OFFICIAL STATEMENT Ratings:

Fitch: "AA"
Dated May 8, 2020 S&P: "AA"
(See "OTHER INFORMATION -
NEW ISSUE - Book-Entry-Only RATINGS" herein)

In the opinion of Bond Counsel (defined below), under current law and subject to conditions described in the section "TAX MATTERS –
Tax Exemption" herein, interest on the Bonds (defined below) (a) is not included in gross income for federal income tax purposes and (b)
is not an item of tax preference for purposes of the federal alternative minimum income tax. A holder may be subject to other federal tax
consequences as described in the section "TAX MATTERS."

THE BONDS ARE DESIGNATED AS "QUALIFIED TAX-EXEMPT OBLIGATIONS" FOR FINANCIAL INSTITUTIONS

$6,835,000
CITY OF SUGAR LAND, TEXAS
(Fort Bend County)
WATERWORKS AND SEWER SYSTEM REVENUE BONDS, SERIES 2020

Dated Date: April 15, 2020

Delivery Date: May 28, 2020 Due: August 15, as shown on inside cover

PAYMENT TERMS . . . Interest on the $6,835,000 City of Sugar Land, Texas Waterworks and Sewer System Revenue Bonds, Series 2020
(the "Bonds") will accrue from May 28, 2020 (the "Delivery Date"), will be payable until maturity or prior redemption on February 15
and August 15 commencing August 15, 2020, and will be calculated on the basis of a 360-day year consisting of twelve 30-day months.
The definitive Bonds will be initially registered in the name of and delivered only to Cede & Co., the nominee of The Depository Trust
Company ("DTC"), pursuant to the Book-Entry-Only System described herein. Beneficial ownership of the Bonds may be acquired in
principal denominations of $5,000 or integral multiples thereof. No physical delivery of the Bonds will be made to the beneficial owners
thereof. Principal of, premium, if any, and interest on the Bonds will be payable by the Paying Agent/Registrar (defined below) to Cede
& Co., which will make distribution of the amounts so paid to the participating members of DTC for subsequent payment to the
beneficial owners of the Bonds. See "THE BONDS - BOOK-ENTRY-ONLY SYSTEM" herein. The initial paying agent/registrar for the
Bonds is The Bank of New York Mellon Trust Company, N.A., Dallas, Texas (the "PAYING AGENT/REGISTRAR") (see "THE BONDS -
PAYING AGENT/REGISTRAR").

AUTHORITY FOR ISSUANCE/SECURITY FOR PAYMENT . . . The Bonds are issued pursuant to the general laws of the State of Texas,
particularly Chapters 1371 and 1502, Texas Government Code, and an ordinance (the "Bond Ordinance") passed by the City Council and
as Pricing Certificate executed by an authorized officer of the District (the "Pricing Certificate") and together with the Bond Ordinance,
the "Ordinance" authorizing the issuance of the Bonds. The Bonds are special obligations of the City of Sugar Land, Texas (the "City"),
payable, both as to principal and interest, solely from and secured by a first lien on and pledge of the Net Revenues (defined herein) of
the City's waterworks and sanitary sewer system (the "System"). The City has not covenanted nor obligated itself to pay the Bonds from
monies raised or to be raised from taxation (see "THE BONDS - AUTHORITY FOR ISSUANCE" and "-SECURITY AND SOURCE OF PAYMENT").

PURPOSE . . . Proceeds from the sale of the Bonds will be used (i) for collection system rehabilitation, lift station rehabilitation, easement
acquisition, wastewater plant rehabilitation, groundwater plant improvement, well rehabilitation, distribution and water storage tank
rehabilitation and (ii) to pay the costs incurred in connection with the issuance of the Bonds.
______________________________

MATURITY SCHEDULE

See page 2
_______________________________

OPTIONAL REDEMPTION . . . The City reserves the right, at its option, to redeem Bonds having stated maturities on and after August 15,
2029, in whole or from time to time in part in principal amounts of $5,000 or any integral multiple thereof, on August 15, 2028, or any
date thereafter, at the par value thereof plus accrued interest to the date of redemption (see "THE BONDS - OPTIONAL REDEMPTION").

MANDATORY SINKING FUND REDEMPTION . . . In addition, the Bonds Maturing August 15, 2033, August 15, 2035, August 15, 2037 and
August 15, 2039 (the "Term Bonds") are also subject to mandatory sinking fund redemption in part prior to maturity at the price of par
plus accrued interest to the redemption date (see "THE BONDS – MANDATORY SINKING FUND REDEMPTION").

LEGALITY . . . The Bonds are offered for delivery when, as and if issued and received by the Underwriters set forth below (the
"Underwriters") and subject to the approving opinion of the Attorney General of Texas and the opinion of Hunton Andrews Kurth, LLP,
Houston, Texas, Bond Counsel (see APPENDIX C, "FORMS OF BOND COUNSEL'S OPINION"). Certain legal matters will be passed
upon for the Underwriters by McCall, Parkhurst & Horton L.L.P., Houston, Texas, Counsel for the Underwriters.

DELIVERY . . . It is expected that the Bonds will be available for delivery through DTC on May 28, 2020.

BAIRD BOK FINANCIAL SECURITIES, INC.

 MATURITY SCHEDULE

$6,835,000 Waterworks and Sewer System Revenue Bonds, Series 2020

M aturity Interest Price or CUSIP M aturity Interest Price or CUSIP

Principal* August 15 Rate Yield (1) Numbers (2) Principal* August 15 Rate Yield (1) Numbers (2)
$ 115,000 2020 5.000% 1.150% 864881SL2 $ 290,000 2026 5.000% 1.720% 864881SS7
235,000 2021 5.000% 1.180% 864881SM 0 305,000 2027 5.000% 1.800% 864881ST5
245,000 2022 5.000% 1.310% 864881SN8 320,000 2028 5.000% 1.910% 864881SU2
260,000 2023 5.000% 1.420% 864881SP3 335,000 2029 (3) 4.000% 2.010% (4) 864881SV0
275,000 2024 3.000% 1.530% 864881SQ1 350,000 2030 (3) 4.000% 2.040% (4) 864881SW8
280,000 2025 3.000% 1.630% 864881SR9 360,000 2031 (3) 4.000% 2.100% (4) 864881SX6

$765,000 4.000% TERM BOND DUE AUGUST 15, 2033 (3) PRICED TO YIELD 2.240% (1) (4) - CUSIP 864881SZ1 (2)
$830,000 4.000% TERM BOND DUE AUGUST 15, 2035 (3) PRICED TO YIELD 2.300% (1) (4) - CUSIP 864881TB3 (2)
$900,000 4.000% TERM BOND DUE AUGUST 15, 2037 (3) PRICED TO YIELD 2.370% (1) (4) - CUSIP 864881TD9 (2)
$970,000 4.000% TERM BOND DUE AUGUST 15, 2039 (3) PRICED TO YIELD 2.450% (1) (4) - CUSIP 864881TF4 (2)

(1) The initial reoffering prices or yields on the Bonds are furnished by the Underwriters and represent the initial offering prices or
yields to the public, which may be changed by the Underwriters at any time.
(2) CUSIP numbers have been assigned to the Bonds by CUSIP Global Services, managed by S&P Global Market Intelligence on
behalf of the American Bankers Association, and are included solely for the convenience of the beneficial owners of the Bonds.
Neither the City nor the Underwriters of the Bonds is responsible for the selection or correctness of the CUSIP numbers set forth
herein.
(3) The Bonds maturing on or after August 15, 2029 are subject to redemption, at the option of the City, on August 15, 2028, or any
date thereafter, at the par value thereof plus accrued interest to the date of redemption. See "THE BONDS – OPTIONAL
REDEMPTION." In addition, the Bonds maturing on August 15, 2033, August 15, 2035, August 15, 3037 and August 15, 2039 (the
"Term Bonds") are also subject to mandatory sinking fund redemption in part prior to maturity at the price of par plus accrued
interest to the redemption date.
(4) Yield calculated based on the assumption that the Bonds denoted and sold at a premium will be redeemed on August 15, 2028, the
first optional call date for such Bonds, at a redemption price of par, plus accrued interest to the redemption date.

2
 CITY OFFICIALS, STAFF AND CONSULTANTS

ELECTED OFFICIALS

City Council Occupation Position

Joe R. Zimmerman Engineer M ayor
Himesh Gandhi Attorney Councilmember At Large Position 1
Jennifer J. Lane Substitute Teacher Councilmember At Large Position 2
Steve R. Porter Retired Councilmember Single M ember District 1
Naushad Kermally M obile Technology Councilmember Single M ember District 2
Stewart Jacobson Financial Planning Councilmember Single M ember District 3
Carol K. M cCutcheon Retired (Engineer) Councilmember Single M ember District 4

APPOINTED OFFICIALS

Year
Name Position Employed
M ichael W. Goodrum City M anager 2020
Doug Brinkley Assistant City M anager 2005
Chris Steubing Assistant City M anager 2006
Jennifer M ay Assistant City M anager 2006
Jennifer Brown Director of Finance 2000
M eredith Riede City Attorney 2013
Thomas Harris III City Secretary 2016
Robert Valenzuela Director of Public Works 2009

CONSULTANTS AND ADVISORS

Certified Public Accountants ............................................................................................................................... Whitley Penn, LLP

Houston, Texas

Bond Counsel ......................................................................................................................................... Hunton Andrews Kurth LLP

Houston, Texas

Financial Advisor ............................................................................................................................................ Hilltop Securities, Inc.

Houston, Texas

3
This Official Statement, which includes the cover page and the Appendices hereto, does not constitute an offer to sell or the solicitation
of an offer to buy in any jurisdiction to any person to whom it is unlawful to make such offer, solicitation or sale.

No dealer, broker, salesperson or other person has been authorized to give information or to make any representation other than those
contained in this Official Statement, and, if given or made, such other information or representations must not be relied upon.

The information set forth herein has been obtained from the City and other sources believed to be reliable, but such information is not
guaranteed as to accuracy or completeness and is not to be construed as the promise or guarantee of the Financial Advisor or the
Underwriters. This Official Statement contains, in part, estimates and matters of opinion which are not intended as statements of fact,
and no representation is made as to the correctness of such estimates and opinions, or that they will be realized.

None of the City, Bond Counsel, the Financial Advisor or the Underwriters make any representation or warranty with respect to the
information contained in this Official Statement regarding the Depository Trust Company ("DTC") or its book-entry-only system as
described under "THE BONDS -Book-Entry-Only System" as such information has been provided by DTC.

The information and expressions of opinion contained herein are subject to change without notice, and neither the delivery of this
Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in
the affairs of the City or other matters described herein since the date hereof. See "CONTINUING DISCLOSURE OF INFORMATION"
for a description of the City’s undertaking to provide certain information on a continuing basis.

THE BONDS HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, IN RELIANCE UPON EXEMPTIONS
CONTAINED IN SUCH ACT. THE REGISTRATION OR QUALIFICATION OF THE BONDS IN ACCORDANCE WITH APPLICABLE
PROVISIONS OF SECURITIES LAW OF THE STATES IN WHICH THE BONDS HAVE BEEN REGISTERED OR QUALIFIED AND
THE EXEMPTION FROM REGISTRATION OR QUALIFICATION IN OTHER STATES CANNOT BE REGARDED AS A
RECOMMENDATION THEREOF.

This Official Statement contains "Forward-Looking" statements within the meaning of Section 21E of the Securities and Exchange Act of
1934. Such statements may involve known and unknown risks, uncertainties and other factors which may cause the actual results,
performance and achievements to be different from the future results, performance and achievements expressed or implied by such
forward-looking statements. Investors are cautioned that the actual results could differ materially from those set forth in the forward-
looking statements.

The prices and other terms respecting the offering and sale of the Bonds may be changed from time to time by the Underwriters after
such Bonds are released for sale, and the Bonds may be offered and sold at prices other than the initial offering prices, including sales
to dealers who may sell the Bonds into investment accounts.

The Underwriters have provided the following sentence for inclusion in this Official Statement. The Underwriters have reviewed the
information in this Official Statement pursuant to their respective responsibilities to investors under the federal securities laws, but the
Underwriters do not guarantee the accuracy or completeness of such information.

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT TRANSACTIONS THAT
STABILIZE OR MAINTAIN THE MARKET PRICES OF THE BONDS AT A LEVEL ABOVE THAT WHICH MIGHT
OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY
TIME.

4
 TABLE OF CONTENTS

MATURITY SCHEDULE ....................................................... 2 MUNICIPAL UTILITY DISTRICTS WITHIN THE

CITY ................................................................................... 20
CITY OFFICIALS, STAFF AND CONSULTANTS ............. 3
ELECTED OFFICIALS ................................................................. 3
APPOINTED OFFICIALS ............................................................. 3 SELECTED PROVISIONS OF THE ORDINANCE .......... 21
CONSULTANTS AND ADVISORS ................................................. 3 DEFINITIONS.......................................................................... 21
RATES AND CHARGES ............................................................ 21
OFFICIAL STATEMENT SUMMARY ................................. 6 SPECIAL FUNDS ..................................................................... 22
FLOW OF FUNDS .................................................................... 22
FINANCIAL HIGHLIGHTS ................................................... 7 INTEREST AND SINKING FUND ................................................ 22
RESERVE FUND...................................................................... 22
INTRODUCTION .................................................................... 8 ADDITIONAL BONDS .............................................................. 23
DESCRIPTION OF THE CITY ....................................................... 8
CITY........................................................................................ 23
PLAN OF FINANCING ........................................................... 8 GOVERNMENTAL STRUCTURE ................................................ 23
PURPOSE .................................................................................. 8 LOCATION OF THE CITY ......................................................... 23
SOURCES AND USES OF FUNDS ................................................. 8 SERVICES PROVIDED BY THE CITY ......................................... 23
INFECTIOUS DISEASE OUTBREAK – COVID-19 ...................... 24
THE BONDS ............................................................................. 9 HURRICANE HARVEY............................................................. 24
DESCRIPTION OF THE BONDS .................................................... 9 PERIODIC FLOODING .............................................................. 25
AUTHORITY FOR ISSUANCE....................................................... 9 FINANCIAL ACCOUNTING ....................................................... 25
SECURITY AND SOURCE OF PAYMENT ....................................... 9 BUDGETING ........................................................................... 25
PLEDGED REVENUES ................................................................ 9 INVESTMENTS ........................................................................ 26
OPTIONAL REDEMPTION ........................................................... 9 LEGAL INVESTMENTS ............................................................ 26
MANDATORY SINKING FUND REDEMPTION............................. 10 INVESTMENT POLICIES ........................................................... 27
NOTICE OF REDEMPTION ........................................................ 10 ADDITIONAL PROVISIONS ...................................................... 27
DEFEASANCE ......................................................................... 10 CURRENT INVESTMENTS ........................................................ 27
ADDITIONAL BONDS .............................................................. 10
BOOK-ENTRY-ONLY SYSTEM ................................................. 10 ANNEXATION POLICY ...................................................... 28
USE OF CERTAIN TERMS IN OTHER SECTIONS OF THIS
OFFICIAL STATEMENT ........................................................ 12 TAX MATTERS..................................................................... 28
EFFECT OF TERMINATION OF BOOK-ENTRY-ONLY OPINIONS OF BOND COUNSEL ................................................ 28
SYSTEM ............................................................................. 12 OTHER TAX MATTERS ........................................................... 28
PAYING AGENT/REGISTRAR ................................................... 12 BOND PREMIUM .................................................................... 29
TRANSFER, EXCHANGE, AND REGISTRATION .......................... 12
RECORD DATE FOR INTEREST PAYMENT ................................. 13 CONTINUING DISCLOSURE OF INFORMATION ........ 29
BONDHOLDERS’ REMEDIES .................................................... 13 ANNUAL REPORTS ................................................................. 29
EVENT NOTICES .................................................................... 29
WATERWORKS AND SEWER SYSTEM .......................... 14 AVAILABILITY OF INFORMATION ............................................ 30
GENERAL ............................................................................... 14 LIMITATIONS AND AMENDMENTS........................................... 30
GROUNDWATER REDUCTION PLAN & SURFACE COMPLIANCE WITH PRIOR UNDERTAKINGS ............................ 30
WATER FEES...................................................................... 14
HISTORICAL WATER CONSUMPTION ....................................... 15 OTHER INFORMATION ..................................................... 30
TEN LARGEST WATER CUSTOMERS ........................................ 15 RATINGS ............................................................................... 30
MONTHLY WATER RATES ...................................................... 15 LITIGATION ........................................................................... 30
MONTHLY WASTEWATER RATES ............................................ 16 REGISTRATION AND QUALIFICATION OF BONDS FOR
MONTHLY SURFACE WATER RATES ....................................... 16 SALE ................................................................................. 31
LEGAL INVESTMENTS AND ELIGIBILITY TO SECURE
CITY WATER AND WASTEWATER FUND PUBLIC FUNDS IN TEXAS ................................................... 31
OPERATING STATEMENT ............................................ 17 LEGAL MATTERS ................................................................... 31
COMPUTATION OF SELF-SUPPORTING WATERWORKS FINANCIAL ADVISOR ............................................................. 31
AND SEWER SYSTEM DEBT ................................................. 17 UNDERWRITING ..................................................................... 32
COVERAGE AND FUND BALANCES .......................................... 18 FORWARD-LOOKING STATEMENTS DISCLAIMER .................... 32
ENVIRONMENTAL REGULATIONS ........................................... 32
DEBT INFORMATION ......................................................... 18 AIR QUALITY ........................................................................ 32
PRO-FORMA WATERWORKS AND SEWER SYSTEM MISCELLANEOUS ................................................................... 33
REVENUE DEBT SERVICE REQUIREMENTS .......................... 18
SURFACE WATER FUND DEBT SERVICE APPENDICES
REQUIREMENTS ................................................................. 19 GENERAL INFORMATION REGARDING THE CITY ... A
AUTHORIZED BUT UNISSUED REVENUE BONDS ...................... 19 EXCERPTS FROM THE COMPREHENSIVE
ANTICIPATED ISSUANCE OF REVENUE BONDS ......................... 19 ANNUAL FINANCIAL REPORT ............................... B
PENSION FUND ....................................................................... 19 FORM OF BOND COUNSEL'S OPINION.................... C
OTHER POST-EMPLOYMENT BENEFITS ................................... 19
The cover page hereof, this page, the appendices
included herein and any addenda, supplement or
amendment hereto, are part of the Official Statement.

5
 OFFICIAL STATEMENT SUMMARY

This summary is subject in all respects to the more complete information and definitions contained or incorporated in this
Official Statement. The offering of the Bonds to potential investors is made only by means of this entire Official Statement. No
person is authorized to detach this summary from this Official Statement or to otherwise use it without the entire Official
Statement.

THE CITY ..................................... The City of Sugar Land, Texas (the "City") is a political subdivision and home rule
municipality of the State of Texas (the "State"), located in Fort Bend County, Texas. The
City covers approximately 42.9 square miles (see "INTRODUCTION - DESCRIPTION OF THE
CITY" and "THE CITY").

THE BONDS .................................. The Bonds are issued as $6,835,000 Waterworks and Sewer System Revenue Bonds, Series
2020 (the "Bonds"). The Bonds are issued as serial bonds maturing on August 15 in the years
2020 through 2031, inclusive, and as term bonds maturing August 15, 2033, August 15, 2035,
August 15, 2037 and August 15, 2039 (the "Term Bonds") (see "THE BONDS - DESCRIPTION
OF THE BONDS" and "- MANDATORY SINKING FUND REDEMPTION").

PAYMENT OF INTEREST .............. Interest on the Bonds accrues from May 28, 2020, and is payable August 15, 2020, and each
February 15 and August 15 thereafter until maturity or prior redemption (see "THE BONDS -
DESCRIPTION OF THE BONDS" and "THE BONDS - OPTIONAL REDEMPTION").

AUTHORITY FOR ISSUANCE.......... The Bonds are issued pursuant to the general laws of the State, particularly Chapters 1371 and
1502, Texas Government Code, and an ordinance passed by the City Council of the City and
a pricing certificate authorizing the issuance of the Bonds (together, the "Ordinance") (see
"THE BONDS - AUTHORITY FOR ISSUANCE").

SECURITY FOR THE BONDS .......... The Bonds constitute special obligations of the City, payable, both as to principal and interest,
solely from and secured by a first lien on and pledge of the Net Revenues (defined herein) of
the System (defined herein). Owners of the Bonds are not entitled to demand payment of
the Bonds out of any money raised or to be raised by taxation (see "THE BONDS -
SECURITY AND SOURCE OF PAYMENT").

REDEMPTION ............................... The City reserves the right, at its option, to redeem Bonds having stated maturities on and
after August 15, 2029, in whole or from time to time in part in principal amounts of $5,000 or
any integral multiple thereof, on August 15, 2028, or any date thereafter, at the par value
thereof plus accrued interest to the date of redemption (see "THE BONDS - OPTIONAL
REDEMPTION"). Additionally, the Term Bonds are subject to mandatory sinking fund
redemption as set forth herein (see "THE BONDS – MANDATORY SINKING FUND
REDEMPTION").

TAX EXEMPTION.......................... In the opinion of Bond Counsel, under current law and subject to conditions described in the
section "TAX MATTERS – Tax Exemption" herein, interest on the Bonds (a) is not included
in gross income for federal income tax purposes and (b) is not an item of tax preference for
purposes of the federal alternative minimum income tax. A holder may be subject to other
federal tax consequences as described in the section. The Bonds have been designated as
"Qualified Tax-Exempt Obligations" for Financial Institutions.

USE OF PROCEEDS ....................... Proceeds from the sale of the Bonds will be used (i) for collection system rehabilitation, lift
station rehabilitation, easement acquisition, wastewater plant rehabilitation, groundwater plant
improvement, well rehabilitation, distribution and water storage tank rehabilitation and (ii) to
pay the costs incurred in connection with the issuance of the Bonds.

RATINGS ...................................... The Bonds and presently outstanding system revenue debt of the City are rated "AA" by
Standard & Poor's Ratings Services, a Standard & Poor's Financial Services LLC business
("S&P") and "AA" by Fitch Ratings ("Fitch"), without regard to credit enhancement (see
"OTHER INFORMATION – RATINGS").

BOOK-ENTRY-ONLY SYSTEM...... The definitive Bonds will be initially registered in the name of and delivered only to Cede &
Co., the nominee of DTC pursuant to the Book-Entry-Only System described herein.
Beneficial ownership of the Bonds may be acquired in principal denominations of $5,000 or
integral multiples thereof. No physical delivery of the Bonds will be made to the beneficial
owners thereof. Principal of, premium, if any, and interest on the Bonds will be payable by
the Paying Agent/Registrar to Cede & Co., which will make distribution of the amounts so
paid to the participating members of DTC for subsequent payment to the beneficial owners of
the Bonds (see "THE BONDS - BOOK-ENTRY-ONLY SYSTEM").

PAYMENT RECORD ..................... The City has never defaulted in payment of its bonds.

6
 FINANCIAL HIGHLIGHTS

Waterworks and Sewer System Revenue Bonds Outstanding as of September 30, 2019…………………………………… $ 105,695,000
The Bonds……………………………………………………………………………………………………………………… 6,835,000
Total Revenue Debt……………………………………………………………………………………………………… $ 112,530,000

Waterworks and Sewer System Indebtedness Payable to City General Fund as of September 30, 2019 (1)………………… $ 81,925,000

City Water Connections (September 30, 2019)……………………………………………………………………………… 40,146

City Wastewater Connections (September 30, 2019)………………………………………………………………………… 37,795

Audited Waterworks and Sewer System Statement of Operations (September 30, 2019)
Total Revenues…………………………………………………………………………………………………………… $ 48,383,222
Total Expenses…………………………………………………………………………………………………………… 29,733,533
Waterworks and Sewer System Revenue Available for Debt Service………………………………………………… $ 18,649,689

M aximum Annual City Revenue Bond Debt Service (2020) (2)……………………………………………………………… $ 11,017,063
Coverage of M aximum Annual Revenue Bond Debt Service by September 30, 2019 Net Revenues Available……………… 1.69x

(1) A portion of the City’s Combination Tax and Revenue Certificates of Obligation, Series 2016 ("the Series 2016
Certificates") and General Obligation Refunding Bonds, Series 2017 ("the Series 2017 Bonds" and together with the Series
2016 Certificates, the "Surface Water Enterprise Obligations") are secured by a pledge of both ad valorem taxes and a
subordinate pledge of net revenues of the waterworks and sewer system after the payment of senior lien obligations such as
the Bonds; however, it is the intention and practice of the City to pay for the Surface Water Enterprise Obligations from net
revenues derived from the City’s waterworks and sewer system. Should waterworks and sewer system net revenues be
insufficient in any year to pay principal and interest on the Surface Water Enterprise Obligations, the City would be
required to levy a tax sufficient together with other available funds to pay principal of and interest on such debt. See
"GROUNDWATER REDUCTION PLAN AND SURFACE WATER FEES" herein. In the past, the City has paid other outstanding
certificates of obligation secured by pledges of ad valorem taxes and a subordinate pledge of the City’s waterworks and
sewer system primarily from ad valorem taxes.
(2) Projected, includes the Bonds. Does not include debt service on the Surface Water Enterprise Obligations.

REMAINDER OF THE PAGE INTENTIONALLY LEFT BLANK

7
 OFFICIAL STATEMENT

RELATING TO

$6,835,000
CITY OF SUGAR LAND, TEXAS
WATERWORKS AND SEWER SYSTEM REVENUE BONDS, SERIES 2020

INTRODUCTION

This Official Statement, which includes the Appendices hereto, provides certain information regarding the issuance of
$6,835,000 City of Sugar Land, Texas Waterworks and Sewer System Revenue Bonds, Series 2020 (the "Bonds"). Capitalized
terms used in this Official Statement have the same meanings assigned to such terms in the ordinance and the pricing certificate
executed on the date of sale of the Bonds which authorized the issuance of the Bonds (together, the "Ordinance"), except as
otherwise indicated herein (see "THE BONDS - AUTHORITY FOR ISSUANCE" and "SELECTED PROVISIONS OF THE
ORDINANCE").

There follows in this Official Statement descriptions of the Bonds and certain information regarding the City of Sugar Land,
Texas (the "City") and its finances. All descriptions of documents contained herein are only summaries and are qualified in their
entirety by reference to each such document. Copies of such documents may be obtained from the City's Financial Advisor,
Hilltop Securities, Inc., Houston, Texas.

This Official Statement speaks only as to its date, and the information contained herein is subject to change. A copy of the Final
Official Statement pertaining to the Bonds will be filed with the Municipal Securities Rulemaking Board through its Electronic
Municipal Markets Access (EMMA) system. See "CONTINUING DISCLOSURE OF INFORMATION" herein for a description
of the City's undertaking to provide certain information on a continuing basis. Capitalized terms used, but not defined herein,
will have the meanings ascribed thereto in the Ordinance.

DESCRIPTION OF THE CITY

The City is a municipal corporation, duly organized and existing under the laws of the State of Texas (the "State"), including the
City's Home Rule Charter. The City was incorporated in 1959 and first adopted its Home Rule Charter in November 1980. The
Charter provides for a Council-Manager form of government. The Council is composed of a Mayor and six Council Members,
two of whom are elected at large and four of whom are elected by district. The Mayor and Council all serve two-year terms.
The 2010 Census population for the City was 78,817; while the City estimates its 2020 population at 118,118. The City
encompasses 42.85 square miles.

PLAN OF FINANCING

PURPOSE

The Bonds are being issued (i) for collection system rehabilitation, lift station rehabilitation, easement acquisition, wastewater
plant rehabilitation, groundwater plant improvement, well rehabilitation, distribution and water storage tank rehabilitation and
(ii) to pay the costs incurred in connection with the issuance of the Bonds.

SOURCES AND USES OF FUNDS

The proceeds from the sale of the Bonds will be applied approximately as follows:

S ources of Funds
Par Amount $ 6,835,000.00
Premium 871,246.50
Total Sources $ 7,706,246.50

Uses of Funds
Deposit to the Project Fund $ 7,548,250.00
Underwriters' Discount 49,536.24
Costs of Issuance 108,460.26
Total Uses of Funds $ 7,706,246.50

8
 THE BONDS

DESCRIPTION OF THE BONDS

The Bonds are dated April 15, 2020, and mature, or are subject to mandatory redemption prior to maturity, on August 15 in each
of the years and in the amounts shown on the inside cover page hereof. Interest will be computed on the basis of a 360-day year
of twelve 30-day months, and will be payable until maturity or prior redemption on each February 15 and August 15,
commencing August 15, 2020. The definitive Bonds will be issued only in fully registered form in any integral multiple of
$5,000 for any one maturity and will be initially registered in the name of and delivered only to Cede & Co., the nominee of The
Depository Trust Company ("DTC") pursuant to the Book-Entry-Only System described herein. No physical delivery of the
Bonds will be made to the beneficial owners thereof. Principal of, premium, if any, and interest on the Bonds will be payable
by the Paying Agent/Registrar to Cede & Co., which will make distribution of the amounts so paid to the participating members
of DTC for subsequent payment to the beneficial owners of the Bonds. See "THE BONDS - BOOK-ENTRY-ONLY SYSTEM"
herein.

AUTHORITY FOR ISSUANCE

The Bonds are issued pursuant to the general laws of the State of Texas, particularly Chapters 1371 and 1502, Texas Government
Code and the Ordinance.

SECURITY AND SOURCE OF PAYMENT

The Bonds are special obligations of the City, and together with the City’s outstanding waterworks and sewer system revenue
bonds and any additional parity bonds which may be issued in the future, are payable from and secured by a first lien on and
pledge of the Net Revenues of the System. "Net Revenues" are defined in the Ordinance as all gross revenues remaining after
deducting Maintenance and Operation Expenses. "Maintenance and Operation Expenses" are defined in the Ordinance as
reasonable and necessary expenses of operation and maintenance of the System, including all salaries, labor, materials, repairs
and extensions necessary to render efficient service (but only such repairs and extensions as, in the judgment of the governing
body of the City, are necessary to keep the system in operation and render adequate service to the City and the inhabitants
thereof), and all payments under contracts now or hereafter defined as operating expenses by the State Legislature. Depreciation
shall never be considered as a Maintenance and Operation Expense.

As additional security, a Reserve Fund is required to be maintained in an amount at least equal to the average annual debt service
requirements of the Bonds, the outstanding revenue bonds and any additional bonds issued on a parity with the Bonds. Any
additional amount required to be accumulated in the Reserve Fund by reason of the issuance of the Bonds will be funded over a
sixty month period in accordance with the provisions of the Ordinance (see "SELECTED PROVISIONS OF THE
ORDINANCE").

PLEDGED REVENUES

The Net Revenues of the System are irrevocably pledged for the payment of the Bonds and interest thereon as provided in the
Ordinance. The Bonds, the outstanding revenue bonds and any additional bonds based on a parity with the Bonds under the
terms of the Ordinance are equally and ratably secured by a first lien on the Net Revenues of the System.

OPTIONAL REDEMPTION

The City reserves the right, at its option, to redeem Bonds having stated maturities on and after August 15, 2029, in whole or in
part in principal amounts of $5,000 or any integral multiple thereof, on August 15, 2028, or any date thereafter, at the par value
thereof plus accrued interest to the date of redemption. If less than all of the Bonds are to be redeemed, the City may select the
maturities of Bonds to be redeemed. If a Bond (or any portion of the principal sum thereof) shall have been called for
redemption and notice of such redemption shall have been given, such Bond (or the principal amount thereof to be redeemed)
shall become due and payable on such redemption date and interest thereon shall cease to accrue from and after the redemption
date, provided funds for the payment of the redemption price and accrued interest thereon are held by the Paying Agent/Registrar
on the redemption date.

9
MANDATORY SINKING FUND REDEMPTION

The Bonds maturing on August 15, 2033, August 15, 2035, August 15, 2037 and August 15, 2039 (the "Term Bonds") are
subject to mandatory sinking fund redemption prior to maturity on August 15 in each of the years and respective principal
amounts set forth below at a redemption price equal to 100% of the principal amount plus accrued interest to the date of
redemption:

Term Bond Due Term Bond Due

August 15, 2033 August 15, 2035
Redemption Principal Redemption Principal
Date Amount Date Amount
August 15, 2032 $ 375,000 August 15, 2034 $ 405,000
August 15, 2033* 390,000 August 15, 2035* 425,000
$ 765,000 $ 830,000
Term Bond Due Term Bond Due
August 15, 2037 August 15, 2039
Redemption Principal Redemption Principal
Date Amount Date Amount
August 15, 2036 $ 440,000 August 15, 2038 $ 475,000
August 15, 2037* 460,000 August 15, 2039* 495,000
$ 900,000 $ 970,000
*Stated Maturity.

The Paying Agent/Registrar (or DTC while the Bonds are in Book-Entry-Only form) will determine by lot or other random
method the Bonds or portions therof, to be redeemed on each Mandatory Redemption Date. The principal amount of the Term
Bonds required to be redeemed pursuant to the operation of such mandatory redemption provisions may be reduced, at the option
of the City, by the principal amount of Term Bonds of the same maturity which (i) shall have been acquired by the City at a price
not exceeding the principal amount of such Term Bonds plus accrued interest to the date of purchase and delivered to the Paying
Agent/Registrar for cancellation or (ii) shall have been redeemed pursuant to the optional redemption provisions and not
theretofore credited against a mandatory redemption requirement.

NOTICE OF REDEMPTION

Not less than thirty (30) days prior to a redemption date for the Bonds, the Paying Agent/Registrar shall cause a notice of
redemption to be sent by United States mail, first class, postage prepaid, to the registered owners of the Bonds to be redeemed, in
whole or in part, at the address of the registered owner appearing on the registration books of the Paying Agent/Registrar. ANY
NOTICE SO MAILED SHALL BE CONCLUSIVELY PRESUMED TO HAVE BEEN DULY GIVEN, WHETHER OR NOT
THE REGISTERED OWNER RECEIVES SUCH NOTICE. NOTICE HAVING BEEN SO GIVEN, THE BONDS CALLED
FOR REDEMPTION SHALL BECOME DUE AND PAYABLE ON THE SPECIFIED REDEMPTION DATE, AND
NOTWITHSTANDING THAT ANY BOND OR PORTION THEREOF HAS NOT BEEN SURRENDERED FOR PAYMENT,
INTEREST ON SUCH BOND OR PORTION THEREOF SHALL CEASE TO ACCRUE.

DEFEASANCE

The City reserves the right to discharge, defease, redeem or refund the Bonds in any manner now or hereafter permitted by law.

ADDITIONAL BONDS

The City may issue additional obligations payable from the Net Revenues on a parity with the Bonds, subject, however, to
complying with certain conditions in the Ordinance. See "SELECTED PROVISIONS OF THE ORDINANCE" for terms and
conditions to be satisfied for the issuance of additional bonds. The City anticipates the issuance of approximately $10 million in
additional parity bonds in the following calendar year. (See "DEBT INFORMATION - ANTICIPATED ISSUANCE OF REVENUE
BONDS").

BOOK-ENTRY-ONLY SYSTEM

This section describes how ownership of the Bonds is to be transferred and how the principal of, premium, if any, and interest on
the Bonds are to be paid to and credited by The Depository Trust Company ("DTC"), New York, New York, while the Bonds are
registered in its nominee name. The information in this section concerning DTC and the Book-Entry-Only System has been
provided by DTC for use in disclosure documents such as this Official Statement. The City believes the source of such
information to be reliable, but takes no responsibility for the accuracy or completeness thereof.

10
The City cannot and does not give any assurance that (1) DTC will distribute payments of debt service on the Bonds, or
redemption or other notices, to DTC Participants, (2) DTC Participants or others will distribute debt service payments paid to
DTC or its nominee (as the registered owner of the Bonds), or redemption or other notices, to the Beneficial Owners, or that they
will do so on a timely basis, or (3) DTC will serve and act in the manner described in this Official Statement. The current rules
applicable to DTC are on file with the Securities and Exchange Commission, and the current procedures of DTC to be followed
in dealing with DTC Participants are on file with DTC.

The Depository Trust Company ("DTC"), New York, NY, will act as securities depository for the Bonds. The Bonds will be
issued as fully-registered certificates registered in the name of Cede & Co. (DTC’s partnership nominee) or such other name as
may be requested by an authorized representative of DTC. One fully-registered Bond certificate will be issued for the Bonds, in
the aggregate principal amount of such issue, and will be deposited with DTC.

DTC, the world’s largest securities depository, is a limited-purpose trust company organized under the New York Banking Law,
a "banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a
"clearing corporation" within the meaning of the New York Uniform Commercial Code, and a "clearing agency" registered
pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for
over 3.5 million issues of U.S. and non U.S. equity, corporate and municipal debt issues, and money market instrument (from
over 100 countries) that DTC’s participants ("Direct Participants") deposit with DTC. DTC also facilitates the post-trade
settlement among Direct Participants of sales and other certificates transactions in deposited securities through electronic
computerized book-entry transfers and pledges between Direct Participants’ accounts. This eliminates the need for physical
movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks,
trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository
Trust & Clearing Corporation ("DTCC"). DTCC is the holding company for DTC, National Securities Clearing Corporation and
Fixed Income Clearing Corporation all of which are registered clearing agencies. DTCC is owned by the users of its regulated
subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers,
banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant,
either directly or indirectly ("Indirect Participants"). DTC has Standard & Poor’s rating: AA+. The DTC Rules applicable to its
Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at
www.dtcc.com and www.dtc.org.

Purchases of Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the
Bonds on DTC’s records. The ownership interest of each actual purchaser of each Obligation ("Beneficial Owner") is in turn to
be recorded on the Direct and Indirect Participants’ records. Beneficial Owners will not receive written confirmation from DTC
of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the
transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial
Owner entered into the transaction. Transfers of ownership interests in the Bonds are to be accomplished by entries made on the
books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates
representing their ownership interests in Bonds, except in the event that use of the book-entry system for the Bonds is
discontinued.

To facilitate subsequent transfers, all Bonds deposited by Direct Participants with DTC are registered in the name of DTC’s
partnership nominee, Cede & Co. or such other name as may be requested by an authorized representative of DTC. The deposit
of Bonds with DTC and their registration in the name of Cede & Co. or such other nominee do not effect any change in
beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Bonds; DTC’s records reflect only the
identity of the Direct Participants to whose accounts such Bonds are credited, which may or may not be the Beneficial Owners.
The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers.

Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants,
and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject
to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of Bonds may wish to take
certain steps to augment transmission to them of notices of significant events with respect to the Bonds, such as redemptions,
tenders, defaults, and proposed amendments to the certificate documents. For example, Beneficial Owners of Bonds may wish to
ascertain that the nominee holding the Bonds for their benefit has agreed to obtain and transmit notices to Beneficial Owners, in
the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of the
notices be provided directly to them.

Redemption notices shall be sent to DTC. If less than all of the Bonds within an issue are being redeemed, DTC’s practice is to
determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed.

Neither DTC nor Cede & Co. (nor such other DTC nominee) will consent or vote with respect to the Bonds unless authorized by
a Direct Participant in accordance with DTC’s MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to
Issuer as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.’s consenting or voting rights to those
Direct Participants to whose accounts the Bonds are credited on the record date (identified in a listing attached to the Omnibus
Proxy).

11
Payments on the Bonds will be made to Cede & Co., or such other nominee as may be requested by an authorized representative
of DTC. DTC’s practice is to credit Direct Participants’ accounts, upon DTC’s receipt of funds and corresponding detail
information from the City or Paying Agent/Registrar on payable date in accordance with their respective holdings shown on
DTC’s records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary
practices, as is the case with certificates held for the accounts of customers in bearer form or registered in "street name," and will
be the responsibility of such Participant and not of DTC nor its nominee, the City, or Paying Agent/Registrar, subject to any
statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds, distributions, and
dividend payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the
responsibility of the City or Paying Agent/Registrar, disbursement of such payments to Direct Participants will be the
responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and
Indirect Participants.

