OFFICIAL STATEMENT
Dated February 24, 2014
Ratings:
Fitch: “AA+”
S&P: “AA+”
(See “OTHER INFORMATION – Ratings” herein.)
NEW ISSUE - Book-Entry-Only
In the opinion of Bond Counsel, interest on the Obligations (defined below) will be excludable from the gross income of the owners thereof for
federal income tax purposes under statutes, regulations, published rulings and court decisions existing on the date thereof, subject to the matters
described under “TAX MATTERS” herein, including the alternative minimum tax on corporations.
$42,380,000
CITY OF MCALLEN, TEXAS
(Hidalgo County)
GENERAL OBLIGATION BONDS,
SERIES 2014
Dated Date: February 15, 2014
$11,850,000
CITY OF MCALLEN, TEXAS
(Hidalgo County)
COMBINATION TAX AND REVENUE
CERTIFICATES OF OBLIGATION, SERIES 2014
Due: February 15, as shown on inside cover
PAYMENT TERMS . . . Interest on the $42,380,000 City of McAllen, Texas General Obligation Bonds, Series 2014 (the "Bonds") and
$11,850,000 City of McAllen, Texas Combination Tax and Revenue Certificates of Obligation, Series 2014 (the “Certificates”) will accrue from
February 15, 2014 (the "Dated Date"), will be payable February 15 and August 15 of each year commencing February 15, 2015, and will be
calculated on the basis of a 360-day year consisting of twelve 30-day months. The Bonds and the Certificates are referred to collectively herein
as the "Obligations." The definitive Obligations will be initially registered and delivered only to Cede & Co., the nominee of The Depository
Trust Company ("DTC") pursuant to the book-entry-only system described herein. Beneficial ownership of the Obligations may be acquired in
denominations of $5,000 or integral multiples thereof. No physical delivery of the Obligations will be made to the beneficial owners thereof.
Principal of, premium, if any, and interest on the Obligations will be payable by the Paying Agent/Registrar to Cede & Co., which will make
distribution of the amounts so paid to the participating members of DTC for subsequent payment to the beneficial owners of the Obligations. See
"THE OBLIGATIONS - Book-Entry-Only System" herein. The initial Paying Agent/Registrar is Regions Bank, Houston, Texas, an Alabama
banking corporation. See "THE OBLIGATIONS - Paying Agent/Registrar".
AUTHORITY FOR ISSUANCE AND SECURITY FOR THE BONDS . . . The Bonds are issued pursuant to the Constitution and general laws of the State
of Texas, (the "State") including particularly, Texas Government Code, Chapters 1251 and 1331, as amended, and an election held on
November 5, 2013, and are direct obligations of the City of McAllen, Texas (the "City") payable from a continuing ad valorem tax levied on all
taxable property within the City, within the limits prescribed by law, all as provided in the ordinance authorizing the Bonds (the "Bond
Ordinance") (see "THE OBLIGATIONS - Authority for Issuance of the Bonds” and "- Security and Source of Payment for the Bonds").
AUTHORITY FOR ISSUANCE AND SECURITY FOR THE CERTIFICATES . . . The Certificates are issued pursuant to the Constitution and general
laws of the State of Texas (the "State"), particularly Subchapter C of Chapter 271, Texas Local Government Code, as amended, and constitute
direct obligations of the City, payable from a continuing ad valorem tax levied on all taxable property within the City, within the limits prescribed
by law, and a limited pledge of the surplus revenues of the City’s hotel occupancy tax levied pursuant to Chapter 351, Texas Tax Code, as
amended, all as provided in the ordinance authorizing the Certificates (the "Certificate Ordinance"). The Bond Ordinance and the Certificate
Ordinance are collectively referred to herein as the "Ordinances." See "THE OBLIGATIONS - Authority for Issuance of the Certificates" and "Security and Source of Payment for the Certificates."
PURPOSE FOR THE BONDS . . . Proceeds from the sale of the Bonds will be used for the purpose of: (1) constructing street, sidewalk and related
drainage improvements in the City; (2) providing a portion of the funds required to construct and equip a new Performing Arts Center at the
City’s Convention Center; (3) acquiring land for parks and recreation purposes and constructing and equipping improvements to the City parks
and other recreation facilities; and (4) to pay the costs associated with the issuance of the Bonds.
PURPOSE FOR THE CERTIFICATES . . . Proceeds from the sale of the Certificates will be used for the purpose of: (1) providing a portion of the
funds required to construct and equip a new Performing Arts Center at the City’s Convention Center; and (2) to pay the costs associated with the
issuance of the Certificates.
CUSIP PREFIX: 579083
MATURITY SCHEDULES & 9 DIGIT CUSIP
See Schedules on Page 2
LEGALITY . . . The Obligations are offered for delivery when, as and if issued and received by the Initial Purchaser and subject to the approving
opinion of the Attorney General of Texas and the opinion of McCall, Parkhurst & Horton L.L.P., Bond Counsel, San Antonio, Texas (see
APPENDIX C, "Forms of Bond Counsel's Opinions").
DATE OF DELIVERY . . . It is expected that the Obligations will be available for delivery through The Depository Trust Company on Thursday,
March 20, 2014.
MATURITY SCHEDULE FOR THE BONDS
Interest
Rate
Initial
Price
or
Yield
Cusip
Number(1)
2015
3.000%
0.180%
1,480,000
2016
3.000%
1,525,000
2017
1,575,000
1,640,000
1,720,000
CUSIP Prefix: 579083 (1)
Principal
Amount
Stated
M aturity
(February 15)
Interest
Rate
Initial
Price
or
Yield
QM 1
$ 2,190,000
2025
3.000%
2.850%
(2)
QX7
0.330%
QN9
2,260,000
2026
3.250%
3.000%
(2)
QY5
3.000%
0.560%
QP4
2,340,000
2027
4.000%
3.150%
(2)
QZ2
2018
2019
2020
3.000%
5.000%
5.000%
0.880%
1.200%
1.640%
QQ2
QR0
QS8
2,435,000
2,535,000
2,635,000
2028
2029
2030
4.000%
4.000%
3.500%
3.350%
3.450%
3.600%
(2)
RA6
RB4
RC2
1,810,000
2021
5.000%
2.000%
QT6
2,735,000
2031
4.000%
3.680%
(2)
RD0
1,905,000
2022
5.000%
2.320%
QU3
2,845,000
2032
4.000%
3.730%
(2)
RE8
2,000,000
2,105,000
2023
2024
5.000%
5.000%
2.530%
2.700%
QV1
QW9
2,960,000
3,085,000
2033
2034
4.000%
4.000%
3.850%
3.900%
(2)
RF5
SC1
Principal
Amount
Stated
M aturity
(February 15)
$ 600,000
(2)
Cusip
Number(1)
(2)
(2)
(Accrued Interest from February 15, 2014 to be Added)
_______________
(1)
CUSIP numbers are included solely for the convenience of owners of the Obligations. CUSIP is a registered trademark
of the American Bankers Association. CUSIP data herein is provided by CUSIP Global Services, managed by
Standard & Poor’s Financial Services LLC on behalf of The American Bankers Association. This data is not intended
to create a database and does not serve in any way as a substitute for the CUSIP Services. None of the City nor the
Financial Advisor is responsible for the selection or correctness of the CUSIP numbers set forth herein.
(2)
Yield calculated based on the assumption that the Certificates denoted and sold at a premium will be redeemed on
February 15, 2023, the first optional call date for such Certificates, at a redemption price of par plus accrued interest to
the redemption date.
OPTIONAL REDEMPTION FOR THE BONDS . . . The City reserves the right, at its option, to redeem Bonds having stated maturities
on and after February 15, 2024, in whole or in part in principal amounts of $5,000 or any integral multiple thereof, on
February 15, 2023, or any date thereafter, at the par value thereof plus accrued interest to the date of redemption (see "THE
OBLIGATIONS - Optional Redemption for the Bonds").
MATURITY SCHEDULE FOR THE CERTIFICATES
Principal
Amount
$ 205,000
430,000
445,000
465,000
480,000
495,000
515,000
535,000
Stated
M aturity
(February 15)
2015
2016
2017
2018
2019
2020
2021
2022
Interest
Rate
3.000%
3.000%
4.000%
4.000%
2.000%
4.000%
4.000%
4.000%
Initial
Price
or
Yield
0.250%
0.380%
0.650%
0.950%
1.260%
1.700%
2.060%
2.380%
555,000
580,000
2023
2024
4.000%
4.000%
2.620%
2.750%
Cusip
Number(1)
RG3
RH1
RJ7
RK4
RL2
RM 0
RN8
RP3
(2)
Principal
Amount
$ 605,000
630,000
650,000
675,000
695,000
720,000
750,000
775,000
RQ1
RR9
805,000
840,000
CUSIP Prefix: 579083 (1)
Stated
M aturity
(February 15)
2025
2026
2027
2028
2029
2030
2031
2032
Interest
Rate
4.000%
4.000%
3.250%
3.375%
3.500%
3.500%
3.750%
3.750%
Initial
Price
or
Yield
2.950%
3.120%
3.346%
3.512%
3.620%
3.720%
3.831%
3.906%
2033
2034
4.000%
4.000%
4.000%
4.060%
(2)
(2)
Cusip
Number(1)
RS7
RT5
RU2
RV0
RW8
RX6
RY4
RZ1
SA5
SB3
(Accrued Interest from February 15, 2014 to be Added)
_______________
(1)
CUSIP numbers are included solely for the convenience of owners of the Obligations. CUSIP is a registered trademark
of the American Bankers Association. CUSIP data herein is provided by CUSIP Global Services, managed by
Standard & Poor’s Financial Services LLC on behalf of The American Bankers Association. This data is not intended
to create a database and does not serve in any way as a substitute for the CUSIP Services. None of the City nor the
Financial Advisor is responsible for the selection or correctness of the CUSIP numbers set forth herein.
(2)
Yield calculated based on the assumption that the Certificates denoted and sold at a premium will be redeemed on
February 15, 2023, the first optional call date for such Certificates, at a redemption price of par plus accrued interest to
the redemption date.
OPTIONAL REDEMPTION FOR THE CERTIFICATES . . . The City reserves the right, at its option, to redeem Certificates having
stated maturities on and after February 15, 2024, in whole or in part in principal amounts of $5,000 or any integral multiple
thereof, on February 15, 2023, or any date thereafter, at the par value thereof plus accrued interest to the date of redemption (see
"THE OBLIGATIONS - Optional Redemption for the Certificates").
2
This Official Statement, which includes the cover page, Schedule and the Appendices hereto, does not constitute an offer to sell
or the solicitation of an offer to buy in any jurisdiction to any person to whom it is unlawful to make such offer, solicitation or
sale.
No dealer, broker, salesperson or other person has been authorized to give information or to make any representation other than
those contained in this Official Statement, and, if given or made, such other information or representations must not be relied
upon.
The information set forth herein has been obtained from the City and other sources believed to be reliable, but such information
is not guaranteed as to accuracy or completeness and is not to be construed as a representation, promise or guarantee of the
Financial Advisor.
This Official Statement includes descriptions and summaries of certain events, matters and documents. Such descriptions and
summaries do not purport to be complete and all such descriptions, summaries and references thereto are qualified in their
entirety by reference to this Official Statement in its entirety and to each such document, copies of which may be obtained from
the Financial Advisor. Any statements made in this Official Statement or the appendices hereto involving matters of opinion or
estimates, whether or not so expressly stated, are set forth as such and not as representations of fact, and no representation is
made that any of such opinions or estimates will be realized.
The information and expressions of opinion contained herein are subject to change without notice, and neither the delivery of this
Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no
change in the affairs of the City or other matters described herein. See "OTHER INFORMATION – Continuing Disclosure of
Information" for a description of the City's undertaking to provide certain information on a continuing basis.
NEITHER THE CITY NOR ITS FINANCIAL ADVISOR, OR THE INITIAL PURCHASER MAKES ANY REPRESENTATION OR
WARRANTY WITH RESPECT TO THE INFORMATION CONTAINED IN THIS OFFICIAL STATEMENT REGARDING THE
DEPOSITORY TRUST COMPANY OR ITS BOOK-ENTRY ONLY SYSTEM.
THE OBLIGATIONS HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, IN
RELIANCE UPON EXEMPTIONS CONTAINED IN SUCH ACT. THE REGISTRATION OR QUALIFICATION OF THE
OBLIGATIONS IN ACCORDANCE WITH APPLICABLE PROVISIONS OF SECURITIES LAW OF THE STATES IN WHICH
THE OBLIGATIONS HAVE BEEN REGISTERED OR QUALIFIED, IF ANY, AND THE EXEMPTION FROM REGISTRATION
OR QUALIFICATION IN OTHER STATES, IF ANY, CANNOT BE REGARDED AS A RECOMMENDATION THEREOF. THE
OBLIGATIONS HAVE NOT BEEN RECOMMENDED BY ANY FEDERAL OR STATE SECURITIES COMMISSION OR
REGULATORY AUTHORITY. FURTHERMORE, THE FOREGOING AUTHORITIES HAVE NOT CONFIRMED THE
ACCURACY OR DETERMINED THE ADEQUACY OF THIS OFFICIAL STATEMENT. ANY REPRESENTATION TO THE
CONTRARY MAY BE A CRIMINAL OFFENSE.
THIS OFFICIAL STATEMENT CONTAINS "FORWARD-LOOKING" STATEMENTS WITHIN THE MEANING OF SECTION
21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. SUCH STATEMENTS MAY INVOLVE KNOWN AND
UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS WHICH MAY CAUSE THE ACTUAL RESULTS,
PERFORMANCE AND ACHIEVEMENTS TO BE DIFFERENT FROM FUTURE RESULTS, PERFORMANCE AND
ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. INVESTORS ARE
CAUTIONED THAT THE ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE SET FORTH IN THE
FORWARD-LOOKING STATEMENT.
[The Remainder of this Page Intentionally Left Blank]
3
TABLE OF CONTENTS
INTRODUCTION ............................................................ 9 FINANCIAL INFORMATION ..................................... 26 TABLE 13 - CHANGES IN NET POSITION ................... 26 TABLE 13-A - GENERAL FUND REVENUES AND
EXPENDITURE HISTORY .................................. 27 TABLE 14 - MUNICIPAL SALES TAX ........................ 28 FINANCIAL POLICIES ................................................ 28 INVESTMENTS .......................................................... 29 TABLE 15 - CURRENT INVESTMENTS ......................... 30 THE OBLIGATIONS....................................................... 9 TAX MATTERS............................................................. 31 TAX INFORMATION ................................................... 14 TABLE 1 - VALUATION, EXEMPTIONS AND
GENERAL OBLIGATION DEBT .......................... 17 TABLE 2 - TAXABLE ASSESSED VALUATIONS
BY CATEGORY ................................................. 18 TABLE 3 - VALUATION AND GENERAL
OBLIGATION DEBT HISTORY ........................... 19 TABLE 4 - TAX RATE, LEVY AND COLLECTION
HISTORY ......................................................... 19 TABLE 5 - TEN LARGEST TAXPAYERS ...................... 20 TABLE 6 - TAX ADEQUACY ..................................... 20 TABLE 7 - ESTIMATED OVERLAPPING DEBT ............. 21 OTHER INFORMATION ............................................. 32 RATINGS .................................................................. 32 LITIGATION .............................................................. 32 REGISTRATION AND QUALIFICATION OF
OBLIGATIONS FOR SALE.................................. 33 LEGAL INVESTMENTS AND ELIGIBILITY TO
SECURE PUBLIC FUNDS IN TEXAS ................... 33 LEGAL OPINIONS AND NO-LITIGATION
CERTIFICATE .................................................. 33 CONTINUING DISCLOSURE OF INFORMATION............. 33 FINANCIAL ADVISOR ................................................ 35 INITIAL PURCHASER FOR THE BONDS ........................ 35 INITIAL PURCHASER FOR THE CERTIFICATES ............. 35 FORWARD-LOOKING STATEMENTS DISCLAIMER ....... 36 MISCELLANEOUS...................................................... 36 OFFICIAL STATEMENT SUMMARY ......................... 5 CITY OFFICIALS, STAFF AND
CONSULTANTS ..................................................... 8 ELECTED OFFICIALS ................................................... 8 SELECTED ADMINISTRATIVE STAFF ............................ 8 CONSULTANTS AND ADVISORS.................................... 8 DEBT INFORMATION ................................................. 22 TABLE 8 - GENERAL OBLIGATION DEBT
SERVICE REQUIREMENTS ................................. 22 TABLE 9 - INTEREST AND SINKING FUND
BUDGET PROJECTION ...................................... 23 TABLE 10 - COMPUTATION OF SELFSUPPORTING DEBT .......................................... 23 TABLE 11 - AUTHORIZED BUT UNISSUED
TAX DEBT ....................................................... 23 TABLE 12 – OTHER OBLIGATIONS ............................. 23 APPENDICES
GENERAL INFORMATION REGARDING THE CITY .........A
EXCERPTS FROM THE CITY OF MCALLEN, TEXAS
ANNUAL FINANCIAL REPORT ............................... B
FORMS OF BOND COUNSEL'S OPINIONS ...................... C
The cover page hereof, this page, the appendices included
herein and any addenda, supplement or amendment hereto,
are part of the Official Statement.
4
OFFICIAL STATEMENT SUMMARY
This summary is subject in all respects to the more complete information and definitions contained or incorporated in this
Official Statement. The offering of the Obligations to potential investors is made only by means of this entire Official Statement.
No person is authorized to detach this summary from this Official Statement or to otherwise use it without the entire Official
Statement.
THE CITY ..................................... The City of McAllen, Texas (the "City" or “Issuer”) is a political subdivision and municipal
corporation of the State of Texas (the "State"), located in Hidalgo County. The City covers
approximately 48.30 square miles. See "INTRODUCTION - Description of the City."
THE BONDS .................................. The Bonds are issued as $42,380,000 City of McAllen, Texas General Obligation Bonds,
Series 2014. The Bonds are issued as serial bonds maturing February 15, 2015 through
February 15, 2034 (see "THE OBLIGATIONS - Description of the Bonds").
THE CERTIFICATES ..................... The Certificates are issued as $11,850,000 City of McAllen, Texas Combination Tax and
Revenue Certificates of Obligation, Series 2014. The Certificates are issued as serial
certificates maturing February 15, 2015 through February 15, 2034 (see "THE
OBLIGATIONS - Description of the Certificates").
PAYMENT OF INTEREST ............... Interest on the Obligations accrues from February 15, 2014 (the “Dated Date”), and is payable
February 15, 2015, and each August 15 and February 15 thereafter until maturity or, with
respect to the Obligations, prior redemption (see "THE OBLIGATIONS - Description of the
Bonds" and “THE OBLIGATIONS – Description of the Certificates).
AUTHORITY FOR ISSUANCE
FOR THE BONDS .......................... The Bonds are being issued pursuant to the Constitution and general laws of the State of
Texas, particularly, Texas Government Code, Chapters 1251 and 1331, as amended; an
election held on November 5, 2013, and an ordinance passed by the City Commission of the
City (the “Bond Ordinance”) (see "THE OBLIGATIONS - Authority for Issuance for the
Bonds").
AUTHORITY FOR ISSUANCE
FOR THE CERTIFICATES ............. The Certificates are issued pursuant to the general laws of the State, particularly Subchapter C
of Chapter 271, Texas Local Government Code, as amended, and an ordinance passed by the
City Commission of the City (the “Certificate Ordinance” and together with the Bond Ordinance,
the “Ordinances”) (see "THE OBLIGATIONS - Authority for Issuance of the Certificates").
SECURITY FOR THE BONDS .......... The Bonds constitute direct and voted 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 OBLIGATIONS - Security and Source of
Payment for the Bonds").
SECURITY FOR THE
CERTIFICATES ............................ The Certificates constitute direct obligations of the City payable from a continuing ad valorem
tax levied, within the limits prescribed by law, on all taxable property within the City. The
Certificates additionally are secured with a limited pledge of the surplus revenues of the City’s
hotel occupancy tax levied pursuant to Chapter 351, Texas Tax Code, as amended (see "THE
OBLIGATIONS - Security and Source of Payment for the Certificates").
OPTIONAL REDEMPTION FOR
THE BONDS ................................. The City reserves the right, at its option, to redeem Bonds having stated maturities on and
after February 15, 2024, in whole or in part in principal amounts of $5,000 or any integral
multiple thereof, on February 15, 2023, or any date thereafter, at the par value thereof plus
accrued interest to the date of redemption (see "THE OBLIGATIONS - Optional Redemption
for the Bonds").
OPTIONAL REDEMPTION FOR
THE CERTIFICATES .................... The City reserves the right, at its option, to redeem Certificates having stated maturities on
and after February 15, 2024, in whole or in part in principal amounts of $5,000 or any integral
multiple thereof, on February 15, 2023, or any date thereafter, at the par value thereof plus
accrued interest to the date of redemption (see "THE OBLIGATIONS - Optional Redemption
for the Certificates").
5
TAX EXEMPTION.......................... In the opinion of Bond Counsel, interest on the Obligations will be excludable from the gross
income of the owners thereof for federal income tax purposes under statutes, regulations,
published rulings and court decisions existing on the date thereof, subject to the matters
described under “TAX MATTERS” herein, including the alternative minimum tax on
corporations.
USE OF PROCEEDS FOR THE
BONDS ........................................ Proceeds from the sale of the Bonds will be used for the purpose of: (1) constructing street,
sidewalk and related drainage improvements in the City; (2) providing a portion of the funds
required to construct and equip a new Performing Arts Center at the City’s Convention
Center; (3) acquiring land for parks and recreation purposes and facilities; and (4) to pay the
costs associated with the issuance of the Bonds.
USE OF PROCEEDS FOR THE
CERTIFICATES ............................ Proceeds from the sale of the Certificates will be used for the purpose of: (1) providing a
portion of the funds required to construct and equip a new Performing Arts Center at the
City’s Convention Center; and (2) to pay the costs associated with the issuance of the
Certificates.
RATINGS ...................................... The Obligations and the presently outstanding tax supported debt of the City are rated "AA+"
by Fitch and "AA+" by S&P without regard to credit enhancement (see "OTHER
INFORMATION - Ratings").
BOOK-ENTRY-ONLY
SYSTEM ...................................... The definitive Obligations will be initially registered and delivered only to Cede & Co., the
nominee of DTC pursuant to the book-entry-only system described herein. Beneficial
ownership of the Obligations may be acquired in denominations of $5,000 or integral
multiples thereof. No physical delivery of the Obligations will be made to the beneficial
owners thereof. Principal of, premium, if any, and interest on the Obligations will be payable
by the Paying Agent/Registrar to Cede & Co., which will make distribution of the amounts so
paid to the participating members of DTC for subsequent payment to the beneficial owners of
the Obligations (see "THE OBLIGATIONS - Book-Entry-Only System").
PAYMENT RECORD ..................... The City has not defaulted, due to a deficiency in Interest and Sinking Fund since 1935 when a
par refunding at a reduced rate of interest was completed with consent of the bondholders. On
September 15, 1943, the City began a series of defaults which were not corrected until the
United States district Court in December, 1944 directed payment of matured principal and
interest following which a majority of bondholders voluntarily accepted refunding bonds
bearing 4.50% for their 5.75% and 6.00% noncallable bonds of the 1933 Series.
The City has never defaulted on its revenue bonds.
SELECTED FINANCIAL INFORMATION
Per
Capita
Tax
Ratio
Tax Debt
to Taxable
Assessed
% of
Total Tax
Tax Debt
$ 32,130,000
Debt
$ 247
Valuation
0.46%
Collections(3)
98.87%
52,574
26,860,000
202
0.38%
98.76%
52,179
33,850,000
253
0.48%
98.35%
52,092
21,735,000
161
0.31%
96.21%
Fiscal
Year
Ended
Estimated
City
Taxable
Assessed
Per Capita
Taxable
Assessed
9/30
2010
Population(1)
129,877
Valuation(2)
$ 7,032,559,952
Valuation
$ 54,148
2011
133,206
7,003,237,801
2012
133,978
6,990,879,362
2013
135,119
7,038,672,572
2014
136,507
7,342,031,955
53,785
61,375,000 (4)
450 (4) 0.84% (4)
(5)
________________
(1)
Source: City of McAllen, Texas.
(2)
As reported by the Hidalgo County Appraisal District on the City’s annual State Property Tax Board Reports; subject to
change during the ensuing year.
(3)
City allocates delinquent tax collections to the respective years in which the taxes were levied.
(4)
Includes the Obligations.
(5)
In process of collection.
6
CHANGE IN NET POSITION
Beginning Net Position
Total Revenue
Total Expenditures
Transfers
Prior Period Adjustment
Ending Net Position
Fiscal Year Ended September 30,
2011
2010
Unaudited
2013
2012
$ 353,910,012
124,110,826
(118,326,885)
1,656,644
$ 361,350,597
$ 361,989,769
124,702,874
(119,073,809)
(13,708,822)
$ 353,910,012
$ 353,187,965
121,387,690
(113,878,419)
1,292,533
$ 361,989,769
$ 344,131,328
117,812,061
(111,732,261)
(610,088)
3,586,925
$ 353,187,965
2009
$ 331,784,883
119,634,275
(110,218,703)
2,930,873
$ 344,131,328
GENERAL FUND CONSOLIDATED STATEMENT SUMMARY
Unaudited
2013
2012
Fiscal Year Ended September 30,
2011
2010
Beginning Balance
Total Revenue
Total Expenditures
Other Sources
Net Funds Available
Prior Period Adjustment
$ 45,810,264
94,159,197
(96,146,279)
52,375
(1,934,707)
-
$ 42,975,257
92,968,840
(94,802,869)
4,669,036
2,835,007
-
$ 50,872,591
90,470,108
(96,168,835)
(2,198,607)
(7,897,334)
-
$ 49,435,625
89,941,401
(96,497,769)
4,406,409
(2,149,959)
-
$ 51,489,403
91,951,139
(97,581,386)
3,576,469
(2,053,778)
-
Ending Balance
$ 43,875,557
$ 45,810,264
$ 42,975,257
$ 47,285,666
$ 49,435,625
2009
For additional information regarding the City, please contact:
M r. M ike R. Perez
City M anager
M r. Jerry W. Dale, CPA, CGFO
Finance Director
City of M cAllen, Texas
1300 Houston Avenue
M cAllen, Texas 78501
956-681-1000 - Telephone
956-681-1010 - Fax
[email protected]
[email protected]
or
M s. Anne Burger Entrekin
FirstSouthwest
70 Northeast Loop 410
Suite 710
San Antonio, Texas 78216
210-308-2200 - Telephone
210-349-7585 - Fax
[email protected]
or
[The Remainder of this Page Intentionally Left Blank]
7
M r. Cris Vela
FirstSouthwest
400 North M cColl
Suite C
M cAllen, Texas 78501
956-686-0991 - Telephone
956-618-4791 - Fax
[email protected]
CITY OFFICIALS, STAFF AND CONSULTANTS
ELECTED OFFICIALS
Length
of Service
6 Years
Term Expires
M ay, 2017
Attorney
Hilda Salinas, M ayor Pro-Tem
Commissioner, District 3
12 Years
M ay, 2017
Educator
Scott Crane
Commissioner, District 1
8 Years
M ay, 2017
Business/Entrepreneur
John J. Ingram
Commissioner, District 5
8 Years
M ay, 2015
Attorney
Trey Pebley
Commissioner, District 2
1 Year
M ay, 2017
Contractor
Aida Ramirez
Commissioner, District 4
12 Years
M ay, 2015
County Court Administrator
City Commission
James E. Darling(1)
M ayor
Occupation
Veronica Vela Whitacre
8 M onths
M ay, 2015
M arketing Director/Pharmacy
Commissioner, District 6
________________
(1)
Prior to being elected to serve as Mayor, Mr. Darling served as City Attorney, Assistant City Manager and
Commissioner for 33 years.
SELECTED ADMINISTRATIVE STAFF
Length of Service
to the City
21 Years
Total Government
Service
37 Years
Deputy City M anager
20 Years
41 Years
Jerry W. Dale, CPA, CGFO
Finance Director
16 Years
21 Years
Annette Villarreal
City Secretary
21 Years
22 Years
Kevin Pagan
City Attorney
13 Years
19 Years
Name
M ike R. Perez
Position
City M anager
Brent Branham
CONSULTANTS AND ADVISORS
Auditors ............................................................................................................................................................. Long Chilton, LLP(1)
McAllen, Texas
Bond Counsel ............................................................................................................................. McCall, Parkhurst & Horton L.L.P.
San Antonio, Texas
Financial Advisor....................................................................................................................................... First Southwest Company
Dallas, San Antonio and McAllen, Texas
________________
(1)
Although the audit included as Appendix B was prepared by Padgett, Stratemann & Co., LLP, the City has appointed
Long Chilton, LLP as new auditor for fiscal year ending September 30, 2013.
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OFFICIAL STATEMENT
RELATING TO
$42,380,000
CITY OF MCALLEN, TEXAS
(Hidalgo County)
GENERAL OBLIGATION BONDS,
SERIES 2014
$11,850,000
CITY OF MCALLEN, TEXAS
(Hidalgo County)
COMBINATION TAX AND REVENUE
CERTIFICATES OF OBLIGATION, SERIES 2014
INTRODUCTION
This Official Statement, which includes the Appendices hereto, provides certain information regarding the issuance of
$42,380,000 City of McAllen, Texas General Obligation Bonds, Series 2014 (the “Bonds”) and the $11,850,000 City of
McAllen, Texas Combination Tax and Revenue Certificates of Obligation, Series 2014 (the “Certificates”). The Bonds and the
Certificates are herein collectively referred to as the “Obligations.” The Capitalized terms used in this Official Statement have
the same meanings assigned to such terms in the ordinances authorizing the issuance of the Obligations, except as otherwise
indicated herein.
There follows in this Official Statement descriptions of the Obligations and certain information regarding the City of McAllen,
Texas (the “City” or the “Issuer”) and its finances. All descriptions of documents contained herein are only summaries and are
qualified in their entirety by reference to each such document. Copies of such documents may be obtained from the City's
Financial Advisor, First Southwest Company, Dallas and San Antonio, Texas.
DESCRIPTION OF THE CITY . . . The City is a political subdivision and municipal corporation of the State of Texas (the "State"),
duly organized and existing under the laws of the State, including the City’s Home Rule Charter. The City was incorporated in
1911, and first adopted its Home Rule Charter in 1911. The City is located in South Texas along the United States - Mexico
border and covers approximately 48.30 square miles. The City operates under a Commission/Manager form of government with
a City Commission comprised of the Mayor and six Commissioners elected for staggered four-year terms from single-member
districts. The City Manager is the chief administrative officer for the City and is responsible for the day to day operations of the
City. The 2010 Census population for the City was 129,877, while the estimated 2014 population is 136,507. The City covers
approximately 48.30 square miles.
THE OBLIGATIONS
DESCRIPTION OF THE BONDS . . . The Bonds are dated February 15, 2014 (the “Dated Date”), and mature on February 15 in each
of the years and in the amounts shown on the inside cover page hereof. Interest will accrue from the Dated Date, will be
computed on the basis of a 360-day year of twelve 30-day months, and will be payable on February 15 and August 15,
commencing February 15, 2015, until maturity. The definitive Bonds will be issued only in fully registered form in any integral
multiple of $5,000 for any one maturity and will be initially registered and delivered only to Cede & Co., the nominee of The
Depository Trust Company ("DTC") pursuant to the book-entry-only system described herein. No physical delivery of the
Bonds will be made to the beneficial owners thereof. Principal of, premium, if any, and interest on the Bonds will be payable
by the Paying Agent/Registrar to Cede & Co., which will make distribution of the amounts so paid to the participating members
of DTC for subsequent payment to the beneficial owners of the Bonds. See "THE OBLIGATIONS - Book-Entry-Only System"
herein.
DESCRIPTION OF THE CERTIFICATES . . . The Certificates are dated February 15, 2014 (the “Dated Date”), and mature on
February 15 in each of the years and in the amounts shown on the inside cover page hereof. Interest will accrue from the Dated
Date, will be computed on the basis of a 360-day year of twelve 30-day months, and will be payable on February 15 and
August 15, commencing February 15, 2015, until maturity. The definitive Certificates will be issued only in fully registered form
in any integral multiple of $5,000 for any one maturity and will be initially registered and delivered only to Cede & Co., the
nominee of DTC pursuant to the book-entry-only system described herein. No physical delivery of the Certificates will be
made to the beneficial owners thereof. Principal of, premium, if any, and interest on the Certificates will be payable by the
Paying Agent/Registrar to Cede & Co., which will make distribution of the amounts so paid to the participating members of DTC
for subsequent payment to the beneficial owners of the Certificates. See "THE OBLIGATIONS - Book-Entry-Only System"
herein.
AUTHORITY FOR ISSUANCE OF THE BONDS . . . The Bonds are being issued pursuant to the Constitution and general laws of the
State of Texas, particularly, Texas Government Code, Chapters 1251 and 1331, as amended; an election held November 5, 2013,
and passed by a majority of the participating voters; and an ordinance approved by the City Commission authorizing the Bonds
(the “Bond Ordinance”).
AUTHORITY FOR ISSUANCE OF THE CERTIFICATES . . . The Certificates are being issued pursuant to the Constitution and general laws
of the State of Texas, particularly Subchapter C of Chapter 271, Texas Local Government Code, as amended, and an ordinance
approved by the City Commission authorizing the Certificates (the “Certificate Ordinance” and together with the Bond Ordinance,
the “Ordinances”).
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SECURITY AND SOURCE OF PAYMENT FOR THE BONDS . . . In the Bond Ordinance, the City covenants that it will levy and collect
an annual ad valorem tax, within the limitations prescribed by law, against all taxable property located within the City sufficient
to meet the debt service requirements on the Bonds.
SECURITY AND SOURCE OF PAYMENT FOR THE CERTIFICATES
Ad valorem Tax Pledge: In the Certificate Ordinance, the City covenants that it will levy and collect an annual ad valorem tax,
within the limitations prescribed by law, against all taxable property located within the City sufficient to meet the debt service
requirements on the Certificates.
Pledge of Surplus Hotel Occupancy Tax Revenues for Certificates: The Certificates are additionally secured by a lien on and
limited pledge of the "Surplus Revenues" derived from the City’s hotel occupancy tax levied pursuant to Chapter 351, Texas Tax
Code, as amended, all as provided in the Certificates Ordinance.
TAX RATE LIMITATION . . . All taxable property within the City is subject to the assessment, levy and collection by the City of a
continuing, direct annual ad valorem tax sufficient to provide for the payment of principal of and interest on all ad valorem tax
debt within the limits prescribed by law. Article XI, Section 5, of the Texas Constitution is applicable to the City, and limits its
maximum ad valorem tax rate to $2.50 per $100 Taxable Assessed Valuation for all City purposes. The Home Rule Charter of
the City limits its tax rate to $2.50 per $100 Assessed Valuation for all City purposes. 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, as
calculated at the time of issuance.
OPTIONAL REDEMPTION FOR THE BONDS . . . The City reserves the right, at its option, to redeem Bonds having stated maturities
on and after February 15, 2024, in whole or in part in principal amounts of $5,000 or any integral multiple thereof, on
February 15, 2023, or any date thereafter, at the par value thereof plus accrued interest to the date of 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 an 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.
