notice by first-class mail (postage prepaid) not less than 30 days prior to the date fixed for redemption, in the name of the Corporation, of the redemption of such Bonds to the Registered Owner of each Bond to be redeemed in whole or in part at the address shown on the registration books at the close of business on a day not later than the fifth day preceding the date of mailing. The notice with respect to an optional redemption may state (1) that it is conditioned upon the deposit of moneys, in an amount equal to the amount necessary to effect the redemption, with the Trustee no later than the redemption date, or (2) that the Corporation retains the right to rescind such notice at any time prior to the scheduled redemption date if the Corporation delivers a certificate of an authorized representative to the Trustee instructing the Trustee to rescind the redemption notice, and such notice and redemption shall be of no effect if such moneys are not so deposited or if such notice is so rescinded. Any notice mailed as provided in the Trust Agreement shall be conclusively presumed to have been duly given, whether or not the owner of such Bonds actually receives the notice. Failure to give such notice by mail to any Registered Owner, or any defect therein, shall not affect the validity of any proceedings for the redemption of other Bonds. Redemption Through The Depository Trust Company. The Trustee and the Corporation, so long as a Book-Entry-Only System is used for the Bonds, will send any notice of redemption, notice of proposed amendment to the Financing Documents or other notices with respect to the Bonds only to DTC. Any failure by DTC to advise any Direct Participant (hereinafter defined), or of any Direct Participant or Indirect Participant (hereinafter defined) to notify the Beneficial Owner (hereinafter defined), will not affect the validity of the redemption of the Bonds called for redemption or any other action premised on any such notice. Redemption of portions of the Bonds by the Corporation will reduce the outstanding principal amount of such Bonds held by DTC. In such event, DTC may implement, through its Book-Entry-Only System, redemption of such Bonds held for the account of Direct Participants in accordance with its rules or other agreements with Direct Participants and then Direct Participants and Indirect Participants may implement a redemption of such Bonds from the Beneficial Owners. Any such selection of Bonds to be redeemed will not be governed by the Trust Agreement and will not be conducted by the Corporation or the Trustee. Neither the Corporation nor the Trustee will have any responsibility to Direct Participants, Indirect Participants or the persons for whom Direct Participants act as nominees, with respect to the payments on the Bonds or the providing of notice to Direct Participants, Indirect Participants, or Beneficial Owners of the Bonds being called for redemption. See “REGISTRATION, TRANSFER AND EXCHANGE – Book- Entry-Only System” herein. Defeasance The Trust Agreement provides that any Bond will be deemed paid and will no longer be considered to be outstanding within the meaning of the Trust Agreement when payment of principal of and interest on such Bond to its stated maturity or date of prior redemption has been made or provided for by depositing with or making available to the Trustee any combination of (i) money in an amount sufficient to make such payment and/or (ii) Defeasance Securities (defined below) certified, in the case of a net defeasance, by an independent certified public accountant to mature as to principal and interest in such amounts and at such times
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to insure the availability, without reinvestment, of sufficient money to make such payment. The Corporation has additionally reserved the right, subject to satisfying the requirements of (i) and (ii) above, to substitute other Defeasance Securities for the Defeasance Securities originally deposited, to reinvest the uninvested money on deposit for such defeasance and to withdraw for the benefit of the Corporation money in excess of the amount required for such defeasance. Under the Trust Agreement, the term “Defeasance Securities” means noncallable bills, interest-bearing notes, bonds, or other direct obligations of the United States, including United States Treasury State and Local Government Series, or those for which the full faith and credit of the United States are pledged for the payment of principal and interest. Upon such deposit as described above, such Bonds will no longer be regarded as outstanding or unpaid for purposes of applying any limitation on indebtedness. After firm banking and financial arrangements for the discharge and final payment of the Bonds have been made as described above, all rights of the Corporation to initiate proceedings to call the Bonds for redemption or take any other action amending the terms of the Bonds are extinguished; provided, however, that the Corporation has reserved the option, to be exercised at the time of the defeasance of the Bonds, to call for redemption at an earlier date those Bonds which have been defeased to their maturity date, if the Corporation (i) in the proceedings providing for the firm banking and financial arrangements, expressly reserves the right to call the Bonds for redemption, (ii) gives notice of the reservation of that right to the Owners of the Bonds immediately following the making of the firm banking and financial arrangements, and (iii) directs that notice of the reservation be included in any redemption notices that it authorizes. Trustee as Paying Agent and Bond Registrar Under the Trust Agreement, the Trustee serves as the paying agent and the “bond registrar” for the Bonds at its offices located in Dallas, Texas (the “Designated Trust Office”). The Trust Agreement describes the capacity and duties of the Trustee in such capacity. Successor Trustee Under the Trust Agreement, the Trustee may resign by giving written notice thereof to all Registered Owners, the City and the Corporation at least 30 days prior to its proposed resignation date. Additionally, the Corporation, upon written request of the Registered Owners owning a majority in aggregate principal amount of the Parity Bonds then Outstanding, reserves the right to replace the Trustee. Any successor Trustee selected by the Corporation must be a bank or trust company authorized to provide corporate trust services and must be subject to examination or supervision by a federal or state banking authority. If the Trustee resigns or is replaced by the Corporation, the Trustee is required to deliver to the successor Trustee all documents and funds held in connection with the Trust Agreement. No resignation or removal of the Trustee will become effective until acceptance of appointment by the successor Trustee. Ownership The Corporation, the Trustee, and any other person may treat the person in whose name any Bond is registered as the absolute owner of such Bond for the purpose of making and receiving payment of the principal thereof and for the further purpose of making and receiving payment of the interest thereon, and for all other purposes, whether or not such Bond is overdue. Neither the Corporation nor the Trustee will be bound by any notice or knowledge to the contrary. All payments made to the person deemed to be the Owner of any Bond in accordance with the Trust Agreement will be valid and effective and will discharge the liability of the Corporation and the Trustee for such Bond to the extent of the sums paid. Payment Record The Corporation has never defaulted in payments on its bonded indebtedness.
For Fiscal Year ending August 31, 2008, the City did not appropriate funds to pay the final amount specified in an Installment Payment Supplement dated 1/12/05 to an Installment Payment Master Agreement (the “Unauthorized Agreement”) for the financing of certain computer software licenses. Although the City had made certain initial payments under the Unauthorized Agreement in prior fiscal years, neither the Unauthorized Agreement nor the underlying computer software licensing agreement had ever been submitted to, or approved by, the City Council or the City Manager and both such agreements were only signed on behalf of the City by the Director of the City’s Information Technology Department (who was not authorized to sign such agreements). Moreover, the software which was the subject of the financing was never used by the City. Following City Council action to not appropriate funds for the Unauthorized Agreement, the City provided written notice to the vendor in accordance with the terms of such agreement and returned the computer software which was the subject of such agreement as directed by the vendor. Such action by the City was not an event of default under the Unauthorized Agreement.
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REGISTRATION, TRANSFER AND EXCHANGE
Book-Entry-Only System This section describes how ownership of the Bonds is to be transferred and how the principal of, premium, if any, and interest on, the Bonds are to be paid to and credited by DTC while the Bonds are registered in its nominee name. The information in this section concerning DTC and the Book-Entry-Only System has been provided by DTC for use in disclosure documents such as this Official Statement. The Corporation, the City, the Financial Advisor, and the Underwriters believe the source of such information to be reliable, but take no responsibility for the accuracy or completeness thereof. The Corporation cannot and does not give any assurance that: (1) DTC will distribute payments of debt service on the Bonds, or redemption or other notices, to Direct Participants, (2) Direct Participants or others will distribute debt service payments paid to DTC or its nominee (as the Registered Owner of the Bonds), or redemption or other notices, to the Beneficial Owners, or that they will do so on a timely basis, or (3) DTC will serve and act in the manner described in this Official Statement. The current rules applicable to DTC are on file with the United States Securities and Exchange Commission (“SEC”), and the current procedures of DTC to be followed in dealing with Direct Participants are on file with DTC. DTC will act as securities depository for the Bonds. The 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 of DTC. One fully-registered certificate will be issued for each maturity of the Bonds, in the aggregate principal amount of each maturity of such issue, and will be deposited with DTC. General. DTC, the world’s largest securities depository, is a limited-purpose trust company organized under the New York Banking Law, a “banking organization” within the meaning of the New York Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code, and a “clearing agency” registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC’s participants (“Direct Participants”) deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants’ accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation (“DTCC”). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly (“Indirect Participants”). DTC has a Standard & Poor’s rating of “AA+”. The DTC Rules applicable to its Participants are on file with the SEC. More information about DTC can be found at www.dtcc.com. To facilitate subsequent transfers, all Bonds deposited by Direct Participants with DTC are registered in the name of DTC’s partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of Bonds with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Bonds; DTC’s records reflect only the identity of the Direct Participants to whose accounts such Bonds are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers. Purchases of Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Bonds on DTC’s records. The ownership interest of each actual purchaser of each Bond (“Beneficial Owner”) is in turn to be recorded on the Direct and Indirect Participants’ records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the 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 Bonds, except in the event that use of the Book-Entry-Only-System for the Bonds is discontinued. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of the Bonds may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Bonds, such as defaults and proposed amendments to the Bond documents. For example, Beneficial Owners of the Bonds may wish to ascertain that the nominee holding the Bonds for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the Trustee and request that copies of notices be provided directly to them. Redemption notices will be sent to DTC. If less than all of the Bonds within a stated maturity are being redeemed, DTC’s practice is to determine by lot the amount of the interest of each Direct Participant in such maturity to be redeemed.
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Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to Bonds unless authorized by a Direct Participant in accordance with DTC’s procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the Corporation 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 Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy). Payments on the Bonds will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC’s practice is to credit Direct Participants’ accounts upon DTC’s receipt of funds and corresponding detail information from the Corporation or the Trustee, on the payment date in accordance with their respective holdings shown on DTC’s records. Payments by Direct or Indirect Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in “street name”, and will be the responsibility of such Participant and not of DTC, the Trustee, or the Corporation, subject to any statutory or regulatory requirements as may be in effect from time to time. Payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the Corporation or the Trustee, disbursement of such payments to Direct Participants will be the responsibility of DTC; and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants. DTC may discontinue providing its services as depository with respect to the Bonds at any time by giving reasonable notice to the Corporation or the Trustee. Under such circumstances, in the event that a successor depository is not obtained, Bonds are required to be printed and delivered. The Corporation may decide to discontinue use of the system of book-entry-only transfers through DTC (or a successor securities depository). In that event, Bonds will be printed and delivered to DTC. The information in this section concerning DTC and DTC’s Book-Entry-Only-System has been obtained from DTC, but the Corporation takes no responsibility for the accuracy thereof. So long as Cede & Co. is the Registered Owner of the Bonds, the Corporation will have no obligation or responsibility to the Direct Participants or Indirect Participants, or to the persons for which they act as nominees, with respect to payment to or providing of notice to such Participants, or the persons for which they act as nominees. Use of Certain Terms in Other Sections of this Official Statement. In reading this Official Statement it should be understood that while the Bonds are in the Book-Entry-Only System, references in other sections of this Official Statement to Registered Owners should be read to include the person for which the Direct Participant or Indirect Participant acquires an interest in the Bonds, but (i) all rights of ownership must be exercised through DTC and the Book-Entry-Only System, and (ii) except as described above, notices that are to be given to Registered Owners under the Trust Agreement will be given only to DTC. Future Registration In the event the Book-Entry-Only System should be discontinued, the Bonds may be transferred, exchanged and assigned on the Bond Register, only upon presentation and surrender thereof to the Trustee and such transfer, exchange, or assignment of the Bonds will be without expense or service charge to the Registered Owner, except for any tax or other governmental charges required to be paid with respect to such transfer, exchange, and assignment. A Bond may be assigned by the execution of an assignment form on the Bond or by other instrument of transfer and assignment acceptable to the Trustee. A new Bond or Bonds will be delivered by the Trustee in lieu of the Bond or Bonds being transferred or exchanged at the Designated Trust Office of the Trustee, or sent by United States mail, first-class postage prepaid, to the new Registered Owner or his assignee. To the extent possible, new Bonds issued in an exchange or transfer of Bonds will be delivered to the contracting party or assignee of the Owner in not more than three (3) business days after the receipt of the Bonds to be canceled in the exchange or transfer and the written instrument of transfer or request for exchange duly executed by the Owner or his duly authorized agent, in form satisfactory to the Trustee. New Bonds registered and delivered in an exchange or transfer will be in denominations of $5,000 for any one maturity or any integral multiple thereof and for a like aggregate principal amount of the Bond or Bonds surrendered for exchange or transfer. Limitation on Transfer of Bonds The Trustee shall not be required to transfer or exchange any Parity Bond (i) after the notice calling such Parity Bond for redemption has been given as provided in the Trust Agreement or (ii) during a period beginning at the opening of business on the 15th day (whether or not a Business Day) next preceding either any Bond Payment Date or any date of selection of Parity Bonds to be redeemed and ending at the close of business on the Bond Payment Date or day on which the applicable redemption is made. Replacement Bonds The Corporation has agreed to replace mutilated, destroyed, lost, or stolen Bonds upon surrender of the mutilated Bonds to the Trustee, or receipt of satisfactory evidence of such destruction, loss, or theft, and receipt by the Corporation and Trustee of security or indemnity as may be required by either of them to hold them harmless. The Corporation may require payment of taxes, governmental charges, and other expenses in connection with any such replacement.
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SECURITY FOR THE BONDS AND REMEDIES IN THE EVENT OF NONAPPROPRIATION
General The principal of, premium, if any, and interest on the Bonds are payable solely from Lease Payments to be made by the City to the Corporation under the Sublease. The Corporation’s interest under the Sublease, including its rights to receive and dispose of Lease Payments to be paid by the City thereunder, will be assigned to the Trustee under the Trust Agreement and be made a part of the Trust Estate for the benefit of the Owners of the Bonds. THE BONDS ARE PAYABLE SOLELY FROM LEASE PAYMENTS TO BE MADE BY THE CITY. THE PARITY BONDS SHALL NEVER CONSTITUTE AN INDEBTEDNESS OR GENERAL OBLIGATION OF THE CORPORATION, THE STATE, THE CITY, OR ANY OTHER POLITICAL SUBDIVISION OF THE STATE, WITHIN THE MEANING OF ANY CONSTITUTIONAL PROVISION OR STATUTORY LIMITATION WHATSOEVER, BUT THE BONDS ARE LIMITED OR SPECIAL OBLIGATIONS OF THE CORPORATION PAYABLE SOLELY FROM THE FUNDS PROVIDED THEREFOR AS PROVIDED IN THE TRUST AGREEMENT. NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF THE STATE, THE CITY, OR ANY OTHER POLITICAL SUBDIVISION OF THE STATE IS PLEDGED TO THE PAYMENT OF THE PRINCIPAL OF THE BONDS OR THE INTEREST OR ANY PREMIUM THEREON OR OTHER COSTS INCIDENT THERETO.
THE OBLIGATION OF THE CITY TO MAKE LEASE PAYMENTS IS A CURRENT EXPENSE OF THE CITY, PAYABLE SOLELY FROM FUNDS ANNUALLY APPROPRIATED BY THE CITY FOR SUCH USE FROM LAWFULLY AVAILABLE FUNDS TO THE PAYMENT THEREOF. THE LEASE AGREEMENT MAY BE TERMINATED ANNUALLY BY THE CITY WITHOUT ANY PENALTY, AND THERE CAN BE NO ASSURANCE THAT THE CITY WILL ANNUALLY RENEW THE LEASE AGREEMENT. IF THE LEASE AGREEMENT IS TERMINATED, THE CITY WILL HAVE NO FURTHER OBLIGATION TO MAKE LEASE PAYMENTS REGARDLESS OF WHETHER ANY BONDS REMAIN OUTSTANDING. THE LEASE AGREEMENT AND THE OBLIGATIONS OF THE CITY THEREUNDER DO NOT CONSTITUTE A PLEDGE, A LIABILITY, OR A CHARGE UPON THE FUNDS OF THE CITY AND DO NOT CONSTITUTE A DEBT OR GENERAL OBLIGATION OF THE STATE, THE CITY, THE CORPORATION, OR ANY OTHER POLITICAL SUBDIVISION OF THE STATE. HOWEVER, THE CITY COVENANTS THAT REASONABLE EFFORTS WILL BE MADE TO INCLUDE A REQUEST FOR APPROPRIATION IN EACH ANNUAL BUDGET SUBMITTED TO THE CITY COUNCIL FOR APPROVAL.
Trust Estate All payments to be made by the Trustee under the Trust Agreement to the Bondholders may be made only from the income and proceeds from the Trust Estate and only to the extent that the Trustee has received income or proceeds from the Trust Estate. The “Trust Estate” consists of all right, title, and interest of the Corporation (i) in and under the Lease Agreement including, but not limited to, all Lease Payments and other payments (other than payments for Operating Expenses) paid or payable by the City to the Corporation or the Trustee pursuant to the Lease Agreement and other income, charges, and funds realized from the lease of the Project, and (ii) in and under the Trust Agreement including, but not limited to, all funds and investments in the Trust Fund (excluding the Rebate Account) and all funds deposited with the Trustee pursuant to the Financing Documents (excluding funds transferred to the Trustee for deposit in the Operating Fund or the Rebate Account), all subject to and in accordance with the Trust Agreement. Lease Payments The City is required to pay to the Trustee, for the account of the Corporation, for deposit into the Payment Account of the Corporation, the Lease Payments from Appropriated Funds on each August 5 and February 5 for so long as the Sublease is in effect. The amount of each Lease Payment required under the Sublease is equal to an amount of money which, when added to the amount then on deposit in the Payment Account, will equal the amount of principal and/or interest on the Bonds to become due on the applicable Bond Payment Date. The term “Appropriated Funds” is defined in the Lease Agreement as funds Appropriated by the City from any money that has not been encumbered to secure the payment of any indebtedness of the City and that may lawfully be used with respect to any payment obligated or permitted under the Lease Agreement, including but not limited to unencumbered and lawfully available revenues derived by the City from the Additional Tax, the 1% general sales and use tax levied by the City, bridge revenues and transfers from City-owned utility systems. The term “Additional Tax” means additional hotel occupancy tax levied in support of the Project at the rate of two (2) percent of the consideration paid by an occupant of a hotel room within the City. In the Lease Agreement, the City covenants that, to the extent permitted by applicable law and as long as any Parity Bonds remain Outstanding, the City will (i) continue to levy the Additional Tax, (ii) not reduce the Additional Tax, and (iii) enforce the provisions of any ordinance or resolution levying a hotel occupancy tax concerning the collection, remittance and payment of such tax (including the Additional Tax). By City ordinance, the Additional Tax must be collected on every occupancy occurring on or after January 1, 2013. See “THE CITY’S HOTEL OCCUPANCY TAX” herein.
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Notwithstanding the foregoing, the City has no obligation to Appropriate any funds to enable the City to pay Lease Payments, regardless of the amount or source of funds that are lawfully available to be Appropriated, in any Fiscal Year.
Limited Nature of Obligations of the Corporation The Corporation currently has no assets other than its Leasehold Estate in the Project pursuant to the Primary Lease and its rights under the Sublease, which will be assigned to the Trustee for the benefit of the Bondholders upon the initial delivery of the Bonds. The Corporation’s leasehold interest in the Project is also subject to the leasehold interest granted to the Developer pursuant to the terms of the Team Lease. The “Project” includes the Ballpark, together with the related infrastructure financed in connection therewith, and the Real Property (described in the Lease Agreement) together with all improvements constructed thereon and also including any and all items of personal property situated respectively thereon by the City whether now owned or hereafter acquired or refinanced with proceeds of any series of Parity Bonds for and on behalf and use of the City or the Corporation, including but not limited to any and all furniture, fixtures, machinery and equipment and any and all other items of personal property. The Corporation’s obligation with respect to the payment of the principal of, premium, if any, and interest on the Bonds is a special, limited, and non-recourse obligation payable solely from the Trust Estate, consisting primarily of the Lease Payments payable by the City pursuant to the Sublease (which may be paid from any and all lawful and unencumbered revenues of the City, as described above, including, but not limited to, the Additional Tax and, with respect to the Taxable Parity Bonds, including the Bonds, the Team Payments). In the event the City fails to Appropriate for Lease Payments, the only funds available to the Corporation will be payments received from the City under the Primary Lease for payment of Operating Expenses (which payment is also subject to annual Appropriation by the City) and from proceeds derived from the operation or other lease of the Project for the duration of the Primary Lease. The Corporation has no authority to levy taxes. The Bonds do not constitute an obligation, either special, general, or moral, of the City, the State or any other political subdivision thereof. The obligation of the City to make Lease Payments is a current expense, payable solely from funds annually Appropriated by the City Council for such use (the Lease Agreement defines “Appropriate”, “Appropriated” and “Appropriation” to mean the adoption by the City Council of a budget or amendments to the budget for a Fiscal Year which includes the Lease Payments, Operating Expenses, and other payments required, if any, to be made by the City under the Lease Agreement during the respective Fiscal Year). See “ANNUAL BUDGET ADOPTION”. The City has no obligation to Appropriate any funds to pay Lease Payments, regardless of the amount or source of funds that are lawfully available to be Appropriated, in any Fiscal Year.
Remedies For Failure to Appropriate Remedies available upon a failure of the City to Appropriate or pay Lease Payments are limited to termination of the City’s Leasehold Estate under the Sublease, the right to take possession and control of the Project pursuant to and for the duration of the Primary Lease, and the right to operate or lease the Project for the remaining term of the Primary Lease; subject to the terms of the Team Lease. In the Lease Agreement, the City has covenanted and agreed that, subsequent to the occurrence of an Event of Nonappropriation, it will not, for the remaining term of the Primary Lease, acquire any outstanding Parity Bonds for the purpose of delivering those Parity Bonds to the Trustee for cancellation or extinguishment of the indebtedness evidenced thereby. See “INVESTOR CONSIDERATIONS” herein and “SELECTED PROVISIONS OF THE FINANCING DOCUMENTS” attached hereto as Appendix B. The enforcement by the Trustee of the remedies provided in the Financing Documents is subject to the application of principles of equity and state and federal laws relating to bankruptcy, moratorium, reorganization and creditors’ rights generally, and such remedies may require the expenditure of money and considerable time to enforce. The Sublease and the obligations of the City thereunder do not constitute a pledge, a liability, or a charge upon the funds of the City and do not constitute a debt or general obligation of the State, the City or any other political subdivision of the State. Neither the full faith and credit nor the taxing power of the State, the City or any other political subdivision of the State has been pledged to the payment of the principal of, premium, if any, or interest on the Bonds.
Operating Fund The Primary Lease specifies that the City is obligated to provide for the maintenance and operation of the Project (as further described below, the “Operating Expenses”) for the duration of the Primary Lease, the payment of costs of which are to be made from Appropriated Funds. The Trust Agreement provides for the creation and establishment of an “Operating Fund” into which City funds received by the Corporation for payment of Operating Expenses are to be deposited until expended at the direction of the Corporation. The Operating Fund is not included in the Trust Estate, nor is it provided as additional security for the Bonds. Under the Trust Agreement, the Operating Fund is only created in the event the Sublease is terminated. Therefore, no payment for Operating Expenses is owed to the Corporation by the City during the time that the Sublease remains valid and in effect. The Lease Agreement defines “Operating Expenses” to mean expenses required to operate and maintain the Project, including without limitation, salaries and benefits of personnel employed to operate and maintain the Project and the costs and expenses of maintenance, use for intended purpose, certain insurance premiums, utilities, and taxes.
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No Additional Unrelated Obligations The Corporation has covenanted and agreed that, other than Additional Bonds issued to (i) complete the Project, if necessary, (ii) make expansions, renovations and/or improvements to the Project, and/or (iii) refund any Parity Bonds then outstanding (see “THE BONDS - Additional Bonds”), no other bonds or other obligations will be issued which are secured by a lien on the Trust Estate.
THE FINANCING DOCUMENTS The Trust Agreement and the Lease Agreement are referred to jointly herein as the “Financing Documents.” As noted above, the security for the Bonds is derived solely from the Trust Estate which is comprised primarily of the Lease Payments to be paid by the City pursuant to the Lease Agreement. To the extent Appropriated, the City may pay the Lease Payments from (i) the Additional Tax, (ii) with respect to any outstanding Taxable Parity Bonds, including the Bonds, the Team Payments and (iii) other lawfully available City revenues. Below are brief descriptions of certain provisions contained in the Financing Documents, but such descriptions are qualified in their entirety by reference to the detailed provisions contained in the Financing Documents. For additional information, see Appendix B of this Official Statement which contains excerpts from the Financing Documents. The Lease Agreement General. Pursuant to the terms of the Master Lease Agreement, dated as of August 1, 2013, as amended by the First Amendment to Master Lease Agreement, dated May 1, 2016, and a Second Amendment to Master Lease Agreement, dated July 17, 2020 (the “Original Lease Agreement”), the Corporation obtained a leasehold estate in the Project from the City (the “Primary Lease”) and immediately subleased the Project back to the City (the “Sublease”). In connection with the issuance of the Bonds, the City and the Corporation will enter into a Third Amendment to Master Lease Agreement dated as of June 1, 2021 (the “Lease Amendment”). The Lease Amendment and the Original Lease Agreement are collectively referred to herein as the “Lease Agreement.” Accordingly, the Corporation and the City have entered into the Lease Agreement (and the Primary Lease - Sublease structure described herein) in order to provide for the payment of Lease Payments by the City to the Corporation as the source of revenues to pay debt service on the Parity Bonds. As long as the Sublease is in existence and has not terminated, the City will have full control over the operations of the Project, without any need for obtaining further approvals from the Corporation, and will be fully responsible for paying all Operating Expenses of the Project. The City is conveying a leasehold interest in the Project to the Developer pursuant to the Team Lease. See “The Downtown Ballpark Venue Project – The Team Lease.” The Primary Lease. The City is the owner of the Project (including the Real Property). Pursuant to the Lease Agreement, the City (as the Lessor) will grant a Leasehold Estate in the Project to the Corporation (as the Lessee) for the Term of the Primary Lease (described below). Such grant of a Leasehold Estate in the Project from the City to the Corporation is referred to in the Lease Agreement as the “Primary Lease.” Consideration for the Primary Lease includes the Corporation’s commitment to issue Parity Bonds (including the Bonds) to finance and refinance the Project at the request and for the benefit of the City, and the payment of a nominal amount by the Corporation to the City. The “Term of the Primary Lease” commences on the effective date of the Lease Agreement and continues until the day immediately following the date of final maturity of all Parity Bonds issued to finance or refinance the Project or until earlier terminated upon the occurrence of the first of (i) the payment in full of all principal and interest on all Parity Bonds upon early redemption, or (ii) the payment to the Trustee by the City (as Sublessee) of available funds in an amount, together with amounts, if any, on deposit in the Payment Account, Insurance and Condemnation Account, Redemption Account and Project Account, that is at least equal to the Defeasance Amount required to defease all Outstanding Parity Bonds on the date fixed for their redemption. During the Term of the Primary Lease, the City shall be responsible for the payment of all Operating Expenses, subject to annual Appropriation by the City Council, related to the Project. The Sublease. Pursuant to the Lease Agreement, the Corporation (as the Sublessor) will immediately lease-back to, and grant a Leasehold Estate in, the Project (identical to the Leasehold Estate received from the City under the Primary Lease) to the City (as the Sublessee) for the Term of the Sublease (described below). Such grant of a Leasehold Estate in the Project from the Corporation back to the City is referred to as the “Sublease.” Consideration for the Sublease includes the City’s commitment to make Lease Payments to the Corporation, subject to annual Appropriation by the City Council, in an amount sufficient to pay annual debt service on all outstanding Parity Bonds. The “Term of the Sublease” commences on the effective date of the Lease Agreement and continues until the day immediately following the date of final maturity of all Parity Bonds issued to finance or refinance the Project or until earlier terminated upon the occurrence of the first of the following events: (i) the termination of the Primary Lease; (ii) at the end of the Fiscal Year in which an Event of Nonappropriation occurs which results in the termination of the Sublease in accordance with Section 10.03 of the Lease Agreement; or (iii) the occurrence of an Event of Default and the Corporation (as Sublessor) elects to terminate the Sublease pursuant to Section 10.01 of the Lease Agreement. Trustee Fees and Operating Expenses. In the Lease Agreement, the City agrees to pay, from Appropriated Funds, the fees for ordinary services and expenses of the Trustee. In the event of termination of the Sublease, the City agrees to pay from Appropriated Funds, amounts sufficient for the Corporation to pay expenses required to operate and maintain the Project during the term of the Sublease and the remaining term of the Primary Lease as a reimbursement to the Corporation.
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Annual Appropriations and Consequences Upon Event of Nonappropriation. On or before the last day of each Fiscal Year, the City is required to deliver to the Corporation and the Trustee written certification (a “Certificate of Appropriation”) that the City has Appropriated available funds in an amount sufficient to pay Lease Payments and other payments required, if any, to be made by the City (as Sublessee) under the Sublease during the succeeding Fiscal Year. The City is required to provide the Corporation (as Sublessor), the Trustee and the Rating Agencies with written notice within 72 hours of (i) action by the City Council which would constitute (A) a failure to Appropriate funds sufficient to pay Lease Payments and any other payments, if any, required to be made by the Sublessee in accordance with the Lease Agreement due during the succeeding Fiscal Year, or (B) a modification of a previous Appropriation to pay Lease Payments, or (ii) a legal inability to adopt a budget (each an “Event of Nonappropriation”). In the event that the Trustee does not timely receive the Certificate of Appropriation from the City, the Trustee is required to give written notice thereof to the City and the Corporation. If the City fails to deliver the Certificate of Appropriation within ten days of its receipt of the foregoing notice from the Trustee, the Trustee is required to give written notice to the Bondholders and the Rating Agencies of the City’s failure to provide the Certificate of Appropriation. Upon the occurrence of an Event of Nonappropriation, the Sublease will terminate at the end of the Fiscal Year for which sufficient Appropriations have been made (but the Primary Lease will remain in existence and will not terminate), and upon the expiration of such Fiscal Year the City will be required to immediately vacate the Project and surrender possession and control of the Project to the Trustee and will be prohibited from conducting any operations or activities at the Project. Notwithstanding the provisions described in the preceding sentence, if an Event of Nonappropriation occurs because the City is legally unable to adopt a budget, the Trustee will have the right, but not the obligation (unless directed by a majority in principal amount of the Bondholders), to (i) terminate the Sublease and the City (as Sublessee) will be required to immediately surrender possession and control of the Project to the Trustee, and thereafter the Trustee will have the right, but not the obligation (unless directed by a majority in principal amount of the Bondholders), to lease, sublease, or otherwise provide for the operation of the Project for the remainder of the Term of the Primary Lease, or (ii) without terminating the Sublease, permit the Sublease to continue in effect, to the extent permitted by law, and continue to permit the City (as Sublessee) to exercise and enjoy its rights of quiet enjoyment, use, occupancy and control of the Project. The City has covenanted that, upon an Event of Nonappropriation, it will not, for the remaining term of the Primary Lease, acquire any outstanding Parity Bonds for the purpose of delivering those Parity Bonds to the Trustee for cancellation or extinguishment of the indebtedness evidenced thereby Certain Covenants in the Lease Agreement. The following are certain covenants and representations made by the City in the Lease Agreement: The City covenants that, to the extent permitted by applicable law and as long as any Parity Bonds remain Outstanding, it will (i) continue to levy the Additional Tax, (ii) not reduce the Additional Tax, and (iii) enforce the provisions of any ordinance or resolution levying a hotel occupancy tax concerning the collection, remittance and payment of such tax (including the Additional Tax). The City represents that it presently expects to have sufficient funds to satisfy its obligations under the Lease Agreement, including but not limited to revenues derived from the levy and collection of the Additional Tax, and the City represents that it presently expects, while any Parity Bonds remain Outstanding, that it annually will prepare a Fiscal Year budget, for consideration by the City Council of the City, which contains provisions to fully pay from lawfully available revenues of the City all Lease Payments and Operating Expenses coming due during the applicable Fiscal Year. Notwithstanding the foregoing, the City has no obligation to Appropriate any funds to enable the City (as Sublessee) to pay Lease Payments, or (as Lessor) to pay Operating Expenses, regardless of the amount or source of funds that are lawfully available to be Appropriated, in any Fiscal Year. The City has fee simple title, subject to the Permitted Encumbrances described in the Lease Agreement, to the Real Property described in the Lease Agreement upon which the Project will be built, and the City has agreed to, for the period of time commencing on the date of execution of the Lease Agreement and expiring on the termination of the Primary Lease, warrant and forever defend all and singular title to such property against every person whomsoever lawfully claiming the same, or any part thereof, subject to the Permitted Encumbrances. City Reimbursement of Appropriated Funds. In the event the City ever contributes Appropriated Funds other than the Additional Tax and payments received under the Team Lease (“Non-HOT Appropriated Funds”) to the Venue Project Fund for the purpose of making Lease Payments, or otherwise pays any amounts owed under the Lease Agreement and/or under the Trust Agreement from Non-HOT Appropriated Funds, then the City shall be entitled to repayment of such contributions in the manner, to the extent and as described in Section 6.07 of the Lease Agreement. Such Section 6.07 provides that commencing on the fifth anniversary of the effective date of the Original Lease Agreement, the City shall have the continuous right, to the extent permitted by law, to transfer to its general fund (or other appropriate fund designated by the City), from funds on deposit in the Venue Project Fund, an amount not to exceed the aggregate amount of all Non-HOT Appropriated Funds which have been contributed by the City (and for which the City has not been previously reimbursed) and used to pay costs under the Lease Agreement and/or the Trust Agreement, including Lease Payments and underlying debt service payments on any Parity Bonds; provided, however, that the Venue Project Fund shall at all times contain funds in an amount sufficient to make the Lease Payments and other payments due and payable hereunder and under the Trust Agreement during the then current Fiscal Year; and provided further that the City may not reimburse itself from the Series 2013B Subaccount of the Venue Project Fund pursuant to such Section 6.07 as long as any of the Taxable Series 2013B Bonds or any other Taxable Parity Bonds, including the Bonds, are Outstanding.
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Amendments to the Lease Agreement. The Lease Agreement may be amended, upon the mutual consent of the City and the Corporation and without the consent any Bondholders or the Trustee, to cure any ambiguity, inconsistency or formal defect or omission therein and in a manner appropriate to provide for the issuance of Additional Bonds in accordance with the applicable provisions of the Trust Agreement (which provisions generally are described herein under “THE BONDS - Additional Bonds”). Additionally, the Lease Agreement may be amended, upon the mutual consent of the City and the Corporation, for any other purpose if, before the amendment takes effect: (i) the City and the Corporation each receive an opinion of their legal counsel to the effect that such amendment is permitted under the laws governing the City and the Corporation; (ii) the Corporation obtains an opinion of Bond Counsel to the effect that such amendment will not adversely affect the status of the Bonds (and any other Tax- Exempt Parity Bonds then Outstanding) as obligations described by section 103 of the Internal Revenue Code, the interest on which is excludable from “gross income” for federal income tax purposes; and (iii) either of the following requirements is satisfied: (i) the Corporation obtains an opinion of Bond Counsel that such amendment will not adversely affect the rights of the Bondholders; or (ii) the owners of at least 51% in aggregate principal amount of the Outstanding Parity Bonds affected by such amendment consent thereto, except that the consent of the owner of each Outstanding Parity Bond affected by such amendment is required if such amendment would decrease the minimum percentage of Bondholders required for effective consent to such amendment, or if such amendment affects the amount of the Lease Payments or the Lease Payment Dates. Events of Default and Remedies Under the Lease Agreement. Events of Default Under the Lease Agreement. The following constitute an Event of Default under the Lease Agreement: (i) failure by the Sublessee to make a Lease Payment from Appropriated Funds within ten calendar days after the due date thereof; (ii) failure by the City to construct the Project in accordance with the terms and conditions the Lease Agreement; (iii) failure by the City or the Corporation to observe and perform any covenant, condition or agreement, on its part to be observed or performed by it under the Lease Agreement, other than as referred to in (i) or (ii) above, and such failure is not cured within 30 calendar days after written notice thereof is provided to the Trustee or to the party in default by the other party to the Lease Agreement; (iv) any material statement, representation or warranty made by the City in the Lease Agreement or in any writing ever delivered by the City pursuant to or in connection with the Lease Agreement is false, misleading or erroneous in any material respect; (v) the filing by the City of a voluntary petition in bankruptcy, or failure by the City promptly to lift any execution, garnishment or attachment of such consequence as would impair the ability of the City to carry on its operations at the Project, or adjudication of the City as a bankrupt, or assignment by the City for the benefit of creditors, or the entry by the City into an agreement of composition with creditors, or the approval by a court of competent jurisdiction of a petition applicable to the City in any proceedings instituted under the provisions of the Federal Bankruptcy Code, as amended, or under any similar federal or State laws which may hereafter be enacted; (vi) any event which shall occur or any condition which shall exist the effect of which is to cause (a) more than $1,000,000 of aggregate indebtedness of the City to become due prior to its stated due date (exclusive of any optional or mandatory redemptions permitted by the applicable documents related to such indebtedness), or (b) a lien to be placed on the Project or the City’s interest in the Project, and not released within sixty (60) days; or (vii) a final judgment against the City for an amount in excess of $1,000,000 shall be outstanding for any period of sixty (60) days or more from the date of its entry and shall not have been discharged in full or stayed pending appeal, and a lien is placed on the Project or the City’s interest in the Project. Remedies Upon an Event of Default Under the Lease Agreement. Upon an Event of Default under the Lease Agreement by the City (as Sublessee), the Corporation (as the Sublessor) or the Trustee as the assignee of the Sublessor may take one or any combination of the following remedial steps (to the extent permitted by law): (i) with or without terminating the Sublease, declare all Lease Payments due or to become due during the then current Fiscal Year to be immediately due and payable by Sublessee to the extent of Appropriated Funds, whereupon such Lease Payments shall be, to the extent permitted by State law, immediately due and payable; (ii) with or without terminating the Primary Lease, declare all payments for Operating Expenses due or to become due during the then current Fiscal Year to be immediately due and payable by Lessor to the extent of Appropriated Funds, whereupon such payments for Operating Expenses shall be, to the extent permitted by State law, immediately due and payable; (iii) with or without terminating the Sublease, re-enter and take possession of the Project and exclude the Sublessee from using the Project; however, if the Sublease has not been terminated, the Sublessor shall return possession of the Project to the Sublessee when the Event of Default is cured (including the Sublessee having provided for the payment of all costs and expenses incurred by the Sublessor, the Trustee or the Bondholders resulting therefrom), and, further, the Sublessee shall, during such period of repossession by the Sublessor without termination of the Sublease, to the extent of Appropriated Funds, continue to be responsible for the Lease Payments due or to become due during the Term of the Sublease; (iv) terminate the Sublease upon giving 30 days written notice to the Sublessee at the expiration of which period of time the Sublessee shall immediately surrender possession and control of the Project to the Trustee and the Trustee shall have the right, thereafter, to lease, sublease, or otherwise provide for the operation of the Project; or (v) take whatever action at law or in equity may appear necessary or desirable to collect the Lease Payments and payments for Operating Expenses then due and thereafter to become due during the Term of the Primary Lease or to enforce performance and observance of any other obligation, agreement, or covenant of the Lessor under the Primary Lease and the surviving obligations of the Sublessee under the Sublease. Upon the termination of the Sublease by the Sublessor, the Sublessee shall immediately surrender possession of the Project to the Sublessor, and the Sublessee shall be prohibited from conducting any operations or activities at the Project.
