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Ord 805 Amending Ordinance 800 Authorizing the Issuance General Obligation Refunding Bonds Series 2017
TOWN OF WESTLAKE ORDINANCE 805 ORDINANCE BY THE TOWN COUNCIL OF TOWN OF WESTLAKE, TEXAS, AMENDING ORDINANCE 800, AUTHORIZING THE ISSUANCE OF THE TOWN OF WESTLAKE, TEXAS, GENERAL OBLIGATION REFUNDING BONDS, SERIES 2017, AND ENACTING OTHER PROVISIONS RELATED TO THE SUBJECT WHEREAS, the Town Council (the "Council") of the Town of Westlake, Texas (the "Town") previously adopted an ordinance authorizing the issuance of its General Obligation Refunding Bonds, Series 2017 (the "Bonds") on October 24, 2016 (the "Bond Ordinance"); and WHEREAS, the Council desires to amend certain provisions of the Bond Ordinance to change the minimum present value savings parameter for the Bonds; and WHEREAS, any capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the Bond Ordinance; and WHEREAS, the meeting at which this Ordinance is considered is open to the public as required by law, and the public notice of the time, place and purpose of said meeting was given as required by Chapter 551, Texas Government Code, as amended; NOW, THEREFORE, BE IT ORDAINED BY THE TOWN COUNCIL OF THE TOWN OF WESTLAKE,TEXAS: SECTION l: Bond Ordinance Amendment. Pursuant to Section 14(a) of the Bond Ordinance, Section 3(a)(iv) of the Bond Ordinance is hereby amended and restated in its entirety as follows: "(iv) the refunding achieved by the Bonds of must produce debt service savings of at least 3.5%measured on a present value basis as a percentage of the principal amount of the Refunded Obligations, with such savings to be net of any Issuer contribution to the refunding." The amendment shall be effective as of the date hereof. SECTION 2: Further Procedures. The Mayor, the Mayor Pro Tem, the Town Manager and the Town Secretary, individually or jointly, shall be and are hereby authorized and directed to furnish and execute such documents, instruments and certifications relating to the Town and the amendment of the Bond Ordinance, including certifications as to facts, estimates, circumstances and reasonable expectations, and to make or approve such revisions, additions, deletions and variations to this Ordinance as may be necessary or convenient to carry out or assist in carrying out the intent and -- -- --purposes-of-this_Ordinance,_or as_maybe necessary to correct any-ambiguity or mistake or properly or more completely document the transactions contemplated and approved by this Ordinance. In addition, the statements, findings, representations, and determinations set forth in the recitals to this Ordinance are hereby incorporated into and made a part of this Ordinance for all purposes. Ordinance 805 Page 1 of 2 SECTION 3: This ordinance shall take effect immediately from and after its passage as the law in such case provides. PASSED AND APPROVED ON THIS 5T" DAY OF DECEMBER, 2016. Al, ATTEST: Laura Wheat, Mayor Kell Edw6Ms, Town Secretary Thomas E. Bryme : own Manager APPROVED AS TO FORM: OF WEST. nton Lowry own orney 7"EXP�a Ordinance 805 Page 2 of 2 TRANSCRIPT OF I RELATING TO $5, 795,000 Town of Westlake, Texas General Obligation Refunding Bonds, Series 2017 DATE OF DELIVERY February 7, 2017 MCCALL PARKHURST & HORTON 717 North Harwood, Suite 900, Dallas, TX 75201 I 214.754.9200 CONTACT Chris Settle 214.754.9237 Transcript ql'Proceedings Town of Westlake, Texas, General Obligation Refunding Bonds, Series 2017 Document Tab Certified Ordinance Authorizing the Issuance Ofthe Bonds........................................ \ Certified Amending Ordinance..................................................................................... 2 Pricing Certifico10---------------------------..-------. 3 Bond Purchase Agreeozco1..-------.--------.----.----.—.---. 4 EscrowAgreement........................................................................................................ 5 Signature Identification and Authority Certificate OfEscrow Agent........................... 6 IdentificationSignature and General Certificate .......................................................... 7 Paying Agent/Registrar Agreement.............................................................................. 8 Verification Report--.-------.------------.----.------- 9 Preliminary Official Statement..................................................................................... }O Final Official Statement................................................................................................ | } Closing Ccztifioate..--.-------------.----'------.-------. 12 FederalTax Certificate ................................................................................................. 13 Form@038-G................................................................................................................. 14 Attorney General Opinion and Comptroller Registration CertifiCabe........................... 15 OpinionOfBond Counsel ............................................................................................. 16 Supplemental Opinion o[Bond Counsel ...................................................................... 17 Opinion of COouSe!------.-----.--------.—.---.—. 10 Rating [fttez------------------------------.-------. 19 Receipt and Disbursement ofFunds............................................................................. 20 CERTIFICATE FOR ORDINANCE THE STATE OF TEXAS COUNTIES OF TARRANT AND DENTON TOWN OF WESTLAKE We, the undersigned officers of the Town of Westlake, Texas (the "Town"), hereby certify as follows: 1. The Town Council (the "Council') of the Town convened in a regular meeting on October 24, 2016, at the regular designated meeting place, and the roll was called of the duly constituted officers and members of the Council, to wit: Laura Wheat, Mayor Carol Langdon, Mayor Pro Tem Michael Barrett,Council Member Alesa Belvedere, Council Member Wayne Stoltenberg, Council Member Rick Rennhack,Council Member Kelly Edwards,Town Secretary and all of said persons were present except Michael Barrett, thus constituting a quorum. Whereupon, among other business the following was transacted at said meeting: a written ORDINANCE AUTHORIZING THE ISSUANCE OF GENERAL OBLIGATION REFUNDING BONDS, SERIES 2017, ESTABLISHING SALE PARAMETERS, PROVIDING FOR THE SECURITY FOR AND PAYMENT OF SAID BONDS; AND ENACTING OTHER PROVISIONS RELATING TO THE SUBJECT was duly introduced for the consideration of the Council. It was then duly moved and seconded that said Ordinance be passed; and, after due discussion, said motion, carrying with it the passage of said Ordinance, prevailed and carried, with all members of the Council shown present above voting "Aye," except as noted below: NAYS: 0 ABSTENTIONS: 0 2. A true, full, and correct copy of the aforesaid Ordinance passed at the meeting described in the above and foregoing paragraph is attached to and follows this Certificate; said Ordinance has been duly recorded in the Council's minutes of said meeting; the above and foregoing paragraph is a true, full, and correct excerpt from the Council's minutes of said meeting pertaining to the passage of said Ordinance; the persons named in the above and foregoing paragraph are the duly chosen, qualified, and acting officers and members of the Council as indicated therein; that each of the officers and members of the Council was duly and sufficiently notified officially and personally, in advance, of the time, place, and purpose of the aforesaid meeting, and that said Ordinance would be introduced and considered for passage at said meeting, and each of said officers and members consented, in advance, to the holding of said meeting for such purpose; and that said meeting was open to the public, and public notice of the time, place, and purpose of said meeting was given all as required by the Texas Government Code, Chapter 551. 3. The Council has approved and hereby approves the aforesaid Ordinance; and the Mayor and the Town Secretary of the Town hereby declare that their signing of this Certificate shall constitute the signing of the attached and following copy of said Ordinance for all purposes. SIGNED AND SEALED ON OCTOBER 24, 2016. 4,,'Luw��Cj 1,0 , -)L Tow Secr to Mayor (Town Seal) �O••riN dF WFC, m rFX'A S• ORDINANCE OF THE TOWN COUNCIL Of TOWN OF WESTLAKE,TEXAS AUTHORIZING THE ISSUANCE OF TOWN OF WESTLAKE,TEXAS, GENERAL OBLIGATION REFUNDING BONDS, SERIES 2017 Table of Contents Section 1. Recitals, Amount, Purpose and Designation of the Bonds............................................2 Section2. Definitions......................................................................................................................2 Section 3. Delegation to Pricing Officer.........................................................................................2 Section 4. Characteristics of the Bonds..........................................................................................4 Section5. Form of Bonds...............................................................................................................8 Section6. Tax Levy........................................................................................................................9 Section 7. Defeasance of Bonds......................................................................................................9 Section 8. Damaged, Mutilated, Lost, Stolen, or Destroyed Bonds.............................................11 Section 9. Custody, Approval, and Registration of Bonds; Bond Counsel's Opinion; CUSIP Numbers and Contingent Insurance Provision, if Obtained..............................................12 Section 10. Covenants Regarding Tax Exemption of Interest on the Bonds................................12 Section 11. Sale of Bonds; Official Statement......................................................................... 15 Section 12. Further Procedures; Engagement of Bond Counsel; Attorney General Filing Fee; Appropriation.....................................................................................................................15 Section 13. Compliance with Rule 15c2-12 .................................................................................16 Section 14. Method of Amendment..............................................................................................19 Section 15. Redemption of Refunded Obligations .......................................................................21 Section 16. Governing Law..........................................................................................................21 Section17. Severability................................................................................................................22 Section 18. Events of Default.......................................................................................................22 Section 19. Remedies for Default.................................................................................................22 Section 20. Remedies Not Exclusive............................................................................................22 Section 21. Effective Date............................................................................................................23 Schedule I Schedule of Eligible Refunded Obligations.............................................................S-1 ExhibitA Form of Bonds.........................................................................................................A-1 Exhibit B Notice of Defeasance and Redemption....................................................................B-1 ORDINANCE AUTHORIZING THE ISSUANCE OF GENERAL OBLIGATION REFUNDING BONDS, SERIES 2017, ESTABLISHING SALE PARAMETERS, PROVIDING FOR THE SECURITY FOR AND PAYMENT OF SAID BONDS; AND ENACTING OTHER PROVISIONS RELATING TO THE SUBJECT THE STATE OF TEXAS § COUNTIES OF TARRANT AND DENTON § TOWN OF WESTLAKE,TEXAS § WHEREAS, the Town of Westlake, Texas (the "Issuer"), has previously issued, and there are presently outstanding, obligations of the Issuer payable from ad valorem taxes levied and to be levied, assessed and collected within the Issuer, within the limits prescribed by law, and from waterworks and sewer system revenues; and WHEREAS, the Issuer now desires to refund all or part of the bonds described in Schedule I attached hereto, collectively, the "Eligible Refunded Obligations", and those Eligible Refunded Obligations designated by the Pricing Officer in the Pricing Certificate, each as defined below,to be refunded are herein referred to as the "Refunded Obligations"; and WHEREAS, Chapter 1207, Texas Government Code ("Chapter 1207"), authorizes the Issuer to issue refunding bonds and to deposit the proceeds from the sale thereof, and any other available funds or resources, directly with a place of payment (paying agent) for the Refunded Obligations, and such deposit, if made before such payment dates, shall constitute the making of firm banking and financial arrangements for the discharge and final payment of the Refunded Obligations; and WHEREAS, the Town Council (the "Council") of the Issuer hereby finds and determines that it is a public purpose and in the best interests of the Issuer to refund the Refunded Obligations in order to achieve a present value debt service savings, with such savings, among other information and terms to be included in a pricing certificate(the "Pricing Certificate")to be executed by the Pricing Officer(hereinafter designated), all in accordance with the provisions of Section 1207.007,Texas Government Code; and WHEREAS, all the Refunded Obligations mature or are subject to redemption prior to maturity within 20 years of the date of the bonds hereinafter authorized; and WHEREAS, the bonds hereafter authorized are being issued and delivered pursuant to said Chapter 1207; and WHEREAS, it is officially found, determined and declared that the meeting at which this Ordinance has been adopted was open to the public, and public notice of the date, hour, place and subject of said meeting, including this Ordinance, was given, all as required by the applicable provisions of Tex. Gov't Code Ann. ch. 551; 1 NOW, THEREFORE BE IT ORDAINED BY THE TOWN COUNCIL OF THE TOWN OF WESTLAKE,TEXAS: Section 1. RECITALS, AMOUNT, PURPOSE AND DESIGNATION OF THE BONDS. (a) The recitals set forth in the preamble hereof are incorporated herein and shall have the same force and effect as if set forth in this Section. (b) The bonds of the Issuer are hereby authorized to be issued and delivered in the maximum aggregate principal amount hereinafter set forth for the public purpose of providing funds to refund a portion of the Issuer's outstanding indebtedness, and to pay the costs incurred in connection with the issuance of the Bonds. (c) Each bond issued pursuant to this Ordinance shall be designated (unless otherwise provided in the Pricing Certificate): "TOWN OF WESTLAKE, TEXAS, GENERAL OBLIGATION REFUNDING BOND, SERIES 2017," and initially there shall be issued, sold, and delivered hereunder fully registered Bonds, without interest coupons, payable to the respective registered owners thereof (with the initial bonds being made payable to the initial purchaser as described in Section 11 hereof), or to the registered assignee or assignees of said bonds or any portion or portions thereof(in each case, the "Registered Owner"). The Bonds shall be in the respective denominations and principal amounts, shall be numbered, shall mature and be payable on the date or dates in each of the years and in the principal amounts or amounts due at maturity, as applicable, and shall bear interest to their respective dates of maturity or redemption, if applicable, prior to maturity at the rates per annum, as set forth in the Pricing Certificate. Section 2. DEFINITIONS. Unless otherwise expressly provided or unless the context clearly requires otherwise in this Ordinance, the following terms shall have the meanings specified below: "Bonds" means and includes the Bonds initially issued and delivered pursuant to this Ordinance and all substitute Bonds exchanged therefor, as well as all other substitute bonds and replacement bonds issued pursuant hereto, and the term "Bond" shall mean any of the Bonds. "Issuance Date" shall mean the date of delivery of the Bonds to the initial purchaser or purchasers thereof against payment therefor. "State" shall mean the State of Texas. Section 3. DELEGATION TO PRICING OFFICER. (a) As authorized by Section 1207.007, Texas Government Code, the Town Manager and Finance Director of the Issuer are each individually authorized to act on behalf of the Issuer in selling and delivering the Bonds (of which officers,the officer executing the Pricing Certificate shall be hereinafter referred to as, and 2 shall for all purposes be, the "Pricing Officer"), determining which of the Eligible Refunded Obligations shall be refunded and carrying out the other procedures specified in this Ordinance, including, determining the date of the Bonds, any additional or different designation or title by which the Bonds shall be known, the price at which the Bonds will be sold, the years in which the Bonds will mature, the principal amount to mature in each of such years, the rate of interest to be borne by each such maturity, the interest payment and record dates, the price and terms, if any, upon and at which the Bonds shall be subject to redemption prior to maturity at the option of the Issuer, as well as any mandatory sinking fund redemption provisions, approving modifications or additions to the Rule 15c2-12 continuing disclosure undertaking, and all other matters relating to the issuance, sale, and delivery of the Bonds and the refunding of the Refunded Obligations, including without limitation establishing the redemption date for and effecting the redemption of the Refunded Obligations, determining any amounts to be contributed to the refunding by the Issuer and procuring municipal bond insurance and approving modifications to this Ordinance and executing such instruments, documents and agreements as may be necessary with respect thereto, if it is determined that such insurance would be financially desirable and advantageous, all of which shall be specified in the Pricing Certificate, provided that: (i)the aggregate original principal amount of the Bonds shall not exceed$6,500,000; (ii)no Bond shall mature after February 15, 2032; (iii)the net interest cost for the Bonds shall not exceed 3.50%; and (iv)the refunding achieved by the Bonds of must produce debt service savings of at least 10% measured on a present value basis as a percentage of the principal amount of the Refunded Obligations, with such savings to be net of any Issuer contribution to the refunding. (b) In establishing the aggregate principal amount of the Bonds, the Pricing Officer shall establish an amount not exceeding the amount authorized in Subsection(a) above,which shall be sufficient in amount to provide for the purposes for which the Bonds are authorized and to pay costs of issuing the Bonds. The delegation made hereby shall expire if not exercised by the Pricing Officer on or prior to the date that is 180 days after the adoption of this Ordinance. The Bonds shall be sold at such price, with and subject to such terms as set forth in the Pricing Certificate. (c) The Bonds may be sold by public offering (either through a negotiated or competitive offering) or by private placement. If the Bonds are sold by private placement, the Pricing Certificate shall so state, and the Pricing Certificate may make changes to this Ordinance to effect such private placement, including the provisions hereof that pertain to the book-entry-only procedures (including eliminating the book-entry-only system of registrations, payment and transfers) and to the provisions of Section 13 hereof relating to the Rule 15c2-12 undertaking 3 (including eliminating or replacing such undertaking with an agreement to provide alternative disclosure information). (d) It is hereby found and determined that the refunding of the Refunded Obligations is advisable and necessary in order to restructure the debt service requirements of the Issuer, and that the debt service requirements on the Bonds will be less than those on the Refunded Obligations, resulting in a reduction in the amount of principal and interest which otherwise would be payable. The Refunded Obligations are subject to redemption, at the option of the Issuer, and the Pricing Officer is hereby authorized to cause all of the Refunded Obligations to be called for redemption on the respective date or dates consistent with the savings analysis set forth in Section 3(a)(iv) hereof, and the proper notices of such redemption to be given, and in each case at a redemption price of par, plus accrued interest to the date fixed for redemption. In furtherance of authority granted by Section 1207.007(b), Texas Government Code, the Pricing Officer is further authorized to enter into and execute on behalf of the Issuer with the escrow agent named therein, an escrow agreement or deposit agreement, in substantially the form presented to the Council at the meeting at which this Ordinance was adopted and as shall be approved by the Pricing Officer, which escrow agreement or deposit agreement will provide for the payment in full of the Refunded Obligations (the "Escrow Agreement"). In addition, the Pricing Officer is authorized to purchase such securities with proceeds of the Bonds, to execute such subscriptions for the purchase of the United States Treasury Securities, State and Local Government Series and to transfer and deposit such cash from available funds, as may be necessary or appropriate for the escrow or deposit fund described in the Escrow Agreement. (e) In satisfaction of Section 1201.022(a)(3)(B), Texas Government Code, the Council hereby determines that the delegation of the authority to the Pricing Officer to approve the final terms of the Bonds set forth in this Ordinance is, and the decisions made by the Pricing Officer pursuant to such delegated authority and incorporated into the Pricing Certificate will be, in the Issuer's best interests, and the Pricing Officer is hereby authorized to make and include in the Pricing Certificate a finding to that effect. Section 4. CHARACTERISTICS OF THE BONDS. (a) Registration, Transfer, Conversion and Exchange. The Issuer shall keep or cause to be kept at the designated office of the bank named in the Pricing Certificate as the paying agent/registrar for the Bonds(the "Paying Agent/Registrar"), books or records for the registration of the transfer, conversion and exchange of the Bonds (the "Registration Books"), and the Issuer hereby appoints the Paying Agent/Registrar as its registrar and transfer agent to keep such books or records and make such registrations of transfers, conversions and exchanges under such reasonable regulations as the Issuer and Paying Agent/Registrar may prescribe; and the Paying Agent/Registrar shall make such registrations, transfers, conversions and exchanges as herein provided within three days of presentation in due and proper form. The Paying Agent/Registrar shall obtain and record in the Registration Books the address of the registered owner of each Bond to which payments with respect to the Bonds shall be mailed, as herein provided; but it shall be the duty of each registered owner to notify the Paying Agent/Registrar in writing of the address to which 4 payments shall be mailed, and such interest payments shall not be mailed unless such notice has been given. The Issuer shall have the right to inspect the Registration Books during regular business hours of the Paying Agent/Registrar, but otherwise the Paying Agent/Registrar shall keep the Registration Books confidential and, unless otherwise required by law, shall not permit their inspection by any other entity. The Issuer shall pay the Paying Agent/Registrar's standard or customary fees and charges for making such registration, transfer, conversion, exchange and delivery of a substitute Bond or Bonds. Registration of assignments, transfers, conversions and exchanges of Bonds shall be made in the manner provided and with the effect stated in the FORM OF BOND set forth as Exhibit A of this Ordinance. Each substitute Bond shall bear a letter and/or number to distinguish it from each other Bond. (b) Authentication. Except as provided in Section 4(e) hereof, an authorized representative of the Paying Agent/Registrar shall, before the delivery of any such Bond, date and manually sign said Bond, and no such Bond shall be deemed to be issued or outstanding unless such Bond is so executed. The Paying Agent/Registrar promptly shall cancel all paid Bonds and Bonds surrendered for conversion and exchange. No additional ordinances, orders or resolutions need be passed or adopted by the governing body of the Issuer or any other body or person so as to accomplish the foregoing conversion and exchange of any Bond or portion thereof, and the Paying Agent/Registrar shall provide for the printing, execution and delivery of the substitute Bonds in the manner prescribed herein. Pursuant to Subchapter D, Chapter 1201, Texas Government Code, the duty of conversion and exchange of Bonds as aforesaid is hereby imposed upon the Paying Agent/Registrar, and, upon the execution of said Bond, the converted and exchanged Bond shall be valid, incontestable, and enforceable in the same manner and with the same effect as the Bonds which initially were issued and delivered pursuant to this Ordinance, approved by the Attorney General, and registered by the Comptroller of Public Accounts. (c) Payment of Bonds and Interest. The Issuer hereby further appoints the Paying Agent/Registrar to act as the paying agent for paying the principal of and interest on the Bonds, all as provided in this Ordinance. The Paying Agent/Registrar shall keep proper records of all payments made by the Issuer and the Paying Agent/Registrar with respect to the Bonds, and of all conversions and exchanges of Bonds, and all replacements of Bonds, as provided in this Ordinance. However, in the event of a nonpayment of interest on a scheduled payment date, and for thirty (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 Issuer. Notice of the Special Record Date and of the scheduled payment date of the past due interest(which shall be 15 days after the Special Record Date) shall be sent at least five (5) 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 Registration Books at the close of business on the last business day next preceding the date of mailing of such notice. 5 (d) Substitute Pang A eg nt/Registrar. The Issuer covenants with the registered owners of the Bonds that at all times while the Bonds are outstanding the Issuer will provide a competent and legally qualified bank, trust company, financial institution or other agency to act as and perform the services of Paying Agent/Registrar for the Bonds under this Ordinance, and that the Paying Agent/Registrar will be one entity. The Issuer reserves the right to, and may, at its option, change the Paying Agent/Registrar upon not less than 50 days written notice to the Paying Agent/Registrar, to be effective not later than 45 days prior to the next principal or interest payment date after such notice. In the event that the entity at any time acting as Paying Agent/Registrar (or its successor by merger, acquisition, or other method) should resign or otherwise cease to act as such, the Issuer covenants that promptly it will appoint a competent and legally qualified bank, trust company, financial institution, or other agency to act as Paying Agent/Registrar under this Ordinance. Upon any change in the Paying Agent/Registrar, the previous Paying Agent/Registrar promptly shall transfer and deliver the Registration Books (or a copy thereof), along with all other pertinent books and records relating to the Bonds, to the new Paying Agent/Registrar designated and appointed by the Issuer. Upon any change in the Paying Agent/Registrar, the Issuer promptly will cause a written notice thereof to be sent by the new Paying Agent/Registrar to each registered owner of the Bonds, by United States mail, first-class postage prepaid, which notice also shall give the address of the new Paying Agent/Registrar. By accepting the position and performing as such, each Paying Agent/Registrar shall be deemed to have agreed to the provisions of this Ordinance, and a certified copy of this Ordinance shall be delivered to each Paying Agent/Registrar. (e) General Characteristics of the Bonds. The Bonds (i) shall be issued in fully registered form, without interest coupons, with the principal of and interest on such Bonds to be payable only to the Registered Owners thereof, (ii) may be redeemed prior to their scheduled maturities (notice of which shall be given to the Paying Agent/Registrar by the Issuer at least 35 days prior to any such redemption date), (iii) may be transferred and assigned, (iv) may be converted and exchanged for other Bonds, (v) shall have the characteristics, (vi) shall be signed, sealed, executed and authenticated, (vii) the principal of and interest on the Bonds shall be payable, and(viii)shall be administered and the Paying Agent/Registrar and the Issuer shall have certain duties and responsibilities with respect to the Bonds, all as provided, and in the manner and to the effect as required or indicated, in the FORM OF BOND set forth as Exhibit A of this Ordinance. The Bonds initially issued and delivered pursuant to this Ordinance are not required to be, and shall not be, authenticated by the Paying Agent/Registrar, but on each substitute Bond issued in conversion of and exchange for any Bond or Bonds issued under this Ordinance the Paying Agent/Registrar shall execute the Paying Agent/registrar's Authentication Certificate, in the FORM OF BOND set forth as Exhibit A of this Ordinance. (f) Book-Entry-OnlySystem. Unless the Bonds are sold by private placement, the Bonds issued in exchange for the Bonds initially issued to the purchaser specified herein shall be initially issued in the form of a separate single fully registered Bond for each of the maturities thereof. Upon initial issuance, the ownership of each such Bond shall be registered in the name of Cede & Co., as nominee of The Depository Trust Company of New York ("DTC"), and 6 except as provided in subsection (g) hereof, all of the outstanding Bonds shall be registered in the name of Cede&Co., as nominee of DTC. With respect to Bonds registered in the name of Cede & Co., as nominee of DTC, the Issuer and the Paying Agent/Registrar shall have no responsibility or obligation to any securities brokers and dealers,banks,trust companies, clearing corporations and certain other organizations on whose behalf DTC was created ("DTC Participant") to hold securities to facilitate the clearance and settlement of securities transactions among DTC Participants or to any person on behalf of whom such a DTC Participant holds an interest in the Bonds. Without limiting the immediately preceding sentence, the Issuer and the Paying Agent/Registrar shall have no responsibility or obligation with respect to (i) the accuracy of the records of DTC, Cede &Co. or any DTC Participant with respect to any ownership interest in the Bonds, (ii) the delivery to any DTC Participant or any other person, other than a registered owner of Bonds, as shown on the Registration Books, of any notice with respect to the Bonds, or (iii) the payment to any DTC Participant or any other person, other than a registered owner of Bonds, as shown in the Registration Books of any amount with respect to principal of or interest on the Bonds. Notwithstanding any other provision of this Ordinance to the contrary, the Issuer and the Paying Agent/Registrar shall be entitled to treat and consider the person in whose name each Bond is registered in the Registration Books as the absolute owner of such Bond for the purpose of payment of principal and interest with respect to such Bond, for the purpose of registering transfers with respect to such Bond, and for all other purposes whatsoever. The Paying Agent/Registrar shall pay all principal of and interest on the Bonds only to or upon the order of the registered owners, as shown in the Registration Books as provided in this Ordinance, or their respective attorneys duly authorized in writing, and all such payments shall be valid and effective to fully satisfy and discharge the Issuer's obligations with respect to payment of principal of and interest on the Bonds to the extent of the sum or sums so paid. No person other than a registered owner, as shown in the Registration Books, shall receive a Bond certificate evidencing the obligation of the Issuer to make payments of principal and interest pursuant to this Ordinance. Upon delivery by DTC to the Paying Agent/Registrar of written notice to the effect that DTC has determined to substitute a new nominee in place of Cede & Co., and subject to the provisions in this Ordinance with respect to interest checks being mailed to the registered owner at the close of business on the Record Date, the words "Cede & Co." in this Ordinance shall refer to such new nominee of DTC. (g) Successor Securities Depository; Transfers Outside Book-Entry-Only System. If the Bonds are subject to the DTC book-entry system, and in the event that the Issuer determines that DTC is incapable of discharging its responsibilities described herein and in the representation letter of the Issuer to DTC or that it is in the best interest of the beneficial owners of the Bonds that they be able to obtain certificated Bonds, the Issuer shall (i) appoint a successor securities depository, qualified to act as such under Section 17A of the Securities and Exchange Act of 1934, as amended, notify DTC and DTC Participants of the appointment of such successor securities depository and transfer one or more separate Bonds to such successor securities depository or (ii) notify DTC and DTC Participants of the availability through DTC of Bonds 7 and transfer one or more separate Bonds to DTC Participants having Bonds credited to their DTC accounts. In such event, the Bonds shall no longer be restricted to being registered in the Registration Books in the name of Cede & Co., as nominee of DTC,but may be registered in the name of the successor securities depository, or its nominee, or in whatever name or names registered owners transferring or exchanging Bonds shall designate, in accordance with the provisions of this Ordinance. (h) Payments to Cede & Co. Notwithstanding any other provision of this Ordinance to the contrary, so long as any Bond is registered in the name of Cede & Co., as nominee of DTC, all payments with respect to principal of and interest on such Bond and all notices with respect to such Bond shall be made and given, respectively, in the manner provided in the representation letter of the Issuer to DTC. (i) Cancellation of Initial Bonds. On the Issuance Date, one initial Bond representing the entire principal amount of the Bonds, payable in stated installments to the order of the initial purchaser of the Bonds or its designee, executed by manual or facsimile signature of the Mayor and the Town Secretary, approved by the Attorney General of Texas, and registered and manually signed by the Comptroller of Public Accounts of the State, will be delivered to such purchaser or its designee. If the Bonds are sold subject to the book-entry system of DTC, then upon payment for the initial Bonds, the Paying Agent/Registrar shall insert the Issuance Date on Bond No. TCAB-1, cancel each of the initial Bonds and deliver to DTC on behalf of such purchaser one registered definitive Bond for each year of maturity of the Bonds, in the aggregate principal amount of all of the Bonds for such maturity, registered in the name of Cede & Co., as nominee of DTC. To the extent that the Paying Agent/Registrar is eligible to participate in DTC's FAST System, pursuant to an agreement between the Paying Agent/Registrar and DTC, the Paying Agent/Registrar shall hold the definitive Bonds in safekeeping for DTC. 0) Conditional Notice of Redemption. With respect to any optional redemption of the Bonds, unless certain prerequisites to such redemption required by this Ordinance have been met and moneys sufficient to pay the principal of and premium, if any, and interest on the Bonds to be redeemed shall have been received by the Paying Agent/Registrar prior to the giving of such notice of redemption, such notice may state that said redemption may, at the option of the Issuer, be conditional upon the satisfaction of such prerequisites and receipt of such moneys by the Paying Agent/Registrar on or prior to the date fixed for such redemption, or upon any prerequisite set forth in such notice of redemption. If a conditional notice of redemption is given and such prerequisites to the redemption and sufficient moneys are not received, such notice shall be of no force and effect, the Issuer shall not redeem such Bonds and the Paying Agent/Registrar shall give notice, in the manner in which the notice of redemption was given, to the effect that the Bonds have not been redeemed. Section 5. FORM OF BONDS. The form of the Bond, including the form of Paying Agent/Registrar's Authentication Certificate, the form of Assignment and the form of Registration Certificate of the Comptroller of Public Accounts of the State to be attached only to the Bonds initially issued and delivered pursuant to this Ordinance, shall be, respectively, substantially in the form provided in Exhibit A, with such appropriate variations, omissions, or 8 insertions as are permitted or required by this Ordinance. The Form of Bond as it appears in Exhibit A shall be completed, amended and modified by Bond Counsel to incorporate the information set forth in the Pricing Certificate, but it is not required for the Form of Bond to be reproduced as an exhibit to the Pricing Certificate. Section 6. TAX LEVY. (a) A special "Interest and Sinking Fund" is hereby created and shall be established and maintained by the Issuer as a separate fund or account and the funds therein shall be deposited into and held at an official depository bank of said Issuer. Said Interest and Sinking Fund shall be kept separate and apart from all other funds and accounts of said Issuer, and shall be used only for paying the interest on and principal of said Bonds. All amounts received from the sale of the Bonds as accrued interest shall be deposited upon receipt to the Interest and Sinking Fund, and all ad valorem taxes levied and collected for and on account of said Bonds shall be deposited, as collected, to the credit of said Interest and Sinking Fund. During each year while any of said Bonds are outstanding and unpaid, the governing body of said Issuer shall compute and ascertain a rate and amount of ad valorem tax that will be sufficient to raise and produce the money required to pay the interest on said Bonds as such interest comes due, and to provide and maintain a sinking fund adequate to pay the principal of said Bonds as such principal matures (but never less than 2% of the original amount of said Bonds as a sinking fund each year); and said tax shall be based on the latest approved tax rolls of said Issuer, with full allowances being made for tax delinquencies and the cost of tax collection. Said rate and amount of ad valorem tax is hereby levied, and is hereby ordered to be levied, against all taxable property in said Issuer, for each year while any of said Bonds are outstanding and unpaid, and said tax shall be assessed and collected each such year and deposited to the credit of the aforesaid Interest and Sinking Fund. Said ad valorem taxes sufficient to provide for the payment of the interest on and principal of said Bonds, as such interest comes due and such principal matures, are hereby pledged for such payment, within the limit prescribed by law. If lawfully available moneys of the Issuer are actually on deposit in the Interest and Sinking Fund in advance of the time when ad valorem taxes are scheduled to be levied for any year, then the amount of taxes that otherwise would have been required to be levied pursuant to this Section may be reduced to the extent and by the amount of the lawfully available funds then on deposit in the Interest and Sinking Fund. (b) Chapter 1208, Government Code, applies to the issuance of the Bonds and the pledge of the taxes granted by the Issuer under this Section, and is therefore valid, effective, and perfected. Should Texas law be amended at any time while the Bonds are outstanding and unpaid, the result of such amendment being that the pledge of the taxes granted by the Issuer under this Section is to be subject to the filing requirements of Chapter 9, Business&Commerce Code, in order to preserve to the registered owners of the Bonds a security interest in said pledge, the Issuer agrees to take such measures as it determines are reasonable and necessary under Texas law to comply with the applicable provisions of Chapter 9, Texas Business & Commerce Code and enable a filing of a security interest in said pledge to occur. Section 7. DEFEASANCE OF BONDS. (a) Any Bond and the interest thereon shall be deemed to be paid,retired, and no longer outstanding(a "Defeased Bond")within the meaning of this Ordinance, except to the extent provided in subsection (d) of this Section, when payment of 9 the principal of such Bond, plus interest thereon to the due date (whether such due date be by reason of maturity or otherwise) either (i) shall have been made or caused to be made in accordance with the terms thereof, or(ii) shall have been provided for on or before such due date by irrevocably depositing with or making available to the Paying Agent/Registrar in accordance with an escrow agreement or other instrument (the "Future Escrow Agreement") for such payment (1) lawful money of the United States of America sufficient to make such payment or (2) Defeasance Securities that mature as to principal and interest in such amounts and at such times as will insure the availability, without reinvestment, of sufficient money to provide for such payment, and when proper arrangements have been made by the Issuer with the Paying Agent/Registrar for the payment of its services until all Defeased Bonds shall have become due and payable. At such time as a Bond shall be deemed to be a Defeased Bond hereunder, as aforesaid, such Bond and the interest thereon shall no longer be secured by, payable from, or entitled to the benefits of, the ad valorem taxes herein levied and pledged as provided in this Ordinance, and such principal and interest shall be payable solely from such money or Defeasance Securities, and thereafter the Issuer will have no further responsibility with respect to amounts available to the Paying Agent/Registrar (or other financial institution permitted by applicable law) for the payment of such Defeased Bonds, including any insufficiency therein caused by the failure of the Paying Agent/Registrar (or other financial institution permitted by applicable law)to receive payment when due on the Defeasance Securities. Notwithstanding any other provision of this Ordinance to the contrary, it is hereby provided that any determination not to redeem Defeased Bonds that is made in conjunction with the payment arrangements specified in subsection 8(a)(i) or (ii) shall not be irrevocable, provided that: (1) in the proceedings providing for such payment arrangements, the Issuer expressly reserves the right to call the Defeased Bonds for redemption; (2) gives notice of the reservation of that right to the owners of the Defeased Bonds immediately following the making of the payment arrangements; and (3) directs that notice of the reservation be included in any redemption notices that it authorizes. (b) Any moneys so deposited with the Paying Agent/Registrar may at the written direction of the Issuer also be invested in Defeasance Securities, maturing in the amounts and times as hereinbefore set forth, and all income from such Defeasance Securities received by the Paying Agent/Registrar that is not required for the payment of the Bonds and interest thereon, with respect to which such money has been so deposited, shall be turned over to the Issuer, or deposited as directed in writing by the Issuer. Any Future Escrow Agreement pursuant to which the money and/or Defeasance Securities are held for the payment of Defeased Bonds may contain provisions permitting the investment or reinvestment of such moneys in Defeasance Securities or the substitution of other Defeasance Securities upon the satisfaction of the requirements specified in subsection 8(a)(i) or (ii). All income from such Defeasance Securities received by the Paying Agent/Registrar which is not required for the payment of the Defeased Bonds, with respect to which such money has been so deposited, shall be remitted to the Issuer or deposited as directed in writing by the Issuer. (c) The term "Defeasance Securities" means any securities and obligations now or hereafter authorized by State law that are eligible to refund, retire or otherwise discharge obligations such as the Bonds. 10 (d) Until all Defeased Bonds shall have become due and payable, the Paying Agent/Registrar shall perform the services of Paying Agent/Registrar for such Defeased Bonds the same as if they had not been defeased, and the Issuer shall make proper arrangements to provide and pay for such services as required by this Ordinance. (e) In the event that the Issuer elects to defease less than all of the principal amount of Bonds of a maturity, the Paying Agent/Registrar shall select, or cause to be selected, such amount of Bonds by such random method as it deems fair and appropriate. Section 8. DAMAGED, MUTILATED, LOST, STOLEN, OR DESTROYED BONDS. (a) Replacement Bonds. In the event any outstanding Bond is damaged, mutilated, lost, stolen, or destroyed, the Paying Agent/Registrar shall cause to be printed, executed, and delivered, a new bond of the same principal amount, maturity, and interest rate, as the damaged, mutilated, lost, stolen,or destroyed Bond, in replacement for such Bond in the manner hereinafter provided. (b) Application for Replacement Bonds. Application for replacement of damaged, mutilated, lost, stolen, or destroyed Bonds shall be made by the registered owner thereof to the Paying Agent/Registrar. In every case of loss, theft, or destruction of a Bond, the registered owner applying for a replacement bond shall furnish to the Issuer and to the Paying Agent/Registrar such security or indemnity as may be required by them to save each of them harmless from any loss or damage with respect thereto. Also, in every case of loss, theft, or destruction of a Bond, the registered owner shall furnish to the Issuer and to the Paying Agent/Registrar evidence to their satisfaction of the loss, theft, or destruction of such Bond. In every case of damage or mutilation of a Bond, the registered owner shall surrender to the Paying Agent/Registrar for cancellation the Bond so damaged or mutilated. (c) No Default Occurred. Notwithstanding the foregoing provisions of this Section, in the event any such Bond shall have matured, and no default has occurred which is then continuing in the payment of the principal of or interest on the Bond, the Issuer may authorize the payment of the same (without surrender thereof except in the case of a damaged or mutilated Bond) instead of issuing a replacement Bond, provided security or indemnity is furnished as above provided in this Section. (d) Charge for Issuing Replacement Bonds. Prior to the issuance of any replacement bond, the Paying Agent/Registrar shall charge the registered owner of such Bond with all legal, printing, and other expenses in connection therewith. Every replacement bond issued pursuant to the provisions of this Section by virtue of the fact that any Bond is lost, stolen, or destroyed shall constitute a contractual obligation of the Issuer whether or not the lost, stolen, or destroyed Bond shall be found at any time, or be enforceable by anyone, and shall be entitled to all the benefits of this Ordinance equally and proportionately with any and all other Bonds duly issued under this Ordinance. (e) Authority for Issuing Replacement Bonds. In accordance with Subchapter B, Chapter 1206, Texas Government Code, this Section shall constitute authority for the issuance of any such replacement bond without necessity of further action by the governing body of the 11 Issuer or any other body or person, and the duty of the replacement of such bonds is hereby authorized and imposed upon the Paying Agent/Registrar, and the Paying Agent/Registrar shall authenticate and deliver such Bonds in the form and manner and with the effect, as provided in Section 4(b)of this Ordinance for Bonds issued in conversion and exchange for other Bonds. Section 9. CUSTODY, APPROVAL, AND REGISTRATION OF BONDS; BOND COUNSEL'S OPINION; CUSIP NUMBERS AND CONTINGENT INSURANCE PROVISION, IF OBTAINED . The Mayor of the Issuer (or, in the absence of the Mayor, the Mayor Pro Tem) is hereby authorized to have control of the Bonds initially issued and delivered hereunder and all necessary records and proceedings pertaining to the Bonds pending their delivery and their investigation, examination, and approval by the Attorney General of the State of Texas, and their registration by the Comptroller of Public Accounts of the State of Texas. Upon registration of the Bonds said Comptroller of Public Accounts (or a deputy designated in writing to act for said Comptroller) shall manually sign the Comptroller's Registration Certificate attached to such Bonds, and the seal of said Comptroller shall be impressed, or placed in facsimile, on such Bond. The approving legal opinion of the Issuer's Bond Counsel and the assigned CUSIP numbers may, at the option of the Issuer, be printed on the Bonds issued and delivered under this Ordinance, but neither shall have any legal effect, and shall be solely for the convenience and information of the registered owners of the Bonds. In addition, if bond insurance is obtained, the Bonds may bear an appropriate legend as provided by the insurer. Section 10. COVENANTS REGARDING TAX EXEMPTION OF INTEREST ON THE BONDS. (a) Covenants. The Issuer covenants to take any action necessary to assure, or refrain from any action which would adversely affect, the treatment of the Bonds as obligations described in section 103 of the Internal Revenue Code of 1986, as amended (the "Code"), the interest on which is not includable in the "gross income" of the holder for purposes of federal income taxation. In furtherance thereof, the Issuer covenants as follows: (1) to take any action to assure that no more than 10 percent of the proceeds of the Bonds or the projects financed therewith (less amounts deposited to a reserve fund, if any) are used for any "private business use," as defined in section 141(b)(6) of the Code or, if more than 10 percent of the proceeds or the projects financed therewith are so used, such amounts, whether or not received by the Issuer, with respect to such private business use, do not, under the terms of this Ordinance or any underlying arrangement, directly or indirectly, secure or provide for the payment of more than 10 percent of the debt service on the Bonds, in contravention of section 141(b)(2)of the Code; (2) to take any action to assure that in the event that the "private business use" described in subsection (1) hereof exceeds 5 percent of the proceeds of the Bonds or the projects financed therewith (less amounts deposited into a reserve fund, if any) then the amount in excess of 5 percent is used for a "private business use" which is "related" and not "disproportionate," within the meaning of section 141(b)(3) of the Code, to the governmental use; 12 (3) to take any action to assure that no amount which is greater than the lesser of $5,000,000, or 5 percent of the proceeds of the Bonds (less amounts deposited into a reserve fund, if any) is directly or indirectly used to finance loans to persons, other than state or local governmental units, in contravention of section 141(c)of the Code; (4) to refrain from taking any action which would otherwise result in the Bonds being treated as "private activity bonds" within the meaning of section 141(b) of the Code; (5) to refrain from taking any action that would result in the Bonds being "federally guaranteed" within the meaning of section 149(b) of the Code; (6) to refrain from using any portion of the proceeds of the Bonds, directly or indirectly, to acquire or to replace funds which were used, directly or indirectly, to acquire investment property(as defined in section 148(b)(2) of the Code)which produces a materially higher yield over the term of the Bonds, other than investment property acquired with-- (A) proceeds of the Bonds invested for a reasonable temporary period of 3 years or less or, in the case of a current refunding bond, for a period of 90 days or less until such proceeds are needed for the purpose for which the bonds are issued, (B) amounts invested in a bona fide debt service fund, within the meaning of section 1.148-1(b) of the Treasury Regulations, and (C) amounts deposited in any reasonably required reserve or replacement fund to the extent such amounts do not exceed 10 percent of the proceeds of the Bonds; (7) to otherwise restrict the use of the proceeds of the Bonds or amounts treated as proceeds of the Bonds, as may be necessary, so that the Bonds do not otherwise contravene the requirements of section 148 of the Code (relating to arbitrage) and, to the extent applicable, section 149(d) of the Code(relating to advance refundings); and (8) to pay to the United States of America at least once during each five-year period(beginning on the date of delivery of the Bonds) an amount that is at least equal to 90 percent of the "Excess Earnings," within the meaning of section 148(f) of the Code and to pay to the United States of America, not later than 60 days after the Bonds have been paid in full, 100 percent of the amount then required to be paid as a result of Excess Earnings under section 148(f) of the Code. 13 (b) Rebate Fund. In order to facilitate compliance with the above covenant (8), a "Rebate Fund" is hereby established by the Issuer for the sole benefit of the United States of America, and such fund shall not be subject to the claim of any other person, including without limitation the bondholders. The Rebate Fund is established for the additional purpose of compliance with section 148 of the Code. (c) Proceeds. The Issuer understands that the term "proceeds" includes "disposition proceeds" as defined in the Treasury Regulations and, in the case of refunding bonds, transferred proceeds (if any) and proceeds of the Refunded Obligations expended prior to the date of issuance of the Bonds. It is the understanding of the Issuer that the covenants contained herein are intended to assure compliance with the Code and any regulations or rulings promulgated by the U.S. Department of the Treasury pursuant thereto. In the event that regulations or rulings are hereafter promulgated which modify or expand provisions of the Code, as applicable to the Bonds, the Issuer will not be required to comply with any covenant contained herein to the extent that such failure to comply, in the opinion of nationally recognized bond counsel, will not adversely affect the exemption from federal income taxation of interest on the Bonds under section 103 of the Code. In the event that regulations or rulings are hereafter promulgated which impose additional requirements which are applicable to the Bonds, the Issuer agrees to comply with the additional requirements to the extent necessary, in the opinion of nationally recognized bond counsel, to preserve the exemption from federal income taxation of interest on the Bonds under section 103 of the Code. In furtherance of such intention,the Issuer hereby authorizes and directs the Mayor, the Town Manager,the Finance Director and the Town Secretary,individually or jointly, to execute any documents, certificates or reports required by the Code and to make such elections, on behalf of the Issuer, which may be permitted by the Code as are consistent with the purpose for the issuance of the Bonds. (d) Disposition of Project. The Issuer covenants that the property constituting the Project will not be sold or otherwise disposed in a transaction resulting in the receipt by the Issuer of cash or other compensation, unless the Issuer obtains an opinion of nationally- recognized bond counsel that such sale or other disposition will not adversely affect the tax- exempt status of the Bonds. For purposes of the foregoing, the portion of the property comprising personal property and disposed in the ordinary course shall not be treated as a transaction resulting in the receipt of cash or other compensation. For purposes hereof, the Issuer shall not be obligated to comply with this covenant if it obtains an opinion that such failure to comply will not adversely affect the excludability for federal income tax purposes from gross income of the interest. (e) Designation as Qualified Tax-Exempt Obligations. Subject to any statement to the contrary in the Pricing Certificate, the Issuer hereby designates the Bonds as "qualified tax- exempt obligations" as defined in section 265(b)(3) of the Code, conditioned upon the Purchaser certifying that the aggregate initial offering price of the Bonds to the public (excluding any accrued interest) is no greater than $10 million (or such other amount permitted by such section 265 of the Code). Assuming such condition is met, in furtherance of such designation, the Issuer 14 represents, covenants and warrants the following: (a) that during the calendar year in which the Bonds are issued, the Issuer (including any subordinate entities) has not designated nor will designate obligations, which when aggregated with the Bonds, will result in more than $10,000,000 (or such other amount permitted by such section 265 of the Code) of"qualified tax- exempt obligations" being issued; (b) that the Issuer reasonably anticipates that the amount of tax-exempt obligations issued during the calendar year in which the Bonds are issued, by the Issuer(or any subordinate entities) will not exceed $10,000,000 (or such other amount permitted by such section 265 of the Code); and (c) that the Issuer will take such action or refrain from such action as necessary, and as more particularly set forth in this Section, in order that the Bonds will not be considered "private activity bonds" within the meaning of section 141 of the Code. Section 11. SALE OF BONDS; OFFICIAL STATEMENT. (a) The Bonds shall be sold and delivered subject to the provisions of Section 1 and Section 3 and pursuant to the terms and provisions of a bond purchase agreement, notice of sale and bidding instructions or private placement agreement (collectively and individually, the "Purchase Agreement"), each of which the Pricing Officer is hereby authorized to execute and deliver and in which the purchaser or purchasers (collectively, the "Purchaser") of the Bonds shall be designated. The Bonds shall initially be registered in the name of the purchaser thereof as set forth in the Pricing Certificate. (b) The Pricing Officer is hereby authorized, in the name and on behalf of the Issuer, to approve the distribution and delivery of a preliminary official statement and a final official statement relating to the Bonds to be used by the Purchaser in the marketing of the Bonds, if applicable. Section 12. FURTHER PROCEDURES; ENGAGEMENT OF BOND COUNSEL; ATTORNEY GENERAL FILING FEE; APPROPRIATION. (a) The Mayor and Town Secretary of the Issuer, the Pricing Officer and all other officers, employees and agents of the Issuer, and each of them, shall be and they are hereby expressly authorized, empowered and directed from time to time and at any time to do and perform all such acts and things and to execute, acknowledge and deliver in the name and under the corporate seal and on behalf of the Issuer the Paying Agent/Registrar Agreement with the Paying Agent/Registrar in substantially the form presented to the Council at the meeting at which this Ordinance was adopted and all other instruments, whether or not herein mentioned, as may be necessary or desirable in order to carry out the terms and provisions of this Ordinance, the Letter of Representations, the Bonds, the sale of the Bonds and the Official Statement. Notwithstanding anything to the contrary contained herein, while the Bonds are subject to DTC's Book-Entry-Only System and to the extent permitted by law, the Letter of Representations is hereby incorporated herein and its provisions shall prevail over any other provisions of this Ordinance in the event of conflict. In case any officer whose signature shall appear on any Bond shall cease to be such officer before the delivery of such Bond, such signature shall nevertheless be valid and sufficient for all purposes the same as if such officer had remained in office until such delivery. 15 (b) The obligation of the Purchaser to accept delivery of the Bonds is subject to the Purchaser being furnished with the final, approving opinion of McCall, Parkhurst & Horton L.L.P., bond counsel to the Issuer, which opinion shall be dated as of and delivered on the Issuance Date. The engagement of such firm as bond counsel to the Issuer in connection with issuance, sale and delivery of the Bonds is hereby approved and confirmed. The execution and delivery of an engagement letter between the Issuer and such firm, with respect to such services as bond counsel, is hereby authorized in such form as may be approved by the Mayor or the Town Manager, and the Mayor and the Town Manager are each hereby authorized to execute such engagement letter. (c) To pay the debt service coming due on the Bonds, if any (as determined by the Pricing Certificate) prior to receipt of the taxes levied to pay such debt service, there is hereby appropriated from current funds on hand, which are hereby certified to be on hand and available for such purpose, an amount sufficient to pay such debt service, and such amount shall be used for no other purpose. (d) In accordance with the provisions of Section 1202.004, Tex. Gov't Code Ann., in connection with the submission of the Bond by the Attorney General of Texas for review and approval, a statutory fee (an amount equal to 0.1% principal amount of the Bond, subject to a minimum of$750 and a maximum of$9,500) is required to be paid to the Attorney General upon the submission of the transcript of proceedings for the Bonds. The Issuer hereby authorizes and directs that a check in the amount of the Attorney General filing fee for the Bond, made payable to the "Texas Attorney General," be promptly furnished to the Issuer's Bond Counsel, for payment to the Attorney General in connection with his review of the Bonds. Section 13. COMPLIANCE WITH RULE 15c2-12. (a) If the Bonds are sold by public offering, and are subject to the Rule (as defined below), the following provisions shall apply, unless modified by the Pricing Officer in the Pricing Certificate: (i) Definitions. As used in this Section, the following terms have the meanings ascribed to such terms below: "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. (ii) Annual Reports. (A) The Issuer shall provide annually to the MSRB, within the timeframe set forth in the Pricing Certificate, in the electronic format prescribed by the MSRB, certain updated financial information and operating data pertaining to the Issuer, being the information described in the Pricing Certificate. (B) Any financial information described in the Pricing Certificate to be provided shall be (i)prepared in accordance with the accounting principles described in the financial statements of the Issuer appended to the Official Statement, or such other accounting principles as the Issuer may be required to employ from time to time pursuant to state law or regulation, and(ii) audited, if the Issuer commissions an audit of such statements and the audit is completed within the 16 period during which they must be provided. If the audit of such financial statements is not completed within the period set forth in the Pricing Certificate, then the Issuer shall provide unaudited financial information of the type described in the Pricing Certificate within such period, and audited financial statements for the applicable fiscal year to the MSRB, when and if the audit report on such statements becomes available. (C) If the Issuer 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 Issuer otherwise would be required to provide financial information and operating data pursuant to this Section. (D) All financial information, operating data, financial statements and notices required by this Section to be provided to the MSRB shall be provided in an electronic format and be accompanied by identifying information prescribed by the MSRB. 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 (including an official statement or other offering document) available to the public on the MSRB's Internet Web site or filed with the SEC. (iii) Event Notices. The Issuer shall notify the MSRB, in a timely manner not in excess of ten business days after the occurrence of the event, of any of the following events with respect to the Bonds: 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 Issuer; 13. The consummation of a merger, consolidation, or acquisition involving the Issuer or the sale of all or substantially all of the assets of the Issuer, other than in the ordinary course of business, the entry into 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; and 14. Appointment of a successor Paying Agent/Registrar or change in the name of the Paying Agent/Registrar, if material. The Issuer shall notify the MSRB, in a timely manner, of any failure by the Issuer to provide financial information or operating data in accordance with subsection (a)(iii) of this 17 Section by the time required by subsection(a)(iii). As used in clause(a)(iii)12 above, the phrase "bankruptcy, insolvency, receivership or similar event" means the appointment of a receiver, fiscal agent or similar officer for the Issuer in a proceeding under the U.S. Bankruptcy Code or in any other proceeding under state or federal law in which a court of governmental authority has assumed jurisdiction over substantially all of the assets or business of the Issuer,or if jurisdiction has been assumed by leaving the Council and officials or officers of the Issuer 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 Issuer. (iv) Limitations Disclaimers and Amendments. (A) The Issuer shall be obligated to observe and perform the covenants specified in this Section for so long as, but only for so long as, the Issuer remains an "obligated person" with respect to the Bonds within the meaning of the Rule, except that the Issuer in any event will give notice of any deposit made in accordance with this Ordinance or applicable law that causes the Bonds no longer to be outstanding. (B) The provisions of this Section are for the sole benefit of the registered owners and beneficial owners of the Bonds, and nothing in this Section, express or implied, shall give any benefit or any legal or equitable right, remedy, or claim hereunder to any other person. The Issuer undertakes to provide only the financial information, operating data, financial statements, and notices which it has expressly agreed to provide pursuant to this Section and does not hereby undertake to provide any other information that may be relevant or material to a complete presentation of the Issuer's financial results, condition, or prospects or hereby undertake to update any information provided in accordance with this Section or otherwise, except as expressly provided herein. The Issuer does not make any representation or warranty concerning such information or its usefulness to a decision to invest in or sell Bonds at any future date. (C) UNDER NO CIRCUMSTANCES SHALL THE ISSUER BE LIABLE TO THE REGISTERED OWNER OR BENEFICIAL OWNER OF ANY BOND OR ANY OTHER PERSON, IN CONTRACT OR TORT, FOR DAMAGES RESULTING IN WHOLE OR IN PART FROM ANY BREACH BY THE ISSUER, WHETHER NEGLIGENT OR WITHOUT FAULT ON ITS PART, OF ANY COVENANT SPECIFIED IN THIS SECTION,BUT EVERY RIGHT AND REMEDY OF ANY SUCH PERSON, IN CONTRACT OR TORT, FOR OR ON ACCOUNT OF ANY SUCH BREACH SHALL BE LIMITED TO AN ACTION FOR MANDAMUS OR SPECIFIC PERFORMANCE. (D) No default by the Issuer in observing or performing its obligations under this Section shall comprise a breach of or default under the Ordinance for purposes of any other provision of this Ordinance. Nothing in this Section is intended or shall act to disclaim, waive, or otherwise limit the duties of the Issuer under federal and state securities laws. (E) The provisions of this Section may be amended by the Issuer 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 Issuer, but only if(1) the provisions of this Section, as so amended, would have permitted an underwriter to purchase or sell Bonds in the primary offering of the Bonds in compliance with the Rule, taking into account any amendments or interpretations of the Rule since such offering as well as such changed 18 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 this Ordinance that authorizes such an amendment) of the outstanding Bonds consent to such amendment or(b) a person that is unaffiliated with the Issuer (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. If the Issuer so amends the provisions of this Section, it shall include with any amended financial information or operating data next provided in accordance with subsection (b) of this Section an explanation, in narrative form, of the reason for the amendment and of the impact of any change in the type of financial information or operating data so provided. The Issuer 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. (b) If the Bonds are sold by private placement, the Pricing Officer may agree to provide for an undertaking in accordance with the Rule or may agree to provide other public information to the purchaser as may be necessary for the sale of the Bonds on the most favorable terms to the Issuer. Section 14. METHOD OF AMENDMENT. The Issuer hereby reserves the right to amend this Ordinance subject to the following terms and conditions,to-wit: (a) The Issuer may from time to time, without the consent of any Registered Owner, except as otherwise required by paragraph (b) below, amend or supplement this Ordinance to (i)cure any ambiguity, defect or omission in this Ordinance that does not materially adversely affect the interests of the Registered Owners, (ii) grant additional rights or security for the benefit of the Registered Owners, (iii) add events of default as shall not be inconsistent with the provisions of this Ordinance and that shall not materially adversely affect the interests of the Registered Owners, (v) qualify this Ordinance under the Trust Indenture Act of 1939, as amended, or corresponding provisions of federal laws from time to time in effect, or (iv) make such other provisions in regard to matters or questions arising under this Ordinance as shall not be materially inconsistent with the provisions of this Ordinance and that shall not, in the opinion of nationally-recognized bond counsel, materially adversely affect the interests of the Registered Owners. (b) Except as provided in paragraph (a) above, a majority of the Registered Owners of Bonds then outstanding that are the subject of a proposed amendment shall have the right from time to time to approve any amendment hereto that may be deemed necessary or desirable by the Issuer; provided, however, that without the consent of 100% of the Registered Owners in aggregate principal amount of the then outstanding Bonds, nothing herein contained shall permit or be construed to permit amendment of the terms and conditions of this Ordinance or in any of the Bonds so as to: (1) Make any change in the maturity of any of the outstanding Bonds; (2) Reduce the rate of interest borne by any of the outstanding Bonds; 19 (3) Reduce the amount of the principal of, or redemption premium, if any, payable on any outstanding Bonds; (4) Modify the terms of payment of principal or of interest or redemption premium on outstanding Bonds or any of them or impose any condition with respect to such payment; or (5) Change the minimum percentage of the principal amount of the Bonds necessary for consent to such amendment. (c) If at any time the Issuer shall desire to amend this Ordinance under this Section, the Issuer shall send by U.S. mail to each registered owner of the affected Bonds a copy of the proposed amendment. (d) Whenever at any time within one year from the date of mailing of such notice the Issuer shall receive an instrument or instruments executed by the Registered Owners of at least a majority in aggregate principal amount of all of the Bonds then outstanding that are required for the amendment (or 100% if such amendment is made in accordance with paragraph (b)), which instrument or instruments shall refer to the proposed amendment and which shall specifically consent to and approve such amendment, the Issuer may adopt the amendment in substantially the same form. (e) Upon the adoption of any amendatory Ordinance pursuant to the provisions of this Section, this Ordinance shall be deemed to be modified and amended in accordance with such amendatory Ordinance, and the respective rights, duties, and obligations of the Issuer and all Registered Owners of such affected Bonds shall thereafter be determined, exercised, and enforced, subject in all respects to such amendment. (f) Any consent given by the Registered Owner of a Bond pursuant to the provisions of this Section shall be irrevocable for a period of six months from the date of such consent and shall be conclusive and binding upon all future Registered Owners of the same Bond during such period. Such consent may be revoked at any time after six months from the date of said consent by the Registered Owner who gave such consent, or by a successor in title, by filing notice with the Issuer, but such revocation shall not be effective if the Registered Owners the required amount of the affected Bonds then outstanding, have, prior to the attempted revocation, consented to and approved the amendment. (g) For the purposes of establishing ownership of the Bonds, the Issuer shall rely solely upon the registration of the ownership of such Bonds on the Registration Books kept by the Paying Agent/Registrar. 20 Section 15. REDEMPTION OF REFUNDED OBLIGATIONS. (a) Subject to execution and delivery of the Purchase Agreement with the Purchaser, the Issuer hereby directs that the Refunded Obligations be called for redemption on the dates and at the prices set forth in the Pricing Certificate. The Pricing Officer is hereby authorized and directed to issue or cause to be issued the Notice of Redemption of the Refunded Obligations in substantially the form set forth in Exhibit B attached hereto to the paying agent for the Refunded Obligations. The Notice of Redemption of the Refunded Obligations as it appears in Exhibit B shall be completed, amended and modified by Bond Counsel to incorporate the information set forth in the Pricing Certificate, but it is not required for the Notice of Redemption of the Refunded Obligations to be reproduced as an exhibit to the Pricing Certificate. (b) The paying agent/registrar for the Refunded Obligations is hereby directed to provide the appropriate notice of redemption as required by the Refunded Obligations and is hereby directed to make appropriate arrangements so that the Refunded Obligations may be redeemed on the redemption date. (c) If the redemption of the Refunded Obligations results in the partial refunding of any maturity of the Refunded Obligations, the Pricing Officer shall direct the paying agent/registrar for the Refunded Obligations to designate at random and by lot which of the Refunded Obligations will be payable from and secured solely from ad valorem taxes of the Issuer pursuant to the ordinance of the Issuer authorizing the issuance of such Refunded Obligations (the "Refunded Obligation Ordinance"). For purposes of such determination and designation, all Refunded Obligations registered in denominations greater than $5,000 shall be considered to be registered in separate $5,000 denominations. The paying agent/registrar shall notify by first- class mail all registered owners of all affected bonds of such maturities that: (i) a portion of such bonds have been refunded and are secured until final maturity solely with cash and/or investments maintained by the Escrow Agent in the Escrow Fund, (ii) the principal amount of all affected bonds of such maturities registered in the name of such registered owner that have been refunded and are payable solely from cash and/or investments in the Escrow Fund and the remaining principal amount of all affected bonds of such maturities registered in the name of such registered owner, if any, have not been refunded and are payable from and secured by ad valorem taxes of the Issuer as described in the Refunded Obligation Ordinance, (iii) the registered owner is required to submit his or her Refunded Obligations to the paying agent/registrar, for the purposes of re-registering such registered owner's bonds and assigning new CUSIP numbers in order to distinguish the source of payment for the principal and interest on such bonds, and (iv) payment of principal of and interest on such bonds may, in some circumstances, be delayed until such bonds have been re-registered and new CUSIP numbers have been assigned as required by(iii) above. (d) The source of funds for payment of the principal of and interest on the Refunded Obligations on their respective maturity or redemption dates shall be from the funds deposited with the Escrow Agent, pursuant to the Escrow Agreement, or pursuant to such other arrangement determined by the Pricing Officer in the Pricing Certificate. Section 16. GOVERNING LAW. This Ordinance shall be construed and enforced in accordance with the laws of the State and the United States of America. 21 Section 17. SEVERABILITY. If any provision of this Ordinance or the application thereof to any circumstance shall be held to be invalid, the remainder of this Ordinance and the application thereof to other circumstances shall nevertheless be valid, and this governing body hereby declares that this Ordinance would have been enacted without such invalid provision. Section 18. EVENTS OF DEFAULT. Each of the following occurrences or events for the purpose of this Ordinance is hereby declared to be an event of default (an 'Event of Default"): (i) the failure to make payment of the principal of or interest on any of the Bonds when the same becomes due and payable; or (ii) default in the performance or observance of any other covenant, agreement or obligation of the Issuer, the failure to perform which materially, adversely affects the rights of the Registered Owners, including, but not limited to, their prospect or ability to be repaid in accordance with this Ordinance, and the continuation thereof for a period of 60 days after notice of such default is given by any Registered Owner to the Issuer. Section 19. REMEDIES FOR DEFAULT. (a) Upon the happening of any Event of Default, then and in every case, any Owner or an authorized representative thereof, including, but not limited to, a trustee or trustees therefor, may proceed against the Issuer for the purpose of protecting and enforcing the rights of the Owners under this Ordinance, by mandamus or other suit, action or special proceeding in equity or at law, in any court of competent jurisdiction, for any relief permitted by law, including the specific performance of any covenant or agreement contained herein, or thereby to enjoin any act or thing that may be unlawful or in violation of any right of the Owners hereunder or any combination of such remedies. (b) It is provided that all such proceedings shall be instituted and maintained for the equal benefit of all Owners of Bonds then outstanding. Section 20. REMEDIES NOT EXCLUSIVE. (a) No remedy herein conferred or reserved is intended to be exclusive of any other available remedy or remedies, but each and every such remedy shall be cumulative and shall be in addition to every other remedy given hereunder or under the Bonds or now or hereafter existing at law or in equity; provided, however, that notwithstanding any other provision of this Ordinance, the right to accelerate the debt evidenced by the Bonds shall not be available as a remedy under this Ordinance. (b) The exercise of any remedy herein conferred or reserved shall not be deemed a waiver of any other available remedy. (c) By accepting the delivery of a Bond authorized under this Ordinance, such Owner agrees that the certifications required to effectuate any covenants or representations contained in this Ordinance do not and shall never constitute or give rise to a personal or pecuniary liability or charge against the officers, employees or officials of the Issuer or the Council. 22 Section 21. EFFECTIVE DATE. In accordance with the provisions of Texas Government Code, Section 1201.028, this Ordinance shall be effective immediately upon its adoption by the Council. ------------------------------------- 23 SCHEDULE I SCHEDULE OF ELIGIBLE REFUNDED OBLIGATIONS Town of Westlake, Texas, General Obligation Refunding Bonds, Series 2007 S-1 EXHIBIT A FORM OF BOND (a) The form of the Bond, including the form of Paying Agent/Registrar's Authentication Certificate, the form of Assignment and the form of Registration Certificate of the Comptroller of Public Accounts of the State of Texas to be attached only to the Bonds initially issued and delivered pursuant to this Ordinance, shall be, respectively, substantially as follows, with such appropriate variations, omissions, or insertions as are permitted or required by this Ordinance and with the Bonds to be completed with information set forth in the Pricing Certificate. The Form of Bond as it appears in this Exhibit A shall be completed, amended and modified by Bond Counsel to incorporate the information set forth in the Pricing Certificate, but it is not required for the Form of Bond to be reproduced as an exhibit to the Pricing Certificate. NO. R-_ UNITED STATES OF AMERICA PRINCIPAL STATE OF TEXAS AMOUNT TOWN OF WESTLAKE,TEXAS $ GENERAL OBLIGATION REFUNDING BOND SERIES 2017 INTEREST ISSUANCE MATURITY RATE DATE DATE CUSIP NO. % February 7, 2017 February 15, 20_ REGISTERED OWNER: PRINCIPAL AMOUNT: ON THE MATURITY DATE specified above, TOWN OF WESTLAKE, TEXAS, in Tarrant and Denton Counties, Texas (the "Issuer"), being a political subdivision of the State of Texas, hereby promises to pay to the Registered Owner set forth above, or registered assigns (hereinafter called the "registered owner") the principal amount set forth above, and to pay interest thereon from the Issuance Date, on August 15, 2017 and semiannually thereafter on each February 15 and August 15 to the maturity date specified above, or the date of redemption prior to maturity, at the interest rate per annum specified above; except that if this Bond is required to be authenticated and the date of its authentication is later than the first Record Date (hereinafter defined), such principal amount shall bear interest from the interest payment date next preceding the date of authentication, unless such date of authentication is after any Record Date but on or before the next following interest payment date, in which case such principal amount shall bear interest from such next following interest payment date; provided, however,that if on the date of authentication hereof the interest on the Bond or Bonds, if any, for which this Bond is being exchanged or converted from is due but has not been paid, then this Bond shall bear interest from the date to which such interest has been paid in full. THE PRINCIPAL OF AND INTEREST ON this Bond are payable in lawful money of the United States of America, without exchange or collection charges. The principal of this Bond shall be paid to the registered owner hereof upon presentation and surrender of this Bond at maturity, or upon the date fixed for its redemption prior to maturity, at the designated corporate trust office of U.S. Bank National Association, Dallas, Texas, which is the "Paying Agent/Registrar" for this Bond. The payment of interest on this Bond shall be made by the Paying Agent/Registrar to the registered owner hereof on each interest payment date by check or draft, dated as of such interest payment date, drawn by the Paying Agent/Registrar on, and payable solely from, funds of the Issuer required by the ordinance authorizing the issuance of the Bonds (the "Bond Ordinance") to be on deposit with the Paying Agent/Registrar for such purpose as hereinafter provided; and such check or draft shall be sent by the Paying Agent/Registrar by United States mail, first-class postage prepaid, on each such interest payment date, to the registered owner hereof, at its address as it appeared on the last business day of the month next preceding each such date (the 'Record Date") on the Registration Books kept by the Paying Agent/Registrar, as hereinafter described. In addition, interest may be paid by such other method, acceptable to the Paying Agent/Registrar, requested by, and at the risk and expense of, the registered owner. 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 Issuer. Notice of the Special Record Date and of the scheduled payment date of the past due interest(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 owner of a Bond appearing on the Registration Books at the close of business on the last business day next preceding the date of mailing of such notice. ANY ACCRUED INTEREST due at maturity or upon the redemption of this Bond prior to maturity as provided herein shall be paid to the registered owner upon presentation and surrender of this Bond for payment at the principal corporate trust office of the Paying Agent/Registrar. The Issuer covenants with the registered owner of this Bond that on or before each principal payment date and interest payment date for this Bond it will make available to the Paying Agent/Registrar, from the "Interest and Sinking Fund" created by the Bond Ordinance, the amounts required to provide for the payment, in immediately available funds, of all principal of and interest on the Bonds,when due. IF THE DATE for any payment due on this Bond shall be a Saturday, Sunday, a legal holiday, or a day on which banking institutions in the city where the principal corporate trust office of the Paying Agent/Registrar 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 Saturday, Sunday, legal holiday, or day on which banking institutions are authorized to close, and payment on such date shall have the same force and effect as if made on the original date payment was due. THIS BOND is one of a Series of Bonds dated as of January 15, 2017, authorized in accordance with the Constitution and laws of the State of Texas in the principal amount of $5,795,000 FOR THE PURPOSE OF PROVIDING FUNDS TO REFUND A PORTION OF THE ISSUER'S OUTSTANDING OBLIGATIONS. ON February 15, 2027, or on any date thereafter, the Bonds may be redeemed prior to their scheduled maturities, at the option of the Issuer, with funds derived from any available and lawful source, as a whole, or in part, and, if in part, the particular Bonds, or portions thereof, to be redeemed shall be selected and designated by the Issuer (provided that a portion of a Bond A-2 may be redeemed only in an integral multiple of $5,000), at a redemption price equal to the principal amount to be redeemed plus accrued interest to the date fixed for redemption. AT LEAST 30 days prior to the date fixed for any redemption of Bonds or portions thereof prior to maturity a written notice of such redemption shall be sent by the Paying Agent/Registrar by United States mail, first-class postage prepaid, to the registered owner of each Bond to be redeemed at its address as it appeared at the close of business on the day of mailing such notice; provided, however, that the failure of the registered owner to receive such notice, or any defect therein or in the sending or mailing thereof, shall not affect the validity or effectiveness of the proceedings for the redemption of any Bond. By the date fixed for any such redemption, due provision shall be made with the Paying Agent/Registrar for the payment of the required redemption price for the Bonds or portions thereof which are to be so redeemed. If such written notice of redemption is sent and if due provision for such payment is made, all as provided above, the Bonds or portions thereof which are to be so redeemed thereby automatically shall be treated as redeemed prior to their scheduled maturities, and they shall not bear interest after the date fixed for redemption, and they shall not be regarded as being outstanding except for the right of the registered owner to receive the redemption price from the Paying Agent/Registrar out of the funds provided for such payment. If a portion of any Bond shall be redeemed a substitute Bond or Bonds having the same maturity date, bearing interest at the same rate, in any denomination or denominations in any integral multiple of$5,000, at the written request of the registered owner, and in aggregate amount equal to the unredeemed portion thereof,will be issued to the registered owner upon the surrender thereof for cancellation, at the expense of the Issuer, all as provided in the Bond Ordinance. WITH RESPECT TO ANY OPTIONAL REDEMPTION OF THE BONDS, unless certain prerequisites to such redemption required by the Bond Ordinance have been met and moneys sufficient to pay the principal of and premium, if any, and interest on the Bonds to be redeemed shall have been received by the Paying Agent/Registrar prior to the giving of such notice of redemption, such notice may state that said redemption may, at the option of the Issuer, be conditional upon the satisfaction of such prerequisites and receipt of such moneys by the Paying Agent/Registrar on or prior to the date fixed for such redemption, or upon any prerequisite set forth in such notice of redemption. If a conditional notice of redemption is given and such prerequisites to the redemption and sufficient moneys are not received, such notice shall be of no force and effect, the Issuer shall not redeem such Bonds and the Paying Agent/Registrar shall give notice, in the manner in which the notice of redemption was given, to the effect that the Bonds have not been redeemed. ALL BONDS OF THIS SERIES are issuable solely as fully registered Bonds, without interest coupons, in the denomination of any integral multiple of $5,000. As provided in the Bond Ordinance, this Bond may, at the request of the registered owner or the assignee or assignees hereof, be assigned, transferred, converted into and exchanged for a like aggregate amount of fully registered Bonds, without interest coupons, payable to the appropriate registered owner, assignee or assignees, as the case may be, having any authorized denomination or denominations as requested in writing by the appropriate registered owner, assignee or assignees, as the case may be, upon surrender of this Bond to the Paying Agent/Registrar for cancellation, all in accordance with the form and procedures set forth in the Bond Ordinance. Among other requirements for such assignment and transfer, this Bond must be presented and surrendered to the Paying Agent/Registrar, together with proper instruments of assignment, in form and with A-3 guarantee of signatures satisfactory to the Paying Agent/Registrar, evidencing assignment of this Bond or any portion or portions hereof in any authorized denomination to the assignee or assignees in whose name or names this Bond or any such portion or portions hereof is or are to be registered. The form of Assignment printed or endorsed on this Bond may be executed by the registered owner to evidence the assignment hereof, but such method is not exclusive, and other instruments of assignment satisfactory to the Paying Agent/Registrar may be used to evidence the assignment of this Bond or any portion or portions hereof from time to time by the registered owner. The Paying Agent/Registrar's reasonable standard or customary fees and charges for assigning, transferring, converting and exchanging any Bond or portion thereof will be paid by the Issuer. In any circumstance, any taxes or governmental charges required to be paid with respect thereto shall be paid by the one requesting such assignment, transfer, conversion or exchange, as a condition precedent to the exercise of such privilege. The Paying Agent/Registrar shall not be required to make any such transfer or exchange of any Bonds during the period commencing with the close of business on any Record Date and ending with the opening of business on the next following principal or interest payment date or, with respect to any Bond or any portion thereof called for redemption prior to maturity,within 30 days prior to its redemption date. IN THE EVENT any Paying Agent/Registrar for the Bonds is changed by the Issuer, resigns, or otherwise ceases to act as such, the Issuer has covenanted in the Bond Ordinance that it promptly will appoint a competent and legally qualified substitute therefor, and cause written notice thereof to be mailed to the registered owners of the Bonds. IT IS HEREBY certified, recited and covenanted that this Bond has been duly and validly authorized, issued and delivered; that all acts, conditions and things required or proper to be performed, exist and be done precedent to or in the authorization, issuance and delivery of this Bond have been performed, existed and been done in accordance with law; and that annual ad valorem taxes sufficient to provide for the payment of the interest on and principal of this Bond, as such interest comes due and such principal matures, have been levied and ordered to be levied against all taxable property in said Issuer, and have been pledged for such payment, within the limits prescribed by law. THE ISSUER ALSO HAS RESERVED THE RIGHT to amend the Bond Ordinance as provided therein, and under some (but not all) circumstances amendments thereto must be approved by the registered owners of a majority in aggregate principal amount of the outstanding Bonds. BY BECOMING the registered owner of this Bond, the registered owner thereby acknowledges all of the terms and provisions of the Bond Ordinance, agrees to be bound by such terms and provisions, acknowledges that the Bond Ordinance is duly recorded and available for inspection in the official minutes and records of the governing body of the Issuer, and agrees that the terms and provisions of this Bond and the Bond Ordinance constitute a contract between each registered owner hereof and the Issuer. IN WITNESS WHEREOF, the Issuer has caused this Bond to be signed with the manual or facsimile signature of the Mayor of the Issuer and countersigned with the manual or facsimile signature of the Town Secretary of the Issuer, and has caused the official seal of the Issuer to be duly impressed,or placed in facsimile, on this Bond. A-4 Town Secretary Mayor Town of Westlake,Texas Town of Westlake, Texas (SEAL) (b)Form of Pang Agent/Registrar's Authentication Certificate. PAYING AGENT/REGISTRAR'S AUTHENTICATION CERTIFICATE (To be executed if this Bond is not accompanied by an executed Registration Certificate of the Comptroller of Public Accounts of the State of Texas) It is hereby certified that this Bond has been issued under the provisions of the Bond Ordinance described in the text of this Bond; and that this Bond has been issued in conversion or replacement of, or in exchange for, a bond, bonds, or a portion of a bond or bonds of a Series which originally was approved by the Attorney General of the State of Texas and registered by the Comptroller of Public Accounts of the State of Texas. Dated: U.S. BANK NATIONAL ASSOCIATION, Dallas, Texas, Paying Agent/Registrar By: Authorized Representative (c) Form of Assignment. ASSIGNMENT (Please print or type clearly) For value received,the undersigned hereby sells, assigns and transfers unto: Transferee's Social Security or Taxpayer Identification Number: Transferee's name and address, including zip code: the within Bond and all rights thereunder, and hereby irrevocably constitutes and appoints , attorney, to register the transfer of the within Bond on the books kept for registration thereof, with full power of substitution in the premises. A-5 Dated: Signature Guaranteed: NOTICE: Signature(s) must be guaranteed by NOTICE: The signature above must an eligible guarantor institution participating correspond with the name of the Registered in a securities transfer association recognized Owner as it appears upon the front of this signature guarantee program. Bond in every particular, without alteration or enlargement or any change whatsoever. (d)Form of Registration Certificate of the Comptroller of Public Accounts COMPTROLLER'S REGISTRATION CERTIFICATE: REGISTER NO. I hereby certify that this Bond has been examined, certified as to validity, and approved by the Attorney General of the State of Texas, and that this Bond has been registered by the Comptroller of Public Accounts of the State of Texas. Witness my signature and seal this Comptroller of Public Accounts of the State of Texas (COMPTROLLER'S SEAL) (e) Insertions for the Initial Bond. (i) The initial Bond shall be in the form set forth in paragraph (a) of this Section, except that: (A) immediately under the name of the Bond, the headings "INTEREST RATE" and "MATURITY DATE" shall both be completed with the words "As shown below" and "CUSIP NO. " shall be deleted. (B)the first paragraph shall be deleted and the following will be inserted: "TOWN OF WESTLAKE, TEXAS (the "Issuer"), being a political subdivision located in Tarrant and Denton Counties, Texas, hereby promises to pay to the Registered Owner specified above, or registered assigns (hereinafter called the "Registered Owner"), on February 15 in each of the years, in the principal installments and bearing interest at the per annum rates set forth in the following schedule: Maturity Principal Interest Date Amount Rate A-6 2018 $ 30,000 2.00 % 2019 30,000 2.00 2020 35,000 2.00 2021 35,000 2.00 2022 35,000 2.50 2023 35,000 3.00 2024 40,000 3.00 2025 605,000 4.00 2026 625,000 4.00 2027 645,000 4.00 2028 675,000 4.00 2029 715,000 4.00 2030 735,000 4.00 2031 775,000 4.00 2032 780,000 4.00 The Issuer promises to pay interest on the unpaid principal amount hereof (calculated on the basis of a 360-day year of twelve 30-day months) from the Issuance Date at the respective Interest Rate per annum specified above. Interest is payable on August 15, 2017, and on each February 15 and August 15 thereafter to the date of payment of the principal installment specified above, or the date of redemption prior to maturity; except, that if this Bond is required to be authenticated and the date of its authentication is later than the first Record Date (hereinafter defined), such principal amount shall bear interest from the interest payment date next preceding the date of authentication, unless such date of authentication is after any Record Date but on or before the next following interest payment date, in which case such principal amount shall bear interest from such next following interest payment date; provided, however, that if on the date of authentication hereof the interest on the Bond or Bonds, if any, for which this Bond is being exchanged is due but has not been paid, then this Bond shall bear interest from the date to which such interest has been paid in full." (C)The initial Bond shall be numbered "T-l." A-7 EXHIBIT B NOTICE OF DEFEASANCE AND REDEMPTION TOWN OF WESTLAKE, TEXAS (TARRANT AND DENTON COUNTIES,TEXAS) NOTICE IS HEREBY GIVEN that the Town of Westlake, Texas (the "Town") has called for early redemption the outstanding obligations of the Town described as follows: Town of Westlake, Texas, General Obligation Refunding Bonds, Series 2007, dated March 15, 2007 (the "Series 2007 Obligations"), maturing on May 1 in the years and in the amounts shown below. Such Series 2007 Obligations have been called for redemption on May 1, 2017 (the "Redemption Date") at the redemption price of par and accrued interest to the Redemption Date: Maturity Principal CUSIP Maturity Principal CUSIP Date Amount Number Date Amount Number 2020 $ 125,000 96048PCJ3 2028 $ 730,000 96048PCS3 *** *** *** 2029 760,000 96048PCT1 2024 230,000 96048PCN4 2030 790,000 96048PCU8 2025 645,000 96048PCP9 2031 825,000 96048PCV6 2026 670,000 96048PCQ7 2032 855,000 96048PCW4 2027 700,000 96048PCR5 aggregating $6,330,000 in principal amount. On February 7, 2017, funds were deposited with U.S. Bank National Association, which is the Escrow Agent for the Series 2007 Obligations, in an amount, together with investment earnings thereon, to redeem the Series 2007 Obligations on the Redemption Date, and such Series 2007 Obligations shall be paid from amounts held in an escrow account administered by Escrow Agent, until the Redemption Date, when the redemption price shall be paid upon presentation of the Series 2007 Obligations to the paying agent/registrar thereof, as follows: First Class/Registered/ Express Delivery Certified Mail Hand Delivery U.S.Bank National Association U.S. Bank National Association Corporate Trust Services Corporate Trust Services P. O. Box 64111 60 Livingston Avenue St. Paul,MN 55164-0111 1st Floor-Bond Drop Window St. Paul,MN 55107 Upon presentation of the Series 2007 Obligations at the paying agent/registrar on the Redemption Date, the holder thereof shall be entitled to receive the redemption price equal to par plus accrued interest to the Redemption Date and thereafter the Series 2007 Obligations shall no longer bear interest. TOWN OF WESTLAKE, TEXAS B-1 CERTIFICATE FOR ORDINANCE THE STATE OF TEXAS COUNTIES OF TARRANT AND DENTON TOWN OF WESTLAKE We, the undersigned officers of the Town of Westlake, Texas (the "Town"), hereby certify as follows: I. The Town Council (the "Council") of the Town convened in a regular meeting oil December 5, 2016, at the regular designated meeting place, and the roll was called of the duly constituted officers and members of the Council, to wit: Laura Wheat, Mayor Carol Langdon, Mayor Pro Tem Michael Barrett, Council Member Alesa Belvedere, Council Member Wayne Stoltenberg, Council Member Rick Rennhack, Council Member Kelly Edwards, Town Secretary and all of said persons were present except Michael Barrett, thus constituting a quorum. Whereupon, among other business the following was transacted at said meeting: a written ORDINANCE BY THE TOWN COUNCIL OF TOWN OF WESTLAKE, TEXAS, AMENDING THE ORDINANCE AUTHORIZING THE ISSUANCE OF THE TOWN OF WESTLAKE, TEXAS, GENERAL OBLIGATION REFUNDING BONDS, SERIES 2017, AND ENACTING OTHER PROVISIONS RELATED TO THE SUBJECT was duly introduced for the consideration of the Council. It was then duly moved and seconded that said Ordinance be passed; and, after due discussion, said motion, carrying with it the passage of said Ordinance, prevailed and carried, with all members of the Council shown present above voting "Aye," except as noted below: NAYS: 0 ABSTENTIONS: 0 2. A true, full, and correct copy of the aforesaid Ordinance passed at the meeting described in the above and foregoing paragraph is attached to and follows this Certificate; said Ordinance has been duly recorded in the Council's minutes of said meeting; the above and foregoing paragraph is a true, full, and correct excerpt from the Council's minutes of said meeting pertaining to the passage of said Ordinance; the persons named in the above and foregoing paragraph are the duly chosen, qualified, and acting officers and members of the Council as indicated therein; that each of the officers and members of the Council was duly and sufficiently notified officially and personally, in advance, of the time, place, and purpose of the aforesaid meeting, and that said Ordinance would be introduced and considered for passage at said meeting, and each of said officers and members consented, in advance, to the holding of said meeting for such purpose; and that said meeting was open to the public, and public notice of the time, place, and purpose of said meeting was given all as required by the Texas Government Code, Chapter 551. 3. The Council has approved and hereby approves the aforesaid Ordinance; and the Mayor and the Town Secretary of the Town hereby declare that their signing of this Certificate shall constitute the signing of the attached and following copy of said Ordinance for all purposes. SIGNED AND SEALED ON DECEMBER 5, 2016. ToN n Secr A -y Mayor (Town OF ''FX A'S TOWN OF WESTLAKE ORDINANCE 805 ORDINANCE BY THE TOWN COUNCIL OF TOWN OF WESTLAKE, TEXAS, AMENDING ORDINANCE 800, AUTHORIZING THE ISSUANCE OF THE TOWN OF WESTLAKE, TEXAS, GENERAL OBLIGATION REFUNDING BONDS, SERIES 2017, AND ENACTING OTHER PROVISIONS RELATED TO THE SUBJECT WHEREAS, the Town Council (the "Council") of the Town of Westlake, Texas (the "Town") previously adopted an ordinance authorizing the issuance of its General Obligation Refunding Bonds,Series 2017 (the 'Bonds") on October 24,2016(the "Bond Ordinance"); and WHEREAS, the Council desires to amend certain provisions of the Bond Ordinance to change the minimum present value savings parameter for the Bonds; and WHEREAS, any capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the Bond Ordinance; and WHEREAS, the meeting at which this Ordinance is considered is open to the public as required by law, and the public notice of the time, place and purpose of said meeting was given as required by Chapter 551,Texas Government Code,as amended; NOW, THEREFORE, BE IT ORDAINED BY THE TOWN COUNCIL OF THE TOWN OF WESTLAKE,TEXAS: SECTION 1: Bond Ordinance Amendment. Pursuant to Section 14(a) of the Bond Ordinance, Section 3(a)(iv) of the Bond Ordinance is hereby amended and restated in its entirety as follows: "(iv)the refunding achieved by the Bonds of must produce debt service savings of at least 3.5%measured on a present value basis as a percentage of the principal amount of the Refunded Obligations, with such savings to be net of any Issuer contribution to the refunding." The amendment shall be effective as of the date hereof. SECTION 2: Further Procedures. The Mayor, the Mayor Pro Tem, the Town Manager and the Town Secretary, individually or jointly, shall be and are hereby authorized and directed to furnish and execute such documents, instruments and certifications relating to the Town and the amendment of the Bond Ordinance, including certifications as to facts, estimates, circumstances and reasonable expectations, and to make or approve such revisions,additions, deletions and variations to this Ordinance as may be necessary or convenient to carry out or assist in carrying out the intent and _._._purposes.-of-this.-Ordinance,.or_as_may_.be_necessar_y_.to.-correct_any_ambiguity or.mistake,_Qr properly__ or more completely document the transactions contemplated and approved by this Ordinance. In addition, the statements, findings, representations, and determinations set forth in the recitals to this Ordinance are hereby incorporated into and made a part of this Ordinance for all purposes. Ordinance 805 Page I of 2 SECTION 3: This ordinance shall take effect immediately from and after its passage as the law in such case provides. PASSED AND APPROVED ON THIS 5TH DAY OF DECEMBER,2016. ATTEST: Laura Wheat,Mayor -4 k J-9 IVF41 xf Kell Edw s,Town Secretary Thomas E. Bryme , own Manager APPROVED AS TO FORM: 4ton Lowry own orney TEXPS Ordinance 805 Page 2 of 2 PRICING CERTIFICATE I, the undersigned, Town Manager of the Town of Westlake, Texas (the "Issuer"), acting as Pricing Officer pursuant to the authority granted to me by the ordinance adopted by the Town Council of the Issuer on October 24, 2016, as amended on December 5, 2016 (the "Bond Ordinance"), relating to the issuance of the Issuer's General Obligation Refunding Bonds, Series 2017 (the "Bonds"), hereby fmd, determine and commit on behalf of the Issuer to sell and deliver the Bonds on the following terms: 1. Capitalized terms not otherwise defined herein have the meaning assigned in the Bond Ordinance. 2. The Bonds are hereby sold and shall be delivered to FTN Financial Capital Markets, for cash at a price of$6,526,678.90 (which reflects the par amount of the Bonds, plus an aggregate premium of$774,059.40, less an underwriting discount of$42,380.50) according to the following terms: A. The aggregate principal amount of the Bonds shall be $5,795,000. B. The Bonds shall be dated January 15, 2017 and shall be numbered consecutively from R-1 upward, except that the initial Bond shall be numbered T-1. The Bonds shall be issued and be exchangeable in the denomination of any integral multiple of $5,000 of principal amount. C. The delivery date of the Bonds is February 7, 2017 (the "Issuance Date"). D. The Bonds shall mature and be payable on February 15 in each of the years and in the principal amounts and shall bear interest at the per annum rates set forth in the following schedule: Maturity Principal Interest Date Amount Rate 2018 $ 30,000 2.00 % 2019 30,000 2.00 2020 35,000 2.00 2021 35,000 2.00 2022 35,000 2.50 2023 35,000 3.00 2024 40,000 3.00 2025 605,000 4.00 2026 625,000 4.00 2027 645,000 4.00 2028 675,000 4.00 2029 715,000 4.00 2030 735,000 4.00 2031 775,000 4.00 2032 780,000 4.00 (ii) Interest on the Bonds shall accrue from the Issuance Date and shall be payable February 15 and August 15 of each year, commencing August 15, 2017, until maturity or prior redemption. The record date for the Bonds will be the las business day of the month preceding an interest payment date. The Bonds shall bear interest calculated on the basis of a 360-day year composed of twelve 30-day months. (iii) The debt service requirements of the Bonds is set forth in Exhibit A attached hereto. E. The Bonds shall be subject to redemption prior to maturity as set forth in the Form of Bond attached as an exhibit to the Bond Ordinance. F. The Initial Bond shall be initially registered in the name of FTN Financial Capital Markets. G. The Paying Agent/Registrar for the Bonds and the Escrow Agent for the Refunded Obligations shall be U.S. Bank National Association, Dallas, Texas. The Paying Agent/Registrar Agreement and the Escrow Agreement shall each be dated as of January 10, 2017, and such documents shall be completed to reflect the terms set forth herein. H. The form of Bonds, completed in accordance with the terms of sale set forth herein, are attached as an exhibit to the Bond Ordinance. I. In satisfaction of Section 1201.022(a)(3)(B), Texas Government Code, and upon consultation with the Issuer's Financial Advisor, the undersigned hereby certifies that the final terms of the Bonds as set forth herein are the most advantageous reasonably available to the Issuer. 3. The Bond proceeds are sufficient in amount to refund the Refunded Obligations and to pay the costs of issuing the Bonds. 4. The Eligible Refunded Obligations that are to be refunded in connection with the issuance of the Bonds, and the redemption date of the Refunded Obligations, are designated and set forth in Exhibit B attached hereto. The Refunded Obligations total $6,330,000. A completed form of the Notice of Defeasance and Redemption is included as an exhibit to the Bond Ordinance. 5. The issuance of the Bonds produces a debt service savings of 12.107% measured on a present value basis as a percentage of the principal amount of the Refunded Obligations. There will be no Issuer contribution to the refunding. 6. Pursuant to Section II(b) of the Ordinance, and in the name of the Issuer, distribution and use of the Preliminary Official Statement and the final Official Statement by the underwriters of the Bonds designated in paragraph 2 is authorized and approved. 7. For purposes of Section 13 of the Bond Ordinance, the financial information and operating data with respect to the Issuer to be provided annually in accordance with Section 13(a)(ii) of the Bond Ordinance are (1) the quantitative financial information and operating data of the general type included in the Official Statement under Tables numbered 1 through 12 and (2) the Issuer's comprehensive annual financial report. The Issuer will update and provide the information in the numbered tables within six months after the end of each fiscal year ending in and after 2016 and, if not submitted as part of such annual financial information, the Issuer will provide its audited financial statements when and if available, and in any event, within 12 2 months after the end of each fiscal year ending in and after 2016. If the audit of such financial statements is not complete within 12 months after any such fiscal year end, then the Issuer will 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. Any such financial statements will be prepared in accordance with the accounting principles described in Appendix B to the Official Statement or such other accounting principles as the Issuer may be required to employ from time to time pursuant to State law or regulation. 8. The net interest cost of the Bonds is 2.4719960%. The undersigned is relying upon the calculation of such rate by the Issuer's financial advisor. [Remainder of page left blank intentionally] 3 fq, WITNESS MY HAND this n jAA Al TOWN OF WESTLAKE,TEXAS By: Title: Town Manager v S-1 Exhibit A Schedule of Debt Service Requirements Bate Pdndpal coupon Interest Total P+1 FISC lTotal WMOV - f�'15=:tf1F Ft3.��5i� kk3.€G?5U 08 M-6{a 1!336.1 50 113.3fiv #L'35'a, _ ?5,03.0 «Cd. 11?.s"fs?.5ik 1483+.'.!4 i 1E_u-v c4W9 2613'500 kl-15 1 MA'AM ;.C> . f! ?1:5� 148,41 50 00 34=4.F :6.6'Sifl QZ<024L 35- x, 2.5tk'k kk:.✓2.4 k4', .�4 t�'15i2?:L 35M.0 3.@0'' 1t SAC 14"=4.00 t'i4 ?s Iii"<?LTJ DOWD ....._._ _ ---...._.__ ___. .__ __... ..__.... -----------__. ___.... 4'15. d 40M,00 000: Itl,'C$E.M 156'. ig1 'I -2%V 1113,00'M h€SWOO A{ts _.... MNIOA 130-00 - - Ce f.