HomeMy WebLinkAbout2010 $2 Million Unlimited Tax Bonds Series 2010-Fire StationTRANSCRIPT OF PROCEEDINGS
RELATING TO
$2,000,000
TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1
UNLIMITED TAX BONDS,
SERIES 2010
MCCALL, PARKHURST & HORTON L.L.P.
717 N. HARWOOD, SUITE 900
DALLAS, TEXAS 75201
PARKSIDE@MAYFIELDRNCHMUD\UTB\2010: TABLE.CON
$2,000,000
Trophy Club Municipal Utility District No. 1
Unlimited Tax Bonds,
Series 2010
TABLE OF CONTENTS
CONSOLIDATION PROCEEDINGS TAB
Consolidation Agreement between Trophy Club Municipal Utility District No. 1 and
Trophy Club Municipal Utility District No. 2 ................................ 1
Trophy Club Municipal Utility District No. 1 Certified Order Calling May 9, 2009
Consolidation Election.................................................. 2
Trophy Club Municipal Utility District No. 1 Certified Amended and Restated Order
Calling May 9, 2009 Consolidation Election ................................. 3
Trophy Club Municipal Utility District No. 1 Affidavits of Posting of Notice of
Consolidation Election.................................................. 4
Trophy Club Municipal Utility District No. 1 Certified Order Canvassing Election
Returns for May 9, 2009 Consolidation Election ............................. 5
Trophy Club Municipal Utility District No. 1 Consolidation Election Justice
Department Preclearance Letter........................................... 6
Trophy Club Municipal Utility District No. 2 Certified Order Calling May 9, 2009
Consolidation Election.................................................. 7
Trophy Club Municipal Utility District No. 2 Certified Amended and Restated Order
Calling May 9, 2009 Consolidation Election ................................. 8
Trophy Club Municipal Utility District No. 2 Affidavits of Posting of Notice of
Consolidation Election.................................................. 9
Trophy Club Municipal Utility District No. 2 Certified Order Canvassing Election
Returns for May 9, 2009 Consolidation Election ............................. 10
Trophy Club Municipal Utility District No. 2 Consolidation Election Justice
Department Preclearance Letter........................................... 11
PARKSIDE@MAYFIELDRNCHMUD\UTB\2010: TABLE.CON
BOND ELECTION PROCEEDINGS
Trophy Club Municipal Utility District No. 1 Certified Order Calling May 10, 2008 Bond
Election .............................................................
Trophy Club Municipal Utility District No. 1 Certified Order Canvassing Election
Returns for May 10, 2008 Bond Election ..................................
12
13
Trophy Club Municipal Utility District No. 1 Affidavit of Posting Notice of May 10,
2008 Bond Election ................................................... 14
Trophy Club Municipal Utility District No. 1 Affidavit of Publication of Notice of
May 10, 2008 Bond Election ............................................. 15
Justice Department Preclearance Letter..................................... 16
TCEQ APPROVAL PROCEEDINGS
Certified Copy of an Order Approving an Engineering Project and the Issuance of
$2,000,000 Unlimited Tax Bonds ......................................... 17
BASIC FINANCING DOCUMENTS
Order Authorizing the Issuance of $2,000,000 Trophy Club Municipal Utility District
No. 1 Unlimited Tax Bonds, Series 2010; Authorizing the Levy of an Ad Valorem Tax
in Support of the Bonds; Approving an Official Statement; Authorizing the Execution
of a Paying Agent/registrar Agreement; Awarding the Sale of the Bonds; Making Certain
Continuing Disclosure Undertakings under Rule 15c2-12; and Authorizing Other Matters
Related to the Issuance of the Bonds ....................................... 18
Paying Agent/Registrar Agreement........................................ 19
Bond Insurance Policy and Insurance Documents ............................ 20
PUBLICATION AND OFFERING DOCUMENTS
Resolution Authorizing Notice Sale of Trophy Club Municipal Utility District No. 1
Unlimited Tax Bonds, Series 2010, in the Principal Amount of $2,000,000, and Other
Matters Related Thereto.................................................
21
Affidavits of Publication of Notice of Sale of Bonds .......................... 22
Affidavits of Publication of Corrected Notice of Sale of Bonds .................. 23
PARKSIDE@MAYFIELDRNCHMUD\UTB\2010: TABLE.CON
Preliminary Official Statement dated March 9, 2010 .......................... 24
Winning Bid Form..................................................... 25
Official Statement dated March 16, 2010 ................................... 26
DISTRICT CERTIFICATES
General and No-Litigation Certificate ...................................... 27
Federal Tax Certificate ................................................. 28
LEGAL OPINIONS AND CLOSING DOCUMENTS
Opinion of McCall, Parkhurst & Horton L.L.P., Bond Counsel ................. 29
Reliance Letter........................................................ 30
Approving Opinion of the Attorney General of Texas with Comptroller's Registration
Certificate............................................................ 31
Instruction Letter to Paying Agent/Registrar................................. 32
Closing Memorandum .................................................. 33
Receipt for Proceeds ................................................... 34
Paying Agent/Registrar Receipt ........................................... 35
MISCELLANEOUS
Form 8038-G Filing .................................................... 36
Specimen Bond ....................................................... 37
Rating Letters......................................................... 38
DTC Blanket Letter of Representation ..................................... 39
Certificate of Obligor................................................... 40
Closing Certificate..................................................... 41
NEW ISSUE-BOOK·ENTRY-ONLY Ratings:S&P:"MA"(Negative Outlook)(Insured)
"M·"(Underlying)
Moody's:"Aa3"(Negative Outlook)(Insured)
"A2"(Underlying)
(See "RATINGS"and "BOND INSURANCE"herein)
OFFICIAL STATEMENT
Dated March 16,2010
In the opinion of bond Counsel,interest on the Bonds will be excludable from gross income for federal income tax purposes under
statutes,regulations,pUblished rulings and court decisions existing on the date hereof,subject to the matters described under "TAX
MATTERSw herein.
THE DISTRICT HAS DESIGNATED THE BONDS AS "QUALIFIED TAX-EXEMPTOBLIGATlONS".
(See "TAX MATTERS -Qualified Tax-Exempt Obligations for Financiallnstitutionsw herein.)
$2,000,000
TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO.1
(A Political Subdivision ofthe State ofTexas Located in Denton and Tarrant Counties)
UNLIMITEDTAX BONDS,SERIES 2010
Dated Date:April 1,2010 Due:September 1,as shown on Page ii
The Trophy Club Municipal Utility District NO.1 (the "District"or "Issuer")$2,000,000 Unlimited Tax Bonds,Series 2010 (the "Bonds")
are being issued pursuant to the terms and provisions ofan order (the "Order")of the Board of Directors of the District (the "Board")and
in accordance with the Constitution and general laws of the State of Texas (the "State"),inclUding particularly Article XVI,Section 59 of
the Texas Constitution and the general laws of the State of Texas,including Chapters 49 and 54 of the Texas Water Code,as
amended.and an order ofthe Texas Commission on Environmental Quality.The Bonds were authorized by the voters ofthe District at
an election held on May 10,2008.(See "THE BONDS -Authority for Issuance"herein.)
The Bonds,when issued,will constitute direct and general obligations of the District,payable from the proceeds of an annual ad
valorem tax levied against all taxable property located therein,without limitation as to rate or amount.Neither the State of Texas,
Denton or Tarrant Counties,Texas nor any political subdivision or municipality,other than the District shall be obligated to
pay the principal of or interest on the Bonds.Neither the faith and credit nor the taxing power of the State of Texas or Denton
or Tarrant Counties,Texas or any political subdivision or municipality thereof,other than the District,Is pledged to the
payment of the principal of or interest on or the redemption price of the Bonds.(See "THE BONDS -Security for Payment"
herein.)THE BONDS ARE SUBJECT TO SPECIAL INVESTMENT CONSIDERATIONS DESCRIBED HEREIN.(See "INVESTMENT
CONSIDERATIONS·herein.)Bond purchasers are encouraged to read this entire Official Statement prior to making an investment
decision.
Interest on the Bonds will accrue from April 1,2010 (the "Dated Date")and is payable March 1,2011,and each September 1 and
March 1 thereafter until the earlier of maturity or redemption,and will be calculated on the basis of a 36Q-day year of twelve 3Q-day
months.The Bonds will be issued in fully registered form only,without coupons,in denominations of $5,000 or any integral multiple
thereof,and when issued,will be registered in the name of Cede &Co.,as registered owner and nominee for The Depository Trust
Company rOTC"),New York,New York,acting as securities depository for the Bonds until DTC resigns or is discharged.The Bonds
initially will be available to purchasers in book-entry form only.So long as Cede &Co.,as the paying agent to DTC,is the registered
owner of the Bonds,principal of and interest on the Bonds will be payable by the paying agent to DTC,which will be solely responsible
for making such payment to the beneficial owners of the Bonds.The initial paying agenUregistrar for the Bonds shall be The Bank of
New York Mellon Trust Company,N.A.,Dallas,Texas (the ·Paying Agent").
Proceeds from the sale of the Bonds are being used to (i)construct and equip a new fire station and (ii)pay the costs related to the
issuance of the Bonds.(See "THE BONDS -Use of Bond Proceeds"herein.)
The District reserves the right to redeem,prior to maturity,in integral multiples of $5,000,those Bonds maturing on and after
September 1,2021,in whole or from time to time in part,on September 1,2020,and on any date thereafter at a price of par piUS
accrued interest from the most recent interest payment date to the date fixed for redemption.In addition,the Bonds maturing
September 1,2027,September 1,2029 and September 1,2031 are subject to mandatory sinking fund redemption,as further described
herein.(See "THE BONDS -Redemption Provisionsw herein.)
After requesting competitive bids for purchase of the Bonds,the District has accepted the lowest bid to purchase the Bonds,bearing
interest as shown,at a price of 100%of par plus accrued interest to the date of delivery,resulting in a net interest cost rate to the
District of 4.156986%.
The scheduled payment of principal of and interest on the Bonds when due will be guaranteed under an insurance policy to be issued
concurrently with the delivery of the Bonds by ASSURED GUARANTY MUNICPAL CORP.(FORMERLY KNOWN AS FINANCIAL
SECURITY ASSURANCE INC.)("Assured Guaranty Municipal"or "AGM").(See "BOND INSURANCE"herein.)
~URED
GUARANTY'
MUNICIPAL
STATED MATURITY SCHEDULE
(See Page i1)
The Bonds are offered for delivery,when,as and if issued and received by the initial purchaser (the "Purchaser?and subject to the approving
opinion of the Attomey General ofthe State of Texas and the approval ofcertain legal matters by McCall,ParKhurst &Horton L.L.P.,Dallas,
Texas,Bond Counsel.Delivery ofthe Bonds through DTC in Dallas,Texas is expected on or about April 15,2010.
STATED MATURITY SCHEDULE
(Due September 1)
Base CUSIP -897059 (a)
Stated
Maturity Principal Rate Yield CUSIP
Due 9-1 Amount (%)(%)Suffix(a)
2012 $65,000 3.50 1.00 DU2
2013 65,000 3.50 1.20 DVO
2014 70,000 3.50 1.50 DW8
2015 70,000 3.50 1.90 DX6
2016 75,000 3.50 2.40 DY4
2017 80,000 3.50 2.75 DZ 1
2018 85,000 3.50 3.00 EA5
2019 85,000 3.50 3.20 EB3
2020 90,000 3.50 3.35 EC 1
2021 95,000 3.50 3.50 ED9
2022 100,000 5.00 3.60 EE 7
2023 105,000 5.00 3.70 EF 4
2024 110,000 5.00 3.80 EG2
2025 115,000 4.00 3.90 EH 0
$240,000 4.10%Term Bond due September 1,2027 Price to Yield 4.15%EK 3(8)
$265,000 4.20%Term Bond due September 1,2029 Price to Yield 4.25%EM 9(a)
$285,000 4.25%Term Bond due September 1,2031 Price to Yield 4.35%EP 2 (a)
(8)CUSIP is a registered trademark of the American Bankers Association.CUSIP data herein is provided by Standard and Poor's
CUSIP Service Bureau,a Standard &Poor's Financial Services LLC business.This data is not intended to create a database and
does not serve in any way as a substitute for the CUSIP Services.Neither the District nor the Financial Advisor is responsible for
the selection or the correctness ofthe CUSIP numbers set forth herein.
ii
TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO.1
BOARD OF DIRECTORS
Jim Budarf
Dean Henry
Gary Cantrell
Kevin Carr
Jim Hase
James C.Thomas
Joseph Boclair
Robert Fair
Steven Kohs
Neil Twomey
Position
Joint President
Joint President
Joint Vice President
Joint Vice President
Joint Secretary
Joint Secretary
Director
Director
Director
Director
Two-Year Term·
Expires.May
2010
2010
2010
2010
2010
2010
2010
2010
2010
2010
Occupation
Retired
Retired
Retired
Self Employed
Retired
Retired
Alcon Research
Retired
Retired
Retired
•Due to the May 2009 consolidation of Trophy Club Municipal Utility District No.1 and Trophy Club Municipal Utility
District No.2,all officers ofeach District continue to actjointly as officers of the consolidated Trophy Club Municipal Utility
District No.1 until the next general election.At the May 8,2010 election,all five director positions shall be subject to
election,and the terms ofsuch seats shall be staggered,as provided by law for a confirmation and direction election.
DISTRICT PERSONNEL AND ADVISORS
General Manager Robert Scott .
Trophy Club,Texas
Director of Finance Kathy DuBose
Trophy Club,Texas
Attorneys for the District.,Bob West
Whitaker Chalk Swindle &Sawyer,LLP
Fort Worth,Texas
Pamela Harrell Liston
The Liston Law Firm,P.C.
Rowlett,Texas
Financial Advisor Southwest Securities
Dallas,Texas
Bond Counsel McCall,Parkhurst &Horton L.L.P.
Dallas,Texas
Independent Auditors Weaver &Tidwell,LLP
Dallas,Texas
Professional Engineers TMBP Engineering
Dallas,Texas
Tax Assessor -Collector Denton County Texas
Tarrant County Texas
Chief Appraiser Denton County Texas
Tarrant County Texas
ForAdditional Information Please Contact:
Mr.Robert Scott
.District Manager
100 Municipal Drive
Trophy Club,Texas 76262
(682)831-4610
iii
Mr.Dan A.Almon
Senior Vice President
Southwest Securities,Inc.
1201 Elm Street,Suite 3500
Dallas,Texas 75270
(214)859-9452
TABLE OF CONTENTS
Governance 14
General 14
Location 14
Population 14
Topography and Drainage 14
Shopping and Commercial Facilities 14
Fire Protection 15
Police Protection 15
Schools 15
Recreational Opportunities 15
Status of Development of the District 15
Public Improvement District Description 16
INVESTMENT AUTHORITY AND INVESTMENT
PRACTICES OF THE DISTRICT..16
Current Investments 17
TAX DATA 18
District Bond Tax Rate Limitation 18
Maintenance and Operations Tax 18
Overlapping Taxes 18
TAXING PROCEDURES 18
Authority to Levy Taxes 18
Property Tax Code and County-Wide Appraisal
District 18
Valuation of Property for Taxation 19
Notice and Hearing Procedures 20
District and Taxpayer Remedies 20
Levy and Collection of Taxes 20
District's Rights in the Event of Tax Delinquencies 20
LEGAL MAnERS 21
Legal Opinions 21
Litigation 21
No-Litigation Certificate 21
No Material Adverse Change 21
TAX MAnERS 22
Opinion 22
Federal Income Tax Accounting Treatment of Original
Issue Discount 22
Collateral Federal Income Tax Consequences 23
State,Local and Foreign Taxes 23
Qualified Tax-Exempt Obligations for Financial·
Institutions 23
CONTINUING DISCLOSURE OF INFORMATION 24
Annual Reports 24
Material Event Notices 24
Availability of Information 24
Limitations and Amendments 24
Compliance with Prior Agreements 25
FINANCIAL ADVISOR 25
OFFICIAL STATEMENT 25
Updating the Official Statement During Underwriting
Period 25
Forward-Looking Statements Disclaimer 25
OTHER MAnERS 26
Initial Purchaser 26
Legal Investment and Eligibility to Secure Public
Funds in Texas 26
Registration and Qualification of Bonds for Sale 26
Absence of Litigation 26
Certification as to Official Statement...26
Concluding Statement 27
Appendix A
Appendix B
Appendix C
Appendix D
Appendix E
Financial Information of the Issuer
General Information Regarding the District
Fonn of Legal Opinion of Bond Counsel
The Issuer's General Purpose Audited Financial Statements for the Year Ended September 30,2009
Specimen Municipal Bond Insurance Policy
BOARD OF DIRECTORS iii
DISTRICT PERSONNEL AND ADVISORS iii
TABLE OF CONTENTS iv
USE OF INFORMATION IN THE OFFICIAL STATEMENT v
SALE AND DISTRIBUTION OF THE BONDS vi
Award of the Bonds vi
Issue Prices and Marketability vi
INVESTMENT CONSIDERATIONS vi
SELECTED DATA FROM THE OFFICIAL STATEMENT..vii
SELECTED FINANCIAL INFORMATION viii
OFFICIAL STATEMENT 1
INTRODUCTION 1
THE BONDS 1
General Description 1
Use of Bond Proceeds 1
Authority for Issuance 1
Texas Commission on Environmental Quality
Approval 2
Security for Payment 2
Payment Record 2
Flow of Funds and Investment of Funds 3
Redemption Provisions 3
Termination of Book-Entry-Only System .4
Defeasance of Outstanding Bonds 5
Paying Agent/Registrar 5
Record Date 6
Issuance of Additional Debt...6
Specific Tax Covenants 6
Additional Covenants 6
Remedies in Event of Default...6
Amendments to the Order 6
SOURCES AND USES OF FUNDS .7
RATINGS 7
BOND INSURANCE 7
Bond Insurance Policy 7
Assured Guaranty Municipal Corp.(Fonnerly Known
as Financial Security Assurance Inc.)7
BOND INSURANCE RISK FACTORS 9
General 9
Claims-Paying Ability and Financial Strength of
Municipal Bond Insurers 9
BOOK-ENTRY-ONLY SYSTEM 9
Use ofCertain Terms in Other Sections ofthis Official
Statement 11
INVESTMENT CONSIDERATIONS 11
General 11
Approval of the Bonds 11
Marketability 11
Tax Collections and Foreclosure Remedies 12
Consolidation 12
Abolition 12
Alteration of Boundaries 12
Registered Owners'Remedies 12
Bankruptcy Limitation to Registered Owners'Rights 12
The Effect of the Financial Institutions Act of 1989 on
Tax Collections of the District...13
Continuing Compliance with Certain Covenants 13
Future Debt 13
THE DISTRICT 13
Creation ofthe District...13
The cover page,subsequentpages hereofandthe schedules andappendices attachedhereto,are partofthis Official Statement.
iv
USE OF INFORMATION IN THE OFFICIAL STATEMENT
No dealer,broker,salesman or other person has been authorized to give any information or to make any representations other
than those contained in this Official Statement,and if given or made,such other information or representations must not be
relied upon as having been authorized by the District.
This Official Statement does not alone constitute,and is not authorized by the District for use in connection with,an offer to sell
or the solicitation of any offer to buy in any state in which such offer or solicitation is not authorized or in which the person
making such offer or solicitation is not qualified to do so or to any person to whom it is unlawful to make such offer or solicitation.
All ofthe summaries of the statutes,orders,resolutions,contracts,records,and engineering and other related reports set forth in
the Official Statement are made subject to all of the provisions of such documents.These summaries do not purport to be
complete statements of such provisions,and reference is made to such documents,copies of which are available from the
Financial Advisor,upon the payment of reasonable duplication costs.
This Official Statement contains,in part,estimates,assumptions and matters of opinion which are not intended as statements of
fact,and no representation is made as to the correctness of such estimates,assumptions,or matters of opinion,or as to the
likelihood that they will be realized.Any information and expressions of opinion herein contained are subject to change without
notice,and neither the delivery of this "Official Statement"nor any sale made hereunder shall,under any circumstances,create
any implication that there has been no change in the affairs of the District or the other matters described herein since the date
hereof.However,the District has agreed to keep this "Official Statement"current by amendment or sticker to reflect material
changes in the affairs of the District,and to the extent that information actually comes to its attention,other matters described in
the "Official Statement"until delivery of the Bonds to the Initial Purchaser and thereafter only as specified in "OFFICIAL
STATEMENT -Updating the Official Statement During Underwriting Period"and "CONTINUING DISCLOSURE OF
INFORMATION."
NEITHER THE DISTRICT NOR THE FINANCIAL ADVISOR MAKES ANY REPRESENTATION OR WARRANTY WITH
RESPECT TO THE INFORMATION CONTAINED IN THIS OFFICIAL STATEMENT REGARDING THE DEPOSITORY TRUST
COMPANY ("DTC")OR ITS BOOK-ENTRY-ONLY SYSTEM OR ANY INFORMATION UNDER THE CAPTION "BOND
INSURANCE"REGARDING ASSURED GUARANTY MUNICIPAL CORP.("ASSURED GUARANTY MUNICIPAL"OR "AGM")
OR ITS POLICY,AS SUCH INFORMATION HAS BEEN FURNISHED BY DTC AND AGM,RESPECTIVELY.
Assured Guaranty Municipal Corp.(formerly known as Financial Security Assurance Inc.)("AGM")makes no representation
regarding the Bonds or the advisability of investing in the Bonds.In addition,AGM has not independently verified,makes no
representation regarding,and does not accept any responsibility for the accuracy or completeness of this Official Statement or
any information or disclosure contained herein,or omitted herefrom,other than with respect to the accuracy of the information
regarding AGM supplied by AGM and presented under the heading "BOND INSURANCE"(but excluding the information under
the heading "BOND INSURANCE -Introduction")and "APPENDIX E -SPECIMEN MUNICIPAL BOND INSURANCE POLICY".
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 JURISDICTION IN
WHICH THESE SECURITIES HAVE BEEN REGISTERED,OR EXEMPTED SHOULD NOT BE REGARDED AS A
RECOMMENDATION THEREOF.
THIS OFFICIAL STATEMENT CONTAINS "FORWARD-LOOKING"STATEMENTS WITHIN THE MEANING OF SECTION 21E
OF THE SECURITIES EXCHANGE ACT OF 1934,AS AMENDED.SUCH STATEMENTS MAY INVOLVE KNOWN AND
UNKNOWN RISKS,UNCERTAINTIES,AND OTHER FACTORS WHICH MAY CAUSE THE ACTUAL RESULTS,
PERFORMANCE,AND ACHIEVEMENTS TO BE DIFFERENT FROM FUTURE RESULTS,PERFORMANCE,AND
ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS.INVESTORS ARE
CAUTIONED THAT THE ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE SET FORTH IN THE FORWARD-
LOOKING STATEMENTS.
[The remainder ofthis page is intentionally left blank.]
v
SALE AND DISTRIBUTION OF THE BONDS
Award of the Bonds
After requesting competitive bids for the Bonds,the District accepted the bid resulting in the lowest net interest cost,which bid
was tendered by Southwest Securities (the "Initial Purchaser")bearing the lowest interest rates shown on the cover page hereof,
at a price of 100%of the par value thereof plus accrued interest to the date of delivery which resulted in a net interest cost of
4.156986%as calculated pursuant to Texas Government Code Chapter 1204,as amended.The initial reoffering yields were
supplied to the District by the Purchaser.The initial reoffering yields shown on the cover page will produce compensation to the
Initial Purchaser of approximately $15,237.00,after the payment of the insurance premium.
Issue Prices and Marketability
The delivery of the Bonds is conditioned upon the receipt by the District of a certificate executed and delivered by the Initial
Purchaser on or before the date of delivery of the Bonds stating the prices at which a substantial amount of the Bonds of each
maturity has been sold to the public.For this purpose,the term "public"shall not include any person who is a bond house,
broker or similar person acting in the capacity of underwriter or wholesaler.Otherwise,the District has no understanding with the
Initial Purchaser regarding the reoffering yields or prices of the Bonds.Information concerning reoffering yields or prices is the
responsibility ofthe Initial Purchaser.
The prices and other terms with respect to the offering and sale of the Bonds may be changed from time-to time by the Initial
Purchaser after the Bonds are released for sale,and the Bonds may be offered and sold at prices other than the initial offering
prices,including sales to dealers who may sell the Bonds into investment accounts.In connection with the offering of the Bonds,
the Initial Purchaser may over -allot or effect transactions which stabilize or maintain the market prices or the Bonds at levels
above those which might otherwise prevail in the open market.Such stabilizing,if commenced,may be discontinued at any
time.
The District has no control over trading of the Bonds in the secondary market.Moreover,there is no guarantee that a secondary
market will be made in the Bonds.In such a secondary market,the difference between the bid and asked price of utility district
bonds may be greater than the difference between the bid and asked price of bonds of comparable maturity and quality issued
by more traditional municipal entities,as bonds of such entities are more generally bought,sold or traded in the secondary
market.
INVESTMENT CONSIDERATIONS
The purchase and ownership of the Bonds involve certain investment considerations and all prospective purchasers are urged to
examine carefully the Official Statement,including particularly the section captioned "INVEWSTMENT CONSIDERATIONS",
with respect to the investment security ofthe Bonds.
[The remainder ofthis page is intentionally left blank.]
vi
SELECTED DATA FROM THE OFFICIAL STATEMENT
The following material is qualified in its entirety by the more detailed information and financial statements appearing elsewhere in this Official
Statement.The offering of the Bonds to potential investors is made only by means of this entire Official Statement.No person is authorized to
detach this summary from this Official Statement or to otherwise use it without the entire Official Statement.
The Issuer
The Bonds
Security for Payment
Paying Agent/Registrar
Description
Redemption Provisions
Tax Matters
Use of Proceeds
Bond Insurance
Ratings
Book-Entry-QnlySystem
Future Bond Issues
Payment Record
Delivery
Legality
The Trophy Club Municipal Utility District No.1 (the "District"or "Issuer")is a political subdivision ofthe State of
Texas located in Denton and Tarrant Counties,Texas.The District was created as a municipal utility district
pursuant to Chapter 54 of the Texas Water Code and is a conservation and redamation district in accordance
with Article XVI,Section 59 of the Texas Water Code.The District has also adopted a fire protection plan under
Section 50.055 of the Texas Water Code,now codified as Subchapter L of Chapter 49 of the Texas Water
Code,pursuant to the Order of the Texas Water Commission of August 22,1983.In July of 2009,
documentation was submitted to the Texas Commission on Environmental Quality ("TCEQ")regarding the
consolidation of Trophy Club Municipal Utility District Nos.1 and 2 as of a May 9,2009 election.(See "THE
DISTRICT'and "APPENDIX B -GENERAL INFORMATION REGARDING THE DISTRICT'herein.)
The Bonds are being issued pursuant to the Constitution and general laws of the State of Texas,including
particularly Article XVI,Section 59 of the Texas Constitution and the general laws of the State of Texas,
including Chapters 49 and 54 ofthe Texas Water Code,as amended,an order ofthe Texas Commission on
Environmental Quality,and an order (the "Order")adopted by the Board of Directors (the "Board")of the
District.The Bonds were authorized by the voters of the District at an election held May 10,2008.(See
"THE BONDS -Authority for Issuance"herein.)
The Bonds,when issued,will constitute direct and general obligations of the District,payable from the
proceeds of an annual ad valorem tax levied against all taxable property located therein,without limitation
as to rate or amount.Neither the State ofTexas,Denton or Tarrant Counties,Texas nor any political
subdivision or municipality,other than the District shall be obligated to pay the principal of or
interest on the Bonds.Neither the faith and credit nor the taxing power of the State of Texas or
Denton or Tarrant Counties,Texas or any political subdivisions or municipality thereof,other than
the District,is pledged to the payment of the principal of or interest on or the redemption price of
the Bonds.(See "THE BONDS -Securityfor Payment"herein.)
The initial Paying AgenURegistrarfor the Bonds is The Bank of New York Mellon Trust Company,N.A.,
Dallas,Texas
The Bonds in the aggregate principal amount of $2,000,000 mature on September 1 of each year in the
amounts as set forth on page ii of this Official Statement.Interest accrues from April 1,2010 (the "Dated
Date")atthe rates per annum set forth page ii hereofand is payable March 1,2011 and each September 1 and
March 1 thereafter until maturity or earlier redemption.The Bonds are offered in fully registered form in integral
multiples of$5,000 for anyone maturity.(See "THE BONDS -General Description"herein.)
Bonds maturing on and after September 1,2021 are subject to redemption in whole or from time to time in
part at the option of the District on September 1,2020,and on any date thereafter,at par plus accrued
interest from the most recent interest payment date to the date of redemption.In addition,the Bonds
maturing September 1,2027,September 1,2029 and September 1,2031 are subject to mandatory sinking
fund redemption,as further described herein.
In the opinion of Bond Counsel,the interest on the Bonds will be excludable from gross income ofthe owners
thereof for purposes of federal income laxation under existing law subject to matters discussed herein under
"TAX MAnERS".(See ''TAX MAnERS"and Appendix C -"Form of Legal Opinion ofBond Counsel"herein.)
Proceeds from the sale of the Bonds are being used to (i)construct and equip a new fire station and (ii)pay
the costs related to the issuance of the Bonds.(See "THE BONDS -Use of Bond Proceeds"herein.)
The scheduled payment of principal of and interest on the Bonds when due will be guaranteed under an
insurance policy to be issued concurrently with the delivery of the Bonds by ASSURED GUARANTY
MUNICIPAL CORP.(FORMERLY KNOWN AS FINANCIAL SECURITY ASSURANCE INC.)("Assured
Guaranty Municipal"or "AGM")(See "BOND INSURANCE"and "BOND INSURANCE RISK FACTORS"
herein.)
Moody's Investors Service,Inc.("Moody's")and Standard &Poor's Ratings Services,a Standard &Poor's
Financial Services LLC business ("S&P")are expected to assign ratings of "Aa3"(Negative Outlook)and
"AAA"(Negative Outlook),respectively,to the Bonds with the understanding that,concurrently with the
delivery of the Bonds,a municipal bond insurance policy will be issued by Assured Guaranty Municipal.
Moody's and S&P have assigned underlying ratings of "A2"and "AA-",respectively,to the Bonds.An
explanation of the significance of such ratings may be obtained from the rating agency.(See "RATINGS"
herein.)
The Issuer intends to utilize the Book-Entry-Only System ofThe Depository Trust Company,New York,
New York relating to the method and timing of payment and the method and transfer relating to the
Bonds.(See "BOOK-ENTRY-ONLY SYSTEM"herein.)
The Bonds were authorized at an election held in the District on May 10,2008.After the sale of the Bonds,
the District will have no authorized but unissued bonds for fire protection remaining.(See "APPENDIX A -
TABLE 16"herein).The District has no plans to issue additional bonds within the next twelve months.
The Issuer has never defaulted in the timely payment of principal of or interest on its general obligation
indebtedness.
When issued,anticipated on oraboutApril 15,2010.
Delivery ofthe Bonds is subject to the approval by the Attorney General of the State ofTexas and the rendering
ofan opinion as to legality McCall,Parkhurst &Horton L.L.P.,Bond Counsel,Dallas,Texas.
vii
SELECTED FINANCIAL INFORMATION
2009 Estimated Net Taxable Assessed Valuation
Gross Debt Principal Outstanding (after issuance of the Bonds)
Ratio of Gross Debt Principal to 2009 Taxable Assessed Valuation
Debt Service Fund Balance as of January 31,2010 (unaudited)
2009-2010 Tax Rate
Operations
Fire Protection
Debt Service
Total
$0.02714
0.10914
0.06872
$1,023,493,111
$9,290,000
0.83%
$979,124
$0.20500
(a)
Average Percentage ofTotal Tax Collections -Tax Years 2004-2008
Projected Average Annual Debt Service Requirement (2011-2031)
Ofthe Bonds and the Outstanding Bonds ("Projected Average Requirement")
Tax Rate Required to Pay Projected Average Annual Requirement Based Upon Current
Net Taxable Assessed Valuations at 99%Collections
Projected Maximum Annual Debt Service Requirement (2011)of the Bonds and
The Outstanding Bonds ("Projected Maximum Requirement")
Tax Rate Required to Pay Projected Maximum Annual Requirement Based Upon Current
Net Taxable Assessed Valuations at 99%collections
Estimated 2009 population
99.72%(b)
$567,820
$0.05604/$100 AV
$1,494,559
$0.1475/$100 AV
7,441
ca)2009 Net Taxable Valuation does not include property under protest or values for incomplete accounts.(See "TAXING
PROCEDURES·herein.)
