R-11-05-26-11B3 - 5/26/2011RESOLUTION NO. R -11-05-26-11B3
WHEREAS, the Cities of Austin, Texas and Round Rock, Texas have approved that one
certain Assignment of Agreement Concerning Creation and Operation of Fern Bluff Municipal
Utility District and Agreement Regarding Wastewater Service (the "Agreement") dated June 4,
1997, and
WHEREAS, one of the responsibilities assumed by the City of Round Rock pursuant to
the Agreement is the review and approval of bond issues proposed by Fern Bluff Municipal
Utility District, and
WHEREAS, Fern Bluff Municipal Utility District is proposing the issuance of
approximately $2,730,000 in "Waterworks and Sewer System Combination Unlimited Tax and
Revenue Refunding Bonds Series 2011" (the "Bonds"), and
WHEREAS, based upon the City's review of the Preliminary Official Statement and the
proposed resolution approving the Bonds provided by Fern Bluff Municipal Utility District, the
City Council is willing to approve said Bond issue, Now Therefore
BE IT RESOLVED BY THE COUNCIL OF THE CITY OF ROUND ROCK,
TEXAS,
That the issuance by Fern Bluff Municipal Utility District of approximately $2,730,000 in
"Waterworks and Sewer System Combination Unlimited Tax and Revenue Refunding Bonds
Series 2011" is hereby approved.
The City Council hereby finds and declares that written notice of the date, hour, place
and subject of the meeting at which this Resolution was adopted was posted and that such
meeting was open to the public as required by law at all times during which this Resolution and
the subject matter hereof were discussed, considered and formally acted upon, all as required by
the Open Meetings Act, Chapter 551, Texas Government Code, as amended.
RESOLVED this 26th day of May, 2011.
YYl � lam'
Alan McGraw, Mayor
City of Round Rock, Texas
ATTEST:
Sara L. White, City Secretary
O:\wdox\SCCInts\0112\ 1104\MUNICIPAL\00222734.DOC
ROUND ROCK, TEXAS
PURPOSE. PASSION. PROSPERITY
City Council Agenda Summary Sheet
Agenda Item No. 1163.
Consider a resolution approving the issuance by Fern Bluff Municipal Utility District of
approximately $2,730,000 in Waterworks and Sewer System Combination Unlimited Tax
Agenda Caption: and Revenue Refunding Bonds, Series 2011.
Meeting Date: May 26, 2011
Department: Finance
Staff Person making presentation: Cheryl Delaney
Finance Director
Item Summary:
The creation and operations agreement for Fern Bluff MUD requires that the City of Round Rock review and approve
bond issuances or refunding proposed by Fern Bluff MUD because the MUD is the extraterritorial jurisdiction of
Round Rock. These refunding bonds will be repaid by Fern Bluff MUD property taxes. The City of Round Rock is in no
way responsible for the debts of the MUD.
The proceeds will be used to refund a portion of the District's bonds. They are reducing their overall debt service
expense and appear to be taking advantage of favorable interest rates.
This item was originally presented in November 2010, but due to unfavorable market conditions the refunding did
not occur. Since the market has improved, Fern Bluff plans to execute the bond refunding.
Strategic Plan Relevance:
8.0 — Maintain and enhance public confidence, satisfaction and trust in City government.
Cost: N/A
Source of Funds: N/A
Date of Public Hearing (if required): N/A
Recommended Action: Approval
AArstSouthlwest VIP
A PIains(. p+Cal Co nparry
300 W. 6th Street
Suite 1940
Austin, Texas 78701
512.481.2030 Direct
512.481.2010 Fax
May 5, 2011
Ms. Cheryl Delaney
Finance Director
City of Round Rock
221 E. Main Street
Round Rock, Texas 78664
Re: Fern Bluff Municipal Utility District
$2,730,000 Waterworks and Sewer System Combination
Unlimited Tax and Revenue Refunding Bonds, Series 2011
Dear Ms. Delaney:
John Barganski
Vice President
j ohn.barganski@firstsw. com
Attached hereto is a draft of the Preliminary Official Statement related to the above referenced financing.
A draft resolution approving the issuance of the bonds for the council's consideration will be provided
under separate cover by Mr. Tony Corbett of Freeman & Corbett.
This financing is market sensitive; therefore, the Board of Directors of the District would like to be in a
position to sell the bonds as soon as possible.
The key highlights of this financing, which are described more fully in the Preliminary Official
Statement, are as follows:
• The District is selling $2,730,000 principal amount of refunding bonds scheduled to mature in the
years 2012 through 2020.
• The District has an underlying rating from Standard & Poor's Corporation of "A" and the District
expects that the bonds will be insured and rated "AA+."
• Bond proceeds are being used reduce the District's annual debt service expense.
• The District is currently levying a $0.28 debt service tax and a $0.2295 maintenance tax. The
District's 2010 certified taxable value is $426,538,355.
• The District is fully developed with 1,901 lots completed and 1,897 homes completed. The
estimated population in the District is in excess of 6,500.
After review of the enclosed material, please call with any questions. We would be pleased to provide
any additional information you may need.
Sincerely.
John Barganski
Vice President
cc: Mr. Steve Sheets, City Attorney, City of Round Rock
Ms. Sara White, City Secretary, City of Round Rock
Mr. Anthony Corbett, Freeman & Corbett
2
RESOLUTION NO. R -11 -05 -26 -
WHEREAS, the Cities of Austin, Texas and Round Rock, Texas have approved that one
certain Assignment of Agreement Concerning Creation and Operation of Fern Bluff Municipal
Utility District and Agreement Regarding Wastewater Service (the "Agreement") dated June 4,
1997, and
WHEREAS, one of the responsibilities assumed by the City of Round Rock pursuant to
the Agreement is the review and approval of bond issues proposed by Fern Bluff Municipal
Utility District, and
WHEREAS, Fern Bluff Municipal Utility District is proposing the issuance of
approximately $2,730,000 in "Waterworks and Sewer System Combination Unlimited Tax and
Revenue Refunding Bonds Series 2011" (the "Bonds"), and
WHEREAS, based upon the City's review of the Preliminary Official Statement and the
proposed resolution approving the Bonds provided by Fern Bluff Municipal Utility District, the
City Council is willing to approve said Bond issue, Now Therefore
BE IT RESOLVED BY THE COUNCIL OF THE CITY OF ROUND ROCK,
TEXAS,
That the issuance by Fern Bluff Municipal Utility District of approximately $2,730,000 in
"Waterworks and Sewer System Combination Unlimited Tax and Revenue Refunding Bonds
Series 2011" is hereby approved.
The City Council hereby finds and declares that written notice of the date, hour, place
and subject of the meeting at which this Resolution was adopted was posted and that such
meeting was open to the public as required by law at all times during which this Resolution and
the subject matter hereof were discussed, considered and formally acted upon, all as required by
the Open Meetings Act, Chapter 551, Texas Government Code, as amended.
RESOLVED this 26th day of May, 2011.
Alan McGraw, Mayor
City of Round Rock, Texas
ATTEST:
Sara L. White, City Secretary
O:\wdox\SCClnts\0112\ 1104\MUNICIPAL\00222734.DOC
MATURITIES, PRINCIPAL AMOUNTS, INTEREST RATES AND INITIAL REOFFERING YIELDS
$2,685,000* Current Interest Bonds
Initial Initial
Due Principal Interest Reoffering CUSIP Due Principal Interest Reoffering CUSIP
May 1 Amount* Rate Yield(a) Number(b) May 1 Amount* Rate Yield(a) Number(b)
2013 $135,000 % % 2017 $125,000 % %
2014 130,000 2018 125,000
2015 130,000 2019 940,000
2016 125,000 2020 975,000(c)
$45,000* Premium Compound Interest Bonds
Original Offering Price Initial Total
Maturity Principal Per $5,000 Reoffering Payment at CUSIP
May 1 Amount* Maturity Amount Yield(a) Maturity Number(b)
2012 $45,000(c) % $
(a) Initial reoffering yield represents the initial offering yield to the public which has been established by the Underwriter (as herein defined) for offers
to the public and which may be subsequently changed by the Underwriter and is the sole responsibility of the Underwriter. The initial reoffering
yields indicated above represent the lower of the yields resulting when priced at maturity or to the first call date. Accrued interest from July 1, 2011,
is to be added to the price.
(b) CUSIP Numbers have been assigned to the Bonds by CUSIP Service Bureau and are included solely for the convenience of the purchasers of the
Bonds. Neither the District nor the Underwriter shall be responsible for the selection or correctness of the CUSIP Numbers set forth herein.
(c) Current Interest Bonds maturing on May 1, 2020, are subject to redemption prior to maturity at the option of the District, in whole or from time to
time in part, on May 1, 2019, or on any date thereafter, at a price equal to the principal amount thereof plus accrued interest to the date fixed for
redemption. The Premium Compound Interest Bonds are not subject to redemption prior to stated maturity. See "THE BONDS—Redemption
Provisions."
*Preliminary, subject to change.
2
TABLE OF CONTENTS
MATURITIES, PRINCIPAL AMOUNTS, INTEREST RATES AND INITIAL REOFFERING YIELDS 2
USE OF INFORMATION IN OFFICIAL STATEMENT 4
OFFICIAL STATEMENT SUMMARY 5
SELECTED FINANCIAL INFORMATION 7
PLAN OF FINANCING 8
DEBT SERVICE REQUIREMENTS 10
THE BONDS 10
BOOK -ENTRY -ONLY SYSTEM 15
THE DISTRICT 16
MANAGEMENT 17
THE SYSTEM 18
FINANCIAL STATEMENT 19
ESTIMATED OVERLAPPING DEBT STATEMENT 20
TAX DATA 21
TAX PROCEDURES 23
WATER AND SEWER OPERATIONS 26
INVESTMENT CONSIDERATIONS 27
INVESTMENT CONSIDERATIONS 27
LEGAL MATTERS 28
TAX EXEMPTION 29
TAX TREATMENT OF ORIGINAL ISSUE DISCOUNT AND PREMIUM BONDS 30
QUALIFIED TAX-EXEMPT OBLIGATIONS 31
MUNICIPAL BOND INSURANCE AND MUNICIPAL BOND RATING 32
SALE AND DISTRIBUTION OF THE BONDS 32
PREPARATION OF OFFICIAL STATEMENT 33
CONTINUING DISCLOSURE OF INFORMATION 34
MISCELLANEOUS 36
ANNUAL FINANCIAL REPORT FOR FISCAL YEAR ENDED SEPTEMBER 30, 2010 APPENDIX A
ACCRETED VALUES OF PREMIUM COMPOUND INTEREST BONDS APPENDIX B
3
USE OF INFORMATION IN OFFICIAL STATEMENT
No dealer, broker, salesman or other 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 representation must
not be relied upon as having been authorized by the District.
For purposes of compliance with Rule 15c2-12 of the Securities and Exchange Commission, this document constitutes a
Preliminary Remarketing Memorandum of the District with respect to the Bonds that has been deemed "final" by the
District as of its date except for the omission of no more than the information permitted by Rule 15c2-12.
This document, when further supplemented by adding information specifying the interest rates and certain other
information relating to the Bonds, shall constitute a "final official statement" of the District with respect to the Bonds, as
such term is defined in rule 15c2-12.
This Official Statement is not to be used in 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.
All of the summaries of the statutes, resolutions, resolutions, contracts, audited financial statements, engineering and other
related reports set forth in this Official Statement are made subject to all of the provisions of such documents. These
summaries do not purport to be complete statements of such provisions, and reference is made to such documents, copies
of which are available from First Southwest Company, the District's financial advisor (the "Financial Advisor"), 1021
Main Street, Suite 2200, Houston, Texas 77002, upon payment of duplication costs.
This Official Statement contains, in part, estimates, assumptions and matters of opinion which are not intended as
statements of fact, and no representation is made as to the correctness of such estimates, assumptions or matters of opinion,
or as to the likelihood that they will be realized. 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 shall, under any
circumstances, create any implication that there has been no change in the affairs of the District or other matters described
herein since the date hereof. However, the District has agreed to keep this Official Statement current by amendment or
sticker to reflect material changes in the affairs of the District and, to the extent that information actually comes to its
attention, the other matters described in this Official Statement until delivery of the Bonds to the Underwriter and thereafter
only as specified in "PREPARATION OF OFFICIAL STATEMENT --Updating the Official Statement."
4
OFFICIAL STATEMENT SUMMARY
The following information is qualified in its entirety by the detailed information appearing elsewhere in this Official
Statement.
THE FINANCING
The Issuer Fern Bluff Municipal Utility District (the "District"), a political subdivision of the State
of Texas, is located in Williamson County, Texas. See "THE DISTRICT."
The Issue $2,730,000* Waterworks and Sewer System Combination Unlimited Tax and Revenue
Refunding Bonds, Series 2011 (the "Bonds") are issued pursuant to a resolution (the
"Bond Resolution") of the District's Board of Directors. The Current Interest Bonds
will be issued as fully registered serial bonds in the aggregate principal amount of
$2,685,000*. Interest on the Current Interest Bonds accrues from July 1, 2011, and is
payable on November 1, 2011, and on each May 1 and November 1 thereafter until the
earlier of maturity or prior redemption. The Premium Compound Interest Bonds will
be issued as fully registered bonds in the aggregate principal amount of $45,000* in
denominations which result in total amounts due at maturity equal to $5,000 or integral
multiples thereof (including both accreted principal and compounded interest). Interest
on the Premium Compound Interest Bonds accretes from the date of delivery and is
compounded on May 1 and November 1 of each year until maturity, commencing
November 1, 2011. See "THE BONDS" and "APPENDIX B --Accreted Values of
Premium Compound Interest Bonds."
The Current Interest Bonds maturing on or after May 1, 2020 are subject to
redemption, in whole or from time to time in part, at the option of the District, prior to
their maturity dates, on May 1, 2019, or any date thereafter. Upon redemption, the
Current Interest Bonds will be payable at a price of par plus accrued interest to the date
of the redemption. The Premium Compound Interest Bonds are not subject to
redemption prior to maturity. See "THE BONDS".
Book -Entry -Only System... The definitive Bonds 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 Bonds may be acquired in denominations of $5,000 or integral
multiples thereof. No physical delivery of the Bonds will be made to the beneficial
owners thereof. Principal of and interest on the Bonds will be payable by the Paying
Agent/Registrar to Cede & Co., which will make distribution of the amounts so paid to
the participating members of DTC for subsequent payment to the beneficial owners of
the Bonds (see "BOOK -ENTRY -ONLY SYSTEM").
