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09.23.2008 Town Council PacketISPER OWN OF 1. Call to Order / Roll Call. 2. Invocation and Pledge of Allegiance. AGENDA Regular Meeting of the Prosper Town Council Prosper ISD Central Administration 605 E. Seventh Street, Prosper, Texas Tuesday, September 23, 2008 at 6:00 p.m. 3. Announcements of dates and times of upcoming community events. EXECUTIVE SESSION 4. Recess into Closed Session in compliance with Section 551.001 et. seq. Texas Government Code, to wit: Section 551.074 to deliberate the evaluation of the Town Manager. 5. Reconvene into Regular Session and take any action necessary as a result of the Closed Session. CONSENT AGENDA (Items placed on the Consent Agenda are considered routine in nature and are considered non -controversial. The Consent Agenda can be acted upon in one motion. A majority vote of the Council is required to remove any item for discussion and separate action. Council members may vote nay on any single item without comment and may submit written comments as part of the official record.) 6. Consent Agenda MINUTES a. Consider and act upon minutes from the following Council meetings. (MD) • September 9, 2008 — Town Council Meeting • September 16, 2008 — Special Town Council Meeting ORDINANCES, RESOLUTIONS. AND AGREEMENTS b. Consider and act upon an ordinance amending Section 2.05 of Planned Development-9 (PD-9), regarding the requirements for emergency access, containing 339.7f acres, located on the west side of Custer Road, 100f feet north of First Street. (Z08-14). (CC) C. Consider and act upon an ordinance ratifying the Property Tax Revenue Increase in the 2008-2009 Budget as a result of the Town receiving more revenues from Property Taxes in the 2008-2009 Budget than in the previous Fiscal Year. (MG) FINANCIALS d. Consider and act upon the financial statements ending August 31, 2008. (MG) CITIZEN'S COMMENTS (The public is invited to address the Council on any topic. However, the Council is unable to discuss or take action on any topic not listed on this agenda. Please complete a "Public Comments Form" and present it to the Town Secretary prior to the meeting.) 7. Other Comments by the Public. Page 1 of 2 REGULAR AGENDA (If you wish to address the Council during the regular agenda portion of the meeting, please fill out a "Speaker Request Form" and present it to the Town Secretary prior to the meeting. Citizens wishing to address the Council for items listed as public hearings will be recognized by the Mayor. Those wishing to speak on a non-public hearing related items will be recognized on a case -by -case basis, at the discretion of the Mayor and Town Council.) PUBLIC HEARINGS 8. Presentation of Service Plan and First Public hearing to consider the voluntary annexation of approximately 121.281 acres of land located in the Collin County School Land Survey, Abstract No. 147, Collin County and being more generally located north of Hwy 380 and +3640' west of the Dallas North Tollway. (MD) DEPARTMENT ITEMS 9. Presentation to the Prosper Independent School District, Collin County and the Collin County Community College District regarding the establishment of Prosper Tax Increment Reinvestment Financing Zone Number One. (MG) 10. Consideration and action on a resolution authorizing the Participation Agreement between the Town of Prosper and Collin County for the Blue Star "Gates of Prosper" development. (MG) 11. Discuss and give an update on the Cities Aggregation Power Project ("CAPP") Member Long Term Contract. (MG) 12. Consider and act upon a change order #1 to Quality Excavation, Ltd., for the Prosper Trail Culvert Extension Project. (HW) 13. Possibly direct Town Staff to schedule topic(s) for discussion at a future meeting. 14. Adjourn. CERTIFICATION I, the undersigned authority, do hereby certify that this Notice of Meeting was posted on the inside window at the Town Hall of the Town of Prosper, Texas, a place convenient and readily accessible to the general public at all times, and said Notice was posted by the following date and time: Friday, September 19, 2008 at 5:00 p.m. and remained so posted at least 72 hours before said meeting was convened. ``%%1111fill//' of: PRO �,O�pi e oo � �e*7teN6tb&e&Removed i� � e � o ew D. Denton, TRMC g Town Secretary i e v In addition to any specifically identified Executive Sessions, Council may convene into EzoE five Scion under Se�t16`n 551e Texas Government Code at any point during the open meeting to discuss any item posted on this agenda. The Open M�Wgs Act "1414idesg° ecific a options that require that a meeting be open. Should Council elect to convene into Executive Session, those exceptions will be spe7��lyAWRid raced. Any subsequent action, as a result of this Executive Session, will be taken and recorded in open session. /// l l l 110` NOTICE OF ASSISTANCE AT PUBLIC MEETINGS: The Prosper Town Council Meetings are wheelchair accessible. Persons with disabilities who plan to attend this meeting and who may need auxiliary aids or services such as Interpreters for persons who are deaf or hearing impaired, readers, or large print, are requested to contact the Town Secretary's Office at (972) 346-2640 or by FAX (972) 347-21 I 1. BRAILLE IS NOT AVAILABLE. Page 2 of 2 ISPER OWN OF 1. Call to Order / Roll Call. The meeting was called to order at 6:04 p.m. Roll call was taken by the Town Secretary. MINUTES Regular Meeting of the Prosper Town Council Prosper ISD Central Administration Building 605 E. Seventh Street, Prosper, Texas Tuesday, September 9, 2008 at 6:00 p.m. Council present included: Mayor Charles Niswanger, Mayor Pro - Kenneth Dugger, Dave Turley, David Vestal, Meigs Miller, and Danny Staff present included: Mike Land, Town Manager; Hui Copple, Senior Planner; Matthew Garrett, Finance Director; Town Secretary. 2. Invocation and Pledge of Allegiance. The Invocation was given by Mike Wadsworth. Mayor Niswanger led the Pledge of Allegiani 3. Announcements of dates and times George Dupont addressed thecouclx'"egarding the'I Dave Turley announced the Prosper Arts Music Town Center. �.... , 11 Mike Land Mike Wadswo th announced tH;e :beginning of the Sth Thursday, Sepp em eel Ph. f CONSENT AGENDA' • 6. Consent Agenda�a�� f MINUTES Ray Smith, Deputy Mayor Pro-Tem of Development Services; Chris for Planner; and Matthew Denton, be held on Saturday, September 13th at the Prosper on September 12th at 2:00 p.m. the Northern Collin County Leadership Program on a. Consider and act upon minutes from the following Council meetings. (MD) • August 26, 2008 — Town Council Meeting ORDINANCES, RESOLUTIONS, AND AGREEMENTS b. Consider and act upon an ordinance for the voluntary annexation of approximately 11.925 acres of land located in the Collin County School Land Survey, Abstract No. 147, Collin County and being more generally located west of Coleman Street and +1750' south of Prosper Trail. (MD) Page 1 of 5 C. Consider and act upon whether to direct staff to submit a written notice of appeal on behalf of the Town Council to the Development Services Department, pursuant to Chapter 4, Section 1.5(C)(7) and 1.6(B)(7) of the Town's Zoning Ordinance, regarding action taken by the Planning & Zoning Commission on any site plan or preliminary site plan. (CC) d. Consider and act upon an ordinance rezoning 11.3f acres, located on the west side of Coleman Street, 200f feet south of Eagle Lane, from Agricultural (A) to Commercial (C). (Z08-10). (CC) e. Consider and act upon an ordinance rezoning 0.6f acre (508 East Broadway Street), located on the southwest corner of Broadway Street and Field Street, from Single Family-15 (SF-15) to Downtown Office (DTO). (Z08-12). (CC) f. Consider and act upon an ordinance rezoning 2.1f acres, located on the southwest corner of Prosper Trail and Robison Creek Drive, from Single Family-15 '( F 15) to Single Family-12.5 (SF-12.5). (Z08-13). (CC) g. Calling two public hearings for October 28, 2008' -and No. ember 4, 2008 for the involuntary annexations of a 33.658 acre tract of land locate 'north of Hwy 380 and 1720' west of the North Dallas Parkway, a 9.619 acre tract of land located west of the North allas Parkway and 1990' south of West First Street, a 19.960 acre tract of land located on Dallas No arkway and 445' south of West First Street, a 29.684 acre tract of land located north of West First Street and 350' west of Dallas North Parkway, a 80.031 acre tract of lanl'ocated4north of West First Street and east of von M�Pt $h PA Dallas North Parkway, a 12.561 acre; tract of land1located"south of West First` -Street and 891' east of Dallas North Parkway, a .0935acre tract of land located east of Coleman Street and 671' south of First Street, a 1.999 acre tract of land Broadway Street, a 21.464 acre tractof lan Prosper Trail, a 151.078 acre tract of eland 1 and 1554' south of,Prosper Trail, a .069 acre Abstract Number g11 32.667acre tract 119 of la eo Survey Abstract Number 600, a .6.787 acrq t Abstract Number 600and the Jeremiah Horn land locateu�west of CustelbRoa'd n fihes.,.eremi Motioned by�p fy May6ilp,, o; Tem Motion awi v,,ed 7-0. ®R •. 7. Other REGULAR AGENDA PUBLIC HEARINGS located westk!—O! Preston Road and north of East d�located weof Preston Road and 1340' south of ocated, east of .estston Road and west of Coit Road trac � o Mand located in the William Butler Survey nd ated no„. of First Street in the Larkin McCarty r ct of land located in the Larkin McCarty Survey urvey Abstract Number 411, and a 3.876 acre tract of akHorn Survey Abstract Number 41L(MD) lmember Turley to approve the consent agenda. 8. A public hearing to consider and act upon a request to amend Section 2.05 of Planned Development-9 (PD-9), regarding the requirements for emergency access, containing 339.7f acres, located on the west side of Custer Road,100f feet north of First Street. (Z08-14). (CC) Chris Copple, Senior Planner, gave council background information on this item. Motioned by Councilmember Turley, seconded by Councilmember Wilson to open the public hearing. Motion approved 7-0. Mayor Niswanger opened the public hearing at 6:20 p.m. Page 2 of 5 There were no comments by the public. Motioned by Deputy Mayor Pro-Tem Dugger, seconded by Councilmember Vestal to close the public hearing. Motion approved 7-0. Mayor Niswanger closed the public hearing at 6:21 p.m. Motioned by Deputy Mayor Pro-Tem Dugger, seconded by Mayor Pro-Tem Smith to approve the requested zoning to amend Section 2.05, of the Planned Development-9 removing the requirement for an emergency access easement per the attached Exhibit B. Motion approved 7-0. 9. A public hearing to discuss the Town of Prosper proposed 2008=2009 tax rate. (ML) Mayor Niswanger read the following statement: Following the Budget Proposal by the Town Manager duringZ`otir Auggt 2`° meeting, the Town Council voted unanimously to advertise the Town Manager's proposed tax rate equal toathe current tax rate of $0.52 per $100 of taxable appraised values. This is the second of two public hearings to discus September 9, 2008 at 6:00 pm at this same location Building. MIZ;, The Town Council will take a vote on the 6:00 pm in the Prosper Fire Station Traini: Motioned by Councilmember, Motion approved 7-0. Mayor Niswanger opened the There were no comments;,byt Motioned bytiDeputy Mayor F Motion approved -0. Mayor Niswanger closMjhe I 10. A public hearing St resolution with AN In, Mechanism settlement. (MG) rate. The second publ*c.�hearing is scheduled for rred4o as the Prosper ISR..ACentral Administration x, w of Omeeting scheduled on September 16, 2008 at 1500iast First Street. -b-- to open the public hearing. ilmember Wilson to close the public hearing. val of J Gas ecting an ordinance approving a negotiated Company, regarding the Atmos Rate rate adjustments consistent with the Matthew Garrett, Finance Director, gave council background information on this item. Motioned by Deputy Mayor Pro-Tem Dugger, seconded by Mayor Pro-Tem Smith to open the public hearing. Motion approved 7-0. Mayor Niswanger opened the public hearing at 6:25 p.m. There were no comments by the public. Motioned by Councilmember Vestal, seconded by Deputy Mayor Pro-Tem Dugger to close the public hearing. Page 3 of 5 Motion approved 7-0. Mayor Niswanger closed the public hearing at 6:26 p.m. Motioned by Councilmember Miller, seconded by Councilmember Turley to approve an ordinance approviving a negotiated resolution with ATMOS Engergy Corp, formerly TXU Gas Company, regarding the ATMOS Rate Review Mechanism fling and adopting tariffs reflecting rate adjustments consistent with the settlement. Motion approved 7-0. DEPARTMENT ITEMS 11. Discuss and give an update on the Town's Personnel Policy. (ML) 091 Mile Land, Town Manager gave council an update on the Town's Pers6lh, Policy. 12. Consider and act upon a change order #2 to S.S D P., Inc., for the Folsom Park Improvement Project. (WH) Afiblzll 1 Wade Harden, Senior Planner, gave council Motioned by Mayor Pro -Tern Smith, seconded by Di 45,974.61 for the Folsom Park Improvement Project. Motion approved 7-0. fifth, 13. Discuss and give direction on the Boai Mike Land, Town Manager, discussed the board Council directed staff to EXECUTIVE SESSION 4. a. NSkction 551.072 b. Sec65H551.087 to d ProspeYW 3 t projei C. Section 551:0.74 to d Motioned by Councilmember Motion approved 7-0. I•H on on this item. Pro -Tern Dugger to lapq ove Change Order #2 for "AN" process. (ML) with the council. N.appointments on September 30`n 551.001 et. seq. Texas Government Code, to real property for parks and recreation and a Town regarding economic development negotiations regarding the the evaluation of the Town Manager. by Councilmember Vestal to recess into closed session. 5. Reconvene into Regular Session and take any action necessary as a result of the Closed Session. Council reconvened into open session at 9:00 p.m. 14. Town Manager Comments. 15. Possibly direct Town Staff to schedule topic(s) for discussion at a future meeting. 16. Adjourn. Page 4 of 5 The meeting was adjourned at 9:01 p.m. Attest: Matthew D. Denton, TRMC Town Secretary Charles Niswanger, Mayor Page 5 of 5 TOWN OF S PE 1. Call to Order / Roll Call. The meeting was called to order at 6:05 p.m. Roll call was taken by the Town Secretary. Council present included: Mayor Charles Niswanger, r Kenneth Dugger, Dave Turley, David Vestal, Meigs Miller, Staff present included: Mike Land, Town Manager; Town Secretary. 2. Consider and act upon an ordinance adopting Motioned by Deputy Mayor Pro-Tem, seco3 the fiscal year beginning October 1, 2008 A Secretary with the adjustments submitted by Motion approved 7-0. Motioned by Deputy Mayor revenue increase reflected it Government Code. Motion approved 7-0. 3. Motioned 6youn, adoption of a tax, r payment of prmcip Motion approved 7 4. Consider and Motioned by Deputy Mayor Pro-T adopting the Town's Personnel Polic Motion approved 7-0. 6. Adjourn. MINUTES Special Meeting of the Prosper Town Council Prosper Fire Station 1500 E. First Street, Prosper, Texas Tuesday, September 16, 2008 at 6:00 p.m. Ray Smith, Deputy Mayor Pro-Tem 2008-2009 Town ; and Matthew Denton, (ML) 'urley to approve add -adopt the Budget for 2009 as proposed and filed with the Town tetnber 15, 2008. amber Miller to ratify the property tax under Section 102.007(c) of the Local 's 2008 property tax rate. (ML) Councilmember Vestal that property taxes be increased by the the purpose of maintenance and operation and $0.214989 for aling $0.52 per $100 appraised taxable valuation. adopting the Town's Personnel Policy. (ML) Dugger, seconded by Councilmember Turley to approve a resolution Motioned by Councilmember Turley, seconded by Councilmember Wilson to adjourn. Motion approved 7-0. The meeting was adjourned at 6:35 p.m. Page I of 2 Attest: Matthew D. Denton, TRMC Town Secretary Charles Niswanger, Mayor Page 2 of 2 PLANNING p T SPER. To: Mayor and Town Council From: Chris Copple, Senior Planner Cc: Hulon T. Webb, Jr., P.E., Director of Development Services/Town Engineer Re: Item 6b — Town Council Meeting — September 23, 2008 Date: September 17, 2008 Agenda Item: Consider and act upon an ordinance amending Section 2.05, of Planned Development-9 (PD-9) regarding the requirements for emergency access, containing 339.7t acres, located on the west side of Custer Road, 100t feet north of First Street. (Z08-14). Description of Agenda Item: At the September 9, 2008 meeting, the Town Council approved zoning case Z08-14 by a vote of 7-0. Town staff has prepared an ordinance rezoning the property. Budget Impact: There are no significant budget implications associated with the approval of this zoning request. Legal Obligations and Review: Zoning Ordinance 05-20 requires that the Town Council hold a public hearing before approving a zoning request and adopting an ordinance rezoning property. A public hearing has been held and the Town Council approved the zoning case. The ordinance has been prepared. Review of the ordinance by the Town Attorney is not required. Attached Documents: 1. The Ordinance rezoning the property is attached. Town Staff Recommendation: Town staff recommends the Town Council adopt the attached ordinance, amending Section 2.05, of Planned Development-9 (PD-9) regarding the requirements for emergency access, containing 339.7t acres, located on the west side of Custer Road, 100t feet north of First Street. Agenda Item No. 6b — Page 1 of 1 TOWN OF PROSPER, TEXAS ORDINANCE NO. 08- AN ORDINANCE AMENDING ORDINANCE NO. 06.127; REZONING A TRACT OF LAND CONSISTING OF 339.77 ACRES, MORE OR LESS, SITUATED IN THE LARKIN MCCARTY SURVEY, ABSTRACT NO. 600, IN THE TOWN OF PROSPER, COLLIN COUNTY, TEXAS„ TEXAS, HERETOFORE ZONED PLANNED DEVELOPMENT-9-SINGLE FAMILY-101SINGLE FAMILY-12.51SINGLE FAMILY-151SINGLE FAMILY-221SINGLE FAMILY -ESTATE (PD-9-SF- 101SF-12.51SF-151SF-221SF-E) IS HEREBY REZONED AND PLACED IN THE ZONING CLASSIFICATION OF PLANNED DEVELOPMENT-9-SINGLE FAMILY-101SINGLE FAMILY- 12.51SINGLE FAMILY-151SINGLE FAMILY-221SINGLE FAMILY -ESTATE (PD-9-SF-101SF- 12.51SF-151SF-221SF-E); DESCRIBING THE TRACT TO BE REZONED; PROVIDING FOR A PENALTY FOR THE VIOLATION OF THIS ORDINANCE; PROVIDING FOR REPEALING, SAVING AND SEVERABILITY CLAUSES; PROVIDING FOR AN EFFECTIVE DATE OF THIS ORDINANCE; AND PROVIDING FOR THE PUBLICATION OF THE CAPTION HEREOF. WHEREAS, the Town Council of the Town of Prosper, Texas (the "Town Council") has investigated and determined that Ordinance No. 06-127 should be amended; and WHEREAS, the Town of Prosper, Texas ("Prosper") has received a request from CC Joint Ventures ("Applicant") to rezone 339.77 acres of land, more or less, situated in the Larkin McCarty Survey, Abstract No. 600, in the Town of Prosper, Collin County, Texas; and WHEREAS, the Town Council has investigated into and determined that the facts contained in the request are true and correct; and WHEREAS, all legal notices required for rezoning have been given in the manner and form set forth by law, and public hearings have been held on the proposed rezoning and all other requirements of notice and completion of such zoning procedures have been fulfilled; and WHEREAS, the Town Council has further investigated into and determined that it will be advantageous and beneficial to Prosper and its inhabitants to rezone this property as set forth below. TEXAS: NOW, THEREFORE, BE IT ORDAINED BY THE TOWN COUNCIL OF THE TOWN OF PROSPER, SECTION 1: Findings Incorporated. The findings set forth above are incorporated into the body of this Ordinance as if fully set forth herein. SECTION 2: Amendments to Ordinance No. 06-127. Ordinance No. 06-127, Section 2.05 (Streets) is amended to reflect the deletion of the language regarding emergency access as described in Exhibit "B" attached hereto. Except as amended by this Ordinance, the development of the Property within this Planned Development District must comply with the requirements of all ordinances, rules, and regulations of Prosper, as they currently exist or may be amended. Three original, official and identical copies of the zoning exhibit map are hereby adopted and shall be filed and maintained as follows: a. Two (2) copies shall be filed with the Town Secretary and retained as original records and shall not be changed in any matter. b. One (1) copy shall be filed with the Building Official and shall be maintained up-to-date by posting thereon all changes and subsequent amendments for observation, issuing building permits, certificates of compliance and occupancy and enforcing the zoning ordinance. Reproduction for information purposes may from time -to -time be made of the official zoning district map. Written notice of any amendment to this Planned Development District shall be sent to all property owners within two hundred feet (200) of the specific area to be amended. SECTION 3: No Vested Interest/Repeal. No developer or property owner shall acquire any vested interest in this Ordinance or in any other specific regulations contained herein. Any portion of this Ordinance may be repealed by the Town Council in the manner provided for by law. SECTION 4: Unlawful Use of Premises. It shall be unlawful for any person, firm or corporation to make use of said premises in some manner other than as authorized by this Ordinance, and shall be unlawful for any person, firm or corporation to construct on said premises any building that is not in conformity with the permissible uses under this Zoning Ordinance. SECTION 5: Penalty. Any person, firm, corporation or business entity violating this Ordinance or any provision of Prosper's Zoning Ordinance No. 05-20 and Ordinance No. 06-127, or as amended, shall be deemed guilty of a misdemeanor, and upon conviction thereof shall be fined any sum not exceeding Two Thousand Dollars ($2,000.00). Each continuing day's violation under this Ordinance shall constitute a separate offense. The penal provisions imposed under this Ordinance shall not preclude Prosper from filing suit to enjoin the violation. Prosper retains all legal rights and remedies available to it pursuant to local, state and federal law. SECTION 6: Severability. Should any section, subsection, sentence, clause or phrase of this Ordinance be declared unconstitutional or invalid by a court of competent jurisdiction, it is expressly provided that any and all remaining portions of this Ordinance shall remain in full force and effect. Prosper hereby declares that it would have passed this Ordinance, and each section, subsection, clause or phrase thereof irrespective of the fact that any one or more sections, subsections, sentences, clauses and phrases be declared unconstitutional or invalid. SECTION 7: Savings/Repealing Clause. Prosper's Zoning Ordinance No. 05-20 and Ordinance No. 06-127 shall remain in full force and effect, save and except as amended by this or any other Ordinance. All provisions of any ordinance in conflict with this Ordinance are hereby repealed to the extent they are in conflict; but such repeal shall not abate any pending prosecution for violation of the repealed ordinance, nor shall the appeal prevent a prosecution from being commenced for any violation if occurring prior to the repealing of the ordinance. Any remaining portions of said ordinances shall remain in full force and effect. SECTION 8: Effective Date. This Ordinance shall become effective from and after its adoption and publications as required by law. DULY PASSED AND APPROVED BY THE TOWN COUNCIL OF THE TOWN OF PROSPER, TEXAS ON THIS 23ro DAY OF SEPTEMBER, 2008. APPROVED AS TO FORM: Charles Niswanger, Mayor ATTESTED TO AND CORRECTLY RECORDED BY: Matthew Denton, Town Secretary DATE OF PUBLICATION. Dallas Moming News — Collin County Addition c EXIJlBcr B STATEMENT OF INTENT AND PURPOSE ('WII.ITI..EY PLACE PD ANIENDmENT —'TRACT B, SECTION 2.05, PARAGRAPH 2) The purpose of this submittal is to amend paragraph two of section 2.05 of the existing Whitley Place Planned Development by removing the requirement for an emergency access connection to Custer Road which affects Tract B. The language to be struck from this paragraph is the following: "An Emergency Access road shall be constructed of Grass-crete or similar suitable material from the local residential street to Custer Road to provide a second point of access to this tract. This Emergency Access road shall be provided within an Access Easement. The Emergency Access entrance of - Custer .Road will be gated with a Knox box and/or lock as per Fire Department requirements, and will be built to comply with the landscaping and screening requirements set forth herein." During the preliminary platting process for Whitley Place, Tract B, it was recommended that the -- emergency access drive be removed from. lot 23X by the Town of Prosper staff. On the preliminary plat, approved by P&Z on May 20, 2008, note 6 references the removal of the drive and reads as follows: "Emergency Access on lot 23X may be removed pending an amendment to article 2.05 of the Whitley Place Planned Development Residential Development Standards, accordingly lot 23X may be reduced to 20 feet in width." f 1 ,P,ojteu'.\YCD(*7 7. ing Exhibit 0 ZW80625 d- 11 � vi w r >- 00 of - r7 ~ o 0 .. U z p cD W t o>< i ('Ot1 ZOO'1-3NO lOVdi) Q o a'`' 5 r O LZ� -V60L 'Od '6ttS 'lOn W v- I,, o a cn Q ? S)IVN 'H SINdf w - E > x f m oj o ONV SJ.yW 110OS 'M v W a=Wm� a Of { ' > v o xY� ' r '009 'ON Z)Va eV 'A3bf1S Al VOON! NIM2IV 13H1 30 2GN800 ti, , �' '� ._•,� i 1SV3HinOS 3H1 30 1S3M 1333 L-V ON`d M 3�SVRJ do b o 0 30 HiWN 1333 M A131b'WIXO8ddV _ ,K, [9Z ONINN1039— — AnoM„5o,20.00s d0 iNlOd W 265. 0' 40.11' It MA0,20.0 } in' .d to U n t t C'V co Lo C l in w Z 4i ao I^ a03t w00 �tf) Zo w I— o R ,io rvi o o 0, w aj / 2s 't o w ci • �' o(� ^ � O CS r 0 O N o tJ \� 9k 0 N U S U W j 00 F- r } WCL U Z O U N Q W 0 LL Lli p Q l V n co r M N 00 JI V: e F—W< ! _ w I I— F, ZO � CD w ' V U FI W orn w /O �ZSSss'� — I j v 4' ZHQ S �(' Q m i` QJS C� 0� 0 w L,j W Q Vj U Lo �o II Op �i In MWN 4o w41 s co ul M Z LLI Il il Q o N �..�� 1 Pigci 9 za 9 R Rd e e 'd i° 8 M.T0,9LlON i cn- �6�E::E: LG'r"LYrO�Y J rJ :�jE33�l�El!iLiLg3EFb ��$!o qq 44 gg 44 gg t� q �z< 33 �33333353 1t .f •,R . • fs 'IalJilfTEs?�x:� • �: ?ROSPE8 Prosper Fire Departmer- 1500 E. First Street, P.O. Box 307, Prosper, Texas 75078 (972) 346-9469 Central Station (972) 347-3010 Facsimile To: Planning and Zoning Commission From: Bryan Ausenbaugh, Fire Marshal RE: PD-9 Whitley Place, omitting of secondary access / emergency gate(s) Date: September 3, 2008 Dear P& Z Commission, After careful consideration along with a few minor street modifications, it has been determined by the department that the secondary access / emergency gate(s) from Custer Road will no longer be a requirement. We support and have approved the PD 9 amendment as submitted. Should you have any additional questions and or concerns please feel free to contact me directly. Sincerely, Bryan Ausenbaugh ISPER ADMINISTRATION OWN OF To: Mayor and Town Council From: Matthew B. Garrett, Finance Director Cc: Mike Land, Town Manager Re: Item 6c -- Vote on ordinance to ratify the property tax revenue increase reflected in the FY09 budget as required under Section 102.007(c) of the Local Government Code. AtEenda Item• To ratify the Property Tax Revenue Increase in the 2008-2009 Budget as a result of the Town receiving more revenues from Property Taxes in the 2008-2009 Budget than in the previous Fiscal Year. Description of Aeenda Item: During the 2007 legislative session, House Bill 3195 was passed amending section 102.007 of the Local Government Code. Subsection C was added to state that adoption of a budget that requires raising more revenue from property taxes than in the previous year requires a separate vote of the governing body to ratify the property tax increase reflected in the budget. A vote under this subsection is in addition to, and separate from, the vote to adopt the budget or a vote to set the tax rate as required by Chapter 26 of the Tax Code. The FY09 budget raises more in property tax revenues than in the previous year. Budget Impact: N/A Legal Obligations and Review: None Attached Documents: Ordinance Board. Committee and/or Staff Recommendation: Staff is recommending that the Town Council ratify the property tax revenue increase as reflected in the FY09 budget in compliance with section 102.007(c) of the Local Government Code. Item No. 6c Page 1 of 2 ORDINANCE NO.08-xxx AN ORDINANCE RATIFYING THE PROPERTY TAX REVENUE INCREASE REFLECTED IN THE BUDGET FOR THE FISCAL YEAR OCTOBER 1, 2008 THROUGH SEPTEMBER 30, 2009 FOR THE TOWN OF PROSPER, TEXAS AS REQUIRED UNDER SECTION 102.007(C) OF THE LOCAL GOVERNMENT CODE. WHEREAS, the Town Council of the Town of Prosper, Texas adopted the budget for the fiscal period beginning October 1, 2008 and ending September 30, 2009, in words and figures as adopted by Ordinance No. 08-079; and WHEREAS, Section 102.007 (c) of the Local Government code requires a separate vote of the governing body to ratify the property tax revenue increase reflected in the budget. NOW THEREFORE, BE IT ORDAINED BY THE TOWN COUNCIL OF THE TOWN OF PROSPER, TEXAS, COLLIN COUNTY, TEXAS: SECTION 1: The Town Council hereby votes to "ratify" the property tax revenue increase reflected in the budget as adopted by Ordinance No. 08-079. DULY PASSED AND APPROVED BY THE TOWN COUNCIL OF THE TOWN OF PROSPER, TEXAS ON THIS 23`d DAY OF SEPTEMBER, 2008 AT A MEETING WHICH WAS HELD IN STRICT ACCORDANCE WITH THE TEXAS OPEN MEETING ACT. ATTEST TO: MATTHEW D. DENTON, TRMC Town Secretary CHARLES NISWANGER, Mayor Page 1 of 1 I 7 WAR � kvp-- L � PM ISPER OWN OF August, 2008 FINANCIAL REPORTING TABLE OF CONTENTS 1. INTRODUCTION 2. FINANCIAL OVERVIEW CASH OVERVIEW SUMMARY SUMMARY BY FUND COMBINED REVENUE & EXPENDITURE SUMMARY 3. CASH BALANCES AND GRAPHS BANK BALANCES TEXPOOL / TEXSTAR BALANCE 4. PROPERTY TAX REPORT AND GRAPHS PROPERTY TAX REPORT THREE YEAR PROPERTY TAX COMPARISON 5. SALES TAX AND GRAPHS TOTAL SALES TAX COLLECTED PROSPER SALES TAX ALLOCATION PEDC SALES TAX ALLOCATION 6. CAPITAL PROJECT BONDS 2004 BOND 2006 BOND Individual Department Summaries available upon request priOWN OF SPER FINANCIAL SUMMARY Financial Overview CASH OVERVIEW SUMMARY SUMMARY BY FUND COMBINED REVENUE & EXPENDITURE SUMMARY 0 W J v Z O W W G N W Oy x Q Q V x Z O 2 LL. O Im Z W P4 w�T � 0 za 3V) 0 a h I- N J N Iq � Hpnj It p � N 00 to tM co fn0 O 00 N M e- WI LL 3 0 01 01 CO N O N M dw m 1 U) 00 U) 00 12, : � o. - rn 0)m LL v h O O v Ci CL R y 00 rn — O E LL .1 N 00 M O C7 O N O. « N CA E yl M +o IL oa r.- ro CD S� L IL o U) al Cl) O LO c r` d m a () O co LO N NI LO m N M � N � c LL (C M Cl r 33 cli m N v M N � 00 00co-a 'o c 7 U. M to M (; N N N l0 t c l6 c O U N O t) N m Cl) V L U N c O C O LL w c O c 0 v d ii Of C 0 c O v N O a w LL CL c E w r � L O N O o U � O v n• L LL tU ED U y C � O. C O o ca E o O 0-0 'Q 0 V N .0 U y y C C y 7 o US U y j Coy O > Co � N N N 7 ~LU � ca LL 0f C V C .0ra N l0 L N >o l6 E C m cx E C/o` z . h ....... ... r MI M O 10 ! m '�Y 1�1 i1 1'1 rl ! 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M F P�{ W i i A N h N Z m o A u r o O rl 1 N M N H A N O ry m 1 m � ry M YI p ry O ■ u N PI O OI m df 1p r N M � N A O ry M A O q ry 4 N o m m N Iry+l M n W !p•1 t� A. A N -W eA1 'h ry O ��1lgyyy00 H .y �y 11qq yy�1 �M11 a+ E e r � n AIM hl H h �:•ti ♦ p m M ry 19 'HI 1 U G q A IN.1 m O N m + V o N Iryw ■1 qqA o O m V1 n N H ei u m m w ry MI Oi M M A w1 �► p 1 O m F � 11 O M ry O N m M A A N N R Iryr1 N M p M n fV N M N N m N If1 wk a M V A N � / 1 Si M n a N n H 4lH it V �I N OI N A o o o O O ry o o M � O O W a 1 O O ri O O v O O to el HM O o V� eel a W o N OI r a n V O n 10 H 0 ry [v Ipn YI a 4 O .� In m eAi m y, y rf p % k .... ...... ya m O m O O y +yam NN 40 Y m {y p{ o S a MI pl Fa m 00 O a O O 00 M sqa W 44 A O a a ~ IN L 11 w" O a a Ii/ ■ O O ■ p N m O a O o �!J O V o A u O 'O !O d pyyl Yi . yp O w H w H H patl O P a a R. ? p m m q N o W • O m7 b wyM 9 a+ Epp o m N EO0 D m o m qOl 41 m as u m A to fC F pp F O F O q F M O P� � o M o O 1'� O 11Y O O n C CC H F 333!!! A O OO O O p O O O o O Y O p O pq V m m O h N Y M u r n m 1�1 h m o m .a in i � a en r r m m a a • M a ei v rl `1 1 a r r rl In A Pf rl O O 1 Y m IV N A #1 V ei u O� m ei r q M It 0 0 O 0 0 10 0 0 AI Vq O O 01 a O T O d ID a u M W M O b N }� O O 4me O P O QQ rl Q pO R P riOWN OF s PER. FINANCIAL SUMMARY CASH BALANCES & GRAPHS BANK BALANCES TEXPOOL / TEXSTAR BALANCE TEXPOOL / TEXSTAR FUND DISTRIBUTION n 0 N v * n m m .q N N 0 W _J ci Z O V W 7 W co N W O� CD Q V H Z CO C LL R 0 Z W P4 4. W . za �V) 0 All 0 h _ o 0 0 00 a 0 0 0 0 0 0 o voi 0 0 0 0 0 0 0 ri Lo Ln a m r4 An A^ V in N spuesnOU U 0 W 3 LL O tD u W O it c am m o .o v c a o am m a uo .o c a o Qm m ', u O V1 66 W J V Z O V W d' 3 W o N W ON x Q � U Q x H Z O 2 LL O C Z W H N Lq LQ M Q O N 00 cn N LO LO CO co O 00 M WI n m v LL >0 P- 3 m of co U) Ir y v cL W N U) LO m 00 00 d' 'O r r ac rn rn wLL v O « I cn PI- Lq Cl Q N 00 — O co � 00 N cn O cn cn O N N C« C,O " E NI N — M + Y v Lq R oa R! '& 3 a° W u Lu OD 00 •� C C�0 f0 O. m O O 00 00 to to v v O c b Cn O C O Cn r- U c rn rn Ch CM o c n n CL CO () O a cn cn N LO — v NI N cn cn r- N CO C CO Cli O w M - cn LO LL Cp r- Lf) N 3 M It cn N 00CNO O co P�cqVcq LA 00 00 N C 7 M LO CM (� LL N 1 N N to L cn C m c 0 .0 N 0 Li N m CO L U H c O C O LL w l0 c O c 0 v d LL c O C O U_ N O 0 a LL C. 