R2009-148 - 2009-09-14RESOLUTION NO. R2009-148
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF PEARLAND,
TEXAS, APPROVING A BOND ORDER OF BRAZORIA COUNTY
MUNICIPAL UTILITY DISTRICT N0.2 AUTHORIZING THE ISSUANCE OF
$6,390,000 UNLIMITED TAX AND REVENUE REFUNDING BONDS,
SERIES 2009.
WHEREAS, the Brazoria County Municipal Utility District No. 2 (the "District") is
located within the extraterritorial jurisdiction and the incorporated limits of the City of
Pearland, Texas (the "City"); and
WHEREAS, by Resolution No. R 81-2, dated January 26, 1981, the City consented
to the creation of the District, and placed certain conditions on the issuance of bonds by
the District, including the approval by the City Council of the District's issuance of such
bonds; and
WHEREAS, the City Council has considered the District's proposed $6,390,000
Unlimited Tax and Revenue Refunding Bonds, Series 2009, and has found it to be
acceptable; now, therefore,
BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF PEARLAND, TEXAS:
Section 1. All of the matters and facts set forth in the preamble hereof are true
and correct.
Section 2. The bond order of the board of directors of Brazoria County Municipal
Utility District No. 2, authorizing the issuance of its $6,390,000 Unlimited Tax and Revenue
Refunding Bonds, Series 2009, is hereby approved.
Section 3. This Resolution shall take effect immediately from and after its
passage in accordance with the provisions of the Charter of the City of Pearland and it is
accordingly so resolved.
RESOLUTION NO. R2009-148
PASSED, APPROVED and ADOPTED this the 14t"day of Sep ber, A. D., 2009.
£~.Q
TO REID
MAYOR
ATTEST:
Y NG G, C
Y S ETAR
APPROVED AS TO FORM:
1.~---~
DARRIN M. COKER
CITY ATTORNEY
ACE ItowNF.0FIMMJAS!NC eK/:7a8119tirt3 Nr►MMARKS THIS MAT:I AST PACE--Ave Isvulkl,nn Primliftn i BOD Ff67748 002.00.00.00 6
E M o PRELIMINARY OFFICIAL STATEMENT DATED SEPTEMBER 9, 2009
22>t This Preliminary Official Statement is subject to completion and amendment and is intended solely for the solicitation ofinitiai bids to
o a c purchase the Bonds.Upon the sale of the Bonds,the Official Statement will be completed and delivered to the Underwriters.
7:a
o
EL THE DELIVERY OF THE BONDS IS SUBJECT TO THE OPINIONS OF BOND COUNSEL AS TO THE VALIDITY OF THE BONDS
m m AND OF SPECIAL TAX COUNSEL,TO THE EFFECT THAT INTEREST ON THEBONDS IS EXCLUDABLE FROM GROSS INCOME FOR
a7 , FEDERAL INCOME TAXATION,UNDER EXISTING STATUTES,REGULATIONS,PUBLISHED RULINGS AND COURT DECISIONS,AS
u w m DESCRIBED UNDER"TAX MATTERS"HEREIN.SEE"LEGAL MATTERS"AND "TAX MATTERS"HEREIN FOR A DISCUSSION OF
moo THE OPINIONS OF BOND COUNSEL AND SPECIAL TAX COUNSEL, INCLUDING A DESCRIPTION OFALTERNATIVE AIINIMUM
3 v, TAX CONSEQUENCES FOR CORPORATIONS.
m as The District has designated the Bonds as "Qualified Tar-Ereanpt Obligations"for financial institutions. See "TAX MATTERS—
o`m 2 Qualified Tar-Ereiupt Obligations"herein,
m a'0 NEW ISSUE Standard&Poor's Ratings Services( )..."AAA"
o Va v (See 93OND INSURANCE"and "RATINGS"herein)
0 itsE $6,390,000
N N BRAZORIA COUNTY MUNICIPAL UTILITY DISTRICT NO. 2
,fit a (A Political Subdivision of the State of Texas,located within Brazoria County,Texas)
5 O
f°U WATERWORKS AND SEWER SYSTEM COMBINATION
E o'
si UNLIMITED TAX AND REVENUE REFUNDING BONDS, SERIES 2009
m m ff Dated:October 1,2009 • Due:September 1,as shown below
m c Principal of the above-described bonds(the"Bonds")is payable at stated maturity or redemption upon presentation of the
N ° Bonds at the principal payment office of the paying agent/registrar,initially,The Bank of New York Mellon Trust Company,
N.A.,currently in Dallas,Texas,or any successor paying agent/registrar(the"Paying Agent,""Registrar"or"Paying Agent/
2I'm Registrar").Interest on the Bonds is payable on March 1,2010(five-month interest payment),and on each September 1 and
~a 2 March 1 thereafter until maturity or prior redemption.The Bonds will be issued as fully registered Bonds in the denomination of
E
.co
° $0,000 or integral multiples thereof.The Bonds are not subject to optional redemption prior to their scheduled maturities.
=E•°c The Bonds will be registered in the name of Cede&Co.,as nominee for The Depository Trust Company,New York,New
E m York("DTC"),which will act as securities depository for the Bonds.Beneficial owners of the Bonds will not receive physical
n ra 3 certificates representing the Bonds,but will receive a credit balance on the books of the nominees of such beneficial owners.So
°•'a1 long as Cede&Co.is the registered owner of the Bonds,the principal of and interest on the Bonds will bepaid bythe Pain
oL S P P Paying
Agent directly to DTC,which will,in turn,remit such principal and interest to its participants For subsequent disbursement to the
ag, beneficial owners of the Bonds as described herein. See"THE BONDS—Book-Entry-Only System."
E S.3 The scheduled payment of the principal of and interest on the Bonds when due will be guaranteed under an insurance policy
o a° to be issued by concurrently with the delivery of the Bonds by .
y F PRINCIPAL AMOUNTS,MATURITIES,INTEREST RATES AND INITIAL REOFFERING RING YIELDS
m= Initial Initial
m ° Principal Maturity Interest Reoffering Principal Maturity Interest Reoffering
•c H o Amount (September t) Rate Yieid(a) Amount (September 1) Role Yield(a)
m aa3 re m $105,000 2010 % 95 S965,000 2014
R.L':a 800,000 2011 9E0.000 2015
-0'm Ti 810.000 2012 860,000 2016 '
g L_ 940,000 2013 890,000 2017
o' o (a) Information with respect to the initial reoffering yields of the Bonds has been provided by the Underwriters(hereinafter defined).Initial reoffering yields
0 Cc representing the initial offering price to the public of a substantial amount of the Bonds[breach maturity,which may be changed for subsequent purchasers.
o '7
m-mow The proceeds of the Bonds,together with certain lawfully available funds of the District,will be applied to refund certain
E�0 outstanding bonds of the District and to pay certain costs incurred in connection with the issuance of the Bonds.See"PLAN OF
t€3 FINANCING—Use of Bond Proceeds."The Bonds,when issued,will constitute valid and binding obligations of the District
m 2 c and will be payable from the proceeds of an annual ad valorem tax,without legal limitation as to rate or amount,levied against
P E all taxable property located within the District,and are further payable from and secured by a pledge of and lien on certain Net
E E° Revenues(as defined herein),if any,of the District's waterworks and sewer system(the"System"),to the extent and upon the
i:0 N conditions described herein.The System Is not expected to produce sufficient Net Revenues to make significant contributions,if
m m:3 any,to future debt service payments.See"THE BONDS—Source of Payment."Neither the State of Texas,Brazoria County,
m—_,, Texas,the City of Pearland,Texas,nor any political subdivision other than the District shall be obligated to pay the principal of
Nro and interest on the Bonds.Neither the faith and credit nor the taxing power of the State of Texas,Brazoria County,Texas,nor the
7,'a c City of Pearland,Texas, is pledged to the payment of the principal of and interest on the Bonds.
o E� The Bonds will be delivered when, as and if issued and accepted by the Underwriters, subject to prior sale and to the
m 9'; approval of the Attorney General of Texas; Paul A. .Phi lbin & Assoc., P.C., Houston, Texas, Bond Counsel, and McCall,
E rna N Parkhurst&Horton L.L.P.,Dallas,Texas,Special Tax Counsel.Certain legal matters will be passed upon for the Underwriters
•• by McCall,Parkhurst&Horton L.L.P.,Dallas,Texas. Delivery of the Bonds is expected on or about October .2009.
Ncir RBC CAPITAL MARKETS
Ht`o FIRST SOUTHWEST COMPANY
TABLE OF CONTENTS
Page
USE OF INFORMATION IN OPEICIAL STATEMENT 3
SALE AND DISTRIBUTION OF THE BONDS 3
Underwriters 3
Prices and Marketability 3
Securities Laws 4
BOND INSURANCE 4
Bond Insurance Policy 4
RATINGS 4
OFFICIAL STATEMENT SUMMARY 5
INTRODUCTION 12
THE BONDS 12
General 12
Book-Entry-Only System 12
Assignments,Transfers and Exchanges 14
Authorization of the Bonds 14
Source of Payment 14
Redemption Provisions 15
Defeasance 15
Amendments to Bond Order 16
Annexation and Consolidation 16
Legal Ability to Issue Additional Debt 16
Registered Owners'Remedies 17
Bankruptcy Limitation to Registered Owners'Rights 17
Legal Investment and Eligibility to Secure Public Funds in Texas 18
PLAN OF FINANCING 19
Use of Bond Proceeds 19
The Non-Refunded Bonds 20
Escrow Agreement 21
Sources and Uses of Funds 21
INVESTMENT CONSIDERATIONS 22
General 22
Factors Affecting Taxable Values and Tax Payments 22
Maximum Impact on District Tax Rates 22
Tax Collection Limitations 23
Production of Net Revenues 23
Registered Owners'Remedies and Bankruptcy 23
Marketability 24
Future Debt 24
Continuing Compliance with Certain Covenants 24
AERIAL PHOTOGRAPH OF THE DISTRICT 25
PHOTOGRAPHS WITHIN THE DISTRICT 26
PHOTOGRAPHS WITHIN 1'Hh DISTRICT 27
DISTRICT DEBT 28
General 28
Bonded Indebtedness 28
Estimated Direct and Overlapping Debt Statement 29
Debt Service Requirements 30
TAXING PROCEDURES 31
Authority 31
Exempt Property 31
County-Wide Appraisal District 32
Assessment and Levy 32
District and Taxpayer Remedies 33
Collection 33
Rollback 33
District's Rights in the Event of Tax Delinquencies 33
TAX DATA 34
General 34
Maintenance Tax 34'
Historical Values and Tax Collection History 35
Tax Rate Calculations 36
Tax Rate Distribution 36
Analysis of Tax Base 37
Principal 2009 Property Owners 37
Estimated Overlapping Taxes 38
THE DISTRICT 38
Authority 38
Description 38
Silverlake Project 39
Management of the District 39
DEVELOPMENT AND HOME CONSTRUCTION 40
Land Development and Home Construction Summary 41
FUTURE DEVELOPMENT 42
THE SYSTEM 42
Regulation 42
Description 43
Waterworks and Sewer System Operating Statement 45
LEGAL MArthRS 46
Legal Opinions 46
No Arbitrage 46
No-Litigation Certificate 47
No Material Adverse Change 47
TAX MATTERS 47
Opinion 47
Federal Income Tax Accounting Treatment of Original Issue Discount 48
Collateral Federal Income Tax Consequences 48
State,Local and Foreign Taxes 49
Qualified Tax-Exempt Obligations 49
VERIFICATION OF ACCURACY OF MATHEMATICAL COMPUTATION 50
SOURCES OF INFORMATION 50
General 50
Experts 50
Certification of Official Statement 50
Official Statement"Deemed Final" 51
CONTINUING DISCLOSURE OF INFORMATION 51
Annual Reports 51
Material Event Notices 51
Availability of Information from NRMSIRs,SID and MSRB 52
Limitations and Amendments 52
Updating of Official Statement 53
APPENDIX A-LOCATION MAP
APPENDIX B-ANNUAL FINANCIAL REPORT
APPENDIX C-SPECIMEN OF FINANCIAL GUARANTY INSURANCE POLICY
2
USE OF INFORMATION IN OFFICIAL STATEMENT
No dealer, broker, salesman or other person has been authorized by the District or the Underwriters to give any
information or to make any representations other than those contained in this Official Statement,and,if given or made,
such other information or representations must not be relied upon as having been authorized by the District or the
Underwriters.
This Official Statement does not constitute,and is not authorized by the District for use in connection with,an offer to
sell or the solicitation of an offer to buy in any state in which such offer or solicitation is not authorized or in which the
person making such offer or solicitation is not qualified to do so or to any person to whom it is unlawful to make such
offer or solicitation,
All of the summaries of the statutes,resolutions,orders,contracts,audits,engineering and other related reports set forth
in this Official Statement are made subject to all of the provisions of such documents. These summaries do not purport
to be complete statements of such provisions,and reference is made to such documents,copies of which are available
from the District upon payment of the costs for duplication thereof.
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 condition of the District or
other matters described herein since the date hereof. However,the District has agreed to keep this Official Statement
currentby amendment or sticker to reflect material changes in the affairs of the District,and to the extent that information
actually comes to its attention,the other matters described in this Official Statement,until delivery of the Bonds to the
Underwriters of the Bonds,as shown on the cover page hereof
The Underwriters(defined below)have provided the following sentence for inclusion in this Official Statement. The
Underwriters have reviewed the information in this Official Statement in accordance with, and as part of; their
responsibilities to investors under the federal securities laws as applied to the facts and circumstances ofthis transaction,
but the Underwriters do not guarantee the accuracy or completeness of such information.
SALE AND DISTRIBUTION OF THE;BONDS
Underwriters
RBC Capital Markets Corporation and First Southwest Company (the"Underwriters")have agreed,pursuant to aBand
Purchase Agreement,to purchase the Bonds from the District for$ plus accrued interest from October 1,
2009,to the date of delivery. The obligation of the Underwriters to purchase the Bonds is subject to certain conditions
contained in the Bond Purchase Agreement. The Underwriters may offer and sell the Bonds to certain dealers(including
dealers depositing Bonds into unit investment trusts)and others at prices lower than public offering price stated on the
cover page hereof. The initial offering price maybe changed from time to time by the Underwriters.
Prices and Marketability
The delivery of the Bonds is conditioned upon the receipt by the District of a certificate executed and delivered by the
Underwriters on or before the date of delivery of the Bonds stating the prices at which a substantial amount of the Bonds
of each maturity have 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 Underwriters or wholesaler. The District has no control
over trading of the Bonds after a bona fide offering of the Bonds is made by the Underwriters at the yields specified on
the cover page. Information concerning reoffering yields or prices is the responsibility of the Underwriters.
3
The District has no control over the reoffering yields or prices of the Bonds or over trading ofthe Bonds in the secondary
market. Moreover,there is no assurance that a secondary market will be made in the Bonds. If there is a secondary
market,the difference between the bid and asked prices of the Bonds may be greater than the difference between the bid
and asked prices 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.
The prices and other terms respecting the offering and sale of the Bonds may be changed from time to time by the
Underwriters after the Bonds are released for sale,and the Bonds may be offered and sold at prices other than the initial
offering price,including sales to dealers who may sell the Bonds into investment accounts. IN CONNECTION WITH
THE OFFERING OF THE BONDS,THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT TRANSACTIONS
WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF 1Hh BONDS AT A LEVEL ABOVE THAT
WHICH MIGHT 0 1'HhRWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING,IF COMMENCED,
MAY BE DISCONTINUED AT ANY TIME.
Securities Laws
No registration statement relating to the Bonds has been filed with the Securities and Exchange Commission under the
Securities Act of 1933,as amended,in reliance upon the 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 or qualification of the Bonds under the securities laws of any other jurisdiction in which
the Bonds maybe offered,sold or otherwise transferred.This disclaimer ofresponsibility forregistration 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 jurisdictions.
BOND INSURANCE
Bond Insurance Policy
Concurrently with the issuance of the Bonds, (" ")will issue its Municipal Bond
Insurance Policy for the Bonds(the"Policy"). The Policy guarantees the scheduled payment ofprincipal of and interest
on.the Bonds when due as set forth in the form of the Policy included as"APPENDIX C"to this Official Statement.
BOND INSURANCE RISK FACTORS
In the event of default of the payment of principal or interest with respect to the Bonds when all or some becomes due,
any owner of the Bonds shall have a claim under the Policy for such payments. However,in the event of any acceleration
of the due date of such principal by reason of mandatory or optional redemption or acceleration resulting from default
or otherwise,other than any advancement of maturity pursuant to a mandatory sinking fund payment,the payments are
to be made in such amounts and at such times as such payments would have been due had there not been any such
acceleration. The Policy does not insure against redemption premium,if any. The payment ofprincipal and interest in
connection with mandatory or optional prepayment of the Bonds by the issuer which is recovered by the issuer from the
bond owner as a voidable preference under applicable bankruptcy law is covered by the insurance policy,however,such
payments will be made by the Insurer at suchtime and in such amounts as would have been due absence such prepayment
by the District unless the Insurer chooses to pay such amounts at an earlier date.
Undermost circumstances,default of payment of principal and interest does not obligate acceleration of the obligations
of the Insurer without appropriate consent. The Insurer may direct and must consent to any remedies and the Insurer's
consent may be required in connection with amendments to any applicable bond documents.
4
In the event the Insurer is unable to make payment of principal and interest as such payments become due under the
Policy,the Bonds are payable solely from the moneys received pursuant to the applicable bond documents. In the event
the Insurer becomes obligated to make payments with respect to the Bonds,no assurance is given that such event will
not adversely affect the market price of the Bonds or the marketability(liquidity)for the Bonds.
The long-term ratings on the Bonds are dependent in part on the financial strength of the Insurer and its claim paying
ability. The Insurer's financial strength and claims paying ability are predicated upon a number of factors which could
change over time. No assurance is given that the long-term ratings of the Insurer and of the ratings on the Bonds insured
by the Insurer will not be subject to downgrade and such event could adversely affect the market price of the Bonds or
the marketability(liquidity)for the Bonds. See"BOND INSURANCE"and"RATINGS"herein.
The obligations ofthe Insurer are contractual obligations and in an event of defaultby the Insurer,the remedies available
maybe limited by applicable bankruptcy law or state Iaw related to insolvency of insurance companies.
Neither the District or Underwriter have made independent investigation into the claims paying ability of the Insurer and
no assurance or representation regarding the financial strength or projected financial strength of the Insurer is given.
Thus,when making an investment decision,potential investors should carefully consider the ability of the District to pay
principal and interest on the Bonds and the claims paying ability of the Insurer, particularly over the life of the
investment. See"BOND INSURANCE"herein for further information provided by the Insurer and the Policy,which
includes further instructions for obtaining current financial information concerning the Insurer.
RATINGS
Standard&Poor's Ratings Services("Standard&Poor's")is a division of The McGraw Hill Companies,Inc.,a New
York corporation. Standard&Poor's is located at 55 Water Street,New York,New York 10041,telephone number
(212)208-8000,and has engaged in providing ratings for corporate bonds since 1923 and municipal bonds since 1940.
Long-term debt ratings assigned by Standard.&Poor's reflect its analysis of the overall level of credit risk involved in
financings. At present Standard&Poor's assigns long-term debt ratings with symbols "AAA" (the highest rating)
through'D"(the lowest rating).
The Bonds are expected to receive an initial rating of"AAA"from Standard&Poor's solely in reliance upon its
evaluation of the claims paying ability of the Insurer. The underlying credit rating of the District assigned by Standard
&Poor's is"A-I-."
An explanation of the significance of the foregoing ratings may only be obtained from Standard&Poor's. The foregoing
ratings express only the view of Standard&Poor's at the time the ratings are given. Furthermore,a security rating is not
a recommendation to buy,sell orhold securities.There is no assurance that the ratings will continue for any given period
of time or that they will not be revised downward or withdrawn entirely by Standard&Poor's, if, in its judgment,
circumstances so warrant. Any such downward change in or withdrawal of such ratings may have an adverse effect on
the market price of the Bonds.
The District is not aware of any ratings assigned the Bonds other than the ratings of Standard&Poor's.
5
OFFICIAL STATEMENT SUMMARY
The following summary of certain information contained herein is qualified in its entirety by the detailed information
and financial statements appearing elsewhere in this Official Statement. The reader should refer particularly to
sections that are indicated for more detailed information.
THE BONDS
The Issuer Brazoria County Municipal Utility District No.2(the"District")is
a political subdivision of the State of Texas located in Brazoria
County,Texas. See "THE DISTRICT."
Description $6,390,000 Waterworks and Sewer System Combination Unlimited
Tax and Revenue Refunding Bonds,Series 2009(the"Bonds"),are
dated October 1,2009,and mature on September 1 of the years and
in the principal amounts indicated on the cover page hereof.
Interest on the Bonds is payable on March 1, 2010 (five-month
interest payment), and on each September I and March 1 thereafter
until maturity or prior redemption. The Bonds are not subject to
optional redemption prior to their scheduled maturities. See"THE
BONDS." The Bonds will be issued pursuant to a bond order(the
"Bond Order") adopted by the Board of Directors of the District.
See"THE BONDS-General." The Bonds are being issued under
the authority of Chapters 49 and 54 of the Texas Water Code, as
amended, and Chapter 1207, Texas Government Code.
