OFFICIAL STATEMENT DATED JANUARY 24, 2013 Moody s: "Aa2" S&P: "AA" See "OTHER

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1 NEW ISSUE - Book-Entry-Only OFFICIAL STATEMENT DATED JANUARY 24, 2013 Ratings: Moody s: "Aa2" S&P: "AA" See "OTHER INFORMATION - RATINGS" In the opinion of Bond Counsel, interest on the Obligations is excludable from gross income for federal income tax purposes under existing law and the Obligations are not private activity bonds. See "TAX MATTERS - TAX EXEMPTION" for a discussion of the opinion of Bond Counsel, including a description of alternative minimum tax consequences for corporations. THE OBLIGATIONS HAVE NOT BEEN DESIGNATED AS "QUALIFIED TAX EXEMPT OBLIGATIONS" FOR FINANCIAL INSTITUTIONS. $43,660,000 GENERAL OBLIGATION REFUNDING BONDS SERIES 2013 Dated Date: February 1, 2013 Interest Accrual Date: Date of Delivery CITY OF WACO, TEXAS (McLennan County) $11,880,000 COMBINATION TAX AND REVENUE CERTIFICATES OF OBLIGATION SERIES 2013 Due: February 1, as shown on inside cover The $43,660,000 City of Waco, Texas, General Obligation Refunding Bonds, Series 2013 (the "Bonds"), and the $11,880,000 City of Waco, Texas, Combination Tax and Revenue Certificates of Obligation, Series 2013 (the "Certificates," and, together with the Bonds, the "Obligations"), are being issued by the City of Waco, Texas (the "City") pursuant to the terms of two separate ordinances adopted by the governing body of the City. Interest on the Obligations will accrue from the date of delivery, and will be payable February 1 and August 1 of each year commencing August 1, 2013 for the Bonds and February 1, 2014 for the Certificates, and will be calculated on the basis of a 360-day year consisting of twelve 30-day months. The definitive Obligations will be initially registered and delivered only to Cede & Co., the nominee of The Depository Trust Company ("DTC") pursuant to the Book-Entry-Only System described herein. Beneficial ownership of the Obligations may be acquired in denominations of $5,000 or integral multiples thereof. No physical delivery of the Obligations will be made to the beneficial owners thereof. Principal of and interest on the Obligations will be payable by the Paying Agent/Registrar to Cede & Co., which will make distribution of the amounts so paid to the participating members of DTC for subsequent payment to the beneficial owners of the Obligations (see "THE OBLIGATIONS BOOK-ENTRY-ONLY SYSTEM"). The initial Paying Agent/Registrar is The Bank of New York Mellon Trust Company, N.A. (see "THE OBLIGATIONS PAYING AGENT/REGISTRAR"). AUTHORITY FOR ISSUANCE... The Bonds are being issued pursuant to the Constitution and general laws of the State of Texas (the "State"), including particularly Chapter 1207, Texas Government Code, as amended and an ordinance (the Bond Parameters Ordinance ) adopted by the City Council of the City in which the City Council delegated to the City Manager of the City authority to complete the sale of the Bonds through the execution of a Pricing Certificate (the Bond Parameters Ordinance and the Pricing Certificate together are referred to herein as the Bond Ordinance ). The Bonds are direct obligations of the City payable from the levy and collection of a direct and continuing ad valorem tax levied, within the limits prescribed by law, on all taxable property within the City as provided in the Bond Ordinance. See "THE OBLIGATIONS SECURITY AND SOURCE OF PAYMENT OF THE BONDS." The Certificates are being issued pursuant to the Constitution and general laws of the State of Texas including particularly Chapter 271 Subchapter C of the Texas Local Government Code, as amended, and an ordinance (the Certificate Parameters Ordinance ) adopted by the City Council of the City in which the City Council delegated to the City Manager of the City authority to complete the sale of the Certificates through the execution of a Pricing Certificate (the Certificate Parameters Ordinance and the Pricing Certificate together are referred to herein as the Certificate Ordinance ). The Bond Ordinance and the Certificate Ordinance are referred to together herein as the "Ordinances". The Certificates are direct obligations of the City payable from the levy and collection of a direct and continuing ad valorem tax levied, within the limits prescribed by law, on all taxable property within the City as provided in the Certificate Ordinance, and from a limited pledge, not to exceed $1,000, of the surplus revenues of the City s water and sewer system. See "THE OBLIGATIONS SECURITY AND SOURCE OF PAYMENT OF THE CERTIFICATES." PURPOSE OF THE BONDS... Proceeds from the sale of the Bonds will be used to refund a portion of the City s outstanding general obligation debt and State Participation Obligations (as defined herein) privately placed with the Texas Water Development Board described on SCHEDULE I Schedule of Refunded Obligations (the "Refunded Obligations") in order to lower the overall annual debt service requirements of the City, and to pay the costs associated with the issuance of the Bonds. See "PLAN OF FINANCING PURPOSES OF THE BONDS" and "- USE OF BOND PROCEEDS." PURPOSE OF THE CERTIFICATES... Proceeds from the sale of the Certificates will be used to pay for the cost of (1) construction, acquisition of and improvements to City fire apparatus maintenance facilities, parks and recreational facilities, City streets, traffic control systems, sidewalks, street lighting and drainage; and improvements to City sanitary sewer facilities and the City s waterworks system, including in each case the acquisition of land and rights-of-way in connection therewith and the acquisition of vehicles, fire fighting equipment, radio equipment and other authorized City equipment (collectively, the "Project"), (2) professional services incurred in connection with the Project, and (3) to pay the costs incurred in connection with the issuance of the Certificates (see "PLAN OF FINANCING PURPOSE OF THE CERTIFICATES" and "USE OF CERTIFICATE PROCEEDS"). MATURITY SCHEDULE ON INSIDE COVER OF THIS OFFICIAL STATEMENT OPTIONAL REDEMPTION... The City reserves the right, at its option, to redeem Obligations having stated maturities on and after February 1, 2023, in whole or in part in principal amounts of $5,000 or any integral multiple thereof, on February 1, 2022, or any date thereafter, at the par value thereof plus accrued interest to the date of redemption (see "THE OBLIGATIONS - OPTIONAL REDEMPTION"). LEGALITY... The Obligations are offered for delivery when, as and if issued and accepted by the underwriters identified below (the "Underwriters") subject to the approving opinion of the Attorney General of Texas, the opinion of Naman, Howell, Smith & Lee, PLLC, Bond Counsel, Waco, Texas (see "APPENDIX C - FORM OF BOND COUNSEL'S OPINION"), and the opinion of Bracewell & Giuliani LLP, Austin, Texas as Underwriter s Counsel. DELIVERY... It is expected that the Obligations will be available for delivery through DTC on February 20, RBC CAPITAL MARKETS RAYMOND JAMES MORGAN KEEGAN SAMCO CAPITAL MARKETS

2 MATURITY SCHEDULES THE BONDS Initial Due Interest Reoffering CUSIP Due Interest Principal Feb. 1 Rate Yield Number (1) Principal Feb. 1 Rate Initial Reoffering Yield CUSIP Number (1) $ 140, % 0.300% DU6 $ 960, (2) 4.000% 2.530% (3) EG6 2,560, % 0.450% DV4 1,010, (2) 4.000% 2.600% (3) EH4 2,640, % 0.620% DW2 1,050, (2) 4.000% 2.660% (3) EJ0 2,755, % 0.790% DX0 1,085, (2) 4.000% 2.730% (3) EK7 2,870, % 0.960% DY8 1,125, (2) 3.000% 3.050% EL5 2,980, % 1.190% DZ5 1,160, (2) 3.000% 3.080% EM3 3,125, % 1.430% EA9 1,195, (2) 3.000% 3.130% EN1 3,280, % 1.620% EB7 1,235, (2) 3.125% 3.200% EP6 3,160, % 1.810% EC5 1,275, (2) 3.125% 3.250% EQ4 3,315, (2) 5.000% 1.980% (3) ED3 1,150, (2) 3.125% 3.270% ER2 3,480, (2) 5.000% 2.090% (3) EE1 1,185, (2) 3.250% 3.330% ES0 925, (2) 4.000% 2.450% (3) EF8 THE CERTIFICATES Initial Due Interest Reoffering CUSIP Due Interest Principal Feb. 1 Rate Yield Number (1) Principal Feb. 1 Rate Initial Reoffering Yield CUSIP Number (1) $ 255, % 0.300% ET8 600, (2) 4.000% 2.320% (3) FD2 445, % 0.480% EU5 620, (2) 4.000% 2.450% (3) FE0 455, % 0.640% EV3 645, (2) 4.000% 2.530% (3) FF7 465, % 0.810% EW1 675, (2) 4.000% 2.600% (3) FG5 475, % 0.970% EX9 700, (2) 4.000% 2.670% (3) FH3 495, % 1.200% EY7 730, (2) 4.000% 2.730% (3) FJ9 515, % 1.430% EZ4 755, (2) 3.000% 3.050% FK6 525, % 1.620% FA8 775, (2) 3.000% 3.100% FL4 550, % 1.810% FB6 800, (2) 3.000% 3.150% FM2 575, (2) 4.000% 2.120% (3) FC4 825, (2) 3.125% 3.200% FN0 (1) CUSIP is a registered trademark of the American Bankers Association. CUSIP data is provided by CUSIP Global Services, managed by Standard & Poor s Financial Services LLC 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 Financial Advisor, or the Underwriters shall be responsible for the selection or correctness of the CUSIP Numbers set forth herein. (2) The City reserves the right, at its option, to redeem Obligations having stated maturities on and after February 1, 2023, in whole or in part in principal amounts of $5,000 or any integral multiple thereof, on February 1, 2022, or any date thereafter, at the par value thereof plus accrued interest to the date of redemption (see "THE OBLIGATIONS OPTIONAL REDEMPTION"). (3) Yield shown is the yield to the first call date, February 1,

