HomeMy WebLinkAbout2014 Trophy Club MUD No.1 WWTP Improvements Tax Bond- 2014 OSNEW ISSUE-BOOK-ENTRY-ONLY Ratings: S&P: “AA-”
(See “RATINGS” herein)
OFFICIAL STATEMENT
Dated December 4, 2014
In the opinion of Bond Counsel, interest on the Bonds will be excludable from gross income for federal income tax purposes
under statutes, regulations, published rulings and court decisions existing on the date hereof, subject to the matters described
under “TAX MATTERS” herein including the alternative minimum tax on corporations.
The District has designated the Bonds as “Qualified Tax-Exempt Obligations”
See “TAX MATTERS - Qualified Tax-Exempt Obligations for Financial Institutions” herein.
$5,765,000
TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1
(A Political Subdivision of the State of Texas Located in Denton and Tarrant Counties)
UNLIMITED TAX BONDS, SERIES 2014
Dated Date: December 15, 2014 Due: September 1, as shown on Page ii
The Trophy Club Municipal Utility District No. 1 (the “District” or “Issuer”) $5,765,000 Unlimited Tax Bonds, Series 2014 (the
“Bonds”) are being issued pursuant to the terms and provisions of an order (the “Order”) of the Board of Directors of the District
(the “Board”) and in accordance with the Constitution and general laws of the State of Texas (the “State”), including particularly
Article XVI, Section 59 of the Texas Constitution and the general laws of the State of Texas, including Chapters 49 and 54 of the
Texas Water Code, as amended, and an order of the Texas Commission on Environmental Quality. The Bonds were authorized
by the voters of the District at elections held on October 7, 1975, April 4, 1981 and October 29, 1988. (See “THE BONDS -
Authority for Issuance” herein.)
The Bonds, when issued, will constitute direct and general obligations of the District, payable from the proceeds of an annual ad
valorem tax levied against all taxable property located therein, without limitation as to rate or amount. None of the State of
Texas, Denton or Tarrant Counties, Texas nor any political subdivision or municipality, other than the District shall be
obligated to pay the principal of or interest on the Bonds. Neither the faith and credit nor the taxing power of the State
of Texas or Denton or Tarrant Counties, Texas or any political subdivision or municipality thereof, other than the
District, is pledged to the payment of the principal of or interest on or the redemption price of the Bonds. (See “THE
BONDS –Security for Payment” herein.) THE BONDS ARE SUBJECT TO SPECIAL INVESTMENT CONSIDERATIONS
DESCRIBED HEREIN. (See "INVESTMENT CONSIDERATIONS" herein.) Bond purchasers are encouraged to read this entire
Official Statement prior to making an investment decision.
Interest on the Bonds will accrue from December 15, 2014 (the “Dated Date”) and is payable September 1, 2015, and each
March 1 and September 1 thereafter until the earlier of maturity or redemption, and will be calculated on the basis of a 360-day
year of twelve 30-day months. The Bonds will be issued in fully registered form only, without coupons, in denominations of
$5,000 or any integral multiple thereof within a stated maturity, and when issued, will be registered in the name of Cede & Co.,
as registered owner and nominee for The Depository Trust Company (“DTC”), New York, New York, acting as securities
depository for the Bonds until DTC resigns or is discharged. The Bonds initially will be available to purchasers in book-entry form
only. Purchasers of the Bonds (“Beneficial Owners”) will not receive physical delivery of certificates representing their interest in
the Bonds purchased. So long as Cede & Co., as the paying agent to DTC, is the registered owner of the Bonds, principal of
and interest on the Bonds will be payable by the paying agent to DTC, which will be solely responsible for making such payment
to the Beneficial Owners of the Bonds. The initial paying agent/registrar for the Bonds shall be BOKF, NA dba Bank of Texas,
Austin, Texas (the “Paying Agent”).
Proceeds from the sale of the Bonds are being used to (i) make improvements to the District’s wastewater treatment facilities
and (ii) pay the costs related to the issuance of the Bonds. (See “THE BONDS – Use of Bond Proceeds” herein.)
The District reserves the right to redeem, prior to maturity, in integral multiples of $5,000, those Bonds maturing on and after
September 1, 2025, in whole or from time to time in part, on September 1, 2024, and on any date thereafter at a price of par plus
accrued interest from the most recent interest payment date to the date fixed for redemption. (See “THE BONDS – Optional
Redemption” herein.)
After requesting competitive bids for purchase of the Bonds, the District has accepted the lowest bid to purchase the Bonds,
bearing interest as shown, at a price of 100% of par plus a $4,957.90 cash premium plus accrued interest to the date of delivery,
resulting in a net interest cost rate to the District of 2.886965%.
STATED MATURITY SCHEDULE
(See Page ii)
___________
The Bonds are offered for delivery, when, as and if issued and received by the initial purchaser (the “Purchaser”) and subject to
the approving opinion of the Attorney General of the State of Texas and the approval of certain legal matters by Fulbright &
Jaworski LLP, Dallas, Texas, a member of Norton Rose Fulbright, Bond Counsel. Delivery of the Bonds through DTC is
expected on or about December 23, 2014.
ii
STATED MATURITY SCHEDULE
(Due September 1)
Base CUSIP – 897059 (a)
Stated
Maturity
Principal
Amount
Rate
(%)
Yield
(%)
CUSIP
Suffix(a)
2016 $235,000 1.50 0.55 FN 6
2017 240,000 1.50 0.80 FP 1
2018 245,000 1.50 1.05 FQ 9
2019 250,000 1.50 1.30 FR 7
2020 255,000 1.75 1.60 FS 5
2021 265,000 2.00 1.90 FT 3
2022 270,000 2.00 2.00 FU 0
2023 280,000 2.25 2.20 FV 8
2024 290,000 2.50 2.30 FW 6
2025 295,000 2.50 2.45(b) FX 4
2026 305,000 2.50 2.50 FY 2
2027 315,000 2.75 2.65(b) FZ 9
2028 325,000 2.75 2.75 GA 3
2029 335,000 3.00 2.85(b) GB 1
2030 345,000 3.25 3.05(b) GC 9
2031 360,000 3.25 3.10(b) GD 7
2032 370,000 3.25 3.20(b) GE 5
2033 385,000 3.50 3.25(b) GF 2
2034 400,000 3.50 3.30(b) GG 0
The District reserves the right to redeem, prior to maturity, in integral multiples of $5,000, those Bonds maturing on and after
September 1, 2025, in whole or from time to time in part, on September 1, 2024, and on any date thereafter at a price of par plus
accrued interest from the most recent interest payment date to the date fixed for redemption. (See “THE BONDS – Optional
Redemption” herein.)
___________
(a) CUSIP is a registered trademark of the American Bankers Association. CUSIP data herein is provided by Standard and Poor’s
CUSIP Service Bureau, a division of The McGraw-Hill Companies, Inc. This data is not intended to create a database and does
not serve in any way as a substitute for the CUSIP Services. Neither the District nor the Financial Advisor is responsible for the
selection or the correctness of the CUSIP numbers set forth herein.
(b) Yield calculated to first call date, September 1, 2024.
iii
TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1
BOARD OF DIRECTORS
Name
Position
Two-Year
Term Expires
May
Occupation
James Moss President 2016 Retired
Jim Hase Vice President 2018 Retired
Kevin Carr Secretary / Treasurer 2018 Self-Employed
James C. Thomas Director 2016 Retired
Neil Twomey Director 2018 Retired
DISTRICT PERSONNEL AND ADVISORS
General Manager ............................................................................................................................................. Jennifer McKnight
...................................................................................................................................................................... Trophy Club, Texas
Finance Manager ............................................................................................................................................... Renae Gonzales
...................................................................................................................................................................... Trophy Club, Texas
Administration Manager ................................................................................................................................................ Terri Sisk
...................................................................................................................................................................... Trophy Club, Texas
Attorneys for the District ............................................................................................................................................... Bob West
................................................................................................................................. Whitaker Chalk Swindle & Schwartz, PLLC
......................................................................................................................................................................... Fort Worth, Texas
Pamela Harrell Liston
............................................................................................................................................................ The Liston Law Firm, P.C.
.............................................................................................................................................................................. Rowlett, Texas
Financial Advisor ........................................................................................................................................ Southwest Securities
................................................................................................................................................................................ Dallas, Texas
Bond Counsel ....................................................................................................................................... Fulbright & Jaworski LLP
................................................................................................................................................................................ Dallas, Texas
Independent Auditors .................................................................................................................... Lafollett and Company PLLC
......................................................................................................................................................................... Tom Bean, Texas
Tax Assessor - Collector .......................................................................................................................... Denton County, Texas
.................................................................................................................................................................. Tarrant County, Texas
Chief Appraiser ......................................................................................................................................... Denton County, Texas
.................................................................................................................................................................. Tarrant County, Texas
For Additional Information Please Contact:
Ms. Jennifer McKnight Mr. Dan A. Almon Mr. Andrew Friedman
General Manager Senior Vice President Vice President
Trophy Club Municipal Utility District Southwest Securities, Inc. Southwest Securities, Inc.
100 Municipal Drive 1201 Elm Street, Suite 3500 1201 Elm Street, Suite 3500
Trophy Club, Texas 76262 Dallas, Texas 75270 Dallas, Texas 75270
(682) 831-4610 (214) 859-9452 210-226-8677
iv
TABLE OF CONTENTS
STATED MATURITY SCHEDULE ............................................ ii
BOARD OF DIRECTORS ........................................................ iii
DISTRICT PERSONNEL AND ADVISORS ............................. iii
TABLE OF CONTENTS........................................................... iv
USE OF INFORMATION IN THE OFFICIAL STATEMENT ...... v
SALE AND DISTRIBUTION OF THE BONDS .......................... v
Award of the Bonds .......................................................... v
Issue Prices and Marketability .......................................... v
INVESTMENT CONSIDERATIONS ......................................... v
SELECTED DATA FROM THE OFFICIAL STATEMENT ........ vi
OFFICIAL STATEMENT ........................................................... 1
INTRODUCTION ...................................................................... 1
THE BONDS ............................................................................. 1
General Description ......................................................... 1
Use of Bond Proceeds ..................................................... 1
Authority for Issuance ...................................................... 1
Texas Commission on Environmental Quality
Approval ........................................................................ 2
Security for Payment ........................................................ 2
Payment Record .............................................................. 2
Flow of Funds and Investment of Funds .......................... 2
Optional Redemption ....................................................... 3
Termination of Book-Entry-Only System .......................... 3
Defeasance of Outstanding Bonds ................................... 4
Paying Agent/Registrar .................................................... 5
Record Date ..................................................................... 5
Issuance of Additional Debt .............................................. 5
Tax Covenants ................................................................. 5
Amendments to the Order ................................................ 5
SOURCES AND USES OF FUNDS ......................................... 6
RATING .................................................................................... 6
BOOK-ENTRY-ONLY SYSTEM ............................................... 6
Use of Certain Terms in Other Sections of this Official
Statement ...................................................................... 7
INVESTMENT CONSIDERATIONS ......................................... 8
General ............................................................................ 8
Approval of the Bonds ...................................................... 8
Factors Affecting Taxable Values and Tax Payments ...... 8
Tax Collections and Foreclosure Remedies ..................... 8
Consolidation ................................................................... 8
Abolition ........................................................................... 9
Alteration of Boundaries ................................................... 9
Registered Owners’ Remedies ......................................... 9
Bankruptcy Limitation to Registered Owners' Rights ........ 9
The Effect of the Financial Institutions Act of 1989 on
Tax Collections of the District ...................................... 10
Continuing Compliance with Certain Covenants ............ 10
Future Debt .................................................................... 10
Future and Proposed Legislation ................................... 10
THE DISTRICT ....................................................................... 10
Creation of the District .................................................... 10
Governance .................................................................... 11
Employees ..................................................................... 11
General .......................................................................... 11
Location ......................................................................... 11
Population ...................................................................... 11
Topography and Drainage ............................................. 11
Shopping and Commercial Facilities .............................. 12
Fire Protection ............................................................... 12
Police Protection ............................................................ 12
Schools .......................................................................... 12
Recreational Opportunities ............................................ 12
Status of Development of the District ............................ 12
Public Improvement District Description ........................ 13
THE DISTRICT’S SYSTEM ................................................... 13
Description of the Water System ................................... 13
Description of the Wastewater System .......................... 13
INVESTMENT AUTHORITY AND INVESTMENT
PRACTICES OF THE DISTRICT ........................................ 14
Current Investments ...................................................... 15
TAX DATA ............................................................................. 16
District Bond Tax Rate Limitation .................................. 16
Maintenance and Operations Tax .................................. 16
Overlapping Taxes ........................................................ 16
TAXING PROCEDURES ....................................................... 16
Authority to Levy Taxes ................................................. 16
Property Tax Code and County-Wide Appraisal
District ........................................................................ 16
Tax Increment Reinvestment (Financing) Zones ........... 18
Valuation of Property for Taxation ................................. 18
Notice and Hearing Procedures ..................................... 18
District and Taxpayer Remedies .................................... 18
Levy and Collection of Taxes ......................................... 19
District's Rights in the Event of Tax Delinquencies ........ 19
LEGAL MATTERS ................................................................. 19
Legal Opinions ............................................................... 19
Litigation ........................................................................ 20
No-Litigation Certificate ................................................. 20
No Material Adverse Change ......................................... 20
TAX MATTERS ...................................................................... 21
Tax Exemption ............................................................... 21
Tax Accounting Treatment of Discount on Bonds .......... 21
Qualified Tax-Exempt Obligations for Financial
Institutions .................................................................. 22
CONTINUING DISCLOSURE OF INFORMATION ................ 22
Annual Reports .............................................................. 22
Notice of Certain Events ................................................ 23
Availability of Information from MSRB ........................... 23
Limitations and Amendments ........................................ 23
Compliance with Prior Agreements ................................ 24
FINANCIAL ADVISOR ........................................................... 24
OFFICIAL STATEMENT ........................................................ 24
Updating the Official Statement During Underwriting
Period ......................................................................... 24
Forward-Looking Statements Disclaimer ....................... 24
OTHER MATTERS ................................................................ 24
Legal Investment and Eligibility to Secure Public
Funds in Texas ........................................................... 24
Registration and Qualification of Bonds for Sale ........... 25
Certification as to Official Statement .............................. 25
Concluding Statement ................................................... 25
Financial Information of the Issuer Appendix A
General Information Regarding the Town of Trophy Club and Denton County Appendix B
Form of Legal Opinion of Bond Counsel Appendix C
Excerpts from the District’s Audited Financial Statements for the Year Ended September 30, 2013 Appendix D
The cover page, subsequent pages hereof and the schedules and appendices attached hereto, are part of this Official Statement.
v
USE OF INFORMATION IN THE OFFICIAL STATEMENT
No dealer, broker, salesman or other person has been authorized to give any information or to make any representations other than
those contained in this Official Statement, and if given or made, such other information or representations must not be relied upon as
having been authorized by the District.
This Official Statement does not alone constitute, and is not authorized by the District for use in connection with, an offer to sell or the
solicitation of any offer to buy in any state in which such offer or solicitation is not authorized or in which the person making such offer or
solicitation is not qualified to do so or to any person to whom it is unlawful to make such offer or solicitation.
All of the summaries of the statutes, orders, resolutions, contracts, records, and engineering and other related reports set forth in the
Official Statement are made subject to all of the provisions of such documents. These summaries do not purport to be complete
statements of such provisions, and reference is made to such documents, copies of which are available from the Financial Advisor,
upon the payment of reasonable duplication costs.
This Official Statement contains, in part, estimates, assumptions and matters of opinion which are not intended as statements of fact,
and no representation is made as to the correctness of such estimates, assumptions, or matters of opinion, or as to the likelihood that
they will be realized. Any information and expressions of opinion herein contained are subject to change without notice, and neither the
delivery of this "Official Statement" nor any sale made hereunder shall, under any circumstances, create any implication that there has
been no change in the affairs of the District or the other matters described herein since the date hereof. However, the District has
agreed to keep this "Official Statement" current by amendment or sticker to reflect material changes in the affairs of the District, and to
the extent that information actually comes to its attention, other matters described in the "Official Statement" until delivery of the Bonds
to the Purchaser and thereafter only as specified in "OFFICIAL STATEMENT -Updating the Official Statement During Underwriting
Period" and “CONTINUING DISCLOSURE OF INFORMATION.”
NEITHER THE DISTRICT NOR THE FINANCIAL ADVISOR MAKES ANY REPRESENTATION OR WARRANTY WITH RESPECT TO
THE INFORMATION CONTAINED IN THIS OFFICIAL STATEMENT REGARDING THE DEPOSITORY TRUST COMPANY (“DTC”)
OR ITS BOOK-ENTRY-ONLY SYSTEM, AS SUCH INFORMATION WAS PROVIDED BY DTC.
THE BONDS ARE EXEMPT FROM REGISTRATION WITH THE SECURITIES AND EXCHANGE COMMISSION AND
CONSEQUENTLY HAVE NOT BEEN REGISTERED THEREWITH. THE REGISTRATION, QUALIFICATION, OR EXEMPTION OF
THE BONDS IN ACCORDANCE WITH APPLICABLE SECURITIES LAW PROVISIONS OF THE JURISDICTION IN WHICH THESE
SECURITIES HAVE BEEN REGISTERED, OR EXEMPTED SHOULD NOT BE REGARDED AS A RECOMMENDATION THEREOF.
THIS OFFICIAL STATEMENT CONTAINS "FORWARD-LOOKING" STATEMENTS WITHIN THE MEANING OF SECTION 21E
OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. SUCH STATEMENTS MAY INVOLVE KNOWN AND
UNKNOWN RISKS, UNCERTAINTIES, AND OTHER FACTORS WHICH MAY CAUSE THE ACTUAL RESULTS,
PERFORMANCE, AND ACHIEVEMENTS TO BE DIFFERENT FROM FUTURE RESULTS, PERFORMANCE, AND
ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. INVESTORS ARE
CAUTIONED THAT THE ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE SET FORTH IN THE FORWARD-
LOOKING STATEMENTS.
SALE AND DISTRIBUTION OF THE BONDS
Award of the Bonds
After requesting competitive bids for the Bonds, the District accepted the bid resulting in the lowest net interest cost, which bid was
tendered by FTN Financial (the “Purchaser”) bearing the interest rates shown on page ii hereof, at a price of 100% of the par value
thereof plus a premium of $4,957.90, plus accrued interest to the date of delivery which resulted in a net interest cost of 2.886965% as
calculated pursuant to Texas Government Code Chapter 1204, as amended. The initial reoffering yields were supplied to the District by
the Purchaser. The initial reoffering yields shown on page ii will produce compensation to the Purchasers of approximately $53,694.30.
Issue Prices and Marketability
The delivery of the Bonds is conditioned upon the receipt by the District of a certificate executed and delivered by the Purchaser on or
before the date of delivery of the Bonds stating the prices at which a substantial amount of the Bonds of each maturity has been sold to
the public. For this purpose, the term "public" shall not include any person who is a bond house, broker or similar person acting in the
capacity of underwriter or wholesaler. Otherwise, the District has no understanding with the Purchaser regarding the reoffering yields or
prices of the Bonds. Information concerning reoffering yields or prices is the responsibility of the Purchaser.
The prices and other terms with respect to the offering and sale of the Bonds may be changed from time-to time by the Purchaser after
the Bonds are released for sale, and the Bonds may be offered and sold at prices other than the initial offering prices, including sales to
dealers who may sell the Bonds into investment accounts. In connection with the offering of the Bonds, the Purchaser may over - allot
or effect transactions which stabilize or maintain the market prices or the Bonds at levels above those which might otherwise prevail in
the open market. Such stabilizing, if commenced, may be discontinued at any time.
The District has no control over trading of the Bonds in the secondary market. Moreover, there is no guarantee that a secondary market
will be made for the Bonds. In such a secondary market, the difference between the bid and asked price of utility district bonds may be
greater than the difference between the bid and asked price of bonds of comparable maturity and quality issued by more traditional
municipal entities, as bonds of such entities are more generally bought, sold or traded in the secondary market.
INVESTMENT CONSIDERATIONS
The purchase and ownership of the Bonds involve certain investment considerations and all prospective purchasers are urged to
examine carefully the Official Statement, including particularly the section captioned “INVESTMENT CONSIDERATIONS”, with respect
to the investment security of the Bonds.
vi
SELECTED DATA FROM THE OFFICIAL STATEMENT
The following material is qualified in its entirety by the more detailed information and financial statements appearing elsewhere in this Official
Statement. The offering of the Bonds to potential investors is made only by means of this entire Official Statement. No person is authorized to
detach this summary from this Official Statement or to otherwise use it without the entire Official Statement.
The Issuer The Trophy Club Municipal Utility District No. 1 (the "District" or “Issuer”) is a political subdivision of the
State of Texas located in Denton and Tarrant Counties, Texas. The District was created as a municipal
utility district pursuant to Chapter 54 of the Texas Water Code and is a conservation and reclamation
district in accordance with Article XVI, Section 59 of the Texas Constitution. The District has also
adopted a fire protection plan under Section 50.055 of the Texas Water Code, now codified as
Subchapter L of Chapter 49 of the Texas Water Code, pursuant to the Order of the Texas Water
Commission of August 22, 1983. In July of 2009, documentation was submitted to the Texas
Commission on Environmental Quality (“TCEQ”) regarding the consolidation of Trophy Club Municipal
Utility District Nos. 1 and 2 as of a May 9, 2009 election. (See “THE DISTRICT” herein.)
The Bonds The Bonds are being issued pursuant to the Constitution and general laws of the State of Texas, including
particularly Article XVI, Section 59 of the Texas Constitution and Chapters 49 and 54 of the Texas
Water Code, as amended, an order of the Texas Commission on Environmental Quality, and an
order (the “Order”) to be adopted by the Board of Directors (the “Board”) of the District. The Bonds
were authorized by the voters of the District at elections held on October 7, 1975, April 4, 1981 and
October 29, 1988. (See “THE BONDS - Authority for Issuance” herein.)