OPTIONAL REDEMPTION FOR THE CERTIFICATES . . . The City reserves the right, at its option, to redeem Certificates having
stated maturities on and after February 15, 2024, in whole or in part in principal amounts of $5,000 or any integral multiple
thereof, on February 15, 2023, or any date thereafter, at the par value thereof plus accrued interest to the date of redemption. If
less than all of the Certificates are to be redeemed, the City may select the maturities of Certificates to be redeemed. If less than
all the Certificates of any maturity are to be redeemed, the Paying Agent/Registrar (or DTC while the Certificates are in BookEntry-Only form) shall determine by lot the Certificates, or portions thereof, within such maturity to be redeemed. If an
Certificate (or any portion of the principal sum thereof) shall have been called for redemption and notice of such redemption shall
have been given, such Certificate (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.
NOTICE OF REDEMPTION . . . Not less than 30 days prior to a redemption date for the Obligations, the City shall cause a notice of
redemption to be sent by United States mail, first class, postage prepaid, to the registered owners of the Obligations to be
redeemed, in whole or in part, at the address of the registered owner appearing on the registration books of the Paying
Agent/Registrar at the close of business on the business day next preceding the date of mailing such notice. ANY NOTICE SO
MAILED SHALL BE CONCLUSIVELY PRESUMED TO HAVE BEEN DULY GIVEN, WHETHER OR NOT THE
REGISTERED OWNER RECEIVES SUCH NOTICE. NOTICE HAVING BEEN SO GIVEN, THE OBLIGATIONS CALLED
FOR REDEMPTION SHALL BECOME DUE AND PAYABLE ON THE SPECIFIED REDEMPTION DATE, AND
NOTWITHSTANDING THAT ANY OBLIGATIONS OR PORTION THEREOF HAS NOT BEEN SURRENDERED FOR
PAYMENT, INTEREST ON SUCH OBLIGATIONS OR PORTION THEREOF SHALL CEASE TO ACCRUE.
DEFEASANCE . . . The Ordinances provide for the defeasance of the Obligations when the payment of the principal of and
premium, if any, on the Obligations, 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, in trust (1) money sufficient to make such
payment or (2) Defeasance Securities (as defined below) that mature as to principal and interest in such amounts and at such
times to insure the availability, without reinvestment, of sufficient money to make such payment, and all necessary and proper
fees, compensation and expenses of the paying agent for the Obligations. The Ordinances provide 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,
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and (d) any other then authorized securities or obligations under applicable state law that may be used to defease obligations such
as the Obligations. 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 Obligations shall no longer be regarded to be outstanding or unpaid. Provided,
however, the City has reserved the option, to be exercised at the time of the defeasance of the Obligations, to call for redemption,
at an earlier date, those Obligations which have been defeased to their maturity date, if the City: (i) in the proceedings providing
for the firm banking and financial arrangements, expressly reserves the right to call the Obligations for redemption; (ii) gives
notice of the reservation of that right to the owners of the Obligations immediately following the making of the firm banking and
financial arrangements; and (iii) directs that notice of the reservation be included in any redemption notices that it authorizes.
BOOK-ENTRY-ONLY SYSTEM . . . This section describes how ownership of the Obligations is to be transferred and how the
principal of, premium, if any, and interest on the Obligations are to be paid to and accredited by DTC while the Obligations are
registered in its nominee name. The information in this section concerning DTC and the Book-Entry-Only System has been
provided by DTC for use in disclosure documents such as this Official Statement. The City and the Financial Advisor 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 Obligations, or
redemption or other notices, to DTC Participants, (2) DTC Participants or others will distribute debt service payments paid to
DTC or its nominee (as the registered owner of the Obligations), or redemption or other notices, to the Beneficial Owners, or that
they will do so on a timely basis, or (3) DTC will serve and act in the manner described in this Official Statement. The current
rules applicable to DTC are on file with the Securities and Exchange Commission, and the current procedures of DTC to be
followed in dealing with DTC Participants are on file with DTC.
DTC will act as securities depository for the Obligations. The Obligations will be issued as fully-registered securities registered
in the name of Cede & Co. (DTC’s partnership nominee). One fully registered certificate will be issued for each maturity of the
Obligations in the aggregate principal amount of each such maturity and will be deposited with DTC.
DTC, the world’s largest securities depository, is a limited-purpose trust company organized under the New York Banking Law,
a "banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a
"clearing corporation" within the meaning of the New York Uniform Commercial Code, and a "clearing agency" registered
pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for
over 3.5 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments
(from over 100 countries) that DTC’s participants ("Direct Participants") deposit with DTC. DTC also facilitates the post-trade
settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic
computerized book-entry transfers and pledges between Direct Participants’ accounts. This eliminates the need for physical
movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks,
trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository
Trust & Clearing Corporation ("DTCC"). DTCC is the holding company for DTC, National Securities Clearing Corporation and
Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated
subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers,
banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant,
either directly or indirectly ("Indirect Participants"). DTC has a Standard & Poor’s rating of AA+. The DTC Rules applicable to
its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at
www.dtcc.com and www.dtc.org.
Purchases of Obligations under the DTC system must be made by or through Direct Participants, which will receive a credit for
the Obligations on DTC’s records. The ownership interest of each actual purchaser of each Obligations ("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, but Beneficial Owners are expected to receive written confirmations providing details of the
transactions, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial
Owners entered into the transaction. Transfers of ownership interest in the Obligations are to be accomplished by entries made
on the books of Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing
their ownership interests in the Obligations, except in the event that use of the book-entry system for the Obligations is
discontinued.
To facilitate subsequent transfers, all Obligations deposited by Direct Participants with DTC are registered in the name of DTC’s
partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit
of Obligations with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change
in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Obligations; DTC’s records reflect only
the identity of the Direct Participant to whose account such Obligations are credited, which may or may not be the Beneficial
Owners. The Participants will remain responsible for keeping account of their holdings on behalf of their customers.
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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.
Redemption notices shall be sent to DTC. If less than all of the Obligations 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. will consent or vote with respect to the Obligations 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 the Obligations are credited on the record date (identified in a listing attached to the Omnibus Proxy).
Redemption proceeds and principal and interest payments on the Obligations will be made to DTC. DTC’s practice is to credit
Direct Participants’ accounts, upon DTC’s receipt of funds and corresponding detail information from the City or the Paying
Agent/Registrar on payable dates in accordance with their respective holdings shown on DTC’s records. Payments by
Participants to Beneficial Owners will be governed by standing instructions and customary practices, as in the case with
securities held for the accounts of customers in bearer form or registered in "street name," and will be the responsibility of such
Participant and not of DTC, the Paying Agent or the City, subject to any statutory or regulatory requirements as may be in effect
from time to time. Payment of redemption proceeds and principal and interest to DTC is the responsibility of the City,
disbursement of such payments to Direct Participants shall be the responsibility of DTC, and disbursement of such payments to
the Beneficial Owners shall be the responsibility of Direct and Indirect Participants.
DTC may discontinue providing its services as securities depository with respect to the Obligations at any time by giving
reasonable notice to the City and the Paying Agent/Registrar. Under such circumstances, in the event that a successor securities
depository is not obtained, Obligations 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, Obligations will be printed and delivered.
Use of Certain Terms in Other Sections of this Official Statement. In reading this Official Statement it should be understood
that while the Obligations are in the Book-Entry-Only System, references in other sections of this Official Statement to registered
owners should be read to include the person for which the Participant acquires an interest in the Obligations, but (i) all rights of
ownership must be exercised through DTC and the Book-Entry-Only System, and (ii) except as described above, notices that are
to be given to registered owners under the Ordinances will be given only to DTC.
Information concerning DTC and the Book-Entry-Only System has been obtained from DTC and is not guaranteed as to accuracy
or completeness by, and is not to be construed as a representation by the City, the Financial Advisor or the Initial Purchaser.
Effect of Termination of Book-Entry-Only System. In the event that the Book-Entry-Only System is discontinued by DTC or
the use of the Book-Entry-Only System is discontinued by the City, printed Obligations will be issued to the holders and the
Obligations will be subject to transfer, exchange and registration provisions as set forth in the Ordinances and summarized under
"THE OBLIGATIONS- Transfer, Exchange and Registration" below.
PAYING AGENT/REGISTRAR . . . The initial Paying Agent/Registrar is Regions Bank, Houston, Texas, an Alabama banking
corporation. In the Ordinances, the City retains the right to replace the Paying Agent/Registrar. The City covenants to maintain
and provide a Paying Agent/Registrar at all times until the Obligations are duly paid and any successor Paying Agent/Registrar
shall be a commercial bank or trust company organized under the laws of the State of Texas or other entity duly qualified and
legally authorized to serve as and perform the duties and services of Paying Agent/Registrar for the Obligations. Upon any
change in the Paying Agent/Registrar for the Obligations, the City agrees to promptly cause a written notice thereof to be sent to
each registered owner of the affected Obligations by United States mail, first class, postage prepaid, which notice shall also give
the address of the new Paying Agent/Registrar.
TRANSFER, EXCHANGE AND REGISTRATION . . . In the event the book-entry-only system should be discontinued, the Obligations
may be transferred and exchanged on the registration books of the Paying Agent/Registrar only upon presentation and surrender
to the Paying Agent/Registrar and such transfer or exchange shall be without expense or service charge to the registered owner,
except for any tax or other governmental charges required to be paid with respect to such registration, exchange and transfer.
Obligations may be assigned by the execution of an assignment form on the respective Obligations or by other instrument of
transfer and assignment acceptable to the Paying Agent/Registrar. New Obligations will be delivered by the Paying
Agent/Registrar, in lieu of the Obligations being transferred or exchanged, at the designated office of the Paying Agent/Registrar,
or sent by United States mail, first class, postage prepaid, to the new registered owner or his designee. To the extent possible,
new Obligations issued in an exchange or transfer of Obligations will be delivered to the registered owner or assignee of the
registered owner in not more than three business days after the receipt of the Obligations to be canceled, and the written
instrument of transfer or request for exchange duly executed by the registered owner or his duly authorized agent, in form
satisfactory to the Paying Agent/Registrar. New Obligations registered and delivered in an exchange or transfer shall be in any
integral multiple of $5,000 for any one maturity and for a like aggregate principal amount and series as the Obligations
surrendered for exchange or transfer. See "THE OBLIGATIONS - Book-Entry-Only System" herein for a description of the
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system to be utilized initially in regard to ownership and transferability of the Obligations. Neither the City nor the Paying
Agent/Registrar shall be required to transfer or exchange any Obligation called for redemption, in whole or in part, within 45
days of the date fixed for redemption; provided, however, such limitation of transfer shall not be applicable to an exchange by the
registered owner of the uncalled balance of an Obligation.
RECORD DATE FOR INTEREST PAYMENT . . . The record date ("Record Date") for the interest payable on the Obligations on any
interest payment date means the close of business on the last business day of the preceding month.
In the event of a non-payment of interest on a scheduled payment date, and for 30 days thereafter, a new record date for such
interest payment (a "Special Record Date") will be established by the Paying Agent/Registrar, if and when funds for the payment
of such interest have been received from the City. Notice of the Special Record Date and of the scheduled payment date of the
past due interest ("Special Payment Date," which shall be 15 days after the Special Record Date) shall be sent at least five
business days prior to the Special Record Date by United States mail, first class postage prepaid, to the address of each Holder of
an Obligation appearing on the registration books of the Paying Agent/Registrar at the close of business on the last business day
next preceding the date of mailing of such notice.
AMENDMENTS . . . The City may amend, change, or modify the Ordinances without the consent of or notice to any registered
owners, as may be required (i) by the provisions of the Ordinances; (ii) for the purpose of curing any ambiguity, inconsistency, or
formal defect or omission therein; or (iii) in connection with any other change which is not to the prejudice of the registered
owners. In addition, the City may, with the written consent of the holders of a majority in aggregate principal amount of the
Obligations then outstanding and affected thereby, amend, change, modify, or rescind any of the provisions of the Ordinances;
except that, without the consent of the registered owners of all of the Obligations affected, no such amendment, change,
modification, or rescission may (i) change the date specified as the date on which the principal of or any installment of interest on
the Obligations is due and payable, reduce the principal amount thereof or the rate of interest thereon, or in any other way modify
the terms of payment of the principal of, redemption price, or interest on the Obligations; (ii) give any preference to any
Obligations over any other Obligations; (iii) extend any waiver of default to subsequent defaults; or (iv) reduce the respective
aggregate principal amount of Obligations required for consent to any amendment, change, modification, or rescission.
OBLIGATIONHOLDERS’ REMEDIES . . . The Ordinances establish specific events of default with respect to the Obligations. If the
City defaults in the payment of the principal of or interest on the Obligations when due or the City defaults in the observance or
performance of any of the covenants, conditions, or obligations of the City, the failure to perform which materially, adversely
affects the rights of the owners, including but not limited to, their prospect or ability to be repaid in accordance with the
Ordinances, the Ordinances provide that any registered owner is entitled to seek a writ of mandamus from a court of proper
jurisdiction requiring the City to make such payment or observe and perform such covenants, obligations, or conditions. The
issuance of a writ of mandamus is controlled by equitable principles, so rests with the discretion of the court, but may not be
arbitrarily refused. There is no acceleration of maturity of the Obligations in the event of default and, consequently, the remedy of
mandamus may have to be relied upon from year to year. The Ordinances do not provide for the appointment of a trustee to
represent the interest of the holders upon any failure of the City to perform in accordance with the terms of the Ordinances, or upon
any other condition and accordingly all legal actions to enforce such remedies would have to be undertaken at the initiative of, and
be financed by, the registered owners. The Texas Supreme Court ruled in Tooke v. City of Mexia 197 S.W.3rd 325 (Tex. 2006) that
a waiver of sovereign immunity in a contractual dispute must be provided for by statute in "clear and unambiguous" language.
Because it is unclear whether the Texas legislature has effectively waived the City’s sovereign immunity from a suit for money
damages, obligation holders may not be able to bring such a suit against the City for breach of the Obligations or covenants in the
Ordinances. Even if a judgment against the City could be obtained, it could not be enforced by direct levy and execution against
the City's property. Further, the registered owners cannot themselves foreclose on property within the City or sell property within
the City to enforce the tax lien on taxable property to pay the principal of and interest on the Obligations. Furthermore, the City is
eligible to seek relief from its creditors under Chapter 9 of the U.S. Bankruptcy Code ("Chapter 9"). Although Chapter 9
provides for the recognition of a security interest represented by a specifically pledged source of revenues, the pledge of ad
valorem taxes in support of a general certificate 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
Ordinances and the Obligations are qualified with respect to the customary rights of debtors relative to their creditors.
[The Remainder of this Page Intentionally Left Blank]
13
USE OF OBLIGATION PROCEEDS . . . Proceeds from the sale of the Obligations are expected to be expended as follows:
The Bonds
The Certificates
S ources of Funds:
Par Amount
Net Premium
Accrued Interest
Total Sources of Funds
$ 42,380,000.00
3,029,340.10
165,586.46
$ 45,574,926.56
$ 11,850,000.00
464,566.35
42,590.02
$ 12,357,156.37
Uses of Funds:
Deposit to Project Construction Fund
Underwriters' Discount
Cost of Issuance
Deposit to Debt Service Fund
Total Uses of Funds
$ 45,000,000.00
228,919.81
180,420.29
165,586.46
$ 45,574,926.56
$ 12,100,000.00
123,479.55
91,086.80
42,590.02
$ 12,357,156.37
TAX INFORMATION
AD VALOREM TAX LAW . . . The appraisal of property within the City is the responsibility of the Hidalgo County Appraisal District
(the "Appraisal District"). Excluding agricultural and open-space land, which may be taxed on the basis of productive capacity, the
Appraisal District is required under the Property Tax Code to appraise all property within the Appraisal District on the basis of 100%
of its market value and is prohibited from applying any assessment ratios. In determining market value of property, different methods
of appraisal may be used, including the cost method of appraisal, the income method of appraisal and market data comparison method of
appraisal, and the method considered most appropriate by the chief appraiser is to be used. State law further limits the appraised value
of a residence homestead for a tax year to an amount that would not exceed either the lesser of (1) the property's market value for
the most recent tax year in which it was appraised or (2) the sum of (a) 10% of the property's appraised value for the preceding
tax year, plus (b) the property's appraised value for the preceding tax year, plus (c) the market value of all new improvements to
the property. The value placed upon property within the Appraisal District is subject to review by an Appraisal Review Board,
consisting of three members appointed by the Board of Directors of the Appraisal District. The Appraisal District is required to
review the value of property within the Appraisal District at least every three years. The City may require annual review at its own
expense, and is entitled to challenge the determination of appraised value of property within the City by petition filed with the
Appraisal Review Board.
Reference is made to the Texas Property Tax Code for identification of property subject to taxation; property exempt or which may
be exempted from taxation, if claimed; the appraisal of property for ad valorem taxation purposes; and the procedures and limitations
applicable to the levy and collection of ad valorem taxes.
Article VIII of the State Constitution ("Article VIII") and State law provide for certain exemptions from property taxes, the valuation
of agricultural and open-space lands at productivity value, and the exemption of certain personal property from ad valorem taxation.
Under 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; and (2) an exemption of up to 20% of the market
value of residence homesteads, subject to a minimum exemption under this provision of $5,000. The surviving spouse of an
individual who qualifies for the foregoing exemption for the residence homestead of a person 65 or older (but not the disabled) is
entitled to an exemption for the same property in an amount equal to that of the exemption for which the deceased spouse qualified if
(i) the deceased spouse died in a year in which the deceased spouse qualified for the exemption, (ii) the surviving spouse was at least
55 years of age at the time of the death of the individual’s spouse and (iii) the property was the residence homestead of the surviving
spouse when the deceased spouse died and remains the residence homestead of the surviving spouse.
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 certificate of the contract by which the debt was created.
State law and Section 2, Article VIII, 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. Effective January 1, 2010,
Section 11.131 to the Tax Code provides that a disabled veteran who receives from the United States Department of Veterans Affairs
or its successor 100% disability compensation due to a service-connected disability and a rating of 100% disabled or of individual
unemployability is entitled to an exemption from taxation of the total appraised value of the veteran's residence homestead.
14
Under Article VIII and State law, the City may freeze the total amount of ad valorem taxes levied on the residence homestead of
a disabled person or persons 65 years of age or older to the amount of taxes imposed in the year such residence qualified for such
exemption. Also, upon receipt of a petition signed by five percent of the registered voters of the City, an election must be held to
determine by majority vote whether to establish such a limitation on taxes paid on residence homesteads of persons 65 years of
age or older or who are disabled. Upon providing for such exemption, such freeze on ad valorem taxes is transferable to a
different residence homestead and to a surviving spouse living in such homestead who is disabled or is at least 55 years of age. 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 rate limitation may not be repealed or
rescinded.
Article VIII provides that eligible owners of both agricultural land (Section 1-d) and open-space land (Section 1-d-1), including
open-space land devoted to farm or ranch purposes or open-space land devoted to timber production, may elect to have such property
appraised for property taxation on the basis of its productive capacity. The same land may not be qualified under both Section 1-d
and 1-d-1.
Nonbusiness personal property, such as automobiles or light trucks, are exempt from ad valorem taxation unless the governing body
of a political subdivision elects to tax this property. Boats owned as nonbusiness property are exempt from ad valorem taxation.
Article VIII, Section 1-j of the Texas Constitution provides for an exemption from ad valorem taxation for "freeport property,"
which is defined as goods detained in the state for 175 days or less for the purpose of assembly, storage, manufacturing,
processing or fabrication. Taxing units that took action prior to April 1, 1990 may continue to tax freeport property and decisions
to continue to tax freeport property may be reversed in the future. However, decisions to exempt freeport property are not subject
to reversal. In addition, effective for tax years 2008 and thereafter, Article VIII, Section 1-n of the Texas Constitution provides
for an exemption from taxation for "goods-in-transit," which are defined as personal property acquired or imported into the state
and transported to another location inside or outside the state within 175 days of the date the property was acquired or imported
into the state. The exemption excludes oil, natural gas, petroleum products, aircraft and special inventory, including motor
vehicle, vessel and out-board motor, heavy equipment and manufactured housing inventory. After holding a public hearing, a
taxing unit may take action by January 1 of the year preceding a tax year to tax goods-in-transit during the following tax year. A
taxpayer may obtain only a freeport exemption or a goods-in-transit exemption for items of personal property.
The City and the other taxing bodies within its territory may agree to jointly create tax increment financing zones ("TIFZ"), 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. Other
overlapping taxing units levying taxes in the TIFZ may agree to contribute all or part of future ad valorem taxes levied and
collected against the value of property in the TIFZ in excess of the "frozen values" to pay or finance the costs of certain public
improvements in the TIFZ. Taxes levied by the City against the values of real property in the TIFZ in excess of the "frozen"
value are not available for general city use but are restricted to paying or financing "project costs" within the TIFZ. 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.
EFFECTIVE TAX RATE AND ROLLBACK TAX RATE . . . The City Commission adopts a tax rate per $100 taxable value for the
current year. The City Commission will be required to adopt the annual tax rate for the City before the later of September 30 or
the 60th day after the date the certified appraisal roll is received by the City. If the City Commission does not adopt a tax rate by
such required date the tax rate for that tax year is the lower of the effective tax rate calculated for that tax year or the tax rate
adopted by the City for the preceding tax year. The tax rate consists of two components: (1) a rate for funding of maintenance
and operation expenditures, and (2) a rate for debt service.
Under the Property Tax Code, the City must annually calculate and publicize its "effective tax rate" and "rollback tax rate." A
tax rate cannot be adopted by the City Commission that exceeds the lower of the rollback tax rate or the effective tax rate until
two public hearings have been held on the proposed tax rate following notice of such public hearings (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 Commission 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.
15
"Effective tax rate" means the rate that will produce last year's total tax levy (adjusted) from this year's total taxable values
(adjusted). "Adjusted" means lost values are not included in the calculation of last year's taxes and new values are not included
in this year's taxable values.
"Rollback tax rate" means the rate that will produce last year's maintenance and operation tax levy (adjusted) from this year's
values (adjusted) multiplied by 1.08 plus a rate that will produce this year's debt service from this year's values (unadjusted)
divided by the anticipated tax collection rate.
The Property Tax Code provides that certain cities and counties in the State may submit a proposition to the voters to authorize
an additional one-half cent sales tax on retail sales of taxable items for the purpose of reducing the ad valorem tax rate. If the
additional tax is levied, the effective tax rate and the rollback tax rate calculations are required to be offset by the revenue that
will be generated by the sales tax in the current year.
Reference is made to the Property Tax Code for definitive requirements for the levy and collection of ad valorem taxes and the
calculation of the various defined tax rates.
PROPERTY ASSESSMENT AND TAX PAYMENT . . . Property within the City is generally assessed as of January 1 of each year.
Business inventory may, at the option of the taxpayer, be assessed as of September. Oil and gas reserves are assessed on the
basis of a valuation process which uses an average of the daily price of oil and gas for the prior year. Taxes become due
October 1 of the same year, and become delinquent on February 1 of the following year. Taxpayers 65 years old or older are
permitted by State law to pay taxes on homesteads in four installments with the first due on February 1 of each year and the final
installment due on August 1.
PENALTIES AND INTEREST . . . Charges for penalty and interest on the unpaid balance of delinquent taxes are made as follows:
Month
February
March
April
May
June
July
Cumulative
Penalty
6%
7
8
9
10
12
Cumulative
Interest
1%
2
3
4
5
6
Total
7%
9
11
13
15
18
After July, penalty remains at 12%, and interest increases at the rate of 1% each month. In addition, if an account is delinquent in
July, an attorney's collection fee of up to 20% 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 TAX CODE . . . The City grants an exemption to the market value of the residence homestead of persons
65 years of age or older of $10,000; the disabled are also granted an exemption of $10,000.
The City has not granted an additional exemption of 20% of the market value of residence homesteads; minimum exemption of
$5,000.
See Table 1 for a listing of the amounts of the exemptions described above.
The City has adopted the tax freeze for citizens who are disabled and/or 65 years of age or older, which became a local option
and subject to local referendum on January 1, 2004.
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 the City collects its own taxes.
The City does permit split payments, and discounts are not allowed.
The City does not tax freeport property and the City does not tax goods-in-transit.
The City does collect the additional one-half cent sales tax for reduction of ad valorem taxes.
16
The City does collect an additional one-half cent sales tax for economic development.
The City has adopted a tax abatement policy.
TABLE 1 - VALUATION, EXEMPTIONS AND GENERAL OBLIGATION DEBT
2013/2014 M arket Valuation Established by Hidalgo County Appraisal District
(excluding totally exempt property)
Less Exemptions/Reductions at 100% M arket Value:
Homestead Cap Adjustment
Disabled Veterans
Disabled Persons
Over 65
Historical
Pollution
Productivity Loss
House Bill 366
Freeport Exemption
Charity Exemption
Value Lost to Freeze Adjustments
$ 8,643,858,311
$
17,890,751
29,367,081
8,511,101
65,648,712
1,317,811
362,323
284,270,125
40,687
314,795,888
1,338,427
578,283,450
2013/2014 Net Taxable Assessed Valuation
1,301,826,356
$ 7,342,031,955
General Obligation Debt Payable from Ad Valorem Taxes as of December 31, 2013(1)
Certificates of Obligation
The Bonds
The Certificates
$
30,860,000
42,380,000
11,850,000
$
85,090,000
(2)
Net General Obligation Debt Payable from Ad Valorem Taxes
$
64,115,000
(2)
General Obligation Interest and Sinking Fund as of December 31, 2013
$
1,163,277
General Obligation Debt Payable from Ad Valorem Taxes
Less: Self-Supporting Debt
$
20,975,000
Ratio General Obligation Tax Debt to Taxable Assessed Valuation
1.16%
2014 Estimated Population - 136,507
Per Capita Taxable Assessed Valuation - $53,785
Per Capita General Obligation Debt Payable from Ad Valorem Taxes - $623
Per Capita Net General Obligation Debt Payable from Ad Valorem Taxes - $470
________________
(1)
The above statement of indebtedness does not include currently outstanding $100,937,000 waterworks and sewer
system revenue bonds, as these bonds are payable solely from the net revenues of the Waterworks and Sewer System
(the “System”), as defined in the ordinances authorizing the bonds.
(2)
Portions of the City’s previously issued general obligation debt are treated and administered by the City as selfsupporting debt. In recent years, the City has transferred amounts from its enterprise funds to service substantial
portions of its general obligation debt. However, such transfers (including transfers in respect of self-supporting debt)
derived from such enterprise funds and other special governmental funds are discretionary, and there is no guarantee
that such discretionary payments from enterprise funds and other special governmental funds will be made in the
future. In the event that such discretionary transfers cease or are insufficient to pay debt service on the City’s ad
valorem tax secured debt as such debt service becomes due, the City is obligated to provide funding for any shortfall
through the levy of ad valorem taxes. See “Table 13-A – General Fund Revenues and Expenditure History.”
17
TABLE 2 - TAXABLE ASSESSED VALUATIONS BY CATEGORY
2014
Category
Real, Residential, Single-Family
Real, Residential, M ulti-Family
Real, Vacant Lots/Tracts
Real, Acreage (Land Only)
Real, Farm and Ranch Improvements
Real, Commercial and Industrial
Real, Oil, Gas, and Other M ineral Reserves
Real and Tangible Personal, Utilities
Tangible Personal, Business
Tangible Personal, Other
Real Property, Inventory
Special Inventory
Other
Error
Total Appraised Value Before Exemptions
Less: Total Exemptions/Reductions
Taxable Assessed Value
Category
Real, Residential, Single-Family
Real, Residential, M ulti-Family
Real, Vacant Lots/Tracts
Real, Acreage (Land Only)
Real, Farm and Ranch Improvements
Real, Commercial & Industrial
Real, Oil, Gas, and Other M ineral Reserves
Real and Tangible Personal, Utilities
Tangible Personal, Business
Tangible Personal, Other
Real Property, Inventory
Special Inventory
Other
Error
Total Appraised Value Before Exemptions
Less: Total Exemptions/Reductions
Taxable Assessed Value
Amount
$ 3,804,854,981
316,058,948
310,312,737
290,702,115
26,666,837
2,490,970,288
12,130,935
67,881,986
1,218,169,071
19,567,228
37,297,399
47,865,467
1,379,085
1,234
$ 8,643,858,311
1,301,826,356
$ 7,342,031,955
Taxable Appraised Value for Fiscal Year Ended September 30,
2013
2012
% of
% of
Total
Amount
Total
Amount
46.69%
$ 3,684,441,999
45.21%
$ 3,580,213,960
3.88%
309,993,100
3.80%
316,482,155
3.81%
283,853,512
3.48%
311,928,885
3.57%
302,526,632
3.71%
302,125,105
0.33%
22,753,370
0.28%
24,023,020
30.57%
2,305,527,855
28.29%
2,266,651,860
0.15%
18,521,333
0.23%
12,576,147
0.83%
60,056,870
0.74%
64,350,598
14.95%
1,174,835,528
14.42%
1,183,203,341
0.24%
19,429,841
0.24%
18,816,751
0.46%
29,961,796
0.37%
33,977,362
0.59%
40,026,684
0.49%
34,433,978
0.02%
0.00%
51,567
0.00%
0.00%
106.07%
$ 8,251,928,520
101.27%
$ 8,148,834,729
1,213,255,948
1,157,955,367
$ 7,038,672,572
$ 6,990,879,362
% of
Total
43.94%
3.88%
3.83%
3.71%
0.29%
27.82%
0.15%
0.79%
14.52%
0.23%
0.42%
0.42%
0.00%
0.00%
100.00%
Taxable Appraised Value for Fiscal Year Ended September 30,
2011
2010
RESTATED
% of
% of
Amount
Total
Amount
Total
$ 3,546,780,382
43.51%
$ 3,485,808,851
42.63%
330,576,798
4.05%
329,670,964
4.03%
325,125,700
3.99%
378,133,975
4.62%
305,457,115
3.75%
313,475,191
3.83%
29,832,261
0.37%
30,340,292
0.37%
2,282,439,872
28.00%
2,192,288,770
26.81%
27,079,892
0.33%
24,007,560
0.29%
73,418,212
0.90%
77,320,574
0.95%
1,144,424,243
14.04%
1,245,093,833
15.23%
16,784,237
0.21%
17,474,974
0.21%
35,208,857
0.43%
44,063,339
0.54%
35,346,192
0.43%
39,438,000
0.48%
52,035
0.00%
589,728
0.01%
0.00%
1,668
0.00%
$ 8,152,525,796
100.00%
$ 8,177,707,719
100.00%
1,149,287,995
1,145,147,767
$ 7,003,237,801
$ 7,032,559,952
________________
NOTE: Valuations shown are certified taxable assessed values reported by the Hidalgo County Appraisal District to the State
Comptroller of Public Accounts. Certified values are subject to change throughout the year as contested values are resolved and
the Appraisal District updates records.
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18
TABLE 3 - VALUATION AND GENERAL OBLIGATION DEBT HISTORY
Estimated
Taxable
Assessed
Taxable
Assessed
Valuation
Net Tax Debt
Outstanding
at End
Ratio of
Net Tax Debt
to Taxable
Assessed
Net Tax
Debt
Per
9/30
2010
2011
2012
Population(1)
129,877
133,206
133,978
Valuation(2)
$ 7,032,559,952
7,003,237,801
6,990,879,362
Per Capita
$ 54,148
52,574
52,179
of Year
$ 32,130,000
26,860,000
33,850,000
Valuation
0.46%
0.38%
0.48%
Capita
$ 247
202
253
2013
135,119
7,038,672,572
52,092
21,735,000
Fiscal
Year
Ended
0.31%
161
2014
136,507
7,342,031,955
53,785
61,375,000 (3)
0.84% (3)
450 (3)
________________
(1)
Source: City of McAllen, Texas.
(2)
As reported by the Hidalgo County Appraisal District on the City's annual State Property Tax Board Reports; subject to
change during the ensuing year.
(3)
Includes the Obligations.
TABLE 4 - TAX RATE, LEVY AND COLLECTION HISTORY
Fiscal
Year
Ended
9/30
2010
Tax
Rate
$ 0.4213
General
Fund
$ 0.4123
Interest
and
Sinking
(1)
Fund
$ 0.0090
Tax Levy
$ 32,024,365
% Current
% Total
Collections
94.76%
Collections(2)
98.87%
2011
0.4213
0.4120
0.0093
31,477,544
95.69%
98.76%
2012
0.4313
0.4313
0.0000
31,996,395
96.44%
98.35%
2013
0.4313
0.4313
0.0000
32,234,646
96.21%
96.21%
33,760,812 (4)
N/A
N/A
2014
0.4313
0.4313
0.0000 (3)
________________
(1)
Includes senior freeze tax levy amounts. Accounts for periodic changes in assessed values in subsequent years.
(2)
City allocates delinquent tax collections to the respective years in which the taxes were levied.
(3)
Portions of the City’s previously issued general obligation debt are treated and administered by the City as selfsupporting debt. In recent years, the City has transferred amounts from its enterprise funds to service substantial
portions of its general obligation debt. However, such transfers (including transfers in respect of self-supporting debt)
derived from such enterprise funds and other special governmental funds are discretionary, and there is no guarantee
that such discretionary payments from enterprise funds and other special governmental funds will be made in the
future. In the event that such discretionary transfers cease or are insufficient to pay debt service on the City’s ad
valorem tax secured debt as such debt service becomes due, the City is obligated to provide funding for any shortfall
through the levy of ad valorem taxes. See “Table 13-A – General Fund Revenues and Expenditure History.”
(4)
Provided by City officials.
[The Remainder of this Page Intentionally Left Blank]
19
TABLE 5 - TEN LARGEST TAXPAYERS
Name of Taxpayer
Simon Property Tax Department
Rio Grande Regional Hospital
Universal Health Services
Palms Crossing LP
GE Engine Services-M cAllen, LP
AEP Texas Central CO
H E Butt Grocery Company
Inland Western M cAllen Trenton
M cAllen M edical Center
Weingarten Las Tiendas JV
Nature of Property
Real Estate
Healthcare
Healthcare
Real Estate
Aviation
Utility
Retail
Real Estate
Healthcare
Real Estate
2013/14
Taxable
Assessed
Valuation
$ 61,802,878
56,328,437
52,246,584
41,915,932
35,988,688
31,146,500
24,437,376
22,025,172
19,185,516
17,952,261
$ 363,029,344
% of Total
Taxable
Assessed
Valuation
0.84%
0.77%
0.71%
0.57%
0.49%
0.42%
0.33%
0.30%
0.26%
0.24%
4.94%
GENERAL OBLIGATION DEBT LIMITATION . . . No general obligation debt limitation is imposed on the City under current State
law or the City's Home Rule Charter. See "THE OBLIGATIONS - Tax Rate Limitation."
TABLE 6 - TAX ADEQUACY(1)
2014 Net Principal and Interest Requirements(1)……………………………………………………………………… $3,507,424
$0.0503 Tax Rate at 95% Collection Produces …………………………………………………………………… $3,508,390
Average Annual Net Principal and Interest Requirements, 2014-2034(1)………………………………………………$4,164,299
$0.0598 Tax Rate at 95% Collection Produces …………………………………………………………………… $4,171,008
M aximum Annual Net Principal and Interest Requirements, 2018(1)………………………………………………… $6,653,825
$0.0954 Tax Rate at 95% Collection Produces …………………………………………………………………… $6,654,084
________________
(1)
Includes the Obligations and excludes the self-supporting debt.
[The Remainder of this Page Intentionally Left Blank]
20
TABLE 7 - ESTIMATED OVERLAPPING DEBT
Expenditures of the various taxing entities within the territory of the City are paid out of ad valorem taxes levied by such entities
on properties within the City. Such entities are independent of the City and may incur borrowings to finance their expenditures.