DTC may discontinue providing its services as securities depository with respect to the Bonds at any time by giving reasonable
notice to the City or Paying Agent/Registrar. Under such circumstances, in the event that a successor securities depository is not
obtained, physical Bond certificates are required to be printed and delivered.

The City may decide to discontinue use of the system of book-entry-only transfers through DTC (or a successor securities
depository). In that event, physical Bond certificates will be printed and delivered to DTC.

USE OF CERTAIN TERMS IN OTHER SECTIONS OF THIS OFFICIAL STATEMENT

In reading this Official Statement it should be understood that while the Bonds are in the Book-Entry-Only System, references in
other sections of this Official Statement to registered owners should be read to include the person for which the Participant
acquires an interest in the Bonds, but (i) all rights of ownership must be exercised through DTC and the Book-Entry-Only
System, and (ii) except as described above, notices that are to be given to registered owners under the Ordinance will be given
only to DTC.

EFFECT OF TERMINATION OF BOOK-ENTRY-ONLY SYSTEM

In the event that the Book-Entry-Only System is discontinued by DTC or the use of the Book-Entry-Only System is discontinued
by the City, printed physical Bonds will be issued to the holders and the Bonds will be subject to transfer, exchange and
registration provisions as set forth in the Ordinance and summarized under "THE BONDS - TRANSFER, EXCHANGE AND
REGISTRATION" below.

PAYING AGENT/REGISTRAR

The initial Paying Agent/Registrar is The Bank of New York Mellon Trust Company, N.A., Dallas, Texas. In the Ordinance, the
City retains the right to replace the Paying Agent/Registrar. The City covenants to maintain and provide a Paying
Agent/Registrar at all times until the Bonds are duly paid and any successor Paying Agent/Registrar shall be a commercial bank
or trust company organized under the laws of the State or other entity duly qualified and legally authorized to serve as and
perform the duties and services of Paying Agent/Registrar for the Bonds. Upon any change in the Paying Agent/Registrar for the
Bonds, the City agrees to promptly cause a written notice thereof to be sent to each registered owner of the Bonds by United
States mail, first class, postage prepaid, which notice shall also give the address of the new Paying Agent/Registrar.

Principal of the Bonds will be payable to the registered owner at maturity or prior redemption upon presentation at the
designated payment office of the Paying Agent/Registrar. Interest on the Bonds will be payable by check, dated as of the interest
payment date, and mailed by the Paying Agent/Registrar to registered owners as shown on the records of the Paying
Agent/Registrar on the Record Date (see "THE BONDS – RECORD DATE FOR INTEREST PAYMENT" herein), or by such other
method, acceptable to the Paying Agent/Registrar, requested by and at the risk and expense of, the registered owner. If the date
for the payment of the principal of or interest on the Bonds shall be a Saturday, Sunday, legal holiday, or day on which the
Paying Agent/Registrar is authorized by law or executive order to close, then the date for such payment shall be the next
succeeding business day which is not such a Saturday, Sunday, or legal holiday, or day on which the Paying Agent/Registrar is
authorized to close; and payment on such date shall have the same force and effect as if made on the original date payment was
due.

TRANSFER, EXCHANGE, AND REGISTRATION

In the event the Book-Entry-Only System should be discontinued, the Bonds may be transferred and exchanged on the
registration books of the Paying Agent/Registrar only upon presentation and surrender to the Paying Agent/Registrar and such
transfer or exchange shall be without expense or service charge to the registered owner, except for any tax or other governmental
charges required to be paid with respect to such registration, exchange and transfer. Bonds may be assigned by the execution of
an assignment form on the respective Bonds or by other instrument of transfer and assignment acceptable to the Paying
Agent/Registrar. New Bonds will be delivered by the Paying Agent/Registrar, in lieu of the Bonds being transferred or
exchanged, at the designated office of the Paying Agent/Registrar, or sent by United States mail, first class, postage prepaid, to
the new registered owner or its designee. To the extent possible, new Bonds issued in an exchange or transfer of Bonds will be

12
delivered to the registered owner or assignee of the registered owner in not more than three (3) business days after the receipt of
the Bonds to be canceled, and the written instrument of transfer or request for exchange duly executed by the registered owner or
its duly authorized agent, in form satisfactory to the Paying Agent/Registrar. New Bonds registered and delivered in an
exchange or transfer shall be in any integral multiple of $5,000 for any one maturity and for a like aggregate designated amount
as the Bonds surrendered for exchange or transfer. See "THE BONDS - BOOK-ENTRY-ONLY SYSTEM" herein for a description of
the system to be utilized initially in regard to ownership and transferability of the Bonds.

RECORD DATE FOR INTEREST PAYMENT

The record date ("Record Date") for the interest payable on the Bonds on any interest payment date means the close of business
on the last business day of the preceding month. In the event of a non-payment of interest on a scheduled payment date that
continues for thirty (30) days or more, a new record date for such interest payment (a "Special Record Date") will be established
by the Paying Agent/Registrar, if and when funds for the payment of such interest have been received from or on behalf of the
City. Notice of the Special Record Date and of the scheduled payment date of the past due interest ("Special Payment Date",
which shall be fifteen (15) days after the Special Record Date) shall be sent at least five (5) business days prior to the Special
Record Date by United States mail, first class postage prepaid, to the address of each owner of a Bond appearing on the
registration books of the Paying Agent/Registrar at the close of business on the last business day next preceding the date of
mailing of such notice.

BONDHOLDERS’ REMEDIES

The Ordinance does not specify events of default with respect to the Bonds. If the City defaults in the payment of principal,
interest, or redemption price on the Bonds when due, or if it fails to make payments into any fund or funds created in the
Ordinance, or defaults in the observation or performance of any other covenants, conditions, or obligations set forth in the
Ordinance, the registered owners may seek a writ of mandamus to compel City officials to carry out their legally imposed duties
with respect to the Bonds if there is no other available remedy at law to compel performance of the Bonds or Ordinance and the
City’s obligations are not uncertain or disputed. The issuance of a writ of mandamus is controlled by equitable principles, so
rests with the discretion of the court, but may not be arbitrarily refused. There is no acceleration of maturity of the Bonds in the
event of default and, consequently, the remedy of mandamus may have to be relied upon on a periodic basis. The Ordinance
does not provide for the appointment of a trustee to represent the interest of the bondholders upon any failure of the City to
perform in accordance with the terms of the Ordinance, or upon any other condition and accordingly all legal actions to enforce
such remedies would have to be undertaken at the initiative of, and be financed by, the registered owners.

On June 30, 2006, the Texas Supreme Court ruled in Tooke v. City of Mexia, 197 S.W.3rd 325 (Tex. 2006) that a waiver of
sovereign immunity in a contractual dispute must be provided for by statute in "clear and unambiguous" language. Because it is
unclear whether the Texas legislature has effectively waived the City’s sovereign immunity from a suit for money damages,
bondholders may not be able to bring such a suit against the City for breach of the Bonds or Ordinance covenants. In Tooke, the
Court noted the enactment in 2005 of sections 271.151-.160, Texas Local Government Code (the "Local Government Immunity
Waiver Act"), which, according to the Court, waives "immunity from suit for contract claims against most local governmental
entities in certain circumstances." The Local Government Immunity Waiver Act covers cities and relates to contracts entered
into by cities for providing goods or services to cities. The City is not aware of any Texas court construing the Local
Government Immunity Waiver Act in the context of whether contractual undertakings of local governments that relate to their
borrowing powers are contracts covered by the Act. Neither the remedy of mandamus nor any other type of injunctive relief was
at issue in Tooke, and it is unclear whether Tooke will be construed to have any effect with respect to the exercise of mandamus,
as such remedy has been interpreted by Texas courts. In general, Texas courts have held that a writ of mandamus may be issued
to require public officials to perform ministerial acts that clearly pertain to their duties. Texas courts have held that a ministerial
act is defined as a legal duty that is prescribed and defined with a precision and certainty that leaves nothing to the exercise of
discretion or judgment, though mandamus is not available to enforce purely contractual duties. However, mandamus may be
used to require a public officer to perform legally-imposed ministerial duties necessary for the performance of a valid contract to
which the State or a political subdivision of the State is a party (including the payment of monies due under a contract).

On April 1, 2016, the Texas Supreme Court ruled in Wasson Interests, Ltd. v. City of Jacksonville, 489 S.W. 3d 427 (Tex. 2016)
that sovereign immunity does not imbue a city with derivative immunity when it performs proprietary, as opposed to
governmental, functions in respect to contracts executed by a city. Texas jurisprudence has generally held that proprietary
functions are those conducted by a city in its private capacity, for the benefit only of those within its corporate limits, and not as
an arm of the government or under the authority or for the benefit of the state. In its decision, the Court held that since the Local
Government Immunity Waiver Act waives governmental immunity in certain breach of contract claims without addressing
whether the waiver applies to a governmental function or a proprietary function of a city, the Court could not reasonably read the
Local Government Immunity Waiver Act to evidence legislative intent to waive immunity when a city performs a proprietary
function.

Furthermore, the City is eligible to seek relief from its creditors under Chapter 9 of the U.S. Bankruptcy Code ("Chapter 9").
Although Chapter 9 provides for the recognition of a security interest represented by a specifically pledged source of revenues,
such provision is subject to judicial construction. Chapter 9 also includes an automatic stay provision that would prohibit,
without Bankruptcy Court approval, the prosecution of any other legal action by creditors or bondholders of an entity which has
sought protection under Chapter 9. Therefore, should the City avail itself of Chapter 9 protection from creditors, the ability to
enforce would be subject to the approval of the Bankruptcy Court (which could require that the action be heard in Bankruptcy
13
Court instead of other federal or state court); and the Bankruptcy Code provides for broad discretionary powers of a Bankruptcy
Court in administering any proceeding brought before it. The opinion of Bond Counsel will note that all opinions relative to the
enforceability of the Ordinance and the Bonds are qualified with respect to the limitations related to bankruptcy, insolvency,
reorganization, moratorium, or other similar laws affecting the rights of creditors of political subdivisions.

WATERWORKS AND SEWER SYSTEM

GENERAL

The City owns and operates its water supply, storage, and distribution facilities and provides services to approximately 40,000
customers. Wastewater treatment is provided by the Sugar Land Regional Sewerage System Plant and the South Wastewater
Treatment Plant (currently operated under contract by the Brazos River Authority). With the annexation of Greatwood and New
Territory in December 2017, the City took ownership and operations of the Greatwood and New Territory water and wastewater
systems. The City contracted with Si Environmental to operate the Greatwood and New Territory plants from the date of
annexation (December 12, 2017) through September 30, 2018. Total daily treatment capacity at the four plants is 17.35 million
gallons, and average daily treatment for the year ended September 30, 2019 is 10.88 million gallons.

The City's total water system consists of 576 miles of water mains serving 40,146 distribution connections as of September 30,
2019. The City's water is supplied by 23 groundwater wells and a surface water treatment plant to meet annual water demands of
7.14 billion gallons. Storage capacity is 19.7 million gallons in ground storage tanks and 6.2 million gallons in elevated storage
tanks.

For fiscal year ending September 30, 2019, the system had average daily production of 19.58 million gallons and a maximum
daily production capacity of 37.27 million gallons.

The City has entered into a contract with the Brazos River Authority (the "BRA") to operate all four wastewater treatment plants
beginning October 1, 2018. The annual payments to the BRA have been recorded in the City Water and Wastewater Fund as
operating expenses. Payments during the year ended September 30, 2019 to the BRA amounted to $2.8 million. Total payments
during the year ended September 30, 2020 are expected to be $2.93 million (including plant rehabilitation).

As of March 1, 2020, the City has outstanding $15,870,000 Waterworks and Sewer System Revenue Bonds, Series 2012,
$4,070,000 Waterworks and Sewer System Revenue Refunding Bonds, Series 2012A, $11,960,000 Waterworks and Sewer
System Revenue Bonds, Series 2013, $12,290,000 Waterworks and Sewer System Revenue and Refunding Bonds, Series 2015,
$29,145,000 Waterworks and Sewer System Revenue and Refunding Bonds, Series 2016, $18,470,000 Waterworks and Sewer
System Revenue Bonds Series 2017 (the "System Parity Bonds"), and $13,260,000 Waterworks and Sewer System Revenue
Bonds, Series 2019 (collectively, the "System Parity Bonds").

GROUNDWATER REDUCTION PLAN & SURFACE WATER FEES

To meet the Fort Bend Subsidence District ("FBSD") regulations, the City approved a Groundwater Reduction Plan ("GRP") that
outlines the City's planned strategies for meeting the mandated conversion to non-groundwater sources. Under the FBSD
regulations, 30% of the City’s total water demand must be supplied by sources other than groundwater by 2014 and 60% of the
City’s water demand must be supplied by sources other than groundwater by 2025. The City constructed a surface water
treatment plant ("SWTP") adjacent to Oyster Creek and Gannoway Lake along with other associated projects to implement the
phased conversion from groundwater to surface water. The SWTP was constructed for an initial production capacity of 9.0
million gallons per day (MGD) (Phase I), with capability for future expansion to 22.0 MGD (Phase II). The SWTP began
delivering water to City customers on November 4, 2013, and the City is currently meeting the 2014 conversion requirements.
In order to meet the 2025 conversion requirements, the City will consider options including the expansion of the SWTP and
water reuse among other options.

The City has established a Surface Water Division in the system utility fund to account for expenses associated with the
groundwater reduction efforts. Revenue from groundwater reduction fees paid by utility customers of the City are deposited into
the system utility fund from all GRP participants, including City utility customers. The fee is currently $1.93 per 1,000 gallons
pumped. The GRP fee combined with water and sewer user fees will be increased in amounts estimated to be sufficient to pay
the debt service on the City's System Parity Bonds, a portion of the City’s Combination Tax and Revenue Certificates of
Obligation, Series 2016 (the "Series 2016 Certificates") and the General Obligation Refunding Bonds, Series 2017 (the "Series
2017 Bonds" and together with the Series 2016 Certificates, the "Surface Water Enterprise Obligations") and the portion of
assumed municipal utility district debt that is allocated to the waterworks and wastewater enterprise system. The Surface Water
Enterprise Obligations are secured by a pledge of both ad valorem taxes and a subordinate pledge of net revenues of the City’s
waterworks and sewer system; however, it is the intention and practice of the City to pay for the Surface Water Enterprise
Obligations from such net revenues. Should there be a shortfall in available net revenues, the System Parity Bonds will be paid
prior to the Surface Water Enterprise Obligations from net revenues. The City would then be required to levy taxes sufficient
with other available funds to pay principal and interest on the Surface Water Enterprise Obligations, but taxes are levied annually
in September of each year and become delinquent by February 1, so that the City would need to anticipate the shortfall in order
to timely levy taxes. The surface water fund has a general purpose reserve equal to 50% of budgeted expenditures to account for
14
the delay in revenues from increased GRP fee or taxes levied to support the bonds. In the past, the City has paid other
outstanding certificates of obligation secured by pledges of ad valorem taxes and a subordinate pledge of the City's waterworks
and sewer system primarily from ad valorem taxes.

HISTORICAL WATER CONSUMPTION

City Water
and Sewer
Net Revenue
Fiscal Water Usage(2) Wastewater Revenues Bond Ensuing
Year Estimated Average M aximum Average Available Years'
Ended City Daily Daily Daily For Debt Debt Service Coverage
(1) (2) (3)
9/30 Population Production Production Treatment Service Requirements Of Debt
2015 86,972 15.350 25.840 8.65 $ 22,430,601 $ 8,881,591 2.53x
2016 87,504 15.510 31.000 8.59 25,063,673 9,594,044 2.61x
2017 87,730 15.990 30.787 8.49 20,243,437 10,707,194 1.89x
2018 118,023 20.100 36.200 10.75 21,875,595 10,583,023 2.07x
2019 118,118 19.580 37.270 10.88 18,649,689 10,965,788 1.70x

(1) Source: City of Sugar Land.

(2) Millions of gallons.
(3) Includes the Bonds and excludes the Surface Water Enterprise Obligations.

TEN LARGEST WATER CUSTOMERS (BASED ON GALLONS CONSUMED) AS OF SEPTEMBER 30, 2019

Fiscal 2019
Water Usage
Customer In Gallons
Ondeo Nalco Energy 109,619,000
Methodist Hospital 67,443,800
Crown Cork & Seal 64,101,000
Memorial Hermann Hospital 21,337,600
Alliance Residential Company 18,457,300
225 Fluor Daniel Dr LP 17,382,300
Sugar Land Marriott 17,011,000
St Lukes Sugar Land 16,423,500
Schlumberger 16,388,300
2222 Settlers Way LP 14,737,700
362,901,500

MONTHLY WATER RATES (EFFECTIVE JANUARY 1, 2020)

Residential users must pay consumption charges based on an increasing block volume rate for each 1,000 gallons of water, or
portion thereof, as follows:

Residential Block
0 to 3,000 0.95
3,001 - 10,000 1.1
10,001 - 20,000 1.5
over 20,000 1.72

15
Commercial users must pay consumption charges based on a uniform volume rate of $1.23 for each 1,000 gallons of water, or
portion thereof.

In addition to other charges, each residential and commercial user must pay a service charge based on water meter size as
follows:
Water
M eter Size (Inches) Service Charge
5/8 & 3/4 $ 8.38
1 13.08
1 1/2 34.77
2 54.12
3 116.82
4 323.16
6 632.63
8 790.29

Landscape users must pay usage charges based on a uniform seasonal volume rate for each 1,000 gallons of water, or portion
thereof, as follows:

Landscape M eters - Seasonal Rates Rate (per 1,000 gal)

Winter (Oct - Apr) $1.22
Summer (M ay - Sept) 1.53

MONTHLY WASTEWATER RATES (EFFECTIVE AS OF JANUARY 1, 2020)

Water and wastewater rates shall include a uniform volume charge of $3.05 for each 1,000 gallons of water, or portion thereof,
provided through the meter and a service charge based on the customer’s water meter size as follows:

Wastewater
M eter Size (Inches) Service Charge
5/8 & 3/4 $ 13.02
1 21.12
1 1/2 58.54
2 91.32
3 197.97
4 551.70
6 1,085.47
8 1,356.39

Residential customers are billed for monthly usage based on the average of January and February consumption. Commercial
users are charged wastewater based on 100% of water usage.

MONTHLY SURFACE WATER RATES (EFFECTIVE AS OF JANUARY 1, 2020)

In addition to other volume charges, residential, commercial and landscape customers pay $2.09 per 1,000 gallons based on
billed consumption for surface water. Participants in the City’s Groundwater Reduction Plan located outside the City’s corporate
boundaries pay a pumpage fee of $2.34 per 1,000 gallons based on pumpage for surface water conversion. Participants located
within the City’s corporate boundaries, including private well owners and homeowners associations, pay a pumpage fee of $1.93
per 1,000 gallons based on pumpage for surface water conversion. Municipal Utility Districts ("MUDs") served by the City’s
water system outside the City limits pay a surface water fee of $2.51 per 1,000 gallons for surface water. MUDs also pay $1.09
and $1.53, per 1,000 gallons of water and wastewater, respectively.

REMAINDER OF THE PAGE INTENTIONALLY LEFT BLANK

16
 CITY WATER AND WASTEWATER FUND OPERATING STATEMENT

The following statement sets forth in condensed form the historical results of the operation of the City’s Water and Wastewater
System. Accounting principles customarily employed in the determination of net revenues have been observed and in all
instances exclude depreciation and operating transfers.

Fiscal Year Ended September 30,

2019 2018 2017 2016 2015
Revenues:
Charges for Services $ 45,314,713 $ 49,862,417 $ 42,519,997 $ 46,140,497 $ 43,037,218
Interest on Investments 2,115,558 980,159 530,291 557,944 506,171
M iscellaneous 952,951 24,201 19,913 52,323 57,116
Total Revenues $ 48,383,222 $ 50,866,777 $ 43,070,201 $ 46,750,764 $ 43,600,505

Operating Expenses:
Personnel Services $ 6,608,781 $ 5,849,845 $ 5,508,150 $ 5,164,132 $ 4,475,827
Supplies and M aterials 324,246 316,883 248,284 216,851 270,725
Contractual Services 11,059,053 12,472,887 9,477,236 9,443,131 9,322,953
Repairs and M aintenance 9,932,318 8,798,244 6,555,794 5,980,763 6,157,559
Interfund Transfer to Employee Benefits Fund - - - - 107,022
Other Expenses 1,809,135 1,553,323 1,037,300 882,211 835,818
Total Operating Expenses $ 29,733,533 $ 28,991,182 $ 22,826,764 $ 21,687,088 $ 21,169,904

Net Revenue Available for Debt Service $ 18,649,689 $ 21,875,595 $ 20,243,437 $ 25,063,676 $ 22,430,601

(1)
Debt Service Requirements $ 10,965,788 $ 10,583,023 $ 10,707,194 $ 9,594,044 $ 8,881,591

Coverage 1.70x 2.07x 1.89x 2.61x 2.53x

Surplus Revenue Available $ 7,683,901 $ 11,292,572 $ 9,536,243 $ 15,469,632 $ 13,549,010

Water Connections 40,146 40,009 30,292 30,049 29,117

Wastewater Connections 37,795 37,688 28,432 28,214 27,371
________________
(1) Includes the Bonds.

COMPUTATION OF SELF-SUPPORTING WATERWORKS AND SEWER SYSTEM DEBT

Waterworks and Wastewater Utility S ystem

Net Revenues Available for Debt Service from Water and Wastewater Utilities (9/30/2019) $ 18,649,689
(1)
Water and Sewer System Revenue Bond Requirements (9/30/2020) 10,965,788
Balance $ 7,683,901
Budgeted Assumed M unicipal Utility District Debt Service Requirement (9/30/2020) (2) 5,846,973
Balance $ 1,836,928
The Surface Water Enterprise Obligations Debt Service Requirement (9/30/2020) (3) 5,685,094
(4)
Balance $ (3,848,166)
Percentage of Water and Sewer System General Obligation Bonds Self-Supporting 82.90%
_______________
(1) Includes the Bonds.
(2) The City budgets 100% of assumed municipal utility district debt service with System revenues. It is the City’s current
policy to provide these payments from System revenues; this policy is subject to change in the future. Assumed municipal
utility district debt service associated with bonds issued for drainage purposes is paid with ad valorem taxes.
(3) The limited System revenue pledge for the Surface Water Enterprise Obligations is subordinate to that of the Bonds. If Net
Revenues are not available and GRP fees are not increased to meet debt service requirements on the Surface Water
Enterprise Obligations, the City is required to levy ad valorem taxes to make such debt service payments.
(4) The City implemented a rate increase in January 2020. A rate study is currently in process and will help guide the City as to
future rate requirements.

REMAINDER OF THE PAGE INTENTIONALLY LEFT BLANK

17
COVERAGE AND FUND BALANCES

City System Net Revenue (September 30, 2019)………………………………………………………………… $ 18,649,689

(1)
2020 Principal and Interest Requirements………………………………………………………………………… $ 10,965,788
Coverage of 2020 Requirements by September 30, 2019 Net Revenues ………………………………………… 1.70x
(1)
Average Annual Principal and Interest Requirements (2020-2039)……………………………………………… $ 7,413,141
Coverage of Average Requirements by September 30, 2019 Net Revenue from Operations……………………… 2.52x
(1)
M aximum Future Principal and Interest Requirements (2022)…………………………………………………… $ 11,017,063
Coverage of M aximum Requirements by September 30, 2019 Net Revenue from Operations…………………… 1.69x
(1)
Waterworks and Sewer System Revenue Bonds Outstanding September 30, 2019……………………………… $ 112,530,000
(2)
Unrestricted Cash and Investments as of September 30, 2019…………………………………………………… $ 12,153,982

(1) Projected, includes the Bonds. Does not include debt service on the Surface Water Enterprise Obligations.
(2) Excludes Restricted and Capital Projects Funds.

DEBT INFORMATION

WATERWORKS AND SEWER SYSTEM REVENUE DEBT SERVICE REQUIREMENTS

Grand Percentage
Fiscal Year Outstanding Debt Service The Bonds (1) Total of Principal
Ending 9/30 Principal Interest Total Principal Interest Total Debt Service Retired
2020 $ 6,765,000 $ 4,024,713 $ 10,789,713 $ 115,000 $ 61,076 $ 176,076 $ 10,965,788
2021 6,695,000 3,795,763 10,490,763 235,000 279,800 514,800 11,005,563
2022 6,950,000 3,554,013 10,504,013 245,000 268,050 513,050 11,017,063
2023 6,900,000 3,289,013 10,189,013 260,000 255,800 515,800 10,704,813
2024 7,190,000 2,995,363 10,185,363 275,000 242,800 517,800 10,703,163 31.66%
2025 7,505,000 2,713,288 10,218,288 280,000 234,550 514,550 10,732,838
2026 7,835,000 2,386,600 10,221,600 290,000 226,150 516,150 10,737,750
2027 7,825,000 2,037,425 9,862,425 305,000 211,650 516,650 10,379,075
2028 8,155,000 1,715,900 9,870,900 320,000 196,400 516,400 10,387,300
2029 7,300,000 1,388,688 8,688,688 335,000 180,400 515,400 9,204,088 67.34%
2030 5,650,000 1,116,638 6,766,638 350,000 167,000 517,000 7,283,638
2031 5,605,000 937,538 6,542,538 360,000 153,000 513,000 7,055,538
2032 4,070,000 752,025 4,822,025 375,000 138,600 513,600 5,335,625
2033 4,215,000 610,000 4,825,000 390,000 123,600 513,600 5,338,600
2034 3,245,000 461,838 3,706,838 405,000 108,000 513,000 4,219,838 89.26%
2035 3,330,000 349,744 3,679,744 425,000 91,800 516,800 4,196,544
2036 2,555,000 234,719 2,789,719 440,000 74,800 514,800 3,304,519
2037 2,170,000 142,031 2,312,031 460,000 57,200 517,200 2,829,231
2038 850,000 65,063 915,063 475,000 38,800 513,800 1,428,863
2039 885,000 33,188 918,188 495,000 19,800 514,800 1,432,988 100.00%
$ 105,695,000 $ 32,603,544 $ 138,298,544 $ 6,835,000 $ 3,129,276 $ 9,964,276 $ 148,262,820

(1) Interest on the Bonds has been calculated using the rates stated on page 2 hereof.

REMAINDER OF THE PAGE INTENTIONALLY LEFT BLANK

18
SURFACE WATER FUND DEBT SERVICE REQUIREMENTS

Fiscal Currently Outstanding % of

Year Surface Water Enterprise Obligations (1) Principal
End 9/30 Principal Interest Debt Service Retired
2020 $ 2,340,000 $ 3,345,094 $ 5,685,094
2021 2,290,000 3,274,994 5,564,994
2022 2,400,000 3,180,669 5,580,669
2023 2,540,000 3,057,869 5,597,869
2024 2,685,000 2,927,969 5,612,969 14.96%
2025 2,825,000 2,790,994 5,615,994
2026 2,965,000 2,647,044 5,612,044
2027 3,110,000 2,496,844 5,606,844
2028 3,255,000 2,340,269 5,595,269
2029 3,420,000 2,175,519 5,595,519 33.97%
2030 3,590,000 2,002,019 5,592,019
2031 3,765,000 1,819,994 5,584,994
2032 3,945,000 1,648,394 5,593,394
2033 4,110,000 1,488,269 5,598,269
2034 4,270,000 1,321,669 5,591,669 57.99%
2035 4,445,000 1,148,394 5,593,394
2036 4,625,000 968,069 5,593,069
2037 4,705,000 782,019 5,487,019
2038 4,905,000 589,819 5,494,819
2039 5,080,000 412,344 5,492,344 86.99%
2040 5,245,000 251,016 5,496,016
2041 5,410,000 84,531 5,494,531 100.00%
$ 81,925,000 $ 40,753,797 $ 122,678,797

(1) The Surface Water Enterprise Obligations are secured by a pledge of both ad valorem taxes and a subordinate pledge of net
revenues of the waterworks and sewer system; however, it is the intention of the City to pay for them from net revenues
derived from the City’s waterworks and sewer system after the payment of senior lien obligations such as the Bonds.
Should waterworks and sewer system net revenues be insufficient in any year to pay principal and interest on the Surface
Water Enterprise Obligations, the City would be required to levy a tax sufficient together with other available funds to pay
principal of and interest on such debt.

AUTHORIZED BUT UNISSUED REVENUE BONDS

The City has no voted but unissued revenue bonds, as State law does not require the City to approve its revenue bonds through
an election.

ANTICIPATED ISSUANCE OF REVENUE BONDS

The City anticipates the issuance of approximately $10 million in additional parity bonds in the following calendar year.

PENSION FUND

The City provides pension benefits for all of its full-time employees through the Texas Municipal Retirement System ("TMRS"),
a State-wide pension plan. The City makes monthly contributions to the plan equal to the amounts accrued for pension expense.
(For more detailed information concerning the retirement plan, see City of Sugar Land Comprehensive Annual Financial Report-
Note 9).

OTHER POST-EMPLOYMENT BENEFITS

In addition to providing pension benefits through the TMRS, the City has opted to provide eligible retired employees with the
following post-employment benefits:

 Eligible retirees may purchase health insurance from the City's healthcare provider at the City's cost to cover current
employees.

19
  Eligible retirees may purchase health insurance for dependents from the City's healthcare provider at the City's cost to
cover current dependents of employees if the dependents were covered by City insurance when the employee retired.

The City recognizes its share of the costs of providing these benefits when paid, on a "pay-as-you-go" basis. These payments are
budgeted annually. The amount received for the fiscal year ending September 30, 2019 is $89,930. The appropriation for the
fiscal year ending September 30, 2020 is $122,407. At September 30, 2019, there were 226 retirees, 13 of whom participated in
the retiree health care coverage. (For more detailed information concerning the retiree health care plan, see APPENDIX B,
"EXCERPTS FROM THE CITY OF SUGAR LAND, TEXAS COMPREHENSIVE ANNUAL FINANCIAL REPORT" – Note # 9.)

(For more detailed information concerning the retiree health care plan, see APPENDIX B, "EXCERPTS FROM THE CITY OF SUGAR
LAND, TEXAS COMPREHENSIVE ANNUAL FINANCIAL REPORT" – Note # 9.)

MUNICIPAL UTILITY DISTRICTS WITHIN THE CITY

The City has entered into utility agreements with six municipal utility districts which are within the City's boundaries: Burney
Road Municipal Utility District, Fort Bend County Municipal Utility District Nos. 136, 137, 138 and 139 in Telfair and Fort
Bend Municipal Utility District No. 10 in Lake Pointe. Pursuant to the agreements, the districts are to acquire and construct
water, sanitary sewer, and drainage facilities to serve the area within the districts and may issue bonds to finance such facilities.
Such agreements provide the following:

(1) As water, sanitary sewer, and drainage facilities are acquired and constructed, the districts will transfer the facilities
to the City, reserving a security interest therein for the purpose of securing performance of the City under the
agreements. At such time as the bonds of the districts are discharged, the districts will release the security interest
and the City will own the improvements.

(2) The water and wastewater rates charged by the City will be equal and uniform to those charged other similar users
within the City, with all revenues belonging exclusively to the City.

(3) The City has agreed to pay the districts a tax rebate of the ad valorem taxes collected on land and improvements
within the districts. The rebates for the year ended September 30, 2019 were approximately $4,074,687. Estimated
payments for the period ending September 30, 2020 budget are $4,218,962.

The City has entered into agreements with various municipal utility districts, Fort Bend County and the City's extraterritorial
jurisdiction to provide fire services within the developments of Greatwood, Tara, New Territory, and Riverstone subdivisions.
The districts pay a fee for these services. In addition, Fort Bend County reimburses the City for calls made into the
unincorporated areas of the county. The City has received $1,063,784 from the participating municipal utility districts and Fort
Bend County in the year ending September 30, 2019 in connection with these agreements.

REMAINDER OF THE PAGE INTENTIONALLY LEFT BLANK

20
 SELECTED PROVISIONS OF THE ORDINANCE

The Ordinance authorizes the issuance and sale of the Bonds and prescribes terms, conditions, and provisions for the payment of
the principal of and interest on the Bonds by the City. Set forth below is a summary of certain provisions of the Ordinance.
Such summary is not a complete description of the entire Ordinance and is qualified by reference to the Ordinance, copies of
which are available from Hilltop Securities, Inc., the City’s Financial Advisor, upon request.

DEFINITIONS

"Additional Parity Bonds" means the additional parity revenue bonds permitted to be issued by the City pursuant to Section 6.1
of the Ordinance.

"Business Day" means any day that is not a Saturday, Sunday, or a day on which the Paying Agent/Registrar is authorized by
law or executive order to close.

"Outstanding Parity Bonds" means the outstanding bonds of the City’s Waterworks and Sewer System Revenue Bonds, Series
2012, the City’s Waterworks and Sewer System Revenue Refunding Bonds, Series 2012A, the City’s Waterworks and Sewer
System Revenue Bonds, Series 2013, the City’s Waterworks and Sewer System Revenue and Refunding Bonds, Series 2015, the
City’s Waterworks and Sewer System Revenue and Refunding Bonds, Series 2016, the City’s Waterworks and Sewer System
Revenue Bonds, Series 2017, and the City’s Waterworks and Sewer System Revenue Bonds, Series 2019.

"Owner" or "Registered Owner", when used with respect to any Bond means the person or entity in whose name such Bond is
registered in the Register. Any reference to a particular percentage or proportion of the Owners means the Owners at a particular
time of the specified percentage or proportion in aggregate principal amount of all Bonds then outstanding under the Ordinance,
exclusive of Bonds held by the City.

"Parity Bonds" means the Bonds, the Outstanding Parity Bonds, and each series of Additional Parity Bonds from time to time
hereafter issued, but only to the extent such Parity Bonds remain outstanding within the meaning of the Ordinance.

"Reserve Fund Requirement" means the average annual principal and interest requirements on the Parity Bonds, which may be
determined and redetermined each year by the City but in no event less frequently than upon the issuance of each series of Parity
Bonds.

"Reserve Fund Surety Policy" means a surety bond, insurance policy, letter of credit, or other similar instrument issued by a
financial institution, provided that the claims paying ability of such issuer is rated in one of the highest category of ratings by
Standard & Poor’s Ratings Services, a Standard & Poor’s Financial Services LLC business, and Moody’s Investors Service, Inc.

"Special Project" means, to the extent permitted by law, any waterworks or sanitary sewer system property, improvement or
facility declared by the City not to be part of the System and substantially all of the costs of acquisition, construction, and
installation of which are paid from proceeds of a financing transaction other than the issuance of bonds payable from ad valorem
taxes or Net Revenues of the System, and for which all maintenance and operation expenses are payable from sources other than
revenues of the System, but only to the extent that and for so long as all or any part of the revenues or proceeds of which are or
will be pledged to secure the payment or repayment of such costs of acquisition, construction and installation under such
financing transaction.

"System" means all properties, facilities, improvements, equipment, interests, and rights constituting the waterworks and sanitary
sewer system of the City, including, without limitation, all water production, treatment, storage and distribution facilities and all
wastewater collection, transportation and treatment facilities formerly owned by any water district and assumed by the City upon
annexation and dissolution of said district(s), and including all future extensions, replacements, betterments, additions, and
improvements to the System, but excluding any Special Project.

RATES AND CHARGES

So long as any Parity Bonds remain outstanding, the City shall fix, charge and collect rates and charges for the use and services
of the System which are fully sufficient to produce Net Revenues in each fiscal year at least equal to 110% of the principal and
interest requirements scheduled to occur in such fiscal year on all Parity Bonds then outstanding plus an amount equal to the sum
of all deposits required to be made to the Reserve Fund in such fiscal year; but in no event shall Net Revenues ever be less than
the amount required to maintain the Interest and Sinking Fund and the Reserve Fund as provided in the Ordinance, and, to the
extent that funds for such purpose are not otherwise available, to pay all other outstanding obligations payable from the Net
Revenues of the System as and when the same become due.

The City will not grant or permit any free service from the System except for public buildings and institutions operated by the
City.

21
SPECIAL FUNDS

The following special funds are approved and confirmed and such funds shall be maintained and accounted for as hereinafter
provided, so long as any Parity Bonds remain outstanding:

Waterworks and Sewer System Revenue Bonds Revenue Fund (the "Revenue Fund");

Waterworks and Sewer System Revenue Bonds Interest and Sinking Fund (the "Interest and Sinking Fund"); and

Waterworks and Sewer System Revenue Bonds Reserve Fund (the "Reserve Fund").

The Revenue Fund shall be maintained as a separate account on the books of the City. The Interest and Sinking Fund and the
Reserve Fund shall be maintained at an official depository bank of the City separate and apart from all other funds and accounts
of the City and shall constitute trust funds which shall be held in trust for the benefit of the Owners of the Parity Bonds and the
proceeds of which (except for interest income, which shall be transferred to the Revenue Fund) shall be and are hereby pledged
to the payment of the Parity Bonds. All of the Funds named above shall be used solely as provided in the Ordinance so long as
any Parity Bonds remain outstanding.

FLOW OF FUNDS

All Gross Revenues of the System shall be deposited as collected into the Revenue Fund. Money from time to time on deposit to
the credit of the Revenue Fund shall be applied as follows in the following order of priority:

First, to pay Maintenance and Operation Expenses;

Second, to make all deposits into the Interest and Sinking Fund required by the Ordinance and any ordinance authorizing the issuance
of Additional Parity Bonds;

Third, to make all deposits into the Reserve Fund required by the Ordinance and any ordinance authorizing the issuance of
Additional Parity Bonds; and

Fourth, for any lawful purpose.

Whenever the total amounts on deposit to the credit of the Interest and Sinking Fund and the Reserve Fund shall be equivalent to
the sum of the aggregate principal amount of all outstanding Parity Bonds plus the average aggregate of all interest accrued and
to accrue thereon, no further payments need be made into the Interest and Sinking Fund or the Reserve Fund.

INTEREST AND SINKING FUND

On or before the last Business Day of each month so long as any Parity Bonds remain outstanding, after making all required
payments and provision for payment of Maintenance and Operation Expenses, there shall be transferred into the Interest and
Sinking Fund from the Revenue Fund

such amounts, in approximately equal monthly installments, as will be sufficient to accumulate the amount required to pay the
interest scheduled to become due on the Parity Bonds on the next interest payment date; and

such amounts, in approximately equal monthly installments, as will be sufficient to accumulate the amount required to pay the next
maturing principal of the Parity Bonds, including the principal amounts of, and any redemption premium on, any Parity Bonds
payable as a result of the exercise or operation of any optional or mandatory redemption provision contained in the Ordinance or in
any ordinance authorizing the issuance of Additional Parity Bonds.

Money deposited to the credit of the Interest and Sinking Fund shall be used solely for the purpose of paying principal (at
maturity or prior redemption or to purchase Parity Bonds issued as term bonds in the open market to be credited against
mandatory redemption requirements), interest and any redemption premium on the Parity Bonds, plus all bank charges and other
costs and expenses relating to such payment. On or before each principal and/or interest payment date on the Parity Bonds, the
City shall transfer from the Interest and Sinking Fund to the paying agent an amount equal to the principal, interest and any
redemption premium payable on the Parity Bonds on such date, together with an amount equal to all bank charges and other
costs and expenses relating to such payment. The paying agents shall destroy all paid Parity Bonds and shall provide the City
with appropriate certificates of destruction.

