new issue official statement ratings: s&p: “aa” book … · cusip data herein is provided...

NEW ISSUE BOOK-ENTRY-ONLY

OFFICIAL STATEMENT May 21, 2019

Ratings: S&P: “AA”(See “RATINGS” herein)

In the opinion of Bond Counsel (defined below), interest on the Bonds (defined below) will be excludable from gross income for federal income tax purposes under statutes, regulations, published rulings and court decisions existing on the date of delivery thereof, subject to the matters described under "TAX MATTERS" herein.

THE BONDS HAVE BEEN DESIGNATED AS "QUALIFIED TAX-EXEMPT OBLIGATIONS" FOR FINANCIAL INSTITUTIONS.

CITY OF WINDCREST, TEXAS

(Bexar County)

$6,655,000 GENERAL OBLIGATION BONDS, SERIES 2019A

$1,810,000 GENERAL OBLIGATION BONDS, SERIES 2019B

Dated: May 15, 2019 (interest to accrue from the Delivery Date) Due: February 15, as shown on page ii The $6,655,000 General Obligation Bonds, Series 2019A (the "Series 2019A Bonds") and $1,810,000 General Obligation Bonds, Series 2019B (the “Series 2019B Bonds” and collectively with the Series 2019A Bonds, the “Bonds”) are being issued by the City of Windcrest, Texas (the "City") pursuant to the Constitution and general laws of the State of Texas, particularly Chapters 1201, 1251, and 1331, Texas Government Code, as amended, an election held in the City on November 6, 2018, and two separate ordinances (collectively, the “Ordinance”) adopted by the City Council of the City on the sale date of the Bonds. See “THE BONDS – Authority for Issuance”. Upon the issuance of the Bonds the City will fully utilize the authorization to issue general obligation bonds granted by the voters at the election. The Bonds constitute direct obligations of the City payable from the levy and collection of a direct and continuing ad valorem tax, within the limits prescribed by law, on all taxable property located within the City. See "THE BONDS – Security and Source of Payment" and "THE BONDS – Tax Rate Limitations" herein. Interest on the Bonds will accrue from the Delivery Date (defined herein) and will be payable on February 15 and August 15 of each year until stated maturity or prior redemption, commencing February 15, 2020, and will be calculated on the basis of a 360-day year of twelve 30-day months. The definitive Bonds will be issued only as fully registered obligations in denominations of $5,000 or any integral multiple thereof within a stated maturity. The City intends to utilize the Book-Entry-Only System of The Depository Trust Company New York, New York ("DTC"), but reserves the right on its behalf or on behalf of DTC to discontinue such system. Principal of the Bonds will be payable by the paying agent/registrar (the "Paying Agent/Registrar"), initially UMB Bank, N.A., Austin, Texas, to Cede & Co., as nominee of DTC. Such Book-Entry-Only System will affect the method and timing of payment and the method of transfer relating to the Bonds. DTC will be responsible for distributing the principal and interest payments to the participating members of DTC and the participating members will be responsible for distributing the payments to the owners of beneficial interest in the Bonds. See "BOOK-ENTRY-ONLY SYSTEM" herein. So long as the Bonds are in Book-Entry-Only form, and DTC is the securities depository therefor, Cede & Co., as nominee for DTC, will be the registered owner of the Bonds and references herein to registered owners shall mean Cede & Co. and not the beneficial owners of the Bonds. Proceeds from the sale of the Series 2019A Bonds will be used (i) for the purpose of constructing and improving streets, sidewalks and related drainage improvements within the City, including but not limited to Midcrown Drive, Crestway Drive and Eaglecrest Boulevard; and (ii) to pay costs of issuance of the Series 2019A Bonds. Proceeds from the sale of the Series 2019B Bonds will be used (i) for the purpose of acquiring fire trucks and capital equipment for the fire department; and (ii) to pay costs of issuance of the Series 2019B Bonds. The City reserves the right, at its option, to redeem Bonds having stated maturities on and after February 15, 2029, in whole or in part in principal amounts of $5,000 of or any integral multiple thereof, on February 15, 2028 or any date thereafter, at the par value thereof plus accrued interest to the date of redemption. The Series 2019B Term Bonds, hereinafter defined, are subject to mandatory sinking fund redemption as described herein (see “THE BONDS – Redemption Provisions”).

SEE MATURITY SCHEDULES ON PAGES ii AND iii

The Bonds are offered for delivery when, as and if issued and received by the initial purchaser thereof named below (the “Underwriter”), subject to the approval of legality by the Attorney General of the State of Texas and the approval of certain legal matters by McCall, Parkhurst & Horton L.L.P., San Antonio, Bond Counsel. Certain legal matters will be passed upon for the Underwriter by its counsel, Kassahn & Ortiz, P.C., San Antonio, Texas. The Bonds are expected to be available for initial delivery through the services of DTC on or about June 18, 2019 (the “Delivery Date”).

FROST BANK

ii

SERIES 2019A MATURITY SCHEDULE

BASE CUSIP NO (1): 973900

$6,655,000

CITY OF WINDCREST, TEXAS GENERAL OBLIGATION BONDS, SERIES 2019A

Maturity

Date (02/15)

Principal Amount

Interest Rate

Yield(2)

CUSIP No. Suffix(1)

Maturity

Date (02/15)

Principal Amount

Interest Rate

Yield(2)

CUSIP No. Suffix(1)

2020 $160,000 5.00% 1.64% BM4 2030 $340,000 4.00% 2.19%(3) BX0 2021 220,000 5.00 1.72 BN2 2031 350,000 4.00 2.25(3) BY8 2022 230,000 5.00 1.80 BP7 2032 365,000 4.00 2.31(3) BZ5 2023 240,000 5.00 1.83 BQ5 2033 380,000 4.00 2.38(3) CA9 2024 255,000 5.00 1.86 BR3 2034 395,000 4.00 2.42(3) CB7 2025 270,000 5.00 1.92 BS1 2035 415,000 4.00 2.44(3) CC5 2026 280,000 5.00 1.97 BT9 2036 430,000 4.00 2.48(3) CD3 2027 295,000 5.00 2.00 BU6 2037 445,000 4.00 2.52(3) CE1 2028 310,000 5.00 2.05 BV4 2038 465,000 4.00 2.56(3) CF8 2029 325,000 4.00 2.12(3) BW2 2039 485,000 4.00 2.60(3) CG6

(Interest to accrue from the Delivery Date)

The City reserves the right, at its option, to redeem Series 2019A Bonds having stated maturities on and after February 15, 2029, in whole or in part in principal amounts of $5,000 of or any integral multiple thereof, on February 15, 2028 or any date thereafter, at par value thereof plus accrued interest to the date of redemption (see “THE BONDS – Redemption Provisions”). ________________ (1) CUSIP is a registered trademark of the American Bankers Association. CUSIP data herein is provided by CUSIP Global Services, managed by S&P Global Market Intelligence on behalf of the American Bankers Association. This data is not intended to create a database and does not serve in any way as a substitute for the CUSIP Services. CUSIP numbers are included herein solely for the convenience of the owners of the Bonds. None of the City, the Financial Advisor, or the Underwriter shall be responsible for the selection or correctness of the CUSIP numbers set forth herein.

(2) Yield represents the initial offering yield to the public which has been established by the Underwriter for offers to the public and which may by subsequently changed by the Underwriter and is the sole responsibility of the Underwriter. (3) Yield calculated based on the assumption that the Bonds denoted and sold at a premium will be redeemed on February 15, 2028, the first optional call date for the Bonds, at a redemption price of par plus accrued interest to the date of redemption.

iii

SERIES 2019B MATURITY SCHEDULE

BASE CUSIP NO (1): 973900

$1,810,000

CITY OF WINDCREST, TEXAS GENERAL OBLIGATION BONDS, SERIES 2019B

$930,000 Series 2019B Serial Bonds

Maturity

Date (02/15)

Principal Amount

Interest Rate

Yield(2)

CUSIP No. Suffix(1)

Maturity

Date (02/15)

Principal Amount

Interest Rate

Yield(2)

CUSIP No. Suffix(1)

2020 $ 70,000 5.00% 1.64% CH4 2025 $110,000 5.00% 1.92% CN1 2021 90,000 5.00 1.72 CJ0 2026 115,000 5.00 1.97 CP6 2022 95,000 5.00 1.80 CK7 2027 120,000 5.00 2.00 CQ4 2023 100,000 5.00 1.83 CL5 2028 125,000 5.00 2.05 CR2 2024 105,000 5.00 1.86 CM3

$880,000 Series 2019B Term Bonds

$270,000 4.00% Series 2019B Term Bonds due February 15, 2030; Priced at $114.202 to Yield 2.19%(3); CUSIP No. Suffix(1): CT8

$295,000 4.00% Series 2019B Term Bonds due February 15, 2032; Priced at $113.190 to Yield 2.31%(3); CUSIP No. Suffix(1): CV3

$315,000 4.00% Series 2019B Term Bonds due February 15, 2034; Priced at $112.272 to Yield 2.42%(3); CUSIP No. Suffix(1): CX9

(Interest to accrue from the Delivery Date)

The City reserves the right, at its option, to redeem Series 2019B Bonds having stated maturities on and after February 15, 2030, in whole or in part in principal amounts of $5,000 of or any integral multiple thereof, on February 15, 2028 or any date thereafter, at par value thereof plus accrued interest to the date of redemption. The Series 2019B Term Bonds, hereinafter defined, are subject to mandatory sinking fund redemption as described herein (see “THE BONDS – Redemption Provisions”).

________________ (1) CUSIP is a registered trademark of the American Bankers Association. CUSIP data herein is provided by CUSIP Global Services, managed by S&P Global Market Intelligence on behalf of the American Bankers Association. This data is not intended to create a database and does not serve in any way as a substitute for the CUSIP Services. CUSIP numbers are included herein solely for the convenience of the owners of the Bonds. None of the City, the Financial Advisor, or the Underwriter shall be responsible for the selection or correctness of the CUSIP numbers set forth herein.

(2) Yield represents the initial offering yield to the public which has been established by the Underwriter for offers to the public and which may by subsequently changed by the Underwriter and is the sole responsibility of the Underwriter. (3) Yield calculated based on the assumption that the Bonds denoted and sold at a premium will be redeemed on February 15, 2028, the first optional call date for the Bonds, at a redemption price of par plus accrued interest to the date of redemption.

iv

USE OF INFORMATION IN THE OFFICIAL STATEMENT This Official Statement, which includes the cover page and the appendices hereto, does not constitute an offer to sell or the solicitation of an offer to buy in any jurisdiction to any person to whom it is unlawful to make such offer, solicitation or sale. No dealer, broker, salesperson or other person has been authorized to give information or to make any representation other than those contained in this Official Statement, and, if given or made, such other information or representations must not be relied upon as having been authorized by the City. The information set forth herein has been obtained from the City and other sources believed to be reliable, but such information is not guaranteed as to accuracy or completeness and is not to be construed as the promise or guarantee of the Financial Advisor or the Underwriter. This Official Statement contains, in part, estimates and matters of opinion which are not intended as statements of fact, and no representation is made as to the correctness of such estimates and opinions, or that they will be realized. See “CONTINUING DISCLOSURE OF INFORMATION” for a description of the City’s undertaking to provide certain information on a continuing basis. 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 its 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 information and expressions of opinion contained herein are subject to change without notice, and neither the delivery of the Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the City or other matters described. THIS OFFICIAL STATEMENT IS INTENDED TO REFLECT FACTS AND CIRCUMSTANCES ON THE DATE OF THIS OFFICIAL STATEMENT OR ON SUCH OTHER DATE OR AT SUCH OTHER TIME AS IDENTIFIED HEREIN. NO ASSURANCE CAN BE GIVEN THAT SUCH INFORMATION MAY NOT BE MISLEADING AT A LATER DATE. CONSEQUENTLY, RELIANCE ON THIS OFFICIAL STATEMENT AT TIMES SUBSEQUENT TO THE ISSUANCE OF THE BONDS DESCRIBED HEREIN SHOULD NOT BE MADE ON THE ASSUMPTION THAT ANY SUCH FACTS OR CIRCUMSTANCES ARE UNCHANGED. IN CONNECTION WITH THE OFFERING OF THE BONDS, THE UNDERWRITER MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICES OF THE BONDS AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. THE BONDS ARE EXEMPT FROM REGISTRATION WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION AND CONSEQUENTLY HAVE NOT BEEN REGISTERED THEREWITH. THE REGISTRATION, QUALIFICATION, OR EXEMPTION OF THE BONDS IN ACCORDANCE WITH APPLICABLE SECURITIES LAW PROVISIONS OF THE JURISDICTIONS IN WHICH THESE SECURITIES HAVE BEEN REGISTERED, QUALIFIED, OR EXEMPTED SHOULD NOT BE REGARDED AS A RECOMMENDATION THEREOF. NEITHER THE CITY, THE FINANCIAL ADVISOR, NOR THE UNDERWRITER MAKE ANY REPRESENTATION OR WARRANTY WITH RESPECT TO THE INFORMATION CONTAINED IN THIS OFFICIAL STATEMENT REGARDING THE DEPOSITORY TRUST COMPANY NEW YORK, NEW YORK (“DTC”) OR ITS BOOK-ENTRY-ONLY SYSTEM. [The remainder of this page intentionally left blank]

v

SELECTED DATA FROM THE OFFICIAL STATEMENT The selected data on this page is subject in all respects to the more complete information and 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. No person is authorized to detach this page from this Official Statement or to otherwise use it without the entire Official Statement.

The City The City of Windcrest, Texas (the “City”) was incorporated as a General Law City on September 15, 1959. On November 6, 2007, the voters of the City approved its Home Rule Charter, which was subsequently amended at elections held in 2010, 2015 and 2019. The City is a home-rule municipality and operates under a City Council-Manager form of government. The City is located on within Bexar County, along Interstate Highway 35 and Loop 410, approximately 10 miles from downtown San Antonio. The City’s official 2010 census population was 5,364, a 5.07% increase since 2000.

The Bonds $6,655,000 General Obligation Bonds, Series 2019A, dated May 15, 2019, maturing serially on February 15 in the years 2020 through 2039, inclusive (the “Series 2019A Bonds”).

$1,810,000 General Obligation Bonds, Series 2019B, dated May 15, 2019, maturing serially on February 15 in the years 2020 through 2028, inclusive, and as Series 2019B Term Bonds (defined herein) maturing on February 15 in each of the years 2030, 2032, and 2034 (the “Series 2019B Bonds” and collectively with the Series 2019A Bonds, the “Bonds”).

Interest on the Bonds will be paid semiannually on February 15 and August 15, commencing February 15, 2020, until maturity or prior redemption.

Authority for Issuance The Bonds are being issued pursuant to the Constitution and general laws of the State of Texas, particularly Chapters 1201, 1251, and 1331, Texas Government Code, as amended, an election held in the City on November 6, 2018, and two separate ordinances (collectively, the “Ordinance”) adopted by the City Council of the City on the sale date of the Bonds. Upon the issuance of the Bonds the City will fully utilize the authorization to issue general obligation bonds granted by the voters at the election.

Security for the Bonds The Bonds constitute direct obligations of the City payable from the levy and collection of a direct and continuing ad valorem tax, within the limits prescribed by law, on all taxable property located within the City (see "THE BONDS – Security and Source of Payment" and "THE BONDS – Tax Rate Limitations" herein).

Redemption The City reserves the right, at its sole option, to redeem Bonds having stated maturities on or after February 15, 2029 in whole or in part thereof, in principal amounts of $5,000 or any integral multiple thereof on February 15, 2028, or any date thereafter, at the par value thereof plus accrued interest to the date fixed for redemption. The Series 2019B Term Bonds, hereinafter defined, are subject to mandatory sinking fund redemption as described herein. (See “THE BONDS – Redemption Provisions”.)

Tax Exemption In the opinion of Bond Counsel, the interest on the Bonds is excludable from gross income for federal income tax purposes under existing law, subject to the matters described under the caption "TAX MATTERS" herein (see “TAX MATTERS” and “APPENDIX D – Forms of Legal Opinions of Bond Counsel”).

Qualified Tax-Exempt Obligations The City has designated the Bonds as "Qualified Tax-Exempt Obligations" for financial institutions. See "TAX MATTERS - Qualified Tax-Exempt Obligations" herein.

Use of Proceeds Proceeds from the sale of the Series 2019A Bonds will be used (i) for the purpose of constructing and improving streets, sidewalks and related drainage improvements within the City, including but not limited to Midcrown Drive, Crestway Drive and Eaglecrest Boulevard; and (ii) to pay costs of issuance of the Series 2019A Bonds. Proceeds from the sale of the Series 2019B Bonds will be used (i) for the purpose of acquiring fire trucks and capital equipment for the fire department; and (ii) to pay costs of issuance of the Series 2019B Bonds.

Ratings

The Bonds have been assigned an underlying rating of “AA” by S&P Global Ratings (“S&P”). An explanation of the significance of such rating may be obtained from the rating agency. (See “RATINGS” herein.)

vi

Payment Record The City has never defaulted on the payment of its outstanding debt.

Future Debt Issues The City does not plan to issue additional debt in the next 12 months.

Delivery When issued, anticipated on or about June 18, 2019.

[The remainder of this page intentionally left blank]

vii


8601 Midcrown Dr. Windcrest, Texas 78239

Telephone: (210) 655-0022

ELECTED OFFICIALS

CITY COUNCIL

Name

Term Expires (November)

Occupation

Dan Reese Mayor

2019 Training Coordinator, San Antonio Firefighters

Arthur James “Jim” Flinn* Council Member, Place 1

2019 Building Management Specialist, U.S. Army

Cindy Strzelecki Council Member, Place 2

2020 Nursing Teacher

Greg Turner Council Member, Place 3

2020 Management Analyst, U.S. Army

Frank Archuleta Council Member, Place 4

2019 Realtor, Keller Williams Realty

Joan Pedrotti Council Member, Place 5

2019 Retired, Bexar County Administration

_______ * Council Member Sherillyn Flick resigned on March 26, 2019. Mr. Flinn was appointed to Ms. Flick’s Place by the City Council until a special election in November 2019.

APPOINTED OFFICIALS

Name

Position

Time with the City

Municipal Experience

Rafael Castillo City Manager 8 years 21 years Rachel C. Dominguez City Secretary 1 month 10 years Donald Hakala, CPA Municipal Finance Officer 4 years 4 years

BOND COUNSEL AND ADVISORS

Bond Counsel McCall, Parkhurst & Horton L.L.P.

700 N. St. Mary’s, Suite 1525 San Antonio, Texas 78205

Certified Public Accountants ABIP, P.C.

7330 San Pedro Ave., Suite 901 San Antonio, Texas 78216

Financial Advisor

RBC Capital Markets, LLC 303 Parkway, Suite 220

San Antonio, Texas 78215

viii

TABLE OF CONTENTS

Official Statement: Page

Series 2019A Maturity Schedule iiSeries 2019B Maturity Schedule iiiUse of Information in the Official Statement ivSelected Data From the Official Statement vElected Officials viiTable of Contents viiiIntroductory Statement 1The Bonds 1Sources and Uses of Proceeds 5Book-Entry-Only System 5Default and Remedies 7Tax Information 7Tax Rate Limitations 11Investments 11Pension Plans 13Tax Matters 13Litigation 16Legal Matters 16Ratings 17Financial Advisor 17Underwriting 17Forward-Looking Statements 18Continuing Disclosure of Information 18Authenticity of Financial Information 19Use of Information in Official Statement 19

Financial Information Regarding the City of Windcrest, Texas Appendix AGeneral Information Regarding the City of Windcrest, Texas and Bexar County, Texas Appendix BExcerpts from the City of Windcrest, Texas Annual Financial Report for Fiscal Year Ended September 30, 2018 Appendix CForms of Legal Opinions of Bond Counsel Appendix D

The Cover Page, Table of Contents and Appendices attached hereto are part of this Official Statement

1

OFFICIAL STATEMENT relating to

CITY OF WINDCREST, TEXAS (Bexar County)

$6,655,000 GENERAL OBLIGATION BONDS, SERIES 2019A

$1,810,000 GENERAL OBLIGATION BONDS, SERIES 2019B

INTRODUCTORY STATEMENT

All financial and other information presented in this Official Statement has been provided by the City of Windcrest, Texas (the “City”) from its records, except for information expressly attributed to other sources. The presentation of information, including tables of receipts from taxes and other sources, is intended to show recent historical information, and is not intended to indicate future or continuing trends in the financial position or other affairs of the City. No representation is made that past experience will necessarily continue or be repeated in the future. There follows in this Official Statement a description of the City of Windcrest, Texas General Obligation Bonds, Series 2019A (the “Series 2019A Bonds”), and General Obligation Bonds, Series 2019B (the “Series 2019B Bonds” and collectively with the Series 2019A Bonds, the “Bonds”) and certain information about the City and its finances. All descriptions of documents contained herein are only summaries and are qualified in their entirety by reference to each such document. Copies of such documents may be obtained from the City and, during the offering period, from the Financial Advisor, upon payment of reasonable copying, handling, and delivery charges. Certain capitalized terms used in the Official Statement have meanings assigned to them in the Ordinance (defined herein) authorizing the issuance of the Bonds adopted by the City Council, except as otherwise indicated herein. This Official Statement speaks only as to its date, and the information contained herein is subject to change. A copy of the Official Statement will be submitted to the Municipal Securities Rulemaking Board and will be available through its Electronic Municipal Market Access ("EMMA") system. See "CONTINUING DISCLOSURE OF INFORMATION" for information regarding the EMMA system and for a description of the City’s undertaking to provide certain information on a continuing basis.