This statement of direct and estimated overlapping ad valorem tax debt ("Tax Debt") was developed from information contained
in "Texas Municipal Reports" published by the Municipal Advisory Council of Texas. Except for the amounts relating to the
City, the City has not independently verified the accuracy or completeness of such information, and no person should rely upon
such information as being accurate or complete. Furthermore, certain of the entities listed may have issued additional bonds
since the date hereof, and such entities may have programs requiring the issuance of substantial amounts of additional bonds, the
amount of which cannot be determined. The following table reflects the estimated share of overlapping Tax Debt of taxing
bodies with territory in the City.
Taxing Jurisdiction
City of M cAllen
Edinburg Consolidated Independent School District
Hidalgo County
Hidalgo County Drainage District #1
Hidalgo Independent School District
M cAllen Independent School District
Pharr-San Juan-Alamo Independent School District
Sharyland Independent School District
South Texas College
2013/14
Taxable
Assessed
Value
$ 7,342,031,955
5,095,912,755
28,090,951,424
27,301,836,212
415,606,196
6,286,719,989
3,612,061,657
2,735,210,242
28,599,949,338
2013/14
Tax
Rate
$ 0.4313
1.2398
0.5900
0.0957
1.5564
1.1650
1.3592
1.2855
0.1500
Total
G.O. Tax
Debt As of
12/31/2013
$ 85,090,000
91,086,045
162,385,000
163,535,000
16,805,445
81,550,080
127,702,528
96,212,997
44,384,991
(1)
(3)
(4)
(5)
(6)
(7)
Estimated
%
Applicable
100.00%
1.89%
28.13%
27.52%
19.63%
92.34%
13.11%
25.80%
13.80%
Total Direct and Overlapping G. O. Tax Debt
Ratio of Direct and Overlapping G. O. Tax Debt to Taxable Assessed Valuation
Per Capita Overlapping G. O. Tax Debt
City's
Overlapping
G.O. Tax
Debt As of
12/31/2013
$ 85,090,000
1,721,526
45,678,901
45,004,832
3,298,909
75,303,344
16,741,801
24,822,953
6,125,129
Authorized
But Unissued
Debt As Of
12/31/2013
$48,200,000
100,000,000
159,028,940
(2)
$ 303,787,395
4.14%
$
2,225
________________
(1)
Includes the Obligations.
(2)
These bonds were authorized in August 18, 1979. The City does not intend to issue these bonds.
(3)
Excludes approximately 55.037% as these bonds were awarded Instructional Facilities Allotment from the Texas
Education Agency and/or Tier III allotment as a result of legislation enacted by the Texas Legislature which provides
State Financial assistance for certain outstanding debt issued by school districts, excluding Maintenance Tax Notes.
The amount of state aid for debt service may substantially differ from year to year depending on a number of factors,
including amounts, if any, appropriated for that purpose by the Texas legislature from time to time.
(4)
Excludes approximately 62.791% as these bonds were awarded Instructional Facilities Allotment from the Texas
Education Agency and/or Tier III allotment as a result of legislation enacted by the Texas Legislature which provides
State Financial assistance for certain outstanding debt issued by school districts. The amount of state aid for debt
service may substantially differ from year to year depending on a number of factors, including amounts, if any,
appropriated for that purpose by the Texas legislature from time to time.
(5)
Excludes approximately 29.069% as these bonds were awarded Instructional Facilities Allotment from the Texas
Education Agency and/or Tier III allotment as a result of legislation enacted by the Texas Legislature which provides
State Financial assistance for certain outstanding debt issued by school districts. The amount of state aid for debt
service may substantially differ from year to year depending on a number of factors, including amounts, if any,
appropriated for that purpose by the Texas legislature from time to time.
(6)
Excludes approximately 66.843% as these bonds were awarded Instructional Facilities Allotment from the Texas
Education Agency and/or Tier III allotment as a result of legislation enacted by the Texas Legislature which provides
State Financial assistance for certain outstanding debt issued by school districts. The amount of state aid for debt
service may substantially differ from year to year depending on a number of factors, including amounts, if any,
appropriated for that purpose by the Texas legislature from time to time.
(7)
Excludes approximately 26.684% as these bonds were awarded Instructional Facilities Allotment from the Texas
Education Agency and/or Tier III allotment as a result of legislation enacted by the Texas Legislature which provides
State Financial assistance for certain outstanding debt issued by school districts, excluding Maintenance Tax Notes.
The amount of state aid for debt service may substantially differ from year to year depending on a number of factors,
including amounts, if any, appropriated for that purpose by the Texas legislature from time to time.
[The Remainder of this Page Intentionally Left Blank]
21
DEBT INFORMATION
TABLE 8 - GENERAL OBLIGATION DEBT SERVICE REQUIREMENTS
Fiscal
Year
Ending
22
9/30
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
Less:
Outstanding Debt Service (1)
Principal
$ 3,115,000
3,250,000
3,395,000
3,525,000
3,645,000
3,760,000
3,895,000
460,000
475,000
495,000
515,000
540,000
560,000
585,000
615,000
645,000
675,000
710,000
$ 30,860,000
Interest
$ 1,116,673
983,949
842,549
708,149
584,999
469,761
341,593
265,706
248,401
229,476
209,019
186,986
163,191
137,709
110,324
80,945
49,756
16,863
$ 6,746,049
Total
$ 4,231,673
4,233,949
4,237,549
4,233,149
4,229,999
4,229,761
4,236,593
725,706
723,401
724,476
724,019
726,986
723,191
722,709
725,324
725,945
724,756
726,863
$ 37,606,049
The Bonds
Principal
$
600,000
1,480,000
1,525,000
1,575,000
1,640,000
1,720,000
1,810,000
1,905,000
2,000,000
2,105,000
2,190,000
2,260,000
2,340,000
2,435,000
2,535,000
2,635,000
2,735,000
2,845,000
2,960,000
3,085,000
$ 42,380,000
The Certificates
Interest
$
2,545,763
1,662,975
1,617,900
1,571,400
1,506,775
1,422,775
1,334,525
1,241,650
1,144,025
1,041,400
955,925
886,350
802,825
707,325
607,925
511,113
410,300
298,700
182,600
61,700
$ 20,513,950
Total
$
3,145,763
3,142,975
3,142,900
3,146,400
3,146,775
3,142,775
3,144,525
3,146,650
3,144,025
3,146,400
3,145,925
3,146,350
3,142,825
3,142,325
3,142,925
3,146,113
3,145,300
3,143,700
3,142,600
3,146,700
$ 62,893,950
Principal
$
205,000
430,000
445,000
465,000
480,000
495,000
515,000
535,000
555,000
580,000
605,000
630,000
650,000
675,000
695,000
720,000
750,000
775,000
805,000
840,000
$ 11,850,000
Interest
$
654,028
425,469
410,119
391,919
377,819
363,119
342,919
321,919
300,119
277,419
253,719
229,019
205,856
183,903
160,350
135,588
108,925
80,331
49,700
16,800
$ 5,289,038
Total
$
859,028
855,469
855,119
856,919
857,819
858,119
857,919
856,919
855,119
857,419
858,719
859,019
855,856
858,903
855,350
855,588
858,925
855,331
854,700
856,800
$ 17,139,038
________________
(1)
"Outstanding Debt" does not include lease/purchase obligations. See “Table 12 – Other Obligations” for details on other obligations.
22
Net
% of
Self-Supporting Tax-Supported Principal
Debt Service
$
724,249
1,585,677
1,582,343
1,579,993
1,579,493
1,582,718
1,584,336
1,583,625
1,580,320
1,579,595
1,581,438
1,585,705
1,582,210
1,578,565
1,584,228
1,581,295
1,580,344
1,585,788
855,331
854,700
856,800
$ 30,188,750
Debt Service
$ 3,507,424
6,653,063
6,653,650
6,651,175
6,653,825
6,651,638
6,653,150
3,144,525
3,146,650
3,144,025
3,146,400
3,145,925
3,146,350
3,142,825
3,142,325
3,142,925
3,146,113
3,145,300
3,143,700
3,142,600
3,146,700
$ 87,450,287
Retired
27.80%
52.17%
72.49%
95.39%
100.00%
TABLE 9 - INTEREST AND SINKING FUND BUDGET PROJECTION
Tax Supported Debt Service Requirements, Fiscal Year Ending 9/30/14 (1)
Interest and Sinking Fund, 9/30/2013(2)
Budgeted Transfers
$ 3,507,424
$
284,610
3,507,424
3,792,034
Estimated Balance, 9/30/14
$
284,610
________________
(1)
Does not include self-supporting debt.
TABLE 10 - COMPUTATION OF SELF-SUPPORTING DEBT
Net Airport System Revenue Available as of 9/30/2013(1)
$
1,815,640
$
1,338,158
3,153,798
(1)
Plus: PFC Revenue Available as of 9/30/2013
Less: Requirements for Airport System Revenue Debt
Balance Available for Other Purposes
Requirements for Airport System Supported General Obligation Debt
Percentage of Airport System General Obligation Debt Self-Supporting
$
Net Waterworks and Sewer System Revenue Available as of 9/30/2013(1)
Less: Requirements for Waterworks and Sewer System Revenue Debt
Balance Available for Other Purposes
$ 10,809,537
7,441,659
$ 3,367,878
Requirements for Waterworks and Sewer System Supported General Obligation Debt
Percentage of Waterworks and Sewer System General Obligation Debt Self-Supporting
________________
(1)
Unaudited, provided by City Officials.
724,249
100%
$
100%
TABLE 11 - AUTHORIZED BUT UNISSUED TAX DEBT
Purpose
Fire Station
Police Station
Park
Library
Streets
Performing Arts Center
Parks and Recreation
Date
Amount
Authorized
8/18/1979
8/18/1979
8/18/1979
8/18/1979
11/5/2013
11/5/2013
11/5/2013
Authorized
$ 1,300,000
1,000,000
1,500,000
1,000,000
15,000,000
15,000,000
15,000,000
$ 49,800,000
Amount
Previously
$
Issued
300,000
600,000
700,000
-
$ 1,600,000
Amount
Being
Unissued
Issued
$
Balance
$ 1,000,000
400,000
800,000
1,000,000
-
15,000,000
15,000,000
15,000,000
$ 45,000,000
(1)
$ 3,200,000
________________
(1)
Includes premium being paid by the Initial Bonds Purchaser (as defined hereafter) that counts towards voted authority.
With the exception of approximately $3.2 million of remaining authorized but unissued bonds from a 1979 election that the City
does not intend to issue, the City does not have any authorized but unissued bonds remaining. However, the City may incur nonvoted debt payable from or secured by its collection of taxes and other sources of revenue, including tax notes, certificates of
obligation, public property finance contractual obligations, and leases for various purposes.
ANTICIPATED ISSUANCE OF GENERAL OBLIGATION DEBT . . . The City does not intend to issue any additional general obligation
debt in the next twelve months.
TABLE 12 – OTHER OBLIGATIONS
The City no longer has other obligations outstanding.
23
PENSION FUND . . . The City provides pension benefits for all of its full time employees, except firefighters, through a
nontraditional, joint contributory, hybrid defined pension plan in the state-wide Texas Municipal Retirement System ("TMRS"),
an agent multiple-employer public employee retirement system. The City makes annual contributions to the plan equal to the
amounts accrued for pension expense.
OTHER POST-EMPLOYMENT BENEFITS . . . Prior to the implementation of GASB 45 “Accounting and Financial Reporting by
Employers for Postemployment Benefits Other Than Pensions”, the City reported retiree health benefits in its Employee Benefits
Fund. The City has created an internal services fund entitled “Retiree Health Insurance Fund” to accommodate the provisions of
GASB 45.
(1) Plan Description: The City provides post-employment health care benefits for eligible retirees and their dependents. To be
eligible to elect retiree medical coverage, a City employee retiring at age 60 or over must have at least 10 years of service with
the City. City employees retiring before age 60 must have at least 25 years of service with the City. Members of the City’s Fire
Department are eligible to retire on or after age 50 with at least 20 years of service with the City.
Effective October 1, 2008, spouses must have been covered for at least three years prior to retirement. Retirees less than age 65
will have a one-time option to drop coverage and to be reinstated once the retiree reached age 65 and has enrolled in Medicare
Parts A and B. Retirees are required to pay 100% of the blended (active and retiree) premium cost for both single and dependent
coverage. However, police officers who retire prior to October 1, 2010 with 25 or more years of service will pay 50% of the
blended premium cost for both single and dependent coverage. As of year-end, there were 106 employees who had retired; 52
with single coverage; 31 single coverage with one dependent; and 23 with family coverage.
(2) Funding Policy: The policy of the City is to fund the plan on a pay-as-you go basis.
(3) Annual OPEB and Net OPEB Obligation: The Retiree Health Insurance Fund’s (Fund) ARC is actuarially determined in
accordance with the parameters of GASB Statement No. 45, Accounting and Financial Reporting by Employers for
Postemployment Benefits Other Than Pension. The ARC represents a level of funding that, if paid on an ongoing basis, is
projected to cover the normal cost each year and amortize any unfunded actuarial liabilities (or funding excess) over a period not
to exceed 30 years. The most current actuarial valuation was October 1, 2012. The following table shows the Fund’s annual
OPEB cost for the year, the amount actually contributed to the plan, and changes in the Fund’s net OPEB obligation:
9/30/2013
Annual required contribution
Interest on net OPEB obligation
Adjustment to annual required contribution
Annual OPEB cost
Contributions made
$
859,964
57,710
(72,214)
845,460
(763,275)
Increase (decrease) in net OPEB obligation
Net OPEB obligation at beginning of year
Net OPEB obligation (asset) at end of year
82,185
1,049,270
$ 1,131,455
The City’s annual OPEB cost and the percentage cost contributed to the plan for the year ended September 30, 2013 is as
follows:
Annual
Percentage of
Net OPEB
Year Ended
OPEB
Annual OPEB
Obligation (Asset)
September 30,
Cost
Cost Contributed
at Year End
2009
$ 551,544
96.2%
$
(179,896)
2010
882,368
51.5%
248,430
2011
882,368
62.2%
572,194
2012
862,625
44.7%
1,049,270
2013
845,460
90.3%
1,131,455
24
(4) Funded Status and Funding Progress: The funding of the plan was based on the actuarial valuation dated October 1, 2012.
The study reported the unfunded actuarial accrued liability (UAAL) at $7,165,857 with an annual required cost of $859,964. The
actuarial value of assets was $0, resulting in an UAAL of $7,165,857. The City will also be required to have an actuarial
valuation performed at least every two years.
(5) Actuarial Methods and Assumptions: Projections of benefits for financial reporting purposes are based on the substantive
plan (the plan as understood by the employer and the plan members) and include the types of benefits provided at the time of
each valuation and the historical pattern of sharing the benefits costs between employer and the plan members to that point. The
actuarial methods and assumptions used include techniques that are designed to reduce the effects of short-term volatility in
actuarial accrued liabilities consistent with the long-term perspective of the calculations. For the fiscal year ended September 30,
2013, the actuarial valuation date was October 1, 2012. The actuarial method used was the "projected unit credit" method, the
amortization method used was the "level dollar open" method, and the remaining amortization period was 30 years. The asset
valuation method was market value and the assumed investment rate of return was 5.5%. The healthcare initial inflation rate was
9.0%, with an ultimate goal of 5.0%. Assumptions such as projected salary increases and post-retirement benefit increases are
not applicable to this plan.
[The Remainder of this Page Intentionally Left Blank]
25
FINANCIAL INFORMATION
TABLE 13 - CHANGES IN NET POSITION
Unaudited
2013
REVENUES:
Program Revenues:
Charges for Services
Operating Grants and Contributions
Capital Grants and Contributions
General Revenues:
Property Taxes
Hotel Occupancy Taxes
Sales Taxes
Franchise Taxes
Unrestricted Investment Earnings
Royalties
Gain on sale of capital assets
M iscellaneous
Total Revenues
EXPENSES:
General Government
Public Safety
Highways and Streets
Health and Welfare
Culure and Recreation
Interest on Long-term Debt
Total Expenditures
Increase in Net Position Before Transfers
Transfers
Increase in Net Position
Beginning Net Position
Prior Period Adjustment
Ending Net Position
$
9,112,048
3,592,660
4,306,512
Fiscal Year Ended September 30,
2011
2010
2012
$
11,809,764
2,579,065
5,065,923
$
9,143,814
3,326,439
7,152,106
$
8,085,173
1,955,046
7,871,082
2009
$
8,574,470
2,016,915
3,984,011
32,783,760
4,784,757
60,825,866
6,457,397
123,546
936,278
1,188,002
$ 124,110,826
33,445,701
3,503,985
58,407,779
6,348,331
675,810
1,138,925
1,727,591
$ 124,702,874
32,631,332
3,257,935
54,652,192
6,349,157
944,557
2,706,824
1,223,334
$ 121,387,690
33,061,162
3,470,995
53,550,307
6,130,317
1,087,577
2,217,798
382,604
$ 117,812,061
32,183,867
3,514,817
54,669,746
6,266,684
4,308,531
1,864,867
2,250,367
$ 119,634,275
$
$
$
$
$
$
$
$
$
20,817,432
53,799,148
19,620,592
5,247,302
18,061,633
780,778
118,326,885
5,783,941
1,656,644
7,440,585
353,910,012
361,350,597
$
$
$
$
22,505,316
51,714,002
22,060,953
5,424,919
16,468,099
900,520
119,073,809
5,629,065
(13,708,822)
(8,079,757)
361,989,769
353,910,012
$
$
$
$
21,733,177
51,471,980
18,068,891
5,204,340
16,291,072
1,108,959
113,878,419
7,509,271
1,292,533
8,801,804
353,187,965
361,989,769
[The Remainder of this Page Intentionally Left Blank]
26
$
$
$
$
17,117,884
49,869,325
19,540,947
5,315,188
19,345,749
543,168
111,732,261
6,079,800
(610,088)
5,469,712
344,131,328
3,586,925
353,187,965
$
$
$
$
20,045,996
48,085,324
20,408,868
5,244,236
16,141,618
292,661
110,218,703
9,415,572
2,930,873
12,346,445
331,784,883
344,131,328
TABLE 13-A - GENERAL FUND REVENUES AND EXPENDITURE HISTORY
Unaudited
2013
REVENUES
Taxes
Licenses and Permits
Intergovernmental
Charges for Services
Fine and Forfeitures
Investment Earnings
Net decrease (increase) in the fair value
of investments
Other
Total Revenues
EXPENDITURES
Current Expenditures:
General Government
Public Safety
Highways and Streets
Health and Welfare
Culture and Recreation
Debt Service:
Principal
Interest and Fiscal Charges
Total Expenditures
EXCES S (DEFICIENCY) OF REVENUE
OVER EXPENDITURES
$
$
$
Fiscal Years Ended September 30,
2011
2010
2012
85,284,863
1,415,836
598,470
3,995,475
1,678,688
203,877
$
(171,926)
1,153,914
94,159,197
$
17,428,661
49,552,263
12,009,923
1,751,660
15,403,772
$
$
(1,987,082)
$
$
$
10,502,701
(10,450,326)
52,375
EXCES S (DEFICIENCY) OF REVENUE
AND OTHER FINANCING S OURCES
OVER (UNDER) EXPENDITURES
AND OTHER US ES
$
FUND BALANCES AT BEGINNING OF
YEAR, AS PREVIOUS LY S TATED
$
FUND BALANCES AT BEGINNING OF
YEAR, AS RES TATED
FUND BALANCES AT END OF YEAR
$
$
17,167,270
48,994,483
11,902,801
2,061,310
14,677,005
$
Add: Restatement of Prior Year Fund Balance
$
51,225
1,771,106
92,968,840
94,802,869
OTHER FINANCING S OURCES (US ES )
Transfers In
Transfers Out
Net Other Financing Sources (Uses)
$
96,146,279
$
83,293,338
1,522,912
580,898
3,836,385
1,695,585
217,391
$
79,439,658
1,362,515
662,430
3,708,508
1,597,977
433,237
(48,672)
3,314,455
90,470,108
$
18,878,871
48,758,093
12,523,648
1,596,347
14,411,876
$
96,168,835
(1,834,029)
$
$
$
9,376,061
(4,707,025)
4,669,036
(1,934,707)
$
45,810,264
$
(1)
$
$
2009
78,495,950
1,318,643
803,882
4,217,966
1,594,805
1,017,997
$
(607,465)
3,099,623
89,941,401
$
18,485,421
47,960,560
13,698,329
1,981,806
14,371,653
$
79,033,184
1,381,625
569,675
4,233,634
1,843,298
1,661,167
532,356
2,696,200
91,951,139
18,593,810
47,092,657
14,990,209
1,647,917
15,256,793
$
96,497,769
$
97,581,386
(5,698,727)
$
(6,556,368)
$
(5,630,247)
$
$
7,086,409
(2,680,000)
4,406,409
$
$
9,857,327
(12,055,934)
(2,198,607)
$
12,269,122
(8,692,653)
3,576,469
2,835,007
$
(7,897,334)
$
(2,149,959)
$
(2,053,778)
42,975,257
$
50,872,591
$
49,435,625
$
51,489,403
(2)
(3)
(4)
-
-
-
3,586,925
-
45,810,264
42,975,257
50,872,591
53,022,550
51,489,403
43,875,557
$
45,810,264
$
42,975,257
$
50,872,591
$
(5)
49,435,625
________________
(1)
During the year, the general fund transferred $3,506,426 to the debt service fund and $6,943,900 to the capital
improvement fund. The general fund received transfers of $4,608,653 from the McAllen International Toll Bridge,
$1,103,965 from the McAllen International Airport, $4,093,426 from the McAllen Economic Development
Corporation, $596,657 from the Downtown Parking Fund, and $100,000 from the EB-5 Fund.
(2)
During the year, the general fund transferred $3,507,025 to the debt service fund and $1,200,000 to the capital
improvement fund. The general fund received transfers of $4,168,414 from the McAllen International Toll Bridge,
$1,103,965 from the McAllen International Airport, $3,507,025 from the McAllen Economic Development
Corporation, and $596,657 from the downtown parking fund.
(3)
During the year, the general fund transferred $6,384,694 to the debt service fund, $3,215,240 to the capital
improvement fund, $100,000 to the McAllen EB-5 Regional Center Fund, and $2,356,000 to the Police Department
Seized Funds. The general fund received transfers of $4,429,189 from the McAllen International Bridge, $1,103,965
from the McAllen International Airport, $3,508,578 from the McAllen Economic Development Corporation, $597,657
from the Downtown Parking Fund, and $218,938 from the Health Insurance Fund.
(4)
During the year, the general fund transferred 2,680,000 of surplus revenues to the capital improvement fund, while
receiving $595,556 from nonmajor governmental funds, $4,886,888 from the McAllen International Toll Bridge,
$1,103,965 from the McAllen International Airport and $500,000 from General Insurance.
(5)
During the year, the general fund transferred $5,400,000 of surplus revenues to the capital improvement fund, as well
as a total of $3,292,653 to the debt service fund, and the information technology fund. The General Fund received
transfers of $4,438,558 from the Capital Improvement Fund, $598,818 from nonmajor government funds, $6,127,781
from the McAllen International Toll Bridge and $ 1,103,965 from the McAllen International Airport.
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TABLE 14 - MUNICIPAL SALES TAX
The City has adopted the Municipal Sales and Use Tax Act, VATCS, Tax Code, Chapter 321, 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 Obligations. Collections and enforcements are effected through the offices of the Comptroller of Public
Accounts, State of Texas, who remits the proceeds of the tax, after deduction of a 2% service fee, to the City monthly. In 1990, the
voters of the City approved the imposition of an additional sales and use tax of one-half of one percent (½% of 1%) for property tax
reduction. In 1997, the voters of the City approved the imposition of an additional sales and use tax of one-half of one percent (½%
of 1%) for economic development. The sales tax for economic development is collected solely for the benefit of the McAllen
Economic Development Corporation (the "Corporation"), and may be pledged to secure payment of sales tax revenue bonds issued
by the Corporation.
Fiscal
Year
Ended
9/30
2009
2010
2011
2012
2013
Total
% of
Ad Valorem
Equivalent
of
Ad Valorem
Per
Collected(1)
$ 41,002,311
40,162,730
40,989,143
43,805,834
45,619,399
Tax Levy
129.32%
125.41%
130.22%
136.91%
141.52%
Tax Rate
$
0.6153
0.5711
0.5853
0.6266
0.6481
Capita (2)
$ 307.83
309.24
307.71
326.96
337.62
________________
(1)
Excludes half-cent sales tax for economic development.
(2)
Population provided by the City of McAllen, Texas.
The sales tax breakdown for the City is as follows:
Property Tax Relief
Economic and Community Development
City Sales and Use Tax
State Sales and Use Tax
Total
0.50¢
0.50¢
1.00¢
6.25¢
8.25¢
FINANCIAL POLICIES
Basis of Accounting . . . The City’s accounting system is conducted on the modified accrual basis of accounting for all
governmental fund types, expendable trust funds and agency funds. Under this basis, expenditures are recorded when liabilities
are incurred; and revenues are recorded when they become measurable and available as net current assets. The accrual basis of
accounting is followed for the proprietary and non-expandable trust funds. Under accrual basis, revenues are recognized in the
accounting period in which they are earned and become measurable. Expenses are recorded in the accounting period incurred, if
measurable.
Enterprise funds are accounted for using the accrual basis of accounting. Revenues are recognized when earned, and expenses
are recognized when incurred. Operating transfers to the City are recognized when paid.
Debt Service Fund Balance . . . Money in the Interest and Sinking Funds is accumulated monthly and the Reserve Funds and
Contingency Funds are fully established in the amounts required under the Ordinances authorizing the Obligations and the
ordinances authorizing the outstanding parity bonds.
Budgetary Procedures . . . The City Commission adheres to the following procedures in establishing the budgetary data reflected
in the general purpose financial statements:
1.
Prior to September 1 of each year, the City Manager is required to submit to the City Commission a proposed balanced
budget for the fiscal year beginning on the following October 1. The operating budget includes proposed expenditures
and the means of the financing them.
2.
Public hearings are conducted to obtain taxpayer comments.
3.
Prior to October 1, the budget is legally enacted by the City Commission through passage of an ordinance.
4.
The City Manager is authorized to transfer budgeted amounts between accounts within any departments; however, any
revisions that alter the total expenditures of any department must be approved by the City Commission. Budgeted
amounts include transfers and revisions to the original appropriations ordinance.
28
INVESTMENTS
The City invests its investable funds in investments authorized by Texas law in accordance with investment policies approved by
the City Commission of the City. Both state law and the City's investment policies are subject to change.
Under Texas law, the City is authorized to invest in (1) obligations of the United States or its agencies and instrumentalities,
including letters of credit; (2) direct obligations of the State 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) certificates of deposit and share
certificates meeting the requirements of the Texas Public Funds Investment Act (Chapter 2256, Texas Government Code, as
amended) (i) that are issued by or through an institution that has its main office or a branch office in Texas and are guaranteed or
insured by the Federal Deposit Insurance Corporation or the National Credit Union Share Insurance Fund, or are secured as to
principal by obligations described in clauses (1) through (6) or in any other manner and amount provided by law for City
deposits; or (ii) where (a) 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; (b) 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; (c) the full amount of the principal and accrued interest of each of the certificates of
deposit is insured by the United States or an instrumentality of the United States, and (d) the City appoints the depository
institution selected under (a) above, a custodian as described by Section 2257.041(d) of the Texas Government Code, or a
clearing broker-dealer registered with the 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; (8) fully collateralized repurchase agreements that have a defined termination date, are fully secured by a combination of
cash and obligations described in clause (1) which are pledged to the 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; (9)
securities lending programs if (i) the securities loaned under the program are 100% collateralized, a loan made under the program
allows for termination at any time and a loan made under the program is either secured by (a) obligations that are described in
clauses (1) through (6) above, (b) irrevocable letters of credit issued by a state or national bank that is continuously rated by a
nationally recognized investment rating firm at not less than “A” or its equivalent or (c) cash invested in obligations described in
clauses (1) through (6) above, clauses (11) through (13) below, or an authorized investment pool; (ii) securities held as collateral
under a loan are pledged to the 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 or a financial institution doing business in the State of Texas; and (iv) the agreement to lend securities has a term of one
year or less; (10) certain bankers’ acceptances with the remaining term of 270 days or less, if the short-term obligations of the
accepting bank or its parent are rated at least “A-1” or “P-1” or the equivalent by at least one nationally recognized credit rating
agency; (11) commercial paper with a stated maturity of 270 days or less that is rated at least “A-1” or “P-1” or the equivalent by
either (a) two nationally recognized credit rating agencies or (b) one nationally recognized credit rating agency if the paper is
fully secured by an irrevocable letter of credit issued by a U.S. or state bank; (12) no-load money market mutual funds registered
with and regulated by the United States Securities and Exchange Commission that have a dollar weighted average stated maturity
of 90 days or less and include in their investment objectives the maintenance of a stable net asset value of $1 for each share; and,
(13) no-load mutual funds registered with the United States Securities and Exchange Commission that have an average weighted
maturity of less than two years, invest exclusively in obligations described in this paragraph, and are continuously rated as to
investment quality by at least one nationally recognized investment rating firm of not less than “AAA” or its equivalent. In
addition, bond proceeds may be invested in guaranteed investment contracts that have a defined termination date and are secured
by obligations, including letters of credit, of the United States or its agencies and instrumentalities in an amount at least equal to
the amount of bond proceeds invested under such contract, other than the prohibited obligations described in the next succeeding
paragraph.
The 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.
29
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: (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 Commission 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 Commission.
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
Commission; (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 is dependent on an analysis of the makeup
of the City’s entire portfolio or requires an interpretation of subjective investment standards), 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.
TABLE 15 - CURRENT INVESTMENTS(1)
As of September 30, 2013, the City's investable funds were invested in the following categories:
Description
Certificates of Deposit
Certificates of Deposit Accounts Registry Services (CDARs)
TexPool
M oney M arket M utual Funds
Government Securities
% of
Portfolio
7.84%
0.00%
24.29%
4.47%
63.40%
100.00%
Purchase
Price
$ 19,775,631
61,280,758
11,289,468
159,979,986
$ 252,325,843
M arket
Value
$ 19,775,631
61,286,273
11,289,468
159,680,810
$ 252,032,182
As of such date, 71% of the City's investment portfolio will mature within 701 days. The market value of the investment portfolio
was 99.88% of its purchase price.
________________
(1)
Unaudited.
30
TAX MATTERS
OPINION . . . On the date of initial delivery of the Obligations (referred to collectively throughout this section as the
“Obligations”), Bond Counsel to the Issuer, will render their opinion that, in accordance with statutes, regulations, published
rulings and court decisions existing on the date thereof ("Existing Law") (i) interest on the Obligations will be excludable from
the "gross income" of the holders thereof, and (ii) the Obligations 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 to the Issuer will express no opinion as to any other federal, state or local tax consequences
of the purchase, ownership or disposition of the Obligations. See Appendix C - Forms of Bond Counsel’s Opinions.
In rendering its opinion, Bond Counsel to the Issuer will rely upon (a) certain information and representations of the Issuer,
including information and representations contained in the Issuer's federal tax certificate, and (b) covenants of the Issuer
contained in the Obligation documents relating to certain matters, including arbitrage and the use of the proceeds of the
Obligations and the property financed or refinanced therewith. Failure by the Issuer to observe the aforementioned
representations or covenants could cause the interest on the Obligations 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 Obligations in order for interest on the Obligations 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 Obligations to be included in gross
income retroactively to the date of issuance of the Obligations. The opinion of Bond Counsel to the Issuer is conditioned on
compliance by the Issuer with such requirements, and Bond Counsel to the Issuer has not been retained to monitor compliance
with these requirements subsequent to the issuance of the Obligations.
Bond Counsel's opinion represents its legal judgment based upon its review of Existing Law and the reliance on the
aforementioned information, representations and covenants. Bond Counsel's opinion is not a guarantee of a result. 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 Obligations.
A ruling was not sought from the Internal Revenue Service by the Issuer with respect to the Obligations or the property financed
or refinanced with proceeds of the Obligations. No assurances can be given as to whether the Internal Revenue Service will
commence an audit of the Obligations, or as to whether the Internal Revenue Service would agree with the opinion of Bond
Counsel. If an Internal Revenue Service audit is commenced, under current procedures the Internal Revenue Service is likely to
treat the Issuer as the taxpayer and the Obligationholders may have no right to participate in such procedure. No additional
interest will be paid upon any determination of taxability.
FEDERAL INCOME TAX ACCOUNTING TREATMENT OF ORIGINAL ISSUE DISCOUNT . . . The initial public offering price to be paid
for one or more maturities of the Obligations may be less than the principal amount thereof or one or more periods for the
payment of interest on the Obligations may not be equal to the accrual period or be in excess of one year (the "Original Issue
Discount Obligation"). In such event, the difference between (i) the "stated redemption price at maturity" of each Original Issue
Discount Obligation, and (ii) the initial offering price to the public of such Original Issue Discount Obligation would constitute
original issue discount. The "stated redemption price at maturity" means the sum of all payments to be made on the Obligations
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 Obligation 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 Obligation equal to that portion of the amount of such original issue discount allocable to the accrual period. For a
discussion of certain collateral federal tax consequences, see discussion set forth below. In the event of the redemption, sale or
other taxable disposition of such Original Issue Discount Obligation prior to stated maturity, however, the amount realized by
such owner in excess of the basis of such Original Issue Discount Obligation 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 Obligation was held by such
initial owner) is includable in gross income.
Under existing law, the original issue discount on each Original Issue Discount Obligation is accrued daily to the stated maturity
thereof (in amounts calculated as described below for each accrual period and ratably within each such accrual period) and the
accrued amount is added to an initial owner's basis for such Original Issue Discount Obligation for purposes of determining the
amount of gain or loss recognized by such owner upon the redemption, sale or other disposition thereof.
31
The amount to be added to basis for each accrual period is equal to (a) the sum of the issue price and the amount of original issue
discount accrued in prior periods multiplied by the yield to stated maturity (determined on the basis of compounding at the close
of each accrual period and properly adjusted for the length of the accrual period) less (b) the amounts payable as current interest
during such accrual period on such Original Issue Discount Obligation.
The federal income tax consequences of the purchase, ownership, redemption, sale or other disposition of Original Issue Discount
Obligations 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 Obligations should consult their own tax advisors with
respect to the determination for federal, state and local income tax purposes of the treatment of interest accrued upon redemption,
sale or other disposition of such Original Issue Discount Obligations 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 Obligations.
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 Obligations. This discussion is based on
existing statutes, regulations, published rulings and court decisions, all of which are subject to change or modification,
retroactively. The following discussion is applicable to investors, other than those who are subject to special provisions of the
Code, such as financial institutions, property and casualty insurance companies, life insurance companies, individual recipients of
Social Security or Railroad Retirement benefits, individuals allowed an earned income credit, certain S corporations with
accumulated earnings and profits and excess passive investment income, foreign corporations subject to the branch profits tax
and taxpayers who may be deemed to have incurred or continued indebtedness to purchase Obligations.
THE DISCUSSION CONTAINED HEREIN MAY NOT BE EXHAUSTIVE. INVESTORS, INCLUDING THOSE WHO ARE
SUBJECT TO SPECIAL PROVISIONS OF THE CODE, SHOULD CONSULT THEIR OWN TAX ADVISORS AS TO THE
TAX TREATMENT WHICH MAY BE ANTICIPATED TO RESULT FROM THE PURCHASE, OWNERSHIP AND
DISPOSITION OF OBLIGATIONS BEFORE DETERMINING WHETHER TO PURCHASE THE OBLIGATIONS.
