HomeMy WebLinkAbout$1,870,000 Unlimited Tax Bonds Series 1988NEW ISSUE
OFFICIAL STATEMENT DATED NOVEMBER 1, 1988
IN TIIE OPINION OF CO -BOND COUNSEL, INTEREST ON THE BONDS WILL BE. EXCLUDABLE FROM GROSS INCOME
FOR PURPOSES OF FEDERAL INCOME TAXATIUH UNDER EXISTING STATUTES, REGULATIONS, PUBLISHED
RULINGS AND COURT DECISIONS, EXCEPT A5 EXPLAINED UNDER "TAX EXEMPTION" HEREIN.
THE DISTRICT HAS DESIGNATED 111E BONDS ASLOUALIFIED TAX-EXEMPT OBLIGATIONS
FOR FINANCIAL INSTITUTIONS.
$1,870,000
OENTON COUNTY MUNICIPAL UTILITY DISTRICT NO. 2
OF DENTON COUNTY, TEXAS
(A Political Subdivision of the State of Texas
Located Within Denton County)
UNLIMITED TAX BONDS
SERIES 1988
Dated: December 1, 1988 Due: September I, as shown below
Interest on the Bonds (the "Bonds") will be payable September 1 and March 1 of each year,
commencing September 1, 1989. The Bonds will be issued only as fully registered bonds in the
denomination of $5,000 each, or any integral multiple thereof. Principal of the Bonds will be
payable by the paying agent/registrar (the "Paying Agent/Registrar"), Initially NCNB Texas
National Bank, Fort Worth, Texas. Principal of the Bonds will be payable to the registered owner
at maturity or redemption upon presentation at the principal corporate trust office of the Paying
Agent/Registrar. Interest an the Bonds will be payable by check, dated as of the Interest payment
date, and mailed by the Paying Agent/Registrar to registered owners as shown on the records of the
Paying Agent/Registrar on the fifteenth (15th) day of the preceding month (the "Record Date"), or
by such other method acceptable to the Paying Agent/Registrar, requested by, and at the risk and
expense oF, the registered owner.
MATURITY SCHEDULE
Principal Principal
Amount Rate Maturity Yield Amount Rate Maturity Yield
25,000 9.00% 1990 6.50% $ 70,000 8.00% 2002* 8.00%
25,000 9.00 1991 6.75 75,000 8.10 2003* 8.10
30,000 9.00 199Z 7.00 80,000 8.20 2004* 8.20
30,000 9.00 1993 7.20 90,000 8.25 2005* 8.25
35,000 8.00 1994 7.35 95,000 B.30 2006* B.30
35,000 7.50 1995 7.50 105,000 8.35 2007* 8.35
40,000 7.60 1996 7.60 115,000 8.40 2000* B.40
.45,000 7.70 1997 7.70 125,000 8.45 2009* 8.45
50,000 7.80 1998 7.80 135,000 8.50 2010* 8.50
55,000 7.90 1999* 7.90 150,000 8.50 2011* 8.50
60,000 8.00 2000* 8.00 160,000 8.00 2012* 8.50
5,000 8.00 2001* 8,00 175,000 8.00 2013* 8.50
:ION: The District reserves the right, at its option, to redeem Bonds maturing September 1,
9 -through September 1, 2013, both Inclusive, in whole or in part, in the principal amounts of
000 or any'integral multiple thereof on September 1, 1998, or any date thereafter, at the par
(7e''- thereof plus accrued Interest to the date fixed for redemption. Not less than 30 days prior
y: redemption date, the District shall cause a notice of redemption to be sent by United
e!, mail, first class, postage prepaid, to each registered owner of a Bond to be redeemed, 1n
$"'' r, in part, at the address as it appeared nn the 45th day prior to such redemption.
Y FOR ISSUANCE: These Bonds are the first Installment of a total of $6,450,000
led by the voters of the District at an election held an April 4, 1981, as follows:
Amount'
Authorized
Vote
For Against
Issued
To Date
This Authorized
Issue But Unissued
$ 6,450,000 4 0 $ 0 $ 1,870,000 $ 4,580,000
are being Issued pursuant to a resolution (the "Bond Resolution"), adopted by the Board
ors, -of the District (the "Board") on the date or the sale of the Bonds, and pursuant to
t',- Section 59 of the Texas Constitution and Chapter 54- of the Texas Water Code, as
fie Texas Water Commission ("TUC") authorized the District to sell up to $2,400,000 of
ler adopted on October 11, 1908.
NEW ISSUE
PRELIMINARY OFFICIAL STATEMENT DATED OCTOBER 20, 1988
This Preliminary Official Statement is subject to completion and amendment and is intended solely
for the solicitation of initial bids to purchase the Bonds. Upon the sale of the Bonds, the
Official Statement will be delivered to the Purchaser.
IN THE OPINION OF CO -BOND COUNSEL, INTEREST ON THE BONDS WILL BE EXCLUDABLE FROM GROSS INCOME
FOR PURPOSES OF FEDERAL INCOME TAXATION UNDER EXISTING STATUTES, REGULATIONS, PUBLISHED
RULINGS AND COURT DECISIONS, EXCEPT AS EXPLAINED UNDER °TAX EXEMPTION' HEREIN.
THE DISTRICT HAS DESIGNATED THE BONDS AS QUALIFIED TAX-EXEMPT OBLIGATIONS
FOR FINANCIAL INSTITUTIONS.
$1,870,000
DENTON COUNTY MUNICIPAL UTILITY DISTRICT NO. 2
OF DENTON COUNTY, TEXAS
(A Political Subdivision of the State of Texas
Located Within Denton County)
UNLIMITED TAX BONDS
SERIES 1988
Dated: December 1, 1988 Due: September 1, as shown below
Interest on the Bonds (the "Bonds") will be payable September 1 and March 1 of each year,
commencing September 1, 1909. The Bonds will be issued only as fully registered bonds in the
denomination of $5,000 each, or any integral multiple thereof. Principal of the Bonds will be
payable by the paying agent/registrar (the "Paying Agent/Registrar"), initially NCNB Texas
National Bank, Fort Worth, Texas. Principal of the Bonds will be payable to the registered owner
at maturity or redemption upon presentation at the principal corporate trust office of the Paying
Agent/Registrar. Interest on the Bonds will be payable by check, -dated as of the interest payment
..;:date, and mailed by the Paying Agent/Registrar to registered owners as shown on the records of the
(Paying Agent/Registrar on the fifteenth (15th) day of the preceding month (the "Record Date"), or
by such other method acceptable to the Paying Agent/Registrar, requested by, and at the risk and
expense of, the registered owner.
MATURITY SCHEDULE
jPrincipai Principal
;Amount Rate Maturity Yield Amount Rate Maturity Yield
'.,25,000 % 1990 % $ 70,000 % 2002* %
25,000 1991 75,000 2003*
.30,000 1992 80,000 2004*
3U;000 1993 90,000 2005*
35,000 1994 95,000 2006*
35,000 1995 105,000 2007*
40,000 1996 115,000 2008*
45,000 1997 125,000 2009*
50,000 1998 135,000 2010*
55',000 1999* 150,000 2011*
60400 2000* 160,000 2012*
,MOO 2001* 175,000 2013*
011C The District reserves the right, at its option, to redeem Bonds maturing September 1,
through September 1, 2013, both inclusive, in whole or in part, in the principal amounts of
,or any integral multiple thereof on September 1, 1998, or any date thereafter, at the par
't}iereof plus accrued interest to the date fixed for redemption. Not less than 30 days prior
,igedemption date, the District shall cause a notice of redemption to be sent by United
lap, first class, postage prepaid, to each registered owner of a Bond to be redeemed, in
n part, at the address as it appeared on the 45th day prior to such redemption.
:FOR
el` by
ISSUANCE: These Bonds are the first installment of a total of $6,450,000
he voters of the District at an election held on April 4, 1981, as follows:
Amount Vote Issued This Authorized
Authorized 1 -or Against To Date Issue But Unissued
$ 6,450,000 4 0 $ 0 $ 1,670,000 $ 4,580,000
6eing issued pursuant to a resolution (the °Bond Resolution"), adopted by the Board
of',ithe District (the "Board') on the date of the sale of the Bonds, and pursuant to
15ection 59 of the Texas Constitution and Chapter 54 of the Texas Water Code, as
i;Texas Water Commission ("TWC") authorized the District to sell up to $2,400,000 of
;adopted on October 11, 1988.
zhd
It
'
SECURITY FOR PAYMENT: These Bonds constitute direct and general obligations of the District and
are payable from the proceeds of an annual ad valorem tax levied against all taxable property
located therein, without limitation as to rate or amount.
PURPOSE: Proceeds from the sale of the Bonds will be used to (i) purchase a portion of the
existing water, sanitary sewer and storm drainage facilities for Village West, Phase I, and the
Trophy Club Drive Extension Project from the developer, (iil purchase from the developer a portion
of its pro rata share of existing central wastewater facilities, (iii) pay engineering fees, (iv)
capitalize 12 months interest, and (v) pay costs incurred in the issuance of the Bonds. See "USE
AND DISTRIBUTION OF BOND PROCEEDS" herein.
LEGALITY: The Attorney General of the State of Texas and Messrs. Schwartz, Page 8 Harding,
Houston, Texas, and Kelly, Hart 8 Hallman, Fort Worth, Texas, Co -Bond Counsel. (Legal Opinions
printed on the Bonds - See "LEGAL MATTERS - Legal Opinions" herein).
DELIVERY: When, as and if issued, expected on or about December 5, 1988.
USE OF INFORMATION IN OFFICIAL STATEMENT
No dealer, broker, salesman or other person has been authorized to give any information, or to
make any representations other than those contained in this Official Statement, and, if given or
made, such other information or representations must not be relied upon as having been authorized
by the District.
This Official Statement is not to be used in connection with an offer to sell or the solicitation
of an offer to buy in any state in which such offer or solicitation is not authorized or in which
the person making such offer or solicitation is not qualified to do so or to any person to whom it
is unlawful to make such offer or solicitation.
Any information or expression 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 en Implication that there has been no change in the affairs of the District
or other matters described herein since the date hereof.
TABLE OF CONTENTS
Official Statement; Page
Description of the Bonds _ 1
Registration 4
Official Statement Summary 5
General Information 5
The Bonds S
Selected Financial Information 6
The Bonds 7
General Description 7
Optional Redemption 7
Authority for Issuance 7
Security for Payment 7
Issuance of Additional Debt 7
Bondholder's Remedies in the Event of Default 8
Legality _ 8
Payment Record 8
Delivery 8
Use and Distribution of Bond Proceeds 9
Summary Financial Information 10
District Debt 10
Floating Debt 10
Commitments for Developer Reimbursement 10
Contingent Liabilities 11
Unlimited Tax Bonds Authorized But Unissued 11
Tax Data and Information 11
Tax Rate Limitation 11
Maintenance Taxes 11
Tax Rate 11
Tax Rate Required for Debt Service 11
Principal Taxpayers 12
Classification of Assessed Valuation 12
Overlapping Debt Data and Information 13.