Book-Entry-Only System The definitive Bonds will be initially registered and delivered only to
Cede&Co.,the nominee of DTC,pursuant to the Book-Entry-Only
System described herein. Beneficial ownership of the Bonds may be
acquired in denominations of$5,000 or integral multiples thereof.No
physical delivery of the Bonds will be made to the beneficial owners
thereof. Principal of and interest on the Bonds will be payable by the
Paying Agent/Registrar to Cede&Co.,which will make distribution
of the amounts so paid to the participating members of DTC for
subsequentpaymentto the beneficial owners of the Bonds(see"THE
BONDS-Book-Entry-Only System").
Source of Payment Principal of and interest on the Bonds are payable from the proceeds
of an annual ad valorem tax, without legal limitation as to rate or
amount,levied upon all taxable property located within the District,
and are further payable from and secured by a pledge of and lien on
certain Net Revenues (as defined herein), if any, of the District's
waterworks and sewer system (the "System"), to the extent and
upon the conditions described herein. The System is not expected
to produce sufficient Net Revenues to make significant
contributions, if any, to future debt service payments. The Bonds
are obligations of the District and are not obligations of Brazoria
County,Texas,the State of Texas or any political subdivision other
than the District. See"THE BONDS-Source of Payment," "TAX
DATA - Tax Rate Calculations," and "INVESTMENT
CONSIDERATIONS -Maximum Impact on District Tax Rates".
6
Other Characteristics The Bonds will be issued in fully registered form in the
denomination of$5,000 each, or integral multiples thereof.
Use of Proceeds Proceeds of the sale of the Bonds,together with certain funds of the
District that are lawfully available for such purpose,will be applied
to refund certain of the District's Waterworks and Sewer System
Combination Unlimited Tax and Revenue Bonds, Series 1997(the
"Series 1997 Bonds"),Waterworks and Sewer System Combination
Unlimited Tax and Revenue Refunding Bonds, Series 1998 (the
"Series 1998 Refunding Bonds"), Waterworks and Sewer System
Combination Unlimited Tax and Revenue Bonds, Series 1999(the
"Series 1999 Bonds") and Waterworks and Sewer System
Combination Unlimited Tax and Revenue Bonds, Series 2002(the
"Series 2002 Bonds") in the aggregate principal amount of
$5,980,000. The proceeds will also be used to pay certain costs of
issuing the Bonds. The Bonds are being issued to reduce the
District's debt service payments, and will result in present value
savings in such debt service payments. See "PLAN OF
FINANCING" and "DISTRICT DEBT - Debt Service
Requirements."
Payment Record In addition to the Series 1997 Bonds,Series 1998 Refunding Bonds,
Series 1999 Bonds and Series 2002 Bonds, the District has
• previously issued Waterworks and Sewer System Combination
Unlimited Tax and Revenue Bonds, Series 1985(the "Series 1985
Bonds"),Unlimited Tax Refunding Bonds,Series 1992(the"Series
1992 Refunding Bonds"), Waterworks and Sewer System
Combination Unlimited Tax and Revenue Bonds, Series 1995 (the
"Series 1995 Bonds"),Waterworks and Sewer System Combination
Unlimited Tax and Revenue Refunding Bonds, Series 2003, (the
"Series 2003 Refunding Bonds"), and Waterworks and Sewer
System Combination Unlimited Tax and Revenue Bonds, Series
2004 (the "Series 2004 Bonds"). The District issued the Series
1992 Refunding Bonds to advance refund and defease certain
maturities of the Series 1985 Bonds, issued the Series 1998
Refunding Bonds to advance refund and defease certain maturities
of the Series 1992 Refunding Bonds, and issued the Series 2003
Refunding Bonds to advance refund and defease certain maturities
of the Series 1995 Bonds. Collective reference is made in this
Official Statement to the Series 1985 Bonds, the Series 1992
Refunding Bonds, the Series 1995 Bonds, the Series 1997 Bonds,
the Series 1998 Refunding Bonds,the Series 1999 Bonds,the Series
2002 Bonds,the Series 2003 Refunding Bonds and the Series 2004
Bonds as the "Outstanding Bonds." The District has never
defaulted in the timely payment of principal of and interest on the
Outstanding Bonds. After issuance of the Bonds, the aggregate
principal amount of the Outstanding Bonds, less the maturities
thereof previously paid by the District and less the Refunded Bonds,
will be$5,030,000(the "Remaining Outstanding Bonds"), and the
aggregate principal amount of the District's total direct bonded
indebtedness, including the Bonds, will be $11,420,000. See
"DISTRICT DEBT-Debt Service Requirements."
7
Authorized but Unissued
Bonds $2,845,000 in bonds for waterworks, sanit
ary sewer,and drainage
facilities and for refunding purposes will remain authorized but
unissued after issuance of the Bonds. See "THE BONDS-Legal
Ability to Issue Additional Debt."
Municipal Bond Insurance (" "). See"BOND
INSURANCE"
Municipal Bond Ratings Standard & Poor's Ratings Services ( ) "AAA" See
"BOND INSURANCE"and"RATINGS."
Qualified Tax-Exempt Obligations The District will designate the Bonds as "qualified tax-exempt
obligations" pursuant to Section 265 (b) of the Internal Revenue
Code of 1986,as amended. See"TAX MATTERS-Qualified Tax-
Exempt Obligations"herein.
Legal and Tax Opinions Paul A. Philbin&Assoc., P.C., Houston,Texas, Bond Counsel;
and McCall, Parkhurst&Horton L.L.P., Dallas, Texas, Special
Tax Counsel. See"LEGAL MATTERS"and"TAX MATTERS."
Verification Agent Grant Thornton LLP, Certified Public Accountants. See
"VERIFICATION OF ACCURACY OF MATHEMATICAL
COMPUTATION."
Authority The rights, powers, privileges, authority and functions of the
District are established by Article XVI, Section 59 of the
Constitution of the State of Texas and the general laws of the State
of Texas pertaining to municipal utility districts, particularly
Chapters 49 and 54 of the Texas Water Code, as amended. See
"THE DISTRICT-Authority."
THE DISTRICT
Description Brazoria County Municipal Utility District No. 2, a political
subdivision of the State of Texas,was created by the Texas Water
Commission,predec essor to the Texas Commission on Environmental
Quality(the"TCEQ"or the"Commission"),on July 16, 1981. The
District contains approximately 636.6 acres of land, including
approximately 23.5 acres annexed by the District in 1998. The
District is located approximately 5 miles west of and lies entirely
within the extraterritorial jurisdiction of the City of Pearland,Texas.
State Highway 288 is located approximately 0.6 miles west of the
northwestern boundary of the District and County Road 518 forms the
northernmost boundary of the District. The District is located
approximately twelve and one-halfmiles south of the central business
district of the City of Houston and approximately eleven and one-half
miles south of the Texas Medical Center complex.
Silverlake Project The District is part of a master-planned,mixed-use land development
project which is now known and is being marketed as Sliverlake
(formerly known as Southwyck), which includes an aggregate of
approximately 2,050 acres of land, approximately 1,000 acres of
8
which were purchased by New Southwyck,L.P.("New Southwyck")
in 1994.Amenities within Silverlake include an 18 hole daily fee golf
course and club house,pools,playgrounds, soccer fields, baseball
fields and a major recreation center consisting of 4 tennis courts,
walking paths,community activities and meeting center and a junior
Olympic pool. Silverlake includes the approximate 636.6 acres
located within the District, approximately 518 acres located in
Brazoria County Municipal Utility District No. 1("M.U.D.No. 1"),
approximately477 acres located in Brazoria CountyMunicipal Utility
District No. 3 ("M.U.D. No. 3"), and approximately 418 of an
aggregate approximately 778 acres currently located in Brazoria
County Municipal Utility District No.6("M.U.D.No.6"). Land use
intended for M.U.D.No.'s 1,2,and 3 is predominantly single-family
residential. M.U.D.No. 6 is being developed for residential and
commercial use.
The development of all of the land located within the District which
is available for development is complete. Such development includes
an aggregate of 1,114 single-family residential lots on approximately
372.8 acres and 57 townhome lots on approximately 10.0 acres,on all
1,114 of which fully developed single-family lots and 57 townhomc
lots residences have been constructed,all of which residences have
been sold to home purchasers,plus approximately 10.2 acres that
have been developed for commercial purposes on which above-
ground improvements including two shopping centers totaling
approximately 93,579 square feet of building area have been
constructed, and includes the construction of underground water
distribution, wastewater collection, and storm sewer facilities and
street paving as is enumerated in this Official Statement under the
caption'DEVELOPMENT AND HOME CONSTRUCTION-Land
Development and Home Construction Summary."
In addition to the development of the District,(i)the development of
a total of 1,356 single-family residential lots is complete in M.U.D.
No. 1, (ii) the development of a total of 1,411 single-family
residential lots is complete inM.U.D.No.3,and(iii)the development
of 1,308 single-family residential lots is complete in M.U.D.No.6.
11 holes of the Southwyck Golf Course plus an approximate 6,000
square foot clubhouse, and other facilities including a restaurant,
men's and women's locker rooms, and a golf cart barn are located
within the District,and the balance of the golf course is located within
M.U.D.Nos.3 and 6. See"APPENDIX A-LOCATION MAP"and
"DEVELOPMENT AND HOME CONSTRUCTION."
Authority The rights,powers,privileges,authority and functions of the District
are established by Article XVI,Section 59 of the Constitution of the
State of Texas and the general Iaws of the State of Texas pertaining
to municipal utility districts,particularly Chapters 49 and 54 of the
Texas Water Code,as amended. See"TBE DISTRICT-Authority."
9
Development and Home Construction .... The development of all of the land located within the District which
is available for development is complete. Such development includes
an aggregate of 1,114 single-family residential lots on approximately
372.8 acres and 57 townhome lots on approximately 10.0 acres,on all
1,114 of which fully developed single-family residential lots and 57
townhome lots residences have been constructed, all of which
residences have been sold to home purchasers,plus approximately
10.2 acres that have been developed for commercial purposes on
which above-ground improvements including two shopping centers
totaling approximately 93,579 square feet ofbuilding area have been
constructed, and includes the construction of underground water
distribution, wastewater collection, and storm sewer facilities and
street paving as is enumerated in this Official Statement under the
caption'DEVELOPMENT AND HOME CONSTRUCTION-Land
Development and Home Construction Summary." 11 holes of the 18
hole Southwyck Golf Course (approximately 134.7 acres),plus an
approximate 6,000 square foot clubhouse, and other facilities
including a restaurant,men's and women's locker rooms,and a golf
cart barn are also located within the District. Approximately 108.9
District acres are contained within street and drainage ditch rights-of-
way,various easements,Lake Silverlake,parks and open space or are
otherwise not available for future development.
•
The construction of(i)a regional wastewater treatment facility,(ii)
joint water supply facilities, and(iii)joint drainage facilities,all of
which facilities the District shares with M.U.D.No.1,M.U.D.No.3
and M.U.D.No.6,is also complete. The District financed its portion
of the cost of the acquisition or construction of certain of the
aforementioned components of its system(the"System"),and certain
other facilities, with portions of the proceeds of the sale of the
Outstanding Bonds and will finance additions thereto which are
described in this Official Statement under the caption "THE
SYSTEM"with portions of the proceeds of the sale of the Bonds.
INVESTMENT CONSIDERATIONS
THE BONDS ARE SUBJECT TO SPECIAL INVESTMENT CONSIDERATIONS AS SET FORTH IN THIS
OFFICIAL STATEMENT. PROSPECTIVE PURCHASERS SHOULD CAREFULLY EXAMINE THE ENTIRE
OFFICIAL STATEMENT BEFORE MAKING THEIR INVESTMENT DECISIONS,SPECIALLY THE PORTION
OF THE OFFICIAL STATEMENT ENTITLED"INVESTMENT CONSIDERATIONS."
•
10
SELECTED FINANCIAL INFORMATION
(Unaudited)
2008 Assessed Valuation $319,394,796(a)
(As of January 1,2008)
See"TAX DATA"and"TAXIING PROCEDURES."
2009 Assessed Valuation $319,928,913(b)
(As of January 1,2009)
See"TAX DATA"and"TAXING PROCEDURES."
Direct Debt Remaining Outstanding Bonds $ 5,030,000(c)
The Bonds 6,390,000
Total $ 11,420,000
Estimated Overlapping Debt $ 18.524,782
Direct and Estimated Overlapping Debt $29,944,782
Direct Debt Ratio
: as a percentage of 2008 Assessed Valuation($319,394,796) 3.58%
: as a percentage of2009 Assessed Valuation($319,928,913) 3.57%
Direct and Estimated Overlapping Debt Ratio
: as a percentage of 2008 Assessed Valuation($319,394,796) 9.38%
: as a percentage of 2009 Assessed Valuation($319,928,913) 9.36%
Bond Fund Balance at Delivery of the Bonds $ 1,590,995(d)
•
General Fund Balance as of July 2,2009 $2,934,818
Average Percentage of Total Tax Collections 1998-2007 99.96%
Percentage of Tax Collections 2008 Tax Levy
(As of July 31,2009. In process of collection.) 9931%
2009 Tax Rate per$100 of Assessed Valuation
Debt Service Tax $0.46
Maintenance Tax .04
Total $0.50(d)
Average Annual Debt Service Requirements of the Bonds and the
Remaining Outstanding Bonds(2010-2017) $1,645,666
Maximum Annual Debt Service Requirement of the Bonds and the
Remaining Outstanding Bonds(2009) $1,661,226
Tax Rate per$100 of Assessed Valuation Required to Pay Average Annual
Debt Service Requirements of the Bonds and the Remaining Outstanding Bonds
(2010-2017)at 95%Tax Collections
Based Upon 2008 Assessed Valuation($319,394,796) $0.55
Based Upon 2009 Assessed Valuation($319,928,913) $0.55
11
Tax Rate per$100 of Assessed Valuation Required to Pay Maximum Annual
Debt Service Requirement of the Bonds and the Remaining Outstanding
Bonds(2017)at 95%Tax Collections
Based Upon 2008 Assessed Valuation($319,394,796) $0.55
Based Upon 2009 Assessed Valuation($319,928,913) $0.55
Total Number of Single-Family Housing Units(1,114)and Townhomes(57) 1,171
(a) As of January 1,2008. All property in the District is valued an the tax rolls by the Brazoria County Appraisal
District(the"Appraisal District")at 100%of estimated market value as of January 1 of each year. The District's
tax roll is certified by the Brazoria County Appraisal Review Board(the"Appraisal Review Board"). See
"TAXING PROCEDURES"and"INVESTMENT CONSIDERATIONS-Factors Affecting Taxable Values
and Tax Payments."
(b) As of January 1,2009. All property in the District is valued on the tax rolls by the Brazoria County Appraisal
District(the"Appraisal District")at 100%of estimated market value as ofJanuary 1 of each year. The District's
tax roll is certified by the Brazoria County Appraisal Review Board(the"Appraisal Review Board"). Such sum
includes certain values which have not been certified by the Appraisal Review Board,including the value of
certain properties which has been proposed by the Appraisal District but protested by the owners thereof to the
Appraisal District and the value of certain properties not under protest but not yet certified. The Appraisal
District's estimate of the total taxable value of such properties under protest which will be assigned to such
properties if the owners' claims are upheld by the Appraisal Review Board is$30,647,483, which sum is
included in the amount of$319,928,913. The Appraisal District has proposed the valuation of such protested
properties to be$34,052,759. The District is unable to predict the amount of the District's final 2009 Assessed
Valuation. Such final 2009 Assessed Valuationwill notbe determined until the valuation of all taxable property
located within the District is certified by the Appraisal Review Board for 2009. See "TAXING
PROCEDURES" and"INVESTMENT CONSIDERATIONS -Factors Affecting Taxable Values and Tax
Payments."
(c) Excludes the Refunded Bonds. See "DISTRICT DEBT," and "THE BONDS - Legal Ability to Issue
Additional Debt."
(d) Neither the Bond Order or Texas lawrequires that any particular amount be maintained in the Bond Fund at any
time. Such sum gives effect to the payment by the District of the entirety of its debt service payments due for
2009. See`PLAN OF FINANCING."
12
BRAZORIA COUNTY MUNICIPAL UTILITY DISTRICT NO.2
WATERWORKS AND SEWER SYSTEM COMBINATION
UNLIMITED TAX AND REVENUE REFUNDING BONDS
SERIES 2009
INTRODUCTION
This Official Statement provides certain information with respect to the issuance by Brazoria County Municipal Utility
District No.2,Brazoria County,Texas(the"District")of its Waterworks and Sewer System Combination Unlimited
Tax and Revenue Refunding Bonds, Series 2009(the "Bonds").
There follow in this Official Statement descriptions of the Bonds,the Plan of Financing,and certain information about
the District and its finances. All descriptions of documents contained herein are only summaries and are qualified
in their entirety by reference to each such document. Copies of such documents may be obtained from the District
upon request and payment of the costs of duplication therefor. Certain capitalized terms used in this Official Statement
have the same meanings assigned to such terms in the Bond Order(hereinafter defined),except as otherwise indicated
herein.
THE BONDS
General
The following is a description of certain terms and conditions of the Bonds, which description is qualified in its
entirety by reference to the resolution of the Board of Directors of the District(the"Board")authorizing the issuance
of the Bonds (the "Bond Order"). A copy of the Bond Order may be obtained from the District upon request and
payment of the costs of duplication thereof. The Bond Order authorizes the issuance and sale of the Bonds and
prescribes the terms, conditions and provisions for the payment of the principal of and interest on the Bonds by the
District. The Bond Order also approves and authorizes execution of the Escrow Agreement with the Escrow Agent
and the Bond Purchase Agreement with the Underwriters, all as hereinafter defined.
The Bonds are dated September 1,2009,and will mature on September 1 of the years and in the principal amounts
indicated on the cover page hereof. The Bonds will accrue interest from October 1,2009(or the most recent interest
payment date to which interest has been paid or duly provided for)at the stated interest rates indicated on tbe cover page
ofthis Official Statement. Interest on the Bonds is payable on March 1,2010(five-month interest payment),and on each
March I and September 1 thereafter until maturity or prior redemption. The Bonds will be issued as fully registered
bonds in the denomination of$5,000 or any integral multiple thereof. Principal of the Bonds will be payable to the
registered holder thereof(the"Registered Owner")at maturity or earlier redemption upon presentation ofBands at the
principal payment office of the paying agent/registrar,initially,The Band of New York Mellon Trust Company,N.A.,
currently in Dallas, Texas, or any successor paying agent/registrar (the "Paying Agent," "Registrar" or "Paying
Agent/Registrar"). Interest on the Bonds will be payable by check,dated as of the interest payment date,and mailed by
the Registrar to Registered Owners as shown on the records of the Registrar at the close of business on the 15th day of
the calendar month next preceding each interest payment date(the"Record Date"),or by other such customary banking
arrangements as maybe acceptable to the Registrar and the Registered Owner at the expense and risk of the Registered
Owner.
Book-Entry-Only System
DTC will act as securities depository for the Bonds.The Bonds will be issued as fully-registered securities 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 the Bonds,in the aggregate principal amount of such issue,
and will be deposited with DTC.
13
DTC, the world's largest securities depository, is a limited-purpose trust company organized under the New York
Banking Law,a`banking organization"within the meaning of the New York Banking Law,a member of the Federal
Reserve System, a"clearing corporation"within the meaning of the New York Uniform Commercial Code, and a
"clearing agency"registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC
holds and provides asset servicing for over3.5 million issues of U.S.and non-U.S.equity issues,corporate and municipal
debt issues,and money market instruments from over 100 countries that DTC's participants("Direct Participants")
deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities
transactions in deposited securities,through electronic computerized book-entry transfers and pledges between Direct
Participants' accounts. This eliminates the need for physical movement of securities certificates.Direct Participants
include both U.S.and non-U.S.securities brokers and dealers,banks,trust companies,clearing companies,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 companies that clear through or maintain a custodial relationship with a Direct
Participant,either directly or indirectly("Indirect Participants").DTC has Standard&Poor's highest rating:AAA.The
DTC Rules applicable to its Direct and Indirect Participants are on file with the Securities and Exchange Commission.
More information about DTC can be found at www.dtcc.com and www.dtc.oru.
Purchases of Bonds under the DTC system must be made by or through Direct Participants,which will receive a credit
for the Bonds on DTC's records. The ownership interest of each actual purchaser of each Bond("Beneficial Owner")
is in turn to be recorded on the Direct and Indirect Participants'records.Beneficial Owners will not receive written
confirmation from DTC of their purchase.Beneficial Owners are,however,expected to receive written confirmations
providing details ofthe transaction as well as periodic statements oftheir holdings,fromthe Direct or Indirect Participant
through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Bonds are to
be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners.
Beneficial Owners will not receive certificates representing their ownership interests in Bonds,except in the event that
use of the book-entry system for the Bonds is discontinued.
To facilitate subsequent transfers,all Bonds deposited by Direct Participants with DTC are registered in the name of
DTC's partnership nominee,Cede&Co.,or such other name as may be requested by an authorized representative of
DTC. The deposit ofBonds 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 ofthe Direct Participants to whose accounts suchBonds 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 IndirectParticipants to Beneficial Owners wlllbe governed by arrangements
among them,subject to any statutory or regulatory requirements as maybe in effect from time to time.Beneficial Owners
ofBonds may wish to take certain steps to augment the transmission to them ofnotices 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 notices be provided directly to them.
Redemption notices shall be sent to DTC. If less than all of the Bonds within an issue are being redeemed,DTC's
practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed.