RESERVE FUND

Unless the Reserve Fund is fully funded, on or before the last Business Day of each month so long as any Parity Bonds remain
outstanding, after making all required payments and provision for payment of Maintenance and Operation Expenses, and after
making the required transfers into the Interest and Sinking Fund, there shall be transferred into the Reserve Fund from the
22
Revenue Fund such amounts, in approximately equal monthly installments, as shall be required so that the Reserve Fund shall
contain, in no more than sixty (60) months after the issuance of each issue of Parity Bonds, money and investments in an
aggregate amount equal to the average annual principal and interest requirements on all Parity Bonds then outstanding. After
such amount has accumulated in the Reserve Fund and so long thereafter as the Reserve Fund contains such amount, no further
deposits shall be required to be made into the Reserve Fund, and any excess amounts may be transferred to the Revenue Fund.
But if and whenever the balance in the Reserve Fund is reduced below such amount, monthly deposits into such Fund shall be
resumed and continued in amounts at least equal to one-sixtieth (1/60th) of the average annual principal and interest
requirements on the Parity Bonds until the Reserve Fund has been restored to such amount. The Reserve Fund shall be used to
pay the principal of and interest on the Parity Bonds at any time when there is not sufficient money available in the Interest and
Sinking Fund for such purpose and it may be used finally to pay and retire the last Parity Bonds to mature or be redeemed. At
the option of the City, all or any part of the amount required to be on deposit in the Reserve Fund may be satisfied through the
purchase of a Reserve Fund Surety Policy.

ADDITIONAL BONDS

The City reserves the right to issue, for any lawful purpose (including the refunding of any previously issued Parity Bonds or any
other bonds or obligations of the City issued in connection with or payable from the revenues of the System), one or more series
of Additional Parity Bonds payable from and secured by a first lien on the Net Revenues of the System on a parity with the
Bonds, the outstanding Parity Bonds and any previously issued Additional Parity Bonds; provided, however, that no Additional
Parity Bonds may be issued unless:

The Additional Parity Bonds mature on, and interest is payable on, the same days of the year as the Bonds;

The Interest and Sinking Fund and the Reserve Fund each contains the amount of money then required to be on deposit therein;

For either the preceding fiscal year or a twelve (12) consecutive calendar month period ending no more than 90 days prior to
adoption of the ordinance authorizing such Additional Parity Bonds, Net Revenues were equal to at least 125% of the average annual
principal and interest requirements on all Parity Bonds that will be outstanding after the issuance of the series of Additional Parity
Bonds then proposed to be issued, as certified by the City’s Director of Finance or Controller or by an independent certified public
accountant or firm of independent certified public accountants; or

If the City cannot meet the test described in (c) above, but a change in the rates and charges applicable to the System becomes
effective at least sixty (60) days prior to the adoption of the ordinance authorizing Additional Parity Bonds and the City’s Director of
Finance or Controller certifies that, had such change in rates and charges been effective for the preceding fiscal year or 12
consecutive calendar month period ending no more than ninety (90) days prior to adoption of said ordinance, the Net Revenues for
such period would have met the test described in (c) above.

CITY

GOVERNMENTAL STRUCTURE

The City was incorporated in 1959 and adopted a home rule charter in November 1980. The City operates under a Council-
Manager form of government. The City Council consists of a Mayor and six (6) council members, all of whom are elected for
two year terms. The Mayor and two Council members are elected in even numbered years and four Council members are elected
in odd numbered years. The Mayor and two Council members are elected at large, and the remaining four are elected by each
district.

The Mayor presides at City Council meetings and is entitled to vote on all matters considered by City Council. Powers of the
City are vested in the City Council and include appointment of the City Manager, boards and commissions, adoption of the
budget, authorization of bond issues, and adoption of ordinances and resolutions as deemed necessary, desirable and beneficial to
the City. The City Manager is responsible for administrative and day to day operations of the City.

LOCATION OF THE CITY

The City is located in Fort Bend County and encompasses 42.89 square miles.

SERVICES PROVIDED BY THE CITY

The City provides water, sanitary sewer, airport, and park services. Additionally, it provides local law enforcement, fire/EMS
service, solid waste collection, and building inspection; maintains its storm drainage facilities, bridges and streets; and operates
community recreation facilities.

The City does not operate hospitals, a school system, transit services or a higher education system and does not spend City funds
in providing welfare. Public schools within the boundaries of the City are administered by the Fort Bend Independent School
District and Lamar Consolidated Independent School District, which have independent taxing authority.
23
INFECTIOUS DISEASE OUTBREAK – COVID-19

The outbreak of COVID-19, a respiratory disease caused by a new strain of coronavirus, has been characterized as a pandemic
(the "Pandemic") by the World Health Organization and is currently affecting many parts of the world, including the United
States and Texas. On January 31, 2020, the Secretary of the United States Health and Human Services Department declared a
public health emergency for the United States and on March 13, 2020, the President of the United States declared the outbreak of
COVID-19 in the United States a national emergency. Subsequently, the President’s Coronavirus Guidelines for America and the
United States Centers for Disease Control and Prevention called upon Americans to take actions to slow the spread of COVID-19
in the United States. On March 13, 2020 and April 12, 2020 the Governor of Texas (the "Governor") declared a state of disaster
for all counties in Texas in response to the Pandemic. Pursuant to Chapter 418 of the Texas Government Code, the Governor has
broad authority to respond to disasters, including suspending any regulatory statute prescribing the procedures for conducting
state business or any order or rule of a state agency that would in any way prevent, hinder, or delay necessary action in coping
with the disaster, and issuing executive orders that have the force and effect of law. The Governor has since issued a number of
executive orders relating to COVID-19 preparedness and mitigation.

The Governor has since issued a number of executive orders relating to COVID-19 preparedness and mitigation. These include,
for example, imposing limitations on social gatherings of more than 10 people, banning eating or drinking at bars, restaurants,
and food courts and visiting gyms, and temporarily closing school districts throughout the state for the remainder of the 2019-
2020 school year. These temporary limitations and closures may be further extended, modified, rescinded, or superseded by the
Governor. In addition to the actions by the state and federal officials, certain local officials, including the City and Fort Bend
County, have declared a local state of disaster. Many of the federal, state and local actions and policies under the aforementioned
disaster declarations and orders are focused on limiting instances where the public can congregate or interact with each other or
limiting activities that take place outside of homes to certain essential business, healthcare, and government functions. These
limitations affect the operation of businesses and directly impact the economy.

The Pandemic has negatively affected travel, commerce, and financial markets globally, and is widely expected to continue
negatively affecting economic growth and financial markets worldwide. These negative impacts may reduce or negatively affect
Net Revenues of the System which are pledged as security for the Bonds, property values and/or the collection of sales tax
revenues and ad valorem tax revenues within the City. A reduction in Net Revenues, property values or the collection of sales
tax or ad valorem tax revenues may negatively impact the City’s operating budget and overall financial condition.

In addition, the Pandemic has resulted in volatility of the value of investments in pension funds. Any prolonged continuation of
the Pandemic could further weaken asset values or slow or prevent their recovery, which could require increased City
contributions to fund or pay retirement and other post-employment benefits in the future.

The City continues to monitor the spread of COVID-19 and is working with local, state, and national agencies to address the
potential impact of the Pandemic upon the City. While the potential impact of the Pandemic on the City cannot be quantified at
this time, the continued outbreak of COVID-19 could have an adverse effect on the City’s operations and financial condition,
and the effect could be material.

The financial and operating data contained herein are the latest available, but are as of dates and for periods prior to the
economic impact of the Pandemic and measures instituted to slow it. Accordingly, they are not indicative of the current financial
condition or future prospects of the City.

HURRICANE HARVEY

The Houston area sustained widespread rain damage and flooding as a result of Hurricane Harvey’s landfall along the Texas
Gulf Coast on August 25, 2017, and historic levels of rainfall during the succeeding four (4) days. The City is located
approximately fifty-three (53) miles from the Texas Gulf Coast and along the Brazos River. Land located in this area is
susceptible to high winds and heavy rain caused by hurricanes, tropical storms and other tropical disturbances. The properties on
the south side of the City adjacent to the Brazos River and near the flood plain are susceptible to flooding from the Brazos River
when it reaches major flood stage. Most properties in the City are protected from flooding from the Brazos River by levees,
which are operated and maintained by various Levee Improvement Districts (LIDs). The City of Sugar Land has no authority or
responsibility to operate, maintain or regulate the LIDs.

According to the City, the City did not sustain any significant damage and there was no interruption of water and sewer service.
Further, according to the City, the only flood damage that occurred was from rainfall that occurred once the LIDs closed their
outfall structures to the Brazos River after it reached flood stage, with fewer than 250 homes and fewer than ten (10) commercial
properties within the City that experienced flooding or other significant damage. The City incurred overtime expenses of
approximately $1.1 million. There was minor damage to City facilities. Damages to City facilities include water damage to
some buildings and utility systems, roadway damages from erosion and damage to irrigation systems in city rights of way and
parks. Total expenditures due to the storm were approximately $1.5 million (including personnel cost and debris removal).
Reimbursement has been received in fiscal year 2019 from FEMA on a large portion of this amount.

24
PERIODIC FLOODING

The City of Sugar Land is located in the Texas Gulf Coastal plains. The City has a relatively flat topography and a humid
subtropical climate. Two potential flooding sources are located within the City limits. The Brazos River is located to the South
of the City, while Oyster Creek crosses the City from northwest to southeast on the north side of Highway 6.

Within the City limits, there are nine (9) LIDs, which own and operate several important drainage channels and detention ponds.
The LIDs also own and operate the levees and pump stations that protect the southern section of the City from flooding mainly
from the Brazos River. The North section of the City is not protected by levees, but the majority of the neighborhoods are
outside the special flood hazard areas.

Due to its location, the City is affected by rain events, tropical storms and hurricanes, such as Hurricane Harvey. Certain areas of
the City are subject to periodic flooding as a result of severe storm events. Some neighborhoods within the City have
experienced severe street ponding during severe tropical storms.

The City of Sugar Land participates in the National Flood Insurance Program administered by the Federal Emergency
Management Agency ("FEMA"). Communities participating in the National Flood Insurance Program are required by FEMA to
adopt restrictions on development in designated flood-prone areas. In exchange, the National Flood Insurance Program makes
federally subsidized flood insurance available to property owners located in the participating communities.

Given the increased development and urbanization within Fort Bend County and the City of Sugar Land, FEMA periodically
updates and revises its maps designating the areas of the County that are subject to special flood hazards. Areas of the City
protected by levees are considered to be outside the flood-prone area.

FINANCIAL ACCOUNTING

The accounts of the City are organized on the basis of funds, each of which constitutes a separate entity for accounting purposes.
The Statement of Net Assets and the Statement of Activities are the government wide statements and report information about
the City as a whole. The most significant area of the fund accounting basis is the General Fund, which accounts for all revenues
and expenditures of the City not accounted for in the various enterprise funds or the other funds maintained by the City. Other
than ad valorem taxes, the primary sources of General Fund revenue include sales and use taxes, franchise fees, and
miscellaneous sources, such as fines, penalties, licenses, fees, interest income from investments and other taxes. The Enterprise
Funds consist of the Water and Wastewater Fund, the Airport Fund, and the Solid Waste Fund (collectively, the "Enterprise
Funds"). The GASB 34 entity-wide statements reflect full accrual. For a description of the accrual methods and the reporting
entity definition, see Appendix B, "EXCERPTS FROM THE CITY OF SUGAR LAND, TEXAS COMPREHENSIVE ANNUAL FINANCIAL
REPORT" – Note # 1.

Other funds maintained by the City are the following: (i) the Special Revenue Funds, including expendable trust funds; (ii) the
Internal Service Funds; (iii) the Debt Service Funds; and (iv) the Capital Projects Funds.

BUDGETING

Annual appropriated budgets are adopted for the General, Special Revenue, and Debt Service Funds using the same basis of
accounting as for financial reporting. Unencumbered appropriations lapse at the end of the fiscal year.

Expenditures may not legally exceed budgeted appropriations at the department level. Expenditure requests which would require
an increase in total budgeted appropriations must be approved by City Council through a formal budget amendment. At any time
in the fiscal year, the City Council may make emergency appropriations to meet a pressing need for public expenditure in order
to protect the public health, safety, or welfare. The City Council has the power to transfer any unencumbered funds allocated by
the budget to one activity, function, or department, to another activity, function, or department, to re-estimate revenues and
expenditures, and to amend the budget.

Management has the power to transfer available funds allocated by the budget from one function or activity to another function
or activity within the same department.

In cooperation with the department heads of the City and the Budget Office, the City Manager prepares an annual budget for all
funds for the ensuing fiscal year, in a form and system deemed desirable by the City Manager. The City Manager shall submit to
the Council, for its review, consideration and revision, both a letter describing the proposed new budget, as well as a balanced
budget for the forthcoming fiscal year, not later than sixty (60) days prior to the end of the current fiscal year. The budget, as
adopted, must set forth the appropriations for services, functions and activities of the various City departments and agencies, and
shall meet all fund requirements provided by law and required by bond covenants.

25
INVESTMENTS

The City invests its investable funds in investments authorized by Texas law in accordance with investment policies approved by the
City Council. Both state law and the City’s investment policies are subject to change.

LEGAL INVESTMENTS

Available City funds are invested as authorized by Texas law and in accordance with investment policies approved by the City
Council. Both state law and the City’s investment policies are subject to change. Under Texas law, the City is authorized to
invest in (1) obligations, including letters of credit, of the United States or its agencies and instrumentalities, including the
Federal Home Loan Banks; (2) direct obligations of the State of Texas or its agencies and instrumentalities; (3) collateralized
mortgage obligations directly issued by a federal agency or instrumentality of the United States, the underlying security for
which is guaranteed by an agency or instrumentality of the United States; (4) other obligations, the principal and interest of
which is guaranteed or insured by or backed by the full faith and credit of, the State of Texas or the United States or their
respective agencies and instrumentalities, including obligations that are fully guaranteed or insured by the Federal Deposit
Insurance Corporation or by the explicit full faith and credit of the United States; (5) obligations of states, agencies, counties,
cities, and other political subdivisions of any state rated as to investment quality by a nationally recognized investment rating
firm not less than "A" or its equivalent; (6) bonds issued, assumed or guaranteed by the State of Israel; (7) interest-bearing
banking deposits that are guaranteed or insured by the Federal Deposit Insurance Corporation or the National Credit Union Share
Insurance Fund or their respective successors; (8) interest-bearing banking deposits, other than those described by clause (7), if
(A) the funds invested in the banking deposits are invested through (i) a broker with a main office or branch office in this State
that the City selects from a list the governing body or designated investment committee of the City adopts as required by Section
2256.025; or (ii) a depository institution with a main office or branch office in this state that the City selects; (B) the broker or
depository institution as described in clause (8)(A), above, arranges for the deposit of the funds in the banking deposits in one or
more federally insured depository institutions, regardless of where located, for the City's account; (C) the full amount of the
principal and accrued interest of the banking deposits is insured by the United States or an instrumentality of the United States;
and (D) the investing City appoints as the City's custodian of the banking deposits issued for the City's account: (i) the depository
institution selected as described by Paragraph (A); (ii) an entity described by Section 2257.041(d) of the Texas Government
Code; or (iii) a clearing broker dealer registered with the Securities and Exchange Commission and operating under Securities
and Exchange Commission Rule 15c3-3 (17 C.F.R. Section 240.15c3-3); (9) certificates of deposit or share certificates (i)
meeting the requirements of the Texas Public Funds Investment Act (Chapter 2256, Texas Government Code) that are issued by
or through an institution that either has its main office or a branch in Texas, and are guaranteed or insured by the Federal Deposit
Insurance Corporation or the National Credit Union Share Insurance Fund (or their respective successors), or are secured as to
principal by obligations described in clauses (1) through (8) or in any other manner and amount provided by law for City
deposits or; (ii) where the funds are invested by the City through (I) a broker that has its main office or a branch office in the
State of Texas and is selected from a list adopted by the City as required by law or (II) a depository institution that has its main
office or a branch office in the State of Texas that is selected by the City; (iii) the broker or the depository institution selected by
the City arranges for the deposit of the funds in certificates of deposit in one or more federally insured depository institutions,
wherever located, for the account of the City; (iv) the full amount of the principal and accrued interest of each of the certificates
of deposit is insured by the United States or an instrumentality of the United States; and (v) the City appoints the depository
institution selected under (ii) above, an entity as described by Section 2257.041(d) of the Texas Government Code, or a clearing
broker-dealer registered with the Securities and Exchange Commission and operating pursuant to Securities and Exchange
Commission Rule 15c3-3 (17 C.F.R. Section 240.15c3-3) as custodian for the City with respect to the certificates of deposit
issued for the account of the City; (10) fully collateralized repurchase agreements that have a defined termination date, are
secured by a combination of cash and obligations described in clause (1), and require the securities being purchased by the City
or cash held by the City to be pledged to the City, held in the City’s name, and deposited at the time the investment is made with
the City or with a third party selected and approved by the City, and are placed through a primary government securities dealer,
as defined by the Federal Reserve, or a financial institution doing business in the State; (11) securities lending programs if (i) the
securities loaned under the program are 100% collateralized, a loan made under the program allows for termination at any time
and a loan made under the program is either secured by (a) obligations that are described in clauses (1) through (8) above, (b)
irrevocable letters of credit issued by a state or national bank that is continuously rated by a nationally recognized investment
rating firm at not less than "A" or its equivalent or (c) cash invested in obligations described in clauses (1) through (8) above,
clauses (13) through (15) below, or an authorized investment pool; (ii) securities held as collateral under a loan are pledged to the
City, held in the City’s name and deposited at the time the investment is made with the City or a third party designated by the
City; (iii) a loan made under the program is placed through either a primary government securities dealer (as defined by 5 C.F.R.
Section 6801.102(f), as that regulation existed on September 1, 2003) or a financial institution doing business in the State of
Texas; and (iv) the agreement to lend securities has a term of one year or less; (12) certain bankers’ acceptances with the
remaining term of 270 days or less, if the short-term obligations of the accepting bank or its parent are rated at least "A-1" or "P-
1" or the equivalent by at least one nationally recognized credit rating agency; (13) commercial paper with a stated maturity of
270 days or less that is rated at least "A-1" or "P-1" or the equivalent by either (a) two nationally recognized credit rating
agencies or (b) one nationally recognized credit rating agency if the paper is fully secured by an irrevocable letter of credit issued
by a U.S. or state bank; (14) no-load money market mutual funds registered with and regulated by the SEC that provide the City
with a prospectus and other information required by the Securities Exchange Act of 1934 or the Investment Company Act of
1940, and that complies with SEC Rule 2a-7; and (15) no-load mutual funds registered with the SEC that have an average
weighted maturity of less than two years and either (i) have a duration of one year or more and are invested exclusively in
obligations described in this paragraph or (ii) have a duration of less than one year and an investment portfolio limited to
investment grade securities, excluding asset-backed securities. In addition, bond proceeds may be invested in guaranteed
investment contracts that have a defined termination date and are secured by obligations, including letters of credit, of the United
States or its agencies and instrumentalities in an amount at least equal to the amount of bond proceeds invested under such
contract, other than the prohibited obligations described below.
26
INVESTMENT POLICIES

Under Texas law, the City is required to invest its funds under written investment policies that primarily emphasize safety of
principal and liquidity; that address investment diversification, yield, maturity, and the quality and capability of investment
management; and that include a list of authorized investments for City funds, the maximum allowable stated maturity of any
individual investment, the maximum average dollar-weighted maturity allowed for pooled fund groups, methods to monitor the
market price of investments acquired with public funds, a requirement for settlement of all transactions, except investment pool
funds and mutual funds, on a delivery versus payment basis, and procedures to monitor rating changes in investments acquired
with public funds and the liquidation of such investments consistent with the Public Funds Investment Act. All City funds must
be invested consistent with a formally adopted "Investment Strategy Statement" that specifically addresses each fund's
investment. Each Investment Strategy Statement will describe its objectives concerning: (1) suitability of investment type, (2)
preservation and safety of principal, (3) liquidity, (4) marketability of each investment, (5) diversification of the portfolio, and
(6) yield.

Under Texas law, the City's investments must be made "with judgment and care, under prevailing circumstances, that a person of
prudence, discretion, and intelligence would exercise in the management of the person's own affairs, not for speculation, but for
investment considering the probable safety of capital and the probable income to be derived." At least quarterly the City's
investment officers must submit an investment report to the Board of Trustees detailing: (1) the investment position of the City,
(2) that all investment officers jointly prepared and signed the report, (3) the beginning market value, and any additions and
changes to market value and the ending value of each pooled fund group, (4) the book value and market value of each separately
listed asset at the beginning and end of the reporting period, (5) the maturity date of each separately invested asset, (6) the
account or fund or pooled fund group for which each individual investment was acquired, and (7) the compliance of the
investment portfolio as it relates to: (a) adopted investment strategies and (b) Texas law. No person may invest City funds
without express written authority from the City Council.

ADDITIONAL PROVISIONS

Under Texas law the City is additionally required to: (1) annually review its adopted policies and strategies; (2) require any
investment officers with personal business relationships or relatives with firms seeking to sell securities to the entity to disclose
the relationship and file a statement with the Texas Ethics Commission and the City Council; (3) require the registered principal
of firms seeking to sell securities to the City to: (a) receive and review the City’s investment policy, (b) acknowledge that
reasonable controls and procedures have been implemented to preclude imprudent investment activities, and (c) deliver a written
statement attesting to these requirements; (4) perform an annual audit of the management controls on investments and adherence
to the City’s investment policy; (5) provide specific investment training for the Treasurer, Chief Financial Officer and
investment officers; (6) restrict reverse repurchase agreements to not more than ninety (90) days and restrict the investment of
reverse repurchase agreement funds to no greater than the term of the reverse repurchase agreement; (7) restrict its investment in
mutual funds in the aggregate to no more than 15 percent of its monthly average fund balance, excluding bond proceeds and
reserves and other funds held for debt service, and to invest no portion of bond proceeds, reserves and funds held for debt
service, in mutual funds; and (8) require local government investment pools to conform to the new disclosure, rating, net asset
value, yield calculation, and advisory board requirements.

CURRENT INVESTMENTS

As of February 29, 2020, the City’s investable funds were invested in the following categories:

Par Book M arket

Value Value Value
Cash/ Sweep $ 90,988,780 $ 90,988,780 $ 90,988,780
Texas CLASS 33,248,844 33,248,844 33,248,844
TexPool 9,797,713 9,797,713 9,797,713
TexStar 32,486,315 32,486,315 32,486,315
CD's 6,901,000 6,901,000 6,953,343
Agencies 52,000,000 51,999,524 52,243,238
$ 225,422,652 $ 225,422,176 $ 225,718,233

Texas CLASS was created as a local government investment pool. Entities may pool any of their funds, or funds under their
control, to preserve principal, maintain the liquidity of the funds, and maximize yield. The Texas CLASS Trust Agreement is an
agreement of indefinite term regarding the investment, reinvestment, and withdrawal of local government funds. The parties to
the Trust Agreement are Texas local government entities that choose to participate in the Trust (the Participants), Public Trust
Advisors, LLC (Public Trust) as Program Administrator, and Wells Fargo Bank Texas, N.A. as Custodian.

TexPool is a local government investment pool under the control of the Texas Comptroller of Public Accounts. Investment
management and customer service are outsourced by the Comptroller. The pool’s investment objectives include achieving a
stable net asset value of $1.00 per share. Daily investment or redemption of funds is allowed by the participants.

TexSTAR is a local government investment pool provides participant services and marketing for the pool. TexSTAR currently
maintains a "AAAm" rating from Standard & Poor’s and has an investment objective of achieving and maintaining a stable net
asset value of $1.00 per share. Daily investments or redemptions of funds is allowed by the participants.

27
 ANNEXATION POLICY

The City has expanded its geographic boundaries and its tax base through the annexation of contiguous unincorporated areas
within the extraterritorial jurisdiction of the City. Upon annexation of a utility district by the City, Texas law generally requires
that the City (1) take over all properties and assets of the district, (2) assume all debts, liabilities and obligations of the district,
and (3) perform all functions and services of the district. When the City assumes district bonds or other obligations payable in
whole or in part from ad valorem taxes, Texas law requires the City to levy and collect ad valorem taxes on all taxable property
within the City in amounts sufficient to pay the principal of and interest on such assumed bonds and obligations. Under existing
law, neither the annexation of districts nor the assumption of their outstanding bonds or other obligations requires voter
authorization.

The City has adopted an annexation policy to consider general issues which may impact the City prior to the annexation of any
area. The annexation policy requires a detailed financial analysis to be prepared for review by the City Council. Public
information is provided to both the citizens of the City as well as the citizens of the areas proposed for annexation, and
opportunity is provided for public input. The City’s annexation plan must adhere to the overall goals of the City and must
maintain the quality of life in the annexed areas as well as the City.

TAX MATTERS

OPINION OF BOND COUNSEL

In the opinion of Bond Counsel, under current law, interest on the Bonds (a) is not included in gross income for federal income
tax purposes, and (b) is not an item of tax preference for purposes of the federal alternative minimum income tax. No other
opinion is expressed by Bond Counsel regarding the tax consequences of the ownership of or the receipt or accrual of interest on
the Bonds.

Bond Counsel’s opinion is given in reliance upon certifications by representatives of the City as to certain facts relevant to both
the opinion and requirements of the Internal Revenue Code of 1986, as amended (the "Code"), and is subject to the condition that
there is compliance subsequent to the issuance of the Bonds with all requirements of the Code that must be satisfied in order for
interest thereon to remain excludable from gross income for federal income tax purposes. The City has covenanted to comply
with the current provisions of the Code regarding, among other matters, the use, expenditure and investment of the proceeds of
the Bonds and the timely payment to the United States of any arbitrage rebate amounts with respect to the Bonds. Failure by the
City to comply with such covenants, among other things, could cause interest on the Bonds to be included in gross income for
federal income tax purposes retroactively to their date of issue.

Customary practice in the giving of legal opinions includes not detailing in the opinion all the assumptions, limitations and
exclusions that are a part of the conclusions therein. See "Statement on the Role of Customary Practice in the Preparation and
Understanding of Third-Party Legal Opinions", 63 Bus. Law. 1277 (2008)" and "Legal Opinion Principles", 53 Bus. Law. 831
(May 1998). Purchasers of the Bonds should seek advice or counsel concerning such matters as they deem prudent in connection
with their purchase of Bonds.

Bond Counsel’s opinion represents its legal judgment based in part upon the representations and covenants referenced therein
and its review of current law, but is not a guarantee of result or binding on the Internal Revenue Service (the "Service") or the
courts. Bond Counsel assumes no duty to update or supplement its opinion to reflect any facts or circumstances that may come
to Bond Counsel’s attention after the date of its opinion or to reflect any changes in law or the interpretation thereof that may
occur or become effective after such date.

OTHER TAX MATTERS

The Bonds have been designated as qualified tax-exempt obligations within the meaning of Section 265(b)(3) of the Code.

In addition to the matters addressed above, prospective purchasers of the Bonds should be aware that the ownership of tax-
exempt obligations may result in collateral federal income tax consequences to certain taxpayers, including without limitation
financial institutions, property and casualty insurance companies, S corporations, foreign corporations subject to the branch
profits tax, recipients of Social Security or Railroad Retirement benefits and taxpayers who may be deemed to have incurred or
continued indebtedness to purchase or carry tax-exempt obligations. Prospective purchasers of the Bonds should consult their
tax advisors as to the applicability and impact of such consequences.

Prospective purchasers of the Bonds should consult their own tax advisors as to the status of interest on the Bonds under the tax
laws of any state, local, or foreign jurisdiction.

The Service has a program to audit state and local government obligations to determine whether the interest thereon is includible
in gross income for federal income tax purposes. If the Service does audit the Bonds, under current Service procedures, the
Service will treat the City as the taxpayer and the owners of the Bonds will have only limited rights, if any, to participate.

28
There are many events that could affect the value and liquidity or marketability of the Bonds after their issuance, including but
not limited to public knowledge of an audit of the Bonds by the Service, a general change in interest rates for comparable
securities, a change in federal or state income tax rates, federal or state legislative or regulatory proposals affecting state and
local government securities and changes in judicial interpretation of existing law. In addition, certain tax considerations relevant
to owners of Bonds who purchase Bonds after their issuance may be different from those relevant to purchasers upon issuance.
Neither the opinion of Bond Counsel nor this Official Statement purports to address the likelihood or effect of any such potential
events or such other tax considerations and purchasers of the Bonds should seek advice concerning such matters as they deem
prudent in connection with their purchase of Bonds.

BOND PREMIUM

Bonds purchased, whether upon issuance or otherwise, for an amount (excluding any amount attributable to accrued interest) in
excess of their principal amount will be treated for federal income tax purposes as having amortizable bond premium. A holder's
basis in such a Bond must be reduced by the amount of premium which accrues while such Bond is held by the holder. No
deduction for such amount will be allowed, but it generally will offset interest on the Bonds while so held. Purchasers of such
Bonds should consult their own tax advisors as to the calculation, accrual and treatment of amortizable bond premium and the
state and local tax consequences of holding such Bonds.

CONTINUING DISCLOSURE OF INFORMATION

In the Ordinance, the City has made the following agreement for the benefit of the holders and beneficial owners of the Bonds.
The City is required to observe the agreement for so long as it remains obligated to advance funds to pay the Bonds. Under the
agreement, the City will be obligated to provide certain updated financial information and operating data annually, and timely
notice of specified material events, to the Municipal Securities Rulemaking Board (the "MSRB"). This information will be
available free of charge from the MSRB via the Electronic Municipal Market Access ("EMMA") system at
www.emma.msrb.org.

ANNUAL REPORTS

The City will provide certain updated financial information and operating data to the MSRB. The information to be updated
includes all quantitative financial information and operating data with respect to the City of the general type included in this
Official Statement under the headings "WATERWORKS AND SEWER SYSTEM", "CITY WATER AND WASTEWATER
FUND OPERATING STATEMENT", "DEBT INFORMATION", "MUNICIPAL UTILITY DISTRICTS WITHIN THE CITY"
and in APPENDIX B. The City will update and provide this information within six (6) months after the end of each fiscal year,
however, if audited financial statements are not available when the information is provided, the City will provide audited
financial statements when and if they become available and unaudited financial statements within twelve (12) months after each
fiscal year end, unless audited financial statements are sooner provided. Financial statements will be prepared in accordance
with the accounting principles described in Appendix B or such other accounting principles as the City may be required to
employ from time to time pursuant to state law or regulation. The City may provide updated information in full text or may
incorporate by reference documents available on EMMA or filed with the U.S. Securities and Exchange Commission (the
"SEC").

The City’s current fiscal year end is September 30. Accordingly, it must provide updated information by March 31 in each year,
unless the City changes its fiscal year. If the City changes its fiscal year, it will notify the MSRB of the change.

EVENT NOTICES

The City will also provide timely notices of certain events to the MSRB. The City will provide notice in a timely manner not in
excess of ten (10) business days after the occurrence of the event of any of the following events with respect to the Bonds, (1)
principal and interest payment delinquencies; (2) non-payment related defaults, if material; (3) unscheduled draws on debt
service reserves reflecting financial difficulties; (4) unscheduled draws on credit enhancements reflecting financial difficulties;
(5) substitution of credit or liquidity providers, or their failure to perform; (6) adverse tax opinions, the issuance by the Internal
Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701-TEB) or other
material notices or determinations with respect to the tax status of the Bonds, or other material events affecting the tax status of
the Bonds; (7) modifications to rights of holders of the Bonds, if material; (8) bond calls, if material, and tender offers; (9)
defeasances; (10) release, substitution, or sale of property securing repayment of the Bonds, if material; (11) rating changes; (12)
bankruptcy, insolvency, receivership or similar event of the City; (13) the consummation of a merger, consolidation, or
acquisition involving the City or the sale of all or substantially all of the assets of the City, other than in the ordinary course of
business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to
any such actions, other than pursuant to its terms, if material; (14) appointment of a successor Trustee or change in the name of
the Trustee, if material; (15) incurrence of a financial obligation of the City, if material, or agreement to covenants, events of
default, remedies, priority rights, or other similar terms of a financial obligation of the City, any of which affect security holders,
if material; and (16) default, event of acceleration, termination event, modification of terms, or other similar events under the
terms of a financial obligation of the City, any of which reflect financial difficulties. As used above, the phrase "bankruptcy,
insolvency, receivership or similar event" means the appointment of a receiver, fiscal agent or similar officer for the City in a
proceeding under the U.S. Bankruptcy Code or in any other proceeding under state or federal law in which a court of

29
governmental authority has assumed jurisdiction over substantially all of the assets or business of the City, or if jurisdiction has
been assumed by leaving the Board and officials or officers of the City in possession but subject to the supervision and orders of
a court or governmental authority, or the entry of an order confirming a plan of reorganization, arrangement or liquidation by a
court or governmental authority having supervision or jurisdiction over substantially all of the assets or business of the City.
(Neither the Bonds nor the Ordinance make any provision for liquidity enhancement or credit enhancement, merger,
consolidation, or acquisition). As used in this section, the term "financial obligation" means a (i) debt obligation, (ii) derivative
instrument entered into in connection with, or pledged as security or a source of payment for, an existing or planned debt
obligation, or (iii) guarantee of a debt obligation or any such derivative instrument; provided that "financial obligation" shall not
include municipal securities as to which a final official statement (as defined in 15c2-12 Rule) has been provided to the MSRB
consistent with Rule 15c2-12. The City intends the words used in the above clauses (15) and (16) and in the definition of
financial obligation above to have the meanings ascribed to them in SEC Release No. 34-83885 dated August 20, 2018. In
addition, the City will provide timely notice of any failure by the City to provide information, data, or financial statements in
accordance with its agreement described above under "Annual Reports."

AVAILABILITY OF INFORMATION

The City has agreed to provide the foregoing information only as described above. Investors will be able to access continuing
disclosure information filed with the MSRB free of charge at www.emma.msrb.org.

LIMITATIONS AND AMENDMENTS

The City has agreed to update information and to provide notices of material events only as described above. The City has not
agreed to provide other information that may be relevant or material to a complete presentation of its financial results of
operations, condition, or prospects or agreed to update any information that is provided, except as described above. The City
makes no representation or warranty concerning such information or concerning its usefulness to a decision to invest in or sell
bonds at any future date. The City disclaims any contractual or tort liability for damages resulting in whole or in part from a
breach of its continuing disclosure agreement or from any statement made pursuant to its agreement, although holders of Bonds
may seek a writ of mandamus to compel the City to comply with its agreement.

The City may amend its continuing disclosure agreement from time to time to adapt to changed circumstances that arise from a
change in legal requirements, a change in law, or a change in the identity, nature, status, or type of operations of the City, if (i)
the agreement would have permitted an underwriter to purchase or sell Bonds in the offering described herein in compliance with
the Rule, taking into account any amendments or interpretations of the Rule to the date of such amendment, as well as such
changed circumstances, and (ii) either (a) the holders of a majority in aggregate principal amount of the outstanding Bonds
consent to the amendment or (b) any person unaffiliated with the City (such as nationally recognized bond counsel) determines
that the amendment will not materially impair the interests of the holders and beneficial owners of the Bonds. The City may also
amend or repeal the provisions of this continuing disclosure agreement if the SEC amends or repeals the applicable provisions of
the Rule 15c2-12 or a court of final jurisdiction enters judgment that such provisions of the Rule 15c2-12 are invalid, but only if
and to the extent that the provisions of this sentence would not prevent an underwriter from lawfully purchasing or selling Bonds
in the primary offering of the Bonds. If the City so amends the agreement, it has agreed to include with the next financial
information and operating data provided in accordance with its agreement described above under "ANNUAL REPORTS" an
explanation, in narrative form, of the reasons for the amendment and of the impact of any change in the type of financial
information and operating data so provided.

COMPLIANCE WITH PRIOR UNDERTAKINGS

For the past five (5) years, the City has complied in all material respects with all continuing disclosure agreements made by it in
accordance with the Rule 15c2-12.

OTHER INFORMATION

RATINGS

The Bonds and presently outstanding revenue debt of the City are rated, "AA" by S&P Global Ratings and "AA" by Fitch
Ratings, without regard to credit enhancement. An explanation of the significance of such ratings may be obtained from the
company furnishing the rating. The ratings reflect only the respective views of such organizations and the City makes no
representation as to the appropriateness of the ratings. There is no assurance that such ratings will continue for any given period
of time or that they will not be revised downward or withdrawn entirely by either or both of such rating companies, if in the
judgment of either or both companies, circumstances so warrant. Any such downward revision or withdrawal of such ratings, or
either of them, may have an adverse effect on the market price of the Bonds.

LITIGATION

An appropriate official will certify that, on the date of delivery, there is no pending litigation against the City that would have a
material adverse financial impact upon the City or its operations.

30
REGISTRATION AND QUALIFICATION OF BONDS FOR SALE

The sale of the Bonds has not been registered under the Federal Securities Act of 1933 in reliance upon the exemption provided
thereunder by Section 3(a)(2); and the Bonds have not been qualified under the Securities Act of Texas in reliance upon various
exemptions contained therein; nor have the Bonds been qualified under the securities acts of any jurisdiction. The City assumes
no responsibility for qualification of the Bonds under the securities laws of any jurisdiction in which the Bonds may be sold,
assigned, pledged, hypothecated or otherwise transferred. This disclaimer of responsibility for qualification for sale or other
disposition of the Bonds shall not be construed as an interpretation of any kind with regard to the availability of any exemption
from securities registration provisions.

LEGAL INVESTMENTS AND ELIGIBILITY TO SECURE PUBLIC FUNDS IN TEXAS

Section 1201.041 of the Public Security Procedures Act (Chapter 1201, Texas Government Code) provides that the Bonds are
negotiable instruments governed by Chapter 8, Texas Business and Commerce Code, and are legal and authorized investments
for insurance companies, fiduciaries, and trustees, and for the sinking funds of municipalities or other political subdivisions or
public agencies of the State of Texas. With respect to investment in the Bonds by municipalities or other political subdivisions
or public agencies of the State of Texas, the Public Funds Investment Act, Chapter 2256, Texas Government Code, requires that
the Bonds be assigned a rating of "A" or its equivalent as to investment quality by a national rating agency. See "OTHER
INFORMATION - RATINGS" herein. In addition, various provisions of the Texas Finance Code provide that, subject to a prudent
investor standard, the Bonds are legal investments for state banks, savings banks, trust companies with at capital of one million
dollars or more, and savings and loan associations. The Bonds are eligible to secure deposits of any public funds of the State, its
agencies, and its political subdivisions, and are legal security for those deposits to the extent of their market value. No review by
the City has been made of the laws in other states to determine whether the Bonds are legal investments for various institutions in
those states.

LEGAL MATTERS

The delivery of the Bonds is subject to the approving opinions of the Attorney General of Texas to the effect that the Bonds are
valid and legally binding obligations of the City payable from Net Revenues of the System and the approving legal opinion of
Hunton Andrews Kurth, LLP, Bond Counsel to the City ("Bond Counsel"), in substantially the form attached as Appendix C.

Bond Counsel has reviewed the information appearing in the Official Statement under "THE BONDS" (except for "BOOK-
ENTRY-ONLY SYSTEM" and "BONDHOLDERS’ REMEDIES"), "SELECTED PROVISIONS OF THE ORDINANCE,"
"TAX MATTERS," "CONTINUING DISCLOSURE OF INFORMATION" (except "COMPLIANCE WITH PRIOR
UNDERTAKINGS"), "OTHER INFORMATION – REGISTRATION AND QUALIFICATION OF BONDS FOR SALE,"
"OTHER INFORMATION – LEGAL INVESTMENTS AND ELIGIBILITY TO SECURE PUBLIC FUNDS IN TEXAS," and
"OTHER INFORMATION – LEGAL MATTERS" (except for the last paragraph thereof), solely to determine whether such
information fairly summarizes matters of law and the provisions of the documents referred to therein. Bond Counsel has not,
however, independently verified any of the factual information contained in this Official Statement nor has it conducted an
investigation of the affairs of the City for the purpose of passing upon the accuracy or completeness of this Official Statement.
No person or entity is entitled to rely upon Bond Counsel’s limited participation as an assumption of responsibility for or an
expression of opinion of any kind with regard to the accuracy or completeness of any information contained herein. The legal
fees to be paid to Bond Counsel for services rendered in connection with the issuance of the Bonds are contingent on the sale and
delivery of the Bonds.