Estimated Direct and Overlapping Ad Valorem Tax Supported Gross Debt Statement13
Assessed Valuations and Tax Rates of Direct and Overlapping Governmental
Subdivisions 13
Authorized General Obligation Bonds of Overlapping Governmental Subdivisions13
Estimated Direct and Overlapping Taxes 14
Debt Service Requirements 14
Condensed General Fund Operating Statements 15
Tax Procedures 15
Description of the Existing Central Facilities Water, Wastewater and Drainage
Systems 17
Ownership of Water and Wastewater Central Facilities 18
Description of the District's Water and Wastewater Facilities 18
Water Supply Contract 19
Master District Contract 19
Water and Sewer Rate and Fee Schedule 20
Miscellaneous Statistical Central Facility Systen Data 21
District Revenue Debt 21
Revenue Bonds Outstanding 21
Revenue Bonds Authorized But Unissued 21
General Water and Sewer Operating Fund Comparative Statement of Revenues and
Expenditures 22
Risk Factors 23
Dissolution and Consolidation 24
Future Plans of the District 24
Legal Matters 24
Legal Opinions 24
Tax Exemption 24
Qualified Tax -Exempt Obligations 25
Registration and qualification of Bonds For Sale 25
Legal Investments and Eligibility to Secure Public Funds in Texas 26
ating 26
Financial Consultant 26
Engineers 26
ther flatters 26
eral Background Information Regarding Denton County Municipal Utility
istrict No. 2 of Denton County, Texas APPENDIX A
;Annual Audit Report for the Fiscal Year Ended September 30, 1987 as prepared by
;Phillips, Welch, Dillard & Roberson, P.C., Certified Public Accountants APPENDIX B
Ilr
Ill Ulu Ilia
REGISTRATION
PAYING AGENT/REGISTRAR: The Bonds will be issued in fully registered form in multiples of
$5,000 for any one maturity, and principal and semiannual interest will be paid by the
paying agent/registrar (the "Paying Agent/Registrar"), initially NCNB Texas National Bank, Fort
Worth, Texas. Principal of the Bonds will be payable to the registered owner at maturity or
redemption upon presentation to the Paying Agent/Registrar. Interest on the Bonds will be payable
by check, dated as of the interest payment dates and mailed by the Paying Agent/Registrar to the
registered owner as shown on the records of the Paying Agent/Registrar on the Record Date (see
"Record Date for Interest Payment" herein), or by such other method acceptable to the Paying
Agent/Registrar requested by, and at the risk and expense of, the registered owner.
SUCCESSOR PAYING AGENT/REGISTRAR: The District reserves the right to replace the Paying
Agent/Registrar. If the Paying Agent/Registrar is replaced by the District, the new Paying
Agent/Registrar shall accept the previous Paying Agent/Registrar's records and act in the same
capacity as the previous Paying Agent/Registrar. Any successor Paying Agent/Registrar selected by
the District shall be a bank, trust company, financial institution or other entity duly qualified
and legally authorized to serve and perform the duties of Paying Agent/Registrar for the Bonds.
Upon a change in the Paying Agent/Registrar for the Bonds, the District shall promptly cause a
written notice thereof to be sent to each registered owner of the Bonds by United States mail,
first class, postage prepaid, which notice shall give the address of the new Paying
Agent/Registrar.
FUTURE REGISTRATION: The Bonds may be transferred, registered, and assigned only on the
registration books of the Paying Agent/Registrar, and such registration shall be at the expense of
the District. A Bond may be assigned or transferred only by the execution of the assignment form
on the Bonds. A new Bond or Bonds will be delivered by the Paying Agent/Registrar to the last
assignee (the new registered owner) in exchange for such transferred and assigned Bonds in, to the
extent practicable not more than three (3) business days after the receipt of the Bonds to be
transferred in proper form. Such new Bond or Bonds must be in denominations of $5,000 for any one
maturity or any integral multiple thereof. The last assignee's claim of title to the Bond must be
proved to the satisfaction of the Paying Agent/Registrar.
RECORD DATE FOR INTEREST PAYMENT: The record date ("Record Date") for the interest payable o0
any interest payment date 1s the fifteenth (15th) day of the preceding month, as specified in -thi
Bond Resolution.
LIMITATION ON TRANSFER OF BONDS CALLED FOR REDEMPTION: Neither the District nor the Payin
Agent/Registrar shall be required to exchange or transfer to an assignee of the registered owne'j
any Bond called for redemption, in whole or in part, within 45 days of the date fixed fart-.
redemption; provided, however, such limitation of transfer shall not be applicable to an exchange':
by the registered owner of the unredeemed balance of a Bond called in part for redemption.
OFFICIAL STATEMENT SUMMARY
The Following material is qualified in its entirety by the detailed information and financial
statements appearing elsewhere in this Official Statement.
GENERAL INFORMATION
THE ISSUER Denton County Municipal Utility District No. 2 of Denton County,
Texas, a political subdivision of the State of Texas, was created by
order of the Texas Water Commission, dated October 9, 1979. The
District is located in southeastern Denton County in the Town of
Trophy Club, near the southern shore of Lake Grapevine, just east of
the Town of Roanoke, and is approximately 27 milesfromdowntown
Dallas, 25 miles from downtown Fort Worth, 17 miles from Denton, 11
miles from Grapevine, and 14 miles from the Dallas -Fort Worth
International Airport. The District contains 371.722 acres, of which
346.722 acres, excluding public areas, can be developed. The area
fully developed as of September 30, 1988 is 159 acres with 189 acres
remaining to be developed. As of September 30, 1988, there were
approximately 196 vacant platted lots available within the District
and approximately 186 platted lots with 175 homes fully constructed
and 11 homes partially constructed. The price range of homes
currently under construction is from $90,000 to $105,000.
THE DEVELOPERS The remaining 188 developable acres within the District is owned by
by Independent American Development" Corporation, Bass Land Company,
and Sunbelt Savings Association.
LEGAL OPINIONS Schwartz, Page 8 Harding, Houston, Texas, and Kelly, Hart 8 Hallman,
Fort Worth, Texas, Co -Bond Counsel.
FINANCIAL CONSULTANT Southwest Securities Incorporated, Dallas, Texas.
ENGINEERS Carter 6 Burgess, Inc., Consulting Engineers, Fort Worth, Texas.
.THE ISSUE $1,870,000 Unlimited Tax Bonds, Series 1988, issued pursuant to the
Bond Resolution adopted by the District's Board of Directors.
USE OF PROCEEDS The District will use proceeds from the sale of the Bonds for the
purpose of purchasing a portion of the existing water, sanitary
sewer, and storm drainage facilities for Village West, Phase I, and
the Trophy Club Drive Extension Project from the developer, and for
the purpose of acquiring a portion of the District's share of
existing central wastewater facilities, to pay engineering fees, to
capitalize 12 months interest, and to pay costs incurred in the
issuance of the Bonds.
RYME,NT RECORD The Bonds constitute the first series of bonds issued by the
District. Funds equal to 12 months of interest on the Bonds will be
capitalized from the proceeds of the Bonds.
CR_IPTION
THE BONDS
Serial Bonds in the amount of $1,870,000, maturing in varying e'io:nts
in 1990 through 2013. The Bonds are subject to redemption at the
option of the District commencing in 1998 at par plus accrued
interest. The Bonds are issued in fully registered form in multiples
of $5,000 for any one maturity (see "THE BONDS'),
TY FOR ISSUANCE.... The Bonds are the first series of bonds issued by the District and
are the first installment of $6,450,000 of bonds which were
authorized at an election held in the District on April 4, 1981. The
Bonds are issued pursuant to the Bond Resolution, adopted by the
Board on the date of the sale of the Bonds, and pursuant to Article
XVI, Chapter 59 of the Texas Constitution and Chapter 54 of the Texas
Water Code, as amended. The Texas Water Commission authorized the
District to sell $2,400,000 of bonds by Order adopted on October 11,
1988.
SELECTED FINANCIAL INFORMATION
1988 Certified Assessed Valuation (100% of Market Value)
Bonded Debt (This Issue)
Ratio of Bonded Debt to 1988 Certified Net Assessed Valuation
Direct and Overlapping Gross Debt
Ratio of Direct and Overlapping Gross Debt to 1989 Certified Net Assessed
Valuation
$ 26,838,465
$ 1,870,000
6.97%
$ 2,274,898
8.40%
Estimated Debt Service Fund Balance (Capitalized from Proceeds
of the Bonds) $ 168,300
Projected Maximum Annual Debt Service Requirement (2000) at an Assumed
Interest Rate of 9.00% Per Annum ("Projected Requirement") $ 195,000
Projected Tax Rate Required to Pay Projected Requirement Based Upon
1980 Certified Net Assessed Valuation at 95% Collections $ 0.7648
General Operating Fund - Revenue in Excess of Expenses for the
Fiscal Year Ended September 30, 1988 (Unaudited) $ 6,928
General Operating Fund Balance (Unaudited as of September 30, 1988) $ 15,208
Estimated Population of the District at June 30, 1988 708
THE BONDS
The following is a description of some of the terms and conditions of the Bonds, which description
is qualified in its entirety by the form of the Bonds contained in the resolution of the Board of
Directors of the District (the "Board") authorizing the issuance of the Bonds (the "Bond
Resolution").
GENERAL DESCRIPTION
The $1,870,000 Denton County Municipal Utility District No. 2 of Denton County, Texas Unlimited
Tax Bonds, Series 1988 (the "Bonds"), are dated December 1, 1988, with interest payable September
1, 1989, and each September 1 and March 1 thereafter until the earlier of maturity or redemption.
The Bonds are serial bonds maturing on September 1 of the years shown under "MATURITY SCHEDULE".
Principal and semiannual interest are payable at the principal corporate trust office of the
paying agent/registrar (the "Paying Agent/Registrar"), initially NCNB Texas National Bank, Fort
Worth, Texas. The Bonds are issued in fully registered form in the denomination of $5,000 or any
integral multiple thereof.
OPTIONAL REDEMPTION
The District reserves the right, at its option, to redeem Bonds maturing September 1, 1999 through
September 1, 2013, both inclusive, in whole or in part, in the principal amounts of $5,000 or any
integral multiple thereof on September 1, 1998, or any date thereafter, at the par value thereof,
plus accrued interest to the date fixed for redemption. Not less than 30 days prior to any
redemption date, the District shall cause a notice of redemption to -be sent by United States mail,
first class, postage prepaid, to each registered owner of a Bond to be redeemed, in whole or in
part, at the address as it appeared on the 45th day prior to sudh redemption.
AUTHORITY FOR ISSUANCE
On April 4, 1981, voters of the District authorized, by a vote of 4 "for" to 0 "against", the
issuance of $6,450,000 principal amount of unlimited tax bonds for the purpose of constructing or
purchasing existing water, sanitary sewer, and storm drainage facilities from the developer and
for the purpose of constructing or acquiring the District's share of existing central water supply
and wastewater facilities.
The Bonds are issued pursuant to the Bond Resolution to be adopted by the Board on the date of the
sale of the Bonds and pursuant to Article XVI, Section 59, of the Texas Constitution, and Chapter
54 of the Texas Water Code, as amended. The Bonds are being issued to purchase a portion of the
misting water, sanitary sewer, and storm drainage facilities far Village West, Phase I, and the
sTrophy Club Drive Extension Project from the developer and to purchase from the developer a
portion of the District's pro rata share of certain central wastewater facilities pursuant to the
:Texas Water Commission's approval Order adopted on October 11, 1988.
SECURITY FOR PAYMENT
,These Bonds constitute direct and general obligations of the District, and the principal thereof
and interest thereon are payable from the proceeds of a continuing, direct annual ad valorem tax
!levied against all taxable property located within the District, without limitation as to rate or
punt:
3,1 -the Bond Resolution, the District covenants to levy a sufficient tax to pay principal of and
. terest on the Bonds, with full allowance being made for delinquencies and casts of collection.
0511Jected taxes will be placed in the Debt Service Fund (as defined in the Bond Resolution) and
sed:.solely to pay principal of and interest on the Bonds, and any additional bonds payable from
aeg, which may be issued, together with the costs of assessing and collecting such taxes and
Ing such Bonds.
SSUANCE OF ADDITIONAL DEBT
4fStrict may issue bonds necessary to provide and maintain improvements for which the District
oreated (see "THE DISTRICT - Creation" herein), if authorized by the District's voters and by
Hoard, and approved by order of the Texas Water Commission. The District's voters have
`1 zed, the issuance of a total of $6,450,000 bonds far the purpose of constructing or
sing existing water, sanitary sewer, and storm drainage facilities from the developer and
azitpurpose of acquiring a portion of the District's share of required central water supply
i;,1ewater facilities (of which $4,580,000 will remain unissued after the issuance of the
o„10 may authorize additional amounts. The Bond Resolution imposes no limitation an the
fadditional bonds which may be issued by the District.