'C E 00 cn ca w 1= 47 o EL o U � 0 o a L LL 0 O O V N c d C O C N 03 C c w E f- -'50 'Q y 0 d U d (% 0 U .c C. E $ 01 t6 N � � tT N U � d N w dJ O ~ 0) y c C 0.2 MO C0.) C N t0 LL y S '° E c lC C E cno` z priOWN OF SPER FINANCIAL SUMMARY PROPERTY TAX REPORT & GRAPH PROPERTY TAX REPORT THREE (3) YEAR PROPERTY TAX COMPARISON 4 TOWN OF PROSPER PROPERTY TAX COLLECTIONS REPORT Aug-08 TAX YEAR BEGINNING BALANCE COLLECTIONS CHANGES + / - ENDING BALANCE TAXES P & I TOTAL 2007 4,088,818.74 4,194,455,22 47,977.36 4,242,432.58 256,444.68 150,808.20 2006 49,013.71 60,966.99 7,116.64 68,083.63 23,149.55 11,196.27 2005 7,177.41 4,308.49 1,062.48 5,370.97 0.50 2,869.42 2004 1.00967 (15.56) 10.42 (5.14) 135 99) 989.24 2003 44320 - 443.20 2002 60186 - 601.86 2001 36072 - 360.72 2000 9642 - 96.42 1999 3708 - 37.08 1998 23.27 - 23.27 1997 31 47 - 3.22 28.25 1996 28.64 - 28.64 1995 25.94 - 25.94 1994 102.12 - 102.12 1993 140.81 - 140.81 1992 264.34 - 284.34 1991 227.18 - 227.18 TOTALS 4,148,422.58 4,259,715.14 56,166.90 4,315,882.04 279,555.52 168,262.96 CURRENT LEVY LEVY @ 10/01/07 : 4 088,818 74 ADJUSTMENTS 256,444 68 TOTAL LEVY @ 08/31/08 4,345,263.42 COLLECTED TO DATE 4,194,455.22 UNCOLLECTED TO DATE 150,808.20 • OF LEVY COLLECTED BEF. ADJ 102.58% • OF LEVY COLLECTED INCL.. ADJ L-- 96.53% I VALUATION AXABLE PROPERTY @ 10/01/07: 786,311, HANGES TO ROLL (+/-) : 49,316,28E AXABLE PROPERTY @ 08/31/08 835,627,581 Entry changes with each months activity. LEVY @ 10/01/07 : 59.603 84 ADJUSTMENTS 23,110.84 TOTAL LEVY @ 08/31/08 82,714.68 COLLECTED TO DATE 65.259.92 UNCOLLECTED TO DATE 17,454.76 OF LEVY BE( F ADJ) COLLECTED 1 OUTSTANDING CURRENT LEVY Tax Rate Levy Less Collected Outstanding Operations (53%) 0.275075% 2,298,602.57 2,218,826.98 79,775.59 DebtService(47%) 0.244925% 2,046,660.85 1,975,628.24 71,032.61 0.520000% 4,345,263.42 4,194,455.22 150,80820 PROPERTY TAX COLLECTIONS THREE (3) YEAR COMPARISON FOR PEAK COLLECTION MONTHS $1,750 $1,500 $1,250 C' $1,000 _. t $750 $500 $250 �•l Oct Nov Dec Jan Feb Mar Apr May June July Aug Sept PROPERTY TAX COLLECTIONS THREE (3) YEAR COMPARISON PERCENT OF TOTAL DUE (Before Adjustments) COLLECTED N N 80% 6 V 60% C 40% _ a N a 20% - 0% Oct Nov Dec Jan Feb Mar Apr May June July Aug Sept % of Total % of Total % of Total Month FY 05106 Taxes Due Taxes Due Taxes Due Oct $ 1,187.18 0.07% $ 29,457.50 1.03% $ 50,747.84 1.22% Nov $ 51,306.76 3.07% $ 70,460.97 2.46% $ 279,501.69 6.74% Dec $ 665,598.53 39.89% $ 906,001.34 31.63% $ 1,492,718.39 35.98% Jan $ 423,246.34 25.36% $ 876,903.32 30.61 % $ 1,258,105.15 30.33% Feb $ 387,560.32 23.22% $ 744,527.90 25.99% $ 708,460.51 17.08% Mar $ 34,578.18 2.07% $ 114,929.76 4.01 % $ 166,240.49 4.01 % Apr $ 28,827.86 1.73% $ 46,745.77 1.63% $ 134,741.00 3.25% May $ 17,896.93 1.07% $ 43,138.91 1.51% $ 106,398.32 2.56% June $ 26,630.43 1.60% $ 35,827.45 1.25% $ 80,432.36 1.94% July $ 23,375.92 1.40% $ 70,078.70 2.45% $ 30,554.96 0.74% Aug $ 7,195.32 0.43% $ 36,247.22 1.27% $ 7,975.81 0.19% Sept $ 6,076.11 0.36% $ 13,684.32 0.48% YTD Totals $ 1,673,479.88 100.28% $ 2,988,003.16 104.31% $ 4,315,876.52 104.04% Collected YTD includes delinquent collections $ 1,668,772.29 $ 2,864,424.61 $ 4,148,422.58 Total taxes due includes delinquent before adjustments pilOWN OF SPER FINANCIAL SUMMARY SALES TAX & GRAPHS TOTAL SALES TAX COLLECTED PROSPER SALES TAX ALLOCATION PEDC SALES TAX ALLOCATION $450,000 $400,000 $350,000 i $300,000 $250,000 $200,000 $150,000 $100,000 $50,000 THREE YEAR (3) COMPARISON TOTAL COLLECTIONS -SALES TAX TOWN & EDC TOWN OF PROSPER, TEXAS NIP F��O mac 0 jai°e NJ\�' VA SeQ� ■ FY 05-06 ■ FY 06-07 ■ FY 07-09 Total For Month FY 05106 Oct $ 196,881.25 $ 166,712.63 Nov $ 170,412.36 $ 141,697.21 Dec $ 167,516.79 $ 116,018.11 Jan $ 160,464.80 $ 146,262.04 Feb $ 165,611.73 $ 119,028.30 Mar $ 140,085.12 $ 124,929.81 Apr $ 196,971.39 $ 96,866.94 May $ 180,523.03 $ 196,793.13 June $ 166,563.38 $ 129,919.29 July $ 178,924.32 $ 126,538.37 Aug $ 130,518.50 $ 119,679.50 Sept $ 154,215.18 $ 122,140.90 YTD Totals $ 2,008,687.85 $1,606,586.23 **One time State Comptroller audit payment $ 124,885.22 $ $ 106,473.48 $ $ 105,454.73 $ $ 108,657.68 $ $ 109,286.86 $ $ 101,721.88 $ $ 112,706.99 $ $ 117,497.93 $ "* $ 425,928.82 $ $ 143,407.95 $ $ 136,915.68 $ $ Amount % of Change Inc /(Dec) Inc /(Dec) (41,827.41) -25.09% (35,223.73) -24.86% (10,563.38) -9.10% (37,604.36) -25.71 % (9,741.44) -8.18% (23,207.93) -18.58% 15, 840.05 16.35% (79,295.20) -40.29% 296,009.53 227.84% 16,869.58 13.33% 17,236.18 14.40% $1,592,937.22 $ 108,491.89 7.31 % $350,000 $300,000 j $250,000 $200,000 $150,000 $100,000 $50,000 O& THREE YEAR (3) COMPARISON TOWN OF PROSPER SHARE OF SALES TAX PROSPER, TEXAS ao� Qec lac 'IV at t 0 '40 >J°e ■ FY 05-06 ■ FY 06-07 ■ FY 07-08 '01 V0 -A Toiivffgh'hre : $ Amount % of Change Month I=Y 05lQ& Inc / Dec Inc /(Dec) Oct $ 147,660.94 $ 125,034.47 $ 93,663.91 $ (31,370.56) -25.09% Nov $ 127,809.27 $ 106,272.91 $ 79,855.10 $ (26,417.81) -24.86% Dec $ 125,637.59 $ 87,013.58 $ 79,091.05 $ (7,922.53) -9.10% Jan $ 120,348.60 $ 109,696.53 $ 81,493.26 $ (28,203.27) -25.71% Feb $ 124,208.80 $ 89,271.23 $ 81,965.14 $ (7,306.09) -8.18% Mar $ 105,063.84 $ 93,697.36 $ 76,291.41 $ (17,405.95) -18.58% Apr $ 147,728.54 $ 72,650.21 $ 84,530.24 $ 11,880.03 16.35% May $ 135,392.27 $ 147,594.85 $ 88,123.45 $ (59,471.40) -40.29% June $ 124,922.54 $ 97,439.47 ** $ 319,446.62 $ 222,007.15 227.84% July $ 134,193.24 $ 94,903.78 $ 107,555.96 $ 12,652.18 13.33% Aug $ 97,888.88 $ 89,759.63 $ 102,686.76 $ 12,927.13 14.40% Sept $ 115,661.39 $ 91,605.67 - - - YTD Totals $ 1,506,515.90 $1,204,939.69 $ 1,194,702.90 $ 81,368.88 7.31% $1,200,000.00 Budgeted Sales Tax **One time State Comptroller audit payment August Budgeted $ 83,400.00 for month of August, 2008 August Received: $ 102,686.76 $ 19,286.76 Increase 23.125% August variance YTD Mo'ly Budgeted: $1,108,320.00 YTD October -August, 2008 YTD Mo'ly Received: $ 1,194,702.90 $ 86,382.90 Increase 7.794% YTD variance THREE YEAR (3) COMPARISON ECONOMIC DEVELOPMENT CORP.-SALES TAX PROSPER, TEXAS $120,000 $100,000 } I $80,000 O& le4 Q�c• ."a , EDC for EDC. for Month FY 05-06 1, FY 0610.7 Oct $ 49,220.31 $ 41,678.16 Nov $ 42,603.09 $ 35,424.30 Dec $ 41,879.20 $ 29,004.53 Jan $ 40,116.20 $ 36,565.51 Feb $ 41,402.93 $ 29,757.08 Mar $ 35,021.28 $ 31,232.45 Apr $ 49,242.85 $ 24,216.74 May $ 45,130.76 $ 49,198.28 June $ 41,640.85 $ 32,479.82 July $ 44,731.08 $ 31,634.59 Aug $ 32,629.63 $ 29,919.88 Sept $ 38,553.80 $ 30,535.23 YTD Totals $ 502,171.98 $ 401,646.57 "'One time State Comptroller audit payment Q? lac vs� 'S a FY 05-06 a FY 06-07 ■ FY 07.08 Eck Currerit ear FY 4710 $ 31,221.31 $ $ 26,618.38 $ $ 26,363.68 $ $ 27,164.42 $ $ 27,321.72 $ $ 25,430.47 $ $ 28,176.75 $ $ 29,374.48 $ ** $ 106,482.20 $ $ 35,851.99 $ $ 34,228.92 $ $ 398,234.32 $ $ Amount % of Change Inc / Dec Inc /(Dec) (10,456.85) -25.09% (8,805.92) -24.86% (2,640.85) -9.10% (9,401.09) -25.71 % (2,435.36) -8.18% (5,801.98) -18.58% 3,960.01 16.35% (19,823.80) -40.29% 74,002.38 227.84% 4,217.40 13.33% 4,309.04 14.40% 27,122.98 7.31 % $ 390,000.00 Budgeted Sales Tax p,1OWN OF SPER CAPITAL PROJECTS BOND SUMMARIES 2004 BOND 2006 BOND priOWN OF SPER 2004 BOND On January 13, 2004, the Town Council adopted a resolution directing that notice be published of the Council's intent to sell $10,500,000 of the Town's Combination Tax and Revenue Certificates of Obligation to fund capital expenditures of the Town. The Council's resolution specifies the following uses for the proceeds received from the sale of the Certificates of Obligation: 1. To pay costs of extending, constructing and improving Town's sewer system, including, constructing sewage lift stations, extending and upgrading sewage collection lines and force mains throughout the Town. 2. To pay costs of constructing and improving the Town's water system, including the construction of elevated and ground water storage facilities and acquiring interests in land for such storage facilities, extending the water distribution system including extending and upgrading water lines and constructing pumping stations to improve access to, and the flow of water in, the Town. 3. To pay costs of constructing and equipping municipal park improvements and acquiring interests in land for parks and open space. 4. To pay legal, fiscal, engineering and architectural fees in connection with the foregoing projects. 5. To pay costs of constructing and equipping municipal buildings, specifically: a town hall, fire stations, police facilities, court facilities and acquiring interests in land for such buildings. In connection with the Town's capital planning for these projects, the Town Staff has prepared for the Council a proposed expenditure plan, which is summarized below. The capital plan summarized below is based upon current cost estimates and proposed construction schedules, and the expenditure plan is subject to change. However, under State law, the Town may not use the proceeds of the Certificates of Obligation except for the project categories included in the resolution adopted by the Council that are listed above. The Town Council has indicated that the Town will periodically account to the citizens of the Town, using the Town web site and other means of informing the citizens, as to how the proceeds of the Certificates of Obligation are spent. The following table will be used to report expenditures. The table lists descriptions of projects and their estimated costs. In the future as expenditures are made, the table will be updated to describe the expenditures, the amount of the expenditure, and the difference between the estimated and actual costs. Description of Project and Estimated Cost Date of Expenditure Description of Expenditure Amount Expended Difference between Estimated Cost and Amount Expended Fire Station Pogue Construction $100,000.00 $ 130,248.00 $499;999 Pogue Construction $ 25,174.00 $ 105,074.00 $230,248 12/9/04 Pogue Construction $ 85,957.00 $ 19,117.00 Proj:04-01 07/31/06 $ 19,116.55 $ .45 Total $230,247.55 Diff added to othr project (.45). $ 0 Status: The Town's new Central Fire Station was completed in July. A grand opening ceremony was held on September 26, 2004. This project requires no additional funding from the 2004 Certificates of Obligation. Gentle Creek Lift Station 10/27/04 Dickerson Construction $ 224,505.43 $1,055,494.57 and Force Main to WWTP 11/9/04 Dickerson Construction $ 80,256.00 $ 975,238.57 and CR 80 Lift Station and 12/21/04 Dickerson Construction $ 218,217.85 $ 757,020.72 Force Main to CR 122 04/05/05 Dickerson Construction $ 334,074.91 $ 422,945.81 $1,280,000 06/20/05 Dickerson Construction $ 124,446.54 $ 298,499.27 07/18/05 Freese & Nichols $ 5,304.00 $ 293,195.27 Proj: 04-02 08/04/05 Freese & Nichols $ 11,328.00 $ 281,867.27 08/04/05 Dickerson Construction $ 172,255.89 $ 109,611.38 9/13/05 Dickerson Construction $ 68,447.50 $ 41,163.88 9/13/05 Freese & Nichols $ 20,400.00 $ 20,763.88 9/30/05 Freese & Nichols $ 10,584.00 $ 10,179.88 01/31/06 Dickerson Construction $ 10,179.88 $ 0 Total $1,280,000.00 Status: The Town retained Dickerson Construction Company to construct the Gentle Creek and Steeplechase Sewer Improvement Project. A sewer force main has been extended from the Gentle Creek subdivision along CR 122, CR 81, CR 48, and CR 4 to the Town's wastewater treatment plant, a sewer gravity line was constructed from the Steeplechase subdivision past CR 80 to the east property line of the Whispering Farms subdivision, and a lift station and sewer line have been constructed near the east property line of Whispering Farms to force the sewage north to CR 122. Danville/Prosper Water 07/22/08 Ferguson Waterworks $ 1,639.11 $ 82,360.89 Improvements 07/22/08 Ferguson Waterworks $ 69.96 $ 82,290.93 $84,000 07/22/08 HD Supply $ 523.50 $ 81,767.43 Pro': 04-03 07/31/08 Ferguson Waterworks $ 867.00 $ 80,900.43 Status: A portion of east Prosper currently receives water from the Danville Water Supply District. After several years, the TCEQ approved the amendment to CCN No. 12967 and the transfer of a portion of the service area of CCN No. 10190 from Danville Water Supply Corporation to Prosper, making the Town the water service provider for all of east Prosper. The transfer will involve capping a number of lines, closing a number of valves, and constructing a number of new water lines. Freese & Nichols has recommended that the work be postponed until this fall due to the additional demand that will be placed on the Town's water system by the additional customers. Town staff is working with Freese & Nichols to prepare a plan for this project that will allow the improvements to be completed just as soon as the summer demand lessens. Water Storage Tanks and 11/30/05 Freese & Nichols $ 10,841.86 $ 8,232,130.14 Pump Station at US 380 12/16/05 Freese & Nichols $ 22,116.57 $ 8,210,013.57 between Independence 01/16/06 TXU (Easements) $ 500.00 $ 8,209,513.57 Parkway & Custer Road 01/20/06 Freese & Nichols $ 95,154.97 $ 8,114,358.60 $8,946,499 02/03/06 Freese & Nichols $ 110,250.00 $ 8,004,108.60 $8,324,71.7 02/20/06 Freese & Nichols $ 11,537.24 $ 7,992,571.36 $8,44 746 03/15/06 Freese & Nichols $ 7,047.73 $ 7,985,528.63 $8,242,972 03/15/06 Freese & Nichols $ 120,015.00 $ 7,865,508.63 04/07/06 Freese & Nichols $ 74,235.00 $ 7,791,273.63 Proj: 04-04 04/07/06 Freese & Nichols $ 15,971.38 $ 7,775,302.25 05/15/06 Freese & Nichols $ 52,500.00 $ 7,722,802.25 05/15/06 Freese & Nichols $ 5,837.97 $ 7,716,964.28 07/24/06 Freese & Nichols $ 5,341.73 $ 7,711,622.55 07/24/06 Red River Const $ 183,389.06 $ 7,528,233.49 08/15/06 Red River Const $ 252,424.91 $ 7,275,808.58 08/15/06 Freese & Nichols $ 5,046.10 $ 7,270,762.48 09/30/06 Freese & Nichols $ 13,112.88 $ 7,257,649.60 09/30/06 Red River Const $ 849,635.61 $ 6,408,013.99 09/30/06 Red River Const $ 494,082.78 $ 5,913,931.21 11/19/06 Red River Const $ 594,002.29 $ 5,319,928.92 11/10/06 Freese & Nichols $ 2,196.90 $ 5,317,732.02 11/10/06 Freese & Nichols $ 5,432.71 $ 5,312,299.31 12/05/06 W.R Hodgson $ 764,091.11 $ 4,548,208.20 12/13/06 Red River Const $ 950,626.97 $ 3,597,581.23 12/13/06 Freese & Nichols $ 5,423.23 $ 3,592,158.00 12/13/06 Freese & Nichols $ 3,417.40 $ 3,588,740.60 1/05/07 W. R. Hodgson $ 199,378.94 $ 3,389,361.66 1/05/07 W. R. Hodgson $ 496,636.25 $ 2,892,725.41 1/19/07 Freese & Nichols $ 5,635.02 $ 2,887,090.39 1/19/07 Freese & Nichols $ 2,704.08 $ 2,884,383.31 1/19/07 Red River Const $ 260,195.39 $ 2,624,190.92 1/23/07 W. R. Hodgson $ 50,567.55 $ 2,573,623.37 2/12/07 Freese & Nichols $ 3,176.40 $ 2,570,443.97 2/12/07 Freese & Nichols $ 5,568.24 $ 2,564,878.73 2/12/07 Red River Const $ 282,792.75 $ 2,282,085.98 2/23/07 W. R. Hodgson $ 425,850.80 $ 1,856,235.18 2/27/07 Freese & Nichols $ 5,000.00 $ 1,851,235.18 3/13/07 W. R. Hodgson $ 253,116.72 $ 1,598,118.46 3/13/07 Red River Const $ 265,950.24 $ 1,332,168.22 04/09/07 Freese & Nichols $ 992.49 $ 1,331,175.73 04/09/07 Freese & Nichols $ 4,972.42 $ 1,326,203.31 04/09/07 W. R. Hodgson $ 104,328.05 $ 1,221,875.26 04/09/07 Red River Const $ 620,934.67 $ 600,940.59 05/02/07 Freese & Nichols $ 3,806.38 $ 597,134.21 05/02/07 Freese & Nichols $ 6,147.40 $ 590,986.81 05/02/07 Red River Const $ 166,514.45 $ 424,472.36 06/20/07 Freese & Nichols $ 12,869.13 $ 411,603.23 06/20/07 W. R. Hodgson $ 27,113.00 $ 384,487.23 06/25/07 Home Depot $ 223.46 $ 384,266.77 07/23/07 Freese & Nichols $ 10,379.53 $ 373,887.24 07/23/07 Freese & Nichols $ 3,393.83 $ 370,493.41 07/23/07 W. R. Hodgson $ 5,320.00 $ 365,173.41 08/31/07 Red River Const $ 22,427.97 $ 342,745.44 08/31/07 Freese & Nichols $ 2,387.37 $ 340,358.07 09/30/07 Red River Const $ 77,824.02 $ 262,534.05 12/11/07 Red River Const $ 41,013.65 $ 221,520.40 01/08/08 Freese & Nichols $ 1,624.40 $ 219,896.00 01/14/08 Freese & Nichols-reimb $ (2,000.00) $ 221,896.00 01/31/08 Freese & Nichols $ 1,239.35 $ 220,656.65 01/02/08 Red River Const $ 73,945.73 $ 146,710.92 02/12/08 Freese & Nichols $ 630.51 $ 146,080.41 02/23/08 W.R. Hodgson $ 119,442.23 $ 26,638.18 02/29/08 Freese & Nichols $ 1,937.93 $ 24,700.25 04/03/08 Red River Const(final) $ 2,599.75 $ 22,100.50 04/29/08 Freese & Nichols $ 746.69 $ 21,353.81 Status: The Town entered into a contract with the North Texas Municipal Water District (NTMWD) to provide the Town with another source of surface water. The Town executed contracts with Red River Construction to construct a 3 MG ground water storage tank and pump station and with Hodgson to construct a 30" water line to receive and distribute the surface water to be received from the NTMWD at a site near the intersection of Custer Road / US 380. These projects are complete and the ground storage tank, pump station, and 30" water line are in service. Town Facilities (Town Hall, Perkins & Will $ 23,339.56 $ 48,849.12 Police/Courts, Fire Station, 11/8/04 Perkins & Will $ 36,600.00 $ 12,249.12 etc) 09/30/05 Randal Scott $ 12,249.12 $ 0 $2,000,009 Total $ 72,188.68 $72,188.68 Pro':04-05 Status: To meet its current need for facilities, the Town has relocated its Police Department to 113 W. Broadway and purchased a building at 121 W. Broadway to serve as Town Hall. The construction of additional facilities is on hold. Police Department Renovations $60,000 Pro': 04-06 Status: Pending -Depending on where the Town Hall moves, we will need to renovate some of the space in the possibly vacated offices of Town Hall for use for the officers. We may also enlarge the Court Room by removing walls in the present location at 110 W. Broadway Prosper Trail Elevated 11/10/06 Spiars Engineering $ 1,850.00 $ 98,150.00 Storage Tank 04/10/07 Spiars Engineering $ 475.00 $ 97,675.00 $100,000 01/08/08 App. Consul Grp -land $ 1,800.00 $ 95,875.00 Pro': 04-07 01/08/08 App. Consul Grp -land $ 2,800.00 $ 93,075.00 Status: Discussions ongoing. Folsom Park 11/13/07 Appraisal Consultation $ 2,800.00 $ 697,200.00 $700,000 01/08/08 La Terra Design $ 5,320.00 $ 691,880.00 Proj: 04-08 04/01/08 La Terra Design $ 24,358.00 $ 667,522.00 04/15/08 Denton Co Electric $ 12,219.88 $ 655,302.12 04/28/08 Plans Reimb $ (360.00) $ 655,662.12 05/22/08 La Terra Design $ 2,622.00 $ 653,040.12 6/17/08 Furgo Construction $ 346.00 $ 652,694.12 06/11/08 Site Planning $118,922.43 $ 533,771.69 07/15/08 Southwest Sign $ 75.00 $ 533,696.69 07/31/08 Furgo Construction $ 791.00 $ 532,905.69 08/08/08 Site Planning $238,046.25 $ 294,859.44 08/08/08 Site Plannng $169,065.83 $ 125,793.61 Status: Folsom Park design is being designed by La Terra Studios. Completion for the construction of the park improvements is anticipated by the end of summer 2008. Athletic Field Work $200,000 Pro': 04-09 Status La Cima Sewer Force Main $60, 000 Pro': 04-10 Status Town Phone system $63,200 Pro': 04-11 Status Remaining Funds 2/9/07 City of Frisco $ 5,000.00 $297,679.56 Available including 3/27/07 Randall Scott Architects $ 7,300.00 $290,379.56 interest. 05/22/07 Randall Scott Architects $ 6,000.00 $284,379.56 $-286;061 05/31/07 Tx Meter $ 235.56 $284,144.00 $302,679.56 09/30/07 HP Envirovision $ 1,230.00 $282,914.00 Status: A number of projects originally scheduled to be funded by the 2004 Bond proceeds were reprioritized to reallocate funds to the project to construct a 3 MG ground water storage tank, a pump station, and a 30" water line. These funds are anticipated to be used for a number of pending expenditures, including potential facility improvements, site acquisition for elevated water towers, and contributions towards several development driven water and sewer projects. Total Bond + Interest Earned - Expenditures = Balance $10,500,000.00 $ 895,287.54 $10,408,050.69 $ 987,236.85 General Ledger: FY 03/04 Expense $ 436,766.99 FY 04/05 Expense $ 1,116,373.81 FY 05/06 Expense $ 2,358,336.22 FY 06/07 Expense $ 5,673,486.47 FY 07/08 Expense $ 823.087.20Total Expenses $10,408,050.69 TOWN OF p S P E R. 2006 BOND On July 25, 2006, the Town Council adopted a resolution directing that notice be published of the Council's intent to sell $12,000,000 of the Town's Combination Tax and Revenue Certificates of Obligation to fund capital expenditures of the Town. The Council's resolution specifies the following uses for the proceeds received from the sale of the Certificates of Obligation: 1. To pay costs of constructing and improving the Town's water system, including the construction of an elevated water storage tank and water distribution line. 2. To pay costs of acquiring, constructing and equipping municipal park improvements and open space. 3. To pay costs of constructing and improving roads and streets in the Town and related infrastructure. 4. To pay costs of extending, constructing and improving the Town's sewer system. 5. To pay costs of acquiring land and interests in land as may be required in connection with the purposes as described in 1 through 4. 6. To pay legal, fiscal, engineering and architectural fees in connection with the foregoing projects. In connection with the Town's capital planning for these projects, the Town Staff has prepared for the Council a proposed expenditure plan, which is summarized below. The capital plan summarized below is based upon current cost estimates and proposed construction schedules, and the expenditure plan is subject to change. However, under State law, the Town may not use the proceeds of the Certificates of Obligation except for the project categories included in the resolution adopted by the Council that are listed above. The following table will be used to report expenditures. The table lists descriptions of projects and their estimated costs. In the future as expenditures are made, the table will be updated to describe the expenditures, the amount of the expenditure, and the difference between the estimated and actual costs. Description of Project and Estimated Cost Date of Expenditure Description of Expenditure Amount Expended Difference between Estimated Cost and Amount Expended Project: 12/13/06 Freese & Nichols $ 5,457.81 $4,401,752.19 1.5 MG Elevated Storage 12/13/06 Freese & Nichols $ 3,351.81 $4,398,400.38 Tank and 1st Street 20" 01/19/07 Freese & Nichols $ 6,811.20 $4,391,589.18 Water Line 01/19/07 Freese & Nichols $ 9,519.69 $4,382,069.49 $6,473,9A8 02/15/07 Freese & Nichols $ 18,945.13 $4,363,124.36 Contract $4,407,210 02/15/07 Freese & Nichols $ 21,622.24 $4,341,502.12 Acq Land & Easement 02/27/07 Freese & Nichols $ 53,452.37 $4,288,049.75 $--592,79a 02/27/07 Freese & Nichols $ 1,533.92 $4,286,515.83 03/19/07 G.M. Geer $ 1,350.00 $4,285,165.83 Total $6,900,909 04/10/07 Freese & Nichols $ 920.00 $4,284,245.83 $4,407,210 05/02/07 Freese & Nichols $ 18,181.50 $4,266,064.33 06/14/07 TXU $ 250.00 $4,265,814.33 06/30/07 Freese & Nichols $ 42,957.60 $4,222,856.73 Proj: 06-01 07/23/07 Freese & Nichols $ 46,715.00 $4,176,141.73 08/31/07 Freese & Nichols $ 10,408.54 $4,165,733.19 08/31/07 Freese & Nichols $ 5,272.75 $4,160,460.44 08/31/07 Freese & Nichols $ 11,595.00 $4,148,865.44 08/31/07 Dallas Morning News $ 267.40 $4,148,598.04 09/30/07 Freese & Nichols $ 396.75 $4,148,201.29 10/16/07 LandAmerica Title $ 458.00 $4,147,743.29 11/19/07 Four D Construction $ 496,831.95 $3,650,911.34 11/19/07 Landmark Structures $ 230,636.25 $3,420,275.09 12/11/07 Landmark Structures $ 336,395.00 $3,083,880.09 12/18/07 Four D Construction $ 158,553.90 $2,925,326.19 01/08/08 Freese & Nichols $ 4,111.25 $2,921,214.94 01/14/08 Landmark Structures $ 613,260.15 $2,307,954.79 02/06/08 Landmark Structures $ 218,916.10 $2,089,038.69 02/11/08 Four D Construction $ 146,639.43 $1,942,399.26 ' 02/29/08 Freese & Nichols $ 5,232.50 $1,937,166.76 03/12/08 Landmark Structures $ 160,312.50 $1,776,854.26 04/01/08 Freese & Nichols $ 11,096.46 $1,765,757.80 04/08/08 Four D Construction $ 79,551.68 $1,686,206.12 04/11/08 Landmark Structures $ 346,465.00 $1,339,741.12 05/13/08 Landmark Structures $ 171,570.00 $1,168,171.12 05/22/08 Golden Triangle Fire $ 281.00 $1,167,890.12 05/22/08 Rescom Fire Protection $ 75.00 $1,167,815.12 5/31/08 Freese & Nichols $ 2,457.50 $1,165,357.62 5/31/08 Freese & Nichols $ 4,485.00 $1,160,872.62 06/25/08 Four D Construction $ 113,762.07 $1,047,110.55 06/24/08 Freese & Nichols $ 6,727.50 $1,040,383.05 06/24/08 Freese & Nichols $ 944.49 $1,039,438.56 07/10/08 LandMark Structures $ 29,678.00 $1,009,760.56 07/31/08 LandMark Structures $ 159,505.00 $ 850,255.56 08/08/08 LandMark Structures $ 311,324.50 $ 538,931.06 8/31/08 Freese & Nichols $ 3,970.51 $ 534,960.55 8/31/08 1 Freese & Nichols $ 11,586.25 $ 523,374.30 Status: The 1.5 MG elevated storage tank is under construction and is anticipated to be complete in the Fall of 2008. The First Street 20" pipeline is also under construction and is anticipated to be complete in the summer of 2008. Project: 03/06/07 LandAmerica Wilson $2,005,400.00 $ 0 Community Park $3, 041,590 6/20/07 Grant Reimbursement $ (500,000.00) $ 500,000.00 $2,005,400 Pro': 06-02 Status: March 9, 2007, Purchased 57 acres of land from PISD. Town staff is working with PISD on a joint project with the Stadium architect PBK . Project: Boyer Park $200, 000 Pro': 06-03 Status: Pending resolution for acquisition of additional land west of Church street. Project: 11/20/07 JRJ Paving $186,239.56 $ 321,382.24 Street Paving Projects 2007 01/08/08 JRJ Paving $196,994.84 $ 124,387.40 $469,909 03/07/08 JRJ Paving $ 56,473.02 $ 67,914.38 $507,621.80 04/11/08 JRJ Paving $ 48,856.38 $ 19,058.00 Pro': 06-04 Status: Paving is complete, cleaning up and back filling being done. Project: 02/13/08 Dallas Morning New $ 267.40 $ 809,732.60 Prosper / County Road 06/11/08 RLK Engineering $ 54,000.00 $ 755,732.60 Improvements 06/11/08 Dowdey & Associates $ 42,461.70 $ 713,270.90 $500,999 07/10/08 Dowdey & Associates $ 79,750.48 $ 633,520.42 $810,000 07/10/08 RLK Engineering $ 84,555.63 $ 548,964.79 Proj: 06-05 08/25/08 RLK Engineering $ 36,238.12 $ 512,726.67 08/25/08 Dowdey & Associates $ 62,893.33 $ 449,833.34 08/19/08 1 Prestonwood Ba t. Ch $ 50.00 $ 449,783.34 Status: Design proposals for the three (3) roadway projects were approved by by Council on March 1, 2008. The Town has received monetary consideration from Collin County for 50% matching funds on their November, 2007 bond election. Project: 9/30/07 Dowdey & Associates $ 3,500.00 $ 296,500.00 Prosper Trail Road/Drainage 11/06/07 Dowdey & Associates $ 1,500.00 $ 295,000.00 Improvements 12/11/07 Dowdey & Associates $ 5,944.99 $ 289,055.01 $549,909 01/31/08 Dowdey & Associates $ 549.08 $ 288,505.93 $300,000 03/20/08 Dowdey & Associates $ 1,369.49 $ 287,136.44 Proj: 06-06 3/31/08 Dowdey & Associates $ 404.00 $ 286,732.44 5/22/08 Dowdey & Associates $ 46,546.67 $ 240,185.77 05/22/08 Dowdey & Associates $ 128.06 $ 240,057.71 05/22/08 S.W. Signs $ 555.00 $ 239,502.71 06/11/08 Quality Excavation $ 78,885.00 $ 160,617.71 07/10/08 Quality Excavation $ 47,200.50 $ 113,417.21 08/08/08 1 Quality Excavation $ 45,126.00 1 $ 68,291.21 Status: Quality Excavation has been awarded this project and will begin construction in March, 2008. The construction is anticipated to be complete by the end of summer 2008. Project: 12/18/07 DHS Auto -lift sta. mod $ 1,568.65 $ 29,831.35 Water Flow Reversal 12/18/07 DHS Auto -lift sta. mod $ 10,925.00 $ 18,906.35 $77,909 02/29/08 Preston Services $ 500.00 $ 18,406.35 $31,400 03/07/08 DHS Auto $ 12,975.00 $ 5,431.35 Proj: 06-07 04/11/08 Freese & Nichols $ 2,655.00 $ 2,776.35 05/22/08 Freese & Nichols $ 1,859.00 1 $ 917.35 Status: Flow has been turned over to NTMWD and staff is cleaning up plant. Freese & Nichols is preparing a closure plan for TECQ. Payment pending invoicing. Project: 01/08/07 Ferguson WW-Toll Rd $ 4,389.58 $ 368,790.42 Water/Sewer Line Repl. 01/22/07 Ferguson WW $ 695.10 $ 368,095.32 Water: $160,000 01/31/07 Rodman $ 16,240.00 $ 351,855.32 Sewer: $116,000 04/24/07 Ferguson (6" Line) $ 10,594.79 $ 341,260.53 $276,099 04/24/07 Keys Tapping(6" line) $ 180.00 $ 341,080.53 8/12/08 $373,180 04/24/07 Barbosa Const(6" line) $ 31,500.00 $ 309,580.53 05/31/07 Keys Tapping (6" line) $ 195.00 $ 309,386.53 Proj: 06-08 05/31/07 Texas Meter $ 441.60 $ 308,943.93 05/31/07 Barbosa Const(6" line) $ 7,500.00 $ 301,443.93 05/31/07 Barbosa Const(6" line) $ 3,500.00 $ 297,943.93 05/31/07 Ferguson Waterworks $ 1,028.80 $ 296,915.13 05/31/07 Ferguson Waterworks $ 347.19 $ 296,567.94 05/31/07 Ferguson Waterworks $ 45.00 $ 296,522.94 11/20/07 Ferguson Waterworks $ 4,582.16 $ 291,940.78 12/18/07 Barbosa Const(12" line $ 7,600.00 $ 284,340.78 07/11/08 Barbosa Construction $ 15,400.00 $ 268,940.78 Status: Sewer line replacement on Main St. 1,500 Ift and 12 manhole rehab downtown. Water line replacement 1,300 Ift on Second Street. The toll road water line and Third Street was relocated 2007 and remaining to be done in 2008. Project: 01/02/08 Brookhollow $ 5,953.75 $ 969,046.25 Kohl's Development 01/02/08 G.E. Walker $ 29,599.74 $ 939,446.51 $975,000 01/02/08 G.E. Walker $ 14,377.49 $ 925,069.02 02/26/08 G.E. Walker $ 16,153.75 $ 908,915.27 Proj: 06-09 02/26/08 G.E. Walker $ 40,488.00 $ 868,427.27 02/29/08 AJ Bedford Group $ 800.00 $ 867,627.27 04/08/08 G.E. Walker $ 11,202.92 $ 856,424.35 04/08/08 G.E. Walker $ 4,272.61 $ 852,151.74 04/08/08 AJ Bedford Group $ 350.00 $ 851,801.74 04/08/08 AJ Bedford Group $ 3,600.00 $ 848,201.74 04/08/08 JW Partners $ 7,865.00 $ 840,336.74 04/08/08 JW Partners $ 1,800.00 $ 838,536.74 05/07/08 G.E. Walker $ 12,254.04 $ 826,282.70 05/07/08 Rodman Const. $ 110,345.62 $ 715,937.08 05/06/08 Schneider Siltation $ 5,445.00 $ 710,492.08 05/06/08 Stromcon, LLC $ 1,900.00 $ 708,592.08 05/06/08 Stromcon, LLC $ 200.00 $ 708,392.08 05/31/08 StromCom, LLC $ 250.00 $ 708,142.08 05/31/08 Alpha Testing $ 4,411.00 $ 703,731.08 06/11/08 1 Rodman Const $ 455,333.18 $ 248,397.90 06/11/08 G.E. Walker $ 6,235.00 $ 242,162.90 07/10/08 Rodman Construction $ 364,464.63 ($ 122,301.73) 07/15/08 Alpha Testing $ 3,054.00 ($ 125,355.73) 07/15/08 Stormcom LLC $ 200.00 ($ 125,555.73) 7/31/08 Stromcom LLC $ 250.00 ($ 125,805.73) 07/31/08 Alpha Testing $ 2,702.00 ($ 128,507.73)" 08/08/08 Rodman Construction $ 8,271.00 ($ 136,778.73) 08/08/08 Rodman Construction $ 52,134.13 ($ 188,912.86) 08/08/08 G E Walker $ 8,226.41 ($ 197,139.27) Status: The project has been bid by Land Plan with Rodman Excavation being the low bidder. Construction will begin in March, 2008 and is anticipated to be completed in September, 2008. Project: 05/31/08 American Rehab $ 250.00 $ 768,736.00 Street Paving 2008 $7-38,000 07/31/08 Dallas Morning News $ 779.40 $ 767,956.60 8/12/08 $768,986 Pro': 06-10 Status: Project: 06/30/08 Fisher & Sons Fence $ 10,600.00 $ 19,400.00 1st St. Practice Fields 08/12/08 HortiChem $ 13,784.50 $ 5,615.50 $30,000 Pro': 06-11 Project: 03/21/07 UTRWD $ 62,500.00 $ 1,528,702.20 Remaining bond funds 05/31/07 Home Depot $ 192.50 $ 1,528,509.70 available 01/02/08 UTRWD-Fees $ 68,095.84 $ 1,460,413.86 04/22/08 Apprai Consul(100 blk) $ 3,600.00 $ 1,456,813.86 $1,561,488.18 $ 157, 880.02 $1, 719, 368.20 $ (128,166.00) Balance $1,591,202.20 Status: The 6" pipeline from Coleman to Church is complete. The fee to UTRW is to have Prosper included the study for the Doe Branch wastewater treatment plant. Project: Interest available: $820,429.70 Status: Interest available for future projects Total Bond + Interest Earned - Expenditures = Balance $1 ,842,1 9.98 $820,429.70 $ 7,936,388.34 $ 4,884,041.36 $12,000,000.00 General Ledger: FY 06.'07 Expense $1,885,933.59 FY 07/08 Expense $6,050,454.75 Total Expenses $7,936,388.34 ** $325,000 due from EDC for Kohl project ADMINISTRATION Regular Meeting Prosper Town Council September 23, 2008 - 6:00 p.m. To: Mayor and Town Council From: Matthew D. Denton, Town Secretary Xc: Mike Land, Town Manager Re: Item No. 8 -- Annexation of approximately 121.281 acres of land generally located north of Hwy 380 and +3640' west of the Dallas North Tollway. Description: Council accepted the petition for the voluntary annexation of approximately 121.281 acres of land generally located north of Hwy 380 and +3640' west of the Dallas North Tollway at their August 12, 2008 meeting. This is the first of two public hearings required to annex the property. Following is a service plan for the property. Recommendation: Staff recommends that Council receive any input at the public hearing. Following the public hearing, no Council action is required. Agenda Item No.V3 a � R des ' an m m 8 Q iU� x E o � � W 8�i fin �S q 9 v R fA 2 i m A } COUNTY LINE ROAD NWW'25'E 2277.09' TOM OF PROSPER TOM UMIT .10,6400M oo1'M Cq'.an ausi cdsin ausi oaxn v N w A v �E (7 d O 1 i I P � �y •• i'' o � ' m o � i n i n4 �g RA gpp� Ill jil $g �� 1� $ g it, g Q ��IIL 4gjj��Q a g ` k gg aa= 9$ g t gQ r H .0 �a Fz i a � TOWN OF PROSPER, TEXAS SERVICE PLAN FOR ANNEXED AREA ANNEXATION ORDINANCE: NO. DATE OF ANNEXATION ORDINANCE: ACREAGE ANNEXED: SURVEY, ABSTRACT & COUNTY: CURRENT PROPERTY OWNER: 08-xxx October 28, 2008 Approximately 121.281 acres Collin County School Land Survey, Abstract No. 147, Collin County Prosper Partners MUNICIPAL SERVICES TO THE ACREAGE DESCRIBED ABOVE SHALL BE FURNISHED BY OR ON BEHALF OF THE TOWN OF PROSPER, TEXAS, AT THE FOLLOWING LEVELS AND IN ACCORDANCE WITH THE FOLLOWING SCHEDULE: A. POLICE SERVICE PATROLLING, RESPONSES TO CALLS, AND OTHER ROUTINE POLICE SERVICES, WITHIN THE LIMITS OF EXISTING PERSONNEL AND EQUIPMENT, WILL BE PROVIDED UPON THE EFFECTIVE DATE OF THE ANNEXATION ORDINANCE. 2. UPON ULTIMATE DEVELOPMENT OF THE AREA, THE SAME LEVEL OF POLICE SERVICE WILL BE PROVIDED TO THIS AREA AS ARE FURNISHED THROUGHOUT THE TOWN. B. FIRE SERVICE 1. FIRE PROTECTION AND EMERGENCY AMBULANCE EQUIPMENT BY THE PRESENT PERSONNEL AND THE PRESENT EQUIPMENT OF THE FIRE DEPARTMENT, WITHIN THE LIMITS OF AVAILABLE WATER AND DISTANCES FROM THE EXISTING FIRE STATION, WILL BE PROVIDED TO THIS AREA UPON THE EFFECTIVE DATE OF THE ANNEXATION ORDINANCE. 2. UPON ULTIMATE DEVELOPMENT OF THE AREA, THE SAME LEVEL OF FIRE AND EMERGENCY AMBULANCE SERVICES WILL BE PROVIDED TO THIS AREA AS ARE FURNISHED THROUGHOUT THE TOWN. C. ENVIRONMENTAL HEALTH AND CODE ENFORCEMENT SERVICES 1. ENFORCEMENT OF THE TOWN'S ENVIRONMENTAL HEALTH ORDINANCE AND REGULATIONS, INCLUDED BUT NOT LIMITED TO WEED AND BRUSH ORDINANCES, JUNKED AND ABANDONED VEHICLE ORDINANCE, AND ANIMAL CONTROL ORDINANCES, SHALL BE PROVIDED WITHIN THIS AREA 60 DAYS TO THE EFFECTIVE DATE OF THE ANNEXATION ORDINANCE. THESE ORDINANCES AND REGULATIONS WILL BE ENFORCED THROUGH THE USE OF EXISTING PERSONNEL. 2. INSPECTION SERVICES, INCLUDING THE REVIEW OF BUILDING PLANS, THE ISSUANCE OF PERMITS AND THE INSPECTION OF ALL BUILDINGS, PLUMBING, MECHANICAL, AND ELECTRICAL WORK TO ENSURE COMPLIANCE WITH TOWN CODES AND ORDINANCES WILL BE PROVIDED WITHIN 60 DAYS OF THE EFFECTIVE DATE OF THE ANNEXATION ORDINANCE. EXISTING PERSONNEL WILL BE USED TO PROVIDE THESE SERVICES. 3. THE TOWN'S ZONING, SUBDIVISION, SIGN, AND OTHER ORDINANCES SHALL BE ENFORCED IN THIS AREA BEGINNING UPON THE EFFECTIVE DATE OF THE ANNEXATION ORDINANCE. 4. ALL INSPECTION SERVICES FURNISHED BY THE TOWN OF PROSPER, BUT NOT MENTIONED ABOVE, WILL BE PROVIDED TO THIS AREA BEGINNING WITHIN 60 DAYS OF THE EFFECTIVE DATE OF THE ANNEXATION ORDINANCE. 5. AS DEVELOPMENT AND CONSTRUCTION COMMENCE IN THIS AREA, SUFFICIENT PERSONNEL WILL BE PROVIDED TO FURNISH THIS AREA THE SAME LEVEL OF ENVIRONMENTAL HEALTH AND CODE ENFORCEMENT SERVICES AS ARE FURNISHED THROUGHOUT THE TOWN. D. PLANNING AND ZONING SERVICES THE PLANNING AND ZONING JURISDICTION OF THE TOWN WILL EXTEND TO THIS AREA UPON THE EFFECTIVE DATE OF THE ANNEXATION ORDINANCE. TOWN PLANNING WILL THEREAFTER ENCOMPASS THIS PROPERTY, AND IT SHALL BE ENTITLED TO CONSIDERATION FOR ZONING IN ACCORDANCE WITH THE TOWN'S COMPREHENSIVE PLAN. E. PARK AND RECREATION SERVICES I. RESIDENTS OF THIS PROPERTY MAY UTILIZE ALL EXISTING PARK AND RECREATIONAL SERVICES, FACILITIES, AND SITES THROUGHOUT THE TOWN, BEGINNING UPON THE EFFECTIVE DATE OF THE ANNEXATION ORDINANCE. 2. ADDITIONAL FACILITIES AND SITES TO SERVE THIS PROPERTY AND ITS RESIDENTS WILL BE ACQUIRED, DEVELOPED, AND MAINTAINED AT LOCATIONS AND TIMES PROVIDED BY APPLICABLE PLANS, POLICIES AND PROGRAMS AND DECISIONS OF THE TOWN OF PROSPER. THIS PROPERTY WILL BE INCLUDED IN ALL FUTURE PLANS FOR PROVIDING PARKS AND RECREATION SERVICES TO THE TOWN. 3. THIS PROPERTY WILL BE INCLUDED IN ALL PLANS FOR PROVIDING PARKS AND RECREATION SERVICES TO THE TOWN. THE SAME LEVEL OF PARKS AND RECREATION SERVICES SHALL BE FURNISHED TO THIS PROPERTY AS IS FURNISHED THROUGHOUT THE TOWN. 4. EXISTING PARKS, PLAYGROUNDS, AND OTHER RECREATIONAL FACILITIES WITHIN THIS PROPERTY SHALL, UPON DEDICATION TO AND ACCEPTANCE BY THE TOWN, BE MAINTAINED AND OPERATED BY THE TOWN OF PROSPER, BUT NOT OTHERWISE. F. SOLID WASTE COLLECTION I. SOLID WASTE COLLECTION SHALL BE PROVIDED TO THE PROPERTY IN ACCORDANCE WITH EXISTING TOWN POLICIES, BEGINNING UPON THE EFFECTIVE DATE OF THE ANNEXATION ORDINANCE. RESIDENTS OR COMMERCIAL USERS OF THIS PROPERTY UTILIZING PRIVATE COLLECTION SERVICES AT THE TIME OF ANNEXATION MAY CONTINUE TO DO SO IN LIEU OF RECEIVING CITY SERVICES UNTIL THE SECOND ANNIVERSARY OF THE EFFECTIVE DATE OF THIS ORDINANCE. 2. AS DEVELOPMENT AND CONSTRUCTION COMMENCE ON THIS PROPERTY, AND POPULATION DENSITY INCREASES TO THE PROPERTY LEVEL, SOLID WASTE COLLECTION SHALL BE PROVIDED TO THIS PROPERTY IN ACCORDANCE WITH THE CURRENT POLICIES OF THE TOWN AS TO FREQUENCY, CHANGES AND SO FORTH. G. STREETS 1. THE TOWN OF PROSPER'S EXISTING POLICIES WITH REGARD TO STREET MAINTENANCE, APPLICABLE THROUGHOUT THE ENTIRE TOWN, SHALL APPLY TO THIS PROPERTY BEGINNING UPON THE EFFECTIVE DATE OF THE ANNEXATION ORDINANCE. UNLESS A STREET WITHIN THIS PROPERTY HAS BEEN CONSTRUCTED OR IS IMPROVED TO THE TOWN'S STANDARDS AND SPECIFICATIONS, THAT STREET WILL NOT BE MAINTAINED BY THE TOWN OF PROSPER. 2. AS DEVELOPMENT, IMPROVEMENT OR CONSTRUCTION OF STREETS TO TOWN STANDARDS COMMENCE WITHIN THIS PROPERTY, THE POLICIES OF THE TOWN OF PROSPER WITH REGARD TO PARTICIPATION IN THE COSTS THEREOF, ACCEPTANCE UPON COMPLETION, AND MAINTENANCE AFTER COMPLETION, SHALL APPLY. 3. THE SAME LEVEL OF MAINTENANCE SHALL BE PROVIDED TO STREETS WITHIN THIS PROPERTY WHICH HAVE BEEN ACCEPTED BY THE TOWN OF PROSPER AS IS PROVIDED TO TOWN STREETS THROUGHOUT THE TOWN. 4. STREET LIGHTING INSTALLED ON STREETS IMPROVED TO TOWN STANDARDS SHALL BE MAINTAINED BY THE EXISTING FRANCHISE IN ACCORDANCE WITH CURRENT POLICIES. H. WATER SERVICES 1. CONNECTION TO EXISTING TOWN WATER MAINS FOR WATER SERVICE FOR DOMESTIC, COMMERCIAL, AND INDUSTRIAL USE WITHIN THIS PROPERTY WILL BE PROVIDED IN ACCORDANCE WITH EXISTING TOWN POLICIES. UPON CONNECTION TO EXISTING MAINS, WATER WILL BE PROVIDED AT RATES ESTABLISHED BY TOWN ORDINANCES FOR SUCH SERVICE THROUGHOUT THE TOWN. 2. AS DEVELOPMENT AND CONSTRUCTION COMMENCE IN THIS PROPERTY, WATER MAINS OF THE TOWN WILL BE EXTENDED IN ACCORDANCE WITH PROVISIONS OF THE SUBDIVISION ORDINANCE AND OTHER APPLICABLE ORDINANCES AND REGULATIONS. TOWN PARTICIPATION IN THE COSTS OF THESE EXTENSIONS SHALL BE IN ACCORDANCE WITH THE APPLICABLE TOWN ORDINANCES AND REGULATIONS. SUCH EXTENSIONS WILL BE COMMENCED WITHIN TWO AND ONE-HALF (2 ''/z) YEARS FROM THE DATE OF ADOPTION OF THE ANNEXATION ORDINANCE, OR UPON COMMENCEMENT OF DEVELOPMENT OF A SUBDIVISION WITHIN THIS PROPERTY, WHICHEVER OCCURS LATER. 