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DENTONCOUNTYFRESHWATERSUPPLYDISTRICTNO.11‐C (DentonCounty,Texas) PRELIMINARYOFFICIALSTATEMENT DATED:MAY18,2017 $3,675,000 UNLIMITEDTAXBONDS SERIES2017 BIDSTOBESUBMITTED:10:30A.M.,DALLAS,TEXASTIME THURSDAY,MAY25,2017 BIDSTOBEOPENED:12:00P.M.,DALLAS,TEXASTIME THURSDAY,MAY25,2017 FinancialAdvisor ThisPreliminaryOfficialStatementandtheInformationcontainedhereinaresubjecttocompletionoramendment.Thesesecuritiesmaynotbesoldnormayofferstobuybeacceptedpriortothetimethe OfficialStatementisdeliveredinfinalform.UndernocircumstancesshallthisPreliminaryOfficialStatementconstituteanoffertosellorthesolicitationofanoffertobuynorshalltherebeanyofthese securitiesinanyjurisdictioninwhichsuchoffer,solicitationorsalewouldbeunlawfulpriortoregistrationorqualificationunderthesecuritieslawsofanysuchjurisdiction. PRELIMINARYOFFICIALSTATEMENTDATEDMAY18,2017 ThisPreliminaryOfficialStatementissubjecttocompletionandamendment,asprovidedintheOfficialNoticeofSale,andisintendedforthesolicitationofinitial bidstopurchasetheBonds.UponthesaleoftheBonds,theOfficialStatementwillbecompletedanddeliveredtotheUnderwriter(hereinafterdefined). INTHEOPINIONOF BONDCOUNSEL,THEBONDSAREVALIDANDBINDINGOBLIGATIONSOFDENTONCOUNTYFRESHWATERSUPPLYDISTRICTNO. 11‐CANDUNDERTHESTATUTES,REGULATIONS,PUBLISHEDRULINGS,ANDCOURTDECISIONSEXISTINGONTHEDATEOFSUCHOPINION,INTEREST ON THE BONDS IS EXCLUDABLE FROM GROSS INCOME FOR FEDERAL INCOME TAXATION SUBJECT TO THE MATTERS DESCRIBED UNDER “TAX MATTERS”HEREIN,INCLUDINGTHEALTERNATIVEMINIMUMTAXONCORPORATIONS. TheBondswillbedesignated“qualifiedtax‐exemptobligations”forfinancialinstitutions.See“TAXMATTERS‐QualifiedTax‐ExemptObligations.” NEWISSUE–BookEntryOnly NOTRATED $3,675,000 DENTONCOUNTYFRESHWATERSUPPLYDISTRICTNO.11‐C (APoliticalSubdivisionoftheStateofTexas,locatedwithinDentonCounty) UNLIMITEDTAXBONDS,SERIES2017 Interestaccruesfrom:June1,2017 Due:September1,asshownbelow The$3,675,000DentonCountyFreshWaterSupplyDistrictNo.11‐CUnlimitedTaxBonds,Series2017(the“Bonds”)areobligationsofDentonCountyFresh Water Supply District No. 11‐C (the “District”) and are not obligations of the State of Texas; Denton County, Texas; the Town of Little Elm, Texas; or any entityotherthantheDistrict.NeitherthefaithandcreditnorthetaxingpoweroftheStateofTexas;DentonCounty,Texas;theTownofLittleElm,Texas;nor anyentityotherthantheDistrictispledgedtothepaymentoftheprincipaloforinterestontheBonds. TheBondswillbeinitiallyregisteredanddeliveredonlytoCede&Co.,asnomineeforTheDepositoryTrustCompany,NewYork,NewYork(“DTC”),which willactassecuritiesdepositoryfortheBonds.BeneficialownersoftheBondswillnotreceivephysicalcertificatesrepresentingtheBonds,butwillreceivea credit balance on the books of the nominees of such beneficial owners. So long as Cede & Co. is the registered owner of the Bonds, the principal of and interest on the Bonds will be paid by Amegy Bank, a division of ZB, National Association, Houston, Texas, or any successor paying agent/registrar (the “Paying Agent/Registrar”) directly to DTC, which will, in turn, remit such principal and interest to its participants for subsequent disbursement to the beneficialownersoftheBonds.See“THEBONDS–Book‐Entry‐OnlySystem.”PrincipaloftheBondsispayabletotheRegisteredOwner(s)oftheBonds(the “Bondholder(s)”or“RegisteredOwners”)attheprincipalpaymentofficeofthePayingAgent/RegistraruponsurrenderoftheBondsforpaymentatmaturity oruponpriorredemption.InterestontheBondsaccruesfromJune1,2017andispayableonMarch1,2018,andeachSeptember1andMarch1thereafter until maturity or prior redemption to the person in whose namethe Bonds are registered as of the 15th day of the calendar month next preceding each interestpaymentdate(the“RecordDate”).TheBondsareissuableindenominationsof$5,000oranyintegralmultiplethereofinfullyregisteredformonly. MATURITIES,PRINCIPALAMOUNTS,INTERESTRATESANDINITIALREOFFERINGYIELDS Initial Initial Reoffering Reoffering Due Principal Interest Due Principal Interest Yield(a) Yield(a) (September1) Amount Rate (September1) Amount Rate 2019 $100,000 ____% ____% 2031(b) $160,000 ____% ____% 2020 105,000 ____% ____% 2032(b) 165,000 ____% ____% 2021 110,000 ____% ____% 2033(b) 175,000 ____% ____% 2022 115,000 ____% ____% 2034(b) 180,000 ____% ____% 2023 120,000 ____% ____% 2035(b) 190,000 ____% ____% 2024 120,000 ____% ____% 2036(b) 195,000 ____% ____% 2025 125,000 ____% ____% 2037(b) 205,000 ____% ____% 2026(b) 130,000 ____% ____% 2038(b) 210,000 ____% ____% 2027(b) 135,000 ____% ____% 2039(b) 220,000 ____% ____% 2028(b) 140,000 ____% ____% 2040(b) 230,000 ____% ____% 2029(b) 150,000 ____% ____% 2041(b) 240,000 ____% ____% 2030(b) 155,000 ____% ____% ______________________________ (a) The initial reoffering yield has been provided by the Initial Purchaser (defined herein) and represents the initial offering price to the public of a substantial amountoftheBondsforeachmaturity.Suchinitialreofferingyieldmaysubsequentlybechanged.Theinitialreofferingyieldsindicatedaboverepresentthelower oftheyieldsresultingwhenpricedtomaturityortothefirstcalldate.AccruedinterestfromJune1,2017istobeaddedtotheprice. (b) TheBondsmaturingonSeptember1,2026andthereafter,aresubjecttoredemptionpriortomaturityattheoptionoftheDistrict,asawholeorfromtimetotime inpart,onSeptember1,2025,oranydatethereafteratapriceequaltotheprincipalamountthereof,plusaccruedinteresttothedatefixedforredemption.See “THEBONDS–OptionalRedemption.” TheBondsconstitutethefirstseriesofunlimitedtaxbondsissuedbytheDistrictforthepurposeoffinancingthecostsofacquiringorconstructingawater, wastewateranddrainagesystem(the“System”)toservetheDistrict.TheDistrictpreviouslyhasissuedoneseriesofunlimitedtaxbondsforthefinancingof roadfacilities.VotersoftheDistricthaveauthorized$9,100,000principalamountofunlimitedtaxbondsforfinancingthecostsofacquiringorconstructing theSystem,$10,400,000principalamountofunlimitedtaxbondsforfinancingroadfacilitiesand$19,500,000principalamountofunlimitedtaxbondsfor refunding outstanding bonds of the District at an election held on May 12, 2007. Following the issuance of the Bonds, $5,425,000 principal amount of unlimitedtaxbondsforfinancingthecostsofacquiringorconstructingtheSystem,$7,415,000principalamountofunlimitedtaxbondsforfinancingroad facilitiesand$19,500,000principalamountofunlimitedtaxbondsforrefundingoutstandingbondsoftheDistrictwillremainauthorizedbutunissued.See “THEBONDS–AuthorityforIssuance”and“–IssuanceofAdditionalDebt.” TheBonds,whenissued,willbepayablefromtheproceedsofanannualadvaloremtax,withoutlegallimitastorateoramount,leviedagainstalltaxable propertywithintheDistrict. TheBondsareofferedwhen,asandifissuedbytheDistrict,subjectamongotherthingstotheapprovaloftheinitialBondsbytheAttorneyGeneralofTexas andtheapprovalofcertainlegalmattersbyMcCall,Parkhurst&HortonL.L.P.,Dallas,Texas,BondCounsel.Certainlegalmatterswillbepasseduponforthe District by Norton Rose Fulbright US LLP, Houston, Texas, Disclosure Counsel. The Bonds in book‐entry form are expected to be available for delivery throughthefacilitiesofDTC,onoraboutJune22,2017.See“LEGALMATTERS.” SEALEDBIDSTOBESUBMITTED:10:30A.M.DALLAS,TEXASTIME MAY25,2017 USEOFINFORMATIONINOFFICIALSTATEMENT No dealer, broker, salesman or other person has been authorized to give any information or to make any representations other than those contained in this Official Statement and, if given or made, such other information or representations must not be relied upon as having been authorized by the District or the Underwriter(definedherein). ThisOfficialStatementisnottobeusedinconnectionwithanoffertosellorthesolicitationofanoffertobuy inanystateinwhichsuchofferorsolicitationisnotauthorizedorinwhichthepersonmakingsuchofferor solicitationisnotqualifiedtodosoortoanypersontowhomitisunlawfultomakesuchofferorsolicitation. Allofthesummariesofthestatutes,orders,contracts,records,andengineeringandotherrelatedreportsset forthintheOfficialStatementaremadesubjecttoalloftheprovisionsofsuchdocuments.Thesesummaries do not purport to be complete statements of such provisions, and reference is made to such documents, copiesofwhichareavailablefromtheDistrict,c/oCrawford&JordanLLP,19BriarHollowLane,Suite245, Houston,Texas77027,uponpaymentofthecostsforduplicationthereof. 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 to the likelihood that they will be realized. Any information and expressionsofopinionhereincontainedaresubjecttochangewithoutnotice,andneitherthedeliveryofthis “OfficialStatement”noranysalemadehereundershall,underanycircumstances,createanyimplicationthat therehasbeennochangeintheaffairsoftheDistrictorothermattersdescribedhereinsincethedatehereof. However,theDistricthasagreedtokeepthis“OfficialStatement”currentbyamendmentorstickertoreflect material changes in the affairs of the District, and to the extent that information actually comes to its attention,othermattersdescribedinthe“OfficialStatement”untildeliveryoftheBondstotheUnderwriter, and thereafter only as specified in “OFFICIAL STATEMENT – Updating of Official Statement” and “CONTINUINGDISCLOSUREOFINFORMATION.” TheUnderwriterhasprovidedthefollowingsentenceforinclusioninthisOfficialStatement.TheUnderwriter has reviewed the information in this Official Statement in accordance with its responsibilities to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriterdoesnotguaranteetheaccuracyorcompletenessofsuchinformation. TABLEOFCONTENTS Page USEOFINFORMATIONINOFFICIALSTATEMENT......... 1 SALEANDDISTRIBUTIONOFTHEBONDS...................... 3 AwardoftheBonds ............................................. 3 PricesandMarketability ..................................... 3 SecuritiesLaws .................................................... 3 MUNICIPALBONDINSURANCE ........................................ 3 OFFICIALSTATEMENTSUMMARY ................................... 4 SELECTEDFINANCIALINFORMATION ............................ 8 INTRODUCTION ................................................................ 10 RISKFACTORS ................................................................... 10 General................................................................ 10 EconomicFactorsAffectingTaxable ValuesandTaxPayment ............................ 10 UpperTrinityRegionalWaterDistrict Obligations ................................................... 11 JointUtilityContract.......................................... 12 TaxCollectionsandForeclosure Remedies ...................................................... 13 RegisteredOwners'Remedies ......................... 13 FutureDebt ........................................................ 13 MarketabilityoftheBonds ............................... 14 BankruptcyLimitationtoRegistered Owners'Rights ............................................ 14 ContinuingCompliancewithCertain Covenants..................................................... 14 Page ApprovaloftheBonds ...................................... 15 FutureandProposedLegislation .................... 15 THEBONDS ....................................................................... 15 General ............................................................... 15 Book‐Entry‐OnlySystem.................................. 16 UseofCertainTermsinOtherSections ofthisOfficialStatement ............................ 17 RegistrationandTransfer ................................ 17 ReplacementofPayingAgent/Registrar ........ 18 Mutilated,Lost,StolenorDestroyed Bonds ........................................................... 18 AuthorityforIssuance ...................................... 18 SourceofPayment ............................................ 18 Funds .................................................................. 19 OptionalRedemption ....................................... 19 OutstandingBonds ........................................... 19 Annexation......................................................... 19 Consolidation..................................................... 20 IssuanceofAdditionalDebt ............................. 20 RemediesintheEventofDefault .................... 20 LegalInvestmentandEligibilityto SecurePublicFundsinTexas .................... 21 Defeasance ......................................................... 21 EstimatedUseofBondProceeds..................... 23 DISTRICTFINANCIALDATA ........................................... 24 (UNAUDITED).................................................................... 24 General................................................................ 24 EstimatedOverlappingDebtStatement ......... 26 DebtRatios ......................................................... 26 Pro‐FormaDebtServiceRequirements .......... 27 TAXINGPROCEDURES ...................................................... 28 PropertyTaxCodeandCounty‐Wide AppraisalDistrict ........................................ 28 PropertySubjecttoTaxationbythe District .......................................................... 28 ValuationofPropertyforTaxation.................. 30 DistrictandTaxpayerRemedies...................... 30 Agricultural,OpenSpace,Timberland andInventoryDeferment ........................... 30 NoticeandHearingProcedures ....................... 30 LevyandCollectionofTaxes ............................ 31 CollectionofDelinquentTaxes ........................ 31 TAXDATA........................................................................... 32 General................................................................ 32 TaxRateLimitation ........................................... 32 HistoricalTaxCollections ................................. 32 TaxRateDistribution ........................................ 32 AnalysisofTaxBase .......................................... 33 Exemptions ........................................................ 33 PrincipalTaxpayers........................................... 33 TaxRateCalculations ........................................ 34 EstimatedOverlappingTaxes .......................... 34 THEDISTRICT ................................................................... 35 General................................................................ 35 LocationoftheDistrict...................................... 35 ManagementoftheDistrict .............................. 36 StatusofDevelopment ...................................... 37 HOMEBUILDERSWITHINTHEDISTRICT ...................... 37 PALOMACREEK ................................................................ 37 PHOTOGRAPHSTAKENWITHINTHEDISTRICT .......... 38 PHOTOGRAPHSTAKENWITHINTHEDISTRICT .......... 39 LOCATIONMAP ................................................................. 40 THEDEVELOPERS ............................................................ 41 TheRoleofaDeveloper .................................... 41 TheDevelopers ................................................. 41 THESYSTEM ..................................................................... 42 Regulation .......................................................... 42 UpperTrinityRegionalWaterDistrict Contracts...................................................... 42 DescriptionoftheSystem ................................ 43 HistoricalOperationsoftheDistrict ............... 44 LEGALMATTERS .............................................................. 45 LegalOpinions ................................................... 45 LegalReview...................................................... 45 TAXMATTERS................................................................... 45 Opinion ............................................................... 45 FederalIncomeTaxAccounting TreatmentofOriginalIssue Discount ....................................................... 46 CollateralFederalIncomeTax Consequences.............................................. 47 State,LocalandForeignTaxes ........................ 47 QualifiedTax‐ExemptObligationsfor FinancialInstitutions ................................. 48 NO‐LITIGATIONCERTIFICATE ....................................... 48 NOMATERIALADVERSECHANGE ................................. 48 CONTINUINGDISCLOSUREOFINFORMATION ............ 48 AnnualReports.................................................. 49 EventNotices ..................................................... 49 AvailabilityofInformationfromMSRB .......... 50 LimitationsandAmendments ......................... 50 CompliancewithPriorUndertakings ............. 50 OFFICIALSTATEMENT .................................................... 50 General ............................................................... 50 Experts ............................................................... 51 CertificationastoOfficialStatement .............. 51 UpdatingtheOfficialStatement ...................... 51 OfficialStatement“DeemedFinal” .................. 52 CONCLUDINGSTATEMENT............................................. 52 APPENDIXA‐ 2 Financial Statements of the District SALEANDDISTRIBUTIONOFTHEBONDS AwardoftheBonds AfterrequestingcompetitivebidsfortheBonds,theDistricthasacceptedthebidresultinginthelowestnet interestcost,whichwastenderedby___________________________________(referredtohereinasthe“Underwriter” or the “Initial Purchaser”). The Underwriter has agreed to purchase the Bonds, bearing the interest rates shownunder“MATURITIES,PRINCIPALAMOUNTS,INTERESTRATESANDINITIALREOFFERINGYIELDS”on the cover page of this Official Statement, at a price of _____% of the principal amount thereof plus accrued interesttothedateofdelivery,whichresultedinaneteffectiveinterestrateof_______%,calculatedpursuant toChapter1204,TexasGovernmentCode,asamended. PricesandMarketability TheDistricthasnocontroloverthereofferingyieldsorpricesoftheBondsorovertradingoftheBondsinthe secondarymarket.Moreover,thereisnoassurancethatasecondarymarketwillbemadeintheBonds.If there is a secondary market, the difference between the bid and asked prices of the Bonds may be greater thanthedifferencebetweenthebidandaskedpricesofbondsofcomparablematurityandqualityissuedby moretraditionalmunicipalentities,asbondsofsuchentitiesaremoregenerallybought,soldortradedinthe secondarymarket. 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 has been sold to the public. For this purpose, the term “public”shallnotincludeanypersonwhoisabondhouse,brokerorsimilarpersonactinginthecapacityof underwriterorwholesaler.Otherwise,theDistricthasnounderstandingwiththeUnderwriterregardingthe reoffering yields or prices of the Bonds. Information concerning reoffering yields or prices is the responsibilityoftheUnderwriter. ThepricesandothertermswithrespecttotheofferingandsaleoftheBondsmaybechangedfromtimeto timebytheUnderwriteraftertheBondsarereleasedforsale,andtheBondsmaybeofferedandsoldatprices other than the initial reoffering prices, including sales to dealers who may sell the Bonds into investment accounts.INCONNECTIONWITHTHEOFFERINGOFTHEBONDS,THEUNDERWRITERMAYOVER–ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICES OF THE BONDS AT LEVELSABOVETHOSEWHICHMIGHTOTHERWISEPREVAILINTHEOPENMARKET.SUCHSTABILIZING,IF COMMENCED,MAYBEDISCONTINUEDATANYTIME. SecuritiesLaws NoregistrationstatementrelatingtotheBondshasbeenfiledwiththeUnitedStatesSecuritiesandExchange 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 jurisdictions. The District assumes no responsibility for registration or qualification of the Bonds under the securities laws of any jurisdiction in which the Bonds may be offered, sold or otherwise transferred. This disclaimer of responsibility for registration or qualification for sale or otherdisposition ofthe Bondsshould not be construed asan interpretation ofany kind withregardto the availability of any exemption from securities registration or qualification provisions in such other jurisdiction. MUNICIPALBONDINSURANCE TheDistricthasnotmadeanapplicationforeitheracommitmentformunicipalbondguarantyinsuranceora municipal bond rating on the Bonds. Furthermore, it is not expected that the District would have been successfulinobtainingmunicipalbondinsuranceorreceivinganinvestmentgraderatingontheBondshad applicationsbeenmade. 3 OFFICIALSTATEMENTSUMMARY Thefollowingmaterialisasummaryofcertaininformationcontainedhereinandisqualifiedinitsentiretyby themoredetailedinformationandfinancialstatementsappearingelsewhereinthisOfficialStatement. THEBONDS TheIssuer.................................................................Denton County Fresh Water Supply District No. 11‐C (the “District”),apoliticalsubdivisionoftheStateofTexas,islocatedin DentonCounty,Texas.See“THEDISTRICT.” TheIssue...................................................................$3,675,000 Unlimited Tax Bonds, Series 2017 (the “Bonds”). InterestaccruesfromJune1,2017,attheratesshownonthecover hereof,andtheBondsmatureonSeptember1ofeachoftheyears andintheamountsshownonthecoverhereof.Interestispayable onMarch1,2018,andoneachSeptember1andMarch1thereafter until maturity or prior redemption. The Bonds maturing on and after September 1, 2026, are subject to redemption prior to maturityattheoptionoftheDistrict,inwholeorfromtimetotime inpart,onSeptember1,2025,oronanydatethereafter,ataprice equaltotheprincipalamountthereofplusaccruedinterestthereon tothedatefixedforredemption.See“THEBONDS–General,and– OptionalRedemption.” SourceofPayment................................................Principal of and interest on the Bonds are payable from the proceedsofanannualadvaloremtax,withoutlegallimitationasto rateoramount,leviedagainsttaxablepropertylocatedwithinthe District.TheBondsareobligationssolelyoftheDistrictandarenot obligationsoftheStateofTexas,DentonCounty,theTownofLittle ElmoranyentityotherthantheDistrict.See“THEBONDS–Source ofPayment.” EstimatedUseandDistribution OfBondProceeds.................................................AportionoftheproceedsoftheBondswillbeusedto(1)repaythe District’s$1,838,000BondAnticipationNote,Series2016(“BAN”), theproceedsofwhichwereusedtoreimbursetheDevelopers(as hereinafter defined) for a portion of the costs of (i) the water, wastewater and drainage facilities to serve Paloma Creek South, Phases 9B, 9C, 9D‐1, 10A, and 9D‐2 and related engineering and testing, (ii) Paloma Creek South Force Main, (iii) Paloma Creek South Lift Station, (iv) shared water lines for Paloma Creek South Phase 5A, (v) shared wastewater lines for Paloma Creek South Phase6,(vi)engineeringandtestingforitems(ii)through(v)and (vii) certain operation and creation costs of the District; (2) reimburse the Developers for the remaining costs for items (i) through (vii) above; (3) pay the costs of a shared lift station for Paloma Creek South, Phase 12, and (4) pay the costs of shared wastewater lines for Paloma Creek South Phase 9A. Additionally, proceeds from the Bonds will be used to pay twenty‐four (24) months of capitalized interest, the cost of developer interest, the cost of a market study, certain costs of issuance of the BAN and certain costs of issuance of the Bonds. See “THE BONDS – EstimatedUseandDistributionofBondProceeds.” QualifiedTax‐ExemptObligations.................The District will designate the Bonds as “qualified tax‐exempt obligations” pursuant to section 265(b) of the Internal Revenue Codeof1986,asamended(the“Code”),andwillrepresentthatthe totalamountoftax‐exemptbonds(includingtheBonds)issuedby the District during calendar year 2017 is notreasonably expected to exceed $10,000,000. See “TAX MATTERS – Qualified Tax‐ ExemptObligationsforFinancialInstitutions.” 4 OutstandingBonds...............................................The Bonds are the District’s first series of bonds issued for the purposeoffinancingthecostsofacquiringorconstructingawater, wastewater and drainage system (the “System”) to serve the District.TheDistricthasissuedoneseriesofbondsforthepurpose of financing road facilities (the “Road System”): $2,985,000 Unlimited Tax Road Bonds, Series 2015 (the “Series 2015 Road Bonds”) of which, as of the date hereof, $2,985,000 in aggregate principalamountremainsoutstanding(the“OutstandingBonds”). PaymentRecord.....................................................TheDistricthasneverdefaultedonthetimelypaymentofprincipal andinterestonitsOutstandingBonds.See“THEBONDS–Source ofPayment.” MunicipalBondInsuranceandRating.........Noapplicationhasbeenmadeforacommitmenttoissueapolicy of municipal bond guaranty insurance or a municipal bond rating on the Bonds. Furthermore it is not expected that the District wouldhavebeensuccessfulinobtainingmunicipalbondinsurance or receiving an investment grade rating had applications been made. BondCounsel..........................................................McCall, Parkhurst & Horton L.L.P., Dallas, Texas. See “THE DISTRICT ‐ Management of the District ‐ Bond Counsel” “LEGAL MATTERS–LegalOpinions”and“TAXMATTERS.” GeneralCounsel....................................................Crawford & Jordan LLP, Houston, Texas. See “THE DISTRICT ‐ ManagementoftheDistrict.” DisclosureCounsel...............................................NortonRoseFulbrightUSLLP,Houston,Texas. FinancialAdvisor...................................................RobertW.Baird&Co.Incorporated,Houston,Texas. PayingAgent/Registrar......................................AmegyBank,adivisionofZB,NationalAssociation,HoustonTexas. THEDISTRICT Description...............................................................Denton County Fresh Water Supply District No. 11 (“District 11”) was created by the Denton County Commissioner’s Court on December 12, 2000, as a fresh water supply district pursuant to Chapter 53, Texas Water Code, as amended. On January 20, 2001, pursuant to an election within such district, District 11 was authorizedtoassumesanitarysewerandroaddistrictpowers.On February 20, 2001, District 11 converted to a water control and improvement district. At an election held on May 3, 2003, voters approved the division of District 11 into Denton County Fresh Water Supply District No. 11‐A (“District 11‐A”) and the initial Denton County Fresh Water Supply District No. 11‐B (“Original District 11‐B”). At an election held on November 8, 2005, voters approved the division of Original District 11‐B into the current DentonCountyFreshWaterSupplyDistrictNo.11‐B(“District11‐ B”) and Denton County Fresh Water Supply District No. 11‐C (the “District”).Pursuanttosuchvoter‐approveddivisions,theDistrict succeeded to the rights and powers of its predecessor districts, including sanitary sewer powers and road district powers under Chapter 257, Texas Transportation Code. The District is a conservation and reclamation district and political subdivision of theStateofTexasandoperatespursuanttoArticleXVI,Section59 andArticleIII,Section52oftheConstitutionoftheStateofTexas, and Chapters 49, 51 and, for certain purposes, 53, Texas Water Code, as amended. The District currently encompasses approximately108acresofland.See“THEDISTRICT” 5 Location.....................................................................The District is located approximately 32 miles northwest of the central downtown business district of the City of Dallas and lies whollywithintheextraterritorialjurisdictionoftheTownofLittle Elm. The District is located within Denton Independent School District(“DISD”)andisborderedbyDistrict11‐Bonthesouthand west, by undeveloped acreage on the east, and by undeveloped acreage and Braswell High School on the north. Access to the District is provided by the Dallas North Tollway to U.S. Highway 380 and west to South Paloma Creek Boulevard. See “THE DISTRICT”and“LOCATIONMAP.” Authority...................................................................TheBondsareissuedpursuanttotheArticleXVI,Section59ofthe Texas Constitution and the general laws of the State of Texas, including Chapters 49, 51, and for certain purposes, 53, Texas Water Code, as amended; the Bond Order (defined herein); an election held on May 12, 2007; and an approving Order of the Texas Commission on Environmental Quality (the “TCEQ”). See “THEBONDS‐AuthorityforIssuance,and‐IssuanceofAdditional Debt.” StatusofDevelopment........................................Development within the District consists of Paloma Creek South, Phases9B,9C,9D1,10A,9D2and10B(587lotsonapproximately 108.06acres).AsofApril12,2017,therewereapproximately427 completedsingle‐familyhomeswithintheDistrict,(approximately 400 occupied and 27 unoccupied), 38 new homes under construction, and 122 vacant developed lots available for home construction. There is no remaining developable land in the District.TherearealsohikingandbikingtrailsthroughoutPaloma Creek. PalomaCreek..........................................................TheDistrictispartofthe1,400acremaster‐plannedcommunityof Paloma Creek, consisting of the District and four other utility districts(DentonCountyFreshWaterSupplyDistrictNos.8‐A,8‐B, 11‐Aand11‐B).Approximately4,632single‐familyresidentiallots have been constructed in Paloma Creek, including 587 lots in the District. The District is part of the neighborhood of Paloma Creek South. TheDevelopersand PrincipalLandowners.....................................Denton380Associates,L.P.,aTexaslimitedpartnership(“Denton 380”) was formed for the purpose of acquiring and holding for investment and sale tracts of land, including approximately 62 acres of the land in the District. Denton 380 has determined the overalldevelopmentplanforsuchlandintheDistrictandarranged for the construction of utility trunk lines and the acquisition of water supply and sewage treatment capacity from Upper Trinity Regional Water District. PRA 380 Investors, L.P. (“PRA 380”), a Texas limited partnership, is the general partner of Denton 380, and IHP Investment Fund III, L.P. (“IHP”), a California limited partnership, is the limited partner of Denton 380. The general partner of PRA 380 is PRA 380, Inc., a Texas corporation. Leon J. BackesisthePresidentofPRA380,Inc.Denton380hassoldtracts oflandintheDistricttotheentitiesdescribedbelow.Denton380 nolongerownsanylandintheDistrictbuthastherighttoreceive reimbursement from the District for operating advances and certaincostsofutilitiesandroadsasdescribedherein. 