~~ - ~.

Legal Papers
PERTAINING
TO

$2,000,000
Kerr County, Texas
Certificates of Obligation, Series 2005
Bonds Delivered February 14, 2005
~.



Transcript of Proceedings
LAW OFFICES
McCALL, PARKHURST & HORTON L.L.P.
700 NORTH ST. MARY'S
SUITE 1525
SAN ANTONIO, TEXAS 78205-3503
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,~ $2,000,000
KERR COUNTY, TEXAS
CERTIFICATES OF OBLIGATION, SERIES 2005
~ TABLE OF CONTENTS
Ta No.
PRIMARY FINANCING DOCUMENTS
Order Authorizing Publication of Notice of Intention ............................... 1
Affidavit of Publication re: Notice of Intention .................................... 2
Order Authorizing the Issuance of the Certificates ................................. 3
Order Authorizing the Levy of an Annual Ad Valorem Tax .......................... 4
Final Official Statement ...................................................... 5
Purchase Contract .......................................................... 6
Paying Agent/Registrar Agreement ............................................. 7
Specimen Certificate ........................................................ 8
DTC Blanket Letter of Representations .......................................... 9
DOCUMENTS RELATED TO TAX EXEMPTION
Federal Tax Certificate ....................................................... 10
Form 8038-G .............................................................. 11
CERTIFICATES OF THE COUNTY
~"' General Certificate ......................................................... 12
Closing Certificate .......................................................... 13
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Signature Identification and No-Litigation Certificate .............................. 14
MISCELLANEOUS DOCUMENTS
Instruction Letters to Attorney General and Comptroller of Public Accounts ............. 15
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Closing Memorandum ....................................................... 16
~, Receipt for Proceeds ........................................................ 17
Rating Letter .............................................................. 18
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OPINIONS
Attorney General's Approving Opinion and Comptroller Registration Certificate ......... 19
Underwriters' Counsel Opinion ................................................ 20
rw, Opinion of Bond Counsel .................................................... 21
Supplemental Opinion of Bond Counsel ......................................... 22

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CERTIFICATE FOR ORDER
STATE OF TEXAS §
COUNTY OF KERB §
I, the undersigned County Clerk of KERB COUNTY, TEXAS, hereby certify as follows:
1. The Commissioners Court of said County convened in REGULAR TERM ON THE 28TH
DAY OF DECEMBER, 2004, at the County Courthouse, and the roll was called of the duly
constituted officers and members of said Commissioners Court, to wit:
Pat Tinley, County Judge
H.A. "Buster" Baldwin, Commissioner, Precinct 1
William Williams, Commissioner, Precinct 2
Jonathan Letz, Commissioner, Precinct 3
Dave Nicholson, Commissioner, Precinct 4
""r and all of said officers and members of said Commissioners Court were present, except the following
absentees: None Whereupon, among other
business, the following was transacted at said Meeting: a written Order entitled:
ORDER AUTHORIZING PUBLICATION OF NOTICE OF INTENTION
TO ISSUE CERTIFICATES OF OBLIGATION
was duly introduced for the consideration of said Commissioners Court. It was then duly moved and
seconded that the Order be adopted; and, after due discussion, said motion carrying with it the
adoption of the Order, prevailed and carried by the following vote:
AYES:3 NOES: 1 ABSTENTIONS: 0
2. A true, full and correct copy of the aforesaid Order adopted at the Meeting described in
the above and foregoing paragraph is attached to and follows this Certificate; said Order has been
duly recorded in said Commissioners Court's minutes of said Meeting; the above and foregoing
paragraph is a true, full and correct excerpt from said Commissioners Court's minutes of said Meeting
pertaining to the passage of the Order; the persons named in the above and foregoing paragraph are
the duly chosen, qualified and acting officers and members of said Commissioners Court as indicated
therein; each of the officers and members of said Commissioners Court was duly and sufficiently
notified officially and personally, in advance, ofthe time, place and purpose ofthe aforesaid Meeting,
and that the Order would be introduced and considered for passage at said Meeting, and each of said
officers and members consented, in advance, to the holding of said Meeting for such purpose, and
that said Meeting was open to the public and public notice of the time, place and purpose of said
meet~ng,y~as, '~~ as required by Chapter 551, Texas Government Code.

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the 8th day of February, 2005.
C my Clerk
Kerr County, Texas
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ORDER AUTHORIZING PUBLICATION OF NOTICE OF INTENTION
TO ISSUE CERTIFICATES OF OBLIGATION
STATE OF TEXAS §
COUNTY OF KERR §
WHEREAS, in December 2002, the HILL COUNTRY JUVENILE FACILITY CORPORATxON,
a nonprofit public facility corporation (the "Corporation") created by KERB COUNTY, TEXAS (the
"County") pursuant to the provisions of Chapter 303, Texas Local Government Code, issued and
delivered $5,140,000 in principal amount of Hill Country Juvenile Facility Corporation Lease
Revenue Bonds, Series 2002 (Kerr County, Texas Juvenile Detention Facilities Project) (the "Lease
Revenue Bonds"); and
WHEREAS, proceeds of the Lease Revenue Bonds were used to refinance an existing
juvenile detention facility located in the County and to construct a new facility to house additional
juveniles (collectively, the "Juvenile Facility"); and
WHEREAS, the Juvenile Facility is owned by the Corporation but is operated by the Ken
County Juvenile Board (the "Juvenile Board") in accordance with the provisions of state law; and
WHEREAS, the Juvenile Facility is leased to the County pursuant to a Lease Agreement
between the Corporation and the County that was entered into in connection with the issuance of the
Lease Revenue Bonds; however, most obligations of the County under the Lease Agreement,
including the obligation to make Lease Payments (subject to annual appropriation), were assumed
by the Juvenile Board pursuant to an Operating Agreement between the County and the Juvenile
Board; and
WHEREAS, due to a series of events that occurred subsequent to the issuance of the Lease
Revenue Bonds, which had a substantial negative effect on the revenues of the Juvenile Facility, in
'~'' August 2004, the Juvenile Board exercised its right under the Operating Agreement to
nonappropriate for the payment of Lease Payments due on the Lease Revenue Bonds for the fiscal
year beginning on October 1, 2004; and
WHEREAS, in September 2004, the Commissioners Court similarly exercised the County's
right under the Lease Agreement to nonappropriate for the payment of Lease Payments due on the
~ Lease Revenue Bonds for the fiscal year beginning on October 1, 2004; and
WHEREAS, as a result ofthe Juvenile Board and the County exercising their respective rights
to nonappropriate, the holders of the Lease Revenue Bonds (the "Bondholders") entered into
numerous discussions and negotiations with the Commissioners Court, The Bank ofNew York Trust
Company, N.A., as the Trustee for the Lease Revenue Bonds, and representatives ofthe County and
the Trustee regarding various issues related to mitigating the loss the Bondholders would experience
due to such nonappropriation; and


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~•- WHEREAS, on December 8, 2004, the Commissioners Court of the County approved an
agreement in principal with representatives of the Bondholders to provide $1,900,000 to purchase
the Juvenile Facility from the Corporation, which amount would be used in its entirety by the
+~ Corporation to pay principal of the outstanding Lease Revenue Bonds, in exchange for the
Bondholders providing a full, written release of the County, the Corporation, the Juvenile Board and
all officials and employees of the County from all claims the Bondholders may have against .such
~' entities and persons in connection with the issuance of the Lease Revenue Bonds or the operatipn of
the Juvenile Facility; and
"" WHEREAS, the Commissioners Court hereby determines that it is necessary and desirable
to purchase the Juvenile Facility from the Corporation; and
'~"' WHEREAS, following such acquisition, the Juvenile Facility will be owned by the County
and will be operated in accordance with the requirements of state law; and
~"" WHEREAS, the Commissioners Court ofthe County intends to finance the acquisition ofthe
Juvenile Facility from proceeds derived from the sale of one or more series of Certificates of
Obligation issued by the County pursuant to Sections 271.041 - 271.063, Texas Local Government
"~ Code, as amended; and
WHEREAS, pursuant to Section 271.049, Texas Local Government Code, the
Commissioners Court deems it advisable to give notice of intention to issue certificates of obligation
in an amount not to exceed an aggregate of $2, 000, 000 for the purpose of paying, in whole or in part,
~,,,, for the acquisition of the Juvenile Facility, and to pay all or a portion of the legal, fiscal and
professional fees in connection with such acquisition and the costs of issuance of such Certificates
of Obligation; and
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WHEREAS, it is hereby officially found and determined that the meeting at which this Order
was passed was open to the public, and public notice of the time, place and purpose of said meeting
„w was given, all as required by Chapter 551, Texas Government Code.
THEREFORE, BE IT ORDERED BY THE COMMISSIONERS COURT OF KERR
,~. COUNTY, TEXAS:
SECTION 1. APPROVAL OF NOTICE OF INTENTION. Attached hereto as Exhibit A and
incorporated herein by reference is a form of the "Notice of Intention to Issue Certificates of
Obligation", the form and substance of which is hereby adopted and approved.
"'r SECTION 2. AL?THORIZATIONTOPUBLISHNOTICEOFINTENTION. The County Clerk shall
cause said notice to be published in substantially the form attached hereto in a newspaper of general
circulation in said County, on the same day in each of two consecutive weeks, the date of the first
'~ publication thereof to be before the 14th day before the date tentatively set for the passage of the
order authorizing the issuance of such Certificates of Obligation as shown in said notice. The County
Clerk is authorized to make changes to said Notice as necessary prior to its publication.

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+~ SECTION 3. INCORPORATION OF RECITALS. The Commissioners Court hereby finds. that
the statements set forth in the recitals of this Order are true and correct, and the Commissioners
Court hereby incorporates such recitals as a part of this Order.
SECTION4. EFFECTIVE DATE. This Order shall become effective immediately upon passage.
The remainder of this page intentionally left blank)


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PASSEDANDAPPROVED BYTHECOMMISSIONERS COURT OFKERR COUNTY,
TEXAS ON THE 28'r` DAY OF DECEMBER, 2004.
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County udge
Kerr County, Texas
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[SIGNATURE PAGE TO NOTICE OF INTENTION ORDER]


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Notice as published in the Kerrville Daily Times on January 6, 2005
KERB COUNTY, TEXAS
NOTICE OF INTENTION TO ISSUE CERTIFICATES OF OBLIGATION
The Commssioners Court of Ken County, Texas (the "County") does hereby give notice of
~ intention to issue one or more series of Kerr County, Texas Certificates of Obligation in the
maximum aggregate principal amount not to exceed $2, 000, 000 for the purpose of paying, in whole
~ or in part, contractual obligations to acquire from the Hill Country Juvenile Facility Corporation, a
Texas nonprofit public facility corporation (the "Corporation"),the existing juvenile detention facility
+~+
located in the County (the "Juvenile Facility"), for a purchase price of $1,900,000 (the "Project").
~,,,, All funds received from the County to acquire the Juvenile Facility will be used by the Corporation
to pay $1,900,000 to the holders ofthe Corporation's outstanding Lease Revenue Bonds, Series 2002
(Kerr County, Texas Juvenile Detention Facilities Project) (the "Lease Revenue Bonds"), in exchange
for a full, written release by such holders of the County, the Corporation, the Ken County Juvenile
Board and their officials and employees from all claims such holders may have against such entities
and persons in connection with the issuance of the Lease Revenue Bonds or the operation of the
Juvenile Facility. The County proposes to provide for the payment of such Certificates of Obligation
from the levy and collection of ad valorem taxes in the County within the limits provided by law. The
Commissioners Court proposes to authorize the issuance of such Certificates of Obligation at 1.1:00
a.m. on Monday, January 24, 2005, which is a regularly scheduled meeting of the Commissioners
Court, at the Union Church Building located on the Shreiner University Campus at the intersection
of Travis and Broadway, Kerrville, Texas.
/s/ Pat Tinley
County Judge, Ken County, Texas


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Revised Notice as published in the Kerrville Daily Times in its issues of January 13 and 20, 2005.
KERR COUNTY, TEXAS
CORRECTED NOTICE OF INTENTION
TO ISSUE CERTIFICATES OF OBLIGATION
The Commissioners Court of Ken County, Texas (the "County") does hereby give notice of
intention to issue one or more series of Kerr County, Texas Certificates of Obligation in the
maximum aggregate principal amount not to exceed $2, 000, 000 for the purpose of paying, in whole
or in part, contractual obligations to acquire from the Hill Country Juvenile Facility Corporation, a
Texas nonprofit public facility corporation (the "Corporation"),the existing juvenile detention facility
located in the County (the "Juvenile Facility"), for a purchase price of $1,900,000 (the "Project").
All funds received from the County to acquire the Juvenile Facility will be used by the Corporation
to pay $1,900,000 to the holders ofthe Corporation's outstanding Lease Revenue Bonds, Series 2002
(Kerr County, Texas Juvenile Detention Facilities Project) (the "Lease Revenue Bonds"), in exchange
for a full, written release by such holders of the County, the Corporation, the Ken County Juvenile
Board and their officials and employees from all claims such holders may have against such entities
and persons in connection with the issuance of the Lease Revenue Bonds or the operation of the
Juvenile Facility. The County proposes to provide for the payment of such Certificates of Obligation
from the levy and collection of ad valorem taxes in the County within the limits provided bylaw. The
Commissioners Court proposes to authorize the issuance of such Certificates of Obligation at 1:00
p.m. on Wednesday, January 26, 2005, at the Commissioners Courtroom in the Kerr County
Courthouse, 700 Main Street, Kerrville, Texas.
This corrected Notice is substantially identical to the initial notice published on January 6,
2005, regarding the issuance of the Certificates of Obligation described above. Only the location and
time of the meeting during which the Commissioners Court will meet to consider authorizing the
issuance of such Certificates of Obligation (as described in the final sentence of the preceding
paragraph) have been revised by this corrected Notice.
/s/ Pat Tinley
County Judge, Kerr County, Texas

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TMTMTM
AFFIDAVIT OF PUBLICATION
The State of Texas:
The County of Kerr:
I, Greg Shrader, publisher of the Kerrville Daily Times, a newspaper published in
the County of Kerr, State of Texas, do swear that the foregoing and attached
~,. citation was Published- in Kerrville, Kerr County, Texas, a newspaper of general
circulation published regularly in said Kerr County, Texas for more than one year
before this date on the following dates wit:
~ , 2005
~• , 2005
2005
2005
A printed copy of said writ as it was published is atta hed hereto as a part hereof.
~~ ~.Q.Q:iSU
Greg Shrader
Publisher of THE KERRVILLE DAILY TIMES
"'~ Kerrville, Kerr County, TX
'~` Sworn to and subscribed before m~by the said G~~S,~irader, Publisher of the
Kerrville Daily Times, on this the day of G tbb A:D. 2005, to certify
which witness my hand and seal of office.
Notary Public,
Kerr County, Texas
lsr r~v:+":'~.1!y~~L% VERNE L LARS01~1
_+ `:.` Notary Pt~Ac, 9mledAea~
PRINTER'S FEE }''' ~ ~UL~Y 1~6 2 be
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K~ItR COt~-NTY, 'TE~CAS
CORRECTED NOTICE OF INTENTION
TO ISSUE CERTIFICATES OF OBLIGATION
The Commissioners Court of Ken: County, Texas (the "County")
does hereby .give notice of intention to issue one or more series of Ken•
County, Texas Certificates of Obligation in the maximum aggregate
principal amount not to exceed $2,000,000 for the purpose of paying, in
whole or in part, contractual obligations to acquire from the Hill Country
Juvenile Facility Corporation, 'a Texas nonprofit public facility corporation
(the "Corporation"), the existing juvenile detention facility located in the
County (the "Juvenile Facility"), for a purchase price of $1,900,000 (the
`Project"). All funds received from the County to acquire the Juvenile
Facility will be used by the Corporation to pay $1,900,000 to the holders of
the Corporation's; outstanding Lease Revenue Bonds, Series 2002 (Ken
County, Texas Juvenile Detention Facilities Project) (the "Lease Revenue
Bonds"), in exchange for a full, written release by such holders of the
County, the Corporation, the Ken• County Juvenile Board and their official
and employees from all claims such holders may have against such entities
and persons in connection with the issuance of the Lease Revenue Bonds or
the operation of the Juvenile Facility. The county proposes to provide for the
payment such Certification of .Obligation from levy and collection of ad
valorem taxes in the County within the limits provided by law. The
Commissioners Court proposes to ad valorem taxes in the County within
the limits provided by law. The Commissioners County proposes to
authorize the issuance of such Certificates of Obligation at 4:00 p.m. on
Wednesday, January 26, 2005, at the Commissioners Courtroom in the Ken
County Courthouse, 700 Main Street, Kerrville. Texas.
This corrected Notice is substantially identical to the initial notice
published on January 6, 2005, regarding the issuance of the Certificates of
Obligation described above. Only the location and time and date of the
meeting during which the Commissioners Court will meet to consider
authorizing the issuance of such Certificates of Obligation (as described in
the final sentence of the preceding paragraph) has .been revised by this
corrected Notice.
/s/Pat Tinley
County Judge, Kerr County Texas-

TMTMTM
AFFIDAVIT OF PUBLICATION
The State of Texas:
The County of Kerr:
I, Greg Shrader, publisher of the Kerrville Daily Times, a newspaper published in
the County of Kerr, State of Texas, do swear that the foregoing and attached
~'"" citation was Published in Kerrville, Kerr County, Texas, a newspaper of general
circulation published regularly in said Kerr County, Texas for more than one year
before this date on the following dates wit:
2005
'~"' Sl~,.r.~. ~, 02.0 _ , 2005
2005
2005
A printed copy of said writ as it was published is a ached hereto as a part hereof.
Greg Shrader
~w Publisher of THE KERRVILLE DAILY TIMES
Kerrville, Kerr County, TX
Sworn to and subscribed before me by the said G~~,~hrader, Publisher of the
Kerrville Daily Times, on this the ~ day of ~ A:D. 2005, to certify
which witness my hand and seal of office.
Notary Public,
Kerr County, Texas __,..nr,~~.:..~,..,~:~--
:~,y p~ ,~ VERNE L CARSON
'+~ ~ Notary P,bic, stile of lloae.
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s'° MyConNiWo~
PRINTER'S FEE ~%mN:N,;~'~~ JULY 18, 2006


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KERR COUNTY, TEXAS
NOTICE OF INTENTION TO ISSUE
CERTIFICATES OF OBLIGATION
The Commissioners Court of Kerr County, Texas (the "County")
does hereby give notice of intention to issue one or more series of
Kerr County, Texas Certificates of Obligation in the maximum
000 000 for the
aggregate principal amount not to exceed $2, ,
purpose of paying, in whole or in part, contractual obligations to
acquire- from the Hill Country Juvenile Facility Corporation, a
Texas nonprofit public facility corporation (the "Corporation"),
the existing juvenile detention facility located in the County (the
"Juvenile Facility"), for a purchase price of $1,900,000 (the
"1?roject"). All funds received from the County to acquire the
Juvenile .Facility will be used by the Corporation to pay
$1,900,000 to the holders of the Corporation's outstanding Lease
Revenue Bonds, Series 2002 .(Kerr County, Texas Juvenile
Detention Facilities Project) (the "Lease Revenue Bonds"), in
exchange for a full, written release by such holders of the County,
the Corporation, the Kerr County Juvenile Boazd and their
officials and employees from all claims such holders may have
against such entities and persons in connect with the issuance of
the Lease Revenue Bonds or the operation of the Juvenile Facility.
The County proposes to provide for the payment of such
Certificates of Obligation from the levy and collection of ad
valorem taxes. in the County within the limits provided by law.
The Commissionez :rt proposes to authorize the issuance of
such Certificates o::. <igation at 11:00 a.m. on Monday, January
24, 2005, which regulazly scheduled meeting of the
Commissioners`Co~: the Union Church Building located on
the Schreiner Universi~,. Campus at the intersection of Travis and
Broadway, Kerrville, Tr xas: /s/ pat Tinley
•r. ' County Judge, Kerr County, Tirxas'


a.....
CERTIFICATE FOR ORDER
;,~-
I, the undersigned County Clerk of KEiut COUNTY, TEXAS (the "County"), hereby certify as
follows:
°' 1. The Commissioners Court of the County (the "Commissioners Court") reconvened in a
SPECIAL MEETING ON THE 4t'' DAY OF FEBRUARY, 2005, at the regular designated meeting
place (the "Meeting"), and the roll was called of the duly constituted officers and members of the
~" Commissioners Court, to-wit:
Pat Tinley, County Judge
H.A. "Buster" Baldwin, Commissioner, Precinct 1
William "Bill" Williams, Commissioner, Precinct 2
Jonathan P. Letz, Commissioner, Precinct 3
David Nicholson, Commissioner, Precinct 4
and all of said persons were present, except the following absentees: (~-
thus constituting a quorum. Whereupon, a Ong other business the
following was transacted at the Meeting: a wntten
ORDER AUTHORIZING THE ISSUANCE, SALE AND DELIVERY OF
~, "KERB COUNTY, TEXAS CERTIFICATES OFOBLIGATION, SERIES 2005 ";
PROVIDING FOR THE FUTURE AUTHORIZATION OF THE LEVY OF AN
ANNUAL AD VALOREM TAX TO SECURE THE PAYMENT THEREOF;
APPROVING AND AUTHORIZING THE EXECUTION OF ALL
""' INSTRUMENTS AND PROCEDURES RELATED THERETO INCLUDING
A PAYING AGENT/REGISTRAR AGREEMENT AND A PURCHASE
AGREEMENT; APPROVING THE FORM OF AN OFFICIAL STATEMENT;
~. AND PROVIDING FOR AN IMMEDIATE EFFECTIVE DATE
(the "Order") was duly introduced for the consideration of the Commissioners Court. It was then
duly moved and seconded that the Order be passed; and, after due discussion, said motion, carrying
~" with it the passage of the Order, prevailed and carried by the following votes:
AYES: ~ NOE5: .~ ABSTENTIONS:
~.
2. A true, full, and correct copy of the Order passed at the Meeting is attached to and follows
this Certificate;. the Order has been duly recorded in the Commissioners Court's minutes of the
,~, Meeting; the above and foregoing paragraph is a true, full, and correct excerpt from the
Commissioners Court's minutes of the Meeting pertaining to the passage of the Order; the persons
named in the above and foregoing paragraph are the duly chosen, qualified, and acting officers and
members of the'Commissioners Court as indicated therein; each of the officers and members of the
''"" Commissioners Court was duly and sufficiently notified officially and personally, in advance, of the
time, place, and purpose of the Meeting, and that the Order would be introduced and considered for
passage at the Meeting, and each of the officers and members consented, in advance, to the holding
•• of the Meeting for such purpose; and the Meeting was open to the public, and public notice of the
time, place, and purpose of the Meeting was given all as required by Chapter 551, Texas Government
Code.
~~» ~+~ ..
~~.ri ~ t, t ~ SG / SEALED the 4~' day of February, 2005.
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~ ;' / ' ~" ,~. ~~ ~:, C ty Clerk, Kerr County, Texas
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ORDER AUTHORIZING THE ISSUANCE, SALE AND DELIVERY OF
"KERB COUNTY, TEXAS CERTIFICATES OF OBLIGATION, SERIES 2005";
PROVIDING FOR THE FUTURE AUTHORIZATION OF THE LEVY OF AN
ANNUAL AD VALOREM TAX TO SECURE THE PAYMENT THEREOF;
APPROVING AND AUTHORIZING THE EXECUTION OF ALL
INSTRUMENTS AND PROCEDURES RELATED THERETO INCLUDING
A PAYING AGENT/REGISTRAR AGREEMENT AND A PURCHASE
AGREEMENT; APPROVING THE FORM OF AN OFFICIAL STATEMENT;
AND PROVIDING FOR AN IMMEDIATE EFFECTIVE DATE
SALE DATE: FEBRUARY 4, 20OS
+~r

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TABLE OF CONTENTS
RECITALS ............................................................. 1
Section 1. AMOUNT AND PURPOSE OF THE CERTIFICATES ................ 4
Section 2. DESIGNATION, DATE, DENOMINATIONS, NUMBERS, AND
MATURITIES OF THE CERTIFICATES ........................... 4
Section 3. INTEREST .................................................... 5
Section 4. CHARACTERISTICS OF THE CERTFICATES ...................... 5
(a) Registration, Transfer, and Exchange; Authentication ............... 5
(b) Payment of Certificates of Obligation and Interest .................. 6
(c) In General ................................................. 7
(d) Substitute Paying Agent/Registrar .............................. 7
(e) Book-Entry Only System for The Certificates of Obligation .......... 7
(fj Successor Securities Depository; Transfers Outside Book-Entry
Only Systems .............................................. 8
(g) Payments to Cede & Co ...................................... 9
(h) DTC Letter of Representation ................................. 9
(i) Delivery of Initial Certificate of Obligation ....................... 9
Section 5. FORMS OF CERTIFICATE OF OBLIGATION ...................... 9
Section 6. INTEREST AND SINKING FUND; FUTURE TAX LEVY ............. 15
Section 7. ACQUISITION FUND .......................................... 16
Section 8. INVESTMENTS ............................................... 16
Section 9. DEFEASANCE OF CERTIFICATES ............................... 17
(a) Defeased Certificates of Obligation .............................. 17
(b) Defeasance Securities ......................................... 17
(c) Investment in Defeasance Securities ............................. 17
(d) Paying Agent/Registrar Services ................................ 18
(e) Selection of Certificates of Obligation for Defeasance ............... 18
Section 10. DAMAGED, MUTILATED, LOST, STOLEN, OR DESTROYED
CERTIFICATES ............................................... 18
(a) Replacement Certificates of Obligation .......................... 18
(b) Application for Replacement Certificates of Obligation .............. 18
(c) No Default Occurred ......................................... 18
(d) Charge for Issuing Replacement Certificates of Obligation ........... 19
(e) Authority for Issuing Replacement Certificates of Obligation ......... 19
Section 11. CUSTODY, APPROVAL, AND REGISTRATION OF CERTIFICATES;
BOND COUNSEL'S OPINION; CUSIP NUMBERS; AND
,~.~ OTHER MATTERS ............................................. 19

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Section 12. COVENANTS REGARDING TAX-EXEMPTION OF INTEREST
	ON THE CERTIFICATES .......................................	19
	(a) Covenants ..................................................	19
	(b) Rebate Fund ................................................	21
	(c)Proceeds ...................................................	21
	(d) Allocation of, and Limitation on, Expenditures for the Project .........	21
	(e) Disposition of the Project ......................................	21
	(f) Qualified Tax-Exempt Obligations ...............................	21
Section 13.	SALE AND DELIVERY OF CERTIFICATES .......................	22
Section 14.	APPROVAL OF OFFICIAL STATEMENT ..........................	22
Section 15.	AUTHORITY FOR OFFICERS TO EXECUTE DOCUMENTS ..........	23
Section 16.	ORDER A CONTRACT; AMENDMENTS ..........................	23
Section 17.	SECURITY INTEREST .........................................	24
Section 18.	INTERESTED PARTIES ........................................	24
Section 19.	COMPLIANCE WITH RULE 15c2-12 ..............................	24
	(a) Definitions .................................................	24
	(b) Annual Information ..........................................	24
	(c) Material Event Notices ........................................	25
	(d) Limitations, Disclaimers and Amendments ........................	26
Section 20.	INCORPORATION OF RECITALS ................................	27
Section 21.	SEVERABILITY ...............................................	27
Section 22.	EFFECTIVE DATE .............................................	27
SIGNATURES	
Exhibit A	PAYING AGENT/REGISTRAR AGREEMENT	
Exhibit B	PURCHASE AGREEMENT	
Exhibit C	DESCRIPTION OF ANNUAL FINANCIAL INFORMATION	
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0
ORDER AUTHORIZING THE ISSUANCE, SALE AND DELIVERY OF
~"" "KERB COUNTY, TEXAS CERTIFICATES OFOBLIGATION, SERIES 2005 ";
PROVIDING FOR THE FUTURE AUTHORIZATION OF THE LEVY OF AN
ANNUAL AD VALOREM TAX TO SECURE THE PAYMENT THEREOF;
""' APPROVING AND AUTHORIZING THE EXECUTION OF ALL
INSTRUMENTS AND PROCEDURES RELATED THERETO INCLUDING
A PAYING AGENT/REGISTRAR AGREEMENT AND A PURCHASE
~"' AGREEMENT; APPROVING THE FORM OF AN OFFICIAL STATEMENT;
AND PROVIDING FOR AN IMMEDIATE EFFECTIVE DATE
'""' THE STATE OF TEXAS §
COUNTY OF KERB §
'~`' WHEREAS, pursuant to state law, the KERB COUNTY JUVENILE BOARD (the "Juvenile
Board") operates a juvenile detention facility located within KERB COUNTY, TEXAS (the "County"'),
which facility is referred to herein as the "Juvenile Facility"; and
WHEREAS, on December 17, 2002, the HILL COUNTRY JUVENILE FACILITY
CORPORATION (the "Corporation") delivered $5,140,000 in principal amount of its Lease Revenue
"~' Bonds, Series 2002 (Kerr County, Texas Juvenile Detention Facilities Project) (the "Lease Revenue
Bonds") pursuant to that certain Trust Agreement, dated as ofNovember 15, 2002 (the "Indenture"),
between the Corporation and the THE BANK OF NEW YORK TRUST COMPANY, N.A. (the "Trustee");
~" and
WHEREAS, proceeds of the Lease Revenue Bonds were used to refinance the existing
''~' Juvenile Facility and construct new improvements to the Juvenile Facility; and
WHEREAS, in connection with the issuance of the Lease Revenue Bonds, the County, as
"' lessee, and the Corporation, as lessor, entered into that certain Lease Agreement, dated as of
November 15, 2002 (the "Lease"), under which the Corporation leased the Juvenile Facility to the
County; and
WHEREAS, the County, the Corporation and the Juvenile Board and all officials and
employees of the County, the Corporation and the Juvenile Board, past and present, are collectively
referred to herein as the "County Participants"; and
WHEREAS, the Juvenile Board performs certain ofthe County's obligations underthe Lease
and manages the Juvenile Facility on a day-to-day basis pursuant to that certain Operating
Agreement, dated as ofNovember 15, 2002 (the "Operating Agreement"), between the County and
the Juvenile Board; and
WHEREAS, on September 7, 2004, the Juvenile Board adopted its fiscal year 2004-2005
budget, which budget projected an operating deficit and did not include budgeting or appropriating
~r any funds to pay lease payments under the Lease, thereby causing an "Event of Nonappropriation"
to occur under the Operating Agreement; and
~» WHEREAS, on September 27, 2004, the County adopted its fiscal year 2004-2005 budget,
and in said budget failed to appropriate funds in an amount sufficient to pay lease payments under
the Lease, thereby causing an "Event of Nonappropriation" to occur under the Lease; and
,..

'~' WHEREAS, on September 28, 2004, the County notified the Trustee of such Event of
Nonappropriation, and of its intent to transfer possession and control of the Juvenile Facility to the
Corporation or the Trustee as of 12:00 A.M. on October 1, 2004, in accordance with Section 10.03(c)
~' of the Lease; and
WHEREAS, on September 30, 2004, in order to (i) ensure the health, safety and security of
*~ the juveniles located at the Juvenile Facility and the citizens of the community, (ii) ensure an
appropriate and orderly transition of possession and control of the Juvenile Facility to the
Corporation or the Trustee pursuant to Section 10.03(c) of the Lease, and (iii) maintain the Juvenile
Facility as a going concern, the Trustee, the County, the Juvenile Boazd and the Corporation
executed a letter agreement placing a moratorium on the transfer of possession and control of the
Juvenile Facility until November 1, 2004 (the "Letter Agreement"), with the Lease and Operating
~ Agreement to remain in effect during such moratorium; and
WHEREAS, in order to accommodate the time necessary to negotiate proper settlement
~- terms with the holders of the Lease Revenue Bonds (the "Lease Revenue Bondholders"), such Letter
Agreement has been subsequently amended to extend the moratorium contained in the Letter
Agreement and to extend the terms of the Lease and the Operating Agreement; and
WHEREAS, on December 8, 2004, the Commissioners Court of the County approved an
order in which the County offered to take action to proceed with the issuance of certificates of
obligation for the purpose of providing $1,900,000 to purchase the Juvenile Facility from the
Corporation and provide such amount to the Lease Revenue Bondholders, subject to certain
conditions including the execution by all Lease Revenue Bondholders of a full and complete written
;r. release of all claims or potential claims the Lease Revenue Bondholders may allege to have against
the County Participants or those to whom any County Participant had an obligation of
indemnification, which offer was accepted in principle by the representatives ofthe Lease Revenue
~.. Bondholders; and
WHEREAS, the County Participants, the Trustee, and the Lease Revenue Bondholders have
.rr entered into that Consent and Release Agreement, dated January 24, 2005 (the "Consent and Release
Agreement"), wherein all Lease Revenue Bondholders have provided a full and complete written
release of all claims or potential claims the Lease Revenue Bondholders may allege to have against
„~„~ the County Participants and those to whom any County Participant had an obligation of
indemnification; and
w. WHEREAS, the Commissioners Court of the County hereby determines that it is necessary
and desirable to issue Certificates of Obligation in an amount which will provide $1,900,000 to
purchase the Juvenile Facility from the Corporation (the "Project"), which amount will be
,;~, immediately transferred to the Trustee for further distribution to the Lease Revenue Bondholders;
and
~,,, WHEREAS, on December 28, 2004, the Commissioners Court adopted a resolution
authorizing and directing the County Clerk to give notice of intention to issue Certificates of
Obligation pursuant to the provisions of Subchapter C of Chapter 271, Texas Local Government
„~, Code, as amended, to finance the Project (the "Notice"); and
+~w
2

+rr
WHEREAS, the Notice approved by the Commissioners Court stated that the Commissioners
Court proposed to authorize the issuance of the Certificates of Obligation on Monday, January 24,
2005, which is a regularly scheduled meeting of the Commissioners Court, at the Union Church
+~ Building located on the Shreiner University Campus at the intersection of Travis and Broadway,
Kerrville, Texas; and
WHEREAS, such Notice was published in the Kerrville Daily Times, which is a newspaper
of general circulation in the County, in its issue of January 6, 2005; and
WHEREAS, subsequent to submitting such Notice for initial publication, the Commissioners
Court received advice from the County Attorney that the scheduled meeting of the Commissioners
Court could not be held at the location stated in the Notice published on January 6, 2005; and
WHEREAS, in order to comply with statutory requirements regarding the proper meeting
place for the Commissioners Court and in order to accommodate the time necessary to execute the
Consent and Release Agreement, the Notice was revised to state that the Commissioners Court
proposed to authorize the issuance of the Certificates of Obligation on Wednesday, January 26,
2005, at the Commissioners Courtroom in the Kerr County Courthouse, 700 Main Street, Kerrville,
+~ Texas (the "Revised Notice"); and
WHEREAS, the Revised Notice was duly published in the Kerrville Daily Times in its issues
of January 13 and 20, 2005; and
WHEREAS, notice was also posted at the Union Church Building located on the Shreiner
~• University Campus announcing the revised time and place for consideration of this Order for the
purpose of notifying any person who may have relied on the initial Notice published on January 6,
2005, as to the revised time and place for consideration of this Order; and
WHEREAS, the Commissioners Court of the County, at its regularly scheduled meeting on
Monday, January 24, 2005, and before the authorization and issuance of the Certificates of
;~ Obligation, pursuant to Section 81.005(b), Texas Local Government Code, recessed such regularly
scheduled meeting until 4:00 p.m. on Wednesday, January 26, 2005 and announced during open
session that this Order would be considered for approval when the Commissioners Court resumed
~, such regularly scheduled meeting at 4:00 p.m. on January 26, 2005; and
WHEREAS, the Commissioners Court of the County, upon resumption of such regularly
scheduled meeting on Wednesday, January 26, 2005, and before the authorization and issuance of
the Certificates of Obligation, pursuant to Section 81.005(b), Texas Local Government Code,
recessed such meeting unti13:00 p.m. on Thursday, January 27, 2005 and announced during open
session that this Order would be considered for approval when the Commissioners Court resumed
such meeting at 3:00 p.m. on January 27, 2005; and
~,,, WHEREAS, the Commissioners Court of the County, upon resumption of such regularly
scheduled meeting on Thursday, January 27, 2005, and before the authorization and issuance of the
Certificates of Obligation, announced during open session that this Order would be considered for

.~
0
approval by the Commissioners Court at a special meeting at 11 p.m. on Thursday, February 3, 2005;
~"` and
WHEREAS, the Commissioners Court of the County, at such special meeting on Thursday,
February 3, 2005, and before the authorization and issuance of the Certificates of Obligation,
~""' pursuant to Section 81.005(b), Texas Local Government Code, recessed such meeting until 3:00 p.m.
on Friday, February 4, 2005 and announced during open session that this Order would be considered
for approval when the Commissioners Court resumed such meeting at 3:00 p.m. on February 4,
""' 2005; and
WHEREAS, the County received no petition signed by at least five percent of the qualified
""` electors of the County protesting the issuance of such Certificates of Obligation; and
WHEREAS, it is considered to be in the best interest of the County that said interest bearing
"" Certificates of Obligation be issued; and
WHEREAS, it is hereby officially found and determined that the meeting at which this Order
"" was passed was open to the public, and public notice of the time, place, and purpose of said meeting
was given, all as required by Chapter 551, Texas Government Code.
~" THEREFORE, BE IT ORDERED BY THE COMMISSIONERS COURT OF KERB
COUNTY, TEXAS:
~"' SECTION 1. AMOUNT AND PURPOSE OF THE CERTIFICATES. The certificate or
certificates of the County further described in Section 2 of this Order and referred to herein as the
"Certificates" are hereby authorized to be issued and delivered in the aggregate principal amount of
$2,000,000 FOR THEPURPOSEOFPAYINGCONT~ACTUAL OBLIGATIONS TOACQUIRE
FROM THE HILL COUNTRY JUVENILE FACILITY CORPORATION, A TEXAS
NONPROFIT PUBLIC FACILITY CORPORATION, THE EXISTING JUVENILE
+~ DETENTIONFACILITYLOCATED INTHECOUNTY,AND PAYING FOR PROFESSIONAL
SERVICES RENDERED IN CONNECTION THEREWITH AND COSTS OF ISSUANCE.
,rr SECTION 2. DESIGNATION, DATE, DENOMINATIONS, NUMBERS AND
MATURITIES OF CERTIFICATES. Each certificate issued pursuant to and for the purpose
described in Section 1 of this Order shall be designated: "KERB COUNTY, TEXAS
..~ CERTIFICATE OF OBLIGATION, SERIES 2005", and initially there shall be issued, sold and
delivered hereunder one fully registered certificate, without interest coupons, dated January 15, 2005
in the aggregate principal amount of $2,000,000, numbered T-1 (the "Initial Certificate of
+w Obligation"),with Certificates of Obligation issued in replacement thereof being in the denomination
of $5,000 or any integral multiple thereof and numbered consecutively from R-1 upward, all payable
to the initial registered owner thereof (with the Initial Certificate of Obligation being payable to the
~.. initial purchaser designated in Section 13 hereof), or to the registered assignee or assignees of said
certificates or any portion or portions thereof (in each case, the "Registered Owner"), and the
Certificates of Obligation shall mature and be payable serially on February 15 in each of the years
+~ and in the principal amounts, respectively, as set forth in the following schedule:

0
4
wr

~r The term "Certificates of Obligation" as used in this Order shall mean and include the
Certificates of Obligation initially issued and delivered pursuant to this Order and all substitute
~, certificates of obligation exchanged therefor, as well as all other substitute certificates of obligation
and replacement certificates of obligation issued pursuant hereto, and the term "Certificate of
Obligation" shall mean any of the Certificates of Obligation.
r SECTION 3. INTEREST. The Certificates of Obligation shall beaz interest calculated on
the basis of a 360-day year composed of twelve 30-day months from the dates specified in the
FORM OF CERTIFICATE OF OBLIGATION set forth in this Order to their respective dates of
""~ maturity at the following rates per annum:
Said interest shall be payable in the manner provided and on the dates stated in the FORM OF
CERTIFICATE OF OBLIGATION set forth in this Order.
SECTION 4. CHARACTERISTICS OF THE CERTIFICATES. (a) Registration,
Transfer and Exchange; Authentication. The County shall keep or cause to be kept at the designated
corporate trust office of Wachovia Bank, National Association, Houston, Texas (the "Paying
Agent/Registraz") books or records for the registration of the transfer and exchange of the
Certificates of Obligation (the "Registration Books"), and the County hereby appoints the Paying
Agent/Registraz as its registraz and transfer agent to keep such books or records and make such
registrations of transfers and exchanges under such reasonable regulations as the County and Paying
Agent/Registraz may prescribe; and the Paying Agent/Registraz shall make such registrations,
'' transfers and exchanges as herein provided. Attached hereto as Exhibit A is a copy of the Paying


+rr
Agent/Registraz Agreement between the County and the Paying Agent/Registraz which is hereby
~"" approved in substantially final form, and the County Judge and County Clerk or Deputy County
Clerk of the County are hereby authorized to execute the Paying Agent/Registraz Agreement and
approve any changes in the final form thereof.
The Paying Agent/Registraz shall obtain and record in the Registration Books the address of
the registered owner of each Certificate of Obligation to which payments with respect to the
~" Certificates of Obligation shall be mailed, as herein provided; but it shall be the duty of each
registered owner to notify the Paying Agent/Registraz in writing of the address to which payments
shall be mailed, and such interest payments shall not be mailed unless such notice has been given.
""" To the extent possible and under reasonable circumstances, all transfers of Certificates of Obligation
shall be made within three business days after request and presentation thereof. The County shall
have the right to inspect the Registration Books during regular business hours of the Paying
~" Agent/Registraz, but otherwise the Paying AgentlRegistraz shall keep the Registration Books
confidential and, unless otherwise required by law, shall not permit their inspection by any other
entity. The Paying Agent/Registraz's standard or customary fees and charges for making such regis-
'~' tration, transfer, exchange and delivery of a substitute Certificate of Obligation or Certificates of
Obligation shall be paid as provided in the FORM OF CERTIFICATE OF OBLIGATION set forth
in this Order. Registration of assignments, transfers and exchanges of Certificates of Obligation
"~' shall be made in the manner provided and with the effect stated in the FORM OF CERTIFICATE
OF OBLIGATION set forth in this Order. Each substitute Certificate of Obligation shall beaz a letter
and/or number to distinguish it from each other Certificate of Obligation.
Except as provided in (c) below, an authorized representative of the Paying Agent/Registrar
shall, before the delivery of any such Certificate of Obligation, date and manually sign the Paying
Agent/Registraz's Authentication Certificate, and no such Certificate of Obligation shall be deemed
to be issued or outstanding unless such Certificate is so executed. The Paying AgentlRegistrar
promptly shall cancel all paid Certificates of Obligation and Certificates of Obligation surrendered
for transfer and exchange. No additional ordinances, orders, or resolutions need be passed or
adopted by the governing body of the County or any other body or person so as to accomplish the
foregoing transfer and exchange of any Certificate of Obligation or portion thereof, and the Paying
Agent/Registraz shall provide for the printing, execution, and delivery of the substitute Certificates
of Obligation in the manner prescribed herein, and said Certificates of Obligation shall be of type
composition printed on paper with lithographed or steel engraved borders of customary weight and
strength. Pursuant to Subchapter D of Chapter 1201, Texas Government Code, the duty of transfer
and exchange of Certificates of Obligation as aforesaid is hereby imposed upon the Paying
Agent/Registraz, and, upon the execution of said Certificate, the transferred and exchanged
Certificate of Obligation shall be valid, incontestable, and enforceable in the same manner and with
the same effect as the Certificates of Obligation which initially were issued and delivered pursuant
to this Order, approved by the Attorney General, and registered by the Comptroller of Public Ac-
counts.
(b) Pavment of Certificates of Obligation and Interest. The County hereby further appoints
the Paying Agent/Registraz to act as the paying agent for paying the principal of and interest on the
Certificates of Obligation, all as provided in this Order. The Paying Agent/Registraz shall keep
proper records of all payments made by the County and the Paying Agent/Registraz with respect to
the Certificates of Obligation.


r
(c) In General. The Certificates of Obligation (i) shall be issued in fully registered form,
without interest coupons, with the principal of and interest on such Certificates of Obligation to be
payable only to the registered owners thereof, (ii) may be transferred and assigned, (iii) may be ex-
changed for other Certificates of Obligation, (iv) shall have the characteristics, (v) shall be signed,
sealed, executed and authenticated, (vi) shall be payable as to principal and interest, and (vii) shall
be administered, and the Paying Agent/Registrar and the County shall have certain duties and
responsibilitiestyith respect to the Certificates of Obligation, all as provided, and in the manner and
to the effect as required or indicated, in the FORM OF CERTIFICATE OF OBLIGATION set forth
in this Order. The Initial Certificate of Obligation is not required to be, and shall not be, authenti-
cated by the Paying Agent/ Registrar, but on each substitute Certificate of Obligation issued in ex-
change for the Initial Certificate of Obligation issued under this Order the Paying Agent/Registrar
shall execute the PAYING AGENT/REGISTRAR'S AUTHENTICATION CERTIFICATE, in the
form set forth in the FORM OF CERTIFICATE OF OBLIGATION. In lieu of the executed Paying
AgentlRegistrar's Authentication Certificate described above, the Initial Certificate of Obligation
delivered on the closing date (as further described in subparagraph (i) below) shall have attached
thereto the Comptroller's Registration Certificate substantially in the form set forth in the FORM OF
CERTIFICATE OF OBLIGATION below, manually executed by the Comptroller of Public
Accounts of the State of Texas or by his duly authorized agent, which certificate shall be evidence
that the Initial Certificate of Obligation has been duly approved by the Attorney General of the State
of Texas and that it is a valid and binding obligation of the County, and has been registered by the
Comptroller.
(d) Substitute Paving Agent/Registrar. The County covenants with the registered owners
of the Certificates of Obligation that at all times while the Certificates of Obligation are outstanding
the County will provide a competent and legally qualified bank, trust company, financial institution,
or other entity to act as and perform the services of Paying Agent/Registrar for the Certificates of
Obligation under this Order, and that the Paying Agent/Registrar will be one entity and shall be an
entity registered with the Securities and Exchange Commission. The County reserves the right to,
and may, at its option, change the Paying Agent/Registrar upon not less than 120 days written notice
to the Paying AgentJRegistrar, to be effective not later than 60 days prior to the next principal or
interest payment date after such notice. In the event that the entity at any time acting as Paying
AgentlRegistrar (or its successor by merger, acquisition, or other method) should resign or otherwise
cease to act as such, the County covenants that promptly it will appoint a competent and legally
qualified bank, trust company, financial institution, or other agency to act as Paying Agent/Registrar
under this Order. Upon any change in the Paying AgentlRegistrar, the previous Paying Agent/Regis-
trar promptly shall transfer and deliver the Registration Books (or a copy thereof), along with all
other pertinent books and records relating to the Certificates of Obligation, to the new Paying
Agent/Registrar designated and appointed by the County. Upon any change in the Paying
Agent/Registrar, the County promptly will cause a written notice thereof to be sent by the new
Paying Agent/Registrar to each registered owner of the Certificates of Obligation, by United States
mail, first-class postage prepaid, which notice also shall give the address of the new Paying
Agent/Registrar. By accepting the position and performing as such, each Paying Agent/Registrar
shall be deemed to have agreed to the provisions of this Order, and a certified copy of this Order
shall be delivered to each Paying Agent/Registrar.
(e) Book-Entry On1~System or Certi icates of Obligation. T'he Certificates of Obligation
issued in exchange for the Certificates of Obligation initially issued to the purchaser specified in