THE BONDS GENERAL DESCRIPTION The Bonds will be dated May 15, 2019 (the "Dated Date"), and will be issued in fully-registered form, in denominations of $5,000 or any integral multiple thereof within a maturity. Interest on the Bonds will accrue from the date of initial delivery thereof and interest will be paid semiannually on February 15 and August 15 of each year, commencing February 15, 2020, until stated maturity or prior redemption. Interest on the Bonds will be calculated on the basis of a 360-day year composed of twelve 30-day months. The Bonds will mature on the dates and in the amounts as set forth on page ii. Principal and interest will be paid by UMB Bank, N.A., Austin, Texas (the "Paying Agent/Registrar"). Subject to the requirements associated with the use of the Book-Entry-Only System (see "BOOK-ENTRY-ONLY SYSTEM" herein), interest will be paid by check dated as of the interest payment date and mailed first class, postage paid, on or before each interest payment date by the Paying Agent/Registrar to the registered owners (the "Owners") appearing on the registration books of the Paying Agent/Registrar on the Record Date (herein defined), or by such other method acceptable to the Paying Agent/Registrar, requested by, and at the risk and expense of such Owner. Principal will be paid to the Owners at maturity or redemption upon presentation and surrender of the Bonds to the Paying Agent/Registrar. If the date for the payment of the principal of or interest on the Bonds shall be a Saturday, Sunday, a legal holiday, or a day on which banking institutions in the city where 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 authorize to close; and payment on such date shall have the same force and effect as if made on the original date payment was due. The City will initially use the Book-Entry-Only System of The Depository Trust Company ("DTC"), New York, New York, in regard to the issuance, payment and transfer of the Bonds. Such system will affect the timing and method of payment of the Bonds (see "BOOK-ENTRY-ONLY SYSTEM" herein). PURPOSE Proceeds from the sale of the Series 2019A Bonds will be used (i) for the purpose of constructing and improving streets, sidewalks and related drainage improvements within the City, including but not limited to Midcrown Drive, Crestway Drive and Eaglecrest Boulevard; and (ii) to pay costs of issuance of the Series 2019A Bonds. Proceeds from the sale of the Series 2019B Bonds will be used (i) for the purpose of acquiring fire trucks and capital equipment for the fire department; and (ii) to pay costs of issuance of the Series 2019B Bonds.

2

AUTHORITY FOR ISSUANCE The Bonds are being issued pursuant to the Constitution and general laws of the State of Texas, particularly Chapters 1201, 1251, and 1331, Texas Government Code, as amended, an election held in the City on November 6, 2018, and two separate ordinances (collectively, the “Ordinance”) adopted by the City Council of the City on the sale date of the Bonds. Upon the issuance of the Bonds the City will fully utilize the authorization to issue general obligation bonds granted by the voters at the election. LEGALITY The Bonds are offered when, as and if issued, subject to the approval of legality by the Attorney General of the State of Texas and McCall, Parkhurst & Horton L.L.P., San Antonio, Texas, Bond Counsel (see "LEGAL MATTERS" herein). SECURITY AND SOURCE OF PAYMENT The Bonds constitute direct obligations of the City payable from an annual ad valorem tax levied against all taxable property within the City, within the limits prescribed by law (see "THE BONDS - Tax Rate Limitations" below). TAX RATE LIMITATIONS The City operates under a home-rule charter as authorized by Article XI, Section 5 of the Constitution of the State of Texas (the “State” or “Texas”). The State Constitution and the City Charter provide that the ad valorem taxes levied by the City for general purposes and for the purpose of paying the principal of and interest on the City's indebtedness must not exceed $2.50 for each $100 of assessed valuation of taxable property. There is no constitutional or statutory limitation within the $2.50 rate for interest and sinking fund purposes; however, the Texas Attorney General has adopted an administrative policy that prohibits the issuance of debt by a municipality, such as the City, if its issuance produces debt service requirements exceeding that which can be paid from $1.50 of the foregoing $2.50 maximum tax rate calculated at 90% collection. The issuance of the Bonds does not violate the constitutional restriction, the City Charter provisions, or the Texas Attorney General's administrative policy (see "TAX RATE LIMITATIONS"). REDEMPTION PROVISIONS Optional Redemption. . . The City reserves the right, at its sole option, to redeem Bonds having stated maturities on or after February 15, 2029, in whole or in part thereof, in principal amounts of $5,000 or any integral multiple thereof, on February 15, 2028, 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 are to be redeemed, the City may select the maturities of Bonds to be redeemed. If less than all the Bonds of any 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. If a Bond (or any portion of the principal sum thereof) shall have been called for redemption and notice of such redemption shall have been given, such Bond (or the principal amount thereof to be redeemed) shall become due and payable on such redemption date and interest thereon shall cease to accrue from and after the redemption date, provided funds for the payment of the redemption price and accrued interest thereon are held by the Paying Agent/Registrar on the redemption date. Mandatory Redemption . . . The Series 2019B Bonds stated to mature on February 15 in the years 2030, 2032, and 2034 (the “Series 2019B Term Bonds”) are subject to mandatory sinking fund redemption in part, prior to their stated maturity at the redemption price of par plus accrued interest to the date of redemption on the dates and in the principal amounts as follows:

________ *Stated Maturity The particular Series 2019B Term Bonds to be redeemed shall be selected by the Paying Agent/Registrar by lot or other customary random selection method, on or before February 1 of each year in which Series 2019B Term Bonds are to be mandatorily redeemed. The principal amount of the Series 2019B Term Bonds required to be redeemed pursuant to the operation of such mandatory redemption requirements

Term Bonds due February 15, 2032

Mandatory Redemption Principal Date (02/15) Amount

2031 $ 145,000 2032* 150,000



2029 $ 130,000 2030* 140,000



2033 $ 155,000 2034* 160,000

3

may be reduced, at the option of the City, by the principal amount of any such Series 2019B Term Bond which, prior to the date of the mailing of notice of such mandatory redemption, (i) shall have been acquired by the City and delivered to the Paying Agent/Registrar for cancellation, (ii) shall have been purchased and canceled by the Paying Agent/Registrar at the request of the City, or (iii) shall have been redeemed pursuant to the optional redemption provisions described in the preceding paragraph and not theretofore credited against a mandatory redemption requirement. Notice of Redemption for the Bonds . . . Not less than 30 days prior to a redemption date for the Bonds, the City shall cause a notice of redemption to be sent by United States mail, first class, postage prepaid, to the registered owners of the Bonds to be redeemed, in whole or in part, at the address of the registered owner appearing on the registration books of the Paying Agent/Registrar at the close of business on the business day next preceding the date of mailing such notice. The notice with respect to an optional redemption may state (1) that it is conditioned upon the deposit of moneys, in an amount equal to the amount necessary to effect the redemption, with the Paying Agent/Registrar no later than the redemption date, or (2) that the City retains the right to rescind such notice at any time prior to the scheduled redemption date if the City delivers a certificate of an authorized representative to the Paying Agent/Registrar instructing the Paying Agent/Registrar to rescind the redemption notice, and such notice and optional redemption shall be of no effect if such moneys are not so deposited or if the notice is so rescinded. ANY NOTICE SO MAILED SHALL BE CONCLUSIVELY PRESUMED TO HAVE BEEN DULY GIVEN, WHETHER OR NOT THE REGISTERED OWNER RECEIVES SUCH NOTICE. NOTICE HAVING BEEN SO GIVEN AND FUNDS TO PAY THE REDEMPTION PRICE OF SAID OBLIGATIONS HAVING BEEN PROVIDED, 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. DTC Redemption Provisions . . . The Paying Agent/Registrar and the City, 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 Direct 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 City 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 account of DTC Participants in accordance with its rules or other agreements with DTC Participants and then Direct Participants and Indirect Participants may implement a redemption of such Bonds and such redemption will not be conducted by the City or the Paying Agent/Registrar. Neither the City nor the Paying Agent/Registrar will have any responsibility to DTC Participants, Indirect Participants or 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 “BOOK-ENTRY-ONLY SYSTEM” herein). DEFEASANCE OF BONDS The Ordinance provides for the defeasance of the Bonds when payment of the principal of and premium, if any, on such 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 financial institution permitted by applicable law), in trust (1) money sufficient to make such payment and/or (2) Defeasance Securities (defined herein) that mature as to principal and interest in such amounts and at such times to ensure 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 such Bonds, and thereafter the City 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 (a) direct, noncallable obligations of the United States of America, including obligations that are unconditionally guaranteed by the United States of America, (b) noncallable obligations of an agency or instrumentality of the United States of America, including obligations that are unconditionally guaranteed or insured by the agency or instrumentality and that are rated as to investment quality by a nationally recognized investment rating firm not less than “AAA” or its equivalent, (c) noncallable obligations of a state or an agency or a county, municipality, or other political subdivision of a state that have been refunded and that are rated as to investment quality by a nationally recognized investment rating firm not less than “AAA” or its equivalent and, (d) any other then authorized securities or obligations under applicable State law that may be used to defease obligations such as the Bonds. The City 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 City 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 City 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 that have been defeased to stated maturity is not extinguished if the City: (i) in the proceedings providing for the firm banking and financial arrangements, expressly reserves the right to call the 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.

4

AMENDMENTS In the Ordinance, the City has reserved the right to amend the Ordinance without the consent of any holder for the purpose of amending or supplementing the Ordinance (i) to cure any ambiguity, inconsistency, or formal defect or omission therein, or (ii) in connection with any other change which is not to the prejudice of the owners of the Bonds. The Ordinance further provides that the City may, with the written consent of the owners of a majority in aggregate principal amount of the applicable series of Bonds then outstanding affected thereby, amend, change, modify, or rescind any provisions of the Ordinance; provided that without the consent of all owners affected, no such amendment, change, modification, or rescission shall (i) extend the time or times of payment of the principal of and interest on the Bonds, reduce the principal amount thereof or the rate of interest thereon, (ii) give any preference to any Bond over any other Bond, (iii) extend any waiver of default to subsequent defaults, or (iv) reduce the aggregate principal amount of Bonds required for consent to any such amendment, change, modification, or rescission. RECORD DATE The record date ("Record Date") for determining the person to whom the interest is payable on the Bonds on any interest payment date means the last business day of the month next preceding the date that each interest payment is due. In the event of a non-payment of interest on a scheduled payment date, and for 30 days thereafter, a new record date for such interest payment (a "Special Record Date") will be established by the Paying Agent/Registrar, if and when funds for the payment of such interest have been received from the City. Notice of the Special Record Date and of the scheduled payment date of the past due interest (the "Special Payment Date" which must be 15 days after the Special Record Date) will be sent at least five business days prior to the Special Record Date by United States mail, first class postage prepaid, to the address of each registered owner of a Bond appearing on the registration books of the Paying Agent/Registrar at the close of business on the last business day next preceding the date of mailing of such notice. PAYING AGENT/REGISTRAR The initial Paying Agent/Registrar for the Bonds is UMB Bank, N.A., Austin, Texas. In the Ordinance, the City retains the right to replace the Paying Agent/Registrar for the Bonds. If the Paying Agent/Registrar is replaced by the City, the Paying Agent/Registrar, promptly upon the appointment of its successor, is required to deliver the registration records to the successor Paying Agent/Registrar. Any successor Paying Agent/Registrar selected by the City shall be a commercial bank, trust company or other entity duly qualified and legally authorized to serve as and perform the duties of Paying Agent/Registrar. Upon any change in the Paying Agent/Registrar for the Bonds, the City shall promptly cause a written notice of such change to be sent to each registered owner of the Bonds affected by the change, by United States mail, first class postage prepaid, which notice shall give the address for the new Paying Agent/Registrar. FUTURE REGISTRATION In the event the use of the "Book-Entry-Only System" for the Bonds should be discontinued, printed Bonds will be delivered to the registered owners of the Bonds and thereafter such Bonds may be transferred, registered and assigned on the registration books only upon their presentation and surrender to the Paying Agent/Registrar, and such registration and transfer shall be without expense or service charge to the registered owner except for any tax or other governmental charges required to be paid with respect to such registration and transfer. The Bonds may be assigned by the execution of an assignment form on the Bonds or by other instrument of transfer and assignment acceptable to the Paying Agent/Registrar. New Bonds will be delivered by the Paying Agent/Registrar in lieu of the Bonds being transferred or exchanged at the designated office of the Paying Agent/Registrar, or sent by United States registered mail to the new registered owner at the owner’s request, risk and expense. To the extent possible, new Bonds issued in an exchange or transfer of Bonds will be delivered to the registered owner or assignee of the owner in not more than three (3) business days after the receipt of the Bonds to be canceled in the exchange or transfer and the written instrument of transfer or request for exchange duly executed by the owner or his duly authorized agent, in form satisfactory to the Paying Agent/Registrar. New Bonds registered and delivered in an exchange or transfer shall be in denominations of $5,000 of principal amount for any one maturity or any integral multiple thereof and for a like aggregate principal amount as the Bonds surrendered for exchange or transfer (see “BOOK-ENTRY-ONLY SYSTEM” herein). LIMITATION ON TRANSFER OF BONDS Neither the City nor the Paying Agent/Registrar shall be required to transfer or exchange any Bond (i) 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 (ii) with any Bond or any portion thereof called for redemption prior to maturity, within 45 days of the date fixed for redemption; provided, however, such limitation of transfer shall not be applicable to the registered owner of the uncalled balance of a Bond. MUTILATED, DESTROYED, LOST, OR STOLEN BONDS If any Bond is mutilated, destroyed, stolen or lost, a new Bond in the same principal amount as the Bond so mutilated, destroyed, stolen or lost will be issued. 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 in substitution for a Bond which has been destroyed, stolen or lost, such new Bond will be delivered only (a) upon filing with the City and the Paying Agent/Registrar evidence satisfying to them that such Bond has been destroyed, stolen or lost and proof of the ownership thereof, and (b) upon furnishing the City and the Paying Agent/Registrar with

5

indemnity satisfactory to them. The person requesting the authentication and delivery of a new Bond must pay such expenses as the Paying Agent/Registrar may incur in connection therewith. PAYMENT RECORD The City has never defaulted on the payment of its bonded indebtedness.

SOURCES AND USES OF PROCEEDS The following table shows the estimated sources and uses of the proceeds of the Series 2019A Bonds:

Sources: Principal Amount of the Series 2019A Bonds $6,655,000.00 Original Issue Premium 873,070.25

Total Sources of Funds $7,528,070.25 Uses: Deposit to Construction Fund $7,400,000.00

Costs of Issuance, Underwriter’s Discount and excess proceeds 128,070.25 Total Uses of Funds $7,528,070.25

The following table shows the estimated sources and uses of the proceeds of the Series 2019B Bonds:

Sources: Principal Amount of the Series 2019B Bonds $1,810,000.00 Net Original Issue Premium 250,185.90

Total Sources of Funds $2,060,185.90 Uses: Deposit to Construction Fund $2,000,000.00

Costs of Issuance, Underwriter’s Discount and excess proceeds 60,185.90 Total Uses of Funds $2,060,185.90

BOOK-ENTRY-ONLY SYSTEM

This section describes how ownership of the Bonds is to be transferred and how the principal of, premium, if any, and interest on the Bonds are to be paid to and credited by DTC, while the Bonds are registered in its nominee name. The information in this section concerning DTC and the Book-Entry-Only System has been provided by DTC for use in disclosure documents such as this Official Statement. The City, the Financial Advisor and the Underwriter believe the source of such information to be reliable, but take no responsibility for the accuracy or completeness thereof. The City cannot and does not give any assurance that (1) DTC will distribute payments of debt service on the 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 United States Securities and Exchange Commission (“SEC”), 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 each series of Bonds, each in the aggregate principal amount of such maturity, and will be deposited with DTC. DTC, the world’s largest depository, is a limited-purpose trust company organized under the New York Banking Law, a “banking organization” within the meaning of the New York Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code, and a “clearing agency” registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 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 industries. 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,

6

either directly or indirectly (“Indirect Participants”). DTC has an S&P Global Ratings rating of “AA+”. The DTC Rules applicable to its Participants are on file with the SEC. More information about DTC can be found at www.dtcc.com. 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 Bonds representing their ownership interests in 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, 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 Bonds unless authorized by a Direct Participant in accordance with DTC’s Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the City as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.’s consenting or voting rights to those Direct Participants to whose accounts Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy). All 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 City or Paying Agent/Registrar, on the payment date in accordance with their respective holdings shown on DTC’s records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in “street name,” and will be the responsibility of such Participant and not of DTC nor its nominee, the Paying Agent/Registrar, or the City, subject to any statutory or regulatory requirements as may be in effect from time to time. Payments on the Bonds to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the City or the Paying Agent/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. DTC may discontinue providing its services as depository with respect to the Bonds at any time by giving reasonable notice to the City or the Paying Agent/Registrar. Under such circumstances, in the event that a successor depository is not obtained, the Bonds are required to be printed and delivered. The City may decide to discontinue use of the system of book-entry transfers through DTC (or a successor securities depository). In that event, the Bonds will be printed and delivered. USE OF CERTAIN TERMS IN OTHER SECTIONS OF THIS OFFICIAL STATEMENT

In reading this Official Statement it should be understood that while the Bonds are in the Book-Entry-Only System, references in other sections of this Official Statement to registered owners should be read to include the person for which the Participant acquires an interest in the Bonds, but (i) all rights of ownership must be exercised through DTC and the Book-Entry-Only System, and (ii) except as described above, notices that are to be given to registered owners under the Ordinance, will be given only to DTC. Information concerning DTC and DTC’s book-entry system has been obtained from DTC and is not guaranteed as to accuracy or completeness by, and is not to be construed as a representation by the City, the Financial Advisor or the Underwriter.

7

DEFAULT AND REMEDIES If the City defaults in the payment of principal or interest on the Bonds when due, or if it fails to make payments into any fund or funds created in the Ordinance, or defaults in the observation or performance of any other covenants, conditions, or obligations set for in the Ordinance, the registered owners may seek a writ of mandamus to compel City officials to carry out their legally imposed duties with respect to the Bonds if there is no other available remedy at law to compel performance of the Bonds or the Ordinance and the City’s obligations are not uncertain or disputed. The issuance of a writ of mandamus is controlled by equitable principles, and 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 bondholders upon any failure of the City 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. On June 30, 2006, the Texas Supreme Court ruled in Tooke v. City of Mexia, 197 S.W.3d 325 (Tex. 2006) (“Tooke”) that a waiver of sovereign immunity in a contractual dispute must be provided for by statute in “clear and unambiguous” language. Furthermore, Tooke, and subsequent jurisprudence, held that a municipality is not immune from suit for torts committed in the performance of its proprietary functions, as it is for torts committed in the performance of its governmental functions (the “Proprietary-Governmental Dichotomy”). Governmental functions are those that are enjoined on a municipality by law and are given by the State as a part of the State’s sovereignty, to be exercised by the municipality in the interest of the general public, while proprietary functions are those that a municipality may, in its discretion, perform in the interest of the inhabitants of the municipality. In Wasson Interests, Ltd., v. City of Jacksonville, 489 S.W.3d 427 (Tex. 2016) (“Wasson”) the Texas Supreme Court (the “Court”) addressed whether the distinction between governmental and proprietary acts (as found in tort-based causes of action) applies to breach of contract claims against municipalities. The Court analyzed the rationale behind the Proprietary-Governmental Dichotomy to determine that “a city’s proprietary functions are not done pursuant to the ‘will of the people’” and protecting such municipalities “via the [S]tate’s immunity is not an efficient way to ensure efficient allocation of [S]tate resources”. While the Court recognized that the distinction between governmental and proprietary functions is not clear, the Wasson opinion held that the Proprietary-Governmental Dichotomy applies in contract-claims context. The Court reviewed Wasson again in June 2018 and clarified that to determine whether governmental immunity applies to a breach of contract claim, the proper inquiry is whether the municipality was engaged in a governmental or proprietary function when it entered into the contract, not at the time of the alleged breach. Therefore, in regard to municipal contract cases (as in tort claims), it is incumbent on the courts to determine whether a function was proprietary or governmental based upon the statutory guidance at the time of inception of the contractual relationship. Therefore, in regard to municipal contract cases (as in tort claims), it is incumbent on the courts to determine whether a function was proprietary or governmental based upon the statutory guidance and definitions found in the Texas Civil Practice and Remedies Code. Notwithstanding the foregoing new case law issued by the Court, such sovereign immunity issues have not been adjudicated in relation to bond matters (specifically, in regard to the issuance of municipal debt). Each situation will be prospectively evaluated based on the facts and circumstances surrounding the contract in question to determine if a suit, and subsequently, a judgment, is justiciable against a municipality. If a judgment against the City could be obtained, it could not be enforced by direct levy and execution against the City's property. Further, the registered owners cannot themselves foreclose on property within the City or sell property within the City to enforce the tax lien on taxable property to pay the principal of and interest on the Bonds. Furthermore, the City is eligible to seek relief from its creditors under Chapter 9 of the U.S. Bankruptcy Code (“Chapter 9”). Although Chapter 9 provides for the recognition of a security interest represented by a specifically pledged source of revenues, the pledge of ad valorem taxes in support of a general obligation of a bankrupt entity is not specifically recognized as a security interest under Chapter 9. Chapter 9 also includes an automatic stay provision that would prohibit, without Bankruptcy Court approval, the prosecution of any other legal action by creditors or bondholders of an entity which has sought protection under Chapter 9. Therefore, should the City avail itself of Chapter 9 protection from creditors, the ability to enforce would be subject to the approval of the Bankruptcy Court (which could require that the action be heard in Bankruptcy Court instead of other federal or state court); and the Bankruptcy Code provides for broad discretionary powers of a Bankruptcy Court in administering any proceeding brought before it. The opinion of Bond Counsel will note that all opinions relative to the enforceability of the Ordinance and the Bonds are qualified with respect to the customary rights of debtors relative to their creditors and general principles of equity that permit the exercise of judicial discretion.