(a)Historical tax collection information for Tax Years 2004-2008 represents the combined totals from two separate entities
(Trophy Club MUD No.1 and Trophy Club MUD No.2).
viii
OFFICIAL STATEMENT
relating to
$2,000,000
TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO.1
(A Political Subdivision ofthe State of Texas Located in Dallas County,Texas)
UNLIMITED TAX BONDS,SERIES 2010
INTRODUCTION
This Official Statement provides certain information in connection with the issuance by the Trophy Club Municipal Utility District
NO.1 (the "District"or "Issuer")of its $2,000,000 Unlimited Tax Bonds,Series 2010 (the "Bonds").
The Bonds are being issued pursuant to Article XVI,Section 59 of the Texas Constitution and the general laws of the State of
Texas,including Chapters 49 and 54 of the Texas Water Code,as amended,an order of the Texas Commission on
Environmental Quality,and an order (the "Order")adopted by the Board of Directors (the "Board")of the District,and will
constitute direct and general obligations of the District,payable from the proceeds of an ad valorem tax levied against all taxable
property located therein,without limitation as to rate or amount.
Unless otherwise indicated,capitalized terms used in this Preliminary Official Statement have the same meaning assigned to
such terms in the Order.
Included in this Preliminary Official Statement are descriptions of the Bonds,the Order,and certain information about the District
and its finances.ALL DESCRIPTIONS OF DOCUMENTS CONTAINED HEREIN ARE SUMMARIES ONLY AND ARE
QUALIFIED IN THEIR ENTIRETY BY REFERENCE TO EACH SUCH DOCUMENT.Copies of such documents may be
obtained from the District or Financial Advisor.
THE BONDS
General Description
The $2,000,000 Trophy Club Municipal Utility District No.1 Unlimited Tax Bonds,Series 2010 will bear interest from
April 1,2010 (the "Dated Date")and will mature on September 1 of the years and in the principal amounts,and will bear interest
at the rates per annum,set forth on page ii hereof.
Interest on the Bonds will accrue from the Dated Date and is payable March 1,2011,and each September 1 and March 1
thereafter until the earlier of maturity or redemption,and will be calculated on the basis of a 360-day year of twelve 30-day
months.The Bonds will be issued in fully registered form only,without coupons,in denominations of $5,000 or any integral
multiple thereof.The initial paying agent for the Bonds shall be The Bank of New York Mellon Trust Company,NA,Dallas,
Texas ("Paying Agent").The principal of and interest on the Bonds shall be payable without exchange or collection charges,in
any coin or currency of the United States of America which,on the date of payment,is legal tender for the payment of debt due
the United States of America.
If the specified date for any payment of principal (or Redemption Price)of or interest on the Bonds is a Saturday,Sunday,or
legal holiday or equivalent for banking institutions generally in the city in which Designated Payment I Transfer Office of the
Paying Agent is located,such payment may be made on the next succeeding day which is not one of the foregoing days without
additional interest and with the same force and effect as if made on the specified date for such payment.
Initially,the Bonds will be registered and delivered only to Cede &Co.,the nominee of The Depository Trust Company ("DTC")
pursuant to the Book-Entry-Only System described herein.No physical delivery of the Bonds will be made to the beneficial
owners.Principal of and interest on the Bonds will be payable by the Paying Agent to Cede &Co.,which will distribute the
amounts paid to the participating members of DTC for subsequent payment to the beneficial owners of the Bonds.(See
"BOOK-ENTRY-ONLY SYSTEM"HEREIN.)
Use of Bond Proceeds
Proceeds from the sale of the Bonds are being used to (i)construct and equip a new fire station and (ii)pay the costs related to
the issuance of the Bonds.(See "THE PROJECT"herein.)
Authority for Issuance
The Bonds were authorized at an election held on May 10,2008.
The Bonds are issued by the District pursuant to the terms and provisions of the Order,Article XVI,Section 59 of the Texas
Constitution and the general laws of the State of Texas,including Chapters 49 and 54 of the Texas Water Code,as amended,
and an order of the Texas Commission on Environmental Quality.
1
Texas Commission on Environmental Quality Approval
On January 28,2010,the Texas Commission on Environmental Quality ("TCEQ")issued a Commission Order ("TCEQ Order")
approving the project and the issuance of the Bonds.The approval order included the following information:
"....Pursuant to TEX.WATER CODE Section 49.181,the engineering project for Trophy Club Municipal Utility District
No.1 of Denton and Tarrant Counties is hereby approved together with the issuance of $2,000,000 of bonds at a
maximum net effective interest rate of 5.72%.The District is directed not to expend $1,830,809 ($1,664,372
construction plus $116,437 contingencies)of the bond issue proceeds approved herein for Trophy Club Fire Station
No.1 pending District Board receipt of plans and specifications approved by all entities with jurisdiction and
construction documents....The approval of the sale of these bonds herein shall be valid for one year from the date of
this Order unless extended by written authorization ofthe Commission staff......
The TECQ further ordered,to enable the Commission to carry out the responsibilities imposed by Texas Water Code Sections
49.181-182,that the District shall:(1)fumish the TCEQ copies of all bond issue project construction documentation outlined
under Title 30 of the Texas Administrative Code,Section 293.62,including detailed progress reports and as-built plans required
by Texas Water code Section 49.277(b),to the extent not already been submitted;(2)notify the Utilities and Districts Section of
the TCEQ and obtain approval of the TCEQ for any substantial alterations in the engineering project approved herein before
making such alterations;and (3)ensure,as required by Texas Water Code Section 49.277(b),that all construction financed with
the proceeds from the sale of bonds is completed by the construction contractor according to the plans and specifications
contracted.
Security for Payment
The Bonds will constitute valid and legally binding direct obligations of the District payable from the proceeds of a continuing
direct annual ad valorem tax levied by the District against all taxable property located therein,without legal limit as to rate or
amount.The Order irrevocably pledges such ad valorem taxes to the payment ofthe principal of and interest on the bonds while
the same remain outstanding.Neither the State of Texas,Denton or Tarrant Counties,Texas nor any political subdivision
or municipality,other than the District shall be obligated to pay the principal of or interest on the Bonds.Neither the
faith and credit nor the taxing power of the State of Texas or Denton or Tarrant Counties,Texas or any political
subdivision or municipality thereof,other than the District,is pledged to the payment of the principal of or interest on
or the redemption price of the Bonds.
Tax Pledge:The Board covenants in the Order that,while any ofthe Bonds are outstanding and the District is in existence,it will
levy and assess a continuing ad valorem tax upon each $100 valuation of taxable property within the District at a rate from year
to year sufficient,full allowance being made for anticipated delinquencies,together with revenues and receipts fl:om other
sources which are legally available for such purposes,to pay interest on the Bonds as it becomes due,to provide for the
payment of principal of the Bonds when due or the redemption price at any earlier required redemption date,to pay when due
any other contractual obligations of the District payable in whole or in part from taxes,and to pay the expenses of assessing and
collecting such tax.The Board additionally covenants in the Order to timely assess and collect such tax.The net proceeds from
taxes levied to pay debt service on the Bonds are required to be placed in a special account of the District designated its
"Interest and Sinking Fund"for the Bonds.
Abolition:Under Texas law,If a district is located wholly in two or more municipalities and in unincorporated area,the district
may be abolished by agreement among the district and all of the municipalities in which parts of the district are located.The
abolition agreement must provide for the distribution of assets and liabilities (including the Bonds)of the abolished district.The
agreement must also provide for the distribution among one or more of the municipalities the pro rata assets and liabilities
located in the unincorporated area and must provide for service to customers in unincorporated areas in the service area of the
abolished district.The municipality that provides the service in the unincorporated area may charge its usual and customary
fees and assessments to the customers in that area.No representation is made concerning the likelihood of abolition or the
ability of the municipalities which contain parts of the District to make debt service payments on the Bonds should abolition
occur.
Consolidation:A district (such as the District)has the legal authority to consolidate with other municipal utility districts and in
connection therewith,to provide for the consolidation of its assets, such as cash and the utility system,with the water and
wastewater systems of districts with which it is consolidating as well as its liabilities (which would include the Bonds).The
District is the resulting entity from a consolidation in May 2009 of Trophy Club Municipal Utility District No.1 and Trophy Club
Municipal Utility district NO.2 (see "THE DISTRICr).
Payment Record
The District has never defaulted on the timely payment of principal of and interest on its general obligation indebtedness.
2
Flow of Funds and Investment of Funds
The Bond Order creates an Interest and Sinking Fund and a Construction Fund.
Each fund shall be kept separate and apart from all other funds of the District.Any cash balance in any fund must be
continuously secured,to the extent that the United States or an instrumentality of the United States does not insure the cash
balance,by a valid pledge to the District of securities eligible under the laws of Texas to secure the funds of municipal utility
districts having an aggregate market value,exclusive of accrued interest,at all times equal to the cash balance in the fund to
which such securities are pledged.
Interest and Sinking Fund:The Bond Order establishes the Interest and Sinking Fund to be used to pay principal and interest on
the Bonds.The Bond Order requires that the District deposit to the credit of the Interest and Sinking Fund (i)from the delivery of
the Bonds to the initial purchaser,the amount received from proceeds of the Bonds representing accrued interest,(ii)District ad
valorem taxes (and penalties and interest thereon)levied to pay debt service requirements on the Bonds,and (iii)such other
funds as the Board shall,at its option,deem advisable.The Bond Order requires that the Interest and Sinking Fund be applied
solely to provide for the payment of the principal or redemption price of and interest on the Bonds when due,and to pay fees to
the Paying Agent when due.
Construction Fund:The Construction Fund is the capital improvements fund of the District.The Bond Order requires the District
to deposit to the credit of the Construction Fund the balance of the proceeds of the Bonds remaining after the deposits to the
Interest and Sinking Fund.The Construction Fund may be applied solely to (i)pay the costs necessary or appropriate to
accomplish the purposes for which the Bonds are issued,(ii)pay the costs of issuing the Bonds and (iii)the extent the proceeds
of the Bonds and investment income attributable thereto are in excess of the amounts required to construct and equip the fire
station as approved by the TCEQ,then in the discretion of the District to transfer such unexpended proceeds or income to the
Interest and Sinking Fund.
Redemption Provisions
Optional Redemption:The Bonds maturing on or after September 1,2021,are subject to redemption prior to maturity at the
option of the District,in whole or from time to time in part,on September 1,2020,and on any date thereafter,at a redemption
price equal to the principal amount thereof plus accrued interest from the most recent interest payment date to the date fixed for
redemption.
Mandatory Sinking Fund Redemption:The Bonds maturing September 1,2027,September 1,2029 and September 1,2031
(the "Term Bonds")are subject to mandatory sinking fund redemption in part prior to their stated maturities,and will be
redeemed by the Issuer at the redemption prices equal to the principal amounts thereof plus interest accrued thereon to the
redemption dates,on the dates and in the principal amounts shown in the following schedule:
Term Bond Due
September 1,2027
Redemption Date Principal Amount
September 1,2026 $115,000
September 1,2027*125,000
Term Bond Due
September 1,2029
Redemption Date Principal Amount
September 1,2028 $130,000
September 1,2029*135,000
*Represents Maturity
Term Bond Due
September 1,2031
Redemption Date Principal Amount
September 1,2030 $140,000
September 1,2031*145,000
Approximately forty-five (45)days prior to the mandatory redemption date,the Paying Agent/Registrar shall select by lot the
numbers of the Term Bonds to be redeemed.Any Term Bond not selected for prior redemption shall be paid on the date of its
Stated Maturity.
The principal amount of the Term Bonds for a given Stated Maturity required to be redeemed pursuant to the operation of such
mandatory redemption provisions shall be reduced,at the option of the Issuer,by the principal amount of Term Bonds of like
Stated Maturity which,at least 45 days prior to the mandatory redemption date,(1)shall have been defeased or acquired by the
Issuer and delivered to the Paying Agent/Registrar for cancellation,or (2)shall have been purchased and canceled by the
Paying Agent/Registrar at the request of the Issuer at a price not exceeding the principal amount of such Bonds plus accrued
interest to the date of purchase,(3)have been redeemed pursuant to the optional redemption provisions set forth above and not
theretofore credited against a mandatory sinking fund redemption.
3
Notice ofRedemption:Not less than thirty (30)days prior to a redemption date for the Bonds,the District shall cause a notice of
such redemption to be sent by United States mail,first-class postage prepaid,to the registered owners of each Bond or a portion
thereof to be redeemed at its address as it appeared on the registration books of the Paying Agent/Registrar at the close of
business on the business day next preceding the date of mailing of such notice.With respect to any optional redemption of the
Bonds,unless certain prerequisites to such redemption required by the Order have been met and money sufficient to pay the
principal of and premium,if any,and interest on the Bonds to be redeemed will have been received by the Paying
Agent/Registrar prior to the giving of such notice of redemption,such notice will state that said redemption may,at the option of
the Issuer,be conditional upon the satisfaction of such prerequisites and receipt of such money by the Paying Agent/Registrar
on or prior to the date fixed for such redemption or upon any prerequisite set forth in such notice of redemption.If a conditional
notice of redemption is given and such prerequisites to the redemption are not fulfilled,such notice will be of no force and effect,
the Issuer will not redeem such Bonds,and the Paying Agent/Registrar will give notice in the manner in which the notice of
redemption was given,to the effect that such Bonds have not been redeemed.ANY NOTICE OF REDEMPTION SO MAILED
TO THE REGISTERED OWNERS WILL BE DEEMED TO HAVE BEEN DULY GIVEN IRRESPECTIVE OF WHETHER
RECEIVED BY ANY HOLDER OF THE BONDS,AND,SUBJECT TO PROVISION FOR PAYMENT OF THE REDEMPTION
PRICE HAVING BEEN MADE,AND ANY PRECONDITIONS STATED IN THE NOTICE OF REDEMPTION HAVING BEEN
SATISFIED INTEREST ON THE REDEEMED BONDS SHALL CEASE TO ACCRUE FROM AND AFTER SUCH REDEMPTION
DATE NOTWITHSTANDING THAT A BOND HAS NOT BEEN PRESENTED FOR PAYMENT.By the date fixed for any such
redemption,due provision shall be made with the Paying Agent/Registrar for the payment of the required redemption price for
the Bonds or portions thereof which are to be so redeemed.If such notice of redemption is given and if due provision for such
payment is made,all as provided above,the Bonds or portion thereof which are to be redeemed thereby automatically shall be
treated as redeemed prior to their scheduled maturities,and they shall not bear interest after the date fixed for redemption,and
they shall not be regarded as being outstanding except for the right of the registered owner to receive the redemption price from
the Paying Agent/Registrar out of the funds provided for such payment.
The Paying Agent/Registrar and the Issuer,so long as a Book-Entry-Only System is used for the Bonds,will send any notice of
redemption,notice of proposed amendment to the Bonds or other notices with respect to the Bonds only to DTC.Any failure by
DTC to advise any DTC participant,or of any DTC participant or indirect participant to notify the Beneficial Owner,will not affect
the validity of the redemption of the Bonds called for redemption or any other action premised on any such notice.Redemption of
portions of the Bonds by the Issuer will reduce the outstanding principal amount of such Bonds held by DTC.In such event,
DTC may implement,through its Book-Entry-Qnly System,a redemption of such Bonds held for the account of DTC participants
in accordance with its rules or other agreements with DTC participants and then DTC participants and indirect participants may
implement a redemption of such Bonds from the Beneficial Owners.Any such selection of Bonds to be redeemed will not be
govemed by the Order and will not be conducted by the Issuer or the Paying Agent/Registrar.Neither the Issuer nor the Paying
Agent/Registrar will have any responsibility to DTC participants,indirect participants or the persons for whom DTC participants
act as nominees,with respect to the payments on the Bonds or the providing of notice to DTC participants,indirect participants,
or Beneficial Owners of the selection of portions of the Bonds for redemption.(See "BOOK-ENTRY-ONLY SYSTEM"herein.)
Termination-of Book-Entry-only System
The District is initially utilizing the book-entry-only system of the DTC.(See "BOOK-ENTRY-ONLY SYSTEM"herein.)In the event
that the Book-Entry-Only System is discontinued by DTC orthe District,the following provisions will be applicable to the Bonds.
Payment:Principal of the Bonds will be payable at maturity to the registered owners as shown by the registration books maintained
by the Paying Agent upon presentation and surrender of the Bonds to the Paying Agent at the designated office for payment of the
Paying Agent/Registrar in Dallas,Texas (the "Designated PaymentfTransfer Office").Interest on the Bonds will be payable by check
or draft,dated as of the applicable interest payment date,sent by the Paying Agent by United States mail,first class,postage
prepaid,to the registered owners at their respective addresses shown on such records,or by such other method acceptable to the
Paying Agent requested by registered owner at the risk and expense of the registered owner.If the date for the payment of the
principal of or interest on the Bonds shall be a Saturday,Sunday,legal holiday or day on which banking institutions in the city where
the Designated PaymentfTransfer Office of the Paying Agent is located are required or authorized by law or executive order to close,
then the date for such payment shall be the next succeeding day which is not a Saturday,Sunday,legal holiday or day on which
banking institutions are required or authorized to close,and payment on such date shall for all purposes be deemed to have been
made on the original date payment was due.Initially,the only registered owner of the Bonds will be CEDE &CO.as nominee of
DTC.(See "BOOK-ENTRY-ONLY SYSTEM"herein.)
Registration:The Bonds may be transferred and re-registered on the registration books of the Paying Agent only upon presentation
and surrender thereof to the Paying Agent/Registrar at the Designated PaymentfTransfer Office.A Bond also may be exchanged for
a Bond or Bonds of like maturity and interest and having a like aggregate principal amount or maturity amount,as the case may be,
upon presentation and surrender at the Designated PaymentfTransfer Office.All Bonds surrendered for transfer or exchange must
be endorsed for assignment by the execution by the registered owner or his duly authorized agent of an assignment form on the
Bonds or other instruction of transfer acceptable to the Paying Agent.Transfer and exchange of Bonds will be without expense or
service charge to the registered owner,except for any tax or other govemmental charges required to be paid with respect to such
transfer or exchange.A new Bond or Bonds,in lieu of the Bond being transferred or exchanged,will be delivered by the Paying
Agent/Registrar to the registered owner,at the Designated PaymentfTransfer Office of the Paying AgentlRegistrar or by United
4
States mail,first-class,postage prepaid.To the extent possible,new Bonds issued in an exchange or transfer of Bonds will be
delivered to the registered owner not more than three (3)business days after the receipt of the Bonds to be canceled in the
exchange or transfer and the denominations of $5,000 or any integral multiple thereof.(See "BOOK-ENTRY-ONLY SYSTEM"
herein for a description of the system to be initially utilized in regard to ownership and transferability of the Bonds.)
Umitations on Transfer ofBonds:Neither the District nor the Paying Agent shall be required to make any transfer,conversion or
exchange to an assignee of the registered owner of the Bonds (i)during the period commencing on the close of business on the 15th
calendar day ofthe month preceding each interest payment date (the "Record Date")and ending with the opening of business on the
next following principal or interest payment date or (ii)with respect to any Bond called for redemption,in whole or in part,within forty-
five (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 ofthe uncalled balance of a Bond.
Replacement Bonds:If a Bond is mutilated,the Paying Agent will provide a replacement Bond in exchange for the mutilated bond.
If a Bond is destroyed,lost or stolen,the Paying Agent will provide a replacement Bond upon (i)the filing by the registered owner
with the Paying Agent of evidence satisfactory to the Paying Agent of the destruction,loss or theft of the Bond and the authenticity of
he registered owner's ownership and (ii)the furnishing to the Paying Agent of indemnification in an amount satisfactory to hold the
District and the Paying Agent harmless.All expenses and charges associated with such indemnity and with the preparation,
execution and delivery of a replacement Bond must be borne by the registered owner.The provisions of the Order relating to the
replacement Bonds are exclusive and the extent lawful,preclude all other rights and remedies with respect to the replacement and
payment ofmutilated,destroyed,lost or stolen Bonds.
Defeasance of Outstanding Bonds
The Order provides for the defeasance of the Bonds when payment of the principal of and premium,if any,on Bonds,plus
interest thereon to the due date thereof (whether such due date be by reason of maturity,redemption,or otherwise),is provided
by irrevocably depositing with a paying agent,in trust (1)money sufficient to make such payment or (2)Defeasance Securities,
certified by an independent public accounting firm of national reputation to mature as to principal and interest in such amounts
and at such times to insure the availability,without reinvestment,of sufficient money to make such payment,and all necessary
and proper fees,compensation and expenses of the paying agent for the respective series of Bonds.The Order provides that
"Defeasance Securities"means (1)direct,noncallable obligations of the United States of America,including obligations that are
unconditionally guaranteed by the United States of America,(2)noncallable obligations of an agency or instrumentality of the
United States of America,including obligations that are unconditionally guaranteed or insured by the agency or instrumentality
and that are rated as to investment quality by a nationally recognized investment rating firm not less than AAA or its equivalent,
and (3)noncallable obligations of a state or an agency or a county,municipality,or other political subdivision of a state that have
been refunded and that are rated as to investment quality by a nationally recognized investment rating firm not less than AAA or
its equivalent.The District has additionally reserved the right,subject to satisfying the requirements of (1)and (2)above,to
substitute other Defeasance Securities for the Defeasance Securities originally deposited,to reinvest the uninvested moneys on
deposit for such defeasance and to withdraw for the benefit of the District moneys in excess of the amount required for such
defeasance.
Upon such deposit as described above,such Bonds shall no longer be regarded to be outstanding or unpaid.After firm banking
and financial arrangements for the discharge and final payment or redemption of the Bonds have been made as described
above,all rights of the District to initiate proceedings to call the Bonds for redemption or take any other action amending the
terms of the Bonds are extinguished;provided,however,that the right to call the Bonds for redemption is not extinguishedif the
District:(i)in the proceedings providing for the firm banking and financial arrangements,expressly reserves the right to call the
Bonds for redemption;(ii)gives notice of the reservation of that right to the owners of the Bonds immediately following the
making of the firm banking and financial arrangements;and (iii)directs that notice of the reservation be included in any
redemption notices that it authorize.
Paying Agent/Registrar
Principal of and semiannual interest on the Bonds will be paid by The Bank of New York Mellon Trust Company,NA,Dallas,
Texas,the initial Paying AgenVRegistrar (the "Paying Agent").The Paying Agent.must be a bank,trust company,financial
institution or other entity duly qualified and equally authorized to serve and perform the duties as paying agent and registrar for
the Bonds.
Provision is made in the Order for the District to replace the Paying Agent by a resolution of the District giving notice to the
Paying Agent of the termination of the appointment,stating the effective date of the termination and appointing a successor
Paying Agent.If the Paying Agent is replaced by the District,the new Paying Agent shall be required to accept the previous
Paying Agent's records and act in the same capacity as the previous Paying Agent.Any successor paying agenVregistrar
selected by the District shall be subject to the same qualification requirements as the Paying Agent.The successor paying
agent/registrar,if any,shall be determined by the Board of Directors and written notice thereof,specifying the name and address
of such successor paying agenVregistrar will be sent by the District or the successor paying agenVregistrar to each Registered
Owner by first-class mail,postage prepaid.
5
Record Date
The record date for payment of the interest on Bonds on any regularly scheduled interest payment date is defined as the
fifteenth day of the month preceding such interest payment date.
Issuance ofAdditional Debt
The District may issue bonds necessary to construct waterworks and sewer system improvements and facilities for which the
District was created and to provide fire protection to the District,with the approval of the District's voters.Following the issuance
of the Bonds,$5,769,217,000 unlimited tax bonds authorized by the District's voters will remain unissued,with no remaining
authorization for fire protection.The District has no plans to issue additional general obligation debt within the next twelve
months.In addition,voters may authorize the issuance of additional bonds or other contractual obligations secured by ad
valorem taxes.Neither Texas law nor the Order imposes a limitation on the amount of additional debt which may be issued by
the District.Any additional debt issued by the District may dilute the security of the Bonds.(See "INVESTMENT
CONSIDERATIONS"herein.)The District may also issue bonds secured by revenues of the water and sewer system or other
revenues of the District (other than ad valorem tax revenues)without voter approval.
Specific Tax Covenants
In the Order the District has covenanted with respect to,among other matters,the use of the proceeds of the Bonds and the
property financed therewith by persons other than state or local governmental units,and the manner in which the proceeds of the
Bonds are to be invested.The District may cease to comply with any such covenant if it has received a written opinion of a
nationally recognized bond counsel to the effect that failure to comply with such covenant will not adversely affect the exemption
from federal income taxation of interest on the Bonds under Section 103 of the Code.
Additional Covenants
The District has additionally covenanted in the Order that it will keep accurate records and accounts and employ an independent
certified public accountant to audit and report on its financial affairs at the close of each fiscal year,such audits to be in
accordance with applicable law,rules and regulations and open to inspection in the office of the District.
Remedies in Event of Default
The Order provides that,in addition to all other rights and remedies of any owner of Bonds provided by the laws of the State of
Texas,in the event the District defaults in the observance or performance of any covenant in the Order including payment when
due of the principal of and interest on the Bonds,any Bond owner may apply for a writ of mandamus from a court of competent
jurisdiction requiring the Board of Directors or other officers of the District to observe or perform such covenants.
The Order provides no additional remedies to a Bond owner.Specifically,the Order does not provide for an appointment of a
trustee to protect and enforce the interests of the Bond owners or for the acceleration of maturity of the Bonds upon the
occurrence of a default in the District's obligations.Consequently,the remedy of mandamus is a remedy,which may have to be
enforced from year to year by the Bond owners.
Under Texas law,no judgment obtained against the District may be enforced by execution of a levy against the District's public
purpose property.The Bond owners themselves cannot foreclose on property within the District or sell property within the
District in order to pay principal of or interest on the Bonds.In addition,the enforceability of the rights and remedies of the Bond
owners may be limited by federal bankruptcy laws or other similar laws affecting the rights of creditors of political subdivisions.
The opinion of Bond Counsel will note that all opinions relative to the enforceability of the Order and the Bonds are qualified to
the customary rights of debtors relative to their creditors
Amendments to the Order
The District may without the consent of or notice to any Bond owners amend the Order in any manner not detrimental to the
interest of the Bond owners,including the curing of an ambiguity,inconsistency,or formal defect or omission therein.In addition,
the District may,with the written consent of the owners of a majority in principal amount of the Bonds then outstanding affected
thereby,amend,add to,or rescind any of the provisions of the Order,except that,without the consent of the owners of all of the
Bonds affected,no such amendment,addition,or rescission may (1)extend the time or times of payment of the principal of and
interest on the Bonds,reduce the principal amount thereof or the rate of interest thereon,change the place or places at,or the
coin or currency in which,any Bond or the interest thereon is payable,or in any other way modify the terms of payment of the
principal of or interest on the Bonds,(2)give any preference to any Bond over any other Bond,or (3)reduce the aggregate
principal amount of Bonds required for consent to any such amendment,addition,or rescission.In addition,a state,consistent
with federal law,may in the exercise of its police powers make such modifications in the terms and conditions of contractual
covenants relating to the payment of indebtedness of its political subdivisions as are reasonable and necessary for attainment of
an important public purpose.
6
SOURCES AND USES OF FUNDS
The proceeds from the sale of the Bonds will be applied approximately as follows:
Sources of Funds
Par Amount of Bonds
Accrued Interest on the Bonds
Cash Premium
Total Sources of Funds
Uses of Funds
Deposit to the Construction Fund
Costs of Issuance
Accrued Interest Deposit to Interest &Sinking Fund
Total Uses of Funds
RATINGS
$2,000,000.00
3,139.60
1,000.00
$200413960
$1,915,712.00
85,288.00
3,139.60
$200413960
Moody's Investors Service,Inc.("Moody's")and Standard &Poor's Ratings Services,a Standard &Poor's Financial Services
LLC business ("S&P")are expected to assign ratings of "Aa3"(Negative Outlook)and "AAA"(Negative Outlook),respectively,to
the Bonds with the understanding that,concurrently with the delivery of the Bonds,a municipal bond insurance policy will be
issued by Assured Guaranty Municipal.Moody's and S&P have assigned underlying ratings of "A2"and "M-",respectively,to
the Bonds.An explanation of the significance of a rating may be obtained from the company fumishing the rating.The rating
reflects only the respective view of such companies,and the District makes no representation as to the appropriateness of the
rating.There is no assurance that such rating will continue for any given period of time or that it will not be revised downward or
withdrawn entirely by any such rating company,if,in the judgment of such company circumstances so warrant.Any such
downward revision or withdrawal of such rating may have an adverse effect on the market price of the Bonds.
BOND INSURANCE
The following Information has been supplied byAssured Guaranty Municipal Corp.("Assured Guaranty Municipal","AGM"orthe
"Insurer')for inclusion in this Official Statement.No representation is made by the Issuer,the Financial Advisor or the Purchaser
as to the accuracy or completeness ofthis information.
The following information is not complete and reference is made to Appendix E for a specimen of the municipal bond insurance
policy (the "Policy")ofAssured Guaranty Municipal.
Bond Insurance Policy
Concurrently with the issuance of the Bonds,Assured Guaranty Municipal Corp.(formerly known as Financial Security
Assurance Inc.)("AGM")will issue its Municipal Bond Insurance Policy for the Bonds (the "Policy").The Policy guarantees the
scheduled payment of principal of and interest on the Bonds when due as set forth in the form of the Policy included as an
exhibit to this Official Statement.
The Policy is not covered by any insurance security or guaranty fund established under New York,California,Connecticut or
Florida insurance law.
Assured Guaranty Municipal Corp.(Formerly Known as Financial Security Assurance Inc.)
AGM is a New York domiciled financial guaranty insurance company and a wholly owned subsidiary of Financial Security
Assurance Holdings Ltd.("Holdings").Holdings is an indirect subsidiary of Assured Guaranty Ltd.("AGL"),a Bermuda-based
holding company whose shares are publicly traded and are listed on the New York Stock Exchange under the symbol "AGO".
AGL,through its operating subsidiaries,prOVides credit enhancement products to the U.S.and global public finance,
infrastructure and structured finance markets.No shareholder of AGL,Holdings or AGM is liable for the obligations ofAGM.
On July 1,2009,AGL acquired the financial guaranty operations of Holdings from Dexia SA (UDexia").In connection with such
acquisition,Holdings'financial products operations were separated from its financial guaranty operations and retained by Dexia.
For more information regarding the acquisition by AGL of the financial guaranty operations of Holdings,see Item 1.01 of the
Current Report on Form 8-K filed by AGL with the Securities and Exchange Commission (the "SEC")on July 8,2009.
Effective November 9,2009,Financial Security Assurance Inc.changed its name to Assured Guaranty Municipal Corp.
AGM's financial strength is rated uAAA"(negative outlook)by Standard and Poor's Ratings Services,a Standard &Poor's
Financial Services LLC business ("S&P")and "Aa3"(negative outlook)by Moody's Investors Service,Inc.("Moody's").On
February 24,2010,Fitch,Inc.("Fitch"),at the request of AGL,withdrew its "M"(Negative Outlook)insurer financial strength
rating of AGM at the then current rating level.Each rating of AGM should be evaluated independently.An explanation of the
significance of the above ratings may be obtained from the applicable rating agency.The above ratings are not
7
recommendations to buy,sell or hold any security,and such ratings are subject to revision or withdrawal at any time by the rating
agencies,including withdrawal initiated at the request of AGM in its sole discretion.Any downward revision or withdrawal of any
of the above ratings may have an adverse effect on the market price of any security guaranteed by AGM.AGM does not
guarantee the market price of the securities it insures,nor does it guarantee that the ratings on such securities will not be revised
or withdrawn.
Recent Developments
Ratings
In a press release dated February 24,2010,Fitch announced that,at the request of AGL,it had withdrawn the "M"(Negative
Outlook)insurer financial strength rating of AGM at the then current rating level.Reference is made to the press release,a copy
of which is available at www.fitchratings.com.for the complete text of Fitch's comments.
On December 18,2009,Moody's issued a press release stating that it had affirmed the "Aa3"insurance financial strength rating
of AGM,with a negative outlook.Reference is made to the press release,a copy of which is available at www.moodys.com.for
the complete text of Moody's comments.
On July 1,2009,S&P published a Research Update in which it affirmed its "AM"counterparty credit and financial strength
ratings on Financial Security Assurance Inc.,now known as AGM.At the same time,S&P continued its negative outlook on
AGM.Reference is made to the Research Update,a copy ofwhich is available at www.standardandpoors.com.for the complete
text of S&P's comments.
There can be no assurance as to any further ratings action that Moody's or S&P may take with respect to AGM.
For more information regarding AGM's financial strength ratings and the risks relating thereto,see AGl's Annual Report on
Form 1D-K for the fiscal year ended December 31,2009,which was filed by AGl with the SEC on March 1,2010.Effective July
31,2009,Holdings is no longer subject to the reporting requirements of the Securities and Exchange Act of 1934,as amended
(the "Exchange Act").