Section 13 herein shall be initially issued in the form of a separate single fully registered Certificate
°~" of Obligation for each of the maturities thereof. Upon initial issuance, the ownership of each such
Certificate of Obligation shall be registered in the name of Cede & Co., as nominee of The
Depository Trust Company of New York ("DTC"), and except as provided in subsection (i) hereof,
"~"' all of the outstanding Certificates of Obligation shall be registered in the name of Cede & Co., as
nominee of DTC.
With respect to Certificates of Obligation registered in the name of Cede & Co., as nominee
of DTC, the County and the Paying Agent/Registrar shall have no responsibility or obligation to any
securities brokers and dealers, banks, trust companies, clearing corporations and certain other
organizations on whose behalf DTC was created ("DTC Participant") to hold securities to facilitate
the clearance and settlement of securities transaction among DTC Participants or to any person on
behalf of whom such a DTC Participant holds an interest in the Certificates of Obligation. Without
limiting the immediately preceding sentence, the County and the Paying AgentlRegistrar shall have
no responsibility or obligation with respect to (i) the accuracy of the records of DTC, Cede & Co.
or any DTC Participant with respect to any ownership interest in the Certificates of Obligation, (ii)
the delivery to any DTC Participant or any other person, other than a registered owner of the
Certificates of Obligation, as shown on the Registration Books, of any notice with respect to the
Certificates of Obligation, or (iii) the payment to any DTC Participant or any other person, other than
a registered owner of Certificates of Obligation, as shown in the Registration Books of any amount
with respect to principal of or interest on the Certificates of Obligation. Notwithstanding any other
provision of this Order to the contrary, the County and the Paying Agent/Registrar shall be entitled
to treat and consider the person in whose name each Certificate of Obligation is registered in the
Registration Books as the absolute owner of such Certificate of Obligation for the purpose of
payment of principal and interest with respect to such Certificate of Obligation, for the purpose of
registering transfers with respect to such Certificate of Obligation, and for all other purposes
whatsoever. The Paying Agent/Registrar shall pay all principal of and interest on the Certificates
of Obligation only to or upon the Order of the registered owners, as shown in the Registration Books
as provided in this Order, or their respective attorneys duly authorized in writing, and all such
payments shall be valid and effective to fully satisfy and discharge the County's obligations with
respect to payment of principal of and interest on the Certificates of Obligation to the extent of the
sum or sums so paid. No person other than a registered owner, as shown in the Registration Books,
shall receive a certificate evidencing the obligation of the County to make payments of principal and
interest pursuant to this Order. Upon delivery by DTC to the Paying AgentlRegistrar of written
notice to the effect that DTC has determined to substitute a new nominee in place of Cede & Co.,
and subject to the provisions in this Order with respect to interest checks being mailed to the
registered owner at the close of business on the Record Date, the words "Cede & Co." in this Order
shall refer to such new nominee of DTC.
(f j Successor Securities Depository • Transfers Outside Book-Entry Only S stv ems. In the
event that the County determines that DTC is incapable of discharging its responsibilities described
herein and in the representation letter of the County to DTC or that it is in the best interest of the
beneficial owners of the Certificates of Obligation that they be able to obtain certificated Certificates
of Obligation, the County shall (i) appoint a successor securities depository, qualified to act as such
under Section 17(a) of the Securities and Exchange Act of 1934, as amended, notify DTC and DTC
Participants of the appointment of such successor securities depository and transfer one or more
,,, separate Certificates of Obligation to such successor securities depository or (ii) notify DTC and
0


DTC Participants of the availability through DTC of Certificates of Obligation and transfer one or
~"' more sepazate Certificates of Obligation to DTC Participants having Certificates of Obligation
credited to their DTC accounts. In such event, the Certificates of Obligation shall no longer be
restricted to being registered in the Registration Books in the name of Cede & Co., as nominee of
"" DTC, but may be registered in the name of the successor securities depository, or its nominee, or in
whatever name or names registered owners transferring or exchanging Certificates of Obligation
shall designate, in accordance with the provisions of this Order.
(g) Payments to Cede & Co. Notwithstanding any other provision of this Order to the
contrary, so long as any Certificate of Obligation is registered in the name of Cede & Co., as
"~' nominee for DTC, all payments with respect to principal of and interest on such Certificate of
Obligation and all notices with respect to such Certificate of Obligation shall be made and given,
respectively, in the manner provided in the representation letter of the County to DTC.
~.
(h) DTC Letter oJ'Representation. The officers of the County are herein authorized for and
on behalf of the County and as officers of the County to enter into one or more Letters of
'~'` Representation, if necessary, with DTC establishing the book-entry only system with respect to the
Certificates of Obligation.
'~" (i) Delivery oflnitial Certificate o Obligation. On the closing date, one Initial Certificate
of Obligation representing the entire principal amount of the respective series of Certificates of
Obligation and, payable in stated installments to the initial registered owner named in Section 13 of
+~ this Order or its designee, executed by the manual or facsimile signature of the County Judge,
countersigned by the manual or facsimile signature of the County Clerk or Deputy County Clerk of
the County, registered and signed by the manual or facsimile signature of the County Treasurer of
the County, approved by the Attorney General of Texas, and registered and manually signed by the
Comptroller of Public Accounts of the State of Texas, will be delivered to the initial purchaser or
its designee. Upon payment for the Certificates of Obligation, the Paying Agent/Registraz shall
cancel the Initial Certificate of Obligation and deliver to the initial registered owner or its designee
one registered definitive Certificate of Obligation for each year of maturity of the Certificates of
Obligation, in the aggregate principal amount of all of the Certificates of Obligation for such
+~•~ maturity.
SECTION 5. FORM OF CERTIFICATE OF OBLIGATION. The form ofthe Certificates
~ of Obligation, including the form of Paying Agent/Registraz's Authentication Certificate, the form
of Assignment and the form of Registration Certificate of the Comptroller of Public Accounts of the
State of Texas (to be attached only to the Certificates of Obligation initially issued and delivered
~• pursuant to this Order), shall be, respectively, substantially as follows, with such appropriate varia-
tions, omissions, or insertions as are permitted or required by this Order:
J



The remainder of this page intentionally left blank)


FORM OF CERTIFICATE OF OBLIGATION
R-
PRINCIPAL
AMOUNT
UNITED STATES OF AMERICA
STATE OF TEXAS
""' KERR COUNTY, TEXAS
CERTIFICATE OF OBLIGATION, SERIES 2005
1°~ INTEREST RATE DATE OF SERIES MATURITY DATE CUSIP NO.
January 15, 2005
REGISTERED OWNER:
PRINCIPAL AMOUNT:
DOLLARS
ON THE MATURITYDATE specified above, KERR COUNTY, TEXAS (the "County"),
being a political subdivision of the State of Texas, hereby promises to pay to the Registered Owner
""' set forth above, or registered assigns (hereinafter called the "Registered Owner") the Principal
Amount set forth above, and to pay interest thereon from January 15, 2005, at the Interest Rate per
annum specified above, on February 15, 2006, and semiannually on each February 15 and August
"' 15 thereafter to the Maturity Date specified above; except that if this Certificate of Obligation is
required to be authenticated and the date of its authentication is later than the first Record Date
(hereinafter defined), such Principal Amount shall bear interest from the interest payment date next
preceding the date of authentication, unless such date of authentication is after any Record Date but
on or before the next following interest payment date, in which case such Principal Amount shall
beaz interest from such next following interest payment date; provided, however, that if on the date
+~ of authentication hereof the interest on the Certificate of Obligation or Certificates of Obligation, if
any, for which this Certificate of Obligation is being exchanged or converted from is due but has not
been paid, then this Certificate of Obligation shall bear interest from the date to which such interest
has been paid in full.
THEPRINCIPAL OFAND INTEREST ONTHIS CERTIFICATE aze payable in lawful
money of the United States of America, without exchange or collection charges. The principal of
this Certificate of Obligation shall be paid to the Registered Owner hereof upon presentation and
surrender of this Certificate of Obligation at maturity at the designated corporate trust office of
Wachovia Bank, National Association, Houston, Texas, which is the "Paying Agent/Registrar" for
this Certificate of Obligation. The payment of interest on this Certificate of Obligation shall be made
by the Paying Agent/Registraz to the Registered Owner hereof on each interest payment date by
~_ check or draft, dated as of such interest payment date, drawn by the Paying Agent/Registraz on, and
payable solely from, funds of the County required by the order authorizing the issuance of the
Certificates of Obligation (the "Certificate of Obligation Order") to be on deposit with the Paying
+~ Agent/Registraz for such purpose as hereinafter provided; and such check or draft shall be sent by
the Paying AgentlRegistraz by United States mail, first-class postage prepaid, on each such interest
payment date, to the Registered Owner hereof, at its address as it appeared on the last business day
of the month next preceding each such date (the "Record Date") on the Registration Books kept by

10
..
..,
the Paying Agent/Registraz, as hereinafter described. In addition, interest may be paid by such other
method, acceptable to the Paying AgentlRegistraz, requested by, and at the risk and expense of, the
Registered Owner. In the event of anon-payment of interest on a scheduled payment date, and for
30 days thereafter, a new record date for such interest payment (a "Special Record Date") will be
established by the Paying Agent/Registraz, if and when funds for the payment of such interest have
been received from the County. Notice of the Special Record Date and of the scheduled payment
date of the past due interest (which shall be 15 days after the Special Record Date) shall be sent at
least five business days prior to the Special Record Date by United States mail, first-class postage
prepaid, to the address of each owner of a Certificate of Obligation appearing on the Registration
Books at the close of business on the last business day next preceding the date of mailing of such
notice. The County covenants with the Registered Owner of this Certificate of Obligation that on
or before each principal payment date and interest payment date for this Certificate of Obligation it
will make available to the Paying Agent/Registraz, from the "Interest and Sinking Fund" created by
the Certificate of Obligation Order, the amounts required to provide for the payment, in immediately
available funds, of all principal of and interest on the Certificates of Obligation, when due.
THE CERTIFICATES OF OBLIGATION are not subject to optional redemption.
IF THE DATE FOR ANY PAYMENT DUE on this Certificate of Obligation shall be a
Saturday, Sunday, a legal holiday, or a day on which banking institutions in the city where the
Designated Trust Office of the Paying AgentlRegistraz is located are authorized by law or executive
order to close, then the date for such payment shall be the next succeeding day which is not such a
Saturday, Sunday, legal holiday, or day on which banking institutions are authorized to close, and
payment on such date shall have the same force and effect as if made on the original date payment
was due.
THIS CERTIFICATE OF OBLIGATIONIS ONE OFA SERIES OF CERTIFICATES
OF OBLIGATIONdated as of January 15, 2005, authorized in accordance with the Constitution and
laws of the State of Texas in the principal amount of $2,000,000 FOR THE PURPOSE OF
PAYING CONTRACTUAL OBLIGATIONS TO ACQUIRE FROM THE HILL COUNTRY
JUVENILE FACILITY CORPORATION, A TEXAS NONPROFIT PUBLIC FACILITY
CORPORATION, THE EXISTING JUVENILE DETENTION FACILITYLOCATED IN THE
COUNTY, AND PAYING FOR PROFESSIONAL SERVICESRENDERED INCONNECTION
THEREWITH AND COSTS OF ISS UANCE.
ALL CERTIFICATES OFTHISSERIES aze issuable solely as fully registered Certificates
of Obligation, without interest coupons, in the denomination of any integral multiple of $5,000. As
~, provided in the Certificate of Obligation Order, this Certificate of Obligation may, at the request of
the Registered Owner or the assignee or assignees hereof, be assigned, transferred, converted into
and exchanged for a like aggregate amount of fully registered Certificates of Obligation, without
,;~, interest coupons, payable to the appropriate Registered Owner, assignee or assignees, as the case may
be, having any authorized denomination or denominations as requested in writing by the appropriate
Registered Owner, assignee or assignees, as the case may be, upon surrender of this Certificate of
,,, Obligation to the Paying Agent/Registraz for cancellation, all in accordance with the form and pro-
cedures set forth in the Certificate of Obligation Order. Among other requirements for such
assignment and transfer, this Certificate of Obligation must be presented and surrendered to the
;~„ Paying Agent/Registrar, together with proper instruments of assignment, inform and with guarantee
~r
11
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of signatures satisfactory to the Paying Agent/Registraz, evidencing assignment of this Certificate
'"` of Obligation or any portion or portions hereof in any authorized denomination to the assignee or
assignees in whose name or names this Certificate of Obligation or any such portion or portions
hereof is or are to be registered. The form of Assignment printed or endorsed on this Certificate of
~"~ Obligation may be executed by the Registered Owner to evidence the assignment hereof, but such
method is not exclusive, and other instruments of assignment satisfactory to the Paying
~ Agent/Registraz may be used to evidence the assignment of this Certificate of Obligation or any
portion or portions hereof from time to time by the Registered Owner. The Paying AgentlRegistraz's
reasonable standard or customary fees and charges for assigning, transferring, converting and
exchanging any Certificate of Obligation or portion thereof will be paid by the County. In any cir-
"" cumstance, any taxes or governmental chazges required to be paid with respect thereto shall be paid
by the one requesting such assignment, transfer, conversion or exchange, as a condition precedent
to the exercise of such privilege. The Paying Agent/Registraz shall not be required to make any such
~` transfer or exchange of a Certificate of Obligation during the period commencing with the close of
business on any Record Date immediately preceding a principal or interest payment date for such
Certificate of Obligation and ending with the opening of business on the next following principal
~"' or interest payment date.
IN THE EVENTANYPAYINGAGENT/REGISTRAR for the Certificates of Obligation
'~" is changed by the County, resigns, or otherwise ceases to act as such, the County has covenanted in
the Certificate of Obligation Order that it promptly will appoint a competent and legally qualified
substitute therefor, and cause written notice thereof to be mailed to the registered owners of the
"~" Certificates of Obligation.
IT IS HEREBY CERTIFIED, RECITED, AND COVENANTED that this Certificate of
"'+ Obligation has been duly and validly authorized, issued, and delivered; that all acts, conditions, and
things required or proper to be performed, exist, and be done precedent to or in the authorization,
issuance and delivery of this Certificate of Obligation have been performed, existed, and been done
""` in accordance with law; that this Certificate of Obligation is a general obligation of the County,
issued on the full faith and credit thereof; and that ad valorem taxes sufficient to provide for the
payment of the interest on and principal of this Certificate of Obligation, as such interest comes due,
"~ and as such principal matures, have been levied and ordered to be levied against all taxable property
in the County, and have been pledged for such payment, within the limits provided by law.
~" THE COUNTYHASRESERVED THERIGHT TOAMEND the Certificate of Obligation
Order as provided therein, and under some (but not all) circumstances amendments thereto must be
approved by the registered owners of a majority in aggregate principal amount of the outstanding
""' Certificates of Obligation.
BYBECOMING THEREGISTERED OWNER of this Certificate of Obligation, the Regis-
"" tered Owner thereby acknowledges all of the terms and provisions of the Certificate of Obligation
Order, agrees to be bound by such terms and provisions, acknowledges that the Certificate of
Obligation Order is duly recorded and available for inspection in the official minutes and records of
the governing body of the County, and agrees that the terms and provisions of this Certificate of
Obligation and the Certificate of Obligation Order constitute a contract between each Registered
Owner hereof and the County.
0
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0

IN WITNESS WHEREOF, the County has caused this Certificate of Obligation to be signed
~"" with the manual or facsimile signature of the County Judge of the County, countersigned with the
manual or facsimile signature of the County Clerk or Deputy County Clerk of the County, and has
caused the official seal of the County to be duly impressed, or placed in facsimile, on this Certificate
""~ of Obligation.
Countersigned:
(facsimile si n~ aturel
(Deputy) County Clerk
Kerr County, Texas
(SEAL)
(facsimile signature)
County Judge
Kerr County, Texas
FORM OF REGISTRATION CERTIFICATE OF
THE COMPTROLLER OF PUBLIC ACCOUNTS:
COMPTROLLER'S REGISTRATION CERTIFICATE: REGISTER NO.
I hereby certify that this Certificate of Obligation has been examined, certified as to validity,
and approved by the Attorney General of the State of Texas, and that this Certificate of Obligation
has been registered by the Comptroller of Public Accounts of the State of Texas.
Witness my signature and seal this
(COMPTROLLER'S SEAL)
0
13
Comptroller of Public Accounts
of the State of Texas
r_-~
r~
FORM OF PAYING AGENT/REGISTRAR'S AUTHENTICATION CERTIFICATE
PAYING AGENT/REGISTRAR'S AUTHENTICATION CERTIFICATE
(To be executed if this Certificate of Obligation is not accompanied by an executed
Registration Certificate of the Comptroller of Public Accounts of the State of Texas)
It is hereby certified that this Certificate of Obligation has been issued under the provisions
of the Certificate of Obligation Order described in the text of this Certificate of Obligation; and that
this Certificate of Obligation has been issued in conversion or replacement of, or in exchange for,
a certificate, certificates, or a portion of a certificate or certificates of a Series which originally was
approved by the Attorney General of the State of Texas and registered by the Comptroller of Public
Accounts of the State of Texas.
Dated WACHOVIA BANK, NATIONAL ASSOCIATION,
HOUSTON, TEXAS
Paying Agent/Registrar
By
Authorized Representative
FORM OF ASSIGNMENT:
ASSIGNMENT
FOR VALUERECEIVED, the undersigned Registered Owner of this Certificate of Obligation, or
duly authorized representative or attorney thereof, hereby assigns this Certificate of Obligation to
/ /
(Assignee's Sociai Security or (Print or typewrite Assignee's name and address, including zip code)
Taxpayer Identification)
and hereby irrevocably constitutes and appoints
attorney to register the transfer of the within Certificate of Obligation on the books kept for
registration thereof, with
full power of substitution in the premises.
Dated:
'""' Signature Guaranteed:
~- NOTICE: Signature(s) must be guaranteed by
a member firm of the New York Stock
Exchange or a commercial bank or trust
~„ company.
.r
14
NOTICE: The signature above must
correspond with the name of the Registered
Owner as it appears upon the front of this
Certificate of Obligation in every particular,
without alteration or enlargement or any
change whatsoever.


INITIAL CERTIFICATE OF OBLIGATION INSERTIONS
The Initial Certificate of Obligation shall be in the respective form set forth above except
that:
(A) Immediately under the name of the Certificate of Obligation, the headings
"INTEREST RATE" and "MATURITY DATE" shall be completed with the words
~' "As shown below" and "CUSIP NO. "shall be deleted.
(B) The first pazagraph shall be deleted and the following shall be inserted:
"ONTHERESPECTIVEMATURITYDATESspecified below, KERB COUNTY, TEXAS
(the "County"), being a political subdivision of the State of Texas, hereby promises to pay to the
°"' Registered Owner specified above, or registered assigns (hereinafter called the "Registered Owner"),
the respective Principal Installments specified below, and to pay interest thereon (calculated on the
basis of a 360-day year composed of twelve 30-day months) from January 15, 2005, at the respective
~"' Interest Rates per annum specified below, payable on February 15, 2006, and semiannually on each
February 15 and August 15 thereafter to the respective Maturity Dates specified below. The
respective Maturity Dates, Principal Installments and Interest Rates for this Certificate of Obligation
"'~' aze set forth in the following schedule:
[Insert information from Sections 2 and 3 above]
(C) The Initial Certificate of Obligation shall be numbered "T-1."
SECTION 6. INTEREST AND SINKING FUND; FUTURE TAX LEVY. (a) A special
"Interest and Sinking Fund" is hereby created and shall be established and maintained by the County
„ at an official depository bank of the County. Said Interest and Sinking Fund shall be kept separate
and apart from all other funds and accounts of the County, and shall be used only for paying the
interest on and the principal of said Certificates of Obligation. Subject to the provisions of
,,,,, subsection (b) below, all ad valorem taxes levied and collected for and on account of said
Certificates of Obligation and all accrued interest and premium on the Certificates of Obligation
received by the County from the initial purchaser of the Certificates of Obligation (other than
~, premium on the Certificates of Obligation that is not used by the County to pay costs of issuance,
all in accordance with the provisions of Section 1201.042(d), Texas Government Code, as amended)
shall be deposited, as collected, to the credit of said Interest and Sinking Fund. Subject to the
~,,, provisions of subsection (b) below, for each fiscal year while any of the Certificates of Obligation

15

r
or interest thereon are outstanding and unpaid, the governing body of the County shall compute and
"~' ascertain a rate and amount of ad valorem tax which will be sufficient to raise and produce the
money required to pay the interest on the Certificates of Obligation as such interest comes due, and
to provide and maintain a sinking fund adequate to pay the principal of the Certificates of Obligation
"~" as such principal matures (but never less than 2% of the original principal amount of each series of
the Certificates of Obligation as a sinking fund each year); and said tax shall be based on the latest
approved tax rolls of the County, with full allowance being made for tax delinquencies and the cost
~" of tax collection.
(b) This Order does not levy a tax in order to comply with provisions of Section 81.006(b)
'~" of the Texas Local Government Code providing that a county tax may be levied only at a regularly
scheduled meeting of the court when at least four members of the court are present; however, the
Commissioners Court of the County is scheduled to approve a subsequent order which shall levy,
~" order to be assessed and collected and pledge an ad valorem tax in an amount sufficient to provide
for the payment of the interest on and principal of the Certificates of Obligation, as such interest
comes due and such principal matures, within the limit prescribed by law, at a regular term meeting
~"' of the Commissioners Court on February 14, 2005. Upon passage of such subsequent order, the
provisions of Section 6(a) above will be fully implemented.
'~' SECTION 7. ACQUISITION FUND. There is hereby created and established on the
financial records of the County or in the depository of the County, a fund to be called the "Kerr
County, Texas Certificates of Obligation (Series 2005) Acquisition Fund" (herein called the
~- "Acquisition Fund"). All proceeds from the sale and delivery of the Certificates of Obligation (other
than accrued interest and any premium on the Certificates of Obligation, if any, that is not used by
the County to pay costs of issuance in accordance with the provisions of Section 1201.042(d), Texas
~- Government Code, as amended, which amounts shall be deposited into the Interest and Sinking
Fund) shall be deposited into the Acquisition Fund. Money in the Acquisition Fund shall be subject
to disbursements by the County for payment of costs of issuance and all costs incurred in carrying
out the purposes for which the Certificates of Obligation are issued, including but not limited to costs
for the acquisition of the Juvenile Facility and for financial and legal consultants, services and
expenses related to such acquisition. All funds remaining on deposit in the Acquisition Fund upon
completion of acquisition of the Juvenile Facility being financed with the proceeds from the
Certificates of Obligation, if any, shall be transferred to the Interest and Sinking Fund.
r. SECTION 8. INVESTMENTS. Funds on deposit in the Interest and Sinking Fund and the
Acquisition Fund shall be secured by the depository bank of the County in the manner and to the
extent required by law to secure other public funds of the County and may be invested from time to
time in any investment authorized by applicable law, including but not limited to the Public Funds
Investment Act (Chapter 2256, Texas Government Code), and the County's investment policy
adopted in accordance with the provisions of the Public Funds Investment Act; provided, however,
~. that investments purchased for and held in each Interest and Sinking Fund shall have a final maturity
no later than the next principal or interest payment date on which such funds will be needed, and
investments purchased for and held in the Acquisition Fund shall have a final maturity of not later
... than the date the County reasonably expects the funds from such investments will be required to pay
costs of the projects for which the Certificates of Obligation were issued.. Income and profits from
such investments shall be deposited in the respective Fund which holds such investments; however,
.. any such income and profits from investments in the Acquisition Fund may be withdrawn by the
~.
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County and deposited in the Interest and Sinking Fund to pay all or a portion of the interest next
coming due on the Certificates of Obligation. It is further provided, however, that any interest
earnings on certificate proceeds which are required to be rebated to the United States of America
~ pursuant to Section 12 hereof in order to prevent the Certificates of Obligation from being arbitrage
certificates shall be so rebated and not considered as interest earnings for the purposes of this
Section.
~ SECTION 9. DEFEASANCE OF CERTIFICATES. (a) Defeased Certificates of
O li anon. Any Certificate of Obligation and the interest thereon shall be deemed to be paid, retired
and no longer Outstanding (a "Defeased Certificate of Obligation"), except to the extent provided
'~ in subsection (d) of this Section, when payment of the principal of such Certificate of Obligation,
plus interest thereon to the due date (whether such due date be by reason of maturity or otherwise)
~. either (i) shall have been made or caused to be made in accordance with the terms thereof, or (ii)
shall have been provided for on or before such due date by irrevocably depositing with or making
available to the Paying Agent/Registrar (or another entity permitted by Section 1207.061, Texas
Government Code, as amended, or other applicable law, which entity, together with the Paying
Agent/Registrar, are referred to collectively in this Section as the "Defeasance Agent"), in
accordance with the requirements of Chapter 1207, Texas Government Code, as amended, or other
applicable law (which may include the use of an escrow agreement or other similar instrument -the
"` "Future Escrow Agreement"): (1) lawful money of the United States of America sufficient to make
such payment or (2) "Defeasance Securities" (as defined below) that mature as to principal and
interest in such amounts and at such times as will insure the availability, without reinvestment, of
~ sufficient money to provide for such payment, and when proper arrangements have been made by
the County with the Defeasance Agent for the payment of its services until all Defeased Certificates
of Obligation shall have become due and payable. At such time as a Certificate of Obligation shall
"~' be deemed to be a Defeased Certificate of Obligation hereunder, as aforesaid, such Certificate of
Obligation and the interest thereon shall no longer be secured by, payable from, or entitled to the
benefits of, the ad valorem taxes levied and pledged as provided in this Order or a subsequent Order,
'"~ and such principal and interest shall be payable solely from such money or Defeasance Securities.
(b) Defeasance Securities. The term "Defeasance Securities" means (i) direct,
"~' noncallable obligations of the United States of America, including obligations that are
unconditionally guaranteed by the United States of America., (ii) 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, on the date of the
purchase thereof are rated as to investment quality by a nationally recognized investment rating firm
not less than AAA or its equivalent, and (iii) noncallable obligations of a state or an agency or a
~"' county, municipality, or other political subdivision of a state that have been refunded and that, on
the date on the date the governing body of the County adopts or approves the proceedings
authorizing the financial arrangements are rated as to investment quality by a nationally recognized
"" investment rating firm not less than AAA or its equivalent.
(c) Investment in Defeasance Securities. Any moneys so deposited with the Defeasance
~" Agent may at the written direction of the County be invested in Defeasance Securities, maturing in
the amounts and times as hereinbefore set forth, and all income from such Defeasance Securities
received by the Defeasance Agent that is not required for the payment of the Certificates of
"" Obligation and interest thereon, with respect to which such money has been so deposited, shall be
.w
17


turned over to the County, or deposited as directed in writing by the County. Any account or Future
~' Escrow Agreement pursuant to which the money and/or Defeasance Securities are held for the
payment of Defeased Certificates of Obligation may contain provisions permitting the investment
or reinvestment of such moneys in Defeasance Securities or the substitution of other Defeasance
'~' Securities upon the satisfaction of the requirements specified in subsections (a)(i) or (ii) of this
Section. All income from such Defeasance Securities received by the Defeasance Agent which is
not required for the payment of the Defeased Certificates of Obligation, with respect to which such
"~' money has been so deposited, shall be remitted to the County or deposited as directed in writing by
the County.
"~' (d) Pa~nQAgent/Registrar Services. Until all Defeased Certificates of Obligation shall
have become due and payable, the Paying Agent/Registrar shall perform the services of Paying
Agent/Registrar for such Defeased Certificates of Obligation the same as if they had not been
"' defeased, and the County shall make proper arrangements to provide and pay for such services as
required by this Fifth Supplement.
'~" (e) Selection of Certi icates of Obl igation for Defeasance. In the event that the County
elects to defease less than all of the principal amount of Certificates of Obligation of a maturity, the
Paying Agent/Registrar shall select, or cause to be selected, such amount of Certificates of
~ Obligation by such random method as it deems fair and appropriate.
SECTION 10. DAMAGED, MUTILATED, LOST, STOLEN, OR DESTROYED
+~' CERTIFICATES. (a) Replacement Certi icates of Obli ation. In the event any outstanding
Certificate of Obligation is damaged, mutilated, lost, stolen, or destroyed, the Paying Agent/Registrar
shall cause to be printed, executed, and delivered, a new certificate of the same principal amount,
+~ maturity, and interest rate, as the damaged, mutilated, lost, stolen, or destroyed Certificate of
Obligation, in replacement for such Certificate of Obligation in the manner hereinafter provided.
(b) ~,plication or Replacement Certi tcates of Obli ag tion. Application for replacement of
damaged, mutilated, lost, stolen, or destroyed Certificates of Obligation shall be made by the
registered owner thereof to the Paying Agent/Registrar. In every case of loss, theft, or destruction
~nr of a Certificate of Obligation, the registered owner applying for a replacement certificate shall
furnish to the County and to the Paying Agent/Registrar such security or indemnity as may be
required by them to save each of them harmless from any loss or damage with respect thereto. Also,
~. in every case of loss, theft, or destruction of a Certificate of Obligation, the registered owner shall
furnish to the County and to the Paying Agent/Registrar evidence to their satisfaction of the loss,
theft, or destruction of such Certificate of Obligation. In every case of damage or mutilation pf a
.~. Certificate of Obligation, the registered owner shall surrender to the Paying Agent/Registrar for
cancellation the Certificate of Obligation so damaged or mutilated.
~ (c) No Default Occurred. Notwithstanding the foregoing provisions of this Section, in the
event any such Certificate of Obligation shall have matured, and no default has occurred which is
then continuing in the payment of the principal of or interest on the Certificate of Obligation, the
,,,, County may authorize the payment of the same (without surrender thereof except in the case of a
damaged or mutilated Certificate of Obligation) instead of issuing a replacement Certificate of
Obligation, provided security or indemnity is fiarnished as above provided in this Section.

18

0
(d) Charge or Issuing Replacement Cert~cates o Obligation. Prior to the issuance of any
""' replacement certificate, the Paying Agent/Registrar shall charge the registered owner of such
Certificate of Obligation with all legal, printing, and other expenses in connection therewith. Every
replacement certificate issued pursuant to the provisions of this Section by virtue of the fact that any
'~" Certificate of Obligation is lost, stolen, or destroyed shall constitute a contractual obligation of the
County whether or not the lost, stolen, or destroyed Certificate of Obligation shall be found at any
time, or be enforceable by anyone, and shall be entitled to all the benefits of this Order equally and
~"" proportionately with any and all other Certificates of Obligation duly issued under this Order.
(e) Authoritv~or Issuing Replacement Certificates of Obligation. In accordance with
""' Chapter 1201, Texas Government Code, as amended, this Section of this Order shall constitute
authority for the issuance of any such replacement certificate without necessity of further action by
the governing body of the County or any other body or person, and the duty of the replacement of
•' such certificates is hereby authorized and imposed upon the Paying Agent/Registrar, and the Paying
AgentlRegistrar shall authenticate and deliver such Certificates of Obligation in the form and manner
and with the effect, as provided in Section 4(a) of this Order for Certificates of Obligation issued in
~" conversion and exchange for other Certificates of Obligation.
SECTION 11. CUSTODY, APPROVAL, AND REGISTRATION OF CERTIFICATES;
~* BOND COUNSEL'S OPINION; CUSIP NUMBERS; AND OTHER MATTERS. The County
Judge of the County is hereby authorized to have control of the Certificates of Obligation initially
issued and delivered hereunder and all necessary records and proceedings pertaining to the
~ Certificates of Obligation pending their delivery and their investigation, examination, and approval
by the Attorney General of the State of Texas, and their registration by the Comptroller of Public
Accounts of the State of Texas. Upon registration of the Certificates of Obligation said Comptroller
+^~- of Public Accounts (or a deputy designated in writing to act for said Comptroller) shall manually
sign the Comptroller's Registration Certificate attached to such Certificates of Obligation, and the
seal of said Comptroller shall be impressed, or placed in facsimile, on such Certificate. The
«.~ approving legal opinion of the County's Bond Counsel (with an appropriate certificate pertaining
thereto executed by facsimile signature of the County Clerk or Deputy County Clerk of the County)
and the assigned CUSIP numbers may, at the option of the County, be printed on the Certificates of
rr Obligation issued and delivered under this Order, but neither shall have any legal effect, and shall
be solely for the convenience and information of the registered owners of the Certificates of
Obligation. If bond insurance is obtained, the Certificates of Obligation may bear an appropriate
~w legend as provided by the insurer.
SECTION 12. COVENANTS REGARDING TAX EXEMPTION OF INTEREST ON
THE CERTIFICATES. (a) Covenants. The County covenants to take any action necessary to
assure, or refrain from any action which would adversely affect, the treatment of the Certificates of
Obligation as obligations described in section 103 of the Internal Revenue Code of 1986, as amended
(the "Code"), the interest on which is not includable in the "gross income" of the holder for purposes
of federal income taxation. In furtherance thereof, the County covenants as follows:
.~ (1) to take any action to assure that no more than 10 percent of the proceeds of the
Certificates of Obligation or the projects financed or refinanced therewith (less amounts
deposited to a reserve fund, if any) are used for any "private business use," as defined in
,~. section 141(b)(6) of the Code or, if more than 10 percent of the proceeds or the projects

19

0
financed or refinanced therewith are so used, such amounts, whether or not received by the
~'"" County, with respect to such private business use, do not, under the terms of this Order or
any underlying arrangement, directly or indirectly, secure or provide for the payment of more
than 10 percent of the debt service on the Certificates of Obligation, in contravention of
"' section 141(b)(2) of the Code;
(2) to take any action to assure that in the event that the "private business use"
""' described in subsection (1) hereof exceeds 5 percent of the proceeds of the Certificates of
Obligation or the projects fmanced or refinanced therewith (less amounts deposited into a
reserve fund, if any) then the amount in excess of 5 percent is used fora "private business
~"' use" which is "related" and not "disproportionate," within the meaning of section 141(b)(3)
of the Code, to the governmental use;
"~" (3) to take any action to assure that no amount which is greater than the lesser of
$5,000,000, or 5 percent of the proceeds of the Certificates of Obligation (less amounts
deposited into a reserve fund, if any) is directly or indirectly used to finance loans to persons,
'~" other than state or local governmental units, in contravention of section 141(c) of the Code;
(4) to refrain from taking any action which would otherwise result in the Certificates
"~ of Obligation being treated as "private activity bonds" within the meaning of section 141(b)
of the Code;
(5) to refrain from taking any action that would result in the Certificates of
Obligation being "federally guaranteed" within the meaning of section 149(b) of the Code;
+-~ (6) to refrain from using any portion of the proceeds of the Certificates of Obligation,
directly or indirectly, to acquire or to replace funds which were used, directly or indirectly,
to acquire investment property (as defined in section 148(b)(2) of the Code) which produces
~ a materially higher yield over the term of the Certificates of Obligation, other than
investment property acquired with --
~r (A) proceeds of the Certificates of Obligation invested for a reasonable
temporary period of 3 years or less or, in the case of a refunding certificate, for a
period of 30 days or less until such proceeds are needed for the purpose for which the
certificates are issued,
(B) amounts invested in a bona fide debt service fund, within the meaning
of section 1.148-1(b) of the Treasury Regulations, and
(C) amounts deposited in any reasonably required reserve or replacement
~. fund to the extent such amounts do not exceed 10 percent of the proceeds of the
Certificates of Obligation;
rr- (7) to otherwise restrict the use of the proceeds of the Certificates of Obligation or
amounts treated as proceeds of the Certificates of Obligation, as may be necessary, so that
the Certificates of Obligation do not otherwise contravene the requirements of section 148

20


of the Code (relating to arbitrage) and, to the extent applicable, section 149(d) of the Code
~'"' (relating to advance refundings); and
(8) to pay to the United States of America at least once during each five-yeaz period
'~" (beginning on the date of delivery of the Certificates of Obligation) an amount that is at least
equal to 90 percent of the "Excess Earnings," within the meaning of section 148(f) of the
Code and to pay to the United States of America, not later than 60 days after the Certificates
"~' of Obligation have been paid in full, 100 percent of the amount then required to be paid as
a result of Excess Earnings under section 148(f) of the Code.
'~" (b) Rebate Fund. In order to facilitate compliance with the above covenant (8), a "Rebate
Fund" is hereby established by the County for the sole benefit of the United States of America, and
such fund shall not be subject to the claim of any other person, including without limitation the
°~" certificateholders. The Rebate Fund is established for the additional purpose of compliance with
section 148 of the Code.
~"' (c) Proceeds. The County understands that the term "proceeds" includes "disposition
proceeds" as defined in the Treasury Regulations and, in the case of refunding certificates,
transferred proceeds (if any) and proceeds of the refunded certificates expended prior to the date of
issuance of the Certificates of Obligation. It is the understanding of the County that the covenants
contained herein are intended to assure compliance with the Code and any regulations or rulings
promulgated by the U.S. Department of the Treasury pursuant thereto. In the event that regulations
+~+ or rulings aze hereafter promulgated which modify or expand provisions of the Code, as applicable
to the Certificates of Obligation, the County will not be required to comply with any covenant
contained herein to the extent that such failure to comply, in the opinion of nationally recognized
bond counsel, will not adversely affect the exemption from federal income taxation of interest on
the Certificates of Obligation under section 103 of the Code. In the event that regulations or rulings
are hereafter promulgated which impose additional requirements which are applicable to the
+~ Certificates of Obligation, the County agrees to comply with the additional requirements to the
extent necessary, in the opinion of nationally recognized bond counsel, to preserve the exemption
from federal income taxation of interest on the Certificates of Obligation under section 103 of the
+r~r Code. In furtherance of such intention, the County hereby authorizes and directs the Finance
Director to execute any documents, certificates or reports required by the Code and to make such
elections, on behalf of the County, which may be permitted by the Code as are consistent with the
purpose for the issuance of the Certificates of Obligation.
(d) Allocation Of. and Limitation On Expenditures for the Project. The County covenants
.. to account for the expenditure of sale proceeds and investment earnings to be used for the purposes
described in Section 1 of this Order (the "Project") on its books and records in accordance with the
requirements of the Internal Revenue Code. The County recognizes that in order for the proceeds
,~, to be considered used for the reimbursement of costs, the proceeds must be allocated to expenditures
within 18 months of the later of the date that (1) the expenditure is made, or (2) the Project is
completed; but in no event later than three yeazs after the date on which the original expenditure is
,,, paid. The foregoing notwithstanding, the County recognizes that in order for proceeds to be
expended under the Internal Revenue Code, the sale proceeds or investment earnings must be
expended no more than 60 days after the eazlier of (1) the fifth anniversary of the delivery of the
~,, Certificates of Obligation, or (2) the date the Certificates of Obligation are retired. The County

21

ar
agrees to obtain the advice ofnationally-recognized bond counsel if such expenditure fails to comply
""" with the foregoing to assure that such expenditure will not adversely affect the tax-exempt status of
the Certificates of Obligation. For purposes hereof, the County shall not be obligated to comply with
this covenant if it obtains an opinion that such failure to comply will not adversely affect the
'"'~ excludability for federal income tax purposes from gross income of the interest.
(e) Disposition ofProject. T'he County covenants that the property constituting the Project
'"" will not be sold or otherwise disposed in a transaction resulting in the receipt by the County of cash
or other compensation, unless the County obtains anopinion ofnationally-recognized bond counsel
that such sale or other disposition will not adversely affect the tax-exempt status of the Certificates
~"' of Obligation. For purposes of the foregoing, the portion of the property comprising personal
property and disposed in the ordinary course shall not be treated as a transaction resulting in the
receipt of cash or other compensation. For purposes hereof, the County shall not be obligated to
'~" comply with this covenant if it obtains an opinion that such failure to comply will not adversely
affect the excludability for federal income tax purposes from gross income of the interest.
"" (f) Qualified Tax-Exempt Obligations. The County hereby designates the Certificates of
Obligation as "qualified tax-exempt obligations" as defined in section 265(b)(3) of the Code. In
furtherance of such designation, the County represents, covenants and warrants the following: (a)
~" that during the calendar year in which the Certificates of Obligation aze issued, the County (including
any subordinate entities) has not designated nor will designate bonds or other obligations, which
when aggregated with the Certificates of Obligation, will result in more than $10,000,000 of
"" "qualified tax-exempt obligations" being issued; (b) that the County reasonably anticipates that the
amount of tax-exempt obligations issued during the calendaz year in which the Certificates of
Obligation aze issued by the County (or any subordinate entities) will not exceed $10,000,000; and,
"~' (c) that the County will take such action or refrain from such action as necessary, and as more
particularly set forth in this Section, in order that the Certificates of Obligation will not be considered
"private activity bonds" within the meaning of section 141 of the Code.
SECTION 13. SALE AND DELIVERY OF CERTIFICATES. The Certificates of
Obligation aze hereby initially sold and shall be delivered to SouthwestSecurities, Inc., as the initial
~' purchaser of the Certificates of Obligation (the "Underwriter"), at a price of $1,997,154.70 (which
amount is equal to par, less Underwriter's discount of $26, 000, plus a net original issue premium of
$23,154.70), plus accrued interest on the Certificates of Obligation from January 15, 2005, to the
°~+ date of initial delivery thereof, all pursuant to the terms and provisions of a Purchase Agreement in
substantially the form attached hereto as Exhibit B (the "Purchase Agreement"). The County Judge
of the County is hereby authorized to execute and deliver, and the County Clerk or Deputy County
++~ Clerk is hereby authorized to attest the Purchase Agreement. The County will deliver to the
Underwriter an Initial Certificate of Obligation in the aggregate principal amount of $2, 000, 000 in
principal installments on the dates and in the principal amounts shown in Section 2 hereof, and
bearing interest at the rates for each respective maturity as shown in Section 3 hereof. The Initial
Certificate of Obligation shall be registered in the name of Southwest Securities, Inc.
+~' SECTION 14. APPROVAL OF OFFICIAL STATEMENT. The County hereby approves
the form and content of the Official Statement relating to the Certificates of Obligation and any
addenda, supplement, or amendment thereto, and approves the distribution of the Official Statement
~. in the reoffering of the Certificates of Obligation by the Underwriter in final form, with such changes

22


therein or additions thereto as the officer executing the same may deem advisable, such
~'"' determination to be conclusively evidenced by his execution thereof. The distribution and use of the
Preliminary Official Statement for the Certificates of Obligation, dated January 28, 2005, prior to
the date hereof is hereby ratified and confirmed. The Commissioners Court finds and determines
"" that the Preliminary Official Statement and the Official Statement were and are "deemed final" as
of each of their respective dates within the meaning, and for the purpose, of Rule 15c2-12
promulgated under authority granted by the Federal Securities and Exchange Act of 1934.
«~.
SECTION 15. AUTHORITY FOR OFFICERS TO EXECUTE DOCUMENTS. The
County Judge, County Clerk or Deputy County Clerk, County Treasurer and County Auditor of the
"""' County, and all other officers of the County, and each of them, shall be and they are hereby expressly
authorized, empowered, and directed from time to time and at any time to do and perform all such
acts and things and to execute, acknowledge, and deliver in the name and under the corporate seal
~"" and on behalf of the County all such instruments, whether or not herein mentioned, as may be
necessary or desirable in order to carry out the terms and provisions of this Order, the Certificates
of Obligation, the sale of the Certificates of Obligation, the Official Statement and the Paying
'~" Agent/Registrar Agreement. In case any officer whose signature shall appear on any Certificate of
Obligation shall cease to be such officer before the delivery of such Certificate of Obligation, such
signature shall nevertheless be valid and sufficient for all purposes the same as if such officer had
remained in office until such delivery.
SECTION 16. ORDER A CONTRACT; AMENDMENTS. This Order shall constitute a
contract with the Registered Owners of the Certificates of Obligation, binding on the County and
its successors and assigns, and shall not be amended or repealed by the County as long as any
Certificate of Obligation remains outstanding except as permitted in this Section. The County may,
without the consent of or notice to any Registered Owners, amend, change, or modify this Order as
may be required (i) by the provisions hereof, (ii) for the purpose of curing any ambiguity,
inconsistency, or formal defect or omission herein, or (iii) in connection with any other change which
is not to the prejudice of the Registered Owners. The County may, with the written consent of the
Registered Owners of a majority in aggregate principal amount of the Certificates of Obligation then
outstanding affected thereby, amend, change, modify, or rescind any other provisions of this Order;
provided that without the consent of all of the Registered Owners affected, no such amendment,
change, modification, or rescission shall (i) extend the time or times of payment of the principal of
and interest on the Certificates of Obligation, or reduce the principal amount thereof or the rate of
interest thereon, (ii) give any preference to any Certificate of Obligation over any other Certificate
of Obligation, (iii) extend any waiver of default to subsequent defaults, or (iv) reduce the aggregate
principal amount of Certificates of Obligation required for consent to any such amendment, change,
modification, or rescission. Whenever the County shall desire to make any amendment or addition
to or rescission of this Order requiring consent of the Registered Owners, the County shall cause
notice of the amendment, addition, or rescission to be sent by first class mail, postage prepaid, to the
Registered Owners at the respective addresses shown on the Registration Books. Whenever at any
time within one year after the date of the giving of such notice, the County shall receive an
instrument or instruments in writing executed by the Registered Owners of a majority in aggregate
principal amount of the Certificates of Obligation then outstanding affected by any such amendment,
addition, or rescission requiring the consent of the Registered Owners, which instrument or
instruments shall refer to the proposed amendment, addition, or rescission described in such notice
and shall specifically consent to and approve the adoption thereof in substantially the form of the
r..
23
~.
0
copy thereof referred to in such notice, thereupon, but not otherwise, the County may adopt such
""' amendment, addition, or rescission in substantially such form, except as herein provided. No
Registered Owner may thereafter object to the adoption of such amendment, addition, or rescission,
or to any of the provisions thereof, and such amendment, addition, or rescission shall be fully
""' effective for all purposes.
SECTION 17. SECURITY INTEREST. Chapter 1208, Texas Government Code, applies
~"'' to the issuance of the Certificates of Obligation and the pledge of the ad valorem taxes granted by
the County under Section 6 of this Order or in a subsequent Order ,and is therefore valid, effective,
and perfected. If Texas law is amended at any time while the Certificates of Obligation are
"" outstanding and unpaid such that the pledge of the ad valorem taxes granted by the County under
Section 6 of this Order or in a subsequent Order is to be subject to the filing requirements of Chapter
9, Texas Business & Commerce Code, then in order to preserve to the registered owners of the
"` Certificates of Obligation the perfection of the security interest in said pledge, the County agrees to
take such measures as it determines aze reasonable and necessary under Texas law to comply with
the applicable provisions of Chapter 9, Texas Business & Commerce Code, and enable a filing to
~" perfect the security interest in said pledge to occur.
SECTION 18. INTERESTED PARTIES. Nothing in this Order expressed or implied is
"~ intended or shall be construed to confer upon, or to give to, any person or entity, other than the
County and the registered owners of the Certificates of Obligation, any right, remedy or claim under
or by reason of this Order or any covenant, condition or stipulation hereof, and all covenants,
~"' stipulations, promises and agreements in this Order contained by and on behalf of the County shall
be for the sole and exclusive benefit of the County and the registered owners of the Certificates of
Obligation.
SECTION 19. COMPLIANCE WITH RULE 15c2-12. (a) Definitions. As used in this
Section, the following terms have the meanings ascribed to such terms below:
~..
"MSRB" means the Municipal Securities Rulemaking Board.
"NRMSIR" means each person whom the SEC or its staff has determined to be a
nationally recognized municipal securities information repository within the meaning of the Rule
from time to time.
"Rule" means SEC Rule 15c2-12, as amended from time to time.
"SEC" means the United States Securities and Exchange Commission.
"SID" means any person designated by the State of Texas or an authorized
department, officer, or agency thereof as, and determined by the SEC or its staff to be, a state
information depository within the meaning of the Rule from time to time.
+r (b) Annual Information. (i) The County shall provide annually, within six months after the
end of each fiscal year ending in or after 2004, financial information and operating data with respect
to the County of the general type described in Exhibit C hereto provided that such information and
* data is customarily prepazed by the County. Such information shall be provided to any person upon

24

0
request made to the County provided that the County reserves the right at any time to commence
°~"" making such annual filings with the SID (if any, and if none, to each NRMSIR) in lieu of providing
such information upon request. Any financial statements so to be provided shall be (1) prepazed in
accordance with the accounting principles described in Exhibit C hereto, or such other accounting
"'` principles as the County may be required to employ from time to time pursuant to state law or
regulation, and (2) audited, if the County commissions an audit of such statements and the audit is
completed within the period during which they must be provided. If the audit of such financial
'~"' statements is not completed within such period, then the County shall provide unaudited financial
statements by the required time and shall provide audited financial statements for the applicable
fiscal yeaz to any SID, when and if the audit report on such statements become available.
(ii) If the County changes its fiscal year, it will notify the SID of the change (and of the
date of the new fiscal year end) prior to the next date by which the County otherwise would be
required to provide financial information and operating data pursuant to this pazagraph (b). The
financial information and operating data to be provided pursuant to this Section maybe set forth in
full in one or more documents or may be included by specific reference to any document (including
~" an official statement or other offering document, if it is available from the MSRB) that theretofore
has been provided to the SID or filed with the SEC.
+~ (c) Material Event Notices. The County shall notify the SID and the MSRB, in a timely
manner, of any of the following events with respect to the Certificates of Obligation, if such event
is material within the meaning of the federal securities laws:
1. Principal and interest payment delinquencies;
2. Non-payment related defaults;
3. Unscheduled draws on debt service reserves reflecting financial difficulties;
4. Unscheduled draws on credit enhancements reflecting financial difficulties;
5. Substitution of credit or liquidity providers, or their failure to perform;
6. Adverse tax opinions or events affecting the tax-exempt status of the
Certificates of Obligation;
7. Modifications to rights of holders of the Certificates of Obligation;
8. Certificate of Obligation calls;
9. Defeasances;
10. Release, substitution, or sale of property securing repayment of the
Certificates of Obligation; and
11. Rating changes.

