R98-04 01-12-98RESOLUTION NO. R98-4
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF PEARLAND,
TEXAS, APPROVING THE RESOLUTION OF BRAZORIA COUNTY
MUNICIPAL UTILITY DISTRICT NO. 5 AUTHORIZING THE ISSUANCE OF
$1,980,000 WATERWORKS AND SEWER SYSTEM COMBINATION
UNLIMITED TAX AND REVENUE BONDS, SERIES 1997.
WHEREAS, the Brazoria County Municipal Utility District No. 5 (the "District")
is located within the extraterritorial jurisdiction of the City of Pearland, Texas (the
"City"); and
WHEREAS, by Resolution No. R80-13, dated June 9, 1980, 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 resolution
authorizing the issuance of such bonds; and
WHEREAS, the City Council has considered such a bond resolution in
connection with the issuance of the District's proposed $1,980,000 Waterworks and
Sewer System Combination Unlimited Tax and Revenue Bonds, Series 1997 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 resolution of the board of directors of Brazoria County Municipal
Utility District No. 5, attached hereto and made a part hereof as Exhibit "A",
authorizing the issuance of its $1,980,000 Waterworks and Sewer System
Combination Unlimited Tax and Revenue Bonds, Series 1997, is hereby approved.
1
RESOLUTION NO. R98-4
Section 3. The Mayor of the City of Pearland is hereby authorized to execute
such letters or other documents required to be provided to the Attorney General of
Texas in connection with the issuance of such bonds by the District.
Section 4. 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.
PASSED, APPROVED and ADOPTED this the 12th day of January
A. D., 1998.
ATTEST:
APPRED AS TO FORM:
A MO ES McCULLOUGH
CITY AT • RNEY
2
TOM REID
MAYOR
OFFICIAL STATEMENT DATED FEBRUARY 9, 1998 DEC ? Vic'
IN THE OPINION OF BOND COUNSEL, INTEREST ON THE BONDS IS EXCLUDABLE FROM GROSS INCOME FOR FEDERAL CD
INCOME
INCOME TAX PURPOSES UNDER EXISTING LAW AND THE BONDS ARE NOT PRIVATE ACTIVITY BONDS. SEE "LEGAL MATTERS"
FOR A DISCUSSION OF BOND COUNSEL'S OPINIONS, INCLUDING A DESCRIPTION OF ALTERNATIVE MINIMUM TAX CONSE- O
QUENCES FOR CORPORATIONS. C
The District has designated the Bonds as "qualified tax-exempt obligations." See "LEGAL MATTERS - Qualified Tax -Exempt Obligations - X
Purchase of the Bonds by Financial Institutions."
NEW ISSUE Standard & Poor's Ratings Services (MBIA) ..."AAA"�_ Z
(See "SALE AND DISTRIBUTION OF THE BONDS - '*
THE MBIA Insurance Corporation Insurance Policy" D
and "- Municipal Bond Rating" herein.)
co
$1,980,000co
BRAZORIA COUNTY MUNICIPAL UTILITY DISTRICT NO. 5
(A Political Subdivision of the State of Texas, located within Brazoria County)
UNLIMITED TAX BONDS, SERIES 1998
The $1,980,000 Brazoria County Municipal Utility District No. 5 Unlimited Tax Bonds, Series 1998 (the "Bonds") are
obligations of Brazoria County Municipal Utility District No. 5 (the "District") and are not obligations of the State of Texas, Brazoria
County, Texas, the City of Pearland, Texas, or any entity other than the District. Neither the faith and credit nor the taxing power of
the State of Texas, Brazoria County, Texas, the City of Pearland, Texas, or any entity other than the District is pledged to the payment
of the principal of or interest on the Bonds.
Dated: March 1, 1998 Due: September 1, as shown below
Principal of the Bonds is payable at the principal payment office of Chase Bank of Texas, National Association, currently in Dallas,
Texas, the paying agent/registrar (the "Registrar"). Interest on the Bonds will be payable by check or draft, dated as of the interest
payment date, and mailed by the Registrar to registered owners as shown on the records of the Registrar (the "Registered Owner") at
the close of business on the 15th calendar day of the month next preceding each interest payment date (the "Record Date"), or by such
other customary banking arrangements as may be agreed upon by the Registrar and the Registered Owner at the risk and expense of the
Registered Owner. Interest is payable September 1, 1998, and each March 1 and September 1 thereafter until the earlier of maturity or
redemption. The Bonds are fully registered in denominations of $5,000 or any integral multiple thereof.
The Municipal Bond Guaranty Insurance Policy to guarantee the principal of and interest on the Bonds on ���
the stated payment dates as described herein will be issued by:
MBIA INSURANCE CORPORATION
MATURITY SCHEDULE
(Due September 1)
Initial Initial
Principal Interest Reoffering Principal Interest Reoffering
Amount Maturity Rate Yield(a) Amount Maturity Rate Yield(a)
$ 65,000 1999 6.20% 3.90% $ 90,000 2007(b) 4.50% 4.50%
65,000 2000 6.20 4.00 95,000 2008(b) 4.60 4.60
65,000 2001 6.20 4.10 100,000 2009(b) 4.50 4.55
65,000 2002 6.10 4.15 105,000 20I0(b) 4.50 4.60
70,000 2003 4.20 4.20 115,000 2011(b) 4.60 4.70
75,000 2004 4.30 4.30 125,000 2012(b) 4.60 4.75
80,000 2005 4.40 4.40 245,000 2013(b) 4.60 4.80
85,000 2006 4.45 4.45 260,000 2014(b) 4.60 4.85
275,000 2015(b) 4.60 4.90
(a) Information with respect to the initial reoffering yields of the Bonds is the responsibility of the Underwriter. Initial reoffering yields represent the
initial offering price, which may be changed for subsequent purchasers.
(b) The Bonds maturing on or after September 1, 2007, shall be subject to redemption and payment at the option of the District, in whole or in part, on
September I, 2006, or on any date thereafter, at par plus accrued interest to the date fixed for redemption.
If less than all of the Bonds are redeemed at any time, the particular Bonds to be redeemed shall be selected by the District in
integral multiples of $5,000 within any one maturity. The registered owner of any Bond, all or a portion of which has been called for
redemption, shall be required to present same to the Registrar for payment of the redemption price on the portion of the Bond so called
for redemption and issuance of a new Bond in the principal amount equal to the portion of such Bond not redeemed.
The Bonds constitute the sixth series of unlimited tax bonds issued by the District for the purpose of acquiring and constructing a
waterworks, wastewater and storm drainage system (the "System") to serve the District, and to refund certain of such bonds issued for
such purpose, $7,605,000 in principal amount of which are outstanding as of the date of this Official Statement. After issuance of the
Bonds, the District's total direct bonded indebtedness, included in the Bonds, will be $9,585,000. Voters in the District have authorized
a total of $23,775,000 principal amount of bonds for the purpose of acquiring and constructing the System, of which S17,670,000 may
be used and for refunding purposes. Following the issuance of the Bonds, $7,605,000 principal amount of unlimited tax bonds
authorized by the District's voters will remain unissued. See "THE BONDS - Issuance of Additional Debt." The Bonds, when issued,
constitute valid and legally binding obligations of the District, payable from the proceeds of a continuing, direct annual ad valorem tax,
without legal limitation as to rate or amount, levied against all taxable property within the District. See "THE BONDS - Source of
Payment."
The Bonds are offered subject to prior sale, when, as and if issued by the District and accepted by the Underwriter, subject to the
approval of the Attorney General of Texas and of Coats, Rose, Yale, Holm, Ryman & Lee, P.C., Bond Counsel. Delivery of the Bonds
is expected on or about March 16, 1998.
Resolution No. R1998-04
Exhibit "A"
BRAZORIA COUNTY MUNICIPAL
UTILITY DISTRICT NO. 5
(Brazoria County, Texas)
OFFICIAL STATEMENT
DATED: January 27, 1998
$1,980,000
UNLIMITED TAX BONDS
SERIES 1998
SELLING: 12:30 P.M., HOUSTON TIME
MONDAY, FEBRUARY 9, 1998
HOUSTON, TEXAS
DAN
ROSCHER
INVESTMENT SERVICES
INVESTMENT RANKING
MEMIEA NSSE/SIIC
Financial Advisor to the District
p
EXHIBIT
RESOLUTION AUTHORIZING THE ISSUANCE OF $1, 980, 000
UNLIMITED TAX BONDS, SERIES 1997; PRESCRIBING THE TERMS
AND PROVISIONS THEREOF; MAKING PROVISION FOR THE PAYMENT
OF THE INTEREST THEREON AND THE PRINCIPAL THEREOF;
AUTHORIZING THE SALE THEREOF; AND CONTAINING OTHER
PROVISIONS RELATING TO THE SUBJECT
IT IS HEREBY ORDERED BY THE BOARD OF DIRECTORS OF BRAZORIA
COUNTY MUNICIPAL UTILITY DISTRICT No. 5 THAT:
ARTICLE ONE
STATUTORY AUTHORITY, RECITALS AND FINDINGS
SECTION 1. 01 : AUTHORITY FOR THE DISTRICT. Brazoria County
Municipal Utility District No. 5 (the "District") of Brazoria
County, Texas, is a conservation and reclamation district created
pursuant to the provisions of Article XVI, Section 59, of the Texas
Constitution by order of the Texas Water Rights Commission dated
March 18, 1981, and confirmed at an election held within the
District on April 4, 1981.
SECTION 1 . 02 : PURPOSES OF THE DISTRICT. The District was
organized, created and established for the following purposes :
(a) the control, storage, preservation, and distribution of
its storm water and floodwater, the water of its rivers
and streams for irrigation, power, and all other useful
. purposes;
(b) the reclamation and irrigation of its arid, semi-arid,
and other land needing irrigation;
(c) the reclamation and drainage of its overflowed land and
other land needing drainage;
(d) the conservation and development of its forests, water,
and hydroelectric power;
(e) the navigation of its inland and coastal water;
(f) the control, abatement, and change of any shortage or
harmful excess of water;
(g) the protection, preservation, and restoration of the
purity and sanitary condition of water within the state;
and
(h) the preservation of all natural resources of the state.
LLR\60809.1\BONDRESOLUTION2021
•
d. 4
SECTION 1 . 03 : POWERS OF THE DISTRICT. The District is
authorized to purchase, construct, acquire, own, operate, maintain,
repair, improve, or extend inside and outside its boundaries any
and all works, improvements, facilities, plants, equipment, and
appliances necessary to accomplish the purposes of its creation,
- including all works, improvements, facilities, plants, equipment,
and appliances incident, helpful, or necessary to:
(a) supply water for municipal uses, domestic uses, power,
and commercial purposes and all other beneficial uses or
controls;
(b) collect, transport, process, dispose of, and. control all
domestic, industrial, or communal wastes whether in
fluid, solid, or composite state;
(c) gather, conduct, divert, and control local storm water or
other local harmful excesses of water in the District;
(d) irrigate the land in the District;
(e) alter land elevation in the District where it is needed;
(f) navigate coastal and inland waters of the District; and
(g) provide parks and recreational facilities for the
inhabitants in the District.
SECTION 1 . 04 : AUTHORITY OF THIS RESOLUTION. The District is
authorized to issue bonds for the purposes of purchasing,
constructing, acquiring, owning, operating, repairing, improving,
or extending any District works, improvements, facilities, plants,
equipment, and appliances needed to accomplish the purposes, except
for the purpose of providing parks and recreation facilities, for
which the District was created, including works, improvements,
facilities, plants, equipment, and appliances needed to provide a
waterworks system, sanitary sewer system, and drainage system or
solid waste disposal system, or to make payment of sums due or to
become due under contracts for such purposes .
SECTION 1. 05 : FINDINGS . It is hereby found, determined and
. declared that :
(a) the matters and facts set out in this Article One are
true and correct;
(b) at an election held on November 7, 1987, the District was
authorized to issue the bonds of the District in the
maximum amount of $17, 670, 000, for the purpose or
purposes of purchasing, constructing, acquiring, owning,
operating, repairing, improving, or extending a
waterworks system, a sanitary sewer system, and a
LLa\60809.1\BONDRESOLUTION2021 2
rift) rma
drainage and 'storm sewer system for the District and all
additions to such systems and all works, improvements,
facilities, plants, equipment, appliances, interests in
property, and contract rights needed therefor and
administrative facilities needed in connection therewith,
and for refunding all or part of the principal of or
interest on the District' s bonds, and to provide for the
payment of principal of and interest on bonds by the levy
• and collection of a sufficient tax upon all taxable
property within said District;
(c) the election described in Paragraph (b) hereof was called
and held under and in strict conformity with the
Constitution and laws of the State of Texas, and of the
United States of America, and the Board of Directors has
heretofore officially declared the results of said
election and declared that the District was legally
created and authorized to issue the bonds described in
Paragraph (b) ;
(d) the District has heretofore issued to acquire and
construct various phases of a waterworks, sanitary sewer,
and drainage system for the District $1, 735, 000 Unlimited
Tax Bonds, Series 1982 (the "Series 1982 Bonds") ;
$2, 750, 000 Unlimited Tax Bonds, Series 1983 (the "Series
1983 Bonds") ; $1, 620, 000 Unlimited Tax Bonds, Series 1984
(the "Series 1984 Bonds") ; $6, 065, 000 Unlimited Tax
Refunding Bonds, Series 1992 (the "Series 1992 Refunding
Bonds") , to refund parts of the Series 1982 Bonds, the
Series 1983 Bonds, and the Series 1984 Bonds; and
$2, 020, 000 Tax Bonds, Series 1995 (the "Series 1995
Bonds") ;
(e) the District intends to issue $1, 980, 000 in bonds (the
"Bonds") to provide funds to reimburse a developer for
construction of water distribution, sanitary sewer
collection, and drainage facilities serving Southdown
Subdivision, Sections 6 and 7; to reimburse a developer
for construction of water distribution, sanitary sewer
collection, and drainage facilities for Crystal Lake
Subdivision, Sections 1 and 2 ; to finance the District' s
share of a water plant expansion (remote water well) and
a wastewater treatment plant expansion; to pay certain
engineering costs associated with the design and
construction of such facilities; to pay interest on funds
advanced to the District; to set aside interest payments
on the Bonds; and to pay the costs of issuing the Bonds .
As a result of the issuance of the Bonds, the District' s
remaining authorized but unissued bonds for the purposes
of financing improvements to the District' s water, sewer,
and drainage systems or any other lawful purpose will be
$7, 565, 000;
LLR\60809.1\BONDRESOLUTION2021 3
(f) the District has been authorized to levy taxes, and the
taxes to be collected will be sufficient to make the
principal and interest payments on the Bonds authorized
by this Resolution;
(g) the Board of Directors reserves the right to issue the
remaining $7, 565, 000 in bonds which were voted on at the
election described in Paragraph (b) hereof in one or more
series at a future date or dates when, in the Board' s
judgment, such amounts are required for the authorized
purposes .
ARTICLE TWO
DEFINITIONS AND INTERPRETATIONS
SECTION 2 . 01 : DEFINITIONS . When used in this Resolution,
except in Article Five, and in any order amendatory or supplemental
hereto, the terms listed below shall have the meanings specified
below, unless it is otherwise expressly provided or unless the
context otherwise requires :
Additional Bonds .
The term "Additional Bonds" shall mean the additional bonds
which the District expressly reserves the right to issue in Section
9 . 01 of this Resolution.
Authorized Investments .
The term "Authorized Investments" shall mean all direct or
indirect obligations of the United States or one of its agencies,
the State of Texas, or any county, city, school district, or other
political subdivision of the State and certificates of deposit of
state or national banks or savings and loan associations within the
State provided that they are secured in the manner provided for the
security of the funds of counties of the State of Texas .
Board of Directors .
The term "Board of Directors" or "Board" shall mean the
governing body of the District .
Bondholders .
The term "Bondholder" or "Bondholders" shall mean the holder
or holders of a Bond or Bonds, as the context requires .
LLR\60809.1\BONDRESOLUTION2021 4
Bond Register.
The term "Bond Register" shall mean the books of registration
kept by the Paying Agent/Registrar in which are maintained the
papers and addresses of and the principal amount of the Bonds
Registered to each Holder.
Bond Resolution.
The term "Bond Resolution" or "Resolution" shall mean this
Resolution and all amendments hereof and supplements hereto.
Bonds .
The term "Bond" or "Bonds" shall mean any obligation of the
District authorized and issued pursuant to this Resolution, whether
initially delivered or issued in exchange for, upon transfer of, or
in lieu of any Bond previously issued.
Business Day.
The term "Business Day" shall mean any day which is not a
Saturday, Sunday, legal holiday, or a day on which the Paying
Agent/Registrar is authorized by law or executive order to remain
closed.
Debt Service Fund.
The term "Debt Service Fund" shall mean the District' s Debt
Service Fund which is established and affirmed in Section 7 . 01 of
this Resolution.
• Definitive Bonds.
The term "Definitive Bond" or "Definitive Bonds" shall mean
the Initial Bond, as defined herein, as it may be transferred and
converted into or exchanged for fully registered Bonds in the
denomination of $5, 000 or any integral multiple of $5, 000 .
Depository.
The term "Depository" shall mean the bank or banks which the
District may select from time to time as its depository or
depositories .
District .
The term "District" shall mean Brazoria County Municipal
Utility District No. 5 and any other public agency succeeding to
the powers, rights, privileges and functions of the District and,
when appropriate, the Board of Directors of the District .
LLR\60809.1\BONDRBSOLUTION2021 5
rim.) (m)
Financial Security.
The term "Financial Security" shall mean Financial Security
Assurance Inc. , New York, New York.
Fiscal Year.
The term "Fiscal Year" shall mean the accounting period for
the District, which is currently the period ending September 30,
1998, and thereafter shall be the twelve-month period beginning on
October 1 of each year and ending on September 30 of the following
year, but which may be changed from time to time by the Board of
Directors.
Governmental Securities .
The term "Governmental Securities" shall mean direct
obligations of, or obligations the timely payment of the principal
of and interest on which are fully and unconditionally guaranteed
by, the United States of America.
Holders .
The term "Holder" or "Holders" when used with respect to any
Bond means the Person in whose name such Bond is registered in the
Bond Register.
Initial Bond.
The term "Initial Bond" shall mean the Bond authorized to be
issued hereunder which have the registration certificate executed
on behalf of the Comptroller of Public Accounts of the State of
Texas endorsed thereon, as contemplated by Section 5 . 06 hereof .
Initial Date.
The term "Initial Date" means , 1997 .
Interest Payment Date.
The term "Interest Payment Date" shall mean the Stated
Maturity of an installment of interest on any Bonds .
Maturity.
The term "Maturity" when used with respect to any Bond means
the date on which the principal of such Bond becomes due and
payable as therein and herein provided, whether at the Stated
Maturity or call for redemption.
LLR\60809.1\BONDRESOLUTION2021 6
i.
Municipal Bond Guaranty Insurance Policy.
The term "Municipal Bond Guaranty Insurance Policy" shall mean
the municipal bond guaranty insurance policy issued by Financial
Security insuring the payment when due of the principal and
interest on the Bonds as provided therein.
Net Revenues .
The term "Net Revenues" shall mean the moneys received by the
District from the ownership or operation of the District' s
waterworks, sanitary sewer, drainage and storm sewer systems, as
well as under specific contracts, after deducting the costs of
operating, maintaining, and repairing the System and administration
of the District .
Outstanding Bonds .
The term "Outstanding Bonds" shall mean the previously issued
bonds that remain outstanding, specifically the remaining $60, 000
principal amount of the Series 1984 Bonds; $5, 525, 000 of the Series
1992 Refunding Bonds; and $2, 020, 000 of the Series 1995 Bonds.
Paying Agent/Registrar.
The term "Paying Agent/Registrar" means the Person named as
"Paying Agent/Registrar" herein until a successor Paying
Agent/Registrar shall have become such pursuant to the applicable
provisions of this Resolution, and thereafter "Paying
Agent/Registrar" shall mean such successor Paying Agent/Registrar.
Person.
The term "Person" means any individual, corporation,
partnership, joint venture, association, joint-stock company,
trust, unincorporated organization, or government or any agency or
political subdivision thereof .
Predecessor Bonds .
The term "Predecessor Bonds" of any particular Bond means
every previous Bond evidencing all or a portion of the same debt as
that evidenced by such particular Bond, and, for the purposes of
this definition, any Bond registered and delivered pursuant to
Section 3 . 08 in lieu of a mutilated, lost, destroyed, or stolen
Bond shall be deemed to evidence the same debt as the mutilated,
lost, destroyed, or stolen Bond.
Purchaser.
The term "Purchaser" has the meaning stated in Section 12 . 01.
LLR\60809.1\BONDRESOLUTION2021 7
e ,
Record Date.
The term "Record Date" for the interest payable on any
Interest Payment Date means the fifteenth (15th) day (whether or
not a business day) of the calendar month next preceding such
Interest Payment Date.
Redemption Date.
The term "Redemption Date, " when used with respect to any Bond
to be redeemed, means the date fixed for such redemption pursuant
to the terms of this Resolution.
Redemption Price.
The term "Redemption Price" when used with respect to any Bond
to be redeemed means the price at which it is to be redeemed
pursuant to the terms of this Resolution, excluding installments of
interest whose Stated Maturity is on or before the Redemption Date.
Stated Maturity.
The term "Stated Maturity" when used with respect to any Bond
or any installment of interest thereon means the date specified in
such Bond as the fixed date on which the principal of such Bond or
such installment of interest is due and payable.
System.
The term "System" shall mean the District' s waterworks,
sanitary sewer, drainage, and storm sewer systems presently
existing or to be constructed, all additions thereto, and all
works, improvements, facilities, plants, equipment, and appliances
connected therewith.
SECTION 2 . 02 : INTERPRETATIONS . The titles and headings of
the articles and sections of this Resolution have been inserted for
convenience of reference only and are not to be considered a part
hereof and shall not in any way modify or restrict any of the terms
or provisions hereof. This Resolution and all the terms and
provisions hereof shall be liberally construed to effectuate the
purposes set forth herein and to sustain the validity of the Bonds
and the validity of the taxes levied in payment thereof .
ARTICLE THREE
AUTHORIZATION, DESCRIPTION, AND EXECUTION OF BONDS
SECTION 3 . 01 : AMOUNT, NAME, PURPOSE AND AUTHORIZATION. The
Bonds of the District, to be known and designated as Brazoria
County Municipal Utility District No. 5 Unlimited Tax Bonds, Series
1997, shall be issued in the aggregate principal amount of One
LLR\60809.1\EONDRESOLUTION2021 8
Million Nine Hundred Eighty Thousand and No/100 Dollars
($1, 980, 000 . 00) for the purposes of purchasing and constructing
extensions and additions to the District' s existing water and
sanitary sewer system and drainage system and paying the costs of
issuance of the Bonds, in the form specified herein and bearing the
terms herein provided, under and in strict conformity with the
Constitution and laws of the State of Texas, particularly Section
59 of Article XVI of the Constitution of Texas, Chapters 49 and 54
of the Texas Water Code, as amended, and Article 717k-2 , Vernon' s
Texas Civil Statutes, as amended.
SECTION 3 . 02 : DATE, DENOMINATION, INTEREST RATE, AND
. MATURITIES . The Bonds shall be issued in fully registered form in
the denomination of $5, 000 or any integral multiple thereof. The
Initial Bond shall be dated , 1997, and all Bonds
registered and delivered by the Paying Agent/Registrar shall be
dated , 1997 . The Bonds shall mature in the respective
principal amounts on September 1 of the respective years and bear
interest from the Initial Date until maturity or redemption at the
respective rates per annum set forth below:
Principal Year of Interest
Amount Maturity Rate
$ 65, 000 1999
65, 000 2000
65, 000 2001
65, 000 2002
70, 000 2003
75, 000 2004
80, 000 2005
85, 000 2006
90, 000 2007
95, 000 2008
100, 000 2009
105, 000 2010
115, 000 2011
125, 000 2012
245, 000 2013
260, 000 2014
275, 000 2015
SECTION 3 . 03 : INTEREST PAYMENT DATES . The interest on the
Bonds shall be payable on March 1, 1998 , and semiannually
thereafter on September 1 and March 1 of each year until the
maturity or redemption date of the Bonds. The amount of interest
on the Bonds payable on each Interest Payment Date shall be
computed on the basis of a 360-day year of twelve 30-day months .
LLR\60809.1\BONDRESOLUTION2021 9
(MI
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SECTION 3 . 04 : MEDIUM AND PLACE OF PAYMENT. The Bonds shall
be payable without exchange or collection charges, in any coin or
currency of the United States of America which on the respective
dates of payment is legal tender for the payment of debts due the
United States of America, upon presentation and surrender of the
certificate representing the Bonds as they become due, or at
their earliest redemption date, at the principal trust office of
the Paying Agent/Registrar.
SECTION 3 . 05 : EXECUTION OF BONDS . The Bonds shall be
signed by the President or Vice President and attested by the
Secretary or Assistant Secretary of the Board of Directors by the
manual or facsimile signatures, and the official seal of the
District shall be impressed or placed in facsimile thereon. The
facsimile signatures on the Bonds shall have the same effect as
if the Bonds had been signed manually and in person, and the
facsimile seal on the Bonds shall have the same effect as if the
official seal of the District had been manually impressed upon
each of the Bonds . Bonds bearing the manual or facsimile
signatures of individuals who were at the time the proper
officers of the District shall bind the District, notwithstanding
that such individuals or either of them shall cease to hold such
offices prior to the certification or registration and delivery
of such Bonds or shall not have held such offices at the date of
•
such Bonds, all as provided in the Bond Procedures Act of 1981,
as amended. Any Bond may be signed on behalf of the District by
the actual or facsimile signature of such person as, at the
actual time of execution of such Bond, shall be the proper
officer of the District, although at the time of the Initial Date
of the Bonds or the adoption of this Resolution, any such person
was not said officer. Minor typographical and other minor errors
in the text of any Bond or minor defects in the seal or facsimile
signature on any Bond shall not affect the validity or
enforceability of such Bond if it has been duly authenticated by
the Paying Agent/Registrar.
SECTION 3 . 06 : PAYING AGENT/REGISTRAR. The District shall
at all times maintain a Paying Agent/Registrar meeting the
qualifications herein described, for the performance of the
duties hereunder. Texas Commerce Bank National Association in
Dallas, Texas, is hereby appointed Paying Agent/Registrar for
such purposes . The District reserves the right to appoint a
successor Paying Agent/Registrar by (a) filing with the Person
then performing such function a certified copy of a resolution or
ordinance giving notice of the termination of the Agreement and
appointing a successor, and (b) causing notice to be given to
each Bondholder and the Municipal Advisory Council of Texas .
Every Paying Agent/Registrar appointed hereunder shall at all
times be a corporation organized and doing business under the
laws of the United States of America or of any State, authorized
under such laws to exercise trust powers, and subject to
supervision or examination by Federal or State authority. The
LLR\60809.1\BONDRESOLUTION2021 10
6 6
form of agreement submitted by the Person named above as Paying
Agent/Registrar is hereby approved, and an appropriate official
of the District is hereby authorized to execute such agreement
for and on behalf of the District .
SECTION 3 . 07 : REGISTRATION, DELIVERY, AND TRANSFER OF
BONDS. Initially one Bond (the "Initial Bond" ) representing the
entire principal amount of the Bonds shall be issued in the name
of the Purchaser (as defined herein) , or its designee, executed
and submitted to the Attorney General of Texas for approval, and
thereupon certified by the Comptroller of Public Accounts of the
State of Texas by manual signature of an appropriate official in
such office. At any time thereafter the Holder may deliver the
Initial Bond to the Paying Agent/Registrar for transfer or
exchange, accompanied by instruction from the Purchaser or such
designee designating the Persons, maturities, and principal
amounts to and in which the Initial Bond is to be transferred or
exchanged and the addresses of such Persons, and the Paying
Agent/Registrar shall thereupon, within not more than three (3)
Business Days, register and deliver Definitive Bonds upon
authorization of the District as provided in such instructions .
In the event that the Purchaser provides written instructions to
the Paying Agent/Registrar at least five (5) Business Days prior
to the date of delivery of the Initial Bond to the Purchaser,
then the Paying Agent/Registrar shall transfer or exchange
Definitive Bonds for the Initial Bond on the date of delivery
upon payment for and surrender for exchange or transfer of the
Initial Bond by the Purchaser. No Bond shall be entitled to any
right or benefit under this Resolution, or be valid or obligatory
for any purpose, unless there appears on such Bond either a
certificate of registration substantially in the form provided in
Section 5 . 03 , executed by the Comptroller of Public Accounts of
the State of Texas or his duly authorized agent by manual
signature, or a certificate of registration substantially in the
form provided in Section 5 . 04, as appropriate, executed by the
Paying Agent/Registrar by manual signature, and either such
certificate upon any Bond shall be conclusive evidence, and the
only evidence, that such Bond has been duly certified or
registered and delivered. The District shall cause to be kept at
the principal office of the Paying Agent/Registrar a register
(herein referred to as the "Bond Register") in which, subject to
such reasonable regulations as it may prescribe, registration of
the Bonds and of transfers of the Bonds shall be made as provided
herein. Upon surrender for transfer of any Bond at the principal
payment office of the Paying Agent/Registrar, the District shall
execute and the Paying Agent/Registrar shall register and
deliver, in the name of the designated transferee or transferees,
one or more new Bonds of the same Stated Maturity, of any
authorized denominations, bearing the same rate of interest, and
of like aggregate principal amount, upon surrender of the Bond to
be exchanged at the principal payment office of the Paying
Agent/Registrar. Whenever any Bonds are so surrendered for
LLR\60809.1\BONORESOLUTION2021 11
rt g
exchange, the District shall execute, and the Paying
Agent/Registrar shall register and deliver, the Bonds which the
Holder of Bonds making the exchange is entitled to receive . All
Bonds issued upon any transfer or exchange of Bonds shall be the
valid obligations of the District, evidencing the same debt, and
entitled to the same benefits under this Resolution, as the Bonds
surrendered upon such transfer or exchange. Every Bond presented
or surrendered for transfer or exchange shall be duly endorsed or
be accompanied by a written instrument of transfer in form
satisfactory to the Paying Agent/Registrar duly executed by the
Holder thereof or his attorney duly authorized in writing. No
service charge shall be made to the Holder for any registration,
transfer, or exchange of Bonds, but the District or the Paying
Agent/Registrar may require payment of a sum sufficient to cover
any tax or other governmental charge that may be imposed in
connection with any transfer or exchange of Bonds . Neither the
District nor the Paying Agent/Registrar shall be required (a) to
issue, transfer or exchange any Bond during the period beginning
at the opening of business on a Record Date and ending at the
close of business on the next succeeding Interest Payment Date,
or (b) to transfer or exchange any Bond selected for redemption
in whole or in part where such redemption is scheduled to occur
within thirty (30) calendar days .
SECTION 3 . 08 : MUTILATED, DESTROYED, LOST, AND STOLEN BONDS.
If (a) any mutilated Bond is surrendered to the Paying
Agent/Registrar, or the District and the Paying Agent/Registrar
receive evidence to their satisfaction of the destruction, loss,
or theft of any Bond, and (b) there is delivered to the District
and the Paying Agent/Registrar such security or indemnity as may
be required by them to save each of them harmless, then, in the
absence of notice to the District or the Paying Agent/Registrar
that such Bond has been acquired by a bona fide purchaser, the
District shall execute and upon its request the Paying
Agent/Registrar shall register and deliver, in exchange for or in
lieu of any such mutilated, destroyed, lost, or stolen Bond, a
new Bond of the same Stated Maturity and of like tenor and
principal amount, bearing a number not contemporaneously
outstanding. In case any such mutilated, destroyed, lost, or
stolen Bond has become or is about to become due and payable, the
District in its discretion may, instead of issuing a new Bond,
pay such Bond. Upon the issuance of any new Bond under this
Section, the District may require the payment by the Holder of a
sum sufficient to cover any tax or other governmental charge that
may be imposed in relation thereto and any other expenses
(including the fees and expenses of the Paying Agent/Registrar,
bond printing, and legal fees) connected therewith. Every new
Bond issued pursuant to this Section in lieu of any mutilated,
destroyed, lost, or stolen Bond shall constitute a replacement of
the prior obligation of the District, whether or not the
mutilated, destroyed, lost, or stolen Bond shall be at any time
enforceable by anyone, and shall be entitled to all the benefits
LLR\60809.1\BONDRESOLUTION2021 12
L
of this Resolution equally and ratably with all other outstanding
bonds . The procedures set forth in the Paying Agent/Registrar
Agreement, approved in Section 3 . 06 hereof, shall also be
available with respect to mutilated, destroyed, lost, or stolen
Bonds . The provisions of this Section are exclusive and shall
preclude (to the extent lawful) all other rights and remedies
with respect to the replacement and payment of mutilated,
destroyed, lost, or stolen Bonds .
SECTION 3 . 09 : CANCELLATION. All bonds surrendered for
payment, redemption, transfer, exchange, or replacement, if
surrendered to the Paying Agent/Registrar, shall be promptly
cancelled by it and, if surrendered to the District, shall be
delivered to the Paying Agent/Registrar and, if not already
cancelled, shall be promptly cancelled by the Paying
Agent/Registrar. The District may at any time deliver to the
Paying Agent/Registrar for cancellation any Bonds previously
certified or registered and delivered which the District may have
acquired in any manner whatsoever, and all Bonds so delivered
shall be promptly cancelled by the Paying Agent/Registrar. All
cancelled Bonds held by the Paying Agent/Registrar shall be
disposed of as directed by the District .
ARTICLE FOUR
REDEMPTION OF BONDS BEFORE MATURITY
SECTION 4 . 01 : REDEMPTION OF BONDS . The District reserves
the right to redeem the Bonds maturing on September 1, 2008, or
thereafter, prior to their scheduled maturities, in whole, or
from time to time in part, in such manner as the District may
determine, in integral multiples of $5, 000, on September 1, 2007,
or on any date thereafter, at a price equal to the principal
amount of the Bonds to be redeemed plus accrued interest thereon
to the date fixed for redemption.
SECTION 4 . 02 : NOTICE TO PAYING AGENT/REGISTRAR OF
REDEMPTION. The exercise by the District of its option to redeem
any Bonds shall be entered in the minutes of the Board of
Directors of the District. The District shall, at least forty-
five (45) days prior to the Redemption Date (unless a shorter
notice shall be satisfactory to the Paying Agent/Registrar) ,
notify the Paying Agent/Registrar of such Redemption Date and of
the principal amount of Bonds of each Stated Maturity to be
redeemed.
SECTION 4 . 03 : MANNER OF REDEMPTION. If less than all of
the Outstanding Bonds of the same Stated Maturity are to be
redeemed, the particular Bonds to be redeemed shall be selected
by the Registrar by lot or other random method from the Bonds
which have not previously been called for redemption. The
District shall promptly notify the Paying Agent/Registrar in
LLR\60809.1\BONDRESOLUTION2021 13
l
writing of the Bonds selected for redemption and, in the case of
any Bond selected for partial redemption,. the principal amount
thereof to be redeemed. For purposes of this Resolution, unless
the context otherwise requires, all provisions relating to the
redemption of Bonds shall relate, in the case of any Bond
redeemed or to be redeemed only in part, to the portion of the
principal of such Bond which has been or is to be redeemed.
SECTION 4 . 04 : NOTICE TO HOLDERS OF REDEMPTION. Notice of
redemption shall be mailed by the Paying Agent/Registrar in the .
name of and at the expense of the District, not less than thirty
(30) days prior to the Redemption Date, to each Holder of Bonds
to be redeemed. All notices of redemptions shall include a
statement as to (a) the Redemption Date, (b) the Redemption
Price, (c) the principal amount of the Bonds to be redeemed and,
if less than all Bonds are to be redeemed, the identification
(and, in the case of partial redemption, the respective principal
amounts) of the Bonds to be redeemed, (d) that on the Redemption
Date the Redemption Price of each of the Bonds to be redeemed
will become due and payable and that interest thereon shall cease
to accrue from and after such date, and (e) that such Bonds are
to be surrendered for payment of the Redemption Price at the
principal payment office of the Paying Agent/Registrar, and the
address of such office.
SECTION 4 . 05 : PAYMENT FOR REDEEMED BONDS . Notice of
redemption having been given as aforesaid, the Bonds so to be
redeemed shall, on the Redemption Date, become due and payable at
the Redemption Price, and from and after such date (unless the
District shall default in the payment of the Redemption Price)
such Bonds shall cease to bear interest . Upon the surrender of
such Bonds for redemption in accordance with such notice, such
Bonds shall be paid by the Paying Agent/Registrar at the
Redemption Price out of money supplied by the District .
Installments of interest with a Stated Maturity on or prior to
the Redemption Date shall be payable to the Holders of such Bonds
registered as such on the. relevant Record Dates according to
their terms . If any Bond called for redemption shall not be so'
paid on the date set for redemption by reason of the failure of
the District to provide collected funds, the same shall continue
to bear interest from the Redemption Date at the rate borne by
such Bond.
SECTION 4 . 06 : PARTIAL REDEMPTION. Any Bond which is to be
redeemed only in part shall be surrendered at the office of the
Paying Agent/Registrar (if payment is to be made to other than
the registered Holder with due endorsement by, or a written
instrument of transfer in form satisfactory to the Paying
Agent/Registrar duly executed by, the Holder thereof or his
attorney duly authorized in writing) , and the District shall
execute and the Paying Agent/Registrar shall register and deliver
to the Holder of such Bond, without service charge to the Holder,
LLR\60809.1\BONDRESOLUTION2021 14
L 1
a new Bond or Bonds of the same Stated Maturity and of any
authorized denomination or denominations as requested by.. such
Holder in aggregate principal amount equal to and in exchange for
the unredeemed portion of the principal of the Bond so
surrendered.
ARTICLE FIVE
FORM OF BONDS AND CERTIFICATES
SECTION 5 . 01: FORMS GENERALLY. The Bonds, the Registration
Certificates of the Comptroller of Public Accounts of the State
of Texas, the Certificates of Registration, and the forms of
Assignment to be printed on each of the Bonds, shall be
substantially in the forms set forth in this Article with such
appropriate insertions, omissions, substitutions, and other
variations as are permitted or required by this Resolution, and
may have such letters, numbers, or other marks of identification
(including identifying numbers and letters of the Committee on
Uniform Securities Identification Procedures of the American
Bankers Association ["CUSIP"] ) and such legends and endorsements
(including any reproduction of any opinion of counsel) thereon as
may, consistently herewith, be established by the District or
determined by the officers executing such Bonds as evidenced by
their execution thereof . Any portion of the text of any Bonds
may be set forth on the reverse thereof, with an appropriate
reference thereto on the face of the Bond. The Definitive Bonds
shall be printed, lithographed, or engraved, produced by any
combination of these methods, or produced in any other similar
manner, all as determined by the officers executing such Bonds as
evidenced by their execution thereof, but the Initial Bond
submitted to the Attorney General of Texas may be typewritten or
photocopied or otherwise reproduced.
SECTION 5 . 02 : FORM OF BONDS. The Bonds authorized by this
Resolution shall be in substantially the following form, with
such omissions, insertions, and variations as may be necessary
and desirable and consistent with the terms of this Resolution:
LLR\60809.1\BONDRESOLUTION2021 15
A (114 l
t t.
UNITED STATES OF AMERICA
STATE OF TEXAS
COUNTY OF BRAZORIA
REGISTERED REGISTERED
NUMBER AMOUNT
BRAZORIA COUNTY MUNICIPAL UTILITY DISTRICT No. 5
UNLIMITED TAX BOND
SERIES 1997
Interest Rate: Stated Maturity: Initial Date: CUSIP:
, 1997
BRAZORIA COUNTY MUNICIPAL UTILITY DISTRICT No. 5, a
conservation and reclamation district, a body politic and
corporate and a governmental agency created under the
Constitution and laws of the State of Texas, situated in Brazoria
County, Texas (herein, the "District") , FOR VALUE RECEIVED hereby
acknowledges itself indebted to and PROMISES TO PAY TO
(the "Holder") , or registered assigns, on the Stated Maturity
specified above, the sum of
DOLLARS'.
(or so much thereof as shall not have been paid upon prior
redemption) and to pay interest thereon from the later of the.
Initial Date or the most recent Interest Payment Date to which
interest has been paid or duly provided for, on March 1, 1998,
and thereafter semiannually on September 1 and March 1 in each
year, at the per annum rate of interest specified above, computed
on the basis of a 360-day year of twelve 30-day months . The
principal of this Bond is payable at the agency of the District,
which shall be the principal payment office of the Paying
Agent/Registrar executing the registration certificate appearing
hereon, upon presentation and surrender of this Bond. The
interest so payable, and punctually paid or duly provided for, on
any Interest Payment Date will be paid to the person in whose
name this Bond (or one or more Predecessor Bonds, as defined in
the Resolution hereinafter defined) , is registered at the close
of business on the Record Date for such interest, which shall be
the fifteenth (15th) day of the month next preceding such
Interest Payment Date. All such payments may be made by the
Paying Agent/Registrar by check dated as of the Interest Payment
Date and mailed to the registered Holder.
LLR\60809.1\BONDRESOLUTION2021 16
(' S
THE DATE OF THE INITIAL BOND OF THIS ISSUE, in conformity
with the Resolution authorizing the issuance of the series of
Bonds of which this Bond is a part (herein the "Resolution") , is
, 1997 .
THIS BOND IS ONE OF AN AUTHORIZED ISSUE OF BONDS, designated
Brazoria County Municipal Utility District No. 5 Unlimited Tax
Bonds, Series 1997 (hereinafter sometimes called the "Bonds")
aggregating One Million Nine Hundred Eighty Thousand and No/100
Dollars ($1, 980 , 000 . 00) . The Bonds are issued for the purpose of
purchasing and constructing extensions of and additions to the
District' s existing water and sanitary sewer system and drainage
system, and paying the costs of issuance of the Bonds, all under
and in strict conformity with the Constitution and laws of the
State of Texas, particularly Section 59 of Article XVI of the
Constitution of Texas, Chapters 49 and 54, Texas Water Code, as
amended, and Article 717k-2, Vernon' s Texas Civil Statutes, as
amended.
THE DISTRICT RESERVES THE RIGHT TO REDEEM the Bonds of this
issue maturing on September 1, 2008, or thereafter, prior to
their scheduled maturities, in whole, or from time to time in
part, in such manner as the District may determine, in integral
multiples of $5, 000, on September 1, 2007, or on any date
thereafter, at a price equal to the principal amount of the Bonds
to be redeemed plus accrued interest thereon to the date fixed
for redemption.
AS PROVIDED IN THE BOND Resolution and subject to certain
limitations therein set forth, this Bond is transferable on the
Bond Register of the District, upon surrender of this Bond for
transfer at the principal payment office of the Paying
Agent/Registrar, duly endorsed by or accompanied by a written
instrument of transfer in form satisfactory to the Paying
Agent/Registrar duly executed by the registered Holder hereof or
his attorney duly authorized in writing, and thereupon one or
more new fully registered Bonds of the same Stated Maturity, of
authorized denominations, bearing the same rate of interest, and
• for the same aggregate principal amount will be issued to the
designated transferee or transferees .
NEITHER THE DISTRICT NOR THE PAYING AGENT/REGISTRAR shall be
required (i) to issue, transfer, or exchange any Bond during a
period beginning at the opening of business on a Record Date and
ending at the close of business on the next succeeding Interest
Payment Date, or (ii) to transfer or exchange any Bond so
selected for redemption in whole or in part when such redemption
is scheduled to occur within thirty (30) calendar days .
THE DISTRICT, THE PAYING AGENT/REGISTRAR, and any agent of
either of them may treat the person in whose name this Bond is
registered as the owner hereof for the purpose of receiving
payment as herein provided and for all other purposes, whether or
LLR\60809.1\BONDRESOLUTION2021 17
not this Bond be overdue, and neither the District, the Paying
Agent/Registrar, nor any such agent shall be affected by notice
to the contrary.
THIS BOND, AND THE OTHER BONDS OF THE SERIES OF WHICH IT IS
A PART, is payable from the proceeds of a continuing, direct
annual ad valorem tax levied, without limit as to rate or amount,
upon all taxable property within the District. Reference is made
to the Resolution for a more complete description of the funds
charged with and pledged to the payment of this Bond and the
series of which it is a part . By acceptance of this Bond, the
Holder hereof expressly assents to all of the provisions of the
Resolution.
IN ADDITION TO THE RIGHT TO ISSUE BONDS OF INFERIOR LIEN,
the District has reserved the right to issue Additional Bonds, as
defined in the Resolution, which may be secured by a lien on and
pledge of the Net Revenues resulting from the ownership or
operation of the District' s waterworks, sanitary sewer, and
drainage and storm sewer system. Such Additional Bonds may be
payable solely from such revenues or solely from taxes or may be
payable from a combination of taxes and such revenues . The
District has also reserved the right to issue Special Project
Bonds, as defined in the Resolution, which will be payable from
and secured by the proceeds of a contract or contracts with
persons, corporations, municipal corporations, political
subdivisions, or other entities. Reference is made to the
•
Resolution for a complete description of the right to issue
Additional Bonds and Special Project Bonds .
IT IS HEREBY CERTIFIED, RECITED, AND REPRESENTED that the
issuance of this Bond and the series of Bonds of which it is a
part is duly authorized by law; that all acts, conditions, and
things required to exist and to be done precedent to and in the
issuance of this Bond and said series of Bonds to render the same
lawful and valid have been properly done and performed and have
happened in regular and due time, form, and manner as required by
law; that due provision has been made for the payment of the
interest on and the principal of this Bond and the series of
Bonds of which it is a part by levy of a continuing, direct
annual ad valorem tax upon all taxable property within the
District sufficient for said purposes; and that the issuance of
this series of Bonds does not exceed any Constitutional or
statutory limitation.
.IN WITNESS WHEREOF, BRAZORIA COUNTY MUNICIPAL UTILITY
DISTRICT No. 5 has caused this Bond to be executed by the
• facsimile signatures of the President and Secretary of its Board
of Directors and its official seal to be impressed or placed in
facsimile hereon, all as of the 1st day of , 1997 .
LLR\60809.1\BONDRESOLUTION2021 18
(limb) _ tam')
BRAZORIA COUNTY MUNICIPAL
UTILITY DISTRICT No. 5
By:
President, Board of Directors
ATTEST:
Secretary, Board of Directors
(SEAL)
SECTION 5 . 03 : FORM OF REGISTRATION CERTIFICATE OF
COMPTROLLER OF PUBLIC ACCOUNTS . The Initial Bond shall be
registered by the Comptroller of Public Accounts of the State of
Texas as provided by law. The registration certificate of said
Comptroller of Public Accounts shall be printed on the back of
said Initial Bond in substantially the following form:
OFFICE OF THE COMPTROLLER §
OF PUBLIC ACCOUNTS § REGISTER NO.
STATE OF TEXAS §
I HEREBY CERTIFY THAT there is on file and of record in my
office a certificate to the effect that the Attorney General of
the State of Texas has approved this Bond, and further that this
Bond has been registered this day by me.
WITNESS my signature and seal of office this day of
, 199
Comptroller of Public Accounts
of the State of Texas
(COMPTROLLER' S SEAL)
SECTION 5 . 04 : FORM OF AUTHENTICATION CERTIFICATE OF PAYING
AGENT/REGISTRAR. On the front of all Bonds other than the
Initial Bond, the Authentication Certificate of the Paying
Agent/Registrar shall be printed in substantially the following
form:
LLR\60809.1\BONDRESOLUTION2021 19
AUTHENTICATION CERTIFICATE
It is hereby certified that this Bond has been delivered
pursuant to the Bond Resolution described in the text of this
Bond, in exchange for or in replacement of a bond, bonds, or a
portion of a bond approved by the Attorney General of the State
of Texas and registered by the Comptroller of Public Accounts of
the State of Texas .
Texas Commerce Bank National
Association
Date of Authentication:
By:
Authorized Signature
SECTION 5 . 05 : FORM OF ASSIGNMENT. On the back of all Bonds
other than the Initial Bond, the Form of Assignment shall be
printed in substantially the following form:
ASSIGNMENT
FOR VALUE RECEIVED the undersigned hereby sells, assigns,
and transfers unto (Print or typewrite name, address, and zip
code of Transferee) :
(Social Security or other identifying number of Transferee :
the within Bond and all rights thereunder,
and hereby irrevocably constitutes and appoints
as attorney to transfer the
within Bond on the books kept for registration thereof, with full
power of substitution in the premises.
Dated:
Registered Owner (s)
NOTICE: The signature (s) on this
assignment must correspond with
the name (s) of the registered
Holder (s) as shown on the face of
this Bond in every particular,
without enlargement or change
whatsoever.
LLR\60809.1\BONDRESOLUTION2021 20
•
a1 T (41116)
Signature Guaranteed
NOTICE: Signature (s) must be
guaranteed by a member firm of the
New York Stock Exchange or a
commercial bank or trust company.
The following abbreviations, when used in the inscription on
the face of the within Bond or above Assignment, shall be construed
as though they were written out in full according to applicable
laws or regulations :
TEN COM -- as tenants UNIF GIFT MIN ACT
in common Custodian
(Cust . ) (Minor)
TEN ENT -- as tenants by under Uniform Gifts to Minors Act
the entireties
State
JT TEN -- as joint tenants
with rights of
survivorship and
not as tenants
in common
Additional abbreviations may also be used though not in the above
list.
SECTION 5 . 06 : FORM OF INITIAL BOND. The Initial Bond shall
be in the form set forth in Section 5 . 02 of this Article, except
that:
(a) immediately under the name of the bond the headings
"Interest Rate" and "Stated Maturity" and "CUSIP" shall
all be eliminated.
(b) in the first paragraph:
• (i) the words "on the Stated Maturity specified
above" shall be deleted and the following will be
inserted: "on the first day of September in each of the
years indicated below and bearing interest at the per
annum rates in accordance with the following schedule:
Principal Year of Interest
Amount Maturity Rate
[Information to be inserted from schedules in Section 3 . 02 hereof,
incorporating the Principal Amount, Year of Maturity, and Interest
Rate of the Bonds . ]
LLR\60809.1\BONDRESOLUTION2021 21
(ii) the words "executing the registration
certificate appearing hereon" shall be deleted and an
additional sentence shall be added to the paragraph as
follows : "The initial Paying Agent/Registrar is Texas
Commerce Bank National Association, Dallas, Texas . "
(iii) the words " (or one or more Predecessor Bonds,
• as defined in the Resolution hereinafter defined) " shall
be deleted.
(c) the Initial Bond for the Bond shall be numbered T-1.
(d) the adjective "facsimile" modifying the noun "signatures"
in the last paragraph shall be deleted.
SECTION 5 . 07 : CUSIP REGISTRATION. The President of the Board
of Directors or the Paying Agent/Registrar may secure the printing
of identification numbers on the front of the Bonds through the
CUSIP Service Bureau Division of Standard & Poors Corporation, New
York, New York.
SECTION 5 . 08 : LEGAL OPINION. The approving opinion of Coats,
Rose, Yale, Holm, Ryman & Lee, P.C. , Houston, Texas, bond counsel,
may be printed on the back of the Bonds over the certification of
the Secretary of the Board of Directors which may be executed in
facsimile.
ARTICLE SIX
SECURITY OF THE BONDS
SECTION 6 . 01: SECURITY OF BONDS . The Bonds are secured by
and payable from the levy of a continuing, direct annual ad valorem
tax, without limit as to rate or amount, upon all taxable property
within the District .
SECTION 6 . 02 : LEVY OF TAX. To pay the interest on the Bonds,
and to create a sinking fund for the payment of the principal
thereof when due, and to pay the expenses of assessing and
collecting such taxes, there is hereby levied, and shall be
assessed and collected in due time, a continuing, direct annual ad
valorem tax, without limit as to rate or amount, on all taxable
property in the District for each year while any of the Bonds are
outstanding. All of the proceeds of such collections, except
expenses incurred in that connection, shall be paid into the Debt
Service Fund, and the aforementioned tax and such payments into
such fund shall continue until the Bonds and the interest thereon
have been fully paid and discharged, and such proceeds shall be
used for such purposes and no other. While said Bonds, or any of
them, are outstanding and unpaid, an ad valorem tax each year at a
rate from year to year as will be ample and sufficient to provide
funds to pay the interest on said Bonds and to provide the
• necessary sinking fund to pay the principal , when due, full
LLR\60809.1\BONDRESOLUTION2021 22
allowance being made for delinquencies and costs of collection,
shall be levied, assessed, and collected and applied to the payment
of principal and interest on the Bonds . In determining the amount
of taxes which should be levied each year, the Board may consider
whether proceeds from the sale of Bonds have been placed in escrow
to pay interest during construction and whether the Board
reasonably expects to have revenue or receipts available from other
sources which are legally available to pay principal of or interest
or redemption price on the Bonds.
SECTION 6 . 03 : CONSOLIDATION OF DISTRICT. The laws of the
State of Texas permit the District to be consolidated with one or
more conservation and reclamation districts . In the event the
District is consolidated with another district or districts, the
District reserves the right to:
(a) consolidate the System with a similar system of one or
more districts with which the District is consolidating
and operate and maintain the systems as one consolidated
system (herein for purposes of this section the
"Consolidated System") ;
(b) apply the net revenues from the operation of the
Consolidated System to the payment of principal,
interest, redemption price, and bank charges on the
revenue bonds or the combination tax and revenue bonds
(herein for purposes of this section the "Revenue Bonds")
of the District and of the district or districts with
which the District is consolidating (herein collectively
the "Consolidating Districts") without preference to any
series of bonds (except subordinate lien revenue bonds
which shall continue to be subordinate to the first lien
revenue bonds of the Consolidating Districts) ; and
(c) pledge the net revenues of the Consolidated System to the
payment of principal, interest, redemption price, and
bank charges on revenue bonds which may be issued by the
Consolidating Districts on a parity with the outstanding
first lien revenue bonds of the Consolidating Districts .
ARTICLE SEVEN
FLOW OF FUNDS AND INVESTMENTS
SECTION 7 . 01 : CREATION OF FUNDS . The establishment of the
Debt Service Fund is hereby affirmed. Such fund shall be kept
separate and apart from all other funds of the District . The Debt
Service Fund shall constitute a trust fund which shall be held in
trust for the benefit of the Bondholders and, to the extent
permitted by law, the Holders of Additional Bonds, if any.
SECTION 7 . 02 : SECURITY OF FUNDS . Any cash balance in any
fund shall, to the extent not insured by the Federal Deposit
LLR\60809.1\BONDRESOLUTION2021 23
°
Insurance Corporation or its successor, be continuously secured by
a valid pledge to the District of securities eligible under the
laws of Texas to secure the funds of municipal utility districts,
having an aggregate market value, exclusive of accrued interest, at
all times equal to the uninsured cash balance in the fund to which
such securities are pledged.
SECTION 7 . 03 : GENERAL OPERATING FUND. The establishment of
the General Operating Fund is hereby affirmed. The District shall
deposit, as collected, the Revenues (except earnings and profits
derived from the investment of the funds as provided in Section
7 .09 hereof) from the operation of the System into the General
Operating Fund. Preferentially, all moneys deposited in the
General Operating Fund shall be used for the purpose of paying the
maintenance and operation expenses of the System. The District may
accumulate and maintain an operating reserve in the General
Operating Fund equal to two (2) months' average maintenance and
operation expenses as estimated for that Fiscal Year (the
"Operating Reserve" ) .
SECTION 7 . 04 : DEBT SERVICE FUND. The District shall deposit
or cause to be deposited into the Debt Service Fund the aggregate
of the following at the time specified:
(a) as soon as practicable after the Bonds are sold, accrued
interest on the Bonds from the Initial Date to the date
of delivery of the Bonds to the Purchaser;
(b) as soon as practicable after the Bonds are sold,
capitalized interest on the Bonds; and
(c) taxes levied and collected pursuant to Section 6 . 02
hereof, less costs of collection, as collected.
Not later than five (5) days prior to any principal and/or interest
payment date on the Bonds, the Board of Directors shall cause the
transfer of moneys out of the Debt Service Fund to the Paying
Agent/Registrar in an amount not less than that which is sufficient
to pay the principal which matures on such date, the interest which
accrues on such date, and the Paying Agent/Registrar' s fees for
handling such payments on that date.
SECTION 7 . 05 : CONSTRUCTION FUND. The establishment of the
Construction Fund is hereby affirmed. The proceeds from the sale
of the Bonds, after making the deposits to the Debt Service Fund
from the proceeds of the Bonds as specified in Section 7 . 04 above,
shall be deposited into the Construction Fund and shall be used
solely for the expenses incident to the issuance of the Bonds and
the costs of acquiring, purchasing, and constructing the facilities
for which the Bonds were sold.
The District shall have the authority to retain the following
described monies in the Construction Fund and may expend such sums
LLR\60809.1\BONDRESOLUTION2021 24
L / /
for any item which may be properly paid by the District from its
Construction Fund upon the approval of the Texas Natural Resource
Conservation Commission.
(a) The balance of the District' s Construction Fund, if any,
remaining unexpended from the proceeds of the sale of the
Bonds after completion of the acquisition, purchase and
construction of the facilities for which the Bonds were
sold; and
(b) All interest, income, and increment accruing to the
District as a result of the temporary investment of the
proceeds of the sale of the Bonds which are placed in the
District' s Construction Fund.
Upon completion of the acquisition, purchase, and construction
of all facilities, any unspent monies remaining from the sale of
the Bonds, and the interest earned on such monies, shall be
deposited into the District' s Debt Service Fund.
SECTION 7 . 06 : BOND REDEMPTION FUND. The District reserves
the right to create one or more funds to be known as "Bond
Redemption Funds" in connection with any issue or issues of
Additional Bonds or Revenue Bonds which are term bonds, and to
provide for the transfer of Net Revenues into a Bond Redemption
Fund for the purpose of redeeming all or a specified part of such
Additional Bonds or Revenue Bonds prior to maturity.
SECTION 7 . 07 : INVESTMENTS, EARNINGS . Moneys deposited into
the Debt Service Fund, and any other fund or funds which the
District may lawfully create may be invested or reinvested in
Authorized Investments . All investments and any profits realized
from or interest accruing on such investments shall belong to the
fund from which the moneys for such investments were taken;
provided, however, that at the discretion of the Board of Directors
the profits realized from and interest accruing on investments made
from any fund may be transferred to the Debt Service Fund. If any
moneys are so invested, the District shall have the right to have
sold in the open market a sufficient amount of such investments to
meet its obligations in the event any fund does not have sufficient
uninvested funds on hand to meet the obligations payable out of
such fund. Under such circumstances, the District shall give
. notice to the Depository to sell such investments in the open
market . After such sale the moneys resulting therefrom shall
belong to the fund from which the moneys for such investments were
initially taken. The District shall not be responsible to the
Bondholders for any loss arising out of the sale of any
investments .
LLR\60809.1\BONDRESOLUTION2021 25
6
ARTICLE EIGHT
TAX EXEMPTION
SECTION 8 . 01 Definitions. When used in this Article, the
terms listed below shall have the meanings specified below, unless
it is otherwise expressly provided or unless the context otherwise
requires :
• "Code" means the Internal Revenue Code of 1986, as amended by
any amendments thereto enacted prior to the Issue Date.
"Computation Date" has the meaning set forth in Section 1. 148-
3 (e) of the Regulations .
"Gross Proceeds" has the meaning set forth in Section 1. 148-
1 (b) of the Regulations .
"Investment" has the meaning stated in section 1. 148-1 (b) of
the Regulations and includes :
(1) Stock: a share of stock in a corporation or a
right to subscribe for or to receive such a share,
(2) Debt : any indebtedness or evidence thereof,
including without limitation United States Treasury bonds,
notes, and bills (whether or not of the State and Local
Government Series) and bank deposits (whether or not
certificated or -interest bearing or made pursuant to a
depository contract) ,
(3) Annuities and Deferred Payments : any annuity
contract, or any other deferred payment contract acquired to
fund an obligation of the District, or
(4) Other Property: any other investment-type property.
"Issue Date" means the date on which the Bonds are initially
authenticated and delivered to the Purchaser against payment
therefor.
"Issue Price" of the Bonds of any series and stated maturity
means the amounts set out in paragraph 4 of the Certificate of
Underwriters executed on the Closing Date.
"Net Sale Proceeds" has the meaning set forth in section
1. 148-1 (b) of the Regulations .
"Proceeds" has the meaning set forth in section 1 . 148-1 (b) of
the Regulations .
"Rebate Amount" has the meaning set forth in section 1 . 148-3
of the Regulations .
LLR\60809.1\BONDRESOLUTION2021 26
(m) (dm)
.
"Regulations" shall mean the temporary or final Income Tax
Regulations applicable to the Bonds issued pursuant to Sections 141
through 150 of the Code. Any reference to a section of the
Regulations shall also refer to any successor provision to such
section hereafter promulgated by the Internal Revenue Service
pursuant to Sections 141 through 150 of the Code and applicable to
the Bonds .
"Sale Proceeds" has the meaning set forth in section 1. 148-
1 (b) of the Regulations .
"Taxable Investment" means any Investment other than
(1) Non-AMT Tax Exempt Obligations : an obligation the
interest on which is excluded from the gross income, as
defined in section 61 of the Code, of the owners thereof for
federal income tax purposes (or, when such obligation was
issued, was purported by the evidence of such obligation to be
so excluded) and which is not a preference item, as defined in
section 57 of the Code,
(2) Tax Exempt Mutual Funds : an interest in a regulated
investment company to the extent that at least 95% of the
income to the holders of such interest is interest that is
excludable from gross income under section 103 (a) of the Code,
(3) Demand SLGS : one-day certificates of indebtedness
issued by the United States Treasury pursuant to the Demand
Deposit State and Local Government Series program described in
31 C.F.R. part 344, if the District in good faith attempts to
comply with all the requirements of such program relating to
the investment of Gross Proceeds, and
(4) Exempt Temporary Investments : Taxable Investments
which are held for the credit of the 1995 Debt Service Fund.
"Yield" of
(1) Taxable Investments : Taxable Investments to any
date means the actuarial "yield" of all such Taxable
Investments on or before such date as "yield" is defined in
section 1. 148-5 (b) of the Regulations, and
(2) Bonds : Any series of bonds means the actuarial
"yield" of such Bonds, as defined in section 1. 148-4 of the
Regulations, and for the Bonds shall be specified in a
certificate executed by an officer of the Board on the Issue
Date.
LLR\60809.1\BONDRESOLUTION2021 27
'L P
b
SECTION 8 . 02 . Covenant To Maintain Tax-Exempt Status of
Bonds.
A. Not to Cause Interest to Become Taxable. The District
shall not use, permit the use of, or omit to use Gross Proceeds or
any other amounts (or any property acquired, constructed, or
improved with Gross Proceeds) in a manner which, if made or
omitted, respectively, (or take or omit to take any other action
which if taken or omitted, respectively) , would cause interest on
any Bond to be includable in the gross income, as defined in
• section 61 of the Code, of the owners thereof for federal income
tax purposes . The District shall adopt and comply with the
provisions of such amendments hereof and supplements hereto as may,
in the opinion of nationally recognized bond counsel, be necessary
to preserve or perfect such exclusion. Without limiting the
generality of the foregoing, the District shall comply with each of
the specific covenants in this Section at all times prior to the
last Maturity of Bonds, unless and until the District shall have
received a written opinion of nationally recognized bond counsel to
the effect that failure to comply with such covenant will not
adversely affect the excludability of interest on any Bond from the
gross income of the owner thereof for federal income tax purposes,
and thereafter such covenant shall no longer be binding upon the
District to the extent described in such opinion, anything in any
other Subsection of this Section to the contrary notwithstanding.
B. No Private Use or Payments . At all times prior to the
last Maturity of Bonds, the District shall neither
(1) use nor permit the use of Gross Proceeds (or any
property acquired, constructed or improved with Gross Proceeds
or income from the investment thereof) in any trade or
business carried on by any Person (or in any activity of any
Person other than an individual) other than a state or local
government, nor
(2) directly or indirectly impose or accept any charge
or other payment for use of Gross Proceeds (or use of any
property acquired, constructed, or improved with Gross
Proceeds or income from the investment thereof) in any trade
or business carried on by any Person (or in any activity of
any Person other than an individual) other than a state or
local government,
unless either (i) such use is merely as a member (and, except
possibly for the amount of use and any corresponding rate
adjustment, is extended by the District on the same terms as to all
other members) of the general public or (ii) such charge or payment
consists of taxes of general application within the District or
interest earned on temporary Investments acquired with Gross
Proceeds pending application of such Gross Proceeds for their
intended purposes . For purposes of this Subsection B, property is
considered to be "used" by a Person if :
LLR\60809.1\SONDRESOLUTION2021 28
a
(a) Sale or Lease: it is sold or otherwise disposed of,
or leased, to such Person;
(b) Management Contract : it is operated, managed, or
otherwise physically employed, utilized, or consumed by such
Person, excluding operation or management pursuant to an
agreement which meets the conditions described in I .R. S . Rev.
Proc. 97-13 ;
(c) Capacity, Output, or Service Commitment : capacity
in or output or service from such property is reserved or
committed to such Person under a take-or-pay, output,
incentive payment, or similar contract or arrangement;
(d) Preferential Service : such property is used to
provide service to (or such service is committed to or
reserved for) such Person on a basis or terms which (except
possibly for the amount of use and any corresponding rate
adjustment) are different from the basis or terms on which
such service is provided (or committed or reserved) to members
of the public generally;
• (e) Developer: such Person is a developer and a
significant amount of property acquired, constructed, or
improved with proceeds from the sale of a series of bonds of
which the Bonds are a part serves only a limited area
substantially all of which is owned by such Person, or a
limited group of developers, unless such property carries out
an essential governmental function, use by such Person is
during an initial development period, and such property is
developed and sold to (and occupied by) members of the general
public in accordance with the Regulations; or
(f) Other Incidents of Ownership: substantial burdens
and benefits of ownership of such property are otherwise
effectively transferred to such Person,
but the temporary investment of Gross Proceeds pending application
for their intended purposes shall not constitute "use" of Gross
Proceeds .
C. No Private Loan. The District shall not use Gross
Proceeds to make or finance loans to any Person other than a state
or local government, excluding loans consisting of temporary
investments of Gross Proceeds pending application of such Gross
Proceeds for their intended purposes. For purposes of this
Subsection C, Gross Proceeds are considered to be "loaned" to ,a
Person if (1) property acquired, constructed, or improved with
Gross Proceeds is sold or leased to such Person in a transaction
which creates a debt for federal income tax purposes, (2) capacity
in or service from such property is committed to such Person under
a take-or-pay, output, or similar contract or arrangement, or (3)
indirect benefits, or burdens and benefits of ownership, of Gross
LLR\60809.1\BONDRESOLUTION2021 29
rift) (-11)
Proceeds or such property are otherwise transferred to such Person
in a transaction which is the economic equivalent of a loan.
D. Not to Invest at Higher Yield. The District shall not, at
any time prior to the final Maturity of the Bonds, directly or
indirectly invest Gross Proceeds in any Taxable. Investment (or use
Gross Proceeds to replace money so invested) , if, as a result of
such investment, the Yield of all Taxable Investments acquired with
(or representing an investment of) Gross Proceeds (or money
replaced thereby) , whether then held or previously disposed of, to
the date of such investment exceeds the Yield of the Bonds.
Notwithstanding the foregoing, however, the following Investments
shall be excluded from the limitation described in this
Subsection D:
(1) Three-Year Period for. Sale Proceeds : Taxable
Investments acquired with (or representing an investment of)
proceeds from the sale of the Bonds or earnings from the
investment thereof, to the extent such Taxable Investments are
held during the three-year period beginning on the Issue Date;
(2) One-Year Period for Earnings on Sale Proceeds:
Taxable Investments acquired with (or representing an
investment of) income from investment of proceeds from the
sale of the Bonds, to the extent such Taxable Investments are
held during the first year after receipt of such income;
(3) 1998 Debt Service Fund Deposits : Taxable
Investments acquired with (or representing an investment of)
,amounts held for the credit of the Debt Service Fund for the
payment of the debt service on the Bonds during the then
current bond year (the "1998 Debt Service Fund") , but only
during the first 13 months after the date of deposit of such
amounts to the Debt Service Fund;
(4) Debt Service Fund Deposits : Taxable Investments
acquired with (or representing an investment of) amounts held
for the credit of the Debt Service Fund in excess of the
amounts held for the credit of the 1998 Debt Service Fund to
the extent such Taxable Investments are held during the first
30 days after the date of deposit of such amounts to the Debt
Service Fund or, if held more than 30 days after deposit, do
not exceed 10% of the stated principal amount of the Bonds;
and
(5) Other Investments : any other Taxable Investments
acquired with (or representing an investment of) Gross
Proceeds described in Clause (3) of the definition thereof, to
the extent the aggregate amount of Gross Proceeds invested in
such Taxable Investments does not exceed the lesser of
$100, 000 or 5% of the proceeds from sale of the Bonds .
LLR\60809.1\BONDRESOLUTION2021 30
j
. The District shall not use any money to pay principal of or
interest on the Bonds, or pledge (or permit to be pledged) or
otherwise restrict any money, funds, or Taxable Investments so as
to give reasonable assurance of their availability for such,
purpose, except in each case amounts deposited to the Debt Service
Fund.
E. No Federal Guarantees, Etc . The District shall not
either (a) use Gross Proceeds in an amount which exceeds 5% of the
proceeds from the sale of the Bonds (i) to make loans which. are
guaranteed in whole or in part by the United States or any agency
or instrumentality thereof, including any entity with statutory
authority to borrow from the United States, or (ii) to invest in
any deposit or account in a financial institution to the extent
such deposit or account is insured under federal law by the Federal
Deposit Insurance Corporation, the National Credit Union Admin-
istration, or any similar federally-chartered corporation, or (b)
otherwise permit payment of principal of or interest on the Bonds
to be directly or indirectly guaranteed in whole or in part by the
United States or any agency or instrumentality thereof, including
any entity with statutory authority to borrow from the United
States (e.g. , by the investment of amounts held for the credit of
the Debt Service Fund in federally-guaranteed or federally-insured
• obligations) . Notwithstanding the foregoing, however, the District
may acquire :
(1) Certain Temporary Investments : Investments
described in Subsections D (1) , D (3) , or D (4) of this Section,
whether or not federally-guaranteed or federally-insured, to
the extent such Investments are held during the period
described in such Subsection;
(2) Treasury Investments : Investments issued by the
United States Treasury; and
(3) Investments Permitted by Regulations : Any other
Investments permitted by regulations of the United States
Department of Treasury issued under section 149 (b) (3) (B) (v) of
the Code.
F. Not to Divert Arbitrage Profits . Prior to the final
Maturity of the Bonds, the District shall not at any time invest
amounts held for the credit of the Construction Fund or the Debt
Service Fund in any Investment purchased at other than an arm' s
length price or for which there is not an established market at the
. time of investment, except possibly for Investments described in
Subsection D (2) of this Section to the extent such Investments are
acquired and mature or are disposed of during the period described
in such Subsection.
G. To File Informational Report . The District shall execute
and file with the Secretary of the Treasury, not later than the
15th day of the second calendar month after the close of the
LLR\60809.1\BONDRESOLUTION2021 31
calendar quarter in which the Issue Date occurs (or by such later
date as such Secretary may permit for reasonable cause or may
prescribe with respect to any portion of such statement) , a
statement containing the information and in the form required by
section 149 (e) of the Code or the Regulations promulgated
thereunder.
H. Not to Cause Bonds to Become Hedge Bonds . The District
warrants and represents that :
(1) the District reasonably expects that at least 85% of
the Net Sale Proceeds of the Bonds will be used to carry
out the governmental purposes of the Bonds within three
years from the Issue Date, and
(2) not more than 50% of the Proceeds of the Bonds will
be invested in nonpurpose investments (as defined in
section 148 (f) (6) (A) of the Code) having a substantially
guaranteed Yield for four years or more.
I . Payment of Rebatable Arbitrage. Except to the extent
otherwise provided in section 148 (f) of the Code and the
regulations and rulings thereunder,
(1) The District shall account for all Gross Proceeds
(including all receipts and expenditures thereof) on its books of
account separately and apart from all other funds (and receipts,
expenditures, and investments thereof) and shall maintain all
records of such accounting with the transcript of proceedings
relating to the issuance of the Bonds until six years after the
final Computation Date. The District may, however, to the extent
permitted by law, commingle Gross Proceeds of the Bonds with other
money of the District, provided that the District separately
accounts for each receipt and expenditure of such Gross Proceeds
and the obligations acquired therewith.
(2) Not less frequently than each Computation Date, the
District shall either (i) cause to be calculated by a nationally
recognized accounting or financial advisory firm or (ii) calculate
and cause its calculations to be verified by a nationally
recognized accounting or financial advisory firm, in either case in
accordance with rules set forth in section 148 (f) of the Code and
section 1. 148-3 of the Regulations and rulings thereunder, the
Rebate Amount with respect to the Bonds. The District shall
maintain such calculations with the official transcript of th'e
proceedings relating to the issuance of the Bonds until six years
after the final Computation Date.