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The Trust Agreement General. The Third Supplement supplements the terms of the Trust Agreement relating to the City of El Paso, Texas, Downtown Ballpark Venue Project Financing, dated as of August 1, 2013, as amended by a First Amendment to the Trust Agreement dated as of October 15, 2013, and as supplemented by a First Supplement to Trust Agreement, dated as of May 1, 2016, and a Second Supplement to Trust Agreement, dated as of July 17, 2020 (collectively, as amended and supplemented, the “Original Trust Agreement”), by and between the Corporation and the Trustee. The Third Supplement and the Original Trust Agreement are collectively referred to herein as the “Trust Agreement.” The Corporation has entered into the Trust Agreement with the Trustee primarily for the purposes of establishing and pledging the Trust Estate for the benefit of the Owners of the Parity Bonds, providing for the issuance of the Bonds and any Additional Bonds which may be issued in the future on a parity therewith (previously herein defined collectively as the “Parity Bonds”), confirming the establishment of the Trust Fund, the Operating Fund, and certain accounts and subaccounts related thereto, and providing for remedies upon the occurrence of an Event of Nonappropriation or upon an Event of Default under the Trust Agreement. Pledge of Trust Estate. In the Trust Agreement, the Corporation pledges the Trust Estate (described below) to secure the payment of Bond Payments for the equal and proportionate benefit, security and protection of the owners of all Parity Bonds. The Trust Estate includes all right, title, and interest of the Corporation (i) in and under the Lease Agreement including, but not limited to, all Lease Payments and other payments (other than payments for Operating Expenses) paid or payable by the City to the Corporation or the Trustee pursuant to the Lease Agreement and other income, charges, and funds realized from the lease of the Project, and (ii) in and under the Trust Agreement including, but not limited to, all funds and investments in the Trust Fund (excluding the Rebate Account) and all funds deposited with the Trustee pursuant to the Financing Documents (excluding funds transferred to the Trustee for deposit in the Operating Fund or the Rebate Account), all subject to and in accordance with the Trust Agreement. Funds and Accounts Created Under the Trust Agreement. The following funds have been created pursuant to the Trust Agreement: Trust Fund. The Trust Agreement requires the Trustee to establish a separate and special trust fund designated the City of El Paso, Texas Downtown Ballpark Venue Project Trust Fund, referred to therein as the “Trust Fund.” Within the Trust Fund, the Trustee will establish, for the benefit of the Bondholders, (i) the Series 2021 Proceeds Account (the “Proceeds Account”), (ii) the Payment Account, (iii) the Insurance and Condemnation Account; (iv) the Redemption Account; and (v) the Team Payment Account (each of which are further described below). Proceeds Account. Within the Trust Fund there will be established upon the issuance of a series of Parity Bonds an account related to each series of Parity Bonds in order to separately deposit and account for proceeds and other funds related to such series of Parity Bonds in accordance with the amendment or supplement to the Trust Agreement entered into in connection with such series of Parity Bonds. On the respective Closing Date with respect to each series of Parity Bonds, the Trustee will deposit to the related series Proceeds Account such amounts as are set forth in the Trust Agreement in connection with such series of Parity Bonds. Disbursements to pay or reimburse for the payment of Issuance Costs will be made by the Trustee from the related series Proceeds Account upon receipt of a letter of instructions from the Corporation instructing the Trustee to disburse Issuance Costs, approved and executed by the Corporation’s Treasurer or the Corporation’s Executive Director. The initial disbursement of Issuance Costs shall be made on the Closing Date. On the Closing Date, the Trustee shall withdraw funds from the Proceeds Account and the Payment Account (described below), in an amount sufficient to cause the Refunded Obligations to be no longer Outstanding, and transfer such funds to the Escrow Agent for redemption of the Refunded Obligations on the redemption date. Upon receipt of a fully executed and approved letter of instructions delivered in accordance with the Third Supplement, the Trustee shall have no liability on account of any disbursement from the Proceeds Account in accordance with such letters of instruction provided it has complied with the procedures required by the Trust Agreement. Upon a redemption of all Outstanding Parity Bonds, all funds then on deposit in the Project Account will be transferred to the Redemption Account. Payment Account. On the Closing Date with respect to each series of Parity Bonds, the Trustee will deposit to the Proceeds Account proceeds of such series of Parity Bonds representing accrued and/or capitalized interest, if any. The Trustee also will deposit to the Payment Account all (i) Lease Payments made by the City, (ii) all other funds of the Corporation derived pursuant to the Sublease of Project, (iii) the payment of the Prepayment Option Price, and (iv) such other amounts as may be paid to the Trustee as assignee of the Corporation pursuant to the Financing Documents (except money paid by the City pursuant to the Lease Agreement for Operating Expenses or for deposit to the Rebate Account). The Trustee also will transfer into the Payment Account any proceeds of a Series of Additional Bonds (including investment earnings) that remain on deposit in the related Series Subaccount of the Project Account (established in the Original Trust Agreement) upon completion of construction of the project or projects for which such Additional Bonds were issued (which funds generally may be used only to pay principal on the related Series of Parity Bonds as such principal becomes due). Pursuant to the Lease Agreement, the City is required to pay its Lease Payments (solely from Appropriated Funds) semi-annually to the Trustee on or before each February 5 and August 5 (each a “Lease Payment Date”) in the amount equal to the amount of debt
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service coming due on the Parity Bonds on the immediately following February 15 and August 15 (each a “Bond Payment Date”), respectively. On each Bond Payment Date, the Trustee will withdraw from the Payment Account an amount equal to the amount of debt service due with respect to the Parity Bonds on such Bond Payment Date and will cause the same to be applied to the payment of interest and principal payments due on such Bond Payment Date. Upon a redemption of all Parity Bonds, all funds in the Payment Account will be transferred to the Redemption Account. In the event of a partial redemption of the Parity Bonds, one Business Day prior to the date fixed for such partial redemption of the Parity Bonds, the Trustee shall transfer from the Payment Account to the Redemption Account the amount of money required to pay the redemption price of such Parity Bonds to be redeemed, to the extent of the money contained therein. Insurance and Condemnation Account. Money received by the Trustee as the result of the damage and/or destruction of the Project (from Net Proceeds or otherwise) or as the result of a condemnation award shall be deposited into the Insurance and Condemnation Account. If the amount of Net Proceeds which is deposited into the Insurance and Condemnation Account is sufficient for the necessary repair and/or replacement of the Project, but is not equal to or greater than the Prepayment Option Price to prepay and redeem all Outstanding Parity Bonds, the City will be able to make all necessary repairs and/or replacements and the Trustee will disburse amounts from the Insurance and Condemnation Account for such purpose upon receipt of a requisition required by the Trust Agreement. If the amount of Net Proceeds which is deposited into the Insurance and Condemnation Account is sufficient for the necessary repair and/or replacement of the Project and is also equal to or greater than the Prepayment Option Price, the City will have the option of (i) making all necessary repairs and/or replacements, or (ii) exercising its option to prepay Lease Payments as described herein under “THE BONDS - Mandatory Redemption of Parity Bonds in Whole Upon Exercise of Prepayment Option Due to Casualty Loss or Condemnation” with amounts from the Insurance and Condemnation Account. The City may deposit into the Insurance and Condemnation Account, from available funds, the amount needed, together with amounts available in the Insurance and Condemnation Account, to complete all necessary repairs and/or replacement of the Project, in which case the City may make such necessary repairs and/or replacements and the Trustee will disburse amounts from the Insurance and Condemnation Account for such purpose upon receipt of a requisition required by the Trust Agreement. Similarly, the City may deposit into the Insurance and Condemnation Account, from available funds, an amount which, together with amounts available in the Insurance and Condemnation Account, will be sufficient to pay the Prepayment Option Price. Upon the City’s exercise of its prepayment option, all amounts in the Insurance and Condemnation Account will be transferred to the Redemption Account. If the amount of Net Proceeds which is deposited into the Insurance and Condemnation Account is insufficient for the complete repair and/or replacement of the Project or for the exercise of its prepayment option, and the City does not deposit into the Insurance and Condemnation Account the amount needed to complete the repair and/or replacement of the Project or exercise its option to prepay Lease Payments, the Trustee shall transfer the entire amount on deposit in the Insurance and Condemnation Account to the Redemption Account and such amount shall thereafter be applied to redeem Parity Bonds on the earliest available redemption date. Redemption Account. Money to be used for redemption of Parity Bonds will be transferred to the Redemption Account at the times and in the amounts required by Sections 6.02(e), 6.03(e), 6.05(d) and 6.05(e) of the Trust Agreement. Said money, together with other legally available funds contributed by the City or the Corporation for deposit in the Redemption Account, if any, shall be set aside in the Redemption Account solely for the purpose of redeeming Parity Bonds in advance of their maturity and shall be applied on or after (if such Parity Bonds are submitted for payment after the date fixed for redemption) the date fixed for redemption to the payment of the principal of and interest on the Parity Bonds to be redeemed upon delivery of such Parity Bonds being redeemed to the Trustee. If there is not sufficient money available to pay in full all Trustee’s fees and expenses and interest and principal then due on the Parity Bonds to be redeemed, the Trustee shall apply the money on deposit in the Redemption Account first, to the payment of its reasonable fees and expenses, and second, to the payment of all interest due with respect to such Parity Bonds, pro rata in proportion to the respective aggregate amount of the total amount of interest due, if necessary, and third, to the payment of the principal of such Parity Bonds, pro rata in proportion to the respective amount of the total amount of principal due, if necessary. Any money remaining in the Redemption Account following redemption of, and payment of all principal and interestdue with respect to all Parity Bonds, shall be transferred to the City after the payment of the fees and expenses of the Trustee as provided in the Trust Agreement. No Reserve Account. No debt service reserve fund or account is being established in connection with the issuance and delivery of the Bonds. Team Payment Account. The Trust Agreement requires the Trustee to establish in the Trust Fund a special trust account known as the Team Payment Account. The Trustee is required to maintain the Team Payment Account as long as the Taxable Series 2013B Bonds or any other Taxable Parity Bonds, including the Bonds, are Outstanding. The Trustee shall deposit to the Team Payment Account, promptly after the receipt thereof, all amounts transferred from the Series 2013B Subaccount of the Venue Project Fund which represent payments received under the Team Lease. To the extent of funds contained therein, the Trustee shall withdraw from the Team Payment Account, on each Bond Payment Date, an amount equal to the amount of interest and principal payments due with respect to the Taxable Series 2013B Bonds and any other Outstanding Taxable Parity Bonds, including the Bonds, on such Bond Payment Date and shall cause the same to be applied to the payment of interest and principal payments due on such bonds on such Bond Payment Date. To the extent payments in the Team Payment Account are not sufficient to make such payments, the Trustee shall use funds on the deposit in the Payment Account to make such payments.
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The Team Payment Account and all payments received pursuant to the Team Lease are only pledged to and for the benefit of the holders of the Taxable Series 2013B Bonds and any other Outstanding Taxable Parity Bonds, including the Bonds. Operating Fund. In the event the Sublease is ever terminated in accordance with the Lease Agreement, the Trust Agreement requires the Trustee to establish a special trust fund known as the Operating Fund. The Trustee will keep the Operating Fund separate and apart from the Trust Fund and all other funds held by it pursuant to the Trust Agreement. The Operating Fund will not be part of the Trust Estate and will not be pledged to secure the payment of the Parity Bonds. Money received by the Corporation, as Lessee under the Primary Lease, from the City, as Lessor under the Primary Lease, for the payment of Operating Expenses, if any, shall be deposited into the Operating Fund. Funds on deposit in the Operating Fund shall be disbursed by the Trustee to the Lessee to pay Operating Expenses (or to any third party directed by the Lessee in payment of any Operating Expenses) in accordance with written directions provided by a Corporation Representative. Investments. Money held in the Trust Fund and the Operating Fund will be invested by the Trustee in Permitted Investments pursuant to written instruction of a Corporation Representative, or, if a Corporation Representative does not provide written instruction for such investment, the Trustee will invest money on deposit in the Trust Fund and the Operating Fund in money market funds whose assets are invested exclusively in direct obligations of the United States, including United States Treasury State and Local Government Series, or obligations for which the full faith and credit of the United States are pledged for the payment of principal and interest, and obligations issued, or fully guaranteed as to principal and interest by, the United States or any agency or instrumentality thereof; provided that such money market fund is currently rated not lower than “AA” (or its equivalent) by the Rating Agencies. No money in the Trust Fund may be invested in any Permitted Investment which matures or becomes due and payable after the Business Day next preceding the date upon which such money will be required by the Trustee for the uses and purposes specified in the Trust Agreement. All interest or income received by the Trustee on the investment of money held in the Project Account, the Payment Account, the Insurance and Condemnation Account, the Redemption Account, and the Operating Fund shall be retained in such Accounts and the Operating Fund, respectively. All interest or income received by the Trustee on the investment of money held in the Redemption Account shall be transferred to the Payment Account on each Bond Payment Date while any Parity Bonds are Outstanding. The Trustee is acting only as agent in making or disposing of any investment and is not liable for any loss resulting from the making or disposition of any investment made pursuant to the provisions of the Trust Agreement, and any such losses or penalties will be charged to the account with respect to which such investment was made. Amendments to the Trust Agreement Amendments Without Consent of Bondholders. The Corporation and the Trustee, without the consent of the Bondholders, may amend the Trust Agreement for any of the following purposes: (i) to cure any ambiguity, inconsistency, formal defect or omission in the Trust Agreement; (ii) to grant to or confer upon the Trustee for the benefit of the owners of the Parity Bonds any additional rights, remedies, powers or authority that may lawfully be granted to or conferred upon the Bondholders or the Trustee or either of them; (iii) to subject additional revenues to the lien and pledge of the Trust Agreement; (iv) to add to the covenants and agreements contained in the Trust Agreement other covenants and agreements thereafter to be observed for the protection of the Bondholders or to surrender or limit any right, power or authority in the Trust Agreement reserved to or conferred upon the Corporation; (v) to evidence any succession by the City, the Trustee or the Corporation and the assumption by such successor of the requirements, covenants and agreements of the City, the Trustee or the Corporation in the Financing Documents and the Parity Bonds; or (vi) to provide for the issuance of Additional Bonds as permitted pursuant to the Trust Agreement and described herein under “THE BONDS - Additional Bonds.” Amendments Requiring Consent of Bondholders. The Corporation and the Trustee, with the consent of the Bondholders owning not less than a majority in aggregate principal amount of the Parity Bonds then Outstanding, have the right to amend any terms and provisions in the Trust Agreement that cannot be amended without Bondholder consent as described in the preceding paragraph; provided, however, such authority shall not permit or be construed as permitting: (i) without the consent of each Bondholder so affected, an extension of maturity of the principal of or the interest on any Parity Bond, a reduction in the principal amount of any Parity Bond, or a reduction in the rate of interest thereon; and (ii) without the consent of all of the Bondholders, a privilege or priority of any Parity Bond over any other Parity Bond, a reduction in the aggregate principal amount of the Parity Bonds required for consent to such amendment or the creation of any prior or parity liens on the Trust Estate (except for a parity lien on the Trust Estate in connection with the issuance of Additional Bonds). Notice to Bondholders. If at any time an amendment to the Trust Agreement is proposed which requires the approval of the Bondholders, the Trustee will, upon being satisfactorily indemnified with respect to expenses, notify all Bondholders of the proposed amendment in the manner required under the Trust Agreement, which notice will briefly describe the nature of the proposed amendment and will state that copies thereof are on file at the Designated Office of the Trustee for inspection by all Bondholders. If, within 60 calendar days after mailing of the notice or such longer period not to exceed 120 calendar days as the Corporation may prescribe, the requisite number of Bondholders at the time notice of such amendment is given shall have consented to and approved the execution of such amendment, no Bondholder shall have any right to object to any of the terms and provisions contained therein or the operation thereof, in any manner to question the propriety of the execution thereof, or to enjoin or restrain the Trustee or the Corporation from executing the same or from taking any action pursuant to the provisions thereof.
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Defaults and Remedies Under the Trust Agreement Events of Default Under the Trust Agreement. Each of the following constitutes an Event of Default under the Trust Agreement: (i) failure by the Corporation to make the due and punctual payment of the principal of, premium, if any, or interest on any Parity Bond when and as the same shall become due and payable, whether by acceleration or otherwise; (ii) an Event of Default as defined and described in the Lease Agreement shall have happened and is continuing; (iii) any material statement, representation, or warranty made by the Corporation in the Trust Agreement or in any writing ever delivered by the Corporation pursuant to or in connection with the Lease Agreement is determined to be false, misleading or erroneous in any material respect; (iv) the filing by the Corporation of a voluntary petition in bankruptcy, or failure of the Corporation promptly to lift any execution, garnishment or attachment of such consequence as would impair the ability of the Corporation to carry on its obligations under any of the Financing Documents, or adjudication of the Corporation as a bankrupt or assignment by the Corporation for the benefit of creditors, or the entry by the Corporation into an agreement of composition with creditors, or the approval by a court of competent jurisdiction of a petition applicable to the Corporation in any proceedings instituted under the provisions of the Federal Bankruptcy Code, as amended, or under any similar federal or State laws which may hereafter be enacted; (v) any event which shall occur or any condition which shall exist, the effect of which is to cause (a) more than $100,000 of aggregate indebtedness of the Corporation to become due prior to its stated due date, and (b) a lien to be placed on the Project or the Corporation’s Leasehold Estate in the Project, and not released within 60 days; or (vi) a final judgment against the Corporation for an amount in excess of $100,000 shall be outstanding for any period of 60 days or more from the date of its entry and shall not have been discharged in full or stayed pending appeal, and a lien is placed on the Project or the Corporation’s Leasehold Estate in the Project. Remedies upon Event of Default Under the Trust Agreement. Upon the occurrence of an Event of Default under the Trust Agreement, the Trustee shall have the right, to the extent permitted by law, at its option (or, at the written direction of Bondholders owning not less than a majority of the aggregate principal amount of the Parity Bonds then Outstanding, shall), and without any further demand or notice, take one or any combination of the following remedial steps to the extent permitted by law (provided that the right to terminate the Sublease may only occur upon the occurrence of an Event of Default under the Lease Agreement which is caused by the City): (i) with or without terminating the Sublease, declare the principal of all Outstanding Parity Bonds and all unpaid accrued interest thereon to be due and payable immediately, by a notice in writing to the Corporation and the City, and upon any such declaration, such principal and all unpaid accrued interest thereon shall become immediately due and payable; provided, however, that upon the written request of the Bondholders owning not less than 51% in principal amount of the Parity Bonds Outstanding, the Trustee shall declare the principal of all Outstanding Parity Bonds and all unpaid accrued interest to be due and payable immediately; (ii) terminate the Sublease upon giving 30 days written notice to the City and the Corporation at the expiration of which period of time the City shall immediately surrender possession and control of the Project to the Trustee and the Trustee shall have the right, thereafter, to sublease the Project to any third party for a period up to but not exceeding the remaining Term of the Primary Lease; or (iii) exercise any rights, powers, or remedies it may have as a secured party under the Uniform Commercial Code of the State, or other similar laws in effect, and shall have the power to proceed with any available right or remedy granted by the Financing Documents under the laws of the State, as it may deem best, including any suit, action, mandamus or special proceeding in equity or at law or in bankruptcy or otherwise for the collection of all amounts due and unpaid under the Financing Documents, for specific performance of any covenant or agreement contained in the Financing Documents, or for the enforcement of any legal or equitable remedy as the Trustee shall deem most effective to protect the rights aforesaid, insofar as such may be authorized by law. Notwithstanding any other provision of the Trust Agreement, the Trustee is not required to exercise its option to take possession and control of the Project upon an Event of Default under the Trust Agreement until indemnified in a manner satisfactory to it for any liability and expense it might incur in carrying out such remedy.
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INVESTOR CONSIDERATIONS
General
Each prospective investor in the Bonds should read this Official Statement in its entirety, including Schedule I and the Appendices. Particular attention should be given to the considerations described below which, among others, could affect the payment of debt service on the Bonds, and which could also affect the marketability of the Bonds to an extent that cannot be determined.
Hotel Occupancy Tax Rate
The hotel occupancy tax revenues which will provide the revenues principally needed for the Lease Payments largely depend on the occupancy and average daily rates (“ADRs”) at hotels located within the City. The El Paso market has an aggregate hotel occupancy tax rate of 17.5% which is one of the highest in the nation. Key factors that may adversely affect the amount of hotel occupancy tax revenues generated from the rental of hotel rooms include: market support; general levels of sports and/or convention business; levels of tourism; seasonality; competition from other markets; and the effects of the Pandemic. See “INFECTIOUS DISEASE OUTBREAK COVID-19.”
Nonappropriation
The Bonds and the interest thereon are payable solely from the Trust Estate, which is defined as all right, title, and interest of the Corporation (i) in and under the Lease Agreement including, but not limited to, all Lease Payments and other payments (other than payments for Operating Expenses) paid or payable by the City to the Corporation or the Trustee pursuant to the Lease Agreement and other income, charges, and funds realized from the lease of the Project, and (ii) in and under the Trust Agreement including, but not limited to, all funds and investments in the Trust Fund (excluding the Rebate Account) and all funds deposited with the Trustee pursuant to the Financing Documents (excluding funds transferred to the Trustee for deposit in the Operating Fund or the Rebate Account), all subject to and in accordance with the Trust Agreement. If available funds sufficient to pay the Lease Payments during the succeeding Fiscal Year are not Appropriated by the City, the Sublease will automatically terminate at the end of the Fiscal Year for which sufficient funds have been Appropriated. In such event, the City must immediately, upon expiration of such Fiscal Year, surrender possession and control of the Project to the Trustee for the duration of the Primary Lease. No assurances may be given that the Trustee will be able to manage, operate, or lease the Project if the City does not Appropriate sufficient funds for Lease Payments and the Sublease terminates, in such a manner that there will be sufficient revenues to pay debt service on the Bonds.
There can be no assurance that the City will annually Appropriate sufficient funds to pay the Lease Payments due in any given Fiscal Year. Accordingly, the likelihood that there will be sufficient funds to pay the principal of, premium, if any, and interest on the Bonds is dependent upon certain facts which are beyond the control of the Registered Owners, including (a) the continuing need of the City for the Project, (b) the economic conditions within the service area of the City, (c) the rental value of the Project in the event the Trustee re-leases the Project to a third party for the duration of the Primary Lease in a transaction instituted by the Trustee pursuant to the Trust Agreement, and (d) the Trustee’s ability to generate revenue from the operation of the Project for the duration of the Primary Lease.
Appropriation Budget Covenant
In City-County Solid Waste Control Board v. Capital City Leasing, Inc., 813 S.W.2d 705 (Tex. Civ. App. 1991, writ den.), a Texas appellate court ruled that an equipment lease which required a governmental unit to pursue annual Appropriations creates an unconstitutional debt, thus rendering the lease void and unenforceable. The Texas Supreme Court declined, without comment, to hear the case on appeal. Although the Lease Agreement contains a covenant that the City official responsible for formulating the City’s draft budget shall include a proposed Appropriation for payment of the Lease Payments, such a requirement is not a pre- condition to any right of the City or the Corporation, including the City’s right to not appropriate, and failure of such a City official to include such an amount is not an event of default. The Lease Agreement and the Trust Agreement acknowledge that the Lease Payments and certain other financial obligations of the City and the Corporation are only payable from funds that must be Appropriated by the City. Accordingly, the facts of the Capital City Leasing case are distinguishable from the language contained in the Lease Agreement, but there can be no guarantee that another court would not apply reasoning similar to that of the appellate court in such case to the Lease Agreement.
THE OBLIGATION OF THE CITY TO MAKE LEASE PAYMENTS IS A CURRENT EXPENSE OF THE CITY, PAYABLE SOLELY FROM FUNDS ANNUALLY APPROPRIATED BY THE CITY FOR SUCH USE FROM LAWFULLY AVAILABLE FUNDS TO THE PAYMENT THEREOF. THE CITY HAS THE RIGHT TO TERMINATE THE LEASE AGREEMENT EACH YEAR WITHOUT ANY PENALTY, AND THERE CAN BE NO ASSURANCE THAT THE CITY WILL ANNUALLY RENEW THE LEASE AGREEMENT. IF THE LEASE AGREEMENT IS TERMINATED, THE CITY WILL HAVE NO FURTHER OBLIGATION TO MAKE LEASE PAYMENTS REGARDLESS OF WHETHER ANY BONDS REMAIN OUTSTANDING. THE LEASE AGREEMENT AND THE OBLIGATIONS OF THE CITY THEREUNDER DO NOT CONSTITUTE A PLEDGE, A LIABILITY, OR A CHARGE UPON THE FUNDS OF THE CITY AND DO NOT CONSTITUTE A DEBT OR GENERAL OBLIGATION OF THE STATE, THE CITY, THE CORPORATION, OR ANY OTHER POLITICAL SUBDIVISION OF THE STATE.
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No Reserve Fund
No debt service reserve fund has been established under the Financing Documents relating to the Bonds to pay principal and interest on the Bonds in the event the City fails to Appropriate sufficient funds for Lease Payments for any Fiscal Year.
Damage or Destruction Risk
In the event of damage, destruction, or condemnation of all or a portion of the Project, the City is required to promptly repair, restore, or replace the Project, but solely from Appropriated Funds, in addition to Net Proceeds of any insurance or condemnation award for such purposes. Regardless of the sufficiency or insufficiency of the Net Proceeds for such purposes, the City is obligated to continue to pay the Lease Payments from Appropriated Funds. If the Project is damaged to an extent which results in the City’s inability to use 50% or more of the Project for municipal purposes, the City may exercise its option to prepay the Lease Payments and require the Corporation to redeem the Bonds (see “THE BONDS - Redemption - Mandatory Redemption of Parity Bonds in Whole Upon Exercise of Prepayment Option Due to Casualty Loss or Condemnation”). In such event, any Net Proceeds on deposit in the Insurance and Condemnation Account will be applied as a credit toward the Prepayment Option Price. If the amount on deposit in the Insurance and Condemnation Account is insufficient for the complete repair and/or replacement of the Project, and the City does not, within 45 days of the date of such deposit of Net Proceeds with the Trustee, deposit into the Insurance and Condemnation Account the amount needed to complete the repair and/or replacement of the Project or exercise its option to prepay the Lease Payments and cause the Corporation to redeem the Bonds, the amount on deposit in the Insurance and Condemnation Account will be transferred into the Redemption Account by the Trustee. Regardless of the sufficiency or insufficiency of the Net Proceeds for either the repair and/or replacement of the Project or for the prepayment of the Lease Payments, the City will remain obligated to continue to pay the Lease Payments from Appropriated Funds.
There can be no assurance that the Net Proceeds of an insurance or condemnation award will be sufficient to repair, replace, or restore the Project or that, if such Net Proceeds are insufficient for such purpose, the City will Appropriate sufficient funds for the repair, replacement, or restoration of the Project, or for the payment of the principal of, premium, if any, and interest on the Bonds necessary in order to exercise its option to prepay Lease Payments under the Lease Agreement.
City’s Power of Eminent Domain
Pursuant to State law, the City has the power to exercise its right under the doctrine of eminent domain to condemn and take ownership of property for public use. There is no assurance that the City will not exercise its power of eminent domain in order to acquire unencumbered title to the Project and to terminate its obligations under the Sublease. Under the eminent domain process, a State judge appoints a three-member panel of commissioners to arrive at a fair price for the City to purchase the property. The City and the Corporation have agreed in the Lease Agreement, to the extent permitted by law, that in the event the City determines to exercise its power of eminent domain to take the Corporation’s or the Trustee’s interest in the Project or any part thereof, that the damages payable to the Corporation or the Trustee will be an amount which will be sufficient to pay the principal of, premium, if any, and accrued interest on, all outstanding Bonds to the earliest date for which notice of redemption can be given pursuant to the Trust Agreement. Any condemnation proceeds would be distributed to the Registered Owners in accordance with the provisions of the Trust Agreement.
There is no precedential law in the State to indicate: (i) whether or not the courts would prevent the City’s condemnation of the Project as an equitable abuse of its eminent domain power; or (ii) whether or not the courts would uphold the validity of the agreement of the City and the Corporation under the Lease Agreement to establish, in advance, the damages to be paid to the Corporation or the Trustee in the event that the City determines to exercise its power of eminent domain to acquire unencumbered title to the Project. If the agreement of the City and the Corporation is not upheld, there is no assurance that the “fair price” arrived at by the panel of commissioners will be sufficient to pay the principal of, redemption premium, if any, and interest on, the Bonds then outstanding.
Remedies
Remedies provided for in the Financing Documents may be unenforceable as a result of the application of principles of equity or of state and federal laws relating to bankruptcy, other forms of debtor relief, and creditors’ rights generally. The enforcement of certain remedies may be subject to applicable principles of public policy which may require that the City be given sufficient time to vacate the Project before the termination remedy may be enforced.
Inability to Re-lease, or Delay in Re-leasing, the Project
Termination of the Sublease upon an Event of Nonappropriation or an Event of Default gives the Trustee the right to manage or re-lease the Project. The Project is designed and constructed for a limited purpose use (i.e., use as a baseball park); therefore, potential purchasers of the Bonds should not anticipate that the re-lease of the Project could be accomplished rapidly, or at all. Any delays in the ability of the Trustee to re-lease the Project will result in a delay in payment of principal and interest of the Bonds.
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Other Obligations of the City
The obligation of the City to make Lease Payments will be satisfied from the funds of the City which are Appropriated for such use. Except for the Additional Tax which can only be used for the Project, the City may enter into other obligations which may constitute additional charges against the funds from which the Lease Payments may be Appropriated. To the extent existing obligations increase or additional obligations are incurred by the City, the funds lawfully available to Appropriate for Lease Payments may be decreased.
Securities Law
Bond Counsel has rendered no opinion with respect to the applicability or inapplicability of the registration requirements of the Securities Act of 1933, as amended, to any Bond subsequent to a termination of the Sublease by reason of an Event of Default under the Trust Agreement or an Event of Nonappropriation under the Lease Agreement. If the Sublease is terminated by reason of an Event of Default or an Event of Nonappropriation, there is no assurance that the Bonds may be transferred by a holder thereof without compliance with the registration provisions of the Securities Act of 1933, as amended, or the availability of an exemption therefrom.
Forward-Looking Statements Disclaimer
The statements contained in this Official Statement, including, but not limited to the information under the headings “INVESTOR CONSIDERATIONS”, and in any other information provided by the Corporation or the City that are not purely historical are forward-looking statements, including statements regarding the Corporation’s and the City’s expectations, hopes, intentions, or strategies regarding the future. Readers should not place undue reliance on forward-looking statements. All forward-looking statements included in this Official Statement are based on information available to the Corporation and the City on the date hereof, and the Corporation and the City assume no obligation to update any such forward-looking statements. The Corporation’s and the City’s actual results could differ materially from those discussed in such forward-looking statements. The forward-looking statements included herein are necessarily based on various assumptions and estimates and are inherently subject to various risks and uncertainties, including risks and uncertainties relating to the possible invalidity of the underlying assumptions and estimates and possible changes or developments in social, economic, business, industry, market, legal, regulatory circumstances, and conditions and actions taken or omitted to be taken by third parties, including customers, suppliers, business partners and competitors, and legislative, judicial, and other governmental authorities and officials. Assumptions related to the foregoing involve judgments with respect to, among other things, future economic, competitive, and market conditions of future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond the control of the Corporation and the City. Any of such assumptions could be inaccurate and, therefore, there can be no assurance that the forward- looking statements included in this Official Statement will prove to be accurate.
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DEBT SERVICE REQUIREMENTS
The following schedule reflects the total principal and interest requirements on Parity Bonds, including the Bonds.
Table 4 – Pro-Forma Debt Service Requirements
Fiscal Year Grand % of Ending Outstanding Debt Service(1) The Bonds (2) Total Principal 8-31 Principal Interest Total Principal Interest Total Requirements Retired 2021 $ 650,000 $ 2,875,296 $ 3,525,296 $ - $ 338,114 $ 338,114 $ 3,863,410 2022 670,000 2,025,770 2,695,770 - 811,473.0 811,473 3,507,243 2023 6,800,000 1,990,807 8,790,807 315,000 811,473.0 1,126,473 9,917,280 2024 940,000 1,608,056 2,548,056 495,000 808,165.5 1,303,166 3,851,222 2025 1,130,000 1,556,219 2,686,219 500,000 801,532.5 1,301,533 3,987,751 17.98% 2026 1,310,000 1,494,544 2,804,544 510,000 792,832.5 1,302,833 4,107,376 2027 1,495,000 1,423,531 2,918,531 520,000 782,938.5 1,302,939 4,221,470 2028 285,000 1,342,819 1,627,819 1,935,000 771,342.5 2,706,343 4,334,161 2029 455,000 1,322,156 1,777,156 1,985,000 723,354.5 2,708,355 4,485,511 2030 660,000 1,289,169 1,949,169 2,040,000 671,546.0 2,711,546 4,660,715 35.48% 2031 835,000 1,248,756 2,083,756 2,095,000 615,242.0 2,710,242 4,793,998 2032 1,030,000 1,201,606 2,231,606 2,155,000 555,325.0 2,710,325 4,941,931 2033 1,120,000 1,146,906 2,266,906 2,215,000 490,459.5 2,705,460 4,972,366 2034 1,495,000 1,087,806 2,582,806 2,285,000 421,573.0 2,706,573 5,289,379 2035 1,610,000 1,008,956 2,618,956 2,360,000 348,224.5 2,708,225 5,327,181 62.37% 2036 1,695,000 924,319 2,619,319 2,445,000 268,928.5 2,713,929 5,333,247 2037 1,745,000 834,369 2,579,369 2,525,000 185,554.0 2,710,554 5,289,923 2038 1,840,000 739,206 2,579,206 2,615,000 94,401.5 2,709,402 5,288,608 2039 2,000,000 638,188 2,638,188 - - - 2,638,188 2040 2,110,000 526,600 2,636,600 - - - 2,636,600 88.91% 2041 2,235,000 407,025 2,642,025 - - - 2,642,025 2042 2,360,000 279,588 2,639,588 - - - 2,639,588 2043 2,495,000 144,088 2,639,088 - - - 2,639,088 100.00% $ 36,965,000 $ 27,115,780 $ 64,080,780 $ 26,995,000 $ 10,292,480 $ 37,287,480 $ 101,368,260
(1) “Outstanding Debt Service” excludes the Refunded Obligations. Preliminary, subject to change. (2) Interest on the Bonds has been calculated at the average rates of 1.050 - 3.610% for purposes of illustration. Preliminary, subject to change.
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ANNUAL BUDGET PROCESS
Budget Process The City covenants in the Lease Agreement that the City officer responsible for formulating the City budget will be directed to include in the budget proposal submitted to the City Council in each Fiscal Year that the Bonds are outstanding a request for an Appropriation of funds in an amount equal to all payments required to pay (i) the full amounts of all Lease Payments coming due in the ensuing Fiscal Year, (ii) all amounts due the Trustee in the ensuing Fiscal Year and (iii) all Operating Expenses anticipated to be required for the ensuing Fiscal Year. Such Appropriated amount, or portion thereof, may be transferred to the Trustee at the times and in the manner provided in the Trust Agreement. Notwithstanding the foregoing, (i) the inclusion of such an Appropriation request in proposed budget will not be a condition precedent to any rights of the City under the Lease Agreement, including the right not to Appropriate, and (ii) any failure by a City official to include a proposed Appropriation amount in any proposed City budget will not be considered an Event of Default under the Lease Agreement.