�:ls�k5� �`4r, 31st.r0 31,10004 0.3410y, €12"{5 O1 "5Cab3.t}6 44fKPs ?I.itUM zdil ( 13�..52F? "FtJ.tkYJ.f 41R i 15MUO,. .. TOW 55.7"A"AR $2.63F.84UA4 0,426MON A-1 Exhibit B Schedule of Refunded Obligations Town of Westlake, Texas, General Obligation Refunding Bonds, Series 2007, specifically, the bonds of such series that mature as shown in the following table: Maturity Principal Maturity Principal Date Amount Date Amount 2020 $ 125,000 2028 $ 730,000 *** *** 2029 760,000 2024 230,000 2030 790,000 2025 645,000 2031 825,000 2026 670,000 2032 855,000 2027 700,000 The Series 2007 Bonds shown above are called for redemption on May 1, 2017 at a redemption price of par plus accrued interest to the redemption date. B-1 TOWN OF WESTLAKE,TEXAS (Tarrant and Denton Counties,Texas) $5,795,000 GENERAL OBLIGATION REFUNDING BONDS SERIES 2017 PURCHASE AGREEMENT January 10, 2017 Honorable Mayor and Members of the Town Council Town of Westlake,Texas 1301 Solana Blvd., Suite 4202 Westlake,Texas 76262-1674 Ladies and Gentlemen: The undersigned, FTN Financial Capital Markets, acting on its own behalf, and not acting as fiduciary or agent for the Town of Westlake, Texas (the "Issuer"), offers to enter into this agreement(this"Agreement")with the Issuer,which,upon the Issuer's written acceptance of this offer, will be binding upon the Issuer and upon the Underwriter. This offer is made subject to the Issuer's written acceptance hereof on or before 10:00 p.m., Central Time, on January 10, 2017, and, if not so accepted, will be subject to withdrawal by the Underwriter upon written notice as described in Section 9 hereof delivered to the Issuer at any time prior to the acceptance hereof by the Issuer. Terms not otherwise defined in this Agreement shall have the same meanings set forth in the Bond Ordinance (as defined herein) or in the Official Statement (as defined herein). 1. Purchase and Sale of the Bonds. Subject to the terms and conditions and in reliance upon the representations, warranties and agreements set forth herein, the Underwriter hereby agree,jointly and severally, to purchase from the Issuer, and the Issuer hereby agrees to sell and deliver to the Underwriter, all, but not less than all, of the Issuer's $5,795,000 General Obligation Refunding Bonds, Series 2017 (the"Bonds"). The Issuer acknowledges and agrees that (i) the primary role of the Underwriter is to purchase securities for resale to investors in an arm's length transaction between the Issuer and the Underwriter; (ii)the Underwriter has financial and other interests that differ from those of the Issuer; (iii) the Underwriter is not acting as a municipal advisor, financial advisor or fiduciary to the Issuer and has not assumed any advisory or fiduciary responsibility to Issuer with respect to the transaction contemplated hereby and the discussions, undertakings and procedures leading thereto (irrespective of whether the Underwriter has provided or is currently providing other services to the Issuer on other matters); (iv) the only obligations the Underwriter has to the Issuer with respect to the transaction contemplated hereby expressly are set forth in this Agreement; OHSUSA:766246418 and (v) the Issuer has consulted its own financial, municipal, legal, accounting, tax and/or other advisors, as applicable, to the extent it deems appropriate. The Issuer hereby acknowledges that the Underwriter has provided to the Issuer prior disclosures regarding its role as underwriter and under Rule G-17 of the Municipal Securities Rulemaking Board(the "MSRB"), which have been received by the Issuer. The Issuer has a municipal advisor in this transaction. The Underwriter has been duly authorized to execute this Agreement. The principal amount of the Bonds to be issued, the dated date therefor, the maturities, redemption provisions and interest rates per annum are set forth in Schedule I hereto. The Bonds shall be as described in, and shall be issued and secured under and pursuant to the provisions of, (i) the ordinance adopted by the Town Council of the Issuer (the "Town Councir') on October 24, 2016, and a pricing certificate (the "Pricing Certificate"), dated the date of this Agreement, signed by an authorized representative of the Issuer appointed by the Town Council and duly authorized to approve the terms of pricing and sale for the Bonds (the ordinance and the Pricing Certificate are collectively referred to herein as the"Bond Ordinance"). The purchase price for the Bonds shall be $6,526,678.90 (representing the par amount of the Bonds, plus a net offering premium of$774,059.40 on the Bonds, and less an underwriting discount of$42,380.50). A portion of the proceeds received by the Issuer from the sale of the Bonds pursuant hereto and certain other funds of the Issuer, if any, shall be deposited with U.S. Bank National Association, Dallas, Texas, as escrow agent (the "Escrow Agent"), under and pursuant to the escrow agreement (the "Escrow Agreement") referred to in the Bond Ordinance for the purpose of depositing cash and/or purchasing securities (the "Securities") authorized by the ordinance authorizing the issuance of the obligations being refunded (the "Refunded Obligations"), which shall mature and the interest on which shall be payable at such times and in such amounts so as to provide money which, together with cash balances from time to time on deposit in the trust account established pursuant to the Escrow Agreement, will be sufficient to pay the principal of and interest on the Refunded Obligations when due on the redemption date. Delivered to the Issuer herewith is the Underwriter's good faith corporate check payable to the order of the Issuer in the amount of$59,450 (the "Check"). In the event that the Issuer accepts this Agreement, the Check shall be held uncashed by the Issuer until the time of Closing (as defined herein), at which time the Check shall be returned uncashed to the Underwriter. In the event that the Issuer does not accept this Agreement, the Check shall be immediately returned to the Underwriter. Should the Issuer fail to deliver the Bonds at the Closing, or should the Issuer be unable to satisfy the conditions of the obligations of the Underwriter to purchase, accept delivery of and pay for the Bonds, as set forth in this Agreement (unless waived by the Underwriter), or should such obligations of the Underwriter be terminated for any reason permitted by this Agreement, the Check shall immediately be returned to the Underwriter. In the event that the Underwriter fails (other than for a reason permitted hereunder) to purchase, accept delivery of and pay for the Bonds at the Closing as herein provided, the Check shall be cashed and the amount thereof retained by the Issuer as and for fully liquidated damages for such failure of the Underwriter, and, except as set forth in Sections 8 and 10 hereof, no party shall have any further rights against the other hereunder. The Underwriter and the Issuer understand that in such event the Issuer's actual damages may be greater or may be less than such amount. 2 OHSUSA:766246418 Accordingly, the Underwriter hereby waives any right to claim that the Issuer's actual damages are less than such amount, and the Issuer's acceptance of this offer shall constitute a waiver of any right the Issuer may have to additional damages from the Underwriter. The Underwriter hereby agrees not to stop or cause payment on the Check to be stopped unless the Issuer has breached any of the terms of this Agreement. 2. Public Offering. The Underwriter agrees to make a bona fide public offering of all of the Bonds at prices not to exceed the public offering prices (or yields not less than the reoffering yields) set forth on the inside cover of the Official Statement and may subsequently change such offering prices or yields without any requirement of prior notice. The Underwriter also reserve the right to: (i) over-allot or effect transactions that stabilize or maintain the market price of the Bonds at levels above those that might otherwise prevail in the open market and (ii) discontinue such stabilizing, if commenced, at any time without notice; provided, however that no such actions shall affect the certification of the original issue price of the Bonds as provided below. On or before Closing,the Underwriter shall execute an issue price certificate prepared by McCall, Parkhurst & Horton L.L.P., Dallas, Texas ("Bond Counsel") verifying the initial offering prices to the public at which the Underwriter sold or reasonably expected to sell a substantial amount of each stated maturity of the Bonds to the public. After the initial public offering, the Underwriter may offer and sell Bonds to certain dealers (including dealers depositing Bonds into investment trusts) and others at prices lower (or yields greater) than the public offering prices or yields stated on the inside cover of the Official Statement. 3. The Official Statement. (a) The Issuer previously has delivered copies of the Preliminary Official Statement dated January 3, 2017 (the "Preliminary Official Statement") to the Underwriter in a "designated electronic format," as defined in MSRB Rule G-32 ("Rule G-32"). The Issuer will prepare, or cause to be prepared, a final Official Statement relating to the Bonds, which will be (i) dated the date of this Agreement, (ii) complete within the meaning of the United States Securities and Exchange Commission's Rule 15c2-12, as amended (the "Rule"), (iii) substantially in the form of the most recent version of the Preliminary Official Statement provided to the Underwriter before the execution hereof and (iv) in both a "designated electronic format" consistent with the requirements of Rule G-32 and in a printed format. Such final Official Statement, including the cover page thereto, all exhibits, schedules, appendices, maps, charts, pictures, diagrams, reports, and statements included or incorporated therein or attached thereto, and all amendments and supplements thereto that may be authorized for use with respect to the Bonds, is herein referred to as the "Oficial Statement." Until the Official Statement has been prepared and is available for distribution, the Issuer shall provide to the Underwriter sufficient quantities(which may be in electronic form)of the Preliminary Official Statement as the Underwriter reasonably deems necessary to satisfy the obligation of the Underwriter under the Rule with respect to distribution to each potential customer,upon request, of a copy of the Preliminary Official Statement. (b) The Preliminary Official Statement has been prepared by the Issuer for use by the Underwriter in connection with the public offering, sale and distribution of the Bonds. The Issuer hereby represents and warrants that the Preliminary Official Statement 3 OHSUSA:76624641 S has been "deemed final" by the Issuer as of its date for purposes of the Rule, except for the omission of such information which is dependent upon the final pricing of the Bonds for completion, all as permitted to be excluded by Section(b)(1) of the Rule. (c) The Issuer represents that the Town Council or an authorized official of the Issuer has reviewed and approved the information in the Official Statement and hereby authorizes the Official Statement to be used by the Underwriter in connection with the public offering and sale of the Bonds. The Issuer ratifies and consents to the use by the Underwriter prior to the date hereof of the Preliminary Official Statement in connection with the public offering of the Bonds. The Issuer shall provide, or cause to be provided, to the Underwriter as soon as practicable after the date of the Issuer's acceptance of this Agreement(but, in any event,not later than within seven business days after the Issuer's acceptance of this Agreement and in sufficient time to accompany any confirmation that requests payment from any customer) copies of the Official Statement which is complete as of the date of its delivery to the Underwriter (i) in a "designated electronic format" consistent with the requirements of Rule G-32 and (ii) in a printed format in such quantity as the Underwriter shall request in order for the Underwriter to comply with Section (b)(4) of the Rule and the rules of the MSRB. The Issuer hereby confirms that it does not object to the distribution of the Preliminary Official Statement or the Official Statement in electronic form. (d) If, after the date of this Agreement to and including the date the Underwriter are no longer required to provide an Official Statement to potential customers who request the same pursuant to the Rule (the earlier of(i) ninety (90) days from the"end of the underwriting period" (as defined in the Rule) and (ii) the time when the Official Statement is available to any person from the MSRB, but in no case less than twenty-five(25) days after the"end of the underwriting period" for the Bonds), the Issuer becomes aware of any fact or event which might or would cause the Official Statement, as then supplemented or amended, to contain any untrue statement of a material fact or to omit to state a material fact required to be stated therein, in light of the circumstances under which they were made, or necessary to make the statements therein not misleading, or if it is necessary to amend or supplement the Official Statement to comply with law, the Issuer will notify the Underwriter (and for the purposes of this clause provide the Underwriter with such information as it may from time to time reasonably request), and if, in the reasonable opinion of the Underwriter, such fact or event requires preparation and publication of a supplement or amendment to the Official Statement, the Issuer will forthwith prepare and furnish, at the Issuer's own expense (in a form and manner approved by the Underwriter), copies of either amendments or supplements to the Official Statement so that the statements in the Official Statement as so amended and supplemented will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading or so that the Official Statement will comply with law; provided, however, that for all purposes of this Agreement and any representation, warranty or covenant made herein, or any certificate delivered by the Issuer in accordance herewith, the Issuer makes no representations with respect to the descriptions in the Preliminary Official Statement or the Official Statement of The Depository Trust Company, New York, New York ("DTC"), or its book-entry- 4 OHSUSA:766246418 only system. If such notification shall be subsequent to the Closing, the Issuer shall furnish such legal opinions, certificates, instruments and other documents as the Underwriter may reasonably deem necessary to evidence the truth and accuracy of such supplement or amendment to the Official Statement. The Issuer shall provide any such amendment or supplement, or cause any such amendment or supplement to be provided, (i) in a"designated electronic format" consistent with the requirements of Rule G-32 and (ii) in a printed format in such quantity as the Underwriter shall request in order for the Underwriter to comply with Section(b)(4) of the Rule and the rules of the MSRB. (e) The Underwriter hereby agrees to timely file, or cause to be filed, the Official Statement(and any amendment or supplement to the Official Statement prepared in accordance with Section 3(d) above) with (i) the MSRB or its designee (including the MSRB's Electronic Municipal Market Access System) or(ii) other repositories approved from time to time by the United States Securities and Exchange Commission(in addition to the filing referred to in clause (i) above). Unless otherwise notified in writing by the Underwriter, the Issuer can assume that the"end of the underwriting period"for purposes of the Rule is the date of the Closing. (f) To the knowledge and belief of the Issuer, the Official Statement contains information, including financial information or operating data, concerning every entity, enterprise, fund, account, or person that is material to an evaluation of the offering of the Bonds. 4. Representations, Warranties, and Covenants of the Issuer. The Issuer hereby represents and warrants to and covenants with the Underwriter that: (a) The Issuer is a "Type A general law city" duly created, organized and existing under the laws of the State of Texas (the "State"), and has full legal right,power and authority, and at the date of the Closing will have full legal right, power and authority, under the laws of the State, including particularly Chapter 1207, Texas Government Code, as amended (the "Act"), (i)to enter into, execute and deliver this Agreement, the Bond Ordinance, the Escrow Agreement and the Continuing Disclosure Undertaking, as defined in Section 6(i)(4) hereof, and all documents required hereunder and thereunder to be executed and delivered by the Issuer (this Agreement, the Bond Ordinance, the Escrow Agreement and the Continuing Disclosure Undertaking are hereinafter referred to as the"Issuer Documents"), (ii)to sell, issue and deliver the Bonds to the Underwriter as provided herein, and (iii) to carry out and consummate the transactions described by the Issuer Documents and the Official Statement; and, the Issuer has complied, and will at the Closing be in compliance, in all material respects with the terms of the Act and the Issuer Documents as they pertain to such transactions. (b) By all necessary official action of the Issuer prior to or concurrently with the acceptance hereof,the Issuer has duly authorized all necessary action to be taken by it for(i)the adoption of the Bond Ordinance and the issuance and sale of the Bonds on the terms set forth herein, (ii) the approval, execution and delivery of, and the performance by the Issuer of the obligations on its part, contained in the Bonds and the Issuer Documents, (iii)the approval, distribution and use of the Preliminary Official Statement 5 OHSUSA:766246418 and the Official Statement for use by the Underwriter in connection with the public offering of the Bonds and (iv) the consummation by it of all other transactions described in the Official Statement, and the Issuer Documents and any and all such other agreements and documents as may be required to be executed, delivered and/or received by the Issuer in order to carry out, give effect to, and consummate the transactions described herein and in the Official Statement. (c) This Agreement constitutes a legal, valid and binding obligation of the Issuer, enforceable in accordance with its terms, subject to bankruptcy, insolvency, reorganization, moratorium, sovereign immunity of political subdivisions and other similar laws and principles of equity relating to or affecting the enforcement of creditors' rights; the other Issuer Documents, when duly executed and delivered, will constitute legal, valid and binding obligations of the Issuer, enforceable in accordance with their respective terms, subject to sovereign immunity of political subdivisions, bankruptcy, insolvency, reorganization, moratorium and other similar laws and principles of equity relating to or affecting the enforcement of creditors' rights; the Bonds, when issued, delivered and paid for, in accordance with the Bond Ordinance and this Agreement, will constitute legal, valid and binding obligations of the Issuer entitled to the benefits of the Bond Ordinance and enforceable in accordance with their terms, subject to sovereign immunity of political subdivisions, bankruptcy, insolvency, reorganization, moratorium and other similar laws and principles of equity relating to or affecting the enforcement of creditors' rights; upon the issuance, authentication and delivery of the Bonds as aforesaid, the Bond Ordinance will provide, for the benefit of the holders of the Bonds, the legally valid and binding pledge of ad valorem taxes and lien it purports to create as set forth in the Bond Ordinance, being the pledge to levy, assess and collect an annual ad valorem tax, within the limits prescribed by law, upon all taxable property within the boundaries of the Issuer, sufficient to pay the principal of and interest on the Bonds when due. (d) To its knowledge, the Issuer is not in breach of or default in any material respect under any applicable constitutional provision, law or administrative regulation of the State or the United States relating to the issuance of the Bonds or any applicable judgment or decree or any loan agreement, indenture, bond, note, resolution, agreement or other instrument to which the Issuer is a party or to which the Issuer is or any of its property or assets are otherwise subject, and no event has occurred and is continuing which constitutes or with the passage of time or the giving of notice, or both, would constitute a default or event of default by the Issuer in any material respect under any of the foregoing; and the execution and delivery of the Bonds, the Issuer Documents and the adoption of the Bond Ordinance and compliance with the provisions on the Issuer's part contained therein, will not conflict with or constitute a material breach of or default in any material respect under any constitutional provision, administrative regulation, judgment, decree, loan agreement, indenture, bond, note, resolution, agreement or other instrument to which the Issuer is a party or to which the Issuer is or to which any of its property or assets are otherwise subject nor will any such execution, delivery, adoption or compliance result in the creation or imposition of any lien, charge or other security interest or encumbrance of any nature whatsoever upon any of the property or assets of the Issuer to be pledged to secure the Bonds or under the terms of any such law, regulation or instrument, except as provided by the Bonds and the Bond Ordinance. 6 OHSUSA:766246418 (e) Except for the approval of the Bonds by the Attorney General of the State and the registration thereof by the Comptroller of Public Accounts of the State, all authorizations, approvals, licenses, permits, consents and orders of any governmental authority, legislative body,board, agency or commission having jurisdiction of the matter which are required for the due authorization of, which would constitute a condition precedent to, or the absence of which would materially adversely affect the due performance by the Issuer of its obligations under the Issuer Documents and the Bonds have been duly obtained, except for such approvals, consents and orders as may be required under the Blue Sky or securities laws of any jurisdiction in connection with the offering and sale of the Bonds. (f) The Bonds and the Bond Ordinance conform to the descriptions thereof contained in the Official Statement under the caption "DESCRIPTION OF THE BONDS"; the proceeds of the sale of the Bonds will be applied generally as described in the Official Statement under the caption "PLAN OF FINANCING"; and the Continuing Disclosure Undertaking conforms to the description thereof contained in the Official Statement under the subcaption "OTHER MATTERS - Continuing Disclosure of Information." (g) Except as disclosed in the Official Statement under the subcaption "OTHER MATTERS - Continuing Disclosure of Information", during the last five years the Issuer has complied in all material respects with its previous continuing disclosure undertakings made by it in accordance with the Rule. (h) Except as may be disclosed in the Official Statement, there is no litigation, action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court, government agency,public board or body,pending or,to the best knowledge of the Issuer after due inquiry, threatened against the Issuer, affecting the existence of the Issuer or the titles of its officers to their respective offices, or affecting or seeking to prohibit, restrain or enjoin the sale, issuance or delivery of the Bonds or the levy and collection of taxes pledged to the payment of principal of and interest on the Bonds pursuant to the Bond Ordinance or in any way contesting or affecting the validity or enforceability of the Bonds or the Issuer Documents, or contesting the exclusion from gross income of interest on the Bonds for federal income tax purposes, or contesting in any way the completeness or accuracy of the Preliminary Official Statement or the Official Statement or any supplement or amendment thereto, or contesting the powers of the Issuer or any authority for the issuance of the Bonds, the adoption of the Bond Ordinance or the execution and delivery of the Issuer Documents, wherein an unfavorable decision, ruling or finding would materially adversely affect the validity or enforceability of the Bonds or the Issuer Documents. (i) As of the date thereof and as the date hereof, the Preliminary Official Statement did not and does not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, however, that for all purposes of this Agreement including, without limitation, for purposes of subparagraphs (i), 0) and (k), and any certificate delivered by the Issuer 7 OHSUSA:766246418 in accordance herewith, the Issuer makes no representations with respect to the descriptions in the Preliminary Official Statement or the Official Statement of DTC and its book-entry-only system. 0) During the period beginning when the Official Statement is delivered to the Underwriter pursuant to paragraph (a) of Section 3 of this Agreement and (unless the Official Statement is amended or supplemented pursuant to paragraph(d) of Section 3 of this Agreement) at all times subsequent thereto during the period up to and including the twenty-fifth (25th) day subsequent to the "end of the underwriting period," the Official Statement does not and will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made,not misleading. (k) If the Official Statement is supplemented or amended pursuant to paragraph(d) of Section 3 of this Agreement, at the time of each supplement or amendment thereto and (unless subsequently again supplemented or amended pursuant to such paragraph) at all times subsequent thereto during the period up to and including the twenty-fifth (25th) day subsequent to the "end of the underwriting period," the Official Statement as so supplemented or amended will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which made, not misleading. (1) The Issuer has the legal authority to apply and will apply, or cause to be applied, the proceeds from the sale of the Bonds as provided in and subject to all of the terms and provisions of the Bond Ordinance and will not take or omit to take any action which action or omission will adversely affect the exclusion from gross income for federal income tax purposes of the interest on the Bonds. (m) The Issuer will furnish such information and execute such instruments and take such action in cooperation with the Underwriter, at the sole expense of the Underwriter, as the Underwriter may reasonably request (1)to (i) qualify the Bonds for offer and sale under the Blue Sky or other securities laws and regulations of such states and other jurisdictions in the United States as the Underwriter may designate and (ii)determine the eligibility of the Bonds for investment under the laws of such states and other jurisdictions and (2)to continue such qualifications in effect so long as required for the distribution of the Bonds (provided, however, that the Issuer will not be required to qualify as a foreign corporation or to file any consents to service of process under the laws of any jurisdiction) and will advise the Underwriter immediately of receipt by the Issuer of any notification with respect to the suspension of the qualification of the Bonds for sale in any jurisdiction or the initiation or threat of any proceeding for that purpose. (n) The financial statements of, and other financial information regarding, the Issuer in the Official Statement fairly present the financial position and results of the Issuer as of the dates and for the periods therein set forth. The financial statements of the Issuer have been prepared in accordance with generally accepted accounting principles consistently applied, and except as noted in the Official Statement, the other historical 8 OHSUSA:766246418 financial information set forth in the Official Statement has been presented on a basis consistent with that of the Issuer's audited financial statements included in the Official Statement. Prior to the Closing, the Issuer will not take any action within or under its control that will cause any adverse change of a material nature in such financial position, results of operations or condition, financial or otherwise, of the Issuer. (o) Except as may be disclosed in the Official Statement, the Issuer is not a party to any litigation or other proceeding pending or, to its knowledge,threatened which, if decided adversely to the Issuer, would have a materially adverse effect on the financial condition of the Issuer. (p) Prior to the Closing the Issuer will not offer or issue any bonds, notes or other obligations for borrowed money or incur any material liabilities, direct or contingent, payable from or secured by any of the ad valorem tax revenues which will secure the Bonds, except as may be incurred in the ordinary course of business, without the prior approval of the Underwriter,which approval shall not be unreasonably withheld. (q) The Issuer, to the extent heretofore requested in writing by the Underwriter, has delivered to the Underwriter true, correct, complete, and legible copies of all information, applications, reports, or other documents of any nature whatsoever submitted to any rating agency for the purpose of obtaining a rating for the Bonds true, correct, complete, and legible copies of all correspondence or other communications relating thereto. (r) Any certificate, signed by any official of the Issuer authorized to do so in connection with the transactions described in this Agreement, shall be deemed a representation and warranty by the Issuer to the Underwriter as to the statements made therein. (s) The Issuer covenants that between the date hereof and the date of Closing, it will take no actions which will cause the representations and warranties made in this Section to be untrue in any material respect as of the date of Closing. By delivering the Official Statement to the Underwriter, the Issuer shall be deemed to have reaffirmed, with respect to such Official Statement, the representations, warranties and covenants set forth above with respect to the Preliminary Official Statement. 5. Closing. (a) At 10:00 a.m. Central Time, on February 7, 2017, or at such other time and date as shall have been mutually agreed upon by the Issuer and the Underwriter(the "Closing"), the Issuer will, subject to the terms and conditions hereof, deliver the Bonds to the Underwriter, duly executed and authenticated, together with the other documents hereinafter mentioned, and the Underwriter will, subject to the terms and conditions hereof, accept such delivery and pay the purchase price of the Bonds, as set forth in Section 1 of this Agreement in immediately available funds by wire transfer to the account of the Issuer as indicated by U.S. Bank National Association, Dallas, Texas (the "Paying Agent/Registrar"). Payment for the Bonds as aforesaid shall be made at the 9 OHSUSA:766246418 offices of the Paying Agent/Registrar or such other place as shall have been mutually agreed upon by the Issuer and the Underwriter. (b) Delivery of the Bonds in definitive form, utilizing the book entry system, shall be made through DTC, or at the office of the Paying Agent/Registrar acting on behalf of DTC. The Bonds shall be delivered in definitive fully registered form, bearing CUSIP numbers without coupons, with one Bond for each maturity of the Bonds, registered in the name of Cede&Co., all as provided in the Bond Ordinance, and shall be made available at the offices of the DTC (or if Bonds are to be held in safekeeping for the DTC by the Paying Agent/Registrar pursuant to DTC's FAST System, at the office of the Paying Agent/Registrar) to the Underwriter at least one (1) business day before the date of the Closing for the purposes of inspection. 6. Closing Conditions. The Underwriter has entered into this Agreement in reliance upon the representations, warranties and agreements of the Issuer contained herein, and in reliance upon the representations, warranties and agreements to be contained in the documents and instruments to be delivered at the Closing and upon the performance by the Issuer of its obligations hereunder, both as of the date hereof and as of the date of the Closing. Accordingly, the Underwriter's obligations under this Agreement to purchase, to accept delivery of and to pay for the Bonds shall be conditioned upon the performance by the Issuer of its obligations to be performed hereunder and under such documents and instruments at or prior to the Closing, and shall also be subject to the following additional conditions, including the delivery by the Issuer of such documents as are enumerated herein, in form and substance reasonably satisfactory to the Underwriter unless waived by the Underwriter: (a) The representations and warranties of the Issuer contained herein shall be true, complete and correct in all material respects on the date hereof and on and as of the date of the Closing, as if made on the date of the Closing; (b) The Issuer shall have performed and complied with all agreements and conditions required by this Agreement to be performed or complied with by it prior to or at the Closing; (c) At the time of the Closing, (i) the Issuer Documents and the Bonds shall be in full force and effect in the form heretofore approved by the Underwriter and shall not have been amended, modified or supplemented, and the Official Statement shall not have been supplemented or amended, except in any such case as may have been agreed to by the Underwriter; and (ii) the net proceeds of the sale of the Bonds and any funds to be provided by the Issuer shall be deposited and applied as described in the Official Statement and in the Bond Ordinance and (iii) all actions of the Issuer required to be taken by the Issuer shall be performed in order for Bond Counsel to deliver the opinions referred to hereafter; (d) At the time of the Closing, all official action of the Issuer relating to the Bonds and the Issuer Documents shall be in full force and effect and shall not have been amended, modified or supplemented, except as may have been agreed to by the Underwriter; 10 OHSUSA:766246418 (e) At or prior to the Closing, the Bond Ordinance (including the Pricing Certificate) shall have been duly executed and delivered by the Issuer and the Issuer shall have duly executed and delivered the definitive Bonds; (f) At the time of the Closing, there shall not have occurred any change or any development involving a prospective change in the condition, financial or otherwise, or in the revenues or operations of the Issuer, from that set forth in the Official Statement that in the reasonable judgment of the Underwriter, is material and adverse and that makes it, in the reasonable judgment of the Underwriter, impracticable to market the Bonds on the terms and in the manner described in the Official Statement; (g) The Issuer shall not currently be in default with respect to the payment of principal or interest when due on any of its outstanding Obligations for borrowed money; (h) All steps to be taken and all instruments and other documents to be executed, and all other legal matters in connection with the transactions described in this Agreement shall be reasonably satisfactory in legal form and effect to the Underwriter; (i) At or prior to the Closing, the Underwriter shall have received copies of each of the following documents: (1) The Official Statement, and each supplement or amendment thereto, if any, as may have been agreed to by the Underwriter in(i) a"designated electronic format" that meets the requirements of Rule G-32 and (ii) a printed format; (2) The Bond Ordinance, including the Pricing Certificate, having been duly adopted by the Issuer and certified as being in full force and effect, with such supplements or amendments as may have been agreed to by the Underwriter, and the Pricing Certificate; (3) An executed copy of the Escrow Agreement, having been duly adopted by the Issuer, with such supplements or amendments as may have been agreed to by the Underwriter; (4) The undertaking of the Issuer which is contained within the Bond Ordinance and satisfies the requirements of Section(b)(5)(i) of the Rule (the "Continuing Disclosure Undertaking"); (5) The approving opinion of Bond Counsel in substantially the form attached to the Official Statement; (6) A supplemental opinion of Bond Counsel addressed to the Issuer and the Underwriter, substantially to the effect that: (A) the ordinance has been duly adopted by the Issuer and the Pricing Certificate has been duly executed by the Pricing Officer pursuant 11 OHSUSA:766246418 to the ordinance, and both of the foregoing documents are in full force and effect; (B) the Bonds are exempted securities under section 3(a)(2) of the Securities Act of 1933, as amended (the "1933 Act"), and the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"), and it is not necessary, in connection with the offering and sale of the Bonds to register the Bonds under the 1933 Act or to qualify the Bond Ordinance under the Trust Indenture Act; and (C) Bond Counsel has not verified and is not passing upon, and does not assume any responsibility for, the accuracy, completeness or fairness of the statements contained in the Official Statement, but has reviewed the statements and information contained in the Official Statement under the captions and subcaptions "PLAN OF FINANCE" (exclusive of the subcapiton "Source and Uses of Funds"), "DESCRIPTION OF THE BONDS" (exclusive of the subcaptions`Book- Entry-Only-System," and `Bondholders' Remedies"), "LEGAL MATTERS" (exclusive of the last sentence of the first paragraph thereof), "TAX MATTERS", "OTHER MATTERS — Legal Investments and Eligibility to Secure Public Funds in Texas", "OTHER MATTERS — Registration and Qualification of Bonds for Sale" and "OTHER MATTERS - Continuing Disclosure of Information" (exclusive of the subcaption "Compliance with Prior Undertakings") and Bond Counsel is of the opinion that the information relating to the Bonds and the legal issues contained under such captions and subcaptions is an accurate and fair description of the laws and legal issues addressed therein and, with respect to the Bonds, such information conforms to the Bond Ordinance. (7) An opinion, dated the date of the Closing and addressed to the Underwriter, of counsel for the Underwriter,to the effect that: (A) the Bonds are exempted securities that do not require registration under the 1933 Act and the Trust Indenture Act and it is not necessary, in connection with the offering and sale of the Bonds to register the Bonds under the 1933 Act and the Bond Ordinance need not be qualified under the Trust Indenture Act; and (B) based upon their participation in the preparation of the Official Statement as counsel for the Underwriter and their participation at conferences at which the Official Statement was discussed, but without having undertaken to determine independently the accuracy, completeness or fairness of the statements contained in the Official Statement, such counsel has no reason to believe that the Official Statement contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading (except for any financial, 12 OHSUSA:766246418 forecast, technical and statistical statements and data included in the Official Statement, the information regarding DTC and its book-entry system, in each case as to which no view need be expressed); (8) A certificate, dated the date of Closing, signed by the Mayor of the Town Council of the Issuer or another official of the Issuer acceptable to the Underwriter to the effect that (i) all official actions of the Issuer relating to the Bonds, the Issuer Documents and the Official Statement have been duly taken by the Issuer, are in full force and effect, and have not been amended, modified, supplemented or repealed; (ii) the representations and warranties of the Issuer contained herein are true and correct in all material respects on and as of the date of Closing as if made on the date of Closing; (iii) no litigation or proceeding against the Issuer is pending or, to her knowledge, threatened in any court or administrative body,which would(a) contest the right of the officials of the Issuer to hold and exercise their respective positions, (b) contest the due organization and valid existence of the Issuer, (c) contest the validity, due authorization and execution of the Bonds or the Issuer Documents, or (d) attempt to limit, enjoin or otherwise prevent the Issuer from functioning and levying and collecting the taxes pledged to pay the principal of and interest on the Bonds, or the pledge thereof; (iv) to the best of her knowledge, no event affecting the Issuer has occurred since the date of the Official Statement which should be disclosed in the Official Statement for the purpose for which it is to be used or which it is necessary to disclose therein in order to make the statements and information therein, in light of the circumstances under which they were made, not misleading in any material respect as of the time of Closing, and the information contained in the Official Statement is correct in all material respects and, as of the date of the Official Statement did not, and as of the date of the Closing does not, contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements made therein, in the light of the circumstances under which they were made, not misleading; and(v) there has not been any material adverse change in the financial condition of the Issuer since September 30, 2015, the latest date as of which audited financial information is available; (9) A certificate of the Issuer in form and substance satisfactory to Bond Counsel and counsel to the Underwriter (a) setting forth the facts, estimates and circumstances in existence on the date of the Closing, which establish that it is not expected that the proceeds of the Bonds will be used in a manner that would cause the Bonds to be "arbitrage bonds" within the meaning of Section 148 of the Internal Revenue Code of 1986, as amended (the "Code"), and any applicable regulations (whether final, temporary or proposed), issued pursuant to the Code, and (b) certifying that to the best of the knowledge and belief of the Issuer there are no other facts, estimates or circumstances that would materially change the conclusions, representations and expectations contained in such certificate; 13 OHSUSA:766246418 (10) Evidence of the filing or a covenant to file an IRS Form 8038G, as required by section 149(e) of the Internal Revenue Code of 1986, as amended, of a statement concerning the Bonds with the Secretary of the Treasury; (11) The approving opinion of the Attorney General of the State and the registration certificate of the Comptroller of Public Accounts of the State in respect of the Bonds; (12) Any other certificates and opinions required by the Bond Ordinance for the issuance thereunder of the Bonds; (13) Evidence satisfactory to the Underwriter that the Bonds have been rated "AAA" by S&P Global Ratings ("S&P"), without regard to credit enhancement, and that such rating is in effect as of the date of Closing; (14) A copy of a special report prepared by Grant Thornton LLP, a firm of certified public accountants (the"Verification Agent"),relating to the Refunded Obligations, addressed to the Issuer, Bond Counsel and the Underwriter, verifying the arithmetical computations of the adequacy of the maturing principal and interest on the escrowed Securities and uninvested cash on hand under the Escrow Agreement to pay the principal of and interest on the Refunded Obligations when due; (15) Evidence satisfactory to the Underwriter that the moneys and escrowed Securities identified in the special report of the Verification Agent have been or will be received and that such moneys and escrowed Securities have been or will be deposited in an escrow fund under the Escrow Agreement; and (16) Such additional legal opinions, certificates, instruments and other documents as the Underwriter or counsel to the Underwriter may reasonably request to evidence the truth and accuracy, as of the date hereof and as of the date of the Closing, of the Issuer's representations and warranties contained herein and of the statements and information contained in the Official Statement and the due performance or satisfaction by the Issuer on or prior to the date of the Closing of all the respective agreements then to be performed and conditions then to be satisfied by the Issuer. All of the opinions, letters, certificates, instruments and other documents mentioned above or elsewhere in this Agreement shall be deemed to be in compliance with the provisions hereof if,but only if, they are in form and substance reasonably satisfactory to the Underwriter. If the Issuer shall be unable to satisfy the conditions to the obligations of the Underwriter to purchase, to accept delivery of and to pay for the Bonds contained in this Agreement, or if the obligations of the Underwriter to purchase, to accept delivery of and to pay for the Bonds shall be terminated for any reason permitted by this Agreement, this Agreement shall terminate and neither the Underwriter nor the Issuer shall be under any further obligation hereunder, except that the respective obligations of the Issuer and the and the Underwriter set forth in Sections 1 (with respect to the Check), 4 and 8 hereof shall continue in full force and effect. 14 OHSUSA:766246418 7. Termination. The Underwriter shall have the right to cancel its obligation to purchase the Bonds if(as evidenced by a written notice provided in accordance with Section 9 below to the Issuer terminating this Agreement), between the date of this Agreement and the Closing, the market price or marketability of the Bonds shall be materially adversely affected, in the reasonable judgment of the Underwriter by the occurrence of any of the following: (a) Legislation shall be enacted by the Congress or recommended to the Congress for passage by the President of the United States, or the Treasury Department of the United States or the Internal Revenue Service or favorably reported for passage to either House of the Congress by any committee of such House to which such legislation has been referred for consideration, a decision by a court of the United States or of the State or the United States Tax Court shall be rendered, or an order, ruling, regulation (final, temporary or proposed), press release, statement or other form of notice by or on behalf of the Treasury Department of the United States, the Internal Revenue Service or other governmental agency shall be made or proposed, the effect of any or all of which would be to impose, directly or indirectly, federal income taxation upon interest received on obligations of the general character of the Bonds, of the interest on the Bonds as described in the Official Statement, or other action; (b) Legislation introduced in or enacted (or resolution passed) by the Congress or an order, decree, or injunction issued by any court of competent jurisdiction, or an order, ruling, regulation (final, temporary, or proposed), press release or other form of notice issued or made by or on behalf of the Securities and Exchange Commission, or any other governmental agency having jurisdiction of the subject matter,to the effect that obligations of the general character of the Bonds, including any or all underlying arrangements, are not exempt from registration under or other requirements of the 1933 Act, or that the Bond Ordinance is not exempt from qualification under or other requirements of the Trust Indenture Act, or that the issuance, offering, or sale of obligations of the general character of the Bonds, including any or all underlying arrangements, as contemplated hereby or by the Official Statement or otherwise, is or would be in violation of the federal securities law as amended and then in effect; (c) Any state blue sky or securities commission or other governmental agency or body in any state in which more than 15% of the Bonds have been offered and sold shall have withheld registration, exemption or clearance of the offering of the Bonds as described herein, or issued a stop order or similar ruling relating thereto, provided that such withholding or stop order is not due to the malfeasance, misfeasance or nonfeasance of the Underwriter; (d) A general suspension of trading in securities on the New York Stock Exchange or any other major exchange, the establishment of minimum prices on such exchange, the establishment of material restrictions (not in force as of the date hereof) upon trading securities generally by any governmental authority or any national securities exchange, a general banking moratorium declared by federal, State of New York, or State officials authorized to do so or a material disruption in securities settlement, payment or clearance services in the United States shall have occurred; 15 OHSUSA:766246418 (e) The New York Stock Exchange or other national securities exchange or any governmental authority shall impose, as to the Bonds or as to obligations of the general character of the Bonds, any material restrictions not now in force, or increase materially those now in force, with respect to the extension of credit by, or the charge to the net capital requirements of,the Underwriter; (f) Any amendment to the federal or Texas Constitution or action by any federal or Texas court, legislative body, regulatory body, or other authority materially adversely affecting the tax status of the Issuer, its property, income, securities(or interest thereon), or the validity or enforceability of the assessments or the levy of taxes to pay principal of and interest on the Bonds; (g) Any event occurring, or information becoming known which, in the reasonable judgment of the Underwriter, makes untrue in any material respect any material statement or information contained in the Official Statement, or has the effect that the Official Statement contains any untrue statement of material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; (h) There shall have occurred since the date of this Agreement any materially adverse change in the affairs or financial condition of the Issuer, except for changes which the Official Statement discloses are expected to occur; (i) There shall have occurred (whether or not foreseeable) any (a) new material outbreak of hostilities in the United States (including, without limitation, an act of terrorism) or (b) new material other national or international calamity or crisis including, but not limited to, an escalation of hostilities that existed prior to the date hereof, or (c) material financial crisis or adverse change in the financial or economic conditions affecting the United States government or the securities markets in the United States; 6) Any fact or event shall exist or have existed that, in the Underwriter's reasonable judgment, requires or has required an amendment of or supplement to the Official Statement; (k) There shall have occurred or published notice shall have been given of any downgrading, or any credit watch or credit review shall have been issued or other published notice shall have been given of any intended or potential downgrading, in the rating accorded any of the Issuer's obligations secured in a like manner as the Bonds (including the rating to be accorded the Bonds); (1) The purchase of and payment for the Bonds by the Underwriter, or the resale of the Bonds by the Underwriter, on the terms and conditions herein provided shall be prohibited by any applicable law, governmental authority, board, agency or commission; provided, however, that such prohibition occurs after the date of this Agreement and is not caused by an intentional act or omission of the Underwriter; 16 OHSUSA:766246418 (m) A decision by a court of the United States shall be rendered, or a stop order, release, regulation or no-action letter by or on behalf of the Securities and Exchange Commission or any other governmental agency having jurisdiction of the subject matter shall have been issued or made, to the effect that the issuance, offering or sale of the Bonds, including the underlying obligations as described in this Agreement or the Official Statement, or any document relating to the issuance, offering or sale of the Bonds, is or would be in violation of any provision of the federal securities laws at the Closing date, including 1933 Act, the Securities Exchange Act of 1934 and the Trust Indenture Act; or (n) The Issuer is unable on the date of Closing to fund the Escrow Fund created pursuant to the terms of the Escrow Agreement. With respect to the condition described in subparagraphs (e) and (1) above, the Underwriter is not aware of any current, pending or proposed law or government inquiry or investigation as of the date of execution of this Agreement which would permit the Underwriter to invoke its termination rights thereunder. 8. Expenses. (a) The Underwriter shall be under no obligation to pay, and the Issuer shall pay all expenses incident to the performance of the Issuer's obligations hereunder, including, but not limited to (i) the cost of preparation and printing of the Bonds, Preliminary Official Statement, Official Statement and any amendment or supplement thereto, (ii) the fees and disbursements of Bond Counsel and other counsel retained by the Issuer, if any; (iii)the fees and disbursements of the Financial Advisor to the Issuer, if any; (iv) the fees and disbursements of the Paying Agent/Registrar, the Verification Agent and the Escrow Agent; (v) the fees and disbursements of engineers, accountants, and other experts, consultants or advisers retained by the Issuer, if any; and (vi) all fees and expenses in connection with obtaining bond ratings. The Issuer shall also pay for any expenses (included in the expense component of the Underwriter's discount) mutually agreed by the Issuer and the Underwriter to be reasonably considered expenses of the Issuer and are incurred by the Underwriter which are incidental to implementing this Agreement and the issuance of the Bonds. The Issuer shall pay for any expenses (included in the expense component of the Underwriter's discount) incurred by the Underwriter on behalf of the Issuer in connection with the marketing, issuance and delivery of the Bonds. (b) The Issuer acknowledges that the Underwriter will pay from the Underwriter's expense allocation of the underwriting discount the applicable per bond assessment charged by the Municipal Advisory Council of Texas, a non-profit corporation whose purpose is to collect, maintain and distribute information relating to issuing entities of municipal securities. (c) Except as provided for above, the Underwriter shall pay (i) the cost of preparation and printing of this Agreement, the Blue Sky Survey and Legal Investment Memorandum, if any; (ii) all advertising expenses in connection with the public offering 17 OHSUSA:766246418 of the Bonds; and (iii) all other expenses incurred by them in connection with the public offering of the Bonds, including the fees and disbursements of counsel retained by the Underwriter. Certain payments may be in the form of inclusion of such expenses in the expense component of the Underwriter's discount. 9. Notices. Any notice or other communication to be given to the Issuer under this Agreement may be given by delivering the same in writing or via facsimile at Town of Westlake, Texas, 1301 Solana Blvd., Suite 4202, Westlake, Texas 76262-1674, Attention: Town Manager; and, any notice or other communication to be given to the Underwriter under this Agreement may be given by delivering the same in writing to FTN Financial Capital Markets, 845 Crossover Lane, Suite 150,Memphis, Tennessee 38117-4904, Attention: Hank Tansey. 10. Parties in Interest. This Agreement as heretofore specified shall constitute the entire agreement between us and is made solely for the benefit of the Issuer and the Underwriter (including successors or assigns of the Underwriter) and no other person shall acquire or have any right hereunder or by virtue hereof. This Agreement may not be assigned by the Issuer. All of the Underwriter's and Issuer's representations and warranties contained in this Agreement shall remain operative and in full force and effect, regardless of(i) any investigations made by or on behalf of the Underwriter; (ii) delivery of and payment for the Bonds pursuant to this Agreement; and(iii) any termination of this Agreement. 11. Effectiveness. This Agreement shall become effective upon the acceptance hereof by the Issuer and shall be valid and enforceable at the time of such acceptance. 12. Choice of Law; Venue. This Agreement shall be governed by and construed in accordance with the law of the State and venue shall be proper only in the courts of competent jurisdiction serving Tarrant County,Texas. 13. Severability. If any provision of this Agreement shall be held or deemed to be or shall, in fact, be invalid, inoperative or unenforceable as applied in any particular case in any jurisdiction or jurisdictions, or in all jurisdictions because it conflicts with any provisions of any Constitution, statute, rule of public policy, or any other reason, such circumstances shall not have the effect of rendering the provision in question invalid, inoperative or unenforceable in any other case or circumstance, or of rendering any other provision or provisions of this Agreement invalid, inoperative or unenforceable to any extent whatever. 14. Business Day. For purposes of this Agreement, "business day"means any day on which the New York Stock Exchange is open for trading. 15. Section Headings. Section headings have been inserted in this Agreement as a matter of convenience of reference only, and it is agreed that such section headings are not a part of this Agreement and will not be used in the interpretation of any provisions of this Agreement. 16. Counterparts. This Agreement may be executed in several counterparts each of which shall be regarded as an original (with the same effect as if the signatures thereto and hereto were upon the same document) and all of which shall constitute one and the same document. 18 OHSUSA:766246418 17. No Personal Liability. Neither the Town Council, nor any officer, agent, or employee of the Issuer, shall be charged personally by the Underwriter with any liability, or be held liable to the Underwriter under any term or provision of this Agreement, or because of execution or attempted execution, or because of any breach or attempted or alleged breach, of this Agreement. 18. Entire Aimen:ent. This Agreement represents the entire agreement between the Issuer and the Underwriter with respect to the preparation of the Preliminary Official Statement and the Official Statement, the conduct of the offering, and the purchase and sale of the Bonds. [signature page follows] 19 OHSUSA:766246418 If the Issuer agrees with the foregoing, please sign the enclosed counterpart of this Agreement and return it to the Underwriter. This Agreement shall become a binding agreement between the Issuer and the Underwriter when at least the counterpart of this Agreement shall have been signed by or on behalf of each of the parties hereto. Respectfully submitted, FTN FINANCIAL CAPITAL MARKETS, as the Underwriter By: T:; o f�d.+dirl�i Name: l A I-4dd ty"- Title: r Y Date: ! -- APPROVED AND ACCEPTED as of the date hereof: TOWN OF WESTLAKE,TEXAS By: Name: Title: Date and Time of Acceptance Schedule I— Schedule of Terms Execution Page to Purchase Agreement for Town of Westlake, Texas General Obligation Refunding Bonds, Series 2017 OHSUSA:766246418 If the Issuer agrees with the foregoing, please sign the enclosed counterpart of this Agreement and return it to the Underwriter. This Agreement shall become a binding agreement between the Issuer and the Underwriter when at least the counterpart of this Agreement shall have been signed by or on behalf of each of the parties hereto. Respectfully submitted, FTN FINANCIAL CAPITAL MARKETS,as the Underwriter By: Name: Title: Date: APPROVED AND ACCEPTED as of the date hereof. TOWN OF WESTLAKE,TEXAS By: 1 ,e n Name: _Thomas E. Brymer Title: Town Manager Date and Ti e of Acceptance Schedule I—Schedule of Terms Execution Page to Purchase Agreement for Town of Westlake, Texas General Obligation Refunding Bonds, Series 2017 OHSUSA:766246418 Schedule I $5,795,000 Town of Westlake,Texas General Obligation Refunding Bonds, Series 2017 Interest Accrues From: Date of Delivery Maturity Date Principal Interest Initial 2L15a) Amount Rate Yield() 2018 $30,000 2.000% 1.300% 2019 30,000 2.000 1.550 2020 35,000 2.000 1.800 2021 35,000 2.000 2.000 2022 35,000 2.500 2.100 2023 35,000 3.000 2.150 2024 40,000 3.000 2.250 2025 605,000 4.000 2.200 2026 625,000 4.000 2.250 2027 645,000 4.000 2.300 2028 675,000 4.000 2.350 2029 715,000 4.000 2.400 2030 735,000 4.000 2.450 2031 775,000 4.000 2.500 2032 780,000 4.000 2.550 (a) The Bonds maturing on and after February 15,2028,are subject to redemption prior to maturity at the option of the Issuer,in whole or in part,in principal amounts of$5,000 or any integral multiple thereof,on February 15,2027,or any date thereafter,at a redemption price equal to the principal amount thereof plus accrued interest to the date fixed for redemption. (b) The initial reoffering prices or yields of the Bonds are furnished by the Underwriter and represent the initial offering prices or yields to the public,which may be changed by the Underwriter at any time. Yield shown is to maturity or the fust optional redemption date,whichever produces a lower yield. I-I OHSUSA:766246418 ESCROW AGREEMENT Town of Westlake,Texas,General Obligation Refunding Bonds, Series 2017 THIS ESCROW AGREEMENT,dated as ofJanuary 10,2017(herein,together with any amendments or supplements hereto,called the"Agreement")is entered into by and between the Town of Westlake,Texas (herein called the "Issuer") and U.S. Bank National Association, Dallas, Texas, as escrow agent (herein, together with any successor in such capacity,called the"Escrow Agent"). The addresses of the Issuer and the Escrow Agent are shown on Exhibit"A"attached hereto and made a part hereof. WITNESSETH: WHEREAS,the Issuer heretofore issued and there presently remain outstanding the obligations(the "Refunded Obligations")described in the Verification Report of Grant Thornton LLP(the"Report")relating to the Refunded Obligations,attached hereto as Exhibit"B" and made a part hereof,and WHEREAS,the Refunded Obligations are scheduled to mature in such years,bear interest at such rates,and be payable at such rimes and in such amounts as are set forth in the Report;and WHEREAS, when firm banking arrangements have been made for the payment of principal and interest to the maturity or redemption dates of the Refunded Obligations,then the Refunded Obligations shall no longer be regarded as outstanding except for the purpose of receiving payment from the funds provided for such purpose;and WHEREAS,Chapter 1207,Texas Government Code("Chapter 1207'),authorizes the Issuer to issue refunding bonds and to deposit the proceeds from the sale thereof,and any other available funds or resources, directly with any paying agent for the Refunded Obligations,or a trust company or commercial bank that does not act as a depository for the Issuer,and such deposit,if made before such payment dates and in sufficient amounts,shall constitute the making of firm banking and financial arrangements for the discharge and final payment of the Refunded Obligations; and WHEREAS,Chapter 1207 further authorizes the Issuer to enter into an escrow agreement with any such paying agent for any of the Refunded Obligations,or a trust company or commercial bank that does not act as a depository for the Issuer,with respect to the safekeeping,investment,administration and disposition of any such deposit,upon such terms and conditions as the Issuer and such paying agent,trust company or commercial bank may agree,provided that such deposits may be invested only in obligations described in Section 1207.062 of Chapter 1207, which obligations may be in book entry form, and which shall mature and/or bear interest payable at such times and in such amounts as will be sufficient to provide for the scheduled payment of principal and interest on the Refunded Obligations when due;and WHEREAS,the Escrow Agent is a commercial bank that does not act as a depository for the Issuer and this Agreement constitutes an escrow agreement of the kind authorized and required by said Chapter 1207;and WHEREAS,Chapter 1207 makes it the duty of the Escrow Agent to comply with the terms of this Agreement and timely make available to the places of payment(paying agents)for the Refunded Obligations the amounts required to provide for the payment of the principal of and interest on such obligations when due, and in accordance with their terms,but solely from the funds,in the manner,and to the extent provided in this Agreement;and WHEREAS, the issuance, sale, and delivery of Town of Westlake, Texas, General Obligation Refunding Bonds, Series 2017 (the"Refunding Obligations")have been issued,sold and delivered for the purpose, among others, of obtaining the funds required to provide for the payment of the principal of the Refunded Obligations at their respective maturity dates or dates of redemption and the interest thereon to such dates;and WHEREAS,the Issuer desires that,concurrently with the delivery of the Refunding Obligations to the purchasers thereof,certain proceeds of the Refunding Obligations,together with certain other available funds of the Issuer, if applicable, shall be applied to purchase certain obligations described in Section 1207.062 of Chapter 1207, hereinafter defined as the'Escrowed Securities"for deposit to the credit of the Escrow Fund created pursuant to the terms of this Agreement and to establish a beginning cash balance(if needed)in such Escrow Fund;and WHEREAS,the Escrowed Securities shall mature and the interest thereon shall be payable at such times and in such amounts so as to provide moneys which,together with cash balances from time to time on deposit in the Escrow Fund,will be sufficient to pay interest on the Refunded Obligations as it accrues and becomes payable and the principal of the Refunded Obligations on their maturity dates or dates of redemption; and WHEREAS,to facilitate the receipt and transfer of proceeds of the Escrowed Securities,particularly those in book entry form,the Issuer desires to establish the Escrow Fund at the principal corporate trust office of the Escrow Agent. NOW,THEREFORE,in consideration of the mutual undertakings,promises and agreements herein contained,the sufficiency of which hereby are acknowledged,and to secure the full and timely payment of principal of and the interest on the Refunded Obligations,the Issuer and the Escrow Agent mutually under- take,promise,and agree for themselves and their respective representatives and successors,as follows: ARTICLE I DEFINITIONS AND INTERPRETATIONS Section 1.01. Recitals. The recitals set forth in the preamble hereof are incorporated herein and shall have the same force and effect as if set forth in this Section. Section 1.02. Definitions. Unless the context clearly indicates otherwise,the following terns shall have the meanings assigned to them below when they are used in this Agreement: "Code"means the Internal Revenue Code of 1986,as amended,or to the extent applicable the Internal Revenue Code of 1954, together with any other applicable provisions of any successor federal income tax laws. 'Escrow Fund"means the fund created by this Agreement to be administered by the Escrow Agent pursuant to the provisions of this Agreement. "Escrowed Securities" means, subject to any restrictions set forth in any order, ordinance or resolution of the Issuer authorizing the issuance of the Refunded Obligations,the obligations permitted by 2 Section 1207.062 of Chapter 1207 as described in the Report or cash or other obligations permitted by Section 1207.062 of Chapter 1207 substituted therefor pursuant to Article IV of this Agreement. Section 1.03. Other Definitions. The terms"Agreement","Issuer","Escrow Agent", 'Refunded Obligations","Refunding Obligations,"'Report"and"Paying Agent",when they are used in this Agreement, shall have the meanings assigned to them in the preamble to this Agreement. Section 1.04. Interpretations. The titles and headings of the articles and sections of this Agreement have been inserted for convenience and reference only and are not to be considered a part hereof and shall not in any way modify or restrict the terms hereof. This Agreement and all of the terms and provisions hereof shall be liberally construed to effectuate the purposes set forth herein and to achieve the intended purpose of providing for the refunding of the Refunded Obligations in accordance with applicable law. ARTICLE II DEPOSIT OF FUNDS AND ESCROWED SECURITIES Section 2.01. Deposits in the Escrow Fund. Concurrently with the sale and delivery ofthe Refunding Obligations the Issuer shall deposit, or cause to be deposited, with the Escrow Agent, for deposit in the Escrow Fund,the funds and Escrowed Securities described in the Report,and the Escrow Agent shall,upon the receipt thereof,acknowledge such receipt to the Issuer in writing. ARTICLE III CREATION AND OPERATION OF ESCROW FUND Section 3.01. Escrow Fund. The Escrow Agent has created on its books a special trust fund and irrevocable escrow to be known as the Town of Westlake, Texas, General Obligation Refunding and Improvement Bonds,Series 2017 Escrow Fund(the"Escrow Fund"). The Escrow Agent hereby agrees that upon receipt thereof it will irrevocably deposit to the credit of the Escrow Fund the funds and the Escrowed Securities described in the Report. Such deposit,all proceeds therefrom,and all cash balances from time to time on deposit therein(a)shall be the property of the Escrow Fund,(b)shall be applied only in strict con- formity with the terms and conditions of this Agreement, and (c) are hereby irrevocably pledged to the payment of the principal of and interest on the Refunded Obligations,which payment shall be made by timely transfers of such amounts at such times as are provided for in Section 3.02 hereof. When the final transfers have been made for the payment of such principal of and interest on the Refunded Obligations,any balance then remaining in the Escrow Fund shall be transferred to the Issuer,and the Escrow Agent shall thereupon be discharged from any further duties hereunder. Section 3.02. Payment of Principal and Interest.The Escrow Agent is hereby irrevocably instructed to transfer from the cash balances from time to time on deposit in the Escrow Fund,the amounts required to pay the principal of the Refunded Obligations at their respective maturity dates and interest thereon to such maturity dates in the amounts and at the times shown in the Report. Section 3.03. Sufficiency of Escrow Fund. The Issuer represents(based solely on the Report)that the successive receipts of the principal of and interest on the Escrowed Securities will assure that the cash balance on deposit from time to time in the Escrow Fund will be at all times sufficient to provide moneys for transfer to the Paying Agent at the times and in the amounts required to pay the interest on the Refunded 3 Obligations as such interest comes due and the principal of the Refunded Obligations as the Refunded Obligations mature,all as more fully set forth in the Report. If,for any reason,at any time,the cash balances on deposit or scheduled to be on deposit in the Escrow Fund shall be insufficient to transfer the amounts required by each place of payment(paying agent) for the Refunded Obligations to make the payments set forth in Section 3.02 hereof,notice of any such insufficiency shall be given to the Issuer by the Escrow Agent as promptly as practicable as hereinafter provided,but neither the Escrow Agent nor the Issuer shall in any manner be responsible for any insufficiency of funds in the Escrow Fund. Section 3.04. Trust Fund. The Escrow Agent shall hold at all times the Escrow Fund,the Escrowed Securities and all other assets of the Escrow Fund,wholly segregated from all other funds and securities on deposit with the Escrow Agent;it shall never allow the Escrowed Securities or any other assets of the Escrow Fund to be commingled with any other funds or securities of the Escrow Agent;and it shall hold and dispose of the assets of the Escrow Fund only as set forth herein. The Escrowed Securities and other assets of the Escrow Fund shall always be maintained by the Escrow Agent as trust funds for the benefit of the owners of the Refunded Obligations;and a special account thereof shall at all times be maintained on the books of the Escrow Agent. The owners of the Refunded Obligations shall be entitled to the same preferred claim and first lien upon the Escrowed Securities,the proceeds thereof,and all other assets of the Escrow Fund to which they are entitled as owners of the Refunded Obligations. The amounts received by the Escrow Agent under this Agreement shall not be considered as a banking deposit by the Issuer,and the Escrow Agent shall have no right to title with respect thereto except as a constructive trustee and Escrow Agent under the terms of this Agreement. The amounts received by the Escrow Agent under this Agreement shall not be subject to warrants, drafts or checks drawn by the Issuer or, except to the extent expressly herein provided, by the Paying Agent. Section 3.05. Security for Cash Balances. Cash balances from time to time on deposit in the Escrow Fund shall, to the extent not insured by the Federal Deposit Insurance Corporation or its successor, be continuously collateralized by securities or obligations which qualify and are eligible under both the laws of Texas and the laws of the United States of America to secure and be pledged as collateral for public funds having a market value at least equal to such cash balances. ARTICLE IV LIMITATION ON INVESTMENTS Section 4.01. General Limitations. Except as provided in Sections 3.02,4.02,4.03 and 4.04 hereof, the Escrow Agent shall not have any power or duty to invest or reinvest any money held hereunder, or to make substitutions of the Escrowed Securities, or to sell, transfer or otherwise dispose of the Escrowed Securities. Section 4.02. Reinvestment of Certain Cash Balances in Escrow by Escrow Agent. In addition to the Escrowed Securities listed in the Report,the Escrow Agent shall reinvest cash balances shown in the Report in United States Treasury Certificates of Indebtedness,Notes or Bonds-State and Local Government Series with an interest rate equal to zero percent(0%)(the"Zero SLGs")to the extent such Obligations are available from the Department of Treasury. All such re-investments shall be made only from the portion of cash balances derived from the maturing principal of and interest on any Escrowed Securities. Unless otherwise instructed by the Issuer in accordance with Section 4.03 hereof, the Escrow Agent shall acquire any Zero SLGs on the dates the Escrowed Securities listed in the Report mature,as shown in the Report,or on the first date Zero SLGs become available thereafter.The Escrow Agent shall purchase Zero SLGs that only mature on the dates shown in the Report. 4 Section 4.03. Substitutions and Reinvestments. At the direction of the Issuer,the Escrow Agent shall reinvest cash balances representing receipts from the Escrowed Securities,make substitutions of the Escrowed Securities or redeem the Escrowed Securities and reinvest the proceeds thereof in other Escrowed Securities or hold such proceeds as cash,together with other moneys or Escrowed Securities held in the Escrow Fund provided that the Issuer delivers to the Escrow Agent the following: (1) an opinion by an independent certified public accountant that after such substitution or reinvestment the principal amount of the Escrowed Securities in the Escrow Fund(which shall be noncallable,not pre-payable obligations described in Section 1207.062 of Chapter 1207),together with the interest thereon and other available moneys, will be sufficient to pay, without further investment or reinvestment,as the same become due in accordance with the Report,the principal of, interest on and premium,if any,on the Refunded Obligations which have not previously been paid, and (2) an unqualified opinion of nationally recognized municipal bond counsel to the effect that (a)such substitution or reinvestment will not cause the Refunded Obligations to be"arbitrage bonds" within the meaning of Section 103 of the Code or the regulations thereunder in effect on the date of such substitution or reinvestment,or otherwise make the interest on the Refunded Obligations subject to federal income taxation,and(b)such substitution or reinvestment complies with the Constitution and laws of the State of Texas and with all relevant documents relating to the issuance of the Refunded Obligations. The Escrow Agent shall have no responsibility or liability for loss or otherwise with respect to investments made at the direction of the Issuer. Section 4.04. Substitution for Escrowed Securities.Concurrently with the initial deposit by the Issuer with the Escrow Agent,but not thereafter,the Issuer,at its option,may substitute cash or non-interest bearing direct noncallable and not pre-payable Escrowed Securities described in Section 1207.062 of Chapter 1207 (i.e.,obligations which mature and are payable in a stated amount on the maturity date thereof,and for which there are no payments other than the payment made on the maturity date)(the"Substitute Obligations")for non-interest bearing Escrowed Securities,if any,but only if such Substitute Obligations (a) are in an amount,and/or mature in an amount,which is equal to or greater than the amount payable on the maturity date of the obligation listed in the Report for which such Substitute Obligation is substituted, (b) mature on or before the maturity date of the obligation listed in the Report for which such Substitute Obligation is substituted,and (c) produce the amount necessary to pay the interest on and principal of the Refunded Obligations,as set forth in the Report,as verified by a certified public accountant or a firm of certified public accountants. If,concurrently with the initial deposit by the Issuer with the Escrow Agent,any such Substitute Obligations are so substituted for any Escrowed Securities, the Issuer may, at any time thereafter, substitute for such Substitute Obligations the same Escrowed Securities for which such Substitute Obligations originally were substituted. 5 Section 4.05. Arbitrage. The Issuer hereby covenants and agrees that it shall never request the Escrow Agent to exercise any power hereunder or permit any part of the money in the Escrow Fund or proceeds from the sale of Escrowed Securities to be used directly or indirectly to acquire any securities or obligations if the exercise of such power or the acquisition of such securities or obligations would cause any Refunding Obligations or Refunded Obligations to be an "arbitrage bond"within the meaning of the Code. ARTICLE V APPLICATION OF CASH BALANCES Section 5.01. In General. Except as provided in Sections 3.02, 4.02, 4.03 and 4.04 hereof, no withdrawals,transfers,or reinvestment shall be made of cash balances in the Escrow Fund. ARTICLE VI RECORDS AND REPORTS Section 6.01. Records. The Escrow Agent will keep books of record and account in which complete and correct entries shall be made of all transactions relating to the receipts,disbursements,allocations and application ofthe money and Escrowed Securities deposited to the Escrow Fund and all proceeds thereof,and such books shall be available for inspection at reasonable hours and under reasonable conditions by the Issuer and the owners of the Refunded Obligations. Section 6.02. Reports. While this Agreement remains in effect,the Escrow Agent annually shall prepare and send to the Issuer a written report summarizing all transactions relating to the Escrow Fund during the preceding year, including, without limitation, credits to the Escrow Fund as a result of interest payments on or maturities of the Escrowed Securities and transfers from the Escrow Fund for payments on the Refunded Obligations or otherwise,together with a detailed statement of all Escrowed Securities and the cash balance on deposit in the Escrow Fund as of the end of such period. ARTICLE VII CONCERNING THE PAYING AGENTS AND ESCROW AGENT Section 7.01. Representations. The Escrow Agent hereby represents that it has all necessary power and authority to enter into this Agreement and undertake the obligations and responsibilities imposed upon it herein,and that it will cavy out all of its obligations hereunder. Section 7.02. Limitation on Liability. The liability of the Escrow Agent to transfer funds for the payment of the principal of and interest on the Refunded Obligations shall be limited to the proceeds of the Escrowed Securities and the cash balances from time to time on deposit in the Escrow Fund. Notwithstanding any provision contained herein to the contrary,neither the Escrow Agent nor the Paying Agent shall have any liability whatsoever for the insufficiency of funds from time to time in the Escrow Fund or any failure of the obligors of the Escrowed Securities to make timely payment thereon,except for the obligation to notify the Issuer as promptly as practicable of any such occurrence. The recitals herein and in the proceedings authorizing the Refunding Obligations shall be taken as the statements of the Issuer and shall not be considered as made by,or imposing any obligation or liability upon, the Escrow Agent. The Escrow Agent is not a party to the proceedings authorizing the Refunding 6 Obligations or the Refunded Obligations and is not responsible for nor bound by any of the provisions thereof (except as a place of payment and paying agent and/or a Paying Agent/Registrar therefor). In its capacity as Escrow Agent, it is agreed that the Escrow Agent need look only to the terms and provisions of this Agreement. The Escrow Agent makes no representations as to the value,conditions or sufficiency of the Escrow Fund, or any part thereof, or as to the title of the Issuer thereto, or as to the security afforded thereby or hereby,and the Escrow Agent shall not incur any liability or responsibility in respect to any of such matters. It is the intention of the parties hereto that the Escrow Agent shall never be required to use or advance its own funds or otherwise incur personal financial liability in the performance of any of its duties or the exercise of any of its rights and powers hereunder. The Escrow Agent shall not be liable for any action taken or neglected to be taken by it in good faith in any exercise of reasonable care and believed by it to be within the discretion or power conferred upon it by this Agreement,nor shall the Escrow Agent be responsible for the consequences of any error of judgment; and the Escrow Agent shall not be answerable except for its own action,neglect or default,nor for any loss unless the same shall have been through its negligence or willful misconduct. Unless it is specifically otherwise provided herein, the Escrow Agent has no duty to determine or inquire into the happening or occurrence of any event or contingency or the performance or failure of performance of the Issuer with respect to arrangements or contracts with others,with the Escrow Agent's sole duty hereunder being to safeguard the Escrow Fund,to dispose of and deliver the same in accordance with this Agreement. If,however,the Escrow Agent is called upon by the terms of this Agreement to determine the occurrence of any event or contingency, the Escrow Agent shall be obligated, in making such determination, only to exercise reasonable care and diligence, and in event of error in making such determination the Escrow Agent shall be liable only for its own willful misconduct or its negligence. In determining the occurrence of any such event or contingency the Escrow Agent may request from the Issuer or any other person such reasonable additional evidence as the Escrow Agent in its discretion may deem necessary to determine any fact relating to the occurrence of such event or contingency,and in this connection may make inquiries of,and consult with, among others,the Issuer at any time. TO THE EXTENT PERMITTED BY LAW,THE ISSUER AGREES TO INDEMNIFY,DEFEND AND HOLD THE ESCROW AGENT HARMLESS FROM AND AGAINST ANY AND ALL LOSS, DAMAGE, TAX, LIABILITY AND EXPENSE THAT MAY BE INCURRED BY THE ESCROW AGENT ARISING OUT OF OR IN CONNECTION WITH ITS ACCEPTANCE OR APPOINTMENT AS ESCROW AGENT HEREUNDER, INCLUDING ATTORNEYS FEES AND EXPENSES OF DEFENDING ITSELF AGAINST ANY CLAIM OR LIABILITY IN CONNECTION WITH ITS PERFORMANCE HEREUNDER,EXCEPT THAT THE ESCROW AGENT SHALL NOT BE INDEMNIFIED FOR ANY LOSS,DAMAGE,TAX,LIABILITY,OR EXPENSE RESULTING FROM ITS OWN NEGLIGENCE OR WILLFUL ACTION. THE FOREGOING INDEMNITY SHALL SURVIVE THE TERMINATION OF THIS AGREEMENT OR THE RESIGNATION OR REMOVAL OF THE ESCROW AGENT. The Escrow Agent agrees to accept and act upon instructions or directions pursuant to this Agreement sent by unsecured e-mail,facsimile transmission or other similar unsecured electronic methods("Electronic Communication"), provided, however, that the Issuer shall provide to the Escrow Agent an incumbency certificate listing designated persons authorized to provide such instructions,which incumbency certificate shall be amended whenever a person is to be added or deleted from the listing. If the Issuer elects to give the Escrow Agent instructions by Electronic Communication and the Escrow Agent in its discretion elects to act upon such instructions,the Escrow Agent's reasonable understanding of such instructions shall be deemed controlling. The Escrow Agent shall not be liable for any losses, costs or expenses arising directly or indirectly from the Escrow Agent's reliance upon and compliance with such instructions notwithstanding such 7 instructions conflict or are inconsistent with a subsequent written instruction if the Escrow Agent acted upon the instructions given by Electronic Communication prior to the receipt of the subsequent written instruction. The Issuer agrees to assume all risks arising out of the use of such electronic methods to submit instructions and directions to the Escrow Agent,and the risk or interception and misuse by third parties. The Escrow Agent may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through its agents or attorneys. The Escrow Agent may rely and shall be protected in acting or refraining from acting upon any resolution,certificate,written investment direction,statement,instrument,opinion,notice or other paper or document believed by it to be genuine and to have been signed or presented by the proper party. Section 7.03. Compensation.(a) Concurrently with the sale and delivery of the Refunding Bonds, the Issuer shall pay to the Escrow Agent,as a fee for performing the services hereunder and for all expenses incurred or to be incurred by the Escrow Agent in the administration of this Agreement,the amount set forth in Exhibit C attached hereto,the sufficiency of which is hereby acknowledged by the Escrow Agent. In the event that the Escrow Agent is requested to perform any extraordinary services hereunder,the Issuer hereby agrees to pay reasonable fees to the Escrow Agent for such extraordinary services and to reimburse the Escrow Agent for all expenses incurred by the Escrow Agent in performing such extraordinary services,and the Escrow Agent hereby agrees to look only to the Issuer for the payment of such fees and reimbursement of such expenses. The Escrow Agent hereby agrees that in no event shall it ever assert any claim or lien against the Escrow Fund for any fees for its services,whether regular or extraordinary,as Escrow Agent,or in any other capacity,or for reimbursement for any of its expenses. (b) Upon receipt of the aforesaid specific sum stated in subsection(a)of this Section 7.03 for Escrow Agent fees,expenses,and services,the Escrow Agent shall acknowledge such receipt to the Issuer in writing. Section 7.04. Notice of Redemption. The Escrow Agent is hereby authorized and directed to cause notice of defeasance and redemption of the Refunded Obligations for which it serves as Paying Agent to be given at the time and in the form and manner prescribed in the proceedings that authorized the issuance of the Refunded Obligations,and the Escrow Agent hereby certifies that it has caused,or will cause,notice of redemption to be given to the holders of the Refunded Obligations prior to the date on which such notice of redemption is required to be given in the proceedings that authorized the issuance of the Refunded Obligations. Section 7.05. Successor Escrow Agents. If at any time the Escrow Agent or its legal successor or successors should become unable,through operation or law or otherwise,to act as escrow agent hereunder, or if its property and affairs shall be taken under the control of any state or federal court or administrative body because of insolvency or bankruptcy or for any other reason,a vacancy shall forthwith exist in the office of Escrow Agent hereunder. In such event the Issuer, by appropriate action, promptly shall appoint an Escrow Agent to fill such vacancy. If no successor Escrow Agent shall have been appointed by the Issuer within 60 days, a successor may be appointed by the owners of a majority in principal amount of the Refunded Obligations then outstanding by an instrument or instruments in writing filed with the Issuer,signed by such owners or by their duly authorized attomeys-in-fact. If, in a proper case, no appointment of a successor Escrow Agent shall be made pursuant to the foregoing provisions of this section within three months after a vacancy shall have occurred,the owner of any Refunded Obligation may apply to any court of competent jurisdiction to appoint a successor Escrow Agent. Such court may thereupon,after such notice, if any,as it may deem proper,prescribe and appoint a successor Escrow Agent. Any successor Escrow Agent shall be a corporation organized and doing business under the laws of the United States or the State of Texas, authorized under such laws to exercise corporate trust powers, authorized under Texas law to act as an escrow agent,having its principal office and place of business in the 8 State of Texas,having a combined capital and surplus of at least$50,000,000 and subject to the supervision or examination by Federal or State authority. Any successor Escrow Agent shall execute,acknowledge and deliver to the Issuer and the Escrow Agent an instrument accepting such appointment hereunder,and the Escrow Agent shall execute and deliver an instrument transferring to such successor Escrow Agent,subject to the terms of this Agreement,all the rights,powers and trusts of the Escrow Agent hereunder. Upon the request of any such successor Escrow Agent,the Issuer shall execute any and all instruments in writing for more fully and certainly vesting in and confirming to such successor Escrow Agent all such rights,powers and duties. The Escrow Agent at the time acting hereunder may at any time resign and be discharged from the trust hereby created by giving not less than sixty(60)days'written notice to the Issuer and publishing notice thereof, specifying the date when such resignation will take effect, in a newspaper printed in the English language and with general circulation in New York,New York, such publication to be made once at least three(3)weeks prior to the date when the resignation is to take effect. No such resignation shall take effect unless a successor Escrow Agent shall have been appointed by the owners of the Refunded Obligations or by the Issuer as herein provided and such successor Escrow Agent shall be a paying agent for the Refunded Obligations and shall have accepted such appointment, in which event such resignation shall take effect immediately upon the appointment and acceptance of a successor Escrow Agent. Under any circumstances, the Escrow Agent shall pay over to its successor Escrow Agent proportional parts of the Escrow Agent's fee and,if applicable,its Paying Agent's fee hereunder. ARTICLE VIII MISCELLANEOUS Section 8.01. Notice. Any notice,authorization,request,or demand required or permitted to be given hereunder shall be in writing and shall be deemed to have been duly given when mailed by registered or certified mail, postage prepaid addressed to the Issuer or the Escrow Agent at the address shown on Exhibit "A" attached hereto. The United States Post Office registered or certified mail receipt showing delivery of the aforesaid shall be conclusive evidence of the date and fact of delivery. Any party hereto may change the address to which notices are to be delivered by giving to the other parties not less than ten(10) days prior notice thereof. Prior written notice of any amendment to this Agreement contemplated pursuant to Section 8.08 and immediate written notice of any incidence of a severance pursuant to Section 8.04 shall be sent to Moody's Investors Service,Attn: Public Finance Rating Desk/Refunded Bonds,99 Church Street, New York, New York 10007, Standard & Poor's Corporation, Attn: Municipal Bond Department, 25 Broadway,New York,New York 10004 and Fitch,Inc.,One State Street Plaza,New York,New York 10004. Section 8.02. Termination of Responsibilities. Upon the taking of all the actions as described herein by the Escrow Agent,the Escrow Agent shall have no further obligations or responsibilities hereunder to the Issuer,the owners of the Refunded Obligations or to any other person or persons in connection with this Agreement. Section 8.03. Binding Agreement. This Agreement shall be binding upon the Issuer and the Escrow Agent and their respective successors and legal representatives,and shall inure solely to the benefit of the owners of the Refunded Obligations,the Issuer,the Escrow Agent and their respective successors and legal representatives. Section 8.04. Severability. In case any one or more of the provisions contained in this Agreement shall for any reason be held to be invalid,illegal or unenforceable in any respect,such invalidity,illegality or unenforceability shall not affect any other provisions of this Agreement, but this Agreement shall be construed as if such invalid or illegal or unenforceable provision had never been contained herein. 9 Section 8.05. Texas Law Governs. This Agreement shall be governed exclusively by the provisions hereof and by the applicable laws of the State of Texas. Section 8.06. Time of the Essence. Time shall be of the essence in the performance of obligations from time to time imposed upon the Escrow Agent by this Agreement. Section 8.07. Effective date of Agreement. This Agreement shall be effective upon receipt by the Escrow Agent of the funds described in the Report and the Escrowed Securities,together with the specific sums stated in subsections(a)and(b)of Section 7.03 for Escrow Agent and paying agency fees,expenses, and services. Section 8.08. Amendments. This Agreement shall not be amended except to cure any ambiguity or formal defect or omission in this Agreement. No amendment shall be effective unless the same shall be in writing and signed by the parties thereto. No such amendment shall adversely affect the rights of the holders of the Refunded Obligations. Section 8.09. Counterparts. This Agreement may be executed in one or more counterparts,each and all of which shall constitute one and the same instrument. Section 8.10 Fees as Paying Agent for Refunded Obligations. The Issuer has agreed to make payment of all future paying agent fees and expenses incurred by the Escrow Agent,as Paying Agent for the Refunded Obligations,with respect to the Refunded Obligations. The Escrow Agent,as Paying Agent for the Refunded Obligations,hereby acknowledges such provision and agrees to look only to the Issuer for the payment of such fees and reimbursement of such expenses,and to perform the services as Paying Agent for the benefit of the registered owners of the Refunded Obligations. [Remainder of page left blank intentionally] 10 EXECUTED as of the date first written above. TOWN OF WESTLAKE,TEXAS Mayor U.S.BANK NATIONAL ASSOCIAZI B Tale: Israel Lugo, Vice Presides INDEX TO EXHIBITS Exhibit "A" Addresses of the Issuer and the Escrow Agent Exhibit "B" Verification Report of Grant Thornton LLP Exhibit "C" Escrow Agent Fee Schedule EXHIBIT"A" ADDRESSES OF THE ISSUER AND THE ESCROW AGENT ISSUER Town of Westlake,Texas 1301 Solana Blvd.,Building 4 Suite 4202,2nd Floor Westlake,Texas 76226 Attention: Town Manager ESCROW AGENT U.S.Bank National Association 13737 Noel Road, Suite 800 Dallas,Texas 75240 Attention: Global Corporate Trust Services EXHIBIT"B" Verification Report of Grant Thornton LLP See Tab 9 of Transcript of Proceedings EXHIBIT"C" ESCROW AGENT FEE SCHEDULE bank. Schedule of Fees for Services as Paying Agent, Registrar and Refunding Escrow Agent For Town of Westlake, Texas General Obligation Refunding Bonds, Series 2017 Paying Agent: $450 Annual fee for the standard paying agent services associated with the administration of the account. Administration fees are payable in advance. Refunding Escrow Agent,One Time:(02/07/2017 to 05/01/17) $500 One time fee for the standard agent services in administration of the defeasance escrow. Administration fees are payable in advance. Redemptions: (1 x$300 each issue redeemed with U.S.Bank as Paying Agent) $300 Optional Redemption Fee for each Series redeemed. Charge per redemption for selecting and preparing notices for bonds redeemed. Does not include publication charges. Direct Out of Pocket Expenses At Cost Reimbursement of expenses associated with the performance of our duties, including but not limited to publications,legal counsel after the initial close,travel expenses and filing fees. Extraordinary Services Extraordinary Services are duties or responsibilities of an unusual nature, including termination, but not provided for in the governing documents or otherwise set forth in this schedule.A reasonable charge will be assessed based on the nature of the services and the responsibility involved.At our option, these charges will be billed at a flat fee or at our hourly rate then in effect. A$300 fee will be charged on optional redemptions. Account approval is subject to review and qualification. Fees are subject to change at our discretion and upon written notice. Fees paid in advance will not be prorated. The fees set forth above and any subsequent modifications thereof are part of your agreement. Finalization of the transaction constitutes agreement to the above fee schedule, including agreement to any subsequent changes upon proper written notice. In the event your transaction is not finalized, any related out-of-pocket expenses will be billed to you directly. Absent your written instructions to sweep or otherwise invest,all sums in your account will remain uninvested and no accrued interest or other compensation will be credited to the account. Payment of fees constitutes acceptance of the terms and conditions set forth. IMPORTANT INFORMATION ABOUT PROCEDURES FOR OPENING A NEW ACCOUNT: To help the government fight the funding of terrorism and money laundering activities, Federal law requires all financial institutions to obtain, verify and record information that identifies each person who opens an account. For a non-individual person such as a business entity,a charity,a Trust or other legal entity we will ask for documentation to verify its formation and existence as a legal entity. We may also ask to see financial statements, licenses, identification and authorization documents from individuals claiming authority to represent the entity or other relevant documentation. Dated: January 13,2017 SIGNATURE IDENTIFICATION AND AUTHORITY CERTIFICATE OF U.S. BANK NATIONAL ASSOCIATION U.S. Bank National Association (the "Bank"), which is the Escrow Agent appointed by the Town of Westlake, Texas (the "Issuer"), in connection with the issuance, sale, execution and delivery of its General Refunding Bonds, Series 2017 (the`Bonds"),and the execution and delivery of an Escrow Agreement (the "Escrow Agreement") dated as of January 10, 2017 between the Issuer and the Bank hereby certify as follows: 1. The Bank is a national banking association duly and validly existing under the banking laws of the United States of America and has full power and authority to enter into and perform the obligations of the Escrow Agent under the Escrow Agreement. 2. The Escrow Agreement has been duly executed and attested on behalf of the Bank by one or more of the persons named below whose offices appear set opposite their names; said persons were at the time of executing the Escrow Agreement, and are now, duly elected, qualified and acting incumbents of their respective offices; and the signatures appearing after each of said persons' names is the true and correct specimen of such person's genuine signature: Name Office Signature Israel A.Lugo Vice President 3. The foregoing officers of the Bank, by virtue of the authority delegated to them as set forth in the attached exhibits, are authorized to execute and deliver on behalf of the Escrow Agreement, and such other and further documents as may be necessary or incidental to the acceptance and performance of the duties set forth within. Dated: January 13,2017 U.S. Bank National Association Dallas,Texas as Escrow Agent Exhibits—Evidence of Delegation of Authority bank. Five Star Service(;.=.teed AUTHORIZED SIGNATURES I hereby certify that the following is a true and exact extract from Article VI of the Bylaws presently in effect for U.S. Bank National Association, a national banking association organized and existing under the laws of the United States: Article VI CONVEYANCES, CONTRACTS, ETC. All transfers and conveyances of real estate, mortgages, and transfers, endorsements or assignments of stock, bonds, notes, debentures or other negotiable instruments, securities or personal property shall be signed by any elected or appointed officer. All checks, drafts, certificates of deposit and all funds of the Association held in its own or in a fiduciary capacity may be paid out by an order, draft or check bearing the manual or facsimile signature of any elected or appointed officer of the Association. All mortgage satisfactions, releases, all types of loan agreements, all routine transactional documents of the Association, and all other instruments not specifically provided for, whether to be executed in a fiduciary capacity or otherwise, may be signed on behalf of the Association by any elected or appointed officer thereof. The Secretary or any Assistant Secretary of the Association or other proper officer may execute and certify that required action or authority has been given or has taken place by resolution of the Board under this Bylaw without the necessity of further action by the Board. I further certify that the following officers of U.S. Bank National Association have been duly elected and qualified and now hold their ective offs es, and that the signatures of such officers are authentic: Brad A.Hounsel Israel A. Lugo g Vice President Vice President Mauri J. Cowen Shazia Flores Vice President Vice President "7 Damien M.Daley Assistant Vice President IN WITNESS WHEREOF,I have hereunto set my hand this 13 day of—j alai-- ,2017. U.S. BANK NATION A ASSOCIATION By: SteYrsid i a V e SIGNATURE IDENTIFICATION AND GENERAL CERTIFICATE THE STATE OF TEXAS § COUNTIES OF TARRANT AND DENTON § TOWN OF WESTLAKE § We, the undersigned officers of the Town of Westlake, Texas (the "Issuer"), hereby certify that we are executing and delivering this certificate with reference to the Town of Westlake, Texas, General Obligation Refunding Bonds, Series 2017, dated January 15, 2017, in the principal amount of$5,795,000 (the 'Bonds"). The certifications herein are made this,the 7' day of February,2017. Certifications as to Execution of Bonds and Issuer Seal 1. We officially executed and signed the Bonds with our manual signatures or by causing facsimiles of our manual signatures to be placed on each of the Bonds, and we hereby adopt said facsimile signatures as our own, respectively, and declare that said facsimile signatures constitute our signatures the same as if we had manually signed each of the Bonds. 2. The Bonds are substantially in the form, and have been duly executed and signed in the manner, prescribed in the ordinance authorizing the issuance of the Bonds (the "Ordinance"). 3. At the time we so executed and signed the Bonds we were, and at the time of executing this certificate we are, the duly chosen, qualified and acting officers indicated therein, and authorized to execute the same. 4. We have caused the official seal of the Issuer to be impressed or placed in facsimile on the Bonds; and said seal on the Bonds has been duly adopted as, and is hereby declared to be,the official seal of the Issuer. Certifications as to Litigation 5. No litigation of any nature has been filed or is now pending to restrain or enjoin the issuance or delivery of the Bonds, or which would affect the provision made for their payment or security, or in any manner questioning the proceedings or authority concerning the issuance of the Bonds, and that so far as we know and believe no such litigation is threatened. 6. No litigation of any nature has ever been filed pertaining to, affecting, questioning or contesting, and so far as we know and believe no such litigation is threatened, with respect to: (a) the issuance, delivery, payment, security or validity of the Bonds, (b)the authority of the Town Council and the officers of said Town Council to issue, execute and deliver the Bonds; or(c)the current Tax Rolls of the Issuer. 7. Neither the corporate existence nor boundaries of the Issuer is being contested, no litigation has been filed or is now pending, and so far as we know and believe no such litigation is threatened, that would affect the authority of the officers of the Issuer to issue, execute, sign, and deliver the Bonds, and no authority or proceedings for the issuance of the Bonds have been repealed, revoked or rescinded. Certifications as to the Organization, Existence and Qualifications of the Issuer 8. The Issuer is a duly incorporated Type A general law municipality, having less than 5,000 inhabitants, operating under the Constitution and laws of the State of Texas. The Issuer's population as of the last census was 992. Certifications as to the Refunded Obligations 9. None of the obligations being refunded by the Bonds (the "Refunded Obligations") have been held in, or purchased for the account of, the interest and sinking fund created and maintained for the benefit of the Refunded Obligations, or purchased with any money collected from any taxes levied or revenues collected for the benefit thereof. Attached hereto as Exhibit A is a schedule illustrating the savings to be realized by the Issuer as a result of the refunding of the Refunded Obligations by the issuance of the Bonds. Certification as to No Default 10. The Issuer is not in default with respect to the Bonds or the Ordinance, or with respect to the Refunded Obligations or the ordinance authorizing the issuance of the Refunded Obligations. Certification as to the Issuer's Tax-Supported Debt 11. After the issuance of the Bonds, the Issuer will have $36,322,000 in aggregate principal amount of tax-supported bonded indebtedness outstanding. A schedule of the debt service requirements for all outstanding general obligation bonds of the Issuer, including the Bonds, is included in Table 5 in the Official Statement dated January 10, 2017 pertaining to the Bonds and the Issuer, which schedule is incorporated herein. Certification as to the Issuer's Current Tax Roll 12. That the currently effective ad valorem tax appraisal roll of the Issuer(the "Tax Roll") is the Tax Roll prepared and approved during the calendar year 2015-16, being the most recently approved Tax Roll of the Issuer; that the taxable property in the Issuer has been appraised, assessed and valued as required and provided by the Texas Constitution and Property Tax Code (collectively, "Texas law"); that the Tax Roll for said year has been submitted to the Town Council of the Issuer as required by Texas law, and has been approved and recorded by said Town Council; and according to the Tax Roll for said year the net aggregate taxable value of taxable property in the Issuer (after deducting the amount of all applicable exemptions required or authorized under Texas law), upon which the annual ad valorem tax of the Issuer has been or will be imposed and levied, is $1,105,075,652. 2 Submission of Documents to the Attorney General 13. The initial securities certificates for the Bonds are directed to be sent to the Office of the Attorney General of the State of Texas, Public Finance Division (the "Attorney General"), by the Issuer's Bond Counsel, McCall, Parkhurst & Horton L.L.P. The Issuer requests that the Attorney General examine and approve the initial Bonds in accordance with applicable law. After such approval,the Attorney General is requested to deliver the Bonds to the Comptroller of Public Accounts for registration. Authorization of the Attorney General to Execute this Certificate 14. The Attorney General is hereby authorized and directed to date this Certificate concurrently with the date of approval of the Bonds. If any litigation or contest should develop pertaining to the Bonds or any other matters covered by this Certificate, the undersigned will notify the Attorney General thereof immediately by telephone. With this assurance the Attorney General can rely on the absence of any such litigation or contest, and on the veracity and currency of this Certificate, at the time the Bonds are approved,unless the Attorney General is notified otherwise as aforesaid. Certification as to Issuer Officials 15. As of the date hereof, the members of the Town Council and certain other officers of the Issuer are as follows: Laura Wheat, Mayor Carol Langdon, Mayor Pro Tem Michael Barrett, Council Member Alesa Belvedere, Council Member Wayne Stoltenberg, Council Member Rick Rennhack, Council Member Thomas Brymer, Town Manager Debbie Piper, Finance Director Kelly Edwards, Town Secretary Certification as to Texas Ethics Commission 16. With respect to the contracts contained within the transcript of proceedings filed with the Attorney General in connection with the issuance of the Bonds, all disclosure filings and acknowledgments required by Section 2252.908, Texas Government Code, and the rules of the Texas Ethics Commission related to said provision,have been made. Certification as to Pricing Officer 17. In accordance with the Ordinance, Thomas Brymer, the Town Manager of the Issuer, has duly executed the Pricing Certificate with respect to the Bonds. 3 The persons named below were, on the date of authorization of the Bonds, the duly elected and qualified incumbents of the offices of the Issuer set opposite their respective names, and the signatures below are the genuine signatures of said officers. By signing below, such officers hereby evidence their lawful signatures, adopt same as facsimiles for the purpose of executing the Bonds and attest to the truthfulness of the foregoing certifications. MANUAL SIGNATURES OFFICIAL TITLES Gf1��Y Mayor, Town of Westlake t}_KZL- \ Town Secretary, Town of Westlake Before me, on this day personally appeared the foregoing individuals, known to me to be the officers whose true and genuine signatures were subscribed to the foregoing instrument in my presence. Given under my hand and seal of office this c:3 4 day of -'`— , 2016. aPAY-puo"� GINGER ROBERTS AWTRY o Notary Public p '* STATE OF TExAS Notary PuVi t aa�H f oa 1 pw My COMM.NotaID N 12433747.7 September 18.2018 (Notary Seal) S-1 EXHIBIT A PROOF OF DEBT SERVICE SAVINGS Existing Daft TOW PN om Net Now ols Old Net 0?3 §Mtm 09-�,Y4-1 1 i 4A.".IS, I k77&T4 N S*W-14 W kal,4e IV X:Mil! �03 f, ARIISP 50 Ri 216-1,*W W 4D WAIOU)q 00,0-M m SO *Vlifm !�o �"o-MT 92flMy"Al vv),wu(,ry 904,60 Ni (13 t6-3*ZM41, I 'M W. Fq�JW tkv znJAIIW� LSA:-sil NW) -s—�W 1Y, Tod ".4.14M4,04 st'll-Woo SIAWW-oo sf'18401�11,.