3. WATER MAINS INSTALLED OR IMPROVED TO TOWN STANDARDS WHICH ARE WITHIN THE ANNEXED AREA AND ARE WITHIN DEDICATED EASEMENTS SHALL BE MAINTAINED BY THE TOWN OF PROSPER BEGINNING UPON THE EFFECTIVE DATE OF THE ANNEXATION ORDINANCE. 4. THEIR OWNERS, IN ACCORDANCE WITH EXISTING POLICIES APPLICABLE THROUGHOUT THE TOWN, SHALL MAINTAIN PRIVATE WATER LINES WITHIN THIS PROPERTY. I. SANITARY SEWER SERVICES 1. CONNECTIONS TO EXISTING TOWN SANITARY SEWER MAINS FOR SANITARY SEWAGE SERVICE IN THIS AREA WILL BE PROVIDED IN ACCORDANCE WITH EXISTING TOWN POLICIES. UPON CONNECTION, SANITARY SEWAGE SERVICE WILL BE PROVIDED AT RATES ESTABLISHED BY TOWN ORDINANCES FOR SUCH SERVICE THROUGHOUT THE TOWN. 2. SANITARY SEWAGE MAINS AND/OR LIFT STATIONS INSTALLED OR IMPROVED TO TOWN STANDARDS, LOCATED IN APPROVED DEDICATED EASEMENTS, AND WHICH ARE WITHIN THE ANNEXED AREA AND ARE CONNECTED TO TOWN MAINS WILL BE MAINTAINED BY THE TOWN BEGINNING UPON THE EFFECTIVE DATE OF THE ANNEXATION ORDINANCE. PRIVATE SEWER LINES SHALL BE MAINTAINED BY THE OWNERS THEREOF IN ACCORDANCE WITH EXISTING TOWN POLICIES, PRACTICES AND REGULATIONS. 3. AS DEVELOPMENT AND CONSTRUCTION COMMENCE IN THIS AREA, SANITARY SEWER MAINS OF THE TOWN WILL BE EXTENDED IN ACCORDANCE WITH PROVISIONS OF THE SUBDIVISION ORDINANCE AND OTHER APPLICABLE TOWN ORDINANCES AND REGULATIONS. TOWN PARTICIPATION IN THE COSTS OF THE EXTENSIONS SHALL BE IN ACCORDANCE WITH APPLICABLE TOWN ORDINANCES AND REGULATIONS. SUCH EXTENSIONS WILL BE COMMENCED WITHIN TWO AND ONE-HALF (2 1/2) YEARS FROM THE EFFECTIVE DATE OF THE ANNEXATION ORDINANCE, UNLESS THE SERVICES CANNOT BE REASONABLY PROVIDED IN THAT PERIOD, THEN TOWN SHALL PROPOSE A SERVICE SCHEDULE TO PROVIDE FOR THE PROVISION OF THE SERVICES WITHIN FOUR AND ONE- HALF (4-1/2) YEARS AFTER THAT DATE. J. MISCELLANEOUS 1. ANY FACILITY OR BUILDING LOCATED WITHIN THE ANNEXED AREA AND UTILIZED BY THE TOWN OF PROSPER IN PROVIDING SERVICES TO THE AREA WILL BE MAINTAINED BY THE TOWN COMMENCING UPON THE DATE OF USE OR UPON THE EFFECTIVE DATE OF THE ANNEXATION ORDINANCE, WHICHEVER OCCURS LATER. 2. GENERAL MUNICIPAL ADMINISTRATION AND ADMINISTRATIVE SERVICES TO THE TOWN SHALL BE AVAILABLE TO THE ANNEXED AREA BEGINNING UPON THE EFFECTIVE DATE OF THE ANNEXATION ORDINANCE. 3. NOTWITHSTANDING ANYTHING SET FORT ABOVE, THIS SERVICE PLAN DOES NOT REQUIRE ALL TOWN SERVICES BE PROVIDED AS SET FORTH ABOVE IF DIFFERENT CHARACTERISTICS OF TOPOGRAPHY, LAND USE AND POPULATION DENSITY ARE CONSIDERED A SUFFICIENT BASIS FOR PROVIDING DIFFERENT LEVELS OF SERVICE. 4. THE SERVICE PLAN IS VALID FOR TEN (10) YEARS FROM THE EFFECTIVE DATE OF THE ORDINANCE. 0 W W W � W � cr cz O � � O � O cz cz x O cz rA O o cz 0 0 � N N � Piz O v U v U m cz 0 � o � •�� o U oQ A A � � Ch 1%3E311IN P4 az bn NUS•.]Cd V — 1 F mi i i NN 6 _�➢�r _-_ __ ____ _-_ _--- ---� -- ��`— .t �:� ' Y � 8 €i �♦ s �: x t,� a� �• ... �--i C� U O O W a O 9 a w O A E4 0 x Wcz cz O N Cot O GV C� CO O CV p OQ CV �J r-1 CrJ Ak 6f- 6F� 6fb- 6f- W- 6F- w a� 0 U O U oAcfl�cC�O U t� CyJ r-1 CrJ (y0 Oi0 �i GV C rJ CrJ GV q CYJ d" �f9 CD t` Oi0 0 0 0 0 0 0 y Cal Cal Gil Gil GV Gil U ip Lk go W r+ O 00 z� O 00 O L G�1 W M� W E� � U � UUi Ct CZ 00 00 Q M O � SQ- a LO N O. 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P, o 0) r Z �tN oC"W)aoO aR v L -0 -0 -0 LL v v 7 � 7 7 _7 a 7 LL en LL LL LL U- LLLL �y o E o �, yy cl cl « W d d O o o m �, N U _ m e o O y N pd UJ U °' r� OrOa.0 0O d V C N g LL NJ me W d t O CZ a U C U � U •. �;.� rye .,iS: xrr. _ -�-,%�!'•. �� c dtAL h� l.r _ qMW t3r •' � -• �i 4'; F.yi � ~' � �.,1� fir �� o- / yy low A L& V TCA ir _- _ � �.� -� may. � •� s �:' �_.�ki �.F. 1R� • :�'. • •�:i -.' Al w' � w, .3 . ;,� �.. �. �;a►E • ;'. { : ` .�'� 'tSrl `caw Y MI 1 IOSPER WN OF ADMINISTRATION To: Mayor and Town Council From: Mike Land, Town Manager Re: Item No. 10 -- Town Council Meeting — September 23, 2008 Date: September 19, 2008 Agenda Item: Consideration and action on a Participation Agreement between the Town of Prosper and Collin County for the Blue Star "Gates of Prosper' development. Description of Agenda Item: The Participation Agreement is being presented at this time as part of the Tax Increment Financing (TIF) District formation process. On Tuesday September 16th Prosper's team presented the project to the County Commissioner's Court in a workshop format. As a result of the discussion, staff is working on a scenario where the County could instead of participating in the TIF over the life of the project, could provide funds upfront for the construction of Preston Rd. for example. Even though we do not know at this time at what level the County will be participating, and as a result are not able to 'fill" in the blanks regarding participation, the County requested that the Town Council at consider the agreement prior to the County doing so. The County will not be considering the agreement until the afternoon of October 14th. That night, the Council will be holding its public hearing to create the TIF District, so from a timing perspective, the schedule works well. Matthew, Dan and the rest of the team will be presenting additional information to the Commissioner's Court Tuesday September 23rd as well in response to the questions raised during the recent workshop. Therefore, there may be an opportunity to fill in the blanks Tuesday night based on the input received from the Commissioners earlier in the day. Budget Impact: NA Legal Obligations and Review: Pete Smith produced the agreement that you are reviewing. Agenda Item No. 10 - Page 1 of 2 Attached Documents: 1. A resolution approving the Participation Agreement between the Town of Prosper and Collin County for the Blue Star "Gates of Prosper' development. 2. Participation Agreement between the Town of Prosper and Collin County for the Blue Star "Gates of Prosper' development. Town Staff Recommendation: Town staff recommends that the Town Council approve the resolution and Participation Agreement. Agenda Item No. 10 - Page 2 of 2 STATE OF TEXAS § § Reinvestment Zone Number One Participation Agreement COUNTY OF COLLIN § This Development Agreement ("Agreement") is made by and between the Town of Prosper ("Town") and Collin County, Texas ("County"), acting by and through their respective authorized officers. WITNESSETH: WHEREAS, the Prosper Town Council has or intends to approve an Ordinance establishing Tax Increment Financing Reinvestment Zone Number One, Town of Prosper (hereafter defined as "Reinvestment Zone Number One") in accordance with the Tax Increment Financing Act, as V.T.C.A., Tax Code, Chapter 311, (the "Act"), to promote development and redevelopment through the use of tax increment financing and designating the Reinvestment Zone Number One pursuant to the Act; and WHEREAS, Town and Blue Star Land, LP, 183 Land Corp. and Blue Star Allen Land LP (collectively Blue Star Land, LP, 183 Land Corp. and Blue Star Allen Land LP referred to as the "Landowners") entered into that certain Development and Financing Agreement dated March 25, 2008 for the development of the Gates of Prosper and the construction and financing of certain infrastructure defined therein as "Public Improvements" within Reinvestment Zone Number One (the "Blue Star Development and Financing Agreement"); and WHEREAS, the Gates of Prosper is a mixed -used development consisting of approximately 500 acres of land within the Town generally bounded by First Street on the north, U.S. 380 on south, BNSF Railroad on the west and along either side of Preston Road (S.H. 289). The Landowners have represented to the Town that Gates of Prosper is currently expected to contain approximately 3 million gross square feet of mixed -use development generally consisting of. (i) approximately 2 million gross square feet of retail shopping, (ii) restaurant, office space and other commercial space, (ii) single family dwellings each located on a single family lot and multi -family dwelling units, and (iii) other ancillary facilities such as reasonably required parking and landscaping, as more fully described in the submittals filed by Developer with the Town from time to time in order to obtain a building permits; and WHEREAS, the County intends to contribute percent (_1o) of the County Tax Increment to the Tax Increment Fund (hereinafter defined) for the term of Reinvestment Zone Number One; and WHEREAS, the Act authorizes the expenditure of funds derived within a tax increment financing reinvestment zone for the payment of expenditures made or estimated to be made and monetary obligations incurred or estimated to be incurred by the municipality establishing a reinvestment zone that are listed in the project plan of the reinvestment zone which expenditures and monetary obligations constitute project costs as defined by the Act. Town of Prosper /County Reinvestment Zone Number One Participation — Page 1 24857 NOW THEREFORE, in consideration of the foregoing, and on the terms and conditions hereinafter set forth, the parties agree as follows: them: Article I Definitions Wherever used in this Agreement, the following terms shall have the meanings ascribed to "Act" shall mean the Tax Increment Financing Act, Chapter 311, Tax Code, as amended. "Board" shall mean the Board of Directors of Reinvestment Zone Number One, Town of Prosper, Texas. "Captured Appraised Value" means the total appraised value of all real property taxable by a Taxing Unit and located in Reinvestment Zone Number One for the year less the Tax Increment Base of the Taxing Unit. "Town" shall mean the Town of Prosper, Collin County, Texas. "County" shall mean Collin County, Texas. "Effective Date" shall mean the last date of execution hereof. "Expiration Date" shall mean the date Reinvestment Zone Number One terminates. "Financing Plan" shall mean the reinvestment zone financing plan for Reinvestment Zone Number One as approved by the Town Council for the Town. "Project Plan" shall mean the preliminary project plan for Reinvestment Zone Number One approved by the Town Council for the Town, as finalized, and as amended. "Reinvestment Zone Number One" shall mean Reinvestment Zone Number One, Town of Prosper, Texas. "Tax Increment" means the total amount of property taxes by a Taxing Unit for the year on the Captured Appraised Value of real property taxable by a Taxing Unit and located in Reinvestment Zone Number One. "Tax Increment Base" means the total appraised value of all real property taxable by a Taxing Unit and located in the Reinvestment Zone Number One for the year in which Reinvestment Zone Number One was designated. "Tax Increment Fund" shall mean the funds deposited by the Town and any Taxing Unit in the tax increment fund for Reinvestment Zone Number One. Town of Prosper /County Reinvestment Zone Number One Participation - Page 2 24857 "Taxing Unit" shall mean the Town of Prosper, Collin County, Texas, Collin County Community College District and any taxing unit that taxes real property within Reinvestment Zone Number One that enters into a contract with the Town to contribute to the Tax Increment Fund. Article II Term The term of this Agreement shall begin on the Effective Date and shall continue until termination of Reinvestment Zone Number One, unless sooner terminated as provided herein. Article III TIRZ Projects In consideration of the mutual benefits to be derived from the funding of the Reinvestment Zone Number One improvements and in consideration of the increased future tax base generated from the Gates of Prosper within Reinvestment Zone Number One, the County shall contribute an amount equal to percent (_%o) of its Tax Increment to the Tax Increment Fund pursuant to §§311.013(a), (b) and (g) of the Act during the term of Reinvestment Zone Number One and as authorized by the Collin County Commissioners' Court Order No. dated , 2008. The County shall annually pay its Tax Increment to the Tax Increment Fund beginning in year and ending upon the termination of Reinvestment Zone Number One. Article IV Termination This Agreement shall terminate upon any one of the following: (a) by written agreement of the parties; (b) Expiration Date; and (c) by either party, if any subsequent Federal or State legislation or any decision of a court of competent jurisdiction declares or renders this Agreement invalid, illegal or unenforceable. Article V Miscellaneous 5.1 Binding Agreement. The terms and conditions of this Agreement are binding upon the successors and assigns of all parties hereto. This Agreement may not be assigned without the consent of either party. 5.2 Authorization. Each party represents that it has full capacity and authority to grant all rights and assume all obligations that is granted and assumed under this Agreement. Town of Prosper /County Reinvestment Zone Number One Participation — Page 3 24857 5.3 Notice. Any notice required or permitted to be delivered hereunder shall be deemed received three (3) days thereafter sent by United States Mail, postage prepaid, certified mail, return receipt requested, addressed to the party at the address set forth below or on the day actually received when sent by courier or otherwise hand delivered. If intended for Town, to: Attn: Mike Land Town Administrator Town of Prosper P.O. Box 307 Prosper, Texas 75078 If intended for County: Judge Keith Self Collin County 210 S. McDonald, Ste. 626 McKinney, Texas 75069 With copy to: Peter G. Smith Nichols, Jackson, Dillard Hager & Smith, L.L.P. 1800 Lincoln Plaza 500 North Akard Dallas, Texas 75201 5.4 Entire Agreement. This Agreement is the entire Agreement between the parties with respect to the subject matter covered in this Agreement. There is no other collateral oral or written Agreement between the parties that in any manner relates to the subject matter of this Agreement, except as provided in any Exhibits attached hereto. 5.5 Governing Law. The Agreement shall be governed by the laws of the State of Texas; and venue for any action concerning this Agreement shall be in the State District Court of Collin County, Texas. The parties agree to submit to the personal and subject matter jurisdiction of said Court. 5.6 Amendment. This Agreement may be amended by the mutual written agreement of the parties. 5.7 Legal Construction. In the event any one or more of the provisions contained in this Agreement shall for any reason be held to be invalid, illegal, or unenforceable in any respect, such invalidity, illegality, or unenforceability shall not affect other provisions, and it is the intention of the parties to this Agreement that in lieu of each provision that is found to be illegal, invalid, or unenforceable, a provision be added to this Agreement which is legal, valid and enforceable and is as similar in terms as possible to the provision found to be illegal, invalid or unenforceable. 5.8 Recitals. The recitals to this Agreement are incorporated herein. Town of Prosper /County Reinvestment Zone Number One Participation — Page 4 24857 5.9 Counterparts. This Agreement may be executed in counterparts. Each of the counterparts shall be deemed an original instrument, but all of the counterparts shall constitute one and the same instrument. 5.10 Survival of Covenants. Any of the representations, warranties, covenants, and obligations of the parties, as well as any rights and benefits of the parties, pertaining to a period of time following the termination of this Agreement shall survive termination. 5.11 Approval of Parties. Whenever this Agreement requires or permits the approval or consent to be given by a party, the parties agree that such approval or consent shall not be unreasonably withheld, conditioned or delayed. 5.12 Further Assurances. Each party hereby agrees that it will take all actions and execute all documents necessary to fully carry out the purposes and intent of this Agreement. Executed on this day of , 2008. TOWN OF PROSPER, TEXAS Lo Charles Niswanger, Mayor Executed on this day of , 2008. COLLIN COUNTY, TEXAS C Honorable Keith Self County Judge Town of Prosper /County Reinvestment Zone Number One Participation — Page 5 24857 TOWN OF PROSPER, TEXAS RESOLUTION NO.08-xxx A RESOLUTION OF THE TOWN COUNCIL OF THE TOWN OF PROSPER, TEXAS, HEREBY AUTHORIZING THE TOWN OF PROSPER, TEXAS, TO ENTER INTO A PARTICIPATION AGREEMENT WITH COLLIN COUNTY FOR THE BLUE STAR "GATES OF PROSPER" DEVELOPMENT. NOW, THEREFORE, BE IT RESOLVED BY THE TOWN COUNCIL OF THE TOWN OF PROSPER, TEXAS: SECTION l: The Town of Prosper, Texas, is hereby authorized to enter into a Participation Agreement with Collin County for the Blue Star "Gates of Prosper" Development. SECTION 2: Resolved by affirmative vote of the Town Council on the 23'd day of September, 2008. Charles Niswanger, Mayor ATTEST: Matthew D. Denton, TRMC Town Secretary IOSPER WN OF To: Mayor and Town Council From: Matthew B. Garrett, Finance Director Cc: Mike Land, Town Manager ADMINISTRATION Re: Item No. 11-- CAPP Long Term Contract Discussion Agenda Item• Discuss and give an update on the Cities Aggregation Power Project ("CAPP") Member Long Term Contract. Description of Agenda Item: The Town of Prosper is a member of the Cities Aggregation Power Project ("CAPP"), a non- profit political subdivision corporation aggregator. Created in 2001 in anticipation of the deregulation of the Texas retail electric market, CAPP pools members' electric power needs in order to negotiate lower, more stable prices through bulk purchasing. CAPP is run by a voluntary 10 member Board of Directors, comprised entirely of city employees and city officials. CAPP and its sister political subdivision corporation aggregator, South Texas Aggregation Project, Inc. ("STAP"), have more than 150 political subdivision members that purchase in excess of one billion kWh annually. Together CAPP and STAP have member savings that have surpassed $100 million since the Texas electric market deregulated in 2002. CAPP has entered into a Power Purchase Agreement ("PPA") with Luminant Generation Company LLC, Big Brown Power Company, LLC and Oak Grove Management Company, LLC (collectively, "Luminant") for approximately 150 MW of baseload power from seven different units over a 24-year period. CAPP has entered into the contract on behalf of all CAPP members and STAP members that are willing to be allocated a portion of approximately 150 MW, corresponding to each participating member's energy consumption as a percentage of all participating members' consumption. The attached ordinance commits the Town to purchasing electric power to satisfy a portion of its annual energy needs (approximately 60%) through the CAPP PPA for up to 24 years from CAPP and to pay a capacity payment equal to its proportionate amount of the debt service obligation associated with CAPP's prepayment of PPA capacity costs. The ordinance approves the Energy Sales Contract Between CAPP and the Town (the "Member Contract") and authorizes the Town officers and employees as may be appropriate to take all actions necessary to carry out the terms of this ordinance and the Member Contract. Item No. 11 Page 1 of 2 Budget Impact: The long term contract will decrease a portion of the Town's cost for electricity well below the prevailing market prices and also those expected in the foreseeable future. Legal Obligations and Review: Lloyd, Gosselink, Blevins, Rochelle & Townsend P.C. representing the CAPP Members have been integral in negotiating and finalizing the contract details. Attached Documents: Member Contract, Model Ordinance, CAPP Board Report and Disclosure Statement Board, Committee and/or Staff Recommendation: Staff is recommending that the Town Council review and discuss the contract, placing an action item on the next agenda. The decision whether to participate in the long-term contract must be made by individual CAPP members on or before November 5, 2008. Item No. Page 2 of 2 ENERGY SALES CONTRACT BETWEEN CITIES AGGREGATION POWER PROJECT AND CITY OF , TEXAS ENERGY SALES CONTRACT BETWEEN CITIES AGGREGATION POWER PROJECT AND CITY OF , TEXAS TABLE OF CONTENTS Table of Contents Page ARTICLE 1 DEFINITIONS AND PRINCIPLES OF INTERPRETATION .................... 4 1.1 Definitions...........................................................................................................4 1.2 Principles of Interpretation............................................................................... 11 ARTICLE 2 CAPP'S OBLIGATIONS CONTINGENT UPON PERFORMANCE BY FACILITY OWNERS UNDER THE PPA; ASSUMPTION BY MEMBER...... 12 2.1 Nature of CAPP's obligations to Member......................................................... 12 2.2 CAPP's duty to exercise remedies under the PPA and Guaranty; power coupled with an interest.................................................................................... 12 2.3 Assumption of PPA by Member....................................................................... 12 ARTICLE 3 TERM OF CONTRACT AND DELIVERY OF PRODUCTS ................... 13 3.1 Term.................................................................................................................. 13 3.2 Delivery of Products......................................................................................... 13 ARTICLE 4 PAYMENT OF CAPACITY PREPAYMENT TO FACILITY OWNERS.............................................................................................................. 13 ARTICLE 5 DELIVERY OF CONTRACT ENERGY .................................................... 13 5.1 Acquisition and Delivery of Product................................................................ 13 5.2 Title and Risk of Loss....................................................................................... 14 5.3 Member's Failure to Accept Product................................................................. 14 5.4 Failure of Facility Owners to Schedule or Deliver Product to CAPP............... 14 ARTICLE 6 PRICING OF AND PAYMENT FOR ENERGY ....................................... 14 6.1 Payment of Member's Monthly Aggregated Energy Payment ......................... 14 6.2 Payments through Retail Electric Provider and Designated Agent(s).............. 17 6.3 Payments from Available Funds....................................................................... 17 6.4 Intent to Continue Payments............................................................................. 18 6.5 Failure to Appropriate Available Funds........................................................... 18 6.6 Assignment Upon Failure to Appropriate......................................................... 18 6.7 Appropriated Energy Payments to be Unconditional ....................................... 19 6.8 CAPP as Third Party Beneficiary ..................................................................... 19 6.9 Member's Default of the Energy Payment Covenants and CAPP's Remedies........................................................................................................... 19 ARTICLE 7 CAPACITY PREPAYMENT, MEMBER'S MONTHLY CAPACITY PAYMENT AND PLEDGE OF AD VALOREM TAXES BY MEMBER......... 21 7.1 Capacity Prepayment........................................................................................ 21 7.2 Capacity Payment............................................................................................. 21 7.3 Interest and Sinking Fund; Tax Levy for Monthly Capacity Payments........... 22 7.4 Prepayments based upon Early Termination under the PPA............................ 22 7.5 CAPP and Trustee as Third Party Beneficiaries ............................................... 22 7.7 Member's Default on Capacity Prepayment and CAPP's Remedies ............... 23 ARTICLE 8 BILLING AND PAYMENT........................................................................ 24 8.1 Invoice and Payment Schedules........................................................................ 24 8.2 Method of Payment........................................................................................... 24 8.3 Netting...............................................................................................................25 8.4 Disputed Charges.............................................................................................. 25 8.5 Audits................................................................................................................26 8.6 ERCOT Barred Issue........................................................................................ 26 ARTICLE 9 DESIGNATION OF MEMBER'S DELIVERY POINTS ........................... 26 9.1 Designation of Member's Delivery Points........................................................ 26 ARTICLE10 SECURITY................................................................................................ 26 10.1 Security from Facilities Owners....................................................................... 26 10.2 Collateral Assignment of the Contract to Trustee for Bonds ............................ 27 ARTICLE 11 DEFAULT................................................................................................. 27 11.1 Defaults by Facility Owners; Defaults by Participating Members ................... 27 11.2 Default by CAPP............................................................................................... 27 11.3 Default by Member........................................................................................... 27 11.4 Remedies of CAPP in the event of default by Member .................................... 28 11.5 Remedies of Member in the Event of Default by CAPP.................................. 29 11.6 No Waiver in Event of Default......................................................................... 30 ARTICLE 12 INDEMNIFICATION; LIMITATION OF LIABILITY ........................... 30 12.1 Member's Indemnification of CAPP................................................................ 30 12.2 Claims arising on Facility Owners side of the Facility Owners' Delivery Point.................................................................................................................. 30 12.3 Indemnified Claims........................................................................................... 31 12.4 Limitation of Remedies, Liability and Damages .............................................. 31 ARTICLE 13 REPRESENTATIONS............................................................................... 32 13.1 Mutual representations and warranties............................................................. 32 ARTICLE 14 NOTICES................................................................................................... 33 14.1 Notices..............................................................................................................33 ARTICLE 15 CONFIDENTIALITY................................................................................ 34 15.1 Confidential Information..................................................................................34 ARTICLE 16 ASSIGNMENT.......................................................................................... 34 16.1 Assignment.......................................................................................................34 ARTICLE 17 CONTINUING DISCLOSURE................................................................. 34 17.1 Continuing Disclosure Undertaking of Members ............................................. 34 17.2 Financial Statements......................................................................................... 34 17.3 Change of Fiscal Year....................................................................................... 35 17.4 Failure to Provide Continuing Disclosure......................................................... 35 17.5 Amendment of Continuing Disclosure............................................................. 35 ARTICLE 18 TAX-EXEMPT BONDS............................................................................ 36 18.1 Tax -Exempt Bonds........................................................................................... 36 18.2 Agreement to Pay Beneficiary .......................................................................... 36 ii 18.3 Financing..........................................................................................................37 ARTICLE 19 MISCELLANEOUS.................................................................................. 37 19.1 Applicable Law................................................................................................. 37 19.2 Counterparts......................................................................................................37 19.3 Waiver...............................................................................................................37 19.4 Modification......................................................................................................37 19.5 Severability....................................................................................................... 37 19.6 Requirements.................................................................................................... 38 19.7 Entirety.............................................................................................................. 38 19.8 Captions, Titles and Headings.......................................................................... 38 19.9 Forward Contract.............................................................................................. 38 19.10 Further Assurances............................................................................................ 38 19.11 Survival.............................................................................................................38 iii ENERGY SALES CONTRACT BETWEEN CITIES AGGREGATION POWER PROJECT AND CITY OF , TEXAS This Energy Sales Contract ("Contract") is executed on the date set opposite each signature below, effective, however, on December _, 2008 ("Effective Date"), by and between the Cities Aggregation Power Project, Inc. ("CAPP'), a political subdivision corporation incorporated in the State of Texas, and the City of ("Member"). CAPP and Member are collectively referred to herein as the "Parties", and individually as a "Parry". RECITALS: Capitalized terms used herein not otherwise defined shall have the meanings set forth in Article 1 hereof. Member is a political subdivision of the State of Texas. Member is a member of CAPP. As the result of adoption of Senate Bill 7, enacted as Chapter 405, Acts of the 76tn Legislature, Regular Session, 1999, municipalities now have the opportunity to competitively acquire electricity on more advantageous terms. This opportunity was the impetus for the creation of CAPP. CAPP was created to assist Member and the Participating Members in obtaining electricity used in such Members' own buildings and facilities by aggregating each Participating Member's electric load, and negotiating the best electric price based on the aggregated load. Recognizing that all retail sales in the Texas deregulated electric market have been based on the price of natural gas on the Nymex Futures Market, Member desires to diversify the sources of its electric supplies in order to mitigate potential price volatility associated with a single fuel source supply of electric energy. Member has a need for reliable electric energy at favorable and stable rates to fulfill its proprietary needs and governmental responsibilities in said buildings and facilities. Member desires to increase its bargaining power in the deregulated market for Energy by relying upon and combining with other participating CAPP member cities ("Participating Members") to negotiate for future sources of electricity. The Participating Members are listed on Exhibit "A" attached hereto and incorporated by this reference herein for all purposes. Member has determined to utilize the CAPP aggregation method of electric energy procurement for meeting the electric energy needs of governmental facilities that are located within its deregulated jurisdictional boundaries, as provided in this Contract. CAPP has identified a source of Energy from selected units in the Big Brown generating station in Freestone County, Texas ("Big Brown Facility"), Martin Lake generating station located in Rusk County, Texas ("Martin Lake Facility"), and Oak Grove generating station located in Robertson County, Texas ("Oak Grove Facility") that are owned, respectively, by Big Brown Power Company, LLC, Luminant Generation Company LLC and Oak Grove Management Company, LLC (collectively, the "Facility Owners"), and that CAPP believes will assist Member in (i) mitigating potential price volatility of Energy, and (ii) accessing a wholesale power supply to meet the base load requirements of Member and Participating Members for twenty-four (24) years, commencing on January 1, 2009 at 12:00:00 a.m. CPT ("Service Commencement Date") and ending at one minute before 12:01 a.m. on January 1, 2033 unless the agreement for the procurement of such Energy is terminated sooner as therein provided ("Term"). The Big Brown Facility, Martin Lake Facility, and Oak Grove Facility are collectively called the "Facilities". CAPP has entered into a Power Purchase Agreement with the Facility Owners in substantially the form attached hereto as Exhibit `B" and incorporated by this reference herein for all purposes ("PPA"), pursuant to which PPA, CAPP will contract to obtain 150 megawatts of Contract Capacity ("Contract Capacity") in the Facilities and access to wholesale power supplies to meet base load Energy needs of Member and Participating Members throughout the Term of the PPA. Certain obligations of the Facility Owners under the PPA have been partially guaranteed by Texas Competitive Electric Holdings Company, LLC ("TCEH") through execution of a Guaranty substantially in the form attached to the PPA, and TCEH and its subsidiaries have guaranteed the original leveraged buyout ("LBO") documents and the PPA is a secured obligation under such LBO documents and as such is subject to the guaranty provided therein. Member desires to acquire its Member Contract Energy Allocation in the Project from CAPP ("Member Capacity"). All Participating Members, including Member, have collectively contracted for and reserved the full Contract Capacity in the Facilities from CAPP. The PPA provides the terms for CAPP's purchase of all Contract Capacity from the Facility Owners for the benefit and on behalf of Member and Participating Members. As a result of negotiations with the Facility Owners it has been determined that substantial savings in energy costs based upon today's energy market and current forecasts of future market prices can be realized by purchasing capacity rights in the Facilities from the Facility Owners as provided in the PPA on or before the Service Commencement Date. 2 CAPP has determined that it is in the best interests of Member and the Participating Members to prepay Facility Owners for Contract Capacity in the Facilities ("Capacity Prepayment") out of the proceeds of Bonds issued for such purpose by CAPP. Member and each of the other Participating Members in their respective Participant Contracts, agree to pay Member's Energy Allocation Percentage of the costs incurred by CAPP to issue the Bonds, pay the Capacity Prepayment to the Facility Owners, pay interest costs, establish a reserve, and pay all other costs, fees and charges that CAPP incurs under the Bonds directly to the Trustee, as hereinafter defined, until the Bonds are paid in full according to the payment schedule set forth in the Bonds. The Bonds shall be secured by the collateral assignment of this Contract and all Participant Contracts, as provided in this Contract, including all rights of collection thereon, to the Trustee. A copy of the payment schedule is attached hereto as Exhibit "C" and incorporated by this reference herein for all purposes. Member acknowledges that CAPP shall additionally provide to Member at Member's expense, through Designated Agent(s), all services required and necessary to deliver the Energy from the Facility Owners Delivery Point to Member's Delivery Points, including all costs of transmission, distribution, and including all necessary tariffs, and fees as provided herein. Member agrees to the terms of this Contract, and consents to the terms of the PPA. In reliance thereon, and in reliance upon the acceptance and agreement of all other Participating Members, CAPP (i) has entered or shall enter the PPA for the benefit of Member and Participating Members, (ii) shall cause the Bonds to be issued, and (iii) shall cause the Capacity Prepayment to be paid to the Facility Owners as provided in the PPA. Accordingly, CAPP and Member have determined that it is in their mutual best interests to enter into this Contract as the means of providing Member with the Member Contract Energy Allocation for its base load needs during the Delivery Period described in Section 3.2, below. Other Participating Members have respectively entered or have committed to enter into contracts with CAPP that, when aggregated with this Contract, collectively account for all Contract Energy associated with the Contract Capacity in the Facilities during the Delivery Period that has or will be acquired by CAPP for the benefit of all Participating Members under the PPA. The Public Property Finance Act, Subchapter A, Chapter 271, Local Government Code, as amended (the "Act"), authorizes Member to execute, perform and make payments under contracts with any person for the use, acquisition or purchase of personal property as described in the Act, including the electricity provided for in this Contract. The Act permits the governing body of Member to execute contracts in any form deemed appropriate by said governing body in connection with the use, acquisition or purchase of personal property. 