Capitalization ofAGM
At December 31,2009,AGM's consolidated policyholders'surplus and contingency reserves were approximately
$2,232,359,793 and its total net unearned premium reserve was approximately $2,391,940,484 in accordance with statutory
accounting principles.
Incorporation ofCertain Documents by Reference
Portions of the following documents filed by AGl with the SEC that relate to AGM are incorporated by reference into this Official
Statement and shall be deemed to be a part hereof:
(i)The Annual Report on Form 10-K for the fiscal year ended December 31,2009 (which was filed by AGl with the SEC
on March 1,2010).
All information relating to AGM included in,or as exhibits to,documents filed by AGL pursuant to Section 13(a),13(c),14 or
15(d)of the Exchange Act after the filing of the last document referred to above and before the termination ofthe offering of the
Bonds shall be deemed incorporated by reference into this Official Statement and to be a part hereof from the respective dates
of filing such documents.Copies of materials incorporated by reference are available over the internet at the SEC's website at
http://www.sec.gov,at AGl's website at http://www.assuredguaranty.com,or will be provided upon request to Assured Guaranty
Municipal Corp.(formerly known as Financial Security Assurance Inc.):31 West 52nd Street,New York,New York 10019,
Attention:Communications Department (telephone (212)826-0100).
Any information regarding AGM included herein under the caption "BOND INSURANCE -Assured Guaranty Municipal Corp.
(formerly known as Financial Security Assurance Inc.)"or included in a document incorporated by reference herein (collectively,
the "AGM Information")shall be modified or superseded to the extent that any subsequently included AGM Information (either
directly or through incorporation by reference)modifies or supersedes such previously included AGM Information.Any AGM
Information so modified or superseded shall not constitute a part of this Official Statement,except as so modified or superseded.
AGM makes no representation regarding the Bonds or the advisability of investing in the Bonds.In addition,AGM has not
independently verified,makes no representation regarding,and does not accept any responsibility for the accuracy or
completeness of this Official Statement or any information or disclosure contained herein,or omitted herefrom,other than with
respect to the accuracy of the information regarding AGM supplied by AGM and presented under the heading "BOND
INSURANCE".
8
BOND INSURANCE RISK FACTORS
General
In the event of default of the scheduled payment of principal of or interest on the Bonds when all or a portion thereof becomes
due,any owner of the Bonds shall have a claim under the Policy for such payments.The payment of principal and interest in
connection with mandatory or optional prepayment of the Bonds by the Issuer which is recovered by the Issuer from the Bond
owner as a voidable preference under applicable bankruptcy law is covered by the Policy;however,such payments will be made
by the Insurer at such time and in such amounts as would have been due absent such prepayment by the Issuer (unless the
Insurer chooses to pay such amounts at an earlier date).Payment of principal of and interest on the Bonds is not subject to
acceleration,but other legal remedies upon the occurrence of non-payment do exist (see "THE Bonds -Default and Remedies").
In the event the Insurer is unable to make payment of principal and interest as such payments become due under the Policy,the
Bonds are payable solely from the ad valorem tax levied,within the limits prescribed by law,on all taxable property located within
the Issuer.In the event the Insurer becomes obligated to make payments with respect to the Bonds,no assurance is given that
such event will not adversely affect the market price or the marketability (liquidity)of the Bonds.
The long-term ratings on the Bonds will be dependent in part on the financial strength of the Insurer and its claims-paying ability.
The Insurer's financial strength and claims paying ability are predicated upon a number of factors which could change over time.
No assurance can be given that the long-term ratings of the Insurer and of the ratings on the Bonds,whether or not subject to
the Policy,will not be subject to downgrade and such event could adversely affect the market price or the marketability (liquidity)
for the Bonds.See the disclosure described in "OTHER PERTINENT INFORMATION -Ratings"herein.The obligations of the
Insurer under the Policy are general obligations of the Insurer and in an event of default by the Insurer,the remedies available
may be limited by applicable bankruptcy law.None of the Issuer,the Financial Advisor or the Initial Purchaser has made
independent investigation into the claims-paying ability of the Insurer and no assurance or representation regarding the financial
strength or projected financial strength of the Insurer is given.
Claims-Paying Ability and Financial Strength of Municipal Bond Insurers
Moody's Investor Services,Inc.,Standard &Poor's Ratings Service,a Standard &Poor's Financial Services LLC business and
Fitch Ratings (the "Rating Agencies")have,in recent months,downgraded and/or placed on negative watch the claims-paying
and financial strength of most providers of municipal bond insurance.Additional downgrades or negative changes in the rating
outlook for all bond insurers is possible.In addition,recent events in the credit markets have had substantial negative effects on
the bond insurance business.These developments could be viewed as having a material adverse effect on the claims-paying
ability of such bond insurers,including any bond insurer of the Bonds.Thus,when making an investment decision,potential
investors should carefully consider the ability of any such bond insurer to pay principal and interest on the Bonds and the
c1aimspaying ability of any such bond insurer,particularly over the life of the Bonds.
BOOK-ENTRY-ONLY SYSTEM
This section describes how ownership ofthe Bonds is to be transferred and how the principal of,premium,ifany,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 orcompleteness thereof.
The District cannot and does not give any assurance the (1)DTC will distribute payments of debt service on the Bonds,or
redemption or other notices,to DTC Participant,(2)DTC Participants orothers will distribute debt service payments paid to DTC
orits nominee (as the registered owner of the Bonds),or redemption orother 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 ofDTC to be followed
in dealing with DTC Participants are on file with DTC.
DTC will act as securities depository for the Bonds.The Bonds will be issued as fully registered securities registered in the
name of Cede &Co.(DTC's partnership nominee)or such other name as may be requested by an authorized representative of
DTC.One fully registered certificate will be issued for each maturity of the Bonds,in the aggregate principal amount of each
maturity,and will be deposited with DTC.
DTC,the world's largest depository,is a limited-purpose trust company organized under the New York Banking Law,a "banking
organization"within the meaning of the New York Banking Law,a member of the Federal Reserve System,a "clearing
corporation",within the meaning of the New York Uniform Commercial Code,and a "clearing agency"registered pursuant to the
provisions of Section 17A of the Securities Exchange Act of 1934.DTC holds and provides asset servicing for over 3.5 million
issues of U.S.and non-U.S.equity issues,corporate and municipal debt issues,and money market instruments (from over 100
countries)that DTC's participants ("Direct Participants")deposit with DTC.DTC also facilitates the post-trade settlement among
Direct Participants of sales and other securities transactions in deposited securities,through electronic computerized book-entry
transfers and pledges between Direct Participants'accounts.This eliminates the need for physical movement of certificated
securities.Direct Participants include both U.S.and non-U.S.securities brokers and dealers,banks,trust companies,clearing
9
corporations,and certain other organizations.DTC is a wholly-owned subsidiary of The Depository Trust &Clearing Corporation
("DTCC").DTCC is the holding company for DTC,National Securities Clearing Corporation and Fixed Income Clearing
Corporation,all of which are registered clearing agencies.DTCC is owned by the users of its regulated subsidiaries.Access to
the DTC system is also available to others such as both U.S.and non-U.S.securities brokers and dealers,banks,trust
companies,and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant,either
directly or indirectly ("Indirect Participants").DTC has Standard &Poor's highest rating:AAA.The DTC Rules applicable to its
Participants are on file with the SEC.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 Bonds ("Beneficial Owner")is in turn to be
recorded on the Direct and Indirect Participants'records.Beneficial Owners will not receive written confirmation from DTC of
their purchase.Beneficial Owners are,however,expected to receive written confirmations providing details of the transaction,
as well as periodic statements of their holdings,from the Direct or Indirect Participant through which the Beneficial Owner
entered into the transaction.Transfers of ownership interests in the Bonds are to be accomplished by entries made on the
books of Direct and Indirect Participants acting on behalf of Beneficial Owners.Beneficial Owners will not receive Bonds
representing their ownership interests in Bonds,except in the event that use of the book-entry system for the Bonds is
discontinued.
To facilitate subsequent transfers,all Bonds deposited by Direct Participants with DTC are registered in the name of DTC's
partnership nominee,Cede &Co.,or such other name as may be requested by an authorized representative of DTC.The
deposit of Bonds with DTC and their registration in the name of Cede &Co.or such other DTC nominee do not effect any
change in beneficial ownership.DTC has no knowledge ofthe actual Beneficial Owners ofthe Bonds;DTC's records reflect only
the identity of the Direct Participants to whose accounts such Bonds are credited,which mayor may not be the Beneficial
Owners.The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their
customers.
Conveyance of notices and other communications by DTC to Direct Participants,by Direct Participants to Indirect Participants,
and by Direct Participants and Indirect Participants to Beneficial Owners will be govemed 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 registrar and request that
copies of the notices be provided directly to them.
Redemption notices shall be sent to DTC.If less than all of the Bonds within a maturity are being redeemed,DTC's practice is to
determine by lot the amount ofthe 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 Bonds unless authorized by a
Direct Participant in accordance with DTC's Procedures.Under its usual procedures,DTC mails an Omnibus Proxy to the Issuer
as soon as possible after the record date.The Omnibus Proxy assigns Cede &Co.'s consenting or voting rights to those Direct
Participants to whose accounts Bonds are credited on the Record Date (identified in a listing attached to the Omnibus Proxy).
Principal and interest 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 Issuer or the Paying Agent/Registrar,on the 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 9ustomers in bearer form or
registered in "street name,"and will be the responsibility of such Participant and not of DTC nor its nominee,the Paying
Agent/Registrar,or the Issuer,subject to any statutory or regulatory requirements as may be in effect from time to time.
Payment of principal and interest to Cede &Co.(or such other nominee as may be requested by an authorized representative of
DTe)is the responsibility of the Issuer or the Paying Agent/Registrar,disbursement of such payments to Direct Participants will
be the responsibility of DTC,and disbursement of such payments to the Beneficial Owners will be the responsibility of the Direct
and Indirect Participants.
DTC may discontinue providing its services as securities depository with respect to the Bonds at any time by giving reasonable
notice to the Issuer or the Paying Agent/Registrar.Under such circumstances,in the event that a successor securities
depository is not obtained,Bonds are required to be printed and delivered to DTC Participants or the Beneficial Owners,as the
case may be.
The Issuer may decide to discontinue use of the system of book-entry-only transfers through DTC (or a successor securities
depository).In that event,Bonds will be printed and delivered.(See "THE BONDS -Termination of Book-Entry-Only System"
herein.)
The information in this section concerning DTC and DTC's book-entry system has been obtained from sources that the Issuer
believes to be reliable,but the Issuer takes no responsibility for the accuracy thereof.
10
Use ofCertain 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 Direct or Indirect
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 Order will be given
only to DTC.
INVESTMENT CONSIDERATIONS
General
The Bonds are obligations of the District and are not obligations of the Town of Trophy Club,State of Texas,Denton County,
Tarrant County or any other political subdivision except the District.The Bonds are payable from a continuing,direct,annual ad
valorem tax,without legal limitations as to rate or amount,on all taxable property within the District.(See "THE BONDS -Source
of Payment"herein.)The investment quality of the bonds depends both on the ability of the District to collect from the property
owners all taxes levied against their property or,in the event of foreclosure,the value of the taxable property with respect to
taxes levied by the District and by other taxing authorities.
Approval ofthe 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 quality of the Bonds as an investment,nor does he pass upon the adequacy or accuracy of
the information contained in this Official Statement.
Marketability
The District has no understanding (other than the initial reofferingyields)with the Initial Purchaser regarding the reoffering yields
or prices of the Bonds and has no control over the trading of the Bonds in the secondary market.There is no assurance that a
secondary market will be made for the Bonds.If there is a secondary market,the difference between the bid and asked price of
Bonds may be greater than the difference between the bid and asked spread of other bonds generally bought,sold or traded in
the secondary market.
The prices and other terms with respect to the offering and sale of the Bonds may be changed from time-to time by the Initial
Purchaser after the Bonds are released for sale,and the Bonds may be offered and sold at prices other than the initial offering
prices,including sales to dealers who may sell the Bonds into investment accounts.In connection with the offering of the Bonds,
the Initial Purchaser may over -allot or effect transactions which stabilize or maintain the market prices or the Bonds at levels
above those which might otherwise prevail in the open market.Such stabilizing,if commenced,may be discontinued at any
time.
Factors Affecting Taxable Values and Tax Payments
Economic Factors and Interest Rates:A substantial percentage of the taxable value of the District results from the current
market value of single-family residences and developed lots.The market value of such homes and lots is related to general
economic conditions affecting the demand for and taxable value of residences.Demand for lots and residential dwellings can be
significantly affected by factors such as interest rates,credit availability,construction costs,energy availability and the prosperity
and demographic characteristics of the urban center toward which the marketing of tots is directed.Decreased levels of
construction activity,which has been experienced in the District for the last several years,tend to restrict the growth of property
values in the District or could adversely impact existing values.Interest rates and the availability of mortgage and development
funding have a direct impact on the construction·activity,particularly short-term interest rates at which developers and
homebuilders are able to obtain financing for development and construction costs.Interest rate levels may affect the ability of a
landowner with undeveloped property to undertake and complete development activities within the District.Because of the
numerous and changing factors affecting the availability of funds,the District is unable to assess the future availability of such
funds for continued development and construction within the District.In addition,the success of development within the District
and growth of District's taxable property values are,to a great extent,a function of the Dallas/Fort Worth metropolitan and
regional economics.
Impact on District Tax Rates:Assuming no further development,the value of the land and improvements currently within the
District will be the major determinant of the ability or willingness of District property owners to pay their taxes.The 2009
estimated net taxable assessed valuation of the District (see page vii "SELECTED FINANCIAL INFORMATION")is
$1,023,493,111.After issuance of the Bonds the projected maximum annual debt service requirement will be $1,494,559 (2011)
and the projected average annual debt service requirement will be $567,820 (2010 through 2031,inclusive).Assuming no
increase or decrease from the 2009 assessed valuation and no use of funds on hand,a tax rate of $0.14750 per $100 assessed
valuation at a 99%collection rate would be necessary to pay the projected maximum annual debt service requirement of
$1,494,559 and a tax rate of $0.05604 per $100 assessed valuation at a 99%collection rate would be necessary to pay the
projected average annual debt service requirement of $567,820.The District's 2009 debt service tax rate is $0.06872 per $100
assessed valuation.(See "APPENDIX A -TABLES 4 and 5"herein.
11
Tax Collections and Foreclosure Remedies
The District's ability to make debt service payments may be adversely affected by its inability to collect ad valorem taxes.Under
Texas law,the levy of ad valorem taxes by the District constitutes a lien in favor of the District on a parity with the liens of all other
state and local taxing authorities on the property against which taxes are levied,and such lien may be enforced by foreclosure.
The District's ability to collect ad valorem taxes through such foreclosure may be impaired by (a)cumbersome,time-consuming
and expensive collection procedures,(b)a bankruptcy court's stay of tax collection procedure against a taxpayer,or (c)market
conditions limiting the proceeds from a foreclosure sale of taxable property.While the District has a lien on taxable property
within the District for taxes levied against such property,such lien can be foreclosed only in a judicial proceeding.Because
ownership of the land within the District is highly fragmented among a number of taxpayers,attorney's fees,and other costs of
collecting any such taxpayer's delinquencies could substantially reduce the net proceeds to the District from a tax foreclosure
sale.Finally,any bankruptcy court with jurisdiction over the bankruptcy proceedings initiated by or against a taxpayer within the
District pursuant to the Federal Bankruptcy Code could stay any attempt by the District to collect delinquent ad valorem taxes
against such taxpayer.
Consolidation
A district (such as the District)has the legal authority to consolidate with other municipal utility districts and,in connection
therewith,to provide for the consolidation of its assets,such as its water and wastewater systems with the assets of the
district(s)with which it is consolidating,as well as its liabilities (which would include the Bonds and other Obligations of the
District).The District is the resulting entity from a consolidation in May 2009 of Prior MUD 1 and Prior MUD 2 (see "THE
DISTRICT").No representation is made that the District will consolidate again in the future with any other district.
Abolition
Under Texas law,If a district is located wholly in two or more municipalities and in unincorporated area,the district may be
abolished by agreement among the district and all of the municipalities in which parts of the district are located.The abolition
agreement must provide for the distribution of assets and liabilities (including the Bonds)of the abolished district.The
agreement must also provide for the distribution among one or more of the municipalities the pro rata assets and liabilities
located in the unincorporated area and must provide for service to customers in unincorporated areas in the service area of the
abolished district.The municipality that provides the service in the unincorporated area may charge its usual and customary
fees and assessments to the customers in that area.No representation is made concerning the likelihood of abolition or the
ability of the municipalities which contain parts of the District to make debt service payments on the Bonds should abolition
occur;
Alteration of Boundaries
In certain circumstances,under Texas law the District may alter its boundaries to:1)upon satisfying certain conditions,annex
additional territory;and 2)exclude land subject to taxation within the District that is not served by District facilities if the District
simultaneously annexes land of equal acreage and value that may be practicably served by District facilities.No representation
is made concerning the likelihood that the District would effect any change in its boundaries.
Registered Owners'Remedies
Bond owners are entitled under Texas Law to seek a writ of mandamus to compel the District to perform its obligations under the
Order.Such remedy would have to be exercised upon each separate default and could prove costly,time-consuming and
difficult to enforce.Further,there is no trust indenture or trustee,and all legal actions to enforce such remedies would have to
be taken at the initiative of,and be financed by,Bond owners.The Order does not provide for acceleration of maturity of the
Bonds upon any default.Bankruptcy,reorganization and other similar laws affecting the enforcement of creditor's rights
generally may also limit the rights and remedies of the Bond owners and the enforceability of the Bonds.(See "THE BONDS -
Remedies in Event of Default"herein.)
Bankruptcy Limitation to Registered Owners'Rights
The enforceability of the rights and remedies of Bondholders may be limited by laws relating to bankruptcy,reorganization or
other similar laws of general application affecting the rights of creditors of political subdivisions such as the District.Texas law
requires a municipal utility district such as the District to obtain the approval of the TCEQ as a condition to seeking relief under
the Federal Bankruptcy Code.
Ifa petitioning district were allowed to proceed voluntarily under Chapter 9 of the Federal Bankruptcy Code,it could file a plan for
an adjustment of its debts.If such a plan were confirmed by the bankruptcy court,it could,among other things,affect Registered
Owners by reducing or eliminating the amount of indebtedness,deferring or rearranging the debt service schedule,reducing or
eliminating the interest rate,modifying or abrogating collateral or security arrangements,substituting (in whole or in part)other
securities,and otherwise compromising and modifying the rights and remedies of the Registered Owner's claim against a district.
Although Chapter 9 provides for the recognition of a security interest represented by a specifically pledged source of revenues,
the pledge of ad valorem taxes in support of a general obligation of a bankrupt entity is not specifically recognized as a security
12
interest under Chapter 9 and such provision is subject to judicial construction.Chapter 9 also includes an automatic stay
provision that would prohibit,without Bankruptcy Court approval,the prosecution of any other legal action by creditors or
Bondholders of an entity which has sought protection under Chapter 9.Therefore,should the District avail itself of Chapter 9
protection from creditors,the ability to enforce would be subject to the approval ofthe 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 Bonds are qualified with respect to the customary rights of debtors
relative to their creditors.
A district may not be forced into bankruptcy involuntarily.
The Effect ofthe Financial Institutions Act of 1989 on Tax Collections of the District
The "Financial Institutions Reform,Recovery and Enforcement Act of 1989"("FIRREA"),enacted on August 9,1989,contains
certain provisions which affect the time for protesting property valuations,the fixing of tax liens,and the collection of penalties
and interest on delinquent taxes on real property owned by the Federal Deposit Insurance Corporation ("FDIC")when the FDIC
is acting as the conservator or receiver of an insolvent financial institution.
Under FIRREA real property held by the FDIC is still subject to ad valorem taxation,but such act states (i)that no real property
of the FDIC shall be subject to foreclosure or sale without the consent of the FDIC and no involuntary liens shall attach to such
property,(ii)the FDIC shall not be liable for any penalties or fines,including those arising from the failure to pay any real or
personal property tax when due and (iii)notwithstanding failure of a person to challenge an appraisal in accordance with state
law,such value shall be determined as of the period for which such tax is imposed.
There has been no definitive judicial determination of the validity of the provisions of FIRREA or how they are to be construed
and reconciled with respect to conflicting state laws.However,certain federal court decisions have held that the FDIC is not
liable for statutory penalties and interest authorized by State property tax law,and that although a lien for taxes may exist against
real property,such lien may not be foreclosed without the consent of the FDIC,and no liens for penalties,fines,interest,
attorneys fees,costs of abstract and research fees exist against the real property for the failure of the FDIC or a prior property
owner to pay ad valorem taxes when due.It is also not known whether the FDIC will attempt to claim the FIRREA exemptions
as to the time for contesting valuations and tax assessments made prior to and after the enactment of FIRREA.Accordingly,to
the extent that the FIRREA provisions are valid and applicable to any property in the District,and to the extent that the FDIC
attempts to enforce the same,these provisions may affect the timeliness of collection of taxes on property,if any,owned by the
FDIC in the District,and may prevent the collection of penalties and interest on such taxes.
Continuing Compliance with Certain Covenants
The Order contains covenants by the District intended to preserve the exclusion from gross income of interest on the Bonds from
the gross income of the owners thereof for federal income tax purposes.(See "THE BONDS -Specific Tax Covenants"herein.)
Failure by the District to comply with such covenants on a continuous basis prior to maturity ofthe Bonds could result in interest
on the Bonds becoming taxable retroactively to the date of original issuance.(See "TAX MAnERS"herein.)
Future Debt
The District has reserved in the Order the right to issue the remaining $5,769,217,000 authorized but unissued unlimited tax
bonds and such additional bonds as may hereafter be approved by both the Board of Directors and voters of the District.All of
the remaining unlimited tax bonds,which have heretofore been authorized by the voters of the District may be issued by the
District from time to time for qualified purposes,as determined by the Board of Directorsof the District,subject to the approval of
the Attorney General of the State of Texas and the TCEQ.
THE DISTRICT
Creation ofthe District
The District was created by the consolidation of two prior municipal utility districts,being Trophy Club Municipal Utility District No.
1 ("Prior MUD 1")and Trophy Club Municipal Utility District NO.2 ("Prior MUD 2"and collectively with Prior MUD 1,the "Prior
MUDs").Prior MUD 1 was created as Denton County Municipal Utility District No.1 by order of the Texas Water Rights
Commission (the "Commission")on March 4,1975 for the purpose of providing water and sewer facilities and other authorized
services to the area within the territory of Prior MUD 1.The name of Prior MUD 1 was changed to Trophy Club Municipal Utility
District No.1 on April 1,1983.Prior MUD 2 was created as a result of the consolidation of Denton County Municipal Utility
District No.2 and Denton County Municipal Utility District No.3,which were created by the Texas Commission on Environmental
Quality for the purpose of providing water,sewer and drainage facilities and other authorized services to the area.The creation
of Prior MUD 2 was confirmed by its electorate at an election held on August 9,1980.
On January 26,2009,the Boards of the Prior MUDs entered into an agreement to consolidate the Prior MUDs into a single
Municipal Utility District covering the territory of the Prior MUDs,subject to the approval of the consolidation by the voters at an
election held for that purpose.On May 9,2009,the voters approved the consolidation and the District became the Trophy Club
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Municipal Utility District No.1 (the "District").Pursuant to the consolidation agreement,the District assumed the outstanding
bonds,notes and other obligations of the Prior MUDs and the authorized but unissued bonds,taxes and other obligations ofthe
Prior MUDs and became authorized to levy a uniform tax on all taxable property within the District.The functions performed by
the District include supplying water for municipal purposes;collecting,transporting,processing and disposing of wastes;
establishing,operating and maintain a fire department;and performing other functions permitted by municipal utility districts
under the Texas Water Code.
Governance
The District is governed by a board of directors which has control over and management supervision of all affairs of the District.
Upon the consolidation of Prior MUD 1 and Prior MUD 2,all five board members of each entity continue to act jointly as board
members of the consolidated district until the next general election in May of 2010.At that next general election,five directors
will be elected for the District to serve four-year staggered terms.Directors receive no remuneration,except a Director's per
diem allowance of $100 per day on which necessary service is performed for the District.The District and all similar districts are
subject to the continuing supervision and filing requirements of the TCEQ,including the preparation and filing of an annual
independent audit report.All District facility plans are submitted to the TCEQ for review and approval.
General
The District is comprised of 2283.5 acres [approximately 94 acres in Westlake (Solana)).Approximately 195 acres in Trophy
Club are undeveloped.Ofthe developed acres,there are approximately 2,420 existing households,136 apartment units and 42
townhouses.Of the 195 undeveloped acres,135 are zoned residential and approximately 60 acres are for commercial
development.A developer has indicated future plans to subdivide the 135 residential acres into 290 single family lots;92 will be
custom built homes/acreage.
Location
The District is located in southern Denton County and northern Tarrant County partially within the Town of Trophy Club (the
"Town")and partially within the Town of Westlake.The District is directly adjacent to and accessible from State Highway 114,
north of and approximately mid-way between Dallas and Fort Worth.The District is approximately 27 miles from downtown
Dallas,25 miles from downtown Fort Worth,17 miles from Denton,8 miles from Grapevine and 14 miles from the Dallas-Fort
Worth International Airport.
Major highways connecting these population centers,which will also serve the District,include State Highways 114,170 and 377
and Interstate Highways 35E and 35W.State Highway 170 connects Trophy Club directly to Alliance Airport which is located
seven miles southwest of the District.(See "Vicinity Map"herein.)
Population
The population of the District is estimated to be .approximately 7,441 and the population of the entire Town of Trophy Club,the
District and the Trophy Club PID No.1 (the "Trophy Club Development")is estimated at 8,211 (as of December 2009).
Topography and Drainage
The land within the District has a gradual slope from the southeast to the northwest toward Marshall Creek,which forms the
western boundary of the District.Runoff water enters Grapevine Reservoir just north of the District through Marshall Creek or
several other small tributaries.The maximum elevation in the area being developed is approximately 690 feet mean sea level
and the minimum elevation in the area being developed is approximately 576 feet mean sea level.The soil is sandy loam and
clay loam,and existing vegetation consists of native grasses and small oak trees.Areas which are subject to flooding by a 100-
year frequency flood are located in the flood plan of Marshall Creek and have been delineated by the Water Resources Branch
of the U.S.Geological Survey.Additional flood studies were made by the engineers to determine what areas may be subject to
flooding.It was determined that the area subject to flooding within the District is approximately 58.5 acres based on 100-year
flood frequency;however,57.6 acres of this area is within the golf course area and is not intended to be developed for
residential land use.
Shopping and Commercial Facilities
A shopping center within the District has a major grocery store chain,a bank,a major chain drug store,several service
businesses,fast food outlets,and a beauty shop and a dry cleaners.Additionally there are several more businesses and
professional offices located in the District,at the primary entrance to the Town of Trophy Club.There are additional shopping
facilities in Roanoke,about two (2)miles west of the District and numerous shopping facilities in Southlake about five (5)miles
east of the District and in Grapevine about eleven (11)miles east of the District.Full metropolitan shopping facilities are
available in Dallas and Fort Worth,Texas which have their central business districts approximately 27 miles and 25 miles,
respectively from the District.
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Fire Protection
The District operates its Fire Department (the "Department")with an engine,a Quint,a brush truck and two support vehicles.
Currently the Department is staffed with twelve (12)full-time firefighter /paramedics,one full-time Fire chief and a full-time
administrative assistant.The station was built in 1985 and constructed in a metal building with a square footage of 3,600 square
feet.This includes three apparatus bays,along with living quarters and offices.Operations under the Department include fire
suppression,fire prevention,emergency management,investigation /enforcement and emergency medical response.The new
fire station to be constructed and equipped with proceeds from the sale of the Bonds will replace this existing facility.This
Department serves the Town of Trophy Club and area in the District that is not in the Town limits,and is currently financed by a
combination of a $0.10914 maintenance tax assessment in the District,as well as a $0.10186 Public Improvement District
("PID")assessment in Trophy Club PID NO.1.The 2009-2010 annual operating budget is $1,190,429 with October 1,2009
reserves of $95,138.
Police Protection
Twenty-four hour security is provided by the Town of Trophy Club Police Department
Schools
The Town is served by the Northwest Independent School District (the "School District"or "Northwest ISO").Northwest ISO
covers approximately 232 square miles in Denton,Wise and Tarrant Counties.In addition to serving the Town,the School
District also serves the communities of Aurora,Fairview,Haslet,Justin,Newark,Northlake,Rhome,Roanoke and portions of
Flower Mound,Fort Worth,Keller,Southlake and Westlake.Northwest ISO is comprised of 14 primary schools for grades pre-
kindergarten through fifth,3 middle schools for grades sixth through eighth,2 high schools for grades ninth through twelfth,and
two alternative education campuses for grades seventh through twelfth.One of the high schools,Byron Nelson High School,is
located in the Town of Trophy Club.It opened in August 2009 with ninth and tenth grades.Eleventh grade will be added in
August 2010,and twelfth grade will attend Byron Nelson High School in August 2011.All campuses offer enriched curricula with
special programs for gifted/talented students as well as students achieving below grade level,and all are equipped with
computers and full cafeteria service.The School District serves a 2009-2010 estimated enrollment of 14,096 students (as of
February 1,2010).
Recreational Opportunities
Recreational opportunities in Trophy Club are afforded by Lake Grapevine and its surrounding parks,which lie two miles north
and east of the District.The Town has several community parks,including facilities for soccer,baseball,softball,basketball,
tennis,a competitive swimming pool and playground amenities.The Town also operates an 877 acre Corps of Engineers park,
which features 100 acres of motorized trails,as well as many passive recreational opportunities such as fishing,hiking and
picnicking.
Status ofDevelopment ofthe District
The area in the District is locally known as "Trophy Club."It is a residential and mixed-use development consisting of some
2,283.5 acres.The District is a mature district with roughly 195 acres undeveloped,of which 135 acres are zoned residential
and approximately 60 acres are available for commercial development.There is substantial land left for commercial
development in the Solana complex,which is located within the City of Westlake.
Lot and custom home sales officially began in the District in mid-year 1975.Homes are currently being offered at prices ranging
from $200,000 to $1,000,000 and lots range in price from $35,000 to $200,000.The status of single-family home development
as of February 15,2010 is shown below:
Status of Single-Family Home Development
Houses Additional Total Multi-Family
Under Houses Total Developed Houses Units
Construction Occupied Houses Lots and Lots Completed (a)
19 2,420 2,439 32 2,471 178
(a)In addition to the single-family development,there are approximately 132 apartments and 42 completed townhouses,which
are occupied.
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Status ofBusiness/Commercial Development
The undeveloped commercial land within the Solana complex (approximately 230 acres)is available for commercial
development,however the District is unaware of any current plans for additional development in the Solana complex.The Town
of Trophy Club and the District have commercial land available for development on approximately 52 acres of land along
Highway 114.The land is zoned for uses such as a medical complex,hotels,restaurants and a short-stay hospital facility.
Additionally,the District currently has a small strip center along Highway 114 containing several food establishments and
professional offices.
Public Improvement District Description
Trophy Club PID No.1 (the "PID")consists of approximately 609.683 acres of land generally to the north of Oakmont Drive,Oak
Hill Drive and the Quorum Condominiums,east of the Lakes Subdivision and Parkview Drive,south of the Corps of Engineer's
property,and west of the Town's eastem limit.The PID is located entirely within the Town limits but outside the District.A
master-planned residential community (the "Property")is under construction in the PID and at build-out will be comprised of
approximately 1,489 residential units located within the Property,which Property is zoned to permit such use pursuant to the PD
Zoning.The District provides water and sewer services to the PID.
INVESTMENT AUTHORITY AND INVESTMENT PRACTICES OF THE DISTRICT
Available District funds are invested as authorized by Texas Law and in accordance with investment policies approved by the
Board.Both state law and the District's investment policies are subject to change.The District's goal in its investment policy is
to preserve principal and maintain liquidity,while securing a competitive yield on its portfolio.