The legal opinions to be delivered concurrently with the delivery of the Bonds express the professional judgment of the attorneys
rendering the opinions as to the legal issues explicitly addressed therein. In rendering a legal opinion, the attorney does not
become an insurer or guarantor of the expression of professional judgment, of the transaction opined upon, or of the future
performance of the parties to the transaction. Nor the rendering of an opinion guarantee outcome of any legal dispute that may
arise out of the transaction.

Certain legal matters will be passed upon for the Underwriters by their counsel, McCall, Parkhurst & Horton L.L.P., Houston,
Texas. The legal fee of such firm is contingent upon the sale and delivery of the Bonds.

FINANCIAL ADVISOR

Hilltop Securities, Inc. is employed as Financial Advisor to the City in connection with the issuance of the Bonds. The Financial
Advisor's fee for services rendered with respect to the sale of the Bonds is contingent upon the issuance and delivery of the
Bonds. Hilltop Securities, Inc. has agreed, in its Financial Advisory contract, not to bid for the Bonds, either independently or as
a member of a syndicate organized to submit a bid for the Bonds. Hilltop Securities, Inc., in its capacity as Financial Advisor,
does not assume any responsibility for the information, covenants and representations contained in any of the legal documents
with respect to the federal income tax status of the Bonds, or the possible impact of any present, pending or future actions taken
by any legislative or judicial bodies.

31
The Financial Advisor to the City has provided the following sentence for inclusion in this Official Statement. The Financial
Advisor has reviewed the information in this Official Statement in accordance with, and as part of, its responsibilities to the City
and, as applicable, to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but
the Financial Advisor does not guarantee the accuracy or completeness of such information.

UNDERWRITING

The Underwriters have agreed, subject to certain conditions, to purchase the Bonds from the City at a price of $7,656,710.26,
(representing the principal amount of the Bonds, plus a [net] original issue premium of $871,246.50, less an underwriting
discount of $49,536.24). The Underwriters will be obligated to purchase all of the Bonds if any Bonds are purchased. The Bonds
to be offered to the public may be offered and sold to certain dealers (including the Underwriters and other dealers depositing
Bonds into investment trusts) at prices lower than the public offering prices of such Bonds, and such public offering prices may
be changed, from time to time, by the Underwriters.

The Underwriters have provided the following sentence for inclusion in this Official Statement. The Underwriters have
reviewed the information in this Official Statement pursuant to their respective responsibilities to investors under the federal
securities laws, but the Underwriters do not guarantee the accuracy or completeness of such information.

One of the Underwriters of the Bonds is BOK Financial Securities, Inc., which is not a bank, and the Bonds are not deposits of
any bank and are not insured by the Federal Deposit Insurance Corporation.

FORWARD-LOOKING STATEMENTS DISCLAIMER

The statements contained in this Official Statement, and in any other information provided by the City, that are not purely
historical, are forward-looking statements, including statements regarding the City's expectations, hopes, intentions, or strategies
regarding the future. Readers should not place undue reliance on forward-looking statements. All forward-looking statements
included in this Official Statement are based on information available to the City on the date hereof, and the City assumes no
obligation to update any such forward-looking statements. The City's actual results could differ materially from those discussed
in such forward-looking statements.

The forward-looking statements included herein are necessarily based on various assumptions and estimates and are inherently
subject to various risks and uncertainties, including risks and uncertainties relating to the possible invalidity of the underlying
assumptions and estimates and possible changes or developments in social, economic, business, industry, market, legal, and
regulatory circumstances and conditions and actions taken or omitted to be taken by third parties, including customers, suppliers,
business partners and competitors, and legislative, judicial, and other governmental authorities and officials. Assumptions
related to the foregoing involve judgments with respect to, among other things, future economic, competitive, and market
conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are
beyond the control of the City. Any of such assumptions could be inaccurate and, therefore, there can be no assurance that the
forward-looking statements included in this Official Statement will prove to be accurate.

ENVIRONMENTAL REGULATIONS

The City is subject to the environmental regulations of the State and the United States. These regulations are subject to change,
and the City may be required to expend substantial funds to meet the requirements of such regulatory authorities.

AIR QUALITY

Air quality control measures required by the United States Environmental Protection Agency (the "EPA") and the Texas
Commission on Environmental Quality ("TCEQ") may adversely affect new industrial, commercial and residential development
in Houston and adjacent areas. Under the Clean Air Act Amendments of 1990, the eight county Houston-Galveston-Brazoria
Area ("HGB Area") has been designated by the EPA as a non-attainment area under the EPA’s ozone standards. Such areas are
required to demonstrate progress in reducing ozone concentrations each year until compliance with EPA’s standards are
achieved. To provide for annual reductions in ozone concentrations, the EPA and the TCEQ have imposed increasingly stringent
limitations on emissions of volatile organic compounds and nitrogen oxides (chemical precursors of ground level ozone) from
existing stationary sources of air emissions. In addition, any significant new source of those types of emissions, such as a new
industrial plant, must provide for a net reduction of those air emissions by arranging or paying for reductions of emissions by 1.3
times the amount of pollutants proposed to be emitted by the new source. Even though existing air emissions controls are quite
stringent, studies have indicated that even more stringent air emissions controls will be necessary in order for the HGB Area to
achieve compliance with ozone standards. Due to the magnitude of air emissions reductions required as well as shortage of
economically reasonable control options, the development of a successful air quality compliance plan has been and continues to
be extremely challenging and will inevitably impact a wide cross-section of the business and residential community. More
stringent controls on sources of air emissions in the HGB Area could make the Houston area a less attractive location to
businesses in comparison to other areas of the country that are not subject to similarly stringent air emissions controls. Although
air quality data indicates steady improvements in the HGB Area, if it fails to meet EPA’s standards, EPA may impose a
moratorium on the awarding of federal highway construction grants and other federal grants for certain public works construction
32
projects. The EPA may also impose more stringent emissions offset requirements on new major sources of emissions for which
construction has not already commenced.

Other constraints on economic growth and development include lawsuits filed under the Clean Air Act by plaintiffs seeking to
require emission reduction measures that are even more stringent than those adopted by TCEQ and approved by EPA. From
time to time, various plaintiff environmental organizations have filed lawsuits against TCEQ and EPA seeking to compel the
early adoption of additional emission reduction measures, many of which could make it more difficult for businesses to construct
or expand industrial facilities or which could result in new restrictions on the actions of businesses, governmental entities and
private citizens. Any successful court challenge to the currently effective air emissions control plan could result in the
imposition of even more stringent air emission controls that could threaten continued growth and development in the HGB Area.

MISCELLANEOUS

The financial data and other information contained herein have been obtained from City records, audited financial statements and
other sources which are believed to be reliable. There is no guarantee that any of the assumptions or estimates contained herein
will be realized. All of the summaries of the statutes, documents and resolutions contained in this Official Statement are made
subject to all of the provisions of such statutes, documents and resolutions. These summaries do not purport to be complete
statements of such provisions and reference is made to such documents for further information. Reference is made to original
documents in all respects.

The Ordinance also approved the form and content of this Official Statement, and any addenda, supplement or amendment
thereto, and authorized its further use in the reoffering of the Bonds by the Underwriters.

Joe R. Zimmerman
Mayor
City of Sugar Land, Texas
ATTEST:

Thomas Harris III

City Secretary
City of Sugar Land, Texas

33
THIS PAGE LEFT BLANK INTENTIONALLY
 APPENDIX A

GENERAL INFORMATION REGARDING THE CITY

THIS PAGE LEFT BLANK INTENTIONALLY
 POPULATION ESTIMATES

City of Sugar Land

Fiscal Annual
Year Population % Growth
2009 79,573 2.04%
2010 80,787 1.53%
2011 81,835 1.30%
2012 82,999 1.42%
2013 84,134 1.37%
2014 86,495 2.81%
2015 86,972 0.55%
2016 87,504 0.61%
2017 87,730 0.26%
2018 117,869 34.35%
2019 118,023 0.13%
2020 118,118 0.08%

Source: City of Sugar Land.

TOP EMPLOYERS

City of Sugar Land

Number of
Employer Employees
Houston M ethodist Sugar Land Hospital 2,300
Schlumberger 2,200
Fluor Enterprises, Inc. 1,980
United Healthcare/United Health Group 1,289
Nalco Champion, an Ecolab Company 546
First Data Telecheck 500
M emorial Hermann Sugar Land 497
Tramontina USA, Inc. 419
St. Luke's Hospital Sugar Land 400
AmerisourceBergen 399

Source: City of Sugar Land.

A-1
LABOR FORCE AND UNEMPLOYMENT RATE

City of Sugar Land

Civilian Total
Year Labor Force Employment Unemployment Rate
2015 45,109 43,506 1,603 3.6%
2016 45,137 42,994 2,143 4.7%
2017 44,928 42,989 1,939 4.3%
2018 45,606 43,993 1,613 3.5%
2019 (1) 47,019 45,598 1,421 3.0%

Fort Bend County

Civilian Total
Year Labor Force Employment Unemployment Rate
2015 356,151 341,000 15,151 4.3%
2016 367,057 348,745 18,312 5.0%
2017 376,029 358,547 17,482 4.6%
2018 382,102 366,922 15,180 4.0%
2019 (1) 392,905 380,308 12,597 3.2%

Source: Texas Workforce Commission.

(1) Through December 2019.

NEW BUILDING CONSTRUCTION PERMITS

Fiscal New Commercial New Residential

Year Construction Value Construction Value
2009 $ 102,791,856 $ 113,585,151
2010 29,715,891 129,032,162
2011 105,824,224 119,575,384
2012 24,673,274 116,979,515
2013 126,070,763 56,672,750
2014 144,089,602 63,705,608
2015 233,942,795 73,569,722
2016 93,021,183 67,562,184
2017 103,410,115 72,736,817
2018 163,554,817 70,378,761
(1)
2019 168,792,001 131,762,138

Source: City of Sugar Land.

(1) House Bill 852 was signed into law on May 21, 2019. The bill prohibits cities from using the valuation or cost of a
residential dwelling to determine permit fees. As such the residential valuation is a partial year figure as it is no longer
being collected.

A-2
 APPENDIX B

EXCERPTS FROM THE

CITY OF SUGAR LAND, TEXAS

COMPREHENSIVE ANNUAL FINANCIAL REPORT

For the Year Ended September 30, 2019

The information contained in this Appendix consists of excerpts from the City of Sugar
Land, Texas Comprehensive Annual Financial Report for the Year Ended September 30,
2019, and is not intended to be a complete statement of the City's financial condition.
Reference is made to the complete Report for further information.
THIS PAGE LEFT BLANK INTENTIONALLY
 Houston Office
3737 Buffalo Speedway
Suite 1600
Houston, Texas 77098
713.621.1515 Main

whitleypenn.com

REPORT OF INDEPENDENT AUDITORS

To the Honorable Mayor and Members

of the City Council
City of Sugar Land, Texas

Report on the Financial Statements

We have audited the accompanying financial statements of the governmental activities, the business-type
activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund
information of City of Sugar Land, Texas (the “City”) as of and for the year ended September 30, 2019, and the
related notes to the financial statements, which collectively comprise the City’s basic financial statements as listed
in the table of contents.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance
with accounting principles generally accepted in the United States of America; this includes the design,
implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial
statements that are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit
in accordance with auditing standards generally accepted in the United States of America and the standards
applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of
the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free from material misstatement.

An audit includes performing procedures to obtain audit evidence about the amounts and disclosures in the
financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the
risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk
assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the
financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the
purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no
such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the
reasonableness of significant accounting estimates made by management, as well as evaluating the overall
financial statement presentation.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit
opinions.

1 City of Sugar Land 2019 CAFR

To the Honorable Mayor and Members
of the City Council
City of Sugar Land, Texas

Opinions

In our opinion, the financial statements referred to above present fairly, in all material respects, the respective
financial position of the governmental activities, the business-type activities, the aggregate discretely presented
component units, each major fund, and the aggregate remaining fund information of the City, as of September 30,
2019, and the respective changes in financial position and, where applicable, cash flows thereof for the year then
ended in accordance with accounting principles generally accepted in the United States of America.

Other Matters

Required Supplementary Information

Accounting principles generally accepted in the United States of America require that the management’s
discussion and analysis on pages 5 through 17, budgetary comparison information, pension system supplementary
information, and other post-employment benefit supplementary information on pages 86 to 90 be presented to
supplement the basic financial statements. Such information, although not a part of the basic financial statements,
is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial
reporting for placing the basic financial statements in an appropriate operational, economic, or historical context.
We have applied certain limited procedures to the required supplementary information in accordance with
auditing standards generally accepted in the United States of America, which consisted of inquiries of
management about the methods of preparing the information and comparing the information for consistency with
management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during
our audit of the basic financial statements. We do not express an opinion or provide any assurance on the
information because the limited procedures do not provide us with sufficient evidence to express an opinion or
provide any assurance.

Other Information

Our audit was conducted for the purpose of forming opinions on the financial statements that collectively
comprise the City’s basic financial statements. The other supplementary information, as described in the
accompanying table of contents, is presented for purposes of additional analysis and is not a required part of the
basic financial statements.

The other supplementary information, as described in the accompanying table of contents, is the responsibility of
management and was derived from and relates directly to the underlying accounting and other records used to
prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in
the audit of the basic financial statements and certain additional procedures, including comparing and reconciling
such information directly to the underlying accounting and other records used to prepare the basic financial
statements or to the basic financial statements themselves, and other additional procedures in accordance with
auditing standards generally accepted in the United States of America.

In our opinion, the other supplementary information, as described in the accompanying table of contents, is fairly
stated, in all material respects, in relation to the basic financial statements as a whole.

The introductory and statistical sections have not been subjected to the auditing procedures applied in the audit of
the basic financial statements and, accordingly, we do not express an opinion or provide any assurance on them.

2 City of Sugar Land 2019 CAFR

To the Honorable Mayor and Members
of the City Council
City of Sugar Land, Texas

Other Reporting Required by Government Auditing Standards

In accordance with Government Auditing Standards, we have also issued our report dated February 14, 2020, on
our consideration of the City’s internal control over financial reporting and on our tests of its compliance with
certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that
report is to describe the scope of our testing of internal control over financial reporting and compliance and the
results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance.
That report is an integral part of an audit performed in accordance with Government Auditing Standards in
considering the City’s internal control over financial reporting and compliance.

Houston, Texas
February 14, 2020

3 City of Sugar Land 2019 CAFR

4 City of Sugar Land 2019 CAFR
CITY OF SUGAR LAND, TEXAS
MANAGEMENT’S DISCUSSION AND ANALYSIS

The management of the City of Sugar Land offers readers of the City’s financial statements this narrative
overview and analysis of the financial activities of the City for the fiscal year ended September 30, 2019.

Financial Highlights

 The assets and deferred outflows of resources of the City exceeded its liabilities and deferred inflows of
resources at the close of the most recent fiscal year by $698.1 million (net position). Of this amount, $67.8
million (unrestricted net position) may be used to meet the government's ongoing obligations to citizens and
creditors.
 As of the close of the current fiscal year, the City’s governmental funds reported combined ending fund
balances of $86.0 million, an increase of $18 million over the prior year. Approximately 45% of this total
amount, $38.9 million, is available for spending at the government's discretion (unassigned fund balance).
 The City’s Financial Management Policy requires the City to maintain the General fund’s unassigned fund
balance equivalent to three months of recurring budgeted operating costs, which is approximately $23.5
million for fiscal year 2019.
 The City’s total long-term liabilities increased by $2.8 million due to the issuance of new debt.
Overview of the Financial Statements

This discussion and analysis is intended to serve as an introduction to the City’s basic financial statements. The
City’s basic financial statements comprise three components: 1) government-wide financial statements, 2) fund
financial statements, and 3) notes to the financial statements. This report also contains other supplementary
information in addition to the basic financial statements.

Government-wide Financial Statements

The government-wide financial statements are designed to provide readers with a broad overview of the City’s
finances, in a manner similar to a private-sector business.

The statement of net position presents information on all of the City’s assets, deferred outflows of resources,
liabilities, and deferred inflows of resources with the difference between the four reported as net position. Over
time, increases or decreases in net position may serve as a useful indicator of whether the financial position of the
City is improving or deteriorating.

The statement of activities presents information showing how the government's net position changed during the
most recent fiscal year. All changes in net position are reported as soon as the underlying event giving rise to the
change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this
statement for some items that will only result in cash flows in future fiscal periods (e.g., uncollected taxes and
earned but unused vacation leave).

Both of the government-wide financial statements distinguish functions of the City that are principally supported
by taxes and intergovernmental revenues (governmental activities) from other functions that are intended to
recover all or a significant portion of their costs through user fees and charges (business-type activities). The
governmental activities of the City include general government, administrative services, public safety, public
works, parks and recreation, community development, and environmental and neighborhood services. The
business-type activities of the City include utility system, including surface water operations, and solid waste
operations as well as the operations of a regional airport facility.

5 City of Sugar Land 2019 CAFR

CITY OF SUGAR LAND, TEXAS
MANAGEMENT’S DISCUSSION AND ANALYSIS (continued)

Government-wide Financial Statements (continued)

The government-wide financial statements include not only the City itself (known as the primary government),
but also legally separate entities for which the City is financially accountable. Financial information for these
discretely presented component units is reported separately from the financial information presented for the
primary government itself. The City’s four discretely presented component units consist of the following:

 Sugar Land 4B Corporation (4B Corporation)

 Sugar Land Town Square Tax Increment Reinvestment Zone No. 1 (T1RZ 1)
 Sugar Land Reinvestment Zone No. 3 (TIRZ 3)
 Sugar Land Reinvestment Zone No. 4 (TIRZ 4)

The following component unit is a blended component unit, meaning its financial information is included with
that of the primary government:

 Sugar Land Development Corporation

The government-wide financial statements can be found on pages 21 through 23 of this report.

Fund Financial Statements

A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated
for specific activities or objectives. The City uses fund accounting to ensure and demonstrate compliance with
finance-related legal requirements. All of the funds of the City can be divided into two categories: governmental
funds and proprietary funds.

Governmental Funds - Governmental funds are used to account for essentially the same functions reported as
governmental activities in the government-wide financial statements. However, unlike the government-wide
financial statements, governmental fund financial statements focus on near-term inflows and outflows of
spendable resources, as well as on balances of spendable resources available at the end of the fiscal year. Such
information may be useful in evaluating a government's near-term financing requirements.

Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is
useful to compare the information presented for governmental funds with similar information presented for
governmental activities in the government-wide financial statements. By doing so, readers may better understand
the long-term impact of the government's near-term financing decisions. Both the governmental fund balance
sheet and the governmental fund statement of revenues, expenditures, and changes in fund balances provide a
reconciliation to facilitate this comparison between governmental funds and governmental activities.

The City maintains 12 individual governmental funds. Information is presented separately in the governmental
fund balance sheet and in the governmental fund statement of revenues, expenditures, and changes in fund
balances for the General and Debt Service funds, both of which are considered to be major funds. Data from the
other nine governmental funds are combined into a single, aggregated presentation. Individual fund data for each
of these non-major governmental funds is provided in the form of combining statements elsewhere in the
comprehensive annual financial report on pages 95 through 100.

The basic governmental fund financial statements can be found on pages 24 through 27 of this report.

6 City of Sugar Land 2019 CAFR

CITY OF SUGAR LAND, TEXAS
MANAGEMENT’S DISCUSSION AND ANALYSIS (continued)

Fund Financial Statements (continued)

Proprietary Funds - The City maintains two different types of proprietary funds. Enterprise funds are used to
report the same functions presented as business-type activities in the government-wide financial statements. The
City uses enterprise funds to account for its utility system, solid waste operations as well as the operations of a
regional airport facility. The City uses internal service funds to report activities that provide supplies and services
for the City's other programs and activities. The Employee Benefits Fund, Fleet Replacement Fund and High-
Technology Replacement Fund are the City's internal service funds. Their purpose is to provide for the
accumulation of money for employee benefits, as well as, vehicle and equipment replacement used in City
operations. Because these services predominantly benefit governmental rather than business-type functions, they
have been included within governmental activities in the government-wide financial statements.

Proprietary funds provide the same type of information as the government-wide financial statements, only in more
detail. The proprietary fund financial statements provide separate information for the utility system, including the
surface water treatment plant, and solid waste operations as well as the operations of the regional airport facility.
The utility system and airport funds are considered to be major funds of the City. Conversely, all internal service
funds are combined into a single, aggregated presentation in the proprietary fund financial statements. Individual
fund data for the internal service funds is provided in the form of combining statements elsewhere in the
comprehensive annual financial report.

The basic proprietary fund financial statements can be found on pages 28 through 31 of this report.

Combining Component Unit Financial Statements

The City’s four discretely presented component units shown in aggregate on the face of the government-wide
financial statements have individual information presented in the form of combining statements immediately
following the fund financial statements of the primary government.

Notes to the Financial Statements

The notes provide additional information that is essential to a full understanding of the data presented in the
government-wide and fund financial statements. The notes to the financial statements can be found on pages 35
through 84.

Other Information

In addition to the basic financial statements and accompanying notes, this report also presents certain required
supplementary information concerning the City’s progress in funding its obligation to provide pension benefits
and other post-employment benefits to its employees. The City adopts an annual appropriated budget for its
general, debt service and certain special revenue funds. A budgetary comparison schedule has been provided for
the general fund to demonstrate compliance with this budget. Required supplementary information can be found
on pages 86 through 90 of this report.

7 City of Sugar Land 2019 CAFR

CITY OF SUGAR LAND, TEXAS
MANAGEMENT’S DISCUSSION AND ANALYSIS (continued)

Government-wide Financial Analysis

As noted earlier, net position may serve over time as a useful indicator of a government's financial position. The
City’s assets and deferred outflows of resources exceeded liabilities and deferred inflows of resources by $698.1
million at the close of the most recent fiscal year.

By far the largest portion of the City’s net position, 86% or $597.0 million, reflects its net investment in capital
assets (e.g., land, buildings, and infrastructure), less any related outstanding debt used to acquire those assets. The
City uses these capital assets to provide services to citizens; consequently, these assets are not available for future
spending as of September 30, 2019. Although the City’s investment in its capital assets is reported net of related
debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since
the capital assets themselves cannot be used to liquidate these liabilities.

COMPARATIVE SCHEDULE OF NET POSITION

September 30, 2019 and 2018

Governmental Activities Business-type Activitie s Totals

Amounts in (000's) 2019 2018 2019 2018 2019 2018
Current and other assets $ 104,824 $ 87,940 $ 89,076 $ 85,421 $ 193,900 $ 173,361
Capital assets 620,532 633,460 431,213 443,105 1,051,745 1,076,565
Total Assets 725,356 721,400 520,289 528,526 1,245,645 1,249,926

Total Defe rred Outflows

of Resource s 18,783 10,127 4,976 3,864 23,759 13,991

Other liabilities 11,732 11,187 9,107 8,652 20,839 19,839

Long-term liabilities 329,313 312,441 218,336 212,262 547,649 524,703
Total Liabilities 341,045 323,628 227,443 220,914 568,488 544,542

Total Defe rred Inflows

of Resource s 2,467 6,596 342 915 2,809 7,511

Net Position
Net invesment in capital assets 359,391 358,639 237,564 252,642 596,955 611,281
Restricted 22,177 19,535 11,190 9,770 33,367 29,305
Unrestricted 19,059 23,129 48,726 48,149 67,785 71,278
Total Net Position $ 400,627 $ 401,303 $ 297,480 $ 310,561 $ 698,107 $ 711,864

An additional portion of the City’s net position, 4.8% or $33.4 million, represents resources that are subject to
external restrictions on how they may be used. The remaining balance of unrestricted net position of 9.7% or
$67.8 million, may be used to meet the government's ongoing obligations to citizens and creditors.

At the end of the current fiscal year, the City is able to report positive balances in all three categories of net
position, for the government as a whole, as well as for its separate governmental and business-type activities. The
same situation held true for the prior fiscal year.

8 City of Sugar Land 2019 CAFR

CITY OF SUGAR LAND, TEXAS
MANAGEMENT’S DISCUSSION AND ANALYSIS (continued)

Government-wide Financial Analysis (continued)

COMPARATIVE SCHEDULE OF CHANGES IN NET POSITION

For the Years Ended September 30, 2019 and 2018

Governmental Activities Business-type Activities Totals

Amounts in (000's) 2019 2018 2019 2018 2019 2018
Revenues
Program revenues:
Charges for services $ 18,884 $ 19,294 $ 69,286 $ 73,954 $ 88,170 $ 93,248
Operating grants and
contributions 2,438 2,215 58 195 2,496 2,410
Capital grants and
contributions 4,622 15,379 3,222 11,539 7,844 26,918
General revenues: - -
Property taxes 49,989 44,092 - - 49,989 44,092
Sales tax 47,581 47,038 - - 47,581 47,038
Franchise and other taxes 8,925 9,060 - - 8,925 9,060
Other 5,108 3,751 3,201 1,121 8,309 4,872
Total Revenues 137,547 140,829 75,767 86,809 213,315 227,638
Expenses
General government 23,019 19,810 - - 23,019 19,810
Administrative services 5,706 5,877 - - 5,706 5,877
Public safety - Police 28,011 26,692 - - 28,011 26,692
Public safety - Fire 15,098 14,517 - - 15,098 14,517
Public safety - EMS 2,137 2,127 - - 2,137 2,127
Public works 32,541 37,700 - - 32,541 37,700
Parks and recreation 9,472 10,892 - - 9,472 10,892
Community development 7,597 5,571 - - 7,597 5,571
Environmental and
neighborhood services 6,874 6,138 - - 6,874 6,138
Interest on long-term debt 10,233 9,810 - - 10,233 9,810
Utility - - 57,534 59,854 57,534 59,854
Regional Airport - - 16,935 16,239 16,935 16,239
Solid Waste Management - - 8,201 7,980 8,201 7,980
Total Expenses 140,688 139,134 82,670 84,073 223,358 223,207
Increase (decrease) in net
position before transfers
and extraordinary item (3,141) 1,694 (6,902) 2,736 (10,043) 4,430
Transfers 6,179 3,094 (6,179) (3,094) - -
Extraordinary item (3,714) - - (2,410) (3,714) (2,410)
Increase (decrease) in net
position (676) 4,788 (13,081) (2,768) (13,757) 2,020
Net position - beginning 401,303 396,515 310,561 313,329 711,864 709,844

Net position - ending $ 400,627 $ 401,303 $ 297,480 $ 310,561 $ 698,107 $ 711,864

The City's net position decreased by approximately $13.8 million. This was primarily the result of a decrease in
business-type activities’ net position.

9 City of Sugar Land 2019 CAFR

CITY OF SUGAR LAND, TEXAS
MANAGEMENT’S DISCUSSION AND ANALYSIS (continued)

Governmental Activities

Governmental activities net position remained stable with changes in revenues and expenses between years as
follows:
 Increases in revenues are due to a reimbursement of $1.1 million from FEMA for hurricane Harvey
related damages and increase of $5.9 million in property tax revenues due to the annexation of New
Territory and Greatwood MUDs.
 The increased revenues were offset by increased compensation of $1.6 million and benefit costs of $0.9
million and higher O & M costs during the year.
 A major increase in expense was a one-time write off of $3.7 million receivable of fines due to
termination of the red light camera program. Please refer to Note 16 – Termination of Funds, for further
information.

Expenses and Revenues ‐ Governmental Activities

$35,000
$30,000
$25,000
$20,000
in (000's)

$15,000
$10,000
$5,000
$‐

Expenses Revenues

10 City of Sugar Land 2019 CAFR

CITY OF SUGAR LAND, TEXAS
MANAGEMENT’S DISCUSSION AND ANALYSIS (continued)

Governmental Activities (continued)

Expenses by Program ‐ Governmental Activities

General government Administrative
Interest on long‐term debt 16% services
7% 4%
Public safety ‐ Police
Environmental and 20%
neighborhood services
5%

Community development
5%
Public safety ‐ Fire
11%
Parks and recreation Public safety ‐ EMS
7% 2%
Public works
23%

Business-type Activities

Business-type activities decreased the City’s net position by $13.1 million. Key elements of this decrease are as
follows:
 Charges for services of Utility fund decreased by $5.2 million due to an increase in rainfall, resulting in
decreased water consumption.
 A decrease of $3 million in capital contribution from developer for utility related infrastructure and $5.2
million from Texas Department of Transportation for Airport projects.

Expenses and Revenues ‐ Business‐type Activities

$70,000
in (000's)

$60,000
$50,000
$40,000
$30,000
$20,000
$10,000
$‐
Utility Regional Airport Solid Waste
Management
Expenses Revenues

11 City of Sugar Land 2019 CAFR

CITY OF SUGAR LAND, TEXAS
MANAGEMENT’S DISCUSSION AND ANALYSIS (continued)

Financial Analysis of the City's Funds

As noted earlier, fund accounting is used to demonstrate and ensure compliance with finance-related legal
requirements.

Governmental Funds - The focus of the City's governmental funds is to provide information of near-term inflows,
outflows, and balances of spendable resources. Such information is useful in assessing the City's financing
requirements, in particular, unassigned fund balance may serve as a useful measure of the City's net resources
available for spending at the end of the fiscal year.

As of the close of the current fiscal year, the City’s governmental funds reported combined ending fund balances
of $86.0 million, an increase of $18 million over the prior year. Approximately 45% of this total amount, $38.9
million, is available for spending at the government's discretion (unassigned fund balance).

Fund balance in the General Fund increased from prior year, by $5.2 million, resulting in an ending fund balance
of $40.3 million at year end. The unassigned fund balance of $38.9 million represents 43% of total fund
expenditures.

The Debt Service Fund has a total fund balance of $8.8 million at year end, all of which is restricted for the
payment of debt service. The net increase in fund balance during the current year in the Debt Service Fund was
$2.6 million.

The most significant change in fund balance was in the non-major governmental funds with increases of $10.5
million. This increase is primarily due to the issuance of new bonds offset by capital outlay related to construction
projects including various improvements to street, parks and facilities.

Proprietary Funds - The City's proprietary funds provide the same type of information found in the government-
wide financial statements, but in more detail.

The Utility Fund has unrestricted net position at fiscal year-end of $37.5 million and the Airport Fund's unrestricted
net position amounted to approximately $3.4 million. Other factors concerning the finances of the City's
Proprietary Funds have already been addressed in the discussion of the City's business-type activities.

General Fund Budgetary Highlights

Budget estimates for revenues between the original and final amended budget changed by $5.2 million due to the
reclassification of transfers into sales tax.

During the year there were increases between the original and final amended budget expenditure appropriations
of $2.2 million due to appropriations of carry-over from the prior year.

There were no significant differences between final amended expenditures and actual expenditures in fiscal year
2019. The review of the final amended budget versus the actual for the general fund, reflected a positive budget
variance in the amount of $4.9 million.

12 City of Sugar Land 2019 CAFR

CITY OF SUGAR LAND, TEXAS
MANAGEMENT’S DISCUSSION AND ANALYSIS (continued)

Capital Assets and Debt Administration

Capital Assets

At the end of the current fiscal year 2019, the City's governmental activities and business-type activities had
invested $620.5 million and $431.2 million, respectively, in a variety of capital assets and infrastructure, as reflected
in the following schedule. This represents a net decrease of $12.9 million or 2.0% over the end of last fiscal year for
governmental activities and a decrease of $11.9 million or 2.7% for business-type activities.

Governmental Activities Business-Type Activities Totals

Amounts in (000's) 2019 2018 2019 2018 2019 2018
Land and intangibles $ 107,365 $ 107,233 $ 26,755 $ 26,350 $ 134,120 $ 133,583
Construction in progress 19,452 32,045 11,525 43,868 30,977 75,913
Infrastructure 277,885 268,853 371,214 352,079 649,099 620,932
Buildings and improvements 194,205 202,108 17,946 16,676 212,151 218,784
Equipment and furniture 21,626 23,222 3,773 4,131 25,399 27,353
Total Capital Assets $ 620,533 $ 633,461 $ 431,213 $ 443,104 $ 1,051,746 $ 1,076,565

The overall decrease in capital assets for governmental activities and for the business-type activities is due to the
$27.9 million of depreciation expense.

Additional information on the City’s capital assets can be found in Note 4 to the financial statements.

Long-Term Debt

At the end of the current fiscal year, the City had total outstanding debt of $496.6 million. Of this amount, $183.2
million was general obligation debt (including $1.8 million of dissolved utility district bonds), and $150.8 million
represents bonds secured solely by specified revenue sources (i.e. revenue bonds). Certificates of obligation and tax
notes account for $126.9 million and $2.2 million, respectively.

Governmental Activities Business-Type Activities Totals

Amounts in (000's) 2019 2018 2019 2018 2019 2018
General obligation bonds $ 99,275 $ 106,155 $ 83,890 $ 84,580 $ 183,165 $ 190,735
Revenue bonds 45,120 47,020 105,695 98,510 150,815 145,530
Certificates of obligation 119,265 111,255 7,615 10,035 126,880 121,290
Tax note 2,181 3,247 - - 2,181 3,247
Premiums or discounts 18,596 17,507 14,978 15,489 33,574 32,996
$ 284,437 $ 285,184 $ 212,178 $ 208,614 $ 496,615 $ 493,798

The net increase in debt for the year was $2.8 million or 0.6%. This was primarily due to the issuance of new debt
offset by retirement and refunding of old debt.

13 City of Sugar Land 2019 CAFR

CITY OF SUGAR LAND, TEXAS
MANAGEMENT’S DISCUSSION AND ANALYSIS (continued)

Capital Assets and Debt Administration (continued)

Long-Term Debt
The most recent ratings on debt issues are as follows:

Fitch
Standard and Investors
Poor’s Service
General obligation bonds AAA AAA
Revenue bonds AA+ AA+

Both the Sugar Land Development Corporation (SLDC) and the Sugar Land 4B (SL4B) Corporation, component
units of the City, have issued debt. SLDC bonds are rated "A1" and "A+" from Moody's and Standard & Poor’s,
respectively. SL4B bonds are rated “Aa3” and “A+” from Moody’s and Standard & Poor’s, respectively.

Additional information on the City’s long-term debt can be found in Note 5 to the financial statements.

Economic Factors and Next Year’s Budgets and Rates

The City of Sugar Land has a long history of recognition as a leader in financial stewardship, with strategies
specifically tailored to the community and designed to maximize both the conservative nature of the City’s
finances and to offset the residential tax burden.

Throughout the past several decades, the success of these strategies has been demonstrated through a low property
tax burden for residents – with commercial growth significantly offsetting the cost of residential services. In large
part the result of targeted and aggressive economic development, as well as tools such as sales taxes for property
tax reduction and economic development – all approved by voters in the 1990s, the City of Sugar Land has
lowered the property tax significantly 1993 in order to maximize savings to residents on an annual basis as growth
was occurring. Sugar Land offers both the second lowest tax rate among similarly sized cities in Texas and an
extremely low residential property tax levy per capita.

Additionally, the City’s championship workforce has consistently provided a high level of services while always
being cognizant of the critical importance of also providing a high value for tax dollars – elements of the “Sugar
Land Way” which were confirmed as successful by residents in the latest citizen satisfaction survey. Simply put,
the “Sugar Land Way” is a commitment to bold and thoughtful thinking designed to make life sweeter and more
refined for the people and businesses that call Sugar Land home, with a current emphasis on the priorities listed
below:

 Ensuring Sugar Land remains safer than ever before by building upon years of investments in facilities
and public safety innovations;
 Maintaining aging infrastructure and facilities at the high level expected by Sugar Land residents;
 Retaining and challenging a champion workforce that consistently exceeds the high expectations of the
Sugar Land community;
 Constantly improving the appearance of the community; and
 Building upon Sugar Land’s position as an economic powerhouse and financial leader (as well as a focus
on strengthened resilience) that allows the city to improve its quality of life and minimize the residential
tax burden.

14 City of Sugar Land 2019 CAFR

CITY OF SUGAR LAND, TEXAS
MANAGEMENT’S DISCUSSION AND ANALYSIS (continued)

Economic Factors and Next Year’s Budgets and Rates (continued)

As the City approaches its 60th anniversary, the strategies that led to success in the past must evolve to ensure
Sugar Land continues to be successful in the future – recognizing that the City is aging and changing. Factors
driving the need for the City’s strategies to evolve include slowing growth as the City approaches build-out;
residential value growth outpacing commercial growth in recent years; increasing service costs and aging
infrastructure; competition for and continued volatility of sales tax revenues; the absorption of budget cuts and
constraint in recent years that has left many increasing operational needs and priority capital projects unfunded –
coupled with increasing drainage costs to address changing weather patterns and the need for capital
improvements that exceed the city’s ability to maintain a flat tax rate; completion of new strategy documents such
as the Integrated Water Resources Plan, which will guide the City’s approach to securing the community’s long-
term water supply and completing required capital projects in light of significant unfunded mandates associated
with surface water conversion; and responding to significant negative impacts of recently passed legislation.

The Texas Legislature met in the spring of 2019 for the 86th legislative session, which resulted in the passage of
several bills that will have significant impacts on the City’s future. Major impacts will be felt through caps on
future property tax revenues, elimination of red light cameras as a traffic safety tool, elimination of some fees for
right of way usage by telecommunications and cable providers, and requiring the City to adjust workloads through
restricting processes and unfunded mandates.

Legislative impacts, combined with current and future economic uncertainty, led to the development of a budget
for FY20 that aims to restore funding for operations and maintenance needs and put the City in a stable financial
position in the future- using strategies to enhance increase diversity of revenue streams. Discussions with City
Council have revolved around these strategies and preservation of the City’s flexibility and ability to provide
services that meet residents’ expectations of quality.

Over the last few years, the uncertainty in the regional economy has caused the City to evaluate strategies to
ensure that it is financially strong and resilient. This introspective review and evaluation has led to the City’s
development of resiliency initiatives and its focus on innovative constraint. These ongoing resiliency initiatives
and the focus on innovative constraint, formalized in the Financial Management Policy Statements (FMPS) and
then incorporated into financial plans, are allowing the City to exceed its financial expectations in the current
fiscal year and have positioned the City for success in the future. Mixed messages have been seen in the economy
throughout the year, from downturns in the oil & gas industry and slowdowns in commercial development, to
increases in interest rates by the Federal Reserve Bank, with statements reflecting potential cuts later this year.

In years with high economic volatility, the importance of resiliency initiatives becomes more apparent as they
allow the organization to withstand and maintain strength despite challenging economic conditions. The resiliency
initiatives that were formalized in the most recent adoption of the FMPS were designed to further strengthen the
financial position of the City by lessening the impact of economic swings associated with sales tax - a major
revenue stream for the City, but one that is highly volatile and difficult to forecast. One key assumption is a
conservative estimate of sales tax revenue based on current recurring collections, with no growth assumed in the
budget. Using this methodology, actual sales tax should come in higher than budgeted, as the City regularly
receives one time payments and audit adjustments which are not included in the budget. These revenues are then
available for one-time use in the following year’s budget as they become part of the fund balance. While FY19
actual sales tax performed better than the prior year by 1.16%, recurring sales tax revenues were up 2.6% due to
fluctuations in one time revenues from year to year. This approach allows the City to avoid dependence on these
one-time payments that can vary significantly from year to year. The following year’s budget is based on the
estimated recurring sales tax revenue only, with no growth assumed.

15 City of Sugar Land 2019 CAFR

CITY OF SUGAR LAND, TEXAS
MANAGEMENT’S DISCUSSION AND ANALYSIS (continued)

Economic Factors and Next Year’s Budgets and Rates (continued)

In light of the need for the City’s strategies to evolve in order to ensure continued success – and recognizing that
the “Sugar Land Way” will not continue without City leadership and support from the public, the adopted FY20
budget and five year CIP have been designed to improve the City’s financial resiliency and ability to anticipate
and respond to new challenges and opportunities.