25

rr
The County shall notify the SID and the MSRB, in a timely manner, of any failure by the County to
'~" provide financial information or operating data in accordance with subsection (b) of this Section by
the time required by such subsection.
(d) Limitations Disclaimers, and Amendments. (i) The County shall be obligated to
observe and perform the covenants specified in this Section for so long as, but only for so long as,
the County remains an "obligated person" with respect to the Certificates of Obligation within the
~'' meaning of the Rule, except that the County in any event will give notice of any deposit made in
accordance with this Order or applicable law that causes the Certificates of Obligation no longer to
be outstanding
r
(ii) The provisions of this Section are for the sole benefit of the registered owners and
beneficial owners of the Certificates of Obligation, and nothing in this Section, express or implied,
shall give any benefit or any legal or equitable right, remedy, or claim hereunder to any other person.
The County undertakes to provide only the financial information, operating data, financial
statements, and notices that it has expressly agreed to provide pursuant to this Section and does not
hereby undertake to provide any other information that may be relevant or material to a complete
presentation of the County's financial results, condition, or prospects or hereby undertake to updhte
any information provided in accordance with this Section or otherwise, except as expressly provided
+~ herein. The County does not make any representation or warranty concerning such information or
its usefulness to a decision to invest in or sell Certificates of Obligation at any future date.
(iii) UNDER NO CIRCUMSTANCES SHALL THE COUNTY BE LIABLE TO THE
REGISTERED OWNER OR BENEFICIAL OWNER OF ANY CERTIFICATE OF OBLIGATION
OR ANY OTHER PERSON, IN CONTRACT OR TORT, FOR DAMAGES RESULTING IN
WHOLE OR IN PART FROM ANY BREACH BY THE COUNTY, WHETHER NEGLIGENT OR
WITHOUT FAULT ON ITS PART, OF ANY COVENANT SPECIFIED IN THIS SECTION, BUT
EVERY RIGHT AND REMEDY OF ANY SUCH PERSON, IN CONTRACT OR TORT, FOR OR
+~ ON ACCOUNT OF ANY SUCH BREACH SHALL BE LIMITED TO AN ACTION FOR
MANDAMUS OR SPECIFIC PERFORMANCE.
wrr (iv) No default by the County in observing or performing its obligations under this Section
shall comprise a breach of or default under this Order for purposes of any other provision of this
Order. Nothing in this Section is intended or shall act to disclaim, waive, or otherwise limit the
.~ duties of the County under federal and state securities laws.
(v) The provisions of this Section may be amended by the County from time to time to
+w 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 County, but only if (1) the
provisions of this Section, as so amended, would have permitted an underwriter to purchase or sell
„~, Certificates of Obligation in the primary offering of the Certificates of Obligation in compliance with
the Rule, taking into account any amendments or interpretations of the Rule since such offering as
well as such changed circumstances and (2) either (a) the registered owners of a majority in
,,,r aggregate principal amount (or any greater amount required by any other provision of this Order that
authorizes such an amendment) of the outstanding Certificates of Obligation consent to such
amendment or (b) a person that is unaffiliated with the County (such as nationally recognized bond
~,. counsel) determined that such amendment will not materially impair the interest of the registered
w
26
..
w.r
owners and beneficial owners of the Certificates of Obligation. The County may also amend or
+~' repeal the provisions of this continuing disclosure agreement if the SEC amends or repeals the
applicable provision of the Rule or a court of final jurisdiction enters judgment that such provisions
of the Rule are invalid, but only if and to the extent that the provisions of this sentence would not
~r prevent an underwriter from lawfully purchasing or selling Certificates of Obligation in the primary
offering of the Certificates of Obligation. If the County so amends the provisions of this Section,
it shall include with any amended financial information or operating data next provided in
r accordance with subsection (a) of this Section an explanation, in narrative form, of the reason for
the amendment and of the impact of any change in the type of financial information or operating data
so provided.
SECTION 20. INCORPORATION OF RECITALS. The County hereby finds that the
statements set forth in the recitals of this Order are true and correct, and the County hereby
+~ incorporates such recitals as a part of this Order.
SECTION 21. SEVERABILITY. If any provision of this Order or the application thereof
to any circumstance shall be held to be invalid, the remainder of this Order and the application
thereof to other circumstances shall nevertheless be valid, and this governing body hereby declares
that this Order would have been enacted without such invalid provision.
SECTION 22. EFFECTIVE DATE. This Order shall become effective immediately after
its adoption.
[The remainder of this page intentionally left blank)

27

PASSED AND APPROVED BYTHE COMMISSIONERS COURT OFKERR COUNTY,
~' TEXASATA ,SPECIAL MEETING RECONVENED ON THE 4~" DAY OF FEBRUARY, 2005,
AT WHICH MEETING A QUORUM WAS PRESENT.
ATTEST:
.~ ,,
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my Clerk, Kerr County, Tex County dge, Kerr County,
Jj~P~TT~Y S.>~,> ~~
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[EXECUTION PAGE TO THE CERTIFICATE OF OBLIGATION ORDER]


EXHIBIT A
THE PAYING AGENT/REGISTRAR AGREEMENT IS OMITTED AT THIS POINT AS IT APPEARS IN
EXECUTED FORM ELSEWHERE IN THIS TRANSCRIPT OF PROCEEDINGS.
A-I

0
it
EXHIBIT B

THE PURCHASE AGREEMENT IS OMITTED AT THIS POINT AS IT APPEARS IN EXECUTED FORM
ELSEWHERE IN THIS TRANSCRIPT OF PROCEEDINGS.
B-I

0
EXHIBIT C
DESCRIPTION OF ANNUAL FINANCIAL INFORMATION
The following information is referred to in Section 19 of this Order.
Annual Financial Statements and Operating Data
The financial information and operating data with respect to the County to be provided
annually in accordance with such Section are as specified (and included in the Appendix or under
the headings of the Official Statement referred to) below:
1. The annual audited financial statements of the County or the unaudited financial
statements of the County in the event audited financial statements are not completed within six
months after the end of any fiscal year.
2. All quantitative financial information and operating data with respect to the County
of the general type included in the Official Statement under Tables 1 through 6 and Tables 8 through
~. 11 in the Official Statement.
Accounting Principles
The accounting principles referred to in such Section are the accounting principles described
in the notes to the financial statements referred to in paragraph 1 above.
C-1

0


CERTIFICATE FOR ORDER
I, the undersigned County Clerk of KE1tx COUNTY, TEXAS (the "County"), hereby certify as
follows:
1. The Commissioners Court of the County (the "Commissioners Court") convened in a
REGULAR TERM ON THE 14th DAY OF FEBRUARY, 2005, at the regular designated meeting
place (the "Meeting"), and the roll was called of the duly constituted officers and members of the
~" Commissioners Court, to-wit:
Pat Tinley, County Judge
H.A. "Buster" Baldwin, Commissioner, Precinct 1
William "Bill" Williams, Commissioner, Precinct 2
Jonathan P. Letz, Commissioner, Precinct 3
,~ David Nicholson, Commissioner, Precinct 4
and all of said persons were present, except the following absentees: vt ~---
thus constituting a quorum. Whereupon, among other business the
following was transacted at the Meeting: a written
ORDER SECURING THE PAYMENT OF "KERB COUNTY, TEXAS
~,,; CERTIFICATES OF OBLIGATION, SERIES 2005" BY AUTHORIZING THE
LEVY OF AN ANNUAL AD VALOREM TAX; RE-ADOPTING THE ORDER
APPROVED ON FEBRUARY 4, 2005 WHICH ORIGINALLY AUTHORIZED
THE ISSUANCE OF SUCH CERTIFICATES OF OBLIGATION; AND
~' PROVIDING FOR AN IMMEDIATE EFFECTIVE DATE
(the "Order") was duly introduced for the consideration of the Commissioners Court. It was then
+~ duly moved and seconded that the Order be passed; and, after due discussion, said motion, carrying
with it the passage of the Order, prevailed and carried by the following votes:
~, AYES: 3 NOES: ~ ABSTENTIONS: ~
2. A true, full, and correct copy of the Order passed at the Meeting is attached to and follows
this Certificate; the Order has been duly recorded in the Commissioners Court's minutes of the
"'~' Meeting; the above and foregoing paragraph is a true, full, and correct excerpt from the
Commissioners Court's minutes of the Meeting pertaining to the passage of the Order; the persons
named in the above and foregoing paragraph are the duly chosen, qualified, and acting officers and
rr, members of the Commissioners Court as indicated therein; each of the officers and members of the
Commissioners Court was duly and sufficiently notified officially and personally, in advance, of the
time, place, and purpose of the Meeting, and that the Order would be introduced and considered for
passage at the Meeting, and each of the officers and members consented, in advance, to the holding
of the Meeting for such purpose; and the Meeting was open to the public, and public notice of the
time, place, and purpose of the Meeting was given all as required by Chapter 551, Texas Government
Code.
..
SIGNED AND SEALED the 14th day of February, 2005.
.., ..
;.,~ '~ ''
'n ~4 L C
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,~
. 4 : ' . ~ ~ '•, , C ty Clerk, Kerr County, Tex s
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ORDER SECURING THE PAYMENT OF "KERB COUNTY, TEXAS
CERTIFICATES OFOBLIGATIDN, SERIES2005"BY AUTHORIZING THE
,~,,, LEVY OF AN ANNUAL AD VALOREM TAX; RE-ADOPTING THE ORDER
APPROVED ON FEBRUARY 4, 2005 WHICH ORIGINALLY AUTHORIZED
THE ISSUANCE OF SUCH CERTIFICATES OF OBLIGATION; AND
~, PROVIDING FOR AN IMMEDIATE EFFECTIVE DATE
THE STATE OF TEXAS §
COUNTY OF KERB §
WHEREAS, on February 4, 2004, the Commissioners Court of KExR COUNTY, TEXAS (the
~" "County") approved an order (the "Certificate Order") which authorized the issuance of $2,000,000
in principal amount of "Kerr County, Texas Certificates of Obligation, Series 2005" (the
"Certificates of Obligation"), for the purpose of providing proceeds to purchase the existing juvenile
'~" detention facility located within the County from the Hill Country Juvenile Facility Corporation; and
WHEREAS, the meeting during which the Certificate Order was passed was not a "regularly
scheduled meeting" of the Commissioners Court; therefor, pursuant to Section 81.006, Texas Local
Government Code, the Commissioners Court was not authorized to levy an ad valorem tax securing
the payment of the Certificates of Obligation as would normally have occurred in the Certificate
Order; and
,~, WHEREAS, the purpose of this Order is to fully implement Section 6 of the Certificate
Order and secure payment of the principal of and interest on the Certificates of Obligation by levying
an annual ad valorem tax on all taxable property within the County in an amount sufficient to pay
~,,,, such principal and interest requirements and pledging such amount to secure the Certificates of
Obligation; and
.rr WHEREAS, at the suggestion of the Public Finance Division of the Attorney General of
Texas, which office must approve the issuance of the Certificates of Obligation in accordance with
Texas law, the Commissioner Court also deems it appropriate to re-adopt the Certificate Order in
order to eliminate any question regarding the timing and effectiveness of the Certificate Order; and
WHEREAS, it is hereby officially found and determined that the meeting at which this Order
~""' was passed was a regularly scheduled meeting ofthe Commissioners Court during which at least four
members of the Commissioners Court were present, and such meeting was open to the public, and
public notice of the time, place, and purpose of said meeting was given, all as required by Chapter
"~' 551, Texas Government Code.
THEREFORE, BE IT ORDERED BY THE COMMISSIONERS COURT OF KERB
COUNTY, TEXAS:
0
.~.

0
rr. SECTION 1. TAX LEVY. Pursuant to Subchapter C of Chapter 271, Texas Lacal
Government Code, and in order to fully implement Section 6 of the Certificate Order to provide
payment of principal of and interest on the Certificates of Obligation, an ad valorem tax is hereby
+~~- ordered to be levied against all taxable property in the County for each year while any of the
Certificates of Obligation or interest thereon are outstanding and unpaid; and said tax shall be
assessed and collected each such year and deposited to the credit of the Interest and Sinking Fund
~"' created by Section 6 of the Certificate Order. Said ad valorem taxes sufficient to provide for the
payment of the interest on and principal of the Certificates of Obligation, as such interest comes due
and such principal matures, are hereby pledged for such payment, within the limit prescribed by law.
SECTION 2. RE-ADOPTION OF CERTIFICATE ORDER. The Certificate Order is
hereby re-adopted by the Commissioners Court in its entirety the same as if it were attached to this
Order and made a part hereof.
~r SECTION 3. SECURITY INTEREST. Chapter 1208, Texas Government Code, applies to
the issuance of the Certificates of Obligation and the pledge of the ad valorem taxes granted by the
County pursuant to this Order, and is therefore valid, effective, and perfected. If Texas law is
,,,~ amended at any time while the Certificates of Obligation are outstanding and unpaid such that the
pledge of the ad valorem taxes granted by the County pursuant to this Order is to be subject to the
filing requirements of Chapter 9, Texas Business & Commerce Code, then in order to preserve to
the registered owners of the Certificates of Obligation the perfection of the security interest in said
pledge, the County agrees to take such measures as it determines are reasonable and necessary under
Texas law to comply with the applicable provisions of Chapter 9, Texas Business & Commerce
Code, and enable a filing to perfect the security interest in said pledge to occur.
SECTION 4. INCORPORATION OF RECITALS. The County hereby finds that the
statements set forth in the recitals of this Order are true and correct, and the County hereby
incorporates such recitals as a part of this Order.
SECTION 5. EFFECTIVE DATE. This Order shall become effective immediately after its
adoption.
The remainder of this page intentionally left blank]
~.


r
~.
PASSEDANDAPPROVED BYTHECOMMISSIONERS COURT OFKERR COUNTY,
TEXAS AT A REGULAR TERM MEETING ON THE 14TH DAY OF FEBRUARY, 2005, AT
WHICH MEETING A QUOR UM WAS PRESENT.
ATTEST:
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~`GL 'bounty udge, err County, Tex
** ** ** ** **
[EXECUTION PAGE TO ORDER LEVYING AD VALOREM TAX
TO SECURE CERTIFICATES AND RE-ADOPT THE CERTIFICATE ORDER]

rw
~An.r
,,, NEw -ssoE OFFICIAL STATEMENT Rating: Mo©ay°s: «A3"
BOOK-ENTRY-ONLY F@brUar~r 4~ 205 (See "RATINGS" herein.)
In the opinion of Bond Counsel, interest on the Certificates will be excludable from gross income for federal income tax purposes
under statutes, regulations, published rulings and court decisions existing on the date thereof, subject to the matters described
under "TAX MATTERS" herein, including the alternative minimum tax on corporations.
:,r~""
THE CERTIFICATES WILL BE DESIGNATED AS "QUALIFIED TAX-EXEMPT OBLIGATIONS"
FOR FINANCIAL INSTITUTIONS
~""" $2,000,000
KERR COUNTY, TEXAS
CERTIFICATES OF OBLIGATION, SERIES 2005
Dated• January I5, 2005 Due: February 15, as shown on the following page
~ Kerr County, Texas (the "County" or "Issuer") is issuing $2,000,000 Certificates of Obligation, Series 2005 (the "Certificates")
pursuant to the laws of the State of Texas, including Chapter 271, Texas Local Government Code, as amended, and two orders
(collectively, the "Certificate Order" or the "Order") adopted by the Commissioners Court of the County.
-err The Certificates constitute direct obligations of the County, payable from the levy and collection of a direct and continuing ad
`~ valorem tax, within the limits prescribed by law, on all taxable property located within the County. (See "THE CERTIFICATES -
Security for Payment" herein.)
~"'~"' Interest on the Certificates will accrue from the dated date as shown above and will be payable February 15 and August 15 of each
year, commencing February 15, 2006, and will be calculated on the basis of a 360-day year of twelve 30-day months. The
definitive Certificates will be issued as fully registered obligations in book-entry form only and when issued will be registered in
,,: the name of Cede & Co., as nominee of The Depository Trust Company ("DTC"), New York, New York. DTC .will act as
securities depository (the "Securities Depository"). Book-entry interests in the Certificates will be made available for purchase in
the principal amount of $5,000 or any integral multiple thereof. Purchasers of the Certificates ("Beneficial Owners") will not
receive physical delivery of certificates representing their interest in the Certificates purchased. So long as DTC or its' nominee is
"' the registered owner of the Certificates, the principal of and interest on the Certificates will be payable by Wachovia Bank,
National Association, Houston, Texas as the initial Paying Agent/Registrar, to the Securities Depository, which will in turn remit
such principal and interest to its Participants, which will in turn remit such principal and interest to the Beneficial Owners of the
~,~ Certificates (see "BOOK-ENTRY-ONLY SYSTEM" herein).
Proceeds from the sale of the Certificates will be used to acquire from the Hill Country Juvenile Detention Facility Corporation the
existing juvenile detention facility located in the County (the "Juvenile Facility") and to pay the costs of issuance thereof. (See
z~'°'"'~ "THE CERTIFICATES -Use of Certificate Proceeds" herein.)
SEE FOLLOWING PAGE FOR STATED MATURITIES,
PRINCIPAL AMOUNTS, INTEREST RATES, AND YIELDS.
>tr The Certificates are not subject to redemption prior to maturity.
The Certificates are offered for delivery when, as and if issued and received by the Underwriter and subject to the approving opinion of the
` Attorney General of Texas and the opinion of McCall, Parkhurst & Horton L.L.P, Bond Counsel, San Antonio, Texas (see APPENDIX D, "Form
of Bond Counsel's Opinion'). Certain legal matters will be passed upon for the Underwriter by Locke Lidell & Sapp LLP, Dallas, Texas, as
legal counsel to the Underwriter. It is expected that the Certificates will be available for delivery through the Depository Trust Company, New
York, New York, on February 14, 2005.

SOUTHWEST SECURITIES

STATED MATURITY SCHEDULE
$2,000,000
KERR COUNTY, TEXAS
CERTIFICATES OF OBLIGATION,
SERIES 2005
Base CUSIP~'~: 492350
Maturity				
Date	Principal	Interest		
2/15	Amount	Rate	Yield	CUSIP's~'~
2006	$ 370,000	3.50%	2.50%	CE1
2007	425,000	3.50%	2.75%	CF8
2008	440,000	3.50%	2.90%	CG6
2009	375,000	3.50%	3.06%	CH4
2010	390,000	3.25%	3.27%	CJO
(Interest Accrues from January I5, 2005)
~'~ CUSIP numbers have been assigned to the Bonds by Standard & Poor's CUSIP Service Bureau, a division of the McGraw Hill
Companies, Inc. and are included solely for the convenience of owners of the Certificates. Neither the County, the Financial
Advisor, nor the Underwriter shall be responsible for the selection or correctness of the CUSIP numbers set forth herein.
11

KERR COUNTY, TF.YAS
7111) Main Street
Kerrville, Texas 781128

COMMISSIONERS COURT:

			Years	Term Expires
	Name and Position		Served	(December)
				
	Pat Tinley		2	2006
	` County Judge			
	H.A. "Buster" Baldwin		4	2004
	Commissioner, Precinct I			
	William "Bill" Williantis		6	2006
	Commissioner, Precinct 2			
	Jonathan P. Letz		8	2004
,rr	Commissioner, Precinct 3			
	David Nicholson		2	2006
	Commissioner, Precinct 4			
..rr				
`~,,,,	COUNTY OFFICIALS:			
				Total
"~"~`	Name	Position		Years With the County
	Jannett Pieper	County Clerk		22
	Linda Decker	District Clerk		37
-.rr	Barbara Nemec	County Treasurer		13
	Paula Rector	Tax Assessor/Collector		1 S
	Tummy Tomlinson	Cu~uiry Auditor		13
				
,~, CONSULTANTS AND ADVISORS:
Bond Cu~msel ...............................................................................................................................................McCall, Parkhurst & Hurtun L.L.P.
San Antonio; Texas
Certified Public Accuuntants ....................................................................................................................... Pressler, Thompson, and Company
Kerrville, Texas
"'+rr
Financial Advisur .......................................................................................................................................................... RBC Dain Rauscher lnc.
San Antuniu, Texas
~++~

iii


USE. OF INFORMATION IN OFFICIAL STATEMENT
This Official Statement, which iuchtdes the wver page and the Appendices hereto, does not constitute an after to sell or the solicitation of an after to
buy in anyjurisdiction to any person t<i whom it is unlawti~l to utake such offer, solicitation or sale.
Nu dealer, broker, salesperxm or other person has been authorized to give infomtation or to make any representation other than those wntained in
this Otiicial Statement, and, if given or made, such other intomtation ur representations must nut be relied upon.
The information set forth herein has been obtained from the County and other scntrces believed to be reliable, but such information is nut guaranteed
as tci accuracy or completeness and is nut to be construed as the promise or guarantee of the Financial Advisor or the Underwriter. This Official
Statement contains, in part, estimates and matters of opinion which are nut intended as statements of fact, and no representation is made as tti the
cortctuess of such estimates and opinions, or that they will be realized.
The Underwriter has provided the fi~llowing sentence fix inclusion in this Official Statement. 'The Underwriter has reviewed the information in
this Otticial Statement in accordance with their responsibilities to investors under the federal securities laws as applied to the facts and
circumstances of this transaction, but the Underwriter do not guarantee the accuracy or completeness of such infomtation.
The utfumtation and expressions of opiniuu contained herein are subju;t to change without notice, and neither the delivery of this OlTicial Statement
nor any sale made heretmder shall, under any cireumstances, create any implication that there has been no change in the affairs of the County or other
matters described.
THE CERTIFICATES ARE EXEMPT FROM REGISTRATION WITFI THE SECURITIES AND EXCHANGE COMMISSION AND
CONSEQUENTLY HA~~ NOT BEEN REGISTERED THEREWITH. THE REGISTRATION, QUALIFICATION, OR EXEMPTION OF THE
CERTIFICATES IN ACCORDANCE WI'T'H APPLICABLE SECURITIES LAW PROVISIONS OF THE JURISDICTIONS IN WHICH THESE
SECURITIES HAVE BEEN REGISTERED, QUALIFIED, OR EXEMPTED SHOULD NOT BE REGARDED AS A RECOMMENDATION
THERE(_)F.
IN C'ONNEC'TION WITH `CHIS OPEERING, THE UNDERWRITER MAY O~BR-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE
OR MAINTAIN THE MARKF,T PRICE OF THE CERTIFICATES AT A LEVEL ABOVE THAT WHICH MIGHT PREY"AIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCF.,D, MAY BE DISCONTINUED AT ANY TIME.
NEITHER THE COUNTY, THE FINANCIAL AD~ZSOR, NOR THE CNDERWRITER MAKE ANY REPRESENTATION OR WARRANTY
WITH RESPECT TO THE INFORMATION CONTAINED IN THIS OFFICIAL STATEMF.N'C REGARDING THE DEPOSITORY 'TRUST
COMPANY OR [TS BOOK-ENTRY-ONLY SYSTEM.
The aereements of the County and others related to the Certificates are contained solely in the contracts described herein. Neither this OY~icial
Statement nor any other statement made in aamection with the offer or sale of the Certificates is to be coustmed as constihtting an agreement
with the purchasers of the Certificates. INVESTORS SHOULD READ THE ENTIRE OFFICIAL STATEMENT, INCLUDING ALL
APPENDICES ATTACHED HERETO, TO OBTAIN INFORMATION ESSENTIAL TO MAKING AN INFORMED INVESTMENT
DECISION.

iv

e



~r
wr
.ar
:rr
TABLE OF CONTENTS
Official Sfutentent:
Description of the Certificates
Stated Mat<trity Schedules
County Officials
Use of Inti~tmation in this Official Statement
Table of Contents
Selected Data from the Official StatemenC
Introduction
The Certitcates
Sources of Uses of Certifcates
Registration, Transtzr and Exchange
Book-Entry-Only System
Non Appropriation of Lease Revenue Blinds
Investmeuts
Litigation
Ad Valorem Tax Procedures
Tax Matters
Continuing Disclosure of Information
Registration and Qualification of Certificates for Sale
Legal Investments and Eligibility to Secure Public Funds in Texas
Legal Opinions and No-Litigation Certificates
Ratings
Underwriting
Financial Advisor
Use of information in Official Statement
Financial Intitrmation of the Cotmty
C,eneral Information Regarding the County
The Cowtty's Annual Financial Report tier Fiscal Year Ended 9/30/03
Form of Bond Cotmsel's Opinion
The Cover Pine, tleis use and the A t endives ultached hereto ore at4 of the O tciul Statenlerrt.
Puge
ii
iii
Iv
V
V"i
3
4
5
6
R
R
13
14
l4
14
IS
15
15
l5
Appendix A
Appendix B
Appendix C'
Appendix D
v

SELECTED DATA FROM THE OFFICIAL STATEMENT
T7re selected data is subject in all respects to the more corrrplete irrf~rrnution and definitions contained or incorporated in this Offrciul Statement. 77re
erson is curthor2zed to detach this pure
No
ment
t
l St
i
i
p
.
e
a
c
a
offering of the Certificates to potential irn~estors is etude only by means of this entire Off
from t1~is Official Statement or to	othenaise trse it without the entire Officful Statement.
The County	Kerr County, Texas (the "County" or "Issuer") is a central Texas catnty with an economy based on agriculture,
an increase of 20.24% since 1990. The
653
of 4 x
ti
l
	,
,
on
a
tourism and manuYactttring. The County had a 2000 popu
County is guvemecf by an elected Commissioners' Court, consisting of four Cutmty Commissioners and a County
	Judge, all of wham are elected otFicials.
	The Certificates shall mature serially on February IS in each of the years 2006 through 2010, and interest thereon
The Certificates	is payable un Febntary 15 and Aught I5 in each year, canunencing February 15, 2006.
Authority for Issuance	The C ertiticates are being issued by the County pursuant to the laws of the State of Texas, inchding Chapter 271,
as amended, and two Girders (collectively, the "C'ertificate Order" or the "Order")
ventment Code
l G
L
	,
u
oca
Texas
	adopttxi by the ('ommissiuners Court.
Security for the Certificates	The Certiticates constitute direct obligations of the County, payable from the levy and collection of a direct and
within the limits prescribed by law, on all taxable property located within the
t
l
	ax,
orem
continuing ad va
	Cututty. (See "THE CERTIFICATES -Security for ~aymeut" herein.)
	The Certificates are not subject to optional redemption prior to maturity (see "THE CERTIFICATES -
Redemption	Redemption Provisions" herein).
	In the opinion of Bond Counsel, the interest ou the Certiticates will be exchtdable from gross income for federal
"
"
Tax Exemption	TAX MATTERS
income tax purposes tinder existing law, subject to the matters described under the caption
	herein, including the alternative minimtmt tax ~t cotJxxatious•
Qualified Tas-Exempt	The County will designate the Certificates as "Qttalitied Tax-Exempt Obligations" for financial institutions (see
"
Obligations	).
"TAX MATTERS -Qualified Tax-Exempt Obligations for Financial Institutions
	Proceeds fmtn the sale of the Certificates will be used to acquire from the Hill Country Juvenile Detention Facility
Use of Proceeds	Corporation the existing juvenile detention facility located in the County (the "Juvenile Facility") and to pay the
"
	herein. )
costs of issuance thereof. (See "THE CER"CIFICATES - Use of Certificate Pra:eeds
	Mtx~dy's Investor Service ("Mtx~dy's') has assigned a municipal bond rating of A3 on the Certiticates. An
"
"
Ralhigs	herein. )
RATINGS
explanation of the significance of such rating ntay be obtained from the rating agency. (See
Book-Entry-Only System	The definitive Certificates will be initially registered and delivered only to Cede & Co., the nominee of DTC
eficial ownership of the Certificates may be
B
i
h
	en
n.
ere
pursuant to the Btxtk-Entry-Only System described
acquired in amounts due at maturity of $5,000 or integral multiples thereof: No physical delivery of the
'
	any, and interest on the
Certiticates will be made t<i the beneficial owners thereof. Principal of, premium, it
ill make distribution of the
hi
h
	w
c
Certiticates will be payable by the Paying AgentlRegistrar to Cede & Co., w
aid to the participating members of DTC for subsequent payment to the beneficial owners of the
ounts so
	p
am
Certiticates (see "BCx)K-ENTRY-ONLY SYSTEM").
Payment Record	The County has never defaulted in payment of its general obligation Wx debt.
Delivery	When issued, anticipated uu ur about Febntary 14, 2005.
vi
_~•
OFFICIAL STATEMENT
RELATING TO
KERB COUN'I'YOTEXAS
CERTIFICATES OF OBLIGATION, SERIES 2005
INTRODUCTION
~ This Otfcial Statement, which includes Appendices hereto, provides certain inti~rntation regarding the issttance of $2,000,000 Kerr County, Texas
Certificates of Obligation, Series 2005. Capitalized terms used in this Official Statement have the same meanings assigned r<i such terms in the Order to
be adopted on rite date of sale of the Certificates which will authorize the issutance of the Certificates, except as otherwise indicated herein.
There follows in this Official Statement descriptions of the Certificates and certain infomtation regarding the County and its finances. All descriptions
of da;uments contained herein are only stumttaries and are qualified in their entirety by reference to each such doctunenk Copies of slrch dcx:uments
may be obtained frotn the County's Financial Advisor, RBC Dain Rauscher Inc., San Antonio, Texas.
~` THE CERTIFICATES
General
" The Certificates are dated January 15, 2005 and mature on Febntary IS in each of the years and in the tnattrrity amounts set fiirtlt on the inside cover
page hereof: The Certificates shall bear interest from their date on the unpaid principal amounts, and the amount of interest to be paid each payment
period shall be computed on the basis of a 360-day year of twelve 30-day months. Interest on the Certificates will be payable on Febntary 15 and
August 15 of each year commencing Febntary I5, 2006. Principal is payable at the designated offices of the Paying Agent/Registrar, initially,
Wachovia Bank, National Association, Houston, Texas Interest on the Certificates is payable to the Holders whose names appear in the Security
Register at the close of business on the Record Date (as defined herein) and shall be paid by the Paying Agent/Registrar by check senC United States
Mail, first class postage prepaid, to the address of the Holder recorded in the Security Register or by such other method, acceptable to the Paying
,~ Agent/Registrar, requested by, and at the risk and expense of, the Holder.
The definitive Certificates will be issued only in fully registered form in any integral multiple of $5,000 of amounts due at mahtrity for any one
maturity and will be initially registered and delivered only to Cede & Co., the nominee of The Depository Tnrst Company, New York, New
~ York ("DTC"} pursuant to the Book-Entry-Only System described herein. No physical delivery of the Certificates will be made to the
owners thereof. Principal of, premium, if any, and interest on the Certificates will be payable by the Paying Agent/Kegistrar to Cede & Ca,
which will make disMbutiun of the amounts so paid to [he participating members of DTC for subsequent payment to the beneficial owners of the
Certificates. See BOOK-ENTRY-ONLY SYSYEM" herein.
Authority fitr Issuance
The Certificates are being issued by the County pursuant to the laws of the State of Texas, including Chapter 271, Texas Local Guvernrnent
Code, as amended, and two orders (collectively, the "Certificate Order") adopted by the Commissioners Court of the County.
Security for Payment
All taxable property within the County is subject to a continuing direct annual ad valorem tax levied by the County sufficient to provide for the
payment of principal of and interest on the Certificates and all other obligations payable in whole or in part from ad valorem taxes, which tax must be
levied within limits prescribed by law.
Redemption Provision
The Certificates are not subject to redemption prior tct niatttrity.
Use of Certificate Proceeds
Pra;eeds of the Certificates will be used to purchase all real and personal property constihttiug the Kerr County, Texas Juvenile Detection Facility
(the "Juvenile Facility") from the Hill Country Juvenile Facility Corporation, a nonprofit public facility corporation created by the Cututty (the
~rrr "Corporation"), and to pay costs of issuance. The Juvenile Facility was acquired by the Corporation (which had the effect of refinancing existing
indebtedness), and additional improvements to the Juvenile Facility were financed, with pn~ceeds derived from the sale by the Corporation of
$5,140,000 iu principal amount of the Hill Country Juvenile Facility Corporation Lease Revenue Bonds, Series 2002 (Kerr County, Texas Pttiject)
(the "Lease Revenue Bonds"). The Lease Revenue Bonds were issued in December, 2002. The purchase of [Ire .luvenile Facility is being uude~taken
by the County, in part, in exchange for a hell and complete written release of any claims that could be brought against the County, the Corporation,
the Kerr County Juvenile Board, which operates the Juvenile Facility (the "Juvenile Board"), and their officials and employees, past and present

tty Pa
Bonds" lBie ~itttor additiunalh turtnat mlrelatin~ tutthetLease Rev ntte
(collectively the "C'otu
B
e
u
a
of
hA
y
)	
~~
ue
ve
se
R
L
ppropriatiou
o00 p See '
N
t
principal amount ~ t $ .
venile Board and the County electing not to appropriate fiords tix the payment of debt service on the
J
h	
u
e
Bonds and recent events which resulted in t
Lease Revenue Bonds that is scheduled w come due during the current fiscal year.	
	~:
Payment Record	
The County has never defaulted in the payment of its general obligation tax debt.	
	1i-~
Legality
The Certificates are ot2ered for delivery when, as and if issued attd received by the Underwriter and subject to the approving opinion of the Attlirney
~
B
ln
D
l
l
t	
l t
~xtn
as lega
Sapp LLPy DallaP Texas
General of Texas and tlte~p
&
Lucke Liciell
sawillbe passed tpon for 1 e LJndBtrwrit r by
att
l
l
"	~
t le
er
m
a
). Ce g
Counsel's Opinion	
the Underwriter.	
Defeasance
The Order provides fur the defeasance of the Certificates when payment of the principal anxxmt of the Certificates phis accrued interest on the
is provided by irrevocably depositing with a paying
otherwise)
i	~,
,
ty or
Certiticates to their due date (whether such due date be by reason of matur
iu trust (1) money sufficient to make such payment ur (2) Government Securities, certified by an
t such times to insure t to
ent
row a
d
d
ri	
,
g
esc
a
ze
agent, ur other autlw
independent public accounting firm of national reputation to mature as to principal and interest in such amounts an
of
o
o
t
t	
f ttte United
ns
obl gati
ip n>Lallable
availability, without [hetCe~Minatest The~Ordertpravicies I akGuvernment Secttr ties means (1) diretT
callable obligations of an
2	
) non
the paying went ter Quaranteed b the United States of America, (
States of America, including ubligatians that are unconditionally ~ Y Quaranteed or insured b the a enc or
ations that are unconditionally ~ Y g Y
bli
di	~
g
ng o
agency or instrumentality of the United States of America, inclu
d that are rated as to investment quality by a nationally recognized invesment rating firm nut less than AAA or its equivalent,
of a state that have been retitnded
i
i
i
bdi	
on
v
s
ty an
instnunental
and (3) noncallable obligations of a state ur an agency or a county, municipality, or other political su
nized investment rating tine not less than AAA or its equivalent.
l	
y recog
and that are rated as to investment quality by a national	~
Upon such deposit as described above, such Certificates shall no longer be regarded to be outstanding obligations for purposes of applying any
e other than to be paid from the fiords held in escrow.	
debt limitation on indebtedness fur purposes of taxation ar for any other purpos	
	
Amendments
The C ounty may amend the Certificate Order without the consent of ur nutiee to any registered owners in any manner nut detrimental to the interests
N,to
t
t
•	
r
thereby, amend, add t<
affe twi
of the registered own
rincipalsam~n tnt of the Certificates then uutstandit g
ate
i
n
d
c
s
t	
i
p
aggreg
, no
t
majurity
~ f a
holder
the
without the consent of the registered owners of all of the Certificates affecte
the written consent
C that
exce
d
O	
,
p
er,
r
rescind any of the pnwisions of such Certificate
(1 }change the date specified as the date on which the principal of, ur any installment of interest un any
or currency
i
i
h	
n
on may
e co
such amendment, addition, or resciss
Certificate is due and payable, reduce the principal anxxmt thereof, ur the rate of interest thereon, change the place ut places at or t
ayment of the principal of, or interest on the
terms of
th
if	
p
e
y
iu which any obligation ur interest thereon is payable, or in any outer way mod
Certiticate over mty other Certiticate, or (~) reduce the aggregate principal amount of Certificates required	~
Certiticates, (2) give any preference to any	
for consent to any amenchneut, addition, or waiver.	
Default and Remedies	
Certiticate Order dues not establish specitic events of default with respect to the Certificates. Under State law there is no right to the
covenant under the Certificate Order. Although a
Th	
e
acceleration of maturity of the Certiticates upon the failure of tha County to observe any
a Su
s
pa
s	
wner
tered
ch regi
registered owner of Certiticates could presumab~y ~ ld nut beusati tied by exe ut on against any proper y of h e County
el the County to levy, assess and collect an
interest on any such Certificates, such judgme
to com
di	
p
ng
only practical remedy, if a default occurs. is a mandamus ur mandatory injunction procee
the Certiticates as it becomes doz. The enfurcetnent of any such remedy may
t	
on
annual ad valorem tax sufficient to pay principal of and interes
ould be required to enforce such remedy on a periodic basis. The Certificate Order does
i
h	
t
be difficult and time consuming and a registered owner c
ointment of a trustee to represent the interests of the holders upon any faihue of the County to perform in accordance w
seek relief from its creditors under
the a
t
ibl
f
d
i	
pp
o
ur
e
e
g
nut provi
the terms of the Certiticate Order, ur upon any other condition. Furthern~ore, the County is el
for Ute recognition of a security interest represented by a specifically
id	
es
Chapter 9 of the U.S. Bankruptcy Code. Although Chapter 9 prov
ed source of revenues, the pledge of taxes in support of a general obligation of a bankrupt entity is not specifically recognized as a security
without Bankruptcy Court approval, the
rohibit
led
t would
h	
,
g
p
p
a
interest tinder Chapter 9. Chapter 9 also includes an automatic stay provision t
r bondholders of an entity which has sought protection under Chapter 9. Therefore, should
t
C
di	
our
tors u
prosecution of any other legal action by cre
the Cotmty avail itself of Chapter J protection from creditors, the ability tti enforce would be subject to the approval of the Bankruptcy
B
t)
,	
n T Bnttd Cbunp hw 11 cute
The op n
(which could require 11 a`tyte
it
(proceedingtbrought betLtre
ait
rin
t
i
i
n
t
B
t
i	
)
y
g
e
tt
s
iu
i
rt
Bankruptcy Cu
a
broad discretionary p
of the Certiticate Order and the Certifcates are gtualifted with respect Co the customary rights of
ceabilit
f	
y
or
that all opinions relative to the en	
debtors relative to their creditors.	
SOURCES AND USES OF CERTIFICATE PROCEEDS
The following table shows the estimated sources and uses of the proceeds of the Certificates:
~r
Bootees:
Principal Amount of the Certificates
Net Original Issue Premium ~ 2,000,000.00
~ Aecnted Interest on the Certificates ?'' 154'70
Total Sources of Funds 5 SFiO ;5
Uses; 2.1I2R.715 i15
Deposit to Acquisition Fund
.ter Costs of Issuance and Underwriter's Discount $ 1,900,000.00
Deposit to Interest and Sinking Ftutd 123,154.70
5.560.35
Total Uses of Funds $ 2.1128.715.05 _.
REGISTRATION, TRANSFER AND EXCHANGE
Paying Agent/Registrar
The initial Paying Agent/Registrar is Wachuvia Bank, National Association, Houston, Texas. In the Certificate Order, the County retains the
right to replace the Paying AgentlRegistrar. The County covenants to maintain and provide a Paying Agent/Registrar at all times until the
Certificates are duly paid and any successor Paying Agent/Registrar shall be a commercial bank, tntst company or other entity duly qualified and
~ legally authorized to serve as and perfurnt the duties and services of Paying Agent/Registrar for the Certificates. Upon any change in the Paying
Agent/Re,=istrar &~r the Certificates, the County agrees to promptly cause a written notice thereof to be sent to each registered owner of dte
Certificates by United States mail, first class, postage prepaid, which notice shall also give the address of the new Paying AgentlRegistrar.
.~, The principal of and premium, if any, on the Certificates shall be payable at the stated maturities thereof, or upon their prior redemption, only
upon presentation and surrender of the Certificates to the Paying Agent/Registrar. Interest on the Certificates shall be paid to dte Holdets whose
name appears in the registration lxigks of the Paying Agent/Registrar at the close of business on the "Record Date" (detuted below) and shall be
paid by the Paying Agent/Registrar (i) by dteck sent United States Mail, first class postage prepaid, to the address of the Holder recorded in its
,.~ registration books or (ii) by such other method, acceptable to the Paying Agent/Registrar, requested by, and at the risk and expense uf, the
Holder If the date for the payment of the principal of ur interest on the Certificates, shall be a Saturday, Sunday, a legal holiday, or a day on
which banking institutions in the city where the designated utiice of the Paying Agent/Registrar for the payment of the Certificates is located are
authorized by law ur executive order to close, then the date fix such paytnent shall be the nexC succeeding day which is not such a Saturday,
~r Sunday, legal holiday, or day on which banking iustittrtions are authorized to close; and payment on such date shall have the saute tixce and
effect as if made on the original date payment was due. So long as Cede & Co. is the registered owner of the Certificates, payments of principal
of and interest on the Certificates will be made as described in "BOOK-EN"PRY-ONLY SYSTEM" herein.
Future Registration, Transfer and Exchange
In the event the Book-Entry-Only System is discontinued, printed certificates will be delivered to the registered owners and thereafter the
Certificates may be transferred, registered and assigned on the registration books only upon presentation and surrender of the printed Certificates
to the Paying Agent/Registrar, and such registration and transfer shall be without expense or service charge to the registered owner, except fur
any tax or other governmental charges required to be paid with respect [u such registration and transfer. An Certificate may be assigned by the
execution of an assignment forte on such Certificate or by such other instrument of transfer and assignment acceptable to tha Paying
Agent/Registrar. Anew Certificate or Certificates will be delivered by the Paying AgenURegistrar in lieu of the Certificate being transferred ur
exchanged at the designated corporate utlice of the Paying Agent/Registrar, or sent by United States registered mail to the new registered owner
at the registered owner's request, risk and expense. Tu the extent possible, new Certificates issued in an exchange or transfer of Certificates will
be delivered to the registered owner or assignee of the Owner in not more than three (3) business days otter the receipt of the Certificates to be
canceled in the exchange ur transfer and the written instrument of transfer or request for exchange duly executed by the registered owner ur his
~ duly authorized agent, in form satisfactory to the Paying AgenURegisttar. New Certificates registered and delivered in an exchange or transfer
shall be in authorized denominations and fur a like aggregate principal amumtt and stated maturity as the Certificate ur Certificates sttrtendered
fur exchange or transfer.
Record Date For Interest Payment
The record date ("Record Date") fur the interest payable on any interest payment date means the close of business on the last business day of the
month next preceding such interest payment date, as specified in the Certificate Order. In the event of anon-payment of interest on a scheduled
~w payment date, and for 30 days thereafter, a new rewrd date fur such interest payment (a "Special Record Date") will be established by the
Paying Agent/Registrar, if and when funds for Che paytnent of such interest have been received from the County. Notice of the Special Record
Date and of the scheduled payment date of the past due interest (the "Special Payment Date" which shall be l5 days after the Special Record
Date) shall be sent at least five business days prior to the Special Record Date by United States mail, first class, postage prepaid, to the address
~a of each registered owner of au Certificate appearing on the bunks of the Paying Ageut/Registrar at the close of business un the last business day
next preceding the date of mailing of such notice.
Limitation On Transfer Of Certificates
Neither the County nor the Paying Agent/Registrar shall be required to issue or transfer to an assignee of a registered owner any Certiticate called
for redemption, in whole ur in part, within 45 days of the date fixed for the redemption of such Certiticate; provided, however, such limitation on
transferability shall not be applicable to au exchange by the registered owner of the unredeemed balance of a Certiticate called for redemption in ~
part.
Replacement Certificates
If any Certiticate is mutilated, destroyed, stolen ur lost, a new Certiticate iu the same principal amount and stated maturity as the Certificate so
mutilated, destroyed, stolen or lost will be issued. In the case of a nnrtilated Certiticate, such new Certificate will be delivered only upon surrender
and cancellation of such mutilated Certiticate. In the case of any Certiticate issued in lieu of and substitution for a Certificate which has been
destroyed, stolen ur lost, such new Certificate will be delivered only (a) upon tiling with the County and the Paying Agent/Registrar a certificate to
the effect that such Certiticate has been destroyed, stolen or lost and proof of the ownership thereof, and (b) «pon furnishing the County and the
Paying AgentlRegistrar with indunnity satisfactory to thorn. The person requesting the authentication and delivery of a new Certiticate must pay
such expenses as the Paying Agent/Registrar ntay incur in connection therewith.
BOOK-ENTRY-ONLY SYSTEM
This section describes how ownership of the Certificates is to be transferred and how the principal of, premium, if any, and interest on the
Certificates are Co be paid to and credited by DTC while the Certificates are registered in its nominee name. The inforntation in this section
concerning DTC and the Buok-Entry-Only System has been provided by DTC for use in disclosure documents such as this Official Statement.
The County and the Underwriter believe the source of such information to be reliable, but take nu responsibility fur the accuracy ur
completeness thereof.
The County cannot and dues not give any assurance that (1) DTC will distribute payments of debt service on the CertiticaCes, or redemption or
other notices, to D`TC Participants, (2) DTC Participants or others will distribute debt service payments paid to DTC or its nominee (as the
registered owner of the Certificates), or redemption or other notices, Co the Beneficial Owners, ur Chat they will du so uu a timely basis, or (3)
DTC will serve and act in the manner described in this Official Statement. The current nrles applicable to DTC are on file with the Securities
and Exchange Commission, and the current procedures of DTC W be fi~llowed in dealing with D'TC Participants are un file with DTC.
The Depository Trust Company ("DTC"), New York, New York, will act as securities depusit<iry for the Certiftcates. The Certificates will be
issued as fully-registered securities in the name of Cede & C'o. (DTC's partnership nominee) ur such other name as may be requested by an
authorized representative of DTC'. One fully-registered security certificate will be issued fix each mahrrity of the Certificates in the aggregate
principal amount of such maturity, and will be deposited with the D`CC.
DTC, the world's largest depository, is alimited-purpose trust company organized tinder the New York Banking Law, a "banking organization"
within the meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the
New York Uniform Commercial Cude, and a "clearing agency" registered pursuant to the provisions of Section 17A of the Securities Exchange
Act of 1934. DTC holds and provides asset servicing fur over 2 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt
issues, and money market instruments from over 85 countries that DTC's participants ("Direct Participants") deposit with DTC. DTC also
facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securipe~, through electronic
computerized book-entry transfers and pledges between Direct Participants accounts. This eliminates the need fur h sical movement of
securities certificates. Direct Participants include both U.S. and nun-U.S. securities brokers and dealers, banks, trust companies, clearing
corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Tntst & Clearing Corporation ("DTCC'").
DTCC, iu turn, is owned by a number of Direct Participants of DTC and Members of the National Securities Clearing Corporation, Government
Securities Clearing Corporation, MBS Clearing Corporation, and Emerging Markets Clearing Corporation, (NSCC, GSCC, MBSCC, and
EMCC, also subsidiaries off DTCC), as well as by the New York Stock Exchange, Inc., the American Stock Exchange LLC, and the National
Association of Securities Dealers, Inc. Access to the DTC system is also available to others such as both L1.S. and non-U.S. securities brokers
and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant,
either directly or indirectly ("Indirect Participants"). DTC has Standard & Poor's highest rating: AAA. The DTC Rules applicable its
Participants are on file with the Securities and Exchange Cutnmission. More inforutatiun about D`TC can be fottud at w~~~FV.dtrc.cttm•
Purchases of Certificates under the DTC system must be made by or through Direct Participants, which will receive a credit fur the Certificates
on D'TC's records. The ownership interest of each actual purchaser of each Certiticate ("Beneficial Owner") is in turn to be recorded un the
Direct and Indirect Participants' records. Beneftcial Owners will nut receive written confirmation from DTC of their purchase. Beneficial
Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their
holdings, from the Direct ur Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of uwnersltip interest
in the Certificates are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners.
Beneficial Owners will not receive certificates representing their ownership interests iu the Certificates, except in the event that use of the buok-
entry-only system fur the Certificates is discontinued.
Tu facilitate subsequent transfers, all Certificates deposited by Direct Participants with DTC are registered in the name of DTC's parUtership
nominee, Cede ~ Co., or such other name as may be requested by an authorized representative of DTC. The deposit of Certificates with DTC
and Choir registration in the name of Cede & Cu. ur such other D"fC nominee do nut effect any change in beneficial ownership. DTC has uu
<~-
knowledge of the actual Beneticial Owners of the Certificates; DTC's records reflect only the identity of the Direct Participants to whose
accounts such Certificates are credited, which may or may nut be the Beneticial Owners. The Direct and Indirect Participants will remain
responsible fur keeping account of their holdings on behalf of their costumers.
Conveyance of notices and other commtatications by DTC Co 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 stahttory ur regulatory
requirements as may be in effect from time to time. Beneficial Owners of Certificates may wish to take certain steps to augment the
transmission to them of notices uY significant events with respect Co the Certificates, such as redemptions, tenders, defaults, and proposed
amendments to the Certificate documents. Fur example, Beneficial Owners of CerCitieates may wish to ascertain that the nominee holding the
Certificates for their benefit has agreed to ubtaiu and transmit notices to Beneficial Owners. In the alternative, Beneticial Owners may wish to
provide their names and addresses to the Paying AgentJRegistrar and request that copies of notices be provided directly to theta.
Redemption notices shall be sent to DTC If less than all of the Certificates within an issue are being redeemed, DTC"s practice is to detenniue
~* by lot the amount of the interest of each Direct Participant in such issue to be redeemed.
Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent ur vote with respect to the Certifcates unless authorized by a Direct
Participant in accordance with DTC's procedure. Under its usual procedures, DTC mails an Omnibus Proxy to Che County as soon as possible
~ after the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct Participants to whose accounts the
Certificates are credited un the record date (identified in a listing aCtac:hed to the Omnibus Proxy).
Principal and interest payments on the Certificates will be made to Cede & Cu., or such other nominee as may be requested by an authorized
representative of DTC DTC's practice is to credit Direct Participants' accounts upon DTC's receipt of funds and corresponding detail
infomtatiun from the County ur Paying AgentJRegistrar, on the payment date in accordance with their respective holdings shown on DTC's
records. Payments by Participants to Beneticial Owners will be governed by standing instrtctions and customary practices, as is the case with
securities held for the accounts of costumers in bearer form or registered in "street name," and will be the responsibility of such Participant and
not of DTC', the Paying Agent/Registrar ur the County, subject to any statutory or regulatory requirements as may be in etlect froth time to time.
Payment of principal and interest to Cede & Co. (or Stich other nominee as may be requested by an authorized representative of DTC) is the
responsibilily of the County or Paying Agent/Registrar, disbursement of such payments to Direct Participants shall be the responsibility of DTC,
and disbursemants of Stich payments tci the Beneticial Owners shall be the responsibility of Direct and Indirect Participants.
DTC may diswutiuue providing its services as securities depository with respect to the Certificates at any time by giving reasonable notice to the
County or Paying AgentJRe~istrar. Under such circumstances, in Che event that a successor depository is not obtained, Certificates are required to
be printed and delivered.
;ter
The County may decide to discontinue use of the system uY' book-entry transfers through DTC (or a successor securities depository}. In that
event, Certificates will be printed and delivered.
Inturtttation in this section cuncentiug D`CC and DTC's lxiuk-entry-only system has been obtained from sources that the County believes to be
reliable, but the County takes no responsibility fur the accuracy thereof.
NON-APPROPRIATION OF LEASE REVENUE BONDS
As stated above tinder "THE CERTIFICATES -Use of Certificate Proceeds," the purchase of the Juvenile Facility with proceeds of the
Certificates is being undertaken by the Cotmty, in part, in exchange for a full and complete written release of any claims that weld be brought
against the Cotmty Participants by holders of the Lease Revenue Bonds.
The Corporation, as the issuer of the Lease Revenue Bonds and the "Lessor" of the Juvenile Facility, leased the Juvenile Facility to the County
as the "Lessee" pursuant to a Lease Agreement between the Corporation and the County (the "Lease"). 'The County simultaneously entered into
an Operating Agreement with the Juvenile Board pursuant to which the Juvenile Board operated the Juvenile Facility and assumed most
obligations of the County tinder the Lease, inchtding the obligation to make "Lease Payments" under the Lease to pay principal and interest on
the Lease Revenue Bonds. Pursuant to the Lease and the Operating Agreement, the obligation of the County and the Juvenile Board,
respectively, to make Lease Payments was subject to annual appropriation by the governing body of each entity, respectively.
Due primarily to titndamental changes in juvenile sentencing patterts of numerous "texas counties that historically sent juveniles to the Juvenile
Facility, together with increased competition fur juvenile residents by operators of other juvenile facilities throughout the State of Texas, the
occupancy levels for the Juvenile Facility dropped significantly daring fiscal year 2003-2004. Additionally, in an etTort to balance the state
budget fur fife 2004 - 2005 fiscal biennium, the Texas Legislature in 2003 mandated nwnerous state agencies, including the Texas Juvenile
Probation Commission ("TJPC"), to significantly reduce expenditures. As a result of such mandate, TJPC reduced state ftrnding ti>r juvenile
detention reimbursement for several classes of juvenile detainees from $106.00 per day to as low as $85.00 per day. The wmbined effect of
fewer juveniles being sent to Che Facility coupled with the lower reimbursement payments coming Prom TJPC fur certain classes of juvenile
detainees resulted in a reduction in the receipt of gross revenues at the Juvenile Facility. Furthermore, newly mandated staltin~ requirements
imposed by the State resulted in signillcantly higher expenses to the Juvenile Facility.
The Jtrvenile Board projected that revenues of the Juvenile Facility for the 2004-2005 fiscal year (beginning on October 1, 2004) would be
instdlicient to meet the Juvenile Facility's estimated monthly operating expenses or the average annual debt service requirements on the Lease
Keveuue Bonds of approximately $4l 1,46 ~ per year, nor did the Juvenile Board expect income levels to increase significantly in the near tuhtre