Interest on the Obligations will be includable as an adjustment for "adjusted current earnings" to calculate the alternative
minimum tax imposed on corporations by section 55 of the Code. Under section 6012 of the Code, holders of Obligations, such
as the Obligations, 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 an Obligation,
such as the Obligations, if such Obligation was acquired at a "market discount" and if the fixed maturity of such obligation is
equal to, or exceeds, one year from the date of issue. Such treatment applies to "market discount bonds" to the extent such gain
does not exceed the accrued market discount of such bonds; although for this purpose, a de minimis amount of market discount is
ignored. A "market discount bond" is one which is acquired by the holder at a purchase price which is less than the stated
redemption price at maturity or, in the case of a bond issued at an original issue discount, the "revised issue price" (i.e., the issue
price plus accrued original issue discount). The "accrued market discount" is the amount which bears the same ratio to the
market discount as the number of days during which the holder holds the obligation bears to the number of days between the
acquisition date and the final maturity date.
STATE, LOCAL AND FOREIGN TAXES . . . Investors should consult their own tax advisors concerning the tax implications of the
purchase, ownership or disposition of the Obligations 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.
OTHER INFORMATION
RATINGS
The Obligations and the presently outstanding tax supported debt of the City are rated "AA+" by Fitch and "AA+" by S&P
without regard to credit enhancement. An explanation of the significance of such ratings may be obtained from the companies
furnishing the ratings. The ratings reflect only the views of such organizations and the City makes no representation as to the
appropriateness of the ratings. There is no assurance that such ratings will continue for any given period of time or that they will
not be revised downward or withdrawn entirely by such rating companies, if in the judgment of such companies, circumstances
so warrant. Any such downward revision or withdrawal of such ratings may have an adverse effect on the market price of the
Obligations.
LITIGATION
It is the opinion of the City Attorney and City Staff that there is no pending litigation against the City that would have a material
adverse financial impact upon the City or its operations.
32
REGISTRATION AND QUALIFICATION OF OBLIGATIONS FOR SALE
The sale of the Obligations has not been registered under the Federal Securities Act of 1933, as amended, in reliance upon the
exemption provided thereunder by Section 3(a)(2); and the Obligations have not been qualified under the Securities Act of Texas
in reliance upon various exemptions contained therein; nor have the Obligations been qualified under the securities acts of any
jurisdiction. The City assumes no responsibility for qualification of the Obligations under the securities laws of any jurisdiction
in which the Obligations may be sold, assigned, pledged, hypothecated or otherwise transferred. This disclaimer of responsibility
for qualification for sale or other disposition of the Obligations shall not be construed as an interpretation of any kind with regard
to the availability of any exemption from securities registration provisions.
LEGAL INVESTMENTS AND ELIGIBILITY TO SECURE PUBLIC FUNDS IN TEXAS
Section 1201.041 of the Public Security Procedures Act (Chapter 1201, Texas Government Code) provides that the Obligations
are negotiable instruments governed by Chapter 8, Texas Business and Commerce Code, and are legal and authorized
investments for insurance companies, fiduciaries, and trustees, and for the sinking funds of municipalities or other political
subdivisions or public agencies of the State of Texas. With respect to investment in the Obligations by municipalities or other
political subdivisions or public agencies of the State of Texas, the Public Funds Investment Act, Chapter 2256, Texas
Government Code, requires that the Obligations be assigned a rating of at least "A" or its equivalent as to investment quality by a
national rating agency. See "OTHER INFORMATION - Ratings" herein. In addition, various provisions of the Texas Finance
Code provide that, subject to a prudent investor standard, the Obligations are legal investments for state banks, savings banks,
trust companies with at capital of one million dollars or more, and savings and loan associations. The Obligations are eligible to
secure deposits of any public funds of the State, its agencies, and its political subdivisions, and are legal security for those
deposits to the extent of their market value. No review by the City has been made of the laws in other states to determine
whether the Obligations are legal investments for various institutions in those states.
LEGAL OPINIONS AND NO-LITIGATION CERTIFICATE
The City will furnish a complete transcript of proceedings had incident to the authorization and issuance of the Obligations,
including the unqualified approving legal opinion of the Attorney General of Texas approving the respective Initial Certificate
and to the effect that the Obligations are valid and legally binding obligations of the City, and based upon examination of such
transcript of proceedings, the approving legal opinion of Bond Counsel, to like effect and to the effect that the interest on the
Obligations 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. 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 Obligations, or which would
affect the provision made for their payment or security, or in any manner questioning the validity of said Obligations will also be
furnished. Bond Counsel was not requested to participate, and 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, such firm has reviewed the information under the captions "THE
OBLIGATIONS" (other than the information under the subcaption "Book-Entry-Only System"), "TAX MATTERS", "OTHER
INFORMATION - Registration and Qualification of Obligations for Sale", "OTHER INFORMATION - Legal Investments and
Eligibility to Secure Public Funds in Texas", "OTHER INFORMATION - Legal Opinions and No-Litigation Certificate", and
"OTHER INFORMATION - Continuing Disclosure of Information" (other than the subcaption "Compliance with Prior
Undertakings") in the Official Statement, and such firm is of the opinion that the information relating to the Obligations and the
Ordinances contained under such captions is a fair and accurate summary of the information shown and that the information and
descriptions contained under such captions relating to the provisions of applicable state and federal laws are correct as to matters
of law. The legal fee to be paid Bond Counsel for services rendered in connection with the issuance of the Obligations is
contingent on the sale and delivery of the Obligations. The legal opinion of Bond Counsel will accompany the Obligations
deposited with DTC or will be printed on the Obligations in the event of the discontinuance of the book-entry-only system.
The legal opinions to be delivered concurrently with the delivery of the Obligations express the professional judgment of the
attorneys rendering the opinions as to the legal issues explicitly addressed therein. In rendering a legal opinion, the attorney does
not become an insurer or guarantor of that expression of professional judgment, of the transaction opined upon, or of the future
performance of the parties to the transaction. Nor does the rendering of an opinion guarantee the outcome of any legal dispute
that may arise out of the transaction.
CONTINUING DISCLOSURE OF INFORMATION
The City in the Ordinances have made the following agreement for the benefit of the holders and beneficial owners of the
Obligations. The City is required to observe the agreement for so long as it remains obligated to advance funds to pay the
Obligations. Under the agreement, the City will be obligated to provide certain updated financial information and operating data
annually, and timely notice of specified material events, to the Municipal Securities Rulemaking Board (“MSRB”). This
information will be available to the public at no charge via the MSRB’s Electronic Municipal Market Access (“EMMA”) system
at www.emma.msrb.org as described below under “Availability of Information from MSRB”.
33
ANNUAL REPORTS . . . Under Texas law, including, but not limited to, Chapter 103, as amended, Texas Local Government Code,
the City must keep its fiscal records in accordance with generally accepted accounting principles, must have its financial accounts
and records audited by a certified public accountant and must file each audit report within 180 days after the close of the Issuer's
fiscal year. The City's fiscal records and audit reports are available for public inspection during the regular business hours, and
the Issuer is required to provide a copy of the Issuer's audit reports to any bondholder or other member of the public within a
reasonable time on request upon payment of charges prescribed by the Texas General Services Commission.
The City will provide certain updated financial information and operating data to certain information vendors annually. The
information to be updated includes all quantitative financial information and operating data with respect to the City of the general
type included in Tables 1 through 6 and 8 through 15 in this Official Statement and in Appendix B to this Official Statement.
The City will update and provide this information within six months after the end of each fiscal year ending in or after 2013. The
City will provide the updated information to the MSRB.
The City may provide updated information in full text or may incorporate by reference certain other publicly available
documents, as permitted by SEC Rule 15c2-12. The updated information will include audited financial statements for the City, if
the City commissions an audit and it is completed by the required time. If audited financial statements are not provided by that
time, the City will provide unaudited financial statements for the applicable fiscal year to the MSRB, with the financial
information and operating data and will file the annual audit report when and if the same becomes available. Any such financial
statements will be prepared in accordance with the accounting principles described in the City's annual financial statements or
such other accounting principles as the City may be required to employ from time to time pursuant to state law or regulation.
The City's current fiscal year end is September 30. Accordingly, it must provide updated information by the end of March in
each year, unless the City changes its fiscal year. If the City changes its fiscal year, it will notify the MSRB of the change.
NOTICE OF OCCURRENCE OF CERTAIN EVENTS, WHETHER OR NOT MATERIAL . . . The City will notify the MSRB through
EMMA (in an electronic format as prescribed by the MSRB) within ten business days following the occurrence of any of the
following events with respect to the Obligations, without regard to whether such event is material within the meaning of the
federal securities laws: (1) principal and interest payment delinquencies; (2) unscheduled draws on debt service reserves
reflecting financial difficulties; (3) unscheduled draws on credit enhancements reflecting financial difficulties; (4) substitution of
credit or liquidity providers, or their failure to perform; (5) adverse tax opinions or 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-exempt status of the Obligations, or other events affecting the tax-exempt status of the
Obligations; (6) tender offers; (7) defeasances; (8) rating changes; and (9) bankruptcy, insolvency, receivership or similar event
of an obligated person.
NOTICE OF OCCURRENCE OF CERTAIN EVENTS, IF MATERIAL . . . The City also will notify the MSRB through EMMA (in an
electronic format as prescribed by the MSRB) within ten business days following the occurrence of any of the following events
with respect to the Obligations, if such event is material within the meaning of the federal securities laws: (1) non-payment
related defaults; (2) modifications to rights of Obligationholders; (3) Obligation calls; (4) release, substitution, or sale of property
securing repayment of the Obligations; (5) the consummation of a merger, consolidation, or acquisition involving an obligated
person or the sale of all or substantially all of the assets of the obligated person, other than in the ordinary course of business, the
entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such
actions, other than pursuant to its terms; and (6) appointment of a successor or additional trustee or the change of name of a
trustee.
NOTICE OF FAILURE TO TIMELY FILE . . . The City also will notify the MSRB through EMMA, in a timely manner, of any failure
by the City to provide financial information or operating data in accordance with the provisions described above.
AVAILABILITY OF INFORMATION FROM MSRB . . . Effective July 1, 2009 (the "EMMA Effective Date"), the SEC implemented
amendments to the Rule which approved the establishment by the MSRB of EMMA, which is now the sole successor to the
national municipal securities information repositories with respect to filings made in connection with undertakings made under
the Rule after the EMMA Effective Date. Commencing with the EMMA Effective Date, all information and documentation
filing required to be made by the City in accordance with its undertaking made for the Obligations will be made with the MSRB
in electronic format in accordance with MSRB guidelines. Access to such filings will be provided, without charge to the general
public, by the MSRB.
With respect to debt of the City issued prior to the EMMA Effective Date, the City remains obligated to make annual required
filings, as well as notices of material events, under its continuing disclosure obligations relating to those debt obligations (which
includes a continuing obligation to make such filings with the Texas state information repository (the “SID”)). Prior to the
EMMA Effective Date, the Municipal Advisory Council of Texas (the “MAC”) had been designated by the State and approved
by the SEC staff as a qualified SID. Subsequent to the EMMA Effective Date, the MAC has entered into a Subscription
Agreement with the MSRB pursuant to which the MSRB makes available to the MAC, in electronic format, all Texas-issuer
continuing disclosure documents and related information posted to EMMA’s website simultaneously with such posting. Until the
City receives notice of a change in this contractual agreement between the MAC and EMMA or of a failure of either party to
perform as specified thereunder, the City has determined, in reliance on guidance from the MAC, that making its continuing
34
disclosure filings solely with the MSRB will satisfy its obligations to make filings with the SID pursuant to its continuing
disclosure agreements entered into prior to the EMMA Effective Date.
LIMITATIONS AND AMENDMENTS . . . The City has agreed to update information and to provide notices of material 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 Obligations 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 or beneficial owners of Obligations may seek a writ of mandamus to compel the City
to comply with its agreement.
The City may amend its continuing disclosure agreement 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 the agreement, as
amended, would have permitted an underwriter to purchase or sell Obligations 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 either the holders of a majority in aggregate principal amount of the outstanding Obligations consent
or any person unaffiliated with the City (such as nationally recognized bond counsel) determines that the amendment will not
materially impair the interests of the beneficial owners of the Obligations. The City may also repeal or amend these provisions if
the SEC amends or repeals the applicable provisions of the Rule or any court of final jurisdiction enters judgment that such
provisions of the Rule are invalid, and the City also may amend the applicable provisions of the Ordinances in its discretion in
any other manner or circumstance, but in either case only if and to the extent that the provisions of this sentence would not
prevent an underwriter from lawfully purchasing or selling Obligations in the primary offering of the Obligations giving effect to
(a) such provisions as so amended and (b) any amendments or interpretations of the Rule. If the City amends its agreement, it
must 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 information and data provided.
COMPLIANCE WITH PRIOR UNDERTAKINGS . . . For the past five years, the City has complied in all material respects with all
continuing disclosure agreements made by it in accordance with SEC Rule 15c2-12.
FINANCIAL ADVISOR
First Southwest Company is employed as Financial Advisor to the City in connection with the issuance of the Obligations. The
Financial Advisor's fee for services rendered with respect to the sale of the Obligations is contingent upon the issuance and
delivery of the Obligations. First Southwest Company, in its capacity as Financial Advisor, does not assume any responsibility
for the information, covenants and representations contained in any of the legal documents with respect to the federal income tax
status of the Obligations, or the possible impact of any present, pending or future actions taken by any legislative or judicial
bodies.
The Financial Advisor to the City has provided the following sentence for inclusion in this Official Statement. The Financial
Advisor has reviewed the information in this Official Statement in accordance with, and as part of, its responsibilities to the City and,
as applicable, to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the
Financial Advisor does not guarantee the accuracy or completeness of such information.
INITIAL PURCHASER FOR THE BONDS
After requested competitive bids for the Bonds, the City accepted the bid of Hutchinson, Shockey, Erley & Co. (the “Initial
Bonds Purchaser”) to purchase the Bonds at the interest rates shown on the inside cover page of the Official Statement at a price
of par plus a cash premium of $2,800,420.29. The initial reoffering yields shown on the inside cover page were provided to the
City by the Initial Bonds Purchaser and will produce compensation to the Initial Bonds Purchaser of approximately $228,919.81.
The Initial Bonds Purchaser can give no assurance that any trading market will be developed for the Bonds after their sale by the
City to the Initial Bonds Purchaser. The City has no control over the price at which the Bonds are subsequently sold and the
initial yield at which the Bonds will be priced and reoffered will be established by and will be the responsibility of the Initial
Bonds Purchaser.
INITIAL PURCHASER FOR THE CERTIFICATES
After requested competitive bids for the Certificates, the City accepted the bid of J.P. Morgan Securities LLC (the “Initial
Certificates Purchaser”) to purchase the Certificates at the interest rates shown on the inside cover page of the Official Statement
at a price of par plus a cash premium of $341,086.80. The initial reoffering yields shown on the inside cover page were provided
to the City by the Initial Certificates Purchaser and will produce compensation to the Initial Certificates Purchaser of
approximately $123,479.55. The Initial Certificates Purchaser can give no assurance that any trading market will be developed
for the Certificates after their sale by the City to the Initial Certificates Purchaser. The City has no control over the price at which
the Certificates are subsequently sold and the initial yield at which the Certificates will be priced and reoffered will be established
by and will be the responsibility of the Initial Certificates Purchaser.
35
FORWARD-LOOKING STATEMENTS DISCLAIMER
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 hereof, and the City assumes no
obligation to update any such forward-looking statements. The City's actual results could differ materially from those discussed
in such forward-looking statements.
The forward-looking statements included herein are necessarily based on various assumptions and estimates and are inherently
subject to various risks and uncertainties, including risks and uncertainties relating to the possible invalidity of the underlying
assumptions and estimates and possible changes or developments in social, economic, business, industry, market, legal, 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 will prove to be accurate.
MISCELLANEOUS
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 resolutions contained in this Official
Statement are made subject to all of the provisions of such statutes, documents and resolutions. These summaries do not purport
to be complete statements of such provisions and reference is made to such documents for further information. Reference is
made to original documents in all respects.
The Ordinances authorizing the issuance of the Obligations 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 Obligations by the Initial
Purchaser.
/s/ James E. Darling
Mayor
City of McAllen, Texas
ATTEST:
/s/ Annette Villarreal
City Secretary
City of McAllen, Texas
36
APPENDIX A
GENERAL INFORMATION REGARDING THE CITY
THIS PAGE LEFT BLANK INTENTIONALLY
THE CITY
The City is located in Hidalgo County at the intersection of U.S. Highways 83 and 281. The City was incorporated in 1911 and
is the largest city in Hidalgo County. The City of San Antonio is approximately 230 miles north of McAllen; the City of
Monterrey, Mexico is approximately 130 miles southwest of the City and Mexico City is approximately 490 miles southwest of
the City.
The City is located in South Texas in a region known as the Rio Grande Valley or “the Valley” situated within a ten minute drive
of the United States - Mexico border. The City is locally known as the “City of Palms” because of the palm trees planted by the
earliest residents of the community.
Population samples include:
M cAllen
Hidalgo County
2010
Census
129,877
774,769
2000
Census
106,414
569,463
1990
Census
84,021
383,545
1980
Census
66,281
283,323
ECONOMY
The City’s economy is diversified having government, trade, transportation, utilities, education, health services, and hospitality,
leisure, and international trade with Mexico.
At one time the major industry in the City and the region was agriculture with various vegetables, sugar cane, and citrus groves.
Since then, the economy has undergone a significant transformation characterized by decreasing reliance on agriculture. A large
part of the growth can be attributed to the Maquiladora “Twin Plant” Program under which United States firms locate
manufacturing facilities in Mexico and use warehousing facilities in the City’s foreign trade zone. This program is intended to
keep labor costs down and maintain the firms’ competitiveness in their respective markets. The McAllen Economic
Development Corporation has helped bring hundreds of new companies and thousands of jobs into the City and Reynosa, the city
immediately across the border in which the maquiladoras are primarily located. Additionally, the North American Free Trade
Agreement has facilitated and supported the growth in trade as well as the growth and diversification of the City’s economy.
This growth has also helped to significantly reduce the unemployment rate in McAllen from 13.4% in 1996 to 6.4% in November
2013.
The City has 18 financial institutions which include: BBVA Compass Bank, Banamex USA, Bank of America, N.A., Bank of
South Texas, Border Capital Bank, N.A., Capitol One, N.A., Falcon International Bank, First National Bank, Frost Bank, Greater
South Texas Bank, Inter National Bank, International Bank of Commerce, JPMorgan Chase Bank, N.A., Lone Star National
Bank, Rio Bank, Texas Community Bank, N.A., Vantage Bank of Texas, N.A. and Wells Fargo Bank, N.A.
[The Remainder of this Page Intentionally Left Blank]
A-1
TOP EMPLOYERS MCALLEN MSA(1)
Employer
Type of Business
Edinburg Consolidated I.S.D.
Education
M cAllen Independent School District
Education
Edinburg Regional M edical Center
Healthcare
Edinburg Regional M edical Center
Healthcare
University of Texas Pan American
Education
M cAllen M edical Center
Healthcare
M cAllen M edical Center
Healthcare
Hidalgo County
Government
M ission Consolidated I.S.D.
Education
Doctor's Hospital at Renaissance
Healthcare
City of M cAllen
Government
South Texas College
Education
U.S. Customs & Border Protection
Government
Wal-M art
Retail
Columbia Rio Grande Regional Hospital
Healthcare
M ission Regional M edical Center
Healthcare
T-M obile
Communications
Convergys
Communications
H-E-B
Grocery
Dillards
Retail
________________
(1)
Source: TWC Tracer McAllen MSA reports for Hidalgo County 2011
Approximate
Number of
Employees
3,600
3,595
3,000
3,000
2,850
2,800
2,800
2,211
2,140
2,000
1,801
1,800
1,609
1,000
975
950
900
900
500
354
HISTORICAL EMPLOYMENT DATA FOR CITY OF MCALLEN(1)(2)
2013(2)
61,772
57,790
3,982
6.4%
2012(3)
61,419
56,863
4,556
7.4%
2011(3)
61,303
56,301
5,002
8.2%
2010(3)
60,081
55,120
4,961
8.3%
2009(3)
61,567
57,283
4,284
7.0%
% Unemployed (Texas)
5.8%
% Unemployed (U.S.)
6.6%
________________
(1)
Source: Texas Workforce Commission.
(2)
As of November, 2013.
6.8%
8.1%
7.9%
8.9%
8.2%
9.6%
7.5%
9.3%
Civilian Labor Force
Total Employed
Total Unemployed
Unemployment Rate
EDUCATION
McAllen Independent School District is comprised of 4 high schools (9-12), 7 middle schools (6-8), 20 elementary schools
(EE-5) and 3 alternative schools, with a combined 2011-2012 enrollment of 25,252.
On September 1, 1993, the District officially began operations at the Pecan Campus located at 3201 West Pecan, McAllen,
Texas. Estimated enrollment at the District in Fall 2012 was 29,812. There were many developments in the first year of
operation. The first off-campus courses were offered in temporary facilities in Starr County in December 1993. This pilot effort
was followed by the addition of courses in Mercedes in March 1994. Courses in other communities and facilities soon followed.
A mission statement for South Texas College District was adopted by the Board of Trustees in April 1994, and in May 1994, the
Board approved a Strategic Plan for the District.
The first and founding president of the District, Dr. Shirley A. Reed, was officially appointed in June of 1994. A fundamental
goal of developing facilities at South Texas College District is to provide access to educational opportunities for the residents of
both Starr and Hidalgo counties which are served by the District. Since the combined area is almost 3,000 square miles, this
obviously cannot be achieved by providing a single fixed delivery point. The master plan concept, therefore, comprises three key
delivery components.
A-2
Although the District comprises two counties it can, from a demographic point-of view, be more appropriately divided into three
general areas. One is the central part of Hidalgo County extending from the Rio Grande River in the south to the county line in
the north and from Sullivan City in the west to Alamo in the east. This area is proposed to be served primarily by the Pecan
Campus in McAllen.
The Pecan Campus in McAllen is at the heart of the highest population concentration in the two county areas. The buildings
themselves are in good condition and land is available for expansion. It is therefore proposed that this location continue to be the
central campus serving the local central population and, through Distance Learning, the entire District.
South Texas College District has experienced continuous growth since its inception in the Fall of 1993. South Texas College
District’s Fall 2011 enrollment had a 5% increase over the District’s Fall 2010 enrollment. To meet the demands of its increasing
enrollment, in May 2012, South Texas College District opened its newest addition, the Pecan Campus West Academic Building,
a two-story, 50,000-square foot facility. The Pecan Campus provides a full range of academic, technical, and continuing
education opportunities at the center of the greatest concentration of population.
The Technology Campus (formerly Center for Advanced and Applied Technology) was established near the Foreign Trade zone
in McAllen. The Center was developed to provide technical training to support the tremendous industrial growth which is
occurring along the border and is being fueled by NAFTA. A donated 138,000 square foot industrial building was donated to
house this state of the art training center.
Renovation of the building has been completed and space was added to house additional workforce development programs.
The Ramiro R. Casso Nursing and Allied Health Campus is located at 1101 E. Vermont. The campus was developed to provide a
facility for the nursing and allied health programs. The City of McAllen donated four (4) acres of land and $1.2 million for the
construction of the facility. The Economic Development Administration, United States Department of Commerce provided a
$1.6 million grant for Phase I and a $1.7 million grant for the Phase II construction. The District funded the remainder of the
construction costs, the furniture, fixtures, and equipment. The 53,100 square foot facility opened in August 2000.
A second area is generally the same as the areas covered by Starr County in the west. It was proposed that because of the
comparative remoteness of this area in relation to the central campus with driving times in excess of one hour that this campus be
established to serve the Hidalgo and Starr counties population. A 30-acre location to the west of Rio Grande City was selected as
the most appropriate location for the development of the Starr County Campus and is adjacent to the Rio Grande City High
School. The campus opened in August 1999.
The third distinct demographic area is the concentration of population in the eastern part of Hidalgo County extending north from
the Rio Grande to the Delta area and the county line in the east. This area, although less remote from the Pecan Campus than
Starr County, comprises a substantial concentration of population who has benefited from the opportunity of having a college
facility close at hand. A 20 acre site was selected close to Highway 83 in Weslaco and is located across the street from the
Weslaco High School. It is the site for the South Texas College District Mid-Valley Campus which opened in August 2000.
The first phase of development was funded by a $20 million general obligation bond program and the $2.5 million per year new
construction designated reserve fund. It was anticipated that this initial phase would accommodate the college district’s facilities
requirements through the year 2000.
In 1999 the District began a District Wide Campus Expansion Master Plan for construction of new facilities. The Facilities
Master Plan was developed to coincide with the projected student enrollment through the year 2010 at all campuses. With the
passage of the $98.7 million bond construction program with issues in 2002 and 2003, 763,136 square feet of construction
projects were proposed to be constructed to accommodate the facilities requirements through 2007. The proposed construction
projects have been completed.
The District purchased a 16,048 square foot building in September 2005. The building fit the needs of the information
technology department. The building has since been renovated and houses the Human Resources Office and the Office of
Institutional Research and Analytical Services.
South Texas College District completed a second expansion of the Learning Resource Center at the Pecan Campus. The Phase II
addition increased the total space at the Learning Resource Center to 65,919 square feet.
During fiscal year 2009, South Texas College District completed construction of the Nursing Allied Health Pharmacy
Technology lab improvements, Pecan Campus Memorial Garden Project, Pecan Campus Human Resources, Office of
Institutional Research and Effectiveness, and the Office of Research and Analytical Services Building Renovation, Pecan Plaza
Renovation, Pecan Campus Student Support Building K Faculty Offices Renovation, district wide site lighting improvements,
district wide portable renovations, Mid-Valley Campus sidewalk for Building E and G and Starr County Building E steel frame
improvements. South Texas College District also purchased an additional lot adjacent to its Pecan Campus for future expansion.
South Texas College District’s funding for these projects came from accumulated net assets.
A-3
In 2008, efforts began for developing an updated District Wide Campus Expansion Master Plan that would identify facilities
needs for each campus through 2020. This master plan was completed in the spring of 2010 and identified an additional 1.3
million square feet of new facilities to accommodate the anticipated student enrollment growth.
Major construction completed during fiscal year 2012 included Pecan South Boulevard Entrance and West Loop, Pecan West
Loop Road Phase II, Pecan West Academic Building and Technology Building B Welding Ventilation System. Also, completed
during fiscal year 2012 were the Pecan Building G Science Lab Improvements, Mid-Valley ADA Walkway Improvements, MidValley Portable Buildings Infrastructure, Mid-Valley Child Development Covered Walkway and Nursing Allied Health
Respiratory Therapy Lab Expansion.
________________
Source. South Texas College District Comprehensive Annual Financial Report, Fiscal Years Ended August 31, 2012 and 2011.
Major construction completed during fiscal year 2013 included Pecan Building G Fume Hood Additions, Pecan South Academic
Building J Science Lab Additional Seating Improvements, Pecan Plaza Re-Roofing, Mid-Valley Building G Science Lab
Improvements, Mid-Valley Parking Lot Expansion, Technology Southwest Building E Renovations and Starr HVAC Additional
Chiller Improvements. Also completed during fiscal year 2013 were the Mid-Valley Child Development Center Building L ReRoofing, Technology Campus Southwest Building E Repairs, District Wide Safety Film Installation for Library Windows and
James Property Demolition for Pecan Campus.
________________
Source. South Texas College District Comprehensive Annual Financial Report, Fiscal Years Ended August 31, 2013 and 2012.
South Texas College District allows eligible high school students to enroll in college courses while attending high school and
permits them to take courses in place of, or in addition to the normal course load at their high school through Dual Enrollment
Program.
High school junior and senior students are eligible to participate in this program and to receive college credit. Students admitted
to the program must meet the same requirements as all other college students. College credit earned upon successful completion
of the course may be applied towards an associate degree at South Texas College District or may transfer to other colleges and
universities.
South Texas College District has partnerships with 21 Independent School Districts:





















Donna Independent School District
Edcouch-Elsa Independent School District
Edinburg Independent School District
Hidalgo Independent School District
La Joya Independent School District
La Villa Independent School District
McAllen Independent School District
Mercedes Independent School District
Mid-Valley Academy
Mission Consolidated Independent School District
Pharr Oratory Athenaeum for University Preparation
Premier Charter High School
Progreso Independent School District
Pharr-San Juan-Alamo Independent School District
Rio Grande City Consolidated Independent School District
Roma Independent School District
Sharyland Independent School District
South Texas Independent School District
Valley View Independent School District
Vanguard Academy
Weslaco Independent School District
The District has grown rapidly since Fall 1993. The Fall 2013 enrollment was 30,233 students and the estimated enrollment for
Spring 2014 is 30,572.
________________
Source: South Texas College.
A-4
Another institution of higher learning in the area is The University of Texas-Pan American (“UTPA”), Edinburg, Texas. UTPA
began operations in September of 1927 as a two-year junior college. On December 29, 1951 the Texas Legislature signed and
passed into law the change to Pan American College in recognition of UTPA becoming a four-year institution. During the 1989
session of the Texas Legislature, a bill to merge UTPA into The University of Texas System was approved and then signed by
the Governor of Texas. In addition, during the 1991 session of the Texas Legislature, the Brownsville, Texas campus of UTPA
was established as an independent higher education institution of the University of Texas System. UTPA is the 10th largest
university in the state and the fifth largest in the UT System. UTPA offers 54 bachelor’s degree programs, 55 master’s, 3
doctoral programs, and 2 cooperative doctoral programs within 7 colleges. Newer master’s degree programs include those in
mechanical, manufacturing and electrical engineering. UTPA opened its Rehabilitative Services Annex in August, 2003 serves
the University, the community and the general public. The facility houses two projects supported by the Department of
Rehabilitation – Project Enhance and the Rehabilitation Research Initiative (RRI). Project Enhance is a three-year program
funded by the United States Department of Education with its main goal being to work with disability support offices on
university and college campuses across the country to ensure that no student is left behind as they pursue their post secondary
education. The RRI is a project also funded by the Department of Education to help conduct research on ways to better serve
Hispanics and other minorities with disabilities. After more than five years of planning, UTPA broke ground for its new $22
million Education Building on November 5, 2003. The project was completed in two phases that resulted in a state-of-the-art
teaching facility. The first phase of the project involved the renovation of the old education building, and was completed fall
2004. The second phase included the construction of an 82,000 square-foot facility which was completed in fall 2005 and
connects to the classroom section of the existing education building. The entire education complex is three times its original size
and houses innovative classrooms, labs, bilingual and dual language research centers and instruction therapy facilities. For the
2013-2014 school year, enrollment has surpassed 20,000. UTPA had a faculty of 836 and total staff of 1,136 as of Fall 2012.
________________
Source: The University of Texas-Pan American, and The University of Texas-Pan American website, www.panam.edu.
GROWTH INDICES
Year
2009
2010
2011
2012
2013
Building
Permits (1)
$ 114,668,632
136,781,994
131,404,002
178,190,097
141,336,730
________________
(1)
Source: City of McAllen.
TRANSPORTATION
McAllen-Miller International Airport is the primary business airport of the Rio Grande Valley of Deep South Texas and
Northeast Mexico with frequent daily flights between McAllen-Miller International Airport and major airline transportation hubs
in Dallas and Houston provide easy access to any destination in the world. McAllen-Miller International Airport has a 7,120foot, grooved asphalt, lighted runway and a 2,638-foot, lighted asphalt runway. There are eighteen common-carrier truck lines
operating daily schedules out of Hidalgo County. Greyhound Bus Co. and Valley Transit Co. provide bus service from McAllen
to all parts of the United States as well as various cities in Mexico. Rio Valley Switching Co. maintains daily freight service out
of the Hidalgo County. The McAllen-Hidalgo/Reynosa, Mexico International Bridge is located three miles from the McAllen
Foreign Trade Zone and Industrial Park and seven miles from the McAllen Shopping and Business District. The Anzalduas
International Bridge opened in 2009 and offers a direct route between the Rio Grande Valley and Mexican cities such as
Monterrey and Mexico City.
MEDICAL
McAllen Medical Center is a 441-bed hospital which offers a comprehensive and broad range of community services. McAllen
Medical Center’s staff includes more than 400 physicians in over 50 specialties. McAllen Medical Center offers a full spectrum
of services, including: Behavioral Health, Cancer/Oncology, Cardiology, Case Management Services, Diabetes Management,
Diagnostic Services, Endocrinology, Emergency Medicine, Gastroenterology, Hyper baric Medicine, Infertility Services,
Intensive/Critical Care, Laboratory Services, Neonatal Intensive Care Unit, Obstetric Services, Orthopedics, Outpatient Care,
Pain Management, Pathology, Pediatrics, Physician Referral, Physical Rehabilitation Services, Pulmonology/Lung Disease,
Renal/Kidney Disease, Sub acute Care and Surgery.
Rio Grande Regional Hospital is a full service acute-care medical facility with 320 beds, over 500 physicians representing over
35 specialties, and is a 24–hour Emergency Center.
Doctors Hospital at Renaissance opened in 1997 and is 506-bed full service acute care facility. The Doctors Hospital at
Renaissance opened a major addition, which includes a new Medical Tower with an expanded Emergency Department, a new
Pediatric Intensive Care Unit and a Pediatric Oncology services. Doctors Hospital at Renaissance has a medical staff of over 500
physicians providing a broad spectrum of medical and surgical services.
A-5
McAllen Heart Hospital is a 60-bed hospital that provides comprehensive inpatient and outpatient cardiac care, and staffs a 24hour full service Emergency Center.
RECREATION
Recreational facilities in the McAllen area include 4 lakes/bays, 82 parks, 15 fitness centers, 18 golf courses, 4 country clubs, 70
tennis courts, 13 swimming pools, 9 museums, 14 performing arts companies and 2 symphony orchestras. Some of the popular
sites visited include the McAllen International Museum in McAllen and in close proximity to McAllen the La Lomita Mission,
Anzalduas Park and Dam, Bentsen-Rio Grande State Park, Hidalgo County Historical Museum, Shary Estate, Virgen De San
Juan Del Valle Shrine, Laguna Atascosa, Audubon Sabal Palm Sanctuary, Falcon Dam and Santa Ana National Wildlife Refuge.
For an avid outdoorsman, McAllen is considered a hunter’s haven. Hunters are traditionally attracted to McAllen in the whitewinged dove season, however the surrounding areas provide land for lease hunting of wild turkey, javelina and wild pig as well.
Fishing can be enjoyed at nearby Falcon Lake or Lake Guerrero, or deep sea fishing in the Gulf.
Special events celebrated in McAllen annually are the Dias Festivos Marketplace, Candlelight Posada, Grapefruit Series, Texas
Citrus Fiesta, Borderfest, Springfest and Texas Square Dance Jamboree, which has earned McAllen the title of Square Dance
Capital of the World.
HIDALGO COUNTY
Hidalgo County was created in 1852 from Cameron and Starr Counties. The County is located in South Texas adjacent to the
Republic of Mexico. The County’s economy is diversified by tourism, shipping, mineral production, food processing,
agribusiness and international trade with Mexico. Vegetables, sugar cane, livestock, grains, cotton, citrus and cattle are the
principal sources of agricultural income. Stone, sand, oil, gravel and gas are the minerals produced in the County. The County is
a tourist center located in the Lower Rio Grande Valley with access to Old Mexico, and with facilities to accommodate the
summer and wither visitors.
HISTORICAL EMPLOYMENT DATA FOR HIDALGO COUNTY(1)
2013(2)
318,721
285,919
32,802
10.3%
2012(3)
316,032
281,330
34,702
11.0%
2011(3)
316,954
278,550
38,404
12.1%
2010(3)
310,181
272,730
37,451
12.1%
2009(3)
297,944
266,912
31,032
10.4%
% Unemployed (Texas)
5.8%
% Unemployed (U.S.)
