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This Preliminary Official Statement and the information herein are subject to change, completion or amendment without notice. These securities may not be sold nor may offers to buy be accepted prior to
the time the Official Statement is delivered in final form. Under no circumstances shall this Preliminary Official Statement constitute an offer to sell or the solicitation of an offer to buy, nor may there be any sale
of these securities in any jurisdiction in which such offer, solicitation or sales would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction.
PRELIMINARY OFFICIAL STATEMENT DATED NOVEMBER 4, 2014
NEW ISSUE - Book-Entry-Only
RATINGS:
Moody’s: “Applied For”
S&P:
“Applied For”
(See “OTHER INFORMATION –
Ratings” herein.)
In the opinion of Bond Counsel (identified below), assuming continuing compliance by the County after the date of initial delivery of the Obligations with certain
covenants contained in the Order and subject to the matters set forth under “TAX MATTERS” herein, interest on the Obligations for federal income tax purposes under
existing statutes, regulations, published rulings, and court decisions (1) will be excludable from the gross income of the owners thereof pursuant to section 103 of the
Internal Revenue Code of 1986, as amended to the date of initial delivery of the Obligations, and (2) will not be included in computing the alternative minimum taxable
income of individuals or, except as described herein, corporations. See “TAX MATTERS” herein.
$19,950,000*
HIDALGO COUNTY, TEXAS
CERTIFICATES OF OBLIGATION, SERIES 2014
Dated: November 15, 2014
Interest Accrues: Date of Initial Delivery
Due: August 15, as shown below
PAYMENT TERMS . . . Interest on the $19,950,000* Hidalgo County, Texas Certificates of Obligation, Series 2014 (the “Certificates”) will accrue from their date of
initial delivery and will be payable on February 15 and August 15 of each year, commencing February 15, 2015, and will be calculated on the basis of a 360-day year of
twelve 30-day months. The definitive Certificates are initially issuable only to Cede and Co., the nominee of The Depository Trust Company ("DTC"), New York, New
York, pursuant to the Book-Entry-Only System described herein. Beneficial ownership of the Certificates may be acquired in denominations of $5,000 or integral
multiples thereof. No physical delivery of the Certificates will be made to the purchasers thereof. Principal of and interest on the Certificates will be payable by
The Bank of New York Mellon Trust Company, N.A., Dallas, Texas, the initial Paying Agent/Registrar, to Cede & Co., which will make distribution of the amounts so
paid to the beneficial owners of the Certificates (see "THE OBLIGATIONS - Book-Entry-Only System" herein).
STATED MATURITY SCHEDULE, INTEREST RATES, INITIAL YIELDS, CUSIP NUMBERS,
AND REDEMPTION PROVISIONS*
CUSIP Prefix: 429326
Maturity
(August 15)
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
Principal
Amount
$
180,000
480,000
775,000
1,300,000
1,640,000
555,000
400,000
685,000
720,000
1,060,000
Interest
Rate
Initial
Yield(1)
CUSIP (2)
Suffix
Maturity
(August 15)
2026
2027
2028
2029
2030
2031
2032
2033
2034
Principal
Amount
$ 1,115,000
1,165,000
1,225,000
1,285,000
1,345,000
1,420,000
1,470,000
1,535,000
1,595,000
Interest
Rate
Initial
Yield(1)
CUSIP (2)
Suffix
(Interest to accrue from Date of Initial Delivery)
OPTIONAL REDEMPTION OF THE CERTIFICATES . . . Hidalgo County, Texas (the “County”) reserves the right, at its option, to redeem the Certificates having stated
maturities on and after August 15, 2025, in whole or in part, on August 15, 2024, or any date thereafter, at the par value thereof plus accrued interest to the date fixed
for redemption (see “THE OBLIGATIONS – Optional Redemption of the Certificates and/or Bonds”).
SEPARATE ISSUES . . . The Certificates are being offered by the County concurrently with the “Hidalgo County, Texas, Limited Tax Refunding Bonds, Series 2014C”
(the “Bonds”) and the “Hidalgo County, Texas, Tax Notes, Series 2014” (the “Notes”). The Certificates, Bonds, and Notes are being offered under a common Official
Statement and are hereinafter sometimes referred to collectively as the “Obligations.” The Certificates, Bonds and Notes are separate and distinct securities offerings
being issued and sold independently. While the Certificates, Bonds and Notes share certain common attributes, each issue is separate from the other and should be
reviewed and analyzed independently, including the type of obligation being offered, its terms for payment, the security for its payment, the rights of the holders, and
other features.
LEGALITY . . . The Certificates are offered for delivery when, as, and if issued and received by the original purchasers (the “Underwriters”), and subject to the
approving opinion of the Attorney General of the State and the legal opinion of The J. Ramirez Law Firm, San Juan, Texas, Bond Counsel. See Appendix C – "Form of
Bond Counsel Opinions" herein. Certain legal matters will be passed upon for the Underwriters by their counsel, Locke Lord LLP, Dallas, Texas.
DELIVERY . . . It is expected that the Certificates will be tendered for delivery to the Underwriters through the services of DTC on or about December 16, 2014.
BOFA MERRILL LYNCH
STEPHENS INC.
STIFEL NICOLAUS & COMPANY, INC.
____________
* Preliminary, subject to change.
(1)
Yield calculated based on the assumption that the Certificates denoted and sold at a premium will be redeemed on August 15, 2024, the first optional call date for such
Certificates at a redemption price of par, plus accrued interest to the redemption date.
(2)
CUSIP is a registered trademark of the American Bankers Association. CUSIP data herein is provided by Standard and Poor’s CUSIP Service Bureau, a division of The
McGraw-Hill Companies, Inc. This data is not intended to create a database and does not serve in any way as a substitute for the CUSIP services. Neither the County, the
Financial Advisor, nor the Underwriters are responsible for the selection or correctness of the CUSIP numbers set forth herein.
(THIS PAGE LEFT BLANK INTENTIONALLY)
This Preliminary Official Statement and the information herein are subject to change, completion or amendment without notice. These securities may not be sold nor may offers to buy be accepted prior to
the time the Official Statement is delivered in final form. Under no circumstances shall this Preliminary Official Statement constitute an offer to sell or the solicitation of an offer to buy, nor may there be any sale
of these securities in any jurisdiction in which such offer, solicitation or sales would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction.
PRELIMINARY OFFICIAL STATEMENT DATED NOVEMBER 4, 2014
NEW ISSUE - Book-Entry-Only
RATINGS:
Moody’s: “Applied For”
S&P:
“Applied For”
(See “OTHER INFORMATION –
Ratings” herein.)
In the opinion of Bond Counsel (identified below), assuming continuing compliance by the County after the date of initial delivery of the Obligations with certain
covenants contained in the Order and subject to the matters set forth under “TAX MATTERS” herein, interest on the Obligations for federal income tax purposes under
existing statutes, regulations, published rulings, and court decisions (1) will be excludable from the gross income of the owners thereof pursuant to section 103 of the
Internal Revenue Code of 1986, as amended to the date of initial delivery of the Obligations, and (2) will not be included in computing the alternative minimum taxable
income of individuals or, except as described herein, corporations. See “TAX MATTERS” herein.
$23,595,000*
HIDALGO COUNTY, TEXAS
LIMITED TAX REFUNDING BONDS, SERIES 2014C
Dated: November 15, 2014
Interest Accrues: Date of Initial Delivery
Due: August 15, as below
PAYMENT TERMS . . . Interest on the $23,595,000* Hidalgo County, Texas Limited Tax Refunding Bonds, Series 2014C (the “Bonds”) will accrue from their date of
initial delivery and will be payable on February 15 and August 15 of each year, commencing February 15, 2015, and will be calculated on the basis of a 360-day year of
twelve 30-day months. The definitive Bonds are initially issuable only to Cede and Co., the nominee of The Depository Trust Company ("DTC"), New York, New
York, pursuant to the Book-Entry-Only System described herein. Beneficial ownership of the Bonds may be acquired in denominations of $5,000 or integral multiples
thereof. No physical delivery of the Bonds will be made to the purchasers thereof. Principal of and interest on the Bonds will be payable by The Bank of New
York Mellon Trust Company, N.A., Dallas, Texas, the initial Paying Agent/Registrar, to Cede & Co., which will make distribution of the amounts so paid to the
beneficial owners of the Bonds (see "THE OBLIGATIONS - Book-Entry-Only System" herein).
STATED MATURITY SCHEDULE, INTEREST RATES, INITIAL YIELDS, CUSIP NUMBERS,
AND REDEMPTION PROVISIONS*
CUSIP Prefix: 429326
Maturity
(August 15)
2015
***
2017
2018
2019
2020
Principal
Amount
$
475,000
Interest
Rate
Initial
Yield(1)
CUSIP (2)
Suffix
Maturity
(August 15)
2021
2022
2023
2024
2025
2026
1,740,000
1,805,000
2,095,000
1,715,000
Principal
Amount
$ 2,360,000
2,455,000
2,560,000
2,665,000
2,790,000
2,935,000
Interest
Rate
Initial
Yield(1)
CUSIP (2)
Suffix
(Interest to accrue from Date of Initial Delivery)
OPTIONAL REDEMPTION OF THE BONDS . . . Hidalgo County, Texas (the “County”) reserves the right, at its option, to redeem the Bonds having stated maturities on
and after August 15, 2025, in whole or in part, on August 15, 2024, or any date thereafter, at the par value thereof plus accrued interest to the date fixed for redemption
(see “THE OBLIGATIONS – Optional Redemption of the Certificates and/or Bonds”).
SEPARATE ISSUES . . . The Bonds are being offered by the County concurrently with the “Hidalgo County, Texas, Certificates of Obligation, Series 2014” (the
Certificates”) and the “Hidalgo County, Texas, Tax Notes, Series 2014” (the “Notes”). The Certificates, Bonds, and Notes are being offered under a common Official
Statement and are hereinafter sometimes referred to collectively as the “Obligations.” The Certificates, Bonds and Notes are separate and distinct securities offerings
being issued and sold independently. While the Certificates, Bonds and Notes share certain common attributes, each issue is separate from the other and should be
reviewed and analyzed independently, including the type of obligation being offered, its terms for payment, the security for its payment, the rights of the holders, and
other features.
LEGALITY . . . The Bonds are offered for delivery when, as, and if issued and received by the original purchasers (the “Underwriters”), and subject to the approving
opinion of the Attorney General of the State and the legal opinion of The J. Ramirez Law Firm, San Juan, Texas, Bond Counsel. See Appendix C – "Form of Bond
Counsel Opinions" herein. Certain legal matters will be passed upon for the Underwriters by their counsel, Locke Lord LLP, Dallas, Texas.
DELIVERY . . . It is expected that the Bonds will be tendered for delivery to the Underwriters through the services of DTC on or about December 16, 2014.
BOFA MERRILL LYNCH
STEPHENS INC.
STIFEL NICOLAUS & COMPANY, INC.
____________
* Preliminary, subject to change.
Yield calculated based on the assumption that the Bonds denoted and sold at a premium will be redeemed on August 15, 2024, the first optional call date for such Bonds at
a redemption price of par, plus accrued interest to the redemption date.
(2)
CUSIP is a registered trademark of the American Bankers Association. CUSIP data herein is provided by Standard and Poor’s CUSIP Service Bureau, a division of The
McGraw-Hill Companies, Inc. This data is not intended to create a database and does not serve in any way as a substitute for the CUSIP services. Neither the County, the
Financial Advisor, nor the Underwriters are responsible for the selection or correctness of the CUSIP numbers set forth herein.
(1)
ii
(THIS PAGE LEFT BLANK INTENTIONALLY)
This Preliminary Official Statement and the information herein are subject to change, completion or amendment without notice. These securities may not be sold nor may offers to buy be accepted prior to
the time the Official Statement is delivered in final form. Under no circumstances shall this Preliminary Official Statement constitute an offer to sell or the solicitation of an offer to buy, nor may there be any sale
of these securities in any jurisdiction in which such offer, solicitation or sales would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction.
PRELIMINARY OFFICIAL STATEMENT DATED NOVEMBER 4, 2014
NEW ISSUE - Book-Entry-Only
RATINGS:
Moody’s: “Applied For”
S&P:
“Applied For”
(See “OTHER INFORMATION –
Ratings” herein.)
In the opinion of Bond Counsel (identified below), assuming continuing compliance by the County after the date of initial delivery of the Obligations with certain
covenants contained in the Order and subject to the matters set forth under “TAX MATTERS” herein, interest on the Obligations for federal income tax purposes under
existing statutes, regulations, published rulings, and court decisions (1) will be excludable from the gross income of the owners thereof pursuant to section 103 of the
Internal Revenue Code of 1986, as amended to the date of initial delivery of the Obligations, and (2) will not be included in computing the alternative minimum taxable
income of individuals or, except as described herein, corporations. See “TAX MATTERS” herein.
$5,720,000*
HIDALGO COUNTY, TEXAS
TAX NOTES, SERIES 2014
Dated: November 15, 2014
Interest Accrues: Date of Initial Delivery
Due: August 15, as shown below
PAYMENT TERMS . . . Interest on the $5,720,000* Hidalgo County, Texas Tax Notes, Series 2014 (the “Notes”) will accrue from their date of initial delivery and will
be payable on February 15 and August 15 of each year, commencing February 15, 2015, and will be calculated on the basis of a 360-day year of twelve 30-day months.
The definitive Notes are initially issuable only to Cede and Co., the nominee of The Depository Trust Company ("DTC"), New York, New York, pursuant to the BookEntry-Only System described herein. Beneficial ownership of the Notes may be acquired in denominations of $5,000 or integral multiples thereof. No physical
delivery of the Notes will be made to the purchasers thereof. Principal of and interest on the Notes will be payable by The Bank of New York Mellon Trust
Company, N.A., Dallas, Texas, the initial Paying Agent/Registrar, to Cede & Co., which will make distribution of the amounts so paid to the beneficial owners of the
Notes (see "THE OBLIGATIONS - Book-Entry-Only System" herein).
STATED MATURITY SCHEDULE, INTEREST RATES, INITIAL YIELDS, CUSIP NUMBERS,
AND REDEMPTION PROVISIONS*
CUSIP Prefix: 429326
Maturity
(August 15)
2015
2016
2017
2018
2019
Principal
Amount
$ 1,130,000
1,090,000
1,120,000
1,165,000
1,215,000
Interest
Rate
Initial
Yield
CUSIP (1)
Suffix
(Interest to accrue from Date of Initial Delivery)
NO REDEMPTION OF THE NOTES . . . The Notes are NOT subject to redemption prior to stated maturity (see “THE OBLIGATIONS – No Optional Redemption of the
Notes”).
SEPARATE ISSUES . . . The Notes are being offered by the County concurrently with the “Hidalgo County, Texas, Certificates of Obligation, Series 2014” (the
Certificates”) and the “Hidalgo County, Texas, Limited Tax Refunding Bonds, Series 2014C” (the “Bonds”). The Certificates, Bonds, and Notes are being offered
under a common Official Statement and are hereinafter sometimes referred to collectively as the “Obligations.” The Certificates, Bonds and Notes are separate and
distinct securities offerings being issued and sold independently. While the Certificates, Bonds and Notes share certain common attributes, each issue is separate from
the other and should be reviewed and analyzed independently, including the type of obligation being offered, its terms for payment, the security for its payment, the
rights of the holders, and other features.
LEGALITY . . . The Notes are offered for delivery when, as, and if issued and received by the original purchasers (the “Underwriters”), and subject to the approving
opinion of the Attorney General of the State and the legal opinion of The J. Ramirez Law Firm, San Juan, Texas, Bond Counsel. See Appendix C – "Form of Bond
Counsel Opinions" herein. Certain legal matters will be passed upon for the Underwriters by their counsel, Locke Lord LLP, Dallas, Texas.
DELIVERY . . . It is expected that the Notes will be tendered for delivery to the Underwriters through the services of DTC on or about December 16, 2014.
BOFA MERRILL LYNCH
STEPHENS INC.
STIFEL NICOLAUS & COMPANY, INC.
____________
* Preliminary, subject to change.
(1)
CUSIP is a registered trademark of the American Bankers Association. CUSIP data herein is provided by Standard and Poor’s CUSIP Service Bureau, a division of The
McGraw-Hill Companies, Inc. This data is not intended to create a database and does not serve in any way as a substitute for the CUSIP services. Neither the County, the
Financial Advisor, nor the Underwriters are responsible for the selection or correctness of the CUSIP numbers set forth herein.
iii
For purposes of compliance with Rule 15c2-12 of the Securities and Exchange Commission, this document constitutes a Preliminary Official
Statement of the County with respect to the Obligations that has been deemed final by the County as of its date except for the omission of no more
than the information permitted by Rule 15c2-12.
This Official Statement is not to be used in connection with an offer to sell or the solicitation of an offer to buy in any state in which such offer or
solicitation is not authorized or in which the person making such offer or solicitation is not qualified to do so or to any person to whom it is
unlawful to make such offer or solicitation. Any information and expressions of opinion herein contained are subject to change without notice,
and neither the delivery of this Official Statement nor any sale made hereunder will, under any circumstances, create any implication that there
has been no change in the affairs of the County or other matters described herein since the date hereof. See “CONTINUING DISCLOSURE OF
INFORMATION” for a description of the County’s undertaking to provide certain information on a continuing basis.
The prices and other terms respecting the offering and sale of the Obligations may be changed from time to time by the Underwriters after the
Obligations are released for sale, and the Obligations may be offered and sold at prices other than the initial offering prices, including sales to
dealers who may sell the Obligations into investment accounts.
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 will, under any circumstances, create any implication that there has been no change in the affairs of the
County or other matters described.
The yields at which the Obligations are offered to the public may vary from the initial reoffering yields on pages i through iii of this Official
Statement. In addition, the Underwriters may allow concessions of discounts from the initial offering prices of the Obligations to dealers and
others.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH
STABILIZE OR MAINTAIN THE MARKET PRICE OF THE OBLIGATIONS AT A LEVEL ABOVE THAT WHICH MIGHT PREVAIL
IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
THE OBLIGATIONS ARE EXEMPT FROM REGISTRATION WITH THE SECURITIES AND EXCHANGE COMMISSION AND
CONSEQUENTLY HAVE NOT BEEN REGISTERED THEREWITH. THE REGISTRATION, QUALIFICATION, OR EXEMPTION OF
THE OBLIGATIONS IN ACCORDANCE WITH APPLICABLE SECURITIES LAW PROVISIONS OF THE JURISDICTIONS IN WHICH
THESE SECURITIES HAVE BEEN REGISTERED, QUALIFIED, OR EXEMPTED SHOULD NOT BE REGARDED AS A
RECOMMENDATION THEREOF. THE OBLIGATIONS WILL NOT BE REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY STATE SECURITIES LAW AND WILL NOT BE LISTED ON ANY STOCK OR OTHER SECURITIES
EXCHANGE. NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS
UNLAWFUL.
None of the County, the Financial Advisor, or the Underwriters makes 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.
The information set forth herein has been obtained from the County 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.
The Underwriters have provided the following sentence for inclusion in this Official Statement. The Underwriters have reviewed the
information in this Official Statement in accordance with, and as part of, their respective responsibilities to investors under the federal
securities laws as applied to the facts and circumstances of this transaction, but the Underwriters do not guarantee the accuracy or
completeness of such information.
The agreements of the County and others related to the Obligations are contained solely in the documents described herein. Neither this
Official Statement nor any other statement made in connection with the offer or sale of the Obligations is to be construed as an agreement
with the Underwriters. INVESTORS SHOULD READ THE ENTIRE OFFICIAL STATEMENT, INCLUDING ALL APPENDICES
ATTACHED HERETO, TO OBTAIN INFORMATION ESSENTIAL TO MAKING AN INFORMED INVESTMENT DECISION.
The information contained in this Official Statement has been furnished by the County, DTC and other sources that are believed to be
reliable. No dealer, broker, salesperson, or other person has been authorized by the County or the Underwriters to give any information or to
make any representations other than those made herein. Any such other information or representations must not be relied upon as having
been authorized. This Official Statement does not constitute an offer to sell or solicitation of an offer to buy, nor shall there be any sale of the
Obligations by any person in any jurisdiction in which it is unlawful for such person to make such offer, solicitation or sale. The information
and expressions of opinions herein are subject to change without notice and neither the delivery of this document nor the sale of any of the
Obligations shall, under any circumstances, create any implication that the information herein is correct as of any time subsequent to the date
hereof.
iv
OFFICIAL STATEMENT SUMMARY
This summary is subject in all respects to the more complete information and definitions contained or incorporated in this Official Statement.
The offering of the Obligations to potential investors is made only by means of this entire Official Statement. No person is authorized to detach
this summary from this Official Statement or to otherwise use it without the entire Official Statement.
THE COUNTY...........................
The County of Hidalgo is a political subdivision of the State of Texas. The County covers approximately
1,583 square miles. The City of Edinburg is the county seat.
THE CERTIFICATES.................
The Certificates are being issued as $19,950,000* Certificates of Obligation, Series 2014 pursuant to the
general laws of the State of Texas, including the Certificate of Obligation Act of 1971, Section 271.041 et
seq., Texas Local Government Code, as amended, and an order (the “Certificate Order”) adopted by the
Commissioners Court of the County (see "THE OBLIGATIONS – Authority for Issuance of the
Obligations".)
THE BONDS..............................
The Bonds are being issued as $23,595,000* Limited Tax Refunding Bonds, Series 2014C pursuant to the
general laws of the State of Texas, particularly Chapter 1207, Texas Government Code, as amended, and an
order adopted by the County Commissioners Court on September 30, 2014 authorizing the Bonds (the
“Parameters Order’). In the Parameters Order, the County delegated to certain officials of the County the
authority to effect the sale of the Bonds and to establish certain terms related to the issuance and sale of the
Bonds. The final terms of the sale will be included in an “Officer Pricing Certificate”, which will complete
the sale of the Bonds (the Parameters Order and the Officer Pricing Certificate are jointly referred to as the
“Bond Order”) (see “THE OBLIGATIONS – Authority for Issuance of the Obligations”).
THE NOTES ..............................
The Notes are being issued as $5,720,000* Tax Notes, Series 2014 pursuant to the general laws of the State of
Texas, including Chapter 1431, Texas Government Code, as amended, and an order (the “Note Order”)
adopted by the Commissioners Court of the County (see "THE OBLIGATIONS – Authority for Issuance of
the Obligations").
PAYMENT OF INTEREST ..........
Interest on the Obligations will accrue from their date of initial delivery, and is payable February 15, 2015,
and each August 15 and February 15 thereafter until maturity or prior redemption (see "THE
OBLIGATIONS - Description of the Obligations", "THE OBLIGATIONS - Optional Redemption of the
Certificates and/or Bonds", and “THE OBLIGATIONS – No Optional Redemption of the Notes”).
SECURITY FOR THE
OBLIGATIONS ........................
OPTIONAL REDEMPTION OF
THE CERTIFICATES
AND/OR BONDS....................
NO OPTIONAL REDEMPTION
OF THE NOTES.....................
USE OF PROCEEDS OF THE
CERTIFICATES ....................
The Obligations are payable from annual ad valorem taxes levied against all taxable property in the County,
within the limits prescribed by law. The Certificates are additionally secured by a pledge of not more than
$1,000 derived from surplus net revenues from the operation of the County's park system.
The County reserves the right, at its option, to redeem the Certificates and the Bonds having stated maturities
on and after August 15, 2025, in whole or in part in principal amounts of $5,000 or any integral multiple
thereof, on August 15, 2024, or any date thereafter, at the par value thereof plus accrued interest to the date of
redemption (see "THE OBLIGATIONS - Optional Redemption of the Certificates and/or Bonds ").
The Notes are NOT subject to redemption prior to stated maturity (see “THE OBLIGATIONS – No Optional
Redemption of the Notes”).
Proceeds from sale of the Certificates will be used for the construction of mechanic shops, community
resource centers, and parks; construction and improvement of road and drainage systems, including
acquisition of lands and rights of way and professional services; purchase of equipment; adult detention
center and law enforcement center renovations; and the payment of costs of issuance of the Certificates
(see “THE OBLIGATIONS – Purpose of the Obligations”).
________
* Preliminary, subject to change.
v
USE OF PROCEEDS OF THE
BONDS .................................
USE OF PROCEEDS OF THE
NOTES .................................
RATINGS ..................................
BOOK-ENTRY-ONLY
SYSTEM ..................................
Proceeds from sale of the Bonds will be used to refund outstanding obligations of the County described
herein for the purpose of achieving debt service savings; and the payment of costs of issuance of the
Bonds (see “THE OBLIGATIONS – Purpose of the Obligations”).
Proceeds from sale of the Notes will be used to purchase motor vehicles; and the payment of costs of
issuance of the Notes (see “THE OBLIGATIONS – Purpose of the Obligations”).
Applications for contract ratings have been made to Moody's Investors Service, Inc. (“Moody’s”) and
Standard & Poor's, Ratings Services, a Standard & Poor’s Financial Services LLC business (“S&P”). The
presently outstanding ad valorem tax supported debt of the County has underlying ratings of “Aa2” by
Moody's and “AA-” by S&P. The County also has several series of obligations outstanding with insured
ratings from various municipal bond insurance companies (see “OTHER INFORMATION-Ratings”).
The definitive Obligations will be initially registered and delivered only to Cede & Co., the nominee of DTC,
pursuant to the Book-Entry-Only System described herein. Beneficial ownership of the Obligations may be
acquired in denominations of $5,000 or integral multiples thereof. No physical delivery of the Obligations
will be made to the owners thereof. Principal of and interest on the Obligations will be payable by the Paying
Agent/Registrar to Cede & Co., which will make distribution of the amounts so paid to the participating
members of DTC for subsequent payment to the beneficial owners of the Obligations (see "THE
OBLIGATIONS - Book-Entry-Only System").
PAYMENT RECORD .................
During the early 1930’s, the County defaulted in payment of principal and interest as to all classes of
indebtedness and the last of these defaults involved certain water improvement bonds for which a refunding
issue dated April 10, 1936 was authorized. The County has not defaulted since that refunding.
FUTURE DEBT ISSUES .............
The County is currently considering the issuance of approximately $4,000,000* Tax Notes, Series 2015 and
$157,000,000* Certificates of Obligation, Series 2015 during fiscal year ending 2015. (see “Table 8 –
Issuance of Additional Indebtedness”).
DELIVERY ................................
Delivery of the Obligations is anticipated on or about December 16, 2014.
[The remainder of this page intentionally left blank]
________
* Preliminary, subject to change.
vi
TABLE OF CONTENTS
PRELIMINARY OFFICIAL STATEMENT
Description of the Obligations......................................... i
COUNTY ADMINISTRATION
Elected Officials .........................................................
Elected Administrative Officials ................................
Appointed Official ......................................................
Consultants and Advisors ...........................................
viii
viii
viii
viii
INTRODUCTION............................................................... 1
THE OBLIGATIONS......................................................... 1
GENERAL INFORMATION............................................ 8
PROPERTY TAXES .......................................................... 9
TAX RATE LIMITATIONS ........................................... 11
AD VALOREM TAX INFORMATION
Table 1 - Valuation, Exemptions and Debt
Obligations .........................................................
Table 2 - Taxable Assessed Valuations by Category...
Table 3 - Valuation and Funded Debt History .............
Table 4 - Tax Rate, Levy and Collection History ........
Table 5 - Ten Largest Taxpayers..................................
Table 6 - Assessed Valuations, Tax Rates,
Outstanding Debt and Authorized But
Unissued Bonds of Overlapping Taxing
Jurisdictions ........................................................
DEBT INFORMATION
Table 7 – Pro Forma Ad Valorem Tax Debt Service
Requirements ......................................................
Interest and Sinking Fund Budget Projection ..............
Authorized But Unissued Bonds ..................................
Table 8 – Issuance of Additional Indebtedness ...........
Table 9 - Other Obligations ..........................................
12
13
14
14
15
Legal Investments and Eligibility to Secure Public
Funds in Texas.................................................... 26
Legal Opinions and No-Litigation Certificate ............. 27
Authenticity of Financial Information ......................... 27
Financial Statements..................................................... 27
Certification of the Official Statement ......................... 27
Financial Advisor ......................................................... 28
Underwriters ................................................................. 28
Verification Of Arithmetical And Mathematical
Computations....................................................... 28
Use of Information in Official Statement .................... 29
Forward Looking Statements ....................................... 29
Miscellaneous ............................................................... 29
Schedule I – Schedule of Refunded Obligations ......... 30
APPENDICES
General Information Regarding the County ...................A
Excerpts from the Hidalgo County, Texas
Annual Financial Report ....................................... B
Form of Bond Counsel's Opinions .................................. C
The cover page hereof, this page, the appendices included herein, the
Financial Statements and any addenda, supplement or amendment
hereto, are part of the Official Statement.
16
17
18
18
18
19
INVESTMENT POLICIES
Table 10 - Current Investments .................................... 21
FINANCIAL INFORMATION
Table 11 - General Fund Revenues and Expenditure
History................................................................. 22
TAX MATTERS ............................................................... 23
CONTINUING DISCLOSURE OF
INFORMATION ........................................................ 24
OTHER INFORMATION
Ratings ........................................................................... 26
Litigation ........................................................................ 26
Registration and Qualification of Obligations for Sale. 26
vii
COUNTY ADMINISTRATION
ELECTED OFFICIALS
Length of
Service
3 Years
Term Expires
12/31/14
A.C. Cuellar Jr.
Commissioner Pct. #1
1 Year
12/31/16
Hector “Tito” Palacios
Commissioner Pct. #2
15 Years
12/31/14
Jose M. Flores
Commissioner Pct. #3
13 Years
12/31/16
Joseph Palacios
Commissioner Pct. #4
3 Years
12/31/14
Commissioners Court
Ramon Garcia (1)
County Judge
ELECTED ADMINISTRATIVE OFFICIALS
Name
Arturo Guajardo, Jr.
Pablo “Paul” Villarreal, Jr.
Rene A. Guerra
Norma Garcia
J.E. “Eddie” Guerra
Length of
Service
7 Years
1 Year
32 Years
19 Years
6 Months
Position
County Clerk
Tax Assessor-Collector
District Attorney
County Treasurer
Interim County Sheriff
Term Expires
12/31/2014
12/31/2016
12/31/2014
12/31/2014
12/31/2014
APPOINTED OFFICIALS
Valde Guerra(2)
Sergio Cruz
Ray Eufracio
Executive Officer
Budget Officer
County Auditor
7 Years
3 Years
9 Years
CONSULTANTS AND ADVISORS
Bond Counsel .......................................................................................................................................................The J. Ramirez Law Firm
San Juan, Texas
Independent Auditors ......................................................................................................................... Burton McCumber & Cortez, L.L.P.
McAllen, Texas
Financial Advisor ................................................................................................................................. Estrada Hinojosa & Company, Inc.
Dallas, Texas
For additional information regarding the County, please contact:
Ray Eufracio
County Auditor
2808 S. Business
Highway 281
Edinburg, Texas 78539-6243
(956) 318-2511 - Phone
(956) 318-2577 - Fax
Noe Hinojosa, Jr.
David Gordon
Estrada Hinojosa & Company, Inc.
1717 Main Street, Suite 4700
Dallas, Texas 75201
(214) 658-1670 - Phone
(214) 658-1671 – Fax
________
(1)
(2)
Mr. Garcia previously served as County Judge from 2003 until 2006.
Mr. Guerra previously served as Budget Officer from 2002 until January 2009.
viii
PRELIMINARY OFFICIAL STATEMENT
RELATING TO
HIDALGO COUNTY, TEXAS
$19,950,000*
CERTIFICATES OF OBLIGATION,
SERIES 2014
$23,595,000*
LIMITED TAX REFUNDING BONDS,
SERIES 2014C
$5,720,000*
TAX NOTES, SERIES 2014
INTRODUCTION
This Official Statement of Hidalgo County, Texas (the “County”) is provided to furnish certain information in connection with the sale of the
County's $19,950,000* Certificates of Obligation, Series 2014 (the “Certificates”), the $23,595,000* Limited Tax Refunding Bonds, Series
2014C (the “Bonds”), and the $5,720,000* Tax Notes, Series 2014 (the “Notes”). The Certificates, the Bonds, and the Notes are collectively
referred to herein as the “Obligations”. Capitalized terms used in this Official Statement have the same meaning assigned to such terms in the
orders authorizing the issuance of the Obligations (the “Certificate Order”, the “Bond Order” and the “Note Order” and collectively referred to
herein as the “Order”), except as otherwise provided herein.
This Official Statement contains descriptions of the Obligations and certain other information about the County 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 County at 2808 S. Business Highway 281, Edinburg, Texas 78539-6243 and, during the offering period,
from the County's Financial Advisor, Estrada Hinojosa & Company, Inc., 1717 Main Street, Suite 4700, Dallas, Texas 75201, upon payment of
reasonable copying, mailing, and handling charges.
This Official Statement speaks only as to its date, and the information contained herein is subject to change. Copies of the Final Official
Statement pertaining to the Obligations will be deposited with the Municipal Securities Rulemaking Board, 1900 Duke Street, Suite 600,
Alexandria, Virginia 22314.
THE OBLIGATIONS
AUTHORITY FOR ISSUANCE OF THE OBLIGATIONS. . . The Certificates are being issued pursuant to the general laws of the State of Texas,
including the Certificate of Obligation Act of 1971, Section 271.041 et seq., Texas Local Government Code, as amended, and pursuant to the
provisions of the Certificate Order.
The Bonds are being issued pursuant to the general laws of the State of Texas, particularly Chapter 1207, Texas Government Code, as amended,
and an order adopted by the County Commissioners Court on September 30, 2014 authorizing the Bonds (the “Parameters Order”). In the
Parameters Order, the Commissioners Court delegated to certain officials of the County the authority to effect the sale of the Bonds and to
establish certain terms related to the issuance and sale of the Bonds. The final terms of the sale will be included in an “Officer Pricing Certificate”
which will complete the sale of the Bonds (the Parameters Order and the Officer Pricing Certificate are jointly referred to as the “Bond Order”).
The Notes are being issued pursuant to Chapter 1431, Texas Government Code, as amended, and pursuant to the provisions of the Note Order.
SECURITY FOR THE OBLIGATIONS . . . The Obligations are payable from annual ad valorem taxes levied against all taxable property in the
County, within the limits prescribed by law, sufficient to provide for the payment of principal of and interest on the Obligations. (See
"PROPERTY TAXES - Constitutional Tax Limitations" herein.) The Certificates are additionally payable from not more than $1,000 derived
from surplus net revenues from the operation of the County’s park system.
PURPOSE OF THE OBLIGATIONS . . . Proceeds from sale of the Certificates will be used for the construction of mechanic shops, community
resource centers, and parks; construction and improvement of road and drainage systems, including acquisition of lands and rights of way and
professional services; purchase of equipment; adult detention center and law enforcement center renovations; and the payment of costs of
issuance of the Certificates.
Proceeds from sale of the Bonds will be used to refund outstanding obligations of the County described in Schedule I hereof (the “Refunded
Obligations”) for the purpose of achieving debt service savings; and the payment of costs of issuance of the Bonds.
Proceeds from sale of the Notes will be used to purchase motor vehicles; and the payment of costs of issuance of the Notes.
____________
* Preliminary, subject to change.
1
REFUNDED OBLIGATIONS . . . The Refunded Obligations, and interest due thereon, are to be paid from funds deposited with The Bank of New
York Mellon Trust Company, N.A., Dallas, Texas (the "Escrow Agent") or its successor. The Bond Order approved and authorized the execution
of an escrow agreement (the "Escrow Agreement") between the County and the Escrow Agent. The Bond Order further provides that, from a
portion of the proceeds of the sale of the Bonds and other lawfully available funds of the County, if any, the County will deposit with the Escrow
Agent the amount, together with investment earnings thereon, sufficient to accomplish the discharge and final payment of the Refunded
Obligations. Such amount will be held by the Escrow Agent in an escrow account (the "Escrow Fund") and used to purchase direct obligations of
the United States of America (the "Escrowed Securities").
Simultaneously with the issuance of the Bonds, the County will give irrevocable instructions to provide notice to the owners of the Refunded
Obligations that the Refunded Obligations will be redeemed prior to stated maturity on the first optional redemption date, on which date money
will be made available to redeem the Refunded Obligations from money held under the Escrow Agreement.
Grant Thornton LLP, certified public accountants, will verify the mathematical accuracy of schedules provided by the Financial Advisor at the
time of delivery of the Bonds to the Underwriters and that the Escrowed Securities will mature at such times and yield interest in amounts,
together with uninvested funds, if any, in the Escrow Fund, sufficient to pay the principal of and interest on the Refunded Obligations as the same
shall become due by reason of stated maturity or earlier redemption (see “OTHER INFORMATION - Verification of Arithmetical and
Mathematical Computations”). Under the Escrow Agreement, the Escrow Fund is irrevocably pledged to the payment of principal of and interest
on the Refunded Obligations. Such maturing principal of and interest on the Escrowed Securities will not be available to pay principal of or
interest on the Bonds.
By the deposit of the Escrowed Securities and cash with the Escrow Agent pursuant to the Escrow Agreement, and in reliance on the report (the
“Verification Report”) of Grant Thornton LLP, Bond Counsel is of the opinion that the County will have entered into firm banking and financial
arrangements for the final payment and discharge of the Refunded Obligations pursuant to the terms of the ordinances authorizing the issuance of
the Refunded Obligations and in accordance with Texas law, and that the Refunded Obligations will be deemed to be no longer outstanding,
except for the purpose of being paid from the funds held in such Escrow Fund.
DESCRIPTION OF THE OBLIGATIONS . . . The Obligations are dated November 15, 2014, and mature on August 15 in each of the years and in the
amounts shown on pages i through iii hereof. Interest accrues from the date of initial delivery and will be computed on the basis of a 360-day
year of twelve 30-day months, and will be payable on August 15 and February 15 of each year, commencing February 15, 2015. The Obligations
will be issued only in fully registered form in any integral multiple of $5,000 for any one maturity and series and will be initially registered and
delivered only to Cede & Co., the nominee of The Depository Trust Company ("DTC"), pursuant to the Book-Entry-Only System described
herein. No physical delivery of the Obligations will be made to the owners thereof. Principal of, premium, if any, and interest on the
Obligations will be payable by the Paying Agent/Registrar to Cede & Co., which will make distribution of the amounts so paid to the
participating members of DTC for subsequent payment to the beneficial owners of the Obligations. See "BOOK-ENTRY-ONLY SYSTEM" herein.