Security for Payment The Bonds, when issued, will constitute direct and general obligations of the District, payable from the
proceeds of an annual ad valorem tax levied against all taxable property located therein, without limitation
as to rate or amount. None of the State of Texas, Denton or Tarrant Counties, Texas nor any political
subdivision or municipality, other than the District shall be obligated to pay the principal of or
interest on the Bonds. Neither the faith and credit nor the taxing power of the State of Texas or
Denton or Tarrant Counties, Texas or any political subdivisions or municipality thereof, other than
the District, is pledged to the payment of the principal of or interest on or the redemption price of
the Bonds. (See “THE BONDS –Security for Payment” herein.)
Paying Agent/Registrar The initial Paying Agent/Registrar for the Bonds is BOKF, NA dba Bank of Texas, Austin, Texas
Description The Bonds in the aggregate principal amount of $5,765,000 mature on September 1 of each year in the
amounts as set forth on page ii of this Official Statement. Interest accrues from December 15, 2014 (the
“Dated Date”) at the rates per annum set forth page ii hereof and is payable September 1, 2015 and each
March 1 and September 1 thereafter until maturity or earlier redemption. The Bonds are offered in fully
registered form in integral multiples of $5,000 for any one maturity. (See “THE BONDS - General Description”
herein.)
Optional Redemption Bonds maturing on and after September 1, 2025 are subject to redemption in whole or from time to time in
part at the option of the District on September 1, 2024, and on any date thereafter, at par plus accrued
interest from the most recent interest payment date to the date of redemption. (See “THE BONDS -
Optional Redemption” herein.)
Tax Matters In the opinion of Bond Counsel, the interest on the Bonds will be excludable from gross income of the owners
thereof for purposes of federal income taxation under existing law subject to matters discussed herein under
“TAX MATTERS” including the alternative minimum tax on corporations. (See “TAX MATTERS” and Appendix
C - “Form of Legal Opinion of Bond Counsel” herein.)
Use of Proceeds Proceeds from the sale of the Bonds will be used to (i) make improvements to the District’s
wastewater treatment facilities and (ii) pay the costs related to the issuance of the Bonds. (See “THE
BONDS – Use of Bond Proceeds” herein.)
Rating Standard & Poor’s Rating Services, a Standard & Poor’s Financial Services LLC business (“S&P”)
has assigned an underlying rating “AA-” to the Bonds and to the District's outstanding tax-supporting
debt. An explanation of the significance of a rating may be obtained from S&P. (See “RATINGS”
herein.)
Qualified Tax Exempt
Obligations
The Issuer has designated the Bonds as “Qualified Tax-Exempt Obligations” for financial institutions.
(See “TAX MATTERS - Qualified Tax-Exempt Obligations for Financial Institutions” herein.)
Book-Entry-Only System The Issuer intends to utilize the Book-Entry-Only System of The Depository Trust Company, New York, New
York relating to the method and timing of payment and the method and transfer relating to the Bonds. (See
“BOOK-ENTRY-ONLY SYSTEM” herein.)
Future Bond Issues The District does not plan to issue the $4,217 of remaining authorized but unissued unlimited tax bonds.
The District is considering the issuance of approximately $9,230,000 in water and sewer revenue bonds
within the next three months.
Payment Record The Issuer has never defaulted in the timely payment of principal of or interest on its general obligation
indebtedness.
Delivery When issued, anticipated on or about December 23, 2014.
Legality Delivery of the Bonds is subject to the approval by the Attorney General of the State of Texas and the rendering
of an opinion as to legality by Fulbright & Jaworski LLP, Bond Counsel, Dallas, Texas, a member of Norton
Rose Fulbright.
1
OFFICIAL STATEMENT
relating to
$5,765,000
TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1
(A Political Subdivision of the State of Texas Located in Denton and Tarrant Counties, Texas)
UNLIMITED TAX BONDS, SERIES 2014
INTRODUCTION
This Official Statement provides certain information in connection with the issuance by the Trophy Club Municipal Utility District
No. 1 (the “District” or “Issuer”) of its $5,765,000 Unlimited Tax Bonds, Series 2014 (the “Bonds”).
The Bonds are being issued pursuant to Article XVI, Section 59 of the Texas Constitution and the general laws of the State of
Texas, including Chapters 49 and 54 of the Texas Water Code, as amended, an order of the Texas Commission on
Environmental Quality, and an order (the “Order”) to be adopted by the Board of Directors (the “Board”) of the District, and will
constitute direct and general obligations of the District, payable from the proceeds of an annual ad valorem tax levied against all
taxable property located therein, without limitation as to rate or amount.
Unless otherwise indicated, capitalized terms used in this Preliminary Official Statement have the same meaning assigned to
such terms in the Order.
Included in this Preliminary Official Statement are descriptions of the Bonds, the Order, and certain information about the District
and its finances. ALL DESCRIPTIONS OF DOCUMENTS CONTAINED HEREIN ARE SUMMARIES ONLY AND ARE
QUALIFIED IN THEIR ENTIRETY BY REFERENCE TO EACH SUCH DOCUMENT. Copies of such documents may be
obtained from the District or Financial Advisor.
THE BONDS
General Description
The $5,765,000 Trophy Club Municipal Utility District No. 1 Unlimited Tax Bonds, Series 2014 will bear interest from
December 15, 2014 (the “Dated Date”) and will mature on September 1 of the years and in the principal amounts set forth on
page ii hereof.
Interest on the Bonds will accrue from the Dated Date and is payable September 1, 2015, and each March 1 and September 1
thereafter until the earlier of maturity or redemption, and will be calculated on the basis of a 360-day year of twelve 30-day
months. The Bonds will be issued in fully registered form only, without coupons, in denominations of $5,000 or any integral
multiple thereof within a stated maturity. The initial paying agent for the Bonds shall be BOKF, NA dba Bank of Texas, Austin,
Texas ("Paying Agent"). The principal of and interest on the Bonds shall be payable without exchange or collection charges, in
any coin or currency of the United States of America which, on the date of payment, is legal tender for the payment of debt due
the United States of America.
If the specified date for any payment of principal (or Redemption Price) of or interest on the Bonds is a Saturday, Sunday, or
legal holiday or equivalent for banking institutions generally in the city in which Designated Payment / Transfer Office of the
Paying Agent is located, such payment may be made on the next succeeding day which is not one of the foregoing days without
additional interest and with the same force and effect as if made on the specified date for such payment.
Initially, the Bonds will be registered and delivered only to Cede & Co., the nominee of The Depository Trust Company (“DTC”)
pursuant to the Book-Entry-Only System described herein. No physical delivery of the Bonds will be made to the beneficial
owners. Principal of and interest on the Bonds will be payable by the Paying Agent to Cede & Co., which will distribute the
amounts paid to the participating members of DTC for subsequent payment to the beneficial owners of the Bonds. (See
“BOOK–ENTRY-ONLY SYSTEM” HEREIN.)
Use of Bond Proceeds
Proceeds from the sale of the Bonds are being used to (i) make improvements to the District’s wastewater treatment facilities
and (ii) pay the costs related to the issuance of the Bonds. (See “THE PROJECT” herein.)
Authority for Issuance
The Bonds were authorized at elections held on October 7, 1975, April 4, 1981 and October 29, 1988.
The Bonds are issued by the District pursuant to the terms and provisions of the Order, Article XVI, Section 59 of the Texas
Constitution and the general laws of the State of Texas, including Chapters 49 and 54 of the Texas Water Code, as amended,
and an order of the Texas Commission on Environmental Quality.
2
Texas Commission on Environmental Quality Approval
On February 6, 2014, the Texas Commission on Environmental Quality (“TCEQ”) issued a Commission Order (“TCEQ Order”)
approving the project and the issuance of the Bonds. The approval order included the following information:
“….Pursuant to TEX. WATER CODE Section 49.181, the engineering project for Trophy Club Municipal Utility District
No. 1 of Denton and Tarrant Counties is hereby approved together with the issuance of $14,995,000 ($5,765,000 in
unlimited tax bonds and $9,230,000 in revenue bonds) in bonds at a maximum net effective interest rate of 6.23%....
The District is directed not to expend $12,991,567 ($11,297,015 for construction plus $1,694,552 in contingencies) of
the bond issue proceeds approved herein for the wastewater treatment plant improvements pending District Board’s
receipt of plans and specifications approved by all entities with jurisdiction, as necessary…. The approval of the sale
of these bonds herein shall be valid for one year from the date of this Order unless extended by written authorization
of the Commission staff.”
The TCEQ further ordered, to enable the TCEQ to carry out the responsibilities imposed by Texas Water Code Sections 49.181-
182, that the District shall: (1) furnish the TCEQ copies of all bond issue project construction documentation outlined under Title
30 of the Texas Administrative Code, Section 293.62, including detailed progress reports and as-built plans required by Texas
Water code Section 49.277(b), which have not already been submitted; (2) notify the Utilities and Districts Section of the TCEQ
and obtain approval of the TCEQ for any substantial alterations in the engineering project approved herein before making such
alterations; and (3) ensure, as required by Texas Water Code Section 49.277(b), that all construction financed with the proceeds
from the sale of bonds is completed by the construction contractor according to the plans and specifications contracted.
Security for Payment
The Bonds will constitute valid and legally binding direct obligations of the District payable from the proceeds of a continuing
direct annual ad valorem tax levied by the District against all taxable property located therein, without legal limit as to rate or
amount. The Order irrevocably pledges such ad valorem taxes to the payment of the principal of and interest on the Bonds while
the same remain outstanding. None of the State of Texas, Denton or Tarrant Counties, Texas nor any political
subdivision or municipality, other than the District shall be obligated to pay the principal of or interest on the Bonds.
Neither the faith and credit nor the taxing power of the State of Texas or Denton or Tarrant Counties, Texas or any
political subdivision or municipality thereof, other than the District, is pledged to the payment of the principal of or
interest on or the redemption price of the Bonds.
Tax Pledge: The Board covenants in the Order that, while any of the Bonds are outstanding and the District is in existence, it will
levy and assess a continuing ad valorem tax upon each $100 valuation of taxable property within the District at a rate from year
to year sufficient, full allowance being made for anticipated delinquencies, together with revenues and receipts from other
sources which are legally available for such purposes, to pay principal and interest on the Bonds as it becomes due, and to pay
the expenses of assessing and collecting such tax. The Board additionally covenants in the Order to timely assess and collect
such tax. The net proceeds from taxes levied to pay debt service on the Bonds are required to be placed in a special account of
the District designated as its "Special Series 2014 Unlimited Tax Bond Fund" referred to hereinafter as the Debt Service Fund.
Abolition: Under Texas law, if a district is located wholly in two or more municipalities, the district may be abolished by
agreement among the district and all of the municipalities in which the district is located. The abolition agreement must provide
for the distribution of assets and liabilities (including the bonds) of the abolished district. The assumption by each municipality
must be based on the ratio that the value of the property and other assets distributed to that municipality bears to the total value
of all the property and other assets of the district. No representation is made concerning the likelihood of abolition or the ability
of the municipalities which contain parts of the District to make debt service payments on the Bonds should abolition occur. (See
“INVESTMENT CONSIDERATIONS - Abolition” herein.)
Consolidation: A district (such as the District) has the legal authority to consolidate with other municipal utility districts and in
connection therewith, to provide for the consolidation of its assets, such as cash and the utility system, with the water and
wastewater systems of districts with which it is consolidating as well as its liabilities (which would include the Bonds). The
District is the resulting entity from a consolidation in May 2009 of Trophy Club Municipal Utility District No. 1 and Trophy Club
Municipal Utility district No. 2 (see “THE DISTRICT”).
Payment Record
The District has never defaulted on the timely payment of principal of and interest on its general obligation indebtedness.
Flow of Funds
Debt Service Fund: The Order establishes the Debt Service Fund be kept separate and apart from all other funds of the District
and shall only be used to pay principal and interest on the Bonds. The Order requires that the District deposit to the credit of the
Debt Service Fund (i) from the delivery of the Bonds to the Purchaser, the amount received from proceeds of the Bonds
representing accrued interest, (ii) District ad valorem taxes (and penalties and interest thereon) levied to pay debt service
3
requirements on the Bonds, and (iii) such other funds as the Board shall, at its option, deem advisable. The Order requires that
the Debt Service Fund be applied solely to provide for the payment of the principal or redemption price of and interest on the
Bonds when due, and to pay fees to the Paying Agent when due.
Construction Account: The construction account (referred to herein as the "Construction Fund") is the capital improvements
fund. The Order requires the District to deposit to the credit of the Construction Fund the balance of the proceeds of the Bonds
remaining after the deposits to the Debt Service Fund. The Construction Fund may be applied solely to (i) pay the costs
necessary or appropriate to accomplish the purposes for which the Bonds are issued, (ii) pay the costs of issuing the Bonds and
(iii) the extent the proceeds of the Bonds and investment income attributable thereto are in excess of the amounts required to
construct the improvements to the District’s wastewater treatment facilities as approved by the TCEQ, then in the discretion of
the District to transfer such unexpended proceeds or income to the Debt Service Fund.
Optional Redemption
The Bonds maturing on or after September 1, 2025, are subject to redemption prior to maturity at the option of the District, in
whole or from time to time in part, on September 1, 2024, and on any date thereafter, at a redemption price equal to the principal
amount thereof plus accrued interest from the most recent interest payment date to the date fixed for redemption.
Notice of Redemption: Not less than thirty (30) days prior to a redemption date for the Bonds, the District shall cause a notice of
such redemption to be sent by United States mail, first-class postage prepaid, to the registered owners of each Bond or a portion
thereof to be redeemed at its address as it appeared on the registration books of the Paying Agent/Registrar at the close of
business on the business day next preceding the date of mailing of such notice. With respect to any optional redemption of the
Bonds, unless certain prerequisites to such redemption required by the Order have been met and money sufficient to pay the
principal of and premium, if any, and interest on the Bonds to be redeemed will have been received by the Paying
Agent/Registrar prior to the giving of such notice of redemption, such notice will state that said redemption may, at the option of
the Issuer, be conditional upon the satisfaction of such prerequisites and receipt of such money by the Paying Agent/Registrar
on or prior to the date fixed for such redemption or upon any prerequisite set forth in such notice of redemption. If a conditional
notice of redemption is given and such prerequisites to the redemption are not fulfilled, such notice will be of no force and effect,
the Issuer will not redeem such Bonds, and the Paying Agent/Registrar will give notice in the manner in which the notice of
redemption was given, to the effect that such Bonds have not been redeemed. ANY NOTICE OF REDEMPTION SO MAILED
TO THE REGISTERED OWNERS WILL BE DEEMED TO HAVE BEEN DULY GIVEN IRRESPECTIVE OF WHETHER
RECEIVED BY ANY HOLDER OF THE BONDS, AND, SUBJECT TO PROVISION FOR PAYMENT OF THE REDEMPTION
PRICE HAVING BEEN MADE, AND ANY PRECONDITIONS STATED IN THE NOTICE OF REDEMPTION HAVING BEEN
SATISFIED INTEREST ON THE REDEEMED BONDS SHALL CEASE TO ACCRUE FROM AND AFTER SUCH REDEMPTION
DATE NOTWITHSTANDING THAT A BOND HAS NOT BEEN PRESENTED FOR PAYMENT. By the date fixed for any such
redemption, due provision shall be made with the Paying Agent/Registrar for the payment of the required redemption price for
the Bonds or portions thereof which are to be so redeemed. If such notice of redemption is given and if due provision for such
payment is made, all as provided above, the Bonds or portion thereof which are to be redeemed thereby automatically shall be
treated as redeemed prior to their scheduled maturities, and they shall not bear interest after the date fixed for redemption, and
they shall not be regarded as being outstanding except for the right of the registered owner to receive the redemption price from
the Paying Agent/Registrar out of the funds provided for such payment.
The Paying Agent/Registrar and the Issuer, so long as a Book-Entry-Only System is used for the Bonds, will send any notice of
redemption, notice of proposed amendment to the Bonds or other notices with respect to the Bonds only to DTC. Any failure by
DTC to advise any DTC participant, or of any DTC participant or indirect participant to notify the Beneficial Owner, will not affect
the validity of the redemption of the Bonds called for redemption or any other action premised on any such notice. Redemption of
portions of the Bonds by the Issuer will reduce the outstanding principal amount of such Bonds held by DTC. In such event,
DTC may implement, through its Book-Entry-Only System, a redemption of such Bonds held for the account of DTC participants
in accordance with its rules or other agreements with DTC participants and then DTC participants and indirect participants may
implement a redemption of such Bonds from the Beneficial Owners. Any such selection of Bonds to be redeemed will not be
governed by the Order and will not be conducted by the Issuer or the Paying Agent/Registrar. Neither the Issuer nor the Paying
Agent/Registrar will have any responsibility to DTC participants, indirect participants or the persons for whom DTC participants
act as nominees, with respect to the payments on the Bonds or the providing of notice to DTC participants, indirect participants,
or Beneficial Owners of the selection of portions of the Bonds for redemption. (See "BOOK-ENTRY-ONLY SYSTEM" herein.)
Termination of Book-Entry-Only System
The District is initially utilizing the book-entry-only system of the DTC. (See “BOOK-ENTRY-ONLY SYSTEM” herein.) In the event
that the Book-Entry-Only System is discontinued by DTC or the District, the following provisions will be applicable to the Bonds.
Payment: Principal of the Bonds will be payable at maturity or prior redemption to the registered owners as shown by the registration
books maintained by the Paying Agent upon presentation and surrender of the Bonds to the Paying Agent at the designated office
for payment of the Paying Agent/Registrar in St. Paul, Minnesota (the “Designated Payment/Transfer Office”). Interest on the Bonds
will be payable by check or draft, dated as of the applicable interest payment date, sent by the Paying Agent by United States mail,
first class, postage prepaid, to the registered owners at their respective addresses shown on such records, or by such other method
acceptable to the Paying Agent requested by registered owner at the risk and expense of the registered owner. If the date for the
payment of the principal of or interest on the Bonds shall be a Saturday, Sunday, legal holiday or day on which banking institutions in
4
the city where the Designated Payment/Transfer Office of the Paying Agent is located are required or authorized by law or executive
order to close, then the date for such payment shall be the next succeeding day which is not a Saturday, Sunday, legal holiday or
day on which banking institutions are required or authorized to close, and payment on such date shall for all purposes be deemed to
have been made on the original date payment was due. Initially, the only registered owner of the Bonds will be CEDE & CO. as
nominee of DTC. (See “BOOK-ENTRY-ONLY SYSTEM” herein.)
Registration: The Bonds may be transferred and re-registered on the registration books of the Paying Agent only upon presentation
and surrender thereof to the Paying Agent/Registrar at the Designated Payment/Transfer Office. A Bond also may be exchanged for
a Bond or Bonds of like maturity and interest and having a like aggregate principal amount, upon presentation and surrender at the
Designated Payment/Transfer Office. All Bonds surrendered for transfer or exchange must be endorsed for assignment by the
execution by the registered owner or his duly authorized agent of an assignment form on the Bonds or other instruction of transfer
acceptable to the Paying Agent. Transfer and exchange of Bonds will be without expense or service charge to the registered owner,
except for any tax or other governmental charges required to be paid with respect to such transfer or exchange. A new Bond or
Bonds, in lieu of the Bond being transferred or exchanged, will be delivered by the Paying Agent/Registrar to the registered owner, at
the Designated Payment/Transfer Office of the Paying Agent/Registrar or by United States mail, first-class, postage prepaid. To the
extent possible, new Bonds issued in an exchange or transfer of Bonds will be delivered to the registered owner not more than three
(3) business days after the receipt of the Bonds to be canceled in the exchange or transfer and the denominations of $5,000 or any
integral multiple thereof. (See “BOOK-ENTRY-ONLY SYSTEM” herein for a description of the system to be initially utilized in
regard to ownership and transferability of the Bonds.)
Limitations on Transfer of Bonds: Neither the District nor the Paying Agent shall be required to make any transfer, conversion or
exchange to an assignee of the registered owner of the Bonds , within forty-five (45) days of the date fixed for redemption; provided,
however, such limitation of transfer shall not be applicable to an exchange by the registered owner of the uncalled balance of a
Bond.
Replacement Bonds: If a Bond is mutilated, the Paying Agent will provide a replacement Bond in exchange for the mutilated bond.
If a Bond is destroyed, lost or stolen, the Paying Agent will provide a replacement Bond upon (i) the filing by the registered owner
with the Paying Agent of evidence satisfactory to the Paying Agent of the destruction, loss or theft of the Bond and the authenticity of
he registered owner’s ownership and (ii) the furnishing to the Paying Agent of indemnification in an amount satisfactory to hold the
District and the Paying Agent harmless. All expenses and charges associated with such indemnity and with the preparation,
execution and delivery of a replacement Bond must be borne by the registered owner. The provisions of the Order relating to the
replacement Bonds are exclusive and the extent lawful, preclude all other rights and remedies with respect to the replacement and
payment of mutilated, destroyed, lost or stolen Bonds.
Defeasance of Outstanding Bonds
The Order provides for the defeasance of the Bonds when payment of the principal of and premium, if any, on Bonds, plus
interest thereon to the due date thereof (whether such due date be by reason of maturity, or otherwise), is provided by
irrevocably depositing with the Paying Agent/Registrar or other authorized escrow agent, in trust (1) money sufficient to make
such payment or (2) Defeasance Securities, certified by an independent public accounting firm of national reputation to mature
as to principal and interest in such amounts and at such times to insure the availability, without reinvestment, of sufficient money
to make such payment, and all necessary and proper fees, compensation and expenses of the paying agent for the Bonds. The
Order provides that "Defeasance Securities" means (1) direct, noncallable obligations of the United States of America, including
obligations that are unconditionally guaranteed by the United States of America, (2) noncallable obligations of an agency or
instrumentality of the United States of America, including obligations that are unconditionally guaranteed or insured by the
agency or instrumentality and that on the date of their acquisition or purchase by the District are rated as to investment quality by
a nationally recognized investment rating firm not less than AAA or its equivalent, (3) noncallable obligations of a state or an
agency or a county, municipality, or other political subdivision of a state that have been refunded and that are rated as to
investment quality by a nationally recognized investment rating firm not less than AAA or its equivalent and (4) any other then
authorized securities or obligations under applicable Texas state law that may be used to defease obligations such as the
Bonds. There is no assurance that the current law will not be changed in a manner which would permit investments other than
those described above to be made with amounts deposited to defease the Bonds. Because the Order does not contractually
limit such investments, registered owners will be deemed to have consented to defeasance with such other investments,
notwithstanding the fact that such investments may not be of the same investment quality as those currently permitted under
State law. There is no assurance that any particular rating for U.S. Treasury securities used as Defeasance Securities or the
rating for any other Defeasance Security will be maintained at any particular rating category. The District has additionally
reserved the right, subject to satisfying the requirements of (1) and (2) above, to substitute other Defeasance Securities for the
Defeasance Securities originally deposited, to reinvest the uninvested moneys on deposit for such defeasance and to withdraw
for the benefit of the District moneys in excess of the amount required for such defeasance.