(3) As additional consideration for the purchase of the
Bonds by the Purchasers and the loan of money represented thereby,
and in order to induce such purchase by measures designed to
preserve the excludability of the interest thereon from the gross
income of the owners thereof for federal income tax purposes, the
LLR\60809.1\BONDRESOLUTION2021 32
- y V 1
District shall remit to the United States the amount described in
paragraph (2) above and the amount described in paragraph (4)
below, at the times, in the installments, to the place, in the
manner, and accompanied by such forms or other information as is or
may be required by section 148 (f) of the Code and the Regulations
and rulings thereunder.
(4) The District shall exercise reasonable diligence to
assure that no errors are made in the calculations required by
paragraph (2) and, if such error is made, to discover and promptly
to correct such error within a reasonable amount of time
thereafter, including payment to the United States of any interest
and any penalty required by section 1. 148-3 (h) of the Regulations,.
SECTION 8 . 03 . Qualified Tax-Exempt Obligations . The District
hereby designates the Bonds as "qualified tax-exempt obligations"
pursuant to Section 265 (b) (3) of the Code.
The District hereby warrants and represents that
(a) the aggregate face amount (or, in the case of
obligations on which interest is paid less frequently than
semiannually, the aggregate amount of principal and interest
due at maturity) of all debt obligations issued or expected to
• be issued by the District in the calendar year of the Closing
Date (including the Bonds) is not reasonably expected to
exceed $10, 000, 000;
(b) there are no other Persons which derive their authority
from or are subject to the control of the District and which
have authority to issue obligations described in section 103
of the Code; and
(c) consequently, the Bonds are eligible to be "qualified
tax-exempt obligations" pursuant to section 265 (b) (3) of the
Code.
The President of the Board is hereby authorized to take such
other action as may be necessary to make effective the designation
herein.
ARTICLE NINE
ADDITIONAL BONDS AND REFUNDING BONDS
SECTION 9 . 01 : ADDITIONAL BONDS . The District expressly
reserves the right to issue, in one or more installments, for the
purpose of completing, repairing, improving, extending, enlarging,
or replacing the System or any other lawful purpose :
(a) the unissued unlimited tax bonds which were authorized at
the bond elections described in Section 1 . 05 of this
Resolution; and
LLR\60809.1\BONDRESOLUTION2021 33
(b) such other unlimited tax bonds as may hereafter be
authorized at subsequent elections .
SECTION 9 . 02 : REVENUE BONDS. The District expressly reserves
the right to issue revenue bonds in one or more installments for
the purpose of completing, repairing, improving, extending,
enlarging, or replacing the System, which will be payable solely
from the Net Revenues and such bonds may be payable from and
equally secured by a lien on and pledge of the Net Revenues, if
such revenue bonds are approved by the voters of the District.
SECTION 9 . 03 : INFERIOR LIEN BONDS . The District also
reserves the right to issue inferior lien bonds and pledge the Net
. Revenues to the payment thereof, such pledge to be subordinate in
all respects to the lien of previously issued Additional Bonds and
Revenue Bonds .
SECTION 9 . 04 : SPECIAL PROJECT BONDS . The District further
reserves the right to issue bonds in one or more installments for
the purchase, construction, improvement, extension, replacement,
enlargement, or repair of water, sewer, and/or drainage facilities
necessary under a contract or contracts with persons, corporations,
municipal corporations, political subdivisions, or other entities,
such bonds to be payable from and secured by the proceeds of such
contract or contracts . The District further reserves the right to
refund such bonds .
SECTION 9 . 05 : REFUNDING BONDS . The District further reserves
the right to issue Refunding Bonds in any manner permitted by law
to refund any Bonds and Additional Bonds at or prior to their
respective dates of maturity or redemption.
ARTICLE TEN
MUNICIPAL BOND INSURANCE
Financial Security has made a commitment to issue a municipal
bond guaranty insurance policy (the "Municipal Bond Guaranty
Insurance Policy") relating to the Bonds effective as of the date
of issuance of the Bonds . Under the terms of the Municipal Bond
Guaranty Insurance Policy, Financial Security guarantees timely
payment of principal of and interest on the Bonds . Financial
Security will make such payments to the Paying Agent on the date
due for payment or within one business day after receipt of notice
of nonpayment, whichever is later. The insurance will extend for
the term of the Bonds and, once issued, cannot be canceled.
ARTICLE ELEVEN
SECTION 11 . 01 : PERSONS DEEMED OWNERS . The District, the
Paying Agent/Registrar, and any agent of either of them may treat
the Person in whose name any Bond is registered as the owner of
such Bond for the purpose of receiving payment of the principal
LLR\60809.1\BONDRESOLUTION2021 34
0
(and Redemption Price) of and interest on such Bond and for all
other purposes whatsoever, and to the extent permitted by law,
neither the District, the Paying Agent/Registrar, nor any agent of
either of them shall be affected by notice to the contrary.
SECTION 11. 02 : NOTICES TO HOLDERS; WAIVER. Wherever this
Resolution provides for notice to Bondholders of any event, such
notice shall be sufficiently given (unless otherwise herein
expressly provided) if in writing and mailed, first-class postage
prepaid, to each Holder of such Bonds, at the address of such
Holder as it appears in the Bond Register. In any case where
notice to Holders of Bonds is given by mail, neither the failure to
mail such notice to any particular Holder of Bonds, nor any defect
in any notice so mailed, shall affect the sufficiency of such
notice with respect to all other Bonds. Where this Resolution
provides for notice in any manner, such notice may be waived in
writing by the Person entitled to receive such notice, either
before or after the event, and such waiver shall be the equivalent
of such notice. Waivers of notice by Holders shall be filed with
the Paying Agent/Registrar, but such filing shall not be ;a
condition precedent to the validity of any action taken in reliance
upon such waiver.
SECTION 11. 03 : DUTIES OF DISTRICT OFFICIALS . The President
or any Vice President and the Secretary or any Assistant Secretary
of the Board of Directors and other appropriate officers and agents
of the District are hereby authorized and directed to do any and
all things necessary and/or convenient to carry out the provisions
of this Resolution.
ARTICLE TWELVE
SALE AND DELIVERY OF BONDS
SECTION 12 . 01 : SALE OF BONDS; BOND PURCHASE AGREEMENT. The
Bonds are hereby sold and shall be delivered to
(the "Purchaser") pursuant to the
taking of public bids therefor on 1997, for a price
of $ plus accrued interest from the Initial Date to
the date of delivery. Delivery of the Bonds to the Purchaser shall
be made as soon as practicable after the adoption of this
Resolution, upon payment therefor, in accordance with the terms of
the sale. Purchaser' s obligation to accept delivery of the Bonds
is subject to it being furnished an approving legal opinion of
Coats, Rose, Yale, Holm, Ryman & Lee, P.C. , bond counsel to the
District, approving the Bonds as to their validity and that the
interest thereon is exempt from Federal taxation, said opinion to
be dated and delivered as of the date of delivery and payment for
• the Bonds . The Board hereby finds and determines that the net
effective interest rate of the issue or series of bonds authorized
by this Resolution is , which is the lowest net effective
interest rate bid to the District, as required by law.
LLR\60809.1\BONDRESOLUTION2021 35
SECTION 12 . 02 : APPROVAL, REGISTRATION AND DELIVERY. The
President of the Board of Directors of the District and
representatives of Coats, Rose, Yale, Holm, Ryman & Lee, P.C. are
hereby authorized and directed to submit the Bonds, and a
transcript of the proceedings relating to the issuance of the
Bonds, to the Attorney General of the State of Texas for approval
and, following said approval, to submit the Initial Bond to the
Comptroller of Public Accounts of the State of Texas for
registration. Upon registration of the Initial Bond, the
Comptroller of Public Accounts (or a deputy designated in writing
to act for the Comptroller) shall manually sign the Comptroller' s
registration certificate prescribed herein to be printed and
endorsed on the Initial Bond. After the Initial Bond has been
registered and signed by the Comptroller, it shall be delivered to
. the Underwriter, but only upon receipt of the full purchase price.'
ARTICLE THIRTEEN
SPECIFIC OBLIGATIONS OF BOARD
The Board on behalf of the District expressly stipulates and
covenants that, for the benefit of the Purchaser and any and all
subsequent Holders of the Bonds (and enforceable by any one or all
of said Holders) , in addition to all other provisions hereof, it
will:
(a) Fix and maintain rates and collect charges for the
facilities and services rendered by the District which,
together with any taxes levied for maintenance purposes,
will provide revenues sufficient at all times to pay all
reasonable administration expenses of the District and
all efficient operation and adequate maintenance expenses
of the System. The Board has enacted and will maintain
in effect an order fixing rates and charges for services
which contains, among other provisions, a requirement for
periodic billing of all customers of the District and a
prohibition against the furnishing of water or sewer
• service without charge to any person, firm, organization,
or corporation.
(b) Subject to the provisions of Article Six of this
Resolution, levy an ad valorem tax that will be ample and
sufficient to provide funds to pay the interest on the
Bonds and to provide the necessary sinking fund.
(c) Not mortgage or otherwise encumber the physical
properties of the System, nor sell, lease, or otherwise
dispose of any substantial portion of such physical
properties, unless said properties of the System are
deemed by the Board of Directors of the District to be
unnecessary to the operation of the System.
LL11\60809.1\BONDRESOLUTION2021 36
(d) Maintain the System in good condition and operate it in
an efficient manner and at a reasonable cost .
(e) Maintain insurance on the System of a kind and in an
amount which usually would be carried by municipal
corporations and political subdivisions in Texas
operating similar facilities .
(f) Keep records and accounts and employ an independent
certified public accountant of recognized integrity and
ability to direct the installation of the required
accounting procedures and to audit its affairs at the
close of each fiscal year. The fiscal year of the
District is from October 1 to September 31 of the
following year, or such other fiscal year as the Board of
Directors may hereafter designate . Said audits shall
include a statement in detail of the income and
expenditures of the System for each year; a balance sheet
as of the end of the year; the auditor' s comments
regarding the manner in which the District has carried
out the requirements of all Bond Resolutions; his recom-
mendations, if any, for changes or improvements in the
operation of the District' s plants, facilities, and
improvements; a list of insurance policies in force as of
the date of the audit including the amount, expiration
date, risk covered, and name of the insurer for each such
policy; and the number of properties connected to the
System as of the end of the fiscal year. The audit
report shall be delivered to each member of the Board not
later than 120 days after the close of each fiscal year
and shall be retained and filed in the office of the
auditor. Copies of said audit shall be filed as required
by law and maintained in the office of the District,
available for inspection by any interested person or
persons during normal office hours .
ARTICLE FOURTEEN
DEFEASANCE OF OBLIGATIONS OF DISTRICT
SECTION 14 . 01 : DEFEASANCE. If the District shall pay or
cause to be paid, or there shall otherwise be paid to the Holders,
the principal of and interest on the Bonds, at the times and in the
manner stipulated in this Resolution, then the pledge of any taxes
or other money, securities, and funds pledged under this Resolution
and all covenants, agreements, and other obligations of the
District to the Holders of Bonds shall thereupon cease, terminate,
and become void and be discharged and satisfied, and the Paying
Agent/Registrar shall pay over or deliver all money held by it
' under this Resolution to the District .
Bonds or interest installments for the payment of which money
shall have been set aside and shall be held in trust by the Paying
LLR\60809.1\BONDRESOLUTION2021 37
Agent/Registrar or with any other bank or trust company which has
agreed to hold the same for such purpose (through deposit by the
District of funds for such payment or otherwise) at the Stated
Maturity thereof shall be deemed to have been paid within the
meaning and with the effect expressed above in this Section. All
Bonds shall be deemed to have been paid, prior to their Stated
Maturity, within the meaning and with the effect expressed above in
this Section, if there shall have been deposited with the Registrar
either (a) money in an amount which shall be sufficient to make
such payment, (b) Governmental Securities certified by an
independent public accounting firm of national reputation to be of
such maturities and interest payment dates and to bear such
interest as will, without further investment or reinvestment of
either the principal amount thereof or the interest earnings
therefrom, be sufficient to make such payment, or (c) a combination
. of money and Governmental Securities together so certified to be
sufficient to make such payment, provided that all the expenses
pertaining to the Bonds with respect to which such deposit is made
shall have been paid or the payment thereof provided for to the
satisfaction of the Paying Agent/ Registrar (and to such other bank
or trust company) .
SECTION 14 . 02 : PARTIAL DEFEASANCE. In the event such deposit
is made with respect to some but not all of the Bonds then
outstanding, the District shall designate the Stated .Maturities of
Bonds with respect to which such deposit is made. If such deposit
shall be sufficient to provide for the payment of the principal of
and interest on some but not all Outstanding Bonds of a particular
Stated Maturity so designated, the Paying Agent/Registrar shall
select the Outstanding Bonds of such Stated Maturity with respect
to which such deposit is made by such random method as the Paying
Agent/Registrar shall deem fair and appropriate and which may
provide for the selection of portions (equal to and leaving
unredeemed an authorized denomination) of Bonds a denomination
larger than $5, 000 . Notwithstanding anything herein to the
contrary, no such deposit shall have the effect described in this
Article if made during the subsistence of a default in the payment
of any Bond (a) unless made with respect to all of the Bonds then
outstanding, or (b) unless accompanied by an opinion of counsel of
recognized standing in the field of federal income taxation to the
effect that neither such deposit nor the investment thereof shall
adversely affect the excludability of interest on any Bond from the
gross income of any owner thereof for federal income tax purposes .
SECTION 14 . 03 : INVESTMENTS . No money or Governmental
Securities so deposited shall be invested or reinvested unless in
Governmental Securities and unless such money and Governmental
Securities not invested and such new investments are together
certified by an independent public accounting firm of national
reputation to be of such amounts, maturities, and interest payment
dates and to bear such interest as will, without further investment
or reinvestment of either the principal amount thereof or the
interest earnings therefrom, be sufficient to make such payment .
LLR\60809.1\BONDRESOLUTION2021 38
D
Neither Governmental Securities nor money deposited with the Paying
Agent/Registrar or other bank or trust company pursuant to this
Section, nor principal or interest payments on any such
Governmental Securities, shall be withdrawn or used for any purpose
other than, and shall be held in trust for, the payment of the
principal of, and interest on such Bonds . Any cash received from
such principal of and interest on such investment securities
deposited with the Paying Agent/Registrar, if not needed for such
purpose, shall, to the extent practicable, be reinvested in
Governmental Securities (which may be non-interest bearing)
maturing at times and in amounts sufficient to pay when due the
• principal of and interest on such Bonds on and prior to the
maturity thereof, and interest earned from such reinvestments shall
be paid over to the District as received by the Paying
Agent/Registrar, free and clear of any trust, lien, or pledge and
used in accordance with applicable law. Any payment for
Governmental Securities purchased for the purpose of reinvesting
cash as aforesaid shall be made only against delivery of such
Governmental Securities .
SECTION 14 . 04 : RETIREMENT OF BONDS . At such times as a Bond
shall be deemed to be paid hereunder, as aforesaid, it shall no
longer be entitled to the benefits of this Resolution, except for
the purposes of any such payment from such money or Governmental
Securities, and for the provisions of Section 3 . 07 and 3 . 08
relating to transfer, exchange, and replacement of Bonds and the
covenants of -the District contained in Article Eight . At such
times as all of the Bonds are retired, or provision is made for
their payment, money in the Debt Service Fund, if any, may be
transferred to the General Operating Fund of the District, provided
that any money held by the Paying Agent/Registrar which has been
provided for the payment of interest or principal and not so
utilized for any reason shall continue to be held for a period of
four calendar years, and if not claimed, the same may be returned
to the General Operating Fund of the District, subject, however, to
applicable unclaimed property laws of the State of Texas .
ARTICLE FIFTEEN
CONTINUING DISCLOSURE
SECTION 15 . 01 : ANNUAL REPORTS . The District shall provide
annually to each nationally recognized municipal securities
information repository ("NRMSIR" ) and the state information
depository ("SID") , within six (6) months after the end of each
fiscal year ending in or after 1998, financial information and
operating data with respect to the District of the general type
included in the Official Statement authorized by Section 16 . 05 of
this Bond Resolution, being the information described in Section
15 . 04 hereof . Any financial statements so to be provided shall be
(1) in accordance with generally accepted accounting principles and
(2) audited, if the District commissions an audit of such
statements and the audit is complete within the period during which
LLR\60809.1\BONDRESOLUTION2021 39
they must be provided. If audited financial statements are not so
provided, then the District shall provide unaudited financial
statements as part of the annual report and shall provide audited
financial statements for the applicable fiscal year to each NRMSIR
and any SID, when and if audited financial statements become
available.
If the District changes its fiscal year, it will notify each
NRMSIR and any SID of the change (and of the date of the new fiscal
year) prior to the next day by which the District would otherwise
be required to provide financial information and operating data
pursuant to this Article.
The financial information and operating data to be provided
pursuant to this Article may be set forth in full in one or more
documents or may be included by specific reference to any document'1
including an official statement or other offering document, if it
• is available from the Municipal Securities Rulemaking Board
("MSRB") that heretofore has been provided to each NRMSIR and any
SID or filed with the United States Securities and Exchange
Commission ("SEC" ) .
SECTION 15 . 02 : MATERIAL EVENTS NOTICES . The District shall
notify any SID and either each NRMSIR or the MSRB, in a timely
manner, of any of the following events with respect to the Bonds,
if such event is material within the meaning of the federal
securities laws :
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, if any,,
reflecting financial difficulties;
5 . Substitution of credit or liquidity providers, if any, or
their failure to perform;
6 . Adverse tax opinions or events affecting the tax-exempt
status of the Bonds;
7 . Modifications of the rights of the Owners of the Bonds;
8 . Bond calls;
9 . Defeasance;
10 . Release, substitution, or sale of property securing
payment of the Bonds; and
•
LLR\60809.1\BONDRESOLUTION2021 40
i T
l ..S
11. Rating changes .
SECTION 15 . 03 : LIMITATION, DISCLAIMERS, AND AMENDMENTS .
The District shall be obligated to observe and perform the
covenants specified in this Article for so long as, but only for so
• long as, the. District remains an "obligated person" with respect to
the Bonds within the meaning of the Rule, except that the District,
in any event, will give the notice required by Section 15 . 02 of any
Bond calls and defeasance that cause the District to no longer be
an "obligated person. "
The provisions of this Article are for the sole benefit of the
Holders of the Bonds and nothing in this Article express or implied
shall give any benefit or any legal or equitable right, remedy, or
claim hereunder to any other person. The District undertakes to
provide only the financial information, operating data, financial
statements, and notices which it has expressly agreed to provide
pursuant to this Article and does not undertake to provide any
other information that may be relevant or material to a complete
presentation of the District' s financial results, conditions,
prospects or hereby undertakes to update any information provided
in accordance with this Article or otherwise, except as expressly.
provided herein. The District does not make any representation or
warranty concerning such information or concerning its usefulness
to a decision to invest in or sell Bonds at any future date .
UNDER NO CIRCUMSTANCE SHALL THE DISTRICT BE LIABLE TO THE
OWNER OF ANY BOND OR ANY OTHER PERSON, IN CONTRACT OR TORT, FOR
DAMAGES RESULTING IN WHOLE OR IN PART FROM ANY BREACH BY THE
DISTRICT, WHETHER NEGLIGENT OR WITHOUT FAULT ON ITS PART, OF ANY
COVENANT SPECIFIED IN THIS ARTICLE, BUT EVERY RIGHT AND REMEDY OF
ANY SUCH PERSON, IN CONTRACT OR IN TORT, FOR OR ON ACCOUNT OF ANY
SUCH BREACH SHALL BE LIMITED TO AN ACTION FOR MANDAMUS OR SPECIFIC
PERFORMANCE.
No default by the District in observing or performing its
obligations under this Article shall comprise a breach of or a
default under the Resolution for purposes of any other provision of
this Resolution.
Nothing in this Article is intended or shall act to disclaim,
waive or otherwise limit the duties of the District under federal
and state securities laws .
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, if
but only if (1) the agreement, as amended, would have permitted an
underwriter to purchase or sell Bonds in the primary offering in
• compliance with the Rule, taking into account any amendments or
interpretations of the Rule to the date of such amendment, as well
LLR\60809.1\BONDRESOLUTION2021 41
? d
as such changed circumstances, and (2) either (a) the Holders of a
majority in aggregate principal amount of the outstanding bonds
consent to such amendment or (b) any person unaffiliated with the
District (such as nationally recognized bond counsel) determines
that such amendment will not materially impair the interests of the
Holders of the Bonds . The District may amend or repeal this Article
if the SEC amends or repeals the applicable provisions of the Rule
or a court of final jurisdiction determines that such provisions
are invalid or unenforceable, but only to the extent that its right
to do so would not prevent the Underwriter from lawfully purchasing,
the Bonds in the initial offering. If the District amends the
agreement, it will 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.
The District has not previously made a continuing disclosure;
agreement in accordance with SEC Rule 15c2-12 . 12 .
SECTION 15 . 04 : DESCRIPTION OF ANNUAL FINANCIAL INFORMATION.;
The following information is referred in Section 15 . 01 of this
Article:
a. Annual Financial Statements and Operating Data. The
financial information and operating data with respect to the
District to be provided annually are as specified below:
(i) Appendix A to the Official Statement : Financial
Statements and Auditor' s Report .
b. Accounting Principles . The accounting principles
referred to in Section 15 . 01 are generally accepted accounting
principles for governmental units as prescribed by the Governmental
Accounting Standards Board from time to time, as such principles
may be changed from time to time to comply with state law or
regulation, or as otherwise stated in the financial statements.
ARTICLE SIXTEEN
MISCELLANEOUS PROVISIONS
SECTION 16 . 01 : OPEN MEETING. The Board of Directors
officially finds, determines, and declares that this Resolution was
reviewed, carefully considered, and adopted at a regular meeting of
the Board beginning at , Central Standard Time, on
, 1997, and that a sufficient written notice of the
date, hour, place, and subject of this meeting was posted at a
place readily accessible and convenient to the public within the
District and on bulletin boards located at a place convenient to
the public in the Brazoria County Courthouse for the time required
by law preceding this meeting, as required by the Texas Government
LLR\60809.1\BONDRESOLUTION2021 42
(41111)
Q I Q
Code, Section 551. 043 , as amended, and that this meeting has been
open to the public as required by law at all times during which
this Resolution and the subject matter hereof has been discussed,
considered, and acted upon. The Board of Directors further
ratifies, approves, and confirms such written notice and the
contents and posting thereof.
SECTION 16 . 02 : UNCLAIMED MONIES. Notwithstanding any other
• provision of this Resolution to the contrary, the Texas Property
Code requires that all monies (including principal and interest
payments on the Bonds) which are unclaimed after three years be
turned over to the Texas State Treasurer if (a) the owner' s last
known address as shown in the records of the Paying Agent/Registrar
is in Texas, or (b) if the holder of such unclaimed monies is a
Texas governmental entity or a Texas corporation and (i) the
owner' s identity is unknown or there is no known address for the
owner or (ii) the last known address of the owner is in a state
whose escheat or unclaimed property law is inapplicable to such
monies . Bondholders are advised to be cognizant of the provisions
of the Texas Property Code, particularly Chapters 71, 72, and 74
thereof as such provisions relate to the escheatment of unclaimed
monies to the Texas State Treasurer.
SECTION 16 . 03 : RELATED MATTERS . To satisfy in a timely
manner all of the District' s obligations under this Resolution, the
President and Secretary of the Board of Directors of the District
and all other appropriate officers and agents of the District are
hereby authorized and directed to take all other actions that are
reasonably necessary to provide for the issuance, sale, and
delivery of the Bonds including, without limitation, executing and
delivering on behalf of the District all certificates, consents,
receipts, requests, and other documents as may be reasonably
necessary to satisfy the District' s obligations under this
Resolution and to direct the transfer and application of funds of
the District consistent with the provisions of this Resolution. ,
SECTION 16 . 04 : PAYING AGENT/REGISTRAR. The form of agreement
setting forth the duties of the Paying Agent/Registrar is hereby
approved, and the appropriate officials of the District are hereby
authorized to execute such agreement for and on behalf of the
District .
SECTION 16 . 05 : OFFICIAL STATEMENT. The Board of Directors of
the District hereby ratifies, authorizes, and approves, in
connection with the sale of the Bonds, the preparation and
distribution of the Preliminary Official Statement, dated
1997, and a final Official Statement substantially in
the same form containing such additional information and amendments
as may be necessary to conform to the terms of the Bonds and this
Resolution. The appropriate officials of the District are hereby
authorized to sign such Official Statement and/or to deliver
certificates pertaining to such Official Statement as prescribed
LLR\60809.1\BONDRESOLUTION2021 43
y
therein, dated as of the date of payment for and delivery of the
Bonds.
SECTION 16 . 06 : REMEDIES IN EVENT OF DEFAULT. In addition to
any other rights and remedies provided by the laws of the State of
Texas, the District covenants and agrees that in the event of
default in payment of principal of or interest on any of the Bonds
when due, or, in the event it fails to make the payments required
to be made into the Debt Service Fund, as defined in Section 7 . 01,
or defaults in the observance or performance of any other of the
covenants, conditions, or obligations set forth in this Resolution,
the Holders shall be entitled to a writ of mandamus issued by a
court of competent jurisdiction compelling and requiring the
District and the officials thereof to observe and perform the
covenants, obligations, or conditions prescribed in this
Resolution. Any delay or omission to exercise any right or power
accruing upon any default shall not impair any such right or power
or be construed to be a waiver of any such default or acquiescence
therein, and every such right and power may be exercised from time
to time and as often as may be deemed expedient .
In consideration of the purchase and acceptance of the Bonds
. authorized to be issued hereunder by the Holders, the provisions of
this Resolution shall constitute a contract between the District
and the Holders; and the covenants and agreements herein set forth
to be performed on behalf of the District shall be for the equal
benefit, protection, and security of each of the Holders . The
Bonds, regardless of the time or times of their issue or maturity;
shall be of equal rank without preference, priority, or distinction
of any Bond over any other, except as expressly provided herein.
SECTION 16 . 07 : AMENDMENTS TO BOND RESOLUTION. The District
may, without the consent of or notice to any Holders of the Bonds;
amend, change, or modify this Resolution as may be required (a) by
the provisions hereof, (b) for the purpose of curing any ambiguity;
inconsistency, or formal defect or omission herein, or (c) in
connection with any other change which is not to the prejudice of
the Holders of the Bonds. Except for such amendments, changes, or
modifications, the District shall not amend, change, or modify this
Resolution in any manner without the consent of the Holders of the
Bonds .
SECTION 16 . 08 : NO PERSONAL LIABILITY. No recourse shall be
had for payment of the principal of or interest on any Bonds or for
any claim based thereon or in this Resolution against any official
or employee of the District or any person executing any Bonds .
SECTION 16 . 09 : EFFECTIVE DATE OF RESOLUTION. This Resolution
shall take effect and be in full force and effect upon and after
its passage.
LLR\60809.1\BONDRESOLUTION2021 44
4i
PASSED AND APPROVED this day of , 1997 .
/s/ Ricki A. Willoughby
President, Board of Directors
Brazoria County Municipal Utility
District No. 5
ATTEST:
/s/ Kelly C. Flanagan
Secretary/Treasurer, Board
of Directors Brazoria County
Municipal Utility District No. 5
LLR\60809.1\BONDRESOLUTION2021 45 -
This Official Notice of Sale does not alone constitute an offer to sell, but is merely notice of sale of the bonds
described herein. The offer to sell such bonds is being made by means of this Official Notice of Sale, the Official
Bid Form and the Preliminary Official Statement.
OFFICIAL NOTICE OF SALE
! $1,980,000
1
BRAZORIA COUNTY MUNICIPAL UTILITY DISTRICT NO. 5
(A political subdivision of the State of Texas
located within Brazoria County)
UNLIMITED TAX BONDS
SERIES 1998
Sealed Bids Will Be Received:
12:30 P.M., Monday, February 9, 1998
Houston Time
This Official Notice of Sale does not alone constitute an invitation for bids,but is merely notice of sale of the bonds
described herein. The invitation for such bids is being made by means of.this Official Notice of Sale, the Official
Bid:Form and the Official Statement.
_OFFICIAL NOTICE OF SALE
$1,980,000
BRAZORIA COUNTY MUNICIPAL UTILITY-DISTRICT NO. 5
(A political subdivision of the State of Texas located within Brazoria County, Texas)
UNLIMITED,TAX BONDS
SERIES 1998.
BONDS OFFERED FOR SALE AT COMPETITIVE BID: The Board of Directors (the "Board") of Brazoria
County Municipal Utility District No.5(the"District"),is offering for sale at competitive bid$1,980,000 Unlimited
Tax Bonds, Series 1998 (the "Bonds").
PLACE AND TIME OF SALE: The Board will open and publicly read sealed bids for the purchase of the Bonds
at the designated meeting place outside the boundaries of the District, the offices of Coats, Rose, Yale;' Holm,
Ryman & Lee, P.C., 1001 Fannin, Suite 800, Houston, Texas 77002 at 12:30 P.M., Houston Time, Monday,
February 9, 1998. Sealed bids,which must be submitted in duplicate on the Official Bid Form and plainly marked
"Bid for Bonds," are to be addressed to "President and Board of Directors, Brazoria County Municipal Utility
District No. 5." All bids must be delivered to the above address prior to The above scheduled time for bid opening.
Any bid received after such scheduled time for bid opening will not be accepted and will be returned unopened.
AWARD AND SALE OF THE BONDS: The District will take action to adopt a resolution(the"Bond Resolution")
authorizing-the issuance and awarding sale of the Bonds or will reject all bids promptly after the opening of bids.
The Board reserves the right to reject any or all bids and to waive any irregularities, except time of filing.
THE BONDS
DESCRIPTION OF CERTAIN TERMS-OF THE BONDS: The Bonds will be dated March 1, 1998, with interest
payable on September 1, 1998, and each March 1 and September 1 thereafter until the earlier of maturity or prior
redemption. The Bonds will be delivered to the Initial Purchaser (as hereinafter defined) as one Bond, in fully
registered form, and may be exchanged for bonds in the denomination.of$5,000 or any integral multiple thereof.
The Bonds will be issued only in fully registered form. Principal will be payable to the registered owner(s) of the
Bonds (the "Bondholder(s)") upon presentation and surrender at the principal_payment office of Chase Bank of
Texas;.National Association, currently in Dallas, Texas, the paying agent/registrar (hereinafter sometimes called
the"."Paying Agent" or the "Registrar"). Unless otherwise.agreed between the Paying Agent and the Bondholder,
interest on the Bonds will be payable by,check or draft of the Paying Agent,,dated as of the interest payment date,
and mailed by the Paying Agent to the Bondholders, 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"). The
Bonds will mature serially on September 1 in each of the following years in the following amounts:
Principal Principal-
Maturity Amount Maturity Amount
1999 $ 65,000 2008 $ 95,000
2000 65,000 :2009 100,000
2001 65,000 - 2010 105,000.
2002 65,000 2011 115,000
2003 70,000 - 2012 125,000
2004 . __ 75,000 - 2013 245,000
2005 "80,000- -2014 - 260,000
2006 85,000 2015 ' 275,000
2007 90,000
The Bonds maturing on or after September 1, 2007, are subject to redemption and payment, at the option of the
District,in whole or in part, on September 1, 2006, or on any date thereafter, at par plus accrued interest thereon
to the date fixed for redemption. If less than all the Bonds are redeemed at any time, the District shall determine
the maturity or maturities and the amounts thereof to be redeemed in integral multiples of $5,000 in principal
amount, and if less than all of the Bonds within a maturity are to be redeemed, the Registrar shall designate by
method of random selection the Bonds within such maturity to be redeemed. The Bondholder of any Bond, all or
a portion of which has been called for redemption, shall be required to present such Bond to the Registrar for
payment of the redemption price on the portion of the Bond so called for redemption and issuance of an exchange
Bond in a principal amount equal to the portion of the Bond not so redeemed.
SECURITY FOR PAYMENT: The Bonds, when issued, will constitute valid and binding obligations of the
District,payable as to principal and interest from the proceeds of a continuing,direct annual ad valorem tax,without
legal limitation as to rate or amount, levied against taxable property within the District.
OTHER TERMS AND COVENANTS: Other terms of the Bonds and the various covenants of the District
contained in the Bond Resolution are described in the Preliminary Official Statement, to which reference is made
for all purposes.
MUNICIPAL BOND GUARANTY INSURANCE: An application has been made to MBIA Insurance Corporation
("MBIA"), Financial Security Assurance Inc. ("FSA"), and Ambac Assurance Corporation("Ambac") to issue a
commitment for municipal bond guaranty insurance on the Bonds. The purchase of such insurance, if available,
and payment of all associated costs, including fees charged by rating companies, will be at the option of the Initial
Purchaser.
CONDITIONS OF SALE
TYPES OF BIDS AND INTEREST RATES: The Bonds will be sold in one block on an "all or none" basis at a
price of not less than 97% of the par value thereof, plus accrued interest from the date of the Bonds to the date of
delivery. Bidders are to name the rates of interest to be borne by the Bonds, provided that each interest rate bid
must be a multiple of 1/8th or 1/20th of 1%. All Bonds maturing within a single year must bear the same rate of
interest. The net effective interest rate on the Bonds may not exceed 7.03% as calculated pursuant to Article 717k-
2,Vernon's Texas Civil Statutes, as amended. No limitation will be imposed upon bidders as to the number of rates
which may be used, but the highest rate bid may not exceed the lowest rate bid by more than 2-1/2% in interest
rate. No bids involving supplemental interest payments will be considered. Each bid shall indicate the total and
net interest costs in dollars and the net effective interest rate determined therefrom, which shall be considered
informative only and not as a part of the bid.
BASIS OF AWARD: For the purpose of awarding sale of the Bonds, the total interest cost of each bid will be
computed by determining, at the rates specified therein, the total dollar value of all interest on the Bonds from the
date thereof to their respective maturities, and adding thereto the'dollar amount of the discount bid, if any, or
deducting therefrom the premium bid, if any. Subject to the District's right to reject any or all bids, sale of the
Bonds will be awarded to the bidder (the "Underwriter" or the "Initial Purchaser") whose bid, under the above
computation,produces the lowest net interest cost to the District. The Board reserves the right to reject any or all
bids. In the event of mathematical discrepancies between the interest rate(s)bid and the interest cost determined
therefrom, as both appear on the Official Bid Form, the bid will be governed solely by the interest rate(s) bid.
GOOD FAITH DEPOSIT: Each bid must be accompanied by a bank cashier's check payable to the order of
"Brazoria County Municipal Utility District No. 5" in the amount of $39,600.00, which is 2% of the principal
amount of the Bonds (the "Good Faith Deposit"). The check of the Underwriter will be considered as the Good
Faith Deposit and will be retained uncashed by the District pending the Underwriter's compliance with the terms
of the bid. In the event the Underwriter should fail or refuse to take up and pay for the Bonds in accordance with
such terms, then the Good Faith Deposit will be cashed and the proceeds accepted by the District as full and
complete liquidated damages. The Good Faith Deposit may accompany the bid or it may be submitted separately;
if submitted separately, it shall be made available to the District prior to the opening of the bids and shall be
accompanied by instructions from the bank on which it is drawn which authorize its use as the Good Faith Deposit
of bidders named in such instructions. The Good Faith Deposit of the Underwriter will be returned to the
Underwriter uncashed on the date of delivery of the Bonds. No interest will be credited on the Good Faith Deposit.
The checks accompanying all other bids will be returned immediately after the bids are opened and the award of
the sale of the Bonds has been made.
ii
FINANCIAL ADVISOR'S RIGHT TO BID: The District's Financial Advisor, Dain Rauscher Incorporated, has
requested the right to bid on the Bonds, and the District has given its consent to such request.
DELIVERY OF THE BONDS AND ACCOMPANYING DOCUMENTS
DELIVERY OF INITIAL BONDS: Delivery will be accomplished by the issuance of one Bond, exchangeable as
set forth below. Unless otherwise agreed with the Underwriter, delivery will be at the corporate trust office of the
Registrar in Houston,Texas. Payment for the Bonds must be made in immediately available funds for unconditional
credit to the District, or as otherwise directed by the District. If,,at the time set for closing, the Underwriter has
provided the Registrar five(5)business days written notice of its registration instructions,the Underwriter shall not
be required to pay for the Initial Bonds until the Registrar is able to deliver to the Underwriter definitive,registered
Bonds conforming to such registration instructions. The Underwriter will be given six(6)business days' notice of
the time fixed for delivery of the Bonds. It is anticipated that initial delivery can be made on or about March 16,
1998, and subject to the aforesaid notice, it is understood and agreed that the Underwriter will accept delivery and
make payment for the Initial Bonds by 10:00 A.M., Houston Time, on March 16, 1998, or thereafter on the date
the Initial Bonds are tendered for delivery, up to and.including April 16, 1998. . If for any_reason the District is
unable to make delivery on or before April 16,.1998, then the District immediately shall contact the Underwriter
and offer to allow the Underwriter to extend its offer for an additional thirty(30) days. If the Underwriter does
not elect to extend its offer within six(6) days thereafter, then the Good Faith Deposit will be returned, and both
the District and the Underwriter shall be relieved of any further obligation.
EXCHANGE ON DELIVERY DATE: Upon written request of the Initial Purchaser, delivered.to the Registrar
not less than five business days prior to the date fixed for delivery, the Registrar will, on the delivery date,
exchange the Bonds to be delivered by the District for Bonds registered in accordance with instructions contained
in such request, in integral multiples of $5,000, maturing as set out in the Official Notice of Sale and bearing
interest in accordance with the terms of the Initial Purchaser's bid.
CUSIP NUMBERS: It is anticipated that CUSIP identification numbers will be printed on the Bonds, but neither
the failure to print such number on any Bond nor any error with respect thereto shall constitute cause for a failure
or refusal by.the Underwriter to accept delivery of and pay for the Bonds in accordance with the terms of this
Official Notice of Sale. All expenses relating to the printing of CUSIP numbers on the Bonds shall be paid for by
the District;however, payment of the CUSIP Service Bureau charge for the assignment of the numbers shall be the
responsibility of the Underwriter.
CONDITIONS TO DELIVERY: The obligation to take up and pay for the Bonds is subject to the following
conditions: the issuance of an approving opinion of the Attorney General of Texas, the Underwriter's receipt of
the Bonds(if the Underwriter has provided the Paying Agent with registration instructions as provided above), the
Underwriter's receipt of the legal opinion of Bond Counsel and the no-litigation certificate, and the non-occurrence
of the events described below under the caption "NO MATERIAL ADVERSE CHANGE," all as described below.
Further, the Underwriter is not obligated to take up and pay for the Bonds at Initial Delivery if at any time after
the award of the Bonds and at or prior to Initial Delivery, the Congress of the United States shall have declared war
or a national emergency. In addition,if the District fails to comply with its obligations described under"OFFICIAL
STATEMENT" below, the Underwriter may terminate its contract to purchase the Bonds by delivering written
notice to the District within five (5) days thereafter.
CERTIFICATION REGARDING OFFERING..PRICE OF BONDS: In order to provide the District with
information required to enable it to comply with certain conditions of the Internal Revenue Code of 1986, as
amended(the "Code"), relating to the exclusion of interest on the Bonds from gross income for federal income tax
purposes, the Underwriter will be required to complete, execute and deliver to the District(on or before the date
of delivery of the Bonds) a certification regarding the "issue price" of the Bonds substantially in the form
accompanying this Official Notice of Sale. In the event the Underwriter will not reoffer the Bonds for sale or is
unable to sell a.substantial amount of the Bonds of any maturity by the date of delivery, such certificate may be
modified in a manner acceptable to the District. Each bidder, by submitting its bid, agrees to complete, execute
and deliver such a certificate by the date of delivery of the Bonds, if its bid is accepted by the District. It will be
the responsibility of the Underwriter to institute such syndicate reporting requirements, to make such investigation,
or otherwise to ascertain the facts necessary to enable it to make such certification with reasonable certainty. Any
questions concerning such certification should be directed to Bond Counsel.
iii
LEGAL OPINIONS: The District will furnish without cost to-the Underwriter a transcript of certain certified
proceedings held incident to the authorization and issuance of the Bonds,including a certified copy of the unqualified
approving legal opinion of the 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 validly issued under the Constitution and laws
of the State of Texas, payable from the proceeds of an annual ad-valorem tax levied, without limit as to rate'or
amount, upon all taxable property within the District, and, based-upon an examination of such transcript- of
proceedings, the approving legal opinion of Coats, Rose, Yale,Holm,Ryman&-Lee, P.C., Houston,Texas, Bond
Counsel, to a like effect and to the effect that the interest on the Bonds is excludable from gross income for federal
income tax purposes under existing law and that the Bonds are not private activity bonds.
The opinion of Bond Counsel is-expected to be reproduced on the back panel of the Bonds overa certification by
the facsimile signature of the Secretary of the Board of Directors attesting-that such reproduction is a true and
correct copy of the original opinion-. The failure to print such legal opinion on any Bond shall not constitute cause
for a failure or refusal by the Underwriter to accept delivery of and payment for the Bonds.
QUALIFIED TAX-EXEMPT OBLIGATIONS:-The Code requires a pro rata reduction in the interest expense
deduction of a financial institution to reflect such financial institution's investment in tax-exempt obligations acquired
after August 7, 1986. An exception to the foregoing provision is provided in the Code for "qualified tax-exempt
obligations,"which include tax-exempt obligations,such as the Bonds, (a)designated by the issuer as "qualified tax-
exempt obligations" and (b) issued by a political subdivision for which the aggregate amount of tax-exempt
obligations (not including private activity bonds other than qualified 501(c)(3) bonds) to be issued during the
calendar year is not expected to exceed$10,000,000.
The District will designate the Bonds as "qualified tax-exempt obligations" and has represented that the aggregate
amount of tax-exempt bonds (including the Bonds) issued by the District and entities subordinate--to-the-District.
during calendar year 1998 is not expected to exceed $10,000,000 and that the District and entities subordinate to
the District have not designated more than$10,000,000 in"qualified tax-exempt obligations" (including the Bonds)
during calendar-year 1998.
Notwithstanding this exception, fmancial institutions acquiring the bonds will be subject to a 20% disallowance of
allocable interest expense. - -
NO-LITIGATION CERTIFICATE: With the delivery of the Bonds,the President and Secretary of the Board will,
on behalf of the District; execute and furnish to the Initial Purchaser a certificate to the effect that no litigation of
any nature has been filed or is then pending against the District; of which the District has notice, to restrain the
issuance or delivery of the Bonds, or which would affect the provisions made for-their payment or security, or in
any manner questioning the validity of the Bonds. - -
NO MATERIAL ADVERSE CHANGE: The obligations of the Underwriter to take up-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 of the District(financial
or otherwise)subsequent to the date of sale from that set forth in the Preliminary Official Statement, as it may have
been finalized, supplemented or amended through the date of delivery. - - -
iv
OFFICIAL STATEMENT
To assist the Underwriter in complying with Rule 15c2=12 of the Securities and Exchange Commission("SEC"),
the District and the Underwriter contract and,agree, by the submission and acceptance of the winning bid; as
follows. -
FINAL OFFICIAL STATEMENT: The District has approved and authorized distribution of the accompanying ,
Preliminary Official Statement for dissemination to potential purchasers of the Bonds,but does not presently intend
to prepare any other,document or version thereof for such purpose, except as described below. Accordingly;;the
District intends the Preliminary Official Statement to be final:as of its date, within the meaning of=SEC Rule 15c2-
12(b)(1), except for information relating to the offering prices, interest rates, final debt service schedule, selling
compensation,identity of the.Underwriter and other similar information,terms and provisions to be specified in the
competitive bidding process. The Underwriter shall be responsible for promptly informing the District of the initial
offering yields of the Bonds. Thereafter, the District will complete and authorize distribution'of the Official ''
Statement identifying the Underwriter and containing such omitted information.'The District does not intend to
amend or supplement the Official Statement otherwise,except to take into account certain subsequent events, if any,
as described_below. By'delivering the final Official Statement or any amendment or supplement thereto in the
requested quantity to the Underwriter on or after the sale date, the District intends the same to be final as of such
date, within the meaning of SEC Rule 15c2-12(e)(3). Notwithstanding the foregoing,'the only representations
concerning the absence of material misstatements or omissions from the Official Statement which are being or which
will be made by the District are those described and contained in the Official Statement under the caption
"OFFICIAL STATEMENT- Certification as to Official Statement."
CHANGES TO OFFICIAL STATEMENT: If, subsequent to the date of the Official Statement,the District learns,
through the ordinary course of business and without undertaking any-investigation or'examination for such purposes,
or is notified by the Underwriter of any adverse event which causes the Official Statement to be materially
misleading; and unless the Underwriter elects to'terininate its obligation to purchase the Bonds, as described above -
-
under "DELIVERY OF THE BONDS AND ACCOMPANYING DOCUMENTS: -' -CONDITIONS TO .
DELIVERY," 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 do so will terminate when the District delivers the Bonds to the`Underwriter, unless the Underwriter
notifies the District on or Welke-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: -
DELIVERY OF OFFICIAL.STATEMENTS: :The District shall :furnish to the Underwriter (and,- to:--each.-
participating°Underwriter of the Bonds,. within the meaning of SEC Rule 15c2=12(a), designated`by the
Underwriter), within seven (7) business days after the sale date,.the aggregate number of Official Statements
specified in the winning bid. The District also shall,furnish to the Underwriter alike number of any supplements
or amendments approved and authorized for distribution by the District for dissemination to potential purchasers
of the Bonds, as well as such additional copies of the Official Statement or any such supplements or amendments
as the Underwriter may request;prior to the 90th day after the end of the underwriting period described in SEC Rule
15c2-12(e)(2). The District shall pay the expense of preparing the number of copies of the Official Statement
specified in the winning bid and an equal number of any supplements or amendments issued-.,On or before_the' ,
delivery date, but the Underwriter shall pay for all other copies of the Official Statement or any supplement,or
amendment thereto. ;
GENERAL CONSIDERATIONS
FUTURE REGISTRATION: The Bonds are transferable on the bond register kept by the Registrar upon surrender.
and reissuance. The Bonds are exchangeable for an equal principal amount of Bonds of the same maturity in any
authorized denomination upon surrender of the Bonds to be exchanged, but the District may requite payment of a
sum sufficient to cover any tax or governmental charge payable in connection therewith.
RECORD DATE: The record date ("Record Date") for the interest payable on any interest payment'date means_ -
the 15th calendar day of the month next preceding such interest payment date.
v ,
INVESTMENT CONSIDERATIONS: The Bonds involve certain investment risks as set forth in the Preliminary
Official Statement. Prospective purchasers should carefully review the entire Preliminary Official Statement before
making their investment decision. Particular attention should be given to the information set forth therein under
the caption "INVESTMENT CONSIDERATIONS."
RESERVATION OF RIGHTS: The District reserves the right to reject all bids or any bid not conforming with the
terms hereof and the right to waive any and all irregularities, except time of filing.
NOT AN OFFER TO SELL: This Official Notice of Sale does not alone constitute an offer to sell the Bonds but
is merely notice of sale of the Bonds. The invitation for bids on the Bonds is being made by means of this Official
Notice of Sale, the Preliminary Official Statement and the Official Bid Form.
SECURITIES REGISTRATION AND QUALIFICATION: 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
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 or regulations of any other jurisdiction. The District assumes no responsibility for registration or
qualification of the Bonds under the securities laws or regulations of any other jurisdiction in which the Bonds may
be offered, sold or otherwise transferred. This disclaimer of responsibility for registration or qualification for sale
or other disposition of the Bonds shall not be construed as an interpretation of any kind with regard to the
availability of any exemption from securities registration or qualification provisions in such other jurisdictions.
By submission of a bid,the Underwriter represents that the sale of the Bonds in states other than Texas will be made
only pursuant to exemptions from registration or qualification or, where necessary, the Underwriter will register
or qualify the Bonds in accordance with the securities laws or regulations of any jurisdiction which so requires.
The District agrees to cooperate,at the Underwriter's written request and expense, in registering or qualifying the
Bonds, or in obtaining an exemption from registration or qualification, in any jurisdiction where such action is
necessary, provided that the District shall not be required to file a general consent to service of process in any
jurisdiction.
CONTINUING DISCLOSURE OF INFORMATION: The District will agree in the Bond Resolution to provide
certain periodic information and notices of material events in accordance with Securities and Exchange Commission
Rule 15c2-12, as described in the Preliminary Official Statement under "CONTINUING DISCLOSURE OF
INFORMATION." The Underwriter's obligation to accept and pay for the Bonds is conditioned upon delivery to
the Underwriter or its agent of a certified copy of the Bond Resolution containing the agreement described under
such heading.
ADDITIONAL COPIES: Additional copies of the Official Notice of Sale, the Official Bid Form and the
Preliminary Official Statement may be obtained from Dain Rauscher Incorporated,. 1001 Fannin, Suite 400,
Houston, Texas 77002.
Ricki A. Willoughby
President, Board of Directors
Brazoria County Municipal Utility District No. 5
January 27, 1998
vi
CERTIFICATE OF UNDERWRITER
The undersigned hereby certifies as follows with respect to the sale of$1,980,000 Brazoria County Municipal
Utility District No. 5 Unlimited Tax Bonds, Series 1998 (the "Bonds"):
1. The undersigned is the underwriter or the manager of the syndicate of underwriters (the "Underwriter")
which has purchased the Bonds from Brazoria County Municipal Utility District No.5(the"District")at competitive
sale.
2. The first price for each maturity of the Bonds at which a substantial amount(at least ten percent) of such
maturity is sold to the public(expressed as a percentage of principal amount and exclusive of accrued interest)is
as set forth below:
Principal Principal
Amount Year of Issue Amount Year of Issue
Maturing Maturity Price Maturing Maturity Price
$ 65,000 1999 $ 95,000 2008
65,000 2000 100,000 2009
65,000 2001 105,000 2010
65,000 2002 115,000 2011
70,000 2003 125,000 2012
75,000 2004 245,000 2013
80,000 2005 260,000 2014
85,000 2006 275,000 2015
90,000 2007
3. The Underwriter has made a bona fide offering to the public of all of the Bonds of each maturity at the
issue prices to the public, set out above. Such issue prices have not been changed if part of the Bonds is later sold
at a different price. The issue prices set forth above are determined on the date the Bonds were purchased by the
Underwriters (the "sale date")based on the reasonable expectations regarding the initial public offering prices.
4. None of the issue prices described above exceeds the fair market value for such Bonds on the sale date.
5. The Underwriter[has] [has not]purchased bond insurance for the Bonds. The bond insurance, if any,has
been purchased from (the "Insurer") for a fee of $ (net of any
nonguarantee cost, e.g., rating agency fees). The amount of such fee is set forth in the Insurer's commitment and
does not include any payment for any direct or indirect services other than the transfer of credit risk, unless the
compensation for those other services is separately stated, reasonable, and excluded from such fee. Such fee does
not exceed a reasonable, arms-length charge for the transfer of credit risk. The present value of the debt service
savings expected to be realized as a result of such insurance exceeds the amount of the fee set forth above. For
this purpose,present value is computed using the yield on the Bonds,determined by taking into account the amount
of the fee set forth above, as the discount rate. No portion of the fee payable to the Insurer is refundable upon
redemption of any of the Bonds in an amount which would exceed the portion of such fee that had not been earned.
6. The term "public," as used herein, does not include bondhouses, brokers, dealers and similar persons or
organizations acting in the capacity of underwriters or wholesalers.
7. The undersigned understands that the statements made herein will be relied upon by the District in
complying with the conditions imposed by the Internal Revenue Code of 1986, as amended, on the exclusion of
interest on the Bonds from the gross income of their owners for federal income tax purposes.
EXECUTED AND DELIVERED this day of , 1998.
(Name of Underwriter of Manager)
By
Title
vii
OFFICIAL BID FORM
February 9, 1998
President and Board of Directors-
Brazoria County Municipal
Utility District No. 5
c/o Coats, Rose, Yale, Holm,
• Ryman & Lee, P.C.
1001 Fannin, Suite 800 _ _
Houston, Texas 77002. - _ -- -
Board Members:
We have read in detail the Official Notice of Sale and Preliminary Official Statement, which are hereby made
a part hereof, of Brazoria County Municipal Utility District No. 5 (the "District") relating to its $1,980,000
Unlimited Tax Bonds, Series 1998 (the "Bonds"). We realize that the Bonds involve certain investment risks
and that the ability of the District to service theBonds depends, in part, on the investment considerations
set forth in the Preliminary Official Statement. We have made such inspections and investigations as we
deem necessary relating to the investment quality of the Bonds. Accordingly,-we offer to purchase the Bonds
for a cash price of $ (which represents % of par value), plus
accrued interest to the date of delivery of the Bonds to us, provided such Bonds bear interest at the following
rates: -
Maturity Interest Maturity Interest _
(September 1) Amount Rate (September 1) Amount Rate
1999 $ 65,000 % 2008* $ 95,000 %
2000 65,000 % 2009* 100,000
2001 65,000- % 2010* 105,000
2002 65,000 % 2011* 115,000 %
2003 70,000 % 2012* 125,000 %
2004 75,000 % 2013* 245,000
2005 80,000 % 2014* 260,000 %
2006. 85,000 % 2015*. 275,000
2007* 90,000 %
* Subject to optional redemption beginning September 1, 2006, at a price of par plus accrued interest.
Our calculation (which is not a part of this bid) of the interest cost from the above is: - . -
Total Interest Cost from March 1, 1998 $
Plus: Dollar Amount of Discount - - - -
(or Less: Dollar Amount of Premium) $
NET INTEREST COST $
NET EFFECTIVE INTEREST RATE %
Y' The Initial Bonds shall be registered in the name of (syndicate manager). We will advise
the corporate trust office of Chase Bank of Texas, National Association, Houston, Texas, the Registrar, on
forms to be provided by the Registrar, of our registration instructidns at least five (5) business days prior
to the date set for Initial Delivery. __
We will require 250 copies of the final Official Statement for dissemination to potential purchasers of the
Bonds. By our submission of this bid, we agree to provide such copies of the final Official Statement and
of any amendments or supplements thereto in accordance with the Official Notice of Sale, and to undertake
the obligations of the Underwriter described therein, as contemplated by Rule 15c2-12 of the Securities and
Exchange Commission.
Cashier's Check No. , issued by Bank, , and
payable to your order in the amount of$39,600.00 (is attached hereto) (has been made available to you prior
to the opening of this bid) as a Good Faith Deposit for disposition in accordance with the terms and
conditions set forth in the Official Notice of Sale. Should we fail or refuse to make payment for the Bonds
in accordance with the terms and conditions stated in the Official Notice of Sale, this check shall be cashed
and the proceeds retained as complete liquidated damages against us. The Good Faith Deposit will be
returned to the Underwriter uncashed on the date of delivery of the Bonds.
We agree to accept delivery of and make payment for the Initial Bonds in immediately available funds at the
corporate trust office of Chase Bank of Texas, National Association, in Houston, Texas, not later than 10:00
A.M., Houston Time, on March 16, 1998, or thereafter on the date the Bonds are tendered for delivery
pursuant to the terms set forth in the Official Notice of Sale.
The undersigned agrees to complete, execute and deliver to the District, by the date of delivery of the Bonds,
a certificate relating to the "issue price" of the Bonds in the form accompanying the Official Notice of Sale,
with such changes thereto as may be acceptable to the District.
We hereby represent that sale of the Bonds in jurisdictions other than Texas will be made only pursuant to
exemptions from registration or qualification and that, where necessary, we will register or qualify the Bonds
in accordance with the securities laws and regulations of the jurisdictions in which the Bonds are offered or
sold.
Respectfully submitted,
By:
Authorized Representative
ACCEPTANCE CLAUSE
The above and foregoing bid is hereby in all things accepted by Brazoria County Municipal Utility District
No. 5, this day of February, 1998.
ATTEST:
Secretary, Board of Directors President, Board of Directors
Return of $39,600.00 Good Faith Deposit is hereby acknowledged:
Firm:
By:
Date:
(For your information you will find attached a list of the group of underwriters associated with us in this
proposal.) .
•
OFFICIAL BID FORM
February 9, 1998
President and Board of Directors
Brazoria County Municipal
Utility District No. 5
do Coats, Rose, Yale, Holm,
Ryman & Lee, P.C.
1001 Fannin, Suite 800
Houston, Texas 77002
Board Members:
We have read in detail the Official Notice of Sale and Preliminary Official Statement, which are hereby made
a part hereof, of Brazoria County Municipal Utility District No. 5 (the "District") relating to its $1,980,000
Unlimited Tax Bonds, Series 1998 (the "Bonds"). We realize that the Bonds involve certain investment risks
and that the ability of the District to service the Bonds depends, in part, on the investment considerations
set forth in the Preliminary Official Statement. We have made such inspections and investigations as we
deem necessary relating to the investment quality of the Bonds. Accordingly, we offer to purchase the Bonds
for a cash price of $ (which represents % of par value), plus
accrued interest to the date of delivery of the Bonds to us, provided such Bonds bear interest at the following
rates:
Maturity Interest Maturity Interest
(September 1) Amount Rate (September 1) Amount Rate
1999 $ 65,000 % 2008* $ 95,000
2000 65,000 % 2009* - 100,000
2001 65,000 % 2010* 105,000
2002 65,000 % 2011* 115,000
2003 70,000 % 2012* 125,000
2004 75,000 % 2013* 245,000
2005 80,000 % ' 2014* 260,000
2006 85,000 % ' 2015* ' 275,000
2007* 90,000
* Subject to optional redemption beginning September 1, 2006, at a price of par plus accrued interest.
Our calculation (which is not a part of this bid) of the interest cost from the above is:
Total Interest Cost from March 1, 1998 $
Plus: Dollar Amount of Discount
(or Less: Dollar Amount of Premium) $
NET INTEREST COST $
NET EFFECTIVE INTEREST RATE
The Initial Bonds shall be registered in the name of (syndicate manager). We will advise
the corporate trust office of Chase Bank of Texas, National Association, Houston, Texas, the Registrar, on
forms to be provided by the Registrar, of our registration instructions at least five (5) business days prior
to the date set for Initial Delivery.
We will require 250 copies of the final Official Statement for dissemination to potential purchasers of the
Bonds. By our submission of this bid, we agree to provide such copies of the final Official Statement and
of any amendments or supplements thereto in accordance with the Official Notice of Sale, and to undertake
the obligations of the Underwriter described therein, as contemplated by Rule 15c2-12 of the Securities and
Exchange Commission.
Cashier's Check No. , issued by Bank, , and
payable to your-order in the amount of$39,600.00 (is attached hereto) (has been made available to you prior
to the opening of this bid) as a Good Faith Deposit for disposition in accordance with the terms and
conditions set forth in the Official Notice of Sale. Should we fail or refuse to make payment for the Bonds
in accordance with the terms and conditions stated in the Official Notice of Sale, this check shall be cashed
and the proceeds retained as complete liquidated damages against us. The Good Faith Deposit will be
returned to the Underwriter uncashed on the date of delivery of the Bonds.
We agree to accept delivery of and make payment for the Initial Bonds in immediately available funds at the
corporate trust office of Chase Bank of Texas, National Association, in Houston, Texas, not later than 10:00
A.M., Houston Time, on March 16, 1998, or thereafter on the date the Bonds are tendered for delivery
pursuant to the terms set forth in the Official Notice of.Sale.
The undersigned agrees to complete, execute and deliver to the District, by the date of delivery of the Bonds,
a certificate relating to the "issue price" of the Bonds in the form accompanying the Official Notice of Sale,
with such changes thereto as may be acceptable to the District.
We hereby represent that sale of the Bonds in jurisdictions other than Texas will be made only pursuant to
exemptions from registration or qualification and that, where necessary, we will register or qualify the Bonds
in accordance with the securities laws and regulations .of the jurisdictions in which the Bonds are offered or
sold.
Respectfully submitted,
By:
Authorized Representative
ACCEPTANCE CLAUSE
The above and foregoing bid is hereby in all things accepted by Brazoria County Municipal Utility District
No. 5, this day of February, 1998.
ATTEST:
Secretary, Board of Directors President, Board of Directors
Return of $39,600.00 Good Faith Deposit is hereby acknowledged:
Firm:
By:
Date:
(For your information you will find attached a list of the group of underwriters associated with us in this
proposal.)
$1,980,000
BRAZORIA COUNTY MUNICIPAL UTILITY DISTRICT NO. 5
UNLIMITED TAX BONDS
SERIES 1998
BOND YEARS
Interest accrues from: March 1, 1998 Due: September 1
Accumulated
Year Amount Bond Years Bond Years
1999 $ 65,000 97.50 97.50
2000 65,000 162.50 260.00
2001 65,000 227.50 487.50
2002 65,000 292.50 780.00
2003 70,000 385.00 1,165.00
2004 75,000 487.50 1,652.50
2005 80,000 600.00 2,252.50
2006 85,000 722.50 2,975.00
2007 90,000 855.00 3,830.00
2008 95,000 997.50 4,827.50
2009 100,000 1,150.00 5,977.50
2010 105,000 1,312.50 7,290.00
2011 115,000 1,552.50 8,842.50
2012 125,000 1,812.50 10,655.00
2013 245,000 3,797.50 14,452.50
2014 260,000 4,290.00 18,742.50
2015 275,000 4,812.50 23,555.00
Total Bond Years: 23,555.00
Average Maturity: 11.896465 years
--r
Resolution No. R1998-04
Exhibit "A"
BRAZORIA COUNTY MUNICIPAL
UTILITY DISTRICT NO. 5
(Brazoria County, Texas)
OFFICIAL STATEMENT
DATED: January 27, 1998
ti $1,980,000
UNLIMITED TAX BONDS
SERIES 1998
SELLING: 12:30 P.M., HOUSTON TIME
MONDAY, FEBRUARY 9, 1998
HOUSTON, TEXAS
DAIN
ROSCHER
•
INVESTMENT SERVICES
INVESTMENT BANKING
MEMSEA NYSEISIIC
Financial Advisor to the District
Management of the District
The District is govemed by the Board of Directors(the "Board"),consisting of five directors,who have control over
and management supervision of all affairs of the District. Four of the Directors reside in the District. The directors
serve four-year staggered terms. Elections are held in even numbered years on the first Saturday m May. The
current members and officers of the Board, along with their occupations, are listed below:
Term Expires
Name Title ' Occupation " in May
Ricki A. Willoughby. President : . Senior'Group 1998
'Account Representative
Jack T. Hollis .. Vice President Youth Development 2000
•
Professional
David Denton Assistant Vice President and
Assistant Secretary/Treasurer Engineer 1998
Kelly'C. Flanagan Secretary/Treasurer- ' . _ Computer Support ,. - 1998
•'Specialist'- Compaq
Phil Nedbalek
Assistant Secretary/Treasurer Assistant Operations Manager 2000
Radio Broadcasting
Although the District does not have a general manager or any other full-tithe employees; it has contracted for utility
system operating, bookkeeping, tax'assessing and collecting,auditing,;engineering; financial advisory and legal
services as-follows: . '
Tax Assessor/Collector
•
The District has engaged Wallace P. Hutchinson, Friendswood, Texas, as the District's Tax Assessor/Collector.
According to Mr. Hutchinson, he presently serves 49 taxing units as tax assessor/collector. ' The 'Tax
Assessor/Collector applies the District's tax levy to tax rolls prepared by the Brazoria County Appraisal District
and bills and collects such levy.
. - _ . - MI
Bookkeeper _ f i
The District's bookkeeper is District Data Services, Inc., which acts as bookkeeper for approximately y 90 Utility
Operator
44
ECO Resources, Inc. is the general operator of the System. According to ECO Resources, Inc., it is curre
engaged as utility system operator for 130 utility districts. ntly 4;
Auditor
The District has employed McCall, Gibson&Company, PLLC, Certified Public Accountants, to audit its financial
statements for the year ending September 30, 1997. A copy of the District's audit for the fiscal year ended
September 30, 1997, is included as "APPENDIX B" to this Official Statement.
2'0
Engineer : .
The consulting engineer-for the District connection with the design-and-construction,of,the facilities for which
the,Bonds are being sold to reimburse the Developer is Ferro-Saylors, Inc:,-(the.;'Engineer"): The Engineer-has
also been employed by the Developer in connection with certain planning activities'arid the design of certain streets
and related_'improvements.within the District.
The-District has engaged'Dain Rauscher Incorporated as financial advisor(the "Financial Advisor")to the District.
The fees paid to the Financial'Advisor-for services-rendered in connection with the issuance of the Bonds are based
on-a-percentage of the Bonds actually issued and'sold.Therefore,,the payment of such fees'is contingent upon the
sale-and-delivery of the Bonds: .. '
The District has engaged'Coats;'Rose,=Yale; Holm; 'Ryman'&-Lee;.P.C., Houston, Texas, as general counsel"to
the District and as bond counsel.('Bond Counsel")°in connection withMe issuance of the Bonds.The fees to be paid
Bond Counsel in connection with the issuance of the Bonds are based on a percentage of the Bonds actually issued
and sold.Therefore, the payment.ofsuch-fees iis contingent upon.tlie'sale and delivery of the Bonds. See "LEGAL
MATTERS." _
,_ . .._. _- .. DEVELOPERS
Role of the Developers z = .• .. . - -
In general,the activities of a developer in a-municipal utilitydistrictsuch as the District include purchasing the land
within the-District,designing the subdivision;designing the utilities and streets to be-constructed_in the subdivision,.
designing any community facilities to''be built;'defining'a marketing;program and'building schedule; 'securing
necessary'governmental approvals and,permits for development;~arranging for the construction of roads;and-the
installation of utilities(including,in some cases, water;-wastewater,;and drainage facilities pursuant to'the rules of
the TNRCC; as well as gas, telephone;'and-electric,service)and selling improved lots and commercial reserves to
builders;developers,-lit other'third parties'.'In tnost instances; the developer will be-required.to pay up to thirty
percent of the cost of constructing certain of the water, wastewater and drainage facilities-in a utility'district
pursuant to the rules of the TNRCC. The relative success or failure of a developer to perform such activities in
development of the property within a utility district-may have a'profound effect on the security of the unlimited tax
bonds issued by a district. A developer is generally under no obligation to a district to develop the property which
it owns'in a district: Furthermore, there is no-restriction:on a developer's right to sell any or all of the land which
it owns.within-a district.;'In addition,'a'developer is ordinarily amajor taxpayer'within a:municipal utility district
during the development-phase of the property.. _ ° - -+ - -
Description of the Developers `
The development-and home construction activity which has occurred to date in'the District is described'below:under
the caption "DEVELOPMENT." Such'developinent:and home construction activity includes (i).the completion of
the development of 1,225 single-family residential lots, (ii) 125 additional single-family residential lots which are
currently under development,,and (iii)the construction of 1,170 homes; including 57 homes under construction.
21
Resolution No. R1998-04
Exhibit "A"
BRAZORIA COUNTY MUNICIPAL
UTILITY DISTRICT NO. 5
(Brazoria County, Texas)
OFFICIAL STATEMENT
DATED: January 27, 1998
$1,980,000
UNLIMITED TAX BONDS
SERIES 1998
SELLING: 12:30 P.M., HOUSTON TIME
MONDAY, FEBRUARY 9, 1998
HOUSTON, TEXAS
DAIN
R(USCHER
INVESTMENT SERVICES
INVESTMENT BANKING
MEMEEA NTSE/Si?C
Financial Advisor to the District
a) PRELIMINARY OFFICIAL STATEMENT DATED JANUARY 27, 1998
s D
o IN THE OPINION OF BOND COUNSEL, INTEREST ON THE BONDS IS EXCLUDABLE FROM GROSS INCOME FOR FEDERAL
a cn 3 INCOME TAX PURPOSES UNDER EXISTING LAW AND THE BONDS ARE NOT PRIVATE ACTIVITY BONDS.SEE "LEGAL MATTERS"
v $_ FOR A DISCUSSION OF BOND COUNSEL'S OPINIONS, INCLUDING A DESCRIPTION OF ALTERNATIVE MINIMUM TAX CONSE-
m=y QUENCES FOR CORPORATIONS.
o8-0 crs
The District has designated the Bonds as "qualified tax-exempt obligations."See "LEGAL MATTERS—Qualied Tax-Exempt Obligations—
ai ap Purchase of the Bonds by Financial Institutions."
.n i o
7 0 3 NEW ISSUE
a c co
0 CO y $1,980,000
0 o BRAZORIA COUNTY MUNICIPAL UTILITY DISTRICT NO. 5
co (A Political Subdivision of the State of Texas, located within Brazoria County)
E oo
UNLIMITED TAX BONDS, SERIES 1998
y o = The $1,980,000 Brazoria County Municipal Utility District No. 5 Unlimited Tax Bonds, Series 1998 (the "Bonds").are
.n T�o obligations of Brazoria County Municipal Utility District No.5 (the"District") and are not obligations of the State of Texas,Brazoria
Z. o g County,Texas,the City of Pearland,Texas,or any entity other than the District.Neither the faith and credit nor the taxing power of
t the State of Texas,Brazoria County,Texas,the City of Pearland,Texas,or any entity other than the District is pledged to the payment
Eo cr of the principal of or interest on the Bonds.
a ccc Dated: March 1, 1998 Due: September 1, as shown below
a) o
-,..Ti Principal of the Bonds is payable at the principal payment office of Chase Bank of Texas,National Association,currentlyin Dallas,
aa,, : P PY P P PY
a i CO•CO Texas, the paying agent/registrar (the "Registrar"). Interest on the Bonds will be payable by check or draft, dated as of the interest
(n co payment date,and mailed by the Registrar to registered owners as shown on the records of the Registrar (the"Registered Owner") at
t'c o the close of business on the 15th calendar day of the month next preceding each interest payment date (the"Record Date"),or by such
. E $ other customary banking arrangements as may be agreed upon by the Registrar and the Registered Owner at the risk and expense of the
E 5_ Registered Owner.Interest is payable September 1, 1998,and each March 1 and September 1 thereafter until the earlier of maturity or
c co 5 redemption. The Bonds are fully registered in denominations of$5,000 or any integral multiple thereof.
N ffl
E.0 cs
b-0 = MATURITY SCHEDULE
L
d 1 (Due September 1)
E o Initial Initial
E-- Principal Interest Reoffering Principal Interest Reoffering
o a Amount Maturity Rate Yield(a) Amount Maturity Rate Yield(a)
c) ca
o s ` $ 65,000 1999 % % $ 90,000 2007(b) % %
15 0 65,000 2000 95,000 2008(b)
a)713 c 65,000 2001 100,000 2009(b)
=N o 65,000 2002 105,000 2010(b)
70,000 2003 115,000 2011(b)
al c o 75,000 • 2004 125,000 2012(b)
c-' co80,000 2005 245,000 2013(b)
E d 85,000 2006 260,000 2014(b)
t 2 c 275,000 2015(b)
.0.0
•c—g• c N (a) Information with respect to the initial reoffering yields of the Bonds is the responsibility of the Underwriter. Initial reoffering yields represent the
cat initial offering price,which may be changed for subsequent purchasers.
8 c- (b) The Bonds maturing on or after September 1,2007,shall be subject to redemption and payment at the option of the District,in whole or in part,on
cc m 3 September 1,2006,or on any date thereafter,at par plus accrued interest to the date fixed for redemption.
m g.
c_
€o o If less than all of the Bonds are redeemed at any time, the particular Bonds to be redeemed shall be selected by the District in
o .0 integral multiples of$5,000 within any one maturity. The registered owner of any Bond, all or a portion of which has been called for
redemption,shall be required to present same to the Registrar for payment of the redemption price on the portion of the Bond so called
1-0s c.= for redemption and issuance of a new Bond in the principal amount equal to the portion of such Bond not redeemed.
Y g The Bonds constitute the sixth series of unlimited tax bonds issued by the District for the purpose of acquiring and constructing a
C•�c waterworks,wastewater and storm drainage system (the"System") to serve the District,and to refund certain of such bonds issued for
1 E•c m such purpose,$7,605,000 in principal amount of which are outstanding as of the date of this Official Statement.After issuance of the
y E Bonds,the District's total direct bonded indebtedness,included in the Bonds,will be$9,585,000.Voters in the District have authorized
1--c=
co e, d a total of$23,775,000 principal amount of bonds for the purpose of acquiring and constructing the System,of which$17,670,000 may
7.E "' be used and for refunding purposes. Following the issuance of the Bonds, $7,605,000 principal amount of unlimited tax bonds
0 B d authorized by the District's voters will remain unissued.See"THE BONDS—Issuance of Additional Debt."The Bonds,when issued,
constitute valid and legally binding obligations of the District,payable from the proceeds of a continuing,direct annual ad valorem tax,
1 6 c without legal limitation as to rate or amount,levied against all taxable property within the District.•See "THE BONDS—Source of
c e a) Payment."
i E076
(I) u)
a`.c c The Bonds are offered subject to prior sale,when,as and if issued by the District and accepted by the Underwriter,subject to the
W N m approval of the Attorney General of Texas and of Coats,Rose,Yale,Holm,Ryman&Lee,P.C.,Bond Counsel.Delivery of the Bonds
.0
n is expected on or about March 16, 1998.
