R-07-01-25-9C2 - 1/25/2007Resolution No. — O 1 - Ol rJ J - 9c Z
A RESOLUTION APPROVING PRELIMINARY OFFICIAL STATEMENT
RELATING TO BEHRENS RANCH PUBLIC IMPROVEMENT DISTRICT SPECIAL
ASSESSMENT REVENUE BONDS, SERIES 2007 (BEHRENS RANCH
SUBDIVISION PROJECT) AND AUTHORIZING DISTRIBUTION OF
PRELIMINARY OFFICIAL STATEMENT AND OTHER MATTERS
WHEREAS, upon petition of the landowner, Behrens Subdivision Ltd., (the "Developer"),
the City Council of the City of Round Rock, Texas (the "City") on April 27, 2000 passed Resolution
No. R -00-04-27-12E1 which authorized and approved the creation of the Behrens Ranch Public
Improvement District (the "District") which authorization and creation became effective May 3, 2000;
and
WHEREAS, the City Council also entered into a Development Agreement dated as of
December 21, 2000 with the Developer concerning the District and in such agreement the City, acting
through the District agreed to use its best efforts to sell bonds to reimburse the Developer for ceratin
improvements assuming compliance with the conditions of the Development Agreement including
receipt by the City of the recommendation of First Southwest Company, the City's financial advisor
("Financial Advisor"), that the sale and amount of bonds to be issued is feasible and prudent; and
WHEREAS, the City's Financial Advisor has recommended the issuance of bonds to
reimburse the Developer; and
WHEREAS, the City's Financial Advisor has prepared a Preliminary Official Statement in
connection with the issuance of the City's Behrens Ranch Public Improvement District Special
Assessment Revenue Bonds; Series 2007 (Behrens Ranch Subdivision Project) (the "Bonds"); and
WHEREAS, the City has reviewed the Preliminary Official Statement; and
WHEREAS, the City deems it appropriate to approve the Preliminary Official Statement and
authorize the distribution of the Preliminary Official Statement as set forth below;
NOW THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY
OF ROUND ROCK, TEXAS THAT:
Section 1. APPROVAL AND DISTRIBUTION OF PRELIMINARY OFFICIAL
STATEMENT. The City Council hereby approves the Preliminary Official Statement substantially
in the form attached hereto as Exhibit "A" with such changes, additions or deletions as directed by
the City Council and City staff The Financial Advisor to the City is hereby authorized and directed
to distribute the Preliminary Official Statement to the Underwriter for further distribution to potential
bond purchasers and to do all things necessary to market such Bonds.
BEHRENSRANCHPID2007: POSRu2007
Section 2. CONDITIONS TO REIMBURSEMENT OF DEVELOPER. Prior to the
release of funds to the Developer for the acquisition of qualified improvements, the Developer must
provide evidence satisfactory to the City that: (i) the Green Belt Tract within the District, as identified
in the Compromise and Settlement Agreement and Release dated December 17, 2004 between the
Developer and certain homeowners, has been conveyed to the Behrens Ranch Master Association or
other approved entity or such property is otherwise held by such entity as agreed to by the
homeowners association and (ii) the assessments on the Green Belt Tract as well as all City land
within the District, which are assessed, have been prepaid or satisfactory arrangements have been
made for such prepayment.
Section 3. OTHER MATTERS. The Mayor, City Manager, Assistant City
Manager/Chief Financial Officer or Director of Finance of the City are authorized to do all things
proper and necessary to carry out the intent hereof, including the approval of appropriate changes to
the Preliminary Official Statement.
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.
BEHRENSRANCHP02007: POSRes2007
RESOLVED this 25th day of January, 2007.
NYLE MAXWELL, Mayor
City of Round Rock, Texas
ATTEST:
CHRISTINE MARTINEZ, City Secretary
City of Round Rock, Texas
BEHRENSRANCHPm2007: POSRes2007
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T, PRELIMINARY OFFICIAL STATEMENT
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Ti 74 Delivery of the Bonds is subject to the opinion of McCall, Parkhurst & Horton L.L.P., Bond Counsel, to the effect that interest on the Bonds will
v', be excludable from gross income for federal income tax purposes under statutes, regulations, published rulings and court decisions existing on the
o c o date thereof, subject to the matters described under "TAX MATTERS" herein including the alternative minimum tax on corporations.
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?, .a "F,:: THE BONDS ARE NOT "QUALIFIED TAX-EXEMPT OBLIGATIONS" FOR FINANCIAL INSTITUTIONS
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'" O ° BEHREN'S RANCH PUBLIC IMPROVEMENT DISTRICT
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SPECIAL ASSESSMENT REVENUE BONDS, SERIES 2007
Dated January 25, 2007
• 4.
• ° (Behren's Ranch Subdivision Project located within the City of Round Rock, Texas)
5 O C:
Dated Date: February 15, 2007
The bonds described above (the "Bonds") will be issued pursuant to
Local Government Code, Chapter 372 (the "Act") and are secured
adopted by the City of Round Rock, Texas (the "City") on February
(the "District"), a master -planned residential subdivision within the C
Due: August 15, as shown on the inside cover page
Section 372.023 of the Public Improvement District Act, as amended, Texas
in part by special assessments levied pursuant to the assessment ordinance
8, 2001 on property within the Behren's Ranch Public Improvement District
ity.
° 0 The Bonds, when issued, will constitute special obligations, payable solely from the trust estate pledged therefor, including the annual
yw o installments of special assessments and the reserve fund established in connection with the issuance of the Bonds. See "Security for the Bonds".
c o The holders of the Bonds shall never have the right to demand payment of the principal of or interest on the Bonds from any funds other than the
8 t special assessment revenues and certain other funds established in connection with the issuance of the Bonds. The assessment is a first and prior
to lien against the property assessed, superior to all other liens and claims except liens or claims for state, county, school district, or municipality ad
•• .N og ▪ valorem taxes, and is a personal liability of and charge against the owners of the property. The City has not covenanted nor obligated itself to
o a" pay the Bonds from any funds raised from taxation or any other revenues available to the City. The City has no current or contemplated
U c obligations to support the District directly or indirectly and makes no representation regarding the timely payment of principal or
4 .o interest on the Bonds. The Bonds are not a debt of the State of Texas (the "State") or any of its political subdivisions, and neither the State nor
z 5 2 any of its political subdivisions are liable therefor. The Bonds do not constitute an indebtedness within the meaning of any constitutional or
0 t? statutory debt limit or restriction. The Bonds are not general obligations of the City and shall not constitute a debt within the meaning of the
b- `" ▪ Constitution of the State of Texas, or a pledge of the faith and credit of the City. THE BONDS ARE SUBJECT TO SPECIAL RISK FACTORS
° �
o .,-; o DESCRIBED HEREIN. See "RISKS TO BONDHOLDERS."
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0 - PAYMENT TERMS ... Interest on the Bonds is payable each August 15 and February 15, commencing August 15, 2007, until maturity or prior
3 redemption. Interest on the Bonds accrues from February 15, 2007, and will be payable on the basis of a 360 day year composed of twelve 30
° �: day months. The Bonds will be registered in the name of Cede & Co., as nominee for The Depository Trust Company,New York, New York
DTC" p D
� 0 0' ("DTC"), which will act as securities depository for the Bonds. Beneficial owners of the Bonds will not receive physical certificates representing
Q n the Bonds, but will receive a credit balance on the books of the nominees of such beneficial owners. So long as Cede & Co. is the registered
o4 •o owner of the Bonds, the principal of and interest on the Bonds will be paid by the Trustee/Paying Agent/Registrar, initially The Bank of New
y
o o° York Trust Company, National Association, Dallas, Texas (the "Trustee/Paying Agent/Registrar"), directly to DTC, which will, in turn, remit
t8 7-4 such principal and interest to its participants for subsequent disbursement to the beneficial owners of the Bonds. See "THE BONDS -
1' Book -Entry -Only System."
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0 PURPOSE ... Proceeds of the Bonds will be used to acquire certain authorized improvements within the District including certain water,
Y a wastewater, drainage and road infrastructure necessary for development within the District. The Bonds are authorized by the Act and an
c (9.z. ordinance adopted by the City Council (the "Bond Ordinance").
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LEGALITY ... The Bonds are offered by the Underwriter subject to prior sale, when, as and if issued by the District and accepted by the
.5 Underwriter, subject, among other things, to the approval of the Bonds by the Attorney General of Texas and the approval of certain legal matters
.5 .o by McCall, Parkhurst & Horton L.L.P., Austin, Texas, Bond Counsel (see APPENDIX C — "Form of Bond Counsel's Opinion"). Certain matters
. will be passed upon for the Underwriter by their counsel, Andrews Kurth LLP, Austin, Texas. See "LEGAL MATTERS."
Ta_o
• DELIVERY ... It is expected that the Bonds will be available for delivery through DTC on March 20, 2007.
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• ai *Preliminary, subject to change.
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CUSIP PREFIX:
MATURITY SCHEDULE & 9 DIGIT CUSIP
See Schedule on Page 2
SAMCO Capital Markets
MATURITY SCHEDULE*
Maturity Initial CUSIP Maturity Initial CUSIP
Amount(a) 8/15 Rate Yield Suffix(c) Amount(a) 8/15 Rate Yield Suffix(e)
$ 95,000 2008 $ 165,000 2018(b)
100,000 2009 170,000 2019")
105,000 2010 180,000 2020(b)
110,000 2011 190,000 2021 (b)
120,000 2012 200,000 2022(b)
125,000 2013 210,000 2023(1')
130,000 2014 225,000 2024(b)
140,000 2015 235,000 2025(b)
145,000 2016 250,000 2026(1')
155,000 2017(1')
*Preliminary, subject to change.
(a) The Underwriter may designate one or more maturities as term bonds.
(b) Bonds maturing on and after August 15, 2018, are subject to redemption as provided in the Bond Ordinance prior to their
maturity in whole, or from time to time, in part, on August 15, 2017, or on any interest payment date thereafter at a price
102% of par value plus unpaid accrued interest from the most recent interest payment date to the date fixed for redemption,
declining 1% annually thereafter to a minimum of par value. See "THE BONDS - Optional Redemption." The Bonds are
also subject to mandatory non-scheduled redemption at a price equal to the optional redemption schedule to the extent of
prepayments of special assessments. See "THE BONDS — Mandatory Non -Scheduled Redemption."
(c) 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 City nor the Underwriter shall be responsible for the selection or correctness of
the CUSIP Numbers set forth herein.
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2
No dealer, broker, salesman or other person has been authorized by the District or the Underwriter to give any information, or to
make any representations other than those contained in this Official Statement, and, if given or made, such other information or
representations must not be relied upon as having been authorized by the District or the Underwriter. This Official Statement does
not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of any of the Bonds in any jurisdiction
to any person to whom it is unlawful to make such offer, solicitation or sale in such jurisdiction.
Certain information set forth herein has been obtained from the District and other sources which are believed to be reliable but is
not guaranteed as to accuracy or completeness, and is not to be construed as a representation by the Underwriter. 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
The Underwriter has provided the following sentence for inclusion in this Official Statement. The Underwriter has reviewed the
information in this Official Statement in accordance with, and as part of their responsibilities to investors under the 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.
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 A LEVEL ABOVE THAT
WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED ATANYTIME.
NEITHER THE CITY, ITS FINANCIAL ADVISOR, NOR THE UNDERWRITER MAKE ANY REPRESENTATIONS AS TO THE
ACCURACY, COMPLETENESS, OR ADEQUACY OF THE INFORMATION SUPPLIED BY THE DEPOSITORY TRUST
COMPANYAND THE TEXASEDUCATIONAGENCYFOR USE IN THIS OFFICIAL STATEMENT
THE BONDS ARE EXEMPT FROM REGISTRATION WITH THE SECURITIES AND EXCHANGE COMMISSION AND
CONSEQUENTLY HAVE NOT BEEN REGISTERED THEREWITH. THE REGISTRATION, QUALIFICATION, OR
EXEMPTION OF THE BONDS IN ACCORDANCE WITH APPLICABLE SECURITIES LAW PROVISIONS OF THE
JURISDICTIONS IN WHICH THESE SECURITIES HAVE BEEN REGISTERED, QUALIFIED, OR EXEMPTED SHOULD NOT
BE REGARDED AS A RECOMMENDATION THEREOF.
The statements contained in this Official Statement, and in other information provided by the City, that are not purely historical,
are forward-looking statements, including statements regarding the City's expectations, hopes, intentions, or strategies
regarding the future. All forward-looking statements, including in this Official Statement, are based on information available to
the City on the date hereof and the City assumes no obligation to update any such forward-looking statements. See `RISKS TO
BONDHOLDERS — Forward -Looking Statements."
TABLE OF CONTENTS
OFFICIAL STATEMENT SUMMARY 4
INTRODUCTION 7
THE BONDS 7
THE DISTRICT 13
THE DEVELOPER 15
MANAGEMENT OF THE DISTRICT 17
THE SYSTEM 17
RISKS TO BONDHOLDERS 17
DEBT SERVICE REQUIREMENTS 20
USE AND DISTRIBUTION OF BOND PROCEEDS20
LEGAL MATTERS 21
TAX MATTERS 22
CONTINUING DISCLOSURE OF INFORMATION23
PREPARATION OF THE OFFICIAL
STATEMENT 24
SCHEDULES AND APPENDICES
FINANCIAL STATEMENTS OF THE DEVELOPER A
SELECTED PROVISIONS OF THE BOND ORDINANCE B
FORM OF BOND COUNSEL'S OPINION C
The cover page hereof, this page, the appendices included
herein and any addenda, supplement or amendment hereto, are
part of the Official Statement.
3
PRELIMINARY OFFICIAL STATEMENT SUMMARY
The following is a brief summary of certain information contained herein which is qualified in its entirety by the detailed information and
financial statements appearing elsewhere in this OFFICIAL STATEMENT. The summary should not be detached and should be used in
conjunction with more complete information contained herein. A full review should be made of the entire Official Statement and of the
documents summarized or described therein.
THE DISTRICT
THE BONDS The Bonds are issued as $3,050,000* Behren's Ranch Public Improvement District Special
Assessment Revenue Bonds, Series 2007. The Bonds are issued in minimum denominations of
$5,000, or integral multiples thereof, as serial Bonds maturing August 15, 2008 through and including
August 15, 2026 (see "THE BONDS - Description").