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 fiords and
corresponding detail information from District or Paying Agent,on payable date in accordance with their respective
holdings shown on DTC's records. Payments by Participants to Beneficial Owners will be governed by standing
14
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,Paying
Agent,or District,subject to any statutory or regulatory requirements as may be in effect from time to time. Payment
to Cede&Co.(or such other nominee as maybe requested by an authorized representative of DTC)is the responsibility
of the District or Paying Agent. Disbursement of such payments to Direct Participant will be the responsibility ofDTC,
and reimbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect
Participants.
DTC may discontinue providing its services as depository with respect to the Bonds at any time by giving reasonable
notice to the District or PayingAgent Under such circumstances,in the event that a successor depository is not obtained,
Bond certificates are required to be printed and delivered.
The District may decide to discontinue use of the system ofbook-entry transfers through DTC(or a successor securities
depository). In that event,Band certificates will be printed and delivered to DTC.
The information in this section concerning DTC and DTC's book:entry system has been obtained from sources that the
District believes to be reliable,but the District takes no responsibility for the accuracy thereof
Assignments,Transfers and Exchanges
The Bonds may be transferred, registered and assigned only on the registration books of the Registrar, and such
registration and transfer shall be without expense or service charge to the Registered Owner,except for any tax or other
governmental charges required to be paid with respect to such registration and transfer in accordance with the terms of
the Band Order. A Bond may be assigned by the execution of an assignment form on the Bonds or by other instrument
of transfer and assignment acceptable to the Registrar.At any time after the date of delivery of the Bonds to the Initial
Purchaser(the"Initial Delivery"),any Bond maybe transferred or exchanged upon its presentment and surrender at the
office of the Registrar,duly endorsed for transfer or accompanied by an assignment duly executed by the Registered
Owner.To the extent possible,new Bands issued in an exchange or transfer of Bonds willbe delivered to the Registered
Owner or assignee of the owner in not more than three(3)business days after the receipt of the request in proper form
to transfer,exchange or replace the Bonds.New Bonds registered and delivered in an exchange or transfer shall be in
denominations of$5,000 or any integral multiple thereof for any one maturity and for a lice aggregate principal amount
as the Bond or Bonds surrendered for exchange or transfer.Neither the District nor the Registrar is required(1) to
transfer or exchange any Bond during a period beginning at the opening ofbusiness an a Record Date and ending at the
close of business on the next succeeding interest payment date,or(2)to transfer or exchange any Bond selected for
redemption in whole or in part within thirty(30)calendar days of the redemption date. In the event the book-entry-only
system is discontinued,the District has agreed to replace mutilated,destroyed,lost or stolen Bonds upon surrender of
the mutilated Bonds,or receipt of satisfactory evidence of such destruction,loss or theft and receipt by the District and
the Registrar of security or indemnity to keep them harmless.The District will require payment of taxes,governmental
charges and other expenses in connection with any such replacement.
•
Authorization of the Bonds
At elections held within the District on November 3, 1981, and September 8, 1984, the voters of the District
authorized the issuance of an aggregate of$23,400,000 in bonds for waterworks, sanitary sewer, and drainage
facilities,and for refunding purposes. The Bonds are issued pursuant to the authority of the Bond Order;Article XVI,
Section 59 of the Texas Constitution;Chapters 49 and 54 of the Texas Water Code, as amended; and Chapter 1207,
Texas Government Code. See"Legal Ability to Issue Additional Debt"below.
Source of Payment
The Bonds, when issued, will constitute valid and binding obligations of the District, and the principal thereof and
the interest thereon, together with the principal of and interest on the Remaining Outstanding Bonds and such
additional tax bonds of the District as may hereafter be issued by the District, if any, are payable from and secured
15
by the proceeds of an annual ad valorem tax, without legal limitation as to rate or amount levied against all taxable
property located within the District. The District has the authority to levy an annual ad valorem tax without limit as
to rate or amount on all taxable property within the District for each year the Bonds are outstanding. In the Bond Order,
the District has covenanted to establish a rate of taxation each year ample and sufficient to provide fluids to pay the
interest on the Bonds and to pay the principal when due, full allowance being made for delinquencies and costs of
collection. The Bonds are further payable from and secured by a pledge of and lien on certain Net Revenues,if any,of
the System. Net Revenues are defined by the Bond Order as all income that is derived from the ownership and operation
of the District's System as the same is purchased,constructed or otherwise acquired,which remains after deducting the
operation and maintenance expenses of the System,but not including income derived from contracts that is pledged for
payment of any special project bonds that may be issued. It is not expected that the Net Revenues will ever be sufficient
to contribute significantly,if at all,to debt service payments. See"THE SYSTEM-Waterworks and Sewer System
Operating Statement" See"TAXING PROCEDURES"and"TAX DATA-Tax Rate Calculations"for tax adequacy,
manner of assessing and collecting taxes,and the remedy to the District in the event oftax delinquencies;and"Registered
Owners'Remedies"below for the remedies available to Bondholders in the event of default in the performance of any
of the covenants set forth in the Bond Order or in the event of default in the payment of principal of or interest on the
Bonds.
The Bonds are solely obligations ofBrazoria County Municipal Utility DistrictNo.2 and are not obligations of the State
of Texas,Brazoria County,Texas,the City of Pearland,Texas, or any political subdivision or agency other than the
District.
Redemption Provisions
The Bonds are not subject to optional redemption prior to their scheduled maturities.
Defeasance
The Bond Order provides that the District may discharge its obligations to the Registered Owners of any or all of the
Bonds to pay principal,interest and redemption price thereon in any manner permitted bylaw. Under current Texas law,
such discharge may be accomplished either(i)by depositing with the Comptroller of Public Accounts of the State of
Texas a sum of money equal to the principal of,premium,if any,and all interest to accrue on the Bonds to maturity or
redemption or(ii)by depositing with any place of payment(paying agent) of the Bonds or other obligations of the
District payable from revenues or from ad valorem taxes or both,or with a bank or commercial trust company named
in the proceedings authorizing such discharge,amounts sufficient to provide for the payment and/or redemption of the
Bonds;provided that such deposits may be invested and reinvested only in(a) direct noncaIlable obligations of the
United States of America,(b)noncallable obligations of an agency or instrumentality of the United States,including
obligations that are unconditionally guaranteed or insured by the agency or instrumentality and that, on the date the
governing body of the District adopts or approves the proceedings authorizing the issuance of refunding bonds,are rated
as to investment quality by a nationally recognized investment rating fnn not less than AAA or its equivalent,and(c)
non-callable obligations of a state or an agency or a county,municipality,or other political subdivision of a state that
have been refunded and that; on the date the governing body of the District adopts or approves the proceedings
authorizing the issuance of refunding bonds,are rated as to investment quality by a nationally recognized investment
rating firm not less than AAA or its equivalent,and which mature and/or bear interest payable at such times and in such
amounts as will be sufficient to provide for the scheduled payment and/or redemption of the Bonds.
Upon such deposit as described above,such Bonds shall no longer be regarded as outstanding or unpaid. After firm
banking and financial arrangements for the discharge and final payment or redemption of the Bonds have been made as
described above,all rights of the District to initiate proceedings to call the Bonds for redemption or take any other action
amending the terms of the Bonds are extinguished;provided,however,that the right to call the Bonds for redemption
is not extinguished if the District: (i)in the proceedings providing for the firm banking and financial arrangements,
expressly reserves the right to call the Bonds for redemption;(ii)gives notice of the reservation of that rightto the owners
of the Bonds immediately following the making of the firm banking and financial arrangements; and(in)directs that
notice of the reservation be included in any redemption notices that it authorizes.
16
There is no assurance that the current law will not be changed in the future in a manner which would permit investments
other than those described above to be made with amounts deposited to defease the Bonds.Because the Bond Order does
not contractually limit such investments,Registered Owners may be deemed to have consented to defeasance with such
other investments,notwithstanding the fact that such investments may not be of the same investment quality as those
currently permitted under Texas law.
Amendments to Bond Order
The District may,without the consent of or notice to any Registered Owners of the Bonds,amend,change or modify the
Band Order as maybe required(a)by the provisions thereof,(b)for the purpose of curing any ambiguity,inconsistency,
or formal defect or omission therein,or(c)in connection with any other change which is not to the prejudice of the
Registered Owners of the Bonds. Except for such amendments,changes,or modifications,the District shall not amend,
change or modify the Bond Order in any manner without the consent of the Registered Owners of the Bonds.
Annexation and Consolidation
The District lies within the extraterritorial jurisdiction of the City ofPearland,Texas(the"City").Under Texas statutes,
the District may be annexed in whole,but not in part,by the City without the District's consent,in which case the City
must dissolve the District and assume the assets,functions and obligations of the District, including the Bonds,the
Remaining Outstanding Bonds,and any other bonded indebtedness of the District existing at the time of annexation.
The District and the City ofPearland are currently negotiating the terms of a strategic partnership agreement("SPA").
When any bonds or other obligations of the District payable in whole or inpart from ad valorem taxes have been assumed
by the City,the City is required to levy and cause to be collected,upon all taxable property within the City, taxes
sufficient to pay principal of and interest on any such bonds or obligations as they become due and payable. The City
may issue refunding bonds in its own name to refund any bonds or obligations so assumed. Until such time as the SPA
is executed by the District and the City,the District cannot represent any specific element of such SPA,or that it will
become effective at all. Therefore,no representation is made that the City will ever abolish the District and assume its
debt,nor that the City would be able to pay such debt service obligations Wit were to annex the District.
The District has the right to consolidate with other districts and,in connection therewith,to provide for the consolidation
of its System with the water and sewer systems of the district or districts with which it is consolidating.No representation
is made that the District will ever consolidate its System with another district or consolidate its System with other
systems.
Legal Ability to Issue Additional Debt
The District has reserved the right in the Bond Order to issue additional bonds. Following the issuance of the Bonds,
and the refunding of the Refunded Bonds,the District will have the right to issue$2,845,000 in bonds for waterworks,
sanitary sewer,and drainage facilities,and for refunding purposes,as approved by the District's voters at elections held
on November 3,1981 and September 8,1984.
The District has the right to issue the aforementioned bonds without the necessity of further voter authorization. Except
for such refunding bonds,before issuing any additional bonds for waterworks,sanitary sewer,and drainage facilities,
the District would have to obtain approval of the Texas Commission on Environmental Quality(the"TCEQ"),for the
issuance of such bonds and the projects to be financed thereby. The District has the right to issue such additional tax
bonds,revenue bonds,or combination tax and revenue bonds as maybe hereafter approved by the voters of the District.
The District also has the right to issue revenue notes,bond anticipation notes and tax anticipation notes without the
necessity of voter approval. In addition,the District has the right to enter into contracts and to pledge its taxing power
to secure any payments the District is required to make under such a contract,provided the provisions of the contract
are approved by the voters of the District. The District further has the right to issue refunding bonds,in addition to the
refunding bonds described above,with additional voter approval. The Bond Order places no limitation on the amount
of additional bonds which maybe issued by the District
17
According to the District's Engineer,the District with the proceeds ofthe Outstanding Bonds has financed all ofthe water
supply and distribution,wastewater collection and treatment,and storm drainage facilities that are necessary to serve the
entirety ofthe District. Therefore,the District does not presently foresee the need to issue additional taxbonds to finance
additions to the System, although the District cannot represent that the need for such future issuance might not
materialize. See"THE BONDS-Legal Ability to Issue Additional Debt"
Registered Owners'Remedies
The Band Order contains a covenant that while any part of the Bonds is outstanding,there shall be assessed,levied,and
collected an annual ad valorem tax, without limit as to rate or amount, on all taxable property within the District,
sufficient to pay principal of and interest on the Bonds when due and to pay the expenses necessary in collecting taxes.
Texas law and the Bond Order provide that in the event that the District defaults in the payment of the principal of or
interest on any of the Bonds when due,fails to make payments required by the Bond Order into the Bond Fund,or
defaults in the observance orperformance of any of the covenants,conditions,or obligations set forth in the Bond Order,
any Registered Owner shall be entitled at any time to a writ of mandamus from a court of competent jurisdiction
compelling and requiring the Board of Directors of the District to observe and perform any covenant,obligation, or
condition prescribed by the Bond Order. Such right is in addition to all other rights the Registered Owners may be
provided by the laws of the State of Texas.
Except for mandamus,the Bond Order does not specifically provide for remedies to a Registered Owner in the event of
a District default,nor does itprovide for the appointment of a trustee to protect and enforce the interests of the Registered
Owners. There is no acceleration of maturity of the Bonds in the event of default. Consequently, the remedy of
mandamus is a remedy which may have to be relied upon from year to year by the Registered Owners. Although the
Registered Owners could obtain a judgment against the District,such judgment could not be enforced by direct levy and
execution against the District's property.Further,the Registered Owners cannot themselves foreclose onpropertywithin
the District or sell property within the District in order to pay the principal of and interest on the Bonds. The
enforceability of the rights and remedies of the Registered Owners may be further limited by federal bankruptcy laws,
reorganization,or other similar laws of general application affecting the rights of creditors ofpolitical subdivisions such
as the District. See`Bankruptcy Limitation to Registered Owners'Rights"below.
Bankruptcy Limitation to Registered Owners'Rights
The enforceability of the rights and remedies of the Registered Owners may be limited by laws relating to bankruptcy,
reorganization or other similar laws of general application affecting the rights of creditors ofpolitical subdivisions such
as the District. Subject to the requirements of Texas law,the District may voluntarily proceed under Chapter 9 of the
Federal Bankruptcy Code,11 U.S.C.§§901-946,if the District(1)is generally authorized to file for federalbanlauptcy
protection by State law,(2)is insolvent or unable to meet its debts as they mature,(3)desires to effect a plan to adjust
such debts,and(4)has either obtained the agreement of or negotiated in good faith with its creditors or is unable to
negotiate with its creditors because negotiation is impracticable. Under recent Texas legislation, a municipal utility
district, such as the District,must obtain the approval of the TWC prior to filing for bankruptcy. Such legislation
requires that the TWC investigate the financial condition of the District and authorize the District to proceed only if the
District has fully exercised its rights and powers under Texas law and remains unable to meet its debts and other
obligations as they mature.
lithe District decides in the future to proceed voluntarily under the Federal Bankruptcy Code,the District would develop
and file a plan for the adjustment of its debts,and the Bankruptcy Court would confirm the District's plan if(1)the plan
complies with the applicable provisions of the Federal Bankruptcy Code,(2)all payments to be made in connection with
the plan are fully disclosed and reasonable,(3)the District is not prohibited by law from taking any action necessary to
carry out the plan,(4)administrative expenses are paid in full,and(5)the plan is in the best interests of creditors and
is feasible. The rights and remedies of the Registered Owners would be adjusted in accordance with the confirmed plan
of adjustment of the District's debt. See"INVESTMENT CONSIDERATIONS."
The District may not be placed into bankruptcy involuntarily.
18
Legal Investment and Eligibility to Secure Public Funds in Texas
The following is quoted from Section 49.186 of the Texas Water Code,and is applicable to the District
"(a) All bonds,notes,and other obligations issued by a district shall be legal and authorized investments for all
banks,trust companies,building and loan associations,savings and loan associations,insurance companies of all kinds
and types,fiduciaries,and trustees, and for all interest and sinking funds and other public funds of the state, and all
agencies,subdivisions,and instrumentalities of the state,including all counties,cities,towns,villages,school districts,
and all other kinds and types of districts,public agencies,and bodies politic.
"(b) A district's bonds,notes,and other obligations are eligible and lawful security for all deposits ofpublic funds
of the state,and all agencies,subdivisions,and instrumentalities of the state,including all counties,cities,towns,villages,
school districts,and all other kinds and types of districts,public agencies,and bodies politic,to the extent of the market
value of the bonds,notes,and other obligations when accompanied by any unmatured interest coupons attached to them."
The Public Funds Collateral Act(Chapter 2257, Texas Government Code) also provides that bonds of the District
(including the Bonds)are eligible as collateral for public funds.
No representation is made that the Bonds will be suitable for or acceptable to financial or public entities for investment
or collateral purposes. No representation is made concerning other laws,rules,regulations or investment criteria which
apply to or which might be utilized by any of such persons or entities to limit the acceptability or suitability of the Bonds
for any of the foregoing purposes. Prospective purchasers are urged to carefully evaluate the investment quality of the
Bonds as to the suitability or acceptability of the Bonds for investment or collateral purposes.
PLAN OF FINANCING
Use of Bond Proceeds
Proceeds of the sale of the Bonds,together with certain funds of the District that are lawfully available for such purpose,
will be applied to refund certain of the District's Waterworks and Sewer System Combination Unlimited Tax and Revenue
Bonds,Series 1997(the"Series 1997 Bonds"),Waterworks and Sewer System Combination Unlimited Tax and Revenue
Refunding Bonds, Series 1998 (the"Series 1998 Refunding Bonds") , Waterworks and Sewer System Combination
Unlimited Tax and Revenue Bonds, Series 1999 (the "Series 1999 Bonds") and Waterworks and Sewer System
Combination Unlimited Tax and Revenue Bonds, Series 2002 (the "Series 2002 Bonds") in the aggregate principal
amount of$5,980,000. The proceeds will also be used to pay certain costs of issuing the Bonds. The Bonds are being
issued to reduce the District's debt service payments, and will result in present value savings in such debt service
payments. See "DISTRICT DEBT-Debt Service Requirements." The principal amounts and maturity dates of the
Series 1997 Bonds,Series 1998 Refunding Bonds,Series 1999 Bonds and the Series 2002 Bonds to be advance refunded
(collectively, the"Refunded Bonds"), are set forth below.
Refunded Series Refunded Series Refunded Series Refunded Series
Maturing 1997 Bonds 1998 Refunding Bonds 1999 Bonds 2002 Bonds
September 1 Principal Amount Principal Amount Principal Amount Principal Amount
2011 S200,000 S340,000 $155,000
2012 205,000 355,000 165,000
2013 215,000 375,000 I70,000 120,000
2014 230,000. 390,000 175,000 135,000
2015 595,000 235,000 135,000
2016 635,000 235,000
2017 675.000 240.000
$2,755,000 $1,460,000 S1,375,000 $390,000
Redemption Date: 10/ /2009 10/ /2009 10/ /2009 10/ /2009
Aggregate Principal Amount of Refunded Bonds: $5,980,000
19
The Non-Refunded Bonds(Remaining Outstanding Bonds)
In addition to the Series 1997 Bonds, Series 1998 Refunding Bonds, Series 1999 Bonds and Series 2002 Bonds, the
District has previously issued Waterworks and Sewer System Combination Unlimited Tax and Revenue Bonds, Series
1985(the"Series 1985 Bonds"),Unlimited Tax Refunding Bonds, Series 1992(the "Series 1992 Refunding Bonds"),
Waterworks and Sewer System Combination Unlimited Tax and Revenue Bonds,Series 1995(the"Series 1995 Bonds"),
Waterworks and Sewer System Combination Unlimited Tax and Revenue Refunding Bonds, Series 2003, (the"Series
2003 Refunding Bonds"),and Waterworks and Sewer System Combination Unlimited Tax and Revenue Bonds,Series
2004(the "Series 2004 Bonds"). The District issued the Series 1992 Refunding Bonds to advance refund and defease
certain maturities of the Series 1985 Bonds, issued the Series 1998 Refunding Bonds to advance refund and defease
certain maturities of the Series 1992 Refunding Bonds,and issued the Series 2003 Refunding Bonds to advance refund
and defease certain maturities of the Series 1995 Bonds. Collective reference is made in this Official Statement to the
Series 1985 Bonds,the Series 1992 Refunding Bonds,the Series 1995 Bonds, the Series 1997 Bonds, the Series 1998
Refunding Bonds,the Series 1999 Bonds,the Series 2002 Bonds,the Series 2003 Refunding Bonds and the Series 2004
Bonds as the"Outstanding Bonds." The District has never defaulted in the timely payment of principal of and interest
on the Outstanding Bonds. After issuance of the Bonds, the aggregate principal amount of the Outstanding Bonds,less
the maturities thereof previously paid by the District and less the Refunded Bonds,will be$5,030,000(the"Remaining
Outstanding Bonds"),and the aggregate principal amount of the District's total direct bonded indebtedness, including
the Bonds, will be$11,420,000. See "DISTRICT DEBT-Debt Service Requirements."
The principal amounts and maturity dates of the Remaining Outstanding Bonds are as follows.