` .7%.0 PV ArtabMis gumm#!y(Not to Not) ry Dea -n Yaw.04fim smulp ............................... -—--------------------------- - 9m--6 Nk- PAYING AGENT/REGISTRAR AGREEMENT THIS AGREEMENT entered into as of January 10,2017 (this "Agreement"),by and between the Town of Westlake,Texas(the"Issuer"),and U.S. Bank National Association,Dallas,Texas(the"Bank"). RECITALS WHEREAS,the Issuer has duly authorized and provided for the issuance of its General Obligation Bonds, Series 2017 (the "Securities"), such Securities to be issued in fully registered form only as to the payment of principal and interest thereon; and WHEREAS,the Securities are scheduled to be delivered to the initial purchaser thereof on or about February 7,2017;and WHEREAS,the Issuer has selected the Bank to serve as Paying Agent/Registrar in connection with the payment of the principal of, premium, if any, and interest on said Securities and with respect to the registration,transfer and exchange thereof by the registered owners thereof; and WHEREAS,the Bank has agreed to serve in such capacities for and on behalf of the Issuer and has full power and authority to perform and serve as Paying Agent/Registrar for the Securities; NOW,THEREFORE,it is mutually agreed as follows: ARTICLE ONE APPOINTMENT OF BANK AS PAYING AGENT AND REGISTRAR Section 1.01. Appointment. The Issuer hereby appoints the Bank to serve as Paying Agent with respect to the Securities. As Paying Agent for the Securities,the Bank shall be responsible for paying on behalf of the Issuer the principal, premium(if any),and interest on the Securities as the same become due and payable to the registered owners thereof,all in accordance with this Agreement and the"Order" (hereinafter defined). The Issuer hereby appoints the Bank as Registrar with respect to the Securities. As Registrar for the Securities, the Bank shall keep and maintain for and on behalf of the Issuer books and records as to the ownership of said Securities and with respect to the transfer and exchange thereof as provided herein and in the"Order." The Bank hereby accepts its appointment,and agrees to serve as the Paying Agent and Registrar for the Securities. Section 1.02. Compensation. As compensation for the Bank's services as Paying Agent/Registrar,the Issuer hereby agrees to pay the Bank the fees and amounts set forth in Schedule A attached hereto for the first year of this Agreement and thereafter the fees and amounts set forth in the Bank's current fee schedule then in effect for services as Paying Agent/Registrar for municipalities,which shall be supplied to the Issuer on or before 90 days prior to the close of the Fiscal Year of the Issuer,and shall be effective upon the first day of the following Fiscal Year. In addition,the Issuer agrees to reimburse the Bank upon its request for all reasonable expenses, disbursements and advances incurred or made by the Bank in accordance with any of the provisions hereof (including the reasonable compensation and the expenses and disbursements of its agents and counsel). ARTICLE TWO DEFINITIONS Section 2.01. Definitions. For all purposes of this Agreement, except as otherwise expressly provided or unless the context otherwise requires: "Acceleration Date" on any Security means the date on and after which the principal or any or all installments of interest,or both,are due and payable on any Security which has become accelerated pursuant to the terms of the Security. "Bank Office" means the principal corporate trust office of the Bank as indicated in Section 6.03 hereof. The Bank will notify the Issuer in writing of any change in location of the Bank Office. "Fiscal Year"means the fiscal year of the Issuer. "Holder"and"Security Holder"each means the Person in whose name a Security is registered in the Security Register. "Issuer Request"and"Issuer Order"means a written request or order signed in the name of the Issuer by the Mayor,Mayor Pro Tem,Finance Director or Town Manager,any one or more of said officials, delivered to the Bank. "Legal Holiday"means a day on which the Bank is required or authorized to be closed. "Order" means the order, ordinance or resolution of the governing body of the Issuer pursuant to which the Securities are issued,certified by the Town Secretary or any other officer of the Issuer and delivered to the Bank. "Person" means any individual, corporation, partnership, joint venture, association, joint stock company,trust,unincorporated organization or government or any agency or political subdivision of a government. "Predecessor Securities"of any particular Security means every previous Security evidencing all or a portion of the same obligation as that evidenced by such particular Security(and,for the purposes of this definition,any mutilated,lost,destroyed,or stolen Security for which a replacement Security has been registered and delivered in lieu thereof pursuant to Section 4.06 hereof and the Order). "Redemption Date"when used with respect to any Security to be redeemed means the date fixed for such redemption pursuant to the terms of the Order. "Responsible Officer"when used with respect to the Bank means the Chairman or Vice-Chairman of the Board of Directors,the Chairman or Vice-chairman of the Executive Committee of the Board of Directors, the President, any Vice President, the Clerk, any Assistant Clerk,the Treasurer, any 2 Assistant Treasurer,the Cashier,any Assistant Cashier,any Trust Officer or Assistant Trust Officer, or any other officer of the Bank customarily performing functions similar to those performed by any of the above designated officers and also means,with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of his knowledge of and familiarity with the particular subject. "Security Register"means a register maintained by the Bank on behalf of the Issuer providing for the registration and transfer of the Securities. "Stated Maturity"means the date specified in the Order the principal of a Security is scheduled to be due and payable. Section 2.02. Other Definitions. The terms"Bank," "Issuer," and"Securities(Security)"have the meanings assigned to them in the recital paragraphs of this Agreement. The term"Paying Agent/Registrar"refers to the Bank in the performance of the duties and functions of this Agreement. ARTICLE THREE PAYING AGENT Section 3.01. Duties of Paying Agent. As Paying Agent,the Bank shall,provided adequate collected funds have been provided to it for such purpose by or on behalf of the Issuer,pay on behalf of the Issuer the principal of each Security at its Stated Maturity,Redemption Date,or Acceleration Date,to the Holder upon surrender of the Security to the Bank at the Bank Office. As Paying Agent,the Bank shall,provided adequate collected funds have been provided to it for such purpose by or on behalf of the Issuer,pay on behalf of the Issuer the interest on each Security when due,by computing the amount of interest to be paid each Holder and preparing and sending checks by United States Mail,first class postage prepaid,on each payment date,to the Holders of the Securities(or their Predecessor Securities)on the respective Record Date,to the address appearing on the Security Register or by such other method,acceptable to the Bank,requested in writing by the Holder at the Holder's risk and expense. Section 3.02. Payment Dates. The Issuer hereby instructs the Bank to pay the principal of and interest on the Securities on the dates specified in the Order. 3 ARTICLE FOUR REGISTRAR Section 4.01. Security Register-Transfers and Exchanges. The Bank agrees to keep and maintain for and on behalf of the Issuer at the Bank Office books and records(herein sometimes referred to as the"Security Register")and,if the Bank Office is located outside the State of Texas,a copy of such books and records shall be kept in the State of Texas,for recording the names and addresses of the Holders of the Securities,the transfer,exchange and replacement of the Securities and the payment of the principal of and interest on the Securities to the Holders and containing such other information as may be reasonably required by the Issuer and subject to such reasonable regulations as the Issuer and the Bank may prescribe. All transfers,exchanges and replacement of Securities shall be noted in the Security Register. Every Security surrendered for transfer or exchange shall be duly endorsed or be accompanied by a written instrument of transfer,the signature on which has been guaranteed by an officer of a federal or state bank or a member of the National Association of Securities Dealers,in form satisfactory to the Bank,duly executed by the Holder thereof or his agent duly authorized in writing. The Bank may request any supporting documentation it feels necessary to effect a re-registration, transfer or exchange of the Securities. To the extent possible and under reasonable circumstances,the Bank agrees that,in relation to an exchange or transfer of Securities,the exchange or transfer by the Holders thereof will be completed and new Securities delivered to the Holder or the assignee of the Holder in not more than three(3)business days after the receipt of the Securities to be canceled in an exchange or transfer and the written instrument of transfer or request for exchange duly executed by the Holder, or his duly authorized agent, in form and manner satisfactory to the Paying Agent/Registrar. Section 4.02. Securities. If the book-entry system of securities transfers and registrations shall be discontinued,the Issuer shall provide an adequate inventory of printed Securities to facilitate transfers or exchanges thereof. The Bank covenants that the inventory of printed Securities will be kept in safekeeping pending their use, and reasonable care will be exercised by the Bank in maintaining such Securities in safekeeping,which shall be not less than the care maintained by the Bank for debt securities of other political subdivisions or corporations for which it serves as registrar,or that is maintained for its own securities. Section 4.03. Form of Security Register. The Bank, as Registrar, will maintain the Security Register relating to the registration, payment, transfer and exchange of the Securities in accordance with the Bank's general practices and procedures in effect from time to time. The Bank shall not be obligated to maintain such Security Register in any form other than those which the Bank has currently available and currently utilizes at the time. The Security Register may be maintained in written form or in any other form capable of being converted into written form within a reasonable time. 4 Section 4.04. List of Security Holders. The Bank will provide the Issuer at any time requested by the Issuer,upon payment of the required fee,a copy of the information contained in the Security Register. The Issuer may also inspect the information contained in the Security Register at any time the Bank is customarily open for business, provided that reasonable time is allowed the Bank to provide an up-to-date listing or to convert the information into written form. The Bank will not release or disclose the contents of the Security Register to any person other than to,or at the written request of,an authorized officer or employee of the Issuer,except upon receipt of a court order or as otherwise required by law. Upon receipt of a court order and prior to the release or disclosure of the contents of the Security Register,the Bank will notify the Issuer so that the Issuer may contest the court order or such release or disclosure of the contents of the Security Register. Section 4.05. Cancellation of Securities. All securities surrendered to the Bank, at the designated Payment/Transfer Office, for payment, redemption,transfer or replacement,shall be promptly canceled by the Bank. The Bank will provide to the Issuer,at reasonable intervals determined by it,a certificate evidencing the destruction of canceled securities. Section 4.06. Mutilated,Destroyed,Lost or Stolen Securities. The Issuer hereby instructs the Bank,subj ect to the applicable provisions of the Order,to deliver and issue Securities in exchange for or in lieu ofmutilated,destroyed,lost,or stolen Securities as long as the same does not result in an overissuance. In case any Security shall be mutilated,or destroyed,lost or stolen,the Bank,in its discretion,may execute and deliver a replacement Security of like form and tenor,and in the same denomination and bearing a number not contemporaneously outstanding,in exchange and substitution for such mutilated Security,or in lieu of and in substitution for such destroyed lost or stolen Security,only after(i)the filing by the Holder thereof with the Bank of evidence satisfactory to the Bank of the destruction,loss or theft of such Security, and of the authenticity of the ownership thereof and(ii)the furnishing to the Bank of indemnification in an amount satisfactory to hold the Issuer and the Bank harmless. All expenses and charges associated with such indemnity and with the preparation,execution and delivery of a replacement Security shall be borne by the Holder of the Security mutilated,or destroyed,lost or stolen. Section 4.07. Transaction Information to Issuer. The Bank will,within a reasonable time after receipt of written request from the Issuer,furnish the Issuer information as to the Securities it has paid pursuant to Section 3.01, Securities it has delivered upon the transfer or exchange of any Securities pursuant to Section 4.0 1,and Securities it has delivered in exchange for or in lieu of mutilated,destroyed,lost,or stolen Securities pursuant to Section 4.06. Section 4.08 Reporting Requirements. To the extent required by the Internal Revenue Code of 1986,as amended, and any regulations or rulings promulgated by the U.S.Department of the Treasury pursuant thereto,the Bank shall report or assure that a report is made to the Holder and the Internal Revenue Service the amount of interest paid or the amount treated as interest accrued on the Security which is required to be reported by a Holder on its returns of federal income tax. 5 ARTICLE FIVE THE BANK Section 5.01. Duties of Bank. The Bank undertakes to perform the duties set forth herein and agrees to use reasonable care in the performance thereof. Section 5.02. Reliance on Documents.Etc. (a) The Bank may conclusively rely,as to the truth of the statements and correctness of the opinions expressed therein,on certificates or opinions furnished to the Bank. (b) The Bank shall not be liable for any error of judgment made in good faith by a Responsible Officer,unless it shall be proved that the Bank was negligent in ascertaining the pertinent facts. (c) No provisions of this Agreement shall require the Bank to expend or risk its own funds or otherwise incur any financial liability for performance of any of its duties hereunder,or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity satisfactory to it against such risks or liability is not assured to it. (d) The Bank may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, note, security,or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties. Without limiting the generality of the foregoing statement, the Bank need not examine the ownership of any Securities,but is protected in acting upon receipt of Securities containing an endorsement or instruction of transfer or power of transfer which appears on its face to be signed by the Holder or an agent of the Holder. The Bank shall not be bound to make any investigation into the facts or matters stated in a resolution, certificate, statement,instrument, opinion,report,notice,request, direction, consent,order,bond,note,security or other paper or document supplied by Issuer. (e) The Bank may consult with counsel, and the written advice of such counsel or any opinion of counsel shall be full and complete authorization and protection with respect to any action taken,suffered,or omitted by it hereunder in good faith and in reliance thereon. (f) The Bank may exercise any of the powers hereunder and perform any duties hereunder either directly or by or through agents or attorneys of the Bank. Section 5.03. Recitals of Issuer. The recitals contained herein with respect to the Issuer and in the Securities shall be taken as the statements of the Issuer,and the Bank assumes no responsibility for their correctness. The Bank shall in no event be liable to the Issuer,any Holder or Holders of any Security,or any other Person for any amount due on any Security from its own funds. 6 Section 5.04. May Hold Securities. The Bank,in its individual or any other capacity,may become the owner or pledgee of Securities and may otherwise deal with the Issuer with the same rights it would have if it were not the Paying Agent/Registrar,or any other agent. Section 5.05. Moneys Held by Bank. The Bank shall deposit any moneys received from the Issuer into a trust account to be held in a paying agency capacity for the payment of the Securities,with such moneys in the account that exceed the deposit insurance available to the Issuer by the Federal Deposit Insurance Corporation, to be fully collateralized with securities or obligations that are eligible under the laws of the State of Texas to secure and be pledged as collateral for trust accounts until the principal and interest on such securities have been presented for payment and paid to the owner thereof. Payments made from such trust account shall be made by check drawn on such trust account unless the owner of such Securities shall,at its own expense and risk, request such other medium of payment. Subject to the Unclaimed Property Law of the State of Texas,any money deposited with the Bank for the payment of the principal,premium(if any),or interest on any Security and remaining unclaimed for three years after the final maturity of the Security has become due and payable will be paid by the Bank to the Issuer if the Issuer so elects, and the Holder of such Security shall hereafter look only to the Issuer for payment thereof,and all liability of the Bank with respect to such monies shall thereupon cease. If the Issuer does not elect,the Bank is directed to report and dispose of the funds in compliance with Title Six of the Texas Property Code,as amended. Section 5.06. Indemnification. To the extent permitted by law, the Issuer agrees to indemnify the Bank for, and hold it harmless against,any loss,liability,or expense incurred without negligence or bad faith on its part,arising out of or in connection with its acceptance or administration of its duties hereunder,including the cost and expense against any claim or liability in connection with the exercise or performance of any of its powers or duties under this Agreement. Section 5.07. Interpleader. The Issuer and the Bank agree that the Bank may seek adjudication of any adverse claim,demand, or controversy over its person as well as funds on deposit,in either a Federal or State District Court located in the State and County where the administrative offices of the Issuer are located,and agree that service of process by certified or registered mail,return receipt requested,to the address referred to in Section 6.03 of this Agreement shall constitute adequate service. The Issuer and the Bank further agree that the Bank has the right to file a Bill of Interpleader in any court of competent jurisdiction within the State of Texas to determine the rights of any Person claiming any interest herein. Section 5.08. Depository Trust Company Services. It is hereby represented and warranted that, in the event the Securities are otherwise qualified and accepted for 'Depository Trust Company" services or equivalent depository trust services by other organizations, the Bank has the capability and, to the extent within its control, will comply with the "Operational Arrangements," effective August 1, 1987,which establishes requirements for securities to be 7 eligible for such type depository trust services,including,but not limited to,requirements for the timeliness of payments and funds availability,transfer turnaround time,and notification of redemptions and calls. ARTICLE SIX MISCELLANEOUS PROVISIONS Section 6.01. Amendment. This Agreement may be amended only by an agreement in writing signed by both of the parties hereto. Section 6.02. Assignment. This Agreement may not be assigned by either party without the prior written consent of the other. Section 6.03. Notices. Any request,demand,authorization,direction,notice,consent,waiver,or other document provided or permitted hereby to be given or furnished to the Issuer or the Bank shall be mailed or delivered to the Issuer or the Bank,respectively,at the addresses set forth below: Issuer Town of Westlake,Texas 1301 Solana Blvd.,Building 4 Suite 4202,2nd Floor Westlake,Texas 76226 Paying Agent/Registrar U.S.Bank National Association 13737 Noel Road, Suite 800 Dallas,Texas 75240 Section 6.04. Effect of Headings. The Article and Section headings herein are for convenience only and shall not affect the construction hereof. Section 6.05. Successors and Assigns. All covenants and agreements herein by the Issuer shall bind its successors and assigns,whether so expressed or not. Section 6.06. Severability. In case any provision herein shall be invalid, illegal, or unenforceable, the validity, legality, and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. 8 Section 6.07. Benefits of Agreement. Nothing herein,express or implied,shall give to any Person,other than the parties hereto and their successors hereunder,any benefit or any legal or equitable right,remedy,or claim hereunder. Section 6.08. Entire Agreement. This Agreement and the Order constitute the entire agreement between the parties hereto relative to the Bank acting as Paying Agent/Registrar and if any conflict exists between this Agreement and the Order, the Order shall govern. Section 6.09. Counterparts. This Agreement may be executed in any number of counterparts,each of which shall be deemed an original and all of which shall constitute one and the same Agreement. Section 6.10. Termination. This Agreement will terminate(i)on the date of final payment of the principal of and interest on the Securities to the Holders thereof or(ii)may be earlier terminated by either party upon sixty(60)days written notice;provided,however,an early termination of this Agreement by either party shall not be effective until (a) a successor Paying Agent/Registrar has been appointed by the Issuer and such appointment accepted and (b) notice has been given to the Holders of the Securities of the appointment of a successor Paying Agent/Registrar. Furthermore, the Bank and Issuer mutually agree that the effective date of an early termination of this Agreement shall not occur at any time which would disrupt,delay or otherwise adversely affect the payment of the Securities. Upon an early termination of this Agreement,the Bank agrees to promptly transfer and deliver the Security Register (or a copy thereof), together with other pertinent books and records relating to the Securities,to the successor Paying Agent/Registrar designated and appointed by the Issuer. The provisions of Section 1.02 and of Article Five shall survive and remain in full force and effect following the termination of this Agreement. Section 6.11. Governing Law. This Agreement shall be construed in accordance with and governed by the laws of the State of Texas. (Execution Page Follows) 9 IN WITNESS WHEREOF,the parties hereto have executed this Agreement as of the day and year first above written. U.S.BANK NATIONAL ASSOGIATI Ofd�...�., Title: Israel Lug®, Vice President TOWN OF WESTLAKE, TEXAS — 4��" /i / Mayor SCHEDULE A Paying Agent/Registrar Fee Schedule (See attached) bank. Schedule of Fees for Services as Paying Agent, Registrar and Refunding Escrow Agent For Town of Westlake, Texas General Obligation Refunding Bonds, Series 2017 Paying Agent: $450 Annual fee for the standard paying agent services associated with the administration of the account. Administration fees are payable in advance. Refunding Escrow Agent,One Time:(02/07/2017 to 05/01117) $500 One time fee for the standard agent services in administration of the defeasance escrow. Administration fees are payable in advance. Redemptions: (1 x$300 each issue redeemed with U.S.Bank as Paying Agent) $300 Optional Redemption Fee for each Series redeemed. Charge per redemption for selecting and preparing notices for bonds redeemed. Does not include publication charges. Direct Out of Pocket Expenses At Cost Reimbursement of expenses associated with the performance of our duties, including but not limited to publications,legal counsel after the initial close,travel expenses and filing fees. Extraordinary Services Extraordinary Services are duties or responsibilities of an unusual nature, including termination, but not provided for in the governing documents or otherwise set forth in this schedule.A reasonable charge will be assessed based on the nature of the services and the responsibility involved.At our option, these charges will be billed at a flat fee or at our hourly rate then in effect. A$300 fee will be charged on optional redemptions. Account approval is subject to review and qualification. Fees are subject to change at our discretion and upon written notice. Fees paid in advance will not be prorated. The fees set forth above and any subsequent modifications thereof are part of your agreement. Finalization of the transaction constitutes agreement to the above fee schedule, including agreement to any subsequent changes upon proper written notice. In the event your transaction is not finalized,any related out-of-pocket expenses will be billed to you directly. Absent your written instructions to sweep or otherwise invest,all sums in your account will remain uninvested and no accrued interest or other compensation will be credited to the account. Payment of fees constitutes acceptance of the terms and conditions set forth. IMPORTANT INFORMATION ABOUT PROCEDURES FOR OPENING A NEW ACCOUNT: To help the government fight the funding of terrorism and money laundering activities, Federal law requires all financial institutions to obtain, verify and record information that identifies each person who opens an account. For a non-individual person such as a business entity,a charity,a Trust or other legal entity we will ask for documentation to verify its formation and existence as a legal entity. We may also ask to see financial statements, licenses, identification and authorization documents from individuals claiming authority to represent the entity or other relevant documentation. Dated: January 13,2017 Cash Flow Verification Report Town of Westlake, Texas (Tarrant and Denton Counties) February 7, 2017 Contents Letter Exhibit A Schedule of Sources and Uses of Funds Exhibit B Escrow Account Cash Flow Exhibit B-1 Cash Receipt From the SLGS Exhibit B-2 Debt Service Payment on the Refunded Bonds Appendix I Applicable schedules provided by Lawrence Financial Consulting LLC x, GrantThornton Grant Thornton LLP 200 S 6th Street,Suite 1400 Minneapolis,MN 55402-1434 T 612.332.0001 F 612.332.8361 GrantThornton.com Report of Independent Certified Public Accountants linkd.in/GrantThorntonUS On Applying Agreed-Upon Procedures twitter.com/GrantThorntonUS Town of Westlake 1301 Solana Boulevard,Suite 4202 Westlake,Texas McCall,Parkhurst&Horton L.L.P. 717 North Harwood,Suite 900 Dallas,Texas U.S.Bank National Association Texas Attorney General's Office 13737 Noel Road,Suite 800 300 West 15th Street,Seventh Floor Dallas,Texas Austin,Texas Lawrence Financial Consulting LLC FTN Financial Capital Markets 403 Bonaire Court 9901 IH-10 West,Suite 800 Austin,Texas San Antonio,Texas $5,795,000 Town of Westlake,Texas (Tarrant and Denton Counties,Texas) General Obligation Refunding Bonds,Series 2017 Dated January 15,2017 We have performed the procedures described in this report,which were agreed to by the Town of Westlake,Texas (the"Town") and Lawrence Financial Consulting LLC(the"Financial Advisor'),to verify the mathematical accuracy of certain computations contained in the schedules attached in Appendix I provided by the Financial Advisor. The Financial Advisor is responsible for these schedules. These procedures were performed solely to assist you in the issuance of the above-captioned bond issue(the"Bonds") for the purpose of current refunding a portion of the Town's outstanding General Obligation Refunding Bonds,Series 2007(the "Refunded Bonds")as summarized on the next page. This agreed-upon procedures engagement was conducted in accordance with attestation standards established by the American Institute of Certified Public Accountants. The sufficiency of these procedures is solely the responsibility of the addressees of this report who are the specified parties. Consequently,we make no representation regarding the sufficiency of the procedures described in this report either for the purpose for which this report has been requested or for any other purpose. Grant Thornton LLP U.S.member firm of Grant Thornton International Ltd Page 2 Principal Principal ;Maturities Redemption Redemption Series Issued Dated Refunded Refunded Date Price 5-1-20,5-1-24 and 5-1-25 2007 $7,465,000 March 15,2007 56,330,000 to 5-1-32 5-1-17 100% VERIFICATION OF ESCROW ACCOUNT CASH FLOW SUFFICIENCY The Financial Advisor provided us with schedules (Appendix I) summarizing the future escrow account cash receipt and disbursement. These schedules indicate that there will be sufficient cash available in the escrow account to pay the principal and interest on the Refunded Bonds assuming the Refunded Bonds will be redeemed on May 1,2017 at 100 percent of par plus accrued interest. The attached Exhibit A(Schedule of Sources and Uses of Funds)was compiled based upon information provided by the Financial Advisor. As part of our engagement to recalculate the schedules attached as Appendix I we prepared schedules attached hereto as Exhibits B through B-2 independently calculating the future escrow account cash receipt and disbursement and compared the information used in our calculations to the information listed below contained in applicable pages of the following documents: • Subscription confirmation,dated January 10,2017,and Schedule of U.S.Treasury Securities provided by the Financial Advisor used to acquire certain United States Treasury Securities-State and Local Government Series(the"SLGS' insofar as the SLGS are described as to the principal amount,interest rate,maturity date and issuance date;and • Ordinance and Pricing Certificate for the Refunded Bonds provided by McCall, Parkhurst&Horton L.L.P.insofar as the Refunded Bonds are described as to the maturity and interest payment dates,principal amounts,interest rates and optional redemption date and price. In addition,we compared the interest rate for the maturity, of the SLGS,as shown on the Schedule of U.S.Treasury Securities,with the maximum allowable interest rate shown on the Department of Treasury,Bureau of Public Debt,SLGS Table for use on January 10,2017 and found that the interest rate was equal to the maximum allowable interest rate for that maturity. Our procedures,as summarized in Exhibits B through B-2,prove the mathematical accuracy of the schedules provided by the Financial Advisor summarizing the future escrow account cash receipt and disbursement. The schedules provided by the Financial Advisor and those prepared by us reflect that the anticipated receipt from the SLGS,together with an initial cash deposit of $0.39 to be deposited into the escrow account on February 7,2017,will be sufficient to pay, when due,the principal and interest related to the Refunded Bonds assuming the Refunded Bonds will be redeemed on May 1,2017 at 100 percent of par plus accrued interest. Page 3 We were not engaged to,and did not,conduct an examination or a review in accordance with attestation standards established by the American Institute of Certified Public Accountants,the objective of which would be the expression of an examination opinion or limited assurance on the items referred to above. Accordingly we do not express such an opinion or limited assurance. Had we performed additional procedures,other matters might have come to our attention that would have been reported to you. This report is intended solely for the information and use of those to whom this letter is addressed and is not intended to be and should not be used by anyone other than these specified parties. 1'AWW:UP- AAV Minneapolis,Minnesota February 7,2017 ' Exhibit A Town of Westlake,Texas (Tarrant and Denton Counties) SCHEDULE OF SOURCES AND USES OF FUNDS February 7,2017 SOURCES: Principal amount of the Bonds $5,795,000.00 Net original issue premium 774,059.40 $6,569,059.40 USES: Purchase price of the SLGS $6,452,467.00 Beginning cash deposit to the escrow account 0.39 Costs of issuance 73,301.84 Underwriters discount 42,380.50 Contingency 909.67 56,569,059.40 Exhibit B Town of Westlake,Texas (Tarrant and Denton Counties) ESCROW ACCOUNT CASH FLOW Debt service Cash receipt payment on from SLGS Refunded Bonds Cash Dates (Exhibit B-1) (Exhibit B-2) balance Cash deposit on February 7,2017 $0.39 05-01-17 $6,459,803.37 $6,459,803.75 0.01 $6,459,803.37 $6,459,803.75 Exhibit B-1 Town of Westlake,Texas (Tarrant and Denton Counties) CASH RECEIPT FROM THE SLGS Receipt Interest Cash receipt date Principal rate Interest from SLGS 05-01-17 $6,452,467 0.500% $7,336.37 $6,459,803.37 Exhibit B-2 Town of Westlake,Texas (Tarrant and Denton Counties) DEBT SERVICE PAYMENT ON THE REFUNDED BONDS Interest Debt service Date Principal rate Interest payment 05-01-17 $6,330,000 (1) $129,803.75 $6,459,803.75 (1) Actual maturity dates,principal amounts and interest rates are as follows: Maturity Principal Interest date amount rate 05-01-20 $125,000 4.000% 05-01-24 230,000 4.000% 05-01-25 645,000 4.000% 05-01-26 670,000 4.000% 05-01-27 700,000 4.000% 05-01-28 730,000 4.125% 05-01-29 760,000 4.125% 05-01-30 790,000 4.500% 05-01-31 825,000 4.200% 05-01-32 855,000 4.200% $6,330,000 APPENDIX I Applicable schedules provided by Lawrence Financial Consulting LLC Town of Westlake,Texas General Obligation Refunding Bonds, Series 2017 (Refund 2007) Sources & Uses Dated 02/07/2017 1 Delivered 02/07/2017 Sources Of Funds Par Amount of Bonds SS 795 000.00 _.._.________..._.._..............._....____....._......_..._...._..._........__...__.........._.....______.._...__._—.._..._.._......._._.._.,.__....._.._.__.__.__....._._......__....._......._............_....___.___._...____..._.__..__......__......__._..___-.................._..._.__.._._z._._..r_........._._.. Reoffering Premium 774,059.40 Total Sources S6,569,059.40 Uses Of Funds Deposit to Current Refundin�Pund 6,452,467.39 Costs of Issuance 73 301.84 Total Underwriter's Discount (0.731%) 42,380.50 --_109.67 Total Uses 56,569,059.40 2017 Rfd I SINGLE PURPOSE 1 111012017 1 12:55 PM Town of Westlake,Texas General Obligation Refunding Bonds, Series 2017 (Refund 2007) Current Refunding Escrow Cash Date Principal Rate Interest Receipts Disbursements Balance Fiscal Total 02/07/2017 - - 0.39 0.39 05/01/2017 6,452,467.00 0.500% 7,336.36 6,459,803.36 6,459,803.75 - 09/30/2017 - - 6,459,803.75 Total $6,452,467.00 - $7,336.36 $6,459,803.75 $6,459,803.75 - - Investment Parameters Investment Model[PV,GIC,or Securities —_� , _ _Securities Default investment yield target _ �__ --, Unrestricted Cash Deposit _— 0.39 Cost of Investments Purchased with Bond Proceeds 6,452,467.00 Total Cost of Investments $6,452,467.39 Targwct Cost of Investments at bond yield $6,424,180.60 — ----._..__._._...._..._..._.._....__._..__.._-.___........._._...__.__-........_--__ ....___._____..._ ._... Yield to Receipt _ 0.4875960% Yield for Arbitrage Purposes ._ 2.3840319% State and Local Government Series(SLGS)rates for 1/10/2017 2017 Rfd i SINGLE PURPOSE 1 1/10/2017 1 12:55 PM Town of Westlake,Texas General Obligation Refunding Bonds, Series 2007 (Advance Refunded 2002; refundable beginning 2-1-17) Debt Service To Maturity And To Call Refunded Refunded Refunded Date Bonds Interest D/S To Call Principal Coupon Interest D/S 05/01/2017 6,330,000.00 129,803.75 6,459,803.75 4.000% 129,803.75 129,803.75 11/01/2017 - - - - 129,803.75 129,803.75 05/01/2018 - 40,000.00 4A00% 129,803.75 169,803.75 11/01/2018 - - - - 129,003.75 129,003.75 05/01/2019 - - 40,000.00 4.000% 129,003.75 169,003.75 11/01/2019 - - - - - 128,203.75 128,203.75 05/01/2020 - - - 45,000.00 4.000% 128,203.75 173,203.75 11/01/2020 - - - - - 127,303.75 127,303.75 05/01/2021 - - - 50,000.00 4.000% 127,303.75 177,303.75 11/01/2021 - - - - - 126,303.75 126,303.75 05/01/2022 - - - 55,000.00 4.000% 126,303.75 181,303.75 11/01/2022 - - - - - 125,203.75 125,203.75 05/01/2023 - - - 60,000.00 4.000% 125,203.75 185,203.75 11/01/2023 - - - - - 124,003.75 124,003.75 05/01/2024 - 65,000.00 4.000% 124 003.75 189,003.75 11/01/2024 - - -- - -- - '-- 122,703.75 122,703.75 05/01/2025 - - 645,000.00 4.000% 122,703.75 767,703.75 11/01/2025 - - - - 109,803.75 109,803.75 05/01/2026 - - 670,000.00 4.000% 109,803.75 779,803.75 11/01/2026 _ _ _ 96,403.75 96,403.75 05/01/2027 - - — — 700,000.00 4.000% 96,403.75 796,403.75 11/01/2027 - - - - 82,403.75 82,403.75 05/01/2028 - - 730,000.00 4.125% 82,403.75 812,403.75 11/01/2028 - - - - 67,347.50 67,347.50 05/01/2029 - 760,000.00 4.125% 67,347.50 827,347.50 �r _-- __._..._................. -- —. 11/01/2029 - - - 51,672.50 51,672.50 05/01/2030 - - - 790,000.00 4.150% 51,672.50 841,672.50 11/01/2030 - - - - 35,280.00 35,280.00 05/01/2031 - - 825,000.00 4.2000/. 35,280.00 860,280.00 11/01/2031 —� - - - - 17,955.00 17,955.00 05/01/2032 - - 855,000.00 4.200% 17,955.00 872,955.00 Total $6,330,000.00 $129,803.75 $6,459,803.75 $6,330,000.00 - $3,076,596.25 $9,406,596.25 Yield Statistics Base date for Avg.Life&Avg.Coupon Calculation 2/07/2017 Average Life --— — __ —__ 11.533 Years Average Coupon 4.1192866% Weighted Ay.SraZe Maturity Par Basis) — __....___. _._..._.....__.._..........._._..._................ .._._— —.—_ 11.5533 Years Refunding Bond Information Refunding Dated Date2/07/2017 Refunding Delivery Date2/07/2017 2007(adv rid 2002) 1 SINGLE PURPOSE 1 1/1012017 1 12:55 PM r. IIRE;LDII GARY(II 9°CIAL S i<1 I E 11'.\"I 13;1't i`,II<i 1 al`.liZ1 3 2017 '^ NEW ISSUE: Book-Entry-Only RATING: S&P"AAA"(stable outlook) (See "RATING"herein) In the opinion of Bond Counsel,interest on the Bonds will be excludable from gross income for federal income tax purposes under statutes, regulations,published rulings and court decisions existing on the date thereof, subject to the matters described tinder "TAX AIM77ERS" herein, including the alternative minimum tax on corporations. The Issuer will designate the Bonds as"qualified tax-exempt obligations"for financial institutions. •r.. r $5,945,000* Town of Westlake, Texas f. (Tarrant and Denton Counties,Texas) General Obligation Refunding Bonds, Series 2017 Date:January 15,2017 Due: February 15,as on next page (Interest accrues frons date of delivery) The Town of Westlake, Texas General Obligation Refunding Bonds, Series 2017 (the `Bonds"), authorized and issued in accordance with the Constitution and laws of the State of Texas, including Chapter 1207, Texas Government Code, as amended ("Chapter 1207"), and an ordinance (the `Bond Ordinance") adopted by the Town Council of the Town of r Westlake, Texas (the "Issuer"), constitute direct obligations of the Issuer, payable from a continuing, direct annual ad l_ valorem tax, levied upon all taxable property within the Issuer, within the limits prescribed by law, sufficient to provide for the payment of principal and interest due on the Bonds, as provided in the Bond Ordinance. In the Bond Ordinance, the Town Council has delegated to a designated officer of the Issuer (the "Pricing Officer") pursuant to certain provisions of Chapter 1207, authority to effect the sale of the Bonds and to establish certain terms related to the issuance and sale of the r f Bonds. The terms of the sale will be included in a"Pricing Certificate,"which will complete the sale of the Bonds(the Bond K ,' Ordinance and the Pricing Certificate are collectively referred to as the "Ordinance"). See "DESCRIPTION OF THE BONDS-Authority for Issuance"and"DESCRIPTION OF THE BONDS—Security and Source of Payment"herein. The Bonds are initially issuable only to Cede&Co.,the nominee of The Depository Trust Company,New York,New York ("DTC"), pursuant to the book-entry system described herein. Beneficial ownership of the Bonds may be acquired in . denominations of$5,000 or integral multiples thereof No physical delivery of the Bonds will be made to the beneficial r = owners thereof. Principal of and interest on the Bonds will be payable to Cede& Co., which will make distributions of the '= `w amounts so paid to the participating members of DTC for subsequent remittance to the beneficial owners of the Bonds. Such book-entry-only system will affect the method and timing of payment and the method of transfer for the Bonds. Interest on - the Bonds will accrue from the date of their initial delivery and will be payable on February 15 and August 15 of each year, commencing August 15,2017,until maturity or prior redemption. Principal of the Bonds will be payable at maturity or prior , redemption. The initial Paying Agent/Registrar for the Bonds is U.S. Bank National Association (the "Paying Agent/Registrar"). The Issuer reserves the right,at its option,to redeem Bonds having stated maturities or mandatory sinking fund redemption dates on and after February 15,2028,in whole or in part in principal amounts of$5,000 or any integral multiple thereof, on February 15, 2027, or any date thereafter, at the par value thereof plus accrued interest to the date of redemption(see"DESCRIPTION OF THE BONDS-Optional Redemption"). — Proceeds of the Bonds will be used to refund certain outstanding obligations of the Issuer and pay the costs of issuing the y f Bonds. See "PLAN OF FINANCING" and APPENDIX D, "SCHEDULE OF REFUNDED OBLIGATIONS" herein. The refunding is being undertaken to lower the Issuer's debt service requirements and will result in a present value savings to the Issuer. r; CUSIP PREFIX: 96048P/MATURITY SCHEDULE&9-DIGIT CUSIP—See inside cover f The Bonds are offered when, as and if delivered and subject to approval by the Attorney General of the State of Texas, the receipt of the approving opinion of McCall, Parkhurst & Horton L.L.P., Dallas, Texas, Bond Counsel, and certain other conditions. Certain legal :4 � matters will be passed upon for the Underwriter by its counsel, Orrick, Herrington&Sutcliffe LLP, Houston, Texas. It is expected that <' delivery of the Bonds in definitive form will be through the facilities of DTC in New York,New York,on or about February 7,2017. r FTN Financial Capital Markets I: V, *Preliminary;subject to change. CUSIP Prefix: 96048P(t) MATURITY SCHEDULE* $5,945,000 Serial Bonds—Interest accrues from date of deliverx Maturity Principal Interest Initial CUSIP Feb 15 Amount Rate Yield Suffix(' 2018 $ 30,000 2019 25,000 2020 25,000 2021 35,000 2022 30,000 2023 35,000 2024 35,000 2025 620,000 2026 640,000 2027 670,000 2028'2' 700,000 2029(21 730,000 2030(21 760,000 203 1(2) 795,000 2032(2) 815,000 (1) CUSIP is a registered trademark of the American Bankers Association. CUSIP data herein 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. Neither the Issuer, the Financial Advises•nor the Underwriter takes any responsibilityfor the selection or correctness of the CUSIP numbers set forth herein. (2) The Issuer reserves the right, at its option, to redeem Bonds having stated maturities or mandatory sinking fund redemption dates on and after February 15, 2028, in whole or in part in principal amounts of$5,000 or any integral multiple thereof, on February 15, 2027, or any date thereafter, at the par value thereof plus accrued interest to the date fixed for redemption. If less than all of the Bonds within a maturity are to be redeemed, the Paying Agent/Registrar shall determine by lot the Bonds, or portions thereof, within such maturity to be redeemed. See "DESCRIPTION OF THE BONDS-Optional Redemption." *Preliminary;subject to change. i TOWN OF WESTLAKE 3 Village Circle,Suite 202 Westlake,Texas 76262 (817)430-0941 ELECTED OFFICIALS Term Expires Term Town Council (May) Occupation Inception Laura Wheat,Mayor 2018 Community Service 2008 Carol Langdon,Mayor pro-tem,Member 2017 Retired,Marketing 2008 Michael Barrett,Member 2018 Sr.Executive,Financial Services 2012 Alesa Belvedere,Member 2018 Realtor 2014 Rick Rennhack,Member 2017 Consultant 2009 Wayne Stoltenberg,Member 2017 Senior VP,CFO,Cinco Resources,Inc. 2013 APPOINTED AND OTHER TOWN OFFICIALS Name Title Years with Town Thomas E.Brymer Town Manager 9 Debbie Piper Finance Director 14 CONSULTANTS AND ADVISORS Name Title Weaver and Tidwell,L.L.P. Auditor Dallas,Texas McCall,Parkhurst&Horton L.L.P. Bond Counsel Dallas,Texas Lawrence Financial Consulting LLC Financial Advisor Austin,Texas ii USE OF INFORMATION IN OFFICIAL STATEMENT For purposes of compliance with Rule 15c2-12 of the Securities and Exchange Commission, this document constitutes an official statement of the Issuer with respect to the Bonds that has been deemed "final" by the Issuer as of its date except for the omission of no more than the information permitted by Subsection(b)(1)of Rule 15c2-12. No dealer, broker, salesman or other person has been authorized to give any information or make any representations other than those 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 Issuer or any other person. This Official Statement does not constitute an offer to sell or solicitation of an offer to buy, and there shall not be any sale of,the Bonds in any state in which it is unlawful to make such offer,solicitation or sale. The information and expressions of opinion contained herein have been obtained from the Issuer and other sources that are believed to be reliable, but the accuracy and completeness of information obtained from sources other than the Issuer cannot be guaranteed. 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 Issuer or other matters described herein since the date hereof. See "OTHER MATTERS - Continuing Disclosure of Information" herein for a description of the Issuer's agreement to update certain information contained in this Official Statement. The Underwriter has provided the following sentence for inclusion in this Official Statement. The Underwriter has 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 Underwriter does not guarantee the accuracy or completeness of such information. The prices and other terms respecting the offering and sale of the Bonds may be changed from time to time by the Underwriter after the Bonds are released for sale, and the Bonds may be offered and sold at prices other than the initial offering prices,including to dealers who may sell the Bonds into investment accounts. NEITHER THE ISSUER, ITS FINANCIAL ADVISOR NOR THE UNDERWRITER MAKES 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 HEREIN. 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 JURISDICTION IN WHICH THE BONDS HAVE BEEN REGISTERED, QUALIFIED OR EXEMPTED SHOULD NOT BE REGARDED ASA RECOMMENDATION THEREOF. IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER-ALLOT OR EFFECT TRANSACTIONS- WHICH STABILIZE THE MARKET PRICE OF THE BONDS ATA LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAYBE DISCONTINUED AT ANY TIME. TABLE OF CONTENTS SUMMARYSTATEMENT..................................................................................................................................................................v INTRODUCTION.................................................................................................................................................................................1 PLANOF FINANCING........................................................................................................................................................................1 Purposeof the Bonds.........................................................................................................................................................................l RefundedObligations........................................................................................................................................................................l Sourcesand Uses of Funds................................................................................................................................................................2 DESCRIPTIONOF THE BONDS........................................................................................................................................................2 General..............................................................................................................................................................................................2 Authorityfor Issuance.......................................................................................................................................................................3 Book-Entry-Only System.........:........................................................................................................................................................3 iii Securityand Source of Payment........................................................................................................................................................5 OptionalRedemption.........................................................................................................................................................................5 MandatorySinking Fund Redemption...............................................................................................................................................5 PayingAgent/Registrar......................................................................................................................................................................6 Defeasance.........................................................................................................................................................................................7 Amendmentsto the Ordinance..........................................................................................................................................................8 Bondholders'Remedies.....................................................................................................................................................................8 ISSUER DEBT AND AD VALOREM TAX INFORMATION...........................................................................................................9 Table I—Current Appraised Valuation,Exemptions and Tax Supported Debt................................................................................9 Table 2-Appraised Valuation and Exemptions by Category..........................................................................................................10 Table4-Ten Largest Taxpayers.....................................................................................................................................................12 Table4-Ten Largest Taxpayers.....................................................................................................................................................12 EstimatedOverlapping Debt............................................................................................................................................................12 Table 6-Authorized But Unissued Ad Valorem Tax Debt.............................................................................................................13 Table7-Other Obligations.............................................................................................................................................................14 Table8—Tax Adequacy*...............................................................................................................................................................14 FutureBorrowing............................................................................................................................................................................14 PropertyTax Code...........................................................................................................................................................................14 OTHER FINANCIAL INFORMATION.............................................................................................................................................18 Table 9-General Fund Summary Revenues and Expenditures.......................................................................................................18 Table9A—Changes in Net Assets..................................................................................................................................................19 Table 10-General Fund Summary Balance Sheet..........................................................................................................................20 Table I OA—Consolidated Statement of Net Assets........................................................................................................................20 Investments......................................................................................................................................................................................21 Table 12-Status of Current Investments........................................................................................................................................23 LEGALMATTERS.............................................................................................................................................................................23 TAXMATTERS.................................................................................................................................................................................24 Opinion............................................................................................................................................................................................24 Federal Income Tax Accounting Treatment of Original Issue Discount.........................................................................................25 Collateral Federal Income Tax Consequences.................................................................................................................................25 State,Local and Foreign Taxes........................................................................................................................................................26 Information Reporting and Backup Withholding............................................................................................................................26 Qualified Tax-Exempt Obligations for Financial Institutions..........................................................................................................26 Future and Proposed Legislation.....................................................................................................................................................27 RATING..............................................................................................................................................................................................27 OTHERMATTERS............................................................................................................................................................................27 LitigationCertificate........................................................................................................................................................................27 Legal Investments and Eligibility to Secure Public Funds in Texas................................................................................................27 FinancialAdvisor............................................................................................................................................................................28 FinancialStatements........................................................................................................................................................................28 Registration and Qualification of Bonds for Sale............................................................................................................................28 Underwriting....................................................................................................................................................................................28 Verification of Accuracy of Arithmetical Computations.................................................................................................................28 Continuing Disclosure of Information.............................................................................................................................................29 Conclusion.......................................................................................................................................................................................30 APPENDIX A-FORM OF BOND COUNSEL OPINION..............................................................................................................A-1 APPENDIXB-FINANCIAL STATEMENTS................................................................................................................................B-1 APPENDIX C-GENERAL INFORMATION REGARDING THE ISSUER..................................................................................0-1 APPENDIX D-SCHEDULE OF REFUNDED OBLIGATIONS....................................................................................................D-I iv SUMMARY STATEMENT This summary statement is subject in all respects to the more complete information and to the definitions contained or incorporated in this Official Statement. The offering of the Bonds to potential investors is made only by means of this entire Official Statement, including the cover page and all appendices. No person is authorized to detach this summary statement from this Official Statement or to otherwise use it without the entire Official Statement. The Issuer The Town of Westlake,located in Tarrant and Denton Counties,Texas,was incorporated in 1956 and operates as a"Type A general law city" under the laws of the State of Texas. See APPENDIX C, "GENERAL INFORMATION REGARDING THE ISSUER." The Bonds The Bonds are being issued in the aggregate principal amount set forth on the cover page in accordance with the Constitution and laws of the State of Texas, including Chapter 1207, Texas Government Code, as amended ("Chapter 1207"), and an ordinance(the"Bond Ordinance")adopted by the Town Council of the Issuer.In the Bond Ordinance,the Town Council has delegated to a designated officer of the Issuer (the "Pricing Officer"), pursuant to certain provisions of Chapter 1207, authority to effect the sale of the Bonds and to establish certain terms related to the issuance and sale of the Bonds.The terms of the sale will be included in a"Pricing Certificate,"which will complete the sale of the Bonds(the Bond Ordinance and the Pricing Certificate are collectively referred to as the "Ordinance"). The Bonds having stated maturities or mandatory sinking fund redemption dates on or after February 15, 2028 are subject to redemption at the option of the Issuer prior to maturity on and after February 15,2027.See"DESCRIPTION OF THE BONDS—Optional Redemption." Security The Bonds constitute direct obligations of the Issuer,payable from a continuing annual ad valorem tax levied upon all taxable property located within the Issuer, within the limitations prescribed by law. The Ordinance irrevocably pledges such ad valorem taxes in an amount sufficient to provide for the payment of the Bonds while they remain outstanding. See "DESCRIPTION OF THE BONDS-Security." Tax Matters In the opinion of Bond Counsel, interest on the Bonds will be excludable from gross income for purposes of federal income taxation under statutes, regulations,published rulings and court decisions existing on the date thereof, subject to the matters described under "TAX MATTERS" herein, including the alternative minimum tax on corporations. The Issuer will designate the Bonds as"qualified tax-exempt obligations"for financial institutions. Summary of Key Analytical Data General Fund Equity Balance as of 09/30/2015 $ 7,680,550 Estimated Population of the Issuer 1,200 Net Taxable Assessed Valuation(TAV)for Fiscal Year 2016-17 $ 1,105,075,652 TAV per capita $ 920,896.38 Gross Ad Valorem Tax Debt as of 12/31/2016 $ 36,322,000 Ratio of Gross Ad Valorem Tax Debt to TAV 3.29% Gross Ad Valorem Tax Debt per capita $ 30,268.33 Net Ad Valorem Tax Debt as of 12/31/2016') $ 1,627,000 Ratio of Net Ad Valorem Tax Debt to TAVI') 0.15% Net Ad Valorem Tax Debt per capita(') $ 1,355.83 Sources:Tarrant and Denton Central Appraisal Districts, the Issuer's audited financial statements,and U.S. Census Bureau. (1)Although all of the Issuer's ad valorem tax debt is secured by a pledge of its ad valorem tax, it is currently paying only a minor portion of such debt from its ad valorem tax and the remainder from other available sources.See "ISSUER DEBT AND AD MLOREM TAX INFORMATION—Tables 1,3 and 5." v PRELIMINARY OFFICIAL STATEMENT relating to $59945,000* Town of Westlake, Texas (Tarrant and Denton Counties,Texas) General Obligation Refunding Bonds, Series 2017 INTRODUCTION This Preliminary Official Statement provides certain information in connection with the issuance by the Town of Westlake, Texas(the"Issuer"or"Town")of its General Obligation Refunding Bonds,Series 2017(the"Bonds"). The Bonds will be issued pursuant to the laws of the State of Texas,particularly Chapter 1207,Texas Government Code,as amended, and an ordinance(the"Bond Ordinance")adopted by the Town Council of the Issuer. In the Bond Ordinance,the Town Council has delegated to a designated officer of the Issuer(the "Pricing Officer"), pursuant to certain provisions of Chapter 1207, authority to effect the sale of the Bonds and to establish certain terms related to the issuance and sale of the Bonds. The terms of the sale will be included in a"Pricing Certificate," which will complete the sale of the Bonds(the Bond Ordinance and the Pricing Certificate are collectively referred to as the"Ordinance"). There follows in this Preliminary Official Statement descriptions of the plan of financing,the Bonds and certain information about the Issuer and its finances. Capitalized terms used herein have the same meanings assigned to such terms in the Ordinance. 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 Issuer. PLAN OF FINANCING Purpose of the Bonds Proceeds from the sale of the Bonds will be used (i) to refund selected maturities of the Issuer's outstanding General Obligation Refunding Bonds, Series 2007 (the "Refunded Obligations"), in order to lower the debt service requirements of the Issuer and(ii)to pay the costs associated with the issuance of the Bonds. See APPENDIX D for a detailed listing of the Refunded Obligations and their call date at par. Refunded Obligations The principal and interest due on the Refunded Obligations will be paid on the scheduled redemption date from funds to be deposited with U.S.Bank National Association(the "Escrow Agent"), pursuant to the Escrow Agreement executed between the Issuer and the Escrow Agent. The Ordinance provides that from the proceeds of the sale of the Bonds and from other available funds, the Issuer will deposit with the Escrow Agent the amount necessary to accomplish the discharge and final payment of the Refunded Obligations. Such funds will be held by the Escrow Agent in an escrow account(the"Escrow Fund")and will be invested in U.S. Government obligations(the "Escrowed Securities")maturing in time to make such payments, and the Escrow Fund is irrevocably pledged to the payment of principal of and interest on the Refunded Obligations. Grant Thornton LLP, a nationally recognized accounting firm, will issue its report (the "Report")verifying at the time of delivery of the Bonds to the Underwriter thereof the mathematical accuracy of the schedules that demonstrate the Escrowed Securities will mature and pay interest in such amounts which, together with uninvested funds, if any, 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 Accuracy of Arithmetical Computations"). *Preliminary;subject to change. 1 By the deposit of the Escrowed Securities and cash, if necessary, with the Escrow Agent pursuant to the Escrow Agreement, the Issuer will have effected the defeasance of all of the Refunded Obligations in accordance with State law and in reliance upon the Report. As a result of such defeasance, 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 obligations of the Issuer payable from taxes nor for the purpose of applying any limitation on the issuance of debt,and the Issuer will have no further responsibility with respect to amounts available in the Escrow Fund for the payment of the Refunded Obligations from time to time, including any insufficiency therein caused by the failure to receive payment when due on the Escrowed Securities. Sources and Uses of Funds The following is a summary of the anticipated sources and uses of proceeds of finds (excluding accrued interest) in connection with the issuance of the Bonds: Sources of Funds Principal Amount of Bonds $ - Original Issue Premium - Total Sources $ - Uses of Funds Deposit to Escrow Fund $ - Issuance Costs - Underwriting Discount - Estimated Rounding Amount - Total Uses $ - DESCRIPTION OF THE BONDS General The Bonds are dated January 15,2017. Interest on the Bonds,at the rates set forth on page i hereof,will accrue from the date of their initial delivery to the Underwriter and will be payable semiannually on February 15 and August 15 of each year, commencing August 15,2017,until maturity or prior redemption. The Bonds are stated to mature on February 15 in the years and in the principal amounts set forth on page i hereof. The Bonds will be initially issued utilizing the Book-Entry-Only System of The Depository Trust Company('DTC"),and will be in fully registered form, payable to Cede & Co., as nominee for DTC. See 'Book-Entry-Only System" below. The Bonds are issued only as fully registered obligations in the denomination of$5,000 principal amounts or any integral multiple thereof(an"Authorized Denomination"),within a stated maturity and of like interest rate. Principal and redemption price of the Bonds are payable on the maturity or redemption date upon surrender at the corporate trust office of the Paying Agent/Registrar in Dallas,Texas(the"Trust Office"). Interest on the Bonds payable on any interest payment date shall be paid to the owner (the "Owner") whose name appears in the registration books of the Paying Agent/Registrar(the "Register")at the close of business on the Record Date(the last business day of the month immediately preceding an interest payment date) and shall be paid by the Paying Agent/Registrar by check sent United States mail, first class,postage prepaid,to the address of the Owner recorded in the Register or by such other method,acceptable to the Paying Agent/Registrar, requested by, and at the risk and expense of, the Owner. Notwithstanding the foregoing, so long as the Bonds are in book-entry-only form and are registered in the name of Cede & Co., as nominee for DTC, payment of the principal of and interest on the Bonds will be made to the beneficial owners thereof as described below under"Book-Entry- Only System." In the event of a non-payment of interest on a scheduled payment date with respect to the Bonds,that remains unpaid for 30 days thereafter,the Ordinance requires the Paying Agent/Registrar to establish a Special Record Date, if and when funds for the payment of such interest are received from the Issuer. Notice of the Special Record Date and of the scheduled payment 2 date of the past due interest(the "Special Payment Date"that 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 Owner of a Bond appearing on the 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. If the date specified for the payment of the principal of or interest on the Bonds is a Saturday,Sunday,legal holiday or day on which banking institutions in the city where the Paying Agent/Registrar is located are authorized or required to be closed, then such payment will be made on the next succeeding day which is not one of the foregoing days, without additional interest and with the same force and effect as if made on the specified date for such payment. Authority for Issuance The Bonds are 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 the Bond Ordinance. Book-Entry-Only System This section describes how ownership of the Bonds are to be transferred and how the principal of, premium, if any, and interest on the Bonds are to be paid to and credited by The Depository Trust Company("DTC'), New York, New York, 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 Issuer believes the source of such information to be reliable, but takes no responsibility for the accuracy or completeness thereof. The Issuer cannot and does not give any assurance that (1)DTC will distribute payment of debt service on the Bonds, 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 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 Securities and Exchange Commission, and the current procedures of DTC to be followed in dealing with DTC 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 such maturity,and will be deposited with DTC. 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 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 www.dtcc.com. 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 3 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 the Bonds, except in the event that use of the book-entry system for the Bonds is discontinued. 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. 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 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 redemptions,tenders, defaults, and proposed amendments to the Bond documents. For example, Beneficial Owners of 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 Paying Agent/Registrar and request that copies of notices be provided directly to them. Redemption notices shall be sent to DTC.If less than all of the Bonds within a 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. Neither DTC nor Cede&Co.(nor any other DTC nominee)will consent or vote with respect to the Bonds unless authorized by a Direct Participant in accordance with DTC's MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the Issuer 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 the Bonds are credited on the record date(identified in a listing attached to the Omnibus Proxy). Redemption proceeds and principal and interest 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 Issuer or the Paying Agent/Registrar,on payable dates 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 in 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 Paying Agent or the Issuer, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds and principal and interest to Cede&Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the Issuer or the Paying Agent/Registrar, 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. A Beneficial Owner shall give notice to elect to have its Bonds purchased or tendered,through its Participant,to the Tender Agent, and shall effect delivery of such Bonds by causing the Direct Participant to transfer the Participant's interest in the Bonds, on DTC's records, to the Tender Agent. The requirement for physical delivery of Bonds in connection with an optional tender or a mandatory purchase will be deemed satisfied when the ownership rights in the Bonds are transferred by Direct Participants on DTC's records and followed by a book-entry credit of tendered Bonds to the Tender Agent's DTC account. DTC may discontinue providing its services as depository with respect to the Bonds at any time by giving reasonable notice to the Issuer or the Paying Agent/Registrar. Under such circumstances, in the event that a successor depository is not obtained,Bond certificates are required to be printed and delivered. 4 The Issuer may decide to discontinue use of the system of book-entry transfers through DTC (or a successor securities depository).In that event,Bond certificates will be printed and delivered. The information in this section concerning DTC and DTC's book-entry system has been obtained from sources that the Issuer believes to be reliable,but the Issuer takes not responsibility for the accuracy thereof. Security and Source of Payment The Bonds will constitute direct obligations of the Issuer, payable from ad valorem taxes levied against all taxable property located within the Issuer, within the limitations prescribed by law. The Ordinance pledges such ad valorem taxes to the payment of the principal of and interest on the Bonds while they remain outstanding. See "ISSUER DEBT AND AD VALOREM TAX INFORMATION"herein. Tax Rate Limitations. The Constitution of the State provides that the ad valorem tax levied by the Issuer for general purposes and for the purpose of paying debt service requirements of the Issuer's general obligation debt shall not exceed$1.50 for each $100 of assessed valuation of taxable property. There is no limitation within the $1.50 rate for interest and sinking fund purposes. Administratively, however, the Attorney General of the State of Texas will not permit allocation of more than $1.00 of the$1.50 maximum tax rate for all tax supported debt based on a 90%collection rate. Optional Redemption The Issuer reserves the right, at its option,to redeem Bonds having stated maturities or mandatory sinking fund redemption dates on and after February 15, 2028, in whole or in part in principal amounts of$5,000 or any integral multiple thereof,on February 15, 2027,or any date thereafter, at the par value thereof plus accrued interest to the date fixed for redemption. If less than all of the Bonds within a maturity are to be redeemed,the Paying Agent/Registrar(or DTC,while the Bonds are in Book-Entry-Only form)shall determine by lot the Bonds,or portions thereof,within such maturity to be redeemed. Mandatory Sinking Fund Redemption The Bonds maturing on February 15 in the years indicated in the following schedule(the "Term Bonds")shall be subject to mandatory redemption in part prior to maturity, at random by lot or other customary method selected by the Paying Agent/Registrar, at the redemption price of par and accrued interest to the date of redemption on the dates and in the respective principal amounts,set forth in the following schedule: Term Bonds Due February 15,20Term Bonds Due February 15,20 Redemption Date Amount Redemption Date Amount The principal amount of Term Bonds of a stated maturity required to be redeemed on any mandatory redemption date pursuant to the operation of the mandatory sinking fund redemption provisions shall be reduced, at the option of the Issuer, by the principal amount of any Term Bonds of the same maturity which, at least 45 days prior to a mandatory redemption date (1) shall have been acquired by the Issuer at a price not exceeding the principal amount of such Term Bonds plus accrued interest to the date of purchase thereof, and delivered to the Paying Agent/Registrar for cancellation, (2)shall have been purchased and canceled by the Paying Agent/Registrar at the request of the Issuer at a price not exceeding the principal amount of such Term Bonds plus accrued interest to the date of purchase, or(3) shall have been redeemed pursuant to the optional redemption provisions and not theretofore credited against a mandatory redemption requirement. 5 Notice of Redemption Not less than 30 days prior to a redemption date for the Bonds, the Issuer shall cause a notice of redemption to be sent by United States mail,first class,postage prepaid,to each Owner of a Bond to be redeemed,in whole or in part,at the address of the Owner appearing in the Register at the close of business on the business day next preceding the date of mailing of such notice. ANY NOTICE GIVEN SHALL BE CONCLUSIVELY PRESUMED TO HAVE BEEN DULY GIVEN,WHETHER OR NOT THE OWNER RECEIVES SUCH NOTICE. NOTICE HAVING BEEN SO GIVEN AND ALL OTHER CONDITIONS TO REDEMPTION ARE SATISFIED, THE BONDS CALLED FOR REDEMPTION SHALL BECOME DUE AND PAYABLE ON THE SPECIFIED REDEMPTION DATE, AND,NOTWITHSTANDING THAT ANY BOND OR PORTION THEREOF HAS NOT BEEN SURRENDERED FOR PAYMENT, INTEREST ON SUCH BOND OR PORTION THEREOF SHALL CEASE TO ACCRUE. With respect to any optional redemption of the Bonds, unless certain prerequisites to such redemption required by the Ordinance have been met and money sufficient to pay the principal of and premium, if any,and interest or maturity value on the Bonds to be redeemed will have been received by the Paying Agent/Registrar prior to the giving of such notice of redemption, such notice may state that said redemption may, at the option of the Issuer, be conditional upon the satisfaction of such prerequisites and receipt of such money by the Paying Agent/Registrar on or prior to the date fixed for such redemption or upon any prerequisite 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 Issuer will not redeem such Bonds, and the Paying Agent/Registrar will give notice in the manner in which the notice of redemption was given, to the effect that the Bonds have not been redeemed. The Paying Agent/Registrar and the Issuer,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 Ordinance or other notices with respect to the Bonds only to DTC.Any failure by DTC to advise any DTC participant, or of any DTC participant or indirect participant to notify the beneficial owner,shall 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 Issuer will reduce the outstanding principal amount of such Bonds held by DTC. In such event, DTC may implement, through its Book-Entry-Only System, a redemption of such Bonds held for the account of DTC participants in accordance with its rules or other agreements with DTC participants and then DTC 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 Ordinance and will not be conducted by the Issuer or the Paying Agent/Registrar.Neither the Issuer nor the Paying Agent/Registrar will have any responsibility to DTC participants, indirect participants or the persons for whom DTC participants act as nominees,with respect to the payments on the Bonds or the providing of notice to DTC participants, indirect participants, or beneficial owners of the selection of portions of the Bonds for redemption.See"DESCRIPTION OF THE BONDS—Book-Entry-Only System"herein. Paying Agent/Registrar The initial Paying Agent/Registrar is U.S.Bank National Association,Dallas,Texas. In the Ordinance,the Issuer retains the right to replace the Paying Agent/Registrar. The Issuer covenants to maintain and provide a Paying Agent/Registrar at all times while the Bonds are outstanding, and any successor Paying Agent/Registrar shall be a bank,trust company, financial institution or other entity duly qualified and legally authorized to serve as and perform the duties and services of Paying Agent/Registrar for the Bonds. Upon any change in the Paying Agent/Registrar for the Bonds,the Issuer agrees to promptly cause a written notice thereof to be sent to each Owner by United States mail, first class,postage prepaid,which notice shall also give the effective date of the change and the address of the new Paying Agent/Registrar. If the Paying Agent/Registrar is replaced, the new Paying Agent/Registrar shall accept the previous Paying Agent/Registrar's records and act in the same capacity as the previous Paying Agent/Registrar. Transfer and Exchange In the event the Book-Entry-Only System shall be discontinued with respect to the Bonds,such Bonds may be transferred and exchanged on the Register only upon presentation and surrender thereof to the Paying Agent/Registrar,and such transfer or exchange shall be without expense or service charge to the Owner,except for any tax or other governmental charges required to be paid with respect to such registration, exchange and transfer. 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 Paying Agent/Registrar. A new Bond or Bonds will be delivered by the Paying Agent/Registrar, in lieu of the Bond being transferred or exchanged, at 6 the Trust Office, or sent by United States mail, first class, postage prepaid,to the new Owner or its designee. New Bonds registered and delivered in an exchange or transfer shall be in Authorized Denominations for any one stated maturity and for a like aggregate principal amount and interest rate as the Bond or Bonds surrendered for exchange or transfer. Neither the Issuer nor the Paying Agent/Registrar shall be required to issue, transfer or exchange any Bond in whole or in part during the period commencing with the close of business on any Record Date and ending on the day subsequent to the immediately following payment date or,with respect to any Bond called for redemption, in whole or in part,within 30 days of the date fixed for redemption, provided that such limitation of transfer shall not be applicable to the exchange by the registered owner of the uncalled balance of a Bond. The Paying Agent/Registrar shall require payment by the Owner requesting such transfer or exchange of any tax or other governmental charges required to be paid with respect to such transfer or exchange. Replacement Bonds If any Bond is mutilated, destroyed, stolen or lost, a new Bond in the same principal amount and bearing the same rate of interest as the Bond so mutilated, destroyed,stolen or lost will be issued under the conditions set forth in the Ordinance. In the case of a mutilated Bond,such new Bond will be delivered only upon surrender and cancellation of such mutilated Bond. In the case of any Bond issued in lieu of and substitution for a Bond which has been destroyed,stolen or lost,such new Bond will be delivered only upon(a)the filing with the Issuer and the Paying Agent/Registrar of evidence satisfactory to establish to the Paying Agent/Registrar proof of the ownership and the circumstances of loss,destruction or theft of such Bond,and(b) the furnishing to the Paying Agent/Registrar of such security of indemnity satisfactory to it to hold it and the Issuer harmless. The person requesting the authentication and delivery of a new Bond must comply with such other reasonable requirements as the Issuer and the Paying Agent/Registrar may prescribe and pay such expenses as may be incurred in connection therewith. Defeasance The Ordinance provides for the defeasance of the Bonds when payment of the principal of and premium, if any, on Bonds, plus interest thereon to the due date thereof(whether such due date be by reason of maturity, redemption,or otherwise), is provided by irrevocably depositing with a paying agent or other authorized entity,in trust(1)money sufficient to make such payment or(2)Defeasance Securities,certified by an independent public accounting firm of national reputation to mature as to principal and interest in such amounts and at such times to insure the availability, without reinvestment, of sufficient money to make such payment, and all necessary and proper fees, compensation and expenses of the paying agent for the Bonds,and thereafter the Issuer will have no further responsibility with respect to amounts available to such paying agent(or other financial institution permitted by applicable law)for the payment of such defeased Bonds, including any insufficiency therein caused by the failure of such paying agent (or other financial institution permitted by applicable law) to receive payment when due on the Defeasance Securities. The Ordinance provides that"Defeasance Securities"means any securities and obligations now or hereafter authorized by State law that are eligible to discharges obligations such as the Bonds. Current State law permits defeasance with the following types of securities: (1)direct, noncallable obligations of the United States of America,including obligations that are unconditionally guaranteed by the United States of America,(2)noncallable obligations of an agency or instrumentality of the United States of America, including obligations that are unconditionally guaranteed or insured by the agency or instrumentality and that, on the date the governing body of the Issuer adopts or approves the proceedings authorizing the financial arrangements,are rated as to investment quality by a nationally recognized investment rating firm not less than AAA or its equivalent, and (3) 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 financial arrangements,are rated as to investment quality by a nationally recognized investment rating firm not less than AAA or its equivalent. The Issuer has additionally reserved the right, subject to satisfying the requirements of(1)and(2)above,to substitute other Defeasance Securities for the Defeasance Securities originally deposited, to reinvest the uninvested moneys on deposit for such defeasance and to withdraw for the benefit of the Issuer moneys in excess of the amount required for such defeasance. Upon such deposit as described above, such Bonds 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 Bonds have been made as described above, all rights of the Issuer 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 right to call the Bonds for redemption is not extinguished if the Issuer: (i) in the proceedings providing for the firm banking and financial arrangements, expressly 7 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. There is no assurance that the current law will not be changed in a manner which would permit investments other than those described above to be made with amounts deposited to defease the Bonds.Because the Ordinance does not contractually limit such investments, registered owners may be deemed to have consented to defeasance with such other investments, notwithstanding the fact that such investments may not be of the same investment quality as those currently permitted under State law. There is no assurance that the ratings for U.S. Treasury securities used as Defeasance Securities or those for any other Defeasance Security will be maintained at any particular rating category. Amendments to the Ordinance In the Ordinance,the Issuer has reserved the right to amend the Ordinance without the consent of any holder for the purpose of amending or supplementing the Ordinance to (i) cure any ambiguity, defect or omission therein that does not materially adversely affect the interests of the holders, (ii) grant additional rights or security for the benefit of the holders, (iii) add events of default as shall not be inconsistent with the provisions of the Ordinance that do not materially adversely affect the interests of the holders, (iv) qualify the Ordinance under the Trust Indenture Act of 1939, as amended, or corresponding provisions of federal laws from time to time in effect or (v) make such other provisions in regard to matters or questions arising under the Ordinance that are not inconsistent with the provisions thereof and which, in the opinion of Bond Counsel for the Issuer,do not materially adversely affect the interests of the holders. The Ordinance further provides that the holders of the Bonds aggregating in principal amount 51%of the outstanding Bonds shall have the right from time to time to approve any amendment not described above to the Ordinance if it is deemed necessary or desirable by the Issuer;provided,however,that without the consent of 100%of the holders in original principal amount of the then outstanding Bonds,no amendment may be made for the purpose of(i)making any change in the maturity of any of the outstanding Bonds; (ii) reducing the rate of interest borne by any of the outstanding Bonds; (iii) reducing the amount of the principal of,or redemption premium, if any, payable on any outstanding Bonds; (iv) modifying the terms of payment of principal or of interest or redemption premium on outstanding Bonds,or imposing any condition with respect to such payment; or(v)changing the minimum percentage of the principal amount of the Bonds necessary for consent to such amendment. Reference is made to the Ordinance for further provisions relating to the amendment thereof. Bondholders'Remedies The Ordinance establishes specific events of default with respect to the Bonds. If the Issuer defaults in the payment of the principal of or interest on the Bonds when due or the Issuer defaults in the observance or performance of any of the covenants, conditions,or obligations of the Issuer,the failure to perform which materially,adversely affects the rights of the owners of the Bonds,including but not limited to,their prospect or ability to be repaid in accordance with the Ordinance,and the continuation thereof for a period of 60 days after notice of such default is given by any owner to the Issuer,the Ordinance provides that any registered owner is entitled to seek a writ of mandamus from a court of proper jurisdiction requiring the Issuer 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 Bonds or the Ordinance and the Issuer'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 Bonds in the event of default and, consequently, the remedy of mandamus may have to be relied upon from year to year. The Ordinance does not provide for the appointment of a trustee to represent the interest of the owners of the Bonds upon any failure of the Issuer to perform in accordance with the terms of the Ordinance, 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. The Texas Supreme Court ruled in Tooke v. City of Mexia, 197 S.W. 3`d 325 (Tex. 2006), that a waiver of sovereign immunity 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 Issuer's sovereign immunity from a suit for money damages,owners of the Bonds may not be able to bring such a suit against the Issuer for breach of the Bonds or Ordinance covenants. Even if a judgment against the Issuer could be obtained, it could not be enforced by direct levy and execution against the Issuer's 8 property. Further,the registered owners cannot themselves foreclose on property within the Issuer or sell property within the Issuer to enforce the tax lien on taxable property to pay the principal of and interest on the Bonds. Furthermore, the Issuer 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 owners of the Bonds of an entity which has sought protection under Chapter 9. Therefore, should the Issuer 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 Bonds are qualified with respect to the customary rights of debtors relative to their creditors and by general principles of equity which permit the exercise of judicial discretion. Initially, the only registered owner of the Bonds will be Cede & Co., or DTC's nominee. See "DESCRIPTION OF THE BONDS-Book-Entry-Only System"herein for a description of the duties of DTC with regard to ownership of Bonds. ISSUER DEBT AND AD VALOREM TAX INFORMATION The following tables and calculations relate to the Bonds and to all other tax-supported debt of the Issuer. The Issuer and various other political subdivisions of government which overlap all or a portion of the Issuer are empowered to incur debt to be paid from revenues raised or to be raised by taxation against all or a portion of property within the Issuer. Table 1—Current Appraised Valuation,Exemptions and Tax Supported Debt Tarrant County Denton County Total Total Market Value of Issuer Property for FY 2016-17 $ 1,568,214,122 $ 20,043,379 $ 1,588,257,501 Homestead Cap Loss (62,483,152) - (62,483,152) Ag Deferrals(Productivity Loss) (78,172,761) (16,643.604) (94,816,365) Total Appraised Value of Issuer Property for FY 2016-17 $ 1,427,558,209 $ 3,399,775 $ 1,430,957,984 Less Exemptions: Homestead Exemption-Local Option(General) (100,346,357) - (100,346,357) Homestead Exemption-Local Option(Over 65) (595,000) - (595,000) Abatements(l) (135,433,473) - (135,433,473) Reduction for Cases Before ARB (59,278,265) - (591,278,265) Reduction for Incomplete/In Process Accounts (12,758,433) - (12,758,433) Absolute Exemptions (12,352,533) (2,241,248) (14,593,781) Other Exemptions,Reductions (2,877,023) - (2,877,023) Total Adjustments,Exemptions (323,641,084) (2,241,248) (325,882,332) Taxable Assessed Valuation for FY 2016-17 $ 1,103.917.125 $ 1,158.527 $ 1,105,075.652 Gross Principal Amount of Ad Valorem Tax Supported Debt as of 12/31/2016 $ 36,322,000 Less:Principal Amount Such Debt Being Repaid From Sources Other Than Ad Valorem Taxes (34,695,000) Net Amount of Ad Valorem Tax Supported Debt as of 09/30/2015 $ 1,627,000 Debt Service Fund Balance as of 09/30/2015 $ 20,916 Sources:Tarrant and Denton Central Appraisal Districts;Issuer financial statements. (1) The Issuer has granted partial tax abatements for two major facilities within its boundaries, including those used by Deloitte LLP and Fidelity Investments. Such abatements have 10 year terms and are subject to various terms and conditions, including in the case of Fidelity Investments the satisfaction of certain employment targets, in order to qualify for abatement in any given year. The Deloitte LLP abatement expires October 2021,and the Fidelity Investments abatement expires November 2019. 9 Table 2-Appraised Valuation and Exemptions by Category Fiscal Years Ending September 30, 2017 2016 2015 Market Valuation Amount %of Total Amount %of Total Amount %of Total Real Estate,Residential $ 879,417,798 55.37% $ 669,171,945 50.52% $ 617,469,021 48.62% Real Estate,Commercial 466,391,373 29.36% 455,595,734 34.40% 427,483,453 33.66% Personal Prop,CommUlndust 146,514,438 9.22% 122,122,330 9.22% 146,956,302 11.57% Agricultural Properties 95,250,592 6.00% 77,073,547 5.82% 77,486,314 6.10% Utilities 683,300 0.04% 555,495 0.04% 497,410 0.04% Total Market Valuation 1,588,257,501 100.00% 1,324,519,051 100.00% 1,269,892,500 100.00% Less Exemptions&Reductions Homestead Cap Loss (62,483,152) (5,553,073) (16,626,670) Agricultural,Productivity Loss (94,816,365) (76,467,922) (76,873,063) Homestead-Local Option (100,346,357) (85,558,380) (86,061,862) Over 65-Local Option (595,000) (605,000) (561,700) Disabled-Local Option - - - Abatements(') (135,433,473) (162,354,187) (163,938,263) Reduction for ARB Cases (59,278,265) (9,842,969) (7,517,937) Reduction for Incomplete Accts (12,758,433) (22,863,722) (1,780,074) Absolute Exemptions (14,593,781) (14,706,044) (14,813,387) Disabled Veterans - - - Nominal Value - - - Other Exemptions,Reductions (2,877,023) - Net Taxable Assessed Valuation $ 1,105,075,652 $ 946,567,754 $ 901,719.544 Fiscal Years Ending September 30, 2014 2013 Market Valuation Amount %of Total Amount %of Total Real Estate,Residential $ 574,506,369 46.22% $ 545,598,263 44.65% Real Estate,Commercial 438,047,262 35.24% 443,779,916 36.31% Personal Prop.,Commercial/Indust. 151,927,427 12.22% 140,063,086 11.46% Agricultural Properties 78,589,129 6.32% 92,015,149 7.53% Utilities - 0.00% 584,960 0.05% Total Market Valuation 1,243,070,187 100.00% 1,222,041,374 100.00% Less Exemptions&Reductions Homestead Cap Loss (2,499,033) (4,783,528) Agricultural,Productivity Loss (76,828,073) (80,257,943) Homestead-Local Option (77,856,727) (72,510,736) Over 65-Local Option (551,700) (535,000) Disabled-Local Option - (10,000) Abatements(]) (172,174,981) (168,861,045) Reduction for ARB Cases - Reduction for Incomplete Accts (2,574,101) (2,695,142) Absolute Exemptions (12,122,064) (6,148,041) Disabled Veterans - (12,000) Nominal Value (910) (780) Other Exemptions,Reductions Net Taxable Assessed Valuation $ 898,462,598 $ 886,227,159 Sources:Tarrant and Denton Central Appraisal Districts. (1) The Issuer has granted partial tax abatements for two major facilities within its boundaries, including those used by Deloitte LLP and Fidelity Investments. Such abatements have 10 year terms and are subject to various terms and conditions, including,in the case of Fidelity,the satisfaction of certain employment targets in order to qualify for abatement in any given year. The Deloitte LLP abatement expires October 2021, and the Fidelity Investments abatement expires November 2019. 10 Table 3-Tax Rates,Levies,Collections and Ratios Fiscal Years Ending September 30, 2017 2016 2015 2014 2013 Bond Tax Rate $ 0.00813 $ 0.01687 $ 0.01924 $ 0.01796 $ 0.01487 Maintenance Tax Rate 0.12882 0.13947 0.13710 0.13888 0.14197 Total Tax Rate $ 0.13695 $ 0.15634 $ 0.15634 $ 0.15684 $ 0.15684 Taxable Assessed Valuation $ 1,105,575,652 $ 946,567,764 $ 901,719,544 $ 898,462,598 $ 886.227.159 Total Ad Valorem Taxes Levied $ 1,514,086 $ 1,470,666 $ 1,450,643 $ 1,350,188 $ 1,352,097 Current Collection Ratio In process 98.16% 96.59% 99.23% 99.90% Total Collection Ratio In process 99.77% 98.02% 99.20% 99.93% Gross Ad Valorem Tax DebP $ 35,212,000 $ 27,142,000 $ 28,232,000 $ 29,304,000 $ 30,212,000 Gross Tax Debt Ratio to TAV 3.18% 2.87% 3.13% 3.26% 3.41% Net Ad Valorem Tax DebP $ 1,552,000 $ 1,627,000 $ 1,727,000 $ 1,824,000 $ 1,917,000 Net Tax Debt Ratio to TAV 0.14% 0.17% 0.190/0 0.20% 0.22% Estimated Population 1,200 1,200 1,194 1,194 1,014 TAV per Capita $ 921,313 $ 788,806 $ 755,209 $ 752,481 $ 873,991 Gross Tax Debt per Capita") $ 29,343.33 $ 22,618.33 $ 23,644.89 $ 24,542.71 $ 29,794.87 Net Tax Debt per Capital') $ 1,293.33 $ 1,355.83 $ 1,446.40 $ 1,527.64 $ 1,890.53 Sources: The Town's audited financial statements; Tarrant and Denton Central Appraisal Districts. (1) As of fiscal year end,•most recent fiscal year end amount is a projection and is subject to change. (2) Currently all of the Issuer's ad valorem tax supported debt is being repaid from sources other than its ad valorem tax, except for the Issuer's Combination Tax and Revenue Certificates of Obligation, Series 2011. The Issuer is authorized,at its option, to pay all or any portion of its debt from ad valorem taxes, other lawfully available revenues such as sales tax revenues, or any combination thereof, and may determine in the future to change the sources being used to repay all or any portion of its outstanding debt. [Remainder of page intentionally left blank.] I1 Table 4-Ten Largest Taxpayers Type of TAV for FY %of TAV Name Business(') 2016-17 $ 1,105,075.652 BRE Solana LLC Commercial Real Estate $ 173,218,573 15.67% FMR Texas I LLC/Ltd.Partnership Commercial Real Estate 80,939,255 7.32% DCLI,LLC Conference Center 47,521,483 4.30% Fidelity Investments Inc. Financial Services 39,098,584 3.54% Dallas MTA LP(dba Verizon Wireless) Wireless Telecommunications 38,537,456 3.49% Marsh USA Inc. Risk Mgt.,Insurance 15,402,373 1.39% Lexington TNI Westlake,LP Commercial Real Estate/REIT 14,618,533 1.32% PrinceWhipple Trust Private Trust 7,070,782 0.64% Keith Hutton Personal 6,391,904 0.58% Vernon Wells III and Charlene Wells Personal 5,837,063 0.53% Totals $ 428.636.006 38.26% Source:Tarrant and Denton Central Appraisal Districts. (1)Of the top ten taxpayers,the valuations of three are related solely to commercial real estate,representing approximately 24%of the Issuer's total tax base. The valuations of such property may fluctuate substantially from year to year. Estimated Overlapping Debt As in the case of the Issuer,various taxing units within the Issuer's boundaries may incur debts that are paid from ad valorem taxes levied by such taxing units on taxable properties within the Issuer's boundaries. Such taxing units are separate legal entities and independent of the Issuer. The information in this table shows direct and estimated overlapping ad valorem tax debt and is based on information obtained from the individual taxing units or from the Texas Municipal Reports published by the Municipal Advisory Council of Texas. The Issuer has not independently verified the accuracy or completeness of information relating to any taxing unit other than itself,and no person should rely upon such information as being accurate or complete. Additionally,taxing units listed herein may have issued additional tax debt since the date hereof,and such taxing units may have programs requiring the issuance of substantial amounts of additional tax debt,the amount of which cannot be determined at this time. Estimated Overlapping Taxing Unit Gross Debt As of %Overlapping Debt Carroll ISD $ 204,151,047 09/30/16 5.67% $ 11,575,364 Denton County 602,995,000 09/30/16 0.02% 120,599 Keller ISD 728,705,387 09/30/16 4.56% 33,228,966 Northwest ISD 733,049,556 09/30/16 1.37% 10,042,779 Tarrant County 338,430,000 09/30/16 0.78% 2,639,754 Tarrant County Hospital District 22,335,000 09/30/16 0.78% 174,213 Trophy Club MUD#1 10,845,000 09/30/16 18.76% 2,034,522 Total Overlapping Debt 59,816,197 Gross Amount of Issuer's Outstanding Debt as of 12/31/2016 36,322,000 Total Direct&Overlapping Debt(gross amount) $ 96,138,197 Total Overlapping Debt(see above) $ 59,816,197 Net Amount of Issuer's Outstanding Debt as of 12/31/2016(') 1,627,000 Total Direct&Overlapping Debt(net amount) $ 61,443,197 (1) Currently all of the Issuer's ad valorem tar supported debt is being repaid from sources other than its ad valorem tax,except for the Issuer's Combination Tax and Revenue Certificates of Obligation,Series 2011 which had a balance of$1,627,000 as of 09/30/2016. 12 Table 5-Proforma Debt Service Requirements Fiscal Less: Plus: %of Principal Year End Existing Refunded the Bonds* Gross Debt. Net Debt Principal Retired"' /�30 Debt Service(l) Obligations Principal Int rest Total ervice(i5e t2) Balance $ 36.322,000 2017 $ 2,244,493 $ (129,804) $ - $ 1237062 $ 123,062 $ 2,237,751 $ 1 13,148 $ 34,827,000 4.12% 2018 2,550,991 (299,608) 30,000 235,200 265,200 2,516,584 115,300 33,488,000 7.80% 2019 2,551,980 (298,008) 25,000 234,375 259,375 2,513,347 117.356 32,115,000 11.58% 2020 2,556,622 (301,408) 25,000 233,625 258,625 2,513,840 119,316 30,703,000 15.47% 2021 2,554,531 (304,608) 35,000 232,725 267,725 2,517,649 121,180 29,247,000 19.48% 2022 2,561,582 (307,608) 30,000 231,750 261,750 2,515,725 123,936 27,751,000 23.60% 2023 2,561,888 (310,408) 35,000 230,775 265,775 2,517,256 126,572 26,210,000 27.84% 2024 2,563,354 (313,008) 35,000 229,725 264,725 2,515,072 129,088 24,624,000 32.21% 2025 2,566,370 (890,408) 620,000 216,800 836,800 2,512,763 131,484 22,988,000 36.71% 2026 2,570,937 (889,608) 640,000 191,600 831,600 2,512,929 134348 21,296,000 41.37% 2027 2,572,264 (892,808) 670,000 165,400 835,400 2,514,857 137,868 19,543,000 46.20% 2028 2,575,273 (894,808) 700,000 138,000 838,000 2,518,465 140,844 17,724,000 51.20% 2029 2,569,778 (894,695) 730,000 109,400 839,400 2,514,483 144,664 15,843,000 56.38% 2030 2,570,567 (893,345) 760,000 79,600 839,600 2,516,822 148,316 13,890,000 61.76% 2031 2,568,591 (895,560) 795,000 48,500 843,500 2,516,531 151,800 11,865,000 67.33% 2032 2,576,754 (890,910) 815,000 16,300 831,300 2,517,144 - 9,760,000 73.13% 2033 983,619 - - - - 983,619 - 9,135,000 74.85% 2034 986,269 - - - - 986,269 - 8,485,000 76.64% 2035 988,019 - - - - 988,019 - 7,810,000 78.50% 2036 988,869 - - - - 988,869 - 7,110,000 80.43% 2037 984,613 - - - - 984,613 - 6,390,000 82.41% 2038 983,478 - - - - 983,478 - 5,645,000 84.46% 2039 984,550 - - - - 984,550 - 4,870,000 86.59% 2040 983,700 - - - - 983,700 - 4,065,000 88.81% 2041 985,800 - - - - 985,800 - 3,225,000 91.12% 2042 986,500 - - - - 986,500 - 2,350,000 93.53% 2043 985,800 - - - - 985,800 - 1,440,000 96.04% 2044 508,400 - - - - 508,400 - 980,000 97.30% 2045 509,600 - - - - 509,600 - 500,000 98.62% 2046 510,000 - 510,000 - - 100.00% Totals $ 53,085,192 $ (9,406,596) $ 5,945,000 $ 2,716,837 $ 8,661,837 $ 52,340,432 $ 1,955,620 (l)Secured by a pledge of the Issuer's ad valorem tax. Debt service for a substantial portion of such debt is currently being paid from the Issuer's sales tax and other linvJully available revenues.Although the pledge of the Issuer's ad valorem tax continues for as long as any such debt remains outstanding,the Issuer may use other funds to pay debt service. (2) Only that portion of aggregate debt service that is attributable to the Issuer's Combination Tax and Revenue Certificate of Obligation, Series 2011 (With an outstanding principal balance as of 0913012016 of$1,627,000), is currently being paid from ad valorem tax revenues. Although the pledge of the Issuer's ad valorem tar continues for as long as all debt reflected in this table remains outstanding, the Issuer may use other funds to pay debt service. *Preliminary and for illustrative purposes only;based on an estimated net interest cost of3.11%;subject to change. Table 6-Authorized But Unissued Ad Valorem Tax Debt Voter Authorized but Unissued Ad Valorem Tax Bonds: None Ad Valorem Tax Bond Elections Planned for Next 12 Months: None New Money Ad Valorem Tax Debt Not Requiring Voter Approval Planned During Next 12 Months: Undetermined 13 Table 7-Other Obligations As of September 30,2015,the Issuer had certain other proprietary,contractual,special revenue and lease obligations payable from and secured by sources other than ad valorem taxes as described more fully in the Issuer's audited financial statements under Note 5 beginning on page 53 of the audited financial statements attached hereto as APPENDIX B. Table 8—Tax Adequacy* Gross Ad Est.Gross Net Ad Est.Net Valorem Tax Ad Valorem Valorem Tax Ad Valorem Fiscal Year Debt Service Tax Rate(1)(2) Debt Service Tax Rate(1)(2) Current Year(2016-17) $2,237,751 $0.2025 $113,148 $0.0102 Maximum Annual Debt Service $2,518,465 $0.2279 $151,800 $0.0137 Average Annual Debt Service $1,769,506 $0.1601 $130,375 $0.0118 (1) Prior to 2010-11, the Issuer had not levied an ad valorem tax.Instead it paid debt service on all of its ad valorem tax debt from other lawfully available revenues. Only that portion of aggregate debt service that is attributable to the Issuer's Combination Tax and Revenue Certificate of Obligation,Series 2011(with an outstanding principal balance as of 09/3012016 of$1,627,000), is currently being paid from ad valorem tax revenues.Although the pledge of the Issuer's ad valorem tax continues for as long as all debt reflected in this table remains outstanding, the Issuer may use other funds to pay debt service. (2) The Estimated Ad Valorem Tax Rate is the rate that would be required to be levied to pay debt service assuming no other source of payment,and further assuming a 100%collection ratio applied to the Issuer's current Taxable Assessed Valuation. *Preliminary;subject to change. Future Borrowing The Issuer has no existing voter authorization to issue general obligation bonds,nor does the Issuer currently have any plans to hold a bond election to authorize general obligation bonds,although it could decide to proceed with such an election at any time. Under Texas law,the Issuer may issue ad valorem tax secured certificates of obligations, tax notes and other tax-supported debt without voter authorization. Following the issuance of the Certificates, the Issuer currently has no plans to issue additional certificates of obligation, tax notes or other tax-supported debt within the next 12 months, although it could determine to do so if its financing needs change. Regardless of the Issuer's future borrowing activities,the Issuer may be required to increase its annual ad valorem tax rate as a result of factors unrelated to the level of its outstanding debt and otherwise outside its control, including, for example,the following:(i)a reduction in its taxable assessed valuation,(ii)a reduction in tax collections,or(iii)changes in State law. Property Tax Code General. Receipts from ad valorem taxation are one of the Issuer's principal sources of operational revenue and its principal source of funds for debt service payments. See "OTHER FINANCIAL INFORMATION." The following is a summary of certain provisions of the Texas Property Tax Code, as amended (the "Property Tax Code"), relating to ad valorem taxation procedures. Property Tax Code and County-Wide Appraisal District. Pursuant to Chapter 6 of the Texas Property Tax Code,as amended (the"Property Tax Code"),each county in the State comprises a single appraisal district with responsibility for recording and appraising property for all taxing units within the county, and each county establishes a single appraisal review board for the purpose of reviewing and equalizing the values established by the appraisal district. Chapter 25 of the Property Tax Code requires the appraisal district,by May 15 of each year or as soon thereafter as practicable,to prepare appraisal records listing all property that is taxable in the appraisal district and stating the appraised value of each parcel or item. Property is required to be appraised as of January I of each year(except for business inventories which may be assessed as of September 1 and mineral reserves which are assessed on the basis of a monthly average),and Chapter 23 of the Property Tax Code generally requires appraisals at 100% of market value. Tax appraisers are authorized to use alternative methods (cost, income and 14 market data comparison methods)to determine the market value of property,and the most appropriate method is to be used. Appraisals are subject to review by the appraisal review board, and under certain circumstances,taxpayers and taxing units (such as the Issuer)may appeal the orders of the appraisal review board by filing a petition for review in the district court. In such event, the value of the property in question will be determined by the court or by a jury if requested by any party. Absent any such appeal,the orders of the appraisal review board must be used by each taxing jurisdiction in establishing its tax rolls and tax rate. Based upon their respective relative total appraised values, school districts are each entitled to vote, with other taxing entities, upon the selection of members of the board of directors of the county-wide appraisal districts in their respective counties. Although each taxing unit retains the authority to establish its own tax rates and to levy and collect taxes each year,under the county-wide appraisal plan implemented by the Property Tax Code, the taxing units are unable to influence appraisal standards or determine the frequency of revaluation or reappraisal. Chapter 25 of the Property Tax Code requires each appraisal district to implement a plan for periodic reappraisal of property to update appraised values, and the plan must provide for reappraisal of all real property in the appraisal district at least once every three years. Property Subject to Taxation by the Issuer. Except for certain exemptions provided by Texas law, all real and tangible personal property and certain intangible personal property in each taxing unit, including the Issuer, is subject to taxation by such taxing unit. Principal categories of exempt property which may be exempted under Chapter 11 of the Property Tax Code include: property owned by the State of Texas or its political subdivisions, if the property is used for public purposes; property exempt from ad valorem taxation by federal law; certain household goods,family supplies and personal effects that are not held or used for the production of income; farm products owned by the producer; certain property owned by charitable organizations,youth development associations,religious organizations and qualified schools;designated historical sites; solar and wind powered energy devices; and certain tangible personal property known as "freeport goods." Effective for tax years 2008 and thereafter,Article VII, Section 1-n of the Texas Constitution provides for an exemption from taxation for"goods-in-transit,"which are defined as personal property acquired or imported into the state and transported to another location inside or outside the state within 175 days of the date the property was acquired or imported into the state. The exemption excludes oil,natural gas, petroleum products, aircraft and special inventory, including motor vehicle,vessel and outboard motor, heavy equipment and manufactured housing inventory. After holding a public hearing, a taxing unit may take action by January 1 of the year preceding a tax year to tax goods-in-transit during the following tax year. A taxpayer may obtain only an exemption for"freeport goods"or"goods-in-transit" for items of personal property. In addition,owners of agricultural,timber and open space land may, under certain circumstances,request valuation of such land on the basis of productive capacity rather than market value. Article VIII, Section 2 of the Texas Constitution and Texas law mandate an additional exemption for disabled veterans and the surviving spouses and children of persons dying while on active duty in the armed forces, which exemption applies to either real or personal property and may range from $5,000 to $12,000. A taxing unit may also exempt portions of the taxable value of residential homesteads(see"Residential Homestead Exemption" below).New penalties will apply to taxes which have been wholly or partially exempted upon application of a taxpayer, if it is subsequently determined that the taxpayer did not qualify for the exemption. Residential Homestead Exemption. Pursuant to Article VIII, Section 1-b of the Texas Constitution and the Property Tax Code, the governing body of each political subdivision in the State, including the Issuer, is authorized to exempt from ad valorem taxes(1)up to 20 percent of the appraised value of residential homesteads but not less than$5,000, and(2)at least $3,000 of the appraised value of the residential homesteads of persons at least 65 years old and disabled persons. Article VIII, Section 1-b of the Texas Constitution provides that, with respect to the homestead exemptions granted thereunder,a taxing unit may nevertheless continue to levy taxes against such exempted property if(1)ad valorem taxes had been pledged for the payment of such taxing unit's debt incurred prior to the granting of such exemption,and(2)the loss of ad valorem tax revenues attributable to such exempted property would impair the taxing unit's obligation under the contract pursuant to which the debt was created. In addition to the foregoing exemptions available to all taxing units,Texas law authorizes additional homestead exemptions for school districts, including(1)a basic$15,000 exemption for all homeowners,and(2)an additional$10,000 for persons at least 65 years old or disabled; provided, however, that a person at least 65 years old and disabled may receive only one $10,000 exemption,and only one such exemption is available per family,per residence homestead. Except for increases in appraised value resulting from certain improvements, a school district is prohibited from increasing the total ad valorem tax on the residence homestead of a person 65 years of age or older above the amount of tax imposed in the year such residence qualified for the$10,000 exemption. The tax"freeze"provided on the amount of ad valorem taxes levied on the homestead 15 of a taxpayer 65 years of age or older transfers in proportionate amount to a different residence homestead of such taxpayer. Also, a surviving spouse of a taxpayer who qualifies for the freeze on ad valorem taxes is entitled to the same exemption so long as the property is the homestead of the surviving spouse and the spouse is at least 55 years of age at the time of the death of the individual's spouse. The increase of the appraised value on a residence homestead is limited to ten percent of the appraised value of the property for the last year in which the property was appraised times the number of years since the property was last appraised. Other Reductions in Assessed Valuation. The Issuer and other taxing units may jointly agree to the creation of a tax increment financing zone, under which the tax values on properties within the zone are "frozen" at their values at the time such zone is created. The Issuer and other taxing units may also enter into tax abatement agreements to encourage economic development. Under such agreements, a property owner agrees to construct certain improvements on its property, while the taxing unit would in turn agree to not levy a tax on all or part of the increased value attributable to the improvements until the expiration of the agreement. The abatement agreement may last for as long as 10 years. Notice and Hearing Procedures. The ability of a taxing unit, such as the Issuer,to increase its tax levy from year to year is limited by Chapter 26 of the Property Tax Code,which imposes limitations on certain tax levies(other than tax levies for the payment of debt) based upon a complex formula. These limitations require that, prior to establishing and levying a rate of taxation for a year,the taxing unit compute an "effective rate" for such year pursuant to the Property Tax Code. Generally, this effective rate is the rate which will produce the same amount of operating revenue that the taxing unit levied in the previous year on the same property being taxed for both years,plus the amount necessary to pay bonded indebtedness of the taxing unit for the next year. The governing body of the Issuer may not adopt a tax rate that, if applied to the total taxable values, would impose an amount of taxes exceeding the prior year's levy without holding a public hearing and otherwise complying with the requirements for giving notice of such public hearing. If the rate of taxation to be levied for a year exceeds the sum of(i)the effective rate times 1.08, plus (ii)the Issuer's current debt rate (the "Rollback Rate"), 10%of the qualified voters of the Issuer may petition to require an election to limit the tax levied by the Issuer in the current year to the Rollback Rate. Lew and Collection of Taxes. Each taxing unit, including the Issuer, is responsible pursuant to Chapter 31 of the Property Tax Code for the collection of its taxes, unless it elects to transfer such functions to another governmental entity. By September 1 of each year,or as soon thereafter as practicable,the rate of taxation is set by the governing body of each taxing unit based upon the valuation of property within the taxing unit as of the preceding January 1. Generally, taxes are due October 1, or when billed, whichever comes later, and become delinquent after January 31 of the following year. A delinquent tax incurs a penalty of 12 percent of the amount of the tax through June 30 and additionally accrues interest at the rate of one percent per month. If the tax is not paid by July 1,an additional penalty of up to 15 percent may be imposed by the taxing unit to pay attorney fees for collection of the delinquent tax. Chapter 31 of the Property Tax Code also makes provision each year for consideration of split payments of taxes, discounts for early payment and the postponement of the delinquency date of taxes under certain circumstances. Abatement or deferral of a suit to collect delinquent taxes on residences is available to the extent that the delinquent taxes relate to the portion of the homestead that exceeds the appraised value by 105 percent of the valuation for the prior year. If the collection of the delinquent taxes are abated or deferred,they may not be collected until the taxpayer no longer owns the property and interest continues to accrue on the delinquent taxes at a rate of eight percent. Collection of Delinquent Taxes. Taxes levied by each taxing unit are a personal obligation of the owner of the property. On January I of each year, a tax lien attaches to property to secure the payment of all taxes, penalties and interest ultimately imposed for the year on the property, whether or not the taxes are imposed in the year the lien attaches. The lien exists in favor of each taxing unit, including the Issuer, having the power to tax the property. The Issuer's tax lien is on a parity with the tax liens of all other such taxing units. A tax lien on real property has priority over the claims of most creditors and other holders of liens on the property encumbered by the tax lien, whether or not the debt or lien existed before the attachment of the tax lien. Personal property under certain circumstances is subject to seizure and sale for the payment of delinquent taxes, penalties and interest. At any time after taxes on property become delinquent, the Issuer may file suit to foreclose the lien securing payment of the tax or to enforce personal liability for the tax,or both. In filing a suit to foreclose a tax lien on real property,the Issuer must join other taxing units that have claims for delinquent taxes against all or part of the same property. The ability of the Issuer to collect delinquent taxes by foreclosure may be adversely affected by the amount of taxes owed to other taxing units, adverse market conditions, taxpayer redemption right or bankruptcy proceedings which restrain the collection of taxpayer debt. 16 Issuer Application of Property Tax Code. The following table summarizes the current status of the Issuer's property tax procedures: Description Issuer Procedure Age 65/Disabled Homestead Exemption in addition to$10,000 basic exemption Allowed Exemption for Homestead(at least$5,000,up to 20%of market value) Allowed(up to 20%) Split Payment of Taxes Not allowed Discounts for Early Payment of Taxes Not allowed Nonbusiness Personal Property Not taxed Freeport Property Exemption Not allowed Goods in Transit Exemption Not allowed Tax Abatement Policy Adopted Tax Increment Financing Zone None adopted Tax Collector for the Issuer Tarrant County Tax Assessor-Collector [Remainder of page intentionally left blank.] 