TABLE OF CONTENTS
Page No.
USE OF INFORMATION IN OFFICIAL STATEMENT 3
SALE AND DISTRIBUTION OF THE BONDS 3
Award of the Bonds 3
Marketability 3
Securities Laws 4
Municipal Bond Rating 4
OFFICIAL STATEMENT SUMMARY 5
THE BONDS 12
General 12
Assignments, Transfers and Exchanges 12
Redemption of the Bonds 12
Replacement of Registrar 13
Authority for Issuance 13
Outstanding Bonds 13
Source of Payment 13
Issuance of Additional Debt 14
No Arbitrage 14
Annexation and Consolidation 14
Registered Owners' Remedies 15
Bankruptcy Limitation to Registered Owners' Rights 15
Legal Investment and Eligibility to Secure Public Funds in Texas 16
Defeasance 16
Use and Distribution of Bond Proceeds 16
THE DISTRICT 19
Authority 19
Description 19
Management of the District 20
Tax Assessor/Collector 20
Bookkeeper 20
Operator 20
Auditor 20
Engineer 21
Financial Advisor 21
Attorney 21
DEVELOPERS 21
Role of the Developers 21
Description of the Developers 21
DEVELOPMENT 23
BUILDERS 24
FUTURE DEVELOPMENT 24
AERIAL PHOTOGRAPH OF THE DISTRICT 25
PHOTOGRAPHS TAKEN WITHIN THE DISTRICT 26
PHOTOGRAPHS TAKEN WITHIN THE DISTRICT 27
DISTRICT DEBT 28
Debt Service Requirement Schedule 28
Bonded Indebtedness 29
Estimated Direct and Overlapping Debt Statement 3,1
Debt Ratios 31
TAX DATA 32
General 32
Tax Rate Limitation 32
Maintenance Tax 32
Historical Values and Tax Collection History 32
Analysis of Tax Base 33
Principal 1997 Taxpayers 34
Exemptions 34
Tax Rate Calculations 35
Estimated Overlapping Taxes 35
TAXING PROCEDURES 36
Authority to Levy Taxes 36
Property Tax Code and County-wide Appraisal District 36
Property Subject to Taxation by the District 36
Tax.Abatement 37
Valuation of Property for Taxation 37
District.and Taxpayer Remedies 38
Levy and Collection of Taxes - 38
District's Rights in the Event of Tax Delinquencies 38
THE SYSTEM 39
Regulation 39
Description 39
INVESTMENT.CONSIDERATIONS 41
General 41
Factors.Affecting Taxable Values and Tax Payments 41
Principal Land Owner's Obligations to the District 41
Maximum Impact on District Tax Rates 42
Tax Collection Limitations 43
Registered Owners' Remedies and Bankruptcy 43
The Effect of the Financial Institutions Act of 1989 on Tax Collections of the District 43
Marketability . . 44
Future Debt 44
Competitive.Nature of Houston Residential Housing Market 44
Continuing Compliance with Certain Covenants 44
Approval of the Bonds 44
LEGAL MATTERS 45
. _ Legal Opinions . 45
No-Litigation Certificate 45
Tax Exemption _ 45
Tax Accounting Treatment of Discount and Premium on Certain Bonds 47
QUALIFIED TAX-EXEMPT OBLIGATIONS 48
OFFICIAL STATEMENT 48
General 48
Experts 48
Certification as to Official Statement 49
Updating of Official Statement 49
. Official Statement."Deemed Final" 49
CONTINUING DISCLOSURE OF INFORMATION _ 49
Annual Reports 50
Material Event Notices 50
Availability of Information From NRMSIRs and SID 50
Limitations and Amendments 51
Compliance With Prior Undertakings 51
APPENDIX A - LOCATION MAP
APPENDIX B - FINANCIAL STATEMENTS OF THE DISTRICT
2
USE OF INFORMATION IN OFFICIAL STATEMENT
No dealer, broker, salesman or other person-'has been authorized -to give-any-information or to make any.
representations other than those contained inthis Official Statement and, if given or made, such other information
or representations must not be'reliedupon as.having.been authorized by-the District.
This OfficialStatement does not constitute,and.is.notauthorized by the.District forme in connection with,'an offer
to sell or the solicitation of any offer to buy in any state=in which such offer'or- is not authorized orin
which the person-making such offer or solicitation:is not.qualified to do so or to any person to'wiiom-it:is unlawful.
to make such offer or solicitation.
M1 of the summaries of the statutes,orders, resolutions,contracts, audits, and engineering and other related reports
set forth in.the`Official.Statement.aremade subject to all of the provisions•of-such_documents. These summaries
do not purport to be complete-statements-of such provisions, and reference is made to such documents, copies of
which are available from the Financial Advisor.
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 that they will be realized. Any information and expressions of opinion herein contained are subject
to change without notice, and neither the delivery of this Official Statement nor any sale made hereunder shall,
under any circumstances, create any implication that there has been no change in the affairs of the District or other
matters described herein since the date hereof. However, the District has agreed to keep this Official Statement
current by amendment or sticker to reflect material changes in the affairs of the District and, to the extent that
information actually comes to its attention, the other matters described in the Official Statement, until delivery of
the Bonds to the Initial Purchaser of the Bonds(as hereinafter defined). See "OFFICIAL STATEMENT-Updating
of Official Statement."All changes in the affairs of the District and other matters described in the Official Statement
subsequent to the delivery of the Bonds and all information with respect to the resale of the Bonds is the
responsibility of the Initial Purchaser.
SALE AND DISTRIBUTION OF THE BONDS
Award of the Bonds
After requesting competitive bids for the Bonds, the District has accepted the lowest bid, which was tendered by
a syndicate managed by (collectively referred to herein
as the "Underwriter" or the "Initial Purchaser") to purchase the Bonds bearing the interest rates shown under
"MATURITY SCHEDULE" at a price of % of the par value thereof plus accrued interest to the date of
delivery, which resulted in a net effective interest rate of % as calculated pursuant to Article 717k-2,
Vemon's Texas Civil Statutes, as amended.
Marketability
The District has no control over the reoffering yields or prices of the Bonds or over trading of the Bonds in the
secondary market. Moreover, there is no assurance that a secondary market will be made in the Bonds. If there is
a secondary market, the difference between the bid and asked 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.
I i
3
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 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 acts of any other jurisdictions.The District assumes
no responsibility for registration or qualification of the Bonds under the securities laws of any jurisdiction in which
the Bonds may be offered, sold, or otherwise transferred. This disclaimer of responsibility for registration or
qualification for sale or other disposition of the Bonds should not be construed as an interpretation of any kind with
regard to the availability of any exemption from securities registration or qualification provisions.
Municipal Bond Rating
The District has made no application for a municipal bond rating of the Bonds, nor is it expected that the District
would have been successful in receiving an investment grade rating had such an application been made.
4
OFFICIAL STATEMENT SUMMARY
The following material is a summary of certain information contained herein and is qualified in its entirety by the
detailed information and financial statements appearing elsewhere in this Official Statement.
THE BONDS
The Issuer Brazoria County Municipal Utility District No. 5 (the "District"),
a political subdivision of the State of Texas, is located in Brazoria
County, Texas. See "THE DISTRICT."
The Issue Brazoria County Municipal Utility District No. 5 Unlimited Tax
Bonds, Series 1998, in the aggregate principal amount ofi
$1,980,000. Interest accrues from March 1, 1998, and is payable
September 1, 1998, and each March 1 and September 1 thereafter
until the`earlier of stated maturity or redemption. The Bonds
mature serially on September 1, in each year 1999 through 20151,
both inclusive. The Bonds maturing on or after September 11
2007,are subject to redemption,in whole or in part,on September
1, 2006;or on any date thereafter, at par plus accrued-interest,to
the date fixed for redemption. See "THE BONDS-General."
Source of Payment The. Bonds are payable from a continuing, direct annual ad
valorem.tax, without legal limitation as to rate or amount, levied
against all taxable property within the District. See"THE BONDS
- Source of Payment."
Principal Use of Proceeds . Proceeds of the sale of the Bonds will be used to(i)reimburse the
Developers(defined below under the caption"Developers")for the
costs relating to the construction of water distribution,wastewater
collection, and storm drainage facilities (the "System") to serve
306 single-family residential lots platted as Southdown,Sections 6
and 7 and Crystal Lake, Sections 1 and 2;(ii)finance the Districts
share of the cost of expansion of a joint wastewater treatment plant
and a remote water well and booster pumps; (iii)pay engineering
costs associated with the design and construction of such facilities;-
(iv)pay interest on funds advanced on the District's behalf by tie
Developers;`(v)capitalize an amount equal to one year in interest
payments on the Bonds; and (vi) pay for administrative az d
issuance costs, legal fees, fiscal agent's fees, a fee to the Texas
Natural Resource Conservation Commission,and certain fmancidg
costs related to the issuance of the Bonds. See "THE BONDS -
Use and Distribution of Bond Proceeds."
Payment Record The District has previously issued $1,735,000 Unlimited Tax
Bonds, Series 1982 (the "Series 1982 Bonds"), $2,750,000
Unlimited Tax Bonds, Series 1983 (the "Series 1983 Bonds"),
$1,620,000 Unlimited Tax Bonds, Series 1984 Bonds(the "Series
1984 Bonds")and$2,020,000 Unlimited Tax Bonds, Series 1995
(the"Series 1995 Bonds")to finance the acquisition or construction
of components of the System. In 1992 the District issued
$6,065,000 Unlimited Tax Refunding Bonds, Series 1992 (the
"Series 1992 Refunding Bonds")to refund certain maturities of the
Series 1982, Series 1983 and Series 1984 Bonds. Collective
5
reference is made in this Official Statement to the Series 1982,
Series 1983, Series 1984, Series 1995 and Series 1992 Refunding
Bonds as the "Outstanding Bonds." As of the date of this Official
Statement, none of the Series 1982 Bonds and Series 1983 Bonds,
$60,000 of the Series 1984 Bonds, all $2,020,000 of the Series
1995 Bonds and $5,525,000 of the Series. 1992 Refunding Bonds
are outstanding. As of the date of this Official Statement, the
District's total direct bonded indebtedness, consisting of the
maturities of the Outstanding Bonds not previously paid by the •
_ District, plus the Bonds, is $9,585,000. The District will
capitalize an amount equal to one year in interest payments on the
Bonds from the proceeds of the sale of the Bonds, and will deposit
such sum in the District's Debt Service Fund to make such
payments. The District has timely made all payments due to date
on the Outstanding Bonds. See "THE BONDS - Outstanding
Bonds."
Municipal Bond Rating . . . . .. . ... . . . The District does not intend to make application to a rating service
for a-municipal bond rating of the Bonds, nor is it expected that
the District would have been successful in obtaining an investment
grade rating had such application been made. See "SALE AND
' DISTRIBUTION OF THE BONDS - Municipal Bond Rating."
Qualified Tax-Exempt
Obligations In the Bond Resolution,the District states that it has designated the
Bonds as "qualified tax-exempt obligations." The District
represents that it has or will take such action as it deems necessary
for the Bonds to constitute"qualified tax-exempt obligations." See
"LEGAL MATTERS - Qualified Tax-Exempt Obligations -
Purchase of the Bonds by Financial Institutions."
THE DISTRICT
Description Brazoria County Municipal Utility District No. 5, of Brazoria
County, Texas, a political subdivision of the State of Texas, was
created by the Texas Water Commission, now the Texas Natural
Resource Conservation Commission, on March 18, 1981. The
District contains approximately 570.5 acres of land. The District
is located approximately 13 miles south of the central business
district of Houston,Texas, and approximately seven miles south of
the intersection of Interstate Highway 610 and State Highway 288.
State Highway 288 traverses the western portion of the.District.
Approximately 19 District acres lie to the west of SH 288, and
approximately 551.5 District acres lie to the east of SH 288. The
District is located entirely within Brazoria County and the
extraterritorial jurisdiction of the City of Pearland. See ."THE
DISTRICT - Description" and "APPENDIX A - LOCATION
MAP."
•
Developers ' . . . . . . . . . . .:. . . . The development and home construction activity which has
occurred to. date in the District is described below under the
caption"Development." Such development and home construction
activity.includes (i) the completion of the development of 1,225
single-family residential lots, (ii) 125 additional single-family
residential:lots which are currently under development,and(iii)the
construction of 1,170 homes, including 57 homes under
construction. ,
Lennar Homes; of Texas, Inc., a wholly-owned subsidiary of
Lennar:.Corporation (collectively, "Lennar"), a publicly traded
• - corporations-whose stock is listed on the New York Stock
Exchange,,on March 9, 1994,purchased 28 fully developed single-
- - : family,residential lots plus approximately 214 acres of undeveloped
• _. land located in the District from SLS Enterprises("SLS"). Lennar
subsequently,: purchased 4 additional lots from SLS. See
"DEVELOPERS" and "TAX DATA - Principal 1997 Property
- ... Owners.".,, ,:On December 31, 1995, Lennar purchased the
residential assets of Friendswood Development Company, an
Arizona -corporation, and certain other assets, including
approximately 1,980 acres of land and approximately 790 single-
- family residential lots from Exxon Corporation. Friendswood •
Development.Company was at the time of such purchase the
wholly-owned land development subsidiary of Exxon Corporation.
Lennar'::subsequently incorporated Friendswood Development
• Company, a Texas corporation ("Friendswood"). Lennar's
• activities include home building,real estate investments,residential
_ :and commercial developments and financial services operations
_.: throughout the United States. Lennar has appointed Friendswood
as developer of,the land owned by Lennar located in the District
and has granted to Friendswood a power of attorney to give and
• • - grant power and authority to Friendswood to act for and on behalf
:of Lennar in connection with the development, management,
. • operation, marketing and sale of such property. Lennar and/or
Friendswood have developed Southdown, Sections 5 through 7
(298 single-family residential lots on approximately 65 acres) and
,, have initiated:the development of Southdown, Section 8 (91 single-
- � family residential lots on approximately 18 acres) located in the
= District,and Lennar is currently constructing homes in the District
as described- below under the captions "Development" and
- •. ' "Builders."
2621 Joanel, :Ltd. ("JL"), a Texas limited partnership, the
managing' general partner of which is JNT, Inc., a Texas
corporation whose principal shareholder is Mr. John Taylor of
- - • - Houston,,Texas,has developed Crystal Lake, Section 1, consisting
of 103 fully developed single-family residential lots on
approximately 49 acres located in the District,and has initiated the
development_ .of Crystal Lake, Section 2, consisting of
• approximately 21 acres subdivided into 34 single-family residential
lots as-described below under the caption "Development." . The
' other general partner of JL is the Traylor Corporation, a Texas
corporation whose principal shareholder is Mr. Travis Traylor of
7
Houston, Texas. JL is selling the lots located in Crystal Lake,
Section 1 to Weekley Homes, Inc. and Morrison Homes, which
are currently constructing homes on such lots as described below
under the caption"Builders." Lennar through Friendswood and JL
are sometimes together referred to in this Official Statement as the
Developers (the "Developers"). See "DEVELOPMENT" and
"BUILDERS."
Development As of January 15, 1998, the District contained 1,170 homes,
including 57 homes under construction. According to the District's
. Engineer, the development of approximately 298 of the District's
approximate 570.5 acres is complete. Such acres have been
developed into (i) 1,225 fully developed single-family residential
lots (Southdown, Sections 1 through 3, 5 through 7, and Crystal
Lake, Section 1) plus (ii) two reserves aggregating approximately
2 acres. As described above, Southdown,Sections 5 through 7 are
developments of Lennar through Friendswood, and Crystal Lake,
Section 1 is a development of JL. Lennar through Friendswood
has also initiated the development of Southdown, Section 8,
consisting of approximately 18 acres subdivided into 91 single-
family residential lots, and anticipates the completion of the
development thereof, including underground water distribution,
wastewater collection and storm drainage facilities and street
paving, by approximately March 15, 1998. In addition, JL has
initiated the development of Crystal Lake, Section 2, consisting of
approximately 21 acres subdivided into 34 single-family residential
lots, and anticipates the completion of the development thereof,
including underground water distribution, wastewater collection
• and storm drainage facilities and street paving, by approximately
March.31, 1998. The District financed the cost of acquiring and
constructing. the water supply and distribution, wastewater
collection and treatment,and storm drainage system(the"System")
to serve the 953 fully developed single-family residential lots
located within Southdown, Sections 1 through 3 and 5 with
proceeds of the Outstanding Bonds, and the District will acquire
the water distribution, wastewater collection and storm sewer
facilities which have been constructed to serve the 272 fully
developed single-family residential lots located within Southdown,
Sections 6 and 7 and Crystal Lake, Section 1, plus such facilities
to serve the future 34 lots being developed as Crystal Lake,
Section 2 with a portion of the proceeds of the sale of the Bonds.
See "THE SYSTEM." In addition to the Southdown and Crystal
Lake sections described above, there are approximately 83
currently undeveloped acres of land located within the District
available for future development. Such undeveloped acres are
owned by Lennar. In addition, approximately 150 District acres
are contained within street and drainage rights-of-way, detention
ponds, District plant sites, or are otherwise not available for
development. Although Lennar's current plans for the
approximately 83 undeveloped acres, as reported by Lennar,
include the development of approximately 70 acres thereof into
single-family residential lots when Lennar's current lot inventory
is depleted,Lennar has no obligation to the District to develop any
8
of such land in any particular manner or at all,-and,may sell the
land and lots which it owns in the District at its sole,discretion.
Therefore, the District cannot represent when, or whether, any of
such currently undeveloped acres might be developed. Lennar, as
reported by Lennar, expects that the remaining approximately 13
currently undeveloped acres .will be used in the future for
commercial purposes. See ' "FUTURE DEVELOPMENT,"
"INVESTMENT CONSIDERATIONS - Principal Land Owners'
Obligations to the District," and "DEVELOPMENT."
Builders Three homebuilding companies (collectively, the "Builders") are
currently constructing homes within the District. See
"BUILDERS" for descriptions of such Builders and their current
home construction activity in the District. According to Lennar,
homes which it is constructing in Southdown, Section 7 range in
size from approximately 1,800 to'2,400 square feet of living area
and in sales price from approximately$105,000 to $130,000.
JL has contracted to sell all of the lots which it has not yet
conveyed located in Crystal Lake, Section 1 and all lots located in
future Crystal Lake, Section 2 to Weekley Homes Inc. and to
Morrison Homes, under separate contracts which require each
Builder to.purchase lots according to a take-down schedule.
According to JL, such Builders are currently constructing homes
in Crystal Lake, Section 1 located in the District which range in
• size from approximately 2,400 to 3,600 square feet of living area
and in sales price from approximately $170,000 to $220,000.
INVESTMENT CONSIDERATIONS
THE BONDS ARE SUBJECT TO SPECIAL INVESTMENT CONSIDERATIONS AS SET FORTH IN THIS
OFFICIAL STATEMENT. PROSPECTIVE PURCHASERS SHOULD'CAREFULLY REVIEW THE ENTIRE
OFFICIAL STATEMENT BEFORE MAKING THEIR INVESTMENT. DECISIONS, ESPECIALLY THE
PORTION OF THE OFFICIAL STATEMENT ENTITLED "INVESTMENT CONSIDERATIONS."
•
SELECTED FINANCIAL INFORMATION
(UNAUDITED)
1997 Assessed Valuation $78,484,590(a)
(100% of estimated market value as of January 1, 1997)
See "TAX DATA" and "TAXING PROCEDURES."
Estimated Valuation at November 1, 1997
(100% of estimated market value as of November 1, 1997)
See "TAX DATA" and "TAXING PROCEDURES." $91,876,840(b)
Direct Debt
Outstanding Bonds $ 7,605,000
The Bonds 1,980,000
$ 9,585,000(c)
Estimated Overlapping Debt $ 6,545,975(c)
Total Direct and Estimated Overlapping Debt $16,130,975(d)
Direct Debt Ratios
: as a percentage of 1997 Assessed Valuation 12.21%
: as a percentage of Estimated Valuation at November 1, 1997 10.43%
Direct and Estimated Overlapping Debt Ratios
: as a percentage of 1997 Assessed Valuation 20.55%
: as a percentage of Estimated Valuation at November 1, 1997 17.56%
Debt Service Fund upon delivery of the Bonds $ 1,088,836(e)
1997 Tax Rate per $100 of Assessed Valuation $1.12(d)
Average Percentage of Total Tax Collections (1990-1996) 99.92%
Average Annual Debt Service Requirements
on the Bonds and the Outstanding Bonds (1999-2012) $ 954,489
Maximum Annual Debt Service Requirement -
on the Bonds and the Outstanding Bonds (2012) $ 967,313
Tax Rate per $100 of Assessed Valuation Required to Pay Average Annual
Debt Service Requirements on the Bonds and the Outstanding Bonds
(1999-2012) at 95% Tax Collections
Based Upon 1997 Assessed Valuation $1.29
Based Upon Estimated Valuation at November 1, 1997 $1.10
Tax Rate per $100 of Assessed Valuation Required to Pay
Maximum Annual Debt Service Requirement on the Bonds and the
Outstanding Bonds (2012) at 95% Tax Collections
Based Upon 1997 Assessed Valuation $1.30
Based Upon Estimated Valuation at November 1, 1997 $1.11
•
10
Number of Single-Family Homes (including 57 homes under construction)
as of January 15, 1998 1,170
(a) As of January 1, 1997. All'property'located in the District is valued on the tax rolls by the Brazoria County
Appraisal District (the "Appraisal'District") at 100% of estimated 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 "INVESTMENT CONSIDERATIONS - Factors Affecting Taxable Values and Tax Payments."
(b) Provided by the Appraisal District for informational purposes only,this amount is an estimate of the value of
all taxable property located within the District as Of November 1, 1997, and includes an estimate of values
resulting from the development and construction'of taxable`improvements from January 1, 1997, through
October 31, 1997. No tax was levied for 1997 on the increased valuation of such improvements constructed
subsequent to January 1, 1997, since the District's tax is levied annually on the valuation of property as of
January 1, The valuation of such additional improvements may vary significantly from this estimate when the
Appraisal Review Board certifies the valuation of District property for 1998: See "TAXING PROCEDURES."
(c) See "DISTRICT DEBT."
(d) The District levied as tax rate of$1.12 per $100 of Assessed Valuation in 1997. 'The TNRCC in it's Order
authorizing the District to issue the Bonds advised the District to levy a tax rate not less than$1.12 per $100
of Assessed Valuation in the year in which the District issues the Bond's (1998). Moreover, as'described in
this Official Statement under the caption "TAX DATA-Estimated Overlapping Taxes," the aggregate of the
1997 tax levies of all units of government which levy taxes against the property located within the District is
$3.395631 per $100 of Assessed Valuation. One must;consider the total tax'burden of all'overlapping
jurisdictions imposed upon property located within the District' as contrasted with property located in
- comparable real estate developments to gauge the relative tax burden on property within the District. The tax
rate necessary to service the debt issued or to be issued by the District,and the tax rates levied by other
overlapping jurisdictions,are subject to numerous uncertainties and variables,'and thus the District can give
no assurance that the composite tax rates imposed by overlapping jurisdictions;plus the District's tax rate,will
be comparable with the tax rates of competing projects. To the extent that the District's composite tax rates
are not competitive with competing developments, the growth of property tax values in the.District and the
investment quality or security of the Bonds could -be' adversely 'affected. See -"INVESTMENT
CONSIDERATIONS - Factors Affecting Taxable Values and Tax Payments" and "TAX DATA:" '
(e)- Neither Texas law nor the Bond Resolution requires the District to particular sum in the Debt
Service Fund.Such sum includes an amount sufficient to pay one year in interest payments on the Bonds which
will be capitalized from the proceeds of the sale of the Bonds and deposited'in the District's'DebtService
Fund. : .
.
11
THE BONDS •
General
The following is a description of some of the terms and conditions of the Bonds, which description is qualified in
its entirety by reference to the resolution (the "Bond Resolution") of the Board of Directors of the District (the
"Board") authorizing the issuance of the Bonds. A copy of the Bond Resolution may be obtained from the District
upon written request made to the District's Financial Advisor,Dain Rauscher Incorporated, 1001 Fannin,Suite 400,
Houston, Texas 77002.
The $1,980,000 Brazoria County Municipal Utility District No. 5 Unlimited Tax Bonds, Series 1998, are dated
March 1, 1998, with interest payable September 1, 1998, and each March 1 and September 1 thereafter until the
earlier of maturity or redemption. The Bonds are filly-registered serial bonds maturing on September 1 of the years
shown under "MATURITY SCHEDULE" on the cover page of this Official Statement. Principal of the Bonds will
be payable to the registered owners (the "Registered Owners") at maturity or redemption upon presentation to the
principal payment office of Chase Bank of Texas,National Association,currently in Dallas,Texas(the"Registrar").
Interest on the Bonds will be payable by check or draft, 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
calendar day of the month next preceding the interest payment date (the "Record Date").
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. 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 may be 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 Bonds issued in an exchange or transfer of Bonds will be delivered to the Registered Owner
or assignee of the owner in not more than three business days after the receipt of the request in proper form to
transfer or exchange 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 like 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 of business on 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. The District has
agreed to replace mutilated, destroyed, lost or stolen Bonds upon surrender of the mutilated Bonds, on 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.
Redemption of the Bonds
The Bonds maturing on or after September 1, 2007, shall be subject to redemption and payment at the option of
the District, in whole or from time to time in part, on September 1, 2006, or on any date thereafter, at par plus
accrued interest to the date fixed for redemption. Notice of the exercise of the reserved right of redemption will
be given by the Registrar at least thirty(30)days prior to the redemption date by sending such notice by first class
mail to the Registered Owner of each Bond to be redeemed in whole or in part at the address shown on the bond
register. If less than all of the Bonds are redeemed at any time, the particular Bonds to be redeemed shall be
selected by the District in integral multiples of$5,000 within any one maturity. If less than all of the Bonds within
12
one maturity are to be redeemed, the Registrar shall select the Bonds to be redeemed by lot or other random
method..The Registered Owner of_any Bond, all or a.portion of which has been called for redemption, shall be
required to present same to the Registrar for payment of the redemption price on the portion of the Bonds so called
for redemption and issuance of a new Bond in the principal amount equal to the portion of such Bond not redeemed.--
Replacement of Registrar
Provision is made in the Bond Resolution for replacement of the Registrar: If the Registrar is replaced by the
District, the new paying agent/registrar shall act in the same capacity as the previous Registrar. In order to act as
Registrar for the Bonds, 'any paying agent/registrar selected by the.District:shall be a national or state banking
institution,organized and doing business under the laws of the.United States of America or of any State;authorized
under such laws to exercise trust powers, and subject to supervision or,examination by federal or state authority.
Authority for Issuance
The Bonds constitute the sixth installment of$23,775,000 in:bonds for waterworks, sanitary sewer and drainage
facilities, of which$17,670,000 may be used for refunding purposes authorized at elections held within the District
on April 4,'1981, November'8,1983, and November.7, 1987: Following the issuance of the.Bonds, an aggregate
of$7,605,000 principal amount of bonds will remain authorized but unissued. See "Issuance of.Additional Debt."
The Bonds are issued pursuant to the Bond..Resolution, Chapters 49 and 54 of the Texas Water Code, and Article
XVI, Section 59 of the.Texas Constitution.Issuance of the Bonds has been further authorized by the Texas Natural
Resource Conservation Commission (the "TNRCC"),-formerly the Texas Water.Commission (the "TWC"). The
City Council of the City of Pearland, Texas ("Pearland"), which is also required to approve the issuance of the
Bonds,,approved the Bondsto be issued at a Pearland Council meeting. . .
Outstanding Bonds
The District has previously issued $1,735,000 Unlimited Tax Bonds, Series 1982 (the "Series 1982 Bonds"),
$2,750,000.Unlimited Tax Bonds,.Series 1983(the"Series,.1.983.Bonds"),:$1,620,000 Unlimited Tax Bonds, Series
1984 Bonds(the "Series 1984 Bonds")and$2,020,000 Unlimited Tax Bonds,:Series 1995(the"Series.1995,. Bonds")
to finance the acquisition or construction of components of the.System. In 1992 the.District issued $6,065;000
Unlimited Tax Refunding Bonds, Series,1992(the "Series 1992_RefundingBonds")to refund:certain maturities of
the Series 1982, Series 1983 and Series.1984 Bonds. Collective reference is made in this Official Statement to.the
Series 1982, Series 1983,. Series 1984, Series 1995 and Series 1992 Refunding Bonds as the"Outstanding Bonds.,
As of the date of this Official Statement, none.of the,Series.1982 Bonds and Series 1983 Bonds, $60,000 of the,
Series 1984 Bonds, all $2,020,000 of the Series.1995;Bonds and$5,525,000 of.the.Series 1992 Refunding Bonds
are outstanding. As of the date of this Official Statement,the District's total direct bonded indebtedness, consisting
of the maturities of the Outstanding;Bonds not previously paid by the District,plus the Bonds, is$9,585,000. The
District will capitalize an amount equal to one year in interest payments on the Bonds from the proceeds of the sale.
of the Bonds, and will deposit-such sum in the District's Debt,Service Fund to make such payments. The District
has timely made all payments due to date on the Outstanding Bonds.
Source of Payment
The Outstanding Bonds and the Bonds are payable from the proceeds of a continuing,direct annual ad,valorem tax,
without legal limitation as to rate or amount, levied against all taxable property located within the District. In the
Bond Resolution, the District covenants to levy a sufficient tax to pay principal of and interest on the:Bonds, with
full allowance being made for delinquencies, costs of collections, Registrar fees and Appraisal District.fees. Tax
proceeds, after deduction for collection costs,will be placed in the debt service fund and used solely to pay principal
of and interest on the Outstanding Bonds and the Bonds, and on additional bonds payable from taxes which may
be issued, and Registrar fees. .
The Bonds are obligations of the District and are not the obligations:of the State of Texas, Brazoria County,
Pearland, or any entity other than the District.
13
•
•
Issuance of Additional Debt •
The District may issue'additional bonds;with the approval of'the TNRCC,'necessary to provide improvements and.
facilities consistent with the purposes for'which the District was created: The District's voters have'authorized the
issuance of$23,775,000 unlimited tax bonds; and'Could authorize additional amounts. Following the issuance of
the Bonds, $7,605,000 unlimited tax bonds will remain authorized but unissued. The Bond Resolution imposes no
limitation on the amount of additional parity bonds which may be issued by the District (if authorized by the
District's voters and approved by the Board and the TNRCC).
Based on present engineering'cost estimates and on'development plans supplied by'the Developer, in the opinion
of the'District's consulting engineer-;Ferro-Saylors,'Inc. (the "Engineer"),'the.$7;605;000 authorized but unissued
bonds will"be adequate to'finance'the extension of water,wastevvater and storm drainage facilities and services to '
serve-all of the -remaining undeveloped -portions of' the District. See r "DEVELOPMENT AND 'HOME
CONSTRUCTION," "FUTURE DEVELOPMENT," and "THE SYSTEM."
The District also is authorized by statute to engage in fire-fighting activities,including the issuing of bonds payable -
from taxes such purposes. Before-the District could issue such bonds, the following actions would be required:_. •
(a) authorization of a detailed master plan and bonds:for such purpose by the qualified voters'in the District; (b)`
amendment to the existing Pearland ordinance specifying the purpose for which the'District iriay,issue bonds; (c)
• approval'of the'master plan and bonds'by the TNRCC;•and(d)approval-Of bonds by the Attorney General of Texas.
The Board has not considered calling an election at this time for such purposes. The District has no information
concerning any determination by Pearland with respect to modification of its ordinance:If additional debt obligations
are issued in the future by the District; such issuance.mayincrease gross debt/propery ratios and might adversely
affect the investment security of the Bonds. See "INVESTMENT CONSIDERATIONS - Future Debt."
Under certain circumstances the District also is authorized'to construct, develop and maintain park and recreational`.
- facilities and to construct roads. It is not anticipated at this time that the District will participate in such activities.
No Arbitrage
The District certifies that based upon_all'facts and estimates now known or reasonably expected to be in existence
on the date the Bonds are delivered and paid for,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
the Internal' Revenue Code-of 1986; as amended (the "Code"), •and the regulations prescribed thereunder,
Furthermore, all officers,.employees and';agents of the District have been authorized and directed to provide
certifications of facts and estimates that are material to the reasonable expectations of the District as of the date the
Bonds-.are delivered and paid for. In particular, all or any officers of the-District are:authorized to certify to the
facts and circumstances and reasonable expectations of the District on the date-the Bonds are delivered and paid for
regarding the amount and use of the proceeds of the Bonds.-Moreover;the District covenants that it shall make such'
use of the proceeds'of the-Bonds, regulate"investment of proceeds of the-Bonds and'take such other and further
actions and follow such procedures, including,without limitation; calculating the yield on the Bonds, as may be' •
required so that the Bonds shall not become "arbitrage'bonds" under the Code and the'regulations'prescribed from'
time to time thereunder.
Annexation and Consolidation •
•
The District lies within the extraterritorial jurisdiction of Pearland. Under Texas law,the District maybe annexed
in whole, but not in part, by-Pearland'without the District's consent, in which case Pearland must dissolve the
District-and assume the assets, functions and obligations of the District;including the Bonds, and any other bonded
indebtedness of the District existing at the tithe of annexation. 'No representation is made concerning thelikelihood
of annexation or the ability of Pearland to make debt Service'payments should annexation occur:` •
The District has the right to consolidate with other districts and, in connection therewith, to provide for the
consolidation of the District's System with the water and wastewater systems of the district or districts with which
it is consolidating. No representation is made that the District will ever consolidate its System with other systems•
14
Registered Owners' Remedies
Pursuant to Texas law, the Bond Resolution provides that, in the event 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.Resolution into
the Debt Service Fund, or defaults in the observance or performance of any of the other covenants, conditions or
obligations set forth in the Bond Resolution; any Registered Owner shall be entitled to seek'a writ of mandamus
from a court of competent jurisdiction compelling and requiring the District to make such payments or to observe
and perform such covenants, obligations or conditions. Such right is in addition to other rights the Registered
Owners may be provided by the laws of the State of Texas.
In the event of default in the payment of principal of or interest on the Bonds, the Registered Owners may seek a
writ of mandamus requiring the District to levy adequate taxes to make such payments. Except for the remedy of
mandamus, the Bond Resolution does not specifically provide for remedies to a Registered Owner in the event of
a District default, nor does it provide 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 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 direct,levy and,execution against the
District's property. Further, the Registered Owners cannot themselves foreclose on the,property of the District or
sell property within the District in order to pay the principal of or interest on the Bonds. The enforceability of the
rights and remedies of the Registered Owners may be further limited by laws relating to bankruptcy,reorganization
or other similar laws of general.application affecting the,rights of creditors.of political subdivisions such as the
District. For example, a Chapter 9 bankruptcy proceeding by the District could delay or eliminate payment of
principal or interest to the Registered Owners. 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 of political
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 federal bankruptcy 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 Texas
law, a municipal utility district such as the District must obtain the approval of the TNRCC prior to filing for
bankruptcy. The TNRCC must investigate the financial condition of the District and will authorize the District to
proceed only if the TNRCC determines that 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.
If the 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. If such a plan were-confirmed by the_bankruptcy court, it could, among
other things, affect a Registered Owner lby reducing or eliminating the amount of indebtedness,.deferring or
rearranging the debt service schedule, reducing or eliminating-the interest rate, modifying or abrogating collateral
or security arrangements, substituting (in whole or in part) other securities, and otherwise compromising and
modifying the rights and remedies of such Registered Owner's claim against the District.
15
Legal Investment and Eligibility to Secure Public Funds in Texas
The Texas.Legislature has enacted several statutes which pertain to the eligibility of bonds issued;by a municipal
utility district as investments for certain entities and as security for deposits of public funds in Texas: Section 49.186
of the Water Code;Article 717k-6,Vernon's Texas Civil.Statutes;Chapter 2256,Texas Government.Code("Public
Funds Investment Act");=and•Chapter 2257, Texas Government Code ("Public Funds Collateral Act"). Taken
together,these statutes'provide the following authorization:
1) Whether rated or unrated, bonds of the District (including the Bonds)are authorized investments in the state
of Texas for banks, savings and loan associations, insurance companies, fiduciaries, trustees and the state of
Texas;. •
2) " -Bonds of the:District are authorized investments for political_subdivisions of the state of Texas only if they
have been rated by nationally recognized investment rating firm and have received a rating of not less than
"A" or its equivalent; and
3): Whether rated or-unrated, bonds ofthe District (including the Bonds) may be used to secure the deposit of
public funds in the state•of Texas: . -
The District has not made any investigation of any.other laws,.rules,..regulations or investment criteria that might
affect the'suitability of the Bonds for any of the above purposes or limit the authority of any of the above entities
or persons to purchase or invest in.the Bonds.
The District makes no representation that the Bonds will be acceptable to banks, savings and loan associations, or
public entities for investment purposes or to secure deposits of public funds..The District has made no investigation
of other laws, regulations, or investment criteria that might apply to or otherwise limit the availability of the Bonds
for investment or collateral purposes. Prospective purchasers are urged to carefully evaluate the investment quality
of the Bonds as to the acceptability of the Bonds for investment or collateral_purposes.
Defeasance , - .• - -
The District may defease the provisions of the Bond Resolution and 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
Use`and Distribution of.Bond Proceeds_
Proceeds of the sale of the Bonds will be used to (i) reimburse the Developers (defined below under the caption
"Developers") for.the costs:relating to the construction of water distribution, wastewater.collection;,and storm
drainage facilities (the "System".) to serve_306 single-family residential lots platted as.Southdown Sections 6 and
7 and Crystal Lake, Sections 1 and 2; (ii)finance the District's-share of the cost of expansion of a joint wastewater
treatment plant and a remote water well:and booster pumps; (iii)pay engineering costs associated.with the design
and construction of such facilities;'(iv)-pay interest on funds advanced on the District's behalf by the Developers;
(v) capitalize an amount equal to'one year in interest payments on the Bonds; and (vi)-pay for administrative and
issuance costs, legal.fees, fiscal agent's fees, a fee to the Texas.Natural Resource Conservation Commission, and
certain financing costs related to the issuance of the Bonds.
•
16
I. Construction Costs
Total Developer District
Amount Share - 'Share
A. Developer Contribution Items (a) _..
1. Southdown, Section 6
a. Clearing $ :4;125 $ 1,238 - $ 2,887
b. Construction Facilities 9,231 2,769 6,462
c. Drainage - 220,394-' - 66,118. 154,276
d. Wastewater 91,290 - 27;387 63,903
- e. Off-site Water 8,563 2;569- 5,994
f. Water 60,381 18,114 42,267
g. Well Pointing and Wet Sand 38,600 11,580 - 27,020
Subtotal $432,584 $129,775 $302,809
•
2. Southdown, Section 7
a. Construction Facilities
and Clearing $ 10,841 $ 3,252 $ 7,589
b. Drainage 58,830 17,649 41,181
c. Drainage 26,480 -7;944 = 18,536
d. Wastewater 49,312 14,793;- := 34,519
e. Water 24,018 7,205' ': 16,813
f. Well Pointing and Wet Sand 8,073 '2,422 5,651
Subtotal $ 177,554 $ 53,265 '' $ 124,289
3. Crystal Lake, Section One and Two Site
Clearing and Preparation $ 2,061 $: 619 '$' 1,442
4. Crystal Lake, Section One
a. Construction Facilities $ 4,745 $ 1,424 $ 3,321
b. Drainage 151,938 45581 % : '. ',106357
c. Wastewater 110,893 33,268 77,625
d. Water 79;928 '23,978 '55',950
e. Well Pointing and Wet Sand 31,080 9,324 21,756
f. Off,site Water and Force Main 51,390 _ 15.,417. 35,973
g. Lift Station'and-Force IVIam `' " ' `'74,400 22320 ' 52;080
Subtotal -' `: $ 504;374 $ 151,312 - $':353 062
5 ' 'Crystal Lake, Section Two . - '
a. Construction Facilities ' $` 4,500 - $ `-1,350 -• $ '1,150
- b Drainage =: . :; -8,370`' 2,511.,.: , ,`5,859
c. Wastewater 51,070 `15,321 35;749
Water; , -' 40,531 - s 12159 - 28;372
e. Lift Station and Force Main 80,200 24,060 56;140
f. Well Pointing and Wet Sand-'-:- :` 23,000 :c= '6,900 , 16;-100 •
Subtotal $ 207,671 $ 62,301 $ 145,370
1.7
6.. Engineering $ 187,120 $ 56,136 $ 130,984
7. Contingencies 10,384 3,116 7.268
TOTAL DEVELOPER CONTRIBUTION ITEMS $1,521,748 $ 456,524 $1,065,224
B. District Items
1. Remote Water Well and Booster Pumps $ 116,646
2. Wastewater Plant Expansion . -.
a. Clarifier, Digester and Chlorination Facilities 162,347
b. Generator 73,794
c. Miscellaneous Improvements 26,355
Subtotal $ 262,496
3 Easement Costs for Off-Site Water Line/Force Main 12,500
4. Engineering and Testing 50,495
5. Contingencies 32,082
' TOTAL DISTRICT ITEMS $ 474,219
TOTAL CONSTRUCTION COSTS $1,539,443
II. Non-Construction Cost
A. Legal Fees $ 49,500
B. Fiscal Agent Fees - 39,600
C. Interest Cost
1. Capitalized Interest (1 year). - 138,600
2. Developer Interest (b) 71,321
D. Bond Discount 59,400
E. Bond Issuance Costs 45,121
F. Annexation Costs 8,065
G. TNRCC Bond Issuance Fee 4,950
H. Bond Application Report 24,000
I. Contingency (c) _
0
TOTAL NON-CONSTRUCTION COSTS . . $ 440,557
TOTAL BOND ISSUE REQUIREMENT $1,980,000
(a) The rules of the TNRCC require in certain instances that developers within a district subject to the jurisdiction
of the TNRCC contribute to the construction program of such district an amount of money equal to thirty
percent(30%) of the construction costs of certain water,,sewer and drainage facilities in that district. The
Developer have to date expended funds equal to or in excess of their required contributions toward the
construction and acquisition of the facilities being financed with the proceeds of the sale of the Bonds.
(b) Represents interest owed to the Developers on advances of construction costs and,engineering.fees made on
the District's behalf by the Developers. The actual amount of interest owed will be calculated at the lesser
of(i)the net effective interest rate borne by the Bonds or(ii) the interest rate at which.the Developers have
borrowed funds.
(c) Represents funds which may be used by the District only upon approval of the TNRCC.
In the instance that approved estimated amounts exceed actual costs, the difference comprises a surplus which may
be expended for uses approved by the TNRCC. In the instance that actual costs exceed previously approved
estimated amounts and contingencies, additional TNRCC approval and the issuance of additional bonds may be
required. The Engineer has advised the District that the proceeds of the sale of the Bonds should be sufficient to
reimburse the Developers for the costs of the above-described facilities. However, the District cannot and does not
guarantee the sufficiency of such funds for such purposes.
18
THE DISTRICT
Authority
The District is a municipal utility district created-pursuant to an order. of the Texas Water Commission (the
"TWC"), now the TNRCC, dated March 18, 1981. The District was created pursuant to the authority of Chapter
54, Texas Water Code, and Article XVI, Section 59 of the Texas Constitution. 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. The principal functions
of the District are to fmance, 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 TNRCC, and other governmental entities having jurisdiction,may establish, operate, and maintain
a fire department, independentlyy 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. The District is subject
to the continuing supervision of the TNRCC in certain matters.
The District is empowered, among other things, to purchase, construct, operate, and maintain all works,
improvements, facilities, and plants necessary for the supply of water; the collection,transportation,.and treatment
of wastewater; and the control and diversion of storm water.
Under certain limited circumstances the.District also is authorized to construct,.develop and maintain park and
recreational facilities and to construct roads.In addition,the District is authorized to 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.
The TNRCC exercises continuing supervisory-jurisdiction over the District. In order to obtain:the consent of
Pearland, within whose extraterritorial jurisdiction the District lies, the,District has,agreed to observe certain
Pearland requirements. These requirements limit the purposes for which the District may sell bonds for the
acquisition and improvement of waterworks, wastewater, and drainage facilities; limit the net effective interest rate
on such bonds and other terms of such bonds; and require approval by'Pearland of the District's construction,plans
and specifications, and the issuance of bonds.
Description
When created, the District contained approximately 423 acres of land. Subsequent annexations of land have
increased the area of the District to its present size of approximately 570.5 acres. The District is located
approximately 13 miles south of the central business district of Houston, Texas, and approximately seven miles
south of the intersection of Interstate Highway 610 and State Highway 288. State Highway 288 traverses the
western portion.of the District. "Approximately,,19 District acres lie to the.west of SH.288, and approximately 481
District acres lie to the east of SH 288. The District is located entirely- within Brazoria County and, the
extraterritorial jurisdiction of the City of Pearland. See "APPENDIX A - LOCATION MAP."
19
Management of the District
The District is governed by the Board of Directors(the"Board"),consisting of five directors,who have control over
and management supervision of all affairs of the District. Four of the Directors reside in the District. The'directors
serve four-year staggered terms. Elections are held in even numbered years on the first Saturday in May. The
current members and officers of the"Board, along with their"occupations;"are listed below:
: . ;Term'Expires
_Name Title _ Occupation in May
Ricki A. Willoughby .• : President Senior Group 1998
- - .Account Representative
Jack T. Hollis 'Vice President Youth Development ` .. ,2000
.. Professional
David Denton Assistant Vice President'and
Assistant Secretary/Treasurer Engineer 1998
Kelly C. Flanagan Secretary/Treasurer Computer Support ,'` ' ''1998 •
,Specialist Compaq =
•
Phil Nedbalek 'Assistant'Secretary/Treasurer 3- Assistant Operations Manager 2000
_ - . _ - 106'.9 FM KKHT• ; .
. ' ; - - : . .Radio Broadcasting
Although the District does not have a general manager or'any other full-tittle employees it has contracted'for utility
system operating,bookkeeping; tax assessing and collecting,`auditing, engineering;:financial advisory and legal
services as follows: .. : .
Tax.Assessor/Collector. -` .
The District has engaged Wallace'P. Hutchinson, Friendswood, Texas, as the District's Tax Assessor/Collector.
According to Mr. Hutchinson, he presently serves 49 taxing units as tax assessor/collector. .The Tax
Assessor/Collector applies the District's tax levy to tax rolls prepared by the Brazoria County Appraisal District
and bills and collects such levy. - 7 ;-
Bookkeeper :., _
The District's'bookkeeper is "District Data Services,:Inc.,.which'acts'as bookkeeper=for approximately 90 utility
districts. r,
Operator
ECO Resources, Inc. is the general operator of the System. According to ECO Resources, Inc., it is currently
engaged as utility system operator for 130 utility districts.
Auditor
The District has employed McCall, Gibson&Company, PLLC, Certified Public Accountants,to audit its fmancial
statements for the year ending September 30, 1997.. A copy of the District's audit for the fiscal year ended
September 30, 1997, is included as "APPENDIX B" to this Official Statement.
20
Engineer
The consulting engineer'for the:District in cOnnection with the'design and-construction'of-the facilities.for-which
the Bonds are being sold to reimburse.the Developer is Ferro-Saylors,Inc. '(the•"Engineer").; The Engineer has
also been employed by the Developer in connection With certain.planning_activities'and.the design of certain streets
and related improvements within the District.
Financial Advisor = - .. ,
The District has engaged Dain RauscherIncorporated as fmancial advisor(the"Financial Advisor")'to the District:
'Melees paid to the Financial:Advisor for services Tendered in connection`with the-issuance of the Bonds-are based
on='a percentage of the Bonds actually issued and sold:-Therefore, the payment of such-fees is-contingent upon the
sale and deliveryof.the Bonds. ' - _ ..
Attorney: : .
The-District has engaged Coats,:Rose, Yale, Holm; Ryman &Lee;:P.C., Houston,Texas, as general counsel to
the District and as bond counsel("Bond Counsel")in connection with:the issuance of the Bonds:The.fees to be paid
Bond Counsel in connection with the issuance of the Bonds are based on a percentage of the Bonds actually issued
and-sold. Therefore, thepayment ofr.such fees is contingent upon-the-sale and delivery of the Bonds:See "LEGAL
DEVELOPERS
Role of the Deve1opers• _ -. . ...
In general,.the activities of a developer in a municipal.utilitydistrictsuch as the District include purchasing the-land
within the-District,designing the subdivision;designingthe utilities and streets to be constructed in the subdivision,
designing any community facilities to be built;defining'a marketing program and'building schedule; securing
necessary-governmental'approvals and permits-for development, arranging'for the construction-of-roads and the
installation ofutilities(including;in tome cases,-water wastewater;-and drainage facilities pursuant to:the rules of
the TNRCC, as well at gas, telephone;`and electric-service) and selling.improved lots and commercial:reserves to
builders, developers,-Or other third'parties'. Inmost-instances, the developer will'be required-to pay up to.thirty
percent of the cost of constructing certain of the water, wastewater and drainage facilities-:in a utility district
pursuant to the rules of the TNRCC. The relative success or failure of a developer to perform such activities in
development of the property within a utility district may-have a profound effect on the security of the unlimited tax
bonds issued by a district. A developer is generally under no obligation to a district to develop the property which
it owns in a'-district-. Furthermore, there is no restriction:on a developer's right to sell any-'or all of the land which
it owns:within a-district:_In addition,'-a'developer'is ordinarily a'major`taxpayer within a•municipal+utility district
during the development phase of the property.
Description of-the Developers.
The development and home construction activity which-has occurredto date in the-District is described below under
the caption "DEVELOPMENT." Such development'and•home''construction activity includes (i)'the completion of
the development of 1,225 single-family residential lots, (ii) 125 additional single-family residential lots which are
currently under development and(iii)the construction of 1,170 homes; including 57 homes-under:construction.
2;1
Lennar Homes of Texas, Inc. and Friendswood Development Company
Lennar Homes of Texas,Inc.,a wholly-owned subsidiary of Lennar Corporation(collectively, "Lennar"), a publicly
traded corporation whose stock is listed on the:New York Stock Exchange, on March 9, 1994, purchased 28 fully
developed single-family_residential lots plus approximately.214 acres of undeveloped land located in the District
from SLS Enterprises ("SLS"). Lennar subsequently purchased 4 additional lots from SLS. On:December 31,
1995, Lennar purchased the residential assets of Friendswood Development Company, an Arizona corporation,and
certain other assets,consisting of approximately 1,980 acres of land and approximately 790 single-family residential
lots from Exxon Corporation. Friendswood Development Company was at the time of such purchase the wholly-
owned land development subsidiary of Exxon Corporation.: Lennar subsequently incorporated Friendswood
Development Company, a Texas corporation("Friendswood"), and has appointed Friendswood as developer of the
land owned by Lennar located in the District and has granted to Friendswood a power-of attorney to give and grant
power and authority to Friendswood to act for and on behalf of Lennar in connection with the development,
management, operation, marketing and sale of such property. Lennar and/or Friendswood have developed
Southdown, Sections 5 through 7 (298 single-family residential lots on approximately 65 of such acres),.have
initiated the development of Southdown, Section 8 (91 single-family residential lots on approximately 18 acres)
located in the District, and Lennar is currently constructing homes in the District as described below under the
captions."DEVELOPMENT" and "BUILDERS." See "TAX DATA Principal 1997 Property Owners."..
Lennar Corporation(together with its subsidiaries,the "Company").is a full service,real estate company. The stock
of Lennar is listed on the New York Stock Exchange, and Lennar is subject to the information requirements of the
Securities Exchange Act of 1934, as amended, and in accordance therewith files reports and other information with
the Securities and Exchange Commission("SEC"). Reports,proxy statements and other information filed by Lennar
can be inspected at the office of the SEC at Room 1024, 450 5th Street, N.W., Washington, D.C. 20549; Room
1204 Everett McKinley Dirksen Building,219 South Dearborn Street, Chicago,Illinois 60604;Suite 500 East, 5757
Wilshire Boulevard,Los Angeles, California 90036-3648;and Room 1028 Federal Building,26 Federal Plaza,New
York, New York, .10278. Copies of such material can be obtained from the Public Reference section of the SEC,
Washington, D.C. 20549, at prescribed rates. The Company's operations include .homebuilding, 'real .estate
investments,.residential_and commercialdevelopments and financial services. The Company's homebuilding
operations include.the construction and sale of homes, as well as the purchase, development,and sale of residential
land. The Investment Division is involved in the development,management and leasing, as well as the acquisition
and.sale, of commercial real,estate and other real estate related assets. The financial services operations consist
of mortgage loan servicing and origination,closing and title services and investments in rated commercial real estate
mortgage-backed securities.
2621 Joanel,-Ltd.
2621 Joanel, Ltd. ("JL"), a Texas: limited partnership,, the general partner of,which is JNT, Inc., a Texas
corporation whose principal shareholder:is Mr.John Taylor of Houston,Texas,has developed Crystal Lake,Section
1, consisting of 103 fully developed single-family residential lots on approximately 49 acres located in the District,
and has completed the engineering design of Crystal Lake, Section 2, consisting of approximately 21 acres
subdivided into 34 single-family residential lots as described below under the caption "DEVELOPMENT." The
other general partner of JL is the Traylor Corporation, a Texas corporation whose principal shareholder is Mr.
Travis Traylor of Houston,Texas. JL is.selling the lots located in Crystal Lake, Section 1 to Weekley Homes, Inc.
and Morrison Homes, which are currently constructing homes on such lots.
Lennar. through.Friendswood, and JL,' are -sometimes together referred to in .this.Official Statement as the
Developers (the "Developers"). See "DEVELOPMENT" and "BUILDERS."
22
DEVELOPMENT
As of January 15, 1998, the District contained 1,170.homes, including 57 homes under construction. According
to the District's Engineer, the development of approximately 298 of the District's approximate 570.5 acres is
• complete. Such acres have been developed into(i) 1,225fully developed single-family residential lots(Southdown,
Sections 1 through 3, 5 through 7, and Crystal Lake, Section 1)plus(ii)two reserves aggregating approximately
2 acres. As described above, Southdown,Sections 5 through 7:are developments-of Lennar through Friendswood,
and Crystal Lake','Section 1 is a development'of JL. Lennar through Friendswood has also initiated the development
of Southdown,Section 8,consisting of approximately 18 acres subdivided into 91 single-family residential lots,and
anticipates the completion'of the development thereof, including underground water distribution, wastewater
collection and stormdrainage facilities and'street'paving, by:approximately"March 15, 1998. In addition,7L
- initiated the development of Crystal Lake,Section 2,consisting of approximately 21-acres subdivided into 34 single-
family residential lots,and anticipates the-completion of the development thereof, including underground water
distribution,wastewater collection and stormdrainage facilities and street paving;by approximately March 31; 1998.
The District financed the cost of acquiring and constructing the water supply and distribution,wastewater collection
and treatment, and storm drainage system(the "System")to serve the 953 fully developed single-family residential
lots located within Southdown,Sections 1 through 3 and 5 with proceeds-of the Outstanding Bonds,and the District
will acquire the water distribution, wastewater collection and storm sewer facilities which have been constructed
to serve-the,,272,fully developed single-family residential Jots located within Southdown, Sections'6 and 7 and
,Crystal Lake,.,Section 1, plus such facilities to serve the future 34 lots.being developed,as Crystal Lake, Section
2 with a portion of the proceeds of the sale of,the Bonds. See "THE SYSTEM." In addition to the Southdown and
-Crystal Lake sections described above, there are approximately 83 currently undeveloped acres of land located
- within the District available for future development. Such undeveloped acres are.owned by Lennar. In addition,
approximately 150 District acres are contained within street and.drainage rights-of-way, detention ponds, District
plant sites,or are otherwise not available for development. Although Lennar's current plans for the approximately
83 undeveloped acres, as reported by Lennar,include the development of approximately 70 acres thereof into single-
family residential lots when Lennar's current lot inventory is;depleted, Lennar;has no obligation to the District to
develop any of such land in any particular manner or at all, and may sell the land and lots which it owns in the
District at its sole discretion: Therefore, the-District'cannot represent when, or whether, any of such currently .,
undeveloped acres might be developed. '-Lennar, as reported by Lennar, expects that the remaining approximately
13 currently undeveloped acres will be used in the future-'for commercial purposes. See "FUTURE
- DEVELOPMENT," and "INVESTMENT CONSIDERATIONS -, Principal,'Land Owners' Obligations to the '
District."
As of.January 15, 1998, the status of home.construction-.in the District was as follows:
Residential Units -
' ' :Southdown Sections Crystal Lake
1 2 , -3 , 5 6 7. Section 1 - - Total.
Homes Completed -
Sold and Occupied 258- _ 326 235 121 96 9 36 1,081 -
Sold and Unoccupied' - 0 0 . 0 5 0 2. 15 22
Unsold 0 0 0 0 1 0 5 6
Models 0. _0 0 2 0 _0 2 4
Subtotal 258 326 235- 128 97 11 58 1,113
Homes Under - -
Construction
Sold 0 0 0 , 0 0 45 12 ' 57
Unsold 0 0 0 0 0 0 - 0 0
Models 0 0 0 0 0 0 0 0
Subtotal 0 0 0 0 0 45 12 57
TOTALS 258 326 235 128 97 56 70 1,170
23
BUILDERS
Three homebuilding companies (collectively,the"Builders") are currently constructing homes within the District.
According to Lennar, homes which it is constructing in Southdown, Section 7 range in size from approximately
1,800 to 2,400 square feet of living area and in sales price from approximately$105,000 to $130,000.
JL has contracted to sell all of the,lots which it has not yet conveyed located in Crystal Lake, Section 1 and all lots
located in future Crystal Lake, Section 2 to Weekley Homes Inc. and to Morrison Homes, under separate contracts
which require each Builder to purchase lots-according to a take-down schedule. :According to JL, such Builders
are currently constructing homes in,Crystal Lake, Section 1 located in the District which range in size from
approximately 2,400 to 3,600 square feet of living area and in sales price from approximately $170,000 to
$220,000.
FUTURE DEVELOPMENT .
The development of approximately 298 of the approximate 570.5 acres of land located in the District has been
completed as described above.'under the caption DEVELOPMENT. In addition, Lennar through Friendswood
is currentlydeveloping Southdown, Section 8 (approximately118 acres, 91 single-family residential lots), and JL is
P g g Y )
currently developing Crystal Lake, Section 2 (approximately 21. acres, 34 single-family residential lots).
Approximately 83-acres of land located in the District are available for future development. Such undeveloped
acres are owned by Lennar. Although Lennar's'current plans for approximately 70 of such currently undeveloped
acres, as reported by Lennar, include the development thereof into single-family`residential lots when its current
lot inventory is depleted, Lennar has no obligation to the District to develop any of such land in any particular
manner or at all, and Lennar may sell such land at its sole discretion. Lennar, as,reported by Lennar, expects that
the remaining approximately 13.currently undeveloped acres will be used in the future for commercial purposes.
Therefore, the District can make no representation whether, or when, any development might occur on any of the
currently undeveloped land located within the District. The remaining approximately 150 District acres have been
dedicated as drainage easements, detention ponds, and sites for various District facilities, or are otherwise not
available for development.
Although the aforementioned undeveloped and partially developed acres may be developed in the future, instigation
of any new development beyond that described in this Official Statement will be dependent on several factors
including, to a great extent, the general and other economic conditions which would affect any party's ability to
develop and sell lots and/or other property and of any home builder to sell completed homes described in this
Official Statement under the caption "INVESTMENT CONSIDERATIONS." If the undeveloped portion of the
District is eventually developed, additions to the District's water, wastewater, and drainage systems required to
service such undeveloped acreage may be financed by future issues (if any) of the District's bonds and developer
contributions,if any, as required by the TNRCC. The District's Engineer estimates that the$7,605,000 authorized
bonds which remain unissued after the sale of the Bonds will be adequate to finance the construction of such
facilities to provide service to all of the undeveloped portions of the District. In the event that the remaining
authorized but unissued bonds are insufficient to complete the development of the District,the voters of the District
would have to approve additional bonds at an election held for such purpose for the District to be able to issue such
bonds. See "THE BONDS - Legal Ability to Issue Additional Debt." No party is under any obligation to initiate
development of any of the currently undeveloped land located within the District or to complete any development,
if begun, and any party initiating any future development thereon could modify or discontinue development plans
in its sole discretion. Accordingly, the District makes no representation that future development will occur. See
"INVESTMENT CONSIDERATIONS - Factors Affecting Taxable Values and Tax Payments."
24
AERIAL PHOTOGRAPH OF THE DISTRICT
(taken August 1997)
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PHOTOGRAPHS TAKEN WITHIN THE DISTRICT
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26
PHOTOGRAPHS TAKEN WITHIN '1'HL DISTRICT
(taken August, 1997)
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27
DISTRICT DEBT
Debt Service Requirement Schedule
The following schedule sets forth the total debt service requirements of the Outstanding Bonds and the principal and
estimated interest payments of the Bonds.
The Bonds Total
Outstanding Principal Debt Service
Year Bonds (Due 9-1) Interest (a) Requirements
1998 $ 768,790 $ 54,450 $ 823,240
1999 770,868 $ 65,000 108,900 944,768
2000 777,423 65,000 105,325 947,748
2001 782,103 65,000 101,750 948,853
2002 784,653 65,000 98,175 947,828
2003 785,238 70,000 94,600 949,838
2004 - 783,891 75,000 90,750 949,641
2005 785,303 80,000 86,625 951,928
2006 784,353. 85,000 82,225 951,578
2007 791,103 90,000 77,550 958,653
2008 790,083 95,000 72,600 957,683 .
2009 791,563 100,000 67,375 958,938
2010 794,938 105,000 61,875 961,813
2011 795,263 115,000 56,100 966,363
2012 792,538 125,000 49,775 967,313
2013 197,919 245,000 42,900 485,819
2014 197,813 260,000 29,425 487,238
2015 201,875 275,000 15,125 492,000
$12,375,717 $1,980,000 $1,295,525 $15,651,242
(a) Interest is estimated at 5.50% per annum for purposes of illustration.
Average Annual Requirements: (1999-2012) $954,489
Maximum Requirement: (2012) $967,313
28
Bonded Indebtedness ' -
1997 Assessed Valuation ' ). - $78,484,590(a)
(100% of estithated•market value as.of January,1, 1997)
See "TAX DATA" and-"TAXING-PROCEDURES." -ar.
Estimated'Valuation at November 1., 1997
(100%.of estimated marketvalue as'of November 1;1-997)
See "TAX°DATA" and "TAXING PROCEDURES."
Direct Debt.
- Outstanding Bonds` . . . . '. . . . . . . . :: . . . . :. ,-
" " " $"7,605,000
The Bonds
2.020;000
$ 9,585,000
Estimated Overlapping Debt $ 6,545,975(c)
Total Direct and Estimated Overlapping Debt $16,130,975(d)
Direct Debt Ratios
: as a percentage of 1997 Assessed Valuation 12.21%
: as a percentage of Estimated Valuation at November 1, 1997 10.43%
Direct and Estimated Overlapping Debt Ratios
: as a percentage of 1997 Assessed Valuation 20.55%
: as a percentage of Estimated Valuation at November 1, 1997 17.56%
Debt Service Fund,upon delivery of the Bonds • $ 1,088,836(e)
1997 Tax Rate per $100 of Assessed Valuation $1.12(d)
Average Percentage of Total Tax Collections (1990-1996) 99.92%
(a) As of January 1, 1997. All property located in the District is valued on the tax rolls by the Brazoria County
Appraisal District (the "Appraisal District") at 100% of estimated 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 "INVESTMENT CONSIDERATIONS - Factors Affecting Taxable Values and Tax Payments."
(b) Provided by the Appraisal District for informational purposes only, this amount is an estimate of the value of
all taxable property located within the District as of November 1, 1997, and includes an estimate of values
resulting from the development and construction of taxable improvements from January 1, 1997, through
October 31, 1997. No tax was levied for 1997 on the increased valuation of such improvements constructed
subsequent to January 1, 1997, since the District's tax is levied annually on the valuation of property as of
January 1. The valuation of such additional improvements may vary significantly from this estimate when the
Appraisal Review Board certifies the valuation of District property for 1998. See"TAXING PROCEDURES".
(c) See "Estimated Direct and Overlapping Debt Statement."
(d) The District levied a tax rate of$1.12 per $100 of Assessed Valuation in 1997. The TNRCC in its Order
authorizing the District to issue the Bonds advised the District to levy a tax rate not less than$1.12 per $100
of Assessed Valuation in the year in which the District issues the Bonds (1998). Moreover, as described in
this Official Statement under the caption "TAX DATA- Estimated Overlapping Taxes," the aggregate of the
1997 tax levies of all units of government which levy taxes against the property located within the District is
$3.395631 per $100 of Assessed Valuation. One must consider the total tax burden of all overlapping
29`
jurisdictions imposed upon property located within the District as contrasted with property located in
comparable real estate developments to gauge the relative tax burden on property within the District. The tax
rate necessary to service the debt issued or to be issued by the District, and the tax rates levied by other
overlapping jurisdictions, are subject to numerous uncertainties and variables, and thus the District can give
no assurance that the composite tax rates imposed by overlapping jurisdictions,plus the District's tax rate, will
be comparable with the tax rates of competing projects. To the extent that the District's composite tax rates
are not competitive with competing developments, the growth of property tax values in the District and the
investment quality or security of the Bonds could be adversely affected. See "INVESTMENT
CONSIDERATIONS - Factors Affecting Taxable Values and Tax Payments" and "TAX DATA."
(e) Neither Texas law nor the Bond Resolution requires the District to maintain any particular sum in the Debt
Service Fund.Such sum includes an amount sufficient to pay one year in interest payments on the Bonds which
will be capitalized from the proceeds of the sale of the Bonds and deposited in the District's Debt Service
Fund.
•
30
Estimated Direct and Overlapping Debt Statement
Other governmental entities whose boundaries overlap the District have outstanding bonds payable from ad valorem
taxes. The following statement of direct and:estimated overlapping ad valorem tax debt was developed from
information contained in "Texas Municipal Reports," published by the'Municipal Advisory Council of Texas, or
other available information.Except for the amount relating to the District,the District has not independently verified
the accuracy or completeness of such information;and no person is entitled to rely upon such information as being
accurate or complete. Furthermore, certain of the entities listed below may have issued additional bonds since the
dates stated in this table, and such entities may have programs requiring the issuance of substantial amounts of
additional bonds,the amount of which cannot presently be determined. Political subdivisions overlapping the District
are authorized by Texas law to levy and collect ad valorem taxes for operation,maintenance and/or general revenue
purposes in addition to taxes for payment of their debt, and some are presently levying and collecting such taxes.
Estimated
Debt as of Overlapping
January lti 1998 Percent Amount
Brazoria County $30,867,502 0.7725% $ 238,452
Pearland Independent School District 81,869,102 _ 7.7044 6,307,523
TOTAL ESTIMATED OVERLAPPING DEBT $6,545,975
TOTAL DIRECT DEBT (the District) $'9,585,000(a) 9,585,000
TOTAL DIRECT AND ESTIMATED
OVERLAPPING DEBT $16,130,975
•
Debt Ratios
of
% of 1997 Estimated
Assessed Valuation
Valuation at November 1, 1997
Direct Debt - _ 12.21% . 10.43%
Direct and Estimated Overlapping Debt 20.55% 17.56%
31
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 Outstanding Bonds and the Bonds(see "TAXING PROCEDURES"). The Board of Directors-
of the District has in its Bond Resolution covenanted to assess and levy for each year that all or any part of the
Bonds remain outstanding and unpaid a tax ample and sufficient to produce funds to pay the principal of and interest
on the Bonds(see'"THE BONDS" and "INVESTMENT CONSIDERATIONS.") The District levied a tax for debt
service for 1997 at a rate of$1.12 per $100 Assessed Valuation.
Tax Rate"Limitation
-Debt Service: Unlimited(no legal limit as to rate or amount).
Maintenance: $0.25 per $100 Assessed Valuation.
•
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 vote of the District's electors..
On April 4, 1981, the Board was authorized by a vote of the District's electors to levy such maintenance talc in an
amount not to exceed $0.25 per $100 of assessed valuation. Such tax, when levied, is inaddition to taxes which
the District is authorized to levy for paying principal of and interest'on the Outstanding Bonds and the Bonds and
any parity bonds which may be issued in the future. The District has not levied a maintenance tax to date.
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) Levv Prior Years (b) 9/30
1987 35,137,490 $1.640 576,254.84 100.00% 1988
1988 31,376,000 $1.640 514,566.40 100.00% 1989
1989 31,139,450 $1.640 510,686.98 100.00% 1990
1990 29,713,560 $1.640 487,302.38 100.00% 1991
1991 31,675,430 $1.605 508,390.65 100.00% 1992
1992 35,191,910 $1.544 543,363.09 100.00% 1993
1993 38,729,720 $1.520 588,691.74 99.99% 1994
1994 50,476,660 $1.199 . 605,215.15 100.00% 1995
1995 56,186;060 $1.199 673,670.63 100.00% 1996
1996 64,254,480 $1.120 719,650.17 99.45% 1997
1997 78,484,590 $1.120 879,027.30 53.97%(c) 1998
•
(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 December 31, 1997. 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) In process of collection.
32
Analysis of Tax Base
The foIIowing table illustrates the composition of,property located within:the.District:during the past:nine years.
,1997 ;, - 1996,, 1995
Assessed Value % Assessed Value % Assessed Value
Type of Property
Land $20,735,130 26.42% $16,053,320 24.98% $12,046,740 21.44%
. Improvements ; ,57,234,400 72.9.1\ . 47,786,360 74.37 43,621,360 ;77.64
Personal Property 1,113,600 : .1.43 r 956,460 1.49 953,960-- 1.70
I Exemptions (598,540) (0.76),.. (541,660) (0.84) (436,000) (0.78)
TOTAL : $78;484,590 100.00% -.:$64,254,480 100.00% $56,186;060- 100.00%
1994 1993 - 1992.
Assessed Value % Assessed Value.- .% , Assessed Value %
Type of Property , _ -
Laud $11,395,650 22.58% - $ 7;008,740 18.10% $ ,6;806,450 19.34.%
Improvements 38,585,310 76.44 ,;. 31,080,260 80.25 27,709,190. _. •78.74
Personal Property 992030 1.96 878,340 2.27 892,390 2.54
Exemptions (496,330) (0.98) (237,620) (0.62) . (216,120) (0.61)
TOTAL $50,476,660 100.00% $38,729,720 100.00% $35,191,910 -- 100.00%
1991. . _.. : ,.1990 1989
Assessed Value % Assessed Value % Assessed Value %
Type of Property- . ;, , . .
Land $7,078,960 22.35% $7,662,400. 25.79% $ 9,180,610 29.48%.
Improvements , _ 23,856 290. ; 75.31... - • 21,353,270 71.86 21-,280,390 68.34.
Personal Property _ 965,3QQ-,.., .3.05 - 913,0.10:, - 3..07 894,070. 2.87
Exemptions (225,120); (0.71) (215,-120) (0.72), , .(215,620) . : (0.69)
TOTAL $31,675,430 100.00% $29,713,560 100.00% $31,139,450 100.00%
33
Principal 1997 Taxpayers `'
Based upon information supplied by the District's Tax Assessor/Collector,the following table lists principal District
taxpayers, type of property owned by such taxpayers, and the Assessed Valuation of such property as of January
1, 1997. The information reflects the composition of the Appraisal District's record of property ownership as of
January 1, 1997.
Assessed Valuation % of 1997
Taxpayer Type of Property 1997 Tax Roll Tax Roll
2621 Joanel, Ltd. Lots and Acreage $1,718,810 2.19%
Lennar Homes of Texas, Inc. Houses, Lots and
Acreage 1,418,100 1.81
Weekley Homes, Inc. Homes 708,970 0.90
George Wimpey of Texas, Inc.
(Morrison Homes) Homes 430,880 0.55
Houston Lighting &Power Company, Inc. Utilities 322,650 0.41
Peter J. Loos Houses 251,150 0.32
Entex, Inc. Utilities 234,370 0.30
Reginald T. Mitchell Houses 203,360 0.26
Southwestern Bell Telephone Company Utilities 174,510 0.22
Casey Prigrmore House 139.690 0.18
Totals • $5,602,440 7.14%
Exemptions
The District has adopted a residential homestead exemption for persons 65 years or older or disabled persons in an
amount of$10,000 of Assessed Valuation for 1997,but has not adopted a general residential homestead exemption.
See "TAXING PROCEDURES."
Portions of the land owned by the Developer are undeveloped and at some future date could be used for agricultural
purposes. Accordingly, the owner(s) of such land could be entitled to have such land valued on the basis of its
agricultural productivity(qualified open-space land), which would be a small fraction of its fair market value. The
Developer has not previously claimed an agricultural valuation,and has waived,on behalf of itself and its successors
and assigns, any right to claim such valuation in future years. The waiver has been recorded in the Official Records
of Brazoria County, Texas. The waiver is binding for a period of 30 years.