Under Texas law,the District is authorized to invest in (1)obligations,including letters of credit,of the United States or its
agencies and instrumentalities;(2)direct obligations of the State of Texas or its agencies and instrumentalities;(3)collateralized
mortgage obligations directly issued by a federal agency or instrumentality of the United States,the underlying security for which
are guaranteed by an agency or instrumentality of the United States;(4)other obligations,the principal and interest of which is
guaranteed or insured by or backed by the full faith and credit of,the State of Texas or the United States or their respective
agencies and instrumentalities;(5)obligations of states,agencies,counties,cities,and other political subdivisions of any state
rated as to investment quality by a nationally recognized investment rating firm not less than A or its equivalent;(6)bonds
issued,assumed or guaranteed by the State of Israel;(7)certificates of deposit and share certificates issued by,or invested by
an investing entity through,a depository institution that has its main office or a branch office in the State of Texas,that are
guaranteed or insured as required by,or otherwise meet the requirements of,the Texas Public Funds Investment Act (Chapter
2256,Texas Government Code,as amended);(8)fully collateralized repurchase agreements that have a defined termination
date,are fully secured by obligations described in clause (1),and are placed through a primary govemment securities dealer or
a financial institution doing business in the State of Texas;(9)certain bankers'acceptances with the remaining term of 270 days
or less,if the short-term obligations of the accepting bank or its parent are rated at least A-1 or P-1 or the equivalent by at least
one nationally recognized credit rating agency;(10)commercial paper with a stated maturity of 270 days or less that is rated at
least A-1 or P-1 or the eqUivalent by either (a)two nationally recognized credit rating agencies or (b)one nationally recognized
credit rating agency if the paper is fully secured by an irrevocable letter of credit issued by a U.S.or state bank;(11)no-load
money market mutual funds registered with and regulated by the Securities and Exchange Commission that have a dollar
weighted average stated maturity of 90 days or less and include in their investment objectives the maintenance of a stable net
asset value of $1 for each share;and (12)no-load mutual funds registered with the Securities and Exchange Commission that
have an average weighted maturity of less than two years,invest exclusively in obligations described in the this paragraph,and
are continuously rated as to investment quality by at least one nationally recognized investment rating firm of not less than AAA
or its equivalent.If specifically authorized in the authorizing document,bond proceeds may be invested in guaranteed
investment contracts that have a defined termination date and are secured by obligations of the United States or its agencies
and instrumentalities in an amount at least equal to the amount of bond proceeds invested under such contract,other than the
prohibited obligations described in the next succeeding paragraph and are pledged to the District and deposited with the District
or a third party selected and approved by the District.
The District may invest in such obligations directly or through govemment investment pools that invest solely in such obligations
provided that the pools are rated no lower than AAA or AAA-m or an equivalent by at least one nationally recognized rating
service.The District may also contract with an investment management firm registered under the Investment Advisers Act of
1940 (15 U.S.C.Section 80b-1 et seq.)or with the State Securities Board to provide for the investment and management of its
public funds or other funds under its control for a term up to two years,but the District retains ultimate responsibility as fiduciary
of its assets.In order to renew or extend such a contract,the District must do so by order,ordinance,or resolution.The District
is specifically prohibited from investing in:(1)obligations whose payment represents the coupon payments on the outstanding
principal balance of the underlying mortgage-backed security collateral and pays no principal;(2)obligations whose payment
represents the principal stream of cash flow from the underlying mortgage-backed security and bears no interest;(3)
collateralized mortgage obligations that have a stated final maturity of greater than 10 years;and (4)collateralized mortgage
obligations the interest rate ofwhich is determined by an index that adjusts opposite to the changes in a market index.
Under State law,the District is required to invest its funds under written investment policies that primarily emphasize safety of
principal and liquidity;that address investment diversification,yield,maturity,and the quality and capability of investment
management;and that include a list of authorized investments for District funds,the maximum allowable stated maturity of any
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individual investment and the maximum average dollar-weighted maturity allowed for pooled fund groups.All District funds must
be invested consistent with a formally adopted "Investment Strategy Statement"that specifically addresses each fund's
investment.Each Investment Strategy Statement will describe its objectives conceming:(1)suitability of investment type,(2)
preservation and safety of principal,(3)liquidity,(4)marketability of each investment,(5)diversification of the portfolio,and (6)
yield.
Under Texas law,the District's investments must be made "with judgment and care,under prevailing circumstances,that a
person of prudence,discretion,and intelligence would exercise in the management of the person's own affairs,not for
speculation,but for investment considering the probable safety of capital and the probable income to be derived."At least
quarterly the District's investment officers must submit an investment report to the Board detailing:(1)the investment position of
the District,(2)that all investment officers jointly prepared and signed the report,(3)the beginning market value,and any
additions and changes to market value and the ending value of each pooled fund group,(4)the book value and market value of
each separately listed asset at the beginning and end of the reporting period,(5)the maturity date of each separately invested
asset,(6)the account or fund or pooled fund group for which each individual investment was acquired,and (7)the compliance of
the investment portfolio as it relates to:(a)adopted investment strategies and (b)Texas law.No person may invest District funds
without express written authority from the Board.
Under State law,governmental bodies in the State are authorized to implement securities lending programs if (i)the securities
loaned under the program are 100%collateralized,a loan made under the program allows tor termination at any time and a loan
made under the program is either secured by (a)obligations that are described in clauses (1)through (6)of the second
paragraph under this caption,(b)irrevocable letters of credit issued by a state or national bank that is continuously rated by a
nationally recognized investment rating firm not less than "A"or its equivalent,or (c)cash invested in obligations that are
described in clauses (1)through (6)and (10)through (12)of the second paragraph under this caption,or an authorized
investment pool;(ii)securities held as collateral under a loan are pledged to the governmental body,held in the name of the
governmental body and deposited at the time the investment is made with the District or a third party designated by the District;
(iii)a loan made under the program is placed through either a primary government securities dealer or a financial institution
doing business in the State of Texas;and (iv)the agreement to lend securities has a term of one year or less.
Under State law,the District is additionally required to:(1)annually review its adopted policies and strategies,(2)adopt a rule,
order,ordinance or resolution stating that it has reviewed its investment policy and investment strategies and records any
changes made to either its investment policy or investment strategy in the respective rule,order,ordinance or resolution,(3)
require any investment officers with personal business relationships or relatives with firms seeking to sell securities to the entity
to disclose the relationship and file a statement with the Texas Ethics Commission and the Board;(4)require the qualified
representative of firms offering to engage in an investment transaction with the District to:(a)receive and review the District's
investment policy,(b)acknowledge that reasonable controls and procedures have been implemented to preclude investment
transactions conducted between the District and the business organization that are not authorized by the District's investment
policy (except to the extent that this authorization is dependent on an analysis of the makeup of the District's entire portfolio or
requires an interpretation of subjective investment standards),and (c)deliver a written statement in a form acceptable to the
District and the business organization attesting to these requirements;(5)perform an annual audit of the management controls
on investments and adherence to the District's investment policy;(6)restrict reverse repurchase agreements to not more than
90 days and restrict the investment of reverse repurchase agreement funds to no greater than the term of the reverse purchase
agreement;(7)restrict the investment in non-money market mutual funds in the aggregate to no more than 15%of the District's
monthly average fund balance,excluding bond proceeds and reserves and other funds held for debt service;(8)require local
government investment pools to conform to the new disclosure,rating,net asset value,yield calculation,and advisory board
requirements,and (9)at least annually review,revise,and adopt a list of qualified brokers that are authorized to engage in
investment transactions with the District.
Current Investments
As of January 31,2010 the District's funds were invested in the District's depository bank and TexPool as shown in the table that
follows.The District does not currently own,nor does it anticipate the inclusion of long-term securities or derivative products in
its portfolio.
Fund and InvestmentType
TexPool-lnterest and Sinking Fund
TexPool-Fire Station Construction Reserve Fund
TexPool-Operating Fund
First Financial Bank Money Market Account -Operating Fund
Total Investments
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Amount
$979,124
1,784,044
1,050,672
71,896
$3885,736
TAX DATA
District Bond Tax Rate Limitation
By law the District's tax rate for debt service on the Bonds is unlimited as to rate or amount.
Maintenance and Operations Tax
The Board is also authorized to levy and collect an annual ad valorem tax for planning,constructing,acquiring,or maintaining or
repairing or operating the District's improvements and facilities,if such maintenance and operations tax is authorized by a vote of
the District's electors.Such tax is in addition to taxes which the District is authorized to levy for paying principal of and interest
on the Bonds,and any tax bonds which may be issued in the future.As shown in APPENDIX A,TABLE 13 -"TAX RATE
DISTRIBUTION,"the District levied a 2009-2010 maintenance and operations tax for fire protection purposes of $0.1094/$100
assessed valuation and $0.02714/$100 assessed valuation for all other operations and maintenance purposes.
Overlapping Taxes
Other governmental entities whose boundaries overlap the District have outstanding bonds payable from ad valorem taxes.The
statement of direct and estimated overlapping ad valorem tax debt shown in APPENDIX A -TABLE 14 (page A-6)was
developed from several sources,including information contained in "Texas Municipal Reports,"published by the Municipal
Advisory Council of Texas.Except for the amount relating to the District,the District has not independently verified the accuracy
or completeness of such information,and no person is entitled to rely upon information as being accurate or complete.
Furthermore,certain of the entities listed below may have issued additional bonds since the dates stated in this table,and such
entities may have programs requiring the issuance of substantial amounts of additional bonds,the amount of which cannot be
determined.Political subdivisions overlapping the District are authorized by Texas law to levy and collect ad valorem taxes for
operation,maintenance ahd/or general revenue purposes in addition to taxes of debt service and the tax burden for operation,
maintenance and/or general purposes is not included in these figures.(See APPENDIX A -TABLES 14,15 &17 for information
on overlapping taxing entities.)
TAXING PROCEDURES
Authority to Levy Taxes
The Board has been authorized to levy an annual ad valorem tax on all taxable property within the District in an amount sufficient
to pay the principal of and interest on the Bonds,their pro rata share of debt service on any contract tax bonds and any
additional bonds or obligations payable from taxes which the District may hereafter issue and to pay the expenses of assessing
and collecting such taxes.The District agrees in the Order to levy such a tax from year-to-year as described more fully herein
under "THE BONDS -Security for Payment."Under Texas law,the Board is also authorized to levy and collect an ad valorem
tax for the operation and maintenance of the District and for the payment of certain contractual obligations,if authorized by its
voters.(See"TAX DATA -District Bond Tax Rate Limitation"herein.)
Property Tax Code and County-Wide Appraisal District
The Texas Property Tax Code (the "Property Tax Code")specifies the taxing procedures of all political subdivisions of the State
of Texas,including the District.Provisions ofthe Property Tax Code are complex and are not fully summarized herein.
The Property Tax Code requires,among other matters,county-wide appraisal and equalization of taxable property values and
establishes in each county of the State of Texas an appraisal district with the responsibility for recording and appraising property
for all taxing units within the county and an appraisal review board with responsibility for reviewing and equalizing the values
established by the appraisal district.The board of directors of the appraisal district selects a chief appraiser to manage the
appraisal offices of the appraisal district.The Denton Central Appraisal District and the Tarrant Appraisal District have the
responsibility for appraising property for all taxing units within Denton and Tarrant Counties,including the District.Such
appraisal values are subject to review and change by the appraisal review boards of each county.The appraisal roll as
approved by the appraisal review boards must be used by the District in establishing its tax roll and tax rate.
General:Except for certain exemptions provided by Texas law,all property with a tax situs in the District is subject to taxation by
the District;however,no effort is made by the District to collect taxes on tangible or intangible personal property not devoted to
commercial or industrial use.Principal categories of exempt property applicable to the District include:(i)property owned by the
State of Texas or its political subdivisions if the property is used for public purposes;(ii)property exempt from ad valorem taxation
by federal law;(iii)certain property owned by charitable organizations,youth development associations,religious organizations,
and qualified schools;(iv)designated historical sites;and (v)solar and wind-powered energy devices.
Freeport Exemption:Article VIII,Section 1-j of the Texas Constitution authorizing an ad valorem tax exemption for "freeport
property"was approved November 7,1989.Freeport property is goods detained in Texas for 175 days or less for the purpose of
assembly,storage,manufacturing,processing or fabrication.The District does grant this exemption.
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Goods in Transit:"Goods in Transit",which are certain goods,principally inventory,that are stored,for the purposes of
assembling,storing,manufacturing,processing or fabricating the goods,in a location that is not owned by the owner of the
goods and are transferred from that location to another location within 175 days;a taxpayer may receive only one of the freeport
exemptions or the goods-in-transit exemptions for items of personal property.The District does not exempt Goods in Transit.
Agricultural/Open-Land Exemption:Article VIII provides that eligible owners of both agricultural land (Section 1-d)and open-
space land (Section 1-d-1),including open-space land devoted to farm or ranch purposes or open-space land devoted to timber
production,may elect to have such property appraised for propertytaxation on the basis of its productive capacity.The same
land may not be qualified under both Section 1-d and 1-d-1.The District does have land that qualifies for this exemption.
Residence Homestead Exemptions:Under Section 1-b,Article VIII,and State law,the governing body of a political subdivision,
at its option,may grant an exemption of not less than $3,000 of market value ofthe residence homestead of persons 65 years of
age or older and the disabled from all ad valorem taxes thereafter levied by the political subdivision.Once authorized,such
exemption may be repealed or decreased or increased in amount (i)by the governing body of the political subdivision or (ii)by a
favorable vote of a majority of the qualified voters at an election called by the governing body of the political subdivision,which
election must be called upon receipt of a petition signed by at least 20%of the number of qualified voters who voted in the
preceding election of the political subdivision.In the case of a decrease,the amount of the exemption may not be reduced to
less than $3,000 ofthe market value.
The surviving spouse of an individual who qualifies for the foregoing exemption for the residence homestead of a person 65 or
older (but not the disabled)is entitled to an exemption for the same property in an amount equal to that of the exemption for
which the deceased spouse qualified if (i)the deceased spouse died in a year in which the deceased spouse qualified for the
exemption,(ii)the surviving spouse was at least 55 years of age at the time of the death of the individual's spouse and (iii)the
property was the residence homestead of the surviving spouse when the deceased spouse died and remains the residence
homestead of the surviving spouse.The Board has granted such elderly and disabled exemptions in the amount of
$25,000 of assessed valuation.
In addition to any other exemptions provided by the Property Tax Code,the governing body of a political subdivision,at its
option,may grant an exemption of up to 20%of the market value of residence homesteads,with a minimum exemption of
$5,000.The District does not grant the option percentage of market value exemption.
In the case of residence homestead exemptions granted under Section 1-b,Article VIII,ad valorem taxes may continue to be
levied against the value of homesteads exempted where ad valorem taxes have previously been pledged for the payment ofdebt
if cessation of the levy would impair the obligation of the contract by which the debt was created.
Disabled/Deceased Veterans Exemption:State law and Section 2,Article VIII,mandate an additional property tax exemption for
disabled veterans or the surviving spouse (for so long as the surviving spouse remains unmarried)or children (under 18 years of
age)of a deceased veteran who died while on active duty in the armed forces;the exemption applies to either real or personal
property with the amount of assessed valuation exempted ranging from $5,000 to a maximum of $12,000;provided,however,
that beginning in the 2009 tax year,a disabled veteran who receives from the from the United States Department of Veterans
Affairs or its successor 100 percent disability compensation due to a service-connected disability and a rating of 100 percent
disabled or of individual unemployability is entitled to an exemption from taxation of the total appraised value of the veteran's
residence homestead.The District does grantthe disabled I deceased veterans Exemption.
Tax Abatement:Dallas County or the City of Irving may designate all or part of the area within the District as a reinvestment
zone.Thereafter,the District may enter into tax abatement agreements with owners of real property within the District for up to
ten (10)years,all or any part of any increase in the assessed valuation of property covered by the agreement over its assessed
valuation in the year in which the agreement is executed,on the condition that the property owner make specified improvements
or repairs to the property in conformity with a comprehensive plan.All of the area of the District is included in reinvestment
zones designated by the Town of Trophy Club,fortax abatement purposes.
Valuation of Property for Taxation
Generally,all taxable property in the District must be appraised by the Denton Central Appraisal District and the Tarrant
Appraisal District (collectively,the "Appraisal District")at one hundred percent (100%)of market value as of January 1 of each
year,subject to review and approval by the Appraisal Review Board.In determining market value,either the replacement cost or
the income or the market data method of valuation may be used,whichever is appropriate.
Certain land may be appraised at less than market value under the Property Tax Code.Increases in the appraised value of
residence homesteads are limited to 10 percent annually regardless of the market value of the property.Upon application of a
landowner,land which qualifies as "open-space land"is appraised based on the category of land,using accepted income
capitalization methods applied to the average net income derived from the use of the land for agriculture and hunting or
recreational leases.Upon application of a landowner,land which qualifies as "timber land"is appraised using accepted income
capitalization methods applied to the average net income derived from the use of the land for production of timber.Land which
qualifies as an aesthetic management zone,critical wildlife management zone,or streamside management zone or is being
regenerated for timber production for 10 years after harvest is valued at one-half that amount.In the case of both open space
and timber land valuations,if the use of land changes,an additional tax is generally imposed on the land equal to the difference
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between the taxes imposed on the land for each ofthe five (5)years preceding the year in which the change of use occurs and
the tax that would have been imposed had the land been taxed on the basis of market value in each of those years,plus interest
at an annual rate of seven percent (7%)calculated from the dates on which the differences would have become due.There are
also special appraisal methods for agricultural land owned by individuals whose primary occupation and income are farming and
for recreational,park,and scenic land.Also,houses or lots held for sale by a developer or builder which remain unoccupied,are
not leased or rented and produce no income are required to be assessed at the price for which they would sell as a unit to a
purchaser who would continue the owner's business,upon application of the owner.
Once an appraisal roll is prepared and approved by the Appraisal Review Board,it is used by the District in establishing its tax
rate.The Property Tax Code requires the Appraisal District to implement a plan for periodic reappraisal of property to update
appraised values.The plan must provide for appraisal of all real property in the Appraisal District at least one every three (3)
years.It is not know what frequency of reappraisal will be utilized by the Appraisal District or whether reappraisals will be
conducted on a zone or countywide basis.
Notice and Hearing Procedures
The Tax Code establishes a "truth-in-taxation"process identifying increases in the effective tax rate.The rollback tax rate
equals 108%of the total tax rate for the prior year.If the District decides to increase the tax rate more than eight percent (8%)
above the previous year's tax rate,it must hold a public hearing and give notice to its taxpayers.If the actual tax rate adopted
exceeds the rollback tax rate,taxpayers may petition to hold an election to reduce the tax rate to the rollback tax rate for the
fiscal year.
The Tax Code also establishes a procedure for notice to property owners of reappraisals reflecting increased property values,
appraisals which are higher than renditions,and appraisals of property not previously on an appraisal roll
District and Taxpayer Remedies
The chief appraiser must give written notice before the Appraisal Review Board meeting to an affected owner if a reappraisal has
resulted in an increase in value over the prior year or the value rendered by the owner,or if property not previously included on
the appraisal roll has been appraised.Any owner who has timely filed notice with the Appraisal Review Board may appeal the
final determination by the Appraisal Review Board of the owner's protest by filing suit in Texas district court.Prior to such
appeal,however,the owner must pay the tax due on the amount of value of the property involved that is not in dispute or the
amount of tax paid in the prior year,whichever is greater,but not to exceed the amount of tax due under the order from which
the appeal is taken.In the event of such suit,the value of the property is determined by the court,or a jury if requested by any
party.Additionally,the District is entitled to challenge certain matters before the Appraisal Review Board,including the level of
appraisal of certain category of property,the exclusion of property from the appraisal records,or the grant in whole or in part of a
partial exemption,or a determination that land qualifies for a special use appraisal (agricultural or timber classification,for
example).The District may not,however,protest a valuation of individual property.
Levy and Collection ofTaxes
The rate of taxation is set by the Board based upon the valuation of property within the District as of the preceding January 1 and
the amount required to be raised for debt service,maintenance purposes,and authorized contractual obligations.
Unless the Board,or the qualified voters of the District or of Denton County or Tarrant County at an election held for such
purpose,determines to transfer the collection of taxes to the Denton Central Appraisal District or Tarrant Appraisal District or
another taxing unit,the District is responsible for the levy and collection of its taxes.The District has contracted with the
Denton County Tax Collector to collect the taxes for the District.
Taxes are due on receipt of the tax bill and become delinquent after January 31 of the following year.The date of the
delinquency may be postponed if the tax bills are mailed after January 10 of any year.Delinquent taxes are subject to a 6%
penalty for the first month of delinquency,one percent (1 %)for each month thereafter to July 1,and 12%total if any taxes are
unpaid on July 1.Delinquent taxes also accrue interest at the rate of 1%per month during the period they remain outstanding.
In addition,where a district engages an attorney for collection of delinquent taxes,the Board may impose a further penalty not to
exceed twenty percent 20%on all taxes unpaid on July 1.The District may be prohibited from collection of penalties and interest
on real property owned by the Federal Depository Insurance Corporation.In prior years the District has engaged a delinquent
tax attorney and imposed such a penalty.
District's Rights in the Event of Tax Delinquencies
Taxes levied by the District are a personal obligation of the owner of the property on January 1 of the year for which the tax is
imposed.On January 1 of each year,a tax lien attaches to property to secure the payment of all state and local taxes,penalties,
and interest ultimately imposed for the year on the property.The lien exists in favor ofthe State of Texas and each local taxing
unit,including the District,having power to tax the property.The District's tax lien is on a parity with tax liens of such other taxing
units.A tax lien on real property takes priority over the claim of most creditors and other holders of liens on the property
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encumbered by the tax lien,whether or not the debt or lien existed before the attachment of the tax lien;however,whether a lien
of the United States is on a parity with or takes priority over a tax lien of the District is determined by applicable federal law.
Personal property under certain circumstances is subject to seizure and sale for the payment of delinquent taxes,penalty,and
interest.
At any time after taxes on property become delinquent,the District may file suit to foreclose the lien securing payment of the tax,
to enforce personal liability for the tax,or both.In filing a suit to foreclose a tax lien on real property,the District must join other
taxing units that have claims for delinquent taxes against all or part of the same property.Collection of delinquent taxes may be
adversely affected by the amount of taxes owed to other taxing units,by the effects of market conditions on the foreclosure sale
price,by taxpayer redemption rights (a taxpayer may redeem property within two years after the purchaser's deed issued at the
foreclosure sale is filed in the county records)or by bankruptcy proceedings which restrict the collection of taxpayer debts.(See
"INVESTMENT CONSIDERATIONS -General-Tax Collections and Foreclosure Remedies".)
LEGAL MATTERS
Legal Opinions
Issuance of the Bonds is subject to the approving legal opinion of the Attorney General of Texas to the effect that the initial
Bonds are valid and binding obligations of the District payable from the proceeds of an annual ad valorem tax levied,without
legal limit as to rate or amount,upon all taxable property within the District.Issuance of the Bonds is also subject to the legal
opinion of McCall,Parkhurst &Horton L.L.P.("Bond Counsel"),based upon examination of a transcript of the proceedings
incident to authorization and issuance of the Bonds,to the effect that the Bonds are valid and binding obligations of the District
payable from the sources and enforceable in accordance with the terms and conditions described therein,except to the extent
that the enforceability thereof may be affected by bankruptcy,insolvency,reorganization,moratorium,or other similar laws
affecting creditors'rights or the exercise of judicial discretion in accordance with general principles of equity.Bond Counsel's,
legal opinion will also address the matters described below under "TAX MATTERS."Such opinions will express no opinion with
respect to the sufficiency ofthe security for or the marketability of the Bonds.In its capacity as Bond Counsel,McCall,Parkhurst
&Horton L.L.P.has reviewed the information describing the Bonds in the Official Statement to verify that such description
conforms to the provisions of the Order.
The legal fees to be paid Bond Counsel for services rendered in connection with the issuance of the Bonds are based upon a
percentage of Bonds actually issued,sold and delivered,and therefore,such fees are contingent upon the sale and delivery of
the Bonds.The legal opinion to be delivered concurrently with the delivery of the Bonds expresses the professional judgment of
the attorney rendering the opinion as to the legal issue 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.Though it represents the financial Advisor and certain entities that may bid on the
Bonds from time to time in matters unrelated to the issuance of the Bonds,Bond Counsel has been engaged by and only
represents the District in connection with the issuance ofthe Bonds.
Litigation
The District is not a party to any litigation or other proceeding pending or to its knowledge threatened,in any court,agency or
other administrative body (either city,state or federal)which,if decided adversely to the District would have a material adverse
effect on the financial condition of the District.
No-Litigation Certificate
The District will furnish to the Initial Purchaser 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,except as disclosed in this Official Statement,
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 ofthe Bonds.
No Material Adverse Change
The obligations of the Initial Purchaser 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 the Official Statement.
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TAX MATTERS
Opinion
On the date of initial delivery of the Bonds,McCall,Parkhurst &Horton L.L.P.,Dallas,Texas,Bond Counsel to the Issuer,will
render its opinion that,in accordance with statutes,regulations,published rulings and court decisions existing on the date
thereof ("Existing Law"),for federal income tax purposes,interest on the Bonds (i)will be excludable from the "gross income"of
the holders thereof and (ii)will not be includable in the owner's alternative minimum taxable income under section 55 of the
Internal Revenue Code of 1986 (the "Code").Except as stated above,Bond Counsel to the Issuer 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 Legal Opinion of Bond Counsel.
In rendering its opinion,Bond Counsel to the Issuer will rely upon (a)certain information and representations of the Issuer,
including information and representations contained in the Issuer's federal tax certificate,and (b)covenants of the Issuer
contained in the Bond documents relating to certain matters,including arbitrage and the use of the proceeds of the Bonds and
the property financed or refinanced therewith.Failure by the Issuer 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 to the Issuer is conditioned on compliance by
the Issuer with such requirements,and Bond Counsel to the Issuer has not been retained to monitor compliance with these
requirements subsequent to the issuance of the Bonds.
Bond Counsel's opinion represents its legal judgement 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 the 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 Issuer with respect to the Bonds or the property financed or
refinanced with proceeds of the 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 Issuer
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 ofOriginal Issue Discount
The initial public offering price to be paid for one or more maturities of the 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 (the "Original Issue Discount Bonds").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
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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)le.ss (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 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.
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 statutes,regulations,published rulings and court
decisions,all ofwhich are subject to change or modification,retroactively.
The following discussion is applicable to investors,other than those who are subject to special provisions of the Code,such as
financial institutions,property and casualty insurance companies,life insurance companies,individual recipients of Social
Security or Railroad Retirement benefits,individuals allowed an earned income credit,certain S corporations with accumulated
earnings and profits and excess passive investment income,foreign corporations subject to the branch profits tax and taxpayers
who may be deemed to have incurred or continued indebtedness to purchase tax-exempt obligations.
THE DISCUSSION CONTAINED HEREIN MAY NOT BE EXHAUSTIVE.INVESTORS,INCLUDING THOSE WHO ARE
SUBJECT TO SPECIAL PROVISIONS OF THE CODE,SHOULD CONSULT THEIR OWN TAX ADVISORS AS TO THE TAX
TREATMENT WHICH MAY BE ANTICIPATED TO RESULT FROM THE PURCHASE,OWNERSHIP AND DISPOSITION OF
TAX-EXEMPT OBLIGATIONS BEFORE DETERMINING WHETHER TO PURCHASE THE BONDS.
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 ofissue.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 ofa bond issued at an original issue discount,the "revised issue price"(Le.,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.
Qualified Tax-Exempt Obligations for Financial Institutions
Section 265(a)of the Code provides,in pertinent part,that interest paid or incurred by a taxpayer,including a "financial
institution,"on indebtedness incurred or continued to purchase or carry tax-exempt obligations is not deductible indeterrnining
the taxpayer's taxable income.Section 265(b)ofthe Code provides an exception to the disallowance of such deduction for any
interest expense paid or incurred on indebtedness of a taxpayer that is a "financial institution"allocable to tax-exempt
obligations,other than "private activity bonds,"that are designated by a "qualified small issuer"as "qualified tax-exempt
obligations."A "qualified small issuer"is any governmental issuer (together with any "on-behalf of'and "subordinate"issuers)
who issues no more than $10,000,000 of tax-exempt obligations during the calendar year,except that such amount will be
$30,000,000 for taxable years beginning after December 31,2008 and ending prior to January 1,2011.Section 265(b)(5)ofthe
Code defines the term ''financial institution"as any "bank"described in Section 585(a)(2)of the Code,or any person accepting
deposits from the public in the ordinary course of such person's trade or business that is subject to federal or state supervision
as a financial institution.Notwithstanding the exception to the disallowance of the deduction of interest on indebtedness related
to "qualified tax-exempt obligations"provided by Section 265(b)of the Code,Section 291 of the Code provides that the allowable
deduction to a "bank,"as defined in Section 585(a)(2)of the Code,for interest on indebtedness incurred or continued to
purchase "qualified tax-exempt obligations"shall be reduced by twenty-percent (20%)as a "financial institution preference item."
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The Issuer has designated the Bonds as "qualified tax-exempt obligations"within the meaning of section 265(b)of the Code.In
furtherance of that designation,the Issuer has covenanted to take such action that would assure,or to refrain from such action
that would adversely affect,the treatment of the Bonds as "qualified tax-exempt obligations."Potential purchasers should be
aware that if the issue price to the public exceeds $10,000,000 ($30,000,000 for taxable years beginning after December 31,
2008 and ending prior to January 1,2011),there is a reasonable basis to conclude that the payment of a de minimis amount of
premium in excess of $10,000,000 ($30,000,000 for taxable years beginning after December 31,2008 and ending prior to
January 1,2011)is disregarded,however,the Internal Revenue Service could take a contrary view.If the Internal Revenue
Service takes the position that the amount of such premium is not disregarded,then such obligations might fail to satisfy the
aforementioned dollar limitation and the Bonds would not be "qualified tax-exempt obligations."
CONTINUING DISCLOSURE OF INFORMATION
In the Order,the Issuer has made the following agreement for the benefit of the holders and beneficial owners of each of the
Bonds.The Issuer is required to observe the agreement for so long as it remains obligated to advance funds to pay the Bonds.
.Under the agreement,the Issuer will be obligated to provide certain updated financial information and operating data annually,
and timely notice of specified material events,to the Municipal Securities Rulemaking Board (the "MSRB").
Annual Reports
The Issuer will provide certain updated financial information and operating data to the MSRB.The District will provide to any
quantitative financial information and operating data with respect to the District of the general type included in this Official Statement.
The information to be updated includes Tables 1,12 and 13 of Appendix A,and the annual audited financial statements ofthe District.
The Issuerwill update and provide this information within six months after the end of each fiscal year ending in and after 2010.
The financial information to be provided may be set forth in full in one or more documents or may be included by specific
reference to any document available to the public on the MSRB's Internet Website or filed with the SEC,as permitted by SEC
Rule 15c2-12 (the "Rule").The updated information will include audited financial statements for the Issuer,if the Issuer
commissions an audit and it is completed by the required time.If audited financial statements are not available by the required
time,the Issuer will provide unaudited financial statements by the required time and audited financial statements when and if
such audited financial statements become available.Any such financial statements will be prepared in accordance with the
accounting principles described in Appendix D or such other accounting principles as the Issuer may be required to employ from
time to time pursuant to State law or regulation.
The Issuer's current fiscal year end is September 30.Accordingly,it must provide updated information by the last day in March
in each year,unless the Issuer changes its fiscal year.If the Issuer changes its fiscal year,it will notify the MSRB of the change.
Material Event Notices
The Issuer will also provide timely notices of certain events to certain information vendors.The Issuer 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.Neither the Bonds nor the Order makes any provision for debt
service reserves or liquidity enhancement.In addition,the Issuer will provide timely notice of any failure by the Issuer to provide
information,data,or financial statements in accordance with its agreement described above under "Annual Reports".The Issuer
will provide each notice described in this paragraph to the MSRB.
Availability of Information
The Issuer has agreed to provide the foregoing financial information and operating data only as described above.Investors will
be able to access continuing disclosure information filed with the MSRB free of charge at www.emma.msrb.org.
Limitations and Amendments
The Issuer has agreed to update information and to provide notices of material events only as described above.The Issuer 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 Issuer
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 Issuer disclaims any contractual or tort liability for damages resulting in whole or in part from any
breach of its continuing disclosure agreement or from any statement made pursuant to its agreement,although holders or
beneficial owners of Bonds may seek a writ of mandamus to compel the Issuer to comply with its agreement.
The Issuer may amend its continuing disclosure agreement 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 Issuer,if the agreement,as
amended,would have permitted an underwriter to purchase or sell Bonds in the offering described herein in compliance with the
24
Rule,taking into account any amendments or interpretations of the Rule to the date of such amendment,as well as such
changed circumstances,and either the holders of a majority in aggregate principal amount of the outstanding Bonds consent or
any person unaffiliated with the Issuer (such as nationally recognized bond counsel)determines that the amendment will not
materially impair the interests of the beneficial owners of the Bonds.The Issuer may also repeal or amend these provisions if
the SEC amends or repeals the applicable provisions of the Rule or any court of final jurisdiction enters jUdgment that such
provisions of the Rule are invalid,but in either case 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 giving effect to (a)such
provisions as so amended and (b)any amendments or interpretations of the Rule.If the Issuer 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 Agreements
For the last five years,the District has complied in all material respects with its previous continuing disclosure agreements made
in accordance with the Rule.