17 OTHER FINANCIAL INFORMATION Table 9-General Fund Summary Revenues and Expenditures Fiscal Years Ended September 30, Revenues: 2015 2014 2013 2012 2011 Sales tax $ 3,587,323 $ 3,471,344 $ 3,061,948 $ 2,534,774 $ 1,502,020 Property tax 1,256,796 1,198,374 1,236,978 1,271,975 1,226,689 Mixed beverage tax 59,184 51,602 39,727 38,286 19,721 Franchise tax 963,040 795,322 734,935 664,991 586,836 Interest income 10,078 10,503 9,286 14,060 10,679 Building permits and fees 11,200,790 1,175,075 969,735 598,394 520,646 Fines and penalties 734,152 730,441 695,167 622,338 605,705 Intergovernmental 3,810 3,540 10,331 - - Contributions 10,000 - 11,094 325,520 180,063 Miscellaneous 81,539 70,338 73,933 80,936 91,015 Total Revenues 7,906,712 7,506,539 6,843,134 6,151,274 4,743,374 Expenditures: General government and admin. 2,411,239 2,236,360 1,910,545 1,878,885 1,733,324 Public safety 2,490,551 2,146,587 1,967,584 2,224,469 1,842,751 Cultural and recreational 130,322 123,541 113,924 111,765 122,400 Economic development - - - - - Public works 744,028 615,781 532,675 391,115 324,874 Capital outlay 748,297 20,875 50,014 - 41,037 Debt service 48,237 48,240 Total Operating Expenditures 6,572,674 5,191,384 4,574,742 4,606,234 4,064,386 Excess(deficiency)of revs over exp 1,334,038 2,315,155 2,268,392 1,545,040 678,988 Other Financing Sources(Uses): Proceeds from sale of assets - - - - - Note proceeds - 34,710 - - 50,000 Other proceeds(insurance,asset sales) 162,059 7,000 Transfers in(l) 521,320 56,419 609,826 583,857 2,178,403 Transfers ouP (2,290,385) (1,504,397) (1,090,392) (880,486) (2,691,982) Total Other Sources(Uses) (1,607,006) (1,413,268) (480,566) (296,629) (456,579) Net Change in Fund Balance (272,968) 901,887 1,787,826 1,248,411 222,409 Beginning Fund Balance 7,953,518 7,051,631 5,263,805 4,015,394 3,792,985 Ending Fund Balance $ 7,680,550 $ 7,953,518 $ 7,051,631 $ 5,263,805 $ 4,015,394 Source:Derived from the Issuer's Comprehensive Annual Financial Reports;please refer directly to such Reports for important Notes and more detailed information. (1) Detailed information relating to transfers may be found in the notes to the audited financial statements included in the Issuer's Comprehensive Annual Financial Reports.For the most recent fiscal year,see Note 9 on page 62 of the Comprehensive Annual Financial Report included herewith as APPENDIX B. 18 Table 9A-Changes in Net Assets Governmental Activities-Fiscal Years Ended September 30, 2015 2014 2013 2012 2011 Revenues: Program revenues: Fees,fines,charges for services $ 2,466,032 $ 2,127,786 $ 1,798,529 $ 1,417,879 $ 1,253,967 Operating grants,contributions 7,615,653 6,592,642 4,907,472 5,269,841 4,472,999 Capital grants,contributions 19,983,078 80,472 5,897,456 - 425,900 General revenues: Taxes Sales taxes 4,925,428 4,725,845 4,375,397 3,657,274 4,609,626 Property taxes 1,438,969 1,367,069 1,366,633 1,441,238 1,260,112 Hotel occupancy taxes 872,179 796,481 709,578 590,853 527,261 Mixed beverage taxes 59,184 51,602 39,727 38,286 19,721 Franchises taxes 963,040 795,322 734,935 664,991 586,836 Unrestricted grants 28,904 - - - - Interest on investments 198,199 26,713 24,218 33,353 46,248 Miscellaneous - 246,633 1,023,149 1,112,858 691,345 Extraordinary items - - - (124,346) 56,704 Special item - - - 67,760 - Gain on sale of capital assets - - - - 7,000 Total revenues 38,550,666 16,810,565 20,877,094 14,169,987 13,957,719 Expenses: General government 3,145,716 2,784,587 2,606,785 2,518,490 2,478,826 Public safety 2,381,437 2,190,050 1,9781803 1,883,424 1,801,585 Culture and recreation 129,970 123,541 113,924 1111765 122,400 Economic development 171,757 147,680 267,973 216,901 680,823 Public works . 1,081,996 955,794 626,423 546,039 470,054 Visitor services 665,936 493,087 521,521 475,719 356,365 Education 8,598,261 7,147,411 5,803,611 6,193,560 4,884,985 Interest on long-term debt 1.022,201 998,951 1,031,328 897,573 1,127,913 Total expenses 17,197,274 14,841,101 12,950,368 12,843,471 11,922,951 Excess(deficiency)before transfers 21,353,392 1,969,464 7,926,726 1,326,516 2,034,768 Transfers 323,100 43,399 (485,591) 45,507 145,216 Change in net position 21,676,492 2,012,863 7,441,135 1,372,023 2,179,984 Effect of accounting principle change (530,877) (647,443) - - - Net position,beginning 33,422,961 32,057,541 24,616,406 23,244,383 21,064,399 Net position,ending $ 54,568,576 $ 33,422,961 $ 32,057,541 $ 24,616,406 $ 23,244,383 Source: Derived from Comprehensive Annual Financial Reports;please refer directly to such Reports for important Notes and more detailed information. 19 Table 10-General Fund Summary Balance Sheet Fiscal Years Ended September 30, Assets: 2015 2014 2013 2012 2011 Cash and investments $ 7,106,297 $ 7,399,920 $ 6,219,206 $ 4,637,252 $ 3,379,864 Property tax receivables 5,379 14,353 1,961 1,796 4,643 Accounts receivable 824,725 771,499 703,875 557,579 259,938 Due from other funds 164,147 157,353 165,140 149,641 296,555 Other assets 13,334 8,821 6,906 6,856 62,020 Restricted cash&investments 293.363 264.709 428.463 Total Assets $ 8.113,882 $ 8,351,946 $ 7,390,451 $ 5,617.833 $ 4,431,483 Liabilities,Deferred Inflows&Fund Balance: Liabilities: Unearned revenue - - 1,961 1,796 2,796 Accounts payable 427,953 372,092 336,859 352,232 413,293 Due to other funds 11.983 Total Liabilities 427,953 384,075 338.820 354.028 416,089 Deferred Inflows of Resources: Unavailable resources-prop taxes 5,379 14,353 - - - Total Deferred Inflows 5,379 14.353 Fund Balances: Restricted/Committed/Nonspendable 296,949 282,345 300,269 271,565 490,483 Unassigned 7.383,601 7,671,173 6.751362 4.992,240 3,524911 Total Fund Equity 7.680,550 7,951518 7.051,631 5,263,805 4.015394 Total Liabilities and Fund Equity $ 8,113,882 $ 8,351,946 $ 7390,451 $ 5,617,833 $ 4,431,483 Source: Derived from Comprehensive Annual Financial Reports;please refer directly to such Reports for important Notes and more detailed information. Table l0A-Consolidated Statement of Net Assets Governmental Activities-Fiscal Years Ended September 30, 2015 2014 2013 2012 2011 Assets Current and other assets $ 29,451,181 $ 14,197,535 $ 21,781,962 $ 12,185,864 $ 12,449,931 Capital assets 54,470,449 50,205,686 41,121,883 34,313,615 33,665,877 Total Assets 83,921,630 64,403,221 62,903,845 46,499,479 46,115,808 Deferred outflows of resources 1,549,467 1,194,749 1,247,851 - - Liabilities Non-current liabilities 29,466,305 29,866,622 27,611,536 20,098,829 20,731,060 Other liabilities 1,377,466 2,308,387 1,986,917 1,784,244 2,140,365 Total Liabilities 30,843,771 32,175,009 29,598,453 21,883,073 22,871,425 Deferred inflows of resources 58,750 - - - - Net Position Net investments in capital assets 29,633,298 32,048,991 21,177,426 14,866,299 14,188,516 Restricted 17,827,177 2,284,947 4,242,491 4,726,376 5,607,767 Unrestricted 7,108,101 (910,977) 6,637,624 5,023,731 3,448,100 Total Net Position $ 54,568,576 $ 33,422,961 $ 32,057,541 $ 24,616,406 $ 23,244,383 Source: Derived from Comprehensive Annual Financial Reports;please refer directly to such Reports for important Notes and more detailed information. 20 Table 11 -Municipal Sales Tax History The Issuer has adopted the Municipal Sales and Use Tax Act, Texas Tax Code, Chapter 321, as amended, which grants the Issuer the power to impose and levy a 1% Local Sales and Use Tax within the boundaries of the Issuer; the proceeds are credited to the General Fund and are not pledged to the payment of the Bonds. Collection and enforcement are effected through the Office of the Comptroller of Public Accounts of the State of Texas, which remits the proceeds of the tax, after deduction of a 2%service fee, to the Issuer monthly. Revenue from the 1%Local Sales and Use Tax,for the years shown, has been: Sales Tax Percentage Ad Valorem FYE Revenues- of Ad Valorem Tax Rate Breakdown of Sales Tax Collected 30-Sea Govt'1.Funds M Tax Levy FAuivalent Taxing Unit Tax Rate 2011 $4,609,626$4,609,626 335.05% $0.5251 The Issuer(approximate allocation) 2012 $3,657,274 254.02% $0.3868 General Fund $0.0100 2013 $4,375,397 323.27% $0.4937 4B Economic Dev.Fund $0.0050 2014 $4,725,845 338.56% $0.0527 Property Tax Reduction $0.0050 2015 $4,925,428 352.86% $0.5348 State of Texas $0.0625 Total $0.0825 Source:the Issuer's audited financial statements. (1)Includes a substantial amount of one-time sales tax payments attributable to construction,furnishing and equipping of a 750,000 square foot campus on a 107-acre tract and known as Deloitte University. The campus,which cost$135 million,serves as a central training destination for Deloitte LLP employees. Investments The Issuer invests its investable funds in investments authorized by Texas law in accordance with investment policies approved by the Town Council of the Issuer. Both State law and the Issuer's investment policies are subject to change. Legal Investments. Available Issuer funds are invested as authorized by State law and in accordance with investment policies approved by the Town Council. Both State law and the Issuer's investment policies are subject to change. Under State law, the Issuer is authorized to invest in (1) obligations of the United States or its agencies and instrumentalities, including letters of credit;(2)direct obligations of the State or its agencies and instrumentalities;(3)collateralized mortgage obligations directly issued by a federal agency or instrumentality of the United States, the underlying security for which is guaranteed by an agency or instrumentality of the United States; (4)other obligations,the principal and interest of which is guaranteed or insured by or backed by the full faith and credit of,the State or the United States or their respective agencies and instrumentalities,including obligations that are fully guaranteed or insured by the Federal Deposit Insurance Corporation or by the explicit full faith and credit of the United States; (5) obligations of states, agencies, counties, cities, and other political subdivisions of any state rated as to investment quality by a nationally recognized investment rating firm not less than A or its equivalent;(6)bonds issued,assumed or guaranteed by the State of Israel; (7)certificates of deposit and share certificates(i)issued by a depository institution that has its main office or a branch office in the State,that are guaranteed or insured by the Federal Deposit Insurance Corporation or the National Credit Union Share Insurance Fund,or are secured as to principal by obligations described in clauses(1)through(6)or in any other manner and amount provided by law for Town deposits,or(ii)where(a)the funds are invested by the Town through(1)a broker that has its main office or a branch office in the State and is selected from a list adopted,at least annually,by the Town as required by law or(11)a depository institution that has its main office or a branch office in the State that is selected by the Town;(b)the broker or the depository institution selected by the Town arranges for the deposit of the funds in certificates of deposit in one or more federally insured depository institutions, wherever located, for the account of the Town; (c) the full amount of the principal and accrued interest of each of the certificates of deposit is insured by the United States or an instrumentality of the United States;and(d) the Town appoints the depository institution selected under(a)above,a custodian as described by Section 2257.041(d)of the Texas Government Code,or a clearing broker-dealer registered with the United States Securities and Exchange Council and operating pursuant to Securities and Exchange Council Rule 15c3-3 (17 C.F.R. Section 240.15c3-3) as custodian for the Town with respect to the certificates of deposit;(8)fully collateralized repurchase agreements that have a defined termination date,are fully secured by a combination of cash and obligations described in clause(1)which are pledged to the Town, held in the Town's name, and deposited at the time the investment is made with the Town or with a third party selected and 21 approved by the Town and are placed through a primary government securities dealer,as defined by the Federal Reserve,or a financial institution doing business in the State of Texas;(9)securities lending programs if(i)the securities loaned under the program are 100%collateralized, a loan made under the program allows for termination at any time and a loan made under the program is either secured by(a)obligations that are described in clauses(1)through(6)above,(b) irrevocable letters of credit issued by a state or national bank that is continuously rated by a nationally recognized investment rating firm at not less than A or its equivalent or (c) cash invested in obligations described in clauses (1) through (6) above, clauses (11) through(13)below,or an authorized investment pool; (ii)securities held as collateral under a loan are pledged to the Issuer, held in the Issuer's name and deposited at the time the investment is made with the governmental body or a third party designated by the governmental body; (iii) a loan made under the program is placed through either a primary government securities dealer or a financial institution doing business in the State of Texas;and(iv)the agreement to lend securities has a term of one year or less, (10) certain bankers' acceptances with the remaining term of 270 days or less, if the short-term obligations of the accepting bank or its parent are rated at least A-1 or P-1 or the equivalent by at least one nationally recognized credit rating agency,(l 1)commercial paper with a stated maturity of 270 days or less that is rated at least A-1 or P-1 or the equivalent by either(a) two nationally recognized credit rating agencies or (b) one nationally recognized credit rating agency if the paper is fully secured by an irrevocable letter of credit issued by a U.S.or state bank,(12)no-load money market mutual funds registered with and regulated by the Securities and exchange Commission that have a dollar weighted average stated maturity of 90 days or less and include in their investment objectives the maintenance of a stable net asset value of$1 for each share,and(13)no-load mutual funds registered with the Securities and Exchange Commission that have an average weighted maturity of less than two years, invest exclusively in obligations described in this paragraph, and are continuously rated as to investment quality by at least one nationally recognized investment rating firm of not less than AAA or its equivalent. In addition, bond proceeds may be invested in guaranteed investment contracts that have a defined termination date and are secured by obligations, including letters of credit, of the United States or its agencies and instrumentalities in an amount at least equal to the amount of bond proceeds invested under such contract, other than the prohibited obligations described in the next succeeding paragraph. The Issuer may invest in such obligations directly or through government investment pools that invest solely in such obligations provided that the pools are rated no lower than AAA or AAA-m or an equivalent by at least one nationally recognized rating service. The Issuer may contract for a term not to exceed two years with an investment management firm registered under the Investment Advisors Act of 1940(15 U.S.C. Section 80b-I et seq.)or registered with the State Securities Board to provide for the investment and management of Issuer funds or funds under its control. The Issuer is also authorized to contract,for a term not to exceed seven years,for the purchase of investments with proceeds of taxes levied or to be levied to pay debt service on bonds,provided that the Issuer must solicit and receive bids from at least three separate providers and accept the qualifying bid that provides for the highest yield investments over the term of the contract and such contract may provide only for the purchase of an obligation described in clause(1)above. The Issuer is specifically prohibited from investing in:(1)obligations whose payment represents the coupon payments on the outstanding principal balance of the underlying mortgage-backed security collateral and pays no principal; (2) obligations whose payment represents the principal stream of cash flow from the underlying mortgage-backed security and bears no interest; (3) collateralized mortgage obligations that have a stated final maturity of greater than 10 years; and (4) collateralized mortgage obligations the interest rate of which is determined by an index that adjusts opposite to the changes in a market index. Investment Policies. Under Texas law, the Issuer is required to invest its funds under written investment policies that primarily emphasize safety of principal and liquidity; that address investment diversification,yield, maturity,and the quality and capability of investment management; and that includes a list of authorized investments for Issuer funds, maximum allowable stated maturity of any individual investment, the maximum dollar-weighted average maturity allowed for pooled fund groups, methods to monitor the market price of investments acquired with public funds, and requirement for settlement of all transactions,except investment pool funds and mutual funds,on a delivery versus payment basis. All Issuer funds must be invested consistent with a formally adopted "Investment Strategy Statement" that specifically addresses each fund's investment. Each Investment Strategy Statement will describe its objectives concerning: (1) suitability of investment type; (2)preservation and safety of principal,(3)liquidity,(4)marketability of each investment,(5)diversification of the portfolio, and(6)yield. Under Texas law,Issuer investments must 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." At least quarterly the 22 investment officers of the Issuer shall submit to its governing body an investment report detailing:(1)the investment position of the Issuer, (2) that all investment officers jointly prepared and signed the report, (3) the beginning market value, , the ending market value and the fully accrued interest during the reporting period (4)the book value and market value of each separately listed asset at the end of the reporting period; (5) the maturity date of each separately invested asset, (6) the account or fund or pooled fund group for which each individual investment was acquired, and (7) the compliance of the investment portfolio as it relates to: (a) adopted investment strategy statements and (b) State law. No person may invest Issuer funds without express written authority from its governing body. Additional Provisions. Under Texas law the Issuer is additionally required to: (1) annually review its adopted policies and strategies, (2) require any investment officers' with personal business relationships or relatives with firms seeking to sell securities to the entity to disclose the relationship and file a statement with the Texas Ethics Commission and its governing body; (3) require the registered principal of firms seeking to sell securities to the Issuer or the registered principal of an investment management firm under contract with the Issuer to: (a) receive and review the Issuer's investment policy, (b) acknowledge that reasonable controls and procedures have been implemented to preclude unauthorized investment activities, and(c)deliver a written statement attesting to these requirements;(4)perform an annual audit of the management controls on investments and investment officers; (5)provide specific investment training for the Treasurer, Chief Financial Officer, or other investment officers;(6)restrict reverse repurchase agreements to not more than 90 days; (7) restrict the investment of funds in any one mutual fund to an amount not greater than 10% of the total assets of such mutual fund; (8) restrict the investment in non-money market mutual funds in the aggregate to no more than 15%of the Issuer's monthly average fund balance, excluding bond proceeds and reserves and other funds held for debt service; (9) prohibit the investment in non- money market mutual funds of any portion of bond proceeds,reserves and funds held for debt service and;(10)require local government investment pools to conform to the new disclosure,rating,net asset value,yield calculation,and advisory board requirements. The Issuer's current investment policy is in compliance with the State law requirements described above. Table 12-Status of Current Investments As of November 30,2016,the Issuer's investment portfolio, including its General Fund,Capital Projects Fund,Utility Fund, and other miscellaneous governmental, proprietary and component unit funds, was invested as follows (with no material difference between book and market values): Westlake , Investment Description Issuer Acad1) Total Bank Accounts(cash and cash equivalents) $ 15,665,559 $ 1,143,963 $ 16,809,522 TexPool 250 100 350 Total 15.665,809 $ 1,144,063 $ 16,809.872 Source: The Issuer's monthly statements and financial records;unaudited See Comprehensive Annual Financial Report(Note 2), included herewith as APPENDIX B,for more investment information. (1)Represents investments of the Westlake Academy, a component unit of the Issuer, the balances and transactions of which are blended with the balances and transactions of the Issuer. Investments of other component units of the Issuer may also be blended with the Issuer or alternatively may be excluded and"discretely presented."See Note I to the Issuer's audited financial statements, beginning on page 33, included in its Comprehensive Annual Financial Report included herewith as APPENDIX B for more information regarding component units. LEGAL MATTERS The Issuer will furnish a complete transcript of proceedings that are incident to the authorization and issuance of the Bonds, including the unqualified approving legal opinion of the Attorney General of Texas approving the Initial Bond and to the effect that the Bonds are valid and legally binding obligations of the Issuer,and based upon examination of such transcript of proceedings,the approving legal opinion of Bond Counsel,to like effect and to the effect that the interest on the Bonds will be excludable from gross income for federal income tax purposes under Section 103(a) of the Code, subject to the matters described under"TAX MATTERS"herein,including the alternative minimum tax on corporations. Though it may represent the Underwriter from time to time in matters unrelated to the issuance of the Bonds,Bond Counsel has been engaged by and only represents the Issuer in the issuance of the Bonds. Bond Counsel was not requested to participate,and did not take part, 23 in the preparation of the Official Statement, and such firm has not assumed any responsibility with respect thereto or undertaken independently to verify any of the information contained therein, except that, in its capacity as Bond Counsel, such firm has reviewed the information in the Official Statement under the captions or subcaptions entitled "PLAN OF FINANCING"(exclusive of the subcaption"Sources and Uses of Funds"), "DESCRIPTION OF THE BONDS"(exclusive of the subcaptions entitled "Book-Entry-Only System"and "Bondholders'Remedies"), "LEGAL MATTERS"(exclusive of the last sentence of the first paragraph thereof), "TAX MATTERS," "OTHER MATTERS-Legal Investments and Eligibility to Secure Public Funds in Texas," "OTHER MATTERS - Registration and Qualification of Bonds for Sale" and "OTHER MATTERS-Continuing Disclosure of Information" (exclusive of the subcaption"Compliance with Prior Undertakings") in the Official Statement, and such firm is of the opinion that the information relating to the Bonds and the legal issues contained under such captions and subcaptions is an accurate and fair description of the laws and legal issues addressed therein and,with respect to the Bonds, such information conforms to the Ordinance. Bond Counsel's fee is contingent upon the sale and issuance of the Bonds. The legal opinion will accompany the Bonds deposited with DTC or will be printed on the Bonds in the event of the discontinuance of the Book-Entry-Only System. Certain matters will be passed upon for the Underwriter by its counsel, Orrick, Herrington & Sutcliffe LLP, Houston, Texas, whose fees are contingent upon sale and delivery 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 the 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 from the transaction. TAX MATTERS Opinion On the date of initial delivery of the Bonds,McCall,Parkhurst&Horton L.L.P.,Dallas,Texas,Bond Counsel,will render its opinion that, in accordance with statutes, regulations, published rulings and court decisions existing on the date thereof ("Existing Law"),(1)interest on the Bonds for federal income tax purposes will be excludable from the"gross income"of the holders thereof and (2) the Bonds will not be treated as "specified private activity bonds" the interest on which would be included as an alternative minimum tax preference item under section 57(a)(5) of the Internal Revenue Code of 1986 (the "Code"). Except as stated above, Bond Counsel will express no opinion as to any other federal, state or local tax consequences of the purchase, ownership or disposition of the Bonds. See APPENDIX A, FORM OF BOND COUNSEL OPINION. In rendering its opinion, Bond Counsel will rely upon (a) certain information and representations of the Issuer, including information and representations contained in the Issuer's federal tax certificate, (b) covenants of the Issuer contained in the Bond documents relating to certain matters, including arbitrage and the use of the proceeds of the Bonds and the Refunded Obligations and the property financed or refinanced therewith,and (c)the verification report of Grant Thornton LLP.Failure by the Issuer to observe the aforementioned representations or covenants could cause the interest on the Bonds to become taxable retroactively to the date of issuance. The Code and the regulations promulgated thereunder contain a number of requirements that must be satisfied subsequent to the issuance of the Bonds in order for interest on the Bonds to be, and to remain, excludable from gross income for federal income tax purposes. Failure to comply with such requirements may cause interest on the Bonds to be included in gross income retroactively to the date of issuance of the Bonds. The opinion of Bond Counsel is conditioned on compliance by the Issuer with such requirements, and Bond Counsel has not been retained to monitor compliance with these requirements subsequent to the issuance of the Bonds. Bond Counsel's opinion represents its legal judgment based upon its review of Existing Law and the reliance on the aforementioned information, representations and covenants. Bond Counsel's opinion is not a guarantee of a result. The Existing Law is subject to change by the Congress and to subsequent judicial and administrative interpretation by the courts and the Department of the Treasury. There can be no assurance that such Existing Law or the interpretation thereof will not be changed in a manner which would adversely affect the tax treatment of the purchase, ownership or disposition of the Bonds. 24 A ruling was not sought from the Internal Revenue Service by the Issuer with respect to the Bonds or the property financed or refinanced with the proceeds of the Bonds. No assurances can be given as to whether the Internal Revenue Service will commence an audit of the Bonds, or as to whether the Internal Revenue Service would agree with the opinion of Bond Counsel. If an Internal Revenue Service audit is commenced,under current procedures the Internal Revenue Service is likely to treat the Issuer as the taxpayer and the Bondholders may have no right to participate in such procedure. No additional interest will be paid upon any determination of taxability. Federal Income Tax Accounting Treatment of Original Issue Discount The initial public offering price to be paid for one or more maturities of the Bonds(the"Original Issue Discount Bonds")may be less than the principal amount thereof or one or more periods for the payment of interest on the Bonds may not be equal to the accrual period or be in excess of one year. In such event, the difference between (i) the "stated redemption price at maturity of each Original Issue Discount Bond, and (ii) the initial offering price to the public of such Original Issue Discount Bond would constitute original issue discount. The "stated redemption price at maturity" means the sum of all payments to be made on the Bonds less the amount of all periodic interest payments. Periodic interest payments are payments which are made during equal accrual periods (or during any unequal period if it is the initial or final period)and which are made during accrual periods which do not exceed one year. Under Existing Law,any owner who has purchased such Original Issue Discount Bond in the initial public offering is entitled to exclude from gross income(as defined in section 61 of the Code)an amount of income with respect to such Original Issue Discount Bond equal to that portion of the amount of such original issue discount allocable to the accrual period. For a discussion of certain collateral federal tax consequences,see discussion set forth below. In the event of the redemption,sale or other taxable disposition of such Original Issue Discount Bond prior to stated maturity, however,the amount realized by such owner in excess of the basis of such Original Issue Discount Bond in the hands of such owner (adjusted upward by the portion of the original issue discount allocable to the period for which such Original Issue Discount Bond was held by such initial owner)is includable in gross income. Under Existing Law,the original issue discount on each Original Issue Discount Bond is accrued daily to the stated maturity thereof(in amounts calculated as described below for each six-month period ending on the date before the semiannual anniversary dates of the date of the Bonds and ratably within each such six-month period)and the accrued amount is added to an initial owner's basis for such Original Issue Discount Bond for purposes of determining the amount of gain or loss recognized by such owner upon the redemption, sale or other disposition thereof. The amount to be added to basis for each accrual period is equal to (a)the sum of the issue price and the amount of original issue discount accrued in prior periods multiplied by the yield to stated maturity (determined on the basis of compounding at the close of each accrual period and properly adjusted for the length of the accrual period) less (b) the amounts payable as current interest during such accrual period on such Original Issue Discount Bond. The federal income tax consequences of the purchase, ownership, redemption, sale or other disposition of Original Issue Discount Bonds which are not purchased in the initial offering at the initial offering price may be determined according to rules which differ from those described above. All owners of Original Issue Discount Bonds should consult their own tax advisors with respect to the determination for federal,state and local income tax purposes of the treatment of interest accrued upon redemption,sale or other disposition of such Original Issue Discount Bonds and with respect to the federal,state, local and foreign tax consequences of the purchase, ownership, redemption, sale or other disposition of such Original Issue Discount Bonds. Collateral Federal Income Tax Consequences The following discussion is a summary of certain collateral federal income tax consequences resulting from the purchase, ownership or disposition of the Bonds. This discussion is based on existing statutes,regulations,published rulings and court decisions,all of which are subject to change or modification,retroactively. The following discussion is applicable to investors, other than those who are subject to special provisions of the Code,such as financial institutions,property and casualty insurance companies,life insurance companies, individual recipients of Social Security or Railroad Retirement benefits, individuals allowed an earned income credit, certain S corporations with 25 Subchapter C earnings and profits, foreign corporations subject to the branch profits tax,taxpayers qualifying for the health insurance premium assistance credit and taxpayers who may be deemed to have incurred or continued indebtedness to purchase tax-exempt obligations. THE DISCUSSION CONTAINED HEREIN MAY NOT BE EXHAUSTIVE. INVESTORS, INCLUDING THOSE WHO ARE SUBJECT TO SPECIAL PROVISIONS OF THE CODE, SHOULD CONSULT THEIR OWN TAX ADVISORS AS TO THE TAX TREATMENT WHICH MAY BE ANTICIPATED TO RESULT FROM THE PURCHASE, OWNERSHIP AND DISPOSITION OF TAX-EXEMPT OBLIGATIONS BEFORE DETERMINING WHETHER TO PURCHASE THE BONDS. Interest on the Bonds will be includable as an adjustment for"adjusted current earnings"to calculate the alternative minimum tax imposed on corporations by section 55 of the Code. Under section 6012 of the Code, holders of tax-exempt obligations, such as the Bonds, may be required to disclose interest received or accrued during each taxable year on their returns of federal income taxation. Section 1276 of the Code provides for ordinary income tax treatment of gain recognized upon the disposition of a tax-exempt obligation, such as the Bonds, if such obligation was acquired at a "market discount" and if the fixed maturity of such obligation is equal to,or exceeds,one year from the date of issue. Such treatment applies to "market discount bonds"to the extent such gain does not exceed the accrued market discount of such bonds;although for this purpose,a de minimis amount of market discount is ignored. A"market discount bond" is one which is acquired by the holder at a purchase price which is less than the stated redemption price at maturity or, in the case of a bond issued at an original issue discount, the "revised issue price" (i.e., the issue price plus accrued original issue discount). The "accrued market discount" is the amount which bears the same ratio to the market discount as the number of days during which the holder holds the obligation bears to the number of days between the acquisition date and the final maturity date. State,Local and Foreign Taxes Investors should consult their own tax advisors concerning the tax implications of the purchase,ownership or disposition of the Bonds under applicable state or local laws. Foreign investors should also consult their own tax advisors regarding the tax consequences unique to investors who are not United States persons. Information Reporting and Backup Withholding Subject to certain exceptions, information reports describing interest income, including original issue discount, with respect to the Bonds will be sent to each registered holder and to the Internal Revenue Service. Payments of interest and principal may be subject to backup withholding under section 3406 of the Code if a recipient of the payments fails to furnish to the payor such owner's social security number or other taxpayer identification number("TIN"), furnishes an incorrect TIN, or otherwise fails to establish an exemption from the backup withholding tax. Any amounts so withheld would be allowed as a credit against the recipient's federal income tax. Special rules apply to partnerships, estates and trusts, and in certain circumstances,and in respect of Non-U.S.Holders,certifications as to foreign status and other matters may be required to be provided by partners and beneficiaries thereof. Qualified Tax-Exempt Obligations for Financial Institutions Section 265(a) of the Code provides, in pertinent part, that interest paid or incurred by a taxpayer, including a "financial institution," on indebtedness incurred or continued to purchase or carry tax-exempt obligations is not deductible in determining the taxpayer's taxable income. Section 265(b) of the Code provides an exception to the disallowance of such deduction for any interest expense paid or incurred on indebtedness of a taxpayer that is a"financial institution" allocable to tax-exempt obligations,other than"private activity bonds,"that are designated by a"qualified small issuer"as"qualified tax- exempt obligations." A "qualified small issuer" is any governmental issuer (together with any "on-behalf of and "subordinate" issuers) who issues no more than $10,000,000 of tax-exempt obligations during the calendar year. Section 265(b)(5) of the Code defines the term "financial institution" as any "bank" described in Section 585(a)(2) of the Code, or any person accepting deposits from the public in the ordinary course of such person's trade or business that is subject to federal or state supervision as a financial institution. Notwithstanding the exception to the disallowance of the deduction of interest on indebtedness related to"qualified tax-exempt obligations"provided by Section 265(b)of the Code,Section 291 of 26 the Code provides that the allowable deduction to a "bank," as defined in Section 585(a)(2) of the Code, for interest on indebtedness incurred or continued to purchase "qualified tax-exempt obligations" shall be reduced by twenty-percent(20%) as a"financial institution preference item." The Issuer will designate the Bonds as"qualified tax-exempt obligations" within the meaning of section 265(b)of the Code. In furtherance of that designation, the Issuer will covenant to take such action that would assure, or to refrain from such action that would adversely affect, the treatment of the Bonds as "qualified tax-exempt obligations." Potential purchasers should be aware that if the issue price to the public exceeds $10,000,000,there is a reasonable basis to conclude that the payment of a de minimis amount of premium in excess of $10,000,000 is disregarded; however, the Internal Revenue Service could take a contrary view. If the Internal Revenue Service takes the position that the amount of such premium is not disregarded,then such obligations might fail to satisfy the $10,000,000 limitation and the Bonds would not be"qualified tax-exempt obligations." Future and Proposed Legislation Tax legislation, administrative actions taken by tax authorities,or court decisions,whether at the Federal or state level,may adversely affect the tax-exempt status of interest on the Bonds under Federal or state law and could affect the market price or marketability of the Bonds.Any such proposal could limit the value of certain deductions and exclusions, including the exclusion for tax-exempt interest. The likelihood of any such proposal being enacted cannot be predicted. Prospective purchasers of the Bonds should consult their own tax advisors regarding the foregoing matters. RATING The Bonds have been rated"AAA"(stable outlook)by S&P Global Ratings ("S&P"). No application has been made at any other rating agency. The explanation of the significance of such rating may be obtained from S&P. There is no assurance that such rating will continue for any period of time or that such rating will not be revised or withdrawn. A revision or withdrawal of such rating may have a materially adverse effect on the market price of the Bonds. OTHER MATTERS Litigation Certificate Authorized representatives of the Issuer will certify that as of the date of initial delivery of the Bonds, no litigation of any nature is pending or, to the best of such authorized representatives' knowledge and belief, threatened against the Issuer affecting directly or indirectly the validity of the Bonds or the Ordinance; restraining, enjoining or in any other manner affecting the issuance or delivery of the Bonds; affecting the provision made for the payment of or security for the Bonds, including the levy of or collection of the taxes pledged to pay such amounts or the pledge so made;affecting, in any way,the right or authority of the Issuer to pay such amounts from the sources pledged, or otherwise carrying out the terms and provisions of the Ordinance or other authorizing proceedings,and the covenants and agreements therein,and each of them or affecting the corporate existence or boundaries of the Issuer,or the title of the officers or members of the governing body or any of them to their respective positions. 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 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 obligations such as 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,this requirement does not apply,however,to the purchase of obligations such as the Bonds for interest and sinking funds of such entities. See "RATING"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 27 deposits to the extent of their market value. No review has been made of the laws in other states to determine whether the Bonds are legal investments for various institutions in those states. Financial Advisor Lawrence Financial Consulting LLC, Dallas, Texas (the "Financial Advisor") has been retained by the Issuer as financial advisor in connection with the issuance of the Bonds and, in such capacity, has assisted the Issuer in the preparation of documents. 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. Although the Financial Advisor has read and participated in the preparation of this Official Statement,the Financial Advisor has not independently verified any of the information set forth herein. The information contained in this Official Statement has been obtained primarily from the Issuer's records and from other sources which are believed to be reliable, including financial records of the Issuer and other entities which may be subject to interpretation. No guarantee is made as to the accuracy or completeness of any such information. No person, therefore, is entitled to rely upon the participation of the Financial Advisor as an implicit or explicit expression of opinion as to the completeness and accuracy of the information contained in this Official Statement. Financial Statements The Issuer's basic financial statements and notes thereto for the fiscal year ended September 30, 2015 which have been excerpted from the Issuer's most recently audited annual financial statements, are included as APPENDIX B to this Official Statement. The accountants who audited such statements have not participated in the preparation of this Official Statement and have not been requested to and have not performed any post-audit procedures in connection with the offering of the Bonds. 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 jurisdiction. The Issuer assumes 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 shall not be construed as an interpretation of any kind with regard to the availability of any exemption from securities registration provisions. Underwriting The Underwriter has agreed to purchase the Bonds from the Issuer, subject to certain conditions, at prices that include a $ underwriting discount from initial public offering prices of the Bonds as set forth on page i of this Official Statement. The Underwriter will be obligated to purchase all of the Bonds if any portion of such Bonds is purchased. The Issuer has no control over the prices at which the Bonds will initially be offered to the public. The price and other terms relating to the offering and sale of the Bonds may be changed from time to time by the Underwriter after the Bonds are released for sale, and the Bonds may be offered and sold at prices other than the initial offering price, including sales to dealers who may sell the Bonds into investment accounts. The Underwriter has reviewed the information in this Official Statement in accordance with and as part of its responsibilities to investors under federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriter does not guarantee the accuracy or completeness of such information. Verification of Accuracy of Arithmetical Computations The arithmetical accuracy of certain computations included in the schedules provided by the Financial Advisor relating to computation of forecasted receipts of principal and interest on the Escrowed Securities and the forecasted payments of principal and interest to redeem the Refunded Obligations was verified by Grant Thornton LLP. Such computations were based solely on assumptions and information supplied by the Financial Advisor. Grant Thornton LLP has restricted its procedures to verifying the arithmetical accuracy of certain computations and has not made any study or evaluation of the assumptions and information on which the computations are based and,accordingly,has not expressed an opinion on the data 28 used, the reasonableness of the assumptions, or the achievability of the forecasted outcome. The report of Grant Thornton LLP will be relied upon by Bond Counsel in rendering its opinion with respect to the tax exemption of interest on the Bonds and with respect to the defeasance of the Refunded Obligations. Continuing Disclosure of Information In the Ordinance, the Issuer has made the following agreement for the benefit of the holders and beneficial owners of the Bonds. The Issuer is required to observe the agreement for so long as it remains an"obligated person"with respect to the Bonds,within the meaning of the Securities and Exchange Commission's Rule 15c2-12(the"Rule"). Under the agreement, the Issuer will be obligated to provide certain updated financial information and operating data annually,and timely notice of certain specified events, to the Municipal Securities Rulemaking Board (the "MSRB") through its Electronic Municipal Market Access("EMMA")system. Annual Reports. The Issuer 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 Issuer of the general type included in this Official Statement under Tables numbered 1 through 12 and in APPENDIX B, which is the Issuer's annual audited financial report.The Issuer will update and provide the information in the numbered tables within six months after the end of each fiscal year ending in and after 2016 and, if not submitted as part of such annual financial information, the Town will provide audited financial statements when and if available, and in any event, within 12 months after the end of each fiscal year. If the audit of such financial statements is not complete within 12 months after any such fiscal year end,then the Issuer will file unaudited financial statements by the required time and audited financial statements for the applicable fiscal year, when and if the audit report on such statements becomes available. Any such financial statements will be prepared in accordance with the accounting principles described in Appendix B or such other accounting principles as the Issuer may be required to employ from time to time pursuant to State law or regulation. The Issuer's current fiscal year end is September 30. Accordingly, the Issuer must provide updated information included in the above-referenced tables by the last day of March in each year, and audited financial statements for the preceding fiscal year (or unaudited financial information if the audited financial statements are not yet available) must be provided by September 30 in each year,unless the Issuer changes its fiscal year. If the Issuer changes its fiscal year,it will file notice of the change (and of the date of the new fiscal year end) with the MSRB prior to the next date by which the Issuer otherwise would be required to provide financial information and operating data as set forth above. All financial information, operating data, financial statements and notices required to be provided to the MSRB shall be provided in an electronic format and be accompanied by identifying information prescribed by the MSRB. Financial information and operating data to be provided as set forth above may be set forth in full in one or more documents or may be included by specific reference to any document(including an official statement or other offering document)available to the public on the MSRB's Internet Web site or filed with the Securities and Exchange Commission(the"SEC"),as permitted by the Rule. Event Notices. The Issuer will also provide notices of certain events to the MSRB. The Issuer will provide notice of any of the following events with respect to the Bonds to the MSRB in a timely manner and not more than 10 business days after 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 payment of the Bonds, if material; (11)rating changes; (12)bankruptcy, insolvency,receivership, or similar event of the Issuer,which shall occur as described below;(13)the consummation of a merger,consolidation,or acquisition involving the Issuer 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; and(14) appointment of a successor or additional trustee or the change of name of a trustee, if material. For these purposes,any event described in the immediately preceding paragraph(12)is considered to occur when any of the following occur:the appointment of a receiver,fiscal agent,or similar officer for the Issuer 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 29 assumed jurisdiction over substantially all of the assets or business of the Issuer,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 Issuer. Neither the Bonds nor the Ordinance make any provision for debt service reserves, credit enhancement, or liquidity enhancement. In addition,the Issuer will provide timely notice of any failure by the Issuer to provide information, data, or financial statements in accordance with its agreement described above under"Annual Reports".The Issuer will provide each notice described in this paragraph to the MSRB. Availability of Information. The Town has agreed to provide the foregoing information only as described above. Investors will be able to access continuing disclosure information filed with the MSRB free of charge at www.emma.msrb.org. Limitations and Amendments.The Issuer has agreed to update information and to provide notices of events only as described above. The Issuer 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 Issuer makes 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 Issuer disclaims any contractual or tort liability for damages resulting in whole or in part from any breach of its continuing disclosure agreement or from any statement made pursuant to its agreement,although holders of Bonds may seek a writ of mandamus to compel the Issuer to comply with its agreement. The Issuer may amend its continuing disclosure agreement 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 Issuer, if(i) the agreement, as amended, would have permitted an underwriter to purchase or sell Bonds in the offering described herein in compliance with the Rule,taking into account any amendments or interpretations of the Rule to the date of such amendment,as well as such changed circumstances,and(ii)either(a)the holders of a majority in aggregate principal amount of the outstanding Bonds consent to the amendment or(b)any person unaffiliated with the Issuer(such as nationally recognized bond counsel)determines that the amendment will not materially impair the interests of the registered owners of the Bonds.The Issuer may also amend or repeal the provisions of this continuing disclosure agreement if the SEC amends or repeals the applicable provisions 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. If the Issuer so amends the agreement, it has agreed to include with the next financial information and operating data provided in accordance with its agreement described above under"Annual Reports"an explanation,in narrative form,of the reasons for the amendment and of the impact of any change in the type of financial information and operating data so provided. Compliance with Prior Undertakings. During the last five years, the Issuer has complied in all material respects with all continuing disclosure agreements made by it in accordance with the Rule. Conclusion The financial data and other information contained herein have been obtained from the Issuer's records, audited financial statements and other sources which are believed to be reliable. There is no guarantee that any of the assumptions or estimates contained herein will be realized. All of the summaries of the statutes, documents and ordinances contained in this Official Statement are made subject to all of the provisions of such statutes, documents and ordinances. These summaries do not purport to be complete statements of such provisions and reference is made to such documents for further information. Reference is made to original documents in all respects. The Pricing Officer will approve the form and content of this Official Statement and any addenda,supplement or amendment thereto and authorize its further use in the re-offering of the Bonds by the Underwriter. 30 THIS OFFICIAL STATEMENT will be approved by the Pricing Officer for distribution in accordance with the provisions of the Rule. TOWN OF WESTLAKE,TEXAS By: Pricing Officer 31 APPENDIX A-FORM OF BOND COUNSEL OPINION A-1 LAW OFFICES M-CALL, PARKHURST & HORTON L.L.P. 600 CONGRESS AVENUE 717 NORTH HARWOOD 700 N.ST.MARY'S STREET 1800 ONE AMERICAN CENTER NINTH FLOOR 1525 ONE RIVERWALK PLACE AUSTIN,TEXAS 78701-3248 DALLAS,TEXAS 75201-6587 SAN ANTONIO,TEXAS 78205-3503 TELEPHONE:512478-3805 TELEPHONE:214 754-9200 TELEPHONE:210225-2800 FACSIMILE:512472-0871 FACSIMILE:214 754-9250 FACSIMILE:210 225.2884 Proposed Form of Opinion of Bond Counsel An opinion in substantially the following form will be delivered by McCall,Parkhurst&Horton L.L.P.,Bond Counsel, upon the delivery of the Bonds, assuming no material changes in facts or law. TOWN OF WESTLAKE,TEXAS GENERAL OBLIGATION REFUNDING BONDS,SERIES 2017 IN THE AGGREGATE PRINCIPAL AMOUNT OF$ AS BOND COUNSEL for the Town of Westlake, Texas (the "Issuer"), the issuer of the Bonds described above(the"Bonds"),we have examined into the legality and validity of the Bonds,which bear interest from the dates specified in the text of the Bonds,at the rates and payable on the dates as stated in the text of the Bonds,maturing,unless redeemed prior to maturity in accordance with the terms of the Bonds, serially, all in accordance with the terms and conditions stated in the text of the Bonds. WE HAVE EXAMINED the applicable and pertinent provisions of the Constitution and laws of the State of Texas, and a transcript of certified proceedings of the Issuer, and other pertinent instruments authorizing and relating to the issuance of the Bonds,including one of the executed Bonds(Bond Number T-1), BASED ON SAID EXAMINATION,IT IS OUR OPINION that the Bonds have been authorized and issued and the Bonds delivered concurrently with this opinion have been duly delivered and that, assuming due authentication, Bonds issued in exchange therefore will have been duly delivered, in accordance with law,and that the Bonds,except as may be limited by laws applicable to the Issuer relating to governmental immunity and bankruptcy,reorganization and other similarmatters affecting creditors'rights generally,and by general principles of equity which permit the exercise of judicial discretion,constitute valid and legally binding special obligations of the Issuer,and that ad valorem taxes sufficient to provide for the payment of the interest,if any,on and principal of the Bonds have been levied and pledged for such purpose, within the limit prescribed by law,as provided in the ordinance adopted by the Town Council of the Issuer, pursuant to which the Bonds have been issued(the"Bond Ordinance"). THE ISSUER HAS RESERVED the right to amend the Bond Ordinance as provided therein and subject to the restrictions therein stated. IT IS FURTHER OUR OPINION, except as discussed below, that the interest on the Bonds is excludable from the gross income of the owners for federal income tax purposes under the statutes, regulations,published rulings,and court decisions existing on the date of this opinion. We are further of the opinion that the Bonds are not"specified private activity bonds"and that,accordingly,interest on the Bonds will not be included as an individual or corporate alternative minimum tax preference item under section 57(a)(5)of the Internal Revenue Code of 1986(the"Code"). Except as stated above,we express no opinion as to any other federal, state,or local tax consequences of acquiring,carrying,owning,or disposing of the Bonds. EXCEPT AS STATED ABOVE,we express no opinion as to any other federal,state,or local tax consequences of acquiring,carrying,owning,or disposing of the Bonds. OUR OPINIONS ARE BASED ON EXISTING LAW,which is subject to change. Such opinions are further based on our knowledge of facts as of the date hereof. We assume no duty to update or supplement our opinions to reflect any facts or circumstances that may thereafter come to our attention or to reflect any changes in any law that may thereafter occur or become effective. Moreover,our opinions are not a guarantee of result and are not binding on the Internal Revenue Service (the "Service"); rather, such opinions represent our legal judgment based upon our review of existing law and in reliance upon the representations and covenants referenced above that we deem relevant to such opinions. The Service has an ongoing audit program to determine compliance with rules that relate to whether interest on state or local obligations is includable in gross income for federal income tax purposes. No assurance can be given whether or not the Service will commence an audit of the Bonds. If an audit is commenced, in accordance with its current published procedures the Service is likely to treat the Issuer as the taxpayer. We observe that the Issuer has covenanted not to take any action, or omit to take any action within its control,that if taken or omitted,respectively,may result in the treatment of interest on the Bonds as includable in gross income for federal income tax purposes. WE EXPRESS NO OPINION as to any insurance policies issued with respect to the payments due for the principal of and interest on the Bonds,nor as to any such insurance policies issued in the future. OUR SOLE ENGAGEMENT in connection with the issuance of the Bonds is as Bond Counsel for the Issuer,and,in that capacity,we have been engaged by the Issuer for the sole purpose of rendering our opinions with respect to the legality and validity of the Bonds under the Constitution and laws of the State of Texas,and with respect to the exclusion from gross income of the interest on the Bonds for federal income tax purposes,and for no other reason or purpose. The foregoing opinions represent our legal judgment based upon a review of existing legal authorities that we deem relevant to render such opinions and are not a guarantee of a result. We have not been requested to investigate or verify, and have not independently investigated or verified,any records,data,or other material relating to the financial condition or capabilities of the Issuer,or the disclosure thereof in connection with the sale of the Bonds,and have not assumed any responsibility with respect thereto. We express no opinion and make no comment with respect to the marketability of the Bonds and have relied solely on certificates executed by officials of the Issuer as to the current outstanding indebtedness of,and assessed valuation of taxable property within the Issuer. Our role in connection with the Issuer's Official Statement prepared for use in connection with the sale of the Bonds has been limited as described therein. THE FOREGOING OPINIONS represent our legal judgment based upon a review of existing legal authorities that we deem relevant to render such opinions and are not a guarantee of a result. Respectfully, OFFICIAL STATEMENT DATED JANUARY 10,2017 NEW ISSUE: Book-Entry-Only RATING: S&P"AAA"(stable outlook) (See 'RATING"herein) In the opinion of Bond Counsel, interest on the Bonds will be excludable from gross income for federal income tax purposes under statutes, regulations,published rulings and court decisions existing on the date thereof, subject to the matters described under "T.4X MATTERS" herein, including the alternative minimum tax on corporations. The Issuer has designated the Bonds as"qualified tax-exempt obligations"for financial institutions. $5,795,000 Town of Westlake, Texas (Tarrant and Denton Counties,Texas) General Obligation Refunding Bonds, Series 2017 Date:January 15,2017 Due: February 15,as on next page (Interest accrues from date of deliver}) The Town of Westlake, Texas General Obligation Refunding Bonds, Series 2017 (the "Bonds"), authorized and issued in accordance with the Constitution and laws of the State of Texas, including Chapter 1207, Texas Government Code, as amended ("Chapter 1207"), and an ordinance (the "Bond Ordinance") adopted by the Town Council of the Town of Westlake, Texas (the "Issuer"), constitute direct obligations of the Issuer, payable from a continuing, direct annual ad valorem tax, levied upon all taxable property within the Issuer, within the limits prescribed by law, sufficient to provide for the payment of principal and interest due on the Bonds, as provided in the Bond Ordinance. In the Bond Ordinance, the Town Council delegated to a designated officer of the Issuer(the"Pricing Officer")pursuant to certain provisions of Chapter 1207,authority to effect the sale of the Bonds and to establish certain terms related to the issuance and sale of the Bonds.The terms of the sale are included in a"Pricing Certificate," which completes the sale of the Bonds(the Bond Ordinance and the Pricing Certificate are collectively referred to as the "Ordinance"). See "DESCRIPTION OF THE BONDS -Authority for Issuance"and"DESCRIPTION OF THE BONDS—Security and Source of Payment"herein. The Bonds are initially issuable only to Cede&Co.,the nominee of The Depository Trust Company,New York,New York ("DTC"), pursuant to the book-entry system described herein. Beneficial ownership of the Bonds may be acquired in denominations of$5,000 or integral multiples thereof. No physical delivery of the Bonds will be made to the beneficial owners thereof. Principal of and interest on the Bonds will be payable to Cede&Co.,which will make distributions of the amounts so paid to the participating members of DTC for subsequent remittance to the beneficial owners of the Bonds. Such book-entry-only system will affect the method and timing of payment and the method of transfer for the Bonds. Interest on the Bonds will accrue from the date of their initial delivery and will be payable on February 15 and August 15 of each year, commencing August 15,2017,until maturity or prior redemption. Principal of the Bonds will be payable at maturity or prior redemption. The initial Paying Agent/Registrar for the Bonds is U.S. Bank National Association (the "Paying Agent/Registrar"). The Issuer reserves the right,at its option,to redeem Bonds having stated maturities on and after February 15,2028, in whole or in part in principal amounts of$5,000 or any integral multiple thereof,on February 15, 2027, or any date thereafter, at the par value thereof plus accrued interest to the date of redemption (see "DESCRIPTION OF THE BONDS-Optional Redemption"). Proceeds of the Bonds will be used to refund certain outstanding obligations of the Issuer and pay the costs of issuing the Bonds. See "PLAN OF FINANCING" and APPENDIX D, "SCHEDULE OF REFUNDED OBLIGATIONS" herein. The refunding is being undertaken to lower the Issuer's debt service requirements and will result in a present value savings to the Issuer. CUSIP PREFIX:96048P/MATURITY SCHEDULE&9-DIGIT CUSIP—See inside cover The Bonds are offered when, as and if delivered and subject to approval by the Attorney General of the State of Texas, the receipt of the approving opinion of McCall, Parkhurst & Horton L.L.P., Dallas, Texas, Bond Counsel, and certain other conditions. Certain legal matters will be passed upon for the Underwriter by its counsel, Orrick, Herrington&Sutcliffe LLP, Houston, Texas. It is expected that delivery of the Bonds in definitive form will be through the facilities of DTC in New York,New York,on or about February 7,2017. FTN Financial Capital Markets CUSIP Prefix: 96048P(') MATURITY SCHEDULE $5,795,000 Serial Bonds—Interest accrues from date of delivery Maturity Principal Interest Initial CUSIP (Feb 15) Amount Rate Yield Suffix(l) 2018 $ 30,000 2.00% 1.30% FV3 2019 30,000 2.00% 1.55% F W 1 2020 35,000 2.00% 1.80% FX9 2021 35,000 2.00% 2.00% FY7 2022 35,000 2.50% 2.10% FZ4 2023 35,000 3.00% 2.15% GA8 2024 40,000 3.00% 2.25% G136 2025 605,000 4.00% 2.20% GC4 2026 625,000 4.00% 2.25% GD2 2027 645,000 4.00% 2.30% GEO 2028(2)(3) 675,000 4.00% 2.35% GF7 2029(2)13) 715,000 4.00% 2.40% GG5 2030(2)(3) 735,000 4.00% 2.45% GIH3 203 1(2)(3) 775,000 4.00% 2.50% GJ9 2032(2)(3) 780,000 4.00% 2.55% GK6 (1) CUSIP is a registered trademark of the American Bankers Association. CUSIP data herein 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. Neither the Issuer, the Financial Advisor nor the Underwriter takes any responsibility for the selection or correctness of the CUSIP numbers set forth herein. (2) The Issuer reserves the right, at its option, to redeem Bonds having stated maturities on and after February 15, 2028, in whole or in part in principal amounts of$5,000 or any integral multiple thereof, on February 15, 2027, or any date thereafter, at the par value thereof plus accrued interest to the date fixed for redemption. If less than all of the Bonds within a maturity are to be redeemed, the Paying Agent/Registrar shall determine by lot the Bonds, or portions thereof, within such maturity to be redeemed See "DESCRIPTION OF THE BONDS-Optional Redemption." (3) The yield shown for these Bonds is the yield to the first call date, February 15,2027. i TOWN OF WESTLAKE 3 Village Circle,Suite 202 Westlake,Texas 76262 (817)430-0941 ELECTED OFFICIALS Term Expires Term Town Council (Mu) Occupation Inception Laura Wheat,Mayor 2018 Community Service 2008 Carol Langdon,Mayor pro-tem,Member 2017 Retired,Marketing 2008 Michael Barrett,Member 2018 Sr.Executive,Financial Services 2012 Alesa Belvedere,Member 2018 Realtor 2014 Rick Rennhack,Member 2017 Consultant 2009 Wayne Stoltenberg,Member 2017 Senior VP,CFO,Cinco Resources,Inc. 2013 APPOINTED AND OTHER TOWN OFFICIALS Name Title Years with Town Thomas E.Brymer Town Manager 9 Debbie Piper Finance Director 14 CONSULTANTS AND ADVISORS Name Title Weaver and Tidwell,L.L.P. Auditor Dallas,Texas McCall,Parkhurst&Horton L.L.P. Bond Counsel Dallas,Texas Lawrence Financial Consulting LLC Financial Advisor Austin,Texas ii USE OF INFORMATION IN OFFICIAL STATEMENT No dealer, broker, salesman or other person has been authorized to give any information or make any representations other than those 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 Issuer or any other person. This Official Statement does not constitute an offer to sell or solicitation of an offer to buy, and there shall not be any sale of, the Bonds in any state in which it is unlawful to make such offer,solicitation or sale. The information and expressions of opinion contained herein have been obtained from the Issuer and other sources that are believed to be reliable,but the accuracy and completeness of information obtained from sources other than the Issuer cannot be guaranteed. 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 Issuer or other matters described herein since the date hereof. See "OTHER MATTERS - Continuing Disclosure of Information" herein for a description of the Issuer's agreement to update certain information contained in this Official Statement. The Underwriter has provided the following sentence for inclusion in this Official Statement. The Underwriter has 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 Underwriter does not guarantee the accuracy or completeness of such information. The prices and other terms respecting the offering and sale of the Bonds may be changed from time to time by the Underwriter after the Bonds are released for sale, and the Bonds may be offered and sold at prices other than the initial offering prices,including to dealers who may sell the Bonds into investment accounts. NEITHER THE ISSUER, ITS FINANCIAL ADVISOR NOR THE UNDERWRITER MAKES 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 HEREIN. 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 JURISDICTION IN WHICH THE BONDS HAVE BEEN REGISTERED, QUALIFIED OR EXEMPTED SHOULD NOT BE REGARDED ASA RECOMMENDATION THEREOF. IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER ALLOT OR EFFECT TRANSACTIONS- WHICH STABILIZE THE MARKET PRICE OF THE BOATDS AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MA Y BE DISCONTINUED AT ANY TIME. TABLE OF CONTENTS SUMMARYSTATEMENT..................................................................................................................................................................v INTRODUCTION.................................................................................................................................................................................1 PLANOF FINANCING........................................................................................................................................................................1 Purposeof the Bonds.........................................................................................................................................................................l RefundedObligations........................................................................................................................................................................l Sourcesand Uses of Funds................................................................................................................................................................2 DESCRIPTIONOF THE BONDS........................................................................................................................................................2 General..............................................................................................................................................................................................2 Authorityfor Issuance.......................................................................................................................................................................3 Book-Entry-Only System..................................................................................................................................................................3 Securityand Source of Payment........................................................................................................................................................5 OptionalRedemption.........................................................................................................................................................................5 PayingAgent/Registrar......................................................................................................................................................................6 Defeasance.........................................................................................................................................................................................7 iii Amendmentsto the Ordinance..........................................................................................................................................................8 Bondholders'Remedies.....................................................................................................................................................................8 ISSUER DEBT AND AD VALOREM TAX INFORMATION...........................................................................................................9 Table 1—Current Appraised Valuation,Exemptions and Tax Supported Debt................................................................................9 Table 2-Appraised Valuation and Exemptions by Category..........................................................................................................10 Table4-Ten Largest Taxpayers.....................................................................................................................................................11 Table4-Ten Largest Taxpayers.....................................................................................................................................................l 1 EstimatedOverlapping Debt............................................................................................................................................................12 Table5—Debt Service Requirements..............................................................................................................................................13 Table 6-Authorized But Unissued Ad Valorem Tax Debt.............................................................................................................13 Table7-Other Obligations.............................................................................................................................................................13 Table8—Tax Adequacy..................................................................................................................................................................14 FutureBorrowing............................................................................................................................................................................14 PropertyTax Code...........................................................................................................................................................................14 OTHER FINANCIAL INFORMATION.............................................................................................................................................18 Table 9-General Fund Summary Revenues and Expenditures.......................................................................................................18 Table9A—Changes in Net Assets..................................................................................................................................................19 Table 10-General Fund Summary Balance Sheet..........................................................................................................................20 Table 1 OA—Consolidated Statement of Net Assets........................................................................................................................20 Investments......................................................................................................................................................................................21 Table 12-Status of Current Investments........................................................................................................................................23 LEGALMATTERS.............................................................................................................................................................................24 TAXMATTERS.................................................................................................................................................................................24 Opinion............................................................................................................................................................................................24 Federal Income Tax Accounting Treatment of Original Issue Discount.........................................................................................25 Collateral Federal Income Tax Consequences.................................................................................................................................26 State,Local and Foreign Taxes........................................................................................................................................................26 Information Reporting and Backup Withholding............................................................................................................................26 Qualified Tax-Exempt Obligations for Financial Institutions..........................................................................................................27 Futureand Proposed Legislation.....................................................................................................................................................27 RATING..............................................................................................................................................................................................27 OTHERMATTERS............................................................................................................................................................................27 LitigationCertificate........................................................................................................................................................................27 Legal Investments and Eligibility to Secure Public Funds in Texas................................................................................................28 FinancialAdvisor............................................................................................................................................................................28 FinancialStatements........................................................................................................................................................................28 Registration and Qualification of Bonds for Sale............................................................................................................................28 Underwriting....................................................................................................................................................................................29 Verification of Accuracy of Arithmetical Computations.................................................................................................................29 Continuing Disclosure of Information.............................................................................................................................................29 Conclusion.......................................................................................................................................................................................31 APPENDIX A-FORM OF BOND COUNSEL OPINION..............................................................................................................A-I APPENDIX B-FINANCIAL STATEMENTS................................................................................................................................B-I APPENDIX C-GENERAL INFORMATION REGARDING THE ISSUER..................................................................................0-1 APPENDIX D-SCHEDULE OF REFUNDED OBLIGATIONS....................................................................................................D-I iv SUMMARY STATEMENT This summary statement is subject in all respects to the more complete information and to the definitions contained or incorporated in this Official Statement. The offering of the Bonds to potential investors is made only by means of this entire Official Statement, including the cover page and all appendices. No person is authorized to detach this summary statement from this Official Statement or to otherwise use it without the entire Official Statement. The Issuer The Town of Westlake, located in Tarrant and Denton Counties,Texas,was incorporated in 1956 and operates as a"Type A general law city" under the laws of the State of Texas. See APPENDIX C, "GENERAL INFORMATION REGARDING THE ISSUER." The Bonds The Bonds are being issued in the aggregate principal amount set forth on the cover page in accordance with the Constitution and laws of the State of Texas, including Chapter 1207, Texas Government Code, as amended ("Chapter 1207"), and an ordinance (the "Bond Ordinance") adopted by the Town Council of the Issuer. In the Bond Ordinance, the Town Council delegated to a designated officer of the Issuer (the 'Pricing Officer"), pursuant to certain provisions of Chapter 1207, authority to effect the sale of the Bonds and to establish certain terms related to the issuance and sale of the Bonds.The terms of the sale are included in a"Pricing Certificate,"which completes the sale of the Bonds(the Bond Ordinance and the Pricing Certificate are collectively referred to as the "Ordinance"). The Bonds having stated maturities on or after February 15, 2028 are subject to redemption at the option of the Issuer prior to maturity on and after February 15, 2027. See "DESCRIPTION OF THE BONDS—Optional Redemption." Security The Bonds constitute direct obligations of the Issuer,payable from a continuing annual ad valorem tax levied upon all taxable property located within the Issuer, within the limitations prescribed by law. The Ordinance irrevocably pledges such ad valorem taxes in an amount sufficient to provide for the payment of the Bonds while they remain outstanding. See "DESCRIPTION OF THE BONDS-Security." Tax Matters In the opinion of Bond Counsel, interest on the Bonds will be excludable from gross income for purposes of federal income taxation under statutes, regulations,published rulings and court decisions existing on the date thereof, subject to the matters described under "TAX MATTERS" herein, including the alternative minimum tax on corporations. The Issuer has designated the Bonds as"qualified tax-exempt obligations"for financial institutions. Summary of Key Analytical Data General Fund Equity Balance as of 09/30/2015 $ 7,680,550 Estimated Population of the Issuer 1,200 Net Taxable Assessed Valuation(TAV)for Fiscal Year 2016-17 $ 1,105,075,652 TAV per capita $ 920,896.38 Gross Ad Valorem Tax Debt as of 12/31/2016 $ 36,322,000 Ratio of Gross Ad Valorem Tax Debt to TAV 3.29% Gross Ad Valorem Tax Debt per capita $ 30,268.33 Net Ad Valorem Tax Debt as of 12/31/2016") $ 1,627,000 Ratio of Net Ad Valorem Tax Debt to TAVI" 0.15% Net Ad Valorem Tax Debt per capita(') $ 1,355.83 Sources:Tarrant and Denton Central Appraisal Districts, the Issuer's audited financial statements,and U.S. Census Bureau. (1)Although all of the Issuer's ad valorem tax debt is secured by a pledge of its ad valorem tax, it is currently paying only a minor portion of such debt from its ad valorem tax and the remainder from other available sources.See "ISSUER DEBT AND AD VALOREM TAX INFORMATION—Tables 1,3 and 5." v OFFICIAL STATEMENT relating to $5,795,000 Town of Westlake, Texas (Tarrant and Denton Counties,Texas) General Obligation Refunding Bonds, Series 2017 INTRODUCTION This Official Statement provides certain information in connection with the issuance by the Town of Westlake, Texas(the"Issuer"or"Town")of its General Obligation Refunding Bonds,Series 2017(the"Bonds"). The Bonds will be issued pursuant to the laws of the State of Texas, particularly Chapter 1207,Texas Government Code, as amended, and an ordinance (the "Bond Ordinance") adopted by the Town Council of the Issuer. In the Bond Ordinance,the Town Council delegated to a designated officer of the Issuer(the "Pricing Officer"),pursuant to certain provisions of Chapter 1207,authority to effect the sale of the Bonds and to establish certain terms related to the issuance and sale of the Bonds.The terms of the sale are included in a'Pricing Certificate,"which completed the sale of the Bonds (the Bond Ordinance and the Pricing Certificate are collectively referred to as the "Ordinance"). There follows in this Official Statement descriptions of the plan of financing, the Bonds and certain information about the Issuer and its finances. Capitalized terms used herein have the same meanings assigned to such terms in the Ordinance. 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 Issuer. PLAN OF FINANCING Purpose of the Bonds Proceeds from the sale of the Bonds will be used(i)to refund selected maturities of the Issuer's outstanding General Obligation Refunding Bonds, Series 2007 (the "Refunded Obligations"), in order to lower the debt service requirements of the Issuer and(ii)to pay the costs associated with the issuance of the Bonds. See APPENDIX D for a detailed listing of the Refunded Obligations and their call date at par. Refunded Obligations The principal and interest due on the Refunded Obligations will be paid on the scheduled redemption date from funds to be deposited with U.S. Bank National Association (the 'Escrow Agent"), pursuant to the Escrow Agreement executed between the Issuer and the Escrow Agent. The Ordinance provides that from the proceeds of the sale of the Bonds, the Issuer will deposit with the Escrow Agent the amount necessary to accomplish the discharge and final payment of the Refunded Obligations. Such funds will be held by the Escrow Agent in an escrow account (the 'Escrow Fund") and will be invested in U.S. Government obligations(the "Escrowed Securities")maturing in time to make such payments,and the Escrow Fund is irrevocably pledged to the payment of principal of and interest on the Refunded Obligations. Grant Thornton LLP, a nationally recognized accounting firm, will issue its report(the "Report") verifying at the time of delivery of the Bonds to the Underwriter thereof the mathematical accuracy of the schedules that demonstrate the Escrowed Securities will mature and pay interest in such amounts which,together with uninvested funds, if any, 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 Accuracy of Arithmetical Computations"). 1 By the deposit of the Escrowed Securities and cash, if necessary, with the Escrow Agent pursuant to the Escrow Agreement,the Issuer will have effected the defeasance of all of the Refunded Obligations in accordance with State law and in reliance upon the Report. As a result of such defeasance, 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 obligations of the Issuer payable from taxes nor for the purpose of applying any limitation on the issuance of debt, and the Issuer will have no further responsibility with respect to amounts available in the Escrow Fund for the payment of the Refunded Obligations from time to time,including any insufficiency therein caused by the failure to receive payment when due on the Escrowed Securities. Sources and Uses of Funds The following is a summary of the anticipated sources and uses of proceeds of funds in connection with the issuance of the Bonds: Sources of Funds Principal Amount of Bonds $ 5,795,000.00 Original Issue Premium 774,059.40 Total Sources $ 6,569,059.40 Uses of Funds Deposit to Escrow Fund $ 6,452,467.39 Issuance Costs 73,301.84 Underwriting Discount 42,380.50 Rounding Amount 909.67 Total Uses $ 6,569,059.40 DESCRIPTION OF THE BONDS General The Bonds are dated January 15, 2017. Interest on the Bonds, at the rates set forth on page i hereof, will accrue from the date of their initial delivery to the Underwriter and will be payable semiannually on February 15 and August 15 of each year,commencing August 15,2017,until maturity or prior redemption. The Bonds are stated to mature on February 15 in the years and in the principal amounts set forth on page i hereof. The Bonds will be initially issued utilizing the Book-Entry-Only System of The Depository Trust Company ('DTC"),and will be in fully registered form,payable to Cede&Co.,as nominee for DTC. See 'Book-Entry-Only System" below. The Bonds are issued only as fully registered obligations in the denomination of$5,000 principal amounts or any integral multiple thereof(an "Authorized Denomination"), within a stated maturity and of like interest rate. Principal and redemption price of the Bonds are payable on the maturity or redemption date upon surrender at the corporate trust office of the Paying Agent/Registrar in Dallas, Texas (the "Trust Office"). Interest on the Bonds payable on any interest payment date shall be paid to the owner (the "Owner") whose name appears in the registration books of the Paying Agent/Registrar(the "Register") at the close of business on the Record Date (the last business day of the month immediately preceding an interest payment date) and shall be paid by the Paying Agent/Registrar by check sent United States mail, first class,postage prepaid,to the address of the Owner recorded in the Register or by such other method, acceptable to the Paying Agent/Registrar,requested by,and at the risk and expense of, the Owner. Notwithstanding the foregoing, so long as the Bonds are in book-entry-only form and are registered in the name of Cede& Co., as nominee for DTC, payment of the principal of and interest on the Bonds will be made to the beneficial owners thereof as described below under'Book-Entry-Only System." 2 In the event of a non-payment of interest on a scheduled payment date with respect to the Bonds, that remains unpaid for 30 days thereafter,the Ordinance requires the Paying Agent/Registrar to establish a Special Record Date, if and when funds for the payment of such interest are received from the Issuer. Notice of the Special Record Date and of the scheduled payment date of the past due interest(the "Special Payment Date" that 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 Owner of a Bond appearing on the 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. If the date specified for the payment of the principal of or interest on the Bonds is a Saturday, Sunday,legal holiday or day on which banking institutions in the city where the Paying Agent/Registrar is located are authorized or required to be closed,then such payment will be made on the next succeeding day which is not one of the foregoing days, without additional interest and with the same force and effect as if made on the specified date for such payment. Authority for Issuance The Bonds are 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 the Bond Ordinance. Book-Entry-Only System This section describes how ownership of the Bonds are to be transferred and how the principal of,premium, if any, and interest on the Bonds are to be paid to and credited by The Depository Trust Company ("DTC'), New York, New York, 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 Issuer believes the source of such information to be reliable, but takes no responsibility for the accuracy or completeness thereof. The Issuer cannot and does not give any assurance that (1) DTC will distribute payment of debt service on the Bonds, 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 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 Securities and Exchange Commission, and the current procedures of DTC to be followed in dealing with DTC 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 such maturity,and will be deposited with DTC. 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 3 through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ("Indirect Participants").DTC has 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 www.dtcc.com. 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 the Bonds,except in the event that use of the book-entry system for the Bonds is discontinued. 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. 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 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 redemptions,tenders,defaults,and proposed amendments to the Bond documents. For example, Beneficial Owners of 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 Paying Agent/Registrar and request that copies of notices be provided directly to them. Redemption notices shalt be sent to DTC.If less than all of the Bonds within a 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. Neither DTC nor Cede&Co. (nor any other DTC nominee) will consent or vote with respect to the Bonds unless authorized by a Direct Participant in accordance with DTC's MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the Issuer 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 the Bonds are credited on the record date(identified in a listing attached to the Omnibus Proxy). Redemption proceeds and principal and interest 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 Issuer or the Paying Agent/Registrar, on payable dates 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 in 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 Paying Agent or the Issuer,subject to any statutory or regulatory requirements as may be in effect from time to time.Payment of redemption proceeds and principal and interest to Cede&Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the Issuer or the Paying Agent/Registrar, 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. A Beneficial Owner shall give notice to elect to have its Bonds purchased or tendered,through its Participant,to the Tender Agent,and shall effect delivery of such Bonds by causing the Direct Participant to transfer the Participant's 4 interest in the Bonds, on DTC's records, to the Tender Agent. The requirement for physical delivery of Bonds in connection with an optional tender or a mandatory purchase will be deemed satisfied when the ownership rights in the Bonds are transferred by Direct Participants on DTC's records and followed by a book-entry credit of tendered Bonds to the Tender Agent's DTC account. DTC may discontinue providing its services as depository with respect to the Bonds at any time by giving reasonable notice to the Issuer or the Paying Agent/Registrar. Under such circumstances, in the event that a successor depository is not obtained,Bond certificates are required to be printed and delivered. The Issuer may decide to discontinue use of the system of book-entry transfers through DTC (or a successor securities depository).In that event,Bond certificates will be printed and delivered. The information in this section concerning DTC and DTC's book-entry system has been obtained from sources that the Issuer believes to be reliable,but the Issuer takes not responsibility for the accuracy thereof. Security and Source of Payment The Bonds will constitute direct obligations of the Issuer, payable from ad valorem taxes levied against all taxable property located within the Issuer,within the limitations prescribed by law. The Ordinance pledges such ad valorem taxes to the payment of the principal of and interest on the Bonds while they remain outstanding. See "ISSUER DEBT AND AD VALOREM TAX INFORMATION"herein. Tax Rate Limitations. The Constitution of the State provides that the ad valorem tax levied by the Issuer for general purposes and for the purpose of paying debt service requirements of the Issuer's general obligation debt shall not exceed $1.50 for each $100 of assessed valuation of taxable property. There is no limitation within the $1.50 rate for interest and sinking fund purposes. Administratively, however,the Attorney General of the State of Texas will not permit allocation of more than $1.00 of the$1.50 maximum tax rate for all tax supported debt based on a 90% collection rate. Optional Redemption The Issuer reserves the right,at its option,to redeem Bonds having stated maturities on and after February 15,2028, in whole or in part in principal amounts of$5,000 or any integral multiple thereof,on February 15,2027,or any date thereafter,at the par value thereof plus accrued interest to the date fixed for redemption. If less than all of the Bonds within a maturity are to be redeemed,the Paying Agent/Registrar(or DTC,while the Bonds are in Book-Entry-Only form)shall determine by lot the Bonds,or portions thereof,within such maturity to be redeemed. Notice of Redemption Not less than 30 days prior to a redemption date for the Bonds, the Issuer shall cause a notice of redemption to be sent by United States mail,first class,postage prepaid,to each Owner of a Bond to be redeemed,in whole or in part, at the address of the Owner appearing in the Register at the close of business on the business day next preceding the date of mailing of such notice. ANY NOTICE GIVEN SHALL BE CONCLUSIVELY PRESUMED TO HAVE BEEN DULY GIVEN, WHETHER OR NOT THE OWNER RECEIVES SUCH NOTICE. NOTICE HAVING BEEN SO GIVEN AND ALL OTHER CONDITIONS TO REDEMPTION ARE SATISFIED, THE BONDS CALLED FOR REDEMPTION SHALL BECOME DUE AND PAYABLE ON THE SPECIFIED REDEMPTION DATE, AND, NOTWITHSTANDING THAT ANY BOND OR PORTION THEREOF HAS NOT BEEN SURRENDERED FOR PAYMENT, INTEREST ON SUCH BOND OR PORTION THEREOF SHALL CEASE TO ACCRUE. With respect to any optional redemption of the Bonds, unless certain prerequisites to such redemption required by the Ordinance have been met and money sufficient to pay the principal of and premium, if any, and interest or maturity value on the Bonds to be redeemed will have been received by the Paying Agent/Registrar prior to the giving of such notice of redemption, such notice may state that said redemption may, at the option of the Issuer, be conditional upon the satisfaction of such prerequisites and receipt of such money by the Paying Agent/Registrar on or prior to the date fixed for such redemption or upon any prerequisite set forth in such notice of redemption. If a 5 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 Issuer will not redeem such Bonds,and the Paying Agent/Registrar will give notice in the manner in which the notice of redemption was given,to the effect that the Bonds have not been redeemed. The Paying Agent/Registrar and the Issuer, 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 Ordinance or other notices with respect to the Bonds only to DTC.Any failure by DTC to advise any DTC participant,or of any DTC participant or indirect participant to notify the beneficial owner,shall 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 Issuer will reduce the outstanding principal amount of such Bonds held by DTC. In such event, DTC may implement, through its Book- Entry-Only System, a redemption of such Bonds held for the account of DTC participants in accordance with its rules or other agreements with DTC participants and then DTC 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 Ordinance and will not be conducted by the Issuer or the Paying Agent/Registrar.Neither the Issuer nor the Paying Agent/Registrar will have any responsibility to DTC participants, indirect participants or the persons for whom DTC participants act as nominees,with respect to the payments on the Bonds or the providing of notice to DTC participants, indirect participants, or beneficial owners of the selection of portions of the Bonds for redemption. See"DESCRIPTION OF THE BONDS—Book-Entry-Only System"herein. Paying Agent/Registrar The initial Paying Agent/Registrar is U.S. Bank National Association, Dallas, Texas. In the Ordinance, the Issuer retains the right to replace the Paying Agent/Registrar. The Issuer covenants to maintain and provide a Paying Agent/Registrar at all times while the Bonds are outstanding, and any successor Paying Agent/Registrar shall be a bank, trust company, financial institution or other entity duly qualified and legally authorized to serve as and perform the duties and services of Paying Agent/Registrar for the Bonds. Upon any change in the Paying Agent/Registrar for the Bonds,the Issuer agrees to promptly cause a written notice thereof to be sent to each Owner by United States mail, first class, postage prepaid, which notice shall also give the effective date of the change and the address of the new Paying Agent/Registrar. If the Paying Agent/Registrar is replaced, the new Paying Agent/Registrar shall accept the previous Paying Agent/Registrar's records and act in the same capacity as the previous Paying Agent/Registrar. Transfer and Exchange In the event the Book-Entry-Only System shall be discontinued with respect to the Bonds, such Bonds may be transferred and exchanged on the Register only upon presentation and surrender thereof to the Paying Agent/Registrar,and such transfer or exchange shall be without expense or service charge to the Owner, except for any tax or other governmental charges required to be paid with respect to such registration, exchange and transfer. 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 Paying Agent/Registrar. A new Bond or Bonds will be delivered by the Paying Agent/Registrar, in lieu of the Bond being transferred or exchanged, at the Trust Office, or sent by United States mail, first class, postage prepaid, to the new Owner or its designee. New Bonds registered and delivered in an exchange or transfer shall be in Authorized Denominations for any one stated maturity and for a like aggregate principal amount and interest rate as the Bond or Bonds surrendered for exchange or transfer. Neither the Issuer nor the Paying Agent/Registrar shall be required to issue,transfer or exchange any Bond in whole or in part during the period commencing with the close of business on any Record Date and ending on the day subsequent to the immediately following payment date or,with respect to any Bond called for redemption,in whole or in part, within 30 days of the date fixed for redemption, provided that such limitation of transfer shall not be applicable to the exchange by the registered owner of the uncalled balance of a Bond. The Paying Agent/Registrar shall require payment by the Owner requesting such transfer or exchange of any tax or other governmental charges required to be paid with respect to such transfer or exchange. 6 Replacement Bonds If any Bond is mutilated, destroyed, stolen or lost, a new Bond in the same principal amount and bearing the same rate of interest as the Bond so mutilated,destroyed,stolen or lost will be issued under the conditions set forth in the Ordinance. In the case of a mutilated Bond, such new Bond will be delivered only upon surrender and cancellation of such mutilated Bond. In the case of any Bond issued in lieu of and substitution for a Bond which has been destroyed, stolen or lost, such new Bond will be delivered only upon (a)the filing with the Issuer and the Paying Agent/Registrar of evidence satisfactory to establish to the Paying Agent/Registrar proof of the ownership and the circumstances of loss,destruction or theft of such Bond,and(b)the furnishing to the Paying Agent/Registrar of such security of indemnity satisfactory to it to hold it and the Issuer harmless. The person requesting the authentication and delivery of a new Bond must comply with such other reasonable requirements as the Issuer and the Paying Agent/Registrar may prescribe and pay such expenses as may be incurred in connection therewith. Defeasance The Ordinance provides for the defeasance of the Bonds when payment of the principal of and premium, if any, on Bonds,plus interest thereon to the due date thereof(whether such due date be by reason of maturity,redemption,or otherwise), is provided by irrevocably depositing with a paying agent or other authorized entity, in trust(1)money sufficient to make such payment or(2)Defeasance Securities,certified by an independent public accounting firm of national reputation to mature as to principal and interest in such amounts and at such times to insure the availability, without reinvestment,of sufficient money to make such payment, and all necessary and proper fees,compensation and expenses of the paying agent for the Bonds, and thereafter the Issuer will have no further responsibility with respect to amounts available to such paying agent(or other financial institution permitted by applicable law)for the payment of such defeased Bonds,including any insufficiency therein caused by the failure of such paying agent(or other financial institution permitted by applicable law)to receive payment when due on the Defeasance Securities. The Ordinance provides that "Defeasance Securities" means any securities and obligations now or hereafter authorized by State law that are eligible to discharges obligations such as the Bonds. Current State law permits defeasance with the following types of securities:(1)direct,noncallable obligations of the United States of America, including obligations that are unconditionally guaranteed by the United States of America, (2) noncallable obligations of an agency or instrumentality of the United States of America, including obligations that are unconditionally guaranteed or insured by the agency or instrumentality and that, on the date the governing body of the Issuer adopts or approves the proceedings authorizing the financial arrangements, are rated as to investment quality by a nationally recognized investment rating firm not less than AAA or its equivalent, and (3) 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 financial arrangements,are rated as to investment quality by a nationally recognized investment rating firm not less than AAA or its equivalent. The Issuer has additionally reserved the right,subject to satisfying the requirements of (1) and (2) above, to substitute other Defeasance Securities for the Defeasance Securities originally deposited, to reinvest the uninvested moneys on deposit for such defeasance and to withdraw for the benefit of the Issuer moneys in excess of the amount required for such defeasance. Upon such deposit as described above, such Bonds 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 Bonds have been made as described above, all rights of the Issuer 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 right to call the Bonds for redemption is not extinguished if the Issuer: (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. There is no assurance that the current law will not be changed in a manner which would permit investments other than those described above to be made with amounts deposited to defease the Bonds. Because the Ordinance does not contractually limit such investments, registered owners may be deemed to have consented to defeasance with such other investments,notwithstanding the fact that such investments may not be of the same investment quality as those currently permitted under State law. There is no assurance that the ratings for U.S.Treasury securities used as 7 Defeasance Securities or those for any other Defeasance Security will be maintained at any particular rating category. Amendments to the Ordinance In the Ordinance,the Issuer has reserved the right to amend the Ordinance without the consent of any holder for the purpose of amending or supplementing the Ordinance to(i)cure any ambiguity,defect or omission therein that does not materially adversely affect the interests of the holders,(ii)grant additional rights or security for the benefit of the holders, (iii) add events of default as shall not be inconsistent with the provisions of the Ordinance that do not materially adversely affect the interests of the holders, (iv) qualify the Ordinance under the Trust Indenture Act of 1939, as amended, or corresponding provisions of federal laws from time to time in effect or(v) make such other provisions in regard to matters or questions arising under the Ordinance that are not inconsistent with the provisions thereof and which, in the opinion of Bond Counsel for the Issuer, do not materially adversely affect the interests of the holders. The Ordinance further provides that the holders of the Bonds aggregating in principal amount 51% of the outstanding Bonds shall have the right from time to time to approve any amendment not described above to the Ordinance if it is deemed necessary or desirable by the Issuer;provided,however,that without the consent of 100% of the holders in original principal amount of the then outstanding Bonds, no amendment may be made for the purpose of. (i)making any change in the maturity of any of the outstanding Bonds; (ii)reducing the rate of interest borne by any of the outstanding Bonds;(iii)reducing the amount of the principal of,or redemption premium,if any, payable on any outstanding Bonds; (iv) modifying the terms of payment of principal or of interest or redemption premium on outstanding Bonds, or imposing any condition with respect to such payment; or (v) changing the minimum percentage of the principal amount of the Bonds necessary for consent to such amendment. Reference is made to the Ordinance for further provisions relating to the amendment thereof. Bondholders'Remedies The Ordinance establishes specific events of default with respect to the Bonds. If the Issuer defaults in the payment of the principal of or interest on the Bonds when due or the Issuer defaults in the observance or performance of any of the covenants, conditions, or obligations of the Issuer, the failure to perform which materially, adversely affects the rights of the owners of the Bonds, including but not limited to, their prospect or ability to be repaid in accordance with the Ordinance, and the continuation thereof for a period of 60 days after notice of such default is given by any owner to the Issuer, the Ordinance provides that any registered owner is entitled to seek a writ of mandamus from a court of proper jurisdiction requiring the Issuer 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 Bonds or the Ordinance and the Issuer'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 Bonds in the event of default and, consequently,the remedy of mandamus may have to be relied upon from year to year. The Ordinance does not provide for the appointment of a trustee to represent the interest of the owners of the Bonds upon any failure of the Issuer to perform in accordance with the terms of the Ordinance, 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. The Texas Supreme Court ruled in Tooke v. City of Alexia, 197 S.W. 3`d 325 (Tex.2006),that a waiver of sovereign immunity 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 Issuer's sovereign immunity from a suit for money damages, owners of the Bonds may not be able to bring such a suit against the Issuer for breach of the Bonds or Ordinance covenants. Even if a judgment against the Issuer could be obtained, it could not be enforced by direct levy and execution against the Issuer's property. Further, the registered owners cannot themselves foreclose on property within the Issuer or sell property within the Issuer to enforce the tax lien on taxable property to pay the principal of and interest on the Bonds. Furthermore, the Issuer 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 8 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 owners of the Bonds of an entity which has sought protection under Chapter 9. Therefore, should the Issuer 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 Bonds are qualified with respect to the customary rights of debtors relative to their creditors and by general principles of equity which permit the exercise of judicial discretion. Initially,the only registered owner of the Bonds will be Cede&Co.,or DTC's nominee. See"DESCRIPTION OF THE BONDS-Book-Entry-Only System"herein for a description of the duties of DTC with regard to ownership of Bonds. ISSUER DEBT AND AD VALOREM TAX INFORMATION The following tables and calculations relate to the Bonds and to all other tax-supported debt of the Issuer. The Issuer and' various other political subdivisions of government which overlap all or a portion of the Issuer are empowered to incur debt to be paid from revenues raised or to be raised by taxation against all or a portion of property within the Issuer. Table 1—Current Appraised Valuation,Exemptions and Tax Supported Debt Tarrant County Denton County Total Total Market Value of Issuer Property for FY 2016-17 $ 1,568,214,122 $ 20,043,379 $ 1,588,257,501 Homestead Cap Loss (62,483,152) - (62,483,152) Ag Deferrals(Productivity Loss) (78,172.761) (16,643,604) (94,816,365) Total Appraised Value of Issuer Property for FY 2016-17 $ 1.427,558,209 $ 3,399.775 $ 1.430,957,984 Less Exemptions: Homestead Exemption-Local Option(General) (100,346,357) - (100,346,357) Homestead Exemption-Local Option(Over 65) (595,000) - (595,000) AbatementO (135,433,473) - (135,433,473) Reduction for Cases Before ARB (59,278,265) - (59,278,265) Reduction for Incomplete/In Process Accounts (12,758,433) - (12,758,433) Absolute Exemptions (12,352,533) (2,241,248) (14,593,781) Other Exemptions,Reductions (2,877,023) - (2,877,023) Total Adjustments,Exemptions (323,641,084) (2,241,248) (325,882,332) Taxable Assessed Valuation for FY 2016-17 $ 1,103.917,125 $ 1,158,527 $ 1,105,075,652 Gross Principal Amount of Ad Valorem Tax Supported Debt as of 12/31/2016 $ 36,322,000 Less:Principal Amount Such Debt Being Repaid From Sources Other Than Ad Valorem Taxes (34,695,000) Net Amount of Ad Valorem Tax Supported Debt as of 12/31/2016 $ 1,627,000 Debt Service Fund Balance as of 09/30/2015 $ 20,916 Sources:Tarrant and Denton Central Appraisal Districts;Issuer financial statements. (1) The Issuer has granted partial tax abatements for two major facilities within its boundaries, including those used by Deloitte LLA and Fidelity Investments. Such abatements have 10 year terms and are subject to various terms and conditions, including in the case of Fidelity Investments the satisfaction of certain employment targets, in order to qualify for abatement in any given year. The Deloitte LLP abatement expires October 2021,and the Fidelity Investments abatement expires November 2019. 