official statement dated march 11, 2015 · 2015. 3. 20. · delivery of the bonds is expected...
TRANSCRIPT
OFFICIAL STATEMENT
DATED MARCH 11, 2015
In the opinion of Kelly Hart & Hallman LLP, Bond Counsel, under existing law, and assuming compliance with certain covenants and the accuracy of certain representations, interest on the Bonds described herein is excludable from gross income for federal income tax purposes and is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations; however, interest on the Bonds will be included in the "adjusted current earnings" of a corporation (other than an S corporation, regulated investment company, REIT, REMIC, or FASIT) for purposes of computing its alternative minimum tax liability (see “TAX MATTERS”).
THE BONDS WILL BE DESIGNATED AS "QUALIFIED TAX-EXEMPT OBLIGATIONS" FOR FINANCIAL INSTITUTIONS.
NEW ISSUE—BOOK ENTRY ONLY
$5,500,000
DENTON COUNTY FRESH WATER SUPPLY DISTRICT NO. 8-C
(A political subdivision of the State of Texas located within Denton County, Texas) UNLIMITED TAX UTILITY BONDS, SERIES 2015
The Bonds described above (the "Bonds") are obligations solely of Denton County Fresh Water Supply District No. 8-C (the "District") and are not obligations of the State of Texas; Town of Little Elm, Texas, Denton County; or any entity other than the District.
The Bonds, when issued, will constitute valid and legally binding obligations of the District and will be 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. THE BONDS ARE SUBJECT TO SPECIAL RISK FACTORS
DESCRIBED HEREIN. See "RISK FACTORS."
Dated Date: March 15, 2015 Due: September 1, as shown below
Interest Accrues: Dated Date Principal of the Bonds is payable at maturity or earlier redemption at the principal payment office of the paying agent/registrar, initially Wells Fargo Bank N.A., Minneapolis, Minnesota (the "Paying Agent/Registrar"), upon surrender of the Bonds for payment. Interest on the Bonds is payable each March 1 and September 1, commencing March 1, 2016, until maturity or prior redemption. Interest on the Bonds accrues from March 15, 2015 (the “Dated Date”), and will be payable on the basis of a 360-day year of twelve 30-day months. The Bonds will be issued only in fully registered form in denominations of $5,000 each or integral multiples thereof. The Bonds are subject to redemption prior to their maturity, as shown below. The Bonds will be registered in the name of Cede & Co., as nominee for The Depository Trust Company, New York, New York ("DTC"), which will act as securities depository for the Bonds. Registered Owners (as defined herein) of the Bonds will not receive physical certificates representing the Bonds, but will receive a credit balance on the books of the nominees of such Registered Owners. So long as Cede & Co. is the Registered Owner of the Bonds, the principal of and interest on the Bonds will be paid by the Paying Agent/Registrar directly to DTC, which will, in turn, remit such principal and interest to its participants for subsequent disbursement to the Registered Owners of the Bonds as described herein. See "THE BONDS--Book-Entry-Only System".
MATURITY SCHEDULE, INTEREST RATES, INITIAL YIELDS AND CUSIP NUMBERS
CUSIP Prefix: 24879U (a)
$195,000 3.000% Term Bonds due September 1, 2025 at a Price of 101.488% to Yield 2.800% (b) (c) - CUSIP No. (a) GM7
$360,000 3.125% Term Bonds due September 1, 2029 at a Price of 98.568% to Yield 3.250% (b) (c) - CUSIP No. (a) GR6
$225,000 3.250% Term Bonds due September 1, 2033 at a Price of 97.957% to Yield 3.400% (b) (c) - CUSIP No. (a) GV7
$1,560,000 3.750% Term Bonds due September 1, 2039 at a Price of 100.000% to Yield 3.750% (b) (c) - CUSIP No. (a) HB0
(a) CUSIP numbers have been assigned to the Bonds by CUSIP Global Services, managed by Standard & Poor's Financial Services LLC on behalf of the American Bankers Association and are included solely for
the convenience of the purchasers of the Bonds. Neither the District nor the Initial Purchaser (as defined herein) shall be responsible for the selection or correctness of the CUSIP numbers set forth herein.
(b) Bonds maturing on and after September 1, 2024, are subject to redemption prior to maturity at the option of the District, in whole or from time to time in part, on September 1, 2023, or on any date thereafter,
at a price equal to the principal amount thereof plus accrued interest to the date fixed for redemption. The Term Bonds (as defined herein) are also subject to mandatory sinking fund redemption as more fully
described herein. See “THE BONDS – Redemption Provisions.”
(c) Initial reoffering yield represents the initial reoffering yield to the public, which has been established by the Initial Purchaser for offers to the public and which may be subsequently changed by the Initial
Purchaser and is the sole responsibility of the Initial Purchaser. Accrued interest from March 15, 2015, is to be added to the price.
The scheduled payment of principal of and interest on the Bonds when due will be guaranteed under a municipal bond insurance policy to be issued
concurrently with the delivery of the Bonds by BUILD AMERICA MUTUAL ASSURANCE COMPANY.
The Bonds are offered subject to prior sale, when, as and if issued by the District subject, among other things, to the approval of the Bonds by the Attorney General of Texas and the legal opinion of Kelly Hart & Hallman LLP, Fort Worth, Texas, Bond Counsel. Certain legal matters will be reviewed by McCall, Parkhurst & Horton L.L.P., Dallas, Texas, as Disclosure Counsel to the District. See "LEGAL MATTERS." Delivery of the Bonds is expected through DTC on or about April 2, 2015.
RAYMOND JAMES & ASSOCIATES, INC.
Maturity Maturity Interest Initial CUSIP Maturity Maturity Interest Initial CUSIP
Amount (Sept. 1) Rate Yield (c )
Suffix (a)
Amount (Sept. 1) Rate Yield (c )
Suffix (a)
85,000$ 2017 2.000% 1.000% GD7 95,000$ 2023 2.500% 2.500% GK1
90,000 2018 2.000% 1.400% GE5 *** *** *** *** ***
90,000 2019 2.000% 1.550% GF2 525,000 2034(b)
3.375% 3.450% GW5
90,000 2020 2.000% 1.850% GG0 540,000 2035(b)
3.375% 3.500% GX3
95,000 2021 2.250% 2.100% GH8 715,000 2036(b)
3.375% 3.550% GY1
95,000 2022 2.500% 2.400% GJ4 740,000 2037(b)
3.625% 3.700% GZ8
Rating:
S&P: “AA” (stable)/BAM Insured
S&P: “BBB” (stable)/Underlying
(see “MUNICIPAL BOND RATING”
and “MUNICIPAL BOND
INSURANCE” herein)
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TABLE OF CONTENTS
USE OF INFORMATION IN OFFICIAL STATEMENT ........................................................................................................................................................... 4
SALE AND DISTRIBUTION OF THE BONDS .......................................................................................................................................................................... 4
AWARD OF THE BONDS ................................................................................................................................................................................................................. 4 PRICES AND MARKETABILITY ....................................................................................................................................................................................................... 4
SECURITIES LAWS ......................................................................................................................................................................................................................... 4
MUNICIPAL BOND RATING AND MUNICIPAL BOND INSURANCE .................................................................................................................................................... 5
OFFICIAL STATEMENT SUMMARY ........................................................................................................................................................................................ 6
THE DISTRICT ........................................................................................................................................................................................................................... 6
THE BONDS ............................................................................................................................................................................................................................... 7
SELECTED FINANCIAL INFORMATION ................................................................................................................................................................................ 9
OFFICIAL STATEMENT ........................................................................................................................................................................................................... 10
INTRODUCTION ......................................................................................................................................................................................................................... 10
THE BONDS ................................................................................................................................................................................................................................. 10
DESCRIPTION .............................................................................................................................................................................................................................. 10
BOOK-ENTRY-ONLY SYSTEM ..................................................................................................................................................................................................... 10
USE OF CERTAIN TERMS IN OTHER SECTIONS OF THIS OFFICIAL STATEMENT ............................................................................................................................. 12
EFFECT OF TERMINATION OF BOOK-ENTRY-ONLY SYSTEM ........................................................................................................................................................ 12
RECORD DATE FOR INTEREST PAYMENT ..................................................................................................................................................................................... 12 SOURCE OF PAYMENT ................................................................................................................................................................................................................. 12
PERFECTED SECURITY INTEREST ................................................................................................................................................................................................. 12
FUNDS ........................................................................................................................................................................................................................................ 12
REDEMPTION PROVISIONS........................................................................................................................................................................................................... 13
AUTHORITY FOR ISSUANCE ......................................................................................................................................................................................................... 13
REGISTRATION AND TRANSFER ................................................................................................................................................................................................... 14
REPLACEMENT OF PAYING AGENT/REGISTRAR ........................................................................................................................................................................... 14 LOST, STOLEN, OR DESTROYED BONDS ...................................................................................................................................................................................... 14
ISSUANCE OF ADDITIONAL DEBT ................................................................................................................................................................................................ 15
ANNEXATION AND CONSOLIDATION ........................................................................................................................................................................................... 15
REMEDIES IN EVENT OF DEFAULT ............................................................................................................................................................................................... 15
LEGAL INVESTMENT AND ELIGIBILITY TO SECURE PUBLIC FUNDS IN TEXAS ............................................................................................................................... 16
DEFEASANCE .............................................................................................................................................................................................................................. 16
USE AND DISTRIBUTION OF BOND PROCEEDS ................................................................................................................................................................ 17
BOND INSURANCE..................................................................................................................................................................................................................... 18
BOND INSURANCE RISKS ............................................................................................................................................................................................................ 19
RISK FACTORS ........................................................................................................................................................................................................................... 19
GENERAL .................................................................................................................................................................................................................................... 19
FACTORS AFFECTING TAXABLE VALUES AND TAX PAYMENTS ................................................................................................................................................... 19
THE EFFECT OF THE FINANCIAL INSTITUTIONS ACT OF 1989 ON TAX COLLECTIONS OF THE DISTRICT ........................................................................................ 21
FUTURE DEBT ............................................................................................................................................................................................................................. 21
TAX COLLECTION LIMITATIONS AND FORECLOSURE REMEDIES .................................................................................................................................................. 21
REGISTERED OWNERS' REMEDIES AND BANKRUPTCY LIMITATIONS ............................................................................................................................................ 22 CONTINUING COMPLIANCE WITH CERTAIN COVENANTS ............................................................................................................................................................. 22
MARKETABILITY ........................................................................................................................................................................................................................ 22
FUTURE AND PROPOSED LEGISLATION ........................................................................................................................................................................................ 22
RISK FACTOR ON MUNICIPAL BOND INSURANCE ........................................................................................................................................................................ 22
THE DISTRICT ............................................................................................................................................................................................................................ 23
GENERAL .................................................................................................................................................................................................................................... 23
LOCATION .................................................................................................................................................................................................................................. 23 BOARD OF DIRECTORS ................................................................................................................................................................................................................ 24
STATUS OF DEVELOPMENT ......................................................................................................................................................................................................... 24
FUTURE DEVELOPMENT .............................................................................................................................................................................................................. 26
THE DEVELOPERS .................................................................................................................................................................................................................... 26
ROLE OF A DEVELOPER ............................................................................................................................................................................................................... 26
THE DEVELOPERS ....................................................................................................................................................................................................................... 26
BUILDERS ................................................................................................................................................................................................................................... 27
THE UTILITY SYSTEM ............................................................................................................................................................................................................. 27
GENERAL .................................................................................................................................................................................................................................... 27
WATER SYSTEM ......................................................................................................................................................................................................................... 27
WASTEWATER SYSTEM ............................................................................................................................................................................................................... 28
DRAINAGE SYSTEM .................................................................................................................................................................................................................... 28
100-YEAR FLOOD PLAIN ............................................................................................................................................................................................................. 28
THE ROAD SYSTEM .................................................................................................................................................................................................................. 28
GENERAL FUND STATEMENT OF ACTIVITIES ................................................................................................................................................................. 29
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DEBT SERVICE REQUIREMENTS .......................................................................................................................................................................................... 30
FINANCIAL INFORMATION .................................................................................................................................................................................................... 31
ASSESSED VALUE ....................................................................................................................................................................................................................... 31
UNLIMITED TAX BONDS AUTHORIZED BUT UNISSUED................................................................................................................................................................ 31 UNLIMITED TAX REFUNDING BONDS AUTHORIZED BUT UNISSUED ............................................................................................................................................ 31
OUTSTANDING BONDS ................................................................................................................................................................................................................ 32
CASH AND INVESTMENT BALANCES ............................................................................................................................................................................................ 32
INVESTMENTS OF THE DISTRICT .................................................................................................................................................................................................. 32
ESTIMATED OVERLAPPING DEBT ................................................................................................................................................................................................ 33
TAX DATA .................................................................................................................................................................................................................................... 33
AUTHORIZED TAXES ................................................................................................................................................................................................................... 33
TAX EXEMPTIONS ....................................................................................................................................................................................................................... 33 HISTORICAL TAX COLLECTIONS ................................................................................................................................................................................................. 34
SIGNIFICANT TAXPAYERS ........................................................................................................................................................................................................... 34
TAX ADEQUACY FOR DEBT SERVICE .......................................................................................................................................................................................... 34
TAXING PROCEDURES............................................................................................................................................................................................................. 35
AUTHORITY TO LEVY TAXES ...................................................................................................................................................................................................... 35
PROPERTY TAX CODE AND COUNTY-WIDE APPRAISAL DISTRICT ............................................................................................................................................... 35
PROPERTY SUBJECT TO TAXATION BY THE DISTRICT .................................................................................................................................................................. 35
TAX ABATEMENT ....................................................................................................................................................................................................................... 36 VALUATION OF PROPERTY FOR TAXATION .................................................................................................................................................................................. 36
DISTRICT AND TAXPAYER REMEDIES .......................................................................................................................................................................................... 36
ROLLBACK OF OPERATION AND MAINTENANCE TAX RATE......................................................................................................................................................... 37
LEVY AND COLLECTION OF TAXES ............................................................................................................................................................................................. 37
DISTRICT’S RIGHTS IN THE EVENT OF TAX DELINQUENCIES........................................................................................................................................................ 37
LEGAL MATTERS ...................................................................................................................................................................................................................... 37
LEGAL PROCEEDINGS ................................................................................................................................................................................................................. 37 NO MATERIAL ADVERSE CHANGE .............................................................................................................................................................................................. 38
NO-LITIGATION CERTIFICATE ..................................................................................................................................................................................................... 38
TAX MATTERS ........................................................................................................................................................................................................................... 38
LEGAL OPINION .......................................................................................................................................................................................................................... 38
TAX ACCOUNTING TREATMENT OF DISCOUNT AND PREMIUM ON CERTAIN BONDS .................................................................................................................... 39
QUALIFIED TAX-EXEMPT OBLIGATIONS FOR FINANCIAL INSTITUTIONS ...................................................................................................................................... 40
PREPARATION OF OFFICIAL STATEMENT ....................................................................................................................................................................... 40
SOURCES AND COMPILATION OF INFORMATION .......................................................................................................................................................................... 40 FINANCIAL ADVISOR .................................................................................................................................................................................................................. 40
CONSULTANTS ............................................................................................................................................................................................................................ 40
UPDATING THE OFFICIAL STATEMENT ........................................................................................................................................................................................ 41
CERTIFICATION OF OFFICIAL STATEMENT ................................................................................................................................................................................... 41
CONTINUING DISCLOSURE OF INFORMATION ............................................................................................................................................................... 41
ANNUAL REPORTS ...................................................................................................................................................................................................................... 41
NOTICE OF CERTAIN EVENTS ...................................................................................................................................................................................................... 41 AVAILABILITY OF INFORMATION ................................................................................................................................................................................................ 42
LIMITATIONS AND AMENDMENTS ............................................................................................................................................................................................... 42
COMPLIANCE WITH PRIOR UNDERTAKINGS ................................................................................................................................................................................ 42
MISCELLANEOUS ........................................................................................................................................................................................................................ 43
LOCATION MAP ......................................................................................................................................................................................................................... 44
PHOTOGRAPHS OF IMPROVEMENTS WITHIN THE DISTRICT .................................................................................................................................... 45
APPENDIX A ................................................................................................................................................................................................................................ 46
APPENDIX B ................................................................................................................................................................................................................................ 47
APPENDIX C ................................................................................................................................................................................................................................ 48
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USE OF INFORMATION IN OFFICIAL STATEMENT No dealer, broker, salesman or other person has been authorized to give any information or to make any representations other than those contained in this Official Statement, and, if given or made, such other information or representations must not be relied upon as having been authorized by the District. This Official Statement is not to be used in an offer to sell or the solicitation of an offer to buy in any state in which such offer or solicitation is not authorized or in which the person making such offer or solicitation is not qualified to do so or to any person to whom it is unlawful to make such offer or solicitation. All of the summaries of the statutes, resolutions, orders, contracts, audited financial statements, and engineering and other related reports set forth in this Official Statement are made subject to all of the provisions of such documents. These summaries do not purport to be complete statements of such provisions, and reference is made to such documents, copies of which are available from Kelly Hart & Hallman LLP, 201 Main Street, Suite 2500, Fort Worth, Texas 76102, for further information. This Official Statement contains, in part, estimates, assumptions and matters of opinion which are not intended as statements of fact, and no representation is made as to the correctness of such estimates, assumptions or matters of opinion, or as to the likelihood that they will be realized. Any information and expressions of opinion herein contained are subject to change without notice and neither the delivery of this Official Statement nor any sale made hereunder will, 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 this Official Statement until delivery of the Bonds to the Initial Purchaser (hereinafter defined) and thereafter only as specified in "PREPARATION OF OFFICIAL STATEMENT--Updating the Official Statement".
Build America Mutual Assurance Company (“BAM”) makes no representation regarding the Bonds or the advisability of investing in the Bonds. In addition, BAM has not independently verified, makes no representation regarding, and does not accept any responsibility for the accuracy or completeness of this Official Statement or any information or disclosure contained herein, or omitted herefrom, other than with respect to the accuracy of the information regarding BAM, supplied by BAM and presented under the heading “BOND INSURANCE” and “APPENDIX D - Specimen Municipal Bond Insurance Policy”.
SALE AND DISTRIBUTION OF THE BONDS
AWARD OF THE BONDS After requesting competitive bids for the Bonds, the District accepted the bid resulting in the lowest net effective interest rate, which bid was tendered by Raymond James & Associates, Inc. (the "Initial Purchaser") bearing the interest rates shown on the cover page hereof, at a price of 97.533331% of the principal amount thereof plus accrued interest to the date of delivery, which resulted in a net effective interest rate of 3.618505% as calculated pursuant to the Notice of Sale and Bidding Instructions. PRICES AND MARKETABILITY The delivery of the Bonds is conditioned upon the receipt by the District of a certificate executed and delivered by the Initial Purchaser on or before the date of delivery of the Bonds stating the prices at which a substantial amount of the Bonds of each maturity has been sold to the public. For this purpose, the term "public" will not include any person who is a bond house, broker, or similar person acting in the capacity of underwriter or wholesaler. Otherwise, the District has no understanding with the Initial Purchaser regarding the reoffering yields or prices of the Bonds. Information concerning reoffering yields or prices is the responsibility of the Initial Purchaser. The prices and other terms with respect to the offering and sale of the Bonds may be changed from time-to-time by the Initial Purchaser after the Bonds are released for sale, and the Bonds may be offered and sold at prices other than the initial offering prices, including sales to dealers who may sell the Bonds into investment accounts. In connection with the offering of the Bonds, the Initial Purchaser may over-allot or effect transactions which stabilize or maintain the market prices of the Bonds at levels above those which might otherwise prevail in the open market. Such stabilizing, if commenced, may be discontinued at any time. The District has no control over trading of the Bonds in the secondary market. Moreover, there is no guarantee that a secondary market will be made in the Bonds. In such a secondary market, the difference between the bid and asked price of utility district bonds may be greater than the difference between the bid and asked price of bonds of comparable maturity and quality issued by more traditional municipal entities, as bonds of such entities are more generally bought, sold, or traded in the secondary market.
SECURITIES LAWS No registration statement relating to the offer and sale of the Bonds has been filed with the United States Securities and Exchange Commission under the Securities Act of 1933, as amended, in reliance upon the exemptions provided thereunder. The Bonds have not been registered or qualified under the Securities Act of Texas in reliance upon various exemptions contained therein and the Bonds have not been registered or qualified under the securities laws of any other jurisdiction. The District assumes no responsibility for registration or qualification of the Bonds under the securities laws of any other jurisdiction in which the Bonds may be offered, sold, or otherwise transferred. This disclaimer of responsibility for registration or qualification for sale or other
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disposition of the Bonds will not be construed as an interpretation of any kind with regard to the availability of any exemption from securities registration or qualification provisions in such other jurisdiction.
MUNICIPAL BOND RATING AND MUNICIPAL BOND INSURANCE
Standard & Poor’s Rating Services, a Standard & Poor’s Financial Services LLC business (“S&P”), has assigned a rating of “BBB”
(stable outlook) to the Bonds. An explanation of the rating may be obtained from S&P, 55 Water Street, New York, New York,
10041. The rating fees of S&P will be paid by the District; however, the fees associated with any other rating will be the
responsibility of the Initial Purchasers.
It is expected that Standard and Poor’s Rating Services, a Standard & Poor’s Financial Services LLC business (“S&P”), will assign its municipal bond rating of “AA” (stable outlook) to this issue of Bonds with the understanding that upon delivery of the Bonds, a municipal bond insurance policy insuring the timely payment of the principal of and interest on the Bonds will be issued by Build America Mutual Assurance Company. The rating reflects only the view of S&P 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 or withdrawn entirely by S&P if, in its judgment, circumstances so warrant. Any such revision or withdrawal of the rating may have an adverse effect on the market price of the Bonds.
S&P has assigned an underlying credit rating of “BBB” to the Bonds. There is no assurance that such rating will continue for any
given period of time or that it will not be revised or withdrawn entirely by S&P, if in their judgment, circumstances so warrant.
Any such revisions or withdrawal of the rating may have an adverse effect on the market price of the Bonds.
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OFFICIAL STATEMENT SUMMARY
The following is a brief summary of certain information contained herein which is qualified in its entirety by the detailed
information and financial statements appearing elsewhere in this Official Statement. THE SUMMARY MUST NOT BE
DETACHED AND MUST BE USED IN CONJUNCTION WITH MORE COMPLETE INFORMATION CONTAINED
HEREIN. A FULL REVIEW MUST BE MADE OF THE ENTIRE OFFICIAL STATEMENT AND OF THE
DOCUMENTS SUMMARIZED OR DESCRIBED THEREIN.
THE DISTRICT
Risk Factors…… ................. The purchase and ownership of the Bonds described herein are subject to special risk factors and all
prospective purchasers are urged to examine carefully the entire Official Statement with respect to the investment security of the Bonds, including particularly the section captioned "RISK FACTORS."
The Issuer ........................ Denton County Fresh Water Supply District No. 8-C (the “District”) was originally part of Denton
County Fresh Water Supply District No. 8 (“District 8”), which was created by the Denton County
Commissioner’s Court on June 27, 2000 as a fresh water supply district pursuant to Chapters 49 and
51, Texas Water Code, as amended. Pursuant to an election held on November 7, 2000, District 8
assumed sanitary sewer powers under Chapter 53, Texas Water Code, and road district powers under
Chapter 257, Texas Transportation Code. On December 4, 2000, District 8 converted to a water
control and improvement district pursuant to Chapters 49 and 51, Texas Water Code. At an election
held within District 8 on May 5, 2001, District 8’s voters approved the division of District 8 into
Denton County Water Supply District No. 8-A and Denton County Fresh Water Supply District No.
8-B (“Initial District 8-B”). At an election held within the Initial District 8-B on November 5, 2002,
the voters approved the division of the Initial District 8-B into Denton County Fresh Water Supply
District No. 8-B and the District. The District is a conservation and reclamation district and political
subdivision of the State of Texas and operates pursuant to Article XVI, Section 59 and Article III,
Section 52 of the Texas Constitution and Chapters 49 and 51 and, for certain purposes, 53, Texas
Water Code, as amended. When created by the division election, the District contained approximately
176.24 acres. On March 10, 2004, the District added 176.131 acres to the boundaries of the District.
On February 7, 2006, the District added 156.44 acres to the boundaries of the District. On October
18, 2006 the District added another 16.579 acres which when combined form a total of approximately
525.391 acres currently within the boundaries of the District. (see “THE DISTRICT” – General) . Location.................. .............. The District is located approximately 30 miles north of the central downtown business district of the
City of Dallas. The District lies within the exclusive extraterritorial jurisdiction of the Town of Little Elm, Texas. The District is located within the Frisco Independent School District. The District is just west of Frisco and north of Little Elm and south of Highway 380. (see “AERIAL LOCATION MAP”).
Developers/Landowners ....... The active developers within the District are FH 295 LLC and Arapaho East, Inc. (see
“DEVELOPERS/LANDOWNERS” and “THE DISTRICT – Status of Development”). Development within The District ......................... Of the approximately 525.391 acres within the District, approximately 445 acres are developable
under current land development regulations. As of December 2014, utility facilities have been constructed, or are currently under construction, to serve approximately 317 acres of the District. Development includes 1,122 completed single-family homes, 48 homes under construction and approximately 297 vacant developed single-family lots. In addition to the single-family development, the development includes an amenity center, future school site, trails and two small lakes. The District currently includes approximately 105.5 remaining undeveloped but developable acres which will include an estimated 515 additional single family lots, although there is no obligation of the owners of such land to proceed with such development. (see “THE DISTRICT – Status of Development”).
Homebuilders ....................... Homebuilders active within the District include Beazer Homes, Cheldan Homes, 1st Texas, Dunhill
Homes and Grand Homes (see “THE DISTRICT – Status of Development”).
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THE BONDS
Bonds .................................... The Bonds are in the aggregate principal amount of $5,500,000 and mature on September 1 of each
of the years and in the amounts shown on the cover hereof applicable to the Bonds. Interest accrues
from the Dated Date at the rates per annum set forth on the cover page hereof and is payable on
March 1, 2016 and on each September 1 and March 1 thereafter until maturity or earlier redemption.
The Bonds are offered in fully registered form in integral multiples of $5,000 for any one maturity.
see “THE BONDS – General Description”.
Redemption .......................... The District reserves the right, at its option, to redeem Bonds having stated maturities on and after
September 1, 2024, in whole or in part in principal amounts of $5,000 or any integral multiple thereof,
on September 1, 2023, or any date thereafter, at a price equal to the principal amount thereof plus
accrued interest to the date of redemption. See "THE BONDS – Redemption Provisions."
Source of Payment ............... The Bonds are payable from a continuing direct annual ad valorem tax, without legal limitation as to
rate or amount, levied upon all taxable property within the District. The Bonds are obligations solely
of the District and are not obligations of the State of Texas; Denton County, Texas; Town of
Little Elm, Texas or any other political subdivision or entity other than the District. See "THE
BONDS--Source of Payment."
Payment Record ................... This is the District’s ninth issue of unlimited tax bonds and the fourth issued for utility purposes.
The District currently has $18,384,985 in principal amount (the “Outstanding Bonds”), of unlimited
tax bonds outstanding for utility and road purposes.