Upon such deposit as described above, such Bonds shall no longer be regarded to be outstanding or unpaid. After firm banking
and financial arrangements for the discharge and final payment of the Bonds have been made as described above, all rights of
the District to initiate proceedings to take any action amending the terms of the Bonds are extinguished.
5
Paying Agent/Registrar
Principal of and semiannual interest on the Bonds will be paid by BOKF, NA dba Bank of Texas, Austin, Texas, the initial Paying
Agent/Registrar (the "Paying Agent"). The Paying Agent must be a bank, trust company, financial institution or other entity duly
qualified and equally authorized to serve and perform the duties as paying agent and registrar for the Bonds.
Provision is made in the Order for the District to replace the Paying Agent by a resolution of the District giving notice to the
Paying Agent of the termination of the appointment, stating the effective date of the termination and appointing a successor
Paying Agent. If the Paying Agent is replaced by the District, the new Paying Agent shall be required to accept the previous
Paying Agent’s records and act in the same capacity as the previous Paying Agent. Any successor paying agent/registrar
selected by the District shall be subject to the same qualification requirements as the Paying Agent. The successor paying
agent/registrar, if any, shall be determined by the Board of Directors and written notice thereof, specifying the name and address
of such successor paying agent/registrar will be sent by the District or the successor paying agent/registrar to each Registered
Owner by first-class mail, postage prepaid.
Record Date
The record date for payment of the interest on Bonds on any regularly scheduled interest payment date is defined as the
fifteenth day of the month preceding such interest payment date.
Issuance of Additional Debt
The District may issue unlimited tax bonds necessary to construct waterworks and sewer system improvements and facilities for
which the District was created and to provide fire protection to the District, with the approval of the District’s voters. Following
the issuance of the Bonds, $4,217 unlimited tax bonds authorized by the District’s voters will remain unissued. The District does
not plan to issue this remaining portion of the authorized unlimited tax bonds. In addition, voters may authorize the issuance of
additional bonds or other contractual obligations secured by ad valorem taxes. Neither Texas law nor the Order imposes a
limitation on the amount of additional debt which may be issued by the District. Any additional debt issued by the District may
dilute the security of the Bonds. (See “INVESTMENT CONSIDERATIONS” herein.) The District may also issue bonds secured
by revenues of the water and sewer system or other revenues of the District (other than ad valorem tax revenues) without voter
approval. The District is considering the issuance of approximately $9,230,000 in water and sewer system revenue bonds within
the next three months to finance a portion of the costs of improvements to the District’s wastewater treatment facilities.
Tax Covenants
In the Order the District has covenanted with respect to, among other matters, the use of the proceeds of the Bonds and the
property financed therewith by persons other than state or local governmental units, the manner in which the proceeds of the
Bonds are to be invested, the periodic calculation and payment to the United States of arbitrage profits from the investment of
proceeds, and the reporting of certain information to the United States Treasury. The District may cease to comply with any
such covenant if it has received a written opinion of a nationally recognized bond counsel to the effect that failure to comply with
such covenant will not adversely affect the exemption from federal income taxation of interest on the Bonds under Section 103 of
the Code.
Amendments to the Order
The District may without the consent of or notice to any Bond owners amend the Order in any manner not detrimental to the
interest of the Bond owners, including the curing of an ambiguity, inconsistency, or formal defect or omission therein. In addition,
the District may, with the written consent of the owners of a majority in principal amount of the Bonds then outstanding, amend,
add to, or rescind any of the provisions of the Order, except that, without the consent of the owners of all of the Bonds
outstanding, no such amendment, addition, or rescission may (1) change the time or times of payment of the principal of and
interest on the Bonds, reduce the principal amount thereof or the rate of interest thereon, change the place or places at, or the
coin or currency in which, any Bond or the interest thereon is payable, or in any other way modify the terms of payment of the
principal of or interest on the Bonds, (2) give any preference to any Bond over any other Bond, or (3) reduce the aggregate
principal amount of Bonds required for consent to any such amendment, addition, or rescission. In addition, a state, consistent
with federal law, may in the exercise of its police powers make such modifications in the terms and conditions of contractual
covenants relating to the payment of indebtedness of its political subdivisions as are reasonable and necessary for attainment of
an important public purpose.
6
SOURCES AND USES OF FUNDS
The proceeds from the sale of the Bonds will be applied approximately as follows:
Sources of Funds
Par Amount of Bonds $5,765,000.00
Accrued Interest on the Bonds 3,296.11
Premium 58,652.20
Total Sources of Funds $5,826,948.31
Uses of Funds
Deposit to the Construction Fund $5,555,780.40
Costs of Issuance 214,177.50
Accrued Interest Deposit to Interest & Sinking Fund 3,296.11
Underwriter's Discount 53,694.30
Total Uses of Funds $5,826,948.31
RATING
Standard & Poor’s Rating Services, a Standard & Poor’s Financial Services LLC business (“S&P”) has assigned an underlying
rating “AA-” to the Bonds and to the District's outstanding tax-supporting debt. An explanation of the significance of a rating may
be obtained from S&P. The rating reflects only the view of such company, and the District makes no representation as to the
appropriateness of the rating. There is no assurance that such rating will continue for any given period of time or that it will not
be revised downward or withdrawn entirely by any such rating company, if, in the judgment of such company circumstances so
warrant. Any such downward revision or withdrawal of such rating may have an adverse effect on the market price of the Bonds.
BOOK-ENTRY-ONLY SYSTEM
This section describes how ownership of the Bonds is to be transferred and how the principal of, premium, if any, and interest on
the Bonds are to be paid to and credited by the Depository Trust Company while the Bonds are registered in its nominee’s
name. The information in this section concerning DTC and the Book-Entry-Only System has been provided by DTC for use in
disclosure documents such as this Official Statement. The District and the Purchaser believe the source of such information to
be reliable, but take no responsibility for the accuracy or completeness thereof.
The District and the Purchaser cannot and do not give any assurance the (1) DTC will distribute payments of debt service on the
Bonds, or redemption or other notices, to DTC Participant, (2) DTC Participants or others will distribute debt service payments
paid to DTC or its nominee (as the registered owner of the Bonds), or redemption or other notices, to the Beneficial Owners
(hereinafter defined), or that they will do so on a timely basis, or (3) DTC will serve and act in the manner described in this
Official Statement. The current rules applicable to DTC are on file with the Securities and Exchange Commission, and the
current procedures of DTC to be followed in dealing with DTC Participants are on file with DTC.
DTC will act as securities depository for the Bonds. The Bonds will be issued as fully registered securities registered in the
name of Cede & Co. (DTC’s partnership nominee) or such other name as may be requested by an authorized representative of
DTC. One fully registered certificate will be issued for each maturity of the Bonds, in the aggregate principal amount of each
maturity, and will be deposited with DTC.
DTC, the world’s largest depository, is a limited-purpose trust company organized under the New York Banking Law, a “banking
organization“ within the meaning of the New York Banking Law, a member of the Federal Reserve System, a “clearing
corporation“, within the meaning of the New York Uniform Commercial Code, and a “clearing agency” registered pursuant to the
provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.5 million
issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments (from over 100
countries) that DTC‘s participants (“Direct Participants”) deposit with DTC. DTC also facilitates the post-trade settlement among
Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry
transfers and pledges between Direct Participants’ accounts. This eliminates the need for physical movement of certificated
securities. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing
corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation
(“DTCC”). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing
Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to
the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust
companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either
directly or indirectly (“Indirect Participants”). DTC is rated “AA+“ by Standard & Poor’s. The DTC Rules applicable to its
Participants are on file with the SEC. More information about DTC can be found at www.dtcc.com and www.dtc.org.
7
Purchases of Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the
Bonds on DTC’s records. The ownership interest of each actual purchaser of Bonds (“Beneficial Owner”) is in turn to be
recorded on the Direct and Indirect Participants’ records. Beneficial Owners will not receive written confirmation from DTC of
their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction,
as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner
entered into the transaction. Transfers of ownership interests in the Bonds are to be accomplished by entries made on the
books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive Bonds
representing their ownership interests in Bonds, except in the event that use of the book-entry system for the Bonds is
discontinued.
To facilitate subsequent transfers, all Bonds deposited by Direct Participants with DTC are registered in the name of DTC’s
partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The
deposit of Bonds with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any
change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Bonds; DTC’s records reflect only
the identity of the Direct Participants to whose accounts such Bonds are credited, which may or may not be the Beneficial
Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their
customers.
Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants,
and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject
to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of Bonds may wish to take
certain steps to augment the transmission to them of notices of significant events with respect to the Bonds, such as
redemptions, tenders, defaults, and proposed amendments to the Bond documents. For example, Beneficial Owners of Bonds
may wish to ascertain that the nominee holding the Bonds for their benefit has agreed to obtain and transmit notices to Beneficial
Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that
copies of the notices be provided directly to them.
Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to Bonds unless authorized by a
Direct Participant in accordance with DTC’s Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the Issuer
as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.’s consenting or voting rights to those Direct
Participants to whose accounts Bonds are credited on the Record Date (identified in a listing attached to the Omnibus Proxy).
Principal and interest payments on the Bonds will be made to Cede & Co., or such other nominee as may be requested by an
authorized representative of DTC. DTC’s practice is to credit Direct Participants’ accounts upon DTC’s receipt of funds and
corresponding detail information from the Issuer or the Paying Agent/Registrar, on the payable date in accordance with their
respective holdings shown on DTC’s records. Payments by Participants to Beneficial Owners will be governed by standing
instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or
registered in “street name,” and will be the responsibility of such Participant and not of DTC nor its nominee, the Paying
Agent/Registrar, or the Issuer, subject to any statutory or regulatory requirements as may be in effect from time to time.
Payment of principal and interest to Cede & Co. (or such other nominee as may be requested by an authorized representative of
DTC) is the responsibility of the Issuer or the Paying Agent/Registrar, disbursement of such payments to Direct Participants will
be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of the Direct
and Indirect Participants.
DTC may discontinue providing its services as securities depository with respect to the Bonds at any time by giving reasonable
notice to the Issuer or the Paying Agent/Registrar. Under such circumstances, in the event that a successor securities
depository is not obtained, physical Bonds are required to be printed and delivered to DTC Participants or the Beneficial Owners,
as the case may be.
The Issuer may decide to discontinue use of the system of book-entry-only transfers through DTC (or a successor securities
depository). In that event, physical Bonds will be printed and delivered. (See "THE BONDS – Termination of Book-Entry-Only
System" herein.)
The information in this section concerning DTC and DTC’s book-entry system has been obtained from sources that the Issuer
and Underwriter believe to be reliable, but the Issuer and the Underwriter take no responsibility for the accuracy thereof.
Use of Certain Terms in Other Sections of this Official Statement
In reading this Official Statement it should be understood that while the Bonds are in the Book-Entry-Only System, references in
other sections of this Official Statement to registered owners should be read to include the person for which the Direct or Indirect
Participant acquires an interest in the Bonds, but (i) all rights of ownership must be exercised through DTC and the Book-Entry-
Only System, and (ii) except as described above, notices that are to be given to registered owners under the Order will be given
only to DTC.
8
INVESTMENT CONSIDERATIONS
General
The Bonds are obligations of the District and are not obligations of the Town of Trophy Club, the Town of Westlake, the State of
Texas, Denton County, Tarrant County, or any other political subdivision except the District. The Bonds are payable from a
continuing, direct, annual ad valorem tax, without legal limitations as to rate or amount, on all taxable property within the District.
(See "THE BONDS - Security for Payment “ herein.) The investment quality of the Bonds depends both on the ability of the
District to collect from the property owners all taxes levied against their property or, in the event of foreclosure, the value of the
taxable property with respect to taxes levied by the District and by other taxing authorities.
Approval of the Bonds
The Attorney General of Texas must approve the legality of the Bonds prior to their delivery. The Attorney General of Texas
does not pass upon or guarantee the quality of the Bonds as an investment, nor does he pass upon the adequacy or accuracy of
the information contained in this Official Statement.
Factors Affecting Taxable Values and Tax Payments
Economic Factors and Interest Rates: A substantial percentage of the taxable value of the District results from the current
market value of single-family residences and developed lots. The market value of such homes and lots is related to general
economic conditions affecting the demand for and taxable value of residences. Demand for lots and residential dwellings can be
significantly affected by factors such as interest rates, credit availability, construction costs, energy availability and the prosperity
and demographic characteristics of the urban center toward which the marketing of lots is directed. Decreased levels of
construction activity, which has been experienced in the District for the last several years, tend to restrict the growth of property
values in the District or could adversely impact existing values. Interest rates and the availability of mortgage and development
funding have a direct impact on the construction activity, particularly short-term interest rates at which developers and
homebuilders are able to obtain financing for development and construction costs. Interest rate levels may affect the ability of a
landowner with undeveloped property to undertake and complete development activities within the District. Because of the
numerous and changing factors affecting the availability of funds, the District is unable to assess the future availability of such
funds for continued development and construction within the District. In addition, the success of development within the District
and growth of District’s taxable property values are, to a great extent, a function of the Dallas/Fort Worth metropolitan and
regional economics.
Impact on District Tax Rates: Assuming no further development, the value of the land and improvements currently within the
District will be the major determinant of the ability or willingness of District property owners to pay their taxes. The 2014 certified
net taxable assessed valuation (ARB Approved) of the District (see “APPENDIX A - ASSESSED VALUATION - TABLE 1”
herein) is $1,113,383,211. After issuance of the Bonds the maximum annual debt service requirement will be $1,032,070 (2023)
and the average annual debt service requirement will be $727,742 (2015 through 2034, inclusive). Assuming no increase or
decrease from the 2014 net taxable assessed valuation and no use of funds on hand, a tax rate of $0.09363 per $100 assessed
valuation at a 99% collection rate would be necessary to pay the maximum annual debt service requirement of $1,032,070 and a
tax rate of $0.06602 per $100 assessed valuation at a 99% collection rate would be necessary to pay the average annual debt
service requirement of $727,742. (See “APPENDIX A – TABLES 4 and 5” herein.
Tax Collections and Foreclosure Remedies
The District's ability to make debt service payments may be adversely affected by its inability to collect ad valorem taxes. Under
Texas law, the levy of ad valorem taxes by the District constitutes a lien in favor of the District on a parity with the liens of all other
state and local taxing authorities on the property against which taxes are levied, and such lien may be enforced by foreclosure.
The District's ability to collect ad valorem taxes through such foreclosure may be impaired by (a) cumbersome, time-consuming
and expensive collection procedures, (b) a bankruptcy court's stay of tax collection procedure against a taxpayer, or (c) market
conditions limiting the proceeds from a foreclosure sale of taxable property. While the District has a lien on taxable property
within the District for taxes levied against such property, such lien can be foreclosed only in a judicial proceeding. Because
ownership of the land within the District is highly fragmented among a number of taxpayers, attorney's fees, and other costs of
collecting any such taxpayer's delinquencies could substantially reduce the net proceeds to the District from a tax foreclosure
sale. Finally, any bankruptcy court with jurisdiction over the bankruptcy proceedings initiated by or against a taxpayer within the
District pursuant to the Federal Bankruptcy Code could stay any attempt by the District to collect delinquent ad valorem taxes
against such taxpayer.
Consolidation
A district (such as the District) has the legal authority to consolidate with other municipal utility districts and, in connection
therewith, to provide for the consolidation of its assets, such as its water and wastewater systems with the assets of the
district(s) with which it is consolidating, as well as its liabilities (which would include the Bonds and other outstanding obligations
of the District). The District is the resulting entity from a consolidation in May 2009 of Prior MUD 1 and Prior MUD 2 (see “THE
DISTRICT”). No representation is made whether the District will consolidate again in the future with any other district.
9
Abolition
Under Texas law, if a municipal utility district is located wholly in two or more municipalities, the district may be abolished by
agreement among the district and all of the municipalities in which the district is located. The abolition agreement must provide
for the distribution among the municipalities of the property and other assets of the district and for the pro rata assumption by the
municipalities of all the debts, liabilities, and obligations of the abolished district. When the pro rata share of any district bonds or
other obligations payable in whole or in part from property taxes has been assumed by the municipality, the governing body of
the municipality is required to levy and collect taxes on all taxable property in the municipality to pay the principal of and interest
on its share as the principal and interest become due and payable.
If the abolished municipal utility district has outstanding bonds or other obligations payable in whole or in part from the net
revenue from the operation of the district utility system or property, the affected municipalities are required take over and operate
the system or property through a board of trustees. The municipalities are required to apply the net revenue from the operation
of the system or property to the payment of outstanding revenue bonds or other obligations as if the district had not been
abolished. The system or property is required to be operated in that manner until all the revenue bonds or obligations are retired
in full by payment or by the refunding of the bonds or other obligations into municipal obligations. When all the revenue bonds
and other obligations are retired in full, the property and other assets of the district are distributed among the municipalities as
described above. On the distribution, the board of trustees is dissolved.
The District is located wholly within the municipalities of the Town of Westlake and the Town of Trophy Club. The Town of
Westlake has recently proposed that it, the Town of Trophy Club and the District enter into an agreement to abolish the District
with the District's assets and liabilities assumed by the two municipalities. The Board of Directors of the District has rejected that
proposal and stated that the District currently intends to continue to operate as a municipal utility district. As described above,
the District would have to separately agree to any abolition of the District. No representation is made concerning the ability of
the Town of Trophy Club and the Town of Westlake to make debt service payments on the Bonds should abolition occur at some
point in the future.
Alteration of Boundaries
In certain circumstances, under Texas law the District may alter its boundaries to: 1) upon satisfying certain conditions, annex
additional territory; and 2) exclude land subject to taxation within the District that is not served by District facilities if the District
simultaneously annexes land of equal acreage and value that may be practicably served by District facilities. No representation
is made concerning the likelihood that the District would effect any change in its boundaries.
Registered Owners’ Remedies
If the District defaults in the payment of principal, interest or redemption price on the Bonds when due, or if it fails to make
payments into any fund or funds created in the Order, or defaults in the observation or performance of any other covenants,
conditions or obligations set forth in the Order, the registered owners may seek a writ of mandamus to compel District officials to
carry out their legally imposed duties with respect to the Bonds if there is no other available remedy at law to compel
performance of the covenants contained in the Bonds or in the Order and the District’s obligations are not uncertain or disputed.
The remedy of mandamus is controlled by equitable principles and rests with the discretion of the court. The issuance of a writ
of mandamus is controlled by equitable principles and rests with the discretion of the court, but may not be arbitrarily refused.
There is no acceleration of maturity of the Bonds in the event of default and, consequently, the remedy of mandamus may have
to be relied upon from year to year. The Order does not provide for the appointment of a trustee to represent the interest of the
bondholders upon any failure of the District to perform in accordance with the terms of the Order, or upon any other condition
and accordingly all legal actions to enforce such remedies would have to be undertaken at the initiative of, and be financed by,
the registered owners. The Texas Supreme Court has ruled in Tooke v. City of Mexia, 197 S.W.3d 325 (Tex. 2006) that a
waiver of sovereign immunity in a contractual dispute must be provided for by statute in “clear and unambiguous” language.
Therefore, bondholders may not be able to bring such a suit against the District for breach of the Bonds or Order covenants.
Even if a judgment against the District could be obtained, it could not be enforced by direct levy and execution against the
District’s property. Further, the registered owners cannot themselves foreclose on property within the District or sell property
within the District to enforce the tax lien on taxable property to pay the principal of and interest on the Bonds.
Bankruptcy Limitation to Registered Owners' Rights
The enforceability of the rights and remedies of Bondholders may be limited by laws relating to bankruptcy, reorganization or
other similar laws of general application affecting the rights of creditors of political subdivisions such as the District. Texas law
requires a municipal utility district such as the District to obtain the approval of the TCEQ as a condition to seeking relief under
the Federal Bankruptcy Code.
If a petitioning district were allowed to proceed voluntarily under Chapter 9 of the Federal Bankruptcy Code, it could file a plan for
an adjustment of its debts. If such a plan were confirmed by the bankruptcy court, it could, among other things, affect Registered
Owners by reducing or eliminating the amount of indebtedness, deferring or rearranging the debt service schedule, reducing or
eliminating the interest rate, modifying or abrogating collateral or security arrangements, substituting (in whole or in part) other
securities, and otherwise compromising and modifying the rights and remedies of the Registered Owner's claim against a district.
Although Chapter 9 provides for the recognition of a security interest represented by a specifically pledged source of revenues,
10
the pledge of ad valorem taxes in support of a general obligation of a bankrupt entity is not specifically recognized as a security
interest under Chapter 9 and such provision is subject to judicial construction. Chapter 9 also includes an automatic stay
provision that would prohibit, without Bankruptcy Court approval, the prosecution of any other legal action by creditors or
Bondholders of an entity which has sought protection under Chapter 9. Therefore, should the District avail itself of Chapter 9
protection from creditors, the ability to enforce would be subject to the approval of the Bankruptcy Court (which could require that
the action be heard in Bankruptcy Court instead of other federal or state court); and the Bankruptcy Code provides for broad
discretionary powers of a Bankruptcy Court in administering any proceeding brought before it. The opinion of Bond Counsel will
note that all opinions relative to the enforceability of the Bonds are qualified with respect to the customary rights of debtors
relative to their creditors.
A district may not be forced into bankruptcy involuntarily.
