district no.1 - i

Transcription

district no.1 - i

This Preliminary Official Statement and the Information contained herein are subject to completion or amendment. These securities may not be sold nor may offers to buy be accepted prior to the time the Official Statement is delivered in final form. Under no circumstances shall this
Preliminary Official Statement constitute an offer to sell or the solicitation of an offer to buy nor shall there be any of these securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such
jurisdiction.
PRELIMINARY OFFICIAL STATEMENT DATED FEBRUARY 12, 2013
IN THE OPINION OF BOND COUNSEL THE BONDS ARE VALID OBLIGATIONS OF THE DISTRICT. INTEREST ON THE BONDS IS
EXCLUDABLE FROM GROSS INCOME FOR FEDERAL INCOME TAX PURPOSES UNDER STATUTES, REGULATIONS, PUBLISHED RULINGS
AND COURT DECISIONS EXISTING ON THE DATE OF SUCH OPINION. SEE “LEGAL MATTERS” and “TAX MATTERS – TAX EXEMPTION”
HEREIN FOR A DISCUSSION OF BOND COUNSEL'S OPINION, INCLUDING A DISCUSSION OF CERTAIN ALTERNATIVE MINIMUM TAX
CONSEQUENCES FOR CORPORATIONS
The District will designate the Bonds as “Qualified Tax-Exempt Obligations” for financial institutions. See “QUALIFIED TAX-EXEMPT
OBLIGATIONS” herein.
NEW ISSUE - Book-Entry-Only
$5,370,000*
ROCKWALL COUNTY CONSOLIDATED MUNICIPAL UTILITY DISTRICT NO. 1
(A Political Subdivision of the State of Texas, located within Rockwall County)
UNLIMITED TAX REFUNDING BONDS, SERIES 2013
Dated: April 1, 2013
Due: October 1, as shown below
The above-described bonds (the “Bonds”) will be registered and delivered only 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. Beneficial Owners (as defined herein under “BOOKENTRY-ONLY SYSTEM”) of the Bonds will not receive physical certificates representing the Bonds, but will receive a credit balance on the books of
the DTC participants. 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, as herein defined, directly to DTC, which will, in turn, remit such principal and interest to its participants for subsequent disbursement
to the Beneficial Owners. See “BOOK-ENTRY-ONLY SYSTEM.” Interest on the Bonds will accrue from April 1, 2013, and will be payable on
April 1 and October 1 of each year, commencing October 1, 2013 (six months interest) until maturity or prior redemption. The Bank of New York
Mellon Trust Company, N.A., Dallas, Texas, will be the paying agent/registrar (sometimes hereinafter called the “Paying Agent,” “Paying
Agent/Registrar” or “Registrar”).
MATURITIES, AMOUNTS, INTEREST RATES AND INITIAL PRICES
Initial
Initial
Maturity
Principal
Interest
Reoffering
Maturity
Principal
Interest
Reoffering
(October 1)
Amount*
Rate
Yield (a)
(October 1)
Amount*
Rate
Yield (a)
2014
$ 35,000
____%
____%
2023 (b)
$345,000
____%
____%
2015
35,000
____%
____%
2024 (b)
355,000
____%
____%
2016
265,000
____%
____%
2025 (b)
370,000
____%
____%
2017
270,000
____%
____%
2026 (b)
395,000
____%
____%
2018
280,000
____%
____%
2027 (b)
410,000
____%
____%
2019
290,000
____%
____%
2028 (b)
435,000
____%
____%
2020
300,000
____%
____%
2029 (b)
455,000
____%
____%
2021 (b)
315,000
____%
____%
2030 (b)
485,000
____%
____%
2022 (b)
330,000
____%
____%
______________________________
(a) The initial reoffering yield has been provided by the Underwriter (defined herein) and represents the initial offering price to the public of a
substantial amount of the Bonds for each maturity.
(b) The Bonds maturing on October 1, 2021 and thereafter, are subject to redemption prior to maturity at the option of the District, as a whole or from
to time in part, on October 1, 2020, or any date thereafter at a price equal to par, plus accrued interest to the date fixed for redemption. See “THE
BONDS – Optional Redemption.”
The proceeds of the Bonds will be applied to pay certain costs incurred in connection with the issuance of the Bonds, and to advance refund
$5,205,000* in principal amount (the “Refunded Bonds”) of the District’s Unlimited Tax Bonds, Series 2006. The refunding of the Refunded Bonds is
expected to result in annual and net present value savings in the District’s current annual debt service requirements. See “PLAN OF FINANCING.”
The Bonds, when issued, constitute valid and binding obligations of the District, and will be payable from the proceeds of an annual ad valorem tax,
without legal limitation as to rate or amount, levied against all taxable property within the District. See “THE BONDS – Source of Payment.” Neither
the State of Texas; Rockwall County, Texas; the City of Fate, Texas; nor any political subdivision other than the District shall be obligated to pay the
principal of and interest on the Bonds. Neither the faith and credit nor the taxing power of the State of Texas nor Rockwall County, Texas, is pledged
to the payment of the principal of and interest on the Bonds.
THE BONDS ARE SUBJECT TO SPECIAL INVESTMENT CONSIDERATIONS DESCRIBED HEREIN.
The Bonds are offered subject to prior sale, when, as and if issued by the District and accepted by the Underwriter, subject among other things to the
approval of the Attorney General of Texas and Kelly Hart & Hallman LLP, Fort Worth, Texas, Bond Counsel. Certain legal matters will be passed
upon for the Underwriter by its counsel, McCall, Parkhurst & Horton L.L.P., Dallas, Texas. The Bonds in definitive form are expected to be available
for delivery through DTC, on or about April 4, 2013.
FIRSTSOUTHWEST
_______________________________
*
Preliminary, subject to change.
TABLE OF CONTENTS
Page
USE OF INFORMATION IN OFFICIAL
STATEMENT....................................................... 3
SALE AND DISTRIBUTION OF THE BONDS ...... 3
Underwriting........................................................... 3
Prices and Marketability......................................... 3
Securities Laws....................................................... 4
MUNICIPAL BOND GUARANTY INSURANCE .. 4
RATINGS....................................................................... 4
OFFICIAL STATEMENT SUMMARY.................... 5
INTRODUCTION....................................................... 10
THE BONDS................................................................ 10
General.................................................................. 10
Description............................................................ 10
Book-Entry-Only System..................................... 11
Use of Certain Terms in Other Sections of this
Official Statement........................................ 12
Successor Paying Agent/Registrar ....................... 13
Registration, Transfer and Exchange................... 13
Replacement of Bonds ......................................... 13
Authorization of the Bonds .................................. 13
Source of Payment................................................ 13
Redemption of the Bonds..................................... 14
Remaining Outstanding Bonds ............................ 14
Defeasance............................................................ 14
Annexation and Consolidation............................. 15
Legal Ability to Issue Additional Debt ................ 15
Registered Owners' Remedies.............................. 15
Bankruptcy Limitation to Registered Owners'
Rights........................................................... 16
Legal Investment and Eligibility to Secure Public
Funds in Texas............................................. 16
PLAN OF FINANCING............................................. 17
Use and Distribution of Bond Proceeds............... 17
The Refunded Bonds............................................ 17
Remaining Outstanding Bonds ............................ 18
Escrow Agreement ............................................... 18
Sources and Uses of Funds .................................. 19
LOCATION MAP OF THE DISTRICT.................. 20
DISTRICT DEBT........................................................ 21
General.................................................................. 21
Bonded Indebtedness............................................ 21
Estimated Direct and Overlapping Debt
Statement ..................................................... 22
Debt Ratios ........................................................... 22
Debt Service Requirement Schedule.................... 23
TAX PROCEDURES ................................................. 23
Authority to Levy Taxes ...................................... 23
Property Tax Code and County-Wide Appraisal
District ......................................................... 23
Exempt Property................................................... 24
County-Wide Appraisal District .......................... 25
Assessment and Levy ........................................... 26
Page
District and Taxpayer Remedies .......................... 26
Collection.............................................................. 26
District's Rights in the Event of Tax
Delinquencies .............................................. 26
TAX DATA .................................................................. 27
General.................................................................. 27
Tax Rate Limitation.............................................. 27
Historical Values and Tax Collection History..... 27
Analysis of Tax Base............................................ 28
Tax Rate Distribution ........................................... 28
Principal 2012 Taxpayers..................................... 28
Tax Rate Calculations .......................................... 29
Estimated Overlapping Taxes .............................. 29
THE DISTRICT .......................................................... 29
General.................................................................. 29
Special District Agreements................................. 30
Location ................................................................ 30
Management of the District.................................. 30
DEVELOPMENT WITHIN THE DISTRICT........ 31
Current Status of Development............................ 31
Future Development............................................. 32
THE DEVELOPERS .................................................. 32
Role of the Developer........................................... 32
Description of the Current Developers ................ 32
Agricultural Waiver.............................................. 33
Utility Construction Agreements ......................... 33
HOMEBUILDERS WITHIN THE DISTRICT...... 34
THE SYSTEM ............................................................. 34
General.................................................................. 34
Special District Agreements................................. 34
Water System........................................................ 34
Wastewater System .............................................. 35
Drainage System................................................... 35
100-year Flood Plain ............................................ 35
Future Debt........................................................... 35
Historical Operations of the District .................... 36
INVESTMENT CONSIDERATIONS...................... 36
General.................................................................. 36
Factors Affecting Taxable Values and Tax
Payments...................................................... 36
Tax Collection Limitations................................... 38
Registered Owners' Remedies and Bankruptcy... 38
Marketability ........................................................ 39
Future Debt........................................................... 39
Competitive Nature of Dallas Residential Market39
Continuing Compliance with Certain Covenants 39
Bond Insurance Risk Factors ............................... 39
Future and Proposed Legislation.......................... 40
LEGAL MATTERS.................................................... 41
Legal Opinions ..................................................... 41
Legal Review........................................................ 41
No-Litigation Certificate ...................................... 42
No Material Adverse Change............................... 42
TAX MATTERS ......................................................... 42
Opinion ................................................................. 42
Federal Income Tax Accounting Treatment of
Original Issue Discount............................... 43
Collateral Federal Income Tax Consequences..... 43
State, Local and Foreign Taxes............................ 44
Qualified Tax-Exempt Obligations for Financial
Institutions ................................................... 44
VERIFICATION OF MATHEMATICAL
CALCULATIONS ............................................. 44
CONTINUING DISCLOSURE OF
INFORMATION................................................ 45
Annual Reports..................................................... 45
Event Notices........................................................ 45
Availability of Information from MSRB ............. 46
Limitations and Amendments .............................. 46
Compliance with Prior Undertakings................... 46
OFFICIAL STATEMENT......................................... 46
General.................................................................. 46
Experts .................................................................. 47
Updating of Official Statement ............................ 47
Certification of Official Statement....................... 47
Official Statement “Deemed Final” ..................... 47
APPENDIX A - Financial Statements of the District
APPENDIX B - Form of Bond Counsel Opinion
2
USE OF INFORMATION IN OFFICIAL STATEMENT
No dealer, broker, salesman or other person has been authorized by the District or the Underwriter to give any
information or to make any representations other than those contained in this Official Statement, and, if given or
made, such other information or representations must not be relied upon as having been authorized by the District or
the Underwriter.
This Official Statement does not constitute, and is not authorized by the District for use in connection with, an offer
to sell or the solicitation of an offer to buy in any state in which such offer or solicitation is not authorized or in
which the person making such offer or solicitation is not qualified to do so or to any person to whom it is unlawful
to make such offer or solicitation.
All of the summaries of the statutes, resolutions, orders, contracts, audits, engineering and other related reports set
forth in this Official Statement are made subject to all of the provisions of such documents. These summaries do
not purport to be complete statements of such provisions, and reference is made to such documents, copies of which
are available from the District upon payment of the costs for duplication thereof.
This Official Statement contains, in part, estimates, assumptions and matters of opinion which are not intended as
statements of fact, and no representation is made as to the correctness of such estimates, assumptions or matters of
opinion, or as to the likelihood that they will be realized. Any information and expressions of opinion herein
contained are subject to change without notice, and neither the delivery of this Official Statement nor any sale made
hereunder shall, under any circumstances, create any implication that there has been no change in the condition of
the District or other matters described herein since the date hereof; however, the District has agreed to keep this
Official Statement 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 Underwriter (hereinafter defined) and thereafter only as set forth herein under
“OFFICIAL STATEMENT – Updating of Official Statement.”
SALE AND DISTRIBUTION OF THE BONDS
Underwriting
First Southwest Company (referred to herein as the “Underwriter”) has agreed to purchase the Bonds from the
District for $____________ (representing the principal amount of the Bonds, plus/less an original issue,
premium/discount on the Bonds of $__________, less an underwriter’s discount of $__________) plus accrued
interest on the Bonds from April 1, 2013, to the date of delivery. The Underwriter’s obligation is to purchase all of
the Bonds, if any are purchased.
The Underwriter has provided the following sentence for inclusion in this Official Statement. The Underwriter has
reviewed the information in the Official Statement in accordance with, and as part of, its responsibilities to investors
under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriter
does not guarantee the accuracy or completeness of such information.
Prices and Marketability
The delivery of the Bonds is conditioned upon the receipt by the District of a certificate executed and delivered by
the Underwriter on or before the date of delivery of the Bonds stating the prices at which a substantial amount of the
Bonds of each maturity have been sold to the public. For this purpose the term “public” shall not include any
person who is a bond house, broker or similar person acting in the capacity of underwriter or wholesaler. The
District has no control over trading of the Bonds after a bona fide offering of the Bonds is made by the Underwriter
at the yields specified on the cover page. Information concerning reoffering yields or prices is the responsibility of
the Underwriter.
The prices and other terms respecting the offering and sale of the Bonds may be changed from time to time by the
Underwriter after the Bonds are released for sale, and the Bonds may be offered and sold at prices other than the
initial offering price, including sales to dealers who may sell the Bonds into investment accounts.
3
IN CONNECTION WITH THE OFFERING OF THE BONDS, THE UNDERWRITER MAY OVER-ALLOT OR
EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE BONDS AT
A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
Securities Laws
No registration statement relating to the Bonds has been filed with the 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, nor have the Bonds been registered or qualified under the securities laws of any other
jurisdiction. The District assumes no responsibility for registration or qualification of the Bonds under the securities
laws of any other jurisdiction in which the Bonds may be offered, sold or otherwise transferred. This disclaimer of
responsibility for registration or qualification for sale or other disposition of the Bonds shall not be construed as an
interpretation of any kind with regard to the availability of any exemption from securities registration or
qualification provisions in such other jurisdictions.
MUNICIPAL BOND GUARANTY INSURANCE
The District has made an application with Assured Guaranty Municipal Corp. (“AGM”) and Build America Mutual
(“BAM”) for a commitment for municipal bond guaranty insurance on the Bonds. The purchase of such insurance,
if available or advisable, and payment of all associated costs, including the premium charged by the insurer, will be
paid from proceeds of the Bonds. See “INVESTMENT CONSIDERATIONS – Bond Insurance Risk Factors.”
RATINGS
Standard & Poor’s Ratings Services (“Standard & Poor’s”), a Standard & Poor’s Financial Services LLC business,
is located at 25 Broadway, New York, New York 10004, telephone number (212) 208-8000 and has engaged in
providing ratings for corporate bonds since 1923 and municipal bonds since 1940.
Standard & Poor’s has assigned an underlying rating of “BBB+” to the Bonds. The rating fees charged by Standard
& Poor’s will be paid from proceeds of the Bonds.
An explanation of the significance of the foregoing ratings may only be obtained from Standard & Poor’s. The
foregoing ratings express only the view of Standard & Poor’s at the time the ratings are given. Furthermore, a
security rating is not a recommendation to buy, sell or hold securities. There is no assurance that the ratings will
continue for any given period of time or that they will not be revised downward or withdrawn entirely by Standard
& Poor’s, if, in its judgment, circumstances so warrant. Any such downward change in or withdrawal of such
ratings may have an adverse effect on the market price of the Bonds.
The District is not aware of any rating assigned the Bonds other than the ratings of Standard & Poor’s.
4
OFFICIAL STATEMENT SUMMARY
The following summary of certain information contained herein is qualified in its entirety by the detailed
information appearing elsewhere in this Official Statement. The reader should refer particularly to sections that are
indicated for more detailed information.
THE BONDS
The Issuer ..................................................... Rockwall County Consolidated Municipal Utility District No. 1 (the
“District”), a political subdivision of the State of Texas.
Description ................................................... $5,370,000* Unlimited Tax Refunding Bonds, Series 2013 (the
“Bonds”), are dated April 1, 2013, and mature on October 1 in each of
the years and in the amounts set forth on the cover hereof. Interest on
the Bonds accrues from April 1, 2013, and is payable on
October 1, 2013 (six months interest), and each April 1 and October 1
thereafter until maturity or prior redemption. See “THE BONDS –
General.” The Bonds will be issued pursuant to a bond order (the
“Bond Order”) adopted by the Board of Directors of the District. The
Bonds are being issued under the authority of Chapters 49 and 54 of
the Texas Water Code, as amended, and Chapter 1207, Texas
Government Code, as amended.
Redemption................................................... Bonds maturing on and after October 1, 2021, are subject to
redemption, in whole or from time to time in part, at the option of the
District on October 1, 2020, and on any date thereafter at a price of par
plus accrued interest from the most recent interest payment date to the
date of redemption. See “THE BONDS - Redemption Provisions”.
Source of Payment........................................ Principal of and interest on the Bonds are payable from the proceeds of
an annual ad valorem tax, without legal limitation as to rate or amount,
levied against all taxable property within the District. The Bonds are
obligations solely of the District and are not obligations of Rockwall
County, Texas; the City of Fate, Texas; the State of Texas; or any
political subdivision other than the District. See “THE BONDS Source of Payment,” “TAX DATA - Tax Rate Calculations,” and
“INVESTMENT CONSIDERATIONS - Maximum Impact on District
Tax Rates.”
Book-Entry-Only System ............................. 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 securities registered in the name of Cede & Co. (DTC’s
partnership nominee) or such other name as may be requested by an
authorized representative of DTC. One fully-registered certificate will
be issued for each maturity of the Bonds and will be deposited with
DTC. See “BOOK-ENTRY-ONLY SYSTEM.”
Other Characteristics .................................... The Bonds will be issued in fully registered form in the denomination
of $5,000 each, or integral multiples thereof.
______________________________
* Preliminary, subject to change.
5
Use of Proceeds ............................................ The proceeds of the Bonds will be applied to pay certain costs incurred
in connection with the issuance of the Bonds, and to advance refund
$5,205,000* in principal amount (the “Refunded Bonds”) of the
District’s Unlimited Tax Bonds, Series 2006 (the “Series 2006
Bonds”). The refunding of the Refunded Bonds is expected to result in
annual and net present value savings in the District’s current annual
debt service requirements. See “PLAN OF FINANCING – Use and
Distribution of Bond Proceeds.”
Remaining Outstanding Bonds..................... The District has previously issued $6,500,000 Unlimited Tax Bonds,
Series 2006 (the “Series 2006 Bonds”); $6,260,000 Unlimited Tax
Bonds, Series 2007 (the “Series 2007 Bonds”); $2,750,000 Unlimited
Tax Bonds, Series 2008 (the “Series 2008 Bonds”) aggregating
$15,510,000 principal amount of bonds originally issued. As of
January 1, 2013, $13,955,000 principal amount of bonds originally
issued remain outstanding (the “Outstanding Bonds”). Following the
issuance of the Bonds and the refunding of the Refunded Bonds,
$8,750,000* principal amount of the Outstanding Bonds will remain
outstanding (the “Remaining Outstanding Bonds”) and the District’s
total bonded indebtedness, including the Bonds, will be $14,120,000*.
See “THE BONDS - Outstanding Bonds.”
Authorized but Unissued Bonds................... On May 15, 2004, the District authorized $53,315,000 in bonds for
refunding purposes and $46,100,000 in bonds for the purpose or
purposes of purchasing, constructing or otherwise acquiring a water,
wastewater and drainage system for the District. The Bonds represent
the first series of refunding bonds issued by the District. After the sale
of the Bonds, $53,150,000* and $30,590,000 in original authorization
for refunding purposes and water, wastewater and drainage facilities
purposes, respectively, will remain authorized but unissued.
Municipal Bond Insurance and Rating ......... An application has been made to Assured Guaranty Municipal Corp.
and Build America Mutual for a commitment to issue a policy of
municipal bond guaranty insurance on the Bonds. The Bonds were
assigned an underlying rating of “BBB+” by Standard & Poor’s. See
“MUNICIPAL
BOND
GUARANTY
INSURANCE”
and
“RATINGS.”
Qualified Tax-Exempt Obligations .............. The District will designate the Bonds as “qualified tax-exempt
obligations” pursuant to Section 265 (b) of the Internal Revenue Code
of 1986, as amended. See “TAX MATTERS – Qualified Tax-Exempt
Obligation.”
THE DISTRICT
Description .................................................... Rockwall County Consolidated Municipal Utility District No. 1 was
formed pursuant to a Consolidation Agreement dated April 5, 1976
among Rockwall County Municipal Utility District No. 1 (created by
the Texas Water Rights Commission (“TWRC”) on February 29,
1972), Rockwall County Municipal Utility District No. 3 (created by
the TWRC on June 19, 1972) and Rockwall County Municipal Utility
District No. 4 (created by the TWRC on June 19, 1972). The District
__________________________
*Preliminary, subject to change.
6
assumed the powers and functions of the individual districts. These
districts were created for the purposes of providing, operating, and
maintaining facilities to control storm water, distribute potable water,
and to collect and treat wastewater.
The District contains
approximately 581 acres and is located entirely within Rockwall
County, partially within Rockwall Independent School District,
partially within Royse City Independent School District and entirely
within the corporate boundaries of the City of Fate. See “THE
DISTRICT – General.”
Authority ...................................................... The rights, powers, privileges, authority and functions of the District
are established by Article XVI, Section 59 of the Constitution of the
State of Texas and the general laws of the State of Texas pertaining to
municipal utility districts, particularly Chapters 49 and 54 of the Texas
Water Code. See “THE DISTRICT - Authority.”
Location........................................................ The District is located in Rockwall County approximately 27 miles
northeast of downtown Dallas and on the west side of the downtown of
City of Fate within the city limits of the City of Fate. The District is
bounded by State Highway 66 on the South.
Developers/Landowners ............................... The active developers within the District are JFB Woodcreek/2004,
Ltd. (“JFB Woodcreek”); Fate Project Development Partners, Ltd.
(“Fate Project”); JFB Fate/2003, Ltd. (“JFB Fate”); FateWoodcreek/2003, Ltd. (“Fate-Woodcreek”); and H4 Woodcreek, LLC
(“H4 Woodcreek”). In addition, pursuant to contract, Provident Realty
Advisors, Inc. (“Provident”) acts as Project Manager for the
development of the District for the above listed entities with the
exception of H4 Woodcreek. Provident is also controlled by Leon J.
Backes. Provident, JFB/Woodcreek, Fate Project, JFB Fate, FateWoodcreek, and H4 Woodcreek are collectively referred to herein as
the “Developers.” See “THE DEVELOPERS/LANDOWNERS” and
“DEVELOPMENT WITHIN THE DISTRICT - Current Status of
Development”.
Development Within the District.................. Of the approximately 581 acres within the District, approximately 542
acres are developable under current land development regulations. As
of January 1, 2013, water, wastewater and drainage facilities have been
completed to serve approximately 1,491 lots on 404.12 acres within the
District. To date, development within the District includes 1,335
completed single-family homes, 11 homes under construction, and
approximately145 vacant developed single-family lots. In addition to
the single-family home development, the development includes an
amenity center and parks. The construction of 58 lots in Woodcreek
Phase 1D-2 on approximately 13 acres is anticipated to begin in March
2013 with completion anticipated in August of 2013. The remaining
land within the District includes approximately 124 remaining
undeveloped acres and 39 undevelopable acres.
See
“DEVELOPMENT WITHIN THE DISTRICT – Current Status of
Development.”
Current Developers and Homebuilder.......... Homebuilders active within the District include Altura Homes, Drees
Homes and Lionsgate Homes in Phases 1A, 1C, and 1D; Altura Homes
and Drees Homes in Phases 2A, 2B, 2C, and 2D; Megatel Homes and
Plantation Homes in Phases 3A, 3B, 3C and 4. Homes in Phase 1A,
1C and 1D are being marketed in the $150,000 to $300,000+ price
7
range and range in size from 1,800 to 3,400+ square feet. Homes in
Phases 2A, 2B and 2C are being marketed in the price range of
$140,000 to $200,000+ and range in size from 1,500 to 2,500+ square
feet. Homes in Phases 3A, 3B, 3C and 4 are being marketed in the
$165,000 to $240,000 price range and range in size from 1,600 to
3,300 square feet. See “THE DISTRICT – Homebuilders Within the
District.”
INVESTMENT CONSIDERATIONS
THE BONDS ARE SUBJECT TO SPECIAL INVESTMENT CONSIDERATIONS AS SET FORTH IN THIS
OFFICIAL STATEMENT. PROSPECTIVE PURCHASERS SHOULD CAREFULLY EXAMINE THE ENTIRE
OFFICIAL STATEMENT BEFORE MAKING THEIR INVESTMENT DECISIONS, ESPECIALLY THE
PORTION OF THE OFFICIAL STATEMENT ENTITLED “INVESTMENT CONSIDERATIONS.”
8
SELECTED FINANCIAL INFORMATION
(Unaudited)
2012 Assessed Valuation ............................................................................................................
(100% of market value as of January 1, 2012)
See “TAX DATA” and “TAXING PROCEDURES.”
$239,132,056 (a)
Direct Debt:
Remaining Outstanding Bonds ....................................................................................
The Bonds.....................................................................................................................
Total............................................................................................................................
$ 8,750,000 *(b)
5,370,000 *
$ 14,120,000 *
Estimated Overlapping Debt .......................................................................................................
$ 15,602,975 (c)
Direct and Estimated Overlapping Debt .....................................................................................
$ 29,722,975 *
Debt Service Fund Balance (as of January 22, 2013) ................................................................
General Fund Balance (as of January 22, 2013).........................................................................
$ 2,396,833 (d)
$
371,434
Direct Debt Ratio
: as a percentage of 2012 Assessed Valuation ($239,132,056)..................................
See “DISTRICT DEBT.”
5.90 %
Ratio of Direct and Estimated Overlapping Debt
: as a percentage of 2012 Assessed Valuation ($239,132,056)..................................
See “DISTRICT DEBT.”
12.43 %
Percentage of Tax Collections (2007-2011) ...............................................................................
99.77 %
2012 Tax Rate per $100 of Assessed Valuation for
Debt Service .................................................................................................................
Maintenance and Operation .........................................................................................
Total Tax Rate .........................................................................................................
$0.48
0.22
$0.70
Average Annual Debt Service Requirement of the Bonds and the
Outstanding Bonds (2013-2030)..................................................................................
Debt Service Tax Rate per $100 of Assessed Valuation Required to Pay Average
Annual Debt Service Requirements of the Bonds and
the Outstanding Bonds (2013-2030) at 95% Tax Collections
Based on 2012 Assessed Valuation ($239,132,056) ...................................................
Maximum Annual Debt Service Requirement of the Bonds and the
Outstanding Bonds (2030) ...........................................................................................
$ 1,144,508 *
$0.51
$ 1,238,175 *
Debt Service Tax Rate per $100 of Assessed Valuation Required to Pay Maximum
Annual Debt Service Requirements of the Bonds and
the Outstanding Bonds (2030) at 95% Tax Collections
Based on the 2012 Assessed Valuation ($239,132,056) .............................................
$0.55
Single-Family Homes (including 11 homes under construction) as of January 1, 2013...........
1,346
Estimated Population as of January 1, 2013 ...............................................................................
4,711 (e)
___________________________
(a) Certified Taxable Assessed Value within the District as provided by the Rockwall Central Appraisal District
(“RCAD”). See “TAXING PROCEDURES.”
(b) Excludes the Refunded Bonds.
(c) See “DISTRICT DEBT - Estimated Overlapping Debt.”
(d) Neither Texas law nor the Bond Order requires that the District maintain any particular sum in the Debt Service
Fund.
(e) As of January 1, 2013. Based on 3.5 residents per completed single-family connection.
9
$5,370,000*
ROCKWALL COUNTY CONSOLIDATED MUNICIPAL UTILITY DISTRICT NO. 1
(A Political Subdivision of the State of Texas Located in Rockwall County, Texas)
UNLIMITED TAX REFUNDING BONDS
SERIES 2013
INTRODUCTION
This Official Statement provides certain information in connection with the issuance by Rockwall County
Consolidated Municipal Utility District No. 1 (the “District”) of its $5,370,000 Unlimited Tax Refunding Bonds,
Series 2013 (the “Bonds”).
The Bonds are issued pursuant to (i) the Bond Order (“Bond Order”) adopted by the Board of Directors of the
District on the date of the sale of the Bonds, (ii) the Constitution and general laws of the State of Texas, particularly
Chapter 1207 of the Texas Government Code, as amended, and (iii) an election held within the boundaries on the
District on May 15, 2004.
Unless otherwise indicated, capitalized terms used in this Official Statement have the same meaning assigned to
such terms in the Bond Order.
Included in this Official Statement are descriptions of the Bonds and certain information about the District and its
finances. ALL DESCRIPTIONS OF DOCUMENTS CONTAINED HEREIN ARE SUMMARIES ONLY AND
ARE QUALIFIED IN THEIR ENTIRETY BY REFERENCE TO EACH SUCH DOCUMENT. Copies of such
documents may be obtained from the District at Kelly Hart & Hallman LLP, 201 Main Street, Suite 2500, Fort
Worth, Texas 76102 or during the offering period from the District’s Financial Advisor, RBC Capital Markets
Corporation, Attn: Jan Bartholomew, 1001 Fannin Street, Suite 1200, Houston, Texas 77002 upon payment of
reasonable copying, mailing and handling charges.
THE BONDS
General
The following is a description of certain terms and conditions of the Bonds, which description is qualified in its
entirety by reference to the order of the Board of Directors of the District (the “Board”) authorizing the issuance of
the Bonds (the “Bond Order”). A copy of the Bond Order may be obtained from the District upon request and
payment of the costs for duplication thereof. The Bond Order authorizes the issuance and sale of the Bonds and
prescribes the terms, conditions and provisions for the payment of the principal of and interest on the Bonds by the
District.
Description
The Bonds are dated April 1, 2013, and will mature on October 1 in the years and in the principal amounts indicated
on the cover page hereof. The Bonds will accrue interest from April 1, 2013 at the stated interest rates indicated on
the cover page hereof. Interest on the Bonds is payable on October 1, 2013 (six months interest), and on each April
1 and October 1 (each an “Interest Payment Date”) thereafter until maturity or prior redemption. The Bonds will be
issued as fully registered bonds in the denomination of $5,000 or any integral multiple thereof. Principal of the
Bonds will be payable to the registered holder thereof (the “Registered Owner”) at maturity or earlier redemption
upon presentation of Bonds at the principal payment office of The Bank of New York Mellon Trust Company,
N.A., Dallas, Texas, the paying agent/registrar (the “Paying Agent/Registrar,” “Paying Agent,” or “Registrar”).
Interest on the Bonds will be payable by check, dated as of the interest payment date, and mailed by the Registrar to
Registered Owners as shown on the records of the Registrar at the close of business on the 15th day of the calendar
month next preceding each interest payment date (the “Record Date”), or by other such customary banking
arrangements as may be acceptable to the Registrar and the Registered Owner at the expense and risk of the
Registered Owner.
______________________________
10
Book-Entry-Only System
This section describes how ownership of the Bonds is 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’s name. The information in this section concerning DTC and the Book-EntryOnly 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 Participant, (2) DTC Participants or others will distribute debt
service payments paid to DTC or its nominee (as the registered owner of the Bonds), or redemption or other
notices, to the Beneficial Owners, 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.
The Depository Trust Company (“DTC”), New York NY, will act as securities depository for the Bonds. The
Bonds will be issued as fully-registered securities registered in the name of Cede & Co. (DTC’s partnership
nominee) or such other name as may be required by an authorized representative of DTC. One fully-registered
Bond certificate will be issued for each of the Bonds, each in the aggregate principal amount of such issue, 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 bookentry 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 purchase 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
11
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 an issue are being redeemed, DTC’s
practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed.
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 Issue 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).
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 Issuer or Agent, on payable date in accordance with their respective holdings
shown on DTC’s records. Payments by Participants to Beneficial Owners will be governed by standing instructions
and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered
in “street name,” and will be the responsibility of such Participant and not of DTC, the Paying Agent/Registrar or
the District, subject to any statutory or regulatory requirements as may be in effect from time to time. 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.
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 form,
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 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.
The information concerning DTC and DTC's book-entry system has been obtained from sources that the District
believes to be reliable, but the District takes no responsibility for the accuracy thereof.
12
Successor Paying Agent/Registrar
Provision is made in the Bond Order for replacing the Paying Agent/Registrar. If the District replaces the Paying
Agent/Registrar, such Paying Agent/Registrar shall, promptly upon the appointment of a successor, deliver the
Paying Agent/Registrar's records to the successor Paying Agent/Registrar, and the successor Paying Agent/Registrar
shall act in the same capacity as the previous Paying Agent/Registrar. Any successor Paying Agent/Registrar
selected by the District shall be a commercial bank; a trust company organized under the laws of the State of Texas;
or other entity duly qualified and legally authorized to serve and perform the duties of the Paying Agent/Registrar
for the Bonds.
Registration, Transfer and Exchange
In the event the Book-Entry-Only system is discontinued, the Bonds are transferable only on the bond register kept
by the Registrar upon surrender at the principal payment office of the Registrar in Dallas, Texas. A Bond may be
assigned by the execution of an assignment form on the Bonds or by other instrument of transfer and assignment
acceptable to the Registrar. At any time after the date of initial delivery, any Bond may be transferred upon its
presentation and surrender at the designated offices of the Registrar, duly endorsed for transfer or accompanied by
an assignment duly executed by the Bondholder. The Bonds are exchangeable upon presentation at the designated
office(s) of the Registrar, for an equal principal amount of Bonds of the same maturity in authorized denominations.
To the extent possible, new Bonds issued in exchange or transfer of Bonds will be delivered to the Bondholder or
assignee of the Bondholder within not more than three (3) business days after the receipt by the Registrar of the
request in proper form to transfer or exchange the Bonds. New Bonds registered and delivered in an exchange or
transfer shall be in the denomination of $5,000 in principal amount for a Bond, or any integral multiple thereof for
any one maturity and shall bear interest at the same rate and be for a like aggregate principal or maturity amount as
the Bond or Bonds surrendered for exchange or transfer. Neither the Registrar nor the District is required to issue,
transfer, or exchange any Bond during a period beginning at the opening of business on a Record Date and ending
at the close of business on the next succeeding Interest Payment Date or to transfer or exchange any Bond selected
for redemption, in whole or in part, beginning fifteen (15) calendar days prior to, and ending on the date of the
mailing of notice of redemption, or where such redemption is scheduled to occur within forty-five (45) calendar
days. No service charge will be made for any transfer or exchange, but the District or Registrar may require
payment of a sum sufficient to cover any tax or governmental charge payable in connection therewith.
Replacement of Bonds
In the event the Book-Entry-Only system is discontinued, the District has agreed to replace mutilated, destroyed,
lost or stolen Bonds upon surrender of the mutilated Bonds, receipt of satisfactory evidence of such destruction, loss
or theft, and receipt by the District and the Registrar of security or indemnity to hold them harmless. The District or
the Registrar may require payment of taxes, governmental charges and other expenses in connection with any such
replacement.
Authorization of the Bonds
At an election held within the District on May 15, 2004, the voters authorized issuance of $53,315,000 unlimited tax
bonds for refunding purposes and $46,100,000 for waterworks, sanitary sewer, and drainage facilities to serve the
District. The Bonds constitute the first issuance of bonds from the refunding authorization and the fourth issuance
of bonds altogether.
The Bonds are issued pursuant to (i) the Bond Order (“Bond Order”) adopted by the Board of Directors of the
District on the date of the sale of the Bonds, (ii) the Constitution and general laws of the State of Texas, particularly
Chapter 1207 of the Texas Government Code, as amended, and (iii) the election held within the boundaries on the
District on May 15, 2004.
Source of Payment
The Bonds, when issued, will constitute valid and binding obligations of the District, and the principal thereof and
the interest thereon, together with the principal and interest on the Remaining Outstanding Bonds (hereinafter
13
defined) and such additional tax bonds of the District as may hereafter be authorized by District voters, if any, and
subsequently issued, are payable from and secured by the proceeds of an annual ad valorem tax, without legal
limitation as to rate or amount, levied against all taxable property located within the District. See “TAXING
PROCEDURES” and “TAX DATA - Tax Rate Calculations” for tax adequacy, manner of assessing and collecting
taxes, and the remedy to the District in the event of tax delinquencies; and “Registered Owners' Remedies” below
for the remedies available to Bondholders in the event of default in the performance of any of the covenants set
forth in the Bond Order or in the event of default in the payment of principal of or interest on the Bonds.
The Bonds are obligations solely of the District and are not obligations of Rockwall County, Texas; the City of Fate,
Texas; the State of Texas; or any political subdivision other than the District.
Redemption of the Bonds
The District reserves the right, at its option, to redeem the Bonds maturing on and after October 1, 2021 prior to
their scheduled maturities, in whole or in part, on October 1, 2020, or on any date thereafter, at a price equal to the
principal amount thereof plus accrued interest to the date fixed for redemption. Notice of the exercise of the
reserved right of redemption will be given at least thirty (30) days prior to the redemption date by sending such
notice by first class mail to the Registered Owner of each Bond to be redeemed in whole or in part at the address
shown on the bond register. If less than all of the Bonds are optionally redeemed at any time, the particular
maturities and amounts of Bonds to be optionally redeemed shall be selected by the District in integral multiples of
$5,000 within any one maturity and if less than all of the Bonds within a maturity are to be redeemed, the Paying
Agent/Registrar (or DTC in accordance with its procedures while the Bonds are in book-entry-only form) shall
designate by method of random selection the Bonds within such maturity to be redeemed. The Registered Owner of
any Bond, all or a portion of which has been called for redemption, shall be required to present same to the Paying
Agent/Registrar for payment of the redemption price on the portion of the Bond so called for redemption and
issuance of a new Bond in the principal amount equal to the portion of such Bond not redeemed.
Remaining Outstanding Bonds
The District has previously issued $6,500,000 Unlimited Tax Bonds, Series 2006 (the “Series 2006 Bonds”);
$6,260,000 Unlimited Tax Bonds, Series 2007 (the “Series 2007 Bonds”); and $2,750,000 Unlimited Tax Bonds,
Series 2008 (the “Series 2008 Bonds”) aggregating $15,510,000 principal amount of bonds originally issued. As of
January 1, 2013, $13,955,000 principal amount of such bonds remains outstanding (the “Outstanding Bonds”).
Following the issuance of the Bonds and the refunding of the Refunded Bonds (hereinafter defined), $8,750,000*
principal amount of the Outstanding Bonds will remain outstanding (the “Remaining Outstanding Bonds”), and the
District’s total bonded indebtedness, including the Bonds, will be $14,120,000*.
Defeasance
The Bond Order provides that the District may discharge its obligations to the Registered Owners of any or all of
the Bonds to pay principal, interest and redemption price thereon in any manner permitted by law. Under current
Texas law, such discharge may be accomplished either (i) by depositing with the Comptroller of Public Accounts of
the State of Texas a sum of money equal to the principal of, premium, if any, and all interest to accrue on the Bonds
to maturity or redemption of (ii) by depositing with any place of payment (paying agent) for obligations of the
District payable from revenues or from ad valorem taxes or both or with a commercial bank or trust company
designated in the proceedings authorizing such discharge, amounts sufficient to provide for the payment and/or
redemption of the Bonds; provided that such deposits may be invested and reinvested only in (a) direct noncallable
obligations of the United States of America, including obligations that are unconditionally guaranteed by the United
States of America, (b) noncallable obligations of an agency or instrumentality of the United States, including
obligations that are unconditionally guaranteed or insured by the agency or instrumentality and that, on the date the
governing body of the District adopts or approves the proceedings authorizing the issuance of refunding bonds, are
rated as to investment quality by a nationally recognized investment rating firm not less than AAA or its equivalent,
and (c) noncallable obligations of a state or an agency or a county, municipality, or other political subdivision of a
state that have been refunded and that, on the date the governing body of the District adopts or approves the
_____________________________
*
14
proceedings authorizing the issuance of refunding bonds, are rated as to investment quality by a nationally
recognized investment rating firm not less than AAA or its equivalent. The foregoing obligations may be in book
entry form, and shall mature and/or bear interest payable at such times and in such amounts as will be sufficient to
provide for the scheduled payment and/or redemption of the Bonds. If any of such Bonds are to be redeemed prior
to their respective dates of maturity, provision must have been made for giving notice of redemption as provided in
the Bond Order.
There is no assurance that the current law will not be changed in a manner which would permit other investments to
be made with amounts deposited to defease the Bonds. Because the Bond Order does not contractually limit such
investments, Bondholders may be deemed to have consented to defeasance with such other investments,
notwithstanding the fact that such investments may not be of the same investment quality as currently permitted
under Texas law. There is also no assurance that any investment held for such discharge will maintain its rating.
Annexation and Consolidation
In certain circumstances, under Texas law, the District may alter its boundaries to: (1) upon satisfying certain
conditions, annex additional territory; and (2) exclude land subject to taxation within the District that is not served
by District facilities if the District simultaneously annexes land of equal acreage and value that may be practicably
served by District facilities. No representation is made concerning the likelihood that the District would effect any
additional changes in its boundaries.
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.
Legal Ability to Issue Additional Debt
After the issuance of the Bonds, $53,150,000* of bonds for refunding purposes and $30,590,000 of bonds for water,
sewer and drainage purposes will remain authorized but unissued. The Bond Order imposes no limitation on the
amount of additional parity bonds which may be issued by the District. It is the opinion of the Engineer that the
$30,590,000 remaining authorized but unissued bonds will be sufficient to complete construction of all water, sewer
and drainage facilities in the District. See “INVESTMENT CONSIDERATIONS - Future Debt.”
Before issuing any additional bonds for water, sewer and drainage facilities, the District would have to obtain
approval of the Texas Commission on Environmental Quality (the “Commission” or “TCEQ”) for the issuance of
such bonds and the projects to be financed thereby. In addition to the above-mentioned bonds, the District has the
right to issue such additional tax bonds or combination tax and revenue bonds as may be hereafter approved by the
voters of the District. The District also has the right to issue revenue notes, bond anticipation notes, and tax
anticipation notes without the necessity of voter approval. In addition, the District has the right to enter into
contracts and to pledge its taxing power to secure any payments the District is required to make under such
contracts, provided the provisions of the contract are approved by the voters of the District. The District further has
the right to issue refunding bonds without additional voter approval. The City provides the District with facilities
for parks, roads and fire protection.
Registered Owners' Remedies
The Bond Order contains a covenant that while any part of the Bonds is outstanding, there shall be assessed, levied,
and collected an annual ad valorem tax, without legal limit as to rate or amount, on all taxable property within the
District, sufficient to pay principal of and interest on the Bonds, the Remaining Outstanding Bonds of any additional
tax bonds when due and to pay the expenses necessary in collecting taxes. Texas law and the Bond Order provide
that in the event that the District defaults in the payment of the principal of or interest on any of the Bonds when
due, fails to make payments required by the Bond Order into the Debt Service Fund, or defaults in the observance or
performance of any of the covenants, conditions, or obligations set forth in the Bond Order, any Registered Owner
shall be entitled at any time to a writ of mandamus from a court of competent jurisdiction compelling and requiring
______________________________
*
15
the Board of Directors of the District to observe and perform any covenant, obligation, or condition prescribed by
the Bond Order. Such right is in addition to all other rights the Registered Owners may be provided by the laws of
the State of Texas.
Except for mandamus, the Bond Order does not specifically provide for remedies to a Registered Owner in the
event of a District default, nor does it provide for the appointment of a trustee to protect and enforce the interests of
the Registered Owners. There is no acceleration of maturity of the Bonds in the event of default. Consequently, the
remedy of mandamus is a remedy which may have to be relied upon from year to year by the Registered Owners.
Even if the Registered Owners could obtain a judgment against the District, such judgment could not be enforced by
direct levy and execution against the District's property. Further, the Registered Owners cannot themselves
foreclose on property within the District or sell property within the District in order to pay the principal of and
interest on the Bonds. Certain traditional legal remedies also may be unavailable. The enforceability of the rights
and remedies of the Registered Owners may be further limited by federal bankruptcy laws, reorganization, or other
similar laws of general application affecting the rights of creditors of political subdivisions such as the District. See
“Bankruptcy Limitation to Registered Owners' Rights.”
Bankruptcy Limitation to Registered Owners' Rights
Other than a writ of mandamus and other relief authorized by law, the Bond Order does not expressly provide a
specific remedy for a default. 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 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
principals of equity. See “INVESTMENT CONSIDERATIONS - Registered Owners’ Remedies,” and “Bankruptcy Limitation to Registered Owners’ Rights.”
Legal Investment and Eligibility to Secure Public Funds in Texas
Pursuant to the Texas Bond Procedures Act, Chapter 1201, Texas Government Code, as amended, and Section
49.186, Texas Water Code, the Bonds, whether rated or unrated, 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 the public funds of cities, towns, villages, school districts, and other
political subdivisions or public agencies of the State of Texas. Most political subdivisions in the State of Texas are
required to adopt investment guidelines under the Public Funds Investment Act, Chapter 2256, Texas Government
Code, and such political subdivisions may impose a requirement consistent with such act that the Bonds have a
rating of not less than “A” or its equivalent to be legal investments for such entity’s funds. The Bonds are eligible
under the Public Funds Collateral Act, Chapter 2257, Texas Government Code, 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.
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 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.
16
PLAN OF FINANCING
Use and Distribution of Bond Proceeds
The proceeds of the Bonds, will be applied to pay certain costs incurred in connection with the issuance of the
Bonds, and to advance refund $5,205,000* in principal amount (the “Refunded Bonds”) of the District’s Unlimited
Tax Bonds, Series 2006 (the “Series 2006 Bonds”). The refunding of the Refunded Bonds is expected to result in
annual and net present value savings in the District’s current annual debt service requirements.
The Refunded Bonds
The principal amounts and maturity dates of the Refunded Bonds are set forth as follows:
Series 2006
Refunded Bonds*
Maturity
Principal
Date
Amount
10/01/2016
10/01/2017
10/01/2018
10/01/2019
10/01/2020
10/01/2021
10/01/2022
***
10/01/2024
10/01/2025
10/01/2026
10/01/2028
10/01/2030
Total
230,000
240,000
255,000
270,000
285,000
300,000
320,000
***
695,000(a)
375,000
400,000
865,000(b)
970,000(c)
$5,205,000
Redemption Date:
October 1, 2013
Aggregate Principal Amount of Refunded Bonds
$5,205,000*
(a) Term Bond with scheduled mandatory redemption amounts as follows:
Redemption Date
10/01/2023
10/01/2024
Amount
$340,000
355,000
(b) Term Bond with scheduled mandatory redemption amounts as follows:
Redemption Date
10/01/2027
10/01/2028
Amount
$420,000
445,000
__________________________________
17
(c) Term Bond with scheduled mandatory redemption amounts as follows:
Redemption Date
10/01/2029
10/01/2030
Amount
$470,000
500,000
Remaining Outstanding Bonds
The District has previously issued the following bonds for waterworks, sanitary sewer and drainage facilities;
recreational facilities and to refund bonds issued by the District:
Series
Series 2006 Bonds
Series 2007 Bonds
Series 2008 Bonds
Principal Amount
Originally Issued
Outstanding
Bonds
Refunded
Bonds*
Remaining
Outstanding
Bonds*
$ 6,500,000
6,260,000
2,750,000
$15,510,000
$ 5,820,000
5,595,000
2,540,000
$13,955,000
$ 5,205,000
-0-0$5,205,000
$ 615,000
5,595,000
2,540,000
$8,750,000
Escrow Agreement
The District will enter into an escrow agreement (the “Escrow Agreement”) with The Bank of New York Mellon
Trust Company, N.A., Dallas, Texas (the “Escrow Agent”), pursuant to which a portion of the proceeds of the
Bonds will be deposited in cash or invested in certain securities of the United States of America (the “Escrowed
Obligations”) and held in an escrow fund (the “Escrow Fund”) to provide for scheduled payments of principal of
and interest on the Refunded Bonds until their redemption date. At the time of delivery of the Bonds, Grant
Thornton L.L.P. will verify to the District, the Escrow Agent, Bond Counsel, and the Underwriter that the cash and
the Escrowed Securities in the Escrow Fund is sufficient in principal amount to pay, when due, the principal of and
interest on the Refunded Bonds. See “VERIFICATION OF MATHEMATICAL CALCULATIONS.”
By the deposit of cash and the Escrowed Securities with the Escrow Agent pursuant to the Escrow Agreement, the
District will have affected the defeasance of the Refunded Bonds pursuant to the terms of the order authorizing the
issuance of the Refunded Bonds. In the opinion of Bond Counsel, as a result of such deposit, firm banking and
financial arrangements will have been made for the discharge and final payment of the Refunded Bonds pursuant to
the Escrow Agreement, and such Refunded Bonds will be deemed under Texas law to be fully paid and no longer
outstanding, except for the purpose of being paid from the funds provided therefor in such Escrow Agreement.
___________________________________
*
18
Sources and Uses of Funds
The proceeds from the sale of the Bonds will be applied as follows:
SOURCES OF FUNDS:
Par Amount of Bonds...................................................................................................
Plus: Net Premium on the Bonds ................................................................................
Accrued Interest............................................................................................................
Total Sources of Funds.................................................................................................
$
$
USES OF FUNDS:
Deposit to Redeem Refunded Bonds ...........................................................................
Deposit Accrued Interest to Debt Service Fund ..........................................................
Issuance Expenses and Underwriter Discount.............................................................
Total Uses of Funds......................................................................................................
[Remainder of Page Intentionally Left Blank]
19
$
$
LOCATION MAP OF THE DISTRICT
(taken August, 2012)
20
DISTRICT DEBT
General
The following tables and calculations relate to the Bonds. The District is empowered to incur debt to be paid from
revenues raised by taxation against all taxable property located within the District, and various other political
subdivisions of government which overlap all or a portion of the District are empowered to incur debt to be paid
from revenues raised or to be raised by taxation against all or a portion of property within the District.
Bonded Indebtedness
2012 Assessed Valuation ............................................................................................................
(100% of market value as of January 1, 2012)
See “TAX DATA” and “TAXING PROCEDURES”
$239,132,056 (a)
Direct Debt:
Remaining Outstanding Bonds ....................................................................................
The Bonds.....................................................................................................................
Total...........................................................................................................................
$ 8,750,000 *(b)
5,370,000 *
$ 14,120,000 *
Estimated Overlapping Debt .......................................................................................................
$ 15,602,975 (c)
Direct and Estimated Overlapping Debt .....................................................................................
$ 29,722,975
Debt Service Fund Balance (as of January 22, 2013) ................................................................
General Fund Balance (as of January 22, 2013).........................................................................
$ 2,396,834 (d)
$
371,434
Ratio of Direct Debt to ....... :2012 Assessed Valuation ($239,132,056) ................................
5.90 %
Ratio of Direct and Estimated
Overlapping Debt to ........... :2012 Assessed Valuation ($239,132,056) ................................
12.43 %
Estimated Population as of January 1, 2013 ...............................................................................
4,711 (d)
__________________________
* Preliminary, subject to change
(a) Certified Taxable Assessed Value within the District as provided by the Rockwall Central Appraisal District
(“RCAD”). See “TAXING PROCEDURES.”
(b) Excludes the Refunded Bonds.
(c) See “DISTRICT DEBT - Estimated Overlapping Debt.”
(d) Neither Texas law nor the Bond Order requires that the District maintain any particular sum in the Debt Service
Fund.
(e) As of January 1, 2013. Based on 3.5 residents per active single-family connection.
21
Estimated Direct and Overlapping Debt Statement
The following statement indicates the direct and estimated overlapping debt of the District. The table includes the
estimated amount of indebtedness of governmental entities overlapping the District, defined as outstanding bonds
payable from ad valorem taxes, and the estimated percentages and amounts of such indebtedness attributable to
property located within the District. This information is based upon data secured from the individual jurisdictions
and/or the Texas Municipal Reports published by the Municipal Advisory Council of Texas. The calculations by
which the statement was derived were made in part by comparing the reported assessed valuation of the property in
the overlapping taxing jurisdictions with the 2012 Assessed Valuation of property within the District. No effect has
been given to the tax burden levied by any applicable taxing jurisdiction for maintenance and operational or other
purposes.
Outstanding
Debt
as of 12/31/2012
$ 94,582,015
2,545,000
346,078,257
110,563,840
Taxing Body
Rockwall County
City of Fate
Rockwall ISD
Royse City ISD
Overlapping
Percent
3.80%
49.16
1.69
4.44
TOTAL ESTIMATED OVERLAPPING DEBT
TOTAL DIRECT DEBT
TOTAL DIRECT & ESTIMATED OVERLAPPING
DEBT
Amount
$ 3,594,030
1,251,188
5,848,723
4,909,034
$15,602,975
14,120,000 *
$29,722,975
__________________________
* Includes the refunding of the Refunded Bonds and the issuance of the Bonds. Preliminary, subject to change
Debt Ratios
Direct Debt
Direct and Estimated Overlapping Debt
% of 2012
Assessed Valuation
5.90%
12.43%
Under Texas law ad valorem taxes levied by each taxing authority other than the District create a lien which is on a
parity with the lien in favor of the District on all taxable property within the District. In addition to the ad valorem
taxes required to retire the foregoing direct and overlapping debt, the various taxing authorities mentioned above are
also authorized by Texas law to assess, levy and collect ad valorem taxes for operation, maintenance, administration
and/or general revenue purposes. Certain of the jurisdictions have in the past levied such taxes. The District has the
power to assess, levy and collect ad valorem taxes for operation and maintenance purposes, and such taxes have
been authorized by the duly qualified voters of the District. The District has levied a maintenance tax since 1991,
the initial year taxes were levied within the District. See “TAX DATA - Maintenance Tax”.
22
Debt Service Requirement Schedule
The following schedule sets forth the debt service requirements on the Outstanding Bonds, less the debt service of
the Refunded Bonds and the principal and estimated interest requirements on the Bonds, assuming the Bonds are
issued at various interest rates.
Year
Ending
December 31
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
Current
Debt Service
Requirements
$ 1,120,198
1,118,573
1,115,498
1,125,248
1,124,218
1,139,478
1,142,593
1,148,924
1,158,718
1,176,320
1,181,325
1,189,208
1,195,008
1,208,139
1,218,708
1,231,225
1,240,693
1,257,025
$ 21,091,093
Less:
Debt Service
on Refunded
Bonds*
231,395
231,395
231,395
461,395
461,965
467,125
471,415
474,940
477,828
484,778
490,698
490,568
494,770
502,895
504,895
510,575
515,105
523,250
$8,026,385
Plus: -- The Bonds -Principal*
Interest*
$
$
$
35,000
35,000
265,000
270,000
280,000
290,000
300,000
315,000
330,000
345,000
355,000
370,000
395,000
410,000
435,000
455,000
485,000
$5,370,000
103,688
177,750
177,050
176,350
171,050
165,650
160,050
151,350
142,350
132,900
123,000
112,650
102,000
87,200
71,400
55,000
37,600
19,400
$2,166,438
Average Annual Requirements - (2013-2030) ...........................................................................
Maximum Annual Requirement - (2030) ...................................................................................
Total New
Debt Service
$
992,490
1,099,928
1,096,153
1,105,203
1,103,303
1,118,003
1,121,228
1,125,334
1,138,240
1,154,443
1,158,628
1,166,290
1,172,238
1,187,444
1,195,213
1,210,650
1,218,188
1,238,175
$20,601,145
$1,144,508*
$1,238,175*
See “TAX DATA - Tax Rate Calculations” and “INVESTMENT CONSIDERATIONS - Maximum Impact on
District Tax Rates” for a discussion of the District's projected tax rates and the effect of the Bonds thereon.
TAX PROCEDURES
Authority to Levy Taxes
The Board is authorized to levy an annual ad valorem tax on all taxable property within the District in an amount
sufficient to pay the principal of and interest on the Bonds, and any additional bonds payable from taxes which the
District may hereafter issue (see “INVESTMENT CONSIDERATIONS - Future Debt”) and to pay the expenses of
assessing and collecting such taxes. The District agrees in the Bond Order to levy such a tax from year-to-year as
described more fully herein under “THE BONDS - Source of and Security for Payment.” Under Texas law, the
Board is also authorized to levy and collect an annual ad valorem tax for the operation and maintenance of the
District and its water, wastewater and drainage system and for the payment of certain contractual obligations if
authorized by its voters. See “TAX DATA - Tax Rate Limitation”.
Property Tax Code and County-Wide Appraisal District
The Texas Property Tax Code (the “Property Tax Code”) specifies the taxing procedures of all political
subdivisions of the State of Texas, including the District. Provisions of the Property Tax Code are complex and are
not fully summarized herein.
____________________________
23
The Property Tax Code requires, among other matters, county-wide appraisal and equalization of taxable property
values and establishes in each county of the State of Texas an appraisal district with the responsibility for recording
and appraising property for all taxing units within a county and an appraisal review board with the responsibility for
reviewing and equalizing the values established by the appraisal district. The Rockwall County Appraisal District
(the “Appraisal District” or “RCAD”) has the responsibility for appraising property for all taxing units within
Rockwall County, including the District. Such appraisal values are subject to review and change by the Rockwall
County Appraisal Review Board (the “Appraisal Review Board”). The appraisal roll as approved by the Appraisal
Review Board must be used by the District in establishing its tax roll and tax rate.
Exempt Property
Except for certain exemptions provided by Texas law, all real property, tangible personal property held or used for
the production of income, mobile homes and certain categories of intangible personal property with a tax situs in the
District are subject to taxation by the District. Principal categories of exempt property include, but are not limited
to: property owned by the State of Texas or its political subdivisions, if the property is used for public purposes;
property exempt from ad valorem taxation by federal law; certain household goods, family supplies and personal
effects; certain goods, wares, and merchandise in transit; certain farm products owned by the producer; certain
property of charitable organizations, youth development associations, religious organizations, and qualified schools;
designated historical sites; and most individually-owned automobiles. In addition, the District may by its own action
exempt certain property owned by qualified organizations engaged primarily in charitable activities, residential
homesteads of persons 65 years or older and certain disabled persons, to the extent deemed advisable by the Board
of Directors of the District. For the 2012 tax year, the District has adopted an exemption of $10,000 from ad
valorem taxation on residential homesteads of individuals who are 65 years or older and certain disabled persons.
The District may be required to offer such exemptions if a majority of voters approve same at an election. The
District would be required to call an election upon petition by twenty percent (20%) of the number of qualified
voters who voted in the preceding election. The District is authorized by statute to disregard exemptions for the
disabled and elderly if granting the exemption would impair the District's obligation to pay tax supported debt
incurred prior to adoption of the exemption by the District. Furthermore, the District must grant exemptions to
disabled veterans, or certain surviving dependents of disabled veterans if requested, but only to the maximum extent
of $5,000 to $12,000 of assessed valuation depending upon the disability rating of the veteran. A veteran who
receives a disability rating of 100% is entitled to an exemption for the full amount of the veteran’s residence
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.
The Board may exempt up to 20% of the market value of residential homesteads from ad valorem taxation. Such
exemption would be in addition to any other applicable exemptions provided by law. However, if ad valorem taxes
have previously been pledged for the payment of debt and the reduction or cessation of the levy would impair the
obligation of the contract by which the debt was created, then the Board may continue to levy and collect taxes
against the exempt value of the homesteads until the debt is discharged. To date, the Board has not granted a
residential homestead exemption.
Rockwall County may designate all or part of the area within the District as a reinvestment zone, and Rockwall
County, or the District may thereafter enter into tax abatement agreements with owners of real property within the
zone with each taxing jurisdiction's agreement affecting its own tax roll. The tax abatement agreements exempt from
ad valorem taxation by the applicable taxing jurisdiction (including the District with the District's consent) for a
period of up to 10 years, all or any part of any increase in the assessed valuation of property covered by the
agreement over its assessed valuation in the year in which the agreement is executed, on the condition that the
property owner make specified improvements or repairs to the property in conformity with a comprehensive plan. In
certain instances, personal property also may be eligible for tax abatement. Each taxing jurisdiction has discretion
to determine terms for its tax abatement agreements without regard to the terms approved by other taxing
jurisdictions.
24
Freeport Goods and Goods-in-Transit Exemptions: A “Freeport Exemption” applies to goods, wares,
merchandise, other tangible personal property and ores, other than oil, natural gas, and petroleum products (defined
as liquid and gaseous materials immediately derived from refining oil 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 certain
tangible personal property as defined by the Property Tax Code. The exemption excludes oil, natural gas,
petroleum products, aircraft and certain special inventory including dealer’s motor vehicles, dealer’s vessel and
outboard motor vehicle, dealer’s heavy equipment and retail manufactured housing inventory. For tax year 2011
and prior applicable years, the exemption applies to covered property if it 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 2012 and subsequent years, such Goods-in-Transit Exemption is further 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. For tax year 2012 and subsequent years, 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. However, taxing units who took official action
as allowed by prior law before October 1, 2011, to tax goods-in-transit property, and who pledged such taxes for the
payment of debt, may continue to impose taxes against the goods-in-transit property until the debt is discharged
without further action, if cessation of the imposition would impair the obligations of the contract by which the debt
was created. 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.
County-Wide Appraisal District
Generally, property in the District must be appraised by the RCAD at market value as of January 1 of each year.
Once an appraisal roll is prepared and formally approved by the Appraisal Review Board, it is used by the District
in establishing its tax rolls and tax rate. Assessments under the Property Tax Code are to be based on one hundred
percent (100%) of market value, as such is defined in the Property Tax Code.
The Property Tax Code permits land designated for agricultural use, open space or timberland to be appraised at its
value based on the land’s capacity to produce agricultural or timber products rather than at its market value. The
Property Tax Code permits, under certain circumstances, that residential real property inventory held by a person in
the trade or business be valued at the price that such property would bring if sold as a unit to a purchaser who would
continue the business. 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 RCAD to implement a plan for periodic reappraisal of property. The plan must
provide for appraisal of all real property in the RCAD at least once every three years. It is not known what
frequency of reappraisal will be utilized by the RCAD 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 RCAD 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
25
values within the District, it cannot be used for establishing a tax rate within the District until such time as the
RCAD chooses formally to include such values on its appraisal roll.
Assessment and Levy
The District is responsible for the levy and collection of its taxes unless it elects to transfer the collection functions
to another governmental entity or private tax assessor/collector approved by the Board. Each year the rate of
taxation is set by the Board based upon the valuation of property within the District as of the preceding January 1.
Taxes are due when billed, and become delinquent after January 31 of the following year. A delinquent tax incurs a
penalty of six percent (6%) of the amount of the tax for the first calendar month it is delinquent, plus one percent
(1%) for each additional month or portion of a month the tax remains unpaid prior to July 1 of the year in which it
becomes delinquent. If the tax is not paid by July 1 of the year in which it becomes delinquent, the tax incurs a total
penalty of twelve percent (12%) regardless of the number of months the tax has been delinquent. The delinquent
tax also accrues interest at a rate of one percent (1%) for each month or portion of a month it remains unpaid. In
addition, if the District engages an attorney for the collection of delinquent taxes, the Board may impose a further
penalty not to exceed twenty percent (20%) on all taxes, penalty and interest unpaid on July 1. 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.
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 of 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 RCAD to compel compliance with the Property Tax Code.
The Property Tax Code sets forth notice and hearing procedures for certain tax rate increases by the District and
provides for taxpayer referenda, which could result in the repeal of certain tax increases. The Property Tax Code
also establishes a procedure for notice to property owners of reappraisals reflecting increased property value,
appraisals which are higher than renditions, and appraisals of property not previously on an appraisal roll.
Collection
The District is responsible for the levy and collection of its taxes unless it elects to transfer the collection functions
to another governmental entity or private tax assessor/collector approved by the Board. Each year the rate of
taxation is set by the Board based upon the valuation of property within the District as of the preceding January 1.
Taxes are due when billed, and become delinquent after January 31 of the following year. A delinquent tax incurs a
penalty of six percent (6%) of the amount of the tax for the first calendar month it is delinquent, plus one percent
(1%) for each additional month or portion of a month the tax remains unpaid prior to July 1 of the year in which it
becomes delinquent. If the tax is not paid by July 1 of the year in which it becomes delinquent, the tax incurs a total
penalty of twelve percent (12%) regardless of the number of months the tax has been delinquent. The delinquent
tax also accrues interest at a rate of one percent (1%) for each month or portion of a month it remains unpaid. In
addition, if the District engages an attorney for the collection of delinquent taxes, the Board may impose a further
penalty not to exceed twenty percent (20%) on all taxes, penalty and interest unpaid on July 1. 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.
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 STATEMENT –
Overlapping Taxes”). 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
26
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 proceeding which restrict the collection of taxpayer debts. See “INVESTMENT CONSIDERATIONS General - Tax Collection and Foreclosure Remedies.”
TAX DATA
General
Taxable property within the District is subject to the assessment, levy and collection by the District of an annual ad
valorem tax, without legal limitation as to rate or amount, sufficient to pay principal of and interest on the Bonds
(and any future tax-supported bonds which may be issued from time to time as authorized). Taxes are levied by the
District each year against the District's assessed valuation as of January 1 of that year. Taxes become due October 1
of such year, or when billed, and generally become delinquent after January 31 of the following year. The Board
covenants in the Bond Order to assess and levy for each year that all or any part of the Bonds remain outstanding
and unpaid a tax ample and sufficient to produce funds to pay the principal of and interest on the Bonds. The actual
rate of such tax will be determined from year to year as a function of the District's tax base, its debt service
requirements and available funds. In addition, the District has the power and authority to assess, levy and collect ad
valorem taxes, in an unlimited amount, for operation and maintenance purposes. The Board levied a 2012 tax rate
for debt service purposes of $0.48 per $100 of assessed valuation and $0.22 per $100 of assessed valuation for
operation and maintenance purposes for a total tax rate of $0.70 per $100 of assessed value.
Tax Rate Limitation
Debt Service:
Maintenance:
Unlimited (no legal limit as to rate or amount).
Unlimited (no legal limit as to rate or amount).
Historical Values and Tax Collection History
The following statement of tax collections sets forth in condensed form the historical Assessed Valuation and tax
collections of the District. Such summary has been prepared for inclusion herein based upon information obtained
from District records. Reference is made to such records, including the District's annual audited financial
statements, for more complete information.
Tax
Year
Assessed
Valuation
Tax Rate/
$100(a)
2004
$ 8,143,410
$0.75
2005
41,089,158
0.75
2006
93,700,860
0.75
2007
147,540,066
0.75
2008
177,180,520
0.75
2009
202,520,991
0.72
2010
216,203,287
0.72
2011
231,170,379
0.72
2012
239,132,056
0.70
____________________________
(a) See “- Tax Rate Distribution.”
(b) In process of collection.
Adjusted
Levy
$
61,076
308,169
702,756
1,106,550
1,328,854
1,518,907
1,621,525
1,664,427
1,673,924
27
Current
Year
99.60%
98.55
96.47
94.90
99.20
99.43
99.62
99.58
94.06 (b)
Fiscal Year
Ending 9/30
As of
2/5/2013
2005
2006
2007
2008
2009
2010
2011
2012
2013
100.00%
100.00
100.00
99.89
99.87
99.77
99.74
99.58
94.06 (b)
Analysis of Tax Base
The following table illustrates the composition of property located within the District for the 2007-2012 tax years.
2012
Assessed
Valuation
Type of Property
Land
Improvements
Personal Property
Exemptions
Total
$ 42,616,747
197,326,128
743,140
(1,553,959)
$239,132,056
2010
Assessed
Valuation
$ 42,734,077
188,806,772
776,080
(1,146,550)
$231,170,379
2009
Assessed
Valuation
Type of Property
Land
Improvements
Personal Property
Exemptions
Total
2011
Assessed
Valuation
2008
Assessed
Valuation
$ 41,367,940
161,438,825
988,170
(1,273,944)
$202,520,991
$ 42,078,762
174,500,995
947,260
(1,323,730)
$216,203,287
2007
Assessed
Valuation
$ 40,792,440
136,396,721
1,098,390
(1,107,031)
$177,180,520
$ 39,093,566
108,277,069
664,250
(494,819)
$147,540,066
Tax Rate Distribution
The following table illustrates the breakdown of the District's tax rate in the 2007-2012 tax years:
Debt Service
Maintenance
2012
2011
2010
2009
2008
2007
$0.48
0.22
$0.70
$0.50
0.22
$0.72
$0.54
0.18
$0.72
$0.54
0.18
$0.72
$0.59
0.16
$0.75
$0.59
0.16
$0.75
Principal 2012 Taxpayers
Based upon information supplied by the District's Tax Assessor/Collector, the following table lists principal District
taxpayers, type of property owned by such taxpayers, and the Assessed Valuation of such property as of
January 1, 2012. The information reflects the composition of the Appraisal District's record of property ownership
as of January 1, 2012.
Taxpayers
Property Description
2012
Assessed Value
% of
Assessed Value
Fate Project Development Partners, Ltd. (a)
JFB Fate/2003, Ltd. (a)(b)
JFB Fate/2005, Ltd. (a)(b)
Drees Custom Homes, LP
Horizon Homes, Ltd.
Weekley Homes, LP
Woodcreek Fate Homeowners Assoc. Inc.
PRA/Fate Development Corp. (a)
Homeowner
Homeowner
Land & Improvements
Land & Improvements
Land & Improvements
Land & Improvements
Land & Improvements
Land & Improvements
Land & Improvements
Land & Improvements
Land & Improvements
Land & Improvements
$1,119,890
1,077,700
856,930
530,520
494,060
458,470
396,300
367,890
308,380
307,260
0.47%
0.45%
0.36%
0.22%
0.21%
0.19%
0.17%
0.15%
0.13%
0.13%
$5,917,400
2.47%
Total
____________________________
(a) See “THE DEVELOPERS”
(b) Related entities.
28
Tax Rate Calculations
The tax rate calculations set forth below are presented to indicate the tax rates per $100 of Assessed Valuation
which would be required to meet certain debt service requirements if no growth occurs in the District's tax base
beyond the District's 2012 Assessed Valuation. The calculations also assume collection of 95% of taxes levied, no
use of District funds on hand, and no sale of additional bonds by the District.
Average Annual Debt Service Requirements (2013-2030)................................................................... $1,144,508
Tax Rate of $0.51 on the 2012 Assessed Valuation ($239,132,056) produces .................................... $1,158,595
Maximum Debt Service Requirement (2030)........................................................................................ $1,238,175
Tax Rate of $0.55 on the 2012 Assessed Valuation ($239,132,056) produces .................................... $1,249,465
Estimated Overlapping Taxes
Property located within the District is subject to taxation by several taxing authorities in addition to the District. Set
forth below is a compilation of all 2012 taxes levied upon property located within the District. Under Texas law, ad
valorem taxes levied by each taxing authority other than the District entitled to levy taxes against property located
within the District create a lien which is on a parity with the tax lien of the District. In addition to the ad valorem
taxes required to make the debt service payments on bonded debt of the District and of such other jurisdictions (see
“DISTRICT DEBT- Estimated Direct and Overlapping Debt Statement”), certain taxing jurisdictions are authorized
by Texas law to assess, levy and collect ad valorem taxes for operation, maintenance, administrative and/or general
revenue purposes.
2012 Tax Rate/
Per $100 of A.V.
Taxing Jurisdiction
Rockwall ISD
Royse City ISD
The District
City of Fate
Rockwall County
Rockwall Independent School District
Royse City Independent School District
$0.7000
0.2463
0.3864
1.4700
--
$0.7000
0.2463
0.3864
-1.6700
Estimated Total Tax Rate
$2.8027
$3.0027
THE DISTRICT
General
The District is a limited-purpose political subdivision of the State of Texas operating as a municipal utility district
pursuant to Article XVI, Section 59 of the Texas Constitution and Sections 49 and 54 of the Texas Water Code.
The District was formed pursuant to a Consolidation Agreement dated April 5, 1976 between Rockwall County
Municipal Utility District No. 1 (created by the Texas Water Rights Commission (“TWRC”) on February 29, 1972),
Rockwall County Municipal Utility District No. 3 (created by the TWRC on June 19, 1972) and Rockwall County
Municipal Utility District No. 4 (created by the TWRC on June 19, 1972). The District assumed the powers and
functions of the individual districts. The District is vested with all the rights, privileges, authority and functions
conferred by the laws of the State of Texas applicable to municipal utility districts, including without limitation
those conferred by Chapters 49 and 54, Texas Water Code, as amended. The District is empowered to purchase,
construct, operate and maintain all works, improvements, facilities and plants necessary for the supply of water; the
collection, transportation and treatment of wastewater; and the control and diversion of storm water, among other
things. The District may also provide solid waste collection and disposal service and operate and maintain
recreational facilities. Currently the District’s water and wastewater are provided by contract with the City of Fate,
Texas (the “City”) as described under “Special District Agreements” below. The District may operate and maintain
a fire department, independently or with one or more other conservation and reclamation districts, if approved by
the voters and the TCEQ. The District does not operate and/or maintain a fire department. The District is subject to
the continuing supervision of the TCEQ and is located exclusively within the corporate limits of the City.
29
Special District Agreements
The District has entered into a Special District Agreement dated December 2, 2003 with the City and PRA/Fate
(defined herein under “DEVELOPERS / LANDOWNERS”) that provides, in part, for the City to own, operate and
maintain the internal and off-site water, wastewater and drainage facilities acquired from the proceeds of the Bonds,
for the City to provide water and wastewater capacity to serve customers within the District, and that the City shall
not exercise its right to dissolve the District until the Bonds and any additional debt of the District has been repaid.
Pursuant to this Agreement, the District included the prohibition of dissolution in its bond election propositions and
in the order authorizing the issuance and sale of the Refunded Bonds.
The District has also entered into a Special District Agreement No. 2 dated May 17, 2006 with the City, PRA/Fate
and Rockwall County Municipal Utility Districts 6, 7, 8 and 9 (the “New Districts”) which provides that the New
Districts, in addition to the District, accept the obligations and provisions of the original Special District Agreement.
Location
The District is located in Rockwall County approximately 27 miles northeast of downtown Dallas, on the west side
of downtown City of Fate within the corporate limits of the City of Fate. The District is bounded by State Highway
66 on the south.
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. Directors’ terms are four years with elections held within the District on the
second Saturday in May in each even numbered year. All of the directors own property in the District.
Name
Position
Term Expires
May
Bobby L. Jackson, Jr.
President
2014
Burnis F. Turner
Vice President
2016
Jo Carol McCormick
Secretary
2016
Randy C. Roland
Treasurer/Asst. Secretary
2014
Paul Wilson
Assistant Secretary
2014
- Consultants Tax Assessor/Collector - Land and improvements in the District are being appraised by the Rockwall Central
Appraisal District. The Tax Assessor/Collector is appointed by the Board of Directors of the District. Ray Helm,
Chief Appraiser of the Rockwall Central Appraisal District, serves the District in this capacity under contract.
Bookkeeper - The District contracts with Dye & Bloomfield, P.C. as Bookkeeper for the District.
Engineer - The District's consulting engineer is Petitt Barraza LLC (the “Engineer”).
Auditor - The District’s audited financial statements for the year ended September 30, 2012, were prepared by
McCall, Gibson & Company, PLLC. See APPENDIX A for a copy of the District’s year end September 30, 2012,
audited financial statements.
30
Bond Counsel & General Counsel - The District has engaged Kelly Hart & Hallman LLP (“Kelly Hart”), Fort
Worth, Texas, as Bond Counsel in connection with the issuance of the District’s Bonds. The fees of Bond Counsel
are contingent upon the sale of and delivery of the Bonds. Kelly Hart also serves as the District’s general counsel.
Financial Advisor - The District has employed the firm of RBC Capital Markets, LLC as financial advisor to the
District. Payment to the Financial Advisor by the District is contingent upon the issuance, sale and delivery of the
Bonds. The Financial Advisor may also receive a fee for conducting a competitive bidding process regarding the
investment of certain proceeds of the Bonds. The Financial Advisor is not obligated to undertake, and has not
undertaken to make, an independent verification or to assume responsibility for the accuracy, completeness, or
fairness of the information in this Official Statement.
Special Consultants Related to Issuance of the Bonds
Verification Agent – At the time of delivery of the Bonds, Grant Thornton LLP, Certified Public Accountants, will
verify to the District, the Paying Agent/Registrar, Bond Counsel, and the Underwriter certain matters related to the
issuance of the bonds and the refunding of the Refunded Bonds. See “VERIFICATION OF MATHEMATICAL
CALCULATIONS.”
DEVELOPMENT WITHIN THE DISTRICT
Current Status of Development
Of the approximately 581 acres within the District, approximately 542 acres are developable under current land
development regulations. As of January 1, 2013, water, wastewater and drainage facilities have been completed to
serve approximately 1,491 lots on 404.12 acres within the District as part of the single family subdivision know as
Woodcreek. To date, development within the District includes 1,335 completed single-family homes, 11 homes
under construction, and approximately 145 vacant developed single-family lots. In addition to the single-family
home development, the development includes an amenity center and parks. The construction of 58 lots in
Woodcreek Phase 1D-2 on approximately 13 acres is anticipated to begin in March 2013 with completion
anticipated in August of 2013. The remaining land within the District includes approximately 124 remaining
undeveloped acres and 39 undevelopable acres
Woodcreek
Phase 1A
Phase 1B
Phase 1C
Phase 1D-1
Phase 1D-2
Phase 2A
Phase 2B
Phase 2C
Phase 3A
Phase 3B
Phase 3C
Phase 4
Total
Total
Developed
Acres
Total
Developed
Lots
Total Acres
Under
Development
Total Lots
Under
Development
67.41
11.81
55.18
3.30
177
N/A
164
17
13.06
58
54.15
46.97
44.35
40.26
22.36
45.68
12.65
228
218
205
154
96
186
46
____
404.12
1,491
13.06
31
Homes
Remaining
Developed
Lots
Completed
Under
Construction
173
0
4
__
141
0
0
225
218
175
154
84
119
46
1
4
0
0
0
0
0
2
4
0
22
13
0
3
0
30
0
10
63
0
58
1,335
11
145
Future Development
The construction of 58 lots in Woodcreek Phase 1D-2 on approximately 13 acres is anticipated to begin in March
2013 with completion anticipated in August of 2013. Additionally, approximately 124 acres within the District are
undeveloped but developable. It is currently anticipated by the Developers that the homebuilding programs
underway within the District will continue on the lots currently under design.
THE DEVELOPERS
Role of the Developer
In general, the activities of a developer in a municipal utility district, such as the District, include the following:
acquiring the land within the district; designing the subdivision, the utilities and streets to be constructed in the
subdivision, and any community facilities to be built; defining a marketing program and building schedule; securing
necessary governmental approvals and permits for development; arranging for the construction of roads and the
installation of utilities; and selling improved lots and commercial reserves to builders and other developers or other
third parties. Pursuant to the rules of the TCEQ, a developer can be required to pay up to thirty percent (30%) of
the cost of constructing certain water, wastewater and drainage facilities in a municipal utility district. The relative
success or failure of a developer to perform such activities in the development of property within a municipal utility
district may have a profound effect on the security of the bonds issued by a district. A developer is generally under
no obligation to a municipal utility district to develop the property that it owns in a district. Furthermore, there is no
restriction on a developer's right to sell any or all of the land that the developer owns within a municipal utility
district.
Description of the Current Developers
The land within the District was originally owned by Fate Land, L.P. (“Fate Land”). The general partner of Fate
Land is Fate GP, L.L.C., and the limited partners are Jason Pettigrew, Robby Pettigrew, Charley Pettigrew, Ben
Pettigrew, Amy Pettigrew and PRA Fate Investors, L.P. Subsequently, Fate Land sold 348 acres to PRA/Fate
Development Corp. (“PRA/Fate”). PRA/Fate is owned by Leon J. Backes. PRA/Fate has sold sections to the
following developers: JFB Woodcreek/2004, Ltd. (“JFB Woodcreek”) and JFB Fate/2003, Ltd. (“JFB Fate”),
which are related entities; Fate Project Development Partners, Ltd. (“Fate Project”); Fate-Woodcreek/2003, Ltd.
(“Fate-Woodcreek”); and H4 Woodcreek, LLC (“H4 Woodcreek”). In addition, pursuant to contract, Provident
Realty Advisors, Inc. (“Provident”) acts as Project Manager for the development of the District for the above listed
entities with the exception of H4 Woodcreek. Provident is also controlled by Leon J. Backes.
Provident, JFB/Woodcreek, Fate Project, JFB Fate, Fate-Woodcreek, and H4 Woodcreek are collectively referred to
herein as the “Developers.” Currently, there are approximately 124 acres of undeveloped but developable land, of
which PRA/Fate owns 13 acres, Fate Project owns 45 acres, and H4 Woodcreek owns 62 acres. JFB Woodcreek,
Fate Project, JFB Fate and Fate-Woodcreek have assigned their rights to reimbursement to PRA/Fate which has in
turn assigned their rights to reimbursement to Fate Land.
-JFB Woodcreek/2004, Ltd.Approximately 122.6 acres (341 lots) have been developed within the District by JFB Woodcreek as Woodcreek,
Phases 1A and 1C. JFB Woodcreek is a Texas limited partnership whose general partner is J. Baker Corporation, a
Texas corporation, and whose limited partner is the J. Faye Baker Trust. JFB Woodcreek does not currently own
any acres of undeveloped but developable land within the District.
-Fate Project Development Partners, Ltd.Approximately 145.5 acres (651 lots) have been developed within the District by Fate Project as Woodcreek, Phases
2A, 2B and 2C. Fate Project is a Texas limited partnership whose general partner is Fate/2003, L.L.C., a Texas
limited liability company, and whose limited partners are Drees Custom Homes, L.P., Horizon Homes, Ltd. and
Priority Development, LP. Fate Project currently own approximately 45 acres of undeveloped but developable land
and approximately 27 single family lots within the District.
32
-JFB Fate/2003, Ltd.Approximately 108.3 acres (436 lots) have been developed within the District by JFB Fate as Woodcreek, Phases
3A, 3B and 3C. JFB Fate is a Texas limited partnership whose general partner is J. Baker Corporation, a Texas
corporation, and whose limited partners are Glenn and Sherri Thurman, DP Custom Homes, Inc., Thrailkill
Revocable Trust, William B. Thrailkill, Jr., Tipton Growth Partners, Ltd. and the J. Faye Baker Trust, an Oklahoma
revocable trust. JFB Fate/2003, Ltd. does not currently own any acres of undeveloped but developable land or lots
within the District.
-Fate-Woodcreek/2003, Ltd.Approximately 12.7 acres (46 lots) have been developed within the District by Fate-Woodcreek as Woodcreek,
Phase 4. Fate-Woodcreek is a Texas limited partnership whose general partner is Fairway/2000 Development
Corporation and whose limited partner is Highland Homes, Ltd. Fate-Woodcreek/2003, Ltd. does not currently
own any acres of undeveloped but developable land or lots within the District.
- Provident Realty Advisors, Inc. Provident Realty Advisors, Inc. (“Provident”) is acting as the Project Manager for development activities in the
District for all of the Developers except H4 pursuant to a fee contract. Provident has handled all negotiations with
the City with respect to the acquisition of the water and sewer capacity from the City. As Project Manager,
Provident is responsible for overseeing the installation of major roads, water, wastewater and drainage services and
the amenities. The management contract is with Fate Land, L.P.
-H4 WoodcreekH4 Woodcreek currently owns approximately 62 developable acres within in the District and is currently scheduled
to begin development in March, 2013 of 58 single family lots on approximately 13 acres in Phase 1D-2 of
Woodcreek. The remaining acreage is currently planned to be developed into an additional 170 single family lots.
H4 Woodcreek is managed by Hillwood Residential Services L.P., a Perot Company, a Dallas company owned by
H. Ross Perot, Jr., having over 25 years experience developing land in Texas. Hillwood Investment Services, LLC,
a Texas limited liability company, provides asset management services to H4 Woodcreek. Hillwood Residential
Services L.P. and Hillwood Investment Services, LLC are affiliates of Hillwood Development Company, LLC,
which is a national real estate development company with development expertise and experience that encompasses
diverse product types, including arenas, high-rise condominiums, offices, single-family residential communities,
distribution centers, regional malls, mixed-use urban development, call centers, hotels, golf courses, airports,
intermodal rail yards, corporate campuses and major air facilities
H4 Woodcreek is financing its acquisition and future development of land within the District with a loan from
Finance Partners LP, in the original amount of approximately $2,000,000. The interest rate on the loan is the 30day LIBOR rate plus 3.5%, with a minimum interest rate of 4.5%. Interest is paid monthly. Such loan is due on
February 8, 2015 and is secured by the land, lots and reimbursements due to H4 Woodcreek from the bond proceeds
of the District. Currently, the balance due on such loan is approximately $20,000. According to the Developer it is
in compliance with all material terms of such loan.
Agricultural Waiver
On October 19, 2004, PRA/Fate, Fate Land, Fate Project, JFB Fate, Fate Woodcreek, and JFB Woodcreek executed
a Waiver of Special Appraisal affecting all land within the District, which was recorded in the real property of
Rockwall County and is a covenant running with the land, waiving the right to have undeveloped land located
within the District classified as agricultural, open-space or timberland. In addition, such agreement waives the right
of the Developers to have its lots and houses (if any) classified as business inventory. Such agreement may not be
modified without approval of the TCEQ and is binding on purchasers of such land within the District.
Utility Construction Agreements
The District is a party to agreements for the construction and purchase of facilities and reimbursement for costs and
amendment thereto with the Developers, which define the conditions under which the District will issue additional
33
bonds to reimburse such entity for the water, wastewater and drainage facilities within and outside the District.
Under the terms of the agreements, the District has agreed to repay the cost of facilities through a series of bond
sales over time. The District’s obligation to issue bonds and reimburse the entity for funds advanced for facilities is
subject to various conditions, including approval of such facilities and bonds by the TCEQ and the Texas Attorney
General and the recommendation of the District’s financial advisor that the sale of the bonds is feasible and prudent.
HOMEBUILDERS WITHIN THE DISTRICT
Homebuilders active within the District include Altura Homes, Drees Homes and Lionsgate Homes in Phases 1A,
1C, and 1D; Altura Homes and Drees Homes in Phases 2A, 2B, 2C, and 2D; Megatel Homes and Plantation Homes
in Phases 3A, 3B, 3C and 4. Homes in Phase 1A, 1C and 1D are being marketed in the $150,000 to $300,000+
price range and range in size from 1,800 to 3,400+ square feet. Homes in Phases 2A, 2B and 2C are being marketed
in the price range of $140,000 to $200,000+ and range in size from 1,500 to 2,500+ square feet. Homes in Phases
3A, 3B, 3C and 4 are being marketed in the $165,000 to $240,000 price range and range in size from 1,600 to 3,300
square feet.
THE SYSTEM
General
The water, wastewater and drainage facilities, the purchase, acquisition and construction of which have been
financed by the District with the proceeds of the 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 all such facilities has been approved by all governmental
agencies which have jurisdiction over the District.
Operation of the District’s water, wastewater and drainage 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.
Special District Agreements
The District has entered into a Special District Agreement dated December 2, 2003 with the City and PRA/Fate that
provides, in part, for the City to own, operate and maintain the internal and off-site water, wastewater and drainage
facilities constructed with the proceeds of bonds issued by the District, for the City to provide water and sewer
capacity to serve customers within the District, and that the City shall not exercise its right to dissolve the District
until the Bonds and any additional debt of the District has been repaid. Pursuant to this Agreement, the District
included the prohibition of dissolution in its bond election propositions and in the order authorizing the issuance and
sale of the Refunded Bonds.
The District has also entered into a Special District Agreement No. 2 dated May 17, 2006 with the City, PRA/Fate
and Rockwall County Municipal Utility Districts 6, 7, 8 and 9 (the “New Districts”) which provides that the New
Districts, in addition to the District, accept the obligations and provisions of the original Special District Agreement.
Water System
Water supply for District customers is provided pursuant to contracts with the City of Fate (the “City”). The City
receives wholesale water from the North Texas Municipal Water District (“NTMWD”). The City has contracted
with NTMWD to receive 1,420,556 gpd. Pursuant to a December 1, 2003 agreement among the City, PRA/Fate,
the District, and Rockwall County Consolidated Municipal Utility District No. 2 (“RCCMUD#2”), the City has
agreed to provide capacity for 1,300 ESFCs to the District and RCCMUD#2. By agreement dated December 14,
2004, between the District and RCCMUD#2, the District is entitled to all 1,300 ESFCs of capacity. Pursuant to the
terms of the Special District Agreement No. 2, dated on May 17, 2006, the City agreed to provide an additional
1,000 residential water connections for a total of 2,300 ESFCs.
34
The City’s existing elevated storage tank is adjacent to the District. The District will not issue bonds or use other
funds for water supply costs; water supply impact fees are to be paid directly by the builders to the City.
Wastewater System
Wastewater treatment for District customers is currently provided by the City through the North Texas Municipal
Water District’s Regional Wastewater Treatment Plant. Pursuant to a December 1, 2003 agreement among the City,
PRA/Fate, the District, and RCCMUD#2, the City has agreed to provide wastewater for 700 residential ESFCs to
the District and RCCMUD#2. By agreement dated December 14, 2004, between the District and RCCMUD#2, the
District is entitled to all 700 ESFCs of wastewater capacity.
Pursuant to the terms of the Special Agreement No. 2, dated on May 17, 2006, the City agreed to provide an
additional 500 residential wastewater connections, for a total of 1,200 ESFCs.
The District will not issue bonds or use other funds for wastewater treatment costs except wastewater capacity fees
paid by the Developers for the benefit of the District; wastewater treatment impact fees are to be paid directly by the
builders to the City.
Drainage System
Stormwater from within the District currently drains through underground lines leading to natural tributaries, or
through underground lines directly to natural tributaries, such as Parker Creek or Comp Creek.
100-year Flood Plain
Approximately 16.97 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.
Future Debt
After the issuance of the Bonds, $30,590,000 in unlimited tax bonds will remain authorized but unissued for the
purposes of purchasing, constructing, or otherwise acquiring a water, wastewater, and drainage system for the
District and $53,150,000* in unlimited tax bonds for refunding purposes will remain authorized but unissued. To
date, according to the Developers, approximately $2,070,827 is owed to the Developers on current development. In
the opinion of the District’s Engineer, the $30,590,000 of authorized but unissued bonds should be sufficient to
fully reimburse and provide utility service to the remaining undeveloped but potentially developable acreage.
[Remainder of Page Intentionally Left Blank]
______________________________
35
Historical Operations of the District
Fiscal Year Ended September 30,
2011
2010
2009
2012
REVENUES
Property Taxes
Penalty and Interest
Investment Revenues
Miscellaneous
TOTAL REVENUES
2008
$506,762
3,248
906
223
$511,139
$ 389,252
2,044
-0-0$ 391,296
$363,657
2,286
6,778
-0$372,721
$285,167
3,393
1,585
564
$290,709
$224,105
2,854
2,280
-0$229,239
EXPENDITURES
Professional Fees
Contracted Services
Repairs and Maintenance
Other
Capital Outlay
Wastewater Treatment Center
TOTAL EXPENDITURES
$ 95,421
10,681
-0-0206,666
152,525
$479,152
$ 67,032
9,577
-013,363
-0600,000
$ 689,972
$100,678
11,096
-011,373
-063,373
$186,520
$ 65,925
12,280
-016,453
-0-0$ 94,658
$102,376
10,022
16,355
17,854
-0-0$146,607
NET CHANGE IN FUND
BALANCE
$ 31,987
$(298,676)
$186,201
$196,051
$ 82,632
BEGINNING FUND BALANCE
$233,260
$ 531,936
$345,735
$149,684
$ 67,052
ENDING FUND BALANCE
$265,247
$ 233,260
$531,936
$345,735
$149,684
INVESTMENT CONSIDERATIONS
General
The Bonds, which are obligations solely of the District and are not obligations of Rockwall County, Texas; the City
of Fate, Texas; the State of Texas; or any political subdivision other than the District, will be secured by an annual
ad valorem tax, without legal limitation as to rate or amount, on all taxable property located within the District. See
“THE BONDS - Source of Payment.” The ultimate security for payment of the principal of and interest on the
Bonds depends upon the ability of the District to collect from the property owners within the District taxes levied
against all taxable property located within the District or, in the event taxes are not collected and foreclosure are
instituted by the District, upon the value of the taxable property with respect to taxes levied by the District and by
other taxing authorities. The District makes no representations that over the life of the Bonds the property within
the District will maintain a value sufficient to justify continued payment of taxes by the property owners. The
potential increase in taxable valuation of District property is directly related to the economics of the residential
development and construction industries, not only due to general economic conditions, but also due to the particular
factors discussed below.
Factors Affecting Taxable Values and Tax Payments
Credit Markets and Liquidity in the Financial Markets: Interest rates and the availability of mortgage
and development funding have a direct impact on the construction activity, particularly short-term interest
rates at which developers are able to obtain financing for development costs.
36
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, 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 27 miles
from the central downtown business district of the City of Dallas, the success of development within the
District and growth of District taxable property values are, to a great extent, a function of the Dallas
metropolitan and regional economies and the national financial and credit markets. A continued downturn
in the economic conditions of Dallas and the nation could adversely affect development plans in the
District and restrain the growth of the District’s property tax base.
National Economy: Nationally, there has been a significant downturn in new housing construction caused
primarily by the unavailability of mortgage funds, resulting in a decline in housing market values. The
Dallas/Fort Worth area, including the District, has experienced reduced levels of home construction. The
District cannot predict what impact, if any, a continued downturn in the national housing market and
financial markets might have on the Dallas/Fort Worth area market.
Competition: The demand for and construction of single-family homes in the District, could be affected
by competition from other residential developments, including other residential developments located in
the northern portion of the Dallas 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. The competitive
position of a builder in the sale of single-family residential houses within the District is affected by most of
the factors discussed in this section. Such a competitive position directly affects the growth and
maintenance of taxable values in the District and tax revenues to be received by the District.
Economic Factors: The rate of development of the District is directly related to the vitality of the future
commercial, retail and multi-family industries. New commercial, retail and multi-family construction can
be significantly affected by factors such as interest rates, construction costs, and consumer demand.
Decreased levels of home construction activity would restrict the growth of property values in the District.
Although, as described in this Official Statement under the captions “DEVELOPMENT OF THE
DISTRICT,” and “THE DEVELOPERS” (i) the development of an aggregate of 2,049 single-family
residential lots within the District has been completed, and (ii) as of January 1, 2013, the District contained
approximately 1,335 single-family homes, the District cannot predict the pace or magnitude of any future
development or home construction in the District other than that which has occurred to date.
Maximum Impact on District Tax Rates: Assuming no further development, the value of the land and
improvements currently within the District will be the major determinant of the ability or willingness of
District property owners to pay their taxes. The 2012 Assessed Valuation, of property located within the
District (see “TAX DATA”) is $239,132,056. After issuance of the Bonds, the maximum annual debt
service requirement on the Bonds will be $1,238,175 (2030) and the average annual debt service
requirements will be $1,144,508 (2013-2030, inclusive). Assuming no increase to nor decrease from the
2012 Assessed Valuation, tax rates of $0.55 and $0.51, respectively, per $100 of Assessed Valuation at a
95% tax collection rate would be necessary to pay the maximum annual debt service requirement and the
average annual debt service requirements, respectively, on the Bonds. See “TAX DATA - Tax Rate
Calculations.” The District levied a debt service tax rate of $0.48 per $100 of Assessed Valuation and a
maintenance tax rate of $0.22 per $100 of Assessed Valuation for a total tax rate of $0.70 per $100 of
Assessed Valuation for the 2012 tax year. However, the District can make no representation that the
taxable property values in the District will increase in the future or will maintain a value sufficient to
support the aforementioned tax rate or to justify continued payment of taxes by property owners.
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Increases in the District's tax rate to substantially higher levels than the current rate of $0.70 per $100 of
Assessed Valuation which the District presently levied may have an adverse impact upon future
development of the District, the sale and construction of homes within the District, and the ability of the
District to collect, and the willingness of owners of property located within the District to pay, ad valorem
taxes levied by the District. In addition, the collection by the District of delinquent taxes owed to it and the
enforcement by a Registered Owner of the District's obligations to collect sufficient taxes may be a costly
and lengthy process.
Developers Under No Obligation to the District: The Developers have informed the District of their
current plans to continue to develop land in the District for residential and commercial purposes. However,
the Developers are not 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 their 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 - Principal
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 their
ability to pay taxes. See “THE DEVELOPERS,” “DEVELOPMENT WITHIN THE DISTRICT.”
Tax Collection Limitations
The District's ability to make debt service payments may be adversely affected by its inability to collect ad valorem
taxes. Under Texas law, the levy of ad valorem taxes by the District constitutes a lien in favor of the District on a
parity with the liens of all other state and local taxing authorities on the property against which taxes are levied, and
such lien may be enforced by foreclosure. The District's ability to collect ad valorem taxes through such foreclosure
may be impaired by (a) cumbersome, time-consuming and expensive collection procedures, (b) a bankruptcy court's
stay of tax collection procedures against a taxpayer, or (c) market conditions affecting the marketability of taxable
property within the District and limiting the proceeds from a foreclosure sale of such property. Moreover, the
proceeds of any sale of property within the District available to pay debt service on the Bonds may be limited by the
existence of other tax liens on the property, by the current aggregate tax rate being levied against the property, and
by other factors (including the taxpayers' right to redeem property within six (6) months of foreclosure unless the
property is his residence homestead or designated for agricultural use, in which case the taxpayer may redeem the
property within two years of foreclosure). Finally, any 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 assessed against such taxpayer. The District's
lien on taxable property within the District for taxes levied against such property can be foreclosed only in a judicial
proceeding.
Registered Owners' Remedies and Bankruptcy
In the event of default in the payment of principal of or interest on the Bonds, the Registered Owners have a right to
seek a writ of mandamus requiring the District to levy adequate taxes each year to make such payments. Except for
mandamus, the Bond Order does not provide for remedies to protect and enforce the interests of the Registered
Owners. There is no acceleration of maturity of the Bonds in the event of default and, consequently, the remedy of
mandamus may have to be relied upon from year to year. Based on recent Texas court decisions, it is unclear
whether, §49.066, Texas Water Code, effectively waives governmental immunity of a municipal utility 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 a direct levy and execution against the District's property. Further, the
Registered Owners cannot themselves foreclose on property within the District or sell property of the District in
order to pay the principal of and interest on the Bonds. Since there is no trust indenture or trustee, the Registered
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Owners would have to initiate and finance the legal process to enforce their remedies. The enforceability of the
rights and remedies of the Registered Owners further may be limited by laws relating to bankruptcy, reorganization
or other similar laws of general application affecting the rights of creditors of political subdivisions such as the
District. In this regard, should the District file a petition for protection from creditors under federal bankruptcy
laws, a suit seeking the remedy of mandamus would be automatically stayed and could not be pursued unless
authorized by a federal bankruptcy judge. See “THE BONDS - Bankruptcy Limitation to Registered Owners'
Rights.”
Marketability
The District has no understanding (other than the initial reoffering yields) with the Underwriter regarding the
reoffering yields or prices of the Bonds and has no control over the trading of the Bonds in the secondary market.
There is no assurance that a secondary market will be made for the Bonds. If there is a secondary market, the
difference between the bid and asked price of the Bonds may be greater than the bid and asked spread of other
bonds generally bought, sold or traded in the secondary market. See “SALE AND DISTRIBUTION OF THE
BONDS.”
Future Debt
The District has the right to issue the remaining $53,150,000* authorized but unissued bonds for refunding
purposes, the remaining $30,590,000 authorized but unissued bonds for waterworks, sanitary sewer, and drainage
facilities (see “THE BONDS - Legal Ability to Issue Additional Debt”), and additional bonds as may hereafter be
approved by both the Board of Directors and voters of the District. The District also has the right to issue certain
other additional bonds, special project bonds, and other obligations described in the Bond Order and under “THE
BONDS - Legal Ability to Issue Additional Debt”. All of the remaining $53,150,000* in bonds for refunding
purposes and $30,590,000 in bonds for waterworks, sanitary sewer and drainage facilities, which have heretofore
been authorized by the voters of the District may be issued by the District from time to time as needed. The issuance
of such $30,590,000 in bonds for waterworks, sanitary sewer and drainage facilities, is also subject to TCEQ
authorization. . To date, according to the Developers, approximately $2,070,827 is owed to the Developers on
current development. In the opinion of the District’s Engineer, the $30,590,000 of authorized but unissued bonds
should be sufficient to fully reimburse and provide utility service to the remaining undeveloped but potentially
developable acreage. If additional bonds are issued in the future and property values have not increased
proportionately, such issuance may increase gross debt/property valuation ratios and thereby adversely affect the
investment quality or security of the Bonds and the Outstanding Bonds.
Competitive Nature of Dallas Residential Market
The residential housing industry in the Dallas area is very competitive, and the District can give no assurance that
the building programs which are planned by the Developer will be continued or completed. The respective
competitive positions of the developers which might attempt future residential building or development projects in
the District in the sale of residential housing are affected by most of the factors discussed in this section, and such
competitive positions are directly related to tax revenues received by the District and the growth and maintenance of
taxable values in the District.
Continuing Compliance with Certain Covenants
The Bond Order contains covenants by the District intended to preserve the exclusion from gross income of interest
on the Bonds. Failure by the District to comply with such covenants on a continuous basis prior to maturity of the
Bonds could result in interest on the Bonds becoming taxable retroactively to the date of original issuance. See
“TAX MATTERS.”
Bond Insurance Risk Factors
The District has applied for a bond insurance policy to guarantee the scheduled payment of principal and interest
on the Bonds. The District has yet to determine whether any insurance will be purchased with the Bonds. If an
insurance policy is purchased, the following are risk factors relating to bond insurance.
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In the event of default of the payment of principal or interest with respect to the Bonds when all or some becomes
due, any owner of the Bonds shall have a claim under the applicable Bond Insurance Policy (the “Policy”) issued by
the insurer (the “Bond Insurer”) for such payments. Default of payment of principal and interest does not accelerate
the obligations of the District or the Bond Insurer. The Bond Insurer may direct and must consent to any remedies
that the Paying Agent exercises and the Bond Insurer’s consent may be required in connection with amendments to
the Bond Order.
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 moneys received by the Paying Agent pursuant to the Bond
Order. 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.
The long-term ratings on the Bonds are dependent in part on the financial strength of the Bond Insurer and its claim
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 ratings on 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 “MUNICIPAL
BOND INSURANCE” and “RATINGS” herein.
The obligations of the Bond Insurer are general obligations of the Bond Insurer and in an event of default by the
Bond Insurer, the remedies available to the Paying Agent may be limited by applicable bankruptcy law or other
similar laws related to insolvency.
Neither the District nor the Underwriter has made an independent investigation into the claims paying ability of the
Bond Insurer, and no assurance or representation regarding the financial strength or projected financial strength of
the Bond 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 Bond
Insurer, particularly over the life of the investment. See “MUNICIPAL BOND INSURANCE AND RATING”
herein for further information provided by the Bond Insurer and the Policy, which includes further instructions for
obtaining current financial information concerning the Bond Insurer.
Future and Proposed Legislation
From time to time, there are Presidential proposals, proposals of various federal committees, and legislative
proposals in the Congress and in the states that, if enacted, could alter or amend the federal and state tax matters
referred to herein or adversely affect the marketability or market value of the Bonds or otherwise prevent holders of
the Bonds from realizing the full benefit, or any benefit, of the tax exemption of interest on the Bonds. Further, such
proposals may impact the marketability or market value of the Bonds simply by being proposed. It cannot be
predicted whether or in what form any such proposal might be enacted or whether if enacted it would apply to
bonds issued prior to enactment. In addition, regulatory actions are from time to time announced or proposed and
litigation is threatened or commenced which, if implemented or concluded in a particular manner, could adversely
affect the market value, marketability or tax status of the Bonds. It cannot be predicted whether any such regulatory
action will be implemented, how any particular litigation or judicial action will be resolved, or whether the Bonds
would be impacted thereby.
Purchasers of the Bonds should consult their tax advisors regarding any pending or proposed legislation, regulatory
initiatives or litigation. The disclosures and opinions expressed herein are based upon existing legislation and
regulations as interpreted by relevant judicial and regulatory authorities as of the date of issuance and delivery of
the Bonds, and no opinion is expressed as of any date subsequent thereto or with respect to any proposed or pending
legislation, regulatory initiatives or litigation.
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LEGAL MATTERS
Legal Opinions
The District will furnish to the Underwriter a transcript of certain certified proceedings incident to the issuance and
authorization of the Bonds, including a certified copy of the approving opinion of the Attorney General of Texas, as
recorded in the Bond Register of the Comptroller of Public Accounts of the State of Texas, to the effect that the
Attorney General has examined a transcript of proceedings authorizing the issuance of the Bonds, and that based
upon such examination, the Bonds are valid and binding obligations of the District payable from the proceeds of an
annual ad valorem tax, without legal limitation as to rate or amount, levied upon all taxable property within the
District. The District will also furnish the approving legal opinion of Kelly Hart & Hallman LLP, Fort Worth,
Texas, Bond Counsel, to the effect that, based upon an examination of such transcript, the Bonds are valid and
binding obligations of the District under the Constitution and laws of the State of Texas, except to the extent that
enforcement of the rights and remedies of the Registered Owners of the Bonds 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. The legal opinion of Bond Counsel will further state that the Bonds are payable,
both as to principal and interest, from the levy of ad valorem taxes, without legal limitation as to rate or amount
upon all taxable property within the District, and that interest on the Bonds is excludable from gross income of the
owners for federal income tax purposes under existing law and not subject to the alternative minimum tax on
individuals, or, except as described therein, corporations.
In addition to serving as Bond Counsel, Kelly Hart & Hallman LLP, also serves as counsel to the District on matters
not related to the issuance of bonds. The legal fees to be paid to Bond Counsel for services rendered in connection
with the issuance of the Bonds are based upon a percentage of bonds actually issued, sold and delivered, and
therefore such fees are contingent upon the sale and delivery of the Bonds. Certain legal and disclosure matters will
be passed upon for the Underwriter by its counsel, McCall, Parkhurst & Horton L.L.P., Dallas, Texas.
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 the 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.
Legal Review
Delivery of the Bonds will be accompanied by the 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, 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 approving legal opinion of Bond Counsel, to
a like effect, and to the effect that interest on the Bonds is excludable from gross income of the holders for federal
tax purposes under existing law, and the Bonds are not “private activity bonds” under the Internal Revenue Code of
1986, as amended (the “Code”) and interest on the Bonds will not be subject to the alternative minimum tax on
individuals and corporations, except as described below in the discussion regarding the adjusted current earnings
adjustments for corporations.
In its capacity as Bond Counsel, Kelly Hart & Hallman LLP, has reviewed the information appearing in this Official
Statement under the captioned sections “THE BONDS” (except for the subsection “Book-Entry-Only System”),
“PLAN OF FINANCING – The Refunded Bonds” and “– Escrow Agreement,” “TAX PROCEDURES,” “THE
DISTRICT – Authority,” “– Special District Agreements” and “– Management of the District – Bond Counsel &
General Counsel,” “LEGAL MATTERS,” “TAX MATTERS” and “CONTINUING DISCLOSURE OF
INFORMATION” solely to determine whether such information fairly summarizes the law and documents referred
to therein. Such firm has not independently verified factual information contained in this Official Statement, nor
has such firm conducted an investigation of the affairs of the District for the purpose of passing upon the accuracy
or completeness of this Official Statement. No person is entitled to rely upon such firm’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 of the other information contained herein.
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No-Litigation Certificate
The District will furnish the Underwriter a certificate, dated as of the date of delivery of the Bonds, executed by
both the President or Vice President and Secretary or Assistant Secretary of the Board, to the effect that no litigation
of any nature has been filed or is to their knowledge then pending or threatened, either in state or federal courts,
contesting or attaching the Bonds; restraining or enjoining the issuance, execution or delivery of the Bonds;
affecting the provisions made for the payment of or security for the Bonds; in any manner questioning the authority
or proceedings for the issuance, execution or delivery of the Bonds; or affecting the validity of the Bonds.
No Material Adverse Change
The obligations of the Underwriter to take up and pay for the Bonds, and of the District to deliver the Bonds, are
subject to the condition that, up to the time of delivery of and receipt of payment for the Bonds, there shall have
been no material adverse change in the financial condition of the District subsequent to the date of sale from that set
forth in the Preliminary Official Statement, as it may have been finalized, supplemented or amended through the
date of sale.
TAX MATTERS
Opinion
On the date of initial delivery of the Bonds, Kelly Hart & Hallman LLP, Bond Counsel, will render its opinion that,
in accordance with statutes, regulations, published rulings and court decisions existing on the date thereof (“Existing
Law”), (1) interest on the Bonds for federal income tax purposes will be excludable from the “gross income” of the
holders thereof and (2) the Bonds will not be treated as “specified private activity bonds” the interest on which
would be included as an alternative minimum tax preference item under section 57(a)(5) of the Internal Revenue
Code of 1986 (the “Code”). Except as stated above, Bond Counsel will express no opinion as to any other federal,
state or local tax consequences of the purchase, ownership or disposition of the Bonds.
In rendering their opinion, Bond Counsel will rely upon (a) the District's federal tax certificate and the verification
report prepared by Grant Thornton LLP, Certified Public Accountants and (b) covenants of the District with respect
to arbitrage, the application of the proceeds to be received from the issuance and sale of the Bonds and certain other
matter. Although it is expected that the Bonds will qualify as tax-exempt obligations for federal income tax
purposes as of the date of issuance, the tax-exempt status of the Bonds could be affected by future events.
However, future events beyond the control of the District, as well as the failure to observe the aforementioned
representations or covenants, could cause the interest on the Bonds to become taxable retroactively to the date of
issuance.
Bond Counsel’s opinion represents its legal judgment based upon its review of Existing Law and the reliance on the
aforementioned information, representations and covenants. Bond Counsel’s opinion is not a guarantee of a result.
The law upon which Bond Counsel has based its opinion is subject to change by Congress, administrative
interpretation by the Department of the Treasury and to subsequent judicial interpretation. There can be no
assurance that such law or the interpretation thereof will not be changed in a manner which would adversely affect
the tax treatment of ownership of the Bonds.
A ruling was not sought from the Internal Revenue Service by the Issuer with respect to the Bonds or the Project.
No assurances can be given as to whether or not the Internal Revenue Service will commence an audit of the Bonds,
or as to whether the Internal Revenue Service would agree with the opinion of Bond Counsel. If an audit is
commenced, under current procedures the Internal Revenue Service is likely to treat the District as the taxpayer and
the Bondholders may have no right to participate in such procedure. No additional interest will be paid upon any
determination of taxability.
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Federal Income Tax Accounting Treatment of Original Issue Discount
The Underwriters have represented that the initial public offering price to be paid for certain of the Bonds (the
“Original Issue Discount Bonds”), as stated on the cover of the Official Statement, may be less than the principal
amount thereof. As such, the difference between (i) the amount payable at the maturity of each Original Issue
Discount Bond, and (ii) the initial offering price to the public of such Original Issue Discount Bond constitutes
original issue discount with respect to such Original Issue Discount Bond in the hands of any owner who has
purchased such Original Issue Discount Bond in the initial public offering of the Bonds.
Under Existing Law, such an owner is entitled to exclude from gross income (as defined in section 61 of the Code)
an amount of income with respect to such Original Issue Discount Bond equal to that portion of the amount of such
original issue discount allocable to the period for which such Original Issue Discount Bond continues to be owned
by such owner. For a discussion of certain collateral federal tax consequences, see discussion set forth below.
In the event of the redemption, sale or other taxable disposition of such Original Issue Discount Bond prior to stated
maturity, however, the amount realized by such owner in excess of the basis of such Original Issue Discount Bond
in the hands of such owner (adjusted upward by the portion of the original issue discount allocable to the period for
which such Original Issue Discount Bond was held by such initial owner) is includable in gross income.
Under existing law, the original issue discount on each Original Issue Discount Bond is accrued daily to the stated
maturity thereof (in amounts calculated as described below for each six-month period ending on the date before the
semiannual anniversary dates of the date of the Bonds and ratably within each such six-month period) and the
accrued amount is added to an initial owner's basis for such Original Issue Discount Bond for purposes of
determining the amount of gain or loss recognized by such owner upon the redemption, sale or other disposition
thereof. The amount to be added to basis for each accrual period is equal to (a) the sum of the issue price and the
amount of original issue discount accrued in prior periods multiplied by the yield to stated maturity (determined on
the basis of compounding at the close of each accrual period and properly adjusted for the length of the accrual
period) less (b) the amounts payable as current interest during such accrual period on such Original Issue Discount
Bond.
The federal income tax consequences of the purchase, ownership, redemption, sale or other disposition of Original
Issue Discount Bonds which are not purchased in the initial offering at the initial offering price may be determined
according to rules which differ from those described above. All owners of Original Issue Discount Bonds should
consult their own tax advisors with respect to the determination for federal, state and local income tax purposes of
the treatment of interest accrued upon redemption, sale or other disposition of such Original Issue Discount Bonds
and with respect to the federal, state, local and foreign tax consequences of the purchase, ownership, redemption,
sale or other disposition of such Original Issue Discount Bonds.
Collateral Federal Income Tax Consequences
The following discussion is a summary of certain collateral federal income tax consequences resulting from the
purchase, ownership or disposition of the Bonds. This discussion is based on Existing Law which is subject to
change or modification retroactively.
Prospective purchasers of the Bonds should be aware that the ownership of tax-exempt obligations may result in
collateral federal income tax consequences. The following discussion is applicable to investors, other than those
who are subject to special provisions of the Code, including financial institutions, life insurance and property and
casualty insurance companies, individual recipients of Social Security or Railroad Retirement benefits, taxpayers
who may be deemed to have incurred or continued indebtedness to purchase or carry tax-exempt obligations, certain
S corporations with accumulated earnings and profits and excess passive investment income, foreign corporations
subject to the branch profits tax, and individuals otherwise allowed an earned income credit.
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
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THE PURCHASE, OWNERSHIP AND DISPOSITION OF TAX-EXEMPT OBLIGATIONS BEFORE
DETERMINING WHETHER TO PURCHASE THE BONDS.
Interest on the Bonds will be includable as an adjustment for “adjusted current earnings” to calculate the alternative
minimum tax imposed on corporations by section 55 of the Code.
Under section 6012 of the Code, holders of tax-exempt obligations, such as the Bonds, may be required to disclose
interest received or accrued during each taxable year on their returns of federal income taxation.
Section 1276 of the Code provides for ordinary income tax treatment of gain recognized upon the disposition of a
tax-exempt obligation, such as the Bonds, if such obligation was acquired at a “market discount” and if the fixed
maturity of such obligation is equal to, or exceeds, one year from the date of issue. Such treatment applies to
“market discount bonds” to the extent such gain does not exceed the accrued market discount of such bonds;
although for this purpose, a de minimis amount of market discount is ignored. A “market discount bond” is one
which is acquired by the holder at a purchase price which is less than the stated redemption price at maturity or, in
the case of a bond issued at an original issue discount, the “revised issue price” (i.e., the issue price plus accrued
original issue discount). The “accrued market discount” is the amount which bears the same ratio to the market
discount as the number of days during which the holder holds the obligation bears to the number of days between
the acquisition date and the final maturity date.
State, Local and Foreign Taxes
Investors should consult their own tax advisors concerning the tax implications of the purchase, ownership or
disposition of the Bonds under applicable state or local laws. Foreign investors should also consult their own tax
advisors regarding the tax consequences unique to investors who are not United States persons.
Qualified Tax-Exempt Obligations for Financial Institutions
Section 265(a) of the Code provides, in pertinent part, that interest paid or incurred by a taxpayer, including a
“financial institution,” on indebtedness incurred or continued to purchase or carry tax-exempt obligations is not
deductible by such taxpayer in determining taxable income. Section 265(b) of the Code provides an exception to
the disallowance of such deduction for any interest expense paid or incurred on indebtedness of a taxpayer which is
a “financial institution” allocable to tax-exempt obligations, other than “specified private activity bonds,” which are
designated by a “qualified small issuer” as “qualified tax-exempt obligations.” A “qualified small issuer” is any
governmental issuer (together with any subordinate issuers) who issues no more than $10,000,000 of tax-exempt
obligations during the calendar year. Section 265(b)(5) of the Code defines the term “financial institution” as
referring to any corporation described in section 585(a)(2) of the Code, or any person accepting deposits from the
public in the ordinary course of such person's trade or business which is subject to federal or state supervision as a
financial institution.
The District has designated the Bonds as “qualified tax-exempt obligations” within the meaning of section 265(b) of
the Code. In furtherance of that designation, the District has covenanted to take such action which would assure, or
to refrain from such action which would adversely affect, the treatment of the Bonds as “qualified tax-exempt
obligations.” Potential purchasers should be aware that if the issue price to the public exceeds $10,000,000,
there is a reasonable basis to conclude that the payment of a de minimis amount of premium in excess of
$10,000,000 is disregarded, however, the Internal Revenue Service could take a contrary view. Were the
Internal Revenue Service to conclude that the amount of such premium is not disregarded, then such
obligations might fail to satisfy the $10,000,000 limitation and the obligations would not be “qualified taxexempt obligations.”
VERIFICATION OF MATHEMATICAL CALCULATIONS
The arithmetical accuracy of certain computations included in the schedules provided by the Underwriter on behalf
of the District relating to (a) computation of the adequacy of the bond proceeds along with certain available funds
(if any) to pay, when due, the principal or redemption price of and interest on the Refunded Bonds, and (b) the
computation of the yields on the Bonds was verified by Grant Thornton LLP. The computations were
44
independently verified by Grant Thornton LLP, based upon certain assumptions and information supplied by the
Underwriter on behalf of the District, and the District. Grant Thornton LLP has restricted its procedures to
verifying the arithmetical accuracy of certain computations and has not made any study or evaluation of the
assumptions and information upon which the computations are based and accordingly, has not expressed an opinion
on the data used, the reasonableness of the assumptions or the achievability of future events.
CONTINUING DISCLOSURE OF INFORMATION
In the Bond Order, the District has made the following covenants for the benefit of the holders of the Bonds. The
District is required to observe these covenants for so long as it remains obligated to pay the Bonds. Under the
covenants, the District will be obligated to provide certain updated financial information and operating data
annually, as well as timely notice of specified events, to the Municipal Securities Rulemaking Board or any
successor to its function as a repository (the “MSRB”), through its Electronic Municipal Market Access
(“EMMA”) system.
Annual Reports
The District will provide certain financial information and operating data annually. The financial information and
operating data which will be provided is found in the section titled “DISTRICT DEBT - Estimated Direct and
Overlapping Debt,” “DISTRICT DEBT - Debt Service Requirement Schedule,” and “TAX DATA,” and
“APPENDIX A - Financial Statements of the District.” The District will update and provide this information to the
MSRB through its EMMA system within six months after the end of each of its fiscal years ending in or after 2013.
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 of the United States Securities and Exchange Commission (the
“SEC”). The updated information will include audited financial statements 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 to the MSRB within such six
month period, and audited financial statements when the audit report on such statements becomes available. Any
such financial statements 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 current fiscal year end is September 30. Accordingly, it must provide updated information by
March 30 in each year, unless the District changes its fiscal year. If the District changes its fiscal year, it will notify
the MSRB of the change.
Event Notices
The District will provide timely notices of certain events to the MSRB, but in no event will such notices be provided
to the MSRB in excess of ten days after the occurrence of an event. The District will provide notice of any of the
following events with respect to the Bonds: (1) principal and interest payment delinquencies; (2) non-payment
related defaults, if material; (3) unscheduled draws on debt service reserves reflecting financial difficulties; (4)
unscheduled draws on credit enhancements reflecting financial difficulties; (5) substitution of credit or liquidity
providers, or their failure to perform; (6) adverse tax opinions, the issuance by the Internal Revenue Service of
proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701 TEB) or other material
notices or determinations with respect to the tax-exempt status of the Bonds, or other events affecting the taxexempt status of the Bonds; (7) modifications to rights of beneficial owners of the Bonds, if material; (8) bond calls,
if material, and tender offers; (9) defeasances; (10) release, substitution, or sale of property securing repayment of
the Bonds, if material; (11) rating changes; (12) bankruptcy, insolvency, receivership or similar event of the District
or other obligated person within the meaning of SEC Rule 15c2-12; (13) consummation of a merger, consolidation,
or acquisition involving the District or other obligated person within the meaning of such Rule or the sale of all or
substantially all of the assets of the District or other obligated person within the meaning of such Rule, other than in
the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination
of a definitive agreement relating to any such actions, other than pursuant to its terms, if material; and (14)
appointment of a successor or additional trustee or the change of name of a trustee, if material to a decision to
purchase or sell Bonds. The term “material” when used in this paragraph shall have the meaning ascribed to it
45
under federal securities laws. Neither the Bonds nor the Bond Order makes any provision for debt service reserves
or liquidity enhancement. In addition, the District will provide timely notice of any failure by the District to provide
information, data, or financial statements in accordance with its agreement described above under “Annual
Reports.”
Availability of Information from MSRB
The District has agreed to provide the foregoing information only to the MSRB. Investors will be able to access
continuing disclosure information filed with the MSRB through its EMMA system at www.emma.msrb.org.
Limitations and Amendments
The District has agreed to update information and to provide notices of certain 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 of Bonds may seek a writ of mandamus to compel
the District to comply with its agreement.
The District may amend its continuing disclosure agreement from time to time to adapt to changed circumstances
that arise from a change in legal requirements, a change in law, or a change in the identity, nature, status, or type of
operations of the District, if by only (1) the agreement, as amended, would have permitted an underwriter to
purchase or sell Bonds in the offering made hereby in compliance with the Rule, taking into account any
amendments or interpretations of SEC Rule 15c2-12 to the date of such amendment, as well as such changed
circumstances, and (2) either (a) the holders of a majority in aggregate principal amount of the outstanding Bonds
consent to the amendment or (b) any qualified professional unaffiliated with the District (such as nationally
recognized bond counsel) determines that the amendment will not materially impair the interests of the holders and
beneficial owners of the Bonds. If the District so amends the agreement, it has agreed to include with any financial
information or operating data next provided in accordance with its agreement described above under “Annual
Reports” an explanation, in narrative form, of the reasons for the amendment and of the impact of any change in the
type of financial information and operating data so provided. The District may also amend or repeal its continuing
disclosure agreement if the SEC amends or repeals the applicable provisions of the SEC Rule 15c2-12 or a court of
final jurisdiction enters judgment that such provisions of such rule are invalid, and the District also may amend its
continuing disclosure agreement in its discretion in any other manner or circumstance, but in either case only if and
to the extent that the provisions of this sentence would not prevent an underwriter from lawfully purchasing or
selling Bonds in the primary offering of the Bonds.
Compliance with Prior Undertakings
The District has complied in all material respects with its previous continuing disclosure agreement made in
accordance with SEC Rule 15c2-12.
OFFICIAL STATEMENT
General
The information contained in this Official Statement has been obtained primarily from the District's records, the
Rockwall Central Appraisal District and other sources believed to be reliable; however, no representation is made as
to the accuracy or completeness of the information contained herein, except as described below under “Certification
of Official Statement.” The summaries of the statutes, resolutions and engineering and other related reports set
forth herein are included subject to all of the provisions of such documents. These summaries do not purport to be
complete statements of such provisions and reference is made to such documents for further information.
46
The District's audited financial statements for the year ended September 30, 2012, were prepared by McCall, Gibson
& Company, PLLC, Certified Public Accountant, and have been included herein as “APPENDIX A.” McCall,
Gibson & Company, PLLC, Certified Public Accountant, has consented to the publication of such financial
statements in this Preliminary Official Statement.
Experts
The information contained in this Preliminary Official Statement relating to engineering, to the description of the
System generally and, in particular, the engineering information included in the section captioned “THE SYSTEM,”
has been provided by Petitt Barraza, LLC. Such information has been included herein in reliance upon the authority
of said firm as expert in the field of civil engineering.
The information contained in this Preliminary Official Statement relating to assessed valuations of property
generally and, in particular, that information concerning valuations contained in the sections captioned “TAX
DATA” and “DISTRICT DEBT” has been provided by the Rockwall Central Appraisal District, in reliance upon
the authority of said appraisal district as an expert in the field of tax assessing and real property appraisal.
Updating of Official Statement
The District will keep the Official Statement current by amendment or sticker to reflect material changes in the
affairs of the District and, to the extent that information actually comes to its attention, to the other matters
described in the Official Statement, until the delivery of the Bonds to the Underwriter, unless the Underwriter
notifies the District on or before such date that less than all of the Bonds have been sold to ultimate customers, in
which case the District's obligations hereunder will extend for an additional period of time (but not more than 90
days after the date the District delivers the Bonds) until all of the Bonds have been sold to ultimate customers.
Certification of Official Statement
At the time of payment for and delivery of the Bonds, the District will furnish the Underwriter a certificate,
executed by the President and Secretary of the Board, acting in their official capacities, to the effect that to the best
of their knowledge and belief: (a) the information, descriptions and statements of or pertaining to the District
contained in this Official Statement, on the date thereof and on the date of delivery were and are true and correct in
all material respects; (b) insofar as the District and its affairs, including its financial affairs, are concerned, this
Official Statement did not and does not contain an untrue statement of a material fact or omit to state a material fact
required to be stated herein or necessary to make the statements herein, in the light of the circumstances under
which they were made, not misleading; and (c) insofar as the descriptions and statements, including financial data
contained in this Official Statement, of or pertaining to entities other than the District and their activities are
concerned, such statements and data have been obtained from sources which the District believes to be reliable and
that the District has no reason to believe that they are untrue in any material respect or omit to state any material fact
necessary to make the statements herein, in the light of the circumstances under which they were made, not
misleading; however, the District has made no independent investigation as to the accuracy or completeness of the
information derived from sources other than the District. This Official Statement is duly approved by the Board of
Directors of the District as of the date specified on the first page hereof.
Official Statement “Deemed Final”
For purposes of compliance with SEC Rule 15c2-12, this document, as the same may be supplemented or corrected
by the District from time to time, may be treated as an Official Statement with respect to the Bonds described herein
as has been “deemed final” by the District as of the date hereof (or of any such supplement or correction), except for
the omission of certain information referred to in the succeeding paragraph.
47
The Official Statement, when further supplemented by adding information specifying the interest rates and certain
other information relating to the Bonds, shall constitute a “final official statement” of the District with respect to the
Bonds, as that term is defined in SEC Rule 15c2-12.
/s/
____________________________________________
President, Board of Directors
Rockwall County Consolidated Municipal Utility District No. 1,
of Rockwall County, Texas
ATTEST:
/s/ ____________________________________________
Secretary, Board of Directors
Rockwall County Consolidated Municipal Utility District No. 1
of Rockwall County, Texas
48
APPENDIX A
FINANCIAL STATEMENTS OF THE DISTRICT
ROCKWALL COUNTY CONSOLIDATED
MUNICIPAL UTILITY DISTRICT NO.1
ROCKWALL COUNTY, TEXAS
ANNUAL FINANCIAL REPORT
SEPTEMBER 30, 2012
McCALL GIBSON SWEDLUND BARFOOT PLLC
Certified Public Accountants
TABLE OF CONTENTS
PAGE
INDEPENDENT AUDITOR'S REPORT
1-2
MANAGEMENT'S DISCUSSION AND ANALYSIS
3-7
STATEMENT OF NET ASSETS AND GOVERNMENTAL FUNDS BALANCE
SHEET
8-9
RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO
THE STATEMENT OF NET ASSETS
10
STATEMENT OF ACTIVITIES AND GOVERNMENTAL FUND REVENUES,
EXPENDITURES AND CHANGES IN FUND BALANCES
RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF
REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES TO
THE STATEMENT OF ACTIVITIES
NOTES TO BASIC FINANCIAL STATEMENTS
11-12
13
14-26
REQUIRED SUPPLEMENTARY INFORMATION
SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND
BALANCE-BUDGET AND ACTUAL-GENERAL FUND
28
SUPPLEMENTARY INFORMATION REQUIRED BY THE WATER DISTRICT
FINANCIAL MANAGEMENT GUIDE
NOTES REQUIRED BY THE WATER DISTRICT FINANCIAL
MANAGEMENT GUIDE ( Included in the notes to basic financial
statements)
SERVICES AND RATES
30-31
GENERAL FUND EXPENDITURES
32-33
INVESTMENTS
34
TAXES LEVIED AND RECEIVABLE
35-36
LONG-TERM DEBT SERVICE REQUIREMENTS
37-40
CHANGE IN LONG-TERM BOND DEBT
41-42
COMPARATIVE SCHEDULE OF REVENUES AND EXPENDITURES
GENERAL FUND AND DEBT SERVICE FUND - FIVE YEARS
43-46
BOARD MEMBERS, KEY PERSONNEL AND CONSULTANTS
47-48
McCALL GIBSON SWEDLUND BARFOOT PLLC
13100 Worthanr Center Drive
Suite 235
Houston, Texas 77065-5610
(713) 462-0341
Fax (713) 462-2708
E-Mail: [email protected]
111 Congress Avenue
Suite 400
Austin, Texas 78701
(512) 610-2209
rururarngsbellc.conr
Board of Directors
Rockwall County Consolidated
Municipal Utility District No. 1
Rockwall County, Texas
Independent Auditor's Report
We have audited the accompanying financial statements of the governmental activities and each
major fund of Rockwall County Consolidated Municipal Utility District No. 1 (the "District"), as
of and for the year ended September 30, 2012, which collectively comprise the District's basic
financial statements as listed in the preceding table of contents. These financial statements are
the responsibility of the District's management. Our responsibility is to express opinions on
these financial statements based on our audit.
We have conducted our audit in accordance with auditing standards generally accepted as
promulgated within the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes consideration of internal control over financial
reporting as a basis for designing audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the effectiveness of the District's internal control
over financial reporting.
Accordingly, we express no such opinion.
An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our opinions.
In our opinion, the financial statements referred to above present fairly, in all material respects,
the respective financial position of the governmental activities and each major fund of the
District as of September 30, 2012, and the respective changes in financial position for the year
then ended in conformity with accounting principles generally accepted in the United States of
America.
Member of
American Institute ofCer7ified Public Accountants
Texas Society of Certified Public Accountants
Board of Directors
Rockwall County Consolidated
Municipal Utility District No. 1
Accounting principles generally accepted in the United States of America require that
Management's Discussion and Analysis on pages 3 through 7 and the Schedule of Revenues,
Expenditures, and Changes in Fund Balance - Budget and Actual - General Fund on page 28 be
presented to supplement the basic financial statements. Such information, although not a part of
the basic financial statements, is required by the Governmental Accounting Standards Board,
who considers it to be an essential part of financial reporting for placing the basic financial
statements in an appropriate operational, economic, or historical context. We have applied
certain limited procedures to the required supplementary information in accordance with auditing
standards generally accepted in the United States of America, which consisted of inquiries of
management about the methods of preparing the information and comparing the information 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
express an opinion or provide any assurance on the information because the limited procedures
do not provide us with sufficient evidence to express an opinion or provide any assurance.
Our audit was conducted for the purpose of forming opinions on the financial statements as a
whole. The supplementary information required by the Texas Commission on Environmental
Quality as published in the Water District Financial Management Guide is 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 the
The
underlying accounting and other records used to prepare the financial statements.
supplementary information, excluding that portion marked "Unaudited" on which we express no
opinion or provide any assurance, has been subjected to the auditing procedures applied in the
audit of the financial statements and certain additional procedures, including comparing and
reconciling such information directly to the underlying accounting and other records used to
prepare the financial statements or to the financial statements themselves, and other additional
procedures in accordance with auditing standards generally accepted in the United States of
America. In our opinion, the information is fairly stated in all material respects in relation to the
financial statements as a whole.
9AL774(wj
9
M
/,/C C
McCall Gibson Swedlund Barfoot PLLC
January 22, 2013
MUNICIPAL UTILITY DISTRICT NO. X
FOR THE YEAR ENDED SEPTEMBER 30, 2012
Management's discussion and analysis of Rockwall County Consolidated Municipal Utility
District No. 1's (the "District") financial performance provides an overview of the District's
financial activities for the fiscal year ended September 30, 2012. Please read it in conjunction
with the District's financial statements, which begin on page 8.
USING THIS ANNUAL REPORT
This annual report consists of a series of financial statements. The basic financial statements
include: (1) combined fund financial statements and government-wide financial statements and
(2) notes to the basic financial statements. The combined fund financial statements and
government-wide financial statements combine both: (1) the Statement of Net Assets and
Governmental Funds Balance Sheet and (2) the Statement of Activities and Governmental Fund
Revenues, Expenditures and Changes in Fund Balances. This report also includes other
supplementary information in addition to the basic financial statements.
GOVERNMENT-WIDE FINANCIAL STATEMENTS
The District's annual report includes two financial statements combining the government-wide
financial statements and the fund financial statements. The government-wide portion of these
statements 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 with
its basis in full accrual accounting and elimination or reclassification of internal activities.
The first of the government-wide statements is the Statement of Net Assets. This information is
found in the Statement of Net Assets column on pages 8 and 9. The Statement of Net Assets is
the District-wide statement of its financial position presenting information that includes all of the
District's assets and liabilities, with the difference reported as net assets. Over time, increases or
decreases in net assets may serve as a useful indicator of whether the financial position of the
District as a whole is improving or deteriorating. Evaluation of the overall health of the District
would extend to other non-financial factors.
The government-wide portion of Statement of Activities on pages 11 and 12 reports how the
District's net assets changed during the current fiscal year. All current year revenues and
expenses are included regardless of when cash is received or paid.
FUND FINANCIAL STATEMENTS
The combined statements also include fund financial statements. A fund is a grouping of related
accounts that is used to maintain control over resources that have been segregated for specific
activities or objectives. The District has two governmental fund types. The General Fund
accounts for resources not accounted for in another fund, maintenance tax revenues, costs and
general expenditures. The Debt Service Fund accounts for ad valorem taxes and financial
resources restricted, committed or assigned for servicing bond debt and the cost of assessing and
-3-
FUND FINANCIAL STATEMENTS (Continued)
collecting taxes.
Governmental funds are reported in each of the financial statements . The focus in the fund
statements provides a distinctive view of the District's governmental funds. These statements
report short-term fiscal accountability focusing on the use of spendable resources and balances of
spendable resources available at the end of the year. They are useful in evaluating annual
financing requirements of the District and the commitment of spendable resources for the nearterm.
Since the government-wide focus includes the long-term view, comparisons between these two
perspectives 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 the
Statement of Net Assets on page 10 and the Reconciliation of the Governmental Funds Statement
of Revenues, Expenditures and Changes in Fund Balances to the Statement of Activities on page
13 explain the differences between the two presentations and assist in understanding the
differences between these two perspectives.
NOTES TO THE BASIC FINANCIAL STATEMENTS
The accompanying notes to the basic financial statements provide information essential to a full
understanding of the government-wide and fund financial statements. The notes to the basic
financial statements can be found on pages 14 through 26 in this report.
OTHER INFORMATION
In addition to the basic financial statements and accompanying notes, this report also presents
certain required supplementary information ("RSP'). The budgetary comparison schedule is
included as RSI for the General Fund.
GOVERNMENT-WIDE FINANCIAL ANALYSIS
Net assets may serve over time as a useful indicator of the District's financial position. In the
case of the. District, liabilities exceeded assets by $10,128,706 as of September 30, 2012. The
following is a comparative analysis of the government-wide changes in net assets:
GOVERNMENT-WIDE FINANCIAL ANALYSIS (Continued)
Summary of Changes in the Statement of Net Assets
2012
Change
Positive
(Negative)
2011
Current and Other Assets
$
4,618,800
$
4,611,456
$
7,344
Total Assets
$
4,618,800
$
4,611,456
$
7,344
$
13,955,000
$
14,395,000
$
440,000
Long -Term Liabilities
Total Liabilities
Net Assets:
Restricted
(10,888)
$
14,747,506
$
15,176,618
$
429,112
$
2,728,978
(12,857,684)
$
2,671,092
(13,236,254)
$
57,886
378,570
$ (10,565,162)
$
436,456
Unrestricted
Total Net Assets
781,618
792,506
Other Liabilities
$ (10,128,706)
The followi-,tg table provides a summary of the District's operations for the years ended
September 30, 2012, and September 30, 2011. The District increased its net assets by $436,456,
accounting for a4.1% growth in net assets. Comparative data is presented below:
Summary of Changes in the Statement of Activities
2011
2012
Revenues:
Property Taxes
Other Revenues
Total Revenues
$
$
Net Assets, Beginning of Year
Net Assets, End of Year
$
$
1,251,283
Expenses for Services
Change in Net Assets
1,663,401
24,338
1,687,739
$
436,456
1,556,662
28,778
1,585,440
$
$
1,497,288
$
88,152
$
(10,565,162)
106,739
(4,440}
102,299
246,005
$
(10,653,314)
(10,565,162)
$ (10,128,706)
Change
Positive
(Negative)
348,304
88,152
$
436,456
MUNICIPAL UTILITY DISTRICT NO. I
FINANCIAL ANALYSIS OF THE DISTRICT'S GOVERNMENTAL FUNDS
The District's combined fund balances as of September 30, 2012, were $3,321,935, an increase
of $74,880 from the prior year.
The General Fund fund balance increased by $31,987.
The Debt Service Fund fund balance increased by $42,893, primarily due to the structure of the
District's outstanding debt service.
GENERAL FUND BUDGETARY HIGHLIGHTS
The Board of Directors did not amend the budget during the current fiscal year. Actual revenues
were $10,936 more than budgeted revenues. Actual expenditures were $351,549 more than
budgeted. See the budget to actual comparison on page 28.
CAPITAL ASSETS
The District operates in contractual conjunction with the City of Fate, Texas (the "City"). In this
arrangement, the facilities constructed by the District are conveyed to the City. The City
maintains the facilities and operates the facilities for the benefit of the residents of the District.
Therefore, the District does not have capital assets on its balance sheet. As of September 30,
2012, the District has recorded $11,711,533 in transfers to the City in relation to assets that have
been conveyed to the City.
LONG-TERM DEBT ACTIVITY
At the end of the current fiscal year, the District had total bond debt payable of $14,395,000.
The changes in the debt position of the District during the fiscal year ended September 30, 2012,
are summarized as follows:
Bond Debt Payable, October 1, 2011
$
Less: Bond Principal Paid
Bond Debt Payable, September 30, 2012
14,810,000
415,000
$
14,395,000
LONG-TERM DEBT ACTIVITY (Continued)
The District's bonds carry an underlying rating of "BBB+". The Series 2006 bonds carry an
insured rating of "BB-" by virtue of bond insurance issued by Radian Asset Assurance, Inc.
(Radian). The Series 2007 bonds originally carried an insured rating by virtue of bond insurance
issued by Ambac whose rating has been withdrawn. The Series 2008 bonds carry an insured
rating of "AA-" by virtue of bond insurance issued by Assured Guaranty. Credit enhanced
ratings provided through bond insurance policies are subject to change based on the rating of the
bond insurance company. The ratings above include all rating changes through September 30,
2012.
CONTACTING THE DISTRICT'S FINANCIAL 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 additional
information should be addressed to Rockwall County Consolidated Municipal Utility District
No. 1, c/o Kelly Hart & Hallman, LLP, 301 Congress , Suite 2000 , Austin, Texas 78701.
STATEMENT OF NET ASSETS AND
GOVERNMENTAL FUNDS BALANCE SHEET
SEPTEMBER 30, 2012
Debt
Service Fund
General Fund
ASSETS
Cash, Note 5
Investments , Note 5
Cash with Fiscal Agent
Receivables:
$
282,906
$
4,612
Property Taxes
Due from Other Funds, Note 11
Prepaid Costs
Unamortized Bond Issuance Costs
53,209
2,216,376
780,418
12,708
5,571
1,114
Unamortized Bond Discount
TOTAL ASSETS
LIABILITIES
Accounts Payable
Accrued Interest Payable
Due to Other Funds, Note 11
Deferred Revenues:
Property Taxes
Long Term Liabilities:
$
287,518
$
$
12,088
$
3,069,396
5,571
12,708
4,612
Bonds Payable, Due Within One Year, Note 3
Bonds Payable, Due After One Year, Note 3
$
TOTAL LIABILITIES
22,271
$
12,708
$
1,114
3,055,574
FUND BALANCES/NET ASSETS
FUND BALANCES
Nonspendable:
Prepaid Costs
Restricted for Debt Service
Unassigned
$
265,247
TOTAL FUND BALANCES
$
265,247
$
3,056,688
TOTAL LIABILITIES AND FUND BALANCES
$
287,518
$
3,069,396
NET ASSETS
Restricted for:
Debt Service
Unrestricted
TOTAL NET ASSETS
The accompanying notes to basic financial
statements are an integral part of this report.
-8-
Total
$
336,115
2,216,376
780,418
Statement of
Net Assets
Adjustments
$
$
17,320
17,320
5,571
1,114
(5,571)
1,114
910,316
357,141
910,316
357,141
$
336,115
2,216,376
780,418
3,356,914
$
12,088
$
1,261,886
5,571
340,418
(5,571)
17,320
(17,320)
$
4,618,800
$
12,088
340,418
440,000
13,955,000
440,000
13,955,000
34,979
$
14,712,527
$
$
1,114
3,055,574
265,247
$
(1,114)
(3,055,574)
(265,247)
$
$
3,321,935
$
(3,321,935)
$
$
3,356,914
14,747,506
-0
2,728,978
(12,857,684)
2,728,978
(12,857,684)
$ (10,128,706)
$ (10,128,706)
-9-
RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET
TO THE STATEMENT OF NET ASSETS
SEPTEMBER 30, 2012
Total Fund Balances - Governmental Funds
$
3,321,935
Amounts reported for governmental activities in the Statement of Net Assets are
different because:
Unamortized bond issuance costs and bond discounts in governmental activities are
not current financial resources and, therefore, are not reported as assets in the
governmental funds.
1,267,457
Deferred tax revenues and deferred penalty and interest revenues on delinquent
taxes for the 2011 and prior tax levies became part of recognized revenue in the
governmental activities of the District.
17,320
Certain liabilities are not due and payable in the current period and, therefore, are
not reported as liabilities in the governmental funds. These liabilities at year end
consist of:
Accrued Interest Payable
Bonds Payable Within One Year
Bonds Payable After One Year
$
(340,418)
(440,000)
(13,955,000)
Total Net Assets - Governmental Activities
(14,735,418)
$
-10-
(10,128,706)
THIS PAGE INTENTIONALLY LEFT BLANK
STATEMENT OF ACTIVITIES AND GOVERNMENTAL FUND REVENUES,
EXPENDITURES AND CHANGES IN FUND BALANCES
Debt
Service Fund
General Fund
REVENUES
Property Taxes
Investment Revenues
Miscellaneous Revenues
TOTAL REVENUES
EXPENDITURES/EXPENSES
Service Operations:
Professional Fees
Contracted Services
Other
Wastewater Treatment Costs, Note 12
$
506,762
3,248
906
223
$
1,152,227
3,131
16,829
1
$
511,139
$
1,172,188
$
95,421
10,681
13,859
152,525
$
1,660
19,679
40
Capital Outlay
206,666
Debt Service:
Bond Principal
Bond Interest
415,000
692,916
TOTAL EXPENDITURES/EXPENSES
$
479,152
$
1,129,295
NET CHANGE IN FUND BALANCES
$
31,987
$
42,893
CHANGE IN NET ASSETS
FUND BALANCES/NET ASSETS OCTOBER 1, 2011
233,260
FUND BALANCES/NET ASSETS SEPTEMBER 30, 2012
265,247
- 11 -
3,013,795
$
3,056,688
Total
Statement of
Activities
Adjustments
$
1,658,989
6,379
17,735
224
$
4,412
$
1,663,401
6,379
17,735
224
$
1,683,327
$
4,412
$
1,687,739
$
97,081
30,360
13,899
152,525
206,666
$
132,843
$
229,924
30,360
13,899
226,348
73,823
(206,666)
415,000
692,916
(415,000)
57,836
750,752
$
1;608,447
$
(357,164)
$
$
74,880
$
(74,880)
$
436,456
1,251,283
436,456
3,247,055
(13,812,217}
(10,565,162)
3,321,935
$ (13,450,641)
$ (10,128,706)
-12-
RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF
REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES
TO THE STATEMENT OF ACTIVITIES
Net Change in Fund Balances - Governmental Funds
$
74,880
Amounts reported for governmental activities in the Statement of Activities are
different because:
Governmental funds report tax revenues when collected. However, in the
Statement of Activities , revenue is recorded in the accounting period for which the
taxes are levied.
4,412
Governmental funds report bond principal payments as expenditures. However, in
the Statement of Net Assets, bond principal payments are reported as decreases in
long-term liabilities.
415,000
tovernmental tunds report interest expenditures on long-term debt as expenditures
in the year paid. However, in the Statement of Net Assets, interest is accrued on the
long-term debt through fiscal year-end.
(57,836)
Change in Net Assets - Governmental Activities
436,456
-13-
SEPTEMBER 30, 2012
NOTE 1.
CREATION OF DISTRICT
Rockwall County Consolidated Municipal Utility District No. 1 (the "District") was formed
pursuant to a Consolidation Agreement dated April 5, 1976 between Rockwall County Municipal
Utility District No. 1 (created by the Texas Water Rights Commission ("TWRC") on February
29, 1972), Rockwall County Municipal Utility District No. 3 (created by the TWRC on June 19,
1972) and Rockwall County Municipal Utility District No. 4 (created by the TWRC on June 19,
1972). The District assumed the powers and functions of the individual districts. The TWRC is
presently known as the Texas Commission on Environmental Quality (the "Commission").
Pursuant to the provisions of Chapters 49 and 54 of the Texas Water Code, the District is
empowered to purchase, operate and maintain all facilities, plants, and improvements necessary
to provide water, sanitary sewer service, storm sewer drainage, irrigation, solid waste collection
and disposal, including recycling, and to construct parks and recreational facilities for the
residents of the District. The District is also empowered to contract for or employ its own peace
officers with powers to make arrests and to establish, operate and maintain a fire department to
perform all fire-fighting activities within the District. The District was originally organized in
1972 but remained inactive until October 25, 2002, when the Commission confirmed the
appointment of five temporary directors for the District and the District was reactivated. The
District held its reorganizational meeting on February 5, 2003 and sold its first bonds on March
23, 2006.
NOTE 2.
SIGNIFICANT ACCOUNTING POLICIES
The accompanying basic financial statements have been prepared in accordance with accounting
principles generally accepted in the United States of America as promulgated by the
Governmental Accounting Standards Board ("GASB"). In addition, the accounting records of
the District are maintained generally in accordance with the Water District Financial
Management Guide published by the Commission.
The GASB has established the criteria for determining whether or not a given entity is a
component unit. The criteria are: (1) is the potential component unit a legally separate entity, (2)
does the primary government appoint a voting majority of the potential component unit's board,
(3) is the primary government able to impose its will on the potential component unit, (4) is there
a financial benefit or burden relationship.
The District was created as an independent
municipality. The District does not meet the criteria for inclusion as a component unit of any
entity nor does any other entity meet the component unit criteria for inclusion in the District's
basic financial statements.
SEPTEMBER 30, 2012
NOTE 2.
SIGNIFICANT ACCOUNTING POLICIES (Continued)
Financial Statement Presentation
These financial statements have been prepared in accordance with GASB Codification of
Governmental Accounting and Financial Reporting Standards Part II, Financial Reporting.
The GASB Codification sets forth standards for external financial reporting for all state and local
government entities, which include a requirement for a Statement of Net Assets and a Statement
of Activities. It requires the classification of net assets into three components: Invested in
Capital Assets, Net of Related Debt; Restricted; and Unrestricted. These classifications are
defined as follows:
•
Invested in Capital Assets, Net of Related Debt - This component of net assets consists
of capital assets, including restricted capital assets, net of accumulated depreciation and
reduced by the outstanding balances of any bonds, mortgages, notes, or other borrowings
that are attributable to the acquisition, construction, or improvements of those assets.
•
Restricted Net Assets - This component of net assets consists of external constraints
placed on the use of net assets imposed by creditors (such as through debt covenants),
grantors, contributors, or laws or regulation of other governments or constraints imposed
by law through constitutional provisions or enabling legislation.
•
Unrestricted Net Assets - This component of net assets consists of net assets that do not
meet the definition of "Restricted" or "Invested in Capital Assets, Net of Related Debt."
When both restricted and unrestricted resources are available for use, generally it is the District's
policy to use restricted resources first.
Government-Wide Financial Statements
The Statement of Net Assets and the Statement of Activities display information about the
District as a whole. The District's Statement of Net Assets and Statement of Activities are
combined 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 Assets is reported by adjusting the governmental fund types to report on
the full accrual basis, economic resource basis, which recognizes all long-term assets and
receivables as well as long-term debt and obligations. Any amounts recorded due to and due
from other funds are eliminated in the Statement of Net Assets.
-15-
SEPTEMBER 30, 2012
NOTE 2.
Government-Wide Financial Statements (Continued)
The Statement of Activities is reported by adjusting the governmental fund types to report only
items related to current year revenues and expenditures. Items such as capital outlay are
allocated over their estimated useful lives as depreciation expense. Internal activities between
governmental funds, if any, are eliminated to obtain net total revenues and expenses of the
government-wide Statement of Activities.
Fund Financial Statements
As discussed above, the District's fund financial statements are combined with the governmentwide statements. The fund statements include a Balance Sheet and Statement of Revenues,
Expenditures and Changes in Fund Balances.
Governmental Funds
The District has two governmental funds and considers each to be a major fund.
General Fund - To account for resources not required to be accounted for in another fund,
maintenance tax 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.
Basis of Accounting
The District uses the modified accrual basis of accounting for governmental fund types. The
modified accrual basis of accounting recognizes revenues when both "measurable and available."
Measurable means the amount can be determined. Available means collectable within the
current period or soon enough thereafter to pay current liabilities. The District considers revenue
reported in governmental funds to be available if they are collectable within 60 days after year
end. Also, under the modified accrual basis of accounting, expenditures are recorded when the
related fund liability is incurred, except for principal and interest on long-term debt, which are
recognized as expenditures when payment is due.
SEPTEMBER 30, 2012
NOTE 2.
Basis of Accounting (Continued)
Property taxes considered available by the District and included in revenue include taxes
collected during the year and taxes collected after year-end, which were considered available to
defray the expenditures of the current year. Deferred tax revenues are those taxes which the
District does not reasonably expect to be collected soon enough in the subsequent period to
finance current expenditures.
Amounts transferred from one fund to another fund are reported as other financing sources or
uses. Loans by one fund to another fund and amounts paid by one fund for another fund are
reported as interfund receivables and payables in the Governmental Funds Balance Sheet if there
is intent to repay the amount and if the debtor fund has the ability to repay the advance on a
timely basis.
Capital Assets
Capital assets, which include property, plant, equipment, and infrastructure assets, are reported in
the government-wide Statement of Net Assets. All capital assets are valued at historical cost or
estimated historical cost if actual historical cost is not available. Donated assets are valued at
their fair market value on the date donated.
Repairs and maintenance are recorded as
expenditures in the governmental fund incurred and as an expense in the government-wide
Statement of Activities. Capital asset additions, improvements and preservation costs that extend
the 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 are
capitalized 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 depreciable
property using the straight-line method of depreciation. Estimated useful lives are as follows:
Years
Buildings
Water System
40
10-45
Wastewater System
10-45
Drainage System
All Other Equipment
10-45
3-20
To date all capital assets constructed by the District have been conveyed to the City of Fate,
Texas for operations and maintenance , see Note 6.
- 17 -
SEPTEMBER 30, 2012
NOTE 2.
Budgeting
In compliance with governmental accounting principles, the Board of Directors annually adopts
an unappropriated budget for the General Fund. The budget was not amended during the current
fiscal year.
Pensions
The District has not established a pension plan as the District does not have employees. The
Internal Revenue Service has determined that fees of office received by Directors are considered
to be wages subject to federal income tax withholding for payroll tax purposes only.
Measurement Focus
Measurement focus is a term used to describe which transactions are recognized within the
various financial statements. In the government-wide Statement of Net Assets and Statement of
Activities, the governmental activities are presented using the economic resources measurement
focus. The accounting objectives of this measurement focus are the determination of operating
income, changes in net assets, financial position, and cash flows. All assets and liabilities
associated with the activities are reported. Fund equity is classified as net assets.
Governmental fund types are accounted for on a spending or financial flow measurement focus.
Accordingly, only current assets and current liabilities are included on the Balance Sheet, and the
reported fund balances provide an indication of available spendable or appropriable resources.
Operating statements of governmental fund types report increases and decreases in available
spendable resources.
Fund Balances
GASB Statement No. 54, Fund Balance Reporting and Governmental Fund-type Definitions,
requires the classification of fund balances in governmental funds using the following hierarchy:
Nonspendable: amounts that cannot be spent either because they are in nonspendable form or
because they are legally or contractually required to be maintained intact.
Restricted: amounts that can be spent only for specific purposes because of constitutional
provisions, or enabling legislation, or because of constraints that are imposed externally.
- l s-
SEPTEMBER 30, 2012
NOTE 2.
Fund Balances (Continued)
Committed: amounts that can be spent only for purposes determined by a formal action of the
Board 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 be
established, modified, or rescinded only through ordinances or resolutions approved by the
Board. The District does not have any committed fund balances.
Assigned: amounts that do not meet the criteria to be classified as restricted or committed, but
that are intended to be used for specific purposes. The District has not adopted a formal policy
regarding the assignment of fund balances and does not have any assigned fund balances.
Unassigned: all other spendable amounts in the General Fund.
When expenditures are incurred for which restricted, committed, assigned or unassigned fund
balances are available, the District considers amounts to have been spent first out of restricted
funds, then commmitted funds, then assigned funds, and finally unassigned funds.
Accounting Estimates
The preparation of financial statements in conformity with accounting principles generally
accepted in the United States of America requires management to make estimates and
assumptions that affect the reported amount of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the reported amounts of revenues
and expenditures during the reporting period. Actual results could differ from those estimates.
NOTE 3.
BONDS PAYABLE
Series 2006
Series 2007
Series 2008
Amount Outstanding September 30, 2012
$
Interest Rates
4.00% - 5.75%
4.00% - 5.00%
5.50% - 8.00%
Maturity Date
October 1,
2012/2030
October 1,
2012/2030
October 1,
2012/2030
Interest Payment Dates
October 1/
April 1
October 1/
April 1
October 1/
April 1
October 1, 2013
October 1, 2015
October 1, 2016
'k•
:t
Callable Dates
6,005,000
-19-
$
5,775,000
$
2,615,000
SEPTEMBER 30, 2012
NOTE 3.
BONDS PAYABLE (Continued)
Or any date thereafter at a price of par plus unpaid accrued interest in whole or in part, at the
option of the District. Series 2006 term bonds maturing on October 1, 2024, October 1, 2028
and October 1, 2030, are subject to mandatory redemption by random selection beginning
October 1, 2023, October 1, 2027, and October 1, 2029, respectively. Series 2007 term
bonds maturing on October 1, 2027, are subject to mandatory redemption by random
selection beginning October 1, 2026. Series 2008 term bonds maturing October 1, 2018,
October 1, 2021, October 1, 2024, October 1, 2027, and October 1, 2030, are subject to
mandatory redemption by random selection beginning October 1, 2017, October 1, 2019,
October 1, 2022, October 1, 2025, and October 1, 2028.
The following is a summary of transactions regarding bonds payable for the year ended
September 30, 2012:
Bond Debt Payable - October 1, 2011
$
14,810,000
Less: Bond Principal Retirement -
Series 2006
Series 2007
Series 2008
$
175,000
170,000
70,000
415,000
Bond Debt Payable - September 30, 2012
Bond Debt Payable Due Within One Year
Due After One Year
14,395,000
$
Bond Debt Payable - September 30, 2012
440,000
13,955,000
14,395,000
Original Bonds Voted
$
46,100,000
Original Bonds Approved
$
15,510,000
Original Bonds Issued
$
15,510,000
Refunding Bonds Voted
$
53,315,000
MUNICIPAL UTILITY DISTRICT NO. 1
SEPTEMBER 30, 2012
NOTE 3.
BONDS PAYABLE (Continued)
As of September 30, 2012, the debt service requirements on the bonds outstanding were as
follows:
Fiscal Year
2013
2014
2015
2016
2017
2018-2022
2023-2027
2028-2031
Principal
Interest
Total
$
440,000
465,000
490,000
515,000
550,000
3,235,000
4,290,000
4,410,000
$
668,017
641,886
614,534
587,872
562,233
2,407,480
1,561,196
433,297
$
1,108,017
1,106,886
1,104,534
1,102,872
1,112,233
5,642,480
5,851,196
4,843,297
$
14,395,000
$
7,476,515
$
21,871,515
The bonds are payable from the proceeds of an ad valorem tax levied upon all property subject to
taxation within the District, without limitation as to rate or amount.
During the year ended September 30, 2012, the District levied an ad valorem debt service tax
rate of $0.50 per $100 of assessed valuation, which resulted in a tax levy of $1,155,140 on the
adjusted taxable valuation of $231,027,899 for the 2011 tax year. The bond order requires the
District to levy and collect an ad valorem debt service tax sufficient to pay interest and principal
on bonds when due and the cost of assessing and collecting taxes, see Note 7 for maintenance tax
levy.
The District's tax calendar is as follows:
Levy Date
- October 1, or as soon thereafter as practicable.
Lien Date
- January 1.
Due Date
- Not later than January 31.
Delinquent Date
- February 1, at which time the taxpayer is liable for penalty and interest.
SEPTEMBER 30, 2012
NOTE 4.
SIGNIFICANT BOND ORDER AND LEGAL REQUIREMENTS
The bond orders state that the District is required by the Securities and Exchange Commission to
provide continuing disclosure of certain general financial information and operating data with
respect to the District to the state. information depository. This information, along with the
audited annual financial statements, is to be provided within six months after the end of each
fiscal year and shall continue to be provided through the life of the bonds.
NOTE 5.
DEPOSITS AND INVESTMENTS
Deposits
Custodial credit risk is the risk that, in the event of the failure of a depository financial
institution, a government will not be able to recover deposits or will not be able to recover
collateral securities that are in the possession of an outside party. The District's deposit policy
for 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 the
Federal Deposit Insurance Corporation or its successor, be continuously secured by a valid
pledge to the District of securities eligible under the laws of Texas to secure the funds of the
District, having an aggregate market value, including accrued interest, at all times equal to the
uninsured cash balance in the fund to which such securities are pledged. At fiscal year end, the
carrying amount of the District's deposits was $2,552,491 and the bank balance was $2,283,571.
Of the bank balance, $280,130 was covered by federal depository insurance and the balance was
collateralized with 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 and
the Statement of Net Assets at September 30, 2012, as listed below:
Certificates
of Deposit
Cash
GENERAL FUND
$
DEBT SERVICE FUND
TOTAL DEPOSITS
282,906
$
336,115
$
$
2,216,376
282,906
2,269,585
2,216,376
53,209
$
Total
$
2,552,491
SEPTEMBER 30, 2012
DEPOSITS AND INVESTMENTS (Continued)
NOTE 5.
Investments
Under Texas law, the District is required to invest its funds under written investment policies that
primarily emphasize safety of principal and liquidity and that address investment diversification,
yield, maturity, and the quality and capability of investment management, and all District funds
must be invested in accordance with the following investment objectives: understanding the
suitability of the investment to the District's financial requirements, first; preservation and safety
of principal, second; liquidity, third; marketability of the investments if the need arises to
liquidate the investment before maturity, fourth; diversification of the investment portfolio, fifth;
and yield, sixth. The District's investments must be made "with judgment and care, under
prevailing circumstances, that a person of prudence, discretion, and intelligence would exercise
in the management of the person's own affairs, not for speculation, but for investment,
considering the probable safety of capital and the probable income to be derived." No person
may invest District funds without express written authority from the Board of Directors.
Texas statutes include specifications for and limitations applicable to the District and its
authority to purchase investments as defined in the Public Funds Investment Act. Authorized
investments are summarized as follows: (1) obligations of the United States or its agencies and
instrumentalities, (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 interest
on which are unconditionally guaranteed or insured by the State of Texas or the United States or
its agencies and instrumentalities, including obligations that are fully guaranteed or insured by
the Federal Deposit Insurance Corporation or by the explicit full faith and credit of the United
States, (5) certain A rated or higher obligations of states, agencies, counties, cities, and other
political 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 repurchase
agreements secured by delivery, (9) certain bankers' acceptances with limitations, (10)
commercial paper rated A-1 or P-1 or higher and a maturity of 270 days or less, (11) no-load
money market mutual funds and no-load mutual funds with limitations, (12) certain guaranteed
investment contracts, (13) certain qualified governmental investment pools and (14) a qualified
securities lending program.
As of September 30, 2012, the District had the following investments and maturities:
Maturities in Years
Less Than
Fund and
Investment Type
DEBT SERVICE FUND Certificates of Deposit
Fair Value
1
$ 2,216,376
$ 2,216,376
-23-
$
1-5
6-10
-0-
$ -0-
More Than
10
$ -0-
MUNICIPAL, UTILITY DISTRICT NO.1
SEPTEMBER 30, 2012
NOTE 5.
DEPOSITS AND INVESTMENTS (Continued)
Restrictions
All cash and investment of the Debt Service Fund are restricted for payment of debt service and
cost of assessing and collecting taxes.
NOTE 6.
CAPITAL ASSETS
The District operates in contractual conjunction with the City of Fate, Texas (the "City"). In this
arrangement , the facilities constructed by the District are conveyed to the City. The City
maintains the facilities and operates the facilities for the benefit of the residents of the District.
Therefore, the District does not have capital assets on its balance sheet . As of September 30,
2012, the District has recorded $11,711,533 in transfers to the City in relation to assets that have
been conveyed to the City.
NOTE 7.
MAINTENANCE TAX
On May 15, 2004, the voters of the District approved the levy and collection of a maintenance
tax in an unlimited amount per $100 of assessed valuation of taxable property within the District.
This maintenance tax is to be used by the General Fund to pay expenditures of operating the
District's waterworks and wastewater systems. During the current fiscal year, the District levied
an ad valorem maintenance tax at the rate of $0.22 per $100 of assessed valuation, which
resulted in a tax levy of $508,262 on the adjusted taxable valuation of $231,027,899 for the 2011
tax year.
NOTE 8.
SPECIAL DISTRICT AGREEMENT
The District, Rockwall County Consolidated Municipal Utility District No. 2 (District No. 2), the
City of Fate, Texas (the "City") and PRA/Fate Development Corp., the Developer within the
District, have entered into the Special District Agreement dated December 1, 2003. Pursuant to
the terms of the agreement, the City agrees to provide retail water capacity to 1,300 residential
units and sewer capacity to 700 residential units within the districts. The City agrees to own,
operate and maintain the facilities and charge user fees equal to those charged others within its
boundaries. Under the agreement, the Developer agrees to finance and construct on behalf of the
districts the internal water, sewer and drainage facilities, see Note 9.
-24-
SEPTEMBER 30, 2012
NOTE 8.
SPECIAL DISTRICT AGREEMENT (Continued)
On May 17, 2006, the District, Rockwall County Municipal Utility District's No. 6, 7, 8 and 9
(District's No. 6, 7, 8 and 9), the City, and PRA/Fate Development Corp. entered into the Special
District Agreement No. 2. This agreement noted that District No. 2 has become dormant and
that District's No. 6, 7, 8 and 9 have been created over land comprising of District No. 2 and are
now party to the original agreement in the place of District No. 2. It was also noted that the
newly created districts have certain road powers that the District does not have and that the
construction and acquisition of roads will be subject to the same rights and obligations as the
water, sewer and drainage facilities referenced in the original agreement. Pursuant to the terms
of the agreement, the City agrees to provide additional retail water capacity to 1,000 residential
units and sewer capacity to 500 residential units with the districts.
Pursuant to the Capacity Allocation Agreement between the District and District's No. 6, 7, 8
and 9 approved on September 19, 2006, the districts have agreed that all the water and sewer
capacity mentioned in the Special District Agreement and the Special District Agreement No. 2
will be allocated to the District. The districts will cooperate with the Developer and the City for
any additional water and sewer capacity that will be needed by any of the districts.
NOTE 9. UNREIM 3URSED COSTS
The District has executed development financing agreements with Developers within the
District. These agreements call for the Developers to fund costs associated with water, sewer
and drainage facilities and to advance monies to fund operations until such time as the District
can sell bonds to reimburse the Developers. As of September 30, 2012, the Developers indicated
that approximately $2,030,827 had been advanced on behalf of the District in connection with
these agreements. Since any reimbursement is contingent upon a future bond sale, the District
has not accrued a liability related to these items.
NOTE 10.
RISK MANAGEMENT
The District is exposed to various risks of loss related to torts, theft of, damage to and destruction
of assets, error and omission and natural disasters for which the District carries commercial
insurance. There have been no significant reductions in coverage from the prior year and
settlements have not exceeded coverage in the past three years.
SEPTEMBER 30, 2012
NOTE 11.
INTERFUND PAYABLES AND RECEIVABLES
As of September 30, 2012, the District recorded interfund liabilities of $5,571 in the General
Fund as due to the Debt Service Fund for debt service tax collections.
NOTE 12.
WATER AND WASTEWATER CAPACITY
On June 24, 2003, the City and PRA/Fate Development Corp (the "Developer") entered into an
agreement for certain off-site water and sewer improvements to serve the District (the "2003
Agreement"). The Developer agreed to pay the entire cost for the design and construction of the
improvements and, as consideration for the construction of the improvements, the City shall
provide access, capacity and rights to water and sewer services for the Developer to be used on
the property provided by the improvements.
In order to adequately serve the property with sewer service, the City has become a member of
the Sabine Creek Wastewater System, which is owned and operated by North Texas Municipal
Water District ("NTMWD"). The City's capacity contracts with NTMWD require annual debt
service payments from the City to NTMWD. Any shortfall between the City's sewer revenue
and the debt service payment to NTMWD related to the District would be paid by the Developer
pursuant to the 2003 Agreement.
On November 15, 2010, the 2003 Agreement was amended. The City will remain obligated to
fully reimburse the Developer for remaining unreimbursed project costs. In consideration for the
Developer funding the project costs and project improvements, the City agrees to provide the
Developer, and in turn the District, with 2,300 residential units of water capacity and 1,200
residential units of wastewater capacity.
In consideration for the provisions of wastewater service to the District and reservation of
wastewater capacity for the District, the Developer had made and shall make annual payments to
the City according to the following schedule; $400,000, 200,000, and $152,525 due on
November 30, 2010, September 30, 2011 and September 30, 2012 respectively, for the debt
service payments to NTMWD. As of September 30, 2012, the District paid $752,525 to the City
for the payments due November 30, 2010, September 30, 2011 and September 30, 2012, in lieu
of Developer payment or as reimbursement to the Developer for prior payments which are of
benefit to the District. After payment of these amounts, the Developer and District have no other
obligation to pay such shortfall amounts to the City. The term of the agreement is the earlier of
20 years or satisfaction of all terms and conditions by the parties to the agreement.
-26-
REQUIRED SUPPLEMENTARY INFORMATION
SEPTEMBER 30, 2012
SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES
CHANGES IN FUND BALANCE - BUDGET AND ACTUAL - GENERAL FUND
Variance
Positive
(Negative)
Original and
Actual
Final Budget
REVENUES
Property Taxes
Investment Revenues
$
498,403
$
506,762
3,248
906
223
$
1,800
8,359
3,248
(894)
223
TOTAL REVENUES
$
500,203
$
511,139
$
10,936
EXPENDITURES
Services Operations:
Professional Fees
$
98,500
12,100
17,003
$
95,421
10,681
13,859
152,525
206,666
$
3,079
1,419
3,144
(152,525)
(206,666)
TOTAL EXPENDITURES
$
127,603
$
479,152
$
(351,549)
NET CHANGE IN FUND BALANCE
$
372,600
$
31,987
$
(340,613)
$
(340,613)
Contracted Services
Other
Wastewater Treatment Costs
Capital Outlay
FUND BALANCE - OCTOBER 1, 2011
FUND BALANCE - SEPTEMBER 30, 2012
233,260
$
605,860
233,260
$
See accompanying independent auditor's report.
-28-
265,247
SUPPLEMENTARY INFORMATION REQUIRED BY THE
WATER DISTRICT FINANCIAL MANAGEMENT GUIDE
SEPTEMBER 30, 20X2
MUNICIPAL UTILITY DISTRICT NO. 1
SERVICES AND RATES
1.
SERVICES PROVIDED BY THE DISTRICT DURING THE FISCAL YEAR:
Retail Water
Wholesale Water
Drainage
Retail Wastewater
Parks/Recreation
Solid Waste/Garbage
Wholesale Wastewater
Fire Protection
Flood Control
Irrigation
Security
Roads
Participates in joint venture, regional system and/or wastewater service (other than
emergency interconnect)
X
2.
3.
4.
5.
Other: The District operates in contractual conjunction with the City of Fate
RETAIL SERVICE PROVIDERS (NOT APPLICABLE)
TOTAL WATER CONSUMPTION DURING THE FISCAL YEAR ROUNDED TO
THE NEAREST THOUSAND: (NOT APPLICABLE)
STANDBY FEES (authorized only under TWC Section 49.231):
Does the District have Debt Service standby fees ?
Yes- No X
Does the District have Operation and Maintenance standby fees?
Yes- No ,X
LOCATION OF DISTRICT:
Is the District located entirely within one county?
Yes
X
No
County or Counties in which District is located:
Rockwall County, Texas
Is the District located within a city?
Entirely
X
Partly
Not at all
-30-
SERVICES AND RATES
5.
LOCATION OF DISTRICT : (Continued)
City or Cities in which District is located:
City of Fate, Texas
Are Board Members appointed by an office outside the District?
Yes
No
X
-31-
PROFESSIONAL FEES:
Auditing
$
15,650
Engineering
10,897
Legal
68,874
TOTAL PROFESSIONAL FEES
$
CONTRACTED SERVICES:
Arbitrage Compliance
$
Bookkeeping
95,421
2,950
7,731
TOTAL CONTRACTED SERVICES
$
UTILITIES - Electricity
$
-0-
REPAIRS AND MAINTENANCE
$
-0-
ADMINISTRATIVE EXPENDITURES:
Director Fees
$
Election Costs
Insurance
Payroll Taxes
Travel and Meetings
Other
10,681
6,750
75
4,981
525
1,363
165
TOTAL ADMINISTRATIVE EXPENDITURES
-32-
$
13,859
FOR THE YEAR ENDED SEPTEMBER 30, 201.2
CAPITAL OUTLAY:
Capitalized Assets
Expenditures Not Capitalized
206,666
TOTAL CAPITAL OUTLAY
$
206,666
SOLID WASTE DISPOSAL
$
-0-
SECURITY
$
-0-
FIRE FIGHTING
-0-
PARKS AND RECREATION
-0-
OTHER EXPENDITURES:
152,525
TOTAL EXPENDITURES
479,152
See accompanying independent auditor 's report.
-33-
INVESTMENTS
SEPTEMBER 30, 201.2
und
DEBT SERVICE FUND
Certificate of Deposit
Identification or
Certificate Number
Interest
Rate
Maturity
Date
9400639
9400640
8401731
8401802
8401803
0.45%
0.45%
0.45%
0.45%
0.45%
03/27/13
03/27/13
06/29/13
06/29/13
06/29/13
TOTAL DEBT SERVICE FUND
-34-
Balance at
End of Year
Accrued
Interest
Receivable at
End of Year
$
481,086
220,498
1,256,500
168,190
90,102
$
$
2,216,376
$
-0-
Debt Service Taxes
Maintenance Taxes
TAXES RECEIVABLE OCTOBER 1, 2011
$
3,112
$
9,796
Adjustments to Beginning
$
Balance
Original 2011 Tax Levy
Adjustment to 2011 Tax Levy
$
508,575
(313)
TOTAL TO BE
ACCOUNTED FOR
3,112
$
$
508,262
$
1,155,852
(712)
511,374
9,796
1,155,140
$
1,164,936
TAX COLLECTIONS:
Prior Years
Current Year
$
$
645
506,117
TAXES RECEIVABLE SEPTEMBER 30, 2012
TAXES RECEIVABLE BY
YEAR:
2011
2010
2009
2008
2007
506,762
$
4,612
$
2,145
1,962
1,150,266
1,152,228
12,708
$
2,981
2,531
1,349
973
994
843
366
264
$
TOTAL
4,612
-35-
4,874
$
12,708
2011
PROPERTY VALUATIONS:
Land
Improvements
Personal Property
Exemptions
TOTAL PROPERTY
VALUATIONS
$
2010
42,734,077
188,806,772
776,080
(1,289,030)
$
2009
42,078,762
174,489,935
947,260
(1,328,230)
$
2008
41,367,940
161,424,165
988,170
(1,439,274)
$
40,792,440
136,338,191
1,098,390
(1,120,693)
$ 231,027,899
$ 216,187,727
$ 202,341,001
$ 177,108,328
$
0.50
0.22
$
0.54
0.18
$
0.54
0.18
$
0.59
0.16
TOTAL TAX RATES PER
$100 VALUATION
$
0.72
$
0.72
$
0.72
$
0.75
ADJUSTED TAX LEVY*
$
1,663,402
$
1,556,551
$
1,456,856
$
1,328,312
TAX RATES PER $100
VALUATION:
Debt Service
Maintenance
PERCENTAGE OF TAXES
COLLECTED TO TAXES
LEVIED
99.58 %
99.74%
99.77 %
Based upon the adjusted tax levy at the time of the audit for the fiscal year in which the tax
was levied.
Maintenance Tax - Maximum tax rate of unlimited amount per $100 of assessed valuation
approved by voters on May 15, 2004.
See accompanying independent auditor ' s report.
-36-
99.87 %
SEPTEMBER 30, 2012
SERIES-2006
Due During Fiscal
Years Ending
September 30
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
Principal
Due
October 1
$
Interest Due
October 1/
April 1
185,000
195,000
205,000
215,000
230,000
240,000
255,000
270,000
285,000
300,000
320,000
340,000
355,000
375,000
400,000
420,000
445,000
470,000
$
500,000
267,314
256,633
245,632
235,695
226,680
217,045
206,770
195,677
183,884
171,302
157,738
143,132
127,669
111,333
93,895
75,235
55,340
34,178
11,625
6,005,000
3,016,777
See accompanying independent auditor 's report.
-37-
Total
$
452,314
451,633
450,632
450,695
456,680
457,045
461,770
465,677
468,884
471,302
477,738
483,132
482,669
486,333
493,895
495,235
500,340
504,178
511,625
9,021,777
SEPTEMBER 30, 2012
SERIES-2007
Principal
Interest Due
Years Ending
Due
October I/
September 30
October 1
April 1
Due During Fiscal
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
$
180,000
190,000
200,000
210,000
225,000
235,000
250,000
260,000
275,000
290,000
310,000
325,000
345,000
360,000
380,000
400,000
425,000
445,000
470,000
$
Total
9,987
422,484
423,234
423,483
423,758
429,534
430,334
435,571
435,146
439,112
442,423
449,973
451,715
457,645
457,750
462,025
465,450
472,919
474,432
479,987
2,701,975
8,476,975
242,484
233,234
223,483
213,758
204,534
195,334
185,571
175,146
164,112
152,423
139,973
126,715
112,645
97,750
82,025
65,450
47,919
29,432
5,775,000
-38-
$
SEPTEMBER 30, 2012
SERIES-2008
Due During Fiscal
Years Ending
Principal
Interest Due
Due
October 1/
September 30
October 1
April 1
2013
$
$
Total
2027
175,000
55,004
2028
2029
190,000
44,281
200,000
215,000
32,700
20,250
230,000
6,900
233,219
232,019
230,419
228,419
226,019
224,469
228,694
227,434
225,825
228,794
231,113
227,919
229,294
229,991
230,004
234,281
232,700
235,250
236,900
1,757,763
4,372,763
75,000
158,219
2014
80,000
152,019
2015
2016
85,000
145,419
90,000
138,419
2017
95,000
131,019
2018
100,000
124,469
2019
110,000
118,694
2020
2021
115,000
120,000
112,434
2022
130,000
98,794
2023
140,000
91,113
2024
145,000
2025
155,000
82,919
74,294
2026
165,000
64,991
2030
2031
2,615,000
105,825
$
-39-
$
SEPTEMBER 30, 2012
ANNUAL REQUIREMENTS
FOR ALL SERIES
Due During Fiscal
Years Ending
September 30
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
Total
Interest Due
Total
Principal Due
$
Total
Principal and
Interest Due
440,000
465,000
490,000
515,000
550,000
575,000
615,000
645,000
680,000
720,000
770, 000
810,000
855,000
900,000
955,000
$
668,017
641,886
614,534
587,872
562,233
536,848
511,035
483,257
453,821
422,519
388 ,824
352,766
314,608
274,074
230,924
$
1,108,017
1,106,886
1,104,534
1,102,872
1,112,233
1,111,848
1,126,035
1,128,257
1,133,821
1,142,519
1,158,824
1,162,766
1,169,608
1,174,074
1,185,924
2028
1,010,000
184,966
1,194,966
2029
2030
2031
1,070,000
1,130,000
1,200,000
135,959
83,860
28,512
1,205,959
1,213,860
1,228,512
14,395,000
$
7,476,515
-40-
$
21,871,515
CHANGE IN LONG-TERM BOND DEBT
Original
Bonds Issued
Description
Rockwall County Consolidated Municipal Utility
District No. 1 Unlimited Tax Bonds - Series 2006
$
6,500,000
Bonds
Outstanding
October 1, 2011
$
6,180,000
6,260,000
5,945,000
2,750,000
2,685,000
$
TOTAL
15,510,000
Tax Bonds*
Bond Authority:
$
Amount Authorized by Voters
46,100,000
$
14,810,000
Refunding Bonds
$
53,315,000
15,510,000
Amount Issued
$
Remaining to be Issued
30,590,000
53,315,000
Includes all bonds secured with tax revenues. Bonds in this category may also be secured with
other revenues in combination with taxes.
Debt Service Fund cash, investments and cash with paying agent balances as of
September 30, 2012:
Average annual debt service payment (principal and interest) for remaining term
of all debt:
See Note 3 for interest rate, interest payment dates and maturity dates.
-41 -
$
3,050,003
1,151,132
Current Year Transactions
Retirements
Bonds Sold
Principal
$
$
175,000
Interest
$
170,000
-0-
$
415,000
277,663
$
251,234
70,000
$
Bonds
Outstanding
September 30, 2012
164,019
$
692,916
$
6,005,000
The Bank of New York
Mellon Trust Company, N.A.
Dallas, TX
5,775,000
Dallas, TX
2,615,000
Dallas, TX
14,395 ,000
-42-
Paying Agent
GENERAL FUND - FIVE YEARS
Amounts
2012
REVENUES
Property Taxes
Investment Revenues
TOTAL REVENUES
EXPENDITURES
Service Operations:
Professional Fees
Contracted Services
2011
2010
$
506,762
3,248
906
223
$
389,252
2,044
$
363,657
2,286
6,778
$
511,139
$
391,296
$
372,721
$
95,421
10,681
$
67,032
9,577
$
100,678
11,096
Repairs and Maintenance
Other
Capital Outlay
13,859
152,525
206,666
13,363
600,000
11,373
63,373
TOTAL EXPENDITURES
$
479,152
$
689,972
$
186,520
$
31,987
$
(298,676)
$
186,201
233,260
531,936
345,735
ENDING FUND BALANCE
265,247
233,260
531,936
-43-
Percentage of Total Revenue
2008
2009
$
2011
2012
2010
224,105
2,854
2,280
99.2 %
0.6
0.2
99.5 %
0.5
97.6 %
$
229,239
100.0 %
100.0 %
$
102,376
10,022
16,355
17,854
18.7 %
2.1
17.1 %
2.5
285,167
3,393
1,585
564
$
$
290;709
$
65,925
12,280
16,453
2009
2008
98.1 %
1.2
0.5
0.2
97.8 %
1.2
1.0
100.0 %
100.0 %
100.0 %
27.0 %
3.0
22.7 %
4.2
44.7 %
4.4
7.1
7.8
0.6
1.8
2.7
29.8
40.4
3.4
153.3
3.1
17.0
5.7
$
94,658
$
146,607
93.7 %
176.3 %
50.1 %
32.6 %
64.0 %
$
196,051
$
82,632
6.3 %
(76.3) %
49.9 %
67.4 %
36.0 %
149,684
67,052
345,735
149,684
-44-
DEBT SERVICE FUND - FIVE YEARS
Amounts
2012
REVENUES
Property Taxes
$
Interest on Investments
2011
1,152,227
3,131
$
16,829
1,168,075
8,862
2010
$
17,866
1,092,020
10,195
45,467
1
TOTAL REVENUES
5,086
$
1,172,188
$
1,194,803
$
1,152,768
$
20,079
415,000
694,216
$
30,793
390,000
718,141
$
22,480
310,000
777,626
TOTAL EXPENDITURES
$
1,129,295
$
1,138,934
$
1,110,106
EXCESS (DEFICIENCY) OF REVENUES
OVER EXPENDITURES
$
42,893
$
55,869
$
42,662
$
4,201
$
$
4,201
$
$
60,070
$
EXPENDITURES
Tax Collection Expenditures
Debt Service Principal
Debt Service Interest and Fees
OTHER FINANCING SOURCES (USES)
Transfers In
Long-Term Debt Issued
TOTAL OTHER FINANCING SOURCES (USES)
$
$
-0-
42,893
3,013,795
ENDING FUND BALANCE
$
3,056,688
2,953,725
$
3,013,795
-0-
42,662
2,911,063
$
2,953,725
TOTAL ACTIVE RETAIL WATER
CONNECTIONS
N/A
N/A
N/A
TOTAL ACTIVE RETAIL WASTEWATER
CONNECTIONS
N/A
N/A
N/A
-45-
Percentage of Total Revenue
2009
$
2008
2012
2011
2010
2009
2008
826, 388
15 ,896
57,126
23
98 .3 %
0 .3
1.4
97.8 %
0.7
1.5
94.7 %
0.9
3.9
0.5
94.0 %
2.0
4.0
91.8 %
$
899,433
100.0 %
100.0 %
100.0 %
100.0 %
100.0 %
$
17,099
2.6 %
32.6
60.1
2.0 %
26.9
67.5
2.4 %
1.9 %
451,868
1.7 %
35.4
59.2
50.8
50.2
1,051,553
22,210
44,396
36
$
$
1,118,195
$
26,389
568,282
1.8
6.4
$
594,671
$
468,967
96.3 %
95.3 %
96.4 %
53.2 %
52.1 %
$
523,524
$
430,466
3.7 %
4.7 %
3.6 %
46.8 %
47.9 %
302,500
$
302,500
$
826,024
$
430,466
1,654,573
2,085,039
2,911,063
-0-
$
2,085,039
NIA
NIA
N/A
N/A
-46-
BOARD MEMBERS , KEY PERSONNEL AND CONSULTANTS
SEPTEMBER 30, 2012
District Mailing Address
-
Rockwall County Consolidated Municipal
Utility District No. 1
c/o Kelly Hart & Hallman, LLP
301 Congress, Suite 2000
Austin, TX 78701
District Telephone Number
oard Members:
-
(214) 954-6300
Term of
Office
(Elected or
Appointed)
Fees of Office
for the
year ended
September 30, 2012
Expense
Reimbursements
for the
year ended
September 30, 2012
itle
Bobby L. Jackson, Jr.
05/2010
05/2014
(Elected)
$
1,350
$
349
President
Burnis Frederick Turner
05/2012
05/2016
(Elected)
$
750
$
23
Vice
President
Jo Carol McCormick
05/2012
05/2016
(Elected)
$
750
$
Randy C. Roland
05/2010
05/2014
$
1,200
$
-0-
244
(Elected)
Paul Wilson
05/2010
05/2014
Secretary
Treasurer/
Assistant
Secretary
$
1,350
$
315
Assistant
Secretary
(Elected)
Notes:
No Director has any business or family relationships (as defined by the Texas Water Code) with major
landowners in the District, with the District 's developers or with any of the District' s consultants.
Submission date of most recent District Registration Form (TWC Sections 36.054 and 49.054):
May 25, 2012.
The limit on Fees of Office that a Director may receive during a fiscal year is $3,500 as set by Board
Resolution (TWC Section 49.060) on May 17, 2005. Fees of Office are the amounts actually paid to a
Director during the District's current fiscal year.
-47-
BOARD MEMBERS , KEY PERSONNEL AND CONSULTANTS
SEPTEMBER 30, 2012
ate Hired
onsultants:
Fees / Compensation
for the
year ended
September 30, 2012
itle
Kelly Hart & Hallman, LLP
301 Congress, Suite 2000
Austin, TX 78701
05/15/07
$
68,873
Attorney
McCall Gibson Swedlund Barfoot PLLC
13100 Wortham Center Drive, Suite 235
Houston, TX 77065-5610
03/29/05
$
15,650
Auditor
Dye & Bloomfield, LLC
2309B Coit Road, Suite B
Plano, TX 75075
01/01/08
$
7,756
Bookkeeper
Legislative
Action/
09/21/04
$
19,494
Central Appraisal
District/Tax
Assessor/
Collector
Petitt & Associates, Inc.
300 Municipal Drive
Richardson, TX 75080
02/05/03
$
3,412
Engineer
RBC Capital Markets
1001 Fannin, Suite 1200
Houston, TX 77002-6707
11/18/03
$
-0-
Financial Advisor
Kathi Dye
2309 Coit Road, Suite B
Plano, TX 75075
02/26/08
$
-0-
Investment
Officer
Rockwall Central Appraisal District
841 Justin Road
Rockwall, TX 75087
-48-
APPENDIX B
FORM OF BOND COUNSEL OPINION
Proposed Form of Opinion of Bond Counsel
An opinion in substantially the following form will be delivered by
Kelly Hart & Hallman LLP, Bond Counsel,
upon the delivery of the Series 2013 Refunding Bonds, assuming no material changes in facts or
law.
WE HAVE EXAMINED certified copies of proceedings relating to the authorization and
issuance by Rockwall County Consolidated Municipal Utility District No. 1(the “Issuer” or the
“District”) of its bonds dated April 1, 2013 in the amount of FIVE MILLION THREE HUNDRED
SEVENTY THOUSAND AND NO/100 DOLLARS ($5,370,000.00), being more particularly
described as follows:
ROCKWALL COUNTY CONSOLIDATED MUNICIPAL UTILITY DISTRICT
NO. 1 UNLIMITED TAX REFUNDING BONDS, SERIES 2013, dated April 1,
2013 (the “Series 2013 Bonds”) in the original principal amount of $5,370,000.00,
payable as specified in a Bond Order of the governing body of the Issuer, dated
March 5, 2013, authorizing the issuance of the Series 2013 Bonds (the “Bond Order”)
bearing interest at the rates per annum specified in the Bond Order.
OUR EXAMINATION into the legality and validity of the Series 2013 Bonds included a
review of a transcript of certified proceedings of the Issuer relating to the authorization and issuance
of the Series 2013 Bonds, including the Bond Order, and customary certifications and opinions of
officials of the Issuer and other pertinent showings.
WE ALSO HAVE EXAMINED the Constitution and laws of the State of Texas, the Internal
Revenue Code of 1986 as amended to the date hereof (the “Code”), the regulations of the United
States Department of the Treasury adopted thereunder, rulings and procedures thereunder pertinent to
this opinion, such other materials as we deemed necessary to render the opinions hereinafter
expressed and the initially executed and delivered Bonds of the Series 2013 Bonds.
BASED ON OUR EXAMINATION, it is our opinion that:
1.
The Series 2013 Bonds and Bond Order are duly authorized and issued in conformity
with the Constitution and laws of the State of Texas now in force and are valid and legally binding
obligations of the District in accordance with their terms and conditions, except as limited by:
(i)
State and federal laws, regulations, rulings and court decisions relating to applicable
bankruptcy, insolvency, reorganizations, moratoriums and the enforcement of
creditors’ rights generally; and
(ii)
Equitable principles which could limit specific performance.
FORT WORTH OFFICE | 201 MAIN STREET, SUITE 2500 | FORT WORTH, TX 76102 | TELEPHONE: (817) 332-2500 | FAX: (817) 878-9280
AUSTIN OFFICE | 301 CONGRESS, SUITE 2000 | AUSTIN, TX 78701 | TELEPHONE: (512) 495-6400 | FAX: (512) 495-6401
Kelly Hart & Hallman, a Limited Liability Partnership | www.kellyhart.com
RCCMUD1 Series 2013
Page 2 of 3
2.
The Series 2013 Bonds are full faith and credit obligations of the District. The
District is obligated to exercise its ad valorem taxing power without legal limitation as to rate or
amount, upon all taxable property within the District to pay both the principal of and interest on the
Series 2013 Bonds.
3.
Under the terms and conditions of the Bond Order, the District has the right to issue
additional bonds payable from the same source, secured in the same manner and in all things on a
parity with the Series 2013 Bonds.
4.
Assuming compliance by the Issuer with the provisions of the Bond Order, the
interest paid by the Issuer on the Bonds and received by the owners of the Bonds is, under existing
laws, regulations, court decisions and Internal Revenue Service rulings, (i) excluded from the gross
income of the recipient of those payments for federal income tax purposes and (ii) not treated as a
“preference item” for calculation of the alternative minimum tax imposed on individuals and
corporations under Section 57(a)(5) of the Code. Interest on the Series 2013 Bonds owned by a
corporation will be included in such corporation’s adjusted current earnings for purposes of
calculating the alternative minimum taxable income of such corporations, other than an S
corporation, a qualified mutual fund, a real estate mortgage investment conduit, a real estate
investment trust, or a financial asset securitization investment trust. A corporation’s alternative
minimum taxable income is the basis on which the alternative minimum tax imposed by section 55
of the Code will be computed.
WE EXPRESS NO OPINION with respect to any other federal, state or local tax
consequences, under present law or any proposed legislation, resulting form the receipt or accrual of
interest on, or the acquisition or disposition of, the Series 2013 Bonds. Ownership of tax-exempt
obligations such as the Series 2013 Bonds may result in collateral federal tax consequences to,
among others, financial institutions, life insurance companies, property and casualty insurance
companies, certain foreign corporations doing business in the United States, Subchapter 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, taxexempt obligations.
IN PROVIDING THE FOREGOING OPINIONS, we have relied upon representations of the
Issuer with respect to matters solely within the knowledge of the Issuer, which we have not
independently verified, and we have assumed the accuracy and completeness of, and the Issuer’s
continuing compliance with, the representations and covenants contained in the Bond Order
pertaining to those sections of the Code which affect the exclusion from gross income of interest on
the Series 2013 Bonds for federal income tax purposes. In the event that such representations are
determined to be inaccurate or incomplete, or the Issuer fails to comply with the foregoing provisions
Kelly Hart & Hallman, a Limited Liability Partnership
RCCMUD1 Series 2013
Page 3 of 3
of the Bond Order, interest on the Series 2013 Bonds could become includable in gross income from
the date of original delivery, regardless of the date on which the event causing such inclusion occurs.
OUR OPINIONS ARE BASED ON EXISTING LAW, which is subject to change. Such
opinions are further based on our knowledge of facts as of the date hereof. We assume no duty to
update or supplement our opinions to reflect any facts or circumstances that may thereafter come to
our attention or to reflect any changes in any law that may thereafter occur or become effective.
Moreover, our opinions are not a guarantee of result and are not binding on the Internal Revenue
Service (the “Service”); rather, such opinions represent our legal judgment based upon our review of
existing law and in reliance upon the representations and covenants referenced above that we deem
relevant to such opinions. The Service has an ongoing audit program to determine compliance with
rules that relate to whether interest on state or local obligations is includable in gross income for
federal income tax purposes. No assurance can be given whether or not the Service will commence
an audit of the Series 2013 Bonds. If an audit is commenced, in accordance with its current
published procedures the Service is likely to treat the Issuer as the taxpayer. We observe that the
Issuer has covenanted not to take any action, or omit to take any action within its control, that if
taken or omitted, respectively, may result in the treatment of interest on the Series 2013 Bonds as
includable in gross income for federal income tax purposes.
OUR SOLE ENGAGEMENT in connection with the issuance of the Series 2013 Bonds is as
bond counsel for the Issuer and, in that capacity, we have been engaged by the Issuer for the sole
purpose of rendering an opinion with respect to the legality and validity of the Series 2013 Bonds
and the organization of the District under the Constitution and laws of the State of Texas, and for no
other reason or purpose. The foregoing opinions represent our legal judgment based upon a review
of existing legal authorities that we deem relevant to render such opinions and are not a guarantee of
the result. We have not been requested to investigate or verify, and have not investigated or verified,
any records, data or other material relating to the Issuer or to the financial condition or capability of
the Issuer, and we have not assumed any responsibility, and we express no opinions, with respect
thereto. We express no opinion and make no comment with respect to the marketability of the Series
2013 Bonds.
Kelly Hart & Hallman, a Limited Liability Partnership

district no.1 - i

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