6 BeazerHomesTexasL.P.,aDelawarelimitedpartnership,(“Beazer Homes”), acquired approximately 35 acres of land in the District fromPRA2003No.3,onwhichithasdeveloped189single‐family residentiallotsasPalomaCreekSouth,Phases9D1and9D2.The generalpartnerofBeazerHomesisBeazerHomesTexasHoldings, Inc. and the limited partner of Beazer Homes is Beazer Homes HoldingCorp.BeazerHomesistheonlybuilderonthelotswithin PalomaCreekSouth,Phases9D1and9D2. Pulte Homes of Texas LP, a Texas limited partnership, (“Pulte”) purchased approximately 45 acres of land within the District on whichithasdeveloped247residentiallotsasPalomaCreekSouth, Phases10Aand10B.PulteHomesisthehomebuilderonthelots withinPalomaCreekSouth,Phases10Aand10B. PRA 2003 No. 3 LP, a Texas limited partnership (“PRA 2003”) acquired approximately 62.2 acres in the District from its affiliate Denton380,includingapproximately27.791acresthatanaffiliate ofPRA2003hasdevelopedasPalomaCreekSouth,Phases9B&9C (151lots).ThegeneralpartnerofPRA2003No.3LPisPRAGPNo. 2,Inc.PRA2003soldall151lotstoBeazerandMHIBuilders. Denton 380, Beazer Homes, Pulte, and PRA 2003 are collectively referred to herein as the “Developers”. See “THE DEVELOPERS” and“TAXDATA–PrincipalTaxpayers.” Homebuilders.........................................................BuilderscurrentlybuildinghomeswithintheDistrictincludePulte Homes, Beazer Homes, and MHI Builders doing business as PlantationHomes.ThehomesbeingmarketedintheDistrictrange in size from 1,400 square feet to 3,800 square feet and in price from approximately $200,000 to $320,000. See “HOMEBUILDERS WITHINTHEDISTRICT.” RISKFACTORS INVESTMENTINTHEBONDSISSUBJECTTOCERTAINRISKFACTORS.PROSPECTIVEPURCHASERSSHOULD REVIEW THE ENTIRE OFFICIAL STATEMENT BEFORE MAKING AN INVESTMENT DECISION, INCLUDING PARTICULARLYTHESECTIONOFTHEOFFICIALSTATEMENTENTITLED“RISKFACTORS.” 7 SELECTEDFINANCIALINFORMATION (UNAUDITED) 2016CertifiedTaxableAssessedValuation............................................................................................... (100%oftaxablevalueasofJanuary1,2016) See“TAXDATA”and“TAXINGPROCEDURES.” $45,270,766 (a) 2017PreliminaryValuation............................................................................................................................... (100%oftaxablevalueasofJanuary1,2017) See“TAXDATA”and“TAXINGPROCEDURES.” $91,765,272 (b) EstimatedValuationasofApril12,2017.................................................................................................... (ValuefromtheAppraisalDistrictasofApril12,2017) See“TAXDATA”and“TAXINGPROCEDURES.” $100,000,000 (c) DirectDebt: TheOutstandingBonds..................................................................................................................... TheBonds................................................................................................................................................. Total....................................................................................................................................................... $2,985,000 3,675,000 $6,660,000 EstimatedOverlappingDebt.............................................................................................................................. $3,273,981 (d) TotalDirectandEstimatedOverlappingDebt......................................................................................... $9,933,981 RatioofDirectDebtto................... 2016CertifiedTaxableAssessedValuation($45,270,766) 2017PreliminaryValuation($91,765,272) EstimatedValuationasofApril12,2017($100,000,000) RatioofDirectandEstimated OverlappingDebtto…… 2016CertifiedTaxableAssessedValuation($45,270,766) 2017PreliminaryValuation($91,765,272) EstimatedValuationasofApril12,2017($100,000,000) 14.71% 7.26% 6.66% 21.94% 10.83% 9.93% RoadDebtServiceFundBalance(asofMarch23,2017)................................................................... SystemDebtServiceFundBalance(asofMarch23,2017).............................................................. GeneralOperatingFundBalance(asofMarch23,2017)................................................................... RoadCapitalProjectsFundBalance(asofMarch23,2017)............................................................ $78,351 (e) $‐0‐ (f) $698,152 $163,710 2016TaxRate RoadDebtService.................................................................................................................. $0.43 SystemDebtService............................................................................................................. 0.00 Maintenance&Operation................................................................................................ 0.57 Total.......................................................................................................................................................... $1.00(g) EstimatedAverageAnnualDebtServiceRequirements ontheBondsandOutstandingBonds(2017‐2041)........................................................... EstimatedMaximumAnnualDebtServiceRequirements ontheBondsandOutstandingBonds(2037)........................................................................ TaxRateper$100ofAssessedValuationRequiredtoPayEstimatedAverageAnnual DebtServiceRequirementsontheBondsand OutstandingBonds(2017‐2041)at95%TaxCollections BasedUpon2016CertifiedAssessedValuation($45,270,766)................................... BasedUpon2017PreliminaryValuation($91,765,272)................................................. BasedUponEstimatedValuationasofApril12,2017($100,000,000)................... 8 $420,711 (h) $454,281 (h) $0.98 $0.49 $0.45 TaxRateper$100ofAssessedValuationRequiredtoPayEstimatedMaximumAnnual DebtServiceRequirementsontheBondsand OutstandingBonds(2037)at95%TaxCollections BasedUpon2016CertifiedAssessedValuation($45,270,766)................................... $1.06 BasedUpon2017PreliminaryValuation($91,765,272)................................................. $0.53 BasedUponEstimatedValuationasofApril12,2017($100,000,000)................... $0.48 NumberofSingle‐FamilyHomes(including38homesunderconstruction).......................... 465 ___________________________________ (a) As certified by the Denton Central Appraisal District (“DCAD” or the “Appraisal District”). See “TAXINGPROCEDURES.” (b) ProvidedbyDCADasthepreliminaryindicationofvalueasofJanuary1,2017.Thisvaluerepresents thepreliminarydeterminationofthetaxablevalueintheDistrictasofJanuary1,2017.Notaxeswill be levied on this preliminary value, which is subject to review and downward adjustment prior to certification.AfterthevalueiscertifiedbytheAppraisalReviewBoard,taxeswillbeleviedonthe certifiedvalue.See“TAXINGPROCEDURES.” (c) ProvidedbyDCADforinformationpurposesonly.Reflectstheadditionofvalueofnewconstruction withintheDistrictfromJanuary1,2016toApril12,2017.Thisestimateisbaseduponthesameunit value used in the assessed value. No taxes will be levied on this estimate. See “TAXING PROCEDURES.” (d) See“DISTRICTDEBT–EstimatedOverlappingDebt.” (e) NeitherTexaslawnortheBondOrderrequiresthattheDistrictmaintainanyparticularsuminthe DebtServiceFund.TheDebtServiceFundhastwocomponents:theRoadDebtServiceFundandthe SystemDebtServiceFund.ThefundsintheRoadDebtServiceFundarepledgedonlytopaythedebt serviceontheDistrict’sbondsissuedtoconstructaroadsystem(“RoadBonds”)andarenotpledged totheBondsorotherbondsissuedtofinancetheSystem(“SystemBonds”).ThefundsintheSystem DebtServiceFundarepledgedonlytopaythedebtserviceontheDistrict’sSystemBonds,including theBonds,andarenotpledgedtoRoadBonds. (f) NeitherTexaslawnortheBondOrderrequiresthattheDistrictmaintainanyparticularsuminthe DebtServiceFund.Twenty‐four(24)monthsofcapitalizedinterestontheBondswillbedeposited uponclosingoftheBonds.Additionally,accruedinterestfromJune1,2017,tothedateofdelivery willbedepositedtothisfunduponclosingoftheBonds. (g) TheDistrictleviedataxrateof$1.00per$100ofassessedvaluation,consistingof$0.43per$100of assessed valuation for road debt service purposes and $0.57 per $100 of assessed valuation for maintenance and operation purposes. See “TAXING PROCEDURES.” In connection with its Order approving the issuance of the Bonds, TCEQ concluded that a total debt service tax rate of at least $0.76 per $100 of assessed valuation should be levied by the District initially after issuance of the Bonds. (h) DebtserviceontheBondsisestimatedatanaverageannualinterestrateof4.00%.See“DISTRICT DEBT–DebtServiceRequirements.” 9 OFFICIALSTATEMENT relatingto $3,675,000 DENTONCOUNTYFRESHWATERSUPPLYDISTRICTNO.11‐C (APoliticalSubdivisionoftheStateofTexasLocatedinDentonCounty,Texas) UNLIMITEDTAXBONDS,SERIES2017 INTRODUCTION ThisOfficialStatementprovidescertaininformationinconnectionwiththeissuancebyDentonCountyFresh Water Supply District No. 11‐C (the “District”), of its $3,675,000 Unlimited Tax Bonds, Series 2017 (the “Bonds”). TheBondsareissuedpursuantto(i)theBondOrder(“BondOrder”)adoptedbytheBoardofDirectorsofthe District on the date of the sale of the Bonds, (ii) Article XVI, Section 59 of the Texas Constitution and the general laws of the State of Texas, particularly Chapters 49, 51, and for certain purposes, 53, Texas Water Code,asamended,(iii)anelectionheldbytheDistrictonMay12,2007,and(iv)anorder(the“TCEQOrder”) issuedbytheTexasCommissiononEnvironmentalQuality(the“Commission”or“TCEQ”). CertaincapitalizedtermsusedinthisOfficialStatementhavethesamemeaningsassignedtosuchtermsin theBondOrder,exceptasotherwiseindicatedherein. ThisOfficialStatementalsoincludesinformationabouttheDistrictandcertainreportsandotherstatistical data. The summaries and references to all documents, statutes, reports and other instruments referred to herein do not purport to be complete, comprehensive or definitive and each summary and reference is qualifiedinitsentiretybyreferencetoeachsuchdocument,statute,reportorinstrument. RISKFACTORS General TheBondsareobligationsoftheDistrictandarenotobligationsoftheStateofTexas,DentonCounty,Texas, theTownofLittleElm,Texas(the“Town”),oranypoliticalsubdivisionotherthantheDistrict.TheBondsare securedbyanannualadvaloremtax,withoutlegallimitationastorateoramount,onalltaxableproperty locatedwithintheDistrict.See“THEBONDS–SourcesofPayment.”Theultimatesecurityforpaymentofthe principal ofand intereston the Bondsdepends upon the ability ofthe District tocollectfrom the property ownerswithintheDistricttaxesleviedagainstalltaxablepropertylocatedwithintheDistrictor,intheevent taxes are not collected and foreclosure proceedings are instituted by the District, upon the value of the taxable property with respect to taxes levied by the District and by other taxing authorities. The District makesnorepresentationthatoverthelifeoftheBondsthepropertywithintheDistrictwillmaintainavalue sufficient to justify continued payment of taxes by the property owners. The potential increase in taxable valuationofDistrictpropertyisdirectlyrelatedtotheeconomicsoftheresidentialhousingindustry,notonly duetogeneraleconomicconditions,butalsoduetotheparticularfactorsdiscussedbelow. EconomicFactorsAffectingTaxableValuesandTaxPayment TherateofdevelopmentwithintheDistrictisdirectlyrelatedtothevitalityofthesingle‐familyhousinginthe Dallas and Denton metropolitan areas. New single‐family residential construction can be significantly affected by factors such as interest rates, construction costs, and consumer demand. Decreased levels of single‐familyresidentialconstructionwouldrestrictthegrowthofpropertyvaluesintheDistrict.Although theconstructionof38single‐familyhomesareunderway,theDistrictcannotpredictthepaceormagnitude ofanyfuturedevelopmentorhomebuildingintheDistrict.See“THEDISTRICT–StatusofDevelopment.” DependenceonMajorTaxpayersandtheDevelopers:Thetenprincipaltaxpayersrepresent$10,425,064 or 23.03% of the 2016 Certified Taxable Assessed Valuation, which represents ownership as of January 1, 2016.Iftheseprincipaltaxpayersweretodefaultinthepaymentoftaxesinanamountwhichexceedsthe District’sdebtservicefundsurplus,theabilityoftheDistricttomaketimelypaymentofdebtserviceonthe Bonds would be dependent on its ability to enforce and liquidate its tax lien, which is a time‐consuming process,ortoselltaxanticipationnotes.Failuretorecoverorborrowfundsinatimelyfashioncouldresultin anexcessiveDistricttaxrate,hinderinggrowthandleadingtofurtherdefaultsinthepaymentoftaxes.The 10 District is not required by law or the Bond Order to maintain any specified amount of surplus in its debt service fund. See “Tax Collections and Foreclosure Remedies” in this section, “TAX DATA – Principal Taxpayers,”and“TAXINGPROCEDURES–LevyandCollectionofTaxes.” NoHomebuilderObligationtotheDistrict:Thereisnocommitmentbyorlegalrequirementofanyhome buildertoproceedatanyparticularpacewiththeconstructionofhomesintheDistrict.Moreover,thereisno restrictiononanylandowner’srighttosellitsland.Therefore,theDistrictcanmakenorepresentationabout the rate of future home construction activity in the District. Failure to construct taxable improvements on developedlotswouldrestricttherateofgrowthoftaxablevaluesintheDistrictandresultinhighertaxrates. See “THE DISTRICT – Status of Development,” “THE DEVELOPERS,” and “HOMEBUILDERS ACTIVE WITHIN THEDISTRICT.” Competition:ThedemandforandconstructionoftaxableimprovementsintheDistrictcouldbeaffectedby competition from other developments near the District. In addition to competition for new single‐family home sales from other developments, there are numerous previously‐owned single‐family homes in more established commercial centers and neighborhoods closer to Dallas that are for sale. Such existing developments could represent additional competition for new development proposed to be constructed withintheDistrict.ThecompetitivepositionoftheDevelopersortheprincipallandownersinthesaleofland, and the sale or leasing of residences is affected by most of the factors discussed in this section. Such a competitivepositionisdirectlyrelatedtothegrowthandmaintenanceoftaxablevaluesintheDistrictandtax revenues to be received by the District. The District can give no assurance that building and marketing programsintheDistrictbytheDevelopersand/orhomebuilderswillbeimplementedor,ifimplemented,will besuccessful. Maximum Impact on District Tax Rate: 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 property owners to pay their taxes. The 2016 Certified Taxable Assessed Valuation of property within the District(see“TAXDATA”)is$45,270,766,the2017PreliminaryValuationofpropertywithintheDistrictis $91,765,272andtheEstimatedValuationasofApril12,2017ofpropertywithintheDistrictis$100,000,000. See “SELECTED FINANCIAL INFORMATION.” After issuance of the Bonds, the estimated maximum annual debt service requirement for the Bonds will be $454,281 (2037) and the estimated average annual debt servicerequirementfortheBondswillbe$420,711(2017through2041,inclusive).See“DISTRICTDEBT‐ DebtServiceRequirements”.Assumingnoincreasetonordecreasefromthe2016CertifiedTaxableAssessed Valuation,taxratesof$1.06and$0.98per$100ofAssessedValuationata95%taxcollectionratewouldbe necessary to pay the maximum annual debt service requirement and the average annual debt service requirement,respectively,ontheOutstandingBondsandtheBonds.Assumingnoincreasetonordecrease fromthe2017PreliminaryValuation,taxratesof$0.53and$0.49per$100ofAssessedValuationata95% taxcollectionratewouldbenecessarytopaythemaximumannualdebtservicerequirementandtheaverage annual debt service requirement, respectively, on the Outstanding Bonds and the Bonds. Assuming no increasetonordecreasefromtheEstimatedValuationasofApril12,2017,taxratesof$0.48and$0.45per $100ofAssessedValuationata95%taxcollectionratewouldbenecessarytopaythemaximumannualdebt service requirement and the average annual debt service requirement, respectively, on the Outstanding BondsandtheBonds. TheDistrictleviedataxratein2016of$0.43per$100ofassessedvaluationfordebtserviceonRoadBonds and$0.57per$100ofassessedvaluationformaintenanceandoperationoftheDistrict. UpperTrinityRegionalWaterDistrictObligations Upper Trinity Regional Water District(“Upper Trinity”) wascreatedby the State of Texasto constructand operate regional water and wastewater systems in Denton County and surrounding areas. Denton County Fresh Water Supply District No. 11 (“District 11”) entered into two separate contracts (together, the “Contracts”) with Upper Trinity as follows: “Upper Trinity Regional Water District Regional Treated Water SystemParticipatingCustomerContractWithDentonCountyFreshWaterSupplyDistrictNo.11”(“theWater Contract”), and “Upper Trinity Regional Water District Northeast Regional Water Reclamation System Participating Customer Contract With Denton County Fresh Water District No. 11” (the “Wastewater Contract”),eachdatedAugust29,2001,andsubsequentlyamended.PursuanttoanOrderDeclaringResults andCanvassingElectiontoDivideDentonCountyFreshWaterSupplyDistrictNo.11intoTwoNewDistricts, dated May 6, 2003, the rights and obligations of District 11 under the Contracts were retained by Denton County Fresh Water Supply District No. 11‐A (“District 11‐A”). The District has entered into a Joint Utility 11 Contract (hereinafter defined) for water supply and wastewater treatment with District 11‐A and Denton County Fresh Water Supply District No. 11‐B (“District 11‐B”). See “Joint Utility Contract” below and “THE SYSTEM.” PursuanttotheContracts,UpperTrinitypledgestodelivercertainwatersupplyandwastewatertreatment servicesasrequiredtoservetheneedsofthepropertyownerswithintheDistrict,District11‐AandDistrict 11‐B.TheUpperTrinitywaterandwastewatersystemisfinancedbyUpperTrinitythroughtheissuanceof bonds payable from and secured by payments made under the Contracts and other similar contracts with othermembersandcustomersofUpperTrinity.PursuanttotheContracts,Denton380hasadvancedfundsto payforconstructionofcertainUpperTrinityfacilitiesthatservetheDistrict,District11‐AandDistrict11‐B, includingapproximately$2,685,000forconstructionoftheRiverbendWastewaterTreatmentPlantandthe sanitarysewerlinealongPalomaCreekBoulevard. The District expects that its share of such funds advanced to meet costs of the Riverbend Plant will be reimbursedtoDenton380fromcertainwastewaterpermitfeesandotheravailablefundsoftheDistrict. The District has agreed to fix and collectwater and sewer rates and to levy a contracttax, if funds are not otherwise available from the water and wastewater system revenues, sufficient to meet its payment obligationundertheJointUtilityContract.Thelevyandassessmentofacontracttaxissubjecttotheapproval oftheTCEQ.TheDistricthasnotappliedtotheTCEQforapprovalofacontracttaxandaccordinglyhasnot leviedacontracttaxtodate. JointUtilityContract The District, District 11‐A and District 11‐B were created and organized to provide certain facilities and services, including water and sanitary sewer facilities and services to the areas within their respective boundaries.PursuanttoaMerged,AmendedandRestatedJointUtilityContract,datedasofMarch1,2011(as amended, the “Joint Utility Contract”), among District 11‐A, District 11‐B and the District, District 11‐A has assumedresponsibilityofcoordinatingandsecuringprovisionofsuchservicesandfacilitiesonbehalfofthe District,District11‐AandDistrict11‐B.Inthisregard,District11‐Ahasenteredintoorotherwiseassumed theContractssecuringwaterandwastewaterserviceandcapacitiesfromUpperTrinity.PursuanttotheJoint UtilityContract,theDistricthasbeenallocatedwatersupplyandwastewatertreatmentcapacityassetforth in“THESYSTEM.” Further,pursuanttotheJointUtilityContract,theDistrict,District11‐AandDistrict11‐Bhaveestablisheda procedure for sharing the costs of securing treated water and wastewater services, as well as the costs of certainutilityfacilities. TheDistrict,District11‐AandDistrict11‐Bhaveagreedtoestablishandcollectfeesandchargessufficientto paytheirrespectivesharesoftheobligationsundertheContractswithUpperTrinityandthecostsofcertain utility facilities. Each district has also agreed to levy and, if necessary, annually assess and collect an ad valorem tax, unlimited in rate or amount, sufficient to accomplish full and timely payment of all costs, charges, fees, and expenses due under the Joint Utility Contract, including each district’s share of the obligationsundertheContracts.IntheContractswithUpperTrinity,District11‐Ahaspledgedallpayments raisedbytheDistrict,District11‐AandDistrict11‐BpursuanttotheJointUtilityContracttothepaymentof theobligationsundertheContracts. Todate,Denton380haspaidasubstantialportionofthefeesandchargesdueundertheJointUtilityContract onbehalfoftheDistrict. EachoftheDistrict,District11‐AandDistrict11‐Bhasthestatutoryauthoritytolevyandcollectanannualad valoremtax to make payments under acontract, ifthe provisionsof thecontract have been approved bya majority of the qualified voters of such District, and such tax is approved by the TCEQ. On May 12, 2007, votersintheDistrictapprovedtheJointUtilityContractandlevyofacontracttaxinsupportthereofwithout legallimitationastorateoramount.SuchtaxisinadditiontotaxeswhichtheDistrictisauthorizedtolevyfor payingprincipalofandinterestontheBonds,taxesforanyadditionaltaxbondswhichmaybeissuedinthe future,andtaxesforthemaintenanceoftheDistrict’simprovementsandoperationalexpenses.TheDistrict hasnotmadeapplicationtotheTCEQforapprovalofthelevyofataxpursuanttotheJointUtilityContract, and accordingly the District has not levied a contract tax at this time; however, if the District were to levy suchatax,suchcontracttax,whenaddedtotheDistrict’sdebtservicetaxandmaintenancetax,couldresult 12 in a total District tax rate in excess of the tax rate of similar developments and could adversely affect continueddevelopmentoftheDistrictaswellasthewillingnessoftaxpayerstopaytaxesontheirproperty. TaxCollectionsandForeclosureRemedies TheDistrict'sabilitytomakedebtservicepaymentsmaybeadverselyaffectedbydifficultiesincollectingad valoremtaxes.UnderTexaslaw,thelevyofadvaloremtaxesbytheDistrictconstitutesalieninfavorofthe Districtonaparitywiththeliensofallothertaxingauthoritiesonthepropertyagainstwhichtaxesarelevied, andsuchlienmaybeenforcedbyjudicialforeclosure. 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 proceedings against a taxpayer; or (c) market conditions affecting the marketability of taxable propertywithintheDistrictandlimitingtheproceedsfromaforeclosuresaleofsuchproperty.See“TAXING PROCEDURES–CollectionofDelinquentTaxes.” Moreover,theproceedsofanysaleofpropertywithintheDistrictavailabletopaydebtserviceontheBonds maybelimitedbytheexistenceofothertaxliensontheproperty(see“TAXDATA‐‐EstimatedOverlapping Taxes”),bythecurrentaggregatetaxratebeingleviedagainsttheproperty,andbyotherfactors(including thetaxpayers'righttoredeempropertyafterforeclosure).Finally,abankruptcycourtwithjurisdictionover 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 againstsuchtaxpayer.Inadditiontotheautomaticstayagainstthecollectionofdelinquenttaxesaffordeda taxpayerduringthependencyofabankruptcy,abankruptcycouldaffectpaymentoftaxesintwootherways: firstadebtor’sconfirmationplanmayallowadebtortomakeinstallmentpaymentsondelinquenttaxesfor uptosixyears;and,second,adebtormaychallenge,andabankruptcycourtmayreduce,theamountofany taxesassessedagainstthedebtor,includingtaxesthathavealreadybeenpaid. RegisteredOwners'Remedies Remediesavailable toRegisteredOwners of Bonds inthe eventof a default by the District under the Bond Order are limited. Although the Bond Order provides that the Registered Owners may obtain a writ of mandamusrequiringperformancebytheDistrict,suchremedymustbeexerciseduponeachdefaultandmay prove time‐consuming, costly and difficult to enforce. The Bond Order does not provide for acceleration of maturityoftheBonds,appointmentofatrusteetoprotecttheinterestsoftheRegisteredOwnersoranyother additionalremedyintheeventofadefaultbytheDistrict.ThereisnoaccelerationofmaturityoftheBondsin the event of default and, consequently, the remedy of mandamus may have to be relied upon from year to year.Further,thereisnotrustindentureortrustee,andalllegalactionstoenforcesuchremedieswouldhave to be undertaken at the initiative of, and be financed by, the Registered Owners. Statutory language authorizinglocalgovernmentssuchastheDistricttosueandbesueddoesnotwaivethelocalgovernment's sovereignimmunityfromsuitsformoneydamages,sothatintheabsenceofotherwaiversofsuchimmunity bytheTexasLegislature,adefaultbytheDistrictinitscovenantsintheBondOrdermaynotbereducedtoa judgmentformoneydamages.TheBondsarenotsecuredbyaninterestintheimprovementsfinancedwith theBonds,oranyotherpropertyoftheDistrict.NojudgmentagainsttheDistrictisenforceablebyexecution of a levy against the District's public purpose property. Further, the Registered Owners themselves cannot forecloseonpropertywithintheDistrictorsellpropertywithintheDistrictinordertopaytheprincipalof andinterestontheBonds.TherightsoftheRegisteredOwnersandtheenforceabilityoftheBondsmayalso be delayed, reduced or otherwise affected by a State of Texas statute reasonably required to allow an importantpublicpurposeorbyproceedingsundertheFederalBankruptcyCodeorotherlawsaffectingthe enforcementofcreditors'rightsgenerally. FutureDebt FollowingtheissuanceoftheBonds,theDistrictwillhave$5,425,000inprincipalamountofauthorizedbut unissued unlimited tax bonds for the purpose of financing the costs of acquiring or constructing a water, wastewateranddrainagesystem(the“System”),$7,415,000inprincipalamountofauthorizedbutunissued unlimited tax bonds for the financing of road facilities to serve the District; and $19,500,000 in principal amountofauthorizedbutunissuedunlimitedtaxbondsforpurposesofrefundingoutstandingbondsofthe District. The District reserves in the Bond Order the right to issue the remaining authorized but unissued bonds plus such additional bonds as may hereafter be authorized by voters in the District. In addition, the 13 District has the right to issue obligations, other than the Bonds, including tax anticipation notes and bond anticipationnotes,andtoborrowmoneyforanyvalidpublicpurpose.Theissuanceofadditionalobligations mayincreasetheDistrict'staxrateandadverselyaffectthesecurityforandtheinvestmentqualityandvalue oftheBonds. Based on present engineering cost estimates and on development plans, in the opinion of the District's Engineer, the remaining $5,425,000 principal amount of authorized but unissued unlimited tax bonds for financingthecostsofacquiringorconstructingawater,wastewateranddrainagesystemtheSystemwillbe sufficienttofullyfinancesuchsystemtoservetheDistrict. Based on present engineering cost estimates and on development plans, in the opinion of the District's Engineer, the remaining $7,415,000 principal amount of authorized but unissued unlimited tax bonds for roadfacilitieswillbesufficienttofullyfinancetheroadstoservetheDistrict. FollowingtheissuanceoftheBonds,theDistrictwillstillowetheDevelopersapproximately$5,450,000for the reimbursable expenditures advanced to develop land, including road facilities within the District and capacitypaymentstoUpperTrinityonbehalfoftheDistrict.See“THESYSTEM”and“THEDISTRICT–Status ofDevelopment.” TheDistrictanticipatessellingunlimitedtaxbondsforroadpurposesinthe3rdquarterof2017inanamount tobedetermined. MarketabilityoftheBonds TheDistricthasnounderstandingwiththeUnderwriterregardingthereofferingyieldsorpricesoftheBonds andhasnocontrolovertradingoftheBondsinthesecondarymarket.Moreover,thereisnoassurancethata secondarymarketwillbemadeintheBonds.Ifthereisasecondarymarket,thedifferencebetweenthebid andaskedpricemaybegreaterthanthedifferencebetweenthebidandaskedpriceofbondsofcomparable maturityandqualityissuedbymoretraditionalissuers,sincesuchbondsaremoregenerallybought,soldand tradedinthesecondarymarket. BankruptcyLimitationtoRegisteredOwners'Rights The enforceability of the rights and remedies of Registered Owners may be limited by laws relating to bankruptcy, reorganization or other similar laws of general application affecting the rights of creditors of political subdivisions such as the District. Texas law requires a district, such as the District, to obtain the approvaloftheTCEQasaconditiontoseekingreliefundertheFederalBankruptcyCode. NotwithstandingnoncompliancebyadistrictwithTexaslawrequirements,theDistrictcouldfileavoluntary bankruptcy petition under Chapter 9, thereby invoking the protection of the automatic stay until the bankruptcycourt,afterahearing,dismissesthepetition.Afederalbankruptcycourtisacourtofequityand federal bankruptcy judges have considerable discretion in the conduct of bankruptcy proceedings and in makingthedecisionofwhethertograntthepetitioningDistrictrelieffromitscreditors.Whilesuchadecision mightbeappealable,theconcomitantdelayandlossofremediestotheRegisteredOwnercouldpotentially andadverselyimpairthevalueoftheRegisteredOwner'sclaim. IfapetitioningdistrictwereallowedtoproceedvoluntarilyunderChapter9oftheFederalBankruptcyCode, itcouldfileaplanforanadjustmentofitsdebts.Ifsuchaplanwereconfirmedbythebankruptcycourt,it could,amongotherthings,affectRegisteredOwnersbyreducingoreliminatingtheamountofindebtedness, deferring or rearranging the debt service schedule, reducing or eliminating the interest rate, modifying or abrogating collateral or security arrangements, substituting (in whole or in part) other securities, and otherwisecompromisingandmodifyingtherightsandremediesoftheRegisteredOwners'claimsagainsta district. Adistrictmaynotbeforcedintobankruptcyinvoluntary. ContinuingCompliancewithCertainCovenants Failure ofthe District to comply with certain covenants contained in the Bond Orderon a continuing basis priortothematurityoftheBondscouldresultininterestontheBondsbecomingtaxableretroactivelytothe dateoforiginalissuance.See“LEGALMATTERS‐‐TaxExemption.” 