OPTIONAL REDEMPTION OF THE CERTIFICATES AND/OR BONDS . . . The County reserves the right, at its option, to redeem the Certificates and/or
Bonds having stated maturities on and after August 15, 2025, in whole or in part in principal amounts of $5,000, or integral multiples thereof, on
August 15, 2024, or any date thereafter, at the par value thereof plus accrued interest to the date fixed for redemption. If less than all the
Certificates and/or Bonds of any maturity and series are to be redeemed, the Paying Agent/Registrar (described herein) (or DTC while the
Certificates and/or Bonds are in Book-Entry-Only form) will determine by lot which Certificates and/or Bonds, or portions thereof, within such
maturity and series to be redeemed. If a Certificate and/or Bond (or any portion of the principal sum thereof) will have been called for
redemption, and notice of such redemption will have been given, such Certificate and/or Bond (or the principal amount thereof to be redeemed)
will become due and payable on such redemption date and interest thereon will 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.
NO OPTIONAL REDEMPTION OF THE NOTES . . . The Notes are NOT subject to redemption prior to stated maturity.
NOTICE OF REDEMPTION . . . Not less than 30 days prior to a redemption date for the Certificates and/or Bonds, the County will cause a notice of
redemption to be sent by United States mail, first class, postage prepaid, to the registered owners of a Certificate and/or Bond to be redeemed, in
whole or in part, at the address of the registered owner appearing on the registration books of the Paying Agent/Registrar at the close of business
on the business day next preceding the date of mailing such notice. ANY NOTICE SO MAILED WILL BE CONCLUSIVELY PRESUMED
TO HAVE BEEN DULY GIVEN, WHETHER OR NOT THE REGISTERED OWNER RECEIVES SUCH NOTICE. NOTICE HAVING
BEEN SO GIVEN, THE CERTIFICATES AND/OR BONDS CALLED FOR REDEMPTION WILL BECOME DUE AND PAYABLE ON
THE SPECIFIED REDEMPTION DATE, AND NOTWITHSTANDING THAT ANY CERTIFICATE AND/OR BOND OR PORTION
THEREOF CALLED FOR REDEMPTION HAS NOT BEEN SURRENDERED FOR PAYMENT, INTEREST ON SUCH CERTIFICATE
AND/OR BOND OR PORTION THEREOF WILL CEASE TO ACCRUE.
2
The Paying Agent/Registrar and the County, so long as a Book-Entry-Only System is used for the Certificates and/or Bonds, will send any notice
of redemption, notice of proposed amendments to the Order or other notices with respect to the Certificates and/or Bonds only to DTC. Any
failure by DTC to advise any DTC participant, or of any DTC participant or indirect participant to notify the beneficial owner, will not affect the
validity of the redemption of the Certificates and/or Bonds called for redemption or any other action premised on any such notice. Redemption
of portions of the Certificates and/or Bonds by the County will reduce the outstanding principal amount of such Certificates and/or Bonds held by
DTC. In such event, DTC may implement, through its Book-Entry-Only System, a redemption of such Certificates and/or Bonds held for the
account of DTC participants in accordance with its rules or other agreements with DTC participants and then DTC participants and indirect
participants may implement a redemption of such Certificates and/or Bonds from the beneficial owners. Any such selection of Certificates and/or
Bonds to be redeemed will not be governed by the Order and will not be conducted by the County or the Paying Agent/Registrar. Neither the
County nor the Paying/Agent Registrar will have any responsibility to DTC participants, indirect participants or the persons for whom DTC
participants act as nominees, with respect to the payment on the Certificates and/or Bonds or the providing of notice to DTC participants, indirect
participants, or beneficial owners of the selection of portions of the Certificates and/or Bonds for redemption. See “Book-Entry-Only System”
herein.
BOOK-ENTRY-ONLY SYSTEM . . . This section describes how ownership of the Obligations is to be transferred and how the principal of,
premium, if any, and interest on the Obligations are to be paid to and credited by the Depository Trust Company (“DTC”), New York, New
York, while the Obligations are registered in its nominee name. The information in this section concerning DTC and the Book-Entry-Only
System has been provided by DTC for use in disclosure documents such as this Official Statement. The County, County’s Financial Advisor and
the Underwriters believe the source of such information to be reliable, but take no responsibility for the accuracy or completeness thereof.
The County cannot and does not give any assurance that (1) DTC will distribute payments of debt service on the Obligations, or redemption or
other notices, to DTC Participants, (2) DTC Participants or others will distribute debt service payments paid to DTC or its nominee (as the
registered owner of the Obligations), or redemption or other notices, to the Beneficial Owners, or that they will do so on a timely basis, or (3)
DTC will serve and act in the manner described in this Official Statement. The current rules applicable to DTC are on file with the Securities and
Exchange Commission, and the current procedures of DTC to be followed in dealing with DTC Participants are on file with DTC.
DTC will act as securities depository for the Obligations. The Obligations will be issued as fully-registered securities registered in the name of
Cede & Co. (DTC's partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully-registered
certificate will be issued for each series of the Obligations, in the aggregate principal amount of such issue, and will be deposited with DTC.
DTC, the world’s largest depository, is a limited-purpose trust company organized under the New York Banking Law, a "banking organization"
within the meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the
New York Uniform Commercial Code, and a "clearing agency" registered pursuant to the provisions of Section 17A of the Securities Exchange
Act of 1934. DTC holds and provides asset servicing for over 2.2 million issues of U.S. and non-U.S. equity corporate and municipal debt issues,
and money market instruments from over 100 countries that its participants ("Direct Participants") deposit with DTC. DTC also facilitates the
post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized
book-entry transfers and pledges between Direct Participants' accounts. This eliminates the need for physical movement of securities certificates.
Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other
organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation (“DTCC”). DTCC, in turn, is owned by a
number of Direct Participants of DTC and Members of the National Securities Clearing Corporation, Fixed Income Clearing Corporation, and
Emerging Markets Clearing Corporation (NSCC, FICC, and EMCC, also subsidiaries of DTCC), as well as the New York Stock Exchange, Inc.,
the American Stock Exchange, LLC., and the National Association of Securities Dealers, Inc. Access to the DTC system is also available to
others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or
maintain a custodial relationship with a Direct Participant, either directly or indirectly ("Indirect Participants"). DTC has Standard & Poor’s
rating of AA+. The DTC Rules applicable to its participants are on file with the Securities and Exchange Commission. More information about
DTC can be found at www.dtcc.com.
Purchases of Obligations under the DTC system must be made by or through Direct Participants, which will receive a credit for the Obligations
on DTC's records. The ownership interest of each actual purchaser of the Obligations ("Beneficial Owner") is in turn to be recorded on the Direct
or 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 interest in the Obligations
are to be accomplished by entries made on the books of Direct Participants and Indirect Participants acting on behalf of Beneficial Owners.
Beneficial Owners will not receive Obligations representing their ownership interests in the Obligations, except in the event that use of the bookentry system for the Obligations is discontinued.
To facilitate subsequent transfers, all Obligations deposited by Direct Participants with DTC are registered in the name of DTC's partnership
nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of Obligations with DTC
and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no
knowledge of the actual Beneficial Owners of the Obligations; DTC's records reflect only the identity of the Direct Participants to whose
accounts such Obligations 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.
3
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 Obligations may wish to take certain steps to augment the transmission
to them of notices of significant events with respect to the Obligations, such as redemptions, tenders, defaults, and proposed amendments to the
Certificate documents. For example, Beneficial Owners of Obligations may wish to ascertain that the nominee holding the Obligations 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 notices be provided directly to them.
Redemption notices will be sent to DTC. If less than all of the Obligations 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 any other DTC nominee) will consent or vote with respect to the Obligations unless authorized by a Direct
Participant in accordance with DTC’s Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the County as soon as possible
after the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct Participants to whose accounts the
Obligations are credited on the record date (identified in a listing attached to the Omnibus Proxy).
Redemption proceeds, distributions, and dividend payments on the Obligations 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 Issuer 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 securities held for the accounts of customers in bearer form or registered in “street name,” and will be the responsibility of such Participant
and not of DTC (nor its nominee), the Paying Agent/Registrar or the County, 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 County 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 Obligations at any time by giving reasonable notice to the
County. Under such circumstances, in the event that a successor depository is not obtained, Obligations are required to be printed and delivered.
The County may decide to discontinue use of the system of book-entry transfers through DTC (or a successor securities depository). In that
event, Obligation certificates will be printed and delivered.
The Paying Agent/Registrar and the County, so long as the DTC book-entry system is used for the Obligations, will send any notice of
redemption, notice of proposed amendment to the Order, or other notices with respect to such Certificates and/or Bonds only to DTC. Any failure
by DTC to advise any DTC Participant, or of any Direct Participant or Indirect Participant to notify the Beneficial Owners, of any notices and
their contents or effect will not affect the validity of the redemption of the Certificates and/or Bonds called for redemption or of any other action
premised on any such notice. Redemption of portions of the Certificates and/or Bonds by the County will reduce the outstanding principal
amount of such Certificates and/or Bonds held by DTC. In such event, DTC may implement, through its book-entry system, a redemption of such
Obligations held for the account of DTC Participants in accordance with its own rules or other agreements with DTC Participants and then Direct
Participants and Indirect Participants may implement a redemption of such Obligations from the Beneficial Owners. Any such selection of the
Obligations to be redeemed will not be governed by the Order and will not be conducted by the County or the Paying Agent/Registrar. Neither
the County nor the Paying Agent/Registrar will have any responsibility or obligation to Direct Participants, Indirect Participants, or the persons
for whom DTC Participants act as nominees, with respect to the payments on the Obligations or the providing of notice to Direct Participants,
Indirect Participants, or Beneficial Owners of the selection of portions of the Obligations for redemption.
USE OF CERTAIN TERMS IN OTHER SECTIONS OF THIS OFFICIAL STATEMENT . . . In reading this Official Statement it should be understood that
while the Obligations are in the Book-Entry-Only System, references in other sections of this Official Statement to registered owners should be
read to include the person for which the Direct or Indirect Participant acquires an interest in the Obligations, but (1) all rights of ownership must
be exercised through DTC and the Book-Entry-Only System, and (2) except as described above, notices that are to be given to registered owners
under the Order will be given only to DTC.
TERMINATION OF BOOK-ENTRY-ONLY SYSTEM… In the event that the Book-Entry-Only System is discontinued by DTC or the County, the
following provisions will be applicable to the Obligations.
PAYMENT . . . Principal of the Obligations will be payable at maturity (or prior redemption) to the registered owners as shown by the
registration books maintained by the Paying Agent/Registrar upon presentation and surrender of the Obligations to the Paying
Agent/Registrar at the Designated Payment/Transfer Office (hereinafter defined). Interest on the Obligations will be payable by check or
draft, dated as of the applicable interest payment date, sent by the Paying Agent/Registrar by United States mail, first class, postage prepaid,
to the registered owners at their respective addresses shown on such records, or by such other method acceptable to the Paying
Agent/Registrar and requested owner at the risk and expense of the registered owner. If the date for the payment of the principal of or
interest on the Obligations will be a Saturday, Sunday, legal holiday, or day on which banking institutions in the city where the Designated
Payment/Transfer Office (hereinafter defined) of the Paying Agent/Registrar is located are required or authorized by law or executive order
to close, then the date for such payment will be the next succeeding day which is not a Saturday, Sunday, legal holiday, or day on which
banking institutions are required or authorized to close, and payments on such date will for all purposes be deemed to have been made on the
original date payment was due.
4
TRANSFER, EXCHANGE AND REGISTRATION . . . In the event the Book-Entry-Only System is discontinued, the Obligations may be transferred
and re-registered on the registration books of the Paying Agent/Registrar only upon presentation and surrender thereof to the Paying
Agent/Registrar at the Designated Payment/Transfer Office. An Obligation also may be exchanged for an Obligation of like series, maturity and
interest and having a like aggregate principal amount, upon presentation and surrender at the Designated/Payment Transfer Office. All
Obligations surrendered for transfer or exchange must be endorsed for assignment by the execution by the registered owner or his duly authorized
agent of an assignment form on the Obligations or other instruction of transfer acceptable to the Paying Agent/Registrar. Transfer and exchange
of Obligations will 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 transfer or exchange. A new Obligation or Obligations, in lieu of the Obligation or Obligations being transferred or
exchanged, will be delivered by the Paying Agent/Registrar to the registered owner, at the Designated Payment/Transfer Office of the Paying
Agent/Registrar or by United States mail, first class, postage prepaid. To the extent possible, new Obligations issued in an exchange or transfer
of Obligations will be delivered to the registered owner or assignee of the registered owner not more than three business days after the receipt of
the Obligations to be canceled in the exchange or transfer and the denominations of $5,000 or any integral multiple thereof.
REPLACEMENT OF OBLIGATIONS . . . If an Obligation is mutilated, the Paying Agent/Registrar will provide a replacement Obligation in
exchange. If an Obligation is destroyed, lost or stolen, the Paying Agent/Registrar will provide a replacement Obligation upon (1) filing by the
registered owner with the Paying Agent/Registrar of evidence satisfactory to the Paying/Agent Registrar of the destruction, loss or theft of the
Obligation and the authenticity of the registered owner’s ownership and (2) the furnishing to the Paying Agent/Registrar security or indemnity as
may be required to hold the Paying Agent/Registrar harmless. All expenses and charges associated with such indemnity and with the
preparation, execution and delivery of a replacement Obligation must be borne by the registered owner. The provisions of the Order relating to
the replacement Obligation are exclusive and, to the extent lawful, preclude all other rights and remedies with respect to the replacement and
payment of mutilated, destroyed, lost or stolen Obligations.
SECURITY FOR PAYMENT . . . The Obligations are payable from annual ad valorem taxes levied against all taxable property in the County, within
the limits prescribed by law, sufficient to provide for the payment of principal of and interest on the Obligations. The Certificates are
additionally payable from not more than $1,000 derived from surplus revenues from the operation of the County’s park system.
DEFEASANCE . . . The Order provides for the defeasance of the Obligations when the payment of the principal of the Obligations, plus interest
thereon to the due date thereof (whether such due date be by reason of maturity, redemption, or otherwise), is provided by irrevocably
depositing with the Paying Agent/Registrar (or other eligible entity under State law), in trust (1) money sufficient to make such payment or
(2) Defeasance Securities certified by an independent public accounting firm of national reputation to mature as to principal and interest in
such amounts and at such times to insure the availability, without reinvestment, of sufficient money to make such payment, and all necessary
and proper fees, compensation and expenses of the paying agent for the Obligations. The Order provides that “Defeasance Securities” means
(a) direct, noncallable obligations of the United States of America, including obligations that are unconditionally guaranteed by the United
States of America, (b) noncallable obligations of an agency or instrumentality of the United States of America, including obligations that are
unconditionally guaranteed or insured by the agency or instrumentality and that are rated as to investment quality by a nationally recognized
investment rating firm not less than “AAA” or its equivalent, and (c) noncallable obligations of a state or an agency or a county,
municipality, or other political subdivision of a state that have been refunded and that are rated as to investment quality by a nationally
recognized investment rating firm not less than “AAA” or its equivalent. The County has additionally reserved the right, subject to satisfying
the requirements of (1) and (2) above, to substitute other Defeasance Securities for the Defeasance Securities originally deposited, to reinvest
the uninvested moneys on deposit for such defeasance and to withdraw for the benefit of the County moneys in excess of the amount required
for such defeasance.
Upon such deposit as described above, such Obligations will no longer be regarded to be outstanding or unpaid; provided, however, the County
has reserved the option, to be exercised at the time of the defeasance of the Obligations, to call for redemption, at an earlier date, those
Obligations which have been defeased to their maturity date, if the County: (1) in the proceedings providing for the firm banking and financial
arrangements, expressly reserves the right to call the Obligations for redemption: (2) gives notice of the reservation of that right to the owners of
the Obligations immediately following the making of the firm banking and financial arrangements; and (3) directs that notice of the reservation
be included in any redemption notices that it authorizes.
AMENDMENTS . . . The County may amend the Order without the consent of or notice to any registered owners in any manner not detrimental to
the interests of the registered owners, including the curing of any ambiguity, inconsistency, or formal defect or omission therein. In addition, the
County may, with the written consent of the holders of a majority in aggregate principal amount of the Obligations then outstanding affected
thereby, amend, add to, or rescind any of the provisions of the Order; except that, without the consent of the registered owners of all of the
Obligations affected, no such amendment, addition, or rescission may (1) change the date specified as the date on which the principal of,
maturity, or any installment of interest on any Obligation is due and payable, reduce the principal amount thereof, maturity, or the rate of interest
thereon, change the place or places at or the coin or currency in which any Obligation or interest thereon is payable, or in any other way modify
the terms of payment of the principal of, maturity value, or interest on the Obligations, (2) give any preference to any Obligation over any other
Obligation, or (3) reduce the aggregate principal amount of Obligations required for consent to any amendment, addition, or waiver.
5
PAYING AGENT/REGISTRAR . . . The initial Paying Agent/Registrar is The Bank of New York Mellon Trust Company, N.A., Dallas, Texas.
Interest on and principal of the Obligations will be payable, and transfer functions will be performed, at the designated payment office of the
Paying Agent/Registrar, initially in Dallas, Texas (the “Designated Payment/Transfer Office”) and, in the case of a successor Paying
Agent/Registrar, at such location as may be designated by such successor. In the Order, the County retains the right to replace the Paying
Agent/Registrar. The County covenants to maintain and provide a Paying Agent/Registrar at all times while the Obligations are outstanding and
any successor Paying Agent/Registrar will be a commercial bank or trust company organized under the laws of the State of Texas or other entity
duly qualified and legally authorized to serve and perform the duties and services of Paying Agent/Registrar for the Obligations. Upon any
change in the Paying Agent/Registrar for the Obligations, the County agrees to promptly cause a written notice thereof to be sent to each
registered owner of the Obligations by United States mail, first class, postage prepaid, which notice will also give the address of the new Paying
Agent/Registrar.
RECORD DATE . . . The record date ("Record Date") for determining the person to whom the interest is payable on the Obligations on any interest
payment date means the last business day of the month next preceding the date that each interest payment is due.
SPECIAL RECORD DATE FOR INTEREST PAYMENT . . . In the event of a non-payment of interest on a scheduled payment date, and for 30 days
thereafter, a new record date for such interest payment (a “Special Record Date”) will be established by the Paying Agent/Registrar, if and
when funds for the payment of such interest have been received from the County. Notice of the Special Record Date and of the scheduled
payment date of the past due interest (the “Special Payment Date” which must be 15 days after the Special Record Date) will be sent at least
five business days prior to the Special Record Date by United States mail, first class postage prepaid, to the address of each registered owner
of an Obligation appearing on the registration books of the Paying Agent/Registrar at the close of business on the last business day next
preceding the date of mailing of such notice.
DEFAULTS AND REMEDIES . . . The Order does not establish specific events of default with respect to the Obligations. Under State law, there is
no right to the acceleration of maturity of the Obligations upon the failure of the County to observe any covenant under the Order. Although a
registered owner of an Obligation might obtain a judgment against the County if a default occurred in payment of principal of or interest on any
such Obligation, such judgment could not be satisfied by execution against any property of the County. Such registered owner's only practical
remedy, if a default occurs, is to bring a mandamus or mandatory injunction proceeding seeking to compel the County to levy, assess, and collect
an annual ad valorem tax sufficient to pay principal of and interest on the Obligations as it becomes due. The issuance of a writ of mandamus
may be sought if there is no other available remedy at law to compel performance of the Obligations or the Order and the County’s obligations
are not uncertain or disputed. The remedy of mandamus is controlled by equitable principles, and rests with the discretion of the court, but may
not be arbitrarily refused. The enforcement of any such remedy may be difficult and time-consuming and a registered owner could be required to
enforce such remedy on a periodic basis. The Order does not provide for the appointment of a trustee to represent the interest of the owners of
the Obligations upon any failure of the County to perform in accordance with the terms of the Order, 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.
Furthermore, the County is eligible to seek relief from its creditors under Chapter 9 of the U.S. Bankruptcy Code. Although Chapter 9 provides
for the recognition of a security interest represented by a specifically pledged source of revenues, the pledge of taxes in support of a general
obligation debt of a bankrupt entity is not specifically recognized as a security interest under Chapter 9. Chapter 9 also includes an automatic
stay provision that would prohibit, without Bankruptcy Court approval, the prosecution of any other legal action by creditors or owners of
obligations of an entity which has sought protection under Chapter 9.
Therefore, should the County avail itself of Chapter 9 protection from creditors, the ability to enforce would be subject to the approval of the
Bankruptcy Court (which could require that the action be heard in Bankruptcy Court instead of other federal or state court); and the Bankruptcy
Code provides for broad discretionary powers of a Bankruptcy Court in administering any proceeding brought before it. The opinion of Bond
Counsel will note that all opinions relative to the enforceability of the Order and the Obligations are qualified with respect to the customary rights
of debtors relative to their creditors.
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Recent decisions of the Texas Supreme Court have held that local governmental entities such as counties and municipalities are immune to
suit for breach of contract under the doctrine of sovereign immunity unless the State Legislature, by clear and unambiguous language, waives
such immunity. In 2002, the Texas Supreme Court held in Travis County v. Pelzel & Associates, Inc., 77 S.W.3d 246 (Tex. 2002) that
counties were immune to suit for breach of contract under the doctrine of sovereign immunity. In Travis County, the Texas Supreme Court
held that section 89.004 of the Texas Local Government Code was merely a presentment statute and did not reflect a clear and unambiguous
legislative intent to waive a county’s sovereign immunity to suit on a contract. The following year, in 2003, the Texas Legislature amended
section 89.004 and enacted section 262.007 of the Texas Local Government Code which waives a county’s immunity to suit on “a written
contract for engineering, architectural, or construction services or for goods related to engineering, architectural, or construction services”
(the “County Immunity Waiver Act”). In 2005, the Texas Legislature amended Chapter 271 of the Texas Local Government Code by
enacting Subchapter I, §§271.152 - .160 which waived immunity to suit on written contracts for goods or services for certain governmental
entities, such as cities, school districts, and special districts (the “Local Government Immunity Waiver Act”). In 2006, the Texas Supreme
Court held in Tooke v. City of Mexia, 197 S.W.3d 325, 342 (Tex. 2006) that the phrase "plead and be impleaded" in section 51.075 of the
Texas Local Government Code did not reflect a clear legislative intent to waive a municipality’s immunity from suit. In Tooke, the Texas
Supreme Court also overruled long-standing precedent in Missouri Pacific Railroad Co. v. Brownsville Navigation District, 453 S.W.2d 812
(Tex.1970), and further held that “sue and be sued” language and other similar language in organic statutes, without more, did not reflect a
clear and unambiguous legislative intent to waive a governmental entity’s immunity from suit. In Tooke, the Texas Supreme Court
acknowledged that the only waiver of immunity to suit for municipalities was to be found in the Local Government Immunity Waiver Act.
The County is not aware of any court construing Section 89.004 of the Texas Local Government Code, as amended in 2003, the County
Immunity Waiver Act, or the Local Government Immunity Waiver Act in the context of whether contractual undertakings of local
governments, such as the County, that are related to their borrowing powers are contracts covered by the Acts. Also, the County is not aware
of any court decision which has held that a county is immune to a suit brought under federal substantive law to enforce contractual
obligations related to the county’s borrowing powers. As noted above, the Order provides that Obligation holders may exercise the remedy of
mandamus to enforce the obligations of the County under the terms of the Order. Neither the remedy of mandamus nor any other type of
injunctive relief was at issue in Travis County or Tooke, and it is unclear whether Travis County or 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 money due under the contract).
There are common law doctrines which provide a way a governmental entity waives sovereign immunity, such as when the governmental
entity initiates a lawsuit, the defendant may counterclaim for an offset. There is also the “waiver by conduct” that has been considered by the
Texas Supreme Court with respect to a state agency’s immunity from suit, but which has not yet been given any legitimacy or definition.
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7
SOURCES AND USES OF FUNDS FOR THE CERTIFICATES . . . The proceeds of the Certificates will be applied approximately as follows:
Sources of Funds:
Principal Amount of the Certificates
Net Premium
Total Sources of Funds
$
-
Uses of Funds:
Deposit to Project Fund
Costs of Issuance
Underwriters' Discount
Total Uses of Funds
$
-
SOURCES AND USES OF FUNDS FOR THE BONDS . . . The proceeds of the Bonds will be applied approximately as follows:
Sources of Funds:
Principal Amount of the Bonds
Issuer Contribution
Total Sources of Funds
$
-
Uses of Funds:
Deposit to Escrow Fund
Costs of Issuance
Underwriters' Discount
Total Uses of Funds
$
-
SOURCES AND USES OF FUNDS FOR THE NOTES . . . The proceeds of the Notes will be applied approximately as follows:
Sources of Funds:
Principal Amount of the Notes
Net Premium
Total Sources of Funds
$
-
Uses of Funds:
Deposit to Project Fund
Costs of Issuance
Underwriters' Discount
Total Uses of Funds
$
-
GENERAL INFORMATION
HISTORY AND LOCATION . . . Founded in 1852, Hidalgo County, in South Texas is bordered by Cameron County on the east, Brooks County on
the north, Starr County on the west, and Mexico on the south. Hidalgo County is one of 254 counties in the State of Texas and located in
southernmost tip of Texas along the U.S.-Mexico border in the Rio Grande Valley (RGV). The Rio Grande Valley is comprised of the four
southern-most counties in Texas: Cameron, Hidalgo, Starr and Willacy; three of the four counties (with the exemption of Willacy) lie along the
USMexico border. Hidalgo County, with a land area of 1,570 square miles and a population density of 493 per square mile, is one of the fastestgrowing counties in the United States and the 8th largest county statewide.
According to the U.S. Census Bureau, Hidalgo County population grew 36% from 2000 to 2010 ranking the 75th most populous county
countrywide and is anticipated to outpace the State of Texas and the United States estimates through 2015. The 2014 population is estimated at
862,768 and will cross the 1 million mark by 2020 under a moderate growth rate scenario. Hidalgo County boasts one of the youngest
populations in the country which makes it one of its best assets. The largest cities in the County are McAllen, Edinburg, Mission, Pharr, Weslaco,
and San Juan.
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ADMINISTRATION OF THE COUNTY . . . Hidalgo County strives to provide citizens and community with the most effective and efficient delivery
of services in a quality and cost effective manner with measurable outcomes. The Commissioners Court is the governing body of Hidalgo County
and the county seat is in Edinburg at the junction of U.S. Highways 107 and 281. The Commissioners Court consists of a County Judge and four
county commissioners elected by the qualified voters of individual commissioner’s precincts to a four-year term. The Commissioners Court has
certain powers expressly granted by the legislature. This administrative body is primarily tasked with overseeing the budgetary and policy
making functions of county government. Among other things, the Commissioners Court approves the budget, determine the tax rates, authorize
contracts, and appoint certain County officials.
The management of the finances also relies on the Tax Assessor-Collector, the County Treasurer and the County Auditor, all of whom are elected
officials, except for the County Auditor, which is appointed by a board of district judges. The Tax Assessor-Collector is responsible for collecting
ad valorem taxes, certain State and County fees and other taxes. The County Treasurer is tasked with receiving money deposits and co-signing all
of the County’s checks. Finally, the County Auditor is the chief financial officer of the County and is responsible for substantially all County
finance and accounting control functions. He is appointed for a two year term and is accountable to the eleven State district judges whose courts
are located in the County. See page viii for the names of the current office holders.
PROPERTY TAXES
CONSTITUTIONAL TAX LIMITATIONS . . . The Texas Constitution (Article VIII, Section 9) authorizes the County to levy a tax for general fund,
jury fund, road and bridge fund and permanent improvement fund purposes limited in the aggregate to $0.80 per $100 of assessed valuation on
taxable property within the County (the “$0.80 Tax Limitation”). Administratively, the Attorney General of Texas will not approve the issuance
of limited tax obligations such as the Obligations in an amount which produces debt service requirements exceeding that which can be paid from
$0.40, at a 90% collection rate, of the $0.80 Tax Limitation. Taxes subject to this limitation are the source from which the Obligations are
payable. See Table 7 – “PRO FORMA AD VALOREM TAX DEBT SERVICE REQUIREMENTS.”
PROPERTY TAX CODE AND COUNTY-WIDE APPRAISAL DISTRICT . . . The appraisal district created for Hidalgo County (the "Hidalgo County
Appraisal District" or the "Appraisal District") is responsible for the appraisal of all taxable property and the equalization of appraised values of
property of all taxing units in the Appraisal District, including the County. The Appraisal District is governed by a Board of Directors appointed
by the governing bodies of certain taxing units in the Appraisal District. The Board of Directors has appointed a Chief Appraiser to act as chief
administrator of the Appraisal District. Appraisal districts have a minimum of five directors and may have up to 13 directors. The Hidalgo
County Appraisal District presently has six directors.
The Property Tax Code, Title 1, Texas Tax Code, as amended (the “Property Tax Code”) governs appraisal of property and tax rollbacks: (1)
requires that all taxing units assess taxable property at 100% of its appraised value; (2) allows the valuation of certain eligible farm, ranch, and
timberlands on a "productive capacity" basis; (3) requires that the appraised values of real property within an appraisal district be reviewed at
least every three years; (4) provides for notices of any increases in appraised values to property owners before meetings of an appraisal review
board; (5) grants rights of administrative and judicial appeal for taxpayers challenging property valuations established by an appraisal district or a
county; (6) requires taxing jurisdictions to hold two public hearings if the tax rate it intends to adopt exceeds the lesser of the "effective tax rate"
or the "rollback tax rate", as defined by the Property Tax Code; and (7) permits taxpayers, by referendum, to reduce the tax rate to the Rollback
Tax Rate.
TAX ROLLBACK . . . The County must annually calculate and publicize its “effective tax rate” and “rollback tax rate”. The Commissioners
Court may not adopt a tax rate that exceeds the lower of the rollback rate or the effective tax rate until it has held two public hearings on the
proposed increase following notice to the taxpayers and otherwise complied with the Texas Tax Code. If the adopted tax rate exceeds the
rollback tax rate, the qualified voters of the County, by petition, may require that an election be held to determine whether or not to reduce
the tax rate adopted for the current year to the rollback tax rate.
“Effective tax rate” means the rate that will produce last year’s total tax levy (adjusted) from this year’s total taxable values
(adjusted). “Adjusted” means lost values are not included in the calculation of last year’s taxes and new values are not included in this year’s
taxable values.
“Rollback tax rate” means the rate that will produce last year’s maintenance and operation tax levy (adjusted) from this year’s
values (adjusted) multiplied by 1.08 plus a rate that will produce this year’s debt service from this year’s values (adjusted) divided by the
anticipated tax collection rate.
Reference is made to the Texas Tax Code for definitive requirements for the levy and collection of ad valorem taxes and the calculation of
the various defined tax rates.
In determining market value, different methods of appraisal may be used, including the cost method of appraisal, the income method of
appraisal and market data comparison method of appraisal. The method considered most appropriate by the chief appraiser is to be used.
State law further limits the appraised value of a residence homestead for a tax year to an amount not to exceed the lesser of (1) the market
value of the property or (2) the sum of (a) 10% of the appraised value of the property for the last year in which the property was appraised for
taxation times the number of years since the property was last appraised plus (b) the appraised value of the property for the last year in which
the property was appraised plus (c) the market value of all new improvements to the property.
9
Reference is made to the Texas Tax Code for identification of property subject to taxation; property exempt or which may be exempted from
taxation, if claimed; the appraisal of property for all ad valorem purposes; and the procedures and limitations applicable to the levy and
collection of such taxes.
REINVESTMENT ZONES/TAX ABATEMENT AGREEMENTS . . . State law permits the creation of Reinvestment Zones (the "Zone(s)") within cities
and counties to encourage the revitalization and redevelopment of underdeveloped areas thereof and permits cities to issue tax increment bonds
for that purpose. Assessed values in a Zone at the time of its creation constitute the base value as to all governmental entities exercising taxing
authority within, and participating in, a Zone. Tax receipts from increased values from all participating taxing jurisdictions over the base value
are placed in a trust fund to retire the bonds issued or otherwise pay for public improvements to revitalize a Zone. For fiscal year 2014, the
County had one tax abatement agreement resulting in a total levy loss of $28,356.44. The County is currently participating in twelve tax
increment reinvestment zones (“TIRZ”). For fiscal year 2014, TIRZ contributions are estimated at $2,801,886.04 from maintenance and
operations tax increment. The County has not dedicated its debt service tax to the TIRZs. The County also has entered into three Chapter 381
agreements with an estimated levy loss of $201,265.22 for fiscal year 2014.
EXEMPTIONS FROM TAXES . . . The Texas Constitution and the Property Tax Code grant various exemptions from taxation, if properly claimed,
including exemptions for public property, residence homestead, tangible personal property not producing income, farm products and implements
of farming or ranching, cemeteries, property owned and used exclusively by certain charitable organizations, and, at the option of the taxing
jurisdiction, freeport goods.
RESIDENTIAL HOMESTEAD EXEMPTIONS . . . The Texas Constitution permits the exemption of certain percentages of the market value of
residential homesteads from ad valorem taxation. A political subdivision may exempt (1) not less than $3,000 of the market value of the
residence homestead of persons 65 years of age or older and disabled from all ad valorem taxes thereafter levied by the political subdivision
and (2) up to 20% of the market value of residence homesteads. The County does not offer a residence homestead exemption. The County
offers an over-65 exemption of $15,000.
In the case of exemptions granted in the preceding paragraph, ad valorem taxes may continue to be levied against the value of homesteads
exempted where such ad valorem taxes have been previously pledged of debt if such cessation would impair the obligation of contract by
which the debt was created.
Following the approval by the voters at the November 5, 2013 statewide election, a partially disabled veteran or the surviving spouse of a
partially disabled veteran is entitled to an exemption equal to the percentage of the veteran’s disability, if the residence was donated at no
cost to the veteran by a charitable organization.
Also approved by voters at the November 5, 2013 election, was a constitutional amendment providing that the surviving spouse of a member
of the armed forces who is killed in action is entitled to a property tax exemption for all or part of the market value of such surviving spouse’s
residences homestead, if the surviving spouse has not remarried since the service member’s death and said property was the service
member’s residence homestead at the time of death. Such exemption is transferable to a different property of the surviving spouse, if the
surviving spouse has not remarried, in an amount equal to the exemption received on the prior residence in the last year in which such
exemption was received.
The Texas Constitution also mandates an additional tax exemption for disabled veterans or the surviving spouse or children of a deceased
veteran who died while on active duty in the armed forces. This exemption applies to either real or personal property. The County has
granted the disabled veterans exemption in the range of $5,000 to $12,000, based on the percentage of disability.
TAX FREEZE . . . Under Article VIII of the Constitution and State law, a county, municipality or junior college, at its option, may provide for
a prohibition on increasing the total ad valorem tax, except for increases attributable to certain improvements, on the residence homestead of
a disabled person or persons 65 years of age or older above the amount of tax imposed in the year such residence qualified for such
exemption and such freeze on ad valorem taxes is transferable to a residence and to a surviving spouse living in such homestead who is
disabled or is at least 55 years of age. If improvements (other than maintenance or repairs) are made to the property, the value of the
improvements is taxed at the then current tax rate, and the total amount of taxes imposed is increased to reflect the new improvements with
the new amount of taxes then serving as the ceiling on taxes for the following years. Once established, the tax rate limitation may not be
repealed or rescinded. On February 17, 2004 the County approved such freeze on tax rates to be effective as of January 1, 2004.
AGRICULTURAL AND OPEN SPACE EXEMPTIONS . . . The Texas Constitution provides that eligible owners of agricultural land and open space
land, including open space land devoted to farm or ranch purposes or open space land devoted to timber production, may elect to have such
property appraised on the basis of its production capacity. The same land may not qualify for both exemptions.
FREEPORT GOODS EXEMPTION . . . Freeport goods are goods, wares, merchandise, other tangible personal property and ores, other than oil,
natural gas, and other petroleum products, which have been acquired or brought into the State for assembling, storing, manufacturing, repairing
and maintaining, processing or fabricating, or used to repair or maintain aircraft of a certified air carrier, and shipped out of the State within 175
days. As a result of a State constitutional amendment passed by Texas voters on November 7, 1989, goods in transit (“freeport goods”) are
exempted from taxation effective January 1, 1990. The County took official action before January 1, 1990 to tax Article VIII, Section 1-j exempt
property.
10
COUNTY AND TAXPAYER REMEDIES . . . Under certain circumstances, taxpayers and taxing units, including the County, may appeal orders of the
Appraisal Review Board by filing a notice of appeal with that Board and a petition for review in district court. In such event, the property value
in question may be determined by the courts or by a jury, if requested by any party. Additionally, taxing units may bring suit against the
Appraisal District to compel compliance with the Texas Tax Code.
The Texas Tax Code establishes procedures for providing notice and the opportunity for a hearing for taxpayers in the event of certain proposed
tax increases and provides for taxpayer referenda which could result in the repeal of certain tax increases. The Texas Tax Code also establishes a
procedure for notice to property owners of reappraisals reflecting increased property value, appraisals which are higher than renditions, and
appraisals of property not previously on an appraisal roll.
LEVY AND COLLECTION OF TAXES . . . The County is responsible for the collection of its taxes, but it may assign such functions to another
governmental entity. Before the later of September 30 or the 60th day after the date the certified appraisal roll is received by the County of each
year, the Commissioners Court adopts a tax rate per $100 taxable value for the current year based upon the valuation of property within the
County as of January 1. The tax rate consists of two components: (1) a rate for funding of maintenance and operation expenditures, and (2) a rate
for debt service. Ad valorem taxes are due on receipt of a tax bill and payable from October 1 of the year in which levied until January 31 of the
following year without interest or penalty. Taxes become delinquent after January 31. On February 1, the unpaid taxes have a penalty and
interest charge of 7%. Taxes delinquent from March 1 through June 30 have an additional penalty and interest charge of 2% per month, for a
total penalty and interest charge of 15%. Taxes delinquent on July 1 have a total penalty and interest charge of 18%. Unpaid taxes after July 31
accrue an additional penalty and interest charge of 1% per month until paid. State law allows employment of outside legal counsel to collect
delinquent taxes. When this is done, the County may, upon giving proper notice, impose an additional penalty of up to 20% to the taxes, penalty,
and interest delinquent as of July 1. The County has elected this option and presently uses outside legal counsel to collect delinquent taxes, with
an additional penalty of 15%. Split payments are not allowed.
TAX LIENS . . . Taxes levied by the County are a personal obligation of the owner of the property. On January 1 of each year, a tax lien attaches
to property to secure the payment of all taxes, penalties, and interest ultimately imposed for the year on the property. The lien exists in favor of
each taxing unit, including the County, having power to tax the property. The tax lien on real property has priority over the claim of most
creditors and other holders of liens on the property encumbered by the tax lien, whether or not the debt or lien existed before the attachment of
the tax lien. Personal property under certain circumstances is subject to seizure and sale for the payment of delinquent taxes, penalty, and
interest. At any time after taxes on property become delinquent, the County may file suit to foreclose the lien securing payment of the tax, to
enforce personal liability for the tax, or both. In filing a suit to foreclose a tax lien on real property, the County may join other taxing units that
have claims for delinquent taxes against all or part of the same property. The ability of the County to collect delinquent taxes by foreclosure may
be adversely affected by the amount of taxes owed to other taxing units, adverse market conditions, taxpayer redemption rights, or bankruptcy
proceedings which restrain the collection of a taxpayer's debt. Also, provisions of the Texas Tax Code require the abatement of any foreclosure
or collection suit for delinquent taxes against any individual who is 65 years of age or older, owns and occupies as a residential homestead the
property on which the taxes are delinquent, and requests the abatement in writing at the appropriate time.