LOCATION The District is located approximately 22 miles north of the central downtown business district of the
City of Austin and lies wholly within the City of Round Rock and within the boundaries of the Round
Rock Independent School District. The District is located approximately 1.2 miles west of Interstate
Highway 35 on the north side of FM 3406.
AUTHORITY FOR ISSUANCE The Bonds are issued pursuant to the general laws of the State, including particularly Chapter 372 of
the Texas Local Government Code and an Ordinance adopted by the City Council (the "Bond
Ordinance").
SECURITY The Bonds constitute special and limited obligations, payable solely from special assessment revenues
within the District and certain other funds established in connection with the issuance of the Bonds.
The holders shall never have the right to demand payment of the principal of or interest on the Bonds
from any funds other than the special assessment revenues and certain other funds established in
connection with the issuance of the Bonds, including the Debt Service Reserve Fund. The assessment
is a first and prior lien against the property assessed, superior to all other liens and claims except liens
or claims for state, county, school district, or municipality ad valorem taxes, and is a personal liability
of and charge against the owners of the property. The City has not covenanted nor obligated itself
to pay the Bonds from any funds raised from taxation or any other revenues available to the
City. The City has no current or contemplated obligations to support the District directly or
indirectly and makes no representation regarding the timely payment of principal or interest on
the Bonds. The Bonds are not a debt of the State or any of its political subdivisions, and neither the
State nor any of its political subdivisions are liable therefor. The Bonds do not constitute an
indebtedness within the meaning of any constitutional or statutory debt limit or restriction. The Bonds
are not general obligations of the City and shall not constitute a debt within the meaning of the
Constitution of the State of Texas, or a pledge of the faith and credit of the City.
REDEMPTION Bonds maturing on and after August 15, 2018, are subject to redemption as provided in the Bond
Ordinance prior to their maturity dates in whole, or from time to time, in part, on August 15, 2017, or
on any interest payment date thereafter at a price of par value plus unpaid accrued interest from the
most recent interest payment date to the date fixed for redemption. See "THE BONDS - Optional
Redemption." The Bonds are also subject to mandatory non-scheduled redemption at a price equal to
the optional redemption schedule to the extent of prepayments of special assessments. See "THE
BONDS — Mandatory Non -Scheduled Redemption."
ADDITIONAL PARITY
OBLIGATIONS The City may issue additional bonds which together with the Bonds and any outstanding Parity
Obligations (as defined herein) shall be equally and ratably secured by the special assessment
revenues and certain other funds established in the Bond Ordinance including the Debt Service
Reserve Fund, subject, however, to complying with certain conditions in the Bond Ordinance,
including the requirement that the City provide a certificate or report reflecting that for the fiscal year
next following the date of the proposed additional bonds, the special assessment revenues included on
the then current special assessment roll are equal to at least 1.40 times the combined average annual
principal and interest requirements on the Bonds, any outstanding parity obligations and the
prepayment of additional bonds. See APPENDIX B — "Selected Provisions of the Bond Ordinance"
for terms and conditions to be satisfied for the issuance of Additional Parity Obligations.
TAX EXEMPTION In the opinion of Bond Counsel, the interest on the Bonds will be excludable from gross income for
federal income tax purposes under existing law, subject to the matters described under the caption
"TAX MATTERS" herein, including the alternative minimum tax on corporations.
*Preliminary, subject to change.
4
USE OF PROCEEDS
MUNICIPAL BOND RATING
BOOK -ENTRY -ONLY SYSTEM
THE DEVELOPER
THE HOMEBUILDERS
STATUS OF DEVELOPMENT
PAYMENT RECORD
LEGAL OPINION
Proceeds from the sale of the Bonds will be used to (i) acquire certain water, wastewater, street and
drainage improvements and detention and water quality ponds within the District and (ii) pay the costs
associated with the issuance of the Bonds.
No application for a rating on the Bonds has been made nor is it expected that an investment grade
rating would be assigned had such application been made.
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, premium, if any, and interest on the
Bonds will be payable by the Trustee/Paying Agent/Registrar to Cede & Co., which will make
distribution of the amounts so paid to the participating members of DTC for subsequent payment to
the beneficial owners of the Bonds (see "THE BONDS - Book -Entry -Only System").
The property in the District is being developed by Behrens Subdivision, Ltd., a Texas limited
partnership comprised of Meredith Gressett, Inc., a Texas corporation, as general partner (the
"Developer"), which owns the property in the District and funds development costs with the proceeds
of development loans from various financial institutions. See "THE DEVELOPER" and "THE
DISTRICT — Status of Development."
The Developer has entered into lot sales contracts with the following home builders: Newmark
Homes, Lennar Homes, Legacy Homes, Pulte Homes and Village Builders. See "THE DISTRICT-
Homebuilders."
In May, 1999 the Developer purchased 580 acres for $7,503,763 in an area now known as the District.
The Developer is developing the District as Behrens Ranch, a master planned single-family residential
community located in the City.
As of July 1, 2006, 10 Sections consisting of 651 single-family residential lots on approximately 222
acres, have been constructed and paved, a total of 509 homes were complete and 486 homes were
occupied and 54 homes were under construction. A total of 83 lots were owned by the homebuilders
or individuals and available for construction, and lots were owned by the Developer.
As of July 1, 2006 there were approximately 57 acres currently under construction, which represents
196 lots, and another 31 acres of developable acreage, all of which have not been developed with
water distribution, wastewater collection and storm drainage facilities. There are 220 acres of
openspace/park area, a 4 acre community center, a 13 acre elementary school and approximately 9
acres of right-of-way. Homes within the District range in market value from approximately $198,000
to in excess of $800,000. See "THE DISTRICT."
The District is newly created and has no previously issued debt outstanding.
McCall, Parkhurst & Horton L.L.P., Bond Counsel, Austin, Texas.
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5
SELECTED FINANCIAL INFORMATION (UNAUDITED)
2006 Certified Net Taxable Assessed Valuation of the District (100% of Market Value) $149,083,460 (a)
Gross Direct Long -Term Debt Outstanding of the District $ 3,050,000 (b)
Estimated Overlapping Debt of the District (including the District) 157,188
Gross Direct Long -Term Debt and Estimated Overlapping Debt $ 3,207,188
Ratio of Direct Long -Term Debt of the District to:
2006 Certified Taxable Assessed Valuation of the District 2.01%
Ratio of Net Long -Term Debt of the District and Estimated Overlapping Debt to:
2006 Certified Taxable Assessed Valuation of the District 2.15%
Average Annual Debt Service Requirement (2007-2026) $257,976 (b)
Maximum Annual Debt Service Requirement (2018) $265,375 (b)
Fiscal 2006 Special Assessments Collected (as of 12-1-06) $272,710
Fiscal 2007 Special Assessments Billed (as of 12-1-06) $368,928
Ratio of Fiscal 2007 Special Assessments Billed (as of 12-1-06) to Average Annual Debt Service 1.43 Times
Ratio of Fiscal 2006 Special Assessment Collections (as of 12-1-06) to Average Annual Debt Service 1.06 Times
Status of Development as of July 1, 2006:
Homes Completed (486 occupied) 509
Homes Under Construction 56
Lots Available for Home Construction 86
Undeveloped but developable acreage (including acreage under development) 88
Estimated Population 1,701(°)
(a) As certified by the Williamson County Appraisal District (the "Appraisal District").
(b) Includes the Bonds. Preliminary, subject to change. See "DEBT SERVICE REQUIREMENTS".
(c) Assumes 3.5 residents per completed single-family home.
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6
PRELIMINARY OFFICIAL STATEMENT
$3,050,000*
BEHREN'S RANCH PUBLIC IMPROVEMENT DISTRICT
SPECIAL ASSESSMENT REVENUE BONDS, SERIES 2007
INTRODUCTION
This Preliminary Official Statement provides certain information in connection with the issuance of the Behren's Ranch Public
Improvement District (the "District"), $3,050,000* Special Assessment Revenue Bonds, Series 2007 (the "Bonds"). Any capitalized
term not otherwise defined herein have the meaning given in APPENDIX A.
The Bonds are issued pursuant to the Texas Constitution, the general laws of the State of Texas including the Public Improvement
District Act, Chapter 372, Texas Local Government Code (the "Act"), and a bond ordinance authorizing the issuance of the Bonds (the
"Bond Ordinance") adopted by the City Council of the City of Round Rock (the "City"). The District is a special purpose entity created
by the City but it does not have a separate board of directors organizing body. Any reference in the Official Statement to the District
means the District acting through the governing body of the City.
This Preliminary Official Statement includes descriptions, among others, of the Bonds and the Bond Ordinance and certain other
information about the District, and the Developer. 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 First Southwest Company, Financial
Advisor for the Bonds, 300 West 6th Street, Suite 1940, Austin, Texas 78701
This Official Statement speaks only as of its date. The information contained herein is subject to change. Copies of the Final Official
Statement will be filed with the Municipal Securities Rulemaking Board, 1900 Duke Street, Suite 600, Alexandria, Virginia 22314. See
"CONTINUING DISCLOSURE OF INFORMATION" for a description of the undertakings to provide certain information on a
continuing basis.
THE BONDS
DESCiurrioN ... The Bonds will pay interest from their dated date of February 15, 2007 with interest payable August 15, 2007 and each
February 15 and August 15 thereafter until the earlier of maturity or redemption. The Bonds are serial bonds maturing on August 15 of
the years and in the amounts, and paying interest on the basis of a 360 -day year composed of twelve 30 -day months at the per annum
rates, shown on the inside cover page of this Official Statement. The definitive Bonds will be initially registered and delivered only to
Cede & Co., the nominee of The Depository Trust Company of New York, New York ("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, premium, if any, and interest on the Bonds will
be payable by the Trustee/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.
AUTHORITY FOR ISSUANCE ... The Bonds are issued pursuant to the general laws of the State, including particularly the Act and the
Bond Ordinance adopted by the City Council of the City.
DEFEASANCE ... General. The Bond Ordinance provides for the defeasance of the Bonds and the termination of the pledge of special
assessments and all other general defeasance covenants in the Bond Ordinance under certain circumstances. Any Bond and the interest
thereon shall be deemed to be paid, retired and no longer outstanding (a "Defeased Bond") within the meaning of the Bond Ordinance,
except to the extent provided below for the Trustee/Paying Agent/Registrar to continue payments and for the District to retain the right to
call Defeased Bonds to be paid at maturity, when the payment of all principal and interest payable with respect to such Bond to the due
date or dates thereof (whether such due date or dates be by reason of maturity, upon redemption, or otherwise) shall have been provided
for on or before such due date by irrevocably depositing with or making available to the Trustee/Paying Agent/Registrar or a commercial
bank or trust company for such payment (a) lawful money of the United States of America sufficient to make such payment, (b)
Defeasance Securities (defined below) that mature as to principal and interest in such amounts and at such times as will ensure the
availability, with reinvestment, of sufficient money to provide for such payment and when proper arrangements have been made by the
District with the Trustee/Paying Agent/Registrar for the payment of its services until all Defeased Bonds shall have become due and
payable or (c) any combination of (a) and (b). At such time as a Bond shall be deemed to be a Defeased Bond, such Bond and the
interest thereon shall no longer be secured by, payable from, or entitled to the benefits of, the ad valorem taxes levied and pledged as
provided in the Bond Ordinance and such principal and interest shall be payable solely from such money or Defeasance Securities.
*Preliminary, subject to change.
7
The deposit shall be deemed a payment of a Bond when proper notice of redemption of such Bonds shall have been given, in accordance
with the Bond Ordinance. Any money so deposited with the Trustee/Paying Agent/Registrar or a commercial bank or trust company may
at the discretion of the Board of Directors also be invested in Defeasance Securities, as hereinafter defined, maturing in the amounts and
at the times set forth in the Bond Ordinance and all income from such Defeasance Securities received by the Trustee/Paying
Agent/Registrar or a commercial bank or trust company that is not required for the payment of the Bonds and interest thereon, with
respect to which such money has been so deposited, shall be turned over to the District.
All money or Defeasance Securities set aside and held in trust pursuant to the provisions of the Bond Ordinance for the payment of
principal of the Bonds and premium, if any, and interest thereon, shall be applied to and used solely for the payment of the particular
Bonds and premium, if any, and interest thereon, with respect to which such money or Defeasance Securities have been so set aside in
trust. Until all Defeased Bonds shall have become due and payable, the Trustee/Paying Agent/Registrar or a commercial bank or trust
company shall perform the services of Trustee/Paying Agent/Registrar for such Defeased Bonds the same as if they had not been
defeased, and the District shall make proper arrangements to provide and pay for such services as required by the Bond Ordinance.
If money or Defeasance Securities have been deposited or set aside with the Trustee/Paying Agent/Registrar or a commercial bank or
trust company for the payment of Bonds and such Bonds shall not have in fact been actually paid in full, no amendment of the defeasance
provisions of the Bond Ordinance shall be made without the consent of the registered owner of each Bond affected thereby.
Retention of Rights ... To the extent that, upon the defeasance of any Defeased Bond to be paid at its maturity, the District acting
through the governing body of the City retains the right under Texas law to later call the Defeased Bond for redemption in accordance
with the provisions of the ordinance authorizing its issuance, the District acting through the governing body of the City may call such
Defeased Bond for redemption upon complying with the provisions of Texas law and upon satisfaction of the provisions set forth above
regarding such Defeased Bond as though it was being defeased at the time of the exercise of the option to redeem the Defeased Bond and
the effect of the redemption is taken into account in determining the sufficiency of the provisions made for the payment of the Defeased
Bond.
Investments ... Any escrow agreement or other instrument entered into between the District and the Trustee/Paying Agent/Registrar or a
commercial bank or trust company pursuant to which money and/or Defeasance Securities are held by the Trustee/Paying
Agent/Registrar or a commercial bank or trust company for the payment of Defeased Bonds may contain provisions permitting the
investment or reinvestment of such moneys in Defeasance Securities or the substitution of other Defeasance Securities upon the
satisfaction of certain requirements. All income from such Defeasance Securities received by the Trustee/Paying Agent/Registrar or a
commercial bank or trust company which is not required for the payment of the Bonds and interest thereon, with respect to which such
money has been so deposited, will be remitted to the City.