The Effect of the Financial Institutions Act of 1989 on Tax Collections of the District
The "Financial Institutions Reform, Recovery and Enforcement Act of 1989" ("FIRREA"), enacted on August 9, 1989, contains
certain provisions which affect the time for protesting property valuations, the fixing of tax liens, and the collection of penalties
and interest on delinquent taxes on real property owned by the Federal Deposit Insurance Corporation ("FDIC") when the FDIC
is acting as the conservator or receiver of an insolvent financial institution.
Under FIRREA real property held by the FDIC is still subject to ad valorem taxation, but such act states (i) that no real property
of the FDIC shall be subject to foreclosure or sale without the consent of the FDIC and no involuntary liens shall attach to such
property, (ii) the FDIC shall not be liable for any penalties or fines, including those arising from the failure to pay any real or
personal property tax when due and (iii) notwithstanding failure of a person to challenge an appraisal in accordance with state
law, such value shall be determined as of the period for which such tax is imposed.
There has been no definitive judicial determination of the validity of the provisions of FIRREA or how they are to be construed
and reconciled with respect to conflicting state laws. However, certain federal court decisions have held that the FDIC is not
liable for statutory penalties and interest authorized by State property tax law, and that although a lien for taxes may exist against
real property, such lien may not be foreclosed without the consent of the FDIC, and no liens for penalties, fines, interest,
attorneys fees, costs of abstract and research fees exist against the real property for the failure of the FDIC or a prior property
owner to pay ad valorem taxes when due. It is also not known whether the FDIC will attempt to claim the FIRREA exemptions
as to the time for contesting valuations and tax assessments made prior to and after the enactment of FIRREA. Accordingly, to
the extent that the FIRREA provisions are valid and applicable to any property in the District, and to the extent that the FDIC
attempts to enforce the same, these provisions may affect the timeliness of collection of taxes on property, if any, owned by the
FDIC in the District, and may prevent the collection of penalties and interest on such taxes.
Continuing Compliance with Certain Covenants
The Order contains covenants by the District intended to preserve the exclusion of interest on the Bonds from the gross income
of the owners thereof for federal income tax purposes. (See "THE BONDS - Tax Covenants “ herein.) Failure by the District to
comply with such covenants on a continuous basis prior to maturity of the Bonds could result in interest on the Bonds becoming
taxable retroactively to the date of original issuance. (See "TAX MATTERS “ herein.)
Future Debt
The District does not plan to issue the remaining $4,217 authorized but unissued unlimited tax bonds, following the issuance of
Bonds. The District has reserved in the Order the right to issue such additional bonds as may hereafter be approved by both the
Board of Directors and voters of the District. The District is considering the issuance of approximately $9,230,000 in water and
sewer revenue bonds within the next three months.
Future and Proposed Legislation
Tax legislation, administrative actions taken by tax authorities, or court decisions, whether at the federal or state level, may
adversely affect the tax-exempt status of interest on the Bonds under federal or state law and could affect the market price or
marketability of the Bonds. Any such proposal could limit the value of certain deductions and exclusions, including the exclusion
for tax-exempt interest. The likelihood of any such proposal being enacted cannot be predicted. Prospective purchasers of the
Bonds should consult their own tax advisors regarding the foregoing matters.
THE DISTRICT
Creation of the District
The District was created by the consolidation of two prior municipal utility districts, being Trophy Club Municipal Utility District No.
1 (“Prior MUD 1”) and Trophy Club Municipal Utility District No. 2 (“Prior MUD 2” and collectively with Prior MUD 1, the “Prior
MUDs”). Prior MUD 1 was created as Denton County Municipal Utility District No. 1 by order of the Texas Water Rights
Commission (the “Commission”) on March 4, 1975 for the purpose of providing water and sewer facilities and other authorized
services to the area within the territory of Prior MUD 1. The name of Prior MUD 1 was changed to Trophy Club Municipal Utility
11
District No. 1 on April 1, 1983. Prior MUD 2 was created as a result of the consolidation of Denton County Municipal Utility
District No. 2 and Denton County Municipal Utility District No. 3, which were created by the Texas Commission on Environmental
Quality (“TCEQ”) for the purpose of providing water, sewer and drainage facilities and other authorized services to the area. The
creation of Prior MUD 2 was confirmed by its electorate at an election held on August 9, 1980.
On January 26, 2009, the Boards of the Prior MUDs entered into an agreement to consolidate the Prior MUDs into a single
Municipal Utility District covering the territory of the Prior MUDs, subject to the approval of the consolidation by the voters at an
election held for that purpose. On May 9, 2009, the voters approved the consolidation and the District became the Trophy Club
Municipal Utility District No. 1. Pursuant to the consolidation agreement, the District assumed the outstanding bonds, notes and
other obligations of the Prior MUDs and the authorized but unissued bonds, taxes and other obligations of the Prior MUDs and
became authorized to levy a uniform tax on all taxable property within the District. The functions performed by the District
include supplying water for municipal purposes; collecting, transporting, processing and disposing of wastes; establishing,
operating and maintaining a fire department; and performing other functions permitted by municipal utility districts under the
Texas Water Code.
Governance
The District is governed by a board of directors which has control over and management supervision of all affairs of the District.
There are five elected directors that serve four-year staggered terms. Directors receive no remuneration, except a Director's per
diem allowance of $100 per day on which necessary service is performed for the District. The District and all similar districts are
subject to the continuing supervision and filing requirements of the TCEQ, including the preparation and filing of an annual
independent audit report. All District facility plans are submitted to the TCEQ for review and approval.
Employees
The District has nineteen (19) full-time employees for water and wastewater services. The District is required to pay 50% of the
costs incurred by the Town (hereinafter defined) for salary, benefits and other compensation of employees who provide
firefighting and emergency medical services to both the District and the Town. The District’s liabilities under the Agreement for
Fire Personnel, including pension benefits, do not have a substantial impact on the District’s finances.
General
The District is comprised of 2,283.5 acres [approximately 449.9 acres in Town of Westlake (Solana)]. Of the developed acres
within the District, there are approximately 2,800 existing households, 136 apartment units and 42 townhouses.
Location
The District is located in southern Denton County and northern Tarrant County partially within the Town of Trophy Club (the
“Town”) and partially within the Town of Westlake. The District is directly adjacent to and accessible from State Highway 114,
north of and approximately mid-way between Dallas and Fort Worth. The District is approximately 27 miles from downtown
Dallas, 25 miles from downtown Fort Worth, 17 miles from Denton, 8 miles from Grapevine and 14 miles from the Dallas-Fort
Worth International Airport.
Major highways connecting these population centers, which will also serve the District, include State Highways 114, 170 and 377
and Interstate Highways 35E and 35W. State Highway 170 connects Trophy Club directly to Alliance Airport which is located
seven miles southwest of the District. (See "Vicinity Map" herein.)
Population
According to District officials, the current population of the District is estimated to be approximately 7,843 (2,801 occupied homes
times 2.8 persons per household) and the current population of the entire Town of Trophy Club, the District and the Trophy Club
PID No. 1 (the “Trophy Club Development”) is estimated at 11,127 (3,974 occupied homes times 2.8 persons per household).
Topography and Drainage
The land within the District has a gradual slope from the southeast to the northwest toward Marshall Creek, and from the west to
the east toward Marshall Creek. Runoff water enters Grapevine Reservoir just north of the District through Marshall Creek or
several other small tributaries. The maximum elevation in the area being developed is approximately 690 feet mean sea level
and the minimum elevation in the area being developed is approximately 576 feet mean sea level. The soil is sandy loam and
clay loam, and existing vegetation consists of native grasses and small oak trees. Areas which are subject to flooding by a 100-
year frequency flood are located in the flood plan of Marshall Creek and have been delineated by the Water Resources Branch
of the U.S. Geological Survey. Additional flood studies were made by the engineers to determine what areas may be subject to
flooding. It was determined that the area subject to flooding within the District is approximately 58.5 acres based on 100-year
flood frequency; however, 57.6 acres of this area is within the golf course area and is not intended to be developed for
residential land use.
12
Shopping and Commercial Facilities
A shopping center within the District has a major grocery store chain, a bank, a major chain drug store, several service
businesses, fast food outlets, and a beauty shop and a dry cleaners. Additionally there are several more businesses and
professional offices located in the District, at the primary entrance to the Town of Trophy Club. There are additional shopping
facilities in Roanoke, about two (2) miles west of the District and numerous shopping facilities in Southlake about five (5) miles
east of the District and in Grapevine about eleven (11) miles east of the District. Full metropolitan shopping facilities are
available in Dallas and Fort Worth, Texas which have their central business districts approximately 27 miles and 25 miles,
respectively from the District.
Fire Protection
The District operates its Fire Department (the “Department”) with an engine, a Quint, a brush truck and two support vehicles.
Currently the Department is staffed with fourteen (15) full-time firefighter / paramedics and one full-time Fire Chief. Operations
under the Department include fire suppression, fire prevention, emergency management, investigation/enforcement and
emergency medical response. The new $3.1 million fire station was completed and equipped in August 2011 with proceeds from
the sale of the District’s Series 2010 Bonds, replacing the previously existing facility. This Department serves the Town of
Trophy Club and area in the District that is not in the Town limits, and is currently financed by a combination of a $0.07727
maintenance tax assessment in the District, as well as a $0.07727 Public Improvement District (“PID”) assessment in Trophy
Club PID No. 1. The 2014-2015 annual operating budget is $1,383,940 with October 1, 2014 reserves of $528,633 (subject to
change).
Police Protection
Twenty-four hour security is provided by the Town of Trophy Club Police Department.
Schools
The Town is served by the Northwest Independent School District (the “School District” or “Northwest ISD”). Northwest ISD
covers approximately 234.71 square miles in Denton, Wise and Tarrant Counties. In addition to serving the Town, the School
District also serves the communities of Aurora, Fairview, Haslet, Justin, Newark, Northlake, Rhome, Roanoke and portions of
Flower Mound, Fort Worth, Keller, Southlake and Westlake. Northwest ISD is comprised of 17 elementary schools for grades
pre-kindergarten through fifth, 5 middle schools for grades sixth through eighth, 2 comprehensive high schools and one
accelerated high school for grades ninth through twelfth, and 2 alternative education campuses for grades seventh through
twelfth. One of the high schools, Byron Nelson High School, is located in the Town of Trophy Club. All campuses offer enriched
curricula with special programs for gifted/talented students as well as students achieving below grade level, and all are equipped
with computers and full cafeteria service. The School District serves a 2014-2015 estimated enrollment of 19,831 students (as
of October 27, 2014).
Recreational Opportunities
Recreational opportunities in Trophy Club are afforded by Lake Grapevine and its surrounding parks, which lie two miles north
and east of the District. The Town has several community parks, including facilities for soccer, baseball, softball, basketball,
tennis, a competitive swimming pool and playground amenities. The Town also operates an 877 acre Corps of Engineers park,
which features 100 acres of motorized trails, as well as many passive recreational opportunities such as fishing, hiking and
picnicking.
Status of Development of the District
The area in the District is locally known as “Trophy Club.” It is a residential and mixed-use development consisting of
approximately 2,283.5 acres. The District is a mature district with approximately 146 acres undeveloped, of which approximately
96 acres are zoned residential and approximately 50 acres are available for commercial development. The majority of the acres
zoned residential are located in the Canterbury Hills addition. Home construction has begun in the Canterbury Hills addition.
There is substantial land left for commercial development in the Solana complex, which is located within the Town of Westlake.
Lot and custom home sales officially began in the District in mid-year 1975. Homes are currently being offered at prices ranging
from $200,000 to $1,000,000 and lots range in price from $35,000 to $200,000. The status of single-family home development
as of September 30, 2014 is shown below:
13
Status of Single-Family Home Development(b)
Houses Additional Total Multi-Family
Under Houses Total Developed Houses Units
Construction Occupied Houses Lots and Lots Completed (a)
24 2,801 2,825 156 2,981 178
(a) In addition to the single-family development, there are approximately 136 apartments and 42 completed townhouses, which
are occupied. (b) Figures exclude development within the Public Improvement District, which is totally located within the Town of Trophy Club
and is not in the District.
Status of Business / Commercial Development
Solana business complex (“Solana”), a 900 acre tract located in the District and the Town of Westlake, has approximately 230
acres available for additional development. The existing 14 building campus style office development was originally owned by
Los Angeles based Maguire Thomas Partners and IBM Corporation. In September 2014, the Maguire Thomas Partners
properties in Solana were sold to BRE Solana LLC (Tarrant Appraisal District lists this taxpayer as 5 Village Circle Holding, LP.
Two other developers have bought undeveloped property in Solana and plan commercial and residential projects, which were
approved by the Town of Westlake in 2013.
The District has additional commercial property available for development in the Town of Trophy Club, which is approximately 52
acres of land along Highway 114. Current development includes a medical complex, hotels, restaurants and a short-stay
hospital facility. Additionally, the District currently has a small strip center along Highway 114 containing several food
establishments and professional offices.
Solana remains current in the payment of their property taxes, including the amount due for Tax Year 2013. The District cannot
predict the impact that any future events may have on the District’s financial condition.
Public Improvement District Description
Trophy Club PID No. 1 (the “PID”) consists of approximately 609.683 acres of land generally to the north of Oakmont Drive, Oak
Hill Drive and the Quorum Condominiums, east of the Lakes Subdivision and Parkview Drive, south of the Corps of Engineer’s
property, and west of the Town’s eastern limit. The PID is located entirely within the Town limits but outside the District. A
master-planned residential community (the “Property”) is under construction in the PID and at build-out will be comprised of
approximately 1,407 residential units located within the Property, which Property is zoned to permit such use pursuant to the PID
Zoning. As of September 30, 2014, 1,173 homes have been completed and are occupied and an additional 63 homes have
been permitted and are currently under construction. The PID is projected to build out as early as 2017. The District provides
emergency and fire protection services to the PID, and the PID pays the District an assessment for such services at the current
fire tax rate of $0.07727. The District also provides water and sewer service for the PID. The total billed for PID water and
sewer for fiscal year 2013-2014 was $1,408,037.
THE DISTRICT’S SYSTEM
The following information describes generally the water and wastewater systems for the District.
Description of the Water System
Sources of Water Supply: The present water supply is provided from two sources: (i) four ground wells which provide
approximately 1,000,000 gallons per day, and (ii) a 21-inch water line which is capable of delivering 10,000,000 gallons per day
of treated water from the City of Fort Worth facilities. Currently the District has a contract with the City of Fort Worth, which
expires September 30, 2031, for unlimited water services. Current maximum usage is approximately 5,500,000 gallons per day
(of which 4,500,000 is Fort Worth water). These sources, when combined, provide water which complies with the quality
requirements of the TCEQ and needs only chlorination at the District’s water plant facility.
Water Plant Facility: The present facility provides 900,000 gallons elevated and 6,000,000 gallons ground storage with
pumping/chlorination capacity of 10,000,000 gallons per day.
Description of the Wastewater System
Wastewater Treatment Plant Facility: The wastewater treatment plant system has a permitted treatment/discharge capacity of
1,750,000 gallons per day from the TCEQ under TPDES Permit No. 11593-001. Although the permit authorizes the discharge of
wastewater to the adjacent tributary leading to Lake Grapevine, the plant effluent is currently pumped to various holding ponds
within the community of Trophy Club and is re-used for irrigating the golf course. The District’s application to the Texas
Commission on Environmental Quality (“TCEQ”) to issue up to $5,765,000 in Unlimited Tax Bonds and up to $9,230,000 in water
and sewer system revenue bonds for expansion of the wastewater treatment plant facility has been approved. Construction is
expected to begin as soon as possible.
14
INVESTMENT AUTHORITY AND INVESTMENT PRACTICES OF THE DISTRICT
Available District funds are invested as authorized by Texas law and in accordance with investment policies approved by the
Board of Directors. Both State law and the District’s investment policies are subject to change. Under Texas law, the District is
authorized to invest in (1) obligations of the United States or its agencies and instrumentalities, including letters of credit; (2)
direct obligations of the State of Texas or its agencies and instrumentalities; (3) collateralized mortgage obligations directly
issued by a federal agency or instrumentality of the United States, the underlying security for which is guaranteed by an agency
or instrumentality of the United States; (4) other obligations, the principal and interest of which is guaranteed or insured by or
backed by the full faith and credit of, the State of Texas or the United States or their respective agencies and instrumentalities,
including obligations that are fully guaranteed or insured by the Federal Deposit Insurance Corporation or by the explicit full faith
and credit of the United States; (5) obligations of states, agencies, counties, cities, and other political subdivisions of any state
rated as to investment quality by a nationally recognized investment rating firm not less than “A” or its equivalent; (6) bonds
issued, assumed or guaranteed by the State of Israel; (7) certificates of deposit and share certificates meeting the requirements
of the Texas Public Funds Investment Act (Chapter 2256, Texas Government Code, as amended) (i) that are issued by or
through an institution that has its main office or a branch office in Texas and are guaranteed or insured by the Federal Deposit
Insurance Corporation or the National Credit Union Share Insurance Fund, or are secured as to principal by obligations
described in clauses (1) through (6) or in any other manner and amount provided by law for District deposits; or (ii) where (a) the
funds are invested by the District through (I) a broker that has its main office or a branch office in the State of Texas and is
selected from a list adopted by the District as required by law or (II) a depository institution that has its main office or a branch
office in the State of Texas that is selected by the District; (b) the broker or the depository institution selected by the District
arranges for the deposit of the funds in certificates of deposit in one or more federally insured depository institutions, wherever
located, for the account of the District; (c) the full amount of the principal and accrued interest of each of the certificates of
deposit is insured by the United States or an instrumentality of the United States, and (d) the District appoints the depository
institution selected under (a) above, a custodian as described by Section 2257.041(d) of the Texas Government Code, or a
clearing broker-dealer registered with the Securities and Exchange Commission and operating pursuant to Securities and
Exchange Commission Rule 15c3-3 (17 C.F.R. Section 240.15c3-3) as custodian for the District with respect to the certificates
of deposit; (8) fully collateralized repurchase agreements that have a defined termination date, are fully secured by a
combination of cash and obligations described in clause (1) which are pledged to the District, held in the District’s name, and
deposited at the time the investment is made with the District or with a third party selected and approved by the District and are
placed through a primary government securities dealer, as defined by the Federal Reserve, or a financial institution doing
business in the State; (9) securities lending programs if (i) the securities loaned under the program are 100% collateralized, a
loan made under the program allows for termination at any time and a loan made under the program is either secured by (a)
obligations that are described in clauses (1) through (6) above, (b) irrevocable letters of credit issued by a state or national bank
that is continuously rated by a nationally recognized investment rating firm at not less than “A” or its equivalent or (c) cash
invested in obligations described in clauses (1) through (6) above, clauses (11) through (13) below, or an authorized investment
pool; (ii) securities held as collateral under a loan are pledged to the District, held in the District’s name and deposited at the time
the investment is made with the District or a third party designated by the District; (iii) a loan made under the program is placed
through either a primary government securities dealer or a financial institution doing business in the State of Texas; and (iv) the
agreement to lend securities has a term of one year or less; (10) certain bankers’ acceptances with the remaining term of 270
days or less, if the short-term obligations of the accepting bank or its parent are rated at least “A-1” or “P-1” or the equivalent by
at least one nationally recognized credit rating agency; (11) commercial paper with a stated maturity of 270 days or less that is
rated at least “A-1” or “P-1” or the equivalent by either (a) two nationally recognized credit rating agencies or (b) one nationally
recognized credit rating agency if the paper is fully secured by an irrevocable letter of credit issued by a U.S. or state bank; (12)
no-load money market mutual funds registered with and regulated by the United States Securities and Exchange Commission
that have a dollar weighted average stated maturity of 90 days or less and include in their investment objectives the
maintenance of a stable net asset value of $1 for each share; and, (13) no-load mutual funds registered with the United States
Securities and Exchange Commission that have an average weighted maturity of less than two years, invest exclusively in
obligations described in this paragraph, and are continuously rated as to investment quality by at least one nationally recognized
investment rating firm of not less than “AAA” or its equivalent. In addition, bond proceeds may be invested in guaranteed
investment contracts that have a defined termination date and are secured by obligations, including letters of credit, of the United
States or its agencies and instrumentalities in an amount at least equal to the amount of bond proceeds invested under such
contract, other than the prohibited obligations described in the next succeeding paragraph.
The District may invest in such obligations directly or through government investment pools that invest solely in such obligations
provided that the pools are rated no lower than “AAA” or “AAAm” or an equivalent by at least one nationally recognized rating
service. The District may also contract with an investment management firm registered under the Investment Advisers Act of
1940 (15 U.S.C. Section 80b-1 et seq.) or with the State Securities Board to provide for the investment and management of its
public funds or other funds under its control for a term up to two years, but the District retains ultimate responsibility as fiduciary
of its assets. In order to renew or extend such a contract, the District must do so by order, ordinance, or resolution. The District
is specifically prohibited from investing in: (1) obligations whose payment represents the coupon payments on the outstanding
principal balance of the underlying mortgage-backed security collateral and pays no principal; (2) obligations whose payment
represents the principal stream of cash flow from the underlying mortgage-backed security and bears no interest; (3)
collateralized mortgage obligations that have a stated final maturity of greater than 10 years; and (4) collateralized mortgage
obligations the interest rate of which is determined by an index that adjusts opposite to the changes in a market index.
15
Under Texas law, the District is required to invest its funds under written investment policies that primarily emphasize safety of
principal and liquidity; that address investment diversification, yield, maturity, and the quality and capability of investment
management; and that include a list of authorized investments for District funds, the maximum allowable stated maturity of any
individual investment and the maximum average dollar-weighted maturity allowed for pooled fund groups, methods to monitor
the market price of investments acquired with public funds, a requirement for settlement of all transactions, except investment
pool funds and mutual funds, on a delivery versus payment basis, and procedures to monitor rating changes in investments
acquired with public funds and the liquidation of such investments consistent with the Public Funds Investment Act. All District
funds must be invested consistent with a formally adopted “Investment Strategy Statement” that specifically addresses each
fund’s investment. Each Investment Strategy Statement will describe its objectives concerning: (1) suitability of investment type,
(2) preservation and safety of principal, (3) liquidity, (4) marketability of each investment, (5) diversification of the portfolio, and
(6) yield.