FINANCIAL ADVISOR
Southwest Securities is employed as Financial Advisor to the District to assist in the issuance of the Bonds.In this capacity,the
Financial Advisor has compiled certain data relating to the Bonds that is contained in this Official Statement.The Financial
Advisor has not independently verified any of the data contained herein or conducted a detailed investigation of the affairs of the
District to determine the accuracy or completeness of this Official Statement.Because of their limited participation,the Financial
Advisor assumes no responsibility for the accuracy or completeness of any of the information contained herein.The fee of the
Financial Advisor for services with respect to the Bonds is contingent upon the issuance and sale of the Bonds.In the normal
course of business,the Financial Advisor may from time to time sell investment securities to the District for the investment of
debt proceeds or other funds of the District,upon the request of the District.
OFFICIAL STATEMENT
Updating the Official Statement During Underwriting Period
If,subsequent to the date of the Official Statement to and including the date the Initial Purchaser is no longer required to provide
an Official Statement to potential customers who request the same pursuant to Rule 15c2-12 of the federal Securities Exchange
Act of 1934 (the "Rule")(the earlier of (i)90 days from the "end of the underwriting period"(as defined in the Rule)and (ii)the
time when the Official Statement is available to any person from a nationally recognized repository,but in no case less than 25
days after the "end of the underwriting period"),the District learns or is notified by the Initial Purchaser of any adverse event
which causes any of the key representations in the Official Statement to be materially misleading,the District will promptly
prepare and supply to the Initial Purchaser a supplement to the Official Statement which corrects such representation to the
reasonable satisfaction of the Initial Purchaser.(See "DELIVERY OF THE BONDS AND ACCOMPANYING DOCUMENTS"in
the Official Notice of Sale herein.)The obligation of the District to update or change the Official Statement will terminate when
the District delivers the Bonds to the Initial Purchaser (the "end of the underwriting period"within the meaning of the Rule),
unless the Initial Purchaser provides written notice to the District that less than all of the Bonds have been sold to ultimate
customers on or before such date,in which case the obligation to update or change the Official Statement will extend for an
additional period of time of 25 days after all of the Bonds have been sold to ultimate customers (but no longer than the earlier of
(i)90 days from the "end of the underwriting period"(as defined in the Rule)and (ii)the time when the Official Statement is
available to any person from the MSRB,but in no case less than 25 days after the "end of the underwriting period"for the
Bonds).In the event the Initial Purchaser provides written notice to the District that less than all of the Bonds have been sold to
ultimate customers,the Initial Purchaser agrees to notify the District in writing following the occurrence of the "end of the
underwriting period"as defined in the Rule.
Forward-Looking Statements Disclaimer
The statements contained in this Official Statement,and in any other information provided by the District,that are not purely
historical,are forward-looking statements,including statements regarding the District'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 District on the date hereof,and the
District assumes no obligation to update any such forward-looking statements.The District's actual results could differ materially
from those discussed in such forward-looking statements.
The forward-looking statements included herein are necessarily based on various assumptions and estimates and are inherently
subject to various risks and uncertainties,including risks and uncertainties relating to the possible invalidity of the underlying
assumptions and estimates and possible changes or developments in social,economic,business,industry,market,legal,and
regulatory circumstances and conditions and actions taken or omitted to be taken by third parties,including customers,
suppliers,business partners and competitors,and legislative,judicial,and other governmental authorities and officials.
25
Assumptions related to the foregoing involve judgments with respect to,among other things,future economic,competitive,and
market conditions and future business decisions,all of which are difficult or impossible to predict accurately and many of which
are beyond the control of the District.Any of such assumptions could be inaccurate and,therefore,there can be no assurance
that the forward-looking statements included in this Official Statement will prove to be accurate.
OTHER MATTERS
Initial Purchaser
After requesting competitive bids for the Bonds,the District accepted the bid of Southwest Securities,Inc.(the "Initial Purchaser
of the Bonds")to purchase the Bonds at the interest rates shown on the inside cover page of the Official Statement at a price of
par plus a cash premium of $1,000.The Issuer has expressly consented in writing to allow Southwest Securities,Inc.the option
to bid on the Bonds.Compensation earned by Southwest Securities,Inc.as Initial Purchaser of the Bonds will be in addition to
fees received by Southwest Securities,Inc.as Financial Advisor as described under the caption "FINANCIAL ADVISOR."
The Initial Purchaser of the Bonds can give no assurance that any trading market will be developed for the Bonds after their sale
by the District to the Initial Purchaser of the Bonds.The District has no control over the price at which the Bonds are
subsequently sold and the initial yield at which the Bonds will be priced and reoffered will be established by and will be the
responsibility of the Initial Purchaser of the Bonds.
Legal Investment and Eligibility to Secure Public Funds in Texas
Section 1201.041 of the Public Security Procedures Act (Chapter 1201,Texas Government Code)provides that the Bonds are
negotiable instruments governed by Chapter 8,Texas Business and Commerce Code,and are legal and authorized investments
for insurance companies,fiduciaries,and trustees,and for the sinking fund of municipalities or other political subdivisions or
public agencies of the State of Texas.In addition,various provisions of the Texas Finance Code provide that,subject to a
prudent investor standard,the Bonds are legal investments for state banks,savings banks,trust companies with at least $1
million ofcapital and savings and loan associations.The Bonds are eligible to secure deposits of any public funds of the state,its
agencies and political subdivisions,and are legal security for those deposits to the extent of their market value.For political
subdivisions in Texas which have adopted investment policies and guidelines in accordance with the Public Funds Investment
Act (V.T.CA,Government Code,Chapter 2256),the Bonds may have to be assigned a rating of "A"or its equivalent as to
investment quality by a national rating agency before such obligations are eligible investments for sinking funds and other public
funds.(See "RATINGS"herein.)
No representation is made that the Bonds will be acceptable to public entities to secure their deposits or acceptable to such
institutions for investment purposes.The District has made no investigation of other laws,rules,regulations or investment
criteria which might apply to any such persons or entities or which might otherwise limit the suitability of the Bonds for any of the
foregoing purposes or limit the authority of such persons or entities to purchase or invest in the Bonds for such purposes.The
District has not made any review of the laws in other states to determine whether the Bonds are legal investments for various
institutions in those states.
Registration and Qualification of Bonds for Sale
No registration statement relating to the offer and sale of the Bonds has been filed with the Securities and Exchange
Commission under the Securities Act of 1933,as amended,in reliance upon the exemptions provided thereunder.The Bonds
have not been registered or qualified under the Securities Act of Texas in reliance upon various exemptions contained therein;
nor have the Bonds been registered or qualified under the securities laws of any other jurisdiction.The District assumes no
responsibility for registration of the Bonds under the securities laws of any other jurisdiction in which the Bonds,may be offered,
sold or otherwise transferred.This disclaimer of responsibility for registration or qualification for sale or other disposition ofthe
Bonds shall not be construed as an interpretation of any kind with regard to the availability of any exemption from securities
registration or qualification provisions in such other jurisdiction.
Absence of Litigation
No litigation is currently outstanding or threatened which would result in any material claim against District.
Certification as to Official Statement
At the time of payment for and delivery of the Bonds,the Purchaser will be furnished a certificate executed by the proper officials
of the District acting in their official capacity,to the effect that:(a)the descriptions and statements of or pertaining to the District
contained in its Official Statement relating to the Bonds,and any addenda,supplement or amendment thereto,on the date of
such Official Statement,on the date of the sale of said Bonds,and on the date of the delivery,were and are true and correct in
all material respects;(b)insofar as the District and its affairs,including its financial affairs,are concerned,such Official
Statement did not and does not contain an untrue statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statement therein,in the light of the circumstances under which they were made,not
misleading;(c)to the best of their knowledge,insofar as the descriptions and statements,including financial data,or pertaining
to entities,other than the District and its activities,contained in such Official Statement are concerned,such statements and data
26
have been obtained from sources which the District believes to be reliable and the District has no reason to believe that they are
untrue in any material respect;and (d)there has been no material adverse change in the financial condition of the District since
September 30,2009,the date of the last audited financial statements of the Issuer,portions of which appear in the Official
Statement.
The Official Statement was approved as to form and content and the use thereof in the offering of the Bonds was authorized,
ratified and approved by the Board on the date of sale,and the Purchaser will be furnished,upon request,at the time of payment
for and the delivery of the Bonds,a certified copy of such approval,duly executed by the proper officials ofthe Issuer.
Concluding Statement
The financial data and other information contained in this Official Statement have been obtained from the District's records,
audited financial statements and other sources which are believed to be reliable.There is no guarantee that any of the
assumptions or estimates contained herein will be realized.All of the summaries of the statutes,documents and resolutions
contained in this Official Statement are made subject to all of the provisions of such statues,documents and resolutions.These
summaries do not purport to be complete statements of such provisions and reference is made to such documents for further
information.Reference is made to original documents in all respects.
This Official Statement was approved by the Board of the Issuer for distribution in accordance with the provisions of the
Securities and Exchange Commission's rule codified at 17 C.F.R.Section 240.15c2-12.
lsi Jim Budarf
lsi Dean Henry
Joint Presidents,Board of Directors
Trophy Club Municipal Utility District No.1
lsi Jim Hase
lsi James C.Thomas
Joint Secretaries,Board of Directors
Trophy Club Municipal Utility District No.1
27
[This page is intentionally left blank.]
APPENDIX A
FINANCIAL INFORMATION OF THE ISSUER
(This appendix contains quantitative financial information and operating data with respect to the Issuer.The information is onlya
partial representation and does not purport to be complete.For further and more complete information,reference should be made to
the original documents,which can be obtained from various sources,as noted.)
FINANCIAL INFORMATION OF THE ISSUER
ASSESSEp VALUATION TABLE 1
2009 Actual Market Value ofTaxable Property (100%ofActualya)$1.076.047,808
Less Exemptions:
Local Optional Over-65 $11,972,353
Disabled and Deceased Veterans'1,287,007
Agricultual Productivity Loss 3,990,915
Freeport 58,351
10%Homestead Cap Value Loss 2,957,045
Total Exempt Properly 22,740,838
Partial Exempt Property 7,208 43013717
2009 Certified Net Taxable Assessed Valuation{a)$1,033,034,091 (b)
Less:Estimated Supplemental Adjustments $(9,540,980)
2009 Estimated Net Taxable Assessed Valuation $1.023,493,111
(a)See"TAXING PROCEDURES"in the Official Statement fora description ofthe Issuer's taxation procedures.
(a)Includes taxable value of$17,256.702 for incomplete accounts andaccounts underARB Review
Source:Denton Central AppraisalDistrict and Tarrant AppraisalDistrict
GENERAL OBLIGATION BONDED DEBT
General Obligation Debt Principal Outstanding (As of February 1.2010):
IJWo/&SS Combined Tax and Revenue Refunding Bonds,Series 1997
Unlimited Tax Bonds,Series 2002
Unlimited Tax Refunding Bonds.Series 2003
Unlimited Tax Bonds,Series 2003
Unlimited Tax Refunding Bonds,Series 2005
Total General Obligation Debt Principal Outstanding
.Current Issue General Obligation Debt Principal
Unlimited Tax Bonds,Series 2010 (the "Bonds")
Total General Obligation Debt Principal Outstanding (Following the Issuance ofthe Bonds)
Interest and Sinking Fund Balance as ofJanuary 31,2010 (unaudited)
Ratio of General Obligation Debt Principal to 2009 Estimated NetTaxable Assessed Valuation
2009 Estimated Net Assessed Valuation(a)
Population Estimates:2000 -6,350;Current 2009 (Estimate)-
Per Capita 2009 Estimated Net Assessed Valuation -
Per Capita General Obligation Debt Principal -
la)See "TAXING PROCEDURES"in the Official Statement fora description ofthe Issuer's taxation procedures.
TABLE 2
$745,000
2,800,000
480,000
945,000
2,320,000
$7,290,000
$2,000,000
$9,290,000
$979,124
0.91%
$1,023,493,111
7,441
$137,548
$1,248
OTHER OBLIGATIONS TABLE 3
Interest Average Principal
Yearof Rate Final Annual Original Outstanding
Description Issue Payable Maturitv ~Amount as of9-30-09
Public Property Finance Contractual Obligations:
Improvements 2004 3.50%2012 $39,000 $270,000 $101,250
Fire Truck 2007 4.33%2014 56,000 448,000 322,000
Improvements 2009 3.90%2012 110,000 330,000 330,000
$753,250
NotesPayable:
Equipment 1999 2.50%2018 $2,245 $35,000 $17,895
Capital Lease Obligations:
Equipment 2006 4.95%2010 $33,000 $165,000 $33,000
Equipment 2008 4.00%2012 9,886 49,432 29,660
$62,660
Total OtherObligations $833,805
A-1
GENERAL OBLIGATION DEBT SERVICE REQUIREMENTS TABLE 4
Current Total The Bonds
Fiscal Year Debt Service Combined
Sept 30 Outstanding(')Principal Interest Total Debt Service
2010 $1,363,310 $-$-$$1,363,310
2011 1,380,188 114,371 114,371 1,494,559
2012 720,568 65,000 80,733 145,733 866,300
2013 722,138 65,000 78,458 143,458 865,595
2014 512,940 70,000 76,183 146,183 659,123
2015 514,205 70,000 73,733 143,733 657,938
2016 514,655 75,000 71,283 146,283 660,938
2017 519,210 80,000 68,658 148,658 667,868
2018 517,610 85,000 65,858 150,858 668,468
2019 524,955 85,000 62,883 147,883 672,838
2020 520,830 90,000 59,908 149,908 670,738
2021 521,010 95,000 56,758 151,758 672,768
2022 525,100 100,000 53,433 153,433 678,533
2023 523,030 105,000 48,433 153,433 676,463
2024 110,000 43,183 153,183 153,183
2025 115,000 37,683 152,683 152,683
2026 115,000 33,083 148,083 148,083
2027 125,000 28,368 153,368 153,368
2028 130,000 23,243 153,243 153,243
2029 135,000 17,783 152,783 152,783
2030 140,000 12,113 152,113 152,113
2031 145,000 6,163 151,163 151,163
$9379748 $2000000 $1 112301 $3112301 $12492049
(a)Does not include Public Properly Finance Contractual Obligations indebtedness (see Table 3,page A-1).
TAX ADEQUACY
2009 Estimated Net Taxable Assessed Valuation
Maximum Annual Debt Service Requirements (Fiscal Year Ending 9-30-11)
Indicated Maximum Interest and Sinking Fund Tax Rate at 99%collections
Note:Above computation is exclusive ofinvestment earnings,delinquent tax collections and
penalties and interest on delinquent tax collections.
INTEREST AND SINKING FUND MANAGEMENT INDEX
TABLE 5
$1,023,493,111
$1,494,559
$0.14750
TABLE 6
Interest and Sinking Fund Balance,Fiscal Year Ended September30,2009 $
FY 2010 Interest and Sinking Fund Tax Levy of $0.06872 at 99%Collections based on the
2009 Estimated Net Taxable Assessed Valuation of $1 ,023,493,111 Produces
Interest and Sinking Fund Deposit from Fire Department Rental Income
Budgeted Income from PID Utility Connection Fees Paid by Developer(guaranteed with bank letter of credit)
(to be depistied to I&S Fund on or before June 2010)
Total Available for Debt Service $
239,434
696,311
308,000
345,000
1,588,745
Less:General Obligation Debt Service Requirements,Fiscal Year Ending 9-30-10
Estimated Surplus at Fiscal Year Ending 9-30-10(')$
1,363,310
225,435
(a)Does notinclude delinquent tax collections,penalties and interest on delinquent tax collections or
investment earnings.
A-2
PROJECTED GENERAL OBLIGATION PRINCIPAL REPAYMENT SCHEDULE TABLE 7
(As ofFebruary 1,2010)
Principal Repayment Schedule(bl Bonds Percent of
Fiscal Year Outstanding The Unpaid at Principal
Ending 9/30 Bondscal Bonds Total End of Year Retired (%)
2010 $1,055,000 $$1,055,000 $8,235,000 11.36%
2011 1,115,000 1,115,000 7,120,000 23.36%
2012 500,000 65,000 565,000 6,555,000 29.44%
2013 520,000 65,000 585,000 5,970,000 35.74%
2014 330,000 70,000 400,000 5,570,000 40.04%
2015 345,000 70,000 415,000 5,155,000 44.51%
2016 360,000 75,000 435,000 4,720,000 49.19%
2017 380,000 80,000 460,000 4,260,000 54.14%
2018 395,000 85,000 480,000 3,780,000 59.31%
2019 420,000 85,000 505,000 3,275,000 64.75%
2020 435,000 90,000 525,000 2,750,000 70.40%
2021 455,000 95,000 550,000 2,200,000 76.32%
2022 480,000 100,000 580,000 1,620,000 82.56%
2023 500,000 105,000 605,000 1,015,000 89.07%
2024 110,000 110,000 905,000 90.26%
2025 115,000 115,000 790,000 91.50%
2026 115,000 115,000 675,000 92.73%
2027 125,000 125,000 550,000 94.08%
2028 130,000 130,000 420,000 95.48%
2029 135,000 135,000 285,000 96.93%
2030 140,000 140,000 145,000 98.44%
2031 145,000 145,000 100.00%
$7,290,000 $2,000,000 $9,290,000
(a)Excludes all PPFCO principal outstanding (see Table 2,page A-1).
FUND BALANCES TABLE 8
(As ofJanauary 31,2010
General Fund $1,012,553
Debt Service Fund 1,363,824 (al
Fire Station Construction Reserve 1,784,044
Total $4,160,421
(a)Includes additional February 2010 deposits totaling $384,700
TAXABLE ASSESSED VALUATION FOR TAX YEARS 2005-2009 Cal TABLE 9
Change From Preceding YearTax
Year
2005
2006
2007
2008
2009
Net Taxable
Assessed Valuation
$744,193,000
811,214,000
912,618,000
960,911,000
1,023,493,111 (Estimated)
Amount ($)
35,623,000
67,021,000
101,404,000
48,293,000
62,582,111
Percent (%)
5.03%
9.01%
12.50%
5.29%
6.51%
A-3
Note:
(a)Historical comparison information for Tax Years 2005-2008 represents the combined totals from two
separate entities (Trophy Club MUD NO.1 and Trophy Club MUD NO.2).
Sources:Denton Central Appraisal District,Tarrant Appraisal District andIssuer's 2009 Audited Financial
Statements (Supplemental Information)
Assessed Valuations may change during the yeardue to various supplements and protests,and
valuations on a later date or in othertables ofthis Official Statement maynot match those shown
on this table.
CLASSIFICATION OF ASSESSED VALUATION TABLE 10
%of %of %of %of %of
Cateaorv 2009 Total 2008 Total 2007 Total 2006 Total 2005 Total
Land (0)$-0.00%$186,574,000 18.75%$213,640,000 22.56%$193,906,000 23.06%$166,046,000 22.06%
Land -Homesite 188,045,683 17.48%-0.00%-0.00%-0.00%0.00%
Land -Non Homesite 271,608,898 25.24%-0.00%0.00%0.00%0.00%
Land -Agricultural 3,998,666 0.37%0.00%-0.00%-0.00%0.00%
Improvements (0)-0.00%737,273,000 74.10%638,560,000 67.43%581,667,000 69.18%518,213,000 68.85%
Improvements -Homesite 505,293,510 46.96%-0.00%0.00%0.00%0.00%
Improvements -Non Homesite 26,769,054 2.49%-0.00%-0.00%0.00%0.00%
Personal Property (oj 70,157,777 6.52%71,091,000 7.15%94,823,000 10.01%65,248,000 7.76%68,356,000 9.08%
Mineral Property 10,174,220 0.95%0.00%0.00%-0.00%-0.00%
Total Appraised Value $1,076,047,808 100.00%$994,938,000 100.00%$947,023,000 100.00%$840,821,000 100.00%$752,615,000 100.00%
Less Exemptions:
Exemptions (oj $-$34,027,000 $34,405,000 $29,607,000 $8,422,000
Optional Over-65 11,972,353
Disabled and Deceased Veterans'1,287,007
:to Agricultural Productivity Loss 3,990,915,
.j:>.Freeport 58,351
Homestead Cap Adjustment 2,957,045
Total Exempt Property 22,740,838
Partial Exempt Property 7,208
Total Exemptions $43,013,717 $34,027,000 $34,405,000 $29,607,000 $8,422,000
Certified Net Taxable $1,033,034,091 (b)$960,911,000 $912,618,000 $811,214,000 $744,193,000
Assessed Valuation
Less:Estimated Supplemental
Adjustments $(9,540,980)
Estimated Net Taxable Assessed
Valuation $1,023,493,111
(oj Historical comparison information for Tax Years 2005-2008 represents the combined totals from two separate entities (Trophy Club MUD No.1and Trophy Club MUD No.2)and detailed information
for Land,Improvements and Exemptions is not available.
(bj Includes taxable value of$17,256,702 for incomplete accounts and accounts under ARB Review.
Source:Denton Central Appraisal District,Tarrant Appraisal District and Issuer's 2009 Audited Basic Financial Statements (Supplemental Information)
Note:Assessed Valuations may change during the yeardue to various supplements andprotests,and valuations on a later date or in other tables ofthis Official Statement maynot
match those shown on this table.
PRINCIPAL TAXPAYERS 2009-2010
Name Tvpe ofProperty
Maguire Thomas Partners ETAL Commercial Office Complex
Maguire Partners Commercial Office Complex
CNL RETMT CRSI Trophy Club Texas LP Medical Plaza I Hospital
Citigroup Technology Inc.Computer-Related Services
Regency Centers LP Retail Grocery
4663 Okechobee Blvd.&Palm Beach Holdings Commercial Office Complex
Levi Strauss &Company Commercial Office
Trophy Club Medical Center Healthcare Services
Red Oak Gas Opperating Co.LP Natural Gas Wells I Mineral Exploration
Clubcorp GolfTexas LP PIS Golf Course Management
BDMR Development LLC Real Estate Development
Total
Based on a 2009 Estimated Net Taxable Assessed Valuation of $1,023,493,111 (a)
2009 Net Taxable
Assessed Valuation
$129,644,096
41,078,939
20,300,000
14,804,220
12,792,824
6,524,588
6,224,386
6,070,692
6,014,100
5,400,864
5,276,198
$254130 907
TABLE 11
%of Total 2009
Assessed
Valuation
12.67%
4.01%
1.98%
1.45%
1.25%
0.64%
0.61%
0.59%
0.59%
0.53%
0.52%
~
(aJ Excludes taxable values for incomplete accounts and accounts under ARB Review and some estimated supplemental adjustments
Source:Texas Municipal Report pUblished by the Municipal Advisory Council ofTexas and the Denton CentralAppraisal District.
PROPERTYTAX RATES AND COLLECTIONS (al (bl TABLE 12
Tax Net Taxable Tax Tax %Collections Fiscal Year
Year ssessed Valuation Rate ~Current Total Ended
2005 $744,193,000 $0.280000 $2,271,746 98.04%98.04%9-30-06
2006 811,214,000 0.280000 2,191,536 100.62%100.62%9-30-07
2007 912,618,000 0.230000 2,234,909 100.36%100.36%9-30-08
2008 960,911,000 0.244615 2,380,679 98.94%99.58%9-30-09
2009 1,023,493,111 (Estimated)0.205000 2,098,161 87.47%(c)87.47%(c)9-30-10
(aJ See wTAXING PROCEDURES -Levyand Collection ofTaxeswin the bodyofthe Official Statement for a complete discussion ofthe
District's provisions.
(bJ Historical comparison information for Tax Years 2005-2008 represents the combined totals from two separate entities
(Trophy Club MUD NO.1and Trophy Club MUD NO.2).
(eJ Current year collections as ofJanuary 31,2010.
Source:Texas Municipal Report pUblished by the Municipal Advisory Council ofTexas,the Denton Central Appraisal District and the Issuer
Note:Assessed Valuations maychange during the yeardue to various supplements andprotests,and valuations on a later date
or in othertables ofthis Official Statement may not match those shown on this table.
TAX RATE DISTRIBUTION (01 TABLE 13
2009·10 2008-09 2007-08 2006-07 2005-06 2004-05
Operations $0.027140 $0.014040 $0.010200 $0.030900 $0.030900 $0.060000
Fire Protection 0.109140 0.116020 0.120900 0.102700 0.146400 0.107600
Debt Service 0.068720 0.114555 0.098900 0.146400 0.102700 0.112400
TOTAL $0.205000 $0.244615 $0.230000 $0.280000 $0.280000 $0.280000
(aJ Historical comparison information for Tax Years 2005-2008 represents the combined totals from two separate entities
(Trophy Club MUD No.1and Trophy Club MUD No.2).
Sources:Texas Municipal Report publishedbythe M4nicipal Advisory Council of Texas
A-5
DIRECT AND OVERLAPPING DEBT DATA INFORMATION TABLE 14
The following table indicates the indebtedness,defined as outstanding bonds payable from ad valorem taxes,of governmental entities
overlapping the District and the estimated percentages and amounts of such indebtedness attributable to property within the District.
This information is based upon data secured from the individual jurisdictions and/or the Texas Municipal Reports published by the
Texas Municipal Advisory Council.Except for the amounts relating to the District,the District has not independently verified the
accuracy or completeness of such information,and no person should rely upon such information as being accurate or complete.
Furthermore,certain ofthe entities listed below may have issued additional bonds since the date stated,and such entities may have
programs requiring the issuance of substantial amounts of additional bonds,the amount ofwhich cannot be determined.
As of
02-01-10
02-01-10
02-01-10
02-01-10
02-01-10
02-01-10
02-01-10
02-01-10
Taxing Body
Carroll Independent School District
Denton County
Northwest Independent School District
Tarrant County
Tarrant County College District
Tarrant County Hospital District
Town of Trophy Club
Westlake,Town of
Total Net Overlapping Debt
Trophy Club MUD NO.1 02-01-10
Total Gross Direct Principal and Overlapping Debt
Gross Debt
Principal
$194,305,512
374,335,734
515,730,159
322,210,000
42,785,000
28,810,000
8,722,000
21,525,000 (a)
$1,508,423,405
9,290,000 (b)
$1,517,713,405
%
Overlapping
3.16%
1.16%
6.78%
0.18%
0.18%
0.18%
94.53%
21.16%
100.00%
Amount
Overlapping
$6,140,054
4,342,295
34,966,505
579,978
77,013
51,858
8,244,907
4,554,690
$58,957,299
9,290,000 (b)
$68,247,299 (b)
Ratio of Direct and Overlapping Debt to 2009 Estimated Net Taxable Assessed Valuation
Ratio of Direct and Overlapping Debt to 2009 Market Value
Per CapitaDirect and Overlapping Debt
(a)Includes $560,000 Tax Notes,Series 2010 sold as a Private Placment to be delivered on March 9,2010.
(b).Includes the Bonds.
Source:Most Recent Texas Municipal Reports published by the Municipal Advisory Council ofTexas.
ASSESSED VALUATION AND TAX RATE OF OVERLAPPING ENTITIE~
6.67%
6.34%
$9,172
TABLE 15
Governmental Entity
Carroll Independent School District
Denton County
Northwest Independent School District
Tarrant County
Tarrant County College District
Tarrant County Hospital District
Town of Trophy Club
Westlake,Town of
2009 NetTaxable
Assessed Valuation
$5,340,419,857
53,341,773,091
10,381,883,214
121,465,013,127
122,129,756,706
121,565,707,495
668,728,455
920,264,010
2009
%ofActual Tax Rate
100%$ 1.41500
100%0.24980
100%1.35500
100%0.26400
100%0.13770
100%0.22790
100%0.47000
The Town of Westlake does not levy a property tax.
Source:Most recent Texas Municipal Reports publishedby The MunicipalAdvisory Council of Texas and Denton and Tarrant
County Appraisal Districts
A-6
AUTHORIZED BUT UNISSUED DIRECT GENERAL OBLIGATION BONDS TABLE 16
Date of Amount Issued This
Taxing Body Authorization Purpose Authorized To Date Issue Unissued
Trophy Club MUD No.1 10-07-75 Water &Sewer $12,344,217 $11,115;000 $$1,229,217
04-04-81 Water &Sewer 5,800,000 3,760,000 2,040,000
10-29-88 Water &Sewer 2,500,000 2,500,000
05-10-08 Fire Station 2,000,000 2,000,000
$22.644,217 $14,875,000 $2,000,000 $5,769,217
AUTHORIZED BUT UNISSUED GENERAL OBLIGATION BONDS
OF OVERLAPPING GOVERNMENTAL ENTITIES TABLE 17
Date of Amount Issued
Taxing Body Authorization Purpose Authorized To Date Unissued
CarroiliSD 05-09-09 School Buildings $114,100,000 $56,600,000 $57,500,000
05-09-09 School Buildings 19,300,000 6,000,000 13,300,000
05-09-09 School Buildings 4,600,000 2,400,000 2,200,000
$138.000.000 $65,000.000 $73.000,000
Denton County 01-16-99 Road $85,320,000 $77,629,375 $7,690,625
05-15-04 Road 186,970,000 131,465,000 55,505,000
05-15-04 Equipment 2,000,000 2,000,000
11-04-08 Road 310,000,000 41,820,000 268,180,000
11-04-08 County Buildings 185,000,000 47,455,000 137,545,000
$769.290,000 $298,369,375 $470,920,625
Northwest I S D 05-10-08 School Buildings $260,000,000 $65,000,000 $195,000,000
Tarrant County 04-04-87 Courthouse Improv.$47,000,000 $46,500,000 $500,000 (a)
08-08-98 Law Enforcement Ctr 70,600,000 63,100,000 7,500,000
08-08-98 Healthcare Facility 9,100,000 1,000,000 8,100,000
05-13-06 Road &Bridge 200,000,000 96,000,000 104,000,000
05-13-06 County Buildings 62,300,000 16,000,000 46,300,000
05-13-06 Juvenile Deten.Ctr.36,320,000 4,200,000 32,120,000
$425,320.000 $226,800,000 $198,520,000
Tarrant Co.College Dist None
Tarrant Co.Hospital Dis None
Trophy Club,Town of 11-16-09 Parks &Recreation $5,000,000 $$5,000,000
Westlake,Town of None
(8)The County will not issue authorization due to age.
Source:Most recent Texas Municipal Reports published byThe Municipal Advisory Council of Texas and the Issuer.