BONDHOLDER'S REMEDIES IN THE EVENT OF DEFAULT
The Bond Resolution contains a covenant which provides that while any part of the Bands _ares`
outstanding, there shall be assessed, levied and collected an annual ad valorem tax, without limit=
as to rate or amount, on all taxable property within the District sufficient to pay interest
and principal of the Bonds when due and to pay the expenses necessary in collecting such taxes and: -
paying such Bonds. Futhermore, the Bond Resolution states that in the event the District defaults
in the performance of any of the covenants set forth in the Bond Resolution, any Bondholder shatf&l:
be entitled to seek in a court of competent jurisdiction a writ of mandamus requiring the Board;§of
Directors to observe and perform such covenants. Such right is in addition to any other right's
the Bondholders are provided by the laws of the State of Texas. Specifically, in the event .4f
default in the payment of principal of or interest on the Bonds, the Bondholders have the right
seek a writ of mandamus requiring the District to levy adequate taxes to make such paymenfs'ly
There is no acceleration of maturity of principal of the Bonds in the event of default,.,=
Consequently, the remedy of mandamus is a remedy which may have to be enforced from year to_,yea,.
by the Bondholders. The Bondholders cannot themselves foreclose on property within the Districa,.
or sell property within the District in order to pay principal of and interest on the Bonds..,,the:,
addition, the enforceability of the rights and remedies of the Bondholders may be subject id -2
limitations pursuant to the federal bankruptcy laws, or other similar laws affecting the rights'of
creditors of political subdivisions generally.
LEGALITY
Opinions of legality will be rendered by the Attorney General of the State of Texas, and Schwartz,
Page & Harding, Houston, Texas, and Kelly, Hart & Hallman, Fort Worth, Texas, Co -Band Counsel',
(Legal Opinions to be printed on the Bonds - see "LEGAL MATTERS - Legal Opinions" herein).
PAYMENT RECORD
The Bonds constitute the first series of bonds issued by the District. Funds for the first 12
months of interest on the Bonds will be capitalized from the proceeds of the Bonds.
DELIVERY
Delivery, when, as and if issued, is expected on or about December 5, 1988.
USE AND DISTRIBUTION OF BOND PROCEEDS
USE OF PROCEEDS
The District will use proceeds from the sale of the Bonds for the purpose of purchasing existing
water, sanitary sewer, and storm drainage facilities from the developer and for the purpose of
acquiring a portion of the District's share of existing central wastewater facilities, to pay
engineering fees, to capitalize 12 months interest, and to pay costs incurred in the issuance of
the Bonds.
DISTRIBUTION OF PROCEEDS
Construction Costs
A. Developer Contribution Items
1. Village West, Phase I:
a. Water Distribution
b. Sanitary Sewer Collection (b)
c. Storm Drainage
Subtotal
Share Paid Net Cost
Amount By Developer (a) To District
$
357,003
22,816
488,585
107,101
6,845
146,575
$
249,902
15,971
342,010
868,404 260,521 607,883
2. Trophy Club Drive Extension:
a, Water Distribution $ 6,243 $ 1,873 $ 4,370
b. Sanitary Sewer Collection 0 0 0
c. Storm Drainage 116,260 62,528 53,732
Subtotal 122,503
3. Survey and Inspection $ 98,841
Total Developer Contribution Items L1,0824748
B. District Items
1. WWTP Expansion to 1.4 mgd
a. Construction Costs
b. Engineering (15.73%)
Total District Items
al Construction Costs
onconstruction Costs
64,401
$ 31,788
$ 356,710
58,102
67,053
733,038
150,227
23,631
173,858
906,896
Legal Fees (3%) $
Fiscal Agent Fees (1.5%)
'Interest Costs:
Capitalized Interest (1 yr. 9 9%)
Developer Interest
Bond Discount (3%)
Administrative
iperation Advances
PACcounting
,ineering
C -,Bond Issuance Fee
ohconstruction Costs
56,100
28,050
168,300
504,900
56,100
24,602
90,377
5,000
25,000
4,675
963,104
$ 1,870,000
opers of municipal utility districts, with certain exceptions, are required by the Texas
rCtbmmission's rules to contribute at least 30% of the costs of certain water, sewer and
a ge:-.fiacilities.
efts partial payment only.
IBUTION RULE
,b, certain exceptions applicable in part to these Bonds, are required by rules of
':Commission to contribute at least 30% of the cost of providing certain water,
e facilities within districts, such as the District. For this bond issue, items
oyer contribution totaled $1,089,748, of which the developers paid $356,710.
SELECTED FINANCIAL INFORMATION
(As of September 30, 1988)
1988 Appraised Value established by the Denton County Appraisal District $ 26,844,079
Less: Agricultural Use Exemptions 5.614
1988 Certified Assessed Valuation (100% of actual) $ 254838,46S
Bonded Debt (This Issue) $ 1,870,000
Ratio of Bonded Debt to 1988 Certified Assessed Valuation 6.97%
Estimated Debt Service Fund Balance $ 168,300 (a)
General Operating Fund Balance (Unaudited) $ 15,208 ..
Estimated Population - 708
Estimated Per Capita 1988 Certified Assessed Valuation - $37,907
Estimated Per Capita Bonded Debt - $2,641
Area of the District - 371.722 Acres
Bonded Debt Per Acre - $5,031
(a) Represents 12 months interest (at an annual interest rate of 9.00%) to be
proceeds of the Bonds. Accrued interest from the date of the Bonds to the
will also be deposited into the Debt Service Fund.
DISTRICT DEBT -
FLOATING DEBT - None
COMMITMENTS FOR DEVELOPER REIMBURSEMENT
capitalized from
date of delivery
Developers within the District, with the concurrence of the District, have awarded construction
contracts and made progress payments to construction contractors for the construction of works,
improvements, facilities, plants and equipment necessary to provide waterworks, wastewater and
drainage systems within the District. The District intends to undertake, within the limits of
economic feasibility, to reimburse a percentage of the total cost of the project plus accrued
interest from the date of the progress payments to the developers. As shown below, the District
estimates such reimbursable costs at present to be $3,479,647, a portion of which will be payable
from this issue of Bonds. The unpaid balance, plus any additional reimbursable costs incurred in
the future, will be payable from the proceeds of bonds to be issued in the future, as shown below:
Facility Payable To
Central Facilities:
Expanded Wastewater Treatment Plant
Wastewater Treatment Capacity of
Original Plant
'Land Associated with Wastewater
Treatment Plant
Water Plant
Water Line from Fort Worth
Elevated Tank
Oversized Water and Sewer Lines
Operation Advances
Developer Contribution Items (b):
Water Distribution System
Sanitary Sewer System
Storm Drainage System
Survey and Inspection
Trophy Club Drive Extension
Independent American Development Corporation
Gibraltar Savings Association
Gibraltar Savings Association
Gibraltar Savings Association
Gibraltar Savings Association
Gibraltar Savings Association
Gibraltar Savings Association
Gibraltar Savings Association
Gibraltar Savings Association
Gibraltar Savings Association
Gibraltar Savings Association
Gibraltar Savings Association
Independent American Development Corporation
Estimated Total Commitments for Developer Reimbursement
Estimated
Amount
$
689,912 (a)
162,229
5,800
666,728
619,341
99,528
62,671
90,377 (c)
254,277 (c)
220,857 (c)
427,508 (c)
69,720 (c)
110,699
S 3.474,647
(a) Of this amount, $173,858 will be paid from proceeds of this issue of Bonds, with the remaining
portion to be paid from future bond issues.
(b) Developer contribution items represent the District's 70% share of the total cost.
(c) To be paid from proceeds of this issue of Bonds. -
-10_
CONTINGENT LIABILITIES
In addition to the Foregoing, the District intends to pay its proportionate share of the cost of
the central administration building serving the District area. The amount is not yet determined,
however, the maximum amount payable is estimated to be $120,000.
UNLIMITED TAX BONDS AUTHORIZED BUT UNISSUED
Date of
Authorization
04-04-81
Amount Previously
Authorized Issued
$ 6,450,000 $ 0
TAX DATA AND INFORMATION
This
Issue
Amount
Unissued
$ 1,870,000 $ 4,580,000
TAX RATE LIMITATION
Unlimited as to rate or amount of debt service; $0.25 for maintenance and operations.
MAINTENANCE TAXES
At an election held August 8, 1980, the voters of the District authorized the Board of Directors
of the District to assess, levy and collect ad valorem taxes for operation and maintenance of
District improvements in an amount not to exceed $0.25 per $100 assessed valuation. Such tax is
in addition to taxes which the District is authorized to levy for paying principal of and interest
on the Bonds, and any authorized but unissued bonds which may hereafter be issued. The District's
1988 maintenance tax levy is $0.119 per $100 assessed valuation. Such amount includes a current
fire protection tax rate of $0.039 per $100 assessed valuation, further described below.
At an election held November 19, 1983, voters of the District authorized the Board of Directors of
the District to assess, levy and collect ad valorem taxes for fire protection purposes. Such tax,
when combined with the tax levied for maintenance and operation, is not to exceed $0.25 per $100
assessed valuation. The initial tax rate levied for fire protection was $0.038.
TAX RATE
As set forth in the Bond Resolution,
of and interest on the Bonds. Since
on the Bonds, the District will not
District presently intends to issue a
the District will levy a tax sufficient to pay the principal
Bond proceeds will be capitalized to pay 12 months interest
levy a debt service tax until tax year September 1989. The
tax rate of $0.65 per $100 assessed valuation.
TAX RATE REWIRED FOR DEBT SERVICE
Projected maximum annual debt service requirement on the Bonds, at an assumed
rate of 9.00% per annum (2000) $ 195,000
$0.7648.required tax rate based on 1988 certified assessed valuation of
$26,842,079 at 95% collection produces $ 195,024
The calculations shown above are far illustration purposes only. They do not include capitalized
interest and assume no further increase or decrease in the current assessed valuation.
-11-
PRINCIPAL TAXPAYERS
Taxpayer
Bass Land Company
Independent American Land
Development Corporation
Independent American
Development Corporation
Terrell, L. Glenn
Sunbelt Savings
Association
Metroplex Savings
Association
Gibraltar Savings
Association
Birkdale Homes, Inc.
Empire American Realty
Credit
Residential Development, Ltd.