Under Texas law, the District’s investments must be made “with judgment and care, under prevailing circumstances, that a
person of prudence, discretion, and intelligence would exercise in the management of the person’s own affairs, not for
speculation, but for investment considering the probable safety of capital and the probable income to be derived.” At least
quarterly the District’s investment officers must submit an investment report to the Board of Directors detailing: (1) the
investment position of the District, (2) that all investment officers jointly prepared and signed the report, (3) the beginning market
value, the ending market value and the fully accrued interest for the reporting period of each pooled fund group, (4) the book
value and market value of each separately listed asset at the end of the reporting period, (5) the maturity date of each separately
invested asset, (6) the account or fund or pooled fund group for which each individual investment was acquired, and (7) the
compliance of the investment portfolio as it relates to: (a) adopted investment strategies and (b) Texas law. No person may
invest District funds without express written authority from the Board of Directors.
Under State law, the District is additionally required to: (1) annually review its adopted policies and strategies; (2) adopt by
written instrument a rule, order, ordinance or resolution stating that it has reviewed its investment policy and investment
strategies and records any changes made to either its investment policy or investment strategy in the respective rule, order,
ordinance or resolution; (3) require any investment officers with personal business relationships or relatives with firms seeking to
sell securities to the entity to disclose the relationship and file a statement with the Texas Ethics Commission and the Board of
Directors; (4) require the qualified representative of firms offering to engage in an investment transaction with the District to: (a)
receive and review the District’s investment policy, (b) acknowledge that reasonable controls and procedures have been
implemented to preclude investment transactions conducted between the District and the business organization that are not
authorized by the District’s investment policy (except to the extent that this authorization is dependent on an analysis of the
makeup of the District’s entire portfolio or requires an interpretation of subjective investment standards), and (c) deliver a written
statement in a form acceptable to the District and the business organization attesting to these requirements; (5) perform an
annual audit of the management controls on investments and adherence to the District’s investment policy; (6) provide specific
investment training for the Treasurer, chief financial officer and investment officers; (7) restrict reverse repurchase agreements
to not more than 90 days and restrict the investment of reverse repurchase agreement funds to no greater than the term of the
reverse purchase agreement; (8) restrict the investment in no-load mutual funds in the aggregate to no more than 15% of the
District’s monthly average fund balance, excluding bond proceeds and reserves and other funds held for debt service; (9) require
local government investment pools to conform to the new disclosure, rating, net asset value, yield calculation, and advisory
board requirements; and (10) at least annually review, revise and adopt a list of qualified brokers that are authorized to engage
in investment transactions with the District.
Current Investments
As of September 30, 2014 (unaudited) the District’s funds were invested in the District’s bank accounts and TexPool as shown in
the table that follows. The District does not currently own, nor does it anticipate the inclusion of long-term securities or derivative
products in its portfolio.
Fund and Investment Type Amount
Bank of the West Money Market Account - General Fund $1,504,702
First Financial Bank Accounts 587,297
First Financial - Debt Service 4,846
TexPool – General Fund 1,171,507
(Includes Operating Fund / Fire Dept. / Reserves for Future Asset Replacement )
TexPool - Debt Service 10,406
TexPool - Capital Projects Fund 152,090
Total Investments $3,430,848
The Texas State Comptroller of Public Accounts exercises oversight responsibility over the Texas Local Government Investment
Pool ("TexPool"). Oversight includes the ability to significantly influence operations, designation of management and
accountability for fiscal matters. Additionally, the State Comptroller has established an advisory board composed both of
participants in TexPool and of the other persons who do not have a business relationship with TexPool. The advisory Board
members review the investment policy and management fee structure. Finally, TexPool is rated AAA by S&P. TexPool operates
in a manner consistent with the SEC’s Rule 2a-7 of the Investment Company Act of 1940. As such, TexPool uses amortized cost
to report net assets and share prices since that amount approximates fair value.
16
TAX DATA
District Bond Tax Rate Limitation
By law the District's tax rate for debt service on the Bonds is unlimited as to rate or amount.
Maintenance and Operations Tax
The Board is also authorized to levy and collect an annual ad valorem tax for planning, constructing, acquiring, or maintaining or
repairing or operating the District's improvements and facilities, if such maintenance and operations tax is authorized by a vote of
the District's electors. Such tax is in addition to taxes which the District is authorized to levy for paying principal of and interest
on the Bonds, and any outstanding tax bonds or tax bonds which may be issued in the future. As shown in APPENDIX A,
TABLE 13 - “TAX RATE DISTRIBUTION,” the District levied a 2014-2015 maintenance and operations tax for fire protection
purposes of $0.07727/$100 assessed valuation and $0.01486/$100 assessed valuation for all other operations and maintenance
purposes.
Overlapping Taxes
Other governmental entities whose boundaries overlap the District have outstanding bonds payable from ad valorem taxes. The
statement of direct and estimated overlapping ad valorem tax debt shown in APPENDIX A – TABLE 14 (page A-7) was
developed from several sources, including information contained in "Texas Municipal Reports," published by the Municipal
Advisory Council of Texas. Except for the amount relating to the District, the District has not independently verified the accuracy
or completeness of such information, and no person is entitled to rely upon information as being accurate or complete.
Furthermore, certain of the entities listed below may have issued additional bonds since the dates stated in this table, and such
entities may have programs requiring the issuance of substantial amounts of additional bonds, the amount of which cannot be
determined. Political subdivisions overlapping the District are authorized by Texas law to levy and collect ad valorem taxes for
operation, maintenance and/or general revenue purposes in addition to taxes of debt service and the tax burden for operation,
maintenance and/or general purposes is not included in these figures. (See APPENDIX A – TABLES 14, 15 & 17 for information
on overlapping taxing entities.)
TAXING PROCEDURES
Authority to Levy Taxes
The Board has been authorized to levy an annual ad valorem tax on all taxable property within the District in an amount sufficient
to pay the principal of and interest on the Bonds, their pro rata share of debt service on any contract tax bonds and any
additional bonds or obligations payable from taxes which the District has outstanding or may hereafter issue and to pay the
expenses of assessing and collecting such taxes. The District agrees in the Order to levy such a tax from year-to-year as
described more fully herein under "THE BONDS - Security for Payment." Under Texas law, the Board is also authorized to levy
and collect an ad valorem tax for the operation and maintenance of the District and for the payment of certain contractual
obligations, if authorized by its voters. (See " TAX DATA - District Bond Tax Rate Limitation” herein.)
Property Tax Code and County-Wide Appraisal District
The Texas Property Tax Code (the "Property Tax Code") specifies the taxing procedures of all political subdivisions of the State
of Texas, including the District. Provisions of the Property Tax Code are complex and are not fully summarized herein.
The Property Tax Code requires, among other matters, county-wide appraisal and equalization of taxable property values and
establishes in each county of the State of Texas an appraisal district with the responsibility for recording and appraising property
for all taxing units within the county and an appraisal review board with responsibility for reviewing and equalizing the values
established by the appraisal district. The board of directors of the appraisal district selects a chief appraiser to manage the
appraisal offices of the appraisal district. The Denton Central Appraisal District and the Tarrant Appraisal District have the
responsibility for appraising property for all taxing units within Denton and Tarrant Counties, including the District. Such
appraisal values are subject to review and change by the appraisal review boards of each county. The appraisal roll as
approved by the appraisal review boards must be used by the District in establishing its tax roll and tax rate.
General: Except for certain exemptions provided by Texas law, all property with a tax situs in the District is subject to taxation by
the District; however, no effort is made by the District to collect taxes on tangible or intangible personal property not devoted to
commercial or industrial use. Principal categories of exempt property applicable to the District include: (i) property owned by the
State of Texas or its political subdivisions if the property is used for public purposes; (ii) property exempt from ad valorem
taxation by federal law; (iii) certain property owned by charitable organizations, youth development associations, religious
organizations, and qualified schools; (iv) designated historical sites; and (v) solar and wind-powered energy devices.
17
Freeport Exemption: Article VIII, Section 1-j of the Texas Constitution authorizing an ad valorem tax exemption for "freeport
property" was approved November 7, 1989. Freeport property is goods detained in Texas for 175 days or less for the purpose of
assembly, storage, manufacturing, processing or fabrication. The District does grant this exemption but currently has no
freeport property within its boundaries.
Goods in Transit: “Goods in Transit”, which are certain goods, principally inventory, that are stored, for the purposes of
assembling, storing, manufacturing, processing or fabricating the goods, in a location that is not owned by the owner of the
goods and are transferred from that location to another location within 175 days; a taxpayer may receive only one of the freeport
exemptions or the goods-in-transit exemptions for items of personal property. Senate Bill 1, passed by the 82nd Texas
Legislature, 1st Called Session, requires again that the governmental entities take affirmative action prior to January 1 of the first
tax year in which the governing body proposes to tax good-in-transit to continue its taxation of good-in-transit in the 2012 tax
year and beyond. The District does not exempt Goods in Transit.
Agricultural/Open-Land Exemption: Article VIII provides that eligible owners of both agricultural land (Section 1-d) and open-
space land (Section 1-d-1), including open-space land devoted to farm or ranch purposes or open-space land devoted to timber
production, may elect to have such property appraised for property taxation on the basis of its productive capacity. The same
land may not be qualified under both Section 1-d and 1-d-1. The District does have land that qualifies for this exemption.
Residence Homestead Exemptions: Under Section 1-b, Article VIII, and State law, the governing body of a political subdivision,
at its option, may grant an exemption of not less than $3,000 of market value of the residence homestead of persons 65 years of
age or older and the disabled from all ad valorem taxes thereafter levied by the political subdivision. Once authorized, such
exemption may be repealed or decreased or increased in amount (i) by the governing body of the political subdivision or (ii) by a
favorable vote of a majority of the qualified voters at an election called by the governing body of the political subdivision, which
election must be called upon receipt of a petition signed by at least 20% of the number of qualified voters who voted in the
preceding election of the political subdivision. In the case of a decrease, the amount of the exemption may not be reduced to
less than $3,000 of the market value.
The surviving spouse of an individual who qualifies for the foregoing exemption for the residence homestead of a person 65 or
older (but not the disabled) is entitled to an exemption for the same property in an amount equal to that of the exemption for
which the deceased spouse qualified if (i) the deceased spouse died in a year in which the deceased spouse qualified for the
exemption, (ii) the surviving spouse was at least 55 years of age at the time of the death of the individual’s spouse and (iii) the
property was the residence homestead of the surviving spouse when the deceased spouse died and remains the residence
homestead of the surviving spouse. The Board has granted such elderly and disabled exemptions in the amount of
$25,000 of assessed valuation.
In addition to any other exemptions provided by the Property Tax Code, the governing body of a political subdivision, at its
option, may grant an exemption of up to 20% of the market value of residence homesteads, with a minimum exemption of
$5,000. The District does not grant the option percentage of market value exemption.
In the case of residence homestead exemptions granted under Section 1-b, Article VIII, ad valorem taxes may continue to be
levied against the value of homesteads exempted where ad valorem taxes have previously been pledged for the payment of debt
if cessation of the levy would impair the obligation of the contract by which the debt was created.
Disabled/Deceased Veterans Exemption: State law and Section 2, Article VIII, mandate an additional property tax exemption for
disabled veterans or the surviving spouse (for so long as the surviving spouse remains unmarried) or children (under 18 years of
age) of a deceased veteran who died while on active duty in the armed forces; the exemption applies to either real or personal
property with the amount of assessed valuation exempted ranging from $5,000 to a maximum of $12,000; provided, however,
that beginning in the 2009 tax year, a disabled veteran who receives from the from the United States Department of Veterans
Affairs or its successor 100 percent disability compensation due to a service-connected disability and a rating of 100 percent
disabled or of individual unemployability is entitled to an exemption from taxation of the total appraised value of the veteran’s
residence homestead. In addition, effective January 1, 2012, and subject to certain conditions, surviving spouses of a deceased
veteran who had received a disability rating of 100% will be entitled to receive a residential homestead exemption equal to the
exemption received by the deceased spouse until such surviving spouse remarries. The District does grant the disabled /
deceased veterans exemption.
Tax Abatement: Denton County, Tarrant County or the Town of Trophy Club may designate all or part of the area within the
District as a reinvestment zone. Thereafter, the District may enter into tax abatement agreements with owners of real property
within the District for up to ten (10) years, all or any part of any increase in the assessed valuation of property covered by the
agreement over its assessed valuation in the year in which the agreement is executed, on the condition that the property owner
make specified improvements or repairs to the property in conformity with a comprehensive plan. A portion of the District is
included in reinvestment zones designated by the Town of Trophy Club, for tax abatement purposes. The District IS
NOT a participant in the Tax Abatement Reinvestment Zone agreement.
18
Tax Increment Reinvestment (Financing) Zones
A city or a county may create one or more tax increment reinvestment zones (“TIRZs” or “TIFs”) within the city or the county, and
in doing so, other overlapping taxing entities may agree to contribute taxes levied against the “Incremental Value” in the TIRZ to
finance or pay for public improvements or projects within the TIRZ. At the time of the creation of the TIRZ, a “base value” for the
real property in the TIRZ is established and the difference between any increase in the assessed valuation of taxable real
property in the TIRZ in excess of the base value of taxable real property in the TIRZ is known as the “Incremental Value”, and
during the existence of the TIRZ, all or a portion (as determined by the city or the county) of the taxes levied by the city or the
county against the Incremental Value in the TIRZ are restricted to paying project and financing costs within the TIRZ and are not
available for the payment of other obligations of the city or the county. The District does not currently participate in a TIRZ.
Valuation of Property for Taxation
Generally, all taxable property in the District must be appraised by the Denton Central Appraisal District and the Tarrant
Appraisal District (collectively, the “Appraisal District”) at one hundred percent (100%) of market value as of January 1 of each
year, subject to review and approval by the Appraisal Review Board. In determining market value, either the replacement cost or
the income or the market data method of valuation may be used, whichever is appropriate. In determining the market value of
property, different methods of appraisal may be used, including the cost method of appraisal, the income method of appraisal
and market data comparison method of appraisal. The method considered most appropriate by the chief appraiser is to be used.
State law requires the appraised value of a residence homestead to be based solely on the property’s value as a residence
homestead, regardless of whether residential use is considered to be the highest and best use of the property. State law further
limits the appraised value of a residence homestead for a tax year to an amount not to exceed the less of (1) the market value of
the property, or (2) the sum of (a) 10% of the appraised value of the property for the last year in which the property was
appraised for taxation times the number of years since the property was last appraised, plus (b) the appraised value of the
property for the last year in which the property was appraised plus (c) the market value of all new improvements to the property.
Certain land may be appraised at less than market value under the Property Tax Code. Increases in the appraised value of
residence homesteads are limited to 10 percent annually regardless of the market value of the property. Upon application of a
landowner, land which qualifies as “open-space land” is appraised based on the category of land, using accepted income
capitalization methods applied to the average net income derived from the use of the land for agriculture and hunting or
recreational leases. Upon application of a landowner, land which qualifies as “timber land” is appraised using accepted income
capitalization methods applied to the average net income derived from the use of the land for production of timber. Land which
qualifies as an aesthetic management zone, critical wildlife management zone, or streamside management zone or is being
regenerated for timber production for 10 years after harvest is valued at one-half that amount. In the case of both open space
and timber land valuations, if the use of land changes, an additional tax is generally imposed on the land equal to the difference
between the taxes imposed on the land for each of the five (5) years preceding the year in which the change of use occurs and
the tax that would have been imposed had the land been taxed on the basis of market value in each of those years, plus interest
at an annual rate of seven percent (7%) calculated from the dates on which the differences would have become due. There are
also special appraisal methods for agricultural land owned by individuals whose primary occupation and income are farming and
for recreational, park, and scenic land. Also, houses or lots held for sale by a developer or builder which remain unoccupied, are
not leased or rented and produce no income are required to be assessed at the price for which they would sell as a unit to a
purchaser who would continue the owner’s business, upon application of the owner.
Once an appraisal roll is prepared and approved by the Appraisal Review Board, it is used by the District in establishing its tax
rate. The Property Tax Code requires the Appraisal District to implement a plan for periodic reappraisal of property to update
appraised values. The plan must provide for appraisal of all real property in the Appraisal District at least one every three (3)
years. It is not know what frequency of reappraisal will be utilized by the Appraisal District or whether reappraisals will be
conducted on a zone or countywide basis.
Notice and Hearing Procedures
The Tax Code establishes a "truth-in-taxation" process identifying increases in the effective tax rate. The rollback tax rate
equals 108% of the total tax rate for the prior year. If the District decides to increase the tax rate more than eight percent (8%)
above the previous year’s tax rate, it must hold a public hearing and give notice to its taxpayers. If the actual tax rate adopted
exceeds the rollback tax rate, taxpayers may petition to hold an election to reduce the tax rate to the rollback tax rate for the
fiscal year.
The Tax Code also establishes a procedure for notice to property owners of reappraisals reflecting increased property values,
appraisals which are higher than renditions, and appraisals of property not previously on an appraisal roll
District and Taxpayer Remedies
The chief appraiser must give written notice before the Appraisal Review Board meeting to an affected owner if a reappraisal has
resulted in an increase in value over the prior year or the value rendered by the owner, or if property not previously included on
the appraisal roll has been appraised. Any owner who has timely filed notice with the Appraisal Review Board may appeal the
final determination by the Appraisal Review Board of the owner’s protest by filing suit in Texas district court. Prior to such
appeal, however, the owner must pay the tax due on the amount of value of the property involved that is not in dispute or the
19
amount of tax paid in the prior year, whichever is greater, but not to exceed the amount of tax due under the order from which
the appeal is taken. In the event of such suit, the value of the property is determined by the court, or a jury if requested by any
party. Additionally, the District is entitled to challenge certain matters before the Appraisal Review Board, including the level of
appraisal of certain category of property, the exclusion of property from the appraisal records, or the grant in whole or in part of a
partial exemption, or a determination that land qualifies for a special use appraisal (agricultural or timber classification, for
example). The District may not, however, protest a valuation of individual property.
Levy and Collection of Taxes
The rate of taxation is set by the Board based upon the valuation of property within the District as of the preceding January 1 and
the amount required to be raised for debt service, maintenance purposes, and authorized contractual obligations.
Unless the Board, or the qualified voters of the District or of Denton County or Tarrant County at an election held for such
purpose, determines to transfer the collection of taxes to the Denton Central Appraisal District or Tarrant Appraisal District or
another taxing unit, the District is responsible for the levy and collection of its taxes. The District has contracted with the
Denton County Tax Collector to collect the taxes for the District.
Taxes are due on receipt of the tax bill and become delinquent after January 31 of the following year. The date of the
delinquency may be postponed if the tax bills are mailed after January 10 of any year. Delinquent taxes are subject to a 6%
penalty for the first month of delinquency, one percent (1%) for each month thereafter to July 1, and 12% total if any taxes are
unpaid on July 1. Delinquent taxes also accrue interest at the rate of 1% per month during the period they remain outstanding.
In addition, where a district engages an attorney for collection of delinquent taxes, the Board may impose a further penalty not to
exceed twenty percent 20% on all taxes unpaid on July 1. The District may be prohibited from collection of penalties and interest
on real property owned by the Federal Depository Insurance Corporation. The District has engaged a delinquent tax
attorney and has imposed such a penalty when necessary.
District's Rights in the Event of Tax Delinquencies
Taxes levied by the District are a personal obligation of the owner of the property on January 1 of the year for which the tax is
imposed. On January 1 of each year, a tax lien attaches to property to secure the payment of all state and local taxes, penalties,
and interest ultimately imposed for the year on the property. The lien exists in favor of the State of Texas and each local taxing
unit, including the District, having power to tax the property. The District's tax lien is on a parity with tax liens of such other taxing
units. A tax lien on real property takes priority over the claim of most creditors and other holders of liens on the property
encumbered by the tax lien, whether or not the debt or lien existed before the attachment of the tax lien; however, whether a lien
of the United States is on a parity with or takes priority over a tax lien of the District is determined by applicable federal law.
Personal property under certain circumstances is subject to seizure and sale for the payment of delinquent taxes, penalty, and
interest.
At any time after taxes on property become delinquent, the District may file suit to foreclose the lien securing payment of the tax,
to enforce personal liability for the tax, or both. In filing a suit to foreclose a tax lien on real property, the District must join other
taxing units that have claims for delinquent taxes against all or part of the same property. Collection of delinquent taxes may be
adversely affected by the amount of taxes owed to other taxing units, by the effects of market conditions on the foreclosure sale
price, by taxpayer redemption rights (a taxpayer may redeem property within two years after the purchaser's deed issued at the
foreclosure sale is filed in the county records) or by bankruptcy proceedings which restrict the collection of taxpayer debts. (See
"INVESTMENT CONSIDERATIONS - General” and “INVESTMENT CONSIDERATIONS - Tax Collections and Foreclosure
Remedies”.)
LEGAL MATTERS
Legal Opinions
Issuance of the Bonds is subject to the approving legal opinion of the Attorney General of Texas to the effect that the initial
Bonds are valid and binding obligations of the District payable from the proceeds of an annual ad valorem tax levied, without
legal limit as to rate or amount, upon all taxable property within the District. Issuance of the Bonds is also subject to the legal
opinion of Fulbright & Jaworski LLP, a member of Norton Rose Fulbright ("Bond Counsel"), based upon examination of a
transcript of the proceedings incident to authorization and issuance of the Bonds, to the effect that the Bonds are valid and
binding obligations of the District payable from the sources and enforceable in accordance with the terms and conditions
described therein, except to the extent that the enforceability thereof may be affected by bankruptcy, insolvency, reorganization,
moratorium, or other similar laws affecting creditors' rights or the exercise of judicial discretion in accordance with general
principles of equity. Bond Counsel's, legal opinion will also address the matters described below under "TAX MATTERS - Tax
Exemption." Such opinions will express no opinion with respect to the sufficiency of the security for or the marketability of the
Bonds. In its capacity as Bond Counsel, Fulbright & Jaworski LLP has reviewed the information describing the Bonds in the
Official Statement to verify that such description conforms to the provisions of the Order.