For the purposes of these provisions, "Defeasance Securities" means (i) Federal Securities,(ii) noncallable obligations of an agency or
instrumentality of the United States of America, including obligations that are unconditionally guaranteed or insured by the agency or
instrumentality and that, on the date the City adopts or approves proceedings authorizing the issuance of refunding bonds or otherwise
provide for the funding of an escrow to effect the defeasance of the Bonds, are rated as to investment quality by a nationally recognized
investment rating firm not less than "AAA" or its equivalent, and (iii) 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 City adopts or approves
proceedings authorizing the issuance of refunding bonds or otherwise provide for the funding of an escrow to effect the defeasance of the
Bonds, are rated as to investment quality by a nationally recognized investment rating firm no less than "AAA" or its equivalent. For the
purposes of these provisions, "Federal Securities" means direct, noncallable obligations of the United States of America, including
obligations that are unconditionally guaranteed by the United States of America (including Interest Strips of the Resolution Funding
Corporation).
BOOK -ENTRY -ONLY SYSTEM ... This section describes how ownership of the Bonds is to be transferred and how the principal of
premium, if any, and interest on the Bonds are to be paid to and credited by the Depository Trust Company while the Bonds are
registered in its nominee's name. The information in this section concerning DTC and the book -entry -only system has been provided by
DTC for use in disclosure documents such as this Official Statement. The District believes the source of such information to be reliable,
but takes no responsibility for the accuracy or completeness thereof.
No assurances can be given that (1) DTC will distribute payments of debt service on the Bonds, or redemption or other notices, to DTC
Participants, (2) DTC Participants or others will distribute debt service payments paid to DTC or its nominee (as the registered owner of
the Bonds), or redemption or other notices, to the Beneficial Owners, or that they will do so on a timely basis, or (3) DTC will serve and
act in the manner described in this Official Statement. The current rules applicable to DTC are on file with the Securities and Exchange
Commission, and the current procedures of DTC to be followed in dealing with DTC Participants are on file with DTC.
The Depository Trust Company ("DTC"), New York, NY, will act initially 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 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 securities depository, is a limited -purpose trust company organized under the New York Banking Law, a
"banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code, and a "clearing agency" registered pursuant to the
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provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 2.2 million issues of
U.S. and non -U.S. equity 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, in turn, is owned by a number of Direct
Participants of DTC and members of the National Securities Clearing Corporation, Fixed Income Clearing Corporation, and Emerging
Markets Clearing Corporation, also subsidiaries of DTCC, as well as by the New York Stock Exchange, Inc., the American Stock
Exchange LLC, and the National Association of Securities Dealers, Inc. Access to the DTC system is also available to others such as both
U.S. and non -U.S. securities brokers and dealers, banks, trust companies, and clearing companies 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 or Indirect Participants
acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in the 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 Participants will remain responsible for keeping
account of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by
Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory
or regulatory requirements as may be in effect from time to time. Beneficial Owners of Bonds may wish to take certain steps to augment
the transmission to them of notices of significant events with respect to the Bonds, such as redemptions, tenders, defaults, and proposed
amendments to the Bond documents. For example, Beneficial Owners of Bonds may wish to ascertain that the nominee holding the
Bonds for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to
provide their names and addresses to the Trustee/Paying Agent/Registrar and request that copies of notices be provided directly to them.
Redemption notices shall be sent to DTC. If less than all of the Bonds within a maturity are being redeemed, DTC's practice is to
determine by lot the amount of the interest of each Direct Participant in such maturity to be redeemed. Neither DTC nor Cede & Co. (nor
any other DTC nominee) will consent or vote with respect to the Bonds unless authorized by a Direct Participant in accordance with
DTC's Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the District as soon as possible after the record date. The
Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct Participants to whose accounts the Bonds are credited
on the record date (identified in a listing attached to the Omnibus Proxy).
Redemption proceeds, interest and principal payments on the Bonds will be made to Cede & Co., or such other nominee as may be
requested by an authorized representative of DTC. DTC's practice is to credit Direct Participants' accounts upon DTC's receipt of funds
and corresponding detail information from the District or the Trustee/Paying Agent/Registrar, on payable date in accordance with their
respective holdings shown on DTC's records. Payments by Participants to Beneficial Owners will be governed by standing instructions
and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in "street name,"
and will be the responsibility of such Participant and not of DTC nor its nominee, the Trustee/Paying Agent/Registrar, or the District,
subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds, interest and
principal payments 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 Trustee/Paying Agent/Registrar, disbursement of such payments to Direct Participants will be the
responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect
Participants.
DTC may discontinue providing its services as depository with respect to the Bonds at any time by giving reasonable notice to the
District. Under such circumstances, in the event that a successor securities depository is not obtained, Bonds are required to be printed
and delivered.
The District acting through the governing body of the City may decide to discontinue use of the system of book -entry transfers through
DTC (or a successor securities depository). In that event, Bonds will be printed and delivered in accordance with the Bond Ordinance.
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In reading this Official Statement it should be understood that while the Bonds are in the book -entry -only system, references in other
sections of this Official Statement to registered owners should be read to include the person for which the Participant acquires an interest
in the Bonds, but (i) all rights of ownership must be exercised through DTC and the book -entry -only system, and (ii) except as described
above, notices that are to be given to registered owners under the Bond Ordinance will be given only to DTC.
The information in this section concerning DTC and DTC's book -entry system has been obtained from sources that the City believes to
be reliable, but the City takes no responsibility for the accuracy thereof.
USE OF CERTAIN TERMS IN OTHER SECTIONS OF THIS OFFICIAL STATEMENT ... In reading this Official Statement it should be
understood that while the Bonds are in the book -entry only system, references in other sections of this Official Statement to registered
owners should be read to include the person for which the Participant acquires an interest in the Bonds, but (i) all rights of ownership
must be exercised through DTC and the book -entry only system, and (ii) except as described above, notices that are to be given to
registered owners under the Ordinance will be given only to DTC.
Information concerning DTC and the book -entry only system has been obtained from DTC and is not guaranteed as to accuracy or
completeness by, and is not to be construed as a representation by the City, the Financial Advisor or the Underwriter.
EFFECT OF TERMINATION OF BOOK -ENTRY -ONLY SYSTEM ... In the event that the book -entry -only system is discontinued by DTC or
the use of the book -entry -only system is discontinued by the District acting through the governing body of the City, printed bonds will be
issued to the holders and the Bonds will be subject to transfer, exchange and registration provisions as set forth in the Bond Ordinance
and summarized under "THE BONDS — Registration and Transfer" below.
OPTIONAL REDEMPTION ... The Bonds may be redeemed in whole or from time -to -time in part on August 15, 2017 or any interest
payment date thereafter at par plus accrued interest to the date of redemption.
MANDATORY NON-SCHEDULED REDEMPTION ... The Bonds are subject to mandatory nonscheduled redemption, in whole or in part prior
to maturity, on any interest payment date at a price equivalent to the optional redemption schedule set forth in the immediately preceding
paragraph plus accrued interest to the date of redemption to the extent of prepayments of special assessments. Mandatory nonscheduled
prepayments will not be required to be made until at least $25,000 is available in the Redemption Fund. In the event Bonds are called for
early redemption with prepayments of special assessments, the redemption premium is payable from monies in the Reserve Fund. The
Reserve Fund is initially funded and will be maintained at 100% of average annual debt service on the Bonds; however, should
substantial delinquencies exist, insufficient monies may remain in the Reserve fund to pay such premiums.
ADDITIONAL BONDS ... The City may issue additional bonds which together with the Bonds and any outstanding parity obligation shall
be equally and ratably secured by the special assessment revenue and certain other funds established by the Bond Ordinance, subject,
however, to complying with certain conditions in the Bond Ordinance, including the requirement that the City provide a certificate or
report reflecting that for the fiscal year next following the date of the proposed additional bonds, the special assessment revenues are
shown on the then current special assessment roll to be equal to at least 1.40 times the combined average annual principal and interest
requirements on all the Bonds, any outstanding parity obligations and the proposed additional bonds. See APPENDIX B — "Selected
Provisions of the Bond Ordinance" for terms and conditions to be satisfied for the issuance of Additional Parity Obligations.
TRUSTEE/PAYING AGENT ... The initial Trustee/Paying Agent/Registrar is The Bank of New York Trust Company, National
Association, Dallas, Texas. Interest on and principal of the Bonds will be payable, and transfer functions will be performed, at a
corporate trust office of the Trustee/Paying Agent/Registrar in Dallas, Texas (the "Designated Payment/Transfer Office"), and, in the
case of a successor Trustee/Paying Agent/Registrar, at such location as may be designated by such successor. In the Bond Ordinance, the
District retains the right to replace the Trustee/Paying Agent/Registrar. The District covenants to maintain and provide a Trustee/Paying
Agent/Registrar at all times until the Bonds are duly paid and any successor Trustee/Paying Agent/Registrar shall be a commercial bank
or trust company organized under the laws of the State of Texas or other entity duly qualified and legally authorized to serve as and
perform the duties and services of Trustee/Paying Agent/Registrar for the Bonds. Upon any change in the Trustee/Paying
Agent/Registrar for the Bonds, the District agrees to promptly cause a written notice thereof to be sent to each registered owner of the
Bonds by United States mail, first-class, postage prepaid, which notice shall also give the address of the new Trustee/Paying
Agent/Registrar.
JPMorgan Chase & Co. ("JPMorgan"), the parent company of the Trustee/Paying Agent/Registrar, has entered into an agreement with
The Bank of New York Company ("BONY") pursuant to which JPMorgan intends to exchange portions of its corporate trust business,
including municipal and corporate trusteeships, for BONY's consumer, small business and middle market banking businesses. This
transaction has been approved by both companies' boards of directors and, subject to regulatory approvals, is expected to close in the late
third quarter or fourth quarter of 2006.
TRANSFER, EXCHANGE AND REGISTRATION. . . In the event the book -entry -only system should be discontinued, the Bonds may be
transferred and exchanged on the registration books of the Trustee/Paying Agent/Registrar only upon presentation and surrender to the
Trustee/Paying Agent/Registrar and such transfer or exchange shall be without expense or service charge to the registered owner, except
for any tax or other governmental charges required to be paid with respect to such registration, exchange and transfer. Bonds may be
assigned by the execution of an assignment form on the respective Bonds or by other instrument of transfer and assignment acceptable to
the Trustee/Paying Agent/Registrar. New Bonds will be delivered by the Trustee/Paying Agent/Registrar, in lieu of the Bonds being
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transferred or exchanged, at the designated office of the Trustee/Paying Agent/Registrar, or sent by United States mail, first class, postage
prepaid, to the new registered owner or his designee. To the extent possible, new Bonds issued in an exchange or transfer of Bonds will
be delivered to the registered owner or assignee of the registered owner in not more than three business days after the receipt of the
Bonds to be canceled, and the written instrument of transfer or request for exchange duly executed by the registered owner or his duly
authorized agent, in form satisfactory to the Trustee/Paying Agent/Registrar. New Bonds registered and delivered in an exchange or
transfer shall be in any integral multiple of $5,000 for any one maturity and for a like aggregate principal amount or maturity amount, as
appropriate, as the Bonds surrendered for exchange or transfer. See "THE BONDS - Book -Entry -Only System" herein for a description
of the system to be utilized initially in regard to ownership and transferability of the Bonds. Neither the District nor the Trustee/Paying
Agent/Registrar shall be required to transfer or exchange any Bond called for redemption, in whole or in part, within 45 days of the date
fixed for redemption; provided, however, such limitation of transfer shall not be applicable to an exchange by the registered owner of the
uncalled balance of a Bond.
RECORD DATE FOR INTEREST PAYMENT ... The record date ("Record Date") for the interest payable on the Bonds on any interest
payment date means the close of business on the last business day of the preceding month.
In the event of a non-payment of interest on a scheduled payment date, and for 30 days thereafter, a new record date for such interest
payment (a "Special Record Date") will be established by the Trustee/Paying Agent/Registrar, if and when funds for the payment of such
interest have been received from the District. Notice of the Special Record Date and of the scheduled payment date of the past due
interest ("Special Payment Date", which shall be 15 days after the Special Record Date) shall be sent at least five business days prior to
the Special Record Date by United States mail, first-class postage prepaid, to the address of each registered owner of a Bond appearing
on the registration books of the Trustee/Paying Agent/Registrar at the close of business on the last business day next preceding the date
of mailing of such notice.
SOURCE OF PAYMENT ... General. The Bonds constitute special obligations payable solely from Special Assessment Revenues (hereinafter
defined), and the holders thereof shall never have the right to demand payment of the principal of or interest on the Bonds from any funds of
the City other than the Special Assessment Revenues and certain funds established in the Bond Ordinance including the Debt Service
Reserve Fund. Special Assessment Revenues means the monies collected from Special Assessments levied against properties in the District,
including interest on Special Assessments during the period of Special Assessment or any installment thereof is current or delinquent,
Prepayments, Foreclosure Proceeds and penalties for non -timely payment of Special Assessments. Earnings and income derived from the
investment or deposit of monies in any special funds or account created and established for the payment and security of the bonds also
constitute Special Assessment Revenues.
The Bonds are not a debt of the State, the City or any of its political subdivisions, and neither the State, the City nor any of its political
subdivisions are liable therefor. The Bonds do not constitute an indebtedness within the meaning of any constitutional or statutory debt limit
or restriction. The Bonds are not general obligations of the City and shall not constitute a debt within the meaning of the Constitution of the
State of Texas, or a pledge of the faith and credit of the City.
Levy of Special Assessments. By ordinance (the "Assessment Ordinance") adopted by the City on February 8, 2001, the City levies Special
Assessments against all property located within the boundaries of the District (the "Special Assessments") by allocating the costs of the
improvements between four classes (Class A, B, C and D) based upon the estimated benefits received by each class from the improvements
constructed to provide water, sewer, drainage service and street upgrades within the District. The aggregate amount of Special Assessments
assessed to pay the Debt Service Requirements on the Bonds, together with interest thereon, are payable in annual installments which have
been established to correspond as nearly as practicable to the Debt Service Requirements of the $6,000,000 maximum amount of bonds
authorized to be issued by the District.
Special Assessments are classified and levied on a per acre basis at the annual rates shown below:
Class A Property
Class B Property
Class C Property
Class D Property
Completed Homes
Platted Lots
Unplatted Lots
Open Space
$ 2,860.00
567.20
45.38
38.57
The City has contracted with the Round Rock Independent School District to bill and collect annual installments of Special Assessments.
Assessments are billed in conjunction with City, county and school taxes on one consolidated bill.