A-7
GENERAL FUND COMPARATIVE SCHDULES OF
REVENUES AND EXPENDITURES TABLE 18
Fiscal Year Ended September 30
2009 2008 2007 2006 2005
Revenueand Other Financing Sources:
Ad Valorem Property Taxes $1,283,705 $1,002,608 $909,495 $1,038,439 $894,343
Water &Wastewater Charges 3,721,868 3,678,859 3,151,144 4,005,608 3,355,439
Utility Fees 515,200
Inspection and Tap Fees 4,975 22,550 32,900 42,725 79,625
Interest Earned 20,755 69,447 106,168 57,329 21,840
Capital Proceeds/Contractual Oligations 330,000 49,432 165,000
Miscellaneous and Other 199,780 116,295 131,124 71,151 45,937
Total Revenues and Other Financing
Sources:$6,076,283 $4,939,191 $4,330,831 $5,380,252 $4,397,184
Expenditures and OtherFinancing Uses:
Administrative $1,297,613 $905,052 $835,590 $769,646 $806,272
Water Operations 1,811,385 1,934,792 1,638,294 1,916,008 1,632,987
Wastewater Operations 999,388 500,224 480,798 469,292 468,513
Wastewater Collection System 294,869 409,948 402,482 673,422 328,419
Information Systems 175,698 187,908 124,987 60,557 55,476
Contribution to Trophy Club Fire Dept.783,736 902,353 725,764 724,738 579,873
Contribution to JointVenture 95,000
Capital Outlay 29,379 442,782 31,381 26,678
Miscellaneous 383,009 45,457 135,121 67,054 200,454
Total Expenditures and Other Financing
Uses:$5.745.698 $4.915,113 $4.785.818 $4.712098 $4,193,672
Excess (Deficit)of Revenues and Other
Financing Sources Over (Under)
Expenditures and Other Financing Uses $330,585 $24,078 $(454,987)$668,154 $203,512
Beginning Fund Balance -October 1(Restated)
(Restated)2,501,593 2,477,515 2,932,502 2,264,348 2,060,836
Ending Fund Balance -September 30 $2832178 $2501 593 $2477515 $2932502 $2264348
Total Active Retail Connections
Water and/orWastewaterConnections 3,161 3,092 2,827 2,799 2,794
NOTE:Historical comparison information forFiscal Years 2006-2009 represents the combined totals from two separate
entities (Trophy Club MUD No.1and Trophy Club MUD No.2)
N/A =Not Available
Source:The Issuer's 2009 AuditedFinancial Statements
DEBT SERVICE FUND COMPARATIVE SCHEDULES OF
REVENUES AND EXPENDITURES TABLE 19
Fiscal Year Ended September 30
2009 2008 2007 2006 2005
Revenue and OtherFinancing Sources:
Ad Valorem Property Taxes $1,100,081 $1,302,763 $1,325,143 $1,309,781 $1,357,464
Penalties and Interest 12225 4,558
Transfers In 383,009 4,558
Interest Earned 4,105 23,326 43,456 32,279 18,724
Miscellaneous and Other 29,379 29,379 41,210 11,831
Total Revenuesand OtherFinancing
Sources:$1,499,420 $1,355,468 $1,397,978 $1,383,270 $1,397,135
Expenditures and Other Financing Uses:
Principal Retirement $1,025,000 $975,000 $945,000 $636,635 $752,795
Interestand Fiscal Charges 352,195 390,565 425,838 728,740 806,970
Total Expendituresand Other Financing
Uses:$1.377.195 $1.365.565 $1.370,838 $1.365,375 $1,559,765
Excess (Deficit)of Revenues and Other
Financing Sources Over(Under)
Expenditures and OtherFinancing Uses $122,225 $(10,097)$27,140 $17,895 $(162,630)
Beginning Fund Balance·October 1(Restated)
(Restated)117,209 N/A N/A N/A N/A
Ending Fund Balance -September30 $239434 N/A N/A N/A N/A
A-a
APPENDIXB
GENERAL INFORMATION REGARDING THE TOWN OF TROPHY CLUB AND DENTON COUNTY,TEXAS
GENERAL INFORMATION REGARDING THE TOWN OF TROPHY CLUB
AND DENTON COUNTY,TEXAS
TOWN OF TROPHY CLUB
General
The Town of Trophy Club (the "Town"),incorporated in January of 1985 is Texas's first premiere planned residential and
country-club community.The Town is located in the southern portion of the Denton County (the "County")on State Highway 114
approximately 8 miles west of the City of Grapevine,17 miles south of the City of Denton and 14 miles northwest of the Dallas-
Fort Worth Intemational Airport.Lake Grapevine is located approximately 2 miles north and east of the Town.The majority of
property within the Town consists of single-family and multi-family housing.The Solana Business Complex is located adjacent to
the Town's eastern border in the cities of Westlake and Southlake.Both residents and businesses of the Town are furnished
water and wastewater treatment from Trophy Club Municipal Utility District No.1.The Town's 2000 Census was 6,350,which is
a 61.9%increase over the 1990 Census.The Town's 2009 population estimate is 8,211.
Source:Latest Texas Municipal Report published by the Municipal Advisory Council of Texas,U.S.Census Report and the
Town ofTrophy Club.
AWAIIUO•
MAP OF TE~,QS
SIlC!l/ING LOCATlOK or
Population:
LUIIOCX•
t.4ID1..AND•
Year
2009 Estimate
2000 Census
1990 Census
1980 Census
"""--•
WAC;O•
AUSTIN
•
Town of
Trophy Club
8,211
6,350
3,922
N/A
Denton
County
628,300
423,976
273,525
143,126
Sources:United States Bureau ofthe Census,North Central Texas Council ofGovernment and the Town of Trophy Club
B-1
Leading Employers in the District:
Employer
Maguire Partners
Northwest Independent School District
Trophy Club Country Club
Trophy Club Country Club
Tom Thumb
Town of Trophy Club &Trophy Club MUD #1
Ivy Glen
Blockbuster
Bank ofAmerica
Texas National Bank
Quizno's
Beck Properties/Centurion
Source:Information from the Issuer
Education
Type of Business
Commercial Office Complex
Public School District
Country Club
Country Club and Golf Course
Retail Grocery
Municipal Governmental Entities
Daycare
Video Rental/Sales
Financial Institution
Financial Institution
Delicatessen
Real Estate Development
Number of
Employees (2009)
3,531
267
100
99
90
87
31
12
7
6
4
4
The Town is served by the Northwest Independent School District (the "School District"or "Northwest ISO").Northwest ISO
covers approximately 232 square miles in Denton,Wise and Tarrant Counties.In addition to serving the Town,the School
District also serves the communities of Aurora,Fairview,Haslet,Justin,Newark,Northlake,Rhome,Roanoke and portions of
Flower Mound,Fort Worth,Keller,Southlake and Westlake.Northwest ISO is comprised of 14 primary schools for grades pre-
kindergarten through fifth,3 middle schools for grades sixth through eighth,2 high schools for grades ninth through twelfth,and
two alternative education campuses for grades seventh through twelfth.One of the high schools,Byron Nelson High School,is
located in the Town of Trophy Club.It opened in August 2009 with ninth and tenth grades.Eleventh grade will be added in
August 2010,and twelfth grade will attend Byron Nelson High School in August 2011.All campuses offer enriched curricula with
special programs for gifted/talented students as well as students achieving below grade level,and all are equipped with
computers and full cafeteria service.The School District serves a 2009-2010 estimated enrollment of 14,096 students (as of
February 1,2010).
Source:Information from Northwest Independent School District and the Town ofTrophy Club
DENTON COUNTY
General
Denton County (the "County")is located in north central Texas.The County was created in 1846.It is the eighth most populous
county in the state occupying a land area of 911 square miles.The population of the County has grown by nearly 41 %since the
2000 census.The County seat is the City of Denton.
The economy is diversified by manufacturing,state supported institutions,and agriculture.The Texas Almanac designates
cattle,horses,poultry,hay and wheat as the principal sources of agricultural income.Minerals produced in Denton County
include natural gas and clay.There were 212.6 billion cubic feet of natural gas recovered in 2008,making it the 8th largest gas
producing county in the state.
Institutions of higher education include University of North Texas and Texas Woman's University with a combined 2009 fall
enrollment of over 64,000.
Nearby Lake Lewisville attracts over 3,000,000 visitors annually.
Alliance Airport,the largest industrial airport in the world is located in the county and continues to attract new transportation,
distribution,and manufacturing tenants.The Texas Motor Speedway,a major NASCAR race track,was completed in 1997 and
has had a positive impact on employment and recreational spending for the area.A major Wal-Mart distribution center located in
Sanger is adding to the growth of the northern portion of the County.Robson Development is constructing one of the nation's
largest new communities for retired citizens in the southern portion of the County.
Source:Texas Municipal Report and information from the County:
B-2
Major Employers in Denton County
Employer
University of North Texas
Lewisville Independent School District
Frito Lay Co
American Airlines
Texas Women's University
Denton Independent School District
Horizon Health
Denton State School
Xerox Corporation
Denton County
City of Denton
Federal Express
Denton Reg.Medical Center
Wal-Mart Distribution Center
Medical Center of Lewisville
FEMA
Source:Denton County Economic Development
LaborForce Statistics
Principal Line of Business
Education
Education
Distribution Center
Airline
Education
Education
Healthcare
MHMR Facility
Office Equipment
County Government
Municipality
Mail Center
Medical Center
Distribution Center
Health Care
Emergency Management
Number of
Employees
7,100
4,500
2,436
2,350
2,200
2,000
1,500
1,473
1,400
1,227
1,200
863
850
800
769
750
Denton County
Civilian Labor Force
Total Employed
Total Unemployed
%Unemployed
%Unemployed (Texas)
%Unemployed (United States)
December 2009 December 2008
351,583 338,134
325,993 320,416
25,590 17,718
7.3%5.2%
8.0%5.7%
9.7%7.1%
Source:Texas Workforce Commission,Labor Market Information Department.
B-3
[This page is intentionally left blank.]
APPENDIXC
FORM OF LEGAL OPINION OF BOND COUNSEL
Proposed Form of Opinion of Bond Counsel
An opinion in substantially thefollowingform will be delivered by
McCall,Parkhurst &Horton L.L.P.,BondCounsel,upon the delivery ofthe Bonds,
assuming no material changes in facts or law.
[DATE OF DELIVERY]
TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO.1
UNLIMITED TAX BONDS,SERIES 2010,DATED APRIL 1,2010
IN THE AGGREGATE PRINCIPAL AMOUNT OF $2,000,000
AS BOND COUNSEL FOR TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO.1 (the
"District")issuer ofthe Bonds described above (the "Bonds"),we have examined into the legality and validity of
the Bonds,which bear interest from the dates and mature on the dates,and are subject to redemption,in
accordance with the terms and conditions stated in the text ofthe Bonds.Terms used herein and not otherwise
defmed shall have the meaning given in the Order ofthe District authorizing the issuance and sale ofthe Bonds
(the "Order").
WE HAVE EXAMINED the Constitution and laws of the State of Texas,and other documents
authorizing and relating to the issuance ofsaid Bonds,including one ofthe executed Bonds (Bond Number T-1),
and specimens ofBonds to be authenticated and delivered in exchange for the Bonds.
BASED ON SAID EXAMINATION,IT IS OUR OPINION THAT the Bonds have been authorized
and issued and the Bonds delivered concurrently with this opinion have been duly delivered,and that,assuming
due authentication,Bonds issued inexchange therefor will havebeenduly delivered,inaccordance with law,and
that said Bonds,except as may be limited by laws applicable to the District relatingto bankruptcy,reorganization
and other similar matters affecting creditors'rights generally or by general principles ofequity which permit the
exercise ofjudicial discretion,constitute valid and legally binding obligations ofthe District,payable from ad
valorem taxes to be levied and collectedbythe District upon taxable property within the District,which taxes the
District has covenantedto levy in an amount sufficient to paythe interest on and the principal ofthe Bonds.Such
covenant to levy taxes is subject to the right ofa city,under existing Texas law,to annex all ofthe territory within
the District;to take over all properties and assets ofthe District;to assume all debts,liabilities,and obligations of
the District,including the Bonds;and to abolish the District or ifthe District consolidates with another District.
IT IS FURTHEROUR OPINION THAT,except as discussed below,under the statutes,regulations,
published rulings,and court decisions existing on the date ofthis opinion,for federal income tax purposes,the
interest on the Bonds (i)is excludable from the gross income ofthe owners thereofand (ii)is not includable in an
owner's alternative minimum taxable income under section 55 ofthe Internal Revenue Code of1986 (the "Code").
In expressing the aforementioned opinions,we have relied on,certain representations,the accuracy ofwhich we
have not independently verified,and assume compliance with certaincovenants regarding the use and investment
ofthe proceeds ofthe Bonds and the use ofthe property financed therewith.We callyour attention to the fact that
ifsuch representations are determined to be inaccurate or ifthe Issuer fails to comply with such covenants,interest
on the Bonds may become includable in gross income retroactively to the date ofissuance ofthe Bonds.
EXCEPT AS STATED ABOVE,we express no opinion as to any other federal,state or local tax
consequences ofacquiring,carrying,owning or disposing ofthe Bonds.
OUROPINIONS ARE BASED ON EXISTING LAW,which is subject to change.Such opinions are
further based on our knowledge of facts as ofthe date hereof.We assume no duty to update or supplement our
opinions to reflect any facts orcircumstances that may thereafter come to our attentionorto reflect any changesin
any law that may thereafter occur or become effective.Moreover,our opinions are not a guarantee ofresult and
are not binding onthe Internal Revenue Service (the "Service");rather,such opinions represent our legaljudgment
based upon our review ofexisting law and in reliance upon the representations and covenants referenced above
that we deemrelevant to such opinions.The Service has an ongoing audit program to determine compliance with
rules that relate to whether interest on state or local obligations is includable in gross income for federal income
tax purposes.No assurance can be given whether or not the Service will commence an audit ofthe Bonds.Ifan
audit is commenced,in accordance with its currentpublishedprocedures the Service is likely to treat the Issuer as
the taxpayer.We observe that the Issuer has covenanted not to take any action,or omit to take any action within
its control,that iftaken or omitted,respectively,may result in the treatment ofintereston the Bonds as includable
in gross income for federal income tax purposes.
WE EXPRESS NO OPINION as to any insurance policies issued with respect to the payments due for
the principal ofand interest on the Bonds,nor as to any such insurance policies issued in the future.
OUR SOLE ENGAGEMENT in connection with the issuance ofthe Bonds is as Bond Counsel for the
Issuer,and,in that capacity,we have been engaged by the Issuer for the sole purpose ofrendering our opinions
with respect to the legality and validity ofthe Bonds under the Constitution and laws ofthe State ofTexas,and
with respect to the exclusionfrom gross income ofthe interest on the Bonds for federal income tax purposes,and
for no other reason or purpose.The foregoing opinions represent our legal judgment based upon a review of
existing legal authorities that we deem relevant to render such opinions and are not a guarantee ofa result.We
have not been requestedto investigate or verify,and have not independentlyinvestigated or verified,any records,
data,or other material relating to the financial condition or capabilities ofthe Issuer,orthe disclosure thereofin
connection with the sale ofthe Bonds,and have not assumed any responsibility with respect thereto.We express
no opinion and make no comment with respect to the marketability ofthe Bonds.Our role in connection with the
Issuer's Official Statementpreparedfor use in connection with the sale ofthe Bonds has been limited as described
therein.
Respectfully,
APPENDIXD
EXCERPTS FROM THE DISTRICT'S AUDITED FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED SEPTEMBER 30,2009
(Independent Auditor's Report,General Financial Statements and Notes to the Financial Statements -not intended to be a complete
statement ofthe Issuer's financial condition.Reference is made to the complete Annual Financial Report for further infonmation.)
weaver
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
Trophy Club Municipal Utility District No.1
Trophy Club,Texas
We have audited the accompanying financial statements of the governmental activities and
each major fund of the Trophy Club Municipal Utility District No.1,(the District),as of and for
the year ended September 30,2009,which collectively comprise the District's basic financial
statements as listed in the table of contents.These financial statements are the responsibility
of the District's management.Our responsibility is to express opinions on these financial
statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United
States of America and Government Auditing Standards,issued by the Comptroller General of the
United States.Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatement.An audit
includes examining,on a test basis,evidence supporting the amounts and disclosures in the
financial statements.An audit also includes assessing the accounting principles used and
significant estimates made by management,as well as evaluating the overall financial
statement presentation.We believe that our audit provides a reasonable basis for our opinions.
In our opinion,the financial statements referred to above present fairly,in all material respects,
the respective financial position of the governmental activities,and each major fund of the
Trophy Club Municipal Utility District No.1 as of September 30,2009,and the changes in
financial position for the year then ended,in conformity with accounting principles generally
accepted in the United States of America.
The management's discussion and analysis,and budgetary comparison information on pages 3
through 10 and 32 through 33,are not a required part of the basic financial statements but are
supplementary information required by accounting principles generally accepted in the United
States of America.We have applied certain limited procedures,which consisted principally of
inquiries of management regarding the methods of measurement and presentation of the
supplementary information.However,we did not audit the information and express no opinion
on it.
In accordance with Government Auditing Standards,we have issued a report dated January 25,
2010 on our consideration of the District's internal control over financial reporting and our tests of
compliance with certain provisions of laws,regulations,contracts and grants.The purpose of that
report is to describe the scope of testing of internal control over financial reporting and compliance
and the results of that testing,and not to provide an opinion on the internal control over financial
reporting or on compliance.The report is an integral part of an audit performed in accordance
with Government Auditing Standards and should be considered in assessing the results of our
audit.
AN INDEPENDENT
MEMBER OF BAKER TILlY
INTF.R.NATIONAL
WEAVER AND TIDWELL LLP
CERTIFIED PUBUCACCOUNTANTS AND CONSULTANTS
WWWWEAVER1LPCDM
DALLAS
12m MERIT DRIVE,SUITE 1400,DALLAS.TX 75251
P(972)490 1970 F(972)7028321
Trophy Club Municipal Utility District No.1
January 25,2010
Page 2
Our audit was conducted for the purpose of forming an opinion on the financial statements that
collectively comprise Trophy Club Municipal Utility District No.1's basic financial statements.
The accompanying individual schedules and other supplementary information listed in the table
of contents are presented for the purpose of additional analysis and are not a required part of
the basic financial statements.The accompanying individual schedules and other
supplementary information have been subjected to the auditing procedures applied in the audit
of the basic financial statements and,in our opinion,are fairly stated in all material respects in
relation to the basic financial statements taken as a whole.
~~~.L.!-P
WEAVER AND TIDWELL,L.L.P.
Dallas,Texas
January 25,2010
2
TROPHY CLUB MUNICIPAl UTILITY DISTRICT NO.1
MANAGEMENT'S DISCUSSION AND ANALYSIS
September 30,2009
Trophy Club Municipal Utility District No.1,Texas (the District)Management's Discussion and
Analysis (MD&A),is a narrative overview and analysis designed to provide the reader a means
to identify and understand the financial activity of the District and changes in the District's
financial position during the fiscal year ended September 30,2009.
The Management's Discussion and Analysis is supplemental to,and should be considered
along with the District's financial statements.
Financial Highlights
As a result of the May 9,2009 election,voters approved the consolidation of Trophy Club
Municipal District No.1 (MUD 1)and Trophy Club Municipal District No.2 (MUD 2).The
.consolidation also incorporated and dissolved the Trophy Club Master District Joint Venture,
which was a joint venture of the two municipal utility districts'water and wastewater
operations.While each of the three entities budgeted and reported financial information
independently previous to the election results,state law required that the consolidation be
completed within 90 days of the election.As of August 1,2009,all budgets and financial
data for the three entities were combined as Trophy Club Municipal Utility District Number 1.
All contracts,debt instruments,and official documents of the three entities were revised
and/or reauthorized to be that of the consolidated Trophy Club Municipal Utility District
Number 1.
At the close of the fiscal year,the assets of the consolidated District exceeded its liabilities
by $9,017,058.Of this amount,$1,982,083 is unrestricted net assets and may be used to
meet the District's ongoing commitments to its citizens and creditors.
The District's consolidated net assets increased by $910,336 as a result of operations.
At the end of the fiscal year,the District's consolidated governmental funds reported a
combined fund balance of $3,071,612.
For the year ended September 30,2009,the unreserved fund balance for the General Fund
was $2,829,068,which is 53%of the total expenditures for the General Fund for fiscal year
2009.
The governmental long-term consolidated liabilities of the District decreased by $828,252.
Overview of the Financial Statements
The MD&A is intended to introduce the reader to the District's basic financial statements,which
are comprised of three components:1.Government Wide Financial Statements,2.Fund
Financial Statements,and 3.Notes to those Financial Statements.The report also contains
other required supplementary information in addition to the basic financial statements.
3
TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO.1
MANAGEMENT'S DISCUSSION AND ANALYSIS
September 30,2009
Overview ofthe Financial Statements -Continued
Government Wide Financial Statements -the government wide financial statements are
designed to provide the reader with a general overview of the District's finances in a way that is
comparable with financial statements from the private sector.The government wide financial
statements consist of two statements:
1.The Statement of Net Assets -(Page 11)this statement presents information on all of
the District's consolidated assets and liabilities;the difference between the two is
reported as net assets.Over an extended period,the increase or decrease in net assets
will serve as a good indicator of whether the financial position of the District is improving
or deteriorating.
2.The Statement of Activities -(Page 12)gives information showing how the District's
consolidated net assets have changed during the fiscal year.All revenues and
expenses are reported on the full accrual basis so certain revenue and expense items
will result in cash flows in future fiscal periods (such as uncollected taxes or unused
vacation leave).
Note:the government wide financial statements are found on pages 11 and 12 of this
report.
Fund Financial Statements - A fund is a grouping of related accounts that is used to maintain
control over resources that have been set aside for specific activities or objectives.Fund
financial statements provide detailed information about the most important funds and not about
the District as a whole as in the government-wide financial statements.
The District uses fund accounting to demonstrate compliance with finance related legal
requirements which can be categorized as governmental fund activities.
Governmental Funds -All of the District's activities are reported in governmental funds.They
are used to account for those functions known as governmental activities.But unlike
government -wide financial statements,governmental fund financial statements focus on how
monies flow into and out of those funds and their resulting balances at the end of the fiscal
year.Statements of governmental funds provide a detailed short-term view of the District's
general government operations and the basic services it provides.Such information can be
useful in evaluating a government's short-term financing requirements.
The District maintains two governmental funds.Information is presented separately in the
Governmental Fund Balance Sheet and in the Governmental Fund Statement of Revenues,
Expenditures and Changes in Fund Balances for the General Fund and the Debt Service
Funds,both of which are considered to be major funds.
4
TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO.1
MANAGEMENT'S DISCUSSION AND ANALYSIS
September 30,2009
Overview of the Financial Statements -Continued
The District adopts annual appropriated budgets for the general fund,and debt service funds.
A budgetary comparison statement is provided for each annually budgeted fund to demonstrate
compliance with its budget.
Notes to the Financial Statements -The notes provide additional information that is essential to
a full understanding of the data presented in the government-wide and fund financial
statements.The notes to the financial statements can be found on pages 17-31.
Government-wide Financial Analysis
The management discussion and analysis highlights the information provided in both the
Statement of Net Assets and Statement of Activities in the government-wide financial
statements.It may serve over an extended period of time,as a useful indicator of the District's
financial position.At the end of the fiscal year,the District's assets exceeded liabilities by
$9,017,058.Of this amount $6,791,050 (75.3%)reflects the District's investment in capital
assets (e.g.,land,buildings,machinery and equipment,net of accumulated depreciation),less
any related outstanding debt used to acquire those assets.The District uses these capital
assets to provide service to the community;therefore these assets are not available for future
spending.
Table 1
Condensed Statement of Net Assets
Current and other
Capital assets
Total Assets
Long-term liabilities
Other liabilities
Total Liabilities
$
Governmental
Pctivities
2009
3,922,519
14,018,127
17,940,646
8,194,694
728,894
8,923,588
$
Governmental
Activities
2008
3,412,180
14,000,337
17,412,517
9,022,946
681,712
9,704,658
NetAssets:
Invested in capital
Net of related debt
Restricted
Unrestricted
Total Net Assets
6,791,050 6,390,163
243,925 115,353
1,982,083 1,202,343
$9,017,058 $7,707,859
5
TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO.1
MANAGEMENT'S DISCUSSION AND ANALYSIS
September 30,2009
Government-wide Financial Analysis -Continued
District operational analysis -The following table provides a summary analysis of the District's
consolidated operations for the fiscal year ended September 30,2009.Governmental activities
have increased the District's net assets by $1,309,199 which amounts to a 17.0%increase in
net assets for the year.
Changes in net assets
Table 2
Changes in Net Assets
Governmental
Activities
2009
Governmental
Activities
2008
Total Revenue
Expenses:
General govemment
Fire
Interest and fiscal charges
Revenue:
Program reverue
Charges fa"services $
Operating Grants and Contributions
General Revenue
Ad valorem taxes
Ulrestricted investment earnings
Miscellaneous
Intergovernmental revenue
Total Expenses
Increase in net assets $
6
4,242,862 $3,901,575
33,653
2,405,928 2,299,886
24,860 92,773
165,308 115,539
569,379
6,872,611 6,979,152
4,448,268 4,190,448
770,108 902,353
345,036 400,962
5,563,412 5,493,763
1,309,199"$1,485,389
TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO.1
MANAGEMENT'S DISCUSSION AND ANALYSIS
September 30,2009
Financial analysis of the District's funds
Governmental Funds -the main focus of the District's governmental funds is to provide
information on the consolidated flow of monies to and from the funds,and to note the
consolidated unreserved fund balance,which is a good indicator of resources available for
spending in the near term.The information derived from these funds is highly useful in
assessing the District's financial requirements.The consolidated unreserved fund balance may
serve as a useful measure of the government's net resources available for use at the fiscal year
end.
At the end of the fiscal year,the District's consolidated governmental funds reported combined
ending fund balances of $3,071,612,of which 92.1%,or $2,829,068,is unreserved and
available to the District for future spending..$3,110 is reserved for prepaid items.The
remaining fund balance is not available for spending and is committed to pay debt service.
General fund budgetary highlights
Revenue:Revenues were $319,766 less than budgeted
•Water and wastewater charges were $452,954 (10.85%)less than budgeted.The
bUdget was based on estimated growth in new housing similar to the rate in the prior
fiscal year.Actual housing starts were much less than anticipated.
•Utility fees were $170,200 more than budgeted (49.3%).
Expenses:Expenses were $290,946 less than budgeted
•Salary savings compared to budget during the fiscal year were $38,319.
•Bulk water purchases related to water sales were $24,851 less than budgeted due to
unusually cool weather with a high incidence of rain.
•Electricity costs were $10,823 less than budget due to successful negotiations for
reduced electric rates.
•BUdgeted maintenance costs were $57,705 under budget for the fiscal year.-
•Fire department vacancies provided salary savings of $23,125 under budget.
•Other Fire Department operational savings in training,travel,fuel,and insurance costs
provided an additional $45,225 in budget savings during the fiscal year.
Debt Service:
•The debt service revenue was $6,763 more than budgeted.The debt service expenses
were $1 less than budget.
7
TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO.1
MANAGEMENT'S DISCUSSION AND ANALYSIS
September 30,2009
Debt Service -Continued
•Transfers from operations were $225,461 more than budgeted.The additional
transfers were made in order to establish an ending fund balance adequate to provide a
110%debt coverage ratio at the end of the subsequent fiscal year.
•The debt service reserves were increased from $117,209 to $239,434.
Overall:
•The District's revenue and other financing sources totaled $7,192,694 on expenses of
$6,739,884.
•The total fund balance increased from $2,618,802 to $3,071,612;an increase of
$452,810 or 17.3%in reserves.
Capital asset and debt administration.
The District's consolidated investments of capital assets for its governmental activities as of
September 30,2009 amounted to $14,018,127 net of accumulated depreciation.This
represents a broad range of capital assets including,but not limited to land,buildings,
improvements,machinery and equipment,vehicles,and water,wastewater treatment,and
wastewater collection systems,as well as,organization costs.
Table 3
Capital Assets at Year-end
Net of Accumulated Depreciation
Governmental Governmental
Activities Activities
2009 2008
Land $248,093 $248,093
Buildings 357,877 389,290
Improvements other than buildings 103,796 115,326
Machinery and equipment 854,109 435,298
Vehicles 533,633 617,476
Water system 5,338,964 5,104,126
Wastewater treatment system 4,082,727 4,653,503
Wastewater collection system 2,101,115 2,195,861
Organization costs 397,813 480,341
Construction in Progress 159,886
Total $14,018,127 $14,399,200
8
TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO.1
MANAGEMENT'S DISCUSSION AND ANALYSIS
September 30,2009
Capital asset and debt administration -Continued
The major additions to capital assets for the fiscal year included a $417,490 disk filter system.
Consolidated capital assets net of depreciation at year end:$14,018,127
Additional information about capital assets may be found in Notes 1 F and 5 in the notes to
financial statements.
Debt administration
Long-Term Debt -at the end of the current fiscal year the consolidated District had $8,194,694
in general obligation bonds,contractual obligation bonds,notes payable,capital lease
obligations,and accrued compensated absences,a decrease of 9.2%from the previous fiscal
year.Of this amount,$8,091,522 is backed by the full faith and credit of the government.
General debt currently outstanding
Table 4
Outstanding Debt at Year-end
Govemmental
Activities
2009
Govemmental
Activities
2008
General obligation bonds
Contract obilgations
Notes payable
capital lease obligations
Compensated aDsences
Total
$
$
7,338,272
753,250
17,895
62,660
22,617
8,194,694
$
$
8,366,802
514,000
19,649
105,546
16,949
9,022,946
9
TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO.1
MANAGEMENT'S DISCUSSION AND ANALYSIS
September 30,2009
Economic factors and next year's budgets and rates:
General fund fiscal 2010 budgetary highlights
Revenue:Operational revenue budget decreased by $983,701 from fiscal 2009.
•Property tax revenue budget increased by $145,668 due to increased valuations.
•Utility fees revenue decreased $345,000 due to the reallocation of those fees to the
Debt Service Fund.
•Water and wastewater revenue budget decreased by $94,084 due to reduced estimates
on new housing starts.
•Loan proceeds budget related to capital purchases decreased by $707,750.
•Interest revenue decreased by $12,896 as a result of lower fund balances and interest
rates.
Expenses:Operational expense budget increased by $206,728 from fiscal 2009.
•The majority of the budget increase is related to $332,660 in bulk water purchases
related to increased rates and anticipated growth.
•Payroll increases related to anticipated raises and insurance costs are $97,765.
The remainder of the budget lines in operating expenses remained basically the same.
Overall:
The consolidated District's operational budget is anticipated to have expenses of
$5,860,363 on revenues of $5,860,363 resulting in no anticipated excess or deficit.
Debt Service:
•Budgeted debt service revenues have increased from $1,267,196 in fiscal 2009 to
$1,367,310 in fiscal 2010,an increase of $100,114,or a 7.9%increase.
•Debt service appropriations decreased from $1,377,196 to $1,367,310 as a result of
normal annual variances in bond payments.
The consolidated District's overall budget for revenue decreased from $8,058,495 in fiscal
2009 to $7,227,673 in fiscal 2010 a 10.3%decrease.The overall appropriations increased
from $7,213,378 to $7,227,673 a 0.2%increase.
Requests for information
This financial report is designed to provide a general overview of the District's consolidated
finances for all interested parties.Questions concerning any of the information in this report or
requests for additional information should be directed to the Trophy Club Municipal Utility
District No.1,Director of Finance,100 Municipal Drive,Trophy Club,Texas 76262.
10
BASIC FINANCIAL STATEMENTS
TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO.1
STATEMENT OF NET ASSETS
SEPTEMBER 30,2009
ASSETS
Cash and cash equivalents
Receivables
Accounts receivable,net
Taxes
Other
Due from other governments
Prepaids
Restricted cash
Capital assets:
Land
Buildings
Improvements other than buildings
Machinery and equipment
Vehicles
Water system
Wastewater treatment system
Wastewater collection system
Organization costs
Accumulated depreciation
Deferred charges
TOTAL ASSETS
LIABILITIES
Accounts payable
Accrued liabilities
Accrued interest payable
Due to other governments
Customer deposits
Noncurrent liabilities:
Debt due within one year
Debt due in more than one year
Total liabilities
NET ASSETS
Invested in capital assets,net of related debt
Restricted for debt service
Unrestricted
TOTAL NET ASSETS
The Notes to Financial Statements are
an integral part ofthis statement.
11
Governmental
Activities
$3,077,898
514,663
55,711
5,892
37,275
3,110
135,976
248,093
506,790
292,801
1,212,378
1,502,552
8,509,288
6,432,479
4,286,723
2,331,300
(11,304,277)
91,994
$17,940,646
$431,403
78,677
25,692
53,095
140,027
1,324,400
6,870,294
8,923,588
6,791,050
243,925
1,982,083
$9,017,058
TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO.1
STATEMENT OF ACTIVITIES
YEAR ENDED SEPTEMBER 30,2009
Program Activites
Governmental activities
General government
Water operations
Wastewater operations
Wastewater collection system
Utility billing
Directors
Manager's office
Human resources
Finance
Facilities management
Information systems
Fire
Interest on long term debt
Total governmental
activities
Governmental Activities
Net (Expenses)
Revenue and
Program Changes in
Revenues Net Assets
Operating
Charges for Grants and Governmental
Expenses Services Contributions Activities
$960,449 $4,242,862 $$3,282,413
1,125,502 (1,125,502)
999,388 (999,388)
261,869 (261,869)
160,719 (160,719)
31,244 (31,244)
463,252 (463,252)
38,681 (38,681)
173,359 (173,359)
70,291 (70,291)
163,514 (163,514)
770,108 33,653 (736,455)
345,036 (345,036)
$5,563,412 $4,242,862 $33,653 (1,286,897)
General Revenues:
Ad valorem taxes
Investment income
Miscellaneous
Total general revenues
Change in net assets
Net Assets -beginning of year,as restated
Net Assets·end of year
The Notes to Financial Statements are
an integral part of this statement.