Total
CLASSIFICATION OF ASSESSED VALUATION
1988 Percent of
Certified Total
Assessed Assessed
Tyne of Property Valuation Valuation
Undeveloped Land $ 5,579,217 20.79%
Undeveloped Land 1,134,095 4.23
Undeveloped Land 1,003,878 3.74
Townhouses 833,000 3.10
Platted Lots 617,045 2.30
Platted Lots 526,525 1.96
Platted Lots 381,280 1.42
Platted Lots 377,201 1.41
Platted Lots 292,452 1.09
Platted Lots 268,595 1.00
5 14,014 088 4141.04%
Property Use Category 1988 1987 1986
Real, Residential, Single -Family
Real, Residential, Multi -Family
Real, Vacant Platted Lots/Tracts
Real, Acreage (Land only)
Real, Farm and Ranch Improvements
Real, Commercial and Industrial
Real and Tangible Personal, Utilities
Tangible Personal, Business
Real, Inventory
$ 15,970,467
1,833,788
888,204
4,421,563
121,275
570,764
183,110
227,763
2,627,145
Total Appraised Value $ 26,844,079
Less Agricultural Use
Exemptions 5,614 5,614
Net Assessed Valuation $ 26 838,465 $ 2L863 119
Percent of Market Value 100% 100%
Increase from Prior Year $ 975,346 $ 7,043,995
$ 12,434,658
2,882,566
5,271,037
4,469,420
538,016
172,410
100,626 15,922
8,824,006
2,882,566
2,761,785
3,886,339
454,120
$ 25,868,733 $ 18,824,738
Percent Increase from Prior Year 3.63% 27.24%
-12-
5,614
4 18.819.124
100%
OVERLAPPING DEBT DATA AND INFORMATION
REGT AND OVERLAPPING AD VALOREM TAX SUPPORTED GROSS DEBT STATEMENT
atons.of direct and overlapping gross debt were made by calculating the value of the
hn.:tfie District as established by the Denton County Appraisal District as a percentage of
sedvad;ues of all taxable property within the overlapping jurisdictions. No attempt has
toljohtain assessed values of property in the District from the overlapping taxing
ops_,:. and such values may vary substantially from the values calculated as described
G'ossHdebt figures were developed by the Financial Consultant. Political subdivisions
'_,,.
aga;;the District are authorized by Texas law to levy and collect ad valorem taxes for
amaintenance, and/or general revenue purposes in addition to taxes levied for payment of
andsome are presently levying and collecting such taxes.
Estimated
.VetnMental Subdivision Gross Debt
aC`ounty $ 12,355,000 (a)
C],ub, Town of 0
i
estp:Independent School
w
'OW 9,099,989
"` "'county Municipal
i,ty District No. 2 1,870,000 (b)
Deptuh County, Texas
rect and Overlapping Gross Debt
Estimated
Percent
As of Overlapping
Estimated
Amount
Overlapping
10-01-88 0.25%
$ 30,888 (a)
10-01-88 10.72 0
10-01-88 4.11 374,010
10-01-88 100.00 1,870,000 (b)
ebf.;Direct and Overlapping Gross Debt to 1988 Certified Assessed
a aon
sa; Direct and Overlapping Gross Debt
CU* $2,595,000 General Obligation Refunding Bonds,
Y' . 1988.
eg8bnds herein offered.
UATYt1NS AND TAX RATES OF
Governmental Subdivision
tot County
hyi.Club, Town of
;t!hjvest Independent School District
ggVf County Municipal Utility
aigEOct No. 2 of Denton County,
Texas,, 26,838,465 100
presents maintenance tax rate and fire protection tax rate only.
Series
1988 which
$ 2,274,898
8.48%
$ 3,213.13
were sold on
DIRECT AND OVERLAPPING GOVERNMENTAL SUBDIVISIONS
1988
Certified
Assessed
Valuation
$ 9,966,220,790
233,334,959
607,910,896
Percent
of
Actual
100%
100
100
:ZED.„GENERAL OBLIGATION BONDS OF OVERLAPPING GOVERNMENTAL SUBDIVISIONS - None
-13-
1988
Tax Rate
$ 0.2259
0.2270
1.2489
0.1190 (a)
ESTIMATED DIRECT AND OVERLAPPING TAXES
Set forth below is an estimation of all taxes levied by jurisdictions overlapping the District on
single -Family residence with an assessed value of $110,000 on January 1, 1988, assuming t.,_
assessments are made at fair market value. The estimation is based upon tax rates and estimated.
basis of assessment secured from the individual jurisdictions or reports of the Municipal Advisory
Council of Texas. Actual tax billings will vary according to each jurisdiction's assessing,:
procedures and the following table does not purport to be an exact computation of such tax levies;,'
Furthermore, no recognition is given to local assessments for civic association dues, firm department
contributions, or other charges made by entities other than political subdivisions.
Estimated 1988
Basis of Assessed Tax Rate Estimated
Taxing Jurisdiction Assessment Value Per $100 Tax
Denton County 100% $ 110,000 $ 0.2259 $ 248.49
Trophy Club, Town of 100 110,000 0.2270 249.70
Northwest Independent School
District 100 110,000 1.2489 1,373.79
Denton County Municipal
Utility District No. 22 100 110,000 0.1190 (a) 130.90 (a)
Estimated 1988/89 Total Tax Levy $ 2 002.88
(a) Represents maintenance tax levy and fire protection tax rate only.
DEBT SERVICE REQUIREMENTS
Fiscal
Year
Ending
9-30 Principal Interest (a)
1989
1990 $ 25,000
1991 25,000
1992 30,000
1993 30,000
1994 35,000
1995 35,000
1996 40,000
1997 45,000
1998 50,000
1999 55,000
2000 60,000
2001 65,000
2002 70,000
2003 75,000
2004 80,000
2005 90,000
2006 95,000
2007 105,000
2008 115,000
2009 125,000
2010 135,000
2011 150,000
2012 160,000
2013 175,000
126,225
168,300
166,050
163,800
161,100
158,400
155,250
152,100
148,500
144,450
139,950
135,000
129,600
123,750
117,45D
110,700
103,500
95,400
86,850
77,400
67,050
55,800
43,650
30,150
15,750
Total
Bands
Remaining Percent
Unpaid of Principal
At Year End Retired
$ 126,225: $ 1,870,000
193,300 1,845,000
191,050 1,820,000
193,800 1,790,000
191,100 1,760,000
193,400 1,725,000
190,250 1,690,000
192,100 1,650,000
193,500 1,605,000
194,450 1,555,000
194,950 1,500,000
195,000 1,440,000
194,600 1,375,000
193,750 1,305,000
192,450 1,230,000
190,700 1,150,000
193,500 1,060,000
190,400 965,000
191,850 860,000
192,400 745,000
192,050 620,000
190,800 485,000
193,650 335,000
190,150 175,000
190,750 0
5.88%
16.84%
34.22%
60.16%
100.00%
Total L1,870.000 $ 2.876,175 $ 4_,746. 175
(a) Interest calculated at the rate of 9.00% for purpose of illustration.
Note: This schedule does not reflect the fact that an amount of money equal to 12 months interest
will be set aside from the proceeds of the Bonds to pay debt service requirements.
-14-
Fund(:Balance
n8ji, tures
endes over
'fires...
dgialance
R,+
CONDENSED GENERAL FUND OPERATING STATEMENTS
Unaudited
Fiscal Year
Ended Fiscal Year Ended September 30
9-30-88 (a) 1987 lb) 1986 (b) 1985 (b)
$ 8,085 $ (6,691) $ (4,593) $ (3,121)
$ 34,777 $ 22,950 $ 0 $ 0
27,849 8,174 (2,098) (1,472)
$ 6,928 $ 14,776 $ (2,098) $ (1,472)
# 15,,013 # 8,085 $ (6,691) 3 0,991)
luted figures provided by the District.
ed from the District's Annual Audit Reports.
TAX PROCEDURES
FAX CODE AND COUNTY -WIDE APPRAISAL DISTRICT
;Texas Legislature, 1979, adopted a comprehensive Property Tax Cade (the "Code") which was
,
1k/emended by the 67th Legislature, 1981, the 68th Texas Legislature, 1983, and the 69th
1985, and the 70th Legislature, 1987. The Code, as amended, has significantly affected
g
gnpr;ocedures of all political subdivisions of the State, including the District.
.o0exas law, each taxing jurisdiction was responsible for placing taxable property on its tax
(;appraising its value for tax purposes. The Code, however, has established for each county in
4 -single appraisal district, with responsibility for recording and appraising property for
�gteunits within the county, and a single appraisal review borad, with responsibility for
Nandequalizing the values established by the appraisal district. The Code requires the
d,istrict, by May 15 of each year, to prepare appraisal records of property to be appraised as
-yL!1 of each year, and the Code generally requires appraisals to be made at market value.
10re- subject to review by the appraisal review board, and under certain circumstances,
hand taxing units (such as the District) may appeal the orders of the appraisal review board
gja petition for review in district court. In such event, the value of the property in
171be determined by the court, or by a jury, if requested by any party. Absent any such
-.,appraisal roll prepared by the appraisal district and approved by the appraisal review
stbe used by each taxing jurisdiciton in establishing its tax rolls and tax rate.
i L't
q2 the District has the responsibility for establishing tax rates and levying and collecting its
eb year, under the county -wide appraisal plan implemented by the Code, the District does not
bi appraisal standards or determine the frequency of revaluation or reappraisal. The Cade
:each appraisal district to implement a plan for periodic reappraisal of property to update
dtLvalues, and the plan must provide for reappraisal of all real property in the appraisal
at -least once every four years. The four-year requirement, however, was not effective until
Pi:1984. [1 is not known what frequency of reappraisals will be utilized by the Denton County
0 -District or whether reappraisals will be conducted on a zone or county -wide basis. The
tf fs not entitled to vote upon or participate in the selection of members of the Board of
M'of the Oenton County Appraisal District or the members of the Denton County Appraisal Review
jd. consequently, will have little, if any, influence on the appraisal policies and standards of
on County Appraisal District.
-15-
PROPERTY SUBJECT TO TAXATION BY THE DISTRICT
Except for certain exemptions provided by Texas law, all real and tangible personal property in the 'vl
District is subject to taxation by the District, however, no effort is made by the District to collect' t
taxes on personal property, other than on personal property rendered for taxation, business.=
inventories, and the property of privately -owned utilities. Principal categories of exempt property
include: property owned by the State of Texas or its political subdivisions, iF the property is used:
for public purposes; property exempt from ad valorem taxation by federal law; certain household goods,';
family supplies, and the personal effects; farm products owned by the producer; certain property owned-.,
by charitable organizations, youth development associations, religious organizations, and qualified -
schools; designated historical sites; solar and wind -powered energy devices; and most':
individually -owned automobiles. In addition, the District, either by action of its Board of Directors:
or through a process of petition and referendum initiated by its residents, may grant exemptions for-
residential homesteads of persons 65 years or older and of certain disabled persons, to the exten
deemed advisable by the Board of Directors of the District. Furthermore, the District must gran
exemptions to disabled veterans or certain surviving dependents of disabled veterans, if requested, bu
only to the maximum extent of $3,000 of taxable valuation.
RESIDENTIAL HOMESTEAD EXEMPTION
On November 3, 1981, Texas voters approved an amendment to the State Constitution providing for the
exemption of certain percentages of the market value of residential homesteads from ad valorem
taxation. The amendment authorized the governing body of each political subidivion in the State to.
exempt up to forty percent (40%) of the market value of residential homesteads from ad valorem taxation;}
for the years 1982 through 1984, thirty percent (30%) for the years 1985 through 1987, and twenty.
percent (20%) in 1988 and thereafter. The amendment provides, however, that where ad valorem taxes
have previously been pledged for the payment of debt, the governing body of a political subidivision
may continue to levy and collect taxes against the exempt value of the homesteads until the debt is
discharged, if the cessation of the levy would impair thb obligation of the contract by which the debt
was created. To date, the District has not granted a homestead exemption.
NOTICE AND HEARING PROCEDURES
The Code establishes procedures for providing notice and the opportunity for a hearing for taxpayers in
the event of certain proposed tax increases and provides for taxpayer referenda which could result in;.
the repeal of certain tax increases. The 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.
LEVY AND COLLECTION OF TAXES
The District is responsible for the collection of its taxes, unless it elects to transfer such
functions to another governmental entity. By October 1 of each year, or as soon thereafter as
practicable, the rate of taxation is set by the Board of Directors of the District based upon the:
valuation of property within the District as of the preceding Janaury 1. Taxes are due October 1 or
when billed, whichever occurs later, and become delinquent after January 31 of the following year, or
on the first day of the calendar month next following the expiration of twenty-one (21) days after;,;
mailing of the tax bills, whichever occurs later. A delinquent tax incurs an initial penalty of six-"
percent (6%) of the amount of the tax and accrues an additional penalty of one percent (1%) per month
up to July 1, at which time the total penalty becomes twelve percent (12%). In addition, delinquent
taxes accrue interest at one percent (1%) per month. If the tax is not paid by July 1, an additional.''':
penalty of up to fifteen percent (15%) may, under certain circumstances, be imposed by the District.-;
The, Code also makes provisions for the split payment of taxes, discounts for early payments, partial
payments of taxes and the postponement of the delinquency date of taxes under certain circumstances.