Source of Payment The Bonds are payable from a continuing, direct, annual ad valorem tax, without legal
limitation as to rate or amount, levied against all taxable property located within the
District and additionally from Net Revenues (as defined herein), if any, derived from
the operation of the District's water and wastewater system. The District does not
expect that Net Revenues will ever be sufficient in amount to contribute to the payment
of debt service on the Bonds. The Bonds are obligations of the District and are not
obligations of the State of Texas, Williamson County, the City of Round Rock or any
other political subdivision or agency other than the District. See "THE BONDS --
Source of and Security for Payment."
Use of Proceeds Proceeds from sale of the Bonds, together with other lawfully available funds of the
District on hand, will be used to pay certain costs incurred in connection with the
issuance of the Bonds and to refund $2,730,000* of the Outstanding Bonds in order to
achieve net savings in the District's annual debt service expense. See "PLAN OF
FINANCING."
Payment Record The District has previously issued six series of waterworks and sewer system
combination unlimited tax and revenue bonds and three series of waterworks and sewer
system combination unlimited tax and revenue refunding bonds, of which a total of
$9,505,000 principal amount are outstanding as of May 1, 2011 (the "Outstanding
Bonds"). There has been no default by the District on the Outstanding Bonds.
*Preliminary, subject to change.
5
Qualified Tax -Exempt
Obligations In the Bond Resolution the District designated the Bonds as "qualified tax-exempt
obligations." See "QUALIFIED TAX-EXEMPT OBLIGATIONS."
Municipal Bond Rating
and Insurance
Standard & Poor's Ratings Services ("S&P") has assigned an underlying rating to the
District of " ." An explanation of the rating may be obtained from Standard &
Poor's Ratings Services, 55 Water Street, New York, New York 10041. The fee
associated with the rating assigned to the District by S&P will be paid by the District;
however, the fee associated with ratings provided by other agencies will be at the
expense of the Underwriter.
Bond Counsel
Financial Advisor
Application has also been made to a municipal bond insurance company for
qualification of the Bonds for municipal bond insurance. The District will consider the
purchase of such insurance after analysis of the insurance premium.
Freeman & Corbett, Bond Counsel, Austin, Texas.
First Southwest Company, Houston, Texas.
Underwriter's Counsel , Austin, Texas.
Special Tax Counsel Andrews Kurth LLP, Austin, Texas.
Paying Agent/Registrar... The Bank of New York Mellon Trust Company, N.A., Dallas, Texas.
Investment Considerations
The purchase and ownership of the Bonds are subject to special investment
considerations and all prospective purchasers are urged to examine carefully the entire
Official Statement for a discussion of investment risks, including particularly the
section captioned "INVESTMENT CONSIDERATIONS."
THE DISTRICT
Description The District is a political subdivision of the State of Texas, created by order of the
Texas Water Commission (predecessor to the Texas Commission on Environmental
Quality) on June 10, 1986, under Article XVI, Section 59 of the Texas Constitution,
and operates pursuant to Chapters 49 and 54 of the Texas Water Code, as amended.
The District consists of approximately 701 acres of land. See "THE DISTRICT—
General."
Status of Development Development of the land within the District began in 1987. Water supply and
distribution, wastewater collection and storm drainage facilities are available to serve
the entire District. Single-family residential development includes the subdivisions of
Fern Bluff, Stone Canyon and Oak Brook (collectively, 1,901 single-family Tots on
approximately 535 acres). As of March 1, 2011, 1,897 homes were completed in the
District, no homes were under construction and 4 developed lots were available for
home construction.
There are approximately 144 acres of land within the District devoted to recreation and
approximately 22 acres are owned by the Round Rock Independent School District
where Fern Bluff Elementary School has been constructed. See "THE DISTRICT—
Status of Development" and "THE SYSTEM."
Water and Wastewater... Water supply is being provided to the District by the City of Round Rock through a
water supply agreement which provides for the sale of bulk water to the District.
Wastewater treatment for the District is provided by a regional wastewater collection
and treatment project known as the Brushy Creek Regional Project (the "Regional
Project"). Participants in the Regional Project include the Cities of Round Rock, Cedar
Park, Leander and Austin. Wastewater treatment for the District is provided by the City
of Round Rock through its participation in the Regional Project. According to the
District's engineer, the District's share of the Regional Project is sufficient to serve the
District at full development. See "THE SYSTEM."
6
SELECTED FINANCIAL INFORMATION
2010 Assessed Valuation $426,538,355(a)
Gross Debt Outstanding (after the issuance of the Bonds) $ 9,505,000 *
Estimated Overlapping Debt 26,776,953(b)
Gross Debt and Estimated Overlapping Debt $36,281,953
Ratio of Gross Debt to 2010 Assessed Valuation 2.23% *
Ratio of Gross Debt and Estimated Overlapping Debt to 2010 Assessed Valuation 8.51% *
Funds Available as of February 28, 2011
Debt Service Fund $1,991,199(c)
Operations and Maintenance Fund $2,566,675
Park Fund $284,765
Capital Projects Fund $263,715
2010 Tax Rate:
Debt Service $0.2800
Maintenance and Operations 0.2295
Total $0.5095/$100 A.V.
Projected Average Annual Debt Service Requirements (2011-2020) ("Average Requirement") .... $1,245,668 *
Tax rate required to pay Average Requirement based upon
2010 Assessed Valuation at a 95% collection rate
Status of Development as of March 1, 2011:
Total homes (1,888 occupied) 1,897
Homes under construction 0
Vacant developed lots 4
Estimated 2011 Population 6,608 (d)
(a) As certified by the Williamson Central Appraisal District (the "Appraisal District"). See "TAX PROCEDURES."
(b) See "ESTIMATED OVERLAPPING DEBT STATEMENT" herein.
(c) Neither Texas law nor the Bond Resolution requires that the District maintain any particular balance in such fund.
(d) Based on 3.5 persons per occupied home.
*Preliminary, subject to change.
7
$0.31/$100 A.V.
PRELIMINARY OFFICIAL STATEMENT
$2,730,000*
FERN BLUFF MUNICIPAL UTILITY DISTRICT
(A political subdivision of the State of Texas located within Williamson County)
WATERWORKS AND SEWER SYSTEM
COMBINATION UNLIMITED TAX AND REVENUE REFUNDING BONDS
SERIES 2011
This Official Statement provides certain information in connection with the issuance by Fern Bluff Municipal Utility
District (the "District") of its $2,730,000* Waterworks and Sewer System Combination Unlimited Tax and Revenue
Refunding Bonds, Series 2011 (the "Bonds").
The Bonds are issued pursuant to the Texas Constitution, the general laws of the State of Texas, particularly Chapter 1207,
Texas Government Code, as amended, and a resolution authorizing the issuance of the Bonds (the "Bond Resolution")
adopted by the Board of Directors of the District (the "Board").
This Official Statement includes descriptions, among others, of the Bonds and the Bond Resolution, and certain other
information about the District. All descriptions of documents contained herein are only summaries and are qualified in
their entirety by reference to each document. Copies of documents may be obtained from the District upon payment of the
costs of duplication therefor.
PLAN OF FINANCING
Purpose
The Bonds are being issued to refund and redeem outstanding portions of the District's original issue of $4,880,000
Waterworks and Sewer System Unlimited Tax and Revenue Bonds, Series 1998 and $2,135,000 Waterworks and Sewer
System Unlimited Tax and Revenue Bonds, Series 2001, in order to achieve a reduction in the District's annual debt service
expense. The bonds to be refunded are collectively referred to as the "Refunded Bonds." See "Refunded Bonds" below.
A total of $6,775,000* in principal amount of the District's Outstanding Bonds, excluding the Bonds, will remain
outstanding after the issuance of the Bonds. See "PLAN OF FINANCING --Outstanding Bonds" and "--Sources and Uses
of Funds" below.
Outstanding Bonds
The District has previously issued six series of waterworks and sewer system unlimited tax and revenue bonds and three
series of waterworks and sewer system unlimited tax and revenue refunding bonds (the "Outstanding Bonds"). The
following table lists the original principal amount, the currently outstanding principal amount, the principal amount of the
Refunded Bonds and the principal amount of Remaining Outstanding Bonds for each such series.
Original Principal Remaining*
Principal Currently Refunded* Outstanding
Series Amount Outstanding Bonds Bonds
1991 $1,500,000 $ 0 $ 0 $ 0
1993 700,000 0 0 0
1996 4,350,000 0 0 0
1997(a) 1,210,000 0 0 0
1998 4,880,000 1,695,000 1,695,000 0
2000 3,750,000 0 0 0
2001 2,135,000 1,035,000 1,035,000 0
2004(a) 3,390,000 2,700,000 0 2,700,000
2009(a) 4,435,000 4,075,000 0 4,075,000
Total $26,350,000 $9,505,000 $2,730,000 $6,775,000
The Bonds (a) 2,730,000
The Bonds and Remaining Outstanding Bonds $9,505,000
(a) Refunding Bonds.
Preliminary, subject to change.
8
Refunded Bonds
Proceeds of the Bonds, together with other lawfully available funds of the District, will be applied to refund and defease
$2,730,000* in principal amount of the Refunded Bonds and to pay certain costs of issuing the Bonds. The principal
amounts and maturity dates of the Refunded Bonds are set forth below:
Maturity Date Series Series
May 1 1998* 2001*
2012 $ 0 $ 115,000
2013 0 115,000
2014 0 115,000
2015 0 115,000
2016 0 115,000
2017 0 115,000
2018 0 115,000 (b)
2019 825,000 (a) 115,000 (b)
2020 870,000 (a) 115,000 (b)
Redemption Date:
$1,695,000 $1,035,000
July , 2011 July , 2011
(a) Consisting of a tern bond in the aggregate principal amount of $1,695,000 maturing May 1, 2020 and subject to mandatory sinking fund
redemption.
(b) Consisting of a term bond in the aggregate principal amount of $345,000 maturing May 1, 2020 and subject to mandatory sinking fund redemption.
Sources and Uses of Funds
The proceeds derived from the sale of the Bonds will be applied as follows:
Sources of Funds:
Principal Amount of the Bonds $
Premium on Premium Compound Interest Bonds
Premium on Current Interest Bonds
Transfer from the District's Debt Service Fund
Accrued Interest
Total Sources of Funds
Uses of Funds:
Deposit to Redemption Fund
Issuance Expenses and Underwriter's Discount (a)
Accrued Interest
Total Uses of Funds $
Includes municipal bond insurance premium.
Preliminary, subject to change.
9
DEBT SERVICE REQUIREMENTS
The following table sets forth the actual debt service requirements for the Outstanding Bonds, Tess the debt service on the
Refunded Bonds, plus the estimated debt service on the Bonds.
Outstanding Less:
Bonds Refunded Bonds
Calendar Debt Service Debt Service Plus: Debt Service on the Bonds* Debt Service
Year Requirements Requirements* Principal Interest Total Requirements*
2011 $ 1,278,346 $ 64.493 $ - $ 29,485 $ 29,485 $ 1,243,339
2012 1,273,166 241,398 50,000 178,456 228,456 1,260,225
2013 1,267,890 236,165 135,000 87,106 222,106 1,253,831
2014 1,260,986 230,818 130,000 84,456 214,456 1,244,625
2015 1,262,478 225,413 130,000 81,775 211,775 1,248,841
2016 1,251,995 220,008 125,000 78,753 203,753 1,235,741
2017 1,252,359 214,603 125,000 75,238 200,238 1,237,994
2018 1,248,650 209,169 120,000 71,413 191,413 1,230,894
2019 1,269,013 1,009,113 940,000 53,013 993,013 1,252,913
2020 1,263,394 1,008,394 975,000 18,281 993,281 1,248,281
Total $ 12,628,277 $ 3,659,570 $ 2,730,000 $ 757,976 $ 3,487,976 $ 12,456,683
THE BONDS
General
Following is a description of some of the terms and conditions of the Bonds, which description is qualified in its entirety by
reference to the Bond Resolution of the Board authorizing the issuance and sale of the Bonds. The Bond Resolution
authorizes the issuance and sale of the Bonds and prescribes the terms, conditions, and provisions for the payment of the
principal of and interest on the Bonds by the District.
Principal of the Current Interest Bonds, together with principal and interest on the Premium Compound Interest Bonds, is
payable at maturity at the principal payment office of the paying agent/registrar, initially, The Bank of New York Mellon
Trust Company, N.A. in Dallas, Texas (the "Paying Agent/Registrar"). Interest on the Current Interest Bonds accrues from
July 1, 2011, and is payable on each May 1 and November 1 commencing November 1, 2011, until the earlier of maturity
or prior redemption. Interest on the Premium Compound Interest Bonds will accrue from the date of delivery and will be
compounded semi-annually on May 1 and November 1 of each year commencing November 1, 2011. The Premium
Compound Interest Bonds will be issued in principal amounts that will mature in $5,000 denominations or integral
multiples thereof, including both principal and interest. See "APPENDIX B Accreted Values of Premium Compound
Interest Bonds" for the accreted value thereof on each compounding date through maturity. The Bonds mature on May 1 in
the amounts and years shown on the inside cover page of this Official Statement. Interest calculations are based on a 360 -
day year comprised of twelve 30 -day months.
Authority for Issuance
The Bonds are issued by the District pursuant to the terms and provisions of the Bond Resolution; Article XVI, Section 59
of the Texas Constitution; Chapter 1207, Texas Government Code; as amended; Chapters 49 and 54 of the Texas Water
Code, as amended; and the general laws of the State of Texas.
Source of and Security for Payment
While the Bonds or any part of the principal thereof or interest thereon remain outstanding and unpaid, the District
covenants in the Bond Resolution to levy a continuing, direct, annual ad valorem tax, without legal limit as to rate or
amount, upon all taxable property in the District sufficient to pay the principal of and interest on the Bonds, with full
allowance being made for delinquencies and costs of collection.
Preliminary, subject to change.
10
The Bonds are further payable from and secured by a pledge of and lien on certain Net Revenues, if any, of the District's
water and sewer system (the "System"). Net Revenues are defined by the Bond Resolution as all income that is derived
from the ownership and operation of the District's System as the same is purchased, constructed or otherwise acquired,
which remains after deducting the operation and maintenance expenses of the System, but not including income derived
from contracts that are pledged for payment of any special project bonds that may be issued. It is not expected that the Net
Revenues will ever be sufficient to contribute to debt service payments.