Series 1998
Maturity Series 1997 Bonds Refunding Bonds Series 1999 Bonds
September 1 Principal Amount Principal Amount Principal Amount
2010 $185,000 $325,000 $ 155,000
$185,000 $325,000 $155,000
Series 2003
Maturity Series 2002 Bonds Refunding Bonds Series 2004 Bonds
September 1 Principal Amount Principal Amount Principal Amount
2010 $105,000 $245,000 $140,000
2011 110,000 255,000 145,000
2012 115,000 270,000 155,000
2013 290,000 165,000
2014 300,000 175,000
2015 320,000 185,000
2016 145,000 340,000 195,000
2017 145.000 360.000 205.000
$620,000 $2,380,000 $1,365,000
Total principal amount of Remaining Outstanding Bonds $5,030,000
20
Sources and Uses of Funds
The proceeds from the sale of the Bonds will be applied as follows:
SOURCES OF FUNDS:
Principal Amount of Bonds
Plus: Premium
District Contribution
Accrued Interest
Less: Original Issue Discount
Total Sources of Funds
USES OF FUNDS:
Escrow Fund
Deposit Accrued Interest to Bond Fund
Expenses:
Underwriters Discount
Municipal Bond Insurance Premium and Other Issuance Expenses
Total Uses of Funds
INVESTMENT CONSIDERATIONS
General
The Bonds,which are obligations of the District and not of the State of Texas,Brazoria County,Texas,or any political
subdivision other than the District,are secured by a continuing,direct,annual ad valorem tax,without legal limitation as
to rate or amount,on all taxable property located within the District,and are further payable from and secured by a pledge
of and lien on certain Net Revenues (as defined herein), if any, of the District's waterworks and sewer system(the
"System"),to the extent and upon the conditions described herein. The System is not expected to produce sufficient Net
Revenues to make significant contributions, if any,to future debt service payments. See"THE BONDS -Source of
Payment." The ultimate security for payment of the principal of and interest on the Bonds depends upon the ability of the
District to(i)collect from the property owners within the District taxes Ievied against all taxable property located within
the District,or,in the event taxes are not collected and foreclosure proceedings are institutedby the District,upon the value
of the taxable property with respect to taxes levied by the District and by other taxing authorities,and(ii)generate Net
Revenues from the operation of the District's System. The District makes no representations that over the life of the Bonds
the property within the District will maintain a value sufficient to justify continued payment of taxes by the property
owners,or that any Net Revenues will be generated. The potential increase in taxable valuation of District property will
be primarily as a result of increases in the value of existing homes,which is directly related to the economics of the
residential housing industry,not only due to general economic conditions,but also due to the particular factors discussed
below.
Maximum Impact on District Tax Rates
The value of the Iand and improvements currently located within the District will be a major determinant of the ability of
the District to collect,and the willingness of District property owners to pay,ad valorem taxes levied by the District. The
2008 Assessed Valuation of property within the District is$319,394,796. (See"TAX DATA"). After issuance of the
Bonds, the Maximum Annual Debt Service Requirement on the Bonds and the Remaining Outstanding Bonds will be
$1,661,226(2017)and the Average Annual Debt Service Requirements will be$1,645,666(2010 through 2017,inclusive).
Assuming no increase to or decrease fromtlie 2008 Assessed Valuation,and no use of other legally available Districtfunds,
a tax rate of$0.55 per$100 of Assessed Valuation at a 95%collection rate would be necessary to pay the Maximum
Annual Debt Service Requirement and the Average Annual Debt Service Requirements. The 2009 Assessed Valuation
of propertywithin the District is$319,928,913. Assuming no increase to or decrease from the 2009 Assessed Valuation,
21
and no use of other legally available District funds,a tax rate of$0.55 per$100 of Assessed Valuation at a 95%collection
rate would be necessary to pay the Maximum Annual Debt Service Requirement and the Average Annual Debt Service
Requirements.
The District levied a debt service tax in 2009 of$0.46 per$100 of Assessed Valuation,plus a maintenance tax of$0.04
per$100 of Assessed Valuation,for a total 2009 District tax rate of$0.50 per$100 of Assessed Valuation.As the above
information illustrates,the 2009 debt service tax rate of$0.46 per$100 of Assessed Valuation is not sufficient to pay the
Average Annual Debt Service Requirements on the Bonds and the Remaining Outstanding Bonds,assuming the District's
tax base at the level of the 2008 Assessed Valuation or the 2009 Assessed Valuation,and assuming no use of other legally
available District funds,95%tax collections and the issuance of no additional bonds by the District. The District's Bond
Fund balance is estimated to be$1,157,818 upon delivery of the Bonds. Although neither Texas law nor the Bond Order
requires that any specific amount be retained in the Bond Fund at any time,the District has in the past applied earnings from
the investment ofmonies held in the Bond Fund to meet the debt service requirements of the Remaining Outstanding Bonds
(see"APPENDIX B-ANNUAL FINANCIAL REPORT"). In addition,the District had,at July 31,2009,total annual
tax collections averaging 99.96%for the years 1998 through 2007,and had collected 99.31%of its 2008 tax levy,which
was in the process of collection,as of that date. Therefore,the District anticipates being able to pay the Average Annual
and Maximum Annual Debt Service Requirements of the Bonds and the Remaining Outstanding Bonds without increasing
its debt service levy above the level of the 2009 debt service levy of$0.46 per$100 ofAssessed Valuation. See"TAXING
PROCEDURES"and"TAX DATA-Tax Rate Calculations."
Tax Collection Limitations
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 Iocal taxing authorities on the property against which taxes are levied,and such lien maybe
enforced by foreclosure. The District's ability to collect ad valorem taxes through such foreclosure may be impaired by
the amount of taxes owed to other taxing units,a bankruptcy court's stay of tax collection procedures against a taxpayer,
and market conditions limiting the proceeds from a foreclosure sale of taxable property. The District's lien on taxable
property within the District for taxes levied against such property can be foreclosed only in a judicial proceeding. See
"TAXING PROCEDURES-District's Rights in the Event of Tax Delinquencies."
Production of Net Revenues
The Net Revenues,if any,to be derived from the operation of the System are entirely dependent upon sales of water and
sewer services to current and future residents and users of the System and related operating expenses. The District does
not expect that the operation of the System will produce net operating revenue sufficient to make a significant contribution,
if any,to the District's debt service requirements. The District's General Fund balance(audited)as of December 31,2008,
was$2,913,286(audited),and as of July 2,2009,was$2,934,818(unaudited). See"THE SYSTEM-Waterworks and
Sewer System Operating Statement"
Registered Owners'Remedies and Bankruptcy
In the event of default in the payment of principal of or interest on the Bonds,the Registered Owners have a right to seek
a writ of mandamus requiring the District to levy adequate taxes each year to make such payments. Except for mandamus,
the Bond Order does not provide for remedies to protect and enforce the interests of the Registered Owners. There is no
acceleration of maturity of the Bonds in the event of default and,consequently,the remedy of mandamus may have to be
relied upon from year to year. Although the Registered Owners could obtain a judgment against the District,such a
judgment could not be enforced by a direct levy and execution against the District's property. Further,the Registered
Owners cannot themselves foreclose on property within the District or sell property of the District in order to pay the
principal of and interest on the Bonds. Since there is no trust indenture or trustee,the Registered Owners would have to
initiate and finance the legal process to enforce their remedies. The enforceability of the rights and remedies of the
Registered Owners further may be limited by laws relating to bankruptcy,reorganization or other similar laws of general
22
application affecting the rights of creditors ofpolitical subdivisions such as the District. In this regard,should the District
file a petition for protection from creditors under federal bankruptcy laws,a suit seeking the remedy of mandamus would
be automatically stayed and could not be pursued unless authorized by a federal bankruptcy judge. See"THE BONDS
-Bankruptcy Limitation to Registered Owners'Rights."
Marketability
The District has no understanding(other thou the initial reoffering yields)with the Underwriter regarding the reoffering
yields or prices of the Bonds and has no control over the trading of the Bonds in the secondary market. There is no
assurance that a secondary market wiII be made for the Bonds. If there is a secondary market,the difference between the
bid and asked price of the Bonds may be greater than the bid and asked spread of other bonds generally bought,sold or
traded in the secondary market. See"SALE AND DISTRIBUTION OF THE BONDS."
Future Debt
The District has reserved in the Bond Order the right to issue the remaining$2,845,000 in bonds authorized but unissued
for waterworks,sanitary sewer and drainage facilities, and for refunding purposes, and such additional bonds as may
hereafter be approved by both the Board of Directors and voters of the District. The District also has reserved the right
to issue certain other additional bonds,special project bonds,and other obligations described in the Bond Order. All of
the remaining bonds authorized for waterworks,sanitary sewer and drainage facilities,and for refunding purposes,which
have heretofore been authorized by voters of the District may be issued by the District from time to time as needed. If
additional bonds are issued in the future andproperty values have not increased proportionately,such issuance may increase
gross debt/property valuation ratios and thereby adversely affect the investment quality or security of the Bonds and the
Remaining Outstanding Bonds. According to the District's Engineer,the District with the proceeds of the Outstanding
Bonds has financed all of the water supply and distribution,wastewater collection and treatment, and storm drainage
facilities that are necessary to serve the entirety of the District. Therefore,the District does not presently foresee the need
to issue additional taxbonds to finance additions to the System,although-the District cannot represent that the need for such
future issuance might not materialize. See"THE BONDS-Legal Ability to Issue Additional Debt,""DEVELOPMENT
AND HOME CONSTRUCTION"and"nib SYSTEM."
Continuing Compliance with Certain Covenants
The Bond Order contains covenants by the District intended to preserve the exclusion from gross income of interest on the
Bonds. 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."
23
AERIAL PHOTOGRAPH OF THE DISTRICT
(taken August,2009)
24
PHOTOGRAPHS WITHIN THE DISTRICT
(taken August,2009)
•
25
PHOTOGRAPHS WITHIN THE DISTRICT
(taken August,2009)
26
DISTRICT DEBT
General
The following tables and calculations relate to the Bonds and the Remaining Outstanding Bonds. After issuance of the
Bonds, the aggregate principal amount of the Outstanding Bonds, less the Refunded Bonds, will be $5,030,000 (the
"Remaining Outstanding Bonds"),and the District's total bonded indebtedness,including the Bonds,will be$11,420,000.
The District is empowered to incur debt to be paid from revenues raised by taxation against all taxable property located
within the District,and various other political subdivisions of government which overlap all or a portion of the District are
empowered to incur debt to be paid from revenues raised or to be raised by taxation against all or a portion of the property
within the District.
Bonded Indebtedness
2008 Assessed Valuation $319,394,796(a)
(As of January 1,2008)
See"TAX DATA"and"TAXING PROCEDURES."
2009 Assessed Valuation $319,928,913(b)
(As of January 1,2009)
See"TAX DATA"and"TAXING PROCEDURES."
Direct Debt: Remaining Outstanding Bonds $ 5,030,000(c)
The Bonds 6,390,000
Total $ 11,420,000
Estimated Overlapping Debt $ 18,524,782
Direct and Estimated Overlapping Debt $29,944,782
Direct Debt Ratio
: as a percentage of 2008 Assessed Valuation($319,394,796) 3.58%
: as a percentage of 2009 Assessed Valuation($319,928,913) 3.57%
Direct and Estimated Overlapping Debt Ratio
: as a percentage of 2008 Assessed Valuation($319,394,796) 9.38°%o
: as a percentage of 2009 Assessed Valuation($319,928,913) 9.36%
Bond Fund Balance at Delivery of the Bonds $ 1,590,995(d)
General Fund Balance as of July 2,2009 $ 2,934,818
(a) As of January 1,2008. All property in the District is valued on the tax rolls by the Brazoria County Appraisal
District(the"Appraisal District")at 100%of estimated market value as of January 1 of each year. The District's
tax roll is certified by the Brazoria County Appraisal Review Board (the "Appraisal Review Board"). See
'TAXING PROCEDURES"and"INVESTMENT CONSIDERATIONS-Factors Affecting Taxable Values and
Tax Payments."
(b) As of January 1,2009. All property in the District is valued on the tax rolls by the Brazoria County Appraisal
District(the"Appraisal District")at 100%of estimated market value as of January 1 of each year. The District's
tax roll is certified by the Brazoria County Appraisal Review Board(the"Appraisal Review Board"). Such sum
includes certain values which have not been certified by the Appraisal Review Board, including the value of
certain properties which has been proposed by the Appraisal District but protested by the owners thereof to the
27
Appraisal District and the value of certain properties not under protest but not yet certified. The Appraisal
District's estimate of the total taxable value of such properties under protest which will be assigned to such
properties if the owners'claims are upheld by the Appraisal Review Board is$30,647,483,which total is included
in the amount of$319,928,913. The Appraisal District has proposed the valuation of such protested properties
to be$34,052,759. The District is unable to predict the amount of the District's final 2009 Assessed Valuation.
Such final 2009 Assessed Valuation will not be determined until the valuation of all taxable property located
within the District is certified by the Appraisal Review Board for 2009. See"TAXING PROCEDURES"and
"INVESTMENT CONSIDERATIONS-Factors Affecting Taxable Values and Tax Payments."
(c) Excludes the Refunded Bonds. See "THE BONDS-Legal Ability to Issue Additional Debt."
(d) Neither the Bond Order or Texas law requires that any particular amount be maintained in the Bond Fund at any
time. Such sum gives effect to the payment by the District of the entirety of its debt service payments due for
2009. See"PLAN OF FINANCING."
28
Estimated Direct and Overlapping Debt Statement
The following statement indicates the direct and estimated overlapping debt of the District. The table includes the
estimated amount of indebtedness of governmental entities overlapping the District,defined as outstanding bonds payable
from ad valorem taxes,and the estimated percentages and amounts of such indebtedness attributable to property located
within the District This information is based upon data secured from the individual jurisdictions and/or the Texas
Municipal Reports published by the Municipal Advisory Council of Texas. The calculations by which the statement was
derived were made in part by comparing the reported assessed valuation of the property in the overlapping taxing
jurisdictions with the Assessed Valuation ofproperty within the District No effect has been given to the tax burden levied
by any applicable taxing jurisdiction for maintenance and operational or other purposes.
Outstanding Debt Overlapping
Taxing Jurisdiction As of June 1,2009 Percent Amount
Brazoria County $53,845,000 1.53022% $ 823,948
PearIand Independent School 336,315,890 5.26316 17,700.834 •
TOTAL ESTIMATED OVERLAPPING DEBT $18,524,782
TOTAL DIRECT DEBT(the Bonds and the
Remaining Outstanding Bonds)* 11.420.000
TOTAL DIRECT AND ESTIMATED
OVERLAPPING DEBT S29,944.782
Ratio of Total Direct and Estimated
Overlapping Debt to:
2008 Assessed Valuation($319,394,796) 9.38%
2009 Assessed Valuation($319,928,913) 9.36%
* See"Bonded Indebtedness"above.
Under Texas law ad valorem taxes levied by each taxing authority other than the District create a lien which is on a parity
with the lien in favor of the District on all taxable property within the District. In addition to the ad valorem taxes required
to retire the foregoing direct and overlapping debt,the various taxing authorities mentioned above also are authorized by
Texas law to assess,Ievy and collect ad valorem taxes for operation,maintenance,administration and/or general revenue
purposes. Certain of the jurisdictions have in the past levied such taxes. The District has the power to assess,levy and
collect ad valorem taxes for operation and maintenance purposes in an amount not to exceed$0.20 per$100 of Assessed
Valuation,and such taxes have been authorized by the duly qualified voters of the District The District levied a total tax
of$0.50 per$100 of Assessed Valuation in 2009,consisting of debt service and maintenance tax components of$0.46 and
$0.04 per$100 of Assessed Valuation,respectively. See"TAX DATA-Maintenance Tax"and"Tax Rate Distribution."
29
Debt Service Requirements
The following schedule sets forth the debt service requirements on the Outstanding Bonds, less the debt service
requirements on the Refunded Bonds,plus the principal and estimated interest requirements of the Bonds.
Less: Debt
Current Service on Total
Year Ending Total Debt Refunded Plus:—The Bonds— New Debt
December 31 Service Bonds Principal Interest* Service
2009 $1,661,226 $1,661,226
2010 1,669,111 306,488 $ 120,000 $ 144,464 1,627,088
2011 1,668,511 1,001,488 805,000 156,158 1,628,181
2012 1,674,194 996,373 810,000 144,888 1,632,709
2013 1,686,005 1,114,086 945,000 130,713 1,647,631
2014 1,693,590 1,119,436 970,000 109,923 1,654,076
2015 1,692,248 1,107,269 985,000 84,703 1,654,681
2016 1,700,714 961,625 865,000 56,630 1,660,719
2017 1.702.381 961.950 890.000 29.815 1,660.246
$15,147,980 $7,568,715 $6,390,000 $857,294 $14,826,557
Average Annual Requirements-Subsequent to Refunding(2010-2017) $1,645,666
Maximum Annual Requirement -Subsequent to Refunding(2009) $1,661,226
*Interest is estimated at various rates for the maturities of the Bonds.
See"TAX DATA-TaxRate Calculations"and"INVESTMENT CONSIDERATIONS-Maximumlmpact on District Tax
Rates"for a discussion of the District's projected tax rates and the effect of the Bonds thereon.
TAXING PROCEDURES
Authority
The Board is authorized to levy an annual ad valorem tax,without legal limitation as to rate and amount,on all taxable
property within the District in sufficient amount to pay the principal of and interest on the Bonds and the Remaining
Outstanding Bonds and any additional bonds payable from taxes which the District may hereafter issue,and to pay the
expenses of assessing and collecting such taxes. The District agrees in the Bond Order to levy such a tax from year to year
as described more fully above under the caption"THE BONDS-Source of Payment." The Board is also authorized to
levy and collect annual ad valorem taxes for the administration and maintenance of the District and the System and for the
payment of certain contractual obligations if such taxes are authorized by vote of the District's electors at an election. The
District's electors have authorized the levy of such a maintenance tax in the maximum amount of$0.20 per$100 of assessed
valuation. See"TAX DATA-Maintenance Tax."
Exempt Property
Except for certain exemptions provided by Texas law, all real property and tangible personal property and certain
categories of intangible personal property with a tax situs in the District are subject to taxation by the District;however,
no effort is expected to be made by the Brazoria County Appraisal District("BCAD"orthe"Appraisal District")described
below to assess taxes against tangible or intangible personal property not devoted to commercial or industrial use.Principal
categories of exempt real property include: property owned by the State of Texas or its political subdivisions,if the
property is used for public purposes;property exempt from ad valorem taxation by federal law;nonprofit cemeteries;and
30
certainproperty owned by qualified charitable,religious,veterans,fraternal,or educational organizations.Partially exempt
to the extent of$5,000 to$12,000 of assessed value,depending on the disability rating of the veteran,is property owned
by a disabled veteran or by the spouse or certain children of a deceased disabled veteran or a veteran who died while on
active duty. Also partially exempt,if approved by the Board or at an election called by the Board upon petition of at least
20%of the number of the qualified voters who voted in the District's preceding election, are residence homesteads of
certain persons who are disabled or at least 65 years old to the extent of$3,000 of appraised value or such higher amount
as the Board or the District's voters may approve. The District's tax assessor is authorized by statute to disregard
exemptions for the disabled and elderly if granting the exemption would impair the District's obligation to pay tax-
supported debt incurred prior to adoption of the exemption by the District. The District's 2009 tax roll contains disabled
veterans'exemptions aggregating$103,000 in assessed valuation,and over 65 or disabledpersons'exemptions aggregating
$3,060,000.
TheBoard may exempt up to 20%ofthe market value of residential homesteads from ad valorem taxation. Such exemption
would be in addition to any other applicable exemptions provided by law. However,if ad valorem taxes have previously
been pledged for the payment of debt and the cessation of the levy would impair the obligation of the contract by which
the debt was created,then the Board may continue to Ievy and collect taxes against the exempt value of the homesteads
until the debt is discharged. To date the Board has not voted to exempt any percentage of the market value of residential
homesteads from ad valorem taxation,but no representation may be made that the Board will not determine to grant such
exemption in the future.
Brazoria County may designate all or part of the area within the District as a reinvestment zone,and the City,Brazoria
County,or the Pearland Independent School District,may thereafter enter into tax abatement agreements with owners of
real property within the zone. The tax abatement agreements may exempt from ad valorem taxation by the applicable
taxing jurisdiction, and by the District, for a period of up to 15 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. None of the area within the District has been designated as a reinvestment zone to date.
County-Wide Appraisal District
The Texas Property Tax Code(the"Property Tax Code")establishes an appraisal district and an appraisal review board
in each county of the State of Texas. The appraisal district is governed by a board of directors elected by the governing
bodies of cities,towns,school districts and,if entitled to vote,the conservation and reclamation districts that participate
in the appraisal district and of the county. The District is entitled to vote upon and participate in the selection of members
of the board of directors of the BCAD. The board of directors selects a chief appraiser to manage the appraisal office of
the appraisal district. All taxing units within Brazoria County,including the District,are included in the BCAD. BCAD
is responsible for appraising property within the District,subject to reviewbythe Brazoria CountyAppraisal Review Board
(the"Appraisal Review Board"). The appraisal roll as approved by the Appraisal Review Board must be used by the
District in establishing its tax rolls and tax rate. The valuation and assessment of taxable property within the District is
governed by the Property Tax Code.
Under current Texas law, the District is responsible for the levy and collection of its taxes and will continue to be so
responsible unless the Board of Directors of the District,or the qualified voters of the District or of Brazoria County at an
election held for such purpose,determines to transfer such functions to the BCAD or another taxing unit.
Assessment and Levy
Generally,all taxable property in the District(other than any qualifying agricultural and timberland)must be appraised at
100%of market value as of January 1 of each tax year,subject to review and approval by the Appraisal Review Board.
Under the Property Tax Code,however,houses 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. Implementation of this amendment could reduce the assessed value
of builder inventory within the District. See"TAX DATA-Principal 2009 Property Owners"below. The Property Tax
31
Code requires each appraisal district to implement a plan providing for reappraisal of all real property in the appraisal
district at least once every three years. It is not known what frequency of reappraisal will be utilized by the BCAD or
whether reappraisals will be conducted on a zone or county-wide basis.