COLLECTION OF DELINQUENT TAXES
Taxes levied by the District are a personal obligation of the owner of the property. On January 1 of
each year, a tax lien attaches to property to secure the payment of all taxes, penalties and interest
ultimately imposed For the year on the property. The lien exists in favor of the State and each taxing
unit, including the District, having the power to tax the property. She District's tax lien is on a
parity with tax liens of all other such taxing units. A tax lien on real property has priority over
the claim of most creditors and other holders of liens on the property encumbered by the tax lien,
whether or not the debt or lien existed before the attachment of the tax lien. Personal property under
certain circumstances is subject to seizure and sale for the payment of delinquent taxes, penalty and
interest. At any time after taxes on property becom 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 sane property. The ability of the District
to collect delinquent taxes by foreclosure may be adversely affected by the amount of taxes owed to
other taxing units, adverse market conditions, taxpayer redemption rights, or bankruptcy preceedings
which restrain the collection of a taxpayer's debt.
-16-
* * * * * * * * * *
e%f8ands offered herein are payable from annual ad valorem taxes levied against all taxable
PAtrogety located in the District, without limitation as to rate or amount. The following
mfdmnation pertaining to the District's Waterworks and Sewer System and the central water supply
ewastewater facilities serving the District is submitted for informational purposes only.
DESCRIPTION OF THE EXISTING CENTRAL FACILITIES WATER, WASTEWATER AND DRAINAGE SYSTEMS
`;following information describes generally the water, sewer and drainage systems for the entire
phy Club project, including those facilities located in the District, Trophy Club Municipal
"city District No. 1, and Denton County Municipal Utility District No. 3 (hereinafter referred
"MUD No. 1" and MUD No. 3°). The water, sewer and drainage facilities located in the
Pict and MUD No. 3 are currently owned by the developers and are operated by MUD No. 1 under
,.terms of an operating contract (see "MASTER DISTRICT CONTRACT" herein). A portion of the
ceeds of the Bonds will be used to purchase some of these facilities from the developers. For
eakdown of the District's present and future proportionate share of the central water and
ewater facilities serving the Trophy Club project, see "OWNERSHIP OF WATER AND WASTEWATER
TRAL FACILITIES" herein.
PTION OF THE WATER SYSTEM
ces -of Water Supply: The present water supply is provided from two sources: (1) four ground
;r,which provide approximately 750,000 gallons per day, and (ii) a 21° gravity water line which
capable of delivering 6,000,000 gallons per day of treated water From the City of Fort Worth
-4ities. (See "WATER SUPPLY CONTRACT" herein.) Currently HUD No. 1 contracts with the City of
Worth, on behalf of the Trophy Club development, for water service of a maximum of 3,700,000
} is per day, however, negotiations are underway to remove the maximum limit criteria. Current
um -usage is some 2,200,000 gallons per day (of which 1,500,000 is Fort Worth water). These
es, when when combined, provide water which complies with the quality requirements of the Texas
nt of Health and needs only chlorination at the water plant.
Plant Facility: The present facility provides 2,420,000 gallons ground storage with
i ,"eg/chlorination capacity of 10,000,000 gallons per day. Preliminary site work and piping
ems are in-place for an additional 3,000,000 gallon ground storage which is anticipated to be
s;nucted during the next several years by a developer.
i+0istribution System: The water distribution system consists of water mains ranging from 6°
in size. The system pressure is maintained by a 400,000 gallons elevated storage tank
Os fed from four high service pumps located within the water plant facility. Distribution
Wand valving provide for maximum fire protection and system reliability in the event of
orated disruptions.
E+SCRIPTION OF THE WASTEWATER SYSTEM
astewater Collection System: The system consists of gravity mains ranging from 6" to 24" with a
wed amount of 8" force mains fed from five separate lift stations. The rolling terrain of the
eyelopment dictates the use and operation of the lift stations and force mains to provide service
serious low-lying areas. An additional lift station (and system) 1s currently being designed
;accdmmodate the IBM Corporation wastewater service needs of their new development. These
gitlities will be constructed to comply with existing specifications, and when complete, will be
edbto MUD No. 1 in fee without charge.
er Treatment Plant Facility: The wastewater treatment plant system has a permitted
.eatmant isc arge capacity of 1,400,000 gallons per day from the Texas Water Commission (Permit
"-w4 0011593-01) with a renewal date of February 11, 1991. The plant is a combined
ivated-sludge and modified rotating biological contact process facility. On-site
'nstrative and laboratory offices are provided to insure compliance with operational criteria
responsiveness to management of the facility. Although the permit authorizes the discharge of
awater to the adjacent tributary leading to Lake Grapevine, the plant effluent is currently
d to various holding ponds within the community and is re -used for irrigating the golf course.
ESCR:IPTION OF THE STORM DRAINAGE SYSTEM
orm drainage system consists of a network of reinforced concrete storm drain pipe, with curb
> manholes and headwalls at discharge points as necessary appurtenances to the system. The
?'-in the system ranges in size from 18" to 54". The storm drain facilities are designed to
°vide 5 -year frequency storm protection within the paved streets. At the low areas near creek
anne1s, 100 -year storm protection is provided. The District has established minimum building
opo elevations to exceed the 100 -year Frequency storm.
-17-
OWNERSHIP OF WATER AND WASTEWATER CENTRAL FACILITIES
The District's proportionate share of the existing central water supply and wastewater facilities
in the Trophy Club development is as follows:
Central Facility
Land Associated with
Wastewater Treatment Plant
Water Plant
Twenty-one inch Fort Worth
Water Line
Elevated Tank
Municipal Building and Land
Original Treatment Plant
(Capacity 0.365 MGD)
Expanded Wastewater Treatment
Plant (Additional 1.0 MGD
Capacity)
(a)
(b)
Ownership
Required by
the District for
Total Development
23.0%
31.1
22.8
23.9
22.8
Ownership
(Following the Issuance of
Gibraltar
Savings
The District Association(a)
40.0%
76.4
63.0
60.0
12.2 33.0
27.2(b)
the Bonds)
Independent
American
-
Development
Corporation(e)
76.4%
6.8% 93.2
Remaining percentages of ownership presently held by Gibraltar Savings Association and
Independent American Development Corporation, not required for total District development,
will be sold to Denton County Municipal Utility District No. 3 and future municipal utility
districts.
The District has a letter of agreement with Independent American Development Corporation to
buy up to 27.2% of the capacity or 1,000 connections of the expanded wastewater treatment
facilities for an amount of $689,912.
Note: See "DISTRICT DEBT - Commitments For Developer Reimbursement" and "Contingent
Liabilities" herein.
DESCRIPTION OF THE DISTRICT'S WATER AND WASTEWATER FACILITIES
WATER SYSTEM
The District's source of water supply is from central water supply facilities operated by MUD
No. 1. The supply facilities consist of three Paluxy and one Trinity ground water wells with a
combined rated capacity of 510 gallons per minute (GPM) capable of serving 850 connections. The
City of Fort Worth ("City") provides 3.7 million gallons daily (MGD) of treated surface water
supply, pursuant to a long term water supply agreement between the City and MUD No. 1. The
construction of the supply line was financed by the developer, Gibraltar Savings Association.
Gibraltar has retained a 63% share or 4,223 connections for allocation to the District, Denton
County Municipal Utility District No. 3 ("MUD No. 3"), and future municipal utility districts.
The District will receive capacity for 1,375 connections from Gibraltar's share of the water from
the City. The District will repay its proportional share from proceeds of future bond issues.
The central facilities water supply system also includes a 400,000 gallon elevated storage tank
rated at 3,226 connections of which the District will receive capacity for 772 connections. The
District's proportional share of the elevated storage tank will be purchased with proceeds from
future bond issues.
WASTEWATER SYSTEM
The District, MUD No, 1, and MUD No. 3 are served by a central wastewater plant located in MUD No.
1. Capacity of the original plant was rated at 385,000 gallons per day or 1,415 connections.
Construction of the original plant was financed by Gibraltar who has allocated 173 connections to
the District which will be purchased from the proceeds of future bond issues.
In early 1987, Independent American Development Corporation financed construction of a plant
expansion up to 1.4 1160. Independent American has allocated up to an additional 1,000 connections
to the District. A portion of the proceeds of the Bonds will be used to purchase 252 connections
at a cost of $689.91 per connection.
_18-
WATER SUPPLY CONTRACT
a contract with the City of Fart Worth (the "City") dated March 13, 1979, MUD No. 1 obtained
._e. -right to receive a maximum of 3.7 million gallons of water per day from a water storage
,ac,ility constructed by the City near Keller, Texas, about ten miles southwest of MUD No. 1. This
'Opacity for the development represents 28.5% of the total capacity of the City's storage facility
'tLithat site, and in consideration of such contract, the development was required to pay the City
6.5% of the cost of such water storage facility and the line to connect the storage facility with
e`eity's existing water transmission lines. MUD No. 1's share of the 28.5% total capacity is
''proximately 30% and the District's share is approximately 22.8%. The approximate cost to MUD
;-ii of its share of the water storage is $225,000' and the District's share of such facility is
estimated at $151,955. The development also pays for all water actually taken out of the storage
facility on an agreed rate basis specified in the contract which is currently $0.85 per 1,000
lions. -In addition to the cost of the water actually used and its share of the cost of the
orage facility, MUD No. 1 and the developers of Trophy Club, also paid the entire cost of a
pipeline to transmit the water from the storage facility to Trophy Club, a distance of about
55,000 feet. MUD No. l's share of the cost of the pipeline is $886,412 and the District's share
is estimated at $457,386.
s0o,finance MUD No. l's share of the cost of the water storage facility payable to the City of Fort
Orth and to provide for use of the water supply throughout the Trophy Club project, MUD No. 1
3entered into a contract with Gibraltar Savings Association d/b/a Trophy Club dated August 21,
979. Under the terms of such contract: (1) Gibraltar agreed to fund all money required to be
{paid by MUD No. 1 to the City of Fort Worth; (ii) Gibraltar has the right to receive up to 2.335
-MGD, a 63% share or 4,223 connections, of the water from the City of Fort Worth for use in those
.parts of the Trophy Club project outside the boundaries of MUD No. 1, which leaves 1.365 MGD of
water from the City of Fort Worth that is available for use in MUD No. 1; (iii) MUD No. 1 repaid
_its proportionate share of the advances made by Gibraltar to the City of Fort Worth; and (iv) MUD
Na. 1 and Gibraltar mutually agreed to cooperate in establishing a central water system to serveentire Trophy Club project by using MUD No. 1 as a "Master District". These provisions have
-now been incorporated into the Master District Contract described herein.
MASTER DISTRICT CONTRACT
On December 1, 1982, MUD No. 1 entered into a written contract for the Provisions, Operation and
Maintenance of Water Supply and Waste Disposal Facilities with Gibraltar Savings Association as
the then principal developer of Trophy Club (the "Contract"). Under the terms of the Contract,
MUD No. 1 agreed to construct, operate, and maintain the central water supply and wastewater
treatment facilities to serve the entire Trophy Club project, including the District and the
presently existing Denton County Municipal Utility District No. 3, and other land to the north and
northwest of the MUD No. 1 which is part of the Trophy Club project, but not yet developed or
included in a municipal utility•district.
The Contract contains detailed provisions regarding the policies and procedures to be used in the
planning, financing, and operation of the joint facilities. In general, the Contract provides
that MUD No. 1 will retain legal title to the joint facilities and will oversee the construction,
operation, and maintenance of the joint facilities, but that the District and MUD No. 3 or
customers using or benefitted by the joint facilities shall pay its proportionate part of the
costs of the joint facilities and related administrative costs.