Priority Lien. The assessment or any reassessment, the expense of collection, and reasonable attorney's fees, if incurred, constitute a first
and prior lien against the property assessed, superior to all other liens and claims except liens or claims for state, county, city, school
district, or other political subdivision, ad valorem taxes, and are a personal liability of and charge against the owners of the property
regardless of whether the owners are named. The lien is effective from the date of the Assessment Ordinance until the Special
Assessment is paid, and may be enforced by the City in the same manner as an ad valorem tax levied against real property may be enforced
by the City. The owner of any property assessed may pay the entire Special Assessment levied against any lot or parcel, together with
accrued interest to the date of payment which must be an interest payment date.
Convenant to Commence Foreclosure Proceedings. Pursuant to the provisions of the Bond Ordinance, the City has covenanted to
determine or cause to be determined, no later than March 1 of each year, whether or not any installment or installments of Special
Assessments are delinquent and, if such delinquencies exist, the City has covenanted to order and cause to be commenced, or cause the
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Trustee to do so on behalf of the City, on or before April 1, or immediately thereafter, and thereafter diligently prosecute an action in district
court to foreclose the currently delinquent lien for the amount of any delinquent installment or installments of Special Assessments, provided,
however, that the City shall not be required to order the commencement of foreclosure proceedings if (i) the total of such Special Assessment
installments posted to the Assessment Roll for such Fiscal Year is less than five percent (5%) of the total of the Special Assessment
installments posted to the Assessment Roll for such Fiscal Year, and (ii) the Reserve Fund is not less than five percent (5%) of the principal
amount of all Bonds originally issued, less any Bonds called for redemption. The City has, pursuant to the Bond Ordinance, appointed the
Round Rock Independent School District to act as a billing and collection agent for the City and to pursue legal actions in the City's name to
collect delinquent Special Assessments and to proceed to sell any assessed property in a judicial foreclosure proceeding. See "APPENDIX B
— Selected Provisions of the Bond Ordinance - Trustee to Pursue Collections."
To the extent it may legally do so, and taking into account the prior liens on assessed land for ad valorem taxes, the City covenants that
property will not be sold in a judicial foreclosure for less than the amount of a currently delinquent Special Assessment installment due on the
property, including delinquent penalties, interest, and attorney fees, without the consent of fifty-one percent (51%) of the owners of the
Outstanding Bonds. Any sale of property for nonpayment of an installment or installments of a Special Assessment shall be subject to the
lien established for the remaining unpaid installments of the Special Assessment against such property and such property may again be sold
at a judicial foreclosure sale if the purchaser thereof fails to make timely payment of the nondelinquent installments of Special Assessment
against such property as they become due and payable pursuant to the terms of the Assessment Ordinance and the Bond Ordinance.
Judicial foreclosure proceedings are not mandatory; however, the City has covenanted to order and cause such actions to be commenced. In
the event a foreclosure is necessary, there could be a delay in payments to owners of the Bonds pending prosecution of the foreclosure
proceedings and receipt by the City of the proceeds of the foreclosure sale. It is possible that no bid would be received at the foreclosure sale,
and in such event there could be an additional delay in payment of the principal of and interest on Bonds or such payment may not be made
in full.
The Reserve Fund, however, may be drawn upon, to the extent monies remain, to make payments of principal and interest, whether at
maturity or on scheduled mandatory redemption dates.
The City is not obligated to advance available funds from the City treasury to cure any deficiency which may occur in any fund created
pursuant to the Bond Ordinance or to pay any other costs associated with the Bonds not covered by amounts on deposit in such funds.
Reserve Fund. Monies on deposit in the Reserve Fund will constitute a trust fund for the benefit of the owners of the Bonds and shall be
administered by the Trustee as described in "APPENDIX B — Selected Provisions of the Bonds Ordinance - Reserve Fund." The Reserve
Fund will be funded from previously collected Special Assessments.
ESTABLISHMENT OF SPECIAL FUNDS ... The Bond Ordinance establishes with the Trustee certain funds. All Special Assessment Revenues
(other than that received as a Prepayment of a Special Assessment or as interest and earnings from the investment or deposit on monies in the
special funds or accounts created and established in the Bond Ordinance) will be deposited to the credit of the Assessment Fund. The Trustee
will disburse from the Assessment Fund on the required dates, amounts which are required to be on deposit in the Debt Service Fund and the
Reserve Fund, as described below. See "APPENDIX B — Selected Provisions of the Bond Ordinance - Funds."
Debt Service Fund. There is required to be kept on deposit in the Debt Service Fund prior to each principal, sinking fund, and interest
payment date on the Bonds, an amount equal to 100% of the amount required to fully pay the interest on and the principal of the Bonds then
due and payable, whether at maturity or as a mandatory nonscheduled redemption. Accrued interest on the bonds shall be deposited into the
Debt Service Fund upon issuance of the Bonds.
Reserve Fund. There is required to be kept on deposit in the Reserve Fund, and initially funded with previously collected Special
Assessments, an amount equal to the Required Reserve Amount, as defined in the Bond Ordinance. The Trustee shall, upon delivery of the
Bonds, deposit into the Reserve Fund, (i) an amount equal to the Required Reserve Amount, which is 100% of average annual principal and
interest of the Bonds Outstanding, and (ii) all amounts required to be transferred to such Fund from the Assessment Fund pursuant to, and at
the times specified in the Bond Ordinance. The Trustee shall transfer from the Reserve Fund to the Debt Service Fund such amounts at such
times as required to pay the Debt Service Requirements on the Bonds as they become due, (whether at maturity or on nonscheduled
mandatory redemption dates), to the extent that other funds available in the Debt Service Fund for such purposes are insufficient and for the
payment of the applicable redemption premium, if any, on Bonds called for early redemption with Prepayments, as provided in the Bond
Ordinance. In addition, amounts in the Reserve Fund may be used to retire the last maturity or interest on the Bonds that remain
Outstanding.
Assessment Prepayment Fund. The Trustee shall deposit all amounts received from the early payment, in whole or in part, of a Special
Assessment for the payment of the Debt Service Requirements on the Bonds (a "Prepayment") (except for any portion thereof that represents
a payment of principal, interest or penalty on a delinquent installment of such prepaid Special Assessment, which portion shall be treated and
applied as Special Assessment Revenues) into the Assessment Prepayment Fund. All Prepayments may be commingled in a single account.
Promptly following the deposit of any such Prepayment into the Assessment Prepayment Fund, the Trustee shall transfer such amount of
Prepayment representing unpaid principal of the Special Assessment into the Redemption Fund to be used to redeem or purchase Bonds and
such amount representing unpaid interest to the Debt Service Fund. See "APPENDIX B - Selected Provisions of the Bond Ordinance -
Funds."
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Redemption Fund. The Trustee shall deposit into the Redemption Fund all amounts required to be transferred to such Fund from the
Assessment Fund, Assessment Prepayment Fund, Administrative Expense Fund, and the Improvement Fund pursuant to, and at the times
specified in the Bond Ordinance. The Trustee shall apply all such amounts in the Redemption Fund, subject to the $25,000 limitation
imposed by the Bond Ordinance, to redeem or purchase Bonds in accordance with the provisions of the Bond Ordinance.
BONDHOLDERS' REMEDIES ... The Bond Ordinance establishes specific events of default with respect to the Bonds. If the City defaults
in the payment of the principal of or interest on the Bonds when due or the City defaults in the observance or performance of any of the
covenants, conditions or obligations of the City, the failure to perform which materially, adversely affects the rights of the owners,
including but not limited to, their prospect or ability to be repaid in accordance with the Bond Ordinance, and the continuation thereof for
a period of 60 days after notice of such default is given by any owner to the City, the Bond Ordinance provides that any registered owner
is entitled to seek a writ of mandamus from a court of proper jurisdiction requiring the City to make such payment or observe and
perform such covenants, obligations, or conditions. Such right is in addition to any other rights the registered owners of the Bonds may
be provided by the laws of the State. Under Texas law, there is no right to the acceleration of maturity of the Bonds upon the failure of
the City to observe any covenant under the Bond Ordinance. Such registered owner's only practical remedy, if a default occurs, is a
mandamus or mandatory injunction proceeding to compel the City to assess and collect an annual ad valorem tax sufficient to pay
principal of and interest on the Bonds as it becomes due. The enforcement of any such remedy may be difficult and time consuming and
a registered owner could be required to enforce such remedy on a periodic basis.
On June 30, 2006, the Texas Supreme Court ruled in Tooke v. City of Mexia, _ S.W.3rd _ (Tex. 2006) ("Tooke") that a waiver of
sovereign immunity must be provided for by statute in "clear and unambiguous" language. In so ruling, the Court declared that statutory
language such as "sue and be sued," in and of itself, did not constitute a clear and unambiguous waiver of sovereign immunity. In Tooke,
the Court noted the enactment in 2005 of sections 271.151-.160, Texas Local Government Code (the "Local Government Immunity
Waiver Act"), which, according to the Court, waives "immunity from suit for contract claims against most local governmental entities in
certain circumstances." The Local Government Immunity Waiver Act covers cities and relates to contracts entered into by cities for
providing goods or services to cities. The City is not aware of any Texas court construing the Local Government Immunity Waiver Act
in the context of whether contractual undertakings of local governments that relate to their borrowing powers are contracts covered by the
Act. As noted above, the Bond Ordinance provides that registered owners may seek to exercise the remedy of mandamus to enforce the
obligations of the City under the Bond Ordinance. Neither the remedy of mandamus nor any other type of injunctive relief was at issue
in Tooke, and it is unclear whether Tooke will be construed to have any effect with respect to the exercise of mandamus, as such remedy
has been interpreted by Texas courts. In general, Texas courts have held that a writ of mandamus may be issued to require public
officials to perform ministerial acts that clearly pertain to their duties. Texas courts have held that a ministerial act is defined as a legal
duty that is prescribed and defined with a precision and certainty that leaves nothing to the exercise of discretion or judgment, though
mandamus is not available to enforce purely contractual duties. However, Texas courts have held that mandamus may be used to require
a public officer to perform legally -imposed ministerial duties necessary for the performance of a valid contract to which the State or a
political subdivision of the State is a party, including the payment of monies due under a contract.
The Bond Ordinance does not provide for the appointment of a trustee to represent the interest of the bondholders upon any failure of the
City to perform in accordance with the terms of the Bond Ordinance, or upon any other condition. Furthermore, the City is eligible to
seek relief from its creditors under Chapter 9 of the U.S. Bankruptcy Code ("Chapter 9"). Although Chapter 9 provides for the
recognition of a security interest represented by a specifically pledged source of revenues, the pledge of taxes in support of a general
obligation of a bankrupt entity is not specifically recognized as a security interest under Chapter 9. Chapter 9 also includes an automatic
stay provision that would prohibit, without Bankruptcy Court approval, the prosecution of any other legal action by creditors or
bondholders of an entity which has sought protection under Chapter 9. Therefore, should the City avail itself of Chapter 9 protection
from creditors, the ability to enforce would be subject to the approval of the Bankruptcy Court (which could require that the action be
heard in Bankruptcy Court instead of other federal or state court); and the Bankruptcy Code provides for broad discretionary powers of a
Bankruptcy Court in administering any proceeding brought before it. The opinion of Bond Counsel will note that all opinions relative to
the enforceability of the Bond Ordinance and the Bonds are qualified with respect to the customary rights of debtors relative to their
creditors.
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13
THE DISTRICT
GENERAL ... The District was created by the City on April 27, 2000 upon petition of Behren's Subdivision Ltd., the landowner within the
District. The City is a political subdivision of the State of Texas (the "State") located in Williamson and Travis Counties, Texas, operating as
a home -rule city under the laws of the State and a charter approved by the voters in August, 1977 (the "Home Rule Charter"). The District is
a special purpose entity created by the City but the District does not have a separate board of directors and therefore acts through the
operating body of the City. The City manages the District's affairs.
DESCRIPTION AND LOCATION ... The District is located approximately 22 miles north of the central downtown business district of the
City of Austin and lies wholly within City and within the boundaries of the Round Rock Independent School District. The District is
located approximately 1.2 miles west of Interstate Highway 35 on the north side of FM 3406.
AUTHORIZED PUBLIC IMPROVEMENTS BY THE ACT ... The City Council may undertake improvement projects and/or services that confer a
special benefit on property located within the District. The City Council may levy and collect Special Assessments on property in the
District, payable in periodic installments based on the benefit conferred by the improvement project and/or services, to pay all or part of its
cost.
A public improvement project may include:
(1) landscaping; the erection of fountains, distinctive lighting and signs; the improvement, widening, narrowing, closing or
rerouting of sidewalks or of streets; drainage improvements; the construction or improvement of pedestrian malls, the establishment or
improvement of parks; the acquisition and installation of articles of art; and the acquisition, construction or improvement of off-street parking
facilities;
(2) other improvements similar to those described in (1) above;
(3) the acquisition of real property in connection with an authorized improvement;
(4) special supplemental services for improvement and promotion of the District, including advertising, promotion, health and
sanitation, public safety, security, business recruitment, development, recreation and cultural enhancements; and
(5) expenses incurred in the establishment, administration and operation of the District.
ASSESSMENT/SERVICE PLAN ... Pursuant to the Act, an ongoing assessment and service plan (the "Assessment/Service Plan") was adopted
by the City Council on February 8, 2001, setting forth a plan for services and activities to be provided in the District, and setting forth the
plan for apportioning the costs of the improvements to be assessed against properties in the District and for payment of the assessments. The
improvements contemplated by the Assessment/Service Plan include the following with an estimated total cost not to exceed $5,450,000:
(1) Acquisition or construction of a water distribution system throughout the District, connecting to the City's master water
distribution collection system;
(2) Acquisition or construction of a wastewater collection system throughout the District, connecting to the City's master
wastewater collection system;
(3) Acquisition or construction of a stormwater drainage system throughout the District, connecting to the City's master
drainage system; and
(4) Street improvements.
Under the Act, the cost of the improvements may be assessed equally per acre against all property within the District, or it may be assessed
against property according to the value of the property as determined by the City Council, with or without regard to structures or other
improvements on the property, or it may be assessed on the basis of any other reasonable assessment plan that results in imposing equal
shares of the cost on property similarly benefited. The City Council has elected to levy an assessment based on four classes of property and
apportioning costs with each class based on the estimated benefits received by each class from the improvements constructed to provide
water, sewer and drainage service and street improvements within the District.
PREPARING ASSESSMENT ROLL AND NOTICES ... On December 21, 2000, the City Council levied the Special Assessments against each
parcel of land within the District to be determined in accordance with the provisions of the Assessment/Service Plan. The City Council also
proposed an Assessment Roll which is revised every year to reflect any changes within each class of property. The Assessment Roll is on
file with the City Secretary and is available for public inspection.