6.6%
_______________
(1)
Source: Texas Workforce Commission.
(2)
As of November, 2013.
6.8%
8.1%
7.9%
8.9%
8.2%
9.6%
7.5%
9.3%
Civilian Labor Force
Total Employed
Total Unemployed
Unemployment Rate
EMPLOYMENT BY INDUSTRY AND WAGES (HIDALGO COUNTY)(1)(2)
2013
Natural Resources and Mining
Construction
Manufacturing
T rade, T ransportation & Utilities
Information
Financial Activities
Professional and Business Services
Education and Health Services
Leisure and Hospitality
Other Services
Unclassified
State Government
Local Government
Total Employme nt
Total Wage s
6,916
6,376
6,519
49,710
2,086
8,649
14,919
58,215
20,886
3,869
144
6,217
44,369
228,874
$ 1,687,077,664
2012
7,189
6,440
6,288
47,623
2,011
8,508
14,889
58,342
19,483
3,748
76
6,104
44,031
224,734
$ 1,652,101,904
_______________
(1)
(2)
Source: Texas Workforce Commission.
Statistics do not include Federal employees or their wages.
A-6
First Quarter
2011
7,248
6,451
6,106
45,767
2,046
8,171
14,140
56,119
19,564
3,903
107
6,203
45,119
220,947
$ 1,562,247,278
2010
6,373
6,855
6,294
44,258
2,020
7,628
13,679
53,689
19,198
3,844
110
6,249
44,860
215,055
$ 1,477,291,449
2009
7,457
7,586
6,635
44,717
2,252
8,047
14,504
51,011
18,970
3,857
112
5,937
44,277
215,362
$ 1,479,505,782
APPENDIX B
EXCERPTS FROM THE
CITY OF MCALLEN, TEXAS
ANNUAL FINANCIAL REPORT
For the Year Ended September 30, 2012
The information contained in this Appendix consists of excerpts from the City of McAllen,
Texas Annual Financial Report for the Year Ended September 30, 2012, and is not intended
to be a complete statement of the City's financial condition. Reference is made to the
complete Report for further information.
THIS PAGE LEFT BLANK INTENTIONALLY
,
,
,
CITY OF McALLEN, TEXAS
STATEMENT OF NET ASSETS
September 30, 2012
Governmental
Activities
ASSETS
Cash
Certificate of deposits
Investments
Receivables, net
Internal balances
Inventories
Notes receivable
Deferred charges
Restricted assets
Capital assets not being depreciated:
Land
Construction in progress
Capital assets being depreciated:
Buildings and systems
Equipment
Improvements
Infrastructure
Water rights
Accumulated depreciation
Other long term assets
Total assets
LIABILITIES
Accounts payable and accrued liabilities
Unearned revenues
Other
$
2,266,445
23,940,080
106,200,321
20,569,699
(3,457,068)
279,664
-
Primary Government
Business-type
Activities
$
3,335,090
3,305,962
21,979,962
6,976,999
3,457,068
310,896
168,702
2,520,990
82,715,938
Total
$
5,601,535
27,246,042
128,180,283
27,546,698
310,896
168,702
2,800,654
82,715,938
47,111,423
43,662,463
21,147,150
61,699,097
68,258,573
105,361,560
63,737,943
72,472,450
40,056,357
179,561,099
(188,078,556)
1,246,791
229,559,974
48,944,568
216,184,694
7,123,100
(193,721,285)
609,713
293,297,917
121,417,018
256,241,051
179,561,099
7,123,100
(381,799,841)
1,856,504
$
409,569,111
$
516,318,618
$
925,887,729
$
16,135,243
558,431
3,697,936
$
9,575,843
2,118,705
244,012
$
25,711,086
2,677,136
3,941,948
Non-current liabilities:
Due within one year
Due in more than one year
Net OPEB obligation
Net pension obligation
7,281,970
26,660,742
1,049,270
275,507
6,618,000
136,519,838
-
13,899,970
163,180,580
1,049,270
275,507
Total liabilities
55,659,099
155,076,398
210,735,497
234,246,829
269,408,160
503,654,989
26,415,082
273,111
6,732,690
86,242,300
20,349,242
3,993,602
4,610,438
62,880,778
26,415,082
20,349,242
4,266,713
4,610,438
6,732,690
149,123,078
353,910,012
361,242,220
715,152,232
NET ASSETS
Invested in capital assets, net of related debt
Restricted for:
Economic Development
Capital projects
Debt service
Distribution of net surplus revenues
Other purposes
Unrestricted
Total net assets
Total liabilities and net assets
$
409,569,111
The notes to the financial statements are an intergral part of this statement.
‐ 19 ‐
$
516,318,618
$
925,887,729
CITY OF McALLEN, TEXAS
STATEMENT OF ACTIVITIES
For the Year Ended September 30, 2012
Program Revenues
Charges for
Services
Expenses
Operating Grants
and Contributions
Capital Grants
and Contributions
$
$
Functions/Programs
Governmental activities:
General government
$
22,505,316
$
1,862,654
1,033,797
465,719
Public safety
51,714,002
7,358,779
338,718
1,320,808
Highways and streets
22,060,953
1,140,683
-
3,125,322
5,424,919
241,620
1,185,997
-
16,468,099
1,206,028
20,553
154,074
Health and welfare
Culture and recreation
Interest on long-term debt
Total governmental activities
900,520
-
-
-
119,073,809
11,809,764
2,579,065
5,065,923
Business-type activities:
Water services
16,492,817
15,964,657
-
770,502
Sewer services
12,704,012
14,568,552
-
562,695
Sanitation services
13,808,444
16,669,790
-
56,115
1,464,808
1,254,934
-
-
Golf course services
Civic center services
398,739
254,288
-
-
Convention center services
4,970,522
1,946,962
-
-
Airport services
6,672,164
5,348,050
-
2,811,955
Transit services
1,155,996
339,969
157,396
1,072
Bus services
2,553,618
392,354
626,918
121,043
Bridge services--anzalduas
4,140,909
2,648,419
-
-
Bridge services
6,004,265
11,911,324
-
-
70,366,294
189,440,103
71,299,299
83,109,063
784,314
3,363,379
4,323,382
9,389,305
Total business-type activities
Total primary government
General revenues:
Property taxes
Hotel occupancy tax
Sales taxes
Franchise taxes
Unrestricted investment earnings
Royalties
Miscellaneous
Transfers
Total general revenues and transfers
Change in net assets
Net assets - beginning
Net assets - ending
The notes to the financial statements are an integral part of this statement.
- 20 -
Net (Expenses) Revenues and
Changes in Net Assets
Primary Government
Governmental
Activities
$
(19,143,146)
Business-type
Activities
$
-
$
(19,143,146)
(42,695,697)
-
(42,695,697)
(17,794,948)
-
(17,794,948)
(3,997,302)
-
(3,997,302)
(15,087,444)
-
(15,087,444)
(900,520)
-
(900,520)
(99,619,057)
-
(99,619,057)
-
242,342
242,342
-
2,427,235
2,427,235
-
2,917,461
2,917,461
-
(209,874)
(209,874)
-
(144,451)
(144,451)
-
(3,023,560)
(3,023,560)
-
1,487,841
1,487,841
-
(657,559)
(657,559)
-
(1,413,303)
(1,413,303)
-
(1,492,490)
(1,492,490)
-
5,907,059
5,907,059
(99,619,057)
6,040,701
6,040,701
6,040,701
(93,578,356)
33,445,701
-
33,445,701
3,503,985
-
3,503,985
58,407,779
-
58,407,779
6,348,331
-
6,348,331
675,810
456,604
1,132,414
1,138,925
-
1,138,925
1,727,591
1,001
1,728,592
(13,708,822)
13,708,822
-
91,539,300
14,166,427
105,705,727
(8,079,757)
20,207,128
12,127,371
361,989,769
$
Total
353,910,012
341,035,092
$
361,242,220
- 21 -
703,024,861
$
715,152,232
CITY OF McALLEN, TEXAS
BALANCE SHEET
GOVERNMENTAL FUNDS
September 30, 2012
Development
Corp.
General
ASSETS
Current assets:
Cash
$
Certificates of deposit
Investments
1,656,445
$
26,554
7,440,080
5,000,000
37,960,340
23,120,378
11,571,789
2,432,289
1,840,304
-
Receivables, net:
Taxes
Accounts
Accrued interest
69,894
42,448
Other
573,835
-
Due from other funds
724,446
-
34,601
-
150,000
-
1,246,791
-
Due from other governments
Advances to other funds
Board advances
Total assets
$
63,268,525
$
30,621,669
$
2,880,404
$
2,432,299
LIABILITIES AND FUND BALANCES
Liabilities:
Accounts payable
Accrued liabilities
2,392,572
505,813
Due to other funds
-
-
Deferred revenues
11,202,850
1,263,649
982,435
-
17,458,261
4,201,761
Other
Total liabilities
Fund balances:
Nonspendable
1,396,791
-
88,536
26,419,908
-
-
1,464,107
-
Unassigned
42,860,830
-
Total fund balances
45,810,264
26,419,908
Restricted
Committed
Assigned
Total liabilities and fund balances
$
63,268,525
The notes to the financial statements are an intergral part of this statement.
- 22 -
$
30,621,669
Other
Governmental
Funds
Capital
Improvement
$
23,914
$
278,196
Total
Governmental
Funds
$
1,985,109
-
1,650,000
14,090,080
8,216,783
9,376,940
78,674,441
-
37,984
14,042,062
-
674,404
2,514,708
11,149
13,190
136,681
4,244
408,744
986,823
-
-
724,446
296,638
1,966,757
2,297,996
352,716
-
502,716
-
-
1,246,791
$
8,905,444
$
14,406,215
$
117,201,853
$
689,027
$
1,674,453
$
7,676,183
58,720
461,987
3,419,092
-
907,274
907,274
-
37,984
12,504,483
-
2,700,644
3,683,079
747,747
5,782,342
28,190,111
352,716
-
1,749,507
-
7,751,219
34,259,663
-
217,989
217,989
7,804,981
663,760
9,932,848
-
(9,095)
8,157,697
$
8,905,444
42,851,735
8,623,873
$
14,406,215
- 23 -
89,011,742
$
117,201,853
,
CITY OF McALLEN, TEXAS
Reconciliation of the Balance Sheet of the Governmental Funds
to the Statement of Net Assets
September 30, 2012
Total governmental fund balances (refer to page 23)
$
89,011,742
Amounts reported for governmental activities in the statement of net assets are different because:
Capital assets used in governmental activities are not financial resources and therefore are not reported in the
funds.
252,493,086
Other long-term assets are not available to pay for current-period expenditures and therefore are deferred in
the funds. The amount consists of the following: property taxes-$3,646,065; sales and
franchise taxes-$5,054,594; weed and lot cleaning-$773,488; special assessments-$21,974;
others; $1,203,139 and Mission repayment on Series B Bridge bonds, $1,246,791.
11,946,051
Internal service funds are used by management to charge the costs of certain activities, such as fleet
management and insurance, to individual funds. The assets and liabilities of certain internal service funds
are included in governmental activities in the statement of net assets.
35,550,741
Some liabilities, including bonds payable, are not due and payable in the current period and therefore are not
reported in the funds, including unpaid compensated absences, ($8,411,369), sales tax revenue
bonds payable,($150,000), accrued interest, ($119,974), certificate of obligations, ($24,355,000),
premium, ($1,010,152), discount, $164,494, issuance costs, $115,170, net pension obligation, ($275,507),
and net OPEB obligation, ($1,049,270).
Net assets of governmental activities
(35,091,608)
$
The notes to the financial statements are an integral part of this statement.
- 25 -
353,910,012
CITY OF McALLEN, TEXAS
STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES
GOVERNMENTAL FUNDS
For the Year Ended September 30, 2012
Development
Corp
General
REVENUES
Taxes
Licenses and permits
Intergovernmental
Charges for services
Fines and forfeitures
Investment earnings
Net increase in the fair value of investments
Other
$
Total revenues
83,293,338
1,522,912
580,898
3,836,385
1,695,585
217,391
51,225
1,771,106
$
14,601,944
113,199
29,017
-
92,968,840
14,744,160
17,167,270
48,994,483
11,902,801
2,061,310
14,677,005
607,266
100,000
8,331,863
2,174,829
28,060
-
25,000
9,056
Total expenditures
94,802,869
11,276,074
Excess of revenues over (under) expenditures
(1,834,029)
3,468,086
OTHER FINANCING SOURCES (USES)
Transfers in
Transfers out
9,376,061
(4,707,025)
(5,382,394)
Net other financing sources (uses)
4,669,036
(5,382,394)
Net change in fund balances
2,835,007
(1,914,308)
42,975,257
28,334,216
EXPENDITURES
Current:
General government
Public safety
Highways and streets
Health and welfare
Culture and recreation
Debt service:
Principal
Interest and fiscal charges
Fund balances at beginning of year
Fund balances at end of year
$
45,810,264
The notes to the financial statements are an integral part of this statement.
- 26 -
$
26,419,908
Other
Governmental
Funds
Capital
Improvement
$
257,015
51,521
15,792
83,321
$
$
101,438,055
1,536,902
6,734,270
5,026,625
5,422,628
412,223
96,260
2,686,826
407,649
15,233,140
123,353,789
307,682
740,388
1,913,217
2,636,207
3,328,205
2,770,371
2,834,978
1,166,454
5,127,978
21,410,423
52,605,242
24,982,859
5,402,593
22,469,250
-
2,505,000
1,003,200
2,530,000
1,012,256
5,597,494
18,736,186
130,412,623
(5,189,845)
(3,503,046)
(7,058,834)
2,181,997
(135,831)
4,412,566
(3,624,503)
15,970,624
(13,849,753)
2,046,166
$
3,542,773
13,990
5,896,357
1,190,240
3,727,043
30,112
226
832,399
Total
Governmental
Funds
788,063
2,120,871
(3,143,679)
(2,714,983)
(4,937,963)
11,301,376
11,338,856
93,949,705
8,157,697
$
- 27 -
8,623,873
$
89,011,742
,
CITY OF McALLEN, TEXAS
Reconciliation of the Statement of Revenues
Expenditures, and Changes in Fund Balances of Governmental Funds
to the Statement of Activities
For the year ended September 30, 2012
Amounts reported for governmental activities in the statement of activities are different because:
Net change in fund balances--total governmental funds (refer to page27)
$
(4,937,963)
Amounts reported for governmental activities in the statement of activities are different because:
Governmental funds report capital outlays as expenditures. However, in the statement of activities the cost
of those assets is allocated over their estimated useful lives and reported as depreciation expense. This is
the amount by which capital outlays $21,842,876 exceeded depreciation, net of depreciation ($12,370,248)
in the current period.
9,472,628
Revenues in the statement of activities that do not provide current financial resources are not reported as
revenues in the funds.
492,881
Repayment of bond principal is an expenditure in the governmental funds, but the repayment reduces longterm liabilities in the statement of net assets.
2,530,000
Some expenses reported in the statement of activities do not require the use of current financial resources
and therefore are not reported as expenditures in governmental funds of which ($383,575) is compensated
absences, $12,686 accrued interest expense, bond amortization expense, $99,049, Firemen's Fund net
pension obligation, ($92,877), and net OPEB obligation, ($1,049,270).
(1,413,987)
Internal service funds are used by management to charge the costs of certain activities, such as fleet
management and insurance, to individual funds. The net revenue (expense) of certain internal service funds
is reported with governmental activities.
1,651,824
In the statement of actitivies, only the loss on sale is reported, whereas in the governmental, the proceeds
from the sale decrease financial resources. Thus the change in net assets differs from the change in fund
balance by the cost of the capital assets transferred to a BTA fund, $15,829,693, and
by the cost of other assets sold, $45,447.
Change in net assets of governmental activities
(15,875,140)
$
The notes to the financial statements are an integral part of this statement.
- 29 -
(8,079,757)
,
CITY OF McALLEN, TEXAS
GENERAL FUND
STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES
BUDGET AND ACTUAL
For the Year Ended September 30, 2012
Original
Budget
REVENUES
Taxes:
Property
Sales
Franchise
Total taxes
Licenses and permits:
Business licenses and permits
Occupational
Non-business licenses and permits
Total licenses and permits
Intergovernmental revenues:
State shared revenues
Total intergovernmental revenues
Charges for services:
General government
Public safety
Highways and streets
Health
Culture and recreation
Total charges for services
Fines and forfeitures:
Corporations court
Other fines
Total fines and forfeitures
Investment earnings
$
Final Budget
32,651,201
40,564,358
6,304,000
$
32,651,201
40,564,358
6,304,000
Actual Amount
Variance with
Final Budget
Positive
(Negative)
$
$
33,139,172
43,805,835
6,348,331
487,971
3,241,477
44,331
79,519,559
79,519,559
83,293,338
3,773,779
43,000
201,400
1,013,800
43,000
201,400
1,013,800
55,953
253,938
1,213,021
12,953
52,538
199,221
1,258,200
1,258,200
1,522,912
264,712
430,000
430,000
580,898
150,898
430,000
430,000
580,898
150,898
1,368,602
696,900
1,000
568,100
1,013,460
1,368,602
696,900
1,000
568,100
1,013,460
1,342,629
764,039
590,220
1,139,497
(25,973)
67,139
(1,000)
22,120
126,037
3,648,062
3,648,062
3,836,385
188,323
1,650,000
45,000
1,720,571
45,000
1,628,655
66,930
(91,916)
21,930
1,695,000
1,765,571
1,695,585
(69,986)
265,000
265,000
217,391
(47,609)
- 31 -
CITY OF McALLEN, TEXAS
GENERAL FUND
STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES
BUDGET AND ACTUAL
For the Year Ended September 30, 2012
Original
Budget
Net increase in fair value of investments
$
Final Budget
-
$
-
Actual Amount
Variance with
Final Budget
Positive
(Negative)
$
$
51,225
51,225
Other:
Royalties
Rents and concessions
Reimbursements
Other
2,500,000
40,000
371,000
2,500,000
40,000
371,000
1,138,925
17,993
76,463
537,725
(1,361,075)
(22,007)
76,463
166,725
Total other revenues
2,911,000
2,911,000
1,771,106
(1,139,894)
89,726,821
89,797,392
92,968,840
3,171,450
EXPENDITURES
General government:
City commission
Special service
City manager
City secretary
Vital statistics
Passport facility
Audit office
Municipal court
Finance
Tax office
Purchasing and contracting
Legal
Grant administration
Right of way
Human resources
Risk management
Planning
Information technology
Public information office
City hall
Building maintenance
Non-departmental activities
Contingency
168,206
856,800
1,434,539
405,565
188,647
63,550
200,623
1,281,616
1,286,945
942,393
491,371
999,617
383,771
172,991
547,552
651,761
1,129,089
2,196,023
644,953
738,552
506,733
2,159,435
(1,733,333)
168,206
856,800
1,434,539
405,565
188,647
63,550
200,623
1,352,187
1,286,945
942,393
491,371
1,309,617
383,771
200,491
547,552
651,761
1,129,089
2,196,023
644,953
738,552
506,733
2,159,435
(1,733,333)
150,622
983,805
1,179,418
407,899
144,783
58,602
201,919
1,204,481
1,304,555
997,215
420,416
1,490,140
359,775
180,801
539,150
651,761
941,955
2,111,878
564,559
655,338
518,667
2,099,531
-
17,584
(127,005)
255,121
(2,334)
43,864
4,948
(1,296)
147,706
(17,610)
(54,822)
70,955
(180,523)
23,996
19,690
8,402
187,134
84,145
80,394
83,214
(11,934)
59,904
(1,733,333)
Total general government
15,717,399
16,125,470
17,167,270
(1,041,800)
Total revenues
- 32 -
CITY OF McALLEN, TEXAS
GENERAL FUND
STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES
BUDGET AND ACTUAL
For the Year Ended September 30, 2012
Original
Budget
Public safety:
Police
Animal control
Communication technology
Fire
Traffic operations
Building code compliance
Total public safety
Highways and streets:
Engineering services
Street cleaning
Street maintenance
Street lighting
Sidewalk construction
Drainage
Total highways and streets
Health and welfare:
Health code compliance
Graffiti cleaning
Other agencies
Total health and welfare
Culture and recreation:
Parks and recreation administration
Parks
Recreation
Pools
Las palmas community center
Recreation center-Lark
Recreation center-Palmview
$
Final Budget
29,259,082
210,653
199,842
15,959,012
2,146,745
971,794
$
29,259,082
210,653
199,842
15,959,012
2,146,745
971,794
Actual Amount
$
29,302,202
183,681
244,692
16,191,498
2,179,112
893,298
Variance with
Final Budget
Positive
(Negative)
$
(43,120)
26,972
(44,850)
(232,486)
(32,367)
78,496
48,747,128
48,747,128
48,994,483
(247,355)
1,826,293
424,120
6,898,047
1,977,001
306,518
1,451,711
1,871,793
424,120
6,898,047
1,977,001
306,518
1,451,711
1,828,514
369,402
5,710,159
2,414,288
257,940
1,322,498
43,279
54,718
1,187,888
(437,287)
48,578
129,213
12,883,690
12,929,190
11,902,801
1,026,389
1,100,898
171,586
242,462
1,100,898
171,586
242,462
1,041,252
150,453
869,605
59,646
21,133
(627,143)
1,514,946
1,514,946
2,061,310
(546,364)
540,952
5,409,583
1,145,052
692,085
334,241
365,695
390,673
540,952
5,409,583
1,145,052
692,085
334,241
365,695
390,673
540,198
5,722,790
1,337,214
750,909
315,631
354,414
387,763
754
(313,207)
(192,162)
(58,824)
18,610
11,281
2,910
- 33 -
CITY OF McALLEN, TEXAS
GENERAL FUND
STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES
BUDGET AND ACTUAL
For the Year Ended September 30, 2012
Original
Budget
Quinta mazatlan
Library
Library branch-Lark
Library branch-Palmview
Other agencies
Museums
$
Final Budget
459,754
3,041,082
401,143
417,599
656,659
748,112
$
459,754
3,041,082
401,143
417,599
656,659
748,112
Actual Amount
$
483,759
2,649,354
346,905
383,464
656,492
748,112
Variance with
Final Budget
Positive
(Negative)
$
(24,005)
391,728
54,238
34,135
167
-
Total culture and recreation
14,602,630
14,602,630
14,677,005
(74,375)
Total expenditures
93,465,793
93,919,364
94,802,869
(883,505)
Excess of revenues over (under) expenditures
(3,738,972)
(4,121,972)
(1,834,029)
2,287,943
9,261,430
(6,007,025)
9,261,430
(6,007,025)
9,376,061
(4,707,025)
114,631
1,300,000
3,254,405
3,254,405
4,669,036
1,414,631
2,835,007
3,702,574
42,975,257
-
OTHER FINANCING SOURCES (USES)
Transfers in
Transfers out
Net other financing sources (uses)
Net change in fund balances
(484,567)
Fund balances at begining of year
Fund balances at end of year
(867,567)
42,975,257
$
42,490,690
42,975,257
$
The notes to the financial statements are an integral part of this statement.
- 34 -
42,107,690
$
45,810,264
$
3,702,574
CITY OF McALLEN, TEXAS
DEVELOPMENT CORPORATION FUND
STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES
BUDGET AND ACTUAL
For Fiscal Year Ended September 30, 2012
Original
Budget
Final Budget
Actual Amount
Variance with
Final Budget
Positive
(Negative)
$
$
REVENUES
Sales tax
$
Intergovernmental revenues
Investment earnings
Increase in the fair value of investments
Total revenues
13,521,452
$
13,521,452
14,601,944
1,080,492
913,069
913,069
-
(913,069)
50,000
-
50,000
-
113,199
29,017
63,199
29,017
14,484,521
14,484,521
14,744,160
259,639
4,391,640
4,391,640
607,266
3,784,374
112,500
112,500
100,000
12,500
EXPENDITURES
Current:
General government
Public safety
Highways and streets
12,258,401
12,924,124
8,331,863
4,592,261
Health and welfare
2,356,000
2,356,000
2,174,829
181,171
Culture and recreation
1,752,000
1,752,000
28,060
1,723,940
25,000
25,000
25,000
8,506
8,506
9,056
20,904,047
21,569,770
11,276,074
10,293,696
(6,419,526)
(7,085,249)
3,468,086
10,553,335
Transfers out
(9,584,606)
(9,584,606)
(5,382,394)
4,202,212
Total other financing sources (uses)
(9,584,606)
(9,584,606)
(5,382,394)
4,202,212
(16,004,132)
(16,669,855)
(1,914,308)
14,755,547
28,334,216
28,334,216
28,334,216
Debt service:
Principal
Interest and fiscal charges
Total expenditures
(550)
Excess (deficiency) of revenues
over expenditures
OTHER FINANCING SOURCES (USES)
Net changes in fund balances
Fund balances--beginning
Fund balances--ending
$
12,330,084
$
11,664,361
The notes to the financial statements are a integral part of this statement.
- 35 -
$
26,419,908
$
14,755,547
CITY OF McALLEN, TEXAS
PROPRIETARY FUNDS
STATEMENT OF NET ASSETS
September 30, 2012
Business Type Activities-Enterprise Funds
Water
ASSETS
Current assets:
Cash
Certificate of deposit
Investments
Receivables, net:
Accounts
Accrued interest
Other
Due from other funds
Due from other governments
Inventories, at cost
Restricted assets:
Cash and cash equivalents
Total current assets
Noncurrent assets:
Restricted assets:
Investments
Other
Total noncurrent restricted assets
Capital assets:
Land
Buildings and systems
Improvements other than buildings
Machinery and equipment
Construction in progress
Water rights
Less accumulated depreciation
and amortization
$
290,735
555,962
4,521,266
Sewer
$
Sanitation
1,925,085
2,278,171
$
McAllen
International
Airport
Convention
Center
150,672
750,000
4,704,764
$
19,365
700,000
1,521,387
$
70,822
250,000
3,619,685
1,997,606
11,009
65
-
1,869,049
4,253
19,705
-
2,135,067
6,629
867
-
34,833
2,876
5,124
247,690
-
434,491
3,888
1,165
17,157
24,013
-
-
-
-
152,971
18,021
39,444
69
14,888
7,553,627
6,114,284
7,787,443
2,531,344
4,412,096
20,031,660
108,335
32,390,144
130,930
7,871,360
-
751,109
-
12,031,282
1,196,392
20,139,995
32,521,074
7,871,360
751,109
13,227,674
3,039,265
54,547,011
58,696,272
5,799,024
5,371,234
7,123,100
1,983,995
63,233,397
37,541,736
6,969,665
46,219,312
-
928,277
2,241,785
382,905
20,349,487
9,152
-
6,202,778
56,281,224
6,690,881
2,651,356
-
3,251,781
32,253,761
53,010,829
2,378,037
10,001,537
-
(51,535,468)
(51,458,948)
(14,332,738)
(8,966,424)
(41,928,635)
83,040,438
104,489,157
9,578,868
62,859,815
58,967,310
84,351
816,331
-
84,351
712,507
-
-
-
158,798
-
900,682
796,858
-
-
158,798
104,081,115
137,807,089
17,450,228
63,610,924
72,353,782
$ 111,634,742
$ 143,921,373
Total capital assets (net of
accumulated depreciation and amortization)
Other noncurrent assets
Loans receivable
Other assets, net
Goodwill
Board advances
Total other noncurrent assets
Total noncurrent assets
Total assets
The notes to the financial statements are an integral part of this statement.
- 36 -
$
25,237,671
$
66,142,268
$
76,765,878
Governmental
Activities
Business-type Activities-Enterprise Funds
McAllen
International
Toll Bridge
$
$
222,984
1,938,119
Anzalduas
International
Crossing
$
92,976
1,023,644
Other
Proprietary
Funds
$
Total
129,404
1,050,000
2,372,926
$
2,902,043
3,305,962
21,979,962
Internal
Service Funds
$
714,383
9,850,000
27,525,880
-
-
10,448
2,625
36,923
397,745
6,481,494
31,280
26,926
284,613
414,902
570,759
43,067
-
-
-
-
24,013
286,883
124,204
56,393
94,744
500,734
-
2,285,307
1,173,013
4,094,815
35,951,929
38,990,972
6,130,581
-
1,106,355
-
467,056
-
80,779,547
1,435,657
-
6,130,581
1,106,355
467,056
82,215,204
-
573,798
10,698,086
2,415,376
1,784,526
77,642
-
2,936,598
10,415,086
40,357,634
930,393
-
2,230,658
7,285,171
9,560,691
7,486,053
20,220
-
21,147,150
236,955,521
208,656,324
48,348,541
61,699,097
7,123,100
132,823
21,132,558
-
(8,765,774)
(4,169,998)
(12,225,892)
(193,383,877)
(14,843,845)
6,783,654
50,469,713
14,356,901
390,545,856
6,421,536
609,713
14,745,108
833,354
-
-
168,702
2,520,990
609,713
14,745,108
-
15,354,821
833,354
-
18,044,513
-
28,269,056
52,409,422
14,823,957
490,805,573
6,421,536
30,554,363
$
53,582,435
$
18,918,772
$
526,757,502
$
45,412,508
Continued
- 37 -
CITY OF McALLEN, TEXAS
PROPRIETARY FUNDS
STATEMENT OF NET ASSETS
September 30, 2012
Business Type Activities-Enterprise Funds
Water
LIABILITIES
Current liabilities:
Accounts payable
Accrued expenses
Due to other funds
Due to other government agencies
Customer deposits payable
Compensated absences due one year
Current portion of revenue bonds
Other
Total current liabilities
$
754,259
497,144
2,359,579
290,000
1,448,903
16,684
Sewer
$
417,357
1,360,205
186,000
2,771,097
-
Sanitation
$
411,659
171,898
200,000
300
McAllen
International
Airport
Convention
Center
$
137,437
50,290
20,515
50,000
198,425
$
1,340,191
338,338
50,000
370,000
14,749
5,366,569
4,734,659
783,857
456,667
2,113,278
21,780,769
70,575
685,862
197,639
-
66,839,233
91,228
1,385,249
1,165,000
-
150,000
66,937
397,292
-
30,978
82,444
-
9,125,000
15,749
108,335
-
Total other noncurrent liabilities
22,734,845
69,480,710
614,229
113,422
9,249,084
Total liabilities
28,101,414
74,215,369
1,398,086
570,089
11,362,362
61,042,976
44,018,342
9,578,868
62,859,815
56,370,531
15,831,370
482,969
6,176,013
18,090,509
1,996,756
5,600,397
7,871,360
6,389,357
751,178
1,961,186
4,396,948
276,884
4,359,153
83,533,328
69,706,004
23,839,585
65,572,179
65,403,516
$ 111,634,742
$ 143,921,373
Other noncurrent liabilities:
Advances from other funds
Revenue bonds, net of current portion and discount
Accumulated unpaid compensated absences
Notes payable
Bond premium
Deferred revenues
Board advances
NET ASSETS
Invested in capital assets, net of related debt
Restricted for:
Capital projects
Debt service
Distribution of net surplus revenues
Unrestricted
Total net assets
Total liabilities and net assets
The notes to the financial statements are an integral part of this statements.
- 38 -
$
25,237,671
$
66,142,268
$
76,765,878
Business-type Activities-Enterprise Funds
McAllen
International
Toll Bridge
$
$
113,467
42,050
1,785
731,515
52,000
-
Anzalduas
International
Crossing
$
22,959
160,597
1,150,000
-
Other
Proprietary
Funds
$
275,406
82,017
100,000
50,000
13,854
Governmental
Activities
Total
$
3,472,735
2,702,539
101,785
731,515
2,380,094
878,000
5,740,000
244,012
Internal
Service Funds
$
763,267
4,445,687
14,857
940,817
1,333,556
521,277
16,250,680
5,223,811
42,122
195,800
-
35,645,000
9,120
502,436
14,745,108
352,716
89,633
80,530
-
502,716
133,390,002
416,342
108,335
2,573,547
2,118,705
14,745,108
47,803
-
237,922
50,901,664
522,879
153,854,755
47,803
1,178,739
52,235,220
1,044,156
170,105,435
5,271,614
6,783,654
14,005,631
14,356,901
269,016,718
6,421,536
1,066,957
502,198
4,608,653
16,414,162
281,458
734,795
(13,674,669)
300,082
3,217,633
48,589,862
3,993,602
4,608,653
30,443,232
33,719,358
29,375,624
1,347,215
17,874,616
356,652,067
40,140,894
30,554,363
$
53,582,435
$
18,918,772
$
526,757,502
$
45,412,508
Concluded
- 39 -
,
CITY OF MCALLEN, TEXAS
Reconciliation of the Statement of Net Assets of the Proprietary Funds
to the Government-Wide Statement of Net Assets
September 30, 2012
Fund equity - total proprietary funds (page 39)
$
Some amounts reported for business-type activities in the statement of net assets
are different because certain internal service fund assets and liabilities
are included with business-type activities.
Net assets of business-type activities
4,590,153
$
The notes to the financial statements are an integral part of this statement.
- 41 -
356,652,067
361,242,220
CITY OF McALLEN, TEXAS
PROPRIETARY FUNDS
STATEMENT OF REVENUES, EXPENSES AND CHANGES IN FUND NET ASSETS
For the Year Ended September 30, 2012
Business Type Activities-Enterprise Funds
Water
Operating revenues
Charges for services
Rentals
Other
$
Total operating revenues
15,686,958
737,701
Sewer
$
14,076,842
491,707
Convention
Center
Sanitation
$
16,491,139
178,650
$
921,344
971,822
153,788
16,424,659
14,568,549
16,669,789
2,046,954
5,570,443
3,337,922
2,371,683
801,879
3,515,055
-
3,513,661
585,035
2,815,617
478,351
3,913,143
-
5,048,829
266,750
3,915,894
2,839,453
1,756,762
-
1,488,759
72,128
1,613,225
312,859
1,606,634
-
Total operating expenses
15,596,982
11,305,807
13,827,688
5,093,605
Operating income (loss)
827,677
3,262,742
2,842,101
(3,046,651)
Operating expenses
Salaries, wages and employee benefits
Supplies
Contractual and other services
Repairs and maintenance
Depreciation and amortization
Self insurance claims
Other
Non operating revenues (expenses)
Investment earnings
Net increase (decrease) in fair value of investments
Interest expense
Interest on board advances
Bond related charges
Capitalized interest
Gain (loss) on sale of capital assets
Other
Net non-operating revenues (expenses)
Income (loss) before contributions and transfers
118,230
29,778
(1,345,463)
(28,155)
-
122,978
32,706
(1,432,594)
27,684
-
58,102
18,136
-
6,694
1,008
-
(1,225,610)
(1,249,226)
76,238
7,702
(397,933)
2,013,516
2,918,339
(3,038,949)
Capital contributions
Transfers in
Transfers out
16,600,195
-
562,695
-
56,115
-
2,002,277
-
Change in net assets
16,202,262
2,576,211
2,974,454
(1,036,672)
67,331,066
67,129,793
20,865,131
66,608,851
Total net assets-beginning
Total assets--ending
$
83,533,328
The notes to the financial statements are an integral part of this statement.