3 Member desires to acquire electricity property pursuant to this Contract as described herein from CAPP, and such personal property is deemed by the governing body of Member to be necessary, useful, and/or appropriate for the purposes of Member as contemplated by Section 304.001, Government Code, as amended. In consideration of the mutual undertakings contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged and confessed, the Parties agree as follows: ARTICLE 1 DEFINITIONS AND PRINCIPLES OF INTERPRETATION 1.1 Definitions. The following capitalized terms shall have the following meanings assigned to them under this Contract unless the context shall clearly indicate otherwise: "Aggregated Expenses" shall mean the sum of charges to CAPP that are payable under the PPA to the Facility Owners and under a Wrap Contract for: (a) adjustments to the Capacity Prepayment under Section 4.2(b) of the PPA, (b) sums charged to CAPP under Section 3.3 of the PPA, (c) the amount of Disputed Charges that are payable by CAPP under Section 8.3 of the PPA or as a result of an Audit under Section 8.4 of the PPA, (d) sums payable by CAPP under Article 10 of the PPA, (e) sums, if any, required for the indemnity of the Facility Owners under Section 13.1 of the PPA, (f) Governmental Charges payable by CAPP pursuant to Section 20.1 of the PPA, (g) New Governmental Charges payable by CAPP pursuant to Section 20.2 of the PPA, (h) the cost of environmental improvements that are required to be paid by CAPP under the PPA, (i) any unforeseen non -recurring expenses approved by CAPP, and 0) the amount of any Seller Termination Payment due by CAPP to the Facility Owners pursuant to Article 12 of the PPA. The amount of Aggregated Expenses shall be reduced by (i) credits to the Capacity Prepayment under Section 4.2(a) of the PPA, (ii) credits under Section 3.4 of the PPA on account of the failure of the Facility Owners to deliver the Products to CAPP, and (iii) the amount of Disputed Charges that are payable by the Facility Owners to CAPP under Section 8.3 of the PPA or as a result of an Audit under Section 8.4 of the PPA. "Alternate Energy" has the meaning set forth in the PPA. "Appropriate", "Appropriated", and/or "Appropriation" means, with respect to any Energy Payment that Member is obligated to make under this Contract during a Fiscal Year, the adoption by the governing body of Member of a budget for such Fiscal Year that includes such payment. "Available Funds" means, when used to describe funds of Member, those funds of the Member which have been lawfully Appropriated, within the sole and 4 uncontestable discretion of the Member, from current revenues and which may be expended, during the Fiscal Year for which Appropriated, for the purpose expressed in such Appropriation. "Bankrupt" means a Party that: (i) files a petition or otherwise commences, authorizes or acquiesces in the commencement of a proceeding or cause of action under any bankruptcy, insolvency, reorganization or similar law, or has any such petition filed or commenced against it, (ii) makes an assignment or any general arrangement for the benefit of creditors, (iii) otherwise becomes bankrupt or insolvent (however evidenced and regardless of whether the bankruptcy or insolvency is voluntary or involuntary), (iv) has a liquidator, administrator, receiver, trustee, conservator or similar official appointed with respect to it or any substantial portion of its property or assets, or (v) is generally unable to pay its debts as they fall due. "Base Year" means an annual period determined by CAPP as of the Effective Date to be representative of the typical total current Energy requirements of all Participating Members. "Big Brown Facility" means Unit 1 and Unit 2 of the Big Brown generating station located in Freestone County, Texas, with an appropriate cumulative Net Rated Capacity of 1203 megawatts as of the Effective Date. "Bonds" shall mean all contract revenue bonds issued by CAPP for the purpose of prepaying and funding the Capacity Prepayment plus cost of issuance of and reserve funds required to be maintained under such contract revenue bonds, said bonds to be secured by the pledge and assignment by CAPP to a trustee, pursuant to a trust agreement between CAPP and such trustee of the Capacity Prepayment Component of each Participating Member's contract, it being stipulated and agreed that this Contract and each Participant Contract constitutes a contract under Subchapter A of Chapter 271, Local Government Code, State of Texas, as amended, payable from such respective Participating Member's ad valorem taxes within the limits prescribed by law. "Business Day" means any Day except a Saturday, Sunday, or a Federal Reserve Bank holiday. A Business Day shall open at 8:00 a.m. CPT and close at 5:00 p.m. CPT. "Capacity Prepayment' has the meaning set forth in Section 7.1, below. "CAPP" shall mean the Cities Aggregation Power Project, a political subdivision corporation in Texas organized pursuant to Local Government Code Chapter 304 for the purpose of contracting for electric power for Participating Members and for assisting in procurement of REP and QSE services for governmental electric accounts of Participating Members. 5 "Code" means Texas Local Government Code, Title 7, Chapter 271, Subchapter 1, Sections 271.151 through 271.160. "Contract" shall mean this Energy Sales Contract and all related exhibits, as same may be amended from time to time by the mutual written agreement of the Parties. "Contract Capacity" means 150 megawatts, being the Contract Capacity acquired by CAPP in the Facilities under the PPA on behalf of Member and the Participating Members. "Contract Energy" has the meaning set forth in the PPA. Additionally, the Parties understand that if, in any Settlement Interval, the output of one or more of the Facilities is less than its Net Rated Capacity, due to a Planned Outage or Forced Outage as provided in the PPA, the Contract Energy may be reduced. In such an event, CAPP shall only receive a share of the output as provided in the PPA. In such event, the reduced amount of output received by CAPP will be delivered to and apportioned between Member and the other Participating Members based on their respective Member's Energy Allocation Percentages. "Contract Price" has the meaning set forth in Section 6.1. "CPI" means central prevailing time. "Day" means the consecutive twenty-four (24) hour period beginning at 12:00:00 a.m. CPT on any calendar day and ending at 12:00:00 p.m. CPT on such calendar day. "Default' has the meaning set forth in Article 11 hereof. "Defaulting Member" shall mean one or more Participating Members that default under a Participant Contract that has been collaterally assigned in whole or in part as security for the repayment of the Bonds. "Delivery Month" has the meaning set forth in the PPA. "Delivery Period" means that period of time in which Energy shall be delivered to CAPP as agent for Member as the Energy is delivered by the Facility Owners under the PPA, commencing on January 1, 2009 at 12:01:00 a.m. CPT and ending on the earlier of. (i) 12:01:00 a.m. CPT on January 1, 2033, (ii) the date and time that the PPA is terminated in accordance with its terms, or (iii) the date and time that this Contract is rightfully terminated in accordance with its terms. "Designated Agent(s)" means service providers such as, but not limited to, REPS, QSEs, and other market service product providers that are engaged from time -to - time by CAPP to act as agents for and representatives of CAPP, Member, and/or 6 Participating Members for the purposes of: (i) receiving and accounting for Products delivered by Facility Owners under the PPA, and Energy that is delivered to Member and Participating Members under this Contract and Participant Contracts, (ii) remitting payments, including payments of ERCOT fees, transmission fees, congestion fees, QSE fees, REP charges, and tariffs, (iii) allocating costs between Member and Participating Members, and/or (iv) billing, netting, and collecting sums due under this Contract. "Effective Date" has the meaning set forth in the preamble of this Contract. "Energy" has the meaning set forth in the PPA. Energy Payment' means the product of the Energy Price times the number of megawatt hours delivered to Member. "Energy Price" has the meaning set forth in Section 6.1(a)(i). "ERGOT" shall mean the Electric Reliability Council of Texas, or its successor in function. "ERGOT Guides" means the then -current ERCOT Operating Guides, Market Guides, Protocols, Nodal Protocols, Transaction Guides, and/or ISO procedures, as they may be amended from time to time. "ESI-IDs" shall mean Electric Service Identifiers as defined in ERCOT Protocols, or their successor in function, same being the basic identifier assigned to each service delivery point used in the registration and settlement systems managed by ERCOT. "Facilities" means the Big Brown Facility, Martin Lake Facility, and upon COD of the Oak Grove Unit 1 and Oak Grove Unit 2, the Oak Grove Facility as defined and described in the PPA, including, with respect to each, the land, structures, fixtures, equipment, machinery, lignite, and related auxiliary equipment required to operate each such facility. "Facility Owner Delivery Points" means the point at a Facility at which Contract Energy is capable of being injected for the credit of CAPP into the ERCOT high voltage transmission system with Member and other Participating Members being fully responsible for reimbursing CAPP for any and all charges and assessments by ERCOT related to delivery of energy from the Facility Owner's Delivery Points into the ERCOT high voltage transmission system. "Facility Owners" shall mean Big Brown Power Company, LLC, Oak Grove Management Company, LLC, Luminant Generation Company, LLC, and their respective successors and assigns. 7 "Fiscal Year" means the fiscal year of Member. "Forced Outage" has the meaning set forth in the PPA. "Governmental Authority" has the meaning set forth in the PPA. "Governmental Charges" has the meaning set forth in the PPA and which are charged to or payable by CAPP, including those Governmental Charges that survive the termination of the PPA. "Guarantor" shall mean Texas Competitive Electric Holdings Company, LLC, a Delaware limited liability company. "Guaranty" shall mean that certain Guaranty Agreement executed by Guarantor and delivered to CAPP at closing. "Interest and Sinking Fund" means that a special fund or account designated as the "City of Electric Public Property Finance Contractual Obligation Interest and Sinking Fund", authorized, established and maintained in a depository bank of the Member, so long as the contractual obligation to make Monthly Capacity Payments hereunder are outstanding and unpaid. "k W " means kilowatt(s). "Law" means (i) any law, legislation, statute, act, rule, ordinance, decree, treaty, regulation, order, judgment, or other similar legal requirement, and (ii) any legally binding announcement, directive or published practice or interpretation thereof, including but not limited to, ERCOT Guides, enacted, issued or promulgated by any Governmental Authority having jurisdiction over this Contract, the Facilities, and the delivery of Energy pursuant to this Contract. "Martin Lake Facility" means Unit 1, Unit 2, and Unit 3 of the Martin Lake generating station located in Rusk County, Texas, with an approximate cumulative Net Rated Capacity of 2,345 megawatts as of the Effective Date of the PPA. "Member Contract Energy Allocation" shall equal the product of the Member's Energy Allocation Percentage and the Contract Energy during each Delivery Month of the Delivery Period. "Member's Monthly Aggregated Energy Payment" has the meaning set forth in Section 6.1(a). "Member's Energy Allocation Percentage" is %, being calculated by multiplying 100 by a fraction, the numerator of which is Member estimated energy required during the Base Year, and the denominator of which is the estimated total energy requirement of all Participating Members during the Base Year. "Member's Delivery Points" shall be all ESI-IDs accounts that Member has for receipt of energy to the revenue meters of such Member that are metered and the light fixtures for street/outdoor lights or other accounts of such Member that are not metered. "Member's Unique Delivery Costs" shall have the meaning set forth in Section 6.1(b) hereof. "Monthly Capacity Payment" shall have the meaning set forth in Article 7 below. "Monthly Energy Payment" means the product of the Monthly Energy Price times Member's Energy Allocation Percentage times the megawatt hours delivered to CAPP by the Facility Owners during the Delivery Month. "Monthly Energy Price" means the price per megawatt hour as set forth in the PPA. "MW" means megawatt. "MWh" means megawatt hour. "New Governmental Charges" means (i) any Governmental Charges enacted and effective after the Effective Date, including without limitation, that portion of any Governmental Charges or New Governmental Charges that constitutes an increase or that cause the Facility or Facilities to incur additional or new expenses less Governmental Charges enacted or imposed prior to the Effective Date that are replaced by the New Governmental Charge and that become payable by CAPP under the PPA, (ii) any Law or interpretation thereof, enacted and effective after the Effective Date resulting in a new or additional expense to the Facility or the Facilities or the application of any Governmental Charges to a new or different class of parties and that become payable by CAPP under the PPA. "Oak Grove Facility" means, when the first commercial operation date is reached, Oak Grove Unit 1 and Oak Grove Unit 2 of the lignite coal- fired power generation facility known as the Oak Grove Generating Station located in Robertson County, Texas. "Ordered Backdown" has the meaning set forth in Section 5.2 of the PPA. "Participant Contracts" means those individual contracts between CAPP and a Participating Member under which such Participating Member is acquiring a portion of the Contract Energy that CAPP is acquiring for the benefit of all 9 Members under the PPA. Such term has the same meaning as the term "Member Output Contract" in the PPA. This Contract is one of the Participant Contracts. "Participating Members" shall mean those members of CAPP that enter into contracts with CAPP for the procurement of electric energy from the Facilities. A list of Participating Members is attached to this Contract as Exhibit "A" and incorporated by this reference herein for all purposes. Member is one of the Participating Members. "Person" means a natural person, corporation, electric cooperative, partnership, trust, association, joint venture, real estate investment trust or business trust (including any beneficiary thereof), unincorporated association, Governmental Authority, and any other form of business or legal entity. "Planned Outage" has the meaning set forth in Section 6.1 of the PPA. "PPA" shall mean that certain Power Purchase Agreement between CAPP and the Facility Owners, a copy of which is attached hereto as Exhibit "B" and incorporated by this reference herein for all purposes. "Product" or "Products" means Contract Capacity, Contract Energy and Alternate Energy, if any, received by CAPP from the Facility Owners under the PPA. "QSE" means the entity which is responsible for performing the responsibilities defined for a Qualified Scheduling Entity under the ERCOT Guides, or their successor in function. "Regulatory Authorities" has the meaning found in the Utilities Code Vernon's Texas Codes Annotated. "REP" means Retail Electric Provider, as defined in ERCOT Protocols. "REP Services" shall mean all services that a REP provides that are associated with the provision of electric service to a retail customer by a REP in ERCOT. "Replacement Price" has the meaning in the PPA. "Resale Price" has the meaning in the PPA. "Service Commencement Date" has the meaning set forth in Section 3.2 hereof and shall be one minute before 12:01 a.m. CPT on January 1, 2009. "Settlement Interval" has the meaning as set forth in the ERCOT Guides. "Term" has the meaning set forth in Section 3.1 hereof. 10 "Transmission Losses" means losses associated with the transmission of Energy under this Contract and under the PPA from resources used by (a) the Facility Owners to the Delivery Points for the respective Facility Owners, and (b) the Designated Agent(s) from the Facility Owners' Delivery Point to Member's Delivery Points as determined in accordance with the ERCOT Guides. "Transmission Service Provider" has the meaning found in the Utilities Code. "Trustee" means the trustee related to the Bonds pursuant to an indenture of trust with CAPP. "Unit" means each of the generating units at the Big Brown Facility, the Oak Grove Facility and the Martin Lake Facility that are then the subject of the PPA. "Unit Contingent Energy" means the Contract Energy supplied to CAPP for delivery to Participating Members from the Facilities under the terms of the PPA, for which non -delivery is excused if. (i) a Facility is unavailable as a result of a Forced Outage or a Planned Outage; (ii) CAPP fails to perform any of its obligations under the PPA; or (iii) an event of Force Majeure prevents delivery of such Energy to CAPP. "Wrap Contract" means any energy service contract executed by CAPP on behalf of Participating Members for electrical service requirements in addition to the PPA and other associated and ancillary services necessary to fulfill the full requirements for each of the Members electric power needs. 1.2 Principles of Interpretation. Unless the context requires otherwise, any reference in this Contract to any document means such document and all schedules, exhibits, and attachments thereto as amended and in effect from time to time. Unless otherwise stated, any reference in this Contract to any Person or Party includes its permitted successors and assigns and, in the case of any Governmental Authority, any Person succeeding to its functions and capacities. The words "hereof', "herein" and "hereunder" and words of similar import when used in this Contract, unless otherwise expressly specified, refers to this Contract as a whole and not to any particular provision of this Contract. The singular includes the plural, and the masculine includes the feminine and neuter genders. Whenever the term "including" is used herein in connection with a listing of items included within a prior reference, such listing shall be interpreted to be illustrative only, and shall not be interpreted as a limitation on or exclusive listing of the items included within the prior reference. The language used in this Contract is deemed to be the language chosen by the Parties to express their mutual intent, and no rule of strict construction shall be applied against any Party. All times set forth in this Contract shall be construed to be CPT. ARTICLE 2 CAPP'S OBLIGATIONS CONTINGENT UPON PERFORMANCE BY FACILITY OWNERS UNDER THE PPA; ASSUMPTION BY MEMBER 2.1 Nature of CAPP's obligations to Member. Member agrees and understands that CAPP has entered or shall enter the PPA on behalf of Member and all Participant Members for the purpose of achieving the benefits set forth in the Recitals, above, including contracting for less than market prices for energy. Member understands that CAPP is not a power provider or power deliverer. Member agrees and understands that CAPP's obligation to perform its covenants under this Contract is absolutely contingent upon the performance of obligations of the Facility Owners and Guarantor to CAPP under the PPA, including, but not limited to, timely delivery of the Products in the quantities required under the PPA. 2.2 CAPP's duty to exercise remedies under the PPA and Guaranty; power coupled with an interest. In the event that the Facility Owners, without an excuse or right permitted under the PPA, fail to deliver the Products and/or fail to perform their obligations to CAPP as required under the PPA and Guaranty, then CAPP, on behalf of itself, Member, and the Participating Members, may exercise one or more of the remedies available to it under the PPA, the Guaranty, or both, as the Board of Directors of CAPP shall determine in its sole judgment and discretion. To the fullest extent necessary, Member hereby irrevocably appoints CAPP as its agent and attorney -in -fact to exercise such of the remedies available to CAPP under the PPA, that CAPP, in the sole judgment and discretion of its Board of Directors, believes to be the best interests of the Parties and Participating Members. Member agrees and understands that the power granted by it to CAPP in this Section 2.2 is and shall be construed to be a power coupled with an interest that cannot be revoked during the Term of this Contract. It is further agreed and understood that Member's obligation to pay the sums set forth in Article 6 and Article 7 on the dates set forth in Article 8, below, shall not be excused, offset, or mitigated on account of a default by Facility Owners under the PPA or by the failure of Facility Owners to deliver the Products. 2.3 Assumption of PPA by Member. Member agrees and understands that CAPP has entered or will enter into the PPA for the benefit of Member and Participating Members to the extent of their respective Member's Energy Allocation Percentages. For the consideration set forth in this Contract, Member assumes CAPP's obligations under the PPA, to the extent of Member's Energy Allocation Percentage, provided, however, that such rights and obligations shall be exercised on Member's behalf as the Board of Directors of CAPP shall determine in its sole and absolute discretion. 12 ARTICLE 3 TERM OF CONTRACT AND DELIVERY OF PRODUCTS 3.1 Term. The term ("Term") of this Contract shall commence on the Effective Date, and shall continue until the later of (a) January 1, 2033 at 12:00:00 a.m., or (b) the date that the Bonds have been repaid in full and all covenants required to be performed and all interest and costs required to be paid by CAPP under the Bonds have been performed and paid in full by CAPP. 3.2 Delivery of Products. A Member's Contract Energy Allocation of the Products shall be provided by CAPP to Member as set forth herein at 12:00:00 a.m. CPT on January 1, 2009 (the "Service Commencement Date") provided that the Products are then commenced to be delivered by Facility Owners to CAPP under the PPA. Thereafter, the Products shall be received by CAPP or its Designated Agent(s) for the benefit of and as agent for Member as the Products are delivered by Facility Owners under the PPA until the earlier of. (a) one second following 11:59:59 p.m. CPT on December 31, 2032, (b) the date that the PPA is terminated in accordance with its terms, or (c) the date that this Contract is terminated in accordance with its terms ("Delivery Period"). In the event that the Facility Owners fail to deliver all of the Products they are required to deliver under the PPA, Member shall be entitled to receive only Member's Energy Allocation Percentage of the Products actually delivered to and received by CAPP, net of Transmission Losses ARTICLE 4 PAYMENT OF CAPACITY PREPAYMENT TO FACILITY OWNERS Provided that the PPA has not been terminated by CAPP or by the Facility Owners prior to the Service Commencement Date pursuant to Article 11 of the PPA, CAPP shall pay or cause the Capacity Prepayment to be paid to Facility Owners on or before the date described in said Section 4.1(b) of the PPA. CAPP and Member stipulate and agree that the Capacity Prepayment shall be paid to the Facility Owners as required by the PPA, in whole or in part, from the proceeds of the Bonds, interest earned while such Bond proceeds are escrowed, and, as CAPP may elect, funds paid to CAPP by Member and Participating Members. ARTICLE 5 DELIVERY OF CONTRACT ENERGY 5.1 Acquisition and Delivery of Product. Upon the Service Commencement Date, CAPP shall require (i) Facility Owners to provide and deliver the Contract Energy described in the PPA to the Designated Agent(s) at the Facility Owners' Delivery Point, and (ii) the Designated Agent(s) to deliver Energy to Member at the Member's Delivery Points, in both cases from Products generated from the Facilities or acquired by the 13 Facility Owners for delivery under the PPA as Alternate Energy pursuant to Section 5.3 of the PPA. 5.2 Title and Risk of Loss. Risk of loss of the Energy provided in accordance with this Contract shall transfer to CAPP as agent for Member and Participating Members at the Facility Owners' Delivery Points. Title to the Energy (subject to loss) shall be held by CAPP as agent for Member and Participating Members between the Facility Owners' Delivery Points and Member's Delivery Points. 5.3 Member's Failure to Accept Product. If Member fails to accept all or part of the Product under this Contract and such failure is not excused under the terms of this Contract or by failure of the Facility Owners to deliver same under the PPA, then Member shall pay to CAPP or to the Designated Agent(s) from time -to -time designated by CAPP, on the date payment would otherwise be due with respect to the month in which the failure occurred, an amount for each MWh of such deficiency equal to the positive difference, if any, obtained by subtracting the Resale Price from the Contract Price. The invoice for such amount shall include reasonable detail as to the calculation of such amount. 5.4 Failure of Facility Owners to Schedule or Deliver Product to CAPP. If one or more of the Facility Owners fail to schedule and/or deliver all or part of the Product as required by it under the PPA, and such failure is not excused under the terms of the PPA or by CAPP's failure to perform, then CAPP or the then -designated Designated Agent(s) shall, on behalf of all Participating Members, at the expense of and in the proportion of their respective Member's Energy Allocation Percentages, seek to collect sums from the Facility Owners that are recoverable pursuant to Section 3.4 of the PPA; provided, however, that any obligation by CAPP or by the Designated Agent(s), as the case may be, to pay Member in such event is limited to the amount that CAPP or the Designated Agent(s) actually collect from the Facility Owners and the Guarantor, net of costs of collection. For the avoidance of doubt, CAPP shall not be required to pay damages under this Section 5.4 when the failure to schedule and/or deliver is excused under the definition of Unit Contingent Energy. ARTICLE 6 PRICING OF AND PAYMENT FOR ENERGY 6.1 Payment of Member's Monthly Aggregated Energy Payment. In consideration for the Energy received by it under this Contract, Member shall pay Member's Monthly Aggregated Energy Payment to CAPP, or to the Designated Agent(s), as the case may be, on or before the dates for payment set forth in Article 8, below, and calculated as follows: 14 (a) Calculation of Member's Monthly Energy Payment. Commencing on the Service Commencement Date, and continuing during each Delivery Month during the Term, but subject to annual appropriation therefore by Member during such Member's Fiscal Year, Member shall pay to CAPP, or to the Designated Agent(s) from time -to -time designated by it, the Member's Monthly Energy Payment, as computed monthly pursuant to the provisions of this Section 6.1(a). The Member's Monthly Energy Payment shall be the sum of (i) the Energy Component of Member's Energy Payment and (ii) the Aggregated Expenses Component of Member's Energy Payment, both determined as follows: (i) Energy Component of Member's Monthly Energy Payment. The price of Energy deliverable to CAPP under the PPA at the Facility Owners' respective Delivery Points during the Delivery Month as provided in the PPA is set forth in the schedule attached hereto as Exhibit "D" and incorporated herein by reference herein for all purposes. The Parties recognize that the PPA calls for the Contract Energy to be delivered to CAPP at the Facility Owners' respective Delivery Points at which points the Energy Payment is measured and calculated pursuant to Section 4.1(a) of the PPA. The Wrap Contracts shall provide that the cost of energy delivered to Member will be measured at Member's Delivery Points. The price of energy deliverable to CAPP under the Wrap Contracts shall be at a price determined by negotiations at that time. Member recognizes that the Energy Component in the monthly invoices will reflect a blended rate per MWh taking into account the Energy provided to all Participating Members under all energy procurement contracts and shall include (1) the cost of Contract Energy; (2) ancillary services under Section 3.5 of the PPA; (3) the cost of engaging a QSE under Section 7.1 of the PPA or under any Wrap Contracts; (4) the cost of engaging a REP under the PPA or under any Wrap Contracts; (5) the cost of delivering the Contract Energy to the Delivery Points of all Participating Members from the Facility Owners' respective Delivery Points; and (6) the cost of energy and other expenses associated with one or more Wrap Contract. The Energy Component of Member's Monthly Energy Payment shall be computed as the product of such blended rate and the total Energy delivered to Member's Points of Delivery during the billing month. (ii) Aggregated Expenses Component of Member's Monthly Energy Payment. The total Aggregated Expenses for each Delivery Month shall be allocated and apportioned between Member and each of the other Participating Members based upon each Member's Energy Allocation Percentage. The total amount so allocated to Member shall be billed to Member on a monthly basis by CAPP or its Designated Agent(s) as they shall determine appropriate. 15 (b) Member's Unique Delivery Costs. The Parties further recognize that Member and each of the Participating Members require delivery of the Energy by the Designated Agent(s) from the Facility Owners Delivery Point to their respective Member's Delivery Points, the cost of which may vary between Participating Members based on a number of factors, including, but not limited to, distance from the Facility Owners Point of Delivery, differing zones into which Energy shall be delivered, different tariffs that may change from time to time as ordered by Regulatory Authorities, loss of Energy during transmission, and differing contractual arrangements that must be made to effect the delivery of Energy to the required points of delivery. In this connection, CAPP shall, as agent for Participating Members (including Member) (i) enter into one or more contracts with Designated Agent(s) for delivery of the Products to all Participating Members from the Facility Owners Delivery Point to each of their respective Member's Delivery Points, and (ii) require the Designated Agent(s) to separately account to and bill each Participating Member for the unique costs that are associated with delivery of the Energy from the Facility Owners Point of Delivery. Commencing on the Service Commencement Date, and continuing during each Delivery Month during the Term, but subject to annual appropriation therefore by Member during such Member's Fiscal Year, Member shall pay to CAPP or to the Designated Agent(s) from time -to -time designated by it the Member's Unique Delivery Costs. The Member's Unique Delivery Costs shall be due and payable at the same time that the Member's Aggregated Monthly Energy Payment is due. (c) Governmental Charges and New Governmental Charges. Member shall pay or cause to be paid all Governmental Charges on or with respect to the Product at and from the Facility Owners' Delivery Points. In the event CAPP and/or the Designated Agent(s) are required by Law to remit or pay Governmental Charges which are Member's responsibility hereunder, or in the event that CAPP must remit or pay to Facility Owners for Governmental Charges that it may pass through to CAPP for reimbursement under the PPA, CAPP shall notify Member of the amount of Governmental Charges owed, whether such payment is to Facility Owners or to the governmental entities that made such Governmental Charges, on Member's behalf. Such notice shall be provided in a commercially practicable manner and may be provided by a Designated Agent. Notwithstanding any other provision of this Contract to the contrary, if a New Governmental Charge (as defined in the PPA) is passed through to CAPP for reimbursement, including but not limited to New Governmental Charges imposed on all coal and lignite generating facilities in ERCOT, including the Product, and CAPP's share of any such New Governmental Charge is greater than the Materiality Threshold set forth in the PPA (after taking into account the application of any entitlements and the extent of old charges that are replaced by the New Governmental Charge), such charges shall be treated as though they were incurred by CAPP for the benefit of all Participating Members (including Member). All Governmental Charges and New Governmental Charges shall be apportioned between Member and the Participating Members as an energy charge reflected on monthly bills from a Designated Agent. If, as, and when CAPP pays Governmental Charges and New Governmental Charges, it shall be deemed to have paid same on behalf of Member and all Participating Members in the proportion stated immediately above, and Member shall pay CAPP and/or the Designated Agent(s) 16 its proportionate share, subject, however, to Appropriation by Member during Member's Fiscal Year. The obligation to pay such Governmental Charges and New Governmental Charges shall continue until such time as reimbursement of Facility Owners therefore are no longer required by the PPA. (d) Adjustments. Section 4.2 of the PPA provides for monthly adjustments if the Equivalent Availability Factor for such month is greater or less than 90%. It is the intention of the Parties to this Contract that (i) such credits and supplemental payments shall be allocated and passed through to Member and each of the other Participating Members, on a pro rata basis, in the month payable or credited against the Energy Payment based on an energy basis and (ii) the Designated Agent responsible for billing shall net the adjustments under Section 4.2 of the PPA against other amounts owed. It is understood that Member's obligation to pay any adjustments under this Section 6.1(d), as part of an Energy Payment or Payments, is subject to appropriation by Member during Member's Fiscal Year. (e) Other Adjustments. In the event that inequities arise between Participating Members or between Member and Participating Members in energy based allocation of credits and supplemental charges under this or other energy contracts, the Board of Directors of CAPP, in its sole discretion, may direct further adjustments as necessary to preserve the integrity of the allocation process and relative economic position of Member and Participating Members; provided, however, no adjustments shall affect the obligation to make Capacity Payments under Article 7 of this Contract. 