The Property Tax Code permits land designated for agricultural use or timberland to be appraised at its value based on the
land's capacity to produce agricultural or timber products rather than at its fair market value. Provisions of the Property
Tax Code are complex and are not fully summarized here. Landowners wishing to avail themselves of the agricultural use
designation must apply for the designation,and the appraiser is required by the Property Tax Code to act on each claimant's
right to the designation individually. If a claimant receives the designation and later loses it by changing the use of the
property or selling it to an unqualified owner,the District can collect taxes based on the new use,including for three years
for agricultural use and for five years for agricultural land and timberland,prior to the loss of the designation.
The chief appraiser must give written notice on May 15,or as soon thereafter as practicable to each owner if the appraised
value of his property is greater than it was in the preceding year,if the appraised value of the property is greater than the
value rendered by the property owner,or if the property was not on the appraisal roll in the preceding year. In addition,
the chief appraiser must give written notice to each property owner whose property was reappraised in the current year or
if ownership of the property changed during the preceding year. The appraisal reviewboard has the ultimate responsibility
for determining the value of all taxable property within the District;however,any owner who has timely filed notice with
the appraisal review board may appeal the final determination by the appraisal review board by filing suit in Texas district
court. Prior to such appeal and prior to the delinquency date,however,the owner must pay the tax due on the amount of
value of the property involved that is not in dispute or the amount of tax paid in the prior year,whichever is greater,or 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 appraisals of a certain category of property,the exclusion
of property from the appraisal records, or the grant in whole or in part of a partial exemption. The District may not,
however,protest a valuation of individual property.
By September 1 of each year,or as soon thereafter as practicable,the rate of taxation is set by the Board based upon the
assessed 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.
District and Taxpayer Remedies
Under certain circumstances,taxpayers and taxing units,including the District,may appeal orders ofthe Appraisal Review
Board by filing a petition for review in Texas state district court within forty-five(45)days after notice is received that a
final order has been entered. In such event,the property value in question may be determined by the court,or by a jury,
if requested by any party. Additionally,taxing units may bring suit against the Appraisal District to compel compliance
with the Property Tax Code.
The Property Tax Code establishes a procedure for notice to property owners ofreappraisals reflecting increased property
values,appraisals that are higher than renditions and appraisals of property not previously on an appraisal roll.
Collection
The District is responsible for the collection of its taxes,unless it elects to transfer such functions to another governmental
entity. Taxes are due on receipt of the tax bill and become delinquent after January 31 of the following year. The date of
the delinquency maybe postponed if the tax bills are mailed after September 30(if the Board has authorized discounts for
early payment)or otherwise after January 10, So long as the Board has not transferred responsibility for collection of the
taxes to another taxing unit or the Appraisal District,the Board may permit payment without penalty or interest of the final
tax installment by July 1,if one-half of taxes assessed for the current year are paid prior to December 1. The Board may
approve a 3%discount for taxes paid in October,2%for November and 1%for December. Delinquent taxes are subject
to a 6%penalty for the first month of delinquency, 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,the Board may impose a further penalty not to exceed 20%on all taxes unpaid on July 1 which
is used to defray the cost of engaging an attorney for collection of delinquent taxes.
32
Rollback of Operation and Maintenance Tax Rate
The qualified voters of the District have the right to petition for a rollback of the District's operation and maintenance tax
rate only ifthe total District tax bill on the average residence homestead increases by more than eight percent. If a rollback
election's called and passes,the rollback tax rate is the District's current year's debt service and contract tax rates plus 1.08
times the District's previous year's operation and maintenance tax rate. Thus,the District's debt service and contract tax
rates cannot be changed by a rollback election.
District's Rights in the Event of Tax Delinquencies
Taxes levied by the District are a personal obligation of the person who owns or acquires 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
taxes,penalties,and interest ultimately imposed for the year upon the property. The District's tax lien is on a parity with
the tax liens of the other state and local jurisdictions levying taxes on property within the District. 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.
In the absence of such federal Iaw,the District's tax lien takes priority over a lien of the United States. In the event a
taxpayer falls to make timely payment of taxes due the District,the District may file suit at any time after taxes become
delinquent to foreclose its 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 also be adversely affected by the amount of taxes owed
to other federal,state and local taxing jurisdictions,by the effects of market conditions on the foreclosure sales price,by
the taxpayer's right to redeem the property(a taxpayermay redeemproperty within six(6)months for commercial property
and two(2)years for residential and all other types of property after the purchaser's deed issued at the foreclosure sale is
filed in the county records), or by bankruptcy proceedings which restrain or stay the collection of a taxpayer's debts.
Federal bankruptcy Iaw provides that an automatic stay of actions by creditors and other entities,including governmental
units,goes into effect with the filing of any petition in bankruptcy. The automatic stay prevents governmental units from
foreclosing on property and prevents liens for post-petition taxes from attaching to property and obtaining secured creditor
status unless,in either case,an order lifting the stay is obtained from the bankruptcy court. In many cases post-petition
taxes are paid as an arlminictrative expense of the estate in bankruptcy or by order of the bankruptcy court.
TAX DATA
General
All taxable property within the District is subject to the assessment,levy and collection by the District of a continuing,
direct,annual ad valorem tax,without legal limitation as to rate or amount,sufficient to pay principal of and interest on
the Remaining Outstanding Bonds,the Bonds and any future tax-supported bonds which may be issued from time to time
as authorized. Taxes are levied by the District each year against the District's assessed valuation at January 1 of that year.
Taxes become due October 1 of such year,or when billed,and become delinquent after January 31 of the following year.
The Board covenants in the Bond Order to assess and Ievy, for each year that all or any part of the Bonds remain
outstanding and unpaid,a tax ample and sufficient(with any net revenue)to produce funds to pay the principal of and
interest on the Bonds when due. The actual rate of such tax will be determined from year to year as a function of the
District's tax base,its debt service requirements and available funds.
Maintenance Tax
The Board of Directors of the District has the statutory authority to levy and collect an annual ad valorem tax for
maintenance of the District's improvements,if such maintenance tax is authorized by a vote ofthe District's electorate. On
November 3,1981,the District voters authorized the levy of such a maintenance tax in an amount not to exceed$0.20 per
$100 of Assessed Valuation. Such tax is in addition to taxes which the District is authorized to levy for paying principal
of and interest on the Bonds,the Remaining Outstanding Bonds and any tax supported bonds which maybe issued in the
future. The District has levied a maintenance tax in 2009 of$0.04 per$100 of Assessed Valuation and in prior years in
varying amounts as indicated below under the caption"Tax Rate Distribution."
33
Historical Values and Tax Collection History
The following statement of tax collections sets forth, in condensed form, the historical Assessed Valuation and tax
collections of the District. Such summary has been prepared for inclusion herein based upon information obtained from
District records. Reference is made to such records,including the District's annual audited financial statements,for more
complete information.
Collections
Assessed Tax Adjusted Current& Year Ending
Tax Year Valuation Rate(a) Levy Prior Years(b) 9/30
1998 $127,638,472 $0.9480 $1,210,012.71 100.00% 1999
1999 148,627,208 0.8700 1,293,056.71 100.00 2000
2000 170,326,897 0.7800 1,328,549.80 100.00 2001
2001 199,486,977 0.7400 1,476,203.63 99.99 2002
2002 238,209,950 0.7400 1,762,753.63 100.00 2003
2003 290,956,191 0.6700 1,949,406.48 .100.00 2004
2004 308,401,000 0.5500 1,695,714.06 99.98 2005
2005 313,083,942 0.4800 1,502,567.85 99.94 2006
2006 320,068,656 0.4500 1,440,513.99 99,85 2007
2007 325,872,267 . 0.5100 1,662,302.89 99.86 2008
2008 319,394,796 0.5000 1,597,073.88 99.31(c) 2009
2009 319,928,913(d) 0.5000 1,599,644.57 (d) 2010
(a) Per$100 of Assessed Valuation.
(b) Such percentages reflect cumulative total collections for each year from the time each respective annual tax was
levied through July31,2009. The amount of tax collected for each levy on a current basis(by September 30 of the
year following each respective levy)is not reflected in this statement.
(c) As of July 31,2009. In process of collection.
(d) Such sum includes certain values which have not been certified by the Appraisal Review B oard,including the value
of certain properties which has been proposed by the Appraisal District but protested by the owners thereof to the
Appraisal District The Appraisal District's estimate ofthe total taxable value ofsuchproperties under protest which
will be assigned to such properties if the owners'claims are upheld by the Appraisal Review Board is$30,647,483,
included in the amount of$319,928,913. The Appraisal District has proposed the valuation of such protested
properties to be$34,052,759. The District is unable to predict the amount of the District 's final 2009 Assessed
Valuation:Such final 2009 Assessed Valuation will not be determined until the valuation of all taxable property
located within the District is certified by the Appraisal Review Board for 2009.
(e) Levied September 9,2009.
34
Tax Rate Calculations
The tax rate calculations setforthbelow are presented to indicate the tax rates per$100 ofAssessed Valuation which would
be required to meet certain debt service requirements if no growth in the District occurs beyond the 2009 Assessed
Valuation. The calculations also assume collection of 95%of taxes levied,no use of other legally available District funds
on hand,and the sale of no additional bonds by the District. As outlined above under the caption"Historical Values and
Tax Collection History,"the District has collected an average total annual percentage of its property taxes of 99.96%for
the period 1998 through 2007,while 2008 taxes were 99.31%collected as of July 31,2009.
•
Average Annual Debt Service Requirements(2010-2017) $1,645,666
Tax Rate of$0.55 on the 2008 Assessed Valuation($319,394,796)produces $1,668,838
Tax Rate of$0.55 on the 2009 Assessed Valuation($319,928,913)produces $1,671,269
Maximum Debt Service Requirement(2017) $1,661,226
Tax Rate of$0.55 on the 2008 Assessed Valuation($319,394,796)produces $1,668,838
Tax Rate of$0.55 on the 2009 Assessed Valuation($319,928,913)produces $1,671,629
The District Ievied a debt service tax in 2009 of$0.46 per$100 of Assessed Valuation,plus a maintenance tax of$0.04
per$100 of Assessed Valuation. As the above table indicates,the 2009 debt service tax rate will not be sufficient to pay
the average annual debt service requirements on the Bonds and the Remaining Outstanding Bonds assuming the District's
tax base at the level of 2008 Assessed Valuation or the 2009 Assessed Valuation,and assuming no use of other legally
available District funds,95%tax collections and the issuance of no additional bonds by the District. The District's Bond
Fund balance is estimated to be$1,157,818 upon delivery of the Bonds. Although neither Texas law nor the Bond Order
requires that any specific amount be retained in the Bond Fund at any time,the District has in the past applied earnings from
the investment of monies held in the BondFund to meet the debt service requirements ofthe Remaining Outstanding Bonds
(see"APPENDIX B-ANNUAL FINANCIAL REPORT"). In addition,the District bad,at July 31,2009,total annual
tax collections averaging 99.96%for the years 1998 through 2007,and had collected 99.31%of its 2008 tax levy,which
was in the process of collection,as of that date. Therefore,the District anticipates being able to pay the Average Annual
and Maximum Annual Debt Service Requirements of the Bonds and the Remaining Outstanding Bonds without increasing
its debt service levy above the level of the 2009 debt service levy of$0.46 per$100 ofAssessed Valuation. See"TAXIING
PROCEDURES"and"INVESTMENT CONSIDERATIONS-Factors Affecting Taxable Values and Tax Payments."
Tax Rate Distribution
2009 2008 2007 2006 2005
Debt Service $0.46 $0.46 $0.49 $0.43 $0.46
Maintenance 0.04 0.04 0.02 0.02 0.02
Total $0.50 $0.50 $0.51 $0.45 $0.48
35
Analysis of Tax Base
The following table illustrates the composition of property located within the District during the past six years.
Assessed Valuation
Property Valuation 2009 % 2008 % 2007 %
Land $ 47,771,200 14.93% $ 53,672,670 16.80% $ 53,083,450 16.29%
Improvements 246,164,807 76.94 269,748,956 84.46 276,369,112 84.81
Personal Property 5,334,490 1.67 6,302,920 1.97 6,578,730 2.02
Exemptions (9,989,067) (3.12) (10,329,750) (3.23) (10,159,025) (3.12)
Not Certified 30,647,483 9.58 0 0 0
Total Valuations $319,928,913* 100.00% $319,394,796 100.00% $325,872,267 100.00%
Assessed Valuation
Property Valuation 2006 % 2005 % 2004 %
Land $53,054,970 16.58% $ 53,048,870 16.94% $48,560,870 15.75%
Improvements 269,094,986 84,07 262,089,990 83.71 260,479,690 84.46
Personal Property 6,315,720 1.97 6,122,390 1.96 5,092,480 1.65 •
Exemptions (8,397,020) (2.62) (8,177,308) (2.61) (5,732,040) (1.86)
Total $320,068,656 100,00% $313,083,942 100.00% $308,401,000 100.00%
* Such sum includes certain values which have not been certified by the Appraisal Review B oard,including the value
of certain properties which has been proposed by the Appraisal District but protested by the owners thereof to the
Appraisal District.The Appraisal District's estimate ofthe total taxable value ofsuchpropertiesunderprotestwhich
will be assigned to suchproperties if the owners'claims are upheld by the Appraisal Review Board is$30,647,483,
included in the amount of$319,928,913. The Appraisal District has proposed the valuation of such protested
properties to be$34,052,759. The District is unable to predict the amount of the District 's final 2009 Assessed
Valuation. Such final 2009 Assessed Valuation will not be determined until the valuation of all taxable property
located within the District is certified by the Appraisal Review Board for 2009.
Principal 2009 Property Owners
Based upon information supplied by the District's Tax Assessor/Collector,the following table lists principal District
taxpayers,type ofproperty owned by such taxpayers,and the Assessed Valuation of such property as of January 1,2009.
The information reflects the composition ofthe Appraisal District's record ofproperty ownership as of January 1,2009.
%of 2009
2009 Assessed
Property Owner Property Description Property Value Valuation
Plalca Stiverlake,LLC Commercial $5,356,050 1.68%
Silverlake Plaza,LLC Commercial 2,624,470 0.80
Roth Pearland LLC Commercial 1,688,360 0.53
Akshipra Investments,Inc. Commercial 1,143,110 0.36 .
WSG Southwyck IV,LP Commercial 957,830 0.30
Jubilee Brown Lot and Home 764,810 0.24 . •
Centerpoint Energy Inc. Utilities 753,970 0.23
AEI Income&Growth Fund XXII LP Lot and Home 749,350 0.23
Horace&Alexa St.Julian Lot and Home 711,000 0.22
June Jackson&Horace St.Julian Lot and Home 705.740 0.22
$15,354,690 4.81%
36
Estimated Overlapping Taxes
Property located within the District is subject to taxation by several taxing authorities in addition to the District. Set
forth below is a compilation of all 2008 taxes levied upon property located within the District and the 2009 tax rate
of the District. Under Texas law, ad valorem taxes levied by each taxing authority other than the District entitled to
levy taxes against property located within the District create a lien which is on a parity with the tax lien of the District.
In addition to the ad valorem taxes required to make the debt service payments on bonded debt of the District and of
such other jurisdictions(see"DISTRICT DEBT-Estimated Direct and Overlapping Debt Statement"), certain taxing
jurisdictions are authorized by Texas law to assess, levy and collect ad valorem taxes for operation, maintenance,
administrative and/or general revenue purposes.
2008 Tax Rate
Per$100 of
Taxing Jurisdictions Assessed Valuation
The District $0.500000*
Brazoria County 0.390000
Pearland Independent School District 1.419400
Brazoria County Drainage District No, 4 0.143845
Estimated Total Tax Rate $2.453245
* The District has levied a tax of$0.50 per$100 of Assessed Valuation for 2009, consisting of debt service and
maintenance tax components of$0.46 and$0.04 per$100 of Assessed Valuation, respectively.
THE DISTRICT
Authority
The District is a municipal utility district created pursuant to an order of the Texas Water Commission(the"TWC"),
now the Texas Commission on Environmental Quality(the "TCEQ"), dated July 16, 1981,and is authorized under
Article XVI, Section 59 of the Texas Constitution. The creation of the District was confirmed at an election held
within the District on November 3, 1981 by a vote of 4 "For" to 0 "Against." The rights, powers, privileges,
authority,and functions of the District are established by the general laws of the State of Texas pertaining to municipal
utility districts,particularly Chapters 49 and 54,Texas Water Code,as amended. In addition,the District is subject
to the continuing supervision of the TCEQ. The principal functions of the District are to finance,construct,own,and
operate waterworks, wastewater, and drainage facilities and to provide such facilities and services to the customers
of the District. The District,if approved by the voters within the District,the TCEQ,and other governmental entities
having jurisdiction,may establish,operate, and maintain a fire department,independently or with one or more other
conservation and reclamation districts,and provide such facilities and services to the customers of the District. Under
certain circumstances the District also is authorized to construct,develop and maintain park and recreational facilities
and to construct roads. See "DEVELOPMENT AND HOME CONSTRUCTION." The District is subject to the
continuing supervision of the TCEQ in certain matters.
Description
The District contains approximately 636.6 acres of land,including approximately 23.5 acres annexed by the District in
1998. The District is located approximately 5 miles west of and lies entirely within the extraterritorial jurisdiction of
the City of Pearland,Texas. State Highway 288 is Iocated approximately 0.6 miles west of the northwestern boundary
of the District and County Road 518 forms the northernmost boundary of the District. The District is located
approximately twelve and one-half miles south of the central business district of the City of Houston and approximately
eleven and one-half miles north of the Texas Medical Center complex.
37
Silverlake Project
The District is part of a master-planned,mixed-use land development project which is now known and is being marketed
as Silverlake (formerly known as Southwyck), which includes an aggregate of approximately 2,050 acres of land,
approximately 1,000 acres of which were purchased by New Southwyck,L.P.("New Southwyck")in 1994. Amenities
within Silverlake include an 18 hole daily fee golf course and club house,pools,playgrounds,soccer fields,baseball
fields and a majorrecreation center consisting of 4 tennis courts,walking paths,community activities and meeting center
and a junior Olympic pool. Silverlake includes the approximate 636.6 acres Iocated within the District,approximately
518 acres located inBrazoriaCountyMunicipal Utility DistrictNo.1("M.U.D.No.1"),approximately 477 acres located
in Brazoria County Municipal Utility District No. 3 ("M.U.D. No. 3"), and approximately 418 of an aggregate
approximately 778 acres currently located in Brazoria County Municipal Utility District No.6("M.U.D.No.6"). Land
use intended for M.U.D.No.'s 1,2,and 3 is predominantly single-family residential. M.U.D.No.6 is being developed
for residential and commercial use.
The development of all of the land located within the District which is available for development is complete. Such
developmentincludes an aggregate of 1,114 single-familyresidential lots on approximately 372.8 acres and 57 townhome
lots on approximately 10.0 acres, on all 1,114 of which fully developed single-family lots and 57 townhome lots
residences have been constructed,all of which residences have been sold to home purchasers,plus approximately 10.2
acres that have been developed for commercial purposes on which above-ground improvements including two shopping
centers totaling approximately 93,579 square feet of building area have been constructed,and includes the construction
of underground water distribution,wastewater collection,and storm sewer facilities and street paving as is enumerated
in this Official Statement under the caption"DEVELOPMENT AND HOME CONSTRUCTION-Land Development
and Home Construction Summary."
In addition to the development of the District,(i)the development of a total of 1,356 single-family residential lots is
complete in M.U.D.No. 1,(ii)the development of a total of 1,411 single-family residential lots is complete in M.U.D.
No.3,and(iii)the development of 1,308 single-family residential Iots is complete in M.U.D.No. 6. 11 holes of the
Southwyck Golf Course plus an approximate 6,000 square foot clubhouse,and other facilities including a restaurant,
men's and women's locker rooms,and a golf cart barn are located within the District,and the balance of the golf course
is located within M.U.D.Nos.3 and 6. See"APPEND]X A-LOCATION MAP"and`DEVELOPMENT AND HOME
CONSTRUCTION."
Management of the District
The District is governed by the Board of Directors,consisting of five directors. The Board of Directors has control over
and management supervision of all affairs of the District. Directors serve four-year staggered terms,and elections are
held within the District in May in even numbered years. The current members and officers of the Board,along with their
respective terms of office,are listed below. Directors Scarry and Linzer currently reside within the District. The other
Directors own separate parcels of land located within the District that are subject to separate non-recourse promissory
notes.
Name Title Term Expires Mav
Sandy Gingles President 2004
Gerry Lowry Vice President 2006
Kevin Wilson Secretary 2006
Bernie Scarry Deputy Secretary 2006
Larry Linzer Director 2004
38
The District does not have a general manager but has contracted for services,or employs directly,as follows:
Bookkeeper-The District's bookkeeper is McLennan&Associates,L.P.,which serves as bookkeeper for 100
utility districts.
Tax Assessor/Collector-The District has engaged Thomas W.Lee,RTA and Assessments of the Southwest,Inc.,
Friendswood,Texas,as the District's Tax Assessor/Collector.According to Mr.Lee,he presently serves 138 taxing
units as tax assessor/collector. The Tax Assessor/Collector applies the District's tax Ievy to tax rolls prepared by
the Brazoria County Appraisal District and bills and collects such levy.
Consulting Engineers-The District has employed the firm of Jones&Carter,Inc.,Houston,Texas,as Consulting
Engineer on a contract basis to provide engineering services to the District.
District Operator-SWWC Services,Inc.is the general operator of the District's System. According to SWWC
Services,Inc.,it is currently employed as operator for 275 utility districts including the District.