Authority for Issuance ......... The Bonds are issued pursuant to the Bond Order, the Texas Constitution and the general laws of the
State of Texas, an election held within the boundaries of the District and an order of the Texas
Commission on Environmental Quality. See "THE BONDS-Authority for Issuance."
Bonds
Use of Proceeds .................... Proceeds of the Bonds will be used to for utility purposes and to pay costs of issuance for the Bonds,
as shown under “ESTIMATED USE AND DISTRIBUTION OF BOND PROCEEDS”.
Bonds Authorized But
Unissued ............................. The District authorized $58,710,000 in unlimited tax bonds at elections held within the District on
May 3, 2003 and May 13, 2006 for the purpose of purchasing, constructing or otherwise acquiring a
water, wastewater and drainage system for the District. At elections held within the District on May
3, 2003 and May 13, 2006, voters in the District also authorized a total of $43,700,000 for the purpose
of constructing roads. After issuance of the Bonds, $45,400,000 in principal amount for water sewer
and drainage purposes and $30,700,000 in principal amount for road purposes will remain authorized
but unissued.
The District authorized $56,810,000 of unlimited tax road refunding bonds at elections held within
the District on May 3, 2003 and May 13, 2006 and $70,330,000 of unlimited tax utility refunding
bonds at elections held within the District May 13, 2006. $52,430,015 of unlimited tax road
refunding bonds and $67,090,000 of unlimited tax utility refunding bonds remain authorized but
unissued.
Municipal Bond Rating and
Municipal Bond Insurance Standard & Poor’s Rating Services, a Standard & Poor’s Financial Services LLC business (“S&P”),
has assigned a rating of “BBB” (stable outlook) to the Bonds. An explanation of the rating may be
obtained from S&P, 55 Water Street, New York, New York, 10041. The rating fees of S&P will be
paid by the District; however, the fees associated with any other rating will be the responsibility of
the Initial Purchaser.
Build America Mutual Assurance Company (“BAM”) see “SALE AND DISTRIBUTION OF THE
BONDS – Municipal Bond Rating”). The rating fees of S&P will be paid by the District; any other
rating fees associated with the insurance will be the responsibility of the Initial Purchaser.
General and Bond Counsel Kelly Hart & Hallman LLP, Fort Worth, Texas
Disclosure Counsel .............. McCall, Parkhurst & Horton L.L.P., Dallas, Texas.
Financial Advisor ................ First Southwest Company, LLC, Dallas, Texas.
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Engineer ............................... Petitt Barraza LLC, Richardson, Texas.
Paying Agent/Registrar ........ Wells Fargo Bank, N.A., Minneapolis, Minnesota.
Risk Factors ......................... THE DISTRICT'S TAX IS LEVIED ONLY ON THE PROPERTY LOCATED WITHIN THE
DISTRICT. THEREFORE, THE INVESTMENT SECURITY AND QUALITY OF THE BONDS IS DEPENDENT UPON THE SUCCESSFUL DEVELOPMENT OF PROPERTY AND CONTINUED CONSTRUCTION OF TAXABLE IMPROVEMENTS LOCATED WITHIN THE DISTRICT AND THE PAYMENT AND COLLECTION OF TAXES LEVIED THEREON. THE PURCHASE AND OWNERSHIP OF THE BONDS DESCRIBED HEREIN ARE SUBJECT TO SPECIAL RISK FACTORS AND ALL PROSPECTIVE PURCHASERS ARE URGED TO EXAMINE CAREFULLY THE ENTIRE OFFICIAL STATEMENT WITH RESPECT TO THE INVESTMENT SECURITY OF THE BONDS, INCLUDING PARTICULARLY THE SECTION CAPTIONED "RISK FACTORS."
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SELECTED FINANCIAL INFORMATION
(1) As Certified by the Denton Central Appraisal District (the "Appraisal District") on November 13, 2014.
(2) Preliminary Value Certified by the Denton Central Appraisal District (the "Appraisal District") on February 11, 2015.
(3) Unaudited. Neither Texas law nor the Bond Orders require the District to maintain any minimum balance in Debt Service
Fund.
(4) Unaudited.
2014 Certified Assessed Net Taxable Valuation 221,569,235$ (1)
2015 Preliminary Assessed Net Taxable Valuation 271,947,934$ (2)
Direct Debt
Outstanding Bonds (as of 3/1/2015) 18,384,985$
The Bonds 5,500,000
Direct Debt Outstanding 23,884,985$
Overlapping Debt 16,315,548$
Total Gross Direct Debt and Estimated Overlapping Debt 40,200,533$
Ratios of Gross Direct Debt to:
2014 Certified Taxable Assessed Valuation 10.78%
2015 Preliminary Taxable Assessed Valuation 8.78%
Ratio of Gross Direct Debt and Estimated Overlapping Debt to:
2014 Certified Taxable Assessed Valuation 18.14%
2015 Preliminary Taxable Assessed Valuation 14.78%
Average Annual Debt Service Requirement (2016-2039) 1,471,143$
Maximum Annual Debt Service Requirement (2035) 1,606,089$
Tax Rate Required to Pay Average Annual Debt Service (2016-2039) at a 98% Collection Rate
Based upon 2014 Certified Taxable Assessed Valuation 0.6775$
Based upon 2015 Preliminary Taxable Assessed Valuation 0.5520$
Tax Rate Required to Pay Maximum Annual Debt Service (2016) at a 98% Collection Rate
Based upon 2014 Certified Taxable Assessed Valuation 0.7397$
Based upon 2015 Preliminary Taxable Assessed Valuation 0.6026$
Debt Service Fund Balance (as of 3/11/2015) 2,122,513$ (3)
Operating Fund Balance (as of 3/11/2015) 1,392,373$ (4)
2014 District Tax Rate (per $100 Assessed Valuation)
Debt Service 0.7419$
Maintenance and Operations 0.2581
Total 1.0000$
Status of Estimated Home Construction as of December 31, 2014
Single Family Homes Completed and Occupied 1,122
Single Family Homes Completed and Unoccupied 0
Single Family Homes Under Construction 48
Total 1,170
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OFFICIAL STATEMENT
$5,500,000
UNLIMITED TAX UTILITY BONDS, SERIES 2015
INTRODUCTION
This Official Statement provides certain information in connection with the issuance by Denton County Fresh Water Supply District
No. 8-C (the "District") of its $5,500,000 Unlimited Tax Utility Bonds, Series 2015 (the “Bonds”).
The Bonds are issued pursuant to Article XVI, Section 59 of the Texas Constitution, the general laws of the State of Texas, including
Chapters 49 and 51 and, for certain purposes, Chapter 53 of the Texas Water Code, as amended, pursuant to order (the “Bond
Order”) adopted by the Board of Directors of the District on the date of the sale of the Bonds.
This Official Statement includes descriptions, among others, of the Bonds, the Bond Order, and certain other information about the
District. All descriptions of documents contained herein are only summaries and are qualified in their entirety by reference to each
document. Copies of documents may be obtained from Kelly Hart & Hallman LLP, Bond Counsel (“Bond Counsel”), 201 Main
Street, Suite 2500, Fort Worth, Texas 76102 or during the offering period from the District’s Financial Advisor, First Southwest
Company, LLC, 325 N. St. Paul Street, Suite 800, Dallas, Texas 75201, upon payment of the cost of duplication, mailing and
handling charges.
THE BONDS
DESCRIPTION
Principal of the Bonds is payable at maturity or prior redemption, as applicable, at the designated payment office of the paying agent/registrar, initially, Wells Fargo Bank, N.A., Minneapolis, Minnesota (the “Paying Agent/Registrar”). The Bonds will be issued in $5,000 denominations of principal amount or integral multiples thereof. Interest on the Bonds accrues from the Dated Date, and is payable on each March 1 and September 1 commencing March 1, 2016, until the earlier of maturity or prior redemption. The Bonds are scheduled to mature on September 1 in the amounts and years shown on the inside cover page of this OFFICIAL STATEMENT. Interest calculations are based on a 360-day year comprised of twelve 30-day months.
The principal of the Bonds will be payable, without exchange or collection charges, in any coin or currency of the United States of
America which, on the date of payment, is legal tender for the payment of debts due the United States of America, upon their
presentation and surrender as they respectively become due and payable, at the principal payment office of the Paying
Agent/Registrar. If not then subject to the Book-Entry-Only System described below, interest on the Current Interest Bonds will
be payable by check, dated as of the Interest Payment Date, and mailed on or before the Interest Payment Date, by the Paying
Agent/Registrar to the Owners on the Record Date (described below under "THE BONDS – Record Date for Interest Payment"),
or by such other customary banking arrangements as may be agreed upon by the Paying Agent/Registrar and the Owner at the risk
and expense of the Owner, to the address of such Owner as shown on the Paying Agent/Registrar's records (the "Register") or by
such other customary banking arrangements as may be agreed upon by the Paying Agent/Registrar and the Owners at the risk and
expense of the Owners.
If the date for payment of the principal of or interest on any Bond is a Saturday, Sunday, legal holiday, or day on which banking
institutions in the city where the Paying Agent/Registrar is located are authorized by law or executive order to close, then the date
for such payment will be the next succeeding business day, as defined in the Bond Order.
BOOK-ENTRY-ONLY SYSTEM
This section describes how ownership of the Bonds are to be transferred and how the principal of and interest on the Bonds are to
be paid to and credited by The Depository Trust Company ("DTC"), New York, New York, while the Bonds are registered in its
nominee name. The information in this section concerning DTC and the Book-Entry-Only System has been provided by DTC for
use in disclosure documents such as this Official Statement. The District believes the source of such information to be reliable, but
takes no responsibility for the accuracy or completeness thereof.
The District cannot and does not give any assurance that (1) DTC will distribute payments of debt service on the Bonds, or
redemption or other notices, to DTC Participants, (2) DTC Participants or others will distribute debt service payments paid to
DTC or its nominee (as the registered owner of the Bonds), or redemption or other notices, to the Beneficial Owners, or that they
will do so on a timely basis, or (3) DTC will serve and act in the manner described in this Official Statement. The current rules
applicable to DTC are on file with the Securities and Exchange Commission, and the current procedures of DTC to be followed in
dealing with DTC Participants are on file with DTC.
* Preliminary, subject to change.
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The Depository Trust Company (“DTC”), New York, New York, will act as securities depository for the Bonds. The Bonds will
be issued as fully-registered Bonds registered in the name of Cede & Co. (DTC’s partnership nominee) or such other name as may
be requested by an authorized representative of DTC. One fully-registered Bond certificate will be issued for each maturity of the
Bonds, each in the aggregate principal amount of such maturity, and will be deposited with DTC.
DTC, the world’s largest securities depository, is a limited-purpose trust company organized under the New York Banking Law, a
“banking organization” within the meaning of the New York Banking Law, a member of the Federal Reserve System, a “clearing
corporation” within the meaning of the New York Uniform Commercial Code, and a “clearing agency” registered pursuant to the
provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.5 million
issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments (from over 100
countries) that DTC’s participants (“Direct Participants”) deposit with DTC. DTC also facilitates the post-trade settlement among
Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry
transfers and pledges between Direct Participants’ accounts. This eliminates the need for physical movement of securities
certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing
corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation
(“DTCC”). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing
Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the
DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, and
clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly
("Indirect Participants"). DTC has a Standard & Poor’s rating of AA+. The DTC Rules applicable to its Participants are on file with
the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com.
Purchases of Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the
Bonds on DTC’s records. The ownership interest of each actual purchaser of each Bond (“Beneficial Owner”) is in turn to be
recorded on the Direct and Indirect Participants’ records. Beneficial Owners will not receive written confirmation from DTC of
their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as
well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered
into the transaction. Transfers of ownership interests in the Bonds are to be accomplished by entries made on the books of Direct
and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their
ownership interests in Bonds, except in the event that use of the book-entry system for the Bonds is discontinued.
To facilitate subsequent transfers, all Bonds deposited by Direct Participants with DTC are registered in the name of DTC’s
partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of
Bonds with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial
ownership. DTC has no knowledge of the actual Beneficial Owners of the Bonds; DTC’s records reflect only the identity of the
Direct Participants to whose accounts such Bonds are credited, which may or may not be the Beneficial Owners. The Direct and
Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers. Conveyance of
notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory
or regulatory requirements as may be in effect from time to time. Beneficial Owners of Bonds may wish to take certain steps to
augment the transmission to them of notices of significant events with respect to the Bonds, such as redemptions, tenders, defaults,
and proposed amendments to the Bond documents. For example, Beneficial Owners of Bonds may wish to ascertain that the
nominee holding the Bonds for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative,
Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of notices be provided
directly to them.
Redemption notices shall be sent to DTC. If less than all of the Bonds within a maturity are being redeemed, DTC’s practice is to
determine by lot the amount of the interest of each Direct Participant in such maturity to be redeemed.
Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to Bonds unless authorized by a
Direct Participant in accordance with DTC’s MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the
District as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.’s consenting or voting rights to those
Direct Participants to whose accounts Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy).
All payments on the Bonds will be made to Cede & Co., or such other nominee as may be requested by an authorized representative
of DTC. DTC’s practice is to credit Direct Participants’ accounts upon DTC’s receipt of funds and corresponding detail information
from the District or the Paying Agent/Registrar, on payable date in accordance with their respective holdings shown on DTC’s
records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is
the case with Bonds held for the accounts of customers in bearer form or registered in “street name,” and will be the responsibility
of such Participant and not of DTC, the Paying Agent/Registrar, or the District, subject to any statutory or regulatory requirements
as may be in effect from time to time. Payment of redemption proceeds, distributions, and dividend payments to Cede & Co. (or
such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the District or the Paying
Agent/Registrar, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such
payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants.
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DTC may discontinue providing its services as depository with respect to the Bonds at any time by giving reasonable notice to the
District or the Paying Agent/Registrar. Under such circumstances, in the event that a successor depository is not obtained, Bond
certificates are required to be printed and delivered.
The District may decide to discontinue use of the system of book-entry-only transfers through DTC (or a successor securities
depository). In that event, Bond certificates will be printed and delivered to DTC.
USE OF CERTAIN TERMS IN OTHER SECTIONS OF THIS OFFICIAL STATEMENT
In reading this Official Statement it should be understood that while the Bonds are in the Book-Entry-Only System, references in
other sections of this Official Statement to "Registered Owners" should be read to include the person for which the Participant
acquires an interest in the Bonds, but (i) all rights of ownership must be exercised through DTC and the Book-Entry-Only System,
and (ii) except as described above, notices that are to be given to Registered Owners under the Bond Order will be given only to
DTC. EFFECT OF TERMINATION OF BOOK-ENTRY-ONLY SYSTEM
In the event that the Book-Entry-Only System is discontinued by DTC or the use of the Book-Entry-Only System is discontinued
by the District, printed securities certificates will be issued to the respective Registered Owners and the Bonds will be subject to
transfer, exchange and registration provisions as set forth in the Bond Order and summarized under caption "Registration and
Transfer " below. RECORD DATE FOR INTEREST PAYMENT
The date for determining the person to whom the interest on the Bonds is payable on any Interest Payment Date means the close of
business on the 15th calendar day of the preceding month.
In the event of a non-payment of interest on a scheduled payment date, and for 30 days thereafter, a new record date for such
interest payment (a "Special Record Date") will be established by the Paying Agent/Registrar, if and when funds for the payment
of such interest have been received from the District. Notice of the Special Record Date and of the scheduled payment date of the
past due interest which will be 15 days after the Special Record Date, must be sent at least five (5) business days prior to the Special
Record Date by United States mail, first class postage prepaid, to the address of each Registered Owner appearing on the Register
at the close of business on the last business day next preceding the date of mailing of such notice. SOURCE OF PAYMENT
The Bonds, the Outstanding Bonds (hereinafter defined) and any bonds subsequently issued payable in whole or in part from ad
valorem taxes of the District, are secured by and 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 (see "TAXING PROCEDURES").
The Bonds involve certain elements of risk, and all prospective purchasers are urged to examine carefully this Official Statement
with respect to the investment security of the Bonds. See "RISK FACTORS." The Bonds are obligations solely of the District and
are not obligations of the State of Texas; Denton County; the Town of Little Elm, Texas or any political subdivision or entity other
than the District.
PERFECTED SECURITY INTEREST
Chapter 1208, Texas Government Code, applies to the issuance of the Bonds and the pledge of the taxes granted by the District
under the Bond Order and such pledge is, therefore, valid, effective, and perfected. Should Texas law be amended at any time
while the Bonds are outstanding and unpaid, the result of such amendment being that the pledge of the taxes granted by the District
under the Bond Order is to be subject to the filing requirements of Chapter 9, Texas Business & Commerce Code, in order to
preserve to the Registered Owners of the Bonds a security interest in such pledge, the District agrees to take such measures as it
determines are reasonable and necessary to enable a filing of a security interest in said pledge to occur. FUNDS
Debt Service Fund: The Bond Orders create, establish or utilize the District's Debt Service Fund (the "Debt Service Fund"). The
Debt Service Fund, which constitutes a trust fund for the benefit of the Registered Owners and any additional tax bonds issued by
the District, is to be kept separate from all other funds of the District, and is to be used for payment of debt service on the Bonds
and any of the District's duly authorized additional bonds payable in whole or part from taxes. Amounts on deposit in the Debt
Service Fund may also be used to pay the fees and expenses of the Paying Agent/Registrar and to defray the expenses of assessing
and collecting taxes levied for payment of interest on and principal of the Bonds and any additional bonds payable from taxes.
13
REDEMPTION PROVISIONS
Optional Redemption: The District reserves the right, at its option, to redeem the Bonds maturing on and after September 1, 2024,
prior to their scheduled maturities, in whole or in part, in integral multiples of $5,000 on September 1, 2023, or any date thereafter,
at a price equal to the principal amount thereof plus accrued interest on the principal amounts called for redemption to the date
fixed for redemption. If fewer than all of the Bonds are optionally redeemed at any time, the maturities and amounts of the Bonds
to be redeemed will be selected by the District. If fewer than all the Bonds of a certain maturity are to be optionally redeemed, the
particular Bonds to be redeemed will be selected by the Paying Agent/Registrar by lot or other method of random selection (or by
DTC in accordance with its procedures while the Bonds are in Book-Entry-Only form).
Mandatory Redemption: The Bonds maturing on September 1 in the years 2025, 2029, 2033 and 2039 (the “Term Bonds”) are
subject to mandatory sinking fund redemption in the amounts and at the price of par plus accrued interest to the redemption date
on September 1 in the following years:
The Paying Agent/Registrar shall select by lot the Term Bonds within the applicable stated maturity to be redeemed. Any Term
Bond not selected for prior redemption shall be paid on the date of their stated maturity.
The principal amount of Term Bonds of a stated maturity required to be redeemed on any mandatory redemption date pursuant to
the operation of the mandatory sinking fund redemption provisions shall be reduced, at the option of the District, by the principal
amount of any Term Bonds of the same maturity which, at least 45 days prior to a mandatory redemption date (1) shall have been
acquired by the District and delivered to the Paying Agent/Registrar for cancellation, or (2) shall have been redeemed pursuant to
the optional redemption provisions and not theretofore credited against a mandatory redemption requirement.
Notice of Redemption; Effect of Redemption: Notice of any redemption identifying the Bonds to be redeemed in whole or in part
will be given by the Paying Agent/Registrar at least 30 days prior to the date fixed for redemption by sending written 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 Register. Such
notices will state the redemption date, the redemption price, the place at which the Bonds are to be surrendered for payment, and,
if less than all the Bonds outstanding are to be redeemed, the numbers of the Bonds or the portions thereof to be redeemed. Any
notice given will be conclusively presumed to have been duly given, whether or not the Registered Owner receives such notice.
By the date fixed for redemption, due provision must be made with the Paying Agent/Registrar for payment of the redemption price
of the Bonds or portions thereof to be redeemed, plus accrued interest to the date fixed for redemption. When Bonds have been
called for redemption in whole or in part and due provision has been made to redeem the same as herein provided, the Bonds or
portions thereof so redeemed will no longer be regarded as outstanding except for the purpose of receiving payment solely from
the funds so provided for redemption, and the rights of the Registered Owners to collect interest which would otherwise accrue
after the redemption date on any Bond or portion thereof called for redemption will terminate on the date fixed for redemption. AUTHORITY FOR ISSUANCE
The District authorized $58,710,000 in unlimited tax bonds at elections held within the District on May 3, 2003 and May 13, 2006
for the purpose of purchasing, constructing or otherwise acquiring a water, wastewater and drainage system for the District. At
elections held within the District on May 3, 2003 and May 13, 2006, the District also authorized a total of $43,700,000 for the
purpose of constructing roads for the District. The District has issued $7,810,000 principal amount of unlimited tax bonds for water,
wastewater and storm drainage facilities and $13,000,000 principal amount of unlimited tax bonds for road facilities. The District
currently has $18,384,985 principal amount of its bonds outstanding (the “Outstanding Bonds”). After issuance of the Bonds,
$45,400,000 of unlimited tax bonds and $30,700,000 of unlimited tax road bonds will remain authorized but unissued.
The District authorized $56,810,000 of unlimited tax road refunding bonds at elections held within the District on May 3, 2003 and
May 13, 2006 and $70,330,000 of unlimited tax utility refunding bonds at elections held within the District May 13, 2006.
Redemption Date Principal Amount Redemption Date Principal Amount
September 1, 2024 $95,000 September 1, 2026 $105,000
September 1, 2025 (maturity) $100,000 September 1, 2027 $80,000
September 1, 2028 $85,000
September 1, 2029 (maturity) $90,000
Term Bonds Due September 1, 2025 Term Bonds Due September 1, 2029
Redemption Date Principal Amount Redemption Date Principal Amount
September 1, 2030 $85,000 September 1, 2038 $765,000
September 1, 2031 $90,000 September 1, 2039 (maturity) $795,000
September 1, 2032 $25,000
September 1, 2033 (maturity) $25,000
Term Bonds Due September 1, 2033 Term Bonds Due September 1, 2039
14
$52,430,015 of unlimited tax road refunding bonds and $67,090,000 of unlimited tax utility refunding bonds remain authorized but
unissued.
The Bonds are issued by the District pursuant to the terms and conditions of the Bond Order; Article XVI, Section 59 of the
Constitution of the State of Texas, Chapters 49 and 51 and, for certain purposes, Chapter 53 of the Texas Water Code, as amended,
and general laws of the State of Texas relating to the issuance of bonds by political subdivisions of the State of Texas and an order
of the Texas Commission of Environmental Quality (the “TCEQ” or “Commission”).
Before the Bonds can be issued, the Attorney General of Texas must pass upon the legality of certain related matters. The Attorney
General of Texas does not guarantee or pass upon the safety of the Bonds as an investment or upon the adequacy of the information
contained in this Official Statement.
REGISTRATION AND TRANSFER
So long as any Bonds remain outstanding, the Paying Agent/Registrar will keep the Register at its principal payment office and,
subject to such reasonable regulations as it may prescribe, the Paying Agent/Registrar will provide for the registration and transfer
of Bonds in accordance with the terms of the Bond Order.
In the event the Book-Entry-Only System should be discontinued, each Bond will be transferable only upon the presentation and
surrender of such Bond at the principal payment office of the Paying Agent/Registrar, duly endorsed for transfer, or accompanied
by an assignment duly executed by the Registered Owner or his authorized representative in form satisfactory to the Paying
Agent/Registrar. Upon due presentation of any Bond in proper form for transfer, the Paying Agent/Registrar has been directed by
the District to authenticate and deliver in exchange therefore, to the extent possible and under reasonable circumstances within
three business days after such presentation, a new Bond or Bonds, registered in the name of the transferee or transferees, in
authorized denominations and of the same maturity and aggregate principal amount and paying interest at the same rate as the Bond
or Bonds so presented.
All Bonds will be exchangeable upon presentation and surrender thereof at the principal payment office of the Paying
Agent/Registrar for a Bond or Bonds of the same maturity and interest rate and in any authorized denomination in an aggregate
principal amount or maturing amounts, as appropriate, equal to the unpaid principal amount or maturing amount of the Bond or
Bonds presented for exchange. The Paying Agent/Registrar is authorized to authenticate and deliver exchange Bonds. Each Bond
delivered will be entitled to the benefits and security of the Bond Order to the same extent as the Bond or Bonds in lieu of which
such Bond is delivered.
Neither the District nor the Paying Agent/Registrar will be required to transfer or to exchange any Bond during the period beginning
on a Record Date and ending the next succeeding Interest Payment Date or to transfer or exchange any Bond called for redemption
during the 30-day period prior to the date fixed for redemption of such Bond.
The District or the Paying Agent/Registrar may require the Registered Owner of any Bond to pay a sum sufficient to cover any tax
or other governmental charge that may be imposed in connection with the transfer or exchange of such Bond. Any fee or charge
of the Paying Agent/Registrar for such transfer or exchange will be paid by the District. REPLACEMENT OF PAYING AGENT/REGISTRAR
Provision is made in the Bond Order for replacement of the Paying Agent/Registrar by the District. If the Paying Agent/Registrar
is replaced by the District, the new paying agent/registrar must act in the same capacity as the previous Paying Agent/Registrar.
Any paying agent/registrar selected by the District must be a national or state banking institution, 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, to act as Paying Agent/Registrar for the Bonds. LOST, STOLEN, OR DESTROYED BONDS
In the event the Book-Entry-Only System should be discontinued, upon the presentation and surrender to the Paying
Agent/Registrar of a damaged or mutilated Bond, the Paying Agent/Registrar will authenticate and deliver in exchange therefore a
replacement Bond of like maturity, interest rate and principal amount, bearing a number not contemporaneously outstanding. If
any Bond is lost, destroyed, or stolen, the District, pursuant to the applicable laws of the State of Texas and in the absence of notice
or knowledge that such Bond has been acquired by a bona fide purchaser, will, upon receipt of certain documentation from the
Registered Owner and an indemnity bond, execute and the Paying Agent/Registrar will authenticate and deliver a replacement
Bond of like maturity, interest rate and principal amount bearing a number not contemporaneously outstanding.
Registered Owners of lost, stolen, destroyed, damaged, or mutilated Bonds will be required to pay the District's costs and fees to
replace such bond. In addition, the District or the Paying Agent/Registrar may require the Registered Owner to pay a sum sufficient
to cover any tax or other governmental charge that may be imposed.
15
ISSUANCE OF ADDITIONAL DEBT
The District authorized $58,710,000 in unlimited tax bonds at elections held within the District on May 3, 2003 and May 13, 2006
for the purpose of purchasing, constructing or otherwise acquiring a water, wastewater and drainage system for the District. At
elections held within the District on May 3, 2003 and May 13, 2006, voters in the District also authorized a total of $43,700,000
for the purpose of constructing roads. After issuance of the Bonds, $45,400,000 in principal amount for water sewer and drainage
purposes and $30,700,000 in principal amount for road purposes will remain authorized but unissued.
The District authorized $56,810,000 of unlimited tax road refunding bonds at elections held within the District on May 3, 2003 and
May 13, 2006 and $70,330,000 of unlimited tax utility refunding bonds at elections held within the District May 13, 2006.
$52,430,015 of unlimited tax road refunding bonds and $67,090,000 of unlimited tax utility refunding bonds remain authorized but
unissued.