TAX INFORMATION SUMMARY OF CERTAIN PROVISIONS OF THE PROPERTY TAX CODE The appraisal of property within the City is the responsibility of the Bexar County Appraisal District (the “Appraisal District”). The Appraisal District is required under Title 1 of the Texas Tax Code, as amended (the “Property Tax Code”), to assess all property within the Appraisal District on the basis of 100% of its market value and is prohibited from applying any assessment ratios. In determining market value of property, different methods of appraisal may be used, including the cost method of appraisal, the income method of appraisal and the market data comparison method of appraisal, and the method considered most appropriate by the chief appraiser is to be used. State law requires the appraised value of a residence homestead to be solely on the property’s value as a residence homestead, regardless of whether residential use is considered to be the highest and best use of the property. State law further limits the appraised value of a residence homestead for a tax year to an amount not to exceed the lesser of (1) the market value of the property, or (2) the sum of (a) 10% of the appraised value of the property for the last year in which the property was appraised for taxation times the number of years since the

8

property was last appraised, plus (b) the appraised value of the property for the last year in which the property was appraised plus (c) the market value of all new improvements to the property. The value placed upon property within the Appraisal District is subject to review by the Appraisal Review Board appointed by the Board of Directors of the Appraisal District. The Appraisal District is required to review the value of property within the Appraisal District every three years. The City may require annual review at its own expense and is entitled to challenge the determination of appraised value of property within the City by petition filed with the Appraisal Review Board. Reference is made to the Property Tax Code for identification of property subject to taxation; property exempt or which may be exempted from taxation, if claimed; the appraisal of property for ad valorem tax purposes; and the procedures and limitations applicable to the levy and collection of ad valorem taxes. Article VIII of the State Constitution (“Article VIII”) and State law provide for certain exemptions from property taxes, the valuation of agricultural and open-space lands at productivity value, and the exemption of certain personal property from ad valorem taxation. Under Section 1-b, Article VIII, and State law, the governing body of a political subdivision, at its option, may grant: (1) An exemption of not less than $3,000 of the market value of the residence homestead of persons 65 years of age or

older and the disabled from all ad valorem taxes thereafter levied by the political subdivision; (2) An exemption of up to 20% of the market value of residence homesteads; minimum exemption $5,000. In the case of residence homestead exemptions granted under Section 1-b, Article VIII, ad valorem taxes may continue to be levied against the value of homesteads exempted where ad valorem taxes have previously been pledged for the payment of debt if cessation of the levy would impair the obligation of the contract by which the debt was created. Under Article VIII, Section 1-b(h) and State law, a city at its option may provide a prohibition on increasing the total ad valorem tax, except for increases attributable to certain improvements, on the residence homestead of a disabled person or person 65 years of age or older above the amount of tax imposed in the later of (1) the year such residence qualified for an exemption based on the disability or age of the owner or (2) the year the city chooses to establish the tax limitation. The above-referenced tax limitation is transferable to (1) a different residence homestead within the city and (2) to a surviving spouse so long as the property was the residence homestead of the surviving spouse when the deceased spouse died and remains the residence homestead of the surviving spouse and the spouse was at least 55 years of age at the time of the death of the individual’s spouse. On the receipt of a petition signed by five percent of the registered voters of the City, the City shall call an election to determine by majority vote whether to establish such a tax limitation. If improvements (other than maintenance or repairs) are made to the property, the value of the improvements is taxed at the then current tax rate, and the total amount of taxes imposed is increased to reflect the new improvements with the new amount of taxes then serving as the ceiling on taxes for the following years. Once established, the tax limitation may not be repealed or rescinded. State law and Section 2, Article VIII of the Texas Constitution, mandate an additional property tax exemption for disabled veterans or the surviving spouse or children of a deceased veteran who died while on active duty in the armed forces; the exemption applies to either real or personal property with the amount of assessed valuation exempted ranging from $5,000 to a maximum of $12,000; provided, however, a disabled veteran who receives from the United States Department of Veterans Affairs or its successor 100 percent disability compensation due to a service-connected disability and a rating of 100 percent disabled or of individual unemployability is entitled to an exemption from taxation of the total appraised value of the veteran’s residence homestead. The surviving spouse of a deceased veteran who had received a disability rating of 100% is entitled to receive a residential homestead exemption equal to the exemption received by the deceased spouse until such surviving spouse remarries. The surviving spouse of a 100% disabled veteran who died prior to the effective date of the homestead exemption is entitled to the exemption, but only if the surviving spouse has not remarried since the death of the disabled veteran. Effective January 1, 2018, a partially disabled veteran or the surviving spouse of a partially disabled veteran is entitled to an exemption from taxation of a percentage of the appraised value of their residence homestead in an amount equal to the partially disabled veteran’s disability rating if the residence homestead was donated by a charitable organization either at no cost or at some cost to the disabled veteran in the form of a cash payment, a mortgage, or both in an aggregate amount that is not more than 50 percent of the good faith estimate of the market value of the residence homestead made by the charitable organization as of the date the donation is made. Also effective January 1, 2018, the surviving spouses of police officers, firefighters, jailers, and other specified first responders who are killed or fatally injured in the line of duty are entitled to an exemption from taxation of the total appraised value of the surviving spouse's residence homestead. Article VIII provides that eligible owners of both agricultural land (Section 1-d) and open-space land (Section 1-d-1), including open-space land devoted to farm or ranch purposes or open-space land devoted to timber production, may elect to have such property appraised for property taxation on the basis of its productive capacity. The same land may not be qualified under both Section 1-d and 1-d-1. Non-business vehicles, such as automobiles or light trucks, are exempt from ad valorem taxation unless the governing body of a political subdivision elects to tax this property. Boats owned as non-business property are exempt from ad valorem taxation.

9

Section 1-j of Article VIII authorizes an ad valorem tax exemption for “freeport property”. Freeport property is defined as goods detained in the State for 175 days or less for the purpose of assembly, storage, manufacturing, processing or fabrication. The exemption became effective for the 1990-91 fiscal year and thereafter unless action to tax such property has been taken prior to April 1, 1990. Decisions to continue to tax may be reversed in the future; decisions to exempt freeport property are not subject to reversal. Article VIII, Section 1-n of the Texas Constitution provides for an exemption from taxation for “goods-in-transit,” which are defined as (i) personal property acquired or imported into the State and transported to another location inside or outside the State, (ii) stored under a contract for bailment in public warehouses not in any way owned or controlled by the owner of the stored goods, and (iii) 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 out-board motor, heavy equipment and manufactured housing inventory. All taxing units, including those that have previously taken official action to tax goods-in-transit, may not tax goods-in-transit in the 2012 tax year or thereafter, unless the governing body of the taxing unit holds a public hearing and takes action on or after October 1, 2011, to provide for the taxation of the goods-in-transit. After holding a public hearing, a taxing unit may take official action prior to January 1 of the first tax year in which the governing body proposes to tax goods-in-transit. After taking such official action, the goods-in-transit remain subject to taxation by the taxing unit until the governing body of the taxing unit rescinds or repeals its previous action to tax goods-in-transit. If, however, a taxing unit took official action prior to October 1, 2011 to tax goods-in-transit and pledged the taxes imposed on the goods-in-transit for the payment of a debt, taxes may continue to be imposed on goods-in-transit until the debt is discharged, if cessation of the imposition of the tax would impair the obligation of the contract by which the debt was created. Article VIII, Section 1-l, provides for the exemption from ad valorem taxation of certain property used to control the pollution of air, water, or land. A person is entitled to an exemption from taxation of all or part of real and personal property that the person owns and that is used wholly or partly as a facility, device or method for the control of air, water or land pollution. The City and the other taxing bodies within its territory may agree to jointly create tax increment financing zones, under which the tax values on property in the zone are “frozen” at the value of the property at the time of creation of the zone. The City also may enter into tax abatement agreements to encourage economic development. Under the agreements, a property owner agrees to construct certain improvements on its property. The City in turn agrees not to levy a tax on all or part of the increased value attributable to the improvements until the expiration of the agreement. The abatement agreement could last for a period of up to 10 years. Cities are also authorized, pursuant to Chapter 380, Texas Local Government Code, as amended ("Chapter 380"), to establish programs to promote state or local economic development and to stimulate business and commercial activity in the city. In accordance with a program established pursuant to Chapter 380, a city may make loans or grants of public funds for economic development purposes, however no obligations secured by ad valorem taxes may be issued for such purposes unless approved by voters of the city. The City has adopted the Municipal Sales and Use Tax Act, Chapter 321, Texas Tax Code, which grants the City the power to impose and levy a 1% Local Sales and Use Tax within the City. The proceeds are credited to the General Fund and are not pledged to the payment of the Bonds. Collections and enforcements are effected through the offices of the Comptroller of Public Accounts of the State, which remits the proceeds of the tax, after deduction of a 2% service fee, to the City monthly. In addition to the 1% sales and use tax described above, the Texas Tax Code provides that certain cities and counties in the State may submit a proposition to the voters to authorize an additional one-half cent sales tax on retail sales of taxable items to reduce its ad valorem taxes. If the additional tax is levied, the effective tax rate and the rollback tax rate calculations are required to be offset by the revenue that will be generated by the sales tax in the current year. Subject to the approval of a majority of the voters in a local option election, state law also provides certain cities the option of assessing a sales and use tax for a variety of other purposes, including economic development, crime prevention, municipal street maintenance and repair, and sports and community venues. See Appendix A for information relating to the City’s taxable assessed valuation, appraised valuation by category, assessed valuation by category, property tax rates, levies and collections and sales tax revenues. 2019 LEGISLATION AFFECTING AD VALOREM TAXATION The 86th Regular Legislative Session convened on January 8, 2019 and concluded on May 27, 2019. The Governor may call one or more additional special sessions, which may last no more than 30 days, and for which the Governor sets the agenda. During the 86th Regular Legislative Session, the Texas Legislature passed Senate Bill 2 ("SB 2"), a law that materially changes ad valorem tax matters, including rollback elections for maintenance tax increases, and other matters which may have an adverse impact on the City's operations and, therefore, the marketability or market value of the Bonds. As of the date of this Official Statement, SB 2 is awaiting signature by the Governor. Pursuant to Article IV, section 14 of the Texas Constitution, the Governor has until June 16, 2019 (the 20th day following final adjournment of the 86th Regular Legislative Session), to

10

sign or veto bills passed during the regular session. If the Governor takes no action by June 16, 2019, the bills passed during the regular sessions will automatically become law regardless of the Governor's signature. SB 2 includes provisions that address the following goals as described by the Texas Senate Research Center: (1) lowering the rollback rate for maintenance and operations taxes from the existing 8.0% for the largest taxing units in the State; (2) requiring a tax ratification election if the rollback rate is exceeded, eliminating the petition requirement in current statute; (3) making information about the tax rates proposed by local taxing units more accessible to property owners and more timely; and (4) making it easier for property owners to express their opinions about proposed tax rates to local elected officials before tax rates are adopted. Specifically, with respect to municipalities such as the City, SB 2, as passed by both the Texas House and Senate, would lower the rollback rate to 3.5%. At this time, the City cannot predict whether SB 2 will be signed into law by the Governor, and if it becomes law, how the City would be affected by the provisions of SB 2. The City cannot predict whether the Governor will call a special session to address other property tax reforms not included in SB 2. DELINQUENT TAX PROVISION Property within the City is assessed as of January 1 of each year. Business inventory may, at the option of the taxpayer, be assessed as of September 1 of each year. Mineral values are assessed on the basis of a twelve-month average. Taxes become due upon receipt of the tax statement, usually October of the same year, and become delinquent on February 1 of the following year. Split payments are not permitted except that taxpayers over 65 and taxpayers qualifying for the disabled person exemption are allowed to pay taxes on their residential homestead in four equal payments before February 1, April 1, June 1 and August 1. Discounts are not allowed. Charges for penalty and interest on the unpaid balance of delinquent taxes are made as follows:

Month Penalty Interest Total February 6% 1% 7% March 7 2 9 April 8 3 11 May 9 4 13 June 10 5 15 July 12 6 18

After July, penalty remains at 12%, and accrues at a rate of one percent (1%) for each month or portion of a month the tax remains unpaid. A delinquent tax continues to incur the penalty as long as the tax remains unpaid, regardless of whether a judgment for the delinquent tax has been rendered. The purpose of imposing such interest is to compensate the taxing unit for revenue lost because of the delinquency. In addition, if an account is delinquent in July, an attorney's collection fee of up to 20% of the amount of delinquent tax penalty, and interest collected may be added to the total tax penalty and interest charge. Under certain circumstances, taxes which become delinquent on the homestead of a taxpayer 65 years old or older incur a penalty of 8% per annum with no additional penalties or interest assessed. In general, property subject to the City’s lien may be sold, in whole or in parcels, pursuant to court order to collect the amounts due. Federal law does not allow for the collection of penalty and interest against an estate in bankruptcy. Federal bankruptcy law provides that an automatic stay of action by creditors and other entities, including governmental units, goes into effect with the filing of any petition in bankruptcy. The automatic stay prevents governmental units from foreclosing on property and prevents liens for post-petition taxes from attaching to property and obtaining secured creditor status unless, in either case, an order lifting the stay is obtained from the bankruptcy court. In many cases post-petition taxes are paid as an administrative expense of the estate in bankruptcy or by order of the bankruptcy court. CITY APPLICATION OF PROPERTY TAX CODE The City grants an exemption to the market value of the residence homestead of persons 65 years of age or older or disabled of $15,000. The City has not granted an additional exemption of 20% of the market value of residence homesteads; minimum exemption of $5,000. The City does grant exemptions to Disabled American Veterans. Ad valorem taxes are not levied by the City against the exempt value of residence homesteads for the payment of debt. The City does not tax nonbusiness personal property; and Bexar County Tax Assessor collects City taxes. The City does not permit split payments except as for set forth above, and discounts are not allowed. The City does not tax freeport property. The City does tax goods-in-transit.

11

The City collects the following sales taxes: 1 cent general sales and use tax; ¼ cent sales tax for the reduction of ad valorem taxes; ¼ cent sales tax for economic development; ¼ cent sales tax for street maintenance and repairs; ¼ cent sales tax for the municipal crime control and prevention district use. The City has granted several tax abatements, either directly or through tax increment participation, that provide for the abatement of ad valorem property taxation on property for the City’s 2018/19 fiscal year. Such abatements resulted in total reductions in taxable valuation in the amounts shown in Table 1 of Appendix A.

TAX RATE LIMITATIONS All taxable property within the City is subject to the assessment, levy and collection by the City of a continuing, direct annual ad valorem tax sufficient to provide for the payment of principal of and interest on all ad valorem tax debt within the limits prescribed by law. Article XI, Section 5 of the Texas Constitution is applicable to the City and limits its maximum ad valorem tax rate to $2.50 per $100 assessed valuation for all City purposes. The City operates under a Home Rule Charter, which adopts the constitutional provisions. Administratively, the Attorney General of the State of Texas will permit allocation of $1.50 of the $2.50 maximum tax rate for all general obligation debt service calculated at the time of issuance based upon 90% tax collections. The issuance of the Bonds does not violate the constitutional restriction, City Charter provision, or the Texas Attorney General's administrative policy. Section 26.05 of the Texas Tax Code provides that the governing body of a taxing unit is required to adopt the annual tax rate for the unit before the later of September 30 or the 60th day after the date the certified appraisal roll is received by the taxing unit, and a failure to adopt a tax rate by such required date will result in the tax rate for the taxing unit for the tax year to be the lower of the effective tax rate calculated for that tax year or the tax rate adopted by the taxing unit for the preceding tax year. Furthermore, Section 26.05 provides the City Council may not adopt a tax rate that exceeds the lower of the rollback tax rate or the effective tax rate until two public hearings are held on the proposed tax rate following a notice of such public hearing (including the requirement that notice be posted on the City's website if the City owns, operates or controls an internet website and public notice be given by television if the City has free access to a television channel) and the City Council has otherwise complied with the legal requirements for the adoption of such tax rate. If the adopted tax rate exceeds the rollback tax rate, the qualified voters of the City by petition may require that an election be held to determine whether or not to reduce the tax rate adopted for the current year to the rollback tax rate. “Effective tax rate” means the rate that will produce last year’s total taxes for maintenance and operations and debt service (adjusted) from this year’s total taxable values (adjusted). “Adjusted” means lost values are not included in the calculation of last year’s taxes and new values are not included in this year’s taxable values. “Rollback tax rate” means the rate that will produce last year’s total taxes for maintenance and operations (adjusted from this year’s values) multiplied by 1.08 plus a rate that will produce this year’s debt service from this year’s values (unadjusted) divided by the anticipated tax collection rate. See “TAX INFORMATION – 2019 Legislation Affecting Ad Valorem Taxation” for information regarding changes to the rollback tax rate recently enacted by the Texas Legislature.

INVESTMENTS

The City invests its investable funds in investments authorized by Texas law in accordance with investment policies approved by the City Council of the City. Both State law and the City's investment policies are subject to change. LEGAL INVESTMENTS Under Texas law, the City is authorized to invest in (1) obligations, including letters of credit, of the United States or its agencies and instrumentalities, including the Federal Home Loan Banks; (2) direct obligations of the State of Texas 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 of Texas 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) interest-bearing banking deposits that are guaranteed or insured by the Federal Deposit Insurance Corporation or the National Credit Union Share Insurance Fund or their respective successors; (8) interest-bearing banking deposits, other than those described by clause (7), if (A) the funds invested in the banking deposits are invested through (i) a broker with a main office or branch office in this State that the City selects from a list the governing body or designated investment committee of the City adopts as required by Section 2256.025; or (ii) a depository institution with a main office or branch office in this state that the City selects; (B) the broker or depository institution as described in clause (8)(A), above, arranges for the deposit of the funds in the banking deposits in one or more federally insured depository institutions, regardless of where located, for the City's account; (C) the full amount of the principal and accrued interest of the banking deposits is insured by the United States or an instrumentality of the United States; and (D) the investing City appoints as the City's custodian of the banking deposits issued for the City's account: (i) the depository institution selected as described by Paragraph (A); (ii) an entity described by Section 2257.041(d) of the Texas Government Code; or (iii) a clearing

12

broker dealer registered with the Securities and Exchange Commission and operating under Securities and Exchange Commission Rule 15c3-3 (17 C.F.R. Section 240.15c3-3); (9) certificates of deposit or share certificates (i) meeting the requirements of the Texas Public Funds Investment Act (Chapter 2256, Texas Government Code) that are issued by or through an institution that either has its main office or a branch in Texas, and are guaranteed or insured by the Federal Deposit Insurance Corporation or the National Credit Union Share Insurance Fund (or their respective successors), or are secured as to principal by obligations described in clauses (1) through (8) or in any other manner and amount provided by law for City deposits or; (ii) where the funds are invested by the City through (I) a broker that has its main office or a branch office in the State of Texas and is selected from a list adopted by the City as required by law or (II) a depository institution that has its main office or a branch office in the State of Texas that is selected by the City; (iii) the broker or the depository institution selected by the City 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 City; (iv) 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 (v) the City appoints the depository institution selected under (ii) above, an entity as described by Section 2257.041(d) of the Texas Government Code, or a clearing broker-dealer registered with the Securities and Exchange Commission and operating pursuant to Securities and Exchange Commission Rule 15c3-3 (17 C.F.R. Section 240.15c3-3) as custodian for the City with respect to the certificates of deposit issued for the account of the City; (10) fully collateralized repurchase agreements that have a defined termination date, are secured by a combination of cash and obligations described in clause (1), and require the securities being purchased by the City or cash held by the City to be pledged to the City, held in the City’s name, and deposited at the time the investment is made with the City or with a third party selected and approved by the City, and are placed through a primary government securities dealer, as defined by the Federal Reserve, or a financial institution doing business in the State; (11) 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 (8) 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 (8) above, clauses (13) through (15) below, or an authorized investment pool; (ii) securities held as collateral under a loan are pledged to the City, held in the City’s name and deposited at the time the investment is made with the City or a third party designated by the City; (iii) a loan made under the program is placed through either a primary government securities dealer (as defined by 5 C.F.R. Section 6801.102(f), as that regulation existed on September 1, 2003) 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; (12) 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; (13) 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; (14) no-load money market mutual funds registered with and regulated by the SEC that provide the City with a prospectus and other information required by the Securities Exchange Act of 1934 or the Investment Company Act of 1940, and that complies with SEC Rule 2a-7; and (15) no-load mutual funds registered with the SEC that have an average weighted maturity of less than two years and either (i) have a duration of one year or more and are invested exclusively in obligations described in this paragraph or (ii) have a duration of less than one year and an investment portfolio limited to investment grade securities, excluding asset-backed securities. 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 below. The City 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 “AAAm” or an equivalent by at least one nationally recognized rating service. The City may also contract with an investment management firm registered under the Investment Advisers Act of 1940 (15 U.S.C. Section 80b-1 et seq.) or with the State Securities Board to provide for the investment and management of its public funds or other funds under its control for a term up to two years, but the City retains ultimate responsibility as fiduciary of its assets. In order to renew or extend such a contract, the City must do so by order, ordinance, or resolution. The City 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 City 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 include a list of authorized investments for City funds, the maximum allowable stated maturity of any individual investment and the maximum average dollar-weighted maturity allowed for pooled fund groups, methods to monitor the market price of investments acquired with public funds, a requirement for settlement of all transactions, except investment pool funds and mutual funds, on a delivery versus payment basis, and procedures to monitor rating changes in investments acquired with public funds and the liquidation of such investments consistent with the Public Funds Investment Act. All City 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:

13

(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, the City's 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 City's investment officers must submit an investment report to the City Council detailing: (1) the investment position of the City, (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 for the reporting period of each pooled fund group, (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 strategies and (b) Texas law. No person may invest City funds without express written authority from the City Council. ADDITIONAL PROVISIONS Under State law, the City is additionally required to: (1) annually review its adopted policies and strategies; (2) adopt by written instrument a rule, order, ordinance or resolution stating that it has reviewed its investment policy and investment strategies and records any changes made to either its investment policy or investment strategy in the respective rule, order, ordinance or resolution; (3) 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 the City Council; (4) require the qualified representative of firms offering to engage in an investment transaction with the City to: (a) receive and review the City's investment policy, (b) acknowledge that reasonable controls and procedures have been implemented to preclude investment transactions conducted between the City and the business organization that are not authorized by the City's investment policy (except to the extent that this authorization (i) is dependent on an analysis of the makeup of the City’s entire portfolio, (ii) requires an interpretation of subjective investment standards, or (iii) relates to investment transactions of the entity that are not made through accounts or other contractual arrangements over which the business organization has accepted discretionary investment authority), and (c) deliver a written statement in a form acceptable to the City and the business organization attesting to these requirements; (5) perform an annual audit of the management controls on investments and adherence to the City's investment policy; (6) provide specific investment training for the Treasurer, chief financial officer and investment officers; (7) restrict reverse repurchase agreements to not more than 90 days and restrict the investment of reverse repurchase agreement funds to no greater than the term of the reverse purchase agreement; (8) restrict the investment in no-load mutual funds in the aggregate to no more than 15% of the City's monthly average fund balance, excluding bond proceeds and reserves and other funds held for debt service; (9) require local government investment pools to conform to the new disclosure, rating, net asset value, yield calculation, and advisory board requirements; and (10) at least annually review, revise and adopt a list of qualified brokers that are authorized to engage in investment transactions with the City.