6.2 Payments through Retail Electric Provider and Designated Agent(s). CAPP reserves the right to bill and invoice Member and Participating Members for the Contract Price, collect sums due by Member and Participating Members under Article 6, pay sums to Facility Owners that CAPP is required to pay pursuant to the terms of the PPA, collect payments and credits due to CAPP by the Facility Owners, and allocate and distribute credits and payments received from Facility Owners and third parties to Member and Participating Members as their respective interests appear through a REP or through Designated Agent(s). Notwithstanding the foregoing, it is expressly agreed and understood that (a) the Capacity Payments required to be paid by Member pursuant to Section 7, below, must be paid by Member directly to CAPP or the Trustee, and (b) payments received by CAPP or by Member from the Facility Owners, Guarantor, or any of same as a result of Early Termination of the PPA as defined in and calculated under Article 12 of the PPA must be paid by the recipient of such payments directly to CAPP or the Trustee for application to the Bonds. 6.3 Payments from Available Funds. Notwithstanding any provision herein to the contrary, the obligations of Member under this Contract to make Energy Payments shall be payable solely from the Available Funds received in each Fiscal Year during the Term of this Contract. The obligation of the Member to make any Energy Payments pursuant to this Contract shall constitute a current expense of Member during each Fiscal Year and shall not constitute an indebtedness of Member within the meaning of the laws of the 17 State of Texas. Nothing in this Contract shall constitute a pledge by the Member of any taxes or other money, other than such funds so Appropriated and received in each Fiscal Year during the Term of this Contract and constituting Available Funds, to the payment of any Energy Payment due or to become due hereunder. 6.4 Intent to Continue Payments. Member presently intends to continue this Contract for the entire Term and to pay all Energy Payments required hereunder. Member presently intends to Appropriate, from lawfully Available Funds received in each Fiscal Year, money sufficient to pay the Energy Payments required hereunder. However, Member has no obligation to, and makes no representation that it will, Appropriate or seek to Appropriate in any Fiscal Year Available Funds for the payment of Energy Payments due pursuant to this Contract. 6.5 Failure to Appropriate Available Funds. If, for any Fiscal Year of the Member, the Member does not Appropriate Available Funds received during such Fiscal Year to pay the Energy Payments required under this Contract due and payable by Member during the succeeding Fiscal Year, and if the Member provides CAPP with written notice of such failure to Appropriate thirty (30) days prior to the expiration of Member's then -current Fiscal Year, the obligation to take electric Energy from CAPP under this Contract and make Energy Payments for such electric energy shall terminate and be canceled at the end of such current Fiscal Year for the period of the next Fiscal Year for which the Member has failed to Appropriate Available Funds. The written notice shall be accompanied by a statement as to whether or not Member has made an assignment to another Participating Member under Section 6.6 hereof. The Member may Appropriate Available Funds for any subsequent Fiscal Year for Energy Payments due during such subsequent Fiscal Year and then shall be entitled to receive electric Energy from CAPP under this Contract for such Fiscal Year. 6.6 Assignment Upon Failure to Appropriate. For any Fiscal Year which the Member has failed to Appropriate for Energy Payments (or portion thereof), the Member may assign to another Participating Member all or a portion of such non -appropriating Member's right to receive electric energy for such Fiscal Year provided the Participating Member certifies to CAPP that the assigned electric energy will be utilized by such Participating Member for its buildings and facilities, in compliance with the Local Government Code Chapter 304. The Energy Payments associated to such assigned right to such electric energy shall be calculated according to the terms of this Contract (assuming the Member was receiving such electric energy). At such time the Member provides written notice of its failure to Appropriate for Energy Payments for any Fiscal Year, the Member may also give written notice to CAPP of its assignment of all or a portion of its right to receive electric energy under this Contract, including a written agreement between the Member and the Participating Member reflecting the terms and conditions of such assignment. Prior to the beginning of the relevant Fiscal Year, the assuming Participating Member must provide CAPP written notice of (i) its Appropriation for the Energy Payments associated with the assumed electric energy for the period of the non -appropriating member's Fiscal Year which such non -appropriation is applicable (or portion thereof), (ii) certification that such assumed electric energy will 18 be utilized by such Participating Member for its buildings and facilities, in compliance with the Local Government Code Chapter 304 and (iii) a valid and binding assignment agreement between the Member and the Participating Member. If the Member failing to appropriate for Energy Payments does not assign the Energy to another Participating Member within 30 days following the failure to Appropriate, Member shall assign the Energy to CAPP, and CAPP shall have the right to assign to a Participating Member, or to otherwise dispose of the Energy in a commercially practicable manner. 6.7 Appropriated Energy Payments to be Unconditional. Except as provided herein, including Section 6.3 hereof, the obligation of Member to make Energy Payments each Fiscal Year from funds that have been appropriated for such purpose when due shall be absolute and unconditional. Notwithstanding any dispute between Member and CAPP or any other Participating Member or person, the Member shall make all Energy Payments required hereunder when due and shall not withhold any such payments pending final resolution of such dispute, nor shall Member assert any right of set-off or counterclaim against its obligation to make such payments required under this Contract. Member's obligation to make Energy Payments during the Term shall not be abated because of accident or unforeseen circumstances. However, nothing herein shall be construed to release CAPP from the performance of its obligations hereunder; if CAPP should fail to perform any such obligation, Member may institute such legal action against CAPP as Member may deem necessary to compel the performance of such obligation. Notwithstanding anything to the contrary above, Member's obligation to pay Energy Payments shall not require it to pay Energy Payments from any source other than Available Funds specifically appropriated by Member for payment of the Energy Payments. 6.8 CAPP as Third Party Beneficiary. Member acknowledges that CAPP is an intended third party beneficiary of all Appropriations made by Member for sums described in this Article 6. As part of the consideration for this Contract, Member grants to CAPP and to any Designated Agent(s) appointed by CAPP all rights to enforce, by a mandamus action against Member and its governing body, such provisions for each Fiscal Year of Member for which there has been an Appropriation as contemplated in this Article. 6.9 Member's Default of the Energy Payment Covenants and CAPP's Remedies. (a) Events of Default. Each of the following occurrences or events for the purpose of this Contract is hereby declared to be a Default: (i) The failure to make payment of the Energy Payment when the same becomes due and payable; or (ii) Default in the performance or observance of any other covenant, agreement or obligation of the Member, the failure to perform which materially, adversely affects CAPP, including, but not limited to, its 19 prospect or ability to be repaid in accordance with this Contract, and the continuation thereof for a period of 30 days after notice of such default is given by CAPP or Trustee to the Member. (b) Remedies for Default. (i) Upon the occurrence of a Default, then and in every case, CAPP or an authorized representative thereof may proceed against the Member, or any official, officer or employee of the Member in their official capacity, for the purpose of protecting and enforcing the rights of CAPP under this Contract, by mandamus or other suit, action or special proceeding in equity or at law, in any court of competent jurisdiction, for any relief permitted by law, including the specific performance of any covenant or agreement contained herein, or thereby to enjoin any act or thing that may be unlawful or in violation of any right of CAPP hereunder or any combination of such remedies. (ii) It is provided that all such proceedings shall be instituted and maintained for the benefit of CAPP. (c) Remedies Not Exclusive. (i) No remedy herein conferred or reserved is intended to be exclusive of any other available remedy or remedies, but each and every such remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing at law or in equity; provided, however, that notwithstanding any other provision of this Contract, the right to accelerate the Energy Payments shall not be available as a remedy under this Contract. (ii) The exercise of any remedy herein conferred or reserved shall not be deemed a waiver of any other available remedy. The failure to exercise a remedy upon a Default shall not be deemed to be a waiver of the right to exercise such remedy in the future. (iii) By accepting the delivery of Energy Payment authorized under this Contract, CAPP agrees that the certifications required to effectuate any covenants or representations contained in this Contract do not and shall never constitute or give rise to a personal or pecuniary liability or charge against the officers, employees or trustees of the Member. (iv) No official or officer, agent, or employee of the Member, shall be charged personally by CAPP or the Trustee with any liability, or be held personally liable under any term or provision of this Contract, or because of a Default or Default under this Contract. 20 ARTICLE 7 CAPACITY PREPAYMENT, MEMBER'S MONTHLY CAPACITY PAYMENT AND PLEDGE OF AD VALOREM TAXES BY MEMBER 7.1 Capacity Prepayment. In order to procure Energy at favorable rates produced in the Facilities by the Facility Owners under the PPA, CAPP, at the request of Member and the other Participating Members, shall (i) prepay to Facility Owners the sum of $465,000,000.00 (the "Capacity Prepayment's from the proceeds of the Bonds (ii) establish a reserve fund under the Bonds as may be required for issuance of the Bonds, and (iii) pay costs and charges associated with issuance of the Bonds, including legal fees, accounting fees, and consultant's fees engaged by the bond issuer, bond counsel, and CAPP. The Capacity Prepayment shall be paid to Facility Owners as provided in Section 4.1 hereof and as provided in Section 4.1(b) of the PPA. Once the actual amount of the Bonds and the interest rate established thereunder are known, this Contract shall be amended by CAPP and Member to reflect such facts, and to stipulate the amount of Member's Monthly Capacity Payment. It is the intention of the Parties that CAPP shall receive from Member and each Participating Member through the Monthly Capacity Payment set forth in Section 7.2(a), based upon the Member's Energy Allocation Percentage of each, the amount sufficient to pay: (i) CAPP's costs to issue the Bonds, (ii) the principal and redemption premium, if any, of and interest on the Bonds, (iii) trustee and other administrative fees, and (iv) other costs associated therewith. 7.2 Capacity Payment. (a) Member shall pay CAPP, its Designated Agent or the Trustee, as CAPP shall direct, upon the assignment of all or a portion of this Contract by CAPP to such trustee, a Monthly Capacity Payment for each Delivery Month throughout the remainder of the Term, or until such earlier date as such Monthly Capacity Payments have been prepaid or otherwise fully defeased as provided in Section 7.4 hereof, in an amount equal to the amount shown in Exhibit "E" times the Member Energy Allocation Percentage. (b) It is hereby certified and covenanted that the contractual obligation to make the Monthly Capacity Payments when due, as described in subsection (a) above, has been duly and validly authorized and delivered; that all acts, conditions and things required or proper to be performed, exist and be done precedent to or in the authorization and delivery of this Contract have been performed, existed and been done in accordance with law; that the contractual obligation to make the Monthly Capacity Payments herein is a limited tax obligation of Member; and that annual ad valorem taxes, within the limits prescribed by law, sufficient to provide for the payment of the Monthly Capacity Payments, as such payments come due, have been levied and ordered to be levied against all taxable property in Member, and have been pledged from Member's annual ad valorem maintenance tax for such payment, within the limit prescribed by law. 21 (c) It is understood and agreed that all Monthly Capacity Payments payable by the Member under this Article 7 are assigned by CAPP to the Trustee for the benefit of the Owners of the Bonds. The Member assents to such assignment. 7.3 Interest and Sinking Fund; Tax Levy for Monthly Capacity Payments. The Interest and Sinking Fund shall be kept separate and apart from all other funds and accounts of Member, and shall be used only for paying the Monthly Capacity Payments when due. All ad valorem taxes levied and collected for and on account of the Monthly Capacity Payments shall be deposited, as collected, to the credit of the Interest and Sinking Fund. During each Fiscal Year while a Monthly Capacity Payment is outstanding and unpaid, the governing body of the Member shall compute and ascertain a rate and amount of ad valorem tax which together with any other lawfully available funds that are on deposit in the Interest and Sinking Fund at the time of such levy will be sufficient to provide and maintain a sinking fund adequate to pay the Monthly Capacity Payments as such payments become due (but never less than 2% of the original aggregate amount of the Monthly Capacity Payments as a sinking fund each year); and said tax shall be based on the latest approved tax rolls of the Member, with full allowance being made for tax delinquencies and the cost of tax collection. Said rate and amount of ad valorem tax is hereby levied and is hereby ordered to be levied, against all taxable property in the Member for each year while any of the Monthly Capacity Payments are outstanding and unpaid; and said tax shall be assessed and collected each such year and deposited to the credit of the aforesaid Interest and Sinking Fund. Said ad valorem taxes to be sufficient to provide for the payment of the Monthly Capacity Payments, as such payments come due, are hereby pledged for such payment, within the limit prescribed by law. 7.4 Prepayments based upon Early Termination under the PPA. In the event that CAPP shall receive a Buyer Termination Payment under Article 12 of the PPA, such amount shall be assigned and paid to the Trustee for payment on the Bonds with such payment to be applied to a prorata redemption of all outstanding maturities of such Bonds. Such prorata redemption on the Bonds shall similarly be applied prorata to reduce Member's Monthly Capacity Payments and the Monthly Capacity payments of other Participating Members. If any balance of the Bonds remains unpaid after application of the Buyer Termination Payment, then notwithstanding the obligation to pay the Monthly Capacity Payment under Section 7.2 above, Member shall pay Member's Energy Allocation Percentage of such balance within thirty (30) days following receipt of notice from CAPP. 7.5 CAPP and Trustee as Third Party Beneficiaries. Member acknowledges that CAPP and Trustee are intended third party beneficiaries of the obligation to pay Monthly Capacity Payments and to make provision for payment from ad valorem tax revenues. As part of the consideration for this Contract, Member grants to CAPP and to Trustee all rights to enforce, by a mandamus action against Member and its governing body, the provisions and obligations of this Article 7. 22 7.6 Monthly Capacity Payments to be Unconditional. Except as provided herein, including Section 6.3 hereof, the obligation of Member to make Monthly Capacity Payments when due shall be absolute and unconditional. Notwithstanding any dispute between Member and CAPP or any other Participating Member or person, the Member shall make all Monthly Capacity Payments required hereunder when due and shall not withhold any such payments pending final resolution of such dispute, nor shall Member assert any right of set-off or counterclaim against its obligation to make such payments required under this Contract. Member's obligation to make Monthly Capacity Payments during the Term shall not be abated because of accident or unforeseen circumstances. However, nothing herein shall be construed to release CAPP from the performance of its obligations hereunder; if CAPP should fail to perform any such obligation, Member may institute such legal action against CAPP as Member may deem necessary to compel the performance of such obligation. 7.7 Member's Default on Capacity Prepayment and CAPP's Remedies. (a) Events of Default. Each of the following occurrences or events for the purpose of this Contract is hereby declared to be a Default: (i) The failure to make payment of the Capacity Prepayment when the same becomes due and payable; or (ii) Default in the performance or observance of any other covenant, agreement or obligation of the Member, the failure to perform which adversely affects CAPP, including, but not limited to, its prospect or ability to be repaid in accordance with this Contract, and the continuation thereof for a period of 30 days after notice of such default is given by CAPP or Trustee to the Member. (b) Remedies for Default. (i) Upon the happening of a Default, then and in every case, CAPP or an authorized representative thereof, including, but not limited to, the Trustee, may proceed against the Member, or any official, officer or employee of the Member in their official capacity, for the purpose of protecting and enforcing the rights of CAPP under this Contract, by mandamus or other suit, action or special proceeding in equity or at law, in any court of competent jurisdiction, for any relief permitted by law, including the specific performance of any covenant or agreement contained herein, or thereby to enjoin any act or thing that may be unlawful or in violation of any right of CAPP hereunder or any combination of such remedies. (ii) It is provided that all such proceedings shall be instituted and maintained for the benefit of CAPP and/or owners of the Bonds. 23 (c) Remedies Not Exclusive. (i) No remedy herein conferred or reserved is intended to be exclusive of any other available remedy or remedies, but each and every such remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing at law or in equity; provided, however, that notwithstanding any other provision of this Contract, the right to accelerate the PPA Capacity Payments shall not be available as a remedy under this Contract. (ii) The exercise of any remedy herein conferred or reserved shall not be deemed a waiver of any other available remedy. The failure to exercise a remedy upon a Default shall not be deemed to be a waiver of the right to exercise such remedy in the future. (iii) By accepting the delivery of the Capacity Prepayment authorized under this Contract, CAPP agrees that the certifications required to effectuate any covenants or representations contained in this Contract do not and shall never constitute or give rise to a personal or pecuniary liability or charge against the officers, employees or trustees of the Member. (iv) No official or officer, agent, or employee of the Member, shall be charged personally by CAPP or the Trustee with any liability, or be held personally liable under any term or provision of this Contract, or because of a Default or Default under this Contract. ARTICLE 8 BILLING AND PAYMENT 8.1 Invoice and Payment Schedules. CAPP shall cause the Designated Agent(s) to submit invoices to Member for the Contract Price. All such invoices under this Contract shall be due and payable in accordance with the invoice instructions of the Designated Agent(s) consistent with ERCOT protocols, Rules of the Public Utility Commission of Texas, and contractual agreements between CAPP and Designated Agents. CAPP will cause the Designated Agent(s) to render to Member a separate invoice for the Contract Price for each ESI-ID on a billing month basis. All Monthly Capacity Payment invoices under this Contract pursuant to Article 7, shall be separately due and payable directly to CAPP or the Trustee in accordance with the invoice instructions of CAPP, Trustee or Designated Agent. 8.2 Method of Payment. Each Party will make payments by electronic funds transfer, or by other mutually agreeable method(s), to the account designated by the other Party. Any amounts not paid by the due date will be deemed delinquent and will accrue 24 interest at the Interest Rate, such interest to be calculated from and including the due date, but excluding the date the delinquent amount is paid in full. Because certain charges are aggregated between Member and Participating Members, Member understands that a failure to timely pay an invoice may result in additional costs, interest charges, and damages that CAPP may be required to pay to Facility Owners under the PPA and that are disproportionate to the default by Member. Member agrees, in the event of its default, to reimburse CAPP for all costs, interest charges, and damages that it may be required to pay to Facility Owners that result from Member's default under this Contract. Except for Capacity Payments that are required to be paid by Member directly to CAPP or the Trustee, CAPP may require Member to pay all or any of the payments required to be paid by Member under this Contract to Designated Agent(s) appointed by CAPP. 8.3 Netting. Member understands that CAPP and Facility Owners have agreed to discharge mutual debts and payment obligations due and owing to each other on the same payment due date pursuant to the PPA through netting, so that only the excess amount remaining due shall be paid by the Party who owes such excess amount. All payment obligations of the Parties and all rights to receive payment under this Contract are subject to the netting provisions contained in the PPA. Additionally, it is understood that Designated Agents may net credits and supplemental payments in monthly invoices of the Contract Price. 8.4 Disputed Charges. A Party may, in good faith, dispute the correctness of any invoice or any adjustment to an invoice, rendered under this Contract or adjust any invoice for any arithmetic or computational error within twenty-three (23) months of the date the invoice, or adjustment to an invoice, was rendered, except when a dispute is limited by ERCOT protocols, Rules of the Public Utility Commission or contracts between CAPP and Designated Agents. In the event an invoice or portion thereof, or any other claim or adjustment arising hereunder, is disputed, payment of the undisputed portion of the invoice shall be required to be made when due, with notice of the objection given to the other Party. Any invoice dispute or invoice adjustment shall be in writing and shall state the basis for the dispute or adjustment. Payment of the disputed amount shall not be required until the dispute is resolved unless CAPP is required to pay the disputed amount to Facility Owners under the PPA. Upon resolution of the dispute, any required payment shall be made within five (5) Business Days of such resolution (along with interest accrued, if any, on account thereof under the PPA). Inadvertent overpayments shall be returned upon request or deducted by the Party receiving such overpayment from subsequent payments, with interest accrued only to the extent it accrues under the PPA. Any dispute with respect to an invoice is waived unless the other Party is notified in accordance with this Section 8.4 within twenty-three (23) months or shorter period if required by ERCOT protocols, Rules of the Public Utility Commission or contracts between CAPP and Designated Agents after the invoice is rendered or any specific adjustment to the invoice is made. 25 8.5 Audits. Each Party has the right, at its sole expense and during normal working hours, to examine copies of the relevant portions of the records of the other Party to the extent reasonably necessary to verify the accuracy of any invoice, charge or calculation made pursuant to this Contract. If any such examination reveals any inaccuracy in any invoice or calculation, the necessary adjustments in such invoice or calculation, and the payment of any adjustment thereto, shall be paid, with interest at the Interest Rate calculated from the date the overpayment or underpayment was made until paid, by the responsible Party pursuant to the terms of the PPA, the Wrap Contract or the applicable contract between CAPP and Designated Agents. 8.6 ERCOT Barred Issue. It is recognized by the Parties that ERCOT has some established time periods for disputing certain matters and the Parties expressly desire to be bound by such periods in their performance under this Contract. Therefore, notwithstanding any provisions in Article 7 of this Contract to the contrary, in the event CAPP is barred from disputing and correcting or adjusting with ERCOT any matter of any nature whatsoever affecting any matter covered by this Contract (an "ERCOT Barred Issue"), then Member shall be barred for all purposes from disputing any portion of any statement, invoice, notice or other matter hereunder to the extent that CAPP is unable to receive adjustment from or dispute such matter with ERCOT because such statement, invoice, notice or other matter is an ERCOT Barred Issue, even if Member's notice is given within the twenty-three (23) months' period set forth in this Article 8. ARTICLE 9 DESIGNATION OF MEMBER'S DELIVERY POINTS 9.1 Designation of Member's Delivery Points. Member has designated its initial Member's Delivery Points by identifying the ESI-IDs and providing that information to CAPP's Designated Agent(s). Such Member's Delivery Points are all points of receipt for electric service that are subject to retail choice. Member shall have a continuing obligation to provide CAPP and Designated Agent(s) with an updated listing of ESI-IDs by location and profile type. ARTICLE 10 SECURITY 10.1 Security from Facilities Owners. The Facility Owners and Guarantor have agreed under Article 9 of the PPA to provide CAPP a first lien on certain collateral on a pari passu basis with other creditors. Member acknowledges that it has no direct right to enforce the lien, nor does it have any individual interest in the Facilities in the event of foreclosure of the first lien, nor may it exercise remedies available to CAPP under the PPA. To the extent that CAPP shall determine that it is in CAPP's interest to (i) agree to renewals, modifications, amendments, and refinancing of the first lien indebtedness described in the PPA, (ii) exercise or fail to exercise one or more remedies available to it under the PPA, or (iii) terminate or modify the PPA, Member irrevocably appoints the Board of Directors of CAPP as its agent and attorney in fact to enter into agreements 26 appropriate to the situation, including, but not limited to, agreements to substitute collateral, and agreements to release or partially release liens. The power herein granted to CAPP and its Board of Directors by Member is a power coupled with an interest that may not be revoked while all or any portion of the Bonds is unpaid. 10.2 Collateral Assignment of the Contract to Trustee for Bonds. This Contract and the Participant Contracts shall be collaterally assigned to the Trustee under the Bonds as security for the repayment of the Bonds to the extent of the Capacity Payment payable pursuant to Article 7 of this Contract and each of Participant Contracts. ARTICLE 11 DEFAULT 11.1 Defaults by Facility Owners; Defaults by Participating Members. In the event of default by Facility Owners under the PPA, or in the event of a default by Member or by a Participating Member under a Participant Contract, the Parties agree and stipulate that decisions as to the exercise or non -exercise of remedies upon such default shall be solely vested in CAPP, as its Board of Directors may determine from time to time. Member acknowledges that CAPP's rights to elect remedies may be subject and subordinate to rights granted to or reserved by the holders and owners of the Bonds or the Trustee thereof. 11.2 Default by CAPP. Except as otherwise excused under this Contract, the occurrence of any of the following shall constitute an event of default by CAPP: (a) Failure of CAPP to pay the Capacity Prepayment as required under the PPA; (b) Failure by CAPP to timely perform its covenants under the Bonds, including payments required by it, unless such failure is caused by the failure of Member under this Contract or of one or more Participating Members under the Participant Contracts to pay CAPP sums required under Article 6; or (c) CAPP breaches any material contractual obligation under this Contract and such breach continues for a period of thirty (30) Days after the date on which written notice thereof is received from Member by CAPP. 11.3 Default by Member. Except as otherwise excused under this Contract, the occurrence of any of the following shall constitute an event of default by Member: (a) Member fails to accept delivery of the Products, or any portion thereof from CAPP. In the event of such failure, CAPP may, in addition to other remedies available to it under this Contract, provide the unaccepted Products to another Participating Member or, if no Participating Member elects to accept such 27 Products, to a third party at such price as CAPP may negotiate in the marketplace. If the price obtained in the marketplace is less than the price Member would have been required to pay for such Products, Member shall pay CAPP and CAPP may recover from Member (i) the positive difference, if any, obtained by subtracting what was received from the Participating Member or third party from what would have been received from Member had Member accepted the full delivery of Products required of it, and (ii) all costs of collection incurred by CAPP, including reasonable attorney's fees; (b) Except for disputed charges arising under Section 8.4, Member fails to pay amounts due to CAPP as and when required under this Contract, which failure continues for a period of three (3) Business Days after the date on which written notice of a prospective Default is received by Member from CAPP; (c) Failure by Member to levy the rate and amount of ad valorem taxes out of the maintenance tax of Member, and failure by Member to establish and maintain a sinking fund for the Monthly Capacity Payments and CAPP fees as required under Section 7.3, above; (d) Failure by Member to pay to CAPP any sum of money required to be paid by Member under this Contract; (e) Member breaches any material contractual obligation under this Contract and such breach continues for a period of twenty-eight (28) Days after the date on which written notice thereof is received by the breaching Party; (f) Member becomes Bankrupt. 11.4 Remedies of CAPP in the event of default by Member. Unless otherwise limited by the terms of this Contract, in the event that Member shall default in the performance of its obligations under this Contract, CAPP may: (a) Suspend delivery of Products to Member, and provide such Products to one or more Participating Members or third parties until such default is cured; (b) Then and in every case, CAPP or an authorized representative thereof may proceed against the Member, or any official, officer or employee of the Member in their official capacity, for the purpose of protecting and enforcing the rights of CAPP under this Contract, by mandamus or other suit, action or special proceeding in equity or at law, in any court of competent jurisdiction, for any relief permitted by law, including the specific performance of any covenant or agreement contained herein, or thereby to enjoin any act or thing that may be unlawful or in violation of any right of CAPP hereunder or any combination of such remedies; 28 (c) Suspend performance of CAPP's obligations to Member under this Contract until the earlier of (i) the Day the Default has been cured in accordance with the terms of this Contract, except for Member's obligations to make Monthly Capacity payments under Article 7 hereof which shall not be affected by any such action; (d) Exercise any other remedy available to CAPP at law or in equity. In addition to all of the rights and remedies provided to CAPP by the laws of the State of Texas, and in addition to the remedies set forth above, the Member covenants and agrees that in the event of its default under this Contract, including failure to pay Monthly Capacity Payments and payments under Section 7.5 when due or Energy Payments when due after the Member has Appropriated for such payments, or, in the event it fails to make the payments required to be made into the Interest and Sinking Fund or defaults in the observance or performance of any other of the contracts, covenants, conditions or obligations set forth in this Contract, the following remedies shall also be available: (e) CAPP, the trustee if CAPP has assigned all or part of this Contract to a trustee for the benefit of bond owners, shall be entitled to a writ of mandamus issued by a court of competent jurisdiction compelling and requiring Member and the officials thereof to observe and perform all agreements, covenants, obligations and conditions prescribed in this Contract; (f) Any delay or omission to exercise any right or power accruing upon any default shall not impair any such right or power nor be construed to be a waiver of any such default or acquiescence therein, and every such right and power may be exercised from time to time and as often as may be deemed expedient; and (g) Any other remedies available to CAPP at law or in equity. 