The District intends to issue additional bonds from its voted authorization. See "THE BONDS – Authority for Issuance". Any
bonds issued by the District, however, must be approved by the Attorney General of Texas. Approval of TCEQ is necessary for
the issuance of bonds issued to finance the acquisition or construction of facilities for water, wastewater or drainage purposes, such
as the Bonds. See "THE DISTRICT - General."
The Bond Orders impose no limitation on the amount of additional parity bonds which may be authorized for issuance by the
District's voters or the amount ultimately issued by the District. The District does not employ any formula with regard to assessed
valuations or tax collections or otherwise to limit the amount of bonds which may be issued. However, Texas law does limit the
amount of road bonds that the District may have outstanding to an amount that, when added to any other road debt allocable to the
District, does not exceed 25% of the assessed value of real property within the District.
The District also is authorized by statute to engage in fire-fighting activities, including the issuing of bonds payable from taxes for
such purpose. Before the District could issue fire-fighting bonds payable from taxes, 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) approval of the master
plan and issuance of bonds by the TCEQ; and (c) approval of bonds by the Attorney General of Texas. The District does not
provide fire protection service, and the Board has not considered calling such an election at this time. Issuance of bonds for fire-
fighting activities could dilute the investment security for the Bonds. ANNEXATION AND CONSOLIDATION
The District lies within the extraterritorial jurisdiction of the Town of Little Elm, Texas (the “Town” or “Little Elm”). Under Texas
law, a city or town may annex a special district, such as the District, located within its extraterritorial jurisdiction pursuant to certain
statutory provisions that allow for negotiations between the city and the special district as to the timing, terms and conditions of
the annexation. When such special district is dissolved, the city or town succeeds to the right, powers, duties and obligations of the
special district. The Town may, but is not required to, annex the District but no representation is made concerning the annexation
of the District by the Town or the ability of the Town to meet the debt service obligations on the Bonds should annexation occur.
The District has the legal authority to consolidate with other districts and, in connection therewith, to provide for the consolidation
of its assets (such as cash and the utility system) and liabilities (such as the Bonds), with the assets and liabilities of districts with
which it is consolidating. Although no consolidation is presently contemplated by the District, no representation is made concerning
the likelihood of consolidation in the future. REMEDIES IN EVENT OF DEFAULT
Other than a writ of mandamus, the Bond Orders do not provide a specific remedy for a default. 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.
Further, there is no trust indenture or trustee, and all legal actions to enforce such remedies would have to be undertaken at the
initiative of, and be financed by, the Owners. On June 30, 2006, the Texas Supreme Court (the “Court”) ruled in Tooke v. City of
Mexia, 197 S.W.3d 325 (Tex. 2006) (“Tooke”) that a waiver of sovereign immunity must be provided for by statute in “clear and
unambiguous” language. In so ruling, the Court declared that statutory language such as “sue and be sued” or “plead and be
impleaded”, in and of itself, did not constitute a clear and unambiguous waiver of sovereign immunity. Therefore, it is unclear
whether Section 49.066, Texas Water Code, effectively waives government immunity of a municipal utility district for suits for
money damages. Even if a Registered Owner could obtain a judgment against the District for a default in the payment of principal
or interest, such judgment could not be satisfied by execution against any property of the District. If the District defaults, a
Registered Owner could petition for a writ of mandamus issued by a court of competent jurisdiction compelling and requiring the
District and the District's officials to observe and perform the covenants, obligations or conditions prescribed in the Bond Order.
Such remedy might need to be enforced on a periodic basis. The enforcement of a claim for payment on the Bonds would be
subject to the applicable provisions of the federal bankruptcy laws, any other similar laws affecting the rights of creditors of political
subdivisions, and general principles of equity. Certain traditional legal remedies also may not be available. See "RISK FACTORS-
- Registered Owners' Remedies and Bankruptcy Limitations." Federal bankruptcy law provides that an automatic stay of actions
by creditors and other entities, including governmental units, goes into effect with the filing of any petition in bankruptcy. The
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automatic stay prevents governmental units from foreclosing on property and prevents liens for post-petition taxes from the
bankruptcy court. In many cases post-petition taxes are paid as an administrative expense of the estate in bankruptcy or by order
of the bankruptcy court. LEGAL INVESTMENT AND ELIGIBILITY TO SECURE PUBLIC FUNDS IN TEXAS
The Bonds are (a) legal investments for banks, savings banks, trust companies, building and loan associations, savings and loan
associations, insurance companies, fiduciaries, and trustees and (b) legal investments for public funds of cities, villages, school
districts, and other political subdivisions or public agencies of the State. The Bonds are also eligible under the Public Funds
Collateral Act to secure deposits of public funds of the State of Texas or any political subdivision or public agency of the State of
Texas and are lawful and sufficient security for those deposits to the extent of their market value. Most political subdivisions in
the State of Texas are required to adopt investment guidelines under the Public Funds Investment Act, and such political
subdivisions may impose other, more stringent, requirements in order for the Bonds to be legal investments of such entity’s funds
or to be eligible to serve as collateral for their funds.
The District has not reviewed the laws in other states to determine whether the Bonds are legal investments for various institutions
in those states or eligible to serve as collateral for public funds in those states. The District has made no investigation of any other
laws, rules, regulations, or investment criteria that might affect the legality or suitability of the Bonds for any of the above purposes
or limit the authority of any of the above persons or entities to purchase or invest in the Bonds. DEFEASANCE
Except to the extent provided in the Bond Orders, any Bond, and the interest thereon, will be deemed to be paid, retired, and no
longer outstanding within the meaning of the Bond Orders (a "Defeased Bond") when payment of the principal of such Bond, plus
interest thereon to the due date (whether such due date be by reason of maturity, redemption, or otherwise) either (i) will have been
made or caused to be made in accordance with the terms of such Bond (including the giving of any required notice of redemption)
or (ii) will have been provided for on or before such due date by irrevocably depositing with or making available to a person (a
"Depositary"), with respect to the safekeeping, investment, administration, and disposition of a deposit for such payment (the
"Deposit") lawful money of the United States of America or Government Obligations sufficient to make such payment (as defined
in the Bond Order), which may be in book-entry form, that mature and bear interest payable at times and in amounts sufficient to
provide for the scheduled payment or redemption of any Defeased Bond. To cause a Bond scheduled to be paid or redeemed on a
date later than the next scheduled interest payment date on such Bond to become a Defeased Bond, the District must, with respect
to the Deposit, enter into an escrow or similar agreement with a Depositary.
In connection with any defeasance of the Bonds, the District will cause to be delivered: (i) in the event an escrow or similar
agreement has been entered into with a Depositary to effectuate such defeasance, a report of an independent firm of nationally
recognized certified public accountants verifying the sufficiency of the escrow established to pay the Defeased Bonds in full on the
maturity or redemption date thereof ("Verification") or (ii) in the event no escrow or similar agreement has been entered into, a
certificate from the chief financial officer of the District certifying that the amount deposited with a Depositary is sufficient to pay
the Defeased Bonds in full on the maturity or redemption date thereof. In addition to the required Verification or certificate, the
District will also cause to be delivered an opinion of nationally recognized bond counsel to the effect that the Defeased Bonds are
no longer outstanding pursuant to the terms of the Bond Order and a certificate of discharge of the Paying Agent/Registrar with
respect to the Defeased Bonds. The Verification, if any, and each certificate and opinion required under the Bond Order must be
acceptable in form and substance, and addressed, if applicable, to the Paying Agent/Registrar and the District. The Bonds will
remain outstanding unless and until they are in fact paid and retired or the above criteria are met.
At such time as a Bond is deemed to be a Defeased Bond, and all required criteria under the Bond Order have been met, such Bond
and the interest thereon will no longer be outstanding or unpaid and will no longer be entitled to the benefits of the pledge of the
security interest granted under the Bond Order, and such principal and interest will be payable solely from the Deposit of money
or Government Obligations. Provided, however, the District has reserved the option, to be exercised at the time of the defeasance
of the Bonds, to call for redemption, at an earlier date, those Bonds which have been defeased to their maturity date, if the District:
(i) in the proceedings providing for the firm banking and financial arrangements, expressly reserves the right to call the Bonds for
redemption; (ii) gives notice of the reservation of that right to the owners of the Bonds immediately following the making of the
firm banking and financial arrangements; and (iii) directs that notice of reservation be included in any redemption notices that it
authorizes.
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USE AND DISTRIBUTION OF BOND PROCEEDS The proceeds of the Bonds will be used for construction of utility systems within the District and to repay a Bond Anticipation Note of the District. In addition, proceeds of the Bonds will be used to pay certain costs associated with the issuance of the Bonds. The use and distribution of Bond proceeds is set forth below. Of the proceeds to be received from the sale of the Bonds, $4,085,593 is required for construction costs, and $1,414,407 is required for non-construction costs. Proceeds of the Bonds will also be utilized to refund and redeem the District’s Bond Anticipation Notes Series 2014 (the “BAN”) in the principal amount of $3,175,000, the proceeds of which were used to pay certain of the following costs.
_________________
(1) The District has requested a waiver of the 30% developer contribution requirement.
(2) Based on an interest rate of 3.62% and a funding date of April 2, 2015 with proceeds of the Bonds. The District requested to reimburse more than two
years interest in accordance with 30 TAC Section 293.50(b). Pursuant to 30 TAC Section 293.50(b)(2), developer interest is limited to a maximum of four
years interest on the bonds less any bond anticipation note interest and/or capitalized interest. (3) Represents interest on $3,175,000 at 2% for 6 months.
(4) Includes reimbursement of advances of $60,605 made by the Developers in order to pay such Operating Expenses from September 7, 2008 through June
28, 2009.
(5) In its approval of the issuance of the Bonds, TCEQ directed any surplus bond proceeds resulting from the sale of the Bonds at a lower interest rate than
anticipated in the bond application be shown as a contingency line item in the official statement and be subject to TCEQ rules on disbursement of surplus
funds.
In the instance that approved estimated amounts exceed actual costs, the difference comprises a surplus which may be
expended for uses approved under the rules of the Commission. In the instance that actual costs exceed previously
approved estimated amounts and contingencies, additional Commission approval and the issuance of additional bonds
may be required. The District cannot and does not guarantee the sufficiency of such funds for such purpose.
Construction Costs
District's Share(1)
A. Developer Contribution Items
1. Frisco Hills Phase 1 - W, WW, & D and Offsite W & D $935,509
2. Frisco Hills Phase 1A - W, WW & D 317,492
3. Frisco Hills PHase 1B/1C - W, WW & D 221,878
4. Frisco Hills Phase 3A/4A - Offsite W, WW & D 646,034
5. Frisco Hills Phase 4B 182,000
6. Shops at Sunset Pointe - W, WW & D 411,770
7. Frisco Hills Lift Station and Force Main 319,458
8. 20" Offsite Water Transmission Line 423,307
9. Material for Transmission Line 70,335
10. Engineering (15.6% of Items 1-9) 552,003
Total Developer Contributed Items $4,079,786
B. District Items
1. Frisco Hills Lift Station Land Costs $5,807
Total District Items $5,807
Total Construction Costs (74.3% of Bond Issue Requirement) $4,085,593
Non-Construction Costs
A. Legal Fees (2.50%) $137,500
B. Financial Advisor Fees (2.27%) 125,000
C. Interest Costs
1. Capitalized Interest (0 months @ 3.62%) -
2. Developer Interest 433,466(2)
3. BAN Interest 31,750(3)
D. Bond Discount (2.47%) 135,667
E. Operating Expenses 161,605(4)
F. Bond Issuance Expenses 41,539
G. BAN Issuance Expenses 87,904
H. Bond Application Report 42,000
I. Attorney General's Fee (0.10%) 5,500
J. TCEQ Bond Issuance Fee (0.25%) 13,750
K. Contingency Item 198,726(5)
Total Non-Construction Costs $1,414,407
TOTAL BOND ISSUE REQUIREMENT $5,500,000
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BOND INSURANCE
BOND INSURANCE POLICY
Concurrently with the issuance of the Bonds, Build America Mutual Assurance Company (“BAM”) will issue its Municipal Bond
Insurance Policy for the Bonds (the “Policy”). The Policy guarantees the scheduled payment of principal of and interest on the
Bonds when due as set forth in the form of the Policy included as an exhibit to this Official Statement.
The Policy is not covered by any insurance security or guaranty fund established under New York, California, Connecticut or
Florida insurance law.
BUILD AMERICA MUTUAL ASSURANCE COMPANY
BAM is a New York domiciled mutual insurance corporation. BAM provides credit enhancement products solely to issuers in the
U.S. public finance markets. BAM will only insure obligations of states, political subdivisions, integral parts of states or political
subdivisions or entities otherwise eligible for the exclusion of income under section 115 of the U.S. Internal Revenue Code of 1986,
as amended. No member of BAM is liable for the obligations of BAM.
The address of the principal executive offices of BAM is: 200 Liberty Street, 27th Floor, New York, New York 10281, its telephone
number is: 212-235-2500, and its website is located at: www.buildamerica.com.
BAM is licensed and subject to regulation as a financial guaranty insurance corporation under the laws of the State of New York
and in particular Articles 41 and 69 of the New York Insurance Law.
BAM’s financial strength is rated “AA/Stable” by Standard and Poor’s Ratings Services, a Standard & Poor’s Financial Services
LLC business (“S&P”). An explanation of the significance of the rating and current reports may be obtained from S&P at
www.standardandpoors.com. The rating of BAM should be evaluated independently. The rating reflects the S&P’s current
assessment of the creditworthiness of BAM and its ability to pay claims on its policies of insurance. The above rating is not a
recommendation to buy, sell or hold the Bonds, and such rating is subject to revision or withdrawal at any time by S&P, including
withdrawal initiated at the request of BAM in its sole discretion. Any downward revision or withdrawal of the above rating may
have an adverse effect on the market price of the Bonds. BAM only guarantees scheduled principal and scheduled interest payments
payable by the issuer of the Bonds on the date(s) when such amounts were initially scheduled to become due and payable (subject
to and in accordance with the terms of the Policy), and BAM does not guarantee the market price or liquidity of the Bonds, nor
does it guarantee that the rating on the Bonds will not be revised or withdrawn.
Capitalization of BAM
BAM’s total admitted assets, total liabilities, and total capital and surplus, as of December 31, 2014 and as prepared in accordance
with statutory accounting practices prescribed or permitted by the New York State Department of Financial Services were $475.7
million, $26.9 million and $448.8 million, respectively.
BAM is party to a first loss reinsurance treaty that provides first loss protection up to a maximum of 15% of the par amount
outstanding for each policy issued by BAM, subject to certain limitations and restrictions.
BAM’s most recent Statutory Annual Statement, which has been filed with the New York State Insurance Department and posted
on BAM’s website at www.buildamerica.com, is incorporated herein by reference and may be obtained, without charge, upon
request to BAM at its address provided above (Attention: Finance Department). Future financial statements will similarly be made
available when published.
BAM makes no representation regarding the Bonds or the advisability of investing in the Bonds. In addition, BAM has not
independently verified, makes no representation regarding, and does not accept any responsibility for the accuracy or completeness
of this Official Statement or any information or disclosure contained herein, or omitted herefrom, other than with respect to the
accuracy of the information regarding BAM, supplied by BAM and presented under the heading “BOND INSURANCE”.
Additional Information Available from BAM
Credit Insights Videos. For certain BAM-insured issues, BAM produces and posts a brief Credit Insights video that provides a
discussion of the obligor and some of the key factors BAM’s analysts and credit committee considered when approving the credit
for insurance. The Credit Insights videos are easily accessible on BAM's website at buildamerica.com/creditinsights/.
Obligor Disclosure Briefs. Subsequent to closing, BAM posts an Obligor Disclosure Brief on every issue insured by BAM,
including the Bonds. BAM Obligor Disclosure Briefs provide information about the gross par insured by CUSIP, maturity and
coupon; sector designation (e.g. general obligation, sales tax); a summary of financial information and key ratios; and demographic
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and economic data relevant to the obligor, if available. The Obligor Disclosure Briefs are also easily accessible on BAM's website
at buildamerica.com/obligor/.
Disclaimers. The Obligor Disclosure Briefs and the Credit Insights videos and the information contained therein are not
recommendations to purchase, hold or sell securities or to make any investment decisions. Credit-related and other analyses and
statements in the Obligor Disclosure Briefs and the Credit Insights videos are statements of opinion as of the date expressed, and
BAM assumes no responsibility to update the content of such material. The Obligor Disclosure Briefs and Credit Insight videos
are prepared by BAM and have not been reviewed or approved by the issuer of or the underwriter for the Bonds, and they assume
no responsibility for their content.
BAM receives compensation (an insurance premium) for the insurance that it is providing with respect to the Bonds. Neither BAM
nor any affiliate of BAM has purchased, or committed to purchase, any of the Bonds, whether at the initial offering or otherwise.
BOND INSURANCE RISKS
In the event of default of the payment of principal or interest with respect to the Bonds when all or some becomes due, any owner
of the Bond shall have a claim under the applicable Bond Insurance Policy (the “Policy”) for such payments. The payment of
principal and interest in connection with mandatory or optional prepayment of the Bonds by the District which is recovered by the
District from the Bond owner as a voidable preference under applicable bankruptcy law is covered by the Policy, however, such
payments will be made by the insurer at such time and in such amounts as would have been due absent such prepayment by the
District unless the bond insurer chooses to pay such amounts at an earlier date.
Under no circumstances does default of payment of principal and interest obligate acceleration of the obligations of the bond insurer
without their consent, so long as the bond insurer performs its obligations under the applicable Policy. In the event the bond insurer
is unable to make payment of principal and interest as such payments become due under the Policy, the Bonds are payable solely
from the revenues pledged in the Resolution. In the event the bond insurer becomes obligated to make payments with respect to
the Bonds, no assurance is given that such event will not adversely affect the market price of the Bonds or the marketability
(liquidity) for the Bonds.
In the event bond insurance is purchased, the long-term rating on the Bonds will be dependent in part on the financial strength of
the bond insurer and its claims paying ability. The bond insurer’s financial strength and claims paying ability are predicated upon
a number of factors which could change over time. No assurance is given that the long-term ratings of the bond insurer and of the
Bonds insured by the bond insurer will not be subject to downgrade and such event could adversely affect the market price of the
Bonds or the marketability (liquidity) for the Bonds. See “OTHER INFORMATION - Ratings” herein for a description of the
ratings.
The Bonds of the bond insurer are general obligations of the bond insurer and in an event of default by the bond insurer the remedies
may be limited by applicable bankruptcy law. Neither the District nor the Financial Advisor have made an independent investigation
into the claims paying ability of any potential bond insurer and no assurance or representation regarding the financial strength or
projected financial strength of any potential bond insurer is given.
RISK FACTORS GENERAL
The Bonds are obligations of the District and not obligations of the State of Texas; Denton County; the Town of Little Elm, Texas
or any other political entity other than the District. The Bonds will be secured by a continuing direct annual ad valorem tax, without
legal limitation as to rate or amount, levied on all taxable property within the District. The ultimate security for payment of the
principal of and interest on the Bonds depends on the ability of the District to collect from the property owners within the District
all taxes levied against the property or in the event of foreclosure and on the value of the taxable property with respect to taxes
levied by the District and by other taxing authorities.
FACTORS AFFECTING TAXABLE VALUES AND TAX PAYMENTS
Economic Factors: The stability and/or growth of taxable values in the District are directly related to the vitality of the housing
industry in the Dallas/Fort Worth Metropolitan area (the "Metroplex"). The housing and building industry has historically been a
cyclical industry, affected by both short and long-term interest rates, availability of mortgage and development funds, employment
levels, and general economic conditions. In recent years, the Metroplex has experienced strong economic growth positively
affecting local residential development and construction industries. However, the Metroplex has been affected by the national
economic slowdown, as evidenced by an increase in commercial real estate vacancy rates, and a decline in the residential market.
If the overall economy should continue to decline, the demand for single family residential developments could decline further.
A substantial portion of the taxable values of the District is derived from the current market value of certain developed lots and
undeveloped tracts. The market value of such lots and tracts is related to general economic conditions affecting the demand for
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single family, multi-family, commercial, retail, and office space. Demand for lots and tracts of this type and the construction of
single family, multi-family residential dwellings, and/or commercial projects thereon can be significantly affected by factors such
as interest rates, credit availability, construction costs, energy availability, and the prosperity and demographic characteristics of
the urban center toward which the marketing of such lots and tracts is directed. Decreased levels of construction activity or reduced
resale value of such lots and tracts would tend to restrict the growth of property values in the District or could adversely impact
such values.
Future development and construction in the District is highly dependent on the availability of financing. Many lenders have become
more selective in making real estate loans in the Metroplex. Because of the numerous and changing factors affecting the availability
of funds, the District is unable to assess the future availability of such funds to potential builders and home purchasers.
Credit Markets and Liquidity in the Financial Markets: Interest rates and the availability of mortgage and development funding
have a direct impact on construction activity, particularly short-term interest rates at which developers are able to obtain financing
for development costs. Interest rate levels may affect the ability of a landowner with undeveloped property to undertake and
complete construction activities within the District. Because of the numerous and changing factors affecting the availability of
funds, particularly liquidity in the national credit markets, the District is unable to assess the future availability of such funds for
continued construction within the District. In addition, since the District is located approximately 30 miles from downtown Dallas,
the success of development within the District and growth of District taxable property values are, to a great extent, a function of
the Metroplex regional economy and national credit and financial markets. A downturn in the economic conditions of the
Metroplex and decline in the nation’s real estate and financial markets could continue to adversely affect development and home-
building plans in the District and restrain the growth of the District’s property tax base.
National Economy: Nationally, in recent years there has been a downturn in new housing construction, resulting in a decline in
housing market values. In the recent past the Metroplex has experienced reduced levels of home construction. The District cannot
predict what impact, if any, a continued downturn in the national housing and financial markets or a downturn in the local housing
market may have on the Dallas area market and specifically, the District.
Recent Events in Real Estate Market: The housing and mortgage markets in most parts of the United States have been under
pressure due to many economic factors, including the tightening of credit standards, reduction of access to mortgage capital, and
interest rate adjustments on many adjustable rate mortgages which have caused property owners to default on their mortgages. In
recent years foreclosures have increased to record levels as a result to these factors, and residential property values in most areas
of the country have generally declined and the Metroplex experienced reduced levels of home construction. The District cannot
predict what impact, if any, a continued downturn in the national housing market may have on the Metroplex market and assessed
values in the District.
Competition: The demand for and construction of single-family homes in the District, which is approximately 30 miles from
downtown Dallas, could be affected by competition from other residential developments, including other residential developments
located in the north and east portion of the Metroplex area market. In addition to competition for new home sales from other
developments, there are numerous previously-owned homes in the area of the District. Such homes could represent additional
competition for new homes proposed to be sold within the District.
Developer/Landowner Obligation to the District: There are no commitments from or obligations of the Developers (hereinafter
defined) or any other landowner to the District to proceed at any particular rate or according to any specified plan with the
development of land or the construction of improvements in the District, and there is no restriction on any landowner's right to sell
its land. Failure to construct taxable improvements on developed lots or develop tracts of land would restrict the rate of growth of
taxable values in the District. The District cannot and does not make any representations that over the life of the Bonds continued
development of taxable property within the District will increase or maintain its taxable value.
Developers are Under No Obligation to the District: The Developers have informed the Board of their current plans to continue
to develop land in the District for single family home purposes. None of the Developers has informed the Board of any current
plans to sell their land within the District. However, none of the Developers are obligated to implement such plan on any particular
schedule or at all. Thus, the furnishing of information related to the proposed development by the Developers should not be
interpreted as such a commitment. The District makes no representation about the probability of development continuing in a timely
manner or about the ability of the Developers, or any other subsequent landowners to whom a party may sell all or a portion of its
holdings within the District, to implement any plan of development. Furthermore, there is no restriction on the Developers right to
sell their land. The District can make no prediction as to the effects that current or future economic or governmental circumstances
may have on any plans of the Developers. Failure to construct taxable improvements on developed lots and tracts and failure of the
Developers to develop their land would restrict the rate of growth of taxable value in the District. The District is also dependent
upon the Developers (see "TAX DATA - Top Ten Taxpayers") for the timely payment of ad valorem taxes, and the District cannot
predict what the future financial condition of the Developers will be or what effect, if any, such conditions may have on its ability
to pay taxes. See "THE DEVELOPERS/LANDOWNERS."
Impact on District Tax Rates: Assuming no further development or construction of taxable improvements, the value of the land
and improvements currently within the District will be the major determinant of the ability or willingness of property owners within
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the District to pay their taxes. The 2014 certified assessed valuation of the District is $221,569,235 (see "FINANCIAL
STATEMENT"). After issuance of the Bonds, the Maximum Annual Debt Service Requirement is estimated to be $1,609,363 and
the Average Annual Debt Service Requirement is estimated to be $1,473,394 (2016 through 2039, inclusive). Based on the 2014
certified assessed valuation and no use of funds on hand, a tax rate of $0.7515 per $100 assessed valuation, at a 98% collection rate
would be necessary to pay the Maximum Annual Debt Service Requirement and a tax rate of $0.6862 per $100 assessed valuation
at a 98% collection rate would be necessary to pay the Average Annual Debt Service Requirement. See "DEBT SERVICE
REQUIREMENTS" and "TAX DATA - Tax Adequacy for Debt Service." 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 or RTC shall not be liable for any penalties or fines, including those arising from the failure to pay any real
or personal property tax when due and (iii) notwithstanding failure of a person to challenge an appraisal in accordance with state
law, such value shall be determined as the period for which such tax is imposed.
Certain federal court decisions have held that the FDIC is not liable for statutory penalties and interest authorized by State property
tax law, and that although a lien for taxes may exist against real property, such lien may not be foreclosed without the consent of
the FDIC, and no liens for penalties, fines, interest, attorneys fees, costs of abstract, and research fees exist against the real property
for the failure of the FDIC or a prior property owner to pay ad valorem taxes when due. It is also not known whether the FDIC
will attempt to claim the FIRREA exemptions as to the time for contesting valuations and tax assessments made prior to and after
the enactment of FIRREA. Accordingly, to the extent that the FIRREA provisions are valid and applicable to any property in the
District, and to the extent that the FDIC attempts to enforce the same, these provisions may affect the timeliness of collection of
taxes on property which may be owned in the future by the FDIC in the District, and may prevent the collection of penalties and
interest on such taxes. FUTURE DEBT After issuance of the Bonds, $76,100,000 of unlimited tax bonds will remain authorized but unissued by the District, $30,700,000 for roads and $45,400,000 for utilities. The District currently estimates $8,650,000 of costs have been or will be expended to complete development within the District based on current development and present costs. Such estimate is subject to change based on future development costs. In the opinion of the District’s Engineer, the remaining authorized but unissued bonds should be sufficient to provide road and utility service to the remaining undeveloped but potentially developable acreage and fully reimburse the Developer or future developers for road and utility costs.
In addition, $67,090,000 of Unlimited Tax Utility Refunding Bonds and $52,430,015 of Unlimited Tax Road Refunding Bonds
remain authorized but unissued.