Auditor-The District has employed McCall Gibson Swedlund Barfoot PLLC,Certified Public Accountants,to
audit its financial statements for the year ending December 31,2008. A copy ofthe District's audit for the fiscal year
ended December 31,2008,is included as"APPENDIX B"to this Official Statement.
Counsel-The District employs Paul A.Philbin&Assoc.,P.C.,Houston,Texas,as general counsel and as Bond
Counsel in connection with the issuance of the Bonds. Payment to Bond Counsel by the District is contingent on
the issuance,sale and delivery of the Bonds. See`LEGAL MATTERS."
Special Tax Counsel-McCall,Parkhurst&Horton,L.L.P.,Dallas,Texas,serves as Special Tax Counsel to the
District in connection with the issuance ofthe Bonds. The fees to be paid Special Tax Counsel for services rendered
in connection with the issuance of the Bonds is contingent on the issuance,sale and delivery of the Bonds.
Financial Advisor-The District has engaged Rathmann&Associates,L.P.,as financial advisor(the"Financial
Advisor")to the District. The fees payable to the Financial Advisor for services rendered in connection with the
issuance of the Bonds are contingent upon the issuance,sale and delivery of the Bonds.
DEVELOPMENT AND HOME CONSTRUCTION
The development of all of the land located within the District which is available for development is complete. Such
developmentincludes an aggregate of 1,114 single-familyresidential lots on approximately 372.8 acres and 57 townhome
Iots on approximately 10.0 acres,on all 1,114 of which fully developed single-family residential lots and 57 townhome
lots residences have been constructed,all of which residences have been sold to home purchasers,plus approximately
10.2 acres that have been developed for commercial purposes on which above-ground improvements including two
shopping centers totaling approximately 93,579 square feet of building area have been constructed,and includes the
construction of underground water distribution,wastewater collection,and storm sewer facilities and street paving as
is enumerated in this Official Statement under the caption"DEVELOPMENT AND HOME CONSTRUCTION-Land
Development andHome Construction Summary." 11 holes of the 18 hole Southwyck Golf Course(approximately 134.7
acres),plus an approximate 6,000 square foot clubhouse,and other facilities including a restaurant,men's and women's
locker rooms,and a golf cartbam are also located withinthe District. Approximately 108.9 District acres are contained
within street and drainage ditchrigbts-of-way,various easements,Lake Silverlake,parks and open space or are otherwise
not available for future development.
The construction of(i)a regional wastewater treatment facility,(ii)joint water supply facilities,and(iii)joint drainage
facilities,all of which facilities the District shares with M.U.D.No.1,M.U.D.No.3 and M.U.D.No.6,is also complete.
The District financed its portion of the cost of the acquisition or construction of certain of the aforementioned
components of its system(the"System"),and certain other facilities,with portions of the proceeds of the sale of the
Outstanding Bonds and will finance additions thereto which are described in this Official Statement under the caption
"THE SYSTEM"with portions of the proceeds of the sale of the Bonds.
39
Land Development and Home Construction Summary
The residential lot development and home construction activity which has been undertaken within the District as of
September 1,2009,is illustrated below.Underground water distribution,wastewater collection and storm sewer facilities
and street paving have been constructed to serve the entirety of the developable land located within the District,and
wastewater treatment capacity and water supply capacity have been allocated to provide service to all of such land. Such
underground facilities and wastewater treatment and water supply capacity have been financed by the District with the
proceeds of the sale of the Outstanding Bonds as is described in this Official Statement.
Lots Homes
Under Under Construction Completed
Subdivision Developed Acres Development Acres Sold Unsold Sold Unsold Totals
Southwyck
Section 4 142 35.8 0 0 142 0 142
Section 5 53 37.9 0 0 53 0 53
Section 9,
Phase 1 57 15.6 0 0 57 0 57
Phase 2 68 19.0 0 0 68 0 68
Parkeside at
Silverlake
Section 1 90 24.1 0 0 90 0 90
The Gardens at
Silverlake
Section 1 82 22.7 0 0 82 0 82
Lakepointe at
Silverlake
Section 1 81 27.3 0 0 81 0 81
Section 2 59 20.1 0 0 59 0 59
Meadowview at
Silverlake
Section 1 76 22.5 0 0 76 0 76
Section 2 16 6.3 0 0 16 0 16
Cambridge Cove
at Stiverlake
Section 1 79 35.5 0 0 79 0 79
Section 2 21 7.3 0 0 21 0 21
Waterbury Estates
at Stiverlake
Section 1 45 19.0 0 0 45 0 45
Section 2 34 13.8 0 0 34 0 34
Section 3 32 8.5 0 0 32 0 32
Springbrook at
Silverlake
Section 1 93 28.8 0 0 93 0 93
Section 2 86 28.6 0 0 86 0 86
Townhome Tract 57 10.0 0 0 0 0 57 0 57
Totals 1,171 382.8 0 0 0 0 1,171 0 1,171
40
According to the District's Engineer,the District,with the proceeds of the Outstanding Bonds has financed all of the
water supply and distribution,wastewater collection and treatment,and storm drainage facilities that are necessary to
serve the entirety of the District. Therefore,the District does not presently foresee the need to issue additional tax bonds
to finance additions to the System,although the District cannot represent that the need for such future issuance might
not materialize. See`°11L-th BONDS-Legal Ability to Issue Additional Debt"
THE SYSTEM
Regulation
The water,wastewater and storm drainage facilities serving land within the District(the"System")have been designed
in conformance with accepted engineering practices and the requirements of certain governmental agencies having
regulatory or supervisory jurisdiction over the construction and operation of such facilities including,among others,the
City ofPearland,Brazoria County,Brazoria Drainage District No.4 and the TCEQ.
Operation of the System is subject to regulation by,among others,the United States Environmental Protection Agency
and the TCEQ. In many cases,regulations promulgated by these agencies have become effective only recently and are
subject to further development and revision. According to the District's Engineer, the total number of equivalent
residential connections projected for the District at the full development of its approximate 636.6 acres is 1,328 with a
total estimated population of 3,916. A description of portions of the System follows,and is based upon information
supplied by the District's Engineer.
Description
As described above under the caption"DEVELOPMENT AND HOME CONSTRUCTION,"portions of the proceeds
of the sale of the Outstanding Bonds were used to finance the construction or acquisition of water supply and distribution,
wastewater collection and treatment,and storm drainage facilities to serve the entirety of the developable land that is
located within the District. According to the District's Engineer,the District,with the proceeds of the Outstanding Bonds
'has financed all of the water supply and distribution,wastewater collection and treatment,and storm drainage facilities
that are necessary to serve the entirety of the District. Therefore,the District does not presently foresee the need to issue
additional tax bonds to finance additions to the System,although the District cannot represent that the need for such
future issuance might not materialize. See"THE BONDS-Legal Ability to Issue Additional Debt"
-Storm Drainage-
Storm water drainage for the District is accomplished by a joint drainage improvement and storm sewer system financed
with proceeds of the sale of the Outstanding Bonds. Such improvements,which also serve M.U.D.No 1,M.U.D.No.
3,and M.U.D.No.6 include(i)the excavation of the detentionportion ofLake Silverlake,Phase 1 located in the District
to serve as an onsite detention lake, including approximately 160,000 cubic yards of excavation, and related
appurtenances;(ii)a detention pond system which includes approximately 3,317 linear feet of 54-inch diameter storm
sewer pipe,a drop structure,a control weir,a lake outran structure,approximately 11,200 feet of linear detention pond,
and a bridge at County Road 89;and(iii)the reclamation of Mary's Creek which includes approximately 8,590 linear
feet of improvements to the existing channel of Mary's Creek downstream of FM 1128. See"100-Year FIood Plain"
below.
-Water Supply-
The District has entered into a Restated P ermanent Water Supply Contract(the"Agreement")dated September 1,1999,
as amended by a FirstAmendment to the Agreement dated December 3,2001,with the adjoining M.U.D.No.1,M.U.D.
No.3 andM.U.D.No.6 whichprovides,among other things,for the joint ownership of a water supply well and treatment
plant(the"Water Plant No. 1"). The District financed its pro rata share of the cost of the facility with a portion of the
proceeds of the Outstanding Bonds. Water PlantNo.1 consists of a 1,000 gallons-per-minute(g.p.m.")water well with
auxiliary power supply,a 500,000 gallon storage tank,30,000 gallons ofhydropneumatic tank capacity,a total of 2,750
41 •
g.p.m. of booster pump capacity, a 450 g.p.m.remote water well and related appurtenances. Under the terms of the
Agreement,the District is entitled to 24%of the water supply capacity in the Water Plant and bears 24%of the costs,
including construction costs,related thereto. The District entered into a Facilities Proration Agreement dated February
24, 1995, with M.U.D.No. 1,M.U.D.No. 3, and M.U.D.No. 6 which provides, among other things, for the joint
ownership of the District's second water supply well and treatment plant("Water Plant No.2"). The District financed
its pra rata share of the cost of Phases 1,2 and 3 of Water Plant No.2 with a portion of the proceeds of the sale of the
Outstanding Bonds. Water Plant No.2 consists of a 1,250 g.p.m.water well with auxiliary power, an 1,800 g.p.m.
remote water well, two (2) 300,000 gallon and one (1) 600,000 gallon ground storage tanks, 30,000 gallons of
hydropneumatic tank capacity,a total of 7,000 g.p.m.of booster pump capacity and related appurtenances. Under the
terms of the agreement,the District is entitled to 23%of the water supply capacity of the plant and bears 23%of the
costs,including construction costs related thereto. The District has entered into a Facilities Proration Agreement with •
M.U.D.No.1,M.U.D.No.3,and M.U.D.No.6 which provides,among other things,for the joint ownership of Water
PIant No.3 ("Water Plant No.3"). The District financed its pro rata share of the cost of the Phases 1 and 2 of Water
Plant No.3 with a portion of the proceeds of the sale of the Outstanding Bonds. Water PlantNo.3 consists of a 2,100
g.p.m.well,two(2) 620,000 gallon ground storage tanks,booster pumps totaling 6,250 g.p.m.of capacity and related
appurtenances. Under the terms of the agreement,the District bears 12.8%of the costs,including construction costs
related thereto,and is entitled to 12.8%of the water supply capacity of Water Plant No.3 upon completion of Phase 2.
The District has entered into a Facilities Proration Agreement with M.U.D.No. 1,M.U.D.No.3, and M.U.D.No.6
which provides,among other things,for the joint ownership of a 700,000 gallon elevated storage tank. The District
financed its pro rata share of the cost of the facilities with a portion ofthe proceeds of the sale of the Outstanding Bonds.
Under the terms of the agreement,the District is entitled to 19.0%of the capacity of the tank upon its completion and
bears 19.0%of the costs,including construction costs related thereto.
According to the District's Engineer,the District's pro rata share of the capacity in the water plants and aforementioned
related facilities is sufficient to provide service to all of the connections that are programmed for the District upon its
full development.
-Wastewater Treatment-
The District has entered into a Facilities Proration Agreement dated April 29, 1993,restated pursuant to the`Restated
Regional Wastewater Treatment Facilities Agreement" dated September 1, 1999, and amended by the "Facilities
Proration Agreement"dated February 24,2000,with M.U.D.No.1,M.U.D.No.3 and M.U.D.No.6 which provides,
among other things,for the joint ownership of a regional wastewater treatment facility. The plant currently consists of
2,400,000 gallons per day("g.p.d.")average daily flow capacity. The District financed its pro rata share of the cost of
the facility with a portion of the proceeds of the sale of the Outstanding Bonds. Under the terms of the Agreement,the
District is entitled to 16.7%of the wastewater treatment capacity in the plant and bears 16.7%of the costs,including
construction costs related thereto.According to the District's Engineer,the District's 16.7%pro rata share of the capacity
in the plant is sufficient to provide service to all of the connections that are programmed for the District upon its full
development.
-100-Year Flood Plain-
According to the District's Engineer,the Federal EmergencyManagement Agency FloodHazardBoundaryMap currently
in effect which covers the land located in the District indicates thatno portion ofthe District except the channel of Mary's
Creek is located within the 100-year flood plain of any water course.
42
Waterworks and Sewer System Operating Statement
The following statement summarizes the operating history of the District's waterworks and sewer system for the fiscal '
years ended December 31,2004,through 2008,and the six-month period ended June 30,2009. The summary has been
condensed from information contained in the District's audited financial statements for the fiscal years ended December
31,2004,through 2008,to which reference is made for more complete and further information and from an unaudited
compilation of information supplied by the District's Bookkeeper in the case of the information covering the six-month
period ended June 30, 2009. The derivation of Net Revenues which follows excludes depreciation expenses. See
"APPENDIX C-FINANCIAL STATEMENTS OF THE DISTRICT."
Fiscal Year Ended December 31
Six-Month
Period Ended
June 30,2009* 2008 2007 2006 2005 2004
GENERAL FUND
REVENUES:
Property Taxes $126,181 $65,516 $64,240 $62,235 $62,281 $58,430
Water Service 166,849 389,503 348,315 407,592 444,983 383,472 ,
. Wastewater Service 155,942 306,015 307,323 301,717 303,741 290,944
Penalty and Interest 6,654 9,657 9,351 13,455 10,450 9,778
Tap Connection and •
Inspection Fees 7,055 63,655
Investment Revenues 13,979 80,375 130,042 125,007 74,607 28,470
Miscellaneous Revenues 22,185 23,534 29,025 12.887 13.279 11.737
TOTAL REVENUES $498,845 $874,600 $888,296 $922,893 $909,341 $846,486
EXPENDITURES:
Professional Fees $72,342 $92,651 $64,916 $72,024 $71,308 $49,000
Contracted Services 117,489 228,694 226,811 210,643 195,734 171,193
Purchased Water Service 103,616 159,312 103,922 109,073 91,911 88,715
Purchased Wastewater Service 64,913 173,516 132,273 127,955 113,142 89,127
Utilities 2,660 4,652 4,668 4,647 3,981 3,097
Repairs and Maintenance 111,951 178,339 187,453 111,589 151,382 105,936
Other 41,788 54,756 43,751 48,099 33,036 55,844
Capital Outlay 28.051 38.696
TOTAL EXPENDI-
TURES $514.759 $891,920 $763,794 $684,030 $688,545 $601,608
EXCESS REVENUES
OVER(UNDER)
EXPENDITURES S(15,914) $(17,320) $124,502 $238,863 5157.765 $219,169
* Unaudited.
The District's General Fund balance(audited) as of December 31, 2008,was$2,913,286(audited), and as of July
2, 2009, was$2,934,818(unaudited).
43
r
LEGAL MATTERS
Legal Opinions
The District will furnish the Underwriters a transcript of certain certified proceedings had incident to the authorization
and issuance of the Bonds. Such transcript will include a certified copy of the approving opinion ofthe Attorney General
of Texas,as recorded in the Bond Register of the Comptroller of Public Accounts of the State of Texas,to the effect that
the Bonds are valid and binding obligations of the District. The District also will furnish the approving legal opinion
of Paul A.Philbin&Assoc.,P.C.,Houston,Texas,Bond Counsel("Bond Counsel"),to the effect that,based upon an
examination of such transcript,the Bonds are valid and binding obligations of the District under the Constitution and
laws of the State of Texas. The legal opinion of Bond Counsel will further state that the Bonds,including principal of
and interest thereon,are payable from ad valorem taxes,without legal limit as to rate or amount,upon all taxable property
located within the District,and are further payable from and secured by a pledge of and lien on the Net Revenues,if any,
of the System. The District will also furnish the approving legal opinion of McCall,Parkhurst&Horton L.L.P,Dallas,
Texas,Special Tax Counsel to the District("Special Tax Counsel"),to the effect that interest on the Bonds is excludable
from gross income of the owners thereof for federal income tax purposes under existing statues,regulations,published
rulings and court decisions as described under the caption which follows entitled"TAX MATTERS." The opinions of
Bond Counsel and Special Tax Counsel will be printed on the Bonds. Based upon the matters stated in such opinion,
Bond Counsel's opinion will also state that,as a result of the deposit of the Escrowed Obligations pursuant to the Escrow
Agreement, firm banking and financial arrangements will have been made for the payment of the Refunded Bonds
pursuant to the Escrow Agreement and that,therefore,such Refunded Bonds will be deemed to be fully paid and no
longer outstanding except for the purpose of being paid from the funds provided therefor in such Escrow Agreement
In its capacity as Bond Counsel,Paul A.Philbin&Assoc.,P.C.has reviewed the information appearing in this Official
Statement under the captions "THE BONDS," `PLAN OF FINANCING - Escrow Agreement," "TAXING
PROCEDURES," "THE DISTRICT-Authority," and- "Management of the District- Legal Counsel," "LEGAL
MATTERS" (except the information therein relating to the opinion of Special Tax Counsel and the information
appearing under the caption"No Arbitrage"),and"CONTINUING DISCLOSURE OF INFORMATION,"to determine
whether such information fairly summarizes the procedures,law and documents referred to therein. In its capacity as
Special Tax Counsel, McCall, Parkhurst&Horton L.L.P.,has reviewed the information appearing in this Official
Statement under the captions "THE DISTRICT - Management of the District - Special Tax Counsel," "LEGAL
MATTERS-Legal Opinions"(but only insofar as such caption relates to the opinion of Special Tax Counsel)and"TAX
MATTERS"to determine whether such information fairly summarizes the procedures,law and documents referred to
therein. Bond Counsel and Special Tax Counsel have not,however,independently verified any of the other factual
information contained in this Official Statement nor have they conducted an investigation of the affairs of the District
for the purpose of passing upon the accuracy or completeness of this Official Statement. No person is entitled to rely
upon such parties'limited participation as an assumption of responsibility for,or an expression of opinion of any kind
with regard to the accuracy or completeness of any of the information contained herein. The legal fees to be paid Bond
Counsel and Special Tax Counsel for services rendered in connection with the issuance of the Bonds are based on a
percentage of the Bonds actually issued, sold and delivered and, therefore, such fees are contingent on the sale and
delivery of the Bonds. Bond Counsel acts as general counsel for the District on matters other than the issuance ofbonds.
Certain legal matters will be passed upon for the Underwriters by McCall,Parkhurst&Horton L.L.P.,Dallas,Texas,
as Underwriters'Counsel.
No Arbitrage
The District will certify on the date the Bonds are delivered and paid for that based upon all facts and estimates now
known or reasonably expected to be in existence,the District reasonably expects that the proceeds of the Bonds will not
be used in a manner that would cause the Bonds,or any portion of the Bonds,to be"arbitrage bonds"under Section 148
of the Internal Revenue Code of 1986, as amended(the"Code"), and the regulations prescribed from time to time
thereunder. Furthermore,all officers,employees and agents of the District have been authorized and directed to provide
certifications offacts and estimates that are material to the reasonable expectations of the District as ofthe date the Bonds
are delivered and paid for. In particular,all or any officers of the District have been authorized to certify to the facts,
44
circumstances and reasonable expectations of the District an the date the Bonds are delivered and paid for regarding the
amount and use of the proceeds of the Bonds. Moreover,the District will covenant in the Bond Order that it will make
such use of the proceeds of the Bonds,regulate investments of proceeds of the Bonds and take such other and further
actions and follow such procedures, including without limitation, calculation of the yield on the Bonds, as may be
required so that the Bonds will not become"arbitrage bonds"under the Code and the regulations prescribed from time
to time thereunder. •
No-Litigation Certificate
The District will furnish to the Underwriters a certificate,dated as of the date of delivery of the Bonds,executed by both
the President and Secretary of the Board,to the effect that no litigation of any nature has been filed or is then pending
or threatened,either in state or federal courts,contesting or attacking the Bonds;restraining or enjoining the issuance,
execution or delivery of the Bonds;affecting the provisions made for the payment of or security for the Bonds;in any
manner questioning the authority or proceedings for the issuance,execution,or delivery of the Bonds;or affecting the
validity of the Bonds.
No Material Adverse Change
The obligations of the Underwriters 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,as it may have been supplemented or amended,through the date of sale.
TAX MATTERS
Opinion
On the date of initial delivery of the Bonds,McCall,Parkhurst&Horton L.L.P.,Dallas,Texas,Special Tax Counsel,
will render its opinion that,in accordance with statutes,regulations,published rulings and court decisions existing on
the date thereof("Existing Law")interest on the Bonds(1)will be excludable from the gross income, as defined in
section 61 of the Code, of the owners thereof for federal income tax purposes;and(2) will not be included in the
alternative minimum taxable income of individuals under section 57(a)(5)of the Code or,except as described below,
corporations.Except as stated above,Special Tax Counsel will express no opinion as to any other federal,state or local
tax consequences of the purchase,ownership or disposition of the Bonds.
In rendering its opinion,Special Tax Counsel will rely upon(a)the opinion of Paul A.Philbin&Assoc.,P.C.,Bond
Counsel,that the Bonds are valid and binding obligations of the District payable from the proceeds of a generally-
applicable ad valorem tax,(b)the District's federal tax certificate and the verification reportprepared by Grant Thornton
LLP, Certified Public Accountants and(c) covenants of the District with respect to arbitrage,the application of the
proceeds to be received from the issuance and sale of the Bonds and certain other matter. Failure by the District to
observe the aforementioned representations or covenants, could cause the interest on the Bonds to become taxable
retroactively to the date of issuance.