11.5 Remedies of Member in the Event of Default by CAPP. Unless otherwise limited by the terms of this Contract, in the event that CAPP shall default in the performance of its obligations under this Contract, Member may: (a) Then and in every case, Member may proceed against CAPP, or any official, officer or employee of CAPP in their official capacity, Sue for the purpose of protecting and enforcing the rights of Member under this Contract, by mandamus or other suit, action or special proceeding in equity or at law, in any court of competent jurisdiction, for any relief permitted by law, including the specific performance of any covenant or agreement contained herein, or thereby to enjoin any act or thing that may be unlawful or in violation of any right of Member hereunder or any combination of such remedies; 29 (b) Terminate this Contract, except for Member's obligations to make Monthly Capacity Payments under Article 7 hereof which shall survive any termination of this Contract; (c) Exercise any other remedies available to Member at law or in equity. 11.6 No Waiver in Event of Default. Pursuit by either Party of any remedy for default pursuant to Article 11 of this Contract shall not constitute a forfeiture or waiver of any amount due by the defaulting Party or of any damages occurring by reason of the violation of any terms, provisions, or conditions of this Contract, provided however, that in no event shall CAPP be required to return to Member any sums paid by Member to CAPP for Capacity Prepayment. No waiver of any default or breach of this Contract shall be deemed or construed to constitute a waiver of any other violation or breach of any of the terms, provisions, or conditions of this Contract. Forbearance to enforce one or more of the remedies available upon the occurrence of an event of default shall not constitute a waiver of that or any subsequent default or breach. ARTICLE 12 INDEMNIFICATION; LIMITATION OF LIABILITY 12.1 Member's Indemnification of CAPP. To the extent permitted by the Constitution and laws of the State of Texas, and with full reservation of all defenses and immunities available under the Law, Member agrees to and shall indemnify, defend, and hold harmless CAPP and all of CAPP's officers, directors, shareholders, representatives, and employees, from and against all Indemnified Claims, including Indemnified Claims for personal injury, death, or damages to property, occurring after the Facility Owners' Delivery Points, arising out of or related to the Products. Notwithstanding the foregoing, CAPP agrees and understands that Member cannot indemnify CAPP, Facility Owners, or any individual associated with either of them from and against their own gross negligence and willful misconduct. To the extent that CAPP has agreed to indemnify Facility Owners pursuant to Article 13 of the PPA, then Member agrees to and shall indemnify, defend, and hold harmless CAPP and all of CAPP's officers, directors, shareholders, representatives, and employees, from and against all Indemnified Claims that CAPP has made to Facility Owners, but only to the extent permitted by the Constitution and laws of the State of Texas, and with full reservation of all defenses and immunities available under the Law. 12.2 Claims arising on Facility Owners side of the Facility Owners' Delivery Point. To the extent that claims for personal injury, death, or damages to property: (a) occur at and/or before the Facility Owners' Delivery Point, (b) arise out of or are related to the Product and Products, and (c) are covered as an Indemnified Claim by Facility Owners for the benefit of CAPP, Member and Participating Members, and each of their respective officers, officials, directors, and employees, then CAPP, on behalf of itself, Member, and Participating members, agrees to enforce the indemnity and 30 duty of defense that Facility Owners have granted to CAPP and Member under Article 12 of the PPA. 12.3 Indemnified Claims. "Indemnified Claims", as used in Sections 12.1 and 12.2, above, means all third party claims or actions, threatened or filed and, whether groundless, false, fraudulent or otherwise, that directly or indirectly relate to the subject matter of an indemnity, and the resulting losses, damages, expenses, attorneys' fees and court costs, whether incurred by settlement or otherwise, and whether such claims or actions are threatened or filed prior to or after the termination of this Contract. 12.4 Limitation of Remedies, Liability and Damages. EXCEPT AS SET FORTH IN THIS AGREEMENT, THERE IS NO WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, AND ANY AND ALL IMPLIED WARRANTIES ARE DISCLAIMED. THE PARTIES CONFIRM THAT THE EXPRESS REMEDIES AND MEASURES OF DAMAGES PROVIDED IN THIS AGREEMENT SATISFY THE ESSENTIAL PURPOSES HEREOF. FOR BREACH OF ANY PROVISION FOR WHICH AN EXPRESS REMEDY OR MEASURE OF DAMAGE IS PROVIDED, SUCH EXPRESS REMEDY OR MEASURE OF DAMAGES SHALL BE LIMITED AS SET FORTH IN SUCH PROVISION AND ALL OTHER REMEDIES OR DAMAGES AT LAW OR IN EQUITY ARE WAIVED EXCEPT AS SET FORTH IN ARTICLE 11 OF THIS AGREEMENT. IF NO REMEDY OR MEASURE OF DAMAGES IS EXPRESSLY PROVIDED HEREIN, THE OBLIGOR'S LIABILITY SHALL BE LIMITED TO DIRECT ACTUAL DAMAGES ONLY, SUCH DIRECT ACTUAL DAMAGES SHALL BE THE SOLE AND EXCLUSIVE REMEDY AND ALL OTHER REMEDIES OR DAMAGES AT LAW OR IN EQUITY ARE WAIVED. UNLESS EXPRESSLY HEREIN PROVIDED, NEITHER PARTY SHALL BE LIABLE FOR CONSEQUENTIAL, INCIDENTAL, PUNITIVE, EXEMPLARY OR INDIRECT DAMAGES, LOST PROFITS OR OTHER BUSINESS INTERRUPTION DAMAGES, BY STATUTE, IN TORT OR CONTRACT, UNDER ANY INDEMNITY PROVISION OR OTHERWISE. IT IS THE INTENT OF THE PARTIES THAT THE LIMITATIONS HEREIN IMPOSED ON REMEDIES AND THE MEASURE OF DAMAGES BE WITHOUT REGARD TO THE CAUSE OR CAUSES RELATED THERETO, INCLUDING THE NEGLIGENCE OF ANY PARTY, WHETHER SUCH NEGLIGENCE IS SOLE, JOINT OR CONCURRENT, OR ACTIVE OR PASSIVE. TO THE EXTENT ANY DAMAGES REQUIRED TO BE PAID HEREUNDER ARE LIQUIDATED, THE PARTIES ACKNOWLEDGE THAT THE DAMAGES ARE DIFFICULT OR IMPOSSIBLE TO DETERMINE, OR OTHERWISE OBTAINING AN ADEQUATE REMEDY IS INCONVENIENT AND THE DAMAGES CALCULATED HEREUNDER CONSTITUTE A REASONABLE APPROXIMATION OF THE HARM OR LOSS. 31 ARTICLE 13 REPRESENTATIONS 13.1 Mutual representations and warranties. Each Party represents and warrants to the other Party that: (a) Such Party has the power and authority to execute, deliver and perform its obligations under this Contract. Such Party has authorized the execution and delivery of this Contract by the person(s) executing this Contract below. (b) No provision contained in Member's charter or enabling legislation, as the case may be, if any, prohibits Member from entering into this Contract and performing the obligations required of Member under this Contract. (c) This Contract constitutes a legal, valid and binding obligation of such Party, except as the enforceability of this Contract may be limited by the effect of any applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditor's rights generally and by general principles of equity which permit the exercise of judicial discretion. (d) Neither the execution or delivery of this Contract results in any breach of or constitutes any default under any material agreement to which such Party is bound or causes such Party to be in violation of any Law, regulation, administrative or judicial order or process or decision to which such Party is a party or by which it or its properties are bound or affected. (e) It is not Bankrupt and there are no proceedings pending or being contemplated by it or, to its knowledge, threatened against it which would result in it being or becoming Bankrupt. (f) It is duly organized and validly existing under the laws of the jurisdiction of its organization or incorporation and, if relevant under such laws, in good standing. (g) All governmental and other authorizations, approvals, consents, notices and filings that are required to have been obtained or submitted by it with respect to this Contract or other document relating hereto or thereto to which it is a party have been obtained or submitted and are in full force and effect and all conditions of any such authorizations, approvals, consents, notices and filings have been complied with. (h) No Default with respect to it, or event which with notice and/or lapse of time would constitute such a Default, has occurred and is continuing and 32 no such event or circumstance would occur as a result of its entering into or performing its obligations under this Contract or other document relating hereto or thereto to which it is a party. There is not pending or, to its knowledge, threatened against it or any of its Affiliates any action, suit or proceeding at law or in equity or before any court, tribunal, governmental body, agency or official or any arbitrator that is likely to affect the legality, validity or enforceability against it of this Contract, or other document relating hereto or thereto to which it is a party or its ability to perform its obligations under the same. ARTICLE 14 NOTICES 14.1 Notices. All notices and other communications required or permitted by this Contract or by Law to be served upon or given to a Party by the other Party shall be deemed duly served and given when received after being delivered by hand, or courier service, or sent by confirmed facsimile or certified mail, return receipt requested, postage prepaid, to the following address. To Member: Attention: Telephone: Facsimile: To CAPP: Attention: Telephone: Facsimile: Notices shall, unless otherwise specified herein, be in writing and may be delivered by hand delivery, United States mail, overnight courier service or facsimile. Notice by facsimile or hand delivery shall be effective at the close of business on the Day actually received, if received during business hours on a Business Day, and otherwise shall be effective at the close of business on the next Business Day. Notice by overnight 33 United States mail or courier shall be effective on the next Business Day after it was sent. A Party may change its addresses by providing notice of it in accordance herewith. ARTICLE 15 CONFIDENTIALITY 15.1 Confidential Information. Parties to this Contract acknowledge that they are obligated to protect the confidentiality of certain information provided by Luminant to CAPP in the course of negotiating the PPA pursuant to Article 17 of the PPA. Member agrees to be bound by the provisions of Article 17 of the PPA regarding any information that counsel to CAPP indicates in writing should be kept confidential and to promptly advise counsel to CAPP of any request for Public Information pursuant to Chapter 552 of the Texas Government Code for public revelation of confidential information provided to Member in its consideration of this Contract and related documents. ARTICLE 16 ASSIGNMENT 16.1 Assignment. Except as provided otherwise in this Contract, neither Party shall assign this Contract or its rights hereunder without the prior written consent of the other Party, which consent shall not be unreasonably withheld or delayed; provided, however, that the assignee is at the time of assignment a Member of CAPP. In no event shall the assigning Party be relieved from liability under this Contract upon assignment. ARTICLE 17 CONTINUING DISCLOSURE 17.1 Continuing Disclosure Undertaking of Members. At such time that Member's aggregated unpaid Monthly Capacity Payments equals at least ten percent (10%) of the outstanding principal amount of the Bonds, Member agrees to provide annually to each Nationally Recognized Municipal Securities Information Depositories ("NRMSIR") and any State Information Depositories ("SID") financial information and operating data with respect to the Member of the general type hereinafter described. Subject to the foregoing sentence Member agrees to provide, within 195 days after the end of each Fiscal Year thereof ending in or after 2009, financial information and operating data with respect the Member. Any financial statements so to be provided shall be prepared in accordance with the accounting principles as Member may be required to employ from time to time pursuant to state law or regulation. 17.2 Financial Statements. If Member is required to file financial information pursuant to Section 17.1 and Member commissions an audit of such statements and the audit is completed within the period during which they must be provided, the financial statements to be provided shall be audited. If the audit of such financial statements is not complete within such period, then Participating Member shall provide unaudited financial statements and thereafter audited financial statements for the applicable fiscal year to 34 CAPP, each NRMSIR and any SID, when and if the audit report on such statements become available. 17.3 Change of Fiscal Year. If Member is required to file financial information pursuant to Section 17.1 and Member changes its Fiscal Year, it shall be the duty of such Member to notify each NRMSIR and any SID of the change (and of the date of the new Fiscal Year end) prior to the next date by which such Member otherwise would be required to provide financial information and operating data pursuant to this Article. The financial information and operating data to be provided pursuant to this Article may be set forth in full in one or more documents or may be provided pursuant to this Article may be set forth in full in one or more documents or may be included by specific reference to any document (including an official statement or other offering document, if it is available from the Municipal Securities Rulemaking Board ("MSRB") that theretofore has been provided to each NRMSIR and any SID or filed with the SEC. 17.4 Failure to Provide Continuing Disclosure. Member shall notify CAPP, any SID and either each NRMSIR or the MSRB , in a timely manner, of any failure of such Member to provide financial information or operating data in accordance with this Article by the time required thereby and hereby. No default by Member in observing or performing its obligations as described in this Article shall constitute a breach of or default under this Contract for purposes of any other provision of this Contract. Nothing in this Article is intended or shall act to disclaim, waive, or otherwise limit the duties of any Member under federal and state securities laws. If Member fails to provide such continuing disclosure required under this Article, CAPP shall use its best efforts to obtain relevant financial information and operating data with respect to any such Participating Member and to provide the same annually to each NRMSIR and any SID within 195 days after the end of each Fiscal Year of any such Member. 17.5 Amendment of Continuing Disclosure. Member's undertaking under this Article may be amended by Member, with the consent of CAPP, from time to time to adapt to changed circumstances that arise from a change in legal requirements, a change in law, or a change in the identity, nature, status, or type of operations of any Member, but only if (1) the undertaking, as so amended, would have permitted an underwriter to purchase or sell Bonds in the primary offering of such Bonds in compliance with the Rule, taking into account any amendments or interpretations of the Rule since such offering as well as such changed circumstances and (2) either (a) the holders of a majority in aggregate principal amount of the outstanding Bonds consent to such amendment or (b) a person that is unaffiliated with Member (such as nationally recognized bond counsel) determined that such amendment will not materially impair the interest of the holders and beneficial owners of the Bonds. If Member amends its undertaking herein, it shall include with any amended financial information or operating data next provided in accordance with this Article an explanation, in narrative form, of the reason for the amendment and of the impact of any change in the type of financial information or operating data so provided. 35 Member shall be obligated to observe and perform the covenants specified in this Article for so long as, but only for so long as, Member remains an "obligated person" with respect to the Bonds within the meaning of the Rule. The provisions of this Article are for the sole benefit of the holders and beneficial owners of the Bonds, and nothing in this Article, express or implied, shall give any benefit or any legal or equitable right, remedy, or claim hereunder to any other person. ARTICLE 18 TAX-EXEMPT BONDS 18.1 Tax -Exempt Bonds. The Parties understand and agree that CAPP will use commercially reasonable efforts to provide for, but will not be liable for a failure to produce, the lowest overall debt service cost for the Bonds. In connection therewith, the parties intend that CAPP may, with the approval of the Member, issue refunding bonds to refund the Bonds, if possible, the interest on which is excludable from the gross income of the owners thereof for federal income tax purposes. The Parties acknowledge that, under current federal tax laws, such tax-exempt financing of the Capacity Prepayment is not permitted. The Parties further acknowledge their understanding that the federal income tax laws impose certain restrictions on the use and investment of proceeds of tax- exempt bonds and on the use of the property financed therewith and the output produced therefrom. Accordingly, the Parties agree and covenant that if any refunding bonds are offered to investors with the understanding that the interest thereon will be exempt from federal income taxation, then the Parties, their assigns and agents, will take such action to assure, and refrain from such action which will adversely affect, the treatment of such refunding bonds as obligations described in Section 103 of the Internal Revenue Code of 1986. Should either Party fail to comply with such covenant, the effect of which being that such refunding bonds no longer qualify as obligations described in the Internal Revenue Code of 1986, such defaulting party shall be liable for all costs resulting from the loss of the tax-exempt status of such bonds. The Parties hereby agree and covenant to comply with all of the representations and covenants relating to such exemption which are set out in any relevant trust indenture or bond resolution. The Parties further agree and covenant that in the event any refunding bonds issued are to be tax-exempt, they will modify such agreements, make such filings, restrict the yield on investments, and take such other action necessary to fulfill the applicable provisions of the Internal Revenue Code of 1986. For these purposes, the Parties may rely on the respective opinion of any firm of bond attorneys selected by CAPP. 18.2 Agreement to Pay Beneficiary. In the event that tax-exempt refunding bonds are issued with the consent of the Members as provided in the immediately preceding paragraph above, Member hereby covenants and agrees to pay its proportionate share of any deficiency to CAPP for deposit into the appropriate rebate fund at the times and as described in the indenture of trust related to the Bonds to comply with the provisions of Section 148(f)(2) of the Internal Revenue Code of 1986. 36 18.3 Financing. Member agrees to cooperate with CAPP in connection with the issuance of the Bonds. Without limiting the foregoing, CAPP and Member acknowledge that this Contract may be an integral part of the documentation securing the Bonds. At CAPP's request, Member shall agree to amend this Contract to include any provision which may reasonably be requested by the issuer of the Bonds, and to include any provision that may be required to correspond to an amendment of the PPA; provided, however, that no such amendment shall increase the burdens or obligations of Member hereunder with respect to the price and purchase obligations set forth herein. Upon the request of CAPP, Member agrees to negotiate in good faith and shall execute additional documents, opinions and instruments reasonably requested by the proposed issuer of the Bonds including (i) a consent and agreement that provides an additional reasonable period of time to remedy any Default, and (ii) a legal opinion of counsel for Member affirming the enforceability of this Contract against Member and other matters reasonably requested, subject to customary exceptions and qualifications. ARTICLE 19 MISCELLANEOUS 19.1 Applicable Law. This Contract is governed by and shall be construed under the Laws of the State of Texas excluding any conflict of laws rules. The Parties submit to the exclusive jurisdiction of the state and federal courts in Dallas County, Texas in connection with any litigation arising hereunder. 19.2 Counterparts. This Contract may be executed in more than one counterpart, each of which shall be deemed to be an original, but all of which together shall constitute one and the same document. 19.3 Waiver. No waiver of any breach of the terms of this Contract shall be effective unless such waiver is in writing and signed by the Party against whom such waiver is claimed. No waiver of any breach shall be deemed to be a waiver of any subsequent breach. 19.4 Modification. The provisions of this Contract, including any exhibits, may only be modified by written agreement duly executed by each Party. 19.5 Severability If any provision of this Contract shall be determined to be unenforceable, void or otherwise contrary to Law, such condition shall in no manner operate to render any other provision of this Contract unenforceable, void or contrary to Law, and this Contract shall continue in force in accordance with the remaining terms and provisions hereof, unless such condition invalidates the purpose or intent of this Contract. In the event that any of the provisions, or portions or applications thereof, of this Contract are held unenforceable or invalid by any court of competent jurisdiction, Buyer and Seller shall negotiate in good faith to attempt to implement an equitable adjustment in the provisions of this Contract with a view toward effecting the purposes of this Contract by replacing the provision that is unenforceable, void, or contrary to Law 37 with a valid provision the economic effect of which comes as close as possible to that of the provision that has been found to be unenforceable, void, or contrary to Law. 19.6 Requirements. Each Party shall timely comply with all then -current PUCT and ERCOT requirements (including, without limitation, the ERCOT Guides) that are applicable to it and shall reasonably cooperate upon reasonable notice with the other Party to the extent necessary for the other Party to timely comply with then -current PUCT and ERCOT requirements (including, without limitation, the ERCOT Guides) that are applicable to it. 19.7 Entirety. It is the intention of the Parties that this Contract shall contain all terms, conditions, and protections in any way related to, or arising out of, the sale and purchase of the Products as contemplated herein, and supersedes all prior agreements regarding the subject matter hereof, whether written or oral. 19.8 Captions, Titles and Headings. Captions, titles and headings used in this Contract are for ease of reference only and do not constitute a part of this Contract. 19.9 Forward Contract. The Parties acknowledge and agree that this Contract constitutes a "forward contract" within the meaning of the United States Bankruptcy Code. 19.10 Further Assurances. Each Party shall, from time to time, upon the written request of any other Party, execute and deliver such further instruments and documents as shall be necessary to perform its obligations hereunder. 19.11 Survival. The confidentiality and audit provisions, indemnities, releases from liability, and limitations on liability or damages expressed in this Contract shall, unless otherwise provided herein, survive without limitation the termination, cancellation or expiration of this Contract, and shall apply whether in contract, equity, or otherwise. Notwithstanding the foregoing, the statute of limitations for bringing any action with respect to this Contract or either Party's performance hereunder is not extended by the provisions of this Section 19.11. 38 IN WITNESS WHEREOF, the Parties have caused this Contract to be executed in their respective names by their duly authorized officers. Date ATTEST: MEMBER: CITY OF By: Printed name: Its: 39 Date ATTEST: CAPP: CITIES AGGREGATION POWER PROJECT Printed name: Its: 40 SCHEDULE OF EXHIBITS "A" List of Participating Members "C" Payment Schedule "D" Total Monthly Contract Payment Schedule. "E" CAPP Capacity Payment Schedule LACLIENTS\1813\02 - Long Term Contract\2008 PPA CAPP-Cities\WBC Drafts\agr0808l4WBCdraft-version20.doc 41 ORDINANCE NO. ORDINANCE OF THE CITY OF , TEXAS APPROVING AN ELECTRIC POWER CONTRACT WITH CITIES AGGREGATION POWER PROJECT, INC. ("CAPP") FOR ELECTRIC CAPACITY AND ENERGY, PROVIDING CAPACITY PAYMENTS AS PUBLIC PROPERTY FINANCE CONTRACTUAL OBLIGATIONS OF THE CITY, PLEDGING AND LEVYING AN AD VALOREM TAX TO SUCH PAYMENTS, PROVIDING FOR ENERGY PAYMENTS FOR ELECTRIC ENERGY SUBJECT TO ANNUAL APPROPRIATION BY THE CITY, PROVIDING FOR THE ASSIGNMENT OF SUCH CAPACITY PAYMENTS TO SUPPORT DEBT ISSUED BY CAPP INCURRED TO ACQUIRE ELECTRIC CAPACITY RIGHTS FROM LUMINANT GENERATION COMPANY AND RELATED ENTITIES PURSUANT TO A 24-YEAR POWER PURCHASE AGREEMENT ("PPA"); AUTHORIZING THE CITY MANAGER OR OTHER APPROPRIATE CITY OFFICER OR EMPLOYEE TO EXECUTE AND DELIVER THE MEMBER CONTRACT; FURTHER AUTHORIZING THE CITY MANAGER OR OTHER APPROPRIATE CITY OFFICER OR CITY EMPLOYEE TO SIGN ADDITIONAL AGREEMENTS ARRANGED BY CAPP FOR ELECTRIC POWER NEEDED BY THE CITY IN THE PERIOD 2009-2011 IN EXCESS OF THE AMOUNT OBTAINED UNDER THE MEMBER CONTRACT; ACKNOWLEDGING, AUTHORIZING AND DIRECTING THE CITY MANAGER OR APPROPRIATE CITY OFFICER OR CITY EMPLOYEE TO SIGN AND RETURN CAPP'S DISCLOSURE LETTER; FURTHER AUTHORIZING THE CITY MANAGER OR APPROPRIATE CITY OFFICER OR OTHER CITY EMPLOYEE TO ACCEPT CONFORMING CHANGES TO THE MEMBER CONTRACT DEPENDENT ON THE FINAL TERMS OF THE CAPP PPA; PROVIDING FOR VALIDITY AND SUFFICIENCY OF CITY EMPLOYEE'S OR CITY OFFICER'S SIGNATURE IF THE OFFICER OR EMPLOYEE LEAVES OFFICE OR EMPLOYMENT PRIOR TO THE DELIVERY OF THE MEMBER CONTRACT; ADOPTING A SAVINGS CLAUSE; DETERMINING THAT THIS ORDINANCE WAS PASSED IN ACCORDANCE WITH THE REQUIREMENTS OF THE TEXAS OPEN MEETINGS ACT. WHEREAS, the City of must purchase electricity in order to perform its proprietary and governmental functions; and WHEREAS, the price of power sold in the deregulated retail market in Texas has been directly linked to the daily fluctuations for natural gas futures prices, regardless of the type of generation fuel; and WHEREAS, natural gas prices are extremely volatile, resulting in an upward cost trend and significant electric price instability; and WHEREAS, the City is a member of the non-profit political subdivision corporation Cities Aggregation Power Project, Inc. ("CAPP"), which has the legal authority to contract for the purchase of electricity on behalf of more than 100 political subdivision members; and WHEREAS, CAPP has endeavored to provide its members with the most favorable energy pricing available in the market, delivering more than $100 million in savings for its members since 2002; and WHEREAS, the CAPP Board of Directors is a voluntary ten -member board comprised entirely of city employees and city officials that directs the activities of CAPP's legal and energy advisors; and WHEREAS, the CAPP Board of Directors has investigated potential long-term contracting options to both lower and stabilize electric prices for member political subdivisions that must prepare annual budgets and require cost predictability for essential services like electricity; and WHEREAS, CAPP negotiated a Purchase Power Agreement ("PPA") with owners of non -gas fired generation for the long-term, fixed price supply of power, which will allow participating CAPP members to meet a portion of energy needs (approximately 60 percent) at a stable, known price for a 24-year period; and WHEREAS, the PPA calls for CAPP to contract with Luminant Generation Company LLC, Big Brown Power Company, LLC and Oak Grove Management Company, LLC (collectively, "Luminant") for approximately 150 MW of baseload power supplied by seven different units over 24 years and pre -paying a portion of the capacity costs associated with power purchased pursuant to the long-term contract; and WHEREAS, the City wishes to acquire a portion of its future electric energy pursuant to the PPA between CAPP and Luminant; and WHEREAS, to acquire power pursuant to the PPA, the City must enter into an electric power contract, the Energy Sales Contract Between CAPP and the City of (the "Member Contract"), substantially in the form attached hereto; and WHEREAS, CAPP will issue general revenue bonds, with the bond proceeds used to pre -pay a portion of the 24-year capacity commitment pursuant to the PPA on behalf of the City and all participating CAPP members; and WHEREAS, bonds issued by CAPP will be backed by the individual Member Contracts of each participating CAPP city committing to pay a capacity payment equal to its proportionate amount of the debt service obligation associated with CAPP's prepayment of PPA capacity costs; and WHEREAS, the City's allocated total maximum capacity payment is $ (total maximum monthly capacity payment is $ ); and WHEREAS, the Member Contract requires that certain capacity payments payable by each participating CAPP member will be public property finance contractual obligations pursuant to Texas Local Government Code Chapter 271, Subchapter A, secured by a pledge of such member's ad valorem taxes, which will be assigned to support debt issued by CAPP to pay the capacity costs of the PPA; and WHEREAS, the fixed capacity component constitutes a long-term, general obligation tax debt of each participating member that is secured by a pledge of the member's ad valorem taxes; and WHEREAS, CAPP must secure an additional "wrap" agreement to arrange for power deliveries when needed to meet the remaining portion of the City's energy needs in excess of the baseload power provided under the Member Contract, with said wrap agreement needing ratification/approval of the City; and WHEREAS, the resulting power supply blend adds to both stability and savings for the City; and WHEREAS, the total capacity and energy to be purchased under the long-term PPA cannot be known until all CAPP members have acted on their opportunity to participate in the transaction; and WHEREAS, a change in total capacity and energy obligated under the PPA will change the cost of the transaction and may change the percentage of debt service obligation and energy assigned to participating CAPP members; and WHEREAS, the PPA is an effort, initiated by CAPP pursuant to direction and support of its participating members, including the City, to diversify fuel sources and minimize the risk associated with complete reliance upon electric pricing linked to natural gas costs that are influenced by unpredictable weather, geo-political and global economic factors, but nonetheless the PPA involves a number of somewhat unique risks and uncertainties; and WHEREAS, CAPP has prepared and distributed a Disclosure Statement dated September 10, 2008, in the form attached hereto that identifies and describes certain risks (but may not describe all risks) associated with the transactions contemplated by the Member Contract and the PPA; and WHEREAS, the Disclosure Statement is to be acknowledged, signed, and returned to CAPP, prior to pricing of CAPP's bonds, if the Member Contract is approved; and WHEREAS, it is hereby officially found and determined that the meeting at which this ordinance was passed was open to the public, and public notice of the time, 3 place and purpose of said meeting was given, all as required by Chapter 551, Texas Government Code; and NOW, THEREFORE BE IT ORDAINED BY THE CITY OF OF THE 1. The CAPP Member Contract, attached hereto and incorporated herein for all purposes is deemed necessary and desirable for the City to meet its proprietary functions and basic governmental responsibilities and is hereby approved. 2. The City acknowledges that the Member Contract requires that certain capacity payments payable by the City will be public property finance contractual obligations pursuant to Texas Local Government Code Chapter 271, Subchapter A, secured by a pledge of such member's ad valorem taxes, which will be assigned to support debt issued by CAPP to pay the capacity costs of the PPA; and the City further acknowledges that the fixed capacity component constitutes a long-term, general obligation tax debt of the City that is secured by a pledge of the City's ad valorem taxes. 3. The City of hereby acknowledges that it has reviewed the Member Contract and the Disclosure Statement dated September 10, 2008, and the City Manager, or other appropriate officer or staff person of the City, is authorized and directed to sign, date, and return by November 5, 2008, to CAPP both the Member Contract and such Disclosure Statement. 4. The City Manager, or other appropriate officer or staff person of the City, is authorized to approve modifications and corrections to the Member Contract that are necessary to conform to changes to the assigned cost in the PPA after all CAPP members have made decisions regarding participation in the long-term PPA, so long as no such changes increase the City's capacity payment obligations in any year from the amounts reflected in the Member Contract attached hereto. 5. The City Manager, or other appropriate officer or staff person of the City, is authorized to sign additional agreements arranged by CAPP for the provision of electricity during the period 2009-2011 that are necessary to meet the City's power needs that exceed the power arranged through the Member Contract with CAPP, with the understanding that any agreement for energy beyond 2009 is subject to the right of annual appropriation. 6. The City Manager, or other appropriate officer or staff person of the City, is hereby authorized, empowered and directed from time to time and at any time to do and perform all such acts and things and to execute, acknowledge and deliver in the name and under the corporate seal and on behalf of the City all such instruments, whether or not herein mentioned, as may be necessary or desirable in order to carry out the terms and provisions of this ordinance, the Member Contract and the Disclosure. 7. The City Manager, or other appropriate officer or staff person of the City, is hereby authorized and directed to approve any changes or corrections necessary to this 4 ordinance, the Member Contract or any ancillary agreement, certificate or document, prior to the initial delivery of the Member Contract in order to (i) correct any ambiguity or mistake or properly or more completely document the transactions contemplated and approved by this ordinance, (ii) approve any changes to the Member Contract as contemplated in the recitals hereto and Section 3 hereto, or (iii) obtain the approval of the Member Contract (and the debt issued by CAPP relating to the PPA) by the Texas Attorney General's office. 8. In case any officer of the City whose signature shall appear on the Member Contract shall cease to be such officer before the delivery of such Member Contract, such signature shall nevertheless be valid and sufficient for all purposes the same as if such officer had remained in office until such delivery. 9. That if any one or more sections or clauses of this ordinance is adjudged to be unconstitutional or invalid, such judgment shall not affect, impair or invalidate the remaining provisions of this ordinance and the remaining provisions of the ordinance shall be interpreted as if the offending section or clause never existed. 