3 This Official Statement, which includes the cover page and the Appendices hereto, does not constitute an offer to sell or the solicitation of an offer to buy in any jurisdiction to any person to whom it is unlawful to make such offer, solicitation or sale. No dealer, broker, salesperson or other person has been authorized to give information or to make any representation other than those contained in this Official Statement, and, if given or made, such other information or representations must not be relied upon. The information set forth herein has been obtained from the City and other sources believed to be reliable, but such information is not guaranteed as to accuracy or completeness and is not to be construed as the promise or guarantee of the Financial Advisor or the Underwriters. This Official Statement contains, in part, estimates and matters of opinion which are not intended as statements of fact, and no representation is made as to the correctness of such estimates and opinions, or that they will be realized. The information and expressions of opinion contained herein are subject to change without notice, and neither the delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the City or other matters described. NONE OF THE CITY, THE FINANCIAL ADVISOR OR THE UNDERWRITERS MAKE ANY REPRESENTATION OR WARRANTY WITH RESPECT TO THE INFORMATION CONTAINED IN THIS OFFICIAL STATEMENT REGARDING THE DEPOSITORY TRUST COMPANY OR ITS BOOK-ENTRY-ONLY SYSTEM. No registration statement relating to the Obligations has been filed with the United States Securities and Exchange Commission under the Securities Act of 1933, as amended, in reliance upon an exemption provided thereunder. The Obligations have not been registered or qualified under the Securities Act of Texas in reliance upon various exemptions contained therein; nor have the Obligations been registered or qualified under the securities laws of any other jurisdiction. THESE SECURITIES HAVE NOT BEEN RECOMMENDED BY ANY FEDERAL OR STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY. FURTHERMORE, THE FOREGOING AUTHORITIES HAVE NOT CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY OF THIS DOCUMENT. The statements contained in this Official Statement that are not purely historical are forward-looking statements, including statements regarding the City s expectations, hopes, intentions or strategies regarding the future. All forward-looking statements included in this Official Statement are based on information available to the City on the date hereof, and the City assumes no obligation to update any such forward-looking statements. See "OTHER INFORMATION FORWARD-LOOKING STATEMENTS." The Underwriters have provided the following sentence for inclusion in this Official Statement. The Underwriters have reviewed the information in this Official Statement in acceptance with, and as a part of their responsibility 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. In connection with this offering, the Underwriters may over-allot or effect transactions which stabilize the market price of the issue at a level above that which might otherwise prevail in the open markets. Such stabilizing, if commenced, may be discontinued at any time. 3

4 TABLE OF CONTENTS MATURITY SCHEDULES... 2 OFFICIAL STATEMENT SUMMARY... 5 SELECTED FINANCIAL INFORMATION... 7 GENERAL FUND CONSOLIDATED STATEMENT SUMMARY... 7 CITY OFFICIALS, STAFF AND CONSULTANTS... 8 ELECTED OFFICIALS... 8 SELECTED ADMINISTRATIVE STAFF... 8 CONSULTANTS AND ADVISORS... 8 INTRODUCTION... 9 DESCRIPTION OF THE CITY... 9 PLAN OF FINANCING... 9 PURPOSE OF THE BONDS... 9 PURPOSE OF THE CERTIFICATES... 9 REFUNDED OBLIGATIONS USE OF PROCEEDS FROM THE BONDS USE OF PROCEEDS FROM THE CERTIFICATES THE OBLIGATIONS DESCRIPTION OF THE OBLIGATIONS AUTHORITY FOR ISSUANCE OF THE BONDS AUTHORITY FOR ISSUANCE OF THE CERTIFICATES SECURITY AND SOURCE OF PAYMENT OF THE BONDS SECURITY AND SOURCE OF PAYMENT OF THE CERTIFICATES TAX RATE LIMITATION OPTIONAL REDEMPTION MANDATORY SINKING FUND REDEMPTION NOTICE OF REDEMPTION DEFEASANCE BOOK-ENTRY-ONLY SYSTEM PAYING AGENT/REGISTRAR TRANSFER, EXCHANGE AND REGISTRATION RECORD DATE FOR INTEREST PAYMENT OBLIGATION-HOLDERS REMEDIES AMENDMENTS TO THE ORDINANCES TAX INFORMATION AD VALOREM TAX LAW EFFECTIVE TAX RATE AND ROLLBACK TAX RATE PROPERTY ASSESSMENT AND TAX PAYMENT CITY APPLICATION OF PROPERTY TAX CODE TAX ABATEMENT POLICY TAX INCREMENT REINVESTMENT ZONES TABLE 1 - VALUATION, EXEMPTIONS AND GENERAL OBLIGATION DEBT TABLE 2 TAXABLE ASSESSED VALUATION BY CATEGORY TABLE 3 - VALUATION AND GENERAL OBLIGATION DEBT HISTORY TABLE 4 - TAX RATE, LEVY AND COLLECTION HISTORY TABLE 5 - TEN LARGEST TAXPAYERS TABLE 6 - TAX ADEQUACY TABLE 7 - ESTIMATED OVERLAPPING DEBT DEBT INFORMATION TABLE 8 GENERAL OBLIGATION DEBT SERVICE REQUIREMENTS TABLE 9 - INTEREST AND SINKING FUND BUDGET PROJECTION TABLE 10 SELF-SUPPORTING DEBT FINANCIAL INFORMATION TABLE 11 GOVERNMENTAL ACTIVITIES: CHANGE IN NET ASSETS TABLE 11A GENERAL FUND REVENUES AND EXPENDITURE HISTORY TABLE 12 ENTERPRISE FUNDS: NET REVENUES AVAILABLE FOR DEBT SERVICE TABLE 13 - MUNICIPAL SALES TAX HISTORY CAPITAL IMPROVEMENT PROGRAM WATERWORKS AND SEWER SYSTEM WATER SYSTEM WASTEWATER TREATMENT MONTHLY WATER RATE MONTHLY WASTEWATER RATE TABLE 14 CONDENSED SUMMARY OF OPERATIONS FINANCIAL POLICIES INVESTMENTS LEGAL INVESTMENTS INVESTMENT POLICIES ADDITIONAL PROVISIONS THE CITY S INVESTMENT POLICY TABLE 15 - CURRENT INVESTMENTS TAX MATTERS TAX EXEMPTION ADDITIONAL FEDERAL INCOME TAX CONSIDERATIONS TAX ACCOUNTING TREATMENT OF ORIGINAL ISSUE PREMIUM TAX ACCOUNTING TREATMENT OF ORIGINAL ISSUE DISCOUNT OBLIGATIONS CONTINUING DISCLOSURE OF INFORMATION ANNUAL REPORTS AVAILABILITY OF INFORMATION LIMITATIONS AND AMENDMENTS OTHER INFORMATION RATINGS LITIGATION REGISTRATION AND QUALIFICATION OF OBLIGATIONS FOR SALE LEGAL INVESTMENTS AND ELIGIBILITY TO SECURE PUBLIC FUNDS IN TEXAS LEGAL MATTERS FINANCIAL ADVISOR VERIFICATION OF ARITHMETICAL AND MATHEMATICAL COMPUTATIONS UNDERWRITING FORWARD-LOOKING STATEMENTS AUTHENTICITY OF FINANCIAL DATA AND OTHER INFORMATION SCHEDULE I SCHEDULE OF REFUNDED OBLIGATIONS APPENDICES GENERAL INFORMATION REGARDING THE CITY... A EXCERPTS FROM THE CITY OF WACO, TEXAS ANNUAL FINANCIAL REPORT... B FORMS OF BOND COUNSEL'S OPINIONS... C The cover page hereof, this page, the schedule and the appendices included herein and any addenda, supplement or amendment hereto, are part of the official statement. 4