PENSION PLANS All qualified employees of the City are members of the Texas Municipal Retirement System. Covered employees of the City contribute 6% of gross covered salary. For additional information, refer to the notes to the Comprehensive Annual Financial Report for the fiscal year ended September 30, 2018, in Appendix C herein.

TAX MATTERS OPINIONS On the date of initial delivery of the Bonds, McCall, Parkhurst & Horton L.L.P., San Antonio, Texas, Bond Counsel to the City, will render its opinions 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 D - Forms of Legal Opinions of Bond Counsel" for a copy of the opinions relating to the Bonds that are expected to be delivered by Bond Counsel upon closing and delivery of the Bonds. In rendering its opinions, Bond Counsel will rely upon (a) certain information and representations of the City, including information and representations contained in the City's federal tax certificate, and (b) covenants of the City contained in the documents authorizing the Bonds relating to certain matters, including arbitrage and the use of the proceeds of the Bonds and the property financed therewith. Failure by the City 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 the issuance

14

of the Bonds. The opinions of Bond Counsel are conditioned on compliance by the City 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 opinions represent its legal judgment based upon its review of Existing Law and the reliance on the aforementioned information, representations and covenants. Bond Counsel's opinions are not a guarantee of a result. 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 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 City with respect to the Bonds or the property financed with the proceeds of the Bonds. No assurances can be given as to whether or not the Internal Revenue Service will commence an audit of the Bonds, or as to whether the Internal Revenue Service would agree with the opinions of Bond Counsel. If an audit is commenced, under current procedures the Internal Revenue Service is likely to treat the City as the taxpayer and the holders of the Bonds may have no right to participate in such procedure. No additional interest will be paid upon any determination of taxability. 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. FEDERAL INCOME TAX ACCOUNTING TREATMENT OF ORIGINAL ISSUE DISCOUNT BONDS The initial public offering price to be paid for one or more maturities of the 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 (the "Original Issue Discount Bonds"). 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 the 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 accrual period ending on the date before the semi-annual anniversary dates of the date of the Bonds and ratably within each such six-month accrual 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 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 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. Prospective purchasers should be aware that because the first interest payment will be made more than one year after the issue date of the Bonds, the first payment may be treated as original issue discount. While such treatment of the payment will not adversely affect the excludability of the interest portion of the payment from a holder's gross income, special tax accounting treatment may apply. This tax accounting treatment would cause a portion of the interest payment to be recognized in the taxable year in which the Bonds are purchased, rather than the taxable year in which the payment is received by the holder. This treatment may accelerate any alternative minimum tax

15

consequences for corporations, the recognition of any portion of the payment which is treated as market discount and any other collateral federal income tax consequences for certain holders. Prospective purchasers should consult their tax advisors for advice regarding such consequences. 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 earned income credit, certain S corporations with accumulated earnings and profits and excess passive investment income, 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 RECENTLY ENACTED LIGISLATION OR THE PURCHASE, OWNERSHIP AND DISPOSITION OF TAX-EXEMPT OBLIGATIONS BEFORE DETERMINING WHETHER TO PURCHASE THE BONDS. 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 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 withholding under sections 1471 through 1474 or 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 Section 265(b) of the Code provides, in pertinent part, that interest paid or incurred by 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)(3) of the Code provides an exception to the disallowance of such deduction for any interest expense paid or incurred on indebtedness of 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."

16

The City has designated the Bonds as "qualified tax-exempt obligations" within the meaning of section 265(b)(3) of the Code. In furtherance of that designation, the City has covenanted to take such action that will assure, or to refrain from such action that will 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."

LITIGATION In the opinion of various officials of the City, there is no litigation or other proceeding pending against or, to their knowledge, threatened against the City in any court, agency, or administrative body (either state or federal) wherein an adverse decision would materially adversely affect the financial condition of the City.

LEGAL MATTERS LEGAL OPINIONS The City will furnish the Underwriter with a complete transcript of proceedings incident to the authorization and issuance of the Bonds, including the unqualified approving legal opinions of the Attorney General of the State of Texas to the effect that the initial Bond for each series of the Bonds is a valid and legally binding obligation of the City, and based upon examination of such transcript of proceedings, the legal opinions 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. Though it represents the Financial Advisor and 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 City in the issuance of the Bonds. Except as noted below, Bond Counsel did not take part in the preparation of this Official Statement, and such firm has not assumed any responsibility with respect thereto or undertaken independently to verify any of the information contained herein except that in its capacity as Bond Counsel, McCall, Parkhurst & Horton L.L.P., San Antonio, Texas has reviewed the information under the captions and subcaptions "THE BONDS" (except for the subcaption "Payment Record" as to which no opinion is expressed), “LEGAL MATTERS”, "TAX MATTERS", and "CONTINUING DISCLOSURE OF INFORMATION" (except the information under the subheading "Compliance with Prior Undertakings" as to which no opinion is expressed) in this 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. The customary closing papers, including a certificate to the effect that no litigation of any nature has been filed or is then pending to restrain the issuance and delivery of the Bonds or which would affect the provision made for their payment or security, or in any manner questioning the validity of the Bonds will also be furnished. The legal fees to be paid Bond Counsel for services rendered in connection with the issuance of Bonds are contingent on the sale and delivery of the Bonds. The legal opinions of Bond Counsel will accompany the Bonds deposited with DTC or will be printed on the definitive Bonds in the event of the discontinuance of the Book-Entry-Only System. Certain legal matters will be passed upon for the Underwriter by Kassahn & Ortiz, P.C., San Antonio, Texas, as counsel to the Underwriter. The legal fee of such firm is contingent upon the 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 out of the transaction. LEGAL INVESTMENT AND ELIGIBILITY TO SECURE PUBLIC FUNDS IN TEXAS Section 1201.041 of the Public Security Procedures Act (Chapter 1201, Texas Government Code) provides that the Bonds are negotiable instruments, investment securities governed by Chapter 8, Texas Business and Commerce Code, and are legal and authorized investments for insurance companies, fiduciaries, and trustees, and for the sinking funds of municipalities or other political subdivisions or public agencies of the State of Texas. 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. In accordance with the Public Funds Investment Act, Chapter 2256, Texas Government Code, the Bonds must be rated at least “A” or its equivalent as to investment quality by a national rating agency in order for most municipalities or other political subdivisions or public agencies of the State of Texas to invest in the Bonds, except for purchases of interest and sinking funds of such entities. See “RATINGS” herein. Moreover, municipalities or other political subdivisions or public agencies of the State of Texas that have adopted investment policies and guidelines in accordance with the Public Funds Investment Act may have other, more stringent requirements for purchasing securities, including the Bonds. The Bonds are eligible to secure deposits of any public funds of the State, its agencies, and its political subdivisions, and are legal security for those deposits to the extent of their market value. The City has made no investigation of other laws, rules, regulations or investment criteria which might apply to such institutions or entities or which might limit the suitability of the Bonds for any of the foregoing purposes or limit the authority of such institutions or entities to

17

purchase or invest in the Bonds for such purposes. The City has made no review of laws in other states to determine whether the Bonds are legal investments for various institutions in those states. REGISTRATION AND QUALIFICATION OF BONDS FOR SALE No registration statement relating to the Bonds has been filed with the Securities and Exchange Commission under the Securities Act of 1933, as amended, in reliance upon the exemption provided thereunder by Section 3(a)(2). The Bonds have not been approved or disapproved by the Securities and Exchange Commission, nor has the Securities and Exchange Commission passed upon the accuracy or adequacy of the Official Statement. The Bonds have not been registered or qualified under the Securities Act of Texas in reliance upon various exemptions contained therein; nor have the Bonds been registered or qualified under the securities acts of any other jurisdiction. The City assumes no responsibility for registration or 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 registration or 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 or qualification provisions. It is the obligation of the Underwriter to register or qualify the sale of the Bonds under the securities laws of any jurisdiction which so requires. The City agrees to cooperate, at the Underwriter’s written request and sole expense, in registering or qualifying the Bonds or in obtaining an exemption from registration or qualification in any state where such action is necessary; provided, however, that the City shall not be required to qualify as a foreign corporation or to execute a general or special consent to service of process in any jurisdiction.

RATINGS The Bonds have been assigned a rating of “AA” by S&P Global Ratings (“S&P”). An explanation of the significance of such rating may be obtained from S&P. The rating of the Bonds reflects only the view of S&P at the time the rating is given, and the City makes no representations as to the appropriateness of the rating. There is no assurance that the rating will continue for any given period of time, or that the rating will not be revised downward or withdrawn entirely by S&P, if, in the judgment of S&P, circumstances so warrant. Any such downward revision or withdrawal of the rating may have an adverse effect on the market price of the Bonds.

FINANCIAL ADVISOR RBC Capital Markets, LLC (the “Financial Advisor”) is employed as Financial Advisor to the City. The fees to paid the Financial Advisor for services rendered in connection with the issuance and sale of the Bonds are based on the amount of Bonds actually issued, sold and delivered, and therefore such fees are contingent on the sale and delivery of the Bonds. The Financial Advisor is not obligated to undertake, and has not undertaken to make, an independent verification or to assume responsibility for the accuracy, completeness, or fairness of the information in this Official Statement.

UNDERWRITING The Underwriter has agreed, subject to certain conditions, to purchase the Series 2019A Bonds from the City at a price equal to the initial public offering prices set forth on the inside front cover of this Official Statement, less an underwriting discount of $48,641.20 and no accrued interest. The Underwriter’s obligations are subject to certain conditions precedent. The Underwriter will be obligated to purchase all of the Series 2019A Bonds if any Series 2019A Bonds are purchased. The Series 2019A Bonds to be offered to the public may be offered and sold to certain dealers (including the Underwriter and other dealers depositing the Series 2019A Bonds into investment trusts) at prices lower than the public offering prices of such Series 2019A Bonds, and such public offering prices may be changed, from time to time, by the Underwriter. The Underwriter has agreed, subject to certain conditions, to purchase the Series 2019B Bonds from the City at a price equal to the initial public offering prices set forth on the inside front cover of this Official Statement, less an underwriting discount of $15,567.30 and no accrued interest. The Underwriter’s obligations are subject to certain conditions precedent. The Underwriter will be obligated to purchase all of the Series 2019B Bonds if any Series 2019B Bonds are purchased. The Series 2019B Bonds to be offered to the public may be offered and sold to certain dealers (including the Underwriter and other dealers depositing the Series 2019B Bonds into investment trusts) at prices lower than the public offering prices of such Series 2019B Bonds, and such public offering prices may be changed, from time to time, by the Underwriter. 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 its 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.

18

FORWARD-LOOKING STATEMENTS The statements contained in this Official Statement, and in any other information provided by the City, that are not purely historical, are forward-looking statements, including statements regarding the City’s expectations, hopes, intentions, or strategies regarding the future. Readers should not place undue reliance on forward-looking statements. All forward-looking statements included in this Official Statement are based on information available to the City on the date thereof, and the City assumes no obligation to update any such forward-looking statements. It is important to note that the City’s actual results could differ materially from those in such forward-looking statements. The forward-looking statements herein are necessarily based on various assumptions and estimates and are inherently subject to various risks and uncertainties, including risks and uncertainties relating to the possible invalidity of the underlying assumptions and estimates and possible changes or developments in social, economic, business, industry, market, legal and regulatory circumstances and conditions and actions taken or omitted to be taken by third parties, including customers, suppliers, business partners and competitors, and legislative, judicial and other governmental authorities and officials. Assumptions related to the foregoing involve judgments with respect to, among other things, future economic, competitive, and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond the control of the City. Any of such assumptions could be inaccurate and, therefore, there can be no assurance that the forward-looking statements included in this Official Statement would prove to be accurate.

CONTINUING DISCLOSURE OF INFORMATION In the Ordinance, the City has made the following agreement for the benefit of the holders and beneficial owners of the Bonds. The City is required to observe the agreement for so long as it remains obligated to advance funds to pay the Bonds. Under the agreement, the City will be obligated to provide certain updated financial information and operating data annually, and timely notice of specified events, to the Municipal Securities Rulemaking Board (the “MSRB”). This information will be available free of charge from the MSRB via the Electronic Municipal Market Access (“EMMA”) system at www.emma.msrb.org. ANNUAL REPORTS The offering of the Bonds qualifies for the Rule 15c2-12(d)(2) exemption from Rule 15c2-12(b)(5) regarding the City’s continuing disclosure obligations because the City does not have more than $10,000,000 in aggregate amount of outstanding debt that was offered pursuant to SEC Rule 15c2-12 (the "Rule") and no person is committed by contract or other arrangement with respect to payment of the Bonds. Pursuant to the exemption, the City in the Ordinance has made the following agreement for the benefit of the holders and beneficial owners of the Bonds. The City will provide certain updated financial information and operating data, which is customarily prepared by the City and is publicly available, to the MSRB on an annual basis. Such information to be provided consists of the City's audited financial statements. The City will update and provide this information within 12 months after the end of each fiscal year commencing with the fiscal year ending September 30, 2019. The financial statements of the City will be audited, if the City commissions an audit of such financial statements and the audit is completed within the period during which it must be provided. If the audit of such financial statements is not complete within 12 months after any such fiscal year end, then the City shall file unaudited financial statements within such 12-month period and audited financial statements for the applicable fiscal year, when and if the audit report on such financial statements becomes available. The City may provide updated information in full text or may incorporate by reference certain other publicly available documents, as permitted by the Rule. The City’s current fiscal year end is September 30. Accordingly, it must provide updated information by the last day of September in each following year, unless the City changes its fiscal year. If the City changes its fiscal year, it will notify the MSRB of the change. EVENT NOTICES The City will also provide to the MSRB notices of certain events on a timely basis no later than 10 business days after the event. The City will provide notice 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 City; (13) the consummation of a merger, consolidation, or acquisition involving the City or the sale of all or substantially all of the assets of the City, other than in the ordinary course of business, the entry into of a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms, if material; (14) appointment of a successor or additional trustee or the change of name of a trustee, if material; (15) incurrence of a debt obligation of the City or a derivative instrument entered into by the City in connection with, or pledged as security or a source of payment for, an existing or planned debt obligation, or a guarantee by the City of any such debt obligation or derivative instrument, if material, or agreement to covenants, events of default, remedies, priority rights, or other similar terms of any such debt obligation, derivative instrument, or guarantee of the City, any of which affect security holders, if

19

material; and (16) default, event of acceleration, termination event, modification of terms, or other similar events under the terms of any such debt obligation, derivative instrument, or guarantee of the City, any of which reflect financial difficulties. (Neither the Bonds nor the Ordinance makes any provision for a debt service reserve fund, credit enhancement, or a trustee.) LIMITATIONS AND AMENDMENTS The City has agreed to update information and to provide notices of events only as described above. The City has not agreed to provide other information that may be relevant or material to a complete presentation of its financial results of operations, condition, or prospects or agreed to update any information that is provided, except as described above. The City 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 City 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 City to comply with its agreement. The City 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 City, 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 City (such as nationally recognized bond counsel) determines that the amendment will not materially impair the interests of the registered and beneficial owners of the Bonds. If the City 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 The City has not previously made a continuing disclosure agreement in accordance with the Rule.

AUTHENTICITY OF FINANCIAL INFORMATION The financial data and other information contained herein have been obtained from the City’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.

USE OF INFORMATION IN OFFICIAL STATEMENT No person has been authorized to give any information or to 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 City. This Official Statement does not constitute an offer to sell or solicitation of an offer to buy in any state in which such offer or solicitation is not authorized or in which the person making such offer or solicitation is not qualified to do so or to any person to whom it is unlawful to make such offer of solicitation. The Ordinance approved the form and content of this Official Statement, and any addenda, supplement or amendment thereto, and authorized its further use in the reoffering of the Bonds by the Underwriter in accordance with the provisions of the Rule. CITY OF WINDCREST, TEXAS

Dan Reese Mayor

City of Windcrest, Texas ATTEST:

Rachel C. Dominguez City Secretary

City of Windcrest, Texas

[This page is intentionally left blank.]

APPENDICES The information contained in Appendix A consists of financial and statistical information with respect to the City of Windcrest, Texas. The information contained in Appendix B consists of general information regarding the City of Windcrest, Texas and Bexar County, Texas. The information contained in Appendix C consists of excerpts from the City’s Annual Financial Report for Fiscal Year Ended September 30, 2018 for the City of Windcrest, Texas. The information contained in Appendix D consists of the Forms of Legal Opinions of Bond Counsel.

APPENDIX A

The information in Appendix A contains financial and statistical information with respect to the City of Windcrest, Texas

Table 1 - Valuations, Exemptions and Tax Supported Debt

2018/19 Appraised Market Value of Property 774,720,232$

Less: Exemptions/Reductions at 100% Market Value Over 65 and/or Disabled Homestead 15,100,050$ Disabled or Deceased Veteran's Survivors 41,310,686 Abatements 27,104,950 Freeport 3,059,330 Residential Homestead 10% Per Year Cap 8,041,151

Total Exemptions 94,616,167$

2018/19 Net Taxable Assessed Valuation 680,104,065$

City Funded Debt Payable from Ad Valorem Taxes (as of April 1, 2019) Outstanding Tax Supported Obligations -$ The Series 2019A Bonds 6,655,000 The Series 2019B Bonds 1,810,000

Total General Obligation Bonded Debt 8,465,000$

General Obligation Interest & Sinking Fund Balance on 9/30/2018 -$

1.24%1.09%

Per Capita General Obligation Bonded Debt - $1,443

FINANCIAL INFORMATION REGARDING THE CITY OF WINDCREST, TEXAS

Per Capita 2018/19 Net Taxable Assessed Valuation - $115,940

Ratio of Gross General Obligation Bonded Debt to 2018/19 Net Taxable Assessed Valuation Ratio of Gross General Obligation Bonded Debt to 2018/19 Appraised Market Value

Estimated Population: 5,866

A-1

Table 2 - Five Year History of Taxable Assessed Valuations

Net TaxableTax AssessedYear Valuation(1) Amount ($) Percent

2014 $ 483,859,941 31,499,392 6.96%2015 532,259,754 48,399,813 10.00%2016 584,221,553 51,961,799 9.76%2017 622,286,286 38,064,733 6.52%2018 680,104,065 57,817,779 9.29%

_______

Table 3 - Taxable Assessed Valuation and General Obligation Debt

Net Taxable Gross BondedTax Assessed Bonded DebtYear Valuation Debt Ratios

2014 $ 483,859,941 $ - 0.00%2015 532,259,754 - 0.00%2016 584,221,553 - 0.00%2017 622,286,286 - 0.00%

2018 680,104,065 8,465,000 (1) 1.24%

_______(1) Includes the Bonds.

Change From Preceding Year

(1) Obtained from property tax reports provided by the Bexar County Appraisal District.

A-2

Table 4 - City Sales Tax History

% ofFiscal Year Sales Tax Ad Valorem Equivalent Ad

Ending 9/30 Collections(1) Tax Levy2014 2,716,128$ 144.60% 0.61269 2015 2,835,665 171.91% 0.59801 2016 3,430,481 192.91% 0.65767 2017 3,227,376 179.30% 0.56370 2018 3,428,035 178.80% 0.56212

_______

Table 5 - Tax Rate Distribution

2018/19 2017/18 2016/17 2015/16 2014/15 General Fund 0.3275$ 0.3081$ 0.3081$ 0.3341$ 0.3409$

Interest & Sinking Fund - - - - - 0.3275$ 0.3081$ 0.3081$ 0.3341$ 0.3409$

Table 6 - Tax Rate, Levy and Collection History

Net Taxable Total FiscalTax Assessed Tax Total % Total YearYear Valuation Rate Tax Levy Collections Ended2013 452,360,549$ 0.4152$ 1,878,341$ 99.75% 09/30/20142014 483,859,941 0.3409 1,649,479 100.83% 09/30/20152015 532,259,754 0.3341 1,778,280 98.54% 09/30/20162016 584,221,553 0.3081 1,799,946 98.80% 09/30/20172017 622,286,286 0.3081 1,917,214 98.67% 09/30/20182018 680,104,065 0.3275 2,227,130 (Under Collection) 09/30/2019

Source: City's Audited Financial Statements and Finance Department Records.

Valorem Tax Rate

(1) Includes the 1/4 cent sales tax collection for property tax relief and the 1/4 cent sales taxcollection for street maintenance and repair. Excludes the 1/4 cent sales tax collection for economicdevelopment and the 1/4 cent sales tax collection for the City’s Crime Control and PreventionDistrict.

A-3

2018/19 Taxable Percent Name of Taxpayer Assessed Valuation of TotalEastgroup Properties LP 37,905,070$ 5.57%HCP REIT Operating Company IV LLC 17,586,770 2.59%HD Development Properties LP 10,986,319 1.62%US Auto Force 10,691,610 1.57%Villas of Windcrest LLC 8,300,000 1.22%Cotter, James F 6,310,310 0.93%Buffet Palace Westgate Inc. 5,186,590 0.76%Jones-Tradewinds Apartments LP 5,000,000 0.74%Riverside 193 Inc. 4,788,019 0.70%Terrard Inc. 4,730,000 0.70%

111,484,688$ 16.39%

Table 8 - Estimated Overlapping Debt Statement

Taxing Body Amount As of % Overlap $ OverlapAlamo Community College District 419,445,000$ 04/01/19 0.53% 2,223,059$ Bexar County 1,881,600,000 04/01/19 0.53% 9,972,480 Bexar County Hospital District 840,300,000 04/01/19 0.53% 4,453,590 North East ISD 1,392,040,000 04/01/19 1.64% 22,829,456

Total Net Overlapping Debt 39,478,585$

City of Windcrest(1)8,465,000 04/01/19 100.00% 8,465,000

Total Direct and Overlapping Ad Valorem Tax Debt 47,943,585$

Ratio Direct and Overlapping Debt to Taxable Assessed Valuation 7.05%Ratio Direct and Overlapping Debt to Appraised Market Value 6.19%Per Capita Direct and Overlapping Debt 8,173$

(1) Includes the Bonds.