THE LEASE AGREEMENT AND THE PAYMENT OBLIGATIONS SET FORTH THEREIN ARE SPECIAL, LIMITED OBLIGATIONS OF THE CITY, PAYABLE SOLELY FROM APPROPRIATED FUNDS. THE OBLIGATIONS OF THE CITY UNDER THE LEASE AGREEMENT, INCLUDING ITS OBLIGATION AS SUBLESSEE TO PAY THE LEASE PAYMENTS AND OTHER EXPENSES DESCRIBED THEREIN, AND ITS OBLIGATION AS LESSOR TO PAY OPERATING EXPENSES DESCRIBED IN THE LEASE AGREEMENT, CONSTITUTE A CURRENT EXPENSE OF THE CITY IN EACH FISCAL YEAR, AND DO NOT CONSTITUTE AN INDEBTEDNESS OF THE CITY WITHIN THE MEANING OF THE CONSTITUTION AND LAWS OF THE STATE. NOTHING IN THE LEASE AGREEMENT CONSTITUTES A PLEDGE BY THE CITY OF ANY PROPERTY TAXES OR OTHER MONEY, OTHER THAN APPROPRIATED FUNDS FOR THE THEN CURRENT FISCAL YEAR, TO THE PAYMENT OF LEASE PAYMENTS, OPERATING EXPENSES OR OTHER COSTS AND EXPENSES DUE UNDER THE LEASE AGREEMENT. WITHOUT A SUBSEQUENT VOTE OF THE CITIZENS OF THE CITY UNDER SECTION 334.0241 OF THE VENUE PROJECT ACT, THE CITY IS NOT AUTHORIZED TO USE REVENUE DERIVED FROM AD VALOREM TAXES TO MAKE THE LEASE PAYMENTS OR MAINTAIN THE PROJECT.
There can be no assurance that the City will Appropriate such funds in any year and the Lease Agreement and the Trust Agreement do not obligate the City to do so. However, under the Lease Agreement, the City covenants that it will make reasonable efforts to include a request for Appropriation in each annual budget submitted to the governing body of the City for approval. The City Charter requires that the City Council adopt an annual budget for the City’s September 1 through August 31 fiscal year. The process includes total debt service requirements for the subsequent fiscal year, with debt service for individual issues also presented for detail. In fulfilling this requirement, the City’s year-round budget and planning process consists of four phases: Budget Development. The City Charter requires that departments submit their requests to the City Manager, annually but not later than June 1. Prior to this phase, the City Council also convenes a strategic planning session to provide staff with information on City Council funding priorities. Budget Review. The Proposed Budget, as developed by the City Manager, Chief Financial Officer, and Director of Management and Budget, is filed with the City and County Clerks and provided to the Mayor and City Council in accordance with State law." Budget Consideration and Adoption. The City Manager transmits the Proposed Budget to the City Council by the second regular meeting of July. The City Council, meeting as a Committee of the Whole reviews the budget and holds hearings with the public, the City Manager, and department directors. Budgeted appropriations for debt service have historically been considered a first funded priority. Budgeted debt service is constructed at a discrete project level then rolled up to the aggregate. Budgeted debt service is considered as a whole, as part of the overall budget approval, and no debt service appropriation requested has ever been changed or reduced. Administration of the Budget. After the budget has been adopted by the City Council, the approved appropriations and revenues are entered into the City’s financial accounting system. Each quarter the Office of Management and Budget reviews the financial performance of departments and, on the basis of this analysis, makes necessary budget adjustments to ensure the City’s financial stability. Strict budgetary compliance is maintained through the checks and balances of administrative regulations, Office of the Comptroller Manuals of Instruction, and an automated accounting system. Department budgets can only be increased or decreased pursuant to the annual Budget Resolution authorized by City Council.
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CITY REVENUES AND EXPENSES
General Fund The following statements set forth in condensed form reflect the historical operations of the City. The City has prepared such summary for inclusion herein based upon information obtained from the City’s Comprehensive Annual Financial Report (“CAFR”) and financial records. Reference is made to such statements for further and complete information.
Table 5 – Statement of Revenues, Expenditures and Changes in General Fund Balances
Fiscal Years Ended August 31, 2020 2019 2018 2017 2016 Revenues: Property Taxes $ 213,422,017 $ 191,642,579 $ 170,365,472 $ 158,844,476 $ 153,490,605 Penalties and Interest-Delinquent Taxes 1,458,170 1,581,339 1,316,914 1,289,169 1,166,589 Sales Taxes 99,591,904 96,649,171 92,109,776 87,704,730 85,269,622 Franchise Fees 50,281,690 50,463,838 53,828,946 53,599,045 51,525,945 Charges for Services 25,510,531 37,360,998 39,874,376 37,485,337 38,179,887 Fines and Forfeits 6,770,924 9,081,663 8,143,346 7,760,033 10,649,110 Licenses and Permits 13,564,194 14,809,829 14,352,354 14,939,427 13,993,065 Intergovernmental Revenues 1,649,614 1,002,594 1,013,206 452,977 349,877 County Participation - - - 469,169 469,169 Investment earnings 916,668 1,454,174 638,531 286,712 85,405 Rents and Other 8,084,044 5,593,485 1,695,305 1,536,669 1,411,981 Total Revenues $ 421,249,756 $ 409,639,670 $ 383,338,225 $ 364,367,744 $ 356,591,255
Expenditures: General Government $ 38,003,658 $ 31,734,785 $ 29,871,754 $ 28,278,533 $ 28,067,753 Public Safety 251,960,895 248,370,273 233,497,389 223,762,410 209,990,139 Public Works 37,598,336 38,346,170 39,205,475 37,771,710 35,790,708 Public Health 5,922,371 5,985,981 5,864,867 5,936,208 5,857,910 Facilities M aintenance - - - - Parks Department 26,705,250 27,306,855 24,812,171 22,263,171 20,518,044 Library 7,024,452 8,984,558 9,002,895 8,876,913 8,702,007 Non Departmental 11,070,288 17,529,908 17,488,741 18,473,482 19,540,951 Cultural and Recreation 6,722,574 7,573,727 6,962,274 6,600,337 6,427,183 Economic Development 8,652,886 9,142,330 9,305,627 8,941,212 8,557,774 Environmental Code Compliance - - - - - Community and Human Development 835,188 671,080 1,007,040 60,800 1,038,045 Debt Service Principal - - 7,161,843 6,941,373 5,951,740 Debt Service Interest - - 638,620 800,224 425,030 Capital Outlay 2,146,930 867,442 1,115,675 533,914 700,107 Total Expenditures $ 396,642,828 $ 396,513,109 $ 385,934,372 $ 369,240,287 $ 351,567,391
Excess (Deficiency) of Revenues Over Expenditures $ 24,606,928 $ 13,126,561 $ (2,596,147) $ (4,872,543) $ 5,023,864
Other Financing Sources (Uses) Transfers from Other Funds $ 26,352,314 $ 23,806,266 $ 17,232,156 $ 15,153,272 $ 16,920,895 Transfers Out (30,335,095) (31,773,762) (13,081,008) (9,303,627) (20,305,174) Sale of Capital Assets - 71,837 3,931 (740,585) - Total Other Financing Sources (Uses) $ (3,982,781) $ (7,895,659) $ 4,155,079 $ 5,109,060 $ (3,384,279)
Net Change in Fund Balances $ 20,624,147 $ 5,230,902 $ 1,558,930 $ 236,517 $ 1,639,585 Beginning Fund Balance 51,610,270 46,379,368 44,820,438 44,583,921 42,944,336 Ending Fund Balance $ 72,234,417 $ 51,610,270 $ 46,379,368 $ 44,820,438 $ 44,583,921
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Municipal Sales Taxes Net sales tax collections and the equivalent ad valorem tax rates on a Fiscal Year basis are as follows: Table 6 – Municipal Sales Tax
Fiscal Year % of Net Taxable Equivalent of Ended Total Ad Valorem Ad Valorem Assessed Ad Valorem 8-31 Collected Tax Levy Tax Levy Valuation Tax Rate 2017 $ 87,704,730 $ 251,440,726 34.88% $ 33,774,165,835 $ 0.2597 2018 92,109,776 270,188,859 34.09% 34,300,055,358 0.2685 2019 96,649,171 297,463,382 32.49% 35,707,774,945 0.2707 2020 99,591,904 331,934,914 30.00% 36,846,716,551 0.2703 (1) (2) 2021 61,344,226 344,968,463 17.78% 37,170,466,732 0.1650 ______(1) Unaudited (2) Collections as of March 31, 2021.
INVESTMENTS
The City invests its investable funds in investments authorized by State law and in accordance with investment policies approved and reviewed annually by the City Council of the City. Both State law and the City’s investment policies are subject to change.
Legal Investments
Under State law and subject to certain limitations, the City is authorized to invest in (1) obligations of the United States or its agencies and instrumentalities; (2) direct obligations of the State of Texas or its agencies and instrumentalities; (3) collateralized mortgage obligations issued and secured by a federal agency or instrumentality of the United States; (4) other obligations unconditionally guaranteed or insured by the State of Texas or the United States or their respective agencies and instrumentalities; (5) A or better rated obligations of states, agencies, counties, cities, and other political subdivisions of any state; (6) bonds issued, assumed, or guaranteed by the State of Israel; (7) federally insured interest-bearing bank deposits, brokered pools of such deposits, and collateralized certificates of deposit and share certificates; (8) fully collateralized U.S. government securities repurchase agreements; (9) one-year or shorter securities lending agreements secured by obligations described in clauses (1) through (7) above or (11) through (14) below or an irrevocable letter of credit issued by an A or better rated state or national bank; (10) 270-day or shorter bankers’ acceptances, if the short-term obligations of the accepting bank or its holding company are rated at least “A-1” or “P-1”; (11) commercial paper rated at least “A-1” or “P-1”; (12) SEC-registered no-load money market mutual funds that are subject to SEC Rule 2a-7; (13) SEC-registered no-load mutual funds that have an average weighted maturity of less than two years; (14) AAA or AAAm-rated investment pools that invest solely in investments described above; and (15) in the case of bond proceeds, guaranteed investment contracts that are secured by obligations described in clauses (1) through (7) above and, except for debt service funds and reserves, have a term of 5 years or less.
The City may not, however, invest in (1) interest only obligations, or non-interest bearing principal obligations, stripped from mortgage-backed securities; (2) collateralized mortgage obligations that have a remaining term that exceeds 10 years; and (3) collateralized mortgage obligations that bear interest at an index rate that adjusts opposite to the changes in a market index. In addition, the City may not invest more than 15 percent of its monthly average fund balance (excluding bond proceeds and debt service funds and reserves) in mutual funds described in clause (13) above or make an investment in any mutual fund that exceeds 10% of the fund’s total assets.
Except as stated above or inconsistent with its investment policy, the City may invest in obligations of any duration without regard to their credit rating, if any. If an obligation ceases to qualify as an eligible investment after it has been purchased, the City is not required to liquidate the investment unless it no longer carries a required rating, in which case the City is required to take prudent measures to liquidate the investment that are consistent with its investment policy.
Investment Policies
Under State law, the City is required to adopt and annually review written investment policies and must invest its funds in accordance with its policies. The policies must identify eligible investments and address investment diversification, yield, maturity, and the quality and capability of investment management. For investments whose eligibility is rating dependent, the policies must adopt procedures to monitor ratings and liquidate investments if and when required. The policies must require that all investment transactions settle on a delivery versus payment basis. The City adopt a written investment strategy for each fund group to achieve investment objectives in the following order of priority: (1) suitability, (2) preservation and safety of principal, (3) liquidity, (4) marketability, (5) diversification, and (6) yield.
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State law requires the City’s investments be made “with judgment and care, under prevailing circumstances, that a person of prudence, discretion, and intelligence would exercise in the management of the person’s own affairs, not for speculation, but for investment considering the probable safety of capital and the probable income to be derived.” The City is required to perform an annual audit of the management controls on investments and compliance with its investment policies and provide regular training for its investment officers.
Current Investments
As of March 31, 2021, the City’s investable funds were invested in the following categories:
Security Type Face Value Book Value % of Total Pools $ 70,225,468 $ 70,225,468 18.5% Certificates of Deposit 8,692,658 8,575,914 2.3% Money Market 40,015,837 40,015,837 10.5% Municipal Bonds 29,215,966 29,131,348 7.7% Agency Bonds 172,161,745 172,308,268 45.3% US Treasuries 59,878,087 59,751,532 15.7% Total Portfolio $ 380,189,761 $ 380,008,367 100.0%
LITIGATION
The City Attorney and City Staff believe that there is no pending litigation against the City or the Corporation that would have a material adverse effect upon the City, the Corporation, their respective operations, or the Bonds.
CITY PENSION AND OTHER POSTEMPLOYMENT RETIREMENT BENEFIT LIABILITIES
PENSION PLANS
The employees of the City and the El Paso Water Utilities (“EPWater”) participate in one of two single-employer defined benefit pension plans: the City Employees’ Retirement Trust (“CERT”) and the Firemen and Policemen’s Pension Funds (“FPPF”), which consists of separate divisions for firemen (“FPPF-Firemen Division”) and policemen (“FPPF-Policemen Division”). Separate boards of trustees administer these pension plans as described in Note 1 (“CERT Board” and “FPPF Board”, respectively).
The CERT was established in accordance with authority granted by Chapter 2.64 of the El Paso City Code and is a component unit (fiduciary fund type) of the City. The FPPF was established in accordance with authority granted by Article 6243b of Vernon’s Annotated Texas Statutes and is a component unit (fiduciary fund type) of the City. Each pension plan issues stand-alone financial statements that may be obtained from the respective funds’ administrative offices.
The totals for the City’s pension liabilities, deferred outflows of resources and deferred inflows of resources related to pensions, and expense are as follows:
FPPF CERT Firemen Policemen Total Net Pension Liability $ 251,631,068 $ 159,937,304 $ 229,249,947 $ 640,818,319
Deferred outflows of resources Contrbutions 27,369,717 9,057,089 12,430,395 48,857,201 Change in Experience 11,448,538 8,374,168 12,777,427 32,600,133 Investment Earnings 29,545,094 - - 29,545,094 Change in Assumptions 14,053,086 4,501,163 3,535,672 22,089,921
Deferred inflows of resources Change in Experience 8,500,861 3,535,116 1,172,402 13,208,379 Investment Earnings - 29,217,861 45,698,251 74,916,112 Change in Assumptions - - 3,998,125 3,998,125
Pension Expense 47,877,356 24,856,667 28,890,812 101,624,835
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The CERT amounts include an allocated portion for the City (80.1%) and EPWater (19.9%).
MEMBERSHIP
Membership of each plan as of the measurement date consisted of the following:
August 31, 2020 December 31, 2019 FPPF-Firemen FPPF-Policemen CERT Division Division Retirees and beneficiaries receiving benefits 3,174 790 1,080 Terminated plan members entitled to but not yet receiving benefits 181 4 14 Active plan members 4,345 898 1,162 Total 7,700 1,692 2,256
CITY EMPLOYEES’ PENSION PLAN
PLAN DESCRIPTION
Substantially all full-time employees of the City are eligible to participate in the retirement plan, except for uniformed firefighters and police officers who are covered under separate plans. Non-employer contributions are limited to participating employees of the CERT.
The designated purpose of the CERT is to provide retirement, death, and disability benefits to participants or their beneficiaries. The CERT is administered by the CERT Board, which is comprised of two citizens designated by the Mayor who are not officers or employees of the City, four elected City employees, a retiree, and two members of City Council, one of whom may include the Mayor. The CERT Board contracts with an independent pension custodian, investment managers, a pension consultant and an actuary to assist in managing the CERT.
The City is the only contributing employer. The CERT pays direct administrative costs. The City provides indirect administrative support such as office space, utilities, and payroll processing at no charge to the CERT. The CERT reimburses the City for various direct costs of processing pension checks, such as postage and supplies.
The CERT is not required to maintain any legally required reserves.
Participation is mandatory for classified employees (except permanent part-time employees). For non-classified employees, participation is mandatory for employees hired after July 1997. Classified employees include all persons who are permanent, full- time employees and are not otherwise excluded from the CERT.
Members who were first participants prior to September 1, 2011, accrue benefits based on Tier I provisions as follows:
• Participants who leave the Plan before completion of five years of service receive a refund of their contributions. Participants leaving the Plan with more than five years but less than 10 years of service may receive a refund of their contributions plus interest at 5.5% compounded annually. Participants become fully vested after reaching 40 years of age and ten years of service or 45 years of age and seven years of service. Normal retirement is the earlier of: (i) 55 years of age with ten years of service, or (ii) 60 years of age with seven years of service or (iii) 30 years of service, regardless of age. Participants who have met the minimum vesting requirements may retire, but defer receiving pension payments until they reach normal retirement age. Alternatively, such vested participants may elect an early retirement, which will provide an actuarially reduced pension benefit payment upon termination. Persons retiring and eligible to receive benefits receive monthly pension payments in the amount of 2.5% of average monthly gross earnings received by the employee during the three years immediately prior to retirement, or 2.5% of the average monthly base salary received by the employee during the year immediately prior to retirement, or 2.5% of the monthly base salary pay for the month immediately prior to retirement, whichever is greater, multiplied by the number of completed years of service, plus 0.2083 of 1% of such average for each additional completed or fractional part of a month of service.
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Members who were first participants on or after September 1, 2011, accrue benefits based on Tier II provisions as follows:
• Participants who leave the Plan before completion of seven years of service receive a refund of their contributions. Participants leaving the Plan with more than seven years but less than 10 years of service may receive a refund of their contributions plus interest at 3% compounded annually. Participants become fully vested after reaching 45 years of age and seven years of service. Normal retirement is the earlier of: (i) 60 years of age with seven years of service, or (ii) 35 years of service, regardless of age. Participants who have met the minimum vesting requirements may retire, but defer receiving pension payments until they reach normal retirement age. Alternatively, such vested participants may elect an early retirement, which will provide an actuarially reduced pension benefit payment upon termination. Persons retiring and eligible to receive benefits receive monthly pension payments in the amount of 2.25% of average monthly gross earnings received by the employee during the three years immediately prior to retirement, multiplied by the number of completed years of service, plus .1875 of 1% of such average for each additional completed or fractional part of a month of service, limited to 90% of the three-year average final pay. A pension benefit is available to surviving spouses and dependents. The Plan includes no automatic increase in retirement benefits. However, the Board, at its discretion after consideration of a recent actuarial review of the funding status, may provide ad-hoc cost of living or other increases in retirement benefits.
BASIS OF ACCOUNTING
The accounting policies of the CERT have been established to conform to GAAP for state and local governments as promulgated by authoritative pronouncements issued by the GASB. The CERT is accounted for on an economic resources measurement focus and the accrual basis of accounting.
The preparation of financial statements in conformity with GAAP requires the CERT’s management to make estimates and assumptions that affect reported amounts of assets and liabilities at the date of the financial statements and the reported changes in net position during the reporting period. Actual results may differ from those estimates.
METHOD USED TO VALUE INVESTMENTS
Investments are stated at fair value in the accompanying statement of fiduciary net position. The fair value of marketable investments, including U.S. government securities, corporate bonds and stocks, is determined by the latest bid price or by the closing exchange price at statements of fiduciary net position dates. The fair value of investments in bank collective investment funds, commingled funds, real estate investment funds and private equity limited partnerships are determined by the investment managers based on the fair values of the underlying securities in the funds. In general, the fair value of the underlying securities held in the real estate investment funds are based upon property appraisal reports prepared by independent real estate appraisers (members of the Appraisal Institute or an equivalent organization) within a reasonable amount of time following acquisition of the real estate and no less frequently than annually thereafter. In general, the fair value of the underlying securities held in the private equity limited partnerships are based on GASB 72 – Fair Value Measurements and Disclosures, and limited partnership financial statements are audited by independent certified public accountants. Bank collective investment funds are governed by Section 9.18 of Regulation 9 issued by the Office of Comptroller of the Currency and by other applicable regulations as defined by the Mellon Bank, N.A. Employee Benefit Collective Investment Fund Plan.
Purchases and sales of securities are recorded on a trade-date basis. Interest income is recorded on the accrual basis. Dividends are recorded on the ex-dividend date.
Net appreciation (depreciation) in fair value of investments reflected in the accompanying statements of changes in fiduciary net position represents gains or losses realized during the year plus or minus the change in the net unrealized gains or losses on investments. The change in net unrealized gains or losses on investments represents the change in the difference between the cost and fair value of investments at the beginning versus the end of the fiscal year.
CONTRIBUTIONS REQUIRED AND CONTRIBUTIONS MADE
Contribution rates for the CERT are based upon City ordinance chapter 2.64.190 and are not actuarially determined. However, each time a new actuarial valuation is performed, contribution requirements are compared to the actuarially determined amount necessary to fund service costs and amortize the unfunded actuarial accrued liability (using entry-age-normal cost method) over thirty years. As of the most recent actuarial valuation, the contribution rate was 23.00% of annual covered payroll.
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Contributions for the City’s fiscal year ended August 31, 2020, were made as follows:
Stated Percentage of Covered Amount Payroll Employer contribution $ 27,369,717 14.05% Employee contributions 14,865,730 8.95% Total contributions $ 42,235,447 23.00%
ACTUARIAL METHODS AND ASSUMPTIONS:
Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the probability of occurrence of events far into the future. Actuarially determined amounts are subject to revision as actual results are compared with past expectations and new estimates are made about the future.
Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and the plan members) and include the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between the employer and plan members to that point. The actuarial methods and assumptions used include techniques that are designed to reduce the effects of short-term volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the long-term perspective of the calculations.
For the August 31, 2019 rolled forward to August 31, 2020 actuarial valuation, the entry age normal cost method was used. The actuarial value of pension benefit assets was determined using techniques that spread the effects of short-term volatility in the market value of investments over a five-year period. The actuarial assumptions included a 7.50% investment rate of return (net of administrative expenses), projected salary increases of 3.00%, which includes an inflation rate of 3.00% and no costs of living increases. The remaining amortization period at August 31, 2019, was 20 years using a level percent, open basis, amortization period. The mortality assumption was based on the RP-2014 employee tables with Blue Collar adjustment projected to 2030 using Scale BB. Mortality rates for disabled participants are based on the RP-2014 tables for Disabled Lives. Retirement, disability, and termination rates were adjusted to reflect experience.
The long-term expected rate of return on pension fund investments was determined using a building-block method in which best- estimate ranges of future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. Best estimates of arithmetic real rates of return for each major asset class included in the CERT’s target asset allocation as of August 31, 2020 are summarized in the following table: Long-term Expected Asset Class Real Rate of Return Domestic equity 6.99% International equity 6.45% Fixed income 0.37% Real estate 4.81% Private Equity 10.62% Alternatives 3.03%
DISCOUNT RATE: The discount rate used to measure the total pension liability was 7.50 percent. Based on plan funding expectations, no actuarial projection of cash flows was made as the plan’s fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of the projected benefit payments to determine the total pension liability.
The City’s net pension liability as of August 31, 2020 was measured as of August 31, 2019, and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of August 31, 2019 rolled forward to August 31, 2020.
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Changes in the total pension liability, plan fiduciary net position and the net pension liability through the respective fiscal years ended, are as follows for the CERT and as apportioned to the City and EPWater, as determined by the City at August 31, 2020:
Changes in Net Pension Liability - City Employees Retirement Trust Increase (Decrease)
Total Pension Fiduciary Net Net Pension Liability (a) Position (b) Liability (a) - (b) Balances as of 9/1/19 $ 1,024,379,167 $ 820,416,288 $ 203,962,879
Changes for the year: Service Cost 20,769,411 - 20,769,411 Interest on total pension liability 75,886,822 - 75,886,822 Difference between expected and actual return - - - Changes in assumptions - - - Benefit Payments (66,648,577) (66,648,577) - Employer contributions - 25,761,130 (25,761,130) Plan Member contributions - 16,410,115 (16,410,115) Net investment income (loss) - 9,080,390 (9,080,390) Administrative expense - (2,263,591) 2,263,591 Other - - - Net Changes 30,007,656 (17,660,533) 47,668,189
Balances as of 8/31/20 $ 1,054,386,823 $ 802,755,755 $ 251,631,068
Changes in Net Pension Liability - City Increase (Decrease) Total Pension Fiduciary Net Net Pension Liability (a) Position (b) Liability (a) - (b) Balances as of 9/1/19 $ 820,527,713 $ 657,153,447 $ 163,374,266
Changes for the year: Service Cost 16,636,298 - 16,636,298 Interest on total pension liability 60,785,346 - 60,785,346 Difference between expected and actual return - - - Changes in assumptions - - - Benefit Payments (53,385,510) (53,385,510) - Employer contributions - 20,634,665 (20,634,665) Plan Member contributions - 13,144,502 (13,144,502) Net investment income (loss) - 7,273,392 (7,273,392) Administrative expense - (1,813,136) 1,813,136 Other - - - Net Changes 24,036,134 (14,146,087) 38,182,221
Balances as of 8/31/20 $ 844,563,847 $ 643,007,360 $ 201,556,487
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Changes in Net Pension Liability - EPWater Increase (Decrease) Total Pension Fiduciary Net Net Pension Liability (a) Position (b) Liability (a) - (b) Balances as of 9/1/19 $ 203,851,454 $ 163,262,843 $ 40,588,612
Changes for the year: Service Cost 4,133,113 - 4,133,113 Interest on total pension liability 15,101,478 - 15,101,478 Difference between expected and actual return - - - Changes in assumptions - - - Benefit Payments (13,263,067) (13,263,067) - Employer contributions - 5,126,465 (5,126,465) Plan Member contributions - 3,265,613 (3,265,613) Net investment income (loss) - 1,806,998 (1,806,998) Administrative expense - (450,454) 450,454 Other - - - Net Changes 5,971,524 (3,514,445) 9,485,969
Balances as of 8/31/20 $ 209,822,978 $ 159,748,398 $ 50,074,581
SENSITIVITY TO INTEREST RATE CHANGES: The following presents the resulting net pension liability as of August 31, 2020 calculated using the discount rate of 7.5%, as well as what the net pension liability would be if it were calculated using a discount rate that is one-percent lower or one-percent higher than the current rate.
Current 1% Decrease Discount Rate 1% Increase (6.5%) (7.5%) (8.5%) City's net pension liability $ 372,822,910 $ 251,631,068 $ 149,972,475
PENSION EXPENSE AND DEFERRED OUTFLOWS OF RESOURCES AND DEFERRED INFLOWS OF RESOURCES RELATED TO PENSIONS
For the year ended August 31, 2020, the City recognized pension expense, as measured in accordance with GASB Statement No. 68, of $38,349,762 for the City and $9,527,594 for EPWater. The reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources for the City Employees Retirement Trust in total and as apportioned to the City and EPWater, as determined by the City at August 31, 2020:
Deferred Deferred Outflows of Inflows of City Employees Retirement Trust of Resources Resources Difference in expected and actual experience $ 11,448,538 $ 8,500,861 Difference between expected and actual investment earnings on plan investments 29,545,094 - Change in Assumptions for Pensions 14,053,086 - Contributions subsequent to the measurement date 27,369,717 - Total City Employees Retirement Trust $ 82,416,435 $ 8,500,861
Deferred Deferred Outflows of Inflows of City of Resources Resources Difference in expected and actual experience $ 9,170,279 $ 6,809,189 Difference between expected and actual investment earnings on plan investments 23,665,619 - Change in Assumptions for Pensions 11,256,523 - Contributions subsequent to the measurement date 21,923,144 - Total City $ 66,015,565 $ 6,809,189
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Deferred Deferred Outflows of Inflows of EPWater of Resources Resources Difference in expected and actual experience $ 2,278,259 $ 1,691,672 Difference between expected and actual investment earnings on plan investments 5,879,475 - Change in Assumptions for Pensions 2,796,563 - Contributions subsequent to the measurement date 5,446,573 - Total EPWater $ 16,400,870 $ 1,691,672
An amount of $27.4 million reported as deferred outflows of resources related to pensions resulting from City contributions subsequent to the measurement date but before the end of the City's reporting period will be recognized as a reduction in the net pension liability in the subsequent fiscal period rather than in the current fiscal period.
Other amounts reported as deferred outflows and inflows of resources to the plan will be recognized in pension expense as follows:
Ending August 31 Total City EPWater 2021 $ 11,453,992 $ 9,174,648 $ 2,279,344 2022 9,129,394 7,312,645 1,816,749 2023 12,008,820 9,619,065 2,389,755 2024 12,889,277 10,324,311 2,564,966 2025 1,064,374 852,564 211,810 Total $ 46,545,857 $ 37,283,233 $ 9,262,624
FIRE AND POLICE PENSION FUND
PLAN DESCRIPTION
The designated purpose of the FPPF is to provide retirement, death and disability benefits to participants or their beneficiaries.
The FPPF is a defined benefit pension plan covering uniformed firefighters and police officers employed by the City of El Paso. Non-employer contributions are limited to participating employees. The City of El Paso is the only participating employer. The City’s contributions to the FPPF are limited to 18.50% of compensation as provided by the City Charter. The projection of benefits for financial reporting purposes does not explicitly incorporate the potential effects of the legal funding limitations.
The FPPF – Firemen Division is a defined benefit, contributory retirement plan covering uniformed employees of the Fire Department. Participants are required to contribute 16.368% of their compensation to the FPPF.
The FPPF – Policemen Division is a defined benefit, contributory retirement plan covering uniformed employees of the Police Department. Participants are required to contribute 15.534% of their compensation to the FPPF.
Under both divisions, membership is mandatory and effective upon commencement of the probationary period. Participant contributions are not refunded if a participant terminates with less than five years of service and all benefits under the FPPF are terminated. Participant contributions (without interest) are refunded upon request if a participant terminates with five or more years of service but less than twenty years of service. All benefits under the FPPF are terminated if contributions are refunded.
Benefits are calculated as follows for the Base Plan and Second Tier Plan. Any member originally enrolled on July 1, 2007 or thereafter is automatically enrolled in the Second Tier Plan. a. Base Plan
Retirement benefits for members with at least 20 years of vested service and the attainment of age 45 or more are calculated at 2.75% of the member's final 36-month average wages, excluding overtime, multiplied by years of service, not to exceed 28 years. Retirement benefits for members with at least 20 years of vested service, under the age of 45 are calculated at 2.75% of the member's final wages multiplied by years of service reduced by a factor proportionate to the number of months and years below the age 45. Retirement benefits for members with at least 10 years of vested service and at least 50 years of age are calculated at 2.75% of the member's final wages.
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Plan members are eligible for service-connected disability benefits and for ordinary disability benefits. Disability retirement benefits are calculated as the greater of 50% of the member's final wages or 2.75% of the member's final wages multiplied by years of service.
Death benefits are calculated as the greater of 50% of the member's final wages or the calculation of a retiree as mentioned in the preceding paragraph.
A qualified spouse with no qualifying children is entitled to receive 100% of member's death benefit. If there are qualifying children, a qualified spouse receives two-thirds of the death benefit and qualified children equally share the remaining third. If there is no qualifying spouse, then the qualifying children are entitled to equally share two-thirds of the member's death benefit.
Cost-of-living adjustment (COLA) is provided upon the earlier of the retiree having attained age 60 or the fifth anniversary for firemen or second anniversary for policemen of the pension commencement date and on each January 1st thereafter. b. Second Tier Plan
Retirement benefits for members with at least 20 years of service and the attainment of age 45 or more. The monthly benefit is equal to 2.75% of the final 36-month average wages, excluding overtime, for each year of service, not to exceed 28 years. If a police officer terminates with at least 20 years of service before age 45, the member may elect an early retirement benefit which is actuarially reduced based on the years and months below age 45. If a police officer terminates with at least 10 years of service but less than 20, the member is entitled to a retirement benefit commencing at age 50, or their age at termination if older. The normal form of the monthly benefit in all three of these types of retirement is joint and 100% to a surviving spouse. A 3% COLA is provided upon the earlier of the retiree having attained age 60 or the second anniversary of the pension commencement date and on each January 1st thereafter.
The FPPF is maintained under the provisions of Article 6243b of Vernon's Annotated Texas Statutes. All current FPPF provisions are set forth in the City of El Paso Firemen and Policemen's Pension Fund Plan Document as Restated Effective July 1, 2007. Benefit provisions, contribution obligations and funding policy of the Fund are established and amended in accordance with authority granted by Article 6243b of Vernon's Annotated Texas Statutes. The costs of administering the Fund are paid out of the Fund's assets. The complete Plan Document containing benefit and vesting provision in their entity is available at the Pension office.
BASIS OF ACCOUNTING
The accounting policies of the Fund have been established to conform to GAAP for state and local governments as promulgated by authoritative pronouncements issued by GASB. The Fund is accounted for on an economic resources measurement focus using the accrual basis of accounting.
METHOD USED TO VALUE INVESTMENTS
Investments are stated at fair value in the accompanying statements of fiduciary net position. The fair value of marketable investments is determined by the latest bid price, closing exchange price at year end, institutional bid evaluation or NAV as considered appropriate for each investment type by the Custodian. The estimated fair value of alternative investments is based on the most recent valuations provided by the external investment managers. Because alternative investments are not readily marketable, their estimated value is subject to uncertainty and, therefore, may differ from the value that would have been used had a ready market for such investments existed. Third‑party investment managers administer substantially all marketable securities of the Fund.
Gains and losses resulting from securities transactions are recorded in investment income.
Purchases and sales of securities are recorded on a trade-date basis. Interest income is recorded on the accrual basis. Dividends are recorded on the ex-dividend date.
Net change in fair value of investments reflected in the accompanying statements of changes in fiduciary net position available for benefits represents the net realized and unrealized gains or losses on investments, which equals the difference between the cost and the market value of investments at the beginning versus the end of the year, plus or minus gains or losses realized during the year.
CONTRIBUTIONS REQUIRED AND CONTRIBUTIONS MADE
Funding policies providing for periodic employer contributions are determined by City Charter, and employee contributions are established by the FPPF’s Board of Trustees and a vote of active participants in accordance with Article 6243b (Act) of Vernon’s Annotated Texas Statutes. Actuarial valuations are prepared biennially for the Fund.
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In the event, based upon the results of the actuarial valuations, a qualified actuary determines that the total contribution rate is insufficient to amortize an unfunded actuarial accrued liability, the City's governing body may increase its contribution rate.
Based upon the results of the actuarial evaluations, if present contribution requirements are insufficient to accumulate sufficient assets to amortize the unfunded actuarial accrued liability, the FPPF’s Board of Trustees, after approval by secret ballot of the rank and file policemen or firemen, could increase participant contributions or decrease participant benefits to maintain the actuarial integrity of the system. The City’s contribution is determined by a formula set forth in the City Charter.
Employer contributions for the year ended December 31, 2019 were $12,789,438 and $17,627,625 for the Firemen and Policemen Divisions, respectively.
ACTUARIAL METHODS AND ASSUMPTIONS
Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the probability of occurrence of events far into the future. Actuarially determined amounts are subject to revision as actual results are compared with past expectations and new estimates are made about the future.
Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and the plan members) and include the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between the employer and plan members to that point. The actuarial methods and assumptions used include techniques that are designed to reduce the effects of short-term volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the long-term perspective of the calculations.
For the January 1, 2018 actuarial valuations used in the determination of the total pension liability at December 31, 2019, the measurement date, the entry age normal cost method was used. The actuarial value of pension benefit assets was determined using techniques that spread the effects of short-term volatility in the market value of investments over a five-year period.
The actuarial assumptions included a 7.75% investment rate of return (net of administrative expenses), projected salary increases of 3% to 4%, which includes an inflation rate of 3% per year. A 3% COLA is provided at age 60 or on the fifth anniversary of the pension commencement. Mortality rates were based on the RP-2014 employee tables with Blue Collar adjustment projected to be 2030 using scale BB. Mortality rates for the disabled participants are based on the RP-2014 Tables for Disabled Lives. The long-term expected rate of return on pension plan investments was based primarily on historical returns on plan assets, adjusted for changes in target portfolio allocations and recent changes in long-term interest rates based on publicly available information.
Long-term Expected Real Rate of Target Equities Return Allocation Large cap domestic 6.00% 19.25% Small cap domestic 6.11% 8.25% International developed 6.44% 22.50% Emerging markets 7.76% 5.00% Real estate 3.90% 10.00% Private equity 6.45% 10.00% Fixed Income Domestic core 1.87% 20.00% Bank loans 2.45% 5.00% Weighted Average 5.03%
DISCOUNT RATE: The discount rate used to measure the total pension liability was 7.75 percent. Based on plan funding expectations, no actuarial projection of cash flows was made as the plan’s fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of the projected benefit payments to determine the total pension liability.