The District expects to issue approximately $3,500,000 in Road Bonds in 2015, and approximately $3,400,000 in Utility Bonds in late spring of 2016 pending TCEQ approval. The District does not employ any formula with respect to appraised valuations, tax collections or otherwise to limit the amount of parity bonds which it may issue. However, Texas law does limit the amount of road bonds that the District may have outstanding to an amount that, when added to any other road debt allocable to the District, does not exceed 25% of the assessed value of real property within the District. The issuance of additional bonds for the purpose of financing water, wastewater and drainage facilities is subject to approval by the TCEQ pursuant to its rules regarding issuance and feasibility of bonds. See “THE BONDS – Authority for Issuance – Issuance of Additional Debt.” TAX COLLECTION LIMITATIONS AND FORECLOSURE REMEDIES The District's ability to make debt service payments may be adversely affected by its inability to collect ad valorem taxes. Under Texas law, the levy of ad valorem taxes by the District constitutes a lien in favor of the District on 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 enforcement of liens for post-petition taxes against a taxpayer, or (c) market conditions limiting the proceeds from a foreclosure sale of taxable property. While the District has a lien on taxable property within the District for taxes levied against such property, such lien can be foreclosed only in a judicial proceeding. Attorney's fees and other costs of collecting any such taxpayer's delinquencies could substantially reduce the net proceeds to the District from a tax foreclosure sale. Finally, a bankruptcy court with jurisdiction over bankruptcy proceedings initiated by or against a taxpayer within the District pursuant to the Federal Bankruptcy Code could stay any attempt by the District to collect delinquent ad valorem taxes against such taxpayer. In addition to the automatic stay against collection of delinquent taxes afforded
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a taxpayer during the pendency of a bankruptcy, a bankruptcy could affect payment of taxes in two other ways: first, a debtor's confirmation plan may allow a debtor to make installment payments on delinquent taxes for up to six years; and, second, a debtor may challenge, and a bankruptcy court may reduce, the amount of any taxes assessed against the debtor, including taxes that have already been paid. See "TAXING PROCEDURES--District's Rights in the Event of Tax Delinquencies."
REGISTERED OWNERS' REMEDIES AND BANKRUPTCY LIMITATIONS In the event of default in the payment of principal of or interest on the Bonds, the Registered Owners (hereinafter defined) have a right to seek a writ of mandamus requiring the District to levy adequate taxes each year to make such payments. There is no provision for acceleration of maturity on the principal of the Bonds in the event of default and, consequently, the remedy of mandamus may have to be relied upon from year to year. The Texas Supreme Court has ruled in Tooke v. City of Mexia, 197 S.W.3d 325 (Tex. 2006) that a waiver of sovereign immunity in a contractual dispute must be provided for by statute in “clear and unambiguous” language. In so ruling, the Court declared that statutory language such as “sue and be sued” or “plead and be impleaded”, in and of itself, did not constitute a clear and unambiguous waiver of sovereign immunity. Therefore, it is unclear whether Section 49.066, Texas Water Code, effectively waives governmental immunity of a water control and improvement district for suits for money damages. Even if 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 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 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. Texas law requires a conservation and reclamation district such as the District to obtain the approval of the TCEQ as a condition to seeking relief under the Federal Bankruptcy Code. If a petitioning district were allowed to proceed voluntarily under Chapter 9 of the Federal Bankruptcy Code, it could file a plan for an adjustment of its debts. If such a plan were confirmed by the bankruptcy court, it could, among other things, affect Registered Owners by reducing or eliminating the amount of indebtedness, deferring or rearranging the debt service schedule, reducing or eliminating the interest rate, modifying or abrogating collateral or security arrangements, substituting (in whole or in part) other securities, and otherwise compromising and modifying the rights and remedies of the Registered Owners' claims against a district. A district, such as the District, may not be placed into bankruptcy involuntarily.
CONTINUING COMPLIANCE WITH CERTAIN COVENANTS The Bond Order contains covenants by the District intended to preserve the exclusion from gross income of interest on the Bonds.
Failure by the District to comply with such covenants in the Bond Order 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
Matters." MARKETABILITY
The District has no agreement with the Initial Purchasers regarding the reoffering yields or prices of the Bonds and has no control
over trading of the Bonds in the secondary market. Moreover, there is no assurance that a secondary market will be made in the
Bonds. If there is a secondary market, the difference between the bid and asked price of the Bonds may be greater than the
difference between the bid and asked price in the secondary market of bonds of comparable maturity and quality issued by more
traditional issuers.
FUTURE AND PROPOSED LEGISLATION
Tax legislation, administrative actions taken by tax authorities, or court decisions, whether at the Federal or state level, may
adversely affect the tax-exempt status of interest on the Bonds under Federal or state law and could affect the market price or
marketability of the Bonds. Any such proposal could limit the value of certain deductions and exclusions, including the exclusion
for tax-exempt interest. The likelihood of any such proposal being enacted cannot be predicted. Prospective purchasers of the
Bonds should consult their own tax advisors regarding the foregoing matters.
On January 13, 2015, the Texas Legislature convened in its 84th regular session until June 1, 2015. During this time, the Legislature
will likely consider legislation which affect ad valorem tax and other matters which could adversely affect the marketability or
market value of the Bonds. The District cannot predict actions of the Legislature.
RISK FACTOR ON MUNICIPAL BOND INSURANCE
The long-term ratings on the Bonds are dependent in part on the financial strength of the insurance provider (the “Insurer”)
providing the Policy and its claim paying ability. The Insurer’s financial strength and claims paying ability are predicated upon a
23
number of factors which could change over time. No assurance is given that the long-term ratings of the Insurer and of the ratings
on the Bonds insured by the Insurer will not be subject to downgrade and such event could adversely affect the market price of the
Bonds or the marketability (liquidity) for the bonds. See “SALE AND DISTRIBUTION OF THE BONDS – Municipal Bond
Rating and Municipal Bond Insurance”. The obligations of the Insurer are contractual obligations and in an event of default by the Insurer, the remedies available may be
limited by applicable bankruptcy law or state law related to insolvency of insurance companies. Neither the District nor the Initial Purchaser has made independent investigation into the claims paying ability of the Insurer and
no assurance or representation regarding the financial strength or projected financial strength of the Insurer is given. Thus, when
making an investment decision, potential investors should carefully consider the ability of the District to pay principal and interest
on the Bonds and the claims paying ability of the Insurer, particularly over the life of the investment.
THE DISTRICT
GENERAL The District was originally part of Denton County Fresh Water Supply District No. 8 (“District 8”) which was created by Order of
the Denton County Commissioners Court on June 27, 2000 as a fresh water supply district pursuant to Chapters 49 and 53, Texas
Water Code, as amended. Pursuant to an election held on November 7, 2000, District 8 assumed sanitary sewer powers under
Chapter 53, Texas Water Code and road district powers under Chapter 257, Texas Transportation Code. On December 4, 2000,
District 8 converted to a water control and improvement district operating pursuant to Chapters 49 and 51, Texas Water Code. At
an election held within District 8 on May 5, 2001, District 8’s voters approved the division of District 8 into Denton County Fresh
Water Supply District No. 8-A and Denton County Fresh Water Supply District No. 8-B (“Initial District 8-B”). At an election
held within the Initial District 8-B on November 5, 2002, the voters approved the division of the Initial District 8-B into Denton
County Fresh Water Supply District No. 8-B and the District. The District is a conservation and reclamation district and political
subdivision of the State of Texas and operates pursuant to Article XVI, Section 59 and Article III, Section 52 of the Texas
Constitution, and Chapters 49 and 51 and, for certain purposes, 53, Texas Water Code, as amended. The District is subject to the
continuing supervision of the TCEQ and is located within the exclusive extraterritorial jurisdiction of the Town of Little Elm, Texas
and within the boundaries of Frisco Independent School District.
At the time of creation, the District contained 176.241 acres of land within its boundaries. Subsequently, on March 10, 2004, the
District added 176.131 acres of land to its boundaries, and on February 7, 2006, the District added an additional 156.44 acres. On
October 18, 2006, the District added 16.579 acres, which when combined form a total of approximately 525.391 acres of land
currently within the boundaries of the District.
The District is empowered to finance, purchase, construct, operate, and maintain all works, improvements, facilities, and plants necessary for the supply and distribution of water; the collection, transportation, and treatment of wastewater; the control and diversion of storm water and the construction, acquisition and maintenance of roadway facilities. The District may issue bonds and other forms of indebtedness for such purposes. Additionally, the District may provide solid waste disposal and collection services. The District is also empowered to establish, operate and maintain fire-fighting facilities, independently or with one or more conservation and reclamation districts, after approval by the TCEQ and the voters of the District. See "THE BONDS – Issuance of Additional Debt". The TCEQ exercises continuing supervisory jurisdiction over the District. Construction and operation of the District's utility system is subject to the regulatory jurisdiction of the State of Texas and local agencies. See "THE UTILITY SYSTEM." LOCATION The District is located in Denton County approximately 30 miles north of downtown Dallas, Texas and 4 miles northeast of the town center of Little Elm and south of State Highway 380.
24
MANAGEMENT OF THE DISTRICT BOARD OF DIRECTORS
The District is governed by a board, consisting of five directors, which has control over and management supervision of all affairs
of the District. Director’s terms are four years with elections held within the District on the first Saturday in May in each even
numbered year. All of the directors own property subject to taxation in the District.
TAX ASSESSOR/COLLECTOR . . . Land and improvements in the District are appraised for taxation by the Denton Central Appraisal
District. The District contracts with Ms. Michelle French, Denton County Tax Assessor/Collector, to act as Tax Assessor/Collector
for the District.
OPERATOR . . . The District contracts with Arcadia Water Management LLC (“Arcadia”) to serve as Operator for the District.
BOOKKEEPER . . . The District contracts with Dye & Bloomfield, PC as Bookkeeper for the District.
ENGINEER . . . Petitt Barraza LLC. (the "Engineer") provides consulting engineering services to the District.
AUDITOR . . . The District engaged McCall Gibson Swedlund Barfoot PLLC, Certified Public Accountants, to prepare the District’s
audited financial statements for the year ended February 28, 2014.
BOND & GENERAL COUNSEL . . . Kelly Hart & Hallman LLP, Fort Worth, Texas, serves as "Bond Counsel" and “General Counsel”
to the District. The fee to be paid Bond Counsel for services rendered in connection with the issuance of the Bonds is contingent
upon the sale and delivery of the Bonds.
DISCLOSURE COUNSEL . . . McCall, Parkhurst & Horton L.L.P., Dallas, Texas, has been engaged by the District to serve as
"Disclosure Counsel" for the District. Fees for services rendered by Disclosure Counsel in connection with the issuance of the
Bonds are contingent upon the sale and delivery of the Bonds.
FINANCIAL ADVISOR . . . First Southwest Company, LLC serves as "Financial Advisor" to the District. The fee to be paid to the
Financial Advisor is contingent upon sale and delivery of the Bonds.
STATUS OF DEVELOPMENT
The District is a 525.391 acre residential and commercial/retail land development located in Denton County, Texas, just north of
Frisco and Little Elm and south of State Highway 380. There are four development projects that are part of the District; Frisco
Ranch, The Preserve, Frisco Hills and The Shops at Sunset Pointe. All developments within the District were designed and
engineered by Pettit Barraza L.L.C.
Frisco Ranch is a master planned community within the District consisting of 759 developed lots on approximately 165.33 acres.
683 completed homes and 10 homes under construction are located in the Frisco Ranch community. All remaining 76 lots have
been sold to builders. Frisco Ranch was developed by 165 Howe, L.P. (165 Howe). The community has an amenity center with
pool and bathrooms as well as being part of a walking/bike trail system master plan.
The Preserve consists of 85 homes and only 5 remaining lots on 16.579 acres and is contiguous to the Frisco Ranch subdivision.
All remaining lots have been sold to builders. The Preserve was developed by Absolute Development, LLC (Absolute).
Frisco Hills is a master planned community within the District consisting of approximately 335 acres. The current land plan
Term
Name Position Expiration
Linda Patman President May 12, 2018
Kellye Hudman Dakil Vice President May 14, 2016
Casie Eeds Secretary May 12, 2018
Randy Edwards Treasurer/Asst. Secretary May 14, 2016
Blake Beecroft Assistant Secretary May 12, 2018
25
envisions 1,126 single-family lots. 611 finished lots have been completed in Phase 1, 1A, 1B, 1C, 3A, 3B, 4A and 4B as of
November, 2014. 332 homes are completed at this time. There are currently 48 homes under construction in Frisco Hills. A four
lane divided boulevard extending to FM 423 from the Frisco Hills community has been completed. Phase 5A consisting of 14.3
acres and 72 single family lots is currently under development. FH 295 (FH295) is the developer for the Frisco Hills community.
The Shops at Sunset Pointe is a commercial/retail development consisting of approximately 11.02 acres. All water, sewer, drainage
and roadways have been constructed to create usable pad sites for neighborhood services. A service station and day care center are
now located in the Shops. A remaining 7 acres out of such 11.02 acres provides future opportunities for further residential services
within the District.
See Development Chart Below As of December 31, 2014:
A. Developed with Utility Facilities
Platted Completed Homes Under Vacant
Phase Acreage Lots Homes Construction Lots
Frisco Ranch:
1 - A 35.074 164 164 0 0
2 - A 28.352 102 102 0 0
2 - B 21.382 90 90 0 0
3 - A 19.851 60 60 0 0
3 - B 32.554 157 155 0 2
4 - A 14.249 77 79 0 51
4 - B 10.882 54 52 0 4
Frisco Hills:
1 42.496 181 124 20 37
1 - A 21.054 89 19 5 65
1 - B 8.57 39 15 1 23
1 - C 6.024 33 10 6 17
3 - A 14.048 72 59 9 4
3 - B 12.758 70 32 2 36
4 - A 10.408 60 58 0 2
4 - B 12.495 67 15 5 47
Preserve 16.579 90 85 0 5
Shops at Sunset Pointe 11.021 7 3 0 4
Subtotal: 317.797 1,412 1,122 48 297
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B. Remaining Developable Acreage
________________
(1) Under construction.
C. Other
FUTURE DEVELOPMENT
Frisco Hills is the only development in the District with lots for sale to builders. The District also contains approximately 94.2
undeveloped but developable acres all of which is currently owned by FH 295. FH 295 intends to develop all remaining acreage
as lots for the construction of homes; however, they are under no obligation to commence development on further phases.
THE DEVELOPERS
ROLE OF A DEVELOPER
In general, the activities of a landowner or developer in a special district such as the District include designing the project; defining
a marketing program and setting building schedules; securing necessary governmental approvals and permits for development;
arranging for the construction of roads and the installation of utilities; and selling or leasing lots and improved tracts or commercial
reserves to other developers, builders, or third parties. While a developer is required by the TCEQ to pave streets and in most cases
to pay a portion of the underground water distribution, wastewater collection, and storm drainage facilities, a developer is under no
obligation to a district to undertake development activities according to any particular plan or schedule. Furthermore, there is no
restriction on a developer's right to sell any or all of the land which the developer owns within a district. In addition, the developer
is ordinarily the major taxpayer within the district during the early stages of development. The relative success or failure of a
developer to perform in the above-described capacities may affect the ability of a district to collect sufficient taxes to pay debt
service and retire bonds. THE DEVELOPERS The original developer of land within the District was PMR/WHM, Ltd. (“PMR”). PMR originally acquired 339 acres of the 508.81 acres then in the District. PMR developed Frisco Ranch, Phases 1, 2A, 2B, 3A and 3B. In March 2007, PMR sold 149 undeveloped acres to Frisco Hills, L.P. (“Frisco Hills”) Hills and, in August 2008, PMR sold the balance of its property in the District, consisting of 25.12 undeveloped acres and all vacant developed lots in Frisco Ranch to 165 Howe, PL (“165 Howe”). PMR currently has no property in the District. The current developer of Frisco Ranch is 165 Howe, a Texas Limited partnership, the general partner of which is Centamtar Terras LLC (“Centamtar”). The limited partner of 165 Howe is CTMGT, LLC (“CTMGT”). Centamtar is wholly owned and managed by CTMGT and controlled by Mehrdad Moayedi, individually. 165 Howe has sold all lots in Frisco Ranch and has no remaining property with the District. Absolute Development, LLC (“Absolute”), a Texas limited liability corporation, is the developer of land within The Preserve. In August 2006, Absolute purchased 35.27 acres, of which 16.579 acres have been annexed into the District, from Tony T. Shaw Profit Sharing Plan. Absolute successfully developed 90 lots and sold all lots in the subdivision to builders. Absolute has no debt and no remaining lots within the District. The developer of Frisco Hills is FH 295 (“FH295”), a Texas limited liability company. The general partner of FH295 is Centamtar Terras, LLC, a Texas limited liability company. Centamtar’s Manager is CTMGT, LLC, a Texas limited liability company whose sole manager is Mehrdad Moayedi, individually. FH295 acquired the 149 acres and 156 acres tract from Frisco Hills, LP in 2010
Phase Acreage Future Lots
Frisco Hills:
2A 27.9 128
2B 30.5 130
3C 20.6 112
5A (1)
14.3 72
5B 12.2 73
105.5 515
Parks, Trails, Open Space 74.647
Flood Plain 80.324
Subtotal: 154.971
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with proceeds from United Development Funding IV (UDF). As of October 31, 2014, 295 had a land loan balance of $15,856,371 and 2 development loans from UDF with balances of $6,476,365 and $2,016,869 respectively. The developer of the Shops at Sunset Pointe is Arapaho East, Inc. (“Arapaho”), a Texas corporation. Arapaho is currently marketing sites within the Shops at Sunset Ponte to commercial/retail users. The owners of FH 295, 165 Howe and Absolute have developed lots in more than 45 communities over the last 18 years. These communities represent over 8,000 lots in the Dallas-Fort Worth SMSA. FH 295, 165 Howe, Absolute and Arapaho are sometimes referred to herein as the “Developers”. The Developers are not responsible for, liable for, and have not made any commitment for payment of the Bonds or other obligations of the District, and of their respective financing arrangements herein should not be construed as an implication to that effect. The Developers have no legal commitment to the District or owners of the Bonds to continue development of land within the District and may sell or otherwise dispose of their properties within the District, or any other assets, at anytime. The District cautions that the foregoing development experience was gained in different markets and under different circumstances than exist today, and the prior success of the Developers is no indication or guarantee that the Developers will be successful in the development of land within the District. BUILDERS The Frisco Ranch development by 165 Howe has sold all lots to builders. 652 homes are completed or under construction in Frisco Ranch. Only 107 lots remain without homes. The Preserve development by Absolute Development has sold all lots to builders. 85 homes are completed within the Preserve. Only 5 lots remain without homes. FH295 sold Phase 3B, consisting of 12.758 acres and 70 lots to Beazer Homes of Texas, (“Beazer”) in 2013. Beazer has developed Phase 3B and FH295 has developed Phases 1, 1A, 1B, 1C, 3A, 4A and 4B totaling 611 finished lots. Grand Homes, First Texas, Cheldan Homes and Dunhill have entered into earnest money contracts on all 544 lots in Phases 1, 1A, 1B, 1C, 3A, 4A and 4B. Builders have closed on 414 lots as of November 15, 2014. Therefor including the 36 remaining vacant lots Beazer owns in Phase 3B, 231 lots remain without homes. Current new homes within the District are being offered for sale for prices ranging from $150,000 to $320,000 with a median price of approximately $200,000. New homes to be constructed in Frisco Hills are expected to have an average sales price of $225,000.
THE UTILITY SYSTEM
GENERAL
The water and wastewater facilities, the purchase, acquisition and construction of which have been financed by the District with
the proceeds of certain Outstanding Bonds, have been designed in accordance with accepted engineering practices and the
recommendation of certain governmental agencies having regulatory or supervisory jurisdiction over construction and operation of
such facilities, including, among others, the TCEQ. According to Petitt Barraza LLC (the “Engineer”), the design of such facilities
has been approved by all governmental agencies which have jurisdiction over the District.
Operation of the District’s waterworks and wastewater facilities is subject to regulation by, among others, the Environmental
Protection Agency and the TCEQ. In many cases, regulations promulgated by these agencies have become effective only recently
and are subject to further development and revision.
WATER SYSTEM
The District obtains water from its own wells within the District. Water Well No. 1 (230 GPM) and associated Pump Station
(including 100,000 gallon ground storage tank and 10,000 gallon pressure tank) have been completed. Water Well no. 2 (280 GPM)
and associated Pump Station (including 100,000 gallon ground storage tank and 10,000 gallon pressure tank) have been completed.
The District has also entered into a wholesale water purchase agreement with the Town of Little Elm that provides a portion of
water to Frisco Hills within the District.
The District has contracted with Arcadia Water Management, LLC for operation and maintenances of its water and wastewater
facilities. On April 22, 2008, the TCEQ approved the District’s purchase of the water Certificate of Convenience and Necessity
(CCN) from the Mustang Special Utility District. The District’s Water CCN number is 13143.
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In the District Engineer’s opinion, the water supply facilities owned by the District are adequate to support all sections of the
District upon full build-out.
The District currently has 332 connections in Frisco Hills being served by the Town of Little Elm. In the District Engineer’s
opinion, the Town’s water supply has the capacity needed to support 1600 connections and the feasibility of the subject bonds.
WASTEWATER SYSTEM
The District obtains wastewater treatment capacity from the Town of Little Elm. Wastewater is collected by a gravity collection
system and pumped through a force main by two lift stations to the Town of Little Elm’s collection system.
The current agreements with the Town of Little Elm required the District to pay an initial fee of $750,000 for the right to connect
to and use the Town’s wastewater treatment plant for the original 176 acres, and for the collection of “impact fees” for residential
units within the District to fund expansion of the Town’s wastewater treatment plant. The impact fees are paid directly by the
builders and are not anticipated to be reimbursed to the District at this time. The District paid the Town an additional $500,000 for
the right to connect the additional annexed areas to the Town’s wastewater treatment plant. The District is not requesting
reimbursement for this additional fee from the proceeds of the Bonds.
The District has contracted with Arcadia Water Management, LLC for operation and maintenance of its water and wastewater
facilities. On April 22, 2008, the TCEQ approved the District’s purchase of the wastewater CCN from Mustang Special Utility
District. The District’s CCN number is 21024.
In the District Engineer’s opinion, the District has available sufficient wastewater capacity to serve all sections of the District upon
full build-out.
DRAINAGE SYSTEM
The natural drainage for the District is from the northeast toward the southwest. The flow follows existing drainage swales and
flows into Lake Lewisville which is only a short distance away.
The storm drainage system that serves the District consists of curb and gutter streets and underground storm sewers inlets along
the curb and gutter streets and detention structures, and then through natural tributaries to Lake Lewisville.
100-YEAR FLOOD PLAIN
According to U.S.G.S topographic maps and Flood Insurance Rate Maps (FIRM) maps, the District is relatively a rolling terrain
with elevations ranging from 553 to 580 feet above mean sea level. The land within the District slopes generally from 0% to 55%.
Approximately 80.324 acres of the District lie within the FEMA 100-year flood plain. This acreage has been planned as green
space and will not be used for development.
THE ROAD SYSTEM
Construction of the Road System has been financed to date with a portion of the proceeds of the Outstanding Bonds and funds
advanced by the Developers.
Roads within Frisco Ranch are constructed with reinforced concrete pavement with curbs on lime stabilized subgrade. Frisco
Ranch Road and Crystal Lake Drive are the principal arterials entering the project off Farm-to-Market 423. Frisco Ranch Road
and Crystal Lake Drive are 4-lane divided roadways for approximately 145 feet, then turning into subdivision roadways. Logan
Springs Drive is additional entrance into Frisco Ranch off Farm-to-Market 423. The drive enters Frisco Ranch as 2-lane subdivision
roadway. Remaining streets provide local interior service within the project and are typically 31-feet wide (between curbs). The
Road System includes streetlights. Franchise utilities (power, phone and cable) and public utilities such as water, wastewater and
storm drainage are typically located within street right of ways.
Roads within Frisco Hills are constructed with reinforced concrete pavement with curbs on lime stabilized subgrade. Rockhill
Parkway is the principal arterial road entering the project off Farm-to-Market 423. Frisco Hills Boulevard, entering the project
from Rockhill Parkway, is a 4-lane divided roadway for approximately 130 feet, then turning into a collector roadway. Remaining
streets provide local interior service within the project and are typically 31-feet wide (between curbs). The Road System includes
streetlights. Franchise utilities (power, phone and cable) and public utilities such as water, wastewater and storm drainage are
typically located within street right of ways.
29
GENERAL FUND STATEMENT OF ACTIVITIES
The Bonds and the Outstanding Bonds are payable from the levy of an annual ad valorem tax, without legal limitation as to rate or
amount, upon all taxable property in the District. Although not pledged to the payment of the Bonds and the outstanding Bonds,
net revenue from operations of the District’s System, if any, are available for any legal purpose, including, upon Board action, the
payment of debt service on the Bonds and the outstanding Bonds. It is anticipated that no significant revenues will be available for
debt service on the Bonds and the Outstanding Bonds in the foreseeable future.
The following statement sets forth in condensed form the historical operations of the District's water and sewer system. Such
summary has been prepared upon information obtained from the District’s audited financial statements. Reference is made to such
statements for further and more complete information. See “APPENDIX A – Audited Financial Statement.
______________________________ (1) For the seventeen month period ending February 28, 2010. The District changed its fiscal year end from September 30 to February 28. (2) See financial statements attached to the Official Statement as Exhibit A. (3) Valencia PID issued bonds and provided payment to DCFWSD 8-C for a portion of joint facilities that will be utilized by Valencia PID. After receipt of such payment, 8-C provided reimbursement to the developers who advanced payment for the joint facilities. (4) Restated. (5) Preliminary YTD as of January 31, 2015. Unaudited.