Business ParkReal Estate DeveloperReal Estate DeveloperAuto Parts Supplier

Apartment ComplexRestaurant

Hotel

Table 7 - Ten Largest Taxpayers

Nature of Property

Business Park

Business Park

Apartment Complex

A-4

Tab

le 9

- O

uts

tan

din

g G

ener

al O

bli

gati

on D

ebt

Ser

vice

Req

uir

emen

ts

Cu

rren

tT

otal

Fis

cal

Ou

tsta

nd

ing

Ou

tsta

nd

ing

Yea

rG

ener

al

Gen

eral

En

ded

Ob

liga

tion

Ob

liga

tion

9/30

Deb

t S

ervi

ceP

rin

cip

alIn

tere

st

Tot

al

Pri

nci

pal

Inte

rest

T

otal

D

ebt

Ser

vice

2019

-$

-

$

20

20-

160,

000

$

330,

527

$

490,

527

$

70,0

00$

92,8

86$

162,

886

$

653,

413

2021

-

22

0,00

0

27

5,30

0

49

5,30

0

90

,000

75,9

50

165,

950

661,

250

2022

-

23

0,00

0

26

4,05

0

49

4,05

0

95

,000

71,3

25

166,

325

660,

375

2023

-

24

0,00

0

25

2,30

0

49

2,30

0

10

0,00

0

66

,450

16

6,45

0

65

8,75

0

20

24-

255,

000

239,

925

494,

925

105,

000

61,3

25

166,

325

661,

250

2025

-

27

0,00

0

22

6,80

0

49

6,80

0

11

0,00

0

55

,950

16

5,95

0

66

2,75

0

20

26-

280,

000

213,

050

493,

050

115,

000

50,3

25

165,

325

658,

375

2027

-

29

5,00

0

19

8,67

5

49

3,67

5

12

0,00

0

44

,450

16

4,45

0

65

8,12

5

20

28-

310,

000

183,

550

493,

550

125,

000

38,3

25

163,

325

656,

875

2029

-

32

5,00

0

16

9,30

0

49

4,30

0

13

0,00

0

32

,600

16

2,60

0

65

6,90

0

20

30-

340,

000

156,

000

496,

000

140,

000

27,2

00

167,

200

663,

200

2031

-

35

0,00

0

14

2,20

0

49

2,20

0

14

5,00

0

21

,500

16

6,50

0

65

8,70

0

20

32-

365,

000

127,

900

492,

900

150,

000

15,6

00

165,

600

658,

500

2033

-

38

0,00

0

11

3,00

0

49

3,00

0

15

5,00

0

9,

500

164,

500

657,

500

2034

-

39

5,00

0

97

,500

492,

500

160,

000

3,20

0

16

3,20

0

65

5,70

0

20

35-

415,

000

81,3

00

49

6,30

0

-

-

-

49

6,30

0

20

36-

430,

000

64,4

00

49

4,40

0

-

-

-

49

4,40

0

20

37-

445,

000

46,9

00

49

1,90

0

-

-

-

49

1,90

0

20

38-

465,

000

28,7

00

49

3,70

0

-

-

-

49

3,70

0

20

39-

485,

000

9,70

0

494,

700

-

-

-

494,

700

TO

TA

L-

$

6,65

5,00

0$

3,22

1,07

7$

9,

876,

077

$

1,81

0,00

0$

66

6,58

6$

2,

476,

586

$

12,3

52,6

63$

Au

thor

ized

bu

t U

nis

sued

Gen

eral

Ob

liga

tion

Bon

ds:

Aft

er th

e is

suan

ce o

f th

e B

onds

, the

Cit

y w

ill h

ave

no v

oter

-aut

hori

zed

but u

niss

ued

gene

ral o

blig

atio

n bo

nds.

Tab

le 1

0 -

Tax

Ad

equ

acy

for

Gen

eral

Ob

liga

tion

s

2018

/19

Tax

able

Ass

esse

d V

alua

tion

680,

104,

065

$ M

axim

um N

et D

ebt S

ervi

ce f

or th

e F

isca

l Yea

r E

ndin

g S

epte

mbe

r 30

, 202

466

3,20

0$

In

dica

ted

Inte

rest

and

Sin

king

Fun

d T

ax R

ate

at 9

8% c

olle

ctio

ns0.

0995

1$

In

dica

ted

Inte

rest

and

Sin

king

Fun

d T

ax L

evy

663,

236

$

Th

e S

erie

s 20

19B

Bon

ds

Th

e S

erie

s 20

19A

Bon

ds

A-5

Table 11 - Other Obligations

Year EndingSeptember 30 Principal Interest Total

2019 125,650$ 13,562$ 139,212$ 2020 131,000 8,212 139,212 2021 90,597 3,094 93,691 2022 46,934 1,234 48,168

394,181$ 26,102$ 420,283$

__________

The City is obligated under various loan agreements for vehicles andequipment. The payments under these obligations are as follows:

Source: The City’s Comprehensive Annual Financial Report.

A-6

Table 12 - General Fund Revenues and Expenditures

09/30/2018 09/30/2017 09/30/2016 09/30/2015 09/30/2014

Fund Balance - Beginning of Year 2,191,598$ 2,451,808$ 2,014,814$ 2,068,467$ 3,110,412$

Revenues:Taxes 5,403,705$ 5,132,076$ 5,279,411$ 4,702,232$ 4,322,221$ Licenses and Permits 236,224 219,442 250,292 192,081 236,410 Intergovernmental - 46,000 23,000 115,334 105,904 Charges for Services 102,440 104,107 118,922 100,716 99,638 Fines and Fees 461,816 602,157 569,629 576,999 585,637 Investment Earnings 20,859 8,820 842 1,908 502 Contributions and Donations - - - - - Other Revenue 101,729 43,998 124,967 90,538 56,825

Total Revenues 6,326,773$ 6,156,600$ 6,367,063$ 5,779,808$ 5,407,137$

Expenditures:General Government 2,606,444$ 2,454,611$ 2,212,328$ 2,164,601$ 1,950,827$ Public Safety 2,739,392 2,542,258 2,448,864 2,465,477 2,320,571 Public Works 977,727 973,143 896,126 873,104 927,150 Animal Control 151,640 141,470 144,119 118,342 98,904 Special Services - - - - - EMS Tech Support - - - - - Debt Service 139,212 91,043 - 12,843 12,876 Capital Outlay 231,574 872,000 368,632 306,653 708,724

Total Expenditures 6,845,989$ 7,074,525$ 6,070,069$ 5,941,020$ 6,019,052$

Excess (Deficit) of RevenuesOver Expenditures (519,216)$ (917,925)$ 296,994$ (161,212)$ (611,915)$

Other Financing Sources (Uses):Transfers In 146,827$ 122,148$ 140,000$ 221,499$ 342,247$ Transfers (Out) - (91,556) - (113,940) (772,277) Special Item 10,000 621,647 - - -

Total Other Financing Sources (Uses): 156,827$ 652,239$ 140,000$ 107,559$ (430,030)$

Prior Period Adjustment -$ 5,476$ -$ -$ -$

Fund Balance - End of Year 1,829,209$ 2,191,598$ 2,451,808$ 2,014,814$ 2,068,467$

Source: The City’s Comprehensive Annual Financial Reports, and the Finance Department of the City of Windcrest.

Type of Investment Amount Percentages

Cash on Hand 1,600$ 0.10%Bank Deposits 1,170,650 75.50%CDs 232,089 14.97%TexPool 146,220 9.43%

1,550,559$ 100.00%

Source: The City’s Comprehensive Annual Financial Report.

Table 13 - Current Investments

Fiscal Year Ended

As of September 30, 2018, the following percentages of the City's investible funds were invested in the following categories of investments:

A-7

APPENDIX B The information contained in Appendix B consists of general information regarding the City of Windcrest, Texas and Bexar

County, Texas

B - 1

GENERAL INFORMATION REGARDING THE CITY OF WINDCREST AND BEXAR COUNTY, TEXAS

General Description of the City Location. The City is located within Bexar County, Texas along Interstate Highway 35 and Loop 410, approximately 10 miles from downtown San Antonio. Government. The City was incorporated in 1959, with the current City Charter being adopted on November 6, 2007, and amended at elections held in 2010, 2015 and 2019. The City is a home-rule municipality and operates under a City Council-Manager form of government. The City is governed by a Mayor and five council members elected by place. All are elected for two-year terms. Population.

Census Report City of Windcrest Bexar County 2010 5,364 1,714,773 2000 5,105 1,392,931 1990 5,331 1,185,394 1980 5,332 988,971 1970 3,371 830,460

Economy. The City’s economy primarily consists of retail establishments, light industrial business, and IT. Rackspace relocated its corporate headquarters to the City of Windcrest in 2008. Utilities. AT&T and Spectrum provide telephone, television, and internet service. San Antonio’s CPS Energy provides electricity and gas. Water and sewer service is provided by the Bexar County Water Control and Improvement District No. 10. Schools. The City lies within the North East Independent School District (the “District”), which provides bus service for the students within the City to Windcrest Elementary, White Middle School and Roosevelt High School. The District is located in Central Texas and comprises a large portion of Bexar County.


B - 2

Bexar County Bexar County (the “County”) was organized in 1836 as one of the original counties of the Republic of Texas and is now the third most populous of the 254 counties in the State of Texas with a 2016 estimated population of 1,928,680. The County has an area of approximately 1,248 square miles and contains 27 incorporated cities within its boundaries. The County is located in south central Texas and is a component of the Metropolitan Statistical Area (“MSA”) of San Antonio. The San Antonio MSA is one of the nation's largest MSAs and the third largest MSA in Texas. The County has a diversified economic base which is composed of financial services, healthcare, agriculture, manufacturing, construction, military, and tourism. Labor Force Statistics State of Texas

2019(a)

2018

2017

2016

2015

Labor Force 14,087,254 13,848,080 13,538,385 13,317,176 13,078,304 Employed 13,538,125 13,314,203 12,960,595 12,702,122 12,494,350 Unemployed 549,129 533,877 577,790 615,054 583,954 Unemployed Rate 3.9% 3.9% 4.3% 4.6% 4.5%

Bexar County

2019(a)

2018

2017

2016

2015

Labor Force 957,012 940,900 924,590 903,856 878,118 Employed 923,973 909,581 892,277 870,020 844,697 Unemployed 33,039 31,319 32,313 33,836 33,421 Unemployed Rate 3.5% 3.3% 3.5% 3.7% 3.8%

___________ (a) As of February 2019.


APPENDIX C The information contained in Appendix C consist of excerpts from the City of Windcrest, Texas Annual Financial Report for

Fiscal Year Ended September 30, 2018

CLIENT FOCUSED. RELATIONSHIP DRIVEN.


FINANCIAL STATEMENTS

For the Fiscal Year Ended September 30, 2018

PREPARED BY: THE FINANCE DEPARTMENT

(This page is intentionally left blank)


TABLE OF CONTENTS

September 30, 2018

PAGE

INTRODUCTORY SECTION

List of Principal Officials i

FINANCIAL SECTION

Independent Auditor’s Report 1-3

Management’s Discussion and Analysis (unaudited) 5-15

Basic Financial Statements:

Government-Wide Financial Statements:

Statement of Net Position 18-19

Statement of Activities 20-21

Fund Financial Statements:

Governmental Funds:

Balance Sheet 22

Reconciliation of Balance Sheet - Governmental Funds to the Statement of Net Position 23

Statement of Revenues, Expenditures and Changes in Fund Balances – Governmental Funds 24

Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances of Governmental Funds to the Statement of Activities 25

Proprietary Fund:

Statement of Net Position 26

Statement of Revenues, Expenses, and Changes in Net Position 27

Statement of Cash Flows 28

Notes to the Financial Statements 31-56


TABLE OF CONTENTS

September 30, 2018

PAGE FINANCIAL SECTION (Continued)

Required Supplementary Information (unaudited):

Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual – General Fund 59 Schedule of Changes in the Net Pension Liability and Texas

Municipal Retirement System (TMRS) Related Ratios 60

Schedule of Contributions –Pension and Notes to Schedule of Contributions 61 Schedule of Changes in the Other Postemployment Benefit (OPEB) Liability and Related Ratios 62 Schedule of Contributions – Other Postemployment Benefits (OPEB) and Notes to Schedule of Contributions 63

Other Supplementary Information: Combining Fund Statements:

Combining Balance Sheet – Non-Major Governmental Funds 68-69

Combining Statement of Revenues, Expenditures, and Changes

in Fund Balances – Nonmajor Governmental Funds 70-71

COMPLIANCE SECTION Independent Auditor’s Report on Internal Control over Financial Reporting

and on Compliance and other matters based on an Audit of Financial Statements performed in accordance with Government Auditing Standards 75-76

Schedule of Findings and Responses 77 Schedule of Prior Findings and Responses 78-79

INTRODUCTORY SECTION


LIST OF PRINCIPAL OFFICIALS

September 30, 2018

i

Mayor Dan Reese

City Council Members Gerd E. Jacobi James McFall Jim Shelton Frank Archuleta Joan Pedrotti

City Manager Rafael Castillo

Attorney Ryan Henry

FINANCIAL SECTION

INDEPENDENT AUDITOR’S REPORT

To the Honorable Mayor and Members of the City Council City of Windcrest, Texas Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities, the business-type activities, the discretely presented component units, each major fund, and the aggregate remaining fund information of the City of Windcrest, Texas (the “City”) as of and for the year ended September 30, 2018, and the related notes to the financial statements, which collectively comprise the City’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 from 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 City’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 City’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.

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 discretely presented component unit, each major fund, and the aggregate remaining fund information of the City of Windcrest, Texas, as of September 30, 2018, and the respective changes in financial position, and where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America. Emphasis of Matter As described in Note 1 to the financial statements, in 2018 the City adopted new accounting guidance, GASB Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions. 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, Budgetary Comparison Information, Schedule of Changes in Net Pension Liability and OPEB Liability and Related Ratios and Schedule of Employer Contributions identified as Required Supplementary Information on the table of contents, 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 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 City's basic financial statements. The combining nonmajor fund financial statements and statistical section are presented for purposes of additional analysis and are not a required part of the basic financial statements. The combining nonmajor fund financial statements 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 basic 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 nonmajor fund financial statements are fairly stated, in all material respects, in relation to the basic financial statements as a whole. The statistical section has 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.

3

Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated May 6, 2019 on our consideration of the City’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 soley 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 effectiveness of the City’s 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 City’s internal control over financial reporting and compliance.

San Antonio, Texas May 6, 2019

5


MANAGEMENT’S DISCUSSION AND ANALYSIS (MD&A)

This section of the City of Windcrest’s comprehensive annual financial report presents an overview, through management’s discussion and analysis (MD&A), of the City’s financial activities and performance during the fiscal year ended September 30, 2018. The MD&A should be read in conjunction with the transmittal letter found in the introductory section of this report and the accompanying financial statements and disclosure following this section. Financial Highlights City of Windcrest The City’s total combined net position was $12,643,949 at September 30, 2018. During the year, the City’s change in net position, before restatement, was a decrease of $355,542 for

governmental activities and a decrease of $5,446 for business-type activities. The City’s general fund reported a year-end fund balance of $1,829,209, a decrease of $362,389 from the

previous year. The unassigned fund balance of $1,817,428 represents 26.55% of general fund operating expenditures, including capital outlay, for the year. The unassigned fund balance represents 27.48% of general fund operating expenditures when capital outlay expenses are not included with total expenditures.

Total revenues for the City increased 5.83% from the previous year and total expenses increased 4.05%.

Economic Development Corporation (Component Unit) The Windcrest Economic Development Corporation (EDC), which was created in 1998 exclusively for the

purpose of promoting economic development in the City of Windcrest, generated sales tax revenue in the amount of $561,339 during the FY 17-18.

In the past the Windcrest EDC has served as a conduit to the revitalization of the Walzem Road area including a boundary change to acquire the old Windsor Park Mall and adjacent land and offerings of incentives that induced Rackspace Managed Hosting, an internet storage company, to relocate its corporate headquarters.

The Windcrest EDC reported net position of $562,324 at September 30, 2018 The Windcrest EDC reported total revenues of $578,739 and total expenses of $231,932 during the year,

thereby increasing the EDC’s net position, before restatement, by $346,807. Crime Control and Prevention District (Blended Component Unit) The Windcrest CCPD, which was created from a ¼ cent sales tax adopted in 2004 for the purpose of crime

control and prevention activities, generated sales tax revenue in the amount of $763,429 during the year. This is the 14th year of operations for the District. The Windcrest CCPD reported total revenues of $770,130 and expenses of $ 619,233 during the year. The Windcrest CCPD reported net position of $1,403,682 at September 30, 2018.

Garbage Fund The City’s garbage utility fund experienced another operating loss this year as total net position decreased

$5,446, leaving a deficit net position of $285,376 in this fund.

6

OVERVIEW OF THE FINANCIAL STATEMENTS

This annual report consists of three parts—management’s discussion and analysis (this section), the basic financial statements, and required supplementary information. The basic financial statements include two kinds of statements that present different views of the City:

The first two statements are government-wide financial statements that provide both long-term and short-term information about the City’s overall financial status.

The remaining statements are fund financial statements that

focus on individual parts of the government, reporting the City’s operations in more detail than the government-wide statements.

The governmental funds statements tell how general

government services were financed in the short term as well as what remains for future spending.

Proprietary fund statements offer short- and long-term

financial information about the activities the government operates like businesses, such as garbage collection.

The financial statements also include notes that explain some of the information in the financial statements and provide more detailed data. The statements are followed by a section of required supplementary information that further explains and supports the information in the financial statements. Figure A-1 shows how the required parts of this annual report are arranged and related to one another.

Figure A-1, Required Components of the City’s Annual Financial Report

7

Figure A-2 summarizes the major features of the City’s financial statements, including the portion of the City government they cover and the types of information they contain. The remainder of this overview section of management’s discussion and analysis explains the structure and contents of each of the statements.

Figure A-2. Major Features of the District's Government-wide and Fund Financial Statements

Fund Statements

Type of Statements Government-wide Governmental Funds Proprietary Funds Entire Agency's government The activities of the district Activities the district

Scope (except fiduciary funds) that are not proprietary or operates similar to private

and the Agency's component fiduciary businesses: self insurance

units

• Statement of net assets • Balance Sheet • Statement of net assets

Required financial • Statement of activities • Statement of revenues, • Statement of revenues,

statements expenditures & changes expenses & changes in

in fund balances fund net assets

•Statement of cash flows

Accounting basis Accrual accounting and Modified accrual Accrual accounting and

and measurement economic resources focus accounting and current economic resources focus

focus financial resources focus

All assets and liabilities, Only assets expected to All assets and liabilities,

Type of both financial and capital, be used up and liabilities both financial and capital,

asset/liabilitiy short-term and long-term that come due during the and short-term and long-

information year or soon thereafter; term

no capital assets included

All revenues and Revenues for which cash All revenues and expenses

Type of expenses during year, is received during or soon during year, regardless of

inflow/outflow regardless of when cash after the end of the year; when cash is received or

information is received or paid expenditures when goods paid

or services have been

received and payment is

due during the year or

soon thereafter

8

GOVERNMENT-WIDE FINANCIAL STATEMENTS The government-wide statements report information about the City as a whole using accounting methods similar to those used by private-sector companies. The statement of net position includes all of the government’s assets, liabilities and deferred inflows/outflows of resources. All of the current year’s revenues and expenses are accounted for in the statement of activities regardless of when cash is received or paid. The two government-wide statements report the City’s net position and how they have changed. Net position—the difference between the City’s assets, liabilities and deferred inflows/outflows of resources—is one way to measure the City’s financial health or position. Over time, increases or decreases in the City’s net position are an indicator of whether its financial health is

improving or deteriorating, respectively. To assess the overall health of the City, one needs to consider additional nonfinancial factors such as

changes in the City’s tax base The government-wide financial statements of the City include the Governmental activities. Most of the City’s basic services are included here, such as public safety, public works and general administration. Property taxes, sales taxes, franchise fees and charges for services finance most of these activities. The government –wide financial statement include also legally separate Economic Development Corporation and legally separate Crime Control and Prevention District for which the City is financially accountable. Fund Financial Statements The fund financial statements provide more detailed information about the City’s most significant funds—not the City as a whole. Funds are accounting devices that the City uses to keep track of specific sources of funding and spending for particular purposes. Some funds are required by State law and by bond covenants. The City Council establishes other funds to control and manage money for particular purposes or to show

that it is properly using certain taxes and grants. The City has the following kinds of funds: Governmental funds—Most of the City’s basic services are included in governmental funds, which focus on (1)

how cash and other financial assets that can readily be converted to cash flow in and out and (2) the balances left at year-end that are available for spending. Consequently, the governmental fund statements provide a detailed short-term view that helps you determine whether there are more or fewer financial resources that can be spent in the near future to finance the City’s programs.

Proprietary funds—Services for which the City charges customers a fee are generally reported in proprietary

funds. Proprietary funds, like the government-wide statements, provide both long-term and short-term financial information.

9

CITY OF WINDCREST’S NET POSITION INFORMATION:

TABLE 1 CITY OF WINDCREST’S NET POSITION

2018 2017 2018 2017 2018 2017

Current Assets:Cash and cash equivalents 1,365,920$ 1,609,797$ 38,419$ 26,494$ 1,404,339$ 1,636,291$ Investments 145,788 232,089 432 - 146,220 232,089 Receivables, net 1,063,721 1,113,946 169,414 79,066 1,233,135 1,193,012 Due from component unit 182,000 182,000 - - 182,000 182,000 Prepaid expense 11,781 7,372 - - 11,781 7,372

Internal balances 284,672 284,672 (284,672) (284,672) - -

Total current assets 3,053,882 3,429,876 (76,407) (179,112) 2,977,475 3,250,764

Non-Current Assets:

Land 347,050 347,050 - - 347,050 347,050

Construction in progress 83,406 - - - 83,406 -

Buildings and improvements 2,437,470 2,437,470 - - 2,437,470 2,437,470

Improvements other than buildings 14,315,910 13,808,160 - - 14,315,910 13,808,160

Furniture and equipment 4,490,819 4,690,526 - - 4,490,819 4,690,526 Less: accumulated depreciation (10,404,539) (9,660,050) - - (10,404,539) (9,660,050)

Total non-current assets 11,270,116 11,623,156 - - 11,270,116 11,623,156

Total assets 14,323,998 15,053,032 (76,407) (179,112) 14,247,591 14,873,920

Deferred outflows of resources 408,816 530,504 - - 408,816 530,504

Current Liabilities:Accounts payable and other

current liabilities 582,992 801,091 208,969 100,818 791,961 901,909

Total current liabilities 582,992 801,091 208,969 100,818 791,961 901,909

Non-Current Liabilities:Due within one year 157,994 156,172 - - 157,994 156,172 Due in more than one year 552,708 1,146,741 - - 552,708 1,146,741

Total non-current liabilities 710,702 1,302,913 - - 710,702 1,302,913

Total liabilities 1,293,694 2,104,004 208,969 100,818 1,502,663 2,204,822

Deferred inflows of resources 509,795 51,442 - - 509,795 51,442

Net Position:Net investment in capital assets 10,875,935 11,623,156 - - 10,875,935 11,623,156 Restricted 444,381 193,226 - - 444,381 193,226 Unrestricted 1,609,009 1,611,708 (285,376) (279,930) 1,323,633 1,331,778

Total net position 12,929,325$ 13,428,090$ (285,376)$ (279,930)$ 12,643,949$ 13,148,160$

GOVERNMENTAL BUSINESS-TYPE

ACTIVITIES ACTIVITIES TOTAL

By far, the largest portion of the City’s net position, $10,875,935 (86%) reflects its investment in capital assets (e.g., land, buildings, machinery, equipment, vehicles, and infrastructure). The City uses these capital assets to provide a variety of services to its citizens. Accordingly, these assets are not available for future spending. A small portion of the City’s net position (3.5%) represents resources that are subject to external restrictions on how they may be used. The remaining balance of $1,323,633 is unrestricted and may be used to meet the City’s ongoing obligations to its citizens and creditors.