- 42 -
$
69,706,004
$
23,839,585
$
65,572,179
Governmental
Activities
Business Type Activites-Enterprise Funds
McAllen
International
Airport
$
2,329,498
2,727,851
290,699
McAllen
International
Toll Bridge
$
$
2,596,703
11,111
40,607
Other
Proprietary
Funds
$
1,838,498
61,704
341,346
Total
$
64,152,434
5,330,615
2,376,242
Internal
Service Funds
$
5,915,826
12,020,709
5,348,048
11,911,323
2,648,421
2,241,548
71,859,291
17,936,535
1,492,187
58,560
1,545,620
302,674
3,337,995
(81,336)
1,116,181
69,881
959,940
318,250
573,073
-
382,331
14,509
329,837
90,192
1,538,249
-
2,320,365
138,850
906,483
808,934
1,424,602
-
20,932,756
4,543,635
14,458,299
5,952,592
17,665,513
(81,336)
1,230,015
23,533
4,745,133
63,094
1,973,339
8,664,502
15,216
6,655,700
3,037,325
2,355,118
5,599,234
63,471,459
16,714,832
(1,307,652)
8,873,998
293,303
(3,357,686)
8,387,832
1,221,703
40,863
11,136
(266,287)
(6,496)
227,891
-
4,847
(6,026)
486,649
(3,987)
(2,970,293)
2,664
(1,772,085)
(486,649)
(17,043)
-
9,203
254
1,001
-
363,581
93,018
(4,822,455)
(27,997)
227,891
1,001
(2,970,293)
142,747
24,586
30,076
370,744
(2,488,810)
(2,273,113)
10,458
(7,135,254)
568,153
(1,300,545)
6,385,188
(1,979,810)
(3,347,228)
1,252,578
2,811,955
(1,103,965)
(4,840,282)
671,868
-
906,429
1,577,168
(427,937)
20,937,389
4,251,313
(6,372,184)
7,107
$
10,211,452
1,558,127
141,744
Anzalduas
International
Crossing
1,789,856
-
407,445
1,544,906
(1,307,942)
(1,291,568)
20,069,096
1,789,856
64,996,071
27,830,718
2,655,157
19,166,184
336,582,971
38,351,038
65,403,516
$
29,375,624
$
1,347,215
- 43 -
$
17,874,616
$
356,652,067
$
40,140,894
,
CITY OF MCALLEN, TEXAS
Reconciliation of the Statement Revenues, Expenses and Changes in Fund Net Assets of the Proprietary Funds
to the Government-Wide Statement of Activities
For The Year Ended September 30, 2012
Change in net assets - total proprietary funds (page 43)
$
Some amounts reported for business-type activities in the statement of activity are different
because the net revenue (expense) of certain internal
service funds is reported with business-type activities.
Net assets of business-type activities
138,032
$
The notes to the financial statements are an integral part of this statement.
- 45 -
20,069,096
20,207,128
CITY OF McALLEN, TEXAS
PROPRIETARY FUNDS
STATEMENT OF CASH FLOWS
For the Year Ended September 30, 2012
Business Type Activities
Water
Cash flows from operating activities:
Receipts from customers
Payments to employees
Payments to suppliers
$
Net cash provided (used) by operating activities
Sewer
16,251,811
(5,530,109)
(6,404,771)
$
McAllen
Convention
Center
Sanitation
15,075,563
(3,495,827)
(3,402,754)
$
16,530,374
(5,018,490)
(6,990,784)
$
4,316,931
8,176,982
Cash flows from noncapital financing
activities:
Transfers from other funds
Transfers to other funds
Advance to other funds
Subsidy from federal grant
Board advances
Distribution of income to City of Hidalgo
-
-
(250,000)
-
2,002,277
-
Net cash provided (used) by noncapital
financing activities
-
-
(250,000)
2,002,277
(4,523,354)
(1,392,378)
(1,354,395)
314,496
(10,940,776)
7,160,000
(2,607,620)
(1,442,467)
(1,989,406)
-
(31,242)
-
(7,270,127)
(7,516,367)
(1,989,406)
(31,242)
15,100,660
(12,310,312)
202,587
20,665,479
(20,016,643)
216,679
5,693,503
(8,357,341)
83,363
1,375,066
(2,122,336)
5,301
Cash flows from capital and related
financing activities:
Capital contributions
Purchases of capital assets
Proceeds from sale of capital assets
Proceeds from capital debt
Principal repayments-bonds and notes
Interest paid
Net cash provided (used) by capital and
related financing activities
Cash flows from investing activities:
Proceeds from sales and maturities of investments
Purchase of investments
Receipt of interest
Net cash provided (used) by
investing activities
Net increase (decrease) in cash
Cash at beginning of year
Cash at end of year
$
4,521,100
1,922,257
(1,471,253)
(1,814,273)
(1,363,269)
2,992,935
865,515
(2,580,475)
(741,969)
39,739
1,526,130
(298,781)
(134,203)
403,967
416,976
488,897
153,637
443,706
The notes to the financial statements are an integral part of this statement.
- 46 -
$
1,943,106
$
190,116
$
19,434
Governmental
Activities
Business Type Activities
McAllen
International
Airport
$
$
5,326,732
(1,388,885)
(1,812,518)
McAllen
International
Toll Bridge
$
12,080,470
(1,110,080)
(1,366,331)
2,125,329
9,604,059
(1,103,965)
-
Anzalduas
International
Crossing
$
2,648,422
(374,978)
(499,471)
Other
Proprietary
Funds
$
2,289,239
(2,289,889)
(1,870,905)
Internal
Service
Funds
Total
$
72,124,868
(20,679,511)
(24,161,807)
$
17,847,462
(1,223,873)
(11,847,362)
1,773,973
(1,871,555)
27,283,550
(671,868)
(4,168,713)
(326,283)
(2,949,936)
671,868
326,283
-
1,577,168
(427,937)
642,033
-
3,579,445
(5,700,615)
(250,000)
642,033
(2,949,936)
-
(1,103,965)
(8,116,800)
998,151
1,791,264
(4,679,073)
-
1,712,365
(4,242,097)
9,744,782
(325,000)
(236,254)
(4,206)
(285,000)
(7,130)
(3,608)
(820,000)
(1,774,818)
(176,395)
1,001
-
2,026,861
(21,911,084)
1,001
16,904,782
(5,429,998)
(4,815,064)
(1,192,832)
30,076
-
6,653,796
(296,336)
(2,598,426)
(175,394)
(13,223,502)
(1,162,756)
4,677,972
(12,521,237)
64,285
7,044,836
(8,068,703)
5,525
1,929,656
(2,129,999)
3,004
2,942,319
(2,795,022)
12,297
59,429,491
(68,321,593)
593,041
20,550,177
(24,703,018)
249,462
(7,778,980)
(1,018,342)
(197,339)
159,594
(8,299,061)
(3,903,379)
(103,820)
172,581
(23,641)
(96,091)
1,081,914
189,530
174,607
173,010
320,239
2,320,863
85,710
$
347,188
$
149,369
$
224,148
$
3,402,777
4,776,227
(289,908)
1,004,291
$
714,383
Continued
- 47 -
CITY OF McALLEN, TEXAS
PROPRIETARY FUNDS
STATEMENT OF CASH FLOWS-(Continued)
For the Year Ended September 30, 2012
Business Type Activities
Water
Reconciliation of operating income (loss) to
net cash provided by operating activities
Operating income (loss)
Adjustment to reconcile operating income
(loss) to net cash provided (used) by operating
activities:
Depreciation and amortization
(Increase) decrease in accounts receivable
(Increase) decrease in intergovernmental receivables
(Increase) decrease in due from other funds
(Increase) decrease in prepaid items
(Increase) decrease in inventories
Increase (decrease) in accounts payable
Increase (decrease) in customer deposits payable
Increase (decrease) in compensated abscences payable
Increase (decrease) in accrued liabilities
Increase (decrease) in due to other funds
Increase (decrease) in other current liabilities
Increase (decrease) in deferred revenues
Recovery of prior year expenses
$
Total adjustments
Net cash provided by (used) by
operating activities
$
Noncash investing, capital and financing activities:
Contributions of capital assets
Decrease in fair value of investments
827,677
Sewer
$
3,262,742
3,515,055
(172,781)
(65)
13,013
18,036
72,096
30,109
10,225
15,846
(12,280)
-
3,913,143
637,941
(130,930)
-
3,489,254
4,914,240
4,316,931
16,600,195
29,778
The notes to the financial statements are an integral part of this statement.
- 48 -
Sanitation
$
26,252
5,621
12,213
450,000
-
$
8,176,982
248,199
32,706
McAllen
Convention
Center
$
2,842,101
$
(3,046,651)
1,756,762
(138,549)
(867)
34,380
19,410
10,929
300
(3,366)
-
1,606,634
(8,392)
(111,189)
(5,124)
(20,745)
20,515
21,562
(4,056)
185,840
(1,663)
-
1,678,999
1,683,382
4,521,100
56,115
18,136
$
(1,363,269)
-
Governmental
Activities
Business Type Activities
McAllen
International
Airport
$
McAllen
International
Toll Bridge
(1,307,652)
$
3,337,995
(28,714)
3,432,981
2,125,329
8,873,998
$
573,073
69,453
(18,258)
4,009
(1,165)
89,642
9,175
12,786
4,700
8,562
-
$
Anzalduas
International
Crossing
$
Other
Proprietary
Funds
293,303
$
Internal
Service
Funds
Total
(3,357,686)
$
8,387,832
$
1,221,703
2,090
99,694
-
1,538,249
(57,579)
-
1,424,602
(5,883)
51,104
2,473
20,876
23,060
(34,483)
46,098
(41,716)
-
17,665,513
353,075
(130,930)
(60,085)
(4,748)
13,013
92,604
92,611
112,946
7,614
46,098
208,776
499,231
-
1,973,339
(460,901)
1,084
(17,752)
(211,415)
2,517
1,911,851
58
355,743
730,061
1,480,670
1,486,131
18,895,718
3,554,524
9,604,059
-
$
1,773,973
-
$
(1,871,555)
236
$
27,283,550
16,904,509
80,856
$
4,776,227
24,586
Concluded
- 49 -
CITY OF McALLEN , TEXAS
STATEMENT OF FIDUCIARY NET ASSETS
FIDUCIARY FUNDS
September 30, 2012
Pension Trust
Agencies
Firemen's Relief
and Retirement
Fund
Communications
Group
Fund
Developer's
Fund
ASSETS
Cash and cash equivalents
$
2,950,188
$
2,705
$
53,376
Receivables:
Interest
116,127
4,159
-
Investments, at fair value:
TexPool
-
382,523
-
Certificate of deposit
-
1,000,000
-
Domestic and international equities
20,640,889
1,250,815
-
Treasury and corporate bonds
10,997,816
-
-
Alternate investments
3,603,294
-
-
Total investments
35,241,999
2,633,338
-
38,308,314
2,640,202
53,376
2,303
-
-
Due agency
-
-
53,376
Escrow payables
-
2,640,202
-
Total liabilities
2,303
Total assets
LIABILITIES
Accounts payable
$
2,640,202
NET ASSETS
Held in trust for pension benefits
$
38,306,011
The notes to the financial statements are an integral part of this statement.
- 50 -
$
53,376
CITY OF McALLEN , TEXAS
STATEMENT OF CHANGES IN FIDUCIARY NET ASSETS
FIDUCIARY FUNDS
For the Year Ended September 30, 2012
Pension Trust
Firemen's Relief
and Retirement
Fund
ADDITIONS
Contributions:
Member
$
1,027,430
Employer
1,287,288
Total contributions
2,314,718
Investment earnings:
Interest and dividends
1,013,874
Loss on sale of investments
(872,929)
Net appreciation in fair value of investments
6,064,633
Total investment earnings
6,205,578
Less: investment expense
253,100
Net investment earnings
5,952,478
Total additions
8,267,196
DEDUCTIONS
Benefits
2,001,400
Refund of contributions
357,669
Administrative expense
28,686
Total deductions
2,387,755
Changes in net assets
5,879,441
Net assets--beginning
32,426,570
Net assets--ending
$
38,306,011
The notes to the financial statements are an intergral part of this statement.
- 51 -
,
CITY OF McALLEN, TEXAS
NOTES TO FINANCIAL STATEMENTS
September 30, 2012
I. Summary of significant accounting policies
(A)
Reporting entity
The City of McAllen, Texas (the City) is a municipal corporation, which was incorporated
February 20, 1911 under Article XI, Section 5 of the Texas Constitution. The City operates
under the commission-manager form of government and provides a full range of municipal
services as authorized by its charter. The governing body consists of an elected mayor and a sixmember commission. Services provided include those typically provided by general-purpose
local governments, namely public safety (principally police and fire,) highways and streets,
health and welfare, culture and recreation (principally library, parks and recreation). Other
services provided include water and sewer utilities, sanitation, civic center, convention center,
international airport, international toll bridge linking Hidalgo, Texas with downtown Reynosa,
Tamaulipas, Mexico, international toll bridge linking south of the City of Mission with the west
side of Reynosa, Tamaulipas, Mexico, golf course, bus transit system, and intermodal transit
terminal.
The accompanying financial statements present the reporting entity, which consists of the
primary government. Financial reporting standards also require the City to include, if any,
legally-separate entities or organizations for which the primary government is financially
accountable and other organizations for which the primary government is not accountable, but
for which the nature and significance of their relationship with the primary government are
such that exclusion could cause the City’s basic financial statements to be misleading or
incomplete.
Financial accountability exists if a primary government appoints a voting majority of an
organization’s governing Board and either is able to impose its will on that organization or
there is a potential for the organization to provide specific financial benefits to, or impose
specific financial burdens on, the primary government. A primary government may also be
financially accountable for governmental organizations with a separately elected governing
Board, a governing Board appointed by another government, or a jointly appointed Board that
is fiscally dependent on the primary government.
Applying these tests to other entities and activities for possible inclusion in the reporting entity,
the City has determined that the Development Corporation meets the financial accountability
tests and, therefore is included as a blended component unit. Its Board is appointed by the City
Commission and serves as an advisory board to the City Commission.
The City of McAllen issues separate publicly available audited financial statements of the
McAllen International Toll Bridge and the Anzalduas International Crossing, which may be
obtained by writing to City of McAllen Finance Department, 1300 Houston, P.O. Box 220,
McAllen, Texas 78505.
- 53 -
CITY OF McALLEN, TEXAS
NOTES TO FINANCIAL STATEMENTS
September 30, 2012
The Firemen’s Relief and Retirement Fund is included as a pension trust fund, and reported as
a fiduciary fund in the accompanying financial statements.
The accompanying financial statements have been prepared in conformity with accounting
principles generally accepted in the United States of America (US GAAP) applicable to states
and local governments. US GAAP for local governments include those principles prescribed
by the Governmental Accounting Standards Board (“GASB”), the American Institute of
Certified Public Accountants in the publication entitled Audits of State and Local
Governments, and by the Financial Accounting Standards Board (when applicable). The City
has elected not to apply pronouncements of the Financial Accounting Standards Board (FASB)
issued after November 30, 1989 as permitted by GASB Statement No. 20.
Governmental Accounting Standards Board has issued the following pronouncements, which
are relevant to the City, became effective this fiscal year and have been implemented:
GASB Statement No. 59, Financial Instruments Omnibus—and amendments of Statement
No.4, No. 25, No. 31, No. 40, and No. 53.
The objective of this Statement is to update and improve existing standards regarding
financial reporting and disclosure requirements of certain financial instruments and external
investment pools for which significant issues have been identified in practice. The provisions
of this Statement are effective for financial statements for periods beginning after June 15,
2010. The adoption of this standard did not have a significant impact on the City’s financial
statements.
The following statements will become effective in future years. Management does not believe
these statements will have a significant impact on the City’s financial statements.
GASB Statement No. 60, Accounting and Financial Reporting for Service Concession
Arrangements.
The objective of this Statement is to improve financial reporting by addressing issues related
to service concession arrangements (SCAs), which are a type of public-private or publicpublic partnership. As used in this Statement, an SCA is an arrangement between a transferor
(a government) and an operator (government on nongovernmental entity) in which (1) the
transferor conveys to an operator the right and related obligation to provide services through
the use of infrastructure or another public asset (a “facility”) in exchange for significant
consideration and (2) the operator collects and is compensated by fees from third parties.
The requirements of this Statement are effective for financial statements for periods beginning
after December 15, 2011. The provisions of this Statement generally are required to be
applied retroactively for all periods presented. The adoption of this standard will not have a
significant impact on the City’s financial statements.
- 54 -
CITY OF McALLEN, TEXAS
NOTES TO FINANCIAL STATEMENTS
September 30, 2012
GASB Statement No. 61, The Financial Reporting Entity: Omnibus—an amendment of
GASB Statements No. 14 and No. 34.
The objective of this Statement is to improve financial reporting for a governmental financial
reporting entity. The requirements of Statement No. 14, The Financial Reporting Entity, and
the related financial reporting requirements of Statement No. 34, Basic Financial
Statements—and Management’s Discussion and Analysis—for State and Local Governments,
were amended to better meet user needs and to address reporting entity issues that have arisen
since the issuance of those Statements. The provisions of this Statement are effective for
financial statements for periods beginning after June 15, 2012. Earlier application is
encouraged.
GASB Statement No. 62, Codification of Accounting and Financial Reporting Guidance
Contained in Pre-November 30, 1989 FASB and AICPA Pronouncements.
The objective of this Statement is to incorporate into the GASB’s authoritative literature
certain accounting and financial reporting guidance that is included in the following
pronouncements issued on or before November 30, 1989, which does not conflict with or
contradict GASB pronouncements:
1. Financial Accounting Standards Board (FASB) Statements and Interpretations
2. Accounting Principles Board Opinions
3. Accounting Research Bulletins of the American Institute of Certified Public
Accountants’ (AICPA) Committee on Accounting Procedure.
Hereinafter, these pronouncements collectively are referred to as the “FASB and AICPA
pronouncements. The requirements of this Statement are effective for financial statements for
periods beginning after December 15, 2011. Earlier application is encouraged. The provisions
of this Statement generally are required to be applied retroactively for all periods presented.
GASB Statement No. 63, Financial Reporting of Deferred Outflows of Resources, Deferred
Inflows of Resources and Net Position.
The Statement provides financial reporting guidance for deferred outflows of resources and
deferred inflows of resources. Concepts Statement No. 4, Elements of Financial Statements,
introduced and defined those elements as a consumption of net assets by the government that
is applicable to a future reporting period, and an acquisition of net assets by the government
that is applicable to a future reporting period, respectively. Previous financial reporting
standards do not include guidance for reporting those financial statements, which are distinct
from assets and liabilities. The provisions of this Statement are effective for financial
statements for periods beginning after December 15, 2011. Earlier application is encouraged.
- 55 -
CITY OF McALLEN, TEXAS
NOTES TO FINANCIAL STATEMENTS
September 30, 2012
GASB Statement No. 65, Items Previously Reported as Assets and Liabilities.
This Statement establishes accounting and financial reporting standards that reclassify, as
deferred outflows of resources or deferred inflows of resources, certain items that were
previously reported as assets and liabilities and recognizes, as outflows of resources or
inflows of resources, certain items that were previously reported as assets and liabilities. The
provisions of this Statement are effective for financial statements for periods beginning after
December 15, 2012. Earlier application is encouraged.
GASB Statement No. 66, Technical Corrections—2012—an amendment of GASB Statements
No. 10 and No. 62.
The objective of this Statement is to improve accounting and financial reporting for a
governmental financial reporting entity by resolving conflicting guidance that resulted from
the issuance of two pronouncements, Statement No. 54, Fund Balance Reporting and
Governmental Fund Type Definitions, and No. 62, Codification of Accounting and Financial
Reporting Guidance Contained in Pre-November 30, 1989 FASB and AICPA
Pronouncements. The provisions of this Statement are effective for financial statements for
periods beginning after December 15, 2012. Earlier application is encouraged.
GASB Statement No. 67, Financial Reporting for Pension Plans—an amendment of GASB
Statement No.25
The objective of this Statement is to improve financial reporting by state and local
governmental pension plans. This Statement results from a comprehensive review of the
effectiveness of existing standards of accounting and financial reporting for pensions with
regard to providing decision-useful information, supporting assessments of accountability and
inter-period equity, and creating additional transparency. This Statement replaces the
requirements of Statement No. 25, Financial Reporting for Defined Benefit Pension Plans and
Note Disclosures for Defined Contribution Plans, and No. 50, Pension Disclosures, as they
relate to pension plans that are administered through trusts, or equivalent arrangements
(hereafter jointly referred to as trusts) that meet certain criteria. The requirements of
Statements 25 and 50 remain applicable to pension plans that are not administered through
trusts covered by the scope of this Statement and to defined contribution plans that provide
postemployment benefits other than pensions. This Statement is effective for financial
statements for fiscal years beginning after June 15, 2013. Earlier application is encouraged.
GASB Statement No. 68, Accounting and Financial Reporting for Pension Plans—an
amendment of GASB Statement No.27
- 56 -
CITY OF McALLEN, TEXAS
NOTES TO FINANCIAL STATEMENTS
September 30, 2012
The primary objective of this Statement is to improve accounting and financial reporting by
state and local governments for pensions. It also improves information provided by state and
local governmental employers about financial support for pensions that is provided by other
entities. This Statement results from a comprehensive review of the effectiveness of existing
standards of accounting and financial reporting for pensions with regard to providing
decision-useful information, supporting assessments of accountability and inter-period equity,
and creating additional transparency. This Statement is effective for fiscal years beginning
after June 15, 2014. Earlier application is encouraged.
The more significant accounting policies of the City are described below.
(B)
Government-wide and fund financial statements
Government-wide Financial Statements
The government-wide financial statements consist of the statement of net assets, a statement of
financial position and the and the statement of activities, a statement of results of operations.
These statements report information on all the activities of the reporting entity with the
exception of fiduciary activity. Generally, the effect of inter-fund activity has been eliminated
from these statements.
Governmental activities, normally supported by taxes and
intergovernmental revenues, are reported separately from business-type activities, which
primarily rely on fees and charges.
The statement of activities reflects the extent to which direct expenses of each function are
offset by program revenues. Direct expenses are those that are attributable to a specific
function and are clearly identifiable. Program revenues include charges to customers or
applicants who purchase, use or directly benefit from goods, services or privileges provided by
a specific function as well as grants and contributions that are restricted to meeting the
operational or capital requirements of a specific function. Taxes and other items not
appropriately included with program revenues are shown as general revenues.
Fund Financial Statements
In addition to and apart from the government-wide financial statements, fund financial
statements are presented for governmental funds, proprietary funds and fiduciary funds. In
each of these financial statements, major funds are presented in separate columns.
(C)
Measurement focus, basis of accounting and financial statement presentation
The government-wide financial statements are presented using the economic resources
measurement focus and the accrual basis of accounting; consistent with the presentation of the
proprietary fund and fiduciary fund financial statements, with the exception that agency funds
- 57 -
CITY OF McALLEN, TEXAS
NOTES TO FINANCIAL STATEMENTS
September 30, 2012
do not have a measurement focus. Revenues are recorded when earned and expenses are
recorded when a liability is incurred, without regard to the timing of the 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 all eligibility requirements imposed by the
provider have been met.
Governmental fund financial statements are reported using the current financial resources
measurement focus and the modified accrual basis of accounting. Revenues are recognized as
soon as they are both measurable and available. Revenues are considered to be available when
they are collectible within the current period or soon enough thereafter to pay liabilities of the
current period. The City considers revenues to be available if they are collected within 30 days
of the end of the current fiscal period. Expenditures generally are recorded when a liability is
incurred, consistent with accrual accounting. However, debt service expenditures, as well as
those related to compensated absences and claims and judgments are recognized only when
payment is made.
Property taxes, sales taxes, franchise taxes, and interest associated with the current fiscal
period are all considered to be susceptible to accrual and so have been recognized as revenues
of the current fiscal period. All other revenue items are considered to be measurable and
available only when cash is received by the government.
The City reports the following governmental fund types and related major governmental funds:
The General Fund is the primary operating fund. It accounts for all of the financial
resources of the general government, except those required to be accounted for in another
fund.
The Special Revenue Funds are used to account for and report the proceeds of specific
revenue sources, other than for debt service or major capital projects that are legally
restricted or committed to expenditure for specified purposes. The only special revenue
fund reported as a major fund is the Development Corp. Fund, a blended component unit.
It is used to account for the additional ½¢ sales tax for economic development.
The Debt Service Fund is used to account for and report financial resources that are
restricted, committed or assigned for the payment of principal, interest and related costs
on general long-term debt paid primarily from taxes levied by the City. The fund balance
of the Debt Service fund is restricted to signify the amounts that are restricted exclusively
for debt service expenditures.
The Capital Projects Funds are used to account for and report financial resources that are
restricted, committed or assigned expenditure for the acquisition and/or construction of
capital facilities except those financed by proprietary fund types. The Capital
Improvement Fund is the only fund of this type that is reported as a major fund.
- 58 -
CITY OF McALLEN, TEXAS
NOTES TO FINANCIAL STATEMENTS
September 30, 2012
The governing body has adopted the policy that the Development Corp. Fund and the Capital
Improvement Fund are to be considered major funds, without regard to the major fund criteria,
due to them being particularly important to the users of these financial statements.
The City reports the following major proprietary fund types and related funds:
The following enterprise funds are used to account for City operations for which a fee is
charged to external users for goods or services. These funds must be used for activities,
whose debt is backed solely by fees and charges or there is a legal requirement to recover
cost, including capital cost, or a policy decision has been made to recover cost, including
capital cost. Enterprise funds, which are reported as major funds include:
The Water Fund, which accounts for the activities of the City’s water system.
The Sewer Fund, which accounts for the activities of the City’s sewer system.
The Sanitation Fund, which accounts for the activities of the City-owned residential and
commercial garbage and brush collection as well as recycling systems.
The Convention Center Fund, which accounts for the activities of the City’s convention
center.
The McAllen International Airport Fund, which accounts for the activities of the Cityowned international airport.
The McAllen International Toll Bridge Fund, which accounts for the operations of the
City-owned international bridge connecting the City of Hidalgo, Texas with downtown
Reynosa, Mexico.
The Anzalduas International Crossing Fund, which accounts for the operations of the
international bridge connecting south of the City of Mission, Texas with the west side of
Reynosa, Mexico.
The City also reports, although not as major funds, the internal service funds as proprietary
funds. These fund types were established to finance and account for goods and services
provided to various departments of the City, and on a limited basis to other local agencies, on a
cost-reimbursement basis. They account for fleet management, health insurance, retiree health
insurance, and general insurance services provided to other operating funds of the City as well
as a capital replacement fund for rolling stock used within departments of the General Fund.
The City reports fiduciary fund types, in which the City accounts for assets received and held
by the City in the capacity of trustee, agent or custodian. Expenditures are made only in
- 59 -
CITY OF McALLEN, TEXAS
NOTES TO FINANCIAL STATEMENTS
September 30, 2012
accordance with the purpose for which the assets are received and cannot be used to support
the City’s programs. Within this category of fund types, the pension trust fund accounts for the
activities of the Firemen’s Relief and Retirement Fund, this accumulates resources for pension
benefit payments to qualified firefighters. It also accounts for developers’ contributions for
future infrastructure development in the Developers’ Fund, an agency fund. Additionally, it
accounts for Communications Group Fund, an agency fund, which was established for the
purpose of accounting the operations and maintenance of a consolidated regional public safety
services communication system.
Generally, with regard to enterprise funds, the City follows private-sector standards of
accounting and financial reporting issued prior to December 1, 1989—to the extent that those
standards do not conflict with or contradict guidance of the (GASB). Governments also have
the option of following subsequent private-sector guidance for the business-type activities and
enterprise funds, subject to the same limitation. As previously discussed, the City has elected
not to follow subsequent private-sector guidance.
Generally, the effect of inter-fund activity has been eliminated from the government-wide
financial statements. Exceptions to this general statement are charges between the City’s water
and sewer function and various other functions of the City. Eliminating these charges would
distort the direct costs and program revenues reported by the respective functions.
Amounts reported in program revenues include 1) charges to customers or applicants for
goods, services or privileges provided, 2) operating grants and contributions, and 3) capital
grants and contributions. Internally dedicated resources are reported as general revenues,
which include all taxes, as opposed to program revenues.
Proprietary funds distinguish operating revenues and expenses from non-operating items.
Operating revenues and expenses typically are the result from activities specific to a particular
proprietary fund’s operations. Operating revenues include charges for services. Operating
expenses include costs of services as well as materials, contracts, personnel and depreciation.
All other revenues and expenses are reported as non-operating revenues and expenses.
When an expense is incurred for purposes for which both restricted and unrestricted net assets
are available, the City typically first applies restricted resources, as appropriate opportunities
arise, but reserves the right to selectively defer the use thereof to a future project or
replacement equipment acquisition.
- 60 -
CITY OF McALLEN, TEXAS
NOTES TO FINANCIAL STATEMENTS
September 30, 2012
(D) Assets, liabilities, and net assets or equity
(1) Deposits and investments
The City’s cash and cash equivalents are considered to be cash on hand and demand deposits.
The Public Funds Investment Act for the state of Texas allows municipalities to invest in the
following:

Obligations of, or guaranteed by governmental entities, including:
o Obligations of the United States or its agencies or instrumentalities
o Direct obligations of this state or its agencies and instrumentalities
o 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.
o Other obligations, the principal and interest of which are unconditionally
guaranteed or insured by or backed by the full faith and credit of, this state
or the United States or their respective agencies and instrumentalities
o 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
o Bonds issued, assumed, or guaranteed by the State of Israel







Certificates of deposit
Fully collateralized repurchase agreements
Bankers’ acceptances
Commercial paper
No-load mutual funds
Guaranteed investment contracts
Investment pools
The City’s investment policy further restricts investments to the following:

U.S. Treasury obligations and government agency securities, specifically those issued
by the Federal Home Land Bank, the Federal National Mortgage Association, the
Federal Home Loan Mortgage Corporation, and the Federal Farm Credit Bank,
excluding mortgage-backed securities (i.e., those issued by the Government National
Mortgage Association (Ginnie Mae), Student Loan Marketing Association (Sallie Mae)
and Tennessee Valley Authority (TVA).

Certificates of Deposit

Local government investment pools
- 61 -
CITY OF McALLEN, TEXAS
NOTES TO FINANCIAL STATEMENTS
September 30, 2012
The City’s investments are reported at fair value.
(2) Receivables and payables
Lending/borrowing between funds that results in amounts outstanding at the end of the fiscal
year are referred to as either “due to/from other funds” or “advances to from other funds”.
“Due to/from other funds” represents the current portion of interfund loans. “Advances
to/from other funds” represents the non-current portion of interfund loans. With respect to the
government-wide financial statements, any residual balances outstanding between the
governmental activities and business-type activities are reported as “internal balances.”
Advance receivables between funds, reported in the fund financial statements, are offset by a
restricted category of fund balance in the applicable governmental fund(s) to indicate that they
are not available for appropriation and are not expendable available financial resources.
All trade and property tax receivables are shown net of an allowance for uncollectible.
Property taxes are levied on October 1 based on the assessed value of property as listed on the
previous January 1, on which date a tax lien attaches. Assessed values are an approximation of
market value. A valuation of all property must be made at least every three (3) years.
However, due to growth, the appraisal district conducts annual valuation by property category.
(3) Inventories and prepaid items
Inventories for all governmental funds are valued at the lower of cost or market on the first-in,
first-out basis. The consumption method is used to account for inventories. Under the
consumption method, all inventory purchases are recorded as inventory acquisitions (current
assets) at the time of purchase and expended when used.
Inventories of proprietary funds are valued at the lower of cost or market on the first-in, firstout basis as well.
Payments to vendors, reflecting costs applicable to future accounting periods, are recorded as
prepaid items in both government-wide and fund financial statements.
(4) Restricted assets
Proceeds from the issuance of bonds, primarily related to enterprise funds and sales tax
revenue bonds, as well as certain resources set aside for their repayment, are classified as
restricted assets on the balance sheet due to their use being limited by applicable bond
covenants. The “revenue bond current debt service” account is used to report segregated
assets accumulated for debt service payments over the next twelve months. The “revenue
- 62 -
CITY OF McALLEN, TEXAS
NOTES TO FINANCIAL STATEMENTS
September 30, 2012
bond contingency” account is used to report resources set aside to subsidize potential
deficiencies from the McAllen International Toll Bridge Fund and/or the Anzalduas
International Crossing Fund operation that could adversely affect debt service payments. In
addition to assets restricted by bond covenants, others are restricted by enabling legislation for
replacement and/or acquisition of capital assets.
(5) Capital assets
Capital assets, which includes property, plant, equipment and infrastructure assets (e.g., roads,
bridges, sidewalks and similar items), are reported in the applicable governmental or businesstype activities columns in the government-wide financial statements. Capital assets are
defined by the City as assets with an initial, individual cost of $2,500 or more and an estimated
useful life in excess of one year. Such assets are recorded at historical cost. Donated assets
are reflected at estimated fair market value at the date of donation.
The costs of normal maintenance and repairs that do not add to the value of an asset or
materially extend the assets life are not capitalized.
Gains or losses on dispositions of capital assets are included in income within the proprietary
fund financial statements and in the governmental activities and business-type activities
columns of the government-wide financial statements. In the governmental fund financial
statements only the proceeds from the disposition are reported. Within the proprietary funds,
interest cost, less interest earned on investments acquired with proceeds of related borrowing,
is capitalized during the construction of capital projects when material. Interest expense is not
capitalized on general capital assets.
Depreciation of capital assets used by proprietary funds, including those acquired by
contributed capital, is charged as an expense against their operations in the fund financial
statements as well as the government-wide financial statements. Depreciation of general
capital assets used by funds categorized as governmental activities is not provided in the fund
financial statements, however is included in the gross expense by function in the governmentwide Statement of Activities. Capital assets, accumulated depreciation as well as the net
amount are reported on proprietary fund balance sheets and in both the governmental activities
and business-type activities column of the government-wide statement of net assets.
Depreciation has been provided over the estimated useful lives using the straight-line method.
The estimated useful lives are as follows:
Buildings and improvements
Equipment
Infrastructure
10 – 50 years
5 – 15 years
15 – 40 years
- 63 -
CITY OF McALLEN, TEXAS
NOTES TO FINANCIAL STATEMENTS
September 30, 2012
(6) Compensated absences
Accumulated unpaid compensated absences are accrued when incurred in all funds reported
within the proprietary fund financial statements as well as the governmental activities and
business-type activities columns of the government-wide statements. The expense is
recognized in the governmental fund financial statements when paid or expected to be paid
with current financial resources. Compensated absences are reported in governmental funds
only if they have matured.
(7) Long-term obligations
In the government-wide financial statements and the proprietary fund types in the fund
financial statements, long-term debt and other long-term obligations are reported as liabilities
in the governmental/business-type activities or the specific proprietary fund to which each
relates, as applicable. Bond premiums and discounts, as well as issuance costs, are deferred
and amortized over the life of the bonds. Bonds payable are reported net of the applicable
bond premium or discount. Bond issuance costs are reported as deferred charges and
amortized over the term of the related debt.
In the fund financial statements, governmental fund types recognize bond premiums and
discounts, as well as bond issuance costs, during the current period. Premiums received on
debt issuances are reported as other financing sources and discounts are reported as other
financing uses. Issuance costs, whether or not withheld from debt proceeds, are reported as
debt service expenditures.
(8) Fund balances
Fund balance, reported in governmental funds, which has some level of constraint placed on it,
is classified as nonspendable, restricted, committed, or assigned. The amount remaining,
which can be spent for any lawful purpose is classified as unassigned. Amounts classified as
restricted have constraints placed on the use by law, regulations of other governments,
creditors, grantors or by enabling legislation. Those classified as committed are constrained
by the City Commission through an ordinance for specific purposes, but are neither restricted
nor committed. Non-spendable is amounts that cannot be spent because they are either (a) not
in spendable form, or (b) legally or contractually required to be maintained intact. The City
Commission has delegated the authority to make assignments to the City Manager with
Commission direction. For the purposes of classifying governmental fund balances, the City
typically considers expenditure to be made from the most restrictive first when more than one
classification is available, however reserves the right to selectively defer the use thereof to
future expenditure. During the budget process, the City Manager designates the assignment of
fund balances and makes recommendations to the City Commission for their consent and
approval.