Preliminary
FY 2015
as of 1/31/2015 2014 2013 2012 2011 2010 (1)
REVENUES
Property Taxes 509,458$ 437,382$ 336,906$ 336,906$ 359,192$ 450,414$
Water Service 427,864 407,508 307,450 307,450 227,518 218,587
Wastewater Service 355,247 322,101 201,911 201,911 169,248 172,653
Solid Waste Revenue 134,644 121,254 80,116 80,116 69,300 82,369
Penalty and Interest - 25,786 20,038 20,038 79,682 7,478
Tap Connection & Inspection Fees 78,300 139,650 297,600 297,600 143,885 148,500
Investment Revenues 2,547 3,842 2,916 2,916 560 719
Sales Tax Receipts, Note 14 (2)
19,582 12,756 6,457 6,457 - -
Sale of Land - - 128,032 128,032 - -
Miscellaneous Revenues 27,941 8,459 3,911 3,911 5,843 3,285
Total Revenues 1,555,581$ 1,478,738$ 1,385,337$ 1,385,337$ 1,055,228$ 1,084,005$
EXPENDITURES
Professional Fees 205,340$ 216,290$ 155,630$ 155,630$ 146,594$ 171,802$
Contracted Services 290,560 295,030 301,979 301,979 244,117 312,593
Purchased Water Service, Note 13 (2)
74,184 43,384 - - - -
Purchased Wastewater Service, Note 8 (2)
128,874 178,509 177,797 177,797 169,938 210,120
Utilities 61,312 73,297 66,370 66,370 62,423 77,099
Repairs and Maintenance 242,666 113,229 43,853 43,853 44,020 36,182
Depreciation, Note 6 (2)
- - - - - -
Capital Outlay, Note 13 (2)
- 1,111,625 - - 110,918 74,262
Other 47,692 80,612 148,079 148,079 32,806 83,325
Total Expenditures 1,050,628$ 2,111,976$ 893,708$ 893,708$ 810,816$ 965,383$
Excess (Deficiency) of Revenues
over Expenditures 504,953$ (633,238)$ 491,629$ 491,629$ 244,412$ 118,622$
Other Financing Sources (Uses)
Contribution from Valencia PID (3)
-$ 937,070$ -$ -$ -$ -$
Developer Contribution/Reimbursement (833,385) - - - - -
Bond Issuance Cost 15,118 - - - - -
Developer Advances - - - - - 60,605
Net Change in Fund Balance (343,550)$ 303,832$ 491,629$ 491,629$ 244,412$ 179,227$
Beginning Fund Balance (Deficit) 1,597,636 1,293,804 (4)
962,311 470,682 226,270 47,043
Ending Fund Balance (Deficit) 1,254,086$ (5)
1,597,636$ 1,453,940$ 962,311$ 470,682$ 226,270$
Fiscal Year Ended February 28,
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DEBT SERVICE REQUIREMENTS
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Calendar
Year Total % of
Ending Outstanding Debt Service The Bonds(1)
Unlimited Tax Principal
31-Dec Principal Interest Total D/S Principal Interest Total D/S Debt Service Retired
2015 735,000$ 589,727$ 1,324,727$ -$ -$ -$ 1,324,727$
2016 616,708 716,100 1,332,808 - 268,552 268,552 1,601,360
2017 715,000 611,908 1,326,908 85,000 183,800 268,800 1,595,708
2018 522,198 804,985 1,327,183 90,000 182,100 272,100 1,599,283
2019 376,079 951,328 1,327,408 90,000 180,300 270,300 1,597,708 13.52%
2020 765,000 563,133 1,328,133 90,000 178,500 268,500 1,596,633
2021 785,000 542,208 1,327,208 95,000 176,700 271,700 1,598,908
2022 810,000 517,933 1,327,933 95,000 174,563 269,563 1,597,495
2023 840,000 492,920 1,332,920 95,000 172,188 267,188 1,600,108
2024 865,000 466,885 1,331,885 95,000 169,813 264,813 1,596,698 32.51%
2025 890,000 440,120 1,330,120 100,000 166,963 266,963 1,597,083
2026 920,000 412,568 1,332,568 105,000 163,963 268,963 1,601,530
2027 975,000 384,173 1,359,173 80,000 160,681 240,681 1,599,854
2028 1,010,000 347,770 1,357,770 85,000 158,181 243,181 1,600,951
2029 1,045,000 309,908 1,354,908 90,000 155,525 245,525 1,600,433 54.70%
2030 1,095,000 270,945 1,365,945 85,000 152,713 237,713 1,603,658
2031 1,135,000 230,045 1,365,045 90,000 149,950 239,950 1,604,995
2032 1,245,000 186,658 1,431,658 25,000 147,025 172,025 1,603,683
2033 1,295,000 136,783 1,431,783 25,000 146,213 171,213 1,602,995
2034 850,000 83,783 933,783 525,000 145,400 670,400 1,604,183 81.37%
2035 895,000 43,408 938,408 540,000 127,681 667,681 1,606,089
2036 - - 715,000 109,456 824,456 824,456
2037 - - 740,000 85,325 825,325 825,325
2038 - - 765,000 58,500 823,500 823,500
2039 - - 795,000 29,813 824,813 824,813 100.00%
18,384,985$ 9,103,283$ 27,488,267$ 5,500,000$ 3,643,902$ 9,143,902$ 33,334,076$
(1) Net Effective Interest Rate calculated at 3.62%.
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FINANCIAL INFORMATION
ASSESSED VALUE
____________
(1) As estimated by the Denton Central Appraisal District (the "Appraisal District") on November 13, 2014.
(2) Includes the Bonds.
(3) Unaudited. Neither Texas law nor the Bond Orders require the District to maintain any minimum balance in the Debt Service
Fund.
UNLIMITED TAX BONDS AUTHORIZED BUT UNISSUED
____________
(1) Remaining authorization canceled in conjunction with approval of Utility Bonds authorization on 5/13/2006.
UNLIMITED TAX REFUNDING BONDS AUTHORIZED BUT UNISSUED
2014 Certified Assessed Valuation (100% of estimated market value) $221,569,235(1)
Estimated Gross Debt Outstanding as of 3/1/2015 $23,884,985(2)
Debt Service Fund Balance (As of March 11, 2015) $2,122,513(3)
Ratio of Gross Debt to 2014 Certified Assessed Valuation 10.78%
Estimated 2014 Population: 1,839
Amount Amount
Date Amount Previously Being Unissued
Purpose Authorized Authorized Issued Issued Balance
Utility Bonds 5/15/2004 33,700,000$ (1)
4,610,000$ -$ -$ (1)
Utility Bonds 5/13/2006 54,100,000 3,200,000 5,500,000 45,400,000
Road Bonds 5/3/2003 10,500,000 3,500,000 - 7,000,000
Road Bonds 5/13/2006 33,200,000 9,500,000 - 23,700,000
Total 131,500,000$ 20,810,000$ 5,500,000$ 76,100,000$
Amount Amount
Date Amount Previously Being Unissued
Purpose Authorized Authorized Issued Issued Balance
Utility Refunding Bonds 5/13/2006 70,330,000$ 3,240,000$ -$ 67,090,000$
Road Refunding Bonds 5/3/2003 13,650,000 4,379,985 - 9,270,015
Road Refunding Bonds 5/13/2006 43,160,000 - - 43,160,000
Total 127,140,000$ 7,619,985$ -$ 119,520,015$
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OUTSTANDING BONDS
CASH AND INVESTMENT BALANCES
_____________________
(1) Neither Texas law nor the Bond Orders require the District to maintain any minimum balance in Debt Service Fund. INVESTMENTS OF THE DISTRICT
The District has adopted an Investment Policy as required by the Public Funds Investment Act, Chapter 2256, Texas Government
Code. The District's goal is to preserve principal and maintain liquidity while securing a competitive yield on its portfolio. Funds
of the District will be invested in short term U.S. Treasuries, certificates of deposit insured by the Federal Deposit Insurance
Corporation ("FDIC") or secured by collateral evidenced by perfected safekeeping receipts held by a third party bank, and public
funds investment pools rated in the highest rating category by a nationally recognized rating service. The District does not currently
own, nor does it anticipate the inclusion of, long-term securities or derivative products in the District portfolio.
[REMAINDER OF THIS PAGE LEFT BLANK INTENTIONALLY]
Original Remaining
Dated Principal Pricipal Outstanding
Date Series Purpose Amount as of 3/1/2015
12/1/2005 2005 Utilities 4,610,000$ 190,000$
9/1/2006 2006 Roads 3,500,000 1,110,000
12/1/2008 2008 Roads 3,500,000 325,000
11/15/2012 2012 Utilities 3,200,000 3,170,000
6/1/2013 2013 Roads 3,000,000 2,970,000
10/1/2013 2013-A Roads 3,000,000 3,000,000
12/15/2014 2014-A Refunding (Utilities) 3,240,000 3,240,000
12/15/2014 2014-B Refunding (Roads) 4,379,985 4,379,985
28,429,985$ 18,384,985$
Operating Fund $1,392,373
Debt Service Fund $2,122,513(1)
Capital Project Fund $61,185
Balances as of March 11, 2015
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ESTIMATED OVERLAPPING DEBT
The following table indicates the outstanding debt payable from ad valorem taxes of governmental entities within which property
in the District is located and the estimated percentages and amounts of such indebtedness attributable to property within the District.
Debt figures equated herein to outstanding obligations payable from ad valorem taxes ("Tax Debt") are based upon data obtained
from individual jurisdictions or the "Texas Municipal Reports" compiled and published by the Municipal Advisory Council of
Texas. Furthermore, certain entities listed below may have issued additional Tax Debt since the date listed and may have plans to
incur significant amounts of additional Tax Debt. Political subdivisions overlapping the District are authorized by Texas law to
levy and collect ad valorem taxes for the purposes of operation, maintenance, and/or general revenue purposes in addition to taxes
for the payment of debt service and the tax burden for operation, maintenance, and/or general revenue purposes is not included in
these figures. The District has no control over the issuance of Tax Debt or tax levies of any such entities.
_______________
(1) Includes the Bonds.
TAX DATA
AUTHORIZED TAXES
Debt Service Tax . . . The Board covenants in the Bond Orders to levy and assess, for each year that all or any part of the Bonds
remain outstanding and unpaid, a Debt Service tax adequate to provide funds to pay the principal of and interest on the Bonds. The
District levied a Debt Service Tax of $0.7419 per $100 of Assessed Valuation for 2014.
Maintenance Tax . . . The Board of Directors of the District has the statutory authority to levy and collect an annual ad valorem tax
for planning, maintaining, repairing and operating the District's improvements, if such maintenance tax is authorized by a vote of
the District's electors. Such tax is in addition to taxes which the District is authorized to levy for paying principal of and interest on
the Outstanding Bonds, the Bonds, and any tax bonds which may be issued in the future, as well as any contract taxes approved by
the voters within the District. At an election held within the District on May 3, 2003, voters of the District authorized the levy of
a maintenance tax unlimited in rate or amount. The District levied a maintenance tax of $0.2581 per $100 of Assessed Valuation
for 2014.
TAX EXEMPTIONS
The District has not granted any tax exemptions for property located within the District.
Fiscal Year District's
2014 Taxable 2014 Total Estimated Overlapping
Assessed Total Tax Debt as of % Debt
Taxing Jurisdiction Value Rate 3/1/2015 Applicable 3/1/2015
The District 221,569,235$ 1.00000$ 23,884,985$ (1)
100.00% 23,884,985$
Denton County 63,594,441,842 0.27200 613,455,000 0.30% 1,840,365
Frisco ISD 21,830,492,218 1.46000 1,683,160,843 0.86% 14,475,183
Total Direct and Overlapping Tax Debt 2.73200$ 2,320,500,828$ 40,200,533$
Ratio of Direct and Overlapping Tax Debt to 2014 Estimated Taxable Assessed Valuation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18.14%
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HISTORICAL TAX COLLECTIONS
The following statement of tax collections sets forth in condensed form a portion of the historical tax experience of the District.
Such table has been prepared for inclusion herein, based upon information obtained from the District's Tax Assessor/Collector.
Reference is made to such statements and records for further and complete information. See "Tax Roll Information" below.
_______________
(1) As reported by the Denton Central Appraisal District.
(2) Collections as of January 31, 2015.
SIGNIFICANT TAXPAYERS
The following table represents the significant taxpayers, the type of property, the taxable assessed value of such property, and such
property's appraised value as a percentage of the 2014 Certified Taxable Appraised Valuation of $221,569,235. See "RISK
FACTORS — Factors Affecting Taxable Values and Tax Payments – Dependence on Major Taxpayers."
Note: As provided by Denton Central Appraisal District.
TAX ADEQUACY FOR DEBT SERVICE
% of Current % of Total
Taxable Total Distribution Tax Tax
Tax Calendar Assessed Tax General Interest and Collections Collections
Year Year Valuation(1)
Rate Fund Sinking Fund Tax Levy to Tax Levy to Tax Levy
2009 2010 103,735,826$ 1.0000$ 0.3000$ 0.7000$ 1,037,358$ 99.48% 99.48%
2010 2011 101,097,358 1.0000 0.3000 0.7000 1,010,974 99.36% 99.36%
2011 2012 116,614,458 1.0000 0.3000 0.7000 1,159,919 98.98% 99.64%
2012 2013 132,954,022 1.0000 0.3000 0.7000 1,325,653 96.81% 100.00%
2013 2014 170,957,411 1.0000 0.2669 0.7331 1,702,511 99.56% 99.56%
2014 2015 221,569,235 1.0000 0.2581 0.7419 2,215,692 91.47%(2)
91.47%(2)
2014 % of Total
Taxable Taxable
Assessed Assessed
Name of Taxpayer Nature of Property Valuation Valuation
FH 295 LLC Land 5,738,849$ 2.59%
Grand Homes 2011 LP Homes & Lots 4,292,653 1.94%
Beazer Homes Texas LP Homes & Lots 3,356,211 1.51%
CTMGT Frisco Hills 1A, 1B, 1C Fl-2 LLC Homes & Lots 1,835,228 0.83%
Arapaho East Inc. Lots & Land 1,826,806 0.82%
Big Diamond Inc. Lots & Land 1,775,000 0.80%
First Texas Homes Inc. Lots & Land 1,700,628 0.77%
Torilane LLC Homes & Lots 1,375,650 0.62%
CTMGT Frisco Hills 4B Fl-2 LLC Homes & Lots 1,309,629 0.59%
MHR Landlord LLC Homes & Lots 824,218 0.37%
Total 24,034,872$ 10.85%
Debt Service Requirement, Calendar Year End 2016 1,601,360$
$0.7375 Tax Rate at 98% Collections to pay Calendar Year End 2016 Debt Service 1,601,360$
Average Annual Debt Service Requirement (2016-2039) 1,471,143$
$0.6775 Tax Rate at 98% Collections to pay Calendar Year 2016 Debt Service 1,471,143$
Maximum Annual Debt Service Requirement (2035) 1,606,089$
$0.7397 Tax Rate at 98% Collections to pay Calendar Year 2016 Debt Service 1,606,089$
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TAXING PROCEDURES AUTHORITY TO LEVY TAXES The Board is authorized to levy a continuing direct 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 and any additional bonds payable from taxes which the District may hereafter issue (see "RISK FACTORS–Future Debt") and to pay the expenses of assessing and collecting such taxes. The District agrees in the Bond Orders to levy, assess, and collect such a tax from year-to-year as described more fully herein under "THE BONDS–Source of Payment." Under Texas law, the Board may also levy and collect an annual ad valorem tax for the operation and maintenance of the District. See "TAX DATA – Authorized Taxes – "Debt Service Tax" and "Maintenance Tax". PROPERTY TAX CODE AND COUNTY-WIDE APPRAISAL DISTRICT The Texas Property Tax Code ("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 a single 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 Appraisal District has the responsibility for appraising property for all taxing units within Denton County, including the District. Such appraisal values are subject to review and change by the Denton Central 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 status 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. 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, of between $5,000 and $12,000 of taxable valuation depending upon the disability rating of the veteran, and qualifying surviving spouses of persons 65 years of age or older will be entitled to receive a residential homestead exemption equal to the exemption received by the deceased spouse. A veteran who receives a disability rating of 100% is entitled to the exemption for the full amount of the veteran’s residential homestead. Additionally, subject to certain conditions, the surviving spouse of a disabled veteran who is entitled to an exemption for the full value of the veteran’s residence homestead is also entitled to an exemption from taxation of the total appraised value of the same property to which the disabled veteran’s exemption applied. Effective January 1, 2014, a partially disabled veteran or certain surviving spouses of partially disabled veterans are entitled to an exemption from taxation of a percentage of the appraised value of their residence homestead in an amount equal to the partially disabled veteran’s disability rating if the residence homestead was donated by a charitable organization. Also, effective January 1, 2014, the surviving spouse of a member of the armed forces who was killed in action is, subject to certain conditions, entitled to an exemption of the total appraised value of the surviving spouse’s residence homestead, and subject to certain conditions, and subject to certain conditions, an exemption up to the same amount may be transferred to a subsequent residence homestead of the surviving spouse. Residential Homestead Exemptions: The Property Tax Code authorizes the governing body of each political subdivision in the State of Texas to exempt up to 20% of the appraised 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 April 30. The District has never granted a general residential homestead exemption. Freeport and Goods-in-Transit Exemptions: A “Freeport Exemption” applies to goods, wares, ores, and merchandise other than oil, gas, and petroleum products (defined as liquid and gaseous materials immediately derived from refining petroleum or natural gas), and to aircraft or repair parts used by a certified air carrier acquired in or imported into Texas which are destined to be forwarded outside of Texas and which are detained in Texas for assembling, storing, manufacturing, processing or fabricating for less than 175 days. Although certain taxing units may take official action to tax such property in transit and negate such exemption, the District does not have such an option. A “Goods-in-Transit” Exemption is applicable to the same categories of tangible personal property which are covered by the Freeport Exemption, if, for tax year 2011 and prior applicable years, such property is acquired in or imported into Texas for assembling, storing, manufacturing, processing, or fabricating purposes and is subsequently forwarded to another location inside or outside of Texas not later than 175 days after acquisition or importation, and the location where said property is detained during that period is not directly or indirectly owned or under the control of the property owner. For tax year
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2012 and subsequent years, such Goods-in-Transit Exemption is limited to tangible personal property acquired in or imported into Texas for storage purposes and which is stored under a contract of bailment by a public warehouse operator at one or more public warehouse facilities in Texas that are not in any way owned or controlled by the owner of such property for the account of the person who acquired or imported such property. A property owner who receives the Goods-in-Transit Exemption is not eligible to receive the Freeport Exemption for the same property. Local taxing units such as the District may, by official action and after public hearing, tax goods-in-transit personal property. A taxing unit must exercise its option to tax goods-in-transit property before January 1 of the first tax year in which it proposes to tax the property at the time and in the manner prescribed by applicable law. The District has taken official action to allow taxation of all such goods-in-transit personal property, but may choose to exempt same in the future by further official action. The District has not exercised its option to tax goods-in-transit personal property but may choose to do so in the future.
TAX ABATEMENT Denton County may designate part of the area within the District as a reinvestment zone. Thereafter, Denton County 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 years, all or any part of any increase in the appraised valuation of property covered by the agreement over its appraised 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 agreement. The terms of all tax abatement agreements must be substantially the same. The District has not entered into any tax abatement agreements and Denton County has not designated any of the area within the District as a reinvestment zone. 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 100% of market value, as such is defined in the Property Tax Code. Nevertheless, certain land may be appraised at less than market value under the Property Tax Code. The Texas Constitution limits increases in the appraised value of residence homesteads to 10% annually regardless of the market value of the property. 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 fair 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 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 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 years. It is not known what frequency of reappraisal 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 formally to 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 also establishes a procedure for notice to property owners of reappraisals reflecting increased property value, appraisals which are higher than renditions, and appraisals of property not previously on an appraisal roll.
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ROLLBACK OF OPERATION AND MAINTENANCE TAX RATE The qualified voters of the District have the right to petition for a rollback of the District's operation and maintenance tax rate only if the total District tax bill on the average residence homestead increases by more than eight percent. If a rollback election is called and passes, the rollback tax rate is the District's current year's debt service and contract rates plus 1.08 times the previous year's operation and maintenance tax rate. Thus, the District's debt service tax rate cannot be changed by a rollback election. 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. Taxes are due October 1, or when billed, whichever comes later, and become delinquent after January 31 of the following
year. However, a person who is 65 years of age or older or disabled is entitled by law to pay current taxes on his residential
homestead in installments or to receive a deferred or abatement of delinquent taxes without penalty during the time he owns or
occupies his property as his residential homestead. A delinquent tax incurs a penalty of 6% of the amount of the tax for the first
calendar month it is delinquent, plus 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 12% regardless of the number of months the tax has been delinquent and incurs an additional penalty of up to
20% if imposed by the District. The delinquent tax also accrues interest at a rate of 1% for each month or portion of a month it
remains unpaid. The Property Tax Code also makes provision for the split payment of taxes, discounts for early payment and the
postponement of the delinquency date of taxes under certain circumstances which, at the option of the District, may be rejected.
The District has rejected such provisions and does not permit split payments nor provide discounts for early payments. 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 power to tax the property. The District’s tax lien is on a parity with tax liens of such other taxing
units (see "FINANCIAL INFORMATION – Estimated Overlapping Debt"). A tax lien on real property takes priority over the
claim of most creditors and other holders of liens on the property encumbered by the tax lien, whether or not the debt or lien existed
before the attachment of the tax lien; however, whether a lien of the United States is on a parity with or takes priority over a tax
lien of the District is determined by applicable federal law. Personal property under certain circumstances is subject to seizure and
sale for the payment of delinquent taxes, penalty, and interest.
At any time after taxes on property become delinquent, the District may file suit to foreclose the lien securing payment of the tax,
to enforce personal liability for the tax, or both. In filing a suit to foreclose a tax lien on real property, the District must join other
taxing units that have claims for delinquent taxes against all or part of the same property. Collection of delinquent taxes may be
adversely affected by the amount of taxes owed to other taxing units, by the effects of market conditions on the foreclosure sale
price, by taxpayer redemption rights or by bankruptcy proceedings which restrict the collection of taxpayer debts. A taxpayer may
redeem property within two years for residential and agricultural use property and within six months for all other types of property
after the purchaser’s deed issued at the foreclosure sale is filed in the county records. See "RISK FACTORS — “General”, —
"Tax Collection Limitations and Foreclosure Remedies", and – "Registered Owners' Remedies and Bankruptcy Limitations."
Federal bankruptcy law provides that an automatic stay of actions by creditors and other entities, including governmental units,
goes into effect with the filing of any petition in bankruptcy. The automatic stay prevents governmental units from foreclosing on
property and prevents enforcement of liens for post-petition taxes from the bankruptcy court. In many cases post-petition taxes are
paid as an administrative expense of the estate in bankruptcy or by order of the bankruptcy court.
LEGAL MATTERS
LEGAL PROCEEDINGS Delivery of the Bonds will be accompanied by the unqualified approving legal opinion of the Attorney General of Texas to the effect that the Bonds are valid and legally binding obligations of the District under the Constitution and laws of the State of Texas payable from the proceeds of a continuing direct annual ad valorem tax levied by the District, without legal limit as to rate or amount, upon all taxable property within the District, and, based upon their examination of a transcript of certified proceedings relating to the issuance and sale of the Bonds, the legal opinion of Bond Counsel, to a like effect and addressing the matters described below under "TAX MATTERS". Bond Counsel has reviewed the information appearing in this Official Statement under "THE BONDS," (except for the information under the sub heading “Book-Entry-Only System”), "THE DISTRICT – General” and “Bond & General Counsel" "TAXING PROCEDURES," "LEGAL MATTERS," “TAX MATTERS,” and "CONTINUING DISCLOSURE OF INFORMATION" solely to determine whether such information fairly summarizes matters of law and the provisions of the documents referred to therein. Bond Counsel has not, however, independently verified any of the factual information contained in this Official Statement nor has
38
either conducted an investigation of the affairs of the District or the Developer 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. Kelly Hart & Hallman LLP, Fort Worth, Texas, serves as Bond Counsel and General Counsel to the District. McCall, Parkhurst & Horton, L.L.P., Dallas, Texas, serves as Disclosure Counsel to the District. 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. The fees paid to Disclosure Counsel for services rendered in connection with the issuance of the Bonds are contingent upon the sale and delivery of the Bonds. The various legal opinions to be delivered concurrently with the delivery of the Bonds express the professional judgment of the attorneys rendering the opinions as to the legal issues explicitly addressed therein. In rendering a legal opinion, the attorney does not become an insurer or guarantor of that expression of professional judgment, of the transaction opined upon, or of the future performance of the parties to the transaction. Nor does the rendering of an opinion guarantee the outcome of any legal dispute that may arise out of the transaction.
NO MATERIAL ADVERSE CHANGE The obligations of the Initial Purchasers to take and pay for the Bonds, and of the District to deliver the Bonds, are subject to the
condition that, up to the time of delivery of and receipt of payment for the Bonds, there shall have been no material adverse change
in the financial condition of the District from that set forth or contemplated in the Official Statement as amended or supplemented
through the date of sale.
NO-LITIGATION CERTIFICATE The District will furnish the Initial Purchaser a certificate, executed by both the President and Secretary of the Board, and dated as of the date of delivery of the Bonds, to the effect that no litigation of any nature is pending or threatened, either in state or federal courts, contesting or attacking the Bonds, restraining or enjoining the levy, assessment and collection of ad valorem taxes to pay the interest on or the principal of the Bonds, in any manner questioning the authority or proceedings for the issuance, execution or delivery of the Bonds, or affecting the validity of the Bonds or the title of the present officers of the District.
TAX MATTERS
LEGAL OPINION
In the opinion of Kelly Hart & Hallman LLP, Bond Counsel, under existing law, and assuming compliance with certain covenants
and the accuracy of certain representations, discussed below, interest on the Bonds is excludable from gross income for federal
income tax purposes and is not subject to the alternative minimum tax on individuals and corporations; however, interest on the
Bonds will be included in the "adjusted current earnings" of a corporation for purposes of computing its alternative minimum tax
liability. Corporate purchasers of the Bonds should consult their tax advisors regarding the computation of alternative minimum
tax (see APPENDIX B—Form of Bond Counsel's Opinion).
Section 103 of the Internal Revenue Code of 1986 (the "Code") establishes certain requirements that must be met at and subsequent
to the issuance of the Bonds in order for interest on the Bonds to be and remain excludable from federal gross income. Included
among these continuing requirements are certain restrictions and prohibitions on the use of bond proceeds, restrictions on the
investment of proceeds and other amounts, and rebate to the United States of certain earnings from investments. Failure to comply
with these continuing requirements may cause interest on the Bonds to become includable in gross income for federal income tax
purposes retroactively to the date of their issuance. The District has covenanted to comply with certain procedures, and has made
certain representations and certifications, designed to assure compliance with these Code requirements. In rendering its opinion,
Bond Counsel will rely on these covenants, and on representations and certifications of the District relating to matters solely within
its knowledge (which Bond Counsel has not independently verified), and will assume continuing compliance by the District.
Prospective purchasers of the Bonds should be aware that ownership of, accrual or receipt of interest on, or disposition of the Bonds
may have collateral federal income tax consequences for certain taxpayers, including financial institutions, certain subchapter S
corporations, United States branches of foreign corporations, property and casualty insurance companies, individual recipients of
Social Security or Railroad Retirement benefits, taxpayers eligible for the earned income credit, and taxpayers who may be deemed
to have incurred or continued indebtedness to purchase or carry tax-exempt obligations. The foregoing is not intended as an
exhaustive list of potential tax consequences. Prospective purchasers of the Bonds should consult their tax advisors regarding any
potential collateral tax consequences. Bond Counsel expresses no opinion regarding any such collateral tax consequences.
The statutes, regulations, published rulings, and court decisions on which Bond Counsel has based its opinion are subject to change
by Congress, as well as to subsequent judicial and administrative interpretation by courts and the Internal Revenue Service (the
"Service"). No assurance can be given that such law or its interpretation will not change in a manner that would adversely affect
39
the tax treatment of receipt or accrual of interest on, or the acquisition, ownership, market value, or disposition of, the Bonds. No
ruling concerning the tax treatment of the Bonds has been sought from the Service, and the opinion of Bond Counsel is not binding
on the Service. The Service has an ongoing audit program of tax-exempt obligations to determine whether, in the Service’s view,
interest on such tax-exempt obligations is excludable from gross income for federal income tax purposes. No assurance can be
given regarding whether or not the Service will commence an audit of the Bonds. If such an audit were to be commenced, under
current procedures, the Service would treat the District as the taxpayer, and owners of the Bonds would have no right to participate
in the audit process. In this regard, in responding to or defending an audit with respect to the Bonds, the District might have different
or conflicting interests from those of the owners of the Bonds.