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Changes in the total pension liability, plan fiduciary net position and the net pension liability through the year ended August 31, 2020 were as follows:
Firemen Division Total Pension Plan Fiduciary Net Pension Liability (a) Net Position (b) Liability (a) - (b) Amounts as of January 1, 2019 $ 778,513,799 $ 550,808,171 $ 227,705,628 Changes for the year: Service Cost 12,804,493 - 12,804,493 Interest (on the total pension liability) 59,711,307 - 59,711,307 Difference between expected and actual experience (4,380,837) - (4,380,837) Contributions by the City - 12,789,438 (12,789,438) Contributions by the firefighters - 11,000,590 (11,000,590) Net investment income - 113,033,609 (113,033,609) Benefit payments (41,699,623) (41,699,623) - Administrative expenses - (920,350) 920,350 Assumption changes - - - Other - - - Net Changes 26,435,340 94,203,664 (67,768,324) Amounts as of December 31, 2019 $ 804,949,139 $ 645,011,835 $ 159,937,304
Policemen Division Total Pension Plan Fiduciary Net Pension Liability (a) Net Position (b) Liability (a) - (b) Amounts as of January 1, 2019 $ 1,119,916,473 $ 798,668,082 $ 321,248,391 Changes for the year: Service Cost 16,367,567 - 16,367,567 Interest (on the total pension liability) 85,725,208 - 85,725,208 Difference between expected and actual experience 2,731,235 - 2,731,235 Contributions by the City - 17,627,625 (17,627,625) Contributions by the Policemen - 14,280,541 (14,280,541) Net investment income - 165,833,901 (165,833,901) Benefit payments (60,304,643) (60,304,643) - Administrative expenses - (919,613) 919,613 Assumption changes - - - Other - - - Net Changes 44,519,367 136,517,811 (91,998,444) Amounts as of December 31, 2019 $ 1,164,435,840 $ 935,185,893 $ 229,249,947
SENSITIVITY TO INTEREST RATE CHANGES: The following table presents the resulting net pension liability calculated using the discount rate of 7.75%, as well as what the net pension liability would be if it were calculated using a discount rate that is one- percent lower or one-percent point higher than the current rate:
Firemen Division 1% Decrease Current Single Rate 1% Increase (6.75%) Assumption (7.75%) (8.75%) $271,263,456 $159,937,304 $69,368,899
Policemen Division 1% Decrease Current Single Rate 1% Increase (6.75%) Assumption (7.75%) (8.75%) $389,596,002 $229,249,947 $98,644,379
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PENSION EXPENSE AND DEFERRED OUTFLOWS OF RESOURCES AND DEFERRED INFLOWS OF RESOURCES RELATED TO THE PLAN: For the year ended August 31, 2020, the City recognized pension expense, as measured in accordance with GASB Statement No. 68, of $24,856,667 for firemen division and $28,890,812 for policemen division, and reported deferred outflows of resources and deferred inflows of resources related to the plan from the following sources:
Firemen Division Deferred Deferred Outflows of Inflows of of Resources Resources Contribution subsequent to measurement date $ 9,057,089 $ - Net difference between projected and actual earnings on pension plan investments - 29,217,861 Change in assumptions 4,501,163 - Difference between expected and actual experience 8,374,168 3,535,116 $ 21,932,420 $ 32,752,977
Policemen Division Deferred Deferred Outflows of Inflows of of Resources Resources Contribution subsequent to measurement date $ 12,430,395 $ - Net difference between projected and actual earnings on pension plan investments - 45,698,251 Change in assumptions 3,535,672 3,998,125 Difference between expected and actual experience 12,777,427 1,172,402 $ 28,743,494 $ 50,868,778
Contributions of $21,487,484 were reported as deferred outflows of resources related to pensions resulting from City contributions subsequent to the measurement date but before the end of the City's reporting period will be recognized as a reduction in the net pension liability in the subsequent fiscal period rather than in the current fiscal period.
Other amounts reported as deferred outflows or deferred inflows of resources related to the plan will be recognized in pension expense as follows:
Year Ending Policemen Firemen August 31 Division Division 2021 $ (9,416,744) $ (3,464,031) 2022 (6,104,712) (4,242,888) 2023 1,492,483 3,042,353 2024 (20,526,706) (15,060,848) 2025 - (152,232) $ (34,555,679) $ (19,877,646)
OTHER POST EMPLOYMENT BENEFITS
Plan Description: The City sponsors and administers an informal single-employer defined benefit OPEB plan for healthcare. Texas statute provides that retirees from a municipality with a population of 25,000 or more and who receive retirement benefits from a municipal retirement plan are entitled to purchase continued health benefits coverage for the retiree and the retiree’s dependents unless the retiree is eligible for group health benefits coverage through another employer. The State of Texas has the authority to establish and amend the requirements of this statute. The City does not issue stand-alone financial statements of the healthcare plan but all required information is presented in this report.
Benefits Provided: The contribution requirements of plan members are established by City ordinance and may be amended as needed. Retiree coverage is the same as the coverage provided to active City employees. Retirees pay premiums ranging from $348.19 per month to $2,237.28 per month depending on the coverage elected. The City’s adopted budget policy maintains that retirees must pay 45% of the cost of premiums and the City will fund the remaining 55%. No assets are accumulated in a trust that meets the criteria in paragraph 4 of GASB 75.
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Employees Covered by Benefit Terms: At August 31, 2020, the following employees were covered by the benefit terms:
Inactive employees currently receiving benefits 934 Active employees 4,180 Total 5,114
Total OPEB Liability: The City's total OPEB liability of $156,786,139 was measured as of August 31, 2020, and was determined by an actuarial valuation as of August 31, 2020.
Actuarial Assumptions and Other Inputs: Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and the plan members) and include the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between the employer and plan members to that point. The actuarial methods and assumptions used include techniques that are designed to reduce the effects of short-term volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the long-term perspective of the calculations.
The City's total OPEB liability in the August 31, 2020 actuarial valuation was determined using the following actuarial assumptions, applied to all periods included in the measurement, unless otherwise specified.
Inflation: 2.20 percent Salary Increases: 3.25 percent Discount Rate: 2.33 percent Healthcare Cost Trend Rates: Initial rates are based on actual changes in the fully- insured premiums
The discount rate was based on the August 31, 2020 Fidelity Municipal General Obligation AA 20- Year Yield.
Mortality rates for active employees were based on the Pub G.H-2010 (general employees) and Pub S.H-2010 (public safety) Employee and Retiree Mortality Tables, Generational with Projection Scale MP-2019 for males or females, as appropriate.
The following table shows the changes in the City's total OPEB liability.
Total OPEB Liability Balance at 08/31/2019 $ 175,075,720 Changes for the Year: Service Cost 5,363,765 Interest 4,687,371 Differences Between Expected and Actual Experience (17,648,291) Changes in Assumptions/Inputs (6,674,574) Benefit Payments (4,017,852) Net Changes (18,289,581) Balance at 08/31/2020 $ 156,786,139
The following table presents the total OPEB liability of the City, as well as what the City's total OPEB liability would be if it were calculated using discount rates that are one-percent lower or one-percent higher than the current discount rate.
1% Decrease Discount Rate 1% Increase (1.33%) (2.33%) (3.33%) Total OPEB liability $ 182,218,406 $ 156,786,139 $ 131,254,759
The following presents the total OPEB liability of the City, as well as what the City's total liability would be if it were calculated using healthcare cost trend rates that are one-percent lower or one-percent higher than the current healthcare cost trend rate of 2.5%.
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Current Healthcare 1% Decrease Cost Trend Rates 1% Increase (1.5%) (2.5%) (3.5%) Total OPEB liability $ 128,672,412 $ 156,786,139 $ 185,358,804
For the fiscal year ended August 31, 2020, the City recognized OPEB expense of $6,376,684. As of August 31, 2020, the City reported deferred outflows of resources and deferred inflows of resources related to OPEB as presented below:
Deferred Deferred Outflows of Inflows of Resources Resources Differences between expected and actual experience $ 149,261 $ 24,303,317 Changes of assumptions or other inputs 12,505,223 5,339,659 $ 12,654,484 29,642,976
Amounts reported as deferred outflows of resources related to OPEB will be recognized in OPEB expense as follows:
Year Ended August 31, Amount 2021 $ (3,674,452) 2022 (3,674,452) 2023 (4,834,721) 2024 (4,834,721) 2025 29,852 $ (16,988,494)
Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the probability of occurrence of events far into the future. Examples include assumptions about future employment, mortality, and the healthcare cost trend. Amounts determined regarding the funded status of the plan and the annual required contributions of the employer are subject to continual revision as actual results are compared with past expectations and new estimates are made about the future. The Schedule of Changes in the Total OPEB Liability and Related Ratios, presented as required supplementary information following the notes to the financial statements, will present multiyear trend information about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liabilities for benefits.
COMPENSATED ABSENCE LIABILITY . . . City employees, excluding uniformed Police Department and Fire Department employees, earn vacation leave, which may either be taken or accumulated (up to a maximum of 400 hours) until paid upon termination or retirement. For uniformed Police Department and Fire Department employees’ only, special provisions apply based on the most current Articles of Agreement between the City and the local associations of Fire and Police unions.
Leave benefits are accrued as a liability as the benefits are earned by employees, but only to the extent that it is probable that the City will compensate the employees through paid time off or cash payments, conditioned on the employee’s termination or retirement. For governmental funds, a liability for these amounts is reported only if they have matured as a result of termination or retirement. For the governmentwide and proprietary fund financial statements, all of the outstanding compensated absences are recorded as a liability.
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TAX MATTERS
The following is a general summary of the United States federal income tax consequences of the purchase and ownership of the Bonds. The discussion is based upon laws, Treasury Regulations, rulings and decisions now in effect, all of which are subject to change or possibly differing interpretations. No assurances can be given that future changes in the law will not alter the conclusions reached herein. The discussion below does not purport to deal with United States federal income tax consequences applicable to all categories of investors. Further, this summary does not discuss all aspects of United States federal income taxation that may be relevant to a particular investor in the Bonds in light of the investor’s particular personal investment circumstances or to certain types of investors subject to special treatment under United States federal income tax laws (including insurance companies, tax exempt organizations, financial institutions, brokers-dealers, and persons who have hedged the risk of owning the Bonds). The summary is therefore limited to certain issues relating to initial investors who will hold the Bonds as “capital assets” within the meaning of section 1221 of the Internal Revenue Code of 1986, as amended (the “Code”), and acquire such Bonds for investment and not as a dealer or for resale. Prospective investors should note that no rulings have been or will be sought from the Internal Revenue Service (the “IRS”) with respect to any of the U.S. federal income tax consequences discussed below, and no assurance can be given that the IRS will not take contrary positions.
INVESTORS SHOULD CONSULT THEIR OWN TAX ADVISORS IN DETERMINING THE FEDERAL, STATE, LOCAL, FOREIGN AND ANY OTHER TAX CONSEQUENCES TO THEM FROM THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE BONDS.
PAYMENTS OF STATED INTEREST ON THE BONDS…The stated interest paid on the Bonds will be included in the gross income, as defined in section 61 of the Code, of the beneficial owners thereof and be subject to U.S. federal income taxation when received or accrued, depending on the tax accounting method applicable to the beneficial owners thereof.
ORIGINAL ISSUE DISCOUNT…If a substantial amount of the Bonds of any stated maturity is purchased at original issuance for a purchase price (the “Issue Price”) that is less than their face amount by more than one quarter of one percent times the number of complete years to maturity, the Bonds of such maturity will be treated as being issued with “original issue discount.” The amount of the original issue discount will equal the excess of the principal amount payable on such Bonds at maturity over its Issue Price, and the amount of the original issue discount on the Bonds will be amortized over the life of the Bonds using the “constant yield method” provided in the Treasury Regulations. As the original issue discount accrues under the constant yield method, the beneficial owners of the Bonds, regardless of their regular method of accounting, will be required to include such accrued amount in their gross income as interest. This can result in taxable income to the beneficial owners of the Bonds that exceeds actual cash distributions to the beneficial owners in a taxable year.
The amount of the original issue discount that accrues on the Bonds each taxable year will be reported annually to the IRS and to the beneficial owners. The portion of the original issue discount included in each beneficial owner’s gross income while the beneficial owner holds the Bonds will increase the adjusted tax basis of the Bonds in the hands of such beneficial owner.
PREMIUM. If a beneficial owner purchases a Bond for an amount that is greater than its stated redemption price at maturity, such beneficial owner will be considered to have purchased the Bond with “amortizable bond premium” equal in amount to such excess. A beneficial owner may elect to amortize such premium using a constant yield method over the remaining term of the Bond and may offset interest otherwise required to be included in respect of the Bond during any taxable year by the amortized amount of such excess for the taxable year. Bond premium on a Bond held by a beneficial owner that does not make such an election will decrease the amount of gain or increase the amount of loss otherwise recognized on the sale, exchange, redemption or retirement of a Bond. However, if the Bond may be optionally redeemed after the beneficial owner acquires it at a price in excess of its stated redemption price at maturity, special rules would apply under the Treasury Regulations which could result in a deferral of the amortization of some bond premium until later in the term of the Bond. Any election to amortize bond premium applies to all taxable debt instruments held by the beneficial owner on or after the first day of the first taxable year to which such election applies and may be revoked only with the consent of the IRS.
MEDICARE CONTRIBUTION TAX. Pursuant to Section 1411 of the Code, as enacted by the Health Care and Education Reconciliation Act of 2010, an additional tax is imposed on individuals. The additional tax is 3.8% of the lesser of (i) net investment income (defined as gross income from interest, dividends, net gain from disposition of property not used in a trade or business, and certain other listed items of gross income), or (ii) the excess of “modified adjusted gross income” of the individual over $200,000 for unmarried individuals ($250,000 for married couples filing a joint return and a surviving spouse). Holders of the Bonds should consult with their tax advisor concerning this additional tax, as it may apply to interest earned on the Bonds as well as gain on the sale of a Bond.
DISPOSITION OF BONDS AND MARKET DISCOUNT…A beneficial owner of Bonds will generally recognize gain or loss on the redemption, sale or exchange of a Bond equal to the difference between the redemption or sales price (exclusive of the amount paid for accrued interest) and the beneficial owner’s adjusted tax basis in the Bonds. Generally, the beneficial owner’s adjusted tax basis in the Bonds will be the beneficial owner’s initial cost, increased by the original issue discount previously included in the beneficial owner’s income to the date of disposition. Any gain or loss generally will be capital gain or loss and will be long-term or short-term, depending on the beneficial owner’s holding period for the Bonds.
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Under current law, a purchaser of a Bond who did not purchase the Bonds in the initial public offering (a “subsequent purchaser”) generally will be required, on the disposition of the Bonds, to recognize as ordinary income a portion of the gain, if any, to the extent of the accrued “market discount.” Market discount is the amount by which the price paid for the Bonds by a subsequent purchaser is less than the sum of Issue Price and the amount of original issue discount previously accrued on the Bonds. The Code also limits the deductibility of interest incurred by a subsequent purchaser on funds borrowed to acquire Bonds with market discount. As an alternative to the inclusion of market discount in income upon disposition, a subsequent purchaser may elect to include market discount in income currently as it accrues on all market discount instruments acquired by the subsequent purchaser in that taxable year or thereafter, in which case the interest deferral rule will not apply. The re-characterization of gain as ordinary income on a subsequent disposition of Bonds could have a material effect on the market value of the Bonds.
LEGAL DEFEASANCE... If the Corporation elects to defease the Bonds by depositing in escrow sufficient cash and/or obligations to pay when due outstanding Bonds (a “legal defeasance”), under current tax law, a beneficial owner of Bonds may be deemed to have sold or exchanged its Bonds. In the event of such a legal defeasance, a beneficial owner of Bonds generally would recognize gain or loss in the manner described above. Ownership of the Bonds after a deemed sale or exchange as a result of a legal defeasance may have tax consequences different from those described above, and each beneficial owner should consult its own tax advisor regarding the consequences to such beneficial owner of a legal defeasance of the Bonds.
BACKUP WITHHOLDING…Under section 3406 of the Code, a beneficial owner of the Bonds who is a United States person, as defined in section 7701(a)(30) of the Code, may, under certain circumstances, be subject to “backup withholding” on payments of current or accrued interest on the Bonds. This withholding applies if such beneficial owner of Bonds: (i) fails to furnish to payor such beneficial owner’s social security number or other taxpayer identification number (“TIN”); (ii) furnishes the payor an incorrect TIN; (iii) fails to report properly interest, dividends, or other “reportable payments” as defined in the Code; or (iv) under certain circumstances, fails to provide the payor with a certified statement, signed under penalty of perjury, that the TIN provided to the payor is correct and that such beneficial owner is not subject to backup withholding.
Backup withholding will not apply, however, with respect to payments made to certain beneficial owners of the Bonds. Beneficial owners of the Bonds should consult their own tax advisors regarding their qualification for exemption from backup withholding and the procedures for obtaining such exemption.
WITHHOLDING ON PAYMENTS TO NONRESIDENT ALIEN INDIVIDUALS AND FOREIGN CORPORATIONS…Under sections 1441 and 1442 of the Code, nonresident alien individuals and foreign corporations are generally subject to withholding at the rate of 30% on periodic income items arising from sources within the United States, provided such income is not effectively connected with the conduct of a United States trade or business. Assuming the interest received by the beneficial owners of the Bonds is not treated as effectively connected income within the meaning of section 864 of the Code, such interest will be subject to 30% withholding, or any lower rate specified in an income tax treaty, unless such income is treated as portfolio interest. Interest will be treated as portfolio interest if: (i) the beneficial owner provides a statement to the payor certifying, under penalties of perjury, that such beneficial owner is not a United States person and providing the name and address of such beneficial owner; (ii) such interest is treated as not effectively connected with the beneficial owner’s United States trade or business; (iii) interest payments are not made to a person within a foreign country which the IRS has included on a list of countries having provisions inadequate to prevent United States tax evasion; (iv) interest payable with respect to the Bonds is not deemed contingent interest within the meaning of the portfolio debt provision; (v) such beneficial owner is not a controlled foreign corporation, within the meaning of section 957 of the Code; and (vi) such beneficial owner is not a bank receiving interest on the Bonds pursuant to a loan agreement entered into in the ordinary course of the bank’s trade or business.
Assuming payments on the Bonds are treated as portfolio interest within the meaning of sections 871 and 881 of the Code, then no backup withholding under section 1441 and 1442 of the Code and no backup withholding under section 3406 of the Code is required with respect to beneficial owners or intermediaries who have furnished Form W-8 BEN, Form W-8 EXP or Form W-8 IMY, as applicable, provided the payor does not have actual knowledge that such person is a United States person.
FOREIGN ACCOUNT TAX COMPLIANCE ACT… Sections 1471 through 1474 of the Code impose a 30% withholding tax on certain types of payments made to a foreign financial institution, unless the foreign financial institution enters into an agreement with the U.S. Treasury to, among other things, undertake to identify accounts held by certain United States persons or U.S.-owned entities, annually report certain information about such accounts, and withhold 30% on payments to account holders whose actions prevent it from complying with these and other reporting requirements, or unless the foreign financial institution is otherwise exempt from those requirements. In addition, the Foreign Account Tax Compliance Act (“FATCA”) imposes a 30% withholding tax on the same types of payments to a non-financial foreign entity unless the entity certifies that it does not have any substantial U.S. owners or the entity furnishes identifying information regarding each substantial United States owner. Failure to comply with the additional certification, information reporting and other specified requirements imposed under FATCA could result in the 30% withholding tax being imposed on payments of interest and principal under the Bonds and sales proceeds of Bonds held by or through a foreign entity. Prospective investors should consult their own tax advisors regarding FATCA and its effect on them.
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REPORTING OF INTEREST PAYMENTS…Subject to certain exceptions, interest payments made to beneficial owners with respect to the Bonds will be reported to the IRS. Such information will be filed each year with the IRS on Form 1099 which will reflect the name, address, and TIN of the beneficial owner. A copy of Form 1099 will be sent to each beneficial owner of a Bond for U.S. federal income tax purposes.
REGISTRATION AND QUALIFICATION OF BONDS FOR SALE
The sale of the Bonds has not been registered under the federal Securities Act of 1933, as amended, in reliance upon the exemption provided thereunder by Section 3(a)(2); and the Bonds have not been qualified under the Securities Act of Texas in reliance upon various exemptions contained therein; nor have the Bonds been qualified under the securities acts of any other jurisdiction. The Corporation and the City assume no responsibility for qualification of the Bonds under the securities laws of any jurisdiction in which the Bonds may be sold, assigned, pledged, hypothecated, or otherwise transferred. This disclaimer of responsibility for qualification for sale or other disposition of the Bonds must not be construed as an interpretation of any kind with regard to the availability of any exemption from securities registration provisions.
LEGAL INVESTMENTS AND ELIGIBILITY TO SECURE PUBLIC FUNDS IN TEXAS
Section 1201.041 of the Public Security Procedures Act (Chapter 1201, Texas Government Code) provides that the Bonds are negotiable instruments, investment securities governed by Chapter 8, Texas Business and Commerce Code, and are legal and authorized investments for insurance companies, fiduciaries, and trustees, and for the sinking funds of municipalities or other political subdivisions or public agencies of the State of Texas. With respect to investment in the Bonds by municipalities or other political subdivisions or public agencies of the State of Texas, the Public Funds Investment Act, Chapter 2256, Texas Government Code, requires that the Bonds be assigned a rating of at least “A” or its equivalent as to investment quality by a national rating agency. See “RATINGS” herein. In addition, various provisions of the Texas Finance Code provide that, subject to a prudent investor standard, the Bonds are legal investments for state banks, savings banks, trust companies with at least $1 million of capital, and savings and loan associations. The Bonds are eligible to secure deposits of any public funds of the State, its agencies, and its political subdivisions, and are legal security for those deposits to the extent of their market value.
The Corporation and the City have made no investigation of other laws, rules, regulations, or investment criteria which might apply to such institutions or entities or which might limit the suitability of the Bonds for any of the foregoing purposes or limit the authority of such institutions or entities to purchase or invest in the Bonds for such purposes. The Corporation and the City have made no review of laws in other states to determine whether the Bonds are legal investments for various institutions in those states.
LEGAL MATTERS
On the Closing Date, the Corporation and the City will furnish the Underwriters with a complete transcript of proceedings incident to the authorization and issuance of the Bonds, including the unqualified approving legal opinion of the Attorney General of the State of Texas to the effect that the Bonds are valid and legally binding special obligations of the Corporation, and based upon examination of such transcript of proceedings, the legal opinion of Bond Counsel to the effect that the Bonds are valid and legally binding special obligations of the Corporation. The customary closing papers, including a certificate to the effect that no litigation of any nature has been filed or is then pending to restrain the issuance and delivery of the Bonds, or which would affect the provision made for their payment or security or in any manner questioning the validity of the Bonds, will also be furnished. In their capacity as Bond Counsel, Norton Rose Fulbright US LLP, Dallas, Texas, has reviewed the information appearing in this Official Statement under the captions “PLAN OF FINANCE” (except for the caption “Sources and Uses of Proceeds”), “THE BONDS” (other than under the subsection “Payment Record” as to which no view will be expressed), “THE FINANCING DOCUMENTS,” “REGISTRATION, TRANSFER AND EXCHANGE” (other than the subsection “Book-Entry-Only System” as to which no view will be expressed), “SECURITY FOR THE BONDS AND REMEDIES IN THE EVENT OF NONAPPROPRIATION”, “TAX MATTERS”, “REGISTRATION AND QUALIFICATION OF BONDS FOR SALE”, “LEGAL INVESTMENTS AND ELIGIBILITY TO SECURE PUBLIC FUNDS IN TEXAS”, “LEGAL MATTERS”, (excluding the last two sentences of the first paragraph thereof), “CONTINUING DISCLOSURE OF INFORMATION” (excluding the information under the subcaption “Compliance with Prior Undertakings”) and “APPENDIX B - SELECTED PROVISIONS OF THE FINANCING DOCUMENTS” attached hereto as Appendix B to determine whether such information fairly summarizes the material and documents referred to therein and is correct as to matters of law. Bond Counsel has not, however, independently verified any of the factual information contained in this Official Statement nor has it conducted an investigation of the affairs of the Corporation or the City for the purpose of passing upon the accuracy or completeness of this Official Statement. No person is entitled to rely upon Bond Counsel’s limited participation as an assumption of responsibility for, or an expression of opinions of any kind with regard to the accuracy or completeness, of any of the information contained herein. The legal fees to be paid Bond Counsel for services rendered in connection with the issuance of the Bonds are contingent on the issuance and delivery of the Bonds. The form of legal opinion of Bond Counsel expected to be delivered on the date of issuance of the Bonds is attached hereto as Appendix D. Certain legal matters will be passed upon for the Corporation and the City by the City Attorney. Certain legal matters will be passed upon for the Underwriters by their Counsel, Bracewell LLP, Austin, Texas, and for the Trustee by its internal counsel.
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None of Bond Counsel, the City Attorney, Underwriters’ Counsel, nor the Trustee’s Counsel has been engaged to investigate or verify, and accordingly none will express any opinion concerning, the financial condition or capabilities of the Corporation or the City or the sufficiency of the security for, or the value or marketability of, the Bonds. The various legal opinions to be delivered concurrently with the delivery of the Bonds express the professional judgment of the attorneys rendering the opinions as to the legal issues explicitly addressed therein. In rendering a legal opinion, the attorney does not become an insurer or guarantor of that expression of professional judgment, of the transaction opined upon, or of the future performance of the parties to the transaction. Nor does the rendering of an opinion guarantee the outcome of any legal dispute that may arise out of the transaction. Bond Counsel represents the Underwriters from time to time on various legal matters; however, Bond Counsel does not represent the Underwriters in connection with the issuance of the Bonds. Underwriters’ Counsel represents the City and the Financial Advisors from time to time on certain legal matters; however, they are not representing the City or the Financial Advisors in connection with the issuance of the Bonds. RATINGS
The Bonds have been rated “AA-” by Fitch Ratings (“Fitch”) and “AA-” by S&P Global Ratings, a division of S&P Global Inc. (“S&P”). An explanation of the significance of such ratings may be obtained from Fitch and S&P. The rating of the Bonds by Fitch and S&P reflects only the views of said companies at the time the ratings are given, and the Corporation makes no representations as to the appropriateness of the ratings. There is no assurance that the ratings will continue for any given period of time, or that the ratings will not be revised downward or withdrawn entirely by Fitch and S&P, if, in the judgment of said companies, circumstances so warrant. Any such downward revision or withdrawal of the ratings may have an adverse effect on the market price of the Bonds. A securities rating is not a recommendation to buy, sell or hold securities and may be subject to revision or withdrawal at any time.
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CONTINUING DISCLOSURE OF INFORMATION
In the Lease Agreement, the Corporation and City have made the following agreement for the benefit of the holders and Beneficial Owners of the Bonds. The Corporation and the City are required to observe the agreement for so long as they remain obligated to advance funds to pay the Bonds. Under the agreement, the Corporation and the City will be obligated to provide certain updated financial information and operating data annually, and timely notice of specified events, to the MSRB through its EMMA system, where it is available free of charge at www.emma.msrb.org.
Annual Reports
The City will provide certain updated financial information and operating data to the MSRB annually. The information to be updated includes all quantitative financial information and operating data with respect to the City of the general type included in this Official Statement in tables one through six and in APPENDIX C. The City will update and provide the information in the tables referenced above within six months after the end of each fiscal year ending in and after 2021 and audited financial statements within 12 months after the end of each fiscal year ending in and after 2021. If the audit of such financial statements is not completed within 12 months after any such fiscal year end, then the City shall file unaudited financial statements within such 12-month period and audited financial statements for the applicable fiscal year, when and if the audit report on such statements becomes available.
The financial information and operating data to be provided may be set forth in full in one or more documents or may be included by specific reference to any document available to the public on the MSRB’s Internet Web site or filed with the United States Securities and Exchange Commission (the “SEC”), as permitted by SEC Rule 15c2-12 (the “Rule”). The updated information will include audited financial statements, if the City commissions an audit and it is completed by the required time. If audited financial statements are not available by the required time, the City will provide unaudited financial information of the type described in the preceding paragraph by the required time, and will provide audited financial statements when and if an audit report becomes available. Any such financial statements will be prepared in accordance with the accounting principles described in APPENDIX C or such other accounting principles as the City may be required to employ from time to time pursuant to State law or regulation.
The City’s current fiscal year end is August 31. Accordingly, it must provide updated information by the last day of February in each year, unless the City changes its fiscal year. If the City changes its fiscal year, it will notify the MSRB of the change.
Notice of Certain Events
The City will also provide timely notices of certain events to the MSRB. The City will provide notice of any of the following events with respect to the Bonds, to the MSRB in a timely manner (but not in excess of ten business days after the occurrence of the event): (1) Principal and interest payment delinquencies; (2) Non-payment related defaults, if material; (3) Unscheduled draws on debt service reserves reflecting financial difficulties; (4) Unscheduled draws on credit enhancements reflecting financial difficulties; (5) Substitution of credit or liquidity providers, or their failure to perform; (6) Adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701-TEB), or other material notices or determinations with respect to the tax status of the Bonds, or other material events affecting the tax status of the Bonds; (7) Modifications to rights of holders of the Bonds, if material; (8) Bond calls, if material, and tender offers; (9) Defeasances; (10) Release, substitution, or sale of property securing repayment of the Bonds, if material; (11) Rating changes; (12) Bankruptcy, insolvency, receivership, or similar event of the City or the Corporation, which shall occur as described below; (13) The consummation of a merger, consolidation, or acquisition involving the City or the Corporation or the sale of all or substantially all of its assets, other than in the ordinary course of business, the entry into of a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms, if material; (14) Appointment of a successor or additional trustee or the change of name of a trustee, if material; (15) Incurrence of a Financial Obligation of the City or the Corporation, if material, or agreement to covenants, events of default, remedies, priority rights, or other similar terms of any such Financial Obligation of the City or the Corporation, any of which affect security holders, if material; and (16) Default, event of acceleration, termination event, modification of terms, or other similar events under the terms of any such Financial Obligation of the City or the Corporation, any of which reflect financial difficulties. In addition, the City will provide timely notice of any failure by the City to provide information, data or financial statements in accordance with its agreement described above under “Annual Reports”.
For these purposes, (A) any event described in clause (12) in the immediately preceding paragraph is considered to occur when any of the following occur: the appointment of a receiver, fiscal agent, or similar officer for the City or the Corporation in a proceeding under the United States Bankruptcy Code or in any other proceeding under state or federal law in which a court or governmental authority has assumed jurisdiction over substantially all of the assets or business of the City or the Corporation, or if such jurisdiction has been assumed by leaving the existing governing body and officials or officers in possession but subject to the supervision and orders of a court or governmental authority, or the entry of an order confirming a plan of reorganization, arrangement, or liquidation by a court or governmental authority having supervision or jurisdiction over substantially all of the assets or business of the City or the Corporation and (B) the City and the Corporation intend the words used in clauses (15) and (16) in the immediately preceding paragraph and the definition of Financial Obligation to have the meanings ascribed to them in SEC Release No. 34-83885 dated August 20, 2018.
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Availability of Information
The City and the Corporation have agreed to provide the foregoing information only to the MSRB. The information will be available free of charge through the MSRB’s EMMA system.
Limitations and Amendments The Corporation and the City have agreed to update information and to provide notices of certain specified events only as described above. The City has not agreed to provide other information that may be relevant or material to a complete presentation of its financial results of operations, condition, or prospects or agreed to update any information that is provided, except as described above. The Corporation and the City make no representation or warranty concerning such information or concerning its usefulness to a decision to invest in or sell Bonds at any future date. The Corporation and the City disclaim any contractual or tort liability for damages resulting in whole or in part from any breach of their continuing disclosure agreement or from any statement made pursuant to their agreement, although holders of the Bonds may seek a writ of mandamus to compel the Corporation and the City to comply with their agreement. The provisions of the continuing disclosure agreement may be amended by the City and the Corporation from time to time to adapt to changed circumstances that arise from a change in legal requirements, a change in law, or a change in the identity, nature, status, or type of operations of the City or the Corporation, but only if (1) the provisions, as so amended, would have permitted an underwriter to purchase or sell Bonds in the primary offering described herein in compliance with the Rule, taking into account any amendments or interpretations of the Rule since such offering as well as such changed circumstances, and (2) either (a) the Registered Owners of a majority in aggregate principal amount (or any greater amount required by any other provision of the Bond Resolution or the Financing Documents that authorizes such an amendment) of the Outstanding Bonds consent to such amendment, or (b) a person that is unaffiliated with the City and the Corporation (such as nationally recognized bond counsel) determined that such amendment will not materially impair the interest of the Registered Owners and beneficial owners of the Bonds. The City and the Corporation may also amend or repeal the provisions of this continuing disclosure agreement if the SEC amends or repeals the applicable provision of the Rule or a court of final jurisdiction enters judgment that such provisions of the Rule are invalid, but only if and to the extent that the provisions of this sentence would not prevent an underwriter from lawfully purchasing or selling Bonds in the primary offering of the Bonds. Compliance with Prior Undertakings Over the last five years, the Corporation has complied in all material respects with its continuing disclosure undertakings pursuant to the Rule.
Over the last five years, the City has complied in all material respects with its continuing disclosure undertakings pursuant to the Rule.
VERIFICATION OF ARITHMETICAL AND MATHEMATICAL COMPUTATIONS
Samuel Klein and Company, Certified Public Accountants, in conjunction with Public Finance Partners LLC, will deliver to the Corporation, on or before the settlement date of the Bonds, its verification report indicating that it has verified, the mathematical accuracy of the mathematical computations of the adequacy of the Escrowed Securities in the Escrow Fund to pay, on the Redemption Date, the maturing principal of and interest on the Refunded Obligations. Such report will be relied upon by Bond Counsel in rendering its opinion with respect to defeasance of the Refunded Obligations.
The verification performed by Samuel Klein and Company, Certified Public Accountants and Public Finance Partners LLC will be solely based upon data, information and documents provided to Samuel Klein and Company, CPA’s and Public Finance Partners LLC by Hilltop Securities on behalf of the Corporation. Samuel Klein and Company, CPA’s and Public Finance Partners LLC has restricted its procedures to recalculating the computations provided by Hilltop Securities on behalf of the City and has not evaluated or examined the assumptions or information used in the computations.
FINANCIAL ADVISOR
Hilltop Securities Inc. is employed as Financial Advisor to the City in connection with the issuance of the Bonds. The Financial Advisor's fee for services rendered with respect to the sale of the Bonds is contingent upon the issuance and delivery of the Bonds. Hilltop Securities Inc., in its capacity as Financial Advisor, has not verified and does not assume any responsibility for the information, covenants and representations contained in any of the legal documents with respect to the federal income tax status of the Bonds, or the possible impact of any present, pending or future actions taken by any legislative or judicial bodies.
The Financial Advisor to the City has provided the following sentence for inclusion in this Official Statement. The Financial Advisor has reviewed the information in this Official Statement in accordance with, and as part of, its responsibilities to the City and, as applicable, to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Financial Advisor does not guarantee the accuracy or completeness of such information.
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UNDERWRITING
J.P. Morgan Securities LLC ("J.P. Morgan"), as representative (the “Representative”) of the Underwriters has agreed, subject to certain conditions, to purchase the Bonds from the Corporation at a purchase price of $ , which represents the par amount of the Bonds, plus a [net] premium of $ , less an Underwriters’ discount of $ , and no accrued interest. The Underwriters’ obligations are subject to certain conditions precedent, and they will be obligated to purchase all of the Bonds if any of the Bonds are purchased. The Bonds may be offered and sold to certain dealers and others at prices lower than such public offering prices, and such public prices may be changed from time to time by the Underwriters.
The Underwriters have provided the following information for inclusion in this Official Statement. The Underwriters have reviewed the information in this Official Statement in accordance with, and as part of, their responsibilities to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriters do not guarantee the accuracy or completeness of such information.
The Underwriters and their respective affiliates are full-service financial institutions engaged in various activities, that may include securities trading, commercial and investment banking, municipal advisory, brokerage, and asset management. In the ordinary course of business, the Underwriters and their respective affiliates may actively trade debt and, if applicable, equity securities (or related derivative securities) and provide financial instruments (which may include bank loans, credit support or interest rate swaps). The Underwriters and their respective affiliates may engage in transactions for their own accounts involving the securities and instruments made the subject of this securities offering or other offering of the Corporation. The Underwriters and their respective affiliates may also communicate independent investment recommendations, market color or trading ideas and publish independent research views in respect of this securities offering or other offerings of the Corporation. The Underwriter and their respective affiliates may make a market in credit default swaps with respect to municipal securities in the future. Certain of the Underwriters and their respective affiliates have provided, and may in the future provide, a variety of these services to the Corporation and to persons and entities with relationships with the Corporation, for which they received or will receive customary fees and expenses.
In the ordinary course of their various business activities, the Underwriters and their respective affiliates may make or hold a broad array of investments and actively trade debt and equity securities (or related derivative securities) and financial instruments (which may include bank loans and/or credit default swaps) for their own account and for the accounts of their customers and may at any time hold long and short positions in such securities and instruments. Such investment and securities activities may involve securities and instruments of the Corporation.
J.P. Morgan, one of the Underwriters of the Bonds, has entered into negotiated dealer agreements (each, a “Dealer Agreement”) with each of Charles Schwab & Co., Inc. (“CS&Co.”) and LPL Financial LLC (“LPL”) for the retail distribution of certain securities offerings at the original issue prices. Pursuant to each Dealer Agreement, each of CS&Co. and LPL may purchase the Bonds from J.P. Morgan at the original issue price less a negotiated portion of the selling concession applicable to any Bonds that such firm sells.
Citigroup Global Markets Inc., an underwriter of the Bonds, has entered into a retail distribution agreement with Fidelity Capital Markets, a division of National Financial Services LLC (together with its affiliates, “Fidelity”). Under this distribution agreement, Citigroup Global Markets Inc. may distribute municipal securities to retail investors at the original issue price through Fidelity. As part of this arrangement, Citigroup Global Markets Inc. will compensate Fidelity for its selling efforts.
AUTHORIZATION OF THE OFFICIAL STATEMENT
This Official Statement has been approved as to form and content and the use thereof in the offering of the Bonds has been authorized and approved by the Board of the Corporation, and the Underwriters will be furnished, upon request, at the time of payment for and the delivery of the Bonds, a certified copy of such approvals, duly executed by the proper officials of the Corporation.
President, Board of Directors City of El Paso Downtown Development Corporation
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SCHEDULE I
SCHEDULE OF REFUNDED OBLIGATIONS*
Original Original Maturity Date and Dated Issue to be Amount Price of Series Date Amount Refunded Refunded Redemption Special Revenue Bonds, Series 2013A 8/1/2013 $ 45,125,000 8/15/2028 (1) $ 1,405,000 8/15/2023 @ Par (Downtown Ballpark Venue Project) 8/15/2029 (1) 1,510,000 8/15/2023 @ Par 8/15/2030 (1) 1,620,000 8/15/2023 @ Par 8/15/2031 (1) 1,735,000 8/15/2023 @ Par 8/15/2032 (1) 1,860,000 8/15/2023 @ Par 8/15/2033 (1) 1,995,000 8/15/2023 @ Par 8/15/2034 (1) 2,140,000 8/15/2023 @ Par 8/15/2035 (1) 2,295,000 8/15/2023 @ Par 8/15/2036 (1) 2,465,000 8/15/2023 @ Par 8/15/2037 (1) 2,640,000 8/15/2023 @ Par 8/15/2038 (1) 2,835,000 8/15/2023 @ Par $22,500,000
(1) Represents term bond maturing on August 15, 2038.