The Bonds are obligations of the District and are not the obligations of the State of Texas, Williamson County, the City of
Round Rock or any entity other than the District.
Funds
In the Bond Resolution, the Debt Service Fund is confirmed, and the proceeds from all taxes levied, assessed and collected
for and on account of the Bonds authorized by the Bond Resolution shall be deposited, as collected, in such fund.
Accrued interest on the Bonds shall be deposited into the Debt Service Fund upon receipt. Any monies remaining after the
payment of issuance costs will be deposited into the Debt Service Fund.
No Arbitrage
The District will certify as of the date the Bonds are delivered and paid for that, based upon all facts and estimates now
known or reasonably expected to be in existence on the date the Bonds are delivered and paid for, the District reasonably
expects that the proceeds of the Bonds will not be used in a manner that would cause the Bonds, or any portion of the
Bonds, to be "arbitrage bonds" under the Internal Revenue Code of 1986, as amended (the "Code"), and the regulations
prescribed thereunder. Furthermore, all officers, employees, and agents of the District have been authorized and directed to
provide certifications of facts and estimates that are material to the reasonable expectations of the District as of the date the
Bonds are delivered and paid for. In particular, all or any officers of the District are authorized to certify to the facts and
circumstances and reasonable expectations of the District on the date the Bonds are delivered and paid for regarding the
amount and use of the proceeds of the Bonds. Moreover, the District covenants in the Bond Resolution that it shall make
such use of the proceeds of the Bonds, regulate investment of proceeds of the Bonds, and take such other and further
actions and follow such procedures, including, without limitation, calculating the yield on the Bonds, as may be required so
that the Bonds shall not become "arbitrage bonds" under the Code and the regulations prescribed from time to time
thereunder.
Redemption Provisions
The District reserves the right, at its option, to redeem the Current Interest Bonds maturing on and after May 1, 2020, prior
to their scheduled maturities, in whole or in part, in integral multiples of $5,000, on May 1, 2019, or on any date thereafter,
at a price of par plus accrued interest on the principal amounts called for redemption to the date fixed for redemption. If
fewer than all of the Current Interest Bonds are redeemed at any time, the particular maturities and amounts of Current
Interest Bonds to be redeemed shall be selected by the District. if less than all the Current Interest Bonds of any maturity
are redeemed at any time, the particular Current Interest Bonds within a maturity to be redeemed shall be selected by the
Paying Agent/Registrar by lot or other customary method of selection (or by DTC in accordance with its procedures while
the Current Interest Bonds are in book -entry -only form).
Notice of any redemption identifying the Current Interest Bonds to be redeemed in whole or in part shall be given by the
Paying Agent/Registrar at least thirty (30) days prior to the date fixed for redemption by sending written notice by first
class mail to the Registered Owner of each Current Interest Bond to be redeemed in whole or in part at the address shown
on the register. Such notices shall state the redemption date, the redemption price, the place at which the Current Interest
Bonds are to be surrendered for payment and, if fewer than all the Current Interest Bonds outstanding within any one
maturity are to be redeemed, the numbers of the Current Interest Bonds or the portions thereof to be redeemed. Any notice
given shall be conclusively presumed to have been duly given, whether or not the Registered Owner receives such notice.
By the date fixed for redemption, due provision shall be made with the Paying Agent/Registrar for payment of the
redemption price of the Current Interest Bonds or portions thereof to be redeemed, plus accrued interest to the date fixed
for redemption. When Current Interest Bonds have been called for redemption in whole or in part and due provision has
been made to redeem the same as herein provided, the Current Interest Bonds or portions thereof so redeemed shall no
longer be regarded as outstanding except for the purpose of receiving payment solely from the funds so provided for
redemption, and the rights of the Registered Owners to collect interest that would otherwise accrue after the redemption
date on any Current Interest Bond or portion thereof called for redemption shall terminate on the date fixed for redemption.
The Premium Compound Interest Bonds are not subject to redemption prior to stated maturity.
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Registration and Transfer
So long as any Bonds remain outstanding, the Paying Agent/Registrar shall keep the register at its principal payment office
and, subject to such reasonable regulations as it may prescribe, the Paying Agent/Registrar shall provide for the registration
and transfer of Bonds in accordance with the terms of the Bond Resolution.
In the event the book -entry -only system is discontinued, each Bond shall be transferable only upon the presentation and
surrender of such Bond at the office of the Paying Agent/Registrar, duly endorsed for transfer, or accompanied by an
assignment duly executed by the Registered Owner or his authorized representative in form satisfactory to the Paying
Agent/Registrar. Upon due presentation of any Bond in proper form for transfer, the Paying Agent/Registrar has been
directed by the District to authenticate and deliver in exchange therefor, within three (3) business days after such
presentation, a new Bond or Bonds, registered in the name of the transferee or transferees, in authorized denominations and
of the same maturity and aggregate principal amount and paying interest at the same rate as the Bond or Bonds so
presented.
All Bonds shall be exchangeable upon presentation and surrender thereof at the principal payment office of the Paying
Agent/Registrar for a Bond or Bonds of the same maturity and interest rate and in any authorized denomination in an
aggregate amount equal to the unpaid principal amount of the Bond or Bonds presented for exchange. The Paying
Agent/Registrar is authorized to authenticate and deliver exchange Bonds. Each Bond delivered shall be entitled to the
benefits and security of the Bond Resolution to the same extent as the Bond or Bonds in lieu of which such Bond is
delivered.
Neither the District nor the Paying Agent/Registrar shall be required to transfer or to exchange any Bond during the period
beginning on the 15th calendar day preceding an Interest Payment Date and ending on the next succeeding Interest
Payment Date or to transfer or exchange any Bond called for redemption during the thirty (30) day period prior to the date
fixed for redemption of such Bond.
The District or the Paying Agent/Registrar may require the Registered Owner of any Bond to pay a sum sufficient to cover
any tax or other governmental charge that may be imposed in connection with the transfer or exchange of such Bond. Any
fee or charge of the Paying Agent/Registrar for such transfer or exchange shall be paid by the District.
Replacement of Paying Agent/Registrar
Provision is made in the Bond Resolution for replacement of the Paying Agent/Registrar. If the Paying Agent/Registrar is
replaced by the District, the new paying agent/registrar shall act in the same capacity as the previous Paying
Agent/Registrar. Any paying agent/registrar selected by the District shall be a national or state banking institution, a
corporation organized and doing business under the laws of the United States of America or of any State, authorized under
such laws to exercise trust powers, and subject to supervision or examination by federal or state authority, to act as Paying
Agent/Registrar for the Bonds.
Lost, Stolen or Destroyed Bonds
In the event the book -entry -only system is discontinued, upon the presentation and surrender to the Paying Agent/Registrar
of a mutilated Bond, the Paying Agent/Registrar shall authenticate and deliver in exchange therefor a replacement Bond of
like maturity, interest rate and principal amount, bearing a number not contemporaneously outstanding. If any Bond is lost,
stolen or destroyed, the District, pursuant to the applicable laws of the State of Texas and in the absence of notice or
knowledge that such Bond has been acquired by a bona fide purchaser, shall, upon receipt of certain documentation from
the Registered Owner and an indemnity bond, execute and the Paying Agent/Registrar shall authenticate and deliver a
replacement Bond of like maturity, interest rate and principal amount bearing a number not contemporaneously
outstanding. Registered Owners of lost, stolen or destroyed bonds will be required to pay the District's costs to replace
such bond. In addition, the District or the Paying Agent/Registrar may require the Registered Owner to pay a sum
sufficient to cover any tax or other governmental charge that may be imposed.
Issuance of Additional Debt
The District may issue additional bonds, with the approval of the Commission, necessary to provide and maintain
improvements and facilities consistent with the purposes for which the District was created. The District's voters have
authorized the issuance of $45,000,000 of waterworks and sewer system combination unlimited tax and revenue bonds for
the purpose of providing water, wastewater and storm drainage facilities to the land within its boundaries. The District
currently has $27,685,000 of waterworks and sewer system combination unlimited tax and revenue bonds authorized but
unissued. The Bond Resolution imposes no limitation on the amount of additional parity bonds which may be authorized
for issuance by the District's voters or the amount ultimately issued by the District. See "THE SYSTEM --Future Debt."
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The District also is authorized by statute to engage in fire -fighting activities, including the issuing of bonds payable from
taxes for such purpose. Before the District could issue fire -fighting bonds payable from taxes, the following actions would
be required: (a) amendments to existing City of Round Rock ordinance specifying the purposes for which the District may
issue bonds; (b) authorization of a detailed master plan and bonds for such purpose by the qualified voters in the District;
(c) approval of the master plan and issuance of bonds by the Commission; and (d) approval of bonds by the Attorney
General of Texas. The Board has not considered calling such an election at this time.
The District is authorized by statute to develop parks and recreational facilities, including the issuing of bonds payable
from taxes for such purpose. Before the District could issue park bonds payable from taxes, the following actions would be
required: (a) amendments to existing City of Round Rock ordinances specifying the purposes for which the District may
issue bonds; (b) preparation of a detailed park plan; (c) authorization of park bonds by the qualified voters in the District;
(d) approval of the park projects and bonds by the Commission; and (e) approval of the bonds by the Attorney General of
Texas. If the District does issue park bonds, the outstanding principal amount of such bonds may not exceed an amount
equal to one percent of the value of the taxable property in the District. The Board has not considered authorizing the
preparation of a park plan or calling a park bond election at this time.
Annexation
Until May 8, 1997, the District was included in the extraterritorial jurisdiction ("ETJ") of the City of Austin. Texas law
permits cities to release certain land from their ETJs. On May 8, 1997, the City of Austin released the District from its ETJ
and the City of Round Rock included the District in its ETJ. The annexation provisions of Chapter 42, Texas Local
Government Code, have not been affected; however, such provisions and requirements are now being exercised by the City
of Round Rock rather than the City of Austin.
Chapter 42, Texas Local Government Code, provides that, within the limits described therein, the unincorporated area
contiguous to the corporate limits of any city comprises that city's ETJ. The size of ETJ depends in part on the city's
population. For the City of Round Rock, the ETJ consists of all the contiguous unincorporated areas, not a part of any
other city or that city's ETJ within five (5) miles of the corporate limits of the City of Round Rock. With certain
exceptions, a city may annex territory only within the confines of its ETJ. When a city annexes additional territory, the
city's ETJ expands in conformity with such annexation.
The District may be annexed by the City of Round Rock without the Districts consent; however, under Texas law, the City
of Round Rock cannot annex territory within the District unless it annexes the entire District. If the District is annexed, the
City of Round Rock will assume the District's assets and obligations (including the Bonds) and dissolve the District.
Annexation of territory by the City of Round Rock is a policy-making natter within the discretion of the Mayor and the
City Council of the City of Round Rock, and therefore, the District makes no representation that the City of Round Rock
will ever annex the District and assume its debt. Moreover, no representation is made concerning the ability of the City of
Round Rock to make debt service payments should annexation occur.
Remedies in Event of Default
If the District defaults in the payment of principal, interest, or redemption price on the Bonds when due, or if it fails to
make payments into any fund or funds created in the Bond Resolution, or defaults in the observation or performance of any
other covenants, conditions, or obligations set forth in the Bond Resolution, the Registered Owners have the statutory right
of a writ of mandamus issued by a court of competent jurisdiction requiring the District and its officials to observe and
perform the covenants, obligations, or conditions prescribed in the Bond Resolution. Except for mandamus, the Bond
Resolution does not specifically provide for remedies to protect and enforce the interests of the Registered Owners. There
is no acceleration of maturity of the Bonds in the event of default and, consequently, the remedy of mandamus may have to
be relied upon from year to year. Further, there is no trust indenture or trustee, and all legal actions to enforce such
remedies would have to be undertaken at the initiative of, and be financed by, the Registered Owners. Statutory language
authorizing local governments such as the District to sue and be sued does not waive the local government's sovereign
immunity from suits for money damages, so that in the absence of other waivers of such immunity by the Texas
Legislature, a default by the District in its covenants in the Bond Resolution may not be reduced to a judgment for money
damages. If such a judgment against the District were obtained, it could not be enforced by direct levy and execution
against the District's property. Further, the Registered Owners cannot themselves foreclose on property within the District
or sell property within the District to enforce the tax lien on taxable property to pay the principal of and interest on the
Bonds. The enforceability of the rights and remedies of the Registered Owners may further be limited by a State of Texas
statute reasonably required to attain an important public purpose or by laws relating to bankruptcy, reorganization or other
similar laws of general application affecting the rights of creditors of political subdivisions, such as the District. See
"INVESTMENT CONSIDERATIONS --Registered Owners' Remedies --Bankruptcy Limitation to Registered Owners'
Rights."
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Legal Investment and Eligibility to Secure Public Funds in Texas
The following is quoted from Section 49.186 of the Texas Water Code, and is applicable to the District:
"(a) All bonds, notes, and other obligations issued by a district shall be legal and authorized investments for all banks,
trust companies, building and loan associations, savings and loan associations, insurance companies of all kinds and types,
fiduciaries, and trustees, and for all interest and sinking funds and other public funds of the state, and all agencies,
subdivisions, and instrumentalities of the state, including all counties, cities, towns, villages, school districts, and all other
kinds and types of districts, public agencies, and bodies politic."
"(b) A district's bonds, notes, and other obligations are eligible and lawful security for all deposits of public funds of
the state, and all agencies, subdivisions, and instrumentalities of the state, including all counties, cities, towns, villages,
school districts, and all other kinds and types of districts, public agencies, and bodies politic, to the extent of the market
value of the bonds, notes, and other obligations when accompanied by any unmatured interest coupons attached to them."
The Public Funds Collateral Act (Chapter 2257, Texas Government Code) also provides that bonds of the District
(including the Bonds) are eligible as collateral for public funds.
No representation is made that the Bonds will be suitable for or acceptable to financial or public entities for investment or
collateral purposes. No representation is made concerning other laws, rules, regulations, or investment criteria which
might apply to or which might be utilized by any of such persons or entities to limit the acceptability or suitability of the
Bonds for any of the foregoing purposes. Prospective purchasers are urged to carefully evaluate the investment quality of
the Bonds as to the suitability or acceptability of the Bonds for investment or collateral purposes.