34
Tax Rate Calculations
The tax rate calculations set forth below are presented to indicate the tax rates per$100 of Assessed Valuation which
would be required to meet certain debt service requirements if no growth in the District's tax base occurs beyond
the 1997 Assessed Valuation, or the Estimated Valuation at November 1, 1997. The calculations assume collection
of 95% of taxes levied,and the sale of no bonds by the District except the Outstanding Bonds and the Bonds.
Average Annual Debt Service Requirements (1999-2012) $954,489
Tax Rate of$1.29 on the'1997 Assessed Valuation($78,484,590)produces - $961,829
Tax Rate of$1.10 on the Estimated Valuation at November 1, 1997 ($91,876,840)produces $960,113
Maximum Annual Debt Service Requirement (2012) $967,313
Tax Rate of$1.30 on the 1997.Assessed Valuation($78,484,590)produces $969,285
Tax Rate of$1.11 on the Estimated Valuation at November 1, 1997 ($91,876,840)produces $968,841
The District levied a debt service tax in 1997 of $1.12 per $100 of Assessed Valuation. As the above table
indicates, the 1997 tax rate is sufficient to pay debt service on the Bonds and the Outstanding Bonds without an
increase,in taxable values in the District beyond the-Estimated Valuation at November 1, 1997,assuming the District
will have a tax collection rate of 95%, and'the issuance of-no additional bonds by the District. See "TAXING
PROCEDURES" -and "INVESTMENT CONSIDERATIONS Factors Affecting Taxable Values and Tax
Payments."
Estimated Overlapping Taxes
Property within the District is subject to taxation by several taxing authorities in addition to the District. Under
Texas law, on January 1 of each year, a tax lien attaches to property to secure payment of all state and local taxes,
penalties and interest ultimately imposed for the year on the property. A tax-lien on property in favor of the District
is on a parity with tax liens of other taxing jurisdictions. In addition to ad valorem taxes required to make 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. -
35
Set forth below is an estimation of all taxes per $100 of assessed valuation levied by such jurisdictions. No
recognition is given to local assessments for civic association dues, emergency medical service contributions, fire
department contributions or any other charges made by:,entities other than political subdivisions.
1997 Tax Rate
Per $100 of
Taxing Jurisdictions Assessed Valuation
The District $1.120000
Brazoria County 0:357500,
Pearland Independent School District 1.776700
Brazoria County Drainage District No: 4 0.141431,
Estimated Total Tax Rate $3.395631
No prediction can be made of the tax rates that will be levied in future years by the respective taxing jurisdictions.
TAXING PROCEDURES
Authority to Levy Taxes
The District is authorized to levy an annual ad valorem tax, without legal.,limitation as to rate or amount, on all
taxable property within the District in an,amount sufficient to pay.the principal of and interest on the'Bonds,the
Outstanding Bonds and any additional bonds payable from taxes .which the. District may hereafter.issue (see
"INVESTMENT CONSIDERATIONS - Future Debt") and to.pay the expenses of assessing and,collecting such
taxes. The District agrees in the Bond Resolution to levy such a tax from year to year as described more fully above
under "THE BONDS - Source of Payment." Under Texas law, the District may also levy and collect annual ad
valorem taxes for the operation and maintenance of the District and the System and..for the payment of certain
contractual obligations. See "TAX DATA - Maintenance Tax" and "- Tax Rate Distribution."
Property Tax Code and County-wide Appraisal District
The Texas Property Tax Code(the"Property Tax Code")specifies the taxing procedures of all political subdivisions
of the State of Texas, including the District. Provisions.of the:Property Tax Code are complex and are not fully
summarized here. The Property Tax Code requires,among other matters,county-wide appraisal and equalization
of taxable property values and, establishes in each county of the State.of Texas an.appraisal ,district_with the
responsibility for recording and appraising property for all taxing units within a county and an appraisal review
board with responsibility for reviewing and equalizing the values established by the appraisal district. The Brazoria
County Appraisal District(the "Appraisal District")has the responsibility of appraising property for all taxing units
within Brazoria County, including the District. Such appraisal values will be subject to review and change by the
Brazoria County Appraisal Review Board (the "Appraisal Review Board").
Property Subject to Taxation by the District
Except for certain exemptions provided by Texas law, all real property, tangible personal property held or used for
the production of income, mobile homes and certain categories of intangible personal property with a tax situs in
the District are subject to taxation by the District. Principal categories of exempt property include, but are not
limited to: property owned by the State of Texas or its political subdivisions if the property is used for public
purposes; property exempt from ad valorem taxation by federal law; certain household goods, family supplies and
personal effects; certain goods, wares, and merchandise in transit; farm products owned by the producer; certain
property of charitable organizations,youth development associations,religious organizations, and qualified schools;
designated historical sites;and most individually-owned automobiles.In addition,the District may by its own action
36
exempt residential homesteads of persons 65 years or older and certain disabled persons to the extent deemed
advisable by the Board. The District may be required to offer such an exemption if a majority of voters approve
it at an election. The District would be required to call such an election upon petition by twenty percent (20%)`'of
the number of qualified voters who voted in the preceding election.The District 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.;Furthermore, the District must grant
exemptions to disabled veterans, or,certain surviving dependents of disabled veterans, if requested, but only to the
maximum extent of between.$5,000 and .$12,000 of taxable valuation depending on the disability rating of the
veteran. _See "TAX DATA -- Exemptions."
Residential Homestead Exemptions: The Property Tax Code authorizes the governing body of each political
_subdivision in the State of Texas to exempt up;to twenty percent (20%) of the appraised market value of
residential homesteads from ad valorem taxation. Where ad valorem taxes have previously been pledged for
the payment of debt, the governing body of a political subdivision may continue to levy and collect taxes
against the exempt value of the homesteads until the debt is discharged, if the,cessation of the levy would
impair the obligations of the contract by which the debt was created. The adoption of a homestead exemption
may be considered each year, but must be adopted,by.May 1. See "TAX DATA -- Exemptions."
Freeport Goods Exemption:-Freeport goods are goods,wares, merchandise, other tangible personal property
and ores, other than oil, natural gas and other petroleum products, which have been acquired or brought into
the state for assembling, storing, manufacturing, repair, maintenance, processing or fabricating or used to
repair or maintain aircraft of a certified,.air carrier. and shipped out of the state within 175 days. Freeport
Goods are exempted from taxation by the District.
Tax Abatement.
Brazoria County or the City of Pearland may designate all or part of the area within the District as a reinvestment
zone.Thereafter, the City of Pearland(after annexation,)Brazoria County,the Pearland Independent School District
and.the District, at the option and discretion of each entity,may enter into tax abatement agreements with owners
of property within the zone. Prior to entering into a tax abatement.agreement, each entity mustadopt guidelines and
criteria for establishing tax abatement, which each entity will follow in granting tax abatement to owners of
property. The tax abatement agreements may exempt from ad valorem taxation by each of the applicable taxing
jurisdictions, including the, District, for a period of up•to ten (10) years; all or any part of any,increase in the
assessed valuation of property covered by the, agreement;over its assessed valuation.in the year in which the
agreement is executed, on the condition that the property owner make specified improvements or repairs to the
property-inconformity with the terms of the,tax abatement. The terms of all tax abatement agreements must be
substantially the same.
Valuation of Property for Taxation
Generally, property in the District must be'appraised by the Appraisal District at market value as of January 1 of
each year. Once an appraisal roll is prepared and finally approved by the Appraisal Review Board, it is used by the
District in establishing its tax rolls and tax rate. Assessments under the Property Tax Code are to be based on one
hundred percent (100%) of market value, as such is defined.in the Property.Tax Code.
The Property Tax Code permits land.designated for agricultural use, open space-or timberland to be appraised at
its.value based on the land's capacity to produce agricultural or timber products_rather than at its market value.The
Property Tax Code permits under certain circumstances that residential real property.inventory held by a person in
the trade or business be valued at the price-all of such property would bring if sold as a unit to a purchaser who
would continue:the business. Provisions of.the Property Tax Code are complex and are not fully summarized here.
Landowners wishing to,avail themselves of the agricultural use, open space or timberland designation or residential
.37
real property inventory 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.A claimant may waive the special valuation as
to taxation by some political subdivisions while claiming it as to another. If a claimant receives the agricultural use
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 taxes for the previous three years'for agricultural use and taxes
for the previous five years for open space land and ltimberland.
The Property Tax Code requires''the Appraisal District to implement a plan for periodic reappraisal of property to
update appraisal values. The plan must provide for appraisal of all real property in the Appraisal District at least
•
once every three(3)years. It is not known what frequency of reappraisals will be utiliied by the Appraisal District
or whether reappraisals will be conducted on a zone-or county-wide basis. The District, however,at its expense,
has the right to obtain from the Appraisal District a current estimate of appraised values within the District or an
estimate of any new property or improvements within the District.While such current estimate of appraised values
may serve to indicate the rate and extent of-growth of taxable values within the District, it cannot be used for
establishing a tax rate within the District untii such tune as the Appraisal District chooses to formally include such
values on its appraisal roll.
District and Taxpayer Remedies
Under certain circumstances, taxpayers and taking units(such as'the District)may appeal the orders-Of the Appraisal
Review Board by filing a timely petition for_review in State district court. In such event, the value of the property
in question will 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 Sets•forth notice and hearing procedures'for certain tax rate increases by the'District and
provides for taxpayer referenda which could result in the repeal of certain tax increases. The Property Tax Code
also establishes a procedure for notice to property owners of reappraisals reflecting increased property values,
appraisals that are higher than renditions and appraisals of property not previously on an appraisal roll.
Levy and Collection of Taxes
The District is responsible for the levy and collection of its taxes; unless it elects to transfer such'functions to
another governmental entity.By September 1 of each year, or as soon thereafter as practicable; the'rate of taxation
is set by the Board based upon the valuation'of property within the District as of the preceding January 1. Taxes
are due October 1, or when billed,whichever`comes later;and become delinquent after January 31 Of the following
year. A delinquent tax incurs a penalty of six percent (6%) of the amount of the tax for the first calendar month
it is delinquent,plus one percent(1%)for each additional month or portion of a month the tax remains unpaid prior
to'July 1 of the year in which it becomes delinquent. If the tax is not paid by July 1 of the year in which it becomes
delinquent, the tax incurs a total penalty of twelve`percent (12%)"regardless Of the numberof months the tax.has
been delinquent and incurs an additional penalty of up to fifteen percent (15%) if imposed by the District.-The
delinquent tax also accrues interest at a rate of one percent (1%)for each month or portion of a month it remains
unpaid. The Property Tax Code also makes provisions for the split payment of taxes, discounts for early payment
and the postponement of the delinquency date of taxes under certain circumstances.
District's Rights in the Event of Tax'Delinquencies -
Taxes levied by the District are a personal obligation of the owner of the property as of January 1 of the year for
which the tax is imposed. On January 1 of each year, a tax lien attaches to property to secure the payment of all
state and local taxes, penalties and interest ultimately imposed for the year on the property. The lien exists in favor
of the State of Texas and each local taxing unit, including the District,having the power to tax the property:The
District's'tax lien is on a parity with the tax liens of other such taxing units(see'TAX DATA Estimated
Overlapping Taxes"). A tax lien on real property takes priority over the claims of most creditors and other holders
of liens on the property encumbered by the tax lien, whether or not the debt or lien existed before the attachment
of the tax lien;however, whether a lien of the United States is on a parity with or takes priority over a tax lien of
the District is determined by applicable federal law. Personal property, under certain circumstances, is subject to
seizure and sale for the payment of delinquent taxes, penalty and interest. -
38
At any time after taxes on property become delinquent, the District may file suit to foreclose the lien securing
payment of the tax, to enforce personal liability for,the tax, or both. In filing a suit to foreclose a tax lien on real
property, the District must join other taxing units that have claims for delinquent taxes against all or part of the
same property. Collection,of delinquent taxes may be adversely affected by the amount of taxes owed to other taxing
units, by the effects of market conditions on the foreclosure sale price, by taxpayer redemption rights (a taxpayer
may redeem property within 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,restrict the collection of taxpayer debts. See."INVESTMENT CONSIDERATIONS-
Tax Collection Limitations."
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, Pearland, Brazoria County, the Brazoria County Drainage District No. 4,.and the TNRCC.
Operation of the System is subject to regulation by, among others, the United States Environmental Protection
Agency and the TNRCC. 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 connections projected for the District at the full,development of its approximate 570.5 acres is 1,769 with a total
estimated population of 5,500. A description of portions of the System follows and is based upon information
supplied by,the District's Engineer.. .
Description
Proceeds of the sale of the Outstanding Bonds were.used,to finance the construction or acquisition of underground
water supply and distribution, wastewater collection and treatment, and storm drainage facilities to serve the
aggregate 953 fully developed single-family residential lots in,the District located within Southdown, Sections 1
through 3 and 5,. The District will acquire the water distribution,wastewater collection and storm sewer facilities
which have been constructed to serve the 272 fully developed single-family. residential lots located within
Southdown, Sections,6 and 7 and Crystal Lake, Section 1, plus such facilities to serve the future 34 lots being
developed as Crystal Lake, Section 2 with a portion of the proceeds of the sale of the Bonds.
- Storm Drainage-
Storm water drainage for the District and the adjoining Brazoria County Municipal Utility District No. 4("M.U.D.
No. 4") is accomplished by a channel improvement and detention pond system jointly constructed by the two
districts. The District's share of such'joint system is.48.9%. According to the District's Engineer, construction
accomplished to date with proceeds of the Outstanding Bonds on the joint system provides adequate storm water
drainage to Southdown, Sections 1,through 3 and 5 through 7, the currently developed area of M.U.D. No. 4 plus
approximately 200 additional acres located in the District which may be developed in the future. The joint drainage
system is designed,upon its completion,to provide,drainage for the two districts in a developed state and upstream
drainage areas in an undeveloped state. The channel,which lies along the north boundary of the District,flows into
Clear Creek, which lies along the north boundary of M.U.D. No. 4. The detention pond lies wholly within the
District. The detention pond is designed to attenuate'the 100-year flood peak in Clear Creek after development
within the two districts to the same level as the 100-year flood peak prior to the initiation of development. Brazoria
County Drainage District No. 4 is responsible for drainage planning, review, and maintenance for the portion of
the County in which the two districts are located. Maintenance of the detention ponds is the responsibility of the
District and M.U.D. No. 4. A separate detention system which drains in to Hickory Slough has been constructed
by JL to accommodate Crystal Lake, Sections 1 and 2. Proceeds of the sale of the Bonds will be used by the
District to acquire drainage improvements including underground lines, manholes and inlets.
39
-Water Supply-
The District currently shares joint water supply facilities with M.U.D. No. 4. The existing facilities, which are
located within the District,consist of(i)one 1,165 gallons-per-minute("g.p.m.")water well and pump, an auxiliary
drive unit, a 500,000 gallon ground storage tank, two 15,000 gallon hydropneumatic tanks, two 1,000 g.p.m. and
one 600 g.p.m. booster pumps and two emergency water wells each with a 300 g.p.m. capacity'located in the
District, and (ii)a 380 g.p.m. well located in MUD No. 4. There are also two water line interconnections which
connect the District's water distribution system with M.U.D. No. 4's water distribution system. The District will
finance its share of the cost of the 380 g.p.m. well with a portion of the proceeds of the sale of the Bonds. The
District's pro rata share of the cost of the balance such facilities was fmanced with proceeds of the sale of the
Outstanding Bonds. The District financed its pro rata share of the cost of construction of a proposed second water
well,to be located within M.U.D.No.4, with a portion of the proceeds of the sale of the Outstanding Bonds. The
two districts will share the costs of the plant located in M.U.D.No. 4 based on the total capacity of both plants and
combined capacity ownership of each plant. The operation and maintenance agreement between the two districts
provides that the operation in each water plant will be the responsibility of the District in which each respective
•
facility is located. According to the District's Engineer, the aforementioned water plant facilities contain capacity
sufficient to provide service to a total of 2,506 connections,of which 1,390 connections are allocated to the District,
including the 1,225 existing and proposed connections in Southdown, Sections 1, 2, 3 and 5 through 7, Crystal
Lake, Sections 1 and 2, plus 50 connections which the District has allocated to the Pearland Independent School
District, and approximately 13 commercial connections.
Wastewater Treatment -
The District financed the District's pro rata portion of the cost of an aggregate'700,000 gallons-per-day ("g.p.d.")
permanent wastewater treatment plant which the District shares with M.U.D. No. 4 with a portion of the proceeds
of the Outstanding Bonds. The District owns 65.64% of the capacity of the facility, and M.U.D. No. 4 owns the
remainder. According to the District's Engineer, the capacity to which the District is entitled in the joint wastewater
treatment facility, consisting of 1,838 of.a total of 2,800 connections, is adequate to provide capacity to serve the
1,225 existing and proposed connections in Southdown, Sections 1 through'3 and 5 through 7, Crystal'Lake,
Sections 1 and 2, plus 50connections which the District has allocated to the Pearland Independent School District,
approximately 13 commercial connections,and approximately 550.additional connections. The District will finance
its pro rata share of the cost of certain improvements to the facility with a portion of the proceeds of the sale of the
Bonds, including a clarifier, digester, chlorination facilities and a generator. These improvements are necessary
to enable the District to meet the requirements of the TNRCC waste discharge permit covering the plant.
- 100-Year Flood Plain-
According to the District's Engineer, the current Federal Emergency Management Agency'Flood Hazard Boundary
Map currently in effect which covers the land located in the District indicates that no area located within Southdown,
Sections 1 through 3, 5 through 7, and Crystal Lake, Section 1, which contain the 1,225 single-family residential
lots which have been'developed in the District to date, or the 34 single-family residential lots currently being
developed as Crystal Lake, Section 2, is located within the 100-year flood plain of Clear Creek. Approximately
60 District acres, which are contained within detention ponds or are otherwise not currently expected to be
developed, are located within the 100-year flood plain of Clear Creek. '
40
INVESTMENT CONSIDERATIONS.
General
The Bonds, which are obligations of the District and not of the State of Texas Brazoria County,"Texas; the City
of Pearland, Texas, or any political subdivision Other thanthe 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.
See "THE BONDS - Source of Payment." The ultimate security forpayment,of the principal of and interest on
the Bonds depends upon the ability of the District to collect from the property owners within the District taxes levied
against all taxable property located within the District or, in the event'taxes are 'not collected and foreclosure
proceedings are instituted by the District,upon the value of the taxable property with respect to taxes levied by the
District and by other taxing authorities. 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. The potential-increase in-taxable valuation of District property'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:
Factors Affecting Taxable Values and Tax Payments'
The-rate of home construction within the District is directly related to the-vitality of the residential housing industry.
New residential housing construction can be"significantly affected by factors such as general economic activity,
interest rates, credit availability,construction costs; the level-of unemployment-and consumer demand. Decreased
levels of home construction activity restrict the growth of property values in the District. :Although the District
currently contains a total of 1,225 fully developed single-family residential lots,on which 1;170 single-family homes
have been constructed'(including 57 homes under construction),55 vacant fullydeveloped lots which are currently
available for home-:construction, and 125-single-family residential lots which are currently under development as
described-in the sections of this Official StatemeCt-entitled"DEVELOPMENT"-and "THE SYSTEM,"and although
there are-currently three-home building companies constructing homes within the District,the District cannot predict
the pace or magnitude of any future development or.home construction:in .the' District in addition to the
aforementioned development and home construction which has heretofore taken place in the District.
Principal'Land Owner's Obligations to the District -
Lennar Homes of Texas,Inc.,a wholly-owned subsidiary of Lennar Corporation(collectively, "Lennar"), a publicly
traded corporation whose-stock is listed on the New York Stock Exchange; on March.9, 1994, purchased 28 fully
developed single-family residential lots plus approximately '193' acres'of undeveloped and 21 acres of'partially
developed land located within the District. Lennar and/or.'Lennar through its-wholly-owned subsidiary',Friendswood
Development Company, has developed.Southdown;-Sections'5 through 7, and has initiated the-development of
Southdown, Section 8, consisting of 91 proposed single-family residential lots locatedin the District. According
to Lennar, it currently anticipates completing the development ofSouthdown,Section 8 by approximately March
15, 1998. Lennar currently owns 64 fully developed'single-family lots, the 91-single-family residential
lots which it is currently developing, approximately 21 partially developed acres, and approximately 109 acres of
currently undeveloped land located in the District: Lennar is currently=constructingihomes on the lots which it owns
located in the_District. 2621 Loanel, Ltd. ("JL") has-developed Crystal Lake, Section 1 and has initiated'the
development of Crystal Lake,=Section 2', consisting of 34 single-family-residential lots-located in the District.
According to IL; it anticipates completing the'development of Crystal Lake, Section 2 by approximately March 31,
1998. -JL has sold-60 of the 103 lots which it has'developed in Crystal Lake, Section 1 to Weekley Homes,'Inca
and Morrison Homes,:and-has contracted to:sell-the remaining-lots which it-owns in Crystal Lake,.Section 1 and
the- lots which it expects. to develop:in Crystal:.Lake,:-Section:2 to :such- home building-companies. _.See
"DEVELOPERS," "DEVELOPMENT," "BUILDERS," and."TAX DATA--Principal-1997.Property Owners."
41
Although Lennar's current plans for the currently undeveloped acreage which it owns in the District, as reported.
by Lennar through Friendswood,include the development thereof into single-family residential lots when Lennar's
current lot inventory is depleted, Lennar through Friendswood has no obligation to the District to develop any of
such land in any particular manner or at all, and may sell the land and lots which it owns in the District at its sole
discretion. Moreover, there is no commitment by or legal requirement of JL to the District to develop Crystal
Lake, Section 2. In addition, there is no requirement of Lennar, Weekley Homes, Inc., Morrison Homes, or any
other home builder to proceed at any particular rate in the construction of homes within the District or at all.
Furthermore, there is no restriction on the right of Lennar, JL, or any of the Builders to sell land or lots owned
by them. Therefore, the District can make no representation about the.probability of future development or the rate
of future home construction activity in the District. See "FUTURE DEVELOPMENT."
Maximum Impact on District Tax Rates
Assuming no further construction of homes and other taxable improvements within the District other_than those
which have heretofore been constructed, and no additional development in the District other than the development
•
which has occurred to date, the value of the land 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 District levied a tax of$1.12 pre$100 of Assessed Valuation in 1997.
The 1997 Assessed Valuation of property within the District is $78,484,590(see "TAX DATA"). After issuance
of the Bonds, the Maximum Annual Debt Service Requirement on the Bonds and the Outstanding Bonds will be
$967,313 (2012) and the Average Annual Debt Service Requirements will be $954,489 (1998 through 2012,
inclusive). Assuming no increase to or decrease from the 1997 Assessed Valuation, and no use of other legally
available District funds,tax rates of$1.30 and$1.29 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,respectively.In addition,the District's Estimated Valuation at November 1, 1997,of property located
within the District supplied by the Appraisal District is$91,876,840,reflecting the estimate by the Appraisal District
of values resulting from the development and construction of taxable improvements from January 1, 1997, through
October 31, 1997. Assuming no increase to or decrease from the Estimated Valuation at November 1, 1997, tax
rates of$1.11 and $1.10 per $100 of Assessed Valuation at a 95% tax collection rate would be necessary to pay
the Maximum Annual Debt Service Requirement and the Average Annual Debt Service Requirements, respectively,
on the Bonds and the Outstanding Bonds. Therefore,.the tax rate of$1.12 per$100 of Assessed Valuation which
the District levied in 1997 will be sufficient to pay debt service on the Bonds and the.Outstanding Bonds without
an increase to taxable values in the District beyond the Estimated Valuation at November 1, 1997, assuming the
District will have a tax collection rate of 95%, and the issuance of no additional bonds by the District.. See "TAX
DATA - Tax Rate Calculations."
Increases in the District's tax rate to levels higher than the,rate of$1.12 per $100 of Assessed Valuation which the
District levied for 1997 may have an adverse impact upon future development within,the District, the future
construction of homes and other taxable improvements within the District, and the ability of the District to collect,
and the willingness of owners of property located within the District to pay, ad valorem taxes levied by the District.
In addition,the collection by the District of delinquent taxes owed to it and the enforcement by a Registered Owner
of the District's obligations to collect sufficient taxes may be a costly and lengthy process. See "TAXING
PROCEDURES - District's Rights in the Event of Tax Delinquencies."
As described in this Official Statement under the caption "TAX DATA - Estimated Overlapping Taxes," the
aggregate of the tax levies of all units of government which levy taxes against the property located within the
District is $3.395631 per $100 of Assessed Valuation. One must consider the total tax burden of all overlapping
jurisdictions imposed upon property located within the District as contrasted with property located in
real estate developments to gauge the relative tax burden on property within the District. The tax rate necessary
to service the debt issued or to be issued by the District, and the tax rates levied by other overlapping jurisdictions,
are subject to numerous uncertainties and variables, and thus the District can give no assurance that the composite
tax rates imposed by overlapping jurisdictions,plus the District's tax rate, will be competitive with the tax rates of
competing projects. To the extent that the District's composite tax rates are not competitive with competing
developments,the growth of property tax values in the District and the investment quality or security of the Bonds
could be adversely affected.
42
Tax Collection Limitations
The District's ability to make debt seivice.payments may be adversely affected by its inability to collect ad valorem
taxes. Under Texas law, the levy of ad valorem taxes by the District constitutes a lien in favor of the District On
a parity with the liens of all other state and local taxing authorities on the property against which takes are levied,
and such lien may be enforced by foreclosure: The District's ability to'collect ad valorem taxes through such
foreclosure may be impaired by (a) cumbersome, time-consuming and expensive collection procedures,.(b) a
bankruptcy court's stay of tax collection procedures against a taxpayer, (c)market conditions limiting the proceeds
from a foreclosure sale of taxable property or(d)the taxpayer's redemption rights(a taxpayer may redeem property
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.) While the District has a lien on
taxable property within the District for taxes levied against such property,such lien can be foreclosed only in a
judicial:proceeding.
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 requiringthe District to levy sufficient taxes each year to make such payments. Except •
for mandamus, the Bond Resolution does not specifically 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 within 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 may be
limited further by laws relating to bankruptcy, reorganization or other similar,laws'of general application affecting
the rights of creditors of political subdivisions such as the District. In this regard, should the District file a petition
for protection from creditors under federal bankruptcy laws, the remedy of mandamus or the right of the District
to seek judicial foreclosure of its tax lien 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."
The Effect of the Financial Institutions Act'of 1989 on Tax Collections of the District
The Financial Institutions Reform,Recovery and Enforcement'Act of 1989("FIRREA"),contains certain provisions
which affect the time for protesting property valuations, the fixing of tax liens and the collection of penalties and
interest on delinquent taxes on real property owned by the Federal Deposit Insurance Corporation("FDIC") when
the FDIC is acting as the conservator or receiver of an insolvent financial institution.
Under FIRREA real property held by the FDIC is still subject to ad valorem taxation; but such act states (i) that
no real property of the FDIC shall be'subject'to foreclosure or sale without the consent of the FDIC and no
involuntary liens shall attach to such property, (ii)the FDIC shall not be liable for any penalties, interest, or fines,
including those arising from the failure to pay any real or personal property tax when due and(iii)notwithstanding
failure of a person to challenge an appraisal in accordance with state law, such value shall be determined as of the
period for which such tax is imposed. -
There has been no definitive judicial determination of the validity of these provisions of FIRREA or how they are
to be construed and reconciled'with respect to conflicting state laws. It is also not known whether the FDIC will
attempt to claim the FIRREA exemptions as to the time for contesting valuations and tax assessments made prior
to and after the enactment of FIRREA. Accordingly, to the extent the FIRREA provisions are valid and applicable
to any property in the District, and to the extent that the FDIC attempts to enforce the same, these provisions:may
affect the timeliness of collection of taxes on property, if any,owned by the FDI in the District, and may prevent
the collection of penalties and interest'on such taxes.
43
{ I
Marketability i
The District has no understanding,(other;than the initial reoffering yields)with the Initial Purchaser regarding the
reoffering yields or prices,of the Bonds:and has no control over the trading,of the.Bonds in the secondary_market.
Moreover,there:is no assur ance that a secondary market will be-made for.the Bonds.If there is a secondary market, , ,
the difference between-the bid and asked price of 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 the right to issue the..remaining, $7,605,000 authorized but unissued bonds for waterworks,
wastewater and drainage facilities and for refunding purposes (see "THE BONDS- Issuance of Additional Debt"),
and such additional bonds as may hereafter be approved by both the Board and voters of the District. The District
also has the right to issue certain other additional bonds, special project bonds, and other.obligations,described in
the Bond Resolution. All of the remaining$7,605,000 in bonds for waterworks, wastewater and drainage facilities
and for refunding purposes which have.heretpfore been authorized by,the voters of the District maybe issued by
the District from time to time as needed. The issuance of such $7,605,000,in bonds for waterworks, wastewater
and drainage facilities is also subject to TNRCC authorization. - -
The District's Engineer estimates,that the aforementioned$7,605,000 authorized bonds which remain unissued will
be adequate to fmance the construction of all water, wastewater,and drainage facilities to provide service.to all.of
the currently undeveloped portions of the.District. If`additional bonds are issued.in the.:future and property 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 Outstanding Bonds. .
Competitive.Nature of Houston Residential Housing,Market.
The housing industry in the Houston area is very competitive, and the District can,give no assurance that the
building programs which are planned by Lennar,or any future home builder(s)will be continued or completed. The
respective competitive positions.of Lennar and/or JL,.and any other developer and Lennar,Weekley Homes, Inc.
and/or Morrison Homes or any other home builder(s) which might attempt future home building or development
projects in the District in the sale of developed lots or in the construction and sale of single-family residential units
are affected by most of the factors discussed in this section, and such competitive positions are directly related to
' tax revenues received by the District and the growth andmaintenance
ofmai taxable values in the.District. -.
Continuing.Compliance with Certain Covenants -
The Bond Resolution contains covenants by the District intended to preserve the exclusion from gross income of
interest on the Bonds. Failure of 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 "LEGAL MATTERS - Tax Exemption." , -
Approval of the Bonds , ,
As required by law, engineering plans, specifications and estimates of construction costs for the facilities and
services to be purchased or constructed by:the District with the proceeds of.thoBonds_have been approved, subject
to certain conditions,by the TNRCC. See "THE BONDS.--,Use and Distribution of_Bond Proceeds." In addition,
the Attorney General of Texas must-approve the legality of the Bonds prior to their delivery..
Neither_the TNRCC nor the Attorney General of Texas passes,upon or guarantees the security of the Bonds as an
investment, nor have the foregoing authorities passed upon the adequacy or accuracy-of the information contained
in this-Official Statement.
44
•
LEGAL MATTERS
Legal Opinions
Delivery of the Bonds will be accompanied by the unqualified approving legal opinion of the 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 under the Constitution and laws of,the State of Texas,
and all taxable property within the District is subject to the levy of ad valorem taxes to pay the same, without legal
limitation as to rate or amount, based upon examination of a transcript of certified proceedings held incident to the
issuance and authorization of the Bonds, and the approving legal opinion.of Coats, Rose, Yale, Holm, Ryman&
Lee, P.C., Bond Counsel for the District, to a like effect. Such opinions express no opinion with respect to the
sufficiency of the security for or the marketability of the Bonds. Bond Counsel's opinion also will address the
matters described below under "Tax Exemption."
Bond Counsel has.reviewed the information appearing in this Official Statement under "THE BONDS - General"
- "Assignments, Transfers and Exchanges," - "Redemption of Bonds," - "Replacement of Registrar,",- "Authority
for Issuance," - "Source of Payment," - "Issuance of Additional Debt," "No Arbitrage," - "Annexation and
Consolidation," - "Registered.Owners' Remedies," - "Legal Investment and Eligibility to Secure Public Funds in
Texas,"and-"Defeasance, "THE DISTRICT-Authority"and"Attorney,"_."TAXING PROCEDURES," "LEGAL
MATTERS-- Tax Exemption,""-Tax Accounting Treatment of Original Issue Discount Bonds," and "-Qualified
Tax-Exempt Obligations- Purchase of the Bonds by Financial Institutions" and "CONTINUING DISCLOSURE
OF INFORMATION" solely to determine whether such information, insofar as it relates to matters of law, is true
and correct and whether such information fairly summarizes matters of law,the provisions of the documents referred
to therein and conforms to the provisions of the Order of the TNRCC approving the Bonds and to the requirements
of Pearland with respect to the sale of the Bonds. Bond Counsel has not, however, independently verified any of
the factual information contained in this Official Statement nor has it 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 Bond Counsel's 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 information contained herein, other than
the matters discussed immediately above.
Coats, Rose, Yale, Holm, Ryman&Lee, P.C., also serves as general counsel to the District on matters other than
the issuance of bonds. The legal fees paid.to Bond,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 upon the sale and delivery of the,Bonds.
No-Litigation Certificate
The District will furnish the Initial Purchaser a certificate, executed,by the President-and Secretary of the Board,
and dated as of the date of delivery of the Bonds, that to their knowledge, no litigation is pending or threatened
affecting the validity of the Bonds,or the levy and/or collection of taxes for the payment thereof,or the organization
or boundaries of the District, or the,title of the officers thereof to their respective offices.
Tax Exemption
In the opinion of Coats, Rose, Yale, Holm, Ryman & Lee, P.C., Bond Counsel, (i) interest on the Bonds is
excludable from gross income for federal income tax purposes under existing law and(ii)the Bonds are not"private
activity bonds"under the Internal Revenue Code of 1986, as amended(the "Code"), and interest on the Bonds will
not be subject to the alternative minimum tax on individuals and corporations, except as described below in the
discussion regarding the adjusted current earnings adjustment for corporations.
45
III '
The Code imposes a number of requirements that must be satisfied for interest on state or local obligations, such
as the Bonds, to be excludable from gross income for federal income tax purposes. These requirements include
limitations on the use of Bond proceeds and the source of repayment of bonds,limitations on the investment of bond
proceeds prior to expenditure, a requirement that excess arbitrage earned on the investment of bond proceeds be
paid periodically to the United States and a requirement that the District file an information report with the Internal
Revenue Service. The District has covenanted in the Bond Resolution that it will comply with these requirements.
Bond Counsel's opinion will assume continuing compliance with the covenants of the Bond Resolution pertaining
to those sections of the Code which affect the exclusion from gross income of interest on the Bonds for federal
income tax purposes and, in addition,will rely on representations by the District and the Underwriter with respect
to matters solely within the knowledge of the District and the Underwriter, respectively, which Bond Counsel has
not independently verified. If the District should fail to comply with the covenants in the Bond Resolution or the
report or if the foregoing representations should be determined to be inaccurate or incomplete, interest on the Bonds
could become taxable from the date of delivery of the Bonds,regardless of the date on which the event causing such
taxability occurs.
The Code also imposes a 20% alternative minimum tax on the "alternative minimum taxable income" of a
corporation(other than any S corporation,regulated investment company,FASIT,REIT, or REMIC),if the amount
of such alternative minimum'tax is greater than the amount of the corporation's regular income tax. Generally, for
taxable years beginning after 1989,a corporation's alternative minimum taxable income includes 75% of the amount
by which a corporation's "adjusted current earnings" exceeds its other "alternative minimum taxable income."
Because interest on tax-exempt obligations, such as the Bonds, is included in the corporation's "adjusted current
earnings," ownership of the Bonds could subject a corporation to alternative minimum tax consequences.
Under the Code, taxpayers are required to report on their returns the amount of tax-exempt interest,such as interest
on the Bonds, received or accrued during the year.
Except as stated above, Bond Counsel will express no opinion as to any federal, state or local tax consequences
resulting from the receipt or accrual of interest on, or acquisition, ownership, or disposition of, the Bonds.
Prospective purchasers of the Bonds should be aware that the ownership of tax-exempt obligations may result in
collateral federal income tax consequences to financial institutions,life insurance and property and casualty insurance
companies, certain S corporations with Subchapter C earnings and profits, individual recipients of Social Security
or Railroad Retirement benefits, owners of interests in a FASIT, taxpayers who may be deemed to have incurred
or continued indebtedness to purchase or carry tax-exempt obligations and individuals otherwise qualifying for the
earned income credit. In addition, certain foreign corporations doing business in the United States may be subject
to the "branch profits tax" on their effectively-connected earnings and profits, including tax-exempt interest such
as interest on the Bonds. These categories of prospective purchasers should consult their own tax advisors as to
the applicability of these consequences.
Bond Counsel's opinions are based on existing law, which is subject to change. Such opinions are further based
on Bond Counsel's knowledge of facts as of the date thereof. Bond Counsel assumes no duty to update or
supplement its opinions to reflect any facts or circumstances that may thereafter come to Bond Counsel's attention
or to reflect any changes in any law that may thereafter occur or become effective.
46
Tax Accounting Treatment of Discount and Premium on Certain Bonds
The initial public offering price of certain of the,Bonds(the."Discount Bonds")may be less than the amount payable
on such Bonds at maturity. An amount equal to the difference between the initial public offering price of a Discount
Bond(assuming that a substantial amount of the,Discount Bonds of that maturity are sold to the public at such price)
and the amount payable at maturity constitutes original issue discount to the initial purchaser of such Discount Bond.
A portion of such original discount allocable to the,holding period of such Discount Bond by the initial purchaser
will, upon the disposition of such Discount Bond (including by reason of its payment at maturity), be treated as
interest excludable from gross income, rather.than as taxable gain; for federal income tax purposes, on the same
terms and conditions as those,for other interest on.the Bonds described above under "TAX EXEMPTION".. Such
interest is considered to be accrued actuarially in accordance with the constant interest method over the life a
Discount Bond,taking into account the semiannual compounding of accrued interest,at the yield to maturity on such
Discount Bond and generally will be allocated.to as initial purchaser in a different amount from the amount of the
payment denominated as interest actually received by the initial purchaser during his taxable year.
However, such interest may be required to be taken into account in.determining the alternative minimum taxable
income of a corporation, for purposes of calculating a corporation's alternative minimum tax imposed by Section
55 of the Code, and the amount of the branch profits tax applicable to certain foreign corporations doing business
in the United States, even though there will not be a corresponding cash payment. In addition,the accrual of such
interest may result in certain other collateral federal income tax consequences to, among others, financial
institutions,life insurance companies,property and casualty insurance companies, "S"corporations with"subchapter
C" earnings and profits,individual recipients of Social Security or Railroad Retirement benefits,owners of interests
in a FASIT, individuals otherwise qualifying for the earned income tax credit, and taxpayers who may be deemed
to have incurred or:continued,indebtedness,to purchase or carry, or who have paid or incurred certain,expenses
allocable to, tax-exempt,obligations.. Moreover, in the,event,of the redemption, sale or other taxable disposition
of a Discount Bond by the initial owner prior to maturity„the amount realized by such owner in excess of the basis
of such Discount Bond in the hands of such owner.(adjusted,upward-by the portion of the original issue discount
allocable to the period for which such Discount Bond was held) is includable in gross income.
Owners of Discount Bonds should consult with their own tax advisors with respect to the determination for federal
income tax purposes of accrued interest upon disposition of Discount Bonds and with respect to the state and local
tax consequences of owning Discount Bonds. It is possible that, under applicable provisions governing
determination of state and local income taxes, accrued interest on:Discount Bonds maybe deemed to be received
in the year of accrual even though there will not be,a corresponding cash payment.
The initial public offering price of certain Bonds(the "Premium Bonds"), may be greater than the amount payable
on such Bonds at maturity. An amount equal to the difference between the initial public offering price of a
Premium Bond (assuming that a.substantial„amount of the Premium Bonds of that.maturity are sold to the public
at such price) and the amount payable at maturity constitutes premium to the initial purchaser,of such Premium
Bond. The basis for,federal income tax purposes.of a Premium Bond in the.hands of such initial purchaser may
be reduced each year by the amortizable bond premium. Such reduction in basis will increase the amount of any
gain or decrease the amount of any loss to be,recognized for federal. income tax purposes upon the sale or other
taxable disposition of a Premium Bond. The amount of premium which is amortizable each year by an initial
purchaser is determined by using such purchaser's yield to maturity.; Purchasers of the Premium Bonds should
consult with their own tax advisors with respect to the determination of amortizable.bond premium with respect to
the state and local tax consequences of owning Premium Bonds. ' . -
47
QUALIFIED TAX-EXEMPT OBLIGATIONS
Section 265 of the Code provides, in general, that interest expense incurred to acquire or carry tax-exempt
obligations is not deductible from the gross income of the owner thereof. In addition,interest expense incurred by
certain owners that are "fmancial institutions" within the meaning of such section and which is allocable to tax-
exempt obligations acquired after August 7, 1986, is completely disallowed as a deduction for taxable years
beginning after December 31, 1986. Section 265(b) of the Code provides an exception to this rule for interest
expense incurred by fmancial institutions and allocable to tax-exempt obligations(other than private activity bonds)
which are designated by an issuer, such as the District, as "qualified tax-exempt obligations." An issue may be
designated as "qualified tax-exempt obligations"only where the amount of such issue, when added to all other tax-
exempt obligations (other than private activity bonds) issued or reasonably anticipated to be issued by the issuer
during the same calendar year, does not exceed $10,000,000.
The District has, pursuant to the Bond Resolution, designated the Bonds as "qualified tax-exempt obligations" and •
certified its expectation that the above-described $10,000,000 ceiling will not be exceeded. Accordingly, it is
anticipated that financial institutions that purchase the Bonds will not be subject to the 100 percent disallowance of
interest expense allocable to interest on the Bonds under section 265(b) of the Code. However, 20 percent of the
interest expense incurred by a fmancial institution which is allocable to the interest on the Bonds would not be
deductible pursuant to section 291 of the Code. '
OFFICIAL STATEMENT
General
The information contained in this Official Statement has been obtained primarily from the District's records, the
Engineer, the Developer, the Tax Assessor/Collector and other sources believed to be reliable; however, no
representation is made as to the accuracy or completeness of the information contained herein, except as described
below. 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 the Official Statement relating to engineering and to the description of the System,
and, in particular, that engineering information included in the sections entitled "THE BONDS - Use and
Distribution of Bond Proceeds," "THE DISTRICT" and"THE SYSTEM"has been provided by Ferro-Saylors, Inc.
and has been included herein in reliance upon the authority of said firm as experts 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 Wallace P. Hutchinson. The District has included certain information herein in reliance upon Mr.
Hutchinson's authority as an expert in the'field of tax assessing and real property appraisal.'
The District's audited fmancial statements for the fiscal year ended September 30, 1997,were prepared by McCall,
Gibson & Company, PLLC, Certified Public Accountants, and have been included herein as "APPENDIX 'B"'.
McCall, Gibson&Company,PLLC,Certified Public'Accountants,has consented to the publication of such financial
statements in this Official Statement.
48
Certification as to Official Statement •
•
The•District,-acting by and through its Board of Directors in'its official capacity and,in reliance upon the'experts
•listed above,hereby certifies,'as of the-date hereof,that to thebest'of its knowledge and belief,the information,
statements and descriptions pertaining10 the'District'and its'affairs herein'contain no untrue statements of a material
fact and do not omit to state any material'fact necessary make the statements herein, in-light of the circumstances
under which they Were made;not misleading.The information,descriptions and statements concerning entities other
than the District; including particularly other governmental entities; have been obtained-from sources believed to
be reliable, but:the District'has'made-no independent investigation or'verificatio_n-of such m_ atters and makes no
representation as to'the accuracy or completeness thereof: - '` -' - •
•
Updating of Official Statement, '' '
If, subsequent to the date of the'Official Statement,the District learns;through the ordinary course of business and
without undertaking any investigation or examination for such purposes, or.is notified by the Initial'Purchaser,;of
any adverse event which causes the Official Statement to be materially misleading, and unless the Initial Purchaser
elects to terminate its obligation to purchase the Bonds,.the District will promptly prepare and supply to the Initial
Purchaser an appropriate'amendirient or'supplement to'the Official.Statement satisfactory to the Initial Purcha ser,
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 Initial Purchaser, unless the Initial Purchaser notifies the
District in writing on or before such date that less than all of the Bonds have been sold to ultimate customers, in
which case the District's obligations hereunder will extend for an additional period of time (but not more than 90
days after the date the District delivers the Bonds).until all of the Bonds have been sold to ultimate customers.
Official Statement:"Deemed Final"' - • - _,: i ,
For purposes of compliance with_ Rule 15c(2)'12'of the Securities'and'Exchange Commission, this document, as
the same May supplemented 'or=corrected'by the`-District from time"to time, may be treated,as an Official
Statement with respect to the Bonds des-bribed'herein and is."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 theinterest 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 tefuied in Rule•l'5c(2)=I2: ' " _ .
CONTINUING DISCLOSURE OF INFORMATION
The offering of the Bonds qualifies for the Rule 15c2-12(d)(2)exemption from Rule 15c2-12(b)(5) regarding the
District's continuing disclosure obligations because the•District has not issued more than$10,000;000 in aggregate
amount of outstanding bonds'and no person is:committed by contractor other arrangement with respect to payment
of the Bonds. Ai'required'by the exemption,however;'the'District-in th"e'Bond Resolution 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 info bationand operating data annually, and timely
notice of specified Material'events, to certain info rmation vendors."This information-will-be'available to securities.
brokers and others who subscribe to receive'the information'from'the vendors.. `` .
•
•
49-
•
Annual Reports
The District will provide certain financial information and operating data which is customarily prepared by the
District and is publicly available, upon request of any person, o r annually,to the appropriate state information
depository. The financial information and operating data which will be provided is found in "APPENDIX B."
Under Texas Law, the District must keep its fiscal.:records in accordance; with generally accepted account' g
principles,must have its financial accounts and records audited by a certified public accountant within 120 days aft r
the close of each fiscal year of.the District, and must,file each audit report with the TNRCC within-135 days aft r
the close of the fiscal year. The District's fiscal•records and audit reportsare available for public inspection during
regular business hours, and the District and the TNRCC are required,by,law to provide.a.,copy of the District's audit
reports to any member of the public within a reasonable time on request, upon payment of applicable copying
charges. Requests for copies should be addressed to the District in care of Coats,-Rose, Yale,•-Holm,.Ryman he
Lee, P.C., Houston, Texas. The District will update and provide this information to any state information
depository("SID")that is designated by,the State of Texas and approved by the staff of-the United States Securities
and Exchange Commission ("SEC")within six months after the end of each of.its.fiscal years, ending in or after 1
1998.
The District's current fiscal year end is September.30. Accordingly,It must provide updated information by March
31 in each year, unless the.District-changes its fiscal year..If the:District changes its fiscal year; it will notify,an,
SID of the change.
Material Event"Notices
-
The District will also provide timely-notices of certain events to certain-information vendors. The District wi
provide notice of any of the following events with respect to the Bonds, if such event is.material to a decision t
purchase or sell Bonds: (1) principal and interest payment delinquencies; (2) non-payment related defaults; (3j
unscheduled draws on debt service reserves reflecting financial.difficulties; (4) unscheduled draws on credit
enhancements reflecting fmancial difficulties; (5) substitution of•credit:or liquidity providers, or their failure to
perform; (6)adverse tax opinions or events affecting the tax-exempt status of the,Bonds; (7)modifications to rights
of holders of the Bonds; (8) Bond calls;, (9) defeasances; (10) release,_substitution, or sale of property securin,
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." The.District will provide,each notice described in this paragraph to any SID and to either,
each nationally recognized municipal securities information;repository ("NRMSIR")or the Municipal Securities
Rulemaking Board ("MSRB").
Availability of Information From NRMSIRs and SID
The District has agreed to provide the foregoing information only to the information vendors described above. The
information will be available to holders.of Bonds only if the holders,comply with the procedures,and pay the charges
established by such information vendors or obtain the information through securities brokers who do so.
The Municipal Advisory Council of Texas (the "MAC")has been designated by.the State of Texas as.a SID.. In
a no-action letter dated August29, 1995, the staff:of the Division of Market Regulation of the SEC,indicated that
it would not recommend that the'SEC_take enforcement action against a."Participating Underwriter"pursuant to th
Rule if the Participating Underwriter reasonably determines that an.issuer.of municipal securities or an obligated
person located in the State has undertaken to provide the disclosure information required under the Rule to tli
MAC. The address of the Municipal Advisory Council is 600 West 8th Street, P.O. Box 2177, Austin, Tex
7876872177, and its telephone number is 512/476-6947.
50
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 fmancial 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 for
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 whole or in part from any breach of its continuing disclosure
agreement or from any statement made pursuant to its agreement, although holders or beneficial owners of Bonds
may seek a writ of mandamus to compel the District to comply with its agreement.
The District may amend its continuing disclosure agreement to adapt to changed circumstances that arise from a
change in legal requirements, change in law, or change in the identity, nature, status or 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 the Rule, taking into account any amendments and interpretations lof
the Rule to the date of such amendment as well as changed circumstances and either the holders of a majority in
aggregate principal amount of the outstanding Bonds consent 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 the Rule or a court of fmal 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 fmancial 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 operating data and fmancial information so provided.
Compliance With Prior Undertakings
The District has not previously made:a continuing disclosure agreement in accordance with the Rule.
This Official Statement was approved by the Board of Directors of Brazoria County Municipal Utility District No.
5 as of the date shown on the first page hereof.
/s/ Ricki A. Willoughby..
President, Board of Directors
Brazoria County Municipal Utility District No. 5
ATTEST:
•
/s/ Kelly C. Flanagan
Secretary, Board of Directors
Brazoria County Municipal Utility District No. 5
51
APPENDIX A
LOCATION MAP
.CITY'. OF HOUSTON- •
•
LM.10
11110
�OVh}�\
CLEAR
•• BRAZORIA. CO. .
7//////1111 PEARLA►C E E
0RAZORIA .COUNTY �; c R
_ Fti:me
Fit 3344
•
0 04 I 1 • +.r - -.
•
ALVIN •
.
APPENDIX B
BRAZORIA COUNTY MUNICIPAL UTILITY DISTRICT NO. 5
BRAZORIA COUNTY; TEXAS
ANNUAL FINANCIAL'REPORT_
SEPTEMBER 30, 1997
TABLE OF CONTENTS .
EXHIBIT
•
INDEPENDENT AUDITOR' S REPORT
GENERAL PURPOSE FINANCIAL STATEMENTS
COMBINED BALANCE SHEET - ALL GOVERNMENTAL FUNDS
AND ACCOUNT GROUPS A
COMBINED STATEMENT OF REVENUES, EXPENDITURES
AND CHANGES IN FUND BALANCES ALL GOVERNMENTAL
FUNDS B
STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN
FUND BALANCES - BUDGET AND ACTUAL - GENERAL FUND
AND SPECIAL REVENUE FUND C
COMBINING AND INDIVIDUAL FUND STATEMENTS
NOTES TO GENERAL PURPOSE FINANCIAL STATEMENTS D
SUPPLEMENTAL INFORMATION
(SEE SEPARATE SUMMARY OF SUPPLEMENTAL
SCHEDULES AND INDEPENDENT AUDITOR' S
REPORT ON SUPPLEMENTAL INFORMATION)
(THIS PAGE INTENTIONALLY -LEFT BLANK)
McCALL & COMPANY
Certified Public Accountants
Member American
13405 Northwest Fwy. Institute of Certified
Suite 204 Public Accountants
Houston,Texas 77040
(713)462-0341 Texas Society of
Fax (713)462-2708 Certified Public
E-Mail:mmccall@accesscomm.net Accountants
Board of Directors
Brazoria County Municipal
Utility District No. 5
Brazoria County, Texas
Independent Auditor' s Report
We have audited the General Purpose Financial Statements of Brazoria
County Municipal Utility District No. 5 at September 30, 1997, and
for the year then ended, as listed in the preceding Table of Con-
tents. The General Purpose Financial Statements are the responsibil-
ity of the management of the District . Our responsibility is to
express an opinion on the General Purpose Financial Statements based
upon an audit .
We have conducted the audit in accordance with generally accepted
auditing standards . These audit standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
General Purpose Financial Statements are free of material misstate-
ments . An audit includes examining, on a test basis, evidence sup-
porting the amounts and disclosures in the financial statements . An
audit also includes assessing the accounting principles used and sig-
nificant estimates made by management, as well as evaluating the
overall General Purpose Financial Statement presentation. We believe
the audit provides a reasonable basis for the opinion presented.
In our opinion, the General Purpose Financial Statements referred to
above present fairly, in all material respects, the financial posi-
tion of Brazoria County Municipal Utility District No. 5 as of
September 30, 1997, and the results of its operations for the year
then ended, in conformity with generally accepted accounting princi-
ples .
i
McCall & Company
Certified Public Accountants
January 14, 1998
BRAZORIA COUNTY MUNICIPAL UTILITY DISTRICT NO. 5
COMBINED BALANCE SHEET -
ALL GOVERNMENTAL FUNDS AND ACCOUNT GROUPS
SEPTEMBER 30, 1997
•
•
Governmental
Special
ASSETS General Revenue
Cash, Note 5 $ 47, 798 $ 20, 644
Temporary Investments -
Note 5 402, 563 53 , 353
Receivables :
Taxes
Service Accounts (Net of Reserve for
Doubtful Accounts of $300) 44, 804
Other 8, 164
Due from Developers 3 , 626
Due from Other Funds, Notes 8 and 9 24, 327 8, 573
Due from Other Governmental Unit,
Note 8 148 8, 280
Prepaid Expenditures 911
Advance for Regional Wastewater
Treatment Plant Operations, Note 9 11, 638
Advance for Joint Water Plant Operations,
Note 8 10, 096
General Fixed Assets, Note 6
Amount Available in Debt Service Fund
Amount to be Provided for Retirement
of General Long-Term Debt
TOTAL ASSETS $ 549, 538 $ 95, 387
EXHIBIT A
Page 1 of 2
Fund Types Account Groups
General, General _ _ Total
Debt Capital Long-Term Fixed (Memorandum
Service Projects Debt Assets - Only)
$ 30, 362 $ 30 $ $ $ 98, 834
329, 865 1, 190, 614 1, 976, 395
5; 130 5, 130
44; 804
8, 164
3 ,:626
404 - - . 33, 304
139, 307 147, 735
911
11, 638
10, 096
7, 391, 100 7; 391, 100
358, 034 358, 034
7, 246, 966 7, 246, 966
$ 365, 357 $ 1, 330, 355 $ 7, 605, 000 $ 7, 391, 100_ $17, 336, 737
The accompanying NOTES TO GENERAL. PURPOSE FINANCIAL
STATEMENTS are an integral part of this report .
BRAZORIA COUNTY MUNICIPAL UTILITY DISTRICT NO. 5
COMBINED BALANCE SHEET -
ALL GOVERNMENTAL FUNDS AND ACCOUNT GROUPS
SEPTEMBER 30, 1997
Governmental
Special .
LIABILITIES AND FUNV`EQUITY =' General Revenue
LIABILITIES : _
Accounts Payable $ 3.0, 621 $ 15, 044
Contract Payable
Retainage Payable
Due to Other Funds 8, 573 24, 731
Due to Other Governmental Unit,
Notes 9 and 10 3, 902 19, 286
Due to Developer
Advances from Participants, Notes
8 and 9 36, 326
Security Deposits 53,520
Deferred Revenue
Bonds Payable, Note 3
TOTAL LIABILITIES $ 96, 616 $ 95, 387
FUND EQUITY:
Investment in General Fixed
Assets, Note 6 $ $
Fund Balances :
Reserved for Authorized
Construction: -
Bond Proceeds _
- Net Investment Revenues - -.
Reserved for Debt Service
Reserved for Water and Sewer
Plant Operations 21, 734
Unreserved - Undesignated 431, 188
TOTAL FUND EQUITY $ 452 ,922 $ -.0-
TOTAL LIABILITIES AND FUND EQUITY $ 549, 538 $ 95, 387
EXHIBIT A
Page 2 of 2
Fund Types Account Groups
General General Total
- -Debt= - .- --. Capital Long-Term Fixed (Memorandum
Service Protects Debt Assets. Only)
$ _2 ;_l93 $ 5, 671 $ $ $ 53, 529
114, 731 114;731
32,440 32, 440
• 33 304
23, 188
4, 823
36, 326
,53 52,0
5, 130 5;130
7, 605, 000 7, 605,.000
$ ` ' 7, 323 $ 157, 665 $ 7, 605, 0'00 $ -0 "$ 7, 961; 991
$ $ $. $ , 7, 391, 100 • ` $- 7,391, 100
1, 038, 246 1, 038, 246
134, 444 134;444
. 358; 034,- •• - 358;034
21;.73.4
. 431, 188
$1 - 358, 034. $ 1, 172, 690 $ -0- ' $ 7391,`100` $ '9,374, 7446
$ . 365,,357 $ 1, 330, 355 $ 7, 605, 000 $ :7, 391; 100 :•.$17,.33,6, 737
The accompanying NOTES TO GENERAL PURPOSE FINANCIAL
STATEMENTS are an integral part of this report .
BRAZORIA COUNTY MUNICIPAL UTILITY DISTRICT NO. 5
COMBINED STATEMENT OF REVENUES, EXPENDITURES AND
CHANGES IN FUND BALANCES - ALL GOVERNMENTAL FUNDS
FOR THE YEAR ENDED SEPTEMBER 30, 1997
Governmental
General
REVENUES :
Taxes $
Water Service 203 , 085
Sewer Service -. 177, 349
Penalty and Interest 13 , 509
Tap Connection and Inspection Fees 94, 633
Investment Revenues 21, 524
Miscellaneous Revenues 1, 852
TOTAL REVENUES . $ 511, 952
EXPENDITURES :
Current :
Professional Fees $ 28, 755
Contracted Services - 83 , 794
.Purchased Water Service, Note 8 45, 426
- Purchased Sewer Service, Note 9 ' 117, 648
Utilities 2, 660
Repairs and Maintenance 63 , 968
Insurance 4, 444
Other Operating Expenditures 40, 092
Capital Outlay 56, 908
Debt Service :
_ Bond Principal
Bond Interest
TOTAL EXPENDITURES $ • 443 , 695
EXCESS OF REVENUES OVER (UNDER) EXPENDITURES $ 68,257
FUND BALANCES - OCTOBER 1, 1996 384 ; 665 -
FUND BALANCES - SEPTEMBER' 30, 1997._: $ 452, 922.
EXHIBIT B
Fund Types
Total
Special Debt Capital (Memorandum
Revenue Service Pro-ects Only)
$ $ 715, 996 $ $ 715, 996
79, 559 282, 644
202, 649 -. 379, 998
c. 3, 470 16,979
94, 633
3 , 757 29, 698 63 , 942 118, 921
1, 852
$ 285, 965 $ 749, 164 $ _ 63 , 942 $ 1, 611; 023
$ 7, 447 $ 4,415 $ $ . 40, 617
25, 313 : 21, 500 130, 607
45,426
117, 648
75,483 78, 143
94, 964 158, 932
4,347 8, 791
76, 772 j 1, 299 30 118, 193
1, 639 60, 517 119, 064
205, 000 205, 000
-509, 080 509', 080
$ 285, 965 $ - 741, 294 $ 60, 547 $ 1, 531, 501 .
$ $.. 7, 870 $ , 3 , 395. $ 79, 522
350, 164 1, 169, 295 1., 904, 124
$ -0- $ 358, 034 - $ 1, 172, 690 $ 1, 983 , 646
The accompanying NOTES TO GENERAL PURPOSE FINANCIAL
STATEMENTS are an integral part of this report .
BRAZORIA COUNTY MUNICIPAL UTILITY DISTRICT NO . 5
STATEMENT OF REVENUES, EXPENDITURES AND
CHANGES IN FUND BALANCES - BUDGET AND ACTUAL - GENERAL FUND
AND SPECIAL REVENUE FUND
FOR THE YEAR ENDED SEPTEMBER 30, 1997
General Fund
Variance
Favorable
Budget Actual (Unfavorable)
REVENUES :
Water Service $190, 000 $203 , 085 $ 13, 085
Sewer Service 166, 000 177, 349 11, 349
Penalty and Interest 12, 000 13 , 509 1, 509
Tap Connection and
Inspection Fees 43 , 500 94, 633 51, 133
Investment Revenues 16, 000 21, 524 5,-524
Miscellaneous Revenues 1, 200 1, 852 652
TOTAL REVENUES $428, 700 $511, 952 $ 83 , 252
EXPENDITURES :
Professional Fees $ 36, 000 $ 28, 755 $ 7,245
Contracted Services 72, 100 83 , 794 (11, 694)
Purchased Water Service 35,470 45, 426 (9, 956)
Purchased Sewer Service 130, 770 117, 648 13 , 122
Utilities 1, 600 2, 660 (1, 060)
Repairs and Maintenance 34, 000 63 , 968 (29, 968)
Insurance 5, 000 4, 444 556
Other Operating
Expenditures 25, 150 40, 092 (14 , 942)
Capital Outlay 20, 000 56, 908 (36, 908)
TOTAL EXPENDITURES $360 , 090 $443 , 695 . $ (83 , 605)
EXCESS OF REVENUES OVER
(UNDER) EXPENDITURES • $ 68, 610 $ 68, 257 $ (353)
FUND BALANCE -
OCTOBER 1, 1996 384, 665 384 , 665
FUND BALANCE -
SEPTEMBER 30, 1997 $453 , 275 $452 , 922 $ (353)
EXHIBIT C
r
Special Revenue Fund Totals (Memorandum Only)
Variance Variance
Favorable Favorable
Budget Actual (Unfavorable) Budget Actual (Unfavorable)
$ 68, 975 $ 79, 559 $ 10, 584 $258, 975 $282, 644 $ 23, 669
230, 476 202, 649 (27, 827) 396,476 379, 998 (16,478)
12, 000 13, 509 1, 509
43 , 500 94, 633 51, 133
3 , 757 3, 757 16, 000 25, 281 9,281
1,200 1, 852 652
$299, 451 $285, 965 ' S (13 ,486) ' ' $728,151 $797, 917 $ 69, 766
$ 17, 950 $ 7,447 $ 10, 503 $ 53 , 950 $ 36,202 $ 17, 748
23 , 370 25, 313 (1, 943) 95,470 109, 107 (13 , 637)
35,470 45, 426 (9, 956)
130, 770 117, 648 13, 122
65, 660 75,483 (9, 823) 67,260. 78, 143 (10, 883)
113, 525 94, 964 18, 561 147, 525 158, 932 (11,407)
4, 750 4, 347 403 9, 750 8, 791 959
69, 230 76, 772 (7, 542) 94, 380 116, 864 (22,484) .
5, 000 1, 639 3 , 361 25, 000 58 , 547 (33 , 547)
$299,485 $285, 965 $ 13 , 520 $659, 575 $729,660 $ (70, 085)
$ (34) $ -0- $ 34 $ 68, 576 $ 68, 257 $ (319)
384, 665 384, 665
$ (34) $ -0- $ 34 $453 , 241 $452, 922 $ (319)
The accompanying NOTES TO GENERAL PURPOSE FINANCIAL
STATEMENTS are an integral part of this report .
(THIS PAGE INTENTIONALLY LEFT BLANK)
BRAZORIA COUNTY MUNICIPAL UTILITY DISTRICT NO. 5
COMBINING AND INDIVIDUAL FUND STATEMENTS
SEPTEMBER 30, 1997. `
(THIS PAGE INTENTIONALLY LEFT BLANK)
BRAZORIA COUNTY MUNICIPAL UTILITY DISTRICT NO. 5
SPECIAL REVENUE FUNDS
COMBINING BALANCE SHEET
SEPTEMBER 30, 1997
Wastewater
Treatment Water
ASSETS Plant Plant Totals
Cash $ 19, 663 $ 981 $ 20, 644
Temporary Investments -
At Cost 51, 830 1, 523 53, 353
Due from Developers 3 , 626 3, 626
Due from Other Funds 8, 573 8, 573
Due from Other Governmental
Unit 8, 280 8,280
Prepaid Expenditures 911 911
TOTAL ASSETS $ 72 ,404 $ 22, 983 $ 95, 387
LIABILITIES AND FUND EQUITY
Liabilities :
Accounts Payable $ 8, 707 $ 6, 337 $ 15, 044
Due to Other Funds 24, 327 404 24, 731
Due to Other Governmental Unit 19,286 19, 286
Advances from Participants 20 , 084 16, 242 36, 326
TOTAL LIABILITIES $ 72 ,404 $ 22, 983 $ 95, 387
FUND BALANCE
Fund Balances :
Unreserved - Undesignated $ -0-. $ -0- $ -0-
TOTAL LIABILITIES AND FUND
BALANCE $ 72,404 $ 22, 983 $ 95, 387
(THIS PAGE INTENTIONALLY LEFT BLANK)
BRAZORIA COUNTY MUNICIPAL UTILITY DISTRICT NO . 5
SPECIAL REVENUE FUNDS
COMBINING STATEMENT OF REVENUES, EXPENDITURES
- AND CHANGES IN. FUND BALANCE .
' SEPTEMBER 30, 1997
Wastewater
Treatment Water
Plant Plant Totals
REVENUE:
Water Service - $ $ 79, 559 $ 79, 559
' Sewer Service 202, 649 202, 649
Investment Revenues 3 , 332 425 3 , 757
TOTAL REVENUES $205, 981 $ 79, 984 $285, 965
EXPENDITURES :
Professional Fees ` --- $ 4, 135 $ 3 , 312 $ 7,447
Contracted Services 23, 517 1, 796 25, 313
Utilities -43, 194 • 32 , 289 75,483
Repairs. and Maintenance : , 68, 067 26, 897 -94,, 964
Insurance - , 2, 379 1, 968 4, 347
Other Operating .Expenditures , 64, 689 - . 12, 083 76, 772
Capital Outlay 1, 639 1,639
TOTAL EXPENDITURES $205, 981 $ 79, 984 $285, 965
EXCESS OF REVENUES. OVER
I (UNDER) EXPENDITURES . -$ ; $ $
1
' FUND BALANCE -
OCTOBER 1, 1996 , .
FUND BALANCE -
SEPTEMBER 30, 1997 $ . -0- $ -0 $ -07
.
1
BRAZORIA -COUNTY MUNICIPAL UTILITY: DISTRICT •NO. 5
SPECIAL REVENUE FUNDS '
COMBINING STATEMENT OF -REVENUES,- EXPENDITURES, AND
CHANGES IN' FUND BALANCE - -BUDGET AND ACTUAL
SEPTEMBER 30, 1997
•
., , . . :. • -. . WASTEWATER TREATMENT PLANT -
- _ Variance
Favorable
Budget Actual (Unfavorable)
REVENUES : . .
'Water Service ' - - - $ $ - $'
_,Sewer. Service.:.. 230,476 202, 649 • '.;(27.., 827)
--Investment Revenues 3 , 332 3 , 332 -
TOTAL REVENUES $230,476 • $205, 981 ` $ (24,495) -
EXPENDITURES :
- Professional Fees - $ 12 , 500 $ 4, 135 . $ 8, 365
Contracted Services - 21, 720 -: 23', 517 _ (1,797),
'-Utilities 33 , 360 43, 194 ' (9, 834)
• Repairs and Maintenance ' 100, 000 ' 68'; 067 3.1,,933
I-nsurance 2, 750 2, 379 ' ' ' 371
Other Operating =
Expenditures 60, 180 64„ 689 (4, 509)
Capital Outlay • '
TOTAL EXPENDITURES $230, 510 $205'; 981 _. . $ 24; 529
EXCESS OF REVENUES OVER
--(UNDER) EXPENDITURES - $ (34) $ . $ • . -. 34
FUND BALANCE -
. OCTOBER 1, 1996' : -
FUND BALANCE - '
SEPTEMBER 30, 1997 $ (34) $ -0- $ .34
'WATER`PLANT " ' ` ~ TOTALS ` (MEMORANDUM ONLY)
Variance Variance-
.Favorable-
- -: a e
Budget • Actual (-Unfavorable) . - -Budget „ActualFavorable
. (Unfavorable)
$ :68, 975 . $ ,79,, 559 $ .10,584.. $: 68,.975 $ ,79,.559, = - $ 10,584
2.3.0,,476 - 202, 649 . - (27, 827)
-4.25 .425 r -,3-,-757.- 3 , 757
'$ `68 , 975 $ 79, 984 $ 11 00'9 $299',451 $285; 965, $ (13,486)'
$ 5,450 $ 3, 312 $ 2, 138 $ 17, 950 $ 7, 447 $ 10, 503
1, 650 1, 796 (146). '-23;370' -25, 313 -- (1,943)
32, 300 32, 289 11 65, 660 75,483 •(9, 823)
13, 52'5' ' 2'6, 897 • (13 37-2.) 113; 525 94, 9'64 ': 18',-561 •
2, 000 1,968 -' 32. , 4, 750 ' : 4 347 = • 403
-9: 05'0. 12, 083 (`3, 033): = '6:9 '23-0-. ` 176, 772 : (7, 542)
5:: 000° 1 63.9 - . ; 3, 3'61 5 '000 1, 639 - 3 ;361
$ 68, 975 $ 79, 984 $ (11; 009.) $299,485 $285, 965 $ 13 , 520
$ $ (3.4) $; :$ 34
$ -:0,- 0 $; - •-0 . ,, $ <. (34.) $ , -0- • $ 34..:
EXHIBIT D
Page 1 of 16
BRAZORIA COUNTY MUNICIPAL UTILITY DISTRICT NO. 5
NOTES TO GENERAL PURPOSE FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
NOTE 1. CREATION OF DISTRICT
Brazoria County Municipal Utility District No. 5 was created by an
Order of the Texas Water Rights Commission, presently known as the
Texas Natural Resource Conservation Commission, effective March 17,
1981 . Pursuant to the provisions of Chapters 49 and 54 of the Texas
Water Code, the District is empowered to purchase, operate and main-
tain all facilities, plants and improvements necessary to provide
water, sanitary sewer service, storm sewer drainage, irrigation,
solid waste collection and disposal, including recycling, parks and
recreational facilities for the residents of the District . The Dis-
trict is also empowered to contract for or employ its own peace offi-
cers with powers to make arrests and to establish, operate and main-
tain a department to perform all fire-fighting activities within
the District . The Board of. Directors held its first meeting on March
18, 1981, and the first bonds were sold on September 16, 1982 .
NOTE 2 . SIGNIFICANT ACCOUNTING POLICIES
The accompanying General Purpose Financial Statements have been pre-
pared in accordance with generally accepted accounting principles as
promulgated by the Governmental Accounting Standards Board. In addi-
tion, the accounting records , of the District are maintained generally
in accordance with the "Water District Accounting Manual" published
by the Texas Natural Resource Conservation Commission.
The Governmental Accounting Standards Board has established the cri-
teria for determining whether or not a given entity is a component
unit . The criteria are (1) is the potential component unit a legally
separate entity, (2) does the primary government appoint a voting
majority of the potential component unit' s board, (3) is the primary
government able to impose its will on the potential componentunit,
(4) is there a financial benefit or burden relationship. The District
was created as an independent municipality. The District does not
meet the criteria for inclusion as a component unit of any entity nor
does any other entity meet the component unit criteria for inclusion
in the District' s General Purpose Financial Statements . The District
has entered into joint venture agreements with Brazoria County Munici-
pal Utility District No. 4 for construction and operation of a water
plant and a sewage treatment plant . The District has oversight
responsibility for the water plant and the sewage treatment plant.
Additional disclosures are provided in Notes 8 and 9 .
The transactions of the District are accounted for in the following
funds and account groups :
EXHIBIT D
Page 2 of 16
BRAZORIA COUNTY MUNICIPAL`'UTILITY' DISTRICT NO-.' 5
NOTES TO GENERAL PURPOSE FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
NOTE 2 . SIGNIFICANT ACCOUNTING POLICIES (Contina.ed)
Funds
Capital Proiects Fund
To account for 'financial resources-segregated for acquisition or- con-
struction of facilities and' related costs.
Debt Service Fund
To account for ad valorem taxes and_ financial resources accumulated
for servicing bonded- dbt` and'the 'cost='of:° assessing and collecting
taxes .
Special= Revenue Fund =' ="' '
To account for financial resources collected and administered by, the
District for the operation of a'joint 'sewage -treatment plant- and a
joint water plant 'which 'are'=component` units 'of the District .
General .Fund
To' account for�'resourc`es 'riot required to -be accounted for in another
fund, customer service'' revenues-�and Costs- and general -expenditures:
Account Groups -
General'-Long-Term Debt _
To account for the unmatured principal 'of general long-term debt obli-
gations . :.
General Fixed Assets
To account -for completed facilities and-district 'organizational -costs.
The General Purpose Financial Statements'include a total column which
is presented for memorandum purposes only and is not intended to _pre-
sent Consolidated- Financial Statements.: '` - -- .
Basis of Accounting -
The accompanying financial statements have been prepared on the modi-
fied- accrual_ basis of accounting.;' Under--this method, -'all expenditures
except bond inteest'--and all-revenues currently-available-are accrued.
EXHIBIT D
Page 3 of 16
BRAZORIA COUNTY MUNICIPAL UTILITY DISTRICT- NO. - 5
NOTES TO GENERAL PURPOSE FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
NOTE 2 . SIGNIFICANT ACCOUNTING POLICIES ,(Continued).