10. The City hereby finds that the statements set forth in the recitals of this ordinance are true and correct, and the City hereby incorporates such recitals as a part of this ordinance. Signed on this the day of , 2008. ATTEST: APPROVED AS TO FORM: City Attorney 5 Providing Stability in Energy Costs to Texas Cities CAPP BOARD Chairman — Jay Doegey, City of Arlington Vice Chairman - Randy Moravec, City of Addison Steve Massey, City of Allen David Ragsdale, City of Benbrook Don Wilson, City of Eastland Odis Dolton, City of Abilene James Zentner, City of Odessa Rod Hogan, City of Plano Carolyn House, City of Snyder Robert Sparkman, City of The Colony Secretary Treasurer — Mary Bunkley, City of Arlington September 11, 2008 To All Cities Aggregation Power Project, Inc. ("CAPP") Members, Since its inception in 2001, CAPP's main objective has been to collectively address electric purchasing issues for its political subdivisions members in the deregulated market. We are proud that CAPP members have saved more than $100 million since the Texas market deregulated and that CAPP membership has grown to include 110 political subdivision members. Although CAPP member savings are significant, the price volatility in the market makes its difficult to accurately budget for power expenditures from year to year. Power contract options made available to retail customers like CAPP, regardless of source, have been priced as if the energy was produced exclusively from costly natural gas -fired plants. For several years the CAPP Board and CAPP consultants have pursued efforts to find a fixed price, long-term contract for at least a portion of CAPP's electric energy needs to bring some sense of stability to the annual budgeting process for members and to achieve pricing that consistently stays below market prices. On July 31st the CAPP Board unanimously approved proceeding with the long-term Purchase Power Agreement ("PPA") with Luminant that will supply a portion of participating CAPP members' power needs for 24 years beginning January 1, 2009. CAPP's consultants forecast that savings for participating CAPP members will exceed $1 billion over the life of the contract when measured against market prices for electricity based on natural gas prices. Indicative market prices for 2009 confirm more than $25 million in savings for members participating in the long-term contract next year. The CAPP Board's recommendation and belief that the long- term contract will result in lower prices for electricity and member savings was made after carefully weighing the benefits and risks of this transaction. All CAPP Board members are city officials or city employees. The benefits and risks inherent in the long-term contract will impact our respective municipalities. The CAPP Board endorses participation in the long-term contract as the most economically attractive alternative despite these identified risks. Page 2 September 11, 2008 The decision whether to participate in the long-term contract must be made by individual CAPP members on or before November 5, 2008. To assist members' appraisal of the long-term contract, the attached discussion provides the Board's overview of the long- term power supply plan for participating CAPP members, the CAPP prepayment and long- term pricing, and an evaluation of the risks involved with this transaction. Also included in this package is a signed copy of the PPA, a copy of the Energy Sales Contract Between CAPP and the City (the "Member Contract") to be completed by each individual member that participates in the long-term contract, a Disclosure Statement of the known risks associated with this arrangement, a model ordinance, and a model staff report. Page 3 September 11, 2008 CAPP Long -Term Power Supply for Participating Members It is anticipated that the portion of energy provided under the long-term Purchase Power Agreement ("PPA") will not only drive the overall average cost of power below market prices for members of CAPP who choose to participate, but also the PPA will add price stability to volatile market prices which are based on the price of natural gas. CAPP and Luminant signed the PPA (included in the package and described below) on or shortly after the Luminant Board meets on September 10, 2008. Under the PPA, CAPP will contract with Luminant Generation Company, LLC and several of its affiliates for 150 MW (to be adjusted up to 175 MW or downward depending upon member participation) of baseload capacity and electric energy. The energy from the baseload capacity will be delivered for CAPP's use from seven generation units at three different sites. The energy to be provided under the PPA will supply a portion, but not all, of each participant's future energy needs for up to 24 years. Specifically, the PPA is designed to serve the recent historic baseload (around the clock, always on) electric needs of participants. This amounts to approximately 150 MW, or about 60 percent of participating members' power needs in 2009. An additional supply agreement (referred to as the "wrap" agreement) of a more traditional one to four year period will be pursued by CAPP in a continuing effort to ensure that all members have adequate power whenever needed, regardless of the amount needed. CAPP will enter two different supply agreements and will contract with a Retail Electric Provider ("REP") for billing and other customer services. One supply agreement will be the long-term PPA, described above. The second supply agreement, the wrap agreement, addresses all remaining supply needs in excess of the baseload power provided under the PPA. The wrap agreement also provides power that would otherwise be supplied by the PPA, when the PPA generation units are not adequately producing either because of voluntary outages (scheduled maintenance) or forced outages (unexpected or emergency shutdowns.) The contract with the REP will provide for delivery of the power from the two supply agreements to individual meters. Ordinance Approves Participation in CAPP Long -Term Power Arrangement To participate in the long-term power arrangement, CAPP members must pass an ordinance (provided in this package.) The ordinance commits the member to purchase electric power to satisfy a portion of its annual energy needs through the CAPP long-term PPA (discussed below) for up to 24 years. The ordinance also approves the Member Contract (discussed below and included in this package) between CAPP and the individual member. Page 4 September 11, 2008 Lonz-Term PPA CAPP's long-term PPA is a unit -contingent contract with the three subsidiaries of the old TXU Generation Company (now Luminant) that own seven units at three sites. The 150 MW of baseload power will be provided on an equal percentage basis from the seven units. The PPA is conditioned to the leveraged buyout ("LBO") financing package that took TXU from a publicly traded company to a private company. Under that financing package, Luminant is authorized to make the long-term PPA agreement with CAPP, and to offer CAPP first -lien security interest in all generation and other competitive assets of Luminant and TXU Energy on an equal basis with the secured lenders to the LBO. In addition, CAPP will have a separate guaranty from Texas Competitive Energy Holdings ("TCEH"), the parent company to the affiliates (collectively referred to as "Luminant") that will supply the power under the PPA. CAPP Member Contract The CAPP Member Contract is the contract between CAPP and each individual member taking power pursuant to the long-term PPA. The primary purposes of the Member Contract are: (1) to assign energy from portions of the PPA baseload power and the associated debt service under the PPA to each participating member; and (2) to guarantee to bond holders that the debt will be paid. The second purpose will be fulfilled by the Member Contract (see Section 7.2 of the Member Contract) which provides a claim against the ad valorem taxing authority of the political subdivision in the event of non-payment of the assigned debt service obligation. Page 5 September 11, 2008 CAPP's Prepayment and Long -Term Contract Pricing Prepayment by CAPP and Ad Valorem Tax Pledge by Members The PPA requires that CAPP prepay three -fifths of the total contract price. CAPP will issue bonds to raise the capital necessary for the prepayment. The prepayment amount is likely to be $400 million to $525 million, depending upon how much of the offered 150 MW is committed to participating members. CAPP plans to issue bonds on or before December 23, 2008, and the bonds will be backed by the individual Member Contracts of each participating CAPP member. The ad valorem tax pledge included in the Member Contract and approved by the participating members' individual ordinances serves as security for the bond holders that participating members will meet their debt service obligations over the life of the PPA. Price Components per kWh for Participating Members Price for power delivered under PPA: The initial wholesale price for the portion of electricity delivered pursuant to the long-term PPA will be approximately 5.60 per kWh in 2009. • Approximately 3.50 of the 5.60 wholesale commodity price represents the member's allocated debt service obligation payment for the capacity amount prepaid by CAPP. This price will remain virtually the same for the life of the PPA. The remaining 2.1 ¢ of the 5.60 wholesale commodity price pays for the remaining energy delivered by Luminant that has not already been prepaid. (For ease of reference, this will be described as the "energy component.") The energy component price escalates over the life of the contract as described below. Fixed, Predictable Escalation Over the Life of the PPA: The energy component price (the 2.10 price of the initial 5.60 price) will escalate by three percent (3%) each year over the life of the contract. This equates to approximately one percent (1%) annual escalation of the 5.6¢ per kWh 2009 price. This means that by 2033, the 240' year of the PPA, the energy component price will be approximately 4.5¢ per kWh. The total price for power delivered under the PPA in 2033 (allocated debt service payment of 3.5¢ plus the 4.50 energy component price) will be approximately 80 per kWh (as compared to the 5.6¢ per kWh in 2009.) Page 6 September 11, 2008 Price for remaining_ power needs — the wrap agreement — set more frequently Unlike traditional contracts that have served CAPP member needs since 2002, the long-term PPA will not serve the entirety of participating members' power needs. In addition to the baseload power provided by the PPA, which is expected to serve about 60 percent of participating members' needs in 2009, CAPP will arrange for a separate contract (the wrap agreement) that fulfills the remaining supply needs in excess of the baseload power provided under the PPA. CAPP's designated REP will accept delivery from both suppliers (PPA and wrap contracts) on behalf of all participating members and will arrange delivery of all power to individual meters with the appropriate transmission and distribution utility. All charges other than the monthly debt service payment will be billed by the REP, just as currently done. Monthly Payments For Participating Members Two separate monthly payments will be made by participating members: Monthly Debt Service Payment to CAPP A separate monthly debt service payment will be made (probably to a trustee who will hold the payments until the payment date prescribed in the bonds) reflecting the capacity portion (3.5¢ per kWh) of the 5.60 per kWh PPA price that represents the participating member's monthly debt service obligation for the prepaid electricity. • Monthly Electric Account Pament(s) to the REP CAPP's REP will separately bill each participating member at a "blended" rate per kWh — blending the remaining 2.1 ¢ energy component price per kWh and the higher market driven price for power under the wrap agreement. The monthly bill will include non-bypassable charges (regulated wires rates). The CAPP Board will consider proposals from its designated REP for more detailed monthly bills that will reflect power costs allocated under each supply agreement and a savings calculation as well as a total monthly bill. It will be up to the individual members to determine how they want to treat the debt service portion of their monthly payments. Since the debt service payment is essentially a component of the cost of power, most members will probably treat these payments as operating costs that will be distributed to their various functions, such as streets, utilities, police, etc. In this case a member can take their monthly electric consumption billing from the CAPP REP, obtain a ratio from the kWh associated with a function's account or accounts (e.g., 23% of total monthly electric bill is for water pumping), and then apply the ratio against the monthly debt billing and charge the appropriate function (e.g., 23% to the utility department). Some members may wish to treat the debt portion of the bill as a debt payment paid from their debt service, or interest and sinking fund, in which case no prorated distribution of the billing is necessary. Page 7 September 11, 2008 Evaluation of Risks The CAPP Board believes that the long-term contract will substantially lower member electric costs and provide a greater degree of budget stability. However, there is no risk -free choice when it comes to contracting for future energy deliveries. While the price for power to be delivered under the PPA is fixed and will not be subject to uncertainties associated with either volatile natural gas prices or potential fuel or capacity supply shortages, there are other risks that each potential participating member must carefully evaluate before committing to the long-term contract. Neither the CAPP Board nor any of its consultants can guarantee future gas prices, the continued linkage between natural gas pricing and electric pricing, or that any participants to the PPA will act in a particular manner. In the Disclosure Statement included in this package, we name and describe the known risks associated with participation in the long-term contract. It is important that you review the information in the Disclosure Statement. An acknowledgement and acceptance of the risks identified in the Disclosure Statement must occur with the approval of the Member Contract. Additionally, the transaction is dependent upon timely completion of a number of events including approval of signed Member Contracts by the Attorney General, the sale of CAPP bonds, closing the transaction by December 23, 2008, and making the prepayment to Seller in sufficient time to arrange the scheduling of power deliveries to be effective January 1, 2009. Although preliminary communication about the PPA has taken place, CAPP cannot guarantee approval of the Attorney General or acceptance by the financial markets. To provide context for the risks and uncertainties listed by the Disclosure Statement, the following discussion provides the Board's perspective on some of the identified risks. It is our intention that this information will help you evaluate long-term contract issues. The Board's perception of the known risks is not intended to be a substitute for individual member due diligence, but provides an explanation why the CAPP Board endorses participation in the long-term contract as the most economically attractive alternative despite these identified risks. The Board's perspective regarding the identified risks is informed by several sources. At least some part of every monthly CAPP Board meeting for the past three years has been spent discussing aspects of the long-term power supply arrangements, including the uncertainties and risks described in the attached Disclosure Statement. In addition to its reliance upon legal advice from CAPP's General Counsel, Geoffrey Gay (Lloyd, Gosselink, Rochelle & Townsend), and the work of CAPP's energy consultants, R.J. Covington, the CAPP Board has retained bond counsel (McCall Parkhurst & Horton) and financial advisors (First Southwest) to arrange and address long-term contract issues, including those related to the prepayment of the capacity received pursuant to the PPA. CAPP's General Counsel has solicited advice from experienced bankruptcy counsel and a lawyer familiar with power contract issues in California. Page 8 September 11, 2008 The CAPP Board believes, but cannot guarantee that its pursuit of lower prices and known and fixed contract obligations will result in lower prices for electricity compared to market prices over the 24-year term of the PPA and make budgeting for electricity more predictable. Known risks associated with participation in the long-term contract include: 1. Bankruptcy of the Seller Considering that TXU, the predecessor company to Luminant, was the subject of the largest leveraged buyout in history and is presently operating with more than $40 billion of debt, issues related to the potential bankruptcy of Luminant or its parent company have received a great deal of scrutiny during the PPA negotiations and as part of the CAPP Board's consideration of the long-term contract. Of the approximately $46 billion borrowed to take the publicly traded TXU private, $26 billion was borrowed from lenders that were provided first -liens against all competitive assets of the former TXU. Lenders with first -liens include Citibank, Goldman Sachs, J. Aron & Company, JP Morgan Chase, Credit Suisse and others. These parties are considered "secured lenders." The remaining $20 billion was borrowed without providing security. By signing the PPA, CAPP will become a "Secured Commodity Hedge Counterparty" under the Security Documents. This means that CAPP will be in a first -lien secured position on equal footing with the secured lenders. Thus, CAPP will have a first -lien on all Luminant generation assets including the most valuable asset --Comanche Peak, the two unit nuclear plant near Glen Rose, Texas. The secured creditors, including CAPP, are protected under the existing Credit Agreement against dilution of the generation assets. Luminant retains the right to replace CAPP's lien at any time with letters of credit, cash or a guaranty from an investment grade rated guarantor. As part of its consideration of the long-term contract, the CAPP Board evaluated the potential for the supplier's bankruptcy and, if bankrupt, the value of CAPP's position as a first -lien holder. In the event of bankruptcy, the substantial Luminant generation assets will retain value (that value will depend upon current and future projections of natural gas prices at the time of bankruptcy.) While it is impossible to specifically quantify the future value of these generation assets, the CAPP Board was guided by the results of a stress test performed by Standard & Poor's ("S&P") in November 2007 (republished in the Spring of 2008.) S&P's stress test measured the effect on the value of Luminant's collateral in the event of a significant decline in natural gas prices over several years. While the value of the generation assets serving as collateral for the more than $40 billion in debt declined under these circumstances, S&P concluded that secured creditors (including CAPP) would have a rating of "1" — virtually guaranteeing recovery of all outstanding debt while unsecured creditors would have a rating of " 5" — virtually guaranteeing no recovery. Page 9 September 11, 2008 Other factors the Board considered that may mitigate the likelihood of bankruptcy despite the heavy debt burden include: • Substantial investment ($20 billion) of unsecured creditors including Berkshire Hathaway. Given the size of their investment, these unsecured creditors may provide additional loans to avoid the complete loss of investment. • The fact that Oncor, a regulated subsidiary, is a consistent source of revenues. Oncor is ring -fenced and allegedly protected against bankruptcy of the parent or affiliates, it nonetheless provides dividends and other cash to the parent. Oncor recently announced the sale of a 20 percent equity position for $1.3 billion. Bankruptcy of one or more of the sellers could alter the expected economics of the transaction. It is the Board's conclusion that bankruptcy would likely present more of a financial problem than an operational problem. The units supplying power under the PPA are necessary for the support of power on the Texas electric grid. Simultaneous loss of all seven units would cause an economic crisis for the State. Therefore, it is reasonable to assume that the units will continue to generate regardless of ownership and regardless of bankruptcy. The threat of bankruptcy comes down to whether a bankruptcy judge would set aside all, part, or none of the PPA. The PPA includes a provision that the parties intend for the contract to be honored as a forward contract. Despite this stated intention, it is possible that the bankruptcy judge would set the PPA aside if the determination is made that it is an executory contract. There have been recent cases where bankruptcy courts have taken into consideration "the public interest" in assessing obligations and rights of parties. The energy needs and good faith agreements of 150 political bodies may influence the bankruptcy judge to decide that preservation of the PPA is in the public interest. 2. Governmental assessments on emissions or greenhouse gases As part of its leveraged buyout, Luminant commits to reduce emissions from its fleet of new and existing plants. The Company's plan includes the installation of in -duct selective catalytic reduction ("SCR") systems at its Martin Lake plant and selective non -catalytic reduction systems at its Monticello and Big Brown plants. Luminant will improve the low - nitrogen oxide burner technology at one of its Monticello units to further reduce nitrogen oxide emissions. External SCR systems will be installed at the Sandow and new Oak Grove units. To reduce sulfur dioxide emissions and mercury emissions, Monticello and Big Brown plants will use coal -cleaning technology. Finally, to reduce mercury emissions, Luminant's entire fleet of plants will use activated carbon injection — a sorbent injection system technology. Page 10 September 11, 2008 The cost of Luminant's commitment to reduce emissions made pursuant to the LBO is not included in the price paid by members participating in the long-term contract. However, any new governmental assessment on coal generation or greenhouse gases will be passed onto CAPP as a pro-rata share of the power it receives from Luminant. The CAPP Board's consideration of the benefits and risks of the long-term contract included the likelihood that legislation levying a tax upon carbon dioxide emissions will be enacted at some point in the future. To the extent these charges are imposed on any unit providing power under the PPA, CAPP and the participating members will be responsible for a proportionate share (approximately 3%) of the cost in excess of operating expenses of $100,000 annually or capital expenses greater than $1,000,000 over the life of the financing. However, the Board believes but cannot guarantee that new governmental assessments will impact the price of power throughout the United States and will be reflected in the market price of power in the deregulated areas of Texas. As a result, the Board has reason to believe that despite future imposition of new governmental charges made under the PPA, the relative advantage of PPA pricing to market pricing will be preserved. 3. Early termination of the PPA that leaves CAPP and Participating Members owing more (to pay off the debt) than the amortized balance of CAPP's loan The PPA is a 24-year agreement, but any commercial contract can be breached when a party decides it is economically advantageous to do so. One of the most difficult and contentious parts of the contract negotiations of the PPA was Article 12 — Early Termination. The favorable pricing associated with the PPA is conditioned on a prepayment of three -fifths of the present value of the entire discounted purchase price. In considering various scenarios that give rise to early termination of the PPA, the CAPP Board's primary concern is that there is adequate protection for the portion of the prepayment associated with the unrealized term of the contract. In the event of early termination by the supplier, damages owed to CAPP include defeasance of the outstanding bond amount previously paid to Luminant. In addition, the PPA provides for liquidated damages not to exceed $120 million. If Texas Competitive Energy Holdings ("TCEH") does not or cannot pay any of the damages owed CAPP under the PPA, participating members may owe their prorated share of the approximately $400 million of CAPP's debt. Whether this hypothetical, worst case termination situation (consistent with the timing, but worse than the circumstances of the S&P stress test), would offset the potential benefit of the PPA's lower than market prices will depend upon the price of natural gas as it relates to the cost of electric power over the course of the next six years. 4. Legislatively mandated changes to the energy market structure Deregulating the Texas retail electric market was an enormous and extremely difficult undertaking, and key policymakers in Texas have never advocated undoing it. Moreover, dramatic market changes that came about because of the deregulation would make re- Page 11 September 11, 2008 regulation extremely difficult. For instance, what were previously some of the state's traditional utilities have unbundled into separate entities. It remains unclear how these units could be put back together. Major generation assets have been sold off to unregulated owners and billions of dollars of stranded costs payments have been ordered and are being paid. Undoing those changes would constitute high barriers to re -regulation. Even in the event of re -regulation of the Texas market or some other dramatic change, it is likely that the legislature would maintain its consistent position that existing contracts for electricity cannot be abrogated. 5. Restructuring or refinancing by Seller that leaves CAPP with collateral of lesser value The LBO financing package, which places CAPP on a first -lien security basis in all generation and competitive assets, is structured as a seven year deal that terminates in the Fall of 2014. It is possible that the PPA will potentially be in effect for 18 years beyond the financing agreements on which the PPA was predicated. Thus, the Substitute Collateral provisions (Section 9.2) of the PPA take on critical importance as the parties try to anticipate whether the Company will be refinanced, taken public or sold off in bits and pieces before the end of 2014. In the event that the seller replaces CAPP's existing first -lien security interest with a new collateral package when it refinances in 2014, the contract terms require that the new package pass several dilution tests. The CAPP Board will be diligently reviewing its security position throughout the life of the PPA, and particularly at the time of refinancing. There is nothing in the PPA that prevents CAPP from exercising its right of early termination in the event that the security supporting CAPP's prepayment becomes inadequate. The CAPP Board is hopeful that participating members receive the benefit of this contract for the full 24 years. However, even assuming that the contract is terminated prematurely, CAPP members should be made whole for the payment to Luminant through the defeasance provisions, receive some amount of liquidated damages, and have enjoyed millions of dollars in savings as compared to purchasing power in the retail market. 6. Deliberate non -delivery by Seller of contracted power such that payment of liquidated damages to CAPP for replacement energy potentially exceeds the cap on damages provided in the PPA forcing CAPP to declare an early termination of the PPA If the supplier intentionally fails to deliver contracted power, CAPP's remedies include the following: a. Penalty for failure to maintain 90% availability from the seven units on a rolling three-year average. b. Reimbursement for replacement power if the contract energy is available but not provided. Page 12 September 11, 2008 While we have every reason to believe that Luminant will operate in good faith, even in the event of prolonged default or deliberate withholding, CAPP has remedies to protect its prepayment. CAPP can elect to terminate the PPA. This may happen under certain circumstances where the provider fails to supply the contracted power, forcing CAPP to replace the power at current market rates and then seek compensation from seller for the replacement energy. In that situation, CAPP may be forced to declare the contract in default and trigger termination. Because any prior payments for withholding power, in the event of a termination payment to CAPP, are to be used as an offset based on a rolling 3 to 5 year average, it may be necessary for CAPP to defensively terminate the contract prematurely to ensure that damage payments remain adequate to defease CAPP's bond debt. The Board envisions a constant economic evaluation of whether to proceed with an early termination of the PPA if Luminant starts withholding power. Based upon projections by CAPP's consultants, in the event that Luminant withholds all contracted power, liquidated damages to fully compensate CAPP for procuring replacement power could amount to approximately $250,000 per day. Even if CAPP waits for 30 days before exercising its right of early termination and Luminant continues to withhold all power for that same period, liquidated damages for 30 days of replacement power amount to $7.5 million. While the early termination payment owed to CAPP would be reduced by the $7.5 million already paid by Luminant in this scenario, the early termination damage payments should remain adequate to defease CAPP's bond debt. To the extent Seller pays liquidated damages for withholding power in a nodal market, CAPP's price of replacement power would be equal to or less than the ERCOT clearing price, which is the price of power TCEH will receive at the same time. Therefore, TCEH should be economically indifferent to fulfilling its PPA obligation to CAPP or withholding power for an alternative sale and paying liquidated damages to CAPP. In other words, the supplier has no incentive to withhold power or fail to meet its obligation to provide power to CAPP. 7. Failure by one or more participating members to appropriate or pay amounts owed for power delivered under the PPA forcing Seller to declare CAPP in default and terminate the transaction Given that electricity is essential to providing city services, we believe that it is extremely unlikely that a participating member will fail to appropriate or pay for the power delivered. Regardless, the PPA does not contemplate joint and several liability for either the power provider or CAPP. Similarly, there is no joint and several liability for individual members pursuant to the Member Contract. In other words, no participating member of the long-term contract will be required to absorb the liabilities of another participating member. Page 13 September 11, 2008 8. Technological Advancements/Availability of Inexpensive Natural Gas The CAPP Board has pursued the long-term contract in order to achieve a great degree of budget stability and predictability for participating members by eliminating some of the price risks associated with natural gas price volatility. Current economic projections indicate that the Board's pursuit of known and fixed contractual obligations for capacity will in fact also result in lower prices for electricity compared to market prices over the 24-year term of the PPA. In the near term (5 years), no natural gas experts are predicting significant declines in the cost of natural gas. In fact, most experts indicate that natural gas prices are likely to increase, perhaps substantially, as liquefied natural gas becomes part of a worldwide commodity index. The Chairman of the Public Utility Commission of Texas testified earlier this summer that natural gas prices will continue to increase over the next several years. Given that it will take approximately ten years to bring new nuclear power plants on line and that wind power is not reliable for meeting baseload needs addressed in the PPA, the energy market will not likely use any proxy for determining electricity costs other than natural gas for the foreseeable future. Similarly, because of the capital intensive nature of electric infrastructure, it is likely to take years before the market price of electricity is affected by technological advancements. Nevertheless, the Board is cognizant that sometime during the term of the 24 year contract, the possibility exists that technological advancements may be made in the production of electricity or circumstances may occur such that natural gas prices decline substantially. If the CAPP Board's sole directive is to achieve the lowest possible electric price at all times, then these unknown and unforeseen scenarios may be reason not to commit to any long-term contract. However, potential technological advancements and declining natural gas prices will not diminish the stability and predictability of the power delivered pursuant to the PPA. In fact, the structure of the PPA (supplying a portion of participating members' power needs) enhances CAPP's ability to take advantage of technological advancements or changes in fuel prices, while also providing budgeting stability. MEMORANDUM TO: Members of Cities Aggregation Power Project, Inc. and South Texas Aggregation Power Project, Inc. FROM: Board of Directors, Cities Aggregation Power Project, Inc. ("CAPP") Board of Directors, South Texas Aggregation Power Project, Inc. ("STAP") DATE: September 10, 2008 SUBJECT: Risks and Considerations Disclosure to CAPP and STAP Members Potentially Participating in the Long Term Power Purchase Agreement -- MUST BE ACKNOWLEDGED BY EACH PARTICIPATING MEMBER This disclosure memorandum is intended to discuss some of the risks and considerations involved in (i) the proposed long term power purchase agreement ("PPA") between CAPP and Luminant Generation Company, LLC, Big Brown Power Company LLC and Oak Grove Management Company, LLC (collectively, "Seller") to provide electric capacity and energy to the members of CAPP who choose to participate in the financing of the PPA ("Participating Members") and (ii) the proposed CAPP-Participating Member Energy Sales Contract (the "Member Contract"), by which a Participating Member participates in the PPA. Such risks and considerations are not organized in any particular order of importance and each potential Participating Member must review and assess the whole of this memorandum. THIS MEMORANDUM IS NOT INTENDED TO PROVIDE A DETAILED EXPLANATION OF THE PPA MEMBER CONTRACT OR CAPP CONTRACT REVENUE BOND TRANSACTION OR TO PROVIDE AN ECONOMIC AND BUSINESS ANALYSIS OF SUCH TRANSACTION. THIS MEMORANDUM IS NOT, AND IS NOT INTENDED TO BE, A COMPLETE DISCUSSION OF ALL MATERIAL RISKS AND CONSIDERATIONS INVOLVED WITH THE PPA AND THE MEMBER CONTRACT. NO REPRESENTATION IS MADE BY CAPP, STAP OR THEIR RESPECTIVE LEGAL COUNSELS AND OTHER CONSULTANTS THAT ALL MATERIAL RISKS AND CONSIDERATIONS ARE DISCUSSED OR DESCRIBED IN THIS MEMORANDUM. Each potential Participating Member is advised to undertake its own assessment of the PPA, the Member Contract and the contemplated transactions described therein and herein. Copies of the most current forms of the PPA and the Member Contract are available from CAPP. In addition, this memorandum references certain external documents, reports and filings which CAPP will assist any potential Participating Member in obtaining; however, neither CAPP, STAP, their respective legal counsel and other consultants make any representation or warranty with respect to the information, statements or analysis contained in any such sources, as of the date of any such source or as of the date of this memorandum. RISKS AND CONSIDERATIONS PPA Seller's Leveraged Buvout and Security for Seller's Obligations under PPA Seller's ultimate parent entity, Energy Future Holdings Company ("EFH"), Energy Future Competitive Holdings Company ("EFCH") and Texas Competitive Electric Holdings Company, LLC ("TCEH"), borrowed approximately $46 billion in October 2007 to privately purchase, through a leveraged buyout, the publicly traded TXU Corp. ("TXU"), formerly the largest electric utility holding company within ERCOT (the "EFH LBO"). Approximately $26 billion was borrowed from Citibank, N.A., Goldman Sachs Credit Partners L.P., J. Aron & Company, JPMorgan Chase Bank, N.A., Credit Suisse and other lenders and parties who were provided a first lien security interest in the assets (excluding assets related to Oncor Electric Delivery Company, LLC), Seller and the certain other TCEH affiliates and subsidiaries (collectively, "TCEH Pledged Entities"), including all generation assets formerly owned by TXU. Another approximately $20 billion was borrowed through unsecured debt of EFH and TCEH. EFH, TCEH and EFCH each have credit ratings below investment grade or "junk" ratings. For a more complete description of the EFH LBO, EFCH and the associated credit ratings, see the presentation entitled "Energy Future Holdings Post Merger Overview," dated January 7, 2008; the publicly available filings of EFH with the U.S. Securities and Exchange Commission(www.energyfutureholdings.com/financial/) (the "SEC Filings"); and the Standard and Poor's Ratings Service ("S&P") reports of July 15, 2008 and March 21, 2008 (to the extent not superseded by the July 15, 2008 report) relating to EFH and the S&P report of October 11, 2007 (to the extent not superseded by the July 15, 2008 and March 21, 2008 reports) relating to TCEH (collectively, the "S&P Reports"). As to the S&P Reports, such reports reflect only the view of S&P, and CAPP makes no representation as to the appropriateness of such reports. There is no assurance that any of the facts, views or opinions reflected therein will continue for any given period of time or that they will not be revised or withdrawn entirely by S&P, if in the judgment of S&P, circumstances so warrant. The first lien security interest of the secured lenders/parties are governed by the various documents related to the EFH LBO financing, including the Credit Agreement, the Intercreditor Agreement, the Security Agreement, the Guarantee and the Pledge Agreement as well as other documents (collectively, the "LBO Financing Documents"). The PPA provides, as it relates to CAPP's rights and security with Seller, as follows (for purposes of this paragraph, undefined capitalized terms will have the meanings set forth in the aforementioned Intercreditor Agreement): 1. The PPA is a Secured Commodity Hedge and Power Sales Agreement under the Intercreditor Agreement and, under the LBO Financing Documents, the PPA is a Secured Obligation having a first lien security interest in the pledged assets of the TCEH Pledged Entities pari passu (on equal footing) with the other secured lenders. Thus, CAPP will have a 2 first lien on all pledged assets of the TCEH Pledged Entities including the Martin Lake, Big Brown and Oak Grove electric generation plants (the three electric generation facilities from which the unit contingent electric energy under the PPA are to be provided and collectively referred to as the "PPA Facilities") as well as Comanche Peak, the two unit nuclear electric generation plant near Glen Rose, Texas and other electric generating facilities owned by the TCEH Pledged Entities. 