The Code and the regulations promulgated thereunder contain a number ofrequirements that must be satisfied subsequent
to the issuance of the Bands in order for interest on the Bonds to be,and to remain,excludable from gross income for
federal income tax purposes.Failure to comply with such requirements may cause interest on the Bonds to be included
in gross income retroactively to the date of issuance of the Bonds.The opinion of Special Tax Counsel is conditioned
on compliance by the District with such requirements, and Special Tax Counsel has not been retained to monitor
compliance with these requirements subsequent to the issuance of the Bonds.
Special Tax Counsel's opinion represents its legal judgement based upon its review of Existing Law and the reliance on
the aforementioned information,representations and covenants.Special Tax Counsel's opinion is not a guarantee of a
result. Existing Law is subject to change by the Congress and to subsequent judicial and administrative interpretation
45
•
by the courts and the Department of the Treasury. There can be no assurance that Existing Law or the interpretation
thereof will not be changed in a manner which would adversely affect the tax treatment of the purchase,ownership or
disposition of the Bonds.
A ruling was not sought from the Internal Revenue Service by the Issuer with respect to the Bonds or the property
financed orrefinanced with proceeds of the Bands.No assurances can be given as to whether or not the Internal Revenue •
Service will commence an audit of the Bonds, or as to whether the Internal Revenue Service would agree with the
opinion of Special Tax Counsel. If an audit is commenced,under current procedures the Internal Revenue Service is
likely to treat the District as the taxpayer and the Bondholders may have no right to participate in such procedure. No
additional interest will be paid upon any determination of taxability.
Federal Income Tax Accounting Treatment of Original Issue Discount
The initial public offering price to be paid for the Bonds,as stated on the cover of the Official Statement,may be less
than the principal amount thereof(the"Original Issue DiscountBonds"). As such,the difference between(i)the amount
payable at the maturity of each Original Issue Discount Bond, and(ii)the initial offering price to the public of such
Original Issue Discount Bond constitutes original issue discount with respect to such Original Issue Discount Bond in
the hands of any owner who has purchased such Original Issue DiscountBond in the initial public offering of the Bonds.
•
Under Existing Law,such an owner is entitled to exclude from gross income(as defined in section 61 of the Code)an
amount of income with respect to such Original Issue Discount Bond equal to that portion ofthe amount of such original
issue discount allocable to the period for which such Original Issue DiscountBond continues to be owned by such owner.
For a discussion of certain collateral federal tax consequences,see discussion set forth below.
In the event of the redemption,sale or other taxable disposition of such Original Issue Discount Bond prior to stated
maturity,however,the amount realized by such owner in excess of the basis of such Original Issue Discount Bond in
the hands of such owner(adjusted upward by the portion of the original issue discount allocable to the period for which
such Original Issue Discount Bond was held by such initial owner)is includable in gross income.
Under Existing Law,the original issue discount on each Original Issue Discount Band is accrued daily to the stated
maturity thereof(in amounts calculated as described below for each six-month period ending on the date before the
semiannual anniversary dates of the date of the Bonds and ratably within each such six-month period)and the accrued
amount is added to an initial owner's basis for such Original Issue DiscountBond forpurposes of determining the amount
of gain or loss recognized by such owner upon the redemption,sale or other disposition thereof. The amount to be added
to basis for each accrual period is equal to(a)the sum ofthe issue price and the amount of original issue discount accrued
in prior periods multiplied by the yield to stated maturity(determined on the basis of compounding at the close of each
accrual period and properly adjusted for the length of the accrual period)less(b)the amounts payable as current interest
during such accrual period on such Original Issue Discount Bond.
The federal income tax consequences of the purchase,ownership,redemption,sale or other disposition of Original Issue
Discount Bonds which are notpurchased in the initial offering at the initial offering price may be determined according
to rules which differ from those described above. All owners of Original Issue DiscountBonds should consult their own
tax advisors withrespect to the determination for federal,state and local income tax purposes of the treatment of interest
accrued upon redemption,sale or other disposition of such Original Issue Discount Bonds and with respect to the federal,
state, local and foreign tax consequences of the purchase, ownership, redemption, sale or other disposition of such
Original Issue Discount Bonds.
Collateral Federal Income Tax Consequences
The following discussion is a summary of certain collateral federal income tax consequences resulting fromthe purchase,
ownership or disposition ofthe Bonds. This discussion is based on existing statutes,regulations,published rulings and
court decisions,all of which are subject to change or modification,retroactively.
46
The following discussion is applicable to investors,other than those who are subject to special provisions of the Code,
such as financial institutions,property and casualty insurance companies,life insurance companies,individual recipients
of Social Security or Railroad Retirement benefits,individuals allowed an earned income credit,certain S corporations
with accumulated earnings and profits and excess passive investment income,foreign corporations subject to the branch
profits tax, taxpayers who may be deemed to have incurred or continued indebtedness to purchase tax-exempt
obligations. •
THE DISCUSSION CONTAINED HEREIN MAY NOT BE EXHAUSTIVE. INVESTORS,INCLUDING THOSE
WHO ARE SUBJECT TO SPECIAL PROVISIONS OF THE CODE, SHOULD CONSULT THEIR OWN TAX
ADVISORS AS TO THE TAX TREATMENT WHICH MAY BE ANTICIPATED TO RESULT FROM THE
PURCHASE,OWNERSHIP AND DISPOSITION OF TAX-EXEMPT OBLIGATIONS BEFORE DETERMINING
WHETHER TO PURCHASE THE BONDS.
Interest on the Bonds will be includable as an adjustment for"adjusted current earnings" to calculate the alternative
minimum tax imposed on corporations by section 55 of the Code. Section 55 of the Code imposes a tax equal to 20
percent for corporations,or 26 percent for noncorporate taxpayers(28 percent for taxable income exceeding$175,000),
of the taxpayer's"alternative minimum taxable income,"if the amount of such alternative minimum tax is greater than
the taxpayer's regular income tax for the taxable year.
Under section 6012 of the Code,holders of tax-exempt obligations,such as the Bonds,may be required to disclose
interest received or accrued during each taxable year on their returns of federal income taxation.
Section 1276 of the Code provides for ordinary income tax treatment of gain recognized upon the disposition of a tax-
exempt obligation,such as the Bonds,if such obligation was acquired at a"market discount"and if the fixed maturity
of such obligation is equal to,or exceeds,one year from the date of issue. Such treatment applies to"market discount
bonds"to the extent such gain does not exceed the accrued market discount of such bonds;although for this purpose,
a de minimiq amount of market discount is ignored. A"market discount bond"is one which is acquired by the holder
at a purchase price which is less than the stated redemption price at maturity or,in the case of a bond issued at an original
issue discount,the"revised issue price"(i.e.,the issue price plus accrued original issue discount). The"accrued market
discount"is the amount whichbears the same ratio to the market discount as the number of days during which the holder
holds the obligation bears to the number of days between the acquisition date and the final maturity date.
State,Local and Foreign Taxes
Investors should consult their own tax advisors concerning the tax implications of the purchase,ownership or disposition
of the Bonds under applicable state or local laws. Foreign investors should also consult their own tax advisors regarding
the tax consequences unique to investors who are not United States persons.
Qualified Tax-Exempt Obligations for Financial Institutions
Section 265(a)of the Code provides,in pertinent part,that interest paid or incurred by a taxpayer,including a"financial
institution,"on indebtedness incurred or continued to purchase or carry tax-exempt obligations is not deductible by such
taxpayer in determining taxable income. Section 265(b)of the Code provides an exception to the disallowance of such
deduction for any interest expense paid or incurred on indebtedness of a taxpayer which is a"financial institution"
allocable to tax-exempt obligations,other than"specified private activity bonds,"which are designated by a"qualified
small issuer"as"qualified tax-exempt obligations." A"qualified small issuer"is any governmental issuer(together with
any subordinate issuers) who issues no more than$10,000,000 of tax-exempt obligations during the calendar year.
Section 265(b)(5)of the Code defines the term"financial institution"as referring to any corporation described in section
585(a)(2)of the Code,or any person accepting deposits from the public in the ordinary course of such person's trade or
business which is subject to federal or state supervision as a financial institution.
47
The District expects to designate the Bonds as"qualified tax-exempt obligations"within the meaning of section 265(b)
of the Code. In furtherance of that designation,the District will covenant to take such action which would assure,or to
refrain from such action which would adversely affect,the treatment ofthe Bonds as"qualified tax-exempt obligations."
Potential purchasers should be aware that if the issue price to the public exceeds $10,000,000, there is a
reasonable basis to conclude that the payment of a de minimis amount of premium in excess of$10,000,000 is
disregarded, however,the Internal Revenue Service could take a contrary view.Were the Internal Revenue
Service to conclude that the amount of such premium is not disregarded,then such obligations might fail to satisfy
the$10,000,000 limitation and the obligations would not be"qualified tax-exempt obligations."
VERIFICATION OF ACCURACY OF MATHEMATICAL COMPUTATION
The arithmetical computations of the adequacy of the amounts deposited with the paying agent for the Refimded Bonds
and certain available funds(if any)to pay,when due,the principal or redemption price of and interest on the Refunded
Bonds,was verified by Grant Thornton LLP, Certified Public Accountants. The computations were independently
verified by Grant Thornton LLP based upon assumptions andJinformation supplied on behalf of the District.
SOURCES OF INFORMATION
General
The information contained in this Official Statement has been obtained primarily from the District's records,the Brazoria
County Appraisal District and other sources believed to be reliable; however, no representation is made as to the
accuracy or completeness ofthe information contained herein,except as describedbelow under"Certification of Official
Statement." The summaries of the statutes,resolutions and engineering and other related reports set forth herein are
included subject to all of the provisions of such documents. These summaries do not purport to be complete statements
of such provisions and reference is made to such documents for further information.
Experts
The information contained in this Official Statement relating to engineering,to the description of the System generally
and,in particular,the engineering information included in the section captioned"THE SYSTEM"has been provided
by Jones&Carter,Inc.Houston,Texas. Such information has been included herein in reliance upon the authority of
said firm as an expert in the field of civil engineering.
The information contained in this Official Statement relating to assessed valuations of property generally and, in
particular,that information concerning principal taxpayers,tax collection rates and valuations contained in the sections
captioned"TAX DATA"and"DISTRICT DEBT"has been provided by the Brazoria County Appraisal District and
Thomas W.Lee. The District has included certain information herein in reliance upon Mr.Lee's authority as an expert
in the field of tax assessing and real property appraisal.
The District's audited financial statements for the year ended December 31,2008,were prepared by McCall Gibson
Swedlund Barfoot PLLC,Certified Public Accountants,and have been included herein as"APPENDIX B." McCall,
Gibson Swedlund Barfoot PLLC, Certified Public Accountants, has consented to the publication of such financial
statements in this Official Statement. A copy of the Management Letter from the District's auditor to the District's Board
of Directors relating to the District's financial reporting under Statement of Auditing Standards No. 112,including the
District's response thereto,is included in"APPENDIX B."
48
Certification of Official Statement
At the time of payment for and delivery of the Bonds,the District will furnish the Underwriter a certificate,executed by
the President and Secretary of the Board,acting in their official capacities,to the effect that to the best of their knowledge
and belief: (a)the information,descriptions and statements of or pertaining to the District contained in this Official
Statement,on the date thereof and on the date of delivery were and are true and correct in all material respects; (b)
' insofar as the District and its affairs,including its financial affairs,are concerned,this 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 herein or necessary
to make the statements herein,in the light of the circumstances under which they were made,not misleading and(c)
insofar as the descriptions and statements,including financial data contained in this Official Statement,of or pertaining
to entities other than the District and their activities are concerned,such statements and data have been obtained from
sources which the District believes to be reliable and that the District has no reason to believe that they are untrue in any
material respect or omit to state any material fact necessary to make the statements herein, in the light of the
circumstances under which they were made,not misleading;however,the District has made no independent investigation
as to the accuracy or completeness of the information derived from sources other than the District.
Official Statement"Deemed Final"
For purposes of compliance with Rule t5c(2)-12 of the Securities and Exchange Commission,this document,as the same
maybe supplemented or corrected by the District from time to time,maybe treated as an Official Statement with respect
to the Bonds described herein "deemed final"by the District as of the date hereof(or of any such supplement or
correction)except for the omission of certain information referred to in the succeeding paragraph.
The Official Statement,when further supplemented by adding information specifying the interest rates and certain other
information relating to the Bonds,shall constitute a"FINAL OFFICIAL STATEMENT'of the District with respect to
the Bonds,as that term is defined in Rule 15c(2)-12.
CONTINUING DISCLOSURE OF INFORMATION
In the Bond Order,the District has made the following agreement for the benefit of the holders and beneficial owners
of the Bonds. The District is required to observe the agreement for so long as it remains obligated to advance funds to
pay the Bonds. Under the agreement,the District will be obligated to provide certain updated financial information and
operating data annually,and timely notice of specified material.events,to certain information vendors. This information
will be available to securities brokers and others who purchase the information from the information vendors.
Annual Reports
The District will provide certain updated financial information and operating data to certain information vendors
annually. The information to be updated includes all quantitative financial information and operating data with respect
to the District of the general type included in this Official Statement under the headings"DISTRICT DEBT"and"TAX
DATA"and in"APPENDIX B"(the Audit). The District will update and provide this information within six months
after the end of each fiscal year ending in or after 2009. The District will provide the updated information to the
Municipal Securities Rulemaking Board(the"MSRB")or any successor to its functions as a repository through its
• Electronic Municipal Market Access("EMMA")system.
The District may provide updated information in full text or may incorporate by reference certain other publicly available
documents,as permitted by SEC Rule 15c2-I2. The updated information will include audited financial statements,if
the District's audit is completed by the required time. If audited financial statements are not available by the required
time,the District will provide unaudited financial statements within the required time,and audited financial statements
when the audit report becomes available. Any such financial statements will be prepared in accordance with the
accounting principles described in the Bond Resolution or such other accounting principles as the District may be
required to employ from time to time pursuant to state law or regulation.
49
The District's fiscal year end is currently December 31. Accordingly,it must provide updated information by June 30
in each year,unless the District changes its fiscal year. If the District changes its fiscal year,it will notify the MSRB of
the change.
Material Event Notices
The District will also provide timely notices of certain events to EMMA and any SID. The District will provide notice
of any of the following events with respect to the Bonds,if such event is material to a decision to purchase or sell Bonds:
(1)principal and interest payment delinquencies; (2)non-payment related defaults; (3)unscheduled draws on debt
service reserves reflecting financial difficulties; (4)unscheduled draws on credit enhancements reflecting financial
difficulties;(5)substitution of credit or liquidity providers,or their failure to perform;(6)adverse tax opinions or events
affecting the tax-exempt status of the Bonds; (7) modifications to rights of holders of the Bonds; (8) Bond calls;
(9)defeasances;(10)release,substitution,or sale ofproperty securing repayment of the Bonds;and(11)rating changes.
Neither the Bonds nor the Bond Resolution makes any provision for debt service reserves or liquidity enhancement. In
addition,the District will provide timely notice of any failure by the District to provide information,data,or financial
statements in accordance with its agreement described above under"Annual Reports."
Availability of Information
The District has agreed to provide the foregoing information only to the MSRB. Investors will be able to access,without
charge from the MSRB,continuing disclosure information filed with the MSRB at www.emma:msrb.org.
Limitations and Amendments
The District has agreed to update information and to provide notices of material events only as described above. The
District has not agreed to provide other information that may be relevant or material to a complete presentation of its
financial results of operations,condition or prospects or agreed to update any information that is provided,except as
described above. The District makes no representation or warranty concerning such information or concerning its
usefulness to a decision to invest in or sell Bonds at any future date. The District disclaims any contractual or tort
liability for damages resulting in whale or in part from any breach of its continuing disclosure agreement,or from any
statement made pursuant to its agreement,although holders and beneficial owners ofB onds may seek a writ of mandamus
to compel the District to comply with its agreement.
The District may amend its continuing disclosure agreement from time to time to adapt 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 District,but only if the agreement,as amended,would have permitted an underwriter to purchase or sell Bonds
in the offering described herein in compliance with Rule 15c2-12, taking into account any amendments and
interpretations of the Rule to the date of such amendment,as well as such changed circumstances,and either the holders
of a majority in aggregate principal amount of the outstanding Bonds consent to the amendment or any person
unaffiliated with the District(such as nationally recognized bond counsel) determines that the amendment will not
materially impair the interests of the beneficial owners of the Bonds. The District may also amend or repeal the
agreement if the SEC amends or repeals the applicable provisions of such rule or a court of final jurisdiction determines
that such provisions are invalid, but in either case only to the extent that its right to do so would not prevent the
Underwriter from lawfully purchasing the Bonds in the offering described herein. If the District so amends the
agreement,it has agreed to include with any financial information or operating data next provided in accordance with
its agreement described above under "Annual Reports" an explanation, in narrative form, of the reasons for the
amendment and of the impact of any change in the type of financial information and operating data so provided.
Compliance with Prior Undertakings
The District is in compliance with all continuing disclosure agreements made by it in accordance with the SEC Rule
15c2-12 in the last five years..
50
Updating of Official Statement
If,subsequent to the date of the Official Statement,the District learns,or is notified by the Underwriter,of any adverse
event which causes the Official Statement to be materially misleading,and unless the Underwriter elects to terminate its
obligation to purchase the Bonds, the District will promptly prepare and supply to the Underwriter an appropriate
amendment or supplement to the Official Statement satisfactory to the Underwriter; provided, however, that the
obligation of the District to so amend or supplement the Official Statement will terminate when the District delivers the
Bonds to the Underwriter, unless the Underwriter notifies the District on or before such date that less than all of the
Bonds have been sold to ultimate customers, in which case the District's obligations hereunder will extend for an
additional period of time(but not more than 90 days after the date the District delivers the Bonds)until all of the bonds
have been sold to ultimate customers. •
This Official Statement is duly approved by the Board ofDirectors of the District as ofthe date specified on the firstpage
hereof.
/s/ Sandy tingles
President,Board of Directors
Brazoria County Municipal Utility District No.2
ATTEST:
/s/ Kevin Wilson
Secretary,Board of Directors
Brazoria County Municipal Utility District No.2
•
51
APPENDIX A
LOCATION MAP
APPENDIX B
BRAZORIA COUNTY MUNICIPAL UTILITY DISTRICT NO.2
BRAZORIA COUNTY,TEXAS
ANNUAL FINANCIAL REPORT
DECEMBER 31,2008
•
APPENDIX B
BRAZORIA COUNTY MUNICIPAL UTILITY DISTRICT NO.3
BRAZORIA COUNTY,TEXAS
ANNUAL FINANCIAL REPORT
DECEMBER 31,2008
APPENDIX C
SPECIMEN OF FINANCIAL GUARANTY INSURANCE POLICY
Brazoria County Municipal Utility District No.2
Refunding Effects
Current Refunding of Selected Series 1997,1998,1999 and 2002 Bonds("A"Insured/BQ Sca
Less:Debt Service Plus:Series 2009 Refunding Bonds
Year Ending Current Total on Refunded Current Interest Bonds Capital Post Rfndg Post Rfndg
12/31 Debt Service Bonds(1) Principal Interest Appr Bonds Debt Service Savings
2009 1,661,226 1,661,226
2010 1,669,111 306,488 120,000 144,464 1,627,088 42,023
2011 1,668,511 1,001,488 805,000 156,158 1,628,181 40,330
2012 1,674,194 996,373 810,000 144,888 1,632,709 41,485
2013 1,686,005 1,114,086 945,000 130,713 1,647,631 38,374
2014 1,693,590 1,119,436 970,000 109,923 1,654,076 39,514
2015 1,692,248 1,107,269 985,000 84,703 1,654,681 37,566
2016 1,700,714 961,625 865,000 56,630 1,660,719 39,995
2017 1,702,381 961,950 890,000 29,815 1,660,246 42,135
Totals $15,147,980 $7,568,715 $6,390,000 $857,294 $14,826,557 $321,422
(1)-This column only reflects debt payments scheduled after the closing date of 10/01/2009.