to be able to fully satisfy all operating and debt service requirements. Consequently, on September 7, 2004, the Juvenile Board adopted its 2004-	
2005 tiscal year budget which did nut include budgeting ur appropriating any funds to pay debt service un the Lease Revenue Bonds. As a result	
of such action, the Juvenile Board, in accordance with the provisions of the Operating Agreement, delivered a written Notice of	
Nonappropriation C<i the County.	
Upon receipt of such Notice of Nonappropriation frutn the Juvenile Board, the County, as the Lessee of the Juvenile Facility, was required under	
the Lease to either (i} appropriate in its 2004-2005 tiscal year budget (beginning October 1, 2004) sufficient funds to pay Lease Payments fur the	
2004-2005 tiscal year and deliver a Notice of Appropriation to the Trustee fur the Lease Revenue Bonds by September 30, 2004, or (ii) provide	
the Curpuration and the Trustee with written notice of action by the Commissioners Court of the County which would constitute a failure to	
appropriate funds in the County's 2004-2005 tiscal year budgeC in an amount sufficient to pay Lease Payments fi>r the 2004-2005 tiscal year.	
On September 27, 2004, the Commissioners Court of the County adopted a budget fur its 2004- 2005 fiscal year which did nut inchtde any fiords	
t<t pay debt service on the Lease Revenue Bonds. Such action constituted an "Event of Nonappropriation" under the Lease and triggered certain	
remedies available under the Lease and other related linancin documents. As a result of such Event of Nonappropria[ion, un September 28,	
2004, Standard & Puor's Ratings Services lowered its rating un the Lease Revenue Bonds from "A-" to "CC" and its rating on the C'ounty's	
outstanding general obligation indebtedness from "A" to "BBB-". As required by the Lease, the Lessee notified the Trustee (The Bank of New	
York Trust Company, N.A. j in writing on September 28, 2004, of such Event of Nonappropriation and that Che Lessee would transfer control of	
the Juvenile Facility to the Lessor or the Trustee as of 12:00 A.M. on October 1, 2004, as required by the Lease. At the request of the Trustee, in	
order to prevent the automatic termination of the Lease on September 30, 2004, and to allow the existing parties to continue to operate the	
Juvenile Facility after such date tier a brief period, the Lessor and the Lessee entered into a letter agreement with the Trtstee on September 30,	
2004, which had the effect of continuing the Lease until November I, 2004. The purpose of such agreement was to permit an additional period	
of time for the Trustee to develop a course of action in consultation with the Bondholders, the Lessor, the Lessee and the hrvenile Board. The	
County is obligated under such agreement to assume payment of all operating shortfalls of the Juvenile Facility, but neither the Lessee nor the	
Juvenile Board is obligated thereunder to make Lease Payments that would accrete during such extension period. Such letter agreement has been	
amended twice fur the purpose of permitting the County to unilaterally extend the termination date of the Lease upon giving written notice to the	
Trustee. The current termination date of the Lease is Febrtary 28, 2005.	
	
Following numerous discussions and negotiations with representatives of the Bondholders, un December R, 2004, the Commissioners Court of	
the County approved an order in wttidt the County offered to take action to proceed with the issuance of certificates of obligation for the purpose	
of providing $1,900,000 to purchase the Juvenile Facility from the Corporation and provide such amount tc> the Bondholders, subject to certain	

conditions including the execution by all Bondholders of a full and complete written release of all claims ur potential claims the Bondholders	~
may allege to have against the County Participants. Such offer was accepted in principle by the representatives of the Bondholders. The release	
of all claims or potential claims will be evidenced by a "Consent and Release Agreement" (the "Release") which was approved by the County,	
the C'urporation, the Juvenile Board and the Buudholders un or about January 27, 2005. The delivery of the C_'ertificates is continent upon all	

Bondholders executing the Release.	~
The County believes that, pursuant to the Lease Revenue Bund financing documents, including the Lease and [he Operating Agreement, neither	
it nor the Juvenile Board is legally or morally obligated to appropriate timds to pay Lease Payments on the Lease Revenue Bonds. Furthermore,	
the Release fitrther provides that it is being entered in0.i as a compromise of doubtful and disputed claims, that nothing in the Release is	
considered as an admissio^ of liability by any party, and that nothing in the Release tray be interpreted as an admission of liability.	
Nevertheless, the County believes that it is in the best interest of the Cotmty to acquire the Juvenile Facility from the Corporation for $1,900,000	
and provide such amount to the Buudholders, for doing so will terminate any possible litigation that might otherwise be brought against any	
County Participant by the Bondholders and will also permit the Juvenile Facility to continue to operate and provide a valuable service to the	
citizens of the Cotmty and the State of'Texas.	
INVESTMENTS
The Cotmty invests its fiords in investments authorized by Texas law in accordance with investment policies approved by the Commissioners Court
of the Comtty. Both State law and the County's investment policies are sltbject to change.
Legal Investments
Under Texas law, the Cotmty is authorized to invest in (1) obligations of the United States or its agencies and instnunentalities, (2) direct ubligatious
of the State of Texas or its agencies and instrtuneutalities, (3) collateralized mortgage obligations directly issued by a federal agency ur
instnunentality of the United States, the wtderlying security fur which is guaranteed by an agency or instntmentality of the United States, (4) other
obligations, the principal and interest of which are unwnditionally guaranteed ur insured by, or backed by the fall faith and credit of, the State of
Texas or the United States or their respective agencies and insttnmentalities, (5) obligations of states, agencies, comities, cities, and other political
subdivisions of any state rated as to investment gttality by a nationally recognized inveshnent rating firnt not less than A or its ~(ttivalent, (6) lxinds
issued, assumed, or guaranteed by the State of Israel, (7) certificates of deposit issued by a state ur national bank, savings bank, or a state or federal
credit union, which is domiciled in the State of Texas, that aft guaranteed ur insured by Che Federal Deposit Insurance Cotporatiou, guaranteed ur
insured by the Federal Deposit Insurance Cotpuratiuu or the National Credit Union Share Insurance Fund, ur are secured as to principal by ubligatious
described iu the clauses (1) through (6) ur in any outer manner and amomtt provided by law tier County deposits, (8) filly collateralized repurchase
agreements that have a defined temtination date, are fitlly secured by obligations described in clause (1), requires the securities being purchased by
the County to be pledged to the County, held in the County's Warne, and deposited at the Cime the investment is made with the County ur with a third
party selc~aed and approved by the Cotmty, attd are placed through a primary guvennnent securities dealer or a tinattcial institution doing business in
the State of Texas, (9) bankers' acceptances with the remaining tern of 27U days ur less, which will be liquidated in till at maturity, is eligible fur
.,`
collateral for born~wing from a Federal Reserve Bank, if the short-term obligations of the accepting bank or its parent are rated at least "A-1" ur "P-1"
or the equivalenC by at least one nationally recognized credit rating agency, (I O) cutnmercial paper with a stated maturity of 270 days ur less and is
rated at least "A-l" of "P-i" or the equivalent by either (a} two nationally recognized crediC rating agencies or (b) one nationally recognized credit
rating agency if the paper is fidly secured by an irrevocable letter of credit issued by a LLS. or state bank, (t 1) nu-load money market mutual fiords
registered with and regulated by the Securities and Exchange Commission that have a dollar weighted average ptxttolio maturity of 90 days or less
and include in their investment objectives the maintenance of a stable net asset vahte of $1 ti)r each share, and provide Che County with a prospectus
and other inti~tmation required by the Securities and Exchange Act of 1934 or the Investment Act of 1940, (12) no-load mutual fiords registered with
the Securities and Exchange Commission that have an average weighted tnahtrity of less than two years; invests exclusively in obligations described
in the preceding clauses; are continuously rated as to inveshnent quality by at least one nationally recognized investment rating first of not less than
"AAA" or its equivalent; and eouforns to the requirements for eligible investment pools, (13) public fiords investment pcwls that have an advixxy
board which includes participants in the pool and are continuously rated as to investment quality by at least one nationally recognized investment
rating firs of not less than "AAA" ur "AAA-m" or its equivalent or nu lower than investment grade with a weighted average maturity no greater than
90 days, and (l4) guaranteed inveshnent contracts secured by obligations of the United States of America or its agencies and instrumentalities, other
than prohibited obligations described in the next succeeding paragraph, with a defined terntinatiun date, and pledged to the County and deposited with
the Cotmty ur a third party selected and approved by the County.
The County may invest in such obligations directly or through government investment pcwls that invest solely in such obligations provided that the
pcwls are rated no lower titan "AAA" or "AAA-m' ur an equivalent by at least one nationally recognized rating service. The County may also
contract with an investment management firm registered under the [nvestment Advisors Act of 1940 (l5 U.S.C. Section 80b-1 et seq.) or with the
SCate Securities Board to provide fur the investment and management of its public fiords ur other funds under its control for a term up to two years,
but the County retains ultimate responsibility as fiduciary of its assets. In order to renew ur extend such a contract, the Cotmty must do sn by order,
ordinance, or resolution. The County is specifically prohibited from investing in: (1) obligations whose paytneitt represents the coupon paytnettts on
the outstanding principal balance of the underlying mortgage-backed security collateral and pays no principal; (2) obligations whose payment
represents the ptutcipal stream of cash flow from the underlying mortgage-backed security and bears no interest (3) collateralized mortgage
obligations that have a stated final maturity of greater then 10 years; and (4} collateralized mortgage obligations the interest rate of which is
determined by an index that adjusts opposite to the changes in a market index.
Investment Policies
Under Texas law, the County is required to invest its fonds under written investment policies that primarily emphasize safety of principal and
liquidity; that address investment diversification, yield, maturity, and the quality and capability of inveshnent management; and that includes a
list of authorized inveshnents for County funds, maximum allowable s[aCed maturity of any individual investu~ent and the maximum average
dollar-weighted maturity allowed fix pooled fund groups. All County funds must be invested consistent with a ti~rnally adopted "Inveshnent
Strategy SCatetnent" that speciftcally addresses each find's investment. Each Inveshnent Strategy Statement will describe its objectives
concerning: (l) suitability of investmenC type, (2) preservation and safety of principal, (3) liquidity, (4) marketability of each inveshnent, (5)
diversification of the purtti>liu, and (6) yield.
Under Texas law, Cotmty 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 tier speculation, but fur investment, considering
the probable safety of capital and the probable income to be derived." At least quarterly the investment officers of the County shall submit an
inveshnent report detailing: (1) the investment position of the County, (2) that all investment officers jointly prepared and signed the report (3 )
the beginning market value, any additions and changes to market value and the ending vahte of each pooled fiord group, (4} the book value and
market value of each separately listed asset at the beginning and end of the reporting period, (5) the mahtrity date of each separately invested
asset, (6) Che account ur fmtd or pooled fiord group for which each individual investment was acquired, and (7) the cutnpliance of the investment
portfolio as it relates to: (a) adopted inveshnent strategy statements and (b) state law. No person may invest Cotmty funds without express
written authority from the Commissioners Court.
Additional Provisions
"'~ Under Texas law the County is additionally required tu: (1) annually review its adopted policies and strategies, (2) adopt an order ur resolution
stating that it has reviewed its inveshnent policy and investment strategies and records any changes made to either its investment policy ur
inveshnent strategy in the said order ur resolution, (3} require any iuvesttnent officers with personal business relationships ur relatives with firms
seeking tct sell securities to the entity to disclose the relationship and file a statement with the Texas Ethics Cutnmissiun and the Commissioners
Court (4) require the qualified representative of firms offering to engage in an investment transaction with the County to: (a) receive and review
the County's inveshnent policy, (b) acktwwledge that reasonable controls and procedures have been implemented to preclude investment
transactions conducted between the County and the business organization that are nut authorized by the County's investment policy (except to
the extent that this authorization is dependent on an analysis of the makeup of the County's entire portfolio or requires an interpretation of
subjective inveshnent standards), and (c) deliver a written statement in a funs acceptable to the County and the business urganizatiun attesting to
these requirements; (5) perform an annual audit of the management conhols un inveshnents and adherence to the County's investment policy; (6)
provide specific inveshnent training fur Che Treasurer, Chief Financial Officer, or other inveshnent officers; (7) restrict reverse repurchase
agreements to not more than 90 days and restrict the investment of reverse repurchase agreement funds to uo greater than the term of the reverse
repurchase agreetneut (R) restrict the inveshnent in mutual fiords in fire aggregate to no more titan RO°% of the County's monthly average fond
balance, exchtding bond proceeds and reserves and other fiords held fur debt service and fitrther restrict the inveshnent in non-money market
tnuhtal funds of any portion of bond proceeds, reserves and tinuis held for debt service and to nu more than 15% of the entity's monthly average
fund balance, excluding bond proceeds and reserves and other funds held fur debC service; (9) require local government inveshnent pools to
'~ contirn t<i the new disclosure, rating, net asset vahte, yield calculation, and advisory board requirements, and (l0) aC least annually review,
revise, and adopt a list of qualified brokers that are authorized to engage in iuvesttnent transactions with the Cotmty.
,~+
Current Investments
See Appendix A, "Table 13 -Current [nvestments."
LITIGATION
In the opinion of certain ufticials of the County, except as utlterwise disclosed herein under "NON-APPROPRIATION OF LEASE REVENUE
BONDS," the C'uunty is not a party to any litigation ur other proceeding pending or to their knowledge, threatened, in any court, agency or other
administrative body (either state or federal) which, if decided adversely to the County, would have a material adverse effect un the financial
condition of the County.
AD VALOREM TAX PROCEDURES
,4~f Valorem Tar Luw The appraisal of property within the Cotmty is the responsibility of the Kerr Cotmty Appraisal District (the "Appraisal	
District"). Excluding agricultural and upon-space land, which may be taxed on the basis of productive capacity, the Appraisal District is required.	
under the Property Tax Code to appraise all pmpetty within the Appraisal District on the basis of 100% of its markeC value and is prohibited from	
applying any assessment ratios. The value placed upon property within the Appraisal District is subject to review by au Appraisal Review Board,	
~
wnsisting of three members aplx~inted by the Board of Directors of the Appraisal District. The Appraisal District is required to review the value of	
property within the Appraisal District at least every three years. The County tray require amttwl review at its own expense, and is entitled to	
challenge the determination of appraised value of property within the County by petition filed with the Appraisal Review Board.	
Property Tas Gtde and County-Wide Appraisal Districts	
Pursuant to a comprehensive Property Tax Cude enacted by the Texas Legislature (the "Tax Code"), there has been established for each comity	
in the State of Texas a single appraisal district with responsibility fur recording and appraising property tier al] taxing units within the county and	
a single appraisal review board with responsibility fir reviewing and equalizing the values established by the appraisal district. The appraisal of	
property within the Cotmty is the responsibility of the Kerr County Appraisal District. The Appraisal DistricC is troverned by a board of rive	
directors appointed by Che votes of the governing bodies of the various governmental units within Kerr Cotmty, with votes weighted by relative	
tax levy. The Tax Code requires the Appraisal District, by May 15 of each year or as stwn thereafter as practicable, to prepare appraisal records	,~
listintr all property that is taxable in the Appraisal District and stating the appraised vahte of each parcel or item of taxable property. Property is
~	
appraised as of January 1 of each year, and the Tax Cude generally re~(uires appraisals at 100% of market value. Iu determining market
to be	
value of property, different methods of appraisal may be used, including the cost method of appraisal, the income method of appraisal and	
market data comparison method of appraisal, and the method considered must appropriate by the chief appraiser is to be used. State law titrther	~
limits the appraised vahte of a residence homestead for a tax year to an anxxurt not to exceed the lesser of (1) the market value of the property of	
(2) the sum of (a) l0% of the appraised value of the property fir the last year in which tits property was appraised fir taxation times the number	
of years since the property was last appraised, plus (b) the appraised value of the property for the last year in which the property was appraised	
plus (c) the market value of all new improvements to the property. Land u sed for aoricultttre, timber production or open space may qualify fur	
valuation un productive capacity rather than market value, thereby resulting in a lower taxable value. Appraisals are subject to review by Che	
appraisal review board. Under certain circumstances taxpayers and taxing units (such as the County) may appeal an order of the appraisal review	
board by tiling a petition tix review in state district court. In such event, the value of the property in question will be determined by the court, or	
by a jury if requested by any party. Absent any such appeal, the appraisal roll as prepared by the Appraisal District and approved by the	
appraisal review board must be used by each taxing jurisdiction in establishing its tax rolls and tax rate.	
Although the County has the authority to establish tax rags and Cu levy and collect its taxes each year, the Cotmty cannot establish standards fix	
appraisal ur determine the tiequency of revaluation or reappraisal. The Tax Code requires each appraisal district to implement a plan for periodic	~
reappraisal of property to update appraised values. The plan must provide for reappraisal of all real property in the appraisal district at least once	
every three years.	
Property Subject to Taxation ~,
Except fur certain exemptions provided by state law, all real and tangible personal property in the Cotmty is subject to taxation by the Cotmty.
However, no effort is made by the County to collect taxes on personal property other than on personal property rendered for taxation, business
inventories and the property of privately owned utilities. Principal categories of exempt property include: property owned by the State of Texas ~
ur its political subdivisions if the property is used tier public purposes; property exempt from ad valorem taxation by federal law; certain
households goods, family supplies and personal etTects; farm products and implements owned by the producer; certain property owned by
charitable organizations, youth development associations, religions organizations and qualified schools; designated historic sites; solar and wind
powered energy devices; and must individually-owned automobiles. The Tax Cude also exempts all tangible personal property not producing
income, other than manufactured homes, team ad valorem taxes; however, the taxing unit may choose to override this exemption. The County
has chosen to override this exetnptiou but dues noC tax nun-business vehicles. Article VIII, Section 1-j of the Texas Constihttiun auUturizes a
property tax exemption for goods, wares, merchandise and other tangible personal property, and ores (other than oil, natural gas and other
petrolewn products), acquired in or imported into the State uf'1'exas for assembling, storing, utanufachtring, processing or fabricating purposes,
provided such property is transported outside of the State within 175 days of the date it was so acquired or imported ("Article VIII, Section l-j
Property"). Notwithstanding such exemption, the County may tax Article VIII, Section l-j Property provided official action to tax was taken
prior to April 1, 1990. The County elected nut to exempt Article VIII, Section 1-j Property from taxation. In addition, owners of agriculhtral,
tiutber and open space land utay, tinder certain circumstances, request valuation of such laud on the basis of productive capacity rather than


market value. The County may agree to participate in a tax increment financing zone, tinder which the tax values un property in the zone are
"frozen" at the value of the property at the tune of creation ut the zone. The County also may enter into tax abatement agreements to encourage
economic development. Under the agreements, a property owner agrees to construct certain improvements on its property. The County iti tarn
agrees nut to levy a tax un all or part of the increased value attributable to the improvements until the expiration of the agreement. The abatement
agreement could last fur a period of up to 10 years. The County cureently does not provide any tax abatements and does out participate in a tax
increment reinveshnent zone.
Up to 20% of the value of the residence homestead of a person (with a minimum exemption of $5,000) may be exempt from taxation at the
option of the guveming body of the taxing entity. Additionally, not less than $3,000 of the market value of the residence homestead of a person
65 years of age ur older and certain disabled persons may be exempt from taxation, if such exemption is allowed by the governing body of the
taxing entity ur imposed by referendum election. Property owned by disabled veterans or by the surviving spouse and surviving minor children
of disabled veterans is exempted from taxation in amounts ranging from $5,000 to $12,000 depending un the disability rating of the veteran.
Fur property to be exempt from taxation, a claim fix exemption must be filed, except with respect to property owned by the State of Texas or its
political subdivisions, property exempt by federal law, household Qoods and personal effects, family supplies, farm products, implements of
farming and ranching and automobiles.
Tax Rate Limitations and Notice and Hearing Procedures
Limited Tax F~mcled Debt Pat~ahle Fronr Proceeds of•8'2R0 Constitrrtional Tal Rute: The Texas Constihttion (Article VIII, Section 9) imposes a
tax rate limit of $0.80 per $100 assessed valuation of all taxable property within the County (tire "$0.80 Tax Limitation") tier general fund,
petTnauent improvement fiord, mad and bridge timd and jury hind purposes, including debt service of bonds ur other debC obligations issued
against such funds. By administrative policy, the Attorney General of Texas will permit allocation of $0.40 of the constittttiunal $0.80 tax rate
calculated at 90°,% collection fur the payment of the debt service requirements on the County's limited tax general obligation indebtedness. The
General Fund, Permanent Improvement Fund, Road and Bridge Fund, and Jury Fund receive operating funds from the $0.80 constihttiunal tax
°""" rate.
The Certificates are limited tax obligations payable from the $0.80 constihUional tax rate.
Roacl and Br~id~e Maintenance: As imposed by statute (Chapter 256, Texas Transportation Code), $0.15 per $100 assessed valuation, no part of
which may be used for debt service.
Farm-to-Market andior Flood Control: As imposed by statute (Chapter 256, Texas Transportation Code), $0.30 per $l00 assessed valuation
after exemption of homesteads up to $3,000; no allocation prescribed by stahtte between debt service and maintenance. All or part may be used
fur either purpose.
Unlinrlted Tax Bonds: Article III, Section 52 of the Texas Constitution authorizes the levy of a tax unlimited as to rate or amomtt for the
payment of debt issued fur various stated purposes; however, total unlimited tax debt cannot exceed 25°!° of the assessed vahratiou of real
property.
Oationrl Sales Tar: The Tax Cude provides certain cities and counties the option of assessing a maxiuntm one-half percent (',%%) sales tax on
rr retail sales of taxable items for the purpose of reducing its ad valorem taxes, if approved by a majority of the voters in a local option election. If
the additional tax is approved and levied, the ad valorem property tax levy must be reduced by the amomrt of the estimated sales tax revenues to
be generated in the current year. The County does levy a sales tax.
The Tax Cude establishes a procedure for notice to property owners of reappraisals reflecting increased property value, appraisals which are
higher than renditions and appraisals of property not previously on an appraisal roll. Article VIII, Section 21 of the Texas Constitution provides
that, subject to any exception prescribed by general law, the total amount of property taxes imposed by a political subdivision in any year may
not exceed the total amount of property taxes imposed in the preceding year (the "effective tax rate") unless a notice of intent to consider an
increase in taxes is given and a public hearing on the proposed increase is held before the Cotal taxes are increased. Section 26.05 Property Tax
Cude provides the governing body of a taxing unit other than a school district tray out adopt a tax rate that exceeds the lower of the rollback tax
rate or 103 per cent of the effective tax rate until a public hearing is held on the proposed tax rate following a notice of such public hearing
(including the requirement that notice be postc;d on the taxing unit's website if the taxing unit owns, operates ur controls an Internet website and
public notice be given by television if the taxing unit has free assess to a television channel) and the goveming body has otherwise complied with
the legal requirements fur the adoption of such tax rate. The "rollback tax rate" means rite rate that will produce last year's maintenance and
operation tax levy from this year's values multiplied by L08 plus a rate that will produce this year's debt service from this year's values divided
by the anticipated collection rate. If fife adopted tax rate exceeds the rollback tax rate, the gttalitied voters of the Cutmty, by petition, may require
that an election be held to determine whether ur not to reduce the tax rate adopted for the current year to fife rollback tax rate.
Levy of Taxes
~+'
The Property Tax Cude provides that the goventing body of a taxing unit is required to adopt the annual tax rate for the unit beli~re the later ut
September 30 or the 60th day after the date the certified appraisal cull is received by the taxing unit, and a failure to adopt a tax rate by such
required date will result in the tax rate fir the taxing unit fur the Wx year to be the lower of the effective tax rate calculated for that tax year ur
~ the tax rate adopted by the taxing unit for the preceding lax year. Taxes are due October l and become delinquent if not paid by Jamtary 31 of

the following year. The County dues not permit split payments uF taxes. Discounts for early payment of taxes are allowed: 3 ;~6 if paid in
October, 2% in November and 1°~° in December.
Collection of Delinyuent Taxes
Charges for penalty and interest on the unpaid balance of delinquent taxes are made as follows:
Month	Penalty	Interest	Total
Febntary	6°%	i%	7°%
Man:h	7	?	y
April	R	3	11
May	9	4	13
June	10	5	I$
July	i~~ u	6	38izi
~' ~ In addition to the penalty and interest collected, the taxing unit may contact with an attorney for the collection of delinquent tarns and the amowrt of compensation as
set forth in such contract may provide for a fen up to 20°% of the amount of delinyuent tax, penalty, and interest collected
~`'r Interest wntinues to accme after July I at a raft; of 1 "/o per maNh rtntil p•<tid.
Issuer's Rights iu the Event of'I'ax Delinquencies
Taxes levied by the Issuer are a personal obligation of the owner uF the property as of January 1 of the year for which the tax is imposed. On Jamtary
1 of each year, a tax lien attaches to property to secure the payment of all state and local taxes, penalties, and interest ultimately imposed fix the year
on the property. The lien exists in favor of the State of Texas and each local taxing unit, including the Issuer, having power tci tax the property. The
Issuer's tax lieu is un a parity with tax liens of such other taxing units. A tax lien on real property takes priority over the claim of must eredittits and
other holders of liens on the property encumbered by the tax lien, whether ur not the debt or lien existed before the attachment of the tax lien;
however, whether a lien of the United States is un a parity with or takes priority over a tax lien of the Issuer is determined by applicable federal law.
Personal property, under certain circumstances, is subject CLi seizure and sale for the payment of delinquent taxes, penalty, and interest.
At any time after taxes un property become delinquent, the County may file suit tci foreclose the lien securing payment of the tax, to enfixce personal
liability fix the tax, or txith. In tiling a suit to foreclose a tax lien un real property, the Cotmty must join outer taxing units that have claims for
delinquent taxes against all or part of the same property. Colle,;tion of delinquent taxes may be adversely affected by the amotmt of taxes owed to
other taxing units, by the effects of market conditions un the toreclosttre sale price, by taxpayer redemption rights (a taxpayer may redeem property
within two (2) years after the purchaser's died issued at the foreclosure sale is tiled in the C'utmty records) or by bankntptcy proceedings which
restrict the cullectiun of taxpayer debts. Federal bankntptcy law provides that an automatic stay of actions by t-reditors and other entities, including
govemmeutal units, goes intri effect with the tiling of any petition in bankntptcy. The aut<~matic stay prevents governmental units from foreclosing
on property and prevents liens for post-petition taxes from attaching to property and obtaining secured creditor status miless, in either case, an order
lifting the stay is obtahted from the bankruptcy court. In many cases, post-petition taxes are paid as an administrative expense of the estate in
bankruptcy ur by order of the bankntptcy court.
Proposition 13 -Amendment to the Texas Constitution
Pmpositiun 13, approved by Texas voters un September 13, 2003, amended the Texas Constitution to allow the governing bodies of counties, cities,
tuwtts, and junior colle,e districts to freeze the amount of property taxes that could be imposed on residence homesteads owned by the elderly or
disabled. Property taxes could not increase as long as the residences are maintained as homesteads by the owners who are disabled or have reached
the age of sixty-five (65) ur their spouses who are disabled or are at least sixty-five (65) years of age.
Alternatively, upon receipt of a petition signed by at least five percenC (5°%) of the political subdivision's registered voters, a la;al ,overning body
would have to call an election to determine by majority vote whether to freeze taxes Yor elderly and disabled humeowrters.
"fUe amendment allows the transfer of the property tax freeze upon the death of a disabled or 65 years of age ur older homeowner to a surviving
spouse who was 55 years of age or older when the owner died, as long as the spouse claimed the property as a residence homestead. A taxing entity
could increase Wxes un such homesteads only to the extent that homeowners made improvements, other than aoverntnentally required repairs ur
improvements that increase Che property's appraised value.
The Cumrty adopted the praperty tax freeze provisions of Proposition 13 on March 2~, X004. The Cotmty will realize the impact on tax revenues
beginning in fiscal year 2005 assuming appraised values and/or tax rates do not increase.
Count+ Application of Tar Codes The County grants an exemption to the market value of the residence homestead of persons 65 years of age or
older of $3,000; the disabled are also granted an exemption of $3,000.
Ad valorem taxes are levied by the County against the value of residence homesteads for payment of the debt.
The Cotmty does nut tax nonbusiness personal ptvperty; and County Tax Assessor-Collector collcx;ts taxes for the Cotmty
The County does nut permit split payrneuts, and discotmts are allowed.
l0

The Cuunty does tax Freeport property.
The Cuunty does collect the additional one-half cent sales tax fur reduction of ad valorem taxes.
At any time after taxes un property become delinquent, the Cuunty may file suit tct fi~reclose the lien securing payment of the tax, to enforce personal
liability fur the tax, or both. In tiling a shit to Ti~reclose a tax lien on real property, the Cuunty mast join other taxing traits that have claims &x
delinquent taxes against all or part of the same property. Collection of delinquenC taxes may be adversely atTected by the amount of taxes owed to
other taxing units, by the effects of market conditions un the foreclosure sale price, by taxpayer redemption rights (a taxpayer Wray redeem property
within two (2) years after the purchaser's deed issued at the foreulosttre sale is filed in the County records) or by bankruptcy pra;eedings which
restrict the wllection of taxpayer debts. Federal bankntptcy law provides that an automatic stay of actions by creditors and other entities, including
govemtental mots, goes into effect with the Fling of any petition in baukrttptcy. The aut<matic stay prevents governmental units from lixeclosing
on property and prevents liens fur post-petition taxes from attaching to property and obtaining secured creditor status unless, in either case, an order
lifting the stay is obtained from the bankruptcy court. ht many cases, post-petition tars are paid as an administrative expense of the estate iu
bankruptcy or by order of the bankntptcy court.
TAX MATTERS
Opinion
On the date of initial delivery of the Certificates, McCall, Parkhurst & Horton L.L.P., San Antonio, Texas, Bond Counsel, will render its opinion
that, in accordance with statutes, regulations, published rulings and court decisions existing un the date thereof ("Existing Law"), (1) interest un
the Certificates lix federal income tax purposes will be excludable from the "gross income" of the holders thereof and (2) the Certificates will not
be treated as "specitied private activity bonds" the interest on which would be included as an alternative minimum tax preference item under
section 57(a)(5) of the Internal Revenue Cude of 1086 (the "Code"). Except as stated above, Band Counsel will express nu opinion as to any
other federal, state or local tax consequences of the purchase, ownership or disposition of the Certificates. See APPENDIX D - Funn of Bond
Counsel's Opinion.
In rendering its opinion, Bond Counsel will rely upon (a) certain inti~rntatiott and representations of the Cuunty, including information and
representations contained in the County's federal tax certificate, and (b) covenants of the County contained in the Certificate documents relating
to certain matters, including arbitrage and the use of the proceeds of the Certiticates and the property financed ur retinanced therewith. Although
it is expected that the Certiticates will qualify as tax-exempt obligations fur federal income tax purposes as of the date of issuance, the tax-
exempt status uY the Certificates could be affected by tittttre events. However, future events beyond the control of Che County, as well as the
failure to observe the aforementioned representations or covenants, weld cause the interest un the Certificates to become taxable retroactively to
the date of issuance.
The Cude and the regulations promulgated thereunder contain a number of requirements that must be satisfied subsequent to the issuance of the
Certificates in order fur interest un the Certificates to be, and to remain, excludable from gross iuconte for federal inwme tax purposes. Failure
to comply with such requirements tray cause interest on the Certiticates to be included in gross income retroactively to the date of issuance of
the Certificates. The opinion of Bund Counsel is conditioned on wmpliance by the County with such requirements, and Bond Counsel has nut
been retained to monitor compliance with these requirements subsequent to the issuance of the Certiticates.
err Bond Counsel's opinion represents its legal judgment based upon its review of Existing Law and the reliance on the aforementioned infonnatiun,
representations and covenants. Bond Counsel's opinion is not a guarantee of a result. The Existing Law is subject to change by the Congress and
to subsequent judicial and administrative interpretation by the courts and the Department of the Treasury. There can be no assurance that such
Existing Law or the interpretation thereof will not be changed in a manner which would adversely affect the tax treatment of the purchase,
"~"" ownership ur disposition of the Certificates.
A ruling was not sought from the Intemal Revenue Service by the Issuer with respect to the Certiticates ur the project financed with the
Certificate proceeds. No assurances can be given as to whether the Intemal Revenue Service will commence au audit of the Certificates, or as to
~' whether the Intemal Revenue Service would agree with the opinion of Bond Camsel. If an Internal Revenue Service audit is wmmenced, wider
current procedures the Internal Revenue Service is likely to treat the Issuer as the taxpayer and the Certiticatehokiers may have no right to
participate in such procedure. No additional interest will be paid upon any determination of taxability.
s Federal Ltcome Tax Accounting Treatment of Original Issac Discount
The initial public offering price to be paid for one or more maturities of the Certiticates (the "Original [ssue Discount Certiticates") may be less
than the principal amount thereof or one or more periods fur the payment of interest on the Certiticates may nut be equal to the accrual. period ur
be in excess of one year. In such event, the difference between (i) the "stated redemption price at mahtrity" of each Original Issue Discount
Certificate, and (ii) the initial offering price to the public of such Original Issue Discount Certificate would constihtte original issue diswunt.
The "stated redemption price at maturity" means the sum of all payments to be made on the Certiticates less the amount of all periodic interest
payments. Periodic interest payments are payments which are trade during equal acernal periods (ur outing any uneyttal period if it is the initial
or final period} and which are made during acental periods which do not exceed one year. Under existing law, such initial owner is entitled to
exclude from gross income (as defined in Section 61 of the Code) an amomrt of income with respc~a to such Urigiual Issue Discount C'ertiticate
equal to that portion of the amount of such original issue diswunt allocable to the period that such Original Issue Discount Certiticate wntiuttes
to be owned by such owner. For a discussion of certain collateral federal tax consequences, see discussion set forth below.



[n the event of the redemption, sale ur other taxable disposition of such Original Issue Discount Certiticate prior tli stated maturity, however, the
amount realized by such owner in excess of the basis of such Original Issue Disaunrt Certiticate iu 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 Certificate was held by such initial
owner) is includable in gross income.
Under existing law, the original issue discount on each Original Issue Discount Certiticate is averted daily Cu the stated maturity thereof (in
amounts calculated as described below fur each six-month period ending on the date betbre the semiannual anniversary dates of the date of the
Certificates and ratably within each such six-month period) and the accrued amount is added to an initial owner's basis for such Original Issue
Discount Certiticate for purposes of detemtining the amount of gain or loss recognized by Stich owner upon the redemption, sale or other
disposition thereof The amount to be added to basis fur each accrual period is equal to (a) the sum of the issue price and the amount of original
issue discount accrued in prior periods multiplied by the yield to stated maturi ~
accrtal period and properly adjusted for the length of the accrual period) less b) theano nts palyable~astcurren tint rest during such a oral
period on such Certiticate.
The federal income tax consequences of the purchase, ownership, redemption, sale ur other disposition of Original Issue Discount Certiticates ~
which are not purchased in the initial uttering at the initial offering price may be determined according to Hiles which differ from tlwse described
above. All owners of Original Issue Discount Certificates should consult their own tax advisors with respect to the determination for federal,
state and local income tax purposes of interest accnred upon redemption, sale ur other disposition of such Original Issue Discount Certificates
and with respect to the federal, state, local and foreign tax consequences of the purchase, ownership, redemption, sale or other disposition of ~
such Original Issue Discount Certiticates.
Collateral Federal Income Tax Consequences.
The titllowing discussion is a summary of certain collateral federal income tax consequences resulting from the purchase, ownership or
disposition of the Certiticates. This discussion is based un existing stahrtes, regulations, published rulings and court decisions, all of which are
subject to change ur modification, retroactively.
The following discussion is applicable to investors, ocher than those wltu are subject to special provisions of the Cude, such as financial
institutions, property and casualty insurance companies, life insurance companies, individual recipients of Social Security or Railroad Retirement
benefits, individuals allowed earned income credit, owners of an interest in a FASIT, certain S corporations with Subchapter C earnings and
profits and taxpayers who may be deemed to have incurred ur continued indebtedness to purchase tax-exempt obligations.
INVESTORS, INCLUDING THOSF, WHO ARE SCJBJECT TO SPECIAL PROVISIONS OF THE CODE, SHOULD CONSULT THEIR OWN
TAX ADVISORS AS TO THE TAX TREATMENT WHICH MAY BE ANTIC'IPA'TED TO RESULT FROM THE PURCHASE,
OWNERSHIP AND DISPOSITION OF TAY-EXEMPT OBLIGATIONS BEFORE DETERMINING WHETHER TO PURCHASE THE
CCRTIFICATES.
Interest on the Certificates will be inchidable as an adjustnteut fir "adjusted current earnings" to calculate the alternative miuimurn tax imposed
on corporations by section 55 of the Cude. Section 55 of the Cude imposes a tax equal to 20 percent fur corporations, or 26 percent fur nun
corporate taxpayers (28 percent fur taxable excess exceeding $175,000), of the taxpayer's "alternative minimum taxable income," if the amount
of such alternative minimum tax is greater than the taxpayer's regular income tax ter the taxable year.
Interest on the Certiticates may be subject to the "branch profits tax" imposed by sectirnt 884 of the Cude on the eftectivelyconnected earnings
and profits of a tureigrt corporation doing business iu the United States.
Under section 60 L of the Cude, holders of tax-exempt obligations, such as the Certificates, may be required to disclose interest received or
accrued during each taxable year uu their returns of federal income taxation.
Section 1276 of the Code provides fur ordinary income tax treahnent of gain recognized upon the disposition of atax-exempt obligation, such as
the Certiticates, if such obligation was acquired at a "market discount" and if the fixed maturity of such obligation is equal to or exceeds, one
year from the date of issue. Stich treatment applies to "market discount bonds" to the extent such gain dues not exceed the accrned market
discount of such bonds, althuttgh fur this purpose, a de tninimis amount of market discotmt is ignored. A "market discount bond" is one which is
acquired by the holder at a purchase price which is less than the stated redemption price ur, in the case of a bond issued at an original issue
discount, the "revised issue price" (i.e., the issue price plus accrued original issue discount). The "accrued market discount" is the amount which
bears the same ratio tti the market discotmt as the ntmtber of days during which the holder holds the obligation bears to the number of days
between the acquisition <tate and the final maturity daG;.
State, Local and Foreign faxes
Investors should consult their uwar tax advisors a>ncerniug the tax implications of the purchase, ownership or disposition of the Certificates
under applicable state or local laws. Foreign investors should also amsttlt their own tax advisors regarding the tax consequences unique tci
investors who are not United States persons.
Qualified Tax-Esempt Obligations for Financial Institutions
Section 265(a) of the Cude provides, in pertinent part, that interest paid ur incurred by a taxpayer, including a "financial instittttiuu," un
indebtedness incurred or continued to purchase ur carry tax-exempt obligations is nut deductible in determining the taxpayer's taxable income.
l2
r
Section 265(b} of the Code provides an exception to the disallowance of such deduction for arty interest expense paid ur incurred on
indebtedness of a taxpayer that is a "tinancial 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 auy "un-behalf of and "subordinate" issuers) who issues no more than $10,000,000 of tax-exempt obligations during the calendar year.
Section 265(b)(5) of the Code defines Che terns "financial instittttiun" as auy "bank" described iu Section 585(a)(2) of the Code, of any person
accepting deposits from the public in the ordinary course of such person's trade ur business that is subject to federal or state supervision as a
financial instihttion. Notwithstanding the exception to the disallowance of the deduction of interest on indebtedness related to "qualified tax-
exempt obligations" provided by Section 265(b) of the Code, Section 291 of the Cude provides that ttte allowable deduction to a "bank," as
defined in Section 585(a)(2) of the Code, for interest on indebtedness incurred or continued to purchase "qualified tax-exempt obligations" shall
be reduced by twenty-percent (20°!~~} as a "tinancial institution preference item."
The County has designated the Certificates as "qualified tax-exempt obligations" within the meaning of section 265(b} of the Code. ht
furtherance of that designation, the County covenants to take such action that will assure, or to refrain from such action that will adversely affect,
the treatment of the Certificates as "qualified tax-exempt obligations." Potential purchasers should be aware that if the issue price to the
public exceeds $10,000,1100, there is a reasonable basis to conclude that the payment of a de minimis amount of premium in excess of
$IO,000,U00 is disregarded; however, the Internal Revenue Service could take a contrary view. If the Internal Revenue Service takes the
position that the amount of such premium is not disregarded, then such obligations might fall to satisfy the ~IU,001),000 limitation and
the Certificates world not be "qualified tax-exempt obligations."
CONTINUING DISCLOSURE OF INFORMATION
The offering of the Certificates qualifies fur the Rule 15c2-12(d)(2} exemption from Rule 15c2-12(b)(5) regarding the County's continuing
disclosure obligations because the County has not issued more than $10,000,000 in aggregate amount of outstanding debt and no person is
committed by contract or other arrangement with respect to payment of the Certificates. Rtrsuant to the exemption, the County in the Order has
made the following agreement for the benefit of ttte holders and beneficial owners of the Certificates. The County is required to observe the
agreement for so long as it remains obligated to advance funds to pay the Certificates. Under the agreement, the County will be obligated to
provide certain updated financial infurmatiott and operating data upon written request. The County will also provide timely notice of specified
material events to certain information vendors. This information will be available to securities brokers and others who subscribe to receive the
information from the vendors.
Information Requests
The County will provide certain financial int~~nnation and operating data which is customarily prepared by the County and is publicly available
to any person upon request made to the Commty in writing; provided that the County reserves the right at any time to continence making i'iliags of
such information with the Texas State Information Depository (the "SID") in lieu of providing such intbnnation to persons up~m request. The
inforntatiun to be updated includes all quantitative tinancial information and operating data with respect to the County of the general type
inchided in this Official Statement under Tables numbered 1 through 7 and 9 through 12 and in Appendix C. The County will update and
provide this iuforttation within six months after the end of each fiscal year ending in or after 2005. The County tray provide updated
information in full text or may incorporate by reference certain other publicly available documents, as permitted by SEC' Rule 15c2-12. The
updated information will inchrde audited tinancial statements, if the County commissions an audit and it is completed by the required time. If
audited ftnancial statements are not available by the required time, the County will provide unaudited financial infi~rmatiou and operating data
which is customarily prepared by Che County by the required time and audited tinancial statements when and if such audited financial statements
become available. Any such financial statements will be prepared in accordance with the accounting principles described in Appendix C or such
other accounting principles as the County may be required to employ from time to time pursuant to state law or regulation. The County's current
fiscal year end is September 30. Accordingly, it must provide updated information by March 31 in each year,~unless the County changes its
fiscal year. If the County changes its fiscal year, it will notify each nationally recognized municipal securities inforntatiun repository
("NRMSIR")and the SID of the change.
The Mttuicipal Advisory Council of Texas has been designated by the State of Texas and approved by the SEC state as a qualified SID. The
address of the Municipal Advisory Council is 600 West 8th Street, P. O. Box 2177, Austin, Texas 78768- 2177, and its telephone number is
512/476-6947.
Material Event Notices
The County will also provide timely notices of certain events to certain information vendors. The County will provide notice of auy of the
following events with respect to the Certificates, if such avert is material to a decision to purchase or sell Certificates: (l) principal and interest
payment delinquencies; (2) non-payment related defaults; (3) tutscheduled draws ou debt service reserves reflecting tinancial difficulties; (4)
tutscheduled draws ou credit enhancements reflecting tinancial ditiiculties; (5) substitution of credit or liquidity providers, or their failure to
perYonn; (6) adverse tax opinions or events affecting the Wx-exempt stunts of the Certificates; (7) modiflcati~ms to rights of holders of the
Certificates; (8) Certificate calls; (9) defeasances; (l0) release, substiuution, or sale of property securing repayment of the Certificates; and (i i)
rating changes. In addition, the County will provide timely notice of any failure by the County to provide infitnnatiun, data, or tinancial
statements in accordance with its agreement described above under "Inti~nnation Requests." The Comity will provide each notice described in
this paragraph to the SID and to either each NRMSIR or the Municipal Securities Rulemaking Board {"MSRB").
~z
l~