The Contract contemplates that it will last for an initial term of 40 years, and for as long
thereafter as any revenue bonds issued to construct joint facilities under the Contract remain
unpaid.
Additional joint facilities constructed include the expansion of the sewage treatment plant. This
project was funded by Independent American Development Corporation as developer with the
District's pro rata share of such improvements in the amount of $689,912. Of this amount,
$173,858 will be paid from proceeds of the Bonds.
_19_
WATER AND SEWER RATE ANO FEE SCHEDULE
(Effective October 1, 1906)
TREATED WATER (Monthly Billing)
Single -Family Homes:
First 4,000 gallons $ 9.00 (Minimum)
Next 21,000 gallons 1.55/M gallons
Over 25,000 gallons 1.75/M gallons
Multi -Family Units:
Single Meter. Each multi -family building or complex of buildings which is served by a single
meter shall be billed for water at the same rate as a single-family home, with a minimum bill of
$9.00 times the number of units in the building or complex.
Mutiple Meters. If a multi -family building or complex of buildings is served by more than ane
meter, then water delivered through each meter shall be billed at the same rate as a single-family
home, with a minimum oill of $9.00 times the number of units served by the meter.
Commercial:
Each business service connection shall be deemed to be a single-family home for purposes of water
service.
Commercial rates per unit outside the District are two times that of residential rates within the
District.
IRRIGATION WATER (Monthly Billing)
In addition to water supplied to residential and commercial customers, bulk irrigation water is
provided to the golf course. Two rate levels reflect the levels of service required and are
dictated by the location of the holding area:
$1.05 per 1,000 gallons for water provided directly to holding area From the City
of Fort Worth water line.
$1.25 per 1,000 gallons for water provided to holding area via the normal water
distribution system.
Additionally, bulk irrigation customers shall be required to pay their respective portion of any
demand rate or minimal payment rate as specified in the Water Supply Contract between MUD Ilo. 1
and the City of Fort Worth.
SEWER (Monthly Billing)
Single -Family Homes:
First 4,000 gallons
Over 4,000 gallons
Maximum
Commercial:
First 4,000 gallons
Over 4,000 gallons
Maximum
$ 9.00 (Minimum)
1.50/M gallons
21.00
$ 9.00 (Minimum)
1.50/H gallons
None
STAND-BY CHARGE
A stand-by charge of $7.00 per month will be made for each lot which has water and sewer service
available, but which is not connected to the District's system. This charge will commence on the
first day of the month following the date upon which water and sewer service is available at the
property line of the lot. The charge will cease on the first day of the month preceding the date
upon which water and sewer charges become due and payable to the District for water and sewer
supplied to the lot.
-20-
SEWER INSPECTION FEE: $25.00/connections
TAP FEES: 3/4" tap $350.00
Over 3/4" Tap cost of meter plus 20%
SERVICE DEPOSITS
Single -Family
Builders
Construction deter Use
All others
CUSTOMER COUNT
$ 40.00
75.00
600.00
Two months' estimated average
monthly dater and sewer bill.
MISCELLANEOUS STATISTICAL CENTRAL FACILITY SYSTEM DATA
9-30-88
9-30-87 9-30-86
Water Customers:
MUD No. 1 (a) 1,130 1,103 1,089
The District (b) 261 249 217
MUD No. 3 251 237 227
Out of Districts 6 . 4 3
Total Water Customers 1648 1,593 1 536
Sewer Customers:
MUD No. 1 (a) 1,091 1;070 1,018
The District (b) 247 198 193
MUD No. 3 237 228 198
Out of Districts - - -
Total Sewer Customers 1,575 1,415 1,409
(a) Includes 136 apartment units which are on 11 master meters.
(b) Includes 67 townhouses which are on one master meter.
WATER USAGE (In thousand of gallons)
Total Amount of Water
Pumped into System
Total Amount of Water
. Billed to Customers
Percentage of Water
Billed to Water Pumped
9-30-99 9-30-87 9-30-86 9-30-85
397,679 (b) 282,795 290,960 (a)
351,730 (b) 272,206 258,324 269,208
84.4% (b) 93.6% 88.8% (a)
(a) During fiscal year ended 1985, the calibration. equipment had mechanical
malfunctions. As a result, the totals of water pumped into the System cannot be
correctly determined.
(b) Decline in amount of water billed to amount of water pumped was due to Flushing of
lines during tie on construction 3t IBM Corporation development which is located in
MUD No. 1.
DISTRICT REVENUE DEBT
REVENUE BONDS OUTSTANDING - None
REVENUE BONDS AUTHORIZED BUT UNISSUED - None
-21-
GENERAL WATER AND SEWER OPERATING FUND
COMPARATIVE STATEMENT OF REVENUES AND EXPENDITURES
The following statements of revenues and expenditures of the General Water and Sewer Operating
Fund are For the entire Trophy Club project, including the District, Trophy Club Municipal Utility
District No. 1, and Denton County Municipal Utility District No. 3 (herein referred to as MUD No.
1 and MUD No. 3). Some of the water and sewer system facilities are currently owned by the
developers and are operated by MUD No. 1 under the terms of an operating contract (see "MASTER
DISTRICT CONTRACT" herein).
Unaudited
Fiscal
Year Ended Fiscal Year Ended September 30
9-30-88 (a) 1987 lb) 198b (b) 1985 lb) 1984 (b)
Beginning Fund Balance $ 345,227 $ 117,026 $ 303,218 $ 207,367 $ 50,372
Revenues:
Service Revenues $ 1,069,674
Tap Connection Fees (c) 13,120
Penalty and Lrterest
Revenue
Tax Revenues
Special Assessments
Miscellaneous
Total Revenues
Expenditures:
Purchased Water and Sewer
Services
Payroll Expenditures
Employee Benefits
Professional Fees
Recurring Operating
Expenditures
Capital Outlay
Tax Assessor/Collector
Miscellaneous
Total Expenditures
Other Financing Sources
(Uses):
Interest on Investments
Operating Transfers In
Operating Transfers Out
Transfers to Other
Municipal Utility
Districts
34,101
12,597
874,142' $ 602,338 $ 575,366 $ 468,294
17,637 32,126
27,706 25,931
176,230 44,694
374,598 -
18,211 14,620
49,964
33,719
46,342
88,273
109,079
$ 1,129,492 $ 1,488,524 $ 719,699 $ 705,391 $ 665,645
$
154,016
333,531
69,863
21,819
$
•
158,844 $ 128,155
313,680 282,148
29,612 -
27,114 29,921
$ 120,436
216,638
15,910
$ 86,773
180,897
17,090
345,676 205,484 247,540 217,061 239,896
33,872 407,092 213,671 (d) 74,480 22,535
20,748 - - -
- 4,456 969 763
$ 958,778 $ 1,309,921 $ 905,891 $ 645,494 $ 547,954
$
6,396 $ 27,428 $
22,170
$ 18,320 $ 6,662
- 35,954 32,925
Total Other Financing
Sources (Uses) $ 6,396 $ 49,598 $
Revenues and Other Financing
Sources in Excess (Deficit)
• of Expenditures and Other
Financing Uses
Ending Fund Balance
$ 54,274 $ 39,587
177,110 $ 228,201 $(186,1921 $ 114,171 $ 157,27C
$ 522.337 $ 345,227 $ 117,026 S 303.218 L201.367
(a) Unaudited figures provided by .'IUD No. 1. Reflects water and sewer systen revenues and
expenditures only.
(b) Derived from MUD No. 1 Annual Audit ieports.
(c) Tap fees are one-time charges Far initial connection to the System and, as such, will
dissipate as construction within the Trophy Club project nears completion.
(d) Includes construction on fire station and maintenance barn, however, $131,000 of this amount
will be reimbursed to the General Operating Fund from fire tax revenues of the District, MUD
No. 1 and MUD No. 3 over the next ten years.
RISK FACTORS
GENERAL
The ultimate security For payment for the principal of and interest on the Bonds depends on the
ability of the District to collect taxes levied on taxable property within the District in an
amount sufficient to service its debt. See "THE BONDS - Security for Payment". The collection by
the District of delinquent taxes owed to it and the enforcement by a Bondholder of the District's
obligations to collect sufficient taxes may be a costly and lengthy process. See "THE BONDS -
Bondholders' Remedies In The Event Of Default".
DEPENDENCE 011 FUTURE DEVELOPMENT AND REQUIRED TAY VALUES
Portions of the land within the District are undeveloped and there does not exist at this time any
obligation to the District from any developers to proceed at any particular rate or according to
any specified plan with the development of the remaining area in the District, and there is no
restriction on the current landowners' rights to sell its land. Failure of the Developers to
implement the development of areas within the District and to construct taxable improvements
thereon will result in increasess in the rate of taxation by the District. The District's 1988
certified assessed valuation is $26,838,465, and should no development occur in the District
beyond that reflected by the certified assessed valuation as of January 1, 1988, a tax rate of
$0.7648 per $100 assessed valuation could be required to pay maximum annual debt service
requirements on the Bonds. Furthermore, adverse developments, not within the control of the
District, could result in a lowering of present and future years certified assessed valuations.
See "TAX DATA AND INFORMATION - Tax Rate Required for Debt Service".
Continued development within the District is directly related to the residential housing industry
in general and to growth in -the Dallas area in particular. The housing industry has historically
been a cyclical industry, affected by both short and long-term interest rates, availability of
mortgage and development funds, labor conditions and general economic conditions. Increases in
mortgage interest rates may adversely affect the sale of new housing starts, and hence reduce
demand for lots available for sale to builders within the District. Homebuilding in districts
located relatively far from Dallas' and Fort Worth's central business districts (the District is
approximately 27 miles from downtown Dallas and 25 miles from downtown Fort Worth) could also be
affected by a change in availability or price of gasoline, or by increases in travel time to the
central business districts due to traffic congestion. Further, homebuilding and the economy in
general in the Dallas area could be affected if governmental guidelines regarding air pollution
were to limit the construction of freeways or manufacturing plants.
FUTURE DEBT
Additional bonds are expected to be issued from time to time as future development requires (see
"FUTURE PLANS OF DISTRICT"). The issuance of such future obligations may adversely affect the
investment security of the Bonds. The District does not employ any formula with regard to
assessed valuations or tax collections to limit the amount of parity bonds which may be issued.
No bonds can be issued, however, without prior authorization by voters of the District, (in the
case of tax bonds), approval from the Board, and approval of the Texas Water Commission. The
District reserves, in the Bond Resolution, the right to issue the remaining $4,580,000 bonds voted
and such additional bonds as may be hereafter voted.
MARKETABILITY
The District has no control over the reoffering yields or prices of the Bonds, or over trading of
the Bonds in the secondary market. Moreover, there is no assurance that a secondary market will
be made in the Bonds. If there is a secondary market, the difference between the bid and asked
price may be greater than the bid and asked spread of bonds of comparable maturity and quality
issued by more traditional municipal entities, as such bonds are generally bought, sold or traded
in the'secondary market.
REGULATION OF ISSUANCE
Before the Bonds can be issued, the Attorney General of Texas must pass upon the legality of the
Bonds. The Attorney General of Texas neither guarantees nor passes upon the safety of the Bonds
as an investment; nor has he, or the Texas Water Commission, passed upon the adequacy or accuracy
of the information contained in this Official Statement.
-23-
DISSOLUTION AND CONSOLIDATION
Under Texas Law, The Town of Trophy Club may, under certain circumstances, without the consent of
the District and upon 2/3 vote of the entire Town Council, dissolve and abolish the District, but
the Town of Trophy Club would then assume the assets, properties, obligations and indebtedness of
the District, including the Bonds. No 'representtion is made that the Town of Trophy Club will
ever dissolve the District.