In combination, the above strategies enable the adopted FY20 budget and five-year CIP to reflect many of the
City’s highest priorities – consistent with feedback provided by residents through surveys, community meetings,
and other forms of input.

Priorities included in the FY20 adopted budget and five year CIP include:

 Increased funding for rehabilitation, which improves the city’s resiliency and ability to maintain
infrastructure such as sidewalks, streets, facilities, parks, drainage and bridges in a way that meets
residents’ expectations of quality – achieved through a shift in existing property tax revenue to the
operating budget;
 Continued innovative constraint such as the insourcing of the city’s landscape maintenance and ROW
beautification services for long-term savings and consistent delivery of services;
 Continued investment in technology to enhance traffic and mobility responsiveness, such as ITS
management and an update to the Comprehensive Mobility Plan;
 Supplemental traffic safety resources to replace the traffic enforcement cameras and identifying alternate
revenues – including targeted increases in EMS fees – to offset revenues that were eliminated as a result
of the 86th state legislature, such as right-of-way usage by telecommunications providers;
 Investments in a championship workforce, such as a public safety compensation study and a performance-
based merit pool of 3 percent – recognizing that, as a personnel-driven public safety and service provider,
a main driver in the City’s budget is employee compensation and benefits;
 Implementation of recommendations from the Integrated Water Resources Plan to meet a mandated 60
percent reduction in groundwater usage and actions to secure water sources to meet the city’s long-term
water supply needs, along with rate adjustments to support the plan – the first rate changes since 2014;
 Completion of the remaining 2013 voter-approved parks bond projects, through a planned tax rate
increase and the strategic use of an increase in the homestead exemption from 10 to 12 percent to offset
the residential tax bill impact; and
 Plans for significant capital investment into the city’s infrastructure in the near future, including a FY21-
23 GO bond program of $90.76 million in capital projects, which were subsequently approved by voters
in November 2019. Over half of the package was identified for drainage improvements and the remainder
for public safety, mobility and animal services.

16 City of Sugar Land 2019 CAFR

CITY OF SUGAR LAND, TEXAS
MANAGEMENT’S DISCUSSION AND ANALYSIS (continued)

Economic Factors and Next Year’s Budgets and Rates (continued)

Based on the priorities addressed identified and discussed above, the FY20 budget totals $272.5 million. Of the
total, $235 million is for operating funds and issuance costs, and $40.5 million is for capital projects, including
the final voter-approved park bond projects from 2013. The Five-Year CIP totals $263.8 million, with $41.5
million in projects approved for funding in FY20.

The FY20 budget is funded by a property tax rate of $0.33200 per $100 taxable value, approved by City Council
in September 2019. The residential homestead exemption was raised from 10% to 12% to offset the impact of the
tax increase to residents, minimizing the tax implications of the park bonds on homeowners and redistributing the
balance between residential and commercial values.

In the Utility Fund, 5% rate adjustments for water and wastewater rates and 10% for surface water rates were
made. The increases will result in an approximate 7% increase to the residential water bill. Solid Waste includes a
2.5% increase to residential rates, based on the City’s cost of services. In FY20, an increase of 1.8% is
incorporated into certain user fees based on changes in the Consumer Price Index (CPI). Selected fees are
recommended to change outside the CPI adjustment to better diversify the City’s revenue streams. Adjustments to
emergency medical services fees, building permits and several new fees are designed to better recover the cost of
services. All changes to fees and rates are effective January 1, 2020.

Requests for Information

This financial report is designed to provide a general overview of the City of Sugar Land's finances for all those
with an interest in the City's finances. Questions concerning this report or requests for additional financial
information should be directed to Alka B. Shah, Controller, City Hall, 2700 Town Center Boulevard North, Sugar
Land, TX 77479, telephone (281) 275-2745 or for general City information, visit the City's website at
www.sugarlandtx.gov.

17 City of Sugar Land 2019 CAFR

18 City of Sugar Land 2019 CAFR
BASIC FINANCIAL STATEMENTS

19 City of Sugar Land 2019 CAFR

20 City of Sugar Land 2019 CAFR
CITY OF SUGAR LAND, TEXAS
STATEMENT OF NET POSITION
September 30, 2019

Governmental Business-type Component

Activities Activities Total Units
Assets
Cash and cash equivalents $ 16,029,444 $ 8,849,868 $ 24,879,312 $ 9,289,254
Investments 32,773,678 30,335,718 63,109,396 2,149,192
Accounts receivable, net of allowance for
doubtful accounts 15,220,993 6,792,618 22,013,611 1,159,609
Internal balances (7,108,531) 7,108,531 - -
Inventories 257,230 322,985 580,215 -
Prepaid items 100,013 1,401 101,414 5,883
Restricted cash and cash equivalents 37,121,411 29,655,740 66,777,151 2,989,565
Restricted investments 10,429,750 6,008,826 16,438,576 -
Capital assets not being depreciated 126,515,552 37,933,291 164,448,843 -
Capital assets net of depreciation 494,016,614 393,279,981 887,296,595 -
Total Assets 725,356,154 520,288,959 1,245,645,113 15,593,503

Deferred Outflows of Resources

Deferred charge on refunding 1,182,243 2,534,767 3,717,010 65,828
Deferred outflows relating to pension activities 17,139,936 2,377,808 19,517,744 -
Deferred outflows relating to OPEB activities 460,547 63,892 524,439 -
Total Deferred Outflows of Resources 18,782,726 4,976,467 23,759,193 65,828

Liabilities
Accounts payable and accrued expenses 9,730,689 5,224,420 14,955,109 157,733
Accrued interest 1,699,294 995,399 2,694,693 163,424
Customer deposits 133,653 2,875,364 3,009,017 -
Unearned revenue 167,956 12,300 180,256 -
Non-current liabilities:
Due within one year 22,121,933 10,005,000 32,126,933 2,122,131
Due in more than one year 307,191,198 208,330,772 515,521,970 26,007,325
Total Liabilities 341,044,723 227,443,255 568,487,978 28,450,613

Deferred Inflows of Resources

Deferred inflows relating to pension activities 2,353,228 326,462 2,679,690 -
Deferred inflows relating to OPEB activities 113,598 15,760 129,358 -
Total Deferred Inflows of Resources 2,466,826 342,222 2,809,048 -

Net Position
Net investment in capital assets 359,390,543 237,563,675 596,954,218 -
Restricted:
Debt service 12,733,145 11,190,060 23,923,205 2,826,141
Economic development activities 7,098,197 - 7,098,197 3,189,301
Public safety 404,232 - 404,232 -
Tourism & marketing 1,941,997 - 1,941,997 -
Unrestricted 19,059,217 48,726,214 67,785,431 (18,806,724)
Total Net Position $ 400,627,331 $ 297,479,949 $ 698,107,280 $ (12,791,282)

See notes to the financial statements. 21 City of Sugar Land 2019 CAFR
CITY OF SUGAR LAND, TEXAS Page 1 of 2
STATEMENT OF ACTIVITIES
For the Year Ended September 30, 2019

Program Revenue
Operating Capital Grants
Charges for Grants and and
Functions/Programs Expenses Services Contributions Contributions
Primary government
Governmental Activities:
General government $ 23,018,594 $ 188,112 $ - $ 1,105,813
Administrative services 5,705,656 8,933,444 1,835,001 -
Public safety - Police 28,010,543 2,175,468 124,857 97,458
Public safety - Fire 15,098,092 1,065,013 66,113 -
Public safety - EMS 2,137,263 1,864,409 - -
Public works 32,541,073 364,198 236,742 3,186,111
Parks and recreation 9,471,888 690,294 68,083 135,664
Community development 7,597,307 3,589,181 104,371 96,698
Environmental and neighborhood services 6,873,883 13,504 2,833 -
Interest on long-term debt 10,233,207 - - -
Total governmental activities 140,687,506 18,883,623 2,438,000 4,621,744

Business-type activities:
Utility 57,533,727 45,314,713 - 1,943,720
Regional Airport 16,934,859 15,351,003 50,000 1,278,009
Solid Waste Management 8,200,994 8,620,756 8,221 -
Total business-type activities 82,669,580 69,286,472 58,221 3,221,729
Total primary government $ 223,357,086 $ 88,170,095 $ 2,496,221 $ 7,843,473
Component Units
Sugar Land 4B Corporation $ 3,154,052 $ - $ 163,100 $ -
Sugar Land Town Square Tax Increment
Reinvestment Zone No. 1 1,634,236 - - -
Sugar Land Reinvestment Zone No. 3 756,689 - - -
Sugar Land Reinvestment Zone No. 4 48,882 - - -
Total component units $ 5,593,859 $ - $ 163,100 $ -

See notes to the financial statements. 22 City of Sugar Land 2019 CAFR
CITY OF SUGAR LAND, TEXAS Page 2 of 2
STATEMENT OF ACTIVITIES
For the Year Ended September 30, 2019

Net (Expense) Revenue and Changes in Net Position

Primary Government

Governmental Business-type Component

Functions/Programs Activities Activities Total Units
Primary government
Governmental Activities:
General government $ (21,724,669) $ (21,724,669)
Administrative services 5,062,789 5,062,789
Public safety - Police (25,612,760) (25,612,760)
Public safety - Fire (13,966,966) (13,966,966)
Public safety - EMS (272,854) (272,854)
Public works (28,754,022) (28,754,022)
Parks and recreation (8,577,847) (8,577,847)
Community development (3,807,057) (3,807,057)
Environmental and neighborhood services (6,857,546) (6,857,546)
Interest on long-term debt (10,233,207) (10,233,207)
Total governmental activities (114,744,139) (114,744,139)

Business-type activities:
Utility $ (10,275,294) (10,275,294)
Regional Airport (255,847) (255,847)
Solid Waste Management 427,983 427,983
Total business-type activities (10,103,158) (10,103,158)
Total primary government (114,744,139) (10,103,158) (124,847,297)
Component Units
Sugar Land 4B Corporation $ (2,990,952)
Sugar Land Town Square Tax Increment
Reinvestment Zone No. 1 (1,634,236)
Sugar Land Reinvestment Zone No. 3 (756,689)
Sugar Land Reinvestment Zone No. 4 (48,882)
Total component units (5,430,759)

General revenues:
Property taxes 49,988,676 - 49,988,676 3,197,446
Sales tax 47,580,665 - 47,580,665 6,798,877
Franchise and other taxes 8,925,196 - 8,925,196 -
Investment earnings 2,616,889 2,331,002 4,947,891 317,773
Miscellaneous 2,491,209 869,998 3,361,207 80,000
Transfers 6,179,094 (6,179,094) - -
Extraordinary item (3,713,598) - (3,713,598) -
Total general revenues, transfers
and extraordinary item 114,068,131 (2,978,094) 111,090,037 10,394,096
Change in net position (676,008) (13,081,252) (13,757,260) 4,963,337

Net position - beginning 401,303,339 310,561,201 711,864,540 (17,754,619)

Net position - ending $ 400,627,331 $ 297,479,949 $ 698,107,280 $ (12,791,282)

See notes to the financial statements. 23 City of Sugar Land 2019 CAFR
CITY OF SUGAR LAND, TEXAS
BALANCE SHEET - GOVERNMENTAL FUNDS
September 30, 2019

Non-Major Total
Debt Service Governmental Governmental
General Fund Fund Funds Funds
Assets
Cash and cash equivalents $ 8,366,930 $ - $ 3,557,589 $ 11,924,519
Investments 28,770,818 - - 28,770,818
Receivables, net of allowance
for uncollectibles 11,615,729 326,466 2,802,306 14,744,501
Inventories 250,126 - 7,104 257,230
Prepaid items 77,771 - 12,359 90,130
Restricted cash and cash equivalents - 5,939,927 31,181,484 37,121,411
Restricted investments - 3,256,850 7,172,900 10,429,750
Total Assets 49,081,374 9,523,243 44,733,742 103,338,359

Liabilities
Accounts payable 4,559,984 210,133 2,241,291 7,011,408
Accrued expenditures 1,534,330 - 6,972 1,541,302
Customer deposits 133,653 - - 133,653
Due to other funds - - 5,600,000 5,600,000
Unearned revenue 1,185 166,771 - 167,956
Total Liabilities 6,229,152 376,904 7,848,263 14,454,319

Deferred Inflows of Resources

Unavailable revenue 2,550,743 299,100 21,546 2,871,389
Total Deferred Inflows of
Resources 2,550,743 299,100 21,546 2,871,389

Fund Balance
Nonspendable:
Inventories 250,126 - 7,104 257,230
Prepaid items 77,771 - 12,359 90,130
Restricted:
Debt service - 8,847,239 5,286,100 14,133,339
Capital projects - - 22,113,944 22,113,944
Economic development activities - - 7,098,197 7,098,197
Public safety - - 404,232 404,232
Tourism & marketing - - 1,941,997 1,941,997
Committed 749,136 - - 749,136
Assigned 314,423 - - 314,423
Unassigned 38,910,023 - - 38,910,023
Total Fund Balance 40,301,479 8,847,239 36,863,933 86,012,651
Total Liabilities, Deferred Inflows
of Resources, and Fund Balance $ 49,081,374 $ 9,523,243 $ 44,733,742 $ 103,338,359

See notes to the financial statements. 24 City of Sugar Land 2019 CAFR
CITY OF SUGAR LAND, TEXAS
RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET
TO THE STATEMENT OF NET POSITION
September 30, 2019

Total fund balance, governmental funds $ 86,012,651

Amounts reported for governmental activities in the Statement of Net Position are different
because:

Capital assets used in governmental activities are not current financial resources and
therefore are not reported in this fund financial statement, but are reported in the
governmental activities of the Statement of Net Position. The cost of the assets is
$1,020,909,389 and the accumulated depreciation is $404,894,206. 616,015,183

Other long-term assets are not available to pay for current period expenditures and,
therefore, are reported as unavailable revenue in the funds. 2,871,389

Deferred charge on refunding amortized over the shorter of the life of the refunded or
refunding debt, therefore, are not reported in the fund financial statement, but are
included in the governmental activities of the Statement of Net Position. 1,182,243

Long-term liabilities, including bonds payable, compensated absences, and sales tax
payable are not due in the current period and, therefore, are not reported as liabilities in
the fund financial statements. Liabilities at year end related to bonds payable,
compensated absences, and sales tax payable consists of:

Debt payable, at maturity $ (265,841,402)

Accrued interest on the bonds (1,699,294)
Premium/discount of bonds payable (18,596,408)
Compensated absences (4,064,877)
Sales tax obligation (219,262)
Net pension liability (35,112,499)
Net OPEB liability (5,478,683)
(331,012,425)

Deferred outflows and deferred inflows relating to pension activities are amortized over
the expected remaining service lives of all employees that are provided with pensions
through the pension plan, therefore, are not included in the fund financial statement, but
are included in the governmental activities of the Statement of Net Position. 14,786,708

Deferred outflows and deferred inflows relating to OPEB activities are amortized over
the expected remaining service lives of all employees that are provided with OPEB
through the OPEB plan, therefore, are not included in the fund financial statement, but
are included in the governmental activities of the Statement of Net Position. 346,949

The assets and liabilities of certain internal service funds are not included in the fund
financial statement, but are included in the governmental activities of the Statement of
Net Position. 10,424,633

Net Position of Governmental Activities in the Statement of Net Position $ 400,627,331

See notes to the financial statements. 25 City of Sugar Land 2019 CAFR
CITY OF SUGAR LAND, TEXAS
STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES
GOVERNMENTAL FUNDS
For the Year Ended September 30, 2019

Non-Major Total
General Debt Service Governmental Governmental
Fund Fund Funds Funds
Revenues
Taxes:
Property taxes $ 28,556,776 $ 21,353,784 $ - $ 49,910,560
Sales tax 40,585,670 - 6,764,278 47,349,948
Franchise and other taxes 6,522,234 - 2,540,793 9,063,027
Licenses and permits 3,585,270 - - 3,585,270
Fines and forfeitures 1,675,673 - 1,923,253 3,598,926
Charges for services 9,687,009 - 169,580 9,856,589
Investment earnings 1,062,735 308,958 1,062,672 2,434,365
Intergovernmental 2,171,380 - 1,979,211 4,150,591
Other 900,286 1,868,689 665,227 3,434,202
Total Revenues 94,747,033 23,531,431 15,105,014 133,383,478

Expenditures
Current:
General government 17,387,937 - 2,993,495 20,381,432
Administrative services 4,173,575 1,754,394 102,808 6,030,777
Public safety - Police 24,869,229 - 1,237,629 26,106,858
Public safety - Fire 13,714,585 - - 13,714,585
Public safety - EMS 1,943,258 38,733 1,981,991
Public works 11,408,302 - 1,694,619 13,102,921
Parks and recreation 5,008,567 2,025 5,010,592
Community development 5,337,472 - - 5,337,472
Environmental and neighborhood services 5,826,617 - - 5,826,617
Debt Service:
Principal - 34,411,024 1,900,000 36,311,024
Interest and other charges - 8,784,592 2,217,621 11,002,213
Bond issuance costs 122,533 252,376 374,909
Capital Outlay - - 13,290,174 13,290,174
Total Expenditures 89,669,542 45,072,543 23,729,480 158,471,565
Excess (deficiency) of revenues
over expenditures 5,077,491 (21,541,112) (8,624,466) (25,088,087)

Other Financing Sources (Uses)

Certificates of obligation issued - 20,760,000 20,760,000
Refunding bonds issued - 13,715,000 - 13,715,000
Premium on debt issued - 1,215,416 1,541,198 2,756,614
Transfers in 978,059 9,268,029 1,320,919 11,567,007
Transfers (out) (818,955) (73,806) (4,495,152) (5,387,913)
Total Other Financing Sources
and Uses 159,104 24,124,639 19,126,965 43,410,708
Net change in fund balance 5,236,595 2,583,527 10,502,499 18,322,621
Fund balance - beginning 35,064,884 6,263,712 26,361,434 67,690,030
Fund balance - ending $ 40,301,479 $ 8,847,239 $ 36,863,933 $ 86,012,651

See notes to the financial statements. 26 City of Sugar Land 2019 CAFR
CITY OF SUGAR LAND, TEXAS
RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND
BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES
For the Year Ended September 30, 2019

Net change in fund balances - total governmental funds: $ 18,322,621

Amounts reported for Governmental Activities in the Statement of Activities are different because:

Governmental funds report outlays for capital assets as expenditures because such outlays use current
financial resources. In contrast, the Statement of Activities reports only a portion of the outlay as expense.
The outlay is allocated over the assets' estimated useful lives as depreciation expense for the period.
This is the amount by which depreciation ($26,736,988) is exceeded by capital outlays ($7,119,447) in the
current period. (19,617,541)

Donated infrastructure does not represent current assets, and therefore is not recognized as revenue in
governmental fund financials. The total amount is, however, reflected in the government wide financial
statements as program revenue. 2,622,213

Governmental funds report the entire net sales price (proceeds) from sale of an asset as revenue because it
provides current financial resources. In contrast, the Statement of Activities reports only the gain or loss on
the sale of the assets. Thus, the change in net position differs from the change in fund balance by the cost of
the asset sold. (19,479)

Governmental funds do not present revenues that are not available to pay current obligations. In contrast,
such revenues are reported in the Statement of Activities when earned. 1,464,008

Pension contributions made after the net pension liability measurement date are reported as expenditures in
the governmental funds and are reported as deferred outflows on the face of the statement of net position 8,370,416

OPEB contributions made after the net OPEB liability measurement date are reported as expenditures in the
governmental funds and are reported as deferred outflows on the face of the statement of net position 135,454

Governmental funds report proceeds from new debt as a current financial resources. In contrast, the
Statement of Activities treats such issuance of debt as a liability. Governmental funds report repayment of
principal as an expenditure. In contrast, the Statement of Activities treats such repayments as a reduction in
long-term liabilities. This is the amount by which repayments exceed proceeds.
Proceeds from the issuance of long term debt, plus premiums and interest, less issuance costs $ (37,231,614)
Repayment of long term debt principal 36,311,024
(920,590)

Bond issuance costs, deferred charges on bond refunding, and other debt charges which are treated as
expenditures or other sources/uses in the fund basis financial statements are set up as assets and amortized in
the Statement of Net Position. The net change for each represents an increase/(decrease) in net position.
Bond premiums/discounts 1,667,044
Bond insurance premiums (39,311)
Gain/loss on refunding (441,477)
1,186,256

Some expenses reported in the Statement of Activities do not require the use of current financial resources
and these are not reported as expenditures in governmental funds.
Changes in accrued interest (57,341)
Changes in accrued compensated absences (869,056)
Pension expense for the pension plan measurement year (11,634,770)
OPEB expense for the OPEB plan measurement year (603,889)
(13,165,056)
Internal service funds are used by management to charge the costs of certain activities, such as fleet
maintenance and information technology, to individual funds. The net revenue (expense) of certain internal
service funds is reported with governmental activities. 945,690

Change in net position of governmental activities $ (676,008)

See notes to the financial statements. 27 City of Sugar Land 2019 CAFR
CITY OF SUGAR LAND, TEXAS
STATEMENT OF NET POSITION
PROPRIETARY FUNDS
September 30, 2019

Gove rnme ntal

Busine ss-type Activities - Enterprise Funds Activitie s
NonMajor
Ente rprise
Major Ente rprise Funds Fund

Solid Waste Inte rnal

Utility Fund Airport Fund Fund Total Se rvice Funds
Asse ts
Curre nt asse ts:
Cash and cash equivalents $ 7,120,607 $ 1,332,321 $ 396,940 $ 8,849,868 $ 3,516,925
Cash with fiscal agent - - - - 588,000
Investments 26,180,156 4,155,562 - 30,335,718 4,002,860
Accounts receivable, net of allowance for
doubtful accounts 5,516,667 244,594 1,031,357 6,792,618 476,492
Due from other funds 5,600,000 - - 5,600,000 -
Inventories 155,393 167,592 - 322,985 -
Prepaid items 88 - 1,313 1,401 9,883
Restricted cash and cash equivalents 28,642,605 1,013,135 - 29,655,740 -
Restricted investments 6,008,826 - - 6,008,826 -
Total curre nt asse ts 79,224,342 6,913,204 1,429,610 87,567,156 8,594,160
Non-curre nt assets:
Capital assets not being depreciated: 13,206,725 24,726,566 - 37,933,291 -
Capital assets being depreciated: 338,797,436 54,428,205 54,340 393,279,981 4,516,983
Total non-curre nt asse ts 352,004,161 79,154,771 54,340 431,213,272 4,516,983
Total Asse ts 431,228,503 86,067,975 1,483,950 518,780,428 13,111,143

De fe rre d Outflows of Re source s

Deferred charge on refunding 2,298,062 236,705 - 2,534,767 -
Deferred outflows relating to pension activities 1,562,050 744,008 71,750 2,377,808 -
Deferred outflows relating to OPEB activities 41,973 19,992 1,927 63,892 -
Total De fe rre d Outflows of Re source s 3,902,085 1,000,705 73,677 4,976,467 -

Liabilities
Curre nt liabilitie s:
Accounts payable and accrued expenses 3,394,763 1,111,554 718,103 5,224,420 627,716
Accrued interest 946,224 49,175 - 995,399 -
Customer deposits 2,767,187 108,177 - 2,875,364 -
Unearned revenue - 12,300 - 12,300 -
Claims and judgments - - - - 550,263
Non-current liabilities due within one year 9,111,167 893,674 159 10,005,000 -
Total curre nt liabilitie s 16,219,341 2,174,880 718,262 19,112,483 1,177,979
Non-curre nt liabilitie s:
Due in more than one year 192,987,950 9,703,414 8,230 202,699,594 -
Net pension liability 3,199,982 1,524,156 146,987 4,871,125 -
Net OPEB liability 499,300 237,818 22,935 760,053 -
Total non-curre nt liabilitie s 196,687,232 11,465,388 178,152 208,330,772 -
Total Liabilities 212,906,573 13,640,268 896,414 227,443,255 1,177,979

De fe rre d Inflows of Re source s

Deferred inflows relating to pension activities 214,462 102,149 9,851 326,462 -
Deferred inflows relating to OPEB activities 10,353 4,931 476 15,760 -
Total De fe rre d Inflows of Re source s 224,815 107,080 10,327 342,222 -

Ne t Position
Net investment in capital assets 176,159,079 68,987,974 54,340 245,201,393 4,516,983
Restricted:
Debt service 8,389,880 977,256 - 9,367,136 -
Unrestricted 37,450,241 3,356,102 596,546 41,402,889 7,416,181
Total Ne t Position $ 221,999,200 $ 73,321,332 $ 650,886 $ 295,971,418 $ 11,933,164

The assets and liabilities of certain internal service funds are not included in the fund financial statement, but
are included in the Business Activities of the Statement of Net Position. 1,508,531

Total Net Position per Government-Wide financial statements $ 297,479,949

See notes to the financial statements. 28 City of Sugar Land 2019 CAFR
CITY OF SUGAR LAND, TEXAS
STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN FUND NET POSITION
PROPRIETARY FUNDS
For the Year Ended September 30, 2019

Governmental
Business-type Activities - Enterprise Funds Activities
NonMajor
Enterprise
Major Enterprise Funds Fund

Solid Waste Internal

Utility Fund Airport Fund Fund Total Service Funds
Revenues
Charges for services $ 45,314,713 $ 15,351,003 $ 8,620,756 $ 69,286,472 $ 16,434,342
Total Operating Revenues 45,314,713 15,351,003 8,620,756 69,286,472 16,434,342

Operating Expenses
Personnel services 6,608,781 3,209,939 266,418 10,085,138 39,162
Supplies and materials 324,246 8,142,681 18,815 8,485,742 1,179,304
Contractual services 11,059,053 1,604,820 7,864,830 20,528,703 411,769
Repairs and maintenance 9,932,318 616,973 16,747 10,566,038 5,382
Other expenses 1,809,135 369,450 29,304 2,207,889 12,969,671
Depreciation 20,787,959 2,650,384 9,880 23,448,223 1,209,231
Total Operating Expenses 50,521,492 16,594,247 8,205,994 75,321,733 15,814,519
Operating income (loss) (5,206,779) (1,243,244) 414,762 (6,035,261) 619,823

Non-Operating Revenues (Expenses)

Interest and investment revenue 2,115,558 208,332 7,112 2,331,002 182,524
Miscellaneous revenue 952,951 193,833 20,054 1,166,838 -
Intergovernmental - 50,000 8,221 58,221
Gain (loss) on disposal of capital assets (296,245) - - (296,245) 234,343
Interest expense (7,093,830) (345,612) - (7,439,442) -
Total Non-operating Revenue (Expenses) (4,321,566) 106,553 35,387 (4,179,626) 416,867
Income (loss) before contributions,
transfers and special item (9,528,345) (1,136,691) 450,149 (10,214,887) 1,036,690

Capital contributions 1,943,720 1,278,009 - 3,221,729 -

Transfers in 30,217 176,842 - 207,059 -
Transfers out (6,086,153) - (300,000) (6,386,153) -
Change in net position (13,640,561) 318,160 150,149 (13,172,252) 1,036,690

Total net position - beginning 235,639,761 73,003,172 500,737 309,143,670 10,896,474

Total net position - ending $ 221,999,200 $ 73,321,332 $ 650,886 $ 295,971,418 $ 11,933,164

Change in net position per above $ (13,172,252)

Internal service funds are used by management to charge the costs of certain activities to individual
funds. The net revenue (expense) of certain internal service funds is reported with Business
Activities. 91,000

Change in Business-Type Activities in Net Position per Government-Wide Financial Statements $ (13,081,252)

See notes to the financial statements. 29 City of Sugar Land 2019 CAFR
CITY OF SUGAR LAND, TEXAS Page 1 of 2
STATEMENT OF CASH FLOWS
PROPRIETARY FUNDS
For the Year Ended September 30, 2019

Governmental
Business-type Activities - Enterprise Funds Activities
NonMajor
Enterprise
Major Enterprise Funds Fund
Solid Waste Internal
Utility Fund Airport Fund Fund Total Service Funds

Cash Flows from Operating Activities:

Receipts from customers and users $ 44,150,642 $ 15,375,212 $ 8,632,553 $ 68,158,407 $ -
Receipts from interfund charges for services 16,450,168
Disbursed for personnel services (6,385,756) (2,972,920) (249,267) (9,607,943) (39,162)
Disbursed for goods and services (23,243,037) (10,284,188) (7,917,218) (41,444,443) (14,532,227)
Net cash provided (used) by operating activities 14,521,849 2,118,104 466,068 17,106,021 1,878,779

Cash Flows from Non-Capital Financing Activities:

Transfers from other funds 1,530,217 176,842 - 1,707,059 -
Transfers to other funds (6,086,153) - (300,000) (6,386,153) -
Operating grants and contributions - 48,200 27,723 75,923 -
Net cash provided (used) by noncapital financing
activities (4,555,936) 225,042 (272,277) (4,603,171) -
Cash Flows from Capital and Related Financing
Activities:
Proceeds from the sale of bonds 14,048,090 - - 14,048,090 -
Interest payments on debt (7,069,304) (349,084) - (7,418,388) -
Principal payments on debt (8,525,000) (860,000) - (9,385,000) -
Acquisition and construction of capital assets (7,564,316) (1,549,471) - (9,113,787) (1,312,583)
Net cash provided (used) by capital and related
financing activities (9,110,530) (2,758,555) - (11,869,085) (1,312,583)

Cash Flows from Investing Activities

Purchase of investments - - - - (541,394)
Sale of investments 10,700,109 1,537,519 - 12,237,628 -
Interest received 2,451,884 231,393 7,305 2,690,582 174,515
Net cash provided (used) by investing activities 13,151,993 1,768,912 7,305 14,928,210 (366,879)
-
Net increase (decrease) in cash and equivalents 14,007,376 1,353,503 201,096 15,561,975 199,317
Cash and equivalents, beginning of year 21,755,836 991,953 195,844 22,943,633 3,317,608
Cash and equivalents, at end of year 35,763,212 2,345,456 396,940 38,505,608 3,516,925

Unrestricted cash and equivalents 7,120,607 1,332,321 396,940 8,849,868 3,516,925

Restricted cash and equivalents 28,642,605 1,013,135 - 29,655,740 -
$ 35,763,212 $ 2,345,456 $ 396,940 $ 38,505,608 $ 3,516,925

See notes to the financial statements. 30 City of Sugar Land 2019 CAFR
CITY OF SUGAR LAND, TEXAS Page 2 of 2
STATEMENT OF CASH FLOWS
PROPRIETARY FUNDS
For the Year Ended September 30, 2019

Governmental
Business-type Activities - Enterprise Funds Activities
NonMajor
Enterprise
Major Enterprise Funds Fund
Solid Waste Internal
Utility Fund Airport Fund Fund Total Service Funds

Reconciliation of operating income (loss) to net

cash provided by operating activities:
Operating income (loss) $ (5,206,779) $ (1,243,244) $ 414,762 $ (6,035,261) $ 619,823
Adjustments to reconcile operating income (loss)
to cash provided (used) by operating activities:
Depreciation 20,787,959 2,650,384 9,880 23,448,223 1,209,231
(Increase) decrease in accounts receivable (1,195,590) 18,186 11,797 (1,165,607) (50,761)
(Increase) decrease in inventory (17,546) (3,650) - (21,196) -
(Increase) decrease in prepaid items 5,858 1,665 192 7,715 10,717
(Increase) decrease in deferred outflows relating to pension activities (819,773) (390,460) (37,655) (1,247,888) -
(Increase) decrease in deferred outflows relating to OPEB activities (12,842) (6,117) (590) (19,549) -
Increase (decrease) in accounts payable (106,597) 451,721 12,286 357,410 23,182
Increase (decrease) in salaries payable (117,163) 74,988 1,524 (40,651) -
Increase (decrease) in customer deposits 31,519 6,023 - 37,542 -
Increase (decrease) in claims and judgments - - - - 66,587
Increase (decrease) in net pension liabiliity 1,503,613 716,173 69,067 2,288,853 -
Increase (decrease) in net OPEB liabiliity 45,499 21,672 2,090 69,261 -
Increase (decrease) in deferred inflows relating to pension activities (386,343) (184,016) (17,746) (588,105) -
Increase (decrease) in deferred inflows relating to OPEB activities 10,034 4,779 461 15,274 -
Net cash provided (used) by operating activities $ 14,521,849 $ 2,118,104 $ 466,068 $ 17,106,021 $ 1,878,779

Non-cash Transactions:
Capital assets contributed to City $ 1,943,720 $ 1,278,009 $ - $ 3,221,729

See notes to the financial statements. 31 City of Sugar Land 2019 CAFR
CITY OF SUGAR LAND, TEXAS
DISCRETELY PRESENTED COMPONENT UNITS - GOVERNMENTAL ACTIVITIES
COMBINING STATEMENT OF NET POSITION
September 30, 2019

Sugar Land
Town Square
Sugar Land Tax Increment Sugar Land Sugar Land Total
4B Reinvestment Reinvestment Reinvestment Component
Corporation Zone No. 1 Zone No. 3 Zone No. 4 Units
Assets
Current assets:
Cash and cash equivalents $ 6,097,869 $ 109,386 $ 40,706 $ 3,041,293 $ 9,289,254
Investments 2,149,192 - - - 2,149,192
Accounts receivable, net of allowance for
doubtful accounts 1,144,619 8,849 1,203 4,938 1,159,609
Prepaid items 5,883 - - - 5,883
Restricted cash and cash equivalents 2,989,565 - - - 2,989,565
Total Assets 12,387,128 118,235 41,909 3,046,231 15,593,503

Deferred Outflows of Resources

Deferred charge on refunding 65,828 - - - 65,828
Total Deferred Outflows of Resources 65,828 - - - 65,828

Liabilities
Current liabilities:
Accounts payable and accrued expenses 140,659 - 3,894 13,180 157,733
Accrued interest 163,424 - - - 163,424
Total current liabilities 304,083 - 3,894 13,180 321,157
Non-current liabilities: -
Due within one year 2,122,131 2,122,131
Due in more than one year 26,007,325 - - - 26,007,325
Total non-current liabilities 28,129,456 - - - 28,129,456
Total Liabilities 28,433,539 - 3,894 13,180 28,450,613

Net Position
Restricted:
Debt service 2,826,141 - - - 2,826,141
Economic development activities - 118,235 38,015 3,033,051 3,189,301
Unrestricted (18,806,724) - - - (18,806,724)
Total Net Position $ (15,980,583) $ 118,235 $ 38,015 $ 3,033,051 $ (12,791,282)

See notes to the financial statements. 32 City of Sugar Land 2019 CAFR
CITY OF SUGAR LAND, TEXAS
DISCRETELY PRESENTED COMPONENT UNITS - GOVERNMENTAL ACTIVITIES
COMBINING STATEMENT OF ACTIVITIES
For the Year Ended September 30, 2019

Program
Revenues Net (Expense) Revenue and Changes in Net Position
Sugar Land
Town Square
Operating Tax Increment Sugar Land Sugar Land
Grants and Sugar Land 4B Reinvestment Reinvestment Reinvestment
Functions/Programs Expenses Contributions Corporation Zone No. 1 Zone No. 3 Zone No. 4 Totals
Component Unit:

Sugar Land 4B Corporation $ 3,154,052 $ 163,100 $ (2,990,952) $ - $ - $ - $ (2,990,952)

Sugar Land Town Square
Tax Increment
Reinvestment Zone No. 1 1,634,236 - - (1,634,236) - - (1,634,236)
Sugar Land Reinvestment
Zone No. 3 756,689 - - - (756,689) - (756,689)
Sugar Land Reinvestment
Zone No. 4 48,882 - - - - (48,882) (48,882)
$ 5,593,859 $ 163,100 (2,990,952) (1,634,236) (756,689) (48,882) (5,430,759)
-
General revenues -
Taxes: -
Property taxes - 1,698,726 753,240 745,480 3,197,446
Sales tax 6,798,877 - - - 6,798,877
Unrestricted investment earnings 249,640 10,997 1,048 56,088 317,773
Miscellaneous 80,000 - - - 80,000
Total general revenues 7,128,517 1,709,723 754,288 801,568 10,394,096
Change in net position 4,137,565 75,487 (2,401) 752,686 4,963,337
Net position - beginning (20,118,148) 42,748 40,416 2,280,365 (17,754,619)
Net position - ending $ (15,980,583) $ 118,235 $ 38,015 $ 3,033,051 $ (12,791,282)

See notes to the financial statements. 33 City of Sugar Land 2019 CAFR
34 City of Sugar Land 2019 CAFR
CITY OF SUGAR LAND, TEXAS
NOTES TO FINANCIAL STATEMENTS

Note 1 - Summary of Significant Accounting Policies

The City of Sugar Land, Texas, (the "City") was incorporated in 1959 and adopted a "Home Rule Charter" in
November 1980. The Charter, as amended, provides for a Council-Manager form of government. The Council is
composed of a Mayor and six Council Members, two of which are elected at large and four of which are elected
by District, each serving two-year terms. The Mayor and Council Members can serve no more than four
consecutive regular two-year terms.

The Mayor presides at Council meetings and is entitled to vote on all matters considered by Council. All powers
of the City are vested in the Council. Such powers include: appointment of the City Manager, boards, and
commissions; adoption of the budget; authorization of bond issues; and adoption of ordinances and resolutions as
deemed necessary, desirable, and beneficial to the City.

A. Financial Reporting Entity

The City is an independent political subdivision of the State of Texas governed by an elected council and a mayor
and is considered a primary government. As required by accounting principles generally accepted in the United
States of America, these financial statements have been prepared based on considerations regarding the potential
for inclusion of component units, which are other legal entities or organizations that are financially accountable to
the City. Blended component units, although legally separate entities, are, in substance, part of the government's
operations, and as a result, data from these units are combined with data of the primary government. Based on
these considerations, the City’s financial statements include the Sugar Land Development Corporation as a
blended component unit. Discretely presented component units, on the other hand, are reported in a separate
column in the government-wide statements to emphasize that they are legally separate from the primary
government. Based on these considerations, the City's financial statements include the following discretely
presented component units: the Sugar Land 4B Corporation, the Sugar Land Town Square TIRZ 1, the Sugar
Land TIRZ 3, and the Sugar Land TIRZ 4. No other entities have been included in the City's reporting entity.
Additionally, as the City is considered a primary government for financial reporting purposes, its activities are not
considered a part of any other governmental or other type of reporting entity.

Considerations regarding the potential for inclusion of other entities, organizations, or functions in the City's
financial reporting entity are based on criteria prescribed by generally accepted accounting principles. These same
criteria are evaluated in considering whether the City is a part of any other governmental or other type of
reporting entity. The overriding elements associated with prescribed criteria considered in determining that the
City's financial reporting entity status is that of a primary government are; that it has a separately elected
Governing body; it is legally separate; and it is fiscally independent of other state and local governments.
Additionally prescribed criteria under generally accepted accounting principles include; considerations pertaining
to organizations for which the primary government is financially accountable; and considerations pertaining to
other organizations for which the nature and significance of their relationship with the primary government are
such that exclusion would cause the reporting entity's financial statements to be misleading or incomplete. The
component units discussed below are included in the City's reporting entity because of the significance of their
operational or financial relationships with the City.

35 City of Sugar Land 2019 CAFR

CITY OF SUGAR LAND, TEXAS
NOTES TO FINANCIAL STATEMENTS (continued)

Note 1 - Summary of Significant Accounting Policies (continued)

A. Financial Reporting Entity (continued)

Blended Component Unit:

Sugar Land Development Corporation

The Sugar Land Development Corporation (the "Corporation") has been included in the reporting entity as a
blended component unit. In 1993, the Corporation was created by the City under the Texas Development
Corporation Act of 1979 for the purpose of promoting, assisting, and enhancing economic and development
activities on behalf of the City. Effective October 1, 2005, the Board of Directors consists of members of the City
Council. In the event of dissolution, net position of the Corporation shall be conveyed to the City. The
Corporation is blended rather than discretely presented because the Corporation’s governing body is the same as
the City’s and the management of the City has operational responsibility for the Corporation.