12
2,405,928
24,860
165,308
2,596,096
1,309,199
7,707,859
$9,017,058
TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO.1
BALANCE SHEET
GOVERNMENTAL FUNDS
SEPTEMBER 30,2009
ASSETS
Debt Total
General Service Governmental
Fund Fund Funds
Assets
Cash and cash equivalents $2,838,464 $239,434 $3,077,898
Receivables:
Accounts receivables,net 514,663 514,663
Taxes 25,528 30,183 55,711
Other receivables 5,892 5,892
Due from other governments 37,275 37,275
Prepaids 3,110 3,110
Restricted cash 135,976 135,976
TOTAL ASSETS $3,560,908 $269,617 $3,830,525
LIABILITIES AND FUND BALANCES
Liabilities
Accounts payable $431,403 $$431,403
Accrued liabilities 78,677 78,677
Customer deposits 140,027 140,027
Due to other governments 53,095 53,095
Deferred revenue 25,528 30,183 55,711
Total liabilities 728,730 30,183 758,913
Fund Balances
Reserved for prepaids 3,110 3,110
Unreserved and undesignated,reported in:
General fund 2,829,068 2,829,068
Debt service fund 239,434 239,434
Total fund balances 2,832,178 239,434 3,071,612
TOTAL LIABILITIES AND FUND BALANCES $3,560,908 $269,617 $3,830,525
The Notes to Financial Statements are
an integral part of this statement.
13
TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO.1
RECONCILIATION OF THE GOVERNMENTAL FUNDS
BALANCE SHEET TO STATEMENT OF NET ASSETS
SEPTEMBER 30,2009
Total fund balances -governmental funds
Amounts reported for governmental activities in the statement of net assets
are different because:
Capital assets used in governmental activities are not current financial resources
and,therefore,are not reported in the governmental funds balance sheet.
Costs associated with the issuance of long-term debt are expensed when incurred
in governmental funds.These costs are capitalized and amortized over the
life of the debt in the government wide financial statements.
Revenue reported as deferred revenue in the governmental funds balance sheet
is recognized as revenue in the government wide statement financial statements.
Interest payable on long term debt does not require current financial resources,
therefore,interest payable is not reported as a liability in the governmental
funds balance sheet.
Accrued vacation does not require the use of current financial resources;
therefore accrued vacation is not reported as a liability in the governmental
funds balance sheet.
Long-term liabilities,including bonds payable are not due and payable in the
current period and,therefore,are not reported in the fund financial statements.
Net assets of governmental activities
The Notes to Financial Statements are
an integral partof this statement.
14
$3,071,612
14,018,127
91,994
55,711
(25,692)
(22,617)
(8,172,077)
$9,017,058
TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO.1
STATEMENT OF REVENUES,EXPENDITURES
AND CHANGES IN FUND BALANCES
GOVERNMENTAL FUNDS
YEAR ENDED SEPTEMBER 30,2009
Debt Total
General Service Governmental
Fund Fund Funds
Revenues:
Taxes $1,283,705 $1,112,306 $2,396,011
Intergovernmental revenues 33,653 33,653
Water and wastewater charges 3,721,868 3,721,868
Standby fees 819 819
Inspection and tap fees 4,975 4,975
Utility fees 515,200 515,200
Investment income 20,755 4,105 24,860
Miscellaneous 165,308 165,308
Total revenues 5,746,283 1,116,411 6,862,694
Expenditures:
Current:
General government 360,067 360,067
Water operations 1,811,385 1,811,385
Wastewater operations 999,388 999,388
Wastewater collection system 294,869 294,869
Utility billing 160,719 160,719
Directors 31,244 31,244
Manager's office 463,252 463,252
Human resources 38,681 38,681
Finance 173,359 173,359
Facilities management 70,291 70,291
Information systems 175,698 175,698
Fire 783,736 783,736
Debt Service
Principal 1,025,000 1,025,000
Interest and fiscal charges 352,195 352,195
Total expenditures 5,362,689 1,377,195 6,739,884
Excess (deficiency)of revenues
over (under)expenditures 383,594 (260,784)122,810
Other financing sources (uses)
Issuance of contractual obligations 330,000 330,000
Transfers in 383,009 383,009
Transfers out (383,009)(383,009)
Total other financing sources (uses)(53,009)383,009 330,000
Net change in fund balance 330,585 122,225 452,810
Fund Balances -beginning of year,as restated 2,501,593 117,209 2,618,802
Fund Balances -end of year $2,832,178 $239,434 $3,071,612
The Notes to Financial Statements are
an integral part of this statement.
15
TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO.1
RECONCILIATION OF THE STATEMENT OF REVENUES
EXPENDITURES AND CHANGES IN FUND BALANCES OF
GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES
YEAR ENDED SEPTEMBER 30,2009
Net change in fund balances -total governmental funds
Amounts reported for governmental activities in the statement of activities
are different because:
Depreciation expense on capital assets reported in the statement of activities
does not require the use of current financial resources,therefore,depreciation
expense is not reported as expenditures in the governmental funds.
Governmental funds report capital outlays as expenditures.However,in the
statement of activities the costs of those assets is allocated over their
estimated useful lives and reported as depreciation expense.This is the
amount of capital assets recorded in the current period.
Governmental funds reflect the proceeds of capital leases as other financing sources
and payments as expenditures.However,in the government-wide statements,
the proceeds and payments made on capital leases are reflected as changes in
liabilities.This amount reflects the payments under capital leases.
Repayment of principal on long-term debt reduces long-term liabilities in the
statement of net assets,but it is recorded as an expenditure in
the governmental funds.
Governmental funds reflect the proceeds from the issuance of bonds,contractual
obligations,and capital leases as other financing sources;however,in the government-
wide financial statements the proceeds are reflected as increases in liabilities.
Current year changes in the long term liability for compensated absences do not
require the use of current financial resources;therefore they are not reported
as expenditures in the governmental funds.
Governmental funds report the effects of issuance costs,premiums,and deferred
losses on refunding when debt is first issued,whereas the amounts are deferred
and amortized in the statement of activities.
Certain revenues in the government-wide financial statements that do not
produce current financial resources are not reported as revenue in
the governmental funds.
Current year changes in accrued interest payable do not require the use of current
financial resources and,therefore,are not reported as expenditures in
governmental funds.
Change in net assets of governmental activities
The Notes to Basic Financial Statements are
an integral part of this statement.
16
$452,810
(684,019)
701,809
42,886
1,117,504
(330,000)
(5,668)
(3,199)
9,917
7,159
$1,309,199
TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO.1
NOTES TO BASIC FINANCIAL STATEMENTS
NOTE 1.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A.General Statement
Trophy Club Municipal Utility District NO.1 (the District)was created by an order of the Texas
Commission on Environmental Quality (TCEQ)(formerly the Texas Natural Resources
Conservation Commission)on March 4,1975 and confirmed by the electorate of the District at a
confirmation election held on October 7,1975.The Board of Director's held its first meeting on
April 24,1975.The bonds were first sold on June 8,1976.The District operates pursuant to
Article XVI,Chapter 59 of the Texas Constitution and Chapter 54 of the Texas Water Code,as
amended.
On May 9,2009,citizens voted to consolidate the District and Trophy Club Municipal Utility District
NO.2 (MUD2).As a result,the District's fiscal year 2009 financial statements report consolidated
activity and balances for the District and the entities formerly known as MUD2 and the Trophy
Club Master District Joint Venture ( a joint venture of MUD1 and MUD2).
The Governmental Accounting Standards Board (GASB)is the accepted standard setting body for
the District.The financial statements of the District have been prepared in conformity with
generally accepted accounting principles (GAAP)as applied to government units.
B.Financial Reporting Entity
As required by accounting principles generally accepted in the United States of America,these
financial statements include the activities of the District and any organizations for which the
District is financially accountable or for which the nature and significance of their relationship with
the District are such that exclusion would cause the reporting entity's financial statements to be
misleading or incomplete.
The definition of the reporting entity is based primarily on the notion of financial accountability.A
primary government is financially accountable for the organizations that make up its legal entity.It
is also financially accountable for legally separate organizations if its officials appoint a voting
majority of an organization's governing body and either it is able to impose its will on that
organization or there is a potential for the organization to provide specific financial benefits to,or
to impose specific financial burdens on,the primary government.A primary government may also
be financially accountable for governmental organizations that are fiscally dependent on it.
A primary government has the ability to impose its will on an organization if it can significantly
influence the programs,projects,or activities of,or the level of services performed or provided by,
the organization.A financial benefit or burden relationship exists if the primary government (a)is
entitled to the organization's resources;(b)is legally obligated or has otherwise assumed the
obligation to finance the deficits of,or provide financial support to,the organization;or (c)is
obligated in some manner for the debt of the organization.Some organizations are included as
component units because of their fiscal dependency on the primary government.An organization
is fiscally dependent on the primary government if it is unable to adopt its budget,levy taxes,set
rates or charges,or issue bonded debt without approval by the primary government.Accordingly,
the District has no component units.
17
TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO.1
NOTES TO BASIC FINANCIAL STATEMENTS
NOTE 1.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -CONTINUED
C.Government-Wide and Fund Financial Statements
The govemment-wide financial statements (the statement of net assets and the statement of
activities)report information on all of the activities of the District,except for fiduciary funds.The
effect of interfund activity has been removed from these statements.Governmental activities,
which normally are supported by taxes and intergovernmental revenues,are reported separately
from business-type activities,which rely to a·significant extent on fees and charges for support.
The activities of the District are comprised only of govemmental activities.
The statement of activities demonstrates the degree to which the direct expenses of a given
program are offset by program revenues.Direct expenses are those that are clearly identifiable
with a specific program.Program revenues include 1)charges to customers or applicants who
purchase,use,or directly benefit from goods,services,or privileges provided by a given program
and 2)operating or capital grants and contributions that are restricted to meeting the operational
or capital requirements of a particular program.Taxes and other items not properly included
among program revenues are reported instead as general revenues.
Fund Financial Statements
The District segregates transactions related to certain functions or activities in separate funds
in order to aid financial management and to demonstrate legal compliance.These
statements present each major fund as a separate column on the fund financial statements.
The District does not report any non-major funds.
Governmental funds are those funds through which most govemmental functions typically are
financed.The measurement focus of governmental funds is on the sources,uses and
balance of current financial resources.The District has presented the following major
govemmental funds:
General Fund
The General Fund is the main operating fund of the District.This fund is used to
account for all financial resources not accounted for in other funds.All general tax
revenues and other receipts that are not restricted by law or contractual agreement to
some other fund are accounted for in this fund.General operating expenditures,fixed
charges and capital improvement costs that are not paid through other funds are paid
from the General Fund.
Debt Service Fund
The Debt Service Fund is used to account for resources accumulated and payments
made for principal and interest on the long-term debt of governmental funds.
D.Measurement Focus and Basis of Accounting
Measurement focus refers to what is being measured;basis of accounting refers to when
revenues and expenditures are recognized in the accounts and reported in the financial
statements.Basis of accounting relates to the timing of the measurement made,regardless of
the measurement focus applied.
The government-wide statements are reported using the economic resources measurement focus
and the accrual basis of accounting.The economic resources measurement focus means all
assets and liabilities (whether current or non-current)are included on the statement of net assets
and the operating statements present increases (revenues)and decreases (expenses)in net total
assets.Under the accrual basis of accounting,revenues are recognized when earned.Expenses
are recognized at the time the liability is incurred.
18
TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO.1
NOTES TO BASIC FINANCIAL STATEMENTS
NOTE 1.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -CONTINUED
D.Measurement Focus and Basis of Accounting
Governmental fund financial statements are reported using the current financial rE;lsources
measurement focus and are accounted for using the modified accrual basis of accounting.Under
the modified accrual basis of accounting,revenues are recognized when susceptible to accrual;
Le.,when they become both measurable and available.
"Measurable"means the amount of the transaction can be determined and "available"means
collectible within the current period or soon enough thereafter to be used to pay liabilities of the
current period.The District considers receivables collected within sixty days after year-end to be
available and recognizes them as revenues of the current year.Expenditures are recorded when
the related fund liability is incurred.However,debt service expenditures are recorded only when
payment is due.
The revenues susceptible to accrual are interest income and ad valorem taxes.All other
governmental fund revenues are recognized when received.
E.Cash and Investments
The District's cash and cash equivalents are considered to be cash on hand,demand deposits,
and short-term investments of three months or less from the date of acqUisition.
The District's investment policy requires that all monies be deposited with the authorized District
depository or in (1)obligations of the United States or its agencies and instrumentalities;(2)direct
obligations of the State of Texas or its agencies;(3)other obligations,the principal of and interest
on which are unconditionally guaranteed or insured by the State of Texas or the United States;(4)
obligations of states,agencies,counties,cities,and other political subdivisions of any state having
been rated as to investment quality by a nationally recognized investment rating firm and having
received a rating of not less than A or its equivalent;(5)certificates of deposit by state and
national banks domiciled in this state that are (A)guaranteed or insured by the Federal Deposit
Insurance Corporation,or its successor;or,(B)secured by obligations that are described by (1)-
(4);or,(6)fully collateralized direct repurchase agreements having a defined termination date,
secured by obligations described by (1),pledged with third party selected or approved by the
District,and placed through a primary government securities dealer.
All investments are recorded at fair value based on quoted market prices.Fair value is the
amount at which a financial instrument could be exchanged in a current transaction between
willing parties.
F.Capital Assets
Capital assets,which include property,plant,equipment,are reported in the government-wide
financial statements.All capital assets are valued at historical cost or estimated historical cost if
actual historical cost is not available.Donated assets are valued at their fair market value on the
date donated.Repairs and maintenance are recorded as expenses.Renewals and betterments
are capitalized.Interest has not been capitalized during the construction period on property,plant
and equipment.
Assets capitalized have an original cost of $5,000 or more and over one year of useful life.
Depreciation has been calculated on each class of depreciable property using the straight-line
method.Estimated useful lives are as follows:
Buildings
Improvements other than buildings
Machinery and equipment
Vehicles
Water and wastewater systems
19
50 Years
15 -30 Years
6 -15 Years
6 -12 Years
30 -65 Years
TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO.1
NOTES TO BASIC FINANCIAL STATEMENTS
NOTE 1.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -CONTINUED
G.Accumulated Vacation,Compensated Time and Sick Leave
The District has no employees of its own,but instead,personnel services are furnished under a
contract with the Town of Trophy Club,Texas.The District records an allocation of personnel
costs from the Town in personnel expense accounts rather than as single line item payable to the
Town.Accordingly,the District also records current payroll and an allocation in compensated
absences earned by the personnel assigned to it.The District reports this liability using the
Town's vacation policy;however,the Town retains primary liability for its employee vacation pay.
H.Organizational Costs
The District,in conformance with requirements of the TCEQ,capitalized costs incurred in the
creation of the District.The TCEQ requires capitalization of organizational costs for the
construction period,all costs incurred in the issue and sale of bonds,bond interest and amortized
bond premium and discount losses on sales of investments,accrued interest on investments
purchased,attorney fees and some administrative expenses until construction and acceptance or
use of the first revenue producing facility has occurred.The District amortizes the organizational
costs using the straight-line method over a period of 22 to 45 years.
I.Net Assets
Net assets represent the difference between assets and liabilities.Net assets invested in capital
assets,net of related debt consists of capital assets,net of accumulated depreciation,reduced by
the outstanding balances of any borrowing used for the acquisition,construction or improvements
of those assets,and adding back unspent proceeds.Net assets are reported as restricted when
there are limitations imposed on their use either through the enabling legislations adopted by the
District or through external restrictions imposed by creditors,grantors or laws or regulations of
other governments.
K.Estimates
In preparing financial statements in conformity with accounting principles generally accepted in the
United States of America,management is required to make estimates and assumptions that
affect the reported amounts of assets and liabilities,the disclosures of contingent assets and
liabilities,and the reported amounts of revenue and expenses/expenditures.Actual results could
differ from those estimates.
L.Adopted Accounting Pronouncements
On September 30,2009,the District adopted the guidance for subsequent events set forth under
generally accepted accounting principles.The current guidance establishes general standards of
accounting for and disclosure of events that occur after the balance sheet date,but before
financial statements are issued or are available to be issued.Specifically,the guidance set forth
the period after the balance sheet date during which management of a reporting entity should
evaluate events or transactions that may occur for potential recognition or disclosure in the
financial statements,the circumstances under which an entity should recognize events or
transactions occurring after the balance sheet date in its financial statements,and the disclosures
that an entity should make about events or transactions that occurred after the balance sheet
date.The current guidance for accounting for subsequent events provides largely the same
guidance on subsequent events which previously existed only in auditing literature.The adoption
of the new standard for accounting for subsequent events had no impact on the financial
statements as management already followed a similar approach to the adoption of this standard.
The District has evaluated subsequent events through January 25,2010.
20
TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO.1
NOTES TO BASIC FINANCIAL STATEMENTS
NOTE 2.CASH AND INVESTMENTS
The funds of the District must be deposited and invested under the terms of a contract,contents of
which are set out in the Depository Contract Law.The depository bank places approved pledged
securities for safekeeping and trust with the District's agent bank in an amount sufficient to protect
District funds on a day-to-day basis during the period of the contract.The pledge of approved
securities is waived only to the extent of the depository bank's dollar amount of Federal Deposit
Insurance Corporation (FDIC)insurance.
At September 30,2009,the carrying amount of the District's deposits (cash,certificates of deposit,
and interest-bearing savings accounts included in temporary investments)was $285,121 and the bank
balance was $290,413.The District's cash deposits at September 30,2009,and during the year then
ended were entirely covered by FDIC insurance or by pledged collateral held by the District's agent
bank in the District's name.
The Public Funds Investment Act (Govemment Code Chapter 2256)contains specific provisions in
the areas of investment practices,management reports and establishment of appropriate policies.
Among other things,it requires the District to adopt,implement,and publicize an investment policy.
That policy must address the following areas;(1)safety of principal and liquidity,(2)portfolio
diversification,(3)allowable investments,(4)acceptable risk levels,(5)expected rates of return,(6)
maximum allowable stated maturity of portfolio investments,(7)maximum average dollar-weighted
maturity,allowed based on the stated maturity date for the portfolio,(8)investment staff quality and
capabilities,(9)and bid solicitation preferences for certificates of deposit.Statutes and the District's
investment policy authorized the District to invest in the following investments as summarized below:
Maximum Maximum
Authorized Maximum Percentage Investment
Investment Type Maturity·of Portfolio In One Issuer
U.S.Treasury Obligations 2 years 85%NA
U.S.Agencies Securities 2 years 85%NA
State of Texas Securities 2 years 85%NA
Certificates of Deposits 2 years 85%NA
Municipal Securities 2 years 85%NA
Money Market 2 years 50%NA
Mutual Funds 2 years 50%NA
Investment pools 2 years 100%NA
The Act also requires the District to have independent auditors perform test procedures related to
investment practices as provided by the Act.The District is in substantial compliance with the
requirements of the Act and with local policies.
Cash and investments as of September 30,2009 are classified in the accompanying financial
statements as follows:
Statement of Net Assets
Primary Government:
Cash and cash equivalents
Restricted cash
Total cash and investments
21
$
$
3,077,898
135,976
3,213,874
TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO.1
NOTES TO BASIC FINANCIAL STATEMENTS
NOTE 2.CASH AND INVESTMENTS -CONTINUED
Cash and investments as of September 30,2009 consist of the following:
Deposits with financial institutions
Investments
Total cash and investments
Disclosures Relating to Interest Rate Risk
$
$
285,121
2,928,753
3,213,874
Interest rate risk is the risk that changes in market interest rates will adversely affect the fair value
of an investment.Generally,the longer the maturity of an investment the greater the sensitivity of
its fair value to changes in market interest rates.One of the ways that the District manages its
exposure to interest rate risk is by investing mainly in investment pools which purchase a
combination of shorter term investments with an average maturity of less than 60 days thus
reducing the interest rate risk.The District monitors the interest rate risk inherent in its portfolio by
measuring the weighted average maturity of its portfolio.The District has no specific limitations
with respect to this metric.
As of September 30,2009,the District had the following investment:
Investment Type
TexPool
Amount
$2,928,753
Weighted
Average
Maturity
44 days
Total Investments $2,928,753
As of September 30,2009,the District did not invest in any securities which are highly sensitive to
interest rate fluctuations.
Disclosures Relating to Credit Risk
Generally,credit risk is the risk that an issuer of an investment will not fulfill its obligation to the
holder of the investment.This is measured by the assignment of a rating by a nationally
recognized statistical rating organization.Presented below is the minimum rating required by
(where applicable)the Public Funds Investment Act,the District's investment policy,or debt
agreements,and the actual rating as of year-end for each investment type.
Minimum Rating as
Legal of Year
Investment Type Amount Rating End
TexPool $2,928,753 N/A AAAm
Total Investments $2,928,753
22
TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO.1
NOTES TO BASIC FINANCIAL STATEMENTS
NOTE 2.CASH AND INVESTMENTS -CONTINUED
Concentration of Credit Risk
The investment policy of the District contains no limitations on the amount that can be invested in
anyone issuer.As of September 30,2009,other than external investment pools,the District did
not have 5%or more of its investments with one issuer.
Custodial Credit Risk
Custodial credit risk for deposits is the risk that,inthe event of the failure of a depository financial
institution,a government will not be able to recover its deposits or will not be able to recover
collateral securities that are in the possession of an outside party.The custodial credit risk for
investments is the risk that,in the event of the failure of the counterparty to a transaction,a
government will not be able to recover the value of its investment or collateral securities that are in
the possession of another party.The Public Funds Investment Act and the District's investment
policy do not contain legal or policy requirements that would limit the exposure to custodial credit
risk for deposits or investments,other than the following provision for deposits:The Public Funds
Investment Act requires that a financial institution secure deposits made by state or local
governmental units by pledging securities in an undivided collateral pool held by a depository
regulated under state law (unless so waived by the governmental unit).The market value of the
pledged securities in the collateral pool must equal at least the bank balance less FDIC insurance
at all times.
As of September 30,2009 the District deposits with financial institutions were not in excess of
federal depository insurance limits.
Investment in State Investment Pools
The District is a voluntary participant in TexPool.The State Comptroller of Public Accounts
exercises responsibility over TexPool.This oversight includes the ability to significantly influence
operations,designation of management,and accountability for fiscal matters.Additionally,the
State Comptroller has established an advisory board composed of both participants in TexPool
and other persons who do not have a business relationship with TexPool.TexPool operates in a
manner consistent with the SEC's Rule 2a7 of the Investment Company Act of 1940.TexPool
uses amortized costs rather than market value to report net assets to compute share prices.
Accordingly,the fair value of the position in TexPool is the same as the value of TexPool shares. .
23
TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO.1
NOTES TO BASIC FINANCIAL STATEMENTS
NOTE 3.ACCOUNTS RECEIVABLE
Receivables as of year-end,including the applicable allowances for uncollectible accounts,are as
follows:
Accounts Receivable:
MUD water
MUD sewer
Unbilled receivables-MUD#1
Refuse (as agent for Town of Trophy Club)
Refuse tax (as agent for Town of Trophy Club)
Storm drainage (as agent for Town of Trophy Club)
Allowance for uncollectible accounts
Total (net)
Due From Other Governments:
Town of Trophy Club
NOTE 4.INTERFUND TRANSFERS
Transfers between funds during the year are as follows:
$
$
$
248,831
140,509
79,456
33,235
2,866
11,189
516,086
(1,423)
514,663
37,275
Transfer In
Debt Service
Transfer Out
General Fund
Total
24
$
$
Amount
383,009
383,009
Purpose
To pay debt service
TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO.1
NOTES TO BASIC FINANCIAL STATEMENTS
NOTE 5.CAPITAL ASSETS
Capital asset activity for the year ended September 30,2009,was as follows:
Beginning
Balance as Beginning
Previously Adjustments!Balance Retirements!Ending
Reported Reclassifications As Restated Additions Transfers Balance
Governmental Activities:
Capital assets,
not being depreciated
land $248,093 $$248,093 $$$248,093
Construction in progress 159,886 159,886 214,615 374,501
Total capital assets
not being depreciated 407,979 407,979 214,615 374,501 248,093
Capital assets,
being depreciated
Buildings 460,917 45,873 506,790 506,790
Improvements other than buildings 292,751 50 292,801 292,801
Machinery and equipment 594,262 144,550 738,812 473,566 1,212,378
Organization costs 3,168,427 (837,127)2,331,300 2,331,300
Vehicles 1,918,685 (429.761)1,488.924 13.628 1,502,552
Water system 8,134,787 8.134.787 374.501 8,509,288
Wastewater treatment system 5,641,225 791,254 6,432;479 6,432,479
Wastewater collection system 4,286,723 4,286,723 4,286,723
Total capital assets
being depreciated 24,497,777 (285,161)24,212,616 861,695 25,074,311
less accumulated
depreciation for:
Buildings (117,891)(19,552)(137,443)(11,470)(148,913)
Improvements other than buildings (177,475)(177,475)(11,530)(189,005)
Machinery and equipment (154,349)(149.165)(303.514)(54.755)(358.269)
Organization costs (2,249,827)398.868 (1.850.959)(82.528)(1.933,487)
Vehicles (1,301,934)430,486 (871,448)(97,471)(968,919)
Water system (3,026,637)(4,024)(3,030.661 )(139.662)(3,170.323)
Wastewater treatment system (1,764,621)(393,275)(2,157,896)(191.857)(2,349,753)
Wastewater collection system (2,090,862)(2,090,862)(94,746)(2,185,608)
Total accumulated
depreciation (10,883,596)263,338 (10,620,258)(684,019)(11,304,277)
Governmental activities capital
assets,net $14,022,160 $(21,823)$14,000,337 $392,291 $374,501 $14,018,127
Depreciation expense was charged as direct expense to programs of the primary government as
follows:
General government
Water operations
Wastewater operations
Wastewater collection systems
Information systems
Fire
Total depreciation expense
25
$
$
135,436
200,079
205,551
98,198
13,481
31,274
684,019
TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO.1
NOTES TO BASIC FINANCIAL STATEMENTS
NOTE 6.LONG·TERM DEBT
At September 30,2009,the District's long-term debt payable consisted of the following:
Interest Year Average
Rate of Final Annual Original Outstanding
Description Payable Issue Maturity Payment Amount 9/30/2009
Tax and revenue bonds:
Refunding 3.25-5.90%1997 2011 $398,800 $3,075,000 $745,000
Refunding 4.00-5.00%2003 2011 253,100 1,949,288 480,000
Improvements 4.00-5.00%2002 2023 280,060 3,510,000 2,800,000
Operations 4.00-5.00%2003 2023 89,566 1,200,000 945,000
Refunding 3.00-4.20%2005 2023 216,786 3,143,998 2,320,000
$7,290,000
Contractual Obligations:
Fire Truck 4.33%2007 2014 56,000 448,000 $322,000
Improvements 3.50%2004 2012 39,000 270,000 101,250
Improvements 3.90%2009 2012 110,000 330,000 330,000
$753,250
Notes payable:
Equipment 2.50%1999 2018 2,245 35,000 $17,895
Capital Lease Obligations:
Equipment 4.95%2006 2010 33,000 165,000 $33,000
Equipment 4.00%2008 2012 9,886 49,432 29,660
$62,660
The following is a summary of long-term debt transactions of the District for the year ended
September 30,2009:
Beginning Ending Due Within
Balance Additions Reductions Balance One Year
Governmental Activities:
Tax and revenue bonds $8,315,000 $$(1,025,000)$7,290,000 $1,055,000
Contractual obligations 514,000 330,000 (90,750)753,250 198,570
Deferred loss on refunding (64,734)4,413 (60,321 )(4,414)
Premium on bonding 116,536 (7,943)108,593 7,943
8,880,802 330,000 (1,119,280)8,091,522 1,257,099
Notes payable 19,649 (1,754)17,895 1,798
Capital lease obligations 105,546 (42,886)62,660 42,886
Compensated absences 16,949 5,668 22,617 22,617
Total Governmental Activities
Long-term Liabilities $9,022,946 $335,668 $(1,163,920)$8,194,694 $1,324,400
26
TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO.1
NOTES TO BASIC FINANCIAL STATEMENTS
NOTE 6.LONG·TERM DEBT -CONTINUED
The annual requirements to amortize all debts outstanding as of September 30,2009,are as follows:
Tax and revenue bonds:
Year Ending
September 30,Principal Interest Total
2010 $1,055,000 $308,308 $1,363,308
2011 1,115,000 265,189 1,380,189
2012 500,000 220,567 720,567
2013 520,000 202,138 722,138
2014 330,000 182,940 512,940
2015-19 1,900,000 690,635 2,590,635
2020-23 1,870,000 219,969 2,089,969
Total $7,290,000 $2,089,746 $9,379,746
Contractual obligations
Year Ending
September 30,Principal Interest Total
2010 $198,570 $30,356 $228,926
2011 205,696 22,493 228,189
2012 211,984 14,339 226,323
2013 67,000 5,932 72,932
2014 70,000 3,031 73,031
Total $753,250 $76,151 $829,401
Notes payable:
Year Ending
September 30,Principal Interest Total
2010 $1,798 $447 2,245
2011 1,843 402 2,245
2012 1,889 356 2,245
2013 1,936 309 2,245
2014 1,983 261 2,244
2015-18 8,446 534 8,980
Total $17,895 $2,309 $20,204
27
TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO.1
NOTES TO BASIC FINANCIAL STATEMENTS
NOTE 6.LONG-TERM DEBT -CONTINUED
Capital Lease:
Year Ending
September 30,Principal Interest Total
2010 $42,886 $2,859 $45,745
2011 9,886 802 10,688
2012 9,888 402 10,290
Total $62,660 $4,063 $66,723
The assets acquired under the capital lease obligations above are included in capital assets at a cost
of $193,622.Accumulated depreciation on the assets as of September 30,2009 was $83,298.
The tax revenue bonds are payable from the proceeds of ad valorem taxes levied upon all property
subject to taxation within the District,without limitation as to rate or amount,and are further payable
from,and secured by a lien on and pledge of the net revenue to be received from the operation of the
District's waterworks and sanitary sewer system..
The outstanding bonds are callable for redemption prior to maturity at the option of the District as
follows:
Series 1997 -All maturities from 2008 to 2011 are callable in principal increments of $5,000 on or
after September 1,2007 at par plus unpaid accrued interest to the fixed date for redemptions.
Series 2002 -All maturities from 2013 to 2023 are callable in principal increments of $5,000 on or
after September 1,2012 at par plus unpaid accrued interest to the fixed date for redemptions.
Series 2003 -No bonds are subject to redemption prior to maturity.
Series 2003 (debt issued by the entity formerly known as MUD 2)-All maturities from 2013 to
2023 are callable in principal increments of $5,000 on or after September 1,2012 at par plus
unpaid accrued interest to the fixed date for redemptions.
Series 2005 -All maturities from 2014 to 2023 are callable in principal increments of $5,000 on or
after September 1,2013 at par plus unpaid accrued interest to the fixed date for redemptions.
Contractual obligations and notes payable are liquidated from the general fund.Tax and revenue
bonds are liquidated from the debt service fund.
28
TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO.1
NOTES TO BASIC FINANCIAL STATEMENTS
NOTE 6.LONG-TERM DEBT -CONTINUED
The provisions of the bond resolutions relating to debt service requirements have been met,and the
cash allocated for these purposes is sufficient to meet debt service requirements for the year ended
September 30,2009.
In previous years,the District has legally defeased certain outstanding general obligation debt by
placing funds into irrevocable trusts pledged to pay all future debt service payments of the refunded
debt.Accordingly,a liability for the defeased debt issue is not included in the District's financial
statements.As of September 30,2009,the following outstanding bonds were legally defeased:
Series
1995
Type
Unlimited Tax Refunding Bonds $
Amount
2,490,000
NOTE 7.PROPERTY TAXES
$2,490,000
Property taxes are levied as of October 1,on the assessed value listed as of the prior January 1,for
all real and certain personal property located in the District and MUD2 (the "Districts").The appraisal
of property within the District is the responsibility of Denton Appraisal District (Appraisal District)as
required by legislation passed by the Texas legislature.The Appraisal District is required under such
legislation to assess all property within the Appraisal District on the basis of 100%of its appraised
value and is prohibited from applying any assessment ratios.The value of property within the
Appraisal District must be reviewed every five years;however,the District may,at its own expense,
require annual reviews of appraised values.The Districts may challenge appraised values established
by the Appraisal District through various appeals and,if necessary,legal action.Property taxes for the
Districts are not limited as to rate or amount.In an election held October 7,1975,the electorate of the
Districts authorized the levy of up to $0.25 per $100 valuation per District for the operations and
maintenance of the Districts.Property taxes attach as an enforceable lien on property as of January
1,following the levy date.Taxes are due by January 31,following the levy date.Property taxes are
recorded as receivables when levied.Following is information regarding the 2009 tax levies:
MUD 1:
Adjusted taxable values $516,687,776
0&M tax levy
1&S tax levy
Total tax levy
$0.1308/$100
$0.0942/$100
$0.2250/$100
29
$
$
675,880
486,668.00
1,162,548
TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO.1
NOTES TO BASIC FINANCIAL STATEMENTS
NOTE 7.PROPERTY TAXES-CONTINUED
MUD2:
Adjusted taxable values $413,674,092
0&M tax levy
1&S tax levy
Total tax levy
NOTE 8.RISK MANAGEMENT
$0.1293/$100
$0.1349/$100
$0.2642/$100
$
$
534,922
558,129
1,093,051
The District is exposed to various risks of loss related to torts;theft of,damage to,and destruction of
assets;business interruption;errors and omissions;injuries to employees;employee health benefits;
and other claims of various nature.Commercial insurance is purchased for the risks of loss to which
the District is exposed.Any losses reported but unsettled or incurred and not reported,are believed to
be insignificant to the District's basic financial statements.