* Preliminary; subject to change.
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APPENDIX A
CITY OF EL PASO, TEXAS GENERAL DEMOGRAPHIC AND ECONOMIC INFORMATION
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LOCATION AND HISTORY . . . The City of El Paso (the “City” or “El Paso”) is located in far West Texas on the international boundary between the United States and the Republic of Mexico, on the Rio Grande, and is the lowest altitude, all-weather pass through the Rocky Mountains. It is approximately equidistant from the Cities of Houston, Texas, Denver, Colorado, and Los Angeles, California. Since the first appearance of Europeans on the North American Continent, it has been a major crossroads for continental north-south and east-west traffic. In 1536, Cabeza de Vaca and his party crossed the Rio Grande at El Paso. In 1659, the first permanent European settlement was established in the El Paso region, and the Mission of Guadalupe was erected (the Mission still stands in the central square of the City of Ciudad Juarez, Mexico). The first trading post was erected in central El Paso in 1848, and the same year, the United States Military Post, later named Fort Bliss, was established. El Paso has continued since that time to be a highly strategic military base. The City's corporate limits encompass 256 square miles.
This historic City, situated at the foot of the Franklin Mountains, enjoys a diversified economy. Mining and manufacturing, important military establishments, domestic and foreign commerce, farming and tourist trade are major contributors to the economy. El Paso's large natural retail and wholesale trade territory extends into New Mexico and Arizona, as well as Texas and Mexico.
El Paso is the largest U.S. city on the Mexico border, the sixth largest city in Texas, and the nineteenth largest city in the U.S. according to estimates by the US Census Bureau. Population in the 1960 Census was 276,687; the 1970 Census was 322,261; the 1980 Census was 425,259; the 1990 Census was 515,342, the 2000 Census was 563,662, and the 2010 Census was 649,121. From 2000 – 2006, El Paso was the seventh fastest growing large city in the nation. The City's July 1, 2019 estimated population was 681,728. The population of El Paso County was estimated at 839,238 and the population of the sister Mexican city of Ciudad Juarez was estimated at 1,500,000.
EDUCATION . . . Most of the public schools in El Paso are under the supervision of three independent school districts, the El Paso Independent School District (with approximately 58,549 students on 84 campuses), the Ysleta Independent School District (with approximately 41,524 students on 62 campuses) and the Socorro Independent School District (with approximately 46,500 students on 47 campuses). In addition to public schools, there are several private and parochial schools in the El Paso area, with enrollment of approximately 5,124.
A number of excellent junior colleges, colleges and universities are located within the El Paso trade area. Among these are: El Paso Community College (El Paso); University of Texas at El Paso (El Paso); New Mexico State University (Las Cruces, New Mexico); Sul Ross State College (Alpine, Texas); Western New Mexico University (Silver City, New Mexico); New Mexico School of Mines (Socorro, New Mexico); Eastern New Mexico University (Portales, New Mexico); and New Mexico Military Institute (Roswell, New Mexico).
The University of Texas at El Paso (the “University”) was established in 1914, and attracts thousands of visitors to seminars, conferences, convocations, sport contests and other events. The University offers degrees in nine schools: Engineering, Business Administration, Science, Education, Health Sciences, Liberal Arts, Nursing, Pharmacy School and Graduate. At the University, 24,879 students were enrolled in the school for the Fall 2020 semester including in undergraduate and graduate programs with both full-time and part-time attending status.
The Texas Tech University Health Sciences Center (the “Health Sciences Center”) is an educational multi-campus institution created under Chapter 110 of the Texas Education Code and is governed by the Texas Tech University Board of Regents. The Health Sciences Center's administrative center is located in Lubbock, Texas. Currently, the Health Sciences Center located in the City of El Paso includes the Paul L. Foster School of Medicine at El Paso, the Gayle Greve Hunt School of Nursing, and the Graduate School of Biomedical Sciences. In addition, approval was given to open the Woody L. Hunt School of Dental Medicine in 2021.
El Paso County Community College, which offers a range of studies for both daytime and evening classes, had a Fall 2020 enrollment of 35,836.
Across the border, Ciudad Juárez is home to five colleges: El Colegio de Chihuahua, Instituto Tecnológico de Ciudad Juárez, Universidad Autónoma de Ciudad Juárez, Universidad Tecnológica de Ciudad Juárez and Tecnológico de Monterrey.
HOSPITALS . . . El Paso is a major medical center, with eight hospitals providing approximately 2,658 beds, including William Beaumont Army Medical Center.
AGRICULTURE . . . Agriculture is an important activity in El Paso County, with crop production in the lowlands and livestock in upland areas. Major farm products include beef and dairy cattle, cotton, alfalfa, grain, pecans, onions, forage and peppers. As reported in the Texas Almanac, the average annual income from El Paso County farm products sold is about $45.5 million.
CONVENTIONS AND TOURISM . . . The El Paso Civic and Convention Center (the “Center”) includes a 70,000 square foot Assembly- Exhibition Hall, theatre-auditorium, and headquarters for the Chamber of Commerce. To accommodate conventioneers, approximately 9,657 hotel and motel rooms are available.
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Ciudad Juarez, immediately adjacent to El Paso, is a major factor and attraction in the area.
TRANSPORTATION . . . Regional transportation facilities, together with El Paso's strategic location, have contributed to development and growth of the City. Four rail lines operate through El Paso, with the National Railway of Mexico serving Ciudad Juarez. Interstate Highways 10 and 25 provide direct access to El Paso for commercial truckers and tourists. Five other U.S. Highways and the Central Highway of Mexico link El Paso to its surrounding market areas.
The El Paso International Airport is a large, modern airport with facilities equipped for handling many types and sizes of commercial aircraft. The Airport is classified as a medium air traffic hub by the Federal Aviation Administration and is currently served by seven passenger airlines and three all-cargo airlines. The following table shows the total airline passenger enplanements for the past six years (Airport Fiscal Year):
2015 1,369,943 2018 1,576,390 2016 1,384,737 2019 1,764,324 2017 1,461,620 2020 1,101,811
MINING, SMELTING AND REFINERIES . . . Freeport-McMoRan Copper & Gold Inc., with facilities located in El Paso, processes approximately 30% of all copper refined in the United States. While mining within El Paso County is of negligible proportions, substantial supplies of ore are produced in the trade territory, both domestic and in Mexico. Other minerals are also processed in the trade area, notably potash from the Carlsbad vicinity where 90% of the United States’ production is mined.
The steel rolling mill facility of Border Steel Rolling Mill, Inc. currently has the capacity to produce 16,500 tons per month of merchants rod and bar steel products. The modern electric furnaces use scrap metal as the basic ingredient.
Two oil refineries provide asphalt, jet fuel, gasoline and fuel oil for a market area encompassing West Texas, New Mexico and Arizona.
MANUFACTURING . . . Because of El Paso's location on the Mexican border, firms can maintain manufacturing plant operations in the United States but can assemble their goods in Mexico. This “dual plant” operation is commonly called the Maquila Program and enables certain firms to cut production costs by producing the main component of goods across the border while assembling the finished product in the United States.
The Directory of El Paso Manufacturers lists more than 500 industrial firms in El Paso County and Ciudad Juarez. Currently, according to employment and value, the electronics industry has emerged as the leader among El Paso manufacturers, surpassing both the automotive and apparel industries. Other current growth industries in the area include plastics (primarily injected molded parts), electrical equipment, and military defense manufacturing. Approximately 70 Fortune 500 companies are located in El Paso.
MAJOR EMPLOYERS
Number of Name of Business Nature of Business Employees Fort Bliss (Military and Civilian) Army base 135,610 El Paso Independent School District Education 8,000 City of El Paso City government 6,698 Ysleta Independent School District Education 6,388 T&T Staff M anagement, LP Professional employment organization 6,187 Socorro Independent School District Education 5,664 County of El Paso County government 3,387 Hospitals of Providence Healthcare 3,300 University M edical Center Healthcare 2,619 GC Services Calling Center 2,250
Source: City of El Paso 2020 CAFR.
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EMPLOYMENT STATISTICS
City of El Paso Average Annual December Civilian Labor Force 2016 2017 2018 2019 2020 Total Employment 279,084 283,010 287,136 291,637 280,221 Total Unemployment 13,775 13,153 12,201 11,144 23,250 Percentage Unemployed 4.7% 4.4% 4.1% 3.7% 7.7%
El Paso County Average Annual December Civilian Labor Force 2016 2017 2018 2019 2020 Total Employment 332,375 337,807 343,330 348,712 335,061 Total Unemployment 17,258 16,353 15,025 13,870 29,318 Percentage Unemployed 4.9% 4.6% 4.2% 3.8% 8.0%
Source: Texas Workforce Commission, Labor Market Information Department.
BANKING . . . The City is the banking center for El Paso County with 52 financial institutions, as well as the El Paso Branch of the Federal Reserve Bank of Dallas.
MILITARY INSTALLATIONS . . . Military installations in and around El Paso have a significant impact on the economy of the City and El Paso County. The employment of civilian personnel is substantial, and, combined with the military payrolls, has a pronounced effect on the level and stability of business volume. Large additional expenditures for supplies and contractual services, when added to the military payrolls, place many millions of dollars annually in local commercial channels.
Fort Bliss, historically important since its establishment as a post in 1848, is now the Army's Air Defense Training Center. From its common boundary with the City, Fort Bliss extends northward to adjoin White Sands Missile Range. The combined facilities represent an uninterrupted distance in excess of 100 miles dedicated to military and scientific pursuits. According to the Department of Defense, Fort Bliss is home to over 91,000 people between active and reserve duty personnel, family members, and other civilians.
Biggs Army Base adjoins both the City and Fort Bliss. Having fulfilled a variety of missions during its history, the base, which once was a major installation of the Strategic Air Command, has now been transferred to the Army. The Army Air Materiel Command, the Defense Language Institute and the Army Aviation Laboratory utilize the facilities of the base.
William Beaumont Army Medical Center, the Army's hospital in El Paso, is a 12-story facility with 432 beds and is a fully accredited, permanent teaching and specialized-treatment hospital. With a complement of approximately 2,200 military and civilian personnel, the hospital's contribution to the El Paso economy is substantial.
White Sands Missile Range in New Mexico has long played an important role in weapons testing. With increasing technology involved in modern weapons, the facility's activities continue to be of significant importance. It is the largest all-land missile range in the Western Hemisphere.
Holloman Air Development Center, near Alamogordo, New Mexico, specializes in the testing and evaluation of new weapons for the Air Force. More than 25 electronic and aircraft companies operate at the Center.
McGregor Range is a testing and experimental area for missiles, rockets and anti-aircraft weapons. Like its neighbors, the impact of both construction and expansion programs, and operations requirements, make the Range an important economic factor in the region.
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FINANCIAL INFORMATION OF THE CITY
Change in Net Assets
Governmental Activities 2020 2019 2018 2017 2016 Revenues: Program revenues: Charges for services $ 101,160,160 $ 120,532,328 $ 118,213,865 $ 121,033,533 $ 124,136,564 Operating grants and contributions 56,164,682 37,320,031 46,814,154 38,597,485 33,822,176 Capital grants and contributions 5,025,818 4,266,151 4,913,457 2,950,231 7,168,957 General revenues: Ad valorem taxes 333,335,059 301,548,114 271,100,422 254,897,464 237,442,459 Sales taxes 99,591,904 96,649,171 92,109,776 87,704,730 85,269,622 Hotel Occupancy Tax 11,664,791 15,353,411 15,270,465 13,415,214 14,811,044 Franchise taxes 60,824,072 58,804,220 58,426,721 58,295,404 55,986,614 Investment earnings 6,556,806 8,761,753 4,503,973 2,867,819 650,355 BABs federal tax credit 754,593 1,684,503 1,996,608 2,058,173 - Gain (loss) on disposal of assets 13,640 8,079 - 28,103 91,638 Total revenues $ 675,091,525 $ 644,927,761 $ 613,349,441 $ 581,848,156 $ 559,379,429
Expenses: Governmental activities: General government $ 83,024,157 $ 76,481,860 $ 87,872,880 $ 59,192,090 $ 93,447,706 Public safety 299,637,681 322,600,351 282,425,339 278,648,815 241,548,165 Public works 77,967,798 98,063,309 86,876,259 76,780,581 67,038,656 Public health 31,560,770 28,202,328 28,819,169 33,794,360 21,849,467 Parks 31,684,741 32,474,213 30,939,587 31,298,298 26,477,652 Library 8,021,082 10,490,024 10,494,285 12,420,754 10,888,401 Culture and recreation 26,677,132 33,395,772 32,270,960 33,397,565 32,079,547 Community and economic development 33,065,629 23,657,159 46,626,758 37,843,697 34,224,066 Interest on long-term debt 51,954,912 52,659,367 50,537,493 55,962,214 36,191,595 Total expenses $ 643,593,902 $ 678,024,383 $ 656,862,730 $ 619,338,374 $ 563,745,255 Excess (deficiency) before transfers $ 31,497,623 $ (33,096,622) $ (43,513,289) $ (37,490,218) $ (4,365,826)
Transfers 22,389,224 20,401,711 15,177,810 12,345,926 (1,164,070) Increase (decrease) in net assets $ 53,886,847 $ (12,694,911) $ (28,335,479) $ (25,144,295) $ (5,529,896) Net assets - beginning balance (402,667,313) (389,972,402) (320,379,518) (295,235,223) (289,705,327) Change in accounting principle (176,851) (2) - (41,257,405) (1) - - (3) Net assets - ending balance $ (348,957,317) $ (402,667,313) $ (389,972,402) $ (320,379,518) $ (295,235,223)
Source: Office of the Comptroller, City of El Paso, Texas. (1) In Fiscal Year 2018, the City implemented GASB Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits Other than Pensions. As a result, the beginning net position of the City’s governmental activities has been restated on the Statement of Activities to reflect the net OPEB liability and deferred outflows of resources relating to TRS-Care contributions made after the prior measurement date of the plan. (2) In Fiscal Year 2020, the City implemented GASB Statement No. 84, Fiduciary Activities. As a result, the beginning net position of the City’s governmental activities has been restated on the Statement of Activities to reflect the change in reporting of one of the City’s component units previously reported as a blended component unit in the nonmajor governmental funds to a custodial fund in the fiduciary statements. (3) In Fiscal Year 2015, the City implemented GASB Statement No. 67 & 68 which resulted in a change in accounting principle affecting the way the pension liability and related outflows are reported in the government wide statement of net position. Please refer to the City’s Fiscal Year 2020 Comprehensive Annual Financial Report (CAFR) Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances of Governmental Funds to the Statement of Activities for additional information.
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Taxable Assessed Valuation, Exemptions
2020/2021 Taxable Market Valuation Established by El Paso Central Appraisal District (Excludes Fully Exempt Property) $ 42,546,720,038 Less Exemptions: 65 Years and Over and/or Disabled including Surviving Spouse $ 1,908,182,972 Optional Homestead Exemptions 619,619,787 Agriculture 31,571,465 Tax Abatement 8,431,531 State Mandated Veterans Homestead Exemption including Surviving Spouse 903,543,760 Disabled or Deceased Veterans Survivors 96,604,490 Freeport 1,735,914,137 Pollution Control 46,591,061 Historical 52,753 Value Lost Cap on Residential Homesteads 25,741,350 Total Exemptions $ 5,376,253,306 2020/2021 Net Taxable Assessed Valuation $ 37,170,466,732
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Taxable Assessed Valuations by Category
Taxable Appraised Value for Fiscal Year Ended August 31, 2021 2020 2019 % of % of % of Category Amount Total Amount Total Amount Total Real, Residential, Single-Family $ 24,257,308,365 57.01% $ 24,178,342,381 57.45% $ 23,082,372,166 57.65% Real, Residential, Multi-Family 2,458,742,653 5.78% 2,197,743,115 5.22% 2,172,168,731 5.43% Real, Vacant Lots/Tracts 401,825,326 0.94% 450,460,427 1.07% 461,797,363 1.15% Real, Acreage (Land Only) 33,039,613 0.08% 34,729,905 0.08% 34,907,430 0.09% Real, Farm and Ranch Improvements 56,887,585 0.13% 56,547,221 0.13% 57,463,748 0.14% Real, Commercial 8,016,293,520 18.84% 7,743,998,460 18.40% 7,284,968,079 18.20% Real, Industrial 859,895,929 2.02% 870,302,223 2.07% 892,498,768 2.23% Tangible, Non-business Vehicles 137,434,986 0.32% 170,657,322 0.41% 199,087,819 0.50% Real and Tangible Personal, Utilities 673,958,304 1.58% 653,564,407 1.55% 603,052,526 1.51% Tangible Personal, Commercial 3,507,946,647 8.24% 3,608,945,784 8.57% 3,183,583,745 7.95% Tangible Personal, Industrial 1,736,044,382 4.08% 1,727,543,235 4.10% 1,651,689,926 4.13% Tangible Personal, Other 45,542,383 0.11% 45,937,623 0.11% 44,748,766 0.11% Special Inventory 171,411,393 0.40% 176,446,658 0.42% 199,269,858 0.50% Real Property, Inventory 190,388,952 0.45% 172,199,392 0.41% 168,292,435 0.42% Total Appraised Value Before Exemptions $ 42,546,720,038 100.00% $ 42,087,418,153 100.00% $ 40,035,901,360 100.00% Plus: Adjust ment - - 485,613,099 Less: Total Exemptions/Reductions 5,376,253,306 5,240,701,602 4,813,739,514 Taxable Assessed Value $ 37,170,466,732 $ 36,846,716,551 $ 35,707,774,945
Taxable Appraised Value for Fiscal Year Ended Aug. 31, 2018 2017 % of % of Category Amount Total Amount Total Real, Residential, Single-Family $ 22,007,014,467 56.34% $ 21,699,231,744 56.49% Real, Residential, Multi-Family 2,325,600,838 5.95% 2,273,433,121 5.92% Real, Vacant Lots/Tracts 478,406,736 1.22% 509,684,353 1.33% Real, Acreage (Land Only) 35,333,603 0.09% 35,683,080 0.09% Real, Farm and Ranch Improvements 60,210,223 0.15% 54,448,273 0.14% Real, Commercial 7,212,309,918 18.46% 7,115,460,619 18.52% Real, Industrial 760,096,454 1.95% 817,156,155 2.13% Tangible, Non-business Vehicles 208,037,154 0.53% 169,090,319 0.44% Real and Tangible Personal, Utilities 653,816,025 1.67% 632,073,442 1.65% Tangible Personal, Commercial 3,565,445,646 9.13% 3,291,066,213 8.57% Tangible Personal, Industrial 1,345,185,421 3.44% 1,400,787,446 3.65% Tangible Personal, Other 41,556,558 0.11% 40,660,822 0.11% Special Inventory 200,938,150 0.51% 174,415,152 0.45% Real Property, Inventory 170,343,815 0.44% 197,808,592 0.51% Total Appraised Value Before Exemptions $ 39,064,295,008 100.00% $ 38,410,999,331 100.00% Less: Total Exemptions/Reductions 4,764,239,650 4,636,833,496 Taxable Assessed Value $ 34,300,055,358 $ 33,774,165,835
Source: El Paso Central Appraisal District Report of Property Values for City of El Paso. Adjustments may be made to the tax roll subsequent to the date of such Reports.
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Valuation and General Obligation Debt History
Ratio Fiscal Net Per Capita Tax Debt Year Estimated Taxable Taxable Per Capita to Taxable Ended City Assessed Assessed Funded Funded Assessed 8-31 Population(1) Valuation(2) Valuation Tax Debt Tax Debt Valuation 2017 683,080 $ 33,774,165,835 $ 49,444 $1,254,200,000 $ 1,836 3.71% 2018 683,577 34,300,055,358 50,177 1,199,575,000 1,755 3.50% 2019 682,669 35,707,774,945 52,306 1,292,860,000 1,894 3.62% 2020 691,610 36,846,716,551 53,277 1,368,510,000 1,979 3.71% (3) (3) (3) 2021 691,610 37,170,466,732 53,745 1,445,785,000 2,090 3.89%
(1) Source: City’s Comprehensive Annual Financial Report for the fiscal year ended August 31, 2020. (2) Source: El Paso Central Appraisal District Report of Property Values for the City. Adjustments may be made to the tax roll subsequent to the dates of such reports. (3) Includes the City of El Paso, Texas, General Obligation Bonds, Series 2021 (the "2021 Bonds"), City of El Paso, Texas, Combination Tax and Revenue Certificates of Obligation, Series 2021A (the "2021A Certificates"), City of El Paso, Texas, Combination Tax and Revenue Certificates of Obligation, Series 2021B (the "2021B Certificates"), and City of El Paso, Texas, General Obligation Refunding Bonds, Taxable Series 2021A (the "2021A Bonds"), each expected to be issued by the City on June 3, 2021, and excludes the obligations being refunded by the 2021A Bonds. Preliminary; subject to change.
Tax Rate, Levy and Collection History
Fiscal Year Interest % of % of Ended Tax General and Sinking Current Total 8-31 Rates Fund Fund Tax Levy Collections Collections 2017 $ 0.759656 $ 0.485641 $ 0.274015 $ 251,440,726 99.49% 99.50% 2018 0.803433 0.522982 0.280451 270,188,859 99.06% 99.39% 2019 0.843332 0.557239 0.286093 297,463,382 98.86% 99.11% 2020 0.907301 0.610139 0.297162 331,934,914 98.32% 98.32% (1) (1) 2021 0.907301 0.623847 0.283454 344,968,463 96.45% 96.45%
(1) Unaudited collections through March 31, 2021.
Ten Largest Taxpayers
2020/2021 % of Total Taxable Taxable Assessed Assessed Name of Taxpayer Nature of Property Valuation Valuation Western Refining Co. L.P. Oil Refinery $ 484,075,599 1.30% El Paso Electric Company Electric Utility 291,495,032 0.78% Wal-M art Stores Retail 262,805,889 0.71% Sierra Providence Physical Rehabilitation Hospital Hospital 213,203,890 0.57% River Oaks Properties Ltd. Commercial Property/Apartments 200,386,813 0.54% Texas Gas Service Gas Utility 136,985,940 0.37% Simon Property Group L.P. Shopping Centers 121,129,507 0.33% Union Pacific Railroad Co Railroad 97,290,239 0.26% Hawkins & I-10 Acquisition Co LP Investors 97,029,512 0.26% Tenet Hospitals Limited M edical Facilities 89,709,204 0.24% $ 1,994,111,625 5.36%
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Estimated Overlapping Debt
Expenditures of the various taxing entities within the territory of the City are paid out of ad valorem taxes levied by such entities on properties within the City. Such entities are independent of the City and may incur borrowings to finance their expenditures. This statement of direct and estimated overlapping ad valorem tax bonds (“Tax Debt”) was developed from information contained in “Texas Municipal Reports” published by the Municipal Advisory Council of Texas. Except for the amounts relating to the City, the City has not independently verified the accuracy or completeness of such information, and no person should rely upon such information as being accurate or complete. Furthermore, certain of the entities listed may have issued additional Tax Debt since the date hereof, and such entities may have programs requiring the issuance of substantial amounts of additional Tax Debt, the amount of which cannot be determined. The following table reflects the estimated share of overlapping Tax Debt of the City.
2020/2021 Direct and Authorized Taxable 2020/2021 Total Estimated Overlapping But Unissued Assessed Tax Tax % Tax Debt Debt As Of Taxing Jurisdiction Valuation Rate Debt Applicable As of 2-28-21 As of 2-28-21 City of El Paso $ 37,170,466,732 $ 0.907301 $1,497,710,000 (1) 100.00% $ 1,497,710,000 (1) $ 506,578,286 El Paso County 44,824,041,989 0.489000 138,573,147 85.62% 118,646,328 - El Paso Co Hosp Dist 46,705,152,150 0.267700 326,350,000 85.62% 279,420,870 - Canutillo ISD 2,616,168,457 1.390100 92,164,627 79.66% 73,418,342 1,176 El Paso ISD 17,622,966,559 1.318300 938,045,305 99.49% 933,261,274 - Socorro ISD 11,406,056,309 1.343400 820,672,678 71.54% 587,109,234 - Ysleta ISD 7,458,064,858 1.446600 770,593,205 99.98% 770,439,086 150,000,000 Total Direct and Overlapping Tax Debt...... $ 4,260,005,134
Ratio of Direct and Overlapping Tax Debt to Taxable Assessed Valuation ...... 11.46%
Per Capita Overlapping Tax Debt ...... $ 6,160 ______(1) Includes the 2021 Bonds, 2021A Certificates, 2021B Certificates, and the 2021A Bonds, and excludes the obligations being refunded by the 2021A Bonds. Preliminary; subject to change.
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DEBT INFORMATION GENERAL OBLIGATION DEBT SERVICE REQUIREMENTS
Fiscal Year Gran d % of Ending Outstanding General Obligation Debt Service(1) The 2021 Bonds (2) The 2021A Certificates (3) The 2021B Certificates (4) The 2021A Bonds (5) Total Principal 8-31 Principal Interest Total Principal Interest Total Principal Interest Total Principal Interest Total Principal Interest Total Requirements Retired 2021 $ 51,925,000 $ 60,826,096 $ 112,751,096 $ - $ 730,188 $ 730,188 $ - $ 1,103,583 $ 1,103,583 $ - $ 302,354 $ 302,354 $ - $ 961,772 $ 961,772 $ 115,848,992 2022 54,220,000 56,836,485 111,056,485 - 1,752,450 1,752,450 - 2,648,600 2,648,600 - 725,650 725,650 - 2,308,252 2,308,252 118,491,437 2023 50,720,000 54,397,667 105,117,667 - 1,752,450 1,752,450 - 2,648,600 2,648,600 - 725,650 725,650 4,500,000 2,308,252 6,808,252 117,052,619 2024 50,785,000 51,914,990 102,699,990 - 1,752,450 1,752,450 - 2,648,600 2,648,600 - 725,650 725,650 8,120,000 2,266,852 10,386,852 118,213,542 2025 54,190,000 49,429,265 103,619,265 1,040,000 1,752,450 2,792,450 1,570,000 2,648,600 4,218,600 430,000 725,650 1,155,650 7,740,000 2,171,848 9,911,848 121,697,813 19.23% 2026 62,430,000 46,742,849 109,172,849 1,090,000 1,700,450 2,790,450 1,650,000 2,570,100 4,220,100 450,000 704,150 1,154,150 7,845,000 2,073,550 9,918,550 127,256,099 2027 63,075,000 43,648,173 106,723,173 1,145,000 1,645,950 2,790,950 1,730,000 2,487,600 4,217,600 475,000 681,650 1,156,650 7,985,000 1,944,108 9,929,108 124,817,480 2028 66,210,000 40,494,700 106,704,700 1,205,000 1,588,700 2,793,700 1,820,000 2,401,100 4,221,100 500,000 657,900 1,157,900 8,125,000 1,804,370 9,929,370 124,806,770 2029 69,545,000 37,090,821 106,635,821 1,265,000 1,528,450 2,793,450 1,910,000 2,310,100 4,220,100 525,000 632,900 1,157,900 5,105,000 1,639,433 6,744,433 121,551,704 2030 73,375,000 33,677,361 107,052,361 1,325,000 1,465,200 2,790,200 2,005,000 2,214,600 4,219,600 550,000 606,650 1,156,650 5,215,000 1,530,696 6,745,696 121,964,507 45.17% 2031 76,375,000 30,134,687 106,509,687 1,395,000 1,398,950 2,793,950 2,105,000 2,114,350 4,219,350 575,000 579,150 1,154,150 5,330,000 1,414,402 6,744,402 121,421,538 2032 76,000,000 26,461,939 102,461,939 1,465,000 1,329,200 2,794,200 2,210,000 2,009,100 4,219,100 605,000 550,400 1,155,400 5,455,000 1,290,213 6,745,213 117,375,852 2033 63,905,000 22,802,583 86,707,583 1,535,000 1,255,950 2,790,950 2,320,000 1,898,600 4,218,600 635,000 520,150 1,155,150 5,595,000 1,157,656 6,752,656 101,624,939 2034 63,790,000 19,859,903 83,649,903 1,610,000 1,179,200 2,789,200 2,435,000 1,782,600 4,217,600 665,000 488,400 1,153,400 5,725,000 1,018,900 6,743,900 98,554,003 2035 51,385,000 16,855,948 68,240,948 1,675,000 1,114,800 2,789,800 2,535,000 1,685,200 4,220,200 695,000 461,800 1,156,800 5,875,000 871,195 6,746,195 83,153,943 70.75% 2036 46,015,000 14,449,400 60,464,400 1,745,000 1,047,800 2,792,800 2,635,000 1,583,800 4,218,800 720,000 434,000 1,154,000 6,030,000 713,745 6,743,745 75,373,745 2037 42,770,000 12,386,541 55,156,541 1,815,000 978,000 2,793,000 2,740,000 1,478,400 4,218,400 750,000 405,200 1,155,200 6,220,000 526,212 6,746,212 70,069,353 2038 44,545,000 10,605,597 55,150,597 1,885,000 905,400 2,790,400 2,850,000 1,368,800 4,218,800 780,000 375,200 1,155,200 6,410,000 332,770 6,742,770 70,057,767 2039 43,420,000 8,738,388 52,158,388 1,960,000 830,000 2,790,000 2,965,000 1,254,800 4,219,800 810,000 344,000 1,154,000 4,290,000 133,419 4,423,419 64,745,607 2040 44,315,000 6,870,150 51,185,150 2,040,000 751,600 2,791,600 3,085,000 1,136,200 4,221,200 845,000 311,600 1,156,600 - - - 59,354,550 88.83% 2041 41,780,000 5,066,400 46,846,400 2,120,000 670,000 2,790,000 3,205,000 1,012,800 4,217,800 880,000 277,800 1,157,800 - - - 55,012,000 2042 37,475,000 3,330,900 40,805,900 2,205,000 585,200 2,790,200 3,335,000 884,600 4,219,600 915,000 242,600 1,157,600 - - - 48,973,300 2043 17,165,000 1,764,400 18,929,400 2,295,000 497,000 2,792,000 3,470,000 751,200 4,221,200 950,000 206,000 1,156,000 - - - 27,098,600 2044 17,850,000 1,077,800 18,927,800 2,385,000 405,200 2,790,200 3,605,000 612,400 4,217,400 990,000 168,000 1,158,000 - - - 27,093,400 2045 9,095,000 363,800 9,458,800 2,480,000 309,800 2,789,800 3,750,000 468,200 4,218,200 1,030,000 128,400 1,158,400 - - - 17,625,200 99.11% 2046 - - - 2,580,000 210,600 2,790,600 3,900,000 318,200 4,218,200 1,070,000 87,200 1,157,200 - - - 8,166,000 2047 - - - 2,685,000 107,400 2,792,400 4,055,000 162,200 4,217,200 1,110,000 44,400 1,154,400 - - - 8,164,000 100.00% $ 1,272,360,000 $ 655,826,841 $ 1,928,186,841 $ 40,945,000 $ 29,244,838 $ 70,189,838 $ 61,885,000 $ 44,202,933 $ 106,087,933 $ 16,955,000 $ 12,112,504 $ 29,067,504 $ 105,565,000 $ 26,467,643 $ 132,032,643 $ 2,265,564,759
(1) “Outstanding General Obligation Debt Service” does not include lease/purchase obligations, nor debt service for obligations secured by a pledge of both ad valorem taxes and revenues from certain proprietary operations of the City, which are considered to be self-supporting. In the event that other funds of the City are not sufficient to pay debt service on such obligations, the City is obligated to levy and collect an ad valorem tax, within the limits prescribed by law, sufficient for the payment thereof. Excludes the obligations being refunded by the 2021A Bonds. (2) Interest on the 2021 Bonds has been calculated at rates ranging from 4% to 5% for purposes of illustration. Preliminary, subject to change. (3) Interest on the 2021A Certificates has been calculated at rates ranging from 4% to 5% for purposes of illustration. Preliminary, subject to change. (4) Interest on the 2021B Certificates has been calculated at rates ranging from 4% to 5% for purposes of illustration. Preliminary, subject to change. (5) Interest on the 2021A Bonds has been calculated at rates ranging from .92% to 3.11% for purposes of illustration. Preliminary, subject to change.
INTEREST AND SINKING FUND BUDGET PROJECTION
Tax Supported Debt Service Requirements, Fiscal Year Ending 8-31-2021...... $115,848,992 Interest and Sinking Fund, 8-31-2020 ...... 16,368,378 Budgeted Interest and Sinking Fund Tax Levy (1) ...... 111,659,745 Budgeted Other Revenue and Income (1)...... 10,513,414 138,541,537 Estimated Balance, 8-31-2021 ...... $ 22,692,545
(1) Source: City officials.
AUTHORIZED BUT UNISSUED GENERAL OBLIGATION BONDS
Amount Amount Date Amount Previously Being Unissued Purpose Authorized Authorized Issued Issued (1) Balance (1) Public Safety Facility 11-5-2019 $ 413,122,650 $ 35,000,000 $ 48,297,000 $ 329,825,650 Parks and Recreation 11-6-2012 245,000,000 245,000,000 - - Museum-IMPAC 11-6-2012 228,250,000 99,794,364 - 128,455,636 $ 886,372,650 $ 379,794,364 $ 48,297,000 $ 458,281,286
(1) The City expects to issue the 2021 Bonds for such purpose. Preliminary, subject to change. Amount includes premium to the extent it is not used to pay costs of issuance.
ISSUANCE OF ADDITIONAL DEBT AND CAPITAL IMPROVEMENT PLAN . . . The City annually develops a five year capital improvement plan (the “CIP”) to reflect the City’s commitment to continually invest in the City’s infrastructure. The CIP is made for planning purposes and may identify projects that will be deferred or omitted entirely in future years. In addition, as conditions and priorities change, new projects may be added that are not currently identified.
2021 2022 2023 2024 2025 Facilities $ 29,276,527 $ 27,000,000 $ 26,000,000 $ 38,106,015 $ - Infrastucture 58,723,473 25,119,591 10,000,000 3,135,148 - Parks 5,000,000 13,632,000 - - - Public Safety 48,297,200 104,248,409 111,000,000 45,758,837 20,932,514 Grand Total $ 141,297,200 $ 170,000,000 $ 147,000,000 $ 87,000,000 $ 20,932,514
See “INFECTIOUS DISEASE OUTBREAK – COVID-19.”
OTHER OBLIGATIONS
The City leases buildings, office space, and equipment under various lease agreements. Generally, these lease agreements provide for cancellation in the event the City Council does not appropriate funding in subsequent fiscal years. Therefore, the City is not obligated beyond each fiscal year and such leases are classified as operating leases. However, management expects the leases to continue. These leases are treated as operating leases for accounting purposes. Operating lease expenditures for the year ended August 31, 2020, amounted to $5.0 million. Of this amount $3.7 million was for general government and $1.3 million was for enterprise funds. The City also has existing capital leases outstanding as of August 31, 2020 for purchase of digital public safety communication systems in the principal amount of $7.6 million. The leases end in 2022 and 2023. The City has two notes payable outstanding for energy efficient street lighting in the principal amount of $5.0 million. The notes mature in 2022 and 2025.
A-10
APPENDIX B
SELECTED PROVISIONS OF THE FINANCING DOCUMENTS
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SELECTED PROVISIONS OF THE FINANCING DOCUMENTS
THE FOLLOWING ARE SELECTED PROVISIONS OF THE TRUST AGREEMENT AND THE LEASE AGREEMENT. THE SELECTED PROVISIONS ARE QUALIFIED IN THEIR ENTIRETY BY REFERENCE TO THE FULL AND COMPLETE DOCUMENTS.
References to “Sections” in the below provisions refer to the document from which such selected provision was taken unless the context requires otherwise.
1. SELECTED DEFINITIONS
Additional Bonds - The additional parity lease revenue bonds or other obligations which the Corporation reserves the right to issue in the future pursuant to Section 3.09 of the Trust Agreement.
Additional Tax – The additional hotel occupancy tax levied in support of the Project at the rate of two percent (2%) of the consideration paid by an occupant of a hotel room within the City, and as described in Section 2.03 of the Lease Agreement.
Appropriate, Appropriated or Appropriation - The adoption by the City Council of a budget or amendments to the budget for a Fiscal Year which includes the Lease Payments, Operating Expenses, and other payments required, if any, to be made by the City under the Lease Agreement during the respective Fiscal Year.
Appropriated Funds - Funds Appropriated by the City from any money that has not been encumbered to secure the payment of any indebtedness of the City and that may lawfully be used with respect to any payment obligated or permitted under the Lease Agreement, including but not limited to unencumbered and lawfully available revenues derived by the City from the Additional Tax, the general sales and use tax levied by the City, bridge revenues and transfers from City-owned utility systems.
Authorized Denomination - With respect to the Series 2021 Bonds, $5,000 in principal amount or any integral multiple thereof.
Ballpark - A multipurpose coliseum, stadium or other type of arena or facility that is planned for use for one or more professional or amateur sports events, including minor league baseball games, and related infrastructure as defined in the Venue Project Act.
Board - The Board of Directors of the Corporation.
Bond Counsel - An attorney at law or a firm of attorneys, acceptable to the Corporation, the City, and the Trustee, of nationally-recognized standing in matters pertaining to the issuance of tax-exempt bonds by states and their political subdivisions, initially Norton Rose Fulbright US LLP.
Bond Payment - The semiannual payments made to each Bondholder in accordance with the Trust Agreement.
Bond Payment Date – February 15 and August 15 of each year as long as any Parity Bonds are Outstanding.