The legal fees to be paid Bond Counsel for services rendered in connection with the issuance of the Bonds are based upon a
percentage of Bonds actually issued, sold and delivered, and therefore, such fees are contingent upon the sale and delivery of
the Bonds. The legal opinion to be delivered concurrently with the delivery of the Bonds expresses the professional judgment of
20
the attorney rendering the opinion as to the legal issue explicitly addressed therein. In rendering a legal opinion, the attorney
does not become an insurer or guarantor of that expression of professional judgment, of the transaction opined upon, or of the
future performance of the parties to the transaction. Nor does the rendering of an opinion guarantee the outcome of any legal
dispute that may arise out of the transaction. Though it represents the financial Advisor and certain entities that may bid on the
Bonds from time to time in matters unrelated to the issuance of the Bonds, Bond Counsel has been engaged by and only
represents the District in connection with the issuance of the Bonds.
Litigation
On September 24, 2013, the District filed an application with TCEQ for expedited approval of a proposed engineering project and
the issuance of bonds to finance improvements to the District’s wastewater treatment plant. On February 6, 2014, TCEQ issued
an order approving the application and bond issuance. Seeking to overturn the order, Maguire Partners – Solana Land, L.P.
(“Maguire”) filed a Motion to Overturn with TCEQ, which was overruled by operation of law on May 2, 2014, and the following two
lawsuits:
(i) Maguire Partners – Solana Land, L.P. v. Texas Commission on Environmental Quality and Richard Hyde, in
his official capacity as Executive Director, Cause No. D-1-GN-14-000716, filed on March 7, 2014, in the 126th
Judicial District Court of Travis County, Texas (the “First State Court Action”); and
(ii) Maguire Partners – Solana Land, L.P. v. Texas Commission on Environmental Quality and Richard Hyde, in
his official capacity as Executive Director, Cause No. D-1-GN-14-001623, filed on May 30, 2014, in the 53rd
Judicial District of Travis County, Texas (the “Second State Court Action”; collectively with the First State
Court Action, the “Administrative Appeals”).
On June 23, 2014, the District filed a lawsuit under Chapter 1205 of the Texas Government Code to obtain judicial validation of
the TCEQ approved bonds. The lawsuit was styled Ex Parte Trophy Club Municipal Utility District No. 1, Cause No. D-1-GN-14-
001983, and was filed in the 201st Judicial District Court of Travis County, Texas (the “Chapter 1205 Suit”). Specifically, the
Chapter 1205 Suit sought an expedited declaratory judgment to conclusively establish that the District is authorized to issue and
to deliver the Bonds and up to $9,230,000 in revenue bonds to finance improvements to its wastewater treatment plant. On July
14, 2014, the Honorable Judge Lora Livingston entered an order that consolidated the Administrative Appeals with the Chapter
1205 Suit (the “Consolidated Action”).
On July 14, 2014, before Judge Livingston, and October 27, 2014, before the Honorable Judge Scott Jenkins of the 53rd Judicial
District Court of Travis County, Texas, a trial was conducted in the Consolidated Action. As a result, on
October 29, 2014, Judge Jenkins entered an order requiring Maguire to post a $2,300,000 before the 11th day after the entry of
that order, otherwise Maguire would be dismissed from the action. Moreover, on October 30, 2014, Judge Jenkins further
entered a final judgment dismissing all of Maguire’s claims in the Consolidated Action with prejudice, and granting the District the
relief it requested in the Chapter 1205 Suit, including a declaration that the District is authorized to issue and deliver the Bonds
and up to $9,230,000 in revenue bonds to finance improvements to its wastewater treatment plant.
On November 12, 2014, because Maguire failed to post the required bond, Judge Jenkins entered an order dismissing Maguire
with prejudice from the Consolidated Action.
The deadline for Maguire to file a notice of appeal relating to the October 29, 2014 order requiring Maguire to post a bond was
November 18, 2014, but Maguire has not filed a notice of appeal. The deadline for Maguire or any other opposing party or
intervenor to file a notice of appeal relating to the final judgment was November 19, 2014, but no one has filed a notice of
appeal.
The District can make no representations or predictions concerning any appeals that may be filed or any other action that could
be taken which could affect the District’s ability to deliver the Bonds on or about December 23, 2014 as anticipated.
No-Litigation Certificate
The District will furnish to the Purchaser a certificate, dated as of the date of delivery of the Bonds, executed by both the
President and Secretary of the Board, to the effect that no litigation of any nature, except as disclosed in this Official Statement,
has been filed or is then pending or threatened, either in state or federal courts, contesting or attacking the Bonds; restraining or
enjoining the issuance, execution or delivery of the Bonds; affecting the provisions made for the payment of or security for the
Bonds; in any manner questioning the authority or proceedings for the issuance, execution, or delivery of the Bonds; or affecting
the validity of the Bonds.
No Material Adverse Change
The obligations of the Purchaser to take and pay for the Bonds, and of the District to deliver the Bonds, are subject to the
condition that, up to the time of delivery of and receipt of payment for the Bonds, there shall have been no material adverse
change in the condition (financial or otherwise) of the District from that set forth or contemplated in the Official Statement.
21
TAX MATTERS
Tax Exemption
The delivery of the Bonds is subject to the opinion of Bond Counsel to the effect that interest on the Bonds for federal income tax
purposes (i) will be excludable from gross income, as defined in section 61 of the Internal Revenue Code of 1986, as amended
to the date of such opinion (the “Code”), pursuant to section 103 of the Code and existing regulations, published rulings, and
court decisions, and (ii) will not be included in computing the alternative minimum taxable income of the owners thereof who are
individuals or, except as herein after described, corporations. A form of Bond Counsel’s opinion is reproduced as Appendix C.
The statutes, regulations, rulings, and court decisions on which such opinion is based are subject to change.
Interest on the Bonds owned by a corporation will be included in such corporation's adjusted current earnings for purposes of
calculating the alternative minimum taxable income of such corporation, other than an S corporation, a qualified mutual fund, a
real estate investment trust, a real estate mortgage investment conduit, or a financial asset securitization investment trust
(“FASIT”). A corporation's alternative minimum taxable income is the basis on which the alternative minimum tax imposed by
Section 55 of the Code will be computed.
In rendering the foregoing opinions, Bond Counsel will rely upon representations and certifications of the District made in a
certificate dated the date of delivery of the Bonds pertaining to the use, expenditure, and investment of the proceeds of the
Bonds and will assume continuing compliance by the District with the provisions of the Order subsequent to the issuance of the
Bonds. The Order contains covenants by the District with respect to, among other matters, the use of the proceeds of the Bonds
and the facilities financed or refinanced therewith by persons other than state or local governmental units, the manner in which
the proceeds of the Bonds are to be invested, the periodic calculation and payment to the United States Treasury of any
“arbitrage” profits from the investment of proceeds, and the reporting of certain information to the United States Treasury. Failure
to comply with any of these covenants may cause interest on the Bonds to be includable in the gross income of the owners
thereof from the date of the issuance of the Bonds.
Bond Counsel’s opinion is not a guarantee of a result, but represents its legal judgment based upon its review of existing statutes,
regulations, published rulings and court decisions and the representations and covenants of the District described above. No
ruling has been sought from the Internal Revenue Service (the “IRS”) with respect to the matters addressed in the opinion of
Bond Counsel, and Bond Counsel’s opinion is not binding on the IRS. The IRS has an ongoing program of auditing the tax-
exempt status of the interest on tax-exempt obligations. If an audit of the Bonds is commenced, under current procedures the
IRS is likely to treat the District as the “taxpayer,” and the owners of the Bonds would have no right to participate in the audit
process. In responding to or defending an audit of the tax-exempt status of the interest on the Bonds, the District may have
different or conflicting interests from the owners of the Bonds. Public awareness of any future audit of the Bonds could adversely
affect the value and liquidity of the Bonds during the pendency of the audit, regardless of its ultimate outcome.
Except as described above, Bond Counsel will express no other opinion with respect to any other federal, state or local tax
consequences under present law, or proposed legislation, resulting from the receipt or accrual of interest on, or the acquisition or
disposition of, the Bonds. Prospective purchasers of the Bonds should be aware that the ownership of tax-exempt obligations
such as the Bonds may result in collateral federal tax consequences to, among others, financial institutions, life insurance
companies, property and casualty insurance companies, S corporations with “subchapter C” earnings and profits, certain foreign
corporations doing business in the United States, individual recipients of Social Security or Railroad Retirement benefits,
individuals otherwise qualifying for the earned income tax credit, owners of an interest in a FASIT and taxpayers who may be
deemed to have incurred or continued indebtedness to purchase or carry, or who have paid or incurred certain expenses
allocable to, tax-exempt obligations. Prospective purchasers should consult their own tax advisors as to the applicability of these
consequences to their particular circumstances.
Existing law may change to reduce or eliminate the benefit to bondholders of the exclusion of interest on the Bonds from gross
income for federal income tax purposes. Any proposed legislation or administrative action, whether or not taken, could also
affect the value and marketability of the Bonds. Prospective purchasers of the Bonds should consult with their own tax advisors
with respect to any proposed or future changes in tax law.
Tax Accounting Treatment of Discount and Premium on Certain Bonds
The initial public offering price of certain Bonds (the "Discount Bonds") may be less than the amount payable on such Bonds at
maturity. An amount equal to the difference between the initial public offering price of a Discount Bond (assuming that a
substantial amount of the Discount Bonds of that maturity are sold to the public at such price) and the amount payable at
maturity constitutes original issue discount to the initial purchaser of such Discount Bond. A portion of such original issue
discount allocable to the holding period of such Discount Bond by the initial purchaser will, upon the disposition of such Discount
Bond (including by reason of its payment at maturity), be treated as interest excludable from gross income, rather than as
taxable gain, for federal income tax purposes, on the same terms and conditions as those for other interest on the Bonds
described above under "Tax Exemption." Such interest is considered to be accrued actuarially in accordance with the constant
interest method over the life of a Discount Bond, taking into account the semiannual compounding of accrued interest, at the
yield to maturity on such Discount Bond and generally will be allocated to an initial purchaser in a different amount from the
amount of the payment denominated as interest actually received by the initial purchaser during the tax year.
22
However, such interest may be required to be taken into account in determining the alternative minimum taxable income of a
corporation, for purposes of calculating a corporation's alternative minimum tax imposed by Section 55 of the Code, and the
amount of the branch profits tax applicable to certain foreign corporations doing business in the United States, even though there
will not be a corresponding cash payment. In addition, the accrual of such interest may result in certain other collateral federal
income tax consequences to, among others, financial institutions, life insurance companies, property and casualty insurance
companies, S corporations with subchapter C earnings and profits, individual recipients of Social Security or Railroad Retirement
benefits, individuals otherwise qualifying for the earned income tax credit, owners of an interest in a FASIT, and taxpayers who
may be deemed to have incurred or continued indebtedness to purchase or carry, or who have paid or incurred certain expenses
allocable to, tax-exempt obligations. Moreover, in the event of the redemption, sale or other taxable disposition of a Discount
Bond by the initial owner prior to maturity, the amount realized by such owner in excess of the basis of such Discount Bond in
the hands of such owner (adjusted upward by the portion of the original issue discount allocable to the period for which such
Discount Bond was held) is includable in gross income.
Owners of Discount Bonds should consult with their own tax advisors with respect to the determination of accrued original issue
discount on Discount Bonds for federal income tax purposes and with respect to the state and local tax consequences of owning
and disposing of Discount Bonds. It is possible that, under applicable provisions governing determination of state and local
income taxes, accrued interest on Discount Bonds may be deemed to be received in the year of accrual even though there will
not be a corresponding cash payment.
The initial public offering price of certain Bonds (the "Premium Bonds") may be greater than the amount payable on such Bonds
at maturity. An amount equal to the difference between the initial public offering price of a Premium Bond (assuming that a
substantial amount of the Premium Bonds of that maturity are sold to the public at such price) and the amount payable at
maturity constitutes premium to the initial purchaser of such Premium Bonds. The basis for federal income tax purposes of a
Premium Bond in the hands of such initial purchaser must be reduced each year by the amortizable bond premium, although no
federal income tax deduction is allowed as a result of such reduction in basis for amortizable bond premium. Such reduction in
basis will increase the amount of any gain (or decrease the amount of any loss) to be recognized for federal income tax
purposes upon a sale or other taxable disposition of a Premium Bond. The amount of premium which is amortizable each year
by an initial purchaser is determined by using such purchaser's yield to maturity.
Purchasers of the Premium Bonds should consult with their own tax advisors with respect to the determination of amortizable
bond premium on Premium Bonds for federal income tax purposes and with respect to the state and local tax consequences of
owning and disposing of Premium Bonds.
Qualified Tax-Exempt Obligations for Financial Institutions
Section 265 of the Code provides, in general, that interest expense to acquire or carry tax-exempt obligations is not deductible
from the gross income of the owner of such obligations. In addition, section 265 of the Code generally disallows 100% of any
deduction for interest expense which is incurred by “financial institutions” described in such section and is allocable, as
computed in such section, to tax-exempt interest on obligations acquired after August 7, 1986. Section 265(b) of the Code
provides an exception to this interest disallowance rule for interest expense allocable to tax-exempt obligations (other than
private activity bonds that are not qualified 501(c)(3) bonds) which are designated by an issuer as “qualified tax-exempt
obligations.” An issuer may designate obligations as “qualified tax-exempt obligations” only if the amount of the issue of which
they are a part, when added to the amount of all other tax-exempt obligations (other than private activity bonds that are not
qualified 501(c)(3) obligations and other than certain refunding bonds) issued or reasonably anticipated to be issued by the
issuer during the same calendar year, does not exceed $10,000,000.
The District has designated the Bonds as “qualified tax-exempt obligations” and has certified its expectation that the above-
described $10,000,000 ceiling will not be exceeded. Accordingly, it is anticipated that financial institutions which purchase the
Bonds will not be subject to the 100% disallowance of interest expense allocable to interest on the Bonds under section 265(b)
of the Code. However, the deduction for interest expense incurred by a financial institution which is allocable to the interest on
the Bonds will be reduced by 20% pursuant to section 291 of the Code.
CONTINUING DISCLOSURE OF INFORMATION
In the Order, the Issuer has made the following agreement for the benefit of the holders and beneficial owners of each of the
Bonds. The Issuer is required to observe the agreement for so long as it remains obligated to advance funds to pay the Bonds.
Under the agreement, the Issuer will be obligated to provide certain updated financial information and operating data annually,
and timely notice of certain specified events, to the Municipal Securities Rulemaking Board (the “MSRB”).
Annual Reports
The Issuer will provide certain updated financial information and operating data to the MSRB. The District will provide all
quantitative financial information and operating data with respect to the District of the general type included in this Official Statement.
The information to be updated includes Tables 1, 12 and 13 of Appendix A, and the annual audited financial statements of the District.
The Issuer will update and provide this information within six months after the end of each fiscal year ending in and after 2014.
23
The financial information to be provided may be set forth in full in one or more documents or may be included by specific
reference to any document available to the public on the MSRB’s Internet Website or filed with the SEC, as permitted by SEC
Rule 15c2-12 (the “Rule”). The updated information will include audited financial statements for the Issuer, if the Issuer
commissions an audit and it is completed by the required time. If audited financial statements are not available by the required
time, the Issuer will provide unaudited financial statements by the required time and audited financial statements when and if
such audited financial statements become available. Any such financial statements will be prepared in accordance with the
accounting principles described in Appendix D or such other accounting principles as the Issuer may be required to employ from
time to time pursuant to State law or regulation.
The Issuer’s current fiscal year end is September 30. Accordingly, it must provide updated information by the last day in March
in each year, unless the Issuer changes its fiscal year. If the Issuer changes its fiscal year, it will notify the MSRB of the change.
Notice of Certain Events
The Issuer will also provide timely notices of certain events to the MSRB. The Issuer will provide notice of any of the following
events with respect to the Bonds to the MSRB in a timely manner (but not in excess of ten business days after the occurrence of
the event): (1) principal and interest payment delinquencies; (2) non-payment related defaults, if material; (3) unscheduled draws
on debt service reserves reflecting financial difficulties; (4) unscheduled draws on credit enhancements reflecting financial
difficulties; (5) substitution of credit or liquidity providers, or their failure to perform; (6) adverse tax opinions, the issuance by the
Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701-TEB), or
other material notices or determinations with respect to the tax status of the Bonds, or other material events affecting the tax
status of the Bonds; (7) modifications to rights of holders of the Bonds, if material; (8) Bond calls, if material, and tender offers;
(9) defeasances; (10) release, substitution, or sale of property securing repayment of the Bonds, if material; (11) rating changes;
(12) bankruptcy, insolvency, receivership, or similar event of the Issuer, which shall occur as described below; (13) the
consummation of a merger, consolidation, or acquisition involving the Issuer or the sale of all or substantially all of its assets,
other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination
of a definitive agreement relating to any such actions, other than pursuant to its terms, if material; and (14) appointment of a
successor or additional trustee or the change of name of a trustee, if material. In addition, the Issuer will provide timely notice of
any failure by the Issuer to provide annual financial information or operating data in accordance with their agreement described
above under “Annual Reports”. Neither the Order nor the Bonds make any provision for debt service reserves, credit
enhancement, or liquidity enhancement.
For these purposes, any event described in clause (12) of the immediately preceding paragraph is considered to occur when any
of the following occur: the appointment of a receiver, fiscal agent, or similar officer for the Issuer in a proceeding under the
United States Bankruptcy Code or in any other proceeding under state or federal law in which a court or governmental authority
has assumed jurisdiction over substantially all of the assets or business of the Issuer, or if such jurisdiction has been assumed
by leaving the existing governing body and officials or officers in possession but subject to the supervision and orders of a court
or governmental authority, or the entry of an order confirming a plan of reorganization, arrangement, or liquidation by a court or
governmental authority having supervision or jurisdiction over substantially all of the assets or business of the Issuer.
Availability of Information from MSRB
The Issuer has agreed to provide the foregoing financial information and operating data only as described above. Investors will
be able to access continuing disclosure information filed with the MSRB free of charge at www.emma.msrb.org.
Limitations and Amendments
The Issuer has agreed to update information and to provide notices of certain specified events only as described above. The
Issuer has not agreed to provide other information that may be relevant or material to a complete presentation of its financial
results of operations, condition, or prospects or agreed to update any information that is provided, except as described above.
The Issuer makes no representation or warranty concerning such information or concerning its usefulness to a decision to invest
in or sell Bonds at any future date. The Issuer disclaims any contractual or tort liability for damages resulting in whole or in part
from any breach of its continuing disclosure agreement or from any statement made pursuant to its agreement, although holders
or beneficial owners of Bonds may seek a writ of mandamus to compel the Issuer to comply with its agreement.
The Issuer may amend its continuing disclosure agreement to adapt to changed circumstances that arise from a change in legal
requirements, a change in law, or a change in the identity, nature, status, or type of operations of the Issuer, if the agreement, as
amended, would have permitted an underwriter to purchase or sell Bonds in the offering described herein in compliance with the
Rule, taking into account any amendments or interpretations of the Rule to the date of such amendment, as well as such
changed circumstances, and either the holders of a majority in aggregate principal amount of the outstanding Bonds consent or
any person unaffiliated with the Issuer (such as nationally recognized bond counsel) determines that the amendment will not
materially impair the interests of the beneficial owners of the Bonds. The Issuer may also repeal or amend these provisions if
the SEC amends or repeals the applicable provisions of the Rule or any court of final jurisdiction enters judgment that such
provisions of the Rule are invalid, but in either case only if and to the extent that the provisions of this sentence would not
prevent an underwriter from lawfully purchasing or selling Bonds in the primary offering of the Bonds giving effect to (a) such
provisions as so amended and (b) any amendments or interpretations of the Rule. If the Issuer amends its agreement, it must
24
include with the next financial information and operating data provided in accordance with its agreement described above under
“Annual Reports” an explanation, in narrative form, of the reasons for the amendment and of the impact of any change in the
type of information and data provided.
Compliance with Prior Agreements
For the last five years, the District has complied in all material respects with its previous continuing disclosure agreements made
in accordance with the Rule.
FINANCIAL ADVISOR
Southwest Securities is employed as Financial Advisor to the District to assist in the issuance of the Bonds. In this capacity, the
Financial Advisor has compiled certain data relating to the Bonds that is contained in this Official Statement. The Financial
Advisor has not independently verified any of the data contained herein or conducted a detailed investigation of the affairs of the
District to determine the accuracy or completeness of this Official Statement. Because of their limited participation, the Financial
Advisor assumes no responsibility for the accuracy or completeness of any of the information contained herein. The fee of the
Financial Advisor for services with respect to the Bonds is contingent upon the sale and issuance of the Bonds.
OFFICIAL STATEMENT
Updating the Official Statement During Underwriting Period
If, subsequent to the date of the Official Statement to and including the date the Purchaser is no longer required to provide an
Official Statement to potential customers who request the same pursuant to Rule 15c2-12 of the federal Securities Exchange Act
of 1934 (the “Rule”) (the earlier of (i) 90 days from the “end of the underwriting period” (as defined in the Rule) and (ii) the time
when the Official Statement is available to any person from the MSRB, but in no case less than 25 days after the “end of the
underwriting period”), the District learns or is notified by the Purchaser of any adverse event which causes any of the key
representations in the Official Statement to be materially misleading, the District will promptly prepare and supply to the
Purchaser a supplement to the Official Statement which corrects such representation to the reasonable satisfaction of the
Purchaser. (See "DELIVERY OF THE BONDS AND ACCOMPANYING DOCUMENTS” in the Official Notice of Sale herein.)
The obligation of the District to update or change the Official Statement will terminate 25 days after the date the District delivers
the Bonds to the Purchaser (the “end of the underwriting period” within the meaning of the Rule), unless the Purchaser provides
written notice to the District that less than all of the Bonds have been sold to ultimate customers on or before such date, in which
case the obligation to update or change the Official Statement will extend for an additional period of time of 25 days after all of
the Bonds have been sold to ultimate customers (but no longer than the earlier of (i) 90 days from the "end of the underwriting
period" (as defined in the Rule) and (ii) the time when the Official Statement is available to any person from the MSRB, but in no
case less than 25 days after the "end of the underwriting period" for the Bonds). In the event the Purchaser provides written
notice to the District that less than all of the Bonds have been sold to ultimate customers, the Initial Purchaser agrees to notify
the District in writing following the occurrence of the “end of the underwriting period” as defined in the Rule.