Defeasance
The Bond Resolution provides that the District may discharge its obligations to the Registered Owners of any or all of the
Bonds to pay principal, interest and redemption price thereon in any manner permitted by law. Under current Texas law,
such discharge may be accomplished either (i) by depositing with the Comptroller of Public Accounts of the State of Texas
a sum of money equal to the principal of, premium, if any, and all interest to accrue on the Bonds to maturity or redemption
or (ii) by depositing with any place of payment (paying agent) of the Bonds or other obligations of the District payable
from revenues or from ad valorem taxes or both or with a commercial bank or trust company designated in the proceedings
authorizing such discharge, amounts sufficient to provide for the payment and/or redemption of the Bonds; provided that
such deposits may be invested and reinvested only in (a) direct obligations of the United States of America, (b) noncallable
obligations of an agency or instrumentality of the United States, including obligations that are unconditionally guaranteed
or insured by the agency or instrumentality and that, on the date the governing body of the District adopts or approves the
proceedings authorizing the issuance of refunding bonds, 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, on the date the governing
body of the District adopts or approves the proceedings authorizing the issuance of refunding bonds, are rated as to
investment quality by a nationally recognized investment rating firm not less than AAA or its equivalent, and which mature
and/or bear interest payable at such times and in such amounts as will be sufficient to provide for the scheduled payment
and/or redemption of the Bonds.
Upon such deposit as described above, such bonds shall no longer be regarded as outstanding or unpaid. After firm
banking and financial arrangements for the discharge and final payment or redemption of the Bonds have been made as
described above, all rights of the District to initiate proceedings to call the Bonds for redemption or take any other action
amending the terms of the Bonds are extinguished; provided, however, that the right to call the Bonds for redemption is not
extinguished if the District: (i) in the proceedings providing for the firm banking and financial arrangements, expressly
reserves the right to call the Bonds for redemption; (ii) gives notice of the reservation of that right to the owners of the
Bonds immediately following the making of the firm banking and financial arrangements; and (iii) directs that notice of the
reservation be included in any redemption notices that it authorizes.
There is no assurance that the current law will not be changed in the future in a manner which would permit investments
other than those described above to be made with amounts deposited to defease the Bonds. Because the Bond Resolution
does not contractually limit such investments, Registered Owners may be deemed to have consented to defeasance with
such other investments, notwithstanding the fact that such investments may not be of the same investment quality as those
currently permitted under Texas law.
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BOOK -ENTRY -ONLY SYSTEM
The information in this section concerning DTC and DTC's book -entry system has been obtained from sources that the
District believes to be reliable, but the District takes no responsibility for the accuracy or completeness thereof. The
District cannot and does not give any assurances that DTC, DTC Direct Participants or Indirect Participants will
distribute to the Beneficial Owners (a) payments of interest, principal or premium, if any, with respect to the Bonds, (b)
Bonds representing ownership interest in or other confirmation or ownership interest in the Bonds, or (c) prepayment or
other notices sent to DTC or Cede & Co., its nominee, as the registered owner of the Bonds, or that they will so do on a
timely basis or that DTC, DTC Direct Participants or DTC Indirect Participants will 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 "Procedure" of DTC to be followed in dealing with DTC Direct Participants are on file with DTC.
General
The Depository Trust Company ("DTC"), New York, NY, will act as securities depository for the Bonds. The Bonds will
be issued as fully -registered securities registered in the name of Cede & Co. (DTC's partnership nominee) or such other
name as may be requested by an authorized representative of DTC. One fully -registered Bond certificate will be issued for
each maturity of the Bonds, in the aggregate principal amount of such maturity, and will be deposited with DTC.
DTC, the world's largest depository, is a limited -purpose trust company organized under the New York Banking Law, a
"banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a
"clearing corporation" within the meaning of the New York Uniform Commercial Code, and a "clearing agency" registered
pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing
for over 3.5 million issues of U.S. and non -U.S. equity issues, corporate and municipal debt issues, and money market
instruments (from over 100 countries) that DTC's participants ("Direct Participants") deposit with DTC. DTC also
facilitates the post -trade settlement among Direct Participants of sales and other securities transactions in deposited
securities, through electronic computerized book -entry transfers and pledges between Direct Participants' accounts. This
eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non -U.S.
securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a
wholly-owned subsidiary of The Depository Trust & Clearing Corporation ("DTCC"). DTCC is the holding company for
DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered
clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to
others such as both U.S. and non -U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that
clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ("Indirect
Participants"). DTC has Standard & Poor's highest rating: AAA. The DTC Rules applicable to its Participants are on file
with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com and
www.dtc.org.
Purchases of Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for
the Bonds on DTC's records. The ownership interest of each actual purchaser of each Bond ("Beneficial Owner") is in
turn to be recorded on the Direct and Indirect Participants' records. Beneficial Owners will not receive written
confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations
providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant
through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Bonds are to be
accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners.
Beneficial Owners will not receive certificates representing their ownership interests in Bonds, except in the event that use
of the book -entry system for the Bonds is discontinued.
To facilitate subsequent transfers, all Bonds deposited by Direct Participants with DTC are registered in the name of DTC's
partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The
deposit of Bonds with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any
change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Bonds; DTC's records
reflect only the identity of the Direct Participants to whose accounts such Bonds are credited, which may or may not be the
Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on
behalf of their customers.
Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect
Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements
among them, subject to any statutory or regulatory requirements as may be in effect from time to time.
Redemption notices shall be sent to DTC. If less than all of the Bonds within an issue are being redeemed, DTC's practice
is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed.
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Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to Bonds unless authorized
by a Direct Participant in accordance with DTC's MMI Procedures. Under its usual procedures, DTC mails an Omnibus
Proxy to the District (or the Trustee on behalf thereof) as soon as possible after the record date. The Omnibus Proxy
assigns Cede & Co.'s consenting or voting rights to those Direct Participants to whose accounts Bonds are credited on the
record date (identified in a listing attached to the Omnibus Proxy).
Principal, premium, if any, interest payments and redemption proceeds on the Bonds will be made to Cede & Co., or such
other nominee as may be requested by an authorized representative of DTC. DTC's practice is to credit Direct
Participants' accounts upon DTC's receipt of funds and corresponding detail information from the District 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, the Paying Agent/Registrar, or the District, subject to any statutory or regulatory
requirements as may be in effect from time to time. Payment of principal, premium, if any, interest payments and
redemption proceeds to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC)
is the responsibility of the District or the Paying Agent/Registrar, disbursement of such payments to Direct Participants will
be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of
Direct and Indirect Participants.
A Beneficial Owner shall give notice to elect to have its Bonds purchased or tendered, through its Participant, to the Paying
Agent/Registrar, and shall effect delivery of such Bonds by causing the Direct Participant to transfer the Participant's
interest in the Bonds, on DTC's records, to the Paying Agent/Registrar. The requirement for physical delivery of Bonds in
connection with an optional tender or a mandatory purchase will be deemed satisfied when the ownership rights in the
Bonds are transferred by Direct Participants on DTC's records and followed by a book -entry credit of tendered Bonds to
the Paying Agent/Registrar's DTC account.
DTC may discontinue providing its services as depository with respect to the Bonds at any time by giving reasonable
notice to the District or the Paying Agent/Registrar. Under such circumstances, in the event that a successor depository is
not obtained, Bond certificates are required to be printed and delivered.
The District may decide to discontinue use of the system of book -entry transfers through DTC (or a successor securities
depository). In that event, Bond certificates will be printed and delivered.
The information in this section concerning DTC and DTC's book -entry system has been obtained from sources that the
District believes to be reliable, but the District takes no responsibility for the accuracy thereof.
THE DISTRICT
General
The District is a municipal utility district created by an order of the Texas Water Commission (predecessor to the Texas
Commission on Environmental Quality) dated June 10, 1986. The creation of the District was confirmed at an election
held within the District on June 30, 1986. The rights, powers, privileges, authority and functions of the District, including
authority to issue bonds, are established by the general laws of the State of Texas pertaining to utility districts, particularly
Chapters 49 and 54 of the Texas Water Code and Chapter 1207 of the Texas Government Code.
The District is empowered, among other things, to purchase, construct, operate and maintain all works, improvements,
facilities and plants necessary for the supply and distribution of water; the collection, transportation, and treatment of
wastewater; and the control and diversion of storm water. The District may issue bonds and other forms of indebtedness to
purchase or construct such facilities. The District is also empowered to establish, operate, and maintain fire -fighting
facilities, independently or with one or more conservation and reclamation districts, after approval by the Commission and
the voters of the District.
The District is also empowered to establish, operate, and maintain parks and recreational facilities. The District has
established and operates and maintains an improved park (including tennis courts, a soccer field and a basketball court) and
is in the process of establishing greenbelt and nature trail areas.
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The Commission exercises continuing supervisory jurisdiction over the District. Because the District is within the
extraterritorial jurisdiction of the City of Round Rock, the District is required to observe certain requirements of the City
of Round Rock which: limit the purposes for which the District may sell bonds to the acquisition, construction and
improvement of waterworks, wastewater, and drainage facilities; limit the net effective interest rate on such bonds and
other terms of such bonds; require approval by the City of Round Rock of District construction plans; and permit
connections only to lots and commercial or multi -family reserves described in plats which have been approved by the
Planning Commission of the City of Round Rock and recorded in the real property records of Williamson County. The
agreement for creation of the District was assigned by the City of Austin to the City of Round Rock, effective May 8, 1997.
Construction and operation of the System is subject to the regulatory jurisdiction of additional State of Texas agencies. See
"THE SYSTEM—Regulation."
Description and Location
The District consists of approximately 701 acres of land. The District is located approximately 16 miles north of the
central downtown business district of the City of Austin and 3 miles west of the City of Round Rock and lies wholly within
the extraterritorial jurisdiction of the City of Round Rock and within the Round Rock Independent School District. The
District is comprised of two non-contiguous parcels of land. Access to the subdivisions of Fern Bluff and Stone Canyon is
provided by Interstate Highway 35 from Austin to Ranch Road 620 to Wyoming Springs Road and access to the Oak
Brook subdivision is provided by Ranch Road 620 to Great Oaks Drive.
Land Use
Single-family residential development consists of 1,901 developed residential lots on approximately 535 acres. In addition,
approximately 144 acres (including 76 acres of non -developable land) are devoted to recreational use and approximately 22
acres is the site of Fern Bluff Elementary School. The entire District is served with water, water distribution, wastewater
collections and storm drainage facilities.
Status of Development
Homes constructed in the District typically range in market value (including lot price) from $150,000 to $300,000. As of
March 1, 2011, there were 1,897 homes completed in the District (1,888 occupied), no homes under construction and 4 lots
available for home construction.
MANAGE MENT
Board of Directors
All of the Directors listed below reside within the District. Directors are elected by the voters within the District for four-
year staggered terms. Directors elections are held in May of even numbered years. The Directors and Officers of the
District are listed below:
Term
Name Title Expires
Patrick Savarese President May 2012
Joseph Teiber Vice President May 2012
Jessica Stempko Assistant Secretary May 2014
George Sabatino Treasurer May 2012
Dave Quillman Secretary May 2014
The District has contracted for certain services as follows:
Tax Assessor/Collector
Land and improvements within the District are appraised for ad valorem taxation purposes by the Williamson Central
Appraisal District. The Board of Directors of the District contracts with the Williamson County Tax Assessor/Collector
(the "Tax Assessor/Collector") to serve as the Tax Assessor/Collector for the District.
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System Operator
The District contracts with Severn Trent Services for maintenance and operation of the District's System. In addition,
Severn Trent Services acts as the District's bookkeeper.
Engineer
The consulting engineer for the District in connection with the design and construction of the District's facilities is CMA
Engineering, Inc. (the "Engineer").
Auditor
The District's audited financial statements for the year ended September 30, 2010, were prepared by Donald Allman, CPA,
Certified Public Accountants. See "APPENDIX A" for a copy of the District's September 30, 2010 audited financial
statements. A copy of the Management Letter from the District's auditor to the District's Board of Directors relating to the
District's financial reporting under Statement of Auditing Standards No. 112, including the District's response thereto, is
included in APPENDIX A.
Bond Counsel
The District has engaged Freeman & Corbett as Bond Counsel in connection with the issuance of the Bonds. The legal
fees to be paid Bond Counsel for services rendered in connection with the issuance of the Bonds are based on a percentage
of the Bonds actually issued, sold and delivered and, therefore, such fees are contingent on the sale and delivery of the
Bonds.
General Counsel
The District engages McGinnis, Lochridge & Kilgore, L.L.P. as General Counsel in connection with the issuance of the
Bonds. The legal fees to be paid General Counsel for services rendered in connection with the issuance of the Bonds are
based on a percentage of the Bonds actually issued, sold and delivered and, therefore, such fees are contingent on the sale
and delivery of the Bonds.
Financial Advisor
First Southwest Company (the "Financial Advisor") serves as financial advisor to the District. The fee to be paid the
Financial Advisor is contingent on the sale and delivery of the Bonds.
Special Tax Counsel
The District has engaged Andrews Kurth LLP as Special Tax Counsel in connection with the issuance of the District's
bonds. The fees of the attorneys in their capacity as Special Tax Counsel are payable from proceeds of the sale of the
Bonds and contingent upon sale and delivery of the Bonds.
THE SYSTEM
Regulation
According to the Engineer, the Districts improvements that have been financed with the proceeds from the Outstanding
Bonds and the corresponding plans prepared in accordance with accepted engineering practices and specifications and the
approval and pennitting requirements of the Commission, Williamson County and the City of Round Rock, as applicable.
Construction of the facilities is subject to inspection by the Commission, the City of Round Rock and Williamson County.
Each of the aforementioned entities exercises continuing jurisdiction over the System.
Water Supply and Distribution
The City of Round Rock and the District have entered into a Water Supply Agreement (the "Water Supply Agreement")
which provides for the acquisition and construction of extensions to the City of Round Rock water supply facilities and the
sale of bulk water by the City of Round Rock to the District. The District has constructed water mains, an elevated storage
tank and other system improvements. The City of Round Rock currently operates an 18 million gallons per day ("mgd")
surface water treatment facility which obtains water from Lake Georgetown. The treated surface water is transferred from
the City of Round Rock's water plant by a series of booster pumps and transmission lines and then fed through several
master meters to the District. The supply of water presently available to the District from the City of Round Rock is
sufficient to provide service for the District's full build -out.