TAX RATE LIMITATIONS
GENERAL OPERATIONS AND DEBT . . . The Texas Constitution imposes a tax rate limitation of $0.80 per $100 assessed valuation for all
purposes of General Fund, Permanent Improvement Fund, Road and Bridge Fund, and Jury Fund, including debt service of bonds, warrants,
tax notes, or certificates of obligation issued against such funds. The Obligations will be subject to this tax rate limitation. The Attorney
General of Texas will not approve limited tax bonds in an amount which produces debt service requirements exceeding that which can be
paid from $0.40 of the foregoing $0.80 maximum tax rate calculated at 90% collection. The Obligations are limited tax obligations payable
from the constitutionally limited tax rate. See Table 7 – “PRO FORMA AD VALOREM TAX DEBT SERVICE REQUIREMENTS” for the
debt service on all debt of the County payable from the $0.80 limited tax.
UNLIMITED TAX ROAD BONDS . . . Article III, Section 52 of the Texas Constitution authorizes unlimited tax rate for debt service for the
payment of road bonds. The County has no outstanding road bonds.
FARM-TO-MARKET AND FLOOD CONTROL PURPOSES . . . In addition to the $0.80 maximum tax rate, under Section 1-a, Article VIII of the
Texas Constitution, County voters may authorize up to a $0.30 tax for “construction and maintenance of Farm to Market Roads or for Flood
Control” (the “Special Road and Flood Tax”). The Texas Transportation Code provides that revenues from this tax may not be commingled
with the fund to which revenues from the tax with the $0.80 tax rate limitation are deposited. Revenues from the Special Road and Flood
Tax may be dedicated to debt service on bonds or warrants for the construction of farm-to-market and lateral roads and for flood control if
voters approve the obligations. The County has no outstanding bonds using such taxing authority.
TAX FOR FURTHER MAINTENANCE OF ROADS . . . Article VIII, Section 9 of the Texas Constitution grants the Legislature power to authorize
an additional tax not to exceed $0.15 for the further maintenance of public roads. The Texas Transportation Code, Section 256.052 authorizes
such tax, with approval of a majority of the voters in the county. The County has no outstanding bonds using such taxing authority.
DRAINAGE DISTRICT . . . The Hidalgo County Drainage District No. 1 is authorized by Chapter 56, Texas Water Code, as amended, to issue
bonds to pay contractual obligations to be incurred by the District to undertake drainage improvements in the District and pay costs of
issuance of those bonds. Bonds issued by the District are payable from a tax within the District unlimited as to rate or amount. In 1939, a
resolution adopting the provision of Article 8176a of the Revised Civil Statutes of Texas (Texas Water Code §56.069) and transferring the
management and control of Hidalgo County Drainage District No. 1 to the Commissioners’ Court of Hidalgo County was approved by the
District. The currently outstanding unlimited tax debt of the District is $157,905,000.
11
AD VALOREM TAX INFORMATION
TABLE 1 - VALUATION, EXEMPTIONS AND DEBT OBLIGATIONS
Tax Year 2014 Certified Tax Roll Market Valuation (1)
$ 37,528,919,401
Less:
Exemptions/Reductions at 100% Market Value:
Homestead Cap Adjustment
Agricultural Use Valuations Reductions
Residential Homestead Exemptions (Over 65 or Disabled)
Disabled Veterans
H.B. 366
Historical
Freeport Exemption
Pollution Control
CHDO Exemption
Primarily Charitable Organization
Tax Abatement Reduction
$ 4,281,677,275
129,785,077
3,335,178,296
523,286,643
141,153,341
38,401
87,902
399,108,996
91,930,139
9,752,606
2,115,098
1,689,637
8,915,803,411
2014 Taxable Assessed Valuation
$ 28,613,115,990
County Debt Payable From Ad Valorem Taxes
Outstanding Tax Obligations (as of 12/16/2014)
The Certificates
The Bonds
The Notes
$
127,395,000
19,950,000
23,595,000
5,720,000
(2)
(3)
(3)
(3)
Total Debt Payable From Ad Valorem Taxes
$
176,660,000
Interest and Sinking Fund (as of September 1, 2014)
$
4,185,983
Ratio Total Funded Debt to 2014 Tax Year Assessed Valuation
0.62%
2015 Estimated Population
Per Capita Taxable Assessed Valuation
Per Capita Total Tax Debt
$
$
858,644
33,324
205.74
_________
Source: Hidalgo County Appraisal District.
(2)
Preliminary, subject to change. Does not include the Refunded Obligations.
(3)
Preliminary, subject to change.
(1)
[The remainder of this page intentionally left blank]
12
(2)
TABLE 2 - TAXABLE ASSESSED VALUATION BY CATEGORY
2015
Category
Real, Residential, Single-Family
Real, Residential, Multi-Family
Real, Vacant Lots/T racts
Real, Acreage (Land Only)
Real, Farm and Ranch Improvement s
Real, Commercial & Industrial
Real, Oil, Gas and Other Mineral Reserves
Real and T angible Personal, Utilit ies
Farm/Ranch Personal
T angible Personal, Business
T angible Personal, Ot her
Intangible, Personal
Real Propert y, Inventory
Special Inventory
Full Exemptions
Error:
T ot al Appraised Value Before Exemptions
Less: T ot al Exemptions/Reductions
Ne t Taxable Asse sse d Valuation
$ 37,528,919,401
8,915,803,411
$ 28,613,115,990
Category
Real, Residential, Single-Family
Real, Residential, Multi-Family
Real, Vacant Lots/T racts
Real, Acreage (Land Only)
Real, Farm and Ranch Improvement s
Real, Commercial & Industrial
Real, Oil, Gas and Other Mineral Reserves
Real and T angible Personal, Utilit ies
Farm/Ranch Personal
T angible Personal, Business
T angible Personal, Ot her
Intangible, Personal
Real Propert y, Inventory
Exempt
T axable Appraised Value for t he Fiscal Year Ending December 31,
2012
2011
Percent
Percent
Amount
of T otal
Amount
of T otal
$ 14,475,955,650
40.82%
$ 14,227,036,032
39.86%
1,006,750,861
2.84%
1,044,486,949
2.93%
1,441,887,412
4.07%
1,542,819,806
4.32%
3,822,340,136
10.78%
3,791,724,137
10.62%
556,867,572
1.57%
572,905,201
1.61%
5,797,190,233
16.35%
5,761,294,034
16.14%
879,483,361
2.48%
1,342,815,326
3.76%
466,553,602
1.32%
503,509,359
1.41%
11,670
0.00%
5,190
0.00%
2,623,927,999
7.40%
2,587,484,173
7.25%
177,388,133
0.50%
167,784,468
0.47%
1,445
0.00%
1,445
0.00%
120,572,597
0.34%
153,567,472
0.43%
0.00%
1,295,382
0.00%
Special Inventory
Full Exemptions
Error:
Amount
$ 15,530,758,329
1,067,579,005
1,490,328,044
3,525,448,219
653,533,998
6,487,488,777
584,549,398
559,588,493
5,903
2,797,538,246
282,485,490
93,262,126
162,770,456
4,293,582,917
T axable Appraised Value for t he Fiscal Year Ending December 31,
2014
2013
Percent
Percent
of T otal
Amount
of T otal
Amount
41.38%
$ 15,182,378,640
41.49%
$ 14,947,398,398
2.84%
1,007,819,142
2.75%
998,092,853
3.97%
1,486,329,906
4.06%
1,372,931,599
9.39%
3,535,698,182
9.66%
3,757,382,136
1.74%
682,805,050
1.87%
583,090,688
17.29%
6,164,663,057
16.85%
5,695,974,215
1.56%
578,382,598
1.58%
688,112,616
1.49%
524,636,066
1.43%
466,181,449
0.00%
5,903
0.00%
5,903
7.45%
2,778,440,408
7.59%
2,841,272,618
0.75%
192,734,664
0.53%
189,425,775
0.00%
0.00%
1,445
0.25%
134,043,788
0.37%
106,304,089
0.43%
155,279,879
0.42%
124,630,329
11.44%
4,166,522,150
11.39%
4,079,947,711
0.00%
1,234
0.00%
100.00%
$ 36,589,740,667
100.00%
$ 35,850,751,824
8,678,372,480
8,530,722,886
$ 27,911,368,187
$ 27,320,028,938
105,627,992
0.30%
93,086,151
3,984,398,685
11.24%
3,904,731,670
-
T ot al Appraised Value Before Exemptions
Less: T ot al Exemptions/Reductions
$ 35,458,957,348
8,414,695,146
Ne t Taxable Asse sse d Valuation
$ 27,044,262,202
0.00%
100.00%
$ 35,694,546,795
8,274,308,896
Percent
of T otal
41.69%
2.78%
3.83%
10.48%
1.63%
15.89%
1.92%
1.30%
0.00%
7.93%
0.53%
0.00%
0.30%
0.35%
11.38%
0.00%
100.00%
0.26%
10.94%
0.00%
100.00%
$ 27,420,237,899
_________
Note: Valuations shown are certified taxable assessed values reported by the Hidalgo County Appraisal District to the State Comptroller of
Public Accounts. Certified values are subject to change throughout the year as certified values are resolved and the appraisal district updates
records.
[The remainder of this page intentionally left blank]
13
TABLE 3 - VALUATION AND FUNDED DEBT HISTORY
Gross General
Fiscal
Taxable
Obligation Debt
Debt to
General
Year
Taxable
Assessed
Outstanding
Taxable
Obligation
Ended
Estimated
Assessed
Valuation
at End
Assessed
Debt
Population (1)
Valuation (2)
12-31
Per Capita
of Year
Valuation
Per Capita
2006
683,719
$ 19,071,696,997
$
27,894
$ 163,640,000
0.8580%
$
239
2007
701,862
21,191,217,253
30,193
155,985,000
0.7361%
222
2008
721,275
24,153,115,572
33,487
148,575,000
0.6151%
206
2009
741,152
26,343,290,518
35,544
140,675,000
0.5340%
190
2010
774,769
27,491,085,119
35,483
169,400,000
0.6162%
219
2011
797,810
27,420,237,899
34,369
185,405,000
0.6762%
232
2012
806,552
27,044,262,202
33,531
174,275,000
0.6444%
216
2013
815,996
27,320,028,938
33,481
162,385,000
0.5944%
199
2014
837,130
27,911,368,187
33,342
176,660,000 (3)
0.6329%
211
0.5662%
189
2015
858,644
28,613,115,990
33,324
161,995,000 (3)
_________
(1)
Source: County of Hidalgo.
(2)
The valuations shown are the certified Taxable Assessed Valuations reported annually in September to the Property Tax Board. The
valuations are subject to change during the ensuing year due to the settlement of contested valuation, etc.
(3)
Includes the Obligations and excludes the Refunded Obligations (preliminary, subject to change).
TABLE 4 - TAX RATE, LEVY AND COLLECTION HISTORY
Fiscal
Year
Ended
12-31
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
Tax
Rate
$ 0.59000
0.59000
0.59000
0.59000
0.59000
0.59000
0.59000
0.59000
0.59000
0.59000
Distribution
Maintainence
Interest and
& Operations
Sinking Fund
$
0.52710
$
0.06290
0.52000
0.07000
0.51550
0.07450
0.51910
0.07090
0.51270
0.07730
0.51070
0.07930
0.52250
0.06750
0.52350
0.06650
0.52080
0.06920
0.53080
0.05920
Tax
Levy
$ 112,918,025
124,526,671
141,315,869
154,988,101
161,386,867
160,318,224
158,157,252
159,570,084
163,168,241
166,388,199
Current
Collections
$ 105,230,219
117,969,696
136,346,506
149,581,344
152,608,616
151,534,745
150,676,328
152,090,213
154,678,346
Total
Collections
$ 111,627,764
124,163,199
143,237,471
158,006,851
159,688,548
157,261,768
154,500,479
154,529,104
154,678,346
(2)
(2)
_________
(1)
Collections as of August 31, 2014.
(1)
In process of collection.
[The remainder of this page intentionally left blank]
14
% Collections
Current
Total
93.19%
98.86%
94.73%
99.71%
96.48%
101.36%
96.51%
101.95%
94.56%
98.95%
94.52%
98.09%
95.27%
97.69%
95.31%
96.84%
94.80% (1)
94.80%
(2)
(2)
(1)
Property within the County is assessed as of January 1 of each year (except for business inventory which may, at the option of the taxpayer, be
assessed as of September 1); taxes become due January 1 of the following year, and become delinquent on February 1 of the following year.
Split payments are not permitted. Discounts are not allowed. Taxpayers 65 years old or older are permitted by State law to pay taxes on
homesteads in four installments with the first due on February 1 of each year and the final installment due on August 1. Charges for penalty and
interest on the unpaid balance of delinquent taxes are made as follows:
Month
February
March
April
May
June
July
Penalty
6%
7%
8%
9%
10%
12%
Interest
1%
2%
3%
4%
5%
6%
Total
7%
9%
11%
13%
15%
18%
After July, penalty remains at 12%, and interest increases at the rate of 1% each month. In addition, if an account is delinquent in July, a 15%
attorney's collection fee is added to the total tax penalty and interest charge.
TABLE 5 - TEN LARGEST TAXPAYERS
Name
Oxy USA, Inc.
AEP Texas Central Co.
H E Butt Grocery Company
Simon Property Group - M cAllen No. 2
CPG M ercedes LP
Frontera Generation LTD Partnership
Sharyland Utilities LP
Wal-M art Stores Texas LLC
Calpine Const Fin (M agic Vy Gn)
Rio Grande Regional Hospital
Nature of Property
Oil and Gas
Electric Utility
Retail Sales
Retail Sales
Retail Sales
Electric Utility
Telephone Utility
Retail Sales
Electric Utility
Health Services
Tax Year
2014 Taxable
Valuation (1)
$
283,546,481
234,076,850
104,974,764
85,303,024
71,900,000
67,964,220
67,452,860
66,797,866
65,093,830
54,415,269
$ 1,101,525,164
_______
(1)
Source: Hidalgo County Appraisal District.
[The remainder of this page intentionally left blank]
15
% of Taxable
Valuation
0.99%
0.82%
0.37%
0.30%
0.25%
0.24%
0.24%
0.23%
0.23%
0.19%
3.85%
TABLE 6 - ASSESSED VALUATIONS, TAX RATES, OUTSTANDING DEBT
JURISDICTIONS (1)
AND
AUTHORIZED BUT UNISSUED BONDS
OF
OVERLAPPING TAXING
Expenditures of the various taxing entities within the territory of the County are paid out of ad valorem taxes levied by such entities on properties
within the County. Such entities are independent of the County and may incur borrowings to finance their expenditures. This statement of direct
and estimated overlapping ad valorem tax debt (“Tax Debt”) was developed from information contained in “Texas Municipal Reports” published
by the Municipal Advisory Council of Texas, and other sources. Except for the amounts relating to the County, the County has not
independently verified the accuracy or completeness of such information, and no person should rely upon such information as being accurate or
complete. Furthermore, certain of the entities listed may have issued additional Tax Debt since the date hereof, and such entities may have
programs requiring the issuance of substantial amounts of additional Tax Debt, the amount of which cannot be determined. The following table
reflects the estimated overlapping Tax Debt.
2014
T axable
Assessed
Valuation
$ 28,613,115,990
2013/2014
T ax
Rate
$ 0.59000
4,870,041
518,376,862
314,020,513
440,108,919
46,165,624
3,548,101,506
129,605,123
4,373,141
479,162,283
123,235,002
42,813,337
7,889,606,743
521,888,570
3,540,518,418
251,978,744
191,781,508
2,377,258,052
72,059,410
868,901,692
76,968,840
1,480,247,653
0.5990
0.4624
1.2524
0.9705
0.6350
0.9916
0.4253
0.3515
0.5678
0.7836
0.4313
0.7750
0.5288
0.4665
0.4100
0.6800
0.8126
0.7386
0.4160
0.6867
School Districts
Donna ISD
Edcouch-Elsa ISD
Edinburg CISD
Hidalgo ISD
La Joya ISD
La Villa ISD
Lyford ISD
McAllen ISD
Mercedes ISD
Mission CISD
Monte Alto ISD
Pharr - San Juan - Alamo ISD
Progreso ISD
Sharyland ISD
South T exas ISD
Valley View ISD
Weslaco ISD
1,157,884,013
284,916,456
5,236,086,966
418,653,535
2,133,421,640
102,306,675
9,562,688
6,192,959,091
490,193,797
1,728,186,904
86,218,130
3,813,930,176
142,645,510
2,711,846,739
29,524,749,877
456,663,611
2,018,278,834
Special Districts
Hidalgo Co. DD #1
South T exas College District
Donna Irrigation District
27,797,044,065
29,130,282,895
287,434,729
Governmental Subdivision
Hidalgo County
Cities
Abram
Alamo
Alton
Donna
Edcouch
Edinburg
Elsa
Granjeno
Hidalgo
La Joya
La Villa
McAllen
Mercedes
Mission
Palmview
Penitas
Pharr
Progreso
San Juan
Sullivan City
Weslaco
Estimated
%
Applicable
100.00%
County's
Overlapping
T ax
Debt
$ 176,660,000
12,825,000
7,570,000
40,545,000
1,760,000
38,835,000
5,720,000
140,000
2,115,000
81,975,000
25,139,000
31,685,000
1,837,409
5,642,000
23,455,000
1,944,000
18,365,000
86,680,000
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
12,825,000
7,570,000
40,545,000
1,760,000
38,835,000
5,720,000
140,000
2,115,000
81,975,000
25,139,000
31,685,000
1,837,409
5,642,000
23,455,000
1,944,000
18,365,000
86,680,000
1.2582
1.2580
1.2398
1.5564
1.3110
1.3038
1.2200
1.1650
1.2900
1.3000
1.3500
1.3592
1.3275
1.2855
0.0492
1.2770
1.1397
95,135,000
43,921,320
185,160,000
42,515,000
271,223,156
5,310,000
7,294,997
109,046,000
70,662,923
140,788,222
14,460,000
419,520,000
28,450,000
126,386,508
57,329,964
66,279,000
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
4.87%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
64.91%
100.00%
100.00%
95,135,000
43,921,320
185,160,000
42,515,000
271,223,156
5,310,000
355,266
109,046,000
70,662,923
140,788,222
14,460,000
419,520,000
28,450,000
126,386,508
57,329,964
66,279,000
530,000
2,990,000
10,920,000
-
0.0957
0.1500
0.2100
163,535,000
88,864,991
-
100.00%
84.04%
100.00%
163,535,000
74,682,138
-
99,028,940
-
T otal
T ax Supported
Debt
$ 176,660,000
(2)
(2)
Authorized
But Unissued
Debt as of
9/30/2014
$
-
3,200,000
-
(3)
-
T otal Direct and Consolidated Funded Debt……….…….…..…………………..……………………………………………………….… $ 2,477,651,907
Ratio of Direct and Overlapping T ax Debt to T axable Assessed Valuation…….…………………..…………………………………
Per Capita Overlapping Funded Debt…………………………….…….……………………………………………………………………. $
8.66%
2,886
_______
Source: Texas Municipal Reports - Published by the Municipal Advisory Council of Texas.
(2)
Includes the Obligations and excludes the Refunded Obligations (preliminary, subject to change).
(3)
A large portion of the outstanding tax debt shown for the school districts is being subsidized by the Texas Education Agency under its Existing
Debt Allotment and its Instructional Facilities Allotment Programs. The effects of these subsidies are a reduction of the County’s Overlapping
Tax Debt, a reduction of the ratio of Direct and Overlapping Tax Debt to Taxable Assessed Valuation, and a reduction in the Per Capita
Overlapping Funded Debt.
(1)
16
DEBT INFORMATION
TABLE 7 – PRO FORMA AD VALOREM TAX DEBT SERVICE REQUIREMENTS
Fiscal
Year
ȋͳȌ
12/31
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
The Certificates (2)
š‹•–‹‰‡„–‡”˜‹…‡
Ended
Principal
$
$
12,545,000
13,060,000
13,155,000
11,535,000
11,825,000
11,730,000
12,550,000
10,540,000
10,490,000
5,410,000
5,630,000
3,950,000
4,110,000
4,295,000
4,485,000
2,690,000
1,940,000
139,940,000
Interest
$
$
6,995,949
5,005,358
4,448,045
4,114,490
3,812,245
3,462,179
3,096,052
2,656,725
2,242,127
1,764,012
1,499,829
1,224,247
1,020,482
789,588
544,782
289,265
122,220
43,087,595
Total
$
$
19,540,949
18,065,358
17,603,045
15,649,490
15,637,245
15,192,179
15,646,052
13,196,725
12,732,127
7,174,012
7,129,829
5,174,247
5,130,482
5,084,588
5,029,782
2,979,265
2,062,220
183,027,595
Principal
$
$
180,000
480,000
775,000
1,300,000
1,640,000
555,000
400,000
685,000
720,000
1,060,000
1,115,000
1,165,000
1,225,000
1,285,000
1,345,000
1,420,000
1,470,000
1,535,000
1,595,000
19,950,000
The Refunding Bonds (3)
Interest
$
$
611,541
921,150
915,750
896,550
865,550
800,550
718,550
690,800
670,800
636,550
600,550
547,550
491,800
433,550
372,300
308,050
240,800
184,000
125,200
63,800
11,095,391
Total
$
$
611,541
1,101,150
1,395,750
1,671,550
2,165,550
2,440,550
1,273,550
1,090,800
1,355,800
1,356,550
1,660,550
1,662,550
1,656,800
1,658,550
1,657,300
1,653,050
1,660,800
1,654,000
1,660,200
1,658,800
31,045,391
Principal
$
$
475,000
1,740,000
1,805,000
2,095,000
1,715,000
2,360,000
2,455,000
2,560,000
2,665,000
2,790,000
2,935,000
23,595,000
Interest
$
$
652,437
973,250
973,250
921,050
866,900
783,100
714,500
620,100
521,900
419,500
286,250
146,750
7,878,987
The Tax Notes (4)
Total
$
$
1,127,437
973,250
2,713,250
2,726,050
2,961,900
2,498,100
3,074,500
3,075,100
3,081,900
3,084,500
3,076,250
3,081,750
31,473,987
Principal
$
$
1,130,000
1,090,000
1,120,000
1,165,000
1,215,000
5,720,000
Interest
$
$
145,226
184,850
152,150
107,350
60,750
650,326
Total
$
$
1,275,226
1,274,850
1,272,150
1,272,350
1,275,750
6,370,326
Less:
Estimated
BAB
Total General
Obligation Debt
Service
$
$
19,540,949
21,079,562
20,952,295
21,030,640
21,307,195
21,595,379
20,584,702
17,544,775
16,898,027
11,611,712
11,570,879
9,911,047
9,874,782
6,741,388
6,688,332
4,636,565
3,715,270
1,660,800
1,654,000
1,660,200
1,658,800
251,917,298
$
$
(476,611)
(476,611)
(476,611)
(476,611)
(476,611)
(468,247)
(459,472)
(428,870)
(396,825)
(361,096)
(323,863)
(285,112)
(244,309)
(196,208)
(146,089)
(93,953)
(39,697)
(5,826,800)
(1)
Does not include the Refunded Obligations, and a note to the State Infrastructure Bank and a loan under the HUD Section 108 program in the approximate amount of $2,000,000. Preliminary, subject to change.
Shown at a rate of 3.38% for purpose of illustration. Preliminary, subject to change.
(3)
Shown at a rate of 2.50% for purpose of illustration. Preliminary, subject to change.
(4)
Shown at a rate of 1.55% for purpose of illustration. Preliminary, subject to change.
(2)
(5)
Calculated at 32.48% of the interest due on the currently outstanding Taxable Series 2009C and Taxable Series 2010C (Build America Bonds); the amount of the BAB subsidy is subject to change at any time. See "Effect of Federal Sequestration on Certain Bonds".
17
Net Estimated
Debt Service
Subsidy (5)
$
$
19,064,337
20,602,950
20,475,684
20,554,028
20,830,584
21,127,132
20,125,229
17,115,905
16,501,202
11,250,615
11,247,015
9,625,934
9,630,473
6,545,180
6,542,243
4,542,611
3,675,573
1,660,800
1,654,000
1,660,200
1,658,800
246,090,499
EFFECTS OF FEDERAL SEQUESTRATION ON CERTAIN BONDS
Pursuant to the requirements of the Balanced Budget and Emergency Deficit Control Act of 1985, as amended by the Bipartisan Budget Act of
2013, certain automatic reductions in federal spending (the “Sequester Cuts”) took effect as of March 1, 2013 for federal fiscal year ending
September 30, 2013. The Sequester Cuts affected the subsidy payments (the “BAB Subsidy Payments”) to be made by the federal government
to issuers of “direct-pay” tax credit bonds, such as Build America Bonds (including the County’s Certificates of Obligation, Series 2009 and
2010) (the “BABs”). As a result of the Sequester Cuts, the BAB Subsidy Payment received in fiscal years 2014 for the BABs was reduced by
7.2%. The BAB Subsidy Payment for fiscal year 2015 is expected to be reduced by 7.3%. The amount of reduction, if any, in the BAB
Subsidy Payment to be received for the BABs in respect of the February 15, 2015 debt service payment has not yet been announced by the
federal government. If the Sequester Cuts continue, the County may be required to expend additional funds in order to pay debt service on the
BABs resulting from a reduction in BAB Subsidy Payments. The County has determined that the reduced amount of BAB Subsidy Payments
to be received for the BABs as a result of the Sequester Cuts will not have a material adverse impact on the financial condition of the County or
its ability to pay regularly scheduled debt service on the BABs, the Obligations or the other outstanding bonds and obligations of the County
when and in the amounts due in fiscal year 2015.
On February 15, 2014, the Bipartisan Budget Act of 2013 was amended to, among other things, extend the planned Sequester Cuts to 2024;
however, at this time, the County makes no representations as to whether the Sequester Cuts will remain in effect and cause a reduction in
receipt of federal funds or BAB Subsidy Payments for any future year.
INTEREST AND SINKING FUND BUDGET PROJECTION
Interest and Sinking Fund, 12-31-13
Estimated Ad Valorem Tax Debt Service Requirement, FY 2014
$ 4,930,135
(20,205,767)
BABs Interest Reimbursements
Interest and Sinking Estimated Current Tax Collections
Interest and Sinking Estimated Delinquent Tax Collections
Interest and Sinking Estimated Penalty & Interest Tax Collections
Interest and Sinking Costs of Collections and Related Expenditures
Interest Earnings
Estimated Balance, December 31, 2014
476,611
18,324,000
833,000
649,695
(9,000)
2,320
$
5,000,994
AUTHORIZED BUT UNISSUED BONDS
The County currently does not have any voter approved but unissued bonds (see “TAX RATE LIMITATIONS” herein).
TABLE 8 - ISSUANCE OF ADDITIONAL INDEBTEDNESS
The County is currently considering the issuance of approximately $4,000,000* Tax Notes, Series 2015 and $157,000,000* Certificates of
Obligation, Series 2015 during fiscal year ending 2015. The County has the legal authority to issue other debt obligations which could include
public property finance contractual obligations, limited tax notes, revenue bonds, lease purchase agreements, tax anticipation notes, bond
anticipation notes, certificates of participation, certificates of obligation, refunding obligations, or traditional bank loans without voter approval.
______
* Preliminary, subject to change.
18
TABLE 9 - OTHER OBLIGATIONS
OPERATING LEASES . . . The County has various lease commitments for office space and office equipment as well as lease agreements for land
and buildings. The future minimum lease payments are as follows:
Operating Leases
Year Ending
December 31,
Amount
2014
$
654,618
2015
330,447
2016
198,554
2017
123,900
2018
5,400
Total
$ 1,312,919
Land and Buildings
Year Ending
December 31,
Amount
2014
$
57,840
2015
58,320
2016
37,200
2017
37,200
2018
37,200
2019-2023
172,600
Total
$
400,360
CAPITAL LEASES . . . The County had entered into various lease commitments for financing the acquisition of office equipment and buildings.
The future minimum lease payments are as follows:
Year Ending
December 31,
2014
2015
2016
2017
2018
2019-2013
Total future lease payments
Less: Interest
Present value of future lease payments
$
$
$
Amount
1,134,003
1,045,066
979,659
841,658
788,583
3,706,382
8,495,351
(817,640)
7,677,711
RETIREMENT PROGRAM . . . The Texas County and District Retirement System (the "System" or "TCDRS") administers a combined
retirement program for officials and eligible employees of the County. For a description of the plan, including County and employee
contributions for the most recent fiscal year and the possibility of unfunded liabilities, see Note "4.D. - Employee Retirement Plan" in the
Excerpts of the County’s Annual Financial Report attached hereto as Appendix B.
OTHER POST EMPLOYMENT BENEFITS . . . The County administers a self-insured Health Benefits Program for eligible employees and their
dependents. Retired employees are also allowed to participate in the Health Benefits Program at the same rate as provided to current active
employees. For more information regarding the County’s OPEB, please see Note “4.C. – Other Post Employment Benefits” in the Excerpts of
the County’s Annual Financial Report attached hereto as Appendix B.
INVESTMENT POLICIES
INVESTMENTS . . . The County invests its funds in investments authorized by Texas law in accordance with investment policies approved by
the Commissioners Court of the County. Both State law and the County’s investment policies are subject to change.
LEGAL INVESTMENTS . . . Under Texas law, the County is authorized to invest in:
(1) obligations, including letters of credit, of the United States or its agencies and instrumentalities,
(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 are unconditionally 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,
19
(5) obligations of states, agencies, counties, cities, and other political subdivisions of any state rated as to investment quality by a nationally
recognized investment rating firm not less than “A” or its equivalent,
(6) bonds issued, assumed or guaranteed by the State of Israel;
(7) certificates of deposit and share certificates, respectively, meeting the requirements of the Texas Public Funds Investment Act (Chapter
2256, Texas Government Code, as amended) (the “PFIA”) (a) that are issued, by or through an institution that has its main office or a branch
office in Texas and are guaranteed, respectively, or insured by the Federal Deposit Insurance Corporation or the National Credit Union Share
Insurance Fund, or are secured as to principal by obligations described in clauses (1) through (6) above, or in any other manner and amount
provided by law for County deposits; or (b) that are invested by the County through (i) a broker that has its main office or a branch office in
this state and is selected from a list of qualified brokers reviewed, revised and adopted at least annually by the County to undertake investment
transactions with the entity, or (ii) a depository institution that has its main office or a branch office in the State of Texas and otherwise meets
the requirements of the Public Funds Investment Act (Chapter 2256 of the Texas Government Code); and (c) the selected broker or the
depository institution selected by the County (i) arranges for the deposit of funds in certificates of deposit in one or more federally insured
depository institutions, wherever located, for the account of the County, (ii) the County appoints (A) a qualified depository, or (B) a qualified
custodian which may include: (I) a state or national bank (II) that is designated by the State Comptroller as a state depository; (III) has it main
office or a branch office in this state; and (IV) has a capital stock and permanent surplus of $5 million or more; or (is has its main office or a
branch office in this state; or (V) the Texas Treasury Safekeeping Trust Company; a Federal Reserve Bank or a branch of a Federal Reserve
Bank; or federal home loan bank.
(8) fully collateralized repurchase agreements that have a defined termination date, are fully secured by a combination of cash and obligations
described in clause (1) which are pledged to the County, held in the County’s name, and deposited at the time the investment is made with the
County or with a third party selected and approved by the County and are placed through a primary government securities dealer, as defined by
the Federal Reserve, or a financial institution doing business in the State,
(9) bankers’ acceptances with the remaining term of 270 days or fewer from the date of issuance, which will be, in accordance with their terms,
liquidated in full at maturity; are eligible collateral for borrowing from a Federal Reserve Bank, 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;
(10) commercial paper with the remaining term of 270 days or less from the date of issuance that is rated at least A-1 or P-1 or the equivalent
by at least (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,
(11) no-load money market mutual funds registered with and regulated by the United States Securities and Exchange Commission that have a
dollar weighted average portfolio maturity of 90 days or less and include in their investment objectives the maintenance of a stable net asset
value of $1 for each share,
(12) no-load mutual funds registered with the United States Securities and Exchange Commission that have an average weighted maturity of
less than two years, invest exclusively in obligations described in the preceding clauses and conform to certain requirements applicable to
investment pools, and are continuously rated as to investment quality by at least one nationally recognized investment rating firm of not less
than “AAA” or its equivalent.
(13) public funds investment pools that have an advisory board which includes participants in the pool and are continuously rated as to
investment quality by at least one nationally recognized investment rating firm of not less than AAA or its equivalent; and
(14) if specifically authorized in the Order or Resolution authorizing the issuance of bonds or other obligations, guaranteed investment
contracts (“GICs”) that have a defined termination date and are secured by obligations of the United States or its agencies and instrumentalities
in an amount at least equal to the amount of bond proceeds under such contract, other than as prohibited as described under “Prohibited
Investments”; (15) securities lending programs if (a) the value of the securities loan under the program, including the accrued income thereon,
are fully collateralized; a loan made under the program allows for termination at any time; and a loan made under the program is either secured
by (i) obligations that are described in clauses (1) through (6) and clause (13) above, (ii) pledged 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 (iii) cash
invested in obligations described in clauses (1) through (6) and clauses (10) and (11) above, or an authorized investment pool; (b) securities
held as collateral under a loan are pledged to the County or a third party designated by the County; (c) a loan made under the program is placed
through either a primary government securities dealer or a financial institution doing business in the State of Texas; and (d) the agreement to
lend securities has a term of one year or less.
The County is not authorized to invest in “corporate bonds” as defined in the Act.
20
The County may invest in such obligations directly or through government investment pools that invest solely in such obligations provided that
the pools are rated no lower than AAA or AAAm or an equivalent by at least one nationally recognized rating service. The County is
specifically prohibited from investing in: (1) obligations whose payment represents the coupon payments on the outstanding principal balance
of the underlying mortgage-backed security collateral and pays no principal; (2) obligations whose payment represents the principal stream of
cash flow from the underlying mortgage-backed security and bears no interest; (3) collateralized mortgage obligations that have a stated final
maturity of greater than 10 years; and (4) collateralized mortgage obligations the interest rate of which is determined by an index that adjusts
opposite to the changes in a market index.
INVESTMENT POLICIES . . . Under Texas law, the County is required to invest its funds under written investment policies that primarily
emphasize safety of principal and liquidity; that address investment diversification, yield, maturity, and the quality and capability of investment
management; and that includes a list of authorized investments for County funds, maximum allowable stated maturity of any individual
investment owned by the County and the maximum average dollar-weighted maturity allowed for pooled fund groups, methods to monitor the
market price of investments acquired with public funds, a requirement for settlement of all transactions except investment pool funds and
mutual funds, on a delivery versus payment basis, and procedures to monitor rating changes in, investments acquired with public funds and the
liquidation of such investments consistent with the Public Funds Investment Act.
All County 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, County investments must be made “with judgment and care, under prevailing circumstances, that a person of prudence,
discretion, and intelligence would exercise in the management of the person’s own affairs, not for speculation, but for investment, considering
the probable safety of capital and the probable income to be derived”. At least quarterly the investment officers of the County shall submit an
investment report detailing: (1) the investment position of the County, (2) that all investment officers jointly prepared and signed the report, (3)
the beginning market value, the ending market value and the fully accrued interest during the reporting period of each pooled fund group, (4)
the book value and market value of each separately listed
asset at the end of the reporting period, (5) the maturity date of each separately invested asset, (6) the account or fund or pooled fund group for
which each individual investment was acquired, and (7) the compliance of the investment portfolio as it relates to: (a) adopted investment
strategy statements and (b) state law. No person may invest County funds without express written authority from the Commissioners Court.
ADDITIONAL PROVISIONS . . . Under Texas law, the County is additionally required to: (1) annually review its adopted policies and strategies,
(2) adopt a rule, order, ordinance or resolution stating that it has reviewed its investment policy and investment strategies and records any
changes made to either its investment policy or investment strategy in the respective rule, order, ordinance or resolution, (3) require any
investment officers with personal business relationships or relatives with firms seeking to sell securities to the entity to disclose the relationship
and file a statement with the Texas Ethics Commission and the Commissioners Court; (4) require the qualified representative of firms offering
to engage in an investment transaction with the County to: (a) receive and review the County’s investment policy, (b) acknowledge that
reasonable controls and procedures have been implemented to preclude investment transactions conducted between the County and the
business organization that are not authorized by the County’s investment policy (except to the extent that this authorization is dependent on an
analysis of the makeup of the County’s entire portfolio or requires an interpretation of subjective investment standards), and (c) deliver a
written statement in a form acceptable to the County and the business organization attesting to these requirements; (5) perform an annual audit
of the management controls on investments and adherence to the County’s investment policy; (6) provide specific investment training for the
Treasurer, Chief Financial Officer and investment officers; (7) restrict reverse repurchase agreements to not more than 90 days and restrict the
investment of reverse repurchase agreement funds to no greater than the term of the reverse purchase agreement; (8) restrict the investment in
non-money market mutual funds in the aggregate to no more than 15% of the County’s monthly average fund balance, excluding bond
proceeds and reserves and other funds held for debt service; (9) require local government investment pools to conform to the new disclosure,
rating, net asset value, yield calculation, and advisory board requirements, and (10) at least annually review, revise, and adopt a list of qualified
brokers that are authorized to engage in investment transactions with the County.