Discretely Presented Component Units:

Sugar Land 4B Corporation

In 1995, the City of Sugar Land formed the Sugar Land 4B Corporation (the "4B Corporation"), which was
created by voters approving an additional sales tax. State law allows the City to collect sales tax to assist in the
promotion and development activities of the City. The 4B Corporation has been included as a discretely presented
component unit in the City's financial statements. The Board of Directors is appointed by and serves at the
discretion of the City Council. City Council approval is required for annual budgets and bonded debt issuance. In
the event of dissolution, net position of the 4B Corporation shall be conveyed to the City.

Sugar Land Town Square Tax Increment Reinvestment Zone No. 1

In 2000, the City of Sugar Land formed the Sugar Land Town Square Tax Increment Reinvestment Zone No. 1
(TIRZ 1), which was created under the authority of Tax Increment Financing Act, as codified as Chapter 311 of
the Texas Tax Code. TIRZ 1 is a financing and management tool for the City in providing public facilities and
infrastructure for a 32-acre multi-use development. TIRZ 1 has been presented as a discretely presented
component unit in the City's financial statements. The participants include Fort Bend County, First Colony LID
#2 and the City at 100% of incremental value. The Board of Directors consists of nine members. Fort Bend
County appoints one position, the State Senator appoints one position and the State Representative of the area
included within the zone appoints one position. The remaining six members are appointed by City Council. City
Council has the authority to approve or disapprove TIRZ 1 projects.

Sugar Land Reinvestment Zone No. 3

In 2007, the City of Sugar Land formed the Sugar Land Reinvestment Zone No. 3 (TIRZ 3), which was created
under the provisions of the Chapter 311 of the Texas Tax Code for the purposes of promoting and development
and redevelopment of a contiguous area within the City. TIRZ 3 is a financial tool with resources from property
taxes to be utilized in providing public improvements in TIRZ 3. The City participates at 50% of increment over
the 2007 base value plus 50% of sales taxes within the historic district. Fort Bend County General Fund
participates at 50% based on an increment over the 2013 tax base. Fort Bend County Drainage District does not
participate. TIRZ 3 has been presented as a discretely presented component unit in the City's financial statements.
The Board of Directors consists of five members of which the City Council appoints four members and Fort Bend
County has the authority to appoint one member. City Council has the authority to approve or disapprove TIRZ 3
projects.

36 City of Sugar Land 2019 CAFR

CITY OF SUGAR LAND, TEXAS
NOTES TO FINANCIAL STATEMENTS (continued)

Note 1 - Summary of Significant Accounting Policies (continued)

A. Financial Reporting Entity (continued)

Sugar Land Reinvestment Zone No. 4

In 2009, the City of Sugar Land formed Reinvestment Zone Number Four (TIRZ 4) through Ordinance 1768
under the provisions of Chapter 311 of the Texas Tax Code. The purpose of the Zone is to use tax increment
revenue to finance public improvements and facilities necessary to support the development of a high-quality
mixed use center with retail, office and entertainment uses. The City participates at a rate of 50 percent of their
ad valorem tax rate above the 2009 tax base over the 30 year life of the Zone. Fort Bend County Municipal
Utility District Nos. 138 and 139 have also agreed to contribute at a rate of 50 percent of the City’s tax rate via
participation agreements in 2011, while Fort Bend County Municipal Utility District No. 137 has yet to formalize
a participation agreement. Participation agreements were formalized with Fort Bend County and the Fort Bend
County Drainage District in January 2014 with a 2013 tax base. These agreements provide for 50 percent
participation Years 2014 through 2029, 30 percent Years 2030 through 2034, and 20 percent Years 2035 through
2039; however, revenues were not captured until Tax Year 2014 (Fiscal Year 2015). The Board of Directors for
TIRZ 4 consists of nine members, with four members appointed by the City, and one member appointed by each
of the remaining taxing entities. Board members representing taxing entities that have yet to participate in the
Zone have not been officially accepted as full recommending and voting members. The City Council has the final
authority to approve or disapprove the TIRZ 4 Final Project Plan. TIRZ 4, which has one fund, has been presented
as a discretely presented component unit in the City's financial statements.

Separately issued audited financial statements are not issued for the discretely presented component units.
Information on the discretely presented component units is presented as separate combining statements within the
basic financial statements of the City (following the basic financial statements for the funds). Unaudited financial
statements may be obtained from the City's Finance Department.

B. Government-wide and Fund Financial Statements

The government-wide financial statements (i.e., the Statement of Net Position and the Statement of Activities)
report information about the City as a whole. These statements include all activities of the primary government
and its component units. For the most part, the effect of interfund activity has been eliminated from the
government-wide statements. Exceptions to this general rule are charges between the City's business-type and
governmental funds and interfund loans. Elimination of these charges would distort the direct costs and program
revenues reported for the various functions concerned. Governmental activities, which normally are supported by
taxes and intergovernmental revenues, are reported separately from business-type activities, which rely to a
significant extent on fees and charges for services.

The Statement of Activities demonstrates the degree to which the direct expenses of a given function or segment
are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or
segment. Program revenues include 1) charges to customers or applicants who purchase, use or directly benefit
from goods, services, or privileges provided by a given function or segment and 2) grants and contributions that
are restricted to meeting the operational or capital requirements of a particular function or segment. Taxes and
other items not properly included among program revenues are reported as general revenues.

37 City of Sugar Land 2019 CAFR

CITY OF SUGAR LAND, TEXAS
NOTES TO FINANCIAL STATEMENTS (continued)

Note 1 - Summary of Significant Accounting Policies (continued)

C. Measurement Focus, Basis of Accounting and Financial Statement Presentation

The government-wide financial statements and all proprietary funds are reported using the economic resources
measurement focus and the accrual basis of accounting. Revenues are recognized when earned and expenses are
recorded when a liability is incurred, regardless of the timing of the related cash flows. With this measurement
focus, all assets, deferred outflows of resources, and all liabilities associated with the operations of these activities
are included on the statements of net position. Proprietary fund-type operating statements present increases (i.e.,
revenues) and decreases (i.e., expenses) in net total assets. All capital assets in the Proprietary Fund Types are
valued at cost.

The governmental fund financial statements are presented on a current financial resources measurement focus and
modified accrual basis of accounting. This is the manner in which these funds are normally budgeted. Revenues
are recognized as soon as they are both measurable and available. Measurable means that the amount of the
transaction can be determined and available means collectible within the current period or soon enough thereafter
to pay liabilities of the current period. For this purpose, the City considers revenues to be available if they are
collected within 60 days of the end of the current fiscal period. Revenues susceptible to accrual include sales and
use taxes, franchise taxes, charges for services and interest on temporary investments. Property tax levies
collected after the fiscal year-end, which would be available to finance current operations, are immaterial and
remain deferred. Other receipts become measurable and available when cash is received by the government and
are recognized as revenue at that time.

Under modified accrual accounting, expenditures are recognized in the accounting period in which the liability is
incurred, if measurable, except for interest on general long-term debt, which is recognized when due. Since the
governmental fund statements are presented on a different measurement focus and basis of accounting than the
government-wide statements' governmental column, a reconciliation is presented which briefly explains the
adjustments necessary to reconcile fund-based financial statements with the governmental column of the
government-wide presentation.

In the fund financial statements, the accounts of the City are organized on the basis of funds, each of which is
considered a separate accounting entity. The operations of each fund are accounted for with a separate set of self-
balancing accounts that comprise its assets, liabilities, deferred inflows of resources, fund equity, revenues, and
expenditures or expenses, as appropriate. Following is a description of the various funds:

Governmental funds are those funds through which most governmental functions are typically financed. The City
reports the following major governmental funds:

The General Fund is used to account for all financial transactions not properly includable in other funds. The
principal sources of revenues include local property taxes, sales and franchise taxes, licenses and permits,
fines and forfeitures, and charges for services. Expenditures include general government, administrative
services, public works, parks and recreation, community development, and public safety.

The Debt Service Fund is used to account for the payment of interest and principal on all general obligation
bonds and other long-term debt of the City. The principal source of revenue for debt service is local property
taxes. The Debt Service Fund is considered a major fund for reporting purposes.

38 City of Sugar Land 2019 CAFR

CITY OF SUGAR LAND, TEXAS
NOTES TO FINANCIAL STATEMENTS (continued)

Note 1 - Summary of Significant Accounting Policies (continued)

C. Measurement Focus, Basis of Accounting and Financial Statement Presentation (continued)

The City’s business type activities consist of the following major enterprise funds:

The Utility Fund is used to account for the City’s water and wastewater services. The primary source of
revenue is charges for service and the expenditures relate to operating expenses and capital expenditures for
purchases and improvements. This fund also accounts for activity related to the mandated groundwater
reduction plan (GRP) and GRP revenues.

The Airport Fund is used to account for the City’s airport services. The primary source of revenue is charges
for service and the expenditures relate to operating expenses and capital expenditures for purchases and
improvements.

In addition, the City’s business type activities includes the following nonmajor enterprise fund:

The Solid Waste Fund is used to account for the City’s solid waste services. The primary source of revenue is
charges for service and the expenditures relate to operating expenses.

The Enterprise Funds are used to account for the operations that provide water and wastewater utility services to
the public, solid waste disposal operations, and general aviation services. The services are financed and operated
in a manner similar to private business enterprises where the intent of the governing body is that the costs
(expenses including depreciation) of providing goods or services to the general public on a continuing basis will
be financed or recovered primarily through user charges.

Enterprise fund operating revenues, such as charges for services, result from exchange transactions associated
with the principal activity of the fund. Exchange transactions are those in which each party receives and gives up
essentially equal values. Non-operating revenues, such as subsidies and investment earnings, result from non-
exchange transactions or ancillary activities.

Additionally, the City maintains Internal Service Funds used to account for the financing of goods or services
provided by one department or program to other departments or programs of the City on a cost-reimbursement
basis. These funds are presented, in summary form, as part of the proprietary fund financial statements. Since the
principal users of the internal services are the City’s governmental activities, financial activities of the internal
service funds are presented in the governmental activities column when presented at the government-wide level.
The costs of these services are allocated to the appropriate function/program (general government, public safety,
public works, etc.) in the statement of activities. Goods and services provided by the Internal Service Funds
include employee health benefits, fleet replacement and high technology replacement.

The City uses the following classifications to describe the relative spending constraints on the various categories
of fund balance. These clearly defined fund balance categories make the nature and extent of the constraints
placed on a government’s fund balances more transparent. The following classifications describe the relative
strength of the spending constraints:

39 City of Sugar Land 2019 CAFR

CITY OF SUGAR LAND, TEXAS
NOTES TO FINANCIAL STATEMENTS (continued)

Note 1 - Summary of Significant Accounting Policies (continued)

C. Measurement Focus, Basis of Accounting and Financial Statement Presentation (continued)

Non-spendable fund balance – amounts that are not in spendable form or are legally or contractually required to
be maintained intact.

Restricted fund balance – amounts that are subject to external restrictions from creditors, grantors, contributors, or
laws of other governments.

Committed fund balance – amounts constrained for specific purposes as determined by the City itself, using its
highest level of decision-making authority (i.e. City Council). To be reported as committed, amounts cannot be
used for any other purposes unless the City takes the same highest level of action to remove or change the
constraint. The City establishes (and modifies or rescinds) fund balance commitments by passage of a resolution.
City Council will approve obligations of funds, such as multi-year contracts, prior to the end of the fiscal year.

Assigned fund balance – amounts the City intends to use for a specific purpose that is neither restricted or
committed and includes the remaining positive fund balance of all governmental funds except for the General
Fund. Balances for encumbrances, other than those committed by City Council, fall into this category. Intent can
be established by City Council or delegated to the City Manager. City Council has by Resolution 14-24
authorized the City Manager to assign fund balance.

Unassigned fund balance – amounts that are available for any purpose. Positive amounts are reported only in the
General Fund.

The City will typically use restricted fund balances first, followed by committed resources, and then assigned
resources, as appropriate opportunities arise, but reserves the right to selectively spend unassigned resources first
to defer the use of these other classified funds.

The City will maintain the General Fund unassigned fund balance equivalent to three months of normal recurring
operating costs, based on current year budgeted expenditures. If the fund balance exceeds this amount, the amount
in excess of policy requirements may be utilized to fund one-time expenditures in the next fiscal year’s budget.

D. Encumbrances

Encumbrance accounting, under which purchase orders, contracts, and other commitments for the expenditure of
funds are recorded in order to reserve that portion of the applicable appropriation, is employed in the
governmental funds. Open encumbrances are reported as committed or assigned fund balances since they do not
constitute expenditures or liabilities. Encumbrances outstanding at year-end are appropriately provided for in the
subsequent year's budget.

As of September 30, 2019, outstanding purchase orders totaled $14.1 million. These were the result of normal
operations. Encumbrances are liquidated with existing resources, City Council has committed $750K and the City
Manager has assigned $314K in the General Fund to liquidate outstanding purchase orders as of September 30,
2019.

40 City of Sugar Land 2019 CAFR

CITY OF SUGAR LAND, TEXAS
NOTES TO FINANCIAL STATEMENTS (continued)

Note 1 - Summary of Significant Accounting Policies (continued)

E. Cash and Cash Equivalents

The City's cash and cash equivalents are considered to be cash on hand, demand deposits, balances in privately
managed public funds investment pools ("TexPool", “TexSTAR” and “Texas CLASS”), balances in a
governmental money market mutual fund and short-term investments with original maturities of three months or
less from the date of acquisition. For the purpose of the statement of cash flows, the Proprietary Fund Types
consider temporary investments with maturity of three months or less when purchased to be cash equivalents.

The City pools cash resources of its various funds to facilitate the management of cash. Cash applicable to a
particular fund is readily identifiable. The balance in the pooled cash accounts is available to meet current
operating requirements. Cash in excess of current requirements is invested in various interest-bearing securities
and disclosed as part of the City's investments.

The City pools excess cash of the various individual funds to purchase these investments. These pooled
investments are reported in the combined balance sheet as Investments in each fund based on each fund's share of
the pooled investments. Interest income is allocated to each respective individual fund, monthly, based on their
respective share of investments in the pooled investments. The City’s local government investment pools are
recorded at amortized costs as permitted by GASB Statement No. 79, Certain Investment Pools and Pool
Participants.

F. Investments

Investments consist of United States (U.S.) Government and Agency securities and certificates of deposits. The
City reports all investments at fair value based on quoted market prices at year-end date.

The City categorizes fair value measurements of its investments based on the hierarchy established by generally
accepted accounting principles. The fair value hierarchy, which has three levels, is based on the valuation inputs
used to measure an asset’s fair value: Level 1 inputs are quoted prices in active markets for identical assets; Level
2 inputs are significant other observable inputs; level 3 inputs are significant unobservable inputs.

G. Receivables

All receivables are reported at their gross value and, where appropriate, are reduced by the estimated portion that
is expected to be uncollectible. Estimated unbilled revenues from the Utility System Fund are recognized at the
end of each fiscal year on a pro rata basis. The estimated amount is based on billings during the month following
the close of the fiscal year.

H. Internal Balances

The effect of interfund activity has been removed from the financial statements, with the exception of amounts
between governmental and business-type activities, which are presented as internal balances. Goods and services
provided by the City’s internal service funds are charged as direct costs to the enterprise funds that received those
goods and services.

41 City of Sugar Land 2019 CAFR

CITY OF SUGAR LAND, TEXAS
NOTES TO FINANCIAL STATEMENTS (continued)

Note 1 - Summary of Significant Accounting Policies (continued)

I. Inventories and Prepaid Items

Inventories of the General and Enterprise Funds are valued at weighted moving average, except for airport fuel
which is valued at market value. Inventories for all funds consist of expendable supplies held for consumption,
and the cost thereof is recorded as an expense/expenditure at the time the inventory items are issued (consumption
method). Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as
prepaid items in both the government-wide and fund financial statements.

J. Restricted Assets

The Enterprise Funds have restricted certain cash and investments for customer deposits, reserve and emergency
expenditures, cash restricted for other purposes, and revenue bond debt service. Because of certain bond
covenants, the Enterprise Fund is required to maintain prescribed amounts of resources that can be used only to
service outstanding debt. The proceeds from debt are restricted for use on capital projects. Additionally, the
Sugar Land Development Corporation and the Sugar Land 4B Corporation have restricted certain cash and
investments for revenue bond debt service, and because of certain bond covenants, they are required to maintain
prescribed amounts of resources that can be used only to service outstanding debt.

K. Deferred Outflows/Inflows of Resources

In addition to assets, the statement of financial position will sometimes report a separate section for deferred
outflows of resources. This separate financial statement element, deferred outflows of resources, represents a
consumption of net position that applies to a future reporting period and thus, will not be recognized as an outflow
of resources (expense) until that time. The City has three items that qualify for reporting in this category.

 Deferred outflows of resources for refunding - Reported in the government-wide statement of net
position, this deferred charge on refunding results from the difference in the carrying value of refunded
debt and its reacquisition price. This amount is deferred and amortized over the shorter of the life of the
refunded or refunding debt.

 Deferred outflows of resources for pension activities - Reported in the government wide financial
statement of net position, this deferred outflow results from pension plan contributions made after the
measurement date of the net pension liability and the results of 1) differences between projected and
actual earnings on pension plan investments; 2) changes in actuarial assumptions; and 3) differences
between expected and actual actuarial experiences. The deferred outflows of resources related to pensions
resulting from City contributions subsequent to the measurement date will be recognized as a reduction of
the net pension liability in the next fiscal year. The deferred outflows resulting from differences between
projected and actual earnings on pension plan investments will be amortized over a closed five year
period. The remaining pension related deferred outflows will be amortized over the expected remaining
service lives of all employees (active and inactive employees) that are provided with pensions through the
pension plan.

42 City of Sugar Land 2019 CAFR

CITY OF SUGAR LAND, TEXAS
NOTES TO FINANCIAL STATEMENTS (continued)

Note 1 - Summary of Significant Accounting Policies (continued)

K. Deferred Outflows/Inflows of Resources (continued)

 Deferred outflows of resources for other post-employment benefits (OPEB) – Reported in the government
wide financial statement of net position, these deferred outflows result from OPEB plan contributions
made after the measurement date of the net OPEB liability and the results of changes in assumptions and
other inputs. The deferred outflows of resources resulting from City contributions subsequent to the
measurement date will be recognized as a reduction of the total OPEB liability in the next fiscal year. The
other OPEB related outflow will be amortized over the expected remaining service lives of all employees
(active and inactive employees) who are provided with OPEB benefits.

In addition to liabilities, the statement of financial position will sometimes report a separate section for deferred
inflows of resources. This separate financial statement element, deferred inflows of resources, represents an
acquisition of net position or fund balance that applies to a future reporting period and thus, will not be
recognized as an inflow of resources (revenue) until that time. The City has three items that qualifies for reporting
in this category.

 Deferred inflows of resources for unavailable revenues - Reported only in the governmental funds
balance sheet, unavailable revenues from property taxes, photographic traffic enforcement (since we’re
closing this fund this year, can we remove this?) and EMS services arise under the modified accrual basis
of accounting. These amounts are deferred and recognized as an inflow of resources in the period that the
amounts become available.

 Deferred inflows of resources for pension activities - Reported in the government wide financial
statement of net position, these deferred inflows result primarily from 1) changes in actuarial assumptions
and 2) differences between expected and actual actuarial experiences. These pension related deferred
inflows will be amortized over the expected remaining service lives of all employees (active and inactive
employees) that are provided with pensions through the pension plan.

 Deferred inflows of resources for other post-employment benefits (OPEB) - Reported in the government
wide financial statement of net position, these deferred inflows result primarily from differences between
expected and actual experience. These amounts will be amortized over the expected remaining service
lives of all employees (active and inactive employees) who are provided with OPEB.

43 City of Sugar Land 2019 CAFR

CITY OF SUGAR LAND, TEXAS
NOTES TO FINANCIAL STATEMENTS (continued)

Note 1 - Summary of Significant Accounting Policies (continued)

L. Capital Assets

Capital assets used in governmental fund types of the government are recorded as expenditures of the General,
Special Revenue and Capital Projects Funds and as assets in the government-wide financial statements to the
extent the City's capitalization threshold is met. In accordance with GASB Statement No. 34, infrastructure has
been capitalized retroactively. Depreciation is recorded on capital assets on a government-wide basis. Property,
Plant, and Equipment in the Proprietary Funds of the government are recorded at cost or at the estimated fair
value at the date of donation if donated to the City. Property, Plant, and Equipment acquired from Municipal
Utility Districts (MUDs) are recorded at the book value of the MUD at the date of dissolution. Major outlays for
capital assets and improvements are capitalized in Proprietary Funds as projects are constructed and subsequently
depreciated over their estimated useful lives on a straight-line basis at both the proprietary fund and government-
wide levels. All capital assets are valued at historical cost or estimated historical cost if actual cost was not
available. Donated capital assets are recorded at acquisition value at the date of donation.

The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend assets'
original estimated useful lives are charged to operations when incurred. Expenditures that materially change
capacities or extend useful lives are capitalized. Upon sale or retirement of capital assets, the cost and related
accumulated depreciation, if applicable, are eliminated from the respective accounts and resulting gain or loss is
included in the results of operations.

Depreciation has been provided for plant and equipment with estimated useful lives of three or more years and
individual cost in excess of $5,000 using the straight-line method over the following estimated useful life for the
type of assets as follows:

Estimated
Asset Description Useful Life
Vehicles 3 to 10 years
Office furniture and equipment 3 to 20 years
Machinery and equipment 6 to 15 years
Water and wastewater system 10 to 50 years
Airport facilities and improvements 20 to 45 years
Buildings, facilities and land improvements 15 to 45 years
Infrastructure 20 to 50 years
Organizational cost of acquired MUDs 40 years

M. Compensated Absences

Employees earn vacation based on years of service with the City. Employees are paid unused vacation time to a
maximum of 320 hours upon termination, depending on longevity, but may not otherwise elect to be paid in lieu
of vacation. The maximum for Shift Firefighter’s is 448 hours.

Sick leave credit accrues at the rate of one day for each month of service. Full-time employees are, upon
voluntary termination and in good standing or retirement, paid for unused sick leave to a maximum of 40 or 80
hours of such pay, depending on years of service. The General Fund has typically been used to liquidate
governmental activity compensated absences in prior years.

44 City of Sugar Land 2019 CAFR

CITY OF SUGAR LAND, TEXAS
NOTES TO FINANCIAL STATEMENTS (continued)

Note 1 - Summary of Significant Accounting Policies (continued)

N. Pensions

For purposes of measuring the net pension liability, pension related deferred outflows and inflows of resources,
and pension expense, City specific information about its Fiduciary Net Position in the Texas Municipal
Retirement System (TMRS) and additions to/deductions from the City’s Fiduciary Net Position have been
determined on the same basis as they are reported by TMRS. For this purpose, plan contributions are recognized
in the period that compensation is reported for the employee, which is when contributions are legally due. Benefit
payments and refunds are recognized when due and payable in accordance with the benefit terms. Investments are
reported at fair value. Information regarding the City’s Total Pension Liability is obtained from TMRS through a
report prepared for the City by TMRS consulting actuary, Gabriel Roeder Smith & Company, in compliance with
Governmental Accounting Standards Board (GASB) Statements No. 68 and No. 71.

O. Other Post-Employment Benefits

The City provides its retirees the opportunity to maintain health insurance coverage by participating in the City’s
self insurance plan. The City reports the total liability for this plan on the government-wide and proprietary fund
financial statements. The actual cost recorded in the governmental fund financial statements is the cost of the
health benefits incurred on behalf of the retirees less the premiums collected from the retirees. Information
regarding the City’s total liability for this plan is obtained through a report prepared by Gabriel Roeder Smith &
Company, the City’s third-party actuary, in compliance with GASB Statement No. 75, Accounting and Financial
Reporting for Postemployment Benefits Other Than Pensions.

Additionally, the City participates in a defined benefit group-term life insurance plan, both for current and retired
employees, administered by the Texas Municipal Retirement System (TMRS). The City reports the total liability
for this plan on the government-wide and proprietary fund financial statements. Information regarding the City’s
total OPEB liability is obtained from TMRS through a report prepared for the City by TMRS’ consulting actuary,
Gabriel Roeder Smith & Company, in compliance with GASB Statement No. 75.

P. Estimates

The preparation of financial statements, in conformity with generally accepted accounting principles, requires
management to make estimates and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of financial statements and the reported amounts of
revenues and expenditures during the reporting period. Actual results could differ from those estimates.

Q. Deficit Equity

The Sugar Land 4B Corporation had deficit net position of $16 million as of September 30, 2019. The deficit
results from the component unit issuing debt and constructing or purchasing capital assets which are then
conveyed to the primary government.

R. Budgets

Annual appropriated budgets are adopted for the General, Special Revenue, and Debt Service Funds, using the
same cash basis of accounting.

45 City of Sugar Land 2019 CAFR

CITY OF SUGAR LAND, TEXAS
NOTES TO FINANCIAL STATEMENTS (continued)

Note 2 - Deposits (Cash) and Investments

Authorization for Deposits and Investments

The Texas Public Funds Investment Act (PFIA), as prescribed in Chapter 2256 of the Texas Government Code,
regulates deposits and investment transactions of the City.

In accordance with applicable statutes, the City has a depository contract with an area bank (depository) providing
for interest rates to be earned on deposited funds and for banking charges the City incurs for banking services
received. The City may place funds with the depository in interest and non-interest bearing accounts. State law
provides that collateral pledged as security for bank deposits must have a market value of not less than the amount
of the deposits and must consist of: (1) obligations of the United States or its agencies and instrumentalities; (2)
direct obligations of the State of Texas or its agencies; (3) other obligations, the principal and interest on which
are unconditionally guaranteed or insured by the State of Texas; and/or (4) obligations of states, agencies,
counties, cities, and other political subdivisions of any state having been rated as to investment quality by a
nationally recognized investment rating firm and having received a rating of not less than A or its equivalent. City
policy requires the collateralization level to be at least 102% of market value of principal and accrued interest.

The Council has adopted a written investment policy regarding the investment of City funds as required by the
Public Funds Investment Act (Chapter 2256, Texas Government Code). The investments of the City are in
compliance with the City’s investment policy. The City’s investment policy is more restrictive than the PFIA
requires. It is the City’s policy to restrict its direct investments to obligations of the U.S. Government or U.S.
Government Agencies, fully FDIC insured certificates of deposit, banker’s acceptances, mutual funds, repurchase
agreements and local government investment pools. The maximum maturity allowed is three years from date of
purchase.

The City’s investment policy does not allow investments in commercial paper, collateralized mortgage
obligations, floating rate investments or swaps.

The City's cash and investments are classified as: Cash and cash equivalents, investments, restricted cash and cash
equivalents, and restricted investments. The investments which have maturities at purchase greater than three
months consist mainly of U.S. Government treasury bills, treasury notes, and other U.S. Government obligations.
The restricted cash and investments are assets restricted for specific use and include the same investment vehicles
as the unrestricted categories. For better management of cash, the City pools the cash, based on the City's needs,
into either deposits in the bank accounts, in short-term investments with TexPool, TexSTAR, Texas CLASS and a
governmental security money market mutual fund or in longer-term investments in U.S. Government Securities.
However, each fund's balance of cash and investments is maintained separately in the records of the City.

46 City of Sugar Land 2019 CAFR

CITY OF SUGAR LAND, TEXAS
NOTES TO FINANCIAL STATEMENTS (continued)

Note 2 - Deposits (Cash) and Investments (continued)

Deposit and Investment Amounts

The following schedule shows the City’s recorded cash and investments at year-end:

Total Fair Value

Discretely
Presented
Primary Component
Government Units
Cash Deposits $ 592,714 $ -
Governmental Mutual Fund 42,717,876 12,226,263
Certificates of Deposit 5,502,127 996,434
Temporary Investments:
Government securities:
FHLB 25,558,941 501,259
FHLMC 14,508,918 -
FFCB 17,369,098 251,254
FNMA 5,996,666 -
FAMCA 6,009,404 -
Public Funds Investment Pools:
Texas CLASS 4,602,816 400,245
TexPool 4,131,332 52,556
TexSTAR 44,214,543 -
$ 171,204,435 $ 14,428,011

The City’s total cash deposits, including certificates of deposit at September 30, 2019 were entirely covered by
collateralized securities held in the City’s name or by federal deposit insurance.

At September 30, 2019, the City invested in a governmental money market mutual fund (Wells Fargo
Government Money Market Fund) as part of its investment strategy. This investment is accomplished through
daily sweeps of excess cash by the City’s custodial bank into a bank-sponsored short-term investment fund. This
fund is a custodial bank-sponsored commingled fund that is invested in short-term U.S. government agency and
treasury debt and repurchase agreements. At year-end the Fund was rated AAAm by Standard & Poor’s

Investments’ fair value measurements are as follows at September 30, 2019:

Fair Value Measurements Using

Investments Fair Value Level 1 Inputs Level 2 Inputs Level 3 Inputs
Certificates of Deposit $ 5,502,127 $ 5,502,127 $ - $ -
Government securities:
FHLB 25,558,941 - 25,558,941 -
FHLMC 14,508,918 - 14,508,918 -
FFCB 17,369,098 - 17,369,098 -
FNMA 5,996,666 - 5,996,666 -
FAMCA 6,009,404 - 6,009,404 -
Total $ 74,945,154 $ 5,502,127 $ 69,443,027 $ -

47 City of Sugar Land 2019 CAFR

CITY OF SUGAR LAND, TEXAS
NOTES TO FINANCIAL STATEMENTS (continued)

Note 2 - Deposits (Cash) and Investments (continued)

Deposit and Investment Amounts (continued)

Quoted market prices are the basis of the fair value for U.S. Agency securities. The amount of increase or
decrease in the fair value of investments during the current year is included in the City’s investment income as
follows:
Discretely
Presented
Primary Component
Government Units
Interest income $ 3,993,543 $ 278,580

Unrealized gain (loss) on

temporary investments 954,348 39,193
Investment earnings $ 4,947,891 $ 317,773

Interest Rate Risk

At year-end, the City had the following investments subject to interest rate risk disclosure, under U.S. generally
accepted accounting principles:

Fair Value
Discretely
Presented Weighted
Primary Component Average
Government Units Maturity (days)
Cash Deposits $ 592,714 $ - 1
Governmental Mutual Fund 42,717,876 12,226,263 27
Certificate of Deposits 5,502,127 996,434 349
Temporary Investments:
Government securities:
U.S. Agency Securities 69,443,027 752,513 40
Public Funds Investment Pools:
Texas CLASS 4,602,816 400,245 70
TexPool 4,131,332 52,556 36
TexSTAR 44,214,543 - 37
$ 171,204,435 $ 14,428,011
Portfolio weighted average
maturity (days) 46 28

The City measures interest rate risk using the weighted average maturity method for the portfolio. The City’s
investment policy specifies a maximum weighted average maturity of 90 days for public fund investment pools
and a maximum stated maturity of 1,095 days for securities. The targeted maximum weighted average maturity
allowed, based on the stated maturity date, for the portfolio is 548 days or 18 months.

To the extent possible, the City attempts to match investments with anticipated cash flow requirements. The
settlement date is considered the date of purchase.

48 City of Sugar Land 2019 CAFR

CITY OF SUGAR LAND, TEXAS
NOTES TO FINANCIAL STATEMENTS (continued)

Note 2 - Deposits (Cash) and Investments (continued)

Local Government Investment Pools

As of September 30, 2019, the City’s investments included TexPool, TexSTAR and Texas CLASS Investment
Pools. The investment pool’s investments are not evidenced by securities that exist in physical or book entry form
and, accordingly, do not have custodial risk.

TexPool policies require that local government deposits be used to purchase investments authorized by the Public
Funds Investment Act (PFIA) of 1987, as amended. The Texas State Comptroller of Public Accounts has
oversight responsibility for TexPool. TexPool is a public funds investment pool created by the Texas Treasury
Safekeeping Trust Company (Trust Company) to provide a safe environment for the placement of local
government funds in authorized short-term, fully collateralized investments, including direct obligations of, or
obligations guaranteed by, the United States or State of Texas or their agencies; federally insured certificates of
deposit issued by Texas banks or savings and loans; and fully collateralized direct repurchase agreements secured
by United States Government agency securities and placed through a primary government securities dealer.

The Trust Company was incorporated by the State Treasurer by authority of the Texas Legislature as a special
purpose trust company with direct access to the services of the Federal Reserve Bank to manage, disburse,
transfer, safe keep, and invest public funds and securities more efficiently and economically. The State
Comptroller of Public Accounts exercises oversight responsibility over TexPool. Oversight includes the ability to
significantly influence operations, designation of management, and accountability for fiscal matters. TexPool uses
amortized cost rather than fair value to report net position to compute share prices. The fair value of the position
in TexPool is the same as the value of TexPool shares. Accordingly, the City’s investments in TexPool are stated
at cost, which approximates fair value. TexPool is currently rated AAAm by Standard and Poor's. This rating
indicates excellent safety and a superior capacity to maintain principal value and limit exposure to loss.

TexSTAR is administered by First Southwest Asset Management, Inc. and JPMorgan Chase. TexSTAR is a local
government investment cooperative created under the Interlocal Cooperation Act specifically tailored to meet
state and local government investment objectives of preservation of principal, daily liquidity and competitive
yield. The fund maintains a maturity of 60 days or less, with a maximum of 13 months for any individual security.
The fund seeks to maintain a constant dollar objective and fulfills all requirements of Texas PFIA for local
government investment pools.

TexSTAR is overseen by a five member governing board made up of three participants and one of each of the
program’s professional administrators. The responsibility of the board includes the ability to influence operations,
designation of management, and accountability for fiscal matters. In addition, the pool has a Participant Advisory
Board which provides input and feedback on the operations and direction of the program and Standard and Poor’s
reviews the pool on a weekly basis to ensure the pool’s compliance with its rating requirements. TexSTAR uses
amortized cost (which excludes unrealized gains and losses) rather than fair value to report net assets to compute
share price. The fair value of the City’s position in TexSTAR is the same as the value of TexSTAR shares.

Texas Cooperative Liquid Assets Securities System (“Texas CLASS”), is governed by a board of trustees, elected
annually by its participants. Texas CLASS is a local government investment pool emphasizing safety, liquidity,
convenience and competitive yield. Since 1996, Texas CLASS has provided Texas public entities a safe and
competitive investment alternative. Texas CLASS invests only in securities allowed by the Texas Public Funds
Investment Act. The City’s fair value in Texas CLASS is the same as the value of the pool shares.

In accordance with GASB Statement No. 79, Certain External Investment Pools and Pool Participants, the Local
Government Investment Pools do not have any limitations and restrictions on withdrawals such as notice periods
or maximum transaction amounts. These pools do not impose any liquidity fees or redemption gates.

49 City of Sugar Land 2019 CAFR

CITY OF SUGAR LAND, TEXAS
NOTES TO FINANCIAL STATEMENTS (continued)

Note 2 - Deposits (Cash) and Investments (continued)

Concentration of Credit Risk

The City’s investment policy allows investments by type based on the following diversification requirements:

Investment Type Maximum Investment %

Repurchase Agreements up to 50%
Certificates of Deposit up to 50%
U.S. Treasury Bills/Notes up to 100%
Other U.S. Government Securities up to 75%
Authorized Investment Pools up to 75%
Bankers' Acceptances up to 25%
No Load Money Market Mutual Funds up to 50%
No Load Mutual Funds up to 10%
Flexible Repurchase Agreements up to 50%

A summary of the City’s portfolio by investment follows:

Percentage of
Investment Type Fair Value Total Portfolio
Cash Deposits $ 592,714 0.3%
Governmental Mutual Fund 54,944,139 29.6%
Certificates of Deposit 6,498,561 3.5%
Temporary Investments:
Government securities:
FHLB 26,060,200 14.0%
FHLMC 14,508,918 7.8%
FFCB 17,620,352 9.5%
FNMA 5,996,666 3.2%
FAMCA 6,009,404 3.2%
Total government securities 70,195,540 37.8%
Public Funds Investment Pools:
Texas CLASS 5,003,061 2.7%
TexPool 4,183,888 2.3%
TexSTAR 44,214,543 23.8%
$ 185,632,446 100.0%

Credit Risk

At year-end balances in TexPool, TexSTAR and Texas CLASS,, privately managed public funds investment
pools, were rated AAAm by Standard & Poor’s.

Securities from Federal Home Loan Banks (FHLB), Federal Home Loan Mortgage Corporation (FHLMC),
Federal Farm Credit Banks (FFCB), Federal National Mortgage Association (FNMA), and Federal Agricultural
Mortgage Corporation (FAMCA) were all rated AA+ by Standard & Poor’s, AAA by Fitch Ratings, and Aaa by
Moody’s Investors Service.

50 City of Sugar Land 2019 CAFR

CITY OF SUGAR LAND, TEXAS
NOTES TO FINANCIAL STATEMENTS (continued)

Note 2 - Deposits (Cash) and Investments (continued)

Credit Risk (continued)

All credit ratings meet acceptable levels required by guidelines prescribed by both the PFIA and the City’s
investment policy. A public fund investment pool must be continuously rated no lower than AAA or AAAm or
no lower than investment grade by at least one nationally recognized rating service and have a weighted average
maturity no greater than 90 days. Investments with minimum required ratings do not qualify as authorized
investments during the period the investment does not have the minimum rating.

Restricted Assets

The Enterprise Funds have restricted certain cash and cash equivalents and investments for reserve and
emergency expenditures, revenue bond debt service, and other purposes. Because of certain bond covenants, the
Enterprise Fund is required to maintain prescribed amounts of resources that can be used only to service
outstanding debt. Some of the proceeds from debt or from funds received from acquisition of Municipal Utility
Districts are restricted for use on capital projects.

The amounts of the restricted cash and cash equivalents and investments and their respective purpose in the
Enterprise Funds are as follows:

Cash and
Cash
Restricted Purpose Equivalents Investments
Restricted for Capital Projects $ 20,548,075 $ 4,753,956
Restricted for Debt Service 9,107,665 1,254,870
Total $ 29,655,740 $ 6,008,826

The Sugar Land 4B Corporation has restricted certain cash and investments for revenue bond debt service. This is
done to comply with certain bond covenants that require funds to be reserved and used only to service outstanding
debt.

Restricted cash, cash equivalents and investments are also reported in governmental funds and are restricted for the
specific purposes of those particular funds.

Note 3 - Receivables

Property Taxes

Property taxes are levied by October 1 in conformity with Subtitle E, Texas Property Tax Code. Taxes are due on
receipt of the tax bill and are delinquent if not paid before February 1 of the year following the year in which imposed.
On January 1 of each year, a tax lien attaches to property to secure the payment of all taxes, penalties, and interest
ultimately imposed. The Central Appraisal District ("CAD") of Fort Bend County, Texas, establishes appraised
values, and performs billing and collection of the City’s tax levies. Taxes are levied by the City Council based on
the appraised values and in accordance with the adopted budget.