5 OFFICIAL STATEMENT SUMMARY This summary is subject in all respects to the more complete information and definitions contained or incorporated in this Official Statement. The offering of the Obligations to potential investors is made only by means of this entire Official Statement. No person is authorized to detach this summary from this Official Statement or to otherwise use it without the entire Official Statement. THE CITY... The City of Waco, Texas (the "City") is a political subdivision and municipal corporation of the State of Texas (the "State"), located in McLennan County, Texas. The City covers approximately 99 square miles (see "INTRODUCTION - DESCRIPTION OF THE CITY"). THE BONDS... The Bonds are issued as $43,660,000 City of Waco, Texas, General Obligation Refunding Bonds, Series 2013 (the "Bonds"). The Bonds are dated February 1, 2013, and are issued as serial bonds maturing February 1, 2014 through February 1, 2036 (see "THE OBLIGATIONS - DESCRIPTION OF THE OBLIGATIONS"). THE CERTIFICATES... The Certificates are issued as $11,880,000 Combination Tax and Revenue Certificates of Obligation, Series The Certificates are dated February 1, 2013, and are issued as serial certificates maturing February 1, 2014 through February 1, 2033 (see "THE OBLIGATIONS - DESCRIPTION OF THE OBLIGATIONS"). PAYMENT OF INTEREST... Interest on the Obligations accrues from the date of delivery, and is payable on August 1, 2013 for the Bonds and February 1, 2014 for the Certificates, and each August 1 and February 1 thereafter until maturity or prior redemption (see "THE OBLIGATIONS DESCRIPTION OF THE OBLIGATIONS"). AUTHORITY FOR ISSUANCE OF THE BONDS... The Bonds are issued pursuant to the constitution and general laws of the State of Texas, particularly Chapters 1207, Texas Government Code, as amended, and an ordinance (the Bond Parameters Ordinance ) passed by the City Council of the City. In the Bond Parameters Ordinance, the City Council delegated to the City Manager of the City the authority to complete the sale of the Bonds. The terms of the sale are included in a Pricing Certificate, which completed the sale of the Bonds (the Bond Parameters Ordinance and the Pricing Certificate together are referred to herein as the Bond Ordinance ) (see THE OBLIGATIONS AUTHORITY FOR ISSUANCE OF THE BONDS ). AUTHORITY FOR ISSUANCE OF THE CERTIFICATES... The Certificates are issued pursuant to the Constitution and the general laws of the State, including particularly Subchapter C of Chapter 271, Texas Local Government Code, as amended, and an ordinance (the Certificate Parameters Ordinance ) passed by the City Council of the City. In the Certificate Parameters Ordinance, the City Council delegated to the City Manager of the City the authority to complete the sale of the Certificates. The terms of the sale are included in a Pricing Certificate, which completed the sale of the Certificates (the Certificate Parameters Ordinance and the Pricing Certificate together are referred to herein as the Certificate Ordinance ) (see THE OBLIGATIONS - AUTHORITY FOR ISSUANCE OF THE CERTIFICATES ). SECURITY FOR THE BONDS... The Bonds constitute direct obligations of the City, payable from the collection of a direct and continuing ad valorem tax levied, within the limits prescribed by law, on all taxable property within the City (see "THE OBLIGATIONS SECURITY AND SOURCE OF PAYMENT OF THE BONDS" and " TAX RATE LIMITATION"). SECURITY FOR THE CERTIFICATES... The Certificates constitute direct obligations of the City, payable from a combination of (i) the collection of a direct and continuing ad valorem tax levied, within the limits prescribed by law, on all taxable property within the City, and (ii) a limited pledge (not to exceed $1,000) of surplus revenues of the City's water and sewer system, as provided in the Certificate Ordinance (see "THE OBLIGATIONS - SECURITY AND SOURCE OF PAYMENT OF THE CERTIFICATES" and "- TAX RATE LIMITATION"). REDEMPTION... The City reserves the right, at its option, to redeem Obligations having stated maturities on and after February 1, 2023, in whole or in part in principal amounts of $5,000 or any integral multiple thereof, on February 1, 2022, or any date thereafter, at the par value thereof plus accrued interest to the date of redemption (see "THE OBLIGATIONS - OPTIONAL REDEMPTION"). TAX EXEMPTION... In the opinion of Bond Counsel, the interest on the Obligations is excludable from gross income for federal income tax purposes under existing law and is not a specific preference item for purposes of the federal alternative minimum tax. See "TAX MATTERS - TAX EXEMPTION" for a discussion of the opinion of Bond Counsel. 5

6 PURPOSE OF THE BONDS.... Proceeds from the sale of the Bonds will be used to refund a portion of the City s outstanding general obligation debt and State Participation Obligations privately placed with the Texas Water Development Board as described on SCHEDULE I SCHEDULE OF REFUNDED OBLIGATIONS (the "Refunded Obligations") in order to lower the overall annual debt service requirements of the City, and to pay the costs associated with the issuance of the Bonds (see "PLAN OF FINANCING USE OF PROCEEDS FROM THE BONDS"). PURPOSE OF THE CERTIFICATES.. Proceeds from the sale of the Certificates will be used to pay for the cost of (1) construction, acquisition of and improvements to City fire apparatus maintenance facilities, parks and recreational facilities, City streets, traffic control systems, sidewalks, street lighting and drainage; and improvements to City sanitary sewer facilities and the City s waterworks system, including in each case the acquisition of land and rights-of-way in connection therewith and the acquisition of vehicles, fire fighting equipment, radio equipment and other authorized City equipment (collectively, the "Project"), (2) professional services incurred in connection with the Project, and (3) to pay the costs incurred in connection with the issuance of the Certificates (see "PLAN OF FINANCING USE OF PROCEEDS FROM THE CERTIFICATES"). RATINGS... The presently outstanding tax supported debt of the City is rated "Aa2" by Moody's Investors Service, Inc. ("Moody's") and "AA" by Standard & Poor's Ratings Services, A Division of The McGraw-Hill Companies, Inc. ("S&P"). The Obligations have been rated "Aa2" by Moody s and "AA" by S&P. (see "OTHER INFORMATION - RATINGS"). BOOK-ENTRY-ONLY SYSTEM... The definitive Obligations will be initially registered and delivered only to Cede & Co., the nominee of The Depository Trust Company ("DTC") pursuant to the Book-Entry-Only System described herein. Beneficial ownership of the Obligations may be acquired in denominations of $5,000 or integral multiples thereof. No physical delivery of the Obligations will be made to the beneficial owners thereof. Principal of and interest on the Obligations will be payable by the Paying Agent/Registrar to Cede & Co., which will make distribution of the amounts so paid to the participating members of DTC for subsequent payment to the beneficial owners of the Obligations (see "THE OBLIGATIONS BOOK-ENTRY-ONLY SYSTEM"). PAYMENT RECORD... The City has never defaulted in payment of its general obligation tax debt. [Remainder of Page Intentionally Left Blank] 6

7 SELECTED FINANCIAL INFORMATION Ratio Tax Fiscal Per Capita General Per Debt to Year Estimated Taxable Taxable Obligation Capita Taxable Percent Ended City Assessed Assessed (G.O.) G.O. Assessed Total 9/30 Population (1) Valuation (2) Valuation Tax Debt (3) Tax Debt Valuation Collections ,506 $ 5,605,875,680 $ 45,760 $ 105,793,795 $ % 98.78% ,650 6,010,184,387 48,606 98,915, % 99.03% ,805 6,174,641,741 49,474 96,976, % 98.48% ,971 6,280,537,667 49,857 97,700, % 99.86% ,148 6,446,556,172 50,701 93,949, % 98.76% ,336 6,651,867,637 51,832 90,200,143 (4) 703 (4) (4) 1.36% (5) (1) Source: The City. (2) As reported by the McLennan County Appraisal District on the City's annual State Property Tax Board Reports; subject to change during the ensuing year. (3) Payable from ad valorem taxes. This number excludes general obligation debt that is self supporting by virtue of payment from airport, water, sewer and solid waste revenues, as well as revenues from any tax increment fund. See "TABLE 1 - VALUATION, EXEMPTIONS AND GENERAL OBLIGATION DEBT" and the accompanying footnotes and "DEBT INFORMATION - TABLE 10 SELF-SUPPORTING DEBT." (4) Includes the Obligations and excludes the Refunded Obligations. (5) In process of collection. GENERAL FUND CONSOLIDATED STATEMENT SUMMARY For Fiscal Year Ended September (1) Beginning Balance $ 34,596,744 $ 31,241,750 $ 31,851,097 $ 24,635,803 $ 25,618,111 Total Revenue 99,926,422 97,343,961 95,532,794 93,818,275 91,251,546 Total Expenditures 98,788,896 93,988,967 96,142,141 95,188,703 92,233,854 Prior Period Adjustment ,482 (2) - Ending Balance $ 35,734,269 $ 34,596,744 $ 31,241,750 $ 23,539,857 $ 24,635,803 (1) Restated pursuant to GASB Statement No. 54. (2) Prior period adjustment was to record inventory previously expensed when purchased. 7

8 CITY OFFICIALS, STAFF AND CONSULTANTS ELECTED OFFICIALS City Council Title On Council Since Occupation Malcolm Duncan, Jr. Mayor June 2010 Business Executive Alice Rodriguez Mayor Pro Tem May 2005 Retired Wilbert Austin, Sr. Council Member May 2006 Pastor John Kinnaird Council Member May 2012 Investment Portfolio Manager Toni Herbert Council Member May 2009 Nonprofit Management Kyle Deaver Council Member June 2012 Attorney SELECTED ADMINISTRATIVE STAFF Year M unicipal Name Position Employed Experience Larry D. Groth, P.E. City Manager Years Dale A. Fisseler, P.E. Deputy City M anager Years Wiley Stem III Assistant City Manager Years George Johnson, Jr. Assistant City Manager Years Janice J. Andrews, C.P.A. Director of Finance Years Jennifer Richie City Attorney Years Patricia Ervin City Secretary Years CONSULTANTS AND ADVISORS Auditors... Jaynes, Reitmeier, Boyd & Therrell, P.C. Waco, Texas Bond Counsel... Naman, Howell, Smith & Lee, PLLC Waco, Texas Financial Advisor... First Southwest Company Houston, Texas For additional information regarding the City, please contact: Janice J. Andrews Director of Finance City of Waco 300 Austin Avenue Waco, Texas (254) or Drew K. Masterson First Southwest Company 700 Milam Street Suite 500 Houston, Texas (713)