NOTE 9.RESTATEMENT OF BEGINNING FUND BALANCES AND NET ASSETS'
As discussed in Note 1,citizens voted in May 2009 to consolidate the District and MUD2.As a result,
the beginning fund balances and net assets of the District have been restated to include those of the
District,as well as those of the entities formerly known as MUD 2 and the Trophy Club Master District
Joint Venture (Master District).
In addition,the District discovered errors in its capital assets records involVing $285,161 of previously
disposed of vehicles that were still on the District's capital asset register and several other assets
which had been misclassified and incorrectly depreciated.The correction ofthese errors resulted in a
$21,823 decrease in beginning net assets.
The District's October 1,2008 Fund Balances have been restated as follows:
Debt
General Service
Fund Fund
MUD 1 $439,972 $56,840
MUD2 879,256 60,369
Master District 1,182,365
Consolidated fund balances $2,501,593 $117,209
Total
$496,812
939,625
1,182,365
$2,618,802
30
TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO.1
NOTES TO BASIC FINANCIAL STATEMENTS
NOTE 9.RESTATEMENT OF BEGINNING FUND BALANCES AND NET ASSETS -CONTINUED
The District's October 1,2008 Net Assets have been restated as follows:
Per prior year financial statements
MUD 1
MUD2
Master District
To correct capital assets balances
(see Note 5)
To remove prior year investment in
joint venture balance
Beginning net assets,as restated
31
$6,168,820
1,560,862
7,544,474
$15,274,156
(21,823)
(7,544,474)
$7,707,859
REQUIRED SUPPLEMENTARY INFORMATION
32
TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO.1
NOTES TO REQUIRED SUPPLEMENTARY INFORMATION
NOTE 1.BUDGETARY CONTROL
The District Board (Board)adopts an annual budget for the General Fund on a budgetary basis,which
consists of accounting on the modified accrual basis excepting recognition of non-cash grant and
capital lease proceeds and related expenditures for equipment.The District also does not budget
developer contributions of infrastructure.
The Board approves all budget appropriations.Any revisions which alter the total appropriations must
be approved by the Board.The level of budgetary responsibility is by total appropriations of the fund.
All annual appropriations lapse at fiscal year end.
33
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INDIVIDUAL SCHEDULES AND OTHER
SUPPLEMENTARY INFORMATION REQUIRED
BY TEXAS COMMISSION ON
ENVIRONMENTAL QUALITY (TCEQ)
TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO.1
DEBT SERVICE FUND
BUDGETARY COMPARISON SCHEDULE
YEAR ENDED SEPTEMBER 30,2009
Variance with
Budgeted Amounts Final Budget
Original Final Actual Positive (Negative)
Revenues
Taxes $1,084,648 $1,084,648 $1,112,306 $27,658
Investment income 25,000 25,000 4,105 (20,895)
Total revenues 1,109,648 1,109,648 1,116,411 6,763
Expenditures:
Debt service
Principal 1,025,000 1,025,000 1,025,000
Interest 352,196 352,196 352,195
Total expenditures 1,377,196 1,377,196 1,377,195
Excess (deficiency)of revenues under
expenditures (267,548)(267,548)(260,784)6,764
Other financing sources
Transfers in 157,548 157,548 383,009 225,461
Total other financing sources 157,548 157,548 383,009 225,461
Net change in fund balance (110,000)(110,000)122,225 232,225
Fund Balances -beginning of year 117,209 117,209 117,209
Fund Balances -end of year $7,209 $7,209 $239,434 $232,225
34
TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO.1
TSI-1
SERVICE AND RATES
YEAR ENDED SEPTEMBER 30,2009
TSI - 1 SERVICE AND RATES
1.Services provided bythe District:
a)Retail Water
b)Retail Wastewater
c)Fire Protection
d)Irrigation
e)Participates in joint venture,regional system and/or wastewater service (otherthan
emergency interconnect)
2.Retail service providers:
a)Retail rates-based on 5/8"meter:
Most prevalent type of meter (if not a 5/8"):1 inch
Admin
Fee
Minimum
Usage
Flat
Rate
YIN
Rates per 1,000
Gallons Over
Minimum Usage Levels
WATER $11.50 o No
No
No
No
$2.25
2.71
2.92
3.02
oto 6,000
7,000 to 12,000
13,000 to 25,000
More than 25,000
Note:Out of district water rates are double the "in-town"rate and are included in the rate order.
WASTEWATER $11.50 o No
No
No
$2.25
2.71
oto 6,000
7,000 to 12,000
Caps at 12,000
GOLF COURSE Subject to peak draw rates from Ft Worth water department.
NOTE:all rates noted above were amended effective January 1,2009
District employs winter averaging for wastewater usage?No
71.68
34.20
29.70
30.20
$
Total water and wastewater charges per 10,000 gallons usage (including surcharges)
effective January 1,2009
First 10,000 gallons used
Next 10,000 gallons used
Next 10,000 gallons used
Next 10,000 gallons used and subsequent
Maximum residential wastewater charge is for 12,000 gallons or $41.26.
35
TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO.1
TSI - 1 (CONTINUED)
SERVICE AND RATES
YEAR ENDED SEPTEMBER 30,2009
TSI-1 SERVICE AND RATES -CONTINUED
b)Retail service providers:number of retail water and/or wastewater*connections within the District as
of the fiscal year end.Provide actual numbers and single family equivalents (ESFC).
Connections ESFC Active
Meter Size Total Active Factor ESFC's
Unmetered 1.0
Less than 3/4"2,509.0 2,501.0 1.0 2,501.0
1"535.0 519.0 2.5 1,297.5
1 1/2"13.0 12.0 5.0 60.0
2"74.0 69.0 8.0 552.0
3"12.0 11.0 15.0 165.0
4"11.0 11.0 25.0 275.0
6"2.0 2.0 50.0 100.0
8"80.0
10"115.0
Total Water 3,156.0 3,125.0 4,950.5
Total Wastewater 3,161.0 3,130.0 1.0 3,130.0
*Number of connections relates to water service if provided.Otherwise,the number of wastewater
connections should be provided.
Note:"inactive"means that water and wastewater connections were made,but service is not
being provided.
Total water consumption (in thousands)during the fiscal year:
Gallons pumped into the system
Gallons billed to customers
Water accountability ratio
Standby Fees:
Does the District assess standby fees?
763,859
686,466
89.9%
Yes
For the most recent fiscal year,FY2009:
Total
Levy
Debt Service
Operations and Maintenance
$1,102,598
$1,278,081
Total
Collected
$1,091,526
$1,263,853
Percentage
Collected
99.0%
98.9%
Have standby fees been levied in accordance with Water Code Section 49.231,thereby
constituting a lien on property?No**
**Standby fees are levied by the District and constitute a lien under recorded deed restrictions or
covenants pursuant to Section 293.150 of Title 30 of Texas Administrative Code.
36
TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO.1
TSI - 1 (CONTINUED)
SERVICE AND RATES
YEAR ENDED SEPTEMBER 30,2009
TSI - 1 SERVICE AND RATES -CONTINUED
5.Location of District:
Counties in which District is located:
Is the District located entirely in one county?
Is the District located within a city?
Cities in which District is located:
a)Denton
b)Tarrant
No
Partially
Town of Trophy Club
Town of Westlake
Is District located within a city's extra territorial jurisdiction (ETJ)?Unknown
ETJ's in which District is located:Unknown
Is the general membership of the Board appointed by an office outside the District?No
37
TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO.1
TSI-2
GENERAL FUND EXPENDITURES AND OTHER FINANCING USES
YEAR ENDED SEPTEMBER 30,2009
Current Year Prior Year
Administrative $1,297,613 $905,052
Water Operations 1,811,385 1,934,792
Wastewater Operations 538,006 500,224
Wastewater Collection Systems 294,869 409,948
Information Systems 175,698 187,908
Contribution to Trophy Club Fire Dept 783,736 902,353
Capital Outlay 461,382
Miscellaneous 45,457
Transfer to Debt Service Fund 383,009 29,379
Total Expenditures and
Other Financing Uses $5,745,698 $4,915,113
Number of employees employed by the District:
Full time Equivalents (FTEs)
Part time
34 *
None
20
None
*Note:For fiscal year 2008-2009,fire department operations,including 9 FTE's,
were transferred to the MUD
38
TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO.1
TSI-3
TEMPORARY INVESTMENTS
SEPTEMBER 30,2009
Identification Interest Maturity Balance Accrued Interest
Funds Number Rate Date End of Year End of Year
General Fund
TexPool 613300002 0.2303%Demand $203,649 Paid daily
Debt Service Fund
TexPool 613300003 0.2303%Demand $238,934 Paid daily
Fire Department
TexPool 613300004 0.2303%Demand $104,269 Paid daily
Systems Account
TexPool 613300005 0.2303%Demand $384,391 Paid daily
GASB 34 Reserves
TexPool 613300006 0.2303%Demand $78,681 Paid daily
Customer Deposits
TexPool 613300007 0.2303%Demand $135,976 Paid daily
Fire Construction
TexPool 613300008 0.2303%Demand $1,782,853 Paid daily
Total -All Funds $2,928,753
39
TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO.1
TSI-4
TAXES LEVIED AND RECEIVABLE
YEAR ENDED SEPTEMBER 30,2009
General Fund Debt
Operations Fire Total Service Total
Taxes receivable beginning of year $2,251 $15,580 $17,831 $27,769 $45,600
2008 tax levy 138,704 1,139,377 1,278,081 1,102,598 2,380,679
Total to be accounted for 140,955 1,154,957 1,295,912 1,130,367 2,426,279
Less collections and adjustments:
Current year (137,122)(1,126,731)(1,263,853)(1,091,526)(2,355,379)
Prior years (821)(5,710)(6,531) (8,658)(15,189)
Total to be accounted for (137,943)(1,132,441)(1,270,384)(1,100,184)(2,370,568)
Taxes receivable,end of year $3,012 $22,516 $25,528 $30,183 $55,711
Taxes receivable by year
1996 and prior 19 108 127 454 581
1997 7 41 48 150 198
1998 7 44 51 140 191
1999 34 239 273 543 816
2000 33 165 198 598 796
2001 34 134 168 441 609
2002 512 4,590 5,102 10,196 15,298
2003 70 126 196 132 328
2004 20 165 185 239 424
2005 153 459 612 769 1,381
2006 276 1,268 1,544 2,114 3,658
2007 265 2,531 2,796 3,335 6,131
2008 1,582 12,646 14,228 11,072 25,300
$3,012 $22,516 $25,528 $30,183 $55,711
FlY FlY FlY FlY FlY
Property valuations (in OOO's)08/09 07108 06/07 05/06 04/05
Land $186,574 $213,640 $193,906 $166,046 $171,370
Improvements 737,273 638,560 581,667 518,213 501,417
Personal property 71,091 94,823 65,248 68,356 50,577
Exemptions (34,027)(34,405) (29,607)(8,422)(14,794)
$960,911 $912,618 $811,214 $744,193 $708,570
Tax rate per $100 valuation
Operations 0.014040 0.0102 0.0309 0.0309 0.0600
Fire department 0.116020 0.1209 0.1027 0.1464 0.1076
Debt service 0.114555 0.0989 0.1464 0.1027 0.1124
Tax rate per $100 valuation 0.244615 *0.2300 0.2800 0.2800 0.2800
Tax levy:$2,380,679 $2,234,909 $2,191,536 $2,271,746 $2,164,427
Percent of taxes collected to taxes levied 99.58%100.36% 100.62%98.04%99.99%
40
TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO.1
TSI-5
LONG-TERM DEBT SERVICE REQUIREMENTS -BY YEAR
SEPTEMBER 30,2009
All Bonded Debt Series
Due During Fiscal Principal Due Interest Due
Years Ending 1-Sep Mar 1/Sep 1 Total
2010 $1,055,000 $308,308 $1,363,308
2011 1,115,000 265,189 1,380,189
2012 500,000 220,567 720,567
2013 520,000 202,138 722,138
2014 330,000 182,940 512,940
2015 345,000 169,205 514,205
2016 360,000 154,655 514,655
2017 380,000 139,210 519,210
2018 395,000 122,610 517,610
2019 420,000 104,955 524,955
2020 435,000 85,829 520,829
2021 455,000 66,010 521,010
2022 480,000 45,100 525,100
2023 500,000 23,030 523,030
$7,290,000 $2,089,746 $9,379,746
Series 2005 Combination Tax Bonds
Due During Fiscal Principal Due Interest Due
Years Ending 1-Sep Mar 1/Sep 1 Total
2010 $265,000 $87,271 $352,271
2011 285,000 78,660 363,660
2012 290,000 68,685 358,685
2013 295,000 58,535 353,535
2014 100,000 48,210 148,210
2015 105,000 44,210 149,210
2016 105,000 40,010 145,010
2017 110,000 35,810 145,810
2018 115,000 31,410 146,410
2019 120,000 26,810 146,810
2020 125,000 22,010 147,010
2021 130,000 17,010 147,010
2022 135,000 11,550 146,550
2023 140,000 5,880 145,880
$2,320,000 $576,061 $2,896,061
41
TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO.1
TSI-5
LONG-TERM DEBT SERVICE REQUIREMENTS -BY YEAR
SEPTEMBER 30,2009
Series 2003 Unlimited Tax Bonds
Due During Fiscal Principal Due Interest Due
Years Ending 1-Sep Mar 1/Sep 1 Total
2010 $235,000 $15,012 $250,012
2011 245,000 7,963 252,963
$480,000 $22,975 $502,975
Series 2003 Combination Tax Bonds
Due During Fiscal Principal Due Interest Due
Years Ending 1-Sep Mar 1/Sep 1 Total
2010 $50,000 $37,152 $87,152
2011 55,000 35,278 90,278
2012 55,000 33,215 88,215
2013 60,000 31,290 91,290
2014 60,000 29,430 89,430
2015 60,000 27,090 87,090
2016 65,000 24,750 89,750
2017 70,000 22,150 92,150
2018 70,000 19,350 89,350
2019 75,000 16,375 91,375
2020 75,000 13,186 88,186
2021 80,000 10,000 90,000
2022 85,000 6,800 91,800
2023 85,000 3,400 88,400
$945,000 $309,466 $1,254,466
42
TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO.1
TSI-5
LONG-TERM DEBT SERVICE REQUIREMENTS -BY YEAR
SEPTEMBER 30,2009
Series 2002 Combination Tax Bonds
Due During Fiscal Principal Due Interest Due
Years Ending 1-Sep Mar 1/Sep 1 Total
2010 $140,000 $132,368 $272,368
2011 150,000 124,668 274,668
2012 155,000 118,667 273,667
2013 165,000 112,313 277,313
2014 170,000 105,300 275,300
2015 180,000 97,905 277,905
2016 190,000 89,895 279,895
2017 200,000 81,250 281,250
2018 210,000 71,850 281,850
2019 225,000 61,770 286,770
2020 235,000 50,633 285,633
2021 245,000 39,000 284,000
2022 260,000 26,750 286,750
2023 275,000 13,750 288,750
$2,800,000 $1,126,119 $3,926,119
Series 1997 Combination Tax Bonds
Due During Fiscal Principal Due Interest Due
Years Ending 1-Sep Mar 1/Sep 1 Total
2010 $365,000 $36,505 $401,505
2011 380,000 18,620 398,620
$745,000 $55,125 $800,125
43
TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO.1
TSI-6
CHANGES IN LONG-TERM BONDED DEBT
YEAR ENDED SEPTEMBER 30,2009
Series 1997 Series 2002 Series 2003 Series 2003 Series 2005
Combination Combination Combination Unlimited Combination
Tax Tax Tax Tax Tax Total
Interest rate 3.25-5.9%4.00-5.50%3.10-4.25%3.25%2.97-4.20%
Date interest payable 3/1 &9/1 3/1 &9/1 3/1 &9/1 3/1 &9/1 3/1 &9/1
Maturity date 9/1/98 to
9/1/2011 9/1/2023 9/1/2023 9/1/2001 9/1/2023
Bonds outstanding at
beginning ofyear $1,090,000 $2,935,000 $995,000 $715,000 $2,580,000 $8,315,000
Retirements of principal (345,000)(135,000)50,000)(235,000)(260,000)(1,025,000)
Bonds outstanding at end of
fiscal year $745,000 $2,800,000 $945,000 $480,000 $2,320,000 $7,290,000
Retirements of interest $68,575 $28,015 $28,015 $28,015 $28,015 $180,635
Paying agent's name &city:
All Series Bank of New York Mellon
P.O.Box 2320
Dallas,Texas 75221-2320
General
Obligation
Bond Authority Bonds
Amount authorized by voters $27,094,217
Amount issued (21,325,000)
Remaining to be issued $5,769,217
The general obligation bonds were authorized on October 7,1975
Debt Service Fund cash and cash equivalents balance as of September 30,2009:$239,434
Average annual debt service payment (principal &interest)for remaining term of debt $669,982
44
TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO.1
TSI-7
GENERAL FUND
COMPARATIVE SCHEDULES OF REVENUES AND OTHER FINANCING SOURCES
AND EXPENDITURES AND OTHER FINANCING USES -FIVE YEARS
SEPTEMBER 30,2009
Amounts .Percentoftotal revenue
REVENUE AND OTHER FINANCING SOURCES 2009 2008 2007 2006 2005 2009 2008 2007 2006 2005
Ad valorem property taxes $1,283,705 $1,002,608 $909,495 $1,038,439 $894,343 21.1%20.3%21.0%19.3%20.3%
Water and wastewater charges 3,721,868 3,678,859 3,151,144 4,005,608 3,355,439 61.3%74.5%72.8%74.5%76.3%
Utility Fees 515,200 8.5%0.0%0.0%0.0%0.0%
Inspection and tap fees 4,975 22,550 32,900 42,725 79,625 0.1%0.5%0.8%0.8%1.8%
Interest earned 20,755 69,447 106,168 57,329 21,840 0.3%1.4%2.5%1.1%0.5%
Capital lease proceeds/contractual obligations 330,000 49,432 165,000 5.4%1.0%0.0%3.1%0.0%
Miscellaneousand other 199,780 116,295 131,124 71,151 45,937 3.3%2.4%3.0%1.3%1.0%
Total revenue and otherfinancing sources 6,076,263 4,939,191 4,330,831 5,380,252 4,397,164 100.0% 100.0% 100.0%100.0%100.0%
EXPENDITURES AND OTHER FINANCING USES
Administrative 1,297,613 905,052 835,590 769,646 806,272 21.4%18.3%19.3%14.3%18.3%
Water operations 1,811,385 1,934,792 1,638,294 1,916,008 1,632,987 29.8%39.2%37.8%35.6%37.1%
Wastewater operations 999,388 500,224 480,798 469,292 468,513 16.4%10.1%11.1%8.7%10.7%
Wastewater collection system 294,869 409,948 402,482 673,422 328,419 4.9%8.3%9.3%12.5%7.5%
Information systems 175,698 187,908 124,987 60,557 55,476 2.9%3.8%2.9%1.1%1.3%
Contribution to Trophy Club Fire Dept 783,736 902,353 725,764 724,738 579,873 12.9%18.3%16.8%13.5%13.2%
Contribution to joint venture 95,000 0.0%0.0%0.0%0.0%2.2%
Capital outlay 29,379 442,782 31,381 26,678 0.0%0.6%10.2%0.6%0.6%
Miscellaneous 383,009 45,457 135,121 67,054 200,454 6.3%0.9%3.1%1.2%4.6%
Total expenditures and otherfinancing uses 5,745,698 4,915,113 4,785,818 4,712,098 4,193,672 94.6%99.5%110.5%87.6%95.4%
Excess (deficiency)ofrevenues and other
financing sources over(under)expenditures
and otherfinancing uses $330,585 $24,078 $(454,967)$668,154 $203,512 5.4%0.5%-10.5%12.4%4.6%
Total active retail waterand/or
wastewaterconnections 3,161 3,092 2,827 2,799 2,794
45
TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO.1
TSI-7
DEBT SERVICE FUND
COMPARATIVE SCHEDULES OF REVENUES AND OTHER FINANCING SOURCES
AND EXPENDITURES AND OTHER FINANCING USES -FIVE YEARS
SEPTEMBER 30,2009
TSI - 7 COMPARATIVE SCHEDULES OF REVENUES AND OTHER FINANCING SOURCES AND EXPENDITURES AND OTHER FINANCING
USES -FIVE YEARS -CONTINUED
Amounts Percent of total revenue
REVENUE AND OTHER FINANCING SOURCES 2009 2008 2007 2006 2005 2009 2008 2007 2006 2005
Ad valorem property taxes 1,100,081 1,302,763 1,325,143 $1,309,781 $1,357,464 73.4%96.1%94.8%94.7%97.2%
Penalties and interest 12,225 - -
.4,558 0.8% 0.0%0.0%0.0% 0.3%
Transfers in 383,009 .4,558 25.5%0.0%0.0%0.0%0.3%
Interest earned 4,105 23,326 43,456 32,279 18,724 0.3%1.7%3.1%2.3%1.3%
Miscellaneous and other -29,379 29,379 41,210 11,831 0.0%2.2%2.1%3.0%0.8%
Total revenue and otherfinancing sources 1,499,420 1,355,468 1,397,978 1,383,270 1,397,135 100.0% 100.0%100.0%100.0% 100.0%
EXPENDITURES AND OTHER FINANCING USES
Principal retirement 1,025,000 975,000 945,000 636,635 752,795 68.4%71.9%67.6%46.0%53.9%
Interest and fiscal charges 352,195 390,565 425,838 728,740 806,970 23.5%28.8%30.5%52.7% 57.8%
Total expenditures and other financing uses 1,377,195 1,365,565 1,370,838 1,365,375 1,559,765 91.8%100.7%98.1%98.7%111.6%
Excess (deficiency)of revenues and other
financing sources over (under)expenditures
and otherfinancing uses $122,225 $(10,097)$27,140 $17,895 $(162,630)8.2%-0.7%1.9%1.3%-11.6%
46
[This page is intentionally left blank.]
APPENDIXE
SPECIMEN MUNICIPAL BOND INSURANCE POLICY
f\sSURED
GUARANTY"
MUNICIPAL
ISSUER:
BONDS:$in aggregate principal amount of
MUNICIPAL BOND
INSURANCE POLICY
-N
Except .ent expt;essly modified by an endorsement hereto,the following terms shall have
the meanings specified f6r Pl.i''''''of this Policy."Business Day"means any day other than (a)a
Saturday or Sunday or (b)ay 0 ich banking institutions in the State of New York or the Insurer's
Fiscal Agent are aut~orized reqUired by law or executive order to remain closed."Due for Payment"
means (a)when referill'\9,;;to rincipal of a Bond,payable on the stated maturity date thereof or the date
on which the same shalllf~¥.J>en duly called for mandatory sinking fund redemption and does not refer to
any earlier date on which p~yment is due by reason of call for redemption (other than by mandatory sinking
fund redemption),acceleration or other advancement of maturity unless AGM shall elect,in its sale
discretion,to pay such principal due upon such acceleration together with any accrued interest to the date
of acceleration and (b)when referring to interest on a Bond,payable on the stated date for payment of
interest."Nonpayment"means,in respect of a Bond,the failure of the Issuer to have provided sufficient
funds to the Trustee or,if there is no Trustee,to the Paying Agent for payment in full of all principal and
interest that is Due for Payment on such Bond."Nonpayment"shall also include,in respect of a Bond,any
payment of principal or interest that is Due for Payment made to an Owner by or on behalf of the Issuer
which has been recovered from such Owner pursuant to the
Page 2 of 2
Policy No.-N
.hereby waives,
sefoff..,or oth '[se)and defenses
by-'t"sYI:1.r;9Qation,assignment or
.to AGM"ilo avoid payment of itsffi~OllCy.
all not be modified,altered or
.catl or amendment thereto.Except to
a mlum paid in respect of this Policy is
or ..vision being made for payment,of the
celed or revoked.THIS POLICY IS NOT
CURITY FUND SPECIFIED IN ARTICLE 76
ASSURED GUARANTY MUNICIPAL CORP.
(FORMERLY KNOWN AS FINANCIAL
SECURITY ASSURANCE INC.)
By --:---.---:---:--::-::=--_
Authorized Officer
TY MUNICIPAL CORP.(FORMERLY KNOWN AS
used this Policy to be executed on its behalf by its
To the fullest exte
only for the benefit of each
(including,without limitation,
otherwise,to the extent that
obligations under this.'',lic in
nonrefun
United States Bankruptcy Code by a trustee in bankruptcy in accordance with a final,nonappealable order
of a court having competent jurisdiction."Notice"means telephonic or telecopied notice,subsequently
confirmed in a signed writing,or written notice by registered or certified mail,,from an Owner,the Trustee or
the Paying Agent to AGM which notice shall specify (a)the person or entity;;m~ing the claim,(b)the Policy
Number,(c)the claimed amount and (d)the date such claimed amount became,Que for Payment."Owner"
means,in respect of a Bond,the person or entity who,at the time"pf.Nonpayri1~pt,is entitled under the
terms of such Bond to payment thereof,except that "Owner"shallfl9l1Qc:;lude the IS,suer or any person or
entity whose direct or indirect obligation constitutes the underlying secui11Y~()Lthe Bond's,J-:~',--':J'-y[~-',~3::~
AGM may appoint a fiscal agent (the "Insurer's fiscal Agent")f9.,~~?(jf'\hiS Policy by
giving writt~n notice to the Trustee and the Paying A~e~t see~ifying'th.e nam~'yan "'rio~S~..~d9ress of ~he
Insurer's Fiscal Agent.From and after the date of r~~elpt of~y~h notice by ttf~.:!Trusteeaqd.,t,t}~Paying
Agent,(a)copies of all notices required to be d~ftyered to"~~M 'plJrsuant lfG'hthis PolicY;;~B~1I be
simultaneously delivered to the Insurer's Fiscal Agent~l\l'9",to AGM''l:!nd s 11 not be'l:l~~med receivedyntil
received by both and (b)all ~ayments required to be maCf~ByAGM '0 s,rolicy m.ay~.pe made directly
by AGM or by the Insurer's Fiscal Agent on If of AGM:kT~~lnsurer""al>Agent IS the,agent of AGM
only and the Insurer's Fiscal Agent shall in be liable"t9a Ownerr,any act ofJhe Irl~YJ7r's Fiscal
Agent or any failure of AGM to depos,j1!pr cau e deposit "fficient-Wr:tds to rm p<!cYp1Emts due
under this Policy.~·~~Wto;?'
(212)826-0100
Form SOONY (5/90)
Financial Advisory Services
Provided By:
SWS ISOUTHWEST
GROUP SECURITIES
Building what you value.
INVESTMENT BANKERS
NEW ISSUE-BOOK-ENTRY-ONLY Ratings:S&P:"MA"(Negative Outlook)(Insured)
"AA-"(Underlying)
Moody's:"Aa3"(Negative Outlook)(Insured)
"A2"(Underlying)
(See "RATINGS"and "BOND INSURANCE"herein)
OFFICIAL STATEMENT
Dated March 16,2010
In the opinion of bond Counsel,interest on the Bonds will be excludable from gross income for federal income tax purposes under
statutes,regulations,pUblished rulings and courl decisions existing on the date hereof,subject to the matters described under "TAX
MATTERSn herein.
THE DISTRICT HAS DESIGNATED THE BONDS AS MQUALIFIED TAX-EXEMPT OBLIGAT10NSn•
(See "TAXMATTERS -Qualified Tax-Exempt Obligations for Financial Institutions"herein.)
$2,000,000
TROPHY CLUB MUNICIPALUTILITYDISTRICT NO.1
(A Political SubdMsion ofthe State of Texas Located in Denton and Tarrant Counties)
UNLIMITED TAX BONDS,SERIES 2010
Dated Date:April 1,2010 Due:September 1,as shown on Page ii
The Trophy Club Municipal Utility District NO.1 (the "District"or "Issuer")$2,000,000 Unlimited Tax Bonds,Series 2010 (the "Bonds")
are being issued pursuant to the terms and prOVisions of an order (the "Order")of the Board of Directors of the District (the "Board")and
in accordance with the Constitution and general laws of the State ofTexas (the "State"),inclUding particularly Article XVI,Section 59 of
the Texas Constitution and the general laws of the State of Texas,including Chapters 49 and 54 of the Texas Water Code,as
amended,and an order ofthe Texas Commission on Environmental Quality.The Bonds were authorized by the voters ofthe District at
an election held on May 10,2008.(See "THE BONDS -Authority for Issuance"herein.)
The Bonds,when issued,will constitute direct and general obligations of the District,payable from the proceeds of an annual ad
valorem tax levied against all taxable property located therein,without limitation as to rate or amount.Neither the State of Texas,
Denton or Tarrant Counties,Texas nor any political subdivision or municipality,other than the District shall be obligated to
paythe principal of or Interest on the Bonds.Neitherthe faith and credit nor the taxing power ofthe State of Texas or Denton
or Tarrant Counties,Texas or any political subdivision or municipality thereof,other than the District,is pledged to the
payment of the principal of or interest on or the redemption price of the Bonds.(See "THE BONDS -Security for Payment"
herein.)THE BONDS ARE SUBJECT TO SPECIAL INVESTMENT CONSIDERATIONS DESCRIBED HEREIN.(See "INVESTMENT
CONSIDERATIONS"herein.)Bond purchasers are encouraged to read this entire Official Statement prior to making an investment
decision.
Interest on the Bonds will accrue from April 1,2010 (the "Dated Date")and is payable March 1,2011,and each September 1 and
March 1 thereafter until the earlier of maturity or redemption,and will be calculated on the basis of a 36<Hiay year of twelve 30-day
months.The Bonds will be issued in fully registered form only,without coupons,in denominations of $5,000 or any integral multiple
thereof,and when issued,will be registered in the name of Cede &Co.,as registered owner and nominee for The Depository Trust
Company ("DTC"),New York,New York, acting as securities depository for the Bonds until DTC resigns or is discharged.The Bonds
initially will be available to purchasers in book-entry form only.So long as Cede &Co.,as the paying agent to DTC,is the registered
owner of the Bonds,principal of and interest on the Bonds will be payable by the paying agent to DTC,which will be solely responsible
for making such payment to the beneficial owners of the Bonds.The initial paying agent/registrar for the Bonds shall be The Bank of
New York Mellon Trust Company,NA,Dallas,Texas (the "Paying Agent").
Proceeds from the sale of the Bonds are being used to (i)construct and equip a new fire station and (ii)pay the costs related to the
issuance ofthe Bonds.(See "THE BONDS -Use ofBond Proceeds"herein.)
The District reserves the right to redeem,prior to maturity,in integral mUltiples of $5,000,those Bonds maturing on and after
September 1,2021,in whole or from time to time in part,on September 1,2020,and on any date thereafter at a price of par plus
accrued interest from the most recent interest payment date to the date fixed for redemption.In addition,the Bonds maturing
September 1,2027,September 1,2029 and September 1,2031 are subject to mandatory sinking fund redemption,as further described
herein.(See "THE BONDS -Redemption Provisions"herein.)
After requesting competitive bids for purchase of the Bonds,the District has accepted the lowest bid to purchase the Bonds,bearing
interest as shown,at a price of 100%of par plus accrued interest to the date of delivery,resulting in a net interest cost rate to the
District of 4.156986%.
The scheduled payment of principal of and interest on the Bonds when due will be guaranteed under an insurance policy to be issued
concurrently with the delivery of the Bonds by ASSURED GUARANTY MUNICPAL CORP.(FORMERLY KNOWN AS FINANCIAL
SECURITYASSURANCE INC.)("Assured Guaranty Municipal"or "AGM").(See "BOND INSURANCE"herein.)
MsURED
GUARANlY
MUNICIPAl
STATED MATURITYSCHEDULE
(See Page i1)
The Bonds are offered for delivery,when,as and ifissued and received by the initial purchaser (the "Purchaser")and SUbject to the approving
opinion of the Attomey General ofthe State of Texas and the approval ofcertain legal matters by McCall,Parkhurst &Horton L.L.P.,Dallas,
Texas,Bond Counsel.Delivery ofthe Bonds through DTC in Dallas,Texas is expectedon orabout April 15,2010.