9 Table 2-Appraised Valuation and Exemptions by Category Fiscal Years Ending September 30, 2017 2016 2015 Market Valuation Amount %of Total Amount %of Total Amount %of Total Real Estate,Residential $ 879,417,798 55.37% $ 669,171,945 50.52% $ 617,469,021 48.62% Real Estate,Commercial 466,391,373 29.36% 455,595,734 34.40% 427,483,453 33.66% Personal Prop,Comml/Indust 146,514,438 9.22% 122,122,330 9.22% 146,956,302 11.57% Agricultural Properties 95,250,592 6.00% 77,073,547 5.82% 77,486,314 6.10% Utilities 683,300 0.04% 555,495 0.04% 497,410 0.04% Total Market Valuation 1,588,257,501 100.00% 1,324,519,051 100.00% 1,269,892,500 100.00% Less Exemptions&Reductions Homestead Cap Loss (62,483,152) (5,553,073) (16,626,670) Agricultural,Productivity Loss (94,816,365) (76,467,922) (76,873,063) Homestead-Local Option (100,346,357) (85,558,380) (86,061,862) Over 65-Local Option (595,000) (605,000) (5611,700) Disabled-Local Option - - - Abatements(l) (135,433,473) (162,354,187) (163,938,263) Reduction for ARB Cases (59,278,265) (9,842,969) (7,517,937) Reduction for Incomplete Accts (12,758,433) (22,863,722) (1,7801,074) Absolute Exemptions (14,593,781) (14,706,044) (14,813,387) Disabled Veterans - - - Nominal Value - - - Other Exemptions,Reductions (2,877,023) - - Net Taxable Assessed Valuation $1,105,075,652 $ 946,567,754 $ 901,719,544 Fiscal Years Ending September 30, 2014 2013 Market Valuation Amount %of Total Amount %of Total Real Estate,Residential $ 574,506,369 46.22% $ 545,598,263 44.65% Real Estate,Commercial 438,047,262 35.24% 443,779,916 36.31% Personal Prop.,CommerciallIndust. 151,927,427 12.22% 140,063,086 11.46% Agricultural Properties 78,589,129 6.32% 92,015,149 7.53% Utilities - 0.00% 584,960 0.05% Total Market Valuation 1,243,070,187 100.00% 1,222,041,374 100.00% Less Exemptions&Reductions Homestead Cap Loss (2,499,033) (4,783,528) Agricultural,Productivity Loss (76,828,073) (80,257,943) Homestead-Local Option (77,856,727) (72,510,736) Over 65-Local Option (551,700) (535,000) Disabled-Local Option - (10,000) Abatements(]) (172,174,981) (168,861,045) Reduction for ARB Cases - - Reduction for Incomplete Accts (2,574,101) (2,695,142) Absolute Exemptions (12,122,064) (6,148,041) Disabled Veterans - (12,000) Nominal Value (910) (780) Other Exemptions,Reductions Net Taxable Assessed Valuation $ 898,462,598 $ 886,227,159 Sources:Tarrant and Denton Central Appraisal Districts. (1)The Issuer has granted partial tax abatements for two major facilities within its boundaries,including those used by Deloitte LLP and Fidelity Investments. Such abatements have 10-year terms and are subject to various terms and conditions,including, in the case of Fidelity,the satisfaction of certain employment targets in order to qualify for abatement in any given year. The Deloitte LLP abatement expires October 2021, and the Fidelity Investments abatement expires November 2019. 10 Table 3-Tax Rates,Levies,Collections and Ratios Fiscal Years Ending September 30, 2017 2016 2015 2014 2013 Bond Tax Rate $ 0.00813 $ 0.01687 $ 0.01924 $ 0.01796 $ 0.01487 Maintenance Tax Rate 0.12882 0.13947 0.13710 0.13888 0.14197 Total Tax Rate $ 0.13695 $ 0.15634 $ 0.15634 $ 0.15684 $ 0.15684 Taxable Assessed Valuation $ 1,105.575,652 $ 946.567.764 $ 901.719,544 $ 898,462,598 $ 886,227,159 Total Ad Valorem Taxes Levied $ 1,514,086 $ 1,470,666 $ 1,450,643 $ 1,350,188 $ 1,352,097 Current Collection Ratio In process 98.16% 96.59% 99.23% 99.900/0 Total Collection Ratio In process 99.77% 98.02% 99.20% 99.93% Gross Ad Valorem TaxDebt(l) $ 34,677,000 $ 27,142,000 $ 28,232,000 $ 29,304,000 $ 30,212,000 Gross Tax Debt Ratio to TAV 3.14% 2.87% 3.13% 3.26% 3.41% Net Ad Valorem Tax Debt{z) $ 1,552,000 $ 1,627,000 $ 1,727,000 $ 1,824,000 $ 1,917,000 Net Tax Debt Ratio to TAV 0.14% 0.17% 0.190/0 0.20% 0.22% Estimated Population 1,200 1,200 1,194 1,194 1,014 TAV per Capita $ 921,313 $ 788,806 $ 755,209 $ 752,481 $ 873,991 Gross Tax Debt per CapitaM $ 28,897.50 $ 22,618.33 $ 23,644.89 $ 24,542.71 $ 29,794.87 Net Tax Debt per Capita(2) $ 1,293.33 $ 1,355.83 $ 1,446.40 $ 1,527.64 $ 1,890.53 Sources: The Town's audited financial statements;Tarrant and Denton Central Appraisal Districts. (1) As of fiscal year end;most recent fiscal year end amount is a projection and is subject to change. (2) Currently all of the Issuer's ad valorem tax supported debt is being repaid from sources other than its ad valorem tax, except for the Issuer's Combination Tax and Revenue Certificates of Obligation,Series 2011. The Issuer is authorized,at its option, to pay all or any portion of its debt from ad valorem taxes, other lawfully available revenues such as sales tax revenues,or any combination thereof, and may determine in the future to change the sources being used to repay all or any portion of its outstanding debt. Table 4-Ten Largest Taxpayers Type of TAV for FY %of TAV Name BusinessM 2016-17 $ 1.105 075 652 BRE Solana LLC Commercial Real Estate $ 173,218,573 15.67% FMR Texas I LLC/Ltd.Partnership Commercial Real Estate 80,939,255 7.32% DCLI,LLC Conference Center 47,521,483 4.30% Fidelity Investments Inc. Financial Services 39,098,584 3.54% Dallas MTA LP(dba Verizon Wireless) Wireless Telecommunications 38,537,456 3.49% Marsh USA Inc. Risk Mgt.,Insurance 15,402,373 1.39% Lexington TNI Westlake,LP Commercial Real Estate/REIT 14,618,533 1.32% Prince Whipple Trust Private Trust 7,070,782 0.64% Keith Hutton Personal 6,391,904 0.58% Vernon Wells III and Charlene Wells Personal 5,837,063 0.53% Totals $ 428.636,006 38.26% Source: Tarrant and Denton Central Appraisal Districts. (1)Of the top ten taxpayers, the valuations of three are related solely to commercial real estate,representing approximately 24% of the Issuer's total tax base. The valuations ofsuch property may fluctuate substantially from year to year. 11 Estimated Overlapping Debt As in the case of the Issuer,various taxing units within the Issuer's boundaries may incur debts that are paid from ad valorem taxes levied by such taxing units on taxable properties within the Issuer's boundaries. Such taxing units are separate legal entities and independent of the Issuer. The information in this table shows direct and estimated overlapping ad valorem tax debt and is based on information obtained from the individual taxing units or from the Texas Municipal Reports published by the Municipal Advisory Council of Texas. The Issuer has not independently verified the accuracy or completeness of information relating to any taxing unit other than itself, and no person should rely upon such information as being accurate or complete. Additionally,taxing units listed herein may have issued additional tax debt since the date hereof, and such taxing units may have programs requiring the issuance of substantial amounts of additional tax debt,the amount of which cannot be determined at this time. Estimated Overlapping Taxing Unit Gross Debt As of %Overlapping Debt Carroll ISD $ 204,151,047 09/30/16 5.67% $ 11,575,364 Denton County 602,995,000 09/30/16 0.02% 120,599 Keller ISD 728,705,387 09/30/16 4.56% 33,228,966 Northwest ISD 733,049,556 09/30/16 1.37% 10,042,779 Tarrant County 338,430,000 09/30/16 0.78% 2,639,754 Tarrant County Hospital District 22,335,000 09/30/16 0.78% 174,213 Trophy Club MUD#1 10,845,000 09/30/16 18.76% 2,034,522 Total Overlapping Debt 59,816,197 Gross Amount of Issuer's Outstanding Debt as of 12/31/2016 36,322,000 Total Direct&Overlapping Debt(gross amount) $ 96,138,197 Total Overlapping Debt(see above) $ 59,816,197 Net Amount of Issuer's Outstanding Debt as of 12/31/2016(1) 1,627,000 Total Direct&Overlapping Debt(net amount) $ 61,443,197 (1) Currently all of the Issuer's ad valorem tax supported debt is being repaid from sources other than its ad valorem tax,except for the Issuer's Combination Tax and Revenue Certificates of Obligation,Series 2011 which had a balance of$1,627,000 as of 0913012016. [Remainder of page intentionally left blank.] 12 Table 5-Debt Service Requirements Fiscal Less: Plus: %of Principal Year End Existing Refunded the Bonds Gross Debt Net Debt Principal Retired"' 9130 Debt Service°t Obligations Principal Interest Total Service(') Service(2) Balance $ 36.322.000 2017 $ 2,244,493 $ (129,804) $ - $ 119,028 $ 119,028 $ 2,233,716 $ 113,148 $ 34,677,000 4.53% 2018 2,550,991 (299,608) 30,000 227,625 257,625 2,509,009 115,300 33,338,000 8.22% 2019 2,551,980 (298,008) 30,000 227,025 257,025 2,510,997 117,356 31,960,000 12.01% 2020 2,556,622 (301,408) 35,000 226,375 261,375 2,516,590 119,316 30,538,000 15.92% 2021 2,554,531 (304,608) 35,000 225,675 260,675 2,510,599 121,180 29,082,000 19.93% 2022 2,561,582 (307,608) 35,000 224,888 259,888 2,513,862 123,936 27,581,000 24.07% 2023 2,561,888 (310,408) 35,000 223,925 258,925 2,510,406 126,572 26,040,000 28.31% 2024 2,563,354 (313,008) 40,000 222,800 262,800 2,513,147 129,088 24,449,000 32.69% 2025 2,566,370 (890,408) 605,000 210,100 815,100 2,491,063 131,484 22,828,000 37.15% 2026 2,570,937 (889,608) 625,000 185,500 810,500 2,491,829 134,748 21,151,000 41.77% 2027 2,572,264 (892,808) 645,000 160,100 805,100 2,484,557 137,868 19,4231000 46.53% 2028 2,575,273 (894,808) 675,000 133,700 808,700 2,489,165 140,844 17,629,000 51.46% 2029 2,569,778 (894,695) 715,000 105,900 820,900 2,495,983 144,664 15,763,000 56.60% 2030 2,570,567 (893,345) 735,000 76,900 811,900 2,489,122 148,316 13,835,000 61.91% 2031 2,568,591 (895,560) 775,000 46,700 821,700 2,494,731 151,800 11,830,000 67.43% 2032 2,576,754 (890,910) 780,000 15,600 795,600 2,481,444 - 9,760,000 73.13% 2033 983,619 - - - 983,619 - 9,135,000 74.85% 2034 986,269 - - - 986,269 - 8,485,000 76.64% 2035 988,019 - - - 988,019 - 7,810,000 78.50% 2036 988,869 - - - - 988,869 - 7,110,000 80.43% 2037 984,613 - - - - 984,613 - 6,390,000 82.41% 2038 983,478 - - - - 983,478 - 5,645,000 84.46% 2039 984,550 - - - - 984,550 - 4,870,000 86.59% 2040 983,700 - - - - 983,700 - 4,065,000 88.81% 2041 985,800 - - - - 985,800 - 3,225,000 91.12% 2042 986,500 - - - - 986,500 - 2,350,000 93.53% 2043 985,800 - - - - 985,800 - 1,440,000 96.04% 2044 508,400 - - - - 508,400 - 980,000 97.30% 2045 509,600 - - - - 509,600 - 500,000 98.62% 2046 510,000 - - - - 510,000 - - 100.00% Totals $ 53,085,192 $ (9,406,596) $ 5,795.000 $ 2,631,840 $ 8,426,840 $ 52,105,435 $ 1,955,620 (1)Secured by a pledge of the Issuer's ad valorem tax.Debt service for a substantial portion of such debt is currently being paid front the Issuer's sales tax and other Imvfutly available revenues.Although the pledge of the Issuer's ad valorem tax continues for as long as any such debt remains outstanding,the Issuer may use other funds to pay debt service. (2) Only that portion of aggregate debt service that is attributable to the Issuer's Combination Tax and Revenue Certificate of Obligation,Series 2011 (with an outstanding principal balance as of 0913012016 of$1,627,000), is currently being paid from ad valorem tax revenues.Although the pledge of the Issuer's ad valorem tax continues for as long as all debt reflected in this table remains outstanding,the Issuer may use other funds to pay debt service. Table 6-Authorized But Unissued Ad Valorem Tax Debt Voter Authorized but Unissued Ad Valorem Tax Bonds: None Ad Valorem Tax Bond Elections Planned for Next 12 Months: None New Money Ad Valorem Tax Debt Not Requiring Voter Approval Planned During Next 12 Months: Undetermined Table 7-Other Obligations As of September 30,2015,the Issuer had certain other proprietary,contractual,special revenue and lease obligations payable from and secured by sources other than ad valorem taxes as described more fully in the Issuer's audited financial statements under Note 5 beginning on page 53 of the audited financial statements attached hereto as APPENDIX B. 13 Table 8—Tax Adequacy Gross Ad Est.Gross Net Ad Est.Net Valorem Tax Ad Valorem Valorem Tax Ad Valorem Fiscal Year Debt Service Tax Rate(1)(2) Debt Service Tax Rate Current Year(2016-17) $2,233,716 $0.2021 $113,148 $0.0102 Maximum Annual Debt Service $2,516,590 $0.2277 $151,800 $0.0137 Average Annual Debt Service $1,736,848 $0.1572 $130,375 $0.0118 (1) Prior to 2010-11, the Issuer had not levied an ad valorem tax.Instead it paid debt service on all of its ad valorem tax debt from other lawfully available revenues. Only that portion of aggregate debt service that is attributable to the Issuer's Combination Tax and Revenue Certificate of Obligation,Series 2011 (with an outstanding principal balance as of 09/30/2016 of $1,627,000), is currently being paid from ad valorem tax revenues.Although the pledge of the Issuer's ad valorem tax continues for as long as all debt refected in this table remains outstanding, the Issuer may use other funds to pay debt service. (2) The Estimated Ad Valorem Tax Rate is the rate that would be required to be levied to pay debt service assuming no other source of payment,and further assuming a 100%collection ratio applied to the Issuer's current Taxable Assessed Valuation. Future Borrowing The Issuer has no existing voter authorization to issue general obligation bonds, nor does the Issuer currently have any plans to hold a bond election to authorize general obligation bonds, although it could decide to proceed with such an election at any time. Under Texas law, the Issuer may issue ad valorem tax secured certificates of obligations, tax notes and other tax- supported debt without voter authorization.Following the issuance of the Bonds,the Issuer currently has no plans to issue additional certificates of obligation,tax notes or other tax-supported debt within the next 12 months, although it could determine to do so if its financing needs change. Regardless of the Issuer's future borrowing activities, the Issuer may be required to increase its annual ad valorem tax rate as a result of factors unrelated to the level of its outstanding debt and otherwise outside its control, including, for example, the following: (i) a reduction in its taxable assessed valuation, (ii) a reduction in tax collections,or(iii)changes in State law. Property Tax Code General. Receipts from ad valorem taxation are one of the Issuer's principal sources of operational revenue and its principal source of funds for debt service payments. See "OTHER FINANCIAL INFORMATION." The following is a summary of certain provisions of the Texas Property Tax Code, as amended(the"Property Tax Code"),relating to ad valorem taxation procedures. Property Tax Code and County-Wide Appraisal District. Pursuant to Chapter 6 of the Texas Property Tax Code,as amended(the "Property Tax Code"),each county in the State comprises a single appraisal district with responsibility for recording and appraising property for all taxing units within the county, and each county establishes a single appraisal review board for the purpose of reviewing and equalizing the values established by the appraisal district. Chapter 25 of the Property Tax Code requires the appraisal district,by May 15 of each year or as soon thereafter as practicable, to prepare appraisal records listing all property that is taxable in the appraisal district and stating the appraised value of each parcel or item. Property is required to be appraised as of January I of each year(except for business inventories which may be assessed as of September 1 and mineral reserves which are assessed on the basis of a monthly average), and Chapter 23 of the Property Tax Code generally requires appraisals at 100%of market value. Tax appraisers are authorized to use alternative methods(cost,income and market data comparison methods) to determine the market value of property, and the most appropriate method is to be used. Appraisals are subject to review by the appraisal review board, and under certain circumstances, taxpayers and taxing units (such as the Issuer) may appeal the orders of the appraisal review board by filing a petition for review in the district court. In such event, the value of the property in question will be determined by the court or by a jury if requested by any party. Absent any such appeal,the orders of the appraisal review board must be used by each taxing jurisdiction in 14 establishing its tax rolls and tax rate. Based upon their respective relative total appraised values,school districts are each entitled to vote, with other taxing entities, upon the selection of members of the board of directors of the county-wide appraisal districts in their respective counties. Although each taxing unit retains the authority to establish its own tax rates and to levy and collect taxes each year, under the county-wide appraisal plan implemented by the Property Tax Code, the taxing units are unable to influence appraisal standards or determine the frequency of revaluation or reappraisal. Chapter 25 of the Property Tax Code requires each appraisal district to implement a plan for periodic reappraisal of property to update appraised values,and the plan must provide for reappraisal of all real property in the appraisal district at least once every three years. Property Subiect to Taxation by the Issuer. Except for certain exemptions'provided by Texas law, all real and tangible personal property and certain intangible personal property in each taxing unit, including the Issuer, is subject to taxation by such taxing unit. Principal categories of exempt property which may be exempted under Chapter 11 of the Property Tax Code include: property owned by the State of Texas or its political subdivisions, if the property is used for public purposes; property exempt from ad valorem taxation by federal law; certain household goods,family supplies and personal effects that are not held or used for the production of income; farm products owned by the producer; certain property owned by charitable organizations, youth development associations, religious organizations and qualified schools; designated historical sites; solar and wind powered energy devices;and certain tangible personal property known as "freeport goods." Effective for tax years 2008 and thereafter,Article VII,Section 1-n of the Texas Constitution provides for an exemption from taxation for"goods-in- transit," which are defined as personal property acquired or imported into the state and transported to another location inside or outside the state within 175 days of the date the property was acquired or imported into the state. The exemption excludes oil,natural gas,petroleum products,aircraft and special inventory,including motor vehicle, vessel and outboard motor,heavy equipment and manufactured housing inventory. After holding a public hearing,a taxing unit may take action by January 1 of the year preceding a tax year to tax goods-in-transit during the following tax year. A taxpayer may obtain only an exemption for "freeport goods"or"goods-in-transit" for items of personal property. In addition,owners of agricultural,timber and open space land may,under certain circumstances,request valuation of such land on the basis of productive capacity rather than market value. Article VIII, Section 2 of the Texas Constitution and Texas law mandate an additional exemption for disabled veterans and the surviving spouses and children of persons dying while on active duty in the armed forces, which exemption applies to either real or personal property and may range from $5,000 to $12,000. A taxing unit may also exempt portions of the taxable value of residential homesteads(see "Residential Homestead Exemption" below).New penalties will apply to taxes which have been wholly or partially exempted upon application of a taxpayer, if it is subsequently determined that the taxpayer did not qualify for the exemption. Residential Homestead Exemption. Pursuant to Article VIII,Section I-b of the Texas Constitution and the Property Tax Code,the governing body of each political subdivision in the State,including the Issuer,is authorized to exempt from ad valorem taxes(1)up to 20 percent of the appraised value of residential homesteads but not less than$5,000, and (2) at least $3,000 of the appraised value of the residential homesteads of persons at least 65 years old and disabled persons. Article VIII, Section 1-b of the Texas Constitution provides that,with respect to the homestead exemptions granted thereunder,a taxing unit may nevertheless continue to levy taxes against such exempted property if(1)ad valorem taxes had been pledged for the payment of such taxing unit's debt incurred prior to the granting of such exemption, and (2) the loss of ad valorem tax revenues attributable to such exempted property would impair the taxing unit's obligation under the contract pursuant to which the debt was created. In addition to the foregoing exemptions available to all taxing units, Texas law authorizes additional homestead exemptions for school districts, including(1)a basic $15,000 exemption for all homeowners, and(2)an additional $10,000 for persons at least 65 years old or disabled; provided, however, that a person at least 65 years old and disabled may receive only one $10,000 exemption, and only one such exemption is available per family, per residence homestead. Except for increases in appraised value resulting from certain improvements,a school district is prohibited from increasing the total ad valorem tax on the residence homestead of a person 65 years of age or older above the amount of tax imposed in the year such residence qualified for the $10,000 exemption. The tax "freeze"provided on the amount of ad valorem taxes levied on the homestead of a taxpayer 65 years of age or older 15 transfers in proportionate amount to a different residence homestead of such taxpayer. Also,a surviving spouse of a taxpayer who qualifies for the freeze on ad valorem taxes is entitled to the same exemption so long as the property is the homestead of the surviving spouse and the spouse is at least 55 years of age at the time of the death of the individual's spouse. The increase of the appraised value on a residence homestead is limited to ten percent of the appraised value of the property for the last year in which the property was appraised times the number of years since the property was last appraised. Other Reductions in Assessed Valuation. The Issuer and other taxing units may jointly agree to the creation of a tax increment financing zone,under which the tax values on properties within the zone are"frozen"at their values at the time such zone is created. The Issuer and other taxing units may also enter into tax abatement agreements to encourage economic development. Under such agreements, a property owner agrees to construct certain improvements on its property, while the taxing unit would in turn agree to not levy a tax on all or part of the increased value attributable to the improvements until the expiration of the agreement. The abatement agreement may last for as long as 10 years. Notice and Hearing Procedures. The ability of a taxing unit, such as the Issuer,to increase its tax levy from year to year is limited by Chapter 26 of the Property Tax Code,which imposes limitations on certain tax levies(other than tax levies for the payment of debt) based upon a complex formula. These limitations require that, prior to establishing and levying a rate of taxation for a year, the taxing unit compute an "effective rate" for such year pursuant to the Property Tax Code. Generally,this effective rate is the rate which will produce the same amount of operating revenue that the taxing unit levied in the previous year on the same property being taxed for both years, plus the amount necessary to pay bonded indebtedness of the taxing unit for the next year. The governing body of the Issuer may not adopt a tax rate that, if applied to the total taxable values, would impose an amount of taxes exceeding the prior year's levy without holding a public hearing and otherwise complying with the requirements for giving notice of such public hearing. If the rate of taxation to be levied for a year exceeds the sum of(i) the effective rate times 1.08,plus(ii)the Issuer's current debt rate (the "Rollback Rate"), 10%of the qualified voters of the Issuer may petition to require an election to limit the tax levied by the Issuer in the current year to the Rollback Rate. Levy and Collection of Taxes. Each taxing unit, including the Issuer, is responsible pursuant to Chapter 31 of the Property Tax Code for the collection of its taxes, unless it elects to transfer such functions to another governmental entity. By September 1 of each year,or as soon thereafter as practicable,the rate of taxation is set by the governing body of each taxing unit based upon the valuation of property within the taxing unit as of the preceding January 1. Generally,taxes are due October 1,or when billed,whichever comes later,and become delinquent after January 31 of the following year. A delinquent tax incurs a penalty of 12 percent of the amount of the tax through June 30 and additionally accrues interest at the rate of one percent per month. If the tax is not paid by July 1, an additional penalty of up to 15 percent may be imposed by the taxing unit to pay attorney fees for collection of the delinquent tax. Chapter 31 of the Property Tax Code also makes provision each year for consideration of split payments of taxes, discounts for early payment and the postponement of the delinquency date of taxes under certain circumstances.Abatement or deferral of a suit to collect delinquent taxes on residences is available to the extent that the delinquent taxes relate to the portion of the homestead that exceeds the appraised value by 105 percent of the valuation for the prior year. If the collection of the delinquent taxes are abated or deferred, they may not be collected until the taxpayer no longer owns the property and interest continues to accrue on the delinquent taxes at a rate of eight percent. Collection of Delinquent Taxes. Taxes levied by each taxing unit are a personal obligation of the owner of the property. On January 1 of each year,a tax lien attaches to property to secure the payment of all taxes,penalties and interest ultimately imposed for the year on the property, whether or not the taxes are imposed in the year the lien attaches. The lien exists in favor of each taxing unit,including the Issuer,having the power to tax the property. The Issuer's tax lien is on a parity with the tax liens of all other such taxing units. A tax lien on real property has priority over the claims of most creditors and other holders of liens on the property encumbered by the tax lien,whether or not the debt or lien existed before the attachment of the tax lien. Personal property under certain circumstances is subject to seizure and sale for the payment of delinquent taxes, penalties and interest. At any time after taxes on property become delinquent,the Issuer may file suit to foreclose the lien securing payment of the tax or to enforce personal liability for the tax, or both. In filing a suit to foreclose a tax lien on real property, the Issuer must join other taxing units that have claims for delinquent taxes against all or part of the same property. The ability of the 16 Issuer to collect delinquent taxes by foreclosure may be adversely affected by the amount of taxes owed to other taxing units, adverse market conditions, taxpayer redemption right or bankruptcy proceedings which restrain the collection of taxpayer debt. Issuer Application of Property Tax Code. The following table summarizes the current status of the Issuer's property tax procedures: Description Issuer Procedure Age 65/Disabled Homestead Exemption in addition to$10,000 basic exemption Allowed Exemption for Homestead(at least$5,000,up to 20%of market value) Allowed(up to 20%) Split Payment of Taxes Not allowed Discounts for Early Payment of Taxes Not allowed Nonbusiness Personal Property Not taxed Freeport Property Exemption Not allowed Goods in Transit Exemption Not allowed Tax Abatement Policy Adopted Tax Increment Financing Zone None adopted Tax Collector for the Issuer Tarrant County Tax Assessor-Collector [Remainder of page intentionally left blank.) 17 OTHER FINANCIAL INFORMATION Table 9-General Fund Summary Revenues and Expenditures Fiscal Years Ended September 30, Revenues: 2015 2014 2013 2012 2011 Sales tax $ 3,587,323 $ 3,471,344 $ 3,061,948 $ 2,534,774 $ 1,502,020 Property tax 1,256,796 1,198,374 1,236,978 1,271,975 1,226,689 Mxed beverage tax 59,184 51,602 39,727 38,286 19,721 Franchise tax 963,040 795,322 734,935 664,991 586,836 Interest income 10,078 10,503 9,286 14,060 10,679 Building permits and fees 1,200,790 1,175,075 969,735 598,394 520,646 Fines and penalties 734,152 730,441 695,167 622,338 605,705 Intergovernmental 3,810 3,540 10,331 - - Contributions 10,000 - 11,094 325,520 180,063 Miscellaneous 81,539 70,338 73,933 80,936 91,015 Total Revenues 7,906,712 7,506,539 6,843,134 6,151,274 4,743,374 Expenditures: General government and admin. 2,411,239 2,236,360 1,910,545 1,878,885 1,733,324 Public safety 2,490,551 2,146,587 1,967,584 2,224,469 1,842,751 Cultural and recreational 130,322 123,541 113,924 111,765 122,400 Economic development - - - - - Public works 744,028 615,781 532,675 391,115 324,874 Capital outlay 748,297 20,875 50,014 - 41,037 Debt service 48,237 48,240 Total Operating Expenditures 6.572,674 5,191,384 4,574,742 4,606,234 4,064,386 Excess(deficiency)of revs over exp 1.334,038 2,315.155 2,268,392 1,545,040 678,988 Other Financing Sources(Uses): Proceeds from sale of assets - - - - - Note proceeds - 34,710 - - 50,000 Other proceeds(insurance,asset sales) 162,059 7,000 Transfers in(l) 521,320 56,419 609,826 583,857 2,178,403 Transfers oue" (2,290,385) (1,504,397) (1,090,392) (880,486) (2,691,982) Total Other Sources(Uses) (1,607,006) (1,413,268) (480,566) (296,629) (456,579) Net Change in Fund Balance (272,968) 901,887 1,787,826 1,248,411 222,409 Beginning Fund Balance 7,953,518 7,051,631 5,263,805 4,015,394 3,792,985 Ending Fund Balance $ 7,680,550 $ 7,953,518 $ 7,051,631 $ 5,263,805 $ 4,015,394 Source:Derived from the Issuer's Comprehensive Annual Financial Reports;please refer directly to such Reports for important Notes and more detailed information. (1) Detailed information relating to transfers may be found in the notes to the audited financial statements included in the Issuer's Comprehensive Annual Financial Reports. For the most recent fiscal year,see Note 9 on page 62 of the Comprehensive Annual Financial Report included herewith as APPENDIX B. 18 Table 9A-Changes in Net Assets Governmental Activities-Fiscal Years Ended September 30, 2015 2014 2013 2012 2011 Revenues: Program revenues: Fees,fines,charges for services $ 2,466,032 $ 2,127,786 $ 1,798,529 $ 1,417,879 $ 1,253,967 Operating grants,contributions 7,615,653 6,592,642 4,907,472 5,26%841 4,472,999 Capital grants,contributions 19,983,078 80,472 5,897,456 - 425,900 General revenues: Taxes Sales taxes 4,925,428 4,725,845 4,375,397 3,657,274 4,609,626 Property taxes 1,438,969 1,367,069 1,366,633 1,441,238 1,260,112 Hotel occupancy taxes 872,179 796,481 709,578 590,853 527,261 Mixed beverage taxes 59,184 51,602 39,727 38,286 19,721 Franchises taxes 963,040 795,322 734,935 664,991 586,836 Unrestricted grants 28,904 - - - - Interest on investments 198,199 26,713 24,218 33,353 46,248 Miscellaneous - 246,633 1,023,149 1,112,858 691,345 Extraordinary items - - - (124,346) 56,704 Special item - - - 67,760 - Gain on sale of capital assets - - - - 7,000 Total revenues 38,550,666 16,810,565 20,877,094 14,169,987 13,957,719 Expenses: General government 3,145,716 2,784,587 2,606,785 2,518,490 2,478,826 Public safety 2,381,437 2,190,050 1,978,803 1,883,424 1,801,585 Culture and recreation 129,970 123,541 113,924 111,765 122,400 Economic development 1711,757 147,680 267,973 216,901 680,823 Public works 1,081,996 955,794 626,423 546,039 470,054 Visitor services 665,936 493,087 521,521 475,719 356,365 Education 8,598,261 7,147,411 5,803,611 6,193,560 4,884,985 Interest on long-term debt 1,022,201 998,951 1,031,328 897,573 1,127,913 Total expenses 17,197,274 14,841,101 12,950,368 12,843,471 11,922,951 Excess(deficiency)before transfers 21,353,392 1,969,464 7,926,726 1,326,516 2,034,768 Transfers 323,100 43,399 (485,591) 45,507 145,216 Change in net position 21,676,492 2,012,863 7,441,135 1,372,023 2,179,984 Effect of accounting principle change (530,877) (647,443) - - - Net position,beginning 33,422,961 32,057,541 24,616,406 23,244,383 21,064,399 Net position,ending $ 54,568,576 $ 33,422,961 $ 32,057,541 $ 24,6161406 $ 23,244,383 Source:Derived from Comprehensive Annual Financial Reports;please refer directly to such Reports for important Notes and more detailed information. 19 Table 10-General Fund Summary Balance Sheet Fiscal Years Ended September 30, Assets: 2015 2014 2013 2012 2011 Cash and investments $ 7,106,297 $ 7,399,920 $ 6,219,206 $ 4,637,252 $ 3,379,864 Property tax receivables 5,379 14,353 1,961 1,796 4,643 Accounts receivable 824,725 771,499 703,875 557,579 259,938 Due from other funds 164,147 157,353 165,140 149,641 296,555 Other assets 13,334 8,821 6,906 6,856 62,020 Restricted cash&investments 293,363 264.709 428.463 Total Assets $ 8,113,882 $ 8.351,946 $ 7,390.451 $ 5,617,833 $ 4,431,483 Liabilities,Deferred Inflows&Fund Balance: Liabilities: Unearned revenue - - 1,961 1,796 2,796 Accounts payable 427,953 372,092 336,859 352,232 413,293 Due to other funds 11,983 Total Liabilities 427,453 384,075 338.820 354,028 416.089 Deferred Inflows of Resources: Unavailable resources-prop taxes 5.374 14,353 - - Total Deferred Inflows 5,379 14,353 Fund Balances: Restricted/Committed/Nonspendable 296,949 282,345 300,269 271,565 490,483 Unassigned 7.383,601 7.671,173 6.751,362 4.992,240 1524.911 Total Fund Equity 7,680,550 7.953,518 7.051,631 5,263,805 4,015,394 Total Liabilities and Fund Equity $ 8,113.882 $ 8351.946 $ 7,390.451 $ 5.617,833 $ 4,431,483 Source:Derived from Comprehensive Annual Financial Reports;please refer directly to such Reports for important Notes and more detailed information. Table l0A-Consolidated Statement of Net Assets Governmental Activities-Fiscal Years Ended September 30, 2015 2014 2013 2012 2011 Assets Current and other assets $ 29,451,181 $ 14,197,535 $ 21,781,962 $ 12,185,864 $ 12,449,931 Capital assets 54,470,449 50,205,686 41,121,883 34,313,615 33,665,877 Total Assets 83,921,630 64,403,221 62,903,845 46,499,479 46,115,808 Deferred outflows of resources 1,549,467 1,194,749 1,247,851 - - Liabilities Non-current liabilities 29,466,305 29,866,622 27,611,536 20,098,829 20,731,060 Other liabilities 1,377,466 2,308,387 1,986,917 1,784,244 2,140,365 Total Liabilities 30,843,771 32,175,009 29,598,453 21,883,073 22,871,425 Deferred inflows of resources 58,750 - - - - Net Position Net investments in capital assets 29,633,298 32,048,991 21,177,426 14,866,299 14,188,516 Restricted 17,827,177 2,284,947 4,242,491 4,726,376 5,607,767 Unrestricted 7,108,101 (910,977) 6,637,624 5,023,731 3,448,100 Total Net Position $ 54,568,576 $ 33,422,961 $ 32,057,541 $ 24,616,406 $ 23,244,383 Source:Derived from Comprehensive Annual Financial Reports;please refer directly to such Reports for important Notes and more detailed information. 20 Table 11-Municipal Sales Tax History The Issuer has adopted the Municipal Sales and Use Tax Act, Texas Tax Code, Chapter 321, as amended, which grants the Issuer the power to impose and levy a 1%Local Sales and Use Tax within the boundaries of the Issuer; the proceeds are credited to the General Fund and are not pledged to the payment of the Bonds. Collection and enforcement are effected through the Office of the Comptroller of Public Accounts of the State of Texas, which remits the proceeds of the tax, after deduction of a 2% service fee, to the Issuer monthly. Revenue from the 1% Local Sales and Use Tax,for the years shown,has been: Sales Tax Percentage Ad Valorem FYE Revenues- of Ad Valorem Tax Rate Breakdown of Sales Tax Collected 30-SM Govt'1.Funds o) Tax Lev v Equivalent Taxing_Unit Tax Rate 2012 $3,657,274 254.02% $0.3868 The Issuer(appraximate allocation): 2013 $4,375,397 323.60% $0.4937 General Fund $0.0100 2014 $4.725.845 350.01% $0.5260 413 Economic Dev.Fund $0.0050 2015 $4,925,428 339.53% $0.5462 Property Tax Reduction $0.0050 2016 $4,469,161 303.89% $0.0472 State of Texas $0.0625 Total $0.0825 Source:the Issuer's audited financial statements except for the most recent fiscal year which is unaudited and subject to change. (1) Includes a substantial amount of one-time sales tax payments attributable to construction,furnishing and equipping of a 750,000 square foot campus on a 107-acre tract and known as Deloitte University. The campus,which cost$135 million,serves as a central training destination for Deloitte LLP employees. Investments The Issuer invests its investable funds in investments authorized by Texas law in accordance with investment policies approved by the Town Council of the Issuer. Both State law and the Issuer's investment policies are subject to change. Legal Investments. Available Issuer funds are invested as authorized by State law and in accordance with investment policies approved by the Town Council.Both State law and the Issuer's investment policies are subject to change.Under State law,the Issuer is authorized to invest in (1)obligations of the United States or its agencies and instrumentalities,including letters of credit; (2)direct obligations of the State or its agencies and instrumentalities; (3)collateralized mortgage obligations directly issued by a federal agency or instrumentality of the United States, the underlying security for which is guaranteed by an agency or instrumentality of the United States; (4) other obligations,the principal and interest of which is guaranteed or insured by or backed by the full faith and credit of, the State or the United States or their respective agencies and instrumentalities, including obligations that are fully guaranteed or insured by the Federal Deposit Insurance Corporation or by the explicit full faith and credit of the United States; (5)obligations of states, agencies, counties, cities, and other political subdivisions of any state rated as to investment quality by a nationally recognized investment rating firm not less than A or its equivalent;(6)bonds issued, assumed or guaranteed by the State of Israel; (7)certificates of deposit and share certificates(i)issued by a depository institution that has its main office or a branch office in the State, that are guaranteed or insured by the Federal Deposit Insurance Corporation or the National Credit Union Share Insurance Fund, or are secured as to principal by obligations described in clauses(1)through(6)or in any other manner and amount provided by law for Town deposits,or(ii)where(a)the funds are invested by the Town through(I)a broker that has its main office or a branch office in the State and is selected from a list adopted,at least annually,by the Town as required by law or(1I) a depository institution that has its main office or a branch office in the State that is selected by the Town; (b) the broker or the depository institution selected by the Town arranges for the deposit of the funds in certificates of deposit in one or more federally insured depository institutions,wherever located, for the account of the Town; (c) the full amount of the principal and accrued interest of each of the certificates of deposit is insured by the United States or an instrumentality of the United States;and(d)the Town appoints the depository institution selected under (a) above, a custodian as described by Section 2257.041(d) of the Texas Government Code, or a clearing broker- dealer registered with the United States Securities and Exchange Council and operating pursuant to Securities and Exchange Council Rule 150-3 (17 C.F.R. Section 240.15c3-3) as custodian for the Town with respect to the certificates of deposit; (8) fully collateralized repurchase agreements that have a defined termination date, are fully 21 secured by a combination of cash and obligations described in clause(1)which are pledged to the Town,held in the Town's name, and deposited at the time the investment is made with the Town or with a third party selected and approved by the Town and are placed through a primary government securities dealer, as defined by the Federal Reserve, or a financial institution doing business in the State of Texas; (9) securities lending programs if(i) the securities loaned under the program are 100%collateralized, a loan made under the program allows for termination at any time and a loan made under the program is either secured by(a)obligations that are described in clauses(1) through (6) above,(b)irrevocable letters of credit issued by a state or national bank that is continuously rated by a nationally recognized investment rating firm at not less than A or its equivalent or(c) cash invested in obligations described in clauses(1) through (6) above, clauses (11)through (13) below, or an authorized investment pool; (ii) securities held as collateral under a loan are pledged to the Issuer,held in the Issuer's name and deposited at the time the investment is made with the governmental body or a third party designated by the governmental body; (iii) a loan made under the program is placed through either a primary government securities dealer or a financial institution doing business in the State of Texas; and (iv)the agreement to lend securities has a term of one year or less, (10) certain bankers'acceptances with the remaining term of 270 days or less, if the short-term obligations of the accepting bank or its parent are rated at least A-1 or P-1 or the equivalent by at least one nationally recognized credit rating agency,(11)commercial paper with a stated maturity of 270 days or less that is rated at least A-1 or P-1 or the equivalent by either (a) two nationally recognized credit rating agencies or (b) one nationally recognized credit rating agency if the paper is fully secured by an irrevocable letter of credit issued by a U.S.or state bank,(12) no-load money market mutual funds registered with and regulated by the Securities and exchange Commission that have a dollar weighted average stated maturity of 90 days or less and include in their investment objectives the maintenance of a stable net asset value of$1 for each share, and (13) no-load mutual funds registered with the Securities and Exchange Commission that have an average weighted maturity of less than two years, invest exclusively in obligations described in this paragraph,and are continuously rated as to investment quality by at least one nationally recognized investment rating firm of not less than AAA or its equivalent. In addition,bond proceeds may be invested in guaranteed investment contracts that have a defined termination date and are secured by obligations,including letters of credit,of the United States or its agencies and instrumentalities in an amount at least equal to the amount of bond proceeds invested under such contract, other than the prohibited obligations described in the next succeeding paragraph. The Issuer may invest in such obligations directly or through government investment pools that invest solely in such obligations provided that the pools are rated no lower than AAA or AAA-m or an equivalent by at least one nationally recognized rating service. The Issuer may contract for a term not to exceed two years with an investment management firm registered under the Investment Advisors Act of 1940 (15 U.S.C. Section 80b-I et seq.) or registered with the State Securities Board to provide for the investment and management of Issuer funds or funds under its control. The Issuer is also authorized to contract,for a term not to exceed seven years,for the purchase of investments with proceeds of taxes levied or to be levied to pay debt service on bonds,provided that the Issuer must solicit and receive bids from at least three separate providers and accept the qualifying bid that provides for the highest yield investments over the term of the contract and such contract may provide only for the purchase of an obligation described in clause(1)above. The Issuer is specifically prohibited from investing in: (1) obligations whose payment represents the coupon payments on the outstanding principal balance of the underlying mortgage-backed security collateral and pays no principal;(2)obligations whose payment represents the principal stream of cash flow from the underlying mortgage- backed security and bears no interest; (3) collateralized mortgage obligations that have a stated final maturity of greater than 10 years; and (4) collateralized mortgage obligations the interest rate of which is determined by an index that adjusts opposite to the changes in a market index. Investment Policies. Under Texas law, the Issuer is required to invest its funds under written investment policies that primarily emphasize safety of principal and liquidity; that address investment diversification, yield, maturity, and the quality and capability of investment management; and that includes a list of authorized investments for Issuer funds, maximum allowable stated maturity of any individual investment, the maximum dollar-weighted average maturity allowed for pooled fund groups,methods to monitor the market price of investments acquired with public funds,and requirement for settlement of all transactions,except investment pool funds and mutual funds,on a delivery versus payment basis. All Issuer funds must be invested consistent with a formally adopted"Investment Strategy Statement" that specifically addresses each fund's investment. Each Investment Strategy Statement will 22 describe its objectives concerning: (1) suitability of investment type; (2) preservation and safety of principal, (3) liquidity,(4)marketability of each investment,(5)diversification of the portfolio,and(6)yield. Under Texas law,Issuer investments must 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." At least quarterly the investment officers of the Issuer shall submit to its governing body an investment report detailing: (1)the investment position of the Issuer,(2)that all investment officers jointly prepared and signed the report, (3) the beginning market value, , the ending market value and the fully accrued interest during the reporting period (4) the book value and market value of each separately listed asset at the end of the reporting period; (5) the maturity date of each separately invested asset, (6) the account or fund or pooled fund group for which each individual investment was acquired, and (7)the compliance of the investment portfolio as it relates to: (a) adopted investment strategy statements and (b) State law. No person may invest Issuer funds without express written authority from its governing body. Additional Provisions. Under Texas law the Issuer is additionally required to: (1) annually review its adopted policies and strategies, (2) require any investment officers' with personal business relationships or relatives with firms seeking to sell securities to the entity to disclose the relationship and file a statement with the Texas Ethics Commission and its governing body; (3) require the registered principal of firms seeking to sell securities to the Issuer or the registered principal of an investment management firm under contract with the Issuer to: (a) receive and review the Issuer's investment policy, (b) acknowledge that reasonable controls and procedures have been implemented to preclude unauthorized investment activities, and (c) deliver a written statement attesting to these requirements; (4)perform an annual audit of the management controls on investments and investment officers; (5) provide specific investment training for the Treasurer, Chief Financial Officer, or other investment officers; (6) restrict reverse repurchase agreements to not more than 90 days; (7) restrict the investment of funds in any one mutual fund to an amount not greater than 10%of the total assets of such mutual fund; (8)restrict the investment in non-money market mutual funds in the aggregate to no more than 15% of the Issuer's monthly average fund balance, excluding bond proceeds and reserves and other funds held for debt service; (9)prohibit the investment in non-money market mutual funds of any portion of bond proceeds,reserves and funds held for debt service and;(10) require local government investment pools to conform to the new disclosure, rating, net asset value, yield calculation,and advisory board requirements. The Issuer's current investment policy is in compliance with the State law requirements described above. Table 12-Status of Current Investments As of November 30, 2016, the Issuer's investment portfolio, including its General Fund, Capital Projects Fund, Utility Fund,and other miscellaneous governmental,proprietary and component unit funds,was invested as follows (with no material difference between book and market values): Westlake Investment Description Issuer Academy(l) Total Bank Accounts(cash and cash equivalents) $ 15,665,559 $ 1,143,963 $ 16,809,522 TexPool 250 100 350 Total $ 15,665,809 $ 1,144,063 $ 16,809,872 Source:The Issuer's monthly statements and financial records;unaudited.See Comprehensive Annual Financial Report(Note 2), included herewith as APPENDIX B,for more investment information. (1)Represents investments of the i37estlake Academy, a component unit of the Issuer, the balances and transactions of which are blended with the balances and transactions of the Issuer. Investments of other component units of the Issuer may also be blended with the Issuer or alternatively may be excluded and "discretely presented." See Note I to the Issuer's audited financial statements, beginning on page 33, included in its Comprehensive.Annual Financial Report included herewith as APPENDIX B for more information regarding component units. 23 LEGAL MATTERS The Issuer will furnish a complete transcript of proceedings that are incident to the authorization and issuance of the Bonds, including the unqualified approving legal opinion of the Attorney General of Texas approving the Initial Bond and to the effect that the Bonds are valid and legally binding obligations of the Issuer, and based upon examination of such transcript of proceedings,the approving legal opinion of Bond Counsel,to like effect and to the effect that the interest on the Bonds will be excludable from gross income for federal income tax purposes under Section 103(a) of the Code, subject to the matters described under "TAX MATTERS" herein, including the alternative minimum tax on corporations. Though it may represent the Underwriter from time to time in matters unrelated to the issuance of the Bonds, Bond Counsel has been engaged by and only represents the Issuer in the issuance of the Bonds. Bond Counsel was not requested to participate, and did not take part, in the preparation of the Official Statement, and such firm has not assumed any responsibility with respect thereto or undertaken independently to verify any of the information contained therein, except that, in its capacity as Bond Counsel, such firm has reviewed the information in the Official Statement under the captions or subcaptions entitled "PLAN OF FINANCING" (exclusive of the subcaption "Sources and Uses of Funds"), "DESCRIPTION OF THE BONDS" (exclusive of the subcaptions entitled "Book-Entry-Only System" and "Bondholders' Remedies"), "LEGAL MATTERS" (exclusive of the last sentence of the first paragraph thereof), "TAX MATTERS," "OTHER MATTERS - Legal Investments and Eligibility to Secure Public Funds in Texas," "OTHER MATTERS - Registration and Qualification of Bonds for Sale"and"OTHER MATTERS-Continuing Disclosure of Information" (exclusive of the subcaption "Compliance with Prior Undertakings") in the Official Statement, and such firm is of the opinion that the information relating to the Bonds and the legal issues contained under such captions and subcaptions is an accurate and fair description of the laws and legal issues addressed therein and,with respect to the Bonds,such information conforms to the Ordinance. Bond Counsel's fee is contingent upon the sale and issuance of the Bonds. The legal opinion will accompany the Bonds deposited with DTC or will be printed on the Bonds in the event of the discontinuance of the Book-Entry-Only System. Certain matters will be passed upon for the Underwriter by its counsel, Orrick, Herrington & Sutcliffe LLP, Houston, Texas, whose fees are contingent upon sale and delivery 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 the 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 from the transaction. TAX MATTERS Opinion On the date of initial delivery of the Bonds,McCall,Parkhurst&Horton L.L.P.,Dallas,Texas,Bond Counsel, will render its opinion that,in accordance with statutes,regulations,published rulings and court decisions existing on the date thereof("Existing Law"),(1)interest on the Bonds for federal income tax purposes will be excludable from the "gross income" of the holders thereof and (2)the Bonds will not be treated as "specified private activity bonds"the interest on which would be included as an alternative minimum tax preference item under section 57(a)(5) of the Internal Revenue Code of 1986 (the "Code"). Except as stated above,Bond Counsel will express no opinion as to any other federal, state or local tax consequences of the purchase, ownership or disposition of the Bonds. See APPENDIX A.FORM OF BOND COUNSEL OPINION. In rendering its opinion, Bond Counsel will rely upon (a) certain information and representations of the Issuer, including information and representations contained in the Issuer's federal tax certificate, (b)covenants of the Issuer contained in the Bond documents relating to certain matters, including arbitrage and the use of the proceeds of the Bonds and the Refunded Obligations and the property financed or refinanced therewith, and (c) the verification report of Grant Thornton LLP. Failure by the Issuer to observe the aforementioned representations or covenants could cause the interest on the Bonds to become taxable retroactively to the date of issuance. 24 The Code and the regulations promulgated thereunder contain a number of requirements that must be satisfied subsequent to the issuance of the Bonds in order for interest on the Bonds to be, and to remain, excludable from gross income for federal income tax purposes. Failure to comply with such requirements may cause interest on the Bonds to be included in gross income retroactively to the date of issuance of the Bonds. The opinion of Bond Counsel is conditioned on compliance by the Issuer with such requirements, and Bond Counsel has not been retained to monitor compliance with these requirements subsequent to the issuance of the Bonds. Bond Counsel's opinion represents its legal judgment based upon its review of Existing Law and the reliance on the aforementioned information, representations and covenants. Bond Counsel's opinion is not a guarantee of a result. The Existing Law is subject to change by the Congress and to subsequent judicial and administrative interpretation by the courts and the Department of the Treasury. There can be no assurance that such Existing Law or the interpretation thereof will not be changed in a manner which would adversely affect the tax treatment of the purchase,ownership or disposition of the Bonds. A ruling was not sought from the Internal Revenue Service by the Issuer with respect to the Bonds or the property financed or refinanced with the proceeds of the Bonds. No assurances can be given as to whether the Internal Revenue Service will commence an audit of the Bonds, or as to whether the Internal Revenue Service would agree with the opinion of Bond Counsel. If an Internal Revenue Service audit is commenced,under current procedures the Internal Revenue Service is likely to treat the Issuer as the taxpayer and the Bondholders may have no right to participate in such procedure. No additional interest will be paid upon any determination of taxability. Federal Income Tax Accounting Treatment of Original Issue Discount The initial public offering price to be paid for one or more maturities of the Bonds (the "Original Issue Discount Bonds") may be less than the principal amount thereof or one or more periods for the payment of interest on the Bonds may not be equal to the accrual period or be in excess of one year. In such event,the difference between (i) the "stated redemption price at maturity" of each Original Issue Discount Bond,and (ii)the initial offering price to the public of such Original Issue Discount Bond would constitute original issue discount. The "stated redemption price at maturity" means the sum of all payments to be made on the Bonds less the amount of all periodic interest payments. Periodic interest payments are payments which are made during equal accrual periods (or during any unequal period if it is the initial or final period)and which are made during accrual periods which do not exceed one year. Under Existing Law,any owner who has purchased such Original Issue Discount Bond in the initial public offering is entitled to exclude from gross income(as defined in section 61 of the Code)an amount of income with respect to such Original Issue Discount Bond equal to that portion of the amount of such original issue discount allocable to the accrual period. For a discussion of certain collateral federal tax consequences,see discussion set forth below. In the event of the redemption,sale or other taxable disposition of such Original Issue Discount Bond prior to stated maturity, however,the amount realized by such owner in excess of the basis of such Original Issue Discount Bond in the hands of such owner(adjusted upward by the portion of the original issue discount allocable to the period for which such Original Issue Discount Bond was held by such initial owner)is includable in gross income. Under Existing Law,the original issue discount on each Original Issue Discount Bond is accrued daily to the stated maturity thereof(in amounts calculated as described below for each six-month period ending on the date before the semiannual anniversary dates of the date of the Bonds and ratably within each such six-month period) and the accrued amount is added to an initial owner's basis for such Original Issue Discount Bond for purposes of determining the amount of gain or loss recognized by such owner upon the redemption, sale or other disposition thereof. The amount to be added to basis for each accrual period is equal to (a)the sum of the issue price and the amount of original issue discount accrued in prior periods multiplied by the yield to stated maturity(determined on the basis of compounding at the close of each accrual period and properly adjusted for the length of the accrual period) less(b)the amounts payable as current interest during such accrual period on such Original Issue Discount Bond. The federal income tax consequences of the purchase, ownership,redemption, sale or other disposition of Original Issue Discount Bonds which are not purchased in the initial offering at the initial offering price may be determined 25 according to rules which differ from those described above. All owners of Original Issue Discount Bonds should consult their own tax advisors with respect to the determination for federal, state and local income tax purposes of the treatment of interest accrued upon redemption, sale or other disposition of such Original Issue Discount Bonds and with respect to the federal, state, local and foreign tax consequences of the purchase, ownership, redemption, sale or other disposition of such Original Issue Discount Bonds. Collateral Federal Income Tax Consequences The following discussion is a summary of certain collateral federal income tax consequences resulting from the purchase, ownership or disposition of the Bonds. This discussion is based on existing statutes, regulations, published rulings and court decisions,all of which are subject to change or modification,retroactively. The following discussion is applicable to investors, other than those who are subject to special provisions of the Code,such as financial institutions,property and casualty insurance companies,life insurance companies,individual recipients of Social Security or Railroad Retirement benefits, individuals allowed an earned income credit, certain S corporations with Subchapter C earnings and profits,foreign corporations subject to the branch profits tax,taxpayers qualifying for the health insurance premium assistance credit and taxpayers who may be deemed to have incurred or continued indebtedness to purchase tax-exempt obligations. THE DISCUSSION CONTAINED HEREIN MAY NOT BE EXHAUSTIVE.INVESTORS,INCLUDING THOSE WHO ARE SUBJECT TO SPECIAL PROVISIONS OF THE CODE, SHOULD CONSULT THEIR OWN TAX ADVISORS AS TO THE TAX TREATMENT WHICH MAY BE ANTICIPATED TO RESULT FROM THE PURCHASE, OWNERSHIP AND DISPOSITION OF TAX-EXEMPT OBLIGATIONS BEFORE DETERMINING WHETHER TO PURCHASE THE BONDS. Interest on the Bonds will be includable as an adjustment for"adjusted current earnings"to calculate the alternative minimum tax imposed on corporations by section 55 of the Code. Under section 6012 of the Code,holders of tax-exempt obligations,such as the Bonds, may be required to disclose interest received or accrued during each taxable year on their returns of federal income taxation. Section 1276 of the Code provides for ordinary income tax treatment of gain recognized upon the disposition of a tax-exempt obligation, such as the Bonds, if such obligation was acquired at a "market discount" and if the fixed maturity of such obligation is equal to, or exceeds, one year from the date of issue. Such treatment applies to "market discount bonds" to the extent such gain does not exceed the accrued market discount of such bonds; although for this purpose, a de minimis amount of market discount is ignored. A "market discount bond" is one which is acquired by the holder at a purchase price which is less than the stated redemption price at maturity or, in the case of a bond issued at an original issue discount, the "revised issue price" (i.e., the issue price plus accrued original issue discount). The "accrued market discount" is the amount which bears the same ratio to the market discount as the number of days during which the holder holds the obligation bears to the number of days between the acquisition date and the final maturity date. State,Local and Foreign Taxes Investors should consult their own tax advisors concerning the tax implications of the purchase, ownership or disposition of the Bonds under applicable state or local laws. Foreign investors should also consult their own tax advisors regarding the tax consequences unique to investors who are not United States persons. Information Reporting and Backup Withholding Subject to certain exceptions, information reports describing interest income, including original issue discount,with respect to the Bonds will be sent to each registered holder and to the Internal Revenue Service. Payments of interest and principal may be subject to backup withholding under section 3406 of the Code if a recipient of the payments fails to furnish to the payor such owner's social security number or other taxpayer identification number ("TIN"), furnishes an incorrect TIN, or otherwise fails to establish an exemption from the backup withholding tax. Any amounts so withheld would be allowed as a credit against the recipient's federal income tax. Special rules apply to 26 partnerships,estates and trusts,and in certain circumstances,and in respect of Non-U.S.Holders,certifications as to foreign status and other matters may be required to be provided by partners and beneficiaries thereof. Qualified Tax-Exempt Obligations for Financial Institutions Section 265(a) of the Code provides, in pertinent part, that interest paid or incurred by a taxpayer, including a "financial institution," on indebtedness incurred or continued to purchase or carry tax-exempt obligations is not deductible in determining the taxpayer's taxable income. Section 265(b) of the Code provides an exception to the disallowance of such deduction for any interest expense paid or incurred on indebtedness of a taxpayer that is a "financial institution"allocable to tax-exempt obligations,other than "private activity bonds,"that are designated by a "qualified small issuer" as "qualified tax-exempt obligations." A "qualified small issuer" is any governmental issuer (together with any "on-behalf of and "subordinate" issuers) who issues no more than $10,000,000 of tax- exempt obligations during the calendar year. Section 265(b)(5)of the Code defines the term"financial institution" as any "bank" described in Section 585(a)(2) of the Code, or any person accepting deposits from the public in the ordinary course of such person's trade or business that is subject to federal or state supervision as a financial institution.Notwithstanding the exception to the disallowance of the deduction of interest on indebtedness related to "qualified tax-exempt obligations" provided by Section 265(b)of the Code, Section 291 of the Code provides that the allowable deduction to a "bank," as defined in Section 585(a)(2) of the Code, for interest on indebtedness incurred or continued to purchase"qualified tax-exempt obligations" shall be reduced by twenty-percent(20%)as a "financial institution preference item." The Issuer has designated the Bonds as "qualified tax-exempt obligations" within the meaning of section 265(b)of the Code. In furtherance of that designation,the Issuer has covenanted to take such action that would assure, or to refrain from such action that would adversely affect, the treatment of the Bonds as "qualified tax-exempt obligations." Potential purchasers should be aware that if the issue price to the public exceeds $10,000,000, there is a reasonable basis to conclude that the payment of a de minimis amount of premium in excess of $10,000,000 is disregarded; however,the Internal Revenue Service could take a contrary view. If the Internal Revenue Service takes the position that the amount of such premium is not disregarded,then such obligations might fail to satisfy the $10,000,000 limitation and the Bonds would not be "qualified tax-exempt obligations." Future and Proposed Legislation Tax legislation, administrative actions taken by tax authorities, or court decisions, whether at the Federal or state level,may adversely affect the tax-exempt status of interest on the Bonds under Federal or state law and could affect the market price or marketability of the Bonds.Any such proposal could limit the value of certain deductions and exclusions, including the exclusion for tax-exempt interest. The likelihood of any such proposal being enacted cannot be predicted. Prospective purchasers of the Bonds should consult their own tax advisors regarding the foregoing matters. RATING The Bonds have been rated "AAA" (stable outlook) by S&P Global Ratings ("S&P"). No application has been made at any other rating agency. The explanation of the significance of such rating may be obtained from S&P. There is no assurance that such rating will continue for any period of time or that such rating will not be revised or withdrawn. A revision or withdrawal of such rating may have a materially adverse effect on the market price of the Bonds. OTHER MATTERS Litigation Certificate Authorized representatives of the Issuer will certify that as of the date of initial delivery of the Bonds, no litigation of any nature is pending or,to the best of such authorized representatives'knowledge and belief,threatened against the Issuer affecting directly or indirectly the validity of the Bonds or the Ordinance;restraining,enjoining or in any other manner affecting the issuance or delivery of the Bonds; affecting the provision made for the payment of or 27 security for the Bonds,including the levy of or collection of the taxes pledged to pay such amounts or the pledge so made; affecting, in any way, the right or authority of the Issuer to pay such amounts from the sources pledged, or otherwise carrying out the terms and provisions of the Ordinance or other authorizing proceedings, and the covenants and agreements therein,and each of them or affecting the corporate existence or boundaries of the Issuer, or the title of the officers or members of the governing body or any of them to their respective positions. 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 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 obligations such as 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,this requirement does not apply, however, to the purchase of obligations such as the Bonds for interest and sinking funds of such entities. See "RATING" 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. No review has been made of the laws in other states to determine whether the Bonds are legal investments for various institutions in those states. Financial Advisor Lawrence Financial Consulting LLC, Dallas, Texas (the "Financial Advisor") has been retained by the Issuer as financial advisor in connection with the issuance of the Bonds and, in such capacity, has assisted the Issuer in the preparation of documents. 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. Although the Financial Advisor has read and participated in the preparation of this Official Statement,the Financial Advisor has not independently verified any of the information set forth herein. The information contained in this Official Statement has been obtained primarily from the Issuer's records and from other sources which are believed to be reliable, including financial records of the Issuer and other entities which may be subject to interpretation. No guarantee is made as to the accuracy or completeness of any such information. No person,therefore, is entitled to rely upon the participation of the Financial Advisor as an implicit or explicit expression of opinion as to the completeness and accuracy of the information contained in this Official Statement. Financial Statements The Issuer's basic financial statements and notes thereto for the fiscal year ended September 30, 2015 which have been excerpted from the Issuer's most recently audited annual financial statements,are included as APPENDIX B to this Official Statement. The accountants who audited such statements have not participated in the preparation of this Official Statement and have not been requested to and have not performed any post-audit procedures in connection with the offering of the Bonds. 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 jurisdiction. The Issuer assumes 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 shall not be construed as an interpretation of any kind with regard to the availability of any exemption from securities registration provisions. 28 Underwriting The Underwriter has agreed to purchase the Bonds from the Issuer, subject to certain conditions, at prices that include a$42,380.50 underwriting discount from initial public offering prices of the Bonds as set forth on page i of this Official Statement. The Underwriter will be obligated to purchase all of the Bonds if any portion of such Bonds is purchased. The Issuer has no control over the prices at which the Bonds will initially be offered to the public. The price and other terms relating to the offering and sale of the Bonds may be changed from time to time by the Underwriter after the Bonds are released for sale, and the Bonds may be offered and sold at prices other than the initial offering price,including sales to dealers who may sell the Bonds into investment accounts. The Underwriter has reviewed the information in this Official Statement in accordance with and as part of its responsibilities to investors under federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriter does not guarantee the accuracy or completeness of such information. Verification of Accuracy of Arithmetical Computations The arithmetical accuracy of certain computations included in the schedules provided by the Financial Advisor relating to computation of forecasted receipts of principal and interest on the Escrowed Securities and the forecasted payments of principal and interest to redeem the Refunded Obligations was verified by Grant Thornton LLP. Such computations were based solely on assumptions and information supplied by the Financial Advisor.Grant Thornton LLP has restricted its procedures to verifying the arithmetical accuracy of certain computations and has not made any study or evaluation of the assumptions and information on which the computations are based and, accordingly, has not expressed an opinion on the data used, the reasonableness of the assumptions, or the achievability of the forecasted outcome.The report of Grant Thornton LLP will be relied upon by Bond Counsel in rendering its opinion with respect to the tax exemption of interest on the Bonds and with respect to the defeasance of the Refunded Obligations. Continuing Disclosure of Information In the Ordinance,the Issuer has made the following agreement for the benefit of the holders and beneficial owners of the Bonds. The Issuer is required to observe the agreement for so long as it remains an"obligated person"with respect to the Bonds,within the meaning of the Securities and Exchange Commission's Rule 15c2-12(the"Rule"). Under the agreement,the Issuer will be obligated to provide certain updated financial information and operating data annually,and timely notice of certain specified events,to the Municipal Securities Rulemaking Board(the"MSRB") through its Electronic Municipal Market Access("EMMA")system. Annual Reports. The Issuer 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 Issuer of the general type included in this Official Statement under Tables numbered 1 through 12 and in APPENDIX B, which is the Issuer's annual audited financial report. The Issuer will update and provide the information in the numbered tables within six months after the end of each fiscal year ending in and after 2016 and, if not submitted as part of such annual financial information, the Town will provide audited financial statements when and if available, and in any event, within 12 months after the end of each fiscal year. If the audit of such financial statements is not complete within 12 months after any such fiscal year end, then the Issuer will file unaudited financial statements by the required time and audited financial statements for the applicable fiscal year, when and if the audit report on such statements becomes available.Any such financial statements will be prepared in accordance with the accounting principles described in Appendix B or such other accounting principles as the Issuer may be required to employ from time to time pursuant to State law or regulation. The Issuer's current fiscal year end is September 30. Accordingly, the Issuer must provide updated information included in the above-referenced tables by the last day of March in each year, and audited financial statements for the preceding fiscal year(or unaudited financial information if the audited financial statements are not yet available) must be provided by September 30 in each year, unless the Issuer changes its fiscal year. If the Issuer changes its fiscal year, it will file notice of the change(and of the date of the new fiscal year end)with the MSRB prior to the next date by which the Issuer otherwise would be required to provide financial information and operating data as set forth above. 29 All financial information,operating data,financial statements and notices required to be provided to the MSRB shall be provided in an electronic format and be accompanied by identifying information prescribed by the MSRB. Financial information and operating data to be provided as set forth above may be set forth in full in one or more documents or may be included by specific reference to any document (including an official statement or other offering document) available to the public on the MSRB's Internet Web site or filed with the Securities and Exchange Commission(the"SEC"),as permitted by the Rule. Event Notices. The Issuer will also provide notices of certain events to the MSRB. The Issuer will provide notice of any of the following events with respect to the Bonds to the MSRB in a timely manner and not more than 10 business days after 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 payment of the Bonds, if material; (11) rating changes; (12) bankruptcy, insolvency, receivership, or similar event of the Issuer, which shall occur as described below;(13)the consummation of a merger,consolidation,or acquisition involving the Issuer 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; and (14) appointment of a successor or additional trustee or the change of name of a trustee, if material.For these purposes, any event described in the immediately preceding paragraph(12) is considered to occur when any of the following occur:the appointment of a receiver,fiscal agent,or similar officer for the Issuer 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 Issuer,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 Issuer.Neither the Bonds nor the Ordinance make any provision for debt service reserves, credit enhancement, or liquidity enhancement. In addition,the Issuer will provide timely notice of any failure by the Issuer to provide information, data,or financial statements in accordance with its agreement described above under"Annual Reports". The Issuer will provide each notice described in this paragraph to the MSRB. Availability of Information. The Town has agreed to provide the foregoing information only as described above. Investors will be able to access continuing disclosure information filed with the MSRB free of charge at www.emma.msrb.org. Limitations and Amendments.The Issuer has agreed to update information and to provide notices of events only as described above. The Issuer 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 Issuer makes 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 Issuer disclaims any contractual or tort liability for damages resulting in whole or in part from any breach of its continuing disclosure agreement or from any statement made pursuant to its agreement, although holders of Bonds may seek a writ of mandamus to compel the Issuer to comply with its agreement. The Issuer may amend its continuing disclosure agreement 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 Issuer, if(i)the agreement, as amended,would have permitted an underwriter to purchase or sell Bonds in the offering described herein in compliance with the Rule, taking into account any amendments or interpretations of the Rule to the date of such amendment,as well as such changed circumstances,and(ii)either(a) the holders of a majority in aggregate principal amount of the outstanding Bonds consent to the amendment or(b) any person unaffiliated with the Issuer(such as nationally recognized bond counsel)determines that the amendment will not materially impair the interests of the registered owners of the Bonds. The Issuer may also amend or repeal 30 the provisions of this continuing disclosure agreement if the SEC amends or repeals the applicable provisions 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.If the Issuer so amends the agreement, it has agreed to include with the next financial information and operating data provided in accordance with its agreement described above under "Annual Reports" an explanation, in narrative form, of the reasons for the amendment and of the impact of any change in the type of financial information and operating data so provided. Compliance with Prior Undertakings.During the last five years,the Issuer has complied in all material respects with all continuing disclosure agreements made by it in accordance with the Rule. Conclusion The financial data and other information contained herein have been obtained from the Issuer's records, audited financial statements and other sources which are believed to be reliable. There is no guarantee that any of the assumptions or estimates contained herein will be realized. All of the summaries of the statutes, documents and ordinances contained in this Official Statement are made subject to all of the provisions of such statutes, documents and ordinances. These summaries do not purport to be complete statements of such provisions and reference is made to such documents for further information. Reference is made to original documents in all respects. The Pricing Officer has approved the form and content of this Official Statement and any addenda,supplement or amendment thereto and authorized its further use in the re-offering of the Bonds by the Underwriter. TOWN OF WESTLAKE,TEXAS By: Thomas E.Brymer Pricing Officer 31 APPENDIX A-FORM OF BOND COUNSEL OPINION A-1 F KFI"`Ili" C ' ALL PARKHURST & HORTON Proposed Form of Opinion of Bond Counsel An opinion in substantially the following form will be delivered by McCall, Parkhurst& Horton L.L.P., Bond Counsel, upon the delivery of the Bonds, assuming no material changes in facts or law. TOWN OF WESTLAKE,TEXAS GENERAL OBLIGATION REFUNDING BONDS,SERIES 2017 IN THE AGGREGATE PRINCIPAL AMOUNT OF$5,795,000 AS BOND COUNSEL for the Town of Westlake,Texas (the"Issuer"),the issuer of the Bonds described above (the "Bonds"), we have examined into the legality and validity of the Bonds, which bear interest from the dates specified in the text of the Bonds, at the rates and payable on the dates as stated in the text of the Bonds, maturing, unless redeemed prior to maturity in accordance with the terms of the Bonds, serially, all in accordance with the terms and conditions stated in the text of the Bonds. WE HAVE EXAMINED the applicable and pertinent provisions of the Constitution and laws of the State of Texas, and a transcript of certified proceedings of the Issuer, and other pertinent instruments authorizing and relating to the issuance of the Bonds, including one of the executed Bonds (Bond Number T-1). BASED ON SAID EXAMINATION, IT IS OUR OPINION that the Bonds have been authorized and issued and the Bonds delivered concurrently with this opinion have been duly delivered and that, assuming due authentication, Bonds issued in exchange therefore will have been duly delivered, in accordance with law, and that the Bonds, except as may be limited by laws applicable to the Issuer relating to governmental immunity and bankruptcy, reorganization and other similar matters affecting creditors' rights generally, and by general principles of equity which permit the exercise of judicial discretion, constitute valid and legally binding special obligations of the Issuer, and that ad valorem taxes sufficient to provide for the payment of the interest, if any, on and principal of the Bonds have been levied and pledged for such purpose, within the limit prescribed by law, as provided in the ordinance adopted by the Town Council of the Issuer, pursuant to which the Bonds have been issued (the "Bond Ordinance"). THE ISSUER HAS RESERVED the right to amend the Bond Ordinance as provided therein and subject to the restrictions therein stated. IT IS FURTHER OUR OPINION, except as discussed below, that the interest on the Bonds is excludable from the gross income of the owners for federal income tax purposes 600 Congress Ave,.Suite 1800 717 North Harwood,Suite 900 700 N.St.Mary's Street,Suite 1525 ( Austin,Texas 78701 I Dallas,Texas 75201 San Antonio,Texas 78205 T 512.478.3805 I T 214.754.9200 t 1'210.225.2800 F- 512.472.0871 F 214.754.9250 F 210.225.2984 www.mphlcgal.com KA-1 under the statutes, regulations, published rulings, and court decisions existing on the date of this opinion. We are further of the opinion that the Bonds are not "specified private activity bonds" and that, accordingly, interest on the Bonds will not be included as an individual or corporate alternative minimum tax preference item under section 57(a)(5) of the Internal Revenue Code of 1986 (the "Code"). Except as stated above, we express no opinion as to any other federal, state, or local tax consequences of acquiring, carrying, owning, or disposing of the Bonds. EXCEPT AS STATED ABOVE, we express no opinion as to any other federal, state, or local tax consequences of acquiring, carrying, owning, or disposing of the Bonds. OUR OPINIONS ARE BASED ON EXISTING LAW, which is subject to change. Such opinions are further based on our knowledge of facts as of the date hereof. We assume no duty to update or supplement our opinions to reflect any facts or circumstances that may thereafter come to our attention or to reflect any changes in any law that may thereafter occur or become effective. Moreover, our opinions are not a guarantee of result and are not binding on the Internal Revenue Service (the "Service"); rather, such opinions represent our legal judgment based upon our review of existing law and in reliance upon the representations and covenants referenced above that we deem relevant to such opinions. The Service has an ongoing audit program to determine compliance with rules that relate to whether interest on state or local obligations is includable in gross income for federal income tax purposes. No assurance can be given whether or not the Service will commence an audit of the Bonds. If an audit is commenced, in accordance with its current published procedures the Service is likely to treat the Issuer as the taxpayer. We observe that the Issuer has covenanted not to take any action, or omit to take any action within its control, that if taken or omitted, respectively, may result in the treatment of interest on the Bonds as includable in gross income for federal income tax purposes. WE EXPRESS NO OPINION as to any insurance policies issued with respect to the payments due for the principal of and interest on the Bonds, nor as to any such insurance policies issued in the future. OUR SOLE ENGAGEMENT in connection with the issuance of the Bonds is as Bond Counsel for the Issuer, and, in that capacity, we have been engaged by the Issuer for the sole purpose of rendering our opinions with respect to the legality and validity of the Bonds under the Constitution and laws of the State of Texas, and with respect to the exclusion from gross income of the interest on the Bonds for federal income tax purposes, and for no other reason or purpose. The foregoing opinions represent our legal judgment based upon a review of existing legal authorities that we deem relevant to render such opinions and are not a guarantee of a result. We have not been requested to investigate or verify, and have not independently investigated or verified, any records, data, or other material relating to the financial condition or capabilities of the Issuer, or the disclosure thereof in 2 www.mphlegal.com connection with the sale of the Bonds, and have not assumed any responsibility with respect thereto. We express no opinion and make no comment with respect to the marketability of the Bonds and have relied solely on certificates executed by officials of the Issuer as to the current outstanding indebtedness of, and assessed valuation of taxable property within the Issuer. Our role in connection with the Issuer's Official Statement prepared for use in connection with the sale of the Bonds has been limited as described therein. THE FOREGOING OPINIONS represent our legal judgment based upon a review of existing legal authorities that we deem relevant to render such opinions and are not a guarantee of a result. Respectfully, 3 www.mphlegal.com APPENDIX B-FINANCIAL STATEMENTS For Fiscal Year Ended September 30,2015* * The Annual Financial and Compliance Report includes the Issuer's most recent auditedfinancial statements and related footnotes and schedules. The Annual Financial and Compliance Report has also been filed with EMMA and the Municipal Advisory Council of Texas. See "OTHER MATTERS—Continuing Disclosure of Information." B-1 9 krs v UFA } "?Fooit r>t� ;bh � f y� f C i II IMII�uGII Y4�Yry , i M r , TOWN OF WESTLAKE TOWN OF WESTLAKE, TEXAS COMPREHENSIVE ANNUAL FINANCIAL REPORT FISCAL YEAR ENDED SEPTEMBER 30, 2015 Prepared by: Town of Westlake Finance Department 3 Village Circle, Suite 202 Westlake, Texas 76262 MI ' i� TOWN OF WESTLAKE TOWN OF WESTLAKE,TEXAS COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE FISCAL YEAR ENDED SEPTEMBER 30,2015 TABLE OF CONTENTS Exhibit Page 1. INTRODUCTORY SECTION Lefler of Transmittal i GFOA Certificate of Achievement viii Organization Chart ix Town Officials x II. FINANCIAL SECTION Independent Auditor's Report 1 A. MANAGEMENT'S DISCUSSION AND ANALYSIS 4 B. BASIC FINANCIAL STATEMENTS Government-Wide Financial Statements Statement of Net Position A-1 16 Statement of Activities A-2 17 Fund Financial Statements Governmental Funds Financial Statements Balance Sheet A-3 19 Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Position A-4 21 Statement of Revenues, Expenditures,and Changes in Fund Balance A-5 22 Reconciliation of the Statement of Revenues,Expendituresand Changes in Fund Balances of Governmental Funds to the Statement of Activities A-6 24 Proprietary Funds Financial Statements Statement of Net Position A-7 25 Statement of Revenues, Expenses,and Changes in Net Position A-8 26 Statement of Cash Flows A-9 27 Fiduciary Funds Financial Statements Statement of Fiduciary Net Position A-10 28 Discretely Presented Component Units Financial Statements Combining Statement of Net Position A-11 29 Combining Statement of Activities A-12 31 Notes to the Basic Financial Statements 33 C. REQUIRED SUPPLEMENTARY INFORMATION Schedule of Revenues, Expenditures,and Changes in Fund Balance- Budget and Actual-General Fund B-1 77 Schedule of Revenues, Expentitures and Changes in Fund Balance- Budget and Actual-Westlake Academy B-2 78 Notes to Budgetary Comparison Schedules 79 Schedule of Net Pension Liability and Related Ratios-TMRS B-3 80 Schedule of Contributions-TMRS B-4 81 Notes to TMRS Required Supplementary Information 82 Schedule of Academy's Proportionate Share of Net Pension Liability-TRS B-5 83 Schedule of Contributions-TRS B-6 84 Table of Contents -Continued Exhibit Page D. COMBINING AND INDIVIDUAL FUND STATEMENTS AND SCHEDULES Major Governmental Funds Schedule of Revenues, Expenditures and Changes in Fund Balances C-1 85 Budget and Actual- Debt Service Fund Nonmajor Governmental Funds Combining Balance Sheet C-2 87 Combining Statement of Revenues, Expenditures,and Changes in Fund Balance C-3 88 Nonmajor Special Revenue Funds Budgetary Comparison Schedules: Visitors Association Fund C-4 89 Lone Star Public Facilities Corporation Fund C-5 90 Economic Development Fund C-6 91 4B Economic Development Corporation Fund C-7 92 III. STATISTICAL SECTION Exhibit Net Position By Component S-1 94 Changes in Net Position S-2 95 Fund Balances,Governmental Funds S-3 97 Changes in Fund Balances, Governmental Funds S-4 98 Assessed Value and Estimated Actual Value of Taxable Property S-5 100 Principal Property Tax Payers S-6 101 Property Tax Levies and Collections S-7 102 Direct and Overlapping Property Tax Rates S-8 103 Taxable Sales by Industry Type S-9 104 Ratios of General Bonded Debt Outstanding S-10 105 Ratios of Outstanding Debt by Type S-11 106 Direct and Overlapping Governmental Activities Debt S-12 107 Demographic and Economic Statistics S-13 108 Principal Employers S-14 109 Full-Time Equivalent City Government Employees by Function/Program S-15 110 Operating Indicators by Function/Program S-16 111 Capital Asset Statistics by Function/Program S-17 112 Town of Westlake February 22, 2016 Honorable Mayor,Council Members and the Citizens of the Town of Westlake, The Town of Westlake (the "Town") Fiscal and Budgetary Policies require that the Town's Finance Department prepare a complete set of financial statements presented in conformity with generally accepted accounting principles (GAAP) and audited in accordance with generally accepted auditing standards by a firm of licensed certified public accountants. Accordingly, the Comprehensive Annual Financial Report (CAFR) for the Town of Westlake, Texas for the fiscal year ended September 30, 2015, is hereby issued. This report consists of management's representations concerning the finances of the Town. Consequently, management assumes full responsibility for the completeness and reliability of all the information presented in this report. To provide a reasonable basis for making representations, the Town established a comprehensive internal control framework that was designed both to protect the Town's assets from loss, theft or misuse and to compile sufficient reliable information for the preparation of the Town's financial statements in conformity with GAAP. Because the cost of internal controls should not outweigh their benefits, the Town's comprehensive framework of internal controls has been designed to provide reasonable, rather than absolute, assurance that the financial statements will be free from material misstatements. As management,we assert that,to the best of our knowledge and belief,this financial report is complete and reliable in all material respects. The Town's financial statements have been audited by Weaver and Tidwell, L.L.P. The goal of the independent audit was to provide reasonable assurance that the financial statements of the Town for the fiscal year ended September 30, 2015, were free of material misstatements. The independent audit involved examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements; assessing the accounting principles used and significant estimates made by management; and evaluating the overall financial statement presentation. The independent auditor concluded,based upon the audit, that there was a reasonable basis for rendering an unmodified opinion that the Town's financial statements for the fiscal year ended September 30, 2015, were fairly presented in conformity with GAAP. The independent auditors' report is presented as the first component of the financial section of this report. This report is presented in three sections: Introductory, Financial and Statistical. The Introductory Section includes this transmittal letter, a listing of Town Officials, and an organizational chart of the Town. The Financial Section includes the independent auditor's report on the basic financial statements, Management's Discussion and Analysis (MD&A), basic financial statements, the notes to 3 Village Circle#202 • Westlake,Texas 76262 Metro: 817-430-0941 . Fax: 817-430-1812. www.westlake-tx.org I the basic financial statements, and combining and individual fund statements and schedules. The MD&A is a narrative introduction, containing overview and analysis to accompany the basic financial statements. This letter of transmittal is designed to complement, and should be read in conjunction with the MD&A. The Town of Westlake's MD&A can be found immediately following the independent auditor's report. The Statistical Section includes financial and demographic information relevant to readers of the Town's financial statements. The statistical data is generally presented on a multi-year basis. Profile of the Town Minutes from downtown Fort Worth, Texas and DFW International Airport, the Town of Westlake is home to Town"4 ` several upscale residential communities and Fortune 500 'West:) � * i$;, - - - E companies, all of which share a unique character and charm, along with a commitment to excellence. The - -- - 5 Town is located in northeast Tarrant County and may be _. 361 conveniently accessed by several major thoroughfares, i ixt't t''t,i3�r 45 ` . including SH 114 and US 377. The Town occupies approximately 7 square miles and serves a population of approximately 1,184. In 2015, the average size of new home construction was 9,693 square feet with an average estimated construction cost of $1.68 million. The Town, incorporated in 1956, is considered a Type A general-law municipality. The Town operates under the Council-Manager form of government. The Council is comprised of a mayor and five(5) council members and is responsible for, among other things,passing ordinances, adopting the budget, appointing committees, and hiring the Town Manager. The Town Manager is responsible for carrying out the policies and ordinances of the Council, for overseeing the day-to-day operations of the Town and appointing and supervising heads of various departments. The Mayor and Town Council members serve two (2) year terms. All elected officials are elected at-large. The financial reporting entity(the government) includes all funds of the primary government (i.e. the Town of Westlake), as well as all of its component units. Component units are legally separate entities for which the primary government is financially accountable. The following entities are considered blended component units: Lone Star Public Facilities Corporation is a Texas nonprofit corporation that acts on behalf of the Town to further the public purposes under the Public Facilities Corporation Act, as it's duly constituted authority and instrumentality. The board of directors, appointed by the Town's governing body, is comprised of seven members, of whom five must be members of the Town's governing body. 4B Economic Development Corporation is a Texas nonprofit industrial corporation under the Development Corporation Act of 1979 formed to promote economic development within the Town and the State of Texas in order to eliminate unemployment and underemployment, and to promote and encourage employment and the public welfare of, for, and on behalf of the Town by developing, implementing, financing, and providing one or more projects defined and permitted under Section 4B of the Act. The board of directors is composed of seven persons appointed by the members of the Town's governing board. Four of the members of the board of directors are members of the Town's governing board. h Westlake Academy (Academy) is an open-enrollment charter school, as provided by Subchapter D, Chapter 12, of the Texas Education Code. The Town of Westlake ("Charter Holder") applied for and became the first municipality in Texas to ever receive this special charter designation. The Academy had 658 students in FY 12-13 and serves Kindergarten thru 12`h grade. The Academy graduated their first class in FY 09-10. The Board consists of six (6) trustees and is appointed by the Town's governing body. Currently, all members of the board of trustees are members of the Town's governing body. The Academy's year-end is August 31. Discretely presented component units are legally separate entities and not part of the primary government's operations. These component units are as follows: Texas Student Housing Corporation-Denton Project, Texas Student Housing Authority-Jefferson Commons at Town Lake Austin Project, Texas Student Housing Corporation-College Station Project, and Texas Student Housing Authority. Services Provided The Town provides to its citizens those services that have proven to be necessary and meaningful and which the Town can provide for the least amount of cost. Major services provided under the general government and enterprise functions are: Fire and emergency medical services, police, water and sewer utility services, park and recreational facilities, street improvements, education and administrative services. The Town utilizes a combination of direct service delivery along with out- sourced services in its service delivery mix. The decision as to which service to deliver directly versus out-sourcing is based on analysis of cost-effectiveness, citizen responsiveness, and customer service quality. Economic Conditions and Outlook The information presented in the financial statements is perhaps best understood when it is considered from the broader perspective of the environment within which the Town operates. Local Economy The Town staff is aware that the Town of Westlake does not create wealth, but instead,is entrusted with public dollars collected on behalf of our citizens. We are stewards who are fully vested in the success of the Town of Westlake and Westlake Academy. We exist as a municipal corporation for one reason and one reason only: to prioritize and deliver the best services possible with the resources provided to achieve an exceptional quality of life. This is a challenge the Staff takes very seriously, one that we pursue with vigor every day. Over the previous fiscal year, the Town has achieved and/or is continuing to work toward important initiatives and projects that will allow us to balance our"distinctive development, trails, and quality of life amenities amidst an ever expanding urban landscape." These include: Achievement and recognition for our transparency efforts and our fiscal stewardship through receipt of the following: )o, Distinguished Budget Presentation Award from the Governmental Finance Officers Association(GFOA)marking the 8th year in a row that we have received this honor for our municipal budget and the 6th year for our educational services budget(Westlake Academy). Ill International Award for Budget Excellence from the Association of School Business Officials International for the past six years. Certificate of Achievement for Excellence in Financial Reporting for our Comprehensive Annual Financial Report(CAFR), also known as the annual audit which has also been recognized through GFOA for the last six years. Award for Outstanding Achievement in Popular Annual Financial Reporting(PAFR),by converting much of the CAFR document into an easy-to-read format for our residents. This was the Town's second year to achieve this award. ® Invested in an update of our existing Comprehensive Planning document as we worked with the Town Council, residents, and the appointed steering committee members to memorialize our community vision in the new document. Our current version was compiled in 1992 and many changes have occurred since that time. Progress continues through the facilitation efforts of an outside consultant as we move into the final phases with the updating of the associated ordinances that support the Plan. • Invested in the third iteration of our strategic plan through the use of the Balanced Scorecard system. Council members worked with an outside consultant to create strategic themes and updated our vision, mission, and values statements for Westlake. Staff then identified outcome objectives, created a Tier One Strategy Map, and developed performance measures for Council adoption. We also began reporting the approved performance measures to the governing board this fiscal year. • Invested in the Town's open enrollment charter school as Westlake Academy, completed its 12th year of operation and graduated our 6th class of seniors with 54 students. v Westlake Academy continues to have excellent academic and extra-curricular results and is ranked among the best high schools in America: Washington Post ranked us as 42nd out of 2,300 schools across the nation. e Invested in the Town's CIP ($1.7M)mainly through the continued progress of Phase 3 of the FM 1938/Davis Blvd. Streetscaping improvements. v Invested approximately$100K in trail and park improvements; $100K in an outdoor warning siren for emergency weather related events Invested a total of$316K in the Town's infrastructure through reconstruction and drainage improvements on Sam School Rd. and Dove Rd. Short Term Trends, Challenges and Planning Over the history of our Town, municipal budgets have been prepared with an eye toward being fiscally conservative,while providing the high quality customer service that our residents have come to expect in Westlake. As a component of our budgets, we also identify current trends to be stewards of our community. Some of these factors can be found below: ® Westlake's Permanent Population Growth: This is the portion of our population considered Population Growth 1063 1109 to be our permanent residents. An increase in 992 population of 185 in 1990 to the present 1,150 785 S03 847 represents a 522%increase for a net gain of 965 698 703 residents. We will need to monitor and plan for the continued increase in these numbers in light ass tr x of Forging Westlake's forecast of 7.12% population growth between now and 2040. 2005 20106'2_007'2008 2009 2010 2011 2012!2013 2014 iv s Traffic Demands Due to Growth in Westlake and Surrounding Cities': The 4 cities that surround Westlake are also projected to have a combined population of 215,000 people by 2040. As stated earlier, Westlake is estimated to grow to 7,000 by that same time. Internally current zoning entitlements, if executed,would create an estimated 300,000 vehicle trips per day. Local impacts associated with this level of growth affects the Town's street infrastructure,water and sewer system capital investment requirements, as well as demand for daily municipal services ® Balanced Growth to Impact Cost of Municipal Services: Likewise,the ability to pay for municipal services utilizing a cost effective revenue format requires balanced growth that provides for commercial development and a diversified tax base,while maintaining the community's bucolic atmosphere. At the same time,we must continue to ensure the policy direction of the Town is focused on growth paying for the infrastructure for which it creates the demand. m Housing Start Increases: This past year,we 50 so continued to see single family residential construction Housing 40 as a result of Granada Phase 1 receiving a final plat. Starts 28 Existing subdivisions such as Vaquero and Terra Bella also had strong home construction activity. This is 112 10 depicted in the side-chart—prerecession starts were at 38 per year and we are estimating 50 for the coming _.....__ ...... ......... ...._....____ _.._.._._.. ..... . fiscal year. Housing starts in Westlake, due to the F' F'' FY FY FY FY high value, adds taxable value,but impacts the 10/11 11/12 12/13 13/14 14/15 15/16 demand for our municipal services, especially the Town's charter school. Management of Development: As the economy and the surrounding cities in the Metroplex experience commercial development and individuals continue to make the North Texas Region their home,we will need to manage our distinctive housing developments to ensure we maintain our community as an `oasis of natural beauty' as outlined in our Vision statement. Daytime Population: Because Westlake is the home of many major corporate office campuses,its Monday-Friday daytime population swells to approximately 10,000- 12,000 individuals. These office complexes are comprised of notable corporate clients that include Deloitte LLP,Core Logic and Fidelity Investments. Staff will continue to monitor our corporate stakeholders and attempt to identify avenues to strengthen these relationships and assist in drawing new corporations to Westlake. Continued Impact of Westlake Academy on Residential Growth: The number of Westlake residents who are selecting Westlake Academy as the educational choice for their students has doubled in the Westlake Academy past five years. Resident surveys continually indicate that Lottery waiting List the Academy is one of the main reasons they moved to 2,128 2.197 2,177 2'400 Westlake, and why they plan to remain in our community. 705 1,027 For example,the 2015 survey results indicate that 96%of p Y the parents say that enrollment at Westlake Academy was FY FY FY FY FY FY very/somewhat important to their decision to live in the 10/11 11/12 12/13 13/14 14/15 15/16 community. ,.w , v • Increase in Westlake Academy Overall Enrollment and Opening of New School Buildings: The Academy has experienced steady enrollment growth from 491 in SY 2009-10 to a projected 832 in SY 2015-16. The current increase of student population is a result of the Phase I expansion efforts on the Academy campus and our community growth. It will require that we carefully manage our student enrollment processes to provide adequate space for children of Westlake residents. Approximately 39,000 sq. ft. of new facilities spaces was opened in SY 14/15, which was comprised of a secondary classroom building,field house, and a primary years' multi-use building. All of these buildings increased our capacity and allowed for decompression of our current facilities. The lottery waiting list for admissions continues to grow from 705 in 2011 to 2,400 students for this coming school year. ® Public Education Funding Shortfall: State funding of public education was decreased by the State Legislature in 2011. While it has increased somewhat since then, the allocation has not kept pace with basic cost increases. This negatively impacts Westlake since it owns and operates a public charter school,Westlake Academy, which receives 79% of its operational funding from the State. ® Implementation of the Comprehensive Plan: With adoption of the Town's new Comp Plan, Forging Westlake, a number of our ordinances need to be rewritten and new ones drafted so that the Plan's recommendations can be implemented. The task of implementing the changes to the ordinances will require additional staff time and oversight to ensure we reflect the direction of the Council and the Comp Plan. • Pursuit of Infrastructure and Services Reinvestment While Combating Certain Cost Increases: With growth comes the need for reinvestment through capital spending for infrastructure, equipment, as well as work force attraction/retention. This must be facilitated in concert with the consideration of additional staffing needs to maintain our service levels. We have balanced all these components in light of maximizing staff efficiencies and processes to help contain large expenditure drivers such as employee health insurance. ® Continued emphasis on long-range financial planning: The FY15-16 budget contains an updated Long-Range Financial Forecast which identifies key revenue and expenditure drivers while assessing historical financial trends and their potential impact upon the town's financial stability. The forecast must be monitored and updated during the budget formulation process as well as reviewed with the Town Council as the budget is being prepared. Staff will also continue to produce a quarterly financial report for the Council that monitors and analyzes trends in the General Fund, Utility Fund, and Visitor Association Fund. The report serves as a valuable tool to assist in developing a proactive,rather than reactive, approach to our changing financial trends. Users of this document, as well as others interested in the programs and services offered by the Town of Westlake, are encouraged to read the Town's Fiscal Year 2015-16 Budget. The budget details the Town's long-term goals and financial policies, and describes program accomplishments and initiatives. vi Other Information The Government Finance Officers Association of the United States of America and Canada (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to the Town of Westlake for its comprehensive annual financial report (CAFR) for the fiscal year ended September 30, 2014. This was the eighth year the Town has received this prestigious award. In order to be awarded a Certificate of Achievement, a government must publish an easily readable and efficiently organized comprehensive annual financial report. This report must satisfy both generally accepted accounting principles and applicable legal requirements. A Certificate of Achievement is valid for a period of one year only. We believe that our current comprehensive annual financial report (CAFR) continues to meet the Certificate of Achievement Program's requirements and we are submitting it to GFOA to determine its eligibility for another certificate. In addition, we also received our eighth GFOA Distinguished Budget Presentation Award for the fiscal year beginning October 1, 2014 for our municipal budget and the 6th year for our educational services budget for Westlake Academy, a component unit of the Town. In order to qualify for the Distinguished Budget Presentation Award, the Town and Academy budget documents had to be judged proficient as a policy document, a financial plan, an operations guide, and a communications device. Westlake Academy has also received recognition from the Association of School Business Officials International as a recipient of the International Award for Budget Excellence for the past six years. The Finance Department received its third Popular Annual Financial Report(PAFR)converting much of the FIT 2013-2014 audit document into an easy-to-read format for our residents. The goal is to encourage resident awareness as it relates to Town finances through the condensed version of the budget. The report provides an "overview of our financial position and policies, and conveys our commitment to delivering responsive services and programs in a fiscally responsible manner." Acknowledgements The preparation of this report could not be accomplished without the efficient and dedicated services of the entire staff of the Finance Department. Appreciation is expressed to Town employees throughout the organization, especially those employees who were instrumental in the successful completion of this report. The staff would also like to thank the Mayor and Town Council for their conservative leadership and their support in planning and conducting the financial operations of the Town in a responsible and progressive manner. Respectfully Submitted, --e-�- l} ., -t Tom Brymer Debbie Piper, CPA Town Manager Finance Director Vii Government Finance Officers Association Certificate of Achievement for Excellence in Financial Reporting Presented to Town of Westlake Texas For its Comprehensive Annual Financial Report for the Fiscal Year Ended September 30, 2014 Executive Director/CEO Viii r Advisory Boards Town ! Texas Student tary 77777777 f. TSC9 - t Ly,- -,ne ( ze+ s iFacilities - srsc s - WAA De {FT F-efi!ftter ?