9 OFFICIAL STATEMENT RELATING TO $43,660,000 CITY OF WACO, TEXAS GENERAL OBLIGATION REFUNDING BONDS, SERIES 2013 AND $11,880,000 CITY OF WACO, TEXAS COMBINATION TAX AND REVENUE CERTIFICATES OF OBLIGATION, SERIES 2013 INTRODUCTION This Official Statement, which includes the cover pages and schedule and Appendices hereto, provides certain information regarding the issuance of $43,660,000 City of Waco, Texas, General Obligation Refunding Bonds, Series 2013 (the "Bonds"), and $11,880,000 City of Waco, Texas, Combination Tax and Revenue Certificates of Obligation, Series 2013 (the "Certificates," and, together with the Bonds, the "Obligations"). Capitalized terms used in this Official Statement have the same meanings assigned to such terms in the Bond Ordinance (as hereinafter defined) or in the Certificate Ordinance (as hereinafter defined). There follows in this Official Statement descriptions of the Obligations and certain information regarding the City, and its finances. All descriptions of documents contained herein are only summaries and are qualified in their entirety by reference to each such document. Copies of such documents may be obtained from the City's Financial Advisor, First Southwest Company, Houston, Texas. DESCRIPTION OF THE CITY The City is a political subdivision and municipal corporation of the State of Texas (the "State"), located in McLennan County, duly organized and existing under the laws of the State, and the City's Home Rule Charter. The City was incorporated in 1856, and first adopted its Home Rule Charter in The City operates under a Council/Manager form of government with a City Council comprised of the Mayor and five Council members who serve staggered two-year terms. The City Manager is the chief administrative officer for the City. Some of the services that the City provides are: public safety (police and fire protection), highways and streets, water, solid waste, health and social services, culture-recreation, public transportation, planning and zoning, and general administrative services. The 2010 Census population for the City was 124,805, while the estimated 2013 population is 128,336. The City covers approximately 99 square miles. See "APPENDIX A - GENERAL INFORMATION REGARDING THE CITY". PLAN OF FINANCING PURPOSE OF THE BONDS The Bonds are being issued for the purpose of refunding a portion of the City s general obligation debt and State Participation Obligations privately placed with the Texas Water Development Board described on "SCHEDULE I Schedule of Refunded Obligations" attached to this Official Statement (the "Refunded Obligations") in order to lower the overall annual debt service requirements of the City, and to pay the costs of issuance of the Bonds. PURPOSE OF THE CERTIFICATES Proceeds from the sale of the Certificates will be used to pay for the cost of (1) construction, acquisition of and improvements to City fire apparatus maintenance facilities, parks and recreational facilities, City streets, traffic control systems, sidewalks, street lighting and drainage; and improvements to City sanitary sewer facilities and the City s waterworks system, including in each case the acquisition of land and rights-of-way in connection therewith and the acquisition of vehicles, fire fighting equipment, radio equipment and other authorized City equipment (collectively, the "Project"), (2) professional services incurred in connection with the Project, and (3) issuance of the Certificates. 9

10 REFUNDED OBLIGATIONS The principal and interest due on the Refunded Obligations are to be paid on the respective scheduled due dates or redemption dates of such Refunded Obligations, from funds to be deposited pursuant to a certain Escrow Agreement (the "Escrow Agreement") between the City and The Bank of New York Mellon Trust, N.A. Dallas, Texas (the "Escrow Agent"). The Bond Ordinance provides that from the proceeds of the sale of the Bonds received from the Underwriters, the City will deposit with the Escrow Agent the amount necessary to accomplish the discharge and final payment of the Refunded Obligations on their respective due dates or redemption dates. Such funds will be held by the Escrow Agent in a special escrow account (the "Escrow Fund") and with respect to proceeds required to pay the currently callable Refunded Obligations, held in cash with respect to proceeds required to pay the Refunded Obligations that are not currently callable, used to purchase direct obligations of the United States of America (the "Federal Securities") or other legally permissible obligations appropriate for a refund escrow under State law. Under the Escrow Agreement, the Escrow Fund is irrevocably pledged to the payment of the principal of and interest on the Refunded Obligations. Grant Thornton LLP, a nationally recognized accounting firm, will verify at the time of delivery of the Bonds to the Underwriters thereof the mathematical accuracy of the schedules that demonstrate the Federal Securities or other legally permissible obligations under State law 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 in full. Such maturing principal of and interest on the Federal Securities will not be available to pay the Bonds (see "OTHER INFORMATION - VERIFICATION OF ARITHMETICAL AND MATHEMATICAL COMPUTATIONS"). These computations will be based upon information and assumptions supplied by the City. Grant Thornton LLP, has restricted its procedures to recalculating the computations provided by the City and has not evaluated or examined the assumptions or information used in the computations By the deposit of the Federal Securities or other legally permissible obligations under State law and cash, if necessary, with the Escrow Agent pursuant to the Escrow Agreement, the City will have effected 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 Grant Thornton LLP, the Refunded Obligations will be outstanding only for the purpose of receiving payments from the Federal Securities or other legally permissible obligations under State law and any cash held for such purpose by the Escrow Agent and such Refunded Obligations will not be deemed as being outstanding obligations of the City payable from taxes nor for the purpose of applying any limitation on the issuance of debt. The City has covenanted in the Escrow Agreement to make timely deposits to the Escrow Fund, from lawfully available funds, of any additional amounts required to pay the principal of and interest on the Refunded Obligations, if for any reason, the cash balances and Federal Securities on deposit or scheduled to be on deposit in the Escrow Fund be insufficient to make such payment. USE OF PROCEEDS FROM THE BONDS Proceeds of the sale of the Bonds will be applied approximately as follows: Deposit to Escrow Fund $ 49,385, Underwriter's Discount 184, Costs of Issuance 138, Deposit to Debt Service Fund Total Uses of Funds $ 49,707, USE OF PROCEEDS FROM THE CERTIFICATES Proceeds of the sale of the Certificates will be applied approximately as follows: Deposit to Project Fund $ 12,690, Underwriter's Discount 50, Costs of Issuance 56, Deposit to Debt Service Fund 1, Total Uses of Funds $ 12,798,

11 THE OBLIGATIONS DESCRIPTION OF THE OBLIGATIONS The Obligations are dated February 1, 2013, and mature on February 1 in each of the years and in the amounts shown on the inside front cover page hereof. Interest will accrue from the date of delivery, will be computed on the basis of a 360-day year consisting of twelve 30-day months, and will be payable on February 1 and August 1, commencing August 1, 2013 for the Bonds and February 1, 2014 for the Certificates until maturity or prior redemption. The definitive Obligations will be issued only in fully registered form in any integral multiple of $5,000 for any one maturity and series and will be initially registered and delivered only to Cede & Co., the nominee of The Depository Trust Company ("DTC") pursuant to the Book-Entry-Only System described herein. No physical delivery of the Obligations will be made to the beneficial owners thereof. Principal of and interest on the Obligations will be payable by the Paying Agent/Registrar to Cede & Co., which will make distribution of the amounts so paid to the participating members of DTC for subsequent payment to the beneficial owners of the Obligations. See "THE OBLIGATIONS - BOOK-ENTRY- ONLY SYSTEM." AUTHORITY FOR ISSUANCE OF THE BONDS The Bonds are issued pursuant to the Constitution and general laws of the State, particularly Chapter 1207, Texas Government Code, as amended, and the Bond Parameters Ordinance. In the Bond Parameters Ordinance, the City Council delegated to the City Manager of the City the authority to complete the sale of the Bonds. The terms of the sale are included in a Pricing Certificate, which completed the sale of the Bonds (the Bond Parameters Ordinance and the Pricing Certificate together are referred to herein as the Bond Ordinance ). AUTHORITY FOR ISSUANCE OF THE CERTIFICATES The Certificates are issued pursuant to the Constitution and general laws of the State, including particularly Subchapter C of Chapter 271, Texas Local Government Code, as amended. In the Certificate Parameters Ordinance, the City Council delegated to the City Manager of the City the authority to complete the sale of the Certificates. The terms of the sale are included in a Pricing Certificate, which completed the sale of the Certificates (the Certificate Parameters Ordinance and the Pricing Certificate together are referred to herein as the Certificate Ordinance ). SECURITY AND SOURCE OF PAYMENT OF THE BONDS The Bonds constitute direct obligations of the City, payable from the collection of a direct and continuing ad valorem tax levied, within the limits prescribed by law, on all taxable property within the City. SECURITY AND SOURCE OF PAYMENT OF THE CERTIFICATES The Certificates constitute direct obligations of the City, payable from a combination of (i) the collection of a direct and continuing ad valorem tax levied, within the limits prescribed by law, on all taxable property within the City, and (ii) a limited pledge (not to exceed $1,000) of surplus revenues of the City s water and sewer system, as provided in the Certificate Ordinance. TAX RATE LIMITATION All taxable property within the City is subject to the assessment, levy and collection by the City of a continuing, direct annual ad valorem tax sufficient to provide for the payment of principal of and interest on all ad valorem tax debt within the limits prescribed by law. Article XI, Section 5, of the Texas Constitution is applicable to the City, and limits its maximum ad valorem tax rate to $2.50 per $100 Taxable Assessed Valuation for all City purposes. The Home Rule Charter of the City limits its tax rate to $1.85 per $100 Taxable Assessed Valuation for all City purposes. Administratively, the Attorney General of Texas will permit allocation of $1.50 of the $2.50 maximum tax rate for all tax-supported debt service, as calculated at the time of issuance. OPTIONAL REDEMPTION The City reserves the right, at its option, to redeem Obligations having stated maturities on and after February 1, 2023, in whole or in part in principal amounts of $5,000 or any integral multiple thereof, on February 1, 2022, or any date thereafter, at the par value thereof plus accrued interest to the date of redemption. If less than all of the Obligations are to be redeemed, the City may select the series and maturities of Obligations to be redeemed. If less than all the Obligations of any series and maturity are to be redeemed, the Paying Agent/Registrar (or DTC while the Obligations are in Book-Entry-Only form) shall determine by lot or other customary random selection method the Obligations, or portions thereof, within such series and maturity to be redeemed. If an Obligation (or any portion of the principal sum thereof) shall have been called for redemption and notice of such redemption shall have been given, such Obligation (or the principal amount thereof to be redeemed) shall become due and payable on such redemption date and interest thereon shall cease to accrue from and after the redemption date, provided funds for the payment of the redemption price and accrued interest thereon are held by the Paying Agent/Registrar on the redemption date. 11