Availability of Infitrmation from NRMSIRS and SID
The County has agreed to provide the material event notices only to NRMS[Rs and the SID. The information will be available to holders of
Certificates only if the holders comply with the procedures and pay the charges established by such information vendors or obtain the
infi~rmation through securities brokers who do su. Infomtation agreed to be provided by the County on request may be obtained by cuntactin,
the Cotmty at 700 Main Street, Kerrville, Texas, (830) 792-22;5, `
Amendments
The County may amend its continuing disclosure agreement from time to tune to adapt to changed circumstances that arise from a change in
legal requirements, a change in law, ur a change in the identity, nature, status, or type of operations of the County, if (i) the agreement, as
amended, would have permitted an underwriter to purchase or sell Certificates in the oCFeriug described herein in compliance with the Rttle,
taking into account any amendments ur interpretations of the Rule to the date of such amendment, as well as such changed circumstances, and
(ii) either (a) the holders of a majority in aggregate principal amount of the outstanding Certificates consent to the amendment or (b) any person
unaffiliated with the County (such as nationally recognized bond counsel) deternrines that the amendment will not materially impair the interests
of the holders and beneficial owners of the Certificates. The County may also amend or repeal the provisions of this continuing disclosure
agreement if the SEC amends or repeals the applicable provisions of the SEC Rule 15c2- l2 or a court of final jurisdiction enters judgment that
such provisions of the SEC Rule ISc2-12 are invalid, but only if and to the extent that the provisions of this sentence would not prevent an
underwriter from lawfully purchasin, or selling Certificates in the primary offering of the C'ertiticates. [f the County so amends the agreement,
it has agreed to include with the next financial information and operating data provided in accordance with its agreement described above under
"Annual Reports" an explanation, in narrative form, of the reasons for the amendment and of the impact of any change in the type of financial
information and operating data so provided.
Compliance with Prior Undertakings
The Cotmty has complied in all material respects with all continuing disclosure agreements made by it in accordance with the Rttle
REGISTRATION AND QUALIFICATION OF CERTIFICATES FOR SALE
The sale of the Certificates has not been registered tinder the Federal Securities Act of 19 3 3, as amended, in reliance upon the exemption provided
tlrereuuder by Section 3(a)(2); and the Certificates have not been qualified tinder the Securities Act of Texas in reliance upon variutts exemptions
contained therein; nor have the Certificates been qualified under the securities acts of any jurisdiction. The County assumes no responsibility for
qualification of the Certificates under the securities laws of any jurisdiction in which the Certificates may be sold, assigned, pledged, hypothecated or
otherwise transferred. This disclaimer of responsibility for qualification fur sale or other disposition of the Certificates shall not be construed as an
interpretation of any kind with regard to the availability of any exemption from securities registration provisions.
LEGAL INVESTMENTS AND ELIGIBILITY TO SECURE PUBLIC FUNDS IN TEXAS
Section 1201.041 of the Public Security Prcx;edttres Act (Chapter 1201, Texas Government Code) provides that the Certificates are negotiable
instruments governed by Chapter 8, Texas Business and Commerce Cude, and are legal and authorizeo investments fix insurance companies,
fiduciaries, and trustees, and for the sinking funds of municipalities or other political subdivisions ur public agencies of the State of Texas. With
respect to investment in the Certificates by municipalities or other political subdivisions ur public agencies of the State of Texas, the Public Funds
Investment Act, Chapter 2256, Texas Cnwetnment Cude, requires that the Certificates be assigned a rating of "A" ur its equivalent as to investment
quality by a national rating agency. (See "RATINGS" herein.) In addition, various provisions of the Texas Finance C ode provide that, subject to a
pntdent investor standard, the Certificates are legal investments fix state banks, savings banks, mist companies with at capital of one million dollars
or more, and savings and loan associations. The Certificates are eligible to secure deposits of any public lands of the State, its agencies, and its
political subdivisions, and are legal secuttity for those deposits to the extent of their market value. No review by the Cotmty has been made of the laws
in other states to determine whether the Certificates are legal investments for various institutions in those states.
LEGAL OPINIONS AND NO-LITIGATION CERTIFICATE
The County will famish a complete transcript of proceedings had incident to the authorization and issltauce of the Certificates, including the
unqualified approving legal opinion of the Attorney General of Texas approving the Initial Certificates and to the efT~x;t that the Certificates are valid
and legally binding obligations of the C'uunty, and based upon examination of such transcript of proceedings, the approving legal opinion of Bond ~'
Counsel, to like effi~;t and to the effect that the ntterest on the Certificates will be excludable from ;rosy income for federal income tax purposes
under Section 103(a) of dte Code, subject Co the matters desc;ribecf tinder "'fAX MATTERS" herein, including the alternative minimum tax on
corporations.
The custutnary closing papers, including a certificate to the effect that no litigation of arty nahtre has been files or is then pending to restrain the
issuance and delivery of the Certificates, or which wot~d affect the provision made for their paytneut or sectu•ity, or in any manner questioning the
validity of said Certificates will also be fttntished. Bond Cututsel was nut requested ttt participate, and did nut take part, in the preparation of the
Official Statement, and such tirtn has not assuuted any responsibility with respect thereto or tmdertakeu independently to verity any of the
intonnation contained therein, except that, in its capacity as Bond Cutmsel, such time has reviewed the information render the captions "TI3E
CERTIFICATES", "REGISTRAI'IUN TRANSFER AND EXCHANGE", "AD VALOREM TAX PROCF,DURES", "TAY MATTERS",
l4
~,

"CONTINUING D[SC'LOSURE OF INFORMATION", "REGISTRATION AND QCIALIFICATION OF CERTIFICATES FOR SALE", and
"LEGAL INVESTMENTS AND ELIGIBILITY TO SECCIRE PCIBLdC FUNDS IN TEXAS" in this Official Statement, and such tirnt is of the
opinion that the infornation relating to the Certificates contained wuier such captions accurately and fairly reflects the provisions thereof and is
correct as to matters of law. The legal fee tci be paid Bond Counsel for services rendered in connection with the issuance of the Certificates is
contingent on the sale and delivery of the Certificates. The legal opinion of Bond Comtsel will accompany the Certificates deposited with DTC ur
will be printed on the Certificates in the event of the discontinuance of the Book-Entry-Only System. Certain legal matters will be passed upon for
the Underwriter by its legal counsel, Locke Lidell & Sapp LLP, Dallas, Texas.
The legal opinions to be delivered concurrently with the delivery of Che Certificates express the professional judgment of the attorneys rendering
the opinions as to the legal issues explicitly addressed therein. In rendering a legal opinion, the attorney does not become an insurer ur guarantor
of that expression of professional judgment, of the transaction opined upon, or of the future perfumtance of the parties to the transaction. Nor
dues the rendering of an opinion guarantee the utttcome of any legal dispute thaC may arise ottt of the transaction.
..err
RATINGS
Moody's Investors Service ("M~x~dy's'") has assigned a municipal lxind rating of A3 to the Certificates.. An explanation of the significance of such
~ ratings may be ubtahted from Mutxly's. The ratings reflect only the view of the ratio, agency, and the County makes uo representation as to the
appropriateness of such ratings. The ratings are not a recommendation to buy, sell or hold the Certificates, and such ratings may be subje,;t t<i revision
or withdrawal at any time by the rating agencies. Any downward revision ur withdrawal of the ratings may have au adverse effecC on the market
price of the C'ertiticates
r '
UNDERWRITING
The Underwriter agrees, subject t<i certain conditions, to purchase the Certificates from the County at an underwriting discount of $26,000.00. The
Underwriter will be obligated to purchase all of the Certificates, if any Certificates are purchased. The Certificates to be offered t<i the public may be
offered and sold to certain dealers (including the Underwriter and other dealers depositing Certificates into investment trtsts) at prices lower than the
public offering prices of such Certificates, and such public prices may be changed, from time tti time, by the Underwriter.
FINANCIAL ADVISOR
RBC Dain Rauscher Inc. is employed as the Financial Advisor to the Cotmty in connection with the issuance of the Certificates. In this capacity, the
Financial Advisor has compiled certain data relating to the Certificates and has assisted in drafting this Official Statement. The Financial Advisor has
not independently verified any of the data contained herein or conducted a detailed investigation of the atTairs of the Cotmty to determine the
accuracy or completeness of this Official Statement. Because of its limited participation, the Financial Advisor assumes nu responsibility fur the
,~ accuracy or completeness of any of the infomtation contained herein. The fees for Financial Advisor are contingent uprm the issuance, sale and
delivery of the Cotmty.
USE OF INFORMATION IN OFFICIAL STATEMENT
The financial data and other infomtatiun contained herein have been obtained from the County's records, audited financial statements and other
sotuces which are believed to be reliable. There is no guarantee that any of the assumptions or estimates contained herein will be realized. All of the
summaries of the staRitcs, documents and orders contained in this Official Statement are made subject to all of the provisions of such statutes,
~"' dcx;uments and orders. These summaries du not purport to be complete statements of such pmvisiuns and reference is made to such dcxaunents fur
further information. Reference is made to original ductuntents in all respects.
~ The Order will also approve the form and content of this Official Statement, and any addenda, supplement ur amendment thereto issued on behalf of
the County, and authorize its hirther use in the reoffering of the Certificates by the Underwriters. This Official Statement has been approved by the
Coutmissioners Court of the County for distribution in accordance with the provisions of the Securities and Exchange Commission's Rule 15c2-12.
/s/Put Tinlev
Cotmty Judge
Kerr County, Texas
ATTES"I`
/,r/.Tirnnett Pieper
Cotmty Clerk
Kerr Cuttnty, Texas
15
yr

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APPENDIX A
FINANCIAL INFORMATION
REGARDING THE COUNTY
;,r
rte:.

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~~..
-~ FINANCIAL INFORMATION REGARDING
KERR COUNTY, TEXAS
~r
Table I-Valuations, EsempNons and Tax Supported Debt
2U(74/0~ Market Valuation Established by Kerr
~ County Appraisal County (eYCluding totally exempt property)
Less Exemptions/Reductions at 100% Market Value
~"'' l0% Lost to Cap Adjustment
_. Disabled Veterans
Producti~~ity Loss
~.. Pollution Control/Other
Pollution Control
Total
2004/05 Net Taxable Assessed Valuation
County Funded Debt Payable from Ad Valorem Tales (as of January 1 ~, 2000:
Outstanding General Obligation Debt
The Certiticates
arr
Total Indebtedness Payable from Ad Valorem Taffies
Ratio County Funded Debt/2004 Net Taxable Assessed Valuation
~r
County Interest and Sinking Fund Balance as of September 30, 2004 rte
'"~ 2005 Estimated Population
Per Capita Taxable Assessed Valuation
Per Capita Debt Payable from Ad Valorem Tales
r i ~ Unaudited.
Table 2 -Other Obligations
The County has no unfunded debt as of January l~, 200.
A- l
46,450
$ 55,139.96
$ 99.14
$ 3,360,790,913
$ 7,290,412
9,474,10 l
782,204,263
467,078
104,040
$ 799,39,894
$ 2,61,251,019
$ 4,60,000
x,000,000
$ 6,60,000
0.26%
$ 209,927
~.

Table 3 -Taxable Assessed Valuation by Catebory~'~
	Taxable Appraised Value for Fiscal Year Ended September 30,
	2005		2004		2003	
		%of		%of		%of
CateWory	Value	Total	Value	Total	Value	Total
Real, Residential, Single Family	$1,378,813,250	41.03%	$ 1,279,829,876	40.37%	$ 1,224,684,468	41.23%
Real Residential, Multi-Fanuly	61,856,191	1.84%	60,225,964	1.90%	49,655,799	1.67%
Real, Vacant Lots/Tracts	82,476,601	2.45%	74,474,418	2.35%	67,703,579	2.28%
Real, Acreage (Land Only)	897,960,023	26.72%	853,344,083	26.92%	804,643,635	27.09%
Real, Farm and Ranch linprovements	373,383,693	11.1 1%	349,622,351	1 L03%	313,741,468	10.56%
Real, Connnercial and Industrial	287,883,2 L8	8.57%	294,105,526	9.28%	272,072,644	9.16%
Real, Minerals and Oil	-	0.00%	100	0.00%	100	0.00%
Real, Tangible Personal Utilities	68,630,601	2.04%	62,399,744	1.97%	62,038295	2.09%
Tangible Personal, Commercial c~c Industrial	137,441:),344	4.09%	127,046,772	4.01%	114,209,941	3.85%
Mobile Homes	51,778,276	1.54%	49,942,937	1.58%	45,394,946	1.53%
Tangible Personal Other	968,876	0.03%	473,408	0.01%	381237	O.OI%
Residential Inventory	11,1tW,857	0.33%	10,323,348	0.33%	6,801,626	0.23%
Special Inventory	8,494,983	0.25%	8,417,721	0.27%	8,731,889	0.29%
Total Appraised Value Before Exemptions	$ 3,360,790,913	100.00%	$ 3,170,206,248	100.00%	$ 2,970,059,627	100.00%
Less: Total Exemptions/ Reductions	799,539.894		746,653,008		706,428,679	
Net Taxable Assessed Value	~ 2,561,251,0 l9		~ 2,423,553,240		$ 2,263,630,948	
Taxable Appraised Value for Year Ended September 30,
	2002		211111	
		%of		%of
CateRorv	Value	Total	Value	Total
Real, Residential, Single Family	~ 1,149,458,949	41.06%	$ 1,()55,613,644	40.29%
Real Residential, Multi-Family	57,682,489	2.06%	43,004,664	1.64%
Real, Vacant Lots/Tracts	63,315,993	2.26%	54,953,850	2.10%
Real, Acreage (Land Only)	784,045,624	28.00%	757,934,656	28.93%
Real Farm and Ranch Improvements	280,335,333.	10.01%	248,253,517	9.48%
Real, Commercial and Industrial	232,754,630	8.31%	231,912,856	8.85%
Real, Minerals and Oil	8,300	0.00%	8,300	0.00%
Real, Tangible Personal Utilities	50,199,276	1.79%	51,576,513	1.97%
Tangible Personal Conmrercial &i Industrial	120,325,335	4.30%	119,778,316	4.57%
Mobile Homes	43,965,158	L57%	40,577,619	L55%
Tangible Personal, Other	35,186	0.00%	-	0.00%
Residt~rttial inventorv_	7,994,795	0.29%	7,717,814	0.29%
Special Inventory	9,557,636	0.34%	8,522,663	0.33%
Total Appraised Value Before Exemptions	$ 2,799,678,704	100.00%	$ 2,619,854,412	100.00%
Less: Total Exemptions/ Reductions	684,749,750		668,010.278	
Net Taxable Assessed Value	$ 2,114.928.954		~ 1951,844,134	
~ ~ ~ Obtavted from property tax reports provided by the Kerr Cotutty Appraisal District attd
the State of Texas Comptroller of Public Accounts.
A-2

t
~r									
	Table ~ -Valuation and Tas Supporte	d Debt History					
			Fiscal	Net					
									
			Year	Taxable	Bonded	Ratio of Debt			
			Ended	Assessed	Debt	to Assessed			
			09/30	Valuation	Histurv	Valuation			
			2000	$ 1,854,480,694	$11,970,000	0.65%			
			2001	1,951,844,134	7,185,000	0.37%			
			2002	2,114,928,954	6,360,000	0.30%			
			2003	2,263,630,948	5,500,000	0.24%			
			2004 _.	2,~23,553,24U	4,605,000	0.19%			
			2005	2,561,251,019	5,665,000	0.22%			
'""~			#Includes th	e Certiticates.					
	Table 5 -Tax Rate, Levy and Collection History					
w									
				Interest	FM and				
	Tas	Tax	General	and Sinking	Lateral	Tax	% Collections	Fiscal Year
	Year	Rate	Fund	Fund	Roads	Lew	Current	Total	Ended
~~	1999	$0.35 t3	$ 0.2615	$ 0.0526	$ 0.0372	$6,502,606	93.70%	lO L70%	9/30/2000
	2000	0.3513	0.2772	0.0527	0.0214	6,439,133	96.90%	100.30%	9/30/2001
	2001	0.3721	0.2950	0.0537	0.0234	7,604,669	97.00%	99.03%	9/30/2002
	2002	0.3721	0.2986	0.0501	0.0234	8,019,035	97.50%	100.13%	9/30/2003
	2003	0.3721	0.2937	0.0475	0.0309	8,294,863	98.06%	100.82%	9/30/2004
	2004	0.372 I	0.3003	0.0409 -	0.0309	9.495.860	In Pracess o	f Collection	9/30/2005
Source: County Financial Records and Ken County Apprais<~1 District
Table 6 -County Sales Tas Historv			
Fiscal		% of	Equivalent
Year		Ad	Ad
Ending	Total	Valorem	Valorem
9/30	Collected	Tax Lew	Tas Rate
.~++ -
1999	
$ 1,694,245	
29.30%	
$ 0.14000
2000	1,891,533	29.09%	0.14000
2001	1,879,498	29.19%	0.14000
~` 2002	1,997,705	26.27%	0.14000
2003	2,112,617	26.35%	0.14150
2004	2,234,434	26.94%	0.13670
			
Source: Texas Comptroller of Public Accounts and Kerr Cou	nty Appraisal	District
A-3
3
Table 7 -Ten Largest Taxpayers
		2004/05 Taxable	Percent
Name of Taxnavet	Nature of Property	Assessed Valuation	of Total
Kerrville Communications Cotp.	Telephone Utility	$ 29,428,477	L l ~%
Wal-Mart Stores	Retail Superstore	14,017,262	0.55°/n
Mooney Aircraft Corp.	Aircraft Manufacturer	l 1,321,355	0.44%
Ameripark Kerrville Corp.	Real Estate	l L161,481	0.44%
James Avery Craftsmen, Inc.	Jewelry Manufacturer	10,047,622	0.39%
Hill Country Telephone Co-op	Telephone iJtility	9,905,222	0.39%~
LCRA TranSntission Services Corp.	Electric Utility	7,341;241	0.29%
Home Depot USA, Inc.	Retail Superstore	7,160,469	0.28%
Lowe's Home Centers	Retail Superstore	6,818,527	0.27%
Kerrville Bus Company	Bus Line	4,472,44 3	0.17%
		$ L 11,674,099	4.36%
Sources: Kerr County Appraisal District
Table 8 -Estimated Overlapping Debt Statement
Taxins Bodv
Center Point ISD
Comfort ISD
Harper ISD
Htmt ISD
Ingram ISD
Kerrville ISD
Kerrville, City of
Lake Ingram Estates Road District
Medina ISD
Upper Guadalupe RA
Total Overlapping Debl
Kerr County (including the Certificates)
Total Direct and Overlapping Debt
		Percentage	Amount
Amount	As of	Overlapina	Overlaping
`~ 1,910,000	1/15/2005	100.00%	$ 1,910,000
10,104,529	1/]5/2005	20.23%	2,044,146
-	1/15/2005	13.84%	-
-	1/15/2005	100.00%	-
4,715,000	1/15/2005	100.00%	4,715;000
37,150,000	l/15/2005	100.00%	37,150,000
520,000	1/15/2005	100.00%	520,000
221,000	1/16/2005	IOOAO`%	221,000
-	1/17/2005	6.07%	-
-	1/15/2005	100.00%	-
$ 6,605,000 1/15/20115 100.00%
Ratio Overlapping Debt to Taxable Assessed Valuation
Ratio Overlapping Debt to Total Assessed Vahtation
Per Capita Overlapputg Debt
46,560,146.31
$ 6,605,000
$ 53,163,146
2.08%
1.58%
$ 1,144.57
Note: Expendihtres of the various taxing bodies also containing the territory of the County are paid out of ad valorem
taxes levied by these taxing bodies on properties within the County. These political taxing bodies are independent of
the County and may incur borrowings to tuiance their expenditures. The statement of direct and estimated overlapping
ad valorem tax debt was developed from information contanted in ""Texas Municipal Reports'' published by the
Municipal Advisory Council of 'Texas. Except for the amounts relating to the County, fire County has not
ntdependently verified the accuracy or completeness of such utformation, and no person should rely upon such
uttbnnation as being accurate or complete. Furtherniore, certain of the entities may have issued additional debt since
the date stated in the table, and such entities tray have programs requiring the issuance of substantial amounts of
additional debt, the amount of which cannot be deterntined. "The table reYlects the estimated share of overlapping net
debt of the various taxing bodies.
A-4



	Table 9 - Proforma Outstanding Limited Tas General Obligation Debt Service Requirements
	Fiscal	Total
	Year Outstanding	Outstanding
~r	Ended Debt Certiticates of Obligation, Series 2005 ~	Debt
	09/30 Service Principal Interest Total	Service
	2005 $ 1,130,408	$ 1,130.x08
	2006 682,343 $ 370.000 $ 102.815 ti' $ 472.815 ~'~	1,155.157
	2007 687.357 425.000 48,638 473.638	1,160,994
	2008 691,521 440.000 33.500 473,500	L 165A21
	2009 529,056 375.000 19.238 394,238	923.294
	2010 534,188 390.000 6,338 396.338	930,525
	2011 538.256 - - - -.	538.256
	2012 541.263 - - -	541,263
	TOTAL $ 5,334,390 $ 2,000,000 $ 210.527 $ 2,210,527	$ 6.4 ] 4,5 l0
	~~~Includes accnied interest of $5,560.35.	
s	
Authorized but Unissued General Obligation Bonds: "fhe County has no authorized but un	
issued bonds.
	Table 10 -Tas Adequacy for Limited Tas Bonds	
	County's Interest and Sinking Fund Balance as of September 30, 2004	
	2005 Taxable Assessed Valuation	
	Estimated Maximum Debt Service for the Fiscal Year Ending December 31, 2008.	
"	Indicated Interest and Sinking Fund Tas Rate	
	Indicated Interest and Sinking Fund Tas Levy	
	Estimated 96°'o Tax Collections	
		
	~~~Unaudited.	
A-5
$ 209,927 ~~~
$ 2.56 L251.019
L 165.02 l
0.0475
$ 1.216.594
$ 1.167.930
~.

Table 11 -General Fund Revenues and Expenditures
Revenues•
Ad Valorem Taxes
Other Taxes, Licenses and Permits
Automobile Registration
Intergovernmental
Fines and Forfeihues
Fee of Office
Interest
Miscellaneous
Total Revenues
Expenditures:
CURent:
General Government
Administration of Justice
Health and Welfare Services
Tax Administration
Debt Service
Principal
Interest and Fees
Capital Outlay
Total Expenditures
Excessr(Deficiency) of Revenues
Over Expendihres
Other Financing Sources
Other Financing (Uses)
Beginning Fund Balance
Prior Year Adjustment
Ending Fund Balance -September 3U ~~~
Fiscal Years Ended September 30,
21103 2002 2001 21100 1999
$ 5,880,558 $ 5.398.320 $ 4.619.903 $ 3.797.520 $ 3.64).059
2.124.099 2,037.223 1.883,471 1,936.141 1.716,291
498.049 5 L~.889 630.742 496,960 294,752
257.045 259,101 308,421 258,150 258.878
1,549, l57 1.454.579 1,282.647 1,193,833 1,137,776
70.177 98,104 235.397 274,912 171,346
S 13.29 l 415.378 408.536 326, l86 689.496
$ 10,892,376 $ 10,176,594 $ 9,369,117 $ 8,283,702 $ 7,917,598
$ 1.816.404 $ 1.755.507 $ 1.555.464 $ 1,442,324 $ 1.361.843
6.977.762 6,369,590 5,975,917 5,166,216 4,223,611
801.057 793,655 725.755 695,174 622.548
471,743 455947 409,517 390.898 352.067
162.484 115,671 44.282 53,090 -
4,374 36.256 - 554 -
213.054 235,462 361,614 334,701 240.112
$ 10,446,878 $ 9,762,088 $ 9,072,549 $ 8,082,957 $ 6,800,181
$ 445.498 $ 414,506 $ 296,568 $ 200,745 $ 1,117,417
195.535 44,960 6.435 125.184 79.658
(698) (227,499) (1.066). (19,550) (83.894)
3,649.563 3.417,596 3.115.659 2.809,280 1,636.099
- - - - 60.000
$ 4,289,898 $ 3,649,_563 $ 3,417,596 $ 3,115,659 $ 2,809,2811
"~ The County estimates the Ending Fund Balance for the Fiscal Year Ended September 30, 2004 will be approximately $4.495.495.
Source: County's Audited Financial Statements for the Fiscal Years Ended September 30. 1999 -September 30, 2003.
Table 12 -Current Investments (as of December 31, 2004)
Investment Description
Money Market Funds
U.S. Treasury Notes
Agency Securities
Certiticater of Deposit
Total
f\-6
Tot:-IInvested	Percent
$ 52,799	L46°'o
L600.303	44.11°0
1,50 L565	41.39° o
473.250	13.04° o
$ 3,627,917	100.00°'0




APPENDIX B
I~RR COUNTY, TEXAS
ECONOMIC AND DEMOGRAPHIC INFORMATION
~.



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~_


KERB COUNTY, TEXAS
ECONOMIC AND DEMOGRAPHIC INFORMATION
Overview
Kerr County is a central Texas county with an economy based on a<<a-iculture, tourism, and manufacturing. The Texas Almanac
designates cattle, sheep and goats as the principal source of agricultural income.
Economy
Kerr County's economy is based on a combination of manufacturing, agri-business and tourism. There are 10 manutacttrring plants in Kerr
County employing over 20 employers each and producing products ranging tiom aircratl, boats, jewelry, parts and high tech plastics to pre-
fabricated buildings and building components. Much of the resources from ag;ribtuiness involve cattle, sheep, goats, cedar posts, hay, oats,
milo, wheat, and pecans. There are three major hospit<11s located in Kerrville, employing approximately 1,750 people. These hospitals
~" include Kerrville State Hospital, the Veterans Administration Hospital and Sid Peterson Memorial Hospital.
The City's location along the Gtuadalupe River in the heart of the beautiful Texas Hill Country, together with many vacation resorts and
err mtmerous summer camps t<~r young people, make Kem~ille a haven ti>r tourists and conventions as well as a popular retirement area.
Within the City are 19 hotels with approximately 1200 rooms, including flee rooms at the famous Inn of Hills River Resort and Y.O. Hilton.
The Hill Country Arts Foundation was founded in 1958 to provide are classes and summer theatre for professionals and amateurs, plus a
special children's program. These three major aspects of the economy are supported by a strong retail, wholesale and service trade.
Population Trend 2000-2004
2001 2003 2002 2001 2011(1
Kerr County 45,800 45,600 45,000 44,200 44,100
State of Texas 22,405,900 22,087,400 21,607,900 21,141,500 20,206,500
Sotuce: S'crles and !LlarketingA-Lanagenrerrt Srrn~ev of Brrvirrg Power, 2000-2004.
Percentaie ofPopulation by AAe Group
Abe Kerr County State of Texas
0-17 22.5 27.8%
18-24 7.5 10.5
25-34 8.8 14.7
35-49 18.7 22.2
50 -Over 42.5 24.8
Source: Sales and !Llarketirrg alarragement Siuvev of Brryrrrg Power, 2004.
Kerr County Top Ten Employers (May 2UU~):
Emnlover
Kerrville Independent School DistricC
,,, Sid Peterson Memorial Hospital
South Texas Veterans Healthcare System (Kerrville Division)
Kerrville State Hospital
Tames Averv Crattsmen
~ Wal Mart Inc, Store # 508
Kerr County
City of Ken ville
HEB Foods Grocery Store
dr Ingram Independent School District
B-1
Employees
748
630
585
539
413
350
305
299
275
270


Economic Grmvth Histo
2001 2003	2002	21101	2000
Total Retail Sales ($000) $ 642,259 $ 616,402	$ X92,196	$ 600,638	$ 604,1 ~2
Total Effective Buying Income ($OOOs) (EBI)'`~~ 808,98 783,878	780,562	721,020	707,430
Per Capita Retail Salesf e' 14,023 13,E 18	13,160	13,589	13,700
Per Capita EBI'B~ 17,655 17,190	17,346	16,313	16,041
Median Household EBI 32,084 31,994	31,323	28,389	27,343
'~' EBI is defined as personal income less tax and non-tax payments.			
'a~ Based on a population estimates given in previous table.			
Source: Sales ~llark-eting aru>'~Ianagentent, Szrrvey of Buvirtg Power 2000-200-x. Numbers are estimated ea	ch year as of January
KERB COUNTY LABOR FORCE STATISTICS		
Labor Force History			
2004~`~i 2003	21102	2001	2000
Labor Force 18,906 ~ 19,039	17,905	17,741	17,645
Percent Increase\(Decrease) (0.70%) 6.3 %	0.9%,	0.5%	0.7°/~
Employed 18,436 18,4 19	17,3 l2	17,277	17,286
Percent Increase\(Decrease) 0.10% 6.4%	0.0%	0.0%	0.8'%
Unemployed 470 620	593	464	359
Percent Increase\(Decrease) (24.2%) 4.6'%	27.8%	29.3%	(4.3%)
Percent of Labor Force Unemployed 2.5% 3.3°/,	3.3%	2.6%	2.0%
"'~ As of October 2004.			
Source: Labor Market Intonnation Department, Texas Workforce Commission.			
Comnarative Unemnlovment Rates			
2011,Ic:'> 20113 21102	21101	2000	
Kerr County 2.5% 3.3% 3.3%	2.6%	2.0%	
State of Texas 5.3 6.8 6.3	4.9	4.2	
United States of America 5.1 5.7 5.7	4.7	4.0	
'~i As of October 2004.
Source: Labor Market Information Department, Texas Workforce Commission.
B-2


~-~
'1
APPENDIX C
AUDITED FINANCIAL STATEMENT
FOR THE YEAR ENDED SEPTEMBER 30, 2003



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~..
s
KERR COUNTY, TEXAS
COMPREHENSIVE ANNUAL FINANCIAL REPORT
FISCAL YEAR ENDED SEPTEMBER 30, 2003



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KERR COUNTY, TEXAS
TABLE OF CONTENTS
PAGE
INTRODUCTORY SECTION
~,...
Letter of Transmittal _ i
List of Principal Officials ii
FINANCIAL SECTION
Independent Audiiors' Report	2-3
Management's Discussion and Analysis (unaudited)	5-11
Basic Financial Statements:'	
Government-wide Financial Statements:	
Statement of Net Assets	15
Sta#ement of Activities	16-17
Fund Financial Statements:	
Governmental Funds:	
Balance Sheet	18
Reconciliation of the Governmental Funds Balance Sheet to	
Statement of Net Assets	19
Statement of Revenues, Expenditures, and Changes in Fund Balances	20-21
Reconciliation of the Statement of Revenues, Expenditures, and Changes in	
Fund Balances of Governmental Funds to the Statement of Net Activities	22
Proprietary Fund:	
Statement of Net Assets	23
Statement of Revenues, Expenses and Changes in Fund Net Assets	24
Statement of Cash Flows	25
Fiduciary Funds:	
Statement of Fiduciary Net Assets	26
Notes to Basic Financial Statements	27-45
Required Supplementary Information:	
Statement of Revenues, Expenditures, and Changes in Fund Balance -Budget	
to Actual -General Fund	48
Statement of Revenues, Expenditures, and Changes in Fund Balance -Budget	
to Actual -Road and Bridge	49
Combining and Individual Fund Statements - Nonmajor Governmental Funds:	
Combining Balance Sheet	52-56
Combining Statement of Revenues, Expenditures and Changes in Fund Balances	58-62


r
KERR COUNTY, TEXAS
'BASLE OF CONTENTS
FEDERAL AWARDS SECTION

PAGE
Independent Auditors' Report on Compliance and lntemal Control	
Over Financial Reporting Based on an Audit of	
Financial Statements Perfomtied in Accordance	
With Government Auditing Standards	gq.
Independent Auditors' Report on Compliance with Requirements	
Applicable to Each Major Program and lntemal Control Over	
Compliance in Accordance with OMB Circular A-133 ~	gg '
Schedule of Findings and Questioned Costs	67
Schedule of Expenditures of Federal Awards	gg
Notes to Schedule of Expenditures of Federal Awards	gg
	
	


~,.

Tommy Tomlinson
KERB COUNTY AUDITOR
March 24, 2004
~' Honorable County Judge
Honorable County Commissioners
Kerr County
~; Kerrville, Texas 78028
Gentlemen:
Conforming to statutory requirements of the duties of the County Auditor, submitted herewith is
the annual financial report for Kerr County, Texas as of September 30, 2003, and far the fiscal
year then ended. Responsibility for both the accuracy of the presented date and disclosures rest
with the County_ We believe that the data, as presented, is accurate in all material aspects; that it
is prese~ed in a manner designed to fairly set forth the financial position and results of operations
of the County as measured by the financial activity of its various funds, and that all disclosures
necessary to enable the reader to gain the maximum understanding of the County's financial affairs
have been included
This report has been prepared following the guidelines recommended by the Governmernal
Accounting Standards Board. In accordance with these guidelines, the accompanying report
consists of two parts:
1. introductory Section
2. Financial Section, including financial statements and supplemental data of the County
accompanied by our independent auditors' opinion_
3. Fedexal Awards Section
We appreciate the continued cooperation of those county officials and employees whose
contributions were essential for the timely completion of this annual financial report
Respectfully subnautted,
~yvyyy~,
Tommy Tomlinson
Ken County Auditor
'OU MAIM, ROOM 143 (830) 792-2235 KF,RRVILLE, TEXAS 78028-5327

KERR COUNTY, TEXAS
COMPREHENSNE ANNUAL FINANCIAL REPORT
FISCAL. YEAR ENDED SEPTEMBER 30, 2003
PRINCIPAL OFFICIALS
COUNTY JUDGE Pat Tinley
COMMISSIONER, PRECINCT 1	H.A."Buster" Baldwin
COMMISSIONER, PRECINCT 2	William "Bill" Williams
COMMISSIONER, PRECINCT 3	Jonathan Letz
COMMISSIONER, PRECINCT 4	Dave Nicholson
COUNTY ATTORNEY	David Motley
COUNTY AUDITOR	Tommy Tomlinson
GOUNTY CLERK	Jannett Pieper
COUNTY TREASURER	Barbara Nemec
DISTRICT ATTORNEY - 216th	E. Bruce Curry
DISTRICT ATTORNEY - 198th	Ron Sutton
DISTRICT CLERK	Linda Uecker
SHERIFF	William F. "Rusty" Hierholzer
TAX ASSESSOR-COLLECTOR	Paula Rector
JUSTICE OF THE PEACE, PRECINCT 1	Vance Elliott
JUSTICE OF THE PEACE, PRECINCT 2	Dawn Wright
JUSTICE OF THE PEACE, PRECINCT 3	Kari O'Dell
JUSTICE OF THE PEACE, PRECINCT 4	W. E. "Bill" Ragsdale
OFFICIAL ISSUING REPORT
Tommy Tomlinson
County Auditor


r.

FINANC1At_ SECTION

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~.
William F. Thompson, C.P.0.
Ernst H. Druebert, Jr., C.P.A.
Jerry N. OINar, C.P.A.
Dotglas H. Sandberg, C.P.0.
s Timothy R. Porter, C.P.A.
PRESSI.ER, THOME'80N AND COMPANY
A PROFESSIONAL t~RPORA1lON
CERTIFiEQ PUBLIC ACGOUNTANTS
ONE BCHftEIIVEft CENTER
81B WATER STREET, 3UI?'E 320
KERAVII,LE, TEXAS 78028
P.O. Box 290590
Telephone {830) 257-7241
Fax (830) 89&4041
Email: inroC~Ptcoopa.com
INDEPENDENT AUDITORS' REPORT
The Honorable County Judge and
Members of the Commissioners Court
Kerr County, Texas
~ We have audited the accompanying financial statements of the governmental activities, the business-type
activities, each major fund, and the aggregate remaining fund information of Kerr County, Texas as of and
for the year ended September 30, 2DD3, which collectively comprise the County's basic financial statements
~• as listed in the table of contents. These financial statements are the responsibility of Kerr County
management. Our responsibility is to express an opinion 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 and the standards applicable to financial audits contained in Government Auditing Standards,
issued by the Compiroiier General of the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements are free of material
~„ misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the accounting principles used and
the significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our opinions.
In our opinion, the financial statements referred to above present fairly, in all material respells, the
respective financial position of the governmental activities, the business-type activities, each major fund, and
the aggregate remaining fund information of Kerr County as of September 30, 2DD3, and the respective
°" changes in financial position and cash flows, where applicable, thereof for the year then ended in conformity
with accounting principles generally accepted in the.United States of America.
As described in Note 1, the County has implemented a new financial reporting model, as required by the
"'~ provisions of GASB Statemen# No. 34, Basic Ffiancia! Statements -and Management's Discussion and
Analysis -for State and Loca! Governments, as of September 30, 20D3.
~,. The Management's Discussion and Analysis and budgetary comparison information on pages ti through 11
and 48 and 49, are not a required part of the basic financial statements but are supplementary information
required by accounting principtes generally accepted in the United States of America. We have applied
certain limited procedures, which consisted principally of inquiries of management regarding the methods of
measurement and presentation of the supplementary information. However, we did not audit the information
and express no opinion on it.
!n accordance with Government Auditing Standards, we have also issued our report dated March 15, 2D04,
on our consideration a# Kerr County's internal control over financial reporting and on our tests of its
compliance with certain provisions of laws, regulations, contracts, and grants. That report is an integra) part
of an audit performed in accordance with Government Auditing Standards and should be read in conjunction
_~ with Phis report in considering the results of our audit.
2



Our audit was performed for the purpose of forrning opinions on the finanaal statements that collectively
comprise the Kerr County, Texas basic financial statements. The introductory section and combining and
individual nonmajor fund fnancial statements are presented for purposes of additional analysis and are not a
required part of the basic financial statements. The accompanying Schedule of Expenditures of Federal
Awards is presented for purposes of additional analysis as required by U.S. Office of Management and
Budget Circular A-133, Audits of States, Local Govemrrrerrts, and Non-Prof-t Organizations, and is not a
required part of the financial statements of Kerr County, Texas. The combining and nonmajor fund financial
statements and the Schedule of Federal Awards have been subjected to the auditing procedures applied in
the audit of the basic financial statements and, in our opinion, are fairly stated in all material respects in
relation to the basic financial s#atements Taken as a whole. The introductory section has not been subjected
to the auditing procedures applied in the audit of the basic financial statements and, aGCOrdingly, we express
no opinion on them.
PRESSLER, THOMPSON AND COMPANY
A PROFESSIONAL CORPORATION
March 15, 2004

~w

MANAGEMENT'S DISCUSSION AND ANALYSIS (UNAUDITED)
5
~•


KERB COIINTY
MANAGEMENT'S DISCUSSION AND ANALYSIS
Within this section of the Kea County (County) annual financial. report, the Kerr Coutrty Commissioner's Court
provides a naaative discussion and analysis of the financial activities of the County for the fiscal year ending
September 30, 2003. The financial performance is discussed within the context of accompanying financial
statements and disclosures, which begin on page 1 S.
]F~nancial Highlights (thousands)
• The Cotmty's net assets as indicated in the government-wide financial statements are $12,898.
• Total net assets are comprised of the following:
T. Capital assets, net of related debt, of $3,171 include property and equipmen#, net of accumulated
depreciation.
2. Net assets of $4,577 are restricted by debt covenants and or grantee laws or regulations.
3. Unrestricted net assets of $5,150 are available to meet obligations of creditors and citizens.
• The County completed a $927 project of installing acounty--wide communication system for law
enforcement.
• Total governmental long term debt of the County decreased by $917. See Note 3 for detail
• Revenues exceeded expenditures for governmental activities $1,012.
• The rnireserved fund balance in the general fend as shown in the fiord financial statements on page 18 is
$5,872 or 35% of general fund expenditures. This amount is within the gnidelinfs recommended by the
Commissioner's Court and the State Comptroller's Office.
• bong-term debt for business-type activities in the amount of $5,140 was issued to retire an existing debt of
$1,947 and construct an addition to the Kerr County Juvenile Detention Facility at the cost of $3,193.
Using This Annual. Report
This annual report consists of a series of financial statements. The Statement of Net Assets and the Statement of
Activities (pages 15 through 17) provide information about the activities of the County as a whole and present a
longer-term view of the County's finances. Fund financial statements start on page 18. For governmental
activities, these statements tell how these services were financed in the short term as well as what rema;nc for
future spendutg. Fund fraiancial statements also compare actual revenue collection and expenditures to budget
Notes to the financial statement are included to provide additional financial information.
Government-wide Financial Statements
Government-wide statements include all assets and liabilities using the accrual basis of acco~mting, which is
similar to the accauntittg methods used by most private-sector companies. Accrual of the current yeaz's .revenues
and expenses are taken into account regardless of when cash is received or paid. The statements are divided into
two activities, governmental activities which include basic functions o,f county government and business-type
activities tivhich are totally s~poxted by fees charged to customers.
The government-wide financial statements include two statements. One is the Statement of Net Assets; ties
statement presents all of the assets and liabilities of the County as a whole, with the difference reported as net
assets. It answers the question as to whether the financial condition of the County is better or worse as result of
the year's activities. Over time, increases or decreases in the Count's net assets are one indicator of whether its
financial health is improving or deteriorating. To assess the overall financial condition of the County, one must
also consider non-financial conditions such as property tax base and condition of assets.

w..
The other government-wide financial statement is the Statement of Activities. This statement reports how each
activity is fimded by showing grants and program revenues related to each activity and how much reliance is
~'" placed on general revenues. The statement relates to the Statement of Net Assets m that it shows how currant
operations have gauged net assets.
.,.~ F~rrrd Financial Statements
Funds are established to account for money designated for specific purposes by the Commissioner's Court or
grantees such as the State of Texas. The fiord financial statements differ from the government-wide statements m
that they focus on significant fiords rathea the County as a whole. Major funds are presented separately. The fund
financial statements for major fiords begin on page 18. Fund data for non-rnajar funds is included in a combining
statement on page 52. The basic fends are classified by type; each type used by the County is described in the
following paragraphs.
Governmental funds -Mast of the Courriy's basic services are reported in governmental funds, which focus on
haw zztoney flows into and out of those funds and the balances left at year-end that axe available for spending.
~„ These fiords are reported using the modified accrual basis of accounting that measures cash and all other
financial assets that can readily be converted to cash. The governmental fund stateinents gravide a detailed short-
term view of the County's general government operations and the basic services it provides. Governmental fiu~d
information shows the amount of fiz-ancial resources available in the near future to finance County programs.
In addition to the major government fiords Balance Sheet and Statement of Revenues, Expenditures and Changes
in Fund Balances budgetary comparison statements are included for the general fund and major special revenue
fiord. These schedules compare actual revenue and expenditures with adopted and amended budgets.
Proprietary funds -When the County charges customers for the full cost of the services it provides to County
units or to outside third parties, the services are reported in proprietary funds. Proprietary funds are reported in
the same way that all activities are reported in the Statement of Net Assets and the St~lternent of Activities. The
County has only one proprietary fund (business activity) which accounts for the frnancial activities of the Kerr
County Juvenile Detention Facility. A majority of the revenue far this service comes from counties outside of the
County.
~.
Notes to the financial statements -The notes are presented immediately following the basic fmancaal statements
to provide additional information to facilitate the understanding of the government-wide and food financial
statements. The notes explain accounting policies and disclose additional information concerning fixed assets,
•~ long-term liabilities, and the Coumy's retirement plan.
The County as a Whole
' Our analysis of the County as a whole focuses an net assets (Table 1) and changes in net assets (Table 2). Under
Governmental Accounting Standard Board (GASH} regulations, 2003 is the first fiscal year in which full accau~31
county-wide statements are required. The Statement of Activities reports amxual expenditures by major function
_,., along with the charges fax services and grant proceeds available to support eac~r function_ This presentation
shows the cost of services tha# must be offset by general revenue such as property and sales taxes.
The Summary of Net Assets (Table 1}list assets in the order of liquidity beginning with cash and ending in fixed
~°' assets. Receivables include unpaid property taxes and unpaid court cost and fines assessed by the courts. Each
receivable is reported net of a reserve far uncollectable accounts. Historical wllection data far property taxes
shows an average annual collection race of 98 percent. Total land anri improvements are $10,465; this amount is
net of accumulated depreciation of $3,154 (23% of cost}. Other assets (equipment) reported at $885 is net of
accumulated depreciation of $5,635; these assets are 87% depreciated. We have to conclude that many assets
exist with limited useful life that must be replaced in the near future. Liabilities are reported by current (payable
in one year) and long-term classifications. information conc~-ing long-term debt is detailed on page 40 in the
~, motes to the financial statements. Net assets at year-end are $12,898; a total of $4,577 is restricted for specific
purposes as required by state Iaw or by County policy. The $5,150 in unrestricted net assets are available for
funding general operations.