10

During the year ended September 30, 2018, the City’s total net position decreased by $360,988 before the restatement. Total revenues were $8,163,854 and expenses were $8,524,842. A significant portion, 76.6% of the City’s revenues came from taxes, 21.8% came from grants and charges for services, while the remaining amount came from investment earnings and other miscellaneous revenues. The following table indicates changes in net position for the governmental and business-type activities for the City as of September 30, 2018, compared to 2017.

TABLE 2 CITY OF WINDCREST’S CHANGES IN NET POSITION

2018 2017 2018 2017 2018 2017

REVENUES:Program Revenues:

Charges for services 770,750$ 1,060,884$ 975,300$ 901,212$ 1,746,050$ 1,962,096$ Operating grants and contributions 29,453 16,524 - - 29,453 16,524

General Revenues:Property taxes 1,895,538 1,778,300 - - 1,895,538 1,778,300 Other taxes 4,356,456 4,009,059 - - 4,356,456 4,009,059 Investment earnings 24,340 9,537 288 79 24,628 9,616 Gain(Loss) on fixed asset disposal 10,000 - - - 10,000 - Other 101,729 43,998 - - 101,729 43,998

Total revenues 7,188,266 6,918,302 975,588 901,291 8,163,854 7,819,593

EXPENSES:General government 3,035,712 2,935,105 - - 3,035,712 2,935,105 Public safety 3,184,789 3,019,638 - - 3,184,789 3,019,638 Public works 1,148,021 1,170,154 - - 1,148,021 1,170,154 Animal control 175,286 171,400 - - 175,286 171,400 Garbage - - 981,034 1,003,812 981,034 1,003,812

Total expenses 7,543,808 7,296,297 981,034 1,003,812 8,524,842 8,300,109

Change in net position (355,542) (377,995) (5,446) (102,521) (360,988) (480,516)

NET POSITION - BEGINNING 13,428,090 13,828,380 (279,930) (177,409) 13,148,160 13,650,971

PRIOR PERIOD ADJUSTMENT (143,223) (22,295) - - (143,223) (22,295)

NET POSITION - BEGINNING, AS RESTATED 13,284,867 13,806,085 (279,930) (177,409) 13,004,937 13,628,676

NET POSITION – ENDING 12,929,325$ 13,428,090$ (285,376)$ (279,930)$ 12,643,949$ 13,148,160$

ACTIVITIES ACTIVITIES TOTAL

GOVERNMENTAL BUSINESS-TYPE

Governmental activities. Key elements of changes in governmental activities from the prior year follow:

Total revenues increased by $269,964, primarily due to an increase in property and sales tax revenues.

Total expenses increased by $247,511, with the largest increase in public safety expenses.

Property tax rates decreased to $0.308092, all of which was allocated to operations. Property taxes levied changed from $1,791,039 in 2017 to $1,914,228 in 2018, an increase of $123,189. As illustrated in the graph below, property taxes are one of the largest sources of revenue and increased by approximately 6.6% from the prior year. The growth in the property taxes is a result of approximately a 6.9% increase in taxable property value.

11

General Revenue by Source – Governmental Activities

The second largest revenue source, as illustrated in the graph below, is charges for services which are made up of fines and fees, intergovernmental revenue, municipal court fines, charges for services and other fees. Total Revenues – Governmental Activities

12

The following table presents the net cost of the City’s largest functions (total costs less program revenues). The net cost is funded by general revenues, which primarily include taxes.

TABLE 3 CITY OF WINDCREST’S NET COST OF SELECT CITY FUNCTIONS

2018 2017General government (2,902,988)$ (2,720,255)$ Public safety (2,735,474) (2,330,339) Public works (930,387) (980,710) Animal control (174,756) (170,963) Garbage utility (5,734) (102,600)

Net Cost of Services

The net expense of all governmental activities this year before general revenues was $6,743,605. This net expense was funded by general revenues of $6,388,063. Expenses in governmental activities increased by approximately 3.4%. General government and public safety were the largest cost centers, as illustrated in the graph below. Public safety grew by approximately 5% as a result of increases in personnel, benefits, and capital replacement. Total Expenses – Governmental Activities

Business-type activities. Revenues of the City’s business-type activities (garbage utility) were $975,588 and expenses were $981,034, yielding an operating loss of $5,446. The net position of the garbage utility ended the year with a deficit of $285,376. The City plans to increase their efforts to collect on delinquent fees, re-evaluate their billing techniques, and consider moving the residential portion of expenses and revenues into the General Fund in order to eliminate the net position deficit. In addition, City Council is planning to increase commercial and residential garbage rates for fiscal year 2019, to help reduce the deficit.

13

Revenues and Expenditures – Business-Type Activities

FINANCIAL ANALYSIS OF THE CITY’S FUNDS

The focus of the City’s governmental funds is to provide an information on near-term inflows, outflows, and balances of spendable resources. This information is useful in assessing the City’s financing requirement. The unassigned fund balance may serve as a useful measure of a government’s net resources available for spending at the end of the fiscal year. City’s governmental fund reported combined ending fund balance of $2.2 million. Of this total, $1.8 million represents unrestricted fund balance, which is available for spending at the government discretion. The remaining fund balance is non-spendable, restricted to indicate that it is not available for new spending because it has already been committed to pay debt service, for capital improvement projects, and other assigned purposes. The general fund is the chief operating fund for the City of Windcrest. At the end of the fiscal year the unrestricted fund balance of the general fund was $1,817,428 million, while total fund balance was $1,829,209, a decrease of $362,389 from the prior year. The capital projects fund has a total fund balance of $164,847, an increase of $164,847 from the previous year. Revenues from governmental fund types totaled $7,224,927, an increase of $366,869 from the prior year. Governmental revenues are comprised of property taxes, sales taxes, mixed beverage tax, hotel occupancy taxes, franchise taxes, licenses, permits, fines, charges for services, grants, interest and miscellaneous revenue. Expenditures totaled $7,346,161, a decrease of $215,841 from the prior year.

GENERAL FUND BUDGETARY HIGHLIGHTS Over the course of the year, the City did not have any budget adjustments. Final actual revenues were $155,244 less than final budgeted revenues. Final actual expenditures were $318,977 less than final budget expenditures.

14

CAPITAL ASSET AND DEBT ADMINISTRATION

Capital Assets. At the end of 2018, the City had invested $11,270,116 in a broad range of capital assets, including land, equipment, buildings, improvements, and vehicles, net of accumulated depreciation. This amount represents a net decrease (including additions, deductions, and depreciation) of $353,040 from last year. More detailed information about the City’s capital assets is presented in Note 2 to the financial statements.

TABLE 4 CITY OF WINDCREST’S CAPITAL ASSETS AT YEAR-END

2018 2017

Land 347,050$ 347,050$ Construction in progress 83,406 - Buildings and improvements 2,437,470 2,437,470 Improvements other than buildings 14,315,910 13,808,160 Furniture and equipment 4,490,819 4,690,526

Total 21,674,655 21,283,206

Total accumulated depreciation (10,404,539) (9,660,050)

Net capital assets 11,270,116$ 11,623,156$

ACTIVITIES

GOVERNMENTAL

Long-term debt. At year end, the primary government had capital leases of $394,181 which are secured by a street sweeper truck and light fixtures and poles.

2018 2017

Capital leases 394,181$ 514,715$ Compensated absences 129,375 142,551

Total debt 523,556$ 657,266$

GOVERNMENTAL

ACTIVITIES

15

ECONOMIC FACTORS AND NEXT YEAR’S BUDGETS AND RATES The following factors were considered in developing the 2018-2019 budget:

Assessed taxable property value increased from $617,133,375 in 2018 to $678,200,040 in 2019, an increase of $61,066,665.

Revenues available for appropriation in the general fund budget for 2018-2019 are $7,255,480. Estimated general fund operating expenditures for the 2018-2019 budget are $7,272,972. The ad valorem tax rate for fiscal year 2018-2019 is budgeted at 0.327469. There are many capital improvements budgeted; the major projects are:

o A new mower for Public Works o Additional personal protective equipment for the Fire Department o Continued renovations of Takas Park restrooms o New phone system o New servers o Resurfacing middle sized pool

CONTACTING THE CITY’S FINANCIAL MANAGEMENT

This financial report is designed to provide a general overview of the City of Windcrest’s finances and to show the City’s accountability to its taxpayers. If you have any questions about this report or need additional information, contact:

Rafael Castillo, Jr. Donald Hakala City Manager Municipal Finance Officer City of Windcrest City of Windcrest 8601 Midcrown 8601 Midcrown Windcrest, Texas 78239 Windcrest, Texas 78239 [email protected] [email protected]

BASIC FINANCIAL STATEMENTS


STATEMENT OF NET POSITION

September 30, 2018

(The accompanying notes are an integral part of these financial statements)

18

Governmental Business-TypeActivities Activities Total

Cash and cash equivalents 1,365,920$ 38,419$ 1,404,339$ Investments 145,788 432 146,220 Receivables (net of allowance for uncollectibles):

Taxes 903,814 - 903,814

Fines 155,050 - 155,050

Accounts 4,857 169,414 174,271

Due from component unit 182,000 - 182,000

Prepaid expense 11,781 - 11,781

Internal balances 284,672 (284,672) -

Capital assets:

Land 347,050 - 347,050

Construction in progress 83,406 - 83,406 Buildings and improvements 2,437,470 - 2,437,470 Improvements other than buildings 14,315,910 - 14,315,910 Furniture and equipment 4,490,819 - 4,490,819 Less: accumulated depreciation (10,404,539) - (10,404,539)

Total capital assets 11,270,116 - 11,270,116

Total assets 14,323,998 (76,407) 14,247,591

Deferred outflows related to pensions 391,850 - 391,850

Deferred outflows related to OPEB 16,966 - 16,966

Total deferred outflows 408,816 - 408,816

Accounts payable 111,377 158,975 270,352 Accrued liabilities 88,554 - 88,554 Due to other governments 377,342 31,259 408,601 Due to primary government - - - Unearned revenue 5,719 18,735 24,454 Noncurrent liabilities:

Due within one year 157,994 - 157,994 Due in more than one year 552,708 - 552,708

Total liabilities 1,293,694 208,969 1,502,663

DEFERRED INFLOWS OF RESOURCESDeferred inflows related to pension 509,795 - 509,795

NET POSITIONNet investment in capital assets 10,875,935 - 10,875,935 Restricted for:

Capital projects 164,847 - 164,847

Other purposes 279,534 - 279,534

Economic Development Corporation - - - Crime Control and Prevention - - -

Unrestricted 1,609,009 (285,376) 1,323,633

Total net position 12,929,325$ (285,376)$ 12,643,949$

ASSETS

LIABILITIES

DEFERRED OUTFLOWS OF RESOURCES

Primary Government

19

Economic Crime Control andDevelopment Corp. Prevention District

546,991$ 560,904$ 110,627 -

122,413 122,233

- -

- -

- -

- -

- -

- -

- - 3,350 -

- - - 1,042,459

(3,350) (240,747)

- 801,712

780,031 1,484,849

2,056 29,364

197 1,291

2,253 30,655

11,336 - - 7,132

55,648 7,398 145,000 37,000

- 1,890 2,174 19,723

214,158 73,143

5,802 38,679

- 801,712

- -

- -

562,324 - - 601,970 - -

562,324$ 1,403,682$

Component Units


STATEMENT OF ACTIVITIES

For the year ended September 30, 2018


20

OperatingCharges for Grants and

Expenses Services Contributions

Primary GovernmentGovernmental Activities:

General government 3,035,712$ 132,724$ -$ Public safety 3,184,789 419,862 29,453 Public works 1,148,021 217,634 - Animal control 175,286 530 -

Total governmental activities 7,543,808 770,750 29,453

Business-Type Activities:Garbage utility 981,034 975,300 -

Total business-type activities 981,034 975,300 -

Total primary government 8,524,842$ 1,746,050$ 29,453$

Component UnitsEconomic Development Corporation 231,932$ -$ -$

Crime Control and Prevention District 619,233 - -

Total component units 851,165$ -$ -$

General RevenuesTaxes:

Property, levied for general purposesSales Hotel occupancyFranchiseMixed beverage

Investment earningsGain (Loss) on fixed asset disposal

MiscellaneousTotal general revenues

Change in net position

Net position - beginning

Prior period adjustment

Net position - beginning, as restated

Net position - ending

Functions/Programs

Program Revenues


21

Economic Crime ControlGovernmental Business-type Development and Prevention

Activities Activities Total Corporation District

(2,902,988)$ -$ (2,902,988)$ (2,735,474) - (2,735,474)

(930,387) - (930,387) (174,756) - (174,756)

(6,743,605) - (6,743,605)

- (5,734) (5,734)

- (5,734) (5,734)

(6,743,605) (5,734) (6,749,339)

(231,932)$ -$

- (619,233)

(231,932) (619,233)

1,895,538 - 1,895,538 - - 3,428,035 - 3,428,035 571,339 763,429

260,194 - 260,194 - - 637,332 - 637,332 - - 30,895 - 30,895 - - 24,340 288 24,628 4,900 6,701 10,000 - 10,000 - -

101,729 - 101,729 2,500 - 6,388,063 288 6,388,351 578,739 770,130

(355,542) (5,446) (360,988) 346,807 150,897

13,428,090 (279,930) 13,650,971 217,214 1,263,753

(143,223) - (143,223) (1,697) (10,968)

13,284,867 (279,930) 13,004,937 215,517 1,252,785

12,929,325$ (285,376)$ 12,643,949$ 562,324$ 1,403,682$

Net (Expense) Revenue and Changes in Net PositionPrimary Government Component Units


BALANCE SHEET – GOVERNMENTAL FUNDS

September 30, 2018


22

Nonmajor TotalGeneral Capital Governmental GovernmentalFund Projects Fund Funds Funds

ASSETS Cash and cash equivalents 630,823$ 419,843$ 315,254$ 1,365,920$ Investments 123,018 18,824 3,946 145,788Receivables (net of allowance for uncollectibles):

Taxes 660,192 122,323 25,639 808,154 Fines 155,050 - - 155,050 Franchise fees 95,660 - - 95,660 Other 4,857 - - 4,857

Due from component units 182,000 - - 182,000 Due from other funds 686,247 - - 686,247

Prepaid items 11,781 - - 11,781

Total assets 2,549,628$ 560,990$ 344,839$ 3,455,457$

LIABILITIESAccounts payable 108,882$ 2,495$ -$ 111,377$ Accrued liabilities 88,554 - - 88,554 Due to other funds - 338,000 63,575 401,575 Due to other governments 321,694 55,648 - 377,342

Unearned revenues 5,719 - - 5,719 Total liabilities 524,849 396,143 63,575 984,567

DEFERRED INFLOWS OF RESOURCES

Deferred revenue - propery taxes 40,521 - 1,730 42,251 Deferred revenue - fines 155,049 - - 155,049

Total deferred inflows of resources 195,570 - 1,730 197,300

FUND BALANCES

Nonspendable 11,781 - - 11,781 Restricted

Capital projects - 164,847 - 164,847 Other purposes - - 279,534 279,534

Unrestricted 1,817,428 - - 1,817,428

Total fund balances 1,829,209 164,847 279,534 2,273,590

Total liabilities, deferred inflows of resources and fund balances 2,549,628$ 560,990$ 344,839$ 3,455,457$


RECONCILIATION OF BALANCE SHEET- GOVERNMENTAL FUNDS TO THE STATEMENT OF NET POSITION

September 30, 2018


23

Total fund balances - governmental funds balance sheet $ 2,273,590

Amounts reported for governmental activities in the statement of net position are different because:

Capital assets, net of accumulated depreciation, used in governmental funds are not financial resources and, therefore, are not reported in the funds. 11,270,116

Long-term liabilities, including capital leases, net pension liability, and compensated absences, are not due and payable in the current period and therefore, are not reported in the funds. (710,702)

Deferred outflows of resources and deferred inflows of resources related to pensionsare not reported in the funds. (100,979)

Other long-term assets are not available to pay for current period expenditures and, therefore, are reported as unavailable revenue in the funds. 197,300

Net position of governmental activities - statement of net position 12,929,325$


STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - GOVERNMENTAL FUNDS



24

Nonmajor Total

General Capital Governmental Governmental

Fund Projects Fund Funds Funds

REVENUES

Taxes:

Property 1,891,708$ -$ -$ 1,891,708$

Sales 2,856,696 571,339 - 3,428,035

Franchise 624,406 - 12,926 637,332

Hotel occupancy - - 260,194 260,194

Mixed beverage 30,895 - - 30,895

Fines and fees 461,816 - 20,761 482,577

Licenses and permits 236,224 - - 236,224

Intergovernmental - - 6,238 6,238

Charges for services 102,440 - - 102,440

Donations - - 23,215 23,215

Investment earnings 20,859 430 3,051 24,340 Miscellaneous 101,729 - - 101,729

Total revenues 6,326,773 571,769 326,385 7,224,927

EXPENDITURES

Current:

General government 2,606,444 - - 2,606,444

Public safety 2,739,392 - 29,250 2,768,642

Public works 977,727 15,058 - 992,785

Animal control 151,640 - - 151,640

Debt service:

Principal 120,534 - - 120,534

Interest 18,678 - - 18,678 Capital outlay 231,574 391,864 64,000 687,438

Total expenditures 6,845,989 406,922 93,250 7,346,161

Excess (deficiency) of revenues over (under) expenditures (519,216) 164,847 233,135 (121,234)

OTHER FINANCING SOURCES (USES)

Other sources - sale of fixed assets 10,000 - - 10,000 Transfers in 146,827 - - 146,827 Transfers out - - (146,827) (146,827)

Total other financing sources 156,827 - (146,827) 10,000

Net change in fund balances (uses) (362,389) 164,847 86,308 (111,234)

Fund balance - beginning 2,191,598 - 193,226 2,384,824

Fund balance - ending 1,829,209$ 164,847$ 279,534$ 2,273,590$


RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS

TO THE STATEMENT OF ACTIVITIES



25

Net change in fund balances - total governmental funds $ (111,234)

Amounts reported for governmental activities in the statement of activites are different because:

Governmental funds report all capital outlays as expenditures. However, in the statement ofactivities the cost of those assets is allocated over their estimated useful lives and reported asdepreciation expense. This reconciling item represents the amount by which capital outlaysexceeded depreciation in the current period. (353,040)

Some expenses reported in the statement of activities do not require the use of curent financialresources and, therefore, are not reported as expenditures in governmental funds. Thisreconciling item reflects the net of such expenses. 21,683

Long-term liabilities are not due and payable in the current period and, therefore, are notreported in the funds These consisted of the following:

Payments on capital leases 120,534 Compensated absences 13,176

Some revenues in the statement of activities do not provide current financial resources andare not included in the governmental funds. (46,661)

Change in net position of governmental activities - statement of activities (355,542)$


STATEMENT OF NET POSITION PROPRIETARY FUND

September 30, 2018


26

Business-TypeActivities

Garbage Utility

ASSETS

Current assets:

Cash 38,419$

Investments 432Accounts receivable (net allowances for uncollectibles) 169,414

Total current assets 208,265

LIABILITIES

Current liabilities:Accounts payable 158,975Due to other funds 284,672Due to other governments 31,259Unearned revenues 18,735

Total liabilities 493,641

NET POSITION

Unrestricted (285,376) Total net position (285,376)

Total liabilities and net position 208,265$


STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET POSITION - PROPRIETARY FUND



27


Garbage Utility

OPERATING REVENUES:

Charges for services:Commercial customer charges 496,067$ Residential customer charges 461,381 Miscellaneous 17,852

Total operating revenues 975,300

OPERATING EXPENSES:

Contracted services - commercial sanitation 443,980 Contracted services - residential sanitation 501,324 Bad debt expense 17,265 Other 18,465

Total operating expenses 981,034

Operating income (loss) (5,734)

NONOPERATING REVENUES:

Investment earnings 288 Total nonoperating revenues 288

Change in net position (5,446)

Total net position - beginning (279,930)

Total net position - ending (285,376)$


STATEMENT OF CASH FLOWS PROPRIETARY FUND



28


Garbage Utility

CASH FLOWS FROM OPERATING ACTIVITIES

Receipts from customers 881,650$ Payments to suppliers and service providers (869,581)

Net cash provided by (used in) operating activities 12,069

CASH FLOWS FROM INVESTING ACTIVITIESInterest on investments 288

Net increase (decrease) in cash and cash equivalents 12,357

Cash and cash equivalents at beginning of year 26,494

Cash and cash equivalents at end of year 38,851$

RECONCILIATION OF OPERATING INCOME (LOSS) TO NET CASH

PROVIDED BY (USED IN) OPERATING ACTIVITIES

Operating income (loss) (5,734)$ Adjustments to reconcile operating income (loss) to net cash provided by operating activities:

Decrease (increase) in receivables (90,348) Increase (decrease) in accounts payable 83,058 Increase (decrease) in due to other governments 28,395 Increase (decrease) in due to other governments (3,302)

Net cash provided by (used in) operating activities 12,069$

NOTES TO BASIC FINANCIAL STATEMENTS


NOTES TO FINANCIAL STATEMENTS

September 30, 2018

31

(1) Summary of significant accounting policies

The accounting and reporting policies of the City of Windcrest, Texas (the City) relating to the funds included in the accompanying basic financial statements conform to accounting principles generally accepted in the United States of America (“GAAP”) applicable to state and local governments. Generally accepted accounting principles for local governments include the principles prescribed by the Governmental Accounting Standards Board (“GASB”) and the American Institute of Certified Public Accountants in the publication entitled State and Local Governments – Auditing and Accounting Guide. The more significant accounting policies of the City are described below: Description of government-wide 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 nonfiduciary activities of the primary government and its component units. Governmental activities, which normally are supported by taxes, intergovernmental revenues and other nonexchange transactions, are reported separately from business-type activities, which rely to a significant extent on fees and charges to external customers for support. Likewise, the primary government is reported separately from certain legally separate component units for which the primary government is financially accountable.