12 NOTICE OF REDEMPTION Not less than thirty (30) days prior to a redemption date for the Obligations, the City shall cause a notice of redemption to be sent by United States mail, first class, postage prepaid, to the registered owners of the Obligations to be redeemed, in whole or in part, at the address of the registered owner appearing on the registration books of the Paying Agent/Registrar at the close of business on the business day next preceding the date of mailing such notice. ANY NOTICE SO MAILED SHALL BE CONCLUSIVELY PRESUMED TO HAVE BEEN DULY GIVEN, WHETHER OR NOT THE REGISTERED OWNER RECEIVES SUCH NOTICE. NOTICE HAVING BEEN SO GIVEN AND ANY CONDITIONS STATED IN THE NOTICE HAVING BEEN MET, (INCLUDING PROVISION OF FUNDS FOR THE PAYMENT OF THE REDEMPTION PRICE TO THE PAYING AGENT/REGISTRAR) THE OBLIGATIONS CALLED FOR REDEMPTION SHALL BECOME DUE AND PAYABLE ON THE SPECIFIED REDEMPTION DATE, AND NOTWITHSTANDING THAT ANY OBLIGATION OR PORTION THEREOF HAS NOT BEEN SURRENDERED FOR PAYMENT, INTEREST ON SUCH OBLIGATION OR PORTION THEREOF SHALL CEASE TO ACCRUE. With respect to any optional redemption of the Obligations, unless the prerequisites to such redemption required by the Ordinances have been met and money sufficient to pay the principal of and premium, if any, and interest on the Obligations to be redeemed will have been received by that Paying Agent/Registrar prior to the giving of such notice of redemption, such notice will state that said redemption may, at the option of the City, be conditional upon the satisfaction of such prerequisites and receipt of such money by the Paying Agent/Registrar on the prior to the date fixed for such redemption or upon any prerequisites set forth in such notice of redemption. If a conditional notice of redemption is given and such prerequisites to the redemption are not fulfilled, such notice will be of no force and effect, the City will not redeem such Obligations, and the Paying Agent/Registrar will give notice in the manner in which the notice of redemption was given, to the effect that the Obligations have not been redeemed. DEFEASANCE The Ordinances provide that the City may discharge its obligations to the registered owners of any or all of the Obligations to pay principal, interest and redemption price thereon by depositing with a trust company or commercial bank, amounts sufficient to provide for the payment and/or redemption of the Obligations; provided that such deposits may be invested and reinvested only in (a) direct non-callable obligations of the United States of America, including obligations that are unconditionally guaranteed by the United States of America; (b) noncallable obligations of an agency or instrumentality of the United States, including obligations that are unconditionally guaranteed or insured by the agency or instrumentality and that are rated as to investment quality by a nationally recognized investment rating firm not less than "AAA" or its equivalent; and (c) noncallable obligations of a state or an agency or a county, municipality, or other political subdivision of a state that have been refunded and that, on the date the governing body of the Issuer adopts or approves the proceedings authorizing the issuance of such refunding bonds, are rated as to investment quality by a nationally recognized investment rating firm not less than "AAA" or its equivalent. The foregoing obligations may be in book-entry form, and shall mature and/or bear interest payable at such times and in such amounts as will be sufficient to provide for the scheduled payment and/or redemption of the Obligations. If any of such Obligations are to be redeemed prior to their respective dates of maturity, provision must have been made for giving notice of redemption as provided in the Ordinances. Under current State law, upon such deposit as described above, such Obligations shall no longer be regarded to be outstanding or unpaid. After firm banking and financial arrangements for the discharge and final payment or redemption of the Obligations have been made as described above, all rights of the City to initiate proceedings to call the Obligations for redemption or take any other action amending the terms of the Obligations are extinguished; provided, however, that the right to call the Obligations for redemption is not extinguished if the City: (i) in the proceedings providing for the firm banking and financial arrangements, expressly reserves the right to call the Obligations for redemption; (ii) gives notice of the reservation of that right to the owners of the Obligations 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. BOOK-ENTRY-ONLY SYSTEM This section describes how ownership of the Obligations is to be transferred and how the principal of, premium, if any, and interest on the Obligations are to be paid to and credited by The Depository Trust Company ("DTC"), New York, New York, while the Obligations are registered in its nominee name. The information in this section concerning DTC and the Book-Entry-Only System has been provided by DTC for use in disclosure documents such as this Official Statement. The City believes the source of such information to be reliable, but takes no responsibility for the accuracy or completeness thereof. The City cannot and does not give any assurance that (1) DTC will distribute payments of debt service on the Obligations, or redemption or other notices, to DTC Participants, (2) DTC Participants or others will distribute debt service payments paid to DTC or its nominee (as the registered owner of the Obligations), or redemption or other notices, to the Beneficial Owners, or that they will do so on a timely basis, or (3) DTC will serve and act in the manner described in this Official Statement. The current rules applicable to DTC are on file with the Securities and Exchange Commission, and the current procedures of DTC to be followed in dealing with DTC Participants are on file with DTC. 12

13 The Depository Trust Company ("DTC), New York, New York, will act as securities depository for the Obligations. The Obligations 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 Obligation certificate will be issued for each series and maturity of the Obligations, each in the aggregate principal amount of such series and maturity, and will be deposited with DTC. DTC, the world s largest depository, is a limited-purpose trust company organized under the New York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code, and a "clearing agency" registered pursuant to the provisions of Section 17A of the Securities Exchange Act of DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-u.s. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC s participants ("Direct Participants") deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-u.s. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation ("DTCC"). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its 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 companies 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 Securities and Exchange Commission. More information about DTC can be found at Purchases of Obligations under the DTC system must be made by or through Direct Participants, which will receive a credit for the Obligations on DTC s records. The ownership interest of each actual purchaser of each Obligation ("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 Obligations 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 Obligations, except in the event that use of the book-entry system for the Obligations is discontinued. To facilitate subsequent transfers, all Obligations 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 Obligations 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 Obligations; DTC s records reflect only the identity of the Direct Participants to whose accounts such Obligations 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. Redemption notices shall be sent to DTC. If less than all of the Obligations within an issue are being redeemed, DTC s practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed. 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 Obligations may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Obligations, such as redemptions, tenders, defaults, and proposed amendments to the Obligation documents. For example, Beneficial Owners of Obligations may wish to ascertain that the nominee holding the Obligations 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 register and request that copies of the notices be provided directly to them. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to Obligations unless authorized by a Direct Participant in accordance with DTC s MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the City as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co. s consenting or voting rights to those Direct Participants to whose accounts Obligations are credited on the record date (identified in a listing attached to the Omnibus Proxy). Principal and interest payments on the Obligations 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 City or the Paying Agent/Registrar of each series, on the payable date in accordance with their respective holdings shown on DTC s records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in "street name," and will be the responsibility of such Participant and not of DTC nor its nominee, the Paying Agent/Registrar of each series, or the City, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds, principal and interest payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the City or Paying Agent/Registrar of each series, 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. 13