The Bond Resolution also reserves the right of the District to consolidate with other districts
and, in connection therewith, to provide for the consolidation of the District's system with the
water and sewer systems of the district or districts with which it is consolidating. No
representation is made that the District will ever consolidate the system with other systems.
FUTURE PLANS OF THE DISTRICT
A total of $6,450,000 in bonds have been authorized for the District in a bond election held on
April 4, lg81. Following the issuance of this bond issue For $1,870,000, the District will have
$4,580,000 of authorized but unissued bonds. In the opinion of the District's engineers, this
amount of authorized but unissued bands will be sufficient to purchase the District's
proportionate share of the existing central facilities required for total development of the
District.
Additional and future development not yet provided for in the District's proportionate share of
the central facilities water and sewer system capacities may occur. Such additional and future
development may necessitate expansion of and improvements to District facilities, and thus the
issuance of additional bonds if authorized by the District's voters and by the Board.
LEGAL MATTERS
LEGAL OPINION
The District will furnish the Purchaser a transcript of certain certified proceedings had incident
to the authorization and issuance of the Bonds, including a certified copy of the unqualified
approving opinion of the Attorney General of Texas, to the effect that the Initial Bonds, which
the Attorney General will have examined, are valid and binding obligations of the District under
the Consitituion and laws of the State of Texas. The District will also furnish the approving
legal opinion of Schwartz, Page 8 Harding, Houston, Texas, and Kelly, Hart & Hallman, Fort Worth,
Texas, Co -Bond Counsel, to the effect that, based upon an examination of such transcript, the
Bonds are valid and binding obligations of the District under the Constitution and laws of the
State of Texas and to the effect that interest on the Bonds is excludable from gross income for
federal incme tax purposes under existing law. The legal opinions of Co -Bond Counsel will further
state that the Bonds are payable, bath as to principal and interest, from the levy of ad valorem
taxes, without limitation as to rate or amoutn, against taxable property within the District. The
opinions of Co -Bond Counsel are expected to be reproduced an the back panel of the Bonds over a
certification by the District, attesting that such legal opinions are dated as of the date of
delivery of and payment for the Bonds and are true and correct copies of the original opinions.
Errors or omission in the printing of such legal opinions on the Bonds shall not affect the
validity of the Bonds nor constitute cause for the failure or refusal by the Purchaser to accept
delivery of and pay for the Bands.
CONli1TIONS TO DELIVERY
The Purchaser's obligation to take delivery of and pay for the Initial Bands is subject to the
Purchaser's receipt of the legal opinions, and the certificate described in "OTHER MATTERS -
Closing Certificates" below.
LEGAL REVIEWS
In their capacity as Co -Bond Counsel, Schwarts,j'age & Harding, and Kelly, Hart & Hallman have not
reviewed the information in this Official Statement, except as described above, and such firms
have not independently verified factual information in this Official Statement or conducted an
investigation of the affairs of the District for the purpose of passing upon the accuracy or
completeness of this Official Statement. No person is entitled to rely upon such firms'
participation as Co -Bond Counsel as an assumption of responsibility for, or an expression of
opinion of any kind with regard to the accuracy or completeness of any of the other information
contained herein.
TAX EXEMPTION
The delivery of the Bonds is subject to the opinions of Co -Bond Counsel to the effect that
interest on the Bonds is excludble from gross income for federal income tax purposes under
existing law.
The Code imposes a number of requirements that must be satisfied in order for interest on state or
local obligations, such as the Bonds, to be excludable from gross income for federal income tax
purposes. These requirements include limitations on the use of bond proceeds and the source or
repayment of bonds, limitations on the investment of bond proceeds prior to expenditure, a
requirement that excess arbitrage earned on the investment of bond proceeds be paid periodically
to the United States and a requirement that the District file an information report with the
Internal Revenue Service. The District has covenanted in the Bond Resolution that it will comply
with these requirements.
Co -Bond Counsel's opinions will assume continuing compliance with the covenants of the Bond
Resolution pertaining to those sections of the Code which effect the exclusion from gross income
of interest on the Bonds for federal income tax purposes and, in addition, will rely on
representations by the District with respect to matters solely within the knowledge of
theeistrict, which Co -Bond Counsel have not independently verified. If the District should fail
to comply with the covenants in the Bond Resolution, or if the foregoing representations should be
determined to be inaccurate or incomplete, interest on the Bonds could become taxble from the date
of delivery of the Bonds, regardless of the date on which the event causing such taxability occurs.
The Code also imposes a 20% alternative minimum tax on the "alternative minimum taxable income" of
a corporation (other than an "5" corporation, a mutual fund, a REIT, or a REMIC), if the amount of
such alternative minimum tax is greater than the amount of the corporation's regular income tax.
Teh "Superfund Revenue Act of 1986" also imposes an additional 0.12% "environmental tax" on the
alternative minimum taxable income of a corporation in excess of $2,000,000. Under present law,
for taxable years beginning in 1987, 1988 or 1989, a corporation's alternative minimum taxable
income generally includes 50% of the amount by which a corporation's adjusted net book income
exceeds the corporation's alternative minimum taxable income. For later taxable years, a
corporation's alternative minimum taxable income will be based on its "adjusted current
earnings". Because interest on tax-exempt obligations, such as the Bonds, is included in a
corporation's "adjusted net book income" and "adjusted current earnings," ownership of the Bonds
in taxable years beginning after December 31, 1986, could subject a corporation to alternative
minimum tax consequences.
Co -Bond Counsel's opinions will state that the Bonds are not "private activity bonds" under the
Code. Therefore, except as described above in the discussion regarding the book -income item for
corporations, interest on the Bonds will not be subject to the alternative minimum tax an
individuals and corporations.
Except as stated above, Co -Bond Counsel, will express no opinions to any federal, state or local
tax cosequences resulting from the ownership of, receipt of and interest on or disposition of the
Bonds.
Prospective purchasers of the Bonds should be aware that the owernship of tax-exempt obligations
may result in collateral federal income tax consequences to financial institutions, property and
casualty insurance companies, certain "S" Corporations with Subchapter C earnings and profits,
individual recipients of Social Security or Railroad Retirement benefits and taxpayers who may be
deemed to have incurred or continued indebtedness to purchase or carry tax-exempt obligations. In
addition, certain foreign corporations doing business in the United States may be subject to the
new "branch profits tax" on their effectively -connected earnings and profits, including tax-exempt
interest such as interest on the Bonds. These categories of prospective purchasers should consult
their tax advisors as to the applicability of these consequences.
-25-
QUALIFIED TAX-EXEMPT OBLIGATIONS
The Code requires a pro rata reduction in the interest expense deduction of a financial
institution to reflect the portion of such financial institution's investment in tax-exempt
obligations acquired after August 7, 1986. An exception to the foregoing provision is provided in
the Code for "qualified tax-exempt obligations," which include tax-exempt obligations, such as the
Bonds, (a) designated by the issuer as "qualified tax-exempt obligations" and (b) issued by a
political subdivision for which the aggregate amount of tax-exempt obligations (not including
private activity bonds other than qualified 501(c)(3) bonds) to be issued during the calendar year
is not expected to exceed $10,000.000.
The District will designate the Bonds as "qualified tax-exempt obligations" and has represented
that the aggregate amount of tax-exempt bonds (including the Bonds) issued by the District and
entities subordinate to the District during calendar year 1988 is not expected to exceed
$10,000,000, and that the District and entities subordinate to the District have not designated
more than $10,000,000 "qualified tax-exempt obligations" (including the Bonds) during calendar
year 1988.
Based on the foregoing representations, Co -Bond Counsel's opinions will state that the Bands are
"qualified tax-exempt obligations" under existing law.
Notwithstanding this exception, financial institutions acquiring the Bonds will be subject to a
20% disallowance of allocable interest expense.
REGISTRATION AND QUALIFICATION OF BONDS FOR SALE
No registration statement relating to the Bonds has been filed with the Securities and Exchange
Commission under the Securities Act of 1933, as amended, in reliance upon the exemption provided
thereunder by Section 3(a)(2). The Bonds have not been approved or disapproved by the Securities
and Exchange Commission, nor has the Securities and Exchange Commission passed upon the accuracy
or adequacy of the Official Statement. 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 acts of any other jurisdiction. The District
assumes no responsibility For registration or qualification of the Bonds under the securities laws
of any jurisdiction in which the Bonds may be sold, assigned, pledged, hypothecated or otherwise
transferred. This disclaimer of responsibility for registration or qualification for sale or
other disposition of the Bonds shall not be construed as an interpretation of any kind with regard
to the availability of any exemption from securities registration or qualification provisions.
It is the obligation of the Purchaser to register or qualify sale of the bonds under the
securities laws of any jurisdiction which so requires. The District agrees to cooperate, at the
Purchaser's written request and expense, in registering or qualifying the Bonds, or in obtaining
an exemption from registration or qualification in any state where such action is necessary;
provided, however, that the District shall not be required to consent to a general or special
consent to service of process in any jurisdiction.
LEGAL INVESTMENTS AND ELIGIBILITY TO SECURE PUBLIC FUNDS IN TEXAS
The following is quoted from Section 54.515 of the Texas Water Code and is applicable to all
municipal utility districts:
"A11 bonds, notes, and other obligations issued by a district shall be legal and authorized
investments for all banks, trust companies, building and loan associations, savings and loan
associations, insurance companies of all kinds and types, fiduciaries, and trustees, and for all
interest and sinking funds and other funds of the State of Texas, and all agencies, subdivisions,
and instrumentalities of the State including all counties, cities, towns, villages, school
districts, and all other kinds and types of districts, public agencies, and bodies politic, to the
extent of the market value of the bonds, notes, and other obligations when accompanied by any
unmatured interest coupons attached to them."
The District makes no representation 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 to the Bonds For such purposes.
-26-
RATING
`pistrict has made no application for a municipal bond rating, nor is it expected that the
';vitt would have been successful in obtaining an investment grade rating had such an
,1:ication been made.
4FINANCIAL CONSULTANT
i; 5 ;Official Statement was compiled and edited under the supervision of Southwest Securities
grporated, which firm was employed as Financial Consultant to the District. The fees to be
d -the. -Financial Consultant for services rendered in connection with the issuance and sale of
6'o`hds are contingent on the sale and delivery of the Bonds. The Financial Consultant reserves
%rjght to bid on the Bonds.
ENGINEERS
'wt-. •::
-Consulting Engineers for the District in connection with this issue of Bonds and the
14ties financed from the
su`lting Engineers establishedrothe dbasic theCarter
engineeringphilosophy andthe project studies and
OTHER MATTERS
' .
'BESS"AND COMPILATION OF INFORMATION
':3.
,nformation contained in this Official Statement has been obtained primarily from the
act's records, the Engineers, the Denton County Appraisal District, the devl oper and other
i;oes'helieved to be reliable, but no guarantee is made as to the accura completeness of
i formation derived from sources other than the District, and its inclusion herein is not to
i..,.
aop'strued as a representation on the part of the District to such effect. The summaries of the
• es', resolutions and engineering and other related reports set forth in the Official
to 'eht-are included herein subject to all of the provisions of such documents. These summaries
at?.°,purport to be complete statements of such provisions and reference is made to the complete
`T°"ehts for further information.
JI;.formation contained in this Official Statement was compiled and edited by the Financial
_
s ltpnt. Based on the data received from the above sources, the information included under the
toiis "tMATURITY SCHEDULE", "SELECTED FINANCIAL INFORMATION", "OVERLAPPING DEBT DATA AND
ORffATION," "TAX DATA AND INFORMATION - Tax Rate Required For Debt Service", and "DEBT SERVICE
(,illiEMENTS• was compiled for inclusion In this Official Statement by the Financial Consultant.
q) qh' It participated in the drafting of this Official Statement, the Financial Consultant has
4;ndependently verified all of the factual Information contained herein nor has it conducted a
aj,led investigation of the affairs of the District for the purpose of passing upon the accuracy
Fcompleteness of this Official Statement. No person is entitled to rely on such firm's
tjplpation as an assumption of responsibility for, or expression of opinion of any kind with
ard'to, the accuracy and completeness of the information contained herein except as to that
oniiation compiled by the Financial Consultant for use herein.