ASSESSMENTS, HEARING, LEVY AND PAYMENT ... On January 25, 2001, the City conducted a hearing on the proposed Special
Assessments. The Assessment Ordinance, as adopted by the City Council provides for the levy the assessments as Special Assessments on
the property and specifies the method of payment of the Special Assessments and provides that they be payable in periodic installments
which shall meet annual costs for special supplemental services and improvements as set forth in Section 372.023 of the Act, and shall
continue for the number of years required to retire indebtedness.
14
OWNERSHIP OF AUTHORIZED IMPROVEMENTS ... In accordance with the Act, the City will acquire the improvements set forth in the
Assessment Service Plan with proceeds from the Bonds. The improvements will become facilities owned and maintained by the City and
will constitute a portion of the City's infrastructure improvements. On the City applied approximately $550,000 on hand
with the special assessment fund to acquire improvements from the Developer. As such, the City's obligation to issue bonds payable from
the special assessments is limited to $5,450,000 (including the Bonds).
MAINTENANCE OF AUTHORIZED IMPROVEMENTS ... In accordance with the Act, all State and Federal laws regulating home rule
municipalities within the State and all City regulations, the City will provide for the ongoing maintenance and repair of the improvements
constructed and conveyed, as outlined in the Assessment/Service Plan, from the date of receipt and acceptance of title to the improvements.
No fees or expenses related to the maintenance or repairs of the Authorized Improvements shall be due from or collected from the District
other than those currently provided for under current City laws and regulations for any municipally -owned infrastructure improvements.
LAND USE ... The following table has been provided by Masonwood Development Co., Inc. a Texas corporation that acts as project
manager for the Developer (the "Manager") and represents the current and planned land use within the District as of July 1, 2006.
Single -Family Residential
Approximate
Acres
Lots
Behrens Ranch — Completed Lots
Phase A 34
47
Phase B1 34 70
Phase B2 33
Phase B3100
Phase Cl 24 74
25 81
Phase C5 21 87
Phase D2 15
Phase E1 44
14 62
Phase C2
12 38
Phase E2
10 48
Subtotal
222 651
Behrens Ranch — Under Construction
Phase D3 -B 18 57
Phase D5 19 57
Phase F 20
82
Subtotal 57 196
Community/Recreational Facilities 4 0
Undevelopable (a) 33 0
Open Space/Green Belt 220 0
RRISD — Elementary School 13 0
Future Development 31 111
Subtotal 301
111
Totals 580
958
(a) Major streets, rights-of-way & drainage channel
STATUS OF DEVELOPMENT ... The Developer acquired the approximate 580 acres comprising the District in 1999. The Developer is
developing the District as Behrens Ranch, a master planned single-family residential community.
As of July 1, 2006, 10 Sections consisting of 651 single-family residential lots on approximately 222 acres, have been constructed and
paved, a total of 509 homes were complete and 486 homes were occupied and 56 homes were under construction. A total of 83 lots were
owned by the homebuilders or individuals and available for construction, and lots were owned by the Developer.
In January 2006, the Developer sold 68 acres representing Phases D3B, D4, D5, and D6 to a non-affiliated development entity and an
affiliate of the Developer entered into a development management agreement to oversee the construction of the subject tracts on a fee
basis. The acreage is planned for 225 lots which are contracted to Newmark Homes. As of July 1, 2006 Phases D3B and D5 (114 lots)
were under construction.
The Developer owns the remaining 20 acres of developable acreage which is planned for 82 lots. All 82 lots are under contract to
Lennar. Construction has commenced and substantial completion is scheduled by March 31, 2007.
15
As of July 1, 2006 there are approximately 57 acres that are currently under construction, which represents 196 lots, and another 31 acres
of developable acreage that have not been provided with water distribution, wastewater collection and storm drainage facilities. There
are 220 acres of openspace/park area, a 4 acre community center, a 13 acre elementary school and approximately 9 acres of right-of-way.
Homes within the District range in market value from approximately $198,000 to in excess of $800,000. See "THE DISTRICT."
HOMERULLDERS ... The Developer has entered into lot sales contracts with the following home builders: Newmark Homes; Meritage
Homes; Village Builders; Lennar Homes; Pulte Homes.
FUTURE DEVELOPMENT ... The District is currently planned as a primarily single-family residential development. Approximately 88
developable acres of land in the District are not yet served with water distribution and supply, wastewater collection and treatment or
storm drainage facilities, including 57 acres currently under construction. While the Developer anticipates future development of this
acreage as business conditions warrant, there can be no assurances if and when any of such undeveloped land will ultimately be
developed. The District DOES NOT REQUIRE additional bonds to accomplish full development of the District, as all remaining water
distribution and supply, wastewater collection and treatment or storm drainage facilities must be funded by the Developer prior to being
eligible for reimbursement by the District's issuance of bonds.
THE DEVELOPER
THE DEVELOPER ... The property in the District is being developed by Behrens Subdivision, Ltd. (the "Developer"), which was created
to acquire and develop the property in the District and fund development costs. See "THE DISTRICT — Status of Development."
The Developer is a Texas limited partnership and its general partner is Meredith Gressett, Inc., a Texas corporation of which James W.
Meredith serves as the president.
DEVELOPMENT FINANCING ... On May 30, 1999 the Developer purchased 580 acres for $7,503,763 which later became included in the
District. The Developer obtained a $16,600,000 revolving loan from Beal Bank, S.S.B. to finance the developments of its property. As
of July 1, 2006 the principal balance was repaid in full along with all accrued interest. The Developer has secured a $4,832,500
construction loan with Texas Capital Bank, NA to construct the remaining developable acreage owned by the Developer. The Developer
is dependent upon capital contributions from its partners and debt financing to fund additional development costs in the District.
RELATED COMMUNITIES ... Although the Developer was created for the purpose of developing the District, various individuals and
entities affiliated with the Developer and active in the management thereof have been involved in the development of other master -
planned residential communities, including but are not limited to, Wild Flower Center at Circle C, Hielscher as Circle C, Circle C West,
Bull Creek, The Enclave I, II & III, The Forest and Hillcrest I & II in Austin, Texas; Hidden Lakes Phases I, II, III, IV, VI in Keller,
Texas; Heights at Stone Oak and Encino Ranch I, II, III & IV in San Antonio, Texas; Hunters Glen I & II and Red Oaks in Cedar Park,
Texas; High Meadows and The Trails I & II in Kyle, Texas; Springbrook I & II in Pflugerville, Texas.
Prospective Bond purchasers should note that such prior real estate experience described above should not be construed as an indication
that development within the District will occur or will be successful. Circumstances surrounding development within the District may
differ from circumstances surrounding development of other land in several respects, including the existence of different economic
conditions, financial arrangements, homebuilders, geographic location, market conditions, and regulatory climate. No representation is
made as to the relative success of any of the projects mentioned above, and no assurance as to the future performance of the Developer
should be inferred. Prospective purchasers are urged to inspect the District in order to acquaint themselves with the nature of the
Developer's business activities.
FINANCIAL INFORMATION CONCERNING THE DEVELOPER ... For more information concerning the Developer, see "APPENDIX A -
Financial Statement of the Developer." The Developer is not responsible for, liable for, and has not made any commitment for payment
of the Bonds or other obligations of the District, and the inclusion of the Developer's financial statements and description of its financial
arrangements herein should not be construed as an implication to that effect. The Developer has no legal commitment to the District or
owners of the bonds to continue development of land within the District and may sell or otherwise dispose of its property within the
District, or any other assets, at any time. Further, the Developer's financial condition is subject to change at any time. Because of the
foregoing, financial information concerning the Developer will neither be updated nor provided following issuance of the Bonds, except
as described herein under "CONTINUING DISCLOSURE OF INFORMATION."
LITIGATION INVOLVING THE DEVELOPER ... In June 2004, a number of homeowners within the District (the "Plaintiffs") filed a class-
action lawsuit against the Developer, James W. Meredith, Meredith Gressett and Masonwood Development Corporation (the
"Defendants") for failure to construct a golf course in the District. The Plaintiffs alleged that the Defendants represented that the Behrens
Ranch Subdivision was intended to be a golf course community and no such golf course has been constructed. The Plaintiffs alleged that
the Defendants' actions constituted false, misleading or deceptive acts or practices as prohibited by the Texas Deceptive Trade Practices
Act and further alleged that the Defendants committed fraud in real estate transactions and acted with gross negligence in the sale of
property within the District.
On December 17, 2004, the Defendants and Plaintiffs reached a compromise and settlement agreement regarding the alleged causes of
action. Pursuant to the settlement agreement the Defendants agreed to pay the Plaintiffs $375,000 in various installments. Additionally,
16
the Developer agreed to apply for rezoning of the 20.073 Uplands Tract from open space to SF -2 (single family residential). Upon
rezoning of the Uplands Tract, the Developers also agreed to pay the Plaintiffs an additional $300,000 and escrow $200,000 for capital
improvement to the amenity center Zoning was approved and all amounts have been paid. Finally, pursuant to the settlement agreement
the Developers agreed to offer to dedicate approximately 240.37 acres within the District which was originally planned as 16 holes of the
18 hole planned golf course to the City as green belt under terms mutually agreeable between the Behrens Ranch HOA Advisory
Committee and the City of Round Rock. As of October 24, 2006, the two parties have been unable to agree upon the conditions of the
dedication.
SSeLd:,AS:ea, W.
In addition, another lawsuit was filed by Beal Bank, S.S.B. ("Beal Bank") against Behrens Subdivision, Ltd. ("Behrens") and James W.
Meredith, Claire D. Meredith and James D. Gresset (collectively, the "Guarantors" and, collectively with Behrens, the "Behrens
Defendants") to recover the amount owed under an Agreement and Assignment of Net Profits Interest (the "NPI Agreement") between
Beal Bank and Behrens. Behrens executed a Promissory Note payable to Beal Bank which was secured by a Deed of Trust, Security
Agreement and Assignment of Leases and Rents (the "Deed of Trust/Security Agreement") covering certain property (the "Property"),
including all right, title and interest of Behrens in regard to the District, including all rights to payment and/or reimbursement disposing
of any part of the Property without Beal Bank's consent. In connection with the Deed of Trust/Security Agreement, Behrens and Beal
Bank executed the NPI Agreement by which Behrens assigned to Beal Bank a Net Profits Interest (as defined therein) in the Property.
The Net Profits Interest applies to, among other things, any reimbursement from the District. Behrens' obligations under the NPI
Agreement were secured by the Deed of Trust/Security Agreement.
In its lawsuit, Beal Bank alleged that in late 2005, "in blatant violation of the Deed of Trust/Security Agreement and the NPI
Agreement," and without Beal Bank's consent, Behrens "maliciously stole" a portion of the PID Reimbursements from the District and
then transferred that money to third parties to settle a separate lawsuit brought against Behrens by such third parties. Beal Bank further
alleged that after giving Behrens notice of "such theft and resulting violations of the Deed of Trust/Security Agreement," Behrens
"intentionally and deliberately failed and refused to cure the violations" and also failed and refused to pay the amount owed under the
NPI Agreement once the Promissory Note matured. Pursuant to a Guaranty Agreement, the Guarantors "unconditionally, irrevocably
and absolutely, jointly and severally, guaranteed" to Beal Bank the payment of all amounts due and owing under the Deed of
Trust/Security Agreement and the NPI Agreement.
On October , 2006, Beal Bank and the Behrens Defendants reached a Settlement Agreement and Mutual Release (the "Settlement
Agreement") regarding the lawsuit filed by Beal Bank. Pursuant to the Settlement Agreement, Behrens will pay to Beal Bank an agreed
upon sum (the "Settlement Payment"), which is guaranteed on a joint and several basis by the Guarantors. The NPI Agreement was
terminated in consideration for the agreement of Behrens to make the Settlement Payment, however, The Deed of Trust/Security
Agreement and the Guarantors' guarantee remains valid, binding and enforceable until the Settlement Payment is made. In addition,
Behrens agreed to pay Beal Bank the Settlement Payment out of the first proceeds of any kind received from certain sources, including
PID Reimbursements, [which are/may be from this issuance of Bonds]. Upon satisfaction of the Settlement Payment, Beal Bank will
release its liens, and the agreements and guarantees between the parties will be terminated and released, respectively.
TAX ROLL INFORMATION ... The following represents the composition of property comprising the 2005 and 2004 Certified Taxable
Appraised Valuations as of January 1 of each year Appraised Valuations have no effect on the Special Assessments owing on any
property annually as such Special Assessments are fixed by property class on a per acre basis. See "THE BONDS — Source of
Repayment."
Land and Improvements
Personal Property
Total Appraised Valuation
Exemptions
2006 Certified Taxable 2005 Certified Taxable 2004 Certified Taxable
Appraised Valuation Appraised Valuation Appraised Valuation
$ 149,083,460 $ 114,128,813 $ 76,060,727
0 0 0
$ 149,083,460 $ 114,128,813 $ 76,060,727
0 0 0
Total Taxable Appraised Valuation $ 149.083,460
$ 114,128,813 $ 76,060.727
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17
PRINCIPAL TAXPAYERS ... The following table represents the principal taxpayers, total acreage, the total annual assessment of such
property, and such property's annual Special Assessment as a percentage of the fiscal 2007 total Special Assessments billed.
Property Owner
Behrens Ranch Master Assoc.
SCC Canyon
Meritage Homes
Village Builders
Behrens Subdivision, Ltd.
Newmark Homes
Pulte Homes
Christopher Beach
Molly Abhame
David & Linda Astill
Total
Annual Fiscal 2007
Property Total Special Assessment Total Assessments
Class Acreage Obligation Billed
Class B/A
Class B/A
Class B/A
Class B
Class B/A
Class B/A
Class A/B
Class A
Class A
Class A
13.13
25.67
9.665
4.724
3.982 (1)
2.57
2.92
0.912
0.767
0.709
(1) Excludes 220 acres of open space/greenbelt owned by the Developer.