BRAZORIA_MUD02:RUN2009REF AGG2009OLD AGG2009REF NEW2009REF Prepared by:Rathmann&Associates-Houston,Texas 08/24/2009 @ 15:50 v9.03--Run"D"
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Brazoria County Municipal Utility District No.2
Sources &Uses Report
Current Refunding of Selected Series 1997,1998,1999 and 2002 Bonds("A"Insured/BQ Sca
Sources of Funds:
Principal Amount of Current Interest Bonds(CIBs) 6,390,000.00
Total SOURCES of Funds $6,390,000.00
Uses of Funds:
Initial Cash Deposit to Escrow 6,017,460.58
Bond Insurance 72,472.92
Issuance Expenses: ($298,395.00)
Underwriter's Discount 79,875.00
Rating Agency 11,000.00
Bond Counsel 63,900.00
Accountant/CPA 9,000.00
Printing 9,500.00
Trustee 1,600.00
Financial Advisor 108,630.00
Special Tax Counsel 2,500.00
Underwriter's Counsel 6,000.00
Attorney General's Fee 6,390.00
•
Rounding Amount 1,671.50
Total USES of Funds $6,390,000.00
Miscellaneous Bond Issuance Information:
Delivery Date: 10/01/2009
Principal Amount of Bonds Being Refunded 5,980,000.00
Principal Amount of the Refunding Bonds 6,390,000.00
Proceeds of'The(new)Bonds" 6,390,000.00_
Rate/Yield on the Refunded Bonds 5.43357962%
"All Costs Included"TIC on the New Issue is 4.05265810%
Federal Arbitrage Yield on the New Issue is 2.97401229%
Yield on Escrow -
Total Debt Service Savings 321,421.96 •
Present Value Savings @ 4.05265810% 277,259.91
Total Debt Service Savings as a Percent of
Total Debt Service of Refunded Bonds 4.24671836%
Present Value Savings as a Percent of
Principal Amount of Bonds Being Refunded 4.63645343%
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Brazoria County Municipal Utility District No.2
Current Refunding of Selected Series 1997,1998,1999 and 2002 Bonds("A"Insured/BQ Sca
Dated Date=10/01/2009 Series 2009 Refunding Bonds Delivery Date=10/01/2009
Term Bond Bond Coupon Interest Total Fiscal Year
Dates Maturities Redemptions Proceeds Rate Yield Price Amount Debt Service Debt Service '
03/01/2010 - - - - - - 65,665.63 65,665.63 -
09/01/2010 - 120,000.00 120,000.00 1.200 1.200000 100.000000 78,798.75 198,798.75 264,464.38
03/01/2011 - - - - - - 78,078.75 78,078.75 -
09/01/2011 - 805,000.00 805,000.00 1.400 1.400000 100.000000 78,078.75 883,078.75 961,157.50
03/01/2012 - - - - - - 72,443.75 72,443.75 -
09/01/2012 - 810,000.00 810,000.00 1.750 1.750000 100.000000 72,443.75 882,443.75 954,887.50
03/01/2013 - - - - - - 65,356.25 65,356.25 -
09/01/2013 - 945,000.00 945,000.00 2.200 2.200000 100.000000 65,356.25 1,010,356.25 1,075,712.50
03/01/2014 - - - - - - 54,961.25 54,961.25 -
09/01/2014 - 970,000.00 970,000.00 2.600 2.600000 100.000000 54,961.25 1,024,961.25 1,079,922.50
03/01/2015 - - - - - - 42,351.25 42,351.25 -
09/01/2015 - 985,000.00 985,000.00 2.850 2.850000 100.000000 42,351.25 1,027,351.25 1,069,702.50
03/01/2016 - - - - - - 28,315.00 28,315.00 -
09/01/2016 - 865,000.00 865,000.00 3.100 3.100000 100.000000 28,315.00 893,315.00 921,630.00
03/01/2017 - - - - - - 14,907.50 14,907.50 -
09/01/2017 - 890,000.00 890,000.00 3.350 3.350000 100.000000 14,907.50 904,907.50 919,815.00
Total - 6,390,000.00 6,390,000.00 857,291.88 7,247,291.88 7,247,291.88
Acc Int - - - - - -
Grand Ttls - 6,390,000.00 6,390,000.00 857,291.88 7,247,291.88 7,247,291.88
TIC(Incl.all expenses)....4.05265810% Average Coupon 2.73523771% Net Eff.Int.Rate(Texas Vemon's)= 2.735238%(with Adjstmnt of$0.00).
TIC(Arbitrage TIC) 2.97401229% Average Life(yrs)... 4.90 IRS Form 8038-G NIC =2.735238%(with Adjstmnt of$0.00).
Bond Years 31,342.50 WAM(yrs) 4.904930 NIC= 2.735238%(with Adjstmnt of$0.00).
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Brazoria County Municipal Utility District No.2
Refunding Analysis Savings Report
Current Refunding of Selected Series 1997,1998,1999 and 2002 Bonds("A"Insured/BQ Sca
Maturing Proceeds @ Interest Total Escrowed FY Begins Cumulative PV of Savings
Dates Amount issue Date Coupon Yield Amount Debt Service Debt 01/01 Savings 4.05265810%
Savings
2009
2010 120,000 120,000.00 1.200 1.200000 144,464.38 264,464.38 306,487.52 42,023.14 42,023.14 42,216.23
2011 805,000 805,000.00 1.400 1.400000 156,157.50 961,157.50 1,001,487.52 40,330.02 82,353.16 38,755.27
2012 810,000 810,000.00 1.750 1.750000 144,887.50 954,887.50 996,372.52 41,485.02 123,838.18 38,043.67
2013 945,000 945,000.00 2.200 2.200000 130,712.50 1,075,712.50 1,114,086.26 38,373.76 162,211.94 33,688.58 •
2014 970,000 970,000.00 2.600 2.600000 109,922.50 1,079,922.50 1,119,436.26 39,513.76 201,725.70 33,101.15
2015 985,000 985,000.00 2.850 2.850000 84,702.50 1,069,702.50 1,107,268.76 37,566.26 239,291.96 30,088.03
2016 865,000 865,000.00 3.100 3.100000 56,630.00 921,630.00 961,625.00 39,995.00 279,286.96 30,571.67
2017 890,000 890,000.00 3.350 3.350000 29,815.00 919,815.00 961,950.00 42,135.00 321,421.96 30,795.31
$6,390,000 $6,390,000.00 $857,291.88 $7,247,291.88 $7,568,713.84 $321,421.96 $277,259.91 '
Acc/nt
Grnd Total $6,390,000 $6,390,000.00 $857,291.88 $7,247,291.88 $7,568,713.84 $321,421.96 $277,259.91
BRAZORIA MUD02:RUN2009REF NEW2009REF AGG2009REF Prepared by:Rathmann 8 Associates-Houston,Texas 08/24/2009 @ 15:50 v9.03--Run"D"
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Brazoria County Municipal Utility District No.2
Issuance Expenses for NEW2009REF
Current Refunding of Selected Series 1997,1998,1999 and 2002 Bonds("A"Insured/BQ Sca
Expenses for NEW2009REF
Expense Raises Exp has no
Expense Title Type Units Arb Yield Affect Total
on Arb Yield
Underwriter's Discount V 12.500000 0.00 79,875.00 79,875.00
Rating Agency F 11,000.00 0.00 11,000.00 11,000.00
Bond Counsel V 10.000000 0.00 63,900.00 63,900.00
Accountant/CPA F 9,000.00 0.00 9,000.00 9,000.00
Printing F 9,500.00 0.00 9,500.00 9,500.00
Trustee F 1,600.00 0.00 1,600.00 1,600.00
Bond Insurance D 10.000000 72,472.92 0.00 72,472.92
Miscellaneous F 0.00 0.00 0.00 0.00
Financial Advisor V 17.000000 0.00 108,630.00 108,630.00
Special Tax Counsel F 2,500.00 0.00 2,500.00 2,500.00
Underwriter's Counsel F 6,000.00 0.00 6,000.00 6,000.00
Attorney General's Fee V 1.000000 0.00 6,390.00 6,390.00
Totals $72,472.92 $298,395.00 $370,867.92
Type: F-Fixed Expense
V-Variable Expense Based on Issue Size
D-Variable Expense Based on Total Debt Service
E-Variable Expense Based on Total Debt Service Less Accrued Interest
R-Variable Expense Based on Reserve Fund Requirement
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Brazoria County Municipal Utility District No.2
Escrow Sufficiency&Balance Report
Current Refunding of Selected Series 1997,1998,1999 and 2002 Bonds("A"Insured/BQ Sca
Escrow Settlement Date Is 10/01/2009
Proceeds from Less Amts to Plus Maturing Adjusted Proceeds from
Original be Invested Amts Invested Proceeds from Present Value 'Other' Old D/S Escrow Escrow
Dates ResEscted in 0%SLGs in 0%SLGs Rstrct'd Esc @ 0.00000000% Investments Requirement New Balance Old Balance
10/01/2009 0.00 0.00 0.00 0.00 0.00 0.00 0.00 6,017,460.58 6,017,460.58
10/15/2009 0.00 0.00 0.00 0.00 0.00 0.00 6,017,459.58 1.00 1.00
Totals $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $6,017,459.58
Cost of SLG Securities $0.00 Escrow Arbitrage YLD after Reinvestment in 0%SLGs=0.00000000%
Cost of'Other'Restricted Investments $0.00
Escrow Starting Balance $6,017,460.58
Total Escrow Cost... $6,017,460.58 SLG Rates Were Taken From SLG Table Dated 07/30/2009
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Brazoria County Municipal Utility District No.2
Aggregation Spreadsheet Report
Current Refunding of Selected Series 1997,1998,1999 and 2002 Bonds("A"Insured/BQ Sca
Data are Principal Amounts Bonds to Refund in 2009 Data are to Maturity
FY 01/01
Dates Totals OLD1997R OLD1998R OLD1999R OLD2002R
2009 0.00
2010 0.00
2011 695,000.00 200,000.00 340,000.00 155,000.00
2012 725,000.00 205,000.00 355,000.00 165,000.00
2013 880,000.00 215,000.00 375,000.00 170,000.00 120,000.00
2014 930,000.00 230,000.00 390,000.00 175,000.00 135,000.00
2015 965,000.00 595,000.00 235,000.00 135,000.00
2016 870,000.00 635,000.00 235,000.00
2017 915,000.00 675,000.00 240,000.00
Totals $5,980,000.00 $2755,000.00 $1,460,000.00 $1,375,000.00 $390,000.00
Component Face Amt -----Title----- From To
OLD1997R $2,755,000.00 Series 1997 Bonds to Refund
OLD1998R $1,460,000.00 Series 1998 Refunding Bonds to Refund
OLD1999R $1,375,000.00 Series 1999 Bonds to Refund
OLD2002R $390,000.00 Series 2002 New Money Bonds to Refund
•
•
•
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Brazoria County Municipal Utility District No.2
Current Refunding of Selected Series 1997,1998,1999 and 2002 Bonds("A"Insured/BQ Sca
Dated Date=12/01/1996 Series 1997 Bonds to Refund Delivery Date=06/30/1997 _•
Term Bond Bond Coupon Interest Total Fiscal Year Debt Service
Dates Maturities Redemptions Proceeds Rate Yield Price Amount Debt Service Debt Service to Call
03/01/2009 - - - - - - 71,715.63 71,715.63 - 71,715.63
09/01/2009 - - - - - 100.000000 71,715.63 71,715.63 - 71,715.63
10/15/2009 - - - - - - - - 143,431.26 2,772,530.49
03/01/2010 - - - - - - 71,715.63 71,715.63 - -
09/01/2010 - - - - 100.000000 71,715.63 71,715.63 143,431.26 -
03/01/2011 - - - - - - 71,715.63 71,715.63 - -
09/01/2011 - 200,000.00 * 200,000.00 5.375 5.375000 100.000000 71,715.63 271,715.63 343,431.26 -
03/01/2012 - - - - - - 66,340.63 66,340.63 - -
09/01/2012 - 205,000.00 * 202,890.55 5.400 5.500000 98.971000 66,340.63 271,340.63 337,681.26 - .
03/01/2013 - - - - - - 60,805.63 60,805.63 - -
09/01/2013 - 215,000.00 * 213,843.30 5.500 5.550000 99.462000 60,805.63 275,805.63 336,611.26 -
03/01/2014 - - - - - - 54,893.13 54,893.13 - -
09/01/2014 - 230,000.00 * 223,688.80 5.350 5.600000 97.256000 54,893.13 284,893.13 339,786.26 -
03/01/2015 - - - - - - 48,740.63 48,740.63 - -
09/01/2015 - 595,000.00 * 576,507.40 5.375 5.650000 96.892000 48,740.63 643,740.63 692,481.26 -
03/01/2016 - - - - - - 32,750.00 32,750.00 - -
09/01/2016 - 635,000.00 * 583,514.20 5.000 5.700000 91.892000 32,750.00 667,750.00 700,500.00 -
03/01/2017 - - - - - - 16,875.00 16,875.00 - -
09/01/2017 - 675,000.00 " 614,965.50 5.000 5.750000 91.106000 16,875.00 691,875.00 708,750.00 -
Total - 2,755,000.00 2,615,409.75 991,103.82 3,746,103.82 3,746,103.82 2,915,961.75
Acc Int - - - -226,701.06 -226,701.06 - -
Grand Ttls - 2,755,000.00 2,615,409.75 764,402.76 3,519,402.76 3,746,103.82 2,915,961.75
"-Bonds callable... 10/15/2009@100.000
TIC(Incl.all expenses)....5.61888459% Average Coupon 5.19106677% Net Eff.Int.Rate(Texas Vemon's)= 5.448038%(with Adjstmnt of$0.00).
TIC(Arbitrage TIC) 5.61888459% Average Life(yrs)... 19.72 IRS Form 8038-G NIC =5.780651%(with Adjstmnt of$0.00).
Bond Years 54,321.25 WAM(yrs) 18.075156 NIC= 5.448038%(with Adjstmnt of$0.00).
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Brazoria County Municipal Utility District No. 2
Current Refunding of Selected Series 1997,1998,1999 and 2002 Bonds("A"Insured/BQ Sca
Dated Date=05/01/1998 Series 1998 Refunding Bonds to Refund Delivery Date=05/14/1998 _;
Term Bond Bond Coupon Interest Total Fiscal Year Debt Service
Dates Maturities Redemptions Proceeds Rate Yield Price Amount Debt Service Debt Service to Call
03/01/2009 - - - - - - 35,665.63 35,665.63 - 35,665.63
09/01/2009 - - - 4.650 4.700000 99.559000 35,665.63 35,665.63 - 35,665.63
10/15/2009 - - - - - - - - 71,331.26 1,468,718.26
03/01/2010 - - - - - - 35,665.63 35,665.63 - -
09/01/2010 - - * - 4.700 4.770000 99.347000 35,665.63 35,665.63 71,331.26 -
03/01/2011 - - - - - - 35,665.63 35,665.63 - -
09/01/2011 - 340,000.00 * 337,327.60 4.750 4.830000 99.214000 35,665.63 375,665.63 411,331.26 -
03/01/2012 - - - - - - 27,590.63 27,590.63 - -
09/01/2012 - 355,000.00 * 353,345.70 4.875 4.920000 99.534000 27,590.63 382,590.63 410,181.26 -
03/01/2013 - - - - - - 18,937.50 18,937.50 - -
09/01/2013 - 375,000.00 ' 372,180.00 4.900 4.970000 99.248000 18,937.50 393,937.50 412,875.00 -
03/01/2014 - - - - - - 9,750.00 9,750.00 - -
09/01/2014 - 390,000.00 * 387,819.90 5.000 5.050000 99.441000 9,750.00 399,750.00 409,500.00 -
Total - 1,460,000.00 1,450,673.20 326,550.04 1,786,550.04 1,786,550.04 1,540,049.52
Acc Int - - - -2,575.85 -2,575.85 - - •
Grand Ttls - 1,460,000.00 1,450,673.20 323,974.19 1,783,974.19 1,786,550.04 1,540,049.52
*-Bonds callable... 10/15/2009@100.000
TIC(Incl.all expenses)....4.95191135% Average Coupon 4.89217196% Net Eff.Int.Rate(Texas Vernon's)= 4.935070%(with Adjstmnt of$0.00).
TIC(Arbitrage TIC) 4.95191135% Average Life(yrs)... 14.89 IRS Form 8038-G NIC =4.966759%(with Adjstmnt of$0.00).
Bond Years 21,741.67 WAM(yrs) 14.855923 NIC= 4.935070%(with Adjstmnt of$0.00).
BRAZORIA_MUD02:OLD1998R Prepared by:Rathmann&Associates-Houston,Texas 08/24/2009 @ 15:50 v9.03--Run"D"
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Brazoria County Municipal Utility District No.2
Current Refunding of Selected Series 1997,1998,1999 and 2002 Bonds("A"Insured/BQ Sca
Dated Date=11/01/1999 Series 1999 Bonds to Refund Delivery Date=11/30/1999
Term Bond Bond Coupon Interest Total Fiscal Year Debt Service
Dates Maturities Redemptions Proceeds Rate Yield Price Amount Debt Service Debt Service to Call
03/01/2009 - - - - - 37,575.00 37,575.00 - 37,575.00
09/01/2009 - - - 5.200 5.200000 100.000000 37,575.00 37,575.00 - 37,575.00 '
10/15/2009 - - - - - - - - 75,150.00 1,384,185.00
03/01/2010 - - - - - - 37,575.00 37,575.00 - -
09/01/2010 - - 5.200 5.250000 99.584000 37,575.00 37,575.00 75,150.00 - ,
03/01/2011 - - - - - - 37,575.00 37,575.00 - -
09/01/2011 - 155,000.00 * 154,316.45 5.300 5.350000 99.559000 37,575.00 192,575.00 230,150.00 -
03/01/2012 - - - - - - 33,467.50 33,467.50 - -
09/01/2012 - 165,000.00 * 164,232.75 5.400 5.450000 99.535000 33,467.50 198,467.50 231,935.00 - '
03/01/2013 - - - - - - 29,012.50 29,012.50 - -
09/01/2013 - 170,000.00 * 170,000.00 5.500 5.500000 100.000000 29,012.50 199,012.50 228,025.00 -
03/01/2014 - - - - - - 24,337.50 24,337.50 - -
09/01/2014 - 175,000.00 * 174,109.25 5.500 5.550000 99.491000 24,337.50 199,337.50 223,675.00 -
03/01/2015 - - - - - - 19,525.00 19,525.00 - -
09/01/2015 - 235,000.00 * 232,537.20 5.500 5.600000 98.952000 19,525.00 254,525.00 274,050.00 -
03/01/2016 - - - - - - 13,062.50 13,062.50 - -
09/01/2016 - 235,000.00 * 231,190.65 5.500 5.650000 98.379000 13,062.50 248,062.50 261,125.00 -
03/01/2017 - - - - - - 6,600.00 6,600.00 - -
09/01/2017 - 240,000.00 * 234,660.00 5.500 5.700000 97.775000 6,600.00 246,600.00 253,200.00 -
Total - 1,375,000.00 1,361,046.30 477,460.00 1,852,460.00 1,852,460.00 1,459,335.00
Acc Int - - - -6,053.75 -6,053.75 - -
Grand Ttls - 1,375,000.00 1,361,046.30 471,406.25 1,846,406.25 1,852,460.00 1,459,335.00
*-Bonds callable... 10/15/2009@100.000
TIC(Incl.all expenses)....5.56634768% Average Coupon 5.47225796% Net Eff.Int.Rate(Texas Vernon's)= 5.539163%(with Adjstmnt of$0.00).
TIC(Arbitrage TIC) 5.56634768% Average Life(yrs)... 15.17 IRS Form 8038-G MC =5.601218%(with Adjstmnt of$0.00).
Bond Years 20,855.83 WAM(yrs) 15.074210 NIC= 5.539163%(with Adjstmnt of$0.00).
BRAZORIA_MUD02:OLD1999R Prepared by:Rathmann&Associates-Houston,Texas 08/24/2009 @ 15:50 v9.03--Run"D"
Page-10
Brazoria County Municipal Utility District No.2
Current Refunding of Selected Series 1997,1998,1999 and 2002 Bonds("A"Insured I BQ Sca
Dated Date=03/01/2002 Series 2002 New Money Bonds to Refund Delivery Date=03/07/2002
Term Bond Bond Coupon Interest Total Fiscal Year Debt Service
Dates Maturities Redemptions Proceeds Rate Yield Price Amount Debt Service Debt Service to Call
03/01/2009 - - - - - - 8,287.50 8,287.50 - 8,287.50
09/01/2009 - - - 4.250 4.100000 100.957000 8,287.50 8,287.50 - 8,287.50
10/15/2009 - - - - - - - - 16,575.00 392,025.83 ,
03/01/2010 - - - - - - 8,287.50 8,287.50 - -
09/01/2010 - - - 4.250 4.250000 100.000000 8,287.50 8,287.50 16,575.00 -
03/01/2011 - - - - - - 8,287.50 8,287.50 - -
09/01/2011 - - * - 4.250 4.300000 99.613000 8,287.50 8,287.50 16,575.00 -
03/01/2012 - - - - - - 8,287.50 8,287.50 - _
09/01/2012 - - 4.250 4.450000 98.338000 8,287.50 8,287.50 16,575.00 -
03/01/2013 - - - - - - 8,287.50 8,287.50 - _
09/01/2013 - 120,000.00 * 116,805.60 4.250 4.550000 97.338000 8,287.50 128,287.50 136,575.00 -
03/01/2014 - - - - - - 5,737.50 5,737.50 - -
09/01/2014 - 135,000.00 * 129,928.05 4.250 4.650000 96.243000 5,737.50 140,737.50 146,475.00 -
03/01/2015 - -_ - - - - 2,868.75 2,868.75 - _
09/01/2015 - 135,000.00 * 128,981.70 4.250 4.700000 95.542000 2,868.75 137,868.75 140,737.50 -
Total - 390,000.00 375,715.35 100,087.50 490,087.50 490,087.50 408,600.83
Acc Int - - - -276.25 -276.25 - -
Grand Ttls - 390,000.00 375,715.35 99,811.25 489,811.25 490,087.50 408,600.83
*-Bonds callable... 10/15/2009@100.000
TIC(Incl.all expenses)....4.63919757% Average Coupon 4.25000000% Net Eff.Int.Rate(Texas Vernon's)= 4.542120%(with Adjstmnt of$0.00).
TIC(Arbitrage TIC) 4.63919757% Average Life(yrs)... 12.54 IRS Form 8038-G NIC =4.717495%(with Adjstmnt of$0.00).
Bond Years 4,890.00 WAM(yrs) 12.515741 NIC= 4.542120%(with Adjstmnt of$0.00).
BRAZORIA_MUD02:OLD2002R Prepared by:Rathmann&Associates-Houston, Texas 08/24/2009 @ 15:50 v9.03—Run"D"
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