102260675.1/1001161642 B-1 Bond Register - The register of owners of the Parity Bonds, maintained by the Trustee.
Bondholder - The person in whose name any Parity Bond is registered in the Bond Register. As used herein, an “owner” or a “holder” of Parity Bonds means a Bondholder.
Bondholder Representative - Any individual bondholder or any director or officer of a Bondholder who is designated as such in writing for the purposes of the Trust Agreement.
Business Day - Any day other than a Saturday, Sunday, legal holiday, or a day on which banking institutions in El Paso, Texas, Dallas, Texas, and/or New York, New York are authorized or required by law or executive order to close.
Capital Appreciation Bond - Any Parity Bond issued pursuant to the terms hereof in which no interest is paid prior to stated maturity or early redemption and in which interest begins to accrete from the date of delivery of such Parity Bond.
Chapter 1207 – Chapter 1207, Texas Government Code, as amended.
City - The CITY OF EL PASO, TEXAS , a duly created municipal corporation and political subdivision of the State of Texas, operating as a home-rule municipality pursuant to the Texas Local Government Code and its City Charter, together with its successors and permitted assigns.
City Council - The City Council of the City.
City Representative - The Mayor, the City Manager, any Deputy City Manager, the City Clerk, the Chief Financial Officer of the City, and the Comptroller of the City, and any other officer or employee of the City who is designated in writing by resolution or ordinance of the City Council or by a certificate executed by the City Manager or the Chief Financial Officer of the City as a City Representative for the purposes of the Trust Agreement.
Closing Date - With respect to each series of Parity Bonds, the date of initial delivery of and payment for such series of Parity Bonds.
Club - Mountain Star Sports Group, LLC – El Paso Baseball Club Series.
Code - The United States Internal Revenue Code of 1986, as amended, and the regulations and revenue rulings and procedures promulgated thereunder.
Corporation - The City of El Paso Downtown Development Corporation, a nonprofit local government corporation created by the City pursuant to the LGC Act, and its successors and permitted assigns.
Corporation Representative - The Chair and Vice Chair of the Board of the Corporation, and the Executive Director and the Treasurer of the Corporation.
Defeasance Amount - An amount which will be sufficient, together with amounts, if any, on deposit in the Payment Account, Insurance and Condemnation Account, Redemption Account, and Series 2021 Proceeds Account, to pay the principal of all Parity Bonds then Outstanding, the redemption premium, if any, and accrued interest thereon to the next succeeding date fixed for redemption, together with any other amounts then due or past due under the Trust
102260675.1/1001161642 B-2 Agreement, including the fees and expenses of Trustee, less the funds held by the Trustee in any account of the Trust Fund (excluding the Rebate Account) as of the redemption date of the Parity Bonds; provided that all amounts due and payable under the Trust Agreement have been paid.
Designated Office - When used with respect to the Trustee, initially, the office of the Trustee situated at 750 North St. Paul Place, Suite 1750, Dallas, Texas 75201, at which the Trustee conducts its corporate trustee business; provided that, with respect to payments on the Parity Bonds and any exchange, transfer or surrender of the Parity Bonds, means the office of the Trustee situated at 750 North St. Paul Place, Suite 1750, Dallas, Texas 75201, or such other location designated in writing by the Trustee.
Development Agreement - Ballpark Development Agreement dated as of September 18, 2012 between the City and the Club as amended by a First Amendment to the Ballpark Development Agreement dated as of June 18, 2013.
Event of Default -
(i) As used in the Trust Agreement, those events of default provided for in Section 7.01 of the Original Trust Agreement.
(ii) As used in the Lease Agreement:
(a) failure by the Sublessee to make a Lease Payment from Appropriated Funds within ten calendar days after the due date thereof;
(b) failure by the City to construct the Project in accordance with the terms and conditions the Lease Agreement;
(c) failure by the City or the Corporation to observe and perform any covenant, condition, or agreement, on its part to be observed or performed by it under the Lease Agreement, other than as referred to in (a) or (b) above, and such failure is not cured within 30 calendar days after written notice thereof is provided to the party in default by the other party hereto or the Trustee;
(d) any material statement, representation, or warranty made by the City in the Lease Agreement or in any writing ever delivered by the City pursuant to or in connection with the Lease Agreement is false, misleading, or erroneous in any material respect;
(e) the filing by the City of a voluntary petition in bankruptcy, or failure by the City promptly to lift any execution, garnishment, or attachment of such consequence as would impair the ability of the City to carry on its operations at the Ballpark, or adjudication of the City as a bankrupt, or assignment by the City for the benefit of creditors, or the entry by the City into an agreement of composition with creditors, or the approval by a court of competent jurisdiction of a petition applicable to the City in any proceedings instituted under the provisions of the Federal Bankruptcy Code, as amended, or under any similar federal or State laws which may hereafter be enacted;
(f) any event which shall occur or any condition which shall exist the effect of which is to cause (i) more than $1,000,000 of aggregate indebtedness of the City to
102260675.1/1001161642 B-3 become due prior to its stated due date (exclusive of any optional or mandatory redemptions permitted by the applicable documents related to such indebtedness), or (ii) a lien to be placed on the Ballpark or the City’s interest in the Ballpark, and not released within sixty (60) days; or
(g) a final judgment against the City for an amount in excess of $1,000,000 shall be outstanding for any period of sixty (60) days or more from the date of its entry and shall not have been discharged in full or stayed pending appeal, and a lien is placed on the Ballpark or the City’s interest in the Ballpark.
Event of Nonappropriation - The failure of the City to appropriate in the budget adopted prior to the commencement of any Fiscal Year sufficient funds to pay the Lease Payments for such Fiscal Year, or the reduction of any Appropriation to an amount insufficient to permit the City to pay the Lease Payments (in which event, the Event of Nonappropriation shall be retroactive to the beginning of the Fiscal Year in which the reduction is made) from any money that may lawfully be used with respect to any payment obligated or permitted under the Lease Agreement.
Financing Documents - Collectively, the Lease Agreement and the Trust Agreement.
First Lease Amendment - The First Amendment to Master Lease dated as of May 1, 2016.
First Supplement - The First Supplement to Trust Agreement Relating to the City of El Paso, Texas Downtown Ballpark Venue Project Financing made as of May 1, 2016 by and between the Trustee and the Corporation..
Fiscal Year - Each 12 month fiscal period of the City commencing on September 1 and ending on August 31 of the following year, or such other annual accounting period as the City may hereafter adopt.
Initial Series 2021 Bond - The single fully registered Series 2021 Bond, without interest coupons, initially issued and delivered to the Underwriters in the aggregate principal amount of the Series 2021 Bonds issued under the Trust Agreement and as further described in Section 4.04 thereof.
Insurance and Condemnation Account - That certain account so designated and established in accordance with Section 6.05 of the Original Trust Agreement.
Issuance Costs - The costs of issuance incurred in connection with the sale of a series of Parity Bonds and the execution and delivery of the Lease Agreement, including but not limited to the initial and first year’s Trustee’s fees and expenses (including fees of Trustee’s Counsel), fees and expenses of the City’s financial advisor, the Rating Agencies, Bond Counsel, City’s legal counsel, Corporation’s legal counsel, printing and other costs, the Underwriters’ discount (including fees and expenses of Underwriters), the examination fees of the Attorney General of Texas, filing fees, fees of the Municipal Advisory Council of Texas, the Depository Trust Company, CUSIP Bureau, and other miscellaneous costs and expenses.
Lease Agreement - The MAS TER LEAS E AGREEMENT RELATING TO THE CITY OF EL PAS O, TEXAS DO WNTO WN BALLPARK VENUE PROJECT FINANCING, dated as of August 1,
102260675.1/1001161642 B-4 2013, by and between the Corporation and the City and any duly authorized and executed amendment thereto, including the First Lease Amendment, Second Lease Amendment, and Third Lease Amendment.
Lease Payment - (i) On each August 5, while any Parity Bonds are Outstanding under the Trust Agreement, an amount of money equal to the full amount of the principal installment (or Maturity Amount, in the case of Capital Appreciation Bonds) coming due on the Parity Bonds on such date, either pursuant to a mandatory sinking fund redemption or upon maturity of the Parity Bonds; and (ii) on each Lease Payment Date thereafter, while any Parity Bonds are Outstanding under the Trust Agreement, an amount of money which, when added to the amount then on deposit in the Payment Account, will equal the amount of interest to become due on the Parity Bonds on such Lease Payment Date. Attached as Exhibit E to the Lease Agreement is an initial schedule of Lease Payments to be in effect following the issuance of the Series 2021 Bonds.
Lease Payment Date - Each August 5 and February 5 (or the next Business Day thereafter if such day is not a Business Day) for so long as the Lease Agreement is in effect.
Leasehold Estate - An interest in Real Property granting to its holder a right of exclusive possession for a specified duration, subject to the payment of rent and other conditions placed upon the continued effectiveness and validity thereof included within a lease.
Lessor - The City, in its capacity as the lessor of the Ballpark under the Primary Lease, and its successors and permitted assigns.
Lessee - The Corporation, in its capacity as the lessee of the Ballpark under the Primary Lease, and its successors and permitted assigns.
LGC Act – Collectively, Subchapter D of Chapter 431, Texas Transportation Code, as amended; Chapter 394, Texas Local Government Code, as amended; and the Texas Non-Profit Corporation Act (formerly Article 1396, Vernon’s Texas Civil Statutes, as amended), now codified in the Texas Business Organizations Code as the Texas Nonprofit Corporation Law, as defined in Section 1.008 of the Texas Business Organizations Code, as amended.
Maturity Amount - The total amount of principal and accreted interest coming due on the stated maturity date of a Parity Bond that is issued as a Capital Appreciation Bond.
Net Proceeds - Any insurance proceeds or condemnation award paid with respect to the Ballpark remaining after payment of all expenses incurred in the collection thereof.
Non-HOT Appropriated Funds – The meaning set forth in Section 6.07 of the Lease Agreement.
Operating Expenses - The meaning set forth in Section 6.02(e) of the Lease Agreement.
Operating Fund - The “Operating Fund” so designated and to be established by the Trustee pursuant to Section 6.07 of the Trust Agreement upon the termination of the Sublease.
Original Trust Agreement - The TRUS T AGREEMENT RELATING TO THE CITY OF El Paso, TEXAS DO WNTO WN BALLPARK VENUE PROJECT FINANCING, dated as of August 1, 2013, between the Corporation and the Trustee, as amended by a First Amendment to the Trust
102260675.1/1001161642 B-5 Agreement dated October 15, 2013 and any other duly authorized and executed amendment thereto.
Outstanding - As of the date of determination, all Parity Bonds theretofore issued and delivered under the Trust Agreement, except:
(1) Parity Bonds theretofore cancelled by the Trustee or delivered to the Trustee for cancellation;
(2) Parity Bonds for whose payment or redemption money in the necessary amount has been theretofore deposited in an account, other than the “Payment Account” identified in Article VI of the Trust Agreement, with the Trustee holding such money in trust irrevocably for the holders of such Parity Bonds;
(3) Parity Bonds in exchange for or in lieu of which other Parity Bonds have been registered and delivered pursuant to the Trust Agreement; and
(4) Parity Bonds alleged to have been mutilated, destroyed, lost, or stolen which have been paid as provided in the Trust Agreement.
Parity Bonds - The Previously Issued Parity Bonds, the Series 2021 Bonds and any Additional Bonds.
Payment Account - That certain account so designated and established by the Trustee pursuant to Section 6.03 of the Trust Agreement.
Permitted Encumbrances - The matters described on Exhibit H to the Lease Agreement.
Permitted Investments - Any of the following, to the extent permitted by applicable law, including but not limited to Chapter 2256 of the Texas Government Code, and the Corporation’s investment policy:
(i) bills, interest-bearing notes, bonds, or other direct obligations of the United States, including United States Treasury State and Local Government Series, or those for which the full faith and credit of the United States are pledged for the payment of principal and interest;
(ii) obligations issued, or fully guaranteed as to principal and interest by, the United States or any agency or instrumentality thereof;
(iii) certificates of deposit issued by a nationally or state chartered bank (which may include the Trustee), provided either that (A) such bank is currently rated not lower than “AA” (or its equivalent) by the Rating Agencies, and the principal amount of any such certificate of deposit in excess of the amount insured by the FDIC or by the FDIC as manager for the Savings Association Insurance Fund, shall be fully secured in accordance with Section 2256.010, Texas Government Code, and collateralized by the pledge and deposit of securities described in (i) and (ii) of this definition in an amount and with maturities that meet all applicable standards established by the Rating Agencies for funds held for payment of securities rated “AAA” (or its equivalent) by them, that the Trustee has a perfected first priority security interest in the collateral, that the Trustee or any agent has possession of the collateral, and that such obligations are free and clear of claims by third parties, or (B) the principal amount of and interest to be
102260675.1/1001161642 B-6 earned on any such certificate of deposit does not exceed the amount insured by the FDIC or by the FDIC as manager for the Savings Association Insurance Fund;
(iv) fully collateralized direct repurchase agreements having a defined termination date, secured by obligations of the United States of America or its agencies and instrumentalities, in market value of not less than the principal amount of such agreement and accrued interest thereon, pledged and deposited with a third party acting solely for the Trustee, selected or approved by the Corporation, and placed through a primary government securities dealer, as defined by the Board of Governors of the Federal Reserve System, or a nationally or state chartered bank (which may include the Trustee), provided that such dealer or bank is currently rated not lower than “AA” (or its equivalent) by the Rating Agencies, the Trustee has a perfected first priority security interest in the collateral, and that such obligations are free and clear of claims by third parties; and
(v) money market funds whose assets are invested exclusively in those investment vehicles set forth in (i) or (ii) of this definition, provided that such money market fund is currently rated not lower than “AA” (or its equivalent) by the Rating Agencies.
The Trustee shall be entitled to assume that any investment which at the time of purchase is a Permitted Investment remains a Permitted Investment thereafter, absent actual receipt of written notice to the contrary. The Trustee shall have no responsibility to monitor the ratings of Permitted Investments after the initial purchase of or investment in such Permitted Investment.
Prepayment Option Date - In the event of damage, destruction, or condemnation of the Ballpark as described in Section 4.13 of the Lease Agreement, the date established pursuant to such Section 4.13.
Prepayment Option Price - An amount which will be sufficient to pay the principal of all Parity Bonds then Outstanding and accrued interest thereon to the date fixed for redemption in accordance with Section 5.01(d) of the Trust Agreement, together with any other amounts then due or past due hereunder, including the fees and expenses of the Trustee, less the funds held by the Trustee in any account of the Trust Fund (other than the Rebate Account) as of the redemption date of the Parity Bonds.
Previously Issued Parity Bonds – Means the currently Outstanding Series 2013A Bonds, Series 2013B Bonds, Series 2016 Bonds, and Series 2020 Bonds.
Primary Lease - The conveyance of the Leasehold Estate in the Ballpark from the City to the Corporation in accordance with the Lease Agreement, particularly Section 3.01 thereof.
Project – Collectively, the Ballpark, together with the related infrastructure financed in connection therewith, and the Real Property together with all improvements constructed thereon and also including any and all items of personal property situated respectively thereon by the City whether now owned or hereafter acquired or refinanced with proceeds of any series of Parity Bonds for and on behalf and use of the City or the Corporation, including but not limited to any and all furniture, fixtures, machinery and equipment and any and all other items of personal property.
Project Costs - All costs or payment of design, acquisition, construction, installation, and financing of the Project, including but not limited to architectural, engineering, installation, and
102260675.1/1001161642 B-7 management costs; project coordination and supervisory costs; administrative costs; capital expenditures relating to design, construction, and installation; financing payments; sales tax, if any, on the Project; costs of feasibility, environmental, appraisal, and other reports; inspection costs; permit fees; filing and recording costs; title insurance premiums; survey costs; Issuance Costs; fees and expenses of legal counsel to the Corporation and the City; and all other costs related to the Project or the financing thereof, authorized by the Venue Project Act; provided; however, that the term Project Costs does not include any costs to operate and maintain the Ballpark beginning one year after construction of the Project is completed.
Rating Agencies - Fitch Ratings, Moody’s Investors Service, and S&P Global Ratings, a division of S&P Global Inc.
Real Property - The real property of the City described in Exhibit B of the Lease Agreement upon which the Ballpark is situated or will be constructed or installed which includes the site of the City’s current City Hall.
Rebate Account - That certain account so designated by the Trustee pursuant to Section 6.09 the Trust Agreement, and referred to herein in Section 9.03.
Rebate Analyst - A certified public accountant, financial analyst, Bond Counsel, or any firm of the foregoing selected by the Corporation, experienced in making the arbitrage and rebate calculations required under the Code.
Record Date - The last Business Day of the month next preceding the month in which a Bond Payment Date occurs.
Redemption Account - That certain account so designated and established in accordance with Section 6.06 of the Trust Agreement.
Refunded Bonds – The specific maturities of the Series 2013A Bonds which are defeased with the proceeds of the Series 2021 Bonds.
Regulations - Any proposed, temporary, or final income tax regulations issued pursuant to sections 103 and 141 through 150 of the Code, which are applicable to the Parity Bonds. Any reference to any specific Regulation shall also mean, as appropriate, any proposed, temporary, or final income tax regulation designed to supplement, amend, or replace the specific Regulation referenced.
Second Lease Amendment – The Second Amendment to Master Lease dated as of July 17, 2020.
Second Supplement - The Second Supplement to Trust Agreement Relating to the City of El Paso, Texas Downtown Ballpark Venue Project Financing made as of July 17, 2020 by and between the Trustee and the Corporation.
Series 2013A Bonds -The City of El Paso Downtown Development Corporation Special Revenue Bonds, Series 2013A (Downtown Ballpark Venue Project), dated as of August 1, 2013, and issued in the original aggregate principal amount of $45,125,000.
102260675.1/1001161642 B-8 Series 2013B Bonds - The City of El Paso Downtown Development Corporation Special Revenue Bonds, Taxable Series 2013B (Downtown Ballpark Venue Project), dated as of August 1, 2013, and issued in the original aggregate principal amount of $15,660,000.
Series 2013B Subaccount of the Venue Project Fund – The separate subaccount established by the City within the Venue Project Fund in which all payments received under the Team Lease shall be deposited.
Series 2016 Bonds - The City of El Paso Downtown Development Corporation Special Revenue Refunding Bonds, Series 2016 (Downtown Ballpark Venue Project), dated June 29, 2016, and issued pursuant to the First Supplement in the original aggregate principal amount of $17,665,000.
Series 2020 Bonds – The City of El Paso Downtown Development Corporation Special Revenue Refunding Bonds, Series 2020 (Downtown Ballpark Venue Project), dated as of the date of their initial delivery, and issued pursuant to this Second Supplement in the original aggregate principal amount of $655,000.
Series 2021 Bond Resolution - The resolution adopted by the Board of the Corporation on April 13, 2021, authorizing the issuance of the Series 2021 Bonds and approving the Financing Documents and other related matters.
Series 2021 Bonds - The City of El Paso Downtown Development Corporation Special Revenue Refunding Bonds, Taxable Series 2021 (Downtown Ballpark Venue Proje ct), dated as of the date of their initial delivery, and issued pursuant to the Third Supplement in the original aggregate principal amount of $______.
Series 2021 Proceeds Account - That certain account so designated and established in accordance with Section 6.02 of this First Supplement.
State - The State of Texas.
Sublease - The conveyance of a Leasehold Estate in the Ballpark, being the Corporation’s Leasehold Estate in the Ballpark acquired under the Primary Lease, conveyed back to the City as Sublessee, in accordance with the terms of the Lease Agreement, particularly Section 3.02 thereof.
Sublessee - The City, in its capacity as the sublessee of the Ballpark under the Sublease, and its successors and permitted assigns.
Sublessee Representative - The Mayor, the City Manager, any Deputy City Manager, the City Clerk, the Chief Financial Officer of the City, and the Comptroller of the City, and any other officer or employee of the City who is designated in writing by resolution or ordinance of the City Council or by a certificate executed by the City Manager or the Chief Financial Officer of the City as a Sublessee Representative for the purposes of the Lease Agreement.
Sublessor - The Corporation, in its capacity as the sublessor of the Ballpark under the Sublease, and its successors and permitted assigns.
102260675.1/1001161642 B-9 Sublessor Representative - The Chair and Vice Chair of the Board of the Corporation, and the Executive Director, any Assistant Executive Director and the Treasurer of the Corporation.
Taxable Parity Bonds - The Series 2013B Bonds, the Series 2021 Bonds, and each series of Additional Bonds for which Bond Counsel has not delivered an opinion on the date of issuance thereof to the effect that such Additional Bonds are obligations described by section 103 of the Code and as such, the interest on which is not excludable from “gross income” for federal income tax purposes.
Tax-Exempt Parity Bonds - The Series 2013A Bonds, the Series 2016 Bonds, the Series 2020 Bonds, and each series of Additional Bonds for which Bond Counsel has delivered an opinion on the date of issuance thereof to the effect that such Additional Bonds are obligations described by section 103 of the Code, the interest on which is excludable from “gross income” for federal income tax purposes.
Team Lease - The Ballpark Lease Agreement dated as of October 11, 2012 among the City, the Club and Mountain Star Sports Group, LLC and as amended by a First Amendment to the Ballpark Lease Agreement dated as of June 18, 2013.
Term of the Primary Lease - The term of the Primary Lease as determined pursuant to Section 5.01 of the Lease Agreement.
Term of the Sublease - The term of the Sublease as determined pursuant to Section 5.02 of the Lease Agreement.
Third Supplement - The Third Supplement to Trust Agreement Relating to the City of El Paso, Texas Downtown Ballpark Venue Project Financing made as of June 1, 2021, by and between the Trustee and the Corporation.
Trust Agreement - the Original Trust Agreement, the First Supplement, the Second Supplement, the Third Supplement and any subsequent amendment or supplement to the Original Trust Agreement.
Trust Estate - All right, title, and interest of the Corporation (i) in and under the Lease Agreement including, but not limited to, all Lease Payments and other payments (other than payments for Operating Expenses) paid or payable by the City to the Corporation or the Trustee pursuant to the Lease Agreement and other income, charges, and funds realized from the lease of the Ballpark, and (ii) in and under the Trust Agreement including, but not limited to, all funds and investments in the Trust Fund (excluding the Rebate Account) and all funds deposited with the Trustee pursuant to the Financing Documents (excluding funds transferred to the Trustee for deposit in the Operating Fund or the Rebate Account), all subject to and in accordance with the Trust Agreement.
Trust Fund - The “Trust Fund” so designated and established pursuant to Section 6.01 of the Trust Agreement, consisting of the Series 2021 Proceeds Account, the Payment Account, the Insurance and Condemnation Account, the Redemption Account, and all subaccounts created under such Accounts.
102260675.1/1001161642 B-10 Trustee - Wells Fargo Bank, National Association, and its successors and permitted assigns.
Trustee Representative - Any Executive Vice President, any Senior Vice President, any Vice President, or any other trust officer, who by virtue of his position with the Trustee has been authorized by the board of directors of the Trustee to execute trust agreements similar to the Trust Agreement and related documents.
Underwriters - The firm or syndicate of investment banking firms identified in the bond purchase agreement related to the issuance and sale of a series of Parity Bonds.
Venue Project Act - Chapter 334 of the Texas Local Government Code, as amended.
Venue Project Fund – The fund established by the City pursuant to Section 334.042 of the Venue Project Act and pursuant to a resolution of the City Council adopted on December 18, 2012.
102260675.1/1001161642 B-11 2. SELECTED PROVISIONS OF THE THIRD SUPPLEMENT TO TRUS T AGREEMENT
ARTICLE IV SERIES 2021 BONDS
Section 4.01 Form, Denomination and Medium of Payment of Series 2021 Bonds. The Series 2021 Bonds shall be issuable only as fully registered Series 2021 Bonds without coupons. The definitive Series 2021 Bonds shall be in Authorized Denominations. The definitive Series 2021 Bonds shall be substantially in the form set forth in Exhibit B, with such variations, insertions, or omissions as are appropriate and not inconsistent therewith and shall conform generally to the rules and regulations of any governmental authority or usage or requirement of law with respect thereto. Principal of and interest on the Series 2021 Bonds shall be payable in any coin or currency of the United States of America which at the time of payment is legal tender for the payment of public and private debts.
Section 4.02 Number and Payment Provisions Relating to Series 2021 Bonds.
(a) Numbers of Series 2021 Bonds. The Series 2021 Bonds shall be numbered consecutively from RA-1 upward (except the Initial Series 2021 Bond which shall be numbered IA-1), or in such other manner as the Corporation, with the concurrence of the Trustee, shall determine.
(b) Interest Accrual Dates of Series 2021 Bonds. Each Series 2021 Bond shall bear interest from the later of their date of delivery or the most recent Bond Payment Date to which interest has been paid or provided for, or unless, as shown by the records of the Trustee, interest on the Series 2021 Bonds shall be in default, in which event it shall bear interest from the date to which interest has been paid in full.
(c) Registration and Authentication of Series 2021 Bonds. The Trustee shall insert the date of registration and authentication of each Series 2021 Bond in the place provided for such purpose in the form of certificate of authentication of the Trustee to be printed on each Series 2021 Bond. If interest on the Series 2021 Bonds shall be in default, the certificate of authentication on the Series 2021 Bonds issued in exchange for Series 2021 Bonds surrendered for transfer or exchange shall be dated as of the date to which interest has been paid in full on the Series 2021 Bonds surrendered.
(d) Payment of Principal and Interest of Series 2021 Bonds. Subject to the provisions of Section 4.06(c) hereof, principal of the Series 2021 Bonds shall be payable by check or draft to the owner of each Series 2021 Bond upon presentation and surrender of such Series 2021 Bond, when due, at the Designated Office of the Trustee. Payment of interest on the Series 2021 Bonds shall be made to the persons in whose names the Series 2021 Bonds are registered at the close of business on the Record Date described in each Form of Series 2021 Bond for such payment and shall be paid by check or draft mailed to such persons at their addresses as they appear in the Bond Register or at such other addresses as are furnished to the Trustee in writing by such Bondholders at least five days prior to the Record Date. In addition, interest may be paid by such other method acceptable to the Trustee, requested by, and at the risk and expense of, the Registered Owner.
102260675.1/1001161642 B-12 Section 4.03 Issuance of Series 2021 Bonds; Maturities; Interest Rates.
(a) Amount, Dated Date, and Purpose of the Series 2021 Bonds. The Series 2021 Bonds shall be dated the date of delivery of the Series 2021 Bonds (currently anticipated to be June 22, 2021) and shall be designated CITY OF EL PASO DOWNTOWN DEVELOPMENT CORPORATION SPECIAL REVENUE REFUNDING BONDS, TAXABLE SERIES 2021 (DOWNTOWN BALLPARK VENUE PROJECT), shall be issued in the aggregate principal amount of $______for the purpose of providing funds (1) for the discharge and final payment of certain outstanding Series 2013A Bonds as identified on Schedule I hereto (the “Refunded Bonds”); and (2) to pay the costs and expenses of issuing the Series 2021 Bonds.
(b) Series 2021 Bonds Principal Amounts and Interest Rates. The Series 2021 Bonds shall bear interest at the rates per annum shown below from their date of delivery (anticipated to be June 22, 2021) computed on the basis of a 360-day year consisting of twelve 30-day months, payable semiannually on each February 15 and August 15, commencing on ______, 20__, until stated maturity or prior redemption, and shall mature on August 15 in the years and in the amounts shown below, unless earlier called for redemption:
Year of Principal Interest Stated Maturity Amount ($) Rates (%)
20__ 20__ 20__ 20__ 20__ 20__ 20 20__ 20__ 20 20__ *** *** *** 20 *** *** *** 20__ 20 20__ *** *** *** 20 *** *** *** 20__ *** *** *** 20__
Section 4.04 Approval and Authentication of Series 2021 Bonds. The Chair of the Board of Directors is hereby authorized to have control of the Series 2021 Bonds and all necessary records and proceedings pertaining to the Series 2021 Bonds pending their investigation, examination, and approval by the Attorney General of the State; their registration by the Comptroller of Public Accounts of the State (the “Comptroller”); and their delivery to the
102260675.1/1001161642 B-13 Underwriters. A single Series 2021 Bond in the form of Exhibit B hereof shall be submitted to the Attorney General of Texas for such purpose. The Initial Series 2021 Bond is referred to herein as the “Initial Series 2021 Bond.” Upon registration of the Initial Series 2021 Bond, the Comptroller (or a deputy designated in writing to act for such Comptroller) shall manually sign the Comptroller’s Registration Certificate on the Initial Series 2021 Bond. The Initial Series 2021 Bond thus registered shall remain in the custody of the Chair of the Board of Directors (or his designee) until delivered to the Underwriters. The Initial Series 2021 Bond shall be registered in the name of ______. Except for the Initial Series 2021 Bond, only such Series 2021 Bonds as shall have endorsed thereon a certificate of authentication substantially in the form set forth in Exhibit B and duly authenticated by the Trustee shall be entitled to any right, security, or benefit under this Third Supplement. Except for the Initial Series 2021 Bond, no Series 2021 Bond shall be valid or obligatory for any purpose unless and until such certificate of authentication shall have been duly executed by the Trustee, and such executed certificate upon any such Series 2021 Bond shall be conclusive evidence that such Series 2021 Bond has been authenticated and delivered under this Third Supplement and that the owner thereof is entitled to the benefits of the trust hereby created. The Trustee’s certificate of authentication on any Series 2021 Bond shall be deemed to have been duly executed by it if (a) signed by an authorized officer or signatory of the Trustee, but it shall not be necessary that the same officer or signatory sign the certificate of authentication on all of the Series 2021 Bonds, and (b) the date of registration and authentication of the Series 2021 Bond is inserted in the place provided therefor on the certificate of authentication.
Section 4.05 Delivery of Series 2021 Bonds. Upon the execution and delivery of this Third Supplement, the Corporation shall execute and deliver to the Trustee and the Trustee shall register and authenticate the Series 2021 Bonds and deliver them to the persons designated by the Underwriters.
Prior to the registration and authentication by the Trustee of any of the Series 2021 Bonds, there shall be filed with the Trustee:
(a) a certified copy of the Series 2021 Bond Resolution;
(b) a certified copy of the ordinance of the City Council of the City approving the issuance of the Series 2021 Bonds and the execution and delivery of the Third Lease Amendment;
(c) original executed counterparts of the Third Supplement and the Third Lease Amendment;
(d) a letter of instructions (which may be in the form of a closing memo) to the Trustee, signed by the Executive Director or the Treasurer of the Corporation, directing the Trustee to authenticate and deliver the Series 2021 Bonds to the Underwriters upon payment to the Trustee for the account of the Corporation of the sum therein specified (including accrued interest, if any), and to deposit the proceeds thereof as provided in this Third Supplement;
(e) approving opinion of the Attorney General of the State and registration certificates of the Comptroller of Public Accounts of the State;
(f) opinions dated as of the date of the closing of Bond Counsel in form and substance reasonably satisfactory to the Trustee; and
102260675.1/1001161642 B-14 (g) such other documents, certificates and instruments in connection with the transaction contemplated by this Third Supplement, in form and substance satisfactory to the Trustee, as the Trustee may reasonably request.
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Section 4.07 Redemption of Refunded Bonds. In order to provide for the refunding, discharge, and retirement of the Refunded Bonds, the Refunded Bonds, in the amounts set forth on Schedule I, are hereby called for redemption on the redemption date specified therein, at the price of par plus accrued interest to the redemption date. Notices of such redemption of the Refunded Bonds shall be given in accordance with the applicable provisions of the Trust Agreement. A Form of the notice of redemption to be sent to holders of the Refunded Bonds in accordance with the provisions of the Trust Agreement is attached hereto as Exhibit D and incorporated herein by reference as a part hereof for all purposes.
ARTICLE VI ESTABLISHMENT AND ADMINISTRATION OF FUND AND ACCOUNTS
Section 6.02 Establishment and Application of Series 2021 Proceeds Account.
(a) Establishment of Series 2021 Proceeds Account. Within the Trust Fund, there is hereby established a special account to be designated as City of El Paso Downtown Development Corporation Series 2021 Proceeds Account, referred to herein as the “Series 2021 Proceeds Account.” The Trustee shall administer the Series 2021 Proceeds Account as provided in this Article and shall deposit funds into the Series 2021 Proceeds Account as follows:
(i) On the Series 2021 Closing Date, the Trustee shall deposit the proceeds of the Series 2021 Bonds to the Series 2021 Proceeds Account; and
(ii) On the respective closing date of each series of Additional Bonds, the Trustee shall deposit the amounts set forth, and to the accounts designated, in an amendment or supplement to the Trust Agreement entered into in connection with such series of Additional Bonds.
(b) Disbursements for Issuance Costs. Disbursements to pay Issuance Costs for the Series 2021 Bonds (or to reimburse the City for the payment of such Issuance Costs made with available City funds) shall be made by the Trustee from the Series 2021 Proceeds Account upon receipt of a letter of instructions from the Corporation instructing the Trustee to disburse Issuance Costs, approved and executed by the Corporation’s Treasurer or the Corporation’s Executive Director. The initial disbursement of Issuance Costs shall be made on the Series 2021 Closing Date and the initial letter of instructions may be in the form of a closing memo.
(c) Disbursements for Refunding Purposes. On the Series 2021 Closing Date, the Trustee shall withdraw [$______and] $______from the [Payment Account and the] Series 2021 Proceeds Account[, respectively,] and transfer to the Escrow Agent the aggregate sum of $______, which the Corporation agrees shall be sufficient to cause the Refunded Bonds to be no longer “Outstanding,” as defined in the Trust Agreement.
(d) Trustee May Rely on Letter of Instructions. Upon receipt of a fully executed and approved letter of instructions delivered in accordance with this Third Supplement and any
102260675.1/1001161642 B-15 required attachments, the Trustee shall have no liability on account of any disbursement from the Series 2021 Proceeds Account in accordance with such letters of instruction provided that it has complied with the procedure required in paragraphs (b) and (c) above.
(e) Transfer to Redemption Account Upon Redemption of All Parity Bonds. Upon a redemption of all Outstanding Parity Bonds pursuant to Section 5.01 hereof, all funds then on deposit in the Series 2021 Proceeds Account shall be transferred to the Redemption Account in accordance with the terms of Section 6.06 hereof, and the Series 2021 Proceeds Account shall be closed.
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Section 6.08 Deposit and Investment of Money.
(a) Investments. Money held in the Trust Fund and the Operating Fund shall be invested by the Trustee in Permitted Investments pursuant to written instruction of a Corporation Representative, or, if a Corporation Representative does not provide written instruction for such investment, the Trustee shall invest money on deposit in the Trust Fund and the Operating Fund in the [Wells Fargo Government Money Market Fund]. No money in the Trust Fund shall be invested in any Permitted Investment which matures or becomes due and payable after the Business Day next preceding the date upon which such money will be required by the Trustee for the uses and purposes specified in this Third Supplement. Proceeds of the Tax-Exempt Parity Bonds are not to be directed by the Corporation for investment in any Permitted Investments except for a temporary period pending use; such proceeds are not to be used by the Corporation or the City directly or indirectly so as to cause any part of the Tax-Exempt Parity Bonds to be or become “arbitrage bonds” within the meaning of the Code. Any money held in the Redemption Account for more than 30 days will be invested at a yield not materially higher than the yield on the Parity Bonds. The Trustee shall not be liable for the Parity Bonds becoming “arbitrage bonds” as a result of investments it makes pursuant to instructions as required herein. The Corporation acknowledges that to the extent regulations of the Comptroller of the Currency or any other regulatory entity grant the Corporation the right to receive brokerage confirmations of the security transactions as they occur, the Corporation specifically waives receipt of such confirmations to the extent permitted by law. The Trustee will furnish the Corporation with monthly cash transaction statements, which include the detail for all investment transactions made by the Trustee hereunder. The Corporation may receive brokerage confirmations at no additional cost upon its written request. The Trustee shall be deemed to have complied with the provisions hereof if it materially follows the written instructions of the Corporation.
(b) Retainage or Disbursement of Earnings. All interest or income received by the Trustee on the investment of money held in the Series 2021 Proceeds Account, the Payment Account, the Insurance and Condemnation Account, the Redemption Account, and the Operating Fund shall be retained in such Accounts and the Operating Fund, respectively. All interest or income received by the Trustee on the investment of money held in the Redemption Account shall be transferred to the Payment Account on each Bond Payment Date while any Parity Bonds are Outstanding.
(c) Notice by Trustee to City. Interest or income received by the Trustee on the investment of money held in the Payment Account shall be retained in that account for the purpose of making Bond Payments. Not less than ten (10) Business Days prior to each Lease
102260675.1/1001161642 B-16 Payment Date, the Trustee shall give written notice to the City of the amount of the Lease Payment next due and the amount of such investment earnings and other funds then on deposit in the Payment Account, which amount may be applied as a credit to the City’s next Lease Payment.
(d) Amounts in Payment Account Credited Against Lease Payments. Except as provided in subsection (c) hereof, amounts deposited in the Payment Account shall be applied as a credit against the Lease Payments due by the City under the Lease Agreement on the Lease Payment Date following the date of deposit.
(e) Trustee Not Liable for Investment Losses. The Trustee shall act only as agent in making or disposing of any investment. The Trustee shall not be liable for any loss resulting from the making or disposition of any investment made pursuant to the provisions of subsection (a) of this Section, and any such losses or penalties shall be charged to the account with respect to which such investment was made.
102260675.1/1001161642 B-17 3. SELECTED PROVISIONS OF THE ORIGINAL TRUS T AGREEMENT
ARTICLE III PARITY BONDS
Section 3.01 Payments From Trust Estate Only. All payments to be made by the Trustee under this Trust Agreement to the Bondholders shall be made only from the income and proceeds from the Trust Estate and only to the extent that the Trustee shall have received income or proceeds from the Trust Estate.