�. acifi } :B6,e�l2lissglEx a- 'YZk6 Om- -= urwyf 7 - �sstmt WA 7tchm�zwn ' Executiv�2Di€tct�" � ; � sta � Polite services cd�=s=`�zi _# j �5rtsectn y- �xz'�sr.�r z � - Taman , 3... kcadaaa. Exemplary over e ,-wn p Service Excellence ix TOWN OF WESTLAKE ELECTED AND APPOINTED OFFICIALS September 30,2015 Laura Alesa Michael Rick Carol Wayne Wheat Belvedere Barrett Rennhack Langdon Stoltenberg ELECTED OFFICIALS Mayor Laura Wheat Mayor Pro-Tem Carol Langdon Council Member Ales Belvedere Council Member Michael Barrett Council Member Rich Renhack Council Member Wayne Stoltenberg APPOINTED OFFICIALS TOM BRYMER Town Manager AMANDA DEGAN GINGER AWTRY Assistant Town Manager Director of Communications and Community Affairs DEBBIE PIPER KELLY EDWARDS Director of Finance Town Secretary EDDIE EDWARDS TODD WOOD Director of Planning and Director of Human Resources Development and Administrative Services JARROD GREENWOOD RICHARD WHITTEN Director of Public Works Fire Chief TROY MEYER JASON POWER Director of Facilities Maintenance Director of Information and Parks and Recreation Technology x FINANCIAL SECTION r TOWN OF WESTLAKE weaver>�__ INDEPENDENT AUDITOR'S REPORT To the Honorable Mayor and Members of Town Council Town of Westlake, Texas Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities, the business-type activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of the Town of Westlake (the Town) as of and for the year ended September 30, 2015, and the related notes to the financial statements, which collectively comprise the Town's basic financial statements as listed in the table of contents. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor's Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. AN INDEPENDENT MEMBER OF WEAVER AND TIDWELL,L.L.P. 12221 MERIT DRIVE,SUITE 1400,DALLAS,TX 75251 BAKER TILLY INTERNATIONAL CERTIFIED PUBLIC ACCOUNTANTS AND ADVISORS P:972.490.1970 F:972.702.8321 1 Town of Westlake, Texas Page 2 Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of the Town, as of September 30, 2015, and the respective changes in financial position, and, where applicable, cash flows thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America. Emphasis of Matter Regarding Going Concern The accompanying financial statements have been prepared assuming the discretely presented component units will continue as going concerns. As discussed in Note 17 to the financial statements, the discretely presented component units are in default on their bonds due to failure to meet certain bond covenants. This gives bond holders the right to accelerate and demand payment on the bonds in full. This condition raises substantial doubt about the discretely presented component units' ability to continue as going concerns. Management's plans regarding these matters are also described in Note 17. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Our opinion is not modified with respect to this matter. Change in Accounting Principle As discussed in Note 16 to the financial statements, in 2015 the Town adopted new accounting guidance, GASB Statement No. 68, "Accounting and Financial Reporting for Pensions — an amendment of GASB Statement No. 27" and GASB Statement No. 71, "Pension Transition for Contributions Made Subsequent to the Measurement Date". Our opinion is not modified with respect to this matter. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management's discussion and analysis on pages 4 through 15 and budgetary comparison information and pension schedules on pages 77 through 84 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an 2 Town of Westlake, Texas Page 3 opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Town's basic financial statements. The introductory section, combining and individual fund financial statements and schedules, and statistical section, are presented for purposes of additional analysis and are not a required part of the financial statements. The combining and individual fund statements and schedules are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the combining and individual fund statements and schedules are fairly stated in all material respects in relation to the basic financial statements as a whole. The introductory and statistical sections have not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we do not express an opinion or provide any assurance on them. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated February 15, 2016 on our consideration of the Town's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Town's internal control over financial reporting and compliance. ��, WEAVER AND TIDWELL, L.L.P. Dallas, Texas February 15, 2016 3 • f TOWN OF WESTLAKE MANAGEMENT'S DISCUSSION AND ANALYSIS .+v TOWN OF WESTLAKE IFMANAGEMENT'S DISCUSSION AND ANALYSIS Management of the Town of Westlake offers the readers of the Town's financial statements this narrative overview and analysis of the financial activities and financial position of the Town for the fiscal year ended September 30, 2015. Financial reporting is limited in its ability to provide the "big picture" but rather focuses on financial position and changes in financial position. In other words; are revenues and/or expenditures higher or lower than the previous year? Has the net position (containing both short- term and long-term assets and liabilities) or fund balances (the current "spendable" assets less current liabilities) of the government been maintained? Readers are encouraged to consider the information presented here in conjunction with the additional information furnished in the letter of transmittal (pages i-vii of this report) and the statistical section (pages 94- 112 of this report) as well as information in the annual operating budget, along with other community information found on the town's website at www.westlake-tx.org. It should be noted that the Independent Auditor's Report describes the auditors' association with the various sections of this report and that all of the additional information from the website and other Town sources are unaudited. FINANCIAL HIGHLIGHTS • The assets and deferred outflows of resources of the Town exceeded its liabilities and deferred inflows of resources at the close of the most recent fiscal year by $58,370,808 (Net position). This number must be viewed within the context that the vast majority of the Town's net position of $36,043,845 (61.7%) are capital assets and that most capital assets in a government entity do not directly generate revenue nor can they be sold to generate liquid capital. The net position restricted for specific purposes totaled $17,827,177 (30.5%). The remaining amount, $4,499,786 (7.8%), represents unrestricted net position. • As of the close of the current fiscal year, the Town of Westlake's governmental funds reported combined ending fund balances of$28,185,481, which is a increase of$16,297,841 in comparison with the prior year. Within this total, $20,801,880 is non-spendable, restricted, committed or assigned by management or council. • At the end of the current fiscal year, fund balance for the general fund was $7,680,550, a decrease of $272,968 in comparison with the prior year. Of this total fund balance, $7,383,601 is unassigned. This represents 109% of the total general fund expenditures and is equivalent to 283 operating days. • The Town's capital assets (net of accumulated depreciation) increased by$3,824,916. This is primarily attributed to the completion of the Westlake Academy Expansion project which includes a multi-purpose building, three story secondary school building and a field house. • The Town's long-term debt decreased by $1,331,958 in total, due to the scheduled repayment of principal on outstanding bonded debt. OVERVIEW OF THE FINANCIAL STATEMENTS This discussion and analysis is intended to serve as an introduction to the Town's basic financial statements. The Town's basic financial statements are comprised of the following three components: 1) government-wide financial statements, 2) fund financial statements, and 3) notes to the financial statements. This report also contains supplementary information in addition to the basic financial statements themselves. 4 Government-wide financial statements The government-wide financial statements are designed to provide readers with a broad overview of the Town's finances, in a manner similar to a private-sector business. The government-wide financial statements are prepared utilizing the economic resources measurement focus and the accrual basis of accounting. The statement of net position presents information on all of the Town's assets and liabilities with the difference between the two reported as net position. Over time, increases or decreases in the Town's net position serves as a useful indicator of whether the financial position of the Town is improving or weakening. The statement of activities presents information showing how the government's net position changed during the most recent fiscal year. All of the revenues and expenses are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods. Both of the government-wide financial statements distinguish functions of the Town that are principally supported by sales taxes, property taxes, and intergovernmental revenues (governmental activities) from other functions that are intended to recover all or a significant portion of their costs through user fees and charges (business-type activities). The governmental activities of the Town include general government, public safety, culture and recreation, economic development, public works, visitor services and education. The business-type activities of the Town include water/sewer and cemetery. The government-wide financial statements include not only the Town (known as the primary government), but also discretely presented component units including all of the Texas Student Housing entities. Financial information for these component units is reported separately from the financial information presented for the primary government itself. See pages 33- 34 of the "Financial Section" for detail on these entities. In addition, the Town has the following blended component units: Lone Star Public Facilities Corporation, 413 Economic Development Corporation, and Westlake Academy, an open enrollment charter school owned and operated by the Town of Westlake. Fund Financial Statements A fund is a grouping of related accounts used to maintain control over resources that have been segregated for specific activities or objectives. The Town, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. Below are the three types of funds. Governmental funds - Governmental funds are used to account for essentially the same functions reported as government activities in the government-wide financial statements. However, unlike the government-wide financial statements, governmental fund financial statements focus on near-term inflows and out/lows of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating a government's near-term financial requirements. 5 Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. By doing so, the reader may better understand the long-term impact of the government's near-term financing decisions. Both the governmental fund balance sheet and the governmental fund statement of revenues, expenditures, and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. The Town maintains ten individual governmental funds. Information is presented separately in the governmental funds balance sheet and in the governmental funds statement of revenues, expenditures, and changes in fund balances for the General, Westlake Academy, Debt Service, Capital Projects, Solana PID Capital Projects, and Westlake Academy Expansion funds, all of which are presented as major funds. Data from the other funds (Visitors Association, Economic Development, Lone Star Public Facilities Corporation and Westlake 4B Economic Development Corporation) are combined into a single, aggregate presentation. Individual fund data for each of these non-major governmental funds is provided in the form of combining statements elsewhere in this report. The Town adopts an annual appropriated budget for all funds, except the Capital Projects, Solana PID Capital Projects, and Westlake Academy Expansion funds which are project-length based budgets. A budgetary comparison statement has been provided for all appropriate funds to demonstrate compliance with this budget. The basic governmental fund financial statements can be found on pages 19-24 of this report. Proprietary funds-There are two types of proprietary funds, Enterprise Funds and Internal Service Funds. An Enterprise Fund is the only proprietary fund currently maintained by the Town. Enterprise funds are used to report the same functions presented as business-type activities in the government- wide financial statements. The Town uses enterprise funds to account for its water and sewer activities and its cemetery activities. All activities associated with providing such services are accounted for in this fund, including administration, operation, maintenance, debt service, capital improvements, billing and collection. The Town's intent is that costs of providing the services to the general public on a continuing basis is financed through user based charges in a manner similar to a private enterprise. The Town has no Internal Service Funds (fund to report activities that provide supplies and services for the Town's other programs and activities, i.e. self-insurance and fleet management). The basic proprietary fund financial statements can be found on pages 25 -27 on this report. Fiduciary funds - Fiduciary funds are used to account for resources held for the benefit of parties outside the government. Fiduciary funds are not reflected in the government-wide financial statements because the resources of those funds are not available to support the Town's own programs. The accounting used for fiduciary funds is similar to the accounting used for proprietary funds. The Town of Westlake maintains one fiduciary fund, the PID Agency(debt service) Fund. Notes to the financial statements. The notes provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. The notes to the financial statements can be found on pages 33—76 of this report. 6 Other information. In addition to the basic financial statements and accompanying notes, this report also presents schedules that further support the information in the financial statements. The schedules are presented immediately following the notes to the financial statements and can be found on pages 77-92. GOVERNMENT-WIDE FINANCIAL ANALYSIS As noted earlier, net position may serve over time as a useful indicator of the government's financial position. In the case of the Town, assets exceeded liabilities by $58,370,808 at the close of the most recent fiscal year. The Town's combined net position changed from a year ago, increasing $19,485,447 from $38,885,361 to $58,370,808. Our analysis below focuses on the net position (Table 1) and changes in net position (Table 2)of the Town's governmental and business-type activities. The largest portion of the Town's net position, $36,043,845 (61.7%), reflects its investment in capital assets (e.g. land, buildings, equipment, improvements, construction in progress, and infrastructure), less any debt used to acquire capital assets still outstanding. The Town uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although the Town's investment in its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources since the capital assets themselves cannot be used to liquidate these liabilities. An additional portion of the Town's net position, $17,827,177 (30.5%), represents resources that are subject to external or internal restrictions on how they may be used. The remaining balance of $4,499,786 (7.8%) represents unrestricted net position which is available for the town's ongoing expenses. Table 1 Condensed Statement of Net Position At September 30, 2015 and 2014 Governmental Activities Business-type Activities Total 2015 2014 2015 2014 2015 2014 Assets Current and other assets $ 29,451,181 $14,197,535 $ 4,879,191 $ 5,210,808 $ 34,330,372 $19,408,343 Capital assets 54,470,449 50,205,686 12,662,988 13,102,835 67,133,437 63,308,521 Total Assets $ 83,921,630 $64,403,221 $17,542,179 $18,313,643 $101,463,809 $82,716,864 Deferred outflows of resources 1,549,467 1,194,749 42,985 1,592,452 1,194,749 Liabilities Noncurrent liabilities 29,466,305 29,866,622 6,357,349 6,389,337 $ 35,823,654 $36,255,959 Other liabilities 1,377,466 2,308,387 7,425,583 6,461,906 8,803,049 8,770,293 Total Liabilities 30,843,771 32,175,009 13,782,932 12,851,243 $ 44,626,703 $45,026,252 Deferred inflows of resources 58,750 58,750 Net Position Net investments in capital assets 29,633,298 32,048,991 6,410,547 6,734,414 $ 36,043,845 $38,783,405 Restricted 17,827,177 2,284,947 - - 17,827,177 2,284,947 Unrestricted 7,108,101 (910,977) (2,608,315) (1,272,014) 4,499,786 (2,182,991) Total Net Position $ 54,568,576 $33,422,961 $ 3,802,232 $ 5,462,400 $ 58,370,808 $38,885,361 7 Table 2 Changes in Net Position For the years ended September 30, 2015 and 2014 Governmental Activities Business-type Activities Total 2015 2014 2015 2014 2015 2014 Revenues: Program revenues Fees,fines and charges for services $ 2,466,032 $ 2,127,786 $ 3,563,395 $ 3,436,451 $ 6,029,427 $ 5,564,237 Operating grant and contributions 7,615,653 6,592,642 - - 7,615,653 6,592,642 Capital grants and contributions 19,983,078 80,472 19,983,078 80,472 General revenues Taxes Sales taxes 4,925,428 4,725,845 4,925,428 4,725,845 Property taxes 1,438,969 1,367,069 1,438,969 1,367,069 Hotel occupancy taxes 872,179 796,481 872,179 796,481 Mixed beverage taxes 59,184 51,602 59,184 51,602 Franchise taxes 963,040 795,322 - - 963,040 795,322 Interest on investments 28,904 26,713 7,083 7,114 35,987 33,827 Miscellaneous 198,199 246,633 198,199 246,633 Total revenues 38,550,666 16,810,565 3,570,478 3,443,565 $ 42,121,144 $20,254,130 Expenses: General governmental 3,145,716 2,784,587 - - 3,145,716 2,784,587 Public saftey 2,381,437 2,190,050 2,381,437 2,190,050 Culture and recreation 129,970 123,541 129,970 123,541 Economic development 171,757 147,680 171,757 147,680 Public works 1,081,996 955,794 1,081,996 955,794 Visitor services 665,936 493,087 665,936 493,087 Education 8,598,261 7,147,411 8,598,261 7,147,411 Interest on long-term debt 1,022,201 998,951 - - 1,022,201 998,951 Water and sewer - - 4,861,529 3,690,137 4,861,529 3,690,137 Cemetery - 7,297 7,121 7,297 7,121 Total expenses 17,197,274 14,841,101 4,868,826 3,697,258 22,066,100 18,538,359 Increase(decrease)in net position before transfers 21,353,392 1,969,464 (1,298,348) (253,693) 20,055,044 1,715,771 Transfers 323,100 43,399 (323,100) (43,399) Change in net position 21,676,492 2,012,863 (1,621,448) (297,092) 20,055,044 1,715,771 Net position,beginning as previously stated 33,422,961 32,057,541 5,462,400 5,759,492 38,885,361 37,817,033 Cumulative effect of a change in accounting principle (530,877) (647,443) (38,720) - (569,597) (647,443) Net position,ending $ 54,568,576 $33,422,961 $ 3,802,232 $ 5,462,400 $ 58,370,808 $38,885,361 8 Governmental activities: Governmental activities increased the Town's net position by$21,145,615 (63.3%), increasing net position from $33,422,961 to $54,568,576. Unrestricted net position, the part of net position that can be used to finance day-to-day operations without constraints established by debt covenants, enabling legislation, other legal requirements, and/or Council or management's decision, increased by $8,019,078. Total revenues for governmental activities increased by $21,740,121 when compared to the prior year. General revenue had an increase of $476,238, while program revenues had an increase of $21,263,863. Program revenues • Fees, fines and charges for services increased by $338,246 which was primarily due to an increase of building permits/fees related to Granada and Entrada as well as Terra Bella. • Operating Grants and Contributions increased by $1,323,011 primarily due to the increase of state funding as a result of increased enrollment at Westlake Academy due to the campus expansion as well as increased grant revenues from Westlake Academy Foundation and Hudson Foundation. • Capital Grants and Contributions increased by $19,902,606 with the major portion ($18M) associated with the contribution of funds related to the Public Improvement District (PID). General revenues • Sales tax increased by $199,583 which can be attributed to the continued improvement in the local economy as well as several new technology and professional related companies and several one-time payments related to purchases and/or construction. • Hotel occupancy taxes increased by $75,698 which now includes receipts from Deloitte University as well as Solana Marriott. • Increase in property tax receipts of$71,900 and franchise fees by$167,718. • Increase in Miscellaneous of $361,566 is due to contributions by TxDot and Fidelity related to FM 1938. Expenses • Total expenses for governmental activities increased by $2,356,173 or approximately 18%. The increase is made up of several components. The major portion of the total increase was due to capital outlay associated with the Solana PID and $1,450,850 was related to the education expenditures because of staffing and supplies needed for the extra students and classroom supplies caused by the three additional buildings/classrooms. Additionally, the Executive Principal completed her first full year of employment and salary adjustments to other leadership positions during the fiscal year. 9 Business-type Activities: The net position of our business-type activities ended fiscal year 2015 at $3,802,232 compared with $5,462,400 in 2014. This represents a decrease in net position of $1,660,168, or 30% less than the prior fiscal year. Revenues of the Town's business-type activities were $3,570,478 for the fiscal year ending September 30, 2015. Revenues (Charges for Services) increased by $126,913 or 4% over the prior year. Operating expenses for the business-type activities were $4,868,826 for the year, an increase of $1,171,568 or 32%. This increase was primarily attributed to a payment to the City of Fort Worth for the Town's proportionate share of water system upgrades to provide Westlake with future capacity needs. Additional payments of approximately $2M will be made in subsequent years until the completion of the project. The business-type activities also had net transfers out of $323,100 in 2015 compared to net transfers out of $43,399 in the prior year which represented an interfund repayment. FINANCIAL ANALYSIS OF THE TOWN'S FUNDS As noted earlier, the Town uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. Governmental funds. The focus of the Town's governmental funds is to provide information on near-term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the Town's financing requirements. In particular, unassigned fund balance may serve as a useful measure of a town's net resources available for spending at the end of the fiscal year. As of the end of the current fiscal year, the Town's governmental funds reported combined ending fund balances of $28,185,481; an increase of $16,297,841 in comparison with the prior year. Approximately 26.2% of this total ($7,383,601) constitutes unassigned fund balance, which is available for spending at the government's discretion. The remainder of fund balance is nonspendable, restricted, committed or assigned to indicate that it is not available for new spending because it has already been committed. The following tables present a summary of general, special revenue, capital project, and debt service fund revenues and expenditures for the fiscal year ended September 30, 2015, and the amount and percentage of increases and decreases in relation to the prior year. 10 Table 3 Summary of Governmental Funds Revenues Increase Percent 2014-5 Percent (Decrease) Increase Revenues Amount Of Total From 2013-14 (Decrease) Taxes Sales taxes $ 4,925,428 13.1% $ 199,583 4.2% Property taxes 1,432,917 3.8% 79,561 5.9% Hotel occupancy taxes 59,184 0.2% 7,582 14.7% Mixed beverage taxes 872,179 2.3% 75,698 9.5% Franchise taxes 963,040 2.6% 167,718 21.1% Subtotal-Taxes 8,252,748 21.9% 530,142 6.9% State program 6,173,418 16.4% 903,777 17.2% Federal program 87,797 0.2% 7,694 9.6% Interest income 28,904 0.1% 2,191 8.2% Building permits and fees 1,200,790 3.2% 25,715 2.2% Fines and penalties 734,152 1.9% 3,711 0.5% Intergovernmental 3,810 0.0% 270 7.6% Contributions 18,785,953 49.8% 18,703,507 22685.8% Miscellaneous 2,467,381 6.5% 805,918 48.5% Total Revenues $37,734,953 100.0% $20,982,925 125.3% Table 4 Summary of Governmental Funds Expenditures Increase Percent 2014-15 Percent (Decrease) Increase Expenditures Amount Of Total From 2013-14 (Decrease) General government $ 2,411,239 11.0% $ 174,879 7.8% Public safety 2,490,551 11.4% 343,964 16.0% Culture and recreation 130,322 0.6% 6,781 5.5% Economic development 171,757 0.8% 24,072 16.3% Public works 744,028 3.4% 128,247 20.8% Visitor services 670,157 3.1% 177,075 35.9% Education 7,938,501 36.2% 794,823 11.1% Capital outlay 5,274,282 24.0% (4,689,765) -47.1% Debt services 2,108,174 9.6% (82,275) -3.8% Total Expenditures $21,939,011 100.0% $ (3,122,199) -12.5% 11 Below are summaries and explanations of the changes in fund balances from fiscal year 2014 to fiscal year 2015 of the Governmental Funds that are contained in the above totals. General Fund - Fund balance decreased $272,968 (3%). Most General Fund revenue categories realized increases over the prior year and many surpassed budget estimates as well. Sales tax receipts, franchise and fines and penalties exceeded both budget and prior year. Sales taxes grew as a result of continued improvement in the local economy with several new technology and professional related companies and one-time payments related to purchases and/or construction. An additional $485K was transferred from the General Fund with a large portion being contributed to building permits and fees related to Entrada and Granada which have been designated to be moved to the Capital Project Fund for future projects. Visitors Association Fund- Fund balance decreased by $27,455 (2%) primarily due to the additional funds paid to the Marriott based on an economic development agreement to bring more groups to Westlake. Capital Proiects Fund - Fund balance increased by $831,893 (63%) largely due to the transfer in from the General Fund of Entrada and Granada fees which were designated for future projects and additional transfers for various capital projects. Westlake Academy Expansion Fund- Fund balance decreased by $28,941 (7%) with the final expenditures of the Phase I construction being offset by the transfer in of lot fees based on an economic development agreement related to Granada lot sales. Solana Public Improvement District (PID) Capital Proiect Fund —This is a new fund created to detail the funds contributed based on bond proceeds for the construction of infrastructure for the Entrada development. All infrastructure will be conveyed to the Town upon completion. Fund balance increased by $15,173,051 based on the contribution of $18M offset by construction draws for the project and bond issuance costs. Proprietary Funds. The Town's proprietary fund statements provide the same type of information found in the government-wide financial statements with greater detail. Total net position of the Proprietary Funds amounted to $3,802,232, a decrease of$1,660,168 which was primarily due to the payment to the City of Fort Worth for the Town's proportionate share of water system upgrades to provide Westlake with future capacity needs. Additional payments will be made in subsequent years. General Fund Budgetary Highlights The General Fund budget for fiscal year 2015 was amended in total to increase the net change in fund balance from $(1,655,765) to $(674,171), a total increase of $981,594. The amended budget for net revenues was increased by $591,736 (8%) based on anticipated increases in several categories and the amended budget for expenditures was increased by $380,683 while other financing sources (uses) increased by $976,540. This was primarily due to unanticipated insurance proceeds offset by a reduction of transfers out to Debt Service. Sales tax receipts in 4B Economic Development Fund are used for debt service and the General Fund transfers out the shortfall. More than anticipated sales tax revenues were received; therefore, a smaller amount of funds had to be transferred to the Debt Service Fund. The General Fund actual revenue collections were less than the amended budget by $187,265 which can be attributed to the additional receipt of taxes offset by the anticipated addition of building permits and fees which weren't received due to timing. The final expenditures were $971,368 (12%) less than budgeted. Several of the larger expenditures under budget were due to timing. We had anticipated the implementation of permitting software and the amendment to the Code or Ordinances 12 to support the newly approved Comprehensive Plan. These large items were not able to be completed by year-end but will be expensed in the current fiscal year 2015-2016. There was also a savings on the budgeted attorney and consultant fees as a result of reimbursements regarding the Entrada/Granada developments. The remaining larger savings were due to savings in contracted services and training. Capital Assets and Debt Administration Capital Assets. The Town's investment in capital assets for its governmental and business-type activities as of September 30, 2015, totaled $67,133,437 (net of accumulated depreciation). The investment in capital assets includes land, buildings, improvements, machinery and equipment, infrastructure, and construction in progress. The net increase in the Town's investment in capital assets for the current fiscal year was $3,824,916 or 6%. Increase for governmental activities was 8.5% ($4,264,763) and 3.3% ($439,847) decrease in business-type activities. Major capital asset events during the current fiscal year included the following: o $2.8M — Construction in Progress (Primarily PID) o $842K— FM 1938 Town Improvements o $723K— Fire Truck o $489K—WA expansion o $207K— Fire Station Complex o $131 K—WA Playground equipment o $106K—Outdoor warning System o $ 92K—Technology o $ 56K - Open Space and Cemetery improvements o $ 26K— Glenwyck Farms Park Improvements o $ 11 K— Facilities/Maintenance lawnmower Table 5 Town's Capital Assets (Net of Accumulated Depreciation) Governmental Activities Business-type Activities Total 2015 2014 2015 2014 2015 2014 Land $ 11,896,664 $11,896,663 $ - $ - $ 11,896,664 $11,896,663 Capital improvements 10,539,908 7,814,722 10,461,290 10,809,857 21,001,198 18,624,579 Building 27,011,626 27,009,853 27,011,626 27,009,853 Machinery and equipment 1,914,727 1,016,010 1,802,085 1,861,591 3,716,812 2,877,601 WM treatments rights 153,492 185,266 153,492 185,266 Construction in progress 3,107,524 2,468,438 246,121 246,121 3,353,645 2,714,559 Total capital assets $ 54,470,449 $50,205,686 $12,662,988 $13,102,835 $ 67,133,437 $63,308,521 Additional information on the Town's capital assets can be found in Note 4 on pages 48- 51 of this report. 13 Long-term debt At the end of the current fiscal year, the Town had total long-term debt outstanding of $34,924,001. Of this amount, $28,232,000 represents bonded indebtedness, $33,814 economic development reimbursement, $174,373 capital leases, $323,227 in loans and $5,226,294 contractual obligations. During the fiscal year 2014-2015, the Town's total debt payable decreased by $1,331,958. This decrease was due to the scheduled repayment of principal and interest on outstanding bonded debt. Standard & Poor's Ratings Services, a division of McGraw-Hill, Inc. has recently increased the Town's rate from AA to AA+/stable. Additional information about the rating agency or the significance of the rating provided may be obtained from Standard & Poor's web site. Additional information on the Town's long-term debt can be found in Note 5 on pages 51-60. Table 6 Outstanding Debt at Year-End Governmental Activities Business-type Activities Total 2015 2014 2015 2014 2015 2014 General obligation bonds $ 17,480,000 $18,260,000 $ - $ - $ 17,480,000 $18,260,000 Certificates of obligation 9,759,250 10,029,800 992,750 1,014,200 10,752,000 11,044,000 Contractual obligations 33,814 65,789 5,226,294 5,320,824 5,260,108 5,386,613 Capital leases 174,373 237,378 - - 174,373 237,378 Premium on bonds 701,120 744,328 33,397 33,397 734,517 777,725 Notes payable 323,227 371,464 323,227 371,464 Compensated absences 172,704 157,863 27,072 20,916 199,776 178,779 Total long-term debt $ 28,644,488 $29,866,622 $ 6,279,513 $ 6,389,337 $ 34,924,001 $36,255,959 ECONOMIC FACTORS AND NEXT YEAR'S BUDGETS In the FY 2015-16 adopted budget, the General Fund balance is anticipated to increase by $398,987. General Fund revenues are budgeted to increase by 4%with sales tax making up 45% of the budgeted revenue. Ad valorem taxes are anticipated to increase by approximately 3% based on the certified roll of$940,684,347 representing 15% of the budgeted revenues. Expenditures are budgeted to increase $455,731 a 6% increase. This includes an 11% increase in payroll which includes a full year of the increased payroll based on the survey performed in FY 14-15 to bring all personnel to market. In this coming year, the Town's budget continues to be impacted by encouraging economic signs. Growth in Westlake, along the SH 114 corridor and with the progress of our new mixed-use development, Entrada, should continue to increase the commercial revenue sources. Additionally, increases are expected in residential-related revenues due to new housing developments on the horizon. The Utility Fund FY 2015-16 adopted budget is estimated to decrease by $1,658,588 primarily due to the payment to the City of Fort Worth for the Town's proportionate share of water system upgrades to provide Westlake with future capacity needs. 14 CONTACTING THE TOWN'S FINANCE DEPARTMENT This financial report is designed to provide our citizens, customers, and investors and creditors with a general overview of the Town's finances and to demonstrate the Town's accountability for the money it receives. If you have questions about this report or need additional financial information, contact Debbie Piper, Town of Westlake Finance Director, at 817-490-5712 or email at dpiper@westlake-tx.org. 15 BASIC FINANCIAL STATEMENTS w i emu TOWN OF WESTLAKE EXHIBIT A-1 TOWN OF WESTLAKE STATEMENT OF NET POSITION SEPTEMBER 30, 2015 Primary Government Discretely Governmental Business-type Presented Activities Activities Total Component Units ASSETS Cash and cash equivalents $12,120,035 $ 3,538,226 $15,658,261 $ 6,478,370 Receivables(net of allowance) 1,488,435 1,025,216 2,513,651 238,775 Inventories - 96,589 96,589 - Other assets 96,693 - 96,693 80,961 Restricted cash and cash equivalents 15,746,018 219,160 15,965,178 4,188,806 Capital assets: Land and construction in progress 15,004,188 246,121 15,250,309 7,282,413 Buildings and improvements 46,780,027 14,899,416 61,679,443 69,554,153 Wastewater treatment rights - 635,199 635,199 - Machinery and equipment 4,516,302 3,566,595 8,082,897 5,902,065 Less accumulated depreciation (11,830,068) (6,684,343) (18,514,411) (34,184,668) Total capital assets 54,470,449 12,662,988 67,133,437 48,553,963 Total Assets 83,921,630 17,542,179 101,463,809 59,540,875 DEFERRED OUTFLOWS OF RESOURCES Deferred outflows of resources-TRS pension 107,779 - 107,779 - Deferred outflows of resources-TMRS pension 347,792 42,985 390,777 - Deferred loss on refunding 1,093,896 - 1,093,896 - Total Deferred Outflows of Resources 1,549,467 42,985 1,592,452 - LIABILITIES Accounts payable 1,258,548 550,548 1,809,096 844,344 Customer deposit payable - 219,160 219,160 - Uneamed revenue 1,100 284,535 285,635 2,137,931 Accrued interest payable 117,818 6,371,340 6,489,158 25,264,298 Noncurrent liabilities: Due within one year 1,252,914 123,493 1,376,407 74,661,851 Due in more than one year 28,213,391 6,233,856 34,447,247 - Total Liabilities 30,843,771 13,782,932 44,626,703 102,908,424 DEFERRED INFLOWS OF RESOURCES Unavailable resources-TRS pension 58,750 - 58,750 - Total Deferred Inflows of Resources 58,750 - 58,750 NET POSITION Net investment in capital assets 29,633,298 6,410,547 36,043,845 (26,107,888) Restricted for: Tourism 1,081,009 - 1,081,009 - Construction 15,173,051 - 15,173,051 - Court security and technology 203,173 - 203,173 - Future projects 13,632 - 13,632 - Education 1,356,312 - 1,356,312 - Unrestricted 7,108,101 (2,608,315) 4,499,786 (17,259,661) Total net position $54,568,576 $ 3,802,232 $58,370,808 $ (43,367,549) The accompanying notes are an integral part of this statement. 16 TOWN OF WESTLAKE STATEMENT OF ACTIVITIES FOR THE YEAR ENDED SEPTEMBER 30, 2015 Program Revenues Charges for Operating Grants Capital Grants Functions/Programs Expenses Services and Contributions and Contributions Primary government: Governmental activities: General government $ 3,145,716 $ 110,778 $ - $ 18,119,637 Public safety 2,381,437 887,919 13,810 - Cultural and recreation 129,970 - 6,750 - Public works 1,081,996 936,245 - 649,566 Economic development 171,757 - - 410,000 Visitor services 665,936 - - - Education 8,598,261 531,090 7,595,093 803,875 Interest on long-term debt 1,022,201 - - - Total governmental activities 17,197,274 2,466,032 7,615,653 19,983,078 Business-type activities: Water and sewer 4,861,529 3,549,775 - - Cemetery 7,297 13,620 - - Total business-type activities 4,868,826 3,563,395 - - Total primary government $ 22,066,100 $ 6,029,427 $ 7,615,653 $ 19,983,078 Reported Discretely Presented Component Units $ 17,995,200 $ 14,488,825 $ - $ GENERAL REVENUES AND TRANSFERS: Taxes: Sales taxes Property taxes Hotel occupancy taxes Mixed beverage taxes Franchise taxes Interest Income Miscellaneous Transfers Total general revenues and transfers Change in net position NET POSITION,beginning of year as previously stated Cumulative effect of change in accounting principle NET POSITION,end of year The accompanying notes are an integral part of this statement. 17 EXHIBIT A-2 Net(Expense)Revenue and Changes in Net Position Primary Government Discretely Governmental Business-Type Presented Activities Activities Total Component Units $ 15,084,699 $ - $ 15,084,699 $ - (1,479,708) - (1,479,708) - (123,220) - (123,220) - 503,815 - 503,815 - 238,243 - 238,243 - (665,936) - (665,936) - 331,797 - 331,797 - (1,022,201) - (1,022,201) - 12,867,489 - 12,867,489 - - (1,311,754) (1,311,754) - - 6,323 6,323 - (1,305,431) (1,305,431) - 12,867,489 (1,305,431) 11,562,058 - $ $ $ $ (3,506,375) 4,925,428 - 4,925,428 - 1,438,969 - 1,438,969 - 872,179 - 872,179 - 59,184 - 59,184 - 963,040 - 963,040 - 28,904 7,083 35,987 3,211 198,199 - 198,199 - 323,100 (323,100) - - 8,809,003 (316,017) 8,492,986 3,211 21,676,492 (1,621,448) 20,055,044 (3,503,164) 33,422,961 5,462,400 38,885,361 (39,864,385) (530,877) (38,720) (569,597) - $ 54,568,576 $ 3,802,232 $ 58,370,808 $ (43,367,549) 18 TOWN OF WESTLAKE BALANCE SHEET GOVERNMENTAL FUNDS SEPTEMBER 30, 2015 Debt Westlake Service General Academy Fund ASSETS: Cash and cash equivalents $ 7,106,297 $ 1,317,864 $ 20,915 Receivables : Property taxes 5,379 - 674 Accounts receivable 824,725 366,320 - Other - - - Due from other funds 164,147 - - Other assets 13,334 81,485 - Restricted cash and cash equivalents - - - TOTAL ASSETS $ 8,113,882 $ 1,765,669 $ 21,589 LIABILITIES,DEFFERED INFLOWS OF RESOURCES AND FUND BALANCE: Liabilities: Accounts payable $ 427,953 $ 91,957 $ - Unearned revenue - - - Due to other funds - - - Total liabilities 427,953 91,957 - DEFERRED INFLOWS OF RESOURCES: Unavailable resources-property taxes 5,379 - 673 Total deferred inflows of resources 5,379 - 673 Fund Balances: Nonspendable: Prepaid items 13,334 81,485 - Restricted for: Tourism - - - Capital items - - - Court security and technology 203,173 Debt service - - 20,916 Education - 1,592,227 - Committed for: Street and tree improvements 80,442 - - Unassigned 7,383,601 - - Total fund balances 7,680,550 1,673,712 20,916 TOTAL LIABILITIES,DEFERRED INFLOWS OF RESOURCES AND FUND BALANCES $ 8,113,882 $ 1,765,669 $ 21,589 The accompanying notes are are an integral part of this statement. 19 EXHIBIT A-3 Westlake Solana PID Nonmajor Total Capital Academy Capital Governmental Governmental Projects Expansion Projects Funds Funds $ 2,208,871 $ 395,932 $ - $ 1,070,156 $ 12,120,035 - - - - 6,053 - - - 264,948 1,455,993 26,389 - - - 26,389 - - - - 164,147 1,874 96,693 - - 15,746,018 - 15,746,018 $ 2,235,260 $ 395,932 $ 15,746,018 $ 1,336,978 $ 29,615,328 $ 90,276 $ 179 $ 572,967 $ 75,216 $ 1,258,548 - - - 1,100 1,100 - - - 164,147 164,147 90,276 179 572,967 240,463 1,423,795 - - - - 6,052 - 6,052 1,874 96,693 - - - 1,081,009 1,081,009 2,144,984 395,753 15,173,051 13,632 17,727,420 203,173 - - - - 20,916 - - 1,592,227 - - 80,442 - - - - 7,383,601 2,144,984 395,753 15,173,051 1,096,515 28,185,481 $ 2,235,260 $ 395,932 $ 15,746,018 $ 1,336,978 $ 29,615,328 20 EXHIBIT A-4 TOWN OF WESTLAKE RECONCILIATION OF THE GOVERMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET POSITION SEPTEMBER 30, 2015 Total fund balance-governmental funds balance sheet $ 28,185,481 Amounts reported for governmental activities in the statement of net position are different because: Capital assets used in governmental activities are not current financial resources and therefore are not reported in the governmental funds balance sheet. 54,470,449 Deferred losses on refunding are reported as deferred outlfows of resources in the government-wide statement of net position. 1,093,896 Revenues earned but not available within sixty days of the fiscal year-end are not recognized as revenue in the fund financial statements. 6,052 Deferred outflows of resources related to the Town's and Academy's net pension liability increase net position by$107,779 and$347,792,respectively; while the Academys deferred resource outflows related to the net pension liability decreases net position by$58,750.This amount is the net effect. 396,821 Interest payable on long-term debt does not require current financial resources,therefore interest payable is not reported as a liability in the governmental funds balance sheet. (117,818) Long-term liabilities,including bonds payable,are not due and payable in the current period,and therefore are not reported in the fund financial statements. (29,466,305) NET POSITION OF GOVERNMENTAL ACTIVITIES-statement of net position $ 54,568,576 21 tt TOWN OF WESTLAKE TOWN OF WESTLAKE STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2015 Westlake Debt General Academy Service Fund REVENUES: Taxes Sales $ 3,587,323 $ - $ - Property 1,256,796 - 176,121 Mixed beverage 59,184 - - Hotel occupancy - - - Franchise 963,040 - - State program revenues - 6,173,418 - Federal program revenues - 87,797 - Interest income 10,078 2,067 - Building permits and fees 1,200,790 - - Fines and penalties 734,152 - - Intergovernmental 3,810 - - Contributions 10,000 - - Miscellaneous 81,539 1,971,097 - Total revenues 7,906,712 8,234,379 176,121 EXPENDITURES: Current General government 2,411,239 - - Public safety 2,490,551 - - Cultural and recreation 130,322 - - Public works 744,028 - - Economic development - - - Visitor services - - - Education - 7,938,501 - Capital outlay 748,297 - - Debt service Principal retirement 48,237 - 1,050,550 Interest and other fiscal charges - 10,204 963,425 Total expenditures 6,572,674 7,948,705 2,013,975 Excess(deficiency)of revenues Over(Under)Expenditures 1,334,038 285,674 (1,837,854) OTHER FINANCING SOURCES(USES) Transfers in 521,320 300,000 1,857,689 Transfers out (2,290,385) - - Capital lease proceeds - 16,740 - Insurance proceeds 162,059 - - Net other financing sources(uses) (1,607,006) 316,740 1,857,689 NET CHANGE IN FUND BALANCES (272,968) 602,414 19,835 FUND BALANCES,AT BEGINNING OF YEAR 7,953,518 1,071,298 1,081 FUND BALANCES AT END OF YEAR $ 7,680,550 $ 1,673,712 $ 20,916 The accompanying notes are are an integral part of this statement. 22 EXHIBIT A-5 Westlake Solana PID Nonmajor Total Capital Academy Capital Governmental Governmental Projects Expansion Projects Funds Funds $ - $ - $ $ 1,338,105 $ 4,925,428 - 1,432,917 - 59,184 872,179 872,179 - 963,040 6,173,418 - 87,797 3,544 1,401 9,711 2,103 28,904 - - - - 1,200,790 734,152 - - - - 3,810 649,566 18,119,637 6,750 18,785,953 - - - 414,745 2,467,381 653,110 1,401 18,129,348 2,633,882 37,734,953 - - - - 2,411,239 - - 2,490,551 - - 130,322 - - 744,028 - 171,757 171,757 - 670,157 670,157 - - - - 7,938,501 1,260,018 494,670 2,771,297 - 5,274,282 - - - 31,975 1,130,762 - - - 3,783 977,412 1,260,018 494,670 2,771,297 877,672 21,939,011 (606,908) (493,269) 15,358,051 1,756,210 15,795,942 1,438,801 464,328 - 35,758 4,617,896 - - (185,000) (1,819,411) (4,294,796) 16,740 - - - 162,059 1,438,801 464,328 (185,000) (1,783,653) 501,899 831,893 (28,941) 15,173,051 (27,443) 16,297,841 1,313,091 424,694 - 1,123,958 11,887,640 $ 2,144,984 $ 395,753 $ 15,173,051 $ 1,096,515 $ 28,185,481 23 EXHIBIT A-6 TOWN OF WESTLAKE RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES FOR THE YEAR ENDED SEPTEMBER 30, 2015 Net change in fund balances-total governmental funds. $ 16,297,841 Amounts reported for governmental activities in the statement of activities are different because: Governmental funds report capital outlays as expenditures.However,in the statement of activities the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense. 5,431,666 Depreciation expense on capital assets is reported in the statement of activities but does not require the use of current financial resources.Therefore,depreciation expense is not reported as expenditures in the governmental funds. (1,246,759) Governmental funds do not recognize assets contributed by developers.However,in the statement of activities,the fair market value of those assets is recognized as revenue, then allocated over the useful life of the assets and reported as depreciation expense. 130,000 The repayment of the principal of long term debt consumes the current financial resources of governmental funds,but has no effect on net position.The amortization of bond premiums and deferred gaintloss on refunding of long term debt is reported in the statement of activities but does not require the use of current financial resources.Therefore,the effect of the amortization of these various items are not reported in the statement of revenues,expenditures,and changes in fund balance. This amount represents the net effect of the following items: Repayments 1,130,762 Amortization of premium on bonds 43,208 Amortization of deferred loss on refunding (100,852) 1,073,118 Governmental funds reflect the proceeds of capital leases as other financing sources and payments as expenditures.However,in the government-wide statements,the proceeds and payments are reflected as changes in liabilities. This amount represents the net effect of proceeds($16,740)and payments,$79,745. 63,005 Current year changes in accrued interest payable does not require the use of current financial resources;and therefore,are not reported as expenditures in governmental funds. 2,642 Implementation of GASB 68 requires certain expenditures to be de-expended and recorded as deferred outflows of resources.The following is the net effect of current year TMRS pension expense, ($196,848),and contributions made after the measurement date,$228,154. 31,306 Implementation of GASB 68 also affected the Academy.Contributions made to TRS after the measurement date caused the change in net position to increase by$92,325.Contributions made before the measurement period also caused an increase in the change in net position of$12,082. The net share of the Academy's amount of deferred inflows and outflows of resources decreased 74,574 the change in net position by$29,833.This amount is the net effect. Insurance recoveries are recorded as other financing source in the governmental funds financial statements,while in the governmentwide statement of activities,the gain on (50,144) disposal increases net position.The difference is the carrying amount of the assets disposed of. Current year changes in the long-term liability for compensated absences do not require the use of current financial resources;and therefore,are not reported as expenditures in governmental funds. (14,841) Certain revenues in the government-wide statement of activities that do not provide current financial resources are not reported as revenue in the governmental funds. (115,916) CHANGE IN NET POSITION OF GOVERNMENTAL ACTIVITIES-statement of activities $ 21,676,492 The accompanying notes are are an integral part of this statement. 24 EXHIBIT A-7 TOWN OF WESTLAKE STATEMENT OF NET POSITION PROPRIETARY FUNDS SEPTEMBER 30, 2015 Utility Cemetery Fund Fund Total ASSETS: Current Assets Cash and cash equivalents $ 3,478,452 $ 59,774 $ 3,538,226 Accounts receivable 1,025,216 - 1,025,216 Inventories - 96,589 96,589 Restricted cash and investments 219,160 - 219,160 Total current assets 4,722,828 156,363 4,879,191 Noncurrent assets Capital assets: Construction in progress 246,121 - 246,121 Buildings and improvements 14,899,416 - 14,899,416 Wastewwater treatment rights 635,199 - 635,199 Machinery and equipment 3,566,595 - 3,566,595 Less:accumulated depreciation (6,684,343) - (6,684,343) Total capital assets 12,662,988 - 12,662,988 Total noncurrent assets 12,662,988 - 12,662,988 TOTAL ASSETS 17,385,816 156,363 17,542,179 DEFERRED OUTFLOWS OF RESOURCES: Unavailable resources-TMRS pension 42,985 - 42,985 TOTAL DEFERRED OUTFLOWS OF RESOURCES 42,985 - 42,985 LIABILITIES Current liabilities: Accounts payable 548,923 1,625 550,548 Customer deposits payable 219,160 - 219,160 Accrued interest payable 6,371,340 - 6,371,340 Unearned revenue 284,535 - 284,535 Compensated absences-current portion 2,707 2,707 Current portion of bonds payable 21,450 - 21,450 Contractual obligations 99,336 - 99,336 Total current liabilities 7,547,451 1,625 7,549,076 Long-term liabilities: Bonds payable 971,300 - 971,300 Compensated absences 24,365 - 24,365 Contractual obligations 5,160,355 - 5,160,355 Net pension liability 77,836 - 77,836 Total long-term liabilities 6,233,856 - 6,233,856 TOTAL LIABILITIES 13,781,307 1,625 13,782,932 NET POSITION Net investment in capital assets 6,410,547 - 6,410,547 Unrestricted (2,763,053) 154,738 (2,608,315) TOTAL NET POSITION $ 3,647,494 $ 154,738 $ 3,802,232 The accompanying notes are are an integral part of this statement. 25 EXHIBIT A-8 TOWN OF WESTLAKE STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITION PROPRIETARY FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2015 Utility Cemetery Fund Fund Total OPERATING REVENUES: Charges for services $ 3,352,471 $ 13,620 $ 3,366,091 Miscellaneous revenue 197,304 - 197,304 Total operating revenues 3,549,775 13,620 3,563,395 OPERATING EXPENSES: Payroll costs 358,353 - 358,353 Professional and contract services 1,129,962 6,443 1,136,405 Depreciation 493,101 - 493,101 Amortization of wastewater treatment rights 31,774 - 31,774 Water purchases 1,223,393 - 1,223,393 Cost of cemetary lots sold - 397 397 Other operating costs 829,343 457 829,800 Total operating expenses 4,065,926 7,297 4,073,223 Net operating income(loss) (516,151) 6,323 (509,828) NON-OPERATING REVENUES(EXPENSES): Interest income 6,996 87 7,083 Interest expense (795,603) - (795,603) Total non-operating revenues(expenses) (788,607) 87 (788,520) INCOME(LOSS)BEFORE TRANSFERS AND CAPITAL CONTRIBUTIONS (1,304,758) 6,410 (1,298,348) Transfer out (323,100) - (323,100) Total transfers and capital contributions (323,100) - (323,100) Change in net position (1,627,858) 6,410 (1,621,448) Total net position,beginning of year 5,314,072 148,328 5,462,400 Cumulative effect of change in accounting principle (38,720) - (38,720) Total net position,end of year $ 3,647,494 $ 154,738 $ 3,802,232 The accompanying notes are are an integral part of this statement. 26 EXHIBIT A-9 TOWN OF WESTLAKE STATEMENT OF CASH FLOWS PROPRIETARY FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2015 Utility Cemetery CASH FLOWS FROM OPERATING ACTIVITIES: Fund Fund Total Receipts from customers $ 3,350,495 $ 13,678 $ 3,364,173 Payments to employees (372,908) - (372,908) Payments to suppliers (2,851,473) (5,630) (2,857,103) Net cash provided by operating activities 126,114 8,048 134,162 CASH FLOW FROM NONCAPITAL FINANCING ACTIVITIES: Transfer to other funds (323,100) (323,100) Net cash used in noncapital financing activities (323,100) - (323,100) CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES: Principal paid on debt (114,808) - (114,808) Interest paid on debt (139,384) - (139,384) Investment earnings 6,996 87 7,083 Purchase of property and equipment (85,028) - (85,028) Net cash provided by(used in)capital and related financing activities (332,224) 87 (332,137) Net increase(decrease)in cash (529,210) 8,135 (521,075) Cash and cash equivalents at the beginning of the year 4,226,822 51,639 4,278,461 Cash and cash equivalents at the end of the year $ 3,697,612 $ 59,774 $ 3,757,386 RECONCILIATION OF TOTAL CASH AND CASH EQUIVALENTS: Cash and cash equivalents $ 3,478,452 $ 59,774 $ 3,538,226 Restricted cash and cash equivalents 219,160 219,160 Total cash and cash equivalents 3,697,612 59,774 3,757,386 RECONCILIATION OF OPERATING INCOME(LOSS)TO NET CASH PROVIDED BY OPERATING ACTIVITIES: Operating income(loss) (516,151) 6,323 (509,828) Adjustments to reconcile operating income to net cash provided by operating activities: Depreciation and amortization 524,875 - 524,875 Pension expense 24,329 - 24,329 Changes in operating assets and liabilities: Receivables (189,913) 58 (189,855) Prepaid Items Inventory - 397 397 Compensated absences 6,156 - 6,156 Deferred outflows of resource (28,198) - (28,198) Accounts payable 314,383 1,270 315,653 Customer deposits payable 24,450 - 24,450 Deferred revenue (33,817) - (33,817) Net cash provided by operating activities $ 126,114 $ 8,048 $ 134,162 The accompanying notes are are an integral part of this statement. 27 T IYIYY,yI� TOWN OF WESTLAKE EXHIBIT A-10 TOWN OF WESTLAKE STATEMENT OF FIDUCIARY NET POSITION AGENCY FUND SEPTEMBER 30, 2015 PID Agency Fund ASSETS Restricted cash and cash equivalents $ 4,372,587 Total Assets $ 4,372,587 LIABILITIES Liability to bond holders $ 4,372,587 Total Liabilities $ 4,372,587 The accompanying notes are are an integral part of this statement. 28 TOWN OF WESTLAKE DISCRETELY PRESENTED COMPONENT UNITS COMBINING STATEMENT OF NET POSITION SEPTEMBER 30, 2015 Texas Student Texas Student Housing Authority Housing Jefferson Commons Corporation at Town Lake Denton Project Project ASSETS Cash and cash equivalents $ 367,085 $ 256,209 Accounts receivable(net of allowance) 21,644 17,694 Prepaid rent 27,965 - Restricted assets: Cash and cash equivalents 1,933,280 232,333 Capital assets: Land 2,200,000 2,182,816 Buildings and improvements 25,705,000 16,963,841 Machinery and equipment 1,253,841 1,211,085 Less:accumulated depreciation (13,542,440) (7,948,001) Total assets 17,966,375 12,915,977 LIABILITIES AND NET POSITION LIABILITIES: Accounts payable and accrued expenses 287,802 340,452 Unearned revenue 187,524 145,275 Accrued interest payable 7,289,475 4,182,603 Bonds payable 25,605,131 19,627,520 Total liabilities 33,369,932 24,295,850 NET POSITION: Net investment in capital assets (9,988,730) (7,217,779) Unrestricted (5,414,827) (4,162,094) Total net position $ (15,401557) $ (11,379,873) The accompanying notes are are an integral part of this statement. 29 EXHIBIT A-11 Texas Student Housing Corporation Texas Student College Station Housing Project Authority Total $ 5,174,458 $ 680,618 $ 6,478,370 198,464 973 238,775 52,996 - 80,961 2,023,193 - 4,188,806 2,899,597 - 7,282,413 26,885,312 - 69,554,153 3,437,139 - 5,902,065 (12,694,227) (34,184,668) 27,976,932 681,591 59,540,875 215,235 855 844,344 1,770,049 35,083 2,137,931 13,792,220 - 25,264,298 29,429,200 - 74,661,851 45,206,704 35,938 102,908,424 (8,901,379) - (26,107,888) (8,328,393) 645,653 (17,259,661) $ (17,229,772) $ 645,653 $ (43,367,549) 30 TOWN OF WESTLAKE DISCRETELY PRESENTED COMPONENT UNITS COMBINING STATEMENT OF ACTIVITIES FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2015 Program Revenues Charges for Operating Grants Capital Grants Functions/Programs Expenses Services and Contributions and Contributions Business-type activities: Texas Student Housing Authority $ 248,967 $ 359,193 $ - $ - Texas Student Housing Authority: College Station Project 8,054,674 6,006,756 - - Jefferson Commons at Town Lake 4,138,075 3,208,107 - - Denton Project 5,553,484 4,914,769 - - Total business-type activities 17,995,200 14,488,825 - - Total primary government $ 17,995,200 $ 14,488,825 $ - $ - GENERAL REVENUES: Interest Income Total general revenues Change in Net Postion NET POSITION,beginning of year NET POSITION,end of year The accompanying notes are an integral part of this statement. 31 EXHIBIT A-12 Texas Student Texas Student Texas Student Housing Authority Housing Housing Jefferson Commons Corporation Texas Student Corporation at Town Lake College Station Housing Denton Project Project Project Authority Total $ - $ - $ - $ 110,226 $ 110,226 (2,047,918) - (2,047,918) (929,968) - - (929,968) (638,715) - - - (638,715) (638,715) (929,968) (2,047,918) 110,226 (3,506,375) $ (638,715) $ (929,968) $ (2,047,918} $ 110,226 $ (3,506,375) 1,895 100 818 398 3,211 1,895 100 818 398 3,211 (636,820) (929,868) (2,047,100) 110,624 (3,503,164) (14,766,737) (10,450,005) (15,182,672) 535,029 (39,864,385) $ (15,403,557) $ (11,379,873) $ (17,229,772) $ 645,653 $ (43,367,549) 32 w 1 M TOWN OF WESTLAKE TOWN OF WESTLAKE NOTES TO THE FINANCIAL STATEMENTS NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The Town of Westlake, Texas (the Town)was incorporated under the provisions of the laws of the State of Texas on December 26, 1956. The Town operates under a Council- Manager form of government and provides the following services as authorized by the laws of the State of Texas: public safety; cultural and recreation; and economic development. The accounting and reporting policies of the Town conform to accounting principles generally accepted in the United States of America for local governments. Generally accepted accounting principles (GAAP) for local governments include those principles prescribed by the Governmental Accounting Standards Board (GASB). The following is a summary of the more significant accounting and reporting policies: Financial Reporting Entity The accompanying financial statements present the government and its component units, entities for which the government is considered to be financially accountable. Blended component units, although legally separate entities, are, in substance, part of the Town's operations and are appropriately presented as funds of the primary government. Discretely presented component units, on the other hand, are reported in a separate column in the government-wide financial statements to emphasize it is legally separate from the Town. Based on these criteria, the financial information of the following entities have been blended or discretely presented within the financial statements: Lone Star Public Facilities Corporation, 4B Economic Development Corporation, Westlake Academy, Texas Student Housing Authority, Texas Student Housing Authority — Jefferson Commons at Town Lake Project, Texas Student Housing Corporation — College Station Project and Texas Student Housing Corporation—Denton Project. The Texas Student Housing Authority, Texas Student Housing Authority— Jefferson Commons at Town Lake Project, Texas Student Housing Corporation — College Station Project, and Texas Student Housing Corporation — Denton Project (collectively, Texas Student Housing Entities) are Texas nonprofit organizations as a duly constituted authority of the Town pursuant to Section 53.35(b) of the Texas Education Code, as amended (Act). Texas Student Housing Entities' primary purpose is to construct, own, and operate student housing facilities on college campuses in Texas. The board consists of seven directors which are appointed by the Town's governing body and has the ability to remove at will the appointed members; thus, the governing body can impose its will on the organizations. However, the board is not substantively the same as the Town's governing body; therefore, the Texas Student Housing Entities are reported as discretely presented component units (enterprise funds). The Town is not responsible for the long-term debt of the Texas Student Housing Entities. The Texas Student Housing Entities' year-end is August 31. 33 TOWN OF WESTLAKE NOTES TO THE FINANCIAL STATEMENTS NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES—CONTINUED Component Units—Continued Discretely Presented—Continued Separately issued financial reports are available for the all the Texas Student Housing Entities. These reports may be obtained by contacting the following office. Texas Student Housing Authority 99 Trophy Club Drive Trophy Club, Texas 76262 Blended Lone Star Public Facilities Corporation is a Texas nonprofit corporation that acts on behalf of the Town to further the public purposes under the Public Facilities Corporation Act, as it's duly constituted authority and instrumentality. The board of directors, appointed by the Town's governing body, is comprised of seven members, of whom five must be members of the Town's governing body. Since the board of directors is substantively the same as the Town's governing body, and a financial benefit relationship exists, the entity has been reported as a blended component unit of the Town. 4B Economic Development Corporation is a Texas nonprofit industrial corporation under the Development Corporation Act of 1979 formed to promote economic development within the Town and the State of Texas in order to eliminate unemployment and underemployment, and to promote and encourage employment and the public welfare of, for, and on behalf of the Town by developing, implementing, financing, and providing one or more projects defined and permitted under Section 4B of the Act. The board of directors is composed of seven persons appointed by the members of the Town's governing board. Four of the members of the board of directors are members of the Town's governing board. Since the board of directors is substantively the same as the Town's governing body, and a financial benefit relationship exists, the entity has been reported as a blended component unit of the Town. Westlake Academy (Academy) is an open-enrollment charter school, as provided by Subchapter D, Chapter 12, of the Texas Education Code. The Town of Westlake (Charter Holder) applied for and became the first municipality in Texas to ever receive this special charter designation. The board consists of six trustees and is appointed by the Town's governing body. Currently, all the members of the board of trustees are members of the Town's governing body. Since the board of directors is substantively the same as the Town's governing body, and a financial benefit relationship exists, the entity has been reported as a blended component unit of the Town. The Academy's year-end is August 31. 34 TOWN OF WESTLAKE NOTES TO THE FINANCIAL STATEMENTS NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES—CONTINUED Government-wide and Fund Financial Statements The government-wide financial statements (i.e., the Statement of Net Position and the Statement of Activities) report information on all of the non-fiduciary activities of the Town. Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from business-type activities,which rely to a significant extent on fees and charges for support. Likewise, the primary government is reported separately from certain legally separate component units for which the primary government is financially accountable. The statement of activities demonstrates the degree to which the direct expenses of a given function or segment is offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. Program revenues include 1) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function or segment and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment. Taxes and other items not properly included among program revenues are reported instead as general revenues. Separate financial statements are provided for governmental funds and proprietary funds. Major individual Governmental Funds and major individual Enterprise Funds are reported as separate columns in the fund financial statements. Measurement Focus, Basis of Accounting, and Financial Statement Presentation The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting, as are the proprietary fund financial statements. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met. Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the Town considers revenues to be available if they are collected within 60 days of the end of the current fiscal period. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures, as well as expenditures related to compensated absences and claims and judgments, are recorded only when payment is due. 35 TOWN OF WESTLAKE NOTES TO THE FINANCIAL STATEMENTS NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES—CONTINUED Measurement Focus, Basis of Accounting, and Financial Statement Presentation — Continued Sales taxes, franchise taxes, licenses, and interest associated with the current fiscal period are all considered to be susceptible to accrual and so have been recognized as revenues of the current fiscal period. All other revenue items are considered to be measurable and available only when cash is received by the Town. The Town uses funds to report on its financial position and the results of its operations. Fund accounting is designed to demonstrate legal compliance and to aid financial management by segregating transactions related to certain government functions or activities. A fund is a separate accounting entity with a self-balancing set of accounts. Governmental Funds are those through which most governmental functions of the Town are financed. The acquisition, use, and balances of the Town's expendable financial resources and the related liabilities (except those accounted for in the proprietary fund type) are accounted for through governmental funds. The measurement focus is upon determination of changes in financial position, rather than upon income determination. The Town reports the following major governmental funds: General Fund - to account for all financial resources except those required to be accounted for in another fund. The General Fund balance is available for any purpose, provided it is expended or transferred in accordance with the legally adopted budget of the Town. Westlake Academy Fund - to account for all local, state and federal revenue and related educational expenditures of the Academy. Debt Service Fund - to account for resources accumulated and payments made for principal and interest on long-term general obligation debt of governmental funds. Capital Projects Fund-to account for proceeds from long-term financing and revenue and expenditures related to authorized construction and other capital asset acquisitions other than those related to the expansion of Westlake Academy facilities. Westlake Academy Expansion Fund — to account for proceeds from long-term financing and revenue and expenditures related to authorized construction related to the expansion of Westlake Academy facilities. Solana Public Improvement District(PID) Capital Projects Fund—to account for the acquisition or construction of capital facilities and improvements relating to the Solana public improvement district. 36 TOWN OF WESTLAKE NOTES TO THE FINANCIAL STATEMENTS NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES—CONTINUED Measurement Focus, Basis of Accounting, and Financial Statement Presentation — Continued In addition,the Town reports the following nonmajor governmental funds: Visitors Association Fund - to account for municipal hotel occupancy taxes collected and expenditures to promote tourism and the convention and hotel industry. Lone Star Public Facilities Corporation - to account for investment activity relating to the Lone Star Public Facilities Corporation. 4B Economic Development Corporation - to account for sales tax collected to fund the activities of the 413 Economic Development Corporation. Economic Development Fund - to account for sales tax and hotel occupancy tax collected to fund activity relating to Economic Development agreements. The Town adopts an annual appropriated budget for all governmental funds except capital projects, Solana PID capital projects, and Westlake Academy Expansion funds, which are project-length based budgets. A budgetary comparison schedule has been provided for all appropriate funds to demonstrate compliance with the budget. Proprietary Funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund's principal ongoing operations. The principal operating revenues of the Town's Enterprise Fund are charges to customers for sales and services. Operating expenses for the Enterprise Fund include the cost of sales and services, administrative expenses, and depreciation on capital assets. All revenue and expenses not meeting this definition are reported as nonoperating revenue and expenses. The Town reports the following major proprietary funds: Utility Fund - to account for revenues and expenses related to providing water and sewer services to the general public on a continuing basis. Cemetery Fund-to account for the operations of the Town's cemetery. The Town reports the following fiduciary fund: Solana PID Agency Fund — to account for bond proceeds, assessments, and related debt associated with bonds issued by the Town as an agent for the Solana public improvement district. As a general rule, the effect of interfund activity has been eliminated from the government-wide financial statements. Exceptions to this general rule are charges between the Town's water and wastewater function and various other functions of the government. Elimination of these charges would distort the direct costs and program revenue reported for the various functions concerned. 37 TOWN OF WESTLAKE NOTES TO THE FINANCIAL STATEMENTS NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES—CONTINUED Measurement Focus, Basis of Accounting, and Financial Statement Presentation — Continued Amounts reported as program revenues include: 1) charges to customer or applicants for goods, services, or privileges provided, 2) operating grants and contributions, and 3) capital grants and contributions, including special assessments. Internally dedicated resources are reported as general revenues rather than as program revenue. Likewise, general revenue includes all taxes. Assets, Liabilities, and Net Position or Equity Cash and Cash Equivalents Cash and investments of all funds, including restricted cash, are available upon demand and are considered to be"cash equivalents." For purposes of the statement of cash flows, the Town considers highly-liquid investments (including restricted assets) with an original maturity of three months or less when purchased to be cash equivalents. State statutes authorize the Town 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; (3) other obligations, the principal of, and interest on, which are unconditionally guaranteed or insured by the State of Texas or the United States; (4) obligations of states, agencies, counties, cities, and other political subdivisions of any state having been rated as to investment quality by a nationally recognized investment rating firm and having received a rating of not less than "A" or its equivalent; (5) certificates of deposit by state or national banks domiciled in this state that are (a) guaranteed or insured by the Federal Deposit Insurance Corporation, or its successor; or, (b) secured by obligations that are described by (1) - (4); or (6)fully collateralized direct repurchase agreements having a defined termination date, secured by obligations described by (1) pledged with third-party selected or (2) approved by the Town, and placed through a primary government securities dealer. All investments are recorded at fair value based on quoted market prices. Fair value is the amount at which a financial instrument could be exchanged in a current transaction between willing parties. Receivables and Payables Transactions between funds that are representative of lending/borrowing arrangements outstanding at the end of the fiscal year are referred to as"due to/from other funds" (i.e., the current portion of interfund loans) or "advances to/from other funds" (i.e., the non-current portion of interfund loans). All other outstanding balances between funds are reported as "due to/from other funds." Any residual balances outstanding between the governmental activities and business-type activities are reported in the government-wide financial statements as "internal balances." 38 TOWN OF WESTLAKE NOTES TO THE FINANCIAL STATEMENTS NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES— CONTINUED Assets, Liabilities, and Net Position or Equity—Continued Receivables and Payables—Continued Advances between funds, as reported in the fund financial statements, are offset by nonspendable fund balance in applicable governmental funds to indicate that they are not available for appropriation and are not expendable available financial resources. The Town's property taxes are levied on October 1 on the assessed value listed as of the prior January 1 for all real and business personal property located in the Town. Assessed values are established at 100% of estimated market value. Property taxes attach as an enforceable lien on property as of January 1. Taxes are due by January 31 following the October 1 levy date and are considered delinquent after January 31 of each year. All property tax receivables are shown net of an allowance for uncollectibles. The net property tax receivable allowance is equal to management's estimate of uncollectible outstanding property taxes at September 30, 2015. Restricted Assets Certain bond proceeds, as well as certain resources set aside for their repayment, are classified as restricted assets on the balance sheet because their use is limited by applicable bond covenants. Inventories and prepaid items Inventories, which are expended as they are consumed, are stated at the lower of cost or market on a first-in, first-out basis. Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items in both the government-wide and fund financial statements. Fund Changes and Transactions Between Funds Legally authorized transfers are treated as transfers in and out and are included as other financing sources (uses) of both governmental and proprietary funds. The Town allocates an indirect cost percentage of the salaries, wages and related costs of personnel who perform administrative services as well as other indirect costs necessary for the operation of various funds. Expenses are budgeted and paid from the appropriate fund. 39 TOWN OF WESTLAKE NOTES TO THE FINANCIAL STATEMENTS NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES—CONTINUED Assets, Liabilities, and Net Position or Equity—Continued Capital Assets All capital assets are valued at historical cost or estimated historical cost if actual historical cost is not available. The cost of nominal maintenance and repairs that do not add value to the asset or materially extend assets' lives are not capitalized. Donated assets are valued at their fair market value on the date donated. Assets capitalized have an original cost of$5,000 or more and three years or more of life. All infrastructure assets (e.g., roads, bridges, sidewalks, and similar items), regardless of the acquisition date or amount, have been included. Estimated historical cost for initial reporting of infrastructure assets (those reported by governmental activities) was valued by estimating the current replacement cost of the infrastructure and using an index to deflate the cost to the estimated acquisition/construction year. As the Town constructs or acquires additional capital assets, including infrastructure assets, they are capitalized and reported at historical cost. Depreciation has been calculated on each class of depreciable property using the straight-line method. Estimated useful lives are as follows: Assets Years Water and sewer system 10-50 Buildings 20-50 Machinery and equipment 3-30 Improvements 5-30 Information systems and software 3 Compensated Absences The Town's policy allows employees to earn 5 days of vacation and 5 days of sick leave between six months and one year of service, and 10 days of vacation and 10 days of sick leave between one year and two years of service and each successive year through five years of service. After completion of 5 years of service, 15 days of vacation and 15 days of sick leave per year are earned. After completion of 10 years of service, 20 days of vacation and 20 days of sick leave per year are earned. The Town makes sick and vacation time available in full at the beginning of each year, and hours are actually earned throughout the year. Unused, earned vacation hours are paid upon termination or retirement at the employee's normal hourly rate; accumulated, unused sick time is only payable upon retirement, death of the employee, or other circumstances when authorized by the Town Manager. 40 TOWN OF WESTLAKE NOTES TO THE FINANCIAL STATEMENTS NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES—CONTINUED Assets, Liabilities, and Net Position or Equity—Continued Long-term Obligations In the government-wide financial statements and proprietary fund types in the fund financial statements, long-term debt and other long-term obligations are reported as liabilities in the applicable governmental activities, business-type activities, or proprietary fund type statement of net position. Bond premiums and discounts are deferred and amortized over the life of the bonds using the straight-line method, which approximates the effective interest method. Bonds payable are reported net of the applicable bond premium or discount. In the fund financial statements, governmental fund types recognize bond premiums and discounts, as well as issuance costs during the current period. The face amount of the debt issued is reported as other financing sources. Premiums received on debt issuances are reported as other financing sources while discounts are reported as other financing uses. Issuance costs, even if withheld from the actual proceeds, are reported as expenditures. Fund Equity and Net Position The governmental fund financial statements present fund balances based on classifications that comprise a hierarchy that is based primarily on the extent to which the Town is bound to honor constraints on the specific purposes for which amounts in the respective governmental funds can be spent. The classifications used in the governmental fund financial statements are as follows: • Nonspendable: This classification includes amounts that cannot be spent because they are either (a) not in spendable form or (b) are legally or contractually required to be maintained intact. Nonspendable items are not expected to be converted to cash or are not expected to be converted to cash within the next year. • Restricted: This classification includes amounts for which constraints have been placed on the use of the resources either (a) externally imposed by creditors, grantors, contributors, or laws or regulations of other governments, or (b) imposed by law through constitutional provisions or enabling legislation. • Committed: This classification includes amounts that can be used only for specific purposes pursuant to constraints imposed by board resolution of the Town council, the Town's highest level of decision making authority. These amounts cannot be used for any other purpose unless the Town council removes or changes the specified use by taking the same type of action that was employed when the funds were initially committed. This classification also includes contractual obligations to the extent that existing resources have been specifically committed for use in satisfying those contractual requirements. 41 TOWN OF WESTLAKE NOTES TO THE FINANCIAL STATEMENTS NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES—CONTINUED Assets, Liabilities, and Net Position or Equity—Continued Fund Equity and Net Position—Continued • Assigned: This classification includes amounts that are constrained by the Town's intent to be used for a specific purpose but are neither restricted nor committed. In the General Fund, assigned amounts represent intended uses established by the Town Council or a Town official delegated that authority by Town Charter or ordinance. • Unassigned: This classification includes the residual fund balance for the General Fund. The unassigned classification also includes negative residual fund balance of any other governmental fund that cannot be eliminated by offsetting of assigned fund balance amounts. In the government-wide financial statements, net position represents the difference between assets and liabilities. Net investment in capital assets consists of capital assets, net of accumulated depreciation, reduced by the outstanding balances of any borrowing used for the acquisition, construction or improvements of those assets, and adding back unspent proceeds. Net position is reported as restricted when there are limitations imposed on its use either though the enabling legislations adopted by the Town or through external restrictions imposed by creditors, grantors or laws or regulations of other governments. The government-wide and fund level financial statements report restricted fund balances for amounts not available for appropriation or legally restricted for specific uses. When an expenditure is incurred for purposes for which both restricted and unrestricted fund balance is available, it is the Town's policy to use restricted resources first, then unrestricted resources as needed. When an expenditure is incurred for which committed, assigned, or unassigned fund balances are available, the Town considers amounts to have been spent first out of committed funds, then assigned funds, and finally unassigned funds. Summary of Significant Accounting Policies Pensions - For purposes of measuring the net pension liability, deferred outflows of resources and deferred inflows of resources related to pensions, and pension expense, information about the Fiduciary Net Position of the Texas Municipal Retirement System (TMRS) and additions to/deductions from TMRS's Fiduciary Net Position have been determined on the same basis as they are reported by TMRS. For this purpose, plan contributions are recognized in the period that compensation is reported for the employee, which is when contributions are legally due. Benefit payments and refunds are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value. 42 TOWN OF WESTLAKE NOTES TO THE FINANCIAL STATEMENTS NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES—CONTINUED Estimates The preparation of financial statements, in conformity with U.S. generally accepted accounting principles, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual amounts could differ from those estimates. Subsequent Events The Town has evaluated all events or transactions that occurred after September 30, 2015 up through February 15, 2016, the date the financial statements were issued. NOTE 2. CASH AND INVESTMENTS Legal provisions generally permit the Town to invest in certificates of deposit, repurchase agreements, public funds investment pools, direct obligations of the United States of America or its subdivisions and state and local government securities. The Public Funds Investment Act (Government Code Chapter 2256) contains specific provisions in the areas of investment practices, management reports and establishment of appropriate policies. Among other things, it requires the Town to adopt, implement, and publicize its investment policy. That policy must address the following areas: (1) safety of principal and liquidity, (2) portfolio diversification, (3) allowable investments, (4) acceptable risk levels, (5) expected rates of return, (6) maximum allowable stated maturity of portfolio investments, (7) maximum average dollar - weighted maturity allowed based on the stated maturity date for the portfolio, (8) investment staff quality and capabilities, and (9) bid solicitation preferences for certificates of deposit. Statutes and the Town's investment policy authorized the Town to invest in the following investments as summarized in the table below: Maximum Maximum Authorized Maximum Percentage Investment Investment Type Maturity of Portfolio In One Issuer Obligations of the U.S. Government, its agencies and instrumentalities 2 years None None Certificates of deposit 1 year None None Mutual funds 2 years 80% None Investment pools - None None 43 TOWN OF WESTLAKE NOTES TO THE FINANCIAL STATEMENTS NOTE 2. CASH AND INVESTMENTS—CONTINUED The Town did not engage in repurchase or reverse repurchase agreement transactions during the current year. At year end, the carrying amount of the Town's deposits was $16,077,071 and the bank balance was $17,597,039. The bank balance was completely covered by federal deposit insurance and collateral held by the pledging financial institution in the Town's name. At year end, the carrying amount of the component units' deposits was $10,667,176 and the bank balance was $10,742,156. The bank balance was completely covered by federal deposit insurance and collateral held by the pledging financial institution in the component units' names. The carrying amount consists of$6,478,370 in cash and cash equivalents and $4,188,806 in restricted cash and cash equivalents. At September 30, 2015, the Town's cash and cash equivalents consist of and are classified in the accompanying financial statements are follows: Primary government: Cash and cash equivalents $ 15,658,261 Restricted cash and investments 15,965,178 Total primary government 31,623,439 Fiduciary funds: Restricted cash and cash equivalents 4,372,587 Total cash and investments $ 35,996,026 Deposits with financial institutions $ 16,077,071 Investments 19,918,955 Total cash and investments $ 35,996,026 Disclosures Relating to Interest Rate Risk This is the risk that changes in market interest rates will adversely affect the fair value of an investment. Generally, the longer the maturity of an investment the greater the sensitivity of its fair value to changes in market interest rates. In order to limit interest and market rate risk from changes in interest rates, the Town's investment policy sets a maximum stated maturity limit of two years for obligations of the United States Government, its agencies and instrumentalities (excluding mortgage backed securities) and one year for fully insured or collateralized certificates of deposit. No more than 80% of the Town's monthly average balance may be invested in money market funds. Additionally, the Town invests in an investment pool that purchases a combination of shorter term investments with an average maturity of 48 days thus reducing the interest rate risk. Information about the sensitivity of the fair values of the Town's investments to market interest rate fluctuations is provided by the following table that shows the distribution of the Town's Investments. 44 TOWN OF WESTLAKE NOTES TO THE FINANCIAL STATEMENTS NOTE 2. DEPOSITS AND INVESTMENTS—CONTINUED Disclosures Relating to Interest Rate Risk—Continued As of September 30, 2015, the Town's investments were as follows: Weighted Carrying Average Investment Type Amount Fair Value Maturity(days) TexPool $ 350 $ 350 48 days Commerical Paper 19,918,605 19,918,605 1 day Total $ 19,918,955 $ 19,918,955 Disclosures Relating to Credit Risk This is the risk that an issuer of an investment will not fulfill its obligation to the holder of the investment. This is measured by the assignment of a rating by a nationally recognized statistical rating organization. Presented below is the minimum rating required by (where applicable) the Public Funds Investment Act, the Town's investment policy, or debt agreements, and the actual rating as of year-end for each investment type. Minimum Rating Carrying Fair Legal as of Primary government Amount Value Rating Year-end Investments: TexPool $ 350 $ 350 N/A AAA-m Commercial Paper 19,918,605 19,918,605 N/A A-1 Total $ 19,918,955 $ 19,918,955 Disclosures Relating to Concentration of Credit Risk The Town's investment policy is to avoid a concentration of assets in a specific maturity, a specific issue, or a specific class of investments. Disclosures Relating to Custodial Credit Risk Custodial credit risk for deposits is the risk that, in the event of the failure of a depository financial institution, a government will not be able to recover its deposits or will not be able to recover collateral securities that are in the possession of an outside party. The custodial credit risk for investments is the risk that, in the event of the failure of the counterparty to a transaction, a government will not be able to recover the value of its investment or collateral securities that are in the possession of another party. The Public Funds Investment Act does not contain legal or policy requirements that would limit the exposure to custodial credit risk for deposits or investments, other than the following provision for deposits: The Public Funds Investment Act requires that a financial institution secure deposits made by state or local governmental units by pledging securities in an undivided collateral pool held by a depository regulated under state law(unless so waived by the governmental unit). The market value of the pledged securities in the collateral pool must equal at least the bank balance less the FDIC insurance at all times. 45 TOWN OF WESTLAKE NOTES TO THE FINANCIAL STATEMENTS NOTE 2. DEPOSITS AND INVESTMENTS—CONTINUED Disclosures Relating to Custodial Credit Risk—Continued The Town requires all deposits to be covered by Federal Depository Insurance Corporation (FDIC) insurance and/or collateralized by qualified securities pledged by the Town's depository in the Town's name and held by the depository's agent. As of September 30, 2015, the Town's entire cash deposits with financial institutions in excess of federal depository insurance were fully collateralized. Investment in State Investment Pools On September 1, 1989, local government investment pools became authorized investments for the majority of public entities in Texas. The Interlocal Cooperation Act was amended by the 71St Texas Legislature to facilitate the creation of local government investment pools in Texas. This act permits the creation of investment pools to which a majority of political subdivisions (local governments) may delegate, by contract, the authority to make investments purchased with local investment funds and to hold legal title as custodian of the investments. TexPool was organized to conform with the Interlocal Cooperation Act, Chapter 791 of the Texas Government Code, and the Public Funds Investment Act, Chapter 2256 of the Texas Government Code. During the year ended September 30, 2015, the Town had investments with TexPool. TexPool, a public funds investment pool created by the Treasurer of the State of Texas acting by and through the Texas Treasury Safekeeping Trust Company, which is empowered to invest funds and acts as custodian of investments purchased with local investment funds. These investments are not required to be categorized because the investor is not issued securities, but rather it owns an undivided beneficial interest in the assets of the respective funds. The fair value of the position in TexPool is the same as the value of the pool shares. Restricted Cash Proprietary Fund Within the proprietary funds, the $219,160 of restricted cash represents customer deposits received for water and sewer usage that are refundable upon termination of service. Discretely Presented Component Units Within the discretely presented component units, the $4,188,806 in restricted cash and cash equivalents represents funds held for debt service. 46 TOWN OF WESTLAKE NOTES TO THE FINANCIAL STATEMENTS NOTE 3. RECEIVABLES Governmental activities receivable balance consists of the following as of September 30, 2015: Governmental Funds Debt Total Westlake Service Capital Nonmajor Governmental General Academy Fund Projects Fund Funds Receivables: Sales tax $ 464,485 $ - $ - $ - $ 192,103 $ 656,588 Property tax 7,172 - 898 - 8,070 Other taxes 15,875 - - - 72,845 88,720 Franchise tax 228,280 - - - - 228,280 Accounts 46,115 - - - - 46,115 Other 94,244 366,320 - 26,389 - 486,953 Gross receivables 856,171 366,320 898 26,389 264,948 1,514,726 Less:allowance for uncollectibles (26,067) - (224) - - (26,291) Net total receivables $ 830,104 $ 366,320 $ 674 $ 26,389 $ 264,948 $1,488,435 Business-type receivables balance consists of the following as of September 30, 2015: Business-Type Activities utility Cemetery Fund Fund Total Receivables: Sales tax $ - $ - $ - Property tax - - - Other taxes - - - Franchise tax - - - Accounts 1,025,216 - 1,025,216 Other - - - Gross receivables 1,025,216 - 1,025,216 Less: allowance for uncollectibles - - - Net total receivables $ 1,025,216 $ - $ 1,025,216 47 TOWN OF WESTLAKE NOTES TO THE FINANCIAL STATEMENTS NOTE 4. CAPITAL ASSETS Capital asset activity for the year ended September 30, 2015, was as follows: Primary Government Beginning Ending Balance Increases Decreases Transfers Balance Governmental activities: Capital assets,not being depreciated: Land $ 11,896,663 $ 1 $ $ - $ 11,896,664 Construction in progress 2,468,438 2,877,036 (2,237,950) 3,107,524 Total assets not being depreciated 14,365,101 2,877,037 (2,237,950) 15,004,188 Capital assets,being depreciated: Capital improvements 11,374,376 905,115 2,237,950 14,517,441 Buildings 31,625,654 696,832 (59,900) - 32,262,586 Machinery and equipment 3,336,556 990,758 (8,500) - 4,318,814 Information systems and software 105,564 91,924 _ 197,488 Total capital assets being depreciated 46,442,150 2,684,629 (68,400) 2,237,950 51,296,329 Less accumulated depreciation: Capital improvements (3,559,654) (417,879) - - (3,977,533) Buildings (4,615,801) (644,915) 9,756 - (5,250,960) Machinery and equipments (2,367,539) (165,555) 8,500 (2,524,594) Information systems and software (58,571) (18,410) (76,981) Total accumulated depreciation (10,601,565) (1,246,759) 18,256 (11,830,068) Total capital assets being depreciated 35,840,585 1,437,870 (50,144) 2,237,950 39,466,261 Governmental activities capital assets,net $ 50,205,686 $ 4,314,907 $ (50,144) $ $ 54,470,449 Beginning Ending Balance Increases Decreases Transfers Balance Business-type activities: Capital assets,not being depreciated: Construction in progress $ 246,121 $ $ $ $ 246,121 Total assets not being depreciated 246,121 246,121 Capital assets,being depreciated: Capital improvements 14,882,835 16,581 14,899,416 Wastewater treatment rights 635,199 - 635,199 Machinery and equipment 3,498,148 68,447 3,566,595 Total capital assets being depreciated 19,016,182 85,028 19,101,210 Less accumulated depreciation: Capital improvements (4,072,978) (365,149) (4,438,127) Wastewater treatment rights (449,933) (31,774) - (481,707) Machinery and equipment (1,636,557) (127,952) (1,764,509) Total accumulated depreciation (6,159,468) (524,875) (6,684,343) Total capital assets being depreciated 12,856,714 (439,847) 12,416,867 Business-type activities capital assets,net $ 13,102,835 $ (439,847) $ $ $ 12,662,988 48 TOWN OF WESTLAKE NOTES TO THE FINANCIAL STATEMENTS NOTE 4. CAPITAL ASSETS—CONTINUED Depreciation was charged to departments of the primary government as follows: Governmental activities: General government $ 827,326 Public safety 79,419 Public works 340,014 Total depreciation expense-governmental activities $ 1,246,759 Business-type activities: Water and sewer $ 524,875 A summary of discretely presented component units' capital assets at September 30, 2015 follows: Texas Student Housing Corporation—Denton Project Beginning Ending Balance Increases Decreases Balance Capital assets,not being depreciated: Land $ 2,200,000 $ - $ - $ 2,200,000 Total assets not being depreciated 2,200,000 - - 2,200,000 Capital assets,being depreciated: Buildings 25,705,000 - - 25,705,000 Furniture and fixtures 1,253,841 - - 1,253,841 Total capital assets being depreciated 26,958,841 - - 26,958,841 Less accumulated depreciation: Buildings (11,495,847) (856,833) - (12,352,680) Furniture and fixtures (1,181,310) (8,450) - (1,189,760) Total accumulated depreciation (12,677,157) (865,283) - (13,542,440) Total capital assets being depreciated 14,281,684 (865,283) - 13,416,401 Capital assets,net $ 16,481,684 $ (865,283) $ - $ 15,616,401 49 TOWN OF WESTLAKE NOTES TO THE FINANCIAL STATEMENTS NOTE 4. CAPITAL ASSETS—CONTINUED Texas Student Housing Authority—Jefferson Commons at Town Lake Project Beginning Ending Balance Increases Decreases Balance Capital assets,not being depreciated: Land $ 2,182,816 $ - $ - $ 2,182,816 Total assets not being depreciated 2,182,816 - - 2,182,816 Capital assets,being depreciated: Building and improvements 13,270,150 - - 13,270,150 Capitalized purchase price 887,095 - - 887,095 Land improvements 2,806,596 - - 2,806,596 Unit appliances 295,134 - - 295,134 Furniture and fixtures 915,951 - - 915,951 Total capital assets being depreciated 18,174,926 - - 18,174,926 Less accumulated depreciation: Building and improvements (4,976,306) (442,338) - (5,418,644) Capitalized purchase price (313,325) (28,485) - (341,810) Land improvements (882,909) (93,553) - (976,462) Unit appliances (295,134) - - (295,134) Furniture and fixtures (915,951) - - (915,951) Total accumulated depreciation (7,383,625) (564,376) - (7,948,001) Total capital assets being depreciated 10,791,301 (564,376) - 10,226,925 Capital assets,net $ 12,974,117 $ (564,376) $ - $ 12,409,741 50 TOWN OF WESTLAKE NOTES TO THE FINANCIAL STATEMENTS NOTE 4. CAPITAL ASSETS-CONTINUED Texas Student Housing Corporation-College Station Project Beginning Ending Balance Increases Decreases Balance Capital assets,not being depreciated: Land $ 2,899,597 $ - $ $ 2,899,597 Total assets not being depreciated 2,899,597 2,899,597 Capital assets,being depreciated: Buildings 26,885,312 - - 26,885,312 Furniture and fixtures 3,437,138 3,437,138 Total capital assets being depreciated 30,322,450 30,322,450 Less accumulated depreciation: Buildings (8,853,174) (896,177) - (9,749,351) Furniture and fixtures (2,859,802) (85,073) (2,944,875) Total accumulated depreciation (11,712,976) (981,250) (12,694,226) Total capital assets being depreciated 18,609,474 (981,250) - 17,628,224 Capital assets,net $ 21,509,071 $ (981,250) $ $$ 20 NOTE 5. LONG-TERM DEBT A summary of long-term debt transactions for the year ended September 30, 2015, was as follows: Amount Beginning Ending Due within Balance Additions Reductions Balance One year Governmental activities: General obligation bonds and certificates ofobligation $ 28,289,800 $ $ (1,050,550) $ 27,239,250 $ 1,068,550 Unamortized bond premium 744,328 - (43,208) 701,120 - Notes payable 371,464 (48,237) 323,227 48,126 Capital leases 237,378 16,740 (79,745) 174,373 85,154 Fidelity tax reimbursement 65,789 - (31,975) 33,814 33,814 Compensated absences 157,863 145,940 (131,099) 172,704 17,270 Net pension liability-TMRS 428,290 201,471 629,761 - Net pension liability-TRS 235,829 45,287 (89,060) 192,056 - Total governmental activities $ 30,530,741 $ 409,438 $ (1,473,874) $ 29,466,305 $ 1,252,914 Amount Beginning Ending Due within Balance Additions Reductions Balance One year Business-type activities: Certificates of obligation $ 1,014,200 $ - $ (21,450) $ 992,750 $ 21,450 Contractual obligations 5,320,824 - (94,530) 5,226,294 99,336 Unamortized bond premium 33,397 - 33,397 - Compensated absences 20,916 19,497 (13,341) 27,072 2,707 Net pension liability-TMRS 52,935 24,901 77,836 - Totai business-type activities $ 6,442,272 $ 44,398 $ (129,321) $ 6,357,349 $ 123,493 51 TOWN OF WESTLAKE NOTES TO THE FINANCIAL STATEMENTS NOTE 5. LONG-TERM DEBT—CONTINUED General Obligation Bonds and Certificates of Obligation General obligation bonds and certificates of obligation are as follows as of September 30, 2015: General Obligations Bonds and Final Business- Certificates of Obligation Maturity Interest Rates Governmental Type $7,465,000 General Obligation Refunding Bonds, Series 2007 2032 3.75-4.20% $ 7,165,000 $ $2,095,000 Combination Tax and Revenue Certificates of Obligation,Series 2011 2031 3.25% 1,727,000 - $7,375,000 General Obligation Refunding Bonds, Series 2011 2028 2.0-4.0% 6,735,000 - $9,320,000 Certificates of Obligation,Series 2013 2043 2.0-4.0% 8,032,250 992,750 $2,200,000 General Obligation Refunding Bonds, Series 2013 2028 2.0-2.5% 1,855,000 - $1,910,000 General Obligation Refunding Bonds, Series 2014 2032 2.0-5.0% 1,725,000 - $ 27,239,250 $ 992,750 Debt service requirements of certificates of obligation and general obligations to be retired from governmental funds are as follows: Year Ending Total September 30, Principal Interest Requirements 2016 $ 1,068,550 $ 942,543 $ 2,011,093 2017 1,088,000 939,260 2,027,260 2018 1,127,000 897,495 2,024,495 2019 1,160,450 863,898 2,024,348 2020 1,198,350 829,017 2,027,367 2021-2025 6,558,500 3,566,912 10,125,412 2026-2030 7,739,200 2,338,317 10,077,517 2031-2035 4,380,000 874,569 5,254,569 2036-2040 1,717,700 407,317 2,125,017 2041-2043 1,201,500 73,514 1,275,014 $ 27,239,250 $ 11,732,842 $ 38,972,092 52 TOWN OF WESTLAKE NOTES TO THE FINANCIAL STATEMENTS NOTE 5. LONG-TERM DEBT-CONTINUED General Obligation Bonds and Certificates of Obligation -Continued Debt service requirements of certificates of obligation to be retired from proprietary funds are as follows: Year Ending Total September 30, Principal Interest Requirements 2016 $ 21,450 $ 33,896 $ 55,346 2017 22,000 33,461 55,461 2018 22,000 33,021 55,021 2019 22,550 32,576 55,126 2020 23,650 32,114 55,764 2021-2025 126,500 151,079 277,579 2026-2030 173,800 129,137 302,937 2031-2035 220,000 89,882 309,882 2036-2040 212,300 50,343 262,643 2041-2044 148,500 9,086 157,586 Total $ 992,750 $ 594,595 $ 1,587,345 Notes Payable In March 2014, the Town received a $366,774 loan from Bennett Benner Pettit, the proceeds of which were used to fund a portion of the Westlake Academy expansion project. The terms of the note call for ten annual payments at 0% interest. In August 2014, the Town entered into a purchase agreement to acquire technology equipment secured by a 3-year interest-free note in the amount of$34,710. 53 TOWN OF WESTLAKE NOTES TO THE FINANCIAL STATEMENTS NOTE 5. LONG-TERM DEBT—CONTINUED Notes Payable—Continued Debt service requirements for the notes payable to be retired from governmental funds are as follows: Year Ending September 30, 2016 $ 48,126 2017 36,677 2018 36,677 2019 36,677 2020 36,677 2021-2024 128,393 Total $ 323,227 Capital Leases The Westlake Academy has entered into lease agreements as lessee for financing the acquisition of computer equipment and software. The lease agreements qualify capital leases for accounting purposes, and therefore, have been recorded at the present value of its future minimum lease payments as of the inception date. Equipment and software with a historical cost of $255,749 was under capital lease at September 30, 2015. Because the cost of the individual items was below the Town's capitalization threshold, the entire cost was recorded as expense during the year ended September 30, 2015. The following schedule shows the future minimum lease payments under the capitalized lease together with the present value of the net minimum lease payments as of September 30, 2015: Year Ending Annual August 31, Lease Payments 2016 $ 90,561 2017 90,550 2018 648 Total minimum lease payments 181,759 Less:Amounts representing interest (7,386) Present value of net minimum lease payments $ 174,373 54 TOWN OF WESTLAKE NOTES TO THE FINANCIAL STATEMENTS NOTE 5. LONG-TERM DEBT—CONTINUED Fidelity Tax Reimbursement On August 10, 1998, the Town entered into an economic development agreement with Fidelity Texas Limited Partnership (Fidelity) which provided that Fidelity will receive a rebate of one percent of local sales taxes collected by the Town and paid by Fidelity. The agreement provided that the rebate will be paid to Fidelity within 30 days of each calendar quarter from the sales taxes received by the Town. On November 13, 2000, the agreement was amended to allow for a payment schedule of fifteen annual equal installments for sales tax rebate due and payable to Fidelity. The amount due will not bear interest. The loan is discounted to present value and amortized over the life of the loan using the effective interest method. Debt service requirements for deferred rebates to be retired from governmental funds are as follows: Year Ending Total September 30, Principal Interest Requirements 2016 $ 33,814 $ 1,944 $ 35,758 Total $ 33,814 $ 1,944 $ 35,758 Contractual Obligations Proprietary funds contractual obligations as of September 30, 2015 are as follows: Business- Contractual Obligations Maturity Interest Rate Type Elevated Water Storage Facility 2020 5.0-5.65% $ 546,350 Limited pledge contractual obligation: Dove Road Water Line and West Pump Station 2028 6.75% 4,679,944 $ 5,226,294 Elevated Water Storage Facility - On October 9, 2000, the Town approved an interlocal agreement with the City of Keller, which provided for the joint construction, operation, maintenance and use of an elevated water storage facility and appurtenances. The Town recorded a contractual obligation of $1,466,000 based on the terms of the interlocal agreement, which requires 20 annual principal and interest payments to the City of Keller, with payments due each September 30 at interest rates ranging from 5.0% to 5.65%. 55 TOWN OF WESTLAKE NOTES TO THE FINANCIAL STATEMENTS NOTE 5. LONG-TERM DEBT—CONTINUED Contractual Obligations—Continued Dove Road Water Line and West Pump Station - In April 2000, the Town approved an agreement with the Hillwood Development Corporation (Hillwood). In the agreement, Hillwood agreed to bear all initial costs for the design, engineering and constructions of the Dove Road Water Line and the West Pump Station that will service the residents of the Town. The Town agreed to reimburse Hillwood for the cost of the project upon completion and the Town's acceptance of the project, which occurred in June 2001, solely from a $.25 charge per 1,000 gallons of usage. The Town further agreed to deposit debt service revenue of $.25 per 1,000 gallons of usage collected from Town residents to fund its repayment to Hillwood. Debt service revenue will be allocated between Hillwood service area and Town service area by 52% and 48%, respectively and deposited into two separate debt service funds that will result in debt service revenue to pay the respective share of the construction cost. The Town recorded a limited pledge contractual obligation of $4,679,944 for the project cost based upon the terms of the agreement, which requires 239 monthly principal and interest payments to Hillwood, at an interest rate of 6.75%. If the Town collects insufficient funds to pay current interest on the debt, the interest payment may be deferred. No portion of debt payments will be applied to the principal component, until all current and deferred interest is fully paid. The obligation of the Town to pay the purchase price and interest thereon is not a general obligation of the Town but is a limited recourse obligation payable solely from debt service revenue. The schedule of future payments by the Town under these agreements is as follows: Year Ending Total September 30, Principal Interest Requirements Past Due $ - $ 6,362,260 $ 6,362,260 2016 99,336 985,500 1,084,836 2017 104,143 849,799 953,942 2018 108,950 904,224 1,013,174 2019 113,756 962,616 1,076,372 2020 120,165 1,028,071 1,148,236 2021-2025 4,679,944 724,066 5,404,010 Total $ 5,226,294 $ 11,816,536 $ 17,042,830 Prior Year Defeasance of Debt In prior years, the government defeased general obligations bonds by placing proceeds of the new bonds in an irrevocable trust account to provide for all future debt service payments on the old bonds. Accordingly, the trust account assets and the liability for the defeased bonds are not included in the government's financial statements. At September 30, 2015, there were no prior year defeased bonds outstanding. 56 TOWN OF WESTLAKE NOTES TO THE FINANCIAL STATEMENTS NOTE 5. LONG-TERM DEBT—CONTINUED Compensated Absences Although compensated absences are liquidated by the fund to which they relate, the significant portion of the governmental activities compensated absences has typically been liquidated by the general fund. Discretely Presented Component Units—Long-term Debt Texas Student Housing Corporation—Denton Project The long-term debt activity of the Denton Project is as follows: Amounts Beginning Ending Due Within Balance Increases Decreases Balance One Year Revenue Bonds: 2001 A Bonds $23,710,000 $ - $ (785,000) $22,925,000 $ 2,075,000 2001 B Bonds 3,240,000 - - 3,240,000 - Less discount on bonds (597,354) 37.485 (559,869) - Total $26,352,646 $ - $ (747,515) $25,605,131 $ 2,075,000 The Bonds are payable solely from the revenues generated by the Denton Property and are secured by the revenues pledged and assigned under the terms of the Trust Indenture. The Town of Westlake does not have any liability for the payment of the bonds as the bonds are non-recourse to both the Town of Westlake and Texas Student Housing Authority. Interest rates on the bonds range from 5.00% to 11.00% and are payable semi-annually on July 1 and January 1 of each year thereafter. At September 30, 2015, the Project was not in compliance with certain covenants of the Indenture including insufficient funds in some of the required funds discussed in Note 2 and a fixed charges ratio less than 1.0. In addition, all required principal payments on the Series B bonds had not been made as of September 30, 2015. Upon certain events of default either the trustee, or owners of not less than 25% in aggregate principal of the bonds then outstanding, may declare the principal and all interest then due to be immediately due and payable. 57 TOWN OF WESTLAKE NOTES TO THE FINANCIAL STATEMENTS NOTE 5. LONG-TERM DEBT—CONTINUED Discretely Presented Component Units— Long-term Debt—Continued Texas Student Housing Corporation—Denton Project—Continued The debt service requirements of the bonds are as follows: Year Ending Total September 30, Principal Interest Requirements Past Due $ 1,240,000 $ 6,992,072 $ 8,232,072 2016 835,000 1,784,418 2,619,418 2017 950,000 1,728,055 2,678,055 2018 1,020,000 1,661,593 2,681,593 2019 1,085,000 1,589,980 2,674,980 2020 1,165,000 1,513,768 2,678,768 2021-2025 7,190,000 6,205,540 13,395,540 2026-2030 10,185,000 3,220,028 13,405,028 2031-2035 2,495,000 181,283 2,676,283 $ 26,165,000 $ 24,876,737 $ 51,041,737 Texas Student Housing Authority—Jefferson Commons at Town Lake Project Amounts Beginning Ending Due Within Balance Increases Decreases Balance One Year Revenue Bonds: 2002 A-1 Bonds $14,890,492 $ - $ (352,213) $14,538,279 $ 382,998 2002 A-2 Bonds 5,089,241 5,089,241 Total $19,979,733 $ - $ (352,213) $19,627,520 $ 382,998 The bonds are payable solely from the revenues generated by the Project and are secured by the revenues pledged and assigned under the terms of the Trust Indenture. Interest rates on the bonds range from 7.76% to 8.69% at present and principal and interest payments are made monthly. 