18
Storage of water for the District is provided by a 1,500,000 gallon elevated storage tank located within the District and
jointly used by the District and the City of Round Rock. The District and a former developer in the District have entered
into an Agreement Regarding Reservoir Construction and Operation (the "Reservoir Construction Agreement"). The
Reservoir Construction Agreement provides for the financing, construction and joint use of the 1,500,000 gallon elevated
water storage tank and associated facilities located within the District and maintenance and operation of the facilities. Each
participant owns an undivided share in the facilities equal to their pro rata capacity.
Transportation and distribution of water to the District is accomplished through a series of waterlines. Water transportation
and distribution facilities are currently available to serve 1,901 single-family residential lots and approximately 33 acres of
land used for recreational purposes and an elementary school.
Wastewater Collection and Treatment
The District and the City of Round Rock have entered into a Wastewater Service Agreement and wastewater service is
provided through the regional project known as the Brushy Creek Regional Wastewater System. The cities of Round
Rock, Cedar Park, Leander and Austin are owners of the regional system. The District's service agreement with the City of
Round Rock is sufficient to serve the District at full build -out.
Storm Drainage
The drainage system has been designed in accordance with the standards of the General Drainage Policy as set by the City
of Round Rock and the City of Austin. The drainage system consists of a network of 18 -inch to 66 -inch reinforced
concrete pipe and associated headwalls, storm sewer manholes, curb inlets, perimeter dikes and drainage channels.
FINANCIAL STATEMENT
2010 Assessed Valuation $426,538,355(a)
District Debt:
Outstanding Bonds (as of May 1, 2011) $9,505,000
Less: Refunded Bonds (2,730,000)*
Plus: The Bonds 2,730,000 *
Gross Debt Outstanding (after issuance of the Bonds) $9,505,000
Ratio of Gross Debt to 2010 Assessed Valuation 2.23%
Area of District -- 701 acres
Estimated 2011 Population — 6,608 (b)
(a) As certified by the Appraisal District. See "TAX PROCEDURES."
(b) Based on 3.5 persons per occupied home.
Cash and Investment Balances (unaudited as of February 28, 2011)
Operations and Maintenance Fund Cash and Temporary Investments $2,566,675
Park Fund Cash and Temporary Investments $284,765
Capital Projects Cash and Temporary Investments $263,715
Debt Service Fund Cash and Temporary Investments $1,991,199 (a)
(a) Neither the Bond Resolution nor Texas law requires that the District maintain any particular balance in the Debt Service Fund.
*Preliminary, subject to change.
19
ESTIMATED OVERLAPPING DEBT STATEMENT
Expenditures of the various taxing entities within the territory of the District are paid out of ad valorem taxes levied by
such entities on properties within the District. Such entities are independent of the District and may incur borrowings to
finance their expenditures. This statement of direct and estimated overlapping ad valorem tax bonds ("Tax Debt") was
developed from information contained in the "Texas Municipal Reports" published by the Municipal Advisory Council of
Texas. Except for the amounts relating to the District, the District has not independently verified the accuracy or
completeness of such information, and no person should rely upon such information as being accurate or complete.
Furthermore, certain of the entities listed may have issued additional bonds since the date hereof, and such entities may
have programs requiring the issuance of substantial amounts of additional bonds, the amount of which cannot be
determined. The following table reflects the estimated share of the overlapping Tax Debt of the District.
Taxing Outstanding
Jurisdiction Bonds
As of
Overlapping
Percent Amount
Williamson County $737,924,883 3/1/2011 1.28% $9,445,439
Round Rock Independent School District 770,289,535 3/1/2011 2.25 17,331,515
Total Estimated Overlapping Debt $26,776,953
The District 9,505,000(a) 100.00% 9,505,000
Total Direct and Estimated Overlapping Debt $36,281,953
Ratio of Total Direct and Estimated Overlapping Debt to
2010 Assessed Valuation 8.51%
(a) Preliminary, subject to change. Includes the Bonds and excludes the Refunded Bonds.
Overlapping Tax Rates for 2010
Williamson County
Round Rock Independent School District
Williamson County Emergency Services District No. 2
The District
Total Overlapping Tax Rate
20
2010 Tax Rate per
$100 Assessed Valuation
$0.489999
1.380000
0.100000
0.509500
$2.479499
TAX DATA
Tax Collections
The following statement of tax collections sets forth in condensed form the historical tax collection experience of the
District. This summary has been prepared for inclusion herein, based upon information from District records and District
audited financial statements. Reference is made to these records and statements for further and more complete information.
Tax Taxable Tax Tax Current Collections Total Collections Year
Year Valuation Rate Levy Amount Percent Amount Percent Ending
2006 $405,069,250 $0.5095 $2,063,828 $2,060,561 99.84% $2,071,273 100.36% 9/30/2007
2007 429,452,388 0.5095 2,188,060 2,184,092 99.82 2,187,134 99.96 9/30/2008
2008 452,963,310 0.5095 2,307,848 2,306,077 99.92 2.309.853 100.09 9/30/2009
2009 431,389,786 0.5095 2,197,931 2,196,204 99.92 2.198.116 100.01 9/30/2010
2010 426,538,355 0.5095 2,173,213 2,120,512(a) 97.57 2,121,668(a) 97.63 9/30/2011
(a) Reflects collections through February 28, 2011
Taxes are due October 1 and become delinquent if not paid before February 1 of the year following the year in which
imposed. No split payments are allowed and no discounts are allowed.
Tax Rate Distribution
2010 2009 2008 2007 2006
Debt Service $0.2800 $0.2800 $0.2800 $0.2950 $0.3200
Maintenance and Operations 0.2295 0.2295 0.2295 0.2145 0.1895
Total $0.5095 $0.5095 $0.5095 $0.5095 $0.5095
Tax Rate Limitations
Debt Service: Unlimited (no legal limit as to rate or amount).
Maintenance: $1.50 per $100 Assessed Valuation
Debt Service Tax
The Board covenants in the Bond Resolution to levy and assess, for each year that all or any part of the Bonds remain
outstanding and unpaid, a tax adequate to provide funds to pay the principal of and interest on the Bonds. The District
levied a debt service tax in 2010 at the rate of $0.28 per $100 assessed valuation.
Maintenance Tax
The Board of Directors of the District has the statutory authority to levy and collect an annual ad valorem tax for
maintenance of the District's improvements, if such maintenance tax is authorized by a vote of the District's electors. On
June 30, 1986 voters in the District authorized the Board to levy such a maintenance tax in an amount not to exceed $1.50
per $100 assessed valuation. Such tax is in addition to taxes which the District is authorized to levy for paying principal of
and interest on the Bonds and any additional tax bonds which may be issued in the future. The District levied a
maintenance tax for 2010 in the amount of $0.2295 per $100 assessed valuation.
Tax Exemptions
As discussed in the section titled "TAX PROCEDURES" herein, certain property in the District may be exempt from
taxation by the District. The District does not exempt any percentage of the market value of any residential homesteads
from taxation. Property owned by Round Rock Independent School District located in the District is also exempt from
taxation by the District.
21
Additional Penalties
The District has contracted with a delinquent tax attorney to collect certain delinquent taxes. In connection with that
contract, the District established an additional penalty of twenty percent (20%) of the tax to defray the costs of collection.
This 20% penalty applies to taxes that either: (1) become delinquent on or after February 1 of a year, but not later than May
1 of that year, and that remain delinquent on July 1 of the year in which they become delinquent or (2) become delinquent
on or after June I, pursuant to the Texas Tax Code.
Principal Taxpayers
The following list of principal taxpayers was provided by the District's Tax Assessor/Collector based upon the 2010 tax
roll.
Taxpayer
Oncor Electric Delivery Co.
Homeowner
Homeowner
Homeowner
Homeowner
Homeowner
Homeowner
Homeowner
Homeowner
Homeowner
Total
Percentage of certified tax roll
Summary of Assessed Valuation
The following summary of the 2010, 2009 and 2008 Assessed Valuation is provided
Assessor/Collector based on information contained in the 2010, 2009 and 2007 tax rolls of the
totals from others shown in this Official Statement are due to differences in dates of the data.
Type of Property
Utilities
Land & Improvements
Land & Improvements
Land & Improvements
Land & Improvements
Land & Improvements
Land & Improvements
Land & Improvements
Land & Improvements
Land & Improvements
2010
Assessed
Valuation
$1,446,700
519,895
505,847
444,923
382,031
365,151
363,482
358,301
356,004
354,604
$5,096,938
1.19%
Land
Improvements
Personal Property
Exemptions
Total Assessed Valuation
2010
$ 81,492,704
346,863,367
2,146,017
(3,963,733)
$426,538,355
2009
$ 93,599,002
339,562,704
2,370,127
(2,222,142)
$433,309,391
by the District's Tax
District. Differences in
2008
$ 93,266,581
359,684,776
2,403,141
(2,080,241)
$453,274,257
Tax Adequacy for Debt Service
The calculation shown below assumes, solely for purposes of illustration, no increase or decrease in assessed valuation
over the 2010 Assessed Valuation, no use of available funds, and utilizes a tax rate necessary to pay the District's average
annual debt service requirements on the Bonds.
Average annual debt service requirements (2011-2020) $1,245,668*
$0.31 tax rate on the 2010 Assessed Valuation
of $426,538,355 at a 95% collection rate produces $1,256,155
*Preliminary, subject to change
22
TAX PROCEDURES
Authority to Levy Taxes
The Board is authorized to levy an annual ad valorem tax, without legal limitation as to rate or amount, on all taxable
property within the District in an amount sufficient to pay the principal of and interest on the Bonds and any additional
bonds payable from taxes which the District may hereafter issue (see "INVESTMENT CONSIDERATIONS --Future
Debt") and to pay the expenses of assessing and collecting such taxes. The District agrees in the Bond Resolution to levy
such a tax from year to year as described more fully herein under "THE BONDS --Source of and Security for Payment."
Under Texas law, the Board may also levy and collect an annual ad valorem tax for the operation and maintenance of the
District and its water and wastewater system and for the payment of certain contractual obligations. See "TAX DATA."
Property Tax Code and County -Wide Appraisal District
The Texas Property "fax Code (the "Property Tax Code") specifies the taxing procedures of all political subdivisions of the
State of Texas, including the District. Provisions of the Property 'Fax Code are complex and are not fully summarized here.
The Property Fax Code requires, among other matters, county -wide appraisal and equalization of taxable property values
and establishes in each county of the State of Texas an appraisal district with the responsibility for recording and
appraising property for all taxing units within a county and an appraisal review board with responsibility for reviewing and
equalizing the values established by the appraisal district. The Williamson Central Appraisal District (the "Appraisal
District") has the responsibility for appraising property for all taxing units within Williamson County, including the
District. Such appraisal values are subject to review and change by the Williamson Central Appraisal Review Board (the
"Appraisal Review Board").
Property Subject to Taxation by the District
Except for certain exemptions provided by Texas law, all real property, tangible personal property held or used for the
production of income, mobile homes and certain categories of intangible personal property with a tax situs in the District
are subject to taxation by the District. Principal categories of exempt property include, but are not limited to: property
owned by the State of Texas or its political subdivisions if the property is used for public purposes; property exempt from
ad valorem taxation by federal law; certain household goods, family supplies, and personal effects; certain goods, wares
and merchandise in transit; farm products owned by the producer; certain property of charitable organizations, youth
development associations, religious organizations, and qualified schools; designated historical sites; travel trailers; and
most individually owned automobiles. In addition, the District may by its own action exempt residential homesteads of
persons sixty-five (65) years or older and of certain disabled persons to the extent deemed advisable by the Board. The
District may be required to offer such an exemption if a majority of voters approve it at an election. The District would be
required to call such an election upon petition by twenty percent (20%) of the number of qualified voters who voted in the
preceding election. The District is authorized by statute to disregard exemptions for the disabled and elderly if granting the
exemption would impair the District's obligation to pay tax supported debt incurred prior to adoption of the exemption by
the District. Furthermore, the District must grant exemptions to disabled veterans or certain surviving dependents of
disabled veterans, if requested, of between $5,000 and $12,000 depending on the disability rating of the veteran. See
"TAX DATA."
Residential Homestead Exemptions: The Property Tax Code authorizes the governing body of each political subdivision in
the State of Texas to exempt up to twenty percent (20%) (not less than $5,000) of the appraised value of residential
homesteads from ad valorem taxation. Where ad valorem taxes have previously been pledged for the payment of debt, the
governing body of a political subdivision may continue to levy and collect taxes against the exempt value of the
homesteads until the debt is discharged, if the cessation of the levy would impair the obligations of the contract by which
the debt was created. The adoption of a homestead exemption may be considered each year, but must be adopted by May
1. See "TAX DATA." The District has never adopted a general homestead exemption.
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, repair, maintenance, processing or fabricating purposes, or used to repair or maintain aircraft of a
certified air carrier, and shipped out of the state within one hundred seventy-five (175) days. Freeport goods are exempt
from taxation by the District.
23
Goods -in -Transit Exemption: Article VIII, section 1-n of the Texas Constitution provides for the exemption from taxation
of "goods -in -transit." "Goods -in -transit" is defined by a provision of the Tax Code, which is effective for tax years 2008
and thereafter, as personal property acquired or imported into Texas and transported to another location in the State or
outside of the State within 175 days of the date the property was acquired or imported into Texas. The exemption excludes
oil, natural gas, petroleum products, aircraft and special inventory, including motor vehicle, vessel and out -board motor,
heavy equipment and manufactured housing inventory. The Property Tax Code provision permits local governmental
entities, on a local option basis, to take official action by January I of the year preceding a tax year, after holding a public
hearing, to tax goods -in -transit during the following tax year. A taxpayer may receive only one of the freeport exemptions
or the goods -in -transit exemptions for items of personal property. Goods -in -transit are taxed by the District.
Tax Abatement
Williamson County or the City of Round Rock may designate all or part of the area within the District as a reinvestment
zone. Thereafter, Williamson County, Round Rock Independent School District, the District, and the City of Round Rock,
at the option and discretion of each entity, may enter into tax abatement agreements with owners of property within the
zone. Prior to entering into a tax abatement agreement, each entity must adopt guidelines and criteria for establishing tax
abatement, which each entity will follow in granting tax abatement to owners of property. The tax abatement agreements
may exempt from ad valorem taxation by each of the applicable taxing jurisdictions, including the District, for a period of
up to ten (10) years, all or any part of any increase in the assessed valuation of property covered by the agreement over its
assessed valuation in the year in which the agreement is executed, on the condition that the property owner make specified
improvements or repairs to the property in conformity with the terms of the tax abatement. Each taxing jurisdiction has
discretion to determine terms for its tax abatement agreements without regard to the terms approved by the other taxing
jurisdictions.