TABLE 10 - CURRENT INVESTMENTS
The County had the following investments as of September 30, 2014:
Investment Type
Certificates of Deposit
Investment Pool (Texas CLASS)
Total
Market Value
85,000,000
56,101,844
$ 141,101,844
$
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21
FINANCIAL INFORMATION
TABLE 11 - GENERAL FUND REVENUES AND EXPENDITURE HISTORY
Fiscal Year Ended December 31,
2014
Revenues:
T axes
Licenses & Permits
Intergovernmental
Charges for Services
Fines & Forfeits
Interest
Miscellaneous
T otal Revenues
Expenditures:
Current:
General Government
Public Safety
Sanitation
Health and welfare
Culture-recreation
Conservation of Natural Resources
Urban & Economic development
Debt Service:
Principal
Interest and Fiscal Charges
T otal Expenditures
2013
2012
2011
2010
$ 149,130,000
150,000
8,810,221
16,190,008
451,496
253,000
1,975,004
176,959,729
$142,858,120
120,821
14,212,149
15,419,019
466,743
413,959
839,659
174,330,470
$ 143,326,388
170,072
6,384,969
13,671,147
463,301
299,297
1,333,550
165,648,724
$ 141,234,606
114,860
6,680,147
12,830,459
490,702
541,603
3,396,737
165,289,114
$ 143,240,971
142,624
9,344,373
12,775,430
349,149
616,021
8,100,547
174,569,115
72,538,972
69,640,054
5,469,429
18,777,974
4,087,141
936,860
542,036
70,429,282
73,120,450
5,412,808
19,740,758
3,564,656
923,938
496,669
67,678,713
62,293,090
5,389,707
14,213,596
3,262,036
895,125
465,979
66,198,602
60,291,431
5,816,510
14,916,058
3,203,100
873,637
360,824
68,088,905
58,753,925
5,655,893
16,843,406
2,578,580
802,560
346,851
5,000
171,997,466
249,101
10,511
173,948,173
256,133
15,451
154,469,830
220,705
17,877
151,898,744
96,424
9,010
153,175,554
4,962,263
382,297
11,178,894
13,390,370
21,393,561
Excess (deficiency) of Revenues
over (under) expenditures:
Other financing sources (uses):
T ransfers in
T ransfers out
Capital Leases
Sale of Capital Assets
T otal other financing
sources (uses)
(9,826,980)
593
346
(8,852,186)
6,964,955
1,284,701
16,000
(9,734,034)
118,864
350,165
176,433
(9,998,377)
460,323
993,563
3,554,605
(11,602,082)
173,523
895,346
(9,826,387)
(602,184)
(9,249,005)
(8,368,058)
(6,978,608)
Excess (deficiency) of revenues
and other financing sources
over (under)
Beginning Fund Balance
Prior Period Adjustment
Beginning Fund Balance Restated
(4,864,124)
50,031,744
50,031,744
(219,887)
50,251,631
50,251,631
1,929,889
48,412,852
(91,111)
48,321,741
5,022,312
43,390,541
43,390,541
14,414,953
28,975,588
28,975,588
$ 48,412,853
$ 43,390,541
Fund balance
at end of year
(1)
(1)
$ 45,167,620
$ 50,031,744
Preliminary end of year estimates, unaudited.
22
$ 50,251,630
TAX MATTERS
ISSUER’S CERTIFICATE AND BOND COUNSEL OPINION . . . The Internal Revenue Code of 1986, as amended (the “Code”), sets forth certain
requirements that must be met after the Obligations have been validly issued and delivered in order that interest on the Obligations will be and
will remain excludable from gross income pursuant to Section 103 of the Code. Such requirements may include the rebating of certain
amounts earned from the investment of the proceeds of the Obligations. A certificate to be prepared and executed by the County, and dated as
of the date of delivery of the Obligations (the “Tax Certificate”), which will be delivered concurrently with the delivery of the Obligations, will
contain provisions and procedures regarding compliance with the requirements of the Code. The County, in executing the Tax Certificate, will
certify that the County expects to be able to and will comply with the provisions and procedures set forth therein. The County will also certify
in the Tax Certificate that, to the extent authorized by law, the County will do and perform all acts and things necessary or desirable to assure
that interest paid on the Obligations is excludable from gross income under Section 103 of the Code. The County will also certify as to the use
of the proceeds of the Obligations. Assuming compliance with the provisions and procedures set forth in the Tax Certificate and subsequent
rebating, if any, and other requirements, Bond Counsel is of the opinion that, under the Code and other existing statutes, regulations,
administrative rulings, and court decisions, interest on the Obligations is excludable from the gross income of the recipient thereof for Federal
income tax purposes pursuant to Section 103 of the Code and that such interest will not be treated as a specific preference item in calculating
the alternative minimum tax that may be imposed under the Code with respect to individuals and corporations. However, interest on the
Obligations will be includable in adjusted current earnings of certain corporations for purposes of calculating the alternative minimum tax that
may be imposed on such corporations.
Bond Counsel expresses no opinion regarding any other federal, state or local tax consequences with respect to the Obligations. Bond Counsel
renders its opinion under existing law as of the date of issue, and assumes no obligation to update its opinion after the issue date to reflect any
future action, fact or circumstance, or change in law or interpretation, or otherwise. Bond Counsel expresses no opinion on the effect of any
action hereafter taken or not taken in reliance upon an opinion of other counsel on the exclusion from gross income for Federal income tax
purposes of interest on the Obligations, or under state and local law.
TAX ACCOUNTING TREATMENT OF DISCOUNT AND PREMIUM ON CERTAIN BONDS . . . The initial public offering price of certain Obligations
(the "Discount Bonds") may be less than the amount payable on such Obligations at maturity. An amount equal to the difference between the
initial public offering price of a Discount Bond (assuming that a substantial amount of the Discount Bonds of that maturity are sold to the
public at such price) and the amount payable at maturity constitutes original issue discount to the initial purchaser of such Discount Bond. A
portion of such original issue discount allocable to the holding period of such Discount Bond by the initial purchaser will, upon the disposition
of such Discount Bond (including by reason of its payment at maturity), be treated as interest excludable from gross income, rather than as
taxable gain, for federal income tax purposes, on the same terms and conditions as those for other interest on the Obligations described above
under “Opinion”. Such interest is considered to be accrued actuarially in accordance with the constant interest method over the life of a
Discount Bond, taking into account the semiannual compounding of accrued interest, at the yield to maturity on such Discount Bond and
generally will be allocated to an original purchaser in a different amount from the amount of the payment denominated as interest actually
received by the original purchaser during the tax year.
Interest may be required to be taken into account in determining the alternative minimum taxable income, for purposes of calculating the
amount of the branch profits tax applicable to certain foreign corporations doing business in the United States, even though there will not be a
corresponding cash payment. In addition, the accrual of such interest may result in certain other collateral federal income tax consequences to,
among others, financial institutions, life insurance companies, property and casualty insurance companies, S corporations with "subchapter C"
earnings and profits, individual recipients of Social Security or Railroad Retirement benefits, owners of an interest in a financial asset
securitization investment trust, individuals otherwise qualifying for earned income credit, and taxpayers who may be deemed to have incurred
or continued indebtedness to purchase or carry, or who have paid or incurred certain expenses allocable to, tax-exempt obligations. Moreover,
in the event of the redemption, sale or other taxable disposition of a Discount Bond by the initial owner prior to maturity, the amount realized
by such owner in excess of the basis of such Discount Bond in the hands of such owner (adjusted upward by the portion of the original issue
discount allocable to the period for which such Discount Bond was held) is includable in gross income.
Owners of Discount Bonds should consult with their own tax advisors with respect to the determination of accrued original issue discount on
Discount Bonds for federal income tax purposes of and with respect to the state and local tax consequences of owning and disposing of
Discount Bonds. It is possible that, under applicable provisions governing determination of state and local income taxes, accrued interest on
Discount Bonds may be deemed to be received in the year of accrual even though there will not be a corresponding cash payment.
The initial public offering price of certain Obligations (the "Premium Bonds") may be greater than the amount payable on such Obligations at
maturity. An amount equal to the difference between the initial public offering price of a Premium Bond (assuming that a substantial amount of
the Premium Bonds of that maturity are sold to the public at such price) and the amount payable at maturity constitutes premium to the initial
purchaser of such Premium Bonds. The basis for federal income tax purposes of a Premium Bond in the hands of such initial purchaser must be
reduced each year by the amortizable bond premium, although no federal income tax deduction is allowed as a result of such reduction in basis
for amortizable bond premium. Such reduction in basis will increase the amount of any gain (or decrease the amount of any loss) to be
recognized for federal income tax purposes upon a sale or other taxable disposition of a Premium Bond. The amount of premium which is
amortizable each year by an initial purchaser is determined by using such purchaser's yield to maturity.
Purchasers of the Premium Bonds should consult with their own tax advisors with respect to the determination of amortizable bond premium
on Premium Bonds for federal income purposes and with respect to the state and local tax consequences of owning and disposing of Premium
Bonds.
23
COLLATERAL FEDERAL INCOME TAX CONSEQUENCES . . . The following discussion is a summary of certain collateral federal income tax
consequences resulting from the purchase, ownership or disposition of the Obligations. This discussion is based on Existing Law, which is
subject to change or modification, retroactively.
The following discussion is applicable to investors, other than those who are subject to special provisions of the Code, such as financial
institutions, property and casualty insurance companies, life insurance companies, individual recipients of Social Security or Railroad
Retirement benefits, individuals allowed an earned income credit, certain S corporations with accumulated earnings and profits and excess
passive investment income, foreign corporations subject to the branch profits tax, and taxpayers who may be deemed to have incurred or
continued indebtedness to purchase tax-exempt obligations.
THE DISCUSSION CONTAINED HEREIN MAY NOT BE EXHAUSTIVE. INVESTORS, INCLUDING THOSE WHO ARE SUBJECT
TO SPECIAL PROVISIONS OF THE CODE, SHOULD CONSULT THEIR OWN TAX ADVISORS AS TO THE TAX TREATMENT
WHICH MAY BE ANTICIPATED TO RESULT FROM THE PURCHASE, OWNERSHIP AND DISPOSITION OF TAX-EXEMPT
OBLIGATIONS BEFORE DETERMINING WHETHER TO PURCHASE THE OBLIGATIONS.
Interest on the Bonds will be includable as an adjustment for "adjusted current earnings" to calculate the alternative minimum tax imposed on
corporations by section 55 of the Code. Section 55 of the Code imposes a tax equal to 20 percent for corporations, or 26 percent for
noncorporate taxpayers (28 percent for taxable income exceeding $175,000), of the taxpayer's "alternative minimum taxable income," if the
amount of such alternative minimum tax is greater than the taxpayer's regular income tax for the taxable year.
Under section 6012 of the Code, holders of tax-exempt obligations, such as the Obligations, may be required to disclose interest received or
accrued during each taxable year on their returns of federal income taxation.
Section 1276 of the Code provides for ordinary income tax treatment of gain recognized upon the disposition of a tax-exempt obligation, such
as the Obligations, if such obligation was acquired at a "market discount" and if the fixed maturity of such obligation is equal to, or exceeds,
one year from the date of issue. Such treatment applies to "market discount bonds" to the extent such gain does not exceed the accrued market
discount of such Obligations; although for this purpose, a deminimis amount of market discount is ignored. A "market discount bond" is one
which is acquired by the holder at a purchase price which is less than the stated redemption price at maturity or, in the case of a bond issued at
an original issue discount, the "revised issue price" (i.e., the issue price plus accrued original issue discount). The "accrued market discount" is
the amount which bears the same ratio to the market discount as the number of days during which the holder holds the obligation bears to the
number of days between the acquisition date and the final maturity date.
STATE, LOCAL AND FOREIGN TAXES . . . Investors should consult their own tax advisors concerning the tax implications of the purchase,
ownership or disposition of the Obligationsunder applicable state or local laws. Foreign investors should also consult their own tax advisors
regarding the tax consequences unique to investors who are not United States persons.
CONTINUING DISCLOSURE OF INFORMATION
The County’s obligation to provide the information for the benefit of the holders of the Obligations is required by Section (b)(5)(i) of Securities
and Exchange Commission (the “SEC”) Rule 15c2-12 under the Securities Exchange Act of 1934, as amended (17 CFR part 240, §240. 15c212; the “Rule”). The County is an “obligated person” within the meaning of the Rule, and as such undertakes to provide the following
information to the MSRB on or before 6 months from the end of the County’s fiscal year (the “Report Date”), beginning in the year 2014.
Annual Financial Information:
(1) “Annual Financial Information” means the financial information (which shall be based on financial statements prepared in accordance with
generally accepted accounting principles (“GAAP”) for governmental units as prescribed by the Governmental Accounting Standards Board
(“GASB”) or operating data with respect to the County, provided at least annually, of the type included in those sections of the final official
statement with respect to the Obligations contained in Tables 1 through 5 and 7 through 11 and Appendix B of the Official Statement.
(2) “Audited Financial Statements” means the Issuer's Annual financial statements, prepared in accordance with GAAP for governmental units
as prescribed by GASB, which financial statements shall have been audited by such auditor as shall be then required or permitted by the laws
of the State.
The County may adjust the Report Date if the County changes its fiscal year by providing written notice of the change of fiscal year and the
new Report Date to the MSRB, provided that the new Report Date shall be no later than 6 months after the end of the new fiscal year and
provided further that the period between the final Report Date relating to the former fiscal year and the initial Report Date relating to the new
fiscal year shall not exceed one year in duration. It shall be sufficient if the County provides to the MSRB, the Annual Financial Information by
specific reference to documents previously provided to the MSRB, or filed with the Securities and Exchange Commission and, if such a
document is a final Official Statement within the meaning of the Rule, available from the MSRB. The current Report Date is June 30th of each
year.
24
If not provided as part of the Annual Financial Information, the County shall provide the Audited Financial Statements when and if available
while any Obligations are Outstanding to the MSRB. If Audited Financial Statements are not available by the required time, the County will
provide unaudited financial statements by the required time and Audited Financial Statements when and if such Audited Financial Statements
become available.
Certain Specified Events:
“Certain Specified Event” means any of the following events with respect to the Obligations:
(1)
Principal and interest payment delinquencies; (2) Non-payment related defaults; (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-exempt status of the Obligations, or other material events affecting the tax status of the Obligations; (7) Modifications to rights of holders
of the Obligations, if material; (8) Bond calls, if material, and tender offers; (9) Defeasances; (10) Release, substitution, or sale of property
securing repayment of the Obligations, if material; (11) Rating changes; (12) Bankruptcy, insolvency, receivership, or similar event of the
County, which shall occur as described below; (13) The consummation of a merger, consolidation, or acquisition involving the County or the
sale of all or substantially all of its assets, other than in the ordinary course of business, the entry into of a definitive agreement to undertake
such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms, if material; and (14)
Appointment of a successor or additional trustee or the change of name of a trustee, if material.
For these purposes, any event described in (12) above is considered to occur when any of the following occur: the appointment of a receiver,
fiscal agent, or similar officer for the County in a proceeding under the United States Bankruptcy Code or in any other proceeding under state
or federal law in which a court or governmental authority has assumed jurisdiction over substantially all of the assets or business of the County,
or if such jurisdiction has been assumed by leaving the existing governing body and officials or officers in possession but subject to the
supervision and orders of a court or governmental authority, or the entry of an order confirming a plan of reorganization, arrangement, or
liquidation by a court or governmental authority having supervision or jurisdiction over substantially all of the assets or business of the County.
The County shall provide a Specified Event Notice in a timely manner not in excess of ten business days after the occurrence of the event.
Each Specified Event Notice shall be so captioned and shall prominently state the date, title and CUSIP numbers of the Obligations.
The County shall provide in a timely manner to the MSRB notice of any failure by the County while any Obligations are Outstanding to
provide Annual Financial Information on or before the Report Date.
The continuing obligation hereunder of the County to provide Annual Financial Information, Audited Financial Statements, if any,
and Certain Specified Event Notices shall terminate immediately once the Obligations no longer are Outstanding. The County’s obligation
hereunder, or any provision hereof, shall be null and void in the event that the County delivers to the MSRB the proposed amendment and an
opinion of nationally recognized bond counsel to the effect that such amendment, and giving effect thereto, will not adversely affect the
compliance of this section and by the County with the Rule.
Any failure by the County to perform in accordance with this Section shall not constitute an event of default under the Order.
UNDER NO CIRCUMSTANCES SHALL THE COUNTY BE LIABLE TO THE HOLDER OR BENEFICIAL OWNER OF ANY BOND
OR ANY OTHER PERSON, IN CONTRACT OR IN TORT, FOR DAMAGES RESULTING IN WHOLE OR IN PART FROM ANY
BREACH BY THE COUNTY, WHETHER NEGLIGENT OR WITHOUT FAULT ON ITS PART, OF ANY COVENANT SPECIFIED IN
THIS SECTION, BUT EVERY RIGHT AND REMEDY OF ANY SUCH PERSON, IN CONTRACT OR TORT, FOR OR ON ACCOUNT
OF ANY SUCH BREACH SHALL BE LIMITED TO AN ACTION FOR MANDAMUS OR SPECIFIC PERFORMANCE.
(h) The SEC has adopted amendments to the Rule which approve the establishment by the MSRB of the Electronic Municipal
Market Access (“EMMA”) which, as of its implementation effective date of July 1, 2009, is the sole national municipal securities information
repository. On and after July 1, 2009, all information and documentation filing required to be made by the County will be made with the
MSRB in electronic format only in accordance with MSRB guidelines. Access to such filings is provided, without charge to the general public,
by the MSRB.
Nothing in this Section is intended, or shall act, to disclaim, waive, or otherwise limit the duties of the County under federal and state securities
laws.
The County has agreed to update information and to provide notices of Certain Specified Events only as described above. The County 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 County makes no representation or warranty
concerning such information or concerning its usefulness to a decision to invest in or sell Obligations at any future date. The County disclaims
any contractual or tort liability for damages resulting in whole or in part from any breach of its continuing disclosure agreement or from any
statement made pursuant to its agreement, although the registered and beneficial owners of Obligations may seek a writ of mandamus to
compel the County to comply with its agreement.
25
The County 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 County, if (i) the agreement, as
amended, would have permitted an underwriter to purchase or sell Obligations in the offering described herein in compliance with the Rule,
taking into account any amendments or interpretations of the Rule to the date of such amendment, as well as such changed circumstances, and
(ii) either (a) the registered and beneficial owners of a majority in aggregate principal amount of the outstanding Obligations consent to the
amendment or (b) any person unaffiliated with the County (such as nationally recognized bond counsel) determines that the amendment will
not materially impair the interests of the registered and beneficial owners of the Obligations. The County may also amend or repeal the
provisions of this continuing disclosure agreement if the SEC amends or repeals the applicable provisions of the Rule or a court of final
jurisdiction enters judgment that such provisions of the Rule are invalid, but only if and to the extent that the provisions of this sentence would
not prevent an underwriter from lawfully purchasing or selling Obligations in the primary offering of the Obligations. If the County so amends
the continuing disclosure agreement, it has agreed to include with the next financial information and operating data provided in accordance
with its agreement described above under “Annual Reports” an explanation, in narrative form, of the reasons for the amendment and of the
impact of any change in the type of financial information and operating data so provided.
COMPLIANCE WITH PRIOR UNDERTAKINGS . . . During the past five years, the County has complied in all material respects with all continuing
disclosure agreements made by it in accordance with the Rule. However, on March 18, 2014, S&P upgraded the rating on one of its bond
insurers, Assured Guaranty of certain of its prior outstanding obligations, from “AA-“ to “AA”. The County failed to file a timely notice of this
event. A material event notice has since been filed.
OTHER INFORMATION
RATINGS . . . Applications for contract ratings have been made to Moody’s and S&P. The presently outstanding ad valorem tax supported debt
of the County has underlying ratings of “Aa2” by Moody's and “AA-” by S&P. The County also has several series of obligations outstanding
with insured ratings from various municipal bond insurance companies. An explanation of the significance of such ratings may be obtained
from the companies furnishing such ratings. Any rating reflects only the view of the rating organization and the County makes no
representation as to the appropriateness of any rating. There is no assurance that such ratings will continue for any given period of time or they
will not be revised downward or withdrawn entirely by such rating organizations, if in the judgement of such organizations, circumstances so
warrant. Any such downward revision or withdrawal of such ratings may have an adverse effect on the market price of the Obligations.
LITIGATION . . . In the opinion of various officials of the County, there is no litigation of any nature which has been filed or is pending to enjoin
the issuance and delivery of the Obligations or which would affect the provisions made for the payment or security or in any manner
questioning the validity of the Obligations, and that the County is not a party to any litigation or other proceeding pending or to his knowledge,
threatened, in any court, agency or other administrative body (either State or federal) which, if decided adversely to the County, would have a
material adverse effect on the financial condition of the County.
REGISTRATION AND QUALIFICATION OF OBLIGATIONS FOR SALE . . . The sale of the Obligations has not been registered under the federal
Securities Act of 1933, as amended, in reliance upon the exemption provided thereunder by Section 3(a)(2); and the Obligations have not been
qualified under the Securities Act of Texas in reliance upon various exemptions contained therein; nor have the Obligations been qualified
under the securities acts of any other jurisdiction. The County assumes no responsibility for qualification of the Obligations under the
securities laws of any jurisdiction in which the Obligations may be sold, assigned, pledged, hypothecated, or otherwise transferred. This
disclaimer of responsibility for qualification for sale or other disposition of the Obligations must 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 . . . Texas Local Government Code, as amended, provides that
obligations, such as the Obligations, are legal and authorized investments for banks, savings banks, trust companies, savings and loan
associations, insurance companies, fiduciaries, trustees, and guardians, and for the sinking funds of municipalities, counties, school districts, or
other political corporations or subdivisions of the State of Texas. For political subdivisions in Texas which have adopted investment policies
and guidelines in accordance with the Public Funds Investment Act, the Obligations may have to be assigned an investment quality of not less
than "A" or its equivalent by a nationally recognized rating agency, before they are eligible to secure deposits of any public fund of the State or
any political subdivision or public agency of the State, and are lawful and sufficient security for the deposits to the extent of their face value.
See "Ratings" above.
The County has made no investigation of other laws, rules, regulations or investment criteria which might apply to such institutions or entities
or which might limit the suitability of the Obligations for any of the foregoing purposes or limit the authority of such institutions or entities to
purchase or invest in the Obligations for such purposes. The County has made no review of laws in other states to determine whether the
Obligations are legal investments for various institutions in those states.
26
LEGAL OPINIONS AND NO-LITIGATION CERTIFICATE . . . The County will furnish the Underwriters a complete transcript of proceedings
incident to the authorization and issuance of the Obligations, including the unqualified approving legal opinion of the Attorney General of
Texas to the effect that the Initial Obligations are valid and legally binding obligations of the County, and based upon examination of such
transcript of proceedings, the approval of certain legal matters by Bond Counsel, to the effect that the Obligations, issued in compliance with
the provisions of the Order, are valid and legally binding obligations of the County and, subject to the qualifications set forth herein under
"TAX EXEMPTION", the interest on the Obligations is exempt from federal income taxation under existing statutes, published rulings,
regulations, and court decisions. In its capacity as Bond Counsel, The J. Ramirez Law Firm, San Juan, Texas, has reviewed the information
under the captions “THE OBLIGATIONS” (except for the subheading “Book-Entry-Only System”), “TAX EXEMPTION”, “CONTINUING
DISCLOSURE OF INFORMATION” (except under the subheading “Compliance with Prior Undertakings” as to which no opinion is
expressed), “OTHER INFORMATION–Registration and Qualification of Obligations For Sale”, “OTHER INFORMATION–Legal
Investments and Eligibility to Secure Public Funds in Texas”, and “OTHER INFORMATION–Legal Opinions and No-Litigation Certificate”
in the Official Statement and such firm is of the opinion that the information relating to the Obligations and the Order contained under such
captions is a fair and accurate summary of the information purported to be shown and that the information and descriptions contained under
such captions relating to the provisions of applicable state and federal laws are correct as to matters of law. The customary closing papers,
including a certificate to the effect that no litigation of any nature has been filed or is then pending to restrain the issuance and delivery of the
Obligations or which would affect the provision made for their payment or security, or in any manner questioning the validity of the
Obligations will also be furnished. The legal fees to be paid Bond Counsel for services rendered in connection with the issuance of the
Obligations are contingent on the sale and delivery of the Obligations. The legal opinion of Bond Counsel will accompany the Obligations
deposited with DTC or will be printed on definitive Obligations in the event of discontinuance of the Book-Entry-Only System.
Certain legal matters will be passed upon for the Underwriters by Locke Lord LLP, Dallas, Texas, counsel to the Underwriters whose fees are
contingent on the sale and delivery of the Obligations.
The various legal opinions to be delivered concurrently with the delivery of the Obligations express the professional judgment of the attorneys
rendering the opinions as to the legal issues explicitly addressed therein. In rendering a legal opinion, the attorney does not become an insurer
or guarantor of the expression of professional judgment, of the transaction opined upon, or of the future performance of the parties to the
transaction. Nor does the rendering of an opinion guarantee the outcome of any legal dispute that may arise out of the transaction.
AUTHENTICITY OF FINANCIAL INFORMATION . . . The financial data and other information contained herein have been obtained from the
County’s records, audited financial statements and other sources which are believed to be reliable. All of the summaries of the statutes,
documents and the Order contained in this Official Statement are made subject to all of the provisions of such statutes, documents and Order.
These summaries do not purport to be complete statements of such provisions and reference is made to such documents for further information.
All information contained in this Official Statement is subject, in all respects, to the complete body of information contained in the original
sources thereof and no guaranty, warranty or other representation is made concerning the accuracy or completeness of the information herein.
In particular, no opinion or representation is rendered as to whether any projection will approximate actual results, and all opinions, estimates,
and assumptions, whether or not expressly identified as such, should not be considered statements of fact.
FINANCIAL STATEMENTS . . . Appendix B to this Official Statement contains excerpts from the County's annual financial report for the fiscal
year ended December 31, 2013. These financial statements and supplemental schedules have been audited by Burton McCumber & Cortez,
L.L.P., McAllen, Texas, independent certified public accountant, as stated in the reports included with such financial statements in Appendix
B. Since the publication of the audit, there have been no material changes to the County’s financial position which would negatively impact
the County’s ability to repay the Obligations.
CERTIFICATION OF THE OFFICIAL STATEMENT . . . At the time of payment for and delivery of the Obligations, the Underwriters will be
furnished a certificate, executed by proper officers of the County, acting in their official capacity, to the effect that to the best of their
knowledge and belief: (1) the descriptions and statements of or pertaining to the County contained in its Official Statement, and any addenda,
supplement or amendment thereto, for the Obligations, on the date of such Official Statement, and on the date of initial delivery of the
Obligations, were and are true and correct in all material respects; (2) insofar as the County and its affairs, including its financial affairs, are
concerned, such Official Statement did not and does not contain an untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading;
(3) insofar as the descriptions and statements including financial data, of or pertaining to entities, other than the County, and their activities
contained in such Official Statement are concerned, such statements and data have been obtained from sources which the County believes to be
reliable and the County has no reason to believe that they are untrue in any material respect; and (4) there has been no material adverse change
in the financial condition of the County, since the date of the last financial statements of the County appearing in the Official Statement. The
Official Statement will be approved as to form and content and the use thereof in the offering of the Obligations will be authorized, ratified and
approved by the Commissioners Court on the date of sale, and the Underwriters will be furnished, upon request, at the time of payment for and
the delivery of the Obligations, a certified copy of such approval, duly executed by the proper officials of the County.
The Obligations have not been approved or disapproved by the United States Securities and Exchange Commission, nor has the United States
Securities and Exchange Commission passed upon the accuracy or adequacy of the Official Statement. It is the obligation of the Underwriters
to register or qualify the sales of the Obligations under the securities laws of any jurisdiction which so requires. The County agrees to
cooperate, at the Underwriters’ written request and sole expense, in registering or qualifying the Obligations or in obtaining an exemption from
registration or qualification in any state where such action is necessary; provided, however, that the County shall not be required to qualify as a
foreign corporation or to execute a general or special consent to service or process in any jurisdiction.
27
FINANCIAL ADVISOR . . . Estrada Hinojosa & Company, Inc. (the "Financial Advisor") is employed as the Financial Advisor to the County in
connection with the issuance of the Obligations. The Financial Advisor’s fee for services rendered with respect to the sale of the Obligations is
contingent upon the issuance and delivery of the Obligations. The Financial Advisor has relied on the opinion of Bond Counsel and has not
verified and does not assume any responsibility for the information, covenants, and representations contained in any of the documentation with
respect to the federal income tax status of the Obligations or the possible impact of any present, pending or future actions taken by any
legislative or judicial bodies.
UNDERWRITERS . . . The Underwriters named on the cover page hereof have agreed, subject to certain conditions, to purchase the Certificates
from the County, at a discount of $___________ from the respective initial offering prices of the Certificates shown on page i of this Official
Statement. The Underwriters will be obligated to purchase all of the Certificates if any Certificates are purchased. The Certificates to be
offered to the public may be offered and sold to certain dealers (including the Underwriters and other dealers depositing Certificates into
investment trusts) at prices lower than the public offering prices of such Certificates and such public offering prices may be changed, from time
to time, by the Underwriters.
The Underwriters named on the cover page hereof have agreed, subject to certain conditions, to purchase the Bonds from the County, at a
discount of $___________ from the respective initial offering prices of the Bonds shown on page ii of this Official Statement. 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 named on the cover page hereof have agreed, subject to certain conditions, to purchase the Notes from the County, at a
discount of $___________ from the respective initial offering prices of the Notes shown on page iii of this Official Statement. The
Underwriters will be obligated to purchase all of the Notes if any Notes are purchased. The Notes to be offered to the public may be offered
and sold to certain dealers (including the Underwriters and other dealers depositing Notes into investment trusts) at prices lower than the public
offering prices of such Notes 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 in accordance with, and as part of, their respective responsibilities to investors under the federal
securities laws as applied to the facts and circumstances of this transaction, but the Underwriters do not guarantee the accuracy or
completeness of such information.
The Underwriters and their respective affiliates are full service financial institutions engaged in various activities, which may include
securities trading, commercial and investment banking, financial advisory, investment management, principal investment, hedging,
financing and brokerage services. Certain of the Underwriters and their respective affiliates have, from time to time, performed, and may in
the future perform, various financial advisory and investment banking services for the County, for which they received or will receive
customary fees and expenses.
In the ordinary course of their various business activities, the Underwriters and their respective affiliates may make or hold a broad array of
investments and actively trade debt and equity securities (or related derivative securities, which may include credit default swaps) and
financial instruments (including bank loans) for their own account and for the accounts of their customers and may at any time hold long
and short positions in such securities and instruments. Such investment and securities activities may involve securities and instruments of
the County.
The Underwriters and their respective affiliates may also communicate independent investment recommendations, market color or trading
ideas and/or publish or express independent research views in respect of such assets, securities or instruments and may at any time hold, or
recommend to clients that they should acquire, long and/or short positions in such assets, securities and instruments.
VERIFICATION OF ARITHMETICAL AND MATHEMATICAL COMPUTATIONS . . . The arithmetical accuracy of certain computations for the
Bonds included in the schedules provided by Estrada Hinojosa & Company, Inc. on behalf of the County was verified by Grant Thornton
LLP, certified public accountants (the “Accountants”). Such computations were based solely on assumptions and information supplied by
Estrada Hinojosa & Company, Inc. on behalf of the County. The Accountants have restricted their procedures to verifying the arithmetical
accuracy of certain computations and have not made any study or evaluation of the assumptions and information on which the
computations are based, and accordingly, have not expressed an opinion on the data used, the reasonableness of the assumptions, or the
achievability of the forecasted outcome. The Accountants will verify from the information provided to them the mathematical accuracy as
of the date of the closing on the Bonds of (i) the computations contained in the provided schedules to determine that the anticipated receipts
from the Federal Securities and cash deposits listed in the schedules provided by Estrada Hinojosa & Company, Inc., to be held in the
Escrow Fund, will be sufficient to pay, when due, the principal and interest requirements of the Refunded Obligations, and (ii) the
computations of yield on both the Federal Securities and the Bonds contained in the provided schedules used by Bond Counsel in its
determination that the interest on the Bonds is excludable from the gross income of the holders thereof and the effective defeasance of the
Refunded Obligations.
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USE OF INFORMATION IN OFFICIAL STATEMENT . . . No person has been authorized to give any information or to make any representations
other than those contained in this Official Statement, and if given or made, such other information or representations must not be relied upon as
having been authorized by the County. This Official Statement does not constitute an offer to sell or solicitation of an offer to buy in any state
in which such offer or solicitation is not authorized or in which the person making such offer or solicitation is not qualified to do so or to any
person to whom it is unlawful to make such offer or solicitation.
FORWARD LOOKING STATEMENTS . . . The statements contained in this Official Statement, and in any other information provided by the
County, that are not purely historical, are forward-looking statements regarding the County’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 County on the date hereof, and the County assumes no obligation to update
any such forward-looking statements. It is important to note that the County’s actual results could differ materially from those 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 County. Any of such assumptions could be inaccurate
and, therefore, there can be no assurance that the forward-looking statements included in this Official Statement will prove to be accurate.
MISCELLANEOUS . . . The Order will also approve the form and content of this Official Statement and any addenda, supplement or amendment
thereto and authorize its further use in the reoffering of the Obligations by the Underwriters.
This Official Statement has been approved by the Commissioners Court for distribution in accordance with the provisions of the Securities and
Exchange Commission's rule codified at 17 C.F.R. Section 240.15c2-12.
HIDALGO COUNTY, TEXAS
/s/
County Judge
ATTEST:
/s/
County Clerk
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SCHEDULE I
SCHEDULE OF REFUNDED OBLIGATIONS*
Bond
Certificates of Obligation, Series 2006
Serials
M aturity
Date
Interest
Rate
Original
Par
Amount
Call
Date
Call
Price
8/15/2017
8/15/2018
8/15/2019
8/15/2020
8/15/2021
8/15/2022
8/15/2023
8/15/2024
8/15/2025
5.000%
5.000%
4.500%
4.500%
4.500%
4.500%
5.000%
4.375%
4.375%
$ 1,950,000.00
2,065,000.00
2,400,000.00
2,045,000.00
2,345,000.00
2,450,000.00
2,570,000.00
2,700,000.00
2,810,000.00
8/15/2016
8/15/2016
8/15/2016
8/15/2016
8/15/2016
8/15/2016
8/15/2016
8/15/2016
8/15/2016
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
8/15/2026
5.000%
2,935,000.00
$ 24,270,000.00
8/15/2016
100.00
______
* Preliminary, subject to change.
30
APPENDIX A
GENERAL INFORMATION REGARDING THE COUNTY
(THIS PAGE LEFT BLANK INTENTIONALLY)
THE COUNTY . . . Hidalgo County was created in 1852 from Cameron County. It was organized in the same year and at that time had an area
of 2,356 square miles. When first organized the County extended almost as far north as Nueces County; however, later reductions to form
counties to its north and east have reduced Hidalgo County to its present area of 1,583 square miles.
Hidalgo County is bounded on the east by Kenedy, Willacy, and Cameron Counties. Brooks County is to its north. Starr County lies on its
western boundary. On its southern boundary, the Rio Grande River separates Hidalgo County from the Republic of Mexico.
The Governing body of the County is its Commissioners Court. The Court has five members. The County Judge is its chairman and the
commissioner from each of the four road and bridge precincts is also a member. Each member of the Court is elected to a four-year term of
office. One of the most important duties of the Commissioners Court is management of the finances of the County.
ECONOMY . . . The area economy is diversified by the tourist industry, agribusiness and international trade with Mexico. The Texas Almanac
designates cotton, grain, vegetable, citrus, and sugar cane as principal sources of agricultural income. The County is a leading producer of
cotton and sorghum.
Minerals produced in Hidalgo County include gas, sand, and gravel.
The County is a popular tourist center located in the lush Lower Grande Valley with access to Old Mexico and facilities catering to thousands
of summer and winter visitors.
TRANSPORTATION . . . McAllen acts as a regional air transportation center serving the fourth-fastest growing metropolitan area in the United
States. Frequent daily flights to major air transportation hubs in Dallas and Houston are provided by the airport. The airport is served by
American and Continental jet aircraft, which through connections in Dallas and Houston, can provide service to more than 200 markets.
RETAIL SALES . . . Retail Sales in the Retail Trade and All Industries Categories in Hidalgo County are shown for the past ten years in the
following table:
Year
Gross Sales (1)
Retail Trade
All Industries
2005
6,595,827,747
11,898,315,769
2006
7,160,577,619
13,133,199,656
2007
7,892,008,835
14,771,355,651
2008
8,067,676,043
15,232,340,215
2009
7,544,064,879
13,705,787,534
2010
7,907,802,969
14,262,373,202
2011
8,674,685,202
15,609,321,155
2012
9,178,248,532
16,711,311,206
2013
11,819,611,835
2,224,784,159
19,831,594,224
3,949,650,175
2014
(2)
______
Source: Texas State Comptroller Quarterly Sales Tax Report.
(2)
Through first quarter 2014.
(1)
FOREIGN TRADE ZONE . . . The McAllen Foreign Trade Zone (FTZ) is located south of McAllen between McAllen and Reynosa.
Commissioned in 1973, it was the first inland FTZ in the United States and continuously ranks among the most active FTZ’s in the nation.
Products can be brought into the FTZ duty-free. While in the trade zone, components can be assembled, processed, packaged or stored. Duty
is charged only when these items enter U.S. commerce. The original McAllen FTZ encompasses 80 acres of fully developed land and contains
more than 200,000 square feet of FTZ-owned warehouse and air-conditioned office space. The FTZ also offers complete public warehousing
services. It is managed by the McAllen Economic Development Corporation-FTZ Board and monitored by the U.S. Customs Service. The
advantages to using a FTZ include (1) duties are charged only when a product is distributed into the domestic market. No duties are owed on
labor, overhead or profit attributed to a FTZ production operation. Customs duties are not paid on merchandise exported from a FTZ to another
country other than the United States, (2) goods can be stored indefinitely, allowing you to surpass the quota of your product, then release the
merchandise when quotas become available, (3) leasing space at market prices with full 24-hour security and customs assistance, (4) no
property taxes on inventories, (5) cash flow enhancement, (6) lower transportation costs, (7) prime location just north of Texas-Mexico border
and one mile south of the McAllen International Airport, and (8) access to rail service with Union Pacific and Rio Valley Railroads.
The McAllen FTZ has expanded to 695 acres. Hunt Oil Company and its subsidiary, Woodbine Development Corp, have begun the
development of their first phase of a 900-acre Class-A Business Park adjacent to McAllen’s existing Southwest Industrial District. It is
located in McAllen’s CrossPort and Foreign Trade Zone.
A-1
The McAllen Crossport includes hundreds of acres of land with infrastructure in place which includes the McAllen International Airport,
the McAllen FTZ, the South Texas College’s Center for Advanced and Applied Technology, two international bridges and a third in the
planning stages, an International Produce Market for imports and exports of produce and other perishable commodities, rail served
industrial sites with on-site switching capabilities, Enterprise Zone incentive packages, and a distance of 65 miles from McAllen to the Sea
Port of Brownsville.
EMPLOYMENT STATISTICS (1)
Civilian Labor Force
Total Employment
Total Unemployment
Percentage Unemployment
August
2014
315,502
284,682
30,820
9.8%
Hidalgo County
August
2013
316,624
282,012
34,612
10.9%
August
2012
312,052
275,866
36,186
11.6%
August
2014
13,015,760
12,295,402
720,358
5.5%
State of Texas
August
2013
12,832,523
12,010,506
822,017
6.4%
August
2012
12,601,513
11,720,068
881,445
7.0%
______
(1)
Source: Texas Workforce Commission.