51 City of Sugar Land 2019 CAFR

CITY OF SUGAR LAND, TEXAS
NOTES TO FINANCIAL STATEMENTS (continued)

Note 3 - Receivables (continued)

Receivables at September 30, 2019, consist of the following:

Governmental Activities:

Non -Major
Debt Service Governmental Internal
General Fund Fund Funds Total Service Funds
Property taxes, including
penalties and interest $ 793,457 $ 299,100 $ - $ 1,092,557 $ -
Sales and other taxes 7,242,700 - - 7,242,700 -
Fines and forfeitures 2,068,447 - 1,141,581 3,210,028 -
Interest 141,239 27,366 63,416 232,021 27,837
Other 1,173,007 - 655,080 1,828,087 448,655
Due from other
governments 1,324,175 - 942,229 2,266,404 -
Allowance for
uncollectibles (1,127,296) - - (1,127,296) -
Total $11,615,729 $ 326,466 $ 2,802,306 $ 14,744,501 $ 476,492

Business-Type Activities:

Solid Waste
Utility Fund Airport Fund Fund Total
Customer accounts $ 5,330,721 $ 233,540 $ 872,466 $ 6,436,727
Interest 381,879 26,606 552 409,037
Other - - 170,360 170,360
Allowance for
uncollectibles (195,933) (15,552) (12,021) (223,506)
Total $ 5,516,667 $ 244,594 $ 1,031,357 $ 6,792,618

Component Units:

Sugar
Sugar Land Land Town
4B Square Sugar Land Sugar Land
Corporation TIRZ #1 TIRZ #3 TIRZ #4 Total
Sales and other taxes $ 1,116,803 $ - $ - $ - $ 1,116,803
Interest 17,816 138 76 4,938 22,968
Due from other
governments 10,000 8,711 1,127 - 19,838
Total $ 1,144,619 $ 8,849 $ 1,203 $ 4,938 $ 1,159,609

52 City of Sugar Land 2019 CAFR

CITY OF SUGAR LAND, TEXAS
NOTES TO FINANCIAL STATEMENTS (continued)

Note 4 - Capital Assets

A summary of changes in the primary government’s capital assets for the year ended September 30, 2019, follows:

Balance Balance
September 30, September 30,
2018 Increases (Decreases) 2019
Governmental Activities:
Capital assets not being depreciated:
Land $ 102,483,696 $ - $ - $ 102,483,696
Construction in progress 32,044,803 12,801,802 (25,394,724) 19,451,881
Intangibles 4,371,959 208,016 - 4,579,975
Total capital assets not being
depreciated 138,900,458 13,009,818 (25,394,724) 126,515,552
Other capital assets:
Infrastructure 571,346,915 25,095,956 (92,747) 596,350,124
Buildings and improvements 254,560,335 245,822 - 254,806,157
Equipment and furniture 55,055,222 2,089,390 (1,310,176) 55,834,436
Intangibles 753,750 - - 753,750
Total other capital assets 881,716,222 27,431,168 (1,402,923) 907,744,467
Less accumulated depreciation for:
Infrastructure (302,493,774) (16,064,249) 92,753 (318,465,270)
Buildings and improvements (52,452,488) (8,149,108) - (60,601,596)
Equipment and furniture (31,833,212) (3,656,708) 1,281,834 (34,208,086)
Intangibles (376,747) (76,154) - (452,901)
Total accumulated depreciation (387,156,221) (27,946,219) 1,374,587 (413,727,853)
Other capital assets, net 494,560,001 (515,051) (28,336) 494,016,614
Totals $ 633,460,459 $ 12,494,767 $ (25,423,060) $ 620,532,166

Balance Balance
September 30, September 30,
2018 Increases (Decreases) 2019
Business-type Activities:
Capital assets not being depreciated:
Land $ 23,389,556 $ 232,420 $ - $ 23,621,976
Construction in progress 43,868,470 9,809,895 (42,152,986) 11,525,379
Intangibles 2,470,095 315,841 - 2,785,936
Total capital assets not being
depreciated 69,728,121 10,358,156 (42,152,986) 37,933,291
Other capital assets:
Infrastructure 601,676,884 41,447,621 (664,231) 642,460,274
Buildings and improvements 24,936,696 2,100,824 - 27,037,520
Equipment and furniture 10,183,035 105,972 (102,426) 10,186,581
Intangibles 1,019,012 - - 1,019,012
Total other capital assets 637,815,627 43,654,417 (766,657) 680,703,387
Less accumulated depreciation for:
Infrastructure (249,598,003) (22,009,274) 361,205 (271,246,072)
Buildings and improvements (8,260,312) (831,429) - (9,091,741)
Equipment and furniture (6,052,063) (463,835) 102,425 (6,413,473)
Intangibles (528,435) (143,685) - (672,120)
Total accumulated depreciation (264,438,813) (23,448,223) 463,630 (287,423,406)
Other capital assets, net 373,376,814 20,206,194 (303,027) 393,279,981
Totals $ 443,104,935 $ 30,564,350 $ (42,456,013) $ 431,213,272

53 City of Sugar Land 2019 CAFR

CITY OF SUGAR LAND, TEXAS
NOTES TO FINANCIAL STATEMENTS (continued)

Note 4 - Capital Assets (continued)

Depreciation was charged to programs as follows:

General government $ 650,517

Administrative services 1,113,855
Public works 19,396,943
Parks and recreation 3,008,223
Environmental and neighborhood services 1,017,123
Community development 72,518
Public safety-Police 471,797
Public safety-Fire 1,006,012
In addition, depreciation on capital assets held by the
City's internal service funds is charged to various
functions based on their usage of the assets 1,209,231
Total Governmental Activities $ 27,946,219

Water and wastewater $ 20,787,959

Airport 2,650,384
Solid Waste 9,880
Total Business-Type Activities $ 23,448,223

The City has active construction projects as of September 30, 2019. The projects include various improvements
to streets, parks and facilities as well as airport and utility improvements. At year-end, the City's contractual
commitments on projects were as follows:

Total In Remaining
Project Description Progress Commitment
Drainage improvement $ 4,581,092 $ 2,685,006
Park improvement 1,425,210 116,398
Municipal improvements 3,277,260 2,600,209
Street improvement 7,436,153 2,531,371
Traffic improvement 2,732,166 541,673
Water and wastewater improvemen 7,171,256 2,695,496
Airport improvement 4,354,123 190,328
Totals $ 30,977,260 $ 11,360,481

54 City of Sugar Land 2019 CAFR

CITY OF SUGAR LAND, TEXAS
NOTES TO FINANCIAL STATEMENTS (continued)

Note 5 - Long-Term Debt

A. Governmental Activity Debt

The City issues general obligation bonds and certificates of obligation and upon dissolution of Municipal Utility
Districts, assumes unlimited tax and revenue obligations. The assumed obligations were used to acquire and
construct major capital facilities. General obligation bonds, certificates of obligation, and assumed obligations
from dissolved areas are for both governmental and business-type activities. The bonds are reported in the
Proprietary Funds only if they are expected to be repaid from proprietary revenues. The general long-term bonds,
certificates of obligation and assumed obligations are paid through the Debt Service Fund from tax revenues and
transfers from the Utility fund.

The following is a summary of changes in the City's total governmental long-term liabilities for the year ended
September 30, 2019. In general, the City uses the General and Debt Service funds to liquidate governmental long-
term liabilities. Sales tax revenue bonds are serviced through sales tax revenues reported in the Sugar Land
Development Corporation special revenue fund. Compensated absences are typically liquidated by the General
Fund.

Balance Balance Amounts Due

September 30, September 30, Within One
2018 Increases (Decreases) 2019 Year

Bonds payable:
General obligation bonds $ 74,750,000 $ 13,715,000 $ (14,195,000) $ 74,270,000 $ 7,710,000
Annexed utility district bonds 31,405,000 - (6,400,000) 25,005,000 5,405,000
Certificates of obligation 111,255,000 20,760,000 (12,750,000) 119,265,000 5,810,000
Sales tax revenue bonds 47,020,000 - (1,900,000) 45,120,000 1,980,000
Tax note 3,247,426 - (1,066,024) 2,181,402 1,085,406
Issuance premiums/discounts 17,506,838 2,756,614 (1,667,044) 18,596,408 -
285,184,264 37,231,614 (37,978,068) 284,437,810 21,990,406

Other non-current liabilities:

Obligation to State 468,060 - (248,798) 219,262 56,527
Compensated absences 3,195,822 5,228,318 (4,359,263) 4,064,877 75,000
Total Governmental Activities $ 288,848,146 $ 42,459,932 $ (42,586,129) $ 288,721,949 $ 22,121,933

Long-term liabilities applicable to the City's governmental activities are not due and payable in the current period,
and accordingly, are not reported as fund liabilities in the governmental funds. Interest on long-term debt is not
accrued in governmental funds, but rather is recognized as an expenditure when due.

The full amount estimated to be required for debt service on general obligation debt is provided by:

1. the debt service portion of the tax levy;

2. interest earned in the Debt Service Fund; and
3. transfers from the Utility Enterprise and Tourism Funds. Transfers from the Enterprise Funds are
approved at the discretion of City Council and are not intended to service a specific bond series.

55 City of Sugar Land 2019 CAFR

CITY OF SUGAR LAND, TEXAS
NOTES TO FINANCIAL STATEMENTS (continued)

Note 5 - Long-Term Debt (continued)

A. Governmental Activity Debt (continued)

A summary of the terms of general obligation bonds and certificates of obligation, as of September 30, 2019,
follows:
Original Intere st De bt
Se ries Issue Mature s Rate (%) Outstanding
General Obligation Bonds
Series 2012 General Obligation & Refunding Bonds $ 9,440,000 2021 2.0-4.0 $ 300,000
Series 2012A General Obligation Refunding Bonds 4,295,000 2025 2.0-4.0 2,145,000
Series 2014 General Obligation Refunding Bonds 21,565,000 2026 2.0-5.0 10,405,000
Series 2015 General Obligation Bonds 13,010,000 2035 2.125-4.0 11,120,000
Series 2015 General Obligation Refunding Bonds 9,375,000 2028 2.0-5.0 9,070,000
Series 2015 General Obligation Refunding Bonds 22,745,000 2029 4.0-5.0 21,195,000
Series 2016 General Obligation Bonds 7,570,000 2036 2.0-4.0 6,435,000
Series 2019 General Obligation Refunding Bonds 13,715,000 2030 3.0-5.0 13,600,000
Total General Obligation Bonds $ 74,270,000

Certificates of Obligation
Series 2013 Tax and Revenue Certificates of Obligation $ 24,440,000 2033 2.5-4.0 $ 17,930,000
Series 2014 Tax and Revenue Certificates of Obligation 9,980,000 2040 3.25-6.0 8,930,000
Series 2014A Tax and Revenue Certificates of Obligation - Taxable 27,130,000 2046 3.125-4.50 26,130,000
Series 2015 Tax and Revenue Certificates of Obligation 15,005,000 2035 3.0-4.0 12,855,000
Series 2016 Tax and Revenue Certificates of Obligation 19,190,000 2036 2.0-4.0 16,310,000
Series 2017 Tax and Revenue Certificates of Obligation 19,060,000 2037 3.0-5.0 17,150,000
Series 2019 Tax and Revenue Certificates of Obligation 20,760,000 2039 3.25-5.0 19,960,000
Total Certificate s of Obligation $ 119,265,000

Series 2014 Tax Note $ 5,700,000 2021 1.81 $ 2,181,402

Sale s Tax Revenue Bonds

Series 2013 Sales Tax Revenue Bonds $ 7,200,000 2038 4.25-4.375 $ 6,015,000
Series 2014 Sales Tax Revenue Refunding Bonds 7,375,000 2025 2.0-5.0 4,735,000
Series 2014 Sales Tax Revenue Bonds 38,265,000 2040 3.75-6.75 34,370,000
Total Sale s Tax Revenue Bonds $ 45,120,000

Interest
Series Original Issue Matures Rate (%) Debt Outstanding
Annexed Utility District Bonds
Fort Bend County Municipal Utility District No. 21
Series 2012 Unlimited Tax Refunding $ 4,045,000 2021 2.0-3.0 $ 825,000
Fort Bend County Municipal Utility District No. 106
Series 2009 Unlimited Tax Refunding 4,780,000 2021 4.0-5.0 460,000
Series 2012 Unlimited Tax Refunding 5,740,000 2021 3.0-3.50 2,130,000
Fort Bend County Municipal Utility District No. 109
Series 2012 Unlimited Tax Refunding 4,805,000 2023 4.0 2,305,000
Series 2015 Unlimited Tax Refunding 4,960,000 2025 2.0-4.0 3,545,000
Fort Bend County Municipal Utility District No. 117
Series 2012 Unlimited Tax Refunding 7,575,000 2026 3.0-4.0 5,885,000
Series 2016 Unlimited Tax Refunding 7,645,000 2025 2.0-3.0 5,805,000
Fort Bend County Municipal Utility District No. 111
Series 2009 Unlimited Tax Refunding 7,475,000 2021 4.0-4.50 1,015,000
Fort Bend County Municipal Utility District No. 112
Series 2011 Unlimited Tax Refunding 5,640,000 2025 4.0 3,035,000
Total Annexed Utility District Bonds $ 25,005,000

56 City of Sugar Land 2019 CAFR

CITY OF SUGAR LAND, TEXAS
NOTES TO FINANCIAL STATEMENTS (continued)

Note 5 - Long-Term Debt (continued)

A. Governmental Activity Debt (continued)

The annual requirements to amortize governmental activity general obligation bonds and certificates of obligation
outstanding at September 30, 2019, are as follows:

Governmental Activities
General Obligation Bonds Certificates of Obligation
Year Ending
Sept. 30 Principal Interest Principal Interest
2020 $ 7,710,000 $ 2,932,969 $ 5,810,000 $ 4,531,343
2021 8,230,000 2,583,169 5,880,000 4,296,530
2022 8,585,000 2,240,669 5,975,000 4,052,518
2023 8,435,000 1,892,619 6,075,000 3,803,455
2024 8,045,000 1,516,744 5,880,000 3,553,318
2025 6,490,000 1,187,594 5,950,000 3,304,274
2026 5,150,000 924,159 6,020,000 3,054,408
2027 4,265,000 713,925 6,090,000 2,811,464
2028 4,320,000 526,025 6,150,000 2,577,056
2029 3,630,000 370,500 6,225,000 2,337,288
2030 3,035,000 248,425 6,115,000 2,100,789
2031 1,155,000 176,075 6,185,000 1,872,878
2032 1,175,000 141,125 6,265,000 1,644,418
2033 1,200,000 105,500 6,340,000 1,423,243
2034 1,225,000 68,594 5,200,000 1,228,203
2035 1,245,000 30,469 5,205,000 1,053,043
2036 375,000 5,625 4,250,000 889,711
2037 - - 3,360,000 751,919
2038 - - 2,480,000 639,924
2039 - - 2,550,000 539,301
2040 - - 1,780,000 450,950
2041 - - 1,190,000 388,055
2042 - - 1,240,000 335,810
2043 - - 1,295,000 281,308
2044 - - 1,350,000 224,440
2045 - - 1,405,000 165,208
2046 - - 1,465,000 102,038
2047 - - 1,535,000 34,538
$ 74,270,000 $ 15,664,184 $ 119,265,000 $ 48,447,427

57 City of Sugar Land 2019 CAFR

CITY OF SUGAR LAND, TEXAS
NOTES TO FINANCIAL STATEMENTS (continued)

Note 5 - Long-Term Debt (continued)

A. Governmental Activity Debt (continued)

The annual requirements to amortize governmental activity dissolved utility district bonds and the tax note
outstanding at September 30, 2019, are as follows:

Governmental Activities
Annexed Utility District Bonds Tax Note
Year Ending
Sept. 30 Principal Interest Principal Interest
2020 $ 5,405,000 $ 853,356 $ 1,085,406 $ 34,594
2021 4,960,000 688,919 1,095,996 14,859
2022 3,125,000 531,250 - -
2023 3,240,000 419,000 - -
2024 3,400,000 298,700 - -
2025 3,230,000 178,350 - -
2026 1,645,000 65,800 - -
$ 25,005,000 $ 3,035,375 $ 2,181,402 $ 49,453

Sales Tax Revenue Bonds

The annual requirements to amortize governmental activity sales tax revenue bonds outstanding payable from sales
tax receipts collected by the SLDC at September 30, 2019, are as follows:

Sugar Land Development Corporation

Blended Component Unit
Sales Tax Revenue Bonds

Year Ending
Sept. 30 Principal Interest
2020 $ 1,980,000 $ 2,108,984
2021 2,055,000 1,998,721
2022 2,140,000 1,884,090
2023 2,225,000 1,768,821
2024 2,315,000 1,644,571
2025 2,420,000 1,512,268
2026 1,610,000 1,402,659
2027 1,675,000 1,311,318
2028 1,740,000 1,216,346
2029 1,815,000 1,122,215
2030 1,885,000 1,028,808
2031 1,965,000 933,456
2032 2,045,000 835,944
2033 2,135,000 734,106
2034 2,225,000 639,431
2035 2,330,000 552,075
2036 2,450,000 457,600
2037 2,575,000 355,478
2038 2,705,000 248,172
2039 2,355,000 146,100
2040 2,475,000 49,500
$ 45,120,000 $ 21,950,664

58 City of Sugar Land 2019 CAFR

CITY OF SUGAR LAND, TEXAS
NOTES TO FINANCIAL STATEMENTS (continued)

Note 5 - Long-Term Debt (continued)

A. Governmental Activity Debt (continued)

Obligations to State - Refund of Sales Tax

During the 1999 fiscal year, the Texas State Comptroller of Public Accounts notified the City of Sugar Land, the
Sugar Land Development Corporation, and the Sugar Land 4B Corporation, that the State had remitted $591,620 in
sales tax receipts to the City which were not collected within the City. The State requested the amount be returned
to the State. The City had allocated the sales tax to the Corporations in accordance with the proper sales tax rates.
The City settled with the State to repay the State in annual installments of $19,721 starting October 1, 1999, over a
30-year period without interest.

During the fiscal year 2017, the City was informed of an overpayment of sales tax in the amount of $725,100 in
error. At the City's request, the Comptroller's office agreed to deduct $21,973 from March 2017 through October
2019 followed by one final payment of $21,964.

Tax Note

In October 2014, the City issued a $5.7 million tax note to fund the purchase of ambulances and fire trucks. The
note was issued for seven years at the rate of 1.81%.

Defeased Debt

In current and prior years, the City legally defeased certain bonds and certificates of obligation by placing cash
and/or proceeds of refunding bonds issues in an irrevocable trust to provide for all future debt services payments
on the refunded debt. Accordingly, the trust account assets and the liability for the defeased bonds are not
included in the City’s report.

On December 1, 2018 the City issued General Obligation (G.O.) Refunding Bonds, Series 2019, in the par
amount of $13,715,000; Certification of Obligation (C.O.) Bonds, Series 2019, in the amount of $20,760,000. All
bonds closed on January 9, 2019.

The G.O. Refunding Bonds refunded $14,535,000 par amount in total consisting of $990,000 par amount of
Unlimited Tax Revenue Bonds, Series 1997; $6,290,000 par amount of C.O. Bonds, Series 2010; $540,000 par
amount of G.O. Bonds, Series 2010 and $6,715,000 par amount of G.O. Refunding Bonds, Series 2010. The
refunding transaction yielded a reduction in debt service and a net present value savings of $1.0 million or 6.93%
of the refunded bonds.

Projects funded from the C.O.s include Street improvements, Drainage & flood control improvements, Traffic
improvements and building improvements.

A summary of previously defeased debt still outstanding as of September 30, 2019 follows:
Amount
Considered
Description Call Date Defeased
Combination Tax & Revenue Certification of Obligation, Series 2011 2/15/2020 $ 80,935,000
$ 80,935,000

59 City of Sugar Land 2019 CAFR

CITY OF SUGAR LAND, TEXAS
NOTES TO FINANCIAL STATEMENTS (continued)

Note 5 - Long-Term Debt (continued)

B. Business Type Activity Debt (continued)

The City issued $13,660,000 of Waterworks & Sewer System Revenue Bonds Series 2019 on December 1, 2018
for collection system rehabilitation, lift station rehabilitation, easement acquisition, wastewater plant
rehabilitation, groundwater plant improvement, well rehabilitation, distribution and water storage tank
rehabilitation and to pay the costs incurred in connection with the issuance of the bonds.

The following is a summary of changes in the City's total business-type long-term liabilities for the year ended
September 30, 2019:
Balance Balance Amounts Due
September 30, September 30, Within One
2018 Increases (Decreases) 2019 Year
Bonds payable:
Water and wastewater revenue bonds $ 98,510,000 $ 13,660,000 $ (6,475,000) $ 105,695,000 $ 6,765,000
General obligation bonds 84,580,000 - (690,000) 83,890,000 710,000
Certificates of obligation 10,035,000 - (2,420,000) 7,615,000 2,520,000
Issuance premiums/discounts 15,488,679 388,090 (899,053) 14,977,716 -
208,613,679 14,048,090 (10,484,053) 212,177,716 9,995,000
Other liabilities:

Compensated absences 375,411 673,496 (522,029) 526,878 10,000

Total Business-type Activities $ 208,989,090 $ 14,721,586 $ (11,006,082) $ 212,704,594 $ 10,005,000

60 City of Sugar Land 2019 CAFR

CITY OF SUGAR LAND, TEXAS
NOTES TO FINANCIAL STATEMENTS (continued)

Note 5 - Long-Term Debt (continued)

B. Business Type Activity Debt (continued)

A summary of the terms of certificates of obligation and revenue bonds recorded in the Enterprise Funds as of
September 30, 2019 follows:

Original Interest
Series Issue Matures Rate (%) Debt Outstanding
Utility Fund
Series 2011 Combination Tax and Revenue Certificates of Obligation $ 98,810,000 2041 2.0-5.0 $ 2,275,000
Series 2012 Waterworks and Sewer System Revenue Bonds 21,925,000 2031 1.5-3.25 15,870,000
Series 2012A Waterworks and Sewer System Revenue Refunding Bonds 9,025,000 2030 2.0-4.0 4,070,000
Series 2013 Waterworks and Sewer System Revenue Bonds 15,765,000 2033 2.5-4.0 11,960,000
Series 2015 Waterworks and Sewer System Revenue Refunding Bonds 15,750,000 2035 3.0-5.0 12,920,000
Series 2016 Waterworks and Sewer System Revenue Refunding Bonds 31,710,000 2036 2.0-5.0 29,145,000
Series 2016 Tax and Revenue Certificates of Obligation 1,620,000 2036 2.0-4.0 1,455,000
Series 2017 Waterworks and Sewer System Revenue Bonds 19,780,000 2037 3.0-5.0 18,470,000
Series 2017 G.O. Refunding Bonds 78,195,000 2041 3.0-5.0 78,195,000
Series 2019 Waterworks and Sewer System Revenue Bonds 13,660,000 2039 3.0-5.0 13,260,000
Total Utility Fund Debt 187,620,000

Airport Fund
Series 2012A General Obligation Refunding $ 5,610,000 2025 2.0-4.0 $ 3,255,000
Series 2013 Tax and Revenue Certificates of Obligation 730,000 2033 2.5-4.0 530,000
Series 2015 Tax and Revenue Certificates of Obligation 1,670,000 2035 3.0-4.0 1,430,000
Series 2015 General Obligation Refunding 2,820,000 2028 2.0-5.0 2,240,000
Series 2016 General Obligation Refunding 225,000 2029 4.0-5.0 200,000
Series 2017 Tax and Revenue Certificates of Obligation 2,055,000 2037 3.0-5.0 1,925,000
Total Airport Fund Debt 9,580,000

Total Enterprise Funds Long-Term Debt $ 197,200,000

On December 1, 2018 the City issued Waterworks & Sewer System Revenue Bonds, Series 2019 in the amount of
$13,660,000. All bonds closed on January 9, 2019. Projects funded from the Revenue Bonds include
improvements to water wells, distribution system, groundwater storage tanks, groundwater plants, lift stations,
wastewater treatment plant and easement acquisition.

61 City of Sugar Land 2019 CAFR

CITY OF SUGAR LAND, TEXAS
NOTES TO FINANCIAL STATEMENTS (continued)

Note 5 - Long-Term Debt (continued)

B. Business Type Activity Debt (continued)

The annual requirements to amortize business-type activity revenue bonds, certificates of obligation, and general
obligation bonds outstanding at September 30, 2019, are as follows:

Business-Type Activities
Revenue Bonds Certificates of Obligation General Obligation Bonds
Year Ending
Sept. 30 Principal Interest Principal Interest Principal Interest
2020 $ 6,765,000 $ 4,024,713 $ 2,520,000 $ 220,860 $ 710,000 $ 3,492,269
2021 6,695,000 3,795,763 255,000 176,629 2,970,000 3,429,644
2022 6,950,000 3,554,013 265,000 166,016 3,105,000 3,308,869
2023 6,900,000 3,289,013 270,000 155,023 3,270,000 3,158,519
2024 7,190,000 2,995,363 275,000 143,698 3,445,000 2,996,344
2025 7,505,000 2,713,288 285,000 131,973 3,615,000 2,825,769
2026 7,835,000 2,386,600 295,000 119,776 3,180,000 2,658,869
2027 7,825,000 2,037,425 305,000 107,913 3,340,000 2,495,869
2028 8,155,000 1,715,900 315,000 96,910 3,500,000 2,324,969
2029 7,300,000 1,388,688 325,000 85,538 3,355,000 2,153,794
2030 5,650,000 1,116,638 340,000 73,723 3,500,000 1,982,519
2031 5,605,000 937,538 350,000 61,918 3,670,000 1,803,269
2032 4,070,000 752,025 360,000 50,344 3,850,000 1,634,519
2033 4,215,000 610,000 365,000 39,053 4,010,000 1,477,319
2034 3,245,000 461,838 340,000 28,169 4,170,000 1,313,719
2035 3,330,000 349,744 355,000 17,603 4,340,000 1,143,519
2036 2,555,000 234,719 250,000 8,369 4,515,000 966,419
2037 2,170,000 142,031 145,000 2,266 4,705,000 782,019
2038 850,000 65,063 - - 4,905,000 589,819
2039 885,000 33,188 - - 5,080,000 412,344
2040 - - - - 5,245,000 251,016
2041 - - - - 5,410,000 84,531
$ 105,695,000 $ 32,603,544 $ 7,615,000 $ 1,685,778 $ 83,890,000 $ 41,285,922

C. Component Unit Long-Term Debt

The following is a summary of the long-term debt transactions of the Sugar Land 4B Corporation for the year ended
September 30, 2019:

Balance Balance Amounts Due

September 30, September 30, Within One
2018 Increases (Decreases) 2019 Year
Bonds payable:
Sales tax revenue bonds $ 30,140,000 $ - $ (2,025,000) $ 28,115,000 $ 2,115,000
Issuance premiums/discounts (9,905) - 2,477 (7,428) -

Other liabilities:
Obligation to State 56,483 - (34,599) 21,884 7,131
$ 30,186,578 $ - $ (2,057,122) $ 28,129,456 $ 2,122,131

62 City of Sugar Land 2019 CAFR

CITY OF SUGAR LAND, TEXAS
NOTES TO FINANCIAL STATEMENTS (continued)

Note 5 - Long-Term Debt (continued)

C. Component Unit Long-Term Debt (continued)

A summary of the terms of the revenue bonds recorded as long-term liabilities in the Sugar Land 4B Corporation as
of September 30, 2019 follows:

Original Interest Debt

Series Issue Matures Rate (%) Outstanding
Series 2005 Sales Tax Revenue Bonds $ 5,530,000 2025 4.0-6.0 $ 1,545,000
Series 2010 Sales Tax Revenue Refunding Bonds 9,195,000 2022 2.0-3.7 2,535,000
Series 2011 Sales Tax Revenue Bonds 30,145,000 2036 4.0-5.0 24,035,000
Total Component Unit Long-Term Debt $ 28,115,000

The annual requirements to amortize component unit revenue bonds outstanding at September 30, 2019, are as
follows:
Sugar Land 4B Corporation
Revenue Bonds
Year Ending
Sept. 30 Principal Interest
2020 $ 2,115,000 1,239,175
2021 2,195,000 1,156,850
2022 1,900,000 1,076,631
2023 1,330,000 1,011,694
2024 1,390,000 953,169
2025 1,460,000 888,863
2026 1,225,000 828,269
2027 1,290,000 771,681
2028 1,355,000 712,169
2029 1,425,000 648,728
2030 1,500,000 580,150
2031 1,580,000 506,013
2032 1,670,000 425,750
2033 1,765,000 339,875
2034 1,865,000 249,125
2035 1,970,000 153,250
2036 2,080,000 52,000
$ 28,115,000 $ 11,593,391

D. Legal Compliance

Long-term debt assumed by the City upon dissolution of municipal utility districts in previous years has been
recorded as part of the City's long-term debt. A portion of the assumed debt is related to assets recorded in the Utility
Fund. Even though the debt is related to assets recorded in the Utility Fund, the debt is considered general obligation
debt based on Texas law. The dissolved area debt will be retired with tax revenue and operating transfers from the
Utility Fund. The transfers from the Utility Fund to the Debt Service Fund are not intended to service specific
general obligation debt. During the year, at the discretion of City Council, the Utility Fund made a transfer to the
Debt Service Fund as indicated on the transfer schedule of $6.1 million.

63 City of Sugar Land 2019 CAFR

CITY OF SUGAR LAND, TEXAS
NOTES TO FINANCIAL STATEMENTS (continued)

Note 6 - Fund Balance/Net Position

The City records fund balance restrictions at the fund level to indicate that a portion of the fund balance is legally
restricted for a specific future use or to indicate that a portion of the fund balance is not available for expenditures.

Fund balance restrictions for capital projects, economic development and tourism & marketing, for the year ended
September 30, 2019 is as follows:

Restricted Fund Balance Amount Purpose

Debt Service $ 8,847,239 Debt Service activities

Non-major governmental funds $ 5,286,100 Debt Service activities

7,098,197 Economic development activities
404,232 Public safety
1,941,997 Tourism & marketing
22,113,944 Construction & acquisition
of capital assets
$ 36,844,470

The committed and assigned fund balances reported in the General Fund column of the Governmental Funds Balance
Sheet are for various operating activities encumbered but not completed at year-end and have been approved by City
Council and management respectively. The programs or functions for which these amounts have been committed or
assigned are as follows:

Program or Function Committe d Assigne d

General Government $ 166,136 $ 150,423
Administrative Service 7,000 60,000
Public Works 276,000 17,000
Community Development 14,000 10,000
Public Safety 286,000 77,000
$ 749,136 $ 314,423

The Sugar Land 4B Corporation, a discretely presented component unit of the City, had a negative unrestricted net
position balance at year-end of approximately $16 million. This deficit balance is caused by the Corporation issuing
bonds for economic development related construction projects and transferring the capital assets to the primary
government while retaining the related debt. As noted in Note 5, the debt is expected to be retired with future
dedicated sales tax revenues.

64 City of Sugar Land 2019 CAFR

CITY OF SUGAR LAND, TEXAS
NOTES TO FINANCIAL STATEMENTS (continued)

Note 7 - Interfund Transactions

A summary of interfund transfers, the purpose of which is to cover operational expenses/expenditures, for the year
ended September 30, 2019 is as follows:

Transfer In Transfer Out Amount Purpose

General Fund Tourism Fund $ 60,854 To cover special events site expenditures
General Fund Solid Waste Fund 300,000 Street rehabilitation projects
General Fund Photographic Traffic 617,205 50% of net revenues for traffic safety
Enforcement Fund
978,059

Debt Service Fund Tourism Fund 1,372,461 Reimbursement for Conference Center,
Smart Financial Centre & Plaza debt
Debt Service Fund Utility Fund 6,086,153 Reimbursement for Annexed MUD debt
Debt Service Fund GW Debt Reduction Fund 590,843 To support annexed debt
Debt Service Fund NT Debt Reduction Fund 995,822 To support annexed debt
Debt Service Fund Enclave at River Park PID - 89,345 Reimbursement for PID debt issued
Special Revenue Fund
Debt Service Fund Capital Projects 133,405 Bond proceeds to support the debt issued for Parks Projects
9,268,029

Capital Project Fund SLDC Fund 505,000 To repay interfund loan to Surface Water Fund
Capital Project Fund Tourism Fund 50,000 Public art
Capital Project Fund General Fund 715,000 Traffic Safety projects from Red Light Camera proceeds
1,270,000

Court Technology fund General Fund 6,469 To cover court software maintenance
Enclave at River Park PID - Debt Service Fund 19,370 50% of property tax in PID collected during the year
Special Revenue Fund
Enclave at River Park PID - General Fund 25,080 50% of property tax in PID collected during the year
Special Revenue Fund
44,450

Utility Fund Enclave at River Park PID - 30,217 Reimbursement for debt issued
Special Revenue Fund
Airport Fund General Fund 72,406 Property tax collected during the year on
Airport value
Airport Fund Debt Service Fund 54,436 Property tax collected during the year on
Airport value
Airport Fund SLDC Fund 50,000 International Marketing
176,842

$ 11,774,066

65 City of Sugar Land 2019 CAFR

CITY OF SUGAR LAND, TEXAS
NOTES TO FINANCIAL STATEMENTS (continued)

Note 7 - Interfund Transactions (continued)

On May 3, 2016 the City Council approved an inter-fund loan of $5.6 million from the Utility fund (connection fees)
to the Capital Projects fund for the University Blvd. North extension project. The Utility fund is accumulating funds
to support debt service for capital projects driven by new development and is not expected to need the funds through
fiscal year 2020. The funds were transferred on May 3, 2016. A portion of this loan, $1,347,668 together with the
accrued interest of 1.00% will be reimbursed by the Sugar Land Development Corporation in October 2019 and the
remaining balance of $4,252,332 together with the accrued interest of 1.00 % will be reimbursed by the developer no
later than September 30, 2020.

Note 8 - Deferred Compensation Plan

he City maintains for its employees a tax-deferred compensation plan meeting the requirements of Internal Revenue
Code Section 457. The plan was established in the 1995 fiscal year by City Ordinance and Nationwide Retirement
Solutions and SBC Retirement Corporation were the initial third-party administrators. In 2007, ICMA was appointed
as an additional third-party administrator. The deferred compensation is not available to employees until termination,
retirement, or death. However, while employed, deferred compensation may be available to employees in an
unforeseen emergency or under certain loan provisions. The plan's trust arrangements are established to protect
deferred compensation amounts of employees under the plan from any other use other than intended under the plan
(eventual payment to employees deferring the compensation) in accordance with federal tax laws. Amounts of
compensation deferred by employees under plan provisions are disbursed bi-weekly by the City to selected third-party
administrators. The third-party administrators handle all funds in the plan and makes investment decisions and
disburse funds to employees in accordance with plan provisions.

66 City of Sugar Land 2019 CAFR

CITY OF SUGAR LAND, TEXAS
NOTES TO FINANCIAL STATEMENTS (continued)

Note 9 - Employee Retirement System

Texas Municipal Retirement System

Plan Description and Provisions

The City participates as one of 887 plans in the nontraditional, joint contributory, hybrid defined benefit pension
plan administered by the Texas Municipal Retirement System (TMRS). TMRS is an agency created by the State
of Texas and administered in accordance with the TMRS Act, Subtitle G, Title 8, Texas Government Code (the
TMRS Act) as an agent multiple-employer retirement system for municipal employees in the State of Texas. The
TMRS Act places the general administration and management of the System with a six-member Board of
Trustees. Although the Governor, with the advice and consent of the Senate, appoints the Board, TMRS is not
fiscally dependent on the State of Texas. TMRS’s defined benefit pension plan is a tax-qualified plan under
Section 401 (a) of the Internal Revenue Code. TMRS issues a publicly available comprehensive annual financial
report (CAFR) that can be obtained at www.tmrs.com.

All eligible employees of the City are required to participate in TMRS. The City does not participate in Social
Security for TMRS-eligible employees.

Benefits Provided

TMRS provides retirement, disability, and death benefits. Benefit provisions are adopted by the governing body
of the City, within the options available in the state statutes governing TMRS.

At retirement, the benefit is calculated as if the sum of the employee’s contributions, with interest, and the city-
financed monetary credits with interest were used to purchase an annuity. Members may choose to receive their
retirement benefit in one of seven actuarially equivalent payments options. Members may also choose to receive
a portion of their benefit as a Partial Lump Sum Distribution in an amount equal to 12, 24, or 36 monthly
payments, which cannot exceed 75% of the member’s deposits and interest.

On the date the plan began, the City granted monetary credits for service rendered before the plan began of a
theoretical amount equal to two times what would have been contributed by the employee, with interest, prior to
establishment of the plan. Monetary credits for service since the plan began are 200% of the employee's
accumulated contributions.

A summary of plan provisions for the City are as follows:

Employee deposit rate: 7%

Matching ratio (City to employee): 2 to 1
Years required for vesting: 5
Service retirement eligibility: 20 years at any age, 5 years at age 60 and above
Updated Service Credit: 100% Repeating Transfers
Annuity Increase to retirees: 70% of CPI Repeating
Supplemental death benefit – active
employees and retirees Yes

At the December 31, 2018 valuation and measurement date, the following employees were covered by the benefit
terms:
Retirees or beneficiaries currently receiving benefits 229
Inactive employees entitled to but not yet receiving benefits 299
Active employees 750
1,278

67 City of Sugar Land 2019 CAFR

CITY OF SUGAR LAND, TEXAS
NOTES TO FINANCIAL STATEMENTS (continued)

Note 9 - Employee Retirement System (continued)

Texas Municipal Retirement System (continued)

Contributions

The contribution rates for employees in TMRS are either 5%, 6%, or 7% of employee gross earnings, and the City
matching percentages are either 100%, 150%, or 200%, both as adopted by the governing body of the City. Under the
State law governing TMRS, the contribution rate for each City is determined annually by the consulting actuary, using
the Entry Age Normal (EAN) actuarial cost method. The actuarially determined rate is the estimated amount necessary
to finance the cost of benefits earned by employees during the year, with an additional amount to finance any unfunded
accrued liability.

Employees for the City were required to contribute 7% of their annual gross earnings during the fiscal year. For fiscal
year 2019, the City made contributions of 15.13% for the months in 2018 and 14.78% for the months in 2019.

Net Pension Liability

The City’s Net Pension Liability (NPL) was measured as of December 31, 2018, and the Total Pension Liability
(TPL) used to calculate the Net Pension Liability was determined by an actuarial valuation as of that date.

Actuarial Assumptions

The Total Pension Liability in the December 31, 2018 actuarial valuation was determined using the following
actuarial assumptions:

Inflation: 2.5%
Overall payroll growth: 3.5% to 10.5% including inflation
Investment Rate of Return: 6.75%

Salary increases were based on a service-related table. Mortality rates for active members, retirees, and beneficiaries
were based on the gender-distinct RP2000 Combined Healthy Mortality Table with Blue Collar Adjustment with
male rates multiplied by 109% and female rates multiplied by 103% and projected on a fully generational basis with
scale BB to account for future mortality improvements. For disabled annuitants, the gender-distinct RP2000
Disabled Retiree Mortality Table is used, with slight adjustments.

Actuarial assumptions used in the December 31, 2018, valuation were based on the results of actuarial experience
studies. The experience study in TMRS was for the period December 31, 2010 through December 31, 2014, first
used in the December 31, 2015 valuation. Healthy post-retirement mortality rates and annuity purchase rates were
updated based on a Mortality Experience Investigation Study covering 2009 through 2011, and dated December 31,
2013. These assumptions were first used in the December 31, 2013 valuation, along with a change to the Entry Age
Normal (EAN) actuarial cost method. Assumptions are reviewed annually. No additional changes were made for the
2018 valuation.

The long-term expected rate of return on pension plan investments is 6.75%. The pension plan’s policy in regard to
the allocation of invested assets is established and may be amended by the TMRS Board of Trustees. Plan assets are
managed on a total return basis with an emphasis on both capital appreciation as well as the production of income, in
order to satisfy the short-term and long-term funding needs of TMRS.