$ 28,104.70
23,289.35
18,293.98
13,180.86
10,571.95
6,845.78
3,942.15
2,608.47
2,192.99
2,026.88
$111,057.11
7.62%
6.31%
4.96%
3.57%
2.87%
1.86%
1.07%
0.71%
0.59%
0.55%
30.11%
ESTIMATED OVERLAPPING DEBT ... The following table indicates the general obligation indebtedness, defined as outstanding debt
payable from ad valorem taxes, of governmental entities within which the District is located and the estimated percentages and amounts
of such indebtedness attributable to property within the District. Debt figures equated herein to outstanding bonds payable from ad
valorem taxes are based upon data obtained from individual jurisdictions or Texas Municipal Reports compiled and published by the
Municipal Advisory Council of Texas. Furthermore, certain entities listed below may have issued additional bonds since the date listed.
Political subdivisions overlapping the District are authorized by Texas law to levy and collect ad valorem taxes for the purposes of
operation, maintenance and/or general revenue purposes in addition to taxes for the payment of debt service.
Taxing Outstanding Overlapping
Jurisdiction Bonds As of Percent Amount
City of Round Rock $ 97,988,000 01/01/07 0.080% $ 78,390
Williamson County $ 510,770,000 01/01/07 0.002% 10,215
Round Rock ISD $ 336,889,264 01/01/07 0.020% 67,378
Total Estimated Overlapping Debt $ 155,983
The District's Total Direct Debt(a) 3,050,000
Total Direct and Estimated Overlapping Debt $ 3,205,983
Direct and Estimated Overlapping Debt as a Percentage of:
2006 Certified Net Taxable Assessed Value of $149,083,460 2.15%
(a) Including the Bonds. Preliminary, subject to change.
HISTORICAL SPECIAL ASSESSMENT REVENUE (AS OF DECEMBER 1, 2006)
Fiscal Special Special
Year Ended Assessments Assessments Percent
9-30 Billed Collected Collected
2002 $ 49,791 $ 49,791 100%
2003 150,489 150,489 100%
2004 187,412 187,412 100%
2005 203,570 203,570 100%
2006 274,926 272,710 99%
2007 368,928 N/A N/A
Source: Round Rock ISD.
18
MANAGEMENT OF THE DISTRICT
Pursuant to the Act, the District operates through action of the Round Rock City Council. The City has further appointed the Trustee to
perform certain functions as set forth in the Bond Ordinance.
THE SYSTEM
REGULATION ... Construction and operation of the District's water, sanitary sewer and storm drainage system (the "System") as it now
exists or as it may be expanded from time to time is subject to regulatory jurisdiction of federal, state and local authorities. The City of
Round Rock provides all necessary utilities to the District.
WATER SUPPLY AND DISTRIBUTION/WASTEWATER COLLECTION AND TREATMENT ... The District lies wholly within the corporate
limits of the City. The City provides permanent water supply and wastewater treatment for the District.
100 -YEAR FLOOD PLAIN ... The Flood Insurance Rate Map associated with the District indicates that a portion of the land in the District
is located within the 100 -year flood plain. The District has filled part of this land to remove it from the flood plain. The District also
plans to remove the remaining developable area from the flood plain as well. A letter of map revision will be obtained when this is
completed.
RISKS TO BONDHOLDERS
Development in the District can be influenced by such factors as general economic conditions, availability and cost of construction financing,
competition from other developing areas in the region and other factors beyond the control of the property owners.
GENERAL ... Under the provisions of the Act and the Assessment Ordinance, the Special Assessments, or any installments thereof, from
which funds for the payment of installments of principal of and interest on the Bonds are derived, will be billed to properties against which
there are unpaid assessments on the regular property tax bills sent to owners of such properties. Such assessment installments are due and
payable, and bear the same penalties and interest for non-payment, as set forth in the Assessment Ordinance. Additionally, Special
Assessments are payable in annual installments established by the Assessment Ordinance to correspond in number and proportionate amount
to the number of installments and principal amounts of Bonds maturing in each year. It should be noted that the unwillingness or inability of
a property owner to pay regular property tax bills as evidenced by property tax delinquencies may also indicate an unwillingness or inability
to make regular property tax payments and assessment installment payments in the future.
In order to pay debt service on the Bonds, it is necessary that installments of Special Assessments on land within the District are paid in a
timely manner. Should the installments not be paid on time, the City has established a Reserve Fund from the proceeds of the Bonds to cover
delinquencies. The Special Assessments are secured by a lien on the parcels within the District and the City has covenanted to institute
foreclosure proceedings to sell parcels with delinquent assessment installments for amounts sufficient to cover such delinquent installments
in order to obtain funds to pay debt service on the Bonds. However, there can be no assurance that foreclosure proceedings will occur in a
timely manner so as to avoid depletion of the Reserve Fund and delay in payments of debt service on the Bonds. See "Bankruptcy and
Foreclosure" herein.
Failure by owners of the parcels to pay Special Assessments when due, depletion of the Reserve Fund, delay in foreclosure proceedings, or
the inability of the City to sell parcels which have been subject to foreclosure proceedings for amounts sufficient to cover the delinquent
installments of Special Assessments levied against such parcels may result in the inability of the City to make full or punctual payments of
debt service on the Bonds.
A SPECIAL ASSESSMENT CONSTITUTES A FIRST AND PRIOR LIEN AGAINST THE PROPERTY ASSESSED, SUPERIOR TO
ALL OTHER LIENS AND CLAIMS EXCEPT LIENS AND CLAIMS FOR STATE, COUNTY, SCHOOL DISTRICT OR MUNICIPAL
AD VALOREM TAXES, AND IS A PERSONAL LIABILITY OF AND CHARGE AGAINST THE OWNERS OF PROPERTY
LOCATED WITHIN THE DISTRICT.
REGIONAL ECONOMICS ... The District is located approximately 23 miles north of the Austin downtown business district. The local
economy is diverse, with specific concentrations in government employment, high-tech (both personal computers and semi -conductors)
and higher education. Dell Computer Corporation, the area's single largest private employer has its world headquarters less than 5 miles
from the boundaries of the District. Government and higher education employment are generally stable, and high-tech employment is
recovering from the national economic downturn in 2001. The Texas Workforce Commission indicates the Austin region added 14,200
net new jobs in the 12 months ending December 2005, a 2.1% growth rate over 2004. Regional economists project job growth for the
region to range from 15,000 and 20,000 in 2006. See "Maximum Impact on District Tax Rates" below.
COMPETITION ... The demand for and construction of single-family homes in the District could be affected by competition from other
residential developments along Interstate Highway 35 and in Williamson County, many of which have a more mature development
status. In addition to competition for new home sales from other developments, there are numerous previously -owned homes in more
established neighborhoods that are for sale. Such homes could represent additional competition for new homes proposed to be sold
within the District.
19
The competitive position of the Developer in the sale of developed lots and of prospective builders in the construction of single-family
residential houses within the District is affected by most of the factors discussed in this section. The District can give no assurance that
additional building and marketing programs in the District by the Developer will be implemented or, if implemented, will be successful.
However, as special assessments are fixed and do not depend on the development of additional houses, no additional development is
required to pay debt service on the Bonds taking into account the existing special assessments roll and historical collection rates.
DEPENDENCE ON MAJOR TAXPAYERS AND THE DEVELOPER ... The ten principal taxpayers represent $111,057.11 or 30.11% of the
District's Fiscal 2007 assessment roll. The Developer represents $38,676.65 or 10.48% of such value. If the Developer were to default in
the payment of taxes in an amount which exceeds the District's debt service reserve fund, the ability of the District to make timely
payment of debt service on the Bonds will be dependent on its ability to enforce and liquidate its tax lien, which is a time-consuming
process, or to sell special assessment anticipation notes. Failure to recover or borrow funds in a timely fashion could result in payment
default on the Bonds. See "Tax Collection Limitations and Foreclosure Remedies" in this section.
The Developer plans to continue marketing the remaining and future developed lots in the District to home builders. However, neither
the Developer nor any future developer is obligated to implement development plans on any particular schedule or at all. Thus, the
furnishing of information related to any proposed development should not be interpreted as such a commitment. The District makes no
representation about the probability of development continuing in a timely manner or about the ability of the Developer or any other
landowner within the District to implement any plan of development. Furthermore, there is no restriction on any landowner's right to sell
land. The District can make no prediction as to the effects that current or future economic or governmental circumstances may have on
any plans of the Developer or any other landowner. See "THE DEVELOPER."
UNDEVELOPED ACREAGE ... There are approximately 88 developable acres of land (including land currently under development) within
the District that have not been provided with water, wastewater and storm drainage and detention facilities. The District makes no
representation as to when or if development of this acreage will occur. See "THE DISTRICT - Land Use."
DEVELOPMENT AND HOME CONSTRUCTION IN THE DISTRICT ... As of July 1, 2006, approximately 86 developed lots owned by the
Developer and homebuilders within the District remained vacant. Failure of the Developer and/or builders to construct taxable
improvements on developed lots will not result in substantial increases in the rate of assessment by the District during the term of the
Bonds to pay debt service on the Bonds. Future increases in assessment revenue will result primarily from the completion of new homes
by builders.
BANKRUPTCY AND FORECLOSURE ... The payment of Special Assessments and the ability of the City to foreclose the lien of a delinquent
unpaid assessment, as discussed in the section entitled "SECURITY FOR THE BONDS - Covenant to Commence Foreclosure Proceedings,"
may be limited by bankruptcy, insolvency, or other laws generally affecting creditors' rights or by state law relating to judicial foreclosure.
In addition, the prosecution of a foreclosure could be delayed due to congested local court calendars or procedural delays.
The various legal opinions to be delivered concurrently with the delivery of the Bonds (including Bond Counsel's approving legal opinion)
will be qualified as to the enforceability of the various legal instruments by bankruptcy, reorganization, insolvency or other similar laws
affecting the rights of creditors generally.
Although bankruptcy proceedings would not cause the Special Assessments to become extinguished, bankruptcy of a property owner could
result in a delay in prosecuting foreclosure proceedings and could result in delinquent Special Assessments not being paid in full. Such a
delay would increase the likelihood of a delay or default in payment of the principal of and interest on the Bonds.
AVAILABILITY OF FUNDS TO PAY DELINQUENT SPECIAL ASSESSMENT INSTALLMENTS ... The City will establish a Reserve Fund initially
funded from previously collected Special Assessments. An amount equal to 100% of the average annual principal and interest requirements
of Bonds Outstanding will be maintained in the Reserve Fund. As discussed in "THE BONDS - Establishment of Special Funds" herein, if a
delinquency occurs in the payment of any Special Assessment, the City will transfer into the Debt Service Fund the amount of the
delinquency from the Reserve Fund. There is no assurance that the balance in the Reserve Fund will always be adequate to pay all
delinquent installments, and if, during the period of delinquency, there are insufficient funds in the Reserve Fund to pay all delinquent
installments, a delay may occur in payments to the owners of the Bonds.
LIMITED CITY OBLIGATION UPON DELINQUENCY ... The City is not obligated to advance funds from the City treasury for delinquent
assessment installments; the only obligation is for the Trustee to transfer amounts available in the Reserve Fund.
The City may, but is not obligated to, be the purchaser of delinquent property. In the event the City does become the purchaser of such
property, it will pay and transfer from available funds and deposit into the Debt Service Fund the amount of any remaining amount of unpaid
Special Assessment, any delinquent Special Assessment installment, and any interest thereon. The City may also pay and transfer from
available funds and deposit into the Debt Service Fund the amount of any such property pending redemption or sale. Amounts so advanced
are recoverable upon sale or redemption of the property.
FACTORS WHICH MAY AFFECT LAND DEVELOPMENT AND PROPERTY VALUES ... Development in the District and the City as well as
property values may be affected by changes in general economic conditions, fluctuations in the real estate market, availability and cost of
construction financing, competition from other developing areas and other factors beyond the control of the property owners. In addition,
development may be subject to future federal, state and local regulations. Approval may be required from various agencies from time to time
20
in connection with the layout and design of development in the District, the nature and extent of public improvements, land use, zoning and
other matters. Failure to meet any such regulations or obtain any such approvals in a timely manner could delay or adversely affect
development in the District and property values.
The land within the District is subject to a number of contingencies which could slow or prevent future development of the undeveloped land.
Consequently, no assurance can be given that such development will be partially or fully completed, and in assessing the investment quality
of the Bonds, prospective purchasers should evaluate the risks of noncompletion.
First, undeveloped land is less valuable than such land in a developed condition and provides less valuable security to the Bondowners should
it be necessary for the City to foreclose due to the nonpayment of Special Assessments.
Second, if much of the land in the District remains undeveloped, the number of likely purchasers at the foreclosure sale, in the event the City
forecloses the lien of delinquent unpaid assessment installments, is likely to be reduced. See "RISKS TO BONDHOLDERS - Bankruptcy
and Foreclosure" herein.
Third, in addition to potentially reducing the ability and willingness of the landowners to pay assessment installments, a slowdown of the
economic development process in the region could adversely affect land values and reduce the proceeds received at a foreclosure sale in the
event Special Assessments are not paid when due.
DIRECT AND OVERLAPPING INDEBTEDNESS ... The ability of an owner of land within the District to pay the Special Assessment could be
affected by the existence of other taxes and assessments imposed upon the land. In addition, other public agencies whose boundaries overlap
those of the District could, without the consent of the City, and in certain cases without the consent of the owners of the land within the
District, impose additional taxes or assessment liens on the property within the District to finance public improvements to be located inside of
or outside of the District. A statement of direct and overlapping indebtedness on land within the city is included herein under the heading
"THE DISTRICT - Estimated Overlapping Debt."
LAND VALUES AND THE APPRAISAL ... The value of land within the District is a critical factor in determining the investment quality of the
Bonds. If a property owner defaults in the payment of Special Assessments, the City's only remedy is to commence foreclosure proceedings
in an attempt to obtain funds to pay the delinquent installments. See the section entitled "Bankruptcy and Foreclosure" herein.
ABSENCE OF MARKET FOR THE BONDS ... No application has been made for a credit rating for the Bonds, and it is not known whether a
credit rating could be secured either now or in the future for the Bonds. There can be no assurance that there will ever be a secondary market
for purchase or sale of the Bonds, and from time to time there may be no market for them, depending upon prevailing market conditions, the
financial condition on market position of firms who may make the secondary market and the financial condition of the owners of land within
the District and the development of the parcels within the District.
No ACCELERATION PROVISION ... The Bonds do not contain a provision allowing for the acceleration of the Bonds in the event of a
payment default or other default under the terms of the Bonds or the Bond Ordinance. Pursuant to the Bond Ordinance, any holder of any of
the Bonds is given the right for the equal benefit and protection of all holders similarly situated to pursue certain remedies described under
"APPENDIX B — Selected Provisions of the Bond Ordinance - Trustee to Pursue Collections."