58 TOWN OF WESTLAKE NOTES TO THE FINANCIAL STATEMENTS NOTE 5. LONG-TERM DEBT—CONTINUED Discretely Presented Component Units— Long-term Debt—Continued Texas Student Housing Authority — Jefferson Commons at Town Lake Project — Continued The future debt service requirements of the bonds are as follows: Year Ending Total September 30, Principal Interest Requirements Past Due $ - $ 3,931,163 $ 3,931,163 2016 382,998 1,508,639 1,891,637 2017 413,797 1,477,840 1,891,637 2018 447,074 1,444,563 1,891,637 2019 483,026 1,408,611 1,891,637 2020 521,870 1,369,767 1,891,637 2021-2025 3,310,558 6,147,627 9,458,185 2026-2030 4,873,699 4,584,486 9,458,185 2031-2035 6,737,498 1,707,029 8,444,527 2036-2038 2,457,000 - 2,457,000 Total $ 19,627,520 $ 23,579,725 $ 43,207,245 Texas Student Housing Corporation—College Station Project The Project's installment note payable is summarized as follows: Lender/Security/Due/Date Rate Balance Cambridge Student Housing Financing Company, L.P.; substantially all assets and assignment of rents: due November 1, 2039 8.00% $ 29,429,200 The following is a summary of long-term debt transactions of the Project for the year ended August 31, 2015: Amounts Beginning Ending Due Within Balance Increases Decreases Balance One Year Revenue Certificates $29,885,000 $ - $ (455,800) $29,429,200 $ 870,000 59 TOWN OF WESTLAKE NOTES TO THE FINANCIAL STATEMENTS NOTE 5. LONG-TERM DEBT—CONTINUED Discretely Presented Component Units— Long-term Debt—Continued Texas Student Housing Corporation—College Station Project—Continued The debt is to be amortized through 2040 with varying payments. The annual requirements to amortize the Project's outstanding installment notes payable as of September 30, 2015 are as follows: Year Ending Governmental Activities September 30, Principal Interest Total Past Due $ 315,000 $ 13,101,973 $ 13,416,973 2016 555,000 1,795,820 2,350,820 2017 600,000 1,751,328 2,351,328 2018 645,000 1,703,325 2,348,325 2019 720,000 1,650,637 2,370,637 2020 775,000 1,592,890 2,367,890 2021-2025 3,320,000 7,109,570 10,429,570 2026-2030 3,575,000 5,912,733 9,487,733 2031-2035 5,155,000 4,275,367 9,430,367 2036-2040 13,769,200 1,854,218 15,623,418 Total $ 29,429,200 $ 40,747,861 $ 70,177,061 Class C and D bonds are in default and the property does not generate enough revenue to pay the debt obligations. All of the Class C and D bonds issued remain outstanding as of September 30, 2015. Each class has certain rights and privileges, as contained in the private placement memorandum. As a part of the offering, the Project entered into a trust agreement with J. P. Morgan Trust Company, N.A. (the Trustee) for the purpose of determining that each class is paid in accordance with the private placement memorandum. At September 30, 2015, the Project was not in compliance with the fixed charge coverage ratio. As a result, the lender may accelerate the maturity of the unpaid portion of the principal payable under the installment sale agreement. However, the Authority does not anticipate this event will occur, since foreclosure by private interests would result in the loss of tax-exempt status for the Project. The Town of Westlake does not have any liability for the payment of debt of the discretely presented component units as the bonds are non-recourse to both the Town and Texas Student Housing Authority. 60 TOWN OF WESTLAKE NOTES TO THE FINANCIAL STATEMENTS NOTE 6. UNEARNED REVENUE/ DEFERRED INFLOWS OF RESOURCES Unearned revenue in the proprietary fund of $284,535 relates to the collection of the entire amount due on eight Ductbank leases as follows: one 25-year lease with AT&T local network services; five leases with Verizon Southwest ranging from 20 to 30 years; one 5- year lease with MCI Metro; and one 5-year lease with L3 Communications for use of the Town's Ductbank. Unearned revenue of $1,100 in the non-major governmental funds represents sponsorship and registration fees received in advance of an event held in October 2015. Governmental funds report deferred inflows of resources in connection with receivables for revenue that is not considered to be available to liquidate liabilities of the current period. At the end of the current fiscal year, deferred inflows of resources reported in the governmental funds consist of$5,379 and $673 of unavailable property taxes in the general fund and debt service fund, respectively. NOTE 7. INTERLOCAL AGREEMENT WITH THE CITY OF SOUTHLAKE In August 1995, the Town entered into an agreement with the City of Southlake to allow the Town to utilize capacity in a sewer line and to set forth their respective rights and obligations with respect to the sewer line owned by the City of Southlake. The Town is obligated to share in the cost of construction, operation and maintenance of the water sewer line. The sewer line was constructed in 2000. Additionally, the Town must pay the City of Southlake all transportation, treatment and related costs allocable to the metered flow of sewage from the Town into the sewer line. NOTE 8. FEDERAL AND STATE PROGRAM REVENUES The Town received financial assistance from various federal and state governmental agencies in the form of grants for Westlake Academy. The disbursement of funds received under these programs generally requires compliance with terms and conditions specified in the grant agreements and are subject to audit by the grantor agencies. Any unallowed disbursement resulting from such audits becomes a liability of the Town. In the opinion of the Town management, no material refunds will be required as a result of unallowed disbursements (if any) by the grantor agencies. Sources of federal and state program revenues for the year ended September 30, 2015, were as follows: Westlake Source Academy Federal program revenues: U.S. Department of Eduation - Passed through State Department of Education Total federal program revenues: $ 87,797 State program revenues: State Department of Education $ 6,173,418 61 TOWN OF WESTLAKE NOTES TO THE FINANCIAL STATEMENTS NOTE 9. INTERFUND BALANCES AND TRANSACTIONS Interfund receivables and payables at September 30, 2015, were as follows: Due from Due to Other Funds Other Funds General fund $ 164,147 $ - Nonmajor governmental funds: 46 Economic Development Fund - 164,147 $ 164,147 $ 164,147 The 4B Economic Development Corporation Fund amount of $164,147 payable to the General Fund is related to debt service payment reimbursement. Inter-fund transfers are reported in the governmental funds and proprietary fund financial statements. In the government-wide statements, inter-fund transfers are eliminated within the governmental activities column and business-type column, as appropriate. Transfers are used to (1) move revenues collected in the special revenue funds to finance various programs in 'accordance with budgetary authorizations, (2) move receipts restricted for debt service from the funds collecting the receipts to the Debt Service fund as debt service payments become due, (3) payment for services provided to another fund, (4) move unrestricted General fund revenues to Capital Project fund as determined by the Council for capital projects, and (5) transfer payment for economic development agreements to the Economic Development fund. Individual fund transfers for fiscal year 2015 were as follows: Transfer out Transfer in Amount Purpose General Fund Nonmajor Governmental $ 35,758 Payment to Fidelity(Phase I) General Fund Debt Service Fund 461,498 Debt service payments General Fund Westlake Academy Expansion 54,328 Payment for the expansion project General Fund Capital Projects 1,438,801 Payment for the capital project Utility Fund General Fund 323,100 Collection of Ft.Worth Impact Fees and interfund payment Operating expenditures for Communications&Community Nonmajor Governmental General Fund 13,220 Affairs Department. Nonmajor Governmental Debt Service 164,450 Debt service payments Nonmajor Governmental Debt Service 1,231,741 Debt service payments Nonmajor Governmental Westlake Academy Expansion 410,000 Lot payment per economic development agreement General Fund Westlake Academy 300,000 Student reserve funds PID Capital Projects General Fund 185,000 Payment to General Fund for PID creation expenses $ 4,617,896 62 TOWN OF WESTLAKE NOTES TO THE FINANCIAL STATEMENTS NOTE 10. WATER PURCHASE AND WASTEWATER TREATMENT CONTRACTS The Town has a contract with the City of Fort Worth, Texas, to purchase water. Under the contract, the Town may obtain from the City of Fort Worth, a supply of potable water at a reasonable rate based on water usage. The rate charges are subject to minimum annual contract payments. Water expense for the year ended September 30, 2015 was $1,223,393. NOTE 11. DEFINED BENEFIT PENSION PLAN -TMRS Plan Description The Town participates as one of 860 plans in the nontraditional,joint contributory, hybrid defined benefit pension plan administered by the Texas Municipal Retirement System (TMRS). TMRS, is an agency created by the State of Texas and administered in accordance with the TMRS Act, Subtitle G, Title 8, Texas Government Code (the TMRS Act) as an agent multiple-employer retirement system for municipal employees in the State of Texas. The TMRS Act places the general administration and management of the System with a six-member Board of Trustees. Although the Governor, with the advice and consent of the Senate, appoints the Board, TMRS is not fiscally dependent on the State of Texas. TMRS's defined benefit pension plan is a tax-qualified plan under Section 401 (a) of the Internal Revenue Code. TMRS issues a publicly available comprehensive annual financial report(CAFR)that can be obtained at www.tmrs.com. All eligible employees of the city are required to participate in TMRS. Benefits Provided TMRS provides retirement, disability, and death benefits. Benefit provisions are adopted by the governing body of the city, within the options available in the state statutes governing TMRS. At retirement, the benefit is calculated as if the sum of the employee's contributions, with interest, and the city-financed monetary credits with interest were used to purchase an annuity. Members may choose to receive their retirement benefit in one of seven payments options. Members may also choose to receive a portion of their benefit as a Partial Lump Sum Distribution in an amount equal to 12, 24, or 36 monthly payments, which cannot exceed 75% of the member's deposits and interest. Employees Covered By Benefit Terms At the December 31, 2014 valuation and measurement date, the following employees were covered by the benefit terms: Inactive employees of beneficiaries currently receiving benefits 8 Inactive employees entitled to but not yet receiving benefits 17 Active employees 30 55 63 TOWN OF WESTLAKE NOTES TO THE FINANCIAL STATEMENTS NOTE 11. DEFINED BENEFIT PENSION PLAN —TMRS - CONTINUED Contributions The contribution rates for employees in TMRS are either 5%, 6%, or 7% of employee gross earnings, and the city matching percentages are either 100%, 150%, or 200%, both as adopted by the governing body of the city. Under the state law governing TMRS, the contribution rate for each city is determined annually by the actuary, using the Entry Age Normal (EAN) actuarial cost method. The actuarially determined rate is the estimated amount necessary to finance the cost of benefits earned by employees during the year, with an additional amount to finance any unfunded accrued liability. Employees for the Town were required to contribute 7% of their annual gross earnings during the fiscal year. The contribution rates for the Town were 8.05% and 10.92% in calendar years 2014 and 2015, respectively. The Town's contributions to TMRS for the year ended September 30, 2015, were $277,651, and were equal to the required contributions. Net Pension Liability The Town's Net Pension Liability (NPL) was measured as of December 31, 2014, and the Total Pension Liability (TPL) used to calculate the Net Pension Liability was determined by an actuarial valuation as of that date. Actuarial Assumptions The Total Pension Liability in the December 31, 2014 actuarial valuation was determined using the following actuarial assumptions: • Inflation 3.0% per year • Overall payroll growth 3.0% per year • Investment Rate of Return 7.0%, net of pension plan investment expense, including inflation Salary increases were based on a service-related table. Mortality rates for active members, retirees, and beneficiaries were based on the gender-distinct RP2000 Combined Healthy Mortality Table, with male rates multiplied by 109% and female rates multiplied by 103%. The rates are projected on a fully generational basis by scale BB to account for future mortality improvements. For disabled annuitants, the gender-distinct RP2000 Disabled Retiree Mortality Table is used, with slight adjustments. 64 TOWN OF WESTLAKE NOTES TO THE FINANCIAL STATEMENTS NOTE 11. DEFINED BENEFIT PENSION PLAN - TMRS —CONTINUED Actuarial Assumptions—Continued Actuarial assumptions used in the December 31, 2014, valuation were based on the results of actuarial experience studies. The experience study in TMRS was for the period January 1, 2006 through December 31, 2009, first used in the December 31, 2010 valuation. Healthy post-retirement mortality rates and annuity purchase rates were updated based on a Mortality Experience Investigation Study covering 2009 through 2011, and dated December 31, 2013. These assumptions were first used in the December 31, 2013 valuation, along with a change to the Entry Age Normal (EAN) actuarial cost method. Assumptions are reviewed annually. No additional changes were made for the 2014 valuation. The long-term expected rate of return on pension plan investments is 7.0%. The pension plan's policy in regard to the allocation of invested assets is established and may be amended by the TMRS Board of Trustees. Plan assets are managed on a total return basis with an emphasis on both capital appreciation as well as the production of income, in order to satisfy the short-term and long-term funding needs of TMRS. This rate was determined using a building-block method in which best estimate ranges of expected 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. The target allocation and best estimates of arithmetic real rates of return for each major asset class are summarized in the following table: Long-Term Expected Real Asset Class Target Allocation Rate of Return (Arithmetic) Domestic Equity 17.5% 4.80% International Equity 17.5% 6.05% Core Fixed Income 30.0% 1.50% Non-Core Fixed Income 10.0% 3.50% Real Return 5.0% 1.75% Real Estate 10.0% 5.25% Absolute Return 5.0% 4.25% Private Equity 5.0% 8.50% Total 100.0% 65 TOWN OF WESTLAKE NOTES TO THE FINANCIAL STATEMENTS NOTE 11. DEFINED BENEFIT PENSION PLAN —TMRS—CONTINUED Discount Rate The discount rate used to measure the Total Pension Liability was 7.0%. The projection of cash flows used to determine the discount rate assumed that employee and employer contributions will be made at the rates specified in statute. Based on that assumption, the pension plan's Fiduciary Net Position was projected to be available to make all projected future benefit payments of current active and inactive employees. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the Total Pension Liability. Allocations The Town's net pension liability, pension expense, and deferred outflows of resources related to TMRS have been allocated between governmental activities and business- type activities using a contribution-based method. Changes in the Net Pension Liability Increase(Decrease) Total Plan Net Pension Fiduciary Pension Liability Net Position Liability (a) (b) (a)-(b) Balance at 12/31/2013 $ 3,669,053 $ 3,187,798 $ 481,255 Changes for the year: Service Cost 288,923 - 288,923 Interest 264,994 - 264,994 Change of benefit terms - - - Difference between expected and actual experience 176,965 - 176,965 Changes of assumptions - - - Contributions-employer - 172,064 (172,064) Contributions-employee - 152,077 (152,077) Net investment income - 182,430 (182,430) Benefit payments, including refunds of employee contributions (55,762) (55,762) - Administrative expense (1,904) 1,904 Other changes - (127) 127 Net Changes 675,120 448,778 226,342 Balance at 12/31/14 $ 4,344,173 $ 3,636,576 $ 707,597 66 TOWN OF WESTLAKE NOTES TO THE FINANCIAL STATEMENTS NOTE 11. DEFINED BENEFIT PENSION PLAN—TMRS—CONTINUED Sensitivity of the Net Pension Liability to Changes in the Discount Rate The following presents the net pension liability of the Town, calculated using the discount rate of 7.0%, as well as what the Town's net pension liability would be if it were calculated using a discount rate that is 1-percentage-point lower (6.0%) or 1-percentage- point higher(8.0%)than the current rate: 1%Decrease in 1% Increase in Discount Rate(6.0%) Discount Rate(7.0%) Discount Rate(8.0%) Net pension liability $ 1,420,650 $ 707,597 $ 123,093 Pension Plan Fiduciary Net Position Detailed information about the pension plan's Fiduciary Net Position is available in a separately-issued TMRS financial report. That report may be obtained on the Internet at www.tmrs.com. Pension Expense and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions For the year ended September 30, 2015, the Town recognized pension expense of $221,177. At September 30, 2015, the Town reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: Deferred Deferred Outflows of Resources Inflows of Resources Difference between expected and actual economic experience $ 144,686 $ - Changes in actuarial assumptions - - Difference between projected and actual investment earnings 32,573 - Contributions subsequent to the measurement date 213,518 Total $ 390,777 $ - 67 TOWN OF WESTLAKE NOTES TO THE FINANCIAL STATEMENTS NOTE 11. DEFINED BENEFIT PENSION PLAN—TMRS—CONTINUED Pension Expense and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions—Continued $213,518 reported as deferred outflows of resources related to pensions resulting from contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability for the year ending September 30, 2015. Amounts reported as deferred outflows and inflows of resources related to pensions will be recognized in pension expense as follows: Year ended Sept. 30, 2016 $ 253,940 2017 40,422 2018 40,422 2019 40,422 2020 15,571 Total $ 390,777 NOTE 12. DEFINED BENEFIT PENSION PLAN—TRS Plan Description The Academy participates in a cost-sharing multiple-employer defined benefit pension that has a special funding situation. The plan is administered by the Teacher Retirement System of Texas (TRS). TRS's defined benefit pension plan is established and administered in accordance with the Texas Constitution, Article XVI, Section 67 and Texas Government Code, Title 8, Subtitle C. The pension trust fund is a qualified pension trust under Section 401(a) of the Internal Revenue Code. The Texas Legislature establishes benefits and contribution rates within the guidelines of the Texas Constitution. The pension's Board of Trustees does not have the authority to establish or amend benefit terms. All employees of public, state-supported educational institutions in Texas who are employed for one-half or more of the standard work load and who are not exempted from membership under Texas Government Code, Title 8, Section 822.002 are covered by the system. Pension Plan Fiduciary Net Position Detailed information about the Teacher Retirement System's fiduciary net position is available in a separately-issued Comprehensive Annual Financial Report that includes financial statements and required supplementary information. That report may be obtained on the Internet at http://www.trs.state.tx.us/about/documents/cafr.pdf#CAFR; by writing to TRS at 1000 Red River Street, Austin, TX, 78701-2698; or by calling (512) 542-6592. 68 TOWN OF WESTLAKE NOTES TO THE FINANCIAL STATEMENTS NOTE 12. DEFINED BENEFIT PENSION PLAN—TRS—CONTINUED Benefits Provided TRS provides service and disability retirement, as well as death and survivor benefits, to eligible employees (and their beneficiaries) of public and higher education in Texas. The pension formula is calculated using 2.3 percent (multiplier) times the average of the five highest annual creditable salaries times years of credited service to arrive at the annual standard annuity except for members who are grandfathered, the three highest annual salaries are used. The normal service retirement is at age 65 with 5 years of credited service or when the sum of the member's age and years of credited service equals 80 or more years. Early retirement is at age 55 with 5 years of service credit or earlier than 55 with 30 years of service credit. There are additional provisions for early retirement if the sum of the member's age and years of service credit total at least 80, but the member is less than age 60 or 62 depending on date of employment, or if the member was grandfathered in under a previous rule. There are no automatic post-employment benefit changes; including automatic COLAs. Ad hoc post-employment benefit changes, including ad hoc COLAs can be granted by the Texas Legislature as noted in the Plan description in (A) above. Contributions Contribution requirements are established or amended pursuant to Article 16, section 67 of the Texas Constitution which requires the Texas legislature to establish a member contribution rate of not less than 6% of the member's annual compensation and a state contribution rate of not less than 6% and not more than 10% of the aggregate annual compensation paid to members of the system during the fiscal year. Texas Government Code section 821.006 prohibits benefit improvements, if as a result of the particular action, the time required to amortize TRS' unfunded actuarial liabilities would be increased to a period that exceeds 31 years, or, if the amortization period already exceeds 31 years, the period would be increased by such action. Employee contribution rates are set in state statute, Texas Government Code 825.402. Senate Bill 1458 of the 83rd Texas Legislature amended Texas Government Code 825.402 for member contributions and established employee contribution rates for fiscal years 2014 thru 2017. It also added a 1.5% contribution for employers not paying Old Age Survivor and Disability Insurance (OASDI) on certain employees effective for fiscal year 2015 as discussed in Note 1 of the TRS 2014 CAFR. The 83rd Texas Legislature, General Appropriations Act (GAA) established the employer contribution rates for fiscal years 2014 and 2015. 69 TOWN OF WESTLAKE NOTES TO THE FINANCIAL STATEMENTS NOTE 12. DEFINED BENEFIT PENSION PLAN—TRS—CONTINUED Contributions—Continued Contribution Rates 2014 2015 Member 6.4% 6.7% Non-Employer Contributing Entity (State) 6.8% 6.8% Employers 6.8% 6.8% 2014 Employer Contributions $ 18,228 2014 Member Contributions $ 320,575 2014 NECE On-behalf Contributions $ 280,876 Contributors to the plan include members, employers and the State of Texas as the only non-employer contributing entity. The State is the employer for senior colleges, medical schools and state agencies including TRS. In each respective role, the State contributes to the plan in accordance with state statutes and the General Appropriations Act(GAA). As the non-employer contributing entity for public education and junior colleges, the State of Texas contributes to the retirement system an amount equal to the current employer contribution rate times the aggregate annual compensation of all participating members of the pension trust fund during that fiscal year reduced by the amounts described below which are paid by the employers. Employers (public school, junior college, other entities or the State of Texas as the employer for senior universities and medical schools) are required to pay the employer contribution rate in the following instances: • On the portion of the member's salary that exceeds the statutory minimum for members entitled to the statutory minimum under Section 21.402 of the Texas Education Code. • During a new member's first 90 days of employment. • When any part or all of an employee's salary is paid by federal funding sources, a privately sponsored source,from non-educational and general, or local funds. • When the employing district is a public junior college or junior college district, the employer shall contribute to the retirement system an amount equal to 50% of the state contribution rate for certain instructional or administrative employees; and 100% of the state contribution rate for all other employees. In addition to the employer contributions listed above, when employing a retiree of the Teacher Retirement System the employer shall pay both the member contribution and the state contribution as an employment after retirement surcharge. 70 TOWN OF WESTLAKE NOTES TO THE FINANCIAL STATEMENTS NOTE 12. DEFINED BENEFIT PENSION PLAN—TRS—CONTINUED Actuarial Assumptions The total pension liability in the August 31, 2014 actuarial valuation was determined using the following actuarial assumptions: Valuation Date August 31, 2014 Actuarial Cost Method Individual Entry Age Normal Amortization Method Level Percentage of Payroll, Open Remaining Amortization Period 30 years Asset Valuation Method 5 year Market Value Discount Rate 8.00% Long-term expected Investment Rate of Return* 8.00% Salary Increases* 4.25%to 7.25% Weighted-Average at Valuation Date 5.55% Payroll Growth Rate 3.50% *Includes Inflation of 3% The actuarial methods and assumptions are primarily based on a study of actual experience for the four year period ending August 31, 2010 and adopted on April 8, 2011. With the exception of the post-retirement mortality rates for healthy lives and a minor change to the expected retirement age for inactive vested members stemming from the actuarial audit performed in the summer of 2014, the assumptions and methods are the same as used in the prior valuation. When the mortality assumptions were adopted in 2011 they contained a significant margin for possible future mortality improvement. As of the date of the valuation there has been a significant erosion of this margin to the point that the margin has been eliminated. Therefore, the post-retirement mortality rates for current and future retirees was decreased to add additional margin for future improvement in mortality in accordance with the Actuarial Standards of Practice No. 35. Discount Rate The discount rate used to measure the total pension liability was 8.0%. There was no change in the discount rate since the previous year. The projection of cash flows used to determine the discount rate assumed that contributions from plan members and those of the contributing employers and the non-employer contributing entity are made at the statutorily required rates. Based on those assumptions, the pension plan's fiduciary net position was projected to be available to make all 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 projected benefit payments to determine the total pension liability. The long-term rate of return on pension plan investments is 8%. The long-term expected rate of return on pension plan investments was determined using a building- block method in which best-estimates ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. 71 TOWN OF WESTLAKE NOTES TO THE FINANCIAL STATEMENTS NOTE 12. DEFINED BENEFIT PENSION PLAN-TRS-CONTINUED Discount Rate -Continued 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 geometric real rates of return for each major asset class included in the Systems target asset allocation as of August 31, 2014 are summarized below: Long-term Expected Portfolio Target Real Return Real Rate of Asset Class Allocation Geometric Basis Return* Global Equity U.S. 18% 7.0% 1.4% Non-U.S. Developed 13% 7.3% 1.1% Emerging Markets 9% 8.1% 0.9% Directional Hedge Funds 4% 5.4% 0.2% Private Equity 13% 9.2% 1.4% Stable Value U.S.Treasuries 11% 2.9% 0.3% Absolute Return 0% 4.0% 0.0% Stable Value Hedge Funds 4% 5.2% 0.2% Cash 1% 2.0% 0.0% Real Return Global Inflation Linked Bonds 3% 3.1% 0.0% Real Assets 16% 7.3% 1.5% Energy and Natural Resources 3% 8.8% 0.3% Commodities 0% 3.4% 0.0% Risk Parity Risk Parity 5% 8.9% 0.4% Alpha 1.0% Total 100.0% 8.7% * The Expected Contribution to Returns incorporates the volatility drag resulting from the conversion between Arithmetic and Geometric mean returns. Discount Rate Sensitivity Analysis The following schedule shows the impact of the Net Pension Liability if the discount rate used was 1% less than and 1% greater than the discount rate that was used (8%) in measuring the 2014 Net Pension Liability. 1%Decrease in Discount 1%Increase in Discount Rate(7.0%) Rate(8.0%) Discount Rate(9.0%) Academy's proportionate share of the TRS net pension liability $ 343,191 $ 192,056 $ 79,034 72 TOWN OF WESTLAKE NOTES TO THE FINANCIAL STATEMENTS NOTE 12. DEFINED BENEFIT PENSION PLAN—TRS—CONTINUED Pension Liabilities, Pension Expense, and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions At August 31, 2014, the Academy reported a liability of $192,056 for its proportionate share of the TRS's net pension liability. This liability reflects a reduction for State pension support provided to the Academy. The amount recognized by the Academy as its proportionate share of the net pension liability, the related State support, and the total portion of the net pension liability that was associated with the Academy were as follows: Academy's Proportionate share of the collective net pension liability $ 192,056 State's proportionate share that is associated with Academy 2,965,583 Total $ The net pension liability was measured as of August 31, 2014 and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of that date. The employer's proportion of the net pension liability was based on the employer's contributions to the pension plan relative to the contributions of all employers to the plan for the period September 1, 2013 thru August 31, 2014. At August 31, 2014 the employer's proportion of the collective net pension liability was 0.0007190°/x. Since this is the first year of implementation, the Academy does not have the proportion measured as of August 31, 2013. The Notes to the Financial Statements for August 31, 2014 for TRS stated that the change in proportion was immaterial and, therefore, disregarded this year. There were no changes of assumptions or other inputs that affected measurement of the total pension liability during the measurement period. There were no changes of benefit terms that affected measurement of the total pension liability during the measurement period. There was a change in employer contribution requirements that occurred after the measurement date of the net pension liability and the employer's reporting date. A 1.5% contribution for employers not paying Old Age Survivor and Disability Insurance (OASDI) on certain employees went into law effective 09/01/2013. The amount of the expected resultant change in the employer's proportion cannot be determined at this time. For the year ended August 31, 2014, the Academy recognized pension expense of $274,163 and revenue of$274,163 for support provided by the State. 73 TOWN OF WESTLAKE NOTES TO THE FINANCIAL STATEMENTS NOTE 12. DEFINED BENEFIT PENSION PLAN—TRS—CONTINUED Pension Liabilities, Pension Expense, and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions—Continued At August 31, 2014, the Academy reported its proportionate share of the TRS's deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: Deferred Outflows Deferred Inflows of Resources of Resources Difference between expected and actual economic experience $ 2,970 $ - Changes in actuarial assumptions 12,484 - Changes in proportionate share (50) Difference between projected and actual investment earnings - (58,700) Contributions paid to TRS subsequent to the measurement date 92,325 Total $ 107,779 $ (58,750) The net amounts of the employer's balances of deferred outflows and inflows of resources related to pensions will be recognized in pension expense as follows: Year ended Aug. 31, 2016 $ 80,249 2017 (12,076) 2018 (12,076) 2019 (12,076) 2020 2,599 Thereafter 2,409 Total $ 49,029 74 TOWN OF WESTLAKE NOTES TO THE FINANCIAL STATEMENTS NOTE 13. RISK MANAGEMENT The Town is exposed to various risks of loss related to torts, theft of, damage to, and destruction of assets; errors and omissions; injuries to employees, and natural disasters. The Town's general liability, workers' compensation liability, law enforcement liability, errors and omissions liability, and automobile liability coverage is insured by the Texas Municipal League, a public entity risk pool. The Town's only responsibility to the Texas Municipal League is to pay premiums for insurance and related deductible amounts of these policies. Other risk of loss is covered by commercial insurance. Settlements of claims have not exceeded coverage in the past three years. NOTE 14. CONTINGENT LIABILITIES Litigation Various claims and lawsuits are pending against the Town. In the opinion of Town management, after consultation with legal counsel, the potential loss on these claims and lawsuits will not materially affect the Town's financial position. Circle T Municipal Utility Districts The Town and Hillwood are currently in discussions regarding the debt for Municipal Utility District's (MUDs) #1 and #3 on the Circle T property in Westlake which is controlled by AIL Investments, L.P. As this property develops, Hillwood agreed to de- annex developed property from the MUDs in exchange for pro-rata payments on water and sewer infrastructure installed by the MUDs at their inception. To date, two projects, Chrysler Financial and Deloitte University, have been or are being developed within these MUDs. Discussions regarding the Town's payment to AIL Investments, L.P. in exchange for de-annexation of these two tracks from the Circle T MUDs have taken place but have not come to a conclusion as to the settlement amounts. These discussions are ongoing until the Town receives full documentation that it determines is adequate to support the requested payments. The Town of Westlake holds full rights and privileges under the State granted Certificate of Convenience and Necessity (CCN) and can serve all water and sewer customers within these MUD boundaries regardless of the status of these negotiations. NOTE 15. SOLANA PUBLIC IMPROVEMENT DISTRICT On February 24, 2014, the Town Council granted a petition by Maguire Partners-Solana Land, LP in resolution 14-07 to authorize and provide for the creation of a public improvement district, The Solana Public Improvement District ("the District"). The District encompasses approximately 85 acres currently being developed as a master-planned mixed-use development known as "Westlake Entrada" that is expected to include, among other things, condominiums, residential villas, hotels, office, retail, commercial, institutional and hospitality uses, and a wedding event center. The District was created in accordance with Chapter 372 of the Texas Local Government Code. 75 TOWN OF WESTLAKE NOTES TO THE FINANCIAL STATEMENTS NOTE 15. SOLANA PUBLIC IMPROVEMENT DISTRICT—CONTINUED On February 5, 2015, the Town Council approved issuance of $26,175,000 of Special Assessment Revenue Bonds, Series 2015 related to the District. The Public Improvement District Bonds ("The Bonds") are special and limited obligations of the Town payable solely from the pledged revenues and other funds comprising the Trust Estate, as and to the extent provided in the indenture. The bonds do not give rise to a charge against the general credit or taxing power of the Town and are payable solely from the sources identified in the indenture. The owners of the bonds shall never have the right to demand payment thereof out of money raised or to be raised by taxation, or out of any funds of the Town other than the Trust Estate, as and to the extent provided in the indenture; and, no owner of the bonds shall have the right to demand any exercise of the Town's taxing power to pay the principal of the bonds or the interest or redemption premium, if any, thereon. The Town shall have no legal or moral obligation to pay the bonds out of any funds of the Town other than the Trust Estate in accordance with the Texas Local Government Code. The proceeds from the bond issue are to be used as follows: payment of a portion of the costs of construction, acquisition, or purchase of certain water, wastewater and roadway public improvements for the special benefit of the District; funding a reserve fund; funding capitalized interest; payment of a portion of the costs incidental to the organization of the District; and payment of the cost of issuance of the bonds. The Town is not, and will not be obligated to provide any funds to finance construction of authorized improvements. All design and construction costs of the District's authorized public improvements will be paid from the District assessments and from other sources of funds, if any, to the extent provided in the Trust Indenture. NOTE 16. CUMULATIVE EFFECT OF ADOPTION OF GASB STATEMENTS As a result of implementation of GASB Statement No. 68, "Accounting and Financial Reporting for Pensions—an amendment of GASB Statement No. 27", and GASB Statement No. 71, "Pension Transition for Contributions Made Subsequent to the Measurement Date", an adjustment has been made to record the Town's net pension liability associated with TRS as of August 31, 2014 and the Academy's net pension liability associated with TMRS as of December 31, 2014. As a result, beginning net position of the governmental activities has been decreased by $530,877, the net effect of the beginning net pension liability and deferred outflows of resources of TMRS ($313,276) and TRS ($217,601); and the beginning net position of the utility fund has been decreased by$38,720. NOTE 17. GOING CONCERN The 2015 financial statements were prepared assuming the Texas Student Housing entities will continue as going concerns. The Texas Student Housing entities' bonds payable are considered to be in default due to not making full principal and interest payments and, therefore, are reported as current liabilities. This is considered an event of default by the Trustees, which gives the bondholders the right to accelerate and demand payment of the bonds in full. Management and the property managers are in the process of developing and implementing plans to increase occupancy and rental rates at the properties to improve their financial performance. 76 REQUIRED SUPPLEMENTARY INFORMATION EXHIBIT B-1 TOWN OF WESTLAKE SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL-GENERAL FUND FOR THE YEAR ENDED SEPTEMBER 30, 2015 General Fund Variance Budgeted Amounts Favorable Orginal Amended Actual (Unfavorable) REVENUES: Taxes Sales $ 3,376,250 $ 3,575,000 $ 3,587,323 $ 12,323 Property 1,209,094 1,248,094 1,256,796 8,702 Mixed beverages 50,500 50,500 59,184 8,684 Franchise 795,383 809,270 963,040 153,770 Interest income 10,420 10,420 10,078 (342) Building permits and fees 1,460,500 1,561,350 1,200,790 (360,560) Fines and penalties 670,000 690,000 734,152 44,152 Intergovernmental - - 3,810 3,810 Contributions - 167,541 10,000 (157,541) Miscellaneous 60,094 73,344 81,539 8,195 Total revenues 7,632,241 8,185,519 7,906,712 (278,807) EXPENDITURES: Current General government 3,054,661 3,147,116 2,411,239 735,877 Public safety 2,456,719 2,648,274 2,490,551 157,723 Cultural and recreation 224,602 213,415 130,322 83,093 Public works 794,038 751,018 744,028 6,990 Capital outlay 745,000 877,541 748,297 129,244 Debt service Principal retirement 18,339 36,678 48,237 (11,559) Total expenditures 7,293,359 7,674,042 6,572,674 1,101,368 Excess of revenues over expenditures 338,882 511,477 1,334,038 822,561 OTHER FINANCING SOURCES(USES) Transfers in 306,965 700,298 521,320 (178,978) Transfers out (2,301,612) (2,009,410) (2,290,385) (280,975) Insurance proceeds - 291,005 162,059 (128,946) Net other financing sources(uses) (1,994,647) (1,018,107) (1,607,006) (588,899) NET CHANGE IN FUND BALANCE (1,655,765) (506,629) (272,968) 233,661 FUND BALANCE AT BEGINNING OF YEAR 7,953,518 7,953,518 7,953,518 - FUND BALANCE AT END OF YEAR $ 6,297,753 $ 7,446,889 $ 7,680,550 $ 233,661 77 EXHIBIT B-2 TOWN OF WESTLAKE SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL-WESTLAKE ACADEMY FOR THE YEAR ENDED SEPTEMBER 30, 2015 Westlake Academy Variance Budgeted Amounts Favorable Orginal Final Actual (Unfavorable) REVENUES: State program revenues $ 5,782,092 $6,070,659 $ 6,173,418 $ 102,759 Federal program revenues 73,896 162,270 87,797 (74,473) Interest income 1,515 1,575 2,067 492 Miscellaneous 1,409,790 1,536,215 1,971,097 434,882 Total revenues 7,267,293 7,770,719 8,234,379 463,660 EXPENDITURES: Education 7,756,046 7,948,314 7,938,501 9,813 Interest and other fiscal charges 90,565 90,565 10,204 80,361 Total expenditures 7,846,611 8,038,879 7,948,705 90,174 Excess(deficiency)of revenues over expenditures (579,318) (268,160) 285,674 553,834 OTHER FINANCING SOURCES Transfers in 300,000 300,000 300,000 - Capital lease proceeds - - 16,740 16,740 Total other financing sources 300,000 300,000 316,740 16,740 NET CHANGE IN FUND BALANCE (279,318) 31,840 602,414 570,574 FUND BALANCE AT BEGINNING OF YEAR 1,071,298 1,071,298 1,071,298 - FUND BALANCE AT END OF YEAR $ 791,980 $1,103,138 $ 1,673,712 $ 570,574 78 TOWN OF WESTLAKE NOTES TO BUDGETARY COMPARISON SCHEDULES Budgetary Information -The Town follows these procedures annually in establishing the budgetary data reflected in the budgetary comparison schedules: 1. The Town Manager submits to the Town Council a proposed budget for the fiscal year commencing the following October 1. The budget includes proposed expenditures and the means of financing them. 2. Prior to October 1, the budget is legally adopted through passage of an ordinance. This budget is reported as the Original Budget in the budgetary comparison schedules. 3. During the fiscal year, changes to the adopted budget may be authorized, as follows: a. Items requiring Town Council action - appropriation of fund balance reserves; transfers of appropriations between funds; new inter-fund loans or advances; and creation of new capital projects or increases to existing capital projects. b. Items delegated to the Town Manager - appropriation balances from an expenditure account to another within a single fund. 4. Annual budgets are legally adopted and amended as required for the general, special revenue and debt service funds. Project length budgets are adopted for the capital projects funds. All budgets are adopted on a basis consistent with generally accepting accounting principles. Budgets are adopted for the proprietary funds annually only as a management tool. There are no legally mandated budgetary constraints for the proprietary funds. 5. Budget amounts are reflected after all authorized amendments and revisions. This budget is reported as the Final Budget in the budgetary comparison schedules. 6. The appropriated budget is prepared by fund, function and department. The Town's management may make transfers of appropriations within a fund. Transfers of appropriations between funds require the approval of the Town Council. The legal level of budgetary control is the fund level. The Town Council made several supplementary budget appropriations during the year. 7. Encumbrances represent commitments related to unperformed contracts for goods or services. Encumbrance accounting under which purchase orders, contracts and other commitments for the expenditure of resources are recorded to reserve that portion of the applicable appropriation is utilized in the governmental funds. Encumbrances lapse at year-end and do not constitute expenditures or liabilities because the commitments must be re-appropriated and honored during the subsequent year. 8. Expenditures exceeded appropriations in debt service of the General Fund. 79 EXHIBIT B-3 TOWN OF WESTLAKE SCHEDULE OF NET PENSION LIABILITY AND RELATED RATIOS TEXAS MUNICIPAL RETIREMENT SYSTEM FOR THE YEAR ENDED SEPTEMBER 30, 2015 2015 Total Pension Liability: Service cost $ 288,923 Interest 264,994 Change in benefit terms - Difference between expected and actual experience 176,965 Change in assumptions - Benefit payments (55,762) Net change in total pension liability 675,120 Total Pension Liability-beginning 3,669,053 Total Pension Liability-ending 4,344,173 Plan Fiduciary Net Position Contributions- employer 172,064 Contributions- nonemployer 152,077 Net investment income 182,430 Benefit payments (55,762) Administrative income (1,904) Other (127) Net change in plan fiduciary net position 448,778 Plan fiduciary net position-beginning 3,187,798 Plan fiduciary net position -ending 3,636,576 Town's net pension liability-ending $ 707,597 Plan fiduciary net position as a % of total pension liability 83.71% Covered payroll $ 2,172,525 Town's net pension liability as a % of employee payroll 32.57% 80 EXHIBIT B-4 TOWN OF WESTLAKE SCHEDULE OF CONTRIBUTIONS TEXAS MUNICIPAL RETIREMENT SYSTEM FOR THE YEAR ENDED SEPTEMBER 30, 2014 2015 Actuarially Determined Contributions $ 277,651 Contributions in relation to the actuarially determined contributions (277,651) Contribution deficiency (excess) $ - Covered employee payroll 2,778,776 Contributions as a percentage of covered employee payroll 9.99% 81 TOWN OF WESTLAKE NOTES TO TEXAS MUNICIPAL RETIREMENT SYSTEM REQUIRED SUPPLEMENTARY INFORMATION FOR THE YEAR ENDED SEPTEMBER 30, 2015 VALUATION DATE: Actuarial determined contribution rates are calculated as of December 31 each year and become effective in January, 12 months and one day later. METHODS AND ASSUMPTIONS USED TO DETERMINE CONTRIBUTION RATES: Actuarial Cost Method Entry Age Normal Amortization Method Level Percentage of Payroll, Closed Remaining Amortization Period 30 years Asset Valuation Method 10 Year smoothed market; 15%soft corridor Inflation 3.00% Salary Increases 3.50% to 12.00% including inflation Investment Rate of Return 7.00% Retirement Age Experience-based table of rates that are specific to the City's plan of benefits. Last updated for the 2010 valuation pursuant to an experience study of the period 2005-2009 Mortality RP2000 Combined Mortality Table with Blue Collar Adjustment with male rates multiplied by 109%and female rates multiplied by 103% and projected on a fully generational basis with scale BB 82 TOWN OF WESTLAKE EXHIBIT B-5 SCHEDULE OF ACADEMY'S PROPORTIONATE SHARE OF NET PENSION LIABILITY—TEACHER RETIREMENT SYSTEM FOR THE YEAR ENDED AUGUST 31, 2015 2015 Academy's proportion of the net pension liability 0.0007190% Academy's proportionate share of net pension liability $ 192,056 State's proportionate share of net pension liability associated with the Westlake Academy 2,965,583 Total $ 3,157,639 Academy's covered payroll $ 4,300,931 Academy's proportionate share of net pension liability as a percentage of its covered payroll 4.47% Plan fiduciary net position as a percentage of total pension liability 83.25% 83 EXHIBIT B-6 TOWN OF WESTLAKE SCHEDULE OF CONTRIBUTIONS TEACHER RETIREMENT SYSTEM FOR THE YEAR ENDED AUGUST 31, 2015 (UNAUDITED) 2015 Statutorially required contributions $ 92,325 Actual contributions in relation to statutorially required contributions 92,325 Contribution deficiency(excess) $ - Academy's covered payroll $ 4,784,694 Contributions as a percentage of Academy's covered payroll 1.93% 84 A TOWN OF WESTLAKE COMBINING AND INDIVIDUAL FUND STATEMENTS AND SCHEDULES TOWN OF WESTLAKE EXHIBIT C-1 SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL- DEBT SERVICE FUND FOR THE YEAR ENDED SEPTEMBER 30, 2015 Debt Service Fund Variance Budgeted Amounts Favorable Original Amended Actual (Unfavorable) REVENUES: Taxes Property $ 166,969 $ 176,500 $ 176,121 $ (379) Total revenues 166,969 176,500 176,121 (379) EXPENDITURES: Debt service Principal retirement 1,245,550 1,050,550 1,050,550 - Interest and other fiscal charges 1,049,108 963,828 963,425 403 Total expenditures 2,294,658 2,014,378 2,013,975 403 Deficiency of revenues under expenditures (2,127,689) (1,837,878) (1,837,854) 24 OTHER FINANCING SOURCES(USES) Transfers in 2,139,554 1,859,274 1,857,689 (1,585) Net other financing sources(uses) 2,139,554 1,859,274 1,857,689 (1,585) NET CHANGE IN FUND BALANCE 11,865 21,396 19,835 (1,561) FUND BALANCE AT BEGINNING OF YEAR 1,081 1,081 1,081 - FUND BALANCE AT END OF YEAR $ 12,946 $ 22,477 $ 20,916 $ (1,561) 85 TOWN OF WESTLAKE NONMAJOR GOVERNMENTAL FUNDS Visitors Association Fund To account for municipal hotel occupancy taxes collected and expenditures to promote tourism and the convention and hotel industry. Lone Star Public Facilities Corporation To account for investment activity relating to the Lone Star Public Facilities Corporation. Economic Development Fund To account for sales tax and hotel occupancy tax collected to fund activity relating to Economic Development agreements. 4B Economic Development Corporation To account for sales tax collected to fund the activities of the 4B Economic Development Corporation. 86 EXHIBIT C-2 TOWN OF WESTLAKE COMBINING BALANCE SHEET NON MAJOR GOVERNMENTAL FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2015 Lone Star Public 48 Economic Total Facilities Economic Development Nonmajor Visitors Corporation Development Corporation Governmental Association Fund Fund Fund Funds ASSETS Cash and cash equivalents $ 1,050,718 $ 13,632 $ 5,806 $ - $ 1,070,156 Receivables:(net of allowances for uncollectibles) Accounts receivable 68,127 - 32,674 164,147 264,948 Other assets 1,874 - - - 1,874 Total assets $ 1,120,719 $ 13,632 $ 38,480 $ 164,147 $ 1,336,978 LIABILITIES AND FUND BALANCES Accounts payable $ 36,736 $ - $ 38,480 $ - $ 75,216 Unearned revenue 1,100 - - 1,100 Due to other funds - - 164,147 164,147 Total liabilities 37,836 38,480 164,147 240,463 FUND BALANCES Nonspendable: Prepaid items 1,874 - - 1,874 Restricted for'. Tourism 1,081,009 - 1,081,009 Future projects - 13,632 13,632 Total fund balances 1,082,883 13,632 - 1,096,515 Total liabilities and fund balances $ 1,120,719 $ 13,632 $ 38,480 $ 164,147 $ 1,336,978 87 EXHIBIT C-3 TOWN OF WESTLAKE COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES NON MAJOR GOVERNMENTAL FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2015 Lone Star Public 46 Economic Facilities Economic Development Total Nonmajor Visitors Corporation Development Corporation Governmental Association Fund Fund Fund Funds REVENUES Sales $ - $ - $ 106,748 $ 1,231,357 $ 1,338,105 Hotel occupancy 807,179 - 65,000 - 872,179 Interest income 1,698 21 - 384 2,103 Contributions 6,750 - - - 6,750 Miscellaneous 4,745 - 410,000 - 414,745 Total revenues 820,372 21 581,748 1,231,741 2,633,882 EXPENDITURES Current: Economic development - 9 171,748 - 171,757 Visitor services 670,157 - - - 670,157 Debt service Principal retirement - - 31,975 - 31,975 Interest and other fiscal charges - - 3,783 - 3,783 Total expenditures 670,157 9 207,506 - 877,672 Excess of revenues over expenditures 150,215 12 374,242 1,231,741 1,756,210 OTHER FINANCING SOURCES(USES) Transfers in - - 35,758 - 35,758 Transfers out (177,670) - (410,000) (1,231,741) (1,819,411) Total other financing sources(uses) (177,670) - (374,242) (1,231,741) (1,783,653) Net change in fund balances (27,455) 12 - - (27,443) Fund balances,October 1 1,110,338 13,620 - 1,123,958 Fund balances,September 30 $1,082,883 $ 13,632 $ $ - $ 1,096,515 88 EXHIBIT C-4 TOWN OF WESTLAKE SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL-VISITORS ASSOCIATION FUND FOR THE YEAR ENDED SEPTEMBER 30, 2015 Visitors Association Fund Variance Budgeted Amounts Favorable Orginal Amended Actual (Unfavorable) REVENUES: Taxes Hotel occupancy $ 707,000 $ 805,000 $ 807,179 $ 2,179 Interest income 2,900 2,900 1,698 (1,202) Contributions 6,810 8,110 6,750 (1,360) Miscellaneous 11,840 12,490 4,745 (7,745) Total revenues 728,550 828,500 820,372 (8,128) EXPENDITURES: Visitor services 706,924 666,804 670,157 (3,353) Total expenditures 706,924 666,804 670,157 (3,353) Excess of revenues over expenditures 21,626 161,696 150,215 (11,481) OTHER FINANCING USES Transfers out (177,670) (177,670) (177,670) - Total other financing uses (177,670) (177,670) (177,670) - NET CHANGE IN FUND BALANCE (156,044) (15,974) (27,455) (11,481) FUND BALANCE AT BEGINNING OF YEAR 1,110,338 1,110,338 1,110,338 - FUND BALANCE AT END OF YEAR $ 954,294 $ 1,094,364 $ 1,082,883 $ (11,481) 89 EXHIBIT C-5 TOWN OF WESTLAKE SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL- LONE STAR PUBLIC FACILITIES CORPORATION FUND FOR THE YEAR ENDED SEPTEMBER 30, 2015 Lone Star Public Facilities Corporation Variance Budgeted Amounts Favorable Orginal Amended Actual (Unfavorable) REVENUES: Interest income $ 45 $ 45 $ 21 $ (24) Total revenues 45 45 21 (24) EXPENDITURES: Economic development - - 9 9 Total expenditures - - 9 9 NET CHANGE IN FUND BALANCE 45 45 12 (33) FUND BALANCE AT BEGINNING OF YEAR 13,620 13,620 13,620 - FUND BALANCE AT END OF YEAR $ 13,665 $ 13,665 $ 13,632 $ (33) 90 EXHIBIT C-6 TOWN OF WESTLAKE SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL-ECONOMIC DEVELOPMENT FUND FOR THE YEAR ENDED SEPTEMBER 30, 2015 Economic Development Fund Variance Budgeted Amounts Favorable Orginal Amended Actual (Unfavorable) REVENUES: Taxes Sales $ 100,000 $ 100,000 $ 106,748 $ 6,748 Hotel occupancy 70,000 85,000 65,000 (20,000) Miscellaneous 440,000 410,000 410,000 - Total revenues 610,000 595,000 581,748 (13,252) EXPENDITURES: Economic development 170,000 185,000 171,748 13,252 Debt service Principal retirement 5,521 5,521 31,975 (26,454) Interest and other fiscal charges 30,237 30,237 3,783 26,454 Total expenditures 205,758 220,758 207,506 13,252 Excess of revenues over expenditures 404,242 374,242 374,242 - OTHER FINANCING SOURCES(USES) Transfers in 35,758 35,758 35,758 - Transfers out (440,000) (410,000) (410,000) - Total other financing sources(uses) (404,242) (374,242) (374,242) - NET CHANGE IN FUND BALANCE - - - - FUND BALANCE AT BEGINNING OF YEAR - - - - FUND BALANCE AT END OF YEAR $ - $ - $ - $ - 91 EXHIBIT C-7 TOWN OF WESTLAKE SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL-413 ECONOMIC DEVELOPMENT CORPORATION FUND FOR THE YEAR ENDED SEPTEMBER 30, 2015 4B Economic Development Corporation Variance Budgeted Amounts Favorable Orginal Amended Actual (Unfavorable) REVENUES: Taxes Sales $ 1,158,750 $ 1,225,000 $ 1,231,357 $ 6,357 Interest income 500 500 384 (116) Total revenues 1,159,250 1,225,500 1,231,741 6,241 EXPENDITURES: Economic development - - - - Total expenditures - - - - Excess of revenues over expenditures 1,159,250 1,225,500 1,231,741 6,241 OTHER FINANCING USES Transfers out (1,159,250) (1,225,500) (1,231,741) (6,241) Total other financing uses (1,159,250) (1,225,500) (1,231,741) (6,241) NET CHANGE IN FUND BALANCE FUND BALANCE AT BEGINNING OF YEAR FUND BALANCE AT END OF YEAR $ - $ $ $ 92 M y IylflKpllxY q yyi� •�sr 4 Fx TOWN OF WESTLAKE STATISTICAL SECTION STATISTICAL SECTION (UNAUDITED) This part of the Town of Westlake, Texas' comprehensive annual financial report presents detailed information as a context for understanding what the information in the financial statements, note disclosures and required supplementary information says about the Town's overall financial health. Contents Page Financial Trends These schedules contain trend information to help the reader understand how the Town's financial performance and well- being have changed over time. 94-99 Revenue Capacity These schedules contain information to help the reader assess the Town's most significant local revenue sources. Although sales taxes are the Town's most significant local revenue source, information about principal revenue payers is confidential under Texas statutes, and; therefore, not disclosed. Trend information about sales tax revenue is provided in Exhibit S-9. 100-104 Debt Capacity These schedules present information to help the reader assess the affordability of the Town's current levels of outstanding debt and the Town's ability to issue additional debt in the future. 105-107 Demographic and Economic Information These schedules offer demographic and economic indicators to help the reader understand the environment within which the Town's financial activities take place. 108-109 Operating Information These schedules contain service and infrastructure data to help the reader understand how the information in the Town's financial report relates to the services the Town provides and the activities it performs. 110-112 Sources: Unless otherwise noted, the information in these schedules is derived from annual financial reports for the relevant year. 93 EXHIBIT S-1 TOWN OF WESTLAKE NET POSITION BY COMPONENT LAST TEN YEARS (ACCRUAL BASIS OF ACCOUNTING-UNAUDITED) Fiscal Year 2006 2007 2008 2009 2010 2011 2011 2013 2014 2015 Govemmental activities: Invested in capital assets,net ofrelated debt S 9,171,657 $ 9,646,644 S 10,313,743 S 13,244,690 $ 13,633,485 S 12,658,921 S 14,866,299 S 21,177,426 S 32,048,991 $ 29.633,298 Restricted 1,406,756 1,719,771 2,004,763 1,761,067 1,564,868 7,137,362 4,726,376 4,243,239 2,284,947 17,827,177 Unrestricted 3,023,875 3.305,542 3,835,751 4,122.185 5.866.046 3,448,100 5,023,731 6,636,876 ( 910.977) 7,108,101 Total governmental activities net position $ 13,602,288 $ 14,671,957 $ 16.154,257 S 19.127,942 S 21,064,399 S 23,2449383 S 249616,406 S 32.057.541 $ 33,422,961 $ 54.568.576 Business-type activities: Invested in capital assets,net ofrelated debt $ 8,436,729 $ 8,097,807 $ 7,726,576 S 7,349,032 S 7,033,831 S 6,875,031 $ 6,877,555 S 6,601,949 S 6,734,414 S 6,410,547 Unrestricted ( 1,846.851) { 2,008.243) ( 1,997.281 ( 1.945 578) ( 2,003,600) ( 1.542.092) ( 1.636,249) ( 842.457) ( 1,272.014) { 2.608.315) Total business-type activities net position S 6,589,878 $ 6,089.564 $ 5.729,295 $ 5,403,454 S 5.030,231 S 5,332.939 S 5,241,306 S 5.759.492 S 5.462,400 S 3.802.232 Primary government: Invested in capital assets,net ofrelated debt $ 17,608,386 $ 17,744,451 $ 18,040,319 $ 20,593,722 $ 20,667,316 S 19,533,952 $ 21,743,854 S 27,779,375 $ 38,783,405 $ 36,043,845 Restricted 1,406,756 1,719,771 2,004,763 1,761,067 1,564,868 7,137,362 4,726,376 4,243,239 2,284,947 17,827,177 Unrestricted 1,177,024 1,297,299 1,838.470 2,176,607 3,862,446 1,906.008 3.387,482 5,794,419 (2.182,991) 4,499,786 Total primary government net position $ 20,192.166 S 20,761,521 S 21,883,552 S 24,531,396 $ 26,094,630 S 28,577,322 $ 29,857,712 S 37,817.033 S 38.885,361 $ 58,370,808 Source: Annual financial reports 94 EXHIBIT S-2(CONTINUED) TOWN OF WESTLAKE CHANGES IN NET POSITION LAST TEN YEARS (ACCRUAL BASIS OF ACCOUNTING-UNAUDITED) Fiscal Year 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 EXPENSES Governmental activitim: Getcral government S 1,811,281 $ 1,941,289 $ 2,031,460 $ 2,203,882 $ 2,272,127 $ 2,478,826 $ 2,518,490 $ 2,606,785 $ 2,784,587 $ 3,145,716 Public Safety 1,705,528 1,738,080 1,795,782 1,939,441 1,698,164 1,801,585 1,883,424 1,978,803 2,190,050 2,381,437 Cultural and Recreation 91,444 86,560 129,641 115,770 105,997 122,400 111,765 113,924 123,541 129,970 Public Works 613,956 455,481 1,013,804 1,028,934 594,705 470,054 216,901 267,973 955,794 1,081,996 Economic Development 35,759 120,753 473,451 207,044 309,653 680,823 546,039 626,423 147,680 171,757 Visitor Smites 393,115 217,992 312,777 341,270 420,270 356,365 475,719 521,521 493,087 665,936 Education 2,249,998 2,672,698 3,305,220 3,722,705 4,138,875 4,884,985 6,193,560 5,803,611 7,147,411 8,598,261 Interest on long-term debt 1,021,779 869,327 991,184 1,068,935 1,026,026 1,127,913 897,573 1,031,328 998,951 1,022201 Total governmental activities expenses 7,922,860 8,102,180 10,053,319 10,627,981 10,565,817 11,922,951 12,843,471 12,950,368 14,841,101 17.197,274 Business-type activities: Water and Sewer 2,137,831 2,206,618 2,410,765 2,694,407 2,567,675 2,794,235 3,098,466 3,356,466 3,690,137 4,861,529 Cemetery 13,299 473 27,822 5,604 6,282 5,328 7,121 7,297 Total business-type activities expenses 2,137 831 2,206,618 2,424,064 2.694,880 2,595,497 2,799,839 3,104,748 3,361,794 3,697,258 4,868,826 Total primary government program exponsaS 10,060,691 S 10,308,798 S 12,477,383 $ 13,322,861 $ 13,161,314 S 14,722,790 $ 15,948,219 $ 16.312,162 $ 18,538,359 $ 22,066,100 PROGRAM REVENUES Governmental activities: Foes,fines,and charges for services: General Govermment $ 742,176 $ 785,771 $ 522,215 S 677,948 $ 716,624 $ 721,157 $ 673,1190 S 774,909 S 33,975 $ 110,778 Public Safety 136,870 165,255 113,755 107,634 80,665 140,600 142,402 182,154 848,772 887,919 Public Works 699,753 625,340 902,875 594,338 1,597,655 292,572 407,328 659,246 1,022,769 936,245 Education 98,357 85,925 42,839 98,314 102,406 99,638 195,059 182,220 222,270 531,090 Operating grants and contributions 3,686,964 1,257,058 1,296,378 1,522,935 853,151 728,242 5,269,841 4,907,472 6,592,642 7,615,653 Capital grants and contributions 1,455,626 2,059,624 83,250 425,900 5,897,456 80,472 19,983,078 Total governmental activities program raver 6,819,746 2,919,349 2,878,062 5,060,793 3,433,751 2,408,109 6,687,720 12,603,457 8,800,900 30,064,763 Business-type activities: Charges for services: Water and Sewer 1,842,238 1,657,186 2,037,306 2,345,236 2,101,510 3,078,868 2,934,842 3,157,332 3,428,702 3,549,775 Cemetery 2,100 - 5,550 13,300 4,500 5,510 7,749 13,620 Operating grants and contributions 19,653 - - - 46,810 - 24,423 - - - Capital grants and contributions 169,034 Total business-type activities program mer 1,861,891 1,657,186 2,208,440 2,345,236 2.153,870 3,092,168 2,963,765 3,162,842 3,436,451 3,563,395 Total primary government program revermcS 8.681,637 $ 41576,535 $ 5,0861502 $ 7,406,029 $ 5,587,621 $ 5,500,277 $ 9,651,485 $ 15,7616,299 S 12,237,351 $ 33,628,158 95 EXHIBIT S-2(CONCLUDED) TOWN OF WESTLAKE CHANGES IN NET POSITION LAST TEN YEARS (ACCRUAL BASIS OF ACCOUNTING-UNAUDITED) Fiscal Year 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 NET(EXPENSE)REVENUES Governmental activities S( 1,103,114) $( 5,182,831) S( 7,175,257) $( 5,567,188) S( 7,132,066) $( 9,514,842) 3( 6,155,751) S( 346,911) S( 6,040,201) $ 12,867,489 Business-type activities ( 275,940) 549,432) ( 215,624) ( 349,644) ( 441,627) 292,329 140,983) ( 198.952) ( 260,807) ( 1,305,431) Total primary government net expense ( 1.379.054) ( 5,73226.3 ( 7,390,881) ( 5,916,832) ( 7.573.693) ( 9,222,513) ( 6,296.734) ( 545,863) �, 6,301,008) 11,562,058 GENERAL REVENUES AND OTHER CHANGES IN NET POSITION Governmental activities: Taxes Salts $ 1,810,706 $ 2,197,756 S 3590,575 S 3,664,409 $ 3,790,533 S 4,609,626 S 3,657,274 $ 4,375,397 $ 4,725,845 S 4,925,428 Property 1,260,112 1,441 238 1,366,633 1,367,069 1,438,969 Hotel Occupancy 415,544 458,471 527,662 497,769 457,693 527,261 590,853 709,578 796,481 872,179 Mixed 13-mgt, 13,674 14,066 16,177 17,869 17,902 19,721 38,286 39,727 51,602 59.184 Franchise 457,004 560,312 649,108 624,401 603,233 586,836 664,991 734,935 795,322 963,040 Unrestricted grants and contributions 1,822,200 2,259,643 2,500,817 2,960,590 3,484,141 3,744,757 - - - Investment earnings 98,824 261,622 188,459 61,224 38,383 46,249 33,353 24,218 26,713 28,904 Miscellaneous 448,827 466,654 564,973 568,782 676,638 691,345 1,112,858 1,023,149 246,633 198,199 Transfers 45,319 33,976 220,819 61,321 - 145,216 45,507 ( 485,591) 43?99 323,100 Extraordinary item 56,704 ( 124,346) - - - Special item - 67,760 - - - Gain on sale of capital assets 7.000 - Total govemmmml activities 5,112,098 6,252,500 8.258.590 8,456,365 9,068.523 11.694,826 7.527,774 7,788.046 8,053.064 8.809,003 Business-type activities: Investment earnings 25,604 46,158 32,103 7,858 8,334 9,929 10,077 6,552 7,114 7,083 Miscellaneous 56,025 36,936 44,071 77,266 60,070 145,666 84,780 224,995 - - Tmnsfers ( 45,319) 33,976) ( 220,819) ( 61.321 ( 145,216) ( 45,507) 485,591 i 43,399] i 323,100) Total business-type activities 36,310 49,118 ( 144,645) 23,803 68,404 10.379 49,350 717,138 ( 36,285) ( 316,017) Total primary government 5,148,408 6,301,618 8.113,945 8,480,168 9.136,927 11,705,205 7,577,124 8,505,184 8,016,779 8,492,986 CHANGE IN NET POSITION Governmental activities 4,008,984 1,069,669 1,083,333 2,889,177 1,936,457 2,179,984 1,372,023 7,441,135 2,012,863 21,676,492 Business-type activities ( 239,630) t 500,314) f 360,269) ( 325,841) ( 373,223) 302,708 ( 91,633) 518.186 ( 297,092) ( 1.621,446) Total primary government $ 3,769,354 S 569,355 $ 723,064 $ 2.563,336 S 1,56.3,234 S 2,482,692 S 1280.390 S 7.959.321 S 1.715.771 S 20.055.044 Source:Annual financial reports 96 EXHIBIT S-3 TOWN OF WESTLAKE FUND BALANCES GOVERNMENTAL FUNDS LAST TEN YEARS (MODIFIED ACCRUAL BASIS OF ACCOUNTING-UNAUDITED) 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 General fund Reserved S 434,175 $ 563,176 S 303,639 $ 193,105 $ 214,750 $ - $ - - Unreserved 2,850,789 2,533,123 2,503,099 2,532,207 3,578,235 - - - - Nonspendable: Prepaid items 62,020 6,856 6,906 8,821 13,334 Restricted for: Court security and technology 186,776 192,768 194,422 193,082 203,173 Committed for. Future projects 219,687 49,941 74,941 80,442 80,442 Assigned for. Future equipment 22,000 22,000 24,000 - - Unassigned 3,524.911 4.992,240 6,751,362 7,671,173 7,383,601 Total general fund $ 312851164 $ 3,096.299 $ 2,806,738 $ 2,725,312 $ 3,792,985 $ 4,015,394 $ 5.263,805 $ 7,051.631 $ 7,953,518 $ 7,680,550 All other governmental funds Reserved Special revenue funds $ 869,694 $ 1,183,020 S 1,527,724 $ 1,256,954 $ 1,112,941 $ - $ - $ - $ - $ - Unreserved,reported in: Special rrvenue funds 427,720 846,214 1,666,371 1,933,564 2,693,846 - - - - - Nompendable: Prepaid it- 33,511 60,963 62,635 80,118 83,359 Restricted for: Tourism 1,109,365 1,052,546 1,025,891 1,107,520 1,081,009 Future projects 4,647,863 3,594,379 10,370,914 1,751,405 13,632 Debt service 7,505 22,657 1,482 1,081 20,916 Education 885,365 758,127 931,094 993,998 1,592,227 Economic development 267,577 178,384 - - - Capital projects funds 102,687 102,376 3,233,471 323,009 237,177 - - - - 17,713,788 Unassigned Total all other govermnental funds $ 1,400,101 S 2,131,610 $ 6,427,566 $ 3,513,527 S 4,043,964 $ 6,951,186 $ 5,667,056 $ 12,392,016 S 3.934 122 $ 20,504,931 Note: Economic Development Funds were classified as special revenue funds through FY 2002 and considered discretely presented component units through FY 2007. Upon further consideration,the 4B Economic Development Corporation and Lone Star Public Facility Corporation funds are now classified as blended component units. The Town implemented GASB Statement No.54 in fiscal year 2011. Sourer: Annual financial reports 97 EXHIBIT S-4(CONTINUED) TOWN OF WESTLAKE CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS LAST TEN YEARS (MODIFIED ACCRUAL BASIS OF ACCOUNTING-UNAUDITED) 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 REVENUES Tares S 2,696,928 S 3,230,605 $ 4,783522 $ 4,804,448 S 4,869,361 $ 7,000,690 $ 6,193,472 S 7,226,180 7,722,606 8,252,748 Licenses,fees and permits 748,016 900,121 1,108,083 860,697 1,746,954 530,646 $98,394 944,735 1,175,075 1,200,790 Fina and penalties 751,036 651,090 554,376 523,515 647,170 605,705 622,338 695,167 730,441 734,152 State progam revenues 1925,043 2,187,733 2,673,680 3,163,129 3,687,706 3,945,658 4,369,635 4,696,540 5.269,641 6,173,418 Federal program revenues 75,662 49,200 75,207 56,134 199,436 337,508 152,351 81,958 80,103 87,797 Investmcnt carvings 98,824 261,622 188,459 61,224 38,383 46.248 33,353 24,218 26,713 28,904 Contributions 4,964,085 1,079,768 1,048,308 1,264,262 533,400 - 732,535 5,916,014 82,446 18,785,953 Other mmues 547,184 552.579 607,812 673,400 779,044 980,816 1,323,237 1.274,826 1,665.103 2.471.191 Total revenues t 1,806.778 9.112,718 11.039.447 11.406,809 12.501.454 11,447.271 14,225,315 20,859.638 16,752,028 37,734,953 EXPENDITURES General govenuncnt 2,542,295 1,385,492 1316,346 1,519,600 1,644,587 1,733,324 1,878,885 1,910,545 2236,360 2,411,239 Public safety 1,627,641 1,665,879 1,731317 1,890,469 1,634,936 1,842,751 2.224,469 1,967584 2,146,587 2,490,551 Cultural and recreation 91,444 86,560 129,641 115,770 105,997 122.400 111,765 113,924 123,541 130,322 Public works 434,716 276,789 846,604 841,822 333.831 326,749 391,115 $32,675 615,781 744,028 Economic development 35,759 141,197 495,071 229,907 401,879 706,391 243,939 296,565 147,685 171,757 Visitor services 393,115 226,992 312,777 341,270 420,270 356,365 475,719 521,521 493,082 670,157 Education 2.249,998 2,672.698 3,305_.220 3,722,705 4,138,875 4,984,985 6,193,560 5,762,652 7,143,678 7,938,501 Capital Outlay 371,860 836,787 463,918 4,335,114 682,103 1,023.772 1,110,476 7,601,631 9,964,047 5.274,292 Capital Project Debt service Principal 350,000 470,000 395.000 593,937 563,703 555,000 668,000 2,955,000 1,004,677 1,130,762 Interest and other fiscal charges 1,028,634 1,240,950 921,944 990,641 977,163 1,083,377 952,027 830,425 1,116,489 977,412 Bond issuance cost 33.000 16,446 148,891 185.699 69,283 Total crpenditum 9.125.462 9,003344 10,152,838 14,581,235 10,903344 12,671560 14398,846 22,678,221 25,061210 21,939,011 EXCESS(DEFICIENCY) OF REVENUES OVER (UNDER)EXPENDITURES S 2,681 316 S 109,374 S 886,609 S( 3,174,426)$ 1,598,110 S 775,711 V 173,531)$( 1,818,583) $( 8309,182) S 15,795.942 98 EXHIBIT S-4(CONCLUDED) TOWN OF WESTLAKE CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS LAST TEN YEARS (MODIFIED ACCRUAL BASIS OF ACCOUNTING-UNAUDITED) 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 OTHER FINANCING SOURCES(USES): Proceeds from sale ofland $ - $ - $ - $ - $ - $ - $ - $ - S Sale of assets 7,010 _ _ Issuanceofdebt - - 2,500.000 117,640 - 2,095,000 - 8,294,800 - - Premium on CO issued 284,437 - - Refunding bonds issued 7,465,000 - - - - 7,799,196 2,200,000 1,910,000.0(1 - Premium on refunding bonds issued 37,723 84,598.00 - Payments to bond escrow agent ( 7,088,706) - - - - ( 7,650,305) - (1,925,315) - Proceedsfromcapitallease 23,000 - - - _ _ _ 239,009 16,740 Notes payable issued 50,000 - - 401,484 162,059 Special item - 67,760 40,959 - - Extraordinary item 56,704 ( 124,346) ( 40,959) - - Transfers in 704,577 1,212,558 2,160,174 2,435,486 1,804,577 7,082,163 2,121,099 2,104,929 3,094,211 4,617,896 Transfers out ( 659,258) ( 1,178,582) ( 1,939.355) ( 2.374,165) ( 1,804,577) ( 6,936,947) ( 2,075,592) ( 2,590520) 3,0( 50,812) 42'9( 4,796) Total other financing sources(uses) 45,319 433,270 2,720,819 178,961 2.353,920 137,812 10,331,369 753,175 501.899 Prior period adjustment 60,000 NET CHANGES IN FUND BALANCES S 2,786,635 $ 542,644 $ 3.607,428 $( 2,995,465)$ 1.598,110 $ 3.129,631 $( 35,719)$ 8,512,786 $( 7,556,007) $ 16297,841 DEBT SERVICE AS A PERCENTAGE OF NONCAPITAL EXPENDITURES 15.7% 20.9% 13.6% 15.4% 15.0% 14.1% 12.5% 25.3% 14.4% 12.9% Note: Economic Development Funds were classified as special revenue funds through FY 2002 and considered discretely presented component units through FY 2007. Upon further consideration,the 4B Economic Development Corporation and Lone Star Public Facility Corporation funds are now classified as blended component units. Source: Annual Financial Reports 99 EXHIBIT S-5 TOWN OF WESTLAKE ASSESSED VALUE AND ESTIMATED ACTUAL VALUE OF TAXABLE PROPERTY LAST FIVE FISCAL YEARS (MODIFIED ACCRUAL BASIS OF ACCOUNTING—UNAUDITED) Appraised Value Less: Total Taxable Total Fiscal Real Personal Tax-Exempt Assessed Direct Year Property Property Property Value Tax Rate 2011 $ 951,070,355 $ 70,569,170 S 143,856,142 $ 877,783,383 0.1601 2012 1,016,474,604 85,329,823 156,315,552 945,488,875 0.15684 2013 1,099,249,031 122,792,343 335,814,215 886,227,159 0.15684 2014 1,091,142,760 151,927,427 346,730,543 896,339,644 0.15634 2015 1,123,354,430 139,936,507 342,248,275 921,042,662 0.15634 Note: Prior to fiscal year ended September 30,2011,the Town of Westlake did not assess an ad valorem tax. Source: Tarrant County Appraisal District Denton Central Appraisal District 100 EXHIBIT S-6 TOWN OF WESTLAKE PRINCIPAL PROPERTY TAX PAYERS CURRENT AND FOUR YEARS AGO (UNAUDITED) 2015 2011 Percentage Percentage Taxable of Total Town Taxable of Total Town Assessed Taxable Assessed Taxable Taxpayer Value Rank Assessed Value Taxpayer Value Rank Assessed Value 5 Village Circle Holdings LP $ 140,613,560 1 15.27% Maguire Thomas Partners,etal $ 116,839,380 1 13.31% FMR Texas,LLC/LTD Partnership 71,938,529 2 7.81% FMR Texas,LLC/LTD Partnership 148,569,643 2 16.93% DCLI,LLC 52,633,131 3 5.71% Maguire Partners 39,117,985 3 4.46% Fidelity Investments Inc. 26,383,422 4 2.86% Lexington TNI Westlake LP 18,249,200 4 2.08% Marsh USA Inc 21,098,171 5 2.29% First American Leasing/Rcal Estate 17,636,457 5 2.01% Lexington TNI Westlake LP 14,700,000 6 1.60% DCLI,LLC 13,234,691 6 1.51% Corelogic Solutions LLC 14,473,635 7 1.57% Fidelity Investments 12,277,810 7 1.40% Prince Whipple Trust 6,850,000 8 0.74% Levi Strauss&Co. 8,215,271 8 0.94% Levi Strauss&CO 5,903,735 9 0.64% Westlake Tema,LLC 7,400,002 9 0.84% Vaquero Club,Inc. 5,383,416 10 0.58% EMC Corp 6,418,484 10 0.73% Total $ 359,977,599 39.08% Total $ 387.958,923 44.20% Source:Tarrant County Appraisal District Note: (1)Prior to fiscal year ended September 30,2011,the Town of Westlake did not assess an ad valorem tax. (2)Total Taxable Assessed Value including real and personal property for tax year 2010(fiscal year 2011)is$877,783,383. (3)Total Taxable Assessed Value including real and personal property for tax year 2014(fiscal year 2015)is$921.042,662. 101 EXHIBIT S-7 TOWN OF WESTLAKE PROPERTY TAX LEVIES AND COLLECTIONS LAST FIVE FISCAL YEARS (UNAUDITED) Collected within the Fiscal Year Total Collections Taxes Levied Adjusted of the Levy Collections to Date Fiscal for the Adjustments Taxes Levied Percent in Subsequent Percentage Year Fiscal Year to Levy for Fiscal Year Amount of Levy Years Amount of Levy 2011 $ 1,409,956 $ 47,560 $ 1,362,396 $ 1,356.050 99.53% 5,556 $ 1,361,606 99.94% 2012 1,486,968 47,220 1,439,748 1,437,908 99.87% 1,437,908 99.87% 2013 1,398,777 45,297 1,353,480 1,352,097 99.90% 1,352,097 99.90% 2014 1,405,819 44,761 1,361,058 1,350,639 99.23% (451) 1,350,188 99.20% 2015 1,450,674 43,948 1,406,726 1,405,148 99.89% - 1,405,148 99.89% Note: Prior to fiscal year ended September 30,2011,the Town of Westlake did not assess an ad valorem tax. Source: Tarrant County Appraisal District Denton Central Appraisal District 102 EXHIBIT S-8 TOWN OF WESTLAKE DIRECT AND OVERLAPPING PROPERTY TAX RATES (PER$100 OF ASSESSED VALUE) LAST FIVE FISCAL YEARS (UNAUDITED) City Direct Rates Overlapping Rates Operating/ School Districts Counties Tarrant Tarrant Trophy Total Fiscal General Debt Service Total(A) Carroll Northwest Keller Denton Tarrant County Countv Club Direct and Year Fund Fund Direct ISD ISD ISD County County College Dict Hospital Dist. MUD Hl Overlapping 2011 0.15620 0.00390 0.16010 1.41500 1.37500 1.53060 0.27736 0.26400 0.13764 0.22790 0.19500 5.58259 2012 0.13835 0.01849 0.15684 1.41500 1.37500 1.54000 0.28287 0.26400 0.14897 0.22790 0.17500 5.58557 2013 0.14197 0.01487 0.15684 1.40000 1.37500 1.54000 0.28287 0.26400 0.14897 0.22790 0.13339 5.52896 2014 0.13710 0.01924 0.15634 1.40000 1.45250 1.54000 0.27220 0.26400 0.14950 0.22790 0.13339 5.59583 2015 0.13710 0.01924 0.15634 1.40000 1.45250 1.54000 0.27220 0.26400 0.14950 0.22790 0.13339 5.59583 Notes: Prior to fiscal year ended September 30,2011,the Town of Westlake did not assess an advalorem tax. Overlapping rates are those of local and county governments that apply to property owners within the Town of Westlake. Not all overlapping rates apply to all Town's property owners(e.g.,the rates for the counties and school districts apply only to the proportion of the Town's property owners whose property is located within the geographic boundaries of the county and school district) Source: Tarrant County Appraisal District Denton Central Appraisal District 103 EXHIBIT S-9 TOWN OF WESTLAKE TAXABLE SALES BY INDUSTRY TYPE LAST TEN FISCAL YEARS (UNAUDITED) Flscnl Year NAICS Indusin,Type 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 11 Agriculture,Forestry,Fishing and Hunting S 31 S 67 S 182 S 210 S - S 60 S 38 S 163 S 731 S 775 21 Mining 2,321 - 2,109 20 400 4,260 3.050 335 15 714 22 Utilities 463,222 212,336 230,072 186,773 178,693 180,032 171,131 176,622 204,280 191,031 23 Construction 81,542 200,79) 998,867 1,043,752 68,306 131780 139,0181 365,049 239,888 216,546 31-33 Manufacturing 1,120,328 360,010 371,193 430,515 386,492 402,062 526,755 295,660 375,905 234,651 42 Wholesale Trade 248,702 284,082 142,999 138,456 105.557 145,631 134,466 59,571 421,371 515,602 4445 Retail 408,556 253,293 610,119 648,597 1,097,007 707,553 1106,427 1,132,811 962,244 1,332,659 4849 Transportation and Warehousing 63 491 791 556 316 1,156 3,662 1,962 3,550 51 Information 538,210 223,672 320,848 377,828 423,834 508,609 367,298 378,221 623,828 567,685 52 Financial and Insurance 10,162 343,446 107,319 68,936 87,188 73,455 27,857 75,529 505,585 295,622 53 Real Estate and Rental and leasing 178,047 204,398 138,879 154,315 327,207 210,158 215,754 457,693 493,570 708,747 54 Professional,Scientific,and Technical Services 111,746 452,018 199,700 192,008 202,263 231,526 221,331 536,971 242,069 191,145 56 Admin and Support and Waste Mgmt&Rem Sry 245.562 45,809 127,779 22,319 39,539 65,045 39,027 110,686 103,340 50,264 61 Education Services 895 317 282 2.980 619,228 1,675,351 356.689 371,117 153,279 201,761 62 Health Care and Social Assistance 10 - 238 - 170 106 251 11,018 1887 71 Arts,Entertainment and Recreation 49,474 224,101 199,876 174,485 158,996 206,050 204,456 184,687 191,343 189,027 72 Accommodation and Food Services 34,021 57,084 130,923 140.344 140,996 175.938 93,123 204,044 221,061 246,755 81 Other Services(except Public Administration) 130,476 130,392 18,576 1,756 4,462 4,632 9,805 13,156 17,412 8,%5 92 Public Administration 170 I 1 1 135 295 27,243 S 3,623.538 $ 2.992307 S 3,599,960 S 3,584.084 S 3.840.735 S 4,723,628 S 3,617,604 S 4,368,521 S 4,796,144 S 4,960,386 Town direct sales tax rate 2.0 M 20M. 200% INN 2.00% 2.00% 2.00% 2.00% 2.00% 2.0011 Note: Infatuation on sales tax by NAICS was not available prim to 2006.Comparison will be made to the prior y,ar until ten-year prim comparison can be made. Due to confidentiality issues,the names of the ten largest revenue payers are not available.The categories presented arc intended to provide alternative informuion regarding the sauces of the Town's sales tax menue Sourer. Taal State anaptrolle reports 104 EXHIBIT S-10 TOWN OF WESTLAKE RATIOS OF GENERAL BONDED DEBT OUSTANDING LAST TEN FISCAL YEARS General Bonded Debt Outstanding Percentage General Certificates of Actual Fiscal Obligation of Taxable Per Year Bonds Obligation Total Sales Capita 2006 _ 18,460,000 18,460,000 10.19% 26,447 2007 7,365,000 11,755,000 19,120,000 13.05% 27,198 2008 9,850,000 11,375,000 21,225,000 11.82% 27,038 2009 9,735,000 10,975,000 20,710,000 11.30% 25,791 2010 9,630,000 10,555,000 20,185,000 10.65% 23,831 2011 8,962,656 12,210,000 21,172,656 9.19% 21,343 2012 16,770,000 4,877,000 21,647,000 11.84% 20,369 2013 16,590,000 13,622,000 30,212,000 13.81% 27,251 2014 18,260,000 11,044,000 29,304,000 12.40% 24,748 2015 17,480,000 10,752,000 28,232,000 11.46% 23,527 Notes: Details regarding the Town's outstanding debt can be found in the notes to the financial statements. There was no debt issued until fiscal year 2002. See Table 13 for personal income and population data. 35 - 30 25 ; E 20 I c 15 A- AA ..... ........... _._.._._.._.10 -— IM R OR H -I-- ---,I 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 (I General Obligation Bonds a Certificates of obligation 105 EXHIBIT S-11 TOWN OF WESTLAKE RATIOS OF OUTSTANDING DEBT BY TYPE LAST TEN FISCAL YEARS (UNAUDITED) Business-Type Governmental Activities Activities General Certificates Other Certificates Total Percentage Fiscal Obligation of Capital Contractual of Primary of Personal Per Year Bonds Obligation Leases Loans Obligations Obligation Government Income Capita 2004 $ $ 12,400,000 $ - $ $ 6,027,387 $ 18,427,387 45% $ 56,181 2005 18,810,000 - 5,980,921 24,790,921 55% 69,834 2006 18,460,000 - 5,878,381 24,338,381 27% 34,869 2007 7,365,000 11,755,000 23,000 5,822,299 24,965,299 27% 35,513 2008 9,850,000 11,375,000 15,264 5,763,022 27,003,286 23% 34,399 2009 9,735,000 10,975,000 46,559 5,734,191 26,490,750 22% 32,990 2010 9,630,000 10,555,000 - 5,658,888 25,843,888 25% 30,512 2011 8,962,656 12,210,000 50,000 5,580,380 26,803,036 21% 27,019 2012 16,770,000 4,877,000 - 34,075 5,498,668 27,179,743 20% 25,576 2013 16,590,000 13,622,000 - 18,150 5,412,149 35,642,299 24% 32,150 2014 18,260,000 10,029,800 237,378 437,253 5,320,824 1,014,200 35,299,455 22% 29,812 2015 17,480,000 9,759,250 154,347 357,041 5,226,294 992,750 33,969,682 20% 28,308 Note: Details regarding the Town's outstanding debt can be found in the notes to the financial statements. No debt was issued until fiscal year 2000. See Table 13 for personal income and population data. 106 EXHIBIT S-12 TOWN OF WESTLAKE DIRECT AND OVERLAPPING GOVERNMENTAL ACTIVITIES DEBT AS OF SEPTEMBER 30, 2015 (UNAUDITED) Overlapping Amount of Taxing Body Debt Outstanding As of Percent(1) Amount Carroll ISD $ 216,607,746 9/30/2015 5.67% $ 12,281,659 Denton County 634,275,000 9/30/2015 0.02% 126,855 Keller ISD 771,227,959 9/30/2015 4.56% 35,167,995 Northwest ISD 765,546,815 9/30/2015 1.37% 10,487,991 Tarrant County 333,795,000 9/30/2015 0.78% 2,603,601 Tarrant County College District - 9/30/2015 0.78% - Tarrant County Hospital District 23,440,000 9/30/2015 0.78% 182,832 Trophy Club MUD#1 10,845,000 9/30/2015 18.76% 2,034,522 Total Overlapping Debt 62,885,455 Town of Westlake Outstanding Debt 35,299,475 Total Direct&Overlapping Debt $ 98,184,930 Source: Texas Municipal Report prepared by employees of the Municipal Advisory Council of Texas("MAC") Note: Overlapping governments are those that coincide,at least in part,with the geographic boundaries of the Town. This schedule estimates the portion of the outstanding debt of those overlapping governments that is borne by the residents and businesses of the Town of Westlake. This process recognized that,when considering the Town's ability to issue and repay long-term debt,the entire debt burden borne by the resident and businesses should be taken into account. However,this does not imply that every taxpayer is a resident,and therefore responsible for repaying the debt,of each overlapping government. (1) The percentage of overlapping debt applicable is estimated using taxable assessed property values. Applicable percentages were estimated by determining the portion of the entity's taxable assessed value that is within the Town's boundaries and dividing it by the entities'total taxable assessed value. 107 EXHIBITS-13 TOWN OF WESTLAKE DEMOGRAPHIC AND ECONOMIC STATISTICS LAST TEN FISCAL YEARS (UNAUDITED) Per Capita Tarrant County Calendar Estimated Personal Personal Unemployment Year Population Income Income Rate 2006 698 90,835,901 130,137 4.6% 2007 703 93,316,319 132,740 4.3% 2008 785 115,891,905 147,633 5.1% 2009 803 120,920,285 150,586 8.1% 2010 847 102,852,057 121,431 8.1% 2011 992 126,678,400 127,700 7.9% 2012 1,063 138,423,531 130,254 6.2% 2013 1,109 147,292,890 132,859 6.0% 2014 1,184 160,462,095 135,516 5.0% 2015 1,200 165,871,904 138,227 4.0% Sources: Population for 2000 is from the 2000 census. Fiscal Years 2001 through 2003 are estimated. The Town took over the utility billing in 2004 and estimated the population by using number of residential water accounts and assuming a 2.5 average household size. 2010 Census shows median household income at$250,000. Due to the influx of residents coming to Westlake Academy,surveys have shown that there are approximately 1.28 school-age children in each household;therefore,we will use a 3.23 average household size to calculate population. Tarrant County Unemployment Rate information taken from Texas Workforce Commission. American Community Survey(ACS) USA.com-Per Capita Income source North Central Texas Council of Governments/US Census 2010 Estimated Population 1400 1109 1,184 1,200 1200 __..992 1000 _...� 171 785 803 .._. _847 _ i 800 600 I — : f __.. ... ...._. ..__.. ._�_....._.. .v__ 400 __ __._. _. __ i _�� E 200 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 I --------------_..__—_- ._._................. _.__._.._._....__..__.__..__..._..._.....__ 108 EXHIBIT S-14 TOWN OF WESTLAKE PRINCIPAL EMPLOYERS CURRENT AND EIGHT YEARS AGO (UNAUDITED) 2015 2007 Percentage Percentage of Estimated of Estimated Total Town Total Town Employer Employees Employment Employer Employees Employment Fidelity Investments 5,843 51.51% Fidelity Investments 3,100 37.15% Core Logic 1,790 15.78% First American/Core Logic 3,000 35.95% Wells Fargo 617 5.44% Chrysler Financial/f)Auto Finance 325 3.89% Deloitte 460 4.06% Wells Fargo 790 9.47% TD Auto Finance 390 3.44% McKesson Corporation 215 2.58% Sabre JLL Facilities 317 2.79% Sonitrol/World Factory 165 1.98% First American Title 262 2.31% Walco I50 1.80% Verizon Wireless 412 3.63% Vaquero Club 140 1.68% Travelocity 200 1.76% Marriott Solana Hotel 120 1.44% Sount Physicians 170 1.50% Pfizer,Inc. 115 1.38% Vaquero Country Club 123 1.08% Town of Westlake/Westlake Academy 73 0.87% Marriott Solana Hotel 108 0.95% Premier Academy 34 0.41% Westlake Academy 94 0.83% Solara Healthcare 28 0.34% Total 10,786 95% Total 8,255 99% Note: Information on the Principal Employers from 1999 is not available. Information will be accumulated over the next ten years. Comparisons will be made to the first available data until ten years can be coml Source: Cushman&Wakefield tenant records and contact with employers of the Town 109 EXHIBITS-15 TOWN OF WESTLAKE FULL-TIME EQUIVALENT CITY GOVERNMENT EMPLOYEES BY FUNCTION/PROGRAM LAST TEN FISCAL YEARS (UNAUDITED) Function/Program 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 General government Town manager 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 Assistant Town Manager 0.75 0.90 1.00 Assistant to Town Manager 1.00 1.00 1.00 1.00 1.00 1.00 0.75 0.00 0.00 0.00 Administrative 0.50 0.00 0.00 0.75 0.50 0.75 0.75 1.00 0.50 0.50 Building official 1.00 1.00 1.00 1.33 1.33 1.33 1.33 1.50 1.66 1.66 Town secretary 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.25 Facilities/Grounds maintenance 0.50 0.50 0.75 1.08 1.08 1.08 0.83 1.00 1.09 1.34 Municipal 3.75 4.00 4.00 4.25 4.50 4.50 3.75 4.75 5.10 5.00 Finance 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00 4.00 4.00 Payroll/Human Resources 0.00 0.00 1.00 1.33 1.33 1.33 1.33 2.00 2.00 2.00 Information Technology 1.00 1.00 Public safety(EMS) 11.00 11.00 11.00 9.00 9.00 9.00 9.00 10.00 13.25 14.25 Culture and recreation 0.50 0.50 0.75 0.75 0.75 0.75 0.50 0.75 0.84 0.84 Public works 1.00 1.00 1.50 1.50 1.50 1.50 2.00 3.00 2.66 2.66 Marketing and public affairs 1.00 0.00 0.00 0.00 0.00 0.00 1.00 1.00 2.00 2.00 Education 32.40 36.40 43.00 48.10 55.62 59.44 67.48 76.18 91.18 93.65 Total 57.65 60.40 69.00 74.09 81.61 85.68 93.72 106.93 128.18 132.15 Source: Prior Town budgets and Academy personnel records Note: A full time municipal employee is scheduled to work 2,080 hours per year(including vacation and sick leave). Fulltime equivalent employment is calculated by dividing total labor hours by 2,080. A full time education employee is scheduled to work 1,122 hours per year. 110 EXHIBITS-16 TOWN OF WESTLAKE OPERATING INDICATORS BY FUNCTION/PROGRAM LAST TEN FISCAL YEARS (UNAUDITED) Function/Program 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 General government Permits issued 194 162 93 61 44 70 85 132 144 159 Permit value $ 47,464,851 $ 67,101,543 $ 188,578,581 $ 21,051,297 $ 190,388,737 $ 21,173,592 $ 29,481,047 $ 50,544,048 $ 59,358,904 S 80,011,354 Police(Contract with Keller PD) Motor vehicle stops 8,992 10,045 10,357 9,247 9,763 9,829 12,221 9,993 9,579 10,432 Traffic accident investigations 164 225 208 266 273 348 343 322 341 398 Part I crimes 30 25 26 23 19 30 39 9 15 20 DWI arrests 56 53 45 24 32 80 50 69 55 62 Fire/EMS Fire runs 136 153 169 118 172 191 181 238 211 211 Ambulance runs 207 251 159 184 187 264 266 286 240 253 Inspections 161 96 132 15 71 71 54 96 286 261 Public Works-Gencral Street resurfacing(LF) 7,128 5,333 - - - 3,800 30,000 - - - Potholes repaired 20.00 0.00 20.00 10.00 5.00 36.00 6.00 2.00 6.00 20.00 Public Works-Utility Number ofwater accounts 338 386 419 437 478 500 568 614 651 713 Water main breaks 3 2 4 5 6 4 4 3 1 1 Avg daily consumption MG(water) 1.031 0.729 0.999 1.020 0.889 1.200 1.100 1.090 1.045 1.021 Peak daily consumption MG(water) 2.677 1.978 2.060 2.740 2.460 2.540 2.600 2.480 2.690 2.770 System capacity-MG(water) 1.685 1.685 1.685 1.685 L685 1.685 1.685 1.685 2.685 2.685 Water purchased(in gallons x 000) 376,264 266,158 364,764 372,933 324,843 443,222 407,305 401.457 381,482 372,838 Water sold(in gallons x 1000) 338,085 246,280 340,743 313,495 290,000 385,320 376,496 357,297 347,148 360,000 Wastewater Number of new sewer connections 211 235 240 251 254 245 292 325 350 384 Avg daily sewage treatment 0.1320 0.1370 0.124 0.101 0.063 0.163 0.136 0.151 0.208 0.166 (thousands of gallons) Source: Various Town departments Notes: N/A represents information that is unavailable. EXHIBIT S-17 TOWN OF WESTLAKE CAPITAL ASSET STATISTICS BY FUNCTION/PROGRAM LAST TEN FISCAL YEARS (UNAUDITED) Function/Pro¢ram 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Five Stations 1 1 1 I I I 1 I 1 I Public Works-Utility Pump station 1 I I I I I I 1 1 I Lift station 2 2 2 2 3 3 3 3 3 3 Telecommunications Duct Bank(LF) 38,303 38.303 43,703 49,103 51,803 57,783 57,783 57,783 59,936 66.084 Telecommunications Duct Bank Manholes 95 95 104 113 122 122 122 122 1212 140 Water Water mins(1,F) 58,300 59,200 64,600 70,000 79,000 130,000 137,891 137,891 142,694 148,117 Fire hydrants 119 119 130 130 154 188 191 191 201 214 Storage capacity MG 1,685 1,685 1,685 1,685 1,685 1,685 1,685 1,685 2,685 2,685 Wastewater Sanitary sewers(LF) 35,000 35,000 39,300 39,300 49,900 94,000 94,000 94.000 98,964 104.373 Manholes 250 250 267 284 NA 304 304 304 326 355 Public Works-Utility Streets(miles) 10.80 10.80 10.80 10.80 10.80 10.80 10.25 10.25 10.25 10.50 Highways(miles) - - - - - - - - - - Streetlights - - - - - - - Traffic signals(school zone flashers) 2 2 2 2 2 2 2 2 2 2.0 Parks and recreation Acreage 19 19 25 25 25 25 25 25 27 27.0 Playgrounds 2 2 2 2 2 2 2 2 2 2.0 Softball/soccer field I I I 1 1 I 1 I 1 1.0 Football field - - I 1 1 I I I 1 1.0 Public trails(mites) 2.5 3.5 3.5 3.5 3.5 5.0 5.0 5.0 7.0 8.5 Source: Various Tov.m departments Note: No capital asset indicators arc available for the general govcmrnent. The amount of roads decreased in FY 2011-2012 due to a portion of mad being dedicated to TxDot 112 APPENDIX C-GENERAL INFORMATION REGARDING THE ISSUER The Town of Westlake was incorporated in 1956 and is located along the border and within the counties of Tarrant and Denton in the rapidly growing northern triangle of the Dallas-Fort Worth Metroplex. The Town combines a rural Texas atmosphere with the conveniences of the Metroplex. It is the home of the famous Circle T Ranch which was acquired in 1993 by Hillwood Development,a company controlled by H.Ross Perot,Jr. Another high profile corporate campus development in Westlake is known as Solana and is located along Texas Highway 114.Its tenants include CoreLogic,Wells Fargo Bank, Sabre Corporation,Levi Strauss&Co,Boy Scouts of America,Pfizer Inc. and other well-known international businesses as well as smaller local businesses. Solana's Village Circle provides a mix of office, retail, restaurant, and hotel space. Solana currently has the largest taxable assessed valuation of the Town of Westlake's tax base. The Town of Westlake's 2010 census population was 992,a 379%increase since 2000. County Characteristics: Tarrant County, where most of Westlake is located, was created in 1849 from Navarro County. It is a manufacturing and wholesale trade center for much of west Texas, with its economy closely tied in with the Dallas/Fort Worth urban area. The City of Fort Worth is the county seat. The 2010 census for the County was 1,809,034,an increase of 25%since 2000. Tarrant County is one of the largest manufacturing counties in the United States. Industries include tourism, plastics, planes, helicopters, mobile homes, food, electronic equipment, chemicals, automobiles and airports. DFW International Airport, the nation's largest, is located here. Minerals include stone, sand, gravel, gas and cement. Agriculture includes wheat,horticulture,horses,hay and beef cattle. Tarrant County's retail sales for 2014 totaled $27.2 billion. In 2014, the County had a median income of$45,821 per household compared to the state median of$50,464.A total of 67.9% of the households had effective buying incomes in excess of$25,000, while 11.8% had incomes below $25,000.The Texas Employment Commission reported countywide earnings totaling $10.8 billion during the first quarter of 2016, with a total employment of 834,504. The 2015 fall enrollment for the following colleges and universities located in Tarrant County was 109,409: The University of Texas at Arlington, Tarrant County College District (all campuses), Texas Christian University, University of North Texas Health Science Center,Texas Wesleyan Universityand The College of St.Thomas More. The Naval Air Station - Joint Reserve Base is located in Tarrant County and employed 8,368 civilian/military personnel in 2014. Data included herein on population, value added by manufacturing or production of minerals or agricultural products were derived from US Census or other sources believed to be reliable,but no guarantee as to its accuracy is made by the Issuer or any other person. Employment Data Unemployment Rates Oct 2016 Oct 2015 Avg 2015 Tarrant County 3.7% 4.1% 4.2% Denton County 3.3% 3.4% 3.6% State of Texas 4.7% 4.5% 4.4% United States 4.9% 5.0% 5.3% C-1 Labor Force Data for Tarrant County Oct 2016 Oct 2015 Avy,2015 Total Labor Force 1,017,622 994,089 992,840 Employed 979,815 953,487 951,589 Unemployed 37,807 40,602 41,251 Labor Force Data for Denton County Oct 2016 Oct 2015 Avg 2015 Total Labor Force 443,809 427,411 423,135 Employed 429,285 412,674 408,016 Unemployed 14,524 14,737 15,119 Source: Texas Workforce Commission. Unemployment rates for Texas and the United States are seasonally adjusted rates. C-2 APPENDIX D-SCHEDULE OF REFUNDED OBLIGATIONS General Obligation Refunding Bonds Series 2007 Delivered 4/12/2007 Serial/ Type Maturity Maturi1y Term of Bond Coupon Value Call Date Call Price 5/1/2020 Term(') Current Interest 4.000% $ 125,000 5/1/2017 100.00% 5/1/2024 Term(') Current Interest 4.000% 230,000 5/1/2017 100.00% 5/1/2025 Serial Current Interest 4.000% 645,000 5/1/2017 100.00% 5/1/2026 Serial Current Interest 4.000% 670,000 5/1/2017 100.00% 5/1/2027 Serial Current Interest 4.000% 700,000 5/1/2017 100.00% 5/1/2028 Serial Current Interest 4.125% 730,000 5/1/2017 100.00% 5/1/2029 Serial Current Interest 4.125% 760,000 5/1/2017 100.00% 5/1/2030 Serial Current Interest 4.150% 790,000 5/1/2017 100.00% 5/1/2031 Serial Current Interest 4.200% 825,000 5/1/2017 100.00% 5/1/2032 Serial Current Interest 4.200% 855,000 5/1/2017 100.00% Total $ 6,330,000 (I)Subject to mandatory sinking fund redemption prior to maturity. D-1 CLOSING CERTIFICATE THE STATE OF TEXAS COUNTIES OF TARRANT AND DENTON TOWN OF WESTLAKE 1, the undersigned, hereby certify that I am the Mayor of the Town of Westlake, Texas (the "Issuer"), and I further certify as follows: 1. That this certificate is executed for and on behalf of the Issuer with reference to the issuance of Town of Westlake, Texas, General Obligation Refunding Bonds, Series 2017, dated January 15, 2017 (the "Bonds"). 2. That capitalized words and terms contained in this certificate shall have the same meanings as set forth in the Purchase Agreement, dated as of January 10, 2017, by and among the Issuer and FTN Financial Capital Markets (the "Agreement"). 3. That in my official capacity, (i) all official actions of the Issuer relating to the Bonds, the Issuer Documents and the Official Statement have been duly taken by the Issuer, are in full force and effect, and have not been amended, modified, supplemented or repealed; (ii) the representations and warranties of the Issuer contained in the Agreement are true and correct in all material respects on and as of the date hereof as if made on the date hereof, (iii) no litigation or proceeding against the Issuer is pending or,to my knowledge, threatened in any court or administrative body, which would(a)contest the right of the officials of the Issuer to hold and exercise their respective positions, (b) contest the due organization and valid existence of the Issuer, (c) contest the validity, due authorization and execution of the Bonds or the Issuer Documents, or (d) attempt to limit, enjoin or otherwise prevent the Issuer from functioning and levying and collecting the taxes pledged to pay the principal of and interest on the Bonds, or the pledge thereof, (iv)to the best of my knowledge, no event affecting the Issuer has occurred since the date of the Official Statement which should be disclosed in the Official Statement for the purpose for which it is to be used or which it is necessary to disclose therein in order to make the statements and information therein, in light of the circumstances under which they were made, not misleading in any material respect as of the date hereof, and the information contained in the Official Statement is correct in all material respects and, as of the date of the Official Statement did not, and as of the date hereof does not, contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements made therein, in light of the circumstances under which they were made, not misleading; and (v) there has not been any material adverse change in the financial condition of the Issuer since September 30, 2015, the latest date as of which audited financial information is available SIGNED this vuu 7 z 7 TOWN OF WESTLAKE,TEXAS Mayor' F FEDERAL TAX CERTIFICATE 1. In General. 1.1. The undersigned is the Mayor of the Town of Westlake,Texas(the"Issuer"). 1.2. This Certificate is executed for the purpose of establishing the reasonable expectations of the Issuer as to future events regarding the Issuer's General Obligation Refunding Bonds, Series 2017 (the "Bonds"). The Bonds are being issued pursuant to an Ordinance of the Issuer and a Pricing Certificate,each duly adopted by the Issuer (collectively, the "Ordinance"). The Ordinance is incorporated herein by reference. 1.3. To the best of the undersigned's knowledge, information and belief, the expectations contained in this Federal Tax Certificate are reasonable. 1.4. The undersigned is an officer of the Issuer delegated with the responsibility,among others,of issuing and delivering the Bonds. 1.5. The undersigned is not aware of any facts or circumstances that would cause him to question the accuracy of the representations made by FTN Financial Capital Markets(the"Underwriter")in the Issue Price Certificate attached hereto as Exhibit"D",and by Lawrence Financial Consulting LLC(the"Financial Advisor")with respect to the Schedules attached hereto as Exhibit"E." 2. The Purpose of the Bonds and Useful Lives of Proiects. 2.1. The purpose for the issuance of the Bonds,as more fully described in the Ordinance,is to currently refund the Issuer's General Obligation Refunding Bonds,Series 2007(the"Outstanding Bonds")and to pay the related expenses of issuing the Bonds. The proceeds of the Bonds will be expended for such purpose within 90 days of the date hereof. 2.2. The proceeds of the Outstanding Bonds were used to refinance the acquisition and improvement of facilities for a government center to include areas,among other uses,for the administration, Town Council chamber,meeting and conference rooms,fire protection,law enforcement,to include areas for among other uses, municipal court, dispatch area, records, patrol and truck bays, civic administration, recreation,cultural and civic improvements(the"Outstanding Projects"). The Outstanding Projects remain in service and have not been sold or otherwise disposed of by the Issuer. 2.3. The Issuer expects that 120 percent of the aggregate useful lives of the Outstanding Projects, on the later of the date that such Outstanding Projects were placed in service or the date of issuance of the Outstanding Bonds,will exceed the weighted average maturity of the Bonds. 2.4. Other than members of the general public,the Issuer expects that throughout the lesser of the term of the Bonds,or the useful lives of the Outstanding Projects,the only user of the Outstanding Projects will be the Issuer or the Issuer's employees and agents. The Issuer will be the manager of the Outstanding Projects.In no event have the proceeds of the Outstanding Bonds or facilities financed therewith be used for private business use in an amount greater than$15 million. F:\bond counse1\Cities\West1ak62017\G0 Refltax docs\Westlake(Town of)-CRef-CSST-fedtaxcert-v2.doc 2!112017 9:07 AM 2.5. Except as stated below, the Issuer expects not to sell or otherwise dispose of property constituting the Outstanding Projects prior to the earlier of the end of such property's useful life or the final maturity of the Bonds. The Ordinance provides that the Issuer will not sell or otherwise dispose of the Outstanding Projects unless the Issuer receives an opinion of nationally-recognized bond counsel that such sale or other disposition will not adversely affect the tax-exempt status of the Bonds. 2.6. For purposes of Subsection 2.5 hereof, the Issuer has not included the portion of the Outstanding Projects comprised of personal property that is disposed in the ordinary course at a price that is expected to be less than 25 percent of the original purchase price. The Issuer,upon any disposition of such property,will transfer the receipts from the disposition of such property to the general operating fund and expend such receipts within six months for other governmental programs. 3. Yield. 3.1. The issue price of the Bonds included in the Form 8038-G, is based on the Issue Price Certificate attached hereto. 3.2. The Issuer has not entered into any qualified guarantee or qualified hedge with respect to the Bonds. The yield on the Bonds will not be affected by subsequent unexpected events,except to the extent provided in section 1.148-4(h)(3)of the Treasury Regulations when and if the Issuer enters into a qualified hedge or into any transaction transferring,waiving or modifying any right that is part of the terms of any Bond. The Issuer will consult with nationally recognized bond counsel prior to entering into any of the foregoing transactions. 4. Transferred Proceeds and Disposition Proceeds. As of the date of this Certificate,all of the amounts received from the sale of the Outstanding Bonds and the investment earnings thereon have been expended. 5. Interest and Sinking Fund. 5.1. A separate and special Interest and Sinking Fund has been created and established,other than as described herein,solely to pay the principal of and interest on the Bonds(the "Bona Fide Debt Service Portion"). The Bona Fide Debt Service Portion constitutes a fund that is used primarily to achieve a proper matching of revenues and debt service within each bond year. Such portion will be completely depleted at least once each year except for an amount not in excess of the greater of(a)one-twelfth of the debt service on the Bonds for the previous year,or(b)the previous year's earnings on such portion of the Interest and Sinking Fund. Amounts deposited in the Interest and Sinking Fund constituting the Bona Fide Debt Service Portion will be spent within a thirteen-month period beginning on the date of deposit,and any amount received from the investment of money held in the Interest and Sinking Fund will be spent within a one-year period beginning on the date of receipt. 5.2. Any money deposited in the Interest and Sinking Fund and any amounts received from the investment thereof that accumulate and remain on hand therein after thirteen months from the date of deposit of any such money or one year after the receipt of any such amounts from the investment thereof shall constitute a separate portion of the Interest and Sinking Fund. The yield on any investments allocable to the portion of the Interest and Sinking Fund exceeding of the sum of(a)the Bona Fide Debt Service Portion and (b) an amount equal to the lesser of five percent of the sale and investment proceeds of the Bonds or$100,000 will be restricted to a yield that does not exceed the yield on the Bonds. 2 6. Invested Sinking Fund Proceeds,Replacement Proceeds. 6.1. The Issuer has,in addition to the moneys received from the sale of the Bonds,certain other moneys that are invested in various funds which are pledged for various purposes. These other funds are not available to accomplish the purposes described in Section 2 of this Certificate. 6.2. Other than the Interest and Sinking Fund there are,and will be,no other funds or accounts established,or to be established,by or on behalf of the Issuer(a)which are reasonably expected to be used,or to generate earnings to be used, to pay debt service on the Bonds, or(b)which are reserved or pledged as collateral for payment of debt service on the Bonds and for which there is reasonable assurance that amounts therein will be available to pay such debt service if the Issuer encounters financial difficulties. Accordingly, there are no other amounts constituting"gross proceeds"of the Bonds,within the meaning of section 148 of the Internal Revenue Code of 1986(the"Code"). 7. Other Obligations. 7.1. There are no other obligations of the Issuer which(a)are sold at substantially the same time as the Bonds,i.e.,within 15 days of the date of sale of the Bonds,(b)are sold pursuant to a common plan of financing with the Bonds,and(c)will be payable from the same source of funds as the Bonds. 7.2. The Issuer(including any of its related entities)has not issued nor does it expect to issue any other tax-exempt obligations during the current calendar year. 8. Federal Tax Audit Responsibilities. The Issuer acknowledges that in the event of an examination by the Internal Revenue Service(the "Service")to determine compliance of the Bonds with the provisions of the Code as they relate to tax-exempt obligations, the Issuer will respond, and will direct its agents and assigns to respond, in a commercially reasonable manner to any inquiries from the Service in connection with such an examination. The Issuer understands and agrees that the examination may be subject to public disclosure under applicable Texas law. The Issuer acknowledges that this Certificate,including any attachments,does not constitute an opinion of Bond Counsel as to the proper federal tax or accounting treatment of any specific transaction. 9. Record Retention and Private Business Use. The Issuer has covenanted in the Ordinance that it will comply with the requirements of the Code relating to the exclusion of the interest on the Bonds under section 103 of the Code. The Service has determined that certain materials,records and information should be retained by the issuers of tax-exempt obligations for the purpose of enabling the Service to confirm the exclusion of the interest on such obligations under section 103 of the Code. ACCORDINGLY,THE ISSUER SHALL TAKE STEPS TO ENSURE THAT ALL MATERIALS,RECORDS AND INFORMATION NECESSARY TO CONFIRM THE EXCLUSION OF THE INTEREST ON THE BONDS UNDER SECTION 103 OF THE CODE ARE RETAINED FOR THE PERIOD BEGINNING ON THE ISSUE DATE OF THE OUTSTANDING BONDS OR, IN THE CASE OF A SEQUENCE OF REFUNDINGS, THE ISSUE DATE OF THE OBLIGATIONS ORIGINALLY FINANCING THE OUTSTANDING PROJECTS AND ENDING THREE YEARS AFTER THE DATE THE BONDS ARE RETIRED. The Issuer acknowledges receipt of the letters attached hereto as Exhibit"B"which discusses limitations related to private business use and 3 Exhibit"C"which,in part,discusses specific guidance by the Service with respect to the retention of records relating to tax-exempt bond transactions. 10. Rebate to United States. The Issuer has covenanted in the Ordinance that it will comply with the requirements of the Code, including section 148(f)of the Code,relating to the required rebate to the United States. Specifically,the Issuer will take steps to ensure that all earnings on gross proceeds of the Bonds in excess of the yield on the Bonds required to be rebated to the United States will be timely paid to the United States. The Issuer acknowledges receipt of the memorandum attached hereto as Exhibit "A" which discusses regulations promulgated pursuant to section 148(f)of the Code. [THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK] 4 DATED as of 4�,�, 2 7 . TOWN OF WESTLAKE,TEXAS By: h41"mt1-'1 Mayor Town of Westlake,Texas,General Obligation Refunding Bonds,Series 2017 The undersigned represents that,to the best of the undersigned's knowledge,information and belief, the representations contained in the Schedules attached hereto as Exhibit"E" are, as.of February 7,2017, accurate and complete. We understand that the foregoing infonnation will be relied upon by the Issuer with respect to certain of the representations set forth in this Federal Tax Certificate and by McCall,Parkhurst& Horton L.L.P. (i)in connection with rendering its opinion to the Issuer that interest on the Bonds is excludable from gross income thereof for income tax purposes,and(ii)for purposes of completing the IRS Form 8038-G. The undersigned is certifying only as to facts in existence on the date hereof. Nothing herein represents the undersigned's interpretation of any laws or the application of any laws to these facts. LAWRENCE FINANCIAL CONSULTING LLC By:- Name: Tom Lawrence Title: President Town of Westlake,Texas,General Obligation Refunding Bonds,Series 2017 p LoA L L PARKHURST & HORTON Exhibit "A" November 1, 2016 ARBITRAGE REBATE REGULATIONS© The arbitrage rebate requirements set forth in section 148(f) of the Internal Revenue Code of 1986 (the "Code") generally provide that in order for interest on any issue of bonds' to be excluded from gross income (i.e., tax-exempt) the issuer must rebate to the United States the sum of, (1) the excess of the amount earned on all "nonpurpose investments" acquired with "gross proceeds" of the issue over the amount which would have been earned if such investments had been invested at a yield equal to the yield on the issue, and (2) the earnings on such excess earnings. On June 18, 1993, the U.S. Treasury Department promulgated regulations relating to the computation of arbitrage rebate and the rebate exceptions. These regulations, which replace the previously-published regulations promulgated on May 15, 1989, and on May 18, 1992, are effective for bonds issued after June 30, 1993, have been amended. This memorandum was prepared by McCall, Parkhurst & Horton L.L.P. and provides a general discussion of these arbitrage rebate regulations, as amended. This memorandum does not otherwise discuss the general arbitrage regulations, other than as they may incidentally relate to rebate. This memorandum also does not attempt to provide an exhaustive discussion of the arbitrage rebate regulations and should not be considered advice with respect to the arbitrage rebate requirements as applied to any individual or governmental unit or any specific transaction. Any tax advice contained in this memorandum is of a general nature and is not intended to be used, and should not be used, by any person to avoid penalties under the Code. McCall, Parkhurst & Horton L.L.P. remains available to provide legal advice to issuers with respect to the provisions of these tax regulations but recommends that issuers seek competent financial and accounting assistance in calculating the amount of such issuer's rebate liability under section 148(f) of the Code and in making elections to apply the rebate exceptions. ' In this memorandum the word "bond" is defined to include any bond, note, certificate, financing lease or other obligation of an issuer. Copyright 2016 by McCall, Parkhurst& Horton L.L.P. All rights reserved. 