Basis of Accounting (Continued)
Property taxes considered available by the District and included in
revenue include taxes collected during the year and taxes collected -
after year end which were„considered-.available to defray the expendi-
tures of the current year. Deferred-.tax.: revenues are those taxes.
which the District does not reasonably expect to be collected soon
enough in the subsequent period to finance current periodexpendi-
tures.
The District capitalized all costs associated with..the creation of the
District and all costs directly associated with the sale of the bonds .
From the date of sale of bonds through the date of the significant
completion of related improvements, interest earnings and interest,_ .
expenditures related to the bond proceeds are being -capitalized.
All general fixed assets, including infrastructure-fixed assets, are
stated at the .full costs; of assets owned by the-District,_ _ and any con-
tribution by others is recorded in fund equity.
In addition, the District capitalizes the cost of meters and boxes and
residential lines as a part, of the-water system- in general fixed-as-
sets. Repairs are not capitalized: and :replacements- of fixed :assets :
are - capitalized only to the extent that they exceed the cost of the
original assets . Depreciation is not recorded on general fixed
assets.
Amounts transferred from one fund to another fund are. reported as an
other financing source or use. Loans by one fund to another- fund "and
amounts:paid-by, one fund for ano ther,.fund; are .reported as interfund_.
receivables and payables in the balance 'sheet if there is intent to
repay the amount and if the debtor fund has the ability to repay the
advance timely.
In compliance,with_ governmental accounting, principles, the. Board of. -
Directors annually adopts unappropriated budgets for the General Fund
and the Special Revenue--Funds . _
The District does not have employees, therefore, a pension plan has . .
not been established.
Measurement Focus
_ Governmental -fundtypes are accounted for on a spending or financial
flow measurement_ :focus. Accordingly, - only currentassets and, current
liabilities are included on the balance sheet, and the reported fund
EXHIBIT D
Page 4 of 16
BRAZORIA• COUNTY MUNICIPAL UTILITY DISTRICT NO. 5
NOTES TO GENERAL PURPOSE -FINANCIAL STATEMENTS
SEPTEMBER -30, 1997
NOTE 2 . SIGNIFICANT ACCOUNTING POLICIES (Continued)
Measurement Focus (Continued)
balances provide an indication of available spendable or appropriable
resources . Operating statements of governmental fund types report
increases and decreases _in available spendable resources . Fund bal-
ances are included on the balance sheet as follows :
Reserved:
To indicate fund equity which is legally segregated for a
specific future use.
Unreserved:. .
Designated - To indicate fund equity for which the District
has made tentative plans.
Undesignated - To indicate fund equity which is available for
- use in future periods.
NOTE 3 . BONDS PAYABLE _ ' - .:
. . ; Series 1984
Amount Outstanding -- September 30, '1997 $ - 60,000
Interest Rates - - - -10 . 50% - 13 . 50%
Maturity Dates- - Serially March 1,
Beginning/Ending: - _ - . 1987/2008 -
Interest Payment Dates = March 1,
September 1,
Callable Dates September 1,
1994**
** The District reserves the right, at it's' option,- to redeem the' :
bonds maturing on or after March 1, 1995, prior to their sched-
uled maturities, in whole or, from time to time, in part, in such
manner as the District may select, on September 1-, 199'4, or on
any interest payment date thereafter, at thefollowing redemption
prices (expressed as percentages of the principal amount) , plus
accrued interest on the bonds call-ed for redemption to thedate
fixed for redemption. Bonds maturing between 1996 - 2008 were
advance refunded and called for redemption on September 1, 1994 .
EXHIBIT D
•
Page 5 of 16
BRAZORIA COUNTY MUNICIPAL UTILITY DISTRICT . NO . 5
NOTES TO GENERAL PURPOSE FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
NOTE 3 . BONDS PAYABLE. (Continued)
Refunding
Series 1992 Series 1995
Amounts Outstanding
September 30, 1997 $ 5, 525, 000 $ 2, 020, 000
Interest Rates 4 . 00% - 7 . 00% 4 . 75% - 6 . 25%
Maturity Dates - Serially March 1, September 1,
Beginning/Ending 1993/2012 1998/2015
Interest Payment Dates March 1/ March 1/
September 1 September 1
Callable Dates March 1, September 1,
2001** 2005***
** The District reserves the right, at its option, to redeem the
serial bonds maturing on or after March 1, 2002 , prior to their
scheduled maturities, in whole or from time to time in part, in
such manner as the District may select, on March 1, 2001, or on
any date thereafter at a price equal to the principal amount of
the bonds plus accrued interest to the date of redemption.
Series 1992 term bonds maturing September 1, 2011, are subject to
mandatory redemption beginning September 1, 2006 .
*** The District reserves the right, at its option, to redeem the
bonds maturing on or after September 1, 2006, prior to their
scheduled maturities, in whole, or, from time to time, in part,
in such manner as the District may determine, on September 1,
2005, or any date thereafter, at a price equal to the principal
amount of the bonds to be redeemed plus accrued interest thereon
to the date fixed for redemption.
The following is a summary of transactions regarding bonds payable for
the year ended September 30, 1997 :
Bonded Debt Payable - October 1, 1996 $ 7 , 810, 000
Less : Bond Principal Retirement -
Series 1984 $ 55, 000
Series 1992 Refunding 150 , 000 205, 000
Bonded Debt Payable - September 30, 1997 $ 7, 605, 000
EXHIBIT D
Page 6 of 16
BRAZORIA COUNTY MUNICIPAL UTILITY DISTRICT NO 5
NOTES TO GENERAL PURPOSE. FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
NOTE 3 . BONDS PAYABLE (Continued)
Original Bonds Voted - $23,-775, 000
Original Bonds Approved $ _8', 125,000
Original Bonds Issued- $ 8, 125, 000
Refunding Bonds Issued ($6, 065, 000)
Net of Bonds Refunded ($5, 105,.000) $ 960, 000
Bond Discount to Date $ 277, 789
As of September 30, 1997, the debt service requirements on the bonds
outstanding were as follows :
Fiscal
Year : Principal Interest Total
1998 $ 275, 000 $~ 493, 790 " $ 768, 790
1999 . . . 295, 000 : - - 475868 770, 868
2000. 320, 000 457,423 - ' 777,423
2001 _ 345, 000 = 437, 103 " - 782, 103
2002 370, 000 414, 653 784, 653
Thereafter 6, 000, 000 2 ,491, 880 8,491, 880
$ 7, 6.05, 000 $ ,4, 770, 7.17 $12., 375,717-
The bonds are payable from the proceeds of an ad valorem tax levied
upon all property subject, to taxation within. the District, without
limitation as to rate or amount .
The Bond Resolutions require that the'.-District- levy and collect an ad
valorem debt service tax sufficient to pay interest and principal on
bonds when due and the cost of assessing and collecting taxes. During
the year. ended September 30, 1997,. the _District levied an ad valorem
debt service tax at the rate. of :$1 . 12- per _$100 of assessed valuation,
which resulted in a tax levy, of $719, 650 on the adjusted taxable valu-
ation of $64,254,480 for the 1996; tax,.year., see .Note relating to
maintenance tax. ;.
EXHIBIT D
Page 7 of 16
BRAZORIA. COUNTY MUNICIPAL UTILITY DISTRICT NO . 5
NOTES ,TO GENERAL PURPOSE FINANCIAL STATEMENTS
SEPTEMBER 30, 19.97
NOTE 3 . BONDS PAYABLE (Continued) _ ..:
The District' s tax calendar is as follows :
Lien Date - January 1
Billing Date - October 1 or as soon thereafter
as practicable.
Due Date - Not later than January 31
Delinquent- Date - February 1, at which time the taxpayer
is liable for penalty and interest .
NOTE 4 . SIGNIFICANT BOND RESOLUTION AND LEGAL REQUIREMENTS . '
A. In accordance with the :Bond Resolution applicable to the1995
Bond Issue, a portion of the bond proceeds were deposited
into the Debt Service :Fund and reserved for the payment of
bond i-nterest during the construction period. This bond.
interest reserve is reduced as the interest is paid. - Trans-
actions for the current: year are summarized as follows :
Bond _Interest Reserve -. October 1, 199.6 $ 28, 848 .
Less : Bond Interest Payment - Series 1995 28 , 848
Bond .Interest Reserve '= September -30, 1997 $ -O-
B. The Bond Resolutions. state that any profit realized from or -
interest accruing on such, investments shall belong to the
fund from which the monies for such investments were taken;
provided however, that at the discretion of the Board of Direc-
tors, the profits realized from and interest accruing on invest-
ments made from' any' fund may be transferred to the Debt Service
Fund. - No transfers were made during the current fiscal year.
C. For the $6, 065, 000- Series 1992 Refunding Bond Issue' funded on
November 17., 1992 , the District has 'covenanted- that it will take
all necessary steps to comply'with=the requirement that rebatable
arbitrage earnings- on the investment of the gross proceeds of the
Bonds, within the meaning of section 148 (f) of the Internal Rev-
enue Code, be rebated to the federal government . The minimum
requirement for determination of the rebatable amount is on the
five year anniversary of each issue.
EXHIBIT D
• Page 8 of 16
BRAZORIA- COUNTY MUNICIPAL UTILITY DISTRICT NO. 5
NOTES ;TO .GENERAL PURPOSE. FINANCIAI, STATEMENTS
SEPTEMBER 30 .1997
NOTE 5. CASH AND ,TEMPORARY INVESTMENTS ,
•
State. -.statutes include specifications for and limitations applicable
to -the District and its authority to .purchase investments as defined
in- the Public Funds Investment Act .' Authorized investments are sum-
marized as 'follows': .(1) =obligations of the United States or its
instrumentalities, (2) direct obligations of the State of Texas or its
agencies, (3) certain collateralized mortgage obligations ' (excluding
strips and inverse floaters) , (4) other obligations, the principal of
and interest on which are unconditionally guaranteed or insured by the
State of Texas or the United States or -its instrumentalities,, '(5) cer-
tain A rated or higher obligations of states, agencies, counties,
cities, and other political subdivisions of any state, (6) insured or.
collateralized certificates of deposit, (7) certain fully collateral-
1 ized repurchase agreements secured by delivery, -(8) bankers'. accep-
tances with limitations, (9) commercial paper rated 'A-i or P-1 or
higher, (10) no-load money market mutual funds and no-load mutual
funds with limitations, and (11) certain qualified governmental
investment pools .
Under Texas law, the District is required to invest its funds under
written investment policies that primarily emphasize safety of grin-
cipal' and liquidity and that address investment diversification,
yield, maturity, and the quality and capability of investment manage-
ment, and all District funds must be invested in accordance with the
'following investment objectives : understanding the suitability of the
investment to the District' s financial requirements, first; preserva-
tion and safety of principal, second; liquidity, third; .marketability
of the investments if the need arises to liquidate- the investment •
before maturity, fourth; diversification of the investment portfolio,
fifth; and yield, sixth. District' s investments must be made "with
judgment and care, under prevailing circumstances, that a 'person of
prudence, discretion, and intelligence would exercise in the manage-
ment of the person' s own affairs, not for speculation, but for invest-
ment, considering the probable safety of capital and the probable
income to be derived" .= = No person may invest District funds without
express written authority from the Board of Directors.
•
EXHIBIT D
Page 9 of 16
BRAZORIA COUNTY MUNICIPAL UTILITY DISTRICT NO . 5
NOTES TO GENERAL PURPOSE FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
NOTE 5 . CASH AND TEMPORARY INVESTMENTS (Continued)
ASSETS AT COST FAIR VALUE
Cash and Cash Temporary
Equivalents Investments Combined
GENERAL FUND -
Demand Deposits,
Money Market Deposit
Accounts and Savings
Accounts $ 47, 798 $ • $ 47, 798
Tex-Pool 402 , 563 402 , 563
SPECIAL REVENUE FUND
(Restricted for Water .
Plant and Wastewater
Treatment Plant
Operations)
Demand Deposits,
Money Market Deposit
•
Accounts and Savings
Accounts 20, 644 20, 644
Tex-Pool. 53 , 353 53 , 353
DEBT SERVICE FUND -
(Restricted for Payment
of Debt Service and
Cost of Assessing and
Collecting Taxes)
Demand Deposits,
Money Market Deposit
Accounts and Savings
Accounts 30, 362 30, 362
Tex-Pool 329, 865 329, 865
CAPITAL PROJECTS FUND -
(Restricted for Purchase
of General Fixed Assets)
Demand Deposits,
Money Market Deposit
Accounts and Savings
Accounts 30 . 30
Tex-Pool 1, 190, 614 1, 190, 614
TOTALS $ 98, 834 $1, 976, 395 $2 , 075, 229
.. EXHIBIT D
Page 10 of 16
BRAZORIA . COU1TY . MUNICIPAL UTILITY DISTRICT NO. 5-
NOTES TO GENERAL PURPOSE FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
NOTE 5. CASH AND TEMPORARY INVESTMENTS (Continued)
All temporary investments are recorded at cost which the District con-
siders to be fair value.
The Bond Resolutions and, state statutes require that any .cash balance
in' any fund .shall to ,the extent not insured by the Federal Deposit
Insurance Corporation or its successor be continuously secured by a
valid pledge to the, District of securities eligible .under the laws of
Texas to secure the funds of municipal utility districts,. .having an .
aggregate market value, exclusive of accrued interest, at all times
equal to the uninsured cash balance in the fund to which such securi-
ties are pledged. .At the -fiscal year end, the carrying amount of .the
District' s deposits was $98, 834 and the bank balance was $113, 166.
The bank balance was covered by, federal depository-.insurance.
The District' s policy is to require depositories to pledge adequate
collateral to secure the District' s deposits at all times to the •
extent. that the District' s depository balances exceed the limits of
federal depository insurance. As of the highest cash balance date of
each depository exceeding federal depository insurance, the deposito-
ries of the District did pledge adequate collateral to secure the
deposits of .the District . _The. .entity pledging the collateral provided
the information concerning market value.
NOTE 6 . .GENERAL FIXED ASSETS,. .. _
The following is. .a summary of changes -in general fixed assets for the
year ended September 30, 1997 : -
Balances - Balances
October September
- 1, 19-96 Additions 30, 1997
Land and Physical Facilities- ' $ 6, 403, 938 $ 112,-532 . ' $ 6, 5-16,4'70
District -Organizational Costs 869, 737 ' - 4', 893 - 874 , 630
TOTAL _ - $ 7,271,675. ($ 117, 425 , _$ -7, 3-91,100
•
AMOUNTS PROVIDED BY: - -
Capital Projects Fund: -
Bond Proceeds . , $ .5, 529,116 $ , 60, 517 _ $ 5, 589, 633
Revenues 185,194 185, 194
Debt Service Fund:
Revenues (566) (566)
General Fund:
Revenues 266, 940 56, 908 323, 848
Developer Contributions 1, 292 , 991 '1,292, 991
TOTAL $ 7, 273, 675 $ 117, 425 $ 7, 391, 100
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• EXHIBIT. D
Page 12 of 16
BRAZORIA COUNTY .MUNICIPAL ;UTILITY _DISTRICT NO. .5
NOTES TO GENERAL PURPOSE FINANCIAL STATEMENTS
SEPTEMBER. 30, 1997.
NOTE 8. JOINT VENTURE -FOR WATER PLANT. OPERATIONS (Continued)-
If the Districts decide to jointly construct additional water facili-
ties, the Districts will determine which District will operate the
additional water facilities prior -to the awarding of the construction
contract . The facilities will be operated in accordance with the pro-
visions of the current contract . :.
On August 16, 1994, the agreement was supplemented to extend the term
of the 1984 agreement to 1999 and stipulates that if District No. 4 is
required to construct a water plant within its -boundaries, it will
operate and maintain the facility. .. On November 21, 1995., the .Pis-
tricts entered into a restated agreement to reflect the construction
of a second well =and plant within the, boundaries of District No. 4 and
to combine all prior agreements for water production facilities into
one document . The term of the agreement is 20 years ., _ .
During the current fiscal year, the District recorded $45,426 .as its
share of the operating cost of the plant and maintained:an.:operating
reserve of $10, 096 . On May 23 , 1989, -District No. 4 transferred
ownership of water well capacity (243 connections) ::previously leased
to the District in exchange for ownership of an- additional 12,-000 gal-
lons per day capacity in the regional wastewater treatment plant . The
participating districts and their respective pro .rata- share of owner-
ship in the water plant are.:
Percentage •of_ Ownership
Remote
Existing Water
Facilities Well
Brazoria County Municipal
Utility District No. ' 4_ 55 . 61 ' 33 .33
Brazoria County'"Municipal - - '
Utility District No-. '5 44 .39 ' 66 . 67
Total 100 . 00 100 . 00
Transactions for, the current year, are as follows :
EXHIBIT D
Page 13 of 16
BRAZORIA COUNTY MUTNICIPAL UTILITY DISTRICT NO . 5
NOTES TO GENERAL PURPOSE FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
NOTE 8. JOINT VENTURE FOR WATER PLANT OPERATIONS (Continued)
Brazoria Brazoria
County County
Municipal Municipal
Utility Utility
District No. 4 District No. 5 Total
Due (to) from
Participants at
October 1, 1996 $ 14, 332 $ 3, 522 $ 17, 854
Refunded to Participants
Operating Costs 32 , 651 45, 694 78, 345
Capital Outlay 541 1, 098 1, 649
Cash Receipts (39, 649) (45, 657) (85,306)
Interest Revenue (157) (268) (425)
Increase in Reserve 562 4, 184 4, 746
Due (to) from
Participants at
September 30, 1997 $ 8,280 $ 8, 573 $ 16, 853
Two Month' s Operating
Reserve at
October 1, 1996 $ 5, 584 $ 5, 912 $ 11, 496
Increase in Reserve 562 4, 184 4 , 746
Two Month' s Operating
Reserve at
September 30, 1997 $ 6, 146 $ 10, 096 $ 16, 242
NOTE 9 . JOINT VENTURE FOR WASTE DISPOSAL
On May 18, 1983 , the District executed a forty (40) year contract. with
Brazoria County Municipal Utility District No. 4 providing for both
districts to share in the construction and operations cost of a
regional wastewater treatment plant . The contract provides for each
district to pay its pro rata share of the construction cost and each
will be entitled to its pro rata share of capacity in the plant . In a
prior year, the District' s pro rata cost of constructing the plant was
capitalized into the General Fixed Asset Account Group of the Dis-
trict . During the fiscal year ended September 30, 19.94, the plant
capacity was expanded from 380, 000 gallons per day to 700, 000 gallons
per day. District No. 4 paid for the cost of the expansion. On
November 21, 1995, the Districts entered into a restated agreement
which includes provisions for the construction of an additional
180, 000 gallons per day capacity. The term of the agreement is 20
years .
EXHIBIT D
Page 14 of 16
BRAZORIA COUNTY MUNICIPAL UTILITY . D,ISTRICT NO. 5
- NOTES TO GENERAL PURPOSE-FINANCIAL-- STATEMENTS
SEPTEMBER '30, 1997
NOTE 9. JOINT VENTURE FOR WASTE DISPOSAL (Continued)
The participating districts and their respective pro rata share of
capacity in the wastewater treatment plant are :
Percentage of
Capacity Total Capacity
Brazoria County Municipal Utility
District No. 4 240, 500 gpd 34 . 36
Brazoria County Municipal Utility
District No. 5 459, 500 gpd 65 . 64
Total •- 700, 000 gpd 100 . 00
For- operations of the plant, the District and District No. 4 are
responsible for a fixed fee based upon $1 . 50 per thousand gallons per
day of capacity owned, plus a pro rata share of costs in .excess of
that amount based on the -number of connections . As of September 30,
1997, each district' s participation has been adj-usted to actual cost
and -the difference recorded as --due -to or due from -each -participant .
The District accounts 'forthe cost-of operations for the plant in the
Special Revenue Fund. Separate financial statements are not issued on
the -Joint -venture': =
During :the current fiscal- year, the District recorded $117, 648. as its
share of 'the operating cost of the plant and maintained an operating
reserve of $11, 638 .
Transactions -for the current year are as' -follows :
Brazoria Brazoria
• County - County
Municipal Municipal
Utility . Utility
- • District No-. 4- District No. 5 Total
Due (to`) from
Participants at
October -1, 1996 - - $ (17, 550y - $ (23 , 051) $ (40, 601)
-Refunded to Participants ' 17, 550 23, 051 40, 601
Operating Costs- 86,426 - 119, 555 205, 981
Cash Receipts- ' • - (104, 32-2). - (142', 815) - (247, 137)
Interest Revenue (1,425) . - (1, 907)' (3, 332)
Increase in Reserve - 35 840 875
Due (to) from
Participants at
September 30, 1997 $ (19, 286) $ (24, 327) $ (43 , 613)
EXHIBIT D
Page 15 of 16
BRAZORIA COUNTY MUNICIPAL UTILITY DISTRICT NO . 5
NOTES TO GENERAL PURPOSE FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
NOTE 9 . JOINT VENTURE FOR WASTE DISPOSAL (Continued)
Brazoria Brazoria
County County
Municipal Municipal
Utility Utility
District No. 4 District No. 5 Total
One Month' s Operating
Reserve at October 1,
1996 $ 8, 411 $ 10, 798 . $ 19,209
Increase in Reserve 35 840 8.75
One Month' s Operating
Reserve at
September 30, ;,1997 $ 8,446 $ 11, 638 $ 20, 084
NOTE 10 . . AGREEMENT TO LEASE WATER WELL CAPACITY
On June 4, .1991,_ the District contracted to lease from Brazoria County
Municipal Utility District No. 4 the capacity to serve the equivalent
of 50 single-family connections. The capacity will be used. to serve a
school constructed adjacent to the District . The District will, lease
the capacity as the connections are added to the system at the rate of
$1 . 93 per connection. .The term of the agreement is for twenty-five
years ., During the current fiscal year, the District recorded. an-
expenditure of $3 , 426 for capacity leased from District No. 4 .. , •
NOTE 11. AGREEMENT FOR OPERATION AND MAINTENANCE OF DETENTION
FACILITIES
On September 15, 1992, the District and Brazoria County Municipal
Utility District No. 4 _entered into an agreement to share in the oper-
ation and maintenance of a 49-acre detention facility. The District
shall operate the facility and shall be responsible for routine main-
-tenance'. Costs over $500 shall require the approval of both Dis-
tricts . Per the agreement, the costs of operating and insuring the
facility shall be,:allocated based upon each District' s pro rata share.
of reserved capacity. The Districts have verbally agreed to split the
costs equally. The District currently has 54 .3% of the reserved
capacity; District, No. 4 has 45 . 7% of the reserved capacity. The term
of the agreement is ten (10) years.
EXHIBIT D
Page 16 of 16
BRAZORIA COUNTY MUNICIPAL UTILITY DISTRICT NO. 5
NOTES TO GENERAL PURPOSE FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
NOTE 11. AGREEMENT FOR OPERATION AND MAINTENANCE OF DETENTION
FACILITIES (Continued)
The District is administering the costs of maintaining the facilities
and bills District No. 4 for its pro-rata share. Costs of $5, 078 were
incurred during the current fiscal year.
NOTE 12 . UNREIMBURSED COSTS
At September 30, 1997, a Developer within the District indicated that
approximately $662, 000 had been advanced on behalf of the District.
These expenditures were primarily for engineering, construction and .
related costs for water, sanitary sewer, and storm drainage for Crys-
tal Lake Subdivision. A second Developer within the District indi-
cated that approximately $500, 000 had been advanced on behalf of the
District . These expenditures were primarily for engineering, con-
struction and related costs for water, sanitary sewer and storm
drainage for Southdown Subdivision. Since any reimbursement is con-
tingent upon-- a future- bond sale-, these amounts have not been recorded
in the financial statements.
NOTE 13 . ESCROW REQUIREMENT
In compliance with requirements of the Texas Natural Resource Conser-
vation Commission ("the Commission") , the District has escrowed
$923 , 564 from the Series 1995 bond proceeds pending Commission
approval of plans and specifications for the District' s pro rata share
of an expansion of the joint sewage treatment plant ($198, 672) , and
the District' s share of a new water plant ($724, 892) . On January 31,
1997, the Commission authorized the release of $198, 672 from escrow
for construction of an aeration basin, a blower, and an office
building at the wastewater treatment plant . The remaining escrowed
funds are recorded in the temporary investments of the Capital
Projects Fund.
NOTE 14. USE OF SURPLUS FUNDS
On January 31, 1997, the District received approval from the Texas
Natural Resource Conservation Commission to use $55, 244 of surplus
Capital Project Fund monies to fund the additional costs related to
the construction of an aeration basin, a blower, and the office build-
' ing at the wastewater treatment plant.
(THIS PAGE INTENTIONALLY LEFT BLANK)
BRAZORIA COUNTY MUNICIPAL UTILITY DISTRICT NO . 5
SUPPLEMENTAL INFORMATION
SEPTEMBER 30, 1997
(THIS PAGE INTENTIONALLY LEFT BLANK)
SUMMARY OF SUPPLEMENTAL INFORMATION REQUIRED
BY THE ANNUAL AUDIT REPORT REQUIREMENTS OF THE
TEXAS NATURAL RESOURCE .CONSERVATION COMMISSION. .
INDEPENDENT AUDITOR' S REPORT ON
SUPPLEMENTAL INFORMATION
NOTES REQUIRED BY THE WATER DISTRICT ACCOUNTING
MANUAL. (Included in the Notes to General = --
Purpose Financial Statements)
.
SCHEDULE
.
SCHEDULE OF SERVICES AND RATES v 1
SCHEDULE OF .GENERAL FUND- EXPENDITURES - 2:
SCHEDULE ..OF. TEMPORARY-INVESTMENTS' 3
ANALYSIS •OF TAXES: .LEVIED:. AND `RECE-IVABLE. " - g..
ANALYSIS OF CHANGES IN GENERAL FIXED ASSETS
,AND- ORGANIZATIONAL-- COSTS 5
GENERAL LONG--TERM -DEBT. SERVICE. REQUIREMENTS - BY YEARS: 6 _
ANALYSIS_ OF_ CHANGES IN:GENERAL -LONG-TERM DEBT - • 7
COMPARATIVE SCHEDULE OF REVENUE AND- EXPENDITURES -. -
GENERAL AND DEBT' .SERVICE FUNDS -' FIVE YEARS:: g
INSURANCE _COVERAGE:
. BOARD MEMBERS, KEY PERSONNEL AND CONSULTANTS 10
MANAGEMENT LETTER
McCALL & COMPANY
Certified Public Accountants
Member American
13405 Northwest Fwy. Institute of Certified
Suite 204 Public Accountants
Houston,Texas 77040
(713)462-0341 Texas Society of
Fax (713)462-2708 Certified Public
E-Mail:mmccall@accesscomm.net Accountants
Board of Directors
Brazoria County Municipal
Utility District No. 5
Brazoria County, Texas
Independent Auditor' s Report
on Supplemental Information
We have examined the General Purpose Financial Statements of Brazoria
County Municipal Utility District No. 5 as of September 30, 1997,- and
for the year ended, listed in the Table of Contents, and our report
thereon is included in the preceding section of this report . The
accompanying supplemental information includes financial data
excerpted from prior years' financial statements which were audited
by us .
Our audit was made for the purpose of formulating an opinion on the
General Purpose Financial Statements taken as a whole. The accom-
panying supplemental schedules as listed on the preceding page,- are
presented for purposes of additional analysis and are not a
required part of the General Purpose Financial Statements . Such
information, except for that portion marked "unaudited" , on which
we express no opinion, has been subjected to the auditing proce-
dures applied in the audit of the basic General Purpose Financial
Statements and, in our opinion, is fairly stated in all material
respects in relation to the basic General Purpose Financial State-
ments taken as a whole.
In connection with this audit, except as noted in the enclosed man-
agement letter, nothing came to our attention that indicated the
District had departed from general or special legislation under
which the District was created or from laws and regulations
excerpted and included in the WATER DISTRICT ANNUAL AUDIT REPORT
REQUIREMENTS MANUAL, APPENDIX B, or from requirements of the Bond
Resolutions . However, this audit was not directed primarily toward
obtaining such knowledge.
McCall & Company
Certified Public Accountants
January 14, 1998
SCHEDULE 1
Page 1 of 4
BRAZORIA COUNTY MUNICIPAL UTILITY DISTRICT NO . 5
SCHEDULE OF SERVICES .AND 'RATES
FOR THE YEAR ENDED .SEPTEMBER -30, 1997
1. SERVICES PROVIDED BY THE DISTRICT:
X Retail Water Wholesale Water X 'Drainage
X Retail Sewer Wholesale Sewer Irrigation
X Parks/Recreation Fire Protection Security
Solid Waste/Garbage Flood Control Roads
X Participates in joint venture, regional system
and/or wastewater service (other than emergency
interconnect)
Other
2. RETAIL RATES ARE BASED ON A 5/8" METER:
Based on Rate Order Dated: April 16�, 1996.
Flat Rate per 1, 000
Minimum Minimum Rate Gallons Over
Charge ' Usage Y/N Minimum Usage Levels
WATER: $ 8 . 50 2 , 000 N $1 .57 2, 001 and up
WASTE-
WATER:
(SEWER) $ 8 . 89 2, 000 N $1 . 14 2, 001 and up
SURCHARGE: $ -0-
District employs winter averaging for wastewater
usage? Yes No X
Total water and sewer charges per 10, 000
gallons usage (including surcharge) . , $ 39 . 07
3 . RETAIL SERVICE PROVIDERS: Number of retail water and/or waste-
water connections within the District as of the fiscal year end.
Provide actual numbers and single family equivalents (ESFC) as
noted:
See Accompanying Independent Auditor' s
Report on Supplemental Information.
SCHEDULE 1
Page 2 of 4
BRAZORIA COUNTY MUNICIPAL UTILITY DISTRICT NO . 5
SCHEDULE OF SERVICES AND RATES
FOR THE YEAR ENDED SEPTEMBER 30, 1997
3 . RETAIL SERVICE PROVIDERS : (Continued)
(Unaudited)
Inactive
Active Active Connections
Connections ESFC (ESFC) **
Single-Family 1, 026 1, 026 12
Multi-Family
Commercial 2 62
Other - Recreational Centers,
Government and VFD 63 116
TOTAL 1, 091 1, 204 12
* Number of connections relates to water service, if provided.
Otherwise, the number of wastewater connections should be pro-
vided.
** "Inactive" means that water and wastewater connections were
made, but service is not being provided.
4. TOTAL WATER CONSUMPTION (IN THOUSANDS) DURING THE FISCAL YEAR:
(Unaudited)
Gallons pumped into system: 162, 116 *
Gallons billed to customers : 99, 604
* The water plant located within the District also supplies water
to Brazoria County Municipal Utility District No. 4 .
5 . STANDBY FEES :
Does the District assess standby fees? Yes No X
See Accompanying Independent Auditor' s
Report cm Supplemental Information.
SCHEDULE 1
Page 3 of 4
BRAZORIA COUNTY MUNICIPAL -UTILITY DISTRICT NO. _5
SCHEDULE- OF SERVICES AND RATES
FOR THE YEAR "ENDED` SEPTEMBER `30, 1997
6. ANTICIPATED SOURCES OF FUNDS TO BE USED 'FOR.DEBT SERVICE PAY-
MENTS IN THE DISTRICT'S FOLLOWING FISCAL YEAR:
This projected debt service requirement is based on debt .,out-
H standing at September 30, 1997, and does not take into con-
' sideration debt service costs resulting from any bonds sold sub-
sequent to the current fiscal :year. -The District isnot repre-:
sentirig that the revenues projected will in fact occur; only
that, as of the date of this report, the District estimates the
following list of revenues will be used to service debt in the
next fiscal year. -
Amount
a. Debt -Service Tax Receipts _ . , $ . 734, 000
b. Surplus Capital Project Fund Monies
c. Water and/or Wastewater Revenue_
d. Standby Fees
e. Debt Service :Fund:.Balance' :To- Be _Used
f. Interest Revenues 34, 790
g. Other (Describe)
TOTAL ANTICIPATED FUNDS TO BE USED $ 768, 790
The data included in Schedule 1 Item 6 is unaudited due to the
prospective nature of the information presented. The informa-
tion as presented as approved by the Board of Directors on
January 19, 1998 .
See "Accompanying- Independent Auditor'-s
Report 7=on- 'SuppieMental-: Information.
SCHEDULE 1
Page 4 of 4
BRAZORIA COUNTY MUNICIPAL UTILITY DISTRICT NO . 5
SCHEDULE OF SERVICES AND
FOR THE YEAR ENDED SEPTEMBER 30, 1997
7 . LOCATION OF DISTRICT:
County or Counties in which District is located.
Brazoria.
Is the District located entirely within one
county? Yes X No
Is the District located within a city?
Entirely Partly Not at all X
Is the .District located within a city' s extra territorial juris-
diction (ETJ) ? Entirely X Partly Not at all
ETJ' s in which district is located. -
City of Pearland.
Is the general membership of theBoard appointed by an office
outside the district?
Yes No X
See Accompanying Independent Auditor' s
Report on Supplemental Information.-
SCHEDULE 2
Page 1 of 2
BRAZORIA COUNTY MUNICIPAL UTILITY DISTRICT .NO. 5
SCHEDULE OF GENERAL FUND EXPENDITURES
FOR. THE YEAR ENDED -SEPTEMBER 30, 1997
General
Fund
CURRENT
PERSONNEL (Including Benefits) $ _0_
PROFESSIONAL FEES
. Auditing • " • $ 5, 800
:Engineering - - 7,"851
. Legal , . ,-15; 104
TOTAL PROFESSIONAL FEES $ `28, 755
PURCHASED SERVICES FOR RESALE
Water Service Purchases $ 45, 426
Sewer Service Purchases 117648.
Tap Connections 51,483
TOTAL PURCHASED SERVICES FOR RESALE $ 214,557
CONTRACTED SERVICES
. Bookkeeping
..Operations and Billing - ' $' -76, 239
TOTAL CONTRACTED SERVICES -- - ., ;$ - 83 , 794
UTILITIES
Electricity $ 2, 327
Telephone 333
TOTAL UTILITIES $ 2, 660
REPAIRS AND MAINTENANCE -
- $ - 63 , 968
See Accompanying, Independent. Auditor' s
Report onSupplemental Information.
SCHEDULE 2
Page 2 of 2
BRAZORIA COUNTY MUNICIPAL UTILITY DISTRICT NO . 5
SCHEDULE OF GENERAL, FUND EXPENDITURES
FOR THE YEAR ENDED SEPTEMBER 30, 1997
General
Fund
ADMINISTRATIVE EXPENDITURES
Director Fees $ 7, 500
Insurance 4,444
Legal Notices 112
Office Supplies and Postage 211
Regulatory Assessment 1, 675
Travel and Per Diem 6, 836
Other 1, 009
TOTAL ADMINISTRATIVE EXPENDITURES $ 21, 787
CAPITAL OUTLAY - Acquisition of Fixed Assets ' $ 5, 425
SOLID WASTE DISPOSAL $ -0-
FIRE FIGHTING $ ,-0-
PARKS AND RECREATION $ -0-
OTHER EXPENDITURES
Laboratory Fees $ 811
Permit Fees 797
Inspection Fees 17, 715
Water Well Capacity Lease 3 ,426
TOTAL OTHER EXPENDITURES $ 22 , 749
TOTAL EXPENDITURES $ 443 , 695
Number ofpersons employed by the District : 0 Full-Time
0 Part-Time
-' See Accompanying Independent Auditor' s
Report on Supplemental Information.
SCHEDULE 3
BRAZ.ORIA COUNTY MUNICIPAL .UTILITY DISTRICT NO. 5
SCHEDULE OF TEMPORARY INVESTMENTS ::.
SEPTEMBER .30,._ 1997: -
Accrued
Interest Maturity Principal Interest
Rate Date Amount Receivable
GENERAL FUND
Local Government
Investment Pool :
Tex Pool
Number 2015-1111-000 Variable Daily - $ 402,563 $ -0.-
SPECIAL•REVENUE FUND
Local Government
Investment Pool :
Tex Pool
Number 2015-16,69-000 Variable Daily $ 51, 830
Number 2015-2069-000 Variable Daily 1, 523 .:.
TOTAL SPECIAL REVENUE FUND $ 53 , 353 $ -0-
DEBT SERVICE FUND
Local Government
Investment Pool : _
Tex Pool
Number 2015-1023-000 Variable Daily $ 96, 179 $
Number 2015-5021-000 Variable Daily 233 , 686
TOTAL DEBT SERVICE FUND $ 329, 865 $ -0-
CAPITAL PROJECTS FUND
Local Government
Investment Pool :
Tex Pool
Number 2015-1189-000 Variable Daily $ 376, 725 $
Number 2015-2896-000 Variable Daily 813, 889
TOTAL CAPITAL PROJECTS FUND $1, 190, 614
TOTAL TEMPORARY INVESTMENTS $1, 976, 395 $ -0-
See -Accompanying Independent. Auditor's
Report on Supplemental_ Information._
SCHEDULE 4
Page 1 of 3
BRAZORIA COUNTY MUNICIPAL UTILITY DISTRICT NO . 5
ANALYSIS OF TAXES LEVIED AND RECEIVABLE
FOR THE YEAR ENDED SEPTEMBER 30, 1997
Debt Service Taxes
TAXES RECEIVABLE - OCTOBER 1, 1996 . $ 1, 614
Adjustments to Beginning Balance • • (138) $ 1,476
Original .1996 Tax Roll $718, 036
Adjustment to 1996 Tax Roll 1, 614 719, 650
TOTAL TO BE ACCOUNTED FOR - $721, 126
TAX COLLECTIONS :
Current Year $714, 595
Prior Years - 1,401 715 , 996
TAXES RECEIVABLE - SEPTEMBER 30, 1997 $ 5, 130
TAXES RECEIVABLE BY YEARS :
1996 • $. 5, 055
1993 •
75
TOTAL TAXES RECEIVABLE BY YEARS $ 5, 130
See Accompanying Independent Auditor' s
Report on Supplemental Information.
(THIS PAGE INTENTIONALLY LEFT BLANK)
BRAZORIA COUNTY MUNICIPAL UTILITY DISTRICT NO . 5
ANALYSIS OF TAXES LEVIED AND RECEIVABLE
FOR THE YEAR ENDED SEPTEMBER 30, 1997
1996
PROPERTY VALUATIONS :
Land $16, 053 ,320
Improvements 47, 786, 360
Personal Property 956,460
Exemptions (541, 660)
TOTAL PROPERTY VALUATIONS $64 , 254,480
TOTAL DEBT SERVICE TAX RATES PER
$100 VALUATION: $ 1.120
ADJUSTED TAX LEVY* $ 719, 650
PERCENT OF TAXES COLLECTED TO TAXES LEVIED 99. 30%
* Based upon the adjusted tax levy at the time of the audit
for the fiscal year in which the tax was levied.
SCHEDULE 4
Page 2 of 3
1995 .. ' 1994 1993
$12, 047, 530 $11, 396,440 $ 7, 008, 740
-43., 621, 360 38, 5.85, 310 31, 080, 260 .
953, 960 996, 960 = 878, 340
• (426, 000) (496, 330) (227, 620)
$56, 196, 850 $50,482, 380 ' $38; 739,720 •
$ 1 . 199 $ 1 .'199 $ 1 : 520 '
$ 673 , 800 $ 605, 284 -$ 588, 843 •
100 . 00% 100 . 00% 99 . 99%
See Accompanying Independent_Auditor' s ,
Report on-.Supplemental Information, '
SCHEDULE 4
.Page 3 of 3
BRAZORIA COUNTY MUNICIPAL UTILITY DISTRICT NO . 5
ANALYSIS OF TAXES LEVIED AND RECEIVABLE
FOR THE YEAR ENDED SEPTEMBER 30, 1997
Tax rate for all overlapping jurisdictions (Includes any taxing
entities which overlap 10% or more of the district) .
1996
Taxing Jurisdiction -Service Provided Tax Rate
•
Brazoria County - $0 .297500
Pearland Independent School
District - 1 . 768500
Special Districts :
. Brazoria County Drainage
District- No: - 4 - Flood- Control 0.. 144441
District Tax Rate - 1 . 120000
Total Overlapping Tax Rate $3 . 330441
•
•
•
See Accompanying Independent Auditor' s
Report on Supplemental Information.
I _
(THIS PAGE INTENTIONALLY LEFT BLANK)
BRAZORIA COUNTY MUNICIPAL UTILITY DISTRICT NO . .5
ANALYSIS OF CHANGES IN GENERAL FIXED ASSETS
AND ORGANIZATIONAL COSTS
FOR THE YEAR ENDED SEPTEMBER 30, 1997
Balances
October
1, 1996
PHYSICAL FACILITIES :
Land $ 143 , 748
Jogging Trails 27, 328
Water System 1, 202, 758
Drainage System 2 , 175, 555 •
Sanitary Sewer System 1, 871, 870
Lift Stations and Force Main 201, 671
Engineering Fees 775, 008
Clearing and Grubbing 6, 000
Construction in Progress
TOTAL PHYSICAL FACILITIES $ 6, 403 , 938
DISTRICT ORGANIZATIONAL COSTS
Bond Issue Costs $ 85, 189
Financial Advisory Fees 173 , 730
Legal Fees 252 , 256
Operations During Construction Period 21, 755
Bond Anticipation Note Interest 251, 058
Temporary Investments Interest (39, 869)
Developer Interest 125, 618
TOTAL DISTRICT ORGANIZATIONAL COSTS $ 869, 737
TOTAL GENERAL FIXED ASSETS $ 7, 273, 675
AMOUNTS PROVIDED BY:
Capital Projects Fund:
Bond Proceeds $ 5, 529, 116
Revenues 185, 194
Debt Service Fund:
Revenues (5 6 6)
General Fund:
Revenues 266, 940
Developer Contributions 1, 292 , 991
TOTAL AMOUNTS PROVIDED $ 7, 273, 675
SCHEDULE 5
I ,
Balances
September
Additions "Reclassifications - 30, 1997
l ,
$ $ $ 143 , 748
27;328
52, 581 1, 255, 339
750 2, 176, 305
1, 083 1, 872, 953 ' •
201, 671
942 (10, 717) 765, 233
6, 000'
57, 176 10, 717 67, 893
$ 112 , 532 $ -0- $ 6, 516, 470
$ 378 $ $ 85, 567
173 , 730
4, 515 256, 771
21, 755
251, 058
(39, 869)
125, 618
$ 4 , 893 $ -0- $ 874, 630
•
$ 117, 425 $ -0- $ 7, 391, 100
$ 60, 517 $ $ 5, 589, 633
185, 194
(566)
56, 908 323, 848
1, 292 , 991
$ 117,425 $ -0- . - $ 7, 391, 100
See Accompanying Independent Auditor' s
Report on Supplemental Information.
BRAZORIA COUNTY MUNICIPAL UTILITY DISTRICT NO. 5
GENERAL LONG-TERM DEBT SERVICE REQUIREMENTS, BY YEARS
SEPTEMBER 30, 1997
S E R I E S - 1 9 8 4
Due During
Fiscal Principal Interest Due
Years Ending Due March 1/
September 30 March 1 September 1 Total
1998 $ 60, 000 $ 3, 225 $ 63 , 225
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
TOTAL $ 60, 000 $ 3 , 225 $ 63, 225
SCHEDULE 6
` Page 1 of 2
11
REFUNDING S E R I E S - 1 9 9 2
Due During
Fiscal .Principal Interest Due
' ! Years Ending Due I _March 1/ -
, i September 30 March 1 September 1 • Total
1998 • $ 160, 000 $ 373,, 875 $ . 53_3, 875
1999 235, 000 361, 790 596, 790
2.000 255, 0.00 346, 345 • 601, 345
2001 270, 000 329, 275 .599, 275
'! 2002 290, 000 310, 650 600, 650
2003 310, 000 , 290, 395 . 60.0, 395
2004 . 330, 000 268, 553 59,8, 553
. 2005 • 355, 000 244, 825 599, 825
- . 2006 380, 000 . 219,.100 -599, 100
2007 r , , -- 410, 000 191, 450 60,1,450
2008 440, 000 161, 700 ;;601, 700
' 2009 . 470, 000 129, 850 .599, 850
2.010 ' 505, 000 • 95, 725 600, 725
2011 540, 000 59, 150 599, 150
2012 575, 000 20, 125 595, 125
2013
2014 •
2015
TOTAL $ ..5, 525, 000 . $ 3 , 402., 808 $ 8, 92.7, 808
See Accompanying Independent Auditor' s
Report on Supplemental Information.
BRAZORIA COUNTY MUNICIPAL UTILITY DISTRICT NO . 5
GENERAL LONG-TERM DEBT SERVICE REQUIREMENTS, BY YEARS
SEPTEMBER 30, 199.7
S E R I E S - .1 9 9 5
Due During
Fiscal Principal Interest Due
Years Ending : Due March 1/
September 30 September 1 September 1 Total
1998. $ 55, 000 $ 116, 690 $ 171, 690
1999 60, 000 114, 078 174, 078
2000 65, 000 111, 078 176, 078
2001 75, 000 107, 828 182 , 828
2002 80, 000 104, 003 184, 003
,2003 85, 000 99, 843 184, 843
2004 90, 000 95, 338 185, 338
2005 95, 000 90,478 185, 478
2006 . 100 , 000 85, 253 185, 253
2007 110, 000 79, 653 189, 653
2008 115, 000 73 , 383 188, 383
2009 125, 000 66, 713 191, 713
2010 135, 000 59, 213 194, 213
2011 145, 000 51, 113 196, 113
2012 155, 000 42 ,413 197, 413
2013 165, 000 32 , 919 197, 919
2014 175, 000 22, 813 197, 813
2015 190, 000 . 11, 875 201, 875
TOTAL. $ 2., 020, 000 $ .1,3.64, 684 $ 3 , 384, 684
I
!I SCHEDULE 6
Page 2 of 2
•
11
I
li
II
j TOTAL ANNUAL REQUIREMENT
A L L SERIES
' I Due During Total
I
Fiscal Total Total Principal
Years Ending Principal • Interest and Interest
September 30 Due Due Due
1998 $ 275, 000 • $ 4'93, 790 • $ 768, 790
1999 295, 000 475, 868 770, 868
1� 2000 320, 000 457,423 777,423
2001 345, 000 437, 103 782,103
2002 370, 000 414, 653 784, 653
2003 395, 000 - 390, 238 785,238
I
2004 420, 000 363, 891 783, 891
2005 450, 000 335, 303 785, 303
{ 2006 480, 000 304, 353 784, 353
2007 520, 000 271, 103 791, 103
2008 555, 000 235, 083 790, 083
2009 595, 000 196, 563 791, 563
2010 640, 000 154, 938 - - 794, 938
2011 685, 000 110, 263 795, 263
2012 730, 000 62, 538 792, 538
2013 165, 000 32, 919 197, 919
2014 175, 000 22, 813 197; 813
2015 190, 000 11, 875 201; 875
i
TOTAL $ 7, 605, 000 $ 4, 770, 717 $12 , 375; 717
See Accompanying Independent Auditor' s
Report on Supplemental Information.
BRAZORIA COUNTY MUNICIPAL UTILITY DISTRICT NO. 5
ANALYSIS OF CHANGES IN GENERAL LONG-TERM DEBT
FOR THE YEAR ENDED SEPTEMBER 30, 1997
Bonds
Outstanding
Original October
Description Bonds Issued 1, 1996
Brazoria County Municipal Utility
District No. 5 Unlimited Tax
Bonds - Series 1984 $ 1, 620, 000 $ 115, 000
Brazoria County Municipal Utility
District No. 5 Unlimited Tax
Refunding Bonds - - Series 1992 6; 065, 000 5, 675, 000
Brazoria County Municipal Utility
District No. 5 Unlimited Tax
Bonds - Series 1995 2, 020, 000 2 , 020, 000
TOTAL $ 9, 705, 000, $ 7, 810, 000
For interest rates, interest payment dates and
maturity dates, see Exhibit D, Footnote 3 .
SCHEDULE 7
it
Page 1 of 2
Current Year Transactions
Bonds
Retirements Outstanding
September
Bonds Sold Principal Interest 30, 1997 Paying Agent
'i Texas Commerce
Bank N.A.
Corporate Trust
Products
$ $ 55, 000 $ 9, 365 $ 60, 000 Houston, TX .77210
Texas Commerce
Bank N.A.
Corporate Trust
Products
150; 000 383:, 025 5, 525,000 Houston,-. TX. 77210
Texas Commerce
Bank N.A.
Corporate Trust
Products
116, 690 2 , 020, 000 Houston, TX 77210
$ . -0- $ 205, 000 $ 509, 080 $ 7, 605, 000
See Accompanying Independent Auditor' s
Report on Supplemental Information.
(THIS PAGE INTENTIONALLY LEFT BLANK)
BR.AZORIA COUNTY MUNICIPAL UTILITY DISTRICT NO. 5
COMPARATIVE SCHEDULE OF REVENUE AND EXPENDITURES
GENERAL AND DEBT SERVICE FUNDS - FIVE YEARS
Amounts
1997 1996 1995
DEBT SERVICE FUND REVENUES : .
Tax Revenues $ 715, 996 $ 674, 354 $ 605, 615
Penalty and Interest 3 , 470 3, 009 2, 687
Investment Revenues 29, 698 29, 450 21, 829
Miscellaneous Revenues 38
TOTAL DEBT SERVICE FUND .
REVENUES $ 749, 164 $ . 706, 813 $ 630 , 169
DEBT SERVICE EXPENDITURES :
Tax Collection Expenditures $ 21, 456 $ 23 , 441 $ 21, 519
Debt Service Interest and
Fees 514, 838 497, 305 422, 613
Debt Service Principal 205, 000 195, 000 180, 000
Refunding Cost of
Issuance
TOTAL DEBT SERVICE
EXPENDITURES $ 741, 294 $ 715 , 746 $ 624 , 162
EXCESS DEBT SERVICE REVENUE
OVER (UNDER) EXPENDITURES $ 7, 870 $ (8,933) $ 6, 007
TOTAL ACTIVE RETAIL WATER AND/.
OR WASTEWATER CONNECTIONS 1,.0-91 .- .9.43 - 863
I
SCHEDULE 8
Page 1 of 2
Percent of Total Revenue
1994 1993 1997 1996 1995 1994 1993
$ 273 , 852 $ 249, 873 74 .3% 82 .4% 82 . 6% _ 75 .0% . 76 . 8%
9, 006 11, 069 2 . 6 2 . 9 2 . 8 2 .-5 3 .4
5.3, 000 37, 845 18 .5 10 . 6 8 . 6 14 . 5 11 . 6
8,-723 17, 015 2 .4 5 .2
11, 252 8, 470 4 .2 3 . 8 4 .4 3 . 1 2 . 6
9, 089 1, 352 0 .4 0 .3 1 .6 2 . 5. . 0 .4
$ 364, 922 $ 325, 624 100 . 0% 100 . 0% 100 . 0% 100 . 0% 100 . 0%
$ 25,494 $ 30, 915 5 . 6% 7 . 6% 9 . 1% 7 . 0% 9 .5%
177, 842 141, 746 . 48 .2 51 . 5 49 . 0 , , 48 . 7 43 . 5
1, 981 2, 007 0 . 5 0 .4 0 .4 0 . 5 . 0 .6
53 , 106 47, 158 12 .5 5 . 9 20 .2 14 .6 14 . 5
34, 374 30, 373 8 . 7 . 6 . 0 7 . 1 9 .4 9 .3
48, 574 20, 248 11 . 1 5 . 8 14 . 1 13 . 3 6 .2
$ 341, 371 $ . 272 ,447 86. 6% 77 .2% 99 . 9% 93 .5% 83 . 6%
$ 23 , 551 $ - 53, 177 13 .4% 22 . 8% 0 . 1% . 6 . 5% 16 .4%
See Accompanying Independent Auditor' s
Report on Supplemental Information.
SCHEDULE 7
Page 2 of 2
BRAZORIA COUNTY MUNICIPAL UTILITY DISTRICT NO . 5
ANALYSIS OF CHANGES IN GENERAL LONG-TERM DEBT
FOR. THE YEAR ENDED SEPTEMBER 30, 1997
Tax and/or Tax
Bond Authority: Tax Bonds Refunding Bonds
Amount Authorized by Voters $ 6, 105, 000 $17, 670, 000
Less: Amount Issued 6, 105, 000 8, 085, 000
Add: Amount of Bonds Refunded .
and Defeased 5, 105, 000
Remaining To Be Issued $ 5, 105, 000 $ 9, 585, 000
Debt Service Fund .Cash and Temporary Investments
balances as of September 30, 1997 : $ 360,227
Average annual Debt Service payment (Principal &
Interest) for remaining term of all debt : $ 687, 540
-
•
See Accompanying Independent Auditor' s
Report on Supplemental Information.
BRAZORIA COUNTY MUNICIPAL UTILITY DISTRICT NO . 5
COMPARATIVE SCHEDULE OF REVENUE AND EXPENDITURES
GENERAL AND DEBT SERVICE FUNDS - FIVE YEARS
Amounts
1997 1996 1995
GENERAL FUND REVENUES :
Service Revenues $ 380 ,434 $ 369, 393 : :$ ,, 314, 739-
Penalty and Interest 13 , 509 • 12 , 965 10, 528
Tap Connection and -
Inspection Fees 94, 633 47, 600 32 , 775
STP Capacity Lease
Investment Revenues 21, 524 16, 840 16, 760
Miscellaneous Revenue 1, 852 . . :1=; 559 . , 6 , 16E 1
TOTAL GENERAL FUND REVENUES $ 511 , 952 $ -448-, 357 $ --. 380, 970
GENERAL FUND EXPENDITURES :
Professional Fees $ 28, 755 $ 34, 194 $ 34, 665 .
Purchased and Contracted
Services 246, 868 230, 884 186, 858
Utilities 2, 660 1,.633. 1, 684
Repairs and Maintenance .63 , 968 •. `26,469 76, 938
Recurring Operating
Expenditures 44, 536 26, 978 27 , 105
Capital Outlay • • 56,308 . . 26, 209 53 , 615
TOTAL GENERAL FUND
EXPENDITURES $ 443 ,695 $ 346, 367 $ 380 , 865
EXCESS GENERAL FUND REVENUE
OVER (UNDER) EXPENDITURES $ 68, 257 $ 101, 990 $ 105
i
BRAZORIA COUNTY MUTNICIPAL UTILITY DISTRICT, NO . 5
BOARD MEMBERS, KEY PERSONNEL. AND CONSULTANTS
SEPTEMBER 30, 19.97
District Mailing Address - Brazoria County Municipal Utility
District No. 5
c/o Coats, Rose, Yale, Holm,
Ryman & Lee, P.C.
1001 Fannin, Suite 800
Houston, Texas 77002-6707
District Telephone No. - (713) 651-0111
: __Term of Office
Board Members Elected/Expires
Ricki A. Willoughby - -
1026 Margate 05/94 - _,
Pearland, TX 77584 05/98
' Jack T. Hollis
2300 Briarwest' #4309 05/96
• Houston, TX 77077 , , .05/2000,
David Denton 05/94 -
1018 Oxford
Pearland, TX 77584 05/98
Kelly C. Flanagan 05/94 -
1043 Margate 05/98
Pearland, TX 77584
Phil Nedbalek 05/96
1022 Oxford 05/2000
Pearland, TX 77584
Note: No Director has any business or family relationships (as
defined by the Texas Water Code) with major . landowners in
the District, with the District' s Developer or with any of
the District' s consultants.
SCHEDULE 9
Page 2 of 2
BRAZORIA COUNTY MUNICIPAL UTILITY DISTRICT .NO. 5
INSURANCE. COVERAGE -
SEPTEMBER 30, 1997
Policy
Amount . Clause
- of Co-
Type of Coverage From/To Coverage Insurer/Name Insurance
POLLUTION 10/20/96 New Hampshire
LIABILITY 10/20/97 Insurance Company* None
Per Occurrence $ 300., 000
General Aggregate • 300, 000
AUTOMOBILE 10/20/96 New Hampshire
LIABILITY 10/20/97 Insurance Company* None -
Limit Per Accident $2, 000, 000 •
PROPERTY - FIRE, New Hampshire
LIGHTING AND 10/20/96 Insurance Company* 80%
EXTENDED COVERAGE 10/20/97 $2 , 790, 000
Deductible 1, 000
BOILER AND 10/20/96 New Hampshire
MACHINERY 10/20/97 $2, 790, 000 Insurance Company* ' . None
Deductible 2, 500
Extra Expense 50, 000 -
DIRECTORS AND National Union . ` •
OFFICERS - 10/20/96 Fire Insurance _
LIABILITY 10/20/97 Company -Of
General Aggregate $4, 000, 000 Pittsburg, PA None
Each Occurrence 2, 000, 000
Deductible 1, 000
* - Stock Company
See Accompanying Independent Auditor' s
Report on Supplemental Information.
SCHEDULE 9
Page 1 of 2
BRAZORIA COUNTY MUNICIPAL UTILITY DISTRICT NO. .5
INSURANCE COVERAGE
SEPTEMBER 30, 1997
Policy
Amount Clause
-of . Co-
Type of Coverage From/To Coverage Insurer/Name Insurance
FIDELITY BONDS
Public Officials
Faithful Per- 04/15/97 $ 10, 000 Western Surety
formance Bond 04/15/98 Per Company* None
Director
Crime Bond 09/01/96 Redland
Bookkeeper 10/27/97 $ 10, 000 Insurance Company* None
Tax Assessor/Collector 10, 000
. Operator . 10, 0.00
Delinquent Tax Attorney 10, 000
GENERAL 10/20/96 New- Hampshire .
LIABILITY 10/20/97 Insurance Company* None
General Aggregate Limit $4, 000, 000
Products/Completed
Operations Aggregate
Limit 2, 000, 000
Personal and Advertising
Injury -Limit 2, 000, 000
Each Occurrence Limit 2, 000, 000
Fire Damage Limit -
Any one fire 50, 000
Medical Expense 5, 000
* - Stock Company
See Accompanying 'Independ'ent Auditor's
Report on Supplemental Information.
SCHEDULE 8
Page 2 of 2
Percent of Total Revenue
1994 1993 1997 1996 1995 1994 1993
$ 586, 897 $ 543, 804 95 . 6% 95 .4% 96 . 1% 96 . 8% 96 . 8%
3 , 459 1, 738 0 .4 0 .4 0 .4 0 . 6 0 .3
15, 714 16, 301 4 . 0 4 .2 3 . 5 2 . 6 2 . 9
0 . 0 0 . 0 0 . 0 0 . 0 0 . 0
$ 606, 070 $ 561, 843 100 . 0% 100 . 0% 100 . 0% 100 . 0% 100 . 0%
/$ 17, 265 $ 18, 672 2 . 9% 3 . 3% 3 .4% 2 . 8% 3 .3%
438, 525 365, 917 68 . 7 70 .4 67 . 1 72 .4 65 . 1
160, 000 215, 000 27 .4 27 . 6 28 . 6 26 .4 38 .3
2 , 075 789 0 . 0 0 . 0 0 . 0 0 . 3 0 . 0
$ 617, 865 $ 600 , 378 99 . 0% 101 .3% 99 . 1% 101 . 9% 106 . 7%
$ (11, 795) $ (38, 535) 1 . 0% (1 .3) % 0 . 9% (1 . 9) % 6 . 7%
801 735
See Accompanying Independent Auditor' s
Report on Supplemental Information.
SCHEDULE 10
Page 1 of 3
Expense
Per Diem Reimbursement
for the for the
year ended year ended Resident
- September ,September , . . of
30 , 1997 30, 1997 Title District
$1, 650
$1, 003 President Yes
$1,450 $ 699 Vice President No
Assistant Vice President/
Assistant Secretary/
Treasurer/Assistant
$1, 550 . $ 763 Investment Officer Yes
Secretary/Treasurer/
$1, 400 $1, 093 Investment Officer Yes
Assistant Secretary/
$1,450 $ 882 Treasurer Yes
See Accompanying Independent Auditor' s
Report on Supplemental Information.
SCHEDULE 10
Page 2 of 3
BRAZORIA COUNTY MUNICIPAL UTILITY DISTRICT NO . 5
BOARD MEMBERS, ' KEY PERSONNEL AND CONSULTANTS
SEPTEMBER 30, 1997
•
Fees _
for the ---
year ended -
September
Consultants Date Hired 30, 1997 Title
Assessments of the Southwest Tax '
P. 0. Box 1368 - Assessor/
Friendswood, TX 77546 05/04/81 $ 9, 800 Collector
•
Brazoria County Appraisal
District Central
500 N. •Chanango -- - Legislative Appraisal
Angleton, TX 77515 Action • $ 5, 942 • District
Coats, Rose, Yale, Holm, •
-
Ryman & Lee, P.C.
1001 Fannin, Suite 800- -
Houston, TX 77002-6707 • 06/19/90 $ 28, 861 Attorney
District Data Services, Inc.
8558 Katy Frwy. , Suite 119
Houston, TX 77055 - 07/17/85 $ 11, 299 Bookkeeper
ECO Resources
12550 Emily Court
Sugar Land, TX 77478 10/19/81 $359, 117 Operator
Ferro-Saylors, Inc .
1880 Dairy Ashford Rd.
Suite 505
Houston, TX . 77077 07/07/94 $ 13 , 6.54 . Engineer
See Accompanying Independent Auditor' s
Report - on -Supplemental Information.
SCHEDULE 10
Page 3 of 3
BRAZORIA COUNTY MUNICIPAL UTILITY DISTRICT NO . 5
BOARD MEMBERS, KEY PERSONNEL AND CONSULTANTS
SEPTEMBER 30, 1997
Fees
for the
year ended
September
Consultants Date Hired 30, 1997 Title
McCall & Company
Certified Public Accountants
1340.5 Northwest Freeway
Suite 204
Houston, TX 77040 09/16/87 $ 7, 610 Auditor
Perdue, Brandon, Fielder,
Collins & Mott, L.L.P. Delinquent
2600 Citadel Place, Suite 500 Tax
Houston, TX 77008 03/19/96 $ . 871 Attorney
•
Rauscher Pierce Refsnes, Inc.
1001 Fannin, Suite 700 Financial
Houston, TX 77002-6796 03/19/91 $ -0- Advisor
•
See Accompanying Independent Auditor' s
Report on.Supplemental Information.
(THIS PAGE INTENTIONALLY LEFT BLANK)
McCALL & COMPANY
Certified Public Accountants
Member American
13405 Northwest Fwy. Institute of Certified
Suite 204 Public Accountants
Houston,Texas 77040
(713)462-0341 January: 14, 1998 - Texas Society of
Fax (713)462-2708 Certified Public
E-Mail:mmccall@accesscomm.net - Accountants
Board of Directors .
Brazoria County Municipal
Utility District No. 5
Brazoria County, Texas
Members of the Board:
In planning and performing the audit of the General Purpose Financial
Statements of Brazoria County Municipal Utility District No. 5 for
the year ended September 30, 1997, we considered the internal control
structure in order to determine the auditing procedures implemented
for the purpose of expressing an opinion on the financial statements
and not to provide assurance on the internal control structure. Our
consideration of the internal control structure would not necessarily
disclose all matters in the internal control structure that might be
a material weakness under standards established by. the American
Institute of Certified Public Accountants .
A material weakness .is a_ condition. in which the design or operation
of the specific internal control structure elements does not reduce
to a relatively low level the risk that errors or irregularities in
amounts that would be material in relation to the financial state-
ments being audited may occur and not be detected_ within a timely
period by the District in the normal course of performing its
assigned functions .
We noted no matters involving the internal control structure and its
operation that we consider to be a material weakness as defined
above . We would like to communicate to you the following observa-
tions and/or suggestions :
Insurance Coverage
We have not made an adequate study of the companies employed by the
District to determine if such companies have adequately segregated
their procedures to allow for adequate internal controls . The size
of these companies may place certain limits on their ability to seg-
regate functional responsibilities, and the size of the District pre-
cludes sufficient segregation of duties if all accounting functions
were handled by an employee of the District . In addition, some of
the District' s consultant agreements require a certain amount of
insurance coverage for both fidelity bonding and general liability
coverage. •
Members of the Board January 14, 1998
Brazoria County Municipal - Page 2
Utility District No. 5
We recommend the District continue to periodically review certifi-
cates of insurance provided by the consultants to ascertain that the
required amounts of insurance are in force. We also recommend the
District continue to engage its engineer to review the District' s
insurance coverage on its property, plant and equipment to gain
assurance that the facilities are adequately insured.
Public Funds Investment Act
Effective September 1, 1995, the Public Funds Investment Act, Chapter
2256, Government Code was amended. Included in the amended statute
is a requirement for the District' s auditor to perform a compliance
audit of the District' s compliance with its adopted investment pol-
icy. Based upon our test of compliance, we acknowledge that the Dis-
trict has substantially complied with the provisions of the invest-
ment policy.
This. management letter is intended solely for the information and
use of the Board of Directors of Brazoria County Municipal Utility
District No. 5 and to meet the requirements of the Texas Natural
Resource Conservation Commission. We appreciate the courtesy and
assistance extended by the Board of Directors and the District' s
consultants during the course of our audit . If you have any ques-
tions concerning the matters presented herein or need assistance in
implementing any of these, please contact us .
Sincerely yours,
e 1
McCall &Company
Certified Public Accountants
DAN
R 1JSCHER
INVESTMENT SERVICES
INVESTMENT BANKING
MEMBER NYSE/SIPC
Financial Advisor to the District
OFFICIAL STATEMENT DATED FEBRUARY 9, 1998 DEC 2 0 <3cn
IN THE OPINION OF BOND COUNSEL, INTEREST ON THE BONDS IS EXCLUDABLE FROM GROSS INCOME FOR FEDERAL r
gl
INCOME TAX PURPOSES UNDER EXISTING LAW AND THE BONDS ARE NOT PRIVATE ACTIVITY BONDS.SEE "LEGAL MATTERS" C
FOR A DISCUSSION OF BOND COUNSEL'S OPINIONS, INCLUDING A DESCRIPTION OF ALTERNATIVE MINIMUM TAX CONSE-' 0
QUENCES FOR CORPORATIONS.
The District has designated the Bonds as "qualified tax-exempt obligations."See "LEGAL MATTERS-Qualified Tax-Exempt Obligations- m
Purchase of the Bonds by Financial Institutions." X O
NEW ISSUE Standard & Poor's Ratings Services (MBIA) .. ." Q z
(See "SALE AND DISTRIBUTION OF THE BONDS- '": C
THE MBIA Insurance Corporation Insurance Policy" D X
and "-Municipal Bond Rating" herein.)
$1,980,000 03
BRAZORIA COUNTY MUNICIPAL UTILITY DISTRICT NO. 5 2
(A Political Subdivision of the State of Texas, located within Brazoria County)
UNLIMITED TAX BONDS, SERIES 1998
The $1,980,000 Brazoria County Municipal Utility District No. 5 Unlimited Tax Bonds, Series 1998 (the "Bonds') are
obligations of Brazoria County Municipal Utility District No.5 (the"District") and are not obligations of the State of Texas,Brazoria
County,Texas,the City of Pearland,Texas,or any entity other than the District. Neither the faith and credit nor the taxing power of
the State of Texas,Brazoria County,Texas,the City of Pearland,Texas,or any entity other than the District is pledged to the payment
of the principal of or interest on the Bonds.
Dated: March 1, 1998 Due: September 1, as shown below
Principal of the Bonds is payable at the principal payment office of Chase Bank of Texas,National Association,currently in Dallas,
Texas, the paying agent/registrar (the "Registrar"). Interest on the Bonds will be payable by check or draft, dated as of the interest
payment date,and mailed by the Registrar to registered owners as shown on the records of the Registrar (the"Registered Owner") at
the close of business on the 15th calendar day of the month next preceding each interest payment date(the"Record Date"),or by such
other customary banking arrangements as may be agreed upon by the Registrar and the Registered Owner at the risk and expense lof the
Registered Owner.Interest is payable September 1,1998,and each March 1 and September 1 thereafter until the earlier of maturity or
redemption. The Bonds are fully registered in denominations of$5,000 or any integral multiple thereof.
The Municipal Bond Guaranty Insurance Policy to guarantee the principal of and interest on the Bonds on mem
the stated payment dates as described herein will be issued by:
MBIA INSURANCE CORPORATION
MATURITY SCHEDULE
(Due September 1)
Initial Initial
Principal Interest Reoffering Principal Interest Reoffering
Amount Maturity Rate Yield(a) Amount Maturity Rate Yield(a)
$ 65,000 1999 6.20% 3.90% $ 90,000 2007(b) 4.50% 4.50%
65,000 2000 6.20 4.00 95,000 2008(b) 4.60 4.60
65,000 2001 6.20 4.10 100,000 2009(b) 4.50 4.55
65,000 2002 6.10 4.15 105,000 2010(b) 4.50 4.60
70,000 2003 4.20 4.20 115,000 2011(b) 4.60 4.70
75,000 2004 4.30 ' 4.30 125,000 2012(b) 4.60 4.75
80,000 2005 4.40 4.40 245,000 2013(b) 4.60 4.80
85,000 2006 4.45 4.45 260,000 2014(b) 4.60 4.85
275,000 2015(b) 4.60 4.90
(a) Information with respect to the initial reoffering yields of the Bonds is the responsibility of the Underwriter.Initial reoffering yields represent the
initial offering price,which may be changed for subsequent purchasers.
(b) The Bonds maturingon or after September 1,2007,shall be subject to redemption and payment at the option of the District,in whole or in part,on
PJ P� PY P�
September 1,2006,or on any date thereafter, at par plus accrued interest to the date fixed for redemption.
i
If less than all of the Bonds are redeemed at any time, the particular Bonds to be redeemed shall be selected by the District in
integral multiples of$5,000 within any one maturity.The registered owner of any Bond, all or a portion of which has been called for
redemption,shall be required to present same to the Registrar for payment of the redemption price on the portion of the Bond so called
for redemption and issuance of a new Bond in the principal amount equal to the portion of such Bond not redeemed.
if
The Bonds constitute the sixth series of unlimited tax bonds issued by the District for the purpose of acquiring and constructing a
waterworks,wastewater and storm drainage system (the"System") to serve the District,and to refund certain of such bonds issued for
such purpose,$7,605,000 in principal amount of which are outstanding as of the date of this Official Statement.After issuance of the
Bonds,the District's total direct bonded indebtedness,included in the Bonds,will be$9,585,000.Voters in the District have authorized
a total of$23,775,000 principal amount of bonds for the purpose of acquiring and constructing the System,of which$17,670,000 may
be used and for refunding purposes. Following the issuance of the Bonds, $7,605,000 principal amount of unlimited tax bonds
authorized by the District's voters will remain unissued.See"THE BONDS-Issuance of Additional Debt."The Bonds,when issued,
constitute valid and legally binding obligations of the District,payable from the proceeds of a continuing,direct annual ad valorem tax,
without legal limitation as to rate or amount,levied against all taxable property within the District. See "THE BONDS-Source of
Payment."
The Bonds are offered subject to prior sale,when,as and if issued by the District and accepted by the Underwriter,subject to the
approval of the Attorney General of Texas and of Coats,Rose,Yale,Holm,Ryman&Lee,P.C.,Bond Counsel.Delivery of the Bonds
is expected on or about March 16, 1998.
TABLE OF CONTENTS
Page No.
USE OF INFORMATION IN OFFICIAL STATEMENT 3
SALE AND DISTRIBUTION OF THE BONDS 3
Award of the Bonds 3
Marketability 3
Securities Laws 4
The MBIA Insurance Corporation Insurance Policy 4
Municipal Bond Rating 6
OFFICIAL STATEMENT SUMMARY 7
THE BONDS 14
General 14
Assignments, Transfers and Exchanges 14
Redemption of the Bonds 14
Replacement of Registrar 15
Authority for Issuance 15
Outstanding Bonds 15
Source of Payment 15
Issuance of Additional Debt 16
No Arbitrage 16
Annexation and Consolidation 16
Registered Owners' Remedies 17
Bankruptcy Limitation to Registered Owners' Rights 17
Legal Investment and Eligibility to Secure Public Funds in Texas 18
Defeasance 18
Use and Distribution of Bond Proceeds 118
THE DISTRICT 21
Authority 21
Description 21
Management of the District 22
Tax Assessor/Collector 22
Bookkeeper 22
Operator , 22
Auditor 22
Engineer 23
Financial Advisor 23
Attorney 23
DEVELOPERS 23
Role of the Developers 23
Description of the Developers 23
DEVELOPMENT - 25
BUILDERS 26
FUTURE DEVELOPMENT 26
AERIAL PHOTOGRAPH OF THE DISTRICT 27
PHOTOGRAPHS TAKEN WITHIN THE DISTRICT 28
PHOTOGRAPHS TAKEN WITHIN THE DISTRICT 29
DISTRICT DEBT 30
Debt Service Requirement Schedule 30
Bonded Indebtedness 31
Estimated Direct and Overlapping Debt Statement 33
Debt Ratios 33
TAX DATA 34
General 34
Tax Rate Limitation 34
Maintenance Tax 34
Historical Values and Tax Collection History 34
Analysis of Tax Base 35
Principal 1997 Taxpayers _ 36
Exemptions 36
Tax Rate Calculations 37
Estimated Overlapping Taxes 37
TAXING PROCEDURES 38
Authority to Levy Taxes 38
Property Tax Code and County-wide Appraisal District 38
Property Subject to Taxation by the District 38
Tax Abatement 39
Valuation of Property for Taxation 39
District and Taxpayer Remedies 40
Levy and Collection of Taxes - 40
District's Rights in the Event of Tax Delinquencies 40
THE SYSTEM 41
Regulation 41
Description 41
INVESTMENT CONSIDERATIONS 43
General 43
Factors Affecting Taxable Values and Tax Payments 43
Principal Land Owner's Obligations to the District 43
Maximum Impact on District Tax Rates 44
Tax Collection Limitations •• 45
Registered Owners' Remedies and Bankruptcy - 45
The Effect of the Financial Institutions Act,of 1989 on Tax Collections of the District 45
Marketability 46
Future Debt 46
Competitive Nature of Houston Residential Housing Market 46
Continuing Compliance with Certain,Covenants - 46
Approval of the Bonds 46
LEGAL MATTERS 47
Legal Opinions 47
No-Litigation Certificate 47
Tax Exemption 47
Tax Accounting Treatment of Discount and Premium on Certain Bonds 49
QUALIFIED TAX-EXEMPT OBLIGATIONS 50
OFFICIAL STATEMENT 50.