The opinions set forth above are based on existing law and Bond Counsel’s knowledge of relevant facts on the date of issuance of
the Bonds. Such opinions are an expression of professional judgment and are not a guarantee of result. Except as stated above,
Bond Counsel expresses no opinion regarding any other federal, state, or local tax consequences under current law or proposed
legislation resulting from the receipt or accrual of interest on, or the acquisition, ownership, or disposition of, the Bonds. Further,
Bond Counsel assumes no obligation to update or supplement its opinions to reflect any facts or circumstances that may come to
its attention or any changes in law that may occur after the issuance date of the Bonds. In addition, Bond Counsel has not undertaken
to advise in the future whether any events occurring after the issuance date of the Bonds may affect the tax exempt status of interest
on the Bonds.
TAX ACCOUNTING TREATMENT OF DISCOUNT AND PREMIUM ON CERTAIN BONDS
The initial public offering price of certain bonds (the "Discount Bonds") may be less than the amount payable on such Bonds at
maturity. An amount equal to the difference between the initial public offering price of a Discount Bond (assuming that a substantial
amount of the Discount Bonds of that maturity are sold to the public at such price) and the amount payable at maturity constitutes
original issue discount to the initial purchaser of such Discount Bond. A portion of such original issue discount allocable to the
holding period of such Discount Bond by the initial purchaser will, upon the disposition of such Discount Bond (including by
reason of its payment at maturity), be treated as interest excludable from gross income, rather than as taxable gain, for federal
income tax purposes, on the same terms and conditions as those for other interest on the Bonds described above under "Tax
Exemption." Such interest is considered to be accrued actuarially in accordance with the constant interest method over the life of a
Discount Bond, taking into account the semiannual compounding of accrued interest, at the yield to maturity on such Discount
Bond and generally will be allocated to an original purchaser in a different amount from the amount of the payment denominated
as interest actually received by the original purchaser during the tax 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, and taxpayers who may be deemed to have incurred
or continued indebtedness to purchase or carry, or who have paid or incurred certain expenses allocable to, tax-exempt obligations.
Moreover, in the event of the redemption, sale or other taxable disposition of a Discount Bond by the initial owner prior to maturity,
the amount realized by such owner in excess of the basis of such Discount Bond in the hands of such owner (adjusted upward by
the portion of the original issue discount allocable to the period for which such Discount Bond was held) is includable in gross
income. Owners of Discount Bonds should consult with their own tax advisors with respect to the determination of accrued original
issue discount on Discount Bonds for federal income tax purposes and with respect to the state and local tax consequences of
owning and disposing of Discount Bonds. It is possible that, under applicable provisions governing determination of state and local
income taxes, accrued interest on Discount Bonds may be deemed to be received in the year of accrual even though there will not
be a corresponding cash payment.
The initial public offering price of certain Bonds (the "Premium Bonds") may be greater than the amount payable on such Bonds
at maturity. An amount equal to the difference between the initial public offering price of a Premium Bond (assuming that a
substantial amount of the Premium Bonds of that maturity are sold to the public at such price) and the amount payable at maturity
constitutes premium to the initial purchaser of such Premium Bonds. The basis for federal income tax purposes of a Premium Bond
in the hands of such initial purchaser must be reduced each year by the amortizable bond premium, although no federal income tax
deduction is allowed as a result of such reduction in basis for amortizable bond premium. Such reduction in basis will increase the
amount of any gain (or decrease the amount of any loss) to be recognized for federal income tax purposes upon a sale or other
taxable disposition of a Premium Bond. The amount of premium which is amortizable each year by an initial purchaser is
determined by using such purchaser's yield to maturity. Purchasers of the Premium Bonds should consult with their own tax advisors
with respect to the determination of amortizable bond premium on Premium Bonds for federal income tax purposes and with respect
to the state and local tax consequences of owning and disposing of Premium Bonds.
THE DISCUSSION CONTAINED HEREIN MAY NOT BE EXHAUSTIVE. INVESTORS, INCLUDING THOSE WHO ARE
SUBJECT TO SPECIAL PROVISIONS OF THE CODE, SHOULD CONSULT THEIR OWN TAX ADVISORS AS TO THE
TAX TREATMENT WHICH MAY BE ANTICIPATED TO RESULT FROM THE PURCHASE, OWNERSHIP AND
DISPOSITION OF TAX-EXEMPT OBLIGATIONS BEFORE DETERMINING WHETHER TO PURCHASE THE BONDS.
40
QUALIFIED TAX-EXEMPT OBLIGATIONS FOR FINANCIAL INSTITUTIONS
Section 265(a) of the Code provides, in pertinent part, that interest paid or incurred by a taxpayer, including a "financial institution,"
on indebtedness incurred or continued to purchase or carry tax-exempt obligations is not deductible in determining the taxpayer's
taxable income. Section 265(b) of the Code provides an exception to the disallowance of such deduction for any interest expense
paid or incurred on indebtedness of a taxpayer that is a "financial institution" allocable to tax-exempt obligations, other than "private
activity bonds," that are designated by a "qualified small issuer" as "qualified tax-exempt obligations." A "qualified small issuer"
is any governmental issuer (together with any “on-behalf of” and "subordinate" issuers) who issues no more than $10,000,000 of
tax-exempt obligations during the calendar year. Section 265(b)(5) of the Code defines the term "financial institution" as any
"bank" described in Section 585(a)(2) of the Code, or any person accepting deposits from the public in the ordinary course of such
person's trade or business that is subject to federal or state supervision as a financial institution. Notwithstanding the exception to
the disallowance of the deduction of interest on indebtedness related to "qualified tax-exempt obligations" provided by Section
265(b) of the Code, Section 291 of the Code provides that the allowable deduction to a "bank," as defined in Section 585(a)(2) of
the Code, for interest on indebtedness incurred or continued to purchase "qualified tax-exempt obligations" shall be reduced by
twenty-percent (20%) as a "financial institution preference item."
The District expects to designate the Bonds as “qualified tax-exempt obligations” and will certify its expectation that the above-
described $10,000,000 ceiling will not be exceeded for the calendar year 2015. Accordingly, it is anticipated that financial
institutions which purchase the Bonds will not be subject to the 100% disallowance of interest expense allocable to interest on the
Bonds under section 265(b) of the Code. However, the deduction for interest expense incurred by a financial institution which is
allocable to the interest on the Bonds will be reduced by 20% pursuant to section 291 of the Code.
PREPARATION OF OFFICIAL STATEMENT
SOURCES AND COMPILATION OF INFORMATION
The financial data and other information contained in this Official Statement has been obtained primarily from the District's records,
the Developers, the Engineer, the Tax Assessor/Collector, the Appraisal District, and other sources. All of these sources are
believed to be reliable, but no guarantee is made by the District as to the accuracy or completeness of the information derived from
sources other than the District, and its inclusion herein is not to be construed as a representation on the part of the District except
as described below under "Certification of Official Statement." Furthermore, there is no guarantee that any of the assumptions or
estimates contained herein will be realized. The summaries of the agreements, reports, statutes, resolutions, engineering, and other
related information set forth in this Official Statement are included herein 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. FINANCIAL ADVISOR
First Southwest Company, LLC is employed as the Financial Advisor to the District to render certain professional services,
including advising the District on a plan of financing and preparing the Official Statement, including the Official Notice of Sale
and Bidding Instructions and the Official Bid Form for the sale of the Bonds. In its capacity as Financial Advisor, First Southwest
Company, LLC has compiled and edited this Official Statement. The Financial Advisor has reviewed the information in this
Official Statement in accordance with, and as a part of, its responsibilities to the District and, as applicable, to investors under the
federal securities laws as applied to the facts and circumstances of this transaction, but the Financial Advisor does not guarantee
the accuracy or completeness of such information. CONSULTANTS
In approving this Official Statement the District has relied upon the following consultants.
Tax Assessor/Collector: The information contained in this Official Statement relating to the breakdown of the District's historical
assessed value and significant taxpayers, including particularly such information contained in the section entitled "TAX DATA"
has been provided by the Denton County Tax Assessor-Collector and is included herein in reliance upon the authority of such
individual as an expert in assessing property values and collecting taxes.
Engineer: The information contained in this Official Statement relating to engineering and to the description of the facilities and,
in particular that information included in the sections entitled "THE DISTRICT," and "THE SYSTEM" has been provided by Petitt
Barraza LLC, and has been included herein in reliance upon the authority of said firm as experts in the field of civil engineering.
Auditor: The District's audited financial statements for the year ended February 28, 2014, were prepared by McCall Gibson
Swedlund Barfoot PLLC, Certified Public Accountants. See "APPENDIX A" for a copy of the District's February 28, 2014
financial statements.
41
UPDATING THE 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 amendment or supplement to the Official Statement satisfactory to the Initial Purchaser; provided, however, that the obligation of the District to the Initial Purchaser 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 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 the ultimate customer. CERTIFICATION OF OFFICIAL STATEMENT
The District, acting through its Board in its official capacity, hereby certifies, as of the date hereof, that the information, statements,
and descriptions or any addenda, supplement, and amendment thereto pertaining to the District and its affairs contained herein, to
the best of its knowledge and belief, contain no untrue statement of a material fact and do not omit to state any material fact
necessary to make the statements herein, in the light of the circumstances under which they are made, not misleading. With respect
to information included in this Official Statement other than that relating to the District, the District has no reason to believe that
such information contains any untrue statement of a material fact or omits to state any material fact necessary to make the statements
herein, in the light of the circumstances under which they are made, not misleading; however, the Board has made no independent
investigation as to the accuracy or completeness of the information derived from sources other than the District. In rendering such
certificate, the official executing this certificate may state that he has relied in part on his examination of records of the District
relating to matters within his own area of responsibility, and his discussions with, or certificates or correspondence signed by,
certain other officials, employees, consultants, and representatives of the District.
CONTINUING DISCLOSURE OF INFORMATION
In the Bond Order, the District has made the following agreement for the benefit of the holders and beneficial owners of the Bonds.
The District is required to observe the agreement for so long as it remains obligated to advance funds to pay the Bonds. Under the
agreement, the District will be obligated to provide certain updated financial information and operating data annually, and timely
notice of specified events, the Municipal Securities Rulemaking Board ("MSRB") pursuant to its Electric Municipal Market Access
System ("EMMA"). This information will be available through the MSRB at www.emma.msrb.org. Please note that this website
is included herein as active textual references only, and the information contained on (or accessed through) this website is not
incorporated herein and should not be construed as part of this Official Statement. ANNUAL REPORTS
The District will provide certain financial information and operating data to the MSRB annually.
The information to be updated with respect to the District includes all quantitative financial information and operating data with
respect to the District of the general type included in this Official Statement under the headings “SELECTED FINANCIAL
INFORMATION,” “THE UTILITY SYSTEM - Waterworks and Sewer System Operating Statement,” “DEBT SERVICE
REQUIREMENTS,” “FINANCIAL INFORMATION,” “TAX DATA” and in Appendix B (the Audit). The District will update
and provide this information within six months after the end of each of its fiscal years ending in or after 2015.
The District may provide updated information in full text or may incorporate by reference certain other publicly available
documents, as permitted by Rule 15c2-12 (the “Rule”) of the United States Securities and Exchange Commission (the “SEC”).
The updated information will include audited financial statements for the District, if it commissions an audit and the audit is
completed by the required time. If the audit of such financial statements is not complete within such period, then the District shall
provide unaudited financial statements for the applicable fiscal year within such six-month period, and audited financial statements
when the audit report on such statements becomes available. Any such financial information will be prepared in accordance with
the accounting principles described in the Bond Order, or such other accounting principles as the District may be required to employ
from time to time pursuant to state law or regulation.
The District's fiscal year ends on February 28. Therefore, the District must provide updated information by August 31 in each year
thereafter, unless the District changes its fiscal year. If the District changes its fiscal year, it will notify the MSRB of the change.
NOTICE OF CERTAIN EVENTS
Notice of Occurrence of Certain Events, Whether or Not Material . . . The District will notify the MSRB through EMMA (in an
electronic format as prescribed by the MSRB) within ten business days following the occurrence of any of the following events
with respect to the Bonds, without regard to whether such event is material within the meaning of the federal securities laws: (1)
principal and interest payment delinquencies; (2) unscheduled draws on debt service reserves reflecting financial difficulties; (3)
42
unscheduled draws on credit enhancements reflecting financial difficulties; (4) substitution of credit or liquidity providers, or their
failure to perform; (5) adverse tax opinions or the issuance by the Internal Revenue Service of proposed or final determinations of
taxability, Notices of Proposed Issue (IRS Form 5701-TEB) or other material notices or determinations with respect to the tax-
exempt status of the Bonds, or other events affecting the tax-exempt status of the Bonds; (6) tender offers; (7) defeasances; (8)
rating changes; and (9) bankruptcy, insolvency, receivership or similar event of an obligated person. (Neither the Bonds nor the
Bond Order make any provision for credit enhancement - unless a municipal bond insurance policy is obtained - or liquidity
enhancement.)
Notice of Occurrence of Certain Events, If Material . . . The District also will notify the MSRB through EMMA (in an electronic
format as prescribed by the MSRB) within ten business days following the occurrence 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) non-payment related defaults; (2)
modifications to rights of holders; (3) redemption calls; (4) release, substitution, or sale of property securing repayment of the
Bonds; (5) the consummation of a merger, consolidation, or acquisition involving an obligated person or the sale of all or
substantially all of the assets of the obligated person, other than in the ordinary course of business, the entry into a definitive
agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant
to its terms; and (6) appointment of a successor or additional trustee or the change of name of a trustee.
Notice of Failure to Timely File . . . The District also will notify the MSRB through EMMA, in a timely manner, of any failure by
the District to provide financial information or operating data in accordance with the provisions described above.
AVAILABILITY OF INFORMATION
The District has agreed to provide the foregoing information only as described above. Investors will be able to access continuing
disclosure information filed with the MSRB free of charge at www.emma.msrb.org. LIMITATIONS AND AMENDMENTS
The 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 and beneficial
owners of the Bonds may seek a writ of mandamus to compel the District to comply with its agreement.
The District may amend its continuing disclosure agreement in the Bond Orders 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 operations of the District, or business
of the Developers, 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 a 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 Initial
Purchasers 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 reason for the amendment and of the impact of any change in the
type of financial information and operating data so provided.
COMPLIANCE WITH PRIOR UNDERTAKINGS
During the last five years, the District has complied in all material respects with all continuing disclosure agreements made by it in
accordance with the Rule. Certain of the Outstanding Bonds have been insured by Radian Asset Assurance Inc, (“Radian”). S&P
downgraded Radian’s credit rating from AA to BB- over a period of a year and a half and subsequently downgraded Radian to its
current B+ rating. Not all of such rating changes were filed in a timely manner by the District but, as of the date hereof, all have
been filed with the MSRB.
43
MISCELLANEOUS
All estimates, statements, and assumptions in this Official Statement and the APPENDICES hereto have been made on the basis
of the best information available and are believed to be reliable and accurate. Any statements in this Official Statement involving
matters of opinion or estimates, whether or not expressly so stated, are intended as such and not as representations of fact, and no
representation is made that any such statements will be realized.
/S/ LINDA PATMAN
President, Board of Directors
Denton County Fresh Water Supply District No. 8-C
ATTEST:
/S/ CASIE EEDS
Secretary, Board of Directors
Denton County Fresh Water Supply District No. 8-C
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LOCATION MAP
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PHOTOGRAPHS OF IMPROVEMENTS WITHIN THE DISTRICT
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APPENDIX A
Financial Statement of the District for the Year Ended February 28, 2014.
(This Page Intentionally Blank)
McCALL GIBSON SWEDLUND BARFOOTPLLCCertified Public Accountants
13100 Worthain Center DriveSuite 235 111 Congress Avenue
Houston, Texas 77065-5610 Suite 400(713) 462-0341 Austin, Texas 78701
Fax (713) 462-2708 (512) 610-2209E-Mail: 1l;gsb@,nRsbyllc. con’ zuwzv. inasbullccon,
INDEPENDENT AUDITOR’S REPORT
Board of DirectorsDenton County Fresh Water Supply District No. 8-CDenton County, Texas
We have audited the accompanying financial statements of the governmental activities and each majorfund of Denton County Fresh Water Supply District No. 8-C (the “District”), as of and for the year endedFebruary 28, 2014, and the related notes to the financial statements, which collectively comprise theDistrict’s basic financial statements as listed in the table of contents.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements inaccordance with accounting principles generally accepted in the United States of America; this includesthe design, implementation, and maintenance of internal control relevant to the preparation and fairpresentation of financial statements that are free from material misstatement, whether due to fraud orerror.
Auditor’s Responsibility
Our responsibility is to express opinions on these financial statements based on our audit. We conductedour audit in accordance with auditing standards generally accepted in the United States of America.Those standards require that we plan and perform the audit to obtain reasonable assurance about whetherthe financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures inthe financial statements. The procedures selected depend on the auditor’s judgment, including theassessment of the risks of material misstatement of the financial statements, whether due to fraud or error.In making those risk assessments, the auditor considers internal control relevant to the entity’s preparationand fair presentation of the financial statements in order to design audit procedures that are appropriate inthe circumstances, but not for the purpose of expressing an opinion on the effectiveness of the District’sinternal control. Accordingly, we express no such opinion. An audit also includes evaluating theappropriateness of accounting policies used and the reasonableness of significant accounting estimatesmade by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis forour audit opinions.
Member ofAmerican Institute of Certified Public Accountants
Texas Society of Certified Public Accountants
Board of DirectorsDenton County Fresh Water
Supply District No. 8-C
Opinions
In our opinion, the financial statements referred to above present fairly, in all material respects, therespective financial position of the governmental activities and each major fund of the District as ofFebruary 28, 2014, and the respective changes in financial position for the year then ended in accordancewith accounting principles generally accepted in the United States of America.
Other Matters
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that Management’sDiscussion and Analysis on pages 3 through .7 and the Schedule of Revenues, Expenditures, and Changesin Fund Balance — Budget and Actual — General Fund on page 33 be presented to supplement the basicfinancial statements. Such information, although not a part of the basic financial statements, is requiredby the Governmental Accounting Standards Board, who considers it to be an essential part of financialreporting for placing the basic financial statements in an appropriate operational, economic, or historicalcontext. We have applied certain limited procedures to the required supplementary information inaccordance with auditing standards generally accepted in the United States of America, which consistedof inquiries of management about the methods of preparing the information and comparing theinformation for consistency with management’s responses to our inquiries, the basic financial statements,and other knowledge we obtained during our audit of the basic financial statements. We do not expressan opinion or provide any assurance on the information because the limited procedures do not provide uswith sufficient evidence to express an opinion or provide any assurance.
Other Information
Our audit was conducted for the purpose of forming opinions on the financial statements that collectivelycomprise the District’s basic financial statements. The supplementary information required by the TexasCommission on Environmental Quality as published in the Water District Financial Management Guideis presented for purposes of additional analysis and is not a required part of the basic financial statements.Such information is the responsibility of management and was derived from and relates directly to theunderlying accounting and other records used to prepare the financial statements. The supplementaryinformation, excluding that portion marked “Unaudited” on which we express no opinion or provide anyassurance, has been subjected to the auditing procedures applied in the audit of the financial statementsand certain additional procedures, including comparing and reconciling such information directly to theunderlying accounting and other records used to prepare the financial statements or to the financialstatements themselves, and other additional procedures in accordance with auditing standards generallyaccepted in the United States of America. In our opinion, the information is fairly stated in all materialrespects in relation to the financial statements as a whole.
McCall Gibson Swedlund Barfoot PLLCCertified Public Accountants
May 21, 2014
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DENTON COUNTY FRESH WATER SUPPLY DISTRICT NO. 8-CMANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED FEBRUARY 28, 2014
Management’s discussion and analysis of Denton County Fresh Water Supply District No. 8-C’s(the “District”) financial performance provides an overview of the District’s financial activitiesfor the year ended February 28, 2014. Please read it in conjunction with the District’s financialstatements, which begin on page 8.
USING THIS ANNUAL REPORT
This annual report consists of a series of financial statements. The basic financial statementsinclude: (1) combined fund financial statements and government-wide financial statements and(2) notes to the financial statements. The combined fund financial statements and government-wide financial statements combine both: (1) the Statement of Net Position and GovernmentalFund Balance Sheet and (2) the Statement of Activities and Governmental Fund Revenues,Expenditures and Changes in Fund Balance. This report also includes other supplementaryinformation in addition to the basic financial statements.
GOVERNMENT-WIDE FINANCIAL STATEMENTS
The District’s annual report includes two financial statements combining the government-widefinancial statements and the fund financial statements. The government-wide portion of thesestatements provides both long-term and short-term information about the District’s overall status.Financial reporting at this level uses a perspective similar to that found in the private sector withits basis in full accrual accounting and elimination or reclassification of internal activities.
The first of the government-wide statements is the Statement of Net Position. This informationis found in the Statement of Net Position column on pages 8 through 11. The Statement of NetPosition is the District-wide statement of its financial position presenting information thatincludes all of the District’s assets and liabilities, with the difference reported as net position.Over time, increases or decreases in net position may serve as a useful indicator of whether thefinancial position of the District as a whole is improving or deteriorating. Evaluation of theoverall health of the District would extend to other non-financial factors.
The government-wide portion of the Statement of Activities on pages 13 and 14 reports how theDistrict’s net position changed during the current year. All revenues and expenses are includedregardless of when cash is received or paid.
FUND FINANCIAL STATEMENTS
The combined statements also include fund financial statements. A fund is a grouping of relatedaccounts that is used to maintain control over resources that have been segregated for specificactivities or objectives. The District has three governmental fund types. The General Fundaccounts for resources not accounted for in another fund, customer service revenues, costs andgeneral expenditures. The Debt Service Fund accounts for ad valorem taxes and financialresources restricted, committed or assigned for servicing bond debt and the cost of assessing and
-3-
DENTON COUNTY FRESH WATER SUPPLY DISTRICT NO. 8-CMANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED FEBRUARY 28, 2014
FUND FINANCIAL STATEMENTS (Continued)
collecting taxes. The Capital Projects Fund accounts for financial resources restricted,conm-iiitted or assigned for acquisition or construction of facilities and related costs.
Governmental funds are reported in each of the financial statements. The focus in the fundstatements provides a distinctive view of the District’s governmental funds. These statementsreport short-term fiscal accountability focusing on the use of spendable resources and balances ofspendable resources available at the end of the year. They are useful in evaluating annualfinancing requirements of the District and the commitment of spendable resources for the near-term.
Since the government-wide focus includes the long-term view, comparisons between these twoperspectives may provide insight into the long-term impact of short-term financing decisions.The adjustments columns, the Reconciliation of the Governmental Funds Balance Sheet to theStatement of Net Position on page 12 and the Reconciliation of the Governmental FundsStatement of Revenues, Expenditures and Changes in Fund Balances to the Statement ofActivities on page 15 explain the differences between the two presentations and assist inunderstanding the differences between these two perspectives.
NOTES TO THE FINANCIAL STATEMENTS
The accompanying notes to the financial statements provide information essential to a fullunderstanding of the government-wide and fund financial statements. The notes to the financialstatements can be found on pages 16 through 31 in this report.
OTHER INFORMATION
In addition to the financial statements and accompanying notes, this report also presents certainrequired supplementary information (“RSI”). A budgetary comparison schedule is included asRSI for the General Fund.
GOVERNMENT-WIDE FINANCIAL ANALYSIS
Net position may serve over time as a useful indicator of the District’s financial position. In thecase of the District, liabilities and deferred inflows of resources exceeded assets by $1,744,031as of February 28, 2014.
A portion of the District’s net position reflects its net investment in capital assets (water,wastewater and drainage facilities less any debt used to acquire those assets that is stilloutstanding). The District uses these assets to provide water and wastewater services.
The following is a comparative analysis of government-wide changes in net position:
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DENTON COUNTY FRESH WATER SUPPLY DISTRICT NO. 8-CMANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED FEBRUARY 28, 2014
GOVERNMENT-WIDE FINANCIAL ANALYSIS (Continued)
Summary of Changes in the Statement of Net Position
ChangePositive
2013 (Negative)
$ 4,646,964 $ 3,703,830 $ 943,134
______________
13,130,578
______________
$ 24,386,666 $ 16,834,408 $ 7,552,258
$ 5,549,277 $ 4,863,179 $ (686,098)
$ 24,878,831
$ 1,251,866
12,389,858911,474
$ 18,164,511 $ (6,714,320)
$ 930,137 $ (321,729)Net Position:
Net liwestment in Capital AssetsRestrictedUnrestricted
Total Net Position
$ (3,888,021)508,346
1,635,644
$ (1,744,031)
$ (4,355,008)780,834
1,313,934
$ (2,260,240)
$ 466,987(272,488)321,710
$ 516,209
The following table provides a summary of the District’s operations for the years endingFebruary 28, 2014, and February 28, 2013. The District’s net position increased by $516,209.
Summary of Changes in the Statement of Activities
ChangePositive
Revenues:Property TaxesCharges for ServicesOther Revenues
Total Revenues
Expenses for Services
Change in Net Position
Net Position, Beginning of Year
2014
$ 1,384,2121,020,350
967,842
2013 (Negative)
$ 1,194,356 $ 189,8561,214,712 (194,362)
39735 928,107
$ 3,372,404 $ 2,448,803 $ 923,601
2,856,195 2.658,123 (198,072)
$ 516,209 $ (209,320) $ 725,529
(2,050,920)
___________________________
$ (2,260,240)
_____________
2014
Current and Other AssetsCapital Assets (Net of Accumulated
Depreciation)
Total Assets
Due to DeveloperLong -Term LiabilitiesOther Liabilities
Total Liabilities
Deferred Inflows of Resources
19,739,702 6,609,124
17,797,1511,532,403
(5,407,293)(620,929)
Net Position, End of Year
(2,260,240)
$ (1,744,031)
(209,320)
$ 516,209
5
DENTON COUNTY FRESH WATER SUPPLY DISTRICT NO. 8-CMANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED FEBRUARY 28, 2014
FINANCIAL ANALYSIS OF THE DISTRICT’S GOVERNMENTAL FUNDS
The District’s total fund balances as of February 28, 2014, were $2,721,921, an increase of$257,297 from the prior year.
The General Fund fund balance increased by $303,832, primarily due to property tax revenuesand service revenues exceeding operating expenditures for the year.
The Debt Service Fund fund balance decreased by $87,984, primarily due to the structure of theDistrict’s outstanding debt.
The Capital Projects Fund fund balance increased by $41,449 due to the sale of Series 2013 andSeries 2013A Road Bonds.
GENERAL FUND BUDGETARY HIGHLIGHTS
The Board of Directors amended the budget during the current year. Actual revenues were$16,572 more than budgeted revenues. Actual expenditures were $820,281 more than budgetedexpenditures. See the budget to actual comparison on page 33.
CAPITAL ASSETS
The District’s capital assets as of February 28, 2014, amount to $19,739,702 (net of accumulateddepreciation). These capital assets include roads, land and the water, wastewater and drainagesystems. Capital asset activity during the current year include Frisco Ranch, Phase 1 andRockhill Road paving, the Shops at Sunset Pointe paving, Frisco Hills, Phase 3A and 4A paving,Frisco Hills Phase 1 offsite water lines and drainage and Frisco Hills lift station.