Table 1
Summary of Net Assets (thousands)
	Governmental	~ Business-Type	Total
	Activities	Activities	Primary Govt.
	2003	2003	2003
Cash	6,443	2,530	8,973
Receivables	1,739	290	2,029
Capital Assets	i 1,315	31022	14,337
Total Assets	19,497	5,842	25,339
Accounts Payable	421	27	448
Other Liabilities and Deferred Revenue	1,767	197	1,964
Long-term Debt	5,047	4,982	10,029
Total Liabilities	7,235	5,206	12441
Net Assets:			
Invested in capital assets, net of debt	5,289	(2,118}	3,171
Restricted	2,5 SO	2,027	4,577
Unrestricted	4,423	727	5,150
Total Net Assets	12,262	636	12,898
Table 2
Changes in Net Assets (thousands)
Governmenta!	Business-Type	Total
	Activities	Activities	Primary Govt,
	2003	2003	2003
Revenues:			
Program Revenues			
Charges For Services	2,609	1,513	4,122
Operating Grants & Contributions	977	296	1,273
Capital Grants & Contributions	19		19
General Revenges			
Property Taxes	9,009		9,009
Other Taxes	2,124		2,124
Grants & Contributions			
Investment Earnings	95	32	127
Other General Revenues	1,701		1,701
Total Revenues:	16,534	1,841	18,375
Expenditures:			
General Government	2,567		2,567
Administration o£ Justice	2,903		2, 403
Public Safety	3,063		3,063
Corrections	1,871	1,722	3,593
Health & Human Services	929		429
Community & Economic	820		820
Development			
Infrastructure & Environmental	3,034		3,034
Services			
Interest on long-term Debt	334	308	642
Total Expenditures:	15,522	2,030	17,552
Change in Net Assets	1,012	{189}	823
Beginning Net Assets	11,249	825	12,074
Net Assets	12,262	636	12,898


8
..`
		
-	The Changes in Net Assets (Table 2) itemizes the basic sources of revenue and expenditures as to the services	
	provided. Tat.al revenue for governmental activities was $16,534, or approximately 7S% from general revenues.	
~•++	Total governmental expenditures were $15,522 resulting in a net increase in net assets of $1,012. More detail	
	about the increase is discussed in the Financial Analysis of the County Funds.	
	Business-type activities generated $175 in operating net income; however this amount was offset by $364 in cost	
""'~"	related to ~nstrncti.on activities as detailed th the Financial Analysis of the County Funds.	
	Revenues and expenditures for governmental activities are compared in Table 3 showing the relation between	
,,,,,	the cost of services and the revenue generated from users of the service. This table also shows how much general	
	revenue (property and sales taxes) and grants are needed to provide each service. For the past several years the	
	County has maintained a constant property tax rate relying on the steady growth of the County for additional	
	revenues. This growth bas also helped to rnaintaia sales tax revenue. As all other entities in this country, the	
	Co~mty has experienced a sign~icant decline in investment revenues. The service requiring the Least general	
	revenue is that of the courts and clerk offices of the courts. The County has a collection department that focuses	
	on the collection of fines and fees assessed by the courts.	
:r	
Table 3	
	Governmental Activities (thousands) Fended 13y	
	Revenue % of Expenditures % of General Revenue
-~'	2003 Total 2003 Total Amount
	General Government 677 2,567 17% 1,$90	74%
	Administration of justice 1,448 2,903 ] 9% 1,455	50%
,~	.Public Safety l l5 3,063 20% 2,948	46%
	Corrections 271 1,871 12% 1,600	86%
	Health & Human Services 94 929 6% 835	90"/0
	Community & Economic Development 4 820 S% 816	100%
°"`	Infrastrucnu-e & Environmeaatal Services 0 3,034 2t}% 3,034	100%
	Total Charges for Services 2,609 16% 15,187 12,578	
	Investment E.vnings 95 1%	
err	Grants 946 b%	
	General Revenues 12,834 78%	
	Total 16,534	
Capital Assets and Debt Administration
Capital Assets: total capital assets increased $1,772 doe mostly to the purchase of a communication system far
the Sheriff's office for $978 reported in governmental activities, and the $990 construction cost of the addition to
the Kerr County Juvenile Detention Facility, the business-type activity. See Table 4 below.
Table 4
Capital Assets at Year-encl
(thousands)
~,, band
Buildutgs
Equipment
Consirnction in Progress
~' Capital leases
Tola1
Governmental
Activities
2003 2002	Business-Type
Activities
2003 2002	Total
Primary Govt.
2003 2002
390	390	107 107	497	497
13,228	13,228	2,214 2,21.4	15,442	15,442
5,477	4,444	204 191	5,681	4,635
0	310	1,115 125	1,115	435
1,OOfi	963	0 0	1,008	963
20,104	19,335	3,640 2,637	23,744	21972

Outstanding Debt
Table 5 below reports the outstanding balances of each debt for 2002 and 2043 for governmental and business-
type activities. The County has f~nancxd large capital improvement projects with bands ar note obligations. The
capital lease obligations were to acquire heavy equipment for Road and Bridge operations and to maintain a
quality fleet of vehicles for the Sheriffs Department Tn 2002-03 the County retired debt related to governmental
activities by $967. Far business-type activities, a new obligation of $5,140 was incuQed for capital
improvements of $3,143 and to retire an existing mortgage of $1,947. Detailed information concerning long-term
debt is available in the notes on pages 40 through 42.
Table 5
Outstanding Debt at Year-end
(thousands) Governmental Business-Type Total
Activities Activities Activities
2003 2002 2003 2002 2003 2002
1998 Tax Anticipation Note
Original Amount ($2,650) Matures 2005
1994 General Obligation Bonds
Original Amount {$5,900) Matures 2012
2001 Public Finance General Oblig. Bonds
Original Amount ($990) Matures 2008
2002 Lease Revenue Bonds
Original Amount ($5,140) Matures 2023
Capital Lease Obligations
Frankenmuth Mutual Ins. Mortgage
Total
840 1,23 5 840 1,23 5
3,930 4,265 3,930 4,265
730 860 730 860
5,140 0 5,140
526 633 526 633
0 1,947 0 1,947_
6,026 6,993 5,140 .1,947 11,166 8 940
financial Analysis of the County I+~xnds (thousands)
Governmental Funds
The governmental funds statements presented on pages i8 through 26 include the general fund, road and bridge
fund, and ail other governmental fiu-ds combined. 'These statements faces on short-term transacxions and the
impact they have on financial resources for future financial requirements. The total of fiu~d balances at year-end
for all governmental fiords are $6,083, a decrease of $461 from theprior year.
The general fund is the primary day today operating fund that finances services such as the courts and law
enforcement. Approximately SO % of the revenue to support these services is generated by ad valorem taxes.
General fund operations resulted in an increase in fund balance of $640; 75% of that ina~ease came from ad
valoxem taxes. The incr~se in tax revea~ue was a result of higher appraised taxable values and an increase in new
properties. The ending fund balance of $4,290 is 41.8"/° of total expenditures; this percentage satisfies the 25%
recommendation by the State Comptroller and the County's policy is to have a minimum operazirtg reserve of
25%.
The road and bridge fund is reported as a single major govemmartal fund because it repxesearts a material
percentage of the total revenue and expenditures of all governmental funds. The result of operation was a
decrease in fund balance of $82; this lowered the fund balance below the desired level. The County started the
process to address this problem in the 2003-04 budget.
All other govemmeattal fiords are combined to form the non-major govemmental fund category, the funds
included in this combination are itemized in the combining statements on pages 52 through b2 of the report
Combined fund balances decreased by $1,019 to $1,278 at 32.8% of total expenditures. In 2001-02 the County
received proceeds from the sale of contractual obligation bonds in the amount of $990 for the purchase and


10
,~.
installation of a communication system for the Kerr County Sherifil's Departmern; $615 was expensed in 2002-
03. The County used $231 of the accumulated fitnd balance of the Schreiner Road fiords for the construction of a
r road Expenditures exceeded revenues im the indigent health care fund by $132; expeatditmes increased $62 from
the prior year and payments from the State of Texas were down by $27. The indigent health care program is an
unfunded mandate by the State.
~ Proprietary Funds
As stated previously, the County's proprietary funds statemens reports the activities of the Kerr County Juvenile
.rr Detention Facility. The facility provides short term detention services and long term rehabilitation services for
juvenile offenders. The services are provided on a contractual basis with Kerr County and other counties within
the state.
~""' Because of the increase m demand for services, the Kerr County Juvenile Board approved an addition to the
facility to increase capacity to 75 beds. Funding for this project was obtained from the sale of $5,140 Lease
Revenue Bonds. The amount was enough to complete the addition and pay off an existing mortgage on the
~ existing facility of $1,947. The addition will be completed in March of 2004. Net assets decreased $189 resulting
from the fact that interest payments on the new debt were paid before revenues could be generated by the
addition.
Budgetary Highlights
Budgetary statements of revenues and expenditures for the general fund and road and bridge fund are on pages
48 and 49. The statements report the original and final budget with actual amounts for each category. The
~r variance is the difference between actual and the final budget. The original budget was adapted by the Cotmry's
Commissioners Court prior to the beginning of the fiscal year and amendments to the budget are approved by the
court during the year. During the current year the original general fund revenue budget was increased by $52 in
grants and refixnds that were not anticipated in the original budget; the expenditure budget was incaeased by a
"~ corresponding amount. The expenditure budget was also increased by au additional $92; a majority of that
increase was for additional funding requirements for criminal justice.
~,,, The original general fund budget planned for expenditures to exceed revenue by $402, indicating that fund
balances of that amount would be used to fund general fiord operations. Since actual revenues exceeded the final
budget by $637 and actual expenditures were $3031ess than final budget, food balances were not used.
r~r The original and final road and bridge budget anticipated revenues to exceed expenditures by $126. Actual
revenues exceeded budget by $252; actual expenditures exceeded budget by $207. The net of the variances for
revenues and expenditures was $44. The County experienced a major flood in 2001 causing damage to
infrastructure. Tn 2001-02 the County received federal grants to make repairs; those funds were expended in
'"~' 2002-03. Those expenditures were not included in the final budget but were reported in the actual amounts, thus
causing the $207 negative variance for road and bridge maintenance.
,~, Budget for 2003-004
For the 2003-04 fiscal year the County adopted a property tax rate of .3721 per hundred dollars of taxable value,
no change from 2002-03. The combined property tax rate for general and non-major funds was reduced by
~+ .0075. The road and bridge fund properly tax rate was increased by .0075 in an effort to build the working ppital
balance_ Taxable property values increased approximately 1.5%, a significant decline from the 5% to 7°lo growth
in recent years. With no material growth in anticipated revenues, the County funded the 2003-04 general and
non-major budget with $913 of fund balances. The remaining fund balances are budgeted to remain within the
~"' levels as established by Countypolicy.
A total budget for capital expenditures is $268, a significant reduction from $1,084 in 2002-03. '[ltis budget
,,,,, includes three new vehicles for Constables and replacement vehicles and equipment for the Sheriff's Deparimem
and Road & Bridge. Long term debt retirement is budgeted to be $895.
11
0
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12
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'fir

BASIC FINANCIAL STATEMENTS
13
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r
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14


~` KERR COUNTY, TEXAS
GOVERNMENT-WIQE STATEMENT OF NET ASSETS
SEPTEMBER 30, 2003
0
ASSETS
Current Assets:
Casts and Cash Investments
Receivables (Net of Allowance for Doubtful Accounts)
Ad Valorem Taxes Receivable
~""" Accoun#s Receivable
Court >=ines and Fees
Due From Insurance Company
Due From Other Governments
rri
Prepaid Items
Total Current Assets
Noncurrent Assets:
Cash. and Cash Investments
Capital Assets:
Land
~ Buildings and Improvements
Furniture and Equipment
Construction in Progress
Accumulated Depreciation
Total Noncurrent Assets
Total Assets
LIABILITIES
Current Liabilities:
Accounts Payable
~ Accrued Interest Payabie
Accrued Expenses
Accrued Compensated Absences
~~, Deferred Tax Revenue
Current Portion of Long Term Debt
Total Current Liabilities
•w Noncurrent Liabilities:
Accrued Compensated Absences
Lang Term Debt
Total Noncurrent Liabili#ies
~.
Total Liabilities
NET ASSETS
~"` Invested in Capital Assets, Net of Related Debt
Restricted for:
Debt Service
Capital Projects
Other Purposes
Unrestricted
Total Net Assets

	Business-	
Governmental	type	
Activities	Activities	Tota(
$ 6,443,061	$ 2,118,972	$ 8,562,033
376,933		376,933
	290,152	290,152
654,654		654,654
230, 964		230,964
415, 554		415, 554
60, 843		60i 843
8,182,009	2,4D9,124	10,591,133
411,542 411,542
390,457	107,000	497,457
13,227,992	2,213,671	15,441,663
6,485,129	204,318	6,689,447
-	1,114,862	1,114,862
(8,788,622)	(618165)	(9,406,787)
11,314,956	3,433,228	14,748,184
19,496,965	5,842,352	25,339,317
421,101	27,087	448,188
38,647	19,433	58,080
270,156		270,156
131,364	12, 802	144,166
298, 088		298,088
1,028,712	165,000	-1,193,712
2,188,068	224,322	2,412,390
		
49,942	6,893	56,835
4, 997,182	4, 975, 000	9, 972,182
5,047,124	4,981,893	10,029,017
7,235,192	5,206,215	12,441,407
		
5,289,062	(2,118,314)	3,170,748
209,927	411,542	621,469
	1,61 S, 774	1,615, 774
2, 339, 659		2,339,859
4,422,925	727,135	5,150,060
$ 12,261,773	$ 636,137	$ 12,897,910
See accompanying notes to the basic financial statements.
15
0
KERR COUNTY, TEXAS
STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED SEPTEMBER 30, 2003
FunctionslPrograms	Expenses
Governmental Activities:	
Administration of Justice	$ 2,902,89fi
Public Safety	3,063,431
Corrections	1,871,342
Health and Human Services	929,398
Community and Economic Development	819,979
Infrastructure and Environmental	3,034,189
Interest on Long Term Debt	334,480
Administration	2,566,727
Total Govemmental Activities	15,522,442
Business-type Activities:	
Operating Expenses	1,508,186
Administration	125,902
Revenue Bond Issuance Cost	87,275
Interest on Long Term Debt	308,307
Total Business-type Activities	2,029,670
Total	$ 17,552,112
See accompanying notes to the basic €inancial statements.
16
~.

~"'	Program Revenues		Net (Expense) Revenue
	Operating	Capital	and Changes in Net Assets
	Charges Grants and	Grants and	Governmental	Business-type	
,~„	for Services Contributions	Contributions	Activities	Activities	Totai
					
	$ 1,447,569 $ 69,616	$ -	$ (1,385,711)	$ -	$ (1,385,711)
`r	115,207 193,726		(2,754,498}		(2,754,498)
	271,280		(1,600,062)		(1,600,062)
	94,467 58,565		(776,366)		(776,366}
•^	4,000	19,028	(796,951)		(796,951}
	655,292		(2,378,897)		{2,378,897)
			{334,480)		(334,480)
~	676,768		(1, 889,959)		(1,889,959)
r	2,609,291 977,199	19,028	{11,916,924)	-	(11,916,924}
					
	808,872
1			300,686	300,686
	,			(125,902)	(125,902}
				(87,275)	(87,275)
				{308,307)	(308,307)
~	1,808,872 -	-	-	(220,798)	(220,798)
					
	$ 4,418,163 $ 977,199	$ 19,028	(11,916,924)	(220,798)	(12,137,722}
~.					
	General Revenues:				
rti~	Property Taxes Levied		9,008,966		9,008,966
	Sales and Other Taxes		2,124,099		2,124,099
	investment Earnings		95,431	32,082	127,513
	Other Income		1,700,909		1,700,909
rr					
	Total General Revenue		12,929,405	32,082	12,961,487
~	Change in Net Assets		1,012,481	{188,716)	823,765
	Net Assets at Beginning of Year		11,249,292	824,853	'12,074,145
rw	
Net Assets at End of Year		
$ 12,261,773	
$ 636,137	
$ 12,897,910
17
~.


KERR COUNTY, TEXAS
BALANCE SHEET
GOVERNMENTAL FUNDS ~
SEPTEMBER 30, 2003
		Road and	Nonmajor	Total
	General	Bridge	Governmental	Governmental
ASSETS	Fund	Fund	Funds	Funds
Cash	$ 4,562,986	$ 617,099	$ 1,262,976	$ 6,443,061
Receivables				
Delinquent Taxes Receivable, Net of				
Allowance for Doubtful Accounts	248,918	33,360	94,655	376,933
Due from Insurance Company	230,964			230,964
Due from State/Other	356,895	3,876	54,783	415,554
Tota! Assets	$ 5,399,763	$ 654,335	$ 1,412,414	$ 7,466,512
LfAB1LITlES
Accounts Payable/Due to Other Offices $ 255,013 $ 98,413 $ 67,675 $ 421,101
Accrued Compensated Absences
and Liabilities 384,780 15,853 887 401,520
Deferred Tax Revenue 470,072 25,824 65,400 561,296
Total Liabilities 1',109,865 140,090 133,962 1,383,917
FUND BALANCES
Fund Balances
Reserved for Debt Service 209,927 209,927
Unreserved, reported in:
General Fund 4,289,898 4,289,898
Capital Projects Fund 37,639 37,639
Special Revenue Funds 514,245 1,030,886 1,545,131
Total Fund Balances 4,289,898 514,245 1,278,452 6,082,595
Total Liabilities and Fund Balances $ 5,399,763 $ 654,335 $ 1,412,414 $ 7,466,512
See accompanying notes to the basic financial statements.
18
r

..+
..
KERR COUNTY, TEXAS
RECONCILIATION OF THE GOVERNMENTAL FUND BALANCE SHEET
~"' TO THE STATEMENT OF NET ASSETS
SEPTEMBER 3(}, 2Q03
0
Tofa! Fund Balances -Governmental Fund
Amounts reported for governmental activities in the statement of net assets
are different because:
$ 6,082,595
Capital assets used in governmental activities are not financial resources and
therefore are not reported in governmental funds. At the end of the year, the
cost of these assets was $20,103,578 and the accumulated depreciation was
$8,788,622. In addition, long-term liabilities, including bonds payable, are not
,,,~„ due and payable in the current period and therefore are not reported as liabilities
in the funds. The long-term debt was $6,025,895. The net effect of including
the balances for capital assets {net of depreciation) and long-#erm debt in the
governmental activities is #o increase net assets. 5,239,120
Various other reclassifications and accruals are necessary to convert from the
,.,, modified accrual basis of accounting to accrual basis of accounting. These
include recognizing deferred revenue as revenue $263,208, recording court fines
and fees assessed $654,654, accruing interest on long-term debt ($38,647), and
and reclassifying expenses as prepaid $60,843. The net effect of these items
`~" is to increase net assets. 940,058
Net Assets of Governmental Activities
$12,261,773
See accompanying notes to the basic financial statements.
19

^~
KERR COUNTY, TEXAS
STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES
GOVERNMENTAL FUNDS
FOR THE YEAR ENDED SEPTEMBER 30, 2003
	General
	Fund
REVENUES	
Ad Valorem Taxes (Including Interest and Penalties)	$ 5,880,558
Other Taxes, Licenses, and Permits	2,124,099
Automobile Registration	
Intergovernmental	498,049
Fines and Forfeitures	257,045
Fees of Office	1, 549,157
Interest	70,177
Miscellaneous	513,291
Total Revenues	10,892,376
EXPENDITURES
Current:
General Government	1,816,404
Roads/Bridges Maintenance	
Road DistrictlPark Construction	
Administration of Justice.	6,977,762
Health and Welfare Services	801,057
Tax Administration	471,743
Libraries and Education	
Debt Service:	
Principal	162,484
interest and Fees	4,374
Capital Outlay	213,054
Total Expenditures	10,446,878
Excess (Deficiency) of Revenues Over Expenditures	445,498
OTHER FINANCING SOURCES (USES)	
Capital Lease Financing	188,179
Operating Transfers In	7,358
Operating Transfers (Out)	{698)
Total Other Financing Sources (Uses)	194,837
Excess (Deficiency) of Revenues and Other Sources Over	
Expenditures and Other Uses	640,335
Fund Balances at Beginning of Year	3,649,583
Fund Balances at End of Year	$ 4,289,898
See accompanying notes to the basic financial statements.
20
rr
	Road and	Nonmajor	Total
	Bridge	Governmental	Governmental
	Fund	Funds	Funds
,,.	$ 543,180	$ 2,213,603	$ 8,637,341
			2,124,099
	925,351		925,351
	32,022	524,159	1,054,230
~"'	679,699		936,744
		119,167	1, 668, 324
	6,361	18,893	95,431
.~	3,104	18,466	534, 861
	2,189, 717	2, 894, 2 88	15, 976,381
t..			
		1,988	1,818,392
,~.,,	2,071,252	261,878	2,333,130
		2,062	2,062
		268,619	7,246,381
		844,805	1,645, 862
~""			471,743
		478,408	478,408
	30,153	860,000	1,052,637
	19,506	274,339	298,219
	151, 053	914,270	1,278, 377
"~"'	2,271,964	3,906,369	16,625,211
			
	(82,247}	(1,012,081)	(648,830}
~w			
			188,179
		698	8,054
		(7,356}	(8,054).
		(6,658)	188,179
			
	(82,247)	(1, 018,739}	(460,651)
~""	596,492	2,297,191	6,543,246
	$ 514,245	$ 1,278,452	$ 6,082,595
~.			
		21	
			
~-

KERR COUNTY, TEXAS
RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES AND
CHANGES IN FUND BALANCES OF GOVERNMENTAL FUND
TO THE STATEMENT OF ACTNITIES
FOR THE YEAR ENQED SEPTEMBER 30, 2003
Net Change in Fund Balances - Govemmentak Fund $ (46fl,651)
Amounts reported for gavemmental activities in the statement of activities
are different because:
Current year capital outlays and long-term debt principal payments are
expenditures in the fund financial statements, but they should be shown
as increases in capital assets and reductions in long-term debt in the
government-wide financial statements. The net effect of removing the 2003
capital outlays $806,970 and debt principal payments $1,052,637 is to
increase net assets. 1,859,607
Depreciation is not recognized as an expense in governmental funds since it
does not require the use of current financial resources. The net effect of the
current year's depreciation is to decrease net assets. (917,271)
Various other reclassifications and eliminations are necessary to convert from
the modified accrual basis of accounting to the accrual basis of accounting.
These include adjusting current year revenue to show the revenue earned from
the current year's tax levy $356,425, adjusting current year fines and fees col-
lected to show the amount assessed $202,117, to accrue additional expenses
such as interest onlong-term debt and compensated absences ($88,589), and
adjust for expenses paid in advance $60,843. The net effect of the reclassifi-
cations and recognitions is to increase net assets. 530,796
Change in Net Assets of Governmental Activities $ 1.,012,481
See accompanying notes to the basic financia[ statements.
22


ti..
KERR COUNTY, TEXAS
STATEMENT OF NET ASSETS
PROPRIETARY FUND
KERB COUNTY JWENILE DETENTION FACILITY
SEPTEMBER 30, 2003
ASSETS
Current Assets:
Cash and Cash Equivalents	$ 2,118,972
Accounts Receivable	290,152
Total Current Assets	2,409,124
Noncurrent Assets	
Cash and Cash Equivalents -Reserve Account	4'11,542
Land	107,000
Construction in Progress	1,114,862
Building and Equipment	2,213,671
Furniture and Fixtures	204,318
Less Accumulated Depreciation	(618,165}
Total Noncurrent Assets	3,433,228
Total Assets	5,842,352
LIABILITIES	
Current Liabilities:	
Accounts Payable	27,087
Accrued Interest Payable -Lease Revenue Bond	19,433
Accrued Compensated Absences	12,802
Lease Revenue Band Payable	165,000
Total Current Liabilities	224,322
Noncurrent Liabilities:
Accrued Compensated Absences	6,893
Lease Revenue Bond Payable	4,975,000
Total Noncurrent Liabilities	4,981,893
To#al Liabilities	5,206,215
NET ASSETS	
investment in Capital Assets, Net of Related Debt	(2,118,314}
Restricted for Project Completion	1,615,774
Restricted for Debt Service	411,542
Unrestricted	727,135
Tota! Ne# Assets	$ 636,137
See accompanying no#es to the basic financial statements.
23
KERB COUNTY, TEXAS
STATEMENT OF REVENUES, EXPENSES, AND CHANGES 1N FUND NET ASSETS
PROPRIETARY FUND
KERR COUNTY JWENILE DETENTION FACILITY
FOR THE YEAR ENDED SEPTEMBER 30, 2003
OPERATING REVENUES
Charges for Services -Detention Revenue
Other
Total Operating Revenues
OPERATING EXPENSES
Personnel
Residential
Administrative
Facility and Equipment
Other
Depreciation
Total Operating Expenses
Income from Operations
NONOPERATING REVENUES (EXPENSES)
Interest Income
Revenue Bond Issuance Costs
interest on Debt
Total Nonoperating Revenues (Expenses}
Change in Net Assets
Net Assets at Beginning of Year
Net Assets at End of Year
$ 1,513,023
295,849
1,808,872
1,220,959
131,547
36,898
136,804
18, 876
89,004
1,634, 088
174, 784
32,082
(87,275)
{308,307)
1363,500)
(188,716)
824,853
$ 636,137
See accompanying notes to the basic financial statements.
24
w
KERR COUNTY, TEXAS
STATEMENT OF CASH FLOWS
"' PROPRIETARY FUND
KERR COUNTY JUVENILE DETENTION FACILITY
FOR THE YEAR ENDED SEPTEMBER 34, 2003
CASH FLOWS FROM OPERATING ACTNiTIES:
Detention Revenue
Other Operating Revenue
Cash Payments for Detention
Net Cash Provided by Operating Activities
ar CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES:
Proceeds from issuance of Capital Debt -Revenue Bonds
Payoff of Mortgage Debt
lnterest Paid
Revenue Bond Issuance Costs
Acquisition and Construction of Capitat Assets
,n
Net Cash Provided by Capi#al and Related Financing Activities
CASH FLOWS FROM INVESTING ACTNITIES:
lnterest Income
Net Increase in Cash and Cash Equivalents
Cash and Cash Equivalents at Beginning of Year
Cash and Cash Equivalents at End of Year
RECONCILIATION OF OPERATING INCOME TO NET CASH PROVIDED
(USED) BY OPERATING ACTNITIES:
Operating Income
Adjustments to Reconcile Operating Income to Net Cash Provided
{Used) by Operating Activities:
Depreciation
Changes in Assets and Liabilities:
(lncrease) in Accounts Receivable
(Decrease) in Accounts Payable
Increase in Accrued Expenses -Compensated Absences
Met Cash Provided by Operating Activities
See accompanying notes to the basic financial statements.
25
$ 1,460,532
329,472
(1, 529,258)
260,746
5,140,040
(1,946,518)
(288,874}
(87,275)
(1, 003,152}
1,814,181
31,826
2,106, 753
423, 761
$ 2,530,514
$ 174,784
89,004
(18,868}
(3, 869}
19,695
$ 260,746


KERR COUNTY, TE3t:AS
STATEMENT OF FIDUCIARY NET ASSETS
SEPTEMBER 30, X003
ASSETS
Cash and Cash Equivalents
Total Assets
LIABILITIES
Due to Other Governmental Units
Total Liabilities
See accompanying notes to the basic financial statements.
26
$ 578,004
$ 578,004
$ 578,004
$ 578,004


KERR COUNTY, TEXAS
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2003
NOTE 1 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The financial statements of the County are prepared in accordance with Generally Accepted Accounting
Principles (GAAP). GAAP includes all relevant Governmental Accounting Standards Board (GASH}
pronouncements. In the govemment-wide financial statements and the financial statements for the
proprietary funds, Financial Accounting Standards Board (FASB) pronouncements and Accounting
Principles. Board opinions issued on or before November 30, 1989, have been applied unless those
pronouncements conflict with or contradict GASH pronouncements, in which case, GASB prevails. For the
fiscal year ended September 30, 2003, the County impt mented the financial reporting requirements of
GASB Statement No. 34. As a result, an entirely new fina~ciat presen#ation format has been implemented.
1.A. FINANCIAL REPORTING ENTITY
The County is an independent unit and is managed by a governing body of elected officials. The
accompanying financial statements present the County's primary govemment and a component unit
~~" over which the County exercises significant influence. Significan# influence or accountability is
based primarily on operational or financiai relationships with the County (as distinct from legal
relationships).
Due to restrictions of the State constitution relating to the issuance of municipal debt, the Kerr
County Juvenile Board created a Public Facility Corporation to finance the acquisition of the
Juvenile Detention Center. This was accomplished by assuming the existing mortgage on the
,,., property. The above service provided by the Public Facilities Corporation is solely far the benefit of
Kerr County and the Ken• County Juvenile Board. The Public Facility Corporation created to provide
fnancing services is blended into the County's primary government, although retaining separate
legal identity.
Component unit reported in the County's comprehensive annual financial report is shown below:
~" Blended Component Unit
Reported With The Brief Description of Activities and
Prima Government Relationship to the County Reported Funds
Hill Country Juvenile To provide #fnancing for and on Enterprise Fund
Facility Corporation behalf of Kerr County forthe
acquisition of eligible correctional!
detention faalitfes and other
public buildings and facilities.
Kerr County Juvenile Board
serves as the Board of Directors.
27
~..



KERR COUNTY, TEXAS
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2003
NOTE 1 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
1.B BASES OF PRESENTATION
Government-wide Financfa! Statements:
The Statement of Net Assets and Statement of Activities display information abou# the reporting
government as a whole. They include all funds of the reporting entity except for fiduciary funds.
The statements distinguish between governmental and business-type activities. Governmental
activities generally are financed through taxes, intergovernmental revenues, and other nonexchange
revenues. Business-type activities are, financed in whole or in part by fees charged to external
parties far goods or services.
Fund Financial Statements:
Fund financial statements of the reporting entity are organized into funds, each of which is
considered to be separate accounting entities, Each fund is accounted for by providing a separate
set of self-balancing accounts that constitute its assets, liabilities, fund equity, revenues, and
expenditure/expenses. Funds are organized into three major categories: governmental,
proprietary, and fiduciary. An emphasis is placed on major funds within the governmental and
proprietary categories. A fund is considered major if it is the primary operating fund of the County or
meets the following criteria.
a. Total assets, liabilities, revenues, or expenditureslexpenses of that individual governmental
or enterprise fund are at feast 1d percent of the corresponding total for all funds of that
category or type; and
b. Total assets, liabilities, revenues, or expenditure/expenses of the individual governmental
fund or enterprise fund are at least 5 percent of the corresponding total for all governmental
and enterprise funds combined.
The funds of the financal reporting entity are described below:
Governmental Funds
General Fund
The General Fund is the primary operating fund of the County is always classified as a major fund.
It is the basic fund of the County and covers alt activities for which a separate fund has not been
established.
Special Revenue Funds
Special Revenue Funds are used to account for the proceeds of specific revenue sources that are
legally restricted to expenditures for specified purposes.
Debt Service Funds
The Debt Service Fund accounts for the accumulation of financial resources for and the paymen# of
28


,.w
KERR COUNTY, TEXAS
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2003
;~,,,, NOTE 1 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
1.B SASIS OF PRESENTATION (Continued)
principal and interest an general long-term debt of the County o#her than debt service payments
made by enterprise funds. Ad valorem taxes are used for the payment of principal and interest on
the County's debt.
~` Capital Projects Fund
The Capital Projeds Fund is used #o accoun# for proceeds of genera{ long-term debt and other
,,, revenues. F_xpenditures are restricted to the construction and acquisition of major capital facilities.
Proprietary Fund
Enterprise Fund
Enterprise Funds are used to account for business-like activities provided to the general public.
These activities are financed primarily by user charges and the measurement of financial adivity
focuses on net income measurement similar to the private sector. All assets and liabilities
associated with an enterprise fund`s activities are included on its statement of net assets: The
reporting entity includes the Hill Country Juvenile Facility Corporation.
Fiduciary Funds (Not included in govemment~nride statements}
Rgency Funds
~.
Agency funds account for assets held by the County in a purely custodial capacity. The reporting
entity includes 36 agency funds. Since agency funds are custodial in nature (i.e., assets equal
liabilities), they do not involve the measurement of results of operations.
~+
Major and Nonmajor Funds
The funds are further classified as major or nanmajor. The major funds are as folEaws:
Major Fund Srief Description
~„ General See above for description.
Special Revenue Fund:
Road and Bridge Accounts far afl road and bridge construe#ion and maintenance
activity.
Proprietary Fund:
Hill Country .luvenile Accounts for activities of juvenile detention facility in providing
Eetention Facility long term and short term care, education, and rehabilitation.
Nonmajor funds consist of special revenue funds and debt service funds and are detailed in the
Combining and Individual Fund Statements --Nonmajor Funds.
29
.~
~.
r~r
KERB COUNTY, TEXAS
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2003
NOTE 1 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
1. C, MEASUREMENT FOCUS AND BASES OF ACCOUNTING
Measurement focus is a term used to describe "which" transactions are recorded within the various
financial statements. Basis of accounting refers to "when" transactions are recorded regardless of
the measurement focus applied.
Measurement Focus
On the government-wide Statement of Nets Assets and the Statement of Activities, both
govemmental and business-like activities are presented using the economic resources
measurement focus as defined in item b. below.
!n the fund financia! statements, the "current financial resources" measurement focus or the
"economic resources" measurement focus is used as appropriate:
a. Ali governmental funds utilize a " cun'ent financial resources" measurement focus. Only current
financial assets and liabilities are generally included on their balance sheets. Their operating
statements present sources and uses of available spendable financial resources during a given
period. These funds use fund balance as their measure of available spendable financial
resources at the end of the period.
b. The proprietary fund utilizes an "economic Resources" measurement focus. The accounting
objectives of this measurement focus are the detem~ination of operating income, changes in net
assets, financial position, and cash flows. All assets and liabilities .(whether current or
noncurrent) associated with their activities are reported. Proprietary fund equity is classified as
net assets.
c. Agency funds are not involved in the measurement of results of operations; therefore,
measurement focus is not applicable to them.
Basis of Accounting
In the government-wide Statement of Net Assets and Statement of Activities, both govemmental
and business-like activities are presented using the accrual basis of accounting. Under the accrual
basis of accounting, revenues are recognized when earned and expenses are recorded when the
liability is incurred or economic asset used. Revenues, expense, gains, losses, assets, and
liabilities resulting from exchange and exchange-like transactions are recognized when the
exchange takes place.
In the fund financial statement, govemmental funds and agency funds are presented on the
modified accrual basis of accounting. Under this modified accrual basis of accounting, revenues are
recognized revenues when both "measurable and available". Measurable means knowing ar being
able to reasonably estimate the amount. Available means collectable within the current period or
within 60 days after year end. Also under the mod~ed accrual basis of accounting, expenditures
(including capital outlay) are recorded when the related fund liability is incurred, except for general
obligation bond principal and interest which are reported as expenditures in the year due.
30
w

-:
KERR COUNTY, TEXAS
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2003
NOTE 1 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
1. C. MEASUREMENT FOCUS AND BASIS OF ACCOUNTING (Continued}
AEI proprietary funds utilize the accn~al basis of accounting. Under the accrual basis, revenues are
recognized when earned and expenses are recorded when the liability is incurred or economic asset
used.
1.D. ASSETS, LIABILITIES, AND EQUITY
Cash and Cash Investments
For the purpose of the Statement of Net Assets, °Cash and Cash Equivalents° includes demand
deposit accounts, certificates of deposii, mutual funds, government investment pools, and fixed
income securities, each with an original maturity date of three months or less, if applicable.
Therefore, except for certificates of deposit with maturities in excess of 3 months, all amounts are
considered available upon demand and are considered to be "cash equivalents"
Several funds may be invested In an investment account and each fund has an equity interest
therein. Interest earned on the investment of these monies is allocated based upon relative equity
at month end.
Receivables
In the government-wide statements, receivables consist of all revenues earned at year-end and not
yet received. Allowances of uncollectible accounts receivable are based upon historical; trends and
~+ the periodic aging of accounts receivable. The major receivable balances for the governmental
activities relate to property taxes and court fnes and fees. Business-type activities report detention
revenue as its major receivable.
In the fund financial statements, material receivables in governmental funds include revenue
accruals such as property taxes, grants, and other intergovernmental revenues since they are
usually both measurable and available. Interest and investment earnings are recorded when earned
only if paid within 60 days since they would be considered both measurable and available.
Proprietary fund material receivables consist of alt revenues earned at year-end and not yet
received. Detention revenue from the detained juveniles' respective county represents the majority
of proprietary fund receivables. As these receivables are from other Texas counties, all amounts
due are considered collectable and there is no allowance for doubtful accounts.
Fixed Assets
The accounting treatment aver property, plant and equipment {Fixed assets} depends on whether the
assets are used in governmental fund operations or proprietary fund operations and whether they
are reported in the government-wide or fund financial statements.
Governmenf-wide Sfafemenfs
In the government-wide financial statements, fixed assets are accounted for as capital assets. All
fixed assets are valued at historical cost, or estimated historical cost if actual is unavailable.
31

KERR COUNTY, TEXAS
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2003
NOTE 7 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES {Continued)
1.D. ASSETS, LIABILITIES, AND EQUITY (Continued)
Donated assets are recorded at their estimated fair value at the date of donation.
Pursuan# to GASB Statement Number 34, an extended period of deferral is available before the
requirement to record and depreciate infrastructure assets (e.g., roads, bridges, and similar items}
acquired before the implementation date becomes effective. Therefore, infrastructure assets
acquired prior to October 1, 2002 have not yet been capitalized.
Depreciation of all exhaustible fixed assets is recorded as an allocated expense in the Statement of
Activities, with accumulated depreciation refteded in the Statement of Net Assets. Depreciation is
provided over the assets' estimated useful lives using the straight-line method of depreciation_ The
range of estimated useful lives by type of asset is as follows:
Buildings 25 - 50 years
Improvements 10 - 50 years
Machinery and Equipment 3 - 20 years
Infrastructure 25 - 50 years
Fund Financial Statements
In the fund financial statements, fixed assets used in governmental fund operations are accounted
for as capital outlay expenditures of the governmental fund upon acquisition. Fixed assets used in
the proprietary fund operations are accounted for the same as in the government-wide statements.
Restricted Assets
Restricted assets include cash and loves#ments of the proprietary fund that are legally restricted as
to their use. The restriction relates to the "Reserve Account" required by the Trust Agreement
between the Bank of New York Trust Company of Florida, N.A. and the Hill Country Juvenile Facility
Corporation dated November 15, 2002, securing $5,140,000 Hill Country Juvenile Facility
Corporation Lease Revenue Bonds, Series 2002.
Long-term Debt
The accounting treatment for long-term debt depends on whether the assets are used in
governmental fund operations or proprietary fund operations and whether they are reported in the
government-wide or fund financial statements.
All long term debt to be repaid from govemmental and business-type resources .are reported as
liabilities in the government-wide statements. The long-term debt consists primarily of bond and
note payables and capital lease tcansactions.
Long-term debt for governmental funds is not reported as liabilities in the fund financial statements.
The debt proceeds are reported as other financing sources and payment of principal and interest
reported as expenditures.
32

KERR COUNTY, TEXAS
NOTES TO FINANCIAL STATEMENTS
SEPTEM6ER 30, 2403
NOTE 1 -SUMMARY OF 51GNIFICANT ACCOUNTING POLICIES (Continued)
9.D. ASSETS, LIABILITIES, AND EQUITY (Continued)
~""	Compensated Absences
	Full time and regular part time employees who work 20 hours per week or more are granted
	vacation benefits in varying amounts to specified maximums depending on tenure with the Coun#y.
	Sick leave accrues to full time and regular part time employees to specified maximums.
	Accumulated vacation time may be taken in pay upon termination or retirement up to a maximum of
	twenty {20} days; however, this policy does not apply to accumulated sick leave.
	The liability for these compensated absences is recorded as long-term debt in the government-wide
	statements. The current portion of this debt is estimated based on historical trends. In the fund
	financial statements, governmental funds report only the compensated absence liability payable
~"'"	from expendable ava"stable resources. The proprietary fund reports the liability as it is incurred.
	Equity Classiifications
`~"	Govemmer>f wide Statements
	Equity is dassified as net assets and displayed in three components:
	a. Invested in capital assets, ne# of related debt -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 improvement of those assets.
	b. Restricted net assets -Consists of net assets with constraints placed on the use either by (1)
	external groups such as creditors, grantors, or laws or regulations of other governments; or (2)
=~"'	law through constitutional provisions or enabling legislation.
	c. Unrestricted net assets -All other net assets that do not mee# the definition of °restricted" or
	"invested in capital assets, net of related debt."
	
	Fund Statements
	Governmental fund equity is dassified as fund balance. Fund balance is further dassified as
	reserved and unreserved, with unreserved further split between designated and undesignated.
	Proprietary fund equity is classified the same as in the government-wide statements.
"'	1.E. REVENUES, EXPENDITURES, AND EXPENSES
Property Taxes
.. Property taxes are levied October 1 of each year. The taxes are due by January 31 following the
levy date. Pena{ties and interest are added for payments made after the January 31 due date. The
County bills and collects its own property taxes and those of various other taxing entities.
Collections of these taxes pending distribution are accounted for in an agency fund.
33

~.

KERR COUNTY, TEXAS
NOTES TO FINANCIAE. STATEMENTS
SEPTEMBER 30, 203
NOTE 1 -SUMMARY OF SIGNiFICANTACCOUNTING POLICIES {Continued)
1.E. REVENUES, EXPENDITURES, AND EXPENSES {Continued)
in the fund financial statements, property taxes are recorded as revenue in the period levied to the
extent they are collected within 6Q days of year-end. Due to the immaterial amount of additional
property taxes receivable after the 60-day period, no additional aecrua! is made in the government-
wide financial statements.
Operating Revenues and Expenses
Operating revenues and expenses for proprietary funds are those that result from providing services
and producing and delivering goods and/or services. It also includes all revenue and expenses not
related to capital and related financing, noncapita! financing, or investing activities.
Expenditures/Expenses
In the government-wide finanaal statements, expenses are classified by #unction for both
governmental and business-type activities.
In the fund financial statements, expenditures are classified as follows:
Governmental Funds - By Character: Current {further classified by function}
Debt Service
Capital Outlay
Proprietary Fund - By Operating and Nonoperating
In the fund financial statements, governmental funds report expenditures of financial resources.
Proprietary funds report expenses relating to the use of economic resources.
Intertund Transfers
Permanent reallocation of resources between funds of the reporting entity are classified as inter#und
transfers. For the purposes of the Statement of Activities, all interfund transfers between individual
governmental funds have been efrminated.
NOTE Z -STEWARDSHIP, COMPLIANCE, AND ACCOUNTABILITY
By its nature as a IocaE government unit, the County and its component unit are subject to various federal,
state, and local laws and contractual regulations. An analysis of the County's compliance with significant
laws and regulations and demonstration of its stewardship over County resources follows.
2.A. BUDGETARY INFORMATION
The County Judge and staff prepare the proposed budget, using revenue estimates famished by the
County Auditor and submit the data to Commissioners CourE. A public hearing is held on the budget
by Commissioners Court. Before determining the final budget, Commissioners Court may increase
34


~,..
KERR COUNTY, TEXAS
NOTES TO FINANCWL STATEMENTS
SEPTEMBER 30, 2003
NOTE 2 -STEWARDSHIP, COMPLIANCE, AND ACCOUNTABILITY {Continued)
2.A. BUDGETARY INFORMATION (Continued)
or decrease the amounts requested by the various departments. In the final budget, which is
usually adopted in September, expenditures for current operating funds cannot exceed the
estimated available cash balances in such funds on October 1, plus the estimate of revenues for the
ensuing year. A# any time during the year, Commissioners Court may increase the budget for
unexpected revenues. Commissioners Court may transfer amounts among individual budget line
items within major expenditure categories during the year, but no such transfer may increase the
ovecait total of the budget. Formal budgetary integration is employed for the General, Special
Revenue, Debt Service, Capital Projects Funds and Proprietary Fund operations. Budgets for these
funds are prepared on a cash basis. Unused appropriations lapse at the end of each year.
2.6 DEPOSITS AND INVESTMENTS LAWS AND REGULATIONS
The Public Funds Investment Ad (Government Code Chapter 2256) contains specific provisions in
.the areas of investment practices, management reports and establishment of appropriate policies.
Among other things, it requires the County to adopt, implement, and publicize an investment policy.
That policy must address the following areas: (1) safety of principal and liquidity,, {2) portfolio
diversification, (3) allowable investments, (4) acceptable risk levels, (5) expected rates of return, (6)
maximum allowable stated maturity of portfolio investments, ('~ maximum average dollar-weighted
maturity allowed based on the stated maturity date for the portfolio, {8} investment staff quality and
capabilities, (9} and bid solicitation preferences for certificates of deposit. Statutes authorize the
County to invest in (1) obligations of the U.S. Treasury, certain U.S. agencies, and the State of
Texas; (2) certificates of deposit, (3) certain municipal securities, (4) money market savings
accounts, {5) repurchase agreements, {6) bankers acceptances, (T) Mutual funds, (8) Investment
pools, (9} guaranteed investment contracts, (10) and common trust funds. The Act also requires the
County to have independent auditors perform test procedures related to investment practices as
provided by the Act.
The funds of the County must be deposited and invested under the terms of a contrail, contents of
which are set out in the Depository Contract Law. The depository bank places approved pledged
securities for safekeeping and trus# with the County's agent bank in an amount sufficient to protect
County funds on a day-to-day basis during the period of the contract. The pledge of approved
securities is waived only to the extent of the depository bank's dollar amount of Federal Deposit
~. Insurance Corporation ("FDIC's insurance.
For the year ended September 30 2003, the County complied, in ail material respects, with the
requirements of the Public Funds Investment Ad and with local policies.
35


KERR COUNTY, TEXAS		
NOTI=S TO FINANCIAL STATEMENTS		
SEATEMBER 30, 2003		
NOTE 3 -DETAIL NOTES ON TRANSACTION CLASSES/ACCOUNTS		
3.A. CASH AND CASH INVESTMENTS		
The County's policies and applicable laws regarding deposits of cash	and investments are
discussed in Note 1.D. and 2. B. The County's cash and cash investments at September	30, 2003,
are detailed by ffdudary account holder and type of account as fellows;		
Carrying	Market	Category
FiduciaryfType of Deposit Value	Value	Risk
Governmental Activities:		
Depository Bank		
Demand Deposit Accounts $ 679,225	N/A	1
Banc of America LLC		
Money Market Obligations 3,056	3,057	2
LOGIC		
Liquid Asset Portfolio 1,320,748	1,321,912	"
Morgan Stanley		
Money Market 998,785	999,295	2
Corporate Fixed income 441,631	444,435	2
Certificates of Deposit		
Maturities less than 3 months 572,971	572,780	2
Maturities greater than 3 months 2.426,645	2,421,848	2
Total Govemmental Activities $ 6.443.061		
Business-type Activities:		
Depository Bank		
Demand Deposit Accounts $ 503,135	NIA	1
Bank of New York Trust Company of Florida, N.A.		
Mutual funds:		
Nations Treasury Reserves-Payment and		
Project Accounts 1,615,837	1,615,837	2
Nations Treasury Reserves-Reserve Account 419.542	411,542	2
To#al Business-type Activities x..530.575		
The investment in LOGIC is considered a government pool investment. Government pool
investments are not categorized in accoMance with GASS Statement N	o. 3, because they are
not evidenced by securities that exist in physical or book entry form.		
36


KERB COUNTY, TEXAS
NOTES TO F{NANClAL STATEMENTS
SEPTEMBER 30, 2003
NOTE 3 -DETAIL NOTES ON TRANSACTION CLASSES/ACCOUNTS (Continued)
3.A. CASH AND CASH INVESTMENTS (Continued)
The cash and cash investments held can be categorized into three categories of credit risk:
Category 1 -- Deposits which are FDIC insured or collateralized with secur~ies held
by the County or by its agent in the County's name.
Investments that are insured, registered or held by the County or by
its agent in the County's name.
Category 2 - Deposits which are collateralized with securities held by the pledging
financial institution's trust department or agent in the County's name.
Investments that are uninsured and unregistered held by the
counterparty's trust department ar agent in the County's name.
Category 3 - Deposits which are not collateralized.
Uninsured and unregistered investments held by the counterparty, its
trust department, or its agent, but not in the County's name.
In addition, the following is disclosed regarding coverage of combined deposit account balances on
the date of highest deposit at the Depositary Bank, Security State Bank and Trust, Kerrville, Texas.
a. The highest combined balances of cash, savings, and time deposit accounts amounted to
$8,860,462 and occurred during on February 6, 2003.
b.- The market value of securities pledged as of the date of the highest combined balance on
deposit was $10,289,310.
c. Total amount of FDIC coverage at the time of the highest combined balance was $200,000.
3.6. RESTRICTED ASSETS
The amount reporked as noncun'ent cash and cash equivalents in the proprietary fund is restricted
for debt service. This reserve was established by the trust agreement on the issuance of the Mill
~,. Country Juvenile Facility Corporation Lease Revenue Bonds and must remain in this reserve
account at the Bank of New York Trust Company of Florida, N.A. unt11 the final year of payments on
this bond issue,
37
~.