General 50
Experts 50
Certification as to Official Statement 51
Updating of Official Statement 51
Official Statement "Deemed Final" 51
CONTINUING DISCLOSURE OF INFORMATION 51
Annual Reports 52
Material Event Notices 52
Availability of Information From NRMSIRs and SID 52
Limitations and Amendments 53
Compliance With Prior Undertakings 53
APPENDIX A - LOCATION MAP
APPENDIX B - FINANCIAL STATEMENTS OF THE DISTRICT
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 to give any information or to make any
representations other than those contained in this Official Statement and, if given or made, such other information
or representations must not be relied upon as having been authorized by the District. -
This Official Statement does not constitute,and is not authorized by the District for use in connection with, an offer
to sell or the solicitation of any offer to buy in any state in which such offer or solicitation is not authorized or in
which the person making such offer or solicitation is not qualified to do so or to any person to whom it is unlawful
to make such offer or solicitation.
All of the summaries of the statutes,orders, resolutions,contracts, audits, and engineering and other related reports
set forth in the Official Statement are made subject.to all of the provisions of such documents. These surrunaiies
do not purport to be complete statements of such provisions, and reference is:made to such documents, copied of
which are available from the Financial Advisor.
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 that they will be realized. Any information and expressions of opinion herein contained are subject
to change without notice, and neither the delivery,of this Official Statement nor any sale made hereunder shall,
under any circumstances, create any implication:that there has been no change in the affairs of the District or other
matters described herein since the date hereof. However, the District has agreed to keep this Official Statement
current by amendment or sticker to reflect material changes in the affairs of the District and, to the extent that
information actually comes to its attention, the other matters described in the Official Statement, until delivery of
the Bonds to the Initial-Purchaser of the Bonds(as hereinafter defined). See "OFFICIAL STATEMENT- Updating
of Official Statement." All changes in the affairs of the.District and other matters described in the Official Statement
subsequent to the delivery of the Bonds and all information with respect to the resale of the Bonds is the
responsibility of the Initial Purchaser.
SALE AND DISTRIBUTION OF THE BONDS
Award of the Bonds
After requesting competitive bids for the Bonds, the District has accepted the lowest bid, which was tendered by
a syndicate jointly managed by Dean Witter Reynolds, Inc., CIBC Oppenheimer Corp., Banc One Capital Corp.,
and Crews&Associates(collectively referred to herein as the "Underwriter" or the "Initial.Purchaser")to.purchse
the Bonds bearing the interest rates shown under "MATURITY SCHEDULE" at a price of 97.0% of the par value
thereof plus accrued interest to the date of delivery, which resulted in a net effective interest rate of 4.8673% as
calculated pursuant to Article 717k-2, Vernon's Texas Civil Statutes, as-amended.
Marketability
The District has no control over the reoffering yields or prices.of the.Bonds or over trading of the Bonds in the
secondary market. Moreover, there is no assurance that a secondary market will be made in the Bonds. If there is
a secondary market, the difference between the bid and asked 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.
3
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 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 acts of any other jurisdictions.The District assumes
no responsibility for registration or qualification of the Bonds under the securities laws of any jurisdiction in which
the Bonds may be offered, sold, or otherwise transferred. This disclaimer of responsibility for registration or
qualification for sale or other disposition of the Bonds should not be construed as an interpretation of any kind with
regard to the availability of any exemption from securities registration or qualification provisions.
The MBIA Insurance Corporation Insurance Policy
The following information has been furnished by MBIA Insurance Corporation(the "Insurer")for use in this Official
Statement. Reference is made to Appendix C for a specimen of the Insurer's policy.
The Insurer's policy unconditionally and irrevocably guarantees the full and complete payment required to be made
by or on behalf of the District to the Registrar or its successor of an amount equal-to (i) the principal of(either at
the stated maturity or by an advancement of maturity pursuant to a mandatory sinking fund payment) and interest
on, the Bonds as such payments shall become due but shall not be so paid (except that 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 guaranteed by the Insurer's policy shall be made in such amounts and at such times as such.
payments of principal would have been due had there not been any such acceleration); and (ii) the reimbursement
of any such payment which is subsequently recovered from any owner of the Bonds pursuant to a final judgment
by a court of competent jurisdiction that such payment constitutes an avoidable preference to such owner within the
meaning of any applicable bankruptcy law (a"Preference"). - `
The Insurer's policy does not insure against loss of any prepayment premium which may-at any time be payable
with respect to any Bond. The Insurer's policy does not, under any circumstance, insure against loss relating to:
(i) optional or mandatory redemptions (other than mandatory sinking fund redemptions); (ii) any payments to be
made on an accelerated basis; (iii)payments of the purchase price of Bonds upon tender by an owner thereof; or
(iv)any Preference relating to (i)through(iii)above. The Insurer's policy also does not insure against nonpayment
of principal of or interest on the Bonds resulting from the insolvency, negligence or any other act or omission of
the Registrar or any other paying agent for the Bonds. - - -
Upon receipt of telephonic or telegraphic notice, such notice subsequently confirmed.in writing by registered or
certified mail, or upon receipt of written notice by registered or certified mail, by the Insurer from the Registrar
or any owner of a Bond the payment of an insured amount for which is then due, that such required payment,has
not been made, the Insurer on the due date of such payment or within one business day after receipt of notice of
such nonpayment, whichever is later, will make a deposit of funds, in an account with State Street Bank and Trust
Company,N.A., in New York, New York, or its successor, sufficient for the payment of any such insured amounts
which are then due. Upon presentment and surrender of such Bonds or presentment of such other proof of
ownership of the Bonds, together with any appropriate instruments of assignment to evidence the assignment of the
insured amounts due on the Bonds as are paid by the Insurer, and appropriate instruments to effect the appointment
of the Insurer as agent-for such owners of the Bonds in any legal proceeding related to payment of insured amounts
on the Bonds, such.instruments being in a form satisfactory to State Street Bank and Trust Company, N.A., State
Street Bank.and Trust Company, N.A. shall disburse to such owners or the Registrar payment of the insured
amounts due on such Bonds, less any amount held by the Registrar for the payment of such insured amounts and
legally available therefor.
4
, i
The Insurer is the principal operating subsidiary of MBIA Inc., a New York Stock Exchange listed company.
MBIA Inc. is not obligated to pay the debts of or claims against the Insurer. The Insurer is domiciled in the State
of New York and licensed to do business in and subject to regulation under the laws of all 50 states, the District
I of Colombia, the Commonwealth of Puerto Rico, the Commonwealth of the Northern Mariana Islands, the Virgin
!3I217fh of � United States and the Territory• of Guam. The Insurer has two European branches, one in the
Republic of France and the other in the Kingdom of Spain. New York has laws prescribing minimum capital
I
requirements, limiting classes and concentrations of investments and requiring the approval of policy rates and
forms. State laws also regulate the amount of both the aggregate and individual risks that may be insured, the
payment of dividends by the Insurer, changes in control and transactions among affiliates. Additionally,the Insurer
i ' is required to maintain contingency reserves on its liabilities in certain amounts and for certain periods of time.
IOn November 14, 1997, MBIA Inc. announced the signing of a definitive agreement to merge with CapMA
I. Holdings Inc. ("CHI"),theparent company of Capital Markets Assurance Corporation("CapMAC"),
g p y p rp ( p ),in a stock-ford
stock transaction. The announcement also stated that all outstanding policies issued by CapMAC will be backed
by the full financial resources of MBIA Inc., and that the agreement is subject to regulatory approvals and approval
by CHI shareholders. I
As of December 31, 1996, the Insurer had admitted assets of$4.4 billion(audited), total liabilities of$3.0 billion
(audited), and total capital and surplus of$1.4 billion(audited)determined in accordance with statutory accounting
practices prescribed or permitted by insurance regulatory authorities. As of September 30, 1997, the Insurer had
admitted assets of$5.1 billion(unaudited),total liabilities of$3.4 billion(unaudited), and total capital and surplus
of$1.7 billion(unaudited)determined in accordance with statutory accounting practices prescribed or permitted y
insurance regulatory authorities.
Furthermore, copies of the Insurer's year end financial statements prepared in accordance with statutory accounting
practices are available without charge from the Insurer. A copy of the Annual Report on Form 10-K of MBIA Inc.
is available from the Insurer or the Securities and Exchange Commission. The address of the Insurer is 113 King
Street, Armonk, New York 10504. The telephone number of the Insurer is (914) 273-4545.
Moody's Investors Service, Inc. rates the claims paying ability of the Insurer "Aaa".
Standard&Poor's Ratings Services, a division of The McGraw Hill Companies, Inc. ("Standard&Poor's"), rates
the claims paying ability of the Insurer "AAA." I
Fitch IBCA, Inc. (formerly known as Fitch Investors Service, L.P.), rates the claims paying ability of the Insurer
"AAA." I
Each rating of the Insurer should be evaluated independently. The ratings reflect the respective rating agency's
current assessment of the creditworthiness of the Insurer and its ability to pay claims on its policies of insurance.
Any further explanation as to the significance of the above ratings may be obtained only from the applicable;rating
agency.
The above ratings are not recommendations to buy, sell or hold the Bonds, and such ratings may be subject to
revision or withdrawal at any time by the rating agencies. Any downward revision or withdrawal of any of the
above ratings may have an adverse effect on the market price of the Bonds. The Insurer does not guarantee the
market price of the Bonds nor does it guarantee that the ratings on the Bonds will not be revised or withdrawn.
Disclosure of Guaranty Fund Nonparticipation: In the event the Insurer is unable to fulfill its contractual obligation
under this policy or contract or application or certificate or evidence of coverage, the policyholder or
certificateholder is not protected by an insurance guaranty fund or other solvency protection arrangemen .
5
Municipal Bond Rating
Standard&Poor's has assigned its municipal bond rating of"AAA" to the Bonds with the understandinprincipal of and that
delivery of the Bonds, a guaranty insurance policy insuring the timelyeg ®a
ierest on
the Bonds will be issued by the MBIA Insurance Corporation. The rating of the Bonds reflects only the view of
such company at the time the rating is given, and the District makes no representation as to the appropriateness of
the rating. There is no assurance that such rating will continue for any given period of time, or that it will not be
revised downward or withdrawn entirely by Standard & Poor's, if, in the judgment of Standard & Poor's,
circumstances so warrant. Any such downward revision or withdrawal of the rating may have an adverse effect
on the market price of the Bonds.
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6
i I
OFFICIAL STATEMENT SUMMARY
The following material is a summary of-certain information contained herein and is qualified in its entirety by the
detailed information and fmancial statements appearing elsewhere in this Official Statement.
THE BONDS
The Issuer .Brazoria County Municipal Utility District No. 5 (the "District"),
a political subdivision of the State of Texas, is located in Brazoria
County, Texas. See "THE DISTRICT."
The Issue : -Brazoria County Municipal Utility District No. 5 Unlimited Tax
- • Bonds;. -Series 1998, in the aggregate principal amount of
$1,980,000. =Interest accrues from March 1, 1998, and is payable
September 1, 1998, and each March 1 and September 1 thereafter
until the earlier of stated maturity or redemption. The Bonds
mature serially on September 1, in each year 1999 through 2015,
both inclusive. The Bonds maturing on or after September 1,
2007,are subject to redemption,in whole or in part, on September
1, 2006, or on any date thereafter, at par plus-accrued-interest to
the date fixed for redemption. See."THE BONDS - General."
Source of Payment The Bonds are payable from a continuing, direct annual ad
valorem tax, without legal limitation as to rate or amount, levied
- against all taxable property within the District. See "THE BONDS
- Source of Payment."
- -
Principal Use of Proceeds Proceeds of the sale of the Bonds will be used to(i)_reimburse the
Developers(defined below under the caption"Developers:")for the
costs,relating to the construction of water distribution,wastewater
collection, and storm drainage facilities (the "System") to serve
306 single-family,residential-lots platted as Southdown, Sections 6
and 7 and Crystal Lake, Sections 1 and 2; (ii)finance the District)s
share of the cost of expansion of a joint wastewater treatment plant
and a remote water well and booster pumps; (iii)pay engineering
costs associated with the design and construction of such facilities;
(iv)pay interest on funds advanced on the District's behalf by the
Developers; (v) capitalize an amount equal to one year in interest
.payments on the Bonds; and (vi)-pay for administrative and
issuance costs; legal fees, fiscal agent's fees, a fee to the Texas
Natural Resource Conservation Commission,and certain financing
costs related to the issuance of the Bonds. See "THE BONDS -
Use and Distribution of Bond Proceeds."
Payment Record - The District has pre ' usly issued $1,735,000 Unlimited Tax
Bonds, Series 19 (the "Series 1982 Bonds"), $2,750,000
•
nlimited Tax Bonds, Series 1983 (the "Seri 1983 Bonds"),
/$1,620,000 Unlimit9e1 Tax Bonds, Series 1 Bonds (the "Series
1984 Bonds")an4$2,020,000 Unlimited Tax Bonds, Series 1
(the"Series 1995 Bonds")to finance the acquisition or construction
o components of the System. In 1992 the District issued
6,065,000 Unlimited Tax Refunding Bonds, Series 1992I(the
"Series 1992 Refunding Bonds")to refund certain maturities of the
Series 1982, Series 1983 and Series 1984 Bonds. Collective
7'
reference is, made in this Official Statement to the Series 1982,
Series 1983, Series 1984, Series 1995 and Series 1992 Refunding
Bonds as the "Outstanding Bonds." As of the date of this Official 1S tement, none of the Series 1982 Bonds�d Series 1983 Bonds,
60,000 of the Seri s 1984 Bonds, all 42,020,000 of the Series
1995 Bonds and 15,525,000 of the Series 1992 Refunding Bonds
are outstanding. As of the date of this Official Statement, the
District's total direct bonded indebtedness, consisting of the
maturities of the Outstanding Binds not pr viously paid by the
District, plus. the Bonds, is9,585,000. The District will
capitalize an amount equal to one year in intere payments on the
Bonds from the proceeds of the sale of the Bonds, and will deposit
such sum in the District's Debt Service Fund to make such
payments. The District has timely made all payments due to date
on the Outstanding Bonds. See "THE BONDS - Outstanding
Bonds."
Municipal Bond Insurance MBIA Insurance Corporation. See "SALE AND DISTRIBUTION
OF THE BONDS - The MBIA Insurance Corporation Insurance
Policy."
Municipal Bond Rating Standard&Poor's Ratings Services(MBIA) "AAA"
See "SALE AND DISTRIBUTION OF THE BONDS - Municipal
Bond Rating."
Qualified Tax-Exempt
Obligations In the Bond Resolution,the District states that it has designated the
Bonds as "qualified tax-exempt obligations." The District
represents that it has or will take such action as it deems necessary
for the Bonds to constitute"qualified tax-exempt obligations." See
"LEGAL MATTERS - Qualified Tax-Exempt Obligations -
Purchase of the Bonds by Financial Institutions."
THE DISTRICT
Description ' Brazoria County Municipal Utility District No. 5, of Brazoria
County, Texas, a political subdivision of the State of Texas, was
created by the Texas Water Commission, now the Texas Natural
Resource Conservation Commission, on March 18, 1981. The
District contains approximately 570.5 acres of land. The District
is located approximately 13 miles south of the central business
district of Houston,Texas, and approximately seven miles south of
the intersection of Interstate Highway 610 and State Highway 288.
State Highway 288 traverses the western portion of the District.
Approximately 19. District acres lie to the west of SH 288, and
approximately 551.5 District acres lie to the east of SH 288. The
District is located entirely within Brazoria County and the
extraterritorial jurisdiction of the City of Pearland. See "THE
DISTRICT - Description" and "APPENDIX A - LOCATION
MAP."
8
Developers The development and home construction activity which has
occurred to date in the District is described below under the
caption"Development." Such development and home construction
activity includes (i) the completion of the development of 1,225
single-family residential lots, (ii) 125 additional single-family
residential lots which are currently under development,and(iii)the
construction of 1,170 homes, including 57 homes under
construction.
Lennar Homes of Texas, Inc., a wholly-owned subsidiary of
Lennar Corporation (collectively, "Lennar"), a publicly traded
corporation whose stock is listed on the New York Stock
Exchange,on March 9, 1994,purchased 28 fully developed single
family residential lots plus approximately 214 acres of undeveloped
land located in the District from SLS Enterprises("SLS"). Lennar
subsequently purchased 4 additional lots from SLS. See
"DEVELOPERS" and "TAX DATA - Principal 1997 Property
Owners." On December 31, 1995, Lennar purchased the
residential assets of Friendswood Development Company, an
Arizona corporation, and certain other assets, including
approximately 1,980 acres of land and approximately 790 single-
family residential lots from Exxon Corporation. FriendswooId
Development. Company was at the time of such purchase the
wholly-owned land development subsidiary of Exxon Corporation.
Lennar subsequently incorporated Friendswood Development
Company, a Texas corporation ("Friendswood"). Lennar's
1 activities include home building,real estate investments,residential
and commercial developments and financial services operations
throughout the United States. Lennar has appointed Friendswood
as developer of the land owned by Lennar located in the District
and has granted to Friendswood a power of attorney to give and
grant power and authority to Friendswood to act for and on behalf
of Lennar in connection with the development, management,
operation, marketing and sale of such property. Lennar and(or
Friendswood have developed Southdown, Sections 5 through 7
(298 single-family residential lots on approximately 65 acres) and
have initiated the development of Southdown,Section 8 (91 single-
family residential lots on approximately 18 acres) located in the
..District,and Lennar is currently constructing homes in the District
as described below under the captions "Development" and
"Builders."
2621 -Joanel, Ltd. ("JL"), a Texas limited partnership, the
managing .general partner of which is JNT, Inc., a Texas
corporation whose principal shareholder is Mr. John Taylor of
Houston,Texas,has developed Crystal Lake, Section 1, consisting
of 103 fully developed single-family residential lots on
approximately 49 acres located in the District,and has initiated the
development of Crystal Lake, Section 2, consisting of
approximately 21 acres subdivided into 34 single-family residential
lots as described below under the caption "Development." The
other general partner of JL is the Traylor Corporation, a Texas
corporation whose principal shareholder is Mr. Travis Traylor of
9
_ _Houston, Texas.. JL is selling the lots located in Crystal Lake,
Section 1 to.Weekley Homes, Inc. and Morrison Homes, which
are currently constructing homes on such lots as described below
under the caption"Builders." Lennar through Friendswood and JL
are sometimes together referred to in this Official Statement as the
Developers (the "Developers"). See "DEVELOPMENT" and
"BUILDERS."
Development As of January 15, 1998, the District contained 1,170 homes,
including 57 homes under construction. According to the District's
Engineer, the development of approximately 298 of the District's
approximate 570.5 acres is complete. Such acres have been
developed into (i) 1,225 fully developed single-family residential
lots (Southdown, Sections 1 through 3, 5 through 7, and Crystal
- Lake, Section 1) plus (ii) two reserves aggregating approximately
2 acres. As described above, Southdown,Sections 5 through 7 are
developments of Lennar through Friendswood, and Crystal Lake,
Section 1 is a development of JL. Lennar through Friendswood
has also initiated the development of Southdown, Section 8,
consisting of approximately 18 acres subdivided into 91 single-
family residential lots, and anticipates the completion of the
development thereof, including underground water distribution,
wastewater collection and storm drainage facilities and street
paving, by approximately March 15, 1998. In addition, JL has
initiated the development of Crystal Lake, Section 2, consisting of
_ _ approximately 21 acres subdivided into 34 single-family residential
lots, and anticipates the completion of the development thereof,
including underground water distribution, wastewater collection
and storm drainage facilities and street paving, by approximately
March 31, 1998. The District financed the cost of acquiring and
constructing the water supply and distribution, wastewater
collection and treatment, and storm drainage system(the "System")
to serve- the 953-fully developed single-family residential lots
located. within Southdown, Sections 1 through 3 and 5 with
proceeds-of the Outstanding Bonds, and the District will acquire
the water distribution, wastewater collection and storm sewer
facilities which have been constructed to serve the 272 fully
developed single-family residential lots located within Southdown,
Sections 6 and 7 and Crystal Lake, Section 1, plus such facilities
to serve the future 34 lots being developed as Crystal Lake,
Section 2 with a portion of the proceeds of the sale of the Bonds.
See "THE SYSTEM." In addition to the Southdown and Crystal
Lake sections described above, there are approximately 83
currently undeveloped acres of land located within the District
available for future development. Such undeveloped acres are
owned-by Lennar. In addition, approximately 150 District acres •
are-contained within street and drainage rights-of-way, detention
ponds, District plant sites, or are otherwise not available for
development. Although Lennar's current plans for the
approximately 83 undeveloped acres,. as reported by Lennar,
include the development of approximately 70 acres thereof into
single-family residential lots when Lennar's current lot inventory
is depleted,Lennar has no obligation to the District to develop any
10
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_ .
of-such land in any particular manner or at all, and may sell the
land and lots which it owns in the District at its sole discretion.
Therefore, the District cannot represent when, or ki,Thether, any of
such currently undeveloped acres might be develOped.--Lennar, as ,
,
reportedliY Lennar,-expects-that the reniaining aicipthximately 13
'
currently undeveloped acres will be used in the future fo
commercial purposes. See- "FUTURE -DEVELOPMENT;1-
"INVESTMENT CONSIDERATIONS Principal Land Owners ,
--
Obligations to the Distriet," and "DEVELOPMENT." : 1
Builders . . . .7.: . . . . . . . . . . . . . . . Three homebuilding companies (collectively, the "Builders") are i
currently constructing homes within -the District. See
"BUILDERS" for descriptions of such Builders and their current
home construction activity in the District. According to Lennar,
homes which it is constructing in Southdown, Section 7 range In
size from approximately 1,800 to 2,400-square feet of living are
and in sales price from approximately $105,000 to $130,000.
- ,
. , JL has contracted to sell all of the lots which it has not yet
conveyed located in Crystal Lake, Section 1 and all lots located in
- t--- future Crystal Lake, Section 2 to Weeldey- Homes Inc. and to
Morrison Homes, under separate contracts which require each
i
Builder to purchase lots according to a take-down schedule.
. 1
1 - According to JL, such Builders are currently constructing homes I
I
in Crystal Lake, Section 1 located in'the District which range in i
size from approxithately 2,400 to 3,600 square feet of living Area
and in sales price from approximately $170,000 to $220,000.
INVESTMENT CONSIDERATIONS
THE BONDS ARE SUBJECT TO SPECIAL INVESTMENT CONSIDERATIONS AS SET FORTH IN r'HIS
OFFICIAL STATEMENT. PROSPECTIVE PURCHASERS SHOULD CAREFULLY REVIEW THE ENTIRE
OFFICIAL STATEMENT BEFORE MAKING THEIR INVESTMENT DECISIONS, ESPECIALLY THE
,
1, PORTION OF THE OFFICIAL STATEMENT ENTITLED "INVESTMENT CONSIDERATIONS."
,
1
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1
SELECTED FINANCIAL INFORMATION
(UNAUDITED)
1997 Assessed Valuation $78,484,590(a)
(100% of estimated market value as of January 1, 1997)
See "TAX DATA" and,"TAXING PROCEDURES."
Estimated Valuation at November 1, 1997
(100% of estimated market value as of November 1, 1997)
See "TAX DATA" and "TAXING PROCEDURES." $91,876,840(b)
Direct Debt
Outstanding Bonds 47,605,000
The Bonds 1,980,000
$ 9,585,000(c)
Estimated Overlapping Debt, $ 4,890,423(c)
Total Direct and Estimated Overlapping Debt $14,475,423(d)
Direct Debt Ratios
: as a percentage of 1997 Assessed Valuation 12.21%
: as a percentage of Estimated Valuation:at November 1, 1997 0.43%
Direct and Estimated Overlapping Debt Ratios
: as a percentage of 1997 Assessed.Valuation 8.44%
: as a percentage of Estimated Valuation at November 1, 1997 *5.76%
Debt Service Fund upon delivery of the Bonds $ 1,044,324(e)
1997 Tax Rate per $100 of Assessed Valuation $1.12(4/
Average Percentage of Total Tax Collections (1990-1996) 99.92%
Average Annual Debt Service Requirements
on the Bonds and the Outstanding Bonds (1999-2012) $ 941,160
Maximum Annual Debt Service Requirement
on the Bonds and the Outstanding Bonds (2012) $ 959,168
Tax Rate per $100 of Assessed Valuation Required to Pay Average Annual
Debt Service Requirements on the Bonds and the Outstanding Bonds
(1999-2012) at 95% Tax Collections
Based Upon 1997 Assessed Valuation $1.27
Based Upon Estimated Valuation at November 1, 1997 $1.08
Tax Rate per $100 of Assessed Valuation Required to Pay
Maximum Annual Debt Service Requirement on the Bonds and the
Outstanding Bonds (2012) at 95% Tax Collections
Based Upon 1997 Assessed Valuation $1.29
Based Upon Estimated Valuation at November 1, 1997 $1.10
12
Number of Single-Family Homes (including 57 homes under construction)
as of January 15, 1998 1,170
(a) As of January 1, 1997. All property located in the.District is valued on the tax rolls bythe Brazoria County
ary,, P P Y
Appraisal District (the "Appraisal District") at 100% of estimated 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 "INVESTMENT CONSIDERATIONS - Factors Affecting Taxable Values and Tax Payments."
(b) Provided by.the Appraisal District for informational purposes only, this amount is an estimate of the value of
f I all taxable property located within the District as of November 1, 1997, and includes an estimate of values
resulting from the development and construction of taxable improvements from January 1, 1997, through
October 31, 1997. No tax was levied for 1997 on the increased valuation of such improvements constructed
subsequent to January 1, 1997, since the District's tax is levied annually on the valuation of property as of
January 1. The valuation of such additional improvements may vary significantly from this estimate when the
Appraisal Review Board certifies the valuat. n of District property for 1998. See"TAXING PROCEDURES."
(c) See "DISTRICT DEBT."
(d) The District levied a tax rate of$1.1 per $100 of Assessed Valuation in 1997. The-TNRCC in its Order
authorizing the District to issue the Bonds advised the District to levy a tax rate not less than$1.12 per $100
of Assessed Valuation in the year in which the District issues the Bonds (1998). Moreover, as described in
this Official Statement under the caption "TAX DATA- Estimated Overlapping Taxes," the aggregate of the
1997 tax levies of all units of government which levy taxes against the property located within the District is
$3.395631 per $100 of Assessed Valuation. One must consider the total tax burden of all overlapping
- jurisdictions imposed upon property located within the District as contrasted with property located in
comparable real estate developments to gauge the relative tax burden on property within the District. The tax
rate necessary to service the debt issued or to be issued by the District, and the tax rates levied by other
overlapping jurisdictions, are subject to numerous uncertainties and variables, and thus the District can give
no assurance that the composite tax rates imposed by overlapping jurisdictions,plus the District's tax rate, will
be comparable with the tax rates of competing projects. To the extent that the District's composite tax rates
are not competitive with competingdevelopments, the growth of property tax values in the District and the
investment quality or security of the Bonds could be adversely affected. See "INVESTMENTT
li CONSIDERATIONS - Factors Affecting Taxable Values and Tax Payments" and "TAX DATA."
(e) Neither Texas law nor the Bond Resolution requires the.District to maintain any particular sum in the Debt
Service Fund. Such sum includes an amount sufficient to pay one year in interest payments on the Bonds which
will be capitalized from the proceeds of the sale of the Bonds and deposited in the District's Debt Serv'!ce
Fund.
13
THE BONDS
General
The following is a description of some of the terms and conditions of the Bonds, which description is qualified in
its entirety by reference to the resolution (the "Bond Resolution") of the Board of Directors of the District (the
"Board") authorizing the issuance of the Bonds. A copy of the Bond Resolution may be obtained from the District.
upon written request made to the District's Financial Advisor,Dain Rauscher Incorporated,.1001 Fannin, Suite 400,
Hou on, Texas 77002.
e $1,980,000 Brazoria County Municipal Utility District No. 5:Unlimited Tax Bonds, Series 1998, are dated
March 1, 1998, with interest payable September 1, 1998, and each March 1 and September 1 thereafter until the
earlier of maturity or redemption. The Bonds,are fully-registered serial bonds maturing on September 1 of the years
shown under "MATURITY SCHEDULE" on the cover page of this Official Statement. Principal of the Bonds will
be payable to the registered owners (the "Registered Owners") at maturity or redemption upon presentation to the
principal payment office of Chase Bank of Texas, National Association,currently in Dallas,Texas (the "Registrar").
Interest on the Bonds will be payable by check or draft, 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
calendar day of the month next preceding the interest payment date (the "Record Date").
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. 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 may be transferred or exchanged upon its presentment:and surrender at the office of the
Registrar, duly endorsed fo transfer or accompanied by an assignment duly executed by the Registered Owner. To
the extent possible,new B ds issued in an exchange or transfer of Bonds will be delivered to the Registered Owner
or assignee of the owner n not more than three business days after the receipt of the request in proper form to
transfer or exchange th Bonds. New Bonds registered and delivered in an exchange or transfer shall be in
denominations of $5,00 or any integral multiple thereof for any one maturity and for a like 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 openingof business on 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. The District has
agreed to replace mutilated, destroyed, lost or stolen Bonds upon surrender of the mutilated Bonds, on 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.
Redemption of the Bonds
The Bonds maturing on or after September 1, 2007 shall be subject to redemption and payment at the option of
the District, in whole or from time to time in part, n September 1, 2006, or on any date thereafter, at par plus
accrued interest to the date fixed for redemption. Notice of the exercise of the reserved right of redemption will
be given by the Registrar at least thirty(30)days prior to the redemption date by sending such notice by first class
mail to the Registered Owner of each Bond to be redeem d in whole or in part at the address shown on the bond
register. If less than all of the Bonds are redeemed any time, the particular Bonds to be redeemed shall be
selected by the District in integral multiples of$5,00 ithin any one maturity. If less than all of the Bonds within
14
one maturity are to be-redeemed,'the Regigtrar`'shall,select`the-Bends to be redeemed by lot or other random
method. The Registered.Owner::Of-any Bofid;'all'or-al‘ of which has been called for redemption, shall be
required to present same to the Registrar for payment of the redemption price on the portion of the Bonds so called
for redemption and issuance of a new Bond in the principal amount equal to the portion of.such Bond not redeemed.
Replacement of-Registrar • .
Provision is made in the Bond Resolution for replacement of the Registrar. If the-Registrar is replaced by the
District, the new paying agent/registrar shall act in the same capacity as`the''previous Registrar:In order to act as
Registrar for the Bonds, any paying agent/registrar selected-by the District shall be a national or state banking
institution,organized and doing business under the-laws of the United States of America or of any State, authorized
under such laws to exercise trust powers, and subject to supervision of examination by federal or state authority.
Authority for Issuance
The Bonds constitute the sixth installment of$23,775,000 in bonds for waterworks, sanitary sewer and draina e
facilities, of which$17,670,000 maybe used for refunding purposes authorized at elections held-Within the Distrit
on April 4, 1981, November 8; 1983, and November 7, 1987: Following the issuance of the Bonds, an aggregate
of$7,605,000 principal amount of bonds will remain authorized but unissued. See "Issuance of Additional Debt."
•
The Bonds are issued'pursuant to the Bond Resolution, Chapters 49 and 54 of the Texas Water Code, and Article
XVI, Section 59 of the Texas Constitution.Issuance of the Bonds has been further authorized bythe Texas Nat
-
l
Resource Conservation Commission (the "TNRCC"), fornerlythe Texas Water Commission (the "TWC"). Tlie
City Council of the City of Pearland,Texas ("Pearland"), which is also required to approve the issuance of the
Bonds, approved the Bonds to be issued at a Pearland Council meeting.
Outstanding Bonds -
The Di ' t has previously issued $1, ,000 mited Tax Bonds, Series 1 (the "Series 1982 Bonds"),
$2, ,00 nlimited Tax Bonds, Series 1 (the" ies 1983 Bonds"), $1,6 ,000 U 'ted Tax Bonds, Seri s
198 nds(the"Series 1984 Bonds")and$2,0 ,000TUnlimited Tax Bonds,Series 5(the"Series 1995 Bond 11) -
to finance the acquisition or construction of ponents'of the System. In 1992 the-District issued $6 ,000 .
Unlimited Tax Refunding Bonds, Series 14q2(the"Series 1992 Refunding Bonds")to refund certain maturities c4.
the Series 1982, Series 1983 and-Series'1984 Bonds`. Collective reference is made in this Official State nt to the.
Series 1982, Series 1983, Series 1984,Series 1995 and Series 1992 Refunding Bonds as the "Outst mg Bonds."
As of the date of this Of ial Statement, none of the Series-1982 B _ds and Series 1983.Bonds, 60,000 of the
Series 1984'Bonds, all 020,000 of the Series 1995 Bonds and ,525,000 of the Series 1992 Refunding Bonds
i Official Statement the D trict's total direct bonded indebtedness consis '
are outstanding. As of the date of this g
of the maturities of the Outstanding Bonds not previously-paid by the District,plus the Bonds, is;$9,585,000 Tlie
District will capitalize an amount equal to-one year in interest payments on the Bonds from the proceeds of the sale
of the'Bonds, and will deposit such suin in the District's Debt Service Fund to make such payments. The District
has timely made all payments due to date on the Outstanding Bonds. -
Source of Payment -.
The Outstanding Bonds and the Bonds are payable from the proceeds of a continuing,direct annual ad valorem t ,
without legal limitation as to rate or amount, levied against all taxable property located within the District. In the
Bond Resolution,the District covenants to levy a sufficient tax to pay principal of and interest on the Bonds,with
full allowance being made for delinquencies,-costs of collections, Registrar fees and Appraisal District fees. Tax
proceeds,after deduction for collection'costs,will be placed in the debt service fund'and used solely to pay principal
of and interest on the Outstanding'Bonds and the Bonds, and on additional bonds payable from taxes which y
be issued, and Registrar fees.
The Bonds are obligations of the District and-are not the obligations of the State of Texas, Brazoria County,
Pearland, or any entity other than the District. -
15
Issuance of Additional Debt l2 c Z/
d 1 v►cv 4.41J
The District may issue addit' nal bonds, with the approval of the TNRCC, necessary to provide improvements and
facilities cons tent with purposes for which the District was created. The District's voters have authorized the
issuance of43,775,00 unlimited tax bonds, and could authorize additional amounts. Following the issuance of
the Bonds, ': ,:: ,;;; nlimited tax bonds will remain authorized but unissued. The Bond Resolution imposes no
limitation on the amo t of additional parity bonds which may be issued by the District (if authorized by the
District's voters and al'roved by the Board and the TNRCC).
Based on present engineering cost estimates and on development plans supplied by the Developer, in the opinion
of the District's consulting engineer, Ferro-Saylors, Inc. (the."Engineer"), the$7,605,000 authorized but unissued
bonds will be adequate to finance the extension of water, wastewater and storm drainage facilities and services to
serve all of the remaining undeveloped portions of the District. See "DEVELOPMENT AND HOME
CONSTRUCTION," "FUTURE DEVELOPMENT," and "THE SYSTEM."
The District also is authorized by statute to engage in fire-fighting activities, including the issuing of bonds payable
from taxes for such purposes. Before the District could issue such bonds, the following actions would be required:
(a) authorization of a detailed master plan and bonds for such purpose by the qualified voters in the District; (b)
amendment.to the existing Pearland ordinance specifying the purpose for which the District may issue bonds; (c)
approval of the master plan and bonds by the TNRCC; and(d)approval of bonds by the Attorney General of Texas.
The Board has not considered calling an election at this time for such purposes. The District has no information
concerning any determination by Pearland with respect to modification of its ordinance. If additional debt obligations
are issued in the future by the District, such issuance may increase gross debt/property ratios and might adversely
affect the investment security of the Bonds. See "INVESTMENT CONSIDERATIONS - Future Debt."
Under certain circumstances the District also is authorized to construct, develop and maintain park and recreational
facilities and to construct roads. It is not anticipated at this time that the District will participate in such,activities.
No Arbitrage
The District certifies that based upon all facts and estimates now known or reasonably expected to be in existence
on the date the Bonds are delivered and paid for, 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
the Internal Revenue Code of 1986, as amended (the "Code"), and the regulations prescribed thereunder.
Furthermore, all officers, employees and agents of the District have been authorized and directed to provide
certifications of facts and estimates that are material to the reasonable expectations of the District as of the date the
Bonds are delivered and paid for. In particular, all or any officers of the.District are authorized to certify to the
facts and circumstances and reasonable expectations of the District on the date the Bonds are delivered and paid for
regarding the amount and use of the proceeds of the Bonds. Moreover, the District covenants that it shall make such
use of the proceeds of the.Bonds, regulate investment of proceeds of the Bonds and take such other and further
actions and follow such procedures, including, without limitation, calculating the yield on the Bonds, as may be
required so that the Bonds shall not become "arbitrage bonds" under the Code and the regulations prescribed from
time to time thereunder.
Annexation and Consolidation
The District lies within the extraterritorial jurisdiction of Pearland.. Under Texas law, the District may be annexed
in whole, but not in part, by Pearland without the District's consent, in which case Pearland must dissolve the
District and assume the assets, functions and obligations of the District, including the Bonds, and any other bonded
indebtedness.of the District existing at the time of annexation. No representation is made concerning the likelihood
of annexation or the ability of Pearland to make debt service payments should.annexation occur.
The District has the right to consolidate with other districts and, in connection therewith, to provide for the
consolidation of the District's System with the water and wastewater systems of the district or districts with which
it is consolidating. No representation is made that the District will ever consolidate its System with other systems.
16
Registered Owners' Remedies _
Pursuant to Texas law, the Bond Resolution provides that, in the event the District defaults in the payment of le
principal,of or interest on any of the Bonds when due, fails to make payments required by the Bond Resolution irlto'
the Debt Service Fund, or defaults in the observance or performance of any of the other covenants, conditions.lor
obligations set forth in the Bond Resolution, any Registered Owner shall be entitled to seek a writ of mandam�is-
from a court of competent jurisdiction compelling and requiring the.District to make such payments or to observe
and perform such covenants, obligations or conditions. Such right is in addition to other rights the Registered
Owners may be provided by the laws of the State of Texas.
In the event of default in the payment of principal of or interest on the Bonds, the Registered Owners may seek a
writ of mandamus requiring the District to levy adequate taxes to make such payments. Except for the remedy ilof
mandamus,.the Bond Resolution does not specifically provide for remedies to a Registered Owner in the event iof
a District default, nor does it provide 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 and, consequently, tie
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 direct levy and execution against the
District's property. Further, the Registered Owners cannot themselves foreclose on the property of the District or
sell property within the District in order to pay the principal of or interest on the Bonds. The enforceability of the
rights and remedies of the Registered Owners may be further limited by laws relating to bankruptcy, reorganization
or other similar laws of general application affecting the rights of creditors of political subdivisions such as, e
District. For example, a Chapter 9 bankruptcy proceeding by the District could delay or eliminate payment of
principal or interest to-the Registered Owners. 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 of political
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 authorised
to file for federal bankruptcy 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 Texas
law, a municipal utility district such as the District must obtain the approval of the TNRCC prior to filing for
bankruptcy. The TNRCC must investigate the financial condition of the District and will authorize the District to
proceed only if the TNRCC determines that 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.
If the 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.If such a plan were confirmed by the bankruptcy court, it could, among
other things, affect a Registered Owner by reducing or eliminating the amount of indebtedness,. deferring or
rearranging the debt service schedule,reducing or eliminating the interest rate, modifying or abrogating collateral
or security arrangements, substituting (in whole or in part) other securities, and otherwise compromising and
modifying the rights and remedies of such Registered Owner's claim against the District.
17
Legal Investment and Eligibility to Secure Public Funds in Texas
The Texas Legislature has enacted several statutes which pertain to the eligibility of bonds issued by a municipal
utility district as investments for certain entities and as security for deposits of-public funds in Texas: Section 49.186
of the Water Code; Article 717k-6,Vemon's Texas Civil Statutes;Chapter 2256,Texas Government Code("Public
Funds Investment Act"); and Chapter 2257, Texas Government Code ("Public Funds Collateral Act"). Taken
together, these statutes provide the following authorization: -
1) Whether rated or unrated, bonds of the District(including the Bonds)are authorized investments.in the state
of Texas for banks, savings and loan associations, insurance companies, fiduciaries, trustees and the state of
Texas;
•
2) Bonds of the District are authorized investments for political subdivisions of the state of Texas only if they
have been rated by a nationally recognized investment rating firm and have received a rating of not less than
"A" or its equivalent; and
3) Whether rated or unrated, bonds of the District (including the Bonds) may be used to secure the deposit of
public funds in the state of Texas.
The District has not made any investigation of any other laws, rules, regulations or-investment criteria that might
affect the suitability of the Bonds for any of the above purposes or limit the authority of any of the above entities
or persons to purchase or invest in the Bonds.
The District makes no representation that the Bonds will be acceptable to banks, savings and loan associations, or
public entities for investment purposes or to secure deposits of-public funds. The District has made no investigation
of other laws, regulations, or investment criteria that might apply to or otherwise limit the availability of the Bonds
for investment or collateral purposes. Prospective purchasers are urged to carefully evaluate the investment quality
of the Bonds as to the acceptability of the Bonds for investmentor collateral purposes.
Defeasance -
The District may defease the provisions of the Bond Resolution and 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
by law.
Use and Distribution of Bond Proceeds
Proceeds of the sale of the Bonds will be used to (i) reimburse the Developers (defined below under the caption
"Developers") for the costs relating to the construction of water distribution, wastewater collection, and storm
drainage facilities (the "System") to'serve 306 single-family residential lots platted as Southdown, Sections 6 and
7 and Crystal Lake, Sections 1 and 2; (ii)fmance the District's share of the costof expansion of a joint wastewater
treatment plant and a remote water well and booster pumps; (iii)pay engineering costs associated with the design
and construction of such facilities; (iv)pay interest on funds advanced on the District's behalf by the Developers;
(v) capitalize an amount equal to one year in interest payments on the Bonds; and-(vi)pay for administrative and
issuance costs, legal fees, fiscal agent's fees, a fee to the Texas Natural Resource Conservation Commission, and
certain financing costs related to the issuance of the Bonds.
18
I. Construction Costs
Total Developer District
Amount Share Share
A. Developer Contribution Items (a)
1. Southdown, Section 6
a. Clearing $ 4,125 $ 1,238 $ 2,887
b. Construction Facilities 9,231 . 2,769 6,462
c. Drainage _. 220,394 66,118 154,276
d. Wastewater 91,290 , 27,387. 63,903
e. Off-site Water 8,563 2,569 5,994
f. Water 60,381 18,114 42,267
g. Well Pointing and Wet Sand 38,600 11;580 27,020
' Subtotal $432,584 $129,775 $302,809
2. Southdown, Section 7
a. Construction Facilities
and Clearing $ 10,841 $ 3,252 $ 7,589
b. Drainage 58,830 17,649 41,181
c. Drainage 26,480 7,944 18,536
d. Wastewater 49,312 14,793 . . . 34,519
e. Water 24,018 - 7,205 16,813
f. Well Pointing and Wet Sand 8,073 2,422 5,651
Subtotal $ 177,554 $ 53,265 $ . 124, 289
ti
3. Crystal Lake, Section One and Two Site ,
Clearing and Preparation $ 2,061 $ 619 $ 1,442
4. Crystal Lake, Section One
a. Construction Facilities $ 4,745 $ 1,424 $ 3,321
b. Drainage .151,938, r ,45.,581 106,357
c. Wastewater 110,893 33,268 77,625
d. Water 79,928 . 23,978 55,950
e. Well Pointing and Wet Sand 31,080 9,324 21,756
f. Off-site Water and Force Main 51,390 15,417 35,973
g. Lift Station rand Force Main; , " 74,400 22,320 52.080-
Subtotal $ 504,374 _ $ 151,312 $ 353,062
5. Crystal Lake, Section Two . . .
a. Construction Facilities . $.:4,500 . ; . ,$ -1,350._ $ 3,150
b.' Drainage = 8,370 2,511 5,859
c. Wastewater . - 51,070 15,321 . 35,749
d. Water _ 40,531 12,159 28,372
e. Lift Station and Force Main 80,200 24,060 56,140
f. Well Pointing and Wet Sand 23,000 6;900. 16.100 Subtotal $ 207,671 $ 62,301 $ 145,370
t- _ . .. iN-
19
6. Engineering $ 187,120 $ 56,136 $ 130,984
7. Contingencies 10,384 3,116 7,268
TOTAL DEVELOPER CONTRIBUTION ITEMS $1,521,748 $ 456,524 $1,065,224
A N /\'
B. District Items
1. Remote Water Well and Booster Pumps $ 116,646
2. Wastewater Plant Expansion
a. Clarifier, Digester and Chlorination Facilities 162,347
b. Generator 73,794
c. Miscellaneous Improvements 26,355
Subtotal $ 262h496
3. Easement Costs for Off-Site Water Line/Force Main 12,500
4. Engineering and Testing - 50,495
5. Contingencies - 32,082
TOTAL DISTRICT ITEMS $ 474,219
A
TOTAL CONSTRUCTION COSTS- $1,539,443
II. Non-Construction Cost
A. Legal Fees $ 49,500
B. Fiscal Agent Fees 39,600
C. Interest Cost
1. Capitalized Interest (1 year) 94,088
2. Developer Interest (b) 71,321
D. Bond Discount 59,400
E. Bond Issuance Costs 45,121
F. Annexation Costs 8,065
G. TNRCC Bond Issuance Fee 4,950
H. Bond Application Report 24,000
I. Contingency(c) 44,512
TOTAL NON-CONSTRUCTION COSTS $ 449‘557
TOTAL BOND ISSUE REQUIREMENT $1,980,000
h
(a) The rules of the TNRCCrequire in certain instances that developers within a district subject to the jurisdiction
of the TNRCC contribute to the construction program of such district an amount of money equal to thirty
percent (30%) of the construction costs of certain water, sewer and drainage facilities in that district. The
Developer have to date expended funds equal to or in excess of their required contributions toward the
construction and acquisition of the facilities being financed with the proceeds of the sale of the Bonds.
(b) Represents interest-owed to the Developers on advances of construction costs and engineering fees made on
the District's behalf by the Developers. The actual amount of interest owed will be calculated at the lesser
of(i)the net effective interest rate borne by the Bonds or(ii) the interest rate at which the Developers have
borrowed funds.
(c) Represents funds which may be used by the District only upon approval of the TNRCC.
In the instance that approved estimated amounts exceed actual costs, the difference comprises a surplus which may
be expended for uses approved by the TNRCC. In the instance that actual costs exceed previously approved
estimated amounts and contingencies, additional TNRCC approval and the issuance of additional bonds may be
required. The Engineer has advised the District that the proceeds of the sale of the Bonds should be sufficient to
reimburse the Developers for the costs of the above-described facilities. However, the District cannot and does not
guarantee the sufficiency of such funds for such purposes.
20 •
THE DISTRICT
Authority
The District is a municipal utility district created pursuant to an order of the Texas Water Commission (tie
"TWC"), now the TNRCC, dated March 18, 1981. The District was created pursuant to the authority of Chapter
54, Texas Water Code, and Article XVI, Section 59 of the Texas Constitution. 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. The principal functions
of the District are to finance, construct, own, and operate waterworks, wastewater, and drainage facilities and Ito
provide such facilities and services to the customers of the District. The District, if approved by the voters within
the District,the TNRCC, 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. The District is subject
to the continuing supervision of the TNRCC in certain matters.
The District is empowered, among other things, to purchase, construct, operate, and maintain all works,
improvements, facilities, and plants necessary.for the supply of water;.the collection,transportation,,and treatment
of wastewater; and the control and diversion of storm water.
Under certain limited circumstances the.District also is authorized to construct, develop and maintain park and
recreational facilities and to construct roads. In addition,the District is authorized to 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.
The TNRCC exercises continuing supervisory jurisdiction over the District. In order to obtain the consent f
Pearland, within whose extraterritorial jurisdiction the District lies,. the District has agreed to observe certain
Pearland requirements. These requirements limit the purposes for which the District may sell bonds for the
acquisition and improvement of waterworks, wastewater, and drainage facilities; limit the net effective interest rate
on such bonds and other terms of such blinds;and require,.approval by Pearland of the District's construction plans
and specifications, and the issuance of bonds.
Description
When created, the District contained approximately 423 acres of land. Subsequent annexations of land have
increased the area of the District to its present size of approximately 570.5 acres. The District is located
approximately 13 miles south of the central business district of Houston, Texas, and approximately seven miles
south of the intersection of Interstate Highway 610 and State Highway 288. State Highway 288 traverses the
western portion of the District. Approximately 19 District acres lie to the west.of SH 288, and approximately 481
District acres lie to the east of SH 288. The District is located entirely within Brazoria County and .the
extraterritorial jurisdiction of the City of Pearland. See "APPENDIX A - LOCATION MAP."
21
Management of the District
The District is governed by the Board of Directors(the"Board"),consisting of five directors,who have control over
and management supervision of all affairs of the District. Four of the Directors reside in the District. The directors
serve four-year staggered terms. Elections are held in even numbered years on the first Saturday in May. The
current members and-officers of the Board, along with their occupations, are listed below: -
Term Expires
Name Title Occupation in Mav
Ricki A. Willoughby/ President Senior Group 1998
/ Account Representative
/
Jack T. Hollis Vice President Youth Development 2000
Professional
David Denton / Assistant Vice President and
Assistant Secret ary Engineer/Tre rer 1998 /
KellyC. Flanagan Secretary/Treasurer g ary Computer Support 1998 S
Specialist- Compaq
Phil Nedbalek/ _ Assistant Secret /Treasurer Assistant Operations Manager 2000
arY P g -
- 106.9 FM KKHT
Radio Broadcasting
Although the District does not have a general manager or any other full-time employees, it has contracted for utility
system operating, bookkeeping, tax assessing and collecting, auditing, engineering, financial advisory and legal
services as follows: = ® W
Tax Assessor/Collector - 4�y ;V" .11 '' `� -
The District has engaged Wallace P. Hutchinson, Friendswood, Texas, as the District's Tax Assessor/Collector.
According to Mr. Hutchinson, he presently serves 49 taxing units as tax assessor/collector. The Tax
Assessor/Collector applies the District's tax levy to tax rolls prepared by the Brazoria County Appraisal District
and bills and collects such levy. '
/ .
Bookkeeper =
The District's bookkeeper is District Data Services, Inc.;which acts as bookkeeper for-approximately 90 utility
districts.
Operator
ECO Resources, Inc. is the general operator of the System. According to ECO Resources, Inc., it is currently p engaged as unity system operator for 130 utility districts. -`�``� k�•`$,, U �� S �( ` ?
Auditor (/" k� Q;`T �0�5 �o•Cf1 l0,
/
The District has emplo ed McCall, Gibson&Company, PLLC, Certi ied Public Accountants,to audit its fmancial
statements for the year el 1' _ . ----- 1 1997. A copy o . e District's audit for the fiscal year ended
September 30, 1997, is included as "APPENDIX B" to this Official Statement.
22
Engineer 7
The consulting.engineer.for the District in connection with the design and construction,of the facilities for which
the Bonds are being sold to reimburse the Developer is Ferro-Saylors, Inc. (the "Engineer"). The Engineer has
also been employed by the Developer in connection with certain planning activities and the design of certain-streets
and related improvements ithin the District. _
Financial Advisor _
The District has engaged Dain Rauscher Incorporated as,financial advisor(the "-Financial Advisor")to the District.
The fees paid to the Financial Advisor for services rendered in connection with the issuance of the Bonds are baseld
on a percentage of the Bonds actually issued and sold. Therefore, the payment of such fees is.contingent upon the
sale and delivery- f the Bonds.
Attorney
The District has engaged Coats, Rose, Yale, Holm, Ryman& Lee, P.C.,.Houston, Texas, as general counsel to
the District and as bond counsel("Bond Counsel")in connection with the issuance of the Bonds. The fees to be paid
Bond Counsel in connection with the issuance of the Bonds are based on a percentage of the Bonds actually issued
and sold.Therefore, the payment of such fees is contingent upon the sale and delivery of the-Bonds. See "LEGAL
MATTERS."
- : DEVELOPERS -
Role of the Developers
In general, the activities-of a developer in a municipatutility district such as the District include purchasing the land
within the District,:designing the subdivision,designing the utilities and streets to be constructed in the subdivision,
designing any community facilities to be built, defining a marketing program and building schedule, securing
necessary governmental approvals and permits for development, arranging for the construction of roads and the
installation of utilities(including,in some cases,water, wastewater, and drainage facilities pursuant to the rulesof
the TNRCC, as well as gas, telephone, and electric service) and selling improved lots and commercial reserves to
builders, developers, or other third parties.. In most_instances,-the developer will-be required to pay up to thirty
percent of the cost of constructing certain of the water, wastewater and drainage facilities in a utility district
pursuant to the rules of the TNRCC. The relative success or failure of a developer to perform such activities in
development of the property within a utility district may have a profound effect on the security of the unlimited tax
bonds issued by a district. A developer is generally under no obligation to a district to develop-the property which
it owns in a district.Furthermore, there isno restriction on a developer's right to sell any or all of the land which
it owns within a-district. In addition, a developer is ordinarily a major taxpayer within-a municipal utility district
during the development phase of the property.
Description of the Developers -
The development and home construction activity which has occurred to date in the.District is described below under
the caption "DEVELOPMENT." Such development and home construction-activity:includes (i)_the completion of
the development of 1,225 single-family residential lots, (ii) 125 additional single-family residential lots which are
currently under development, and(iii)the construction.of 1,170 homes;including 57 homes under construction.
23
Lennar Homes of Texas, Inc. and Friendswood Development Company
Lennar Homes of Texas, Inc., a wholly-owned subsidiary of Lennar Corporation(collectively, "Lennar"), a publicly
traded corporation whose stock is listed on the New York Stock Exchange, on March 9, 1994, purchased 28 fully
developed single-family residential lots plus approximately 214 acres of undeveloped land located in the District
from SLS Enterprises ("SLS"). Lennar subsequently purchased 4 additional lots from SLS. On December 31,
1995, Lennar purchased the residential assets of Friendswood Development Company, an Arizona corporation, and
certain other assets, consisting of approximately 1,980 acres of land and approximately 790 single-family residential
lots from Exxon Corporation. Friendswood Development Company was at the time of such purchase the wholly-
owned land development subsidiary of Exxon Corporation. Lennar subsequently incorporated Friendswood
Development Company, a Texas corporation("Friendswood"), and has appointed Friendswood as developer of the
land owned by Lennar located in the District and has granted to Friendswood a power of attorney to give and grant
power and authority to Friendswood to act for and on behalf of Lennar in connection with;the development,
management, operation, marketing and sale of such property. Lennar and/or Friendswood have developed
Southdown, Sections 5 through 7 (298 single-family residential lots on approximately 65 of such acres), have
initiated the development of Southdown, Section 8 (91 single-family residential lots on approximately 18 acres)
located in the District, and Lennar is currently constructing homes in the District as described below under the
captions "DEVELOPMENT" and.'BUILDERS." See "TAX DATA - Principal 1997 Property Owners."
Lennar Corporation(together with its subsidiaries,the "Company")is a full service realestate company. The stock
of Lennar is listed on the New York Stock Exchange, and Lennar is subject to the information requirements of the
Securities Exchange Act of 1934, as amended, and in accordance therewith files reports and other information with
the Securities and Exchange Commission("SEC"). Reports,proxy statements and other information filed by Lennar
can be inspected at the office of the SEC at Room 1024, 450 5th Street, N.W., Washington, D.C. 20549; Room
1204 Everett McKinley Dirksen Building,219 South Dearborn Street, Chicago, Illinois 60604;Suite 500 East, 5757
Wilshire Boulevard, Los Angeles, California 90036-3648;and Room 1028 Federal Building,26 Federal Plaza, New
York, New York, 10278. Copies of such material can be obtained from the Public Reference section of the SEC,
Washington, D.C. 20549, at prescribed rates. The Company's operations include homebuilding, real estate
investments, residential and commercial developments and financial services. The Company's homebuilding
operations include the construction and sale of homes, as well as the purchase, development and sale of residential
land. The Investment Division is involved in the development, management and leasing, as well as the acquisition
and sale, of commercial.real estate and other real estate related assets. The financial services operations consist
of mortgage loan servicing and origination,closing and title services and-investments in rated commercial real estate
mortgage-backed securities.
2621 Joanel, Ltd.
2621 Joanel, Ltd. ("JL"), a Texas limited partnership, the general partner of which is JNT, Inc., a- Texas
corporation whose principal shareholder is Mr.John Taylor of Houston,Texas,has developed Crystal Lake, Section
1, consisting of 103 fully developed single-family residential lots on approximately 49 acres located in the District,
and has completed the engineering design of Crystal Lake, Section 2, consisting of approximately 21 acres
subdivided into 34 single-family residential lots as described below under the caption "DEVELOPMENT." The
other general partner of JL is the Traylor Corporation, a Texas corporation whose principal shareholder is Mr.
Travis Traylor of Houston,Texas. JL is selling the lots located.in Crystal Lake, Section 1 to Weekley Homes, Inc.
and Morrison Homes, which are currently constructing:homes on such lots.
Lennar through Friendswood, and JL, are sometimes -together-referred to in this -Official Statement as the
Developers (the "Developers"). See "DEVELOPMENT" and 'BUILDERS."
24
{
DEVELOPMENT
As of January 15, 1998, the District contained 1,170 homes, including 57 homes under construction. According
to the District's Engineer, the development of approximately 298 of the District's approximate 570.5 acres is
complete. Such acres have been developed into(i) 1,225 fully developed single-family residential lots(Southdown,
Sections 1 through 3, 5 through 7, and Crystal Lake, Section 1)plus ((ii)two reserves aggregating approximately
2 acres. As described above, Southdown,Sections 5 through 7 are developments of Lennar through Friendswood,
and Crystal Lake, Section 1 is a development of JL. Lennar through Friendswood has also initiated the development
of Southdown,Section 8, consisting of approximately 18 acres subdivided into 91 single-family residential lots, and
anticipates the completion of the development thereof, including underground water distribution, wastewater
collection and storm drainage facilities and street paving,_by approximately March 15, 1998. In addition, JL
initiated the development of Crystal Lake, Section 2,consisting of approximately 21 acres subdivided into 34 single
family residential lots, and anticipates the completion of the development thereof, including underground water
distribution,wastewater collection and storm drainage facilities and street paving,by approximately March 31, 1998.
The District financed the cost of acquiring and constructing the water supply and distribution,wastewater collection
and treatment, and storm drainage system(the "System")to serve the 953 fully developed single-family residential
lots located within Southdown,Sections 1 through 3 and 5 with proceeds of the Outstanding Bonds, and the Distric
will acquire the water distribution, wastewater collection and storm sewer facilities which have been constructed
to serve the 272 fully developed single-family residential lots located within Southdown, Sections 6 and 7 and
Crystal Lake, Section 1, plus such facilities to serve the future 34 lots being developed as Crystal Lake, Section
2 with a portion of the proceeds of the sale of the-Bonds. See "THE SYSTEM." In addition to the Southdown and
Crystal Lake sections described above, there are approximately 83 currently undeveloped acres of land located
within the District available for future development. Such undeveloped acres are owned by Lennar. In addition,
approximately 150 District acres are contained within street and drainage rights-of-way, detention ponds, District
plant sites, or are otherwise not available for development. Although Lennar's current plans for the approximately
83 undeveloped acres, as reported by Lennar,include the development of approximately 70 acres thereof into single
family residential lots when Lennar's current lot inventory is depleted, Lennar has no obligation to the District tol
develop any of such land in any particular manner or at all, and may sell the land and lots which it owns in the
District at its sole discretion. Therefore, the District cannot represent when, or whether, any of such currentl
undeveloped acres might be developed. Lennar, as reported by Lennar, expects that the remaining approximatel)1
13 currently undeveloped acres will be used in the future for commercial purposes. See "FUTURE
DEVELOPMENT," and "INVESTMENT CONSIDERATIONS - Principal Land Owners' Obligations to the
District."
As of January 15, 1998, the status of home construction in the District was as follows:
Residential Units -
Southdown Sections Crystal Lake
1 2 3 5 6 7 Section 1 Total
Homes Completed
Sold and Occupied 258 326 235 121 96 . 9 -36 1,081
Sold and Unoccupied 0 0 ' 0 5 0 2 15 22
Unsold 0 0 0 0 1- 0 5 . 6
Models 0 0 . 0 , 2 0 0 , - 2 4 .
Subtotal 258 326 235 128 97 11 58 - 1,113
At ,
Homes Under _
Construction
Sold 0 0 0 0 0 45 12 57
Unsold 0 0 0 0 0 0 0 - 0
Models 0 0 0 0 0 0 0 0
Subtotal 0 0 0 0 0 45 12 57
TOTALS 258 326 235 128 97 56 70 1,170
25
BUILDERS =-
Three homebuilding companies (collectively, the "Builders") are currently constructing homes within the District.
According to Lennar, homes which it is constructing in Southdown; Section-7 range in size from approximately
1,800 to 2,400 square feet of living area and'in sales price from approximately $105,000 to $130,000. -
JL has contracted to sell all of the lots which it has not yet conveyed located in Crystal-Lake, Section 1 and all lots
located in future Crystal Lake, Section 2 to Weekley Homes Inca and to Morrison Homes, under separate contracts
which require each Builder to purchase lots according to a take-down schedule.. According to JL, such Builders
are currently constructing homes in Crystal Lake, Section 1 located in the District which range in siie from
approximately 2,400 to 3,600-square feet of living area and in sales price from,approximately $170,000 to
$220,000.
FUTURE DEVELOPMENT.
The development of approximately 298 of the approximate 570.5 acres of land located in the District has been
completed as,described above under the caption "DEVELOPMENT." In addition, Lennar through.Friendswood
is currently developing Southdown, Section 8 (approximately 18 acres,-91-single-family residential lots), and JL is
currently developing Crystal Lake, Section 2 (approximately 21 acres, 34 single-family residential lots).
Approximately 83 acres-of land located in the District are available for future development. Such undeveloped acres
are owned by Lennar. Although Lennar's current plansfor approximately 70 of such currently undeveloped acres,
as reported by Lennar,-include the development thereof into single-family residential lots when its current lot
inventory is depleted, Lennar has-no obligation to the District to develop anyof such land in any particular manner
or at all, and Lennar may sell such land at its sole discretion. Lennar, as reported by Lennar, expects that the
remaining approximately 13 currently undeveloped acres will be used in the future for commercial purposes.
Therefore, the District can make no representation whether, or when, any development might occur-on any of the
currently undeveloped land located within the District. The remaining approximately 150 District acres have been
dedicated as drainage easements, detention ponds, and sites for various District facilities, or are otherwise not
available for development.
Although the aforementioned undeveloped and partially developed acres may be developed in the future, instigation
of any new development beyond that described in this Official Statement will be dependent on several factors
including, to a great extent, the general and other economic conditions which would affect any party's ability to
develop and sell lots and/or other property and of any home builder to sell completed homes described in this
Official Statement under the caption "INVESTMENT CONSIDERATIONS." If the undeveloped portion of the
District is eventually developed, additions to the District's water, wastewater, and drainage systems required to
service such undeveloped acreage may be financed by future issues (if any) of the District's bonds and developer
contributions, if any, as required by the TNRCC. The District's Engineer estimates that the$7,605,000 authorized
bonds which remain unissued after the sale of the Bonds will be adequate to finance the construction of such
facilities to provide service to all of the undeveloped portions of the District. In the event that the remaining
authorized but unissued bonds are insufficient to complete the development of the District, the voters of the District
would have to approve additional bonds at an election held for such purpose for the District to be able to issue such
bonds. See "THE BONDS - Legal=Ability=to Issue Additional Debt. No party is under any obligation to initiate
development of any of the currently undeveloped land located within the District or to complete any development,
if begun, and any party initiating any future development thereon could modify or discontinue development plans
in its sole discretion. Accordingly, the District makes no representation that future development will occur. See
"INVESTMENT CONSIDERATIONS - Factors Affecting Taxable Values and Tax Payments."
26
AERIAL PHOTOGRAPH OF THE DISTRICT
(taken August 1997)
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tit, � i I ^4 b.
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27
PHOTOGRAPHS K WTHIN THE DISTRICT
(taken
TA AugustENI
, 1997)
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28
PHOTOGRAPHS TAKEN WITHIN THE DISTRICT
(taken August, 1997)
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�. `€
29
DISTRICT DEBT -
Debt Service Requirement Schedule
The following schedule sets forth the total debt service requirements of-the Outstanding Bonds and the Bonds.
The Bonds Total
Outstanding Principal Debt Service
Year Bonds (Due 9-1) Interest Requirements
1998 - $ 768,790 - $ 47,044 $ 815,834
1999 770,868 $ 65,000 -94,088 , 929,955
2000_- _ 777,423 65,000 90,058 932,480
2001 782,103 65,000 86,028 933,130
2002 784,653 65,000 - 81,998 - 931,650
2003 785,238 70,000 78,033 _ 933,270
2004 783,891 - 75,000 _ - 75,093 933,983
2005 785,303 80,000 - 71,868 937,170
2006 784,353 85,000 68,348 937,700
2007 791,103 90,000 64,565 - 945,668
2008 - 790,083 95,000 60,515 945,598
2009 .791,563 100,000 56,145 947,708
2010 794,938 105,000 51,645 951,583
2011 795,263 115,000 46,920 957,183
2012 792,538 125,000 41,630 959,168
2013 197,919 245,000 35,880 478,799
2014 197,813 260,000 - 24,610 482,423
2015 201,875 275,000 12,650 489,525
$12,375,717 $1,980,000 $1,087,118 $15,442,827
/0. A ^- N
Average Annual Requirements: (1999-2012) $941,1604
Maximum Requirement: (2012) $959,168✓
30
Bonded Indebtedness
1997 Assessed Valuation _$78,484,590(a)
(100% of estimated market,value as of January.-1, 1997)
See "TAX DATA" and "TAXING PROCEDURES."
Estimated Valuation at November 1, 1997
(100%of estimated market value as of November 1, 1997). -
See "TAX-DATA" and "TAXING PROCEDURES. . . . . . . . ... $91,876,840(b)
Direct Debt
Outstanding Bonds -. -_ 7,605,000
The Bonds I B g99,O1b
k$ 9,585,000
n
Estimated Overlapping Debt $4,890,423(c)
Total Direct and Estimated Overlapping Debt $14,475,423(d.
Direct Debt Ratios
: as a percentage of 1997 Assessed Valuation 12.21%
: as a percentage of Estimated Valuation at November 1, 1997 10.43%
Direct and Estimated Overlapping Debt Ratios
: as a percentage of 1997 Assessed Valuation 8.44%
: as a percentage of Estimated Valuation at November 1, 1997 • 5.76%.
Debt Service Fund upon delivery of the Bonds $ 1,044,324(e)
1997 Tax Rate per $100 of Assessed Valuation $1.12(di
Average Percentage of Total Tax Collections (1990-1996) 99.92%
(a) As of January 1, 1997. All property located in the District is valued on the tax rolls by the Brazoria County
Appraisal District (the "Appraisal District") at 100% of estimated 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 "INVESTMENT CONSIDERATIONS - Factors Affecting Taxable Values and Tax Payments."
(b) Provided by the Appraisal District for informational purposes only, this amount is an estimate of the value of
all taxable property located within the District as of November 1, 1997, and includes an estimate of values
resulting from the development and construction of taxable improvements from January 1, 1997, through
October 31, 1997. No tax was levied for 1997 on the increased valuation of such improvements constructed
subsequent to January 1, 1997, since the District's tax is levied annually on the valuation of property as of
January 1. The valuation of such additional improvements may vary significantly from this estimate when the
Appraisal Review Board certifies the valuation of District property for 1998. See "TAXING PROCEDURES''.
(c) See "Estimated Direct and Overlapping Debt Statement."
(d) The District levied a tax rate of$1.12 per $100 of Assessed Valuation in 1997. The TNRCC in its Order
authorizing the District to issue the Bonds advised the District to levy a tax rate not less than$1.12 per $190
of Assessed Valuation in the year in which the District issues the Bonds (1998). Moreover, as described
this Official Statement under the caption "TAX DATA- Estimated Overlapping Taxes," the aggregate of e
1997 tax levies of all units of government which levy taxes against the property located within the District is
$3.395631 per $100 of Assessed Valuation. One must consider the total tax burden of all overlapping
31
jurisdictions imposed upon property located within the District as contrasted with property located in
comparable real estate developments to gauge the relative tax burden on property within the District. The tax
rate necessary to service the debt issued or to be issued by the District, and the tax rates levied by other
overlapping jurisdictions, are subject to numerous uncertainties and variables; and thus the District can give
no assurance that the composite tax rates imposed by overlapping jurisdictions,plus the District's tax rate, will
be comparable with the tax rates of competing projects. To the extent that the District's composite tax rates
are not competitive with competing developments, the growth of property tax values in the District and the
investment quality or security of the Bonds could be adversely affected. See "INVESTMENT
CONSIDERATIONS - Factors Affecting Taxable Values and Tax Payments" and "TAX DATA."
(e) Neither Texas law nor the Bond Resolution requires the District to maintain any particular sum in the Debt
Service Fund.Such sum includes an amount sufficient to pay one year in interest payments on the Bonds which
will be capitalized from the proceeds of the sale of the Bonds and deposited in the District's Debt Service
—Fund.
32
Estimated Direct and Overlapping Debt Statement
Other governmental entities whose boundaries overlap the District have outstanding bonds payable from ad valorem
taxes. The following statement of direct and estimated overlapping ad valorem tax debt was developed from
information contained in "Texas Municipal Reports," published by the Municipal Advisory Council of Texas, or
other available information.Except for the amount relating to the District,the District has not independently verified
the accuracy or completeness of such information, and no person is entitled to rely upon such information as being
accurate or complete. Furthermore, certain of the entities listed below may have issued additional bonds since the
dates stated in this table, and such entities may have programs requiring the issuance of substantial amounts of
additional bonds,the amount of which cannot presently be determined. Political subdivisions overlapping the District
are authorized by Texas law to levy and collect ad valorem taxes for operation,maintenance and/or general revenue
purposes in addition to taxes for payment of their debt,,and some are presently levying and collecting such taxes.
Estimated
Debt as of Overlapping
January 1, 1998 Percent Amount
Brazoria County $30,867,503 0.7728% $ 238,544
Pearland Independent School District 81,869,012 5.6821' 4,651,879
TOTAL:ESTIMATED OVERLAPPING DEBT $4,890,423 :.
TOTAL DIRECT DEBT (the District) $ 9,585,000(a) 9,585;000
TOTAL DIRECT AND ESTIMATED
OVERLAPPING DEBT $14,475,423
Debt Ratios
% of
% of 1997 Estimated
Assessed Valuation
Valuation at November 1, 1997
Direct Debt 12.21% 0.43
Direct and Estimated Overlapping Debt 18.44% 5.76%
33
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 Outstanding Bonds and the Bonds (see "TAXING PROCEDURES"). The Board of Directors
of the District has in its Bond Resolution covenanted to assess and levy for each year that all or-any part of the
Bonds remain outstanding and unpaid a tax ample and sufficient to produce funds to pay the principal of and interest
on the Bonds(see "THE BONDS" and "INVESTMENT CONSIDERATIONS.") The District levied a tax for debt
service for 1997 at a rate of$1.-12 per $100 Assessed Valuation.
Tax Rate Limitation
Debt Service: nlimited(no legal limit'as to rate or amount). -
Maintenance: .25 per $100 Assessed Valuation.