Capital Assets At Year-End, Net of Accumulated DepreciationChangePositive
2014 2013 (Negative)
Capital Assets Not Being Depreciated:Land and Land Improvements $ 910,186 $ 910,186 $Construction in Progress 900,320 900,320
Capital Assets, Net of AccumulatedDepreciation:Roads 8,468,356 4,302,008 4,166,348Water System 3,769,716 3,153,145 616,571Wastewater System 2,365,582 2,083,652 281,930Drainage System 2,286,521 1,605,608 680,913Wastewater Service Fee-Town
of Little Elm 887,475 919,928 (32,453)Certificate of Convenience
and Necessity 151,546 156,051 (4,505)
Total Net Capital Assets $ 19,739,702 $ 13,130,578 $ 6,609,124
-6-
DENTON COUNTY FRESH WATER SUPPLY DISTRICT NO. 8-CMANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED FEBRUARY 28, 2014
CAPITAL ASSETS (Continued)
Additional information on the District’s capital assets can be found in Note 6 of this report.
LONG-TERM DEBT ACTIVITY
As of February 28, 2014, the District had total bond debt payable of $18,735,000. The changesin the debt position of the District during the year ended February 28, 2014, are summarized asfollows:
Bond Debt Payable, March 1, 2013 $ 13,115,000
Add: Bond Sale - Series 2013 Road Bonds 3,000,000
Add: Bond Sale - Series 2013A Road Bonds 3,000,000
Less: Bond Principal Paid 380,000
Bond Debt Payable, February 28, 2014 $ 18,735,000
The District does not carry an underlying rating. The Series 2008 Road Bonds and Series 2012Tax Bonds do not carry an insured rating. The Series 2005 Tax Bonds and Series 2006 RoadBonds carry insured ratings of “B+” by virtue of bond insurance issued by Radian AssetAssurance Inc. The Series 2013 and Series 2013A Road Bonds carry insured ratings of “AA-”by virtue of bond insurance issued by Assured Guaranty Municipal (“AGM”). The above ratingsreflect all changes through the fiscal year ended February 28, 2014. Subsequent to year end,AGM’s rating was upgraded to “AA”.
CONTACTING THE DISTRICT’S MANAGEMENT
This financial report is designed to provide a general overview of the District’s finances.Questions concerning any of the information provided in this report or requests for additionalinformation should be addressed to Denton County Fresh Water Supply District No. 8-C, doKelly Hart & Hallman LLP, 201 Main Street, Suite 2500, Fort Worth, Texas 76102.
-7-
DENTON COUNTY FRESH WATER SUPPLY DISTRICT NO. 8-CSTATEMENT OF NET POSITION AND
GOVERNMENTAL FUNDS BALANCE SHEETFEBRUARY 28, 2014
DebtGeneral Fund Service Fund
ASSETSCash, Note 5 $ 1,237,458 $ 1,135,053Investments, NoteS 546,910 480,000Cash with Fiscal Agent 462,669Receivables:
Property Taxes 38,008 102,054Service Accounts (Net of Allowance for
Uncollectible Accounts of $23,000) 77,063Accrued Interest 331 809Other 4,065
Due from Other Funds, Note 12 30,891Prepaid Costs 6,667Land, Note 6Construction in Progress, Note 6Capital Assets (Net of Accumulated
Depreciation), Note 6
TOTAL ASSETS $ 1,910,502 $ 2,211,476
The accompanying notes to the financialstatements are an integral part of this report.
-8-
Capital Statement ofProjects Fund Total Adjustments Net Position
$ 555,877 $ 2,928,388 $ $ 2,928,3881,026,910 1,026,910
462,669 462,669
140,062 140,062
77,063 77,0631,140 1,1404,065 4,065
30,891 (30,891)6,667 6,667
910,186 910,186900,320 900,320
17,929,196 17,929,196
$ 555,877 $ 4,677,855 $ 19,708,811 $ 24,386,666
The accompanying notes to the financialstatements are an integral part of this report.
-9-
DENTON COUNTY FRESH WATER SUPPLY DISTRICT NO. 8-CSTATEMENT OF NET POSITION AND
GOVERNMENTAL FUNDS BALANCE SHEETFEBRUARY 28, 2014
DebtGeneral Fund Service Fund
LIABILITIESAccounts Payable $ 61,847 $Accrued Interest PayableDue to Other Governmental Units 61,310Due to Developers, Note 10Due to Other Funds, Note 12 30,891Security Deposits 120,810Accrued Interest at Time of Sale 14,449Long-Term Liabilities:
Due Within One Year, Note 3Due After One Year, Note 3
TOTAL LIABILITIES $ 274,858 $ 14,449
DEFERRED INFLOWS OF RESOURCESProperty Taxes $ 38,008 $ 1,272,852
FUND BALANCESNonspendable:
Prepaid Costs $ 6,667 $Restricted for Authorized Construction:
Bond ProceedsNet Investment Revenues
Restricted for Debt Service 924,175Unassigned 1,590,969
TOTAL FUND BALANCES $ 1,597,636 $ 924,175
TOTAL LIABILITIES, DEFERRED INFLOWSOF RESOURCES AND FUND BALANCES $ 1,910,502 $ 2,211,476
NET POSITIONNet Iiivestment in Capital AssetsRestricted for:
Debt ServiceCapital Projects
Unrestricted
TOTAL NET POSITION
The accompanying notes to the financialstatements are an integral part of this report.
-10-
Capital Statement ofProjects Fund Total Adjustments Net Position
$ 355,767 $ 417,614 $ $ 417,614462,669 462,669
61,310 61,3105,549,277 5,549,277
30,891 (30,891)120,810 120,810
14,449 (14,449)
470,000 470,00017,797,151 17,797,151
$ 355,767 $ 645,074 $ 24,233,757 $ 24,878,831
$ -0- $ 1,310,860 $ (58,994) $ 1,251,866
$ $ 6,667 $ (6,667) $
188,705 188,705 (188,705)11,405 11,405 (11,405)
924,175 (924,175)1,590,969 (1,590,969)
$ 200,110 $ 2,721,921 $ (2,721,921) $ -0-
$ 555,877 $ 4,677,855
$ (3,888,021) $ (3,888,021)
496,941 496,94111,405 11,405
1,635,644 1,635,644
$ (1,744,031) $ (1,744,031)
The accompanying notes to the financialstatements are an integral part of this report.
-11-
DENTON COUNTY FRESH WATER SUPPLY DISTRICT NO. 8-CRECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET
TO THE STATEMENT OF NET POSITIONFEBRUARY 28, 2014
Total Fund Balances - Governmental Funds $ 2,721,921
Amounts reported for governmental activities in the Statement of Net Position aredifferent because:
Land, construction in progress and capital assets used in governmental activities arenot current financial resources and, therefore, are not reported as assets in thegovernmental funds. 19,739,702
Deferred tax revenues for the 2012 and prior debt service tax levies and the 2013and prior maintenance tax levies became part of recognized revenue in thegovernmental activities of the District. 58,994
Certain liabilities are not due and payable in the current period and, therefore, arenot reported as liabilities in the governmental funds. These liabilities at year endconsist of:
Due to Developer $ (5,549,277)Accrued Interest Payable (448,220)Long-Term Payable Within One Year (470,000)Long-Term Payable After One Year (17,797,151) (24,264,648)
Total Net Position - Governmental Activities $ (1,744,031)
The accompanying notes to the financialstatements are an integral part of this report.
-12-
THIS PAGE INTENTIONALLY LEFT BLANK
DENTON COUNTY FRESH WATER SUPPLY DISTRICT NO. 8-CSTATEMENT OF ACTIVITIES AND GOVERNMENTAL FUND REVENUES,
EXPENDITURES AND CHANGES IN FUND BALANCESFOR THE YEAR ENDED FEBRUARY 28, 2014
Debt
REVENUESProperty TaxesWater ServiceWastewater ServiceSolid Waste RevenuePenalty and InterestPermit FeesInvestment RevenuesSales Tax Receipts, Note 14Miscellaneous Revenues
TOTAL REVENUES
___________
$ 933,526
EXPENDITURES/EXPENSESService Operations:
Professional FeesContracted ServicesPurchased Water Service, Note 13Purchased Wastewater Service, Note 8UtilitiesRepairs and MaintenanceDepreciation, Note 6Other
Capital OutlayDebt Service:
Bond Issuance CostsBond PrincipalBond Interest
TOTAL EXPENDITURES/EXPENSES
__________ __________
EXCESS (DEFICIENCY) OF REVENUES OVEREXPENDITURES/EXPENSES
___________
$ (87,984)
OTHER FINANCING SOURCES (USES)Long-Term Debt Issued, Note 15Bond Discount
Contribution from Valeneia PID
_______________
TOTAL OTHER FINANCING SOURCES (USES)
__________
$ -0-
NET CHANGE IN FUND BALANCES
CHANGE IN NET POSITION
FUND BALANCES/NET POSITION - MARCH 1,2013
__________
1,012,159
FUND BALANCES/NET POSITION - FEBRUARY 28, 2014 $ 924,175
Service Fund
$ 926,458
4,051
3,017
15,864
General Fund
$ 437,382407,508322,101121,25425,786
139,6503,842
12,7568,459
$ 1,478,738
$ 216,290295,030
43,384178,50973,297
113,229
80,6121,111,625
S 2,111,976
$ (633,238)
$
937,070
$ 937,070
$ 303,832
1,293,804
$ 1,597,636
$
380,000625,629
$ 1,021,510
17
$
$ (87,984)
The accompanying notes to the financialstatements are an integral part of this report.
- 13 -
CapitalProjects Fund Total
Statement ofAdjustments Activities
948,032
S 3,372,404
S 231,290310,89443,384
178,50973,297
1 13,229631,134
80,629
356,811
837,018
S 2,856,195
5 516,209
S
5 -0-
516,209
(2,260,240)
$ (1,744,031)
the financial
$407,508322,101121,25429,837
139,650195 7,054
407,508322,101121,25429,837
139,6507,054
12,7562,503
S 2,698
5 15,000
5,442,535
356,811
5 5,814,346
$ 1,363,840 $ 20,372 $ 1,384,212
12,75610,962 937,070
_______________
$ 2,414,962 $ 957,442
______________
$ 231,290 $310,89443,384
178,50973,297
113,229631,134
80,6296,554,160 (6,554,160)
356,811380,000 (380,000)625,629 211,389
_____________
$ 8,947,832 $ (6,091,637)
______________
$ (6,532,870) $ 7,049,079
_______________
$ 6,000,000 $ (6,000,000)(146,903) 146,903
937,070 (937,070)
______________
$ 6,790,167 $ (6,790,167)
______________
$ 257,297 $ (257,297) $
516,209
2,464,624 (4,724,864) —
_______________
$ (4,465,952)
_______________
accompanying notes to
5 (5,811,648)
5 6,000,000(146,903)
S 5,853,097
S 41,449
158,661
5 200,110 $ 2,721,921
Thestatements are an integral part of this report.
- 14-
DENTON COUNTY FRESH WATER SUPPLY DISTRICT NO. 8-CRECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF
REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCESTO THE STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED FEBRUARY 28, 2014
Net Change in Fund Balances - Governmental Funds $ 257,297
Amounts reported for governmental activities in the Statement of Activities aredifferent because:
Governmental funds report tax revenues when collected. However, in theStatement of Activities, revenues are recorded in the accounting period for whichthe taxes are levied. 20,372
Governmental funds do not account for depreciation. However, in the Statement ofNet Position, capital assets are depreciated and depreciation expense is recorded inthe Statement of Activities. (631,134)
Governmental funds report capital expenditures as expenditures in the periodpurchased. However, in the Statement of Net Position, capital assets are increasedby new purchases and the Statement of Activities is not affected. 6,554,160
Governmental funds report bond discounts as other financing uses in the year paid.However, in the Statement of Net Position, bond discounts are amortized over thelife of the bonds and the current year amortized portion is recorded in the Statementof Activities. 146,903
Governmental funds report bond principal payments as expenditures. However, inthe Statement of Net Position, bond principal payments are reported as decreases inlong-term liabilities. 380,000
Governmental funds report interest expenditures on long-term debt as expendituresin the year paid. However, in the Statement of Net Position, interest is accrued onthe long-term debt through fiscal year-end. (211,389)
Governmental funds report bond proceeds as other financing sources. Issued bondsincrease long-term liabilities in the Statement of Net Position.
Change in Net Position - Governmental Activities
The accompanying notes to the financialstatements are an integral part of this report.
(6,000,000)
$ 516,209
- 15 -
DENTON COUNTY FRESH WATER SUPPLY DISTRICT NO. 8-CNOTES TO TIlE FINANCIAL STATEMENTS
FEBRUARY 28, 2014
NOTE 1. CREATION OF DISTRICT
On June 27, 2000, the Denton County Conmiissioners Court approved the order creating DentonCounty Fresh Water Supply District No. 8 of Denton County, Texas (the “District”). As a resultof another election held on November 7, 2000, the voters approved the District’s assumption ofcertain rights, authority, privileges and functions of a road district and approved for the Districtto purchase, construct, acquire, own, operate, repair, improve and extend sanitary sewer system.On December 4, 2000, following a hearing, the governing board of the District approved theconversion of the District to a Water Control and Improvement District and conversion tooperating under Chapter 51 of the Texas Water Code and specifically reserved certain rightsunder Sections 53.029, 53.030 through 53.034, 53.040 through 53.041, 53.112, 53.121, and53.125 of the Texas Water Code.
At an election held within the boundaries of the District on May 5, 2001, voters approved thedivision of the District into two new districts of which Denton County Fresh Water SupplyDistrict No. 8-B was one. At an election held within the boundaries of District No. 8-B onNovember 5, 2002, voters approved the division of the District into two new districts of whichDenton County Fresh Water Supply District No. 8-C was one. The District held its first meetingon December 3, 2002. Pursuant to the provisions of Chapters 49, 51 and 53 of the Texas WaterCode, the District is empowered to purchase, operate and maintain all facilities, plants andimprovements necessary to provide water, sanitary sewer service, storm sewer drainage,irrigation, roads, solid waste collection and disposal, including recycling, parks and recreationalfacilities for the residents of the District. The District is also empowered to contract for oremploy its own peace officers with powers to make arrests and to establish, operate and maintaina fire department to perform all fire-fighting activities within the District.
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES
The accompanying basic financial statements have been prepared in accordance with accountingprinciples generally accepted in the United States of America as promulgated by theGovernmental Accounting Standards Board (“GASB”). In addition, the accounting records ofthe District are maintained generally in accordance with the Water District FinancialManagement Guide published by the Commission.
The District is a political subdivision of the State of Texas governed by an elected board. TheGASB has established the criteria for determining whether or not an entity is a primarygovernment or a component unit of a primary government. The primary criteria are that it has aseparately elected governing body, it is legally separate, and it is fiscally independent of otherstate and local governments. Under these criteria, the District is considered a primarygovernment and is not a component unit of any other government. Additionally, no other entitiesmeet the criteria for inclusion in the District’s financial statement as component units.
- 16-
DENTON COUNTY FRESH WATER SUPPLY DISTRICT NO. 8-CNOTES TO THE FINANCIAL STATEMENTS
FEBRUARY 28, 2014
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES (Continued)
Financial Statement Presentation
These financial statements have been prepared in accordance with GASB Codification ofGovernmental Accounting and Financial Reporting Standards Part II, Financial Reporting.
The GASB Codification sets forth standards for external financial reporting for all state and localgovernment entities, which include a requirement for a Statement of Net Position and aStatement of Activities. It requires the classification of net Position into three components: NetInvestment in Capital Assets; Restricted; and Unrestricted. These classifications are defined asfollows:
• Net Investment in Capital Assets — This component of net position consists of capitalassets, including restricted capital assets, net of accumulated depreciation and reduced bythe outstanding balances of any bonds, mortgages, notes, or other borrowings that areattributable to the acquisition, construction, or improvements of those assets.
• Restricted Net Position — This component of net position consists of external constraintsplaced on the use of assets imposed by creditors (such as through debt covenants),grantors, contributors, or laws or regulation of other governments or constraints imposedby law through constitutional provisions or enabling legislation.
• Unrestricted Net Position — This component of net position consists of assets that do notmeet the definition of Restricted or Net Investment in Capital Assets.
When both restricted and unrestricted resources are available for use, generally it is the District’spolicy to use restricted resources first.
Government-Wide Financial Statements
The Statement of Net Position and the Statement of Activities display information about theDistrict as a whole. The District’s Statement of Net Position and Statement of Activities arecombined with the governmental fund financial statements. The District is viewed as a specialpurpose government and has the option of combining these financial statements.
The Statement of Net Position is reported by adjusting the governmental fund types to report onthe full accrual basis, economic resource basis, which recognizes all long-term assets andreceivables as well as long-term debt and obligations. Any amounts recorded due to and duefrom other funds are eliminated in the Statement of Net Position.
- 17 -
DENTON COUNTY FRESH WATER SUPPLY DISTRICT NO. 8-CNOTES TO THE FINANCIAL STATEMENTS
FEBRUARY 28, 2014
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES (Continued)
Government-Wide Financial Statements (Continued)
The Statement of Activities is reported by adjusting the governmental fund types to report onlyitems related to current year revenues and expenditures. Items such as capital outlay areallocated over their estimated useful lives as depreciation expense.
Fund Financial Statements
As discussed above, the District’s fund financial statements are combined with the government-wide statements. The fund statements include a Balance Sheet and Statement of Revenues,Expenditures and Changes in Fund Balances.
Governmental Funds - The District has three major governmental funds.
General Fund - To account for resources not required to be accounted for in another fund,customer service revenues, costs and general expenditures.
Debt Service Fund - To account for ad valorem taxes and financial resources restricted,committed or assigned for servicing bond debt and the cost of assessing and collecting taxes.
Capital Projects Fund - To account for financial resources restricted, committed or assigned foracquisition or construction of facilities and related costs.
Basis of Accounting
The District uses the modified accrual basis of accounting for governmental fund types. Themodified accrual basis of accounting recognizes revenues when both “measurable and available.”Measurable means the amount can be determined. Available means collectable within thecurrent period or soon enough thereafter to pay current liabilities. The District considers revenuereported in governmental funds to be available if they are collectable within 60 days after yearend. Also, under the modified accrual basis of accounting, expenditures are recorded when therelated fund liability is incurred, except for principal and interest on long-term debt, which arerecognized as expenditures when payment is due.
Property taxes considered available by the District and included in revenue include taxescollected during the period and taxes collected after year-end, which were considered availableto defray the expenditures of the current year. Deferred tax revenues are those taxes which theDistrict does not reasonably expect to be collected soon enough in the subsequent period tofinance current expenditures. Recognition of revenues for the 2013 debt service tax levied in thecurrent fiscal year has been deferred until the next fiscal year.
- Is -
DENTON COUNTY FRESH WATER SUPPLY DISTRICT NO. 8-CNOTES TO THE FINANCIAL STATEMENTS
FEBRUARY 28, 2014
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES (Continued)
Basis of Accounting (Continued)
Amounts transferred from one fund to another fund are reported as other financing sources oruses. Loans by one fund to another fund and amounts paid by one fund for another fund arereported as interfund receivables and payables in the Governmental Funds Balance Sheet if thereis intent to repay the amount and if the debtor fund has the ability to repay the advance on atimely basis.
Capital Assets
Capital assets, which include property, plant, equipment, and infrastructure assets, are reported inthe government-wide Statement of Net Position. All capital assets are valued at historical cost orestimated historical cost if actual historical cost is not available. Donated assets are valued attheir fair market value on the date donated. Repairs and maintenance are recorded asexpenditures in the governmental fund incurred and as an expense in the government-wideStatement of Activities. Capital asset additions, improvements and preservation costs that extendthe life of an asset are capitalized and depreciated over the estimated useful life of the asset.Interest costs, including developer interest, engineering fees and certain other costs arecapitalized as part of the asset.
Assets are capitalized, including infrastructure assets, if they have an original cost greater than$10,000 and a useful life over two years. Depreciation is calculated on each class of depreciableproperty using the straight-line method of depreciation. Estimated useful lives are as follows:
Years
Buildings 40Roads 30Water System 10-45Wastewater System 10-45Drainage System 10-45All Other Equipment 3-20
Budgeting
In compliance with governmental accounting principles, the Board of Directors annually adoptsan unappropriated budget for the General Fund. The budget was amended during the currentfiscal year.
- 19-
DENTON COUNTY FRESH WATER SUPPLY DISTRICT NO. 8-CNOTES TO THE FINANCIAL STATEMENTS
FEBRUARY 28, 2014
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES (Continued)
Pensions
The District has not established a pension plan as the District does not have employees. TheInternal Revenue Service has determined that fees of office received by Directors are consideredto be wages subject to federal income tax withholding for payroll purposes only.
Measurement Focus
Measurement focus is a term used to describe which transactions are recognized within thevarious financial statements. li the government-wide Statement of Net Position and Statementof Activities, the governmental activities are presented using the economic resourcesmeasurement focus. The accounting objectives of this measurement focus are the determinationof operating income, changes in net position, financial position, and cash flows. All assets andliabilities associated with the activities are reported. Fund equity is classified as net position.
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 thereported fund balances provide an indication of available spendable or appropriable resources.Operating statements of governmental fund types report increases and decreases in availablespendable resources. Fund balances in governmental funds are classified using the followinghierarchy:
Nonspendable: amounts that cannot be spent either because they are in nonspendable form orbecause they are legally or contractually required to be maintained intact.
Restricted: amounts that can be spent only for specific purposes because of constitutionalprovisions, or enabling legislation, or because of constraints that are imposed externally.
Committed: amounts that can be spent only for purposes determined by a formal action of theBoard of Directors. The Board is the highest level of decision-making authority for the District.This action must be made no later than the end of the fiscal year. Commitments may beestablished, modified, or rescinded only through ordinances or resolutions approved by theBoard. The District does not have any committed fund balances.
Assigned: amounts that do not meet the criteria to be classified as restricted or committed, butthat are intended to be used for specific purposes. The District has not adopted a formal policyregarding the assignment of fund balances and does not have any assigned fund balances.
- 20 -
DENTON COUNTY FRESH WATER SUPPLY DISTRICT NO. 8-CNOTES TO THE FINANCIAL STATEMENTS
FEBRUARY 28, 2014
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES (Continued)
Measurement Pocus (Continued)
Unassigned: all other spendable amounts in the General Fund.
When expenditures are incurred for which restricted, committed, assigned or unassigned fundbalances are available, the District considers amounts to have been spent first out of restrictedfunds, then committed funds, then assigned funds, and finally unassigned funds.
Accounting Estimates
The preparation of financial statements in conformity with accounting principles generallyaccepted in the United States of America requires management to make estimates andassumptions that affect the reported amount of assets and liabilities and disclosure of contingentassets and liabilities at the date of the financial statements and the reported amounts of revenuesand expenditures during the reporting period. Actual results could differ from those estimates.
NOTE 3. LONG-TERM DEBT
Series 2005 Series 2006 Series 2008
Amounts Outstanding—$3,490,000 $2,860,000 $3,185,000
February 28, 2014
Interest Rates 4.20% - 4.50% 4.00% - 4.25% 6.25% - 8.00%
Maturity Dates — Serially September 1, September 1, September 1,Beginning/Ending 20 14/2026 2014/2028 2014/2031
Interest Payment Dates March 1/ March 1/ March 1/September 1 September 1 September 1
Callable Dates September 1, 2013* September 1, 2015* September 1, 2016*
Series 2012 Series 2013 Series 2013A
Amounts Outstanding— $ 3,200,000 $ 3,000,000 $ 3,000,000
February 28, 2014
Interest Rates 3.25% - 3.80% 2.00% - 4.00% 3.00% - 4.85%
Maturity Dates — Serially September 1, September 1, September 1,Beginning/Ending 2014/2032 2014/2033 2015/2035
Interest Payment Dates March 1/ March 1/ March 1/September 1 September 1 September 1
Callable Dates September 1, 2022* September 1, 2023* September 1,2023*-21-
DENTON COUNTY FRESH WATER SUPPLY DISTRICT NO. 8-CNOTES TO TIlE FINANCIAL STATEMENTS
FEBRUARY 28, 2014
NOTE 3. LONG-TERM DEBT (Continued)
* Or any date thereafter at a price of par plus unpaid accrued interest to the date fixed forredemption. For the Series 2005 bond issue, the bonds maturing on September 1, 2015,2017, 2019, 2021, 2024 and 2026, are term bonds and are subject to mandatory redemptionbeginning September 1, 2014. For the Series 2006 bond issue, the bonds maturing onSeptember 1, 2018, 2020, 2022, 2024, 2026 and 2028, are term bonds and are subject tomandatory redemption beginning September 1, 2017. For the Series 2008 bond issue, thebonds maturing on September 1, 2018, and September 1, 2031, are term bonds and aresubject to mandatory redemption beginning September 1, 2017, and September 1, 2019,respectively. For the Series 2012 bond issue, the bonds maturing on September 1, 2026,2028, 2030 and 2032, are term bonds and are subject to mandatory redemption beginningSeptember 1, 2025. For the Series 2013 road bond issue, the bonds maturing on September1, 2028, are term bonds and are subject to mandatory redemption beginning September 1,2023. For the Series 2013A road bond issue, the bonds maturing on September 1, 2027,2030, and 2033, are term bonds and are subject to mandatory redemption on September 1,2023, 2028 and 2031, respectively.
The following is a summary of transactions regarding long-term liabilities for the year endedFebruary 28, 2014:
March 1, February 28,2013 Additions Retirements 2014
BondsPayable $ 13,115,000 $ 6,000,000 $ 380,000 $ 18,735,000Unamortized Discounts (345,142) (146,903) (24,196) (467,849)Total Long-Term Liabilities $ 12,769,858 $ 5,853,097 $ 355,804 $ 18,267,151
Amount Due Within One Year $ 470,000Amount Due After One Year 17,797,151Total Long-Term Liabilities $ 18,267,151
The bonds of the District are payable from the proceeds of an ad valorem tax levied upon allproperty subject to taxation within the District, without limitation as to rate or amount. As ofFebruary 28, 2014, the debt service requirements on the bonds outstanding were as follows:
Fiscal Year Principal Interest Total2015 470,000 907,797 1,377,7972016 550,000 869,672 1,419,6722017 575,000 846,567 1,421,5672018 600,000 821,655 1,421,6552019 625,000 795,292 1,420,292
2020-2024 3,610,000 3,499,221 7,109,2212025-2029 4,635,000 2,488,967 7,123,9672030-2034 5,925,000 1,224,786 7,149,7862035-2036 1,745,000 127,191 1,872,191
$ 18,735,000 $ 11,581,148 $ 30,316,148
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DENTON COUNTY FRESH WATER SUPPLY DISTRICT NO. 8-CNOTES TO THE FINANCIAL STATEMENTS
FEBRUARY 28, 2014
NOTE 3. LONG-TERM DEBT (Continued)
During current year, the District levied an ad valorem debt service tax rate of $0.7331 per $100of assessed valuation, which resulted in a tax levy of $1,251,866 on the adjusted taxablevaluation of $170,563,493 for the 2013 tax year. The bond orders require the District to levy andcollect an ad valorem debt service tax sufficient to pay interest and principal on bonds when dueand the cost of assessing and collecting taxes. See Note 7 for the maintenance tax levy.
The District’s tax calendar is as follows:
Levy Date - October 1, as soon thereafter as practicable.
Lien Date - January 1.
Due Date - Upon receipt but not later than January 31.
Delinquent Date - February 1, at which time the taxpayer is liable for penalty and interest.
NOTE 4. SIGNIFICANT BOND ORDER AND LEGAL REQUIREMENTS
A. The bond orders state that the Board may place money in any fund created by the bondorder in time or demand deposits or invest such monies as authorized by law at the timeof deposit. Interest earnings derived from the investment of proceeds from the sale ofbonds shall be used along with other bond proceeds for the purpose for which bonds areissued after completion of such purpose. If any of such interest earnings remain on hand,such interest earnings shall be deposited in the Debt Service Fund.
B. For the bond sold, the District has covenanted that it will take all necessary steps tocomply with the requirement that rebatable arbitrage earnings on the investment of thegross proceeds of the bonds be rebated to the federal government, within the meaning ofSection 148(f) of the Internal Revenue Code. The minimum requirement fordetermination of the rebatable amount is on the five-year anniversary of each issue.
C. The bond orders state, so long as any of the bonds or the additional bonds remainoutstanding, the District covenants that it will at all times maintain the system or withinthe limits of its authority cause the same to be maintained, in good condition and workingorder and will operate the same, or cause the same to be operated, in an efficient andeconomical manner at a reasonable cost and in accordance with sound managementprinciples. In operating and maintaining the system, the District will comply with allcontractual provisions and agreements entered into by it and with all valid rules,regulations, directions or orders of any governmental, administrative or judicial bodyhaving jurisdiction over the District. The bond orders state that the District will maintaininsurance in the system of a kind and in an amount which usually would be carried bymunicipal corporations and political subdivisions in Texas engaged in a similar type ofbusiness, but considering any governmental immunities to which the District may beentitled.
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DENTON COUNTY FRESH WATER SUPPLY DISTRICT NO. 8-CNOTES TO THE FINANCIAL STATEMENTS
FEBRUARY 28, 2014
NOTE 5. DEPOSITS AND INVESTMENTS
Deposits
Custodial credit risk is the risk that, in the event of the failure of a depository financialinstitution, a government will not be able to recover deposits or will not be able to recovercollateral securities that are in the possession of an outside party. The District’s deposit policyfor custodial credit risk requires compliance with the provisions of Texas statutes.
Texas statutes require that any cash balance in any fund shall, to the extent not insured by theFederal Deposit Insurance Corporation or its successor, be continuously secured by a validpledge to the District of securities eligible under the laws of Texas to secure the funds of theDistrict, having an aggregate market value, including accrued interest, at all times equal to theuninsured cash balance in the fund to which such securities are pledged. At fiscal year end, thecarrying amount of the District’s deposits was $3,955,298 and the bank balance was $4,314,388.Of the bank balance, $1,263,255 was covered by federal depository insurance and the balancewas collateralized by securities held in a third—party depository in the District’s name.
The carrying values of the deposits are included in the Governmental Funds Balance Sheet andthe Statement of Net Position at February 28, 2014, as listed below:
CertificatesCash of Deposit Total
GENERALFIJND $ 1,237,458 $ 546,910 $ 1,784,368
DEBT SERVICE FUND 1,135,053 480,000 1,615,053
CAPITAL PROJECTS FUND 555,877 555,877
TOTAL DEPOSITS S 2,928,388 S 1,026,910 $ 3,955,298
Investments
Under Texas law, the District is required to invest its funds under written investment policies thatprimarily emphasize safety of principal and liquidity and that address investment diversification,yield, maturity, and the quality and capability of investment management, and all District fundsmust be invested in accordance with the following investment objectives: understanding thesuitability of the investment to the District’s financial requirements, first; preservation and safetyof principal, second; liquidity, third; marketability of the investments if the need arises toliquidate the investment before maturity, fourth; diversification of the investment portfolio, fifth;and yield, sixth. The District’s investments must be made “with judgment and care, underprevailing circumstances, that a person of prudence, discretion, and intelligence would exercisein the management of the person’s own affairs, not for speculation, but for investment,considering the probable safety of capital and the probable income to be derived.” No personmay invest District funds without express written authority from the Board of Directors.
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DENTON COUNTY FRESH WATER SUPPLY DISTRICT NO. 8-CNOTES TO THE FINANCIAL STATEMENTS
FEBRUARY 28,2014
NOTE 5. DEPOSITS AND INVESTMENTS
Investments (Continued)
Texas statutes include specifications for and limitations applicable to the District and itsauthority to purchase investments as defined in the Public Funds Investment Act. Authorizedinvestments are summarized as follows: (1) obligations of the United States or its agencies andinstrumentalities, (2) direct obligations of the State of Texas or its agencies and instrumentalities,(3) certain collateralized mortgage obligations, (4) other obligations, the principal of and intereston which are unconditionally guaranteed or insured by the State ofTexas or the United States orits agencies and instrumentalities, including obligations that are fully guaranteed or insured bythe Federal Deposit Insurance Corporation or by the explicit full faith and credit of the UnitedStates, (5) certain A rated or higher obligations of states, agencies, counties, cities, and otherpolitical subdivisions of any state, (6) bonds issued, assumed or guaranteed by the State of Israel,(7) insured or collateralized certificates of deposit, (8) certain fully collateralized repurchaseagreements secured by delivery, (9) certain bankers’ acceptances with limitations, (10)commercial paper rated A-I or P-l or higher and a maturity of 270 days or less, (11) no-loadmoney market mutual funds and no-load mutual funds with limitations, (12) certain guaranteedinvestment contracts, (13) certain qualified governmental investment pools and (14) a qualifiedsecurities lending program.
As of February 28, 2014, the District had the following investments and maturities:
Maturities in YearsFund and Less Than More Than
Investment Type Fair Value 1 1-5 6-10 10
GENERAL FUNDCertificates of Deposit $ 546,910 $ 546,910 $ $ $
DEBT SERVICE FUNDCertificates of Deposit 480,000 480,000
TOTALINVESTMENTS $1,026,910 $1,026,910 $ -0- $ -0- $ -0-
Credit risk is the risk that the issuer or other counter party to an investment will not fulfill itsobligation. The District manages credit risk by investing in certificates of deposit with balancesthat are covered by either the FDIC or pledged securities.
Interest rate risk is the risk that changes in interest rates will adversely affect the fair value of aninvestment. The District manages interest rate risk by investing in certificates of deposit withmaturities of less than one year.
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DENTON COUNTY FRESH WATER SUPPLY DISTRICT NO. 8-CNOTES TO THE FINANCIAL STATEMENTS
FEBRUARY 28, 2014
NOTES. DEPOSITS AND INVESTMENTS
Restrictions
All cash and investments of the Debt Service Fund are restricted for the payment of debt serviceand the cost of assessing and collecting taxes. All cash and investments of the Capital ProjectsFund are restricted for the purchase of capital assets.
NOTE 6. CAPITAL ASSETS
Capital asset activity for the year ended February 28, 2014 is as follows:
March 1, February 28,2013 Increases Decreases 2014
Capital Assets Not Being DepreciatedLand and Land Improvements $ 910,186 $ $ $ 910,186Construction in Progress 7,240,258 6,339,938 900,320
Total Capital Assets Not BeingDepreciated $ 910,186 $ 7,240,258 $ 6,339,938 $ 1,810,506
Capital Assets Subjectto DepreciationRoads $ 5,607,839 $ 4,481,615 $ $ 10,089,454Water System 3,933,745 753,985 4,687,730Wastewater System 2,461,763 349,799 2,811,562Drainage System 1,827,888 754,539 2,582,427Wastewater Service Fee-Town
of Little Elm 1,202,995 1,202,995Certificate of Convenience and
Necessity 180,227 180,227
Total Capital AssetsSubject to Depreciation $ 15,214,457 $ 6,339,938 $ -0- $ 21,554,395
Less Accumulated DepreciationRoads $ 1,305,831 $ 315,267 $ $ 1,621,098Water System 780,600 137,414 918,014Wastewater System 378,111 67,869 445,980Drainage System 222,280 73,626 295,906Wastewater Service Fee-Town
ofLittleElm 283,067 32,453 315,520Certificate of Convenience and
Necessity 24,176 4,505
___________
28,681
Total Accumulated Depreciation $ 2,994,065 $ 631,134 $ -0- $ 3,625,199
Total Depreciable Capital Assets, Net ofAccumulated Depreciation $ 12,220,392 $ 5,708,804 $ -0- $ 17,929,196
Total Capital Assets, Net of AccumulatedDepreciation $ 13,130,578 $ 12,949,062 $ 6,339,938 $ 19,739,702
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DENTON COUNTY FRESH WATER SUPPLY DISTRICT NO. 8-CNOTES TO THE FINANCIAL STATEMENTS
FEBRUARY 28,2014
NOTE 7. MAINTENANCE TAX
On May 3, 2003, voters of the District approved the levy and collection of a maintenance tax inan unlimited amount per $100 of assessed valuation of taxable property within the District. Themaintenance tax will be used for maintenance purposes to include funds for planning,maintaining, repairing and operating all necessary plants, properties, owned or contractedfacilities and improvements of the District and for proper services, engineering and legal fees,and operational and administrative costs in accordance with Section 49.107 of the Texas WaterCode. During the current year, the District levied an ad valorem maintenance tax rate of$0.27669 per $100 of assessed valuation, which resulted in a tax levy of $455,767 on theadjusted taxable valuation of $170,563,493 for the 2013 tax year.
NOTE 8. SEWER TREATMENT AGREEMENT
On March 13, 2003, the District approved the Assignment, Assumption, Release andRestatement of Sanitary Sewer Extension and Wholesale Waste Water Collection ServiceAgreement between the District, Denton Fresh Water Supply District No. 8-B (“District No. 8-B”) and the Town of Little Elm (“Little Elm”). This agreement restated the original agreemententered into between District No. 8-B and Little Elm prior to the division of District No. 8-B intotwo districts. The agreement releases District No. 8-B from all rights and obligations of theoriginal agreement and assigns them to the District.
In accordance with the agreement, the District was responsible for extending Little Elm’s sewersystem in order for the District’s sewage to be transported to Little Elm. As part of the extensionproject, the District installed a master meter in order to determine actual flow of sewage. Uponcompletion of the extension project, the constructed facilities were dedicated to Little Elm andthereafter will be owned and maintained by Little Elm at its sole expense. As furtherconsideration for the right to connect to and use Little Elm’s wastewater treatment plant andwastewater collection system, the District paid Little Elm $750,000.
On January 20, 2004, the District and Little Elm entered into Option Agreement No. 1, whereby,the District added land and needed Little Elm to provide wastewater service for an estimated 600additional residential units. In accordance with the option agreement, the District and Little Elmagreed to amend the service agreement to provide for an additional extension to the sewer systemand service to the added land. The total fee for the additional capacity to service the estimated600 residential units will be $500,000. The District paid Little Elm, after receipt of the moneyfrom the Developer, $100,000 upon execution of the option agreement and paid Little Elm$250,000 upon the execution of the amendment to the service agreement. Amendment No. Iwas effective on May 17, 2006, and amended on October 21, 2009, and on March 28, 2011. Inaccordance with the Second Amendment to Amendment No. 1 of the service agreement, theDistrict agreed to pay Little Elm $150,000 on or before December 31, 2011. Under theamendment, the District will pay Little Elm impact fees of $1,200 per residential unit.
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DENTON COUNTY FRESH WATER SUPPLY DISTRICT NO. 8-CNOTES TO THE FINANCIAL STATEMENTS
FEBRUARY 28, 2014
NOTES. SEWER TREATMENT AGREEMENT (Continued)
Effective March 20, 2012, the Frisco Hills, Frisco Ranch and the Preserve DevelopmentAgreement, Interlocal Agreement, and Compromise and Settlement Agreement, as Revised for2012 (Revised Agreement) was entered into by the District, Little Elm and the developers withinthe District. In accordance with the provisions of this agreement, the Second Amendment toAmendment No. 1 of the service agreement was cancelled and Little Elm and the Districtacknowledged that the S150,000 payment due on December 31, 2011, need not be paid to LittleElm and that such obligation will be considered fully satisfied by the District in light of the otherterms and considerations set forth in the Revised Agreement.
On May 17, 2006, the District and Little Elm entered into Option Agreement No. 2, whereby, theDistrict will be adding land and will need Little Elm to provide wastewater service for anestimated 750 additional residential units. The total fee for the additional capacity to service theestimated 750 residential units will be $500,000. The District paid Little Elm, after receipt of themoney from the Developer, $100,000 upon execution of this option agreement. The District willpay Little Elm $250,000 upon the execution of the amendment to the service agreement and willpay $150,000 on or before the third anniversary of the execution of the amended serviceagreement. The $100,000 option payment is non-refundable under any circumstance.Amendment No. 2 became effective December 3, 2008, and provided for impact fees to be paidto Little Elm of $1,200 per residential unit. Little Elm will bill the District quarterly for sewerservice. Little Elm will read the master meter and calculate its billing according to the followingformula:
Treatment Cost X Outside Town Rate X (Actual Plow/I ,000);
with “Treatment Cost” being Little Elm’s historic treatment cost for sewage for its wastewatertreatment plant per 1,000 gallons; “Outside Town Rate” being 1.25; and “Actual Flow” being thewastewater flow through the master meter each quarter.
The District established a deposit fund (“Sewer Fund”) and deposited into the sewer fund anamount equal to four quarterly payments for sewer service, as estimated by the District and LittleElm. The District will maintain at all times an amount in the sewer fund equal to the last fourquarterly payments (“minimum balance”) owed to Little Elm, and shall be authorized towithdraw only the amount that exceeds the minimum balance. As collateral security for theprompt payment and performance in full of the District’s obligation to make quarterly payments,the District will grant to Little Elm a lien and security interest in and to the sewer fund. If theDistrict fails to make a payment on a quarterly bill within 30 days of receipt of the amount owed,Little Elm will be authorized to withdraw the amount owed from the sewer fund and shallimmediately notify the District of such withdrawal. The District will have 10 days to depositinto the sewer fund the amount withdrawn by Little EJm. The failure of the District to maintainless than the minimum balance shall be considered a default of the agreement. During thecurrent fiscal year, the District paid Little Elm $178,509 for wastewater service in connectionwith this agreement.
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DENTON COUNTY FRESH WATER SUPPLY DISTRICT NO. 8-CNOTES TO THE FINANCIAL STATEMENTS
FEBRUARY 28, 2014
NOTE 9. PEACE OFFICER SERVICES AGREEMENT
On November 17, 2010, the District entered an Tnterlocal Cooperation Agreement for PeaceOfficer Services with Little Elm, effective November 1, 2010. Under this agreement, Little Elmhas agreed to provide certain patrol and law enforcement services to the District. The District isrequired to make monthly payments from current revenues toward an agreed-upon annual feeThis agreement will renew annually until terminated by either party. The current annual fee is$40,000 for the term expiring on October 31, 2014. During the current fiscal year, the Districtpaid $40,000 in relation to this agreement.
NOTE 10. UNREIMBURSED DEVELOPER COSTS
The District has entered into various agreements which call for Developers within the District tofund costs associated with water, sewer, drainage and road facilities, as well as operatingadvances, until such time as the District can sell bonds. As reflected in the Statement of NetPosition, $5,549,277 has been recorded as a liability for completed facilities financed byDevelopers which the District now operates and maintains and for operating advances. It isanticipated that reimbursement to the Developers will come from future bond sales.
NOTE 11. RISK MANAGEMENT
The District is exposed to various risks of loss related to torts, theft of, damage to and destructionof assets, errors and omissions and natural disasters for which the District carries commercialinsurance. There have been no significant changes in coverage and there have been nosettlements of claims exceeding coverage in the prior three years.
NOTE 12. INTERFUND RECEIVABLES AND PAYABLES
As of February 28, 2014, the District has the following interfund payables and receivables: theGeneral Fund owes the Debt Service Fund $30,891 for debt service tax collections.
NOTE 13. WATER SUPPLY AGREEMENT
On December 3, 2008, the District entered into a Wholesale Water Supply Agreement(Agreement) with the Town of Little Elm, Texas. Pursuant to the Agreement, Little Elm willprovide to the District wholesale treated water from Little Elm’s water supply system. Inexchange for the water provided to the District, the District will pay Little Elm a take or payamount equivalent to 50% of the projected annual treated water volume utilized by the District asdetermined by the District’s previous year usage amount. This initial take or pay amount for thefirst year of service under the Agreement will be $1,200 per month, based upon an anticipatedminimum use of 500,000 gallons per month at a rate of $2.40 per 1,000 gallons. The District isrequired to pay for the take or pay amount regardless of whether the District uses the water. If
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DENTON COUNTY FRESH WATER SUPPLY DISTRICT NO. 8-CNOTES TO THE FINANCIAL STATEMENTS
FEBRUARY 28, 2014
NOTE 13. WATER SUPPLY AGREEMENT (Continued)
the District’s water usage exceeds the take or pay amount for any given month, the water will bebilled at $2.40 per 1,000 gallons. Each year the take or pay amount will be recalculated basedon the previous year’s actual water usage. In addition, each District connection receiving waterfrom Little Elm will pay a $750 connection fee. The term of this agreement is 30 years from theeffective date. During the current fiscal year, the District recorded expenditures of $43,384 forpurchased water.
NOTE 14. STRATEGIC PARTNERSHIP AGREEMENT
Effective January 20, 2009, the District entered into a Strategic Partnership Agreement with theTown of Little Elm, Texas. The agreement provides that Little Elm may annex a tract of landwithin the District defined as the Limited Purpose Annexation Area (“Area”) for the limitedpurposes of collecting revenues from the sales and use tax authorized to be imposed by LittleElm on sales consummated at locations within the Area pursuant to the Act and Chapter 321 ofthe Texas Tax Code (currently at a rate of one percent). For a period of ten years from theeffective Date, Little Elm shall pay to the District an amount equal to 50% of the Sales and UseTax revenues paid to Little Elm from businesses operating within the Limited Purpose Property(“District Share”) as reflected in sales tax reports provided by the Comptroller to Little Elm.Little Elm shall pay to the District the District Share at the end of each quarter (i.e., March 31,June 30, September30 and December 31) in which Little Elm receives payment of the Sales andUse Tax revenues from the Comptroller. Any payment of the District Share not made within 90days of the end of the quarter in which the payment is due shall bear interest calculated inaccordance with Section 2251.025 of the Texas Government Code. Little Elm shall retain theremaining 50% of the Sales and Use Tax revenues from within the Limited Purpose Property(“Town Share”) for a period of ten years from the Effective Date. Beginning on the tenthanniversary of the Effective Date, Little Elm shall collect and retain 100% of the Sales and UseTax revenues paid to Little Elm from business operating within the Limited Purpose Propertyand shall not be obligated to pay to the District any portion or share of the Sales and Use Taxcollected. During the current fiscal year, the District received $12,756 in relation to thisagreement.
NOTE 15. BOND SALES
On June 27, 2013, the District issued $3,000,000 of Series 2013 Unlimited Tax Road Bonds.The proceeds were used to reimburse Developers within the District for costs related to theShops of Sunset Pointe paving, Frisco Hills, Phase I and Rockhill Road paving and grading.Additional proceeds were used to cover the cost of issuance of the bonds.
On October 17, 2013, the District issued $3,000,000 of Series 2013A Unlimited Tax RoadBonds. The proceeds were used to reimburse Developers within the District for costs related toFrisco Hills, Phases 1, 3A and 4A drainage, Phases 3A and 4A paving and grading and Phase lBand 1C grading. Additionally proceeds were used to cover the costs of issuance of the bonds.
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DENTON COUNTY FRESH WATER SUPPLY DISTRICT NO. 8-CNOTES TO THE FINANCIAL STATEMENTS
FEBRUARY 28, 2014
NOTE 16. USE OF SURPLUS FUNDS
On August 26, 2013, the Commission approved the use of $161,047 in surplus funds for Frisco Hillsoffsite water line construction and material costs and the surplus funds application costs.
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APPENDIX B
Form of Bond Counsel's Opinion
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APPENDIX C
Specimen Municipal Bond Insurance Policy
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MUNICIPAL BOND INSURANCE POLICY
ISSUER: [NAME OF ISSUER]
MEMBER: [NAME OF MEMBER]
Policy No: _____
BONDS: $__________ in aggregate principal amount of [NAME OF TRANSACTION] [and maturing on]
Effective Date: _________
Risk Premium: $__________ Member Surplus Contribution: $ _________
Total Insurance Payment: $_________
BUILD AMERICA MUTUAL ASSURANCE COMPANY (“BAM”), for consideration received, hereby UNCONDITIONALLY
AND IRREVOCABLY agrees to pay to the trustee (the “Trustee”) or paying agent (the “Paying Agent”) for the Bonds named above (as set forth in the documentation providing for the issuance and securing of the Bonds), for the benefit of the Owners or, at the election of BAM, directly to each Owner, subject only to the terms of this Policy (which includes each endorsement hereto), that portion of the principal of and interest on the Bonds that shall become Due for Payment but shall be unpaid by reason of Nonpayment by the Issuer.
On the later of the day on which such principal and interest becomes Due for Payment or the first Business Day following the Business Day on which BAM shall have received Notice of Nonpayment, BAM will disburse (but without duplication in the case of duplicate claims for the same Nonpayment) to or for the benefit of each Owner of the Bonds, the face amount of principal of and interest on the Bonds that is then Due for Payment but is then unpaid by reason of Nonpayment by the Issuer, but only upon receipt by BAM, in a form reasonably satisfactory to it, of (a) evidence of the Owner’s right to receive payment of such principal or interest then Due for Payment and (b) evidence, including any appropriate instruments of assignment, that all of the Owner’s rights with respect to payment of such principal or interest that is Due for Payment shall thereupon vest in BAM. A Notice of Nonpayment will be deemed received on a given Business Day if it is received prior to 1:00 p.m. (New York time) on such Business Day; otherwise, it will be deemed received on the next Business Day. If any Notice of Nonpayment received by BAM is incomplete, it shall be deemed not to have been received by BAM for purposes of the preceding sentence, and BAM shall promptly so advise the Trustee, Paying Agent or Owner, as appropriate, any of whom may submit an amended Notice of Nonpayment. Upon disbursement under this Policy in respect of a Bond and to the extent of such payment, BAM shall become the owner of such Bond, any appurtenant coupon to such Bond and right to receipt of payment of principal of or interest on such Bond and shall be fully subrogated to the rights of the Owner, including the Owner’s right to receive payments under such Bond. Payment by BAM either to the Trustee or Paying Agent for the benefit of the Owners, or directly to the Owners, on account of any Nonpayment shall discharge the obligation of BAM under this Policy with respect to said Nonpayment.
Except to the extent expressly modified by an endorsement hereto, the following terms shall have the meanings specified for all purposes of this Policy. “Business Day” means any day other than (a) a Saturday or Sunday or (b) a day on which banking institutions in the State of New York or the Insurer’s Fiscal Agent (as defined herein) are authorized or required by law or executive order to remain closed. “Due for Payment” means (a) when referring to the principal of a Bond, payable on the stated maturity date thereof or the date on which the same shall have been duly called for mandatory sinking fund redemption and does not refer to any earlier date on which payment is due by reason of call for redemption (other than by mandatory sinking fund redemption), acceleration or other advancement of maturity (unless BAM shall elect, in its sole discretion, to pay such principal due upon such acceleration together with any accrued interest to the date of acceleration) and (b) when referring to interest on a Bond, payable on the stated date for payment of interest. “Nonpayment” means, in respect of a Bond, the failure of the Issuer to have provided sufficient funds to the Trustee or, if there is no Trustee, to the Paying Agent for payment in full of all principal and interest that is Due for Payment on such Bond. “Nonpayment” shall also include, in respect of a Bond, any payment made to an Owner by or on behalf of the Issuer of principal or interest that is Due for Payment, which payment has been recovered from such Owner pursuant to the United States Bankruptcy Code in accordance with a final, nonappealable order of a court having competent jurisdiction. “Notice” means delivery to BAM of a notice of claim and certificate, by certified mail, email or telecopy as set forth on the attached Schedule or other acceptable electronic delivery, in a form satisfactory to BAM, from and signed by an Owner, the Trustee or the Paying Agent, which notice shall specify (a) the person or entity making the claim, (b) the Policy Number, (c) the claimed amount, (d) payment instructions and (e) the date such claimed amount becomes or became Due for Payment. “Owner” means, in respect of a Bond, the person or entity who, at the time of Nonpayment, is entitled under the terms of such Bond to payment thereof, except that “Owner” shall not include the Issuer, the Member or any other person or entity whose direct or indirect obligation constitutes the underlying security for the Bonds.
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BAM may appoint a fiscal agent (the “Insurer’s Fiscal Agent”) for purposes of this Policy by giving written notice to the Trustee, the Paying Agent, the Member and the Issuer specifying the name and notice address of the Insurer’s Fiscal Agent. From and after the date of receipt of such notice by the Trustee, the Paying Agent, the Member or the Issuer (a) copies of all notices required to be delivered to BAM pursuant to this Policy shall be simultaneously delivered to the Insurer’s Fiscal Agent and to BAM and shall not be deemed received until received by both and (b) all payments required to be made by BAM under this Policy may be made directly by BAM or by the Insurer’s Fiscal Agent on behalf of BAM. The Insurer’s Fiscal Agent is the agent of BAM only, and the Insurer’s Fiscal Agent shall in no event be liable to the Trustee, Paying Agent or any Owner for any act of the Insurer’s Fiscal Agent or any failure of BAM to deposit or cause to be deposited sufficient funds to make payments due under this Policy.
To the fullest extent permitted by applicable law, BAM agrees not to assert, and hereby waives, only for the benefit of each Owner, all rights (whether by counterclaim, setoff or otherwise) and defenses (including, without limitation, the defense of fraud), whether acquired by subrogation, assignment or otherwise, to the extent that such rights and defenses may be available to BAM to avoid payment of its obligations under this Policy in accordance with the express provisions of this Policy. This Policy may not be canceled or revoked.
This Policy sets forth in full the undertaking of BAM and shall not be modified, altered or affected by any other agreement or instrument, including any modification or amendment thereto. Except to the extent expressly modified by an endorsement hereto, any premium paid in respect of this Policy is nonrefundable for any reason whatsoever, including payment, or provision being made for payment, of the Bonds prior to maturity. THIS POLICY IS NOT COVERED BY THE PROPERTY/CASUALTY INSURANCE SECURITY FUND SPECIFIED IN ARTICLE 76 OF THE NEW YORK INSURANCE LAW. THIS POLICY IS ISSUED WITHOUT CONTINGENT MUTUAL LIABILITY FOR ASSESSMENT.
In witness whereof, BUILD AMERICA MUTUAL ASSURANCE COMPANY has caused this Policy to be executed on its behalf by its Authorized Officer.
BUILD AMERICA MUTUAL ASSURANCE COMPANY By: _______________________________________ Authorized Officer
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Notices (Unless Otherwise Specified by BAM) Email: [email protected] Address: 1 World Financial Center, 27th floor 200 Liberty Street New York, New York 10281 Telecopy: 212-962-1524 (attention: Claims)
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Financial Advisory ServicesProvided By