- 64 -
CITY OF McALLEN, TEXAS
NOTES TO FINANCIAL STATEMENTS
September 30, 2012
At September 30, 2012, the McAllen EB-5 Regional Center fund, a non-major governmental
fund, reflects a fund deficit of $9,095. The City intends to cover this shortfall by providing
resources in the upcoming year.
The table in the following page outlines the composition of the City’s governmental fund
balances classifications.
Fund balances:
Nonspendable:
Interfund advances
Restricted for:
Law enforcement
Debt service
Economic development
Tourism
Capital improvements
Public access network
Parks
Committed to:
Downtown services parking
Assigned to:
Future bridge assistance
Information technology projects
Other capital projects
Unassigned
Total fund balances
$
General
Major Funds
Development
Corp.
1,396,791
$
-
Capital
Improvements
$
352,716
Non-major
Funds
Other
$
-
Total
$
1,749,507
88,536
-
26,419,908
-
-
5,822,461
268,285
24,873
959,138
676,462
5,822,461
268,285
26,419,908
24,873
959,138
88,536
676,462
-
-
-
217,989
217,989
1,464,107
42,860,830
-
7,804,981
-
$ 45,810,264
$ 26,419,908
$ 8,157,697
663,760
(9,095)
$ 8,623,873
1,464,107
663,760
7,804,981
42,851,735
$ 89,011,742
(9) Minimum fund balance policy
In order to maintain a margin of safety in the General Fund fund balance in anticipation of
economic downturns or natural disasters, the City Commission has adopted an ordinance,
requiring a minimum fund balance of 140 days of expenditures.
- 65 -
CITY OF McALLEN, TEXAS
NOTES TO FINANCIAL STATEMENTS
September 30, 2012
II. Stewardship, compliance and accountability
(A) Budgetary information
The City adheres to the following procedures in establishing the budgetary data reflected
in the basic financial statements:
1.
Prior to August 1 of each year, the City Manager is required to submit to the City
Commission a proposed budget for the fiscal year beginning on the following
October 1. The operating budget includes proposed expenditures and the means
of financing them.
2.
Public hearings are conducted to obtain taxpayer comments.
3.
Prior to October 1, the budget is legally enacted by the City Commission through
passage of an ordinance.
4.
The City Manager is authorized to transfer budgeted amounts between accounts
within any department; however, any revisions that alter the total expenditures of
any department must be approved by the City Commission. Budgeted amounts
include transfers and revisions to the original appropriations ordinance.
5.
Annual appropriated budgets are adopted for all governmental funds with the
exception of less significant grants.
6. The budget and actual comparisons include the General Fund, and the Development
Corp Fund. Budgets for these funds are adopted on a basis consistent with
accounting principles generally accepted in the United States of American (US
GAAP) applicable to state and local governments. Budgets for proprietary funds
have been prepared on a non-US GAAP basis, which excludes depreciation but
includes capital outlay and debt principal payments.
7. Annual budgeted expenditures are adopted at the department level within funds. As
previously noted, the City Manager is authorized to make transfers within a
department. Accordingly, the level at which expenditures cannot legally exceed
appropriations is the department level. During the year, several supplementary
appropriations were necessary.
(B) Excess of expenditures over appropriations
- 66 -
CITY OF McALLEN, TEXAS
NOTES TO FINANCIAL STATEMENTS
September 30, 2012
For the year ended September 30, 2012, expenditures in certain general fund departments
exceeded appropriations. The related departments and the excess of expenditures over
appropriations are reflected in the following page:
Department:
Special service
City secretary
Audit office
Finance
Tax office
Legal
Building maintenance
Police
Communication technology
Fire
Traffic operations
Street lighting
Other agencies
Parks
Recreation
Pools
Quinta Mazatlan
Total general fund
$ 127,005
2,334
1,296
17,610
54,822
180,523
11,934
43,120
44,850
232,486
32,367
437,287
627,143
313,207
192,162
58,824
24,005
$ 2,400,975
III. Detailed notes on all funds
(A) Deposits and investments
It is the City’s policy as well as a requirement in its Depository Agreement for deposits plus
accrued interest thereon to be 110% secured by collateral valued at fair value, less the amount
of the Federal Deposit Insurance Corporation insurance. At September 30, 2012, the City’s
deposits were entirely covered by federal deposit insurance or were secured by collateral held
by the City’s agent in the City’s name pursuant to the City’s Investment Policy and its
Depository Agreement.
Investments at fair value, including accrued interest, as of September 30, 2012 are reflected in
the table that follows:
- 67 -
CITY OF McALLEN, TEXAS
NOTES TO FINANCIAL STATEMENTS
September 30, 2012
Investment Maturities (in Years)
Tex Pool
Certificates of deposit
U.S. Government
securities
Fair Value
1 or less
2
$ 52,808,197
44,492,841
$ 52,808,197
32,081,938
139,115,823
10,178,438
57,909,216
71,028,169
$ 236,416,861
$ 95,068,573
$70,320,119
$71,028,169
$
12,410,903
3+
$
4+
-
$
-
$
Public funds investment pools
Public funds investment pools in Texas (“Pools”) are established under the authority of the
Interlocal Cooperation Act, Chapter 79 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 fair value of its
underling investment portfolio within one half of one percent of the values of its shares.
The City’s investments in Pools are reported at an amount determined by the fair value per
share of the pool’s underlying portfolio, unless the pool is 2a7-like, in which case they are
reported at amortized cost. A 2a7-like pool is one which is not registered with the Securities
and Exchange Commission (“SEC”) as an investment company, but nevertheless has a policy
that it will, and does, operate in a manner consistent with the SEC’s Rule 2a7 of the Investment
Company Act of 1940.
TexPool is a public funds investment pool created pursuant to the Interlocal Cooperation Act,
Chapter 791 of the Texas Government Code, and the Act. The State Comptroller of Public
Accounts exercises oversight responsibility over TexPool. Oversight includes the ability to
significantly influence operations, designation of management, and accountability for fiscal
matters. Additionally, the State Comptroller of Public Accounts has established an Advisory
Board composed both of participants in TexPool and of other persons who do not have a
business relationship with TexPool. The Advisory Board members review the investment
policy and management fee structure.
The City believes TexPool operates in a manner consistent with the SEC’s Rule 2a-7 of the
Investment Company Act of 1940. As such, TexPool uses amortized cost to report net assets
and share prices since that amount approximates fair value. The City believes that TexPool
- 68 -
-
-
CITY OF McALLEN, TEXAS
NOTES TO FINANCIAL STATEMENTS
September 30, 2012
operates as a 2a-7 like pool as described in GASB Statement No. 59, Financial Instrument
Omnibus.
Interest rate risk. The investment policy states that no investment shall exceed seven years
in maturity. By limiting the exposure of its investments by no more than three years as
reflected in the schedule below, the City reduces its risk to rising interest rates. The table
that follows reflects the allocation of the investment portfolio.
Government
Agencies
Certificates
of Deposit
< 1 Year
1-3 Years
4 Years
$
1 0,178,438
12 8,937,385
-
$
32,081,938
12,410,903
-
Total
$ 13 9,115,823
$
44,492,841
Weighted
Average Maturity
709 Days
108 Days
Credit risk. As of September 30, 2012, the investments in the State’s investment pool was
rated AAAm by Standards and Poor’s. Available funds were invested in certificates of
deposit, all of which are under the Federal Deposit Insurance Corporation limit, as well as
with the City’s depository bank, First National Bank, a privately owned bank. However,
the collateral pledged against the certificates of deposit with First National Bank is
comprised of government securities, which carry AAA rating. The government securities
consist of instruments issued by the Federal Home Loan Bank and Federal Home Loan
Mortgage Corporation, both of which are rated AAA by the rating agencies: Moody’s
Investors Service and Fitch Ratings. The City’s investment policy limits authorized
investments to TexPool, certificates of deposits, U.S. Treasuries and federal government
agencies, excluding Student Loan Marketing Association and Tennessee Valley Authority
and mortgage backed securities.
Concentration of credit risk. The certificate of deposits holdings at September 30, 2012
represents 18.8% of the total portfolio. The U.S. government agencies category represents
58.8% of the total portfolio. Within this category, securities issued by the Federal Home Loan
Bank represent 36% of the portfolio, those issued by the Federal Home Loan Mortgage
represent 22%, those issued by Federal Farm Credit Bank represent 14%, and those issued by
Federal National Mortgage Association represent 28%. The investment policy is silent in the
concentration of holding in the various types of securities and investments.
- 69 -
CITY OF McALLEN, TEXAS
NOTES TO FINANCIAL STATEMENTS
September 30, 2012
Firemen’s Relief and Retirement Fund Investments
The Firemen’s Relief and Retirement Fund Investments (Plan) are recorded at fair value as of
September 30, 2012. The table in the following page reflects the composition of these
investments.
Fair Value
Equities:
Domestic
International
$ 17,365,812
3,275,077
Investment Policy
Asset
% of Portfolio
Allocation
49.28%
9.29%
30-60%
10-30%
Equities total
20,640,889
Fixed income
Treasury/corporate bonds
10,997,816
Fixed income total
10,997,816
31.21%
30-50%
3,603,294
10.22%
0-20%
$ 35,241,999
100.00%
Alternative investments
Total portfolio
Because of the complexity of the portfolio, the firemen’s board of trustees relies on its
consultant to provide the necessary guidance to accomplish the Plan’s objectives. The Board
also understands that return objectives can be achieved while assuming “market” volatility.
The Board is willing to forgo potential return in strong markets in return for protection against
a severe decline during weak periods.
Concentration of credit risk. As noted in the above schedule, none of the sectors exceed
their percentage of asset allocation.
The Plan is well diversified; with no one issue
exceeding 5%. With the exception of the alternative investments, the portfolio can be
liquidated within one to two days if so desired. Alternative investments can only be
liquidated quarterly.
Interest rate risk. Only the fixed income securities of the Plan are subject to interest rate
risk due to the possibility that prevailing interest rates could change before the securities
reach maturity. Securities that are subject to interest rate risk as of September 30, 2012
amount to $6,205,448 and have weighted-average duration of 6.64 years. Durations is
- 70 -
CITY OF McALLEN, TEXAS
NOTES TO FINANCIAL STATEMENTS
September 30, 2012
defined as the change in the value of a fixed income security that will result from a 1%
change in interest rates. Duration is stated in years. For example, 5 year duration means the
bond will decrease in value by 5% if interest rates rise 1% and increase in value by 5% if
interest rates fall 1%. Securities that are subject to interest rate risk are shown in the
following table. The investment policy is silent on the subject.
Investment Type
Corporate bonds
Government agencies
Government bonds
Government MBS
Sub-pranationals
Fair Value
Percentage
of Total
Weighted-Average
Duration
(Years)
$
Municipal & derivatives
797,327
1,767
5,394,584
966
10,802
2
12.85%
0.03%
86.93%
0.02%
0.17%
0.00%
5.69
2.34
6.78
3.73
8.05
-0.49
Total interest rate sensitive bonds $
6,205,448
100.00%
6.64
Credit risk. Using Standard and Poor’s rating system for fixed income securities as of
September 30, 2012 the Plan’s bonds were rated as noted below. The investment policy is
silent on the subject.
Percentage
S&P
Fair Value
of Total
Rating
Total credit sensitive bonds
$
24,782
61,832
335,856
2,861,483
1,478,639
1,155,860
14,288
272,708
0.40%
1.00%
5.41%
46.11%
23.83%
18.63%
0.23%
4.39%
$
6,205,448
100.00%
AAA
AA
A
BBB
BB
B
CCC
Not rated
Foreign currency risk. The Plan has one equity investment manager that has direct foreign
currency exposure. The table that follows represents a summary of the country/currency
allocations as of September 30, 2012. The investment policy is silent on the subject.
- 71 -
CITY OF McALLEN, TEXAS
NOTES TO FINANCIAL STATEMENTS
September 30, 2012
Country
Fair Value
Percentage
of Total
Brazil
Canada
China
Denmark
Europe (forwards)
France
Germany
Hong Kong
Ireland
Israel
Japan
Mexico
Netherlands
Russia
South Korea
Sweden
Switzerland
United States
United Kingdom
$
127,802
147,464
255,603
98,309
1,387
232,665
412,898
68,816
75,370
104,863
291,650
45,878
75,370
16,385
91,755
88,478
252,326
150,740
737,318
3.90%
4.50%
7.80%
3.00%
0.04%
7.10%
12.61%
2.10%
2.30%
3.20%
8.91%
1.40%
2.30%
0.50%
2.80%
2.70%
7.70%
4.60%
22.51%
Totals
$
3,275,077
100.00%
(B) Receivables
Receivables for the City’s governmental activities and business type activities at year end are
reflected in the following table:
- 72 -
CITY OF McALLEN, TEXAS
NOTES TO FINANCIAL STATEMENTS
September 30, 2012
Accounts
Governmental activities:
General
Development corp.
Capital Improvement
Nonmajor governmental
and internal services
Total governmental
Business-type activities:
Water
Sewer
Sanitation
Convention center
McAllen international
airport
Nonmajor enterprise and
fleet
Total business type
$
Taxes
Other
Net
Receivables
34,601
296,638
$ 573,835
4,244
$ 14,090,423
2,474,737
312,031
56,257
1,966,757
408,744
3,692,508
$ 2,297,996
$ 986,823
$ 20,569,699
$
$
$
Interest
1,840,304
-
$ 11,571,789
2,432,289
-
1,222,766
37,984
$
3,063,070
$ 14,042,062
$
179,748
$
1,997,606
1,869,049
2,135,067
34,833
$
$
11,009
4,253
6,629
2,876
$
-
$
69,894
42,448
11,149
Intergovernmental
$
-
65
19,705
867
5,124
2,008,680
1,893,007
2,142,563
42,833
434,491
-
3,888
17,157
1,165
456,701
32,845
-
2,625
397,745
-
433,215
6,503,891
$
-
$
31,280
$
414,902
$
26,926
$
6,976,999
Within the City’s water, sewer, and sanitation funds, an estimated amount has been recorded for
services rendered but not yet billed as of the close of the year. The receivable was determined by
prorating the cycle billings sent to customers in October 2012 based on the number of days
applicable to the prior fiscal year. The receivable balances in the water, sewer, and sanitation have
been reduced by estimated allowances for doubtful accounts. Water accounts were reduced by
$71,067; sewer accounts by $65,814; and sanitation accounts by $91,204.
Governmental funds report deferred revenue in connection with receivables for revenues that are
not considered to be available to liquidate liabilities of the current period. Governmental funds defer
revenue recognition in connection with resources that have been received, but not yet earned. At the
end of the current fiscal year, the various components of deferred revenue and unearned revenue
reported in the fund financial statements are reflected in the following page.
- 73 -
CITY OF McALLEN, TEXAS
NOTES TO FINANCIAL STATEMENTS
September 30, 2012
Unavailable
Unearned
Governmental funds:
Delinquent property taxes receivable (general fund)
$
3,646,065
Sales tax (general fund)
$
5,054,594
-
Sales tax (development corp fund)
1,263,649
-
Other
3,245,393
558,431
Total deferred/unearned revenues for governmental funds
$
13,209,701
$
558,431
(C) Capital assets
Capital asset activity for the year ended September 30, 2012 was as follows:
Beginning
Governmental activities:
Balance
Increases
Retirement/
Ending
Decreases
Balance
Capital assets, not being depreciated:
Land
$
Construction in progress
48,031,171 $
641,237
(1,560,985) $
47,111,423
53,244,610
4,732,006
(14,314,153)
43,662,463
101,275,781
5,373,243
(15,875,138)
90,773,886
Buildings and improvements
96,654,471
7,139,829
Equipment
67,231,249
5,611,508
Infrastructure
174,824,090
4,737,009
Total capital assets being depreciated
338,709,810
17,488,346
Buildings and improvements
(32,014,194)
(3,124,233)
-
(35,138,427)
Equipment
(45,156,769)
(5,187,002)
370,307
(49,973,464)
Infrastructure
(96,976,634)
(5,990,031)
-
(102,966,665)
(174,147,597)
(14,301,266)
370,307
(188,078,556)
Total capital assets being depreciated, net
164,562,213
3,187,080
Governmental activities capital assets net $
265,837,994 $
8,560,323 $
Total capital assets, not being
depreciated
Capital assets, being depreciated:
(370,307)
(370,307)
103,794,300
72,472,450
179,561,099
355,827,849
Less accumulated depreciation for:
Total accumulated depreciation
(15,875,138) $
(1)
(1) $15,520,0138 represents a project, Boeye Reservior, that was transferred to the Water Fund.
- 74 -
167,749,293
258,523,179
CITY OF McALLEN, TEXAS
NOTES TO FINANCIAL STATEMENTS
September 30, 2012
Depreciation expense, exclusive of $370,307 in depreciation retirement, was charged to governmental
functions as follows:
General government
Public safety
Highways and streets, which includes the depreciation of
general infrastructure assets
$
1,622,332
2,212,136
6,303,618
Health and welfare
Culture and recreation
In ad dition, depreciation on capital assets held by the City's
internal service funds is charged to the various functions
24,673
2,207,489
based on their usage of the assets
1,931,018
To tal depreciation-governmental activities
$
- 75 -
14,301,266
CITY OF McALLEN, TEXAS
NOTES TO FINANCIAL STATEMENTS
September 30, 2012
Business-type activities:
Capital assets, not being depreciated:
Land
Construction in progress
Water rights (perpetual)
Capitalized interest
To tal capital assets, not being
depreciated
Beginning
Balance
Retirement/
Decreases
Ending
Balance
20,464,078 $
48,344,717
4,923,100
6,989,873
7,000 $
6,165,649
227,891
676 ,072 $
(29 ,034)
-
21,147,150
54,481,332
4,923,100
7,217,764
80,721,768
6,400,540
647 ,038
87,769,346
Capital assets, being depreciated:
Buildings and imp rovements
Equipment (1)
Water rights (no n-perpetual)
416,993,322
45,287,244
2,200,000
13,878,246
3,660,825
-
14,873 ,100
(3 ,500)
-
445,744,668
48,944,569
2,200,000
To tal capital assets being depreciated
464,480,566
17,539,071
14,869 ,600
496,889,237
Less accumulated depreciation for:
Buildings and imp rovements
Equipment
Water rights
(149,979,740)
(25,624,714)
(412,500)
(13,655,607)
(3,942,224)
(110,000)
3 ,500
-
(163,635,347 )
(29,563,438 )
(522,500 )
To tal accumulated depreciation
(176,016,954)
(17,707,831)
3 ,500
(193,721,285 )
To tal capital assets being
depreciated, net
288,463,612
(168,760)
14,873 ,100
303,167,952
15,520 ,138 $
(1)
390,937,298
Business-type activities
Capital assets net
$
Increases
$
369,185,380 $
6,231,780 $
(1) During the year, previous construction in progress known as “Boeye Reservior” project, in
the governmental funds were transferred to the Water Fund in the net amount of
$15,520,138. This project added more water capacity and would serve its current
customer base as well as in the future.
- 76 -
CITY OF McALLEN, TEXAS
NOTES TO FINANCIAL STATEMENTS
September 30, 2012
Depreciation expense, exclusive of $3,500 in depreciation retirement, was charged to business
type activity functions as follows:
Water
Sewer
Sanitation
Golf course
Civic center
Convention center
McAllen international airport
McAllen express
Transit terminal
McAllen international toll bridge
Anzalduas international crossing
In addition, depreciation on capital assets held by the City's
internal service funds is charged to the various functions
based on their usage of the assets
Total depreciation-business type activities
- 77 -
$
3,515,055
3,913,143
1,756,762
354,025
75,173
1,606,634
3,337,995
676,276
319,126
573,073
1,538,249
42,320
$ 17,707,831
CITY OF McALLEN, TEXAS
NOTES TO FINANCIAL STATEMENTS
September 30, 2012
At September 30, 2012, the City had the following significant remaining contractual
commitments for various construction and improvement projects:
Project Description
Remaining
Commitment
Paving and drainage
$ 5,118,508
Boye reservior relocation
10,228
Bentsen road canal replacement
10,147
Sewer improvements
682,766
(1)
Water improvements
1,200,411
Airport improvements
15,250,714
Toll bridge improvements
678,876
NWWT plant improvements
57,198
Financing Sources
Local and grant
Local and bond fund
Local
Local and bond fund
Local
Local and bond fund
Local and grant
Local
$23,008,848
(1) $682,766 is related to improvement financed by the Texas Water
Development Board (Stimulus Funds) an interest free loan, which is
funded on expense-reimbursement basis.
- 78 -
CITY OF McALLEN, TEXAS
NOTES TO FINANCIAL STATEMENTS
September 30, 2012
(D) Interfund receivables, advances and transfers
The compositions of inter-fund balances as of September 30, 2012 are reflected below.
Receivable Fund:
General Fund
Payable Fund:
Amount
Miscellaneous Grants Fund
Community Development Fund
McAllen Bridge Fund
$
159,453
563,208
1,785
Total Governmental Funds
$
724,446
Civic Center Fund
Hotel Occupancy Tax Fund
$
36,923
Convention Center Fund
Hotel Occupancy Tax Fund
$
147,690
Convention Center Fund
Civic Center Fund
$
100,000
Total Proprietary Funds
$
284,613
Combined totals
$ 1,009,059
The due to/from other funds primarily represent temporary short-term borrowings for working
capital, which are intended to be satisfied soon after year end.
Advances to/from other funds:
Receivable Fund
General Fund
Capital Improvement Fund
Payable Fund
Sanitation Fund
Transit Terminal Fund
Total
Amount
$
150,000
352,716
$
502,716
The General Fund advance to the Sanitation Fund was to finance that fund’s construction of a
recycling center. It is expected to be repaid with the sales proceeds of improved property
owned by the debtor fund. During the year, a payment of $250,000 was made from earnings
of the fund, thus reducing the advance amount to $150,000.
- 79 -
CITY OF McALLEN, TEXAS
NOTES TO FINANCIAL STATEMENTS
September 30, 2012
The Capital Improvement Fund advanced the Transit Terminal Fund $352,716 to assist in
funding the acquisition and construction of the transit terminal building.
Transfers are used to 1) provide unrestricted revenues collected in the general fund to finance
various programs accounted for in other funds, and 2) move revenues from the fund that the
budget requires to collect them to the fund that the budget requires to expend them. The table
below reflects the transfer activity at year end.
Trans fer In:
Anzalduas Int'l
Transfer out:
General fund
$
General
Capit al
Con vention
Nonmajor
Nonmajor
Crossing
Fund
Im prv.
Center
Governmental
Proprietary
Fund
-
$
1,200,000
$
-
$
Development corp.
3,507,025
29,060
Capital impv. Fund
-
-
Nonmajor prop. funds
-
427,937
596,657
525,000
2,002 ,277
-
McAllen int'l toll bridge
4,168,414
-
-
McAllen int'l airport
1,103,965
-
-
Nonmajor gov. funds
Total
$
9,376,061
$
2,181,997
-
3,507,0 25
$
2,002 ,277
$
$
-
$
Total
-
$
769,7 10
1,076,5 99
-
5,382, 394
135,8 31
-
-
135, 831
-
427, 937
500,5 69
-
3,624, 503
-
-
671,8 68
4,840, 282
-
-
-
1,103, 965
4,412,5 66
$
1,577,1 68
$
671,8 68
$
During the year, the General Fund transferred $1,200,000 of surplus revenues to the Capital
Improvement Fund to assist in funding some major projects contemplated in next year’s
budget. It also provided funding in the amount of $3,507,025 to the Debt Service Fund, a non
major governmental fund. This funding is to cover the debt service requirements of the existing
Tax and Revenue Certificates of Obligation Series 2010.
The Development Corporation provided funding for operating costs to the McAllen Express
Fund in the amounts of $1,076,599, as reflected in the non-major proprietary column. It also
transferred $3,507,025 to the General Fund for operating expenditures associated with the
public safety building, which was originally a project of the development corporation fund. It
also transferred $769,710 to the Certificate of Obligation Reservior, a non-major governmental
fund, towards the completion of the Boeye Reservior project. A lesser amount of $29,060 was
transferred to the Capital Improvement Fund.
The transfers of $2,002,277 and $500,269 from the Hotel Occupancy Tax Fund, a non-major
governmental fund, to the Convention Center and Civic Center respectively represent the use
of the former fund as a conduit to these funds. The transfer of $596,657 from the Downtown
Service Parking Fund, a non-major governmental fund, to the General Fund is a reimbursement
- 80 -
4,707, 025
20,221, 937
CITY OF McALLEN, TEXAS
NOTES TO FINANCIAL STATEMENTS
September 30, 2012
for debt service requirements on the debt related to the downtown parking garage. The transfer
of $1,103,965 from the Airport Fund to the General Fund represents reimbursement for public
safety personnel assigned to the airport.
The amount reflected from the McAllen International Toll Bridge Fund to the General Fund of
$4,168,414 represents the City’s share of surplus net revenue from operation of the
international toll bridge. Additionally, it transferred $671,868 to the Anzalduas International
Crossing Fund for debt service requirements on the International Toll Bridge System Revenue
Bonds, Series 2007B.
(E) Long-term debt
(1) General obligation bonds and other
The City issues general obligation bonds to finance the acquisition and construction of major
capital facilities, generally for governmental activities and are direct obligations, for which the
City has pledged the full faith and credit of the government. These bonds generally are serial
bonds and carry a term of 20 years or more with varying amounts of principal maturing each
year. All outstanding general obligation bonds have been retired, leaving only sales tax
revenue bonds and combination of tax and revenue certificates of obligation bond
indebtedness.
The schedule that follows presents an analysis of general long-term debt outstanding, followed
by a schedule of the debt service requirements on those bonds.
- 81 -
CITY OF McALLEN, TEXAS
NOTES TO FINANCIAL STATEMENTS
September 30, 2012
Governmental activities
$25,000,000 Development Corporation of McAllen, Inc.
Sales Tax Revenue Bonds, Series 1998 due in annual installments of
$25,000 per year through February 15, 2018; interest
at 4.80% to 5.25%
$25,030,000 Combination Tax and Revenue Certificates of Obligation,
Series 2010 due in annual installments ranging from $2,170,000 to
$3,450,000 per year through February 15, 2020, with a final installment
of $3,450,000; interest at 2.00% to 5.00%
Net OPEB obligation
$
150,000
24,355,000
1,049,270
Net pension obligation
275,507
Bond premium
1,010,152
Unpaid accumulated compensated absences
8,427,560
Total general long-term debt
$ 35,267,489
The annual debt service requirements to maturity on sales tax bonds payable and combination tax
and revenue certificates of obligation as of September 30, 2012, including interest, are reflected in
the table below:
Year Ending
2013
2014
2015
2016
2017
2018-2020
Totals
Principal
Interest
2,645,000
2,765,000
2,890,000
3,025,000
3,145,000
10,035,000
$ 24,505,000
- 82 -
893,637
773,331
646,894
513,957
390,244
513,319
$
3,731,382
CITY OF McALLEN, TEXAS
NOTES TO FINANCIAL STATEMENTS
September 30, 2012
(2) Revenue bonds and other
The City also issues bonds, for which it pledges revenue, derived from the activity using the bondfinanced assets, to pay debt service. The following schedule is an analysis of the business-type
activity long-term debt, including related revenue bonds.
Payable from Water Fund:
$14,263,200 Waterworks and Sewer System Improvement Revenue
and Refunding Bonds, Series 2005 due in annual installments from
$30,000 to $2,005,000 through February 1, 2030: interest at 3.00% to 5.25% $ 12,471,200
$12,029,050 Waterworks and Sewer System Improvement Revenue
and Refunding Bonds, Series 2006 due in annual installments from $685,000
to $1,960,000 through February 1, 2031: interest at 3.00% to 5.00%
10,758,472
Bond premium
685,862
Unpaid accumulated compensated absences
360,575
Total water fund
$ 24,276,109
- 83 -
CITY OF McALLEN, TEXAS
NOTES TO FINANCIAL STATEMENTS
September 30, 2012
Payable from Sewer Fund:
$11,206,800 -Waterworks and Sewer System Improvement Revenue
$
and Refunding Bonds, Series 2005 due in annual installments from $30,000
to $2,005,000 through February 1, 2030: interest at 3.00% to 5.25%
9,798,800
$26,525,950 Waterworks and Sewer System Improvement Revenue
and Refunding Bonds, Series 2006 due in annual installments from $685,000
to $1,960,000 through February 1, 2031: interest at 3.00% to 5.00%
$ 23,766,530
$39,485,000 Waterworks and Sewer System Revenue Bonds, Series 2009
due in annual installments from $1,090,000 to $1,350,000
through February 1, 2040: with no interest
37,305,000
$1,190,000 Waterworks and Sewer System Improvement Revenue
Series 2012 due in annual installments from $95,000 to $1,135,000
through February 1, 2022: interest at 0.240% to 0.850%; with interest
commencing February 1, 2019
1,190,000
Bond premium
1,385,249
Unpaid accumulated compensated absences
277,228
Total sewer fund
$ 73,722,807
Payable from Sanitation Fund:
Unpaid accumulated compensated absences
$
266,937
Payable from Palm View Golf Course Fund:
Unpaid accumulated compensated absences
$
70,362
Payable from Convention Center Fund:
Unpaid accumulated compensated absences
$
80,978
- 84 -
CITY OF McALLEN, TEXAS
NOTES TO FINANCIAL STATEMENTS
September 30, 2012
Payable from McAllen International Airport Fund:
$9,820,000 Combination Tax and Revenue Certificate of Obligation
Bonds, Series 2011 due in annual installments from $325,000
to $710,000 through September 30, 2031: interest at 2.00% to 4.75%
$
Note payable due Water Fund at 4%
9,495,000
108,335
Unpaid accumulated compensated absences
65,479
Total airport fund
$
9,668,814
Payable from McAllen Express Fund:
Unpaid accumulated compensated absences
$
53,113
Payable from Transit System Fund:
Unpaid accumulated compensated absences
$
41,158
Payable from McAllen International Toll Bridge Fund:
Unpaid accumulated compensated absences
$
94,122
Payable from Anzalduas International Crossing Fund:
$26,000,000 International Toll Bridge System Revenue Bonds, Series 2007A
due in annual installments from $415,000 to $1,895,000 through
March 1, 2032: interest at 4.50% to 4.65%
$ 24,700,000
Payable from Anzalduas International Crossing Fund (Continued):
$13,160,000 International Toll Bridge System Revenue Bonds, Series 2007B
due in annual installments from $340,000 to $915,000 through
March 1, 2032: interest at 4.00% to 5.00%
Unpaid accumulated compensated absences
12,095,000
9,120
Bond premium
502,436
Total Anzalduas International Crossing Fund
- 85 -
$ 37,306,556
CITY OF McALLEN, TEXAS
NOTES TO FINANCIAL STATEMENTS
September 30, 2012
Payable from Fleet Materials Management Fund (an internal service
fund treated as BTA):
Unpaid accumulated compensated absences
$
Total Proprietary Fund Debt
31,612
$ 145,504,233
Repayment for the $39,485,000 Waterworks and Sewer System Revenue Bonds, Series 2009, which
were sold to the Texas Water Development Board is on a “cash reimbursement basis”. To-date the
total amount received for the construction phase is $37,035,000. With principal payments made in
the amount of $1,090,000, the current outstanding principal balance is $34,855,000.
The table below reflects the revenue bond debt service requirements to maturity.
Year Ending
Principal
2013
2014
2015
2016
2017
2018-2022
2023-2027
2028-2032
2033-2037
2038-2040
$
Total bonds
outstanding
(1)
Net bonds
outstanding
Interest
5,740,000
5,940,000
6,360,000
6,650,000
6,895,000
33,930,000
33,760,000
31,500,000
6,755,000
4,050,000
$
4,761,591
4,564,293
4,363,468
4,143,181
3,893,205
15,552,099
9,075,182
2,707,326
-
$ 141,580,000
$
49,060,345
(2,450,000)
$ 139,130,000
-
$
49,060,345
(1) At September 30, 2012, this amount was not available. The
draws on the 2009-Waterworks and Sewer System Revenue Bonds
are on a "cost reimbursement basis".
- 86 -
CITY OF McALLEN, TEXAS
NOTES TO FINANCIAL STATEMENTS
September 30, 2012
(3) Changes in long-term liabilities
Long-term liability activity for the year ended September 30, 2012 is shown in the table below:
Balance at
September 30,
2011
Additional
Obligations
and Net
Increases
Retirement
and Net
Decreases
Balance at
September 30,
2012
Amounts
Due Within
One Year
Governmental activities:
Sales tax revenue bonds
$
175,000
$
-
$
(25,000) $
150,000
$
25,000
Combination tax and revenue
Certificate of obligation
Bond premium
Compensated absences
Net OPEB obligation
Net pension obligation
26,860,000
1,147,122
8,044,122
182,630
4,883,438
1,049,270
92,877
(2,505,000)
(136,970)
(4,500,000)
-
24,355,000
1,010,152
8,427,560
1,049,270
275,507
2,620,000
136,970
4,500,000
-
Total general long-term
36,226,244
6,025,585
(7,166,970)
35,267,489
7,281,970
Business-Type activities:
Revenue bonds payable
Note payable
Compensated absences
Bond premium
127,580,000
1,205,730
2,714,649
16,980,000
108,335
990,224
-
(5,429,998)
(870,000)
(141,102)
139,130,002
108,335
1,325,954
2,573,547
5,740,000
878,000
-
131,500,379
18,078,559
(6,441,100)
143,137,838
6,618,000
$ 167,726,623
$ 24,104,144
$ (13,608,070) $ 178,405,327
$ 13,899,970
Total proprietary fund debt
Total debt
With respect to governmental activities, claims and judgments, net OPEB obligation, and
compensated absences are generally liquidated by the General Fund. The exception to this is
net pension obligation, which is reflected as $275,507.
(4) Debt covenants
The City is required to comply with various provisions included in the trust indenture for
issued bonds (including bonds issued through the Texas Water Development Board). The City
has complied with all significant provisions of the trust indenture.
- 87 -
CITY OF McALLEN, TEXAS
NOTES TO FINANCIAL STATEMENTS
September 30, 2012
IV. Other information
(A) Risk Management
The City is exposed to various risks or torts; theft of, damage to, and destruction of assets;
injuries to employees, citizens and the general public; and natural disasters. During fiscal
year 2012, the City self-funded group health insurance, life insurance, general liability
insurance, and workmen’s compensation insurance. The City purchased insurance coverage
for fire and extended coverage on buildings and contents; and fire, lightning, and windstorm
insurance for its vehicles for damages in excess of certain limits.
The group health insurance program is reported in the Employee Benefits Fund, an internal
service fund. General liability and workmen’s compensation insurance programs are reported
in the General Insurance Fund, an internal service fund, and the Retiree Health Insurance
Fund, an internal service fund.
The health insurance excess coverage policy covers individual claims in excess of $150,000.
Third-party coverage is currently maintained for workmen’s compensation claims in excess of
$400,000. Third-party coverage is also currently maintained for general liability claims in
excess of $10,000.
The City estimates the liabilities for its self-funded insurance programs on a case-by-case
basis based on historical claims experience. A liability for a claim is established if
information indicates that it is probable that a liability has been incurred at the date of the
financial statements and the amount of loss is reasonably estimable. Accruals for claims are
adjusted on a regular basis based on the latest information available on each case. Claims
incurred but not reported have been considered in determining the accrual for claims, and City
management believes adequate accruals have been provided at September 30, 2012. Interfund premiums are based primarily on claims experience and are reported as quasi-external
transactions.