COUNTY EMPLOYEES (1)
The following table shows the number and employment category of the County’s employees during fiscal years 2009 through 2013:
2013
2012
2011
2010
2009
Fuction
General government
Judicial
Executive
Elections
Financial Administration
Other-unclassified
349
25
27
350
129
371
28
26
350
127
375
29
27
353
138
327
13
25
371
130
327
14
18
344
129
Public Safety
Police
Fire
Corrections
Other Protection
450
6
831
5
407
7
790
5
419
7
769
5
389
7
799
4
382
7
801
6
Highway and streets
286
291
292
267
295
Drainage
113
107
102
94
89
Sanitation
70
73
73
75
86
416
760
32
434
804
32
446
780
50
441
778
45
440
786
44
Culture-recreation
Parks
Conservation
51
11
55
7
57
6
47
10
54
11
Urban and economic development
Hidalgo County
Urban County
26
30
29
30
1
27
Economic Opportunity
11
11
10
10
10
3,948
3,955
3,967
3,862
3,871
Health and welfare
Hidalgo County
Head Start Program
Community Service Agency
Total
______
(1)
Source: Hidalgo County payroll database and county related agencies.
A-2
BANK DEPOSITS (1)
Deposits in Hidalgo County Banks for the past ten years are shown below:
Year
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
Bank Deposits
(in thousands)
$ 6,349,957
6,790,778
7,387,490
8,718,328
8,729,406
9,327,072
9,831,374
9,524,963
9,367,086
9,702,841
9,229,518
______
(1)
Source: Federal Deposit Insurance Corporation.
A-3
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APPENDIX B
EXCERPTS FROM THE
HIDALGO COUNTY, TEXAS
ANNUAL FINANCIAL REPORT
For the Year Ended December 31, 2013
The information contained in this Appendix consists of excerpts from the Hidalgo County Annual
Financial Report for the Year Ended December 31, 2013, and is not intended to be a complete
statement of the County's financial condition. Reference is made to the complete Report for further
information.
(THIS PAGE LEFT BLANK INTENTIONALLY)
MANAGEMENT’S DISCUSSION
AND ANALYSIS (MD&A)
19
Management’s Discussion and Analysis
As management of the County of Hidalgo (the County), we offer readers of the County’s financial statements this
narrative overview and analysis of the financial activities of the County for the fiscal year ended December 31,
2013. We encourage readers to consider the information presented here in conjunction with additional
information that we have furnished in our letter of transmittal, which can be found on pages 3-9 of this report.
Financial Highlights
The assets of the County exceeded its liabilities at the close of the most recent fiscal year by
$338,686,400 (net position). Of this amount, $116,453,400 represents unrestricted net position, which
may be used to meet the County’s ongoing obligations to citizens and creditors.
The County’s total net position decreased $5,177,640 primarily due to a prior period adjustment related to
the implementation of GASB Statement No. 65 which required the recognition as an expense of debt
issuance costs which had been previously recognized as an asset (deferred charge) in the Statement of
Net Position.
At the close of the current fiscal year, the County’s governmental funds reported combined ending fund
balances of $191,535,260, an increase of $63,187,476 in comparison with the prior year. Approximately
10% of this total amount ($19,564,348) is available for spending at the County’s discretion (unassigned
fund balance).
At the end of the current fiscal year, unrestricted fund balance (the total of the committed, assigned, and
unassigned components of fund balance) for the general fund was $43,004,715, or approximately 24% of
total general fund expenditures and transfers out.
The County’s total outstanding general obligation debt increased by $61,340,000 due to the issuance of
general obligation bonds by the Drainage District No. 1 in the amount of $77,130,000. This new debt was
offset by regularly scheduled principal reductions.
Overview of the Financial Statements
The discussion and analysis provided here are intended to serve as an introduction to the County’s basic financial
statements. The County’s basic financial statements consist of three components: 1) government-wide financial
statements, 2) fund financial statements, and 3) the notes to the financial statements. This report also includes
supplementary information intended to furnish additional detail to support the basic financial statements
themselves.
Government-wide Financial Statements. The government-wide financial statements are designed to provide
readers with a broad overview of the County’s finances, in a manner similar to a private-sector business.
The statement of net position presents financial information on all of the County’s assets, liabilities, and deferred
inflows/outflows of resources, with the difference 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 County is improving or
deteriorating.
The statement of activities presents information showing how the County’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 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 County 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 County include general government, public safety, highways and
20
streets, sanitation, drainage flood control, health and welfare, culture and recreation, conservation, and urban and
economic development. The business-type activities of the County include the landfill and the jail commissary.
The government-wide financial statements include not only the County itself (known as the primary government),
but also the Hidalgo County Drainage District No. 1 (the Drainage District), and the Health Care Funding District,
both legally separate entities. Although legally separate, both component units meet the criteria in GASB
Statement No. 61 for blending and therefore, have been included as an integral part of the primary government.
The government-wide financial statements can be found on pages 31-33 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 County, like other state and local
governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal
requirements. All of the funds of the County can be divided into three categories: governmental funds, proprietary
funds, and fiduciary 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 assessing 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 County maintains multiple 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 fund, the Head Start Program special revenue fund, and the Drainage
District capital projects fund, which are considered to be major funds. Data from the other governmental funds
are combined into a single, aggregated presentation. Individual fund data for each of these nonmajor
governmental funds is provided in the form of combining statements in the combining and individual fund
statements and schedules section of this report.
The County adopts an annual appropriated budget for its governmental funds, with the exception of grant-funded
special revenue funds and capital projects funds. A budgetary comparison statement has been provided for these
funds to demonstrate compliance with this budget.
The basic governmental fund financial statements can be found on pages 34-45 of this report.
Proprietary Funds. The County 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
County uses enterprise funds to account for its landfill and jail commissary. Internal service funds are an
accounting device used to accumulate and allocate costs internally among the County’s various functions. The
County uses internal service funds to account for its risk financing activities related to health benefits and workers’
compensation. Because both of 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. Both enterprise funds are combined into a single, aggregated presentation in the proprietary fund financial
statements. Similarly, both internal service funds are combined into a single, aggregated presentation in the
proprietary fund financial statements. Individual fund data for the enterprise and internal service funds is provided
in the form of combining statements in the combining and individual fund statements and schedules section of this
report.
The basic proprietary fund financial statements can be found on pages 46-49 of this report.
21
Fiduciary funds. Fiduciary funds are used to account for resources held for the benefit of parties outside of the
government. Fiduciary funds are not reported in the government-wide financial statements because the
resources of those funds are not available to support the County’s own programs. The accounting used for
fiduciary funds is much like that used for proprietary funds.
The County maintains three different types of fiduciary funds. Pension trust funds are used to report resources
held in trust for retirees and beneficiaries covered by the Affiliated Agencies Employees’ Retirement Plan.
Private-purpose trust funds are used to report resources held in trust for others by the County Treasurer, District
Attorney, District Clerk, County Clerk, Sheriff, and the Urban County Program. Agency funds are used to report
resources held by the County in a custodial capacity for individuals, private organizations, and other governments.
The fiduciary fund financial statements can be found on pages 50-51 of this report.
Notes to the Financial Statements. The notes provide additional information that is necessary to acquire a full
understanding of the data provided in the government-wide and fund financial statements.
The notes to the financial statements can be found on pages 54-85 of this report.
Other Information. In addition to the basic financial statements and accompanying notes, this report also
presents combining and individual fund statements and schedules, which can be found on pages 88-302 of this
report.
Government-wide Overall Financial Analysis
As noted earlier, net position over time, may serve as a useful indicator of a government’s financial position. In
the case of the County, assets exceeded liabilities by $338,686,400, at the close of the most recent fiscal year.
Net Position
Governmental activities
2013
2012
Assets:
Current and other assets
Capital assets
Total assets
Deferred Outflow s:
Deferred charged on refunding
Total deferred outflow s
Liabilities:
Long-term liabilities
Other liabilities
Total liabilities
Net Position:
Net investment in capital assets
Restricted
Unrestricted
Total net position
$ 445,941,686
426,572,719
872,514,405
377,581
377,581
Business-type activities
2013
2012
$ 378,098,401
427,344,611
805,443,012
$
-
3,576,417
1,003,375
4,579,792
$
-
Total
3,213,867
1,003,375
4,217,242
-
2013
2012
$ 449,518,103
427,576,094
877,094,197
$ 381,312,268
428,347,986
809,660,254
377,581
377,581
-
367,746,690
169,347,679
537,094,369
291,451,275
172,700,666
464,151,941
1,652,884
38,125
1,691,009
1,624,719
19,554
1,644,273
369,399,574
169,385,804
538,785,378
293,075,994
172,720,220
465,796,214
148,499,402
72,663,061
114,635,154
$ 335,797,617
161,875,118
69,744,709
109,671,244
$ 341,291,071
1,003,375
66,902
1,818,506
2,888,783
1,003,375
66,902
1,502,692
2,572,969
149,502,777
72,729,963
116,453,660
$ 338,686,400
162,878,493
69,811,611
111,173,936
$ 343,864,040
$
$
By far, the largest portion of the County’s net position (44.1%) reflects its investment in capital assets (e.g., land,
buildings, machinery, equipment, vehicles, and infrastructure), less any related outstanding debt that was used to
acquire those assets. The County uses these capital assets to provide a variety of services to its citizens.
Accordingly, these assets are not available for future spending. Although the County’s investment in capital
assets is reported net of related debt, it should be noted that the resources used to repay this debt must be
provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities.
An additional portion of the County’s net position (21.5%) represents resources that are subject to external
restrictions on how they may be used.
22
The remaining balance (34.4%) is unrestricted and may be used to meet the County’s ongoing obligations to its
citizens and creditors.
At the end of the current fiscal year, the County is able to report positive balances in all reported categories of net
position, both for the government as a whole, as well as for its separate governmental and business-type
activities. The same situation is held true for the prior fiscal year.
The County’s overall net position decreased $5,177,640 from the prior fiscal year. The reasons for this overall
decrease are discussed in the following sections for governmental activities and business-type activities.
Governmental Activities. During the current fiscal year, net position for governmental activities decreased
$1,509,221 from the prior fiscal year; however, due to a prior period adjustment of $3,984,233, the overall net
position of governmental activities decreased by $5,493,454 for an ending balance of $335,797,617. The prior
period adjustment was almost entirely related to the implementation of GASB Statement No. 65 which required
the recognition as an expense of debt issuance costs which had been previously recognized as an asset
(deferred charge) in the Statement of Net Position.
Changes in Net Position
Governmental activities
2013
2012
Revenues:
Program revenues:
Charges for services
Operating grants and contributions
Capital grants and contributions
General revenues:
Property taxes
Grants and contributions not
restricted to specific programs
Interest earnings
Other
Total revenues
Expenses:
General government
Public safety
Highways and streets
Sanitation
Drainage flood control
Health and welfare
Culture-recreation
Conservation of natural resources
Urban and economic development
Interest on long-term debt
Landfill services
Jail commissary
Total expenses
Increase (decrease) in net position
Net position - beginning restated
Net position - ending
$
65,814,570
113,472,504
2,425,071
$
60,989,428
99,576,927
2,720,365
Business-type activities
2013
2012
$ 1,335,583
-
$ 1,371,909
-
188,630,519
183,936,243
-
11,497,279
589,637
2,434,450
384,864,030
3,833,434
521,437
3,560,662
355,138,496
189
11
1,335,783
2,239
81
1,374,229
112,827,372
99,428,539
35,538,330
5,768,425
18,402,498
85,762,647
4,212,908
950,619
13,464,903
10,017,010
386,373,251
(1,509,221)
337,306,838
$ 335,797,617 $
101,093,597
90,336,106
28,095,900
5,901,785
11,625,550
71,258,891
3,892,851
916,059
18,498,452
11,411,173
343,030,364
12,108,132
329,182,939
341,291,071
24,777
995,192
1,019,969
315,814
2,572,969
$ 2,888,783
28,558
1,032,782
1,061,340
312,889
2,260,080
$ 2,572,969
Total
2013
$
67,150,153
113,472,504
2,425,071
2012
$
62,361,337
99,576,927
2,720,365
188,630,519
183,936,243
11,497,279
589,826
2,434,461
386,199,813
3,833,434
523,676
3,560,743
356,512,725
112,827,372
99,428,539
35,538,330
5,768,425
18,402,498
85,762,647
4,212,908
950,619
13,464,903
10,017,010
24,777
995,192
387,393,220
(1,193,407)
339,879,807
$ 338,686,400 $
101,093,597
90,336,106
28,095,900
5,901,785
11,625,550
71,258,891
3,892,851
916,059
18,498,452
11,411,173
28,558
1,032,782
344,091,704
12,421,021
331,443,019
343,864,040
As previously stated, there was a decrease of $1,509,221 in the net position for governmental activities during the
current fiscal year. The prior year, net position for governmental activities increased $12,108,132. Overall,
increases in expenditures outpaced revenue increases by $13,617,353 during the current fiscal year.
The following is a discussion of significant increases in revenues and expenditures of governmental activities:
23
Overall revenues within governmental activities increased by $29,725,534 (8%) from the prior fiscal year. The
increase is mainly attributable to the following:
Grants and contributions increased by $21,264,128. The increase is primarily due to the 1115 Medicaid
Waiver. In 2013, the County created a Health Care Funding District that assesses mandatory payments
to the hospitals in the district for the intergovernmental transfer (IGT) to the State for funding the 1115
Medicaid Waiver. The hospitals paid the district $10,515,300 during the current fiscal year. In addition,
the County received a one-time Delivery System Reform Incentive Payment (DSRIP) of $7,022,937 from
the state related to the 1115 Medicaid Waiver. The increases from the 1115 Medicaid Waiver were offset
with decreases in grants to the Head Start Program ($1,977,645) and other grants.
Charges for services increased by $4,825,142 primarily due to new and/or increases in fees and
increases in the premiums for the self-insured health benefits fund.
Property tax revenues increased by $4,694,275 due in part to a higher than expected collection rate.
Overall expenses within governmental activities increased by $43,342,887 (13%) from the prior fiscal year. The
increase is mainly attributable to the following:
Expenses for health and welfare increased by $14,503,756 primarily due to the IGT by the Health Care
Funding District.
Expenses for general government increased by $11,733,775 in large part due to the recognition of debt
issuance costs ($3,972,568) which had been previously recognized as an asset (deferred charge) in the
Statement of Net Position and rising health benefit claims ($3,537,083).
Expenses for public safety increased by $9,092,433 mainly due to a capital lease to upgrade the Sheriff’s
radio communication system ($6,856,405).
Increases in expenditures for highways and streets ($7,442,430) and drainage flood control ($6,776,948)
were offset by decreases in expenses for urban development ($5,033,549) due to cuts in funding by HUD
and interest expense ($1,394,163).
Expenses and Program Revenues - Governmental Activities
expenses
program revenues
Millions
120
100
80
60
40
20
-
General
government
Public safety
Highways &
streets
Sanitation
Drainage
Health & welfare
24
Culturerecreation
Conservation of
natural
resources
Urban and
economic
development
Interest on longterm debt
Revenues by Source - Governmental Activities
Property taxes
49.01%
Interest earnings
0.15%
Other
0.63%
Charges for services
17.10%
Grants &
contributions
33.10%
Business-type Activities. For the County’s business-type activities, the results for the current fiscal year were
positive in that overall net position increased to reach an ending balance of $2,888,783. The total increase in net
position for business-type activities (landfill and jail commissary funds) was $315,814 or 12% from the prior fiscal
year. Overall revenue decreased by $38,446 due to a decrease in jail commissary charges. Expenses decreased
by $41,371. Landfill expenses decreased by $3,781 while the jail commissary expenses decreased by $37,590.
Financial Analysis of the Governmental Funds
As noted earlier, the County uses fund accounting to ensure and demonstrate compliance with finance-related
legal requirements.
Governmental Funds. The focus of the County’s governmental funds is to provide information on near-term
inflows, outflows, and balances of spendable resources. Such information is useful in assessing the County’s
financing requirements. In particular, unassigned fund balance may serve as a useful measure of a government’s
net resources available for discretionary use as they represent the portion of fund balance which has not yet been
limited to use for a particular purpose by either an external party, the County itself, or a group or individual that
has been delegated authority to assign resources for particular purposes by the County’s Commissioners Court.
At December 31, 2013, the County’s governmental funds reported combined fund balances of $191,535,260, an
increase of $63,187,476 in comparison with the prior fiscal year. Approximately 10% of this amount
($19,564,348) constitutes unassigned fund balance, which is available for spending at the County’s discretion.
The remainder of fund balance is either nonspendable, restricted, committed, or assigned to indicate that it is 1)
not in spendable form ($3,685,435), 2) restricted for particular purposes ($43,386,058), 3) committed for particular
purposes ($6,848,513), or 4) assigned for particular purposes ($118,050,906).
The general fund is the chief operating fund of the County. At the end of the current fiscal year, unassigned fund
balance of the general fund was $21,279,479, while total fund balance decreased slightly to $50,031,744. As a
measure of the general fund’s liquidity, it may be useful to compare both unassigned fund balance and total fund
balance to total fund expenditures and transfers out. Unassigned fund balance represents approximately 12% of
total general fund expenditures and transfers out, while total fund balance represents approximately 27% of that
same amount. The fund balance of the County’s general fund marginally decreased by $219,887 during the
current fiscal year.
The Head Start Program special revenue fund, a major fund, had a slight increase of $75,953 in fund balance
during the current fiscal year which brought the overall fund balance to $330,815.
The Drainage District capital projects fund became a major fund in the current fiscal year. The fund balance
increased by $66,105,019 during the current fiscal year which brought the overall fund balance to $73,581,012.
The increase was due to the issuance of $77,130,000 in bonds for drainage flood control projects.
25
Proprietary Funds. The County’s proprietary funds provide the same type of information found in the
government-wide financial statements, but in more detail.
Unrestricted net position of the jail commissary at the end of the current fiscal year increased by $340,402 to a
balance of $2,606,531. However, the unrestricted net position of the landfill decreased by $24,588 to a deficit
balance of $788,025. The total net position for both funds was $2,608,813 and $279,970, respectively. Other
factors concerning the finances of these two funds have already been addressed in the discussion of the County’s
business-type activities.
General Fund Budgetary Highlights
Original Budget Compared to Final Budget. During the current fiscal year, there was an increase of
$13,646,115 in appropriations (including other financing uses) between the original and final amended budget.
Following are the key components of the budget increase.
$8,067,117 of the increase was possible because of unanticipated revenues. This increase in
appropriations was mainly due to a capital lease to upgrade the Sheriff’s radio communication system
($6,856,405). In addition, proceeds from the sale of County property were appropriated for a roadway
project in Precinct No. 2 ($935,540) and to purchase vehicles and equipment for Precinct No. 1
($144,776).
$4,176,073 of the increase resulted from using assigned fund balance. These funds were appropriated
for repairs to the adult detention facility.
$1,402,925 of the increase resulted from using restricted fund balance. These funds were appropriated
for the County Clerk’s records archive ($610,624), Child Advocacy Center ($50,000), Drug Court
($32,508), Sheriff ($12,805), and to fund grant matching requirements ($696,988).
During the current fiscal year, there was an increase of $8,339,723 in estimated revenues (including other
financing sources) between the original and final amended budget. Following are the key components of the
increase in estimated revenues.
$6,964,955 of the increase was due to capital lease agreements for the acquisition of equipment. The
largest capital lease was to upgrade the Sheriff’s radio communication system ($6,856,405).
$1,085,206 of the increase was due to the sale of airport property to the City of Edinburg ($935,540); the
sale of Precinct No. 1 assets to the Drainage District ($144,776); and the sale of abandoned vehicles
($4,890).
$153,400 of the increase was due to unanticipated revenues related to charges for services.
$95,000 of the increase was due to grants received from the Texas Department of Family and Protective
Services.
$17,504 of the increase was due to gambling proceeds.
$1,500 of the increase was a contribution to the County.
$346 of the increase was due to a transfer in to the general fund.
$21,812 of the increase was due to miscellaneous revenues.
Final Budget Compared to Actual Results. A review of actual expenditures compared to appropriations in the
final budget yields no significant variances with two exceptions. Actual expenditures for the repair of the adult
detention facility were $4,921,354 less than the final amended budget because the Sheriff was not ready to begin
procurement for the repairs. In addition, actual transfers out for grant matching requirements were $940,690 less
than the final amended budget due to the difference in fiscal years. Grants operate on a fiscal year (usually
st
st
st
beginning September 1 or October 1 ) different from the County’s fiscal year (beginning January 1 ).
A review of actual revenues compared to estimated revenues in the final budget yields significant variances in
three categories of revenues. The most significant difference between estimated revenues and actual revenues
was in intergovernmental revenues. The County received a one-time Delivery System Reform Incentive Payment
(DSRIP) of $7,022,937 from the state related to the Medicaid 1115 Waiver. The DSRIP payment was made to
the County because it serves as a Regional Healthcare Partnership (RHP) anchor. In addition, actual charges for
services exceeded budgetary estimates by $3,000,393 primarily due to an increase in court costs. Finally, actual
tax collections exceeded the budgetary estimate by $1,358,769 due to a higher than expected collection rate.
26
Capital Asset and Debt Administration
Capital Assets. The County’s investment in capital assets for its governmental and business-type activities as of
December 31, 2013, amounts to $427,576,094 (net of accumulated depreciation). This investment in capital
assets includes land, buildings and systems, improvements, machinery and equipment, park facilities, roads, and
bridges. Total capital assets for the current fiscal year slightly decreased by approximately 0.18%.
Major capital events during the current fiscal year included the following: (1) completed construction on the
Sheriff’s substation in Precinct No. 1; (2) completed an addition to a WIC building; (3) completed construction of
the court modular buildings; began construction on the Precinct No. 4 emergency services building; and (4) began
the schematic design of the new courthouse.
Capital Assets (net of accum ulated depreciation)
Land
Infrastructure
Buildings and renovations
Improvements other than buildings
Machinery and equipment
Construction in progress
Total
Governmental activities
2013
2012
$ 58,794,250 $ 62,181,885
185,312,259
192,443,484
99,897,973
71,199,571
11,230,628
10,040,331
40,142,590
33,625,310
31,195,019
57,854,030
$ 426,572,719 $ 427,344,611
Business-type activities
2013
2012
$ 1,001,093 $ 1,001,093
2,282
2,282
$ 1,003,375 $ 1,003,375
Total
2013
2012
$ 59,795,343 $ 63,182,978
185,312,259
192,443,484
99,897,973
71,199,571
11,230,628
10,040,331
40,144,872
33,627,592
31,195,019
57,854,030
$ 427,576,094 $ 428,347,986
Additional information on the County’s capital assets can be found in the notes to the financial statements (See
Note 3.C.).
Long-term Debt. At the end of the current fiscal year, the County had total bonded debt outstanding of
$325,920,000. This debt is backed by the full faith and credit of the government. Additionally, the County had
notes payable totaling $2,015,024. This table excludes unamortized premiums and discounts.
General Obligation Bonds and Notes Outstanding
Refunding bonds
General obligation bond
Certificates of obligation
Notes-Hidalgo County
Notes-Urban County Program
Total
Governmental activities
2013
2012
$ 66,975,000 $ 71,630,000
163,535,000
90,305,000
95,410,000
102,645,000
500,024
845,988
1,515,000
1,680,000
$ 327,935,024 $ 267,105,988
Business-type activities
2013
2012
$
$
$
$
-
Total
2013
2012
$ 66,975,000 $ 71,630,000
163,535,000
90,305,000
95,410,000
102,645,000
500,024
845,988
1,515,000
1,680,000
$ 327,935,024 $ 267,105,988
The County’s total debt increased by $60,829,036 due to the issuance of $77,130,000 in bonds by the Drainage
District which was offset by regularly scheduled principal reductions.
The County maintains an “AA-” rating from Standard & Poor’s and Fitch Ratings and an “Aa2” rating from Moody’s
investors Service for general obligation debt. The Drainage District maintains an “AAA” rating from Standard &
Poor’s and an “Aaa” rating from Moody’s investors Service for general obligation debt.
State statutes limit the amount of general obligation debt that the County may issue to 25% of its total assessed
valuation. The current debt limitation for the County is $6.96 billion, which is significantly in excess of the
County’s outstanding general obligation debt.
Additional information about the County’s long-term debt can be found in the notes to the financial statements
(See Note 3.G.).
27
Economic Factors and Next Year’s Budgets and Rates
The following economic factors were considered in developing the County’s 2014 fiscal year budget.
According to the Texas Workforce Commission, the unemployment rate (unadjusted) for August 2013 for the
County of Hidalgo was 10.9%, which was higher than the state (6.4%) and national (7.3%) unemployment
rates for the same period.
Assessed property values had averaged 9% growth prior to fiscal year 2010. However, due to the economic
downturn, the County experienced a modest 4% increase in assessed property values for fiscal year 2010
followed by negative growth of 1% for fiscal years 2011 and 2012. For fiscal year 2013, the County
experienced positive growth of 1%. The County was projected to experience positive growth of up to 3% for
fiscal year 2014.
The ad valorem property tax rate has remained at $0.590 per $100 assessed valuation since fiscal year 2004.
The Commissioners Court did not increase the tax rate for fiscal year 2014.
Staffing levels were expected to be maintained for the 2014 budget. In addition, no provision for a Cost of
Living Adjustment (COLA) was approved.
During the current fiscal year, the County’s unassigned fund balance of the general fund was $32,985,426. The
County has appropriated $11,706,190 of this amount for spending in the 2014 fiscal year budget. This action was
taken in order to avoid the need to raise taxes or charges during the 2014 fiscal year.
Requests for Information
This financial report is designed to provide a general overview of the County’s finances for all those with an
interest in the government’s finances. Questions concerning any of the information provided in this report or
requests for additional financial information should be addressed to the Hidalgo County Auditor’s Office, 2808
South Business Highway 281, Edinburg, Texas 78539.
This report is available online at
http://www.co.hidalgo.tx.us/index.asp?NID=448.
28
BASIC FINANCIAL STATEMENTS
29
30
EXHIBIT A-1
COUNTY OF HIDALGO, TEXAS
STATEMENT OF NET POSITION
DECEMBER 31, 2013
Governmental
Activities
ASSETS
Cash and cash equivalents
Certificates of deposit
Receivables (net of allowance for uncollectibles)
Internal balances
Due from others
Inventories
Prepaids
Restricted cash
Other assets
Capital assets not being depreciated:
Land and easements
Construction in progress
Capital assets net of accumulated depreciation:
Infrastructure
Buildings and renovations
Improvements other than buildings
Machinery and equipment
Total capital assets (net of accumulated depreciation)
Total assets
$
$
58,794,250
31,195,019
185,312,259
99,897,973
11,230,628
40,144,872
427,576,094
877,094,198
-
377,581
377,581
18,271
16,942
17,722,462
7,212,438
358,699
6,085,111
194,752
4,779
2,872,605
133,942,428
992,530
-
2,912
-
19,769,304
257,317
486,127
2,159,021
948,208
-
-
-
186,776,474
100,000,000
150,737,685
701,185
786,642
2,798,982
66,902
7,650,233
59,795,343
31,195,019
2,282
1,003,375
4,579,793
17,704,191
7,195,496
358,699
6,085,111
194,752
4,779
2,869,693
133,942,428
992,530
$
$
-
377,581
377,581
LIABILITIES
Accounts payable
Salaries and benefits payable
Retainage payable
Accrued interest payable
Notes payable - short-term
Due to others
Due to other governments
Unearned revenue
Other current liabilities
Noncurrent liabilities:
Due within one year
Bonds payable
Notes payable
Compensated absences
Claims and judgments payable
Capital leases
Landfill closure/postclosure care costs
Due in more than one year
Bonds payable
Notes payable
Compensated absences
Claims and judgments payable
Capital leases
Net pension obligation
Other post employment benefits
Landfill closure/postclosure care costs
Total liabilities
3,487,701
(6,314)
28,128
66,902
-
Total
1,001,093
-
185,312,259
99,897,973
11,230,628
40,142,590
426,572,719
872,514,405
DEFERRED OUTFLOWS OF RESOURCES:
Deferred charges on refunding
Total deferred outflows of resources
NET POSITION
Net investment in capital assets
Restricted For:
Legislative
Grants
Debt service
Capital projects
Bond covenant
Unrestricted
Total net position
183,288,773
100,000,000
150,737,685
6,314
701,185
758,514
2,798,982
7,650,233
Business-type
Activities
35,386
19,769,304
257,317
486,676
2,159,021
948,208
35,386
317,025,982
1,757,707
8,435,916
1,582,979
6,729,503
987,151
7,607,475
537,094,369
12,405
1,604,544
1,691,009
317,025,982
1,757,707
8,448,321
1,582,979
6,729,503
987,151
7,607,475
1,604,544
538,785,378
148,499,402
1,003,375
149,502,777
21,687,062
8,650,732
14,260,869
28,064,398
114,635,154
335,797,616
The accompanying notes are an integral part of this statement.
31
549
-
-
$
66,902
1,818,506
2,888,783
$
21,687,062
8,650,732
14,260,869
28,064,398
66,902
116,453,660
338,686,399
COUNTY OF HIDALGO, TEXAS
STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED DECEMBER 31, 2013
Functions/Programs
Governmental activities:
General government
Public safety
Highways and streets
Sanitation
Drainage flood control
Health and welfare
Culture-recreation
Conservation of natural resources
Urban and economic development
Interest on long-term debt
Total governmental activites
Business-type Activities:
Hidalgo County Sanitary Landfill & Resource
Hidalgo County Jail Commissary
Total Business-type Activities
Total Primary Government
Charges for
Services
Expenses
$
$
112,827,372
99,428,539
35,538,330
5,768,425
18,402,498
85,762,647
4,212,908
950,619
13,464,903
10,017,010
386,373,251
24,777
995,192
1,019,969
387,393,220
$
$
Program Revenues
Operating
Capital
Grants and
Grants and
Contributions
Contributions
56,453,021
7,968,233
429,606
37,250
926,460
65,814,570
$
3,289,315
16,064,696
9,325,074
71,667,224
7,500
11,454
12,872,788
234,453
113,472,504
1,335,583
1,335,583
67,150,153
$ 113,472,504
$
$
General Revenues:
Property taxes
Grants and contributions not restricted to specific programs
Interest earnings
Miscellaneous
Gain on sale of capital assets
Total general revenues and transfers
Change in net position
Net position - beginning
Prior period adjustment
Net position - ending
The accompanying notes are an integral part of this statement.
32
2,425,071
2,425,071
2,425,071
EXHIBIT A-2
Net (Expense) Revenue and Changes in Net Position
Governmental
Activities
$
(53,085,036)
(75,395,610)
(23,358,579)
(5,768,425)
(18,365,248)
(13,168,963)
(4,205,408)
(939,165)
(592,115)
(9,782,557)
(204,661,106)
(204,661,106)
$
Business-type
Activities
188,630,519
11,497,279
589,637
1,991,573
442,877
203,151,885
(1,509,221)
341,291,071
(3,984,233)
335,797,617
Total
$
$
(24,777)
340,391
315,614
315,614
(24,777)
340,391
315,614
(204,345,492)
189
-
$
11
200
315,814
2,572,969
2,888,783
(53,085,036)
(75,395,610)
(23,358,579)
(5,768,425)
(18,365,248)
(13,168,963)
(4,205,408)
(939,165)
(592,115)
(9,782,557)
(204,661,106)
$
188,630,519
11,497,279
589,826
1,991,573
442,888
203,152,085
(1,193,407)
343,864,040
(3,984,233)
338,686,400
33
COUNTY OF HIDALGO, TEXAS
BALANCE SHEET - GOVERNMENTAL FUNDS
DECEMBER 31, 2013
Head
Start
Program
General
Fund
ASSETS
Cash and cash equivalents
Certificates of deposit
Receivables (net of allowance for uncollectibles)
Taxes
Accounts
Loans
Interest
Due from other funds
Due from other governments
Due from others
Inventories
Prepaids
Other assets
Total assets
$
$
LIABILITIES, DEFERRED INFLOWS,
AND FUND BALANCES
Liabilities:
Accounts payable
Salaries and benefits payable
Retainage payable
Notes payable - short-term
Due to other funds
Due to other governments
Due to others
Unearned revenues
Held in escrow
Undistributed receipts
Total liabilities
$
Deferred inflows of resources:
Unavailable revenue-property taxes
Unavailable revenue-other
Total deferred inflows of resources
Fund balances:
Nonspendable
Restricted
Committed
Assigned
Unassigned
Total fund balances
Total liabilites, deferred inflows,
and fund balances
$
The accompanying notes are an integral part of this statement.
34
64,188,119
65,000,000
96,550,136
476,011
441,293
166,613
218,120
2,700,173
60,570
758,514
2,592,665
233,152,214
6,260,086
4,462,437
4,560
10,279,563
1,831,119
915
97,382,920
978,198
13,701
121,213,499
$
$
$
316,698
863,141
1,179,839
343,529
505,495
849,024
58,826,753
3,080,218
61,906,971
-
3,647,152
3,379,877
21,725,479
21,279,236
50,031,744
330,815
330,815
233,152,214
$
1,179,839
EXHIBIT A-3
Capital
Projects
Drainage
District
No. 1
$
$
$
47,317,544
30,000,000
77,317,544
2,109,403
27,637
1,599,492
3,736,532
Other
Governmental
Funds
$
$
$
-
73,581,012
73,581,012
$
77,317,544
$
69,322,492
5,000,000
30,114,078
48,137
10,400
13,576
24,914,111
19,200,315
379,781
27,883
7,650,233
156,681,006
7,481,973
2,201,948
326,502
194,752
13,252,458
1,038,574
3,864
36,496,864
631
60,997,566
Total
Governmental
Funds
$
$
$
181,144,853
100,000,000
126,664,214
1,387,289
451,693
180,189
25,132,231
21,900,488
440,351
758,514
2,620,548
7,650,233
468,330,603
16,194,991
7,169,880
358,699
194,752
25,131,513
2,869,693
4,779
133,879,784
978,829
13,701
186,796,621
18,440,707
9,651,044
28,091,751
77,267,460
12,731,262
89,998,722
38,283
39,675,366
6,848,513
22,744,415
(1,714,888)
67,591,689
3,685,435
43,386,058
6,848,513
118,050,906
19,564,348
191,535,260
156,681,006
35
$
468,330,603
36
EXHIBIT A-4
COUNTY OF HIDALGO, TEXAS
RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET
TO THE STATEMENT OF NET POSITION
DECEMBER 31, 2013
Total fund balances - governmental funds balance sheet
$191,535,260
Amounts reported for governmental activities in the statement of net position (SNP)
are different because:
1 Capital assets used in governmental activities are not financial resources and therefore
are not reported in the funds. Those assets consist of:
Land
Infrastructure
Buildings and renovations
Improvements other than buildings
Machinery and equipment
Construction in progress
58,794,250
185,312,259
99,897,973
11,230,628
40,089,958
31,195,019
2 Deferred outflows of resources represent a consumption of net position that applies
to future periods, therefore, they are not recognized as an outflow until then. For refunding
debt the amount is amortized over the shorter of the life of refunded or refunding debt.
426,520,087
377,581
3 Other long-term assets are not available to pay for current period expenditures and
therefore are reported as unavailable revenues in the funds.
Property taxes
Other
77,267,461
12,731,261
89,998,722
4 Interest on long-term debt is not accrued in the governmental funds, but rather is recognized
as an expenditure when due.
Accrued interest on bonds
Accrued interest on notes
(6,037,313)
(47,798)
(6,085,111)
5 Long-term liabilities applicable to the County's governmental activities are not due and
payable in the current period and accordingly are not reported as fund liabilities. All
liabilities both current and long-term are reported in the statement of net position. The
County has issued bonds with premiums and discounts. The amounts were received
in the governmental funds and increased fund balance. The premium or discounts
will be amortized as an adjustment to interest expense in the statement of activities
over the remaining life of the debt.
(325,920,000)
Bonds payable
(2,015,024)
Notes payable
(7,663,586)
Capital leases payable
(8,889,669)
Compensated absences
(7,607,475)
Post employment benefits
3,151
(7,604,324)
Prepaid post employment benefits
Net pension obigation
Prepaid pension obligation
(987,151)
175,283
(811,868)
Unamortized premiums
Unamortized discounts
(10,939,122)
63,837
(10,875,285)
6 The assets and liabilities of the internal service fund are included in the governmental
activities in the statement of net position. (See Exhibit A-10) Internal service fund net position is:
Total net position of governmental activities (Exhibit A-1)
The accompanying notes are an integral part of this statement.
37
(363,779,757)
(2,769,165)
$335,797,617
COUNTY OF HIDALGO, TEXAS
STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES
IN FUND BALANCES - GOVERNMENTAL FUNDS
FOR THE YEAR ENDED DECEMBER 31, 2013
Head
Start
Program
General
Fund
REVENUES
Taxes
Licenses and permits
Intergovernmental
Charges for services
Fines and forfeits
Interest
Miscellaneous
Total revenues
$
EXPENDITURES
Current:
General government
Public safety
Highways and streets
Sanitation
Drainage flood control
Health and welfare
Culture-recreation
Conservation of natural resources
Urban and economic development
Debt service:
Principal
Interest and fiscal charges
Bond issuance costs
Capital outlay:
General government
Public safety
Highways and streets
Drainage flood control
Culture-recreation
Intergovernmental:
General government
Public safety
Total expenditures
142,858,126
120,821
14,212,149
15,419,015
466,744
413,957
839,659
174,330,471
70,429,284
73,120,450
5,412,808
19,740,758
3,564,655
923,938
496,669
OTHER FINANCING SOURCES (USES):
Transfers in
Transfers out
Premium on bonds issued
Bonds issued
Capital leases
Sale of capital assets
Total other financing sources (uses)
32,977,672
32,977,672
32,901,719
-
249,101
10,511
-
-
-
-
173,948,174
32,901,719
382,297
75,953
Excess (deficiency) of revenues over
(under) expenditures
346
(8,852,186)
6,964,955
1,284,701
(602,184)
Net change in fund balances
-
(219,887)
Fund balances at beginning of year,
as previously reported
75,953
50,251,631
Prior period adjustments
254,862
-
Fund balances at beginning of year,
as restated
Fund balances at the end of year
$
-
50,251,631
$
50,031,744
The accompanying notes are an integral part of this statement.