14 ApprovaloftheBonds TheAttorneyGeneralofTexasmustapprovethelegalityofthe Bondspriortotheirdelivery.TheAttorney GeneralofTexas,however,doesnotpassuponorguaranteethesafetyoftheBondsasaninvestmentorthe adequacyoraccuracyoftheinformationcontainedinthisOfficialStatement. FutureandProposedLegislation Fromtimetotime,therearePresidentialproposals,proposalsofvariousfederalcommittees,andlegislative proposals in the Congress and in the states that, if enacted, could alter or amend the federal and state tax matters referred to hereinor adversely affect the marketability ormarket value ofthe Bondsor otherwise prevent holders of the Bonds from realizing the full 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.Itcannotbepredictedwhetherorinwhatformanysuchproposalmightbeenactedorwhetherif enacteditwouldapplytobondsissuedpriortoenactment.Inaddition,regulatoryactionsarefromtimeto timeannouncedorproposedandlitigationisthreatenedorcommencedwhich,ifimplementedorconcluded in a particular manner,could adversely affectthe market value, marketability ortax status ofthe Bonds. It cannotbepredictedwhetheranysuchregulatoryactionwillbeimplemented,howanyparticularlitigationor judicialactionwillberesolved,orwhethertheBondswouldbeimpactedthereby. 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 anddelivery of the Bonds,andnoopinion isexpressed asof any date subsequent theretoor with respecttoanyproposedorpendinglegislation,regulatoryinitiativesorlitigation. THEBONDS General ThefollowingisadescriptionofcertaintermsandconditionsoftheBonds,whichdescriptionisqualifiedin itsentiretybyreferencetotheBondOrder.AcopyoftheBondOrdermaybeobtainedfromtheDistrictupon requesttoBondCounsel.TheBondOrderauthorizestheissuanceandsaleoftheBondsandprescribesthe terms,conditionsandprovisionsforthepaymentoftheprincipalofandinterestontheBondsbytheDistrict. TheBondsaredatedJune1,2017andwillmatureonSeptember1oftheyearsandinprincipalamounts,and willbearinterestfromJune1,2017,attheratesperannum,allassetforthonthecoverpageofthisOfficial Statement. Interest on the Bonds will be payable on March 1, 2018 and semiannually thereafter on each September1andMarch1untilmaturityorredemption.Interestcalculationsarebaseduponathirty(30)day monthandathreehundredsixty(360)dayyear. TheBondswillbeissuedonlyinfullyregisteredforminanyintegralmultiplesof$5,000foranyonematurity and will be initially registered and delivered only to The Depository Trust Company, New York, New York (“DTC”) in its nominee name of Cede & Co., pursuant to the book‐entry‐only system described herein. No physicaldeliveryoftheBondswillbemadetotheownersthereof.Initially,principalofandinterestonthe Bonds will be payable by Amegy Bank, a division of ZB, National Association, Houston, Texas (the “Paying Agent”,“PayingAgent/Registrar”,orthe“Registrar”),thePayingAgent/RegistrartoCede&Co.,asregistered owner. DTC will make distribution of the amounts so paid to the participating members of DTC for subsequentpaymenttothebeneficialownersoftheBonds.See“THEBONDS–Book‐Entry‐OnlySystem.” IntheeventtheBook‐Entry‐OnlySystemisdiscontinuedandphysicalbondcertificatesissued,interestonthe Bonds shall be payable bycheck mailedby the Paying Agent/Registrar on or before each interest payment date,totheregisteredowners(“RegisteredOwners”)asshownonthebondregister(the“Register”)keptby the Paying Agent/Registrar at the close of business on the 15th calendar day of the month immediately precedingeachinterestpaymentdatetotheaddressofsuchRegisteredOwnerasshownontheRegister,or bysuchothercustomarybankingarrangementsasmaybeagreeduponbythePayingAgent/Registrarand theRegisteredOwnerattheriskandexpenseofsuchRegisteredOwner. IfthedateforpaymentoftheprincipaloforinterestonanyBondisnotabusinessday,thenthedateforsuch paymentshallbethenextsucceedingbusinessdaywithoutadditionalinterestandwiththesameforceand effectasifmadeonthespecifieddateforsuchpayment. 15 Book‐Entry‐OnlySystem ThissectiondescribeshowownershipoftheBondsistobetransferredandhowtheprincipalofandintereston theBondsaretobepaidtoandcreditedbyTheDepositoryTrustCompany(“DTC”),NewYork,NewYork,while theBondsareregisteredinitsnominee’sname.TheinformationinthissectionconcerningDTCandtheBook‐ Entry‐OnlySystemhasbeenprovidedbyDTCforuseindisclosuredocumentssuchasthisOfficialStatement.The District believes the source of such information to be reliable, but takes no responsibility for the accuracy or completenessthereof. TheDistrictcannotanddoesnotgiveanyassurancethat(1)DTCwilldistributepaymentsofdebtserviceonthe Bonds,orredemptionorothernotices,toDTCParticipants,(2)DTCParticipantsorotherswilldistributedebt service payments paid to DTC or its nominee (as the registered owner of the Bonds), or redemption or other notices,totheBeneficialOwners,orthattheywilldosoonatimelybasis,or(3)DTCwillserveandactinthe mannerdescribedinthisOfficialStatement.ThecurrentrulesapplicabletoDTCareonfilewiththeSecurities andExchangeCommission,andthecurrentproceduresofDTCtobefollowedindealingwithDTCParticipants areonfilewithDTC. 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 suchissue,andwillbedepositedwithDTC.Ifhowever,theaggregateprincipalamountofanyissueexceeds $500 million, one certificate will be issued with respect to each $500 million of principal amount, and an additionalcertificatewillbeissuedwithrespecttoanyremainingprincipalamountofsuchissue. DTC,theworld’slargestsecuritiesdepository,isalimited‐purposetrustcompanyorganizedundertheNew YorkBankingLaw,a“bankingorganization”withinthemeaningoftheNewYorkBankingLaw,amemberof 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 ExchangeActof1934. DTC holds andprovides asset servicingfor over 3.5 million issuesof U.S. andnon‐U.S.equityissues,corporateandmunicipaldebtissues,andmoneymarketinstruments(fromover 100countries)thatDTC’sparticipants(“DirectParticipants”)depositwithDTC.DTCalsofacilitatesthepost‐ tradesettlementamongDirectParticipantsofsalesandothersecuritiestransactionsindepositedsecurities, through electronic computerized book‐entry transfers and pledges between Direct Participants’ accounts. Thiseliminatestheneedforphysicalmovementofsecuritiescertificates.DirectParticipantsincludebothU.S. andnon‐U.S.securitiesbrokersanddealers,banks,trustcompanies,clearingcorporations,andcertainother organizations.DTCisawholly‐ownedsubsidiaryofTheDepositoryTrust&ClearingCorporation(“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 custodialrelationshipwithaDirectParticipant,eitherdirectlyorindirectly(“IndirectParticipants”).DTChas aStandard&Poor’sratingofAA+.TheDTCRulesapplicabletoitsParticipantsareonfilewiththeSecurities andExchangeCommission.MoreinformationaboutDTCcanbefoundatwww.dtcc.com. PurchasesofBondsundertheDTCsystemmustbemadebyorthroughDirectParticipants,whichwillreceive 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 OwnerswillnotreceivewrittenconfirmationfromDTCoftheirpurchase.BeneficialOwnersare,however, expectedtoreceivewrittenconfirmationsprovidingdetailsofthetransaction,aswellasperiodicstatements oftheirholdings,fromtheDirectorIndirectParticipantthroughwhichtheBeneficialOwnerenteredintothe transaction. Transfers ofownership interests in the Bondsare to be accomplished by entries made on the booksof Directand Indirect Participants actingon behalfof Beneficial Owners. Beneficial Owners will not receivecertificatesrepresentingtheirownershipinterestsinBonds,exceptintheeventthatuseofthebook‐ entrysystemfortheBondsisdiscontinued. Tofacilitatesubsequenttransfers,allBondsdepositedbyDirectParticipantswithDTCareregisteredinthe nameofDTC’spartnershipnominee,Cede&Co.,orsuchothernameasmayberequestedbyanauthorized representative of DTC. The depositof Bonds with DTC andtheir registration inthe nameof Cede & Co.or 16 such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Bonds; DTC’s records reflect only the identity of the Direct Participants to whose accounts such Bonds are credited,which mayor 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 transmissiontothemofnoticesofsignificanteventswithrespecttotheBonds,suchasredemptions,tenders, defaults,andproposedamendmentstotheBonddocuments.Forexample,BeneficialOwnersofBondsmay 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 addressestotheregistrarandrequestthatcopiesofnoticesbeprovideddirectlytothem. RedemptionnoticesshallbesenttoDTC.IflessthanalloftheBondswithinanissuearebeingredeemed, DTC’spracticeistodeterminebylottheamountoftheinterestofeachDirectParticipantinsuchissuetobe redeemed. NeitherDTCnorCede&Co.(noranyotherDTCnominee)willconsentorvotewithrespecttoBondsunless authorizedbyaDirectParticipantinaccordancewithDTC’sMMIProcedures.Underitsusualprocedures, DTCmailsanOmnibusProxytoIssueassoonaspossibleaftertherecorddate.TheOmnibusProxyassigns Cede&Co.’sconsentingorvotingrightstothoseDirectParticipantstowhoseaccountsBondsarecreditedon therecorddate(identifiedinalistingattachedtotheOmnibusProxy). Payments on the Bonds will be made to Cede & Co., or such other nominee as may be requested by an authorizedrepresentativeofDTC.DTC’spracticeistocreditDirectParticipants’accountsuponDTC’sreceipt of fundsandcorrespondingdetail informationfromthe District orThe Paying Agent/Registrar, onpayable 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 securitiesheldfortheaccountsofcustomersinbearerformorregisteredin“streetname,”andwillbethe responsibilityofsuchParticipantandnotofDTC,ThePayingAgent/RegistrarortheDistrict,subjecttoany statutoryorregulatoryrequirementsasmaybeineffectfromtimetotime.Paymentofredemptionproceeds, distributions and dividend payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the District or The Paying Agent/Registrar, disbursementofsuchpaymentstoDirectParticipantswillbetheresponsibilityofDTC,anddisbursementof suchpaymentstotheBeneficialOwnerswillbetheresponsibilityofDirectandIndirectParticipants. DTC may discontinue providing its services as depository with respect to the Bonds at any time by giving reasonablenoticetotheDistrictorThePayingAgent/Registrar.Undersuchcircumstances,intheeventthat asuccessordepositoryisnotobtained,Securitycertificatesarerequiredtobeprintedanddelivered. The District may decide to discontinue use of the system of book‐entry‐only transfers through DTC (or a successorsecuritiesdepository).Inthatevent,SecuritycertificateswillbeprintedanddeliveredtoDTC. UseofCertainTermsinOtherSectionsofthisOfficialStatement InreadingthisOfficialStatementitshouldbeunderstoodthatwhiletheBondsareinthebook‐entryform, 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 exercisedthroughDTCandthebook‐entrysystem,and(ii)exceptasdescribedabove,noticesthataretobe giventoregisteredownersundertheBondOrderwillbegivenonlytoDTC. RegistrationandTransfer TheBondswillbeissuedasfully‐registeredsecuritiesregisteredinthenameofCede&Co.pursuanttothe Book‐Entry‐OnlySystemdescribedherein.Onefullyregisteredbondwillbeissuedforeachmaturityofthe Bondsand will be deposited with DTC.See “THE BONDS – Book‐Entry‐Only System.”SolongasanyBonds remainoutstanding,theDistrictwillmaintainatleastonePayingAgent/RegistrarintheStateofTexasforthe purposeofmaintainingthebondregister(the“Register”)onbehalfoftheDistrict. 17 ReplacementofPayingAgent/Registrar Provision is made in the Bond Order for the replacement of the Paying Agent/Registrar. If the Paying Agent/Registrar is replaced by the District the new paying agent/registrar shall be required to accept the previous Paying Agent/Registrar’s records and act in the same capacity as the previous Paying Agent/Registrar.Anypayingagent/registrarselectedbytheDistrictshallbeabank,includingacommercial bank, or trust company organized under a law of the State of Texas duly qualified to act as a paying agent/registrarfortheBonds. Mutilated,Lost,StolenorDestroyedBonds IntheeventtheBook‐Entry‐OnlySystemshouldbediscontinued,theDistricthasagreedtoreplacemutilated, destroyed, lost or stolen Bonds upon surrender of the mutilated Bonds to the Paying Agent/Registrar, or receiptofsatisfactoryevidenceofsuchdestruction,lossortheft,andreceiptbytheDistrictandthePaying Agent/Registrarofsecurityorindemnitywhichtheydeterminetobesufficienttoholdthemharmless.The Districtmayrequirepaymentoftaxes,governmentalchargesandotherexpensesinconnectionwithanysuch replacement. AuthorityforIssuance ThebondsauthorizedbytheresidentelectorsoftheDistrict,theamountofbondsissuedandtheremaining authorizedbutunissuedbondsareasfollows: ElectionDate Purpose May12,2007 Water,Wastewater,&Drainage May12,2007 Road May12,2007 SystemRefunding May12,2007 RoadRefunding ____________________________ (a)IncludestheBonds. Amount Authorized $ 9,100,000 $10,400,000 $ 9,100,000 $10,400,000 Remaining AuthorizedBut AmountIssued Unissued $3,675,000(a) $ 5,425,000 $2,985,000 $ 7,415,000 $‐0‐ $ 9,100,000 $‐0‐ $ 10,400,000 The Bonds are issued by the District pursuant to the terms and conditions of the Bond Order, Article XVI, Section59oftheTexasConstitution,thegenerallawsoftheStateofTexas,includingChapters49,51,andfor limitedpurposes,53oftheTexasWaterCode,asamended,andtheTCEQOrder. BeforetheBondscanbeissued,theAttorneyGeneralofTexasmustpassuponthelegalityofcertainrelated matters. The Attorney General of Texas does not guarantee or pass upon the safety of the Bonds as an investmentorupontheadequacyoftheinformationcontainedinthisOFFICIALSTATEMENT. SourceofPayment TheBondsarepayablefromtheproceedsofanannualadvaloremtaxleviedwithoutlegallimitationasto rateoramountagainsttaxablepropertylocatedwithintheDistrict.IntheBondOrder,theDistrictcovenants tolevyasufficienttaxtopaytheprincipalofandinterestontheBonds,withfullallowancebeingmadefor delinquencies and costs of collection. See “TAXING PROCEDURES.” The Bonds involve certain elements of risk,andallprospectivepurchasersareurgedtoexaminecarefullythisOFFICIALSTATEMENTwithrespect totheinvestmentsecurityoftheBonds.See“RISKFACTORS.”TheBondsareobligationssolelyoftheDistrict and are not obligations of Denton County, the State of Texas, the Town of Little Elm or any other political subdivisionorentityotherthantheDistrict. 18 Funds TheBondOrdercreatesaSeries2017SystemCapitalProjectFundtobeheldaspartoftheCapitalProject Fund for the Bonds (the “System Capital Project Fund”) and a Series 2017 System Debt Service Fund (the “System Debt Service Fund”). Accrued interest on the Bonds and twenty‐four (24) months of capitalized interestwillbedepositedfromtheproceedsoftheBondsintotheSystemDebtServiceFund.Allremaining proceedsoftheBondswillbedepositedintheSystemCapitalProjectFund.TheSystemDebtServiceFund, whichconstitutesatrustfundforthebenefitoftheownersoftheBonds(the“RegisteredOwners”)istothe be kept separate from all other funds of the District, and is to be used for payment of debt service on the Bonds.AmountsondepositintheSystemDebtServiceFundmayalsobeusedtopaythefeesandexpensesof the Paying Agent/Registrar, to defray the expenses of assessing and collecting taxes levied for payment of interestonandprincipaloftheBonds. OptionalRedemption Bonds maturing on September 1, 2026, and thereafter are subject to redemption prior to maturity, at the optionoftheDistrict,inwholeorinpart,onSeptember1,2025,oronanydatethereafter,atapriceequalto the principal amount thereof plus accrued interest thereon to the date fixed for redemption. Notice of the exercise of the reserved right of redemption will be given at least thirty (30)days priorto the redemption datebysendingsuchnoticebyfirstclassmailtotheRegisteredOwnerofeachBondtoberedeemedinwhole orinpartattheaddressshownonthebondregister.IffewerthanalloftheBondsareredeemedatanytime, thematuritiesoftheBondstoberedeemedshallbeselectedbytheDistrict.IffewerthanalloftheBondsofa certainmaturityaretoberedeemed,theparticularBondsorportionsthereoftoberedeemedwillbeselected by the Paying Agent/Registrar prior to the redemption date by such method of random selection as the PayingAgent/Registrardeemsfairandappropriateinintegralmultiplesof$5,000withinanyonematurity (orbyDTCinaccordancewithitsprocedureswhiletheBondsareinbook‐entry‐onlyform.TheRegistered OwnerofanyBond,alloraportionofwhichhasbeencalledforredemption,shallberequiredtopresentsuch BondtothePayingAgent/RegistrarforpaymentoftheredemptionpriceontheportionoftheBondssocalled for redemption and issuance of a new Bond in the principal amountequal to the portionof such Bond not redeemed. OutstandingBonds TheBondsaretheDistrict’sfirstseriesofbondsissuedforthepurposeoffinancingthecostsofacquiringor constructingtheSystem.TheDistricthasalsoissuedoneseriesofbondsforthefinancingofRoadfacilities: $2,985,000UnlimitedTaxRoadBonds,Series2015(the“Series2015RoadBonds”)ofwhich,asofthedate hereof,$2,985,000inprincipalamountremainsoutstanding(the“OutstandingBonds”). Annexation UnderexistingTexaslaw,becausetheDistrictlieswhollywithintheextraterritorialjurisdictionoftheTown ofLittleElm(the“Town”),theDistrictmaybeannexedforfullpurposesbytheTownwithouttheDistrict’s consent, subject to compliance by the Town with various requirements of Chapter 43 of the Texas Local Government Code, as amended. If the District is annexed, the Town must assume the District’s assets and obligations(includingtheBonds)andabolishtheDistrictwithinninety(90)daysofthedateofannexation. AnnexationofterritorybytheTownisapolicy‐makingmatterwithinthediscretionoftheMayorandTown CounciloftheTown,andtherefore,theDistrictmakesnorepresentationthattheTownwilleverannexthe Districtandassumeitsdebt.Moreover,norepresentationismadeconcerningtheabilityoftheTowntomake debtservicepaymentsshouldtheannexationoccur. ADevelopmentAgreementhasbeenexecutedamongtheTownandtheowners(atthetimeofexecution)of certain land within the District and neighboring conservation and reclamation districts, including, among others, Denton 380. Among other terms, such agreement effectively places a 15‐year moratorium on full‐ purposeannexationoftheDistrictbytheTown.Suchmoratoriummaybeliftedpriortotheexpirationofthe 15‐year term, which ends in 2022 (unless extended by mutual agreement of the parties), in the event that bothofthefollowingconditionsaresatisfied:(i)allwater,sewer,drainageandroadinfrastructuretoserve the District and such neighboring conservation and reclamation districts at full development has been completed and (ii) the District and such neighboring conservation and reclamation districts have issued bondstoreimbursetheappropriatedevelopersforpaymentofallofthecostsofsuchinfrastructure. 19 Consolidation Adistrict(suchastheDistrict)hasthelegalauthoritytoconsolidatewithotherdistrictsand,inconnection therewith, to provide by mutual agreement for the consolidation of its assets, such as cash and the utility system, with the water and wastewater system of districts with which it is consolidating as well as its liabilities (which could include the Bonds). No representation is made concerning the likelihood of consolidation. IssuanceofAdditionalDebt The District intends to issue additional bonds. Any bonds issued by the District must be approved by the Attorney General of Texas, and the bonds issued to finance the costs of acquisition or construction of the System must be approved by the TCEQ. The District's voters have authorized the issuance of $9,100,000 principal amount of unlimited tax bonds for financing the costs of acquiring or constructing the System, $10,400,000principalamountofunlimitedtaxbondsforthefinancingofroadfacilities,$9,100,000principal amountofunlimitedtaxbondsforrefundingoutstandingbondsoftheDistrictissuedtofinancetheSystem and $10,400,000 principal amount of unlimited tax bonds for refunding outstanding bonds of the District issuedtofinanceroads,andcouldauthorizeadditionalamounts. FollowingtheissuanceoftheBonds,theDistrictwillhave$5,425,000inprincipalamountofauthorizedbut unissuedunlimitedtaxbondsforthepurposeofacquiringorconstructingtheSystem;$7,415,000inprincipal amountofauthorizedbutunissuedunlimitedtaxbondsforfinancingroadfacilitiestoservetheDistrict;anda total of $19,500,000 in principal amount of authorized but unissued unlimited tax bonds for purposes of refunding outstanding bonds of the District. The District reserves in the Bond Order the right to issue the remaining authorized but unissued bonds plus such additional bonds as may hereafter be authorized by voters in the District. In addition, the District has the right to issue obligations, other than the Bonds, including tax anticipation notes and bond anticipation notes, and to borrow money for any valid public purpose. TheBondOrderimposesnolimitationontheamountofadditionalparitybondswhichmaybeauthorizedfor issuancebytheDistrict’svotersortheamountofbondsultimatelyissuedbytheDistrict.Exceptwithrespect totheissuanceofbondsforroadpurposes,theDistrictdoesnotemployanyformulawithregardtoassessed valuationsortaxcollectionsorotherwisetolimittheamountofbondswhichmaybeissued.Thetotalamount of bonds and other obligations of the District issued for road purposes may not exceed one‐fourth of the certified assessed valuation of the real property in the District. The issuance of additional obligations may increasetheDistrict'staxrateandadverselyaffectthesecurityforandtheinvestmentqualityandvalueof theBonds. Based on present engineering cost estimates and on development plans, in the opinion of the District's Engineer, the remaining $5,425,000 principal amount of authorized but unissued unlimited tax bonds for financingthecostsforacquiringorconstructingtheSystemwillbesufficienttofullyfinancetheSystemto servetheDistrict. Based on present engineering cost estimates and on development plans, in the opinion of the District's Engineer,theremaining$7,415,000principalamountofauthorizedbutunissuedunlimitedtaxbondsforthe purposeoffinancingroadfacilitiestoservetheDistrictwillbesufficienttofullyfinanceroadstoservethe District. FollowingtheissuanceoftheBonds,theDistrictwillstillowetheDevelopersapproximately$5,450,000for the reimbursable expenditures advanced to develop land, including roads within the District and capacity payments to Upper Trinity on behalf of the District. See “THE SYSTEM” and “THE DISTRICT – Status of Development.” TheDistrictanticipatessellingunlimitedtaxbondsforroadpurposesinthe3rdquarterof2017inanamount tobedetermined. RemediesintheEventofDefault TexaslawandtheBondOrderprovidethatintheeventtheDistrictdefaultsinthepaymentoftheprincipalof orinterestonanyoftheBondswhendue,failstomakepaymentsrequiredbytheBondOrderintotheDebt ServiceFundordefaultsintheobservanceorperformanceofanyofthecovenants,conditions,orobligations 20 setforthintheBondOrder,anyRegisteredOwnershallbeentitledatanytimetoseekawritofmandamus from a court of competent jurisdiction compelling and requiring the Board of Directors of the District to observe and perform any covenant, obligation or condition prescribed by the Bond Order. Such right is in additiontootherrightstheRegisteredOwnersmaybeprovidedbythelawsoftheStateofTexas. Other than a writ of mandamus, the Bond Order does not provide a specific remedy for a default. If the Districtdefaults,aRegisteredOwnercouldpetitionforawritofmandamusissuedbyacourtofcompetent jurisdiction compelling and requiring the District and the District's officials to observe and perform the covenants,obligationsorconditionsprescribedintheBondOrder.Suchremedymightneedtobeenforcedon a periodic basis. The enforcement of a claim for payment on the Bonds would be subject to the applicable provisionsofthefederalbankruptcylaws,anyothersimilarlawsaffectingtherightsofcreditorsofpolitical subdivisions, and general principles of equity. Further, certain traditional legal, remedies also may not be available.EvenifaRegisteredOwnercouldobtainajudgmentagainsttheDistrictforadefaultinthepayment ofprincipalorinterestsuchjudgmentcouldnotbesatisfiedbyexecutionagainstanypropertyoftheDistrict. See “RISK FACTORS – Registered Owner’s Remedies” and “‐ Bankruptcy Limitations of Registered Owners’ Rights.” LegalInvestmentandEligibilitytoSecurePublicFundsinTexas ThefollowingisquotedfromSection49.186oftheTexasWaterCode,andisapplicabletotheDistrict: “(a) All bonds, notes, and other obligations issued by a district shall be legal and authorized investments for all banks, trust companies, building and loan associations, savings and loan associations, insurance companies of all kinds and types, fiduciaries, and trustees, and for all interest and sinking funds andotherpublicfundsofthestate,andallagencies,subdivisions,andinstrumentalitiesofthestate,including allcounties,cities,towns,villages,schooldistricts,andallotherkindsandtypesofdistricts,publicagencies, andbodiespolitic.” “(b)Adistrict’sbonds,notes,andotherobligationsareeligibleandlawfulsecurityforalldepositsof public funds of the state, and all agencies, subdivisions, and instrumentalities of the state, including all counties,cities,towns,villages,schooldistricts,andallotherkindsandtypesofdistricts,publicagencies,and bodiespolitic,totheextentofthemarketvalueofthebonds,notes,andotherobligationswhenaccompanied byanyunmaturedinterestcouponsattachedtothem.” The Public Funds Collateral Act (Chapter 2257, Texas Government Code) also provides that bonds of the District(includingtheBonds)areeligibleascollateralforpublicfunds. NorepresentationismadethattheBondswillbesuitablefororacceptabletofinancialorpublicentitiesfor investment or collateral purposes. No representation is made concerning other laws, rules, regulations or investmentcriteriawhichapplytoorwhichmightbeutilizedbyanyofsuchpersonsorentitiestolimitthe acceptabilityorsuitabilityoftheBondsforanyoftheforegoingpurposes.Prospectivepurchasersareurged tocarefullyevaluatetheinvestmentqualityoftheBondsastothesuitabilityoracceptabilityoftheBondsfor investmentorcollateralpurposes. Defeasance TheBondOrderprovidesforthedefeasanceoftheBondswhenthepaymentoftheprincipaloftheBonds, plusinterestthereontotheduedatethereof(whethersuchduedatebebyreasonofmaturity,redemption,or otherwise),isprovidedbyirrevocablydepositingwithapayingagent,intrust(1)moneysufficienttomake suchpaymentor(2)DefeasanceSecurities(hereinafterdefined),maturingastoprincipalandinterestinsuch amountsandatsuchtimestoinsuretheavailability,withoutreinvestment,ofsufficientmoneytomakesuch payment, and all necessary and proper fees, compensation and expenses of the Paying Agent/Registrar for theBonds.TheBondOrderprovidesthat“DefeasanceSecurities”means(a)direct,noncallableobligationsof theUnitedStatesofAmerica,includingobligationsthatareunconditionallyguaranteedbytheUnitedStates of America, (b) noncallable obligations of an agency or instrumentality of the United States of America, including obligations that are unconditionally guaranteed or insured by the agency or instrumentality and that,onthedatetheBoardadoptsorapprovesproceedingsauthorizingtheissuanceofrefundingbondsor otherwise provides for funding of an escrow to defease the Bonds, are rated as to investment quality by a nationally recognized investment rating firm not less than AAA or its equivalent, and (c) noncallable obligationsofastateoranagencyoracounty,municipality,orotherpoliticalsubdivisionofastatethathave 21 beenrefundedandthat,onthedatetheBoardadoptsorapprovesproceedingsauthorizingtheissuanceof refunding bonds or otherwise provides for funding of an escrow to defease the Bonds, are rated as to investmentqualitybyanationallyrecognizedinvestmentratingfirmnotlessthanAAAoritsequivalent.The District has additionally reserved the right, subject to satisfying the requirements of (1) and (2) above, to substitute other Defeasance Securities for the Defeasance Securities originally deposited, to reinvest the uninvestedmoneysondepositforsuchdefeasanceandtowithdrawforthebenefitoftheDistrictmoneysin excessoftheamountrequiredforsuchdefeasance. Uponsuchdepositasdescribedabove,suchBondsshallnolongerberegardedtobeoutstandingorunpaid and thereafter the District will have no further responsibility with respect to amounts available to such paying agent (or other financial institution permitted by applicable law) for the payment of such defeased bonds, including any insufficiency therein caused by the failure of such paying agent (or other financial institutionpermittedbyapplicablelaw)toreceivepaymentwhendueonthedefeasancesecurities.Provided, however,theDistricthasreservedtheoption,tobeexercisedatthetimeofthedefeasanceoftheBonds,to for redemption, at an earlier date, those Bonds which have been defeased to their maturity date, if the District:(i)intheproceedingsprovidingforthefirmbankingandfinancialarrangements,expresslyreserves therighttocalltheBondsforredemption;(ii)givesnoticeofthereservationofthatrighttotheownersofthe Bondsimmediatelyfollowingthemakingofthefirmbankingandfinancialarrangements,and(iii)directsthat noticeofthereservationbeincludedinanyredemptionnoticesthatitauthorizes. 