ERTS
approving this Official Statement, the District has relied upon the following experts in
ption to the Financial Consultant:
hi.
.Engineers: The information contained in this Official Statement relating to engineering and,
;particular all or part of that information included in the sections entitled "USE AND
lIiRPBUTION OF BOND PROCEEDS," "COMMITMENTS FOR DEVELOPER REIMBURSEMENT," "DESCRIPTION OF
,§UNG CENTRAL FACILITIES WATER, WASTEWATER AND DRAINAGE SYSTEMS," "OWNERSHIP OF WATER AND
:RATER CENTRAL FACILITIES." and "FUTURE PLANS OF THE DISTRICT" has been provided by the
iftleers specified above, and has been included herein in reliance upon the authority of said
_.i5s experts in the field of civil engineering.
>''%fled Public Accountants: The Financial statements of the District contained in Appendix C
eprovided by Phillips, Welch, Dillard 8 Roberson, P.C., Certified Public Accountants, and have
il,rincluded herein in reliance upon the authority of such firm as experts in auditing and
opjiting. District audits are prepared in conformity with the form thereof prescribed by the
es:end regulations of the Texas Water Commission.
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CLOSING CERTIFICATES
At the time of payment for and delivery of the Bonds, the Purchaser will be furnished a
certificate, executed by proper officers, acting in their official capacity, to the effect that to
the best of their knowledge and belief: (a) the descriptions and statements of or pertaining to
the District contained in its Official Statement, and any addenda, supplement or amendment
thereto, on the date of such Official Statement, on the date of the sale of said Bonds and the
acceptance of the best bid therefore, and on the date of 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 statements therein, in light of the circumstances under which they were made, not
misleading; (c) insofar as the description and statements, including financial data, of or
pertaining to entities, other than the District, and their activities contained in such Official
Statement are concerned, such statements and data have been obtained from sources which the
District believes to be reliable and that the District has no reason to believe that they are
untrue in any material respect; (d) there has been no material adverse change in the financial
condition of the District since September 30, 1987 the date of the last audited financial
statements of the District; and (e) no -litigation of any nature has been filed or is then pending
to restrain the issuance and delivery of the Bonds, or which would affect the provisions made for
their payment or security, or in any manner questioning the validity of said Bonds.
UPDATING OF OFFICIAL STATEMENT
The District will keep the Official Statement current by amendment or sticker to reflect material
changes in the affairs of the District and, to the extent that information actually comes to its
attention, the other matters described in this Official Statement, until the delivery of the
Bonds. All changes in the affairs of the District and.other matters described in this Official
Statement subsequent to the delivery of the Bonds and all information with respect to the resale
of the Bonds is the responsibility of the Initial Purchaser.
The Board of Directors of Denton County Municipal Utility District No. 2 of Denton County, Texas
has reviewed and approved the Official Notice of Sale, Official Bid Form and this Official
Statement, and said instruments have been authorized for use and distribution by Southwest
Securities Incorporated, Financial Consultant, For the purpose of securing bids on the Bonds
offered hereby.
This Official Statement was approved by the Board of Directors of Denton County Municipal Utility
District No. 2 of Denton County, Texas on the date of the sale of the Bonds.
ATTEST:
/s/ Patricia Stoltz
Secretary, Board of Directors
' Denton County Municipal Utility
District No. 2
of Denton County, Texas
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/s/ Peter Reincke
President, Board of Directors
Denton County Municipal Utility
District No. 2
of Denton County, Texas
APPENDIX A
GENERAL BACKGROUND INFORMATION REGARDING DENTON COUNTY MUNICIPAL UTILITY DISTRICT NO. 2
OF DENTON COUNTY, TEXAS
NERAL
eI-oistrict is comprised of 371.722 acres, of which 346.722 acres are developable. Of the
6a22 developable acres, approximately 159 acres have been fully developed, including
proximately 382 single-family lots and 67 townhouses. Presently, there are 188 acres remaining
eresidential development by the developers. The District has experienced a steady increase in
e:: number of houses built (in excess of 40 homes per year) during the past several years. The
S.idential development, known as "Trophy Club" is a country club development featuring a 27 -hole
)(:course, club house, golf shop, swimming pool, tennis courts, and equestrian center.
6ATION
rye;o1strict is located in the far southeastern quadrant of Denton County near the southern shore
-'Lake Grapevine, and just east of the Town of Roanoke. The original limits of the District
ascs .ri.
bed an area wholly outside of an incorporated city and wholly within the extraterritorial
risdiction of the Town of Westlake. In January, 1985, the voters of Trophy Club Municipal
-"ilaity District No. 1, the District and Denton County Municipal Utility District No. 3
�corporated the Trophy Club development into the Town of Trophy Club, except for the area within
ee,Town of Roanoke. The District is directly adjacent to and accessible from State Highway 114,
irti of and approximately mid -way between Dallas and Fort Worth. The District is approximately
Miles from downtown Dallas, 25 miles from downtown Fort Worth, 17 miles from Denton, 11 miles
`um'Grapevine, and 14 miles from the Dallas -Fort Worth International Airport.
atjor highways connecting these population centers which will also serve the District include
#.,.
tate Highways 114 and 377 and Interstate Highways 35E and 35W (see "Vicinity Map" herein).
REATION OF THE DISTRICT
litOistrict was created by Order of the Texas Water Commission on October 9, 1979 for the purpose
troviding water, sewer and drainage facilities and other authorized services to the area within
'S.:District. Creation of the District was confirmed by the electorate of the District at an
?'action held an August 8, 1980. The District is governed by Chapter 54 of the Texas Water Code,
d!,':other applicable state laws.
TA
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POPULATION
t=�
'The papulation of the District, as of June 30, 1988,. was estimated to be approximately 708 based
un:2.8 persons for each of the 253 existing and occupied homes and townhouses. At the time of the
election held an August 8, 1980, for the confirmation of the creation of the District, there were
^people living in the District.
1,,;
TOPOGRAPHY AND DRAINAGE
s'r
Terrain within the District consists of gently rolling hills and flatlands which had previously
been in cultivation. The area drains to the east and north to Lake Grapevine. The lowest
e�levation is in the flowline of Marshall Creek at its exit from the District at approximately 575
mean sea level (MSL). The land gently rises to the west and south to a high elevation of 620 MSL.
tie
itl»od hazard areas along Marshall Creek cover approximately 25 acres. The majority of this flood
rem area is confined to the proposed greenways, proposed neighborhood parks, and the existing
.'equestrian center. Where development occurs in flood prone areas, finished floor elevations are
(established at 1.5 feet above the 100 year storm surface elevation.
Lit
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SCHOOLS
The District is located in the Northwest Independent School District. Lakeview Elementary School,
located in Trophy Club, provides elementary education for kindergarten through grade three.
Roanoke Elementary School, located in Roanoke, Texas, approximately 1.9 miles From the center of
the District, provides elementary education for grades four and five. Northwest Middle School,
grades six through eight, and Northwest High School, grades nine through twelve, are both located
in Justin, Texas, about 8.4 miles from the center of the District. School bus transportation is
provided by the school district and is available to students within the District at no additional
cost.
SHOPPING AND COMMERCIAL FACILITIES
Some shopping and commercial facilities are available in Roanoke, Texas, about 1.9 miles from the
center of the. District, and additional shopping and commercial facilities are available in
Grapevine, Texas, about eleven 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.
FIRE PROTECTION
Trophy Club Municipal Utility District No. 1 f"MUD No. 1") operates a volunteer fire department
with four emergency response vehicles which are housed and maintained in a recently constructed
six -bay station. This department serves the entire community and is currently financed by a
$0.039 maintenance tax assessment and other contributions from MUD No. 1, the District and Denton
County Municipal Utility District No. 3, with an annual budget of approximately $111,000.
POLICE PROTECTION
Twenty-four hour security is provided by the Denton County Sheriff Department under the terms of a
service contract with the Town of Trophy Club.
OTHER COMMUNITY SERVICES AND FACILITIES
The District provides water, sanitary sewer and storm drainage services to residents of the
District. Trophy Club Municipal Utility District No. 1, the Master District for the Trophy Club
project, has established a permanent operations office at the main water plant, located at 100
Municipal Drive, Trophy Club, Texas.
Garbage and trash collection is currently provided to residents of the District by contract
between City Garbage and the Town of Trophy Club, with pickups twice weekly.
Other utilities serving the District are Texas Power and Light Company, Southwestern Bell
Telephone Company, and M.C.I. Telecommunications Company.
The U.S. Postal Service provides mail service to each occupied house in Trophy Club.
Recreational opportunities in Trophy Club are afforded by Lake Grapevine, which lies about two
miles north and east of the District and its surrounding public parks. Trophy Club Community
Improvement Association maintains a large swimming pool and two tennis courts for the use of
Trophy Club residents, Trophy Club Country Club is operated by Trophy Club Country Club, Inc. as
a private membership club and provides a 27 -hole golf course, tennis, swimming and clubhouse
activities for its members.
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...
M9NAGEMENT
; ..
:The+.District is governed by a board of five directors which has control over and management
supervision of all the affairs of the District. Directors serve four-year, staggered terms and
y'peceive no remuneration, except a Director's per diem allowance of $50 per meeting. The District
a- a1,1 similar districts are subject to the continuing supervision and filing requirements of the
eigas'1 Water Commission, including the preparation and filing of an annual independent audit
sport. All District facilities plans are submitted to the Texas Water Commisson for review and
royal.
Name District Title Occupation
titer Reincke President Vice President Accounting System
!Carolyn Venetoff Vice President Office Manager
atricia Stoltz Secretary/Treasurer Homemaker/Student
Ott Smith Assistant Vice President Sales Manager
Gegory Lazar Assistant Secretary/Treasurer Manager Human Resources
All -of the directors are homeowners of the District.
,P.RINCIPAL DEVELOPERS OF THE DISTRICT
he development of property within the District was first started in late 1980 by Gibraltar
Savings. Financing for the project was provided by Gibraltar Savings Association.
Ip June, 1983, Gibraltar Savings Association sold the majority of its interest in the project to
Ijidependent American Development Corporation. Subsequently, on July 2, 1986, Independent American
;;4evelopment Corporation sold a majority of its interest in theprojectto Bass Land Company and
Sunbelt Savings Association who, together with Independent American Development Corporation, are
esponsible for the remaining development of 188 acres within the District.
The approximate amount of developable acreage owned by each developer is shown below:
Acreage to be Developed
Developer Total
Sunbelt Savings Association
Independent American Development Corporation
Bass Land Company
20.52
0.44
167.04 (a)
Total Acreage 188.00
(a) The District is aware of no specific plans of Bass Land
Company at this time to develop this acreage.
DEVELOPMENT IN THE DISTRICT
Homes are currently being offered at prices ranging from $90,000 to $105,000 and lots range in
price from $19,000 to $21,000. The status ar single-family home development as of September 30,
1988, is shown below.
Status of Single -Family Home Development
Additional Total Multi -Family
Houses Under Houses Total Developed Houses Units
Construction Occupied (a) Houses Lots and Lots Completed (b)
11 175 136 196 382 67
(a) Some of these completed homes are for sale in the secondary market and a few may be unoccupied.
(h) In addition to the single-family development, there are 67 completed townhouses, which are
approximately 97% occupied.
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VICINITY MAP OF THE DISTRICT
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DISTRICT)
LOCATION
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WORTH
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COUNTY
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