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Section 3.09 Additional Bonds.
(a) Right to Issue Additional Bonds. The Corporation shall have the right and power at any time and from time to time, and in one or more series or issues, to authorize, issue, and deliver, at the request of the City, additional parity lease revenue bonds or other obligations (herein called “Additional Bonds”), in accordance with law, in any amounts, for the purpose of (i) completing the Project, if necessary, and/or (ii) refunding any Parity Bonds then Outstanding. Such Additional Bonds, if and when authorized, issued, and delivered in accordance with the provisions hereof, shall be secured by and made payable equally and ratably on a parity with the Outstanding Parity Bonds from the Trust Estate (including but not limited to the Lease Payments made by the City, as Sublessee, pursuant to the Sublease, as modified pursuant to clause (b)(ii) below). The Payment Account established pursuant to this Trust Agreement shall secure and be used to pay all Additional Bonds as well as the Outstanding Parity Bonds, all on a parity lien basis. No bonds or other obligations shall be issued which may have a lien on the Trust Estate prior and superior to that securing the Parity Bonds.
(b) Conditions Precedent to Issuance of Additional Bonds. No series or issue of Additional Bonds shall be issued or delivered unless the following conditions have all been met:
(i) the laws of this State effective at the time of the authorization of such Additional Bonds shall permit their issuance, and, if required by law, the Attorney General of Texas shall have approved the issuance of such Additional Bonds;
(ii) to the extent necessary, the Financing Documents shall have been appropriately amended or supplemented to provide for the issuance of such Additional Bonds, including but not limited to amending the Lease Agreement to provide for the payment by the City of Lease Payments under the Sublease to include payment of debt service related to such issue of Additional Bonds, subject to annual Appropriation (as defined in the Lease Agreement) by the City Council of the City;
(iii) the principal of such Additional Bonds shall be scheduled to be paid or mature only on August 15 of the years in which such principal is scheduled to be paid or mature, and all interest thereon shall be payable only on February 15 and August 15;
(iv) the Chair of the Board of Directors of the Corporation and the Executive Director of the Corporation shall execute a written certificate to the effect that the Trust Agreement and the Lease Agreement are in full force and effect, and no Event of Default exists in connection therewith;
102260675.1/1001161642 B-18 (v) the Mayor, City Manager and the Chief Financial Officer of the City shall execute a written certificate to the effect that the Lease Agreement is in full force and effect, no Event of Default exists in connection therewith, and, to the extent applicable, the City has complied with the covenant contained in Section 6.02(g) of the Lease Agreement; and
(vi) if there are any Tax-Exempt Parity Bonds Outstanding at the time of the proposed issuance of Additional Bonds, the Corporation must obtain an opinion of Bond Counsel to the effect that the issuance of the Additional Bonds will not have an adverse effect on the tax exempt status of the Outstanding Tax-Exempt Parity Bonds.
ARTICLE VI ESTABLISHMENT AND ADMINISTRATION OF FUND AND ACCOUNTS
Section 6.01 Trust Fund. There is hereby established with the Trustee a special trust fund to be designated the City of El Paso, Texas Downtown Ballpark Venue Project Trust Fund, referred to herein as the “Trust Fund.” The Trustee shall keep the Trust Fund separate and apart from all other funds held by it. Within the Trust Fund, there are hereby established, for the benefit of the Bondholders, the separate and distinct accounts and subaccounts more particularly described in this Article (excluding the Rebate Account). On the date of delivery of the Series 2013 Bonds to the initial purchasers thereof (the “Closing Date”), the Trustee agrees to accept and deposit the proceeds from the sale of such Parity Bonds pursuant to Sections 6.02 and 6.03 below, which proceeds, together with the City’s contribution, if any, shall thereafter be subject to and be administered pursuant to the terms of this Article.
Section 6.02 Establishment and Application of Project Account.
(a) Establishment of Project Account. Within the Trust Fund, there is hereby established a special account to be designated as City of El Paso Downtown Development Corporation Downtown Ballpark Venue Financing Project Account, referred to herein as the “Project Account.” The Trustee shall administer the Project Account as provided in this Article, shall establish “Series Subaccounts” under the Project Account for each series of Series 2013 Bonds to separately account for proceeds and other funds related to each series of Parity Bonds, and shall deposit funds into the Project Account as follows:
(i) On the Closing Date with respect to the Series 2013A Bonds, the Trustee shall deposit $49,080,873.60 from proceeds of the Series 2013A Bonds to the Series 2013A Subaccount of the Project Account, of which $927,963.31 is available to be used to pay Issuance Costs;
(ii) On the Closing Date with respect to the Series 2013B Bonds, the Trustee shall deposit $15,569,126.40 from proceeds of the Series 2013B Bonds to the Series 2013B Subaccount of the Project Account, of which $322,036.69 is available to be used to pay Issuance Costs; and
(iii) On the respective Closing Date of each series of Additional Bonds, the Trustee shall deposit the amounts set forth, and to the accounts designated, in an amendment or supplement to this Trust Agreement entered into in connection with such series of Additional Bonds.
102260675.1/1001161642 B-19 (b) Disbursements for Issuance Costs. Disbursements to pay Issuance Costs (or to reimburse the City for the payment of Issuance Costs made with available City funds) shall be made by the Trustee from the related Series Subaccount of the Project Account upon receipt of a letter of instructions from the Corporation instructing the Trustee to disburse Issuance Costs, approved and executed by the Corporation’s Treasurer or the Corporation’s Executive Director. The initial disbursement of Issuance Costs shall be made on the Closing Date and the initial letter of instructions may be in the form of a closing memo.
(c) Disbursements for Project Costs. Funds on deposit in each related Series Subaccount of the Project Account shall be disbursed for the payment of Project Costs (or to reimburse the City for the payment of Project Costs made with available City funds) as provided in this Subsection (c).
(i) On the Closing Date, upon receipt of a letter of instructions from the Corporation, approved and executed by the Corporation’s Treasurer or the Corporation’s Executive Director, the Trustee shall immediately pay the City for any Project Costs previously paid by the City in the amounts and as specified in such letter of instructions; such letter of instructions may be in the form of a closing memo;
(ii) Following the Closing Date, upon the Trustee’s receipt of a properly completed and executed Requisition Requesting Disbursement of Project Costs, substantially in the form attached hereto as Exhibit D, together with all attachments, the Trustee shall, within three Business Days of such receipt, disburse money from the related Series Subaccount of the Project Account in an amount sufficient to pay the Project Costs (or to reimburse the City for the payment of Project Costs made with available City funds) which are the subject of such requisition.
(iii) The Trustee shall not be required to accept more than two requisitions each month excluding requisitions paid on the Closing Date.
(iv) The final disbursement from the related Series Subaccount of the Project Account for Project Costs shall additionally require the Certificate of Completion described in subsection 6.01(e) of the Lease Agreement, if applicable.
(d) Trustee May Rely on Letter of Instructions and Requisitions. Upon receipt of a fully executed and approved letter of instructions delivered in accordance with this Trust Agreement or a Requisition Requesting Disbursement of Project Costs and the required attachments, the Trustee may rely conclusively upon such documents. The Trustee shall have no liability on account of any disbursement from the Project Account in accordance with such letters of instruction or Requisitions provided that it has complied with the procedure required in paragraphs (b) and (c) above.
(e) Transfer to Redemption Account Upon Redemption of All Parity Bonds. Upon a redemption of all Outstanding Parity Bonds pursuant to Section 5.01 hereof, all funds then on deposit in the Project Account shall be transferred to the Redemption Account in accordance with the terms of Section 6.06 hereof, and the Project Account shall be closed.
(f) Transfer of Remaining Proceeds of Series 2013 Bonds. Upon the receipt by the Trustee of the Certificate of Completion described in Section 6.01(e) of the Lease Agreement, the Trustee shall transfer any amount remaining in each of the Series 2013 Subaccounts of the
102260675.1/1001161642 B-20 Project Account pursuant to a letter of instructions of the Corporation, approved and executed by the Corporation’s Treasurer or the Corporation’s Executive Director, given on a basis consistent with the City’s commitments in Section 5.3 of the Development Agreement. Thereafter, the Series 2013 Subaccounts of the Project Account shall be closed and the funds transferred shall be used in accordance with such Section 5.3.
(g) Article VI Controls Transfers and Payments from Project Account. No amounts shall be withdrawn or transferred from or paid out of the Project Account except as provided in this Article VI.
Section 6.03 Establishment and Application of Payment Account.
(a) Establishment of Payment Account. Within the Trust Fund, there is hereby established a special account to be designated the City of El Paso Downtown Development Corporation Downtown Ballpark Venue Financing Payment Account (the “Payment Account”). In accordance with Section 6.11 below, the Trustee shall establish the “Team Payment Account” as a subaccount of the Payment Account and may establish additional subaccounts of the Payment Account to separately account for payments or other funds related to each series of Parity Bonds. On the Closing Date, the Trustee shall deposit $42.62 from the proceeds of the Series 2013A Bonds to the Payment Account. The Payment Account shall be maintained by the Trustee until either the Lease Payments and all other amounts payable under the Lease Agreement (other than Operating Expenses) are paid in full, or the Prepayment Option Price and all other amounts payable under the Lease Agreement (other than Operating Expenses) are paid in full, pursuant to the terms of the Lease Agreement. On the Closing Date with respect to each series of Parity Bonds, the Trustee shall deposit to the Payment Account proceeds of such series of Parity Bonds representing accrued and/or capitalized interest, if any. Subject to Sections 6.11 and 7.12 hereof, the Trustee shall also deposit to the Payment Account, promptly after the receipt thereof, all Lease Payments, and, all other funds of the Corporation derived pursuant to the Sublease of the Project, payment of the Prepayment Option Price, and such other amounts as may be paid to the Trustee as assignee of the Corporation pursuant to the Financing Documents (except money paid by the City pursuant to the Lease Agreement for Operating Expenses or for deposit to the Rebate Account). Upon closing of the Project Account, any transfer of funds to pay debt service in accordance with Section 6.02(f) hereof shall be deposited, as soon as practicable, by the Trustee in the Payment Account, and to the extent such funds represents Taxable Parity Bond proceeds, to the Team Payment Account.
(b) Withdrawals by Trustee on Bond Payment Dates. Subject to Section 6.11 hereof and to the extent of funds contained in the Payment Account, the Trustee shall withdraw from such account, on each Bond Payment Date, an amount equal to the amount of interest and principal payments due with respect to the Parity Bonds on such Bond Payment Date and shall cause the same to be applied to the payment of interest and principal payments due on such Bond Payment Date; provided however, that the Team Payment Account and all payments received pursuant to the Team Lease may only be used to pay debt service on the Series 2013B Bonds and any other Outstanding Taxable Parity Bonds.
(c) Transfers to Redemption Account. Upon a redemption of all Parity Bonds pursuant to Sections 5.01 or 6.05(d), all funds in the Payment Account shall be transferred to the Redemption Account. In the event of a partial redemption of the Parity Bonds, one Business Day prior to the date fixed for redemption of the Parity Bonds, the Trustee shall transfer from the
102260675.1/1001161642 B-21 Payment Account to the Redemption Account the amount of money required to pay the redemption price of such Parity Bonds to be redeemed, to the extent of the money contained therein.
(d) Deposit of Excess Proceeds. The Trustee shall transfer into the Payment Account (i) any funds required to be transferred therein in accordance with Section 6.02(f) hereof, and (ii) any proceeds of a series of Additional Bonds (including investment earnings) that remain on deposit in the related Series Subaccount of the Project Account upon completion of construction of the project or projects for which such Additional Bonds were issued. Such proceeds shall be invested at a yield not exceeding the yield on the related series of Parity Bonds (if such Parity Bonds were issued as Tax-Exempt Parity Bonds), and shall be used to pay principal (but not interest) on the related series of Parity Bonds as such principal becomes due. Notwithstanding the foregoing, in the event the Corporation provides the Trustee with an opinion of Bond Counsel to the effect that such remaining proceeds may be used in another manner as described or approved by Bond Counsel without adversely affecting, for federal income tax purposes, the exclusion of interest on such Parity Bonds that are Tax-Exempt Parity Bonds, such proceeds may be used in accordance with the directions provided in such opinion of Bond Counsel.
(e) Article VI Controls Withdrawals and Payments from Payment Account. No amounts shall be withdrawn or transferred from or paid out of the Payment Account except as provided in this Article VI.
Section 6.04 No Reserve Account. No debt service reserve fund or account shall be established in connection with the issuance and delivery of the Series 2013 Bonds.
Section 6.05 Establishment and Application of Insurance and Condemnation Account.
(a) Establishment of Insurance and Condemnation Account. Within the Trust Fund, there is hereby established an account designated as the City of El Paso Downtown Development Corporation Downtown Ballpark Venue Financing Insurance and Condemnation Account (the “Insurance and Condemnation Account”). Money received by the Trustee as the result of the damage and/or destruction of the Project (from Net Proceeds or otherwise) or as the result of a condemnation award shall be deposited into the Insurance and Condemnation Account.
(b) Use of Funds. If the amount of Net Proceeds which are deposited into the Insurance and Condemnation Account is sufficient for the necessary repair and/or replacement of the Project and is also equal to or greater than the Prepayment Option Price, the City has the option of (i) making all necessary repairs and/or replacements, or (ii) exercising its option to prepay Lease Payments in accordance with Section 6.05(d) hereof, with amounts from the Insurance and Condemnation Account.
(i) Use of Funds for Repair and/or Replacement. If the amount of Net Proceeds which are deposited into the Insurance and Condemnation Account is sufficient for the necessary repair and/or replacement of the Project, but is not equal to or greater than a Prepayment Option Price, the City will be able to make all necessary repairs and/or replacements and the Trustee shall disburse amounts from the Insurance and Condemnation Account for such purpose upon receipt from the Corporation of a
102260675.1/1001161642 B-22 “Requisition Requesting Disbursement from the Insurance and Condemnation Account” in substantially the form attached as Exhibit E hereto.
(ii) Use of Funds Upon City’s Election to Prepay Lease Payments. If the amount of Net Proceeds which are deposited into the Insurance and Condemnation Account is equal to or greater than the Prepayment Option Price, in accordance with Section 4.13(a) of the Lease Agreement, the City has the option to terminate the Lease Agreement and all of the Corporation’s interest in the Project by exercising its option to prepay Lease Payments on the next succeeding Bond Payment Date for which it is possible to give notice of intent to exercise its prepayment option. Upon the City’s exercise of its prepayment option, all amounts on deposit in the Insurance and Condemnation Account shall be transferred to the Redemption Account.
(c) Contribution of City Funds for Repair and/or Replacement. If the amount of Net Proceeds which are deposited into the Insurance and Condemnation Account is insufficient for the necessary repair and/or replacement of the Project, in accordance with Section 4.13(a) of the Lease Agreement, the City may, within 45 days of the date of the initial deposit of Net Proceeds, deposit into the Insurance and Condemnation Account, from lawfully available funds, the amount needed for the completion of all necessary repair and/or replacement of the Project. Upon such deposit, the City may make all necessary repairs and/or replacements of the Project and the Trustee shall disburse amounts from the Insurance and Condemnation Account for such purpose upon receipt from the Corporation of a “Requisition Requesting Disbursement from the Insurance and Condemnation Account” in substantially the form attached as Exhibit E hereto.
(d) Contribution of City Funds for Prepayment. If the amount of Net Proceeds which are deposited into the Insurance and Condemnation Account is insufficient for the exercise by the City of its option to prepay Lease Payments, in accordance with Section 4.13(a) of the Lease Agreement, the City may, within 45 days of the date of the initial deposit of Net Proceeds, deposit into the Insurance and Condemnation Account, from lawfully available funds, an amount which together with amounts available in the Insurance and Condemnation Account will be sufficient to pay the Prepayment Option Price. Upon the City’s exercise of its prepayment option, all amounts in the Insurance and Condemnation Account shall be transferred to the Redemption Account.
(e) Transfer to Redemption Account if Funds are Insufficient to Repair and/or Replace Project or City’s Exercise of Prepayment Option. If the amount of Net Proceeds which are deposited into the Insurance and Condemnation Account is insufficient for the complete repair and/or replacement of the Project or for the City’s exercise of its prepayment option, and the City does not, within 45 days of the date of such deposit of Net Proceeds, deposit into the Insurance and Condemnation Account the amount needed to complete the repair and/or replacement of the Project or exercise its option to prepay Lease Payments, the Trustee shall transfer the entire amount on deposit in the Insurance and Condemnation Account to the Redemption Account and such amount shall thereafter be applied in accordance with Section 6.06 hereof.
102260675.1/1001161642 B-23 Section 6.06 Establishment and Application of Redemption Account. Within the Trust Fund, there is hereby established an account designated the City of El Paso Downtown Development Corporation Downtown Ballpark Venue Financing Redemption Account (the “Redemption Account”). Money to be used for redemption of Parity Bonds shall be transferred to the Redemption Account at the times and in the amounts required by Sections 6.02(e), 6.03(c), 6.05(d) and 6.05(e). Said money, together with other legally available funds contributed by the City or the Corporation for deposit in the Redemption Account, if any, shall be set aside in the Redemption Account solely for the purpose of redeeming Parity Bonds in advance of their maturity and shall be applied on or after (if such Parity Bonds are submitted for payment after the date fixed for redemption) the date fixed for redemption to the payment of the principal of and interest on the Parity Bonds to be redeemed upon delivery of such Parity Bonds being redeemed to the Trustee. If there is not sufficient money available to pay in full all Trustee’s fees and expenses and interest and principal then due on the Parity Bonds to be redeemed, the Trustee shall apply the money on deposit in the Redemption Account first, to the payment of its reasonable fees and expenses, and second, to the payment of all interest due with respect to such Parity Bonds, pro rata in proportion to the respective aggregate amount of the total amount of interest due, if necessary, and third, to the payment of the principal of such Parity Bonds, pro rata in proportion to the respective amount of the total amount of principal due, if necessary. Any money remaining in the Redemption Account following redemption of, and payment of all principal and interest due with respect to all Parity Bonds, shall be transferred to the City after the payment of the fees and expenses of the Trustee as provided in Section 8.06.
Section 6.07 Establishment and Application of Operating Fund. In the event the Sublease is ever terminated in accordance with Section 10.03 of the Lease Agreement, there shall be established with the Trustee a special trust fund to be designated the City of El Paso, Texas Downtown Ballpark Venue Financing Operating Fund, referred to herein as the “Operating Fund.” The Trustee shall keep the Operating Fund separate and apart from the Trust Fund and all other funds held by it pursuant to this Trust Agreement. The Operating Fund shall not be part of the Trust Estate and is not pledged to secure the payment of the Parity Bonds. Money received by the Corporation, as Lessee under the Primary Lease, from the City, as Lessor under the Primary Lease, for the payment of Operating Expenses, if any, shall be deposited into the Operating Fund. Funds on deposit in the Operating Fund shall be disbursed by the Trustee to the Lessee to pay Operating Expenses (or to any third party directed by the Lessee in payment of any Operating Expenses) in accordance with written directions provided by a Corporation Representative.
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Section 6.09 Establishment and Application of the Rebate Account.
(a) Establishment of Rebate Account. Within the Trust Fund, there is hereby established with the Trustee a special account to be designated the City of El Paso Downtown Development Corporation Downtown Ballpark Venue Financing Rebate Account” (the “Rebate Account”). Notwithstanding the other provisions of this Trust Agreement, unless the Corporation qualifies for an exception to the payment of rebate, and such exception is confirmed to the Trustee by the Corporation providing a certificate to such effect by a Rebate Analyst, then on or before the 45th day immediately following the date that is one year after the date of delivery of the Tax-Exempt Parity Bonds, and every year thereafter during the term of the Tax-Exempt Parity Bonds, and on or before the 45th day immediately following the date that all Tax-Exempt
102260675.1/1001161642 B-24 Parity Bonds are redeemed or paid, (i) the Corporation shall pay an amount equal to all excess investment earnings as confirmed in the certificate of the Rebate Analyst as hereinafter provided to the Trustee for deposit to the Rebate Account, hereby created but which shall be opened only if amounts are required to be deposited therein; and (ii) the Trustee shall (to the extent the Corporation has not paid such amount to the Trustee for deposit in the Rebate Account) transfer, in the following order of priority - from the Project Account, Payment Account, Insurance and Condemnation Account, or any other account held by the Trustee under this Trust Agreement to the Rebate Account, hereby created - an amount equal to all excess investment earnings as confirmed to the Trustee by the Corporation by providing a certificate to such effect of a Rebate Analyst as hereinafter provided.
(b) Rebate Account Not Part of Trust Estate. Money deposited and held in the Rebate Account shall not be subject to the pledge of this Trust Agreement but shall be held for the benefit of the United States of America and the Corporation. Investment earnings on any money in the Rebate Account shall be retained therein.
(c) Payment of Excess Earnings. On the date no later than the 55th day following the date which is five years after the delivery date of the Tax-Exempt Parity Bonds and every five years thereafter, or such earlier or later date permitted by the Regulations, an amount that is at least equal to 90 percent of the “Excess Earnings,” within the meaning of section 148(f) of the Code, shall be paid by the Trustee to the United States of America and within 60 days following the date that all Outstanding Tax-Exempt Parity Bonds are purchased or redeemed, the entire balance of the Rebate Account shall be paid to the United States of America in accordance with section 148(f)(3) of the Code and the Corporation shall pay to the United States of America when due any additional amounts that may be due to the United States of America in connection with the Tax-Exempt Parity Bonds.
(d) Requirement to Provide Annual Certificate of Rebate Analyst. Unless the Corporation qualifies for an exception to the payment of rebate and such exception has been confirmed to the Trustee in the manner provided herein, the Corporation shall provide annually to the Trustee a certificate of a Rebate Analyst which certificate shall state the excess investment earnings to be paid and transferred to the Rebate Account and that such amount was computed in accordance with section 148(f) of the Code (or any successor section), together with a completed and executed Form 8038-T, if required, and the Trustee may conclusively rely on that certificate in making such transfer and in making any payment to the United States of America hereunder. To the extent that amounts in the Payment Account, the Project Account, the Insurance and Condemnation Account, or any other account held by the Trustee under this Trust Agreement are not sufficient to adequately fund the Rebate Account, the Corporation shall immediately pay such deficiency to the Trustee. The Trustee shall have no liability to use its own funds to make any payment to the United States of America hereunder. If the Corporation fails to provide the Trustee with such certificate, the Trustee may, but has no obligation to, make (or cause to be made) at the Corporation’s expense such calculations and payment out of the Rebate Account and the Corporation agrees to indemnify and hold harmless the Trustee and to reimburse the Trustee for any loss, cost, or damage that it may suffer by reason thereof. Subject to the foregoing provisions, the Trustee covenants to make any payment to the United States of America out of the Rebate Account in the manner required by section 148(f) of the Code and the applicable regulations thereunder and to take such further actions as the Corporation may direct in order to comply with the rebate requirements contained in section 148(f) of the Code. The Trustee on behalf of the Corporation shall retain all records concerning determinations of the
102260675.1/1001161642 B-25 amount to be rebated to the United States of America for six years after the final maturity and payment of the Tax-Exempt Parity Bonds. The Trustee shall not take any action, permit any action to be taken, or fail to take any action with respect to investments of any amounts held by the Trustee relating to the Tax-Exempt Parity Bonds, to the extent the Trustee has and exercises investment discretion, that may result in any Tax-Exempt Parity Bonds being treated as an “arbitrage bond” within the meaning of such term as used in section 148 of the Code. This covenant shall extend to all accounts created hereunder and all money on deposit to the credit of any such account.
(e) Exceptions for Rebate Payments. Upon receipt of certification from a Rebate Analyst that the Corporation qualifies or has qualified for any exception from the payment of rebate, no further deposits to the Rebate Account will be required and any amounts in the Rebate Account, including any investment earnings, in excess of any amount owed to the United States of America from the Rebate Account, as certified by a Rebate Analyst, shall be returned to the Account or payee from whom such amounts were paid.
(f) Requirements May Be Modified to Comply With Tax Law. This Section is intended to comply with the requirements of section 148 of the Code (or any successor section) and the regulations promulgated thereunder. The requirements of this Section shall be deemed modified and amended in the manner to the extent necessary, in the written opinion of Bond Counsel delivered to the Corporation, the City, and the Trustee, to permit compliance with the provisions of said section 148 (or any successor section) applicable to the Tax-Exempt Parity Bonds.
Section 6.10 Payment of Other Costs. The Corporation, as Lessee under the Primary Lease, shall require the City, in its capacity as Lessor under the Primary Lease and as evidenced by the City’s agreement contained in Section 6.02(b) of the Lease Agreement, to pay from Appropriated Funds (i) all Operating Expenses related to the Project and (ii) the ordinary fees and expenses of the Trustee in accordance with the schedule provided in Exhibit G hereto. Upon termination of the Sublease in accordance with Section 10.03 of the Lease Agreement, any funds received by the Corporation from the City to pay Operating Expenses shall be deposited by the Corporation into the Operating Fund, and utilized by the Corporation (as Lessee under the Primary Lease) to pay Operating Expenses, pursuant to Section 6.07 hereof.
Section 6.11 Team Payment Account.
(a) Establishment of Team Payment Account. Within the Payment Account, there is hereby established a special subaccount to be designated the City of El Paso Downtown Development Corporation Downtown Ballpark Venue Financing Team Payment Account (the “Team Payment Account”). The Team Payment Account shall be maintained by the Trustee as long as the Series 2013B Bonds or any other Taxable Parity Bonds are Outstanding. The Trustee shall deposit to the Team Payment Account, promptly after the receipt thereof, all amounts transferred from the Series 2013B Subaccount of the Venue Project Fund which represent payments received under the Team Lease and all amounts transferred from the Project Account in accordance with Section 6.02(f) which represent proceeds from any Taxable Parity Bonds.
(b) Withdrawals by Trustee on Bond Payment Dates. To the extent of funds contained therein, the Trustee shall withdraw from the Team Payment Account, on each Bond Payment Date, an amount equal to the amount of interest and principal payments due with
102260675.1/1001161642 B-26 respect to the Series 2013B Bonds and any other Outstanding Taxable Parity Bonds on such Bond Payment Date and shall cause the same to be applied to the payment of interest and principal payments due on such bonds on such Bond Payment Date. To the extent payments in the Team Payment Account are not sufficient to make such payments, the Trustee shall use other funds on the deposit in the Payment Account to make such payments. Notwithstanding anything herein to the contrary, the Team Payment Account and all payments received pursuant to the Team Lease may only be used to pay debt service on the Series 2013B Bonds and any other Outstanding Taxable Parity Bonds.
(c) Pledge to Series 2013B Bonds Only. Notwithstanding anything herein to the contrary, the Team Payment Account and all payments received pursuant to the Team Lease are only pledged to and for the benefit of the holders of the Series 2013B Bonds and any other Outstanding Taxable Parity Bonds.
ARTICLE VII DEFAULT; LIMITATION OF LIABILITY
Section 7.01 Eve nts of De fault. An Event of Default is the occurrence of any one or more of the following:
(a) failure by the Corporation to make the due and punctual payment of the principal of, premium, if any, or interest on any Parity Bond when and as the same shall become due and payable, whether by acceleration or otherwise;
(b) an Event of Default as defined and described in the Lease Agreement shall have happened and is continuing;
(c) any material statement, representation, or warranty made by the Corporation in this Trust Agreement or in any writing ever delivered by the Corporation pursuant to or in connection with the Lease Agreement is determined to be false, misleading, or erroneous in any material respect;
(d) the filing by the Corporation of a voluntary petition in bankruptcy, or failure of the Corporation promptly to lift any execution, garnishment, or attachment of such consequence as would impair the ability of the Corporation to carry on its obligations under any of the Financing Documents, or adjudication of the Corporation as a bankrupt or assignment by the Corporation for the benefit of creditors, or the entry by the Corporation into an agreement of composition with creditors, or the approval by a court of competent jurisdiction of a petition applicable to the Corporation in any proceedings instituted under the provisions of the Federal Bankruptcy Code, as amended, or under any similar federal or State laws which may hereafter be enacted;
(e) any event which shall occur or any condition which shall exist, the effect of which is to cause (i) more than $100,000 of aggregate indebtedness of the Corporation to become due prior to its stated due date, and (ii) a lien to be placed on the Project or the Corporation’s Leasehold Estate in the Project, and not released within 60 days; or
(f) a final judgment against the Corporation for an amount in excess of $100,000 shall be outstanding for any period of 60 days or more from the date of its entry and shall not
102260675.1/1001161642 B-27 have been discharged in full or stayed pending appeal, and a lien is placed on the Project or the Corporation’s Leasehold Estate in the Project.
The Corporation shall provide written notification to the Trustee at its Designated Office as soon as practicable upon the occurrence of any Event of Default identified in this Section other than paragraph (a) hereof.
Section 7.02 Remedies Upon Event of Default.
(a) Upon the occurrence of an Event of Default, the Trustee shall have the right, to the extent permitted by law, at its option (or, at the written direction of Bondholders owning a majority in aggregate principal amount of the Parity Bonds then Outstanding, shall), and without any further demand or notice, to take one or any combination of the following remedial steps provided that the right to terminate the Sublease may only occur upon the occurrence of an Event of Default described in Section 7.01(b) which is caused by the City):
(i) with or without terminating the Sublease, declare the principal of all Outstanding Parity Bonds and all unpaid accrued interest thereon to be due and payable immediately, by a notice in writing to the Corporation and the City, and upon any such declaration, such principal and all unpaid accrued interest thereon shall become immediately due and payable; provided, however, that upon the written request of the Bondholders owning not less than 51% in principal amount of the Parity Bonds Outstanding, the Trustee shall declare the principal of all Outstanding Parity Bonds and all unpaid accrued interest to be due and payable immediately;
(ii) terminate the Sublease upon giving 30 days written notice to the City and the Corporation at the expiration of which period of time the City shall immediately surrender possession and control of the Project to the Trustee and the Trustee shall have the right, thereafter, to sublease the Project to any third party for a period up to but not exceeding the remaining Term of the Primary Lease; or
(iii) exercise any rights, powers, or remedies it may have as a secured party under the Uniform Commercial Code of the State, or other similar laws in effect, and shall have the power to proceed with any available right or remedy granted by the Financing Documents under the laws of the State, as it may deem best, including any suit, action, mandamus, or special proceeding in equity or at law or in bankruptcy or otherwise for the collection of all amounts due and unpaid under the Financing Documents, for specific performance of any covenant or agreement contained herein or therein, or for the enforcement of any legal or equitable remedy as the Trustee shall deem most effective to protect the rights aforesaid, insofar as such may be authorized by law.
(b) Notwithstanding any other provision of this Trust Agreement, the Trustee shall not exercise its option to take possession and control of the Project upon an Event of Default under this Trust Agreement until indemnified in a manner satisfactory to it for any liability and expense it might incur in carrying out such remedy.
102260675.1/1001161642 B-28 Section 7.03 Notice of Nonappropriation. The Corporation, in the Sublease, shall require the City, as Sublessee, to provide the Corporation, the Trustee and the Rating Agencies with written notice within 72 hours of an action which constitutes failure by the City Council of the City to Appropriate funds sufficient to pay the Lease Payments due during the succeeding Fiscal Year.
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Section 7.12 Application of Money. Any moneys held or received by the Trustee pursuant to this Article VII shall be paid to and applied by the Trustee as follows:
(a) With respect to funds other than those held in the Team Payment Account,
(i) FIRST, to the payment of costs and expenses of suit, if any, and the reasonable compensation of the Trustee, its agents, attorneys and counsel (whether engage directly by the Trustee or at the request of the Trustee), and Bond Counsel; and of all proper expenses, liabilities and advances incurred or made hereunder by the Trustee, and then as follows.
(ii) SECOND, to the payment to the persons entitled thereto of all installments of unpaid interest then due and payable on the Outstanding Parity Bonds in the order in which such installments become due and payable, and, if the amount available shall not be sufficient to pay in full any particular installment; then to the payment, ratably according to the amounts due on such installment, to the persons entitled thereto, without any discrimination or preference except as to any difference in the respective rates of interest specified in the Parity Bonds.
(iii) THIRD, to the payment to the persons entitled thereto of the unpaid principal of any of the Parity Bonds which shall have become due and payable (other than Parity Bonds called for redemption for the payment of which moneys are held pursuant to the provisions of this Trust Agreement), in the order of their due dates, with interest on the principal amount of the Parity Bonds at the respective rates specified therein from the respective dates upon which the Parity Bonds became due and payable, and, if the amount available shall not be sufficient to pay in full the principal of the Parity Bonds due and payable on any particular date, together with the interest, then to the payment first of the interest, ratably, according to the amount of the interest due on that date, and then to the payment of the principal according to the amount of the principal due on that date, to the person entitled thereto without any discrimination.
(iv) FOURTH, to the payment of the interest on and the principal of the Parity Bonds, to the purchase and retirement of Parity Bonds and to the redemption of Parity Bonds, all in accordance with the provisions of Article V of this Trust Agreement.
(b) With respect to funds or required to be deposited in the Team Payment Account,
(i) FIRST, to the payment to the persons entitled thereto of all installments of unpaid interest on the Outstanding Taxable Parity Bonds then due and payable in the order in which such installments become due and payable, and, if the amount available shall not be sufficient to pay in full any particular installment; then to the payment, ratably according to the amounts due on such installment, to the persons entitled thereto,
102260675.1/1001161642 B-29 without any discrimination or preference except as to any difference in the respective rates of interest specified in such Parity Bonds.
(ii) SECOND, to the payment to the persons entitled thereto of the unpaid principal of any of the Outstanding Taxable Parity Bonds which shall have become due and payable (other than Parity Bonds called for redemption for the payment of which moneys are held pursuant to the provisions of this Trust Agreement), in the order of their due dates, with interest on the principal amount of such Parity Bonds at the respective rates specified therein from the respective dates upon which the Parity Bonds became due and payable, and, if the amount available shall not be sufficient to pay in full the principal of the Parity Bonds due and payable on any particular date, together with the interest, then to the payment first of the interest, ratably, according to the amount of the interest due on that date, and then to the payment of the principal, ratably, according to the amount of the principal due on that date, to the person entitled thereto without any discriminat ion.
(c) If the principal of all the Parity Bonds shall have been declared due and payable pursuant to an order of a court of competent jurisdiction, all the moneys shall be applied to the payment of the principal and interest then due and unpaid upon the Parity Bonds, without preference or priority of principal over interest or of interest over principal, or of any installment of interest over any other installment of interest, or of any Parity Bond over any other Parity Bond, ratably, according to the amounts due respectively for principal and interest, to the persons entitled thereto without any discrimination or preferences except as to any difference in the respective rates of interest specified in the Parity Bonds; provided, however, that the Team Payment Account and all payments received pursuant to the Team Lease may only be used to pay debt service on the Series 2013B Bonds and any other Outstanding Taxable Parity Bonds.
(d) Whenever money is to be applied pursuant to the provisions of this Section, such money shall be applied at such times and from time to time as the Trustee shall determine, having due regard to the amount of such money available for such application and the likelihood of additional money becoming available for such application in the future. Whenever the Trustee shall apply such funds, it shall fix the date (which shall be a Bond Payment Date unless it shall deem another date more suitable) upon which such application is to be made, and upon such date interest on the amounts of principal to be paid on such date shall cease to accrue. The Trustee shall give notice to the Corporation, the City, and the Bondholders of the deposit with it of any such money and of the fixing of any such payment date and shall not be required to make payment to the owner of any Parity Bond until such Parity Bond shall be presented to the Trustee for appropriate endorsement or for cancellation if fully paid.
(e) Whenever all principal of, premium, if any, and interest on all Parity Bonds have been paid under the provisions of this Section and whenever all fees, expenses, and charges of the Trustee shall have been paid, and whenever all other costs and expenses have been paid, any portion of the properties comprising the Trust Estate and the Project remaining hereunder shall be paid, transferred, and assigned to the City.
102260675.1/1001161642 B-30 4. SELECTED PROVISIONS OF THE THIRD AMENDMENT TO MAS TER LEAS E AGREEMENT
ARTICLE XVI THE SERIES 2021 BONDS
Section 16.01 Issuance and Sale of the Series 2021 Bonds. Subject to applicable terms, limitations, and procedures, the Corporation will issue and sell the Series 2021 Bonds to achieve present value debt service savings on the Refunded Bonds and pay costs of issuance, at such interest rate and/or discount, and other terms as approved by the Corporation and in accordance with applicable law.
Section 16.02 Cooperation By City. The City shall take the action(s), enter into the agreement(s), provide the certification(s) contemplated by this Lease Agreement, and otherwise cooperate with the Corporation and its agents to effect the lawful issuance and sale of the Series 2021 Bonds.
Section 16.03 Compliance with Rule 15c2-12.
(a) Definitions. As used in this Section, the following terms have the meanings ascribed to such terms below:
“Financial Obligation” means a (a) debt obligation; (b) derivative instrument entered into in connection with, or pledged as security or a source of payment for, an existing or planned debt obligation; or (c) guarantee of a debt obligation or any such derivative instrument; provided that “financial obligation” shall not include municipal securities as to which a final official statement (as defined in the Rule) has been provided to the MSRB consistent with the Rule.
“MSRB” means the Municipal Securities Rulemaking Board.
“Rule” means SEC Rule 15c2-12, as amended from time to time.
“SEC” means the United States Securities and Exchange Commission.
(b) Annual Reports. In accordance with the provisions of the Rule, the City is an “obligated person,” as that term is applied in the Rule, for whom financial or operating data has been presented in the “Final Official Statement,” as defined in the Rule, prepared in connection with the authorization, sale and delivery of the Series 2021 Bonds. Consequently, the City, as such obligated person, enters into the undertaking described in this Section in compliance with the Rule.