38
254,862
$
330,815
EXHIBIT A-5
Capital
Projects
Drainage
District
No. 1
$
-
Other
Governmental
Funds
$
82,853
82,853
$
182,137,224
5,712,911
104,101,649
25,114,781
17,167,982
591,291
2,159,747
336,985,585
-
6,067,764
23,915,968
21,715,045
12,432,685
31,514,249
10,000
11,454
12,872,788
76,497,048
97,036,418
21,715,045
5,412,808
12,432,685
84,156,726
3,574,655
935,392
13,369,457
545,831
16,332,151
12,288,266
-
16,581,252
12,298,777
545,831
18,424,251
-
2,422,595
1,114,959
12,857,667
314,686
2,422,595
1,114,959
12,857,667
18,424,251
314,686
18,970,082
57,172
610,009
154,537,458
57,172
610,009
380,357,433
(18,887,229)
(24,942,869)
(43,371,848)
7,415,831
77,130,000
446,417
84,992,248
12,132,144
(3,280,307)
78,725
13,250,370
22,180,932
12,132,490
(12,132,493)
7,415,831
77,130,000
7,043,680
14,981,488
106,570,996
66,105,019
(2,761,937)
63,199,148
7,475,993
70,365,298
128,347,784
-
(11,672)
7,475,993
$
39,279,098
5,592,090
56,911,828
9,695,766
16,701,238
94,481
1,320,088
129,594,589
Total
Governmental
Funds
73,581,012
(11,672)
70,353,626
$
67,591,689
39
128,336,112
$
191,535,260
40
EXHIBIT A-6
COUNTY OF HIDALGO, 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 DECEMBER 31, 2013
Net change in fund balances - total governmental funds
$63,199,148
The change in net position reported for governmental activities in the statement of activities
(SOA) is different because:
1 Governmental funds report capital outlays as expenditures. However, in the statement of
activities, the cost of those assets are allocated over their estimated useful lives and
reported as depreciation expense.
Capital outlay
Depreciation
2 Sales and other dispositions of capital assets are reported in the governmental funds as
other financing sources. The gain or loss on the sale of capital assets should be reported
in the statement of activities. A gain is reported as general revenue and a loss should
be included as part of the general government function.
3 Governmental funds typically report proceeds they receive in connection with the disposal
of capital assets as other financing sources. This amount must be removed
by an adjustment to the appropriate capital asset and the accumulated depreciation
account. Any gain or loss should be reported as discussed above.
4 Donations of capital assets increase net assets in the SOA but not in the funds.
5 Revenues in the statement of activities that do not provide current financial resources are
not reported as revenue in the current year.
Related to prior years
Earned but unavailable
6 Under the modified accrual basis of accounting used in governmental funds, expenditures
are not recognized for transactions that are not normally paid with expendable available
financial resources. In the statement of activities, however, which is presented on the
accrual basis, expenses and liabilities are reported regardless of when financial resources
are available. In addition, interest on long-term debt is not recognized under the modified
accrual basis of accounting until due, rather than as it accrues. This adjustment combines
the net changes:
Compensated absences
Net pension obligation
Amortization of debt discounts
Amortization of debt premiums
Amortization of deferred charge on refunding
Accrued interest on bonds and notes
Post employment benefits
41,837,369
(28,220,331)
13,617,038
442,877
(174,798)
268,079
(14,981,488)
315,355
(70,774,165)
89,998,722
19,224,557
(670,354)
(11,335)
(5,803)
1,352,706
(614,544)
(1,610,414)
(955,072)
(2,514,816)
(77,130,000)
(7,415,831)
(84,545,831)
7 Bond proceeds are reported as financing sources in governmental funds and thus contribute
to the change in fund balance. In the statement of net position, however, the issuance of debt
increases long-term liabilities and does not affect the statement of activities. Similarly,
repayment of principal is an expenditure in the governmental funds but reduces the liability
in the statement of net position.
Debt issued:
Bonds
Unlimited Tax Improvement Bonds, Series 2013
Premium on Series 2013
Capital leases
(7,043,680)
Repayments:
Bond principal
15,790,000
Note principal
510,961
Capital leases
445,366
8 Internal service fund (See Exhibit A-11) was used by the County to charge the cost of
insurance and workers' compensation to individual funds. The operating income (loss) of the internal
service fund is reported with the governmental activities.
Change in net position of governmental activities - statement of activities
16,746,327
(5,793,909)
$(1,509,221)
The accompanying notes are an integral part of this statement.
41
COUNTY OF HIDALGO, TEXAS
EXHIBIT A-7
Page 1 of 3
STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN
FUND BALANCE - BUDGET AND ACTUAL
GENERAL FUND
FOR THE YEAR ENDED DECEMBER 31, 2013
Budgeted Amounts
Original
Final
REVENUES
Taxes
Licenses and permits
Intergovernmental
Charges for services
Fines and forfeits
Interest
Miscellaneous
Total revenues
EXPENDITURES
Current:
General government
92nd District Court
93rd District Court
139th District Court
206th District Court
275th District Court
332nd District Court
370th District Court
389th District Court
398th District Court
430th District Court
449th District Court
County Court-at-Law 1
County Court-at-Law 2
County Court-at-Law 3
County Court-at-Law 4
County Court-at-Law 5
County Court-at-Law 6
County Court-at-Law 7
County Court-at-Law 8
Master Court 1
Master Court 2
Court of Civil Appeals
Auxiliary Court
Child Protective Court
Justice of the Peace, Pct 1, Pl 1
Justice of the Peace, Pct 1, Pl 2
Justice of the Peace, Pct 2, Pl 1
Justice of the Peace, Pct 2, Pl 2
Justice of the Peace, Pct 3, Pl 1
Justice of the Peace, Pct 3, Pl 2
Justice of the Peace, Pct 4, Pl 1
Justice of the Peace, Pct 4, Pl 2
Justice of the Peace, Pct 5, Pl 1
Criminal District Attorney
Public Defender
District Clerk
County Judge
Budget and Management
Executive Office
Elections
Actual
$ 141,499,356
100,000
5,985,000
12,265,226
301,500
305,000
893,000
161,349,082
$ 141,499,356
100,000
6,080,000
12,418,626
319,004
305,000
916,312
161,638,297
$ 142,858,126
120,821
14,212,149
15,419,015
466,744
413,957
839,659
174,330,471
396,471
396,471
396,471
396,471
396,471
396,471
396,471
396,471
813,768
396,471
396,471
510,254
510,254
615,045
510,254
510,254
510,254
510,254
510,254
120,971
125,310
3,738
290,283
350
333,446
334,841
292,803
308,677
320,245
371,009
380,272
682,216
281,076
7,304,959
831,720
3,210,941
1,394,168
16,885,969
5,700,091
1,809,197
385,261
371,572
391,064
371,753
361,958
382,190
397,442
377,692
817,056
469,764
340,607
528,561
517,801
611,535
515,819
493,075
505,506
494,131
499,202
124,032
124,372
3,381
370,091
109,192
330,202
319,346
292,956
292,670
317,939
377,799
366,209
488,545
292,542
7,433,130
880,023
3,227,686
1,346,639
10,015,413
6,033,859
1,867,945
373,395
357,807
382,702
358,961
352,961
371,663
393,233
364,498
798,749
458,451
322,469
521,630
503,221
603,728
509,567
482,123
489,396
478,077
491,517
122,617
123,156
2,964
367,415
108,055
328,019
318,334
289,017
277,374
315,713
376,718
364,013
476,706
290,335
7,332,370
876,120
3,221,283
1,331,466
9,754,389
5,902,859
1,827,651
The accompanying notes are an integral part of this statement.
42
Variance with
Final Budget
Positive
(Negative)
$
1,358,769
20,821
8,132,149
3,000,389
147,740
108,957
(76,653)
12,692,173
11,866
13,765
8,362
12,792
8,997
10,527
4,209
13,194
18,307
11,313
18,138
6,931
14,580
7,807
6,252
10,952
16,110
16,054
7,685
1,415
1,216
417
2,676
1,137
2,183
1,012
3,939
15,296
2,226
1,081
2,196
11,839
2,207
100,760
3,903
6,403
15,173
261,024
131,000
40,294
COUNTY OF HIDALGO, TEXAS
EXHIBIT A-7
Page 2 of 3
STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN
FUND BALANCE - BUDGET AND ACTUAL
GENERAL FUND
FOR THE YEAR ENDED DECEMBER 31, 2013
Tax-Assessor Collector
County Treasurer
Purchasing
County Auditor
County Clerk
Human Resources/Civil Service
Information Technology
Planning
General Government Buildings
Appraisal Fees
Total general government
Public safety
Criminal District Attorney
County Judge
Budget and Management
Commissioner, Pct 3
Executive Office
Sheriff
Constable, Pct 1
Constable, Pct 2
Constable, Pct 3
Constable, Pct 4
Constable, Pct 5
Fire Marshal
Adult Probation
Juvenile Probation
Total public safety
Budgeted Amounts
Original
Final
6,490,213
6,830,945
832,955
873,260
1,707,670
1,574,343
2,799,832
2,815,168
3,675,581
4,240,605
690,597
730,602
2,346,260
2,740,485
1,059,355
1,067,369
5,470,072
6,092,364
1,600,000
1,649,000
76,620,118
72,060,101
Actual
6,620,361
868,982
1,561,455
2,663,472
4,052,433
717,129
2,624,645
1,062,422
5,988,776
1,648,887
70,429,284
Variance with
Final Budget
Positive
(Negative)
210,584
4,278
12,888
151,696
188,172
13,473
115,840
4,947
103,588
113
1,630,817
719,381
383,304
55,000
26,379
317,779
48,291,968
1,075,270
745,067
1,187,041
1,169,200
1,959,467
346,446
9,334,269
65,610,571
883,795
365,780
80,417
274,662
60,494,483
1,132,011
885,035
1,233,763
1,270,986
1,053
1,625,697
517,258
10,062,326
78,827,266
819,975
358,942
75,500
234,459
55,024,798
1,116,277
870,250
1,224,906
1,263,278
1,053
1,591,040
494,117
10,045,855
73,120,450
63,820
6,838
4,917
40,203
5,469,685
15,734
14,785
8,857
7,708
34,657
23,141
16,471
5,706,816
1,114,743
956,673
2,066,927
832,894
4,971,237
1,680,921
920,868
2,059,937
1,085,130
5,746,856
1,626,802
801,855
1,912,767
1,071,384
5,412,808
54,119
119,013
147,170
13,746
334,048
50,000
822,638
9,498,437
6,536,074
2,000
122,272
261,789
17,293,210
985,074
12,359,231
6,245,616
6,105
84,580
235,509
19,916,115
968,370
12,328,886
6,127,637
5,991
76,397
233,477
19,740,758
16,704
30,345
117,979
114
8,183
2,032
175,357
873,834
1,036,621
768,009
687,650
784,027
4,150,141
835,250
769,824
702,031
739,063
783,687
3,829,855
812,451
709,238
652,436
610,832
779,698
3,564,655
22,799
60,586
49,595
128,231
3,989
265,200
Sanitation
Commissioner, Pct 1
Commissioner, Pct 2
Commissioner, Pct 3
Commissioner, Pct 4
Total sanitation
Health and welfare
Budget and Management
Executive Office
Human Services
Health Department
WIC
Child Welfare
Veterans Service
Total health and welfare
Culture and recreation
Commissioner, Pct 1
Commissioner, Pct 2
Commissioner, Pct 3
Commissioner, Pct 4
Executive Office
Total culture and recreation
The accompanying notes are an integral part of this statement.
43
COUNTY OF HIDALGO, TEXAS
EXHIBIT A-7
Page 3 of 3
STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN
FUND BALANCE - BUDGET AND ACTUAL
GENERAL FUND
FOR THE YEAR ENDED DECEMBER 31, 2013
Budgeted Amounts
Original
Final
Variance with
Final Budget
Positive
(Negative)
Actual
Conservation of natural resources
Executive Office
Texas Cooperative Extension
Total conservation of natural resources
527,855
451,995
979,850
511,775
422,948
934,723
511,612
412,326
923,938
163
10,622
10,785
Urban and economic development
Commissioner, Pct 1
Commissioner, Pct 2
Commissioner, Pct 4
Urban County
Total urban and economic development
85,032
294,414
52,407
431,853
96,905
300,488
48,382
60,404
506,179
95,813
292,917
47,614
60,325
496,669
1,092
7,571
768
79
9,510
170,056,980
249,101
10,511
182,080,703
249,101
10,511
173,948,174
8,132,529
382,297
20,824,703
Debt service:
Principal
Interest and fiscal charges
Total expenditures
Excess (deficiency) of revenues over
(under) expenditures
(8,707,898)
(20,442,406)
OTHER FINANCING SOURCES (USES):
Transfers in
Transfers out
Capital leases
Sale of capital assets
Total financing sources (uses)
(8,899,998)
(8,899,998)
346
(10,522,390)
6,964,955
1,085,206
(2,471,883)
346
(8,852,186)
6,964,955
1,284,701
(602,184)
(17,607,896)
(22,914,289)
(219,887)
Net change in fund balances
Fund balances at beginning of year,
as previously reported
-
-
Prior period adjustment
-
-
Fund balances at beginning of year,
as restated
-
-
$ (17,607,896)
$ (22,914,289)
Fund balances at the end of year
The accompanying notes are an integral part of this statement.
44
(1,670,204)
199,495
1,869,699
22,694,402
50,251,631
50,251,631
-
-
50,251,631
$
50,031,744
50,251,631
$
72,946,033
COUNTY OF HIDALGO, TEXAS
EXHIBIT A-8
STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN
FUND BALANCE - BUDGET AND ACTUAL
HEAD START PROGRAM
FOR THE YEAR ENDED DECEMBER 31, 2013
Budgeted Amounts
Original
Final
REVENUES
Intergovernmental
Total revenues
$
EXPENDITURES
Current:
Health and welfare
Appraisal Fees
Total health and welfare
Total expenditures
36,080,984
36,080,984
$
36,080,984
36,080,984
36,080,984
36,080,984
36,080,984
Variance with
Final Budget
Positive
(Negative)
Actual
$
36,080,984
36,080,984
36,080,984
32,977,672
32,977,672
$
(3,103,312)
(3,103,312)
32,901,719
32,901,719
32,901,719
3,179,265
3,179,265
3,179,265
Excess (deficiency) of revenues over
(under) expenditures
-
-
75,953
75,953
OTHER FINANCING SOURCES (USES):
Total financing sources (uses)
-
-
-
-
Net change in fund balances
-
-
75,953
75,953
Fund balances at beginning of year,
as previously reported
-
-
254,862
254,862
Prior period adjustment
-
-
Fund balances at beginning of year,
as restated
-
-
Fund balances at the end of year
$
-
The accompanying notes are an integral part of this statement.
45
$
-
-
-
254,862
$
330,815
254,862
$
330,815
EXHIBIT A-9
COUNTY OF HIDALGO, TEXAS
STATEMENT OF NET POSITION
PROPRIETARY FUNDS
DECEMBER 31, 2013
Internal
Service
Funds
Nonmajor
Enterprise
Funds
ASSETS
Current assets:
Cash and cash equivalents
Restricted cash
Receivables (net of allowance for uncollectibles)
Accounts
Due from other funds
Due from others
Inventories
Total current assets
Noncurrent assets:
Loans
Capital assets (net of accumulated depreciation)
Land
Machinery and equipment
Total capital assets (net of accumulated depreciation)
Total noncurrent assets
Total assets
LIABILITIES
Current liabilities:
Accounts payable
Salaries and benefits payable
Due to other funds
Due to other governments
Unearned revenues
Compensated absences
Claims and judgments payable
Capital leases
Landfill closure/ post-closure care costs
Total current liabilities
Noncurrent liabilities:
Compensated absences
Claims and judgments payable
Capital leases
Landfill closure/ post-closure care costs
Total noncurrent liabilities
Total liabilities
NET POSITION
Net investment in capital assets
Restricted - bond convenant
Unrestricted
Total net position
$
3,487,701
66,902
$
-
3,812
2,504,987
260,834
4,913,553
16,036
28,128
3,598,767
-
150,000
1,001,093
2,282
1,003,375
1,003,375
4,602,143
$
18,271
16,942
22,350
2,912
52,633
52,633
52,633
5,116,186
$
35,386
96,410
1,509,201
25,628
2,499,382
62,644
1,372
2,159,021
5,141
6,262,389
12,405
1,604,544
1,616,949
1,713,359
31,000
1,582,979
8,983
1,622,962
7,885,351
1,003,375
66,902
1,818,506
2,888,783
38,509
(2,807,674)
(2,769,165)
549
-
$
The accompanying notes are an integral part of this statement.
46
2,143,920
-
$
EXHIBIT A-10
COUNTY OF HIDALGO, TEXAS
STATEMENT OF REVENUES, EXPENSES, AND CHANGES
IN NET POSITION - PROPRIETARY FUNDS
FOR THE YEAR ENDED DECEMBER 31, 2013
Internal
Service
Funds
Nonmajor
Enterprise
Funds
Operating revenues:
Charges for services
Other operating revenues
Total operating revenues
$
Operating expenses:
Costs of services
Operating supplies
Administration
Inmate expense
Depreciation
Total operating expenses
1,334,998
585
1,335,583
$
506,099
13,997
436,751
63,122
1,019,969
19,217,233
2,900,238
22,117,471
24,086,333
3,823,339
5,964
27,915,636
Operating income (loss)
315,614
(5,798,165)
Non-operating revenues (expenses):
Investment earnings
Interest expense
Sale of capital assets
Total non-operating revenues (expenses)
189
11
200
4,423
(175)
8
4,256
Income (loss) before contributions
315,814
(5,793,909)
Change in net position
315,814
(5,793,909)
Net position at beginning of year
Net position at end of year
2,572,969
$
The accompanying notes are an integral part of this statement.
47
2,888,783
3,024,744
$
(2,769,165)
48
EXHIBIT A-11
COUNTY OF HIDALGO, TEXAS
STATEMENT OF CASH FLOWS
PROPRIETARY FUNDS
FOR THE YEAR ENDED DECEMBER 31, 2013
Business
Type
Activities
Enterprise
Funds
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers and users
Receipts from interfund services provided
Payments to vendors
Payments to employees
Payments for interfund services used
Net cash provided (used) by operating activities
$
CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES
Proceeds from sale of capital assets
Interest paid on capital debt
Purchase of capital assets
Net cash provided (used) by capital and related financing activities
1,335,834
(526,792)
(416,679)
392,363
Governmental
Activities
Internal
Service
Funds
$
11
11
8
(175)
(15,094)
(15,261)
189
189
4,423
4,423
-
CASH FLOWS FROM INVESTING ACTIVITIES
Interest and dividends received
Net cash provided (used) by investing activities
Net increase (decrease) in cash and cash equivalents
22,176,317
(3,110,092)
(595,314)
(23,939,333)
(5,468,422)
392,563
(5,479,260)
Cash and cash equivalents, January 1
Cash and cash equivalents, December 31
$
3,162,040
3,554,603
$
7,623,180
2,143,920
Reconciliation of operating income (loss) to net cash
provided (used) by operating activities:
Operating income (loss)
$
315,614
$
(5,798,165)
Adjustments not affecting cash:
Landfill closure & post-closure costs
24,777
Adjustments to reconcile operating income (loss) to
net to cash provided (used) by operating activities
Depreciation expense
(Increase) decrease in accounts receivable
(Increase) decrease in due from other funds
(Increase) decrease in due from other governments
(Increase) decrease in inventory
Increase (decrease) in salaries and fringe benefits payable
Increase (decrease) in accounts payable
Increase (decrease) in accounts payable related to purchase of equipment
Increase (decrease) in due to other governments
Increase (decrease) in due to other funds
Increase (decrease) in unearned revenue
Increase (decrease) in claims and judgments
Increase (decrease) in compensated absences payable
Total adjustments
Net cash provided (used) by operating activities
Noncash operating activites:
Closure & post-closure costs for inflation adjustment
see Exhibit C-74
Noncash capital and financing activities:
Capital contribution to the landfill for expenditures
incurred for the landfill cap and montoring services
Total noncash change in landfill closure and post-closure costs
The accompanying notes are an integral part of this statement.
49
-
-
$
2,394
14,033
954
16,882
734
13,588
3,387
76,749
392,363
$
24,777
$
24,777
$
5,964
272,765
(2,496,223)
(260,833)
2,935
95,568
11,152
2,480,915
62,644
147,000
7,856
329,743
(5,468,422)
EXHIBIT A-12
COUNTY OF HIDALGO, TEXAS
STATEMENT OF FIDUCIARY NET POSITION
FIDUCIARY FUNDS
DECEMBER 31, 2013
Pension
Trust
Funds
ASSETS
Cash and cash equivalents
Certificates of deposit
Investments at fair value
Mutual funds
Participant loans
Accounts receivable
Other receivables
Due from other governments
Due from others
Capital assets (net of accumulated depreciation)
Total assets
LIABILITIES
Accounts payable
Salaries and benefits payable
Due to other governments
Due to others
Deposits
Held in escrow
Total liabilities
NET POSITION
Held in trust for others
Held in trust for pension benefits
Total net position
$
863
Private-purpose
Trust
Funds
$
-
$
22,013,133
1,515,080
6,018
23,535,094
$
$
-
23,535,094
23,535,094
The accompanying notes are an integral part of this statement.
50
19,272,950
20,839,872
Agency
Funds
$
20,605
-
$
$
51
4,380,371
44,513,849
-
$
$
76,549
76,549
$
44,437,300
44,437,300
$
119,934,045
70,000
17,361,635
2,904
70,225
79,965
137,518,774
2,073,578
70,444
103,976,278
31,290,705
107,767
2
137,518,774
-
EXHIBIT A-13
COUNTY OF HIDALGO, TEXAS
STATEMENT OF CHANGES IN FIDUCIARY NET POSITION
FIDUCIARY FUNDS
FOR THE YEAR ENDED DECEMBER 31, 2013
Pension
Trust
Funds
ADDITIONS
Contributions:
Retirement contributions
Unclaimed property
Bail bond surety collateral
Confiscations
Registry
Inmate property
Various boards
Section 108 loans
Investment earnings:
Unrealized gain
Other income
Total additions
$
Private-Purpose
Trust
Funds
2,476,157
1,148,329
82,285
3,706,771
$
4,123
2,257,598
11,382,913
114,990,286
2,614,336
28,213
33,062
131,310,531
DEDUCTIONS
Benefits paid
Other
Release collateral
Forfeitures
Judgments
Release of inmate property
Section 108 loans
Various boards
Total deductions
2,483,298
1,919,588
7,164,687
114,105,999
2,618,473
12,437
8,209
125,829,393
Change in net position
1,223,473
5,481,138
23,211,628
38,956,162
2,477,584
5,714
-
Net position at beginning of the year
as previously reported
Prior period adjustments
(7)
Net position at beginning of the year
as restated
Net position at the end of the year
-
23,311,621
$
23,535,094
The accompanying notes are an integral part of this statement.
51
38,956,162
$
44,437,300
52
NOTES TO THE
FINANCIAL STATEMENTS
53
COUNTY OF HIDALGO, TEXAS
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2013
Note 1 Summary of Significant Accounting Policies
The accounting and reporting policies of the County of Hidalgo, Texas (the County), as reflected in the
accompanying financial statements, conform to generally accepted accounting principles (GAAP) in the United
States of America applicable to state and local governments. The Governmental Accounting Standards Board
(GASB) is the accepted standard-setting body for establishing governmental accounting and financial reporting
principles.
In fiscal year 2013, the County implemented GASB Statement No. 65, Items Previously Reported as Assets and
Liabilities. The implementation of this statement amends the financial statement element classification of certain
items previously reported as assets and liabilities to be consistent with the definition in Concepts Statement 4.
The Statement also provides other financial reporting guidance related to the impact of the financial statement
elements deferred outflows of resources and deferred inflows of resources, such as changes in the determination
of major fund calculations and limiting the use of the term deferred in the financial statement presentation.
The County also evaluated GASB Statement No. 66, Technical Corrections-2012 An Amendment to GASB No.10
and No. 62. GASB Statement No 66 provides guidance on how to account for (1) operating leases that vary from
a straight line basis, (2) the difference between the initial investment and principal amount of a purchased loan or
group of loans, and (3) servicing fees related to mortgage loans that are sold when stated service fee rates differ
s significantly from a current servicing fee rate. It was determined that this GASB statement is not applicable to
the County.
During 2013 GASB has issued the following: GASB Statement No. 69, Government Combinations and Disposals
of Government Operation., GASB Statement No. 70 Accounting and Financial Reporting for Nonexchange
Financial Guarantees, GASB Statement No. 71, Pension Transition for Contributions Made Subsequent to the
Measurement Date-An Amendment of GASB Statement No. 68. Management is currently evaluating the impact
of these pronouncements on the financial statements and will implement those statements that pertain to the
County.
The following significant accounting policies were applied in the preparation of the accompanying generalpurpose financial statements.
A. Reporting Entity
In accordance with GASB Statement No. 61, The Financial Reporting Entity: An Amendment of GASB Statement
No. 14 and No.34, the basic financial statements of the County include the primary government and its blended
component units. A component unit is a legally separate organization for which the elected officials of the primary
government are financially accountable, or the relationship to the primary government is such that exclusion
would cause the reporting entity’s financial statements to be misleading or incomplete. A blended component
unit, although a legally separate entity, is, in substance, part of the County’s operations and so data from these
units is combined with data of the County.
The criteria used to determine whether an organization is a component unit of the County and whether it is a
discretely or a blended component unit includes: the organization is legally separate, the County holds corporate
powers of the organization, the County appoints a voting majority of the organization’s board, the County is able
to impose its will on the organization, fiscal dependency by the organization on the County, and whether the
organization has the potential to impose a financial benefit/burden to the County.
Based on the application of the foregoing criteria, the following is a brief discussion of the entities that are
included within the County’s reporting entity.
Related Agencies. The following agencies do not meet the criteria for component units as set forth in GASB No.
61 because they are not legally separate entities. They are part of the primary government and are as follows:
Urban County Program (Urban County) – This agency administers economic and urban development grants
received primarily from the U.S. Department of Housing and Urban Development.
54
COUNTY OF HIDALGO, TEXAS
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2013
Note 1 Summary of Significant Accounting Policies (Continued)
A. Reporting Entity (Continued)
Head Start Program (Head Start) – This agency administers health and welfare grants received from the
Department of Health and Human Services and the U.S. Department of Agriculture.
Community Service Agency (CSA) – This agency administers health and welfare grants received from various
federal and state grantors.
Blended Component Units. For financial reporting purposes, the Hidalgo County Drainage District No. 1 and
the Health Care Funding District are included in the operations and activities of the County as blended component
units.
Hidalgo County Drainage District No. 1 (the Drainage District) – The Drainage District is a separate legal entity
created on April 9, 1908, by order of the Commissioners Court of Hidalgo County, Texas, pursuant to an election
held within the territory affected. Originally organized under provisions of Article III, Section 52 of the Texas
Constitution, the Drainage District was later converted into a Conservation and Reclamation district under the
provisions of Article XVI, Section 59 of the Texas Constitution, and has continued to exercise all of the powers
and functions of such a district. Complete financial statements for the Drainage District may be obtained from:
Hidalgo County Drainage District No. 1
902 North Doolittle Road
Edinburg, Texas 78542
Health Care Funding District – The district administers the revenue received for the nonfederal share of Medicaid
supplemental payment program by requiring mandatory payment from institutional health care providers in the
district. The Health Care Funding District does not issue a comprehensive annual financial statement.
B. Basis of Presentation
Government-wide Financial Statements
The government-wide financial statements (i.e., the statement of net position and the statement of activities)
report information on all of the non-fiduciary activities of the primary government and its blended component units.
Substantially all of the effects of interfund activities have been removed from these statements. Governmentwide financial statements do not provide information by fund, but distinguish between the County’s governmental
activities and business-type activities. Governmental activities, which normally are supported by taxes and
intergovernmental revenues, are reported separately from business-type activities, which rely to a significant
extent on fees and charges for support.
The statement of net position focuses on the net position of the governmental and business-type activities of the
primary government and its blended component units, where net position equals the difference between assets
plus deferred outflows of resources and liabilities plus deferred inflows of resources.
The statement of activities demonstrates the degree to which the direct expense of a given function or identifiable
activity is offset by program revenues of the County’s different business-type activities and for each function of the
County’s governmental activities. Direct expenses are those that are clearly identifiable with a specific function or
identifiable activity. Program revenues include (a) fees, fines, and charges to those who purchase, use, or
directly benefit from goods, services, or privileges provided by a given function or identifiable activity and (b)
grants and contributions that are restricted to meeting the operational or capital requirements of a particular
program. Taxes and other items not includable in program revenues are reported instead as general revenue.
55
COUNTY OF HIDALGO, TEXAS
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2013
Note 1 Summary of Significant Accounting Policies (Continued)
C. Measurement Focus, Basis of Accounting, and Financial Statement Presentation
Fund Financial Statements
Fund financial statements of the reporting entity are organized into funds, each of which is considered to be a
separate accounting entity. Each fund is accounted for by providing a separate set of self-balancing accounts
that constitute its assets, liabilities, fund balance, revenues, and expenditures/expenses. Funds are organized
into three major categories: governmental, proprietary, and fiduciary. The emphasis of fund financial statements
is on major governmental and enterprise funds, each displayed in a separate column. All remaining governmental
and enterprise funds are aggregated and reported as nonmajor funds.
The government-wide financial statements are reported using the economic resources measurement focus and
accrual basis of accounting, as are the proprietary fund and fiduciary fund financial statements, except for the
agency funds, which have no measurement focus. Revenues are recorded when earned and expenses are
recorded when a liability is incurred, regardless of the timing of related cash flows. Property taxes are recognized
as revenues in the year for which they are levied. Grants and similar items are recognized as revenue as soon as
all eligibility requirements imposed by the provider have been met.
Governmental fund financial statements are reported using the current financial resources measurement focus
and the modified accrual basis of accounting. Under this method, revenues are recognized as soon as they are
both measurable and available. Revenues are considered to be measurable when the amount of the transaction
can be determined and available when they are collectible within the current period or soon enough thereafter to
pay liabilities of the current period. For this purpose, the County considers collections within 60 days of the end of
the current fiscal period to be revenues. Expenditures generally are recorded when a liability is incurred, similar
to accrual accounting. However, debt service expenditures, as well as expenditures related to compensated
absences and claims and judgments, are recorded only when payment is due.
Revenues susceptible to accrual include property taxes, fines, forfeitures, licenses, interest income, and charges
for services and, as such, have been recognized as revenues for the current fiscal period. All other revenues are
considered to be measurable and available only when cash is received by the County.
Under the terms of grant agreements, the County funds certain programs by a combination of specific costreimbursement grants, categorical block grants, and general revenues. Thus, when program expenses are
incurred, there are both restricted and unrestricted net assets available to finance the program. It is the County’s
policy to first apply cost-reimbursement grant resources to such programs, followed by categorical block grants,
and then by general revenues.
The County reports the following major governmental funds:
The general fund is the County’s primary operating fund. It accounts for all financial resources of the County,
except those required to be accounted for in another fund.
The Head Start Program special revenue fund accounts for health and welfare grants received from the
Department of Health and Human Services and the U.S. Department of Agriculture.
The Drainage District No.1 Capital Projects fund accounts for the capital projects of the Drainage District. In
addition, the fund also accounts for the proceeds of $28,000,000 Bond Series 2007, $72,000,000 Bond Series
2008, and $77,130,000 Bond Series 2013. The funds are to be used in the construction of drainage
improvements in the Drainage District and right of way acquisitions.
The County does not report any major enterprise funds.
Additionally, the County reports the following non-major governmental funds:
Special revenue funds account for specific revenue sources that are restricted or committed to expenditure for
specified purposes other than debt service or capital projects.
56
COUNTY OF HIDALGO, TEXAS
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2013
Note 1 Summary of Significant Accounting Policies (Continued)
C. Measurement Focus, Basis of Accounting, and Financial Statement Presentation (Continued)
Debt service funds account for and report financial resources that are restricted, committed, or assigned to
expenditure for principal and interest.
Capital projects funds account for and report financial resources that are restricted, committed, or assigned to
expenditure for major capital outlays, including the acquisition or construction of capital facilities and other
capital assets.
The County also reports the following fund types:
Internal service funds account for health benefits and workers’ compensation insurance provided to County
employees, retirees, and dependents on a cost-reimbursement basis. Contributions to the funds consist of
charges to the participating entities for covered employees along with contributions from employees and
retirees.
Pension trust funds account for the net plan assets and changes in net plan assets of the related agencies’
employees’ retirement plan.
Private-purpose trust funds account for property escheated to the state held for private individuals, certificates
of deposit and nonexempt real property executed in trust to the Bail Bond Board, monies confiscated by the
District Attorney, monies awarded to minors and child support payments held by the District Clerk,
confiscations and monies belonging to inmates held by the Sheriff, and Section 108 bank loans and funds
belonging to various boards and commissions held by the Urban County Program.
Agency funds account for funds held for others in an agency capacity including various clearing accounts and
court costs, fees, fines, restitution, bonds, seizures, and taxes that are collected by the District Attorney,
District Clerk, Tax Assessor/Collector, County Clerk, Sheriff, Adult Probation, and the Health Clinics.
As a general rule, the effects of interfund activity have been eliminated from the government-wide financial
statements. Exceptions to this rule are charges between the government’s health benefits and workers’
compensation divisions and various other functions of the government. Eliminations of these charges would
distort the direct costs and program revenues reported for the various functions concerned. Amounts reported as
program revenues include 1) charges for services (i.e. court costs, fees, and fines, etc.), 2) operating grants and
contributions, and 3) capital grants and contributions. Other revenues that are not related to a specific activity or
function are reported as general revenues. General revenues include all taxes, grants and contributions not
restricted to a specific program or function, and any unrestricted investment earnings.
Proprietary funds distinguish operating revenues and expenses from non-operating items. Operating revenues
and expenses generally result from providing services and producing and delivering goods in connection with a
proprietary fund’s principal ongoing operations. The principal operating revenues of the jail commissary
enterprise fund and the County’s internal service funds are charges to customers for sales and services.
Operating expenses for enterprise funds and internal service funds include the cost of sales and services,
administrative expenses, and depreciation on capital assets. All revenues and expenses not meeting this
definition are reported as non-operating revenues and expenses.
D. Assets, Liabilities, Deferred Outflow/Inflows of Resources and Net Position
1. Deposits and Investments
The County’s cash and cash equivalents consist of cash on hand, demand deposits, and external investment
pools. This excludes rollovers of certificates of deposit such as those in the fiduciary funds. Investments are
carried at fair value. It is the County's intent to hold all investments to maturity.
57
COUNTY OF HIDALGO, TEXAS
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2013
Note 1 Summary of Significant Accounting Policies (Continued)
D. Assets, Liabilities, Deferred Outflow/Inflows of Resources and Net Position (Continued)
2. Receivables and Payables
Activities between funds that are representative of lending/borrowing arrangements outstanding at the end of the
fiscal year are referred to as either “due to/from other funds” for the current portion of the interfund loans or
“advances to/from other funds” for the non-current portion of interfund loans. All other outstanding balances
between funds are classified as “due to/from other funds.” Balances outstanding between funds within
governmental activities are eliminated in the Statement of Net Assets. Any residual balances outstanding
between the governmental activities and business-type activities are reported in the government-wide financial
statements as “internal balances.”
Advances between funds, as reported in the fund financial statements, are offset by a fund balance reserve
account in applicable governmental funds to indicate that they are not available financial resources and, therefore,
not available for appropriation.
All accounts and property taxes receivable are shown net of an allowance for uncollectible amounts. Property
taxes are levied as of October 1 on property values assessed as of the same date. Taxes become delinquent on
February 1, at which time penalties and interest are assessed.
3. Inventories and Prepaid Items
Postage inventories in the general fund are valued at cost using the first-in, first-out (FIFO) method. Inventories
of governmental funds are recorded as expenditures when consumed rather than when purchased.
Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid
items in both government-wide and fund financial statements. The cost of prepaid items is recorded as
expenditure/expense when consumed rather than when purchased.
4. Restricted Assets
Cash set aside in the Landfill Services enterprise fund is restricted because its use is limited by applicable bond
covenants.
5. Capital Assets
Capital assets, which include property, plant, equipment, and infrastructure assets (e.g., roads, bridges,
sidewalks, and similar items,) are reported in the applicable governmental or business-type activities column in
the government-wide financial statements.
As the government constructs or acquires additional capital assets each period, including infrastructure assets,
they are capitalized and reported at historical cost. The reported value excludes normal maintenance and repairs
which are essentially amounts expended that do not increase the capacity or efficiency of the item or extend its
useful life beyond the original estimate. In the case of donations, the County values these capital assets at the
fair market value of the item at the date of its donation.
Standard capitalization thresholds have been established for each major class of assets. Capital assets are
depreciated using the straight-line method over their estimated useful lives.
Capitalization
Threshold
Asset Class
Buildings/building improvements
Facilities & other improvements
$
Infrastructure
Personal property (equipment)
Leasehold improvements
Computer software
58
Useful Life
In Months
50,000
50,000
60-360
120-540
100,000
5,000
120-600
36-180
50,000
60
5,000
60-72
COUNTY OF HIDALGO, TEXAS
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2013
Note 1 Summary of Significant Accounting Policies (Continued)
D. Assets, Liabilities, Deferred Outflow/Inflows of Resources and Net Position (Continued)
6. Deferred outflows/inflows of resources
Deferred outflows of resources represent a consumption of net position that applies to a future period and will not
be recognized as an outflow of resources (expense/expenditure) until then. The deferred charges on refunding,
reported in the government-wide statement of net position, qualify for reporting in this category. A 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 inflows of resources, represents an acquisition of net position that applies to a future period and so will
not be recognized as an inflow of resources (revenue) until that time. The County’s unavailable revenues which
arise only under the modified accrual basis of accounting qualify for reporting in this category in the governmental
funds balance sheet. The governmental funds report unavailable revenues from three sources: property taxes
received in advance (2103 tax levy is not applicable, grants, and interlocal agreements with other governmental
entities.
7. Compensated Absences
The County accrues accumulated unpaid vacation and sick leave when earned (or estimated to be earned) by the
employee. Employees earn vacation and sick leave at varying rates depending on their employment status and
years of service with the County.
Hours Earned Per Year
Full-Time Employees
Part-Time Employees
Years of Service Vacation Leave Sick Leave
Vacation Leave
Sick Leave
Up to 5 years
96
96 hours worked x .04615
48
5 to 10 years
108
96 hours worked x .04615
48
Over 10 years
120
96 hours worked x .04615
48
It is the County’s policy to permit employees to accumulate earned but unused vacation and sick pay benefits as
follows:
Maximum Hours Accumulated Per Year
Full-Time Employees
Part-Time Employees
Years of Service Vacation Leave Sick Leave
Vacation Leave
Sick Leave
Up to 10 years
160
360
160
360
10 to 15 years
240
360
240
360
Over 15 years
320
360
320
360
Employees lose, without pay, unused vacation and sick leave, which exceed these limits. Outstanding sick leave
balances are cancelled, without recompense, upon termination, resignation, retirement or death.
The accrued liability for accumulated compensated absences reported in the government-wide financial
statements consists of unpaid accumulated vacation leave of $6,568,919, compensatory time of $844,359, and
holiday leave of $1,508,765.
8. Post employment benefits
In addition to providing pension benefits, the County provides health insurance coverage for current and future
retirees and their spouses and dependents as described in Note 4.C.