68 City of Sugar Land 2019 CAFR

CITY OF SUGAR LAND, TEXAS
NOTES TO FINANCIAL STATEMENTS (continued)

Note 9 - Employee Retirement System (continued)

Texas Municipal Retirement System (continued)

The long-term expected rate of return on pension plan investments was determined using a building-block method in
which best estimate ranges of expected future real rates of return (expected returns, net of pension plan investment
expense and inflation) are developed for each major asset class. These ranges are combined to produce the long-
term expected rate of return by weighting the expected future real rates of return by the target asset allocation
percentage and by adding expected inflation. The target allocation for each major asset class are summarized in the
following table:
Long-Term
Expected Real Rate
of Return
Asset Class Target Allocation (Arithmetic)
U.S. equities 17.5% 4.55%
International equities 17.5% 6.10%
Core fixed income 10.0% 1.00%
Non-core fixed income 20.0% 3.65%
Real estate 10.0% 4.03%
Real return 10.0% 5.00%
Absolute return 10.0% 4.00%
Private equity 5.0% 8.00%
Total 100.0%

Discount Rate

The discount rate used to measure the Total Pension Liability was 6.75%. The projection of cash flows used to
determine the discount rate assumed that employee and employer contributions will be made at the rates specified in
statute. Based on that assumption, the pension plan’s Fiduciary Net Position was projected to be available to make all
projected future benefit payments of current active and inactive employees. Therefore, the long-term expected rate of
return on pension plan investments was applied to all periods of projected benefit payments to determine the Total
Pension Liability.
Changes in the Net Pension Liability
Increase (Decrease)
Total Pension Plan Fiduciary Net Pension
Liability Net Position Liability
(a) (b) (a) - (b)
Balance at 12/31/2017 $ 234,987,994 $ 213,791,953 $ 21,196,041
Changes for the year:
Service cost 9,388,573 - 9,388,573
Interest 15,982,991 - 15,982,991
Change in benefit terms - -
Difference between expected
and actual experience (1,631,866) - (1,631,866)
Changes in assumptions - -
Contributions - employer - 7,856,693 (7,856,693)
Contributions - employee - 3,634,956 (3,634,956)
Net investment income - (6,409,298) 6,409,298
Benefit payments, including refunds,
of employee contributions (5,794,458) (5,794,458) -
Administrative expense - (123,770) 123,770
Other charges - (6,466) 6,466
Net changes 17,945,240 (842,343) 18,787,583
Balance at 12/31/2018 $ 252,933,234 $ 212,949,610 $ 39,983,624

69 City of Sugar Land 2019 CAFR

CITY OF SUGAR LAND, TEXAS
NOTES TO FINANCIAL STATEMENTS (continued)

Note 9 - Employee Retirement System (continued)

Texas Municipal Retirement System (continued)

Sensitivity of the Net Pension Liability

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

Current Single
1% Decrease to Rate Assumption 1% Increase to
5.75% 6.75% 7.75%
City's net pension liability $ 79,586,390 $ 39,983,624 $ 7,800,980

Pension Plan Fiduciary Net Position

Detailed information about the pension plan’s Fiduciary Net Position is available in a separately-issued TMRS
financial report. That report may be obtained on the Internet at www.tmrs.com.

Pension Expense and Deferred Outflows of Resources and Deferred Inflows of Resources Related to
Pensions

For the year ended September 30, 2019, the City recognized pension expense of $11,634,770.

At September 30, 2019, the City reported deferred outflows and inflows of resources related to pensions from
the following sources:

Deferred Outflows Deferred Inflows

of Resources of Resources

Differences between actuarial assumptions

and actual experience $ 2,428,308 $ 1,872,066
Changes in actuarial assumptions used - 807,624
Differences between projected
and actual investment earnings 11,038,114 -
Contributions subsequent to
the measurement date 6,051,322 -
Total $ 19,517,744 $ 2,679,690

70 City of Sugar Land 2019 CAFR

CITY OF SUGAR LAND, TEXAS
NOTES TO FINANCIAL STATEMENTS (continued)

Note 9 - Employee Retirement System (continued)

Texas Municipal Retirement System (continued)

Pension Expense and Deferred Outflows of Resources and Deferred Inflows of Resources Related to
Pensions (continued)

Deferred outflows of resources related to pensions resulting from contributions subsequent to the measurement
date of $6,051,322 will be recognized as a reduction of the net pension liability for the measurement year
ending December 31, 2019 (i.e. recognized in the City’s fiscal year 2020 financial statements). Other amounts
reported as deferred outflows and inflows of resources related to pensions will be recognized in pension
expense as follows:

Fiscal Ne t de ferred outflows

Year (inflows) of resources
2020 $ 3,825,239
2021 1,677,187
2022 1,666,555
2023 3,961,464
2024 (280,950)
Thereafter (62,763)
Total $ 10,786,732

Note 10 - Postemployment Benefits Other Than Pensions (OPEB)

TMRS Supplemental Death Benefits Fund

Benefit Plan Description

The City also participates in the cost sharing multiple-employer defined benefit group-term life insurance plan
operated by the Texas Municipal Retirement System (TMRS) known as the Supplemental Death Benefits Fund
(SDBF). The City elected, by ordinance, to provide group-term life insurance coverage to both current and retired
employees. The City may terminate coverage under and discontinue participation in the SDBF by adopting an
ordinance before November 1 of any year to be effective the following January 1.

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

Membership in the plan as of the measurement date of December 31, 2018 was as follows:

Inactive plan members or beneficiaries currently receiving benefits 174

Inactive plan members entitled to but not yet receiving benefits 104
Active employees 750
Total plan members 1,028

71 City of Sugar Land 2019 CAFR

CITY OF SUGAR LAND, TEXAS
NOTES TO FINANCIAL STATEMENTS (continued)

Note 10 - Postemployment Benefits Other Than Pensions (OPEB) (continued)

TMRS Supplemental Death Benefits Fund (continued)

Contributions

Contributions are made monthly based on the covered payroll of employee members of the participating member
city. The contractually required contribution rate is determined annually for each city (currently 0.15% of covered
payroll). The rate is based on the mortality and service experience of all employees covered by the SDBF and the
demographics specific to the workforce of the city. There is a one-year delay between the actuarial valuation that
serves as the basis for the employer contribution rate and the calendar year when the rate goes into effect. The
funding policy of this plan is to assure that adequate resources are available to meet all death benefit payments for
the upcoming year; the intent is not to prefund retiree term life insurance during employees’ entire careers. As
such, contributions are utilized to fund active member deaths on a pay-as-you-go basis; any excess contributions
and investment income over payments then become net position available for benefits.

Discount Rate

The TMRS SDBF program is treated as unfunded OPEB plan because the SDBF trust covers both actives and
retirees and the assets are not segregated for these groups. Under GASB No. 75, the discount rate for an unfunded
OPEB plan should be based on 20-year tax-exempt AA or higher Municipal Bonds. Therefore, a discount rate of
3.71% based on the 20 Year Bond GO Index published by bondbuyer.com is used as of the measurement date of
December 31, 2018..

Actuarial Assumptions

The City’s Total OPEB Liability was measured at December 31, 2018 and was determined by an actuarial
valuation as of that date using the following actuarial assumptions:

Valuation Date: December 31, 2018

Methods and Assumptions:

Inflation: 2.50%
Salary Increases: 3.50% to 10.50%, including inflation
Discount rate: 3.71%. The discount rate was based on the Fidelity Index’s “20-Year
Municipal GO AA Index” rate as of December 31, 2018.
Retirees’ share of benefit related costs: $0
Administrative expenses: All administrative expenses are paid through the Pension Trust and
accounted for under reporting requirements under GASB Statement No.
68.
Mortality rates – service retirees: RP2000 Combined Mortality Table with Blue Collar
Adjustment with male rates multiplied by 109% and female rates
multiplied by 103% and projected on a fully generational basis with scale
BB.

72 City of Sugar Land 2019 CAFR

CITY OF SUGAR LAND, TEXAS
NOTES TO FINANCIAL STATEMENTS (continued)

Note 10 - Postemployment Benefits Other Than Pensions (OPEB) (continued)

TMRS Supplemental Death Benefits Fund (continued)

Actuarial Assumptions (continued)

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

Notes: The actuarial assumptions used in the December 31, 2018 valuation were based on the results of an
actuarial experience study for the period December 31, 2010 to December 31, 2014.

Changes in the Total OPEB Liability

Total OPEB Liability

Service cost $ 88,278
Interest 48,529
Changes of benefit terms -
Difference between expected
and actual experience of the total OPEB liability (26,653)
Changes of assumptions (118,129)
Benefit payments (5,193)
Net change in total OPEB liability (13,168)
Total OPEB liability - beginning 1,424,601
Total OPEB liability - ending $ 1,411,433

Covered payroll $ 51,927,946

Total OPEB liability as a percentage of covered payroll 2.72%

Sensitivity Analysis

The following presents the Total OPEB Liability of the employer, calculated using the discount rate of 3.71%, as
well as what the City’s Total OPEB Liability would be if it were calculated using a discount rate that is 1
percentage point lower (2.71%) or 1 percentage point higher (4.71%) than the current rate. Note that the
healthcare cost trend rate does not affect the Total OPEB Liability, so sensitivity to the healthcare cost trend rate
is not shown.

Current Discount Rate

1% Decrease to Assumption 1% Increase to
2.71% 3.71% 4.71%
$ 1,732,954 $ 1,411,433 $ 1,165,552

73 City of Sugar Land 2019 CAFR

CITY OF SUGAR LAND, TEXAS
NOTES TO FINANCIAL STATEMENTS (continued)

Note 10 - Postemployment Benefits Other Than Pensions (OPEB) (continued)

TMRS Supplemental Death Benefits Fund (continued)

OPEB Expense and Deferred Outflows of Resources and Deferred Inflows of Resources Related to OPEB
Activity

For the year ended September 30, 2019, the City recognized OPEB expense of $134,723 relating to the SDBF
plan.

As of September 30, 2019, the City reported deferred outflows and inflows of resources related to OPEB from the
following sources:

Deferred
Outflows of Deferred Inflows
Resources of Resources
Differences between expected
and actual experience $ $ 23,160
Changes assumptions 95,098 102,647
Contributions subsequent to
the measurement date 4,094 -
Total $ 99,192 $ 125,807

The $4,094 reported as deferred outflows of resources related to OPEB resulting from City contributions
subsequent to the measurement date will be recognized as a reduction of the OPEB liability in the year ending
September 30, 2020.

Amounts currently reported as deferred outflows of resources related to OPEBs, excluding contributions
subsequent to the measurement date, will be recognized in OPEB expense as follows:

Net deferred
Fiscal outflows (inflows)
Year of resources
2020 $ (2,084)
2021 (2,084)
2022 (2,084)
2023 (2,084)
2024 (2,084)
Thereafter (20,289)
Total $ (30,709)

74 City of Sugar Land 2019 CAFR

CITY OF SUGAR LAND, TEXAS
NOTES TO FINANCIAL STATEMENTS (continued)

Note 10 - Postemployment Benefits Other Than Pensions (OPEB) (continued)

Retiree Health Care Plan (RHCP)

Plan Description

The City’s defined benefit OPEB plan, City of Sugar Land Retiree Health Care Plan (RHCP), provides OPEB
through an implicit healthcare premium for retirees for all permanent full-time employees of the City. RHCP is a
single employer defined benefit OPEB plan administered by the City. At this time, no assets are accumulated in a
trust to fund the future requirements of the RHCP.

Benefits provided

RHCP provides access to post retirement employees by offering a “blended premium” structure, that is, the
overall health care premiums for active employees and non-Medicare retirees, are stated in terms of a single
“blended premium”. The difference between the underlying retiree claims and the blended overall health care
premium is referred to as an “implicit” subsidy. Because the underlying claims costs for a non-Medicare retiree
are on average higher than the blended premium, there is a positive implicit subsidy for the non-Medicare retirees.

Employees covered by benefit terms. At December 31, 2018, the following employees were covered by the
benefit terms:

Inactive plan members or beneficiaries currently receiving benefits 8

Inactive plan members entitled to but not yet receiving benefits 0
Active employees 730
Total plan members 738

Total OPEB Liability

The City’s total OPEB liability of $4,827,303 was measured as of December 31, 2018, and was determined by an
actuarial valuation as of December 31, 2018.

Actuarial assumptions and methods

The total OPEB liability in the December 31, 2018 actuarial valuation was determined using the following
actuarial assumptions and other inputs, applied to all periods included in the measurement, unless otherwise
specified:

Valuation Date: December 31, 2018

Methods and Assumptions:

Actuarial Cost Method: Individual Entry-Age

Discount Rate: 3.71% as of December 31, 2018
Inflation: 2.50%
Salary Increases: 3.50% to 10.50%, including inflation
Demographic Assumptions: Based on the experience study covering the four year period ending
December 31, 2014 as conducted for the Texas Municipal Retirement System
(TMRS)

75 City of Sugar Land 2019 CAFR

CITY OF SUGAR LAND, TEXAS
NOTES TO FINANCIAL STATEMENTS (continued)

Note 10 - Postemployment Benefits Other Than Pensions (OPEB) (continued)

Retiree Health Care Plan (RHCP) (continued)

Actuarial assumptions and methods (continued)

Mortality: For healthy retirees, the gender-distinct RP2000 Combined Healthy Mortality
Tables with Blue Collar Adjustment are used with male rates multiplied by
109% and female rates multiplied by 103%. The rates are projected on a fully
generational basis by scale BB to account for future mortality improvements.

Health Care Trend Rates: Initial rate of 7.20% declining to an ultimate rate of 4.25% after 15 years
Participation Rates:

Age at Retirement Participation Assumption

Less than 50 0%
Between 50 and 54 15%
Between 55 and 59 20%
Between 60 and 64 30%
65 and over 0%

Other Information:

Notes: The discount rate changed from 3.31% as of December 31, 2017 to 3.71% as
of December 31, 2018.

Discount Rate

Because the RHCP is unfunded or pay-as-you go, the discount rate is based on 20-year tax-exempt AA or higher
Municipal Bonds or 3.71% as of the measurement date of December 31, 2018 based on the 20 Year Bond GO
Index published by bondbuyer.com.

Changes in the Total OPEB Liability

Total OPEB Liability

Service cost $ 283,352
Interest 143,990
Difference between expected
and actual experience of the total OPEB liability 186,156
Changes of assumptions 42,490
Benefit payments (74,311)
Net change in total OPEB liability 581,677
Total OPEB liability - beginning 4,245,626
Total OPEB liability - ending $ 4,827,303

Covered payroll $ 51,927,946

Total OPEB liability as a percentage of covered payroll 9.30%

76 City of Sugar Land 2019 CAFR

CITY OF SUGAR LAND, TEXAS
NOTES TO FINANCIAL STATEMENTS (continued)

Note 10 - Postemployment Benefits Other Than Pensions (OPEB) (continued)

Retiree Health Care Plan (RHCP) (continued)

Sensitivity of the total OPEB liability to changes in the discount rate

The following presents the plan’s total OPEB liability, calculated using a discount rate of 3.71%, as well as what
the plan’s total OPEB liability would be if it were calculated using a discount rate that is one percent lower or one
percent higher:

Current Discount Rate

1% Decrease to Assumption 1% Increase to
2.71% 3.71% 4.71%
$ 5,312,786 $ 4,827,303 $ 4,386,635

Sensitivity of the total OPEB liability to changes in the healthcare cost trend rates

The following presents the plan’s total OPEB liability, calculated using the assumed trend rates as well as what
the plan’s total OPEB liability would be if it were calculated using a trend rate that is one percent lower or one
percent higher:

Current Healthcare
Cost Trend Rate
1% Decrease Assumption 1% Increase
$ 4,257,591 $ 4,827,303 $ 5,501,221

OPEB Expense and Deferred Outflows of Resources and Deferred Inflows of Resources Related to OPEB

For the year ended September 30, 2019, the City recognized OPEB expense of $496,166. At September 30, 2019,
the City reported deferred outflows of resources and deferred inflows of resources related to OPEB from the
following sources:

Deferred
Outflows of Deferred Inflows
Resources of Resources
Differences between expected
and actual experience $ 167,417 $ 3,551
Changes assumptions 194,422 -
Contributions subsequent to
the measurement date 63,606 -
Total $ 425,445 $ 3,551

77 City of Sugar Land 2019 CAFR

CITY OF SUGAR LAND, TEXAS
NOTES TO FINANCIAL STATEMENTS (continued)

Note 10 - Postemployment Benefits Other Than Pensions (OPEB) (continued)

Retiree Health Care Plan (RHCP) (continued)

OPEB Expense and Deferred Outflows of Resources and Deferred Inflows of Resources Related to OPEB
(continued)

City contributions made subsequent to the measurement date of the total OPEB liability (December 31, 2018) and
prior to year-end (September 30, 2019) will be recognized in the following fiscal year. Other amounts reported as
deferred outflows of resources and deferred inflows of resources related to OPEB will be recognized in OPEB
expense as follows:

Net deferred
Fiscal outflows (inflows)
Year of resources
2020 $ 41,824
2021 41,824
2022 41,824
2023 41,824
2024 41,824
Thereafter 149,168
Total $ 358,288

Aggregate Totals – All OPEB plans

Aggregate totals for all OPEB plans administered by the City are as follows:

Total OPEB liabilities $6,238,736

Total deferred outflows of resources related to OPEB $524,439
Total deferred inflows of resources related to OPEB $129,358
Total OPEB expense $630,889

Note 11 - Contracts with Special Districts

Agreements with Utility Districts

The City has entered into utility agreements with six Municipal Utility Districts (Fort Bend MUDs No. 10, 136, 137,
138, 139 and Burney Road MUD) (the "Districts"), which are within the City's boundaries. The Districts are to
acquire and construct water, wastewater, and drainage facilities to serve the area within the Districts and may issue
bonds to finance such facilities. These utility agreements provide the following:
As water, wastewater and drainage facilities are acquired and constructed the Districts will transfer the facilities to
the City, reserving a security interest therein for the purpose of securing performance of the City under the
agreements. At such time as the bonds of the Districts are discharged, the Districts will release the security interest,
and the City will own the improvements.
The water and wastewater rates charged by the City will be equal and uniform to those charged other similar
users within the City, with all revenues belonging exclusively to the City.

78 City of Sugar Land 2019 CAFR

CITY OF SUGAR LAND, TEXAS
NOTES TO FINANCIAL STATEMENTS (continued)

Note 11 - Contracts with Special Districts (continued)

Agreements with Utility Districts (continued)

The City has agreed to pay the Districts a tax rebate of the ad valorem taxes collected on land and improvements
within the Districts. The rebates for the year ended September 30, 2019, were approximately $4.1 million.
Estimated payment for the year ending September 30, 2020 budget are $4.2 million.

The City has entered into agreements with various Municipal Utility Districts (MUDs), Fort Bend County and the
City’s extraterritorial jurisdiction (ETJ) to provide fire services within the developments of Tara and Riverstone
subdivisions. The districts pay a fee for these services. In addition, Fort Bend County reimburses the City for calls
made into the unincorporated areas of the County. The City estimates to have received $1,063,784 from the
participating MUDs and Fort Bend County in the year ended September 30, 2019, in connection with these
agreements.

Note 12 - Lease Agreements

Smart Financial Centre at Sugar Land

The Smart Financial Centre at Sugar Land reached substantial completion December 9, 2016 and the lease with
ACE SL, LLC began December 14, 2016 under the terms of the first amendment to the development agreement
and execution of lease agreement approved by City Council on October 28, 2014. The lease of the facility is for a
term of 30 years from lease commencement date with lease payments due monthly in arrears. The lease agreement
defines base rent, additional base rent, parking fees and participation rent and how each is calculated and when
due to the City. ACE SL, LLC has provided City a letter of credit equal to the last three years’ annual debt service
requirements that will be reduced as additional base rent payments are set aside to build a three-year debt service
reserve. ACE SL, LLC is responsible for all operations and maintenance of the Smart Financial Centre at
Sugar Land during the term of the lease.

The lease payments are based on the following calculation: Base Rent: 1/12 of the annual debt service
requirement for the Series 2014A Taxable Certificates of Obligation issued by the City to fund a portion of the
project construction. Base rent is payable in arrears on the first day of the following month without demand. Rent
payment resets each January 1 for the term of the lease. Beginning in the third year of the lease, and until a debt
service reserve equal to the last three years debt service payments, the base rent increases to 125% of the annual
debt service requirement. Under the lease agreement, the City is entitled to participation rent and a share of
parking fees as well. The City received $64,323 in participation rent during the fiscal year ended September 30,
2019.

Sugar Land Baseball, LLC

In 2010, the City of Sugar Land entered into a twenty-five year lease agreement with Sugar Land Baseball, LLC
for the rental of the Constellation Field (baseball stadium). Sugar Land Baseball, LLC owns “Skeeters” a minor
league baseball team. The base annual rent of $80,000 is due to the City January 1st each lease year. In addition to
the base rent, the City will receive participation rent equal to 40% of all gross revenues in excess of $2.6 million.
In 2019 the City received $0 in addition to the base rent.

79 City of Sugar Land 2019 CAFR

CITY OF SUGAR LAND, TEXAS
NOTES TO FINANCIAL STATEMENTS (continued)

Note 12 - Lease Agreements (continued)

Sugar Land Hotel Associates, L.P.

In 2002, the Sugar Land Town Square Development Authority (the "Authority") entered into a ninety-nine year
lease agreement with Sugar Land Hotel Associates, L.P. (the "Tenant") for the rental of the Sugar Land
Conference Center and Parking Garage (the "Property"), owned by the Authority. The Tenant has the right to use
the Property and has agreed to operate the Property in a "first class manner," as defined in the lease agreement,
paying the Authority a base rent of $1 per lease year, plus an incentive rent, as determined by the lease agreement,
within 15 days after the Authority's receipt of an annual statement that presents the net cash flow and any net sale
proceeds for the preceding lease year.

Note 13 - Commitments and Contingencies

Economic Development Grant Commitments

The Sugar Land Development Corporation has committed economic development grants or incentives to various
companies in targeted industries to be paid in the future on the condition that certain agreed upon criteria are met.
The amounts currently committed are as follows:

Fiscal Grant
Year Commitments
2020 $ 1,685,000
2021 885,000
2022 920,000
2023 920,000
2024 610,000
2025 580,000
2026 580,000
2027 315,000
2028 270,000
2029 270,000
2030 270,000
Totals $ 7,305,000

Litigation and Other Contingencies

The City was involved in various lawsuits and arbitration proceedings at September 30, 2019. The City and its
legal counsel believe that any amounts which the City might ultimately be required to pay will not exceed
underlying insurance coverage.

Federally Assisted Programs - Compliance Audits

The City receives various grants, which are subject to audit by the respective agencies. Subsequent audits may
disallow expenditures financed by government grants. It is the opinion of management that any disallowed
expenditures, based on prior audit experience, will not be material in relation to the City's financial statements as
of September 30, 2019.

80 City of Sugar Land 2019 CAFR

CITY OF SUGAR LAND, TEXAS
NOTES TO FINANCIAL STATEMENTS (continued)

Note 13 - Commitments and Contingencies (continued)

Brooks Lake Diversion Weir Agreement

The AMIL Gates structure was constructed in the early to mid-1970’s as a flood control structure to work in
conjunction with the dam system along Oyster Creek. The gates are a hydraulically activated structure that opens
from the bottom to maintain a maximum flood elevation for Oyster Creek and the Brooks Lake area during high
water events. The gates were designed and have operated in this fashion over 35 years.

The gates operate at a high efficiency as it relates to flooding but they naturally release flow due to the design and
type of construction. The gates were never envisioned to be a watertight structure; however, the flow over time
has become a large concern for the City and Gulf Coast Water Authority (GCWA). The gates were rehabilitated
over five years ago to address normal wear and tear on the gate structure but these improvements did not address
the release of flow. The gates have lived their useful life and are not in production any longer. The study
performed by Klotz Associates recommends replacement of the AMIL Gates with the proposed Brooks Lake
Diversion Weir (BLDW).

The City has teamed with the GCWA on this project and has drafted the Brooks Lakes Diversion Weir Agreement
to identify the parties’ obligations. Terms of this agreement are as follows:

 City pays for engineering and construction costs as per the PER
 GCWA will credit half of the costs of engineering and construction plus any interests on debt against
GCWA Raw Water Agreement (payment schedule of 10 years)
 The costs owed by GCWA will go through a “true-up” process at the completion of the project to include
total project costs and interest
 GCWA has the option to pay their portion of the debt ahead of the schedule but will true-up upon final
completion of the project
 GCWA my review design and be present for construction meetings, but City retains right to make all
decisions regarding final design criteria
 City solicits competitive bids, selects contractor, manages construction
 City owns, operates and maintains project
 If GCWA wants to monitor flow from the weir, they can install flow monitoring devices but at its own
cost

On January 19, 2017 the GCWA’s board of directors unanimously approved the agreement to pay $2,193,995,
which is 50% of estimated project cost of $4,387,990 over period of 10 years.

As of September 30, 2019, the City received payments of $250,000.

Arbitrage Rebate

In accordance with the provisions of the Internal Revenue Code, sections 103, 103A, and 148, as amended, a
governmental debt issuance must qualify and maintain tax-exempt status by satisfying certain arbitrage
requirements contained in these provisions. As part of the requirements, certain amounts earned on the non-
purpose investment of debt issuance proceeds, in excess of the yield on an issue, earned as arbitrage, will be
required to be paid to the U.S. Treasury. As part of this process, the City annually determines potential arbitrage
liabilities on its debt issues, on component unit debt issues and on debt issues assumed by the City from various
Municipal Utility Districts.

81 City of Sugar Land 2019 CAFR

CITY OF SUGAR LAND, TEXAS
NOTES TO FINANCIAL STATEMENTS (continued)

Note 14 - Risk Management

The City is exposed to various risks of loss related to torts: theft of, damage to, and destruction of assets; errors
and omissions; airport operations, law enforcement operations, cyber security, pollution; injuries to employees;
and natural disasters. The City's Risk Management Program manages these risks, which are covered by Liability,
Property and Crime and Fidelity commercial insurance purchased from Texas Municipal League
Intergovernmental Risk Pool (TMLIRP), and through commercial insurance carriers. The participation of the City
in TMLIRP is for payment of premiums, insurance claims above the City’s deductibles and loss control services.
The City has various levels of deductibles for these coverages with the maximum deductible set at $10,000. The
City has not had any significant reduction in insurance coverage, and the amounts of insurance settlements have
not exceeded insurance coverage for any of the last three years. The City also provides Workers' Compensation
insurance on its employees and volunteers through TMLIRP. Workers' Compensation premiums are subject to
change each year when audited by TMLIRP. As of September 30, 2019, the City believed the amounts paid on
Workers' Compensation would not change significantly from the amounts recorded.

Employee Benefits Fund

Beginning January 1, 2012, the City started providing health benefits to its employees and dependents through a
self-funded employee health benefit plan which is accounted for in the Employee Benefits Fund - Internal Service
Fund. This fund is principally supported by contributions from the City and the employees. The City makes
contributions to cover the majority of the premiums for employees, and the employees are required to make
contributions to cover the remaining employee and dependent costs. The Internal Service Fund charges the City’s
General Fund and enterprise funds for the City’s contributions. Payments of premiums and administrative fees are
paid out of this fund. A third party administrator acting on behalf of the City processes health claim payments.

The City has obtained excess loss insurance which limits the City’s aggregate claims responsibility at 120% of
expected claims and sets a deductible of $175,000 annually for any individual, with the exception of two known
catastrophic claimants which were issued a “laser” deductible of $400,000 each for the plan year.

Settled claims did not exceed insurance coverages in fiscal year 2019. Estimates of claims payable and of claims
incurred, but not reported at September 30, 2019, are reflected as accrued expenses and claims payable of the
Employee Benefits Fund - Internal Service Fund. The liabilities include an amount for claims that have been
incurred but were not reported until after September 30, 2019. The liability reported in the fund is one of the
requirements of Governmental Accounting Standards Board Statement No. 10, which requires that a liability for
claims be reported if information prior to the issuance of the financial statements indicates that it is probable that a
liability has been incurred as of the date of the financial statements, and the amount of the loss can be reasonable
estimated. Because actual claims liabilities depend on such complex factors as inflation, changes in legal
requirements, and damage awards, the process used in computing claims liability is an estimate based on
historical claims.

82 City of Sugar Land 2019 CAFR

CITY OF SUGAR LAND, TEXAS
NOTES TO FINANCIAL STATEMENTS (continued)

Note 15 - Tax Abatements

In May 2018, the Sugar Land City Council approved Resolution No. 18-16, as required by Chapter 312 of the
Texas Tax Code, to strengthen minimum guidelines and criteria governing tax abatement agreements in the City
of Sugar Land. The City has an ad valorem tax abatement program that abates property taxes on new value
created as a result of the proposed project, with possible abatements available from the City, Fort Bend County,
and, as applicable, other taxing jurisdictions.

To be eligible to receive a tax abatement the guidelines stipulate that the company must add, at minimum, a value
of $4 million to the tax rolls, with the exact abatement percentage determined by a tiered structure related to the
cumulative value of improvements and personal property. The city’s maximum abatement duration is 10 years
with abatement percentages ranging from 35% to 100%. To receive their abatement each year, companies must
submit compliance documentation to the City as outlined in their respective Tax Abatement Agreements.
Compliance criteria may typically include, but are not limited to, the following requirements: minimum employee
count, minimum average annual salary, minimum real, personal, and / or inventory value on tax roll, construction
material / improvement receipts, minimum taxable sales, occupancy / lease requirements, and LEED
certifications. Additionally, each company is required to submit their tax abatement application to the Fort Bend
Central Appraisal District (FBCAD) by April 30th of each year to receive their abatement. The FBCAD will apply
the abatement after confirming with the City that no deductions need to occur, which would only happen if a
company did not meet a certain requirement of their Tax Abatement Agreement. Each agreement outlines how
deductions will be calculated, if the noncompliance does not automatically result in a default for that year. The
City typically includes a recapture clause in Tax Abatement Agreements that requires the company to return all
property taxes abated under the agreement with interest and penalties to the City should the City have to terminate
the agreement due to noncompliance issues. The Office of Economic Development performs an annual
assessment of the compliance performance for companies receiving tax abatements.

Currently, the City has 8 active tax abatement agreements under contract for tax year 2019. These companies
comprise $165 million in real and personal property values. They also provide $15 million in inventory values not
subject to tax abatement. In tax year 2019, the City abated $94.7 million in improvements and personal property
value, and the revenue received for real and personal property from these companies was $223,122 for tax year
2018.

Note 16 - Termination of Funds and Activities

Photographic Traffic Signal Enforcement Fund

The Photographic Traffic Signal Enforcement Fund was created when the City’s program began in 2007. Due to
the passing of House Bill 1631 by the 86th legislature, this program ended on June 2, 2019 when the cameras were
deactivated by the City. No payments were accepted by the City after June 12, 2019. This fund was closed out
upon payment of the remaining obligations of the fund with half of the net income due to the state at the close of
fiscal year 2019. Because the outstanding receivable balance at June 2, 2019 was uncollectible due to State action,
the entire amount was written off as an extraordinary item in the government-wide financial statements as the
matter was both unusual and infrequent in nature and outside of management’s control.

Greatwood & New Territory Debt Reduction Activities

In December 2017 the City annexed nine Municipal Utility Districts in Greatwood and New Territory into the
City limits and assumed the assets and liabilities of each district. Each area had established a Debt Reduction
Fund as part of the Strategic Partnership Agreement with the City to fund annexation related expenditures and pay
debt upon annexation. In fiscal year 2019, the remaining balances of the two Debt Reduction Funds were
transferred to the Debt Service Fund. Balances remain in the Debt Reduction Fund under separate, unrelated
agreements.

83 City of Sugar Land 2019 CAFR

CITY OF SUGAR LAND, TEXAS
NOTES TO FINANCIAL STATEMENTS (continued)

Note 17 - Combination of Surface Water Fund into Utility Fund

Combining of Utility Enterprise Fund and Surface Water Enterprise Fund

In fiscal year 2019 the City combined the assets, liabilities and equity of the Surface Water Enterprise Fund were
consolidated into the Water Utility Enterprise Fund to create the System Utility Fund. The fiscal year 2019
budget combined the revenues and expenditures of the two funds and the operating results for fiscal year 2019
reflect the combined results of the two funds as well as financial position. The beginning equity of the Surface
Water Enterprise Fund of approximately $9.0 million has been combined with the beginning balance of the Water
Utility Enterprise Fund in the proprietary fund financial statements.

Note 18 - Subsequent Events

Issuance of Bonds

On October 15, 2019 the City issued General Obligation Improvement and Refunding Bonds, Series 2019A
through a competitive transaction that closed November 14, 2019. The refunding defeased $13,620,000 in
principal from Fort Bend MUD 109 Series 2009, Fort Bend MUD 112 Series 2011, Fort Bend MUD 106 Series
2012, Fort Bend MUD 109 Series 2012, Fort Bend MUD 117 Series 2012, all issued by the respective districts
and assumed by the City in December 2017 upon annexation of the districts; and GO Refunding Bonds series
2012 issued by the City for overall debt service savings. The transaction yielded net present value savings of
6.73% of the refunded amount.
On October 15, 2019 the City issued Sugar Land 4B Corporation Sales Tax Refunding Bonds Series 2019 through
a competitive transaction that closed November 19, 2019. The refunding defeased $26,230,000 in outstanding par
amount from series 2005, 2010 Refunding and 2011 bonds issued by the corporation to fund various capital
improvements. The transaction yielded net present value savings of 16.9% of the refunded amount.

84 City of Sugar Land 2019 CAFR

 APPENDIX C

FORM OF BOND COUNSEL'S OPINION

THIS PAGE LEFT BLANK INTENTIONALLY
 Hunton Andrews Kurth LLP
600 Travis, Suite 4200
Houston, Texas 77002
+1.713.220.4200 Phone
+1.713.220.4285 Fax
HuntonAK.com

May 28, 2020

WE HAVE ACTED as Bond Counsel for the City of Sugar Land, Texas (the “City”) in
connection with an issue of bonds (the “Bonds”) described as follows:

CITY OF SUGAR LAND, TEXAS, WATERWORKS AND SEWER SYSTEM

REVENUE BONDS, SERIES 2020, dated April 15, 2020, in the aggregate
principal amount of $6,835,000.

The Bonds mature, bear interest, are subject to redemption prior to maturity and
may be transferred and exchanged as set out in the Bonds and in the ordinance
(the “Ordinance”) adopted by the City Council of the City authorizing their
issuance.

WE HAVE ACTED as Bond Counsel for the sole purpose of rendering an opinion with
respect to the legality and validity of the Bonds under the Constitution and laws of the State of
Texas and with respect to the exclusion of interest on the Bonds from gross income under federal
income tax law. In such capacity we have examined the Constitution and laws of the State of
Texas; federal income tax law; and a transcript of certain certified proceedings pertaining to the
issuance of the Bonds. The transcript contains certified copies of certain proceedings of the City;
certain certifications and representations and other material facts within the knowledge and
control of the City, upon which we rely; and certain other customary documents and instruments
authorizing and relating to the issuance of the Bonds. We have also examined executed Bond
No. I-1 of this issue.

WE HAVE NOT BEEN REQUESTED to examine, and have not investigated or verified,
any original proceedings, records, data or other material, but have relied upon the transcript of
certified proceedings. We have not assumed any responsibility with respect to the financial
condition or capabilities of the City or the disclosure thereof in connection with the sale of the
Bonds. Our role in connection with the City’s Official Statement prepared for use in connection
with the sale of the Bonds has been limited as described therein.

BASED ON SUCH EXAMINATION, it is our opinion as follows:

(1) The transcript of certified proceedings evidences complete legal authority

for the issuance of the Bonds in full compliance with the Constitution and
laws of the State of Texas presently in effect; the Bonds constitute valid
and legally binding obligations of the City enforceable in accordance with
the terms and conditions thereof, except to the extent that the rights and
remedies of the owners of the Bonds may be limited by laws heretofore or
ATLANTA AUSTIN BANGKOK BEIJING BOSTON BRUSSELS CHARLOTTE DALLAS DUBAI HOUSTON LONDON LOS ANGELES
MIAMI NEW YORK NORFOLK RALEIGH/DURHAM RICHMOND SAN FRANCISCO THE WOODLANDS TYSONS WASHINGTON, DC

106882.0000001 EMF_US 79437653v2

May 28, 2020
Page 2

hereafter enacted relating to bankruptcy, insolvency, reorganization,

moratorium or other similar laws affecting the rights of creditors of
political subdivisions and the exercise of judicial discretion in appropriate
cases; and the Bonds have been authorized and delivered in accordance
with law; and

(2) The Bonds, together with the City’s Outstanding Parity Bonds (as defined
in the Ordinance), are special obligations of the City that are payable from
and are equally and ratably secured by a first lien on the Net Revenues of
the City’s waterworks and sanitary sewer system, as defined and provided
in the Ordinance, which Net Revenues are required to be set aside and
pledged to the payment of the Bonds, the Outstanding Parity Bonds and all
additional bonds issued on a parity therewith, in the Interest and Sinking
Fund and the Reserve Fund maintained for the payment of all such bonds,
all as more fully described in the Ordinance.

THE RIGHTS OF THE OWNERS of the Bonds are subject to the applicable provisions
of the federal bankruptcy laws and any other similar laws affecting the rights of creditors of
political subdivisions generally, and may be limited by general principles of equity which permit
the exercise of judicial discretion.

THE CITY HAS RESERVED THE RIGHT to issue additional parity bonds, subject to
the restrictions contained in the Ordinance, which may be equally and ratably payable from, and
secured by a first lien on and pledge of, the aforesaid Net Revenues in the same manner and to
the same extent as the Bonds.

BASED ON OUR EXAMINATION AS DESCRIBED ABOVE, it is further our opinion

that, subject to the restrictions hereinafter described, interest on the Bonds (1) is not included in
gross income of the owners thereof for federal income tax purposes under existing law and (2) is
not an item of tax preference for purposes of the federal alternative minimum income tax. The
opinion set forth in the first sentence of this paragraph is subject to the condition that the City
comply with all requirements of the Internal Revenue Code of 1986, as amended (the “Code”),
that must be satisfied subsequent to the issuance of the Bonds in order that interest thereon be, or
continue to be, excluded from gross income for federal income tax purposes. The City has
covenanted in the Ordinance to comply with each such requirement. Failure to comply with
certain of such requirements may cause the inclusion of interest on the Bonds in gross income for
federal income tax purposes to be retroactive to the date of issuance of the Bonds. The Code and
the existing regulations, rulings and court decisions thereunder, upon which the foregoing
opinions of Bond Counsel are based, are subject to change, which could prospectively or
retroactively result in the inclusion of the interest on the Bonds in gross income of the owners
thereof for federal income tax purposes.

EXCEPT AS DESCRIBED HEREIN, we express no opinions as to any other matters.

106882.0000001 EMF_US 79437653v2

May 28, 2020
Page 3

IN PROVIDING THE FOREGOING OPINIONS, we have relied upon representations of

the City with respect to matters solely within the knowledge of the City, which we have not
independently verified, and have assumed the accuracy and completeness thereof.

IN ADDITION, EXCEPT AS DESCRIBED ABOVE, we express no opinion as to any

federal, state or local tax consequences under present law, or future legislation, resulting from
the ownership of, receipt or accrual of interest on, or the acquisition or disposition of, the Bonds.
Prospective purchasers of the Bonds should be aware that the ownership of tax-exempt
obligations, such as the Bonds, may result in collateral federal income tax consequences to,
among others, financial institutions, life insurance companies, property and casualty insurance
companies, certain foreign corporations doing business in the United States, certain S
corporations with Subchapter C earnings and profits, individual recipients of Social Security or
Railroad Retirement benefits, taxpayers who are deemed to have incurred or continued
indebtedness to purchase or carry tax-exempt obligations, taxpayers owning an interest in a
FASIT that holds tax-exempt obligations and individuals otherwise qualified for the earned
income credit. For the foregoing reasons, prospective purchasers should consult their tax
advisors as to the consequences of investing in the Bonds.

OUR OPINIONS ARE BASED ON EXISTING LAW, which is subject to change. Such
opinions are further based on our knowledge of facts as of the date hereof. We assume no duty
to update or supplement our opinions to reflect any facts or circumstances that may thereafter
come to our attention or to reflect any changes in any law that may thereafter occur or become
effective. Moreover, our opinions are not a guarantee of result and are not binding on the
Internal Revenue Service; rather, such opinions represent our legal judgment based upon our
review of existing law that we deem relevant to such opinions and in reliance upon the
representations and covenants referenced above.

106882.0000001 EMF_US 79437653v2

Financial Advisory Services
Provided By