2. Each TCEH Pledged Entity has executed the Guarantee, guaranteeing the Secured Obligations of any other TCEH Pledged Entity, and such guarantee obligation is also a Secured Obligation. The PPA, as a Secured Obligation, is entitled to the benefits of the Guarantee. 3. The obligations of Seller under the PPA will be secured by an additional guaranty from TCEH. If Seller defaults under the PPA, CAPP would have a right to allege a default (under the LBO Financing Documents, e.g., the Credit Agreement) pursuant to the Intercreditor Agreement. (A payment default by Seller under the PPA is an event of default under the Credit Agreement to the extent such default exceeds $200 million; it is assumed that a Seller default under the PPA would exceed such amount through the term of the Credit Agreement of October 2014.) The Intercreditor Agreement provides, however, that it will be up to the Collateral Agent to declare a default. The Collateral Agent could be overruled or as the case may be, directed to initiate proceedings, by a majority of the secured lenders, but CAPP will likely have no real influence over such vote. If Seller defaults under the PPA, CAPP, it is assumed, may proceed against Seller, and against TCEH under its guaranty as an unsecured claim. The Credit Agreement provides certain protections to the various secured parties under the LBO Financing Documents, including CAPP, wherein the TCEH Pledged Entities have covenanted and agreed to certain borrowing and lien structure restrictions giving the secured parties (and permitted future secured parties) some degree of anti - dilution protection. Reference is made to Article 10 of the Credit Agreement for the various negative covenants of the TCEH Pledged Entities relating to future borrowings and lien structures. The remaining term of the Credit Agreement is approximately six (6) years and ends in October 2014. Therefore, prior to October 2014, the EFH LBO must be refinanced and the secured parties paid (or otherwise participate in such refinancing), with the exception of CAPP. CAPP, through the PPA, will be the sole secured party under the LBO Financing Documents whose agreement extends past October 2014 (the term of the PPA is through December 2032). TCEH has represented that, under the LBO Financing Documents, the TCEH Pledged Entities have an obligation to repay at least one percent (1 %) of the secured debt annually. It is not known how much additional debt the TCEH Pledged Entities may incur between now and 2014, and CAPP can make no assurances with respect thereto. 3 If CAPP and Seller each meet their respective obligations under the PPA, the security provisions related to the Seller's obligations under the PPA should not be an issue, other than security to CAPP for Seller's future performance under the PPA. The security for the Seller's obligations under the PPA becomes critically important if Seller fails to perform under the PPA or otherwise defaults under the PPA. Article 9 of the PPA addresses the security for Seller's obligations under the PPA and reference is made to that article. Within Section 9.2 of the PPA, Seller may, in certain circumstances, substitute the pledged collateral with other collateral such as letters of credit, cash or a guaranty from an investment grade rated guarantor ("Substitute Collateral"). Additionally, Section 9.2 of the PPA provides for Seller to refinance the existing LBO Financing Documents and replace the existing collateral pursuant to a new financing package with new collateral ("New Collateral Refinancing") which permits some dilution from value of the security under the LBO Financing Documents existing immediately prior to such refinancing, and which provides CAPP with a first lien on equal footing with other lenders (subject to other liens which may be permitted by the documents related to the New Collateral Refinancing). Seller's Financial Strength and Resources through the Term of the PPA Fundamental to any decision to participate in the transactions contemplated in the PPA and the Member Contract is the financial viability of Seller and the TCEH Pledged Entities over the term of the PPA. While Seller's obligations under the PPA are secured by a first lien security interest in certain assets of the TCEH Pledged Entities, Seller's ability to meet its obligations under the PPA are dependent on its financial resources and viability to perform (as well as its willingness to do so). No assurances can be given regarding the financial strength or viability of Seller, TCEH or the other TCEH Pledged Entities or the ability of such entities to meet their obligations with respect to the PPA and the LBO Financing Documents. Limitation of Remedies: Damages Available under the PPA The PPA does not provide for the agreement to be enforced by specific performance against either party thereto (i.e., a court directing (i) Seller to meet their obligations to provide electric energy and capacity under the terms of the agreement or (ii) CAPP to accept and pay for electric energy under the terms of the agreement). To the extent a default is declared and such default is not cured, Seller and CAPP have limited remedies. It should be noted that if Seller fails to schedule energy for CAPP from the PPA Facilities when such facilities are available or to otherwise provide alternate energy, Seller is required to pay CAPP "liquidated damages" equal to the cost of any replacement energy acquired by CAPP to replace the electric energy withheld by Seller less the energy price as provided in the PPA ("Replacement Damages"); provided, however, Seller's withholding energy, for extended or repeated occasions, is a default under the PPA and CAPP may terminate the PPA in such an event. 4 The PPA provides a similar provision if CAPP fails to take and pay for electric energy. CAPP is required to pay Seller "Resale Damages" equal to the positive difference, if any, between the energy price as provided in the PPA less the sales price realized by Seller selling such electric energy; provided, however, CAPP's failure to pay for such electric energy, for extended or repeated occasions, is a default under the PPA and Seller may terminate the PPA in such an event. As CAPP will have paid 3/5 of the total electric cost under the PPA as a capacity payment, CAPP believes it is a remote possibility that Resale Damages will ever occur. Seller and CAPP have also agreed on liquidated damages that do not reflect the actual economic loss of either party at the time of termination of the PPA as a result of a default. The amount of such liquidated damages is explained below. Upon a Seller default under the PPA and CAPP's election to terminate the PPA, the parties have agreed to liquidated damages through the payment of a Buyer Termination Payment (provided in Article 12 of the PPA and reference is made to such article). Liquidated damages, being the Buyer Termination Payment, is provided to be the amount equal to (i) the percentage of the principal amount of the outstanding CAPP contract revenue bonds from the initial capacity payment made to Seller under the PPA related to the total initial principal amount of the CAPP contract revenue Bonds (Seller is not responsible for any costs of issuance or reserve fund portions of the CAPP contract revenue bond issue) (such percentage amount is referred to as "Seller's Bond Portion"), (ii) plus the greater of (a) the "make whole premium" related to the Seller's Bond Portion or (b) CAPP's economic damages, capped at $120 million ratably declining over the term of the PPA and (iii) less the aggregate amount of any Replacement Damages paid by Seller to CAPP over (1) the immediately preceding three (3) year period prior to any New Collateral Refinancing or (2) the immediately preceding five (5) year period following a New Collateral Refinancing. Under the PPA, Seller has the ability to make termination of the agreement more likely by defaulting if it determines that it can enter a more economically advantageous transaction by paying CAPP the Buyer Termination Payment. Upon a CAPP default under the PPA (presumably related to unmitigated non - appropriations by Participating Members resulting in CAPP's inability to pay Seller for electric energy under the PPA) and Seller's election to terminate the PPA, the parties have agreed to liquidated damages through the payment of a Seller Termination Payment (provided in Article 12 of the PPA). Liquidated damages, being the Seller Termination Payment, is provided to be the amount equal to (i) Seller's economic damages, capped at $120 million ratably declining over the term of the PPA, (ii) plus the present value of unpaid New Governmental Charges (as defined below) for which CAPP is responsible, (iii) less the aggregate amount of any Resale Damages paid by CAPP to Seller over certain time periods in the PPA, and (iv) plus an amount equal to the unearned portion of the CAPP capacity payment to Seller, determined on a monthly straight line amortization (as opposed to the actual bond amortization schedule) over the term of the PPA. In such an event of CAPP default, CAPP would not be able to defease all of its contract revenue bonds and a portion of each Participating Member's capacity payments under the CAPP-Participating Member Contract will remain, even though such Participating Members will not receive any electric energy through the then terminated PPA. W, Value ofSeller's First Lien Security Interest Assets CAPP is not aware of any asset valuation of the TCEH Pledged Entities' collateral undertaken with respect to the EFH LBO financing and there has been no current valuation relating to the PPA. CAPP cannot make any representation regarding the current or future value of collateral pledged under the LBO Financing Documents. Because the cost of electricity within ERCOT has historically been based on the cost of natural gas as a fuel source, it is assumed the value of the electric generation facilities comprising a substantial portion of the collateral pledged under the LBO Financing Documents, at any point in time, will depend heavily upon the price of natural gas and the assumptions related to the future prices of natural gas. Natural gas prices have been historically volatile and no prediction or estimate can be made regarding the future value of pledged collateral of the TCEH Pledged Entities. If the value of Seller's assets pledged as security under the PPA decreases, there is no requirement in the PPA for Seller to provide additional collateral to CAPP, and CAPP could experience the situation where the value of the collateral under the LBO Financing Documents is insufficient to cover the Secured Obligations under the LBO Financing Documents, including the PPA. If in the event of Bankruptcy, CAPP decides to terminate the PPA and collateral is insufficient to cover CAPP's security, CAPP would not be able to defease all of its contract revenue bonds and a portion of each Participating Member's capacity payments under the Member Contract will remain, even though such Participating Member will not receive any electric energy through the then terminated PPA. New Governmental Char-aes Under Article 20 of the PPA, CAPP and the Participating Members will be responsible for new governmental charges (taxes and required capital improvements at the PPA Facilities), which include the cost of potential carbon and green house gas remediation and taxes, assessments and other governmental impositions and compliance costs imposed on the PPA Facilities ("New Governmental Charges"). Certain taxes, such as income, employment and margin taxes are excluded. To the extent these charges are imposed on the PPA Facilities (all of which will be providing electricity to CAPP under the PPA), CAPP and the Participating Members will be responsible for a proportionate share of the cost of any such New Governmental Charges in excess of operating expenses of $100,000 annually or capital expenses greater than $1,000,000 over the term of the PPA. Such share of the PPA Facilities allocated to CAPP is approximately three percent (3%). To the extent these New Governmental Charges are imposed, the annual energy cost for which each Participating Member is responsible will increase to cover the proportionate share of such charges. M In the event of a default by CAPP and the PPA's termination, part of the Seller Termination Payment CAPP will be required to pay will be an amount relating to New Governmental Charges. It is important to understand that a termination of the PPA under circumstances of a CAPP default may result in a substantial portion of the CAPP bonds remaining outstanding. In the event of a default by Seller and the PPA's termination, CAPP will not be responsible for any continuing New Governmental Charges. Risk o Non -Appropriation by Participating Members The capacity payment from CAPP to Seller under the PPA purchases the electric capacity associated with the contract electricity and is approximately 3/5 of the total cost of electricity under the agreement. The annual capacity charge paid by each Participating Member under the Member Contract will be used to support the CAPP contract revenue bonds. These annual capacity charges will be secured by a pledge of the Participating Member's ad valorem taxes, will be debt under State law and will not be subject to non -appropriation. The annual energy payment, that is the remaining approximately 2/5 of the total cost of electricity under the PPA, is not secured by taxes, but is subject to annual appropriation by each Participating Member. Under the PPA, CAPP is obligated to purchase electric energy on an annual basis and pay for such electric energy. Under the Member Contract, a Participating Member will make its annual determination whether to purchase such electric energy to which it is entitled (pursuant to its acquisition of a portion of the electricity rights CAPP has obtained under the PPA). This purchase is subject to annual appropriation and dependent on each Participating Member appropriating funds in its annual budget for its share of electric energy under the Member Contract. If a Participating Member fails to appropriate in any year, CAPP should have three options to either mitigate or eliminate the potential negative consequences of any such non - appropriation. CAPP presently believes its options include: (i) selling the available electric energy to other Participating Members (or the non -appropriating Participating Member assigning its rights to a willing and appropriating Participating Member); (ii) selling the electric energy into the ERCOT wholesale market through a series of short-term sales; or (iii) requesting Seller to resell the energy. It is anticipated that these options should effectively mitigate the risk of isolated non -appropriation of a small amount of CAPP's electric energy load (recognizing that only 2/5 of the electric energy's cost needs to be realized through such mitigating options). These mitigating options, however, only contemplate isolated non -appropriation by a small number of Participating Members. If non -appropriation occurs by a significant number of the Participating Members affecting a significant portion of CAPP's aggregated electric load under the PPA, such occurrence may result in CAPP defaulting under the PPA. The most likely reason for such wide scale non -appropriations would be that the cost of the electric energy portion under the PPA and the CAPP-Participating Member Contract is more than the then projected market price for electric energy for an extended period. In the event that CAPP defaults under the PPA as a result of the failure by some Participating Members to appropriate funds for the purchase of electricity, Seller may declare a default under the PPA and terminate the agreement. In such event, none of the Participating Members will receive electricity under the PPA, without regard to whether a particular member appropriated or non -appropriated for electric energy. Further, no Participating member will have a claim for damages against CAPP. If CAPP could not sell the electric energy, as described above, TCEH would have the ability to terminate the PPA and demand a Buyer Termination Payment from CAPP, as explained above in the section "PPA — Limitation of Remedies; Damages Available Under the PPA." This situation would leave the Participating Members with some portion of their debt under the CAPP Participating Member Contract remaining outstanding and the Participating Members would not receive any electric energy under the PPA. Defeasance ofCAPP's Bonds Will Not Be Realized i Seller Defaults in Certain Events In the event of a Seller default, the Seller will only be responsible for the Seller Bond Portion and, at least the "make whole redemption premium" related thereto. Funds from a Buyer Termination Payment will only partially defease the CAPP contract revenue bonds — the portion of CAPP bonds issued relating to any reserve fund for the CAPP bonds or the portion issued to pay costs of issuance of the CAPP contract revenue bonds will remain outstanding. Under this scenario, the Participating Members could be in a situation where they are levying and collecting an ad valorem tax to make their capacity payment (debt service obligation) to CAPP under the CAPP-Participating Member Contract, although they may no longer be receiving any energy under the PPA. If this were to occur, there is the potential for Participating Members to collectively be responsible for up to approximately $12 million of CAPP's remaining contract revenue bonds. Seller has the ability to offset a portion of the Buyer Termination Payment under the PPA by paying Replacement Damages to CAPP when Seller fails to schedule energy from the units when such energy is available. Such Replacement Damages paid (1) the immediately preceding three (3) year period prior to any New Collateral Refinancing or (2) the immediately preceding five (5) year period following a New Collateral Refinancing will be subtracted from any Buyer Termination Payment owed by Seller. Seller receives a rolling three to five year credit for such Replacement Damages payment, while reducing the potential Buyer Termination Payment to CAPP. As TCEH► s credit ratings improve, a portion of the amount secured by the first lien security interest decreases in an amount equal to the Credit Threshold (as defined in the PPA). Therefore, if TCEH, as guarantor, were to become more credit -worthy and yet still declare bankruptcy and CAPP terminates the PPA, a portion of the Buyer Termination Payment due to CAPP (the make -whole price of CAPP► s contract revenue bonds) will be an unsecured claim (i.e., not secured by the first lien security interest under the LBO Financing Documents) and CAPP will not have the benefit of the other secured creditors. While the Credit Threshold gives Seller an economic incentive to improve its financial integrity and thus reduce the financial risk s to CAPP, it could also serve to expose CAPP to unsecured credit risk by reducing the amount of CAPP's first lien security. New Collateral Refinancin-a/Substitute Collateral As discussed earlier, CAPP cannot control or predict the future ownership or structure of Seller or the TCEH Pledged Entities. As the LBO Financing Documents expire in October 2014 and will likely be refinanced in some fashion (otherwise the PPA will have been terminated or otherwise secured by Substitute Collateral), no assurances can be given regarding the financing structure related to the New Collateral Refinancing, the value and nature of any related new collateral or the amount and nature of any related debt secured by such collateral. While provisions relating to Substitute Collateral seem to contemplate substitution that is applicable only to CAPP, the PPA does not specifically require such. The New Collateral Refinancing provision in the PPA, Section 9.2(b), provides that the EFH LBO and the LBO Financing Documents will be refinanced and collateral under the LBO Financing Documents may be replaced with "substantially similar" collateral (to the collateral existing immediately prior to such refinancing) on a continuing "pari passu" first lien basis with other lenders. The PPA provides, however, that such lien may be subject to other liens provided for in the documents related to the New Collateral Refinancing. The PPA provides that the collateral related to a New Collateral Refinancing shall be substantially similar in substance to the collateral existing immediately prior to such refinancing as reasonably determined by Seller in good faith. Further, collateral meeting prescribed dilution tests will be automatically deemed to be "substantially similar." While the dilution tests obligate Seller to maintain an asset valuation to debt ratio equivalent to the ratio in play today, it must be noted that the test functionally excludes swap and hedge transactions of TCEH Pledged Entities. Various TCEH Pledged Entities may continuously and actively engage in such transactions. With such swap and hedge transactions excluded, the protection provided to CAPP by the dilution test cannot be determined until a New Collateral Refinancing occurs. CAPP may be obligated to accept the New Collateral Refinancing securing Seller's obligations under the PPA that may be of less value than the collateral under the LBO Financing Documents immediately prior to such refinancing. Additionally, the TCEH guaranty of the Seller's obligations under the PPA is required to be in place for the entire term of the PPA and it is anticipated such guaranty will be secured by the collateral relating to the New Collateral Refinancing Substitute Collateral or other acceptable collateral. However, if such guaranty is not secured, CAPP has potential unsecured credit exposure to the extent CAPP must rely on such TCEH guaranty for payment of the PPA. Unit Contingent Nature of PPA; Extended Force Majeure May Prevent Realization of Economic Benefits Under the PPA, CAPP is entitled to a portion of the electric capacity from each plant comprising the PPA Facilities. Seller's obligation to provide such capacity and electric energy is conditioned on the respective PPA Facilities plants being capable of operating. To the extent 9 there are planned outages or unplanned outages which constitute an event of Force Majeure under the PPA, Seller is not obligated to provide electric energy to CAPP from such affected plants. Sellers are required under the PPA (sections 6.3, 12 and 15.6) to operate and maintain the PPA Facilities according to Prudent Industry Practices, which includes all existing and future Laws. However, CAPP has not undertaken any examination or inspection of the PPA Facilities. If an event of Force Majeure occurs, such as the destruction of a portion of the PPA Facilities contracted for electric supply under the PPA, Seller is partially excused from performing under the PPA and the rights and obligations under the PPA will be suspended. The Participating Members would not be receiving a portion of the contract energy under the CAPP- Participating Member Contract since Seller is not required to provide electric energy to CAPP under the PPA, and CAPP and the Participating Members would have to find other sources of electric energy (including a "wrap" contract) in the event of an extended Force Majeure, while still being liable to pay for its portion of the capacity payment pursuant to the CAPP- Participating Member Contract. TCEH/Seller Bankruptcy If Seller files bankruptcy, this will not happen in a vacuum. It likely will be preceded by months of negotiation with threats of filing bankruptcy. There likely will be ample time to renegotiate the PPA if CAPP so desires. In the event of bankruptcy, the PPA will remain in effect unless it is specifically set aside. Electricity should continue to be provided by the facilities under contract. The risks of bankruptcy include: 1. Adequacy of collateral in the event of termination. The PPA contains an ipso facto clause providing that bankruptcy is a default, giving CAPP the right to terminate the agreement if it desires. The decision of whether to terminate would depend upon the value of assets and market prices for electricity at the time, neither of which can be predicted by CAPP. 2. Whether the PPA will be regarded as a forward contract or an executory agreement. The PPA specifies on its face that it is a "forward contract," but such statement does not bind a Bankruptcy Court. However, if the contract terms are not honored because the Court concludes the PPA is "executory," the likely result would be a renegotiated price closer to the then market rate. CAPP cannot predict what a future judge with broad discretion may rule. 3. The forum for bankruptcy may be Delaware, rather than Texas. TCEH is a Delaware corporation, but venue for pledged entities may be elsewhere. Competing courts will likely have to resolve a venue contest. 4. Whether the Court will apply a "business judgment" test (favoring Seller) or a "public interest" test (favoring CAPP). It is unknown whether courts would apply a heightened public interest standard for electrical energy supply to political subdivisions. 10 Other Risks and Considerations There are other events or developments that could impact the transactions contemplated in the PPA and Member Contract including: • future regulatory changes, including actions of the State legislature, Public Utility Commission of Texas and ERCOT affecting the competitive electric utility industry; • future technological advances in electric generation and transmission such as development of new electric generation resources, including new nuclear power plants, higher efficiency coal and natural gas generation plants, high efficiency electric transmission and/or advances in alternative sources of electricity (wind, solar and etc.); • discovery of additional large scale natural gas reserves or the development of large scale liquefied natural gas ("LNG") facilities in the United States to utilize overseas LNG supplies and transportation facilities and/or a sustained long-term decrease of the price of natural gas; future environmental regulation of coal-fired electric generation facilities generally could impact the transaction contemplated in the PPA, including New Governmental Charges; and • financial markets react to various factors that CAPP can neither predict nor control. Savings protections related to the PPA are dependent upon financing and debt issuance costs that in turn will be influenced by interest rates that will depend upon risk perceptions of financial markets. CAPP can offer no assurances regarding what rates will be applicable when debt is issued or ultimately repaid. MEMBER CONTRACT Effect on a QO±s Debt/Bonding Capacity There is a possibility that the contract could have negative credit rating implications on Participating Members. General discussions with the various credit rating agencies have occurred and will continue taking place to inform them of the transaction so they can make educated credit rating decisions regarding the Participating Members. It is possible that the capacity payment (debt obligation) of the Participating Members under the Member Contract will adversely impact any given Participating Member's bonding capacity and credit rating by any or all of the rating agencies. Each rating agency will have questions and analysis regarding the structure and there has been no definitive answer regarding how each rating agency will view this obligation. It is possible that each rating agency may view this obligation differently. Subject to Annual Appropriation Obligation May Be Viewed as a General Obligation In the event of a non -appropriation by a Participating Member, rating agencies may view the provision of energy to a Participating Member's electric accounts as a governmental function. The Participating Member's failure to appropriate may be considered a default by one or more credit rating agency on the Participating Member's general obligation debt, regardless of the fact that a Participating Member has the choice to appropriate or not. Further risks regarding non -appropriation were addressed in section "PPA - Risk of Non -Appropriation by Participating Members" above. Obligation to Levy Ad Valorem Tax As discussed in prior sections above, the Member Contract obligates each Participating Member to pledge ad valorem taxes to pay for its portion of the capacity payment that CAPP is paying to Seller to acquire energy capacity over the 24 year term of the PPA. The capacity payment under the Member Contract is a debt of the Participating Member municipality which is subject to enforcement by a mandamus action brought by the trustee related to CAPP's contract revenue bonds against a Participating Member municipality to levy taxes sufficient within the limits prescribed by law to make such payments. In the event of a termination of the PPA, there are a number of situations in which CAPP would not be able to defease all of its contract revenue bonds and a portion of each Participating Member's capacity payments under the CAPP-Participating Member Contract would remain, even though such Participating Member will not receive any electric energy through the then terminated PPA. Such situations are discussed above. Acknowledgment This Disclosure Memorandum dated September 10, 2008 is acknowledged and accepted by the undersigned on behalf of the Participating Member indicated below. The governing body of such Participating Member has taken official action acknowledging its understanding of the risks and considerations discussed or described in this Disclosure Memorandum and has formally authorized and directed the undersigned to execute this Disclosure Memorandum on behalf of the Participating Member. Participating Member By: Title: Date: 12 I 1�� p TOWN SPER. To: Mayor and Town Council ENGINEERING From: Hulon T. Webb, Jr., P.E., Director of Development Services/Town Engineer CC: Mike Land, Town Manager Re: Item No. 12 -- Town Council Meeting — September 23, 2008 Date: September 18, 2008 Agenda Item: Consider and act upon a change order #1 to Quality Excavation, Ltd., for the Prosper Trail Culvert Extension Project. Description of Agenda Item: At the February 12, 2008, Town Council Meeting, Quality Excavation, Ltd., was awarded a contract in the amount of $240,803.80 to extend the existing box culverts at Prosper Trail to facilitate the future widening of Prosper Trail from Preston Road to the Tollway. In order to complete the project, construction of the following additional safety measures are needed and were not accounted for in the design of the project: • Extension of the proposed retaining wall along the east side of the access driveway to the channel to safely mitigate the existing grade of the adjacent property. ($3,200) • Installation of concrete rip -rap along the access driveway adjacent to a Wye inlet to prevent erosion. ($1,240) Budoet Impact: There is currently $300,000 funded from the 2006 CO Bonds of which $19,990 has been approved for engineering design and $5,000 for a Storm Water Pollution Prevention Plan. The $4,440.00 cost for the change order is to be funded from the 2006 CO Bonds, Project #06-06. Leaal Obliaations and Review: No legal review of this request by the Town's Attorney is required. Attached Documents: The following documentation is being provided for review: • Change Order #1 Board. Committee and/or Staff Recommendation: Town staff recommends that the Town Council approve the Change Order #1 in the amount of $4,400.00 to Quality Excavation, Ltd., for the Prosper Trail Culvert Extension Project. Agenda Item No. 12 - Page 1 of 1 CHANGE ORDER Number 40t QUALITY EXCAVATION, LTD. 5620 Highway 377 Aubrey, Texas 76227 Ph. 940.365.0800 Fax 940.365.5961 Submitted To: Town of Prosper 121 W. Broadway Prosper, TX Location of Work Prosper Trail Culvert Extension Item No. Quantity Unit Description of Work Unit Cost Total 1 1 2 2 LS Raise Headwall to Match Existing Grade LS 10' X 15' Concrete Rip Rap Total Change Order $ 3,200.00 $ 3,200.00 $ 1,240.00 $ 1,240.00 $ 4,440.00 Quality Excavation, LTD. Ron Davis Acceptance of Proposal Notes: Date