59
COUNTY OF HIDALGO, TEXAS
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2013
Note 1 Summary of Significant Accounting Policies (Continued)
D. Assets, Liabilities, Deferred Outflow/Inflows of Resources and Net Position (Continued)
9. Long-Term Obligations
In the government-wide financial statements, and proprietary fund types in the fund financial statements, longterm debt and other long-term obligations are reported as liabilities in the appropriate governmental activities,
business-type activities or proprietary fund type statement of net position. Bond premiums and discounts are
amortized over the life of the bonds using the straight-line method. Bonds payable are reported net of the
applicable bond premium or discount. On refunding bonds issues, the difference between the reacquisition price
and the net carrying amount of the old debt is reported as a deferred inflow of resources and recognized as a
component of interest expense on a straight-line basis over the remaining life of the old debt or the life of the new
debt, whichever is shorter.
In the fund financial statements, governmental funds recognize bond premiums and discounts, as well as bond
issuance costs, during the current period. The face amount of debt issued is reported as other financing sources.
Premiums received on debt issuances are reported as other financing sources while discounts on debt issuances
are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds
received, are reported as expenditures.
10. Equity Classifications
In the government-wide financial statements, equity is classified as net assets and displayed in three
components:
Net investment in capital assets - Consists of capital assets, net of accumulated depreciation and reduced by the
outstanding balances of any bonds, mortgages, notes, or other borrowings that are attributable to the acquisition,
construction, or improvement of those assets.
Restricted net assets – Consists of net assets with constraints placed on their use by (1) external groups such as
creditors, grantors, contributors, or laws or regulations of other governments; or (2) law, through constitutional
provisions or enabling legislation.
Unrestricted net assets – All other net assets that do not meet the definition of “restricted” or “invested in capital
assets, net of related debt.”
In the fund financial statements, governmental funds report equity as fund balance. The County categorized its
fund balances in five classifications and in the hierarchy to which the government is bound to honor constraints on
specific purposes for which amounts in those funds can be spent. Proprietary fund equity is classified the same
as in the government-wide statements.
Nonspendable – These balances represent amounts that cannot be spent because they (a) are not in spendable
form, (e.g., inventories and prepaid items); (b) are not expected to be converted into cash within the current
period or at all (e.g., long-term receivables); or (c) they are legally or contractually required to be maintained intact
(e.g. the non-spendable corpus of an endowment).
Restricted – These balances represent amounts that are restricted to specific purposes, with constraints that
have either been (a) externally imposed by creditors (e.g. through debt covenant), grantors, contributions, or laws
or regulations of other governments; or (b) imposed by law through constitutional provisions or enabling
legislation. Fund balance in the debt service funds will be restricted for the payment of principal and interest on
the debt service obligation. Any funds that are remaining after all debt is extinguished will be transferred to other
debt service funds.
Committed – These balances represent amounts that are constrained to the use of specific purposes pursuant to
formal action of Commissioners Court, the County’s highest level of decision-making authority. These amounts
are committed through the adoption of a court order. These amounts can only be re-allocated by the same formal
action that was taken to originally commit those amounts.
60
COUNTY OF HIDALGO, TEXAS
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2013
Note 1 Summary of Significant Accounting Policies (Continued)
D. Assets, Liabilities, Deferred Outflow/Inflows of Resources and Net Position (Continued)
Assigned – These balances represent amounts assigned by Commissioners Court for use for specific purposes
but which are neither restricted nor committed. This classification applies to the positive unrestricted and
uncommitted fund balance of all governmental funds except the General Fund.
Unassigned – These balances represent the residual fund balance of the General Fund and to any deficit fund
balances of other governmental funds.
A detailed classification of fund balances is described in Note 3 I.
11. Use of Estimates
The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial statements and reported amount of
revenues and expenses during the reporting period. Actual results could differ from those estimates.
12. Rounding Adjustments
Throughout this comprehensive annual financial report, dollar amounts are rounded, thereby creating differences
between the details and the totals.
Note 2 Stewardship, Compliance, and Accountability
A. Budgetary Information
The County follows these procedures in establishing the budgetary data reflected in the financial statements:
1. The Budget Officer has the responsibility of preparing the County's budgeted expenditures. By statute, the
County Auditor has the responsibility of preparing an estimate of revenues for submission to Commissioners
Court.
2. By July 31, all County departments and organizations must submit their budget requests to the Budget Officer
for the fiscal year commencing the following January 1.
3. During August, Commissioners Court conducts informal budget workshops with each department head to
discuss their budget requests.
4. By September 30, the Budget Officer prepares a proposed budget to cover all proposed expenditures of the
County for the following year. Copies of the proposed budget are filed with the County Clerk and County
Auditor. The proposed budget is available for inspection by taxpayers.
5. Within seven calendar days after the filing of the proposed budget and prior to December 31 of the current
year, Commissioners Court conducts a public hearing on the County's proposed budget. Any taxpayer of the
County of Hidalgo has the right to be present and participate in the hearing. At the conclusion of the hearing,
Commissioners Court acts upon the proposed budget as submitted by the Budget Officer.
The
Commissioners Court has the authority to make such changes in the budget, in its judgment of the facts, the
law warrants, and the interest of the taxpayers demand, provided the amounts budgeted for current
expenditures from the various funds for the County does not exceed the balances in these funds as of
January 1 plus the anticipated revenue for the current year for which the budget is made, as estimated by the
County Auditor.
6. Under no circumstances can Commissioners Court authorize expenditures that will exceed appropriations.
61
COUNTY OF HIDALGO, TEXAS
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2013
Note 2 Stewardship, Compliance, and Accountability (Continued)
A. Budgetary Information (Continued)
Annual budgets are prepared in conformity with GAAP using the modified accrual basis of accounting for all
governmental funds except grant-funded special revenue funds and capital projects funds, which adopt projectlength budgets. All annual appropriations lapse at fiscal year end. Appropriations at year-end for grant-funded
special revenue funds and capital projects funds are carried forward to subsequent years until the grant has
terminated or the project is completed.
The appropriated budget is prepared by fund, function, department, and object. Transfers of appropriations
between departments require the approval of Commissioners Court. The legal level of budgetary control (i.e., the
level at which expenditures cannot legally exceed appropriations) is at the department level.
Encumbrance accounting is employed in governmental funds. Encumbrances (e.g., purchase orders, contracts)
outstanding at year-end do not constitute expenditures or liabilities because the commitments will be honored in
the subsequent year. For the general fund only, encumbrances outstanding at December 31, 2013, were not reappropriated in 2014 as per Commissioners Court order on October 7, 2013. Any encumbrance outstanding in
the general fund at December 31, 2013, will be liquidated with the year 2014 budget.
B. Deficit Fund Balance/Net Position
The TXDOT capital projects fund reported a deficit fund balance of $1,714,888 as of December 31, 2013. This
fund accounts for transactions related to the Texas Department of Transportation (TXDOT) road, bridge, and
outfall projects. Funding for these projects is on a partial or full reimbursement basis from TXDOT, other local
governments and various capital and special revenue funds. At year end, reimbursements from other
governments had not been received.
In addition, the Health Benefits internal service fund reported a deficit net position of $5,555,602 as of December
31, 2013. The rates used by the County did not attain the desired fund level. The County will review the rate
structure for year 2014 to determine if an adjustment to the current rate structure will be necessary to properly
charge the customers of the fund.
Note 3 Detailed Notes on all Funds
A. Deposits and Investments
Deposits and investments for the Community Service Agency, Head Start Program, Urban County Program, and
the Drainage District are held separately from the County’s investment program.
Deposits and investments are pooled for investment purposes in each of the County's fund types. Earnings on
pooled investments are allocated to the funds having equity in the pool on the basis of their relative contribution to
the pool. For reporting purposes, funds with a negative cash balance within the pool were offset by available
cash from other funds within the pool.
Deposits are held in the County’s depository account under the terms of an agreement that was executed on May
10, 2013. The depository agreement requires the designated financial institution to secure by collateral valued at
fair value, less the amount of the Federal Deposit Insurance Corporation (FDIC) insurance, deposits and accrued
interest thereon by 105%.
62
COUNTY OF HIDALGO, TEXAS
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2013
Note 3 Detailed Notes on all Funds (Continued)
A. Deposits and Investments (Continued)
At year-end, the carrying amount of the County’s deposits was $325,984,332 consisting of cash and cash
equivalents.
As of December 31, 2013, the County had the following investments in connection with the pension trust funds:
Fair
*Investment Type
Mutual Funds
Participant Loans
Total
$
$
Value
22,013,133
1,515,080
23,528,213
The mutual funds are participant directed.
*The plan does not rate its investments.
Interest rate risk. In accordance with its investment policy, the County manages its exposure to decreases in fair
value by utilizing controlled disbursement, cash flow analysis and portfolio analysis or similar cash management
techniques and limiting the weighted average maturity of its investment portfolio to one year or less.
Credit risk. The Public Funds Investment Act (Government Code Chapter 2256) limits authorized investments to
obligations of, or guaranteed by governmental entities, certificates of deposit and share certificates, repurchase
agreements, securities lending program, banker’s acceptances, commercial paper, mutual funds, guaranteed
investment contracts, and investment pools. The County’s investment policy further limits investments to
obligations of, or guaranteed by, governmental entities, certificates of deposit, repurchase agreements, banker’s
acceptances, AAA rated mutual funds, and investment pools.
Concentration of credit risk. To limit the concentration of credit risk, the County’s investment policy does not allow
investments in bankers’ acceptances to exceed ten percent of the County’s total investments. Additionally, the
County’s investment policy prohibits funds held for debt service to be invested in mutual funds and prohibits the
County from investing in the aggregate more than eighty percent of its monthly average fund balance, excluding
funds held for debt service, in AAA-rated money market mutual funds.
Custodial credit risk – deposits. In the case of deposits, this is the risk that in the event of a bank failure, the
government’s deposits may not be returned to it. The County’s depository agreement requires its designated
depository financial institution to secure the County’s uninsured deposits by 105% with securities held in the
County’s name at a third party financial institution.
Custodial credit risk – investments. For an investment, this is the risk that, in the event of the failure of the
counterparty, the County will not be able to recover the value of its investments or collateral securities that are in
the possession of an outside party. The County’s investment policy reduces the County’s exposure to custodial
credit risk by limiting investments to securities that are backed by the full faith and credit of the State of Texas or
the United States or their respective agencies and instrumentalities. The County’s investment policy strictly
prohibits riskier-type investments such as commercial paper.
63
COUNTY OF HIDALGO, TEXAS
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2013
Note 3 Detailed Notes on all Funds (Continued)
B. Receivables
County receivables at December 31, 2013, in the aggregate, including the applicable allowance for uncollectible
accounts, are as follows:
Property taxes receivable
Accounts receivable
Loans receivable
Interest receivable
Intergovernmental receivables:
Due from federal
FEMA
Dept. of Homeland Security
Due from state
Due from local
Subtotal
Due from others
Less: allowance for
uncollectibles
Total net receivables
General
Fund
$110,867,727
476,011
441,293
166,613
Head
Start
Program
$
863,141
-
2,400,761
144,200
-
155,212
114,651,817
60,570
(14,317,591)
$100,394,796
863,141
-
$
863,141
Nonmajor
Governmental
Funds
$ 33,488,183
48,137
10,400
13,576
$
Total
144,355,910
1,387,289
451,693
180,189
2,279,665
10,238,311
2,279,665
2,400,761
10,382,511
6,682,339
52,760,611
379,781
6,837,551
168,275,569
440,351
(3,374,105)
$ 49,766,287
$
(17,691,696)
151,024,224
Governmental funds report unearned revenue in connection with receivables for revenues that are not considered
to be available to liquidate liabilities of the current period or in connection with resources that have been received,
but not yet earned. As of December 31, 2013, the various components of unearned revenue reported in the
governmental funds were as follows:
Property taxes-general fund
Property taxes-special revenue
Property taxes-debt service funds
Culvert revenues for future installations to various subdivisions
Courthouse Master Plan
Grant draw downs prior to meeting all eligibility requirements
Total unearned revenue for governmental funds
64
Unearned
Revenues
$ 97,282,920
8,713,739
21,299,831
1,279,246
100,000
5,204,048
$ 133,879,784
COUNTY OF HIDALGO, TEXAS
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2013
Note 3 Detailed Notes on all Funds (Continued)
C. Capital Assets
Capital asset activity for the year ending December 31, 2013, was as follows:
Beginning
Balance
Governm ental activities:
Capital assets not being depreciated:
Land
Easements
Subtotal Land and Easements
$
43,418,684
18,763,201
62,181,885
Increases
$
556,364
866,053
1,422,417
Ending
Balance
Decreases
$
(4,730,218)
(79,834)
(4,810,052)
$
39,244,830
19,549,420
58,794,250
Construction in progress
Total capital assets not being depreciated
57,854,030
120,035,915
15,614,428
17,036,845
(42,273,440)
(47,083,492)
31,195,019
89,989,269
Capital assets being depreciated:
Buildings
115,625,187
35,067,968
(230,031)
150,463,124
14,286,775
83,477,656
469,660,940
683,050,558
1,811,564
14,364,935
25,393,390
76,637,857
(2,150,168)
(17,506,031)
(19,886,230)
16,098,339
95,692,423
477,548,299
739,802,185
(44,425,616)
(4,246,444)
(49,852,346)
(277,217,456)
(375,741,862)
(6,268,470)
(621,267)
(6,857,536)
(19,862,217)
(33,609,490)
307,308,696
43,028,367
(13,753,612)
60,065,212
$ (60,837,104)
$
426,572,719
$
$
1,001,093
1,001,093
Improvements other than buildings
Machinery and equipment
Infrastructure
Total capital assets being depreciated
Less accumulated depreciation for:
Buildings
Improvements other than buildings
Machinery and equipment
Infrastructure
Total accumulated depreciation
Total capital assets being depreciated, net
Governmental activities capital assets, net
Business-type activities:
Capital assets not being depreciated:
Land
Total capital assets not being depreciated
Capital assets being depreciated:
Buildings
Machinery and equipment
Total capital assets being depreciated
Less accumulated depreciation for:
Buildings
Machinery and equipment
Total accumulated depreciation
Total capital assets being depreciated, net
$
427,344,611
$
$
1,001,093
1,001,093
$
-
128,935
1,160,049
4,843,634
6,132,618
-
(50,565,151)
(4,867,711)
(55,549,833)
(292,236,040)
(403,218,735)
336,583,450
321,589
242,142
563,731
-
-
321,589
242,142
563,731
(321,589)
(239,860)
(561,449)
-
-
(321,589)
(239,860)
(561,449)
-
-
2,282
65
2,282
COUNTY OF HIDALGO, TEXAS
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2013
Note 3 Detailed Notes on all Funds (Continued)
C. Capital Assets (Continued)
Depreciation expense was charged to the various functions as follows:
Governmental activities:
General government
Public safety
Highways and streets
Sanitation
Drainage
Health and welfare
Culture and recreation
Conservation
Urban and economic development
Total governmental activities
$
2,050,837
6,787,356
19,558,951
293,573
2,721,088
1,406,511
663,623
2,258
125,292
$ 33,609,490
Business-type activities
Jail Commissary
Landfill Services
Total business-type activities
$
-
$
Construction and other significant commitments
Construction commitments. The County has active construction projects as of December 31, 2013. The
projects include various street constructions and building constructions. At year-end, the County’s commitments
over $200,000 with contractors are as follows:
Projects
Spent-to-date
$ 14,491,128
11,913,200
2,252,008
238,164
140,200
964,842
51,863
1,470,530
1,182,423
1,010,785
545,638
372,050
$ 34,632,831
TXDOT Projects
Border Colonia Access Projects F1312
Common Integrated Justice System-Software
Pct. No. 1 Heavy Equipment
Pct. No. 3 Mile 3 N (FM 492 to FM 2221)
Pct. No. 3 Liberty Blvd. (US 83 to FM 2221)
Pct. No. 3 FM 494 - Shary Road (FM 1924 to SH 107)
Administration Building - 100 E Cano Renovations
Pct. No. 2 Tower Road (Moore to Bali)
Pct. No. 4 10th Street (SH 107 to FM 1925)
Pct. No. 4 FM 1925 (Kenyon-FM 907)
Pct. No. 3 Mile 2 N (Moorefield to La Homa)
Remaining
Commitment
$
2,504,867
575,152
1,311,092
851,306
732,600
944,729
676,563
3,236,229
222,220
856,688
295,982
208,758
$ 12,416,186
Financing Source
C.O.'s, SRF, SIB Loan
State Grant
Tax Notes, Series 2007
SOA1341
SOA1341
SOA1339, C.O.Series 2010A&B
SOA1341
C.O.Series 2006, 2010A&B
SRF, C.O.Series 2009, 2010A&B
C.O.Series 2009B&C
C.O.Series 2009B&C, 2010A&B
SRF, C.O.Series 2010A&B
Encumbrances. As discussed in note 2 A, Budgetary Information, encumbrance accounting is utilized. As of
December 31, 2013, the County had the following encumbrances outstanding:
Governmental Funds
Major Funds
Nonmajor Funds
Head
Special
Capital
General
Start
Revenue
Project
Fund
Program
Funds
Funds
$ 991,465
$
-
$ 3,212,486
$ 14,050,258
66
Total
Governmental
Funds
$ 18,254,209
Internal
Service
Funds
$
18,177
Total
$ 18,272,386
COUNTY OF HIDALGO, TEXAS
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2013
Note 3 Detailed Notes on all Funds (Continued)
D. Interfund Receivables, Payables and Transfers
Interfund balances at December 31, 2013, consisted of the following:
Due to general fund from:
Nonmajor governmental funds
Enterprise funds
Internal service funds
Total general fund
Due to nonmajor governmental funds from:
General fund
Nonmajor governmental funds
Drainage District No. 1-Capital
Total nonmajor governmental funds
Total governmental funds
Due to enterprise funds from:
Internal service funds
Total enterprise funds
Due to internal service funds from:
Enterprise funds
Total internal service funds
Total proprietary funds
$
$
217,410
170
540
218,120
10,279,563
13,035,056
1,599,492
24,914,111
25,132,231
$
$
16,036
16,036
22,180
22,180
38,216
These balances resulted from the time lag between the dates that (1) interfund goods and services are provided
or reimbursable expenditures occur, (2) transactions are recorded in the accounting system, and (3) payments
between funds are made.
Interfund transfers for the year ended December 31, 2013, consisted of the following:
Transfers In:
General fund
Nonmajor governmental funds
Total
General
Fund
$
8,852,186
$ 8,852,186
Transfers Out:
Nonmajor
Governmental
Funds
$
346
3,279,958
$ 3,280,304
Total
$
346
12,132,144
$ 12,132,490
Transfers are used to (1) move revenues from the fund that statute or budget requires to collect them to the fund
that statute for budget requires to expend them, (2) move funds restricted to debt service to the debt service fund
as debt service payments become due, and (3) use unrestricted revenues collected in the general fund to finance
various programs accounted for in other funds in accordance with budgetary authorizations.
E. Restricted Assets
In August of 1991, the County sold Certificates of Obligation in the principal amount of $4,700,000 of which
$2,300,000 was earmarked for the purchase of 212 acres of land for a sanitation landfill and acquisition of
equipment, and for paying legal, fiscal engineering, and architectural fees in connection with this project. An
enterprise fund was set up to account for all of the County's landfill operations. Accordingly, since the abovementioned debt was to be paid from future property tax revenues, the $2,300,000 received by the Landfill
Services enterprise fund was reported as restricted cash. Cash in the amount of $66,902 ($2,300,000 $2,233,098) has been restricted since February 27, 1997.
67
COUNTY OF HIDALGO, TEXAS
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2013
Note 3 Detailed Notes on all Funds (Continued)
F. Leases
Operating Leases
The County has various lease commitments for office space and equipment. The office equipment leases range
from three to five years and the office space leases range from two to thirty years. Lease expense totaled
$1,106,600 (for leases whose terms exceed one year) for the year ended December 31, 2013. The future
minimum lease payments are as follows:
Year Ending
December 31,
2014
2015
2016
2017
2018
Total
Amount
654,618
330,447
198,554
123,900
5,400
$ 1,312,919
$
The County has also entered into lease agreements as the lessor for land and buildings. Lease expense totaled
$11,000 for the year ended December 31, 2013. The cost of the leased assets is $1,726,828. The future
minimum lease payments receivable are as follows:
Year Ending
December 31,
2014
2015
2016
2017
2018
2019-2023
Total
68
Amount
57,840
58,320
37,200
37,200
37,200
172,600
$
400,360
$
COUNTY OF HIDALGO, TEXAS
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2013
Note 3 Detailed Notes on all Funds (Continued)
F. Leases (Continued)
Capital Leases
The County entered into various lease agreements as lessee for financing the acquisition of office equipment and
buildings. The present value of all lease payments at the beginning of the lease term is greater than ninety
percent of the fair value of the leased property; therefore, the leases qualify as capital leases. The leases have
been recorded at the present value of their future minimum lease payments at the inception date. Lease
expenses totaled $449,277 for the year ended December 31, 2013.
Assets accounted for as capital leases are as follows:
Balance
January 1,
2013
Assets:
Office Equipment
Buildings
Total
Less: accumulated depreciation
Office Equipment
Buildings
Carrying value
$
Increases
493,627
574,619
1,068,246
$
(390,177)
$
(7,700)
670,369
$
Decreases
7,058,774
7,058,774
$
(369,976)
(171,779)
6,517,019
$
(324,047)
(125,262)
(449,309)
Balance
December 31,
2013
$
7,228,354
449,357
7,677,711
126,924
(633,228)
(322,385)
(179,479)
6,865,004
$
The future minimum lease obligations and the net present value of these minimum lease payments as of
December 31, 2013, were as follows:
Year Ending
December 31, 2013
2014
2015
2016
2017
2018
2019-2013
Total minimum lease payments
Less: interest
Present value of future minimum lease payments
69
$
$
Amount
1,134,003
1,045,066
979,659
841,658
788,583
3,706,382
8,495,351
(817,640)
7,677,711
COUNTY OF HIDALGO, TEXAS
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2013
Note 3 Detailed Notes on all Funds (Continued)
G. Long-term debt
General Obligation Bonds
The County has issued general obligation bonds to provide for the resources for both the acquisition and
construction of capital assets. These bonds have been issued for governmental activities. The beginning
balance of the general obligation bonds issued in prior years was $264,580,000. During the year, Unlimited Tax
Improvement Bonds totaling $77,130,000 were issued for the construction of drainage improvements in the
Drainage District and for the acquisition of rights of way.
The American Recovery and Reinvestment Act of 2009 (the “Recovery Act”) authorizes the County to issue
taxable bonds known as “Build America Bonds” to finance capital expenditures that could otherwise be financed
with the issuance of tax-exempt bonds and to elect to receive a subsidy payment from the federal government
equal to 35% of the amount of each interest payment on such taxable bonds (the “Build America Bonds
Election”). The County issued $8,195,000 and $17,785,000 of Build America Bonds in 2009 and 2010,
respectively. The certificates are not obligations described in section 103(a) of the Internal Revenue Code and
the interest is not excludable from gross income for federal income tax purposes. The available subsidy for those
certificates will be paid to the County. The subsidy payment may be available for payment of debt service on
those certificates, but is not pledged as security to pay debt service on those obligations. No holders of the
certificates are entitled to such payment or to receive a tax credit with respect to these certificates.
General obligation bonds are direct obligations of the County and the unlimited tax improvement bonds are direct
obligations of the Drainage District, payable from the levy and collection of a direct and continuing ad valorem tax,
within the limits prescribed by law, on all taxable property located within the County and District in an amount
th
sufficient to provide payment of principal and interest. All bonds have a principal due date of August 15 , except
st
for the unlimited tax improvement bond, which is due on September 1 . Interest is payable semi-annually, on
th
th
st
February 15 and August 15 , except for the unlimited tax improvement bonds, which are payable on March 1
st
and September 1 .
The Certificates of Obligation, Series 2009C include $3,120,000 of term bonds maturing on August 15, 2029,
which are subject to mandatory sinking fund redemption. The Certificates of Obligation, Series 2010B include
$16,190,000 of term bonds maturing on August 15, 2021, 2024, and 2030, which are also subject to mandatory
sinking fund redemption. The All other bonds may be prepaid or redeemed prior to their respective scheduled
due dates as per provisions in the bond agreements.
General obligation bonds and tax notes currently outstanding are as follows:
Purpose
Governmental activities
Governmental activities
Governmental activities
Governmental activities
Governmental activities
Governmental activities
Governmental activities
Governmental activities
Governmental activities
Governmental activities
Governmental activities
Governmental activities
Interest
Type
Rates
Refunding bonds
3.50 – 5.00%
Refunding bonds
4.00 – 4.25%
Refunding bonds
2.50 – 5.00%
Certificates of obligation
3.50 – 4.20%
Certificates of obligation
3.00 – 5.25%
Certificates of obligation
4.00 – 5.00%
Certificates of obligation
3.00 – 5.00%
Certificates of obligation
2.00 – 6.00%
Certificates of obligation
2.00 – 6.30%
Unlimited tax improvement 4.00 – 5.00%
Unlimited tax improvement 4.00 – 5.00%
Unlimited tax improvement 2.50 – 5.00%
Total general obligation bonds
70
Issue Maturity
Date
Date
2005 2021
2007 2024
2009 2018
2002 2015
2004 2019
2006 2026
2009 2028
2009 2029
2010 2030
2007 2027
2008 2028
2014 2033
Original
Issue
$ 51,640,000
26,415,000
6,995,000
20,910,000
32,250,000
38,770,000
24,280,000
12,225,000
27,850,000
28,000,000
72,000,000
77,130,000
$ 418,465,000
Amount
Outstanding
$ 39,920,000
25,495,000
1,560,000
2,070,000
5,790,000
31,170,000
21,200,000
10,285,000
24,895,000
23,070,000
63,335,000
77,130,000
$ 325,920,000
COUNTY OF HIDALGO, TEXAS
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2013
Note 3 Detailed Notes on all Funds (Continued)
G. Long-term debt (Continued)
Debt Service Requirements
Annual debt service requirements to maturity for general obligation bonds and certificates of obligation are as
follows:
Year Ending
December 31,
2014
2015
2016
2017
2018
2019-2023
2024-2028
2029-2033
Total
$
$
Governmental Activities
Interest
Principal
18,175,000
$
15,887,855
20,355,000
13,859,299
19,940,000
12,974,077
20,740,000
12,083,320
21,675,000
11,148,145
108,080,000
40,602,448
86,735,000
17,096,512
30,220,000
2,953,485
325,920,000
$ 126,605,141
$
$
Total
34,062,855
34,214,299
32,914,077
32,823,320
32,823,145
148,682,448
103,831,512
33,173,485
452,525,141
Note Payable-Hidalgo County
The County has one note from the State Infrastructure Bank payable from the levy and collection of a direct and
continuing ad valorem tax within the limits prescribed by law on all taxable property within the County. The note is
as follows:
Purpose
Tax Series, 2007
Total tax pledged notes
Interest Rate
4.00%
Issue
Date
2008
Maturity
Date
2018
$
$
Original
Issue
911,009
911,009
Amount
Outstanding
$
500,025
$
500,025
Note Payable-Urban County
The County of Hidalgo, through the Urban County Program, entered into a loan agreement with the U.S.
Department of Housing and Urban Development (HUD) under HUD’s Section 108 Loan Guarantee Program. The
purpose of the loan is to assist certain cities in obtaining the necessary financing to construct vital community
projects. Each City will repay its loan with City funds or from the City’s Community Development Block Grant
(CDBG) allotment from the Urban County Program. Principal and interest payments will be made to the Bank of
New York Mellon, HUD’s trustee. Note principal and interest will be used to pay Section 108 Government
Guaranteed Participation Certificates purchased by underwriters selected by HUD. Interest is payable
st
st
st
semiannually, on February 1 and August 1 . Principal payments are due as scheduled on February 1 until
maturity.
Interest
Urban County
Rate
Alton
6.56%
Total Urban County note payable
Issue
Date
2001
71
Maturity
Date
2020
$
$
Original
Issue
2,925,000
2,925,000
Amount
Outstanding
$ 1,515,000
$ 1,515,000
COUNTY OF HIDALGO, TEXAS
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2013
Note 3 Detailed Notes on all Funds (Continued)
G. Long-term Debt (Continued)
Changes in Long-Term Liabilities
The general fund is ultimately responsible for liquidating long-term liabilities, other than debt (such as
compensated absences and pension liabilities).
Long-term liability activity for the year ended December 31, 2013, was as follows:
Governmental activities:
Bonds and notes payable:
General obligation bonds
Notes-Hidalgo County
Notes-Urban County Program
Plus premiums on bonds
Less discounts on bonds
Less deferred amount for
refunding bonds
Total bonds and notes payable
Other liabilities:
Compensated absences
Claims and judgments
Capital leases
Net pension obligation
Other post employment benefits
Total other liabilities
Governmental activities
long-term liabilities
Business-type activities:
Closure and post-closure costs
Compensated absences
Business-type activities
long-term liabilities
Balance
January 1,
2013
Balance
December 31,
2013
Additions
Deductions
$264,580,000
845,988
1,680,000
267,105,988
4,875,998
(69,638)
$ 77,130,000
77,130,000
7,415,831
-
$(15,790,000)
(345,964)
(165,000)
(16,300,964)
(1,352,707)
5,803
(992,126)
270,920,219
84,545,831
8,243,830
3,595,000
1,068,246
974,726
6,649,251
20,531,053
$
Amounts
Due Within
One Year
325,920,000
500,024
1,515,000
327,935,024
10,939,122
(63,835)
$ 18,175,000
92,318
165,000
18,432,318
-
614,545
(17,033,323)
(377,581)
338,432,730
18,432,318
8,651,463
24,086,333
7,058,774
12,425
978,512
40,787,507
(7,973,250)
(23,939,333)
(449,309)
(20,288)
(32,382,180)
8,922,043
3,742,000
7,677,711
987,151
7,607,475
28,936,380
486,127
2,159,021
948,208
3,593,356
$291,451,273
$ 125,333,338
$(49,415,503)
$
367,369,110
$ 22,025,674
$
1,615,155
9,566
$
24,226
28,166
$
(24,779)
$
1,639,381
12,953
$
35,376
549
$
1,624,721
$
52,392
$
(24,779)
$
1,652,334
$
35,925
H. Short-Term Debt
The County of Hidalgo, through the Urban County Program, had a $500,000 line of credit with PlainsCapital Bank
that was paid on August 13, 2013 and closed. On July 24, 2013 a new line of credit was established at Lone Star
National Bank. The purpose of the line of credit is to finance the costs of construction and general administration
expenses prior to reimbursement from the Texas Department of Housing and Community Affairs (TDHCA) and/or
the Texas Department of Rural Affairs (TDRA). Principal amounts obtained from the line of credit are repaid
directly from the corresponding TDHCA or TDRA grants. The County is responsible for any accrued interest.
Short-term debt activity for the year ended December 31, 2013, was as follows:
Balance
January 1,
2013
Urban County Program:
Colonia Fund Line of Credit
PlainsCapital Bank
Lone Star National Bank
$
$
Additions
64,904
64,904
72
$
$
306,688
257,818
564,506
Deductions
$
$
(371,592)
(63,066)
(434,658)
Balance
December 31,
2013
$
194,752
194,752
COUNTY OF HIDALGO, TEXAS
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2013
Note 3 Detailed Notes on all Funds (Continued)
I. Fund Balance
Fund balances by classifications as of December 31, 2013, pursuant to GASB Statement No. 54, are as follows:
Major Funds
Head
Start
Program
General
Fund
Nonmajor Funds
Debt
Service
Funds
Special
Revenue
Fund
Drainage
District
Capital
Projects
Funds
Total
Governmental
Funds
Fund balances:
Nonspendable:
Inventory
Prepaid items
Noncurrent loans receivables
$
758,513
2,592,664
295,975
3,647,152
$
-
$
-
$
27,883
10,400
38,283
$
-
$
-
$
758,513
2,620,547
306,375
3,685,435
Restricted for:
Grand jury program
Community and Economic Development Programs
Bond forfeitures commissions
Record Archives
Elections
Sheriff's confiscations
Bail bond board
Family Protection Fee
Drug Court Program
District Court Records Archive
Grants
Road maintenance and construction
Road Districts
TXDOT cash match
Grant cash match
Law enforcement officers special education
District Attorney Programs
Court ordered confiscations
Drug abuse prevention rehabilitation
Pretrial intervention
Child abuse prevention
District Clerk Title IV-D
Records management & preservation
Court reporter
Juvenile delinquency prevention
Courthouse security
Probate court contributions
Court building security
T.A.C. special vehicle inventory
Law Library
Supplemental court-ordered guardianship fee
Court Technology
Asset forfeiture
Adult Probation
Health Care Funding District
Drainage District No. 1.
Capital outlay cash match
140,093
238,737
984,667
156,322
161,155
362,425
197,555
209,865
929,059
3,379,877
330,815
330,815
-
3,388,974
6,409,633
55,955
718,779
7,406
212,868
3,229,369
29,564
417,950
26,469
127,175
1,853,276
111,838
3,748
128,204
306,890
134,811
70,041
685,387
71,491
806,006
6,075,535
40,152
194,668
14,554,690
39,660,876
-
14,490
14,490
140,093
238,737
984,667
156,322
161,155
362,425
197,555
209,865
3,719,789
6,409,633
70,445
718,779
929,059
7,406
212,868
3,229,369
29,564
417,950
26,469
127,175
1,853,276
111,838
3,748
128,204
306,890
134,811
70,041
685,387
71,491
806,006
6,075,535
40,152
194,668
14,554,690
43,386,058
Committed for:
Renovation of historical site
Dept of Homeland preaward costs
Debt service reserve
-
-
-
-
6,848,513
6,848,513
-
6,848,513
6,848,513
Assigned for:
Jail repairs/Landmark
Designated for 1115 Waiver
Designated appropriations subsequent year
Designated Capital Outlay
Designated TxDot
Capital improvements
Drainage improvement projects
Unassigned:
Total fund balances
$
5,125,172
4,164,602
11,706,190
20,168
709,347
21,725,479
21,279,236
50,031,744
$ 330,815
73
73,581,012
73,581,012
$ 73,581,012
$
39,699,159
$ 6,848,513
21,157,498
1,586,918
22,744,415
(1,714,888)
$ 21,044,017
5,125,172
4,164,602
11,706,190
20,168
709,347
94,738,510
1,586,918
118,050,906
19,564,348
191,535,260
COUNTY OF HIDALGO, TEXAS
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2013
Note 3 Detailed Notes on all Funds (Continued)
I. Fund Balance (Continued)
The County uses restricted fund balances first when expenditures are incurred for purposes for which both
restricted or unrestricted (committed, assigned, and unassigned) amounts are available. Similarly, for
unrestricted fund balances, committed amounts are reduced first followed by assigned, and then unassigned
amounts when expenditures are incurred for purposes for which amounts in the unrestricted fund balance
classification could be used.
Note 4 Other Information
A. Risk Management
The County is exposed to various risks of loss relating to torts; theft of, damage to, and destruction of assets;
errors and omissions; injuries to employees; and natural disasters. The County purchases commercial insurance
for coverage in the following areas: property, general liability, law enforcement liability, professional liability
medical malpractice, public official liability, business automobile liability and physical damage, kidnap and
extortion, automobile Mexico coverage, international coverage, crime, and pollution. The commercial insurance
covers claims up to a certain limit with deductibles ranging from $1,000 to $100,000 in both liability and property.
Excess loss insurance is carried on general liability, which limits losses on claims to $1,000,000 per occurrence
with a policy aggregate of $2,000,000, and a self-insured retention limit of $1,000,000. The County retains the
liability for covered losses that exceed these limits. Settled claims have not exceeded coverage in the past three
fiscal years.
The County retains the risk of loss relating to workers’ compensation. The County has been self-insured for
workers’ compensation risks since 2003. Under this program, the Workers’ Compensation Fund provides
coverage for up to a maximum of $350,000 for each worker’s compensation claim. The County purchases
commercial insurance for claims in excess of coverage provided by the Fund. As of December 31, 2013, the
County had a total of 561 reported claims. GASB No. 10, as amended, 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 at the date of the financial statements and the amount of the loss can be reasonably estimated.
The claims liability is $1,987,000 at December 31, 2013. Changes in the balances of claims liabilities for workers’
compensation for the past two years are as follows:
Claims liabilities at beginning of year
Claims incurred during the year
Changes in the estimate for claims of prior years
Less: Payments on claims
Claims liabilities at end of year
74
$
$
2013
1,971,000
1,061,220
293,473
(1,338,693)
1,987,000
$
$
2012
1,935,000
924,481
374,543
(1,263,024)
1,971,000
COUNTY OF HIDALGO, TEXAS
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2013
Note 4 Other Information (Continued)
A. Risk Management (Continued)
The County established the Health Benefits Fund, an internal service fund, to account for and finance its
uninsured risk of loss for health benefits. The primary government and Drainage District No.1 as well as the
Hidalgo County Appraisal District participate in the program and pay premiums to the Fund. Additionally,
contributions are made to the Fund by employees for family coverage and by retirees and their dependents
eligible to participate in the program. The participants are charged a blended premium based on the entire pool of
participants. Premium rates are assessed on an annual basis and adjustments are made accordingly on
February 1. Premiums are used to pay claims on a pay-as-you-go basis and administrative costs of the program.
An excess coverage insurance policy covers individual claims in excess of $170,000. The claims liability is
$1,755,000 at December 31, 2013. Changes in the balances of claims liabilities for health benefits for the past
two years are as follows:
Claims liabilities at beginning of year
Claims incurred during the year
Changes in the estimate for claims of prior years
Less: Payments on claims
Claims liabilities at end of year
$
$
2013
1,624,000
22,668,854
(774,939)
(21,762,915)
1,755,000
$
$
2012
1,097,600
18,844,456
473,225
(18,791,281)
1,624,000
B. Contingent Liabilities
1. Litigation
Various lawsuits are pending against the County involving general liability, civil rights actions, and various
contractual matters. In the opinion of County management, the potential claims against the County not
covered by insurance resulting from such litigation will not materially affect the financial position of the County.
2. Federally Assisted Programs
The County and its related agencies participate in a number of federally assisted grant programs. Although
the grant programs have been audited in accordance with the provisions of the Single Audit Act Amendments
of 1996 and OMB Circular A-133 through December 31, 2013, these programs are still subject to financial and
compliance audits. The amount, if any, of expenditures which may be disallowed by the grantor agencies
cannot be determined at this time, although the County and its related agencies expect such amounts, if any,
to be immaterial to the financial position of the County.
C. Other Post Employment Benefits
Plan Description
The County does not have a formal post-employment benefits plan; however, the County allows retired
employees to participate in the County’s Health Benefits Program by purchasing health care benefits at the same
group rate as provided to current active employees at the time they end their service to the County. Members
with the County can retire at age 60 and above with 8 or more years of service, with 20 years of service
regardless of age, or when their age and years of service equals 75 or more. Members with the Drainage District
can retire at age 60 and above with 10 or more years of service, with 20 years of service regardless of age, or
when their age and years of service equals 80 or more. Spouses and dependents are eligible to continue
insurance under COBRA for 36 months after the retiree dies. If a dependent is not yet 26 years of age at the time
of the members’ death the same rule applies. Once the dependent attains the age of 26, Blue Cross Blue Shield
will terminate coverage automatically.
75
COUNTY OF HIDALGO, TEXAS
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2013
Note 4 Other Information (Continued)
C. Other Post Employment Benefits (Continued)
A cost sharing premium is a blended rate that takes into account the cost of medical benefits for active employees
as well as retirees. Medical costs are generally higher for retirees than for active employees of the same age. A
retiree who is paying 100% of the cost sharing premium is most likely not paying 100% of the true cost of the
medical benefits. This situation is known as an “implicit rate subsidy”. GASB Statement No. 45, Accounting and
Financial Reporting by Employer for Postemployment Benefits other than Pensions, is applicable to the County
due to the implicit rate subsidy. This “plan” is not a standalone plan and, therefore, does not issue its own
financial statements. There are 3,705 active employees and 43 retired employees.
Funding Policy. The County collects insurance premiums from the participating retirees each month and
deposits them in the County’s Group Insurance Fund. The County then pays the health insurance premiums for
the retirees at the blended rate to the County’s self-funded Health Benefits Program. The required contribution to
the program includes the employer’s pay-as-you-go amount and the amount paid by retirees. For the fiscal year,
the County paid $584,588 and the Drainage District paid $51,187, which consisted of retiree payments. The
County has elected not to prefund the actuarially determined future cost but will accrue the liability to reflect
proper treatment and will disclose the Health Care Benefits for Retired Employees in accordance with GASB
Statement 45. Monthly medical and prescription contributions required by the plan are as follows:
Base Plan
$347
540
432
624
Employee only
Employee & child/children
Employee & spouse
Employee & family
Buyup Plan
$378
583
470
706
Annual OPEB Cost and Net OPEB Obligation. The County and the Drainage District’s OPEB cost (expense) is
calculated based on the annual required contribution of the employer (ARC), an amount actuarially determined in
accordance with the parameters established by GASB Statement No. 45. The ARC represents a level of funding
that, if paid on an ongoing basis, is projected to cover normal cost each year and amortize any unfunded actuarial
liabilities (or funding excess) over a period not to exceed thirty years. The following table shows the components
of the County and Drainage District’s annual OPEB cost for the year, the amount actually contributed, and
changes in the net OPEB obligation.
Hidalgo
County
$ 1,710,285
232,014
(379,199)
1,563,100
(584,587)
978,513
6,628,962
6,628,962
$ 7,607,475
1. Annual required contributions
2. Interest on net OPEB Obligation
3. Adjustment to ARC
4. Annual OPEB cost [ (1) + (2) + (3) ]
5. Contributions made
6. Increase (decrease) in OPEB [ (4) - (5) ]
7. OPEB at beginning of year
Prior period adjustment
7. OPEB at beginning of year as restated
8. OPEB end of year [ (6) + (7) ]
76
Drainage
District No. 1
$
28,197
710
(1,160)
27,747
(51,187)
(23,440)
20,289
20,289
$
(3,151)
$
$
Total
1,738,482
232,724
(380,359)
1,590,847
(635,774)
955,073
6,649,251
6,649,251
7,604,324
COUNTY OF HIDALGO, TEXAS
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2013
Note 4 Other Information (Continued)
C. Other Post Employment Benefits (Continued)
At December 31, 2013, three years of comparative data is presented. The County and Drainage District’s annual
cost, the percentage of annual OPEB cost contribution, and the net OPEB obligation are as follows:
County of Hidalgo
Year End
Discount
Rate
12/31/2013
12/31/2012
12/31/2011
3.50%
4.00%
4.00%
Annual
OPEB
Cost
$
1,563,100
1,328,929
1,398,611
Percentage
of Annual
OPEB Cost
Contributed
37.40%
50.12%
11.35%
Net OPEB
Obligation
$
7,607,474
6,628,962
7,480,682
Drainage District No. 1
Year End
12/31/2013
12/31/2012
12/31/2011
Discount
Rate
3.50%
4.00%
4.00%
$
Annual
OPEB
Cost
27,747
25,782
25,371
Percentage
of Annual
OPEB Cost
Contributed
184.48%
449.01%
15.37%
Net OPEB
Obligation
$
(3,151)
20,289
153,518
Funded Status and Funding Progress. As of December 31, 2013, the most recent actuarial date, the plan was
0.00% funded for the County and the Drainage District. The actuarial accrued liability was $12,174,052 for the
County and $154,330 for the Drainage District and the actuarial value of assets was $0 for the County and for the
Drainage District, resulting in an unfunded actuarial accrued liability (UAAL) of $12,174,052 for the County and
$154,330 for the Drainage District. The covered payroll (annual payroll of active employees covered by the plan)
was $121,784,045 for the County and $3,666,660 for the Drainage District, and the ratio of the UAAL to the
covered payroll was 10% for the County and 4.2% for the Drainage District.
The schedule of funding progress presents three years of information about whether the actuarial value of plan
assets is increasing or decreasing over time relative to the actuarial accrued liability for benefits. The most recent
actuarial valuation was performed in 2013 and is valid for two years.
77
COUNTY OF HIDALGO, TEXAS
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2013
Note 4 Other Information (Continued)
C. Other Post Employment Benefits (Continued)
Schedule of Funding Progress
(Required Supplemental Information-Unaudited)
Year
2013
2012
2011
Year
2013
2012
2011
Actuarial
Valuation
Actuarial
Value of
Date
12/31/2013
12/31/2011
12/31/2011
Assets
-
Actuarial
Valuation
Date
12/31/2013
12/31/2011
12/31/2011
Actuarial
Value of
Assets
-
Actuarial
Accrued
Liability
County of Hidalgo
Unfunded
Actuarial
Accrued
Liability
Funded
(AAL)
12,174,052
9,966,655
9,966,655
(UAAL)
12,174,052
9,966,655
9,966,655
Ratio
0%
0%
0%
Drainage District No. 1
Unfunded
Actuarial
Actuarial
Accrued
Accrued
Liability
Liability
Funded
(AAL)
(UAAL)
Ratio
154,330
154,330
0%
189,384
189,384
0%
189,384
189,384
0%
Covered
UAAL as a
% of Covered
Payroll
121,784,045
114,570,110
115,070,568
Payroll
10.00%
8.70%
8.66%
Covered
Payroll
3,666,660
3,438,828
3,222,346
UAAL as a
% of Covered
Payroll
4.21%
5.51%
5.88%
Actuarial method and assumptions Actuarial valuations for an ongoing plan involve estimates of the value of
reported amounts and assumptions about the probability of occurrence of events far into the future. Actuarially
determined amounts are subject to continuous revisions as actual results are compared to past expectations and
new estimates about the future are formulated. Although the valuation results are based on values which the
County’s actuarial consultant believes are reasonable assumptions, the valuation results reflect a long-term
perspective and, as such, are merely an estimate of expected future costs. Deviation in any of several factors,
such as future interest rates, medical inflation, and changes in marital status could result in actual costs being
greater or less than estimated.
Projection of the benefits for financial reporting purposes are based on the plan and include the types of benefits
provided at the time of each valuation and the historical pattern of sharing the benefits costs between the
employer and plan members to that point. The actuarial methods and assumptions used include techniques that
are designed to reduce short-term volatility in actuarial accrued liabilities and the actuarial value of assets,
consistent with the long-term perspective of the calculations.
78
COUNTY OF HIDALGO, TEXAS
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2013
Note 4 Other Information (Continued)
C. Other Post Employment Benefits (Continued)
Year
Actuarial valuation date
Actuarial cost method
Amortization method
Amortization period in years
Actuarial assumptions:
Inflation rate
Discount rate
Health cost trend
Spouse coverage
Spouse age
Electing coverage
Hidalgo County and Drainage District No. 1
2011
2012
12/31/2011
12/31/2011
Projected Unit Credit
Projected Unit Credit
2013
12/31/2013
Projected Unit Credit
Level dollar, closed
27
Level dollar, closed
27
Level dollar, closed
26
3.0%
3.0%
3.0%
4.0%
9.0%
10.0%
Females assumed to
be 3 yrs younger
20.0%
4.0%
9.0%
10.0%
Females assumed to
be 3 yrs younger
20.0%
3.5%
6.9%
10.0%
Females assumed to
be 2 yrs younger
20.0%
D. Employee Retirement Plan
Texas County and District Retirement System
Plan Description
The County and District provide retirement and death benefits for all of its full-time employees through a
nontraditional defined benefit pension plan in the statewide Texas County and District Retirement System
(TCDRS). The Board of Trustees of TCDRS is responsible for the administration of the statewide agent multipleemployer public employee retirement system consisting of 641 nontraditional defined benefit pension plans.
TCDRS, in the aggregate, issues a comprehensive annual financial report (CAFR) on a calendar year basis. The
CAFR is available upon written request from the TCDRS Board of Trustees at P.O. Box 2034, Austin, Texas
78768-2034.
The plan provisions are adopted by the governing body of the County and the Drainage District, within the options
available in the Texas state statutes governing TCDRS (TCDRS Act). Members with the County can retire at age
60 and above with 8 or more years of service, with 20 years of service regardless of age, or when their age and
years of service equals 75 or more. Members with the County are vested after 8 years of service but must leave
their accumulated contributions in the plan to receive any employer-financed benefits. Members with the
Drainage District can retire at age 60 and above with 10 or more years of service, with 20 years of service
regardless of age, or when their age and years of service equals 80 or more. Members with the Drainage District
are vested after 10 years of service but must leave their accumulated contributions in the plan to receive any
employer-financed benefits. Members with the County or the Drainage District who withdraw their personal
deposits in a lump sum are not entitled to any amounts contributed by their employer.
Benefit amounts are determined by the sum of the employee's contributions to the plan, with interest, and
employer-financed monetary credits. The level of these monetary credits is adopted by the governing body of the
County and the Drainage District within the actuarial constraints imposed by the TCDRS Act so that resulting
benefits can be expected to be adequately financed by the County’s and the Drainage District's commitment to
contribute. At retirement, death, or disability, the benefit is calculated by converting the sum of the employee's
accumulated contributions and the employer-financed monetary credits to a monthly annuity using annuity
purchase rates prescribed by the TCDRS Act.
79
COUNTY OF HIDALGO, TEXAS
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2013
Note 4 Other Information (Continued)
D. Employee Retirement Plan (Continued)
Funding Policy
The plan is funded by monthly contributions from both employee members and the employer based on the
covered payroll of employee members. Under the TCDRS Act, the contribution rate of the County and the
Drainage District is actuarially determined annually. Contributions were made using the actuarially determined
rate of 10.50% for the County and 12.10% for the Drainage District for the calendar year 2013. The contribution
rate payable by the employee members is 7% as adopted by the governing bodies of the County and the
Drainage District. The employee contribution rate and the employer contribution rate may be changed by the
governing bodies of the County and the Drainage District within the options available in the TCDRS Act.
Annual Pension Cost
For the year ended December 31, 2013, the County’s annual pension cost was $12,609,683 and the actual
contributions were $12,597,257. For the Drainage District, the annual pension cost was $458,627 and the actual
contributions were $459,718. The required contributions were determined as part of the December 31, 2012
actuarial valuation using the entry age actuarial cost method. The actuarial assumptions at December 31, 2012
included (a) 8.0% investment rate of return (net of administrative expenses), and (b) projected salary increases of
5.4%. Both (a) & (b) included an inflation component of 3.5%. The actuarial value of assets was determined
using techniques that spread the effects of short-term volatility in the market value of investments over a ten-year
period. The unfunded actuarial accrued liability is being amortized as a level percentage of payroll on a closed
basis. The remaining amortization period at December 31, 2012 was 20 years.
1. Annual required contributions
2. Interest on net pension obligation (NPO)
3. Adjustment to ARC
4. Annual pension cost [ (1) + (2) + (3) ]
5. Contributions made
6. Increase (decrease) in NPO [ (4) - (5) ]
7. NPO beginning of year
8. NPO end of year [ (6) + (7) ]
Hidalgo
County
$ 12,597,257
87,725
(75,299)
12,609,683
12,597,257
12,426
974,725
$
987,151
80
Drainage
District No. 1
$
459,718
(15,677)
14,586
458,627
459,718
(1,091)
(174,192)
$
(175,283)
$
$
Total
13,056,975
72,048
(60,713)
13,068,310
13,056,975
11,335
800,533
811,868
COUNTY OF HIDALGO, TEXAS
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2013
Note 4 Other Information (Continued)
D. Employee Retirement Plan (Continued)
At December 31, 2013, three years of comparative data is presented. The County and the Drainage Districts’
Annual Pension Cost, the Percentage of Annual Pension Cost Contributed and the Net Pension Obligation are as
follows:
Three Year Trend Information
For the Retirement Plan for the Employees of the County and the Drainage District
County of Hidalgo
Annual
Percentage
Pension
of APC
Cost (APC)
Contributed
Year End
12/31/2011
12/31/2012
12/31/2013
Year End
10,925,351
11,374,613
12,609,683
99.89%
99.89%
99.90%
Drainge District No. 1
Annual
Percentage
Pension
of APC
Cost (APC)
Contributed
12/31/2011
12/31/2012
12/31/2013
357,134
373,718
458,627
100.30%
100.29%
100.24%
Net Pension
Obligation
962,456
974,726
987,151
Net Pension
Obligation
(173,108)
(174,192)
(175,283)
Funded Status and Funding Progress. As of December 31, 2012, the most recent actuarial valuation date, the
plan was 82.66% funded for the County and 83.4% for the Drainage District. The actuarial accrued liability for
benefits was $310,582,147 for the County and $8,964,169 for the Drainage District and the actuarial value of
assets was $256,732,343 for the County and $7,476,013 for the Drainage District, resulting in an unfunded
actuarial accrued liability (UAAL) of $53,849,804 for the County and $1,488,156 for the Drainage District. The
covered payroll (annual payroll of active employees covered by the plan) was $114,194,852 for the County and
$3,328,623 for the Drainage District, and the ratio of the UAAL to the covered payroll was 47.16% for the County
and 44.71% for the Drainage District.
Actuarial Methods and Assumptions
Actuarial valuation date
Actuarial cost method
Amortization method
Amortization period in years
Asset valuation method
Actuarial assumptions:
Investment return
Projected salary increases
Inflation
Cost of living adjustments
Hidalgo County and Drainage District No. 1
12/31/2010
12/31/2011
12/31/2012
Entry age
Entry age
Entry age
Level % of payroll, closed
Level % of payroll, closed
Level % of payroll, closed
20
20
20
SAF: 10-yr smoothed value SAF: 10-yr smoothed value SAF: 10-yr smoothed value
ESF: Fund value
ESF: Fund value
ESF: Fund value
8.0%
5.4%
8.0%
5.4%
8.0%
5.4%
3.5%
0.0%
3.5%
0.0%
3.5%
0.0%
81
COUNTY OF HIDALGO, TEXAS
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2013
Note 4 Other Information (Continued)
D. Employee Retirement Plan (Continued)
The schedule of funding progress presents multiyear trend information about whether the actuarial value of plan
assets is increasing or decreasing over time relative to the actuarial accrued liability for benefits.
Schedule of Funding Information
For the Retirement Plan for the Employees of the County and the Drainage District
(Required Supplemental Information-Unaudited)
1. Actuarial valuation date
2. Actuarial valuation of assets
3. Actuarial accrued liability (AAL)
4. Unfunded actuarial accrued liability (UAAL) [3-2]
5. Funded ratio [2/3]
6. Annual covered payroll (actuarial)
7. UAAL as percentage of covered payroll [(3-2)/6]
$
County of Hidalgo
12/31/2011
$ 239,287,247
287,488,284
48,201,037
83.23%
113,679,935
42.4%
12/31/2010
217,870,317
261,454,163
43,583,846
83.33%
113,261,606
38.48%
$
12/31/2012
256,732,343
310,582,147
53,849,804
82.66%
114,194,852
47.16%
Drainage District No. 1
1. Actuarial valuation date
2. Actuarial valuation of assets
3. Actuarial accrued liability (AAL)
4. Unfunded actuarial accrued liability (UAAL)
5. Funded ratio
6. Annual covered payroll (actuarial)
7. UAAL as percentage of covered payroll
$
12/31/2010
6,425,409
7,425,705
1,000,296
86.53%
3,316,783
30.16%
$
12/31/2011
6,938,718
8,141,686
1,202,968
85.22%
3,282,439
36.65%
$
12/31/2012
7,476,013
8,964,169
1,488,156
83.40%
3,328,623
44.71%
County of Hidalgo Affiliated Agencies Employees’ Retirement Plan
Plan Description
The Plan is a tax deferred money purchase pension plan and covers employees of Hidalgo County Urban County
Program, Hidalgo County Head Start Program, and Hidalgo County Community Service Agency. The Plan was
adopted in 1993 and amended effective January 1, 2001. It is subject to the provisions of the Employee
Retirement Income Security Act of 1974 (ERISA). The plan is a defined contribution plan. The plan does not
issue a comprehensive annual financial report.
The plan provisions are adopted by the Trustees and the governing body of the County. Employees of the
various Agencies are eligible to participate in the Plan once they complete six months of service or accumulate
501 hours of service. Members are fully vested after three years of service or upon reaching normal retirement
age regardless of years of service.
Each member's account is credited with the member's contribution and allocations of (a) the Agency's contribution
and (b) plan earnings, and charged with an allocation for administrative expenses. Allocations are based on
member earnings or account balances, as defined. Forfeited balances of terminated members’ non-vested
accounts are first used to pay Plan administrative expenses for the year with any remaining balance or forfeitures
treated as additional employer contributions.
82
COUNTY OF HIDALGO, TEXAS
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2013
Note 4 Other Information (Continued)
D. Employee Retirement Plan (Continued)
County of Hidalgo Affiliated Agencies Employees’ Retirement Plan (Continued)
The benefit to which a member is entitled is the benefit that can be provided from the member's vested account.
Distribution of benefits upon termination of employment due to death, disability, or retirement will be made in
accordance with the provisions in the Plan agreement. Distributions will be in the form of an annuity or as a lumpsum distribution.
Funding Policy
The plan is funded by monthly contributions from both employee members and the employer based on the
covered payroll of employee members. The contribution rate payable by both the employer and the employee
members is 7%. The Hidalgo County Urban County Program is no longer making contributions to the plan. On
October 2006, employees of the Hidalgo County Urban County Program joined the Texas County and District
Retirement System.
Contributions to the Plan totaled $2,476,157 for the year ended December 31, 2013.
E. 457 Deferred Compensation Plan
The County offers its employees a deferred compensation plan that permits them to defer a portion of their
current salary until future years. Any contributions made to the deferred compensation plan, in compliance with
Section 457 of the Internal Revenue Code, are not available to employees until termination of employment,
retirement, death, or an unforeseen emergency. The Reyna Financial Group, the third party administrator,
administers contributions to the plan. In accordance with the provisions of IRC Section 457(g), the plan assets
are in custodial accounts for the exclusive benefit of the plan participants and beneficiaries. The County provides
neither administrative services nor investment advice to the plan. Therefore, in accordance with GASB Statement
No. 32, no fiduciary relationship exists between the County and the deferred compensation plan. At December
31, 2013, the plan assets were valued at $2,074,631.
F. Landfill Closure and Post-closure Care Costs
State and federal laws and regulations require the County to place final covers on its landfill sites located in
Precinct Three and Four when it stops accepting waste at these sites. During 2004, the County placed a final
cover on the Precinct Four landfill. The County will be required to perform certain maintenance and monitoring
functions at both landfill sites for a minimum of thirty years after closure.
GASB Statement No. 18, Accounting for Municipal Solid Waste Landfill Closure and Post-closure Care Costs,
addresses the financial statement effect of complying with EPA and state requirements. GASB Statement No. 18
requires that all closure and post-closure care costs be recognized during the operating life of the landfill.
Accordingly, a portion of the total estimated closure and post-closure care costs, based on the ratio of landfill
capacity, should be recognized as an expense and/or liability each period the landfill accepts waste.
Closure and post-closure care costs related to the County's landfill site in Precinct Three (MSW-1727A) are based
on a five-acre cell out of twelve acres that are currently in operation. The County has recognized a liability of
$376,251 for closure and post-closure care costs as of December 31, 2013. The County obtained approval from
the Texas Commission on Environmental Quality (TCEQ) to expand the landfill capacity of the above five-acre
cell in 1998.
83
COUNTY OF HIDALGO, TEXAS
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2013
Note 4 Other Information (Continued)
F. Landfill Closure and Post-closure Care Costs (Continued)
Post-closure care costs related to the County's landfill site in Precinct Four are based on eighteen acres of landfill
(MSW-1593A). In 2004, the County submitted the Final Cover System Evaluation Report (FCSER) to the Texas
Commission on Environmental Quality, which satisfied the documentation requirements for closure in 30
TAC§330.253(e)(6). The County has recognized a liability of $1,263,679 for post-closure care costs as of
December 31, 2013.
At December 31, 2013, the total liability of $1,639,930 for both landfill sites is based on the County performing all
of the work. However, due to changes in technology, inflation, laws and regulations, actual costs may change.
The County implemented financial assurance requirements related to landfill closure and post-closure care costs
as required by TCEQ and will continue to do so in future years.
G. Prior Period Adjustments
The following County fund balances at December 31, 2012, have been restated.
Special
Revenue
Funds
Balances at December 31, 2012, as previously reported
To reclassify unallowed cost from Colonia Grant to CDBG
Balances at December 31, 2012, as restated
$ 41,946,207
(11,672)
$ 41,934,535
As a result of implementing GASB Statement No. 65, the County has restated the beginning net position in the
government wide statement of activities by decreasing net position by $3,972,561. The decrease results from no
longer deferring and amortizing bond issuance costs.
H. Property Taxes
Levy and Collections
The Hidalgo County Appraisal District (the Appraisal District) is responsible for the appraisal of all taxable
property of all taxing units in the Appraisal District, including the County. The Property Tax Code requires that all
taxing units assess taxable property at 100% of its appraised value. The County is responsible for the collection
th
of its taxes. Before the later of September 30 or the 60 day after the date the certified appraisal role is received
by the County, the Commissioners Court adopts a tax rate per $100 taxable value for the following year based
upon the valuation of property within the County as of January 1. The tax rate consists of two components: (1) a
rate for funding of maintenance and operation expenditures, and (2) a rate for debt service. Ad valorem taxes are
due on receipt of a tax bill and payable from October 1 of the year in which levied until January 31 of the following
year without interest or penalty. Taxes become delinquent on February 1 of the following year and are then
subject to interest and penalties.
Taxes levied by the County are a personal obligation of the owner of the property. On January 1 of each year, a
tax lien attaches to property to secure the payment of all taxes, penalties, and interest ultimately imposed for the
year on the property. The lien exists in favor of each taxing unit, including the County, having power to tax the
property.
84
COUNTY OF HIDALGO, TEXAS
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2013
Note 4 Other Information (Continued)
H. Property Taxes (Continued)
Tax Rate
The Texas Constitution (Article VIII, Section 9) limits the tax rate that the County may levy to $0.80 per $100
assessed valuation for all purposes of General Fund, Permanent Improvement Fund, Road and Bridge Fund, and
Jury Fund, including debt service of bonds, warrants, tax notes, or certificates of obligation issued against such
funds. The total tax rate for fiscal year 2013 was $0.5900 per $100 assessed valuation, of which $0.5235 was
allocated for maintenance and operations, and $0.0665 was allocated to the debt service funds. The Drainage
District No. 1 tax rate for fiscal year 2013 was $0.0750 per $100 assessed valuation, of which $0.0454 was
allocated for maintenance and operations, and $0.0296 was allocated to the debt service funds.
I. Subsequent events
On April 08, 2014, Commissioners Court approved the issuance of Limited Tax Refunding Bonds, Series 2014A
in the amount of $4,515,000; and Limited Tax Refunding Bonds, Taxable Series 2014B for $32,845,000.
Proceeds from the bond issue will be used to refund a portion of outstanding bonds of the County for debt service
savings and to pay costs of issuance of the respective series of bonds.
The Bond Series 2014A was issued to refund $1,055,000 of Combination Limited Tax and Limited Pledge
Revenue Certificates of Obligation, Series 2002, and $3,630,000 of Combination Tax and Limited Pledge
Revenue Certificates of Obligation, Series 2004.
The Bond Series 2014B was issued to refund $30,850,000 of Limited Tax and General Obligation Refunding
Bonds, Series 2005.
85
(THIS PAGE LEFT BLANK INTENTIONALLY)
APPENDIX C
FORM OF BOND COUNSEL'S OPINIONS
(THIS PAGE LEFT BLANK INTENTIONALLY)
THE J. RAMIREZ LAW FIRM
Attorneys at Law
Ebony Park, Suite B
700 N. Veterans Blvd.
San Juan, Texas 78589
Phone: (956) 502-5424
Fax: (956) 502-5007
[Closing Date]
HIDALGO COUNTY, TEXAS CERTIFICATES OF OBLIGATION, SERIES 2014,
DATED NOVEMBER 15, 2014 IN THE AGGREGATE
PRINCIPAL AMOUNT OF $19,950,000*
WE HAVE ACTED as Bond Counsel for the County of Hidalgo, Texas (the "County") in connection
with the issuance of the captioned certificates of obligation (the "Certificates").
The Certificates are issuable in fully registered form only, in denominations of $5,000 or integral
multiples thereof, bear interest, are payable in the principal amounts and years and may be transferred or
exchanged, as set out in the Certificates and in the Order of the Commissioners Court (the “Commissioners
Court”) authorizing their issuance (the “Order”). The Certificates are being issued to pay the costs of
contractual obligations for the Project as defined in the Order and to pay costs of issuance of the Certificates,
under and pursuant to the authority of the Constitution and laws of the State of Texas particularly Sections
271.041 through 271.063 of the Texas Local Governmental Code, as amended.
WE HAVE ACTED as Bond Counsel for the sole purpose of rendering an opinion with respect to the
legality and validity of the Certificates under the Constitution and laws of the State of Texas and with respect
to the exclusion of interest on the Certificates from gross income of the owners thereof for federal income tax
purposes. In such capacity we have examined the Constitution and laws of the State of Texas, federal income
tax law that we deem applicable, and a transcript of certain certified proceedings pertaining to the issuance of
the Certificates as described in the Order. The transcript contains certain certifications, representations and
other material facts within the knowledge and control of the County and certain other customary documents
and instruments authorizing and relating to the issuance of the Certificates upon which we rely. We have also
examined executed Certificate No. T-l and a specimen of Certificates to be authenticated and delivered in
exchange for the Certificate.
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 County or the disclosure thereof in connection with the sale of the Certificates. Our role in connection
with the preparation of the Official Statement has been limited as described therein.
BASED ON SUCH EXAMINATION, our opinion is as follows:
(1)
The transcript of certified proceedings evidences complete legal authority for the issuance of
the Certificates in full compliance with the Constitution and laws of the State of Texas presently in effect; and
the Certificates have been authorized and delivered in accordance with law and constitute valid and legally
binding obligations of the County in accordance with the terms and conditions thereof, except to the extent
that the rights and remedies of the owners of the Certificates may be limited by laws heretofore or hereafter
* Preliminary, subject to change.
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;
(2)
The Certificates are a full faith and credit obligation of the Issuer and payable, both as to
principal and interest, from the combination of the levy and collection of a direct and continuing ad valorem
tax, within the limits prescribed by law, on all taxable property within the County, and are additionally
secured by and payable from a limited pledge (never to exceed $1000) from the surplus net revenues from the
operation of the County’s parks as authorized pursuant to Chapter 320, Local Government Code.
ALSO BASED ON OUR EXAMINATION AS DESCRIBED ABOVE, it is our further opinion that,
subject to the restrictions hereinafter described, interest on the Certificates is excludable from gross income of
the owners thereof for federal income tax purposes under existing law and is not subject to the alternative
minimum tax on individuals or, except as hereinafter described, corporations. The opinion set forth in the
first sentence of this paragraph is subject to the condition that the County 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 Certificates in order that interest thereon be, or continue to be, excluded from gross income for federal
income tax purposes. The County has covenanted in the Order to comply with each such requirement. Failure
to comply with such requirements may cause the inclusion of interest on the Certificates in gross income for
federal income tax purposes to be retroactive to the date of issuance of the Certificates. The Code and the
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 Certificates in gross income of the owners thereof for federal income tax purposes.
INTEREST ON all tax-exempt obligations, including the Certificates, owned by a corporation, other
than an S corporation; a qualified mutual fund; a financial asset securitization investment trust; a real estate
investment trust (REIT); or a real estate mortgage investment conduit (REMIC), will be included in such
corporation's adjusted current earnings for purposes of calculating the alternative minimum taxable income of
such corporation. A corporation's alternative minimum taxable income is the basis on which the alternative
minimum tax imposed by the Code are computed.
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 Certificates. Prospective purchasers of Certificates should
be aware that the ownership of tax-exempt obligations such as the Certificates may result in collateral federal
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 corporations
with Subchapter C earnings and profits, individual recipients of Social Security or Railroad Retirement
benefits, individuals otherwise qualifying for the earned income credit, individuals who own an interest in a
financial asset securitization investment trust, and taxpayers who are deemed to have incurred or continued
indebtedness to purchase or carry tax-exempt obligations. For the foregoing reasons, prospective purchasers
should consult their own tax advisors as to the consequences of investing in the Certificates.
Very truly yours,
THE J. RAMIREZ LAW FIRM
Attorneys at Law
Ebony Park, Suite B
700 N. Veterans Blvd.
San Juan, Texas 78589
Phone: (956) 502-5424
Fax: (956) 502-5007
[Closing Date]
HIDALGO COUNTY, TEXAS
LIMITED TAX REFUNDING BONDS, SERIES 2014B
IN THE AGGREGATE ORIGINAL PRINCIPAL
AMOUNT OF $23,595,000*
WE HAVE ACTED as Bond Counsel for the County of Hidalgo (the "County") in
connection with the issuance of the captioned bonds (the "Bonds").
THE BONDS are being issued pursuant to an Order (the “Order”) to provide funds to be
used to refund a portion of the County’s currently outstanding debt and to pay for costs of issuance
of the Bonds.
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, the defeasance of the obligations being refunded and discharged with the proceeds of the
Bonds, and with respect to the exclusion of interest on the Bonds from gross income of the owners
thereof for federal income tax purposes. In such capacity we have examined the Constitution and
laws of the State of Texas, federal income tax law that we deem applicable, and a transcript of
certain certified proceedings pertaining to the issuance of the Bonds as described in the Order,
including the escrow agreement (the "Escrow Agreement") between the County and The Bank of
New York Mellon Trust Company, N.A., Dallas, Texas (the "Escrow Agent"), and a special report
of Grant Thornton L.L.P., Certified Public Accountants (the "Accountants"). The transcript contains
certified copies of certain proceedings of the County and certain certifications and representations
and other material facts within the knowledge and control of the County, 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. T-l and a specimen of Bonds to be authenticated
and delivered in exchange for the Bonds.
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 County or the disclosure thereof in connection with the sale of the Bonds. Our
role in connection with the County's Official Statement prepared for use in connection with the sale
of the Bonds has been limited as described therein.
BASED ON SUCH EXAMINATION, our opinion is as follows:
* Preliminary, subject to change.
(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; and the Bonds have been authorized and delivered in accordance with law and constitute
valid and legally binding obligations of the County 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 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;
(2) The Bonds are payable, both as to principal and interest, from the receipts of an annual ad
valorem tax levied, within legal limits as to rate or amount, upon taxable property located within the
County, which taxes have been pledged irrevocably to pay the principal of and the interest on the
Bonds.
(3) The Escrow Agreement has been duly authorized, executed, and delivered by the County
and, assuming due authorization, execution, and delivery thereof by the Escrow Agent, is a valid and
binding obligation, enforceable in accordance with its terms (except to the extent that the
enforceability thereof may be affected by bankruptcy, insolvency, reorganization, moratorium, or
other similar laws affecting creditors' rights or the exercise of judicial discretion in accordance with
general principles of equity), and that the outstanding obligations refunded, discharged, paid, and
retired with the proceeds of the Bonds.
(4) The outstanding obligations refunded by the Bonds have been defeased and are regarded
as being outstanding only for the purpose of receiving payment from the funds held in trust with the
Escrow Agent, pursuant to the Escrow Agreement and the order authorizing their issuance. In
rendering this opinion, we have relied upon the verification by the Accountants of the sufficiency of
cash and investments deposited with the Escrow Agent pursuant to the Escrow Agreement for the
purposes of paying the outstanding obligations refunded and to be retired with the proceeds of the
Bonds and the interest thereon.
It is our further opinion that, subject to the restrictions hereinafter described, interest on the
Bonds is excludable from gross income of the owners thereof for federal income tax purposes under
existing law. Interest on the Bonds, however, owned by a corporation will be included in such
corporation’s adjusted current earnings for purposes of calculating the alternative minimum taxable
income of such corporation, other than an S corporation, a qualified mutual fund, a financial asset
securitization investment trust, a Real Estate Investment Trust (REIT), or a Real Estate Mortgage
Investment Conduit (REMIC). The opinion set forth in the first sentence of this paragraph is subject
to the condition that the County 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 County has covenanted in the Order to comply with each such requirement. Failure to comply
with 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
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 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
Bonds should be aware that the ownership of tax-exempt obligations such as the Bonds may result in
collateral federal tax consequences to, among others, financial institutions, property and casualty
insurance companies, certain foreign corporations doing business in the United States, certain
corporations with Subchapter C earnings and profits, individual recipients of Social Security or
Railroad Retirement benefits, individuals otherwise qualifying for the earned income credit,
individuals who own an interest in a financial asset securitization investment trust, and taxpayers
who are deemed to have incurred or continued indebtedness to purchase or carry tax-exempt
obligations. For the foregoing reasons, prospective purchasers should consult their own tax advisors
as to the consequences of investing in the Bonds.
Very truly yours,
(THIS PAGE LEFT BLANK INTENTIONALLY)
THE J. RAMIREZ LAW FIRM
Attorneys at Law
Ebony Park, Suite B
700 N. Veterans Blvd.
San Juan, Texas 78589
Phone: (956) 502-5424
Fax: (956) 502-5007
[Closing Date]
HIDALGO COUNTY, TEXAS TAX NOTES, SERIES 2014,
DATED NOVEMBER 15, 2014 IN THE AGGREGATE
PRINCIPAL AMOUNT OF $5,720,000*
WE HAVE ACTED as Bond Counsel for the County of Hidalgo, Texas (the "County") in connection
with the issuance of the captioned obligations (the "Notes").
The Notes are issuable in fully registered form only, in denominations of $5,000 or integral multiples
thereof, bear interest, are payable in the principal amounts and years and may be transferred or exchanged, as
set out in the Notes and in the Order of the Commissioners Court (the “Commissioners Court”) authorizing
their issuance (the “Order”). The Notes are being issued to pay the costs of contractual obligations to
purchase motor vehicles and to pay costs of issuance of the Notes, under and pursuant to the authority of the
Constitution and laws of the State of Texas particularly Chapter 1431 Texas Government Code, as amended.
WE HAVE ACTED as Bond Counsel for the sole purpose of rendering an opinion with respect to the
legality and validity of the Notes under the Constitution and laws of the State of Texas and with respect to the
exclusion of interest on the Notes from gross income of the owners thereof for federal income tax purposes. In
such capacity we have examined the Constitution and laws of the State of Texas, federal income tax law that
we deem applicable, and a transcript of certain certified proceedings pertaining to the issuance of the Notes as
described in the Order. The transcript contains certain certifications, representations and other material facts
within the knowledge and control of the County and certain other customary documents and instruments
authorizing and relating to the issuance of the Notes upon which we rely. We have also examined executed
Note No. T-l and a specimen of Notes to be authenticated and delivered in exchange for the Note.
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 County or the disclosure thereof in connection with the sale of the Notes. Our role in connection with the
preparation of the Official Statement has been limited as described therein.
BASED ON SUCH EXAMINATION, our opinion is as follows:
(1)
The transcript of certified proceedings evidences complete legal authority for the issuance of
the Notes in full compliance with the Constitution and laws of the State of Texas presently in effect; and the
Notes have been authorized and delivered in accordance with law and constitute valid and legally binding
obligations of the County in accordance with the terms and conditions thereof, except to the extent that the
rights and remedies of the owners of the Notes may be limited by laws heretofore or 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;
* Preliminary, subject to change.
(2)
The Notes are a full faith and credit obligation of the Issuer and payable, both as to principal
and interest, from the combination of the levy and collection of a direct and continuing ad valorem tax, within
the limits prescribed by law, on all taxable property within the County.
ALSO BASED ON OUR EXAMINATION AS DESCRIBED ABOVE, it is our further opinion that,
subject to the restrictions hereinafter described, interest on the Notes is excludable from gross income of the
owners thereof for federal income tax purposes under existing law and is not subject to the alternative
minimum tax on individuals or, except as hereinafter described, corporations. The opinion set forth in the
first sentence of this paragraph is subject to the condition that the County 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 Notes in order that interest thereon be, or continue to be, excluded from gross income for federal income
tax purposes. The County has covenanted in the Order to comply with each such requirement. Failure to
comply with such requirements may cause the inclusion of interest on the Notes in gross income for federal
income tax purposes to be retroactive to the date of issuance of the Notes. The Code and the 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
Notes in gross income of the owners thereof for federal income tax purposes.
INTEREST ON all tax-exempt obligations, including the Notes, owned by a corporation, other than
an S corporation; a qualified mutual fund; a financial asset securitization investment trust; a real estate
investment trust (REIT); or a real estate mortgage investment conduit (REMIC), will be included in such
corporation's adjusted current earnings for purposes of calculating the alternative minimum taxable income of
such corporation. A corporation's alternative minimum taxable income is the basis on which the alternative
minimum tax imposed by the Code are computed.
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 Notes. Prospective purchasers of Notes should be aware
that the ownership of tax-exempt obligations such as the Notes may result in collateral federal 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 corporations
with Subchapter C earnings and profits, individual recipients of Social Security or Railroad Retirement
benefits, individuals otherwise qualifying for the earned income credit, individuals who own an interest in a
financial asset securitization investment trust, and taxpayers who are deemed to have incurred or continued
indebtedness to purchase or carry tax-exempt obligations. For the foregoing reasons, prospective purchasers
should consult their own tax advisors as to the consequences of investing in the Notes.
Very truly yours,
Financial Advisory Services
Provided By
ESTR ADA HINOJOSA
INVESTMENT BANKERS