Maintenance Tax 11
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 i rovements if such maintenance tax is authorized by vote of the District's electors.
On April 4, 1981,- "the Board as authorized by a vote of the District's electors to levy such maintenance tax in an
amount not to exceed $0.25 er $100 of assessed valuation. Such tax, when levied, is in addition to taxes which
the District is authorized to levy for paying principal of and interest on the Outstanding Bonds and the Bonds and
any parity bonds which may be issued in the future. The District has not levied a maintenance tax to date.
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
1987 35,137,490 $1.6401. 576,254.84 100.00% 1988
1988 31,376,000 $1.640 514,566.40 100.00% 1989
1989 31,139,450 $1.640 510,686.98 100.00% 1990
1990 29,713,560 $1.640 487,302.38 100.00% 1991
1991 31,675,430 $1.605 508,390.65 100.00% 1992
1992 35,191,910 $1.544 543,363.09/ 100.00% 1993
1993 38,729,7263117Y 7g$1.520/ . 588,691.74 1 y 99.99% 1994
1994 50,476,66060, 2,0$1.199 1 605,215.15/ 100.00% 1995
1995 56+8fr,060 C f tikt"u$1.199 673 670.63/ 100.00% 1996
1996 64,254,480/ $1.120 S 719,650.17� 99.45% 1997
1997 78,484,590 $1.120 879,027.30 53.97%(c) 1998
(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 December 31, 1997. 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) In process of collection. L
34
Analysis of Tax Base _
The following table illustrates the composition of property located within the District during the_past_nine years'.
1997 1996: -: 1995 _
Assessed Value % Assessed Value % Assessed Value %
Type of Property
Land $20,735,130 26.42% . $16,053,320 j 24.98% $12,046,740 21.,i4%
Improvements 57,234,400 72.91 - 47,786,360 74.37 43,621,360 -- ;77.64
Personal Property 1,113,600 1.43 956,460 / 1.49 ; 953,960 . '- 1.70-
Exemptions (598,540) (0.76) - (541,660)7 (0.84) (436,000) /. (0.78)
TOTAL' $78,484,590 100.00% $64,254,480 100.00% $56,186,060 100.00%
1994 1993 1992 .
Assessed Value % Assessed Value %. Assessed Value
Type of Property
Land $11,395,650 22.58% $ 7,008,740 18.10% $ 6,806,450 19.34%J
Improvements _ 38,585,310 76.44 31,080,260 80.25 27,709,190= 78.7
Personal Property 992,030 1.96 878,340 2.27 892,390 2.54
Exemptions -(496,330) / (0.98) (237,620) (0.62) (216,120) (0.61)
TOTAL $50,476,660 / 100.E% $38,729,720 100.00% $35,191,910-
1991 ._ 1990 . - 1989
Assessed Value % Assessed Value % Assessed Value .
Type of Property'
Land $7,078,960 22.35%- $_7,662,400 25.79% $.9,180,610 29.48%
Improvements 23,856,290 75.31 21,353,270 71-.86 21,280,390." 68.3I-
Personal Property . - -. 965,300 3.05 913,010 3.07 - . 894,070 2.87
Exemptions (225,120) (0:71) (215,120): :(0.72) (215,620)=_ -- (0.69)
TOTAL $31,6X5,430 100.00% $29,713,560 100.00% $31,139,450 100.00%
35
Principal 1997 Taxpayers
Based upon-information supplied by the District's Tax Assessor/Collector, the following table lists principal District
taxpayers, type of property owned by such taxpayers, and the Assessed Valuation of such property as of January
1, 1997. The information reflects the composition of the Appraisal District's record of property ownership as of
January 1, 1997.
Assessed Valuation % of 1997
Taxpayer Type of Property 1997 Tax Roll Tax Roll
2621 Joanel, Ltd. Lots and Acreage $1;718,810 2.19%
Lennar Homes of Texas, Inc. Houses, Lots and
Acreage 1,418,100 1.81
Weekley Homes, Inc. Homes 708,970 0.90
George Wimpey of Texas, Inc:
(Morrison Homes) Homes 430,880 0.55
Houston Lighting& Power Company, Inc. Utilities 322,650 0.41
Peter J. Loos Houses 251,150 0.32
Entex, Inc. Utilities 234,370 0.30
Reginald T. Mitchell Houses 203,360 0.26
Southwestern Bell Telephone Company Utilities 174,510 0.22
Casey Prigrmore House 139,690 .0.18
Totals $5,602,440 7.14%
Exemptions
'The District has adopted a residential homestead exemption for persons 65 years or older or disabled persons in an
amount of$10,000 of Assessed Valuation for 1997,but has not adopted a general residential homestead exemption.
See ,"TAXING PROCEDURES."
Portions of the land owned by the Developer are undeveloped and at some future date could be used for agricultural
purposes. Accordingly, the owner(s) of such land could be entitled to have such land valued on the basis of its
agricultural productivity(qualified open-space land), which would be a small fraction of its fair market value. The
Developer has not previously claimed an agricultural valuation,and has waived,on behalf of itself and its,successors
and assigns, any right to claim such valuation in future years. The waiver has been recorded in the Official Records
of Brazoria County, Texas. The waiver is binding for a period of 30 years..
36
Tax Rate Calculations
The tax rate calculations set forth below are presented to indicate the tax rates per$100 of Assessed Valuation which
would be required to meet certain debt service requirements if no growth in the District's tax base occurs beyond
the 1997 Assessed Valuation, or the Estimated Valuation at November 1, 1997. The calculations assume collection
of 95% of taxes levied, and the sale of no bonds by the District except the Outstanding Bonds and the Bonds.
Average Annual Debt Service Requirements (1999-2012) $941,160
Tax Rate of$1.27 on the 1997 Assessed Valuation($78,484,590)produces 946,917
Tax Rate of$1.08 on the Estimated Valuation at November 1, 1997 ($91,876,840)produces 942,656
Maximum Annual Debt Service Requirement (2012) 959,168
Tax Rate of$1.29 on the 1997 Assessed Valuation($78,484,590)produces 961,829
Tax Rate of$1.10 on the Estimated Valuation at November 1, 1997 ($91,876,840)produces 960,113
The District levied a debt service tax in 1997 of $1.12 per $100 of Assessed Valuation. As the above table
indicates, the 1997 tax rate is sufficient to pay debt service on the Bonds and the Outstanding Bonds without an
increase in taxable values in the District beyond the Estimated Valuation at November 1, 1997,assuming the District
will have a tax collection rate of 95%., and the issuance of no additional bonds by the District. See "TAXIIJNG
PROCEDURES" and "INVESTMENT CONSIDERATIONS - Factors Affecting Taxable Values and Tax
Payments." - �--
Estimated Overlapping Taxes
Property within the District is subject to taxation by several taxing authorities in addition to the District. Under
Texas law, on January 1 of each year, a tax lien attaches to property to secure payment of all state and local taxs,
penalties and interest ultimately imposed for the year on the property. A tax lien on property in favor of the Distract
is on a parity with tax liens of other taxing-jurisdictions. In addition to ad valorem taxes required to make 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.
37
Set forth below is an estimation of all taxes per $100 of assessed valuation levied by such jurisdictions. No
recognition is given to local assessments for civic association dues, emergency medical service contributions, fire
department contributions or any other charges made by entities other than political subdivisions.
1997 Tax Rate
Per $100 of -
Taxing Jurisdictions Assessed Valuation
The District $1.120000
Brazoria County 0.357500
Pearland Independent School District 1.776700
Brazoria County Drainage District.No. 4 0.141431
Estimated Total Tax Rate $3.395631
A.
No prediction can be made of the tax rates that will be levied in future years by the respective taxing jurisdictions.
TAXING PROCEDURES
Authority to Levy Taxes
The District is authorized to levy an annual ad valorem tax, without legal"limitation as to rate or amount, on all
taxable property within the District in an amount sufficient to pay the principal of and interest on the Bonds, the
Outstanding Bonds and any additional bonds payable from•taxes which the District may hereafter issue (see
"INVESTMENT CONSIDERATIONS - Future Debt") and to pay the expenses of assessing and collecting such
taxes. The District agrees in the Bond Resolution to levy such a tax from year to year as described more fully above
under "THE BONDS - Source of Payment." Under Texas law, the District may also levy and collect annual ad
valorem taxes for the operation and maintenance of the District and the System and for the payment of certain
contractual obligations. See "TAX DATA - Maintenance Tax" and "- Tax Rate Distribution."
Property Tax Code and County-wide Appraisal District -
The Texas Property Tax Code(the "Property Tax Code")specifies the taxing procedures of all political subdivisions
of the State of Texas, including the District. Provisions of the Property Tax Code are complex and are not fully
summarized here. The Property Tax Code requires, among other matters; county-wide appraisal and equalization
of taxable property values and establishes in each county of the State of Texas an-appraisal district with the
responsibility for recording and appraising property for all taxing units within a county and an appraisal review
board with responsibility for reviewing and equalizing the values established by the appr3.is al district. The Brazoria
County Appraisal District(the "Appraisal District")has the responsibility of appraising property for all taxing units
within Brazoria County, including the District. Such appraisal values will be subject to review and change by the
Brazoria County Appraisal Review Board (the "Appraisal Review Board").
Property Subject to Taxation by the District
Except for certain exemptions provided by Texas law, all real property, tangible personal property held or used for
the production of income, mobile homes and certain categories of intangible personal property with a tax situs in
the District are subject to taxation bythe District. Principal categories of exempt property include, but are not
limited to: property owned by the State of Texas or its political subdivisions if the property is used for public
purposes; property exempt from ad valorem taxation by federal law; certain household goods, family supplies and
personal effects; certain goods, wares, and merchandise in transit; farm products owned by the producer; certain
property of charitable organizations,youth development associations,religious organizations, and qualified schools;
i�
designated historical sites;and most individually-owned automobiles.In addition,the District may by its own action
38
exempt residential homesteads of persons 65 years or older and certain disabled persons to the extent deemed
advisable by the Board. The District may be required to offer such an exemption if a majority of voters approve
it at an election.The District would be required to call such an election upon petition by twenty percent (20%)'of
the number of qualified voters who voted in the preceding election.The District 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. Furthermore, the District must grant
exemptions to disabled veterans; or certain surviving dependents-of disabled veterans, if requested, but only to'the
maximum extent of between $5,000 and $12,000 of taxable valuation depending on the disability rating of the
veteran. See "TAX DATA -- Exemptions."
-Residential Homestead Exemptions: The Property Tax Code authorizes the governing body of each political
subdivision in the State of Texas to exempt up to twenty percent (20%)_of the appraised market value of
residential homesteads from ad valorem taxation. Where ad valorem taxes have previously been pledged for
the payment of debt, the governing body of a political subdivision may continue to levy and collect taxes
against the exempt value of the homesteads until the debt is discharged, if the cessation of the levy would
impair the obligations of the contract by which the debt was created. The adoption of a homestead exemption
may be considered each year, but must be adopted by May 1. See "TAX DATA -- Exemptions."
Freeport Goods Exemption:Freeport goods are goods,wares, merchandise, other tangible personal property
and ores, other than oil, natural gas and other petroleum products, which have been acquired or brought into
the state for assembling, storing, manufacturing, repair, maintenance, processing or fabricating or used to
repair or maintain aircraft of a certified air carrier and shipped out of the state within 175 days. Freeport
Goods are exempted from taxation by the District.
Tax Abatement -
Brazoria County or the City of Pearland may designate all or part of the area within the District as a reinvestment
zone.Thereafter, the City of Pearland(after annexation,)Brazoria County,the Pearland Independent School District
and the District, at the option and discretion of each entity, may enter into tax abatement agreements with owners
of property within the zone. Prior to entering into a tax abatement agreement, each entity must adopt guidelines and
criteria for establishing tax abatement, which each entity will follow in granting tax abatement to owners of
property. The tax abatement agreements may exempt from ad valorem taxation by each of the applicable taxing
jurisdictions, including the District, for a period of up to ten (10) years, all or any part of any increase in the
assessed valuation of property covered by the agreement over its assessed valuation in the year in which the
agreement is executed, on the condition that the property owner make specified improvements or repairs to the
property in conformity with the terms of the tax abatement. The terms of all tax abatement agreements must be
substantially the same.
Valuation of Property for Taxation
Generally, property in the District must be appraised by the Appraisal District at market value as of January 1 of
each year. Once an appraisal roll is prepared and finally approved by the Appraisal Review Board, it is used byi the
District in establishing its tax rolls and tax rate. Assessments under the Property Tax Code are to be based on one
hundred percent (100%) of market value, as such is defined in the Property Tax Code.
The Property Tax Code permits land`designated for agricultural use, open space or timberland to be appraised at
its value based on the land's capacity to produce agricultural or timber products rather than at its market value. IThe
Property Tax Code permits under certain circumstances that residential real property inventory held by a person in
the trade or business be valued at the price all of such property would bring if sold as a unit to a purchaser who
would continue the business. Provisions of the Property Tax Code are complex and are not fully summarized here.
Landowners wishing to avail themselves of the agricultural use,open space or timberland designation or residential
39
real property inventory 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.A claimant may waive the special valuation as
to taxation by some political subdivisions while claiming it as to another. If a claimant receives the agricultural use
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 taxes for the previous three years for agricultural use and taxes
for the previous five years for open space land and timberland.
The Property Tax Code requires the Appraisal District to implement a plan for periodic reappraisal of property to
update appraisal values. The plan must provide for appraisal of all real property in the Appraisal District at least
once every three(3)years. It is not known what frequency of reappraisals will be utilized by the Appraisal District
or whether reappraisals will be conducted on a zone or county-wide basis. The District, however, at its expense,
has the right to obtain from the Appraisal District a current estimate of appraised values within the District or an
estimate of any new property or improvements within the District.While such current estimate of appraised values
may serve to indicate the rate and extent of growth of taxable values within the District, it cannot be used for
establishing a tax rate within the District until such time as the Appraisal District chooses to formally include such
values on its appraisal roll.
District and Taxpayer Remedies
Under certain circumstances, taxpayers and taxing units(such as the District)may appeal the orders of the Appraisal
Review Board by filing a timely petition for review in State district court. In such event, the value of the property
in question will 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 sets forth notice and hearing procedures for certain tax rate increases by the District and
provides for taxpayer referenda which could result in the repeal of certain tax increases. The Property Tax Code
also establishes a procedure for notice to property owners of reappraisals reflecting increased property values,
appraisals that are higher than renditions and appraisals of property not previously on an appraisal roll.
Levy and Collection of Taxes
The District is responsible for the levy and collection of its taxes, unless it elects to transfer such functions to
another governmental entity. By September 1 of each year, or as soon thereafter as practicable, the rate of taxation
is set by the Board based upon the valuation of property within the District as of the preceding January 1. Taxes
are due October 1, or when billed,whichever comes later, and become delinquent after January 31 of the following
year. A delinquent tax incurs a penalty of six percent (6%) of the amount of the tax for the first calendar month
it is delinquent,plus one percent(1%) for each additional month or portion of a month the tax remains unpaid prior
to July 1 of the year in which it becomes delinquent. If the tax is not paid by July 1 of the year in which it becomes
delinquent, the tax incurs a total penalty of twelve percent (12%) regardless of the number of months the tax has
been delinquent and incurs an additional penalty of up to fifteen percent (15%) if imposed by the District. The
delinquent tax also accrues interest at a rate of one percent (1%) for each month or portion of a month it remains
unpaid. The Property Tax Code also makes provisions for the split payment of taxes, discounts for early payment
and the postponement of the delinquency date of taxes under certain circumstances.
District's Rights in the Event of Tax Delinquencies
Taxes levied by the District are a personal obligation of the owner of the property as of January 1 of the year for
which the tax is imposed. On January 1 of each year, a tax lien attaches to property to secure the payment of all
state and local taxes, penalties and interest ultimately imposed for the year on the property. The lien exists in favor
of the State of Texas and each local taxing unit, including the District, having the power to tax the property. The
District's tax lien is on a parity with the tax liens of other such taxing units (see "TAX DATA - Estimated
Overlapping Taxes"). A tax lien on real property takes priority over the claims of most creditors and other holders
of liens on the property encumbered by the tax lien, whether or not the debt or lien existed before the attachment
of the tax lien; however, whether a lien of the United States is on a parity with or takes priority over a tax lien of
the District is determined by applicable federal law. Personal property, under certain circumstances, is subject to
seizure and sale for the payment of delinquent taxes, penalty and interest.
40
At any time after taxes on property become delinquent, the District may file suit to foreclose the lien securing
payment of the tax, to enforce personal liability for the tax, or both. In filing a suit to foreclose a tax lien on Teal
property, the District must join other taxing units that have claims for delinquent taxes against all or part of the
same property. Collection of delinquent taxes may be adversely affected by the amount of taxes owed to other taxiing
units, by the effects of market conditions on the foreclosure sale price, by taxpayer redemption rights (a taxpayer
may redeem property 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 restrict the collection of taxpayer debts. See"INVESTMENT CONSIDERATIONS-
Tax Collection Limitations."
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 overthe construction and operation of such facilities including,among
others, Pearland, Brazoria County, the Brazoria County Drainage District No. 4, and the TNRCC.
Operation of the System is subject to regulation by, among others, the United States Environmental Protec ion
Agency and the TNRCC. 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 connections projected for the District at the full development of its approximate 570.5 acres is 1,769 with a otal
estimated population of 5,500. A description of portions of the,System follows and is based upon information
supplied by the District's Engineer.
Description
Proceeds of the sale of the Outstanding Bonds were used to fmance the construction or acquisition of underground
water supply and distribution, wastewater collection and treatment, and storm drainage facilities to serve the
aggregate 953 fully developed single-family residential lots in the District located within Southdown, Sections 1
through 3 and 5. The District will,acquire the water distribution, wastewater collection and storm sewer facilities
which have been constructed to serve the 272 fully developed single-family residential lots located within
Southdown, Sections 6 and 7 and Crystal Lake, Section 1, plus such facilities to serve the future 34 lots being
developed as Crystal Lake, Section 2 with a portion of the proceeds of the sale of the Bonds.
- Storm Drainage-
•
Storm water drainage for the District and the adjoining Brazoria County Municipal Utility Distri o. 4("M.U.D.
No. 4") is accomplished by a channel improvement and detention pond system jointly con ructed by the two
districts. The District's share of such joint system is 48.9%. According to the District's Engineer, construction
accomplished to date with proceeds of the Outstanding Bonds on the joint system provides adequate storm,water
drainage to Southdown, Sections 1 through 3 and 5 through 7, the currently developed area of M.U.D. No. 4 plus
approximately 200 additional acres located in the District which may be developed in the future. The joint drainage
system is designed,upon its completion,to provide drainage for the two districts in a developed state and upstream
drainage areas in an undeveloped state. The channel, which lies along the north boundary of,the District,flows into
Clear Creek, which lies along the north boundary of M.U.D. No. 4. The detention pond lies wholly within the
District. The detention pond is designed to attenuate the 100-year flood peak in Clear Creek after development
within the two districts to the same level as the 100-year flood peak prior to the initiation of development. Brazoria
County Drainage District o. 4 is responsible for drainage planning, review, and maintenance for the portion of
the County in which th wo districts are located. Maintenance of the detention ponds is the responsibility of the
District and M.U.D. o. 4. A separate detention system which drains in to Hickory Slough has been constricted
by JL to accommoda e Crystal Lake, Sections 1 and 2. Proceeds of the sale of the Bonds will be used 4 the
District to acquire drainage improvements including underground lines, manholes and inlets.
41
- Water Supply -
The District currently shares joint water supply facilities with M.U.D. No. 4. The existing facilities, which are
located within the District,consist of(i)one 1;165 gallons-per-minute("g.p.m.")water well and pump, an auxiliary
drive unit, a 500,000 gallon ground storage tank, two 15,000 gallon hydropneumatic tanks, two 1,000 g.p.m. and
one 600 g.p.m. booster pumps and two emergency water wells each with-a 300 g.p.m. capacity located in the
District, and (ii) a 380 g.p.m. well located in MUD No. 4. There are also two water line interconnections which
connect the District's water distribution system with M.U.D. No. 4's water distribution system. The District will
finance its share of the cost of the 380 g.p.m. well with a portion of the proceeds of the sale of the Bonds. The '
District's pro rata share of the,cost of the balance such facilities was financed with proceeds of the sale of the
Outstanding Bonds. The District financed its pro rata share of the cost of construction of a proposed second water
well, to be located within M.U.D. No.4, with a portion of the proceeds of the sale of the Outstanding Bonds. The
two districts will share the costs of the plant located in M.U.D. No. 4 based on the total capacity of both plants and
combined capacity ownership of each plant. The operation and maintenance agreement between the two districts
provides that the operation in each water plant will be the responsibility of the District in which each respective
facility is located. According to the District's Engineer, the aforementioned water plant facilities contain capacity
sufficient to provide service to a total of 2,506 connections,of which 1,390 connections are allocated to the District,
including the 1,225 existing and proposed connections in Southdown, Sections 1,,2, 3 and 5 through 7, Crystal
Lake, Sections 1 and 2, plus 50 connections which the District has allocated to the Pearland Independent School
District, and approximately 13 commercial connections.
-Wastewater Treatment -
The District financed the District's pro rata portion of th cost of an aggregate 700,000 gallons-per-day ("g.p.d.")
permanent wastewater treatment plant which the Distri shares with M.U.D. No. 4 with a portion of the proceeds
of the Outstanding Bonds. The District owns 65.64% of the capacity of the facility, and M.U.D. No. 4 owns the
remainder. According to the District's Engineer, the capacity to which the District is entitled in the joint wastewater
treatment facility, consisting of 1,838 of a total of 2,800 connections, is adequate to provide capacity to serve the
1,225 existing and proposed connections in Southdown, Sections 1 through 3 and 5 through 7, Crystal Lake,
Sections 1 and 2, plus 50 connections which the District has allocated to the Pearland Independent School District,
approximately 13 commercial connections,and approximately 550 additional connections. The District will finance
its pro rata share of the cost of certain improvements to the facility with a portion of the proceeds of the sale of the
Bonds, including a clarifier, digester, chlorination facilities and a generator. These improvements are necessary
to enable the District to meet the requirements of the TNRCC waste discharge permit covering the plant.
- 100-Year Flood Plain -
According to the District's Engineer, the current Federal Emergency Management Agency Flood Hazard Boundary
Map currently in effect which covers the land located in the District indicates that no area located within Southdown,
Sections 1 through 3, 5'through 7, and Crystal Lake, Section 1, which contain the 1,225 single-family residential
lots which have been developed in the District to date, or the 34 single-family residential lots currently being
developed as Crystal Lake, Section 2, is located within the 100-year flood plain of Clear Creek. Approximately
60 District acres, which are contained within detention'ponds or are otherwise not-currently expected to be
developed, are located within the 100-year flood plain of Clear Creek.
42
INVESTMENT CONSIDERATIONS
General
The Bonds, which are obligations of the District and not of the State of Texas, Brazoria County, Texas, the City
of Pearland, 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.
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 collect from the property owners within the District taxes levied
against all taxable property located within the District or, in the event taxes-are not collected and foreclosure
proceedings are instituted by the District,upon the value of the taxable property with respect to taxes levied by the
District and by other taxing authorities. 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. The potential increase in taxable valuation of District property 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. 1
Factors Affecting Taxable Values'and Tax Payments -
The rate of home construction within'the District is directly related to:the vitality of the residential housing industry.
New residential housing construction can be significantly affected by factors such as general economic activity,
interest rates; credit availability,construction costs;the level of unemployment and consumer demand. Decreased
levels of home construction _ctivity restrict the growth of property values in the District. Although the Distract
currently contains a total o ,225 fully developed single-family residential lots on which 1,170 single=family homes
have been constructed(including 57 homes under'construction); 55 vacant fully developed lots which are currently
available for home construction,and 125 single-family residential lots which are currently under development as
described in the sections of this Official Statement entitled"DEVELOPMENT"and "THE SYSTEM," and although
there are currently three home building companies constructing homes within the District,the District cannot predict
the pace or magnitude of any_future development or home construction in the District in addition to the
aforementioned development and home construction which has heretofore taken place in the District.
Principal Land Owner's Obligations to the District
Lennar Homes of Texas, Inc., a wholly-owned subsidiary of Lennar Corporation(collectively, "Lennar"), a publicly
traded corporation whose stock is listed on the New York Stock Exchange, on March 9, 1994, purchased 28 fully
developed single-family residential lots plus approximately 193 acres of undeveloped and 21'acres of partially
developed land,located within the District. Lennar and/or Lennar through its wholly-owned subsidiary;Friendswood
Development Company, has developed Southdown, Sections 5 through 7, and has initiated the development 1 of
Southdown, Section 8, consisting of 91 proposed single-family residential lots located in the District.' According
to Lennar, it currently anticipates completing the development of Southdown, Section 8 by approximately March
15, 1998. -Lennar currently owns 64 fully developed single-family residential lots, the 91 single-family residential
lots which it is currently developing, approximately 21 partially developed acres, and approximately 109 acres of
currently undeveloped land located in the District. Lennar is currently constructing homes on the lots which it owns
i
located in the District. 2621 Loanel,'Ltd. ("JL")-has developed Crystal Lake, Section 1 and has initiated the
development of Crystal Lake, Section 2, consisting of 34 single-family residential lots located in the District.
According to JL, it anticipates completing the development of Crystal Lake, Section 2 by approximately March 31,
1998. JL has sold 60 of the 103 lots which it has developed in Crystal Lake,,Section 1 to Weekley Homes, Inc.
and Morrison Homes, and has contracted to sell the remaining lots which it owns in Crystal Lake, Section 1 and
the lots which it expects to develop in Crystal Lake, Section 2' to such home building companies. See
"DEVELOPERS," "DEVELOPMENT," "BUILDERS," and "TAX DATA - Principal 1997 Property Owners.i'
43
Although Lennar's current plans for the currently undeveloped acreage which it owns in the District, as reported
by Lennar through Friendswood, include the development thereof into single-family residential lots when Lennar's
current lot inventory is depleted, Lennar through Friendswood has no obligation to the District to develop any of
such land in any particular manner or at all, and may sell the land and lots which it owns in the District at its sole
discretion. Moreover, there is no commitment by or legal requirement of JL to the District to develop Crystal
Lake, Section 2. In addition, there is no requirement of Lennar, Weekley Homes, Inc., Morrison Homes, or any
other home builder to proceed at any particular rate in the construction of homes within the District or at alll.
Furthermore, there is no restriction on the right of Lennar, JL, or any of the Builders to sell land or lots owned
by them. Therefore, the District can make no representation about the probability of future development or the rate
of future home construction activity in the District. See "FUTURE DEVELOPMENT."
Maximum Impact on District Tax Rates
Assuming no further construction of homes and other taxable improvements within the District other than those
which have heretofore been constructed, and no additional development in the District other than the development
which has occurred to date, the value of the land and improvements currently located within the District will be
major determinant of the ability of the District to collect, and the willingness of District property owners to pay J
ad valorem taxes levied by the District. The District levied a tax of$1.12 pre$100 of Assessed Valuation in 1997J
The 1997 Assessed Valuation of property within the District is $78,484,590(see "TAX DATA"). After issuance
of the Bonds, the Maximum Annual Debt Service Requirement on the.Bonds and the Outstanding Bonds will be
$959,168 (2012) and the Average Annual Debt Service Requirements will be $941,160 (1998 through 2012,E
inclusive). Assuming no increase to or decrease from the 1997 Assessed Valuation, and no use of other legally
available District funds, tax rates of$1.29-and$1.27 per$100 of Assessed Valuation ata 95% collection rate would
be necessary to pay the Maximum Annual Debt Service Requirement and the Average Annual Debt Service
Requirements,respectively.In addition,the District's Estimated Valuation at November 1, 1997,of property located
within the District supplied by the Appraisal District is$91,876,840,reflecting.the estimate:by the Appraisal District
of values resulting from the development and construction of taxable improvements from January 1, 1997, through
October 31, 1997. Assuming no increase to or decrease from the Estimated Valuation at November 1, 1997, taxi
rates of$1.10 and $1.08 per $100 of Assessed Valuation at a 95% tax collection rate would be necessary to pay
the Maximum Annual Debt Service Requirement and the Average Annual Debt Service Requirements, respectively,
on the Bonds and the Outstanding Bonds. Therefore, the tax rate of$1.12 per $100 of Assessed Valuation which
the District levied in 1997 will be sufficient to pay debt service on the Bonds and the Outstanding Bonds without
an increase to taxable values in the District beyond the Estimated Valuation at November 1, 1997, assuming thell
District will have a tax collection rate of 95%, and the issuance of no additional bonds by the District. See "TAX
DATA - Tax Rate Calculations."
Increases in the District's tax rate to levels higher than the rate of$1.12 per$100 of Assessed Valuation which the
District levied for 1997 may have an adverse impact upon future development within the.District, the future
construction of homes and other taxable improvements within the District, and the ability of the District to collect,
and the willingness of owners of property located within the District to pay, ad valorem taxes levied by the District.
In addition,the collection by the District of delinquent taxes owed to it and the enforcement by a Registered Owner
of the District's obligations to collect sufficient taxes may be a costly and lengthy process. See "TAXING
PROCEDURES - District's Rights in the Event of Tax Delinquencies."
As described in this Official Statement under the caption"TAX DATA - Estimated Overlapping Taxes," the
aggregate of the tax levies of all units of government which levy taxes against the property located within the
District is $3.395631 per $100 of Assessed Valuation. One must consider the total tax burden of all overlapping
jurisdictions imposed upon property located within the District as contrasted with property located in comparable
real estate developments to gauge the relative tax burden on property within the District. The tax rate necessary
to service the debt issued or to be issued by the District, and the tax rates levied by other overlapping jurisdictions,
are subject to numerous uncertainties and variables, and thus the District can give no assurance that the composites
tax rates imposed by overlapping jurisdictions,plus the District's tax rate, will be competitive with the tax rates of
competing projects. To the extent that the District's composite tax rates are not competitive with competing
developments, the growth of property tax values in the District and the investment quality or security of the Bonds
could be adversely affected.
44
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 local taxing authorities on the property against which taxes are levied,
and such lien may be enforced .by foreclosure. The District's ability to collect ad valorem taxes through such
foreclosure may be impaired by (a) cumbersome, time-consuming and expensive collection procedures, (b) a
bankruptcy court's stay of tax collection procedures against a taxpayer, (c)market conditions limiting the proceeds
from a foreclosure sale of taxable property or(d)the taxpayer's redemption rights(a taxpayer may redeem property
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.) While the District has a lien on
taxable property within theDistrict for taxes levied against such property, such lien can be foreclosed only in a
• judicial proceeding.
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 sufficient taxes each year to make such payments. Except
for mandamus, the Bond Resolution does not specifically 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 within the District in order to pay the principal of and interest on the Bond4
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 may be
limited further by laws relating to bankruptcy, reorganization or other similar laws of general application affecting
the rights of creditors of political subdivisions such as the District. In this regard, should the District file a petition
for protection from creditors under federal bankruptcy laws, the remedy of mandamus or the right of the District
to seek judicial foreclosure of its tax lien 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."
The Effect of the Financial Institutions Act of 1989 on Tax Collections of the District
The Financial Institutions Reform,Recovery and Enforcement Act of 1989("FIRREA"),contains certain provisions
which affect the time for protesting property valuations, the fixing of tax liens and the collection of penalties and
interest on delinquent taxes on real property owned by the Federal Deposit Insurance Corporation("FDIC") when
the FDIC is acting as the conservator or receiver of an insolvent financial institution.
Under FIRREA real property held by the FDIC is still subject to ad valorem taxation, but such act states (i) that
no real property of the FDIC shall be subject to foreclosure or sale without the.consent of the FDIC and no
involuntary liens shall attach to such property, (ii)the FDIC shall not be liable for any penalties, interest, or fines,
including those arising from the failure to pay any real or personal property tax when due and (iii)notwithstanding
failure of a person to challenge an appraisal in accordance with state law, such value shall be determined as of the
period for which such tax is imposed.
There has been no definitive judicial determination of the validity of these provisions of FIRREA or how they are
to be construed and reconciled with respect to conflicting state laws. It is also not known whether the FDIC will
attempt to claim the FIRREA exemptions as to the time for contesting valuations and tax assessments made prior
to and after the enactment of FIRREA. Accordingly, to the extent the FIRREA provisions are valid and applicable
to any property in the District, and to the extent that the FDIC attempts to enforce the same, these provisions may
{ affect the timeliness of collection of taxes on property, if any, owned by the FDI in the District, and may prevent
the collection of penalties and interest on such taxes.
k !
45
Marketability
The District has no o understanding (other than the initial reoffering yields) with_the Initial Purchaser regarding the
reoffering yields-or prices of the Bonds and has no control over the trading of:the Bonds in the secondary market.
Moreover, there is no assurance that:a secondary market will be made for the Bonds.;If there is a-secondary market,
the difference between the bid and asked price of 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 the right to issue the remaining $7,605,000_authorized` but unissued bonds for waterworks,
wastewater and drainage facilities and for refunding purposes (see "THE BONDS - Issuance of Additional Debt"),
and such additional bonds as may hereafter be approved by both the Board and voters of the District:The District
also has the right to issue certain other additional bonds, special project bonds, and other obligations described in
the Bond Resolution. All of the remaining $7,605,000 in bonds for waterworks,wastewater and drainage facilities
and for refunding purposes which have heretofore been authorized by the voters of the District may be issued by
the District from time to time as needed. The issuance of such $7;605,000 in bonds for waterworks, wastewater
•
and drainage facilities is also subject to TNRCC authorization:
The District's Engineer estimates that the aforementioned$7,605,000 authorized bonds which remain unissued will
be adequate to finance the construction of all water, wastewater and drainage facilities to provide service to all-of
the currently undeveloped portions of the District. If additional bonds are issued in the`future and property 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 Outstanding Bonds.
Competitive Nature of Houston Residential Housing Market
The housing industry in the Houston area is very competitive, and the District can-give no assurance that the
building programs which are planned by-Lennar or any future home builder(s)will be continued or completed. The
respective competitive positions of Lennar and/or JL, and any other developer and Lennar, Weekley Homes, Inc.
and/or Morrison Homes or any other home.builder(s) which might attempt-future home building or development
projects in the District in the.sale of developed,lots or in the construction and sale of single-family residential units
are affected by most of the factors discussed-in this section,and such competitive positions are directly related to
tax revenues received by the District and the growth and maintenance of taxable values in the District.
Continuing Compliance with Certain Covenants
The Bond Resolution contains covenants by the District intended to preserve the exclusion from gross income of
interest on the Bonds. Failure of 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 "LEGAL MATTERS - Tax Exemption."
Approval of the Bonds
As required by law, engineering plans, specifications and estimates of construction costs for the facilities and
services to be purchased or constructed by the District with the proceeds of the Bonds have been approved, subject
to certain conditions, by the TNRCC. See "THE BONDS -- Use-and Distribution of Bond Proceeds:" In addition,
the Attorney General of Texas must approve the legality of the Bonds prior to their delivery.
Neither the TNRCC nor the Attorney General of Texas passes upon or guarantees the security of the Bonds as an
investment, nor have the foregoing authorities passed upon the adequacy or accuracy of the information contained
in this Official Statement.
46
Analysis of Tax Base
The following table illustrates-the:composition,of property located within the District during the past nine years.
.1997 - • 1996: .-• 1995 _
Assessed Value % Assessed Value % Assessed Value %
Type of Property
Land $20,735,130 26.42% $16,053,320 ` 24.98% $12,046,740 21.44%
Improvements 57,234,400 72.91 47,786,360� 74.37 43,621,360 . 77.64
Personal Property 1,113,600 1.43 956,460 / 1.49 953;960 1.70
Exemptions (598,540) (0.76) (541,6607 (0.84) (436,000) �- (0.78)
TOTAL. $78,484,590 100.00% -$64,254,480 100.00% $56,186,060 100.00%
t- �-
1994 • 1993 1992 _ •
Assessed Value % Assessed Value % . Assessed Value
Type of Property
Land $11,395,650 22.58% $ 7,008,740 18.10% $ 6,806,450 19.34%
Improvements 38,585,310 76.44 31,080,260 80.25 27,709,190 78.74
Personal Property 992,030 1.96 878,340 2.27 892,390 2.54
Exemptions -(496,330) (0.98) (237,620) (0.62) (216,120) (0.61)
TOTAL $50,476,660 / 100.00% $38,729,720 100.00% $35,191,910. 100.'00%
N Ino
mturip
1991 • 1990 1989 -
Assessed Value % Assessed Value % Assessed-Value' %
Type of Property
Land $7,078,960 22.35% $ 7,662,400 25.79% $.9,180,610 29.48%
Improvements 23;856,290 ' • 75.31 1 -'21,353,270 71.86 21,280,390 68.34
Personal Property 965,300 3.05 - 913,010 • 3.07 • 894,070 2.87
Exemptions (225,120) (0.71) (215,1201 (0.72) (215,620) _ (0.69)
TOTAL $31,6X5,430 100.00% $29,713,560 100.00% $31,139,450 100.00%
35
LEGAL MATTERS
Legal Opinions-
Delivery of the Bonds will be accompanied by the unqualified approving legal opinion of the 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 under the Constitution and laws of the State of Teas,
and all taxable property within the District is subject to the levy of ad valorem t es to pay the same, without legal
limitation as to rate or amount, based upon examination of a transcript of cert. ed proceedings held incident to the
issuance and authorization of the Bonds, and-the approving legal opinion Coats, Rose, Yale, Holm, Ryman &
Lee,`-P.C., Bond Counsel for the District, to a like effect. Such opinions express no opinion with respect to the
sufficiency of the security for or the marketability of the Bonds: Bond Counsel's opinion also will address the
matters-described below under "Tax Exemption." '
Bond Counsel has reviewed the information appearing in this Official Statement under "THE BONDS - General"
-"Assignments, Transfers and Exchanges," "Redemption of Bonds," - "Replacement of Registrar," - "Authority
for Issuance," - "Source of Payment," - "Issuance of Additional Debt," - "No Arbitrage," - "Annexation and
Consolidation," - "Registered Owners' Remedies," - "Legal Investment and Eligibility to Secure Public Fund in
Texas," and="Defeasance," "THE DISTRICT-'Authority"and"Attorney," "TAXING PROCEDURES," "LEGAL
MATTERS-- Tax-Exemption," "-Tax Accounting Treatment of Original Issue Discount Bonds," and "-Qualified
Tax-Exempt Obligations- Purchase of the Bonds by Financial Institutions" and "CONTINUING DISCLOSURE
OF INFORMATION" solely to determine whether such information, insofar as it relates-to matters of law, is tine
and correct and whether such information fairly summarizes matters of law,the provisions of the documents referred
to therein and conforms to the provisions of the Order of the`TNRCC-approving the Bonds and to the requirements
of Pearland with respect to the sale of the-Bonds. Bond Counsel has not, however, independently verified any of
the factual information contained in this Official Statement nor has it 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.Bond Counsel's limited participation as an assumption of responsibility for or an expression
of o inion of any kind with regard to the accuracy or completeness of any information contained herein, other than
matters discussed immediately above.
Coats, Rose, Yale, Holm, Ryman&Lee, P.C., also serves as general counsel to the District on matters other than
the issuance of bonds. The legal fees paid to Bond 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 upon the sale and delivery of the Bonds. - -
No-Litigation Certificate
The District will furnish the Initial Purchaser a certificate, executed by the President and Secretary of the Board,
and-dated as of the date of delivery of the Bonds, that to their knowledge; no litigation is pending or threatened
affecting the validity of the Bonds, or the levy and/or collection of taxes for the payment thereof, or the organization
or boundaries of the District, or the title of the officers thereof to their respective offices.
Tax Exemption- -
i
In the opinion of Coats, ose, Yale, Holm, Ryman & Lee, P.C., Bond Counsel, (i) interest on the Bonds is
excludable from gross income for federal income tax purposes under existing law and(ii)the Bonds are not"private
activity bonds"under the Internal Revenue Code of 1986, as amended (the "Code"), and interest on the Bonds will
not be subject to the alternative minimum tax on individuals and corporations, except as described below in the
discussion regarding the adjusted current earnings adjustment for corporations.
47
The Code imposes a number of requirements that must be satisfied for interest on state or local obligations, such
as the Bonds, to be excludable from gross income for federal income tax purposes. These requirements include
limitations on the use of Bond proceeds and the source of repayment of bonds, limitations on the investment of bond
proceeds prior to expenditure, a requirement that excess arbitrage earned on the investment of bond proceeds be
paid periodically to the United States and a requirement that the District file an information report with the Internal
Revenue Service. The District has covenanted in the Bond Resolution that it will comply with these requirements.
Bond Counsel's opinion will assume continuing compliance with the covenants of the Bond Resolution pertaining
to those sections of the Code which affect the exclusion from gross income of interest on the Bonds for federal
income tax purposes and, in addition,will rely on representations by the District and the Underwriter with respect
to matters solely within the knowledge of the District and the Underwriter, respectively, which Bond Counsel has
not independently verified. If the District should fail to comply with the covenants in the Bond Resolution or the
report or if the foregoing representations should be determined to be inaccurate or incomplete, interest on the Bonds
could become taxable from the date of delivery of the Bonds, regardless of the date on which the event causing such
taxability occurs..
The Code also imposes a 20% alternative minimum tax on the "alternative minimum taxable income" of a
corporation(other than any S corporation,regulated investment company, FASIT, REIT, or REMIC),if the amount
of such alternative minimum tax is greater than the amount of the corporation's regular income tax. Generally, for
taxable years beginning after 1989, a corporation's alternative minimum taxable income includes 75% of the amount
by which a corporation's "adjusted current earnings" exceeds its other "alternative minimum taxable income."
Because interest on tax-exempt obligations, such as the Bonds, is included in the corporation's "adjusted current
earnings," 'ownership of the Bonds could subject a corporation to alternative minimum tax consequences.
Under the Code, taxpayers are required to report on their returns the amount of tax-exempt interest, such as interest
on the Bonds, received or accrued during the year.
Except as stated above, Bond Counsel will express no opinion as to any federal, state or local tax consequences
resulting from the receipt or accrual of interest on, or acquisition, ownership, or disposition of, the Bonds.
Prospective purchasers of the Bonds should be aware that the ownership of tax-exempt obligations may result in
collateral federal income tax consequences to financial institutions,life insurance and property and casualty insurance
companies, certain S corporations with Subchapter C earnings and profits, individual recipients of Social Security
or Railroad Retirement benefits, owners of interests in a FASIT, taxpayers who may be deemed to have incurred
or continued indebtedness to purchase or carry tax-exempt obligations and individuals otherwise qualifying for the
earned income credit. In addition, certain foreign corporations doing business in the United States may be subject
to the "branch profits tax" on their effectively-connected earnings and profits, including tax-exempt interest such
as interest on the Bonds. These categories of prospective purchasers should consult their own tax advisors as to
the applicability of these consequences. .
Bond Counsel's opinions are based on existing law, which is subject to change. Such opinions are further based
on Bond Counsel's knowledge of facts as of the date thereof. Bond Counsel assumes no duty to update or
supplement its opinions to reflect any facts or circumstances that may thereafter come to Bond Counsel's attention
or to reflect any changes in any law that may thereafter occur or become effective.
48
Tax Accounting Treatment of Discount and Premium on Certain Bonds
The initial public offering price of the Bonds maturing in the years 2009 through 2015, inclusive, (the "Discount
Bonds") is less than the amount payable on such Bonds at maturity. An amount equal to the difference between
the initial public offering price of a Discount Bond(assuming that a substantial amount of the Discount Bonds'of
that maturity are sold to the public at,such price) and the amount payable at maturity constitutes original_issue
discount to the initial purchaser of such Discount Bond. .A portion of such original discount allocable to the holding
period of such Discount Bond by the initial purchaser will,,upon the disposition of such Discount Bond(including
by reason of its payment at maturity), be treated as interest excludable from gross income, rather than as taxable.
gain, for federal income tax purposes, on.the same terms and conditions as those for other interest on the Bonds
described above under "TAX EXEMPTION". Such interest is considered to be accrued actuarially in accordance
with the constant interest method over the life a Discount Bond, taking into account the semiannual compounding
of accrued interest, at.the yield to maturity on such Discount Bond and generally will be allocated to an initial
purchaser in a different amount from the amount of the payment denominated as interest actually received by the
initial purchaser during his taxable year.
However, such interest may be required to be taken into account in determining the alternative minimum taxable
income of a corporation, for purposes of calculating a corporation's alternative minimum tax imposed by Section
55 of the Code, and the amount of the branch profits tax applicable to certain foreign corporations doing business
in the United States, even though there will not be a corresponding cash payment. In addition,the accrual of such
interest may result in certain other collateral federal income tax consequences to, among others, financial
institutions,life insurance companies,property and casualty insurance companies, "S" corporations with"subchapter
C" earnings and profits, individual recipients of Social Security or Railroad Retirement benefits,owners of interests
in a FASIT, individuals otherwise qualifying for the earned income tax credit, and taxpayers who may be deemed
to have incurred or continued indebtedness to purchase or carry, or who have paid or incurred certain expenses.
allocable to, tax-exempt obligations. Moreover, in the event of,the redemption,,sale or other taxable.disposiuon
of a Discount Bond by the initial owner prior to maturity, the.amount realized by such owner,in excess of the basis
of such Discount Bond in the hands of such owner (adjusted upward by the portion of the original issue discount
allocable to the period for which such Discount Bond was held).is includable in gross income.
Owners of Discount Bonds should consult with their own tax advisors with respect to the determination for federal
income tax purposes of accrued interest upon disposition of Discount Bonds and with respect to the state and local
tax consequences of owning Discount Bonds. . It is possible that, under applicable provisions governing
determination of state and local income taxes, accrued interest on Discount Bonds may be deemed to be received
in the year of accrual even though there will not be a corresponding cash payment.
The initial public offering price of the Bonds maturing in the years 1999 through 2002, inclusive, (the "Premium
Bonds"), is greater than the amount payable on such Bonds at maturity.. An amount equal to the difference between
the initial public offering price of a Premium Bond (assuming that a substantial amount of the Premium Bonds of
that maturity are sold to the public at such price),and the amount payable at maturity constitutes premium to the
initial purchaser of such Premium Bond. The basis for federal income tax purposes of a Premium Bond in the
hands of such initial purchaser may be reduced each year by the amortizable bond premium. Such reduction in l asis
will increase the amount of any gain or decrease the amount of any loss to be recognized for federal income tax
purposes upon the sale or other taxable disposition of a Premium Bond. The amount of. premium which is
amortizable each year by an initial purchaser is determined by using such purchaser's yield to maturity. Purchasers
of the Premium Bonds should consult with their own tax advisors with respect to the determination of amortizable
bond premium with respect to the state and local tax consequences of owning Premium Bonds.
49
QUALIFIED TAX-EXEMPT OBLIGATIONS.
Section 265 of the Code provides, in general, that interest expense incurred to acquire or carry tax-exempt
obligations is not deductible from the gross income of the owner thereof. In addition, interest expense incurred by
certain owners that are "financial institutions" within the meaning of such section and which is allocable to tax-
exempt obligations acquired after August 7, 1986, is completely disallowed as a deduction for taxable years
beginning after December 31, 1986. Section 265(b) of the Code provides an exception to this rule for interest
expense incurred by financial institutions and allocable to tax-exempt obligations(other than private activity bonds)
which are designated by an issuer, such as the District; as "qualified tax-exempt obligations." An issue may be
designated as "qualified tax-exempt obligations"only where the amount of such issue, when added to all other tax-
exempt obligations(other than private activity bonds) issued or reasonably anticipated to be issued by the issuer
during the same calendar year, does not exceed $10,000,000. -
The District has, pursuant to the Bond Resolution, designated the Bonds as "qualified tax-exempt obligations" and
certified its expectation that the above-described $10,000,000 ceiling will not be exceeded. Accordingly, it is
anticipated that financial institutions that purchase the Bonds will not be subject to the 100 percent disallowance of
interest expense allocable to interest on the Bonds under section 265(b) of the Code. However, 20 percent of the
interest expense incurred by a financial institution which is allocable to the interest on the Bonds would not be
deductible pursuant to section 291 of the Code. •
OFFICIAL STATEMENT
General
The information contained in this Official Statement has been obtained primarily from the District's records, the
Engineer, the Developer, the Tax Assessor/Collector and other sources believed to be reliable; however, no
representation is made as to the accuracy or completeness of the information contained herein, except as described
below. 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 the Official Statement relating to engineering and to the description of the System,
and, in particular, that engineering information included in the sections entitled "THE BONDS - Use and
Distribution of Bond Proceeds," "THE DISTRICT" and "THE SYSTEM"has been provided by Ferro-Saylors, Inc.
and has been included herein in reliance upon the authority of said firm as experts 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 Wallace P. Hutchinson. The District has included certain information herein in reliance upon Mr.
Hutchinson's authority as an expert in the field of tax assessing and real property appraisal.
e Dist ' • manci statements for the fiscal year ended September 30, 1997,were prepared by McC
Gibson & Company, PLLC, Certified Public Accountants, and have been included he ' " B"'.
Mc , LLC,Certified Public Accountants, as consented to the publication of such financial
statements in this Official Statement.
50
Certification as to Official Statement
The District, acting by and through its Board of Directors in its official capacity and in reliance upon the experts
listed above, hereby certifies, as of the date hereof,that to the best of its knowledge and belief, the information,
statements and descriptions pertaining to the District and its affairs herein contain no untrue statements of a material
fact and do not omit to state any material fact necessary to make the statements herein; in light of the circumstances
under which they were made, not misleading.The information,descriptions and.statements concerning entities other
than the District, including particularly other governmental entities, have been obtained from sources believed to
be reliable, but the District has made no independent investigation or verification of such matters and makes no
representation as to the accuracy or completeness thereof.
Updating of Official Statement
If, subsequent to the date of the Official Statement, the District learns, through the ordinary course of business d
without undertaking any investigation or examination for such purposes, or is notified by the Initial Purchaseri of
any adverse event which causes the Official Statement to be materially misleading, and unless the Initial Purchaser
elects to terminate its obligation to purchase the Bonds, the District will promptly prepare and supply to the Initial
Purchaser an appropriate-amendment or supplement to the Official Statement satisfactory to the Initial Purchaser;
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 Initial Purchaser, unless the Initial Purchaser notifies the
District in writing on or before such date that less than all of the Bonds have been sold to ultimate customers, in
which case the District's obligations hereunder will extend for an additional period of time (but not more than 90
days after the date the District delivers the Bonds) until all of the Bonds have been sold to ultimate customers.
Official Statement "Deemed Final" .
For purposes of compliance with Rule 15c(2)-12 of the Securities and Exchange Commission, this document, as
the same may be supplemented or corrected by the District from time to time, may be treated as an Official
Statement with respect to the Bonds described herein and is "deemed final" by the District as of the date hereof(or
of anysuch 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
The offering of the Bonds qualifies for the Rule 15c2-12(d)(2) exemption from Rule 15c2-12(b)(5) regarding the
District's continuing disclosure obligations because the District has not issued more than$10,000,000-in aggregate
amount of outstanding bonds and no person is committed by contractor other arrangement with respect to payment
of the Bonds. As required by the exemption,however, the District in the Bond Resolution 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 subscribe to receive the information from the vendors.
51
Annual Reports-
The District will provide certain financial information and operating data which is customarily prepared by the
District and is publicly available, upon request of any person, or annually to the appropriate state information
depository. The financial information and operating data which will be provided is found in "APPENDIX B."
Under Texas Law, the District must keep its fiscal records in accordance with generally accepted accounting
principles,must have its financial accounts and records audited by a certified public accountant within 120 days after
the close of each fiscal year of the District, and must file each audit report with the TNRCC within 135 days after
the close of the fiscal year. The District's fiscal records and audit reports are available for public inspection during
regular business hours, and the District and the TNRCC are required by law to provide a copy of the District's audit
reports to any member of the public within a reasonable time on request, upon payment of applicable copying
charges. Requests for copies should be addressed to the District in care of Coats, Rose, Yale, Holm, Ryman &
Lee, P.C., Houston, Texas. The District will update and provide this information to any state information
depository("SID") that is designated by the State of Texas and approved by the staff of the United States Securities
and Exchange Commission ("SEC") within six months after the end of each of its fiscal years ending in or after
1998.
The District's current fiscal year end is September 30 Accordingly, it must provide updated information by March
31 in each year, unless the District changes its fiscal year. If the District changes its fiscal year, it will notify any
SID of the change.
Material Event Notices
The District will also provide timely notices of certain events to certain information vendors. 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 of property 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." The District will provide each notice described in this paragraph to any SID and to either
each nationally recognized municipal securities information repository ("NRMSIR") or the Municipal Securities
Rulemaking Board ("MSRB")..
Availability of Information From NRMSIRs and SID
The District has agreed to provide the foregoing information only to the information vendors described above. The
information will be available to holders of Bonds only if the holders comply with the procedures and pay the charges
established by such information vendors or obtain the information through securities brokers who do so.
The Municipal Advisory Council of Texas (the "MAC") has been designated by the State of Texas as a SID. In
a no-action letter dated August 29, 1995, the staff of the Division of Market Regulation of the SEC indicated that
it would not recommend that the SEC take enforcement action against a "Participating Underwriter" pursuant to the
Rule if the Participating Underwriter reasonably determines that an issuer of municipal securities or an obligated =
person located in the State has undertaken to provide the disclosure information required under the Rule to the
MAC. The address of the Municipal Advisory Council is 600 West 8th Street, P.O. Box 2177, Austin, Texas
78768-2177, and its telephone number is 512/476-6947.
52
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 whole or in part from any breach of its continuing disclosure
agreement or from any statement made pursuant to its agreement, although holders or beneficial owners of Bonds
may seek a writ of mandamus to compel the District to comply with its agreement.
The District may amend its continuing disclosure agreement to adapt to changed circumstances that arise from a
change in legal requirements, change in law, or change in the identity, nature, status or 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 the Rule, taking into account any amendments and interpretations of
the Rule to the date of such amendment as well as changed circumstances and either the holders of a majority in
aggregate principal amount of the outstanding Bonds consent 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 the 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 operating data and financial information so provided.
Compliance With Prior Undertakings
The District has not previously made a continuing disclosure agreement in accordance with the Rule.
This Official Statement was approved by the Board of Directors of Brazoria County Municipal Utility District No.
5 as of the date shown on the first page hereof.
/s/ Ricki A. Willoughby
President, Board of Directors
Brazoria County Municipal Utility District No. 5
ATTEST:
/s/ Kelly C. Flanagan
Secretary, Board of Directors
Brazoria County Municipal Utility District No. 5
53
APPENDIX A
LOCATION MAP
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CITY OF ' HOUSTON
•OP 610.
I.N.IO
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BRAZORIA CO.
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BRAZORIA COUNTY ' ! ' •• c E
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ALVIN
APPENDIX B
t �
BRAZORIA COUNTY MUNICIPAL UTILITY DISTRICT NO. 5
BRAZORIA COUNTY, TEXAS
ANNUAL FINANCIAL REPORT
SEPTEMBER 30, 1997
TABLE . OF CONTENTS
EXHIBIT
INDEPENDENT AUDITOR' S REPORT
GENERAL PURPOSE FINANCIAL STATEMENTS
COMBINED BALANCE SHEET - ALL GOVERNMENTAL FUNDS
AND ACCOUNT GROUPS A
•
COMBINED STATEMENT OF REVENUES, EXPENDITURES
AND CHANGES IN FUND BALANCES - ALL GOVERNMENTAL
FUNDS B
STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN
FUND BALANCES - BUDGET AND ACTUAL - GENERAL FUND
AND SPECIAL REVENUE FUND C
COMBINING AND INDIVIDUAL FUND STATEMENTS
NOTES TO GENERAL PURPOSE FINANCIAL STATEMENTS D
SUPPLEMENTAL INFORMATION
(SEE SEPARATE SUMMARY OF SUPPLEMENTAL
SCHEDULES AND INDEPENDENT AUDITOR' S
REPORT ON SUPPLEMENTAL INFORMATION)
.� 1
1
I'
McCALL & COMPANY •
Certified Public Accountants I
I _ I
- _ Member(American
i 13405 Northwest Fwy. Institutq of Certified
Suite 204 Public Accountants
i Houston,Texas 77040
1 (713)462-0341 Texas Society of f
Fax (713)462-2708 Certified Public
1` E-Mail:mmccall@accesscomm.net Accountants
f
/,
Board of Directors
' Brazoria County Municipal
Utility District No. 5
Brazoria County, Texas
Independent Auditor' s Report
We have audited the General Purpose Financial Statements of Brazoria
County Municipal Utility District No. 5 at September 30, 1997, and
for the year then ended, as listed in the preceding Table of ConI
�
tents . The General Purpose Financial Statements are the responsibil-
' ity of the management of the District. Our responsibility is to
express an opinion on the General Purpose Financial Statements b sed
upon an audit . -
We have conducted the audit in accordance 'with:_genetally accepted
i auditing- standards . These audit standards require that we plan 4nd
perform the audit to obtain reasonable assurance about- whether the
General Purpose Financial Statements are, free of material misstate-
ments . An audit includes examining, on a- test basis, -evidence siip- ' 1 porting the amounts and disclosures in the financial statements . An-
audit also includes assessing the accounting principles used and sig-
nificant estimates- made by management, as well as evaluating. the
overall General Purpose Financial Statement presentation. We believe
i the -audit provides a reasonable 'basis:for the opinion presented.'
In our opinion,- the General Purpose Financial Statements referred to
above present fairly, in all material respects, the financial posi'-
tion of Brazoria tounty Municipal Utility District No. 5 as of
September 30, 1997, and the results of its operations for the year
then ended, in conformity with generally accepted accounting princi-
ples .
•
McCall & Company
Certified- Public Accountants .
January 14, 1998
! APPIIIIMMIIMIESENNIPIEFRMNIFILF.^"\
BRAZORIA COUNTY MUNICIPAL UTILITY DISTRICT NO . 5
COMBINED BALANCE SHEET -
ALL GOVERNMENTAL FUNDS AND ACCOUNT GROUPS
SEPTEMBER 30, 1997
Governmental
Special
ASSETS General Revenue
Cash, Note 5 $ 47, 798 $ 20, 644
Temporary Investments -
Note 5 402, 563 53 , 353
Receivables :
Taxes
Service Accounts (Net of Reserve for
Doubtful Accounts of $300) _ 44, 804
Other 8, 164
Due from Developers 3 , 626
Due from Other Funds, Notes 8 and 9 24, 327 8, 573
Due from Other Governmental Unit,
Note 8 148 _ 8, 280
Prepaid Expenditures 911
Advance for Regional Wastewater
Treatment Plant Operations, Note 9 11, 638
Advance for Joint Water Plant Operations,
Note 8 10, 096
General Fixed Assets, Note 6
Amount Available in Debt Service Fund
Amount to be Provided- for Retirement -
of General Long-Term Debt
TOTAL ASSETS $ 549, 538 $ 95, 387
EXHIBIT A
Page 1 of 2
Fund:Types Account Groups
General - General - - Total
Debt Capital Long-Term Fixed (Memorandum
Service Protects Debt Assets Only)
$ 30,362 $ 30 $ $ $ 98, 834
329, 865 1, 190, 614 1, 976, 395
•
5, 130 - 5, 130
44,804
8, 164
- 3, 626
404 33, 304
139, 307 147, 735
911
11, 638
10, 096
7, 391, 100 7,391J100
358, 034 3581034
7 ,246, 966 7, 246, 966
$ 365, 357 $ 1, 330, 355 $ 7, 605, 000 $ 7, 391, 100 $17, 336{, 737
The accompanying NOTES TO GENERAL. PURPOSE FINANCIAL
STATEMENTS are an integral part of this report .
BRAZORIA COUNTY MUNICIPAL UTILITY DISTRICT NO. 5
COMBINED BALANCE SHEET -
ALL GOVERNMENTAL FUNDS AND ACCOUNT GROUPS
SEPTEMBER 30, 1997
Governmental
Special
LIABILITIES AND FUND EQUITY General Revenue
LIABILITIES :
Accounts Payable $ 30, 621 $ 15, 044
Contract Payable
Retainage Payable
Due to Other Funds 8, 573 24, 731
Due to Other Governmental Unit,
Notes 9 and 10 3 , 902 19, 286
Due to Developer
Advances from Participants, Notes
8 and 9 36, 326
Security Deposits 53 , 520
Deferred Revenue
Bonds Payable, Note 3
TOTAL LIABILITIES $ 96, 616 $ 95 , 387
FUND EQUITY:
Investment in General Fixed
Assets, Note 6 $ $
Fund Balances :
Reserved for Authorized
Construction:
Bond Proceeds
Net Investment Revenues
Reserved for Debt Service
Reserved for Water and Sewer
Plant Operations 21, 734
Unreserved - Undesignated 431, 188
TOTAL FUND EQUITY $ 452 , 922 $ -0-
TOTAL LIABILITIES AND FUND EQUITY $ 549, 538 $ 95, 387
EXHIBIT A
Page 2 of 2
Fund Types Account Groups
General General Total
Debt Capital Long-Term Fixed (Memorandum
Service Protects Debt Assets Only)
$ 2, 193 $ 5, 671 $ $ $ 53,529
114, 731 114, 731
32 , 440 32,440
33 , 304
23 , 188
4, 823 4, 823
36, 326
53 , 520
5, 130 5, 130
7, 605, 000 7 , 605 , 000
$ 7, 323 $ 157, 665 $ 7, 605, 000 $ -0- $ 7, 961, 991
$ $ $ $ 7, 391, 100 $ 7, 391, 100
1, 038 , 246 1, 038, 246
134, 444 134, 444
358, 034 358, 034
21, 734
431, 188
$ 358 , 034 $ 1, 172 , 690 $ -0- $ 7, 391, 100 $ 9, 374, 746
$ 365, 357 $ 1, 330, 355 $ 7, 605, 000 $ 7, 391, 100 $17, 336, 737
The accompanying NOTES TO GENERAL PURPOSE FINANCIAL
STATEMENTS are an integral part of this report .
BRAZORIA COUNTY MUNICIPAL UTILITY DISTRICT NO . 5
COMBINED STATEMENT OF REVENUES, EXPENDITURES AND
CHANGES IN FUND BALANCES - ALL GOVERNMENTAL FUNDS
FOR THE YEAR ENDED SEPTEMBER 30,. 1997
Governmental
General
REVENUES :
Taxes $
Water Service 203, 085
Sewer Service 177, 349
Penalty and Interest 13 , 509
Tap Connection and Inspection Fees 94, 633
Investment Revenues 21, 524
Miscellaneous Revenues 1, 852
TOTAL REVENUES $ 511, 952
EXPENDITURES :
Current :
Professional Fees $ 28, 755
Contracted Services - - 83 , 794
Purchased Water Service, Note 8 - 45, 426
Purchased Sewer Service, Note 9 117, 648
Utilities 2, 660
Repairs and Maintenance 63, 968
Insurance - 4, 444
Other Operating Expenditures 40, 092
Capital Outlay 56, 908
Debt Service :
Bond Principal
Bond Interest
TOTAL EXPENDITURES $ 443 , 695
EXCESS OF REVENUES OVER (UNDER) EXPENDITURES $ 68, 257
FUND BALANCES - OCTOBER 1, 1996 384 , 665
FUND BALANCES - SEPTEMBER 30, 1997 •
$ 452, 922
EXHIBIT B
Fund Types
Total
Special Debt Capital (Memorandum
Revenue Service Projects Only)
$ $ 715, 996 $ $ 715, 996
79, 559 282, 644
202 , 649 379, 998
3 , 470 16, 979
94, 633
3 , 757 29, 698 63 , 942 118, 921
1,,852
$ 285, 965 $ 749, 164 $ 63 , 942 $ 1, 611, 023
$ 7, 447 $ 4,415 $ $ 40, 617
25, 313 21, 500 130, 607
45,1426
117) 648
75,483 78) 143
94, 964 158) 932
4, 347 8j791
76, 772 1, 299 30 118j193
1, 639 60, 517 119; 064
205, 000 205, 000
509, 080 509, 080
$ 285, 965 $ 741 , 294 $ 60 , 547 $ 1, 531, 501
$ , $ 7, 870 $ 3, 395 $ 79, 522
350, 164 1, 169, 295 1, 904, 124
$ -0- $ 358, 034 $ 1, 172 , 690 $ 1, 983, 646
The accompanying NOTES TO GENERAL PURPOSE FINANCIAL
STATEMENTS are an integral part of this report .
BRAZORIA COUNTY MUNICIPAL UTILITY DISTRICT NO . 5
STATEMENT OF REVENUES, EXPENDITURES AND
CHANGES IN FUND BALANCES - BUDGET AND ACTUAL - GENERAL FUND
- AND SPECIAL REVENUE FUND
FOR THE YEAR ENDED SEPTEMBER 30, 1997
General Fund
Variance
Favorable
Budget Actual (Unfavorable)
REVENUES :
Water Service $190, 000 $203 , 085 $ 13 , 085
Sewer Service 166, 000 177, 349 11, 349
Penalty and Interest 12 , 000 13 , 509 1, 509
Tap Connection and
Inspection Fees 43 , 500 94, 633 51, 133
Investment Revenues 16, 000 21, 524 5, 524
Miscellaneous Revenues 1, 200 1, 852 _ 652
TOTAL REVENUES $428, 700 $511 , 952 $ 83 , 252
EXPENDITURES :
Professional Fees $ 36, 000 $ 28, 755 $ 7, 245
Contracted Services 72, 100 83 , 794 (11, 694)
Purchased Water Service 35, 470 45, 426 (9, 956)
Purchased Sewer Service 130, 770 117, 648 13 , 122
Utilities 1, 600 2, 660 (1, 060)
Repairs and Maintenance 34, 000 63 , 968 (29, 968)
Insurance 5, 000 4,444 556
Other Operating
Expenditures 25, 150 40, 092 (14, 942)
Capital Outlay 20 , 000 56, 908 (36, 908)
TOTAL EXPENDITURES $360 , 090 $443 , 695 $ (83 , 605)
EXCESS OF REVENUES OVER
(UNDER) EXPENDITURES $ 68, 610 $ 68, 257 $ (353)
FUND BALANCE -
OCTOBER 1, 1996 384, 665 384 , 665
FUND BALANCE -
SEPTEMBER 30, 1997 $453, 275 $452, 922 $ (353)
EXHIBIT C
Special Revenue Fund Totals (Memorandum Only)
Variance Variance
Favorable Favorable
Budget Actual (Unfavorable) Budget Actual (Unfavorble)
$ 68, 975 $ 79, 559 $ 10, 584 $258, 975 $282 , 644 $ 23 , 669
230, 476 202, 649 (27, 827) 396, 476 379, 998 (16,478)
12 , 000 13, 509 1, 509
43 , 500 94, 633 51, 133
3 , 757 3 , 757 16, 000 25, 281 9,281
1, 200 1 , 852 652
$299,451 $285, 965 $ (13 , 486) $728, 151 $797, 917 $ 69, 766
$ 17, 950 $ 7, 447 $ 10, 503 $ 53 , 950 $ 36, 202 $ 17, 7 8
23 , 370 25, 313 (1, 943) 95,470 109, 107 (13 , 637)
35,470 45,426 (9, 956)
130, 770 117, 648 13 , 122
65, 660 75,483 (9-, 823) 67, 260 78, 143 (10, 883)
113, 525 94, 964 18, 561 147, 525 158, 932 (11,407)
4, 750 4, 347 403 9, 750 8, 791 959
69, 230 76, 772 (7, 542) 94, 380 116, 864 (22, 484)
5, 000 1, 639 3 , 361 25 , 000 58, 547 (33 , 547)
$299,485 $285, 965 $ 13 , 520 $659, 575 $729, 660 $ (70 , 085)
$ (34) $ -0- $ 34 $ 68, 576 $ 68, 257 $ (319)
384 , 665 384, 665
$ (34) $ -0- $ 34 $453,241 $452 , 922 $ (319)
The accompanying NOTES TO GENERAL PURPOSE FINANCIAL
STATEMENTS are an integral part of this report .
(THIS PAGE INTENTIONALLY LEFT BLANK)
BkAZORIA COUNTY MUNICIPAL UTILITY DISTRICT NO . 5
COMBINING AND INDIVIDUAL FUND STATEMENTS
SEPTEMBER 30, 1997
(THIS PAGE INTENTIONALLY LEFT BLANK)
BRAZORIA COUNTY MUNICIPAL UTILITY DISTRICT NO. 5
SPECIAL REVENUE FUNDS
COMBINING BALANCE SHEET
SEPTEMBER 30, 1997
Wastewater
Treatment Water
ASSETS Plant Plant Totals
Cash $ 19, 663 $ 981 $ 20, 6i4
Temporary Investments -
At Cost 51, 830 1, 523 53 , 353
Due from Developers 3 , 626 3, 626.
Due from Other Funds 8, 573 8, 573
Due from Other Governmental
Unit 8, 280 8, 280
Prepaid Expenditures 911 0 911
TOTAL ASSETS $ 72 ,404 $ 22, 983 $ 95, 387
LIABILITIES AND FUND EQUITY
Liabilities :
Accounts Payable $ 8, 707 $ 6, 337 $ 15, 0 4
Due to Other Funds 24, 327 404 24, 73�1
Due to Other Governmental Unit 19, 286 19,286
Advances from Participants 20 , 084 16, 242 36, 326
TOTAL LIABILITIES $ 72 , 404 $ 22 , 983 $ 95, 387
FUND BALANCE
Fund Balances :
Unreserved - Undesignated $ -0- $ -0- $ -0-
TOTAL LIABILITIES AND FUND
BALANCE $ 72,404 $ 22 , 983 $ 95, 387
(THIS PAGE INTENTIONALLY LEFT BLANK)
BRAZORIA COUNTY MUNICIPAL UTILITY DISTRICT NO. 5
SPECIAL REVENUE FUNDS
COMBINING STATEMENT OF REVENUES, EXPENDITURES
AND CHANGES IN FUND BALANCE
SEPTEMBER 30, 1997
•
Wastewater
- Treatment Water
Plant Plant Totals
REVENUE:
Water Service $ $ 79, 559 $ 79, 559
Sewer Service 202 , 649 202, 049
Investment Revenues 3 , 332 425 3 , 757
TOTAL REVENUES $205, 981 $ 79, 984 $285, 965
EXPENDITURES :
Professional Fees • $ 4, 135 $ 3, 312 $ 7,447
Contracted Services 23 , 517 1, 796 . 25, 313
Utilities 43 , 194 32, 289 75083
Repairs and Maintenance 68, 067 26, 897 - 94, 964
Insurance 2 , 379 1, 968 4, 347
Other Operating Expenditures 64, 689 12 , 083 76, 772
Capital Outlay 1, 639 1, 6II39
TOTAL EXPENDITURES $205, 981 $ 79, 984 $285, 65
EXCESS OF REVENUES OVER
(UNDER) EXPENDITURES
FUND BALANCE -
OCTOBER 1, 1996
FUND BALANCE -
SEPTEMBER 30, 1997 $ -0- $ -0- $ -0-
II
BRAZORIA COUNTY MUNICIPAL UTILITY DISTRICT NO . 5
SPECIAL REVENUE FUNDS
COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND
CHANGES IN FUND BALANCE - BUDGET AND ACTUAL
SEPTEMBER 30, 1997
WASTEWATER TREATMENT PLANT
Variance
Favorable
Budget Actual (Unfavorable)
REVENUES :
Water Service $ $ $
Sewer Service 230, 476 202 , 649 (27, 827)
Investment Revenues 3 , 332 3 , 332
TOTAL REVENUES $230 , 476 $205, 981 $ (24 , 495)
EXPENDITURES :
Professional Fees $ 12, 500 $ 4, 135 $ 8, 365
Contracted Services 21, 720 23 , 517 (1, 797)
Utilities 33, 360 43, 194 (9, 834)
Repairs and Maintenance 100, 000 68, 067 31, 933
Insurance 2, 750 2, 379 371
Other Operating
Expenditures 60, 180 64„ 689 (4, 509)
Capital Outlay
TOTAL EXPENDITURES $230, 510 $205 , 981 $ 24, 529
EXCESS OF REVENUES OVER
(UNDER) EXPENDITURES $ (34) $ $ 34
FUND BALANCE -
OCTOBER 1, 1996
FUND BALANCE -
SEPTEMBER 30, 1997 $ (34) $ -0- $ 34
WATER PLANT TOTALS (MEMORANDUM ONLY)
Variance Variance
Favorable Favorable
Budget Actual (Unfavorable) Budget Actual (Unfavorable)
$ 68, 975 $ 79, 559 -$ 10, 584 $ 68, 975 - $ 79, 559 $ 10,584
230, 476 202, 649 (27, 827)
425 425 3 , 757 3 , 757
$ 68, 975 $ 79, 984 $ 11, 009 $299,451 $285 , 965 $ (13,186)
$ 5, 450 $ 3 , 312 $ 2, 138 $ 17, 950 $ 7,447 - $ 10, 03
1, 650 1, 796 (146) 23, 370 25, 313 (1, 943)
32, 300 32 , 289, 11 65, 660 75,4.83 (9, 823)
13 , 525 26, 8.97 (13, 372) 113, 525 94, 964 18, 561
2, 000 1, 96-8. 32 4, 750. 4, 347 , 403
9, 050 12,.083 (3 , 033) . 69, 230 76, 772 (7, 542)
5 , 000 1, 639 3 , 361 5, 000 1, 639 3 , 361
$ 68, 975 $ 79, 984 $ (11, 009) $299,485 $285, 965 $ 13 , 520
$ • • $ - $ $ (34) $ $ .34
$ -0- $ -0- $ -0- $ (34) $ -0- $ 34
EXHIBIT D
Page 1 of 16
BRAZORIA COUNTY MUNICIPAL UTILITY DISTRICT NO . 5
NOTES TO GENERAL PURPOSE FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
•
NOTE 1. CREATION OF DISTRICT
Brazoria County Municipal Utility District No. 5 was created by an
Order of the Texas Water Rights Commission, presently known as the
Texas Natural Resource Conservation Commission, effective March 17,
1981 . Pursuant to the provisions of Chapters 49 and 54 of- the Texas
Water Code, the District is empowered to purchase, operate and main-
tain all facilities, plants and improvements necessary to provide
water, sanitary sewer service, storm sewer drainage, irrigation,
solid waste collection and disposal, including recycling, parks and
recreational facilities for the residents of the District . The Dis-
trict is also empowered to contract for or employ its own peace offi-
cers .with powers to make. arrests and to establish, operate and main-
tain a fire department to perform all fire-fighting activities within
the District . The Board of Directors held its first meeting on March
18, 1981, and the first bonds were sold on September 16, 1982 .