Forward-Looking Statements Disclaimer
The statements contained in this Official Statement, and in any other information provided by the District, that are not purely
historical, are forward-looking statements, including statements regarding the District's expectations, hopes, intentions, or
strategies regarding the future. Readers should not place undue reliance on forward-looking statements. All forward-looking
statements included in this Official Statement are based on information available to the District on the date hereof, and the
District assumes no obligation to update any such forward-looking statements. The District's actual results could differ materially
from those discussed in such forward-looking statements.
The forward-looking statements included herein are necessarily based on various assumptions and estimates and are inherently
subject to various risks and uncertainties, including risks and uncertainties relating to the possible invalidity of the underlying
assumptions and estimates and possible changes or developments in social, economic, business, industry, market, legal, and
regulatory circumstances and conditions and actions taken or omitted to be taken by third parties, including customers,
suppliers, business partners and competitors, and legislative, judicial, and other governmental authorities and officials.
Assumptions related to the foregoing involve judgments with respect to, among other things, future economic, competitive, and
market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which
are beyond the control of the District. Any of such assumptions could be inaccurate and, therefore, there can be no assurance
that the forward-looking statements included in this Official Statement will prove to be accurate.
OTHER MATTERS
Legal Investment and Eligibility to Secure Public Funds in Texas
Section 1201.041 of the Public Security Procedures Act (Chapter 1201, Texas Government Code) provides that the Bonds are
negotiable instruments governed by Chapter 8, Texas Business and Commerce Code, and are legal and authorized investments
for insurance companies, fiduciaries, and trustees, and for the sinking fund of municipalities or other political subdivisions or
public agencies of the State of Texas. In addition, various provisions of the Texas Finance Code provide that, subject to a
prudent investor standard, the Bonds are legal investments for state banks, savings banks, trust companies with at least $1
25
million of capital and savings and loan associations. The Bonds are eligible to secure deposits of any public funds of the state, its
agencies and political subdivisions, and are legal security for those deposits to the extent of their market value. For political
subdivisions in Texas which have adopted investment policies and guidelines in accordance with the Public Funds Investment
Act (Texas Government Code, Chapter 2256), the Bonds may have to be assigned a rating of "A" or its equivalent as to
investment quality by a national rating agency before such obligations are eligible investments for sinking funds and other public
funds. (See “RATINGS” herein.)
No representation is made that the Bonds will be acceptable to public entities to secure their deposits or acceptable to such
institutions for investment purposes. The District has made no investigation of other laws, rules, regulations or investment
criteria which might apply to any such persons or entities or which might otherwise limit the suitability of the Bonds for any of the
foregoing purposes or limit the authority of such persons or entities to purchase or invest in the Bonds for such purposes. The
District has not made any review of the laws in other states to determine whether the Bonds are legal investments for various
institutions in those states.
Registration and Qualification of Bonds for Sale
No registration statement relating to the offer and sale of the Bonds has been filed with the Securities and Exchange
Commission under the Securities Act of 1933, as amended, in reliance upon the exemptions provided thereunder. The Bonds
have not been registered or qualified under the Securities Act of Texas in reliance upon various exemptions contained therein;
nor have the Bonds been registered or qualified under the securities laws of any other jurisdiction. The District assumes no
responsibility for registration of the Bonds under the securities laws of any other jurisdiction in which the Bonds, may be offered,
sold or otherwise transferred. This disclaimer of responsibility for registration or qualification for sale or other disposition of the
Bonds shall not be construed as an interpretation of any kind with regard to the availability of any exemption from securities
registration or qualification provisions in such other jurisdiction.
Certification as to Official Statement
At the time of payment for and delivery of the Bonds, the Purchaser will be furnished a certificate executed by the proper officials
of the District acting in their official capacity, to the effect that: (a) the descriptions and statements of or pertaining to the District
contained in its Official Statement relating to the Bonds, and any addenda, supplement or amendment thereto, on the date of
such Official Statement, on the date of the sale of said Bonds, and on the date of the delivery, were and are true and correct in
all material respects; (b) insofar as the District and its affairs, including its financial affairs, are concerned, such Official
Statement did not and does not contain an untrue statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statement therein, in the light of the circumstances under which they were made, not
misleading; (c) to the best of their knowledge, insofar as the descriptions and statements, including financial data, or pertaining
to entities, other than the District and its activities, contained in such Official Statement are concerned, such statements and data
have been obtained from sources which the District believes to be reliable and the District has no reason to believe that they are
untrue in any material respect; and (d) there has been no material adverse change in the financial condition of the District since
September 30, 2013, the date of the last audited financial statements of the Issuer, portions of which appear in the Official
Statement.
The Official Statement was approved as to form and content and the use thereof in the offering of the Bonds will be authorized,
ratified and approved by the Board on the date of sale, and the Purchasers will be furnished, upon request, at the time of
payment for and the delivery of the Bonds, a certified copy of such approval, duly executed by the proper officials of the Issuer.
Concluding Statement
The financial data and other information contained in this Official Statement have been obtained from the District’s records,
audited financial statements and other sources which are believed to be reliable. There is no guarantee that any of the
assumptions or estimates contained herein will be realized. All of the summaries of the statutes, documents, orders and
resolutions contained in this Official Statement are made subject to all of the provisions of such statues, documents, orders and
resolutions. These summaries do not purport to be complete statements of such provisions and reference is made to such
statutes, documents, orders and resolutions for further information. Reference is made to original documents in all respects.
This Official Statement was approved by the Board of the Issuer for distribution in accordance with the provisions of the Rule.
James Moss
President, Board of Directors
Trophy Club Municipal Utility District No. 1
Kevin Carr
Secretary, Board of Directors
Trophy Club Municipal Utility District No. 1
[This page is intentionally left blank.]
APPENDIX A
FINANCIAL INFORMATION OF THE ISSUER
(This appendix contains quantitative financial information and operating data with respect to the Issuer. The information is only a
partial representation and does not purport to be complete. For further and more complete information, reference should be made to
the original documents, which can be obtained from various sources, as noted.)
ASSESSED VALUATION TABLE 1
2014 Actual Market Value of Taxable Property (100% of Actual)(a)1,184,922,227$
Less Exemptions:
Local Optional Over-65 $16,114,626
Disabled and Deceased Veterans' 3,851,277
Agricultural Productivity Loss 2,350,542
Freeport -
10% Homestead Cap Value Loss 6,959,758
Total Exempt / Prorated Property 23,336,052
Partial Exempt Property 4,740 52,616,995
2014 Certified Net Taxable Assessed Valuation(b) 1,132,305,232$ (b)
Less: Taxable Value of Accounts Incomplete/Under Review (18,922,021)$
2014 Certified Net Taxable ARB Approved Assessed Valuation 1,113,383,211$
(a) See "TAXING PROCEDURES" in the Official Statement for a description of the Issuer's taxation procedures.
(b) Includes taxable value of incomplete accounts and accounts under ARB Review.
Sources: Denton Central Appraisal District and Tarrant Appraisal District
GENERAL OBLIGATION BONDED DEBT TABLE 2
General Obligation Debt Principal Outstanding (As of November 1, 2014):
Unlimited Tax Bonds, Series 2010 1,800,000$
Unlimited Tax Refunding Bonds, Series 2012 1,980,000
Unlimited Tax Refunding Bonds, Series 2013 1,740,000
Total General Obligation Debt Principal Outstanding 5,520,000$
Current Issue General Obligation Debt Principal
Unlimited Tax Bonds, Series 2014 (the "Bonds")5,765,000$
Total General Obligation Debt Principal Outstanding (Following the Issuance of the Bonds) 11,285,000$
Interest and Sinking Fund Balance as of September 30, 2014 (unaudited) 15,253$
Ratio of General Obligation Debt Principal to 2014 Certified Net Taxable ARB Approved Assessed Valuation 1.01%
2014 Certified Net Taxable ARB Approved Assessed Valuation (a)1,113,383,211$
Population Estimates: 2000 - 6,350; 2010 - 8,042; Current 2014 (Estimate) - 11,127
Per Capita 2014 Certified Net Taxable ARB Approved Assessed Valuation - 100,061$
Per Capita General Obligation Debt Principal - 1,014$
(a) See "TAXING PROCEDURES" in the Official Statement for a description of the Issuer's taxation procedures.
OTHER OBLIGATIONS TABLE 3
Unaudited
Interest Average Principal
Year of Rate Final Annual Original Outstanding
Description Issue Payable Maturity Payment Amount as of 9-30-14
Public Property Finance
Contractual Obligations:
Fire Truck 2007 4.33% 2014 75,404$ 448,000$ -$
Capital Lease
Fire Truck 2014 2.50% 2022 127,149$ 1,057,316$ 807,316$ (a)
Notes Payable:
Equipment 2010 3.90% 2015 201,318$ 179,955$ 35,991$
Water/Wastewater Imprv's 2013 1.85% 2016 153,588 445,000 301,977
337,968$
Total Other Obligations 1,145,284$
_____________
(a)The District paid $250,000 in a down payment on October 23, 2014. The Capital Lease calls for seven additional annual
payments of $127,149 scheduled for fiscal years 2016 through 2022.
FINANCIAL INFORMATION OF THE ISSUER
A-1
GENERAL OBLIGATION DEBT SERVICE REQUIREMENTS TABLE 4
Current Total The Bonds
Fiscal Year Debt Service Combined
Sept 30 Outstanding(a)Principal Interest Total Debt Service
2015 618,507.50$ -$ 105,475.56$ 105,475.56$ 723,983.06$
2016 618,657.50 235,000.00 148,325.00 383,325.00 1,001,982.50
2017 625,782.50 240,000.00 144,800.00 384,800.00 1,010,582.50
2018 622,307.50 245,000.00 141,200.00 386,200.00 1,008,507.50
2019 633,532.50 250,000.00 137,525.00 387,525.00 1,021,057.50
2020 624,082.50 255,000.00 133,775.00 388,775.00 1,012,857.50
2021 628,332.50 265,000.00 129,312.50 394,312.50 1,022,645.00
2022 631,957.50 270,000.00 124,012.50 394,012.50 1,025,970.00
2023 633,457.50 280,000.00 118,612.50 398,612.50 1,032,070.00
2024 153,182.50 290,000.00 112,312.50 402,312.50 555,495.00
2025 152,682.50 295,000.00 105,062.50 400,062.50 552,745.00
2026 148,082.50 305,000.00 97,687.50 402,687.50 550,770.00
2027 153,367.50 315,000.00 90,062.50 405,062.50 558,430.00
2028 153,242.50 325,000.00 81,400.00 406,400.00 559,642.50
2029 152,782.50 335,000.00 72,462.50 407,462.50 560,245.00
2030 152,112.50 345,000.00 62,412.50 407,412.50 559,525.00
2031 151,162.50 360,000.00 51,200.00 411,200.00 562,362.50
2032 - 370,000.00 39,500.00 409,500.00 409,500.00
2033 - 385,000.00 27,475.00 412,475.00 412,475.00
2034 - 400,000.00 14,000.00 414,000.00 414,000.00
6,853,232.50$ 5,765,000.00$ 1,936,613.06$ 7,701,613.06$ 14,554,845.56$
__________
(a) Does not include Other Obligations indebtedness (see Table 3).
TAX ADEQUACY TABLE 5TAX ADEQUACY TABLE 5
2014 Certified Net Taxable ARB Approved Assessed Valuation 1,113,383,211$
Maximum Annual Debt Service Requirements (Fiscal Year Ending 9-30-23) 1,032,070$
Indicated Maximum Interest and Sinking Fund Tax Rate at 99% collections 0.09363$
Average Annual Debt Service Requirements (Fiscal Years 2015-2034) 727,742$
Indicated Interest and Sinking Fund Tax Rate for Average Annual Debt Service at 99% collections 0.06602$
__________
Note: Above computation is exclusive of investment earnings, delinquent tax collections and penalties and interest on
delinquent tax collections.
INTEREST AND SINKING FUND MANAGEMENT INDEX TABLE 6
Interest and Sinking Fund Balance, Fiscal Year Ended September 30, 2014 (unaudited) 15,253$
FY 2015 Interest and Sinking Fund Tax Levy of $0.04126 at 99% Collections based on the
2014 Certified Net Taxable Assessed Valuation of $1,113,383,211 Produces 454,788
FY 2015 Interest and Sinking Fund Deposit from Fire Department Rental Income 214,279
FY 2015 Public Improvement District surcharge 65,255
FY 2015 Budgeted Income from PID Utility Connection Fees Paid by Developer
(guaranteed with bank letter of credit to be deposited to I&S Fund on or before June 2015)16,525
Total Available for Debt Service 766,100$
Less: General Obligation Debt Service Requirements, Fiscal Year Ending 9-30-15(a)723,983
Estimated Surplus at Fiscal Year Ending 9-30-15(b) 42,117$ (a)
(a) Does not include delinquent tax collections, penalties and interest on delinquent tax collections or investment earnings.
A-2
PROJECTED GENERAL OBLIGATION PRINCIPAL REPAYMENT SCHEDULE TABLE 7
(As of November 1, 2014)
Principal Repayment Schedule Bonds Percent of
Fiscal Year Outstanding The Unpaid at Principal
Ending 9/30 Bonds(a)Bonds Total End of Year Retired (%)
2015 440,000$ -$ 440,000$ 10,845,000$ 3.90%
2016 450,000 235,000.00 685,000 10,160,000 9.97%
2017 470,000 240,000.00 710,000 9,450,000 16.26%
2018 480,000 245,000.00 725,000 8,725,000 22.68%
2019 505,000 250,000.00 755,000 7,970,000 29.38%
2020 510,000 255,000.00 765,000 7,205,000 36.15%
2021 530,000 265,000.00 795,000 6,410,000 43.20%
2022 550,000 270,000.00 820,000 5,590,000 50.47%
2023 570,000 280,000.00 850,000 4,740,000 58.00%
2024 110,000 290,000.00 400,000 4,340,000 61.54%
2025 115,000 295,000.00 410,000 3,930,000 65.18%
2026 115,000 305,000.00 420,000 3,510,000 68.90%
2027 125,000 315,000.00 440,000 3,070,000 72.80%
2028 130,000 325,000.00 455,000 2,615,000 76.83%
2029 135,000 335,000.00 470,000 2,145,000 80.99%
2030 140,000 345,000.00 485,000 1,660,000 85.29%
2031 145,000 360,000.00 505,000 1,155,000 89.77%
2032 - 370,000.00 370,000 785,000 93.04%
2033 - 385,000.00 385,000 400,000 96.46%
2034 - 400,000.00 400,000 - 100.00%
5,520,000$ 5,765,000$ 11,285,000$
___________
(a) Excludes all PPFCO principal outstanding (see Table 3).
FUND BALANCES TABLE 8
Unaudited
As of 9-30-14
General Fund 2,482,478$
Debt Service Fund 15,253
Capital Projects Fund 10,268
Total 2,507,999$
TAXABLE ASSESSED VALUATION FOR TAX YEARS 2007-2014 (a)TABLE 9
Tax Net Taxable
Year Assessed Valuation Amount ($)Percent (%)
2007 912,618,000$ 101,404,000 12.50%
2008 960,911,000 48,293,000 5.29%
2009 1,015,777,389 (b)54,866,389 5.71%
2010 978,509,574 (b)(37,267,815) -3.67%
2011 954,645,475 (b)(23,864,099) -2.44%
2012 993,598,863 (b)38,953,388 4.08%
2013 1,047,277,474 (b)53,678,611 5.40%
2014 1,113,383,211 (b)66,105,737 6.31%
____________
(a) Historical comparison information for Tax Years 2007-2008 represents the combined totals from two
separate entities ( Trophy Club MUD NO. 1 and Trophy Club MUD NO. 2).
(b) Excludes valuation for incomplete accounts and accounts under ARB review, as of certification date.
Sources: Denton Central Appraisal District, Tarrant Appraisal District
Note: Assessed Valuations may change during the year due to various supplements and protests, and
valuations on a later date or in other tables of this Official Statement may not match those shown
on this table.
Change From Preceding Year
A-3
CLASSIFICATION OF ASSESSED VALUATIONTABLE 10% of% of% of% of% ofCategory2014Total2013Total2012Total2011Total2010TotalLand (a)Land - Homesite 226,842,778$ 19.14% 203,037,867$ 18.32% 196,695,860$ 18.43% 193,352,075$ 18.57% 189,642,427$ 18.32%Land - Non Homesite 244,868,556 20.67% 232,983,787 21.02% 231,311,751 21.68% 236,144,259 22.68% 248,891,821 24.04%Land - Agricultural 2,356,216 0.20% 3,476,928 0.31% 3,304,866 0.31% 3,304,866 0.32% 3,957,829 0.38%Improvements (a)0.00% 0.00% 0.00% - 0.00% - 0.00%Improvements - Homesite 598,292,096 50.49% 544,853,380 49.15% 521,613,241 48.89% 497,180,522 47.75% 498,665,743 48.16%Improvements - Non Homesite 31,956,877 2.70% 28,600,784 2.58% 29,521,628 2.77% 19,001,251 1.82% 19,724,323 1.90%Personal Property 80,544,647 6.80% 95,502,232 8.62% 84,437,150 7.91% 91,866,777 8.82% 73,302,378 7.08%Mineral Property61,057 0.01%95,857 0.01%111,186 0.01%444,407 0.04%1,263,858 0.12%Total Appraised Value1,184,922,227$ 100.00%1,108,550,835$ 100.00%1,066,995,682$ 100.00%1,041,294,157$ 100.00%1,035,448,379$ 100.00%Less Exemptions:Exemptions (a)Optional Over-65 16,114,626$ 15,664,714$ 14,745,603$ 13,436,103$ 12,886,387$ Disabled and Deceased Veterans' 3,851,277 3,245,975 3,118,815 2,864,298 1,805,306 Agricultural Productivity Loss 2,350,542 3,467,784 3,296,413 3,296,361 3,949,539 Freeport - - - - - Homestead Cap Adjustment 6,959,758 1,559,493 2,224,166 1,127,925 1,391,082 Total Exempt Property 23,336,052 21,205,523 23,398,421 22,745,880 22,572,987 Partial Exempt Property4,740 6,515 4,406 5,894 131,554 Total Exemptions52,616,995$ 45,150,004$ 46,787,824$ 43,476,461$ 42,736,855$ Certified Net Taxable 1,132,305,232$ (b)1,063,400,831$ (b)1,020,207,858$ (b)997,817,696$ 992,711,524$ Assessed ValuationLess: Taxable Value of Accounts Incomplete/Under Review(18,922,021)$ (16,123,357)$ (26,608,995)$ (43,172,221)$ (14,201,850)$ Certified Net Taxable ARB Approved Assessed Valuation1,113,383,211$ 1,047,277,474$ 993,598,863$ 954,645,475$ 978,509,674$ _____________Source: Denton Central Appraisal District, Tarrant Appraisal District Note: Assessed Valuations may change during the year due to various supplements and protests, and valuations on a later date or in other tables of this Official Statement may not match those shown on this table.Note: Appraised figures for Tarrant County already reflect the loss for Homestead Cap Value.A-4
PRINCIPAL TAXPAYERS 2014-2015 TABLE 11
% of Total 2014
2014 Net Taxable Assessed
Name Assessed Valuation Valuation
5 Village Circle Holdings, LP (a)Commercial Office Complex 140,344,165$ 12.61%
Marsh USA Inc. Insurance Consultant / Data Center 21,098,171 1.89%
CNL RETMT CRSI Trophy Club Texas LP Medical Plaza / Hospital 18,000,000 1.62%
Trophy Club 12 LLC Commercial Real Estate 14,481,513 1.30%
Corelogic Solutions LLC Commercial Real Estate 14,473,635 1.30%
Armore Trophy Club LLC Real Estate Development 8,950,000 0.80%
Hydra Hotels LLC Hotel (Hampton Inn) 6,520,997 0.59%
Levi Strauss & Co. Commercial Office 5,903,735 0.53%
Trophy Club Medical Center Healthcare Services 5,563,287 0.50%
4663 Okeechobee Blvd & Palm Beach Holdings Real Estate Development
5,352,159 0.48%
Total 240,687,662$ 21.62%* (b)
* Based on a 2014 Certified Net Taxable ARB Approved Assessed Valuation of 1,113,383,211$
_____________
PROPERTY TAX RATES AND COLLECTIONS (a) (b)TABLE 12
Net Taxable Adjusted
Tax Assessed Tax Tax % Collections Fiscal Year
Year Valuation Rate Levy Current Total Ended
2006 811,214,000$ 0.280000$ 2,191,536$ 100.62% 100.36% 9-30-07
2007 912,618,000 0.230000 2,234,909 100.62% 100.36% 9-30-08
2008 960,911,000 0.244615 2,380,679 98.94% 99.58% 9-30-09
2009 1,015,777,389 (c)0.205000 2,091,414 99.66% 100.75% 9-30-10
2010 978,509,574 (c)0.195000 2,047,972 99.58% 100.36% 9-30-11
2011 954,645,475 (c)0.175000 1,714,788 99.49% 99.60% 9-30-12
2012 993,598,863 (c)0.133390 1,581,619 99.72% 100.63% 9-30-13
2013 1,047,277,474 (c)0.133390 1,417,771 99.32%(d)99.43%(d)9-30-14
(a) See "TAXING PROCEDURES - Levy and Collection of Taxes" in the body of the Official Statement for a complete discussion of the
District's provisions.
(b) Historical comparison information for Tax Years 2006-2008 represents the combined totals from two separate entities
( Trophy Club MUD NO. 1 and Trophy Club MUD NO. 2).
(c) Excludes value of incomplete accounts and accounts under ARB review, as of certification
(d) As of September 30, 2014 (unaudited).
Source: Texas Municipal Report published by the Municipal Advisory Council of Texas, the Denton Central Appraisal District and the Issuer
Note: Assessed Valuations may change during the year due to various supplements and protests, and valuations on a later date
or in other tables of this Official Statement may not match those shown on this table.