Reporting entity

The City is governed by an elected mayor and five-member governing council. The accompanying financial statements present the City and its component units, entities for which the City is considered to be financially accountable. Blended component units are, in substance, part of the primary government’s operations, even though they are legally separate entities. Thus, blended component units are appropriately presented as funds of the primary government. The City has no blended component units. Each discretely presented component unit is reported in a separate column in the government-wide financial statements to emphasize that it is legally separate from the City.

Discretely presented component units

The Windcrest Economic Development Corporation (the Corporation) was created pursuant to state law on September 25, 1998, to act on behalf of the City for the promotion, development and enhancement of economic development within the City. The Corporation is governed by seven members who are appointed by and serve at the pleasure of the City Council. The Corporation is fiscally dependent on the City because it receives predominantly all of its revenue from the City’s sales taxes. Separate financial statements for the Corporation can be obtained by contacting the Corporation located at 8601 Midcrown Drive, Windcrest, Texas 76522 The Windcrest Crime Control and Prevention District (the District) was created for the promotion, development, and enhancement of crime control and prevention within the City on September 20, 2004. The District was established under state law to allow the collection of $0.0025 sales tax revenue to supplement the Windcrest Police Department. The District is governed by six members who are appointed by and serve at the pleasure of the City Council.



September 30, 2018

32

(1) Summary of significant accounting policies (continued) Discretely presented component units (continued)

The District is fiscally dependent on the City because it receives predominantly all of its revenue from the City’s sales taxes. Separate financial statements for the District are not issued.

Basis of presentation – government-wide financial statements

While separate government-wide and fund financial statements are presented, they are interrelated. The governmental activities column incorporates data from governmental funds, while business-type activities incorporate data from the City’s enterprise fund. Separate financial statements are provided for governmental funds and proprietary funds. As discussed earlier, the City has two discretely presented component units that are shown in separate columns in the government-wide financial statements. As a general rule, the effect of interfund activity has been eliminated from the government-wide financial statements. Exceptions to this general rule are eliminations of charges that would distort the direct costs and program revenues reported for the various functions concerned.

Basis of presentation – fund financial statements

The focus of governmental fund measurement (in the fund financial statements) is upon determination of financial position and changes in financial position (sources, uses, and balances of financial resources) rather than upon net income. The following is a description of the major governmental funds of the City: The City reports the following major governmental funds: The general fund is the general operating fund of the City. It is used to account for all financial resources except those required to be accounted for in another fund. All general tax revenues and other receipts that are not restricted by law or contractual agreement to some other fund are accounted for in this fund. General operating expenditures, fixed charges and capital improvements costs that are not paid through other funds are paid from this fund. The capital projects fund accounts for the acquisition or construction of infrastructure and building projects being financed from bond proceeds, grants, transfers from other funds, and sales tax. The City reports the following major enterprise fund: The garbage utility fund accounts for the provision of residential and commercial garbage collection services.



September 30, 2018

33

(1) Summary of significant accounting policies (continued)

Basis of presentation – fund financial statements (continued)

During the course of operations, the City has activity between funds for various purposes. Any residual balances outstanding at year-end are reported as due from/to other funds. While these balances are reported in fund financial statements, certain eliminations are made in the preparation of government-wide financial statements. Balances between the funds included in governmental activities are eliminated so that only the net amount is included as internal balances in the governmental activities column. Further, certain activity occurs during the year involving transfers of resources between funds. In fund financial statements these amounts are reported at gross amounts as transfers in/out. While reported in fund financial statements, certain eliminations are made in the preparation of the government-wide financial statements. Transfers between the funds included in governmental activities are eliminated so that only the net amount is included as transfers in the governmental activities column.

Measurement focus and basis of accounting

The accounting and financial reporting treatment is determined by the applicable measurement focus and basis of accounting. Measurement focus indicates the type of resources being measured such as current financial resources or economic resources. The basis of accounting indicates the timing of transactions or events for recognition in the financial statements. The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Property taxes are recognized as revenues in the year for which they are levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met. The governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose the City considers revenues to be available if they are collected within 60 days of the end of the current fiscal period. Expenditures generally are recorded as soon as 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. Capital asset acquisitions are reported as expenditures in governmental funds. Issuance of long-term debt and acquisitions under capital leases are reported as other financing sources. Property taxes, 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. Expenditure-driven grants are recognized as revenue when the qualifying expenditures have been incurred and all other eligibility requirements have been met, and the amount is received during the period or within the availability period for this revenue source (within 60 days of year-end). All other revenue items are considered to be measurable and available only when cash is received by the City. The proprietary fund is reported using the economic resources measurement focus and the accrual basis of accounting.



September 30, 2018

34


Budgetary information

Annual budgets are adopted on a basis consistent with generally accepted accounting principles for the general fund. During the year the General Fund’s budget exceeded actual expenses by $318,977.

Assets, liabilities, deferred outflows and inflows of resources, net position/fund balance and revenues Cash and cash equivalents. Cash and cash equivalents are considered to be cash on hand, demand

deposits, savings accounts, and investments with original maturities of three (3) months or less from the date of acquisition.

Investments. At September 30, 2018, the City’s investments are comprised of local government investment pools and certificates of deposit.

State statutes authorize the City to invest in (a) obligations of the United States or its agencies and instrumentalities; (b) direct obligations of the State of Texas or its agencies; (c) other obligations, the principal and interest of which are unconditionally guaranteed or insured by the State of Texas or the United States; (d) 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; (e) certificates of deposit by state and national banks domiciled in this state that are (i) guaranteed or insured by the Federal Deposit Insurance Corporation, or its successor; or, (ii) secured by obligations that are described by (a) – (d). Statutes also allow investing in local government investment pools organized and rated in accordance with the Interlocal Cooperation Act, whose assets consist exclusively of the obligations of the United States or its agencies and instrumentalities and repurchase assessments involving those same obligations.

The method used to value investments for financial reporting purposes is dependent upon the type of investment and the time remaining to maturity. Investments are valued at amortized cost if they have a remaining maturity at the time of purchase of one (1) year or less and the fair value of the investments is not affected by the impairment or the credit standing of the issuer or by other factors. All other investments are valued at fair value.

The City’s investments in pools are reported at the net asset value per share (which approximates fair value) even though it is calculated using the amortized cost method. The pool is not registered with the Securities and Exchange Commission (“SEC”) as an investment company, but nevertheless has a policy that will, and does, operate in a manner consistent with the SEC’s Rule 2a7 of the Investment Company Act of 1940.

Local government investment pools in Texas are established under the government of the Interlocal Cooperation Act, Chapter 791 of the Texas Government Code, and are subject to the provisions of the Act, Chapter 2256 of the Texas Government Code. In addition, to other provisions of the Act designed to promote liquidity and safety of principal, the Act requires pools to (1) have an advisory board composed of participants in the pool and other persons who do not have a business relationship with the pool and are qualified to advise the pool; (2) maintain a continuous rating of no lower than AAA or AAAm or an equivalent rating by at least one nationally recognized rating service; and (3) maintain the market value of its underlying investment portfolio within one half of one percent of the value of its shares.



September 30, 2018

35


Assets, liabilities, deferred outflows and inflows of resources, net position/fund balance and revenues (continued)

Investments (continued)

The fair value framework uses a hierarchy that prioritizes the inputs to the valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are described below:

Level 1 - Inputs to the valuation methodology are unadjusted quoted prices for identical assets in active markets that the City has the ability to access.

Level 2 - Inputs to the valuation methodology include:

Quoted prices for similar assets in active markets. Quoted prices for identical or similar assets in inactive markets. Inputs other than quoted prices that are observable for the asset. Inputs that are derived principally from or corroborated by

observable market data by correlation or other means.

If the asset has a specified (contractual) term, the Level 2 input must be observable for substantially the full term of the asset or liability.

Level 3 - Inputs to the valuation methodology are unobservable and significant to the fair value measurement.

The asset's fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs.

The valuation methodologies described above may produce a fair value calculation that may not be indicative of net realizable values or reflective of future fair values. Furthermore, while the City believes its valuation methods are appropriate and consistent with those of other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.

Property taxes. Property taxes are levied by October 1, on the assessed value listed as of the prior January 1 for all real and business personal property located in the City in conformity with the Texas Property Code. Taxes are due upon receipt of the tax bill and are delinquent if not paid before February 1 of the year following the year in which imposed. On January 31 of each year, a tax lien attaches to property to secure payments of all taxes, penalties, and interest ultimately imposed.



September 30, 2018

36


Assets, liabilities, deferred outflows and inflows of resources, net position/fund balance and revenues (continued)

Property taxes (continued)

Tax collections are, at times, prorated between the general fund and debt service fund based on the tax rate approved by the City Council. For the year ended September 30, 2018, the general fund rate was $0.308092. There was no levy for the debt service fund. Allowances for uncollectible tax receivables are based on historical collections.

Prepaid items. Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items in both the government-wide and the fund financial statements. The cost of prepaid items is recorded as expenditures/expenses when consumed rather than when purchased.

Capital assets. Capital assets, which include property, plant, equipment and infrastructure assets (e.g.

roads, bridges, sidewalks and similar items), are reported in the applicable governmental or business-type activities column in the government-wide financial statements. Capital assets are defined as assets with an initial, individual cost of $2,500 or more and an estimated useful life of three (3) years or more. Such assets are recorded at historical cost as purchased or constructed. Donated capital assets are recorded at acquisition cost, which is the price that would be paid to acquire an asset with equivalent service potential at the donation date. The cost of normal maintenance and repairs that do not add value to the asset or materially extend asset lives are not capitalized. When assets are retired or otherwise disposed of, the related costs or other recorded amounts are removed.

Infrastructure assets acquired prior to October 1, 2003, are not reported in the financial statements. Land and construction in progress are not depreciated. The other property, plant, equipment and infrastructure are depreciated using the straight-line method over the following estimated useful lives:

Assets Years Building improvements 5 – 50 Improvements other than buildings 20 - 50 Vehicles 3 - 10 Furniture and equipment 3 - 10

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.



September 30, 2018

37

(1) Summary of significant accounting policies (continued) Assets, liabilities, deferred outflows and inflows of resources, net position/fund balance and revenues (continued)

Other postemployment benefits. During the fiscal year 2018, the City changed accounting policies

related to the other postemployment benefit (OPEB) liabilities, deferred outflows of resources, and deferred inflows of resources in the statement of net position by adopting GASB Statement No. 75, “Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions”. Accordingly, the effect of the accounting change is reported in the statement of net position and statement of activities for the current year. The OPEB liabilities have been determined using the flow of economic resources measurement focus and full accrual basis of accounting. This includes, for purposes of measuring the OPEB liabilities, deferred outflows of resources, and deferred inflows of resources related to the OPEB liabilities and OPEB expense.

Deferred outflows/inflows of resources. In addition to assets, the statement of financial position and/or

balance sheet will sometimes report a separate section for deferred outflows of resources. This separate financial statement element, deferred outflows of resources, represents a consumption of net position that applies to a future period(s) and so will not be recognized as an outflow of resources (expense/expenditure) until then. In addition to liabilities, the statement of financial position will sometimes report a separate section for deferred inflows of resources. This separate financial statement element, deferred inflows of resources, represents an acquisition of net position that applies to a future period(s) and so will not be recognized as an inflow of resources (revenue) until that time.

Compensated absences. The City permits full-time employees to accumulate earned but unused

vacation pay benefits up to certain limits. Upon resignation, the employee may receive pay for any unused accrued vacation provided the employee gives two weeks written notice of the resignation and is not subject to discharge for misconduct. Liabilities for compensated absences are recognized in the fund financial statement to the extent the liabilities have matured (i.e. are due for payment) and recognized as long term liability in the government-wide financial statements. The general fund generally liquidates the liability when it matures. Unused sick leave may be accumulated to certain limits; however, in the event of termination, reimbursement to the employee is not made for accumulated sick leave; therefore, a liability does not exist at September 30, 2018.

Long-term obligations. In the government-wide financial statements, and proprietary funds in the fund financial statements, long-term debt and other long-term obligations are reported as liabilities in the applicable statements of net position. Bonds premiums and discounts are deferred and amortized over the life of the bonds using the straight-line method. Bonds payable are reported net of the applicable bond premium or discount. Bond issuance costs are expensed in the year they are incurred.

In the fund financial statements, governmental fund types recognize bond premiums and discounts during the current period. The face amount of debt issued is reported as other financing sources on premiums received on sources while discounts on debt issuances are reported as other financing uses.



September 30, 2018

38


Net position flow assumptions. Sometimes the City will fund outlays for a particular purpose from both

restricted (e.g., restricted bond or grant proceeds) and unrestricted resources. In order to calculate the amounts to report as restricted – net position and unrestricted – net position in the government-wide and proprietary fund financial statements, a flow assumption must be made about the order in which the resources are considered to be applied.

It is the City’s policy to consider restricted – net position to have been depleted before unrestricted – net position is applied.

Fund balance classification 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 City 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 court resolution of the City Council, the City’s highest level of decision making authority. These amounts cannot be used for any other purpose unless the City 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.

Assigned: This classification includes amounts that are constrained by the City’s intent to be used

for a specific purpose but are neither restricted nor committed. This intent can be expressed by the City Council.

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.



September 30, 2018

39


Fund balance classifications (continued)

When an expenditure is incurred for purposes for which both restricted and unrestricted fund balance is available, the City considers restricted funds to have been spent first. When an expenditure is incurred for which committed, assigned, or unassigned fund balances are available, the City considers amounts to have been spent first out of committed funds, then assigned funds, and finally unassigned. Amounts in the assigned fund balance classification are intended to be used by the City for specific purposes but do not meet the criteria to be classified as committed. The City Council has authorized the Finance Director or City Manager to assign fund balance. The City Council may also assign fund balance as it does when appropriating fund balance to cover a gap between estimated revenue and appropriations in the subsequent year’s appropriated budget. Unlike commitments, assignments generally only exist temporarily. In other words, an additional action does not normally need to be taken for the removal of an assignment. Conversely, as discussed above, an additional action is essential to either remove or revise a commitment. The City’s policy is to maintain an unassigned fund balance in the general fund equal to 25% of the current year’s operating expenditures. At September 30, 2018, the general fund’s unassigned fund balance is $1,817,428, which equals 27.48% of the current year’s operating expenditures.

Program revenues. Amounts reported as 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. All taxes, including those dedicated for specific purposes, and other internally dedicated resources are reported as general revenues rather than as program revenues.

Sales and use taxes. The City’s sales and use tax is currently levied at 2.00%. The sales and use tax is

allocated as follows: 1.25% to the City’s general fund; .25% to the City’s capital projects fund; .25% to the District; and .25% to the Corporation.

Use of estimates. The preparation of financial statements in conformity with GAAP requires

management to make estimates and assumptions that affect certain report amounts and disclosures. Accordingly, actual results could differ from those estimates.



September 30, 2018

40

(2) Detailed notes

Deposits and investments

Custodial credit risk – deposits. Custodial credit risk is the risk that in the event of a bank failure, the City’s deposits may not be returned to it. Deposits are exposed to custodial credit risk if they are not insured or collateralized. As of September 30, 2018, the City’s cash on hand was $1,600. The carrying amount of deposits were $1,170,650 and the bank balances were $1,397,109. The City’s deposits are not exposed to custodial credit risk since all deposits are fully collateralized less an amount insured by the FDIC. The two component units’ combined cash carrying balance was $1,218,522 with a bank balance of 1,107,895 which is fully collateralized less an amount insured by the FDIC. The amount in Lone Star Investment Pool was $110,627 at September 30, 2018.

As of September 30, 2018, the cash and investments are comprised of the following:

PERCENT

OF TOTAL

INVESTMENT TYPE FAIR VALUE INVESTMENTS

The City of WindcrestCash on hand 1,600$ Bank deposits 1,170,650 Certificates of deposit 232,089 0.52 47.5%TexPool (Local Government Investment Pool) 146,220 0.06 29.9%

1,550,559$

Portfolio weighted average maturity 0.34

Discretely presented component unit Windcrest Economic Development Corporation

Bank deposits 546,991$ Lone star 110,627 0.08 22.6%

657,618$

Portfolio weighted average maturity 0.28

Discretely presented component unit Windcrest Crime Control and Prevention

Bank deposits 560,904$

Total cash and investments 2,769,081$

WEIGHTED AVERAGE

MATURITY (YEARS)

Interest rate risk: In accordance with its investment policy, the City manages its exposure to declines in fair values by limiting the weighted average maturity of its operating investment portfolio to no more than six months.



September 30, 2018

41

(2) Detailed notes (continued)

Deposits and investments (continued) Credit risk: Generally, credit risk 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. However, investments issued or explicitly guaranteed by the United States government and investments in mutual funds, external investment pools, and other pooled investments are excluded from this requirement. Standard & Poors has designated Texpool with a credit rating of AAAm and Lone Star with a credit rating of AAA. The City’s certificates of deposit are not exposed to custodial credit risk since all certificates of deposit are fully insured by FDIC. Concentration of credit risk: Disclosure is required for investments in any one issuer that represent 5% or more of total investment. However, investments issued or explicitly guaranteed by the United States government and investments in mutual funds, external investment pools, and other pooled investments are excluded from this requirement. The City’s investments in external investment pools and certificates of deposit exceeding 5% are excluded from this requirement. Investment valuation: The City categorizes the fair value measurements of its investments based on the hierarchy established by generally accepted accounting principles. The hierarchy is based on the valuation inputs used to measure the fair value of assets. The City's investments for all funds at fiscal year-end are listed below at fair value, net of accruals. The City has the following recurring fair value measurements as of September 30, 2018:

Discretely Presented

The City of Component Unit

Windcrest WEDC

Investments measured at amortized cost:

Certificates of deposit 232,089$ -$

External investment pools - TexPool 146,220 -

Total investments at amortized cost 378,309 -

Investments measured at net asset value:

External investment pools - Lonestar - 110,627

Total investments at net asset value - 110,627

Total investments 378,309$ 110,627$

September 30, 2018



September 30, 2018

42


Deposits and investments (continued)

Accounts receivable

Accounts receivable at September 30, 2018 were as follows:

Nonmajor DiscretelyGeneral Capital Projects Governmental Garbage Utility Presented

Fund Fund Funds Fund Component Units Total

Receivables:Taxes 667,343$ 122,323$ 25,945$ -$ 244,646$ 1,060,257$ Fines 620,198 - - - - 620,198 Utilities - - - 346,616 - 346,616 Franchise fees 95,660 - - - - 95,660 Miscellaneous 4,857 - - - - 4,857 Component units 182,000 - - - - 182,000

Gross receivables 1,570,058 122,323 25,945 346,616 244,646 2,309,588 Less:

Allowance for uncollectibles (472,299) - (306) (177,202) - (649,807)

Net total receivables 1,097,759$ 122,323$ 25,639$ 169,414$ 244,646$ 1,659,781$

Due to/from other funds

At September 30, 2018, the due to/from other fund balances represent temporary short-term loans to other funds as a result of overdraws of pooled cash. All balances are expected to be paid back within one year. The following is a summary of interfund receivables at year end:

Due from Due toOther Funds Other Funds

General fundCapital projects fund 338,000$ -$ Nonmajor governmental funds 63,575 - Garbage utility fund 284,672 -

Capital projects fundGeneral fund - 338,000

Nonmajor governmental fundsGeneral fund - 63,575

Garbage utility fundGeneral fund - 284,672

686,247$ 686,247$



September 30, 2018

43

(2) Detailed notes (continued) Capital assets

Capital asset activity for the primary government for the year ended September 30, 2018, was as follows:

October 1, 2017 Additions Deletions September 30, 2018

Governmental ActivitiesCapital assets not being depreciated:

Land 347,050$ -$ -$ 347,050$ Construction in progress - 83,406 - 83,406

Total capital assets not being depreciated 347,050 83,406 - 430,456

Capital assets being depreciated:Buildings and improvements 2,437,470 - - 2,437,470 Improvements other than buildings 13,808,160 507,750 - 14,315,910

Furniture and equipment 4,690,526 96,282 (295,989) 4,490,819

Total capital assets being depreciated 20,936,156 604,032 (295,989) 21,244,199

Less accumulated depreciation:

Buildings and improvements (1,728,245) (49,210) - (1,777,455)

Improvements other than buildings (4,033,422) (854,175) - (4,887,597)

Furniture and equipment (3,898,383) (137,093) 295,989 (3,739,487)

Total accumulated depreciation (9,660,050) (1,040,478) 295,989 (10,404,539)

Total capital assets being depreciated, net 11,276,106 (436,446) - 10,839,660

Governmental activities capital assets, net 11,623,156$ (353,040)$ -$ 11,270,116$

Depreciation expense was charged to functions/programs of the primary government as follows: General government 415,974$ Public safety 441,860 Public works 158,443 Animal control 24,201

Total depreciation expense 1,040,478$



September 30, 2018

44


Capital assets (continued) Discretely presented component units

Capital asset activity for the year ended September 30, 2018 was as follows:

October 1, 2017 Additions Deletions September 30, 2018

Discretely presented component units:

Capital assets being depreciated:

Buildings and improvements 3,350$ -$ -$ 3,350$

Furniture and equipment 818,656 280,946 (57,143) 1,042,459

Total capital assets being depreciated 822,006 280,946 (57,143) 1,045,809

Less: accumulated depreciation:

Buildings and improvements (2,736) (614) - (3,350)

Furniture and equipment (148,394) (149,496) 57,143 (240,747)

Total accumulated depreciation (151,130) (150,110) 57,143 (244,097)

Total capital assets being depreciated, net 670,876 130,836 - 801,712

Discretely presented component units

capital assets, net 670,876$ 130,836$ -$ 801,712$

Depreciation expense was charged to functions/programs of the discretely presented component units as follows: Public safety 149,496$

Economic development 614

Total depreciation expense 150,110$



September 30, 2018

45

(2) Detailed notes (continued) Transfers

Transfers during the year ended September 30, 2018, were:

Transfers In Transfers OutGeneral fund:

Nonmajor funds 146,827$ -$ Capital projects fund - -

Capital projects fund:General Fund - -

Nonmajor funds:General fund - 146,827

Total 146,827$ 146,827$ The primary purpose of this interfund transfer was to support expenditures of one fund in accordance with the authority established for the transferring fund.