FORWARD-LOOKING STATEMENTS ... The statements contained in this Official Statement, and in any other information provided by the
City, that are not purely historical, are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including statements regarding the City's expectations,
hopes, intentions, or strategies regarding the future. Readers should not place undue reliance on forward-looking statements. All
forward-looking statements included in this Official Statement are based on information available to the City on the date hereof, and the
City assumes no obligation to update any such forward-looking statements. It is important to note that the City's actual results could
differ materially from those in such forward-looking statements.
The forward-looking statements herein are necessarily based on various assumptions and estimates and are inherently subject to various
risks and uncertainties, including risks and uncertainties relating to the possible invalidity of the underlying assumptions and estimates
and possible changes or developments in social, economic, business, industry, market, legal and regulatory circumstances and conditions
and actions taken or omitted to be taken by third parties, including customers, suppliers, business partners and competitors, and
legislative, judicial, and other governmental authorities or officials. Assumptions related to the foregoing involve judgments with respect
to, among other things, future economic, competitive, and market conditions and future business decisions, all of which are difficult or
impossible to predict accurately and, therefore, can be no assurance that the forward-looking statements including in this Official
Statement would prove to be accurate.
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21
(1)
EYE
DEBT SERVICE REQUIREMENTS
The Bonds(1)
9/30 Principal
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
95,000
$ 100,000
105,000
110,000
120,000
125,000
130,000
140,000
145,000
155,000
165,000
170,000
180,000
190,000
200,000
210,000
225,000
235,000
250,000
$ 3,050,000
Interest
$ 167,750
167,750
162,525
157,025
151,250
145,200
138,600
131,725
124,575
116,875
108,900
100,375
91,300
81,950
72,050
61,600
50,600
39,050
26,675
13,750
$ 2,109,525
Total
$ 167,750
262,750
262,525
262,025
261,250
265,200
263,600
261,725
264,575
261,875
263,900
265,375
261,300
261,950
262,050
261,600
260,600
264,050
261,675
263,750
$ 5,159,525
Interest calculated at a True Interest Cost of 5.79%. Preliminary, subject to change.
Estimated Maximum Annual Debt Service Requirement (2018) $265,375
Estimated Average Annual Debt Service Requirements (2007-2026) $257,976
USE AND DISTRIBUTION OF BOND PROCEEDS
Proceeds from the sale of the Bonds will be used to acquire certain water, wastewater and drainage improvements within the District.
Additionally, a portion of the proceeds from the sale of the Bonds will be used to pay the costs of issuance in connection with the Bonds.
SUMMARY OF ESTIMATED SOURCE S AND USES OF FUNDS
Sources of Funds:
Par Amount of Bonds
Estimated Accrued Interest
Cash Contribution from Previously Collected Special Assessments
Total Sources of Funds
Uses of Funds
Improvements Acquisition
Legal Fees, Trustee Fees and Other Issuance Costs
Total Underwriter's Discount
Deposit to Debt Service Reserve Fund
Deposit to Debt Service Fund
Rounding
Total Uses of Funds
*Preliminary, subject to change.
22
Amount
$ 3,050,000*
15,843
300,000
$ 3,365,843
$ 2,900,000
107,000
76,250
265,375
15,843
1,375
$ 3,365,843
FUTURE DEBT ... Following the issuance of the Bonds, the District will have the right, subject to the provisions of the Bond Ordinance
governing issuance of additional bonds to issue up to $2,400,000 of Additional Parity Obligations.
CONTINUING COMPLIANCE WITH CERTAIN COVENANTS .. . Failure of the District to comply with certain covenants contained in the
Bond Ordinance on a continuing basis prior to the maturity of the Bonds could result in interest on the Bonds becoming taxable
retroactive to the date of original issuance. See "TAX MATTERS."
APPROVAL OF THE BONDS ...The Attorney General of Texas must approve the legality of the Bonds prior to their delivery. The
Attorney General of Texas does not pass upon or guarantee the security of the Bonds as an investment, nor does he pass upon the
adequacy or accuracy of the information contained in this Official Statement.
LEGAL MATTERS
LEGAL OPINION AND No -LITIGATION CERTIFICATE ... Except as hereinafter noted, Bond Counsel has not verified and has not passed
upon, and assumes no responsibility for the accuracy, completeness or fairness of the information and statements contained in this
Official Statement. In the performance of its duties, Bond Counsel has reviewed the information relating to the Bonds and the Bond
Ordinance contained under the captions "THE BONDS" (exclusive of the subcaption "Book -Entry -Only System" and "Bondholders'
Remedies"), "CONTINUING DISCLOSURE OF INFORMATION" (exclusive of the subcaption "Compliance with Prior Agreements"),
"TAX MATTERS", "LEGAL MATTERS — Registration and Qualification of Bonds for Sale", "-Legal Investments and Eligibility to
Secure Public Funds in Texas", "-Legal Opinion and No -Litigation Certificate", APPENDIX B — "Selected Provisions of the Bond
Ordinance" and APPENDIX C — "Form of Bond Counsel's Opinion" contained in the Official Statement to determine whether such
information is a fair and accurate summary of the information purported to be shown therein and that the information and descriptions
contained under such captions relating to the provisions of applicable state and federal laws conform to such state and federal laws. The
legal fee to be paid Bond Counsel for services rendered in connection with the issuance of the Bonds is contingent on the sale and
delivery of the Bonds. Certain legal matters will be passed upon for the Underwriter by Andrews Kurth LLP, Austin, Texas, Counsel to
the Underwriter.
The legal opinions to be delivered concurrently with the delivery of the Bonds express the professional judgment of the attorneys
rendering the opinions as to the legal issues explicitly addressed therein. In rendering a legal opinion, the attorney does not become an
insurer or guarantor of that expression of professional judgment, of the transaction opined upon, or of the future performance of the
parties to the transaction. Nor does the rendering of an opinion guarantee the outcome of any legal dispute that may arise out of the
transaction. In connection with the issuance of the Bonds, Bond Counsel has been engaged by, and only represents, the City.
REGISTRATION AND QUALIFICATION OF BONDS FOR SALE ... No registration statement relating to the Bonds has been filed with the SEC
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, nor have the Bonds been registered
or qualified under the securities laws of any other jurisdiction. The City assumes no responsibility for registration or qualification of the
Bonds under the securities laws of any jurisdiction in which the Bonds may be offered, sold, or otherwise transferred. It is the obligation
of the purchaser to register or qualify sale of the Bonds under securities laws of any jurisdiction which so requires. This disclaimer of
responsibility for registration or qualification for sale or other disposition of the Bonds will not be construed as an interpretation of any
kind with regard to the availability of any exemption from securities registration or qualification provisions.
LEGAL INVESTMENTS AND ELIGIBILITY TO SECURE PUBLIC FUNDS IN TEXAS ... Pursuant to the Act, the Bonds issued are legal and
authorized investments for:
(1) banks, trust companies, and savings and loan associations;
(2) all insurance companies;
(3) fiduciaries, trustees, and guardians; and
(4) interest funds, sinking funds, and other public funds of the state or of an agency, subdivision, or instrumentality of the
state, including a county, municipality, school district, or other district, public agency, or body politic, to the extent of the
market value of the bonds, if accompanied by an appurtenant unmatured interest coupons.
Bonds issued under the Act may be security for deposits of public funds of the state or of an agency, subdivision, or instrumentality of
the state, including a county, municipality, school district, or other district, public agency, or body politic, to the extent of the market
value of the bonds, if accompanied by any appurtenant unmatured interest coupons.
NO -LITIGATION CERTIFICATE ...The District will furnish to the Underwriter a certificate, dated as of the date of delivery of the Bonds,
executed by both the President and Secretary of the Board, to the effect that no litigation of any nature has been filed or is then pending
or threatened, either in state or federal courts, contesting or attacking the Bonds; restraining or enjoining the issuance, execution or
delivery of the Bonds; affecting the provisions made for the payment of or security for 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.
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 (financial or otherwise) of the District from that set forth or contemplated in this Official
Statement amended through the date of sale.
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TAX MATTERS
OPINION ... On the date of initial delivery of the Bonds, McCall, Parkhurst & Horton L.L.P., Austin, Texas, Bond Counsel, will render its
opinion that, in accordance with statutes, regulations, published rulings and court decisions existing on the date thereof ("Existing Law"),
(1) interest on the Bonds for federal income tax purposes will be excludable from the "gross income" of the holders thereof and (2) the
Bonds will not be treated as "specified private activity bonds" the interest on which would be included as an alternative minimum tax
preference item under section 57(a)(5) of the Internal Revenue Code of 1986, as amended (the "Code"). Except as stated above, Bond
Counsel will express no opinion as to any other federal, state or local tax consequences of the purchase, ownership or disposition of the
Bonds. See "APPENDIX C — Form of Bond Counsel's Opinions."
In rendering its opinion, Bond Counsel will rely upon (a) certain information and representations of the City, including information and
representations contained in the City's federal tax certificate; (b) covenants of the City contained in the Bond documents relating to
certain matters, including arbitrage and the use of the proceeds of the Bonds and the Refunded Bonds and the property financed or
refinanced therewith; and (c) the verification report of Grant Thornton, LLP. Failure by the City to observe the aforementioned
representations or covenants, could cause the interest on the Bonds to become taxable retroactively to the date of issuance.
The Code and the regulations promulgated thereunder contain a number of requirements that must be satisfied subsequent to the issuance
of the Bonds in order for interest on the Bonds to be, and to remain, excludable from gross income for federal income tax purposes.
Failure to comply with such requirements may cause interest on the Bonds to be included in gross income retroactively to the date of
issuance of the Bonds. The opinion of Bond Counsel is conditioned on compliance by the City with such requirements, and Bond
Counsel has not been retained to monitor compliance with these requirements subsequent to the issuance of the Bonds.
Bond Counsel's opinion represents its legal judgment based upon its review of Existing Law and the reliance on the aforementioned
information, representations and covenants. Bond Counsel's opinion is not a guarantee of a result. Existing Law is subject to change by
Congress and to subsequent judicial and administrative interpretation by the courts and the Department of the Treasury. There can be no
assurance that Existing Law or the interpretation thereof will not be changed in a manner which would adversely affect the tax treatment
of the purchase, ownership or disposition of the Bonds.
A ruling was not sought from the Internal Revenue Service by the City with respect to the Bonds or the projects financed or refinanced
with proceeds of the Bonds or the Refunded Bonds. No assurances can be given as to whether the Internal Revenue Service will
commence an audit of the Bonds, or as to whether the Internal Revenue Service would agree with the opinion of Bond Counsel. If an
Internal Revenue Service audit is commenced, under current procedures the Internal Revenue Service is likely to treat the City as the
taxpayer and the Bondholders may have no right to participate in such procedure. No additional interest will be paid upon any
determination of taxability.
FEDERAL INCOME TAX ACCOUNTING TREATMENT OF ORIGINAL ISSUE DISCOUNT ... The initial public offering price to be paid for one
or more maturities of the Bonds (the "Original Issue Discount Bonds") may be less than the principal amount thereof or one or more
periods for the payment of interest on the Bonds may not be equal to the accrual period or be in excess of one year. In such event, the
difference between (i) the "stated redemption price at maturity" of each Original Issue Discount Bond, and (ii) the initial offering price to
the public of such Original Issue Discount Bond would constitute original issue discount. The "stated redemption price at maturity"
means the sum of all payments to be made on the Bonds less the amount of all periodic interest payments. Periodic interest payments are
payments which are made during equal accrual periods (or during any unequal period if it is the initial or final period) and which are
made during accrual periods which do not exceed one year.
Under Existing Law, any owner who has purchased such Original Issue Discount Bond in the initial public offering is entitled to exclude
from gross income (as defined in section 61 of the Code) an amount of income with respect to such Original Issue Discount Bond equal
to that portion of the amount of such original issue discount allocable to the accrual period. For a discussion of certain collateral federal
tax consequences, see discussion set forth below.
In the event of the redemption, sale or other taxable disposition of such Original Issue Discount Bond prior to stated maturity, however,
the amount realized by such owner in excess of the basis of such Original Issue Discount Bond in the hands of such owner (adjusted
upward by the portion of the original issue discount allocable to the period for which such Original Issue Discount Bond was held by
such initial owner) is includable in gross income.
Under Existing Law, the original issue discount on each Original Issue Discount Bond is accrued daily to the stated maturity thereof (in
amounts calculated as described below for each six-month period ending on the date before the semiannual anniversary dates of the date
of the Bonds and ratably within each such six-month period) and the accrued amount is added to an initial owner's basis for such Original
Issue Discount Bond for purposes of determining the amount of gain or loss recognized by such owner upon the redemption, sale or other
disposition thereof. The amount to be added to basis for each accrual period is equal to (a) the sum of the issue price and the amount of
original issue discount accrued in prior periods multiplied by the yield to stated maturity (determined on the basis of compounding at the
close of each accrual period and properly adjusted for the length of the accrual period) less (b) the amounts payable as current interest
during such accrual period on such Original Issue Discount Bond.
The federal income tax consequences of the purchase, ownership, redemption, sale or other disposition of Original Issue Discount Bonds
which are not purchased in the initial offering at the initial offering price may be determined according to rules which differ from those
described above. All owners of Original Issue Discount Bonds should consult their own tax advisors with respect to the determination
24
for federal, state and local income tax purposes of the treatment of interest accrued upon redemption, sale or other disposition of such
Original Issue Discount Bonds and with respect to the federal, state, local and foreign tax consequences of the purchase, ownership,
redemption, sale or other disposition of such Original Issue Discount Bonds.
Prospective purchasers should be aware that because the first interest payment on the Bonds will be made more than one year after their
issue date, the first interest payment on the Bonds may be treated as original issue discount. While such treatment of the payment will not
adversely affect the excludability of the interest portion of the payment from a holder's gross income, special tax accounting treatment
may apply. This tax accounting treatment would cause a portion of the interest payment to be recognized in the taxable year in which the
Bonds are purchased, rather than the taxable year in which the payment is received by the holder. This treatment may accelerate any
alternative minimum tax consequences for corporations, the recognition of any portion of the payment which is treated as market
discount and any other collateral federal income tax consequences for certain holders of the Bonds. Prospective purchasers should
consult their tax advisors for advice regarding such consequences.
COLLATERAL FEDERAL INCOME TAX CONSEQUENCES ... The following discussion is a summary of certain collateral federal income tax
consequences resulting from the purchase, ownership or disposition of the Bonds. This discussion is based on Existing Law, which is
subject to change or modification, retroactively.