600 Congress Ave.,Suite 1800 717 North Harwood,Suite 900 ( 700 N.St Mary's Street,Suite 1525 Austin,Texas 78701Dallas,Texas 75201 San Antonio,Texas 78205 T 512.478.3805 214.754.9200 I T 210.225.2800 i F 512.472.0871 F 214.754.9250 F 210.225.2984 www.mphlegal.com Effective Dates The regulations promulgated on June 18, 1993, generally apply to bonds delivered after June 30, 1993, although they do permit an issuer to elect to apply the rules to bonds issued prior to that date. The temporary regulations adopted by the U.S. Treasury Department in 1989 and 1992 incorporated the same effective dates which generally apply for purposes of section 148(f) of the Code. As such, the previous versions of the rebate regulations generally applied to bonds issued between August 1986 and June 30, 1993 (or, with an election, to bonds issued prior to August 15, 1993). The statutory provisions of section 148(f) of the Code, other than the exception for construction issues, apply to all bonds issued after August 15, 1986, (for private activity bonds) and August 31, 1986, (for governmental public purpose bonds). The statutory exception to rebate applicable for construction issues generally applies if such issue is delivered after December 19, 1989. The regulations provide numerous transitional rules for bonds sold prior to July 1, 1993. Moreover, since, under prior law, rules were previously published with respect to industrial development bonds and mortgage revenue bonds, the transitional rules contained in these regulations permit an issuer to elect to apply certain of these rules for computing rebate on pre-1986 bonds. The regulations provide for numerous elections which would permit an issuer to apply the rules (other than 18-month spending exception) to bonds which were issued prior to July 1, 1993 and remain outstanding on June 30, 1993. Due to the complexity of the regulations, it is impossible to discuss in this memorandum all circumstances for which specific elections are provided. If an issuer prefers to use these final version of rebate regulations in lieu of the computational method stated under prior law (e.g., due to prior redemption)or the regulations, please contact McCall, Parkhurst & Horton L.L.P. for advice as to the availability of such options. Future Value Computation Method The regulations employ an actuarial method for computing the rebate amount based on the future value of the investment receipts (i.e., earnings) and payments. The rebate method employs a two-step computation to determine the amount of the rebate payment. First, the issuer determines the bond yield. Second, the issuer determines the arbitrage rebate amount. The regulations require that the computations be made at the end of each five-year period and upon final maturity of the issue (the "computation dates"). THE FINAL MATURITY DATE WILL ACCELERATE IN CIRCUMSTANCES IN WHICH THE BONDS ARE OPTIONALLY REDEEMED PRIOR TO MATURITY. AS SUCH, IF BONDS ARE REFUNDED OR OTHERWISE REDEEMED, THE REBATE MAY BE DUE EARLIER THAN INITIALLY PROJECTED. In order to accommodate accurate record-keeping and to assure that sufficient amounts will be available for the payment of arbitrage rebate liability, however, we recommend that the computations be performed at least annually. Please refer to other materials provided by McCall, Parkhurst & Horton L.L.P. relating to federal tax rules regarding record retention. Under the future value method, the amount of rebate is determined by compounding the aggregate earnings on all the investments from the date of receipt by the issuer to the 2 computation date. Similarly, a payment for an investment is future valued from the date that the payment is made to the computation date. The receipts and payments are future valued at a discount rate equal to the yield on the bonds. The rebatable arbitrage, as of any computation date, is equal to the excess of the (1) future value of all receipts from investments (i.e., earnings), over(2)the future value of all payments. The following example is provided in the regulations to illustrate how arbitrage rebate is computed under the future value method for a fixed-yield bond: "On January 1, 1994, City A issues a fixed yield issue and invests all the sale proceeds of the issue ($49 million). There are no other gross proceeds. The issue has a yield of 7.0000 percent per year compounded semiannually (computed on a 30 day month/360 day year basis). City A receives amounts from the investment and immediately expends them for the governmental purpose of the issue as follows: Date Amount 2/1/1994 $ 3,000,000 4/1/1994 5,000,000 6/1/1994 14,000,000 9/1/1994 20,000,000 7/1/1995 10,000,000 City A selects a bond year ending on January 1, and thus the first required computation date is January 1, 1999. The rebate amount as of this date is computed by determining the future value of the receipts and the payments for the investment. The compounding interval is each 6-month (or shorter) period and the 30 day month/360 day year basis is used because these conventions were used to compute yield on the issue. The future value of these amounts, plus the computation credit, as of January 1, 1999, is: Date Receipts (Payments) FY(7.0000 percent) 1/1/1994 ($49,000,000) ($69,119,339) 2/1/1994 3,000,000 4,207,602 4/1/1994 5,000,000 6,932,715 6/1/1994 14,000,000 19,190,277 9/1/1994 20,000,000 26,947,162 1/1/1995 (1,000) (1,317) 7/1/1995 10,000,000 12,722,793 1/1/1996 (1,000) (1,229) Rebate amount (01/01/1999) $878,664" 3 www.niplilrq,Fil.com vv. Hg General Method for Computing Yield on Bonds In general, the term "yield," with respect to a bond, means the discount rate that when used in computing the present value of all unconditionally due payments of principal and interest and all of the payments for a qualified guarantee produces an amount equal to the issue price of the bond. The term "issue price" has the same meaning as provided in sections 1273 and 1274 of the Code. That is, if bonds are publicly offered (i.e., sold by the issuer to a bond house, broker or similar person acting in the capacity of underwriter or wholesaler), the issue price of each bond is determined on the basis of the initial offering price to the public (not to the aforementioned intermediaries) at which price a substantial amount of such bond was sold to the public(not to the aforementioned intermediaries). The "issue price" is separately determined for each bond (i.e., maturity) comprising an issue. The regulations also provide varying periods for computing yield on the bonds depending on the method by which the interest payment is determined. Thus, for example, yield on an issue of bonds sold with variable interest rates (i.e., interest rates which are reset periodically based on changes in market) is computed separately for each computation period ending at least on each five-year anniversary of the delivery date that the issue. In effect, yield on a variable yield issue is determined on each computation date by "looking back" at the interest payments for such period. Yield on a fixed interest rate issue (i.e., an issue of bonds the interest rate on which is determined as of the date of the issue) is computed over the entire term of the issue. Issuers of fixed-yield issues generally use the yield computed as of the date of issue for all rebate computations. The yield on fixed-yield issues must be computed by assuming retirements of principal on a call date earlier than the stated maturity date of a bond if (1) the bond is sold at a substantial premium, it may be retired within five years of the date of delivery, and such date is earlier than its scheduled maturity date, or (2) the issue is a stepped-coupon bond. Similarly, recomputation may occur in circumstances in which the issuer or bondholder modify or waive certain terms of, or rights with respect to, the issue or in sophisticated hedging transactions. IN SUCH CIRCUMSTANCES ISSUERS ARE ADVISED TO CONSULT MCCALL. PARKHURST & HORTON L.L.P. TO ADDRESS THE FEDERAL INCOME TAX CONSEQUENCES OF THESE TRANSACTIONS. For purposes of determining the principal or redemption payments on a bond, different rules are used for fixed-rate and variable-rate bonds. The payment is computed separately on each maturity of bonds rather than on the issue as a whole. In certain circumstances, the yield on the bond is determined by assuming that principal on the bond is paid as scheduled and that the bond is retired on the final maturity date for the stated retirement price. For bonds subject to early redemption or stepped-coupon bonds, described above, or for bonds subject to mandatory early redemption, the yield is computed assuming the bonds are paid on the early redemption date for an amount equal to their value. Premiums paid to guarantee the payment of debt service on bonds are taken into account in computing the yield on the bond. Payments for guarantees are taken into account by treating such premiums as the payment of interest on the bonds. This treatment, in effect, raises the yield on the bond, thereby permitting the issuer to recover such fee with excess earnings. 4 www,rr phle i,com The guarantee must be an unconditional obligation of the guarantor enforceable by the bondholder for the payment of principal or interest on the bond or the tender price of a tender bond. The guarantee may be in the form of an insurance policy, surety bond, irrevocable letter or line of credit, or standby purchase agreement. Importantly, the guarantor must be legally entitled to full reimbursement for any payment made on the guarantee either immediately or upon commercially reasonable repayment terms. The guarantor may not be a co-obligor of the bonds or a user of more than 10 percent of the proceeds of the bonds. Payments for the guarantee may not exceed a reasonable charge for the transfer of credit risk. This reasonable charge requirement is not satisfied unless it is reasonably expected that the guarantee will result in a net present value savings on the bond (i.e., the premium does not exceed the present value of the interest savings resulting by virtue of the guarantee). If the guarantee is entered into after June 14, 1989, then any fees charged for the nonguarantee services must be separately stated or the guarantee fee is not recoverable. The regulations also treat certain "hedging" transactions in a manner similar to qualified guarantees. "Hedges" are contracts, e.g., interest rate swaps, futures contracts or options, which are intended to reduce the risk of interest rate fluctuations. Hedges and other financial derivatives are sophisticated and ever-evolving financial products with which a memorandum, such as this, cannot readily deal. IN SUCH CIRCUMSTANCES, ISSUERS ARE ADVISED TO CONSULT MCCALL. PARKHURST & HORTON L.L.P. TO ADDRESS THE FEDERAL INCOME TAX CONSEQUENCES OF THESE TRANSACTIONS. Earnings on Nonpurpose Investments The arbitrage rebate provisions apply only to the receipts from the investment of "gross proceeds" in "nonpurpose investments." For this purpose, nonpurpose investments are stock, bonds or other obligations acquired with the gross proceeds of the bonds for the period prior to the expenditure of the gross proceeds for the ultimate purpose. For example, investments deposited to construction funds, reserve funds (including surplus taxes or revenues deposited to sinking funds) or other similar funds are nonpurpose investments. Such investments include only those which are acquired with "gross proceeds." For this purpose, the term "gross proceeds" includes original proceeds received from the sale of the bonds, investment earnings from the investment of such original proceeds, amounts pledged to the payment of debt service on the bonds or amounts actually used to pay debt service on the bonds. The regulations do not provide a sufficient amount of guidance to include an exhaustive list of "gross proceeds" for this purpose; however, it can be assumed that "gross proceeds" represent all amounts received from the sale of bonds, amounts earned as a result of such sale or amounts (including taxes and revenues) which are used to pay, or secure the payment of, debt service for the bonds. The total amount of "gross proceeds" allocated to a bond generally cannot exceed the outstanding principal amount of the bonds. S www.mph1e9aLcom The regulations provide that an investment is allocated to an issue for the period (1) that begins on the date gross proceeds are used to acquire the investment, and (2) that ends on the date such investment ceases to be allocated to the issue. In general, proceeds are allocated to a bond issue until expended for the ultimate purpose for which the bond was issued or for which such proceeds are received (e.g., construction of a bond-financed facility or payment of debt service on the bonds). Deposit of gross proceeds to the general fund of the issuer(or other fund in which they are commingled with revenues or taxes)does not eliminate or ameliorate the Issuer's obligation to compute rebate in most cases. As such, proceeds commingled with the general revenues of the issuer are not "freed-up" from the rebate obligation. An exception to this commingling limitation for bonds, other than private activity bonds, permits "investment earnings" (but not sale proceeds or other types of gross proceeds) to be considered spent when deposited to a commingled fund if those amounts are reasonably expected to be spent within six months. Other than for these amounts, issuers may consider segregating investments in order to more easily compute the amount of such arbitrage earnings by not having to allocate investments. Special rules are provided for purposes of advance refundings. These rules are too complex to discuss in this memorandum. Essentially, the rules relating to refundings, however, do not require that amounts deposited to the escrow fund to defease the prior obligations of the issuer be subject to arbitrage rebate to the extent that the investments deposited to the escrow fund do not have a yield in excess of the yield on the bonds. Any loss resulting from the investment of proceeds in an escrow fund below the yield on the bonds, however, may be recovered by combining those investments with investments deposited to other funds, e.g., reserve or construction funds. The arbitrage regulations also provide an exception to the arbitrage limitations for the investment of bond proceeds in tax-exempt obligations. As such, investment of proceeds in tax exempt bonds eliminates the Issuer's rebate obligation. A caveat; this exception does not apply to gross proceeds derived allocable to a bond, which is not subject to the alternative minimum tax under section 57(a)(5) of the Code, if invested in tax- exempt bonds subject to the alternative minimum tax, i.e., "private activity bonds." Such "AMT-subject" investment is treated as a taxable investment and must comply with the arbitrage rules, including rebate. Earnings from these tax-exempt investments are subject to arbitrage restrictions, including rebate. Similarly, the investment of gross proceeds in certain tax-exempt mutual funds are treated as a direct investment in the tax-exempt obligations deposited in such fund. While issuers may invest in such funds for purposes of avoiding arbitrage rebate, they should be aware that if "private activity bonds" are included in the fund then a portion of the earnings will be subject to arbitrage rebate. Issuers should be prudent in assuring that the funds do not contain private activity bonds. The arbitrage regulations provide a number of instances in which earnings will be imputed to nonpurpose investments. Receipts generally will be imputed to investments that do not bear interest at an arm's-length (i.e., market) interest rate. As such, the regulations adopt a "market price" rule. In effect, this rule prohibits an issuer from investing bond proceeds in investments at a price which is higher than the market price of comparable obligations, in order to reduce the yield. Special rules are included for determining the market price for investment contracts, certificates of deposit and certain U.S. Treasury 6 WWW.MPh1e9aLC0 K/111 obligations. For example, to establish the fair market value of investment contracts a bidding process between three qualified bidders must be used. The fair market value of certificates of deposit which bear a fixed interest rate and are subject to an early withdrawal penalty is its purchase price if that price is not less than the yield on comparable U.S. Treasury obligations and is the highest yield available from the institution. In any event, a basic "common sense" rule-of-thumb that can be used to determine whether a fair market value has been paid is to ask whether the general funds of the issuer would be invested at the same yield or at a higher yield. An exception to this market price rule is available for United States Treasury Obligations - State or Local Government Series in which case the purchase price is always the market price. Reimbursement and Working Capital The regulations provide rules for purposes of determining whether gross proceeds are used for working capital and, if so, at what times those proceeds are considered spent. In general, issuers can finance short-term or long-term working capital with tax-exempt bonds. . By adopting a "proceeds-spent-last" rule, the regulations also generally require that an issuer actually incur a deficit (i.e., expenditures must exceed receipts) for the computation period (which generally corresponds to the issuer's fiscal year in the case of short-term working capital financing). Also, the regulations permit an operating reserve, but unlike prior regulations the amount of such reserve may not exceed five percent of the issuers actual working capital expenditures for the prior fiscal year. A change was made to the regulations in 2016 allows issuers to finance the operating reserve with proceeds of a tax-exempt obligation. The regulations generally continue the prior regulations' 13-month temporary period for short-term working capital financing. Long-term working capital financings are beyond the scope of this memorandum. In the event long-term working capital financing is needed, issuers are advised to consult Mccall, Parkhurst & Horton L.L.P. to address the federal income tax consequences of these transactions. Importantly, the regulations contain rules for determining whether proceeds used to reimburse an issuer for costs paid prior to the date of issue of the obligation, in fact, are considered spent at the time of reimbursement. These rules apply to an issuer who uses general revenues for the payment of all or a portion of the costs of a project then uses the proceeds of the bonds to reimburse those general revenues. Failure to comply with these rules would result in the proceeds continuing to be subject to federal income tax restrictions, including rebate. To qualify for reimbursement, a cost must be described in an expression (e.g., resolution, legislative authorization) evidencing the issuers intent to reimburse which is made no later than 60 days after the payment of the cost. Reimbursement must occur no later than 18 months after the later of (1) the date the cost is paid or(2) the date the project is placed in service. Except for projects requiring an extended construction period or small issuers, in no event can a cost be reimbursed more than three years after the cost is paid. Reimbursement generally is not permitted for working capital; only capital costs, grants and loans may be reimbursed. Moreover, certain anti-abuse rules apply to prevent issuers from avoiding the limitations on refundings. IN CASES INVOLVING WORKING 7 www.mphlegal.com CAPITAL OR REIMBURSEMENT, ISSUERS ARE ADVISED TO CONTACT McCALL, PARKHURST & HORTON L.L.P. TO ADDRESS THE FEDERAL INCOME TAX CONSEQUENCES OF THE TRANSACTION. Rebate Payments Rebate payments generally are due 60 days after each installment computation date. The interim computation dates occur each fifth anniversary of the issue date. The final computation date is on the latest of (1) the date 60 days after the date the issue of bonds is no longer outstanding, (2) the date eight months after the date of issue for certain short-term obligations (i.e., obligations retired within three years), or (3) the date the issuer no longer reasonably expects any spending exception, discussed below, to apply to the issue. On such payment dates, other than the final payment date, an issuer is required to pay 90 percent of the rebatable arbitrage to the United States. On the final payment date, an issuer is required to pay 100 percent of the remaining rebate liability. Failure to timely pay rebate does not necessarily result in the loss of tax-exemption. Late payments, however, are subject to the payment of interest, and unless waived, a penalty of 50 percent (or, in the case of private activity bonds, other than qualified 501(c)(3) bonds, 100 percent) of the rebate amount which is due. IN SUCH CIRCUMSTANCES, ISSUERS ARE ADVISED TO CONSULT McCALL, PARKHURST & HORTON L.L.P. TO ADDRESS THE FEDERAL INCOME TAX CONSEQUENCES OF THESE TRANSACTIONS. Rebate payments are refundable. The issuer, however, must establish to the satisfaction of the Commissioner of the Internal Revenue Service that the issuer paid an amount in excess of the rebate and that the recovery of the overpayment on that date would not result in additional rebatable arbitrage. An overpayment of less than $5,000 may not be recovered before the final computation date. Alternative Penalty Amount In certain cases, an issuer of a bond the proceeds of which are to be used for construction may elect to pay a penalty, in lieu of rebate. The penalty may be elected in circumstances in which the issuer expects to satisfy the two-year spending exception which is more fully described under the heading "Exceptions to Rebate." The penalty is payable, if at all, within 60 days after the end of each six-month period. This is more often than rebate. The election of the alternative penalty amount would subject an issuer, which fails the two- year spend-out requirements, to the payment of a penalty equal to one and one-half of the excess of the amount of proceeds which was required to be spent during that period over the amount which was actually spent during the period. The penalty has characteristics which distinguish it from arbitrage rebate. First, the penalty would be payable without regard to whether any arbitrage profit is actually earned. Second, the penalty continues to accrue until either(1) the appropriate amount is expended or (2) the issuer elects to terminate the penalty. To be able to terminate the penalty, the issuer must meet specific requirements and, in some instances, must pay an additional penalty equal to three percent of the unexpended proceeds. 8 www,mphl al.co Exceptions to Rebate The Code and regulations provide certain exceptions to the requirement that the excess investment earnings be rebated to the United States. a. Small Issuers. The first exception provides that if an issuer (together with all subordinate issuers) during a calendar year does not issue tax-exempt bonds2 in an aggregate face amount exceeding $5 million, then the obligations are not subject to rebate. Only issuers with general taxing powers may take advantage of this exception. Subordinate issuers are those issuers which derive their authority to issue bonds from the same issuer, e.g., a city and a health facilities development corporation, or which are controlled by the same issuer, e.g., a state and the board of a public university. In the case of bonds issued for public school capital expenditures, the $5 million cap may be increased to as much as $15 million. For purposes of measuring whether bonds in the calendar year exceed these dollar limits, current refunding bonds can be disregarded if they meet certain structural requirements. Please contact McCall, Parkhurst & Horton L.L.P. for further information. b. Spending Exceptions. Six-Month Exception. The second exception to the rebate requirement is available to all tax-exempt bonds, all of the gross proceeds of which are expended during six months. The six month rule is available to bonds issued after the effective date of the Tax Reform Act of 1986. See the discussion of effective dates on page two. For this purpose, proceeds used for the redemption of bonds (other than proceeds of a refunding bond deposited to an escrow fund to discharge refunded bonds) cannot be taken into account as expended. As such, bonds with excess gross proceeds generally cannot satisfy the second exception unless the amount does not exceed the lesser of five percent or $100,000 and such de minimis amount must be expended within one year. Certain gross proceeds are not subject to the spend-out requirement, including amounts deposited to a bona fide debt service fund, to a reserve fund and amounts which become gross proceeds received from purpose investments. These amounts themselves, however, may be subject to rebate even though the originally expended proceeds were not. The Code provides a special rule for tax and revenue anticipation notes (i.e., obligations issued to pay operating expenses in anticipation of the receipt of taxes and other revenues). Such notes are referred to as TRANs. To determine the timely expenditure of the proceeds of a TRAN, the computation of the "cumulative cash flow deficit" is important. If the "cumulative cash flow deficit" (i.e., the point at which the operating expenditures of the issuer on a cumulative basis exceed the revenues of the issuer during the fiscal year) occurs within the first six months of the date of issue and must be equal to at least 90 percent of the proceeds of the TRAM, then the notes are deemed to satisfy the exception. This special rule requires, however, that the deficit actually occur, not that the issuer merely have an expectation that the deficit will occur. In lieu of the statutory exception for TRANs, the regulations also provide a second exception. Under this exception, 100 percent of the proceeds must be spent within six months, but before note proceeds can be considered 2 For this purpose, "private activity bonds"neither are afforded the benefit of this exception nor are taken into account for purposes of determining the amount of bonds issued. 9 www.erph[�:gai.cpm spent, all other available amounts of the issuer must be spent first ("proceeds-spent-last" rule). In determining whether all available amounts are spent, a reasonable working capital reserve equal to five percent of the prior year's expenditures may be set aside and treated as unavailable. 98-Month Exception. The regulations also establish a non-statutory exception to arbitrage rebate if all of the gross proceeds (including investment earnings) are expended within 18 months after the date of issue. Under this exception, 15 percent of the gross proceeds must be expended within a six-month spending period, 60 percent within a 12- month spending period and 100 percent within an 18-month spending period. The rule permits an issuer to rely on its reasonable expectations for computing investment earnings which are included as gross proceeds during the first and second spending period. A reasonable retainage not to exceed five percent of the sale proceeds of the issue is not required to be spent within the 18-month period but must be expended within 30 months. Rules similar to the six-month exception relate to the definition of gross proceeds. Two Year Exception. Bonds issued after December 19, 1989 (i.e., the effective date of the Omnibus Reconciliation Act of 1989), at least 75 percent of the net proceeds of which are to be used for construction, may be exempted from rebate if the gross proceeds are spent within two years. Bonds more than 25 percent of the proceeds of which are used for acquisition or working capital may not take advantage of this exception. The exception applies only to governmental bonds, qualified 501(c)(3) bonds and private activity bonds for governmentally-owned airports and docks and wharves. The two-year exception requires that at least 10 percent of the available construction proceeds must be expended within six months after the date of issue, 45 percent within 12 months, 75 percent within 18 months and 100 percent within 24 months. The term "available construction proceeds" generally means sale proceeds of the bonds together with investment earnings less amounts deposited to a qualified reserve fund or used to pay costs of issuance. Under this rule, a reasonable retainage not to exceed five percent need not be spent within 24 months but must be spent within 36 months. The two-year rule also provides for numerous elections which must be made not later than the date of issuance of the bonds. Once made, the elections are irrevocable. Certain elections permit an issuer to bifurcate bond issues, thereby treating only a portion of the issue as a qualified construction bond; and, permit an issuer to disregard earnings from reserve funds for purposes of determining "available construction proceeds." Another election permits an issuer to pay the alternative penalty amount discussed above in lieu of rebate if the issuer ultimately fails to satisfy the two-year rule. Issuers should discuss these elections with their financial advisors prior to issuance of the bonds. Of course, McCall, Parkhurst & Horton L.L.P. remains available to assist you by providing legal interpretations thereof. Debt Service Funds. Additionally, an exception to the rebate requirement, whether or not any of the previously discussed exceptions are available, applies for earnings on "bona fide debt service funds." A "bona fide debt service fund" is one in which the amounts are expended within 13 months of the accumulation of such amounts by the issuer. In general, most interest and sinking funds (other than any excess taxes or revenues accumulated therein) satisfy these requirements. For private activity bonds, short term bonds (i.e., have a term of less than five years) or variable rate bonds, the exclusion is 10 WWW'Mphlegal.c m available only if the gross earnings in such fund does not exceed $100,000, for the bond year. For other bonds issued after November 11, 1988, no limitation is applied to the gross earnings on such funds for purposes of this exception. Therefore, subject to the foregoing discussion, the issuer is not required to take such amounts into account for purposes of the computation. Conclusion McCall, Parkhurst & Horton L.L.P. hopes that this memorandum will prove to be useful as a general guide to the arbitrage rebate requirements. Again, this memorandum is not intended as an exhaustive discussion nor as specific advice with respect to any specific transaction. We advise our clients to seek competent financial and accounting assistance. Of course, we remain available to provide legal advice regarding all federal income tax matters, including arbitrage rebate. If you have any questions, please feel free to contact either Harold T. Flanagan or Stefano Taverna at(214) 754-9200. 11 www,i,nplitegal.com MCCALL PARKHURST & HORTON EXHIBIT "B" November 1,2016 Certain Federal Income Tax Considerations for Private Business Use of Bond-Financed Facilities This memorandum provides a general discussion of those types of contractual arrangements which give rise to private business use, and to what extent that use rises to a prohibited level. Generally, in order for bonds issued by governmental units to be tax-exempt, no more than a de minimis amount of the proceeds of the bonds or the facilities financed with such proceeds may be used by non-governmental users. That is,there may be no more than an incidental use by persons, other than state or local governments. Too much private business use can cause the bonds to become taxable. Private business use for this purpose can be direct or can result from indirect benefits being conveyed to a private person by contractual arrangement. The following discussion describes,in general terms,those types of arrangements which need to be scrutinized. We hope that this general guideline will be useful to you in interacting with private parties regarding the use of bond proceeds or bond-financed facilities. While the statements contained herein are not intended as advice with regard to any specific transaction,McCall,Parkhurst&Horton L.L.P.remains available should you have questions about these rules. Any tax advice contained in this memorandum, including any attachments, was not intended or written to be used for the purpose of avoiding federal tax related penalties or promoting, marketing or recommending to another party any transaction or matter addressed herein. If you have any specific questions or comments,please feel free to contact Stefano Taverna or Harold T.Flanagan at(214)754-9200. I. Private Business Use Arrangements that involve use in a trade or business by a nongovernmental person of bond proceeds or facilities financed with bond proceeds may cause a "private business use" problem. Bond-financed facilities may be used by a variety of people with differing consequences underthese rules. For example,students,teachers,employees and the general public may use bond-financed facilities on a non-exclusive basis without constituting private business use. More problematic, however, is use of bond-financed facilities by groups such as managers, lessees(e.g., book store owners), persons providing services (e.g., food or cleaning), seminar groups, sports and entertainment groups,and even alumni associations. The benefits also may be considered to pass to a private person where the right to the output produced by the facility is transferred. For this purpose,the federal government is considered a non-governmental person. Use by an organization organized under section 501(c)(3)of the Internal Revenue Code in a trade or business unrelated to the exempt purpose of such organization also is considered use by a private person. The term"use"includes both actual and beneficial use. As such,private business use may arise in a variety of ways. For example,ownership of a bond-financed facility by a non-governmental person is private business use. The leasing of a bond-financed facility by a non-governmental person can also cause a private business use problem. Along the same line,management of such facilities by a non-governmental person can cause a problem with private business use,absent compliance with the management contract rules discussed below. Essentially,such use can occur in connection with 600 Congress Ave..Suite 1800 1 717 North Harwood,Suite 900 1 700 N.St.Mary's Street,Suite 1525 Austin.Texas 78701 1 Dallas,Texas 75201 1 San Antonio,Texas 78205 T 512.47x3.3805 ; 1.214.754.9200 T"210.225.2800 F 512.472.0871 F 214.754.9250 ? C 210.225.2984 www.mphlegal.com any arrangement in which the non-governmental user has a preference to benefit from the proceeds or the facilities. Therefore,any arrangement which results in a non-governmental person being the ultimate beneficiary of the bond financing must be considered. 1. Sales and Leases. The sale of a bond-financed facility to a non-governmental person would cause a private business use problem if that facility involved the use of more than 10 percent of the bond proceeds. Since state law often prohibits a governmental issuer from lending credit, this circumstance generally does not occur. Leases, however, also could be a problem because such arrangements grant a possessory interest in the facility which results in the lessee receiving a right to use the facility which is superior to members of the general public. 2. Management Contracts. Having a private manager will give rise to private business use unless certain terms of the management agreement demonstrate that beneficial use has not been passed to the manager. These factors relate to the compensation arrangements, contract term,cancellation provisions,and the relationship of the parties. The primary focus of these rules is on compensation. In general,compensation must be reasonable and not be based, in whole or in part, on a share of net profits. Compensation arrangements may take one of four forms: (1)periodic fixed fee;(2)capitation fee;(3)per-unit fee; or(4)percentage of fees charged. In general,a periodic fixed fee arrangement,however,is required in which at least 50 percent of annual compensation be based on a predetermined fee. During the initial two year start-up period,compensation may be based on a percentage of fees charged(i.e., gross revenues,adjusted gross revenues or expenses). The term of a management contract, generally, may not exceed five years, including all renewal options,and must be cancelable by the governmental unit at the end of the third year. If per-unit fee compensation is used,the term is limited to three years,with a cancellation option for the governmental unit at the end of two years. Where compensation is based on a percentage of gross revenues, the contract may not extend beyond a term of two years, cancelable by the governmental unit at the end of the first year. In each instance, cancellation may be upon reasonable notice,but must be"without penalty or cause,"meaning no covenant not to compete, buy-out provision or liquidated damages provision is allowed. Finally,the manager may not have any role or relationship with the governmental unit that would limit the ability of the governmental unit to exercise its rights under the contract. Any voting power of either party which is vested in the other party,including its officers,directors,shareholders and employees,may not exceed 20 percent. Further,the chief executive officer of either party may not serve on the governing board of the other party. Similarly,the two parties must not be members of the same controlled group or be related persons,as defined in certain provisions of federal tax law. 3. Cooperative Research Agreements. A cooperative research agreement with a private sponsor whereby the private party uses bond-financed facilities may cause a private business use problem.Nevertheless,such use of a bond-financed facility by a non-governmental person is to be disregarded for purposes of private business use if the arrangement is in one of the following forms. First, the arrangement may be disregarded if the sponsoring party is required to pay a competitive price for any license or other use of resulting technology, and such price must be determined at the time the technology is available. Second,an arrangement may also qualify if a four-part requirement is met: (1)multiple, unrelated industry sponsors must agree to fund university-performed basic research;(2)the university must determine the research to be performed and the manner in which it is to be performed; (3)the university must have exclusive title to any 2 vvww.mphlegal,cam t patent or other product incidentally resulting from the basic research; and (4)sponsors must be limited to no more than a nonexclusive,royalty-free license to use the product of any such research. 4. Output Contracts. In some circumstances,private business use arises by virtue of contractual arrangements in which a governmental unit agrees to sell the output from a bond- financed facility to a non-governmental person. If the non-governmental person is obligated to take the output or to pay for output even if not taken,then private business use will arise. This is because the benefits and burdens of the bond-financed facility are considered as inuring to the non- governmental purchaser. In addition to the general rule,output-type facilities,including electric and gas generation,transmission and related facilities(but not water facilities)are further limited in the amount of private business use which may be permitted. If more than 5 percent of the proceeds are used for output facilities and if more than 10 percent of the output is sold pursuant to an output arrangement, then the aggregate private business use which may result (for all bond issues) is $15,000,000. II. How Much Private Business Use is Too Much? In general,there is too much private business use if an amount in excess of 10 percent of the proceeds of the bond issue are to be used,directly or indirectly,in a trade or business carried on by persons other than governmental units, and other than as members of the general public. All trade or business use by persons on a basis different than that of the general public is aggregated for the 10 percent limit. Private business use is measured on a facility or bond issue basis. On a facility basis, such use is generally measured by relative square footage, fair market rental value or the percentage of cost allocable to the private use. On a bond issue basis,the proceeds of the bond issue are allocated to private and governmental (or public) use of the facility to determine the amount of private business use over the term of the bond issue. Temporary use is not necessarily "bad"(Le,private use)even though it results in more than 10 percent of the facility being so used. For example,if 100 percent of a facility is used for a period equal to five percent of the term of the bond such use may not adversely impact the bonds. The question is whether the benefits and burdens of ownership have transferred to the private user, as in the case of a sale, lease or management contract. if these benefits and burdens have not transferred, such use may be disregarded for purposes of private business use. In no event should private business use exceed $15,000,000. In addition, if the private use is considered "unrelated or disproportionate" to the governmental purpose for issuance of the bonds,the private business use test is met if the level of the prohibited private use rises to 5 percent. The"unrelated" question turns on the operational relationship between the private use and use for the governmental purpose. In most cases,a related use facility must be located within or adjacent to the related governmental facility,e.g.,a privately- operated school cafeteria would be related to the school in which it is located. Whereas,the use of a bond-financed facility as an administrative office building for a catering company that operates cafeterias for a school system would not be a related use of bond proceeds. Nonetheless,even if a use is related,it is disproportionate to the extent that bond proceeds used for the private use will exceed proceeds used for the related governmental use. 111. When are the tests applied to analyze the qualification of a bond? A bond is tested both(1)on the date of issue,and(2)over the term. The tests are applied to analyze the character of the bond on the date of issue,based on how the issuer expects to use the proceeds and the bond-financed property. This is known as the "reasonable expectations" standard. The tests also continuously are applied during the term of the bonds to determine whether there has been a deviation from those expectations. This is known as the"change of use" 3 ww'N,rph1eI.cOrrro All standard. When tested,bonds are viewed on an"issue-by-issue"basis. Generally,bonds secured by the same sources of funds are part of the same"issue"if they are sold within 15 days of one another. IV. What is the reasonable expectations standard? The reasonable expectations standard will be the basis on which McCall,Parkhurst&Horton L.L.P.,as bond counsel,will render the federal income tax opinion on the bonds. The statement of expectations will be incorporated into the Federal Tax Certificate, previously referred to as the Federal Tax Certificate. The certificate also will contain information about the amounts to be expended on different types of property, e.g., land, buildings, equipment, in order to compute a weighted useful life of the bond-financed property. Based on the information on useful life,the maximum weighted average maturity of the bonds tested to ensure that is restricted to no more than 120 percent of the useful life of the property being financed or refinanced. V. Change of Use Standard. The disqualified private business use need not exist on the date of issue. Subsequent use by non-governmental persons also can cause a loss of tax-exemption. Post-issuance"change of use"of bond-financed facilities could result in the loss of the tax-exempt status of the bonds,unless certain elements exist which demonstrate the change was unforeseen. For this purpose,a change in use includes a failure to limit private business use subsequent to the date of issuance of the bonds. A reasonable expectation element requires that,as of the date of issue of the bonds,the governmental unit reasonably have expected to use the proceeds of the issue for qualified facilities for the entire term of the issue. To fall within the safe harbor rules which avoid loss of tax-exempt status the governmental unit must assure that no circumstances be present which indicate an attempt to avoid directly or indirectly the requirements of federal income tax law. Finally,the safe harbor requires that the governmental unit take remedial action that would satisfy one of the following provisions: redemption of bonds;alternative use of disposition proceeds of a facility that is financed by governmental bonds;or,alternative use of a facility that is financed by governmental bonds. For purposes of the latter two remedial action provisions,the governmental unit has 90 days from the date of the change of use to satisfy the requirements. In addition,there is an exception for small transactions for dispositions at a loss. VI. Written Procedures. Each governmental issuer should establish written procedures to assure continuing compliance with the private use and arbitrage limitations imposed by the Code. Moreover, the Internal Revenue Service("IRS")is asking issuers to state in a bond issue's informational return(such an 8038-G)whether such post-issuance procedures have been adopted. The federal tax certificate, together with the attached memoranda and bond covenants can be supplemented by standard written practices adopted by the executive officer or legislative bodies of the issuer. Accordingly,our firm is prepared to advise you with respect to additional practices which we believe would be beneficial in monitoring compliance and taking remedial action in cases of change in use.There is no standard uniform practice for all issuers to adopt because each issuer operates in unique fashion. However, if you wish us to assist you in developing practices which might assist you in complying with the viewpoints expressed by the IRS and its personnel, please contact your bond lawyer at McCall,Parkhurst&Horton LLP. 4 WWP.M,ahlegal.Com K-A CALL PARKHURST & HORTON Exhibit"C" January 10, 2016 Thomas E.Brymer Town Manager Town of Westlake,Texas 1301 Solana Boulevard, Suite 4202 Westlake,Texas 76262 Re: Town of Westlake,Texas General Obligation Refunding Bonds, Series 2017 Dear Mr.Brymer: As you know,the Town of Westlake,Texas(the"Issuer")will issue the captioned bonds in order to provide for the refunding of portions of bonds previously issued by the Issuer. As a result of that issuance, the federal income tax laws impose certain restrictions on the investment and expenditure of amounts to be deposited to the interest and sinking fund for the captioned bonds. The purpose of this letter is to set forth,in somewhat less technical language, those provisions of the tax law which require the timely use of bond proceeds and that investment of these amounts be at a yield which is not higher than the yield on the captioned bonds. For this purpose,please refer to line 21(e)of the Form 8038-G included in the transcript of proceedings for the yield on the captioned bonds. Please note that the Form 8038-G has been prepared based on the information provided by or on your behalf by your financial advisor.Accordingly,while we believe that the information is correct you may wish to have the yield confirmed before your rebate consultant or the paying agent attempt to rely on it. The Issuer has determined that there are no unexpended original and investment proceeds of the outstanding bonds deposited to the capital projects fund. Generally,the federal tax laws provide that,unless excepted,amounts to be deposited to the interest and sinking fund must be invested in obligations the combined yield on which does not exceed the yield on the bonds. Importantly,for purposes of administrative convenience,the bonds,however,have been structured in such a way as to avoid,for the most part,this restriction on investment yield. They also contain certain covenants relating to expenditures of proceeds designed to alert you to unintentional failures to comply with the laws affecting expenditures of proceeds and dispositions of property. First, the interest and sinking fund is made up of amounts which are received annually for the payment of current debt service on all the Issuer's outstanding bonds. Any taxes or revenues deposited to the interest and sinking fund which are to be used for the payment of current debt service on the captioned bonds, or any other outstanding bonds,are not subject to yield restriction. By definition,current debt service refers only to debt service to be paid within one year of the date of receipt of these amounts. For the most part,this would be debt service in the current fiscal year. These amounts deposited to the account for current debt service may be invested without regard to any constraint imposed by the federal income tax laws. ( 600 Congress Ave.,Suite 1800 j 717 North Harwood.Suite 900 700 N.St.Mary's Street,Suite 1525 Austin,Texas 78701 Dallas,Texas 75201 San Antonio,Texas 78205 i. 512.478.3805 I 1'214.754.9200 1210.225.2800 512.472.0871 E i""214.754.9250 F 210.225.2984 www.mphl�ygal.com Second,a portion of the interest and sinking fund is permitted to be invested without regard to yield restriction as a"minor portion." The"minor portion"exception is available for de minimis amounts of taxes or revenues deposited to the interest and sinking fund. The maximum amount that may be invested as part of this account may not exceed the lesser of five percent of the principal amount of the bonds or$100,000. Accordingly, you should review the current balance in the interest and sinking fund in order to determine if such balance exceed the aggregate amounts discussed above. Additionally,in the future it is important that you be aware of these restrictions as additional amounts are deposited to the fund. The amounts in the fund which are subject to yield restriction would only be the amounts which are in excess of, in the case of the interest and sinking fund,the sum of(1)the current debt service account and(2)the"minor portion" account. Moreover, to the extent that additional bonds are issued by the Issuer,whether for new money projects or for refunding,these amounts will change in their proportion. The Ordinance contains covenants that require the Issuer to comply with the requirements of the federal tax laws relating to the tax-exempt obligations. The Internal Revenue Service(the"Service")has determined that certain materials,records and information should be retained by the issuers of tax-exempt obligations for the purpose of enabling the Service to confirm the exclusion of the interest on such obligations under the Internal Revenue Code. Accordingly, the Issuer should retain such materials, records and information for the period beginning on the issue date of the outstanding bonds,or,in the case of a sequence of refundings,the issue date of the obligations originally financing the refinanced projects and ending three years after the date the captioned bonds are retired. Please note this federal tax law standard may vary from state law standards. The material,records and information required to be retained will generally be contained in the transcript of proceedings for the captioned bonds,however, the Issuer should collect and retain additional materials,records and information to ensure the continued compliance with federal tax law requirements. For example, beyond the transcript of proceedings for the bonds, the Issuer should keep schedules evidencing the expenditure of bond proceeds,documents relating to the use of bond-financed property by governmental and any private parties(e.g.,leases and management contracts,if any) and schedules pertaining to the investment of bond proceeds. In the event that you have questions relating to record retention,please contact us. The Service also wants some assurance that any failure to comply with the federal tax laws was not due to an issuer's intentional disregard or gross neglect of the responsibilities imposed on it by the federal tax laws. Therefore,to ensure post-issuance compliance,an issuer should consider adopting formalized written guidelines to help the issuer perform diligence reviews at regular intervals. The goal is for issuers to be able to timely identify and resolve violations of the laws necessary to maintain their obligations' tax-favored status.While the federal tax certificate,together with its attachments,may generally provide a basic written guideline when incorporated in an organizations' operations, the extent to which an organization has appropriate written compliance procedures in place is to be determined on a case-by-case basis Moreover,the Service has indicated that written procedures should identify the personnel that adopted the procedures,the personnel that is responsible for monitoring compliance,the frequency of compliance check activities,the nature of the compliance check activities undertaken,and the date such procedures were originally adopted and subsequently updated,if applicable.The Service has stated that the adoption of such procedures will be a favorable factor that the Service will consider when determining the amount of any penalty to be imposed on an issuer in the event of an unanticipated and non-curable failure to comply with the tax laws. 2 www.mphlegal.com Finally,you should notice that the Ordinance contains a covenant that limits the ability of the Issuer to sell or otherwise dispose of bond-financed property for compensation. Beginning for obligations issued after May 15, 1997 (including certain refunding bonds), or in cases in which an issuer elects to apply new private activity bond regulations,such sale or disposition causes the creation of a class ofproceeds referred to as"disposition proceeds." Disposition proceeds,like sale proceeds and investment earnings,are tax-restricted funds. Failure to appropriately account,invest or expend such disposition proceeds would adversely affect the tax-exempt status of the bonds. In the event that you anticipate selling property, even in the ordinary course,please contact us. Obviously, this letter only presents a fundamental discussion of, among other tax rules, the yield restriction rules as applied to amounts deposited to the fund. This letter does not address the rebate consequences with respect to the interest and sinking fund. You should review the memorandum attached to the Federal Tax Certificate as Exhibit"A"for this purpose. If you have certain concerns with respect to the matters discussed in this letter or wish to ask additional questions with regards to certain limitations imposed, please feel free to contact our firm. Thank you for your consideration and we look forward to our continued relationship. Very truly yours, McCALL,PARKHURST&HORTON L.L.P cc: Chris Settle 3 wwvv.mph1e9a1.com Exhibit"D" ISSUE PRICE CERTIFICATE The undersigned, as the duly authorized representative of FTN Financial Capital Markets (the "Underwriter"),with respect to the underwriting of General Obligation Refunding Bonds,Series 2017(the "Bonds")issued by the Town of Westlake,Texas(the"Issuer"),hereby certifies and represents on behalf of the Underwriter,but not in his/her own right,based on the Underwriter's records and information available to it that it believes,after reasonable inquiry,to be accurate and complete as of the date hereof,as follows: (a) The Underwriter has offered all of the Bonds to members of the public in a bona fide initial offering at a price which, on the date of such offering,was reasonably expected by the Underwriter to be equal to the fair market value of such maturity. For purposes ofthis Issue Price Certificate,the term"public" does not include any bondhouses,brokers,dealers,and similar persons or organizations acting in the capacity of underwriters or wholesalers(including the Underwriter or members of the selling group or persons that are related to,or controlled by,or are acting on behalf of or as agents for the undersigned or members of the selling group). (b) Other than the obligations maturing in each of the years 2020,2021,2023,2025,2026 and 2030(collectively,the"Retained Maturity or Maturities"),the first price at which a substantial amount(i.e..at least 10 percent)of the principal amount of each maturity of the Bonds was sold to the public is set forth in the Official Statement. In the case of the Retained Maturities,the Underwriter reasonably expected on the offering date to sell a substantial amount(i.e., at least 10 percent)of each Retained Maturity at the initial offering price set forth in the Official Statement. The Official Statement is included in the transcript for the Bonds and is incorporated herein by reference. The Underwriter understands that the representations made in this Issue Price Certificate will be relied upon,by the Issuer with respect to certain of the representations set forth in this Federal Tax Certificate and by McCall,Parkhurst&Horton L.L.P. (i)in connection with renderingits opinion to the Issuer that interest on the Bonds is excludable from gross income thereof for income tax purposes,and(ii)for purposes of completing the IRS Form 8038-G. The undersigned is certifying only as to facts in existence on the date hereof. Nothing herein represents the undersigned's interpretation of any laws or the application of any laws to these facts. EXECUTED and DELIVERED as of this February 7,2017. FTN FINANCIAL CAPITAL MARKETS By: �D Name: �iO ►l��4G Title: �� Exhibit"E" SCHEDULES OF FINANCIAL ADVISOR [To be attached hereto] Town of Westlake,Texas General Obligation Refunding Bonds, Series 2017 (Refund 2007) Table of Contents Report Sources&Uses I Pricing Summary _ --_-- ----___---� _. 2 Debt Service Schedule 3 Proof of Premium/SYr Call Bond Selection of Call D 5 Proof of DIS for Arbitrage Purposes_ _-------------- b Proof Of Bond Yield 2.3840319%— 7 Debt Service Comparison 8 Current Refunding Escrow _ 9 Current Refunding Escrow SummaryCost ..___..__ 10. Total Refunded Debt Service 1 I Debt Service To Maturi And To Call 12 Derivation Of Form 8038 Yield Statistics 13 Summa Of Underwriter's Discount 14 Detail Of Underwriter's Discount 15 2017 Rfd I SINGLE PURPOSE 1 1110/2017 1 12:55 PM ConsultingLawrence Financial Town of Westlake,Texas General Obligation Refunding Bonds, Series 2017 (Refund 2007) Sources & Uses Dated 02/07/2017 1 Delivered 02/07/2017 Sources Of Funds Paz Amount of Bonds $5,795,000.00 Reoffering Premium _ _ _ m� _ 774,059.40 Total Sources _�___.__ _..__._.._._.___ ._._ ___. _ _ �__ _ .$6}569,0.59.40 Uses Of Funds Deposit to Current Refunding Fund _ 6,452,467.39 Costs of Issuance 73,301.84 Total Underwriter's Discount (0.731%L 42,380.50 Rounding Amount 909.67„ Total Uses 56,569,059.40 2017 Rfd l SINGLE PURPOSE i 1/10/2017 1 12:55 PM Lawrence • • Consulting Town of Westlake,Texas General Obligation Refunding Bonds, Series 2017 (Refund 2007) Pricing Summary Type of Maturity Maturity Bond Coupon Yield Value Price YTM Call Date Call Price Dollar Price 02/15/2018 Serial Coupon 2.000% 1.300% 30,000.00 100.708% - - 30,212.40 02/15/2019 Serial Coupon 2.000% 1.550% 30,000.00 100.892% - - - 30,267.60 02/15/2020 Serial Coupon 2.000% 1.800% 35,000.00 100.585% - - 35,204.75 02/15/2021 Serial Coupon 2.000% 2.000% 35,000.00 99.999% - - 34,999.65 02/15/2022 Serial Coupon 2.500% 2.100% 35,000.00 101.896% - - 35,663.60 02/15/2023 Serial Coupon 3.000% 2.150% 35,000.00 104.776% - - _ - 36,671.60 02/15/2024 Serial Coupon 3.000% 2.250% 40,000.00 104.846% - - - 41,938.40 02/15/2025 Serial Coupon 4.000% 2.200% 605,000.00 113.170% - - - 684,678.50 02/15/2026 Serial Coupon 4.000% 2.250% 625,000.00 114.216% - - - 713,850.00 02/15/2027 Serial Coupon 4.000% 2.300% 645,000.00 115.138% - - - 742,640.10 02/15/2028 Serial Coupon 4.000% 2.350% 675,000.00 114.656% c 2.473% 02/15/2027 100.000% 773,928.00 02/15/2029 Serial Coupon 4.000% 2.400% 715,000.00 114.177% c 2.618% 02/15/2027 100.0001/o 816,365.55 02/15/2030 Serial Coupon 4.000% 2.450% 735,000.00 113.699% c 2.742% 02/15/2027 100.000% 835,687.65 02/15/2031 Serial Coupon 4.000% 2.500% 775,000.00 113.224% c 2.849% 02/15/2027 100.0001/6 877,486.00 02/15/2032 Serial Coupon 4.000% 2.550% 780,000.00 112.752% c 2.943% 02/15/2027 100.000% 879,465.60 Total - - - $5,795,000.00 - - - - - $6,569,059.40 Bid Information Par Amount of Bonds $5,795,000.00 Reoffering Premium or(Discount) 774,059.40 Gross Production _ $6,569,059.40 Total Unde_nv_riter's Discount_(0.731%} - $(42,380.50) Bid 112.626%-- 6,526,67890 Total Purchase Price $6,526,678.90 Bond Year Dollars $66,153.78 Averse Life 11.416 Years Averap�e Coulon __ ___� - 3.9783669% Net Interest Cost NlC 2.8723395% True Interest Cost(TIC) 2.6755069% 2017 Rfd I SINGLE PURPOSE 1 1/10/2017 1 12:55 PM Lawrence / Town of Westlake, Texas General Obligation Refunding Bonds, Series 2017 (Refund 2007) Debt Service Schedule Part 1 of 2 Date Principal Coupon Interest Total P+l Fiscal Total 02/07/2017 - - - 08/15/2017 - - 119,027.50 119,027.50 - 09/30/2017 - - - - 119,027.50 02/15/2018 30,000.00 2.000% 113,962.50 143,962.50 - 08/15/2018 - 113,662.50 113,662.50 - 09/30/2018 _ - - - - 257,625.00 02/15/2019 30,000.00 2.000% 113,662.50 143,662.50 - 08/15/2019 - - 113,362.50 113,362.50 - 09/30/2019 - - - - 257,025.00 02/15/2020 35,000.00 2.000% 113,362.50 148,362.50 - 08/15/2020 - - 113,012.50 113,012.50 - 09/30/2020 - - - - 261,375.00 02/15/2021 35,000.00 2.000% 113,012.50 148,012.50 - 08/15/2021 - - 112,662.50 112,662.50 - 09/30/2021 - - _ - - 260,675.00 02/15/2022 35,000.00 2.500% — 112,662.50 147,662.50 08/15/2022 - - 112,225.00 112,225.00 - 09/30/2022 - - - - 259,887.50 02/15/2023 35,000.00 3.000% 112,225.00 147,225.00 - 08/15/2023 - 111,700.00 111,700.00 09/30/2023 - - - - 258,925M 02/15/2024 40,000.00 3.000% 111,700.00 151,700M - 08n5/2024 - - 111,100.00 111,100.00 - 09/30/2024 - - - - 262,800.00 02/15/2025 605000.00 4.000% 111,100.00_ 716,100.00 08/15/2025 - - - 99,000.00 99,000.00 - 09/30/2025 - - - - 815,100.00 02/15/2026 625,000.00 4.000% 99,000.00 724,000.00 - 08/15/2026 - - 86,500.00 86,500.00 - 09/30/2026 - - 810,500.00 02/15/2027 645,000.00 4.000% 86,500.00 731,500.00 - 08/15/2027 - - 73,600.00 73,600.00 - 09/30/2027 - - - - 805,100.00 02/15/2028 675,000.00 4.000% 73,600.00 748,600M - 08/15/2028 - 60,100.00 60,100.00 _ 09/30/2028 - - — - - 808,700.00 02/15!2029 715,000.00 4.000% 60,100.00 775,100.00 - 08/15/2029 - - 45,800.00 45,800.00 - 09/30/2029 - - - - 820,900.00 02/15/2030 735,000.00 4.000% 45,800.00 780,800.00 - 08/15/2030 - - 31,100.00 31,100.00 - 09/30/2030 - - - 811,900.00 02/15/2031 775 000.00 4.000% 31 100.00 806 100.00 2017 Rfd i SINGLE PURPOSE 1 1/10/2017 1 12:55 PM Lawrence Financial C6nsulting LLC Town of Westlake,Texas General Obligation Refunding Bonds, Series 2017 (Refund 2007) Debt Service Schedule Part 2 of 2 Date Principal Coupon Interest Total P+I Fiscal Total 08/15/2031 15,600.00 15,600.00 - 09/30/2031 - - 821,700.00 02/15/2032 780,000.00 4.000% 15,600.00 795,600.00 - 09/30/2032 - - - - 795,600.00 Total $5,795,000.00 - $2,631,840.00 58,426,840.00 - Yield Statistics Bond Year Dollars $66,153.78 Average Life 11.416 Years 3.9783669% Net InterestCost NS_IC� 2.8723395% True Interest Cost(TICD 2.6755069% Bond Yield for Arbitrage Purposes 2.3840319% All Inclusive Cost AIC 2.7973663% IRS Form 8038 Net Interest Cost 2.4719960% Weighted Average Maturity 11.440 Years 2017 Rfd 1 SINGLE PURPOSE 1 1/1012017 1 12:55 PM Town of Westlake,Texas General Obligation Refunding Bonds, Series 2017 (Refund 2007) Proof of Premium/5Yr Call Bond Selection of Call Dates/Prices PV at Bond Maturity Call Date Call Price Yield Lowest? 02/15/2028 - - 780,178.23 No 02/15/2028 02/15/2027 100.000% 771,727.95 Yes 02/15/2029 - - 835,152.42 No 02/15/2029 02/15/2027 100.000% 817,459.98 Yes 02/15/2030 - 867,288.77 No 02/15/2030 02/15/2027 100.000% 840,325.99 Yes 02/15/2031 - - 923,524.48 No 02/15/2031 02/15/2027 100.000% 886,058.02 Yes 02/15/2032 - - 938,364.32 No 02/15/2032 02/15/2027 100.000% 891,774.52 Yes 2017 Rtd 1 SINGLE PURPOSE 1 1/10/2017 1 12:55 PM Town of Westlake,Texas General Obligation Refunding Bonds, Series 2017 (Refund 2007) Proof of D/S for Arbitrage Purposes Date Principal Interest Total 02/07/2017 - - - 08/15/2017 - 119,027.50 119,027.50 02/15/2018 30,000.00 113,962.50 143,962.50 08/15/2018 - 113,662.50 113,662.50 02/15/2019 30,000.00 113,662.50 143,662.50 08/15/2019 - 113,362.50 113,362.50 02/15/2020 35,000.00 113,362.50 148,362.50 08/15/2020 - 113,012.50 113,012.50 02/15/2021 35,000.00 113,012.50 148,012.50 08/15/2021 �_— —,_ 112,662.50 _ _.____.___.__-_ 112,662.50 02/15/2022 w35,000.00_ 112,662.50 147,662.50 08/15/2022 - 112,225.00 112,225.00 02/15/2023 35,000.00 112,225.00 147,225.00 08/15/2023 - 111,700.00 111,700.00 02/15/2024 40,000.00 111,700.00 151,700.00 08/15/2024_--� - 111,100.00 111,100.00 02/15/2025 605,000.00 111,100.00 716,100.00 08/15/2025 - 99,000.00 99,000.00 02/15/2026 625,000.00 99,000.00 724,000.00 08/15/2026 - 86,500.00 86,500.00 _.._._ _.._.___-_._._.....__..._.. _._..___._..___--------- . 02/15/2027 4,325,000.00 86,500.00 4,411,500.00 Total $5,795,000.00 $2,179,440.00 $7,974,440.00 2017 Rfd 1 SINGLE PURPOSE 1 111012017 1 12:55 PM Lawrence Registered •. Advisor i Texas Securities Dealer Page Town of Westlake,Texas General Obligation Refunding Bonds, Series 2017 (Refund 2007) Proof Of Bond Yield @ 2.3840319% Present Cumulative Date Cashflow PV Factor Value PV 02/07/2017 - 1.0000000X - - 08/15/2017 119,027.50 0.9876999x 117,563.46 117,563.46 02/15/2018 143,962.50 0.976065]x 140,516.77 258,080.23 08/15/2018 113,662.50 0.9645673x 109,635.13 367,715.36 02/15/2019 143.662.50 0.9532049x 136,939.81 504,655.16 08/15/2019 113,362.50 0.9419764x 106,784.80 611,439.97 02/15/2020 148,362.50 0.9308802x 138,107.71 749,547.68 08/15/2020 113,012.50 0.9199147x 103,961.86 853,509.53 02/15/2021 148,012.50 0.9090783x 134,554.95 988,064.49 08/15/2021 112 662.50 0.8983696x 101,212.56 1,089,277.05 02/15/2022 147,662.50 0.8877870x 131,092.85 1,220,369.90 08/15/2022 112,225.00 0.877329lx 98,458.26 1,318,828.17 02/15/2023 147,225.00 0.8669944x 127,643.25 1,446,471.42 08/15/2023 111,700.00 0.8567814x 95,702.49 1,542,173.91 02/15/2024 151,700.00 0.8466888x 128,442.69 1,670,616.60 08/15/2024 111,100.00 0.8367150x 92,959.04 1,763,575.63 02/15/2025 716,100.00 0.8268587x 592,113.53 2,355,689.16 08/15/2025 99,000.00 0.8171185x 80,894.73 2,436,583.90 02/15/2026 724,000.00 0.807493lx 584,625.00 3,021,208.89 08/15/2026 86,500.00 0.7979810x 69,025.36 3,090,234.25 02/15/2027 4,411,500.00 0.7885810x 3,478,825.15 6,569,059.40 Total $7,974,440.00 - $6,569,059.40 - Derivation Of Target Amount Par Amount of Bonds _ $5,795,000.00 Reoffe�ium or Discount) 774,059.40 Original Issue Proceeds $6,569,059.40 2017 Rfd I SINGLE PURPOSE 1 1/10/2017 1 12:55 PM Lawrence • • l Consulting LLC Registered Municipal Advisor&Texas Securities Dealer Page Town of Westlake,Texas General Obligation Refunding Bonds, Series 2017 (Refund 2007) Debt Service Comparison Existing Date Total P+1 D/S Net New D/S Old Net D/S Savings 09/30/2017 119,027.50 433,500.00 552,527.50 563,303.75 10,776.25 09/30/2018 257,625.00 - 257,625.00 299,607.50 41,982.50 09/30/2019 257,025.00 - 257,025.00 298,007.50 40,982.50 09/30/2020 261,375.00 - 261,375.00 301,407.50 40,032.50 09/30/2021 260 675.00 260,675.00 304,607.50 43932.50 09/30/2022 259,887.50 - 259,887.50 307,607.50 47,720.00 09/30/2023 258,925.00 - 258,925.00 310,407.50 51,482.50 09/30/2024 262,800.00 - 262,800.00 313,007.50 50,207.50 09/30/2025 815,100.00 - 815,100.00 890,407.50 75,307.50 09/30/2026 810,500.00 - 810,500.00 _ 889,607.50 79,107.50_ 09/30/2027 805,100.00 - 805,100.00 892,807.50 87,707.50 09/30/2028 808,700.00 - 808,700.00 894,807.50 86,107.50 09/30/2029 820,900.00 - 820,900.00 894,695.00 73,795.00 09/30/2030 811,900.00 - 811,900.00 893,345.00 81,445.00 09/30/2031 821,700.00 821,700.00 895,560.00 73,860.00 09/30/2032 795,600.00 - 795,600.00 890,910.00 95,310.00 Total $8,426,840.00 $433,500.00 $8,860,340.00 $9,840,096.25 $979,756.25 PV Analysis Summary(Net to Net) Gross PV Debt Service Savings 765,451.82 Net PV Cashflow Savin 2.676%TIC) 765,451.82 909.67 Net Present Value Benefit $766,361.49 Net PV Benefit/ $6,330,000 Refunded Principal — 12.107% Net PV Benefit/ $5,795,000 RefundingPrincipal -incipal� 13.225% Refunding Bond Information Refunding Dated Date 2/07/2017 Refunding Delivery Date 2/07/2017 2017 Rfd I SINGLE PURPOSE 1 1/10/2017 1 12:55 PM Lawrence • •l Consulting Town of Westlake,Texas General Obligation Refunding Bonds, Series 2017 (Refund 2007) Current Refunding Escrow Cash Date Principal Rate Interest Receipts Disbursements Balance Fiscal Total 02/07/2017 - - - 0.39 0.39 05/01/2017 6,452,467.00 0.500% 7,336.36 6,459,803.36 6,459,803.75 - - 09/30/2017 - - - - - 6,459,803.75 Total $6,452,467.00 - $7,336.36 $6,459,803.75 $6,459,803.75 - Investment Parameters Investment Model JPV,GIC,or Securitie§j Securities Default investment yield target _ Unrestricted Caseosit m _0.39 Cost of Investments Purchased with Bond Proceeds _6,452,467.00 Total Cost of Investments � $6,452,467.39 Target Cost of Investments at bond yield $6,424,180.60 ActuaLpositiveor_0jSp.4tivgarbitrage (28,286;79)_ Yield to Receipt 0.4875960% Yield for Arbitrage Poses 2.3840319°!° State and Local Government Series(SLGS)rates for 1/10/2017 2017 Rfd I SINGLE PURPOSE 1 1/10/2017 1 12:55 PM Lawrence Financial • • LLC RegisteredMunicipalAdvisoriTexas SecuritiesD' g- Town of Westlake,Texas General Obligation Refunding Bonds, Series 2017 (Refund 2007) Current Refunding Escrow Summary Cost Par Principal +Accrued = Total Maturity Type Coupon Yield $Price Amount Cost Interest Cost Current Refunding Escrow 05/01/2017 SLGS-Cl 0,500% 0.500% 100.0000000% 6.452,467 6A52,467,00 6,452 467.00 Subtotal - - - $6,452,467 $6,452,467.00 - $6,452,467.00 Total - - $6,452,467 $6,452,467.00 $6,452,467.00 Current Refunding Escrow Cash DMosi_t _ _ 0.39 Cost of Investments Purchased with Bond Proceeds 6,452,467.00 Total Cost of Investments $6,452,467.39 Delivery Date 2/07/2017 2017 Rfd I SINGLE PURPOSE 1 1/10/2017 1 12:55 PM Lawrence • • Consulting Registered Municipal Advisor i Texas Securities i'.ler Pagc 10 Town of Westlake,Texas General Obligation Refunding Bonds, Series 2007 (Advance Refunded 2002; refundable beginning 2-1-17) Total Refunded Debt Service Date Principal Coupon Interest Total P+l 05/01/2017 - 4.000% 129,803.75 129,803.75 05/01/2018 40,000.00 4.000% 259,607.50 299,607.50 05/01/2019 40,000.00 4.000% 258,007.50 298,007.50 05/01/2020 45,000.00 4.000% 256,407.50 301,407.50 05/01/2021 _ ._ 50,000.00 4.000% 254,607.50 _ 304,607.50 __-- 05/01/2022 55,000.00 4.000% 252,607.50 307,607.50 05/01/2023 60,000.00 4.000% 250,407.50 310,407.50 05/01/2024 65,000.00 4.000% 248,007.50 313,007.50 05/01/2025 645,000.00 4.000% 245,407.50 890,407.50 05/01/2026 _ 670,000.00 4.000% 219,607.50 _ 8891607.50 05/01/2027 700,000.00 4.000% 192,807.50 892,807.50 05/01/2028 730,000.00 4.125% 164,807.50 894,807.50 05/01/2029 760,000.00 4.125% 134,695.00 894,695.00 05/01/2030 790,000.00 4.150% 103,345.00 893,345.00 05/01/203182500000 _ 4.200% _ _ 70,560.00 895,560.00 05/01/2032 _855,000.00 4.200% 35,910.00 890,910.00 Total $6,330,000.00 - $3,076,596.25 $9,406,596.25 Yield Statistics Base date for Avg.Life&Avguon Calculation 2/07/2017 Average Life _ �. __.. �— 11.533 Years Average Coupon 4.1192866% Weighted Average Maturity�Par Basis) _ 22.22_ 2222 ..2.22.2 _ _ 11.533 Years Refunding Bond Information Refunding Dated Date _ 2/07/2017 _._ _222..2_. � _ _22.22._ _._.�..s__. Refunding Delivery Date 2/07/2017 2007(adv rfd 2002) 1 SINGLE PURPOSE 1 1/10/2017 1 12:55 PM Lawrence • •l Consulting Town of Westlake,Texas General Obligation Refunding Bonds, Series 2007 (Advance Refunded 2002; refundable beginning 2-1-17) Debt Service To Maturity And To Call Refunded Refunded Refunded Date Bonds interest D/S To Call Principal Coupon Interest D/S 05/01/2017 6,330,000.00 129,803.75 6,459,803.75 - 4.000% 129,803.75 129,803.75 11/01/2017 - - - - - 129,803.75 129,803.75 05/01/2018 - - - 40,000.00 4.000% 129,803.75 169,803.75 11/01/2018 - - - - - 129,003.75 129,003.75 05/01/2019 - 40 000.00 4.000% 129,003.75 169,003.75 11/01/2019 - - - - - 128,203.75 128,203.75 05/01/2020 - - - 45,000.00 4.000% 128,203.75 173,203.75 11/01/2020 - - - - - 127,303.75 127,303.75 05/01/2021 - - - 50,000.00 4.000% 127,303.75 177,303.75 11/01/2021 - - - 126,303.75 126,303.75 05/01/2022 - - - 55,000.00 4.000% 126,303.75 181,303.75 11/01/2022 - - - - - 125,203.75 125,203.75 05/01/2023 - - - 60,000.00 4.000% 125,203.75 185,203.75 11/01/2023 - - - - - 124,003.75 124,003.75 05/01/2024 - - - 65,000.00 4.000% 124,003.75 189,003.75 11/01/2024 - - - - - 122,703.75 122,703.75 05/01/2025 - - - 645,000.00 4.000% 122,703.75 767,703.75 11/01/2025 - - - - - 109,803.75 109,803.75 05/01/2026 - - - 670,000.00 4.000% 109,803.75 779,803.75 11/01/2026 - 96,403.75 96,403.75 05/01/2027 - - 700,000.00 4.000% 96,403.75 796,403.75 11/01/2027 - - - - - 82,403.75 82,403.75 05/01/2028 - - - 730,000.00 4.125% 82,403.75 812,403.75 11/01/2028 - - - - - 67,347.50 67,347.50 05/01/2029 760,000.00 4.125% 67,347.50 827,347.50 ��_.. ____......_ _—_. __... 11/01/2029 - - - - - 51,672.50 51,672.50 05/01/2030 - - 790,000.00 4.150% 51,672.50 841,672.50 11/01/2030 - - - - - 35,280.00 35,280.00 05/01/2031 - - - 825,000.00 4.200% 35,280.00 860,280.00 11/01/2031 - 17,955.00 17,955.00 05/01/2032 - - - 855,000.00 4.200% 17,955.00 872,955.00 Total $6,330,000.00 $129,803.75 $6,459,803.75 $6,330,000.00 - $3,076,596.25 $9,406,596.25 Yield Statistics Base date for Avg Life&Avg.Coupon Calculation 2/07/2017 _Average Life 11.533 Years_ Average Coupon 4.1192866% Weighted Average MaturityPar Basis)..__.__._._ ._____. �_...____.._____._ _____.___.._..._ _._._._..__._.____.._� �_d 11.533 Years Refunding Bond Information Refunding Dated Date — _ 2/07/2017 Refunding Delivery Date 2/07/2017 2007(adv rfd 2002)I SINGLE PURPOSE 1 1/10/2017 1 12:55 PM Lawrence Financial Consulting LLC Town of Westlake,Texas General Obligation Refunding Bonds, Series 2017 (Refund 2007) Derivation Of Form 8038 Yield Statistics Issuance Issuance Maturity Value Price Price Exponent Bond Years 02/07/2017 - - - - - 02/15/2018 30,000.00 100.708% 30,212.40 1.0222222x 30,883.79 02/15/2019 30,000.00 100.892% 30,267.60 2.0222222x 61,207.81 02/15/2020 35,000.00 100.585% 35,204.75 3.0222222x 106,396.58 02/15/2021 35,000.00 99.999% 34,999.65 4.0222222x 140,776.37 02/15/2022 35,000.00 101.896% 35,663.60 5.0222222x 179,110.52 02/15/2023 35,000.00 104.776% 36,671.60 6.0222222x 220,844.52 02/15/2024 40,000.00 104.846% 41,938.40 7.0222222x 294,500.76 02/15/2025 605,000.00 113.170% 684,678.50 8.0222222x 5,492,643.08 02/15/2026 625,000.00 114.216% 713,850.00 9.0222222x 6,440,513.33 02/15/2027 645,000.00 115.138% 742,640.10 10.0222222x 7,442,904.11 02/15/2028 675,000.00 114.656% 773,928.00 11.0222222x 8,530,406.40 02/15/2029 715,000.00 114.177% 816,365.55 12.0222222x 9,814,528.06 02/15/2030 735,000.00 113.699% 835,687.65 13.0222222x 10,882,510.29 02/15/2031 775,000.00 113.224% 877,486.00 14.0222222x 12,304,303.69 02/15/2032 780,000.00 112.752% 879,465.60 15.0222222x 13,211,527.68 Total $5,795,000.00 - $6,569,059.40 - $75,153,057.00 IRS Form 8038 Weighted Average Maturity=Bond Years/Issue Price 11.440 Years Total Interest from Debt Service2,631,840.00 Reoffenn Premrnm or Discount _ mm 774,059.40 Total Interest 1,857,780.60 NIC=Interest issue Price-Average Maturity _ _ - _.__ 2.471996% Bond Yield for Arbitrage Purposes 2.3840319% 2017 Rfd I SINGLE PURPOSE 1 1/10/2017 1 12:55 PM Lawrence Financial Consulting LLC Town of Westlake,Texas General Obligation Refunding Bonds, Series 2017 (Refund 2007) Summary Of Underwriter's Discount + = Issuance Total Maturity Concession Takedown Total Value Takedown 02/15/2018 - 0.750% 0.750% 30,000.00 225.00 02/15/2019 - 0.750% 0.750% 30,000.00 225.00 02/15/2020 - 0.750% 0.750% 35,000.00 262.50 02/15/2021 - 0.750% 0.750% 35,000.00 262.50 02/15/2022 0.750% 0.750% 35 000.00 262.50_ 02/15/2023 - 0.750% 0.750% 35,000.00 262.50 02/15/2024 - 0.750% 0.750% 40,000.00 300.00 02/15/2025 - 0.500% 0.500% 605,000.00 3,025.00 02/15/2026 - 0.500% 0.500% 625,000.00 3,125.00 02/15/2027 0.500% 0.500% 645,000.00 3,225.00 02/15/2028 - 0.500% 0.500% 675,000.00 3,375.00 02/15/2029 - 0.500% 0.500% 715,000.00 3,575.00 02/15/2030 - 0.500% 0.500% 735,000.00 3,675.00 02/15/2031 - 0.500% 0.500% 775,000.00 3,875.00 02/15/2032 - 0.500% 0.500% 780,000.00 3,900.00 Total - - - S5,795,000.00 $29,575.00 Underwriting&Issuance Expenses Total Management Fees 10.086%) _ _ _ _ _mm _ _ _ __ $5,000.00 Total Average Takedown(0.510%) ~�T $29,575.00 Total Underwriters Exenses(0135%) $7,805.50 TOTAL UNDERWRITING SPREAD(0.731%' $42,380.50 2017 Rfd I SINGLE PURPOSE 1 1/10/2017 1 12:55 PM Town of Westlake,Texas General Obligation Refunding Bonds, Series 2017 (Refund 2007) Detail Of Underwriter's Discount Dated 02/07/2017 1 Delivered 02/07/2017 UNDERWRITER'S EXPENSES DETAIL Underwriter's_Counsel 0.086% $5,000.00 MCDC(0.009%°) $495.00 Texas MAC(0.0170.1 $994.50 CUSIP(0 009%) - ------- __._.._.._...._.._________y _..._._..___.__ _ _ —__ __$516_00 DTC(0.014%) _ $800.00 TOTAL 57,805.50 2017 Rfd 1 SINGLE PURPOSE 1 1/1012017 1 12:55 PM Lawrence Financial Consulting LLC IVCCALL PARKHURST & HORTON March 2, 2017 VIA UPS 2ND DAY AIR#IZ56404W0299839610 Internal Revenue Service Center 1973 North Rulon White Boulevard Ogden, Utah 84201-1000 Re: htformation Reporting-Tax-Exempt Bonds Town of Westlake,Texas General Obligation Refunding Bonds, Series 2017 Ladies and Gentlemen: Pursuant to the requirements of Section 149(e)of the Internal Revenue Code of 1986,enclosed please find an original of Form 8038-G which is hereby submitted to you for the above-captioned bonds issued February 7,2017. Sincerely, McCALL, PARKHURST& HORTON L.L.P. Stefano Taverna ST: vm Enclosures cc: Chris Settle 600 Congress Ave.,Suite 1800 717 North Harwood,Suite 900 700 N.St.Mary's Street,Suite 1525 Austin,Texas 78701 Dallas,Texas 75201 San Antonio,Texas 78205 T 512.478.3805 T 214.754.9200 T 210.225.2800 F 512.472.0871 F 214.754.9250 F 210.225.2984 www.mphlegal.com Form 8038-G Information Return for Tax-Exempt Governmental Obligations (Rev.September 2011) ►Under Internal Revenue Code section 149(e) OMB No.1545-0720 Department of the Treasury 10-See separate instructions. Internal Revenue Service Caution:If the issue price is under$100,000,use Form 8038-GC. Reporting Authority If Amended Return,check here ► ❑ 1 Issuer's name 2 Issuer's employer identification number(EIN) Westlake,Texas(Town of) 75.2449357 3a Name of person(other than issuer)with whom the IRS may communicate about this return(see Instructions) 3b Telephone number of other person shown on$a None N/A 4 Number and street(or P.O.box If mail is not delivered to street address) Room/suite 5 Report number(For IRS Use Only) 1301 Solana Boulevard 4202 13 Rc s 8 City,town,or post office,state,and ZIP code 7 Date of Issue Westlake,Texas 76262 02/07/2017 8 Name of Issue 9 CUSIP number General Obligation Refunding Bonds,Series 2017 96048P GK6 10a Name and title of officer or other employee of the Issuer whom the IRS may call for more Information(see 10b Telephone number of officer or other instructions) employee shown on 10a Thomas E,Brymer,Town Manager (817)490.5720 Type of Issue(enter the issue price).See the instructions and attach schedule. 11 Education . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 _ 12 Health and hospital . . . . . . . . . . . . . . . . . . . . . . . . . . 12 13 Transportation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 14 Public safety . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 15 Environment(including sewage bonds) . . . . . . . . . . . . . . . . . . . . 15 16 Housing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 17 Utilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 18 Other. Describe ► various municipal projects 18 1 6,569,059 19 if obligations are TANS or RANs,check only box 19a . . . . . . . . . . . . . ► ❑ If obligations are BANS,check only box 19b . . . . . . . . . . . . . . . . ► ❑ 20 If obligations are in the form of a lease or installment sale,check box . . . . . . . . 01- 0 i Description of Obligations.Complete for the entire issue for which this form is being filed. (a)Finai maturity date (b)Issue price (c)Stated redemption (d)Weighted (e)Yield price at maturity average maturity 21 02/15/2032 6,569,059 5,795,000 11.44 vears 2.3840 % Uses of Proceeds of Bond Issue(including underwriters'discount 22 Proceeds used for accrued interest . . . . . . . . . . . . . . . . . . . . . 22 -0- 23 Issue price of entire issue(enter amount from line 21,column(b)) . . . . . 23 6,569,059 24 Proceeds used for bond issuance costs(including underwriters'discount). 24 115,682 25 Proceeds used for credit enhancement . . . . . . . . . . . 25 -0- 26 Proceeds allocated to reasonably required reserve or replacement fund 26 .0- 27 Proceeds used to currently refund prior issues . . . . . . . . . 27 6,452,467 28 Proceeds used to advance refund prior issues . . . . . . . . . 28 .0- 29 Total(add lines 24 through 28) . . . . . . . . . . . . . . . . . . . . . . 29 6,568,149 30 Nonrefunding proceeds of the issue(subtract line 29 from line 23 and enter amount here) 30 910 Description of Refunded Bonds.Complete this part only for refunding bonds. 31 Enter the remaining weighted average maturity of the bonds to be currently refunded . . . . ► 11.53 years 32 Enter the remaining weighted average maturity of the bonds to be advance refunded . . . . ► NIA years . 33 Enter the last date on which the refunded bonds will be called(MM/DD/YYYY) . . . . . . ► 05/01/2017 34 Enter the date(s)the refunded bonds were issued►(MM/DD/YYYY) 04/12/2007 For Paperwork Reduction Act Notice,see separate instructions. Cat.No.637735 Form 8038-G(Rev.9-2011) Westlake,Texas(Town of) EIN: 75.2449357 Form 8038-G(Rev.9-2011) Page 2 Miscellaneous 35 Enter the amount of the state volume cap allocated to the issue under section 141(b)(5) . . . . 35 .0. 36a Enter the amount of gross proceeds invested or to be invested in a guaranteed investment contract (GIC)(see instructions) . . . . . . . . . . . . . . . . . . . . . . 36a -o- b Enter the final maturity date of the GIC► c Enter the name of the GIC provider It, 37 Pooled financings: Enter the amount of the proceeds of this issue that are to be used to make loans to other governmental units . . . . . . . . . . . . . . . . . . . . . . . . 37 •0- 38a If this issue is a loan made from the proceeds of another tax-exempt issue,check box► ❑and enter the following information: b Enter the date of the master pool obligation 10- c c Enter the EIN of the issuer of the master pool obligation Po- d d Enter the name of the issuer of the master pool obligation► 39 If the issuer has designated the issue under section 265(b)(3)(B)(i)(Ill)(small issuer exception),check box ► ❑✓ 40 If the issuer has elected to pay a penalty in lieu of arbitrage rebate,check box . . . . . . . . . . . . . ► ❑ 41a If the issuer has identified a hedge,check here► ❑ and enter the following information: b Name of hedge provider► c Type of hedge► d Term of hedge 0- 42 If the issuer has superintegrated the hedge,check box . . . . . . . . . . . . . . . . . . . . . ► ❑ 43 If the issuer has established written procedures to ensure that all nonqualified bonds of this issue are remediated according to the requirements under the Code and Regulations(see instructions),check box . . . . . . . . ► 0 44 If the issuer has established written procedures to monitor the requirements of section 148,check box . . . . . ► Z 45a If some portion of the proceeds was used to reimburse expenditures,check here► ❑ and enter the amount of reimbursement . . . . . . . . . ► b Enter the date the official intent was adopted lo- Under Under penalties of perjury,I declare that I have examined this return and accompanying schedules and statements,and to the best of my knowledge Signature and belief,they are true,correct,and complete.I further declare that I consent to the IRS's disclosure of the Issuer's return information,as necessary to and process this return,tot person that I have authorized above. Consent _ 02/07/2017 'Thomas E. Brymer, Town Manager th r S gnature of Issuer's representative Date Type or print name and title PrinUType preparer's name Pre Date PnN PaidI ?M!� Check ❑ if Preparer Stefano Taverna02/0712017 self-employed P01067358 Use Only Firm's name ► McCall,Parkhurst&Horto L.L.P. Firm's EIN ► 75.0799392 Firm's address ► 717 N.Harwood,Suite 900,Dallas,TX 75201 Phone no. 214.754.9200 Form 803$-G(Rev.9-2011) KEN PAXTON ATTORNEY GENERAL OF TEXAS February 3,2017 THIS IS TO CERTIFY that the Town of Westlake,Texas(the"Issuer"),has submitted the Town of Westlake, Texas, General Obligation Refunding_Bond, Series 2017(the 'Bond"), in the principal amount of$5,795,000,for approval. The Bond is dated January 15,2017 numbered T-1,and was authorized by an Ordinance of the Issuer passed on October 24, 2016, as amended by an Ordinance Amending the Ordinance passed on December 5, 2016 (collectively, the"Ordinance"). The Office of the Attorney General has examined the law and such certified proceedings and other papers as we deem necessary to render this opinion. As to questions of fact material to our opinion, we have relied upon representations of the Issuer contained in the certified proceedings and other certifications of public officials furnished to us without undertaking to verify the same by independent investigation. We express no opinion relating to any official statement or any other offering material relating to the Bond. Based on our examination, we are of the opinion, as of the date hereof and under existing law, as follows: (1) The Bond has been issued in accordance with law and is a valid and binding obligation of the Issuer. (2) In accordance with the provisions of the law,including an Escrow Agreement dated as of January 10, 2017, firm banking arrangements have been made for the discharge and final payment or redemption of the obligations being refunded upon deposit of an amount sufficient to pay said obligations when due. (3) The Bond is payable from the proceeds of an ad valorem tax levied, against all taxable property within the Issuer, within the limits prescribed by law. Therefore, the Bond is approved. Post Office Box 12548, Austin, Texas 78711-2548 • (512) 463-2100 • ww•w.texasattorncygeneral.gov Town of Westlake, Texas, General Obligation Refunding Bond, Series 2017 - $5,795,000 -Page 2- The Comptroller is instructed that he may register the Bond without the cancellation of the underlying securities being refunded thereby. Attorney General of the State of Texas No.62332 Book No.2017-A JCH *See attached Signature Authorization OFFICE OF THE ATTORNEY GENERAL § OF THE STATE OF TEXAS § I,KEN PAXTON,Attorney General for the State of Texas, do hereby authorize the employees of the Public Finance Division of the Office of the Attorney General to affix a digital image of my signature, in my capacity as Attorney General, to the opinions issued by this office approving the issuance of public securities by the various public agencies, non-profit corporations, district, entities, bodies politic or corporate, or political subdivisions of this State as required by law, the opinions approving those contracts designated by the Legislature as requiring the approval of the Attorney General, and the obligations, proceedings and credit agreements required by law to be approved by the Attorney General. The authorized digital image of my signature is attached as Exhibit A and is hereby adopted as my own for the purposes set forth herein. This supersedes any prior signature authorizations for the same purpose. The authority granted herein is to be exercised on those occasions when I am unavailable to personally sign said opinions, and upon the condition that the opinions to which the digital image signature is affixed have been approved by an authorized Assistant Attorney General following the completion of the Public Finance Division's review of the transcripts of proceedings to which the opinions relate. Given under my hand and seal of office at Austin, Texas, this the day of January,2015. KEN PAX TON Attorney General of the State of Texas OFFICE OF COMPTROLLER OF THE STATE OF TEXAS I, Melissa Mora, [] Bond Clerk QX Assistant Bond Clerk in the office of the Comptroller of the State of Texas, do hereby certify that, acting under the direction and authority of the Comptroller on the 3rd day of February 2017, 1 signed the name of the Comptroller to the certificate of registration endorsed upon the: Town of Westlake, Texas, General Obligation Refunding Bond, Series 2017, numbered T=1, dated January 15, 2017, and that in signing the certificate of registration I used the following signature: � l IN WITNESS WHEREOave executed this c ificate this the 3rd day of February 2017. 1, Glenn Hegar, Comptroller of Public Accounts of the State of Texas, certify that the person who has signed the above certificate was duly designated and appointed by me under authority vested in me by Chapter 403, Subchapter H, Government Code, with authority to sign my name to all certificates of registration, and/or cancellation of bonds required by law to be registered and/or cancelled by me, and was acting as such on the date first mentioned in this certificate, and that the bonds/certificates described in this certificate have been duly registered in the office of the Comptroller, under Registration Number 88497. GIVEN under my hand and seal of office at Austin, Texas, this the 3rd day of February 2017. r f GLENN HEGAR Comptroller of Public Accounts of the State of Texas OFFICE OF COMPTROLLER OF THE STATE OF TEXAS I, GLENN HEGAR, Comptroller of Public Accounts of the State of Texas, do hereby certify that the attachment is a true and correct copy of the opinion of the Attorney General approving the: Town of Westlake, Texas, General Obligation Refunding Bond, Series 2017 numbered T-1, of the denomination of $ 5,795,000, dated January 15, 2017, as authorized by issuer, interest various percent, under and by authority of which said bonds/certificates were registered electronically in the office of the Comptroller, on the 3rd day of February 2017, under Registration Number 88497. Given under my hand and seal of office, at Austin, Texas, the 3rd day of Februa ry 2017. GLENN HEGAR Comptroller of Public Accounts of the State of Texas MCCALL PARKHURST & HORTON February 7, 2017 TOWN OF WESTLAKE,TEXAS GENERAL OBLIGATION REFUNDING BONDS,SERIES 2017 IN THE AGGREGATE PRINCIPAL AMOUNT OF$5,795,000 AS BOND COUNSEL for the Town of Westlake, Texas (the "Issuer"), the issuer of the Bonds described above (the "Bonds"), we have examined into the legality and validity of the Bonds, which bear interest from the dates specified in the text of the Bonds, at the rates and payable on the dates as stated in the text of the Bonds, maturing, unless redeemed prior to maturity in accordance with the terms of the Bonds, serially, all in accordance with the terms and conditions stated in the text of the Bonds. WE HAVE EXAMINED the applicable and pertinent provisions of the Constitution and laws of the State of Texas, and a transcript of certified proceedings of the Issuer, and other pertinent instruments authorizing and relating to the issuance of the Bonds, including one of the executed Bonds (Bond Number T-1). BASED ON SAID EXAMINATION, IT IS OUR OPINION that the Bonds have been authorized and issued and the Bonds delivered concurrently with this opinion have been duly delivered and that, assuming due authentication, Bonds issued in exchange therefore will have been duly delivered, in accordance with law, and that the Bonds, except as may be limited by laws applicable to the Issuer relating to governmental immunity and bankruptcy, reorganization and other similar matters affecting creditors' rights generally, and by general principles of equity which permit the exercise of judicial discretion, constitute valid and legally binding special obligations of the Issuer, and that ad valorem taxes sufficient to provide for the payment of the interest, if any, on and principal of the Bonds have been levied and pledged for such purpose, within the limit prescribed by law, as provided in the ordinance adopted by the Town Council of the Issuer, pursuant to which the Bonds have been issued (the "Bond Ordinance"). THE ISSUER HAS RESERVED the right to amend the Bond Ordinance as provided therein and subject to the restrictions therein stated. IT IS FURTHER OUR OPINION, except as discussed below, that the interest on the Bonds is excludable from the gross income of the owners for federal income tax purposes under the statutes, regulations, published rulings, and court decisions existing on the date of this opinion. We are further of the opinion that the Bonds are not "specified private 600 Congress Ave.,Suite 1800 717 North Harwood,Suite 900 700 N.St. Mary's Street,Suite 1525 Austin,Texas 78701 Dallas,Texas 75201 San Antonio,Texas 78205 T 512.478.3805 T 214.754.9200 T 210.225.2800 F 512.472.0871 F 214.754.9250 F 210.225.2984 www.mphlegal.com Iv,1111 activity bonds" and that, accordingly, interest on the Bonds will not be included as an individual or corporate alternative minimum tax preference item under section 57(a)(5) of the Internal Revenue Code of 1986 (the "Code"). Except as stated above, we express no opinion as to any other federal, state, or local tax consequences of acquiring, carrying, owning, or disposing of the Bonds. EXCEPT AS STATED ABOVE, we express no opinion as to any other federal, state, or local tax consequences of acquiring, carrying, owning, or disposing of the Bonds. OUR OPINIONS ARE BASED ON EXISTING LAW, which is subject to change. Such opinions are further based on our knowledge of facts as of the date hereof. We assume no duty to update or supplement our opinions to reflect any facts or circumstances that may thereafter come to our attention or to reflect any changes in any law that may thereafter occur or become effective. Moreover, our opinions are not a guarantee of result and are not binding on the Internal Revenue Service (the "Service"); rather, such opinions represent our legal judgment based upon our review of existing law and in reliance upon the representations and covenants referenced above that we deem relevant to such opinions. The Service has an ongoing audit program to determine compliance with rules that relate to whether interest on state or local obligations is includable in gross income for federal income tax purposes. No assurance can be given whether or not the Service will commence an audit of the Bonds. If an audit is commenced, in accordance with its current published procedures the Service is likely to treat the Issuer as the taxpayer. We observe that the Issuer has covenanted not to take any action, or omit to take any action within its control, that if taken or omitted, respectively, may result in the treatment of interest on the Bonds as includable in gross income for federal income tax purposes. WE EXPRESS NO OPINION as to any insurance policies issued with respect to the payments due for the principal of and interest on the Bonds, nor as to any such insurance policies issued in the future. OUR SOLE ENGAGEMENT in connection with the issuance of the Bonds is as Bond Counsel for the Issuer, and, in that capacity, we have been engaged by the Issuer for the sole purpose of rendering our opinions with respect to the legality and validity of the Bonds under the Constitution and laws of the State of Texas, and with respect to the exclusion from gross income of the interest on the Bonds for federal income tax purposes, and for no other reason or purpose. The foregoing opinions represent our legal judgment based upon a review of existing legal authorities that we deem relevant to render such opinions and are not a guarantee of a result. We have not been requested to investigate or verify, and have not independently investigated or verified, any records, data, or other material relating to the financial condition or capabilities of the Issuer, or the disclosure thereof in connection with the sale of the Bonds, and have not assumed any responsibility with respect thereto. We express no opinion and make no comment with respect to the 2 www.mplilegal.com marketability of the Bonds and have relied solely on certificates executed by officials of the Issuer as to the current outstanding indebtedness of, and assessed valuation of taxable property within the Issuer. Our role in connection with the Issuer's Official Statement prepared for use in connection with the sale of the Bonds has been limited as described therein. THE FOREGOING OPINIONS represent our legal judgment based upon a review of existing legal authorities that we deem relevant to render such opinions and are not a guarantee of a result. Respectfully, � 9W � � � 3 www.mphicgal.com MCCALL PARKHURST & HORTON February 7, 2017 Town of Westlake FTN Financial Capital Markets 1301 Solana Blvd., Suite 4202 845 Crossover Lane, Suite 150 Westlake,Texas 76262-1674 Memphis, Tennessee 38117-4904 Re: $5,795,000 Town of Westlake, Texas, General Obligation Refunding Bonds, Series 2017 Ladies and Gentlemen: In reference to the issuance and sale of the above described Bonds (the "Bonds"), we have served as Bond Counsel for the Town of Westlake, Texas (the "Town") and, in such capacity, prepared the ordinance authorizing the issuance of the Bonds adopted by the Town Council of the Town on October 24, 2016 and amended on December 5, 2016 (jointly,the "Ordinance") and the pricing certificate, dated January 10, 2017 (the "Pricing Certificate" and, together with the Ordinance, the "Bond Ordinance"), executed by the Town Manager as Pricing Officer (as defined in the Ordinance), which Bond Ordinance also approved and authorized the distribution of the Official Statement, dated January 10, 2017, relating to the Bonds (the "Official Statement") and approved and authorized the execution of the Purchase Agreement, dated January 10, 2017, relating to the Bonds (the "Purchase Agreement") by and between the Town and FTN Financial Capital Markets, as the underwriter of the Bonds. We have examined such documents and satisfied ourselves as to such matters as we have deemed necessary in order to enable us to express the opinions set forth below. A. The Ordinance has been duly adopted by the Issuer and the Pricing Certificate has been duly executed by the Pricing Officer pursuant to the Ordinance, and both of the foregoing documents are in full force and effect. B. The Bonds are exempted securities under section 3(a)(2) of the Securities Act of 1933, as amended (the "1933 Act"), and the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"), and it is not necessary, in connection with the offering and sale of the Bonds to register the Bonds under the 1933 Act or to qualify the Bond Ordinance under the Trust Indenture Act. C. We were not requested to participate, and did not take part, in the preparation of the Official Statement, and we have not assumed any responsibility with respect thereto or undertaken independently to verify any of the information contained therein, except that, in our capacity as Bond Counsel, we have reviewed the information 600 Congress Ave.,Suite 1800 717 North Harwood,Suite 900 700 N.St. Mary's Street,Suite 1525 Austin,Texas 78701 Dallas,Texas 75201 San Antonio,Texas 78205 T 512.478.3805 T 214.754.9200 T 210.225.2800 F 512.472.0871 F 214.754.9250 F 210.225.2984 www.mphlegal.com h1i'll'i in the Official Statement under the captions and subcaptions "PLAN OF FINANCE" (exclusive of the subcaption "Source and Uses of Funds"), "DESCRIPTION OF THE BONDS" (exclusive of the subcaptions "Book-Entry-Only-System" and "Bondholders' Remedies"), "LEGAL MATTERS" (exclusive of the last sentence of the first paragraph thereof), "TAX MATTERS", "OTHER MATTERS- Legal Investments and Eligibility to Secure Public Funds in Texas", "OTHER MATTERS - Registration and Qualification of Bonds for Sale" and "OTHER MATTERS - Continuing Disclosure of Information" (exclusive of the subcaption "Compliance with Prior Undertakings"), and we are of the opinion that the information relating to the Bonds and the legal issues contained under such captions and subcaptions is an accurate and fair description of the laws and legal issues addressed therein and, with respect to the Bonds, such information conforms to the Bond Ordinance. This letter is furnished to the addressees solely fortheir benefit and no other party is entitled to rely hereon. Very truly yours, z www.mphlegal.com C' orrick Orrick,Herrington&Sutcliffe LLQ' 1301 McKinney Street Suite 4100 Houston,TX 77010-3096 +1713 658 6400 February 7, 2017 orrick.com FTN Financial Capital Markets 845 Crossover Lane, Suite 150 Memphis, Tennessee 38117-4904 Re: $5,795,000 Town of Westlake,Texas General Obligation Refunding Bonds, Series 2017 Ladies and Gentlemen: We have acted as counsel for you as Underwriter in connection with your purchase from the Town of Westlake, Texas (the "Issuer") of its General Obligation Refunding Bonds, Series 2017, in the aggregate principal amount of$5,795,000 (the "Bonds"), pursuant to the Purchase Agreement, dated January 10,2017(the"Purchase Agreement"),between you and the Issuer. The Bonds are to be issued pursuant to an ordinance of the Town Council of the Issuer, dated October 24, 2016 authorizing the issuance of the Bonds (the "Bond Ordinance"). Capitalized terms not otherwise defined herein shall have the meanings ascribed thereto in the Purchase Agreement. In that connection, we have reviewed the Bond Ordinance, the official statement of the Issuer, dated January 10, 2017 with respect to the Bonds (the"Official Statement"), the Purchase Agreement, certificates of the Issuer and others, the opinions referred to in Section 6(i) of the Purchase Agreement, and such records and documents, and we have made such investigations of law, as we have deemed appropriate as a basis for the opinions and conclusions hereinafter expressed. We do not assume any responsibility for any electronic version of the Official Statement and assume that any such version is identical in all respects to the printed version. In arriving at the opinions and conclusions hereinafter expressed, we are not expressing any opinion or view on, and with your permission are assuming and relying on, without independent assessment or inquiry, the validity, accuracy and sufficiency of the records, documents,certificates and opinions referred to above,including the accuracy of all factual matters represented and legal conclusions contained therein, including (without limitation) any representations and legal conclusions regarding the valid existence of the Issuer, the due authorization, issuance,delivery,validity and enforceability of the Bond Ordinance and the Bonds OHSUSA:766246308.1 FTN Financial Capital Markets "w r February 7, 2017 e-krrick ki and the exclusion of interest thereon from gross income for federal income tax purposes, and the legality,validity and enforceability of the any laws,documents and instruments that may be related to the authorization,issuance,payment or security of the Bonds. We have assumed that all records, documents, certificates and opinions that we have reviewed, and the signatures thereto, are genuine. Based on and subject to the foregoing, and in reliance thereon, as of the date hereof,we are of the following opinions or conclusions: 1. The Bonds are not subject to the registration requirements of the Securities Act of 1933, as amended, and the Bond Ordinance is exempt from qualification pursuant to the Trust Indenture Act of 1939, as amended. 2. We are not passing upon and do not assume any responsibility for the accuracy, completeness or fairness of any of the statements contained in the Official Statement and make no representation that we have independently verified the accuracy, completeness or fairness of any such statements. In our capacity as your counsel,to assist you in part of your responsibility with respect to the Official Statement,we participated in conferences with your representatives and representatives of the Issuer, McCall, Parkhurst and Horton L.L.P., as bond counsel, and others, during which the contents of the Official Statement and related matters were discussed. Based on our participation in the above- mentioned conferences (which did not extend beyond the date of the Official Statement), and in reliance thereon,on oral and written statements and representations of the Issuer and others and on the records, documents, certificates, opinions and matters herein mentioned, we advise you as a matter of fact and not opinion that, during the course of our representation of you on this matter, no facts came to the attention of the attorneys in our firm rendering legal services to you in connection with the Official Statement which caused us to believe that the Official Statement as of its date and as of the date hereof(except for any CUSIP numbers, financial, accounting, statistical or economic or demographic data or forecasts, numbers, charts, tables, estimates, projections, assumptions or expressions of opinion, Appendices, or any information about book-entry, bond insurer, DTC, ratings, Ratings Agencies, Tax Exemption, Underwriter, Underwriting, included or referred to therein or omitted therefrom,which we expressly exclude from the scope of this paragraph and as to which we express no opinion or view)contained or contains any untrue statement of a material fact or omitted or omits to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. No responsibility is undertaken or view expressed with respect to any other disclosure document,materials or activity,or as to any information from another document or source referred to by or incorporated by reference in the Official Statement. We are furnishing this letter to you pursuant to paragraph 6(i)(7) of the Purchase Agreement solely for your benefit as Underwriter. We disclaim any obligation to update this letter. 011SUSA:766246308.1 FTN Financial Capital Marketsn February 7, 2017 urrick This letter is not to be used, circulated, quoted or otherwise referred to or relied upon for any other purpose or by any other person. This letter is not intended to, and may not, be relied upon by owners of Bonds or by any other party to whom it is not specifically addressed. Very truly yours, ORRICK, HERRINGTON & SUTCLIFFE LLP OHSUSA:766246308.I GlobaL 500 North Akard Street Lincoln Plaza,Suite 3200 201 Ratings tel(21,)8TX 75140 tel(214)871-1400 reference no.:1468219 December 21, 2016 Town of Westlake 2650 Ottinger Road Westlake, TX 76262--8012 Attention: Ms. Debbie Piper, CPA, Finance Director Re:US$5,945,000 Town of Westlake, Texas, General Obligation Refunding Bonds, Series 2017, dated.January 15, 2017, due: February 15, 2032 Dear Ms. Piper: Pursuant to your request for an S&P Global Ratings rating on the above-referenced obligations, S&P Global Ratings has assigned a rating of"AAA". S&P Global Ratings views the outlook for this rating as stable. A copy of the rationale supporting the rating is enclosed. This letter constitutes S&P Global Ratings' permission for you to disseminate the above-assigned ratings to interested parties in accordance with applicable laws and regulations. However, permission for such dissemination (other than to professional advisors bound by appropriate confidentiality arrangements)will become effective only after we have released the rating on standardandpoors.com. Any dissemination on any Website by you or your agents shall include the full analysis for the rating, including any updates, where applicable. To maintain the rating, S&P Global Ratings must receive all relevant financial and other information, including notice of material changes to financial and other information provided to us and in relevant documents, as soon as such information is available. Relevant financial and other information includes, but is not limited to, information about direct bank loans and debt and debt- like instruments issued to, or entered into with, financial institutions, insurance companies and/or other entities, whether or not disclosure of such information would be required under S.E.C. Rule 15c2-12. You understand that S&P Global Ratings relies on you and your agents and advisors for the accuracy,timeliness and completeness of the information submitted in connection with the rating and the continued flow of material information as part of the surveillance process. Please send all information via electronic delivery to: pubfin statelocalgovtasp lobal.co n. If SEC rule 17g-5 is applicable, you may post such information on the appropriate website. For any information not available in electronic format or posted on the applicable website, Please send hard copies to: S&P Global Ratings Public Finance Department 55 Water Street PF Ratings U.S. (4/28/16) Page 12 New York,NY 10041-0003 The rating is subject to the Terms and Conditions, if any, attached to the Engagement Letter applicable to the rating. In the absence of such Engagement Letter and Terms and Conditions, the rating is subject to the attached Terms and Conditions. The applicable Terms and Conditions are incorporated herein by reference. S&P Global Ratings is pleased to have the opportunity to provide its rating opinion. For more information please visit our website at www.staiidardandpoors.com. If you have any questions, please contact us. Thank you for choosing S&P Global Ratings. Sincerely yours, S&P Global Ratings a division of Standard &Poor's Financial Services LLC td enclosures cc: Mr. Israel Lugo Mr. Leroy Grawunder, Jr. Mr. Rogelio Rodriguez Mr. Tom Lawrence PF Ratings U.S. (4/28/16) Global Ratings S&P Global Ratings Terms and Conditions Applicable To Public Finance Credit Ratings General. The credit ratings and other views of S&P Global Ratings are statements of opinion and not statements of fact. Credit ratings and other views of S&P Global Ratings are not recommendations to purchase, hold, or sell any securities and do not comment on market price,marketability, investor preference or suitability of any security. While S&P Global Ratings bases its credit ratings and other views on information provided by issuers and their agents and advisors, and other information from sources it believes to be reliable, S&P Global Ratings does not perform an audit,and undertakes no duty of due diligence or independent verification, of any information it receives. Such information and S&P Global Ratings' opinions should not be relied upon in making any investment decision. S&P Global Ratings does not act as a "fiduciary"or an investment advisor. S&P Global Ratings neither recommends nor will recommend how an issuer can or should achieve a particular credit rating outcome nor provides or will provide consulting, advisory, financial or structuring advice. Unless otherwise indicated, the term "issuer" means both the issuer and the obligor if the obligor is not the issuer. All Credit Rating Actions in S&P Global Ratings' Sole Discretion. 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No person is intended as a third party beneficiary of any credit rating engagement or of a credit rating when issued. PF Ratings U.S. (4/28/16) RECEIPT AND DISBURSEMENT OF FUNDS U.S. Bank National Association (the 'Bank") hereby acknowledges receipt of the sum of $6,526,678.90 for the account and on behalf of the Town of Westlake,Texas(the"Town"),with respect to its General Obligation Refunding Bonds,Series 2017,and pursuant to instructions from the Town,such funds have been applied,allocated and deposited in the manner set forth in the attached Exhibit A. DATED this February 7,2017. U.S.BANK NATIONAL ASSOCIATION By: Authorized Officer Exhibit A See Tab No. 21 Lawrence Financial Consulting LLC Registered Municipal Advisor& Texas Securities Dealer (512)375-3424(Phom) (512)582-8259(Fax) Closing Memorandum To: Tom Brymer Town of Westlake 817-490-5720(ph) Debbie Piper Town of Westlake 817-490-5712(ph) Chris Settle McCall,Parkhurst& Horton L.L.P. 214-7.54-9237(ph) Leroy Grawunder McCall,Parkhurst& Horton L.L.P. 214-754-9201 (ph) Rogelio Rodriguez FTN Financial Capital Markets 210-558-2821 (ph) John Williford FTN Financial Capital Markets 214-890-6301 (ph) Hank Tansey FTN Financial Capital Markets 901-435-8428(ph) Tiffany Williamson FTN Financial Capital Markets 901-435-8428 (ph) Mary Ann Bohne FTN Financial Capital Markets 901-435-8428(ph) Hoang Vu Orrick Herrington& Sutcliffe LLP 713-658-6430(ph) Amanda Stephens Orrick Herrington& Sutcliffe LLP 713-658-6412(ph) Israel Lugo U.S. Bank N.A. 972-581-1623(ph) Ricca Coursey First Financial Bank,NA 817-329-8601 (ph) From: Tom Lawrence Lawrence Financial Consulting LLC 512-375-3424(ph) Re: $5,795,000 Town of Westlake,Texas General Obligation Refunding Bonds,Series 2017 Date: February 2,2017 The purpose of this memorandum is to describe certain events and transfers which will occur on February 7, 2017 (the "Closing" or "Closing Date") with respect to the above captioned General Obligation Refunding Bonds, Series 2017 (the "Bonds") being issued by the Town of Westlake, Texas (the "Town") pursuant to an ordinance approved by Town Council (the "Ordinance"). The Closing will take place at 10:00 AM, Central Time, at the offices of the Paying Agent/Registrar for the Bonds (the "Paying Agent"), U.S. Bank National Association, 13737 Noel Road, Suite 800, Dallas,Texas 75240, Attention: Israel Lugo. I. Registration of Bonds The Bonds will be initially issued utilizing the Book-Entry-Only System of The Depository Trust Company ("DTC"), and will be in frilly registered definitive form, payable to Cede & Co., as nominee for DTC. By February 1, 2017, FTN Financial Capital Markets, the underwriter for the Bonds (the "Underwriter"), shall provide registration information to DTC. Additionally, prior to the Closing, the initial Bond in the name of the Underwriter (the "Initial Bond") will be prepared by McCall, Parkhurst & Horton L.L.P. ("Bond Counsel") and delivered to the Attorney General for approval. Upon approval by the Attorney General, the Initial Bond will be registered by the Comptroller of Public Accounts to the State of Texas and delivered by Bond Counsel to the Paying Agent no later than the Closing Date. 1 II. Payment of Purchase Price Pursuant to the terms of a Purchase Agreement dated January 10, 2017, the Underwriter shall wire transfer, on the Closing Date, the total purchase price for the Bonds in the amount of $6,526,678.90 (representing the original par amount of the Bonds, plus $774,059.40 of original issue premium, less $42,380.50 of Underwriter's discount)to the Paying Agent, as follows: To: U.S. Bank National Association') ABA: 091000022 Account Name: U.S. Bank Trust N.A. Account No: 180121167365 FFC: Westlake Bond 2017 Attn: Israel Lugo (972-581-1623) Upon receipt of the full purchase price by the Paying Agent,the Town will promptly endorse the good.faith check and send it to Tiffany Williamson, FTN Financial Capital Markets 845 Crossover Ln., Ste. 150, Memphis, TN 38117-4904, 901-435-8428(phone). III. Disbursements by the Paying Agent/Escrow Agent The Paying Agent, acting as Escrow Agent, shall disburse the purchase price (totaling $6,526,678.90) in accordance with the following instructions: A. Escrow Fund. As authorized by the Ordinance, there is an Escrow Agreement between the Town and U.S. Bank N.A. (the "Escrow Agent") which establishes an Escrow Fund for the purpose of a current refunding of certain maturities Town's General Obligation Refunding Bonds, Series 2007 (the "Refunded Obligations"). See APPENDIX D to the Official Statement relating to the Bonds for a list of the maturities to be refunded. Upon receipt of funds from the Underwriter, the Paying Agent shall (1) deposit $6,452,467.39 to the Escrow Fund, and (2) acting as Escrow Agent, promptly wire transfer such amount to Bureau of the Public Debt as the purchase price for the State & Local Government Series ("SLGS") Securities applied for in connection with such advance refunding, as follows: Sender ABA: 091000022 Sender Name: U.S. Bank,N.A. Receiver ABA: 051036476 Receiver Name: TREAS BPD SIB Product-Code: BTR Type Code: 1000 Amount: $6,452,467.00 Originator Name(local govt): Town of Westlake,TX Originator(escrow agent): U.S. Bank,N.A. Reference to Beneficiary: 75-2449357 Originator to Beneficiary Info: 02/07/2017 2 B. Issuance Costs. The Paying Agent shall retain $1,250.00 to cover its initial Paying Agent fee ($450.00), its redemption fee relating to the Refunded Obligations ($300.00), and its Escrow Agent fee ($500.00). The remaining $72,961.51 shall be used to pay the remaining costs of issuing the Bonds upon receipt of invoices therefor(with wire transfer instructions), including: (1) Bond Counsel fees and expenses (including Attorney General fee), (2) Financial Advisor fee and expenses, and (3) Rating Agency fee. Invoices should be submitted to the Paying Agent, Attention: Israel Lugo, israel.lugo@usbank.con? (e-mail), with a copy to Tom Lawrence, t1gwrence@jfctexas.coin (e-mail), 512-582-8259 (fax). Funds remaining after the payment of the foregoing issuance costs, if any (currently estimated at $909.67), shall be wire transferred to the Town for deposit to its Debt Service Fund for the Bonds as follows: Amount: [TBD] To: First Financial Bank NA 95 Trophy Club Dr,Westlake,TX 76262 ABA: 111301122 Account Name: Town of Westlake Debt Service Fund Account Number: 9111-000-6904 Attn: Ricca Coursey(817-329-8601) Upon receipt, the Town shall transfer such funds into the interest and sinking fund established for the Bonds in accordance with the Ordinance. IV. Release of Bonds Immediately upon receipt of the purchase price for the Bonds (see Section II above) and approval of the Closing by Bond Counsel, all the closing documents will be dated the Closing Date and the Paying Agent will cancel the Initial Bond. Bonds in "book-entry-only" form will be released by the Paying Agent to the Underwriter by contacting DTC at 212-855-3752. 3