Long-term liabilities

Capital leases payable The City leases certain property and equipment that includes vehicles and infrastructure assets. The City entered into a capital lease during the current fiscal year to purchase a street sweeper. The City will make five annual payments of $48,169 for a total of $240,844 which represents the present cost of the street sweeper ($222,949) plus a 2.63% annual interest rate on the outstanding balance ($17,895). The City also entered into another capital lease for light fixtures and poles. The City will make 60 monthly payments of $7,587 for a total of $455,216 which represents the cost of the lights fixtures and poles ($398,698) plus an implied annual interest rate of 5.00% ($56,518). The effective interest rate on capital leases range from 2.63% - 5.00%. Annual debt service requirements to maturity for the capital leases is as follows:

Year Ending Total

September 30, Principal Interest Requirements

2019 125,650$ 13,562$ 139,212$ 2020 131,000 8,212 139,212 2021 90,597 3,094 93,691 2022 46,934 1,234 48,168

Total 394,181$ 26,102$ 420,283$



September 30, 2018

46


Changes in long-term debt

Balance Issued / Retired / Balance Due Within

October 1, 2017 Additions Payments Septemer 30, 2018 One Year

Governmental Activities

Compensated absences 142,551$ 22,462$ (35,638)$ 129,375$ 32,344$

Capital lease - street sweeper 222,949 - (42,305) 180,644 43,418

Capital lease - light and fixtures 291,766 - (78,229) 213,537 82,232

Net pension liability 645,647 - (633,363) 12,284 -

OPEB liability 147,710 27,152 - 174,862 -

Total 1,450,623$ 49,614$ (789,535)$ 710,702$ 157,994$

Discretely presented component units:

Compensated absences 9,263$ 611$ (2,316)$ 7,558$ 1,890$

Net pension liability 42,380 - (41,324) 1,056 -

OPEB liability 12,960 2,382 - 15,342 -

Total 64,603$ 2,993$ (43,640)$ 23,956$ 1,890$

(The remainder of this page intentionally left blank)



September 30, 2018

47


Defined benefit pension plan

Plan description

The City of Windcrest participates as one of 883 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 publically 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 total employee’s deposits and interest. Plan provisions for the City are as follows: Employee deposit rate 6% Matching ratio (City to employee) 1.5 to 1 Years required for vesting 5 Service retirement eligibility (expressed as age/years of service) 60 / 5, 0 / 20 Updated service credit 100% Repeating, Transfers Annuity increase (to retirees) 70% of CPI Repeating Employees covered by benefit terms At the December 31, 2017 valuation and measurement date, the following employees were covered by the benefit terms: Inactive employees or beneficiaries receiving benefits 45 Inactive employees entitled to but not yet receiving benefits 58 Active employees 66 Total 169



September 30, 2018

48

(2) Detailed notes (continued) Defined benefit pension plan (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 employer’s 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 City were required to contribute 6% of their annual gross earnings during the fiscal year. The contribution rates for the City were 7.25% and 7.77% in calendar years 2018 and 2017, respectively. The City’s contributions to TMRS for the fiscal year ended September 30, 2018 and 2017, were $244,326 and $261,364, respectively, and were equal to the required contributions. Net pension liability The City’s net pension liability (NPL) was measured as of December 31, 2017, 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, 2017 actuarial valuation was determined using the following actuarial assumptions: Inflation 2.5% per year Overall payroll growth 3.0% per year Investment rate of return 6.75%, net of pension plan investment and

administrative expenses, 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 Tables with Blue Collar Adjustment, 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 Combined Healthy Mortality Tables with Blue Collar Adjustment are used with male rates multiplied by 109% and female rates multiplied by 103% with a 3-year set-forward for both males and females. In addition, a 3% minimum mortality rate is applied to reflect the impairment for younger members who become disabled. The rates are projected on a fully generational basis by scale BB to account for future mortality improvements subject to the 3% floor.



September 30, 2018

49


Defined benefit pension plan (continued)

The actuarial assumptions were developed primarily from the actuarial investigation of the experience of TMRS over the four year period from December 31, 2010 through December 31, 2014. They were adopted in 2015 and first used in the December 31, 2015 actuarial valuation. The post-retirement mortality assumption for healthy annuitants and Annuity Purchase Rates (APRs) are based on the Mortality Experience Investigation Study covering 2009 through 2011 and dated December 31, 2013. In conjunction with these changes first used in the December 31, 2013 valuation, the System adopted the Entry Age Normal (EAN) actuarial cost method and a one-time change to the amortization policy. 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.

The long-term expected rate of return on pension plan investments 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 weighing the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. In determining their best estimate of a recommended investment return assumption under the various alternative asset allocation portfolios, GRS focused on the area between (1) arithmetic mean (aggressive) without an adjustment for time (conservative) and (2) geometric mean (conservative) with an adjustment for time (aggressive). The target allocation and best estimates of real rates of return for each major asset class are summarized in the following table:

Target Long-Term Expected Real

Asset Class Allocation Rate of Return (Arithmetic)Domestic Equity 17.50% 4.55%International Equity 17.50% 6.35%Core Fixed Income 10.00% 1.00%Non-Core Fixed Income 20.00% 4.15%Real Return 10.00% 4.15%Real Estate 10.00% 4.75%Absolute Return 10.00% 4.00%Private Equity 5.00% 7.75%

Total 100.00%

Discount rate The discount rate used to measure the total pension liability was 6.75%. 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.



September 30, 2018

50



Total Pension Plan Fiduciary Net Pension

Liability Net Position Liability

(a) (b) (a) - (b)

Balance at 12/31/2016 8,762,284$ 8,074,257$ 688,027$

Changes for the year: -

Service cost 427,165 - 427,165

Interest 591,432 - 591,432

Change of benefit terms - - -

Difference between expected and actual experience (122,172) - (122,172)

Change of assumptions - - -

Contributions - employer - 258,551 (258,551)

Contributions - employee - 199,610 (199,610)

Net investment income - 1,119,294 (1,119,294)

Benefit payments, including refunds of employee (427,824) (427,824) -

contributions

Administrative expenses - (5,799) 5,799

Other changes - (294) 294

Net changes 468,601 1,143,537 (674,936)

Balance at 12/31/2017 9,230,885$ 9,217,794$ 13,091$

Increase (Decrease)

Sensitivity of the net pension liability to changes in the discount rate The following presents the net pension liability of the City, calculated using the discount rate of 6.75% as well as what the City’s net pension liability would be if it were calculated using a discount rate that is 1-percentage point lower (5.75%) or 1-percentage point higher (7.75%) than the current rate:

1% Decrease in 1% Increase in

Discount Rate (5.75%) Discount Rate (6.75%) Discount Rate (7.75%)

City's net pension liability 1,405,586$ 13,091$ (1,113,704)$

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.



September 30, 2018

51



Pension expense and deferred outflows of resources and deferred inflows of resources related to pensions For the year ended September 30, 2018, the City recognized pension expense of $230,448. At September 30, 2018, the City reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources:

Deferred Outflows Deferred Inflowsof Resources of Resources

Difference between expected and actual economic experience 8,468$ 94,224$

Changes in actuarial assumptions 5,581 -

Difference between projected and actualinvestment earnings 220,582 459,822

Contributions made subsequent to themeasurement date 188,623 -

Total 423,254$ 554,046$

$188,623 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, 2019. Other amounts reported as deferred outflows and inflows of resources related to pensions will be recognized in pension expense as follows:

Net Deferred

Outflows (Inflows)

of Resources

2019 (33,000)$

2020 (52,249)

2021 (119,309)

2022 (114,857)

2023 -

Thereafter -

Total (319,415)$



September 30, 2018

52


Other postemployment benefits (OPEB) plan Plan description

The City participates in the defined benefit group-term life insurance plan administered by TMRS known as the Supplemental Death Benefits Fund (SDBF). This is a voluntary program in which the City may elect, by ordinance, to provide group-term life insurance for active members, including retirees.

Benefits provided

The death benefit for active employees provides a lump-sum payment approximately equal to the employee’s annual salary calculated based on the employee’s actual earnings, for the 12-month period preceding the month of death. The maximum life insurance benefit is $150,000. Retired employees are insured for $7,500. As the SDBF covers both active and retiree participants, with no segregation of assets, the SDBF is considered to be an unfunded OPEB plan (i.e. no assets are accumulated).

Contributions

The City contributes to the SDBF at a contractually required rate as determined by an annual actuarial valuation. The rate is equal to the cost of providing one-year term life insurance. The funding policy for the SDBF program is to assure that adequate resources are available to meet all death benefit payments for the upcoming year. The intent is not to pre-fund retiree term life insurance during employees’ entire careers. The contribution rate for the City was .20% and .22% respectively for calendar years 2017 and 2018. The City’s contribution to TMRS for the year ended September 30, 2018 was $7,132, and was equal to the required contributions.

Employees covered by benefit terms At the December 31, 2017 valuation and measurement date, the following employees were covered by the benefit terms: Inactive employees or beneficiaries currently receiving benefits 29 Inactive employees entitled to but not yet receiving benefits 11 Active employees 66 106

OPEB liability

The City’s total OPEB liability of $190,204 was measured as of December 31, 2017, and was determined by an actuarial valuation as of that date.



September 30, 2018

53


Other postemployment benefits (OPEB) plan (continued) Actuarial assumptions: The total OPEB liability in the December 31, 2017 actuarial valuation was determined using the following actuarial assumptions and other inputs, applied to all periods included in the measurement, unless otherwise specified:

Inflation 2.5%

Salary increases 3.50% to 10.5% including inflation

Discount rate * 3.31%

Retirees' share of benefit-related costs $0Administrative expenses All administative expenses are paid through the Pension Trust and

accounted for under reporting requirements under GASB Statement No. 68.

Mortality rates - service retirees RP2000 Combined Mortality Table with Blue Collar Adjustment with males rates multiplied by 109% and females rates multiplied by 103% and projected on a fully generational basis with scale BB.

Mortality rates - disabled retirees RP2000 Combined Mortality Table with Blue Collar Adjustment with males rates multiplied by 109% and females rates multiplied by 103% with a 3 year set-forward for both male and females. The rates are projected on a fully generational basis with scale BB to account for future mortality improvements subject to the 3% floor.

* The discount rate was based on the Fidelity Index’s “20-Year Municipal GO AA Index” rate as of December 31, 2017. The actuarial assumptions used in the December 31, 2017 valuation were based on the results of an actuarial experience study for the period December 31, 2010 to December 31, 2014. Changes in the total OPEB liability:

Balance at December 31, 2016 160,670$

Changes for the year:

Service cost 8,317

Interest on the total OPEB liability 6,205

Changes of benefit terms -

Difference between expected and actual experience -

Change of assumptions 16,343

Benefit payments (1,331)

Net changes 29,534

Balance at December 31, 2017 190,204$



September 30, 2018

54


Other postemployment benefits (OPEB) plan (continued) Sensitivity of the total OPEB liability to changes in the discount rate:

The following presents the total OPEB liability of the City, calculated using the discount rate of 3.31%, as well as what the City’s OPEB liability would be if it were calculated using a discount rate that is 1-percentage-point lower (2.31%) or 1-percentage-point higher (4.31%) than the current rate:

1% Decrease in Current 1% Increase in

Discount Rate (2.31%) Discount Rate (3.31%) Discount Rate (4.31%)

City's OPEB liability 232,648$ 190,204$ 157,768$

OPEB expense and deferred outflows of resources and deferred inflows of resources related to OPEB:

For the year ended September 30, 2018, the City recognized OPEB expense of $17,671.

At September 30, 2018, the City reported deferred outflows of resources and deferred inflows of resources related to OPEB from the following sources:

Deferred Outflows Deferred Inflows

of Resources of Resources

Difference between expected and actual economic experience -$ -$

Changes in actuarial assumptions 13,194 -

Difference between projected and actual investment earnings - -

Contributions subsequent to the measurement date 5,259 -

Total 18,453$ -$

Amount reported as deferred outflows of resources and deferred inflows of resources related to OPEB will be recognized in OPEB expense as follows:

Plan Year Amortization

December 31, Expense2019 3,149$ 2020 3,149 2021 3,149 2022 3,149 2023 598

Thereafter -

Total 13,194$



September 30, 2018

55

(2) Detailed notes (continued) Risk management

The City is exposed to various risks of loss related to torts; theft of and damage to property, and destruction of assets; public officials’ errors and omissions; bodily injury and property damage; injury to employees and natural disasters. The City contracts with the Texas Municipal League (TML) to provide insurance coverage for identified risks. TML is a multi-government group that provides for a combination of modified self-insurance and stop-loss coverage. Contributions are set annually by TML and liability to the City is generally limited to the contributed amounts. There were no significant reductions in coverage in the past fiscal year and settlements did not exceed insurance coverage for each of the past three fiscal years.

Commitments and contingencies

Commitments In 2007, the City of Windcrest entered into an agreement with the City of San Antonio, Texas, under which the City of San Antonio released an area from its jurisdiction and allowed for the City of Windcrest to accept and annex the area into the municipal limits of the City of Windcrest. The boundary change agreement provides for the sharing of future tax revenues on the annexed area for the next 30 years. Under the terms of the agreement, the City of San Antonio and the City of Windcrest each receive 50% of the local sales taxes due to the City of Windcrest and distributed by the State Comptroller for taxable business activity conducted in the annexed area. For the fiscal year ended September 30, 2018, the total amount of the local sales taxes owed to the City of San Antonio under this agreement amounted to $1,355,644. At September 30, 2018, the City of Windcrest owed the City of San Antonio $338,478.

Net position deficit and management plans

The Garbage Utility Fund had a deficit net position as of September 30, 2018. The Garbage Utility net position deficit increased from ($279,929) in 2017 to ($285,376) in 2018 due primarily to uncollectible receivables that had to be expensed as bad debt expense in the current fiscal year. The City plans to be increase their efforts to collect on delinquent fees, re-evaluate their billing techniques, and consider moving the residential portion of expenses and revenues into the General Fund.

Restatement of fund balance/net position

During fiscal year 2018, the City adopted GASB Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions”. With the adoption of this standard, the City recognized a restatement of beginning net position in the amount of $143,223 in the governmental activities and $12,665 in the component units of the City.



September 30, 2018

56


Tax incentives

The City enters into economic development agreements designed to improve the local economy, create jobs, and promote development within the City. The City’s economic development agreements are authorized under Chapter 380 of the Texas Local Government Code and Chapter 311 (Tax Increment Financing Act) and 312 (Property Redevelopment and Tax Abatement Act) of the Texas Tax Code. Businesses may be eligible based on their positive employment, economic, or community impact. Businesses that receive tax incentives typically commit to building or expanding operations, revitalizing existing facilities, and/or improving the local infrastructure. Agreements usually contain recapture provisions which may require repayment or termination of incentives if the business does not meet the requirements of the economic incentive. The City has an agreement with a business that incentivizes that business to maintain a set level of employment in order for that business’s real and personal property to receive a 100% property tax abatement. Under the agreement if the business does not meet or only partially meets the employment requirements than the business will be required to make a payment to the City of Windcrest for property taxes abated in a proportionate amount to the percentage that the employment requirements were not met. In addition, if the business ceases use of the leased property for a continuous period of three months or more than the City of Windcrest has the right to terminate the agreement and the business will have to make a payment to the City of Windcrest for the amount of property taxes that would have been collected if the property was not exempt from property taxes for the year that the agreement is terminated as well as the amount that would have been paid in the previous years during the exemption period. The amount of property taxes that the City would have received is unknown due to the fact that Bexar Appraisal District has not assessed the value of the leased property. The agreement states that in the event that a payment needed to be made then the business would seek a qualified real estate appraiser to appraise the value of the leased property, then the City would have to agree with the appraisal prior to the payment being made.

APPENDIX D

The information contained in Appendix D consists of the Forms of Legal Opinions of Bond Counsel

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.

June __, 2019


GENERAL OBLIGATION BONDS, SERIES 2019A DATED AS OF MAY 1, 2019

IN THE AGGREGATE PRINCIPAL AMOUNT OF $6,655,000

AS BOND COUNSEL FOR THE CITY OF WINDCREST, TEXAS (the "City"), we have examined into the legality and validity of the Bonds described above (the "Bonds"), which bear interest from the dates specified in the text of the Bonds until stated maturity or prior redemption, at the rates and payable on the dates as stated in the text of the Bonds, and which mature on the dates and are subject to redemption, 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 City, and other pertinent instruments authorizing and relating to the issuance of the Bonds including (i) the ordinance authorizing the issuance of the Bonds (the "Ordinance"), (ii) one of the executed Bonds (Bond No. T‐1), and (iii) the City's Federal Tax Certificate of even date herewith. BASED ON SAID EXAMINATION, IT IS OUR OPINION that the Bonds have been duly authorized, issued and delivered in accordance with law; and that except as the enforceability thereof may be limited by governmental immunity and bankruptcy, insolvency, reorganization, moratorium, liquidation and other similar laws now or hereafter enacted relating to creditors' rights generally or by general principles of equity which permit the exercise of judicial discretion, the Bonds constitute valid and legally binding obligations of the City; and that ad valorem taxes sufficient to provide for the payment of the interest on and principal of said Bonds have been levied and pledged for such purpose, within the limit prescribed by law. 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 alternative minimum tax preference item under section 57(a)(5) of the Internal Revenue Code of 1986 (the "Code"). In expressing the aforementioned opinions, we have relied on certain representations, the accuracy of which we have not independently verified, and assume compliance with certain covenants, regarding the use and investment of the proceeds of the Bonds and the use of the property financed therewith. We call your attention to the fact that if such representations are determined to be inaccurate or upon a failure by the City to comply with such covenants, interest on the Bonds may become includable in gross income retroactively to the date of issuance of the Bonds.

City of Windcrest, Texas General Obligation Bonds, Series 2019A Page 2

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, including the amount, accrual or receipt of interest on the Bonds. Owners of the Bonds should consult their tax advisors regarding the applicability of any collateral tax consequences of owning the Bonds. 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 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 a 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 City as the taxpayer. We observe that the City 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. OUR SOLE ENGAGEMENT in connection with the issuance of the Bonds is as Bond Counsel for the City, and, in that capacity, we have been engaged by the City for the sole purpose of rendering an opinion 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 City, 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 City as to the current outstanding indebtedness of, and assessed valuation of taxable property within, the City. Our role in connection with the City's Official Statement prepared for use in connection with the sale of the Bonds has been limited as described therein.

Respectfully,

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.

June __, 2019


GENERAL OBLIGATION BONDS, SERIES 2019B DATED AS OF MAY 1, 2019

IN THE AGGREGATE PRINCIPAL AMOUNT OF $1,810,000

AS BOND COUNSEL FOR THE CITY OF WINDCREST, TEXAS (the "City"), we have examined into the legality and validity of the Bonds described above (the "Bonds"), which bear interest from the dates specified in the text of the Bonds until stated maturity or prior redemption, at the rates and payable on the dates as stated in the text of the Bonds, and which mature on the dates and are subject to redemption, 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 City, and other pertinent instruments authorizing and relating to the issuance of the Bonds including (i) the ordinance authorizing the issuance of the Bonds (the "Ordinance"), (ii) one of the executed Bonds (Bond No. T‐1), and (iii) the City's Federal Tax Certificate of even date herewith. BASED ON SAID EXAMINATION, IT IS OUR OPINION that the Bonds have been duly authorized, issued and delivered in accordance with law; and that except as the enforceability thereof may be limited by governmental immunity and bankruptcy, insolvency, reorganization, moratorium, liquidation and other similar laws now or hereafter enacted relating to creditors' rights generally or by general principles of equity which permit the exercise of judicial discretion, the Bonds constitute valid and legally binding obligations of the City; and that ad valorem taxes sufficient to provide for the payment of the interest on and principal of said Bonds have been levied and pledged for such purpose, within the limit prescribed by law. 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 alternative minimum tax preference item under section 57(a)(5) of the Internal Revenue Code of 1986 (the "Code"). In expressing the aforementioned opinions, we have relied on certain representations, the accuracy of which we have not independently verified, and assume compliance with certain covenants, regarding the use and investment of the proceeds of the Bonds and the use of the property financed therewith. We call your attention to the fact that if such representations are determined to be inaccurate or upon a failure by the City to comply with such covenants, interest on the Bonds may become includable in gross income retroactively to the date of issuance of the Bonds.

City of Windcrest, Texas General Obligation Bonds, Series 2019B Page 2

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, including the amount, accrual or receipt of interest on the Bonds. Owners of the Bonds should consult their tax advisors regarding the applicability of any collateral tax consequences of owning the Bonds. 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 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 a 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 City as the taxpayer. We observe that the City 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. OUR SOLE ENGAGEMENT in connection with the issuance of the Bonds is as Bond Counsel for the City, and, in that capacity, we have been engaged by the City for the sole purpose of rendering an opinion 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 City, 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 City as to the current outstanding indebtedness of, and assessed valuation of taxable property within, the City. Our role in connection with the City's Official Statement prepared for use in connection with the sale of the Bonds has been limited as described therein.

Respectfully,

new issue official statement ratings: s&p: “aa” book … · cusip data herein is provided...

Documents