(a) Taxpayer formerly Maguire Thomas Partners ETAL. Name shown above is name listed on Tarrant Appraisal District records.
Current owner also known as BRE Solana LLC.
(b) Based on the 2014 Certified Net Taxable ARB Approved Assessed Valuation, which excludes taxable values for incomplete
accounts and accounts under ARB Review.
Source: Texas Municipal Report published by the Municipal Advisory Council of Texas, Denton Central Appraisal District and the
Issuer.
A-5
TAX RATE DISTRIBUTION TABLE 13
2014-2015 2013-2014 2012-2013 2011-2012 2010-2011
Operations $0.01486 $0.00935 $0.00989 $0.00989 $0.00879
Fire Protection 0.07727 0.08738 0.10400 0.10925 0.10925
Debt Service 0.04126 0.03666 0.01950 0.05586 0.07696
TOTAL $0.13339 $0.13339 $0.13339 $0.17500 $0.19500
__________
Sources: Texas Municipal Report published by the Municipal Advisory Council of Texas
DIRECT AND OVERLAPPING DEBT DATA INFORMATION TABLE 14
(As of November 1, 2014)
Gross Debt % Amount
Taxing Body Principal Overlapping Overlapping
Carroll Independent School District 226,024,791$ 3.30% 7,458,818$
Denton County 614,975,000 1.15% 7,072,213
Northwest Independent School District 737,438,319 5.72% 42,181,472
Tarrant County 317,820,000 0.20% 635,640
Tarrant County College District 7,935,000 0.20% 15,870
Tarrant County Hospital District 24,425,000 0.20% 48,850
Town of Trophy Club 14,727,000 80.13% 11,800,745
Westlake, Town of 29,304,000 18.35% 5,377,284
Total Net Overlapping Debt 1,972,649,110$ 74,590,892$
Trophy Club MUD No. 1 11,285,000 (a)100.00% 11,285,000 (a)
Total Gross Direct Principal and Overlapping Debt 1,983,934,110$ 85,875,892$ (a)
Ratio of Direct and Overlapping Debt to 2014 Certified Net Taxable ARB Approved Assessed Valuation 7.71%
(a)
Ratio of Direct and Overlapping Debt to 2014 Market Value 7.25%
(a)
Per Capita Direct and Overlapping Debt $7,718 (a)
__________
(a) Includes the Bonds.
Source: Most Recent Texas Municipal Reports published by the Municipal Advisory Council of Texas.
ASSESSED VALUATION AND TAX RATE OF OVERLAPPING ENTITIES TABLE 15
2014 Net Taxable 2014
Governmental Entity Assessed Valuation % of Actual Tax Rate(a)
Carroll Independent School District 3,274,504,723$ 100% 1.400000$
Denton County 63,594,441,842 100% 0.272200
Northwest Independent School District 11,075,535,331 100% 1.452500
Tarrant County 132,971,955,288 100% 0.264000
Tarrant County College District 133,754,637,419 100% 0.149500
Tarrant County Hospital District 133,230,920,130 100% 0.227897
Town of Trophy Club 1,225,516,256 100% 0.490000
Westlake, Town of 904,126,123 100% 0.156340
__________
Source: Most recent Texas Municipal Reports published by The Municipal Advisory Council of Texas and Denton and Tarrant
County Appraisal Districts
The following table indicates the indebtedness, defined as outstanding bonds payable from ad valorem taxes, of
governmental entities overlapping the District and the estimated percentages and amounts of such indebtedness
attributable to property within the District. This information is based upon data secured from the individual jurisdictions
and/or the Texas Municipal Reports published by the Texas Municipal Advisory Council. Except for the amounts relating
to the District, the District has not independently verified the accuracy or completeness of such information, and no person
should rely upon such information as being accurate or complete. Furthermore, certain of the entities listed below may
have issued additional bonds since the date stated, and such entities may have programs requiring the issuance of
substantial amounts of additional bonds, the amount of which cannot be determined.
A-6
AUTHORIZED BUT UNISSUED DIRECT GENERAL OBLIGATION BONDS TABLE 16
Date of Amount Issued This
Taxing Body Authorization Purpose Authorized To Date Issue Unissued
Trophy Club MUD No. 1 10-07-75 Water & Sewer 12,344,217$ 11,115,000$ 1,229,217$ -$
04-04-81 Water & Sewer 6,450,000 6,450,000 - -
04-04-81 Water & Sewer 5,800,000 3,760,000 2,040,000 -
10-29-88 Water & Sewer 2,500,000 - 2,495,783 4,217 (a)
05-10-08 Fire Station
2,000,000 2,000,000 - -
27,094,217$ 21,325,000$ 5,765,000$ 4,217$ (a)
__________
(a) The District does not plan to issue these remaining authorized bonds.
AUTHORIZED BUT UNISSUED GENERAL OBLIGATION BONDS
OF OVERLAPPING GOVERNMENTAL ENTITIES TABLE 17
Date of Amount Issued
Taxing Body Authorization Purpose Authorized To Date Unissued
Carroll ISD None
Denton County 01-16-99 Road 85,320,000$ 77,629,375$ 7,690,625$
05-15-04 Road 186,970,000 186,970,000 -
05-15-04 County Offices 17,900,000 17,900,000 -
05-15-04 Equipment 2,000,000 - 2,000,000
11-04-08 Road 310,000,000 231,225,532 78,774,468
11-04-08 County Buildings
185,000,000 118,593,406 66,406,594
787,190,000$ 632,318,313$ 154,871,687$
Northwest I S D 05-10-08 School Buildings 260,000,000$ 215,000,000$ 45,000,000$
11-06-12 School Buildings
255,000,000 125,000,000 130,000,000
515,000,000$ 340,000,000$ 175,000,000$
Tarrant County 04-04-87 Courthouse Improv. 47,000,000$ 46,500,000$ 500,000$ (a)
08-08-98 Law Enforcement Ct 70,600,000 63,100,000 7,500,000
08-08-98 Healthcare Facility 9,100,000 1,000,000 8,100,000
08-08-98 Jail 14,600,000 14,600,000 -
05-13-06 Road & Bridge 200,000,000 166,700,000 33,300,000
05-13-06 Jail 108,000,000 108,000,000 -
05-13-06 County Buildings 62,300,000 47,300,000 15,000,000
05-13-06 Juvenile Deten. Ctr. 36,320,000 4,200,000 32,120,000
05-13-06 County Offices
26,500,000 26,500,000 -
574,420,000$ 477,900,000$ 96,520,000$
Tarrant Co. College Dist None
Tarrant Co. Hospital Dis None
Trophy Club, Town of None
Westlake, Town of None
__________
(a) The County will not issue authorization due to age.
Source: Most recent Texas Municipal Reports published by The Municipal Advisory Council of Texas and the Issuer.
A-7
GENERAL FUND COMPARATIVE SCHEDULES OF
REVENUES AND EXPENDITURES TABLE 18
Fiscal Year Ended September 30
2013 2012 2011 2010 2009
Revenue and Other Financing Sources:
Ad Valorem Property Taxes 1,426,185$ 1,374,808$ 1,311,296$ 1,491,564$ 1,283,705$
Water & Wastewater Charges 5,467,371 5,210,077 5,323,244 3,919,084 3,721,868
Utility Fees 508,300 647,080 165,600 80,500 515,200
Inspection and Tap Fees 9,600 9,009 8,560 5,775 4,975
Investment Income 4,641 5,706 5,534 6,171 20,755
Other Financing Sources - Debt Issue - 1,100,000 - - 330,000
Miscellaneous and Other 214,294 215,227 240,831 191,498 199,780
Total Revenues and Other Financing
Sources:7,630,391$ 8,561,907$ 7,055,065$ 5,694,592$ 6,076,283$
Expenditures and Other Financing Uses:
Administrative and Other 1,476,467$ 1,097,547$ 1,042,073$ 993,986$ 1,297,613$
Water Operations 2,623,822 2,503,331 2,271,490 1,882,511 1,811,385
Transfers Out and Debt Service 1,115,390 1,011,260 1,130,123 558,000 383,009
Wastewater Operations 896,538 614,102 598,465 711,382 999,388
Wastewater Collection System 322,017 260,895 277,775 308,798 294,869
Information Systems - 173,386 123,605 182,658 175,698
Contribution to Trophy Club Fire Dept. 790,779 822,307 770,123 876,521 783,736
Capital Outlay 462,876 1,562,809 515,884 - -
Total Expenditures and Other Financing
Uses: 7,687,889$ 8,045,637$ 6,729,538$ 5,513,856$ 5,745,698$
Excess (Deficit) of Revenues and Other
Financing Sources Over (Under)
Expenditures and Other Financing Uses (57,498)$ 516,270$ 325,527$ 180,736$ 330,585$
Beginning Fund Balance - October 1
(Restated)3,854,711 3,338,441 3,012,914 2,832,178 2,501,593
Ending Fund Balance - September 30 3,797,213$ (a)3,854,711$ 3,338,441$ 3,012,914$ 2,832,178$
Total Active Retail Connections
Water and/or Wastewater Connections 3,096 (b)3,887 3,554 3,361 3,161
_________
(a) The District anticipates that the General Fund balance for Fiscal Year 2014 will be approximately $2,482,478. Reduction in the
General Fund Balance was due to (1) funding of engineering cost for wastewater treatment plant expansion to be reimbursed from
Bond proceeds and (2) legal fees associated with the Bond Validation Lawsuit.
(b) Excludes approximately 1,223 Public Improvement District ("PID") customers. Under the terms of a 2013 revised contract with
the Town of Trophy Club, water and sewer customers located in the PID will be wholesale customers of the District and therefore
will be excluded from the District's total customer count.
Source: The Issuer's Audited Financial Statements
A-8
DEBT SERVICE FUND COMPARATIVE SCHEDULES OF
REVENUES AND EXPENDITURES TABLE 19
Fiscal Year Ended September 30
2013 2012 2011 2010 2009
Revenue and Other Financing Sources:
Ad Valorem Property Taxes 201,207$ 547,587$ 771,631$ 740,420$ 1,100,115$
Penalties and Interest 1,688 3,226 6,018 - 11,885
Intergovernmental 503,000 308,000 554,100 653,000 383,009
Interest Earned 11,900 1,294 985 4,848 4,105
Miscellaneous and Other - 10,782 - 1,000 -
Total Revenues and Other Financing
Sources:717,795$ 870,889$ 1,332,734$ 1,399,268$ 1,499,114$
Expenditures and Other Financing Uses:
Principal Retirement 605,000$ 565,000$ 1,115,000$ 1,055,000$ 1,025,000$
Interest and Fiscal Charges 231,333 277,319 382,019 311,570 352,194
Total Expenditures and Other Financing
Uses: 836,333$ 842,319$ 1,497,019$ 1,366,570$ 1,377,194$
Excess (Deficit) of Revenues and Other
Financing Sources Over (Under)
Expenditures and Other Financing Uses (118,538)$ 28,570$ (164,285)$ 32,698$ 121,920$
Beginning Fund Balance - October 1(Restated)
(Restated)136,417 107,847 272,132 239,434 117,514
Ending Fund Balance - September 30 17,879$ 136,417$ 107,847$ 272,132$ 239,434$
_________
Source: The Issuer's Audited Financial Statements
A-9
[This page is intentionally left blank.]
APPENDIX B
GENERAL INFORMATION REGARDING THE TOWN OF TROPHY CLUB AND DENTON COUNTY, TEXAS
B-1
GENERAL INFORMATION REGARDING THE TOWN OF TROPHY CLUB
AND DENTON COUNTY, TEXAS
TOWN OF TROPHY CLUB
General
The Town of Trophy Club (the “Town”), incorporated in January of 1985, is Texas’s first premiere planned residential and
country-club community. The Town is located in the southern portion of the Denton County (the “County”) on State Highway 114
approximately 8 miles west of the City of Grapevine, 17 miles south of the City of Denton and 14 miles northwest of the Dallas-
Fort Worth International Airport. Lake Grapevine is located approximately 2 miles north and east of the Town. The majority of
property within the Town consists of single-family and multi-family housing. The Solana Business Complex is located adjacent to
the Town's eastern border in the cities of Westlake and Southlake. Both residents and businesses of the Town are furnished
water and wastewater treatment from Trophy Club Municipal Utility District No. 1. The Town's 2010 Census was 8,024, which is
a 26.65% increase over the 2000 Census. The Town's 2014 population estimate is 10,866.
_________________
Source: Latest Texas Municipal Report published by the Municipal Advisory Council of Texas, U.S. Census Report, North
Central Texas Council of Governments and the Town of Trophy Club.
Population:
Year
Town of
Trophy Club
Denton
County
Current Estimate 10,866 728,799
2010 Census 8,024 662,614
2000 Census 6,350 423,976
1990 Census 3,922 273,525
1980 Census N/A 143,126
___________
Sources: United States Bureau of the Census and the Town of Trophy Club
B-2
Leading Employers in the District:
Employer
Type of Business
Estimated
Number of
Employees
BRE Solana, LLC Commercial Office Complex 3,531(a)
Northwest Independent School District Public School District 341
Trophy Club Country Club Country Club 150
Baylor Medical Center at Trophy Club Healthcare Services 125
Town of Trophy Club & Trophy Club MUD #1 Municipal Governmental Entities 93
Tom Thumb Retail Grocery 90
Christina’s Mexican Restaurant Restaurant 45
Fellowship United Methodist Church Church 39
Church at Trophy Lake Church 30
Walgreen’s Retail Sales 23
Bank of America Financial Services 11
___________
(a) Employees for combined businesses.
Source: Information from the Issuer
DENTON COUNTY
General
Denton County (the “County”) is located in north central Texas. The County was created in 1846. It is the ninth most populous
county in the state occupying a land area of 911 square miles. The population of the County has grown over 50% since the 2000
census. The County seat is the City of Denton.
The economy is diversified by manufacturing, state supported institutions, and agriculture. The Texas Almanac designates
cattle, horses, poultry, hay, wheat and sorghum as the principal sources of agricultural income. Minerals produced in Denton
County include natural gas and clay. Institutions of higher education include the University of North Texas and Texas Woman’s
University with a combined enrollment of over 50,000.
Nearby Lake Lewisville attracts over 3,000,000 visitors annually.
Alliance Airport, the largest industrial airport in the world is located in the county and continues to attract new transportation,
distribution, and manufacturing tenants. The Texas Motor Speedway, a major NASCAR race track, was completed in 1997 and
has had a positive impact on employment and recreational spending for the area. A major Wal-Mart distribution center located in
Sanger is adding to the growth of the northern portion of the County. Large housing developments that were begun several
years ago have been completed and new developments such as Rayzor Ranch, the Hills of Denton, Hunter Ranch and Cole
Ranch are expected to add over 28,000 new housing units in the next 20 years.
__________
Source: Texas Municipal Report and information from the County.
Labor Force Statistics
Denton County
September
2014
September
2013
Civilian Labor Force 407,027 399,115
Total Employed 388,860 377,579
Total Unemployed 18,167 21,536
% Unemployed 4.5% 5.4%
% Unemployed (Texas) 5.0% 6.2%
% Unemployed (United States) 5.7% 7.0%
___________
Source: Texas Workforce Commission, Labor Market Information Department.
B-3
Major Employers in Denton County
Number of
Employer Principal Line of Business Employees
University of North Texas Higher Education 8,887
Lewisville Independent School District Public School Education 6,312
Wal-Mart Retail Sales 3,900
Denton Independent School District Public School Education 3,067
Nationstar Mortgage Real Estate Loans 2,810
Peterbilt Motors Heavy Duty Truck Manufacturing 2,100
Texas Woman’s University Higher Education 1,787
Northwest Independent School District Public School Education 1,638
Denton State School Sate Mental Health Facility / Services 1,600
Denton County County Government 1,490
City of Denton City Government 1,300
Texas Health Presbyterian Hospital Hospital 1,074
__________
Source: North Central Texas Council of Governments
[This page is intentionally left blank.]
APPENDIX C
FORM OF LEGAL OPINION OF BOND COUNSEL
47239725.1/11411679
Fulbright & Jaworski LLP is a limited liability partnership registered under the laws of Texas.
Fulbright & Jaworski LLP, Norton Rose Fulbright LLP, Norton Rose Fulbright Australia, Norton Rose Fulbright Canada LLP, Norton Rose Fulbright
South Africa (incorporated as Deneys Reitz, Inc.), each of which is a separate legal entity, are members of Norton Rose Fulbright Verein, a Swiss
Verein. Details of each entity, with certain regulatory information, are at nortonrosefulbright.com. Norton Rose Fulbright Verein helps coordinate the
activities of the members but does not itself provide legal services to clients.
Fulbright & Jaworski LLP
2200 Ross Avenue, Suite 2800
Dallas, Texas 75201-2784
United States
Tel +1 214 855 8000
Fax +1 214 855 8200
nortonrosefulbright.com
[Closing Date]
IN REGARD to the authorization and issuance of the "Trophy Club Municipal Utility District
No. 1 Unlimited Tax Bonds, Series 2014", dated December 15, 2014, in the aggregate principal
amount of $5,765,000 (the "Bonds"), we have examined into their issuance by the Trophy Club
Municipal Utility District No. 1 (the "District") solely to express legal opinions as to the validity of
the Bonds and the exclusion of the interest on the Bonds from gross income for federal income
tax purposes, and for no other purpose. We have not been requested to investigate or verify,
and we neither expressly nor by implication render herein any opinion concerning, the financial
condition or capabilities of the District, the disclosure of any financial or statistical information or
data pertaining to the District and used in the sale of the Bonds, or the sufficiency of the security
for or the value or marketability of the Bonds.
THE BONDS are issued in fully registered form only and in denominations of $5,000 or any
integral multiple thereof (within a maturity). The Bonds mature on September 1 in each of the
years specified in the order adopted by the Board of Directors of the District authorizing the
issuance of the Bonds (the "Order"), unless redeemed prior to maturity in accordance with the
terms stated on the Bonds. The Bonds accrue interest from the dates, at the rates, and in the
manner and interest is payable on the dates, all as provided in the Order.
IN RENDERING THE OPINIONS herein we have examined and rely upon (i) original or certified
copies of the proceedings relating to the issuance of the Bonds, including the Order, and an
examination of the initial Bond executed and delivered by the District (which we found to be in
due form and properly executed), (ii) certifications of officers of the District relating to the
expected use and investment of proceeds of the sale of the Bonds and certain other funds of
the District and (iii) other documentation and such matters of law as we deem relevant. In the
examination of the proceedings relating to the issuance of the Bonds, we have assumed the
authenticity of all documents submitted to us as originals, the conformity to original copies of all
documents submitted to us as certified copies, and the accuracy of the statements contained in
such documents and certifications.
BASED ON OUR EXAMINATION, we are of the opinion that, under applicable laws of the State
of Texas in force and effect on the date hereof:
1. The Bonds have been duly authorized by the District and, when issued in
compliance with the provisions of the Order, are valid, legally binding, and enforceable
obligations of the District, payable from the proceeds of an ad valorem tax levied, without legal
limit as to rate or amount, upon all taxable property within the District, except to the extent that
Page 2 of Legal Opinion of Fulbright & Jaworski LLP
Re: "Trophy Club Municipal Utliity District No. 1 Unlimited Tax Bonds, Series 2014", dated
December 15, 2014
47239725.1/11411679
the enforceability thereof may be affected by bankruptcy, insolvency, reorganization,
moratorium, or other similar laws affecting creditors’ rights or the exercise of judicial discretion in
accordance with general principles of equity.
2. Pursuant to section 103 of the Internal Revenue Code of 1986, as amended to
the date hereof (the "Code"), and existing regulations, published rulings, and court decisions
thereunder, and assuming continuing compliance after the date hereof by the District with the
provisions of the Order relating to sections 141 through 150 of the Code, interest on the Bonds
for federal income tax purposes (a) will be excludable from the gross income, as defined in
section 61 of the Code, of the owners thereof, and (b) will not be included in computing the
alternative minimum taxable income of individuals or, except as hereinafter described,
corporations. Interest on the Bonds owned by a corporation will be included in such
corporation’s adjusted current earnings for purposes of calculating the alternative minimum
taxable income of such corporations, other than an S corporation, a qualified mutual fund, a real
estate mortgage investment conduit, a real estate investment trust, or a financial asset
securitization investment trust ("FASIT"). A corporation’s alternative minimum taxable income is
the basis on which the alternative minimum tax imposed by section 55 of the Code will be
computed.
WE EXPRESS NO OPINION with respect to any other federal, state, or local tax consequences
under present law or any proposed legislation resulting from the receipt or accrual of interest on,
or the acquisition or disposition of, the Bonds. Ownership of tax-exempt obligations such as the
Bonds may result in collateral federal tax consequences to, among others, financial institutions,
life insurance companies, property and casualty insurance companies, certain foreign
corporations doing business in the United States, S corporations with subchapter C earnings
and profits, owners of an interest in a FASIT, individual recipients of Social Security or Railroad
Retirement benefits, individuals otherwise qualifying for the earned income tax credit and
taxpayers who may be deemed to have incurred or continued indebtedness to purchase or
carry, or who have paid or incurred certain expenses allocable to, tax-exempt obligations.
OUR OPINIONS ARE BASED on existing law, which is subject to change. Such opinions are
further based on our knowledge of facts as of the date hereof. We assume no duty to update or
supplement our opinions to reflect any facts or circumstances that may thereafter come to our
attention or to reflect any changes in any law that may thereafter occur or become effective.
Moreover, our opinions are not a guarantee of result and are not binding on the Internal
Revenue Service; rather, such opinions represent our legal judgment based upon our review of
existing law that we deem relevant to such opinions and in reliance upon the representations
and covenants referenced above.
APPENDIX D
EXCERPTS FROM THE DISTRICT’S AUDITED FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2013
(Independent Auditor's Report, Management’s Discussion and Analysis, General Financial Statements and Notes to the Financial
Statements - not intended to be a complete statement of the Issuer's financial condition. Reference is made to the complete Annual
Financial Report for further information.)
[This page is intentionally left blank.]
Financial Advisory Services
Provided By:
INVESTMENT BANKERS