There were no significant reductions in insurance coverage from coverage in the prior year by
major category of risk. In addition, there were no insurance settlements exceeding insurance
coverage in any of the past three years. Changes in claims payable amounts for the most
recent two years are reflected in the following page.
- 88 -
CITY OF McALLEN, TEXAS
NOTES TO FINANCIAL STATEMENTS
September 30, 2012
Claims payable at
September 30, 2010
Employee
Benefits
Retiree
Health
Insurance
$ (1,000,000)
$ (240,000)
(8,777,808)
General
Insurance
(572,957)
$ (1,812,957)
(945,076)
(1,853,197)
(11,576,081)
8,027,808
945,076
1,923,159
10,896,043
Claims payable at
September 30, 2011
(1,750,000)
(240,000)
(502,995)
(2,492,995)
Current period claims and changes
in estimate
(7,325,477)
(791,488)
(1,274,642)
(9,391,607)
7,325,477
791,488
1,410,162
9,527,127
Current period claims and changes
in estimate
Current period claims paid
Current period claims paid
Claims payable at
September 30, 2012
$ (1,750,000)
$ (240,000)
$
Total
$
(367,475)
$ (2,357,475)
(B) Contingent liabilities
Amounts received or receivable from grant agencies are subject to audit and adjustment by
grantor agencies, principally the federal government. Any disallowed claims, including
amounts already collected, may constitute a liability of the applicable funds. The amount, if
any of expenditures that may be disallowed by the grantor cannot be determined at this time,
although the City expects such amounts, if any to be immaterial.
The City is a defendant in various lawsuits. Although the outcome of these lawsuits is not
presently determinable, in the opinion of the City’s management and legal counsel the
resolution of these matters will not have a material adverse effect on the financial condition of
the City.
The City has been granted authority from U.S. Citizenship and Immigration Service to operate
an EB-5 Visa (also known as the Employment Based 5th Preference Visa) Regional Center,
which attracts foreign investment for jobs creation in exchange for expediting applicants for
permanent residency. This activity is accounted for in a non-major governmental fund.
Under this program a foreign national deposits with the City—in addition to $10,000
application fee, $540,000, which is held in deposit pending approval of permanent residency,
at which time $40,000 is released to the City as an administrative fee and the remaining
$500,000 to the investment project selected by applicant. As of September 30, 2012 the
account deposited amounted to $2,700,000.
- 89 -
CITY OF McALLEN, TEXAS NOTES TO FINANCIAL STATEMENTS September 30,20\2 (C) Accounting for post-employment benefits ot her than pensions
Prior to the impleme ntatio n of GASB 45 ''Accounting and Financial Reporting by Employers
for Pos/employment Benefits Other Than Pensions ", the City reported retiree's hea lth benefits
in the Employee Benefits Fund. The City created an internal service fund entitled " Retiree
Health Insurance Fund" to accommodate the provisions of GASB 45.
(\) Plan Description: The City provides post-employment health care benefits for eligible
retirees and their dependents. To be eligible to eject retiree medical coverage, a City
employee retiring at age 60 or over must have at least 10 years of se rvice with the
City. City employees retiring before age 60 must have at least 25 year of service with
the City. Members of the City's Fire Department are eligible to retire o n or after age
50 with at least 20 years of service with the City.
Effective October I, 2008, spouses must have been covered for at least three years
prior to retirement, Retirees less than age 65 will have a one-time option to drop
coverage and to be reinstated once the retiree reached age 65 and has enrolled in
Medicare Parts A and B. Retirees are required to pay 100% of the blended (active and
retiree) premium cost for both single and dependent coverage. However, police
officers who retire prior to October I, 20 I 0 with 25 or more years of service will pay
50% of the blended premium cost for both single and dependent coverage. As of
yearend, there were 118 employees who had retired: 47 with single coverage; 31
sing le coverage with one dependent; and 40 with family coverage.
(2) Funding Policy: The policy of the City is to fund the plan on a pay-tls-you-go basis.
(3) Annual OPES Cost and Net OPES Obligation: The Retiree Health Insurance Fund's
(Fund) ARC is ac(uarially determined in accordance with the parameters of GASB
Statement No. 45, Accounling and Financial Reporting by Employers for
Poslemploymenl Benefits Other Than Pension. The ARC represent s a level o f funding
thal, if paid on an ongoing basis, is projec ted to cover the no rmal cost each year and
amortize any unfunded ac tuarial liabilities (or fundin g excess) over a period not to
exceed 30 years. The most curren! actuaria l valuation was October I, 20 IO. The
following table shows the Fund 's annua l OPEB cost for the year. the amOUill actua lly
contributed to the plan, and changes in the Fund 's net OPEB obligation.
- 90 ­
CITY OF McALLEN, TEXAS
NOTES TO FINANCIAL STATEMENTS
September 30, 2012
Net OPEB Obligation
09/30/12
Annual required contribution
Interest on net OPEB obligation
Adjustment to annual required contribution
$
Annual OPEB cost
Contributions made
859,964
(10,591)
13,253
862,626
(385,550)
Increase (decrease) in net OPEB obligation
477,076
Net OPEB obligation (asset) at beginning of year (revised)
572,194
Net OPEB obligation (asset) at end of year
$ 1,049,270
The City’s annual OPEB cost and the percentage cost contributed to the plan for the
year ended September 30, 2012 is as follows:
Year Ended
September 30,
Annual
OPEB
Cost
2008
2009
2010
2011
2012
$ 548,770
551,544
882,368
882,368
862,625
Percentage of
Annual OPEB
Cost Contributed
136.6%
96.2%
51.5%
62.2%
44.7%
Net OPEB
Obligation (Asset)
at Year End
$
(201,098)
(179,896)
248,430
572,194
1,049,270
(4) Funded Status and Funding Progress: The funding of the plan was based on the
actuarial valuation dated October 1, 2010. The study reported the unfunded actuarial
accrued liability (UAAL) at $8,076,583 with an annual required cost of $859,964. The
actuarial value of assets was $0, resulting in an UAAL of $8,076,583. The City will
also be required to have an actuarial valuation performed at least every two years. The
table in the following page reflects the funding progress.
- 91 -
CITY OF McALLEN, TEXAS
NOTES TO FINANCIAL STATEMENTS
September 30, 2012
Actuarial
Vnluation
Date
10/01106
Actuarial
Value of
Assets
(a)
$
10/01/08
10/011 10
Actuarial
Accrued
Liability
(AAL)
(b)
Unfunded
AAL
(UAAL)
(b-a)
$ 4,568,795
7,253,404
8,076,583
$ 4,568,795
7,253,404
8,076,583
UAAL as a
Funded
Ratio
(a/b)
0.0%
0.0%.
0.0010
Covered
Payroll
(,)
$ 5 1,690,160
60,443,815
62,858.165
rercentage of
Covered Payroll
« b-,)',)
8.8%
12.0%
12.8%
(5) Actuarial Methods and Assu mptions: Projections of benefits for financial reporting
purposes are based on the substantive plan (the plan as understood by the employer
and the plan members) and include the types of benefits provided at the time of each
valuation and the historical pattern of sharing the benefits costs between the employer
and the plan members to that point. The actuaria l methods and assumptions used
incl ude tec hniques that are designed to reduce the effect s of short-term volati lity in
actua rial accrued liabil ities consistent w ith the long-te rm pe rspec tive of the
ca lc ula tions. For the fi scal year ended Se pte mber 30. 20 12, the ac tuarial valuation
date was Oc tobe r I, 20 I O. The actuarial method used was the " projected unit credit"
method, the amortization method used was the " le ve l do llar open" me thod, a nd (he
remaining amoniza ti on period was 30 years. The asse t va hmtion method was market
va lue a nd the assumed in vestment rate of return was 5.5%. The hea lthcare initial
inflati on rate was 10%, with a n ultimate goa l o r 5.00/0. Assumptions such as projected
sa lary increases and post-re tireme nt bene fit increases a re not applicab le 10 the plan .
(D)
Reliremenl Plans
( I)
Texas Municipal Retirement System
a} . Plan Description
The City provides pension benefits for all of its eligible employees, except City
Fire Depanment personnel, for whom there is a separate retirement plan. th rough
a non-traditional, joint contributory, hybrid defined benefit plan in the state-wide
Texas Municipal Retirement System (TMRS). an agent mUltiple-employer public
emp loyee retirement system. The plan pro visions th at have been adopted by the
City are within the options available in the governing slate statutes ofTMRS.
TMRS issues a publicly available comprehensi ve annual financial report that
includes financial statements and required supplementary informati on (RS I) for
TMRS; the repon also provides detailed explanations of the contri butions, benefi ts
and actuarial methods and assumptions used the System. This report may be
obtained by writing to Texas Municipal Retirement System, P.O. Box 149 153,
- 92 ­
CITY OF McALLEN, TEXAS
NOTES TO FINANCIAL STATEMENTS
September 30, 2012
Austin, Texas 78714-9153 or by calling 800-924-8677; in addition, the report is
available on TMRS’ website at www.TMRS.com.
The plan provisions are adopted by the governing body of the City, within the
options available in the state statutes governing TMRS. Plan provisions for the
City were as follows:
Employee deposit rate
Matching ratio (city to employee)
Years required for vesting
Service retirement eligibility
(expressed as age/years of service)
Updated Service Credit
Annuity Increase (to retirees)
b).
Plan Year 2011
7.0%
2 to 1
10
60/10,0/20
Plan Year 2012
7.0%
2 to 1
10
60/10,0/20
0%
0% of CPI
0%
0% of CPI
Contributions
Under the state law governing TMRS, the contribution rate for each city is
determined annually by the actuary, using the Projected Unit Credit actuarial cost
method. This rate consists of the normal cost contribution rate and the prior service
cost contribution rate, which is calculated to be a level percent of payroll from year
to-year. The normal cost contribution rate finances the portion of an active
member’s projected benefit allocated annually; the prior service contribution rate
amortizes the unfunded (overfunded) actuarial liability (asset) over the applicable
period for that city. Both the normal cost and prior service contribution rates
include recognition of the projected impact of annually repeating benefits, such as
Updated Service Credits and Annuity increases.
The City contributes to the TMRS Plan at an actuarially determined rate. Both the
employees and the City make contributions monthly. Since the City needs to
know its contribution rate in advance for budgetary purposes, there is a one-year
delay between the actuarial valuation that serves as the basis for the rate and the
calendar year when the rate goes into effect. In meeting its fiscal responsibility,
the City issued a lump sum contribution of $250K for fiscal year 2011. It was an
effort to reduce potential unfunded actuarial liability. Additionally, the City’s
contribution rate was 8.64% and 8.52% for 2010 and 2011 respectively. For the
current year the contribution rate was 5.22% The annual pension cost and the net
pension obligation/ (asset) are reflected in the following page.
- 93 -
CITY OF McALLEN, TEXAS
NOTES TO FINANCIAL STATEMENTS
September 30, 2012
Fiscal Year
Ended
09/30/2010
09/30/2011
09/30/2012
Actual
Contribution
Annual
Pension
Cost
$4,693,532
$5,101,423
$3,414,628
$4,693,532
$5,101,423
$3,414,628
Percentage
of APC
Contributed
100%
100%
100%
Net Pension
Obligation/(Asset)
$0
$0
$0
The required contribution rates for fiscal year 2012 were determined as part of the
December 31, 2008 and 2009 actuarial valuations. Additional information as of
the latest actuarial valuation, December 2011, is reflected below.
Actuarial Valuation Date
12/31/11
Actuarial cost method
Amortization method
GASB 25 Equivalent Single
Amortization period
Asset valuation method
Actuarial assumptions:
Investment rate of return
Projected salary increases –
Projected Unit Credit
Level P ercent of P ayroll
25.5 Years
Closed period
10-yr Smoothed Market
includes inflation at
cost-of-living adjustments
7.0%
Varies by
age and service
3.0%
None
Actuarial value of assets
$161,885,479
Actuarial accrued liability
$159,194,692
Percentage funded
101.7%
Unfunded actuarial accrued
liability (asset) (UAAL)
($2,690,787)
Annual covered payroll
$56,625,910
UAAL as a percentage of covered
payroll
-4.8%
The funded status as of December 31, 2011, the most recent actuarial valuation date
is as follows (unaudited):
Actuarial accrued liability (AAL)
Actuarial value of Assets
$159,194,692
161,885.479
Unfunded actuarial accrued liability (Asset)
(UAAL)
Funded ratio (actuarial value of Assets/AAL)
Annual covered payroll
UAAL as a percentage of covered payroll
$ (2,690,787)
- 94 -
101.7%
$59,840,444
(4.8)%
CITY OF McALLEN, TEXAS
NOTES TO FINANCIAL STATEMENTS
September 30, 2012
The schedule of funding progress, presented as Required Supplementary
Information following the notes to the financial statements, presents multi-year
trend information about whether the actuarial values of plan assets are increasing or
decreasing over time relative to the actuarial accrued liabilities for benefits.
(2)
Firemen’s Fund
a). Plan Description
Firemen’s Fund, a single-employer defined benefit plan (the “Plan”), was created
pursuant to the Texas Local Fire Fighter’s Retirement Act (“TLFFRA”) and is
administered by the Board of Trustees of the fund. The fund provides pension,
disability, death, and severance benefits to employees of the City’s fire department
and former volunteer firemen eligible to receive benefits.
The City issues a publicly-available financial report that includes financial
statements and required supplementary information for the Firemen’s Fund. This
financial report may be obtained by writing to the City of McAllen Finance
Director, P.O. Box 220, McAllen, Texas 78505-0220 or by calling (956) 681-1064.
b). Summary of Significant Accounting Policies
Basis of Accounting – The financial statements of the Firemen’s Fund are prepared
using the accrual basis of accounting. Employee and employer contributions are
recognized as revenues when due, pursuant to formal commitments, as well as
statutory or contractual requirements. Benefits and refunds are recognized when
due and payable in accordance with the terms of the Plan document.
Plan Benefits – Benefit provisions are established under authority of the TLFFRA.
Specific plan provisions are governed by a Plan document and a trust agreement
executed by the Board of Trustees. The Plan document may be amended as
provided in Section 7 of the TLFFRA (Article 6243e. V.T.C.S.) Amending the Plan
requires approval of any proposed change by an eligible actuary and a majority of
the participating members of the Plan. Both the City and the members of the Plan
have specific authority to appoint members of the Board under TLFFRA.
Pension Benefits – Pension benefits become fully vested after 20 years of credited
service. Employees may retire at age 50 with 20 years of service (“normal
retirement age”). A partially vested benefit is also provided for employees who
- 95 -
CITY OF McALLEN, TEXAS
NOTES TO FINANCIAL STATEMENTS
September 30, 2012
terminate employment with at least 10 but less than 20 years of service. The
monthly benefit at normal retirement age, payable in an annuity, is equal to 58% of
the compensation base, as defined, plus $58.00 per month for each year of service in
excess of 20 years.
Death Benefits – Duty related death benefits payable to a member’s spouse equals
the sum of 38.67% of the member’s compensation base, as defined, plus two-thirds
of the member’s accrued retirement benefit at death. Non-duty related benefits will
equal the duty related death benefit to which the member’s beneficiary was eligible
multiplied by the member’s vested percentage based on the member’s years of
service at death. In addition to the spouse’s benefit, each unmarried child of the
member under age 18 will receive a monthly benefit of 7.73% of the firefighter’s
average monthly salary. The sum of all benefits payable as a result of the death of
an active plan member may not exceed the disability or retirement benefit such
member had earned as of the date of death.
Severance Benefits – Members who terminate employment with less than 10 years
of service will be entitled to the return of the excess of his/her contributions to the
fund over the amount of any benefits received from the Plan. Such refunds will not
include any interest on the member’s contribution. If a member terminates on or
after the date of completing 10 years of service but prior to the date of completing
20 years of service, he/she will be entitled to receive a monthly benefit, starting on
the date he/she would have both completed 20 years of service and attained age 50,
had he/she remained in the service of the fire department. The amount the member
will receive will equal the monthly service retirement benefit accumulated on the
date the member separated from service with the fire department, multiplied by the
member’s vested percentage.
Method Used to Value Investments – Fund investments are reported at fair value.
Short-term investments are reported at cost, which approximates fair value. The fair
value of the Fund’s investments is based on the quoted value of each investment on
the last business day of the Fund year. The Plan’s investments are stated at fair
value and, accordingly, unrealized appreciation and depreciation are reported in the
statements of changes in plan net assets. The fair values of United States
Government securities, corporate and foreign bonds, common stocks, and foreign
equities are based on quoted market prices. Plan values in investments in hedge
funds based on its percentage investment in each such fund. The estimated fair
value of each fund is based on market conditions and information reported by the
fund managers, and is generally based on the estimated fair value of each funds’
underlying investments at the end of the reporting period. No investment in any one
organization (other than the U.S. Government or mutual funds) represents 5% or
more of Fund assets.
- 96 -
CITY OF McALLEN, TEXAS
NOTES TO FINANCIAL STATEMENTS
September 30, 2012
Purchases and sales of investments are recorded on a trade-date basis and,
accordingly, the related receivables and payables for any unsettled trades are
recorded. Interest income and dividends are recorded on the accrual basis.
c). Annual Pension Cost
For 2010, the City’s annual pension cost was equal to the City’s actual and required
contributions. The required contribution was established as part of the September 30,
2010 actuarial valuation using the entry-age actuarial cost method. The actuarial
assumptions included (a) 8% investment rate of return, compounded annually
(b) projected salary increases of 4.25% per year, compounded annually, (c) inflation
rate of 3.00% and (d) the amortization period is calculated from the rate contributed
by the City. The plan receives a fixed percentage of pay contribution from the City
each year. Thus, the City’s contribution is not expressed as a dollar amount. This
procedure is permitted under the Guide to Implementation of GASB Statements 25, 26
and 27 on Pension Reporting and Disclosure by State and Local Government Plans
and Employers. The investment rate of return and the projected salary increases both
used the same assumptions with regard to inflation. The actuarial value of assets was
determined using the smoothed market value technique, a technique that smoothes the
effect of short-term volatility in the market value over a four-year period. The
unfunded actuarial liability is being amortized as a level percentage of projected
payroll on an open basis. The remaining amortization period at September 30, 2010
was 39.6 years. The most recent actuarial valuation was done as of September 30,
2010. The amounts of the actuarial value of assets represent estimates based upon the
assumptions described above. Changes in those estimates will result in changes in
such estimates in the future. The amount of benefits ultimately to be paid could differ
materially from the current estimates.
The schedule of actuarial funding progress is presented in the following page.
- 97 -
CITY OF McALLEN, TEXAS
NOTES TO FINANCIAL STATEMENTS
September 30, 2012
Schedule of Actuarial Funding Progress
Actuarial Valuation Date
Actuarial cost method
Amortization method
Remaining amortization period
Asset valuation method
Actuarial assumptions:
Investment rate of return
Projected salary increases –
includes inflation at
cost-of-living adjustments
09/30/10
Entry Age Normal
Level P ercent of P rojected Payroll
39.6 Years open period
5yr Smooth Market Value
8%
4.25%
None
Actuarial value of assets
$36,651,357
Actuarial accrued liability
$51,565,906
Percentage funded
71.1%
Unfunded actuarial accrued
liability (UAAL)
$14,914,549
Annual covered payroll
$8,996,407
UAAL as a percentage of covered
payroll
165.8%
Actuarial valuations of an ongoing plan involve estimates of the value of reported
amounts and assumptions about the profitability of occurrence of events far into the
future. Examples include assumptions about future rates of retirement, mortality,
and salary increases. Actuarially determined amounts are subject to continual
revision as actual results are compared with past expectations and new estimates are
made about the future. The Schedule of Funding Progress, presented as required
supplementary information following the notes to financial statements, presents
multi-year trend information about whether the actuarial values of plan assets are
increasing or decreasing over time relative to the actuarial accrued liabilities for
benefits. The accompanying Schedule of Employer Contributions presents trend
information about the amount contributed to the Plan by the employer in
comparison to the annual required contributions (“ARC”), an amount that is
actuarially determined.
- 98 -
CITY OF McALLEN, TEXAS
NOTES TO FINANCIAL STATEMENTS
September 30, 2012
Schedule of Employer Contributions
Annual pension cost
Annual required contribution (ARC)
09/30/12
$
1,376,033
09/30/11
$
1,315,456
09/30/10
$
1,071,252
Interest on NPO
14,610
7,968
13,524
Adjustments to the ARC
10,478
5,714
9,699
Total annual pension cost (APC)
$
Percentage of annual pension
cost contributed
Contributions made
Increase in NPO
NPO at the end of the period
1,380,165
$
93.3%
$
$
$
1,287,288
92,877
275,507
1,317,710
$
93.7%
$
$
$
1,234,674
83,036
182,630
1,075,077
106.5%
$
$
$
1,144,532
(69,455)
99,594
d). Contributions
The Plan’s minimum required contribution provisions are established under Title 8,
Subtitle A, Chapter 802, Subchapter B, Section 802.101 of the Texas Government
Code and under Texas Pension Review Board Guidelines for Actuarial Soundness.
Specific Plan contribution rates are governed by the Plan document. Changes in the
members’ or the City’s contribution rate requires a plan amendment.
The contribution rates of the Plan members and the City are established under the
terms of the Plan. An actuarial valuation is performed biennially to verify that Plan
benefits and Plan contributions are in balance. Costs of administering the fund are
paid from Plan assets.
Pursuant to the Plan document, a legal instrument binding both the City and its
firefighters, the City of McAllen is required to match employee contributions.
Benefits paid to former volunteer firefighters are funded by the City when paid to the
former volunteer firefighters or beneficiaries. The City’s contribution rate for the
fiscal year ended September 30, 2012 was 12.5% of annual compensation.
Contributions required and paid into the fund as of September 30, 2012 were
members, $1,027,430 and employer, $1,287,288.
e). Other pension information
In September 2003 Texas voters approved an amendment to the Texas Constitution,
which provided that once certain benefits are granted to retirees, those benefits may
- 99 -
CITY OF McALLEN, TEXAS
NOTES TO FINANCIAL STATEMENTS
September 30, 2012
not be subsequently reduced. It was codified as Article XVI, Section 66, of the Texas
Constitution. The amendment applies only to the City of McAllen Firefighters’ Relief
and Retirement Plan. It further provided that the City and the retirement system that
finance benefits under the retirement system are jointly responsible for ensuring that
benefits are not reduced or otherwise impaired, which could potentially require the
City to involuntarily increase its funding due to under-performing investments, plan
improvements as well as other factors outside the control of the City. The amendment
also permitted the City to be exempt from its requirements upon holding an election in
which the majority of the votes favored the exemption. On May 15, 2004, a special
City election was held, in which the majority of the voters voted in favor of exempting
the City of McAllen and the McAllen Firefighters’ Relief and Retirement plan from
the application of this amendment, Article XVI, Section 66 of the Texas Constitution.
(D)
Subsequent events
During the year, the City and the McAllen Fire Fighter’s Association were in discussions
concerning the collective bargaining agreement. This agreement was approved by the City
Commission on January 14, 2013, and all parties signed on January 17, 2013. This is a four
year agreement covering the period of October 1, 2012 through September 30, 2016. Aside
from special labor conditions, some of the key provisions covered by the agreement are:
 Base salary increase of 0.5% per year from FY 2012- FY 2015 with no increase in FY
2015-2016.

Subject to the approval of the plan participants, employees shall contribute up to 11%
of their pay to the Firemen’s Retirement Fund. The Employer (City) shall increase its
contribution to the Firemen’s Retirement Fund, from its current rate of 12.50%, for
all employees in accordance with the following:
i.
Effective as of the signing of this Agreement the City shall increase its
contribution to the Firemen’s Retirement Fund to an amount equal to 12.75%
of annual salaries.
ii.
Effective October 1, 2013, the City shall increase its contribution to 13.00%
of annual salaries.
iii.
Effective October 1, 2014, the City shall increase its contribution to 13.25%
of annual salaries.
iv.
Effective October 1, 2015 through September 29, 2016, the City shall increase
its contribution to 13.50% of annual salaries.
v.
Effective September 30, 2016, the City shall decrease its contribution to
13.00% of annual salaries.
- 100 -
CITY OF McALLEN, TEXAS
NOTES TO FINANCIAL STATEMENTS
September 30, 2012
The City Commission in its December 10, 2012 meeting adopted an ordinance, which updated
service credits with transfers, from 0% to 100%, for all qualifying members of the Texas
Municipal Retirement System. The ordinance became effective January 1, 2013. The most
significant impact was the reduction of the City’s funded ratio from 101.7% to 98.8%.
- 101 -
,
CITY OF McALLEN, TEXAS
REQUIRED SUPPLEMENTAL INFORMATION ON-(Unaudited)
TEXAS MUNICIPAL RETIREMENT SYSTEM
SCHEDULE OF FUNDING PROGRESS
Actuarial
Valuation
Date
Actuarial
Value of
Assets
(a)
12/31/06
12/31/07
12/31/08
12/31/09
12/31/10
12/31/11
$ 83,266,393
90,516,206
97,604,499
105,016,856
149,600,330
161,885,479
Actuarial Accrued
Liability (AAL)
(b)
$
88,394,297
91,916,258
100,472,137
118,250,995
148,677,672
159,194,692
Unfunded
AAL
(UAAL)
(b-a)
Funded
Ratio
(a/b)
Covered
Payroll
(c)
$ 5,127,904
1,400,052
2,867,638
13,234,139
(922,658)
(2,690,787)
94.2%
98.5%
97.1%
88.8%
100.6%
101.7%
$ 44,106,054
47,258,770
53,770,371
57,440,380
58,890,846
56,625,910
UAAL as a
Percentage of
Covered Payroll
((b-a)/c)
11.6%
3.0%
5.3%
23.0%
-1.6%
-4.8%
Refer to page 92 of the notes to financial statements for the actuarial assumptions of the plan. These are a required part of RSI.
- 104 -
CITY OF McALLEN, TEXAS
REQUIRED SUPPLEMENTAL INFORMATION ON-(Unaudited)
FIREMEN'S RELIEF AND RETIREMENT FUND
SCHEDULE OF FUNDING PROGRESS
Actuarial
Valuation
Date
Actuarial
Value of
Assets
(a)
09/30/00
09/30/02
09/30/04
09/30/06
09/30/08
09/30/10
$ 18,173,765
21,116,716
25,443,339
29,226,476
34,588,465
36,651,357
Actuarial Accrued
Liability (AAL)
Entry Age
(b)
$
21,576,631
28,141,949
33,227,793
38,659,974
45,073,090
51,565,906
Unfunded
AAL
(UAAL)
(b-a)
$ 3,402,866
7,025,233
7,794,454
9,433,498
10,484,625
14,914,549
Funded
Ratio
(a/b)
84.2%
75.0%
76.6%
75.6%
76.7%
71.1%
Covered
Payroll
(c)
$ 4,263,430
5,190,836
5,818,893
6,817,267
8,199,849
8,996,407
UAAL as a
Percentage of
Covered Payroll
((b-a)/c)
79.8%
135.3%
133.8%
138.4%
127.9%
165.8%
Refer to page 95 of the notes to financial statements for the actuarial assumptions of the plan. These are a required part of RSI
The next actuarial valuation will be performed as of September 30, 2012.
The City issues a publicly-available financial report that includes financial
statements and required supplementary information for the Firemen's Fund.
This financial report may be obtained by writing to the City of McAllen Finance
Director, P.O. Box 220, McAllen, Texas 78505-0220 or by calling (956) 681-1064.
- 105 -
CITY OF McALLEN, TEXAS
REQUIRED SUPPLEMENTAL INFORMATION ON-(Unaudited)
POST EMPLOYMENT BENEFIT PLAN
SCHEDULE OF FUNDING PROGRESS
Actuarial
Value of
Assets
(a)
Actuarial
Valuation
Date
10/01/06
10/01/08
10/01/10
$
Actuarial Accrued
Liability (AAL)
(b)
-
$
4,568,795
7,253,404
8,076,583
Unfunded
AAL
(UAAL)
(b-a)
$ 4,568,795
7,253,404
8,076,583
Funded
Ratio
(a/b)
0.0%
0.0%
0.0%
Refer to page 90 of the notes to financial statements for the actuarial assumptions of the plan.
This is a "single-employer" plan and no separate financial report is issued by the City.
- 106 -
Covered
Payroll
(c)
$ 51,690,160
60,443,815
62,858,165
UAAL as a
Percentage of
Covered Payroll
((b-a)/c)
8.8%
12.0%
12.8%
APPENDIX C
FORMS OF BOND COUNSEL'S OPINIONS
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Draft: February 28, 2014
LAW OFFICES
M cC A L L , P A R K H U R S T & H O R T O N L . L . P .
717 NORTH HARW OOD
NINTH FLOOR
DALLAS, TEXAS 75201-6587
700 N. ST. MARY'S STREET
1525 ONE RIVERW ALK PLACE
SAN ANTONIO, TEXAS 78205-3503
600 CONGRESS AVENUE
1800 ONE AMERICAN CENTER
AUSTIN, TEXAS 78701-3248
TELEPHONE: 214 754-9200
FACSIMILE: 214 754-9250
TELEPHONE: 210 225-2800
FACSIMILE: 210 225-2984
TELEPHONE: 512 478-3805
FACSIMILE: 512 472-0871
March 20, 2014
CITY OF MCALLEN, TEXAS
GENERAL OBLIGATION BONDS, SERIES 2014
DATED AS OF FEBRUARY 15, 2014
IN THE AGGREGATE PRINCIPAL AMOUNT OF $42,380,000
AS BOND COUNSEL FOR THE CITY OF MCALLEN, TEXAS (the "City") in connection
with the issuance of the bonds described above (the "Bonds"), we have examined into the legality
and validity of the Bonds, which bear interest from the dates specified in the text of the Bonds until
maturity or prior redemption at the rates and payable on the dates as stated in the text of the Bonds,
and which 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
authorized, issued and delivered in accordance with law; that the Bonds constitute valid and legally
binding general obligations of the City in accordance with their terms except as the enforceability
thereof may be limited by 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; that the City has the legal authority to
issue the Bonds and to repay the Bonds; and that ad valorem taxes sufficient to provide for the
payment of the interest on and principal of the Bonds, as such interest comes due, and as such
principal matures, have been levied and ordered to be levied against all taxable property in the City,
and have been pledged for such payment, within the limits 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,
City of McAllen, Texas
General Obligation Bonds, Series 2014
March 20, 2014
Page 2
accordingly, interest on the Bonds will not be included as an individual or corporate alternative
minimum tax preference item under section 57(a)(5) of the Internal Revenue Code of 1986 (the
"Code"). 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 or refinanced 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.
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. In particular, but not
by way of limitation, we express no opinion with respect to the federal, state or local tax
consequences arising from the enactment of any pending or future legislation.
WE CALL YOUR ATTENTION TO THE FACT that the interest on tax-exempt
obligations, such as the Bonds, is included in a corporation's alternative minimum taxable income
for purposes of determining the alternative minimum tax imposed on corporations by section 55 of
the Code.
WE EXPRESS NO OPINION as to any insurance policies issued with respect to the
payments due for the principal of and interest on the Bonds, nor as to any such insurance policies
issued in the future.
OUR SOLE ENGAGEMENT in connection with the issuance of the Bonds is as Bond
Counsel for the 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
we 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.
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.
City of McAllen, Texas
General Obligation Bonds, Series 2014
March 20, 2014
Page 3
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.
Respectfully,
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Draft: February 28, 2014
LAW OFFICES
M cC A L L , P A R K H U R S T & H O R T O N L . L . P .
717 NORTH HARW OOD
NINTH FLOOR
DALLAS, TEXAS 75201-6587
700 N. ST. MARY'S STREET
1525 ONE RIVERW ALK PLACE
SAN ANTONIO, TEXAS 78205-3503
600 CONGRESS AVENUE
1800 ONE AMERICAN CENTER
AUSTIN, TEXAS 78701-3248
TELEPHONE: 214 754-9200
FACSIMILE: 214 754-9250
TELEPHONE: 210 225-2800
FACSIMILE: 210 225-2984
TELEPHONE: 512 478-3805
FACSIMILE: 512 472-0871
March 20, 2014
CITY OF MCALLEN, TEXAS
COMBINATION TAX AND REVENUE
CERTIFICATES OF OBLIGATION, SERIES 2014
DATED AS OF FEBRUARY 15, 2014
IN THE AGGREGATE PRINCIPAL AMOUNT OF $11,850,000
AS BOND COUNSEL FOR THE CITY OF MCALLEN, TEXAS (the "City") in connection
with the issuance of the certificates of obligation described above (the "Certificates"), we have
examined into the legality and validity of the Certificates, which bear interest from the dates
specified in the text of the Certificates until maturity or prior redemption at the rates and payable
on the dates as stated in the text of the Certificates, and which are subject to redemption, all in
accordance with the terms and conditions stated in the text of the Certificates.
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 Certificates including (i) the ordinance
authorizing the issuance of the Certificates (the "Ordinance"), (ii) one of the executed Certificates
(Certificate 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 Certificates have been
authorized, issued and delivered in accordance with law; that the Certificates constitute valid and
legally binding general obligations of the City in accordance with their terms except as the
enforceability thereof may be limited by 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; that the City has the
legal authority to issue the Certificates and to repay the Certificates; that ad valorem taxes sufficient
to provide for the payment of the interest on and principal of the Certificates, as such interest comes
due, and as such principal matures, have been levied and ordered to be levied against all taxable
property in the City, and have been pledged for such payment, within the limits prescribed by law;
and that limited "Surplus Revenues" (as such term is defined and described in the Ordinance) of the
City's hotel occupancy tax levied pursuant to Chapter 351, Texas Tax Code, as amended have been
pledged to further secure the payment of the Certificates in the manner set forth in the Ordinance.
City of McAllen, Texas
Combination Tax and Revenue Certificates of Obligation, Series 2014
March 20, 2014
Page 2
IT IS FURTHER OUR OPINION, except as discussed below, that the interest on the
Certificates 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 Certificates are not "specified private activity bonds" and that,
accordingly, interest on the Certificates will not be included as an individual or corporate alternative
minimum tax preference item under section 57(a)(5) of the Internal Revenue Code of 1986 (the
"Code"). 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 Certificates and the use of the
property financed or refinanced 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 Certificates may become includable in gross income retroactively to the
date of issuance of the Certificates.
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 Certificates. In particular, but
not by way of limitation, we express no opinion with respect to the federal, state or local tax
consequences arising from the enactment of any pending or future legislation.
WE CALL YOUR ATTENTION TO THE FACT that the interest on tax-exempt
obligations, such as the Certificates, is included in a corporation's alternative minimum taxable
income for purposes of determining the alternative minimum tax imposed on corporations by section
55 of the Code.
WE EXPRESS NO OPINION as to any insurance policies issued with respect to the
payments due for the principal of and interest on the Certificates, nor as to any such insurance
policies issued in the future.
OUR SOLE ENGAGEMENT in connection with the issuance of the Certificates 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 Certificates under the
Constitution and laws of the State of Texas, and with respect to the exclusion from gross income of
the interest on the Certificates 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 Certificates, and have not assumed any
responsibility with respect thereto. We express no opinion and make no comment with respect to
the marketability of the Certificates and we 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 Certificates has been limited as described therein.
City of McAllen, Texas
Combination Tax and Revenue Certificates of Obligation, Series 2014
March 20, 2014
Page 3
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 Certificates. 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 Certificates as includable in gross
income for federal income tax purposes.
Respectfully,
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