22 EstimatedUseofBondProceeds AportionoftheproceedsoftheBondswillbeusedto(1)repaytheDistrict’s$1,838,000BondAnticipation Note,Series2016(“BAN”),theproceedsofwhichwereusedtoreimbursetheDevelopersforaportionofthe costsof(i)thewater,wastewateranddrainagefacilitiestoservePalomaCreekSouth,Phases9B,9C,9D‐1, 10A, and 9D‐2 and related engineering and testing, (ii) Paloma Creek South Force Main, (iii) Paloma Creek SouthLiftStation,(iv)sharedwaterlinesforPalomaCreekSouthPhase5A,(v)sharedwastewaterlinesfor PalomaCreekSouthPhase6,(vi)engineeringandtestingforitems(ii)through(v)and(vii)certainoperation andcreationcostsoftheDistrict;(2)reimbursetheDevelopersfortheremainingcostsforitems(i)through (vii)above;(3)topaythecostsofasharedliftstationforPalomaCreekSouth,Phase12,and(4)topaythe costsofsharedwastewaterlinesforPalomaCreekSouthPhase9A.Additionally,proceedsfromtheBonds willbeusedtopaytwenty‐four(24)monthsofcapitalizedinterest,developerinterest,thecostsofamarket study,certaincostsofissuanceoftheBANandcertaincostsofissuanceoftheBonds. District’sShare CONSTRUCTIONCOSTS A. DeveloperContributionItems 1. PalomaCreekSouthPhase9B–W,WW,&D 2. PalomaCreekSouthPhase9C–W,WW,&D 3. PalomaCreekSouthPhase9D‐1–W,WW,&D 4. PalomaCreekSouthPhase10A–W,WW,&D 5. PalomaCreekSouthPhase9D‐2–W,WW,&D 6. Engineering,Surveying,&MaterialTesting(15.0%ofItems1‐4) TotalDeveloperContributionItems B. DistrictItems 1. PalomaCreekSouthPhase5A–SharedWaterLines 2. PalomaCreekSouthPhase6–SharedWastewaterLines 3. PalomaCreekSouthPhase9A–SharedWastewaterLines 4. PalomaCreekSouthForceMain 5. PalomaCreekSouthLiftStation 6. PalomaCreekSouthPhase12–SharedLiftStation 7. Engineering,Surveying,&MaterialTesting(17.1%ofItems1‐6) TotalDistrictItems TOTALCONSTRUCTIONCOSTS NON‐CONSTRUCTIONCOSTS A. LegalFees(2.50%) B. FiscalAgentFees(1.96%) C. DeveloperInterest 1. CapitalizedInterest([email protected]%) 2. DeveloperInterest 3. BANInterest($1,838,[email protected]%for1year) D. BondDiscount(3%) E. BondIssuanceExpenses F. BANIssuanceExpenses G. BondApplicationReportCosts H. CreationExpenses(0.25%) I. OperatingExpenses(4.6%) J. MarketStudy K. AttorneyGeneralFee(0.10%) L. TCEQBondIssuanceFee(0.25%) TOTALNONCONSTRUCTIONCOSTS TOTALBONDISSUEREQUIREMENT 23 $327,235 221,791 518,659 557,169 31,000 243,433 $1,899,287 $37,974 63,617 22,713 47,722 113,929 85,952 63,486 $435,393 $2,334,680 $91,875 73,500 367,500 321,550 45,950 110,250 30,980 58,956 42,000 9,187 170,209 5,500 3,675 9,188 $1,340,320 $3,675,000 DISTRICTFINANCIALDATA (UNAUDITED) General ThefollowingtablesandcalculationsrelatetotheBonds.TheDistrictandvariousotherpoliticalsubdivisions of government which overlap all or a portion of the District are empowered to incur debt to be raised by taxationagainstalloraportionofthepropertywithintheDistrict. 2016CertifiedTaxableAssessedValuation............................................................................................... (100%oftaxablevalueasofJanuary1,2016) See“TAXDATA”and“TAXINGPROCEDURES.” $45,270,766 (a) 2017PreliminaryValuation............................................................................................................................... (100%oftaxablevalueasofJanuary1,2017) See“TAXDATA”and“TAXINGPROCEDURES.” $91,765,272 (b) EstimatedValuationasofApril12,2017.................................................................................................... (ValuefromtheAppraisalDistrictasofApril12,2017) See“TAXDATA”and“TAXINGPROCEDURES.” $100,000,000 (c) DirectDebt: TheOutstandingBonds..................................................................................................................... TheBonds................................................................................................................................................. Total....................................................................................................................................................... $2,985,000 3,675,000 $6,660,000 EstimatedOverlappingDebt.............................................................................................................................. $3,273,981 (d) TotalDirectandEstimatedOverlappingDebt......................................................................................... $9,933,981 RoadDebtServiceFundBalance(asofMarch23,2017)................................................................... SystemDebtServiceFundBalance(asofMarch23,2017).............................................................. GeneralOperatingFundBalance(asofMarch23,2017)................................................................... RoadCapitalProjectsFundBalance(asofMarch23,2017)............................................................ $78,351 (e) $‐0‐ (f) $698,152 $163,710 2016TaxRate RoadDebtService.................................................................................................................. $0.43 SystemDebtService............................................................................................................. 0.00 Maintenance&Operation................................................................................................ 0.57 Total.......................................................................................................................................................... $1.00(g) EstimatedAverageAnnualDebtServiceRequirements ontheBondsandOutstandingBonds(2017‐2041)........................................................... $420,711 (h) EstimatedMaximumAnnualDebtServiceRequirements OntheBondsandOutstandingBonds(2037)....................................................................... $454,281 (h) RatioofDirectDebtto................... 2016CertifiedTaxableAssessedValuation($45,270,766) 2017PreliminaryValuation($91,765,272) EstimatedValuationasofApril12,2017($100,000,000) 14.71% 7.26% 6.66% RatioofDirectandEstimated OverlappingDebtto…… 2016CertifiedTaxableAssessedValuation($45,270,766) 2017PreliminaryValuation($91,765,272) EstimatedValuationasofApril12,2017($100,000,000) 21.94% 10.83% 9.93% 24 ___________________________________ (a) As certified by the Denton Central Appraisal District (“DCAD” or the “Appraisal District”). See “TAXINGPROCEDURES.” (b) ProvidedbyDCADasthepreliminaryindicationofvalueasofJanuary1,2017.Thisvaluerepresents thepreliminarydeterminationofthetaxablevalueintheDistrictasofJanuary1,2017.Notaxeswill be levied on this preliminary value, which is subject to review and downward adjustment prior to certification.AfterthevalueiscertifiedbytheAppraisalReviewBoard,taxeswillbeleviedonthe certifiedvalue.See“TAXINGPROCEDURES.” (c) ProvidedbyDCADforinformationpurposesonly.Reflectstheadditionofvalueofnewconstruction withintheDistrictfromJanuary1,2016toApril12,2017.Thisestimateisbaseduponthesameunit value used in the assessed value. No taxes will be levied on this estimate. See “TAXING PROCEDURES.” (d) See“DISTRICTDEBT–EstimatedOverlappingDebt.” (e) NeitherTexaslawnortheBondOrderrequiresthattheDistrictmaintainanyparticularsuminthe DebtServiceFund.TheDebtServiceFundhastwocomponents:theRoadDebtServiceFundandthe SystemDebtServiceFund.ThefundsintheRoadDebtServiceFundarepledgedonlytopaythedebt serviceontheDistrict’sbondsissuedtoconstructaroadsystem(“RoadBonds”)andarenotpledged totheBondsorotherbondsissuedtofinancetheSystem(“SystemBonds”).ThefundsintheSystem DebtServiceFundarepledgedonlytopaythedebtserviceontheDistrict’sSystemBonds,including theBondsandarenotpledgedtoRoadBonds. (f) NeitherTexaslawnortheBondOrderrequiresthattheDistrictmaintainanyparticularsuminthe DebtServiceFund.Twenty‐four(24)monthsofcapitalizedinterestontheBondswillbedeposited uponclosingoftheBonds.Additionally,accruedinterestfromJune1,2017,tothedateofdelivery willbedepositedtothisfunduponclosingoftheBonds. (g) TheDistrictleviedataxrateof$1.00per$100ofassessedvaluation,consistingof$0.43per$100of assessed valuation for road debt service purposes and $0.57 per $100 of assessed valuation for maintenance and operation purposes. See “TAXING PROCEDURES.” In connection with its Order approving the issuance of the Bonds, TCEQ concluded that a total debt service tax rate of at least $0.76 per $100 of assessed valuation should be levied by the District initially after issuance of the Bonds. (h) DebtserviceontheBondsisestimatedatanaverageannualinterestrateof4.00%.See“DISTRICT DEBT–DebtServiceRequirements.” 25 EstimatedOverlappingDebtStatement Thefollowingtableindicatestheindebtedness,definedasoutstandingbondspayablefromadvaloremtaxes, of governmental entities overlapping the District and the estimated percentages and amounts of such indebtednessattributabletopropertywithintheDistrict.Thisinformationisbasedupondatasecuredfrom theindividualjurisdictionsand/ortheTexasMunicipalReportspreparedbytheMunicipalAdvisoryCouncil of Texas. Such figures do not indicate the tax burden levied by the applicable taxing jurisdictions for operationandmaintenanceorforotherpurposes. OutstandingDebtasof March31,2017 Percent TaxingJurisdiction DentonCounty DentonISD TOTALESTIMATEDOVERLAPPINGDEBT DirectDebt TOTALDIRECT&ESTIMATEDOVERLAPPING DEBT _______________________ (a) IncludestheBonds. $608,895,000 839,287,749 0.06% 0.35 Overlapping Amount $346,759 2,927,221 $3,273,981 6,660,000(a) $9,933,981 DebtRatios 2016Certified Taxable Assessed Valuation DirectDebt TotalDirectandEstimated OverlappingDebt 14.71% 21.94% 26 2017 Preliminary Valuation 7.26% 10.83% Estimated Valuationasof April12,2017 6.66% 9.93% Pro‐FormaDebtServiceRequirements ThefollowingschedulesetsforththeprincipalandinterestrequirementsontheOutstandingBonds,plusthe estimated principal and interest requirements for the Bonds, assuming the Bonds are issued at an interest rateof4.00%perannum. Calendar Year 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 Total Outstanding DebtService $104,163 184,163 187,563 185,863 189,163 192,363 194,513 191,513 193,513 195,363 196,925 198,188 199,138 199,763 200,050 200,156 204,906 204,281 203,081 201,681 205,081 203,081 205,881 203,044 ‐ $4,643,431 Principal $100,000 105,000 110,000 115,000 120,000 120,000 125,000 130,000 135,000 140,000 150,000 155,000 160,000 165,000 175,000 180,000 190,000 195,000 205,000 210,000 220,000 230,000 240,000 $3,675,000 Plus:TheBonds Interest $183,750 147,000 143,000 138,800 134,400 129,800 125,000 120,200 115,200 110,000 104,600 99,000 93,000 86,800 80,400 73,800 66,800 59,600 52,000 44,200 36,000 27,600 18,800 9,600 $2,199,350 TotalNew DebtService $183,750 247,000 248,000 248,800 249,400 249,800 245,000 245,200 245,200 245,000 244,600 249,000 248,000 246,800 245,400 248,800 246,800 249,600 247,000 249,200 246,000 247,600 248,800 249,600 $5,874,350 EstimatedAverageAnnualRequirements‐(2017‐2041).......................................................... EstimatedMaximumAnnualRequirement‐(2037)..................................................................... 27 Total DebtService $104,163 367,913 434,563 433,863 437,963 441,763 444,313 436,513 438,713 440,563 441,925 442,788 448,138 447,763 446,850 445,556 453,706 451,081 452,681 448,681 454,281 449,081 453,481 451,844 249,600 $10,517,781 $420,711 $454,281 TAXINGPROCEDURES PropertyTaxCodeandCounty‐WideAppraisalDistrict The Texas Property Tax Code (the “Property Tax Code”) establishes for each county in Texas a single appraisal district with responsibility for recording and appraising property for all taxing units within the county and a single appraisal review board with responsibility for reviewing and equalizing the values establishedbytheappraisaldistrict.TheappraisalofpropertywithintheDistrictistheresponsibilityofthe DentonCentralAppraisalDistrict.ThePropertyTaxCoderequirestheappraisaldistrict,byMay15ofeach year, or as soon thereafter as practicable, to prepare appraisal records of property as of January 1 of each year based upon market value. The chief appraiser must give written notice before May 15, or as soon thereafteraspracticable,toeachpropertyownerwhosepropertyvalueisappraisedhigherthanthevaluein thepriortaxyearorthevaluerenderedbythepropertyowner,orwhosepropertywasnotontheappraisal rolltheprecedingyear,orwhosepropertywasreappraisedinthecurrenttaxyear.Noticemustalsobegiven ifownershipofthepropertychangedduringtheprecedingyear.Theappraisalreviewboardhastheultimate responsibility for determining the value of all taxable property within the District; however, any property ownerwhohastimelyfilednoticewiththeappraisalreviewboardmayappealafinaldeterminationbythe appraisalreviewboardbyfilingsuitinaTexasdistrictcourt. AlthoughtheDistricthastheresponsibilityforestablishingtaxratesandlevyingandcollectingitstaxeseach year, under the Property Tax Code, the District does not establish appraisal standards or determine the frequencyofrevaluationorreappraisal.Theappraisaldistrictisgovernedbyaboardofdirectorselectedby the governing bodies of the county and all cities, towns, school districts and, if entitled to vote, the conservation and reclamation districts that participate in the appraisal district. The Property Tax Code requireseachappraisaldistricttoimplementaplanforperiodicreappraisalofpropertytoupdateappraised values.Suchplanmustprovideforreappraisalofallrealpropertyintheappraisaldistrictatleastonceevery three years. It is not known what frequency of future reappraisals will be utilized by the Denton Central AppraisalDistrictorwhetherreappraisalswillbeconductedonazoneorcountywidebasis. PropertySubjecttoTaxationbytheDistrict Except for certain exemptions provided by Texas law, all real and tangible personal property and certain categories of intangible personal property with a tax situs in the District are subject to taxation by the District;however,noeffortisexpectedtobemadebytheDentonCentralAppraisalDistricttoincludeonthe tax roll tangible or intangible personal property not devoted to commercial or industrial use. Principal categoriesofexemptpropertyinclude:propertyownedbytheStateofTexasoritspoliticalsubdivisions,if thepropertyisusedforpublicpurposes;propertyexemptfromadvaloremtaxationbyfederallaw;certain household goods, family supplies, and personal effects; farm products owned by the producer; certain property owned by charitable organizations, youth development associations, religious organizations, and qualified schools; designated historical sites; solar and wind powered energy devices; inventory and warehouse goods in transit; and most individually‐owned automobiles and travel trailers. In addition, the District,eitherbyactionofitsBoardofDirectorsorthroughaprocessofpetitionandreferenduminitiatedby its residents, may grant exemptions for residential homesteads of persons 65 years or older and certain disabledpersons,totheextentdeemedadvisablebytheBoardofDirectorsoftheDistrict. Furthermore, the District must grant exemptions to disabled veterans or certain surviving dependents of disabled veterans, if requested, but only to the maximum extent allowed by law. The disabled veteran exemptionrangesbetween$5,000and$12,000,dependinguponthedisabilityratingoftheveteranclaiming theexemption,andqualifyingsurvivingspousesofpersons65yearsofageorolderwillbeentitledtoreceive a resident homestead exemption equal to the exemption received by the deceased spouse. A veteran who receivesadisabilityratingof100%isentitledtoanexemptionofthefullvalueoftheveteran’sresidential 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 exemptionapplied.Apartiallydisabledveteranorcertainsurvivingspousesofpartiallydisabledveteransare entitledtoanexemptionfromtaxationofapercentageoftheappraisedvalueoftheirresidencehomesteadin anamountequaltothepartiallydisabledveteran’sdisabilityratingiftheresidencehomesteadwasdonated byacharitableorganization.Also,thesurvivingspouseofamemberofthearmedforceswhowaskilledin actionis,subjecttocertainconditions,entitledtoanexemptionofthetotalappraisedvalueofthesurviving 28 spouse’sresidencehomestead,andsubjecttocertainconditions,anexemptionuptothesameamountmaybe transferredtoasubsequentresidencehomesteadofthesurvivingspouse. The Board may also exempt up to 20% of the market value of residential homesteads from ad valorem taxation.Suchexemptionwouldbeinadditiontoanyotherapplicableexemptionsprovidedbylaw.However, ifadvaloremtaxeshavepreviouslybeenpledgedforthepaymentofdebtandthecessationofthelevywould impairtheobligationofthecontractbywhichthedebtwascreated,thentheBoardmaycontinuetolevyand collecttaxesagainsttheexemptionvalueofthehomesteadsuntilthedebtisdischarged.Todate,theBoard has not voted to exempt any percentage of the market value of residential homesteads from ad valorem taxation,butnorepresentationcanbemadethattheBoardwillnotdeterminetograntsuchexemptioninthe future. 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 derivedfromrefiningornaturalgas),andtoaircraftorrepairpartsusedbyacertifiedaircarrieracquiredin orimportedintoTexaswhicharedestinedtobeforwardedoutsideofTexasandwhicharedetainedinTexas forassembling,storing,manufacturing,processingorfabricatinglessthan175days.Althoughcertaintaxing unitsmaytakeofficialactiontotaxsuchpropertyintransitandnegatesuchexemption,theDistrictdoesnot havesuchanoption. A “Goods‐in‐Transit” Exemption is applicable to certain tangible personal property, as defined by the Property Tax Code, acquired in or imported into Texas for storage purposes and which is stored under a contractofbailmentbyapublicwarehouseoperatoratoneormorepublicwarehousefacilitiesinTexasthat 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. The exemption excludes oil, natural gas, petroleum products, aircraft andcertainspecialinventoryincludingdealer'smotorvehicles,dealer'svesselandoutboardmotorvehicle, dealer's heavy equipment and retail manufactured housing inventory, The exemption applies to covered property if it is acquired in or /imported into Texas for assembling, storing, manufacturing, processing, or fabricatingpurposesandissubsequentlyforwardedtoanotherlocationinsideoroutsideofTexasnotlater than 175 days after acquisition or importation. A property owner who receives the Goods‐in‐Transit ExemptionisnoteligibletoreceivetheFreeportExemptionforthesameproperty.LocalTaxingUnitssuchas theDistrictmay,byofficialactionandafterpublichearing,taxgoods‐in‐transitpersonalproperty.Ataxing unitmustexerciseitsoptiontotaxgoods‐in‐transitpropertybeforeJanuary1ofthefirsttaxyearinwhichit proposes to tax the property at the time and in the manner prescribed by applicable law. However, taxing unitswhotookofficialactionasallowedbypriorlawbeforeOctober1,2011,totaxgoods‐in‐transitproperty, 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 impairtheobligationsofthecontractbywhichthedebtwascreated.TheDistricthastakennoofficialaction toallowtaxationofsuchgoods‐in‐transitpersonalproperty. DentonCountymaydesignateallorpartoftheareawithintheDistrictasareinvestmentzone.Thereafter, eitherDentonCountyortheDistrict,undercertaincircumstances,mayenterintotaxabatementagreements withownersofpropertywithinthezone.Priortoenteringintoataxabatementagreement,eachentitymust adopt guidelines and criteria for establishing tax abatement, which each entity will follow in granting tax abatementtoownersofproperty.Thetaxabatementagreementsmayexemptfromadvaloremtaxationby eachoftheapplicabletaxingjurisdictions,includingtheDistrict,foraperiodofuptoten(10)years,allorany 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 specifiedimprovementsorrepairstothepropertyinconformitywiththetermsofthetaxabatement.Each taxingjurisdictionhasdiscretiontodeterminetermsforitstaxabatementagreementswithoutregardtothe termsapprovedbytheothertaxingjurisdiction.NoneoftheareawithintheDistricthasbeendesignatedasa reinvestmentzonetodate,andtheDistricthasnotapprovedanysuchtaxabatementagreements. 29 ValuationofPropertyforTaxation Generally,propertyintheDistrictmustbeappraisedbytheAppraisalDistrictatmarketvalueasofJanuary1 ofeachyear,exceptforcertaincategoriesoflanddesignatedforagriculturaluse,openspaceortimberlandas described below. See “Agricultural, Open Space, Timberland and Inventory Deferment.” Assessments under the Property Tax Code are to be based upon one hundred percent (100%) of market value. The appraised valueofresidentialhomesteadpropertymaybelimitedtothelesserofthemarketvalueoftheproperty,or thesumoftheappraisedvalueofthepropertyforthelastyearinwhichitwasappraised,plustenpercent (10%) of such appraised value multiplied by the number of years since the last appraisal, plus the market value of all new improvements on the property. Once an appraisal roll is prepared and approved by the AppraisalReviewBoard,itisusedbytheDistrictinestablishingitstaxrate. The Property Tax Code requires the Appraisal District to implement a plan for periodic reappraisal of propertytoupdateappraisedvalues.TheplanmustprovideforappraisalofallrealpropertybytheAppraisal Districtatleastonceeverythree(3)years.Itisnotknownwhatfrequencyofreappraisalwillbeutilizedby theAppraisalDistrictorwhetherreappraisalswillbeconductedonazoneorcounty‐widebasis. DistrictandTaxpayerRemedies Under certain circumstances, taxpayers and taxing units, including the District, may appeal orders of the AppraisalReviewBoardbyfilingapetitionforreviewindistrictcourtwithinforty‐five(45)daysafternotice is received that a final order has been entered. In such event, the property value in question may be determined by the court, or by a jury, if requested by any party. Additionally, taxing units may bring suit againsttheAppraisalDistricttocomplywiththePropertyTaxCode.TheDistrictmaychallengethelevelof appraisalofacertaincategoryofproperty,theexclusionofpropertyfromtheappraisalrollsorthegrant,in whole or in part, of an exemption. The District may not, however, protest a valuation of any individual property. The Property Tax Code establishes a procedure for notice to property owners of reappraisals reflecting increased property values, appraisals that are higher than renditions and appraisals of property not previouslyonanappraisalroll. Agricultural,OpenSpace,TimberlandandInventoryDeferment The PropertyTax Code permits land designatedfor agricultural use(including wildlife management),open space,ortimberlandtobeappraisedatitsvaluebasedontheland'scapacitytoproduceagricultureortimber productsratherthanatitsfairmarketvalue.ThePropertyTaxCodepermits,undercertaincircumstances, thatresidentialrealpropertyinventoryheldbyapersoninthetradeorbusinessbevaluedatthepriceall such property would bring if sold as a unit to a purchaser who would continue the business. Landowners wishing to avail themselves of any of such designations must apply for the designation, and the Appraisal DistrictisrequiredbythePropertyTaxCodetoactoneachclaimant'srighttothedesignationindividually.A claimantmaywaivethespecialvaluationastotaxationbysomepoliticalsubdivisionsandnotastoothers.If aclaimantreceivesthedesignationandlaterlosesitbychangingtheuseofthepropertyorsellingittoan unqualifiedowner,theDistrictcancollecttaxesbasedonthenewuseforthethree(3)tofive(5)yearsprior tothelossofthedesignationforagricultural,timberlandoropenspaceland. NoticeandHearingProcedures The Property Tax Code establishes procedures for providing notice and the opportunity for a hearing for taxpayers in the event of certain proposed tax increases and provides fortaxpayers referenda which could result in the repeal of certain tax increases. The District is required to publish a notice of a public hearing regardingthetaxrateproposedtobeleviedinthecurrentyearandcomparingtheproposedtaxratetothe tax rate set in the preceding year. If the proposed combined debt service, operation and maintenance and contracttaxratesimposeataxmorethan1.08timestheamountoftaximposedintheprecedingyearona residence homestead appraised atthe average appraised value of a residence homestead, disregarding any homesteadexemptionavailabletothedisabledorpersons65yearsofageorolder,thequalifiedvotersofthe taxing jurisdiction by petition of ten percent of the registered voters in the taxing jurisdiction may require thatanelectionbeheldtodeterminewhethertoreducetheoperationandmaintenancetaxtotherollbacktax rate. 30 LevyandCollectionofTaxes The District is responsible for the levy and collection of its taxes, unless it elects to transfer the collection functionstoanothergovernmentalentity.BySeptember1ofeachyear,orassoonthereafteraspracticable, the rate of taxation is set by the Board based upon the valuation of property within the District as of the preceding January 1 and the amount required to be raised for debt service, maintenance purposes, and authorizedcontractualobligations. TaxesaredueonreceiptofthetaxbillandbecomedelinquentafterJanuary31ofthefollowingyearoronthe firstdayofthecalendarmonthnextfollowingtheexpirationoftwenty‐one(21)daysaftermailingofthetax bills,whicheveroccurslater.Adelinquenttaxincursaninitialpenaltyofsixpercent(6%)oftheamountto thetaxandaccruesanadditionalpenaltyofonepercent(1%)permonthuptoJuly1,atwhichtimethetotal penaltybecomestwelvepercent(12%).Inaddition,delinquenttaxesaccrueinterestatonepercent(1%)per month.IfthetaxisnotpaidbyJuly1,anadditionalpenaltyofuptotwentypercent(20%)ofthetotalamount oftaxes,penaltiesandinterestthenduemay,undercertaincircumstances,beimposedbytheDistrict.The PropertyTaxCodealsomakesprovisionforthesplitpaymentoftaxes,discountsforearlypayments,partial paymentsoftaxesandthepostponementofthedelinquencydateoftaxesundercertaincircumstances.The ownerofaresidentialhomesteadpropertywhoisapersonsixty‐five(65)yearsofageorolderorundera disabilityforthepurposeofpaymentofdisabilityinsurancebenefitsundertheFederalOldAgeSurvivorsand DisabilityInsuranceActisentitledbylawtopaycurrenttaxesonaresidentialhomesteadininstallmentsor to defer the payment of taxes without penalty during the time of ownership. Additionally, a person who is delinquentontaxesforaresidentialhomesteadisentitledtoanagreementwiththeDistricttopaysuchtaxes inequalinstallmentsoveraperiodofbetween12and36monthsasdeterminedbytheDistrict)whensuch personhasnotenteredintoanotherinstallmentagreementwithrespecttothedelinquenttaxeswithinthe preceding24months. CollectionofDelinquentTaxes TaxesleviedbytheDistrictareapersonalobligationoftheownerofthepropertyonJanuary1oftheyearfor whichthetaxisimposed.OnJanuary1ofeachyear,ataxlienattachestothepropertytosecurethepayment ofalltaxes,penaltiesandinterestultimatelyimposedfortheyearontheproperty.Thelienexistsinfavorof each taxing unit, including the District, having the power to tax the property. The District's tax lien is on a paritywithtaxliensofallothersuchtaxingunits.Ataxlienonrealpropertyhaspriorityovertheclaimof mostcreditorsandotherholdersofliensonthepropertyencumberedbythetaxlien,whetherornotthedebt orlienexistedbeforetheattachmentofthetaxlien.Intheeventataxpayerfailstomaketimelypaymentof taxes due the District, the District may file suit to foreclose its lien securing payment of the tax, to enforce personalliabilityforthetax,orboth,subjecttocertainrestrictions.WhetheralienoftheUnitedStatesisona parity with or takes priority over a tax lien of the District is determined by applicable federal law. In the absenceofsuchfederallaw,theDistrict'staxlientakespriorityoverataxlienoftheUnitedStates.Theability of the District to collect delinquent taxes by foreclosure may be adversely affected by the amount of taxes owedtoothertaxingunits,theforeclosuresalepriceattributabletomarketconditions,thetaxpayer'srightto redeemthepropertywithinsix(6)monthsofforeclosure(2yearsinthecaseofresidentialoragricultural property),orbybankruptcyproceedingswhichrestrainthecollectionofataxpayer'sdebtsormodifysuch debts.TheFinancialInstitutionsReform,RecoveryandEnforcementActof1989(“FIRREA”)containscertain provisionswhichaffectthetimeforprotestingpropertyvaluations,thefixingoftaxliensandthecollectionof penalties and interest on delinquent taxes on real property owned by the Federal Deposit Insurance Corporation (“FDIC”) when the FDIC is acting as the conservator or receiver of an insolvent financial institution. 31 TAXDATA General Taxable property within the District is subject to the assessment, levy and collection by the District of an annualadvaloremtax,withoutlegallimitationastorateoramount,sufficienttopayprincipalofandinterest on the Outstanding Bonds and 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 valuationasofJanuary1ofthatyear.TaxesbecomedueOctober1ofsuchyear,orwhenbilled,andgenerally becomedelinquentafterJanuary31ofthefollowingyear.TheBoardcovenantsintheBondOrdertoassess andlevyforeachyearthatalloranypartoftheOutstandingBondsandtheBondsremainoutstandingand unpaidataxampleandsufficienttoproducefundstopaytheprincipalofandinterestontheBondsandthe Outstanding Bonds. The actual rate of such tax will be determined from year to year as a function of the District'staxbase,itsdebtservicerequirementsandavailablefunds.Inaddition,theDistricthasthepower and authority to assess, levy and collect ad valorem taxes, in an unlimited amount, for operation and maintenancepurposes.TheBoardlevieda2016taxrateforroaddebtservicepurposesof$0.43per$100of assessedvaluationand$0.57per$100ofassessedvaluationformaintenancepurposes,foratotaltaxrateof $1.00per$100ofassessedvaluation. TaxRateLimitation RoadDebtService: SystemDebtService: Maintenance: Contract: Unlimited(nolegallimitastorateoramount). Unlimited(nolegallimitastorateoramount). Unlimited(nolegallimitastorateoramount). Unlimited(nolegallimitastorateoramount). HistoricalTaxCollections ThefollowingtableillustratesthecollectionhistoryoftheDistrictforthe2012‐2016taxyears: Tax Year 2012 2013 2014 2015 2016 CertifiedAssessed Valuation $2,279,108 5,849,588 13,268,599 25,362,274 45,270,766 TaxRate/ $100(a) 1.0000 1.0000 1.0000 1.0000 1.0000 AdjustedLevy 22,791 58,496 132,686 253,623 452,708 %of Collections CurrentYear 99.99 99.97 99.99 100.00 97.52(b) Tax Year Ending 9/30 2013 2014 2015 2016 2017 %of Collectionsas of3/31/17 100.00 100.00 100.00 100.00 97.52(b) _______________________ (a) Includesataxformaintenanceandoperationpurposes.See“‐TaxRateDistribution”below. (b) AsofMarch31,2017. TaxRateDistribution 2016 2015 RoadDebtService SystemDebtService Maintenance $0.430 0.000 0.570 $1.000 $0.000 0.000 1.000 $1.000 32 2014 $0.000 0.000 1.000 $1.000 2013 $0.000 0.000 1.000 $1.000 2012 $0.000 0.000 1.000 $1.000 AnalysisofTaxBase ThefollowingtableillustratestheDistrict’stotaltaxableassessedvalueforthe2012‐2016taxyearsbytype ofproperty. TypeofProperty Land Improvements PersonalProperty Exemption Total 2016 Assessed Valuation $17,230,844 28,716,700 61,337 (738,115) $45,270,766 2015 Assessed Valuation $7,650,312 18,437,344 ‐0‐ (725,382) $25,362,274 2014 Assessed Valuation $5,572,926 7,825,932 123 (130,382) $13,268,599 2013 Assessed Valuation 2012 Assessed Valuation $5,849,588 $2,453,650 ‐0‐ 567 ‐0‐ ‐0‐ ‐0‐ (175,109) $5,849,588 $2,279,108 Exemptions For the 2017 tax year, the District has granted an exemption of $5,000 of the appraised value on the residential homesteads of individuals who are 65 years of age or older or are under certain disabilities. According to the Appraisal District, as of January 1, 2016, no land within the District was designated for agricultural use, open space or timberland; and 15 parcels, totaling $424,199 in market value, have been designatedasresidentialinventory. PrincipalTaxpayers Thefollowingrepresentstheprincipaltaxpayers,typeofproperty,andtheirassessedvaluesasofJanuary1, 2016: Taxpayer PulteHomesofTexasLP(a) BeazerHomesTexasLP(a) Homeowner Homeowner Homeowner Homeowner Homeowner Homeowner Homeowner Homeowner Total TypeofProperty LandandImprovements LandandImprovements LandandImprovements LandandImprovements LandandImprovements LandandImprovements LandandImprovements LandandImprovements LandandImprovements LandandImprovements Assessed Valuation 2016TaxRoll $4,674,355 3,396,919 308,555 302,789 301,000 292,224 290,496 289,525 285,669 283,532 $10,425,064 Percentageof2016AssessedValuation 23.03% ___________________________________ (a) See“THEDEVELOPERS”herein. 33 TaxRateCalculations Thetaxratecalculationssetforthbelowarepresentedtoindicatethetaxratesper$100ofTaxableAssessed Valuation that would be required to meet certain debt service requirements if no growth in the District occursbeyondthe2016CertifiedTaxableAssessedValuation($45,270,766),the2017PreliminaryValuation ($91,765,272), or the Estimated Valuation as of April 12, 2017 ($100,000,000). The foregoing further assumescollectionof95%oftaxesleviedandthesaleofnoadditionalbonds: EstimatedAverageAnnualDebtServiceRequirementsontheBonds andtheOutstandingBonds(2017‐2041)............................................................. TaxRateof$0.98onthe2016CertifiedTaxableAssessedValuation at95%collectionproduces.......................................................................................... TaxRateof$0.49onthe2017PreliminaryValuation at95%collectionproduces.......................................................................................... TaxRateof$0.45ontheEstimatedValuationasofApril12,2017 at95%collectionproduces.......................................................................................... EstimatedMaximumAnnualDebtServiceRequirementsontheBonds andtheOutstandingBonds(2037).......................................................................... TaxRateof$1.06onthe2016CertifiedTaxableAssessedValuation at95%collectionproduces.......................................................................................... TaxRateof$0.53onthe2017PreliminaryValuation at95%collectionproduces.......................................................................................... TaxRateof$0.48ontheEstimatedValuationasofApril12,2017 at95%collectionproduces.......................................................................................... $420,711 $421,471 $427,167 $427,500 $454,281 $455,877 $462,038 $456,000 EstimatedOverlappingTaxes Property within the District is subject to taxation by several taxing authorities in addition to the District. UnderTexaslaw,ifadvaloremtaxesleviedbyataxingauthoritybecomedelinquent,alieniscreatedupon thepropertywhichhasbeentaxed.AtaxlienonpropertyinfavoroftheDistrictisonaparitywithtaxliens of other taxing jurisdictions. In addition to ad valorem taxes required to make debt service payments on bonded debt of the District and of such other jurisdictions (see “DISTRICT DEBT ‐ Estimated Direct and Overlapping Debt Statement”), certain taxing jurisdictions are authorized by Texas law to assess, levy and collectadvaloremtaxesforoperation,maintenance,administrativeand/orgeneralrevenuepurposes. Setforthbelowisacompilationofall2016taxesleviedbysuchjurisdictionsper$100ofassessedvaluation. Such levies do not include local assessments for community associations, fire department contributions, charges for solid waste disposal, or any other dues or charges made by entities other than political subdivisions. TaxingJurisdiction 2016TaxRate/ Per$100ofA.V. TheDistrict DentonISD DentonCounty $1.000000 1.540000 0.248409 EstimatedTotalTaxRate $2.788409 34 THEDISTRICT General The District is a conservation and reclamation district and political subdivision of the State of Texas and operatespursuanttoArticleXVI,Section59andArticleIII,Section52oftheConstitutionoftheStateofTexas, andChapters49,51and,forcertainpurposes,53,TexasWaterCode,asamended. Denton County Fresh Water Supply District No. 11 (“District 11”) was created by the Denton County Commissioner’sCourtonDecember12,2000,asafreshwatersupplydistrictpursuanttoChapter53,Texas WaterCode,asamended.OnJanuary20,2001,pursuanttoanelectionwithinsuchdistrict,District11was authorizedtoassumesanitarysewerandroaddistrictpowers.OnFebruary20,2001,District11convertedto awatercontrolandimprovementdistrict.AtanelectionheldonMay3,2003,votersapprovedthedivisionof District11intoDistrict11‐AandtheinitialDentonCountyFreshWaterSupplyDistrictNo.11‐B(“Original District11‐B”).AtanelectionheldonNovember8,2005,votersapprovedthedivisionofOriginalDistrict11‐ BintotheDistrictandDistrict11‐B.Pursuanttosuchvoterapproveddivisions,theDistrictsucceededtothe rights and powers of its predecessor districts, including sanitary sewer powers and road district powers underChapter257,TexasTransportationCode. ThecreationofDistrict11andcertainactsandproceedingsofDistrict11takenpriortoJune17,2001,were validatedandconfirmedinallrespectsbySenateBillNo.1444,Actsofthe77thLegislature,RegularSession, 2001. Accordingly, the District is empowered, among other things, to purchase, construct, operate and maintainallworks,improvements,facilitiesandplantsnecessaryforthesupplyanddistributionofwater;the collection, transportation, and treatment of wastewater; the control and diversion of storm water; and the construction, operation and maintenance of macadamized, graveled or paved roads and turnpikes. The Districtmayissuebondsandotherformsofindebtednesstopurchaseorconstructsuchfacilities.TheDistrict is also empowered to establish, operate, and maintain fire‐fighting facilities, independently or with one or more conservation and reclamation districts, subject to the approval of the TCEQ and the voters of the District.Additionally,theDistrictmay,subjecttocertainlimitations,utilizenon‐taxrevenuestodevelopand financeparksandrecreationalfacilities. The District has applied for and received approval from the TCEQ to implement a plan (the “Fire Plan”) relatingtofire‐protectionserviceswithintheDistrict.TheFirePlanhasbeendevelopedincoordinationwith several conservation and reclamation districts located near the District and includes a contract (the “Fire‐ ProtectionContract”)withtheCityofAubreytostaffandoperateanexistingfirestationlocatednorthofthe District. The Fire Plan, which was approved by District voters at an election held on November 6, 2007, is funded through a monthly surcharge added to each customer’s water bill and will not be funded with the proceedsofanybondsissuedbytheDistrict. LocationoftheDistrict TheDistrictislocatedapproximately32milesnorthwestofthecentraldowntownbusinessdistrictoftheCity of Dallas and lies wholly within the extraterritorial jurisdiction of the Town of Little Elm. The District is locatedwithinDentonIndependentSchoolDistrict(“DISD”)andisborderedbyDistrict11‐Bonthesouthand west, by undeveloped acreage on the east, and by undeveloped acreage and Braswell High School on the north.AccesstotheDistrictisprovidedbytheDallasNorthTollwaytoU.S.Highway380andwesttoSouth PalomaCreekBoulevard. 35 ManagementoftheDistrict The District is governed by a board, consisting of five directors, which has control over and management supervision of all affairs of the District. All of the present members of the Board own property within the District,andonedirectorresidesintheDistrict.Directorsareelectedineven‐numberedyearsforfour‐year staggeredterms.ThepresentmembersandofficersoftheBoardarelistedbelow: Name Position TermExpiresMay RobbieL.Patman President 2018 RyanKoons VicePresident 2020 ShirleyJ.Ross Secretary 2020 RichieSlivocka AssistantSecretary 2020 Vacant 2018 The District does not a general manager or other full‐time employees but contracts for certain necessary servicesasdescribedbelow: TaxAssessor/Collector–TheDistrict'sTaxAssessor/CollectorisMichelleFrench,theDentonCounty TaxAssessor/Collector. Bookkeeper–TheDistrictcontractswithDye&Bloomfield,LLC,forbookkeepingservices. UtilitySystemOperator–TheDistrict’soperatorisMustangSpecialUtilityDistrict(“MSUD”). Auditor – The District’s financial statements for the fiscal year ended February 29, 2016 were auditedbyMcCallGibsonSwedlundBarfoot,PLLC,acopyofwhichisincludedasAPPENDIXA.Such firmhasbeenengagedtoaudittheDistrict’sfinancialstatementsforthefiscalyearendingFebruary 28,2017. Engineer – The consulting engineer retained by the District in connection with the design and constructionoftheDistrict’sfacilitiesisPettitBarrazaLLC.(the“Engineer”). Bond Counsel – The District has engaged McCall, Parkhurst & Horton L.L.P., Dallas Texas as Bond Counsel in connection with the issuance of the Bonds. The legal fees to be paid Bond Counsel for services rendered in connection with the issuance of the Bonds are based on a percentage of the Bonds actually issued, sold and delivered and, therefore, such fees are contingent on the sale and deliveryoftheBonds. Disclosure Counsel – The District has engaged Norton Rose Fulbright US LLP, Houston, Texas as DisclosureCounselinconnectionwiththeissuanceoftheBonds.ThelegalfeestobepaidDisclosure CounselforservicesrenderedinconnectionwiththeissuanceoftheBondsarecontingentonthesale anddeliveryoftheBonds. General Counsel – The District has engaged Crawford & Jordan LLP, Houston, Texas, as General CounseltotheDistrict.ThelegalfeestobepaidGeneralCounselforservicesrenderedinconnection withtheissuanceoftheBondsarecontingentuponthesaleanddeliveryoftheBonds. Financial Advisor – The District has engaged the firm of Robert W. Baird & Co. Incorporated as financialadvisortotheDistrict.PaymenttotheFinancialAdvisorbytheDistrictiscontingentupon theissuance,saleanddeliveryoftheBonds.TheFinancialAdvisorisnotobligatedtoundertake,and has not undertaken to make, an independent verification or to assume responsibility for the accuracy,completeness,orfairnessoftheinformationinthisOfficialStatement. 36 StatusofDevelopment Development within the District is complete and consists of Paloma Creek South, Phases 9B, 9C, 9D1, 10A, 9D2and10B(587lotsonapproximately108.06acres).AsofApril12,2017,therewereapproximately427 completedsingle‐familyhomeswithintheDistrict,(approximately400occupiedand27unoccupied),38new homes under construction, and 122 vacant developed lots available for home construction. There is no remaining developable land within the District. There are also hiking and biking trails throughout Paloma Creek. ThetablebelowsummarizesthedevelopmentwithintheDistrictasofApril12,2017bysection. PalomaCreekSouth,Phase9B PalomaCreekSouth,Phase9C PalomaCreekSouth,Phase9D‐1 PalomaCreekSouth,Phase10A PalomaCreekSouth,Phase9D‐2 PalomaCreekSouth,Phase10B Totals Recreation RemainingUndeveloped butDevelopableAcres UndevelopableAcres Total Acreage 16.09 11.70 18.13 20.03 16.68 25.43 108.06 0.00 0.00 0.00 108.06 Lots 88 63 101 110 88 137 587 Completed 87 63 98 108 15 56 427 Under Construction 0 0 0 0 15 23 38 Vacant Developed Lots 1 0 3 2 58 58 122 Homes HOMEBUILDERSWITHINTHEDISTRICT HomebuildersactiveintheDistrictincludeBeazerHomesandPulteHomes.Thehomesbeingmarketedinthe Districtrangeinsizefrom1,440squarefeetto3,800squarefeetandinpricefromapproximately$200,000to $320,000.BeazerHomesisactingasdeveloperandconstructinghomesinPalomaCreekSouth,Phases9D1 and9D2.PulteHomesisactingasdeveloperandconstructinghomesinPalomaCreekSouth,Phases10Aand 10B. PALOMACREEK TheDistrictispartofthe1,400acremaster‐plannedcommunityofPalomaCreek,consistingoftheDistrict and four other utility districts (Denton County Fresh Water Supply District Nos. 8‐A, 8‐B, 11‐A and 11‐B). Approximately4,632single‐familyresidentiallotshavebeenconstructedinPalomaCreek,including587lots intheDistrict.TheDistrictispartoftheneighborhoodofPalomaCreekSouth. 37 PHOTOGRAPHSTAKENWITHINTHEDISTRICT (takenApril,2017) 38 PHOTOGRAPHSTAKENWITHINTHEDISTRICT (takenApril,2017) 39 LOCATIONMAP 40 THEDEVELOPERS TheRoleofaDeveloper Ingeneral,theactivitiesofalandownerordeveloperinadistrictsuchastheDistrictincludedesigningthe project, defining a marketing program and setting building schedules; securing necessary governmental approvals and permits for development; arranging for the construction of roads and the installation of utilities;andsellingorleasingimprovedtractsorcommercialreservestootherdevelopersorthirdparties.A developerisundernoobligationtoadistricttoundertakedevelopmentactivitiesaccordingtoanyparticular planorschedule.Furthermore,thereisnorestrictiononadeveloper’srighttosellanyorallofthelandwhich thedeveloperownswithinadistrict.Inaddition,thedeveloperisordinarilythemajortaxpayerwithinthe districtduringtheearlystagesofdevelopment.Therelativesuccessorfailureofadevelopertoperformin theabove‐describedcapacitiesmayaffecttheabilityofadistricttocollectsufficienttaxestopaydebtservice andretirebonds. ProspectiveBondpurchasersshouldnotethatthepriorrealestateexperienceofadevelopershouldnotbe construedasanindicationthatfurtherdevelopmentwithintheDistrictwilloccur,orconstructionoftaxable improvements upon property within the District will occur, or that marketing or leasing of taxable improvementsconstructeduponpropertywithintheDistrictwillbesuccessful.Circumstancessurrounding development within the District may differ from circumstances surrounding development of other land in several respects, including the existence of different economic conditions, financial arrangements, homebuilders,geographiclocation,marketconditions,andregulatoryclimate. NoneoftheDevelopers(hereinafterdefined),noranyaffiliateofanysuchentity,ifany,isobligatedtopay principaloforinterestontheBonds.Furthermore,noneoftheDevelopershasabindingcommitmenttothe District to carry out any plan of development, and the furnishing of information relating to the proposed developmentbysuchentitiesshouldnotbeinterpretedassuchacommitment.Prospectivepurchasersare encouragedtoinspecttheDistrictinordertoacquaintthemselveswiththenatureofdevelopmentthathas occurredorisoccurringwithintheDistrict’sboundaries. TheDevelopers Denton380,BeazerHomes,Pulte,andPRA2003arecollectivelyreferredtohereinasthe“Developers”. ‐Denton380‐ Denton 380 Associates, L.P., a Texas limited partnership (“Denton 380”) was formed for the purpose of acquiringandholdingforinvestmentandsaletractsofland,includingapproximately62acresofthelandin the District. Denton 380 has determined the overall development plan for such land in the District and arrangedfortheconstructionofutilitytrunklinesandtheacquisitionofwatersupplyandsewagetreatment capacity from Upper Trinity Regional Water District. PRA 380 Investors, L.P. (“PRA 380”), a Texas limited partnership, is the general partner of Denton 380, and IHP Investment Fund III, L.P. (“IHP”), a California limitedpartnership,isthelimitedpartnerofDenton380.ThegeneralpartnerofPRA380isPRA380,Inc.,a Texascorporation.LeonJ.BackesisthePresidentofPRA380,Inc.Denton380hassoldtractsoflandinthe Districttotheentitiesdescribedbelow.Denton380nolongerownsanylandintheDistrictbuthastheright toreceivereimbursementfromtheDistrictforoperatingadvancesandcertaincostsofutilitiesandroadsas describedherein. ‐BeazerHomes‐ BeazerHomesTexasL.P.,aDelawarelimitedpartnership,(“BeazerHomes”)acquiredapproximately35acres oflandintheDistrictfromPRA2003No.3,onwhichithasdeveloped189single‐familyresidentiallotsas Paloma Creek South, Phases 9D1 and 9D2. The general partner of Beazer Homes is Beazer Homes Texas Holdings,Inc.andthelimitedpartnerofBeazerHomesisBeazerHomesHoldingCorp.BeazerHomesisthe onlybuilderonthelotswithinPalomaCreekSouth,Phases9D1and9D2. ‐PRA2003No.3LP‐ PRA 2003 No. 3 LP, a Texas limited partnership (“PRA 2003”) acquired approximately 62.2 acres in the Districtfromitsaffiliate,Denton380,includingapproximately27.791acresthatanaffiliateofPRA2003has developedasPalomaCreekSouth,Phases9B&9C(151lots).ThegeneralpartnerofPRA2003No.3LPis PRAGPNo.2,Inc.PRA2003hassoldall151lotstoBeazerandMHIBuilders. 41 ‐PulteHomes‐ Pulte Homes,a Texas limited partnership (“Pulte”) purchasedapproximately 45 acresof landwithin in the District on which it has developed 247 residential lots as Paloma Creek South, Phases 10A and 10B. Pulte HomesistheonlyhomebuilderonthelotswithinPalomaCreekSouth,Phases10Aand10B. THESYSTEM Regulation AccordingtotheEngineer,thewaterdistributionandwastewatercollectionlinesconstructedbytheDistrict have been designed in accordance with accepted engineering practices and the requirements of all governmentalagencieshavingregulatoryorsupervisoryjurisdictionovertheconstructionandoperationof such facilities including, among others, the TCEQ, the Town, Mustang Special Utility District and Denton County.AccordingtotheDistrict’sEngineer,thedesignofallsuchfacilitieshasbeenapprovedbyallrequired governmentalagenciesandinspectedbytheTCEQ. Operation of the District’s waterworks and sewer treatment facilities is subject to regulation by, among others,theEnvironmentalProtectionAgencyandtheTCEQ.Inmanycases,regulationspromulgatedbythese agencieshavebecomeeffectiveonlyrecentlyandaresubjecttofurtherdevelopmentandrevisions. UpperTrinityRegionalWaterDistrictContracts Upper Trinity Regional Water District(“Upper Trinity”) wascreatedby the State of Texasto constructand operate regional water and wastewater systems in Denton County and surrounding areas. Denton County Fresh Water Supply District No. 11 (“District No. 11”) entered into the Contracts (as defined in “RISK FACTORS—UpperTrinityRegionalWaterDistrictObligations”),pursuanttowhichUpperTrinitypledgesto delivercertainwatersupplyandwastewaterservicesasrequiredtoservetheneedsofthepropertyowners within the District, District 11‐A and District 11‐B. Pursuant to an Order Declaring Results and Canvassing ElectiontoDivideDentonCountyFreshWaterSupplyDistrictNo.11intoTwoNewDistricts,datedMay6, 2003, the rights and obligations of District 11 under the Contracts were retained by District 11‐A. Further pursuanttotheContracts,District11‐Ahascontractedfor3,000,000gpdpeakflowoftreatedwatersupply and 716,000 gpd of wastewatertreatment capacity forthe benefit of the District, District 11‐A and District 11‐B. The allocation to District 11‐A of 716,000 gpd of wastewater treatment capacity is based on its subscriptionof262,000gpdofcapacityinanexpansionofUpperTrinity’sRiverbendWastewaterTreatment Plant (the “Riverbend Plant”), which expansion is currently expected to be completed by mid‐2019. This subscriptionincreases(bysuch262,000gpd)District11‐A’spreviousallocationof454,000gpdofRiverbend Planttreatmentcapacity. The Upper Trinity water and wastewater system is financed by the Upper Trinity through the issuance of bonds payable from and secured by payments made under the Contracts and other similar contracts with other members and customers of Upper Trinity. Denton 380, on behalf of the District, District 11‐A and District 11‐B, has advanced funds for construction of certain Upper Trinity facilities that will serve the districts.SuchfundsattributabletotheconstructionoffacilitiesservingtheDistrict,District11‐AandDistrict 11‐BareexpectedtobereimbursedtoDistrict11‐A(and,inturn,toDenton380)fromtheproceedsoffuture UpperTrinitybondissues(“UpperTrinityBonds”).PursuanttotheJointUtilityContract(asdefinedin“RISK FACTORS—JointUtilityContract”),theDistrict,District11‐AandDistrict11‐Bhaveestablishedprocedures for the acquisition and allocation among the districts of treated water supply and wastewater capacity providedbyUpperTrinityundertheContractsandaprocedurefortheallocationofthecostsandexpenses arisingundertheContracts.Topayitsshareofsuchcostsandexpenses,eachdistricthasagreedtofixand collect water and sewer rates and to levy a contract tax, if necessary, to meet its obligations. None of the District,District11‐AorDistrict11‐Bhasleviedacontracttax,andDenton380hasmadeoperatingadvances ontheirbehalf.AlloftheDistrictsarecurrentintheirrespectivepaymentsundertheJointUtilityContract, andtheJointUtilityContractisinfullforceandeffect.See“RISKFACTORS—JointUtilityContract.” 42 DescriptionoftheSystem ‐WaterSupply‐ As described above under “Upper Trinity Regional Water District Contracts,” the District’s water supply is obtained from Upper Trinity. Pursuanttothe Joint Utility Contract, the Districthas the contractual right to 501,000 gpd of treated water, which is sufficient to serve at least 579 single‐family residential homes. See “Modification of Capacity Allocations” below. For treated water, the District is required to pay its pro‐rata share of a current annual Demand Charge (as defined in the Contracts) of $411,500 per million gpd subscribedcapacityandacurrentmonthlyVolumeCharge(asdefinedintheContracts)of$1.19per1,000 gallons used. As of April 12, 2017, the District was serving approximately 438 active residential water connections(including38homesunderconstruction). ‐WastewaterTreatment‐ The District’s wastewater is treated by the Riverbend Plant owned and operated by Upper Trinity, which currently has 2,000,000 gallons per day (“gpd”) of treatment capacity constructed and operational. See “Upper Trinity Regional Water District Contracts” above. Pursuant to the Joint Utility Contract, the District currently has the right to 59,200 gpd of wastewater treatment capacity, which is sufficient to serve 320 single‐family connections based on the wastewater “flow factor” presented in the District’s application to TCEQ for approval of issuance of the Bonds, which application was approved pursuant to the TCEQ Order. Upon completion of construction of the expansion of the Riverbend Plant discussed above under “Upper Trinity Regional Water District Contracts,” the District’s wastewater treatment capacity allocation will increase to 110,100 gpd, which would be sufficient to serve 595 single‐family connections using the flow factor discussed above. See “Modification of Capacity Allocations” below. For wastewater treatment, the Districtisrequiredtopayitspro‐ratashareof acurrentannualFixedOperationsandMaintenanceChargeof $490,000,anannualJointFacilitiesCapitalChargeof$57,225,andacurrentmonthlyVolumeChargeof$1.34 per1,000gallonstreated.CollectionofwastewaterbyUpperTrinityisaccomplishedbyundergroundpiping. AsofApril12,2017,theDistrictwasservingapproximately438activeresidentialwastewaterconnections (including38homeunderconstruction). AlthoughcurrentlytheRiverbendPlantexpansionisexpectedtobecompletedbymid‐2019,theDistrictcan makenoassuranceswithrespecttotheultimatedateofcompletionandresultingincreaseincontractually allocatedtreatmentcapacityundertheJointUtilityContract,asdescribedabove. Upper Trinity has indicated to District 11‐A that as a subscribing participant in the Riverbend Plant expansion,unusedcapacityintheRiverbendPlantwouldbeavailabletoDistrict11‐A(andconsequentlyalso toDistrict11‐BandtheDistrictundertheJointUtilityContract)onaninterimbasispendingcompletionof suchexpansion.TheDistricthasconcludedthatadequatephysicalwastewatertreatmentcapacitycurrently isavailabletoservewastewaterconnectionsnowactivewithintheDistrict.Inaddition,theDistrictbelieves thatadequatewastewatertreatmentcapacitywillbeavailabletoservewastewaterconnectionsthatbecome activeduringtheinterimperiodpriortocompletionoftheRiverbendPlantexpansion.However,theDistrict canmakenoassurancesrelativetotheavailabilityofsuchfuturetreatmentcapacitypriortocompletionof theexpansion. ‐ModificationofCapacityAllocations‐ As noted above, the District’s contractual allocations of water supply capacity and wastewater treatment capacity(uponcompletionoftheRiverbendPlantexpansiondiscussedabove)underthecurrentJointUtility Contract will be slightly less than planning‐based requirements to serve full build‐out of the District. The Districtexpectsthatcontractedcapacityallocationswillbemodifiedthroughnecessarycontractamendments inordertoaddresstheseslightcapacitydeficits. ‐Drainage‐ The District generally drains to the south to tributaries of Lewisville Lake located on the Elm Fork of the TrinityRiver.AccordingtotheDistrict’sengineer,noneofthedevelopablelandwithintheDistrictiswithin the100‐yearfloodplain. 43 ‐Roads‐ Certain of the District’s roads and ancillary improvements (“Road System”) that lie within the District’s boundaries have been funded with proceeds from District’s previously issued Bonds. Construction of the District’s roads issubjectto certain regulation by Denton County. The roads in the Districtare constructed with reinforced concrete pavement with curbs on cement or lime stabilized subgrade. Remaining streets provide local interior service within the District. The Road System also includes streetlights and franchise utilities(power,phoneandcable).Publicutilitiessuchaswater,wastewaterandstormdrainagearetypically locatedwithinstreetrightofways.TheRoadSystemismaintainedbytheDistrict. HistoricalOperationsoftheDistrict ThefollowingisasummaryoftheDistrict’sOperatingFundactivityforthelast5years.Thefiguresforthe fiscalyearsendingFebruary29,2013throughFebruary29,2017,wereobtainedfromtheDistrict’sannual financialreports,referencetowhichisherebymade.Thefiguresforfiscalyear2017wereobtainedfromthe bookkeeper and are unaudited. The District is required by statute to have a certified public accountant prepareandfileanannualauditofitsfinancialrecordswiththeTCEQ. The Bonds are payable from the levy of an annual ad valorem tax, without legal limitation as to rate or amount,uponalltaxablepropertyintheDistrict.Netrevenues,ifany,derivedfromtheDistrictoperations arenotpledgedtothepaymentoftheBondsbutareavailableforanylawfulpurposes,includingpaymentof debt service of the Bonds,atthe discretion ofand upon action by the Board. It is not anticipated that any significantnetrevenueswillbeavailableforpaymentofdebtontheBonds. REVENUES: PropertyTaxes WaterService WastewaterService FireProtectionService PermitFees MiscellaneousRevenues TOTALREVENUES EXPENDITURES: ProfessionalFees ContractedServices PurchasedWaterService PurchasedWastewaterService Other CapitalOutlay TOTALEXPENDITURES Excess(Deficiency)ofRevenues OverExpenditures OTHERFINANCINGSOURCES(USES) DeveloperAdvances OtherUses NETCHANGEINFUNDBALANCE ___________________________________ (a) Unaudited. 2017(a) $444,320 195,727 170,186 30,181 193,000 32,768 $1,066,182 $95,247 157,878 238,780 55,319 67,110 ‐ $614,333 $451,848 $‐ (42,402) $409,446 FiscalYearEndedFebruary28, 2016 2015 2014 $248,320 $136,238 $54,557 105,221 62,177 20,460 89,695 50,160 17,241 16,835 8,237 3,137 82,500 68,500 54,000 13,703 4,690 3,005 $556,274 $330,002 $152,400 $86,003 $72,049 $60,062 96,179 65,957 23,845 212,958 199,010 188,212 27,079 17,581 11,179 53,177 43,428 30,897 100,000 ‐ ‐ $575,396 $398,025 $314,195 $(19,122) $(68,023) $(161,795) $165,715 ‐ $146,593 44 $64,434 ‐ $(3,589) $191,055 ‐ $29,260 2013 $22,791 ‐ ‐ ‐ 2,000 14 $24,805 $43,953 5,913 234,668 5,639 11,133 ‐ $301,306 $(276,501) $290,708 ‐ $14,207 LEGALMATTERS LegalOpinions The District will furnish to the Underwriter a transcript of certain certified proceedings incident to the issuanceandauthorizationoftheBonds,includingacertifiedcopyoftheapprovingopinionoftheAttorney GeneralofTexas,asrecordedintheBondRegisteroftheComptrollerofPublicAccountsoftheStateofTexas, totheeffectthattheAttorneyGeneralhasexaminedatranscriptofproceedingsauthorizingtheissuanceof theBonds,andthatbaseduponsuchexamination,theBondsarevalidandbindingobligationsoftheDistrict payablefromtheproceedsofanannualadvaloremtax,leviedwithoutlegallimitationastorateoramount, upon all taxable property within the District. The District will also furnish the approving legal opinion of McCall,Parkhurst&HortonL.L.P.,Dallas,Texas,BondCounsel,totheeffectthat,baseduponanexamination ofsuchtranscript,theBondsarevalidandbindingobligationsoftheDistrictundertheConstitutionandlaws 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 sovereign immunity and 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,bothastoprincipalandinterest,fromthelevyofadvaloremtaxes,withoutlegallimitationastorate oramount,uponalltaxablepropertywithintheDistrict. TheDistrictwillalsofurnishthelegalopinionofBondCounseltotheDistricttotheeffectthatinterestonthe Bondsisexcludablefromgrossincomeoftheownersthereofforfederalincometaxpurposesunderexisting law,subjecttothemattersdiscussedbelowunder“TAXMATTERS,”includingthealternativeminimumtaxon corporations. ThelegalfeestobepaidtoBondCounselforservicesrenderedinconnectionwiththeissuanceoftheBonds are based upon a percentage of bonds actually issued, sold and delivered, and therefore such fees are contingentuponthesaleanddeliveryoftheBonds. 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.Inrenderingalegalopinion,theattorneydoesnotbecomeaninsurerorguarantoroftheexpression ofprofessionaljudgment,ofthetransactionopinedupon,orofthefutureperformanceofthepartiestothe transaction,nordoestherenderingofanopinionguaranteetheoutcomeofanylegaldisputethatmayarise outofthetransaction. LegalReview InitscapacityasBondCounsel,McCall,Parkhurst&HortonL.L.P.,hasreviewedtheinformationappearingin this OFFICIAL STATEMENT under the captioned sections “THE BONDS (except for information under the subheadings “Annexation,” “Issuance of Additional Debt,” and “Estimated Use and Distribution of Bond Proceeds”), “MANAGEMENT OF THE DISTRICT—District Consultants—Bond Counsel,” “TAXING PROCEDURES,” “LEGAL MATTERS – Legal Opinions,” “TAX MATTERS,” and “CONTINUING DISCLOSURE OF INFORMATION”(exceptforinformationunderthesubheading“CompliancewithPriorUndertakings”)solely to determine whether such information fairly summarizes the documents, lawsand procedures referredto 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 passingupontheaccuracyorcompletenessofthisOFFICIALSTATEMENT.Nopersonisentitledtorelyupon such firm’s limited participation as an assumption of responsibility for, or an expression of opinion of any kindwithregardto,theaccuracyorcompletenessofanyoftheotherinformationcontainedherein. TAXMATTERS Opinion On the date of initial delivery ofthe Bonds, McCall, Parkhurst &HortonL.L.P., Dallas, Texas, Bond Counsel, will render its opinion that, in accordance with statutes, regulations, published rulings and court decisions existingonthedatethereof(“ExistingLaw”),(1)interestontheBondsforfederalincometaxpurposeswillbe excludablefromthe“grossincome”oftheholdersthereofand(2)theBondswillnotbetreatedas“specified private activity bonds” the interest on which would be included as an alternative minimum tax preference itemundersection57(a)(5)oftheInternalRevenueCodeof1986(the“Code”).Exceptasstatedabove,Bond 45 Counsel will express no opinion as to any other federal, state or local tax consequences of the purchase, ownershipordispositionoftheBonds. In rendering its opinion, Bond Counsel will rely upon (a) certain information and representations of the District,includinginformationandrepresentationscontainedintheDistrict'sfederaltaxcertificateand(b) covenantsoftheDistrictcontainedintheBonddocumentsrelatingtocertainmatters,includingarbitrageand the use of the proceeds of the Bonds and the property financed or refinanced therewith. Failure by the DistricttoobservetheaforementionedrepresentationsorcovenantscouldcausetheinterestontheBondsto becometaxableretroactivelytothedateofissuance. The Code and the regulations promulgated thereunder contain a number of requirements that must be satisfied subsequent to the issuance of the Bonds in order for interest on the Bonds to be, and to remain, excludable from gross income for federal income tax purposes. Failure to comply with such requirements maycauseinterestontheBondstobeincludedingrossincomeretroactivelytothedateofissuanceofthe Bonds.TheopinionofBondCounselisconditionedoncompliancebytheDistrictwithsuchrequirements,and Bond Counsel has not been retained to monitor compliance with these requirements subsequent to the issuanceoftheBonds. BondCounsel’sopinionrepresentsitslegaljudgmentbaseduponitsreviewofExistingLawandthereliance on the aforementioned information, representations and covenants. Bond Counsel’s opinion is not a guarantee of a result. Existing Law is subject to change by Congress and to subsequent judicial and administrativeinterpretationbythecourtsandtheDepartmentoftheTreasury.Therecanbenoassurance thatsuchExistingLawortheinterpretationthereofwillnotbechangedinamannerwhichwouldadversely affectthetaxtreatmentofthepurchase,ownershipordispositionoftheBonds. ArulingwasnotsoughtfromtheInternalRevenueServicebytheDistrictwithrespecttotheBondsorthe propertyfinancedorrefinancedwithproceedsoftheBonds.Noassurancescanbegivenastowhetherthe InternalRevenueServicewillcommenceanauditoftheBonds,orastowhethertheInternalRevenueService would agree with the opinion of Bond Counsel. If an Internal Revenue Service audit is commenced, under current procedures the Internal Revenue Service is likely to treat the District as the taxpayer and the Bondholdersmayhavenorighttoparticipateinsuchprocedure.Noadditionalinterestwillbepaiduponany determinationoftaxability. FederalIncomeTaxAccountingTreatmentofOriginalIssueDiscount The initial public offering price to be paid for one or more maturities of the Bonds may be less than the principalamountthereoforoneormoreperiodsforthepaymentofinterestontheBondsmaynotbeequal to the accrual period or be in excess of one year (the “Original Issue Discount Bonds”). In such event, the differencebetween(i)the“statedredemptionpriceatmaturity”ofeachOriginalIssueDiscountBond,and(ii) the initial offering price to the public of such Original Issue Discount Bond would constitute original issue discount.The“statedredemptionpriceatmaturity”meansthesumofallpaymentstobemadeontheBonds lesstheamountofallperiodicinterestpayments.Periodicinterestpaymentsarepaymentswhicharemade duringequalaccrualperiods(orduringanyunequalperiodifitistheinitialorfinalperiod)andwhichare madeduringaccrualperiodswhichdonotexceedoneyear. Under Existing Law, any owner who has purchased such Original Issue Discount Bond in the initial public offeringisentitledtoexcludefromgrossincome(asdefinedinsection61oftheCode)anamountofincome withrespecttosuchOriginalIssueDiscountBondequaltothatportionoftheamountofsuchoriginalissue discountallocabletotheaccrualperiod.Foradiscussionofcertaincollateralfederaltaxconsequences,see discussionsetforthbelow. Intheeventoftheredemption,saleorothertaxabledispositionofsuchOriginalIssueDiscountBondpriorto 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 includableingrossincome. UnderExistingLaw,theoriginalissuediscountoneachOriginalIssueDiscountBondisaccrueddailytothe statedmaturitythereof(inamountscalculatedasdescribedbelowforeachsix‐monthperiodendingonthe date before the semiannual anniversary dates of the date of the Bonds and ratably within each such six‐ 46 monthperiod)andtheaccruedamountisaddedtoaninitialowner'sbasisforsuchOriginalIssueDiscount Bondforpurposesofdeterminingtheamountofgainorlossrecognizedbysuchownerupontheredemption, saleorotherdispositionthereof.Theamounttobeaddedtobasisforeachaccrualperiodisequalto(a)the sumoftheissuepriceandtheamountoforiginalissuediscountaccruedinpriorperiodsmultipliedbythe yield to stated maturity (determined on the basis of compounding at the close of each accrual period and properlyadjustedforthelengthoftheaccrualperiod)less(b)theamountspayableascurrentinterestduring suchaccrualperiodonsuchOriginalIssueDiscountBond. The federal income tax consequences of the purchase, ownership, redemption, sale or other disposition of OriginalIssueDiscountBondswhicharenotpurchasedintheinitialofferingattheinitialofferingpricemay be determined according to rules which differ from those described above. All owners of Original Issue DiscountBondsshouldconsulttheirowntaxadvisorswithrespecttothedeterminationforfederal,stateand localincometaxpurposesofthetreatmentofinterestaccrueduponredemption,saleorotherdispositionof suchOriginalIssueDiscountBondsandwithrespecttothefederal,state,localandforeigntaxconsequences ofthepurchase,ownership,redemption,saleorotherdispositionofsuchOriginalIssueDiscountBonds. CollateralFederalIncomeTaxConsequences Thefollowingdiscussionisasummaryofcertaincollateralfederalincometaxconsequencesresultingfrom the purchase, ownership or disposition of the Bonds. This discussion is based on Existing Law, which is subjecttochangeormodification,retroactively. Thefollowingdiscussionisapplicabletoinvestors,otherthanthosewhoaresubjecttospecialprovisionsof theCode,suchasfinancialinstitutions,propertyandcasualtyinsurancecompanies,lifeinsurancecompanies, individualrecipientsofSocialSecurityorRailroadRetirementbenefits,individualsallowedanearnedincome credit,certainScorporationswithaccumulatedearningsandprofitsandexcesspassiveinvestmentincome, foreigncorporationssubjecttothebranchprofitstax,taxpayersqualifyingforthehealthinsurancepremium assistancecreditandtaxpayerswhomaybedeemedtohaveincurredorcontinuedindebtednesstopurchase tax‐exemptobligations. THE DISCUSSION CONTAINED HEREIN MAY NOT BE EXHAUSTIVE. INVESTORS, INCLUDING THOSE WHO ARESUBJECTTOSPECIALPROVISIONSOFTHECODE,SHOULDCONSULTTHEIROWNTAXADVISORSASTO THETAXTREATMENTWHICHMAYBEANTICIPATEDTORESULTFROMTHEPURCHASE,OWNERSHIPAND 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 alternativeminimumtaximposedoncorporationsbysection55oftheCode. 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. Section1276oftheCodeprovidesforordinaryincometaxtreatmentofgainrecognizeduponthedisposition ofatax‐exemptobligation,suchastheBonds,ifsuchobligationwasacquiredata“marketdiscount”andifthe fixed maturity of such obligation is equal to, or exceeds, one year from the date of issue. Such treatment appliesto“marketdiscountbonds”totheextentsuchgaindoesnotexceedtheaccruedmarketdiscountof 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 redemptionpriceatmaturityor,inthecaseofabondissuedatanoriginalissuediscount,the“revisedissue price”(i.e.,theissuepriceplusaccruedoriginalissuediscount).The“accruedmarketdiscount”istheamount whichbearsthesameratiotothemarketdiscountasthenumberofdaysduringwhichtheholderholdsthe obligationbearstothenumberofdaysbetweentheacquisitiondateandthefinalmaturitydate. State,LocalandForeignTaxes Investorsshouldconsulttheirowntaxadvisorsconcerningthetaximplicationsofthepurchase,ownershipor dispositionoftheBondsunderapplicablestateorlocallaws.Foreigninvestorsshouldalsoconsulttheirown taxadvisorsregardingthetaxconsequencesuniquetoinvestorswhoarenotUnitedStatespersons. 47 InformationReportingandBackupWithholding Subject to certain exceptions, information reports describing interest income, including original issue discount, with respect to the Bonds will be sent to each registered holder and to the IRS. Payments of interest and principal may be subject to backup withholding under section 3406 of the Code if a recipient of the payments fails to furnish to the payor such owner’s social security number or other taxpayer identification number (“TIN”), furnishes an incorrect TIN, or otherwise fails to establish an exemption from the backup withholding tax. Any amounts so withheld would be allowed as a credit against the recipient’s federal income tax. Special rules apply to partnerships, estates and trusts, and in certain circumstances, and in respect of Non-U.S. Holders, certifications as to foreign status and other matters may be required to be provided by partners and beneficiaries thereof. QualifiedTax‐ExemptObligationsforFinancialInstitutions Section265(a)oftheCodeprovides,inpertinentpart,thatinterestpaidorincurredbyataxpayer,includinga “financialinstitution,”onindebtednessincurredorcontinuedtopurchaseorcarrytax‐exemptobligationsis not deductible in determining the taxpayer's taxable income. Section 265(b) of the Code provides an exceptiontothedisallowanceofsuchdeductionforanyinterestexpensepaidorincurredonindebtednessof a taxpayer that is a “financial institution” allocable to tax‐exempt obligations, other than “private activity bonds,” that are designated by a “qualified small issuer” as “qualified tax‐exempt obligations.” A “qualified small issuer” is any governmental issuer (together with any “on‐behalf of” and “subordinate” issuers) who issuesnomorethan$10,000,000oftax‐exemptobligationsduringthecalendaryear.Section265(b)(5)ofthe Codedefinestheterm“financialinstitution”asany“bank”describedinSection585(a)(2)oftheCode,orany personacceptingdepositsfromthepublicintheordinarycourseofsuchperson'stradeorbusinessthatis subject to federal or state supervision as a financial institution. Notwithstanding the exception to the disallowance of the deduction of interest on indebtedness related to “qualified tax‐exempt obligations” providedbySection265(b)oftheCode,Section291oftheCodeprovidesthattheallowabledeductiontoa “bank,” as defined in Section 585(a)(2) of the Code, for interest on indebtedness incurred or continued to purchase “qualified tax‐exempt obligations” shall be reduced by twenty‐percent (20%) as a “financial institutionpreferenceitem.” 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 that would assure, or to refrain from such action that 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 publicexceeds$10,000,000,thereisareasonablebasistoconcludethatthepaymentofademinimis amountofpremiuminexcessof$10,000,000isdisregarded;however,theInternalRevenueService couldtakeacontraryview.IftheInternalRevenueServicetakesthepositionthattheamountofsuch premium is not disregarded, then such obligations might fail to satisfy the aforementioned dollar limitationandtheBondswouldnotbe“qualifiedtax‐exemptobligations.” NO‐LITIGATIONCERTIFICATE WiththedeliveryoftheBonds,thePresidentandSecretaryoftheBoardwill,onbehalfoftheDistrict,execute anddelivertotheInitialPurchaseracertificatedatedasofthedateofdelivery,totheeffectthatnolitigation ofanynaturehasbeenfiledorispendingagainsttheDistrict,torestrainorenjointheissuanceordeliveryof the Bonds; affecting the provision made for the payment of or security for the Bonds; in any manner questioningtheauthorityorproceedingsfortheissuanceoftheBonds;affecting,thecorporateexistenceor boundariesoftheDistrictortheauthorityoftheofficersoftheDistricttoexecute,sign,anddelivertheBonds. NOMATERIALADVERSECHANGE TheobligationsoftheUnderwritertotakeandpayfortheBonds,andtheDistricttodelivertheBonds,are subjecttotheconditionthat,uptothetimeofdeliveryofandreceiptofpaymentfortheBonds,thereshall havebeennomaterialadversechangeinthefinancialconditionoftheDistrictsubsequenttothedateofsale fromthatsetforthorcontemplatedinthePreliminaryOfficialStatement,asitmayhavebeensupplemented oramendedthroughthedateofthesale. 48 CONTINUINGDISCLOSUREOFINFORMATION The offering of the Bonds qualifies for the Rule 15c2‐12(d)(2) exemption from Rule 15c2‐12(b)(5) of the UnitedStatesSecuritiesandExchangeCommission(the“SEC”)regardingtheDistrict’scontinuingdisclosure obligations because the District does not have more than $10,000,000 in aggregate amount of outstanding bondsandnopersoniscommittedbycontractorotherarrangementwithrespecttopaymentoftheBonds.In theBondOrder,theDistricthasmadethefollowingagreementforthebenefitoftheregisteredandbeneficial ownersoftheBonds.TheDistrictisrequiredtoobservetheagreementforsolongasitremainsobligatedto advance funds to pay the Bonds. Under the agreement, the District will be obligated to provide certain updated financial information and operating data annually, and timely notice of specified events, to the Municipal Securities Rulemaking Board (the “MSRB”). The MSRB has established the Electronic Municipal MarketAccess(“EMMA”)System. AnnualReports TheDistrictwillprovidecertainfinancialinformationandoperatingdatawhichiscustomarilypreparedby the District and is publicly available, annually to the MSRB. The financial information and operating data whichwillbeprovidedwithrespecttotheDistrictisfoundinAPPENDIXA(theDistrict’sAuditedFinancial ReportandcertainSupplementalSchedules).TheDistrictwillupdateandprovidethisinformationannually totheMSRBwhenandifavailable,butinanyeventwithintwelvemonthsaftertheendofeachofitsfiscal years ending in or after 2017. Any financial statements so provided shall be prepared in accordance with generallyacceptedaccountingprinciplesorothersuchprinciplesastheDistrictmayberequiredtoemploy fromtimetotimepursuanttostatelaworregulation,andauditediftheauditreportiscompletedwithinthe period during which it must be provided. If the audit report is not complete within such period, then the Districtshallprovide unauditedfinancial statements for the applicable fiscal year tothe MSRBwithin such twelvemonthperiod,andauditedfinancialstatementswhentheauditreportbecomesavailable. The District’s current fiscal year end is the last day of February. Accordingly, it must provide updated information by August 31 in each year, unless the Districtchangesits fiscal year. If the District changes its fiscalyear,itwillnotifytheMSRBofthechange. EventNotices The District will provide timely notices of certain events to the MSRB, but in no event will such notices be providedtotheMSRBinexcessoftendaysaftertheoccurrenceofanevent.TheDistrictwillprovidenotice ofanyofthefollowingeventswithrespecttotheBonds:(1)principalandinterestpaymentdelinquencies; (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) substitutionofcreditorliquidityproviders,ortheirfailuretoperform;(6)adversetaxopinions,theissuance bytheInternalRevenueServiceofproposedorfinaldeterminationsoftaxability,NoticesofProposedIssue (IRSForm5701‐TEB)orothermaterialnoticesordeterminationswithrespecttothetax‐exemptstatusofthe Bonds, or other material events affecting the tax‐exempt status of the Bonds; (7) modifications to rights of beneficialownersoftheBonds,ifmaterial;(8)bondcalls,ifmaterial,andtenderoffers;(9)defeasances;(10) release, substitution, orsale of propertysecuring repayment of the Bonds, if material; (11) rating changes; (12)bankruptcy,insolvency,receivershiporsimilareventoftheDistrictorotherobligatedpersonwithinthe meaning of CFR §240.15c2‐12 (the “Rule” or “SEC Rule 15c2‐12”); (13) consummation of a merger, consolidation,oracquisitioninvolvingtheDistrictorotherobligatedpersonwithinthemeaningoftheRule orthesaleofallorsubstantiallyalloftheassetsoftheDistrictorotherobligatedpersonwithinthemeaning oftheRule,otherthanintheordinarycourseofbusiness,theentryintoadefinitiveagreementtoundertake suchanactionortheterminationofadefinitiveagreementrelatingtoanysuchactions,otherthanpursuant toitsterms,ifmaterial;and(14)appointmentofasuccessororadditionaltrusteeorthechangeofnameofa trustee,ifmaterial.Theterm“material”whenusedinthisparagraphshallhavethemeaningascribedtoit underfederalsecuritieslaws.NeithertheBondsnortheBondOrdermakesanyprovisionfordebtservice reserves or liquidity enhancement. In addition, the District will provide timelynoticeofanyfailure by the District to provide financial information, operating data, or financial statements in accordance with its agreementdescribedaboveunder“AnnualReports.” 49 AvailabilityofInformationfromMSRB The District has agreed to provide the foregoing information only to the MSRB. The information will be availabletoholdersofBondsatwww.emma.msrb.org. LimitationsandAmendments 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 completepresentationofitsfinancialresultsofoperations,conditionorprospectsoragreedtoupdateany information that is provided, exceptas described above. The District makes no representationor warranty concerningsuchinformationorconcerningitsusefulnesstoadecisiontoinvestinorsellBondsatanyfuture date.TheDistrictdisclaimsanycontractualortortliabilityfordamagesresultinginwholeorinpartfromany breach of its continuing disclosure agreement or from any statement made pursuant to its agreement, althoughholdersofBondsmayseekawritofmandamustocompeltheDistricttocomplywithitsagreement. 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 permittedanunderwritertopurchaseorsellBondsintheofferingmadeherebyincompliancewiththeRule, takingintoaccountanyamendmentsorinterpretationsofSECRule15c2‐12tothedateofsuchamendment, 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 materiallyimpairtheinterestsoftheholdersandbeneficialownersoftheBonds.IftheDistrictsoamendsthe agreement, it has agreed to include with any financial information or operating data next provided in accordancewithitsagreementdescribedaboveunder“AnnualReports”anexplanation,innarrativeform,of the reasons for the amendment and of the impact of any change in the type of financial information and operatingdatasoprovided.TheDistrictmayalsoamendorrepealitscontinuingdisclosureagreementifthe SECamendsorrepealstheapplicableprovisionsoftheSECRule15c2‐12oracourtoffinaljurisdictionenters judgment that such provisions of such rule are invalid, and the District also may amend its continuing disclosureagreementinitsdiscretioninanyothermannerorcircumstance,butineithercaseonlyifandto theextentthattheprovisionsofthissentencewouldnotpreventanunderwriterfromlawfullypurchasingor sellingBondsintheprimaryofferingoftheBonds. CompliancewithPriorUndertakings TheDistricthascompliedinallmaterialrespectswithitspreviouscontinuingdisclosureagreementsmadein accordancewithSECRule15c2‐12. OFFICIALSTATEMENT General TheinformationcontainedinthisOfficialStatementhasbeenobtainedprimarilyfromtheDistrict'srecords, theDistrictEngineer,theDevelopers,theTaxAssessor/Collector,theAuditor,theDentonCentralAppraisal Districtandothersourcesbelievedtobereliable;however,norepresentationismadeastotheaccuracyor completenessoftheinformationcontainedherein,exceptasdescribedbelow.Thesummariesofthestatutes, resolutions and engineering and other related reports set forth herein are included subject to all of the provisionsofsuchdocuments.Thesesummariesdonotpurporttobecompletestatementsofsuchprovisions andreferenceismadetosuchdocumentsforfurtherinformation. The District'sauditedfinancial statements for the year endedFebruary 29, 2016, were prepared by McCall GibsonSwedlundBarfoot,PLLC,andhavebeenincludedhereinas“APPENDIXA.”McCallGibsonSwedlund Barfoot PLLC, Certified Public Accountant, has consented to the publication of such financial statements in thisPreliminaryOfficialStatement. 50 Experts TheinformationcontainedinthisOfficialStatementrelatingtodevelopmentandthestatusofdevelopment withintheDistrictgenerallyand,inparticular,theinformationinthesectioncaptioned“THEDEVELOPERS– TheDevelopers”hasbeenprovidedbyeachoftheDevelopersandhasbeenincludedhereininrelianceupon theauthorityandknowledgeofeachsuchpartyconcerningthemattersdescribedtherein. The information contained in this Official Statement relating to the District’s financial statements, in particular,theinformationinAPPENDIXA,hasbeenprovidedbytheAuditorandhasbeenincludedhereinin relianceupontheirauthorityandknowledgeofsuchpartyconcerningthemattersdescribedtherein. The information contained in this Official Statement relating to engineering and to the description of the System generally and, in particular, the engineering information included in the sections captioned “THE DISTRICT”and“THESYSTEM”hasbeenprovidedbytheEngineerandhasbeenincludedhereininreliance upontheauthorityofsaidfirmasexpertsinthefieldofcivilengineering. TheinformationcontainedinthisOfficialStatementrelatingtoassessedvaluationsofpropertygenerallyand, in particular, that information concerning valuations, analysis of the tax base and percentages of tax collections contained in the sections captioned “TAX DATA” has been provided by the Denton Central AppraisalDistrictandtheDistrict'sTaxAssessor/Collector,andhasbeenincludedhereininrelianceuponthe authorityofsuchpartiesasexpertsinthefieldoftaxassessingandcollecting. CertificationastoOfficialStatement AtthetimeofpaymentforanddeliveryoftheBonds,theDistrictwillfurnishtheUnderwritersacertificate, executed by the President and Secretary of the Board of Directors of the District, acting in their official capacities,totheeffectthattothebestoftheirknowledgeandbelief:(a)thedescriptionsandstatementsof 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 financialaffairs, areconcerned, this Official Statementdid notand does notcontain an untrue statementofamaterialfactoromittostateamaterialfactrequiredtobestatedhereinornecessarytomake thestatementsherein,inthelightofthecircumstancesunderwhichtheyweremade,notmisleading;and(c) insofarasthedescriptionsandstatements,includingfinancialdata,containedinthisOfficialStatement,ofor pertaining to entities other than the District, such statements and data have been obtained from sources whichtheDistrictbelievestobereliable,andtheDistricthasnoreasontobelievethattheyareuntrueinany materialrespect. UpdatingtheOfficialStatement If, subsequent to the date of the Official Statement to and including the date the Underwriter is no longer requiredtoprovideandOfficialStatementtopotentialcustomerswhorequestthesamepursuanttoSECRule 15c2‐12(the“Rule”)(theearlierof(i)90daysfromthe“endoftheunderwritingperiod”(asdefinedinthe Rule) and (ii) the time when the Official Statement is available to any person from a nationally recognized repositorybutinnocaselessthan25daysafterthe“endoftheunderwritingperiod”),theDistrictlearnsoris notifiedbytheUnderwriterofanyadverseeventwhichcausesanyofthekeyrepresentationsintheOfficial Statement to be materially misleading, the District will promptly prepare and supply to the Underwriter a supplementtotheOfficialStatementwhichcorrectssuchrepresentationtothereasonablesatisfactionofthe Underwriter.TheobligationoftheDistricttoupdateorchangetheOfficialStatementwillterminatewhenthe DistrictdeliverstheBondstotheUnderwriter(the“endoftheunderwritingperiod”withinthemeaningof theRule),unlesstheUnderwriterprovideswrittennoticetheDistrictthatlessthanalloftheBondshavebeen sold to ultimate customers on or before such date, in which case the obligation to update or change the OfficialStatementwillextendforanadditionalperiodoftimeof25daysafteralloftheBondshavebeensold toultimatecustomers.IntheeventtheUnderwriterprovideswrittennoticetotheDistrictthatlessthanallof the Bonds have been sold to ultimate customers, the Underwriter agrees to notify the District in writing followingtheoccurrenceofthe“endoftheunderwritingperiod”asdefinedintheRule. 51 OfficialStatement“DeemedFinal” 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 “deemed final” by the District as of the date hereof (or of any such supplement or correction). TheOfficialStatement,whenfurthersupplementedbyaddinginformationspecifyingtheinterestratesand certainotherinformationrelatingtotheBonds,shallconstitutea“finalofficialstatement”oftheDistrictwith respecttotheBonds,asthattermisdefinedinSECRule15c2‐12. CONCLUDINGSTATEMENT TheinformationsetforthhereinhasbeenobtainedfromtheDistrict’srecords,auditedfinancialstatements andothersourceswhichareconsideredtobereliable.Thereisnoguaranteethatanyoftheassumptionsor estimates contained herein will ever be realized. All of the summaries of the statutes, documents and resolutions contained in this Official Statement are made subject to all of the provisions of such statutes, documentsandresolutions.Thesesummariesdonotpurporttobecompletestatementsofsuchprovisions andreferenceismadetosuchsummarizeddocumentsforfurtherinformation.Referenceismadetoofficial documentsinallrespects. ThisOfficialStatementwasapprovedbytheBoardofDirectorsofDentonCountyFreshWaterSupplyDistrict No.11‐Casofthedatespecifiedonthefirstpagehereof. /s/ ___________________________________________ RobbieL.Patman President,BoardofDirectors DentonCountyFreshWaterSupplyDistrictNo.11‐C ATTEST: /s/ ____________________________________________ ShirleyRoss Secretary,BoardofDirectors DentonCountyFreshWaterSupplyDistrictNo.11‐C 52 APPENDIXA FINANCIALSTATEMENTSOFTHEDISTRICT DENTON COUNTY FRESH WATER SUPPLY DISTRICT NO. 11-C DENTON COUNTY, TEXAS ANNUAL FINANCIAL REPORT FEBRUARY 29, 2016 McCALL GIBSON SWEDLUND BARFOOT PLLC Certified Public Accountants DENTON COUNTY FRESH WATER SUPPLY DISTRICT NO. 11-C DENTON COUNTY, TEXAS ANNUAL FINANCIAL REPORT FEBRUARY 29, 2016 TABLE OF CONTENTS PAGE INDEPENDENT AUDITOR’S REPORT 1-2 MANAGEMENT’S DISCUSSION AND ANALYSIS 3-7 BASIC FINANCIAL STATEMENTS STATEMENT OF NET POSITION AND GOVERNMENTAL FUNDS BALANCE SHEET 8-9 RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET POSITION 10 STATEMENT OF ACTIVITIES AND GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES 11-12 RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES NOTES TO THE FINANCIAL STATEMENTS 13 14-29 REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE-BUDGET AND ACTUAL-GENERAL FUND 31 SUPPLEMENTARY INFORMATION REQUIRED BY THE WATER DISTRICT FINANCIAL MANAGEMENT GUIDE NOTES REQUIRED BY THE WATER DISTRICT FINANCIAL MANAGEMENT GUIDE (Included in the notes to the financial statements) SERVICES AND RATES GENERAL FUND EXPENDITURES TAXES LEVIED AND RECEIVABLE LONG-TERM DEBT SERVICE REQUIREMENTS 33-35 36 37-38 39 CHANGE IN LONG-TERM BOND DEBT 40-41 COMPARATIVE SCHEDULE OF REVENUES AND EXPENDITURES GENERAL FUND AND DEBT SERVICE FUND - FIVE YEARS 42-45 BOARD MEMBERS, KEY PERSONNEL AND CONSULTANTS 46-47 McCALL GIBSON SWEDLUND BARFOOT PLLC Certified Public Accountants 13100 Wortham 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 www.mgsbpllc.com INDEPENDENT AUDITOR’S REPORT Board of Directors Denton County Fresh Water Supply District No. 11-C Denton County, Texas We have audited the accompanying financial statements of the governmental activities and each major fund of Denton County Fresh Water Supply District No. 11-C (the “District”), as of and for the year ended February 29, 2016, and the related notes to the financial statements, which collectively comprise the District’s basic financial statements as listed in the table of contents. Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor’s Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design 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. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Member of American Institute of Certified Public Accountants Texas Society of Certified Public Accountants Board of Directors Denton County Fresh Water Supply District No. 11-C 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 February 29, 2016, and the respective changes in financial position for the year then ended in accordance with accounting principles generally accepted in the United States of America. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that Management’s Discussion and Analysis and the Schedule of Revenues, Expenditures, and Changes in Fund Balance – Budget and Actual – General Fund 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. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the District’s basic financial statements. 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 underlying accounting and other records used to prepare the basic financial statements. The 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 basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic 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 basic financial statements as a whole. McCall Gibson Swedlund Barfoot PLLC Certified Public Accountants Houston, Texas June 15, 2016 -2- DENTON COUNTY FRESH WATER SUPPLY DISTRICT NO. 11-C MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED FEBRUARY 29, 2016 Management’s discussion and analysis of Denton County Fresh Water Supply District No. 11-C’s (the “District”) financial performance provides an overview of the District’s financial activities for the year ended February 29, 2016. Please read it in conjunction with the District’s financial statements. 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 financial statements. The combined fund financial statements and governmentwide financial statements combine both: (1) the Statement of Net Position and Governmental Funds Balance Sheet and (2) the Statement of Activities and Governmental Funds 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 Position. This information is found in the Statement of Net Position column. The Statement of Net Position is the Districtwide statement of its financial position presenting information that includes all of the District’s assets and liabilities, with the difference reported as net position. Over time, increases or decreases in net position may serve as a useful indicator of whether 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 the Statement of Activities reports how the District’s net position changed during the current 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 three governmental fund types. The General Fund accounts for resources not accounted for in another fund, customer service revenues, operating 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 collecting taxes. The Capital Projects Fund accounts for financial resources restricted, committed or assigned for acquisition or construction of facilities and related costs. -3- DENTON COUNTY FRESH WATER SUPPLY DISTRICT NO. 11-C MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED FEBRUARY 29, 2016 FUND FINANCIAL STATEMENTS 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 Position and the Reconciliation of the Governmental Funds Statement of Revenues, Expenditures and Changes in Fund Balances to the Statement of Activities explain the differences between the two presentations and assist in understanding the differences between these two perspectives. NOTES TO THE FINANCIAL STATEMENTS The accompanying notes to the financial statements provide information essential to a full understanding of the government-wide and fund financial statements. OTHER INFORMATION In addition to the financial statements and accompanying notes, this report also presents certain required supplementary information (“RSI”). A budgetary comparison schedule is included as RSI for the General Fund. GOVERNMENT-WIDE FINANCIAL ANALYSIS Net position may serve over time as a useful indicator of the District’s financial position. In the case of the District, liabilities exceeded assets by $1,508,211 as of February 29, 2016. The following is a comparative analysis of government-wide changes in the Statement of Net Position as of February 29, 2016 and February 28, 2015. -4- DENTON COUNTY FRESH WATER SUPPLY DISTRICT NO. 11-C MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED FEBRUARY 29, 2016 GOVERNMENT-WIDE FINANCIAL ANALYSIS (Continued) Summary of Changes in the Statement of Net Position 2016 Current and Other Assets Capital Assets Change Positive (Negative) 2015 $ 709,284 5,325,240 $ 164,035 1,899,066 $ 545,249 3,426,174 $ 6,034,524 $ 2,063,101 $ 3,971,423 Due to Developer Bonds Payable Other Liabilities $ 4,515,403 2,905,567 121,765 $ 3,237,592 $ (1,277,811) (2,905,567) (68,377) Total Liabilities Net Position: Net Investment in Capital Assets Restricted Unrestricted $ 7,542,735 $ $ (4,251,755) $ (1,890,624) 184,051 198,362 $ $ (1,641,048) 184,051 1,176,665 (1,508,211) $ $ (280,332) Total Assets Total Net Position $ 53,388 3,290,980 (249,576) (978,303) (1,227,879) The following table provides a summary of the District’s operations for the years ended February 29, 2016 and February 28, 2015. The District’s net position decreased by $280,332. Summary of Changes in the Statement of Activities 2016 Revenues: Property Taxes Charges for Services Other Revenues Total Revenues $ $ Total Expenses Change in Net Position 2015 $ $ $ (280,332) $ (1,227,879) $ (1,508,211) -5- 133,343 122,443 71,321 327,107 $ $ 446,562 843,524 Net Position, Beginning of Year Net Position, End of Year 255,192 211,751 96,249 563,192 Change Positive (Negative) (119,455) (396,962) $ (1,108,424) $ (1,227,879) 121,849 89,308 24,928 236,085 (160,877) (119,455) $ (280,332) DENTON COUNTY FRESH WATER SUPPLY DISTRICT NO. 11-C MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED FEBRUARY 29, 2016 FINANCIAL ANALYSIS OF THE DISTRICT’S GOVERNMENTAL FUND The District’s combined fund balances as of February 29, 2016, were $506,909, an increase of $463,063 from the prior year. The General Fund fund balance increased by $146,593, primarily due to tax and service revenues exceeding operating and administrative costs in addition to developer advances received during the year. The Debt Service Fund fund balance increased by $213,564, primarily due to proceeds received from the sale of Series 2015 Road Bonds. The Capital Projects Fund fund balance increased by $102,906, primarily due to the sale of Series 2015 Road Bonds, a portion which was on hand at year-end. GENERAL FUND BUDGETARY HIGHLIGHTS The Board of Directors amended the budget during the current fiscal year primarily to increase the budgeted amount for property tax revenue. Actual revenues were more than budgeted revenues by $61,626 primarily due to higher than anticipated service revenues. Actual expenditures exceeded budgeted expenditures by $45,407. See the budget to actual comparison. CAPITAL ASSETS Capital assets as of February 29, 2016, total $5,325,240 (net of accumulated depreciation) and include the water, wastewater and drainage systems as well as roads. Capital assets additions during the year include water, wastewater, drainage and paving improvements for Paloma Creek South, phases 9D1 and 10A. Capital Assets At Year-End, Net of Accumulated Depreciation Capital Assets, Net of Accumulated Depreciation: Roads Water System Wastewater System Drainage System Total Net Capital Assets $ 2016 2015 2,563,368 926,700 801,146 1,034,026 1,005,364 462,362 340,830 90,510 5,325,240 -6- $ 1,899,066 Change Positive (Negative) 1,558,004 464,338 460,316 943,516 $ 3,426,174 DENTON COUNTY FRESH WATER SUPPLY DISTRICT NO. 11-C MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED FEBRUARY 29, 2016 LONG-TERM DEBT At year-end, the District had total bond debt payable of $2,985,000. The changes in the debt position of the District during the year ended February 29, 2016, are summarized as follows: Bond Debt Payable, March 1, 2015 Add: Bond Sale $ -02,985,000 Bond Debt Payable, February 29, 2016 $ 2,985,000 The District’s bonds were not rated. CONTACTING THE DISTRICT’S MANAGEMENT This financial report is designed to provide a general overview of the District’s finances. Questions concerning any of the information provided in this report or requests for additional information should be addressed to Denton County Fresh Water Supply District No. 11-C, c/o Crawford & Jordan LLP, 19 Briar Hollow Lane, Suite 245, Houston, TX 77027. -7- DENTON COUNTY FRESH WATER SUPPLY DISTRICT NO. 11-C STATEMENT OF NET POSITION AND GOVERNMENTAL FUNDS BALANCE SHEET FEBRUARY 29, 2016 General Fund ASSETS Cash Cash with Fiscal Agent Receivables: Property Taxes Service Accounts Due from Other Funds Capital Assets (Net of Accumulated Depreciation) TOTAL ASSETS LIABILITIES Accounts Payable Accrued Interest Payable Due to Developer Due to Other Funds Security Deposits Accrued Interest at Time of Sale Long-Term Liabilities: Bonds Payable, Due After One Year $ 374,199 Debt Service Fund $ 184,051 34,721 218,772 7,923 1,749 3,735 $ 387,606 $ $ 63,044 $ 102,200 24,000 5,208 TOTAL LIABILITIES DEFERRED INFLOWS OF RESOURCES Deferred Property Taxes FUND BALANCES Restricted for Authorized Construction Restricted for Debt Service Unassigned $ 189,244 $ $ 7,923 $ $ 5,208 -0- $ 213,564 190,439 TOTAL FUND BALANCES TOTAL LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND FUND BALANCES NET POSITION Net Investment in Capital Assets Restricted for Debt Service Unrestricted $ 190,439 $ 213,564 $ 387,606 $ 218,772 TOTAL NET POSITION The accompanying notes to the financial statements are an integral part of this report. -8- Capital Projects Fund $ 106,641 Total $ 664,891 34,721 $ 7,923 1,749 3,735 $ 106,641 $ $ (3,735) 5,325,240 713,019 $ $ 63,044 $ 5,321,505 5,325,240 $ 6,034,524 $ 63,044 34,721 4,515,403 34,721 4,413,203 (3,735) 102,200 3,735 24,000 5,208 24,000 (5,208) 2,905,567 $ $ 3,735 -0- 664,891 34,721 7,923 1,749 $ 3,735 Statement of Net Position Adjustments 7,344,548 2,905,567 $ 198,187 $ $ $ 7,923 $ (7,923) $ $ 102,906 $ 102,906 213,564 190,439 $ (102,906) (213,564) (190,439) $ $ 102,906 $ 506,909 $ (506,909) $ $ 106,641 $ 713,019 7,542,735 -0- -0- $ (1,890,624) 184,051 198,362 $ (1,890,624) 184,051 198,362 $ $ (1,508,211) (1,508,211) The accompanying notes to the financial statements are an integral part of this report. -9- DENTON COUNTY FRESH WATER SUPPLY DISTRICT NO. 11-C RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET POSITION FEBRUARY 29, 2016 Total Fund Balances - Governmental Funds $ 506,909 Amounts Reported for governmental activities in the Statement of Net Position are different because: Capital assets are not current financial resources and, therefore, are not reported as assets in governmental funds. 5,325,240 Governmental funds do not record a long-term liability to the Developer for completed projects and operating advances. However, in the Statement of Net Position, the liability for completed projects and operating advances is recorded. (4,413,203) Deferred tax revenues for the 2015 and prior tax levies are part of recognized revenue in the governmental activities of the District. 7,923 Accrued interest on long-term liabilities is not payable with current financial resources and, therefore, is not reported in the funds. (29,513) Long-term liabilities are not due and payable in the current period and, therefore, are not reported as liabilities in the funds. Long-term liabilities at year-end consist of bonds payable. (2,905,567) Total Net Position - Governmental Activities $ The accompanying notes to the financial statements are an integral part of this report. - 10 - (1,508,211) THIS PAGE INTENTIONALLY LEFT BLANK DENTON COUNTY FRESH WATER SUPPLY DISTRICT NO. 11-C STATEMENT OF ACTIVITIES AND GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES FOR THE YEAR ENDED FEBRUARY 29, 2016 General Fund REVENUES Property Taxes Water Service Wastewater Service Fire Protection Service Permit Fees Miscellaneous Revenues TOTAL REVENUES $ $ EXPENDITURES/EXPENSES Service Operations: Professional Fees Contracted Services Purchased Water Service Purchased Wastewater Service Depreciation Other Capital Outlay Conveyance of Assets Debt Service: Bond Issuance Costs Bond Interest TOTAL EXPENDITURES/EXPENSES $ 248,320 105,221 89,695 16,835 82,500 13,703 556,274 86,003 96,179 212,958 27,079 Debt Service Fund $ 31 31 $ $ 53,177 100,000 EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES/EXPENSES $ 575,396 $ $ (19,122) $ -031 OTHER FINANCING SOURCES (USES) Bond Discount $ Developer Advances Proceeds from Issuance of Long-Term Debt TOTAL OTHER FINANCING SOURCES (USES) $ 165,715 165,715 $ 213,533 213,533 NET CHANGE IN FUND BALANCE 146,593 $ 213,564 $ 213,564 $ $ CHANGE IN NET POSITION FUND BALANCES/NET POSITION MARCH 1, 2015 43,846 FUND BALANCES/NET POSITION FEBRUARY 29, 2016 $ 190,439 The accompanying notes to the financial statements are an integral part of this report. - 11 - Capital Projects Fund $ $ Total $ 15 15 $ $ $ Adjustments 248,320 105,221 89,695 16,835 82,500 13,749 556,320 86,003 96,179 212,958 27,079 401 2,426,486 53,578 2,526,486 161,367 161,367 Statement of Activities $ 6,872 $ $ 6,872 $ $ $ 75,959 (2,526,486) 100,000 $ 161,367 30,401 843,524 (280,332) $ 2,588,254 $ 3,163,650 $ $ (2,588,239) $ (2,607,330) $ 2,326,998 $ $ (80,322) $ $ $ $ 80,322 (165,715) (2,985,000) (3,070,393) $ (463,063) $ $ 2,771,467 2,691,145 $ $ 102,906 $ 463,063 43,846 $ 102,906 $ 506,909 $ 86,003 96,179 212,958 27,079 75,959 53,578 100,000 30,401 (2,320,126) (80,322) 165,715 2,985,000 3,070,393 255,192 105,221 89,695 16,835 82,500 13,749 563,192 $ -0- (280,332) (280,332) (1,271,725) (1,227,879) (2,015,120) $ (1,508,211) The accompanying notes to the financial statements are an integral part of this report. - 12 - DENTON COUNTY FRESH WATER SUPPLY DISTRICT NO. 11-C RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES FOR THE YEAR ENDED FEBRUARY 29, 2016 Net Change in Fund Balances - Governmental Funds $ 463,063 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. 6,872 Governmental funds do not account for depreciation. However, in the Statement of Net Position, capital assets are depreciated and depreciation expense is recorded in the Statement of Activities. (75,959) Governmental funds report capital expenditures as expenditures in the period purchased. However, in the Statement of Net Position, capital assets are increased by new purchases and the Statement of Activities is not affected. 2,426,486 Governmental funds report bond discounts as other financing uses in the year paid. However, in the Statement of Net Position, bond discounts are amortized over the life of the bonds and the current year amortized portion is recorded in the Statement of Activities. 80,322 Governmental funds report interest expenditures on long-term debt as expenditures in the year paid. However, in the Statement of Net Position, interest is accrued on the long-term debt through fiscal year-end. (30,401) Governmental funds report bond proceeds as other financing sources. Issued bonds increase long-term liabilities in the Statement of Net Position. (2,985,000) Governmental funds report developer advances as other financing sources. However, in the Statement of Net Position, developer advances, net any amount paid to the developer, are recorded as a liability. (165,715) Change in Net Position - Governmental Activities $ The accompanying notes to the financial statements are an integral part of this report. - 13 - (280,332) DENTON COUNTY FRESH WATER SUPPLY DISTRICT NO. 11-C NOTES TO THE FINANCIAL STATEMENTS FEBRUARY 29, 2016 NOTE 1. CREATION OF DISTRICT On December 12, 2000, the Denton County Commissioners Court approved the order creating Denton County Fresh Water Supply District No. 11 of Denton County, Texas (“District No. 11”). At an election held on January 20, 2001, voters confirmed the creation of District No. 11. On February 20, 2001, following a hearing, the governing board of District No. 11 approved the conversion of District No. 11 to a Water Control and Improvement District operating under Chapter 51 of the Texas Water Code and specifically reserved certain rights under Sections 53.029, 53.030 through 53.034, 53.040 through 53.041, 53.112, 53.121, and 53.125 of the Texas Water Code. At an election held within the boundaries of District No. 11 on May 3, 2003, voters approved the division of District No. 11 into two new districts, of which Denton County Fresh Water Supply District No. 11-B (“Original District 11-B”) was one. At an election held within the boundaries of Original District 11-B on November 8, 2005, voters approved the division of Original District 11-B into two districts consisting of Denton County Fresh Water Supply District No. 11-B (“District 11-B”) and Denton County Fresh Water Supply District No. 11-C (the “District”). The District held its first meeting on November 21, 2005. Pursuant to the provisions of Chapters 49, 51 and 53 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, roads, 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. NOTE 2. SIGNIFICANT ACCOUNTING POLICIES The accompanying 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 District is a political subdivision of the State of Texas governed by an elected board. GASB has established the criteria for determining whether or not an entity is a primary government or a component unit of a primary government. The primary criteria are that it has a separately elected governing body, it is legally separate, and it is fiscally independent of other state and local governments. Under these criteria, the District is considered a primary government and is not a component unit of any other government. Additionally, no other entities meet the criteria for inclusion in the District’s financial statement as component units. - 14 - DENTON COUNTY FRESH WATER SUPPLY DISTRICT NO. 11-C NOTES TO THE FINANCIAL STATEMENTS FEBRUARY 29, 2016 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. 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 Position and a Statement of Activities. It requires the classification of net position into three components: Net Investment in Capital Assets; Restricted; and Unrestricted. These classifications are defined as follows: Net Investment in Capital Assets – This component of net position 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 Position – This component of net position consists of external constraints placed on the use of 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 Position – This component of net position consists of assets that do not meet the definition of Restricted or Net Investment in Capital Assets. When both restricted and unrestricted resources are available for use, generally it is the District’s policy to use restricted resources first. Government-Wide Financial Statements The Statement of Net Position and the Statement of Activities display information about the District as a whole. The District’s Statement of Net Position 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 Position 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 Position. - 15 - DENTON COUNTY FRESH WATER SUPPLY DISTRICT NO. 11-C NOTES TO THE FINANCIAL STATEMENTS FEBRUARY 29, 2016 NOTE 2. SIGNIFICANT ACCOUNTING POLICIES (Continued) Government-Wide Financial Statements (Continued) The Statement of Activities is reported by adjusting the governmental fund types to report 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 by adjustment to obtain net total revenue and expense 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 three 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, customer service revenues, operating 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 f assessing and collecting taxes. Capital Projects Fund – To account for financial resources restricted, committed or assigned for acquisition or construction of facilities and related costs. 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. Property taxes considered available by the District and included in revenue include taxes collected during the period 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. - 16 - DENTON COUNTY FRESH WATER SUPPLY DISTRICT NO. 11-C NOTES TO THE FINANCIAL STATEMENTS FEBRUARY 29, 2016 NOTE 2. SIGNIFICANT ACCOUNTING POLICIES (Continued) Basis of Accounting (Continued) 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 Position. 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 $5,000 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 Wastewater System Drainage System All Other Equipment 40 10-45 10-45 10-45 3-20 Budgeting In compliance with governmental accounting principles, the Board of Directors annually adopts an unappropriated budget for the General Fund. The budget was amended during the current 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 purposes only. - 17 - DENTON COUNTY FRESH WATER SUPPLY DISTRICT NO. 11-C NOTES TO THE FINANCIAL STATEMENTS FEBRUARY 29, 2016 NOTE 2. SIGNIFICANT ACCOUNTING POLICIES (Continued) 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 Position 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 position, financial position, and cash flows. All assets and liabilities associated with the activities are reported. Fund equity is classified as net position. Governmental fund types are accounted for on a spending or financial flow measurement focus. Accordingly, only current assets and current liabilities are included on the Balance Sheet, and 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 in governmental funds are classified 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. The District does not have any nonspendable fund balances. 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. 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 committed funds, then assigned funds, and finally unassigned funds. - 18 - DENTON COUNTY FRESH WATER SUPPLY DISTRICT NO. 11-C NOTES TO THE FINANCIAL STATEMENTS FEBRUARY 29, 2016 NOTE 2. SIGNIFICANT ACCOUNTING POLICIES (Continued) 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. LONG-TERM DEBT Series 2015 Road Amount Outstanding - February 29, 2016 $ 2,985,000 Interest Rates 2.00% - 4.125% Maturity Dates – Serially Beginning/Ending September 1, 2018/2040 Interest Payment Dates March 1/ September 1 Callable Dates * September 1, 2024* Or any date thereafter at a price of par plus unpaid accrued interest to the date fixed for redemption. The Series 2015 term bonds maturing on September 1, 2031, 2033, 2036, 2038 and 2040 are subject to mandatory redemption beginning September 1, 2030, 2032, 2034, 2037 and 2039, respectively. The following is a summary of transactions regarding bonds payable for the year ended February 29, 2016: March 1, 2015 Bonds Payable Unamortized Discounts Bonds Payable, net $ $ Additions $ -0- $ 2,985,000 (80,322) 2,904,678 Retirements $ $ (889) (889) Amount Due Within One Year Amount Due After One Year Bonds Payable, net February 29, 2016 $ 2,985,000 (79,433) $ 2,905,567 $ -02,905,567 $ 2,905,567 As of February 29, 2016, the District has authorized but unissued bonds in the amount of $9,100,000 for water, sewer and drainage purposes, $19,500,000 for refunding purposes and $7,415,000 for roads. - 19 - DENTON COUNTY FRESH WATER SUPPLY DISTRICT NO. 11-C NOTES TO THE FINANCIAL STATEMENTS FEBRUARY 29, 2016 NOTE 3. LONG-TERM DEBT (Continued) As of February 29, 2016, the debt service requirements on the bonds outstanding were as follows: Fiscal Year 2017 2018 2019 2020 2021 2022-2026 2027-2031 2032-2036 2037-2041 Principal $ $ $ 80,000 85,000 85,000 490,000 600,000 740,000 905,000 2,985,000 $ Interest 81,594 104,163 104,162 102,563 100,862 471,062 389,375 272,474 113,768 1,740,023 $ $ Total 81,594 104,163 184,162 187,563 185,862 961,062 989,375 1,012,474 1,018,768 4,725,023 The bonds are payable from the proceeds of an ad valorem tax levied upon all property subject to taxation within the District without legal limit as to rate or amount. The bond orders require 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. During year ended February 29, 2016, the District did not levy an ad valorem debt service tax. See Note 7 for the maintenance tax levy. The District’s tax calendar is as follows: Levy Date - October 1, as soon thereafter as practicable. Lien Date - January 1. Due Date - Upon receipt but not later than January 31. Delinquent Date - February 1, at which time the taxpayer is liable for penalty and interest. NOTE 4. SIGNIFICANT BOND ORDER AND LEGAL REQUIREMENTS The District has covenanted that it will take all necessary steps to comply with the requirement that rebatable arbitrage earnings on the investment of the gross proceeds of the Bonds be rebated to the federal government, within the meaning of Section 148(f) of the Internal Revenue Code. The minimum requirement for determination of the rebatable amount is on the five-year anniversary of each issue. The bond order requires that the District provide continuing disclosure of certain general financial information and operating data with respect to the District to certain information repositories. 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. - 20 - DENTON COUNTY FRESH WATER SUPPLY DISTRICT NO. 11-C NOTES TO THE FINANCIAL STATEMENTS FEBRUARY 29, 2016 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 $664,891 and the bank balance was $665,751. The District was not exposed to custodial credit risk at year-end. GENERAL FUND DEBT SERVICE FUND CAPITAL PROJECTS FUND TOTAL $ $ Cash 374,199 184,051 106,641 664,891 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 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 - 21 - DENTON COUNTY FRESH WATER SUPPLY DISTRICT NO. 11-C NOTES TO THE FINANCIAL STATEMENTS FEBRUARY 29, 2016 NOTE 5. DEPOSITS AND INVESTMENTS (Continued) Investments (Continued) 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 February 29, 2016, the District did not own any investments. NOTE 6. CAPITAL ASSETS Capital asset activity for the year ended February 29, 2016: March 1, 2015 Capital Assets Subject to Depreciation Roads Water System Wastewater System Drainage System Total Capital Assets Subject to Depreciation Less Accumulated Depreciation Roads Water System Wastewater System Drainage System Total Accumulated Depreciation Total Depreciable Capital Assets, Net of Accumulated Depreciation NOTE 7. $ Increases 1,597,415 478,890 473,590 952,238 $ $ 2,148,642 $ 3,502,133 $ $ $ 39,411 14,552 13,274 8,722 75,959 $ $ -0- $ 3,426,174 $ -0- $ 1,154,232 491,371 397,424 105,615 148,868 29,009 56,594 15,105 249,576 $ 1,899,066 $ Decreases $ -0- February 29, 2016 $ 2,751,647 970,261 871,014 1,057,853 $ 5,650,775 $ $ 188,279 43,561 69,868 23,827 325,535 $ 5,325,240 MAINTENANCE TAX On May 12, 2007, voters of the District approved the levy and collection of a maintenance tax of an unlimited rate on all taxable property within the District. The maintenance tax will be used for maintenance and other authorized purposes including, but not limited to, planning, constructing, acquiring, maintaining, repairing and operating all necessary land, works, improvements, facilities, plants, equipment and appliances, and for the payment of proper services, engineering fees, legal fees, and organization and administrative costs in accordance with Section 49.107 of the Texas Water Code. During the year ended February 29, 2016, the District levied an ad valorem maintenance tax rate of $1.00 per $100 of assessed valuation, which resulted in a tax levy of $253,574 on the adjusted taxable valuation of $25,356,942 for the 2015 tax year. - 22 - DENTON COUNTY FRESH WATER SUPPLY DISTRICT NO. 11-C NOTES TO THE FINANCIAL STATEMENTS FEBRUARY 29, 2016 NOTE 8. CONTRACT TAX On May 12, 2007, the voters of the District approved the levy and collection of an annual contract tax of an unlimited rate imposed on all taxable property within the boundaries of the District. Upon approval of the Texas Commission on Environmental Quality, the contract tax may be levied in a sufficient amount to make payments under the Joint Utility Contract described in Note 11 to the extent other funds are not available to make such payments. During the current period, the District did not levy a contract tax. NOTE 9. WATER SUPPLY AGREEMENT Upper Trinity Regional Water District Regional Treated Water System Participating Customer Contract On August 29, 2001, Denton County Fresh Water Supply District No. 11-A (District 11-A) executed an agreement with the Upper Trinity Regional Water District (the “UTRWD”) to provide treated water to the District as a Participating Customer of the UTRWD. The First Amendment to Participating Customer Contract was executed on September 6, 2001. The Second Amendment to Participating Customer Contract was executed on February 24, 2004. The UTRWD has agreed to use its best efforts to build the facilities called for in this agreement and to issue debt to fund the cost of the facilities. The UTRWD is governed by a Board of directors that are appointed by the governing bodies of members and by the County. District 11A, as a Participating Customer, is not entitled to appoint a representative to the Board; however, District 11-A will be represented by a Board member serving Denton County at-large. Pursuant to the Second Amendment, the supply of water on a minimum demand increased from 1.00 to 1.50 million gallons of water per day (MGD) through an interim period. In accordance with the agreement, the interim period quantity applied until the Tom Harpool Regional Treated Water Plant and the associated pipelines and pumping facilities (collectively, the “Harpool Plant”) were constructed and operational. The Harpool Plant now has been completed and is in operation; accordingly, the interim period has terminated and District 11-A’s supply of water on a minimum demand is 3.00 MGD. District 11-A is required to take or pay for the minimum amount of water to assure adequate funds to the UTRWD to fulfill its obligations under the contract. District 11-A may adjust the regular service amount upon mutual agreement with the UTRWD. A determination of demand on an annual basis that takes into account actual usage for the most recent five water years and projected needs for the next water year will be made. The water supply capacity allocated to District 11-A by UTRWD and associated costs are further allocated pursuant to a Joint Utility Contract (See Note 11). Payments to UTRWD are comprised of three components including an Operation and Maintenance Component, a Capital Component and a special reserve for operation and maintenance cost of the system. Annual budgets will be prepared for the system. District 11-A pays its part of the annual requirement in monthly installments. - 23 - DENTON COUNTY FRESH WATER SUPPLY DISTRICT NO. 11-C NOTES TO THE FINANCIAL STATEMENTS FEBRUARY 29, 2016 NOTE 9. WATER SUPPLY AGREEMENT (Continued) Upper Trinity Regional Water District Regional Treated Water System Participating Customer Contract (Continued) The agreement provides for water conservation and drought contingency issues. The term of the contract is 25 years or as long as the bonds issued remain outstanding. The Contract further has a 20 year extension provision. NOTE 10. SEWAGE TREATMENT SERVICE AGREEMENT Upper Trinity Regional Water District Northeast Regional Water Reclamation System Participating Customer Contract On August 29, 2001, Denton County Fresh Water Supply District No. 11-A (District 11-A) executed an agreement (the “UTRWD Wastewater Agreement”) with the Upper Trinity Regional Water District (the “UTRWD”) to provide wastewater treatment service to District 11-A as a Participating Customer of the UTRWD. The UTRWD has agreed to use its best efforts to build the facilities called for in this agreement and to issue debt, if necessary, to fund the cost of the facilities. During a prior fiscal year, the District and District 11-A’s Developer advanced monies on behalf of the Districts to the UTRWD for the District’s share of the construction cost of the Riverbend Wastewater Treatment Plant. The UTRWD is governed by a Board of directors that are appointed by the governing bodies of members and by the County. District 11-A, as a Participating Customer, is not entitled to appoint a representative to the Board; however, District 11-A will be represented by a Board member serving Denton County at-large. Pursuant to an amendment to the UTRWD Wastewater Agreement, dated November 18, 2015, District 11-A has capacity of 0.716 MGD in the Riverbend plant. This capacity, which is an increase of 0.262 MGD over the previous allocation of 0.454 MGD, is based on the construction of a currently planned expansion (the “2018 Riverbend Expansion”) to UTRWD’s Riverbend wastewater treatment facility, which expansion is expected to be complete in 2018. UTRWD has indicated that District 11-A would have use of surplus capacity, if necessary and as available, above the 0.454 MGD during the period prior to completion of the 2018 Riverbend Expansion. District 11-A is required to pay based on this 0.454 MGD minimum flow basis of wastewater, whether or not District 11-A actually delivers this amount of wastewater to the UTRWD, to assure adequate funds to the UTRWD to fulfill its obligations under the contract. District 11-A will be required to pay its share of the capital costs associated with the 2018 Riverbend Expansion, and District 11-A will begin payment based on the 0.716 MGD minimum flow basis (as opposed to the 0.454 MGD basis currently applied) at such time as the 2018 Riverbend Expansion is complete and the additional 0.262 MGD capacity is physically available. - 24 - DENTON COUNTY FRESH WATER SUPPLY DISTRICT NO. 11-C NOTES TO THE FINANCIAL STATEMENTS FEBRUARY 29, 2016 NOTE 10. SEWAGE TREATMENT SERVICE AGREEMENT (Continued) Upper Trinity Regional Water District Northeast Regional Water Reclamation System Participating Customer Contract (Continued) Payments will be comprised of three components including an Operation and Maintenance Component, a Capital Component and a special reserve for operation and maintenance cost of the system. Annual budgets will be prepared for the system. District 11-A will pay its part of the annual requirement in monthly installments. The wastewater treatment capacity allocated to District 11-A by UTRWD under the UTRWD Wastewater Agreement and associated costs are further allocated pursuant to a Joint Utility Contract (See Note 11). The term of the contract is 25 years or as long as the bonds issued remain outstanding. The Contract further has a 20-year extension provision. NOTE 11. JOINT UTILITY CONTRACT On February 24, 2004, District 11-A and District No. 11-B entered into a Joint Utility Contract. District 11-A has entered into the UTRWD contracts, see Notes 9 and 10, on behalf of itself, District 11-B and the District and any additional contract service areas that may request utility services. On January 20, 2005, District 11-A and District 11-B executed an Amended and Restated Joint Utility Contract, which was amended effective June 22, 2006. This agreement establishes the pro rata allocation of the water and wastewater service capacity and costs to be incurred under the UTRWD contracts. The share of the fixed costs shall be paid based upon the reserved capacity each district holds in comparison to the total capacity reserved for all districts. Variable costs will be paid in proportion to actual usage each month based upon the individual meters within the districts. In relation to the UTRWD contracts, the UTRWD will look solely to District No. 11-A to fulfill the obligations of the contracts. On September 28, 2006, the District and District 11-A entered into a Joint Utility Contract. Effective March 1, 2011, the District, District 11-A and District 11-B entered into a Merged, Amended and Restated Joint Utility Contract that replaced and superseded the 2006 contract. Under the third amendment to the contract effective January 1, 2016, District 11-A is now allocated 0.352 MGD of wastewater treatment capacity, District 11-B is allocated 0.076 MGD and the District is allocated 0.026 MGD of treatment capacity. Upon completion of the 2018 Riverbend Expansion, District 11-A’s allocation will be 0.352 MGD, District 11-B’s allocation will be 0.248 MGD and the District’s allocation will be 0.116 MGD. With respect to water supply capacity, a Second Amendment to Merged, Amended and Restated Joint Utility Contract, effective February 1, 2013, governs the allocation, which is as follows: 1.312 MGD to District 11-A, 1.187 MGD to District 11-B and 0.501 MGD to the District. - 25 - DENTON COUNTY FRESH WATER SUPPLY DISTRICT NO. 11-C NOTES TO THE FINANCIAL STATEMENTS FEBRUARY 29, 2016 NOTE 11. JOINT UTILITY CONTRACT (Continued) On April 17, 2012, the District, District 11-A and District 11-B executed the First Amendment to Merged, Amended and Restated Joint Utility Contract. This amendment modifies the procedure for the allocation of the usage, operation and maintenance costs to be incurred under the UTRWD contracts. The share of the fixed costs, including Demand Charges and Joint Facilities Charges under the UTRWD contracts, will be paid based upon the reserved capacity each district holds in proportion to the total capacity reserved for all districts. Relative to charges under the UTRWD Water Contract, each district will pay variable costs, including Volume Charges, in proportion to its relative wholesale water usage on a monthly basis as approximated by the proportion of each district’s retail customer water billings during any monthly period to the total retail customer water billings in all three districts. Relative to charges under the UTRWD Wastewater Contract, each district will pay variable costs, including Volume Charges, in proportion to its relative wholesale wastewater usage on a monthly basis as approximated by the proportion of equivalent single-family connections (ESFCs) in each district to the total number of ESFCs in all three districts. The term of the contract is 40 years from the date of its execution. The contract is renewable for 20 year periods. NOTE 12. UNREIMBURSED DEVELOPER COSTS The District has entered into agreements with the Developer which calls for the Developer to fund costs associated with water, wastewater, drainage and road facilities and non-construction costs, as well as operating advances in order for the District to meet its ongoing financial obligations. As of February 29, 2016, the District recorded $4,515,403 as a liability for operating advances and construction costs. Reimbursement is expected to be made from the proceeds of future bond sales. NOTE 13. WATER AND SEWER SERVICE AGREEMENT On February 1, 2013, the District approved a Water and Sanitary Sewer Service Agreement with Mustang Special Utility District (“Mustang”). District No. 11-A is a party to the agreement for limited purposes. Mustang holds Certificates of Convenience and Necessity Nos. 11856 and 20930 (“CCN”) to provide retail water and wastewater services to certain areas within Denton County, Texas, in which area the District is located. In addition, District No. 11-A holds CCN Nos. 13022 and 20924 to provide retail water and wastewater services to certain areas within the District. The purpose of this agreement is to (1) facilitate the provisions of wholesale water supply and wastewater treatment services to the District by the UTRWD through District No. 11-A, (2) facilitate the provision of retail water supply and distribution service and wastewater collection and treatment service by the District within the District service area, and (3) establish the terms - 26 - DENTON COUNTY FRESH WATER SUPPLY DISTRICT NO. 11-C NOTES TO THE FINANCIAL STATEMENTS FEBRUARY 29, 2016 NOTE 13. WATER AND SEWER SERVICE AGREEMENT (Continued) and provisions by which Mustang will operate and maintain the District’s water and sanitary sewer facilities located within the District’s service area, and provide for compensation for such services. During the term of this agreement, Mustang agrees to perform the schedule of services as outlined in Exhibit “B” of the agreement. Mustang will be responsible for the monthly meter reading and billing of each customer of the District. Mustang will collect the amounts due the District for water and wastewater services and will remit the funds collected on behalf of the District at least once per month. In addition, Mustang will bill and collect for solid waste collection from each District customer. Compensation to Mustang for Exhibit “B” services will be based on an annual operations and maintenance budget beginning October 1 and ending September 30. The costs contained in the annual budget will be categorized as follows: 1.) Mustang only costs; 2.) District only costs; 3.) shared costs which are allocated based on the District’s pro rata share of connections; and 4.) indirect shared administration costs, of which 20% will be allocated to the districts Mustang is providing service to. The District will be invoiced for actual costs plus a 15% overhead charge. The summation of categories 2 through 4 above plus a 15% charge will be allocated to the District based upon the number of active equivalent single family connections for the District. The number of District connections will be determined monthly and the District’s pro rata share of costs for the upcoming month will be adjusted accordingly. In addition, the District will pay Mustang 30% of any disconnection, re-connection and return check fees charged by the District. For other services provided by Mustang for installations, maintenance or repair of the District’s system not listed on Exhibit “B”, the District will pay for such costs based upon Mustang’s actual and direct expenses. Mustang may add a 15% overhead charge to its actual and direct expenses for these services. The District will pay for such services within 30 days from the date of the invoice. No sooner than ten years after the effective date of this agreement, and upon full payment of all the District’s bonded indebtedness and all outstanding reimbursements due to the Developer, Mustang shall have the option to purchase the District’s water and wastewater systems in its then present condition at Mustang’s sole option at a cost of $500, provided that at that time of the exercise of the option, Mustang delivers an opinion of counsel satisfactory to UTRWD and the District that certifies that Mustang or its successor is a governmental unit within the meaning of Section 141 of the Internal Revenue Code. The term of this agreement is 25 years from the effective date, unless terminated by Mustang pursuant to the option to purchase the District’s water and wastewater systems. - 27 - DENTON COUNTY FRESH WATER SUPPLY DISTRICT NO. 11-C NOTES TO THE FINANCIAL STATEMENTS FEBRUARY 29, 2016 NOTE 14. BOND SALE On November 19, 2015, the District closed the sale of its Series 2015 Unlimited Tax Road Bonds in the amount of $2,985,000. Proceeds from the sale were used to reimburse the developer for road construction costs including engineering and testing for Paloma Creek South, Phases 9B, 9C, and 9D1. Additionally, proceeds were used to pay 24 months of capitalized interest and certain costs of issuance. NOTE 15. RISK MANAGEMENT The District is exposed to various risks of loss related to torts, theft of, damage to and destruction of assets, errors and omissions and natural disasters for which the District carries commercial insurance. There have been no significant changes in coverage and there have been no settlements of claims exceeding coverage in the last three years. NOTE 16. FIRE PROTECTION SERVICES AGREEMENT The District, Denton County Fresh Water Supply District No. 8-A, Denton County Fresh Water Supply District No. 8-B, Denton County Fresh Water Supply District No. 9 (now known as Providence Village Water Control and Improvement District of Denton County), Denton County Fresh Water Supply District No. 10, Denton 11-A and Denton No. 11-B have entered into a Fire Protection Services Agreement with the City of Aubrey, Texas (the “City”). The City agrees to provide fire protection services to persons, buildings and property located within the participating districts, including land added to the districts by annexation, in the same manner and to the same extent as it would within the City. The participating districts agree to make monthly payments to the City based on the number of full-time-equivalent employees determined necessary to staff the fire station. Under this agreement, each district’s share of costs will be based on the number of connections within such district in proportion to the total number of connections within the districts. The number of connections is to be reassessed on at least a quarterly basis. The term of this agreement is ten years. During the current fiscal year, the District incurred $15,823 in relation to this agreement. As of April 21, 2015, the Fire Protection Services Agreement was further amended to extend the term to 15 years and to provide Denton County Fresh Water Supply District No. 10, beginning January 1, 2018, an option to exclude a defined portion of the area within its boundaries from service (and corresponding payment obligations) under this Agreement. - 28 - DENTON COUNTY FRESH WATER SUPPLY DISTRICT NO. 11-C NOTES TO THE FINANCIAL STATEMENTS FEBRUARY 29, 2016 NOTE 17. PEACE OFFICER SERVICES AGREEMENT Effective October 1, 2015, the District and District Nos. 8-A, 8-B, 11-A and 11-B entered into a Joint Interlocal Cooperation Agreement for Full-Time Law Enforcement Patrol Services with Denton County. The districts share the salary and benefits costs associated with two deputies assigned to patrol these districts on a full-time (40 hours per week) basis, and the districts also are responsible for the purchase of a vehicle and the equipment necessary to outfit each deputy. NOTE 18. AGREEMENT REGARDING ALLOCATION OF WHOLESALE WATER AND WASTEWATER VOLUME CHARGES Effective May 1, 2016, subsequent to year end, District 11-A and District 8-A executed an Agreement Regarding Allocation of Wholesale Water and Wastewater Volume Charges. The agreement provides for a more effective and accurate allocation of UTRWD’s water and wastewater volume charges to the District and Districts 8-A, 8-B, 11-A and 11-B (Paloma Creek Districts). See also Notes 9, 10 and 11. The water volume charges will be allocated monthly to each district based on the proportion of its monthly retail water usage to the total monthly retail water usage of all Paloma Creek Districts. A district’s monthly retail water usage is calculated as the total gallons of water billed to such district’s retail customers each month as reported by Mustang plus the total gallons of water used by such district itself each month as reported by Mustang. The wastewater volume charges will be allocated monthly to each district based on the proportion of ESFCs served by such district to the total number of ESFCs in all of the Paloma Creek Districts. The number of ESFCs must be updated for such cost-allocation purposes at least quarterly. - 29 - DENTON COUNTY FRESH WATER SUPPLY DISTRICT NO. 11-C REQUIRED SUPPLEMENTARY INFORMATION FEBRUARY 29, 2016 DENTON COUNTY FRESH WATER SUPPLY DISTRICT NO. 11-C SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE – BUDGET AND ACTUAL – GENERAL FUND FOR THE YEAR ENDED FEBRUARY 29, 2016 Final Amended Budget Original Budget REVENUES Property Taxes Water Service Wastewater Service Fire Protection Service Permit Fees Miscellaneous Revenues TOTAL REVENUES $ $ EXPENDITURES Services Operations: Professional Fees Contracted Services Purchased Water Service Purchased Wastewater Service Other TOTAL EXPENDITURES $ 85,411 86,165 85,784 17,264 112,500 11,593 398,717 $ $ $ $ $ $ 81,000 80,859 211,498 25,376 31,256 429,989 EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES $ (37,756) $ OTHER FINANCING SOURCES(USES) Developer Advances (Net of Capital Costs) $ 37,756 NET CHANGE IN FUND BALANCE $ $ 43,846 $ $ $ $ 64,659 $ 80,878 $ 16,219 $ 37,756 $ 65,715 $ 27,959 $ 102,415 $ 146,593 $ 44,178 $ 44,178 43,846 $ 146,261 $ (365) 25,585 14,712 1,763 16,500 3,431 61,626 (5,003) (15,320) (1,460) (1,703) (21,921) (45,407) See accompanying independent auditor’s report. - 31 - $ 248,320 105,221 89,695 16,835 82,500 13,703 556,274 86,003 96,179 212,958 27,079 53,177 475,396 43,846 FUND BALANCE - MARCH 1, 2015 FUND BALANCE - FEBRUARY 29, 2016 -0- $ Actual 248,685 79,636 74,983 15,072 66,000 10,272 494,648 75,600 83,443 211,498 25,376 40,556 436,473 Variance Positive (Negative) 43,846 $ 190,439 THIS PAGE INTENTIONALLY LEFT BLANK DENTON COUNTY FRESH WATER SUPPLY DISTRICT NO. 11-C SUPPLEMENTARY INFORMATION – REQUIRED BY THE WATER DISTRICT FINANCIAL MANAGEMENT GUIDE FEBRUARY 29, 2016 DENTON COUNTY FRESH WATER SUPPLY DISTRICT NO. 11-C SERVICES AND RATES FOR THE YEAR ENDED FEBRUARY 29, 2016 1. SERVICES PROVIDED BY THE DISTRICT DURING THE CURRENT YEAR: X X X 2. Retail Water Wholesale Water X Drainage Retail Wastewater Wholesale Wastewater Irrigation Parks/Recreation X Fire Protection X Security Solid Waste/Garbage Flood Control X Roads Participates in joint venture, regional system and/or wastewater service (other than emergency interconnect) Other (specify): ________________________________________________________ RETAIL SERVICE PROVIDERS: a. RETAIL RATES FOR A 5/8” METER (OR EQUIVALENT): Based on the rate order approved July 15, 2015. Minimum Charge Minimum Usage Flat Rate Y/N Rate per 1,000 Gallons over Minimum Use Usage Levels WATER: $ 23.00 -0- N $ 3.50 $ 4.50 0,001 to 10,000 10,001 and up WASTEWATER: $ 44.00 $ 46.00 10,000 Over 10,000 Y Y SURCHARGE: Fire Protection Services Fee Commission Regulatory Assessments $9.00 per residential connection 0.5% of actual water and sewer bill District employs winter averaging for wastewater usage? Yes Total monthly charges per 10,000 gallons usage: Water: $58.00 Wastewater: $44.00 Surcharge: $9.52 See accompanying independent auditor’s report. - 33 - X No DENTON COUNTY FRESH WATER SUPPLY DISTRICT NO. 11-C SERVICES AND RATES FOR THE YEAR ENDED FEBRUARY 29, 2016 2. RETAIL SERVICE PROVIDERS (Continued) b. WATER AND WASTEWATER RETAIL CONNECTIONS: (Unaudited) Meter Size Unmetered <¾” 1” 1½” 2” 3” 4” 6” 8” 10” Total Connections Active Connections 238 238 Total Water Connections 238 238 Total Wastewater Connections 238 238 3. Active ESFCs x 1.0 x 1.0 x 2.5 x 5.0 x 8.0 x 15.0 x 25.0 x 50.0 x 80.0 x 115.0 238 238 x 1.0 238 TOTAL WATER CONSUMPTION DURING THE CURRENT YEAR ROUNDED TO THE NEAREST THOUSAND: (Unaudited) Gallons billed to customers: Gallons purchased: (1) ESFC Factor 14,797,000 Water Accountability Ratio: (1) (1) The District is part of an integrated water system with Denton County Fresh Water Supply District Nos. 8-A, 8-B, 11-A and 11-B. The districts purchase water from the Upper Trinity Regional Water District. See accompanying independent auditor’s report. - 34 - DENTON COUNTY FRESH WATER SUPPLY DISTRICT NO. 11-C SERVICES AND RATES FOR THE YEAR ENDED FEBRUARY 29, 2016 4. 5. 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 in which District is located: Denton County, Texas Is the District located within a city? Entirely Partly Not at all Is the District located within a city’s extraterritorial jurisdiction (ETJ)? Entirely X Partly Not at all ETJ in which District is located: Town of Little Elm, Texas Are Board Members appointed by an office outside the District? Yes No X See accompanying independent auditor’s report. - 35 - X DENTON COUNTY FRESH WATER SUPPLY DISTRICT NO. 11-C GENERAL FUND EXPENDITURES FOR THE YEAR ENDED FEBRUARY 29, 2016 PROFESSIONAL FEES: Auditing Engineering Legal $ 8,500 14,735 62,768 TOTAL PROFESSIONAL FEES $ 86,003 PURCHASED SERVICES FOR RESALE: Purchased Water Service Purchased Wastewater Service $ 212,958 27,079 TOTAL PURCHASED SERVICES FOR RESALE $ 240,037 $ 1,647 10,648 45,650 67 TOTAL CONTRACTED SERVICES $ 58,012 REPAIRS AND MAINTENANCE $ 123 $ 8,250 3,966 1,150 134 631 519 2,312 TOTAL ADMINISTRATIVE EXPENDITURES $ 16,962 CAPITAL OUTLAY $ 100,000 TAP CONNECTIONS $ 35,137 SOLID WASTE DISPOSAL $ 18,695 SECURITY $ 3,649 FIRE FIGHTING OTHER EXPENDITURES: Regulatory Assessment $ 15,823 $ 955 TOTAL EXPENDITURES $ 575,396 CONTRACTED SERVICES: Appraisal District Bookkeeping Operator Tax Collector ADMINISTRATIVE EXPENDITURES: Director Fees Insurance Legal Notices Office Supplies and Postage Payroll Taxes Travel and Meetings Other See accompanying independent auditor’s report. - 36 - DENTON COUNTY FRESH WATER SUPPLY DISTRICT NO. 11-C TAXES LEVIED AND RECEIVABLE FOR THE YEAR ENDED FEBRUARY 29, 2016 Maintenance Taxes TAXES RECEIVABLE MARCH 1, 2015 Adjustments to Beginning Balance Original 2015 Tax Levy Adjustment to 2015 Tax Levy TOTAL TO BE ACCOUNTED FOR TAX COLLECTIONS: Prior Years Current Year $ 1,051 1,618 $ $ 253,760 (186) 253,574 $ $ TAXES RECEIVABLE FEBRUARY 29, 2016 TAXES RECEIVABLE BY YEAR: 2015 2012 TOTAL 925 247,395 256,243 248,320 $ 7,923 $ 6,179 1,744 $ 7,923 See accompanying independent auditor’s report. - 37 - 2,669 DENTON COUNTY FRESH WATER SUPPLY DISTRICT NO. 11-C TAXES LEVIED AND RECEIVABLE FOR THE YEAR ENDED FEBRUARY 29, 2016 2015 PROPERTY VALUATIONS: Land Improvements Exemptions TOTAL PROPERTY VALUATIONS 2014 $ 7,644,980 18,437,344 (725,382) $ $ 25,356,942 $ $ 0.00 1.00 TOTAL TAX RATES PER $100 VALUATION $ ADJUSTED TAX LEVY* $ TAX RATES PER $100 VALUATION: Debt Service Maintenance PERCENTAGE OF TAXES COLLECTED TO TAXES LEVIED * 2013 $ 6,041,287 747 (191,698) $ 2,453,650 567 (175,109) 13,334,281 $ 5,850,336 $ 2,279,108 $ 0.00 1.00 $ 0.00 1.00 $ 0.00 1.00 1.00 $ 1.00 $ 1.00 $ 1.00 253,574 $ 133,343 $ 58,503 $ 22,791 97.56 % 5,585,543 7,826,055 (77,317) 2012 100.00 % 100.00 % 92.35 % 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 an unlimited amount per $100 of assessed valuation was approved by voters on May 12, 2007. See accompanying independent auditor’s report. - 38 - DENTON COUNTY FRESH WATER SUPPLY DISTRICT NO. 11-C LONG-TERM DEBT SERVICE REQUIREMENTS FEBRUARY 29, 2016 SERIES-2015 ROAD Due During Fiscal Years Ending February 29 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 Principal Due September 1 Interest Due March 1/ September 1 $ $ 81,594 104,163 104,162 102,563 100,862 99,162 97,363 94,512 91,513 88,512 85,363 81,925 78,187 74,138 69,762 65,050 60,156 54,906 49,281 43,081 36,681 30,081 23,081 15,881 8,044 $ 81,594 104,163 184,162 187,563 185,862 189,162 192,363 194,512 191,513 193,512 195,363 196,925 198,187 199,138 199,762 200,050 200,156 204,906 204,281 203,081 201,681 205,081 203,081 205,881 203,044 $ 1,740,023 $ 4,725,023 80,000 85,000 85,000 90,000 95,000 100,000 100,000 105,000 110,000 115,000 120,000 125,000 130,000 135,000 140,000 150,000 155,000 160,000 165,000 175,000 180,000 190,000 195,000 $ 2,985,000 See accompanying independent auditor’s report. - 39 - Total DENTON COUNTY FRESH WATER SUPPLY DISTRICT NO. 11-C CHANGE IN LONG-TERM BOND DEBT FOR THE YEAR ENDED FEBRUARY 29, 2016 Original Bonds Issued Description Denton County Fresh Water Supply District No. 11-C Unlimited Tax Road Bonds - Series 2015 Tax Bonds (Utilities) Bond Authority: Amount Authorized by Voters $ $ 9,100,000 2,985,000 Bonds Outstanding March 1, 2015 $ Refunding Bonds $ 19,500,000 Road Bonds $ 10,400,000 2,985,000 Amount Issued Remaining to be Issued -0- $ 9,100,000 $ 19,500,000 $ 7,415,000 Debt Service Fund cash, investments and cash with paying agent balances as of February 29, 2016: $ 218,772 Average annual debt service payment (principal and interest) for remaining term of all debt: $ 189,001 See Note 3 for interest rate, interest payment dates and maturity dates. See accompanying independent auditor’s report. - 40 - Current Year Transactions Retirements Bonds Sold $ 2,985,000 Principal $ -0- Interest $ -0- Bonds Outstanding February 29, 2016 $ 2,985,000 See accompanying independent auditor’s report. - 41 - Paying Agent Amegy Bank N.A. Houston, TX DENTON COUNTY FRESH WATER SUPPLY DISTRICT NO. 11-C COMPARATIVE SCHEDULE OF REVENUES AND EXPENDITURES GENERAL FUND - FIVE YEARS Amounts 2016 REVENUES Property Taxes Water Service Wastewater Service Fire Protection Service Permit Fees Miscellaneous Revenues $ 2015 248,320 105,221 89,695 16,835 82,500 13,703 556,274 $ $ 86,003 96,179 212,958 27,079 53,177 100,000 TOTAL EXPENDITURES $ EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES 2014 136,238 62,177 50,160 8,237 68,500 4,690 330,002 $ $ 72,049 65,957 199,010 17,581 43,428 $ 60,062 23,845 188,212 11,179 30,897 575,396 $ 398,025 $ 314,195 $ (19,122) $ (68,023) $ (161,795) OTHER FINANCING SOURCES (USES) Developer Advances $ 165,715 $ 64,434 $ 191,055 NET CHANGE IN FUND BALANCE $ 146,593 $ (3,589) $ 29,260 $ TOTAL REVENUES EXPENDITURES Professional Fees Contracted Services Purchased Water Service Purchased Wastewater Service Other Capital Outlay 43,846 BEGINNING FUND BALANCE $ ENDING FUND BALANCE $ 190,439 47,435 $ * Seventeen-month period ended February 29, 2012 See accompanying independent auditor’s report. - 42 - $ 43,846 54,557 20,460 17,241 3,137 54,000 3,005 152,400 18,175 $ 47,435 Percentage of Total Revenue 2013 $ 22,791 $ 2,000 14 24,805 2012* 2016 $ $ 10 10 2015 44.7 % 18.9 16.1 3.0 14.8 2.5 100.0 % 41.3 18.8 15.2 2.5 20.8 1.4 100.0 2014 % % 2013 35.8 13.4 11.3 2.1 35.4 2.0 100.0 % 91.8 % % 8.1 0.1 100.0 % 2012* % 100.0 100.0 % $ 43,953 5,913 234,668 5,639 11,133 $ 34,696 7,737 245,887 5,585 13,224 15.5 % 17.3 38.3 4.9 9.6 18.0 21.8 20.0 60.3 5.3 13.2 % 39.4 15.6 123.5 7.3 20.3 % 177.2 % 23.8 946.0 22.7 44.9 346,960.0 % 77,370.0 2,458,870.0 55,850.0 132,240.0 $ 301,306 $ 307,129 103.6 % 120.6 % 206.1 % 1,214.6 % 3,071,290.0 % $ (276,501) $ (307,119) (106.1) % (1,114.6) % (3,071,190.0) % $ 290,708 $ 302,578 $ 14,207 $ 3,968 $ 18,175 (3.6) % (20.6) % (4,541) 8,509 $ 3,968 See accompanying independent auditor’s report. - 43 - DENTON COUNTY FRESH WATER SUPPLY DISTRICT NO. 11-C COMPARATIVE SCHEDULE OF REVENUES AND EXPENDITURES DEBT SERVICE FUND - FIVE YEARS Amount 2016 REVENUES Property Taxes Penalty and Interest Miscellaneous Revenues 2015 $ 2014 $ $ 31 TOTAL REVENUES $ EXPENDITURES Tax Collection Expenditures Debt Service Principal Debt Service Interest and Fees 31 $ TOTAL EXPENDITURES $ EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES $ OTHER FINANCING SOURCES (USES) Proceeds from Issuance of Long-Term Debt NET CHANGE IN FUND BALANCE $ -0- $ $ -0- -0- $ $ -0- $ -0- 31 $ -0- $ -0- $ 213,533 $ -0- $ -0- $ 213,564 $ -0- $ -0- $ 213,564 $ -0- $ -0- BEGINNING FUND BALANCE ENDING FUND BALANCE TOTAL ACTIVE RETAIL WATER CONNECTIONS 238 142 70 TOTAL ACTIVE RETAIL WASTEWATER CONNECTIONS 238 142 70 * Seventeen-month period ended February 29, 2012 See accompanying independent auditor’s report. - 44 - Percentage of Total Revenue 2013 $ 2012* 2016 $ 2015 2014 2013 2012* % % % % % 100.0 % 0.0 % 0.0 % 0.0 % 0.0 % % % % % % 0.0 % 0.0 % 0.0 % 0.0 % 100.0 $ -0- $ $ -0$ $ -0- $ -0- 0.0 % $ -0- $ -0- 100.0 % $ -0- $ -0- $ -0- $ -0- $ -0- $ -0- -0- -0- -0- -0- N/A % N/A See accompanying independent auditor’s report. - 45 - % N/A % N/A % DENTON COUNTY FRESH WATER SUPPLY DISTRICT NO. 11-C BOARD MEMBERS, KEY PERSONNEL AND CONSULTANTS FEBRUARY 29, 2016 District Mailing Address - Denton County Fresh Water Supply District No. 11-C c/o Crawford & Jordan LLP 19 Briar Hollow Lane, Suite 245 Houston, TX 77027 District Telephone Number - (713) 621-3707 Board Members Term of Office (Elected or Appointed) Fees of Office for the year ended February 29, 2016 Expense Reimbursements for the year ended February 29, 2016 Title Danny Brosseau 05/14 05/18 (Elected) $ 1,650 $ 124 President Robbie Patman 05/14 05/18 (Elected) $ 2,100 $ 32 Vice President Shirley Ross 05/12 05/16 (Elected) $ 1,800 $ 123 Secretary Andrew Henk 08/12 05/16 (Appointed) $ 1,350 $ 92 Assistant Secretary Ryan Koons 02/14 05/16 (Appointed) $ 1,350 $ 128 Assistant Secretary 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 24, 2016. The limit on Fees of Office that a Director may receive during a fiscal year is $7,200 as set by Board Resolution (TWC Section 49.060) on December 20, 2005. Fees of Office are the amounts actually paid to a Director during the District’s current fiscal year. See accompanying independent auditor’s report. - 46 - DENTON COUNTY FRESH WATER SUPPLY DISTRICT NO. 11-C BOARD MEMBERS, KEY PERSONNEL AND CONSULTANTS FEBRUARY 29, 2016 Date Hired Consultants: Crawford & Jordan LLP 05/16/07 McCall, Parkhurst & Horton LLP Fees for the year ended February 29, 2016 Title $ 63,768 General Counsel $ 74,625 Bond Counsel McCall Gibson Swedlund Barfoot PLLC 03/21/12 $ $ 8,500 8,750 Auditor Bond Related Dye & Bloomfield, LLC 08/17/06 $ 10,598 Bookkeeper Petitt Barraza LLC 03/04/08 $ 14,735 Engineer Robert W. Baird & Co. 03/18/15 $ 62,798 Financial Advisor Mustang Special Utility District 02/01/13 $ 77,599 Operator See accompanying independent auditor’s report. - 47 -