The following discussion is applicable to investors, other than those who are subject to special provisions of the Code, such as financial
institutions, property and casualty insurance companies, life insurance companies, individual recipients of Social Security or Railroad
Retirement benefits, individuals allowed an earned income credit, certain S corporations with accumulated earnings and profits and
excess passive investment income, foreign corporations subject to the branch profits tax and taxpayers who may be deemed to have
incurred or continued indebtedness to purchase tax-exempt obligations.
THE DISCUSSION CONTAINED HEREIN MAY NOT BE EXHAUSTIVE. INVESTORS, INCLUDING THOSE WHO ARE
SUBJECT TO SPECIAL PROVISIONS OF THE CODE, SHOULD CONSULT THEIR OWN TAX ADVISORS AS TO THE TAX
TREATMENT WHICH MAY BE ANTICIPATED TO RESULT FROM THE PURCHASE, OWNERSHIP AND DISPOSITION OF
TAX-EXEMPT BONDS BEFORE DETERMINING WHETHER TO PURCHASE THE BONDS.
Interest on the Bonds will be includable as an adjustment for "adjusted current earnings" to calculate the alternative minimum tax
imposed on corporations by section 55 of the Code. Section 55 of the Code imposes a tax equal to 20 percent for corporations, or 26
percent for noncorporate taxpayers (28 percent for taxable income exceeding $175,000), of the taxpayer's "alternative minimum taxable
income," if the amount of such alternative minimum tax is greater than the taxpayer's regular income tax for the taxable year.
Under section 6012 of the Code, holders of tax-exempt obligations, such as the Bonds, may be required to disclose interest received or
accrued during each taxable year on their returns of federal income taxation.
Section 1276 of the Code provides for ordinary income tax treatment of gain recognized upon the disposition of a tax-exempt obligation,
such as the Bonds, if such obligation was acquired at a "market discount" and if the fixed maturity of such obligation is equal to, or
exceeds, one year from the date of issue. Such treatment applies to "market discount bonds" to the extent such gain does not exceed the
accrued market discount of such bonds; although for this purpose, a de minimis amount of market discount is ignored. A "market
discount bond" is one which is acquired by the holder at a purchase price which is less than the stated redemption price at maturity or, in
the case of a bond issued at an original issue discount, the "revised issue price" (i.e., the issue price plus accrued original issue discount).
The "accrued market discount" is the amount which bears the same ratio to the market discount as the number of days during which the
holder holds the obligation bears to the number of days between the acquisition date and the final maturity date.
STATE, LOCAL AND FOREIGN TAXES ... Investors should consult their own tax advisors concerning the tax implications of the purchase,
ownership or disposition of the Bonds under applicable state or local laws. Foreign investors should also consult their own tax advisors
regarding the tax consequences unique to investors who are not United States persons.
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25
CONTINUING DISCLOSURE OF INFORMATION
In the Ordinance, the City has made the following agreement for the benefit of the holders and beneficial owners of the Bonds. The City is
required to observe the agreement for so long as it remains obligated to advance funds to pay the Bonds. Under the agreement, the City will be
obligated to provide certain updated financial information and operating data annually, and timely notice of specified material events, to certain
information vendors. This information will be available to securities brokers and others who subscribe to receive the information from the
vendors.
ANNUAL REPORTS ... Under Texas law, including, but not limited to, Chapter 103, as amended, Texas Local Government Code, the City must
keep its fiscal records in accordance with generally accepted accounting principles, must have its financial accounts and records audited by a
certified public accountant, and must file each audit report with the City Secretary within 120 days after the close of the City's fiscal year. The
City's fiscal records and audit reports are available for public inspection during the regular business hours of the City Secretary. Additionally,
upon the filing of these financial statements and the annual audit, these documents are subject to the Texas Open Records Act, as amended,
Texas Government Code Chapter 552. Thereafter, any person may obtain copies of these documents upon submission of a written request to
the Director of Finance at City of Round Rock, Texas, 221 East Main Street, Round Rock, Texas 78664, and upon paying the reasonable
copying, handling, and delivery charges for providing this information.
The City will provide certain updated financial information and operating data to certain information vendors annually. The information to be
updated includes financial information of the general type included in this Official Statement under "THE DEVELOPER — Historical Special
Assessment Revenue" and the City's financial statements in APPENDIX B. The City will update and provide this information within six
months of the close of each fiscal year. The City will provide the updated information to each nationally recognized municipal securities
information repository ("NRMSIR") and to any state information depository ("SID") that is designated by the State of Texas and approved by
the staff of the United States Securities and Exchange Commission (the "SEC").
The City may provide updated information in full text or may incorporate by reference certain other publicly available documents, as permitted
by SEC Rule 15c2-12 (the "Rule"). The updated information will include audited financial statements, if the City commissions an audit and it
is completed by the required time. If audited financial statements are not provided by that time, the City will provide unaudited financial
statements by the required time and will provide audited financial statements when and if they become available. Any such financial
statements will be prepared in accordance with the accounting principles described in APPENDIX B, the Ordinance or such other accounting
principles as the City may be required to employ from time to time pursuant to state law or regulation.
The City's current fiscal year end is September 30. Accordingly, it must provide updated information by March 31 in each year, unless the
City changes its fiscal year. If the City changes its fiscal year, it will notify each NRMSIR and any SID of the change.
MATERIAL EVENT NOTICES ... The City will also provide timely notices of certain events to certain information vendors. The City 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. In addition, the City will provide timely notice of any failure by the City to provide information, data, or financial
statements in accordance with its agreement described above under "ANNUAL REPORTS". The City will provide each notice described in this
paragraph to any SID and to either each NRMSIR or the Municipal Securities Rulemaking Board ("MSRB"). Any filing under this agreement
may be made solely by transmitting such filing to the Municipal Advisory Council of Texas (the "MAC") as provided at
http://www.disclosureusa.org unless the United States Securities and Exchange Commission has withdrawn the interpretive advice in its letter
to the MAC dated September 7, 2004.
AVAILABILITY OF INFORMATION FROM NRMSIRs AND SID ... The City has agreed to provide the foregoing information only to NRMSIRs
and any SID. The information will be available to holders of Bonds only if the holders comply with the procedures and pay the charges
established by such information vendors or obtain the information through securities brokers who do so.
The Municipal Advisoiy Council of Texas (the "MAC") has been designated by the State of Texas and approved by the SEC staff as a
qualified SID. The address of the MAC is 600 West 8th Street, P.O. Box 2177, Austin, Texas 78768-2177, and its telephone number is
512/476-6947. The MAC has also received SEC approval to operate and has begun to operate, a "central post office" for information
filings made by municipal issuers, such as the City. A municipal issuer may submit its information filings with the central post office,
which then transmits such information to the NRMSIRs and the appropriate SID for filing. This central post office can be accessed and
utilized at www.disclosureUSA.org ("DisclosureUSA"). The City may utilize DisclosureUSA for the filing of information relating to the
Bonds.
LIMITATIONS AND AMENDMENTS ... The City has agreed to update information and to provide notices of material events only as described
above. The City has not agreed to provide other information that may be relevant or material to a complete presentation of its financial results
of operations, condition, or prospects or agreed to update any information that is provided, except as described above. The City makes no
representation or warranty concerning such information or concerning its usefulness to a decision to invest in or sell Bonds at any future date.
The City disclaims any contractual or tort liability for damages resulting in whole or in part from any breach of its continuing disclosure
agreement or from any statement made pursuant to its agreement, although holders of Bonds may seek a writ of mandamus to compel the City
to comply with its agreement.
26
The continuing disclosure agreement may be amended by the City from time to time to adapt to changed circumstances that arise from a
change in legal requirements, a change in law, or a change in the identity, nature, status, or type of operations of the City, but only if (1) the
provisions, as amended, would have permitted an underwriter to purchase or sell Bonds in the primary offering of the Bonds in compliance
with the Rule, taking into account any amendments or interpretation of the Rule since such offering as well as such changed circumstances and
(2) either (a) the Holders of a majority in aggregate principal amount (or any greater amount required by any other provision of the Ordinance
that authorizes such an amendment) of the Outstanding Bonds consent to such amendment or (b) a person that is unaffiliated with the City
(such as nationally recognized Bond Counsel) determines that such amendment will not materially impair the interest of the holders and
beneficial owners of the Bonds. The City may also amend or repeal the provisions of the continuing disclosure agreement if the SEC amends
or repeals the applicable provisions of the Rule or a court of final jurisdiction enters judgment that such provisions of the Rule are invalid, but
only if and to the extent that the provisions of this sentence would not prevent an underwriter from lawfully purchasing or selling Bonds in the
primary offering of the Bonds. If the City amends its agreement, it must include with the next financial information and operating data
provided in accordance with its agreement described above under "ANNUAL REPORTS" an explanation, in narrative form, of the reasons for the
amendment and of the impact of any change in the type of information and data provided.
COMPLIANCE WITH PRIOR UNDERTAKINGS ... The District has not previously made a continuing disclosure agreement in accordance
with SEC Rule 15c2-12.
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 Developers, the Tax Collector, the Appraisal District and information from 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 such sources, and its inclusion herein is not to be construed as a representation on the part of the District to
such effect. 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 City to render certain professional
services, including advising the City 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. In addition to compiling and editing,
the Financial Advisor has obtained the information set forth herein as indicated.
The Financial Advisor has not, however, independently verified the factual information contained in this Official Statement nor has it
conducted an investigation into the affairs of persons or firms referred to in this Official Statement for the purpose of passing upon the
accuracy or completeness of this Official Statement.
CERTIFICATION OF THE OFFICIAL STATEMENT ... The District, acting through the governing body of the City in its official capacity and
in reliance upon the experts listed above, hereby certifies, as of the date hereof, that to the best of its knowledge and belief, the
information, statements and descriptions pertaining to the District and its affairs herein contain no untrue statements of 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 were made,
not misleading. The information, descriptions and statements concerning entities other than the District, including particularly other
governmental entities, have been obtained from sources believed to be reliable, but the City has made no independent investigation or
verification of such matters and makes no representation as to the accuracy or completeness thereof.
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 in writing on or before such date that less 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 (but not more than 90 days after the date the District delivers
the Bonds) until all of the Bonds have been sold to ultimate customers.
OFFICIAL STATEMENT "DEEMED FINAL" ... For purposes of compliance with Rule 15c2-12 of the Securities and Exchange
Commission, this document, as the same may be supplemented or corrected by the District from time -to -time, may be treated as an
Official Statement with respect to the Bonds described herein "deemed final" by the District as of the date hereof (or of any such
supplement or correction) except for the omission of certain information referred to in the succeeding paragraph.
The Official Statement, 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 that term is defined in Rule
15c2-12.
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UNDERWRITING ... The Underwriter has agreed, subject to certain conditions, to purchase the Bonds from the District, at the initial offering
prices shown on page 2, less an underwriting discount of $ . The Underwriter will be obligated to purchase all of the Bonds if
any Bonds are purchased. The Bonds to be offered to the public may be offered and sold to certain dealers (including the Underwriter and
other dealers depositing Bonds into investment trusts) at prices lower than the public offering prices of such Bonds, and such public offering
prices may be changed, from time to time, by the Underwriter.
The Underwriter has provided the following sentence for inclusion in this Official Statement. The Underwriter has reviewed the information
in the Official Statement in accordance with their responsibilities to investors under the federal securities laws as applied to the facts and
circumstances of this transaction, but the Underwriter do not guarantee the accuracy or completeness of such information.
MISCELLANEOUS ... All estimates, statements and assumptions in this Official Statement and the APPENDICES 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 City Council of the City of Round Rock, as of the date shown on the cover page.
Mayor
ATTEST: City of Round Rock, Texas
City Secretary
City of Round Rock, Texas
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PHOTOGRAPHS OF THE DISTRICT
APPENDIX A
Financial Statement of the Developer
The Developer has delivered the financial information included in this APPENDIX A (the "Financial Information") to the District for
publication in connection with the District's offer and sale of the Bonds. The Financial Information has been included herein solely as
additional information concerning the financial condition and capability of the Developer. Such Financial Information is relevant, among
other reasons, to the Developer's ability to continue developing its land within the District and to pay ad valorem taxes thereon, and to
preserve its financial investment in the District. The Developer is not responsible for, liable for, and has not made any commitment for
payment of the Bonds or other obligations of the District, and the inclusion of the Financial Information herein should not be construed as
an implication to that effect. The Developer has not made any legal commitment to the District or owners of the Bonds to continue
development of land within the District and may sell or otherwise dispose of property within the District, or any other assets, at any time.
Further, the Developer's financial condition is subject to change, and financial information concerning the Developer will not be
provided by the District after the sale of the Bonds. Therefore, the District cautions that the Developer Financial Information should not
be construed or interpreted as an indication of the investment security of the Bonds.
The Developer has represented to the District that the Financial Information relating to it has been prepared from its books and records,
and fairly presents its financial condition. The Developer has also represented to the District that the Financial Information does not fail
to disclose any material fact or omit to state any material facts necessary to make such Financial Information not misleading and that
there has not been any material change in the financial condition of the Developer since the date on which the Financial Information is
presented.
APPENDIX B
SELECTED PROVISIONS OF THE BOND ORDINANCE
APPENDIX C
FORM OF BOND COUNSEL'S OPINION
DATE: January 16, 2007
SUBJECT: City Council Meeting - January 25, 2007
ITEM: 9.C.2. Consider a resolution approving the Preliminary Official Statement
Relating to the Behrens Ranch Public Improvement District Special
Assessment Revenue Bonds, Series 2007 (Behrens Ranch
Subdivision Project) and Authorizing Distribution of Preliminary
Official Statement and Other Matters.
Department: Administration
Staff Person: David Kautz, Assistant City Manager/CFO
Charlie Crossfield, Attorney
Justification:
In April 2000, the City created the Behrens Ranch Public Improvement District (PID). The
City agreed to levy assessments on property within the PID to reimburse the Developer
(Behrens Subdivision, LTD) for the costs of public improvements for the development
including water, wastewater, irrigation, road and drainage facilities. The City agreed to use
its best efforts to sell bonds for reimbursement of the improvements.
Funding:
Cost: Costs are funded in ensuing bond issue
Source of funds: PID Annual Assessment repay the bonds
Outside Resources: McCall Parkhurst, Bond Counsel
First Southwest Company, Financial Advisor
Background Information: N/A
Public Comment: N/A