NOTE 2 . SIGNIFICANT ACCOUNTING POLICIES
The accompanying General Purpose Financial Statements have been pre-
pared in accordance with generally accepted accounting principles as
promulgated by the Governmental Accounting Standards- Board. In addi-
tion, the accounting records of the District are maintained generally
in accordance with the "Water District Accounting Manual" published
by the Texas Natura-1 Resource Conservation Commission.
The Governmental Accounting Standards Board has established the cri-
teria for determining whether or not a given entity is a component
unit . The criteria are (1) is the potential component unit a legally
separate entity, (2) does the primary government appoint a voting
majority of the potential component unit' s board, (3) is the primary
government able to impose its will on the potential component unit,
(4) is there a financial benefit or burden relationship. The District
was created as an independent municipality. The District does not
meet the criteria for inclusion as a component unit of any entity nor
does any other entity meet the component unit criteria for inclusion
in the District' s General Purpose Financial Statements . The District
has entered into joint venture agreements with Brazoria County Munici-
pal Utility District No. 4 for construction and operation of a water
plant and a sewage treatment plant . The District has oversight
responsibility for the water plant and the sewage treatment plant .
Additional disclosures are provided in Notes 8 and 9 .
The transactions of the District are accounted for in the following
funds and account groups :
EXHIBIT D
Page 2 of 16
BRAZORIA COUNTY MUNICIPAL UTILITY DISTRICT NO . 5
NOTES TO GENERAL PURPOSE FINANCIAL 'STATEMENTS
SEPTEMBER 30, 1997
NOTE 2 . SIGNIFICANT ACCOUNTING POLICIES (Continued)
Funds
Capital Projects Fund
To account for financial resources segregated for acquisition or c.n-
structionof facilities and related costs . -
- Debt Service Fund •
To account for ad valorem taxes and financial resources accumulated
for servicing bonded debt and- the cost of assessing and collecting
taxes . -
Special.-Revenue. Fund
- To account _for financial resources collected and administered by the
District- for the operation of a joint sewage treatment plant -and a
joint water plant which are component units of the District . _
General Fund
To account for- resources not required to be accounted for in another
fund, customer service- revenues and costs and general expenditures .
• Account Groups
General -Long-Term Debt To account for the unmatured principal of general long-term debt obli-
' gations . -
•
I
General Fixed Assets -
To account for completed facilities and district organizational costs .
j
The General Purpose Financial Statements include a total column which
is presented for memorandum purposes only and" is not intended to pre-
sent Consolidated Financial Statements .
Basis of Accounting
The accompanying financial" statements have been prepared on the modi-
fied accrual basis of accounting. Under this method, - all expenditures
except bond interest and all revenues currently available are- accrued.
EXHIBIT D
Page 3 of 16
BRAZORIA COUNTY MUNICIPAL UTILITY DISTRICT NO . 5
NOTES TO GENERAL PURPOSE FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
NOTE 2 . SIGNIFICANT ACCOUNTING POLICIES (Continued)
Basis of Accounting (Continued)
Property taxes considered available by the District and included in
revenue include taxes collected during the year and taxes collected
after year end which were considered available to defray the expendi-
tures of the current year. Deferred tax revenues are those taxes
which the District does not reasonably expect to be collected soon
enough in the subsequent period to finance current period expendi-
tures .
The District capitalized all costs associated with the" creation of the
District and all costs directly associated with the sale of the bonds.
From the date of sale of bonds through the date of the significant
completion of related improvements, interest earnings and interest
expenditures related to the bond proceeds are being capitalized.
All general_ fixed assets, including. infrastructure fixed assets, are
stated at the full costs of assets owned by the District, and any con-
tribution by others is recorded in fund equity.
In addition, the District capitalizes the cost of meters and boxes and
residential lines as a part of the water system in general fixed as-
sets . Repairs are not capitalized and replacements of fixed assets
are capitalized only to the extent that theyexceed the cost of the
original assets . Depreciation is not recorded on general fixed
assets .
Amounts transferred from one fund to another fund are reported as an
other financing source or use. Loans by one fund to another fund and
amounts paid by one fund for another fund are reported. as interfund
receivables and payables in the balance sheet if there is intent to
repay the amount and if the debtor fund "has the ability to repay the
advance timely.
In compliance with governmental accounting principles, the Board of
Directors annually adopts unappropriated budgets for the General Fund
and the Special Revenue Funds .
The District does not have employees; therefore, a pension plan has
not been established.
Measurement Focus
Governmental fund types are accounted for on a spending or financial
flow measurement focus. Accordingly, only current assets and current
liabilities are included on the balance sheet, and the reported fund
EXHIBIT D
Page 4. of 16
BRAZORIA COUNTY MUNICIPAL UTILITY DISTRICT NO . 5
- NOTES TO GENERAL PURPOSE FINANCIAL STATEMENTS
SEPTEMBER 30; 1997
NOTE 2 . SIGNIFICANT ACCOUNTING POLICIES (Continued)
Measurement Focus (Continued)
balances provide an indication of available spendable or appropriable
resources .. Operating statements of governmental fund types report
increases and- decreases in available spendable resources . Fund bal-
1 ances are included on the balance sheet as follows :
Reserved:
To indicate fund equity which is legally segregated for a
specific future use..
Unreserved:
Designated - To indicate fund equity for which the District
has made tentative plans . '
Undesignated - To indicate fund equity which is available for
use in future periods .
NOTE 3 . BONDS PAYABLE
Series 1984
Amount Outstanding - September 30, 1997 ' $ 60, 000
Interest Rates 10 . 50% - 13 . 50%
Maturity Dates - Serially - March 1,
Beginning/Ending 1987/2008
Interest Payment Dates March 1,
September .1,
Callable Dates September 1,
1994**
** The District reserves the right, at it' s option, to redeem the
bonds maturing on or after March 1, 1995, prior to their sched-
uled maturities, in whole or, from time to time, in part, in such
manner as the District may select, on September 1, 1994, or on
i any interest payment date thereafter, at the following redemption
prices (expressed as percentages of the principal amount) , plus
accrued interest on the bonds called for redemption to the -date
fixed for redemption. Bonds maturing between 1996 - 2008 were
advance refunded and called for redemption on September 1, 1994 .
EXHIBIT D
Page 5 of 16
BRAZORIA COUNTY MUNICIPAL UTILITY DISTRICT NO . 5
NOTES TO GENERAL PURPOSE FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
NOTE 3 . BONDS PAYABLE (Continued)
Refunding
- Series 1992 Series 1995
Amounts Outstanding - _
September 30, 1997 $ 5, 525, 000 $ 2, 020, 000
Interest Rates 4 . 00% - 7 . 00% 4 . 75% - 6 . 25%
Maturity Dates - Serially March 1, September 1,
Beginning/Ending 1993/2012 1998/2015
Interest Payment Dates March 1/ March 1/
September 1 September 1
Callable Dates March 1, September 1-,
2001** 2005***
** The District reserves the right, at its option, to redeem the
serial bonds maturing on or after March 1, 2002 , prior to their
scheduled maturities, in whole or from time to time in part, in
such manner as the District may select, on March 1, 2001, or on
any date thereafter at a price equal to the principal amount of
the bonds plus accrued interest to the date of redemption.
Series 1992 term bonds maturing September 1, 2011, are subject to
mandatory redemption beginning September 1, 2006 .
*** The District reserves the right, at its option, to redeem the
bonds maturing on or after September 1, 2006, prior to their
scheduled maturities, in whole, or, from time to time, in part,
in such manner as the District may determine, on September 1,
2005, or any date thereafter, at a price equal to the principal
amount of the bonds to be redeemed plus accrued interest thereon
to the date fixed for redemption.
The following is a summary of transactions regarding bonds payable for
the year ended September 30, 1997 :
Bonded Debt Payable - October 1, 1996 $ 7, 810 , 000
Less : Bond Principal Retirement - _
Series _ 1984 $ 55, 000
Series 1992 Refunding 150 , 000 205, 000
Bonded Debt Payable - September 30, 1997 $ 7, 605, 000
EXHIBIT D
Page 6 of 16
BRAZORIA COUNTY MUNICIPAL UTILITY DISTRICT . NO. 5
NOTES TO GENERAL-PURPOSE._ FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
NOTE 3 . BONDS PAYABLE (Continued) _ -
Original Bonds Voted
$23, 775, 000
Original Bonds Approved $ 8, 125, 000
Original Bonds Issued $ 8, 125, 000
Refunding Bonds Issued ($6, 065, 000)
Net of Bonds Refunded ($5,.105, 0.00) $ 960, 000
Bond Discount to Date . _ $ 277/789
As of September 30, 1997, the debt service requirements on the bonds
outstanding were as follows :
Fiscal
- Year - Principal Interest Total
1998 . . $ 275, 000 $ 4.93 , 790 _ $ 768, 790
1999 295, 000 475, 868. .770, 868
2-000 . 320, 000 . 457,423 777, 423.
2001 345, 000 437, 103 782, 103
2002 370, 000 414, 653 784, 653
Thereafter 6, 000 , 000 2,491, 880 8 ,491, 880
$ 7, 605, 000 $ 4, 770, 717 $12, 375, 717
The bonds are payable from the proceeds of an ad:valorem tax levied
upon all property subject to taxation -within the -District, without
limitation as to rate or amount . -
The Bond Resolutions require that the District levy and collect an ad
valorem debt service tax sufficient to pay interest and principal on
bonds when due and the cost of assessing and `collecting taxes. During
the year ended _September 30, 1997, the District levied an ad-valorem
debt service .tax at the rate of $1 . 12 per $100 of assessed valuation,
which resulted in a tax levy of $719, 650 on the adjusted taxable -valu-
ation of $64, 254,480 for the 1996 tax year, see Note 7 relating to
maintenance tax.
EXHIBIT D
Page 7 of 16
BRAZORIA COUNTY MUNICIPAL UTILITY DISTRICT NO . 5
NOTES TO GENERAL PURPOSE FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
NOTE 3 . BONDS PAYABLE (Continued)
The District' s tax calendar is as follows :
Lien Date - January 1
Billing Date - October 1 or as soon thereafter
as practicable.
Due Date - Not later than January 31
Delinquent Date - February 1, at which time the taxpayer
is liable for penalty and interest .
NOTE 4 . SIGNIFICANT BOND RESOLUTION AND LEGAL REQUIREMENTS
A. In accordance with the Bond Resolution applicable to the 1995
Bond Issue, a portion of the bond proceeds were deposited
into the Debt Service Fund and reserved for the payment of
bond interest during the construction period. This bond
interest reserve is reduced as the interest is paid. Trans-
actions for the current year are summarized as follows :
Bond Interest Reserve - October 1, 1996 $ 28, 848
Less : Bond Interest Payment - Series 1995 28 , 848
Bond Interest Reserve - September 30, 1997 $ -0-
B. The Bond Resolutions state that any profit realized from or
interest accruing on such investments shall belong to the
fund from which the monies for such investments were taken;
provided however, that at the discretion of the Board of Direc-
tors, the profits realized from and interest accruing on invest-
ments made from any fund may be transferred to the Debt Service
Fund. No transfers were made during the current fiscal year.
C. For the $6, 065, 000 Series 1992 Refunding Bond Issue funded on
November 17, 1992 , the District has covenanted that it will take
all necessary steps to comply with the requirement that rebatable
arbitrage earnings on the investment of the gross proceeds of the
Bonds, within the meaning of section 148 (f) of the Internal Rev-
enue Code, be rebated to the federal government . The minimum
requirement for determination of the rebatable amount is on the
five year anniversary of each issue.
EXHIBIT D
Page 8 of 16
BRAZORIA COUNTY MUNICIPAL UTILITY DISTRICT NO. 5
NOTES TO GENERAL PURPOSE FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
NOTE 5 . CASH AND TEMPORARY INVESTMENTS
State statutes include specificationsfor and limitations applicable
Ii to the District and its authority to purchase investments as defined
in the Public Funds Investment Act . Authorized investments are s1m-
marized as follows : (1) obligations of the United States or its
instrumentalities, (2) direct obligations of the State of Texas or its
agencies, (3) certain collateralized mortgage obligations (excluding
strips and inverse floaters) , (4) -other obligations, the principal of
and interest on which are unconditionally guaranteed or insured by the
State of Texas or the United States or its instrumentalities, (5) cer-
tain A rated or higher obligations of states, agencies, counties,
cities, and other political subdivisions of any state, (6) insured or
collateralized certificates of deposit, (7) certain fully collateral-
ized repurchase agreements secured by delivery, (8) bankers' accep-
tances with limitations, (9) commercial paper rated A-1 or P-1 or
higher, (10) no-load money market mutual funds and no-load mutual
funds with limitations, and (11) certain qualified governmental
investment pools .
Under Texas law, the District is required to invest its funds and r
written investment policies that primarily emphasize safety of prin-
cipal and liquidity and that address investment diversification,
yield, maturity, and the quality and capability of investment manage-
ment, and all District funds must be invested in accordance with the
following investment objectives : understanding the suitability of the
investment to the District' s financial requirements, first; preserva-
tion and safety of principal, second; liquidity,. .third; marketability
of the investments if the need arises to liquidate the investment
before maturity, fourth; diversification of the investment portfolio,
fifth; and yield, sixth. District' s investments must be made "with
judgment and care, under prevailing circumstances, that a person of
prudence, discretion, and intelligence would exercise in the .manage-
ment -of the person' s own affairs, not for speculation, but for iniest-
ment, considering the probable safety of capital and the probable
income to be derived" . No person may invest District funds without
express written authority from the Board of Directors .
EXHIBIT D
Page 9 of 16
BRAZORIA COUNTY MUNICIPAL UTILITY DISTRICT NO. 5
NOTES TO GENERAL PURPOSE FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
NOTE 5. CASH AND TEMPORARY INVESTMENTS (Continued)
ASSETS AT COST FAIR VALUE
Cash and Cash Temporary
Equivalents Investments Combined
GENERAL FUND -
Demand Deposits, -
Money Market Deposit
Accounts and Savings
Accounts $ 47, 798 $ - $ 47, 798
Tex-Pool - 402 , 563 402, 563
SPECIAL REVENUE FUND- -
(Restricted for Water
Plant and Wastewater
Treatment Plant
Operations) -
Demand Deposits,
Money Market Deposit
Accounts and Savings -
Accounts 20, 644 - 20, 644
Tex-Pool- 53, 353 53 , 353
DEBT SERVICE FUND '-
(Restricted for Payment -
of Debt Service and -
Cost of Assessing and -
Collecting Taxes) - -
Demand Deposits,
Money Market Deposit
Accounts and Savings -
Accounts - 30, 362 30, 362
Tex-Pool 329, 865 329, 865
CAPITAL PROJECTS FUND -
(Restricted for Purchase
of General Fixed Assets)
Demand Deposits,
Money Market Deposit
Accounts and Savings
Accounts 30 30
Tex-Pool 1, 190 , 614 1, 190, 614
TOTALS $ 98, 834 $1, 976, 395 $2, 075, 229
EXHIBIT D
Page 10 of 16
BRAZORIA COUNTY MUNICIPAL UTILITY DISTRICT NO . 5
NOTES TO GENERAL PURPOSE FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
NOTE 5. CASH AND TEMPORARY INVESTMENTS (Continued)
All temporary investments are recorded at cost which the District con-
siders to be fair value.
1
The Bond Resolutions and state statutes require that any cash balance
in any fund shall t-o the---extent -not ' insured by the Federal Deposit =
Insurance Corporation or - its successor be Continuously secured 'by a -
valid pledge to the -District of securities eligible under the_ lawsof
Texas to secure the funds of municipal utility districts, having an
aggregate market value, exclusive ' of accrued interest, at all times
equal to the uninsured cash balance in the fund to which such securi-
ties are pledged. At- the fiscal year end, the carrying amount of the
District' s deposits `wa's $98, 834 and the bank balance was $113 , 166 :
The bank balance was covered by federal. depository insurance.
The District' s policy is 'to require depositories -to pledge adequate '_
collateral to secure the District' s -deposits -at all times to the
extent that the -District' s depository balances exceed the limits of
federal depository ' insurance. -*As Of the highest cash balance date of
each depository exceeding federal depository insurance, the deposito-
ries of the District did pledge adequate- collateral to secure the -
deposits of the District . The entity pledging the collateral provided
the information concerning -market value.
NOTE 6. GENERAL FIXED ASSETS
The following is a summary of changes in general fixed- assets for .the
year ended September 30, 1997 : - - -
- - Balances Balances:
October - -September
1, 1996 Additions 30 , 19197
•
Land and Physical Facilities $. 6, 403 , 938 $ .- 112,532 $_ 6, 516,470
District Organizational -Costs- 869, 737 4 , 8-93 - . 874,1630
TOTAL - $ 7,273 , 675 - _ $ - 117,425 $ 7, 391, 10.0
AMOUNTS- .PROVIDED- BY:
Capital Projects :Fund:- _ -
Bond Proceeds $ 5, 529, 116 _ $_ .60, 517 -$ 5, 589, 633
Revenues 185, 194 ' _ - 185, 194
Debt Service Fund:
Revenues (566) - (566)
General Fund:
Revenues 266, 940 56, 908 323, 848
Developer Contributions 1,292, 991 1, 292, 991
TOTAL $ 7, 273, 675 $ 117,425 $ 7, 391, 100
EXHIBIT D
Page 11 of 16
BRAZORIA COUNTY MUNICIPAL UTILITY DISTRICT NO . 5
NOTES TO GENERAL PURPOSE FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
NOTE 7 . MAINTENANCE TAX
At an election held on April 4, 1981, the voters of the District
authorized the levy and collection of an annual maintenance tax for
the operation and maintenance of the District' s improvements in an
amount not to exceed $0 .25 per $100 of assessed -valuation. Such tax,
if levied, would be in addition to taxes which the District is autho-
rized to levy for paying principal of and interest on the Bonds and
any tax bonds which may be issued in the future . No maintenance tax
has been levied by the Board of Directors to date. -
NOTE 8. JOINT VENTURE FOR WATER PLANT OPERATIONS
The District and Brazoria County Municipal Utility District No. 4
jointly own a. water plant which is physically located within the
boundaries of the District . The District has recorded its pro rata
cost of constructing the water plant in the General Fixed Asset
Account Group of the District . The District accounts for the total
cost of operating the plant in the Special Revenue Fund. Separate
financial statementsare not issued on the joint venture.
The District is responsible for the operation and maintenance of the
water plant facility. All invoices for operating the water plant are
rendered to and paid by the District . On July 18, 1984, the District
and District No. 4 entered into a ten (10) year agreement that pro-
vided for the allocation of the operating costs for this facility. In
accordance with the agreement, the operating costs are allocated based
upon the percentage of gallons of water billed to customers within
each district . The cost of improvements, modifications, insurance and
repairs and replacements over $500 are allocated based upon percentage
of ownership in the plant .
On November 16, 1993 , the agreement was amended to provide for the
construction, operation and maintenance of additional water facili-
ties . The Districts may agree to jointly construct an additional
water well and plant or one of the Districts may purchase the other
District' s capacity in the existing water facility and the selling
District may construct a water well and plant to serve its residents .
If the Districts agree to jointly construct additional water facili
ties, the design and construction costs will be shared on the basis of
a ratio of estimated connections within each District and the produc-
tive capacity of the additional water facilities will be owned by each
District on the same basis .
EXHIBIT D
Page 12 of 16
BRAZORIA COUNTY MUNICIPAL UTILITY DISTRICT NO. 5
NOTES TO GENERAL PURPOSE FINANCIAL STATEMENTS
SEPTEMBER 30., 1997
NOTE 8 . JOINT VENTURE FOR WATER PLANT OPERATIONS (Continued)
If the Districts decide to jointly construct additional water facil ' -
ties, the Districts will determine which District will operate the
additional water facilities prior to the awarding of the construction
contract . The facilities will be operated in accordance with the pro-
visions of the current contract .
On August 16, 1994, the agreement was supplemented to extend the term
of the 1984 agreement to 1999 and stipulates that if District No. 4 is
required to construct a water plant within its boundaries, it will .
operate and maintain thefacility. On November 21, 1995, the Dis-
tricts entered into a restated agreement to reflect the construction
of a second well and plant within the boundaries of District No. 4 and
to combine all prior agreements for water production facilities into
one document . The term of the agreement is 20 years .
During the current fiscal year, the District recorded $45, 426 as its
share of the operating cost of the plant and maintained an operating
reserve of $10, 096 . On May 23, 1989, District No. 4 transferred
ownership of water well capacity (243 connections) previously leased
to the District in exchange for ownership of an additional 12, 000 gal-
lons per day capacity in the regional wastewater treatment plant . The
participating districts and their respective pro rata share of owner-
ship in the water plant are :
Percentage of Ownership
Remote
Existing Water
Facilities Well
Brazoria County Municipal
Utility District No. 4 55 . 61 33 . 33
Brazoria County Municipal
Utility District No. 5 44 .39 66 . 67
Total 100 . 00 100 . 00
Transactions for the current year are as follows :
EXHIBIT D
Page 13 of 16
BRAZORIA COUNTY MUNICIPAL UTILITY DISTRICT NO . 5
NOTES TO GENERAL PURPOSE FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
NOTE 8 . JOINT VENTURE FOR WATER PLANT OPERATIONS (Continued)
Brazoria Brazoria
County County
Municipal Municipal
Utility Utility
District No. 4 District No. 5 Total
Due (to) from
Participants at
October 1, 1996 $ _ 14, 332 $ 3 , 522 $ 17, 854
Refunded to Participants
Operating Costs 32 , 651 _ 45, 694 78, 345
Capital Outlay 541 1, 098 1,649
Cash Receipts (39, 649) (45, 657) (85, 306)
Interest Revenue (157) (268) (425)
Increase in Reserve - - 562 4, 184 4, 746
Due (to) from
Participants at
September 30, 1997 $ 8,280 $ 8, 573 $ 16, 853
Two Month' s Operating
Reserve at
October 1, 1996 $ 5, 584 $ 5, 912 $ 11, 496
Increase in Reserve 562 - 4, 184 4, 746
Two Month' s Operating
Reserve at
September 30, 1997 $ 6, 146 $ 10, 096 $ 16, 242
NOTE 9 . JOINT VENTURE FOR WASTE DISPOSAL.
On May_ 18, 1983 , the District executed a forty (40) year contract with
Brazoria County Municipal Utility District No. 4 providing for both
districts to share in the construction and operations cost of a
regional wastewater treatment plant . The contract provides for each
district topay its pro rata share of the construction cost and each
will be entitled to its pro rata-share of capacity in the plant . In a
prior year, the District' s pro rata cost of constructing the plant was
capitalized into the General Fixed Asset Account Group of the Dis-
trict . During the fiscal year ended September 30, 1994, the plant
capacity was expanded from 380, 000 gallons per day to 700, 000 gallons
per day. District No. 4 paid for the cost of the expansion. On
November 21, 1995, the Districts entered into a restated agreement
which includes provisions for the construction of an additional
180, 000 gallons per day capacity. The term of the agreement is 20
years .
EXHIBIT D
Page 14 of _6
BRAZORIA: COUNTY MUNICIPAL .UTILITY DISTRICT NO. 5
NOTES TO GENERAL PURPOSE FINANCIAL STATEMENTS
SEPTEMBER 30 -1997
NOTE 9 . JOINT VENTURE FOR WASTE DISPOSAL (Continued)
The participating districts and their respective pro rata share of
capacity in the wastewater treatment plant are :
Percentage of
Capacity Total Capacity
Brazoria County Municipal Utility
District No. 4 240, 500 gpd 34 .36
Brazoria County Municipal Utility
District No. 5 459, 500 gpd 65 . 64
Total -700, 000 gpd 100 . 00
For operations of .the plant, the District and District No. 4- are
responsible for a fixed fee based upon $1 . 50 per thousand gallons per
day of capacity owned,_ plus a pro rata share of costs in_ excess of
that amount based on the number -of connections . As of September 30,-
1997, each district' s participation has been adjusted to actual cost
and the difference recorded as due- to or due from, each participant .
The District accounts_ for the cost of operations for the plant in the-
Special Revenue Fund. _ Separate financial statements are not issued on
the joint venture.
During- the current fiscal year, . the District recorded $117; 648 as its
share of the -Operating- cost of the- plant and maintained an operating
reserve of $11, 638 .
Transactions for the current year are as follows :
Brazoria Brazoria
County. County
Municipal Municipal
Utility . Utility
District No. 4 District- No. 5 Total
Due (to) from
Participants at __ -
October 1, 1996 $ (17, 550) $ (23, 051) $_ (40, 6001)
Refunded to Participants 17, 550 23 , 051 - 40, 601
Operating Costs 86,426 119,-555 205, 981
Cash Receipts (104, 322) (142, 815) (247, 13.7)
Interest Revenue (1,425) (1, 907) (3; 32)
Increase in Reserve 35 840 _ 875
Due (to) from
Participants at
September 30, 1997 $ (19, 286) $ (24, 327) $ (43, 613)
EXHIBIT D
Page 15 of 16
BRAZORIA COUNTY MUNICIPAL UTILITY DISTRICT NO . 5
NOTES TO GENERAL PURPOSE FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
NOTE 9 . JOINT VENTURE FOR WASTE DISPOSAL (Continued)
Brazoria Brazoria
County. County
Municipal Municipal
Utility Utility
District No. 4 District No. 5 Total
One Month' s Operating
Reserve at October 1,
1996 $ 8, 411 $ 10, 798 $ 19, 209
Increase in Reserve 35 840 875
One Month' s Operating
Reserve at
September 30, 1997 $ 8,446 $ 11, 638 $ 20, 084
NOTE 10 . AGREEMENT TO LEASE WATER WELL CAPACITY
On June 4, 1991, the District contracted to lease from Brazoria County
Municipal Utility District No. 4 the capacity to serve the equivalent
of 50 single-family connections. The capacity will be used to serve a
school constructed adjacent. to the District . The District will lease
the capacity as the connections are added to the system at the rate of
$1 . 93 per connection. The term of the agreement is for twenty-five
years . During the current fiscal year, the District recorded an
expenditure of $3 , 426 for capacity leased from District No. 4 .
NOTE 11. AGREEMENT FOR OPERATION AND MAINTENANCE OF DETENTION
FACILITIES
On September 15, 1992, the District and Brazoria County Municipal
Utility District No. 4 entered into an agreement to share in the oper-
ation and maintenance of a 49-acre detention facility. The District
shall operate the facility and shall be responsible for routine main-
tenance . Costs over $500 shall require the approval of both Dis-
tricts . Per the agreement, the costs of operating and insuring the
facility shall be allocated based upon each District' s pro rata share
of reserved capacity. The Districts have verbally agreed to split the
costs equally. The District currently has 54 . 3% of the reserved
capacity; District No. 4 has 45 . 7% of the reserved capacity. The term
of the agreement is ten (10) years .
EXHIBIT D
Page 16 of 16
BRAZORIA COUNTY MUNICIPAL UTILITY DISTRICT NO. 5
NOTES TO GENERAL PURPOSE FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
NOTE 11. AGREEMENT FOR OPERATION AND MAINTENANCE OF DETENTION
FACILITIES (Continued)
The District is administering the costs of maintaining the facilities
and bills District No. 4 for its pro-rata share. Costs of $5, 078 were
incurred during the current fiscal year.
NOTE 12 . UNREIMBURSED COSTS
At September 30, 1997, a Developer within the District indicated that
approximately $662, 000 had been advanced on behalf of the District .
These expenditures were primarily for engineering, construction and
related costs for water, sanitary sewer, and storm drainage for Crys-
tal Lake Subdivision. A second Developer within the District indi-
cated that approximately $500, 000 had been advanced on behalf of the
District . These expenditures were primarily for engineering, con-
struction and related costs for water, sanitary sewer and storm
drainage for Southdown Subdivision. Since any reimbursement is con-
tingent upon a future bond sale, these amounts have not been recorded
in the financial statements .
NOTE 13 . ESCROW REQUIREMENT
In compliance with requirements of the Texas Natural Resource Conse -
vation Commission ("the Commission") , the District has escrowed
$923 , 564 from the Series 1995 bond proceeds pending Commission
approval of plans and specifications for the District' s pro rata share
of an expansion of the joint sewage treatment plant ($198, 672) , and
the District' s share of a new water plant ($724, 892) . On January 31,
1997, the Commission authorized the release of $198, 672 from escrow
for construction of an aeration basin, a blower, and an office
building at the wastewater treatment plant . The remaining escrowed
funds are recorded in the temporary investments of the Capital
Projects Fund.
NOTE 14. USE OF SURPLUS FUNDS
On January 31, 1997, the District received approval from the Texas
Natural Resource Conservation Commission to use $55, 244 of surplus
Capital Project Fund monies to fund the additional costs related to
the construction of an aeration basin, a blower, and the office build-
ing at the wastewater treatment plant .
SUMMARY OF SUPPLEMENTAL INFORMATION REQUIRED
BY THE ANNUAL AUDIT REPORT REQUIREMENTS OF THE
TEXAS NATURAL RESOURCE CONSERVATION COMMISSION
INDEPENDENT AUDITOR' S REPORT ON
SUPPLEMENTAL INFORMATION
NOTES REQUIRED BY THE WATER DISTRICT ACCOUNTING
MANUAL (Included in the Notes to General
I Purpose Financial Statements)
- SCHEDULE
SCHEDULE OF SERVICES AND RATES 1
SCHEDULE OF GENERAL FUND EXPENDITURES 2
SCHEDULE OF TEMPORARY INVESTMENTS 3
ANALYSIS OF TAXES LEVIED AND RECEIVABLE ' 4
.ANALYSIS OF CHANGES IN GENERAL FIXED ASSETS
AND ORGANIZATIONAL -COSTS - 5
GENERAL LONG-TERM DEBT "SERVICE REQUIREMENTS - BY YEARS 6
ANALYSIS OF CHANGES IN GENERAL LONG-TERM DEBT :7
COMPARATIVE SCHEDULE OF REVENUE AND EXPENDITURES • -. "
"GENERAL AND DEBT SERVICE FUNDS - FIVE YEARS -8 -
INSURANCE COVERAGE 9
BOARD MEMBERS, KEY PERSONNEL AND. CONSULTANTS 10
MANAGEMENT LETTER
McCALL & COMPANY
..Certified Public Accountants
Member American
13405 Northwest Fwy. Institute of Certified
Public Accountants
Suite 204
Houston,Texas 77040 Texas Society of
(713)462-0341 Certified Public
Fax (713)462-2708 Accountants
E-Mail:mmccall@accesscomm.net
Board of Directors
Brazoria County Municipal
Utility District No. 5 -
Brazoria County, Texas
Independent Auditor' s Report
on Supplemental Information
We have examined the General Purpose Financial Statements of Brazoria
County Municipal Utility District No. 5 as of September .30, 1997, and
for the year ended, listed in the Table of Contents, and our report
thereon is included in the preceding section of this report . The
accompanying supplemental information includes financial data
excerpted from prior years' financial statements which were audited
by us.
Our audit was made for the purpose of formulating an opinion on the
General Purpose Financial Statements taken as a whole . The accom-
panying supplemental schedules as listed on the preceding page, are
presented for purposes of additional analysis and are not a
required part of the General Purpose Financial Statements . Such
information, except for that portion marked "unaudited" , on which
we express no opinion, has been subjected to the auditing proce-
dures applied in the audit of the basic General Purpose Financial
Statements and, in our opinion, is fairly stated in all material
respects in relation to the basic General Purpose Financial State-
ments taken as a whole .
In connection with this audit, except as noted in the enclosed man-
agement letter, nothing came to our attention that indicated the
District had departed from general or special legislation under
which the District was created or from laws and regulations
excerpted and included in the WATER DISTRICT ANNUAL AUDIT REPORT
REQUIREMENTS MANUAL, APPENDIX B, or from requirements of the Bond
Resolutions. However, this audit was not directed primarily toward
obtaining such knowledge.
McCall & Company
Certified Public Accountants
January 14, 1998
SCHEDULE 1
Page 1 of 4
BRAZORIA COUNTY MUNICIPAL UTILITY DISTRICT NO . 5.
SCHEDULE OF. SERVICES AND RATES
1 FOR THE YEAR ENDED SEPTEMBER 30,. 1997
1
1. SERVICES PROVIDED BY THE DISTRICT:
X Retail Water Wholesale Water X Drainage
X Retail Sewer Wholesale Sewer Irrigation
X Parks/Recreation Fire Protection Security
Solid Waste/Garbage Flood Control Roads
X Participates in joint venture, regional system
and/or wastewater service (other than emergency
interconnect) - . .
Other
2 . RETAIL RATES ARE BASED ON A 5/8" METER:
Based on Rate Order Dated: April 16, 1996 .
Flat Rate per 1, 000
Minimum Minimum Rate Gallons Over
Charge Usage Y/N Minimum ' ' Usage Levels
WATER: $ 8 . 50 2, 000 N $1 . 57 2, 001 and up
WASTE-
WATER:
(SEWER). $ 8 . 89 2 , 000 N $1 . 14 2 , 001 and up
SURCHARGE: $ -0-
District employs winter averaging for wastewater
usage? Yes No X
Total water and sewer charges per 10, 000 -
gallons usage (including surcharge) . $ 39 . 07
3 . RETAIL SERVICE PROVIDERS: Number of retail water and/or waste-
water connections within the District as of the fiscal year end.
Provide actual numbers and single family equivalents (ESFC) as
noted: .
See Accompanying Independent Auditor' s
Report on Supplemental Information.
SCHEDULE 1
Page 2 of 4
BRAZORIA COUNTY MUNICIPAL UTILITY DISTRICT NO . 5
SCHEDULE OF SERVICES AND RATES
FOR THE YEAR ENDED SEPTEMBER 30, 1997
3 . RETAIL SERVICE PROVIDERS: (Continued)-
(Unaudited)
Inactive
Active Active Connections
Connections ESFC (ESFC) **
Single-Family 1, 026 1, 026 12
Multi-Family
Commercial 2 62
Other - Recreational Centers,
Government and VFD 63 116
TOTAL 1, 091 1, 204 12
* Number of connections relates to water service, if provided.
Otherwise, the number of wastewater connections should be pro-
vided.
** "Inactive" means that water and wastewater connections were
made, but service is not being provided.
4. TOTAL WATER CONSUMPTION (IN THOUSANDS) DURING THE FISCAL YEAR:
(Unaudited)
Gallons pumped into system: 162, 116 *
Gallons billed to customers : 99, 604
* The water plant located within the District also supplies water
to Brazoria County Municipal Utility District No. 4 .
5. STANDBY FEES:
Does the District assess standby fees? Yes No X
See Accompanying Independent Auditor' s
Report on Supplemental Information.
SCHEDULE 1
Page 3 of 4
BRAZORIA COUNTY MUNICIPAL UTILITY DISTRICT NO . -5
SCHEDULE. OF SERVICES AND RATES
FOR THE YEAR. ENDED SEPTEMBER 30, 1997
6. ANTICIPATED SOURCES OF FUNDS TO BE USED FOR DEBT SERVICE PAY-
MENTS IN THE DISTRICT'S FOLLOWING FISCAL YEAR:
This projected debt service requirement is based on debt out-
standing at September 30, 1997, and does not take into con-
sideration debt service costs resulting from any bonds sold sub-
sequent to the current fiscal year. The .District is not repre-
senting that the revenues projected will in fact occur.;- only
that, as of the date of this report, the District estimates the
following list of revenues will be used to service debt in the.
next fiscal year.
Amount
a. Debt Service Tax Receipts $ 734, 000
b. Surplus Capital Project Fund Monies
c. Water and/or Wastewater Revenue
d. Standby Fees
e. Debt Service Fund Balance To Be Used
f. Interest Revenues 34, 79i
g. Other (Describe)
TOTAL ANTICIPATED FUNDS TO BE USED $ 768, 790
The data included in Schedule 1 Item 6 is unaudited due to the
prospective nature of the information presented. The informa-
tion as presented as approved by the Board of Directors on
January 19, 1998 .
See,Accompanying- Independent- Auditor's
Report. on Supplemental Information.-
SCHEDULE 1
Page 4 of 4
BRAZORIA COUNTY MUNICIPAL UTILITY DISTRICT NO. 5
SCHEDULE OF SERVICES AND RATES
FOR THE YEAR ENDED SEPTEMBER 30, 1997
7 . LOCATION OF DISTRICT:
County or Counties in which District is located.
Brazoria.
Is the District located entirely within one -
county? Yes X No
Is the District located within a city?
Entirely Partly Not at all X
Is the District located within a city' s extra territorial juris-
diction (ETJ) ? Entirely X Partly Not at all
ETJ' s in which district is located.
City of Pearland.
Is the general membership of the Board appointed by an office
outside the district?
Yes No X
See Accompanying Independent Auditor' s
Report on Supplemental Information.
SCHEDULE 2
Page 1 of 2
BRAZORIA `COUNTY 'MUNICIPAL UTILITY DISTRICT NO. 5
SCHEDULE OF GENERAL FUND EXPENDITURES
FOR THE YEAR ENDED SEPTEMBER 30, 1997
General
Fund
CURRENT
PERSONNEL (Including Benefits) $ -0-
PROFESSIONAL FEES
Auditing $ 5, 800
Engineering 7, 851
Legal 15, 104
TOTAL PROFESSIONAL FEES $ 28, 755
PURCHASED SERVICES FOR RESALE
Water Service Purchases $ 45,426
Sewer Service Purchases 117, 648
Tap Connections 51,483
TOTAL PURCHASED SERVICES FOR RESALE $ 214, 557
CONTRACTED SERVICES
Bookkeeping $ 7, 555
Operations and Billing 76, 239
TOTAL CONTRACTED SERVICES $ 83 , 794
UTILITIES
Electricity $ 2, 327
Telephone 333
TOTAL UTILITIES $ 2 , 660
REPAIRS AND MAINTENANCE - $ - 63 ,-968
See Accompanying 'Independent Auditor' s
Report on Supplemental Informat-iori.
SCHEDULE 2
Page 2 of 2
BRAZORIA COUNTY MUNICIPAL UTILITY DISTRICT NO. 5
SCHEDULE OF GENERAL FUND EXPENDITURES
FOR THE YEAR ENDED SEPTEMBER 30, 1997
General
Fund
ADMINISTRATIVE EXPENDITURES
Director Fees $ 7, 500
Insurance 4,444
Legal Notices 112
Office Supplies and Postage 211
Regulatory Assessment 1, 675
Travel and Per Diem 6, 836
Other _ 1, 009
TOTAL ADMINISTRATIVE EXPENDITURES $ 21, 787
CAPITAL OUTLAY - Acquisition of Fixed Assets $ 5, 425
SOLID WASTE DISPOSAL $ -0-
FIRE FIGHTING $ -0-
PARKS AND RECREATION $ -0-
OTHER EXPENDITURES
Laboratory Fees $ 811
Permit Fees - 797
Inspection Fees 17, 715
Water Well Capacity Lease 3 ,426
TOTAL OTHER EXPENDITURES $ 22, 749
TOTAL EXPENDITURES $ 443, 695
Number of persons employed by the District : _ 0 Full-Time
0 Part-Time
See Accompanying Independent Auditor' s
Report on Supplemental Information.
SCHEDULE 3
BRAZORIA COUNTY MUNICIPAL UTILITY DISTRICT NO. 5
SCHEDULE OF TEMPORARY INVESTMENTS
SEPTEMBER 30, 1997
Accrued
Interest Maturity Principal Interest
Rate Date:- - -Amount Receivable
GENERAL FUND
Local Government
Investment Pool : -
Tex -Pool
Number 2015-1111-000 Variable Daily $ 402, 563 $ -0-
SPECIAL REVENUE FUND
Local Government
Investment Pool :
Tex Pool
Number 2015-1669-000 Variable Daily $ 51, 830 $
Number 2015=2069-000 Variable Daily 1, 523
TOTAL SPECIAL REVENUE FUND $ 53 , 353 $ -0-
DEBT SERVICE FUND
Local Government -
Investment Pool :
Tex Pool
Number 2015-1023-000 Variable Daily $ 96, 179 $
Number 2015-5021-000 Variable Daily 233 , 686
TOTAL DEBT SERVICE FUND $ 329, 865
CAPITAL PROJECTS FUND
Local Government
Investment Pool :
Tex Pool
Number 2015-1189-000 Variable Daily $ 376, 725 $
Number 2015-2896-000 Variable Daily 813, 889
TOTAL CAPITAL PROJECTS FUND $1, 190, 614 $ -0-
TOTAL TEMPORARY INVESTMENTS $1, 976, 395 $ -0-
See Accompanying Independent Auditor' s
Report on Supplemental Information.
SCHEDULE 4
Page 1 of 3
BRAZORIA COUNTY MUNICIPAL UTILITY DISTRICT NO. 5
ANALYSIS OF TAXES LEVIED AND RECEIVABLE
FOR THE YEAR ENDED' SEPTEMBER 30, 1997
Debt Service Taxes
TAXES RECEIVABLE - OCTOBER 1, 1996 $ 1, 614
Adjustments to Beginning Balance (138) $ 1,476
Original 1996 Tax Roll $718, 036 .
Adjustment to 1996 Tax Roll 1, 614 -' - 719, 650
TOTAL TO BE ACCOUNTED FOR $721, 126
TAX COLLECTIONS :
Current Year $714, 595
Prior Years - 1, 401 715, 996
TAXES RECEIVABLE -- SEPTEMBER 30, 1997 $ 5, 130
TAXES RECEIVABLE BY YEARS :
1996 $ 5, 055
1993 75
TOTAL TAXES RECEIVABLE BY 'YEARS $ 5, 130
•
See Accompanying Independent Auditor' s
Report on Supplemental Information.
i
(THIS PAGE INTENTIONALLY LEFT BLANK)
BRAZORIA COUNTY MUNICIPAL UTILITY DISTRICT NO. 5
ANALYSIS OF TAXES LEVIED AND RECEIVABLE
FOR THE YEAR ENDED SEPTEMBER 30, 1997
1996
PROPERTY VALUATIONS:
Land $16, 053, 320
Improvements 47, 786, 360
Personal Property 956, 460
Exemptions (541, 660)
TOTAL PROPERTY VALUATIONS $64, 254,480
TOTAL DEBT SERVICE TAX RATES PER
$100 VALUATION: $ 1 . 120
ADJUSTED TAX LEVY* $ 719, 650
PERCENT OF TAXES COLLECTED TO TAXES LEVIED 99 . 30%
* Based upon the adjusted tax levy at the time of the audit
for the fiscal year in which the tax was levied.
SCHEDULE 4
Page 2 of 3
1995 - - . 1.994 1993
- $12 , 047, 530 $11, 396, 440 $ 7, 008, 740
- 43, 621, 360- - 3.8, 585, 310 31, 080, 260
953, 960 996, 960 - 878, 340 _ .
- (426, 000) (496, 330) (227, 620)
$56, 196, 850 $50,482, 380 $38, 739, 720
$ 1 . 199 $ 1 . 199 $ 1 . 520
$ 673 , 800 $ , 605, 284 - $ 588, 843
100 . 00% 100 . 00% •99 . 99% -
1
See Accompanying Independent ..Auditor' s
Report. on ,Supplemental Information.
SCHEDULE 4
Page 3 of 3
BRAZORIA COUNTY MUNICIPAL UTILITY DISTRICT NO. 5
ANALYSIS OF TAXES LEVIED AND RECEIVABLE
FOR THE YEAR ENDED SEPTEMBER 30, 1997
Tax rate for all overlapping jurisdictions (Includes any taxing
entities which overlap 10% or- more- of the district) .
1996
Taxing Jurisdiction Service Provided Tax Rate
Brazoria County $0 . 297500
Pearland Independent School
District 1 . 768500
Special Districts :
Brazoria County Drainage
District No. 4 Flood Control ' 0 . 144441
District Tax Rate 1 . 120000
Total Overlapping Tax Rate $3 . 330441
See Accompanying Independent -Auditor' s
Report on Supplemental- Information.
(THIS PAGE INTENTIONALLY LEFT BLANK)
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SCHEDULE 5
Balances
September
Additions Reclassifications 30, 1997
$ $ $ 143 , 748
27, 328
- 52, 581 - 1, 255, 339 . _
750 2, 176,305
1, 083 1, 872, 953
201, 671 -
942 (10, 717) 765, 233
6, 000
57, 176 10, 717 67,893
$ 112 , 532 $ -0- $ 6, 516,470
$ 378 $ $ 85, 567 .
173, 730 -
4, 515 256, 771 •
21, 755
251, 058 .
(39, 869) .
125, 618
$ 4 , 893 $ -0- $ 874, 630
$ 117,425 $ -0- $ 7, 391, 100
$ 60,.517- $ $ 5, 589, 633
185, 194
(.566)
. 56, 908 323, 848
1, 292 , 991
$ 117,425 $ -0- $ 7, 391, 100
See Accompanying Independent Auditor' s
Report on Supplemental Information.
BRAZORIA COUNTY MUNICIPAL UTILITY DISTRICT NO. 5
GENERAL LONG-TERM DEBT SERVICE REQUIREMENTS, BY YEARS
SEPTEMBER 30, 1997
S E R I E S - 1 9 8 4
Due During
Fiscal Principal Interest Due
Years Ending Due March 1/
September 30 - March 1 September 1. Total
1998 $ 60, 000 $ 3 , 225 $ 63, 225
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013-
2014 . -
2015
TOTAL $ 60, 000 $ 3 , 225 -$ 63, 225
i
SCHEDULE 6
Page 1 of 2
REFUNDING S E R I E S - 1 9 9 2
Due During
Fiscal Principal Interest Due -
. Years Ending - Due March 1/
September 30 March 1 September 1 Total
1998 - $ 160, 000 $ 373, 875 $ 533, 875
: 1999 ' . 235, 000 - 361, 790 596, 790
2000 255, 000 346, 345 601, 345
2.001 270, 000 - 329, 275 599,275
2002 290, 000 310, 650 600, 650
- 2003 310, 000 290, 395 600, 395
2004 - 330, 000 268, 553 598, 553
2005 355, 000 . 244, 825 599, 825
2006 380, 000 219, 100 599;.100
2007 410, 000 ' . 191,450 601;450
- 20.08 440, 000 161, 700 601, 700
• 2009 470, 000 : 129, 850 599, 850
• 20.10 505, 000 95, 725 600_, 725
2011 - 540, 000 _ 59, 150 599, 150
. 2012 575, 000 20, 125 595, 125
' 2013
2014 . - _
2015
TOTAL $ 5, 525, 000 . $- 3 ,4.02 ; 808 $ 8;927-, 808
See Accompanying Independent Auditor' s
Report on Supplemental Information.
BRAZORIA COUNTY MUNICIPAL UTILITY DISTRICT NO. 5
GENERAL LONG-TERM DEBT SERVICE REQUIREMENTS, BY YEARS
SEPTEMBER 30, 1997 .
SE R I E S - 1 9 9 5
Due During
Fiscal Principal -Interest Due
Years Ending - Due March 1/
September 30 __ . - September 1 - September 1 Total
• 1998 $ 55; 000 $ 116, 690 • $ 171, 690
- ` 1999 - 60, 000' . 114, 078 174, 078
- 2000 - 65, 000 111, 078 176, 078
2001 75, 000 107, 828 182, 828
2002 = . 80, 000 • 104, 003 184, 003
• 2003 - 85, 000 99, 843 184,843
2004 ' 90, 000 ' ' - 95, 338 185, 338
` 2005 . . - ' 95, 000 - - 90,478 185,478
' 2006 100, 000 85, 253 185,253
2007 ' ' - 110, 000 79, 653 189, 653
, 2008 ' - 115, 000 - 73, 383 188,383 •
2009 125, 000 66, 713 . 191, 713
2010 135, 000 59,213 194,213
2011 ' 145, 000 • , ' . 51, 113 196, 113
2012 • - 155, 000 42, 413 197,413
2013 165, 000 32, 919 197, 919
2014 175, 000 • 22, 813 197, 813
_ 2015 . 190, 000 11, 875 - 201, 875
- TOTAL • 1 _ $ 2, 020, 000 $. 1; 364, 684 $ 3, 384, 684
SCHEDULE 6
Page 2 ON 2
TOTAL ANNUAL REQUIREMEN
A L L SERIES
Due During _ .. Total
- Fiscal - Total - - Total - " Principal
Years Ending Principal Interest and Interest
September 30 Due Due Due
1998 $ 275, 000 $ .. 4.93, 790 . $ 768, 790
19.99 295, 000 475, 86.._ _ _ 770, 868
2000 320, 00.0 457,423 777,423
2001 345, 000 437, 103 782 , 103
2002 370, 000 414, 653 784, 653
2003 395, 000 : . 390, 2.38_. 785, 238
2004 420, 000 - 363 , 891 783 , 8.91
2005 450, 000 335, 303 . 785, 303
2006 480, 000 304, 353 784, 353
2007 520, 000 271, 103 791, 103
2008 555, 000 235, 083 790, 083
2009 595, 000 196, 563 791, 563
2010 640, 000 154, 938 • 794, 938
2011 685, 000 1.10;263 _ 795, 263
2012 730, 000 62 ; 538 , -. _ 792, 530
2013 - 165, 000 32, 919 197, 919
2014 175, 000 22 , 813 197, 813
2015 - 190 , 000 11, 875 201, 870
TOTAL $ 7, 605, 000 $ 4, 770, 717 $12 , 375, 717
See Accompanying Independent Auditor' s
Report on Supplemental Information.
BRAZORIA COUNTY MUNICIPAL UTILITY DISTRICT NO. 5
ANALYSIS OF CHANGES IN GENERAL LONG-TERM DEBT
FOR THE YEAR ENDED SEPTEMBER 30, 1997
Bonds
Outstanding
Original October
Description Bonds Issued 1, 1996
Brazoria County Municipal Utility
District No. 5 Unlimited Tax
Bonds - Series 1984 $ 1, 620, 000 $ 115, 000
Brazoria County Municipal Utility
District No. 5 Unlimited Tax
Refunding Bonds - Series 1992 . 6, 065, 000 5, 675, 000
Brazoria County Municipal Utility
District No. 5 Unlimited Tax
Bonds - Series 1995 • , 2 , 020, 000 2 , 020, 000
TOTAL $ 9, 705, 000 $ 7, 810, 000
For interest rates, interest payment dates and
maturity dates, see Exhibit D, Footnote 3 .
SCHEDULE 7
Page 1 of 2
Current Year Transactions
Bonds
Outstanding
Retirements September
Bonds Sold Principal Interest 30, 1997 Paying Agent
Texas Commerce
Bank N.A.
Corporate Trust
Products
$ $ 55, 000 $ 9, 365 $ 60, 000 Houston, TX 77210
Texas Commerce
Bank N.A.
Corporate Trust
Products
150,000 383, 025 5, 525, 000 Houston, TX 77210
Texas Commerce
Bank N.A.
Corporate Trust
Products
116, 690 2, 020 , 000 Houston, TX 77210
$ -0- $ 205, 000 $ 509, 080 $ 7, 605, 000
See Accompanying Independent Auditor' s
Report on Supplemental Information.
(THIS PAGE INTENTIONALLY LEFT BLANK)
SCHEDULE 7
Page 2 of 2
BRAZORIAA -COUNTY MUNICIPAL UTILITY DISTRICT NO. 5
ANALYSIS OF CHANGES IN GENERAL LONG-TERM DEBT
FOR THE YEAR ENDED SEPTEMBER 30, 1997
Tax-and/or Tax
Bond Authority: Tax Bonds Refunding Bonds
Amount Authorized by Voters $ 6, 105, 000 $17, 670-, 000
Less Amount Issued _ 6, 105, 000 - 8, 085, 0.00
Add: Amount of Bonds Refunded
and Defeased 5, 105, 000
Remaining To Be Issued $ 5, 105, 000 $ 9, 585, 000
Debt Service Fund Cash and Temporary Investments
balances as of September 30, 1997 :. $ 360,22.7
Average annual Debt Service payment (Principal &
Interest) for remaining-term of all debt : $ 687, 540
See Accompanying Independent Auditor' s
Report on Supplemental- Information.
BRAZORIA COUNTY MUNICIPAL UTILITY DISTRICT NO.. 5
COMPARATIVE SCHEDULE -OF -REVENUE AND EXPENDITURES
GENERAL AND DEBT SERVICE FUNDS FIVE YEARS
Amounts
1997 1996 1995
GENERAL FUND REVENUES :
Service Revenues $ 380,434 $ 369, 393 $ 314, 739
Penalty and Interest 13, 509 12 , 965 10, 528
Tap Connection and
Inspection Fees 94, 633 47, 600 32 , 775
STP Capacity -Lease _
Investment Revenues 21, 524 16, 840 16, 760
Miscellaneous Revenue 1, 852 1, 559. 6, 168
TOTAL GENERAL FUND REVENUES $ 511, 952 • $ 448, 357 $ 380, 970
GENERAL FUND EXPENDITURES :
Professional Fees $ 28, 755 $ _34, 194 $ 34, 665
Purchased and Contracted
Services 246, 868 230, 884 186, 858
Utilities 2 , 660 1, 633 1, 684
Repairs and Maintenance 63 , 968 26,469 76, 938
Recurring Operating
Expenditures 44., 536 . 26, 97,8 27, 105
Capita-1 -Outlay 56, 908 26, 209 53 ; 615
TOTAL GENERAL FUND
EXPENDITURES . _ $ 443, 695 $ 346, 367 $ 380, 865
EXCESS GENERAL FUND REVENUE
OVER (UNDER) EXPENDITURES $ 68, 257 $ 101, 990 $ 105
_
SCHEDULE 8
Page 1 of 2
Percent of Total Revenue
1994 1993 1997 1996 1995 1994 1993
$ 273 , 852 $ 249, 873 74 .3% 82 .4% 82 .6% 75 . 0% 76 . 8%
9, 006 11, 069 2 . 6 2 . 9 2 . 8 2 . 5 3 .4
53, 000 37, 845 18 . 5 10 . 6 8 . 6 14 .-5 11. 6
8, 723 17, 015 2 .4. 5 .2
11, 252 8, 470 4 .2 3 . 8 4 .4 3 . 1 2 . 6
9, 089 1, 352 0 .4 0 . 3 1 . 6 2 . 5 0 .4
$ 364, 922 $ 325, 624 100 . 0% 100 . 0% 100 . 0% 100 . 0% 100 . 0%
$ 25, 494 $ 30, 915 5 . 6% 7 . 6% - 9 . 1% 7 . 0% 9 .5%
177-, 842 141, 746 48 .2 51 .5 49 . 0 48 . 7 43 . 5
1, 981 2, 007 0 . 5 0 .4 0 .4 0 . 5 0 . 6
53, 106 47, 158 12 . 5 5 . 9 20 .2 14 . 6 14 .5
34, 374 3-0, 373 8 . 7 6 . 0 7 . 1 9 .4 9 . 3
48, 574 20, 248 11 . 1 5 . 8 14 . 1 13 . 3 6 .2
$ 341, 371 $ 272 , 447 86 . 6% 77 .2% 99 . 9.% .93 . 5% 83 . 6%
$ 23, 551 $ 53 , 177 13 .4% 22 . 8% 0 . 1% 6 . 5%. 16 ,4%
See Accompanying Independent Auditor' s
Report on Supplemental Information.
BRAZORIA COUNTY MUNICIPAL UTILITY DISTRICT NO. 5
COMPARATIVE SCHEDULE OF REVENUE AND EXPENDITURES
GENERAL AND DEBT SERVICE FUNDS - FIVE YEARS
Amounts
1997 . 1996 1995
DEBT SERVICE FUND REVENUES :- .
Tax Revenues $ 715, 996 $ .674, 354 $ 605, 615
Penalty and Interest 3,470 3, 009 2, 687
Investment Revenues- 29, 698 , - 29, 450 .- 21, 829
Miscellaneous Revenues 38
TOTAL DEBT SERVICE FUND
_ REVENUES_ $ 749, 164 $ 706, 813 $ 630, 169
DEBT SERVICE EXPENDITURES :
- Tax Collection Expenditures . $ .21,456 $ 23, 441 $ _ 21, 519
Debt Service Interest and
- " ,.Fees 514,438 497, 305 422, 643
Debt Service Principal 20'5, 000 = '_ 195-, 000 - 180, 000
Refunding Cost of
Issuance - ,
TOTAL DEBT SERVICE
EXPENDITURES $ 741,294 $ `715, 746 $ 624, 162
EXCESS DEBT SERVICE REVENUE -
-OVER (UNDER) EXPENDITURES - $ 7,`870 $ (8, 933) $ - 6, 0.07
TOTAL ACTIVE RETAIL WATER AND/ .
OR WASTEWATER CONNECTIONS -- ,-- 1,-0:91 I. - -9.43 863
SCHEDULE 8
Page 2 of 2
Percent of Total Revenue
1994 1993 1997 1996 1995 1994 1993
$ 586, 897 $ 543, 804 95 . 6% 95 .4% 96 . 1% 96 .8% 96 . 8%
3,459 1, 738 0 .4 0 .4 0 .4 - 0 . 6 - 0 .3-
15, 714 16, 301 4 . 0 4 .2 3 .5 '2 . 6 - 2 .-9
0 . 0 0 . 0 0 .'0 0'. 0 -0 . 0
$ 606, 070 $ 561, 843 100 . 0% 100 .0% 100 . 0% 100 . 0% 100 . 0%
$ 17, 265 $ 18, 672 2 . 9% 3 . 3% 3 .4% 2 . 8 3 .3%
438, 525 .365, 917 68 . 7 70 .4 67 . 1 72 .4 65 . 1
160, 000 215, 000 27 .4 27 . 6 - 28 .6 26 .4 -38 .3
2 , 075 789 0 .0 0 . 0 0 . 0 - 0 ..3 0 . 0
$ 617, 865 $ 600, 378 99 . 0% 101 .3% 99 .1% 101 . 9% 106 .-7%
$ (11, 795) $ (38, 535) 1 . 0% (1 .3) % 0 . 9% - (1 . 9) % - -- 6 . 7%
801 735
See _Accompanying Independent. Auditor' s
Report on- Supplemental .Information:.
SCHEDULE 9
Page 1 of 2
BRAZORIA COUNTY MUNICIPAL UTILITY DISTRICT NO . 5
INSURANCE COVERAGE
SEPTEMBER 30, 1997
Policy
Amount Clause
of Co-
Type of Coverage From/To Coverage Insurer/Name Insurance
FIDELITY BONDS
Public Officials
Faithful Per- 04/15/97 $ 10, 000 Western Surety
formance Bond 04/15/98 Per Company* None
Director
Crime Bond 09/01/96 Redland
Bookkeeper 10/27/97 $ 10, 000 Insurance Company* None
Tax Assessor/Collector 10, 000
Operator 10, 000
Delinquent Tax Attorney 10, 000
GENERAL 10/20/96 New Hampshire
LIABILITY 10/20/97 Insurance Company* None
General Aggregate Limit $4, 000, 000
Products/Completed
Operations Aggregate -
Limit 2, 000, 000
Personal and Advertising
Injury Limit 2 , 000, 000
Each Occurrence Limit 2, 000, 000
Fire Damage Limit -
Any one fire 50, 000
Medical Expense 5, 000
* - Stock Company
See Accompanying Independent Auditor' s
Report on Supplemental Information.
I
j SCHEDULE 9
1 I Page 2 of 2
II
BRAZORIA COUNTY MUNICIPAL UTILITY DISTRICT NO . 5
INSURANCE COVERAGE
SEPTEMBER 30, 1997
I '
Policy
Amount Clause
I of - Co-
Type of Coverage From/To Coverage Insurer/Name Insurance
POLLUTION 10/20/96 New Hampshire
LIABILITY 10/20/97 Insurance Company* None
Per Occurrence $ 300, 000
11 ` General Aggregate 300, 000
II
1 AUTOMOBILE 10/20/96 New Hampshire
i LIABILITY 10/20/97 Insurance Company* None
Limit Per Accident $2 , 000, 000
li PROPERTY - FIRE, New Hampshire
11I LIGHTING AND 10/20/96 Insurance Company* 80%
EXTENDED COVERAGE 10/20/97 $2 , 790, 000
1 Deductible 1, 000
BOILER AND 10/20/96 New Hampshire
MACHINERY 10/20/97 $2, 790, 000 Insurance Company* None
Deductible 2, 500
Extra Expense 50, 000
DIRECTORS AND National -Union
' OFFICERS 10/20/96 Fire Insurance -
LIABILITY 10/20/97 Company of
General Aggregate $4, 000, 000 Pittsburg, PA None
Each Occurrence 2, 000, 000
Deductible 1, 000
* - Stock Company
1
See Accompanying Independent Auditor' s
Report on Supplemental Information.
BRAZORIA COUNTY MUNICIPAL UTILITY DISTRICT NO. 5
BOARD MEMBERS, KEY PERSONNEL AND CONSULTANTS
SEPTEMBER 30, 1997
District Mailing Address - Brazoria County Municipal Utility
District No. 5
c/o Coats, Rose, Yale, Holm,
Ryman & Lee, P.C.
1001 Fannin, Suite 800
Houston, Texas 77002-6707
District Telephone No. (713) 651-0111
Term of Office
Board Members Elected/Expires
Ricki ,A. Willoughby
1026 Margate 05/94 -
Pearland, TX 77584 05/98
" I
Jack T. Hollis,
2300 Briarwest #4309 - 05/96 -
Houston, TX 77077 05/2000
David 'Denton
1018 Oxford 05/94 . -
Pearland, TX 77584 05/98
Kelly C. Flanagan
1043 Margate. 05/94 .-
Pearland, TX 77584 - 05/98
Phil Nedbalek
1022 Oxford 05/96
Pearland, TX 77584 05/2000
Note : No Director has any business or family relationships (as
defined by the Texas Water Code) with major landowners in
the District, with the District' s Developer or with any of
the District' s consultants.
SCHEDULE 10
I ' Page 1 of 3
I
I '
II .
I ,
j ;
I
1, 1
II
i
Expense •
{ Per Diem Reimbursement
for the for the --
j year ended year ended - Resident
! September September - of
I ! 30, 1997 30, 1997 Title District
$1, 650 $1, 003 President Yes
$1,450 $ 699 Vice President No .
it
! Assistant Vice President/
j Assistant Secretary/
Treasurer/Assistant
$1, 550 $ 763 Investment Officer Yes
• Secretary/Treasurer/
$1, 400 $1, 093 Investment Officer Yes
Assistant Secretary/
$1, 450 $ 882 Treasurer -. Yes
1I
I
ji
See Accompanying Independent Auditor' s
Report On Supplemental- Information.
SCHEDULE 10
Page 2 of 3
BRAZORIA COUNTY MUNICIPAL UTILITY DISTRICT NO. 5
BOARD MEMBERS, KEY PERSONNEL AND CONSULTANTS
SEPTEMBER 30, 1997
Fees
for the
year ended
September
Consultants Date Hired 30, 1997 Title
Assessments of the Southwest Tax
P. O. Box 1368 Assessor/
Friendswood, TX 77546 05/04/81 $ 9, 800 Collector
Brazoria County Appraisal
District Central
500 N. Chanango Legislative Appraisal
Angleton, TX 77515 Action $ 5, 942 District
Coats, Rose, Yale, Holm,
Ryman & Lee, P.C.
1001 Fannin, Suite 800 -
Houston, TX 77002-6707 06/19/90 $ 28, 861 Attorney
District Data Services, Inc.
8558 Katy Frwy. , Suite 119
Houston, TX 77055 07/17/85 $ 11, 299 Bookkeeper
ECO Resources
12550 Emily Court
Sugar Land, TX 77478 10/19/81 $359, 117 Operator
Ferro-Saylors, Inc.
1880 Dairy Ashford Rd.
Suite 505
Houston, TX 77077 07/07/94 $ 13, 654 Engineer
See Accompanying , Independent Auditor' s
Report on Supplemental Information.
SCHEDULE 10
Page 3 of 3
BRAZORIA COUNTY MUNICIPAL UTILITY DISTRICT NO . 5
BOARD MEMBERS, KEY PERSONNEL AND CONSULTANTS
SEPTEMBER 30, 1997
Fees
for the
year ended
September
Consultants Date Hired 30, 1997 Title
McCall & Company
Certified Public Accountants
13405 Northwest Freeway
Suite 204
Houston, TX 77040 09/16/87 $ 7, 610 Auditor
Perdue, Brandon, Fielder,
Collins & Mott, L.L. P. Delinquent
2600 Citadel Place, Suite 500 Tax
Houston, TX 77008 03/19/96 $ 871 Attorney
Rauscher Pierce Refsnes, Inc.
1001 Fannin, Suite 700 Financial
Houston, _ TX 77002-6796 03/19/91 $ -0- Advisor
See Accompanying Independent Auditor' s
Report on Supplemental Information.
McCALL & COMPANY
Certified Public Accountants
Member American
13405 Northwest Fwy. Institute of Certified
Suite 204 Public Accountants '
Houston,Texas 77040
(713)462-0341 January 14, 1998 Texas Society of
Fax (713)462-2708 Certified Public
E-Mail:mmccall@accesscomm.net Accountants
Board of Directors
Brazoria County Municipal
Utility District No. 5
Brazoria County, Texas -
Members of the Board:
In planning and performing the audit of the General Purpose Financial
Statements of Brazoria County Municipal Utility District No. 5 for
the year ended September 30, 1997, we considered the internal control
structure in order to determine the auditing procedures implemented
for the purpose of expressing an opinion on the financial statements
and not to provide assurance on the internal control structure. Our
consideration of the internal control structure would not _necessarily
disclose all matters in the internal control structure that might be
a material weakness under standards established by the American
Institute of Certified Public Accountants . .
A material weakness is a condition in which the design or operation
of the specific internal control structure elements does not reduce
to a relatively low level the risk that errors or irregularities in
amounts that would be material in relation to the financial state-
ments being audited may occur and not be detected within a timely
period by the District in the normal course of performing its
assigned functions.
We noted no matters involving the internal control structure and its
operation that we consider to be a material weakness as defined
above. We would like to communicate to you the following observa-
tions and/or suggestions :
Insurance Coverage
We have not made an adequate study of the companies employed by the
District to determine if such companies have adequately segregated
their procedures to allow for adequate internal controls . The size
of these companies may place certain limits on their ability to seg-
regate functional responsibilities, and the size of the District pre-
cludes sufficient segregation of duties if all accounting functions
were handled by an employee of the District . In addition, some of
the District' s consultant agreements require a certain amount of
insurance coverage for both. fidelity bonding and general liability
coverage. _ _
Members of the Board January 14, 19 8
Brazoria County Municipal Page 2
Utility District No. 5
We recommend the District continue to periodically review certifi-
cates of insurance provided by the consultants to ascertain that the
required amounts of insurance are in force. We also recommend the
District continue to engage its engineer to review the District' s
insurance coverage on its property, plant and equipment to gain
assurance that the facilities are adequately insured.
Public Funds Investment Act
Effective September 1, 1995, the Public Funds Investment Act, Chapter
2256, Government Code was amended. . Included in the amended statute
is a requirement for the District' s auditor to perform a - compliance
audit of the District' s compliance with its adopted investment pol-
1
icy. Based upon our test of compliance, we acknowledge that the Dis-
trict has substantially complied with the provisions of the invest-
ment policy.
This management letter is intended solely for the information and
use of the Board of Directors of Brazoria County Municipal Utility
District No. 5 and to meet the requirements of the Texas Natural
Resource Conservation Commission. We appreciate the courtesy and
assistance extended by the Board of Directors and the District' s
consultants during the course of our audit . If you have any ques-
tions concerning the matters presented herein or need assistance in
implementing any of these, please contact us .
Sincerely yours,
McCall & Company
Certified Public Accountants
APPENDIX C
SPECIMEN OF FINANCIAL GUARANTY INSURANCE POLICY
MBIA
FINANCIAL GUARANTY INSURANCE POLICY
MBIA Insurance Corporation
Armonk,New York 10504
Policy No.[NUMBER]
MBIA Insurance Corporation (the "Insurer"), in consideration of the payment of the premium and subject to the terms of this policy, hereby
unconditionally and irrevocably guarantees to any owner,as hereinafter defined,of the following described obligations,the full and complete payment
required to be made by or on behalf of the Issuer to[PAYING AGENT/TRUSTEE]or its successor(the"Paying Agent")of an amount equal to(i)1the
principal of(either at the stated maturity or by any advancement of maturity pursuant to a mandatory sutldng fund payment)and interest on,the
I . Obligations(as that term is defined below)as such payments shall become due but shall not be so paid(except that 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 guaranteed hereby shall be made in such amounts and at such
times as such payments of principal would have been due had there not been any such acceleration); and Cu)the reimbursement of any such payment
which is subsequently recovered from any owner pursuant to a final judgment by a court of competent jurisdiction that such payment constitutes an
avoidable preference to such owner within the meaning of any applicable bankruptcy law. The amounts referred to in clauses n and(h)of the
preceding sentence shall be referred to herein collectively as the"Insured Amounts." "Obligations"shall mean:
[PAR]
[LEGAL NAME OF ISSUE]
Upon receipt of telephonic or telegraphic notice,such notice subsequently confinned in writing by registered or certified mail,or upon receipt of written
notice by registered or certified mail,by the Insurer from the Paying Agent or any owner of an Obligation the payment of an Insured Amount for which
is then due,that such required payment has not been made,the Insurer on the due date of such payment or within one business day after receipt of n notice
of such nonpayment,whichever is later,will make a deposit of funds,in an account with State Street Bank and Trust Company,NA,in New Yodc,
New York,or its successor,sufficient for the payment of any such Insured Amounts which are then due. Upon presentment and surrender of such
Obligations or presentment of such other proof of ownership of the Obligations,together with any appropriate instruments of assignment to evidence
the assignment of the Insured Amounts due on the Obligations as are paid by the Inner,and appropriate instruments to effect the appointment of the
Insurer as agent for such owners of the Obligations in any legal proceeding related to payment of Insured Amounts on the Obligations,such instruments
being ina form satisfactory to State Street Bank and Trust Company,NA,State Street Bank and Trust Company,NA shall disburse to such owners,
or the Paying Agent payment of the Insured Amounts due on such Obligations,less any amount held by the Paying Agent for the payment of such
Insured Amounts and legally available therefor. This policy does not insure against loss of any prepayment premium which may at any time be payable
with respect to any Obligation.
As used herein,the term"owner"shall mean the registered owner of any Obligation as indicated in the books maintained by the Paying Agen the
Issuer,or any designee of the Issuer for such purpose. The term owner shall not include the Issuer or any party whose agreement with the Issuer
constitutes the underlying security for the Obligations.
Any service of process on the Insurer may be made to the Insurer at its offices located at 113 King Street,Armonk,New York 10504 and such service
of process shall be valid and binding.
This policy is non-cancellable for any reason. The premium on this policy is not refindable for any reason including the payment prior to mat • of
the Obligations.
IN WITNESS WHEREOF,the Insurer has caused this policy to be executed in facsimile on its behalf by its duly authorized officers,this[DAY]day of
[MONTH,YEAR].
COUNTERSIGNED: MBIA Insurance Corporation
Resident Licensed Agent Pre
!! C/MEN
City,State Assistant Secretary
DISCLOSURE OF GUARANTY FUND NONPARTICIPATION:In the event the Insurer is unable to fulfill its contractual obligation under this policy or contract
or application or certificate or evidence of coverage,the policyholder or certificateholder is not protected by an insurance guaranty fund or other solvency protection
arrangement.
STD-RCS-DC-6
4A5