Valuation of Property for Taxation
Generally, property in the District must be appraised by the Appraisal District at market value as of January 1 of each year.
Once an appraisal roll is prepared and finally approved by the Appraisal Review Board, it is used by the District in
establishing its tax rolls and tax rate. Generally, assessments under the Property Tax Code are to be based on one hundred
percent (100%) of market value, as such is defined in the Property Tax Code. In determining market value, either the
replacement cost or the income or the market data method of valuation may be used, whichever is appropriate.
Nevertheless, certain land may be appraised at less than market value under the Property Tax Code. Increases in the
appraised value of residence homesteads are limited by the Texas Constitution to 10 percent annually regardless of the
market value of the property.
The Property Tax Code permits land designated for agricultural use, open space or timberland to be appraised at its value
based on the land's capacity to produce agricultural or timber products rather than at its market value. The Property Tax
Code permits under certain circumstances that residential real property inventory held by a person in the trade or business
be valued at the price all such property would bring if sold as a unit to a purchaser who would continue the business.
Provisions of the Property Tax Code are complex and are not fully summarized here. Landowners wishing to avail
themselves of the agricultural use, open space or timberland designation or residential real property inventory designation
must apply for the designation and the appraiser is required by the Property Tax Code to act on each claimant's right to the
designation individually. A claimant may waive the special valuation as to taxation by some political subdivisions while
claiming it as to another. If a claimant receives the agricultural use designation and later loses it by changing the use of the
property or selling it to an unqualified owner, the District can collect taxes based on the new use, including taxes for the
previous three (3) years for agricultural use and taxes for the previous five (5) years for open space land and timberland.
The Property Tax Code requires the Appraisal District to implement a plan for periodic reappraisal of property to update
appraisal values. The plan must provide for appraisal of all real property in the Appraisal District at least once every three
(3) years. It is not known what frequency of reappraisal will be utilized by the Appraisal District or whether reappraisals
will be conducted on a zone or county -wide basis. The District, however, at its expense has the right to obtain from the
Appraisal District a current estimate of appraised values within the District or an estimate of any new property or
improvements within the District. While such current estimate of appraised values may serve to indicate the rate and extent
of growth of taxable values within the District, it cannot be used for establishing a tax rate within the District until such
time as the Appraisal District chooses formally to include such values on its appraisal roll.
District and Taxpayer Remedies
Under certain circumstances taxpayers and taxing units (such as the District) may appeal the orders of the Appraisal
Review Board by filing a timely petition for review in State district court. In such event, the value of the property in
question will be determined by the court or by a jury if requested by any party. Additionally, taxing units may bring suit
against the Appraisal District to compel compliance with the Property Tax Code. The Property 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.
24
Levy and Collection of Taxes
The District is responsible for the levy and collection of its taxes unless it elects to transfer such functions to another
governmental entity. The rate of taxation is set by the Board of Directors, after the legally required notice has been given
to owners of property within the District, based upon: a) the valuation of property within the District as of the preceding
January 1, and b) the amount required to be raised for debt service, maintenance purposes and authorized contractual
obligations. Taxes are due October 1, or when billed, whichever comes later, and become delinquent if not paid before
February 1 of the year following the year in which imposed. A delinquent tax incurs a penalty of six percent (6%) of the
amount of the tax for the first calendar month it is delinquent, plus one percent (1%) for each additional month or portion
of a month the tax remains unpaid prior to July 1 of the year in which it becomes delinquent. If the tax is not paid by July 1
of the year in which it becomes delinquent, the tax incurs a total penalty of twelve percent (12%) regardless of the number
of months the tax has been delinquent and incurs an additional penalty for collection costs of an amount established by the
District and a delinquent tax attorney. For those taxes billed at a later date and that become delinquent on or after June 1,
they will also incur an additional penalty for collection costs of an amount established by the District and a delinquent tax
attorney. The delinquent tax accrues interest at a rate of one percent (1%) for each month or portion of a month it remains
unpaid. The Property Tax Code makes provisions for the split payment of taxes, discounts for early payment and the
postponement of the delinquency date of taxes under certain circumstances which, at the option of the District, may be
rejected.
Rollback of Operation and Maintenance Tax Rate
The qualified voters of the District have the right to petition for a rollback of the District's operation and maintenance tax
rate only if the total tax bill on the average residence homestead increases by more than eight percent. If a rollback election
is called and passes, the rollback tax rate is the current year's debt service and contract tax rates plus 1.08 times the
previous year's operation and maintenance tax rate. Thus, debt service and contract tax rates cannot be changed by a
rollback election.
District's Rights in the Event of Tax Delinquencies
Taxes levied by the District are a personal obligation of the owner of the property as of January 1 of the year for which the
tax is imposed. On January 1 of each year, a tax lien attaches to property to secure the payment of all state and local taxes,
penalties, and interest ultimately imposed for the year on the property. The lien exists in favor of the State of Texas and
each local taxing unit, including the District, having power to tax the property. The District's tax lien is on a parity with tax
liens of such other taxing units (see "ESTIMATED OVERLAPPING DEBT STATEMENT --Overlapping Tax Rates for
2010"). A tax lien on real property takes 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; however, whether
a lien of the United States is on a parity with or takes priority over a tax lien of the District is determined by applicable
federal law. 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 District 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 District
must join other taxing units that have claims for delinquent taxes against all or part of the same property. Collection of
delinquent taxes may be adversely affected by the cost of suit and sale, by the amount of taxes owed to other taxing units,
by the effects of market conditions on the foreclosure sale price, by taxpayer redemption rights (a taxpayer may redeem
property within six (6) months for commercial property and two (2) years for residential and all other types of property
after the purchaser's deed issued at the foreclosure sale is filed in the county records) or by bankruptcy proceedings which
restrict the collection of taxpayer debts. The District's ability to foreclose its tax lien or collect penalties or interest on
delinquent taxes may be limited on property owned by a financial institution which is under receivership by the Federal
Deposit Insurance Corporation pursuant to the Federal Deposit Insurance Act, 12 U.S.C. 1825, as amended. See
"INVESTMENT CONSIDERATIONS --Tax Collection Limitations."
25
WATER AND SEWER OPERATIONS
General
The Bonds and the Remaining Outstanding Bonds are payable from the levy of a continuing, direct, ad valorem tax,
without legal limitation as to rate or amount, upon all taxable property in the District and are further payable from and
secured by a pledge of and lien on Net Revenues of the District's waterworks and sanitary sewer system. It is not
anticipated that any Net Revenues will be available for debt service on the Bonds or the Remaining Outstanding Bonds in
the foreseeable future.
Operating Statement
The following statement sets forth in condensed form the historical results of operation of the District's General Fund.
Accounting principles customarily employed in the determination of net revenues have been observed and in all instances
exclude depreciation. Such summary is based upon information obtained from the District's audited financial statements
and the District's bookkeeping records. Reference is made to such records and statements for further and more complete
information.
Fiscal Year Ended September 30
2010
2009 2008 2007
2006
Revenues
Water, wastewater, and garbage service $ 1,713,671 $ 1,921,179 $ 1,629,627 $ 1,417,138 $ 1,748,487
Property taxes 993,696 1,052,393 923,392 773,961 724,035
Interest 3,337 9,899 37,848 62,013 57,796
Conununitycenter fees 58,668 60,761 46,162 122,314 139,818
Miscellaneous 65,742 154,119 2,285 22,599 20,294
Developer contribution - - - - 13,493
Total Revenues $ 2,835,114 $ 3,198,351 $ 2,639,314 $ 2,398,025 $ 2,703,923
Expenditures
Water, wastewater, and garbage purchases $ 1,548,929 $ 1,647,298 $ 1,439,852 $ 1,180,080 $ 1,383,994
Repairs and maintenance 53,540 58,210 39,212 22,327 17,247
Utilities 50,054 49,528 45,663 44,493 44,291
Park maintenance 381,973 380,362 311,897 256,161 265,304
Tap connection/inspection - 58,510 - - -
Operations manager services 99,249 92,685 143,768 140,878 139,371
Legal fees 175,188 243,883 265,501 204,668 69,353
Engineering fees 10,644 8,183 15,009 13,864 17,918
Audit fees 9,000 10,000 9,000 12,000 12,547
Tax appraisal/collection 6,828 9,420 12,176 6,191 5,556
Director fees 20,050 25,625 16,554 18,731 29,776
Insurance 15,376 20,071 10,612 7,352 7,725
Security service 47,759 32,140 32,401 27,913 30,754
Community center 138,641 128,567 142,753 102,112 211,686
District manager 76,517 - _ _ -
Other 109,308 64,824 65,856 150,887 46,584
Capital Outlay 8,480 - 10,320 48,196
Total Expenditures $ 2,751,536 $ 2,829,306 $ 2,560,574 $ 2,187,657 $ 2,330,302
Net Revenues $ 83,579 $ 369,045 $ 78,740 $ 210,368 $ 373,621
General Operating Fund Balance
(Beginning of Year) $ 2,074,567 $ 1,705,522 $ 1,626,782 $ 1,416,414 $ 1,042,793
General Operating Fund Balance
(End of Year) $ 2,158,146 $ 2,074,567 $ 1,705,522 $ 1,626,782 $ 1,416,414
26
INVESTMENT CONSIDE RATIONS
General
The Bonds are obligations solely of the District and are not obligations of the City of Round Rock, Williamson County, the
State of Texas, or any entity other than the District. Payment of the principal and interest on the Bonds depends upon the
ability of the District to collect taxes levied on taxable property within the District in an amount sufficient to service the
District's bonded debt or in the event of foreclosure, on the value of the taxable property in the District and the taxes levied
by the District and other taxing authorities upon the property within the District. See "THE BONDS --Source of and
Security for Payment." The collection by the District of delinquent taxes owed to it and the enforcement by Registered
Owners of the District's obligation to collect sufficient taxes may be a costly and lengthy process. Furthermore, the District
cannot and does not make any representations that continued development of taxable property within the District will
accumulate or maintain taxable values sufficient to justify continued payment of taxes by property owners or that there will
be a market for the property. See "Registered Owners' Remedies" below.
Future Debt
The District has the right to issue obligations other than the Bonds, including tax anticipation notes and bond anticipation
notes, and to borrow money for any valid corporate purpose. There is currently $45,000,000 principal amount of
waterworks and sewer system combination unlimited tax and revenue bonds authorized by the District's voters of which
$27,685,000 remains authorized but unissued.
The District does not anticipate the issuance of any additional bonds for capital projects at this time. The District does not
employ any formula with respect to appraised valuations, tax collections or otherwise to limit the amount of parity bonds
which it may issue. The issuance of additional bonds is subject to approval by the Commission pursuant to its rules
regarding issuance and feasibility of bonds and to approval by the City of Round Rock.
Tax Collection Limitations
The Districts ability to make debt service payments may be adversely affected by its inability to collect ad valorem taxes.
Under Texas law, the levy of ad valorem taxes by the District constitutes a lien in favor of the District on a parity with the
liens of all other state and local taxing authorities on the property against which taxes are levied, and such lien may be
enforced by foreclosure. The District's ability to collect ad valorem taxes through such foreclosure may be impaired by
market conditions limiting the proceeds from a foreclosure sale of taxable property and collection procedures. While the
District has a lien on taxable property within the District for taxes levied against such property, such lien can be foreclosed
only in a judicial proceeding. The costs of collecting any such taxpayer's delinquencies could substantially reduce the net
proceeds to the District from a tax foreclosure sale. Finally, a bankruptcy court with jurisdiction over bankruptcy
proceedings initiated by or against a taxpayer within the District pursuant to the Federal Bankruptcy Code could stay any
attempt by the District to collect delinquent ad valorem taxes against such taxpayer. In addition to the automatic stay
against collection of delinquent taxes afforded a taxpayer during the pendency of a bankruptcy, a bankruptcy could affect
payment of taxes in two other ways: first, a debtor's confirmation plan may allow a debtor to make installment payments
on delinquent taxes for up to six years; and, second, a debtor may challenge, and a bankruptcy court may reduce, the
amount of any taxes assessed against the debtor, including taxes that have already been paid. See "TAX PROCEDURES --
District's Rights in the Event of Tax Delinquencies."
Registered Owners' Remedies and Bankruptcy Limitations
If the District defaults in the payment of principal, interest, or redemption price on the Bonds when due, or if it fails to
make payments into any fund or funds created in the Bond Resolution, or defaults in the observation or performance of any
other covenants, conditions, or obligations set forth in the Bond Resolution, the Registered Owners have the statutory right
of a writ of mandamus issued by a court of competent jurisdiction requiring the District and its officials to observe and
perform the covenants, obligations, or conditions prescribed in the Bond Resolution. Except for mandamus, the Bond
Resolution does not specifically provide for remedies to protect and enforce the interests of the Registered Owners. There
is no acceleration of maturity of the Bonds in the event of default and, consequently, the remedy of mandamus may have to
be relied upon from year to year. Further, there is no trust indenture or trustee, and all legal actions to enforce such
remedies would have to be undertaken at the initiative of, and be financed by, the Registered Owners. Statutory language
authorizing local governments such as the District to sue and be sued does not waive the local government's sovereign
immunity from suits for money damages, so that in the absence of other waivers of such immunity by the Texas
Legislature, a default by the District in its covenants in the Bond Resolution may not be reduced to a judgment for money
damages. If such a judgment against the District were obtained, it could not be enforced by direct levy and execution
against the District's property. Further, the Registered Owners cannot themselves foreclose on property within the District
or sell property within the District to enforce the tax lien on taxable property to pay the principal of and interest on the
Bonds. The enforceability of the rights and remedies of the Registered Owners may further be limited by a State of Texas
statute reasonably required to attain an important public purpose or by laws relating to bankruptcy, reorganization or other
similar laws of general application affecting the rights of creditors of political subdivisions, such as the District.
27
Subject to the requirements of Texas law discussed below, a political subdivision such as the District may voluntarily file a
petition for relief from creditors under Chapter 9 of the Federal Bankruptcy Code, 11 U.S.C. Sections 901-946. The filing
of such petition would automatically stay the enforcement of Registered Owner's remedies, including mandamus. The
automatic stay would remain in effect until the federal bankruptcy judge hearing the case dismisses the petition, enters an
order granting relief from the stay or otherwise allows creditors to proceed against the petitioning political subdivision. A
political subdivision such as the District may qualify as a debtor eligible to proceed in a Chapter 9 case only if it is (1)
authorized to file for federal bankruptcy protection by applicable state law, (2) is insolvent or unable to meet its debts as
they mature, (3) desires to effect a plan to adjust such debts, and (4) has either obtained the agreement of or negotiated in
good faith with its creditors or is unable to negotiate with its creditors because negotiation is impracticable. Special
districts such as the District must obtain the approval of the Commission as a condition to seeking relief under the Federal
Bankruptcy Code. The Commission is required to investigate the financial condition of a financially troubled district and
authorize such district to proceed under federal bankruptcy law only if such district has fully exercised its rights and
powers under Texas law and remains unable to meet its debts and other obligations as they mature.
If a petitioning district were allowed to proceed voluntarily under Chapter 9 of the Federal Bankruptcy Code, it could file a
plan for an adjustment of its debts. If such a plan were confirmed by the bankruptcy court, it could, among other things,
affect Registered Owners by reducing or eliminating the amount of indebtedness, deferring or rearranging the debt service
schedule, reducing or eliminating the interest rate, modifying or abrogating the collateral or security arrangements,
substituting (in whole or in part) other securities, and otherwise compromising and modifying the rights and remedies of
the Registered Owners' claims against a district.
A district may not be placed into bankruptcy involuntarily.
Continuing Compliance with Certain Covenants
The Bond Resolution contains covenants by the District intended to preserve the exclusion from gross income for federal
income tax purposes of interest on the Bonds. Failure by the District to comply with such covenants in the Bond
Resolution on a continuous basis prior to maturity of the Bonds could result in interest on the Bonds becoming taxable
retroactively to the date of original issuance. See "LEGAL MATTERS."
Marketability
The District has no agreement with the Underwriter regarding the reoffering yields or prices of the Bonds and has no
control over trading of the Bonds in the secondary market. Moreover, there is no assurance that a secondary market will be
made in the Bonds. If there is a secondary market, the difference between the bid and asked price of the Bonds may be
greater than the difference between the bid and asked price of bonds of comparable maturity and quality issued by more
traditional issuers as such bonds are generally bought, sold or traded in the secondary market.
LEGAL MATTERS
Delivery of the Bonds will be accompanied by the unqualified approving legal opinion of the Attorney General to the
effect that the Bonds are valid and legally binding obligations of the District under the Constitution and laws of the State of
Texas payable from the proceeds of an annual ad valorem tax levied by the District, without legal limit as to rate or
amount, upon all taxable property within the District, and are further payable from and secured by a pledge of and lien on
certain Net Revenues, if any, of the District's water and sewer system, and, based upon their examination of a transcript of
certified proceedings relating to the issuance and sale of the Bonds, the legal opinion of Bond Counsel, to a like effect.
Delivery of the Bonds will also be accomplished by the approving legal opinion of Special Tax Counsel to the effect that
(i) interest on the Bonds is excludable from gross income of the holders for federal tax purposes under existing law, (ii)
certain original issue discount on the Original Issue Discount Bonds (defined below) is excludable from gross income for
federal income tax purposes under existing law as described more fully in "Tax Accounting Treatment of Original Issue
Discount Bonds," and (iii) the Bonds are not "private activity bonds" under the Internal Revenue Code of 1986, as
amended (the "Code"), as amended, and interest on the Bonds will not be subject to the alternative minimum tax on
individuals and corporations, except as described below in the discussion regarding adjusted current earnings adjustments
for corporations.
28
Bond Counsel has reviewed the information appearing in this Official Statement under "THE BONDS," "TAX
PROCEDURES," "LEGAL MATTERS" and "CONTINUING DISCLOSURE OF INFORMATION" solely to determine
if such information, insofar as it relates to matters of law, is true and correct, and whether such information fairly
summarizes the provisions of the documents referred to therein. Bond Counsel has not, however, independently verified
any of the factual information contained in this Official Statement nor has it conducted an investigation of the affairs of the
District for the purpose of passing upon the accuracy or completeness of this Official Statement. No person is entitled to
rely upon Bond Counsel's limited participation as an assumption of responsibility for or an expression of opinion of any
kind with regard to the accuracy or completeness of any information contained herein.
Special Tax Counsel's opinion will address the matters described below under, "TAX EXEMPTION," "TAX
TREATMENT OF ORIGINAL ISSUE DISCOUNT AND PREMIUM BONDS," and "QUALIFIED TAX-EXEMPT
OBLIGATIONS." Bond Counsel will not be responsible in any manner for the matters addressed in the opinion of Special
Tax Counsel, and likewise, Special Tax Counsel will not be responsible in any manner for the matters addressed in the
opinion of Bond Counsel. Moreover, Bond Counsel and Special Tax Counsel have no joint responsibility with respect to
the Bonds or the proceedings related to the Bonds.
The legal fees paid to Bond Counsel and Special Tax Counsel for services rendered in connection with the issuance of the
Bonds are based on a percentage of the bonds actually issued, sold, and delivered and, therefore, such fees are contingent
upon the sale and delivery of the Bonds.
No Material Adverse Change
The obligations of the Underwriter to take and pay for the Bonds, and of the District to deliver the Bonds, are subject to the
condition that, up to the time of delivery of and receipt of payment for the Bonds, there shall have been no material adverse
change in the condition of the District from that set forth or contemplated in the Preliminary Official Statement.
No -Litigation Certificate
The District will furnish the Underwriter a certificate, executed by both the President or Vice President and Secretary or
Assistant Secretary of the Board, and dated as of the date of delivery of the Bonds, to the effect that no litigation of any
nature is pending or to its knowledge threatened, either in state or federal courts, contesting or attacking the Bonds;
restraining or enjoining the levy, assessment and collection of ad valorem taxes to pay the interest or the principal of the
Bonds; in any manner questioning the authority or proceedings for the issuance, execution or delivery of the Bonds; or
affecting the validity of the Bonds or the title of the present officers of the District.
TAX EXEMPTION
In the opinion of Andrews Kurth LLP, Austin, Texas, Special Tax Counsel, interest on the Bonds is (1) excludable under
Section 103 of the Internal Revenue Code of 1986, as amended (the "Code"), from gross income of the owners thereof for
federal income tax purposes and (2) is not includable in the alternative minimum taxable income of individuals or
corporations, except as described below.
The foregoing opinions of Special Tax Counsel are based on the Code and the regulations, rulings and court decisions
thereunder in existence on the date of issue of the Bonds. Such authorities are subject to change and any such change
could prospectively or retroactively result in the inclusion of the interest on the Bonds in gross income of the owners
thereof or change the treatment of such interest for purposes of computing alternative minimum taxable income.
In rendering its opinions, Special Tax Counsel has assumed continuing compliance by the District with certain covenants
of the resolution authorizing the issuance of the Bonds (the "Resolution") and has relied on representations by the District
with respect to matters solely within the knowledge of the District, which Special Tax Counsel has not independently
verified. The covenants and representations relate to, among other things, the use of Bond proceeds and any facilities
financed therewith, the source of repayment of the Bonds, the investment of Bond proceeds and certain other amounts
prior to expenditure, and requirements that excess arbitrage earned on the investment of Bond proceeds and certain other
amounts be paid periodically to the United States and that the District file an information report with the Internal Revenue
Service (the "Service"). If the District should fail to comply with the covenants in the Resolution, or if its representations
relating to the Bonds that are contained in the Resolution should be determined to be inaccurate or incomplete, interest on
the Bonds could become taxable from the date of delivery of the Bonds, regardless of the date on which the event causing
such taxability occurs.
29
Interest on all tax-exempt obligations, such as the Bonds, owned by a corporation (other than an S corporation, a regulated
investment company, a real estate investment trust (REIT), a real estate mortgage investment conduit (REMIC) or a
financial asset securitization investment trust (FASIT)) will be included in such corporation's adjusted current earnings for
purposes of calculating such corporation's alternative minimum taxable income. A corporation's alternative minimum
taxable income is the basis on which the alternative minimum tax imposed by the Code is computed.
Except as stated above, Special Tax Counsel will express no opinion as to any federal, state or local tax consequences
resulting from the ownership of, receipt or accrual of interest on or acquisition or disposition of the Bonds.
Special Tax Counsel's opinion is not a guarantee of a result, but represents its legal judgment based upon its review of
existing statutes, regulations, published rulings and court decisions and the representations and covenants of the District
described above. No ruling has been sought from the Service with respect to the matters addressed in the opinion of
Special Tax Counsel, and Special Tax Counsel's opinion is not binding on the Service. The Service has an ongoing
program of auditing the tax-exempt status of the interest on municipal obligations. If an audit of the Bonds is commenced,
under current procedures the Service is likely to treat the District as the "taxpayer," and the owners of the Bonds may have
no right to participate in the audit process. In responding to or defending an audit of the tax-exempt status of the interest
on the Bonds, the District may have different or conflicting interests from the owners of the Bonds. Public awareness of
any future audit of the Bonds could adversely affect the value and liquidity of the Bonds during the pendency of the audit,
regardless of its ultimate outcome.
Under the Code, taxpayers are required to provide information on their returns regarding the amount of tax-exempt interest,
such as interest on the Bonds, received or accrued during the year.
Prospective purchasers of the Bonds should be aware that the ownership of tax-exempt obligations, such as the Bonds, may
result in collateral federal income tax consequences to, among others, financial institutions, life insurance companies,
property and casualty insurance companies, certain foreign corporations doing business in the United States, certain S
corporations with Subchapter C earnings and profits, individual recipients of Social Security or Railroad Retirement
benefits, taxpayers who are deemed to have incurred or continued indebtedness to purchase or carry tax-exempt
obligations, taxpayers owning an interest in a FASIT that holds tax-exempt obligations, and individuals otherwise eligible
for the earned income tax credit. Such prospective purchasers should consult their tax advisors as to the consequences of
investing in the Bonds.
TAX TREATMENT OF ORIGINAL ISSUE DISCOUNT AND PREMI UM BONDS
Discount Bonds
Some of the Bonds may be offered at initial offering prices which are less than the stated redemption prices at maturity of
such Bonds. If a substantial amount of any maturity of the Bonds is sold to members of the public (which for this purpose
excludes bond houses, brokers and similar persons or entities acting in the capacity of wholesalers or underwriters) at such
initial offering price, an initial owner who purchases the Bonds of that maturity (the "Discount Bonds") will be considered
to have "original issue discount" for federal income tax purposes equal to the difference between (a) the stated redemption
price payable at the maturity of such Discount Bond and (b) the initial offering price to the public of such Discount Bond.
Under existing law, such original issue discount will be treated for federal income tax purposes as additional interest on a
Bond and such initial owner will be entitled to exclude from gross income for federal income tax purposes that portion of
such original issue discount deemed to be earned (as discussed below) during the period while such Discount Bond
continues to be owned by such initial owner. Except as otherwise provided herein, the discussion regarding interest on the
Bonds under the caption "TAX EXEMPTION" generally applies to original issue discount deemed to be earned on a
Discount Bond while held by an owner who has purchased such Bond at the initial offering price in the initial public
offering of the Bonds and that discussion should be considered in connection with this portion of the Official Statement.
In the event of a redemption, sale, or other taxable disposition of a Discount Bond prior to its stated maturity, however, any
amount realized by such initial owner in excess of the basis of such Discount Bond in the hands of such owner (increased
to reflect the portion of the original issue discount deemed to have been earned while such Discount Bond continues to be
held by such initial owner) will be includable in gross income for federal income tax purposes.
Because original issue discount on a Discount Bond will be treated for federal income tax purposes as interest on a Bond,
such original issue discount must be taken into account for certain federal income tax purposes as it is deemed to be earned
even though there will not be a corresponding cash payment. Corporations that purchase Discount Bonds must take into
account original issue discount as it is deemed to be earned for purposes of determining alternative minimum tax. Other
owners of a Discount Bond may be required to take into account such original issue discount as it is deemed to be earned
for purposes of determining certain collateral federal tax consequences of owning a Bond. See "TAX EXEMPTION" for a
discussion regarding the alternative minimum taxable income consequences for corporations and for a reference to
collateral federal tax consequences for certain other owners.
30
The characterization of original issue discount as interest is for federal income tax purposes only and does not otherwise
affect the rights or obligations of the owner of a Discount Bond or of the District. The portion of the principal of a
Discount Bond representing original issue discount is payable upon the maturity or earlier redemption of such Bond to the
registered owner of the Discount Bond at that time.
Under special tax accounting rules prescribed by existing law, a portion of the original issue discount on each Discount
Bond is deemed to be earned each day. The portion of the original issue discount deemed to be earned each day is
determined under an actuarial method of accrual, using the yield to maturity as the constant interest rate and semi-annual
compounding.
The federal income tax consequences of the purchase, ownership, redemption, sale or other disposition of Discount Bonds
by an owner that did not purchase such Bonds in the initial public offering and at the initial offering price may be
determined according to rules which differ from those described above. All prospective purchasers of Discount Bonds
should consult their tax advisors with respect to the determination for federal, state and local income tax purposes of
interest and original issue discount accrued upon redemption, sale or other disposition of such Discount Bonds and with
respect to the federal, state, local and foreign tax consequences of the purchase, ownership, redemption, sale or other
disposition of such Discount Bonds.
Premium Bonds
Some of the Bonds may be offered at initial offering prices which exceed the stated redemption prices payable at the
maturity of such Bonds. If a substantial amount of any maturity of the Bonds is sold to members of the public (which for
this purpose excludes bond houses, brokers and similar persons or entities acting in the capacity of wholesalers or
underwriters) at such initial offering price, each of the Bonds of such maturity ("Premium Bonds") will be considered for
federal income tax purposes to have "bond premium" equal to the amount of such excess. The basis for federal income tax
purposes of a Premium Bond in the hands of an initial purchaser who purchases such Bond in the initial offering must be
reduced each year and upon the sale or other taxable disposition of the Bond by the amount of amortizable bond premium.
This reduction in basis will increase the amount of any gain (or decrease the amount of any loss) recognized for federal
income tax purposes upon the sale or other taxable disposition of a Premium Bond by the initial purchaser. Generally, no
corresponding deduction is allowed for federal income tax purposes, for the reduction in basis resulting from amortizable
bond premium. The amount of bond premium on a Premium Bond which is amortizable each year (or shorter period in the
event of a sale or disposition of a Premium Bond) is determined under special tax accounting rules which use a constant
yield throughout the term of the Premium Bond based on the initial purchaser's original basis in such Bond .
The federal income tax consequences of the purchase, ownership, redemption, sale or other disposition by an owner of
Bonds that are not purchased in the initial offering or which are purchased at an amount representing a price other than the
initial offering prices for the Bonds of the same maturity may be determined according to rules which differ from those
described above. Moreover, all prospective purchasers of Bonds should consult their tax advisors with respect to the
federal, state, local and foreign tax consequences of the purchase, ownership, redemption, sale or other disposition of
Premium Bonds.
QUALIFIED TAX-EXEMPT OBLIGATIONS
Section 265(a) of the Code provides, in general, that interest expenses incurred to acquire or carry tax-exempt obligations
are not deductible from the gross income of the holder. For certain holders that are "financial institutions" within the
meaning of such section, complete disallowance of such expense would apply to taxable years beginning after December
31, 1986, with respect to tax-exempt obligations acquired after August 7, 1986. Section 265(b) of the Code provides an
exception to this rule for interest expense incurred by financial institutions to carry tax-exempt obligations (other than
certain private activity bonds) which are designated by an issuer as "qualified tax-exempt obligations." An issuer may only
designate an issue as an issue of "qualified tax-exempt obligations" where less than $10 million of tax-exempt obligations
are issued by the issuer during the calendar year in which the issue so designated is issued.
The District will designate the Bonds as "qualified tax-exempt obligations." Further, the District will represent that it has
or will take such action necessary for the Bonds to constitute "qualified tax-exempt obligations."
Notwithstanding the designation of the Bonds as "qualified tax-exempt obligations," financial institutions acquiring the
Bonds will be subject to a twenty percent (20%) disallowance of interest expenses allocable to the Bonds.
31
MUNICIPAL BOND INSURANCE AND MUNICIPAL BOND RATING
Standard & Poor's Ratings Services ("S&P") has assigned a rating to the Bonds of " ." An explanation of such rating
may be obtained from Standard & Poor's Ratings Services, 55 Water Street, New York, New York 10041. The rating
reflects only the view of S&P and the District makes no representation as to the appropriateness of the rating.
There is no assurance that such rating will continue for any given period of time or that it will not be revised or withdrawn
entirely by S&P, if in its judgment, circumstances so warrant. Any such revisions or withdrawal of the rating may have an
adverse effect on the market price of the Bonds.
Application has also been made to a municipal bond insurance company for qualification of the Bonds for municipal bond
insurance. The District will consider the purchase of such insurance after analysis of the insurance premium.
SALE AND DISTRIBUTION OF THE BONDS
The Underwriter
The Bonds are being purchased by Southwest Securities (the "Underwriter") pursuant to a bond purchase agreement with
the District (the "Bond Purchase Agreement") at a price of (representing the par amount of the Bonds, plus a
premium on the Premium Compound Interest Bonds of the plus a net premium on the Current Interest Bonds of
, less an Underwriter's discount of ), plus accrued interest on the on the Current Interest Bonds to
the date of delivery. The Underwriter's obligation is to purchase all of the Bonds, if any are purchased. See "PLAN OF
FINANCING."
The Underwriter may offer and sell the Bonds to certain dealers (including dealers depositing Bonds into unit investment
trusts) and others at yields lower than the public offering yield stated on the inside cover page hereof. The initial offering
yield may be changed at any time by the Underwriter.
The Underwriter has reviewed the information in this Official Statement in accordance with, and as part of, its
responsibilities to investors under federal securities laws as applied to the facts and circumstances of this transaction, but
the Underwriter does not guarantee the accuracy or completeness of such information.
Prices and Marketability
The delivery of the Bonds is conditioned upon the receipt by the District of a certificate executed and delivered by the
Underwriter on or before the date of delivery of the Bonds stating the prices at which a substantial amount of the Bonds of
each maturity has been sold to the public. For this purpose, the term "public" shall not include any person who is a bond
house, broker or similar person acting in the capacity of underwriter or wholesaler. Otherwise, the District has no
understanding with the Underwriter regarding the reoffering yields or prices of the Bonds. Information concerning
reoffering yields or prices is the responsibility of the Underwriter.
The prices and other terms with respect to the offering and sale of the Bonds may be changed from time -to -time by the
Underwriter after the Bonds are released for sale, and the Bonds may be offered and sold at prices other than the initial
offering prices, including sales to dealers who may sell the Bonds into investment accounts. In connection with the
offering of the Bonds, the Underwriter may over - allot or effect transactions which stabilize or maintain the market prices
of the Bonds at levels above those which might otherwise prevail in the open market. Such stabilizing, if commenced, may
be discontinued at any time.
The District has no control over trading of the Bonds in the secondary market. Moreover, there is no guarantee that a
secondary market will be made in the Bonds. In such a secondary market, the difference between the bid and asked price
of utility district bonds may be greater than the difference between the bid and asked price of bonds of comparable maturity
and quality issued by more traditional municipal entities, as bonds of such entities are more generally bought, sold or
traded in the secondary market.
32
Securities Laws
No registration statement relating to the offer and sale of the Bonds has been filed with the Securities and Exchange
Commission under the Securities Act of 1933, as amended, in reliance upon the exemptions provided thereunder. The
Bonds have not been registered or qualified under the Securities Act of Texas in reliance upon various exemptions
contained therein and the Bonds have not been registered or qualified under the securities laws of any other jurisdiction.
The District assumes no responsibility for registration or qualification of the Bonds under the securities laws of any other
jurisdiction in which the Bonds may be offered, sold or otherwise transferred. This disclaimer of responsibility for
registration or qualification for sale or other disposition of the Bonds shall not be construed as an interpretation of any kind
with regard to the availability of any exemption from securities registration or qualification provisions in such other
jurisdiction.
PREPARATION OF OFFICIAL STATEMENT
Sources and Compilation of Information
The financial data and other information contained in this Official Statement has been obtained primarily from the District's
records, the Engineer, the Tax Assessor/Collector, the Appraisal District and information from certain other sources. All of
these sources are believed to be reliable, but no guarantee is made by the District as to the accuracy or completeness of the
information derived from sources other than the District, and its inclusion herein is not to be construed as a representation
on the part of the District except as described below under "Certification of Official Statement." Furthermore, there is no
guarantee that any of the assumptions or estimates contained herein will be realized. The summaries of the agreements,
reports, statutes, resolutions, engineering and other related information set forth in this Official Statement are included
herein subject to all of the provisions of such documents. These summaries do not purport to be complete statements of
such provisions, and reference is made to such documents for further information.
Financial Advisor
First Southwest Company is employed as the Financial Advisor to the District to render certain professional services,
including advising the District on a plan of financing and preparing the Official Statement for the sale of the Bonds. In its
capacity as Financial Advisor, First Southwest Company has compiled and edited this Official Statement.
The Financial Advisor to the District has provided the following sentence for inclusion in this Official Statement. The
Financial Advisor has reviewed the information in this Official Statement in accordance with, and as part of, its
responsibilities to the District and, as applicable, to investors under the federal securities laws as applied to the facts and
circumstances of this transaction, but the Financial Advisor does not guarantee the accuracy or completeness of such
information.
Consultants
In approving this Official Statement the District has relied upon the following consultants.
Engineer: The information contained in this Official Statement relating to engineering matters and to the description of the
System and in particular that information included in the sections entitled "THE DISTRICT" and "THE SYSTEM" has
been provided by CMA Engineering, Inc., and has been included herein in reliance upon the authority of said firm as
experts in the field of civil engineering.
Appraisal District: The information contained in this Official Statement relating to the Assessed Valuations has been
provided by the Williamson Central Appraisal District and has been included herein in reliance upon the authority of such
entity as experts in assessing the values of property in Williamson County, including the District.
Auditor: The District's audited financial statements for the fiscal year ended September 30, 2010 were prepared by Donald
Allman, CPA, Certified Public Accountants. See "APPENDIX A" for a copy of the District's September 30, 2010 audited
financial statements. A copy of the Management Letter from the District's auditor to the District's Board of Directors
relating to the District's financial reporting under Statement of Auditing Standards No. 112, including the District's
response thereto, is included in APPENDIX A.
33
Updating the Official Statement
If, subsequent to the date of the Official Statement, the District learns, through the ordinary course of business and without
undertaking any investigation or examination for such purposes, or is notified by the Underwriter, of any adverse event
which causes the Official Statement to be materially misleading, and unless the Underwriter elects to terminate its
obligation to purchase the Bonds, the District will promptly prepare and supply to the Underwriter an appropriate
amendment or supplement to the Official Statement satisfactory to the Underwriter; provided, however, that the obligation
of the District to so amend or supplement the Official Statement will terminate when the District delivers the Bonds to the
Underwriter, unless the Underwriter notifies the District on or before such date that Tess than all of the Bonds have been
sold to ultimate customers, in which case the District's obligations hereunder will extend for an additional period of time as
required by law (but not more than 90 days after the date the District delivers the Bonds).
Certification of Official Statement
The District, acting through its Board of Directors in its official capacity, hereby certifies, as of the date hereof, that the
information, statements, and descriptions or any addenda, supplement and amendment thereto pertaining to the District and
its affairs contained herein, to the best of its knowledge and belief, contain no untrue statement of a material fact and do not
omit to state any material fact necessary to make the statements herein, in light of the circumstances under which they are
made, not misleading. With respect to information included in this Official Statement other than that relating to the
District, the District has no reason to believe that such information contains any untrue statement of a material fact or omits
to state any material fact necessary to make the statements herein, in the light of the circumstances under which they are
made, not misleading; however, the Board has made no independent investigation as to the accuracy or completeness of the
information derived from sources other than the District. In rendering such certificate, the official executing this certificate
may state that he has relied in part on his examination of records of the District relating to matters within his own area of
responsibility, and his discussions with, or certificates or correspondence signed by, certain other officials, employees,
consultants and representatives of the District.
CONTINUING DISCLOSURE OF INFORMATION
In the Bond Resolution, the District has made the following agreement for the benefit of the holders and beneficial owners
of the Bonds. The District is required to observe the agreement for so long as it remains obligated to advance funds to pay
the Bonds. Under the agreement, the District will be obligated to provide certain updated financial information and
operating data annually, and timely notice of specified material events, to the Municipal Securities Rulemaking Board (the
"MSRB"), through its Electronic Municipal Market Access ("EMMA") system.
Annual Reports
The District will provide certain updated financial information and operating data annually to the Municipal Securities
Rulemaking Board ("the MSRB"), or any successor, through its Electronic Municipal Market Access System ("EMMA").
The information to be updated with respect to the District is found in "APPENDIX A" (Annual Financial Report and
supplemental schedules). The District will update and provide this information within six months after the end of each
fiscal year ending in or after 2011.
The District may provide updated information in full text or may incorporate by reference certain other publicly available
documents, as permitted by Rule 15c2-12 ("Rule") of the United States Securities and Exchange Commission (the "SEC").
The updated information will include audited financial statements, if the District commissions an audit and the audit is
completed by the required time. If the audit of such financial statements is not complete within such period, then the
District will provide unaudited financial statements for the applicable fiscal year to the MSRB within such six month
period, and audited financial statements when the audit report of such statements becomes available. Any such financial
statements will be prepared in accordance with the accounting principles described in the Bond Resolution or such other
accounting principles as the District may be required to employ from time to time pursuant to state law or regulation.
The District's current fiscal year end is September 30. Accordingly, it must provide updated information by March 31 in
each year, unless the District changes its fiscal year. If the District changes its fiscal year, it will notify the MSRB of the
change.
34
Material Event Notices
The District will also provide timely notices of certain events to the MSRB. The District will provide notice of any of the
following events with respect to the Bonds, if such event is material to a decision to purchase or sell Bonds: (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 or events affecting the tax-
exempt status of the Bonds; (7) modifications to rights of holders of the Bonds; (8) Bond calls; (9) defeasances; (10)
release, substitution, or sale of property securing repayment of the Bonds; and (11) rating changes of the Bonds. In
addition, the District will provide timely notice of any failure by it to provide information, data, or financial statements in
accordance with its agreement described above under "Annual Reports."
Availability of Information From MSRB
The District has agreed to provide the foregoing updated information only to the MSRB. The MSRB intends to make the
information available to the public without charge through an Internet portal at www.emma.msrb.org.
Limitations and Amendments
The District has agreed to update information and to provide notices of material events only as described above. The
District 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 District makes no representation or warranty concerning such information or concerning its
usefulness to a decision to invest in or sell Bonds at any future date. The District disclaims any contractual or tort liability
for damages resulting in whole or in part from any breach of its continuing disclosure agreement or from any statement
made pursuant to its agreement, although holders or beneficial owners of Bonds may seek a writ of mandamus to compel
the District to comply with its agreement.
The District may amend its continuing disclosure agreement from time to time to adapt the 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 District, if but only if the agreement, as amended, would have permitted an underwriter to purchase or sell Bonds in
the offering made hereby in compliance with the Rule, taking into account any amendments or interpretations of the Rule
to the date of such amendment, as well as such changed circumstances, and either the holders of a majority in aggregate
principal amount of the outstanding Bonds consent to the amendment or any person unaffiliated with the District (such as
nationally recognized bond counsel) determines that the amendment will not materially impair the interests of the holders
and beneficial owners of the Bonds. The District may amend or repeal the agreement in the Bond Resolution if the SEC
amends or repeals the applicable provisions of the Rule or a court of final jurisdiction determines that such provisions are
invalid or unenforceable, but only to the extent that its right to do so would not prevent the Initial Purchaser from lawfully
purchasing the Bonds in the initial offering. If the District so amends the agreement, it has agreed to include with any
financial information or operating data next 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 last five years, the District has complied in all material respects with its previous continuing disclosure
agreements made by it in accordance with SEC Rule 15c2-12.
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MISCELLANEOUS
All estimates, statements and assumptions in this Official Statement and the Appendix hereto have been made on the basis
of the best information available and are believed to be reliable and accurate. Any statements in this Official Statement
involving matters of opinion or estimates, whether or not expressly so stated, are intended as such and not as
representations of fact, and no representation is made that any such statements will be realized.
This Official Statement was approved by the Board of Directors of Fern Bluff Municipal Utility District, as of the date
shown on the cover page.
ATTEST:
/s/
Secretary, Board of Directors
Fern Bluff Municipal Utility District
36
/s/
President, Board of Directors
Fern Bluff Municipal Utility District
APPENDIX A
District Audited Financial Statements for the fiscal year ended September 30, 2010
APPENDIX B
Accreted Values of Premium Compound Interest Bonds