r
KERR COUNTY, TEXAS
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 34, 2403
NOTE 3 -DETAIL NOTES ON TRANSACTION CLASSES/ACCOUNTS (Continued)
3.C AD VALOREM TAXES RECEIVABLE
Ad Valorem taxes have been reported in the financial statements net of the allowance #or
uncolledible taxes. Ad Valorem taxes are prorated between maintenance, debt service, and special
revenues based on rates adopted for the year of the levy. Allowances for uncolledible wikhln the
General, Debt Service and Special Revenue Funds are based upon historical experience in
collecting property taxes. The County is prohibited from writing off real property taxes without
specific authority from the Texas Legislature.
Ad Valorem tax payments, received throughout the year, are recognized as revenue in the year
received, except forthose received within 60 days after year-end, which are recognized as revenue
as of September 30, 2003.
The following is a summary, by major and nonmajor funds, of the gross taxes, the allowance for
uncolledible taxes, and net faxes receivable.
Allowance For
General Fund
Road and Bridge
Nonmajor Funds
Special Revenue Funds
Public Library
Fire Pro#edion
Indigent Health Care
Debt Service Funds
1998 Tax Anticipation No#e
1994 Limited Tax General Obligation
Bonds
2001 Genera! Contractual Obligation
Bonds
Total Nonmajor Funds
Taxes	Uncalledible	Net Taxes
Receivable	Taxes	Receivable
339.481	~ 90.563	$ 248.918
		
46.360	13000	33.360
		
23,485	6,265	17,220
13,181	3,516	9,665
27,191	7,254	19,937
25,406	6,777	18.629
30,214	8,060	22,154
9,695	2.565	7.050
		
129.092	34.437	94.655
~__`,1~~-	138-000	6 3
38

~:>

KERB COUNTY, TEXAS
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 3b, 2003
NOTE 3 -DETAIL NOTES ON TRANSACTION CLASSES/ACCOUNTS (Continued)
3.D. COURT 1=1NES AND FEES RECEIVABLE
With the implementation of GASB Statement Number 34, the County has determined the amount of
cour# fines and fees receivable to be $4,270,744 which represents amounts owed and outstanding
_~, for the last 10 years. Based on historical collection rates for the various courts, the County has
booked an allowance for uncollectible court fines and fees of $3,616,090, resulting in a net
receivable of $654,654.
3.E. CAPITAL ASSETS
The following is a summary of capital asset activi#y for the year ended September 30, 2003:
Governmental Activities:
Land
Buildings
Equipment
Construction in Progress
Totals at Historical Cast
Less Accumulated Depreciation
Buildings
Equipment
Total Accumulated Depreciation
Capital Assets, net
Business-type Actnrsties:
~"` Land
Building
Furniture & 1=fixtures
~ Construction in Progress
Totals at Historical Cost
Less Accumulated Depreciation
Building
~. Furniture & F'~xtures
Total Accumulated Depreciation
Capital Assets, net
Balances Balances
October 1, September 30,
2002 Additions .. Deletions 2003
$ 390,457	$ $		$ 390,457
13,227,992			13,227,992
5,406,557	1,305,318	226,746	6,485,129
310,169	616,532	926.701	-
19.335L175	1,,921,850	1,153.447	20.103,578
3,688,589	340,090		4,028,679
4.353.891	577,181	171.129	4.759.943
8.042.480	.917, 271_	171,129	8,788,622
~ _004 5]~ ~9~~18 ~ 11,314.95
$ 107,000 $ $ $ 107,000
2,213,671 2,213,671
190,965 13,353 204,318
125,063 989,799 1.114,862
2.636,699 1, 003,152 3,639, 851
385,524 73,789 459,313
143,637 15,215 158,$52
529,161 89.004 - 618.165
$ 2.107.538 4$ $ - $ 3.,02' 686
39


KERR COUNTY, TEXAS
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2003
NOTE 3 -DETAIL NOTES ON TRANSACTION CLASSES/ACCOUNTS (Continued)
3.F. LONG TERM DEBT
The reporting of long-term debt is segregated between the amounts to be repaid from governmental
activities and amounts to be repaid from business-type activities.
Governmental Activities
As of September 30, 2003, the governmental Fong-term debt consisted of the following:
Notes and Bonds Payable:
Limited Tax General Obligation Bonds, Series 1994
Original issue amount $ 5,900,000, interest cafes of
4.25% to 6.25°I°, with final maturity February 15, 2012 $ 3,930,000
Tax Anticipation Notes, Series 1998
Original issue amount $ 2,650,000, interest rates of
3.20% to 4.00%, with final maturity date August 15, 2005 840,000
Public Property Finance Contractual Obligations, Series 2001
Original issue amount $ 990,000, interest rates of
2.80% to 4.10%, with final maturity date February 15, 2008 730.000
Total Notes and Bonds Payable 5.$00.000
Current Portion $ 895,000
Noncurrent Portion 4.605.000
Total Notes and Bonds Payable $ 5.500.QOQ
Capital Lease Obligations:
Associates Commercial Corporation
Capital lease obligation for Bobcat Skid Steer Loader dated
April 16, 2001, principal and interest of $3,922.47 payable
annually, effective annual interest rate of 6.569%, final
payment due April 1, 2005.
Caferpillar Finanaal Services:
Capi#al lease obligation for Motor Grader dated December 18, 2001,
principal and interest of $1,295.00 paid monthly, interest
rate of 4.82%, final payment December 14, 2006.
Capital lease obligator for Motor Grader dated January 24, 2002,
principal and interest of $1,295.00 paid monthly, interest
rate of 4.82%, final payment February 21, 2007.
Capital lease obligation for Wheel Loader dated April 29, 2002,
principal and interest of $ 1,126.50 paid monthly, interest
rate of 4.40%, final payment February 25, 2007,
4a
$ 7,935
138,791
140,654
76,054


~.
KERR COUNTY, TEXAS
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2003
NOTE 3 -DETAIL NOTES ON TRANSACTION CLASSES/ACCOUNTS (Continued)	
3.F. LONG TERM DEBT {Continued)	
Ford Motor Credit Corporation:	
Capital lease obligation far 6 -2001 Crown Victoria Police Sedans,	-_
annual principal and interest payments of $ 45,036.20, interest	
rate of 4.25%, final maturity October 23, 2003.	43,200
Capital lease obligation for 6 2003 Crown Victoria Police Sedans,	
annual principal and interest payments of $53,526.46, interest	
rate of 4.65%, final maturity November 4, 2004.	100,024
Capital lease obligation for.2003 Expedition,	
annual principal and interest payments of $10,722.46, interest	
rate of 4.65%, final maturity January 15, 2005.	20.037
Total Cap'stal Lease Obligations	$ 52Sr895
Current Portion	$ 133,713
Noncurrent Portion	392.182
Total Capital Lease Obligation	$. 525.895
Accrued Compensated Absences:
Current Portion $ 131,364
Noncurren# Portion 49,942
Total Compensated Absences ~ _ 181 305
Business type Activities
~..
Hill Country Juvenile Facility Corporation tease Revenue Bonds,
Series 2002, original issue amount $ 5,140,000, interest rate
of 3.00 to 5.5 %, with final maturity dated February 15, 2023. $ 5,140,000
Current Portion $ 165,000
Noncurrent Portion 4,975,000
Total Bonds Payable $ 5.140.000
Accrued Compensated Absences:
Current Portion $ 12,802
Noncurrent Portion 6,893
Total Compensated Absences $ , ].9 695
41



KERR COUNTY, TEXAS
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2003
NOTE 3 -DETAIL NOTES ON TRANSACTION CLASSES/ACCOUNTS (Continued)
3.F'. LONG-TERM DEBT (Continued)
Changes in Long-Term Debt
The change in long-term debt outstanding for the year ended September 30, 2003, is summarized
below:
Type of Debt
Governmental Adivities:
Notes and Bonds Payable
Capital Lease Obligations
Accrued Compensated
Absences
Total Long-Term Debt
Business-Type Adivities:
Mortgage Note Payable
Lease Revenue Bond
Accrued Compensated
Absences
Total Long-Term Debt
Balance
October 1,
2002 Additions
$ 6,360,000 $ -
632,578 184,310
49,941
$ 6 992..5.7_$ $-2.~4~25-1
$ 1,946,519 $ -
- 5,140,000
6.893
~ 1.94.6 519 ~5~1.4__~
Balance
September 30,
Deductions 2003
$ 860,000 $ 5,500,000
290,993 525,895
- 49,941
1 1 0.9A~ $ &_075.836
$ 1,946,519 $ -
- 5,140,000
6,1893
1.946.519 5.1 6.893
Annual Debt Service Requirements
The annual debt service requirements to maturity, inGuding principal and interest, for long-term debt
as of September 30, 2003, are as follows.
	Governmental Activities	Business-Tv	ae Activities
Year Ending				
September 30,	Principal	Interest	Prinaaai	Interes#
2004	$ 1,028,713	$ 257,943	$ 165,000	$ 247,960
2005	1,034,818	208,359	170,000	242,722
2006	566,161	160,780	175,000	236,679
2007	831,203	126,942	180,000	229,798
2008	595,000	96,521	190,000	222,279
Thereafter	1,970.000	172.763	4.260,000	2,097,640
Total	~~~5~$95	~p	$~~4a.ooo	" 0 8
42



KERR GOUNTY, TEXAS
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2003
NOTE 4 -OTHER NOTES
4.A. RETIREMENT PLAN
Plan Description. Kerr County, Texas provides retirement, disability, and death benefits for all of
ifs full-time employees through a nontraditional defined benefit pension plan in the statewide Texas
County and District Retirement System (TCDRS}. The Board of Trustees of TCDRS is responsible
for the administration of the statewide agent multiple-employer public employee retirement system
consisting of 509 nontraditionai defined benefit pension plans. TCDRS, in the aggregate, issues a
comprehensive annual financial report (CAFR} on a calendar basis. The CAFR is available upon
written request from,the TCDRS Board of Trustees at P. O. Box 2034, Austin, TX 78768-2034.
The County has adopted plan provisions within the options available in the Texas State sta#utes
governing TCDRS {TCDRS Act). Members can retire at ages 60 and above with 8 or more years of
service, with 30 years of service regardless of age, or when the sum of their age and years of
service equal 75 or more. Members are vested after 8 years of service but must leave their
accumulated contributions in the plan to receive any employer-financed benefit. Members who
withdraw their personal deposits in a lump sum are not entitled to any amounts contributed by the
County.
Benefit amounts are determined by the sum of the employee's deposits to the plan, with interest,
and employer-financed monetary credits. The level of these monetary credits is adopted by the
County within the actuarial constraints imposed by the TCDRS Act so that the resulting benefits can
be expected to be adequately financed by the employer's commitment to contribute. At retirement,
death, or disability, the benefit is calculated by converting the sum of the employee's accumulated
deposits and the empioyer-financed monetary credits to a monthly annuity using annuity purchase
"' rates prescribed by the TCDRS Act.
Funding Policy. The County has elected the annually determined contribution rate {variable rate)
~„ plan provisions of the TCDRS Act. The plan is funded by monthly contributions from both employee
members and the employer based on the covered payroll of employee members. Under the
TCDRS Act, the contribution rate of the empioyer is actuarially determined annually. The Ceunty
contributed using the actuarially de#ermined rate of 7.52% for the mon#hs of the accounting year in
~. 2002, and 7.92° for the months of the accounting year in 2003.
The deposit rate payable by the employee members for calendar year 2002 is the rate of 7%, as
adopted by the County. For calendar year 2003, the employee contribution rate was 7%. The
"' employee deposit rate and the employer contribution rate may be changed by the governing body of
the County within the options available in the TCDRS Ad.
Annual Pension Cost. For the County's accounting year ending September 30, 2003, the annual
pension cost forthe TCDRS plan for its employees was $612,565, and the actual contributions were
$612,565.
The annual required contributions were actuarially determined as a percent of the covered payroll of
the participating employees, and were in compliance with the GASB Statemen# No. 27 parameters
based on the actuarial valuations as of December 31, 2000 and December 31, 2001, the basis for
determining the contribution rates for calendar years 2001 and 2002. The December 31, 2002
'"" actuarial valuation is the most recent valuation.
43
:~+.

KfRR COUNTY, TEXAS
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 3O, 2003
NOTE 4 -OTHER NOTES {Continued}		
4.A. RETIREMENT PLAN (Continued}		
Actuarial Valuation Information	
Actuarial Valuation Date 12/31/00	12/31/01 -~	12/31/02
Actuarial Cost Method Entry Age	Entry Age	Entry Age
Amortization Method Level Percentage	Level Percentage Level Percentage
of Payroll, Open	of Payroll, Open	of Payroll, Open
Amortization Period 20	20	20
Asset Valuation Method Long-Term	Long-Term	Long-Term
Appreciation	Appreciation	Appreciation
With Adjustment	With Adjustment	With Adjustment
Actuarial Assumptions:		
Investment Return 8%	8%	g%
Projected Salary		
Increases 5.9%	5.5%	5,5%
Inflation 4.0%	3.5%	3.5%
Cost-of-Living		
Adjustments 0.0%	0.0%	0.0%
Trend Information		
For the Retirement Pfan for the Employees of Kerr County,	Texas
Annual Percentage		Net
Accounting Pension Cost of APC		Pension
Year Endin4 {APC) Contributed	Obligation
9/30/03 $ 612,565 7.92%	-$	0
9!30/02 554,728 7.62%		0
9/30!01 520,321 7.71 %		0
Schedule of Funding Progress for the Retirement Plan
For the Employees of Kerr County, Texas	

Actuarial Actuarial Actuarial Unfunded		UAAL as a
Annual Percentage
Valuation Value of Accrued AAL	Funded	Covered of Covered
Date Assets Liability (AAL) {UAAL)	Ratio	Payroll Payroll
		
12/31/00 $ 9,244,354 $10,825,578 $1,581,224	85.39%	$ 6,242,5$9 25.33%
12/31/01 10,419,991 12,274,777 1,854,7$6	84.88%	6,950,910 26.68%
12!31102 11,344,919 13,455,125 2,110,206	84.32%	7,493,226 28.16%
44


KERB COUNTY, TEXAS
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2003
NOTE 4 -OTHER NOTES (Continued)
4.B. RISK MANAGMENT
Workers CompensationlEmployers Liability and Unemployment Compensation Fund
The County contracts in the form of interiocal agreements with the Texas Association of Counties
(TAC) to provide the aforementioned types of insurance coverage through an intergovernmental ristc
~, pool. These multi-employer accounts provide for a combination of modified self-insurance and stop
loss coverage. Con#ributions are set annually by Texas Association of Counties. Liability by the
County is generally limited to the amounts calculated by the County in#erlocal agreements.
~' Self Insured Group Medical Insurance
The County has elected #e provide group medical benefits to their employees on a partially self-
funded basis. They have contracted with an outside plan supervisor to administer all claims
payments. The County sets a specific amaun# of money aside each month and as claims are
submitted to the plan supervisor the County reimburses #hem when notified. Under this plan the
County is limited to $40,000 per employee per calendar year with an aggregate amount of
„~, $1,402,246 per year. After the deductible and aggregate amount, the balance is paid by a third
party carrier.
4.C. COMMITMENTS AND CONTINGENCIES
Operating Leases
'""' The reporting entity has entered into a number of operating leases, which contain cancellation
provisions and are subject to annual appropria#ions. For the year ended September 30, 2003, ren#
expenditures approximated $132,979 for all types of operating leases. These expenditures were
,,, made primarily from the General Fund.
Grant Program Involvement
.~+ In the normal course of operations, the County participates in various federal or state grant
programs. The grant programs are often subject to additional audits by agents of the granting or
funding agency, the purpose of that is to ensure compliance wi#h the specifc conditions of the grant.
Any liability for reimbursement that may arise as a result of these audits cannot be reasonably
~"~" determined at this time, although it is believed the amount, if any, would not be ma#eriaL
Insurance Receivable
This receivable represents the unreimbursed amount from a health insurance claim paid by the
County on behalf of a County employee.
45


This page intentionally left blank
r

APPENDIX D
FORM OF BOND COUNSEL'S LEGAL OPINION



This page intentionally left blank
tr,
Draft Date: January 27, 2005
"~ LAW OFFICES
M-CALL, PARKHURST & NORTON L.L.P.
717 NORTH HARW00~ 700 N. ST. MARY'S STREET 600 CONGRESS AVENUE
NINTH FLOOR 1525 ONE RIVERWALK PLACE 1250 ONE AMERICAN CENTER
~~"~ DALLAS. TEXAS 75201-6587 SAN ANTONIO, TEXAS 78205-3503 AUSTIN, TEXAS 78701-3248
TELEPHONE 214754-92UU TELEPHONE. 21U 225~280o TELEPHONE 512478-J805
FACSIMILE 214 754 9250 FACSIMILE 21(12252984 FACSIMILE 512472-0871
February _, 2005
KERB COUNTY, TEXAS
~~+ CERTIFICATES OF OBLIGATION, SERIES 2005
DATED AS OF JANUARY 15, 2005
IN THE AGGREGATE PRINCIPAL AMOUNT OF $2,000,000
AS BOND COUNSEL FOR KERR COUNTY, TEXAS (the "County") in connection with
the issuance of the Certificates of Obligation described above (the "Certificates"j, we have examined
into the legality and validity of the Certificates, which bear interest from January 15, 2005, until
~~"" maturity at the rates stated in the text of the Certificates, payable on February 15, 2006, and
semiannually on each August 15 and February 15 thereafter, and maturing in serial installments on
February 15 in each of the years 2006 through 2010, inclusive, all in accordance with the terms and
~ conditions stated in the text of the Certificates. The Certificates are not subject to optional
redemption prior to maturity.
,~ WE HAVE EXAMINED the applicable and pertinent provisions of the Constitution and
laws of the State of Texas, and a transcript of certified proceedings of the County, and other
pertinent instruments authorizing and relating to the issuance of the Certificates including (i) the
order authorizing the issuance of the Certificates and the subsequent order authorizing and levying
=~"" an annual ad valorem tax to secure payment of principal of and interest on the Certificates
(col lectively, the "Order" ), (ii) one of the executed Certificates (Certificate No. T-1), and (iii j the
County's Federal Tax Certificate of even date herewith.
~..
IT IS OUR OPINION that the Certificates have been authorized, issued and delivered in
accordance with law; that the Certificates constitute valid and legally binding general obligations
of the County in accordance with their terms except as the enforceability thereof maybe limited by
'~ bankruptcy, insolvency, reorganization, moratorium, liquidation and other similar laws now or
hereafter enacted relating to creditors' rights generally; that the County has the legal authority to
issue the Certificates andto repay the Certificates; and that ad valorem taxes sufficient to provide
~~ for the payment of the interest on and principal of the Certificates, as such interest comes due, and
as such principal matures, have been levied and ordered to be levied against all taxable property in
the County, and have been pledged for such payment, within the limits prescribed by law, all as
~.,, provided in the Order.
IT IS FURTHER OUR OPINION, except as discussed below, that the interest on the
Certificates is excludable from the gross income of the owners thereof for federal income tax
purposes under the statutes, regulations, published rulings and court decisions existing on the date
of this opinion. We are further of the opinion that the Certificates are not "specified private activity
bonds" and that, accordingly, interest on the Certificates will not be included as an individual or
corporate alternative minimum tax preference item under section 57(a)(5) of the Internal Revenue
Code of 1986 (the "Code"}. In expressing the aforementioned opinions, we have relied on certain
representations, the accuracy of which we have not independently verified, and assume compliance
~, with certain covenants, regarding the use and investment of the proceeds of the Certificates and the
use of the property financed therewith. We call your attention to the fact that if suchrepresentations
are determined to be inaccurate or upon a failure by the County to comply with such covenants,
interest on the Certificates may become includable in gross income retroactively to the date of
~"' issuance of the Certificates.
Kerr• Coirntti~, Texus Cer•tificcrtes of Obligation, Series 2005
Febr~urrv _, 2005
Puge 2
L

WE CALL YOUR ATTENTION TO THE FACT that the interest ontax-exempt obligations,
such as the Certificates, is (a) included in a corporation's alternative minimum taxable income for
purposes of determining the alternative minimum tax imposed on corporations by section 55 of the
Code, (b) subject to the branch profits tax imposed on foreign corporations by section 884 of the
Code, and (c) included in the passive investment income of an S corporation and subject to the tax
imposed by section 1375 of the Code.
EXCEPTAS STATED ABO i~E, we express no opinion as to any other federal, state or local
tax consequences of acquiring, carrying, owning or disposing of the Certificates.
OUR SOLE ENGAGEMENT in connection with the issuance of the Certificates is as Bond
Counsel for the County, and, in that capacity, we have been engaged by the County for the sole
purpose of rendering an opinion with respect to the legality and validity of the Certificates under the
Constitution and laws of the State of Texas, and with respect to the exclusion from gross income of
the interest on the Certificates for federal income tax purposes, and for no other reason or purpose.
The foregoing opinions represent our legal judgment based upon a review of existing legal
authorities that we deem relevant to render such opinions and are not a guarantee of a result. We
have not been requested to investigate or verify, and have not independently investigated or verified,
any records, data, or other material relating to the financial condition or capabilities of the County,
or the disclosure thereof in connection with the sale of the Certificates, and have not assumed any
responsibility with respect thereto. We express no opinion and make no comment with respect to
the marketability of the Certificates, and we have relied solely on certificates executed by officials
of the County as to the current outstanding indebtedness of, and assessed valuation of taxable
property within, the County. Our role in connection with the County's Official Statement prepared
for use in connection with the sale of the Certificates has been limited as described therein.
OUR OPINIONS ARE BASED ON EXISTING LAW, which is subject to change. Such
opinions are further based on our knowledge of facts as of the date hereof. We assume no duty to
update or supplement our opinions to reflect any facts or circumstances that may hereafter come to
our attention or to reflect any changes in any law that may hereafter occur or become effective.
Moreover, our opinions are not a guarantee of a result and are not binding on the Internal Revenue
Service (the "Service" ); rather, such opinions represent our legal judgment based upon our review
of existing law and in reliance upon the representations and covenants referenced above that we
deem relevant to such opinions. The Service has an ongoing auditprogram to determine compliance
with rules that relate to whether interest on state or local obligations is includable in gross income
for federal income tax purposes. No assurance can be given whether or not the Service will
commence an audit of the Certificates. If an audit is commenced, in accordance with its current
published procedures the Service is likely to treat the County as the taxpayer. We observe that the
County has covenanted not to take any action, or omit to take any action within its control, that if
taken or omitted, respectively, may result in the treatment of interest on the Certificates as
includable in ~~ross income for federal income tax purposes.
Respectfully,


Kerr County, Texas
$2,000,000 Certificates of Obligation, Series 2005
Certificate Purchase Agreement
February 4, 2005
THE HONORABLE COUNTY JUDGE AND COMMISSIONERS COURT
Ken County
700 Main Street
Kerrville, Texas 78028
Ladies and Gentlemen:
The undersigned, Southwest Securities, Inc. (the "Underwriter "), acting on its own behalf and
not acting as fiduciary or agent for you, offers to enter into the following agreement (this
~ "Agreement") with Ken County, Texas (the "Issuer ") which, upon the Issuer's written
acceptance of this offer, will be binding upon the Issuer and upon the Underwriter. This offer is
made subject to the Issuer's written acceptance hereof on or before 11:00 p.m., Kerrville, Texas
~"" time, on February 4, 2005, and, if not so accepted, will be subject to withdrawal by the
Underwriter upon notice delivered to the Issuer at any time prior to the acceptance hereof by the
Issuer. Terms not otherwise defined in this Agreement shall have the same meanings set forth in
"" the Order (as defined herein) or in the Official Statement (as defined herein).
1. Purchase and Sale of the Certificates. Subject to the terms and conditions and in
~' reliance upon the representations, warranties and agreements set forth herein, the Underwriter
hereby agrees to purchase from the Issuer, and the Issuer hereby agrees to sell and deliver to the
Underwriter, all, but not less than all, of the Issuer's $2,000,000 Certificates of Obligation, Series
~" 2005 (the "Certificates"). Inasmuch as this purchase and sale represents a negotiated transaction,
the Issuer understands, and hereby confirms, that the Underwriter is not acting as a fiduciary of
the Issuer, but rather is acting solely in its capacity as Underwriter for its own account.
The principal amount of the Certificates to be issued, the dated date therefor, the
maturities, redemption provisions (if any) and interest rates per annum are set forth in Schedule I
hereto. The Certificates shall be as described in, and shall be issued and secured under and
pursuant to the provisions of the Order adopted by the Commissioners Court of the Issuer on
February 4, 2005, and a subsequent order to be adopted on February 14, 2005, formally levying
an ad valorem tax to secure the Certificates (collectively, the "Order ").
The purchase price for the Certificates shall be $1, 997,154.70 plus interest accrued on the
~""' Certificates from the dated date of the Certificates to the Closing Date (as hereinafter defined).
The discount of $2,845.30 represents an underwriting discount of $26,000.00 and a net
reoffering premium of $23,154.70.


~r
,,~ Delivered to the Issuer herewith as a good faith deposit is a check payable to the order of
the Issuer in clearing house funds in the amount of $20,000. In the event you accept this offer,
such check shall be held uncashed by you until the time of Closing, at which time such check
~„ shall be returned uncashed to the Underwriter. In the event that the Issuer does not accept this
Agreement, such check will be immediately returned to the Underwriter. Should the Issuer fail
to deliver the Certificates at the Closing, or should the Issuer be unable to satisfy the conditions
of the obligations of the Underwriter to purchase, accept delivery of and pay for the Certificates,
as set forth in this Agreement (unless waived by the Underwriter), or should such obligations of
the Underwriter be terminated for any reason permitted by this Agreement, such check shall
immediately be returned to the Underwriter. In the event that the Underwriter fails (other than
for a reason permitted hereunder) to purchase, accept delivery of and pay for the Certificates at
the Closing as herein provided, such check shall be cashed and the amount thereof retained by
the Issuer as and for fully liquidated damages for such failure of the Underwriter, and, except as
set forth in Sections 8 and 10 hereof, no party shall have any further rights against the other
hereunder. The Underwriter and the Issuer understand that in such event the Issuer's actual
damages may be greater or may be less than such amount. Accordingly, the Underwriter hereby
waives any right to claim that the Issuer's actual damages are less than such amount, and the
Issuer's acceptance of this offer shall constitute a waiver of any right the Issuer may have to
additional damages from the Underwriter.
2. Public Offering. The Underwriter agrees to make a bona fide public offering of
all of the Certificates at a price not to exceed the public offering price set forth on page ii of the
Official Statement and may subsequently change such offering price without any requirement of
prior notice. The Underwriter may offer and sell Certificates to certain dealers (including dealers
+^- depositing Certificates into investment trusts) and others at prices lower than the public offering
price stated on the cover of the Official Statement.
~ 3. The Official Statement.
(a) Attached hereto as Exhibit A is either a draft of the final Official
Statement or a copy of the Preliminary Official Statement (as amended) dated
January 28, 2005 (the "Preliminary Official Statement "), including the cover page and
Appendices thereto, of the Issuer relating to the Certificates. Such draft of the final
Official Statement or copy of the Preliminary Official Statement, as amended to reflect
the changes marked or otherwise indicated on Exhibit A hereto, is hereinafter called the
"O~cial Statement. "
(b) The Preliminary Official Statement has been prepared for use in
connection with the public offering, sale and distribution of the Certificates by the
Underwriter. The Issuer hereby represents and warrants that the Preliminary Official
Statement was deemed final by the Issuer as of its date, except for the omission of such
information which is dependent upon the final pricing of the Certificates for completion,
all as permitted to be excluded by Section (b)(1) of Rule 15c2-12 under the Securities
Exchange Act of 1934 (the "Rule ").
•• (c) The Issuer hereby authorizes the Official Statement and the information
therein contained to be used by the Underwriter in connection with the public offering

-2-

.wr
a and the sale of the Certificates. The Issuer consents to the use by the Underwriter prior to
the date hereof of the Preliminary Official Statement in connection with the public
offering of the Certificates. The Issuer shall provide, or cause to be provided, to the
~„ Underwriter as soon as practicable after the date of the Issuer's acceptance of this
Agreement (but, in any event, not later than within seven business days after the Issuer's
acceptance of this Agreement and in sufficient time to accompany any confirmation that
„~, requests payment from any customer) copies of the Official Statement which is complete
as of the date of its delivery to the Underwriter in such quantity as the Underwriter shall
request in order for the Underwriter to comply with Section (b)(4) of the Rule and the
,,,, rules of the Municipal Securities Rulemaking Board.
	(d) If, after the date of this Agreement to and including the date the
~,,,,	Underwriter is no longer required to provide an Official Statement to potential customers
	who request the same pursuant to the Rule (the earlier of (i) 90 days from the "end of the
	underwriting period" (as defined in the Rule) and (ii) the time when the Official
,~„	Statement is available to any person from a nationally recognized municipal securities
	repository, but in no case less than 25 days after the "end of the underwriting period" for
	the Certificates), the Issuer becomes aware of any fact or event which might or would
	cause the Official Statement, as then supplemented or amended, to contain any untrue
	statement of a material fact or to omit to state a material fact required to be stated therein
	or necessary to make the statements therein, in light of the circumstances under which
+w.	they were made, not misleading, or if it is necessary to amend or supplement the Official
	Statement to comply with law, the Issuer will notify the Underwriter (and for the
	purposes of this clause provide the Underwriter with such information as it may from
~+	time to time request), and if, in the opinion of the Underwriter, such fact or event requires
	preparation and publication of a supplement or amendment to the Official Statement, the
	Issuer will forthwith prepare and furnish, at the Issuer's own expense (in a form and
+r~	manner approved by the Underwriter), a reasonable number of copies of either
	amendments or supplements to the Official Statement so that the statements in the
	Official Statement as so amended and supplemented will not contain any untrue
	statement of a material fact or omit to state a material fact required to be stated therein or
	necessary to make the statements therein, in light of the circumstances under which they
	were made, not misleading or so that the Official Statement will comply with law. If
	such notification shall be subsequent to the Closing, the Issuer shall furnish such legal
	opinions, certificates, instruments and other documents as the Underwriter may deem
	necessary to evidence the truth and accuracy of such supplement or amendment to the
"	Official Statement.
(e) The Underwriter hereby agrees to file the Official Statement with a
nationally recognized municipal securities information repository. Unless otherwise
notified in writing by the Underwriter, the Issuer can assume that the "end of the
underwriting period" for purposes of the Rule is the date of the Closing.
4. Representations, Warranties and Covenants of the Issuer. The Issuer hereby
represents and warrants to and covenants with the Underwriter that:

-3-


~,,, (a) The Issuer is a duly organized county and a political subdivision of the
State of Texas (the "State "), and has full legal right, power and authority under Chapter
271, Subchapter C, Texas Local Government Code (the "Act"), and at the date of the
Closing will have full legal right, power and authority under the Act and the Order (i) to
enter into, execute and deliver this Agreement, the Order and all documents required
hereunder and thereunder to be executed and delivered by the Issuer (this Agreement, the
+~•~ Order and the other documents referred to in this clause (i) are hereinafter referred to as
the "Issuer Documents "), (ii) to sell, issue and deliver the Certificates to the Underwriter
as provided herein, and (iii) to carry out and consummate the transactions contemplated
~ by the Issuer Documents and the Official Statement and (iv) to utilize the proceeds from
the sale of the Certificates for the purposes described in the Official Statement, and the
Issuer has complied, and will at the Closing be in compliance in all respects, with the
terms of the Act and the Issuer Documents as they pertain to such transactions;
(b) By all necessary official action of the Issuer prior to or concurrently with
the acceptance hereof, the Issuer has duly authorized all necessary action to be taken by it
for (i) the adoption of the Order and the issuance and sale of the Certificates, (ii) the
approval, execution and delivery of, and the performance by the Issuer of the obligations
on its part, contained in the Certificates and the Issuer Documents and (iii) the
consummation by it of all other transactions contemplated by the Official Statement, the
Issuer Documents and any and all such other agreements and documents as may be
required to be executed, delivered and/or received by the Issuer in order to carry out, give
effect to, and consummate the transactions contemplated herein and in the Official
Statement;
(c) The Issuer Documents constitute legal, valid and binding Certificates of
the Issuer, enforceable against the Issuer in accordance with their respective terms,
subject to bankruptcy, insolvency, reorganization, moratorium and other similar laws and
principles of equity relating to or affecting the enforcement of creditors' rights; the
Certificates, when issued, delivered and paid for, in accordance with the Order and this
~"~' Agreement, will constitute legal, valid and binding obligations of the Issuer entitled to the
benefits of the Order and enforceable in accordance with their terms, subject to
bankruptcy, insolvency, reorganization, moratorium and other similar laws and principles
of equity relating to or affecting the enforcement of creditors' rights; upon the issuance,
authentication and delivery of the Certificates as aforesaid, the Order will provide, for the
benefit of the holders, from time to time, of the Certificates, the legally valid and binding
~" pledge of and lien it purports to create as set forth in the Order;
(d) The Issuer is not in breach of or default in any material respect under any
""' applicable constitutional provision, law or administrative regulation of the State or the
United States or any applicable judgment or decree or any loan agreement, indenture,
bond, note, resolution, agreement or other instrument to which the Issuer is a party or to
""' which the Issuer is otherwise subject, and no event has occurred and is continuing which
constitutes or with the passage of time or the giving of notice, or both, would constitute a
default or event of default by the Issuer under any of the foregoing; and the execution and
""~ delivery of the Certificates, the Issuer Documents and the adoption of the Order and

-4-

~r-
~„ compliance with the provisions on the Issuer's part contained therein, will not conflict
with or constitute a breach of or default under any constitutional provision, administrative
regulation, judgment, decree, loan agreement, indenture, bond, note, resolution,
,,~ agreement or other instrument to which the Issuer is a party or to which the Issuer is
otherwise subject or under the terms of any such law, regulation or instrument, except as
provided by the Certificates and the Order;
~ (e) All authorizations, approvals, licenses, permits, consents and orders of any
governmental authority, legislative body, board, agency or commission having
,,,,~ jurisdiction of the matter which are required for the due authorization of, which would
constitute a condition precedent to, or the absence of which would materially adversely
affect the due performance by the Issuer of its obligations under the Issuer Documents
~,. and the Certificates have been duly obtained, except for such approvals, consents and
orders as may be required under the Blue Sky or securities laws of any jurisdiction in
connection with the offering and sale of the Bonds;
(f) The Certificates and the Order conform to the descriptions thereof
contained in the Official Statement under the captions "Selected Data From the Official
~r Statement" and "The Certificates"; and the proceeds of the sale of the Certificates will be
applied generally as described in the Official Statement under the captions "Selected Data
- From the Official Statement-Use of Proceeds" and "The Certificates-Use of
wr Certificate Proceeds."
(g) There is no legislation, action, suit, proceeding, inquiry or investigation, at
,~ law or in equity, before or by any court, government agency, public board or body,
pending or, to the best knowledge of the Issuer after due inquiry, threatened against the
Issuer, affecting the existence of the Issuer or the titles of its officers to their respective
~r offices, or affecting or seeking to prohibit, restrain or enjoin the sale, issuance or delivery
of the Certificates, the collection of ad valorem taxes pursuant to the Order or in any way
contesting or affecting the validity or enforceability of the Certificates, the Issuer
Documents, or contesting the exclusion from gross income of interest on the Certificates
for federal income tax purposes, or contesting in any way the completeness or accuracy
of the Preliminary Official Statement or the Official Statement or any supplement or
amendment thereto, or contesting the powers of the Issuer or any authority for the
issuance of the Certificates, the adoption of the Order or the execution and delivery of the
Issuer Documents, nor, to the best knowledge of the Issuer, is there any basis therefor,
wherein an unfavorable decision, ruling or finding would materially adversely affect the
validity or enforceability of the Certificates or the Issuer Documents;
w- (h) As of the date thereof, the Preliminary Official Statement did not contain
any untrue statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in the light of the
~. circumstances under which they were made, not misleading;
(i) At the time of the Issuer's acceptance hereof and (unless the Official
w Statement is amended or supplemented pursuant to paragraph (d) of Section 3 of this
Agreement) at all times subsequent thereto during the period up to and including the date

-5-


of Closing, the Official Statement does not and will not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were made,
,,, not misleading;
(j) If the Official Statement is supplemented or amended pursuant to
~„ paragraph (d) of Section 3 of this Agreement, at the time of each supplement or
amendment thereto and (unless subsequently again supplemented or amended pursuant to
such paragraph) at all times subsequent thereto during the period up to and including the
date of Closing the Official Statement as so supplemented or amended will not contain
any untrue statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the circumstances
under which made, not misleading;
(k) The Issuer will apply, or cause to be applied, the proceeds from the sale of
rr the Certificates as provided in and subject to all of the terms and provisions of the Order
and not to take or omit to take any action which action or omission will adversely affect
the exclusion from gross income for federal income tax purposes of the interest on the
Certificates;
(1) The Issuer will furnish such information and execute such instruments and
take such action in cooperation with the Underwriter as the Underwriter may reasonably
request (A) to (y) qualify the Certificates for offer and sale under the Blue Sky or other
securities laws and regulations of such states and other jurisdictions in the United States
as the Underwriter may designate and (z) determine the eligibility of the Certificates for
investment under the laws of such states and other jurisdictions and (B) to continue such
qualifications in effect so long as required for the distribution of the Certificates
(provided, however, that the Issuer will not be required to qualify as a foreign corporation
or to file any general or special consents to service of process under the laws of any
jurisdiction) and will advise the Underwriter immediately of receipt by the Issuer of any
notification with respect to the suspension of the qualification of the Certificates for sale
in any jurisdiction or the initiation or threat of any proceeding for that purpose;
~, (m) The financial statements of, and other financial information regarding the
Issuer, in the Official Statement fairly present the financial position and results of the
Issuer as of the dates and for the periods therein set forth. Prior to the Closing, the Issuer
will not take any action within or under its control that will cause any adverse change of a
material nature in such financial position, results of operations or condition, financial or
otherwise, of the Issuer. Except as disclosed in the Official Statement, the Issuer is not a
party to any litigation or other proceeding pending or, to its knowledge, threatened which,
if decided adversely to the Issuer, would have a materially adverse effect on the financial
condition of the Issuer;
(n) Prior to the Closing the Issuer will not offer or issue any bonds, notes or
other obligations for borrowed money or incur any material liabilities, direct or
contingent, payable from or secured by ad valorem taxes, without the prior approval of
the Underwriter; and
~.
-6-
~..
CJ
,~,,, (o) Any certificate, signed by any official of the Issuer authorized to do so in
connection with the transactions contemplated by this Agreement, shall be deemed a
representation and warranty by the Issuer to the Underwriter as to the statements made
~„ therein.
5. Closing.
(a) At 9:00 a. m. Dallas, Texas time, on February 14, 2005, or at such other
time and date as shall have been mutually agreed upon by the Issuer and the Underwriter
M. (the "Closing"), the Issuer will, subject to the terms and conditions hereof, deliver the
Certificates to the Underwriter duly executed and authenticated, together with the other
documents hereinafter mentioned, and the Underwriter will, subject to the terms and
~,,, conditions hereof, accept such delivery and pay the purchase price of the Certificates as
set forth in Section 1 of this Agreement by a certified or bank cashier's check or checks
or wire transfer payable in immediately available funds to the order of the Issuer, as shall
be determined by the Issuer. Payment for the Certificates as aforesaid shall be made at
the offices of Paying Agent/Registrar, or such other place as shall have been mutually
agreed upon by the Issuer and the Underwriter.
(b) Delivery of the Certificates shall be made to The Depository Trust
Company, New York, New York. The Certificates shall be delivered in definitive fully
,~„ registered form, bearing CUSIP numbers without coupons, with one certificate for each
maturity of the Certificates, registered in the name of Cede & Co., all as provided in the
Order.
6. Closing Conditions. The Underwriter has entered into this Agreement in reliance
upon the representations, warranties and agreements of the Issuer contained herein, and in
„~,~; reliance upon the representations, warranties and agreements to be contained in the documents
and instruments to be delivered at the Closing and upon the performance by the Issuer of its
obligations hereunder, both as of the date hereof and as of the date of the Closing. Accordingly,
,,,, the Underwriter's obligations under this Agreement to purchase, to accept delivery of and to pay
for the Certificates shall be conditioned upon the performance by the Issuer of its obligations to
be performed hereunder and under such documents and instruments at or prior to the Closing,
„~, and shall also be subject to the following additional conditions, including the delivery by the
Issuer of such documents as are enumerated herein, in form and substance reasonably
satisfactory to the Underwriter:
(a) The representations and warranties of the Issuer contained herein shall be
true, complete and correct on the date hereof and on and as of the date of the Closing, as
,,~ if made on the date of the Closing;
(b) The Issuer shall have performed and complied with all agreements and
,,, conditions required by this Agreement to be performed or complied with by it prior to or
at the Closing;
(c) At the time of the Closing, (i) the Issuer Documents and the Certificates
shall be in full force and effect in the form heretofore approved by the Underwriter and

-7-

7
., shall not have been amended, modified or supplemented, and the Official Statement shall
not have been supplemented or amended, except in any such case as may have been
agreed to by the Underwriter; and (ii) all actions of the Issuer required to be taken by the
Issuer shall be performed in order for Bond Counsel to deliver its opinions referred to
hereafter;
~,,,, (d) At the time of the Closing, all official action of the Issuer relating to the
Certificates and the Issuer Documents shall be in full force and effect and shall not have
been amended, modified or supplemented;
(e) At or prior to the Closing, the Order shall have been duly executed and
delivered by the Issuer and the Issuer shall have duly executed and delivered and the
,,,, Registrar shall have duly authenticated the Certificates;
(f) At the time of the Closing, there shall not have occurred any change or
any development involving a prospective change in the condition, financial or otherwise,
or in the revenues or operations of the Issuer, from that set forth in the Official Statement
that in the reasonable judgment of the Underwriter, is material and adverse and that
makes it, in the reasonable judgment of the Underwriter, impracticable to market the
Bonds on the terms and in the manner contemplated in the Official Statement;
(g) The Issuer shall not have failed to pay principal or interest when due on
any of its outstanding Certificates for borrowed money;
(h) All steps to be taken and all instruments and other documents to be
executed, and all other legal matters in connection with the transactions contemplated by
this Agreement shall be reasonably satisfactory in legal form and effect to the
Underwriter;
(i) At or prior to the Closing, the Underwriter shall have received copies of
each of the following documents:
(1) the Official Statement, and each supplement or amendment thereto,
if any, executed on behalf of the Issuer by its County Judge and County Clerk;
(2) the Order with such supplements or amendments as may have been
agreed to by the Underwriter;
(3) the approving opinion of Bond Counsel with respect to the
Certificates, in substantially the form attached to the Official Statement ;
(4) a supplemental opinion of Bond Counsel addressed to the
Underwriter, substantially to the effect that:
(i) the Order has been duly adopted and is in full force and
effect;

-8-
0

(ii) the Certificates are exempted securities under the Securities
'~ Act of 1933, as amended (the "1933 Act"), and the Trust Indenture Act of
1939, as amended (the "Trust Indenture Act ") and it is not necessary, in
connection with the offering and sale of the Certificates, to register the
Certificates under the 1933 Act or to qualify the Order under the Trust
Indenture Act; and
(iii) the statements and information contained in the Official
Statement under the captions "THE CERTIFICATES" (other than under
the subcaption "Payment Record" as to which no view need be expressed)
"REGISTRATION, TRANSFER AND EXCHANGE," "TAX
MATTERS," "CONTIIWING DISCLOSURE OF INFORMATICON"
(except for the information under the caption "Compliance with Prior
Agreements" as to which no view need be expressed), REGISTRATIiON
AND QUALIFICATION OF CERTIFICATES FOR SALE," and
"LEGAL INVESTMENTS AND ELIGIBILITY TO SECURE PUBLIC
FUNDS IN TEXAS" fairly and accurately summarized the matters
purported to be summarized therein;
(5) Opinions, dated the date of the Closing and addressed to the
Underwriter, of counsel for the Underwriter, to the effect that:
~ (i) the Certificates are exempt securities under the 1933 Act
and the Trust Indenture Act and it is not necessary, in connection with the
,,,~ offering and sale of the Certificates, to register the Certificates under the
1933 Act and the Order need not be qualified under the Trust Indenture
Act; and
(ii) based upon their participation in the preparation of the
Official Statement as counsel for the Underwriter and their participation at
conferences at which the Official Statement was discussed, but without
having undertaken to determine independently the accuracy, completeness
or fairness of the statements contained in the Official Statement, such
counsel has no reason to believe that the Official Statement contains any
untrue statement of a material fact or omits to state a material fact
necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading (except for any financial,
forecast, technical and statistical statements and data included in the
Official Statement and the information regarding the Depository and its
book-entry system, in each case as to which no view need be expressed);
(6) A certificate, dated the date of Closing, of the County Judge of the
Issuer to the effect that (i) the representations and warranties of the Issuer
contained herein are true and correct in all material respects on and as of the date
of Closing as if made on the date of Closing; (ii) no litigation or proceeding
against it is pending or, to its knowledge, threatened in any court or administrative
body nor is there a basis for litigation which would (a) contest the right of the

-9-
~.

members or officials of the Issuer to hold and exercise their respective positions,
(b) contest the due organization and valid existence of the Issuer, (c) contest the
validity, due authorization and execution of the Certificates or the Issuer
Documents or (d) attempt to limit, enjoin or otherwise restrict or prevent the
Issuer from functioning and collecting revenues, including payments on the
Certificates, pursuant to the Order, and other income or the levy or collection of
the taxes pledged or to be pledged to pay the principal of and interest on the
Certificates, or the pledge thereof; (iii) the Order has been duly adopted by the
Issuer, is in full force and effect and has not been modified, amended or repealed,
and (iv) to the best of his knowledge, no event affecting the Issuer has occurred
since the date of the Official Statement which should be disclosed in the Official
Statement for the purpose for which it is to be used or which it is necessary to
disclose therein in order to make the statements and information therein, in light
of the circumstances under which made, not misleading in any material respect as
of the time of Closing, and the information contained in the Official Statement is
correct in all material respects and, as of the date of the Official Statement did
not, and as of the date of the Closing does not, contain any untrue statement of a
material fact or omit to state a material fact required to be stated thereiry or
necessary to make the statements made therein, in the light of the circumstances
under which they were made, not misleading;
(7) A certificate of the Issuer in form and substance satisfactory to
Bond Counsel and counsel to the Underwriter (a) setting forth the facts, estimates
and circumstances in existence on the date of the Closing, which establish that it
is not expected that the proceeds of the Certificates will be used in a manner that
would cause the Certificates to be "arbitrage bonds" within the meaning of
Section 148 of the Internal Revenue Code of 1986, as amended (the "Code "), and
any applicable regulations (whether final, temporary or proposed), issued
pursuant to the Code, and (b) certifying that to -the best of the knowledge and
belief of the Issuer there are no other facts, estimates or circumstances that would
materially change the conclusions, representations and expectations contained in
such certificate;
(8) Any other certificates and opinions required by the Order fore the
issuance thereunder of the Certificates;
~. (9) Evidence satisfactory to the Underwriter that the Certificates have
been rated "A3" by Moody's Investors Service, Inc. and that such rating is in
effect as of the date of Closing;
(10) The Release (as defined in the Official Statement); and
~•+ (11) Such additional legal opinions, certificates, instruments and other
documents as the Underwriter or counsel to the Underwriter may reasonably
request to evidence the truth and accuracy, as of the date hereof and as of the date
of the Closing, of the Issuer's representations and warranties contained herein and
of the statements and information contained in the Official Statement and the due

-10-

lw
performance or satisfaction by the Issuer on or prior to the date of the Closing of
all the respective agreements then to be performed and conditions then to be
satisfied by the Issuer.
All of the opinions, letters, certificates, instruments and other documents mentioned above or
elsewhere in this Agreement shall be deemed to be in compliance with the provisions hereof if,
but only if, they are in form and substance satisfactory to Bond Counsel and the Underwriter.
If the Issuer shall be unable to satisfy the conditions to the obligations of the Underwriter to
;,,,,,, purchase, to accept delivery of and to pay for the Certificates contained in this Agreement, or if
the obligations of the Underwriter to purchase, to accept delivery of and to pay for 'the
Certificates shall be terminated for any reason permitted by this Agreement, this Agreement shall
,,,,, terminate and neither the Underwriter nor the Issuer shall be under any further obligation
hereunder, except that the respective obligations of the Issuer and the Underwriter set forth in
Sections 4 and 8 hereof shall continue in full force and effect.
7. Termination. The Underwriter shall have the right to cancel its obligation to
purchase the Certificates if, between the date of this Agreement and the Closing, the market price
or marketability of the Certificates shall be materially adversely affected, in the sole judgment of
the Underwriter, reasonably exercised, by the occurrence of any of the following:
(a) legislation shall be enacted by or introduced in the Congress of the United
States or recommended to the Congress for passage by the President of the United States,
or the Treasury Department of the United States or the Internal Revenue Service or any
member of the Congress or the State legislature or favorably reported for passage to
either House of the Congress by any committee of such House to which such legislation
has been referred for consideration, a decision by a court of the United States or of the
State or the United States Tax Court shall be rendered, or an order, ruling, regulation
(final, temporary or proposed), press release, statement or other form of notice by or on
behalf of the Treasury Department of the United States, the Internal Revenue Service or
other governmental agency shall be made or proposed, the effect of any or all of which
would be to impose, directly or indirectly, federal income taxation upon revenues or other
income of the general character to be derived by the Issuer pursuant to the Order, or upon
interest received on obligations of the general character of the Certificates of the interest
on the Certificates as described in the Official Statement, or other action or events shall
have transpired which may have the purpose or effect, directly or indirectly, of changing
the federal income tax consequences of any of the transactions contemplated herein;
(b) legislation introduced in or enacted (or resolution passed) by the Congress
or an order, decree, or injunction issued by any court of competent jurisdiction, or an
order, ruling, regulation (final, temporary, or proposed), press release or other form of
notice issued or made by or on behalf of the Securities and Exchange Commission, or any
other governmental agency having jurisdiction of the subject matter, to the effect that
obligations of the general character of the Certificates, including any or all underlying
arrangements, are not exempt from registration under or other requirements of the 1933
Act, or that the Order is not exempt from qualification under or other requirements of the
Trust Indenture Act, or that the issuance, offering, or sale of obligations of the general

-11-


,w, character of the Certificates, including any or all underlying arrangements, as
contemplated hereby or by the Official Statement or otherwise, is or would be in
violation of the federal securities law as amended and then in effect;
(c) any state blue sky or securities commission or other governmental agency
or body shall have withheld registration, exemption or clearance of the offering of the
,~„ Certificates as described herein, or issued a stop order or similar ruling relating thereto;
(d) a general suspension of trading in securities on the New York Stock
~,,, Exchange or the American Stock Exchange, the establishment of minimum prices on
either such exchange, the establishment of material restrictions (not in force as of the date
hereof) upon trading securities generally by any governmental authority or any national
~„ securities exchange, a general banking moratorium declared by federal, State of New
York, or State officials authorized to do so;
(e) the New York Stock Exchange or other national securities exchange or
any governmental authority, shall impose, as to the Certificates or as to obligations of the
general character of the Certificates, any material restrictions not now in force, or
increase materially those now in force, with respect to the extension of credit by, or the
charge to the net capital requirements of, the Underwriter;
(f) any amendment to the federal or state Constitution or action by any federal
or state court, legislative body, regulatory body, or other authority materially adversely
affecting the tax status of the Issuer, its property, income securities (or interest thereon),
or the validity or enforceability of the assessments or the levy of taxes to pay principal of
and interest on the Certificates;
(g) any event occurring, or information becoming known which, in the
reasonable judgment of the Underwriter, makes untrue in any material respect .any
statement or information contained in the Official Statement, or has the effect that the
„~„ Official Statement contains any untrue statement of material fact or omits to state a
material fact required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading;
(h) there shall have occurred since the date of this Agreement any materially
adverse change in the affairs or financial condition of the Issuer;
(i) the United States shall have become engaged in hostilities which have
resulted in a declaration of war or a national emergency or there shall have occurred any
other outbreak or escalation of hostilities or a national or international calamity or crisis,
financial or otherwise;
t (j) any fact or event shall exist or have existed that, in the Underwriter's
reasonable judgment, requires or has required an amendment of or supplement to the
Official Statement;

-12-


,,,~ (k) there shall have occurred any downgrading, or any notice shall have been
given of (A) any intended or potential downgrading or (B) any review or possible change
a that does not indicate a possible upgrade, in the rating accorded any of the Issuer's
obligations (including the rating to be accorded the Certificates); and
(1) the purchase of and payment for the Certificates by the Underwriter, or the
,, resale of the Certificates by the Underwriter, on the teens and conditions herein provided
shall be prohibited by any applicable law, governmental authority, board, agency or
commission and such prohibition is not the result of the Underwriter's acts or failures to
;;~ act, which acts or failure to act are not in accordance with the terms of this Agreement.
8. Expenses.
(a) The Underwriter shall be under no obligation to pay, and the Issuer shall
pay, any expenses incident to the performance of the Issuer's obligations hereunder,
including, but not limited to (i) the cost of preparation and printing of the Certificates;. (ii)
the fees and disbursements of Bond Counsel; (iii) the fees and disbursements of the
Financial Advisor to the Issuer; (iv) the fees and disbursements of any other engineers,
accountants, and other experts, consultants or advisers retained by the Issuer; and (v) the
fees for bond ratings and bond insurance fees or premiums.
(b) The Underwriter shall pay (i) the cost of preparation and printing of #his
Agreement, the Blue Sky Survey (if any) and Legal Investment Memorandum (if any);
(ii) all advertising expenses in connection with the public offering of the Certificates; and
(iii) all other expenses incurred by them in connection with the public offering of the
Certificates, including the fees and disbursements of counsel retained by the Underwriter.
.~ 9. Notices. Any notice or other communication to be given to the Issuer under this
Agreement may be given by delivering the same in writing at Ken County, Texas, 700 Main
Street, Kerrville, Texas 78028, Attention: County Judge, and any notice or other communication
to be given to the Underwriter under this Agreement may be given by delivering the same in
writing to Southwest Securities, Inc., 1201 Elm Street, Suite 3500, Dallas, Texas 75270
Attention: Leon Johnson.
10. Parties in Interest. This Agreement as heretofore specified shall constitute the
entire agreement between us and is made solely for the benefit of the Issuer and the Underwriter
(including successors or assigns of the Underwriter) and no other person shall acquire or have
any right hereunder or by virtue hereof. This Agreement may not be assigned by the Issuer. All
of the Issuer's representations, warranties and agreements contained in this Agreement shall
remain operative and in full force and effect, regardless of (i) any investigations made by or on
behalf of the Underwriter; (ii) delivery of and payment for the Certificates pursuant to this
Agreement; and (iii) any termination of this Agreement.
11. Effectiveness. This Agreement shall become effective upon the acceptance hereof
by the Issuer and shall be valid and enforceable at the time of such acceptance.