(i) The City shall provide annually to the MSRB (1) within six months after the end of each fiscal year, beginning in or after 2020, financial information and operating data with respect to the City of the general type included in the Official Statement and described in Exhibit C hereto, and (2) if not provided as part of such financial information and operating data, audited financial statements of the City, when and if available. Any financial statements so provided shall be prepared in accordance with the accounting principles as the City may be required to employ from time to time pursuant to state law or regulation, and audited, if the City commissions an audit of such
102260675.1/1001161642 B-31 statements and the audit is completed within the period during which they must be provided.
(ii) If the City changes its fiscal year, it will notify the MSRB of the change (and of the date of the new fiscal year end) prior to the next date by which the City otherwise would be required to provide financial information and operating data pursuant to this Section. The financial information and operating data to be provided pursuant to this Section may be set forth in full in one or more documents or may be included by specific reference to any document available to the public on the MSRB’s Internet Website or filed with the SEC.
(c) Event Notices. The City and the Corporation (also an “obligated person” as that term is applied in the Rule) shall provide notice of any of the following events with respect to the Series 2021 Bonds to the MSRB in a timely manner and not more than 10 business days after occurrence of the event:
(i) Principal and interest payment delinquencies;
(ii) Non-payment related defaults, if material;
(iii) Unscheduled draws on debt service reserves reflecting financial difficulties;
(iv) Unscheduled draws on credit enhancements reflecting financial difficulties;
(v) Substitution of credit or liquidity providers, or their failure to perform;
(vi) Adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701-TEB), or other material notices or determinations with respect to the tax status of the Series 2021 Bonds, or other material events affecting the tax status of the Series 2021 Bonds;
(vii) Modifications to rights of holders of the Series 2021 Bonds, if material;
(viii) Bond calls, if material, and tender offers;
(ix) Defeasances;
(x) Release, substitution, or sale of property securing repayment of the Series 2021 Bonds, if material;
(xi) Rating changes;
(xii) Bankruptcy, insolvency, receivership, or similar event of the City or the Corporation, which shall occur as described below;
(xiii) The consummation of a merger, consolidation, or acquisition involving the City or the Corporation or the sale of all or substantially all of its assets, other than in the ordinary course of business, the entry into of a definitive agreement to undertake such an
102260675.1/1001161642 B-32 action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms, if material;
(xiv) Appointment of a successor or additional trustee or the change of name of a trustee, if material;
(xv) Incurrence of a Financial Obligation of the City or the Corporation, if material, or agreement to covenants, events of default, remedies, priority rights, or other similar terms of a Financial Obligation of the City or the Corporation, any of which affect security holders, if material; and
(xvi) Default, event of acceleration, termination event, modification of terms, or other similar events under the terms of a Financial Obligation of the City or the Corporation, any of which reflect financial difficulties.
For these purposes, (a) any event described in the immediately preceding subsection (c)(xii) is considered to occur when any of the following occur: the appointment of a receiver, fiscal agent, or similar officer for the City or the Corporation in a proceeding under the United States Bankruptcy Code or in any other proceeding under state or federal law in which a court or governmental authority has assumed jurisdiction over substantially all of the assets or business of the City or the Corporation, or if such jurisdiction has been assumed by leaving the existing governing body and officials or officers in possession but subject to the supervision and orders of a court or governmental authority, or the entry of an order confirming a plan of reorganization, arrangement, or liquidation by a court or governmental authority having supervision or jurisdiction over substantially all of the assets or business of the City or the Corporation, and (b) the City and the Corporation intend the words used in the immediately preceding subsections (c)(xv) and (c)(xvi) in this Section to have the meanings ascribed to them in SEC Release No. 34-83885, dated August 20, 2018.
The City shall notify the MSRB, in a timely manner, of any failure by the City to provide financial information or operating data in accordance with subsection (b) of this Section by the time required by such Section.
102260675.1/1001161642 B-33 5. SELECTED PROVISIONS OF THE ORIGINAL LEAS E AGREEMENT
ARTICLE II GENERAL REPRESENTATIONS, COVENANTS, AND WARRANTIES
Section 2.01 General Representations, Covenants, and Warranties of the City. The City represents, covenants, and warrants as follows:
(a) the City is a duly formed and validly existing municipal corporation and political subdivision of the State duly created and operating as a home-rule municipality pursuant to the Texas Local Government Code, its City Charter and other applicable laws of the State;
(b) the City has full power and authority to execute this Lease Agreement and perform its obligations hereunder;
(c) the City has duly authorized the execution of this Lease Agreement and the performance of its obligations hereunder;
(d) the execution of this Lease Agreement and the performance of its obligations hereunder, and compliance with the terms hereof by the City will not conflict with, or constitute a default under, any law (including administrative rule), judgment, decree, order, permit, license, agreement, mortgage, lease, or other instrument to which the City is subject or by which the City or any of its property is bound;
(e) the City is not in violation of any law, including but not limited to any court orders, which violation could adversely affect the performance of its obligations under this Lease Agreement and the City shall continue to remain in compliance with all applicable laws, regulations and court orders;
(f) this Lease Agreement is a legal, valid, and binding obligation of the City, enforceable in accordance with its terms;
(g) other than the Team Lease and agreements with various persons that will contract with the Sublessee or the Club to use portions of the Ballpark for short periods of time for certain events, the Sublessee will be the sole user of the Ballpark, with the right of assignment, subordination, and subleasing as provided in and limited herein by Article VIII of this Lease Agreement and the Team Lease;
(h) the Project is essential to the City’s operations in providing facilities to support and encourage tourism and economic development in the City, and the Sublessee will use the Ballpark during the Term of the Sublease for its essential purposes and in accordance with the provisions and limitations set forth in Section 4.04 of this Lease Agreement;
(i) the City agrees to keep the Project free and clear of all liens, encumbrances, and security interests (other than Permitted Encumbrances);
(j) the City has complied and will comply with all open meeting laws and all other State and federal laws applicable to the execution, delivery, and performance of this Lease Agreement, the approval and construction of the Project by the City, and the payment of Project Costs by the City;
102260675.1/1001161642 B-34 (k) except for approval of the Attorney General of Texas, no further approval, consent, or withholding of objections is required from any governmental authority with respect to this Lease Agreement;
(l) the Project, as reflected on the Plans and Specifications, will meet the needs of the City, and will be constructed within the boundaries of the Real Property;
(m) the City has fee simple title, subject to Permitted Encumbrances, to the Real Property described in Exhibit B to this Lease Agreement upon which the Ballpark will be built, and will, for the period of time commencing on the date of execution of this Lease Agreement and expiring on the termination of the Primary Lease, warrant and forever defend all and singular title to such property against every person whomsoever lawfully claiming the same, or any part thereof subject to the Permitted Encumbrances; and
(n) upon termination of the Sublease pursuant to Section 5.02 hereof, the Sublessor will deliver, and direct the Trustee to deliver, the Sublessee all documents which are or may be necessary to vest all of the Sublessor’s right, title, and interest in and to the Project under the Sublease in the Sublessee and will release all liens and encumbrances in favor of the Sublessor created under the Sublease, if any, with respect to the Project as provided in Section 7.03 hereof.
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Section 2.03 Hotel Occupancy Tax. As authorized by the Venue Project Act and the Election, the City currently levies an additional hotel occupancy tax upon the cost of occupancy of any room or space in a hotel, when such cost is at the rate of two dollars or more per day, such additional tax to be equal to two percent (2%) of the consideration paid by the occupant of such room of such hotel (the “Additional Tax”). Pursuant to the Election and the Venue Project Act, the Additional Tax is dedicated to support the Project. By City ordinance, the Additional Tax must be collected on every occupancy occurring on or after January 1, 2013. The City covenants that it will collect the Additional Tax for so long as any bonds or other obligations that are issued for the purpose of financing a portion of the costs of the Project (including the Series 2013 Bonds), and any bonds refunding or refinancing those bonds or other obligations, are outstanding and unpaid.
To the extent permitted by applicable law and as long as any Parity Bonds remain Outstanding, the City will (i) continue to levy the Additional Tax, (ii) not reduce the Additional Tax, and (iii) enforce the provisions of any ordinance or resolution levying a hotel occupancy tax concerning the collection, remittance and payment of such tax (including the Additional Tax).
Section 2.04 Ge ne ral Assurance s.
(a) Subject to Section 2.04(c) hereof, each of the City and the Corporation agree that (to the extent permitted by law) it will take or cause to be taken all actions necessary to preserve its existence in full force and effect and to carry out the terms of the Primary Lease and the Sublease, as applicable, as each is set forth in this Lease Agreement.
(b) Subject to Section 2.04(c) hereof, the City presently expects to have sufficient funds to satisfy its obligations under this Lease Agreement, including but not limited to revenues derived from the levy and collection of the Additional Tax, and the City represents that it presently expects, while any Parity Bonds remain Outstanding, that it annually will prepare a
102260675.1/1001161642 B-35 Fiscal Year budget, for consideration by the City Council of the City, which contains provisions to fully pay from lawfully available revenues of the City all Lease Payments and Operating Expenses coming due during the applicable Fiscal Year.
(c) Notwithstanding anything herein to the contrary, the City has no obligation to Appropriate any funds to enable the City (as Sublessee) to pay Lease Payments, or (as Lessor) to pay Operating Expenses, regardless of the amount or source of funds that are lawfully available to be Appropriated, in any Fiscal Year.
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ARTICLE III PRIMARY LEASE AND SUBLEASE
Section 3.01 Lease from City to Corporation. In consideration of the mutual covenants and agreements set forth in this Lease Agreement including but not limited to the Corporation’s commitment to issue Parity Bonds to finance the Project (at the request, and for the benefit, of the City), the annual payment by the Corporation to the City of $1.00, and other good and valuable consideration, the City (as Lessor hereunder) demises, leases and grants to the Corporation (as Lessee hereunder) a Leasehold Estate in the Project for the period set forth in Section 5.01 hereof. Such lease from the City to the Corporation is herein referred to as the “Primary Lease.”
Section 3.02 Leaseback (Sublease) from Corporation to City. In consideration of the mutual covenants and agreements set forth in this Lease Agreement, and other good and valuable consideration including but not limited to the payment of Lease Payments by the City (as Sublessee hereunder) in accordance with Section 6.02(a) hereof, the Corporation (as Sublessor hereunder) demises, leases and grants back to the City (as Sublessee hereunder) a Leasehold Estate (identical to the Leasehold Estate received from the City under the Primary Lease) in the Project for the term set forth in Section 5.02 hereof. Such lease from the Corporation back to the City is herein referred to as the “Sublease.”
Section 3.03 No Merger of Title. As long as any Parity Bonds remain outstanding, the Lessor and the Lessee expressly state their intention that there shall be no merger of the Sublease created by this Lease Agreement into the Primary Lease, also created by this Lease Agreement, or into the fee title to the Project retained by the Lessor by reason of the fact that the Lessor has retained fee title to the Project and has conveyed only a Leasehold Estate in the Project to the Lessee pursuant to and as evidenced by the Primary Lease.
ARTICLE IV THE BALLPARK
Section 4.01 Design, Construction, Acquisition, or Installation of Ballpark. The Sublessee hereby agrees to acquire and construct the Ballpark in accordance with the terms and conditions of the Development Agreement. The Sublessee also agrees to cause the Ballpark to be designed, constructed, acquired, or installed and existing facilities, if any, demolished in compliance with all State and federal laws applicable to the design, construction, demolition, acquisition, or installation of the Ballpark, and to obtain all approvals necessary from the appropriate governmental authorities. The Sublessor shall have no responsibility with respect to the design, construction, acquisition or installation of the Ballpark other than cooperating with
102260675.1/1001161642 B-36 the Sublessee in requisitioning funds on deposit in the Project Account to pay Project Costs. The Sublessee agrees to pay from any lawfully available funds of the Sublessee any amount of the Project Costs in excess of the amount on deposit in the Project Account which is set aside to pay Project Costs. Income and profits from investment of funds on deposit in the respective Series 2013A Subaccount and Series 2013B Subaccount of the Project Account shall remain in such respective Subaccounts to pay Project Costs unless the Sublessee directs the Sublessor to direct the Trustee to transfer such funds to the Payment Account, subject however, to the limitations in Section 9.03 herein. Additionally, in the event any proceeds of the Series 2013 Bonds (including investment earnings) remain on deposit in their respective Subaccounts of the Project Account following receipt by the Trustee of the Certificate of Completion described in Section 6.01(e) of this Lease Agreement, such remaining proceeds shall be used in accordance with Section 5.3 of the Development Agreement unless such proceeds are required to be used in another manner as described in an opinion of Bond Counsel referred to in Section 6.03(d) of the Trust Agreement.
Section 4.02 Access to Ballpark. Subject to the Team Lease, the Sublessee agrees that the Sublessor, any Sublessor Representative, the Trustee, and any Trustee Representative shall have the right at all reasonable times to enter upon and to examine and inspect the Ballpark. Subject to the Team Lease, the Sublessee further agrees that the Sublessor and any Sublessor Representative shall have such rights of access to the Ballpark as may be reasonably necessary to cause the proper maintenance of the Ballpark in the event of failure by the Sublessee to perform its obligations hereunder or the Sublease has been terminated for the reason set forth in Section 5.02(b) or (c) hereof, or to carry out the Sublessor’s obligations and exercise the Sublessor’s rights under Article X hereof, or to determine whether the Sublessee is in compliance with the Sublease.
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ARTICLE V TERMS OF PRIMARY LEASE AND SUBLEASE
Section 5.01 Term of Primary Lease. The Primary Lease granted under Section 3.01 hereunder shall be and remain in effect with respect to the Project for a term (the “Term of the Primary Lease”) commencing on the date hereof and continuing until the day immediately following the date of final maturity of all Parity Bonds issued to finance or refinance the Project or (subject to Section 10.03(e) hereof) until earlier terminated upon the occurrence of the first of the following events:
(a) the payment in full of all principal and interest on all Parity Bonds upon early redemption; or
(b) the payment to the Trustee by the Sublessee of available funds in an amount, together with amounts, if any, on deposit in the Payment Account, Insurance and Condemnation Account, Redemption Account, and Project Account, that is at least equal to the Defeasance Amount for the date fixed for redemption of all Outstanding Parity Bonds.
In no event shall the Primary Lease terminate for any reason prior to the termination of the Sublease.
102260675.1/1001161642 B-37 Section 5.02 Term of Sublease. The Sublease shall be and remain in effect with respect to the Project for a term (the “Term of the Sublease”) commencing on the date hereof and continuing until the day immediately following the date of final maturity of all Parity Bonds issued to finance or refinance Project or until earlier terminated upon the occurrence of the first of the following events:
(a) the termination of the Primary Lease in accordance with Section 5.01 hereof;
(b) at the end of the Fiscal Year in which an Event of Nonappropriation occurs which results in the termination of the Sublease in accordance with Section 10.03 hereof; or
(c) upon the occurrence of an Event of Default and the Sublessor elects to terminate the Sublease pursuant to Section 10.01 hereof.
ARTICLE VI PAYMENTS OF COSTS; LEASE PAYMENTS; APPROPRIATION; BUDGET
Section 6.01 Project Costs; Issuance Costs; Payment of Costs.
(a) The proceeds of each series of Parity Bonds shall be deposited in the accounts held under the Trust Agreement and in the amounts directed by written instruction of the Corporation to the Trustee on the related Closing Date, and the use and disbursement of such funds shall be governed by the Trust Agreement.
The City and the Corporation agree that, in order to ensure that sufficient funds will be available when required to pay all the Project Costs (excluding Issuance Costs and any costs incurred to comply with the City’s public art requirement), there shall be deposited into the respective Series 2013 Subaccounts of the Project Account on the Closing Date related to the Series 2013 Bonds the aggregate sum of at least $60,000,000 (excluding Issuance Costs and any costs incurred to comply with the City’s public art requirement) from the proceeds of the sale of Series 2013 Bonds.
(b) Issuance Costs for the Series 2013 Bonds shall be paid on the Closing Date for such bonds in accordance with the terms of the Trust Agreement.
(c) After payment of the Issuance Costs in accordance with Section 6.01(b) above and the retention by the Trustee of any funds specifically identified to be retained as capitalized interest, all remaining funds on deposit in the Series 2013 Subaccounts of the Project Account under the Trust Agreement shall be disbursed by the Trustee in accordance with the terms of the Trust Agreement. The City shall separately account for the use of proceeds from the Series 2013A Bonds and the Series 2013B Bonds as expended for Project Costs.
(d) At any time prior to the completion of the Project, as provided in paragraph (e) below in this Section 6.01, the Corporation shall direct the Trustee, if requested by the City, to transfer to the Payment Account any bond proceeds retained as capitalized interest or income and profits from investments in the Series 2013 Subaccount of the Project Account, to the extent such funds are not required for the payment of change orders, to be credited against the Lease Payments of the Sublessee required under the Sublease.
102260675.1/1001161642 B-38 (e) On completion of the Project, the City shall provide to the Trustee an executed Certificate of Completion to the effect that, with respect to the Project, all work was performed and completed to its satisfaction in accordance with the Plans and Specifications, that all necessary certificates, approvals, licenses, and permits required to be obtained from any governmental board, agency, or department have been obtained, and that all releases or waivers of mechanic’s and materialman’s liens have been obtained in connection with the construction and installation of the Project.
Section 6.02 Lease Payments; Team Lease Payments; Payment of Operating Expenses.
(a) Lease Payments. Subject to Section 6.05(c) hereof, during the Term of the Sublease, the Sublessee shall pay to the Trustee for the account of the Sublessor, from the Venue Project Fund, the Lease Payments in the amounts and on the respective Lease Payment Dates set forth in Exhibit E attached hereto. Such Lease Payments shall be made at least ten (10) calendar days prior to the applicable Bond Payment Dates.
(b) Obligation to Contribute Appropriated Funds to Venue Project Fund. During the Term of the Sublease, the Sublessee further agrees to pay, from Appropriated Funds, an amount of money which, when added to the amount then on deposit in the Venue Project Fund, will equal the amount of the next Lease Payment. The Sublessee shall make such deposits at least two (2) Business Days prior to the applicable Lease Payment Date.
(c) Trustee Fees. The Sublessee further agrees to pay, from Appropriated Funds, the fees for ordinary services and expenses of the Trustee based upon the Trustee’s Fee Schedule attached as Exhibit F to the Trust Agreement.
(d) Contribution of Team Lease Payments to Venue Project Fund. Subject to 6.05(c) hereof, the City shall deposit all payments received under the Team Lease to the Series 2013B Subaccount of the Venue Project Fund and such payments shall only be used to pay the Series 2013B Bonds or any other Outstanding Taxable Parity Bonds.
(e) Payment of Operating Expenses. As described in Section 4.03(d) hereof, the Lessor agrees to pay from Appropriated Funds, on behalf of the Sublessee during the Term of the Sublease, and thereafter during the remaining term of the Primary Lease as a reimbursement to the Lessee in the event of termination of the Sublease pursuant to Section 10.03 hereof, amounts sufficient for the Lessee to pay expenses required to operate and maintain the Ballpark, including without limitation, salaries and benefits of personnel employed to operate and maintain the Ballpark and the costs and expenses described in Sections 4.03(a) through (c), 4.05(b), 4.06, 4.07, 4.09, and 4.10 hereof (collectively, the “Operating Expenses”).
(f) Immediately Available Funds. The Lease Payments shall be payable in immediately available funds to the Trustee at its address specified in the Trust Agreement, or to such other person or entity and at such other address as the Trustee may designate by written notice to the Sublessor (who shall notify the Sublessee), in lawful money of the United States of America no later than 10:00 a.m. Central Time on the date Lease Payments are due. All Lease Payments received by the Trustee shall be applied in the manner required by the Trust Agreement.
102260675.1/1001161642 B-39 (g) Payment in the Event of a Refunding. Subject to Section 6.05(c) hereof, in the event the Sublessor is issuing Additional Bonds to refund any Outstanding Parity Bonds, then the Sublessee shall pay to the Trustee, for the account of the Sublessor, any amounts then on deposit in the Venue Project Fund. Any such payment shall be used by the Trustee to pay down the obligations which would have otherwise been refunded prior to, or on a contemporaneous basis with, the issuance of refunding bonds and thereby reduce the amount of the refunding; provided however, that all payments received pursuant to the Team Lease may only be used to pay debt service on the Series 2013B Bonds or any other Outstanding Taxable Parity Bonds.
Section 6.03 Limited Obligations. This Lease Agreement and the payment obligations set forth herein are special obligations of the City, payable solely from the Appropriated Funds, and do not constitute a prohibited indebtedness of the City. Without a subsequent vote of the citizens of the City under Section 334.0241 of the Venue Project Act, the City shall not use revenue derived from ad valorem taxes to make the Lease Payments or maintain the Project.
Section 6.04 Current Expenses. The obligations of the City under this Lease Agreement, including its obligation as Sublessee to pay the Lease Payments and other expenses described in Section 6.02(a) hereof, and its obligation as Lessor to pay Operating Expenses described in Sections 4.03(d) and 6.02(b) hereof, shall constitute a current expense of the City in each Fiscal Year, and shall not constitute an indebtedness of the City within the meaning of the laws of the State. Nothing herein shall constitute a pledge by the City of any property taxes or other money, other than Appropriated Funds for the then current Fiscal Year, to the payment of Lease Payments, Operating Expenses, or other costs and expenses due hereunder.
Section 6.05 Sublessee’s and Lessor’s Obligation.
(a) Sublessee’s Obligation. Subject to subsection (c) of this Section, the obligation of the Sublessee to make Lease Payments shall be absolute and unconditional. Notwithstanding any dispute arising with regard to the Project, the Sublessee shall make all Lease Payments when due and shall not withhold Lease Payments pending final resolution of any dispute related to the Project, nor shall Sublessee assert any right of set-off or counterclaim against its obligation to make such Lease Payments. The Sublessee’s obligation to make Lease Payments shall not be abated through accident or unforeseen circumstances. (b) Lessor’s Obligation. Subject to subsection (c) of this Section, the obligation of the Lessor to pay Operating Expenses shall be absolute and unconditional. Notwithstanding any dispute arising with regard to the Project, the Lessor shall pay such Operating Expenses when due and shall not withhold payment thereof pending final resolution of any dispute related to the Project, nor shall Lessor assert any right of set-off or counterclaim against its obligation to pay such Operating Expenses. The Lessor’s obligation to pay such Operating Expenses shall not be abated through accident or unforeseen circumstances. (c) Obligations Subject to Appropriation. The obligation of the Sublessee to make the payments described in Sections 6.02(a) and 6.02(g) hereof and to make deposits to the Venue Project Fund as described in Sections 6.02(b), 6.02(c) and 6.02(d) hereof, and of the Lessor to pay costs and Operating Expenses as described in Sections 4.03(d) and 6.02(e) hereof, is subject to the sufficiency of Appropriated Funds. The Sublessee presently intends to continue the Sublease under this Lease Agreement for the entire Term of the Sublease and to pay all Lease Payments, Operating Expenses and other payments required hereunder. The Sublessee and the Lessor reasonably believe, based upon current State law, the City’s financial practices, and other
102260675.1/1001161642 B-40 factors, that Appropriated Funds in an amount sufficient to make all such Lease Payments, pay all Operating Expenses and make all other payments required hereunder will be available for such purposes; provided however, the Sublessee and the Lessor have no obligation to Appropriate any funds to enable the Sublessee and/or the Lessor to satisfy their respective obligations under this Lease Agreement regardless of the amount or source of funds that are lawfully available to be Appropriated in any Fiscal Year. Section 6.06 Annual Budget Request. During the term of the Sublease, the City covenants that the City Manager, the Chief Financial Officer of the City or any other officer of the City at any time charged with the responsibility of formulating budget proposals shall use reasonable efforts to include in the budget proposals submitted to the City Council, in each Fiscal Year in which the Parity Bonds are Outstanding, a proposed Appropriation for all payments required to be made in accordance with Sections 6.02(b), 6.02(c), 6.02(d) and 6.02(e) for the following Fiscal Year. Notwithstanding the foregoing, (i) any failure by a City official to include a proposed Appropriation amount in any proposed City budget shall not be a default hereunder and does not give rise to a writ of mandamus (or any similar legal process) against the City or such official or any personal liability on the part of such City official; and (ii) the inclusion of such an Appropriation request in a proposed budget shall not be a condition precedent to any rights of the City under this Lease Agreement, including the right not to Appropriate or terminate the Lease or Sublease in accordance with the terms hereof. The parties intend that the decision to budget and Appropriate funds is to be made in accordance with the City’s normal procedures for such decisions, and the decision by the City to Appropriate or not to Appropriate under this Lease Agreement shall be made solely by the City Council and not by any other official of the City.
Section 6.07 City Reimbursement of Appropriated Funds.
(a) In the event the City ever contributes Appropriated Funds other than the Additional Tax and payments received under the Team Lease (“Non-HOT Appropriated Funds”) to the Venue Project Fund for the purpose of making Lease Payments, or otherwise pays any amounts owed hereunder and/or under the Trust Agreement from Non-HOT Appropriated Funds, then the City shall be entitled to repayment of such contributions in the manner, to the extent and as described in this Section.
(b) Commencing on the fifth anniversary of the effective date of this Agreement, the City shall have the continuous right, to the extent permitted by law, to transfer to its general fund (or other appropriate fund designated by a City Representative), from funds on deposit in the Venue Project Fund, an amount not to exceed the aggregate amount of all Non-HOT Appropriated Funds which have been contributed by the City (and for which the City has not been previously reimbursed) and used to pay costs hereunder and/or under the Trust Agreement, including debt service payments on any Parity Bonds; provided, however, that the Venue Project Fund shall at all times contain funds in an amount sufficient to make the Lease Payments and other payments due and payable hereunder and under the Trust Agreement during the then current Fiscal Year; and provided further that the City may not reimburse itself from the Series 2013B Subaccount of the Venue Project Fund pursuant to this Section 6.07 as long as any of the Series 2013B Bonds or any other Taxable Parity Bonds are Outstanding. The City may exercise the foregoing right from time to time and at any time, subject to the limitations set forth above.
102260675.1/1001161642 B-41 (c) The City shall maintain accurate records which indicate (i) the aggregate amount of Non-HOT Appropriated Funds contributed both hereunder and under the Trust Agreement, (ii) the aggregate amount of Non-HOT Appropriated Funds that have been repaid pursuant to this Section and (iii) the amount of Non-HOT Appropriated Funds that remain to be repaid pursuant to this Section.
ARTICLE X REMEDIES
Section 10.01 Remedies on Event of Default of Sublessee.
(a) Upon an Event of Default of the Sublessee, the Sublessor (or the Trustee as the assignee of the Sublessor) shall have the right, to the extent permitted by law, to take one or any combination of the following remedial steps:
(i) with or without terminating the Sublease, declare all Lease Payments due or to become due during the then current Fiscal Year to be immediately due and payable by Sublessee to the extent of Appropriated Funds, whereupon such Lease Payments shall be, to the extent permitted by State law, immediately due and payable; or
(ii) with or without terminating the Primary Lease, declare all payments for Operating Expenses due or to become due during the then current Fiscal Year to be immediately due and payable by Lessor to the extent of Appropriated Funds, whereupon such payments for Operating Expenses shall be, to the extent permitted by State law, immediately due and payable; or
(iii) with or without terminating the Sublease, re-enter and take possession of the Ballpark and exclude the Sublessee from using the Ballpark; however, if the Sublease has not been terminated, the Sublessor shall return possession of the Ballpark to the Sublessee when the Event of Default is cured (including the Sublessee having provided for the payment of all costs and expenses incurred by the Sublessor, the Trustee, or the Bondholders resulting therefrom), and, further, the Sublessee shall, during such period of repossession by the Sublessor without termination of the Sublease, to the extent of Appropriated Funds, continue to be responsible for the Lease Payments due or to become due during the Term of the Sublease; or
(iv) terminate the Sublease upon giving 30 days written notice to the Sublessee at the expiration of which period of time the Sublessee shall immediately surrender possession and control of the Ballpark to the Trustee and the Trustee shall have the right, thereafter, to lease, sublease, or otherwise provide for the operation of the Ballpark; or
(v) take whatever action at law or in equity may appear necessary or desirable to collect the Lease Payments and payments for Operating Expenses then due and thereafter to become due during the Term of the Primary Lease or to enforce performance and observance of any other obligation, agreement, or covenant of the Lessor under the Primary Lease and the surviving obligations of the Sublessee under the Sublease.
(b) Upon the termination of the Sublease by the Sublessor, the Sublessee shall immediately surrender possession of the Ballpark to the Sublessor, and the Sublessee shall be prohibited from conducting any operations or activities at the Ballpark.
102260675.1/1001161642 B-42 Section 10.02 Notice of Appropriation. On or before the last day of each Fiscal Year, the City shall deliver to the Corporation and the Trustee written certification of the City’s Appropriation of available funds sufficient to pay Lease Payments and other payments required, if any, to be made by the Sublessee during the succeeding Fiscal Year. Such certification may be in the form of (i) a certified copy of the City Council resolution making such Appropriation or (ii) a certificate of the City Manager or Chief Financial Officer (or City officials performing comparable duties) confirming that the City Council has taken action to Appropriate funds sufficient to pay the Lease Payments and other payments required by the terms of the Trust Agreement or the Lease Agreement, if any, during the succeeding Fiscal Year (the “Certificate of Appropriation”). The City hereby covenants that, once a Certificate of Appropriation has been delivered in accordance with this Section 10.02, any modification by the City Council to the Appropriation that is the subject of such Certificate that results in an unavailability of funds to satisfy in full the obligations for which such Appropriation was initially made shall immediately cause the Sublease to terminate. Under such circumstance, the parties to this Lease Agreement agree that the Sublessee shall owe to the Sublessor, as liquidated damages, an amount equal to the amount originally Appropriated for such Fiscal Year.
Section 10.03 Notice of Nonappropriation; Termination on Event of Nonappropriation.
(a) The Sublessee shall provide the Sublessor, the Trustee and the Rating Agencies with written notice within 72 hours of (i) action by the City Council which would constitute (A) a failure to Appropriate funds sufficient to pay Lease Payments and any other payments, if any, required to be made by the Sublessee in accordance with this Lease Agreement due during the succeeding Fiscal Year, or (B) a modification of a previous Appropriation to pay Lease Payments in the manner described in the second sentence of Section 10.02 hereof, or (ii) a legal inability to adopt a budget.
(b) In the event that the Trustee does not receive the Certificate of Appropriation from the Sublessee within the time period required in Section 10.02 hereof, the Trustee shall promptly give written notice thereof to the Sublessee and the Sublessor. Thereafter, if the Sublessee fails to deliver the Certificate of Appropriation within ten days of its receipt of the foregoing notice from the Trustee, the Trustee shall promptly give written notice to the Bondholders and the Rating Agencies of its failure to timely receive such Certificate of Appropriation. The Trustee shall also give prompt written notification to the Bondholders and the Rating Agencies of its receipt of a notice from the Sublessee pursuant to paragraph (a) of this Section.
(c) Upon the occurrence of an Event of Nonappropriation, without further demand or notice, the Sublease shall terminate at the end of the Fiscal Year for which sufficient Appropriations have been made to pay Lease Payments (but the Primary Lease shall remain in existence and shall not terminate), and the Sublessee shall immediately, upon the expiration of such Fiscal Year, vacate the Ballpark, shall surrender possession and control of the Ballpark to the Trustee, and shall be prohibited from conducting any operations or activities at the Ballpark.
(d) Upon termination of the Sublease pursuant to Section 10.03(c), if the Sublessee has not vacated and delivered possession and control of the Ballpark to the Sublessor and conveyed or released its interest in the Ballpark as therein required, the termination shall nevertheless be effective, but the Sublessee shall be responsible, from lawfully available funds as
102260675.1/1001161642 B-43 provided in this Lease Agreement and the Trust Agreement, for the payment of damages in an amount equal to the amount of Lease Payments which thereafter would have come due in the absence of an Event of Nonappropriation which are attributable to the number of days during which the Sublessee fails to take such actions.
(e) Notwithstanding Section 10.03(c) above, upon receipt of written notice that the Sublessee is legally unable to adopt a budget, the Trustee shall have the right, but not the obligation (unless directed by Bondholders in the manner set forth in the Trust Agreement), to (i) terminate the Sublease and the Sublessee shall immediately surrender possession and control of the Ballpark to the Trustee, and thereafter the Trustee shall have the right, but not the obligation (unless directed by Bondholders in the manner set forth in the Trust Agreement), to lease, sublease, or otherwise provide for the operation of the Ballpark for the remainder of the Term of the Primary Lease, or (ii) without terminating the Sublease, permit the Sublease to continue in effect, to the extent permitted by law, and continue to permit the Sublessee to exercise and enjoy its rights of quiet enjoyment, use, occupancy and control of the Ballpark.
(f) Subsequent to the occurrence of an Event of Nonappropriation, the City hereby covenants and agrees that it shall not, for the remaining term of the Primary Lease, acquire any outstanding Parity Bonds for the purpose of delivering those Parity Bonds to the Trustee for cancellation or extinguishment of the indebtedness evidenced thereby.
Section 10.04 Remedies on Event of Default of Sublessor. Upon an Event of Default of the Sublessor, the Sublessee or the Trustee shall have the right, to the extent permitted by law, at its option, upon ten days written notice delivered to the Sublessor, by the Sublessee or the Trustee, to take whatever action at law or in equity may appear necessary or desirable to enforce performance and observance of any other obligation, agreement, or covenant of the Sublessor under this Lease Agreement.
Section 10.05 Effect of Termination of Sublease. In the event of termination of the Sublease by the Sublessor or the Trustee pursuant to Section 10.01 or Section 10.02 hereof, the Primary Lease shall nevertheless survive for the remaining term, as provided in Section 5.01 hereof. In such event, all references to the Sublease, the Sublessor, and the Sublessee (as well as the specified duties and obligations of such parties) under this Lease Agreement (except for those specified in Section 4.03(d), 4.05, 4.13(c), 4.16, 12.03, and 13.09, respectively, hereof) shall be of no further force and shall not then have or be given any effect. The City, as Lessor, hereby acknowledges that, in the event of termination of the Sublease prior to the termination of the Primary Lease, the Lessee and/or the Trustee may enter into one or more separate subleases with a third party or parties, each such sublease having terms that may differ from those included in the Sublease to reflect changes in market conditions but all of which shall be compliant with the Trust Agreement and the Primary Lease and expire on or before the termination date of the Primary Lease. In such instance, the City, as Lessor, hereby acknowledges and agrees to its remaining covenants and agreements, in favor of the Lessee (and the Trustee, by way of assignment by the Lessee), for the duration of the Primary Lease.
Section 10.06 Delay; Notice. No delay or omission to exercise any right or power accruing upon any Event of Default or Event of Nonappropriation shall impair any such right or power or shall be construed to be a waiver thereof, but any such right and power may be exercised from time to time and as often as may be deemed expedient. In order to entitle any
102260675.1/1001161642 B-44 party to exercise any remedy reserved to it in this Lease Agreement it shall not be necessary to give any notice, other than such notice as may be required in this Lease Agreement.
Section 10.07 No Remedy Exclusive. No remedy herein conferred upon or reserved to the Sublessor or Trustee is intended to be exclusive, and every such remedy shall be cumulative and shall be in addition to every other remedy given under this Lease Agreement or now or hereafter existing at law or in equity.
Section 10.08 No Additional Waiver Implied by One Waiver. In the event any agreement contained in this Lease Agreement should be breached by either party and thereafter waived by the other party, such waiver shall be limited to the particular breach so waived and shall not be deemed to waive any other breach hereunder.
ARTICLE XI TITLE
During the Term of the Primary Lease, fee simple title to the Ballpark and any and all repairs, replacements, substitutions, and modifications to the Ballpark shall be in the Lessor, but title to the Leasehold Estate granted under the Primary Lease shall be in the Lessee. The Lessor shall not permit any lien or encumbrance of any kind to exist against the title to the Ballpark, other than the Permitted Encumbrances. Upon termination of the Primary Lease under Section 5.01 hereof, all of the Lessee’s interest in the Leasehold Estate relating to the Ballpark existing under the Primary Lease shall immediately terminate, and full unencumbered, with the exception of the Permitted Encumbrances, legal title to the Ballpark shall immediately be restored to the Lessor, and the Lessee and the Trustee shall execute and deliver to the Lessor such documents as the Lessor may request to evidence the restoration of such title to the Lessor and the termination of the Lessee’s Leasehold Estate in the Ballpark and the Trustee’s interest in the Trust Estate.
102260675.1/1001161642 B-45
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APPENDIX C
EXCERPTS FROM THE
CITY OF EL PASO, TEXAS
ANNUAL FINANCIAL REPORT
For the Fiscal Year Ended August 31, 2020
The information contained in this Appendix consists of excerpts from the City of El Paso, Texas Comprehensive Annual Financial Report (the “Report”) for the Fiscal Year Ended August 31, 2020 and is not intended to be a complete statement of the City's financial condition. Reference is made to the complete Report for further information.
The information contained in the Report is provided as of the respective dates and for the periods specified herein and is subject to change without notice, and the filing of the Report does not, under any circumstances, imply that there has been no change in the affairs of the City since the specified date as of which such information is provided. In particular, the dates as of and periods for which some of such information is provided occurred before the impact of the worldwide COVID-19 pandemic and the economic impact of measures instituted to slow it could be fully realized. Accordingly, the historical information set forth in the Report is not necessarily indicative of future results or performance due to these and other factors, including those discussed in the Official Statement.
Moss Adams LLP, the City’s independent auditor, has not been engaged to perform and has not performed, since the date of its report included herein, any procedures on the financial statements addressed in that report. Moss Adams LLP also has not performed any procedures relating to this Official Statement.
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