14 DTC may discontinue providing its services as depository with respect to one or both series of the Obligations at any time by giving reasonable notice to the City or the respective Paying Agent/Registrar. Under such circumstances, in the event that a successor depository is not obtained, Obligation certificate are required to be printed and delivered. The City may decide to discontinue the use of the system of book-entry-only transfers through DTC (or a successor depository). In that event, Obligation certificate, as appropriate, will be printed and delivered. Use of Certain Terms in Other Sections of this Official Statement... In reading this Official Statement it should be understood that while the Obligations are in the Book-Entry-Only System, references in other sections of this Official Statement to registered owners should be read to include the person for which the Participant acquires an interest in the Obligations, but (i) all rights of ownership must be exercised through DTC and the Book-Entry-Only System, and (ii) except as described above, notices that are to be given to registered owners under the Ordinances will be given only to DTC. Information concerning DTC and the Book-Entry-Only System has been obtained from DTC and is not guaranteed as to accuracy or completeness by, and is not to be construed as a representation by the City, the Financial Advisor, or the Underwriters. Effect of Termination of Book-Entry-Only System... In the event that the Book-Entry-Only System of the Obligations is discontinued, printed Obligations will be issued to the DTC Participants or the holder, as the case may be, and such Obligations will be subject to transfer, exchange and registration provisions as set forth in the Ordinances and summarized under "THE OBLIGATIONS - TRANSFER, EXCHANGE AND REGISTRATION." PAYING AGENT/REGISTRAR The initial Paying Agent/Registrar is The Bank of New York Mellon Trust Company, N.A., Dallas, Texas. In the Ordinances, the City retains the right to replace the Paying Agent/Registrar. The City covenants to maintain and provide a Paying Agent/Registrar at all times until the Obligations are duly paid and any successor Paying Agent/Registrar shall be a commercial bank or trust company organized under the laws of the State or other entity duly qualified and legally authorized to serve as and perform the duties and services of Paying Agent/Registrar for the Obligations. Upon any change in the Paying Agent/Registrar for the Obligations, the City agrees to promptly cause a written notice thereof to be sent to each registered owner of the Obligations by United States mail, first class, postage prepaid, which notice shall also give the address of the new Paying Agent/Registrar. TRANSFER, EXCHANGE AND REGISTRATION In the event the Book-Entry-Only System shall be discontinued, the Obligations may be transferred and exchanged on the registration books of the Paying Agent/Registrar only upon presentation and surrender to the Paying Agent/Registrar and such transfer or exchange shall be without expense or service charge to the registered owner, except for any tax or other governmental charges required to be paid with respect to such registration, exchange and transfer. Obligations may be assigned by the execution of an assignment form on the respective Obligations or by other instrument of transfer and assignment acceptable to the Paying Agent/Registrar. New Obligations will be delivered by the Paying Agent/Registrar, in lieu of the Obligations being transferred or exchanged, at the designated office of the Paying Agent/Registrar, or sent by United States mail, first class, postage prepaid, to the new registered owner or his designee. To the extent possible, new Obligations issued in an exchange or transfer of Obligations will be delivered to the registered owner or assignee of the registered owner in not more than three business days after the receipt of the Obligations to be canceled, and the written instrument of transfer or request for exchange duly executed by the registered owner or his duly authorized agent, in form satisfactory to the Paying Agent/Registrar. New Obligations registered and delivered in an exchange or transfer shall be in any integral multiple of $5,000 for any one series and maturity and for a like aggregate principal amount as the Obligations surrendered for exchange or transfer. See "BOOK-ENTRY-ONLY SYSTEM" above for a description of the system to be utilized initially in regard to ownership and transferability of the Obligations. Neither the City nor the Paying Agent/Registrar shall be required to transfer or exchange any Obligation called for redemption, in whole or in part, within 45 days of the date fixed for redemption; provided, however, such limitation of transfer shall not be applicable to an exchange by the registered owner of the uncalled balance of an Obligation. RECORD DATE FOR INTEREST PAYMENT The record date ("Record Date") for the interest payable on the Obligations on any interest payment date means the close of business on the 15th day of the preceding month. In the event of a non-payment of interest on a scheduled payment date, and for 30 days thereafter, a new record date for such interest payment (a "Special Record Date") will be established by the Paying Agent/Registrar, if and when funds for the payment of such interest have been received from the City. Notice of the Special Record Date and of the scheduled payment date of the past due interest (a "Special Payment Date", which shall be 15 days after the Special Record Date) shall 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 of an Obligation appearing on the registration books of the Paying Agent/Registrar at the close of business on the last business day next preceding the date of mailing of such notice. 14

15 OBLIGATION-HOLDERS REMEDIES The Ordinances establish specific events of default with respect to the Obligations. If the City defaults in the payment of principal of or interest or Redemption Price on the Obligations when due or the failure by the City to make payment into any fund or funds established under the Ordinances as the same become due, or if the City defaults in the observance or performance of any of the covenants, conditions or obligations of the City, the failure to perform which materially, adversely affects the rights of the owners, including but not limited to, their prospect or ability to be repaid in accordance with the Ordinances, and the continuation thereof for a period of 60 days after notice of such default is given by any owner to the City, the Ordinances provide that any owner is entitled to seek a writ of mandamus from a court of proper jurisdiction requiring the City to make such payment or observe and perform such covenants, obligations, or conditions. The issuance of a writ of mandamus may be sought if there is no other available remedy at law to compel performance of the Obligations or the Ordinances and the City s obligations are not uncertain or disputed. The remedy of mandamus is controlled by equitable principles, so rests with the discretion of the court, but may not be arbitrarily refused. There is no acceleration of maturity of the Obligations in the event of default and, consequently, the remedy of mandamus may have to be relied upon from year to year. The Ordinances do not provide for the appointment of a trustee to represent the interests of the owners upon any failure of the City to perform in accordance with the terms of the Ordinances, or upon any other condition and accordingly all legal actions to enforce such remedies would have to be undertaken at the initiative of, and be financed by, the registered owners. On June 30, 2006, the Texas Supreme Court ruled in Tooke v. City of Mexia, 197 S.W.3d 325 (Tex.2006), that a waiver of immunity from suit in a contractual dispute must be provided for by statute in "clear and unambiguous" language. Because it is unclear whether the Texas legislature has effectively waived the City s sovereign immunity from a suit for money damages, owners may not be able to bring such a suit against the City for breach of the Obligations or the City's other covenants in the Ordinances. Even if a judgment against the City could be obtained, it could not be enforced by direct levy and execution against the City s property. Further, the registered owners cannot themselves foreclose on property within the City or sell property within the City to enforce the tax lien on taxable property to pay the principal of and interest on the Obligations. Furthermore, the City is eligible to seek relief from its creditors under Chapter 9 of the U.S. Bankruptcy Code ("Chapter 9"). Although Chapter 9 provides for the recognition of a security interest represented by a specifically pledged source of revenues, the pledge of ad valorem taxes in support of a general obligation of a bankrupt entity is not specifically recognized as a security interest under Chapter 9. Chapter 9 also includes an automatic stay provision that would prohibit, without Bankruptcy Court approval, the prosecution of any other legal action by creditors or Obligation owners of an entity which has sought protection under Chapter 9. Therefore, should the City avail itself of Chapter 9 protection from creditors, the ability to enforce would be subject to the approval of the Bankruptcy Court (which could require that the action be heard in Bankruptcy Court instead of other federal or state court); and the Bankruptcy Code provides for broad discretionary powers of a Bankruptcy Court in administering any proceeding brought before it. The opinion of Bond Counsel will note that all opinions relative to the enforceability of the Obligations are qualified with respect to the customary rights of debtors relative to their creditors and that all opinions relative to the enforceability of the Ordinances and the Obligations are subject to bankruptcy and other laws affecting creditors rights or remedies generally. AMENDMENTS TO THE ORDINANCES The City may, without the consent of or notice to any registered owners, from time to time and at any time, amend either or both Ordinances in any manner not detrimental to the interests of the registered owners, including the curing of any ambiguity, inconsistency, or formal defect or omission therein. In addition, the City may, with the consent of registered owners holding a majority in aggregate principal amount of the Bonds or Certificates, respectively, then Outstanding, amend, add to, or rescind any of the provisions of the respective Ordinance; provided that, without the consent of all registered owners of Outstanding Bonds or Certificates, as the case may be, affected, no such amendment, addition, or rescission may (1) change the date specified as the date on which the principal of or any installment of interest on any such Obligation is due and payable, reduce the principal amount thereof, or the rate of interest thereon, change the place or places at or the coin or currency in which any such Obligation or interest thereon is payable, or in any other way modify the terms of payment of the principal of or interest on any such Obligation, (2) give any preference to any Obligation over any other Obligation, or (3) reduce the aggregate principal amount of Obligations required for consent to any amendment, addition, or waiver. TAX INFORMATION AD VALOREM TAX LAW The appraisal of property within the City is the responsibility of the McLennan County Appraisal District (the "Appraisal District"). Excluding agricultural and open-space land, which may be taxed on the basis of productive capacity, the Appraisal District is required under the Property Tax Code (as hereinafter defined) to appraise all property within the Appraisal District on the basis of 100% of its market value and is prohibited from applying any assessment ratios. In determining market value of property, different methods of appraisal may be used, including the cost method of appraisal, the income method of appraisal and market data comparison method of appraisal, and the method considered most appropriate by the chief appraiser is to be used. Regardless of whether the appraisal office has appraised the property and determined the market value of the property for the tax year, state law limits the appraised value of a 15

16 residence homestead for a tax year to an amount not to exceed the lesser of (1) the market value of the property for the most recent tax year that the market value was determined by the appraisal office; or (2) the sum of (a) 10 percent of the appraised value of the property for the preceding tax year, plus (b) the appraised value of the property for the preceding tax year, plus (c) the market value of all new improvements to the property. The value placed upon property within the Appraisal District is subject to review by an Appraisal Review Board, consisting of at least three members appointed by the Board of Directors of the Appraisal District. The Appraisal District is required to review the value of property within the Appraisal District at least every three years. The City may require annual review at its own expense, and is entitled to challenge the determination of appraised value of property within the City by petition filed with the Appraisal Review Board. Reference is made to the Texas Property Tax Code, V.T.C.A. (the "Property Tax Code"), for identification of property subject to taxation; property exempt or which may be exempted from taxation, if claimed; the appraisal of property for ad valorem taxation purposes; and the procedures and limitations applicable to the levy and collection of ad valorem taxes. Article VIII of the State Constitution ("Article VIII") and State law provide for certain exemptions from property taxes, the valuation of agricultural and open-space lands at productivity value, and the exemption of certain personal property from ad valorem taxation. Under Article VIII, Section 1-b and State law, the governing body of a political subdivision, at its option, may grant: (1) an exemption of not less than $3,000 of the market value of the residence homestead of persons 65 years of age or older and the disabled from all ad valorem taxes thereafter levied by the political subdivision; and (2) an exemption of up to 20% of the market value of residence homesteads. The minimum exemption under this provision is $5,000. As of January 1, 2004, under Article VIII, Section 1-b(h) and State law, a city at its option may provide for a prohibition on increasing the total ad valorem tax, except for increases attributable to certain improvements, on the residence homestead of a disabled person or person 65 years of age or older above the amount of tax imposed in the later of (1) the year such residence qualified for an exemption based on the disability or age of the owner or (2) the year the city chooses to establish the tax limitation. The above-referenced tax limitation is transferable to (1) a different residence homestead within a city and (2) to a surviving spouse living in such homestead who is disabled or is at least 55 years of age. On the receipt of a petition signed by five percent of the registered voters of the City, the City shall call an election to determine by majority vote whether to establish such a tax limitation. If improvements (other than maintenance or repairs) are made to the property, the value of the improvements is taxed at the then current tax rate, and the total amount of taxes imposed is increased to reflect the new improvements with the new amount of taxes then serving as the ceiling on taxes for the following years. Once established, the tax limitation may not be repealed or rescinded. In the case of residence homestead exemptions granted under Article VIII, Section 1-b, ad valorem taxes may continue to be levied against the value of homesteads exempted where ad valorem taxes have previously been pledged for the payment of debt if cessation of the levy would impair the obligation of the contract by which the debt was created. State law and Article VIII, Section 2 mandate an additional property tax exemption for disabled veterans or the surviving spouse or children of a deceased veteran who died while on active duty in the armed forces; the exemption applies to either real or personal property with the amount of assessed valuation exempted ranging from $5,000 to a maximum of $12,000. Article VIII provides that eligible owners of both agricultural land (Section 1-d) and open-space land (Section 1-d-1), including open-space land devoted to farm or ranch purposes or open-space land devoted to timber production, may elect to have such property appraised for property taxation on the basis of its productive capacity. The same land may not be qualified under both Section 1-d and 1-d-1. Nonbusiness personal property, such as automobiles or light trucks, are exempt from ad valorem taxation unless the governing body of a political subdivision elects to tax this property. Boats owned as nonbusiness property are exempt from ad valorem taxation. Article VIII, Section 1-j provides for "freeport property" to be exempted from ad valorem taxation. Freeport property is defined as goods detained in Texas for 175 days or less for the purpose of assembly, storage, manufacturing, processing or fabrication. Decisions to continue to tax may be reversed in the future; decisions to exempt freeport property are not subject to reversal. Under Section of the Texas Tax Code, "goods-in-transit" are exempt from taxation unless a taxing unit opts out of the exemption. Goods-in-transit are defined as tangible personal property that: (i) is acquired in or imported into the state to be forwarded to another location in the state or outside the state; (ii) is detained at a location in the state in which the owner of the property does not have a direct or indirect ownership interest for assembling, storing, manufacturing, processing, or fabricating purposes by the person who acquired or imported the property; (iii) is transported to another location in the state or outside the state not later than 175 days after the date the person acquired the property in or imported the property into the state; and (iv) does not include oil, natural gas, petroleum products, aircraft, dealer s motor vehicle inventory, dealer s vessel and outboard motor inventory, dealer s heavy equipment inventory, or retail manufactured housing inventory. Article VIII, Section 1-1, provides for the exemption from ad valorem taxation of certain property used to control the pollution of air, water, or land. A person is entitled to an exemption from taxation of all or part of real and personal property that the person owns and that is used wholly or partly as a facility, device or method for the control of air, water or land pollution. 16

17 The City and the other taxing bodies within its territory may agree to jointly create tax increment reinvestment zones, as more particularly described under "- TAX INCREMENT REINVESTMENT ZONES" below. The City also may enter into tax abatement agreements to encourage economic development. Under the agreements, a property owner agrees to construct certain improvements on its property. The City in turn agrees not to levy a tax on all or part of the increased value attributable to the improvements until the expiration of the agreement. An abatement agreement could last for a period of up to 10 years. Cities are also authorized, pursuant to Chapter 380, Texas Local Government Code, as amended ("Chapter 380"), to establish programs to promote state or local economic development and to stimulate business and commercial activity in the city. In accordance with a program established pursuant to Chapter 380, a city may make loans or grants of public funds for economic development purposes, however no obligations secured by ad valorem taxes may be issued for such purposes unless approved by voters of the city. EFFECTIVE TAX RATE AND ROLLBACK TAX RATE By each September 1 or as soon thereafter as practicable, the City Council adopts a tax rate per $100 taxable value for the current year. The City Council is required to adopt the annual tax rate for the City before the later of September 30 or the 60 th day after the date the certified appraisal roll is received by the City. If the City Council does not adopt a tax rate by such required date the tax rate for that tax year is the lower of the effective tax rate calculated for that tax year or the tax rate adopted by the City for the preceding tax year. The tax rate consists of two components: (1) a rate for funding of maintenance and operation expenditures, and (2) a rate for debt service. Under the Property Tax Code, the City must annually calculate and publicize its "effective tax rate" and "rollback tax rate". A tax rate cannot be adopted by the City Council that exceeds the lower of the rollback tax rate or the effective tax rate until two public hearings are held on the proposed tax rate following a notice of such public hearing (including the requirement that notice be posted on the City s website if the City owns, operates or controls an internet website and public notice be given by television if the City has free access to a television channel) and the City Council has otherwise complied with the legal requirements for the adoption of such tax rate. If the adopted tax rate exceeds the rollback tax rate, the qualified voters of the City by petition may require that an election be held to determine whether or not to reduce the tax rate adopted for the current year to the rollback tax rate. However, taxes levied for the payment of debt (such as the Obligations) are not subject to rollback. "Effective tax rate" means the rate that will produce last year's total tax levy (adjusted) from this year's total taxable values (adjusted). "Adjusted" means lost values are not included in the calculation of last year's taxes and new values are not included in this year's taxable values. "Rollback tax rate" means the rate that will produce last year's maintenance and operation tax levy (adjusted) from this year's values (adjusted) multiplied by 1.08 plus a rate that will produce this year's debt service from this year's values (unadjusted) divided by the anticipated tax collection rate. The Property Tax Code provides that certain cities and counties in the State may submit a proposition to the voters to authorize an additional one-half cent sales tax on retail sales of taxable items. If the additional tax is levied, the effective tax rate and the rollback tax rate calculations are required to be offset by the revenue that will be generated by the sales tax in the current year. Reference is made to the Property Tax Code for definitive requirements for the levy and collection of ad valorem taxes and the calculation of the various defined tax rates. PROPERTY ASSESSMENT AND TAX PAYMENT Property within the City is generally assessed as of January 1 of each year. Business inventory may, at the option of the taxpayer, be assessed as of September 1. Oil and gas reserves are assessed on the basis of a valuation process which uses an average of the daily price of oil and gas for the prior year. Taxes become due October 1 of the same year, and become delinquent on February 1 of the following year. Taxpayers 65 years of age or older and disabled taxpayers other than veterans are permitted by State law to pay taxes on homesteads in four installments with the first installment due before February 1 of each year and the final installment due before August 1. PENALTIES AND INTEREST... Charges for penalty and interest on the unpaid balance of delinquent taxes are made as follows: Cumulative Cumulative Month Penalty Interest Total February 6% 1% 7% March April May June July

18 After July, the penalty remains at 12%, and interest increases at the rate of 1% each month. In addition, if an account is delinquent in July, a 15% attorney's collection fee is added to the total tax penalty and interest charge. On their homestead, an individual who is 65 years of age or older or is disabled may defer collection of taxes, abate a suit to collect a delinquent tax, or abate a sale to foreclose a tax lien, and during the deferral or abatement will be charged interest at the rate of 8% per annum with no additional penalties. In general, property subject to the City's lien may be sold, in whole or in parcels, pursuant to court order to collect the amounts due. Federal law allows for the collection of interest and reasonable fees, costs or charges on the unpaid balance of delinquent taxes on estates in bankruptcy. Federal bankruptcy law provides that an automatic stay of action by creditors and other entities, including governmental units, goes into effect with the filing of any petition in bankruptcy. The automatic stay prevents governmental units from foreclosing on property and prevents liens for post-petition taxes from attaching to property and obtaining secured creditor status unless, in either case, an order lifting the stay is obtained from the bankruptcy court. In many cases post-petition taxes are paid as an administrative expense of the estate in bankruptcy or by order of the bankruptcy court. CITY APPLICATION OF PROPERTY TAX CODE The City grants an exemption of $5,000 to the market value of the residence homestead of persons 65 years of age or older. See "TABLE 1 - VALUATION, EXEMPTIONS AND GENERAL OBLIGATION DEBT." The City does not grant an exemption to the market value of the residence homestead of the disabled. The City grants an additional exemption of 10% of the market value of residence homesteads. The City does not tax non-business personal property or "freeport property." The City does, however, tax "goods-intransit." The City does not permit split payments, and discounts are not allowed. The City does collect the additional one-half cent sales tax for reduction of ad valorem taxes. The City has adopted a tax abatement policy as described below. TAX ABATEMENT POLICY The City has established industrial, commercial and residential tax abatement programs to encourage economic development and single-family housing investment. To be considered for industrial or commercial tax abatement, a project must meet several criteria pertaining to job creation and property value enhancement. Single-family housing projects resulting in property value enhancement via new construction or improvements to existing properties in designated areas may qualify for residential tax abatement. The value of property subject to abatement is shown in "TABLE 1 - VALUATION, EXEMPTIONS AND GENERAL OBLIGATION DEBT." TAX INCREMENT REINVESTMENT ZONES Article VIII, Section 1-g of the State Constitution and Chapter 311, Texas Tax Code, as amended (the "Act"), authorize municipalities in the State to issue tax increment bonds or notes, payable from the tax increment fund established for a reinvestment zone. In 1982, 1983, and 1986, the City Council adopted separate ordinances which created tax increment reinvestment zones number 1 ("Zone No.1"), 2 ("Zone No.2") and 3 ("Zone No.3", and, together with Zone No. 1 and Zone No. 2, collectively referred to as the "Zones") pursuant to the Act, by designation of contiguous geographic areas in the jurisdiction of the boundaries of the Zones, created a board of directors for each of the Zones, established tax increment funds for each of the Zones, adopted bylaws for each of the Zones and found that public works and improvements to be undertaken in the Zones would significantly enhance the value of all taxable real property in the Zones and would generally benefit the City. Ad valorem tax collections attributable to increases in the value of taxable property in the Zones are restricted to financing improvements in the Zones. The City projects a life for the Zones of 40 years from creation. The City established tax increment funds (the "Funds" or, for Zone No. 1, the "Zone No. 1 Fund") in the separate ordinances creating the Zones. Each participating taxing unit that levies real property taxes in the Zones provides for the collection of ad valorem taxes on real property in the Zones, as for any other property taxed by the participating taxing unit and pays into the Funds an amount equal to the tax increment produced (the "Tax Increment"), less the sum of ad valorem taxes produced from the Tax Increments that are, by contract executed before the designation of the area as a reinvestment zone, required to be paid by the taxing unit to another political subdivision. The amount of a tax unit s Tax Increment for a year is the amount of property taxes levied by the taxing unit for that year on the Captured Appraised Value of real property taxable by the taxing unit and located in the Zones. The Captured Appraised Value of real property taxable by a taxing unit for a year is the total appraised value of the property for that year less the tax increment base of the taxing unit, such tax increment base being the total appraised value of all real property taxable by the taxing unit and located in the Zone for the year in which the Zone was established. The Zones have no authority to levy taxes and must look to each taxing unit to levy taxes as indicated above. The taxing units that levy ad valorem taxes in the Zones and participate in the Zones are: the City, McLennan County, Waco Independent School District and McLennan County Junior College District. The City has previously issued $4,990,000 of general obligation debt to pay for projects in Zone No. 1, of which $615,000 remains outstanding. The debt service on this portion of the outstanding debt has been internally allocated by the City as being paid from tax increment revenues in the Zone No. 1 Fund. Revenues in the Zone No. 1 Fund are not pledged to such debt and there is no guarantee that payments from the Zone No. 1 Fund will be made. If payments are not made from the Zone No. 1 Fund, the City would be required to levy ad valorem taxes in amounts sufficient to make such payments. 18

19 The Zones were created to encourage physical and economic development along the Brazos River ("Brazos River Corridor"). Two of the three Zones have experienced development activity. Zone No. 1 extends along MLK Jr. Boulevard from Chapel Hill/Gurley Lane to Waco Drive, from MLK Jr. Boulevard along Elm Avenue to Garrison Street and Forrest Street. and from Herring Avenue up to Lake Shore Drive. It comprises most of the urban section of the Brazos River Corridor, venturing down into the Central Business District between IH35 and Waco Drive, then returning toward the river just north of Waco Drive to include 4th Street, Cameron Park and portions of McLennan Community College. Established in 1982 in anticipation of mixed use development, the Zone No. 1 Fund currently generates approximately $5,300,000 annually according to the City. Economic development in Zone No. 1 has accelerated due to the consolidation of State offices in the area, the rejuvenation efforts in the downtown area, the construction of new restaurants, a Marriott Residence Inn and a Courtyard Hotel in the convention center area, bicycle and pedestrian trail improvements and improvements to City conference and convention facilities in connection with redevelopment of the Hilton Hotel. Income from Zone No. 1 is currently being used to continue downtown rejuvenation projects, to extend bicycle and pedestrian trails along the Brazos River and to facilitate several commercial and residential development projects in the downtown area and 4 th & 5 Streets corridor. In its most extensive project to date, the TIF Zone No. 1 Fund will expend a total of approximately $36 million over a 10-year period to assist with public infrastructure improvements related to the new football stadium at Baylor University. Additional improvements are needed to continue and accelerate growth in the Zone. Zone No. 2, established in 1983, includes an area along MLK Jr. Boulevard that is adjacent to the northern boundaries of Zone No. 1 along the Brazos River. Some commercial and residential development has occurred in Zone No. 2, which Zone extends along MLK Jr. Boulevard from Waco Drive to Herring Avenue. The moderate income generated by Zone No. 2 has been used to reconstruct a section of MLK Jr. Boulevard, to partially fund the construction of a bicycle and pedestrian trail along the Brazos River and to assist with public infrastructure to facilitate construction of the River Park Apartment Homes on MLK Jr. Boulevard. Zone No. 3 was established in 1986 in anticipation of commercial, office, residential and recreational development. Zone No. 3 encompasses the northeast intersection of Lake Shore Drive and North 19th Street. No development activity has occurred in Zone No. 3. When a tax increment reinvestment zone is established, a Board of Directors is appointed by the participating taxing entities to oversee the development of project and financing plans for the zone and to act in an advisory capacity concerning development activity and expenditure of tax increment funds in the zone. The Board for the Zones consists of five members appointed by the City Council and one member appointed by each participating taxing entity (McLennan County, Waco Independent School District and McLennan County Junior College District), for a total of eight members. Recommendations for projects originate with the Board of Directors and go to the City Council for final approval. 19

20 TABLE 1 - VALUATION, EXEMPTIONS AND GENERAL OBLIGATION DEBT 2012/2013 Market Valuation Established by McLennan County Appraisal District $ 7,590,718,292 (excluding totally exempt property) Less Exemptions/Reductions at 100% Market Value: Homestead $ 236,001,635 Over 65 Homesteads 34,410,013 Disabled Veterans 44,520,403 Agricultural Land Use/Timber Productivity Loss 60,026,584 Fiscal Abatements 137,849,976 Freeport Loss 335,147,535 Pollution Control 14,411,429 Limited Value 61,990,875 Historical 10,601,679 Charitable 1,915,626 Miscellaneous 1,974, ,850, /2013 Taxable Assessed Valuation $ 6,651,867,637 General Obligation Debt (as of 2/1/13) (1)(2) Combination Tax & Revenue Certificates of Obligation $ 124,230,000 General Obligation Bonds 129,335,000 The Certificates 11,880,000 The Bonds 43,660,000 $ 309,105,000 City's Self-Supporting General Obligation Debt (as of 2/1/13) (2) Water System General Obligation Debt $ 151,500,286 Sewer System General Obligation Debt 61,149,571 Solid Waste System General Obligation Debt 5,640,000 Tax Increment Zone 1 General Obligation Debt 615,000 $ 218,904,857 Net General Obligation Debt Payable from Ad Valorem Taxes $ 90,200,143 Ratio of Net General Obligation Debt to Taxable Assessed Valuation 1.36% 2013 Estimated Population - 128,336 (3) Per Capita Taxable Assessed Valuation - $51,832 Per Capita Funded Debt - $703 (1) In the past several years, the City has sold combination tax and revenue certificates of obligation to finance projects for the City s water system, sewer system, airport system, tax increment zones and solid waste system and has internally allocated portions of this debt as payable from the respective enterprise funds or tax increment zone fund. The self-supporting amounts listed above are projections of debt that is expected to be retired by the City based on actual historical payments from these funds to pay for debt service on the outstanding certificates of obligation. There is no guarantee that payments from these funds will continue in the future. If payments are not made from such sources in the future, the City will be required to levy ad valorem taxes in amounts sufficient to make such payments. Also, the above schedule of indebtedness does not include $1,356,000 of special assessment revenue bonds, as such bonds are payable solely from property owner assessments and do not represent a general obligation of the City. See "TABLE 10 SELF-SUPPORTING DEBT." (2) Includes the Obligations and excludes the Refunded Obligations. (3) Source: The City. 20