-13-


w.
.p

..
,.•
..
12. Choice of Law. This Agreement shall be governed by and construed in
accordance with the law of the State.
13. Severability. If any provision of this Agreement shall be held or deemed to be or
shall, in fact, be invalid, inoperative or unenforceable as applied in any particular case in any
jurisdiction or jurisdictions, or in all jurisdictions because it conflicts with any provisions of any
Constitution, statute, rule of public policy, or any other reason, such circumstances shall not have
the effect of rendering the provision in question invalid, inoperative or unenforceable in any
other case or circumstance, or of rendering any other provision or provisions of this Agreement
invalid, inoperative or unenforceable to any extent whatever.
14. Business Day. For purposes of this Agreement, "business day" means any day on
which the New York Stock Exchange is open for trading.
15. Section Headings. Section headings have been inserted in this Agreement as a
matter of convenience of reference only, and it is agreed that such section headings are not a part
of this Agreement and will not be used in the interpretation of any provisions of this Agreement.
16. Counterparts. This Agreement may be executed in several counterparts each of
which shall be regarded as an original (with the same effect as if the signatures thereto and
hereto were upon the same document) and all of which shall constitute one and the same
document.
[remainder of page intentionally left blank]
-14-

Schedule I
The Certificates are dated January 15, 2005
MATURITY SCHEDULE FOR
THE CERTIFICATES
Feb. 15 of
The Year	Principal
Amount	
Rate	Price or
Yield
2006	$ 370,000	3.50	2.50
2007	425,000	3.50	2.75
2008	440,000	3.50	2.90
2009	375,000	3.50	3.06
2010	390,000	3.25	3.27
~.

The Certificates are not subject to redemption prior to stated maturity.


EXHIBIT A
THE OFFICIAL STATEMENT IS OMITTED AT THIS POINT AS IT APPEARS
ELSEWHERE IN THIS TRANSCRIPT OF PROCEEDINGS

DALLAS: 87633.00008: 1355873x2
nww

PAYING AGENT/REGISTRAR AGREEMENT
THIS AGREEMENT is entered into as of January 15, 2005 (this "Agreement"), by and
between %rr County, Texas (the "Issuer") and Wachovia Bank, National Association (the
"Bank"), a banking association organized under the laws of the United States of America, with a
corporate trust office located in Houston, Texas.
~,,, WHEREAS, the Issuer has duly authorized and provided for the issuance of its "Kerr
County, Texas Certificates of Obligation, Series 2005" (the "Securities"), such Securities to be
issued in fully registered form only as to the payment of principal and interest thereon; and
WHEREAS, the Securities are scheduled to be delivered to the initial purchasers thereof on
or about February 14, 2005; and
WHEREAS, the Issuer has selected the Bank to serve as Paying Agent/Registrar in
connection with the payment of the principal of, premium, if any, and interest on the Securities and
with respect to the registration, transfer, and exchange thereof by the registered owners thereof; and
WHEREAS, the Bank has agreed to serve in such capacities for and on behalf of the Issuer
and has full power and authority to perform and serve as Paying Agent/Registrar for the Securities;
NOW, THEREFORE, it is mutually agreed as follows:
ARTICLE ONE
APPOINTMENT OF BANK AS PAYING AGENT AND REGISTRAR
SECTION 1.01. APPOINTMENT. The Issuer hereby appoints the Bank to serve as Paying
Agent with respect to the Securities. As Paying Agent for the Securities, the Bank shall be
responsible for paying on behalf of the Issuer the principal, premium (if any), and interest on the
Securities as the same become due and payable to the registered owners thereof, all in accordance
with this Agreement and the "Order" (hereinafter defined).
The Issuer hereby appoints the Bank as Registrar with respect to the Securities. As Registrar
,~„ for the Securities, the Bank shall keep and maintain for and on behalf of the Issuer books and records
as to the ownership of said Securities and with respect to the transfer and exchange thereof as
provided herein and in the Order.
The Bank hereby accepts its appointment, and agrees to serve as the Paying Agent and
Registrar for the Securities.


rr
SECTION 1.02. COMPENSATION. As compensation for the Bank's services as Paying
Agent/Registraz, the Issuer hereby agrees to pay the Bank the fees and amounts set forth in Schedule
A attached hereto for the first year of this Agreement and thereafter the fees and amounts set forth
~, in the Bank's current fee schedule then in effect for services as Paying Agent/Registraz for
municipalities, which shall be supplied to the Issuer on or before 90 days prior to the close of the
Fiscal Year of the Issuer, and shall be effective upon the first day of the following Fiscal Year.
In addition, the Issuer agrees to reimburse the Bank upon its request for all reasonable
expenses, disbursements and advances incurred or made by the Bank in accordance with any of the
.~ provisions hereof (including the reasonable compensation and the expenses and disbursements of
its agents and counsel).
ARTICLE TWO
DEFINITIONS
SECTION 2.01. DEFINITIONS. For all purposes of this Agreement, except as otherwise
expressly provided or unless the context otherwise requires:
`~"" "Acceleration Date" on any Security means, if applicable, the date on and after which the
principal or any or all installments of interest, or both, are due and payable on any Security which
has become accelerated pursuant to the terms of the Security.
"Bank Office" means the corporate trust office of the Bank as indicated on the signature page
hereof. The Bank will notify the Issuer in writing of any change in location of the Bank Office.
"Fiscal Yeaz" means the fiscal yeaz of the Issuer, ending September 30.
"Holder" and "Security Holder" each means the Person in whose name a Security is
registered in the Security Register.
"Issuer Request" and "Issuer Order" means a written request or order delivered to the Bank
that is signed in the name of the Issuer by the County Judge, County Treasurer or County Auditor
of the Issuer.
"Legal Holiday" means a day on which the Bank is required or authorized to be closed.
"Order" means the order, ordinance or resolution of the governing body of the Issuer pursuant
to which the Securities aze issued, certified by the Secretary or any other officer of the Issuer and
' delivered to the Bank.
"Person" means any individual, corporation, partnership, joint venture, association, joint
"" stock company, trust, unincorporated organization or goverrunent or any agency or political
subdivision of a government.
2


r+x
"Predecessor Securities" of anyparticulaz Securitymeans everyprevious Security evidencing
~"" all or a portion of the same obligation as that evidenced by such particular Security (and, for the
purposes of this definition, any mutilated, lost, destroyed, or stolen Security for which a replacement
Security has been registered and delivered in lieu thereof pursuant to Section 4.06 hereof and the
'~ Order).
"Redemption Date" when used with respect to any Security to be redeemed means the date
fixed for such redemption pursuant to the terms of the Order.
,,, "Responsible Officer" when used with respect to the Bank means the Chairman or Vice-
Chairman of the Board of Directors, the Chairman or Vice-chairman of the Executive Committee
of the Board of Directors, the President, any Vice President, the Secretary, any Assistant Secretary,
the Treasurer, any Assistant Treasurer, the Cashier, any Assistant Cashier, any Trust Officer or
Assistant Trust Officer, or any other officer of the Bank customarily performing functions similar
to those performed by any of the above designated officers and also means, with respect to a
particular corporate trust matter, any other officer to whom such matter is referred because of his
knowledge of and familiarity with the particulaz subject.
"Security Register" means a register maintained by the Bank on behalf of the Issuer providing
for the registration and transfer of the Securities.
"Stated Maturity" means the date specified in the Order that the principal of a Security is
scheduled to be due and payable.
SECTION 2.02. UTHER DEFINITIONS. The terms "Bank," Issuer," and "Securities (Security)"
have the meanings assigned to them in the recital pazagraphs of this Agreement.
The term "Paying Agent/Registraz" refers to the Bank in the performance of the duties and
functions of this Agreement.
ARTICLE THREE
PAYING AGENT
SECTION 3.01. DUTIES OF PAYING AGENT. (a) As Paying Agent, the Bank shall, provided
adequate collected funds have been provided to it for such purpose by or on behalf of the Issuer, pay
on behalf of the Issuer the principal of each Security at its Stated Maturity, Redemption Date, or
Acceleration Date, to the Holder upon surrender of the Security to the Bank at the Bank Office.
(b) As Paying Agent, the Bank shall, provided adequate collected funds have been provided
to it for such purpose by or on behalf of the Issuer, pay on behalf of the Issuer the interest on each
Security when due, by computing the amount of interest to be paid each Holder and preparing and
sending checks by United States mail, first class postage prepaid, on each payment date, to the
Holders of the Securities (or their Predecessor Securities) on the respective Record Date, to the



address appearing on the Security Register or by such other method, acceptable to the Bank,
requested in writing by the Holder at the Holder's risk and expense.
(c) To the extent required by the Internal Revenue Code of 1986 and the regulations
"""`" promulgated thereunder, the Bank shall report to the Holders and the Internal Revenue Service (i)
the amount of "reportable payments", if any, subject to backup withholding during each yeaz and the
amount of tax withheld, if any, with respect to payments of the Securities and (ii) the amount of
interest or amount treated as interest on the Securities and required to be included in gross income
of the Holder thereof.
SECTION 3.02. PAYMENT DATES. The Issuer hereby instructs the Bank to pay the principal
of and interest on the Securities on the dates specified in the Order.
ARTICLE FOUR
REGISTRAR
SECTION 4.01. SECURITY REGISTER -TRANSFERS AND EXCHANGES. The Bank agrees to
keep and maintain for and on behalf of the Issuer at the Bank Office books and records (herein
sometimes referred to as the "Security Register") for recording the names and addresses of the
Holders of the Securities, the transfer, exchange, and replacement of the Securities, and the payment
of the principal of and interest on the Securities to the Holders and containing such other information
as may be reasonably required by the Issuer and subject to such reasonable regulations as the Issuer
and the Bank may prescribe. All transfers, exchanges, and replacement of Securities shall be noted
in the Security Register.
Every Security surrendered for transfer or exchange shall be duly endorsed or be
accompanied by a written instrument of transfer, the signature on which has been guaranteed by an
~ officer of a federal or state bank or a member of the National Association of Securities Dealers, in
form satisfactory to the Bank, duly executed by the Holder thereof or his agent duly authorized in
writing.
+rw
The Bank may request any supporting documentation it feels necessary to effect a re-
registration, transfer, or exchange of the Securities.
To the extent possible and under reasonable circumstances, the Bank agrees that, in relation
;,~, to an exchange or transfer of Securities, the exchange or transfer by the Holders thereof will be
completed and new Securities delivered to the Holder or the assignee of the Holder in not more than
three business days after the receipt of the Securities to be canceled in an exchange or transfer and
the written instrument of transfer or request for exchange duly executed by the Holder, or his duly
authorized agent, in form and manner satisfactory to the Paying AgentlRegistraz.
~'"° SECTION 4.02. SECURITIES. The Issuer shall provide an adequate inventory of printed
Securities to facilitate transfers or exchanges thereof. The Bank covenants that the inventory of
printed Securities will be kept in safekeeping pending their use, and reasonable caze will be exercised
4

r-~
r
by the Bank in maintaining such Securities in safekeeping, which shall be not less than the care
maintained by the Bank for debt securities of other political subdivisions or corporations for which
it serves as registrar, or that is maintained for its own securities.
SECTION 4.03. FORM OF SECURITY REGISTER. The Bank, aS Registrar, will maintain the
Security Register relating to the registration, payment, transfer, and exchange of the Securities in
~„ accordance with the Bank's general practices and procedures in effect from time to time. The Bank
shall not be obligated to maintain such Security Register in any form other than those which the
Bank has currently available and currently utilizes at the time.
The Security Register may be maintained in written form or in any other form capable of
being converted into written form within a reasonable time.
SECTION 4.04. LIST OF SECURITY HOLDERS. The Bank will provide the Issuer at any time
requested by the Issuer, upon payment of the required fee, a copy of the information contained in the
Security Register. The Issuer may also inspect the information contained in the Security Register
at any time the Bank is customarily open for business, provided that reasonable time is allowed the
Bank to provide an up-to-date listing or to convert the information into written form.
Unless required by law, the Bank will not release or disclose the contents of the Security
Register to any person other than to, or at the written request of, an authorized officer or employee
~' of the Issuer, except upon receipt of a court order or as otherwise required by law. Upon receipt of
a court order and prior to the release or disclosure of the contents of the Security Register, the Bank
will notify the Issuer so that the Issuer may contest the court order or such release or disclosure of
the contents of the Security Register.
rr SECTION 4.05. CANCELLATION OF SECURITIES. All certificates surrendered to the Bank,
at the designated Bank Office, for payment, redemption, transfer or replacement, shall be promptly
canceled by the Bank. The Bank will provide to the Issuer, at reasonable intervals determined by
,,, it, a certificate evidencing the destruction of canceled certificates..
SECTION 4.06. MUTILATED. DESTROYED. LOST. OR STOLEN SECURITIES. The Issuer
,.. hereby instructs the Bank, subject to the applicable provisions of the Order, to deliver and issue
Securities in exchange for or in lieu of mutilated, destroyed, lost, or stolen Securities as long as the
same does not result in an over issuance.
In case any Security shall be mutilated, or destroyed, lost, or stolen, the Bank, in its
discretion, may execute and deliver a replacement Security of like form and tenor, and in the same
denomination and bearing a number not contemporaneously outstanding, in exchange and
substitution for such mutilated Security, or in lieu of and in substitution for such destroyed, lost, or
stolen Security, only after (i) the filing by the Holder thereof with the Bank of evidence satisfactory
to the Bank of the destruction, loss, or theft of such Security, and of the authenticity of the ownership
thereof and (ii) the famishing to the Bank of indemnification in an amount satisfactory to hold the
Issuer and the Bank harmless. All expenses and charges associated with such indemnity and with
5

~r
r.+~
the preparation, execution, and delivery of a replacement Security shall be borne by the Holder of
the Security mutilated, or destroyed, lost, or stolen.
~, SECTION 4.07. TRANSACTION INFORMATION TO ISSUER. The Bank will, within a
reasonable time after receipt of written request from the Issuer, furnish the Issuer information as to
the Securities it has paid pursuant to Section 3.01, Securities it has delivered upon the transfer or
exchange of any Securities pursuant to Section 4.01, and Securities it has delivered in exchange for
or in lieu of mutilated, destroyed, lost, or stolen Securities pursuant to Section 4.06.
ARTICLE FIVE
THE BANK
SECTION 5.01. DUTIES OF BANK. The Bank undertakes to perform the duties set forth herein
and in the Order and agrees to use reasonable care in the performance thereof.
SECTION 5.02. RELIANCE ON DOCUMENTS. ETC. (a) The Bank may conclusively rely, as
to the truth of the statements and correctness of the opinions expressed therein, on certificates or
opinions furnished to the Bank.
(b) The Bank shall not be liable for any error of judgment made in good faith by a
Responsible Officer, unless it shall be proved that the Bank was negligent in ascertaining the
~ pertinent facts.
(c) No provisions of this Agreement shall require the Bank to expend or risk its own funds
or otherwise incur any financial liability for performance of any of its duties hereunder, or in the
exercise of any of its rights or powers, if it shall have reasonable grounds for believing that
repayment of such funds or adequate indemnity satisfactory to it against such risks or liability is not
assured to it.
(d) The Bank may rely and shall be protected in acting or refraining from acting upon any
resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent,
order, bond, note, security, or other paper or document believed by it to be genuine and to have been
signed or presented by the proper party or parties. Without limiting the generality of the foregoing
statement, the Bank need not examine the ownership of any Securities, but is protected in acting
upon receipt of Securities containing an endorsement or instruction of transfer or power of transfer
which appears on its face to be signed by the Holder or an agent of the Holder. The Bank shall not
be bound to make any investigation into the facts or matters stated in a resolution, certificate,
statement, instrument, opinion, report, notice, request, direction, consent, order, bond, note, security,
or other paper or document supplied by Issuer.
(e) The Bank may consult with counsel, and the written advice of such counsel or any
'""` opinion of counsel shall be full and complete authorization and protection with respect to any action
taken, suffered, or omitted by it hereunder in good faith and in reliance thereon.
6

0

(fl The Bank may exercise any of the powers hereunder and perform any duties hereunder
either directly or by or through agents or attorneys of the Bank.
;~ SECTION 5.03. RECITALS OF ISSUER. The recitals contained herein with respect to the Issuer
and in the Securities shall be taken as the statements of the Issuer, and the Bank assumes no
responsibility for their correctness.
The Bank shall in no event be liable to the Issuer, any Holder or Holders of any Security, or
any other Person for any amount due on any Security from its own funds.
SECTION 5.04. MAY HOLD SECURITIES. The Bank, in its individual or any other capacity,
may become the owner or pledgee of Securities and may otherwise deal with the Issuer with the same
~•- rights it would have if it were not the Paying Agent/Registraz, or any other agent.
SECTION 5.05. MONEY HELD BY BANK. The Bank shall deposit any money received from
~" the Issuer into a trust account to be held in a fiduciary capacity for the payment of the Securities,
with such money in the account that exceeds the deposit insurance, available to the Issuer, provided
by the Federal Deposit Insurance Corporation to be fully collateralized with securities or obligations
'""` that aze eligible under the laws of the State of Texas to secure and be pledged as collateral for trust
accounts until the principal and interest on such securities have been presented for payment and paid
to the owner thereof. Payments made from such trust account shall be made by check drawn on such
~' trust account.
All funds at any time and from time to time provided to or held by the Bank hereunder shall
be deemed, construed, and considered for all purposes as being provided to or held by the Bank in
trust and as a trustee for the benefit of the Security Holders. The Bank acknowledges, covenants,
and represents that it is acting herein in a fiduciary capacity in relation to such funds, and is not
accepting, holding, administering, or applying such funds as a banking depository, but solely as
trustee and fiduciary for and on behalf of the Security thereto, except as trustee pursuant to the terms
of this Agreement. The Holders shall be entitled to the same preferred claim and first lien on the
funds so provided as are enjoyed by the beneficiaries of trust funds generally. The funds provided
to the Bank hereunder shall not be subject to warrants, drafts, or checks drawn by the Issuer and,
except as expressly provided herein, shall not be subject to compromise, set-off, or other chazge or
diminution by the Bank.
The Bank shall be under no liability for interest on any money received by it hereunder.
Subj ect to the unclaimed property laws of the State of Texas and any provisions in the Order
to the contrary, any money deposited with the Bank for the payment of the principal, premium (if
any), or interest on any Security and remaining unclaimed for four yeazs after final maturity of the
Security has become due and payable will be paid by the Bank to the Issuer, and the Holder of such
'~" Security shall thereafter look only to the Issuer for payment thereof, and all liability of the Bank with
respect to such money shall thereupon cease.
7
0
0
*~,
SECTION 5.06. INDEMNIFICATION. To the extent permitted by law, the Issuer agrees to
indemnify the Bank for, and hold it harmless against, any loss, liability, or expense incurred without
negligence or bad faith on its part, arising out of or in connection with its acceptance or
,~,. administration of its duties hereunder, including the cost and expense against any claim or liability
in connection with the exercise or performance of any of its powers or duties under this Agreement.
yrr SECTION 5.07. INTERPLEADER. The Issuer and the Bank agree that the Bank may seek
adjudication of any adverse claim, demand, or controversy over its person as well as funds on
deposit, in either a Federal or State District Court located in a County of the State of Texas where
either the Bank Office or the administrative offices of the Issuer is located, and agree that service of
process by certified or registered mail, return receipt requested, to the address referred to in Section
6.03 of this Agreement shall constitute adequate service. The Issuer and the Bank further agree that
""~ the Bank has the right to file a Bill of Interpleader in any court of competent jurisdiction located in
a County of the State of Texas where either the Bank Office or the administrative offices of the
Issuer is located to determine the rights of any Person claiming any interest herein.
SECTION 5.08. DEPOSITORY TRUST COMPANY SERVICES. It is hereby represented and
warranted that, in the event the Securities are otherwise qualified and accepted for "Depository Trust
.~ Company" services or equivalent depository trust services by other organizations, the Bank has the
capability and, to the extent within its control, will comply with the "Operational Arrangements,"
~ effective from time to time, which establishes requirements for securities to be eligible for such type
depository trust services, including, but not limited to, requirements for the timeliness of payments
and funds availability, transfer turnaround time, and notification of redemptions and calls.
ARTICLE SIX
MISCELLANEOUS PROVISIONS
SECTION 6.01. AMENDMENT. This Agreement maybe amended only by an agreement in
writing signed by both of the parties hereto.
SECTION 6.02. ASSIGNMENT. This Agreement may not be assigned by either party without
the prior written consent of the other.
SECTION 6.03. NOTICES. Any request, demand, authorization, direction, notice, consent,
waiver, or other document provided or permitted hereby to be given or furnished to the Issuer or the
~"` Bank shall be mailed or delivered to the Issuer or the Bank, respectively, at the addresses shown on
the signature page of this Agreement.
SECTION 6.04. EFFECT OF HEADINGS. The Article and Section headings herein are for
convenience only and shall not affect the construction hereof.
SECTION 6.05. SUCCESSORS AND ASSIGNS. All covenants and agreements herein by the
Issuer shall bind its successors and assigns, whether so expressed or not.


*~
SECTION 6.06. SEVERABILITY. In case any provision herein shall be invalid, illegal, or
unenforceable, the validity, legality, and enforceability of the remaining provisions shall not in any
way be affected or impaired thereby.
SECTION 6.07. BENEFITS OF AGREEMENT. Nothing herein, express or implied, shall give
to any Person, other than the parties hereto and their successors hereunder, any benefit or any legal
or equitable right, remedy, or claim hereunder.
SECTION 6.08. ENTIRE AGREEMENT. This Agreement and the Order constitute the entire
agreement between the parties hereto relative to the Bank acting as Paying Agent/Registraz and if
any conflict exists between his Agreement and the Order, the Order shall govern.
SECTION 6.09. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each ofwhich shall be deemed an original and all ofwhich shall constitute one and the
same Agreement.
SECTION 6.10. TERMINATION. This Agreement will terminate on the date of final payment
of the principal of and interest on the Securities to the Holders thereof or maybe earlier terminated
~ by either party upon 60 days written notice; provided, however, an eazly termination of this
Agreement by either party shall not be effective until (a) a successor Paying Agent/Registraz has
been appointed by the Issuer and such appointment accepted and (b) notice has been given to the
Holders of the Securities of the appointment of a successor Paying Agent/Registraz. Furthermore,
the Bank and Issuer mutually agree that the effective date of an eazly termination of this Agreement
~,, shall not occur at any time which would disrupt, delay, or otherwise adversely affect the payment
of the Securities.
„~, Upon an early termination of this Agreement, the Bank agrees to promptly transfer and
deliver the Security Register (or a copy thereof), together with other pertinent books and records
relating to the Securities, to the successor Paying AgentlRegistraz designated and appointed by the
~w Issuer.
The provisions of Section 1.02 and of Article Five shall survive and remain in full force and
effect following the termination of this Agreement.
SECTION 6.11. GOVERNING LAW. This Agreement shall be construed in accordance with
and governed by the laws of the State of Texas.
[The remainder of this page intentionally left blank)
9


~.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day
and year first above written.
Attest:
By ~~ ~ ~ ~ do
Title ~'RESI®ElVT
Attest:
WACHOVIA BANK, NATIONAL ASSOCIATION
By
Title ~i~R-€l~l-T
Address: 5847 San Felipe Plaza, Suite 1050
Houston, Texas 77057
KERB COUNTY, TEXAS
By ~---, ~
oun y udge
/j
County Clerk
~~
!-v,
~,.
~ ~ .. ~~ °,
,.
`~ ~ ~ r..
~,
~ '~ .~
;•
* ~ ~
+ ~ f
a tI N ~ ,,,. ° . .
Address: 700 Main Street
Kerrville, Texas 78028
[SIGNATURE PAGE TO PAYING AGENT/REGISTRARRGREEMENT]

r.y
.w.
SCHEDULE A
Paying Agent/Registrar Fee Schedule

Annual Administration Fee
Out-of-pocket expenses
$400
Reimbursed at cost


~ ~ PRINCIPAL
T-1 ~ I _~ ~ ~ NT
__ AMOU
$2,000,000
UNITED STATES OF AMERICA
STATE OF TEXAS
KERR COUNTY, TEXAS
CERTIFICATE OF OBLIGATION, SERIES 2005
INTEREST RATE DATE OF SERIES MATURITY DATE
As Shown Below January 15, 2005 As Shown Below
REGISTERED OWNER: SOUTHWEST SECURITIES, INC.
PRINCIPAL AMOUNT: TWO MILLION DOLLARS
ON THE RESPECTIVE MATURITY DATES specified below, KERR COUNTY, TEXAS
(the "County"), being a political subdivision of the State of Texas, hereby promises to pay to the
Registered Owner specified above, or registered assigns (hereinafter called the "Registered Owner"),
the respective Principal Installments specified below, and to pay interest thereon (calculated on the
basis of a 360-day year composed of twelve 30-day months) from January 15, 2005, at the respective
Interest Rates per annum specified below, payable on February 15, 2006, and semiannually on each
February 15 and August 15 thereafter to the respective Maturity Dates specified below. The
respective Maturity Dates, Principal Installments and Interest Rates for this Certificate of Obligation
are set forth in the following schedule:

~~~~ ~~.	::...
1~1~1~At,	
~"1`l~~T
		
2006	370,000	3.500%
2007	425,000	3.500
2008	440,000	3.500
2009	375,000	3.500
2010	390,000	3.250
THE PRINCIPAL OFAND INTEREST ON THIS CERTIFICATE are payable in lawful
money ofthe United States of America, without exchange or collection charges. The principal ofthis
Certificate of Obligation shall be paid to the Registered Owner hereof upon presentation and
surrender of this Certificate of Obligation at maturity at the designated corporate trust office of
Wachovia Bank, National Association, Houston, Texas, which is the "Paying Agent/Registrar" for
this Certificate of Obligation. The payment of interest on this Certificate of Obligation shall be made
by the Paying Agent/Registrar to the Registered Owner hereof on each interest payment date by
check or draft, dated as of such interest payment date, drawn by the Paying AgentlRegistrar on, and
Page 1 of 5

~.

payable solely from, funds of the County required by the order authorizing the issuance of the
Certificates of Obligation (the "Certificate of Obligation Order") to be on deposit with the Paying
Agent/Registrarfnr such purpose as hereinafter provided; and such check or draft shall be sent by the
Paying Agent/Registrar by United States mail, first-class postage prepaid, on each such interest
payment date, to the Registered Owner hereof, at its address as it appeared on the last business day
of the month next preceding each such date (the "Record Date") on the Registration Books kept by
the Paying Agent/Registrar, as hereinafter described. In addition, interest may be paid by such other
method, acceptable to the Paying Agent/Registrar, requested by, and at the risk and expense of, the
Registered Owner. In the event of anon-payment of interest on a scheduled payment date, and for
30 days thereafter, a new record date for such interest payment (a "Special Record Date") will be
established by the Paying Agent/Registrar, if and when funds for the payment of such interest have
been received from the County. Notice of the Special Record Date and of the scheduled payment
date of the past due interest (which shall be 15 days after the Special Record Date) shall be sent at
least five business days prior to the Special Record Date by U~'ted States mail, first-class postage
prepaid, to the address of each owner of a Certificate of O~ anon appearing on the Registration
Books at the close of business on the last business d 'ng the date of mailing of such
notice. The County covenants with the Registe 'is Certificate of Obligation that on
or before each principal payment date and ' ate for this Certificate of Obligation it
will make available to the Paying Agent the "Interest and Sinking Fund" created by
the Certificate of Obligation Order, the a quired to provide for the payment, in immediately
available funds, of all principal of and inter ton the Certificates of Obligation, when due.
THE CERTIFICATES OF OBLIGATION are not subject to optional redemption.
IF THE DATE FOR ANY PAYMENT DUE on this Certificate of Obligation shall be a
Saturday, Sunday, a legal holiday, or a day on which banking institutions in the city where the
Designated Trust Office of the Paying Agent/Registrar islocated are authorized by law or executive
order to close, then the date for such payment shall be the next succeeding day which is not such a
Saturday, Sunday, legal holiday, or day on which banking institutions are authorized to close, and
payment on such date shall have the same force and effect as if made on the original date payment
was due.
THIS CERTIFICATE OF OBLIGATION IS ONE OFA SERIES OF CERTIFICATES
OF OBLIGATION dated as of January 15, 2005, authorized in accordance with the Constitution and
laws of the State of Texas in the principal amount of $2, 000, 000 FOR THE PURPOSE OF
PAYING CONTRACTUAL OBLIGATIONS TO ACQUIRE FROM THE HILL COUNTRY
JUVENILE FACILITY CORPORATION, A TEXAS NONPROFIT PUBLIC FACILITY
CORPORATION, THE EXISTING JUVENILE DETENTION FACILITYLOCATED IN THE
COUNTY, AND PAYING FOR PROFESSIONAL SERVICESRENDERED INCONNECTION
THEREWITH AND COSTS OF ISSUANCE.
ALL CERTIFICATES OF THIS SERIES are issuable solely as fully registered Certificates
of Obligation, without interest coupons, in the denomination of any integral multiple of $5,000. As
provided in the Certificate of Obligation Order, this Certificate of Obligation may, at the request of
the Registered Owner or the assignee or assignees hereof, be assigned, transferred, converted into
and exchanged for a like aggregate amount of fully registered Certificates of Obligation, without
interest coupons, payable to the appropriate Registered Owner, assignee or assignees, as the case may
be, having any authorized denomination or denominations as requested in writing by the appropriate
Page 2 of 5

~.
~.
Registered Owner, assignee or assignees, as the case may be, upon surrender of this Certificate of
Obligation to the Paying Agent/Registrar for cancellation, all in accordance with the form and pro-
cedures set forth in the Certificate of Obligation Order. Among other requirements for such
assignment and transfer, this Certificate of Obligation must be presented and surrendered to the
Paying Agent/Registrar, together with proper instruments of assignment, inform and with guarantee
of signatures satisfactory to the Paying Agent/Registrar, evidencing assignment of this Certificate of
Obligation or any portion or portions hereof in any authorized denomination to the assignee or
assignees in whose name or names this Certificate of Obligation or any such portion or portions
hereof is or are to be registered. The form of Assignment printed or endorsed on this Certificate of
Obligation may be executed by the Registered Owner to evidence the assignment hereof, but such
method is not exclusive, and other instruments of assignment satisfactory to the Paying
Agent/Registrar may be used to evidence the assignment of this Certificate of Obligation or any
portion or portions hereof from time to time by the Registered Owner. The Paying Agent/Registrar's
reasonable standard or customary fees and charges for assigning, transferring, converting and
exchanging any Certificate of Obligation or portion thereof will be paid by the County. In any cir-
cumstance, any taxes or governmental charges required to be paid with respect thereto shall be paid
by the one requesting such assignment, transfer, conversion or- change, as a condition precedent
to the exercise of such privilege. The Paying Agent ~ not be required to make any such
,~ • ,
transfer or exchange of a Certificate of Obl' commencing with the close of
business on any Record Date immediat ipal or interest payment date for such
Certificate of Obligation and ending with o of business on the next following principal or
interest payment date.
IN THE EVENT ANY PAYING AGENT/REGISTRAR for the Certificates of Obligation
is changed by the County, resigns, or otherwise ceases to act as such, the County has covenanted in
the Certificate of Obligation Order that it promptly will appoint a competent and legally qualified sub-
stitute therefor, and cause written notice thereof to be mailed to the registered owners of the
Certificates of Obligation.
IT IS HEREBY CERTIFIED, RECITED, AND COVENANTED that this Certificate of
Obligation has been duly and validly authorized, issued, and delivered; that all acts, conditions, and
things required or proper to be performed, exist, and be done precedent to or in the authorization,
issuance and delivery of this Certificate of Obligation have been performed, existed, and been done
in accordance with law; that this Certificate of Obligation is a general obligation ofthe County, issued
on the full faith and credit thereof; and that ad valorem taxes sufricient to provide for the payment
of the interest on and principal of this Certificate of Obligation, as such interest comes due, and as
such principal matures, have been levied and ordered to be levied against all taxable property in the
County, and have been pledged for such payment, within the limits provided by law.
THE COUNTYHAS RESERVED THE RIGHT TO AMEND the Certificate of Obligation
Order as provided therein, and under some (but not all) circumstances amendments thereto must be
approved by the registered owners of a majority in aggregate principal amount of the outstanding
Certificates of Obligation.
BYBECOMING THE REGISTERED OWNER of this Certificate of Obligation, the Regis-
tered Owner thereby acknowledges all of the terms and provisions of the Certificate of Obligation
Order, agrees to be bound by such terms and provisions, acknowledges that the Certificate of
Obligation Order is duly recorded and available for inspection in the official minutes and records of
Page 3 of 5


w
the governing body of the County, and agrees that the terms and provisions of this Certificate of
Obligation and the Certificate of Obligation Order constitute a contract between each Registered
Owner hereof and the County.
IN WITNESS WHEREOF, the County has caused this Certificate of Obligation to be signed
with the manual or facsimile signature of the County Judge of the County, countersigned with the
manual or facsimile signature of the County Clerk or Deputy County Clerk of the County, and has
caused the official seal of the County to be duly impressed, or placed in facsimile, on this Certificate
of Obligation.
Countersigned:
Co Clerk, Kea County, exas
Ss ~
2 ~
~ F=
J ~ ~j.e~
ounty Judge, Kerr County, Texas
COMPTROLLER'S REGISTRATION CERTIFICATE: REGISTER NO.
I hereby certify that this Certificate of Obligation has been examined, certified as to validity,
and approved by the Attorney General of the State of Texas, and that this Certificate of Obligation
has been registered by the Comptroller of Public Accounts of the~t exas~
D
Witness my signature and seal this ~ ~~ ~
(COMPTROLLER'S SEAL)
Comptroller of Public Accounts
of the State of Texas
Page 4 of 5
...

+..+
PAYING AGENT/REGISTRAR'SAUTHENTKATION CERTIFICATE
(To be executed if this Certificate of Obligation is not accompanied by an executed
Registration Certificate of the Comptroller of Public Accounts of the State of Texas)
It is hereby certified that this Certificate of Obligation has been issued under the provisions
of the Certificate of Obligation Order described in the text of this Certificate of Obligation; and that
this Certificate of Obligation has been issued in conversion or replacement of, or in exchange for, a
certificate, certificates, or a portion of a certificate or certificates of a Series which originally was
approved by the Attorney General of the State of Texas and registered by the Comptroller of Public
Accounts of the State of Texas.
Dated WACHOVIA BANK, NATIONAL ASSOCIATION,
HOUSTON, TEXAS
Paying Agent/Registrar
p ~ ~ \~
By ~ ~~..
Authonze epresentative
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned Registered Owner of this Certificate of
Obligation, or duly authorized representative or attorney thereof, hereby assigns this Certificate of
Obligation to
/ /
(Assignee's Social Security or (Print or typewrite Assignee's name and address, including zip code)
Taxpayer Identification)
and hereby irrevocably constitutes and appoints
attorney to register the transfer of the within Certificate of Obligation on the books kept for
registration thereof, with full power of substitution in the premises.
Dated:
Signature Guaranteed:
NOTICE: Signature(s) must be guaranteed by
a member firm of the New York Stock
Exchange or a commercial bank or trust
company.
~~f~(~IIM r;'
NOTICE: The signature above must
correspond with the name of the Registered
Owner as it appears upon the front of this
Certificate of Obligation in every particular,
without alteration or enlargement or any
change whatsoever.
Page 5 of 5


i
C~~
Blanket Issuer Letter of Representations
(To be Completed by Issuer)
KERB COUNTY, TEXAS
Game of Issuers
December 17, 1998
[Date;

Attention: Underwriting Department -Eligibility
The Depository Trust Company
3~ Water Street: SOth FIoor
New York, NY 10041-0099
Ladies and Gentlemen:
This letter sets forth our understanding with respect to all issues (the "Securities") that Issuer
shall request be made eligible for deposit.by The Depository Trust Company ("DTC").
To induce DTC to accept the Securities as eligible for deposit at DTC, and to act in accordance
with DTC's Rules with respect to the Securities, Issuer represents to DTC that Issuer will comply
with the requirements stated in DTC's Operational Arrangements, as they may be amended from
time to time.
Note:
Schedule A contains statements that DTC believes
accurately desaibe DTC, the method of effecting book-
entiy transfers of securities distributed through DTC, and
certain related matters.
Very truly yours,
COUNTY, TEXAS
Issuer
BY
• r' Signature)
Ro rt A. Denson, County Judge
(Typewrite Marne & Tide}
700 Main
(Street Address)
Kerrville TX 78028
(City) (Brace) (Zip)
(830) 792-2211
(Phone tvumber)
Z
T
C
$.
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SCHEDULE :~
SA~~iPLE OFFERING DOCUMENT LANGUAGE
~ DESCRIBING BOOK-ENTRY ONLY ISSUANCE
(Prepared by DTC-bracketed material may be applicable only to certain issues)
1. The Depository Trust Company ("DTC"), Ne~v York, NY. will act as securities depository for the
'~"` securities (the "Securities"). The Securities will be issued as fully-red stered securities registered in the
w name of Cede bt Co. (DTC's partnership nominee). One fully-registered Security certificate will be
issued for (each issue oEJ the Securities. (each] in the a~'regate principal amount of such issue, and will
"'~" be deposited with DTC. (If, however. the aro°reoate principal amount of [anyj issue exceeds S?00
million, one certificate wiU be issued with respect to each S`?00 million of principal amount and an
additional certificate will be issued with respect to any remaining principal amount of such issue.]
~ ~. DTC is alimited-purpose trust company organized under the New York Banking Law, a "banlang
~ organization" within the meaning of the New York Banking Law, a member of the Federal Reserve
System, a "clearing corporation" within the meaning of the New York uniform Commercial Code, and a
"clearing agency" registered pursuant to the provisions of Section 17A of the Securities Exchange Act of
~' 193. DTC holds securities that its participants ("Participants") deposit with DTC. DTC also facilitates .
the settlement among Participants of securities transactions, such as transfers and pledges, in deposited
"r'r securities through electronic computerized book-entry changes in Participants' accounts, thereby
eliminating the need for physical movement of securities certificates. Direct Participants include
securities broken and dealer, banks, trust companies, clearing corporations, gad certain other
'~' organizations. DTC is owned by a number of its Direct Participants and by the New York Stock
Exchange, Inc., the American Stock Exchange, Inc., and the National Association of Securities Dealers,
j Inc. Access to the DTC system is also available to others such az securities brokers and dealers, banks,
and trust companies that clear through or maintain a custodial relationship with a Direct Participant,
either directly or indirectly ("Indirect Participants"). The Rules applicable to DTC and its Participants
are on file with the Securities gad Ezchaage Commission.
'~"' 3. Purchazes of Securities under the DTC system must be made by or through Direct Participants,
which will receive a credit for the Securities on DTC's records. The ownership interest of each actual
~ purchazer of each Security ("Beneficial Owner") is is turn to be recorded on the Direct and lndirect
+~ Participants' records. Beneficial Owner will not receive written confirmation from DTC of their
purchase, but Beneficial Owners are expected tb receive written confirmations providing details of the
transaction, az well az periodic statements of their holdings, from the Direct or Indirect Participant
through which the Beneficial Owner entered into the transaction. Transfers of ownership interests is the
1 Securities are to be accomplished by entries made on the books of Participants acting on behalf of
Beneficial Owners. Beneficial Owners will rat receive certificates representing their ownership interests
~„ in Securities, e:ccept in the event that use of the book~ntry system for the Securities is discontinued.
1 4. To facilitate subsequent transfers, all Securities deposited by Participants with DTC are registered
in the name of DTC's partnership nominee, Cede be Co. The deposit of Securities with DTC and their
registration in the name of Cede dt Co. effect no change in beneficial ownership. DTC has no
^ knowledge of the actual Beneficial Owners of the Securities; DTC's records reflect only the identity of
l` the Direct Participanu to whose accounts such Securities are credited which may or may not be the
.. Beneficial Owners. The Participants wtjl remain responsible for keeping account of their holdings on
behalf of their customers.

r
~ ~. 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 go~•erned by arrangements among them, subject to any statutory or regulatory
i requirements as may be in effect from time to time.
~,,, (6. Redemption notices shall be sent to Cede & Co. If less than all of the Securities within an issue are
being redeemed, DTC's practice is to determine by lot the amount of the interest of each Direct
~ Participant in such issue to be redeemed.)
+~ 7. Neither DTC nor Cede ck Co. will consent or vote with respect to Securities. under its usual
i procedures, DTC mails an Omnibus Proxy to the Issuer as soon az possible aker the record date. The
Omnibus Proxy assigns Cede br Co.'s consenting or voting rights to those Direct Participants to whose
~ acrnunts the Securities are credited on the record date (identified in a listing attached to the Omnibus
~ Proxy).
S. Principal and interest payments on the Securities will be made to DTC. DTC's practice is to credit
Direct Participants' accounts on payable date in accordance with their respective holdings shown on
DTC's records unless DTC haz reason to believe that it will not receive payment on payable date.
Payments by Participants to Beneficial Owners will be governed by standing instructions and customary
practices, as is the rase with securities held for the accounts of customer in bearer form or registered in
"street name," and will be the responsibility of such Participant and not of DTC, the Agent, or the
Issuer, subject to any statutory or regulatory requirements as may be in effect from time to time.
Payment of principal and interest to DTC is the responsibility of the Issuer or the Agent, disbursement
of such payments to Direct Participants shaIl be the responsibility of DTC, and disbursement of such
payments to the Beneficial Owners shall be the responsibility of Direct and Indirect Participants.
~' (9. A Beneficial Owner shall give notice to elect to have its Securities purchased or tendered, through
~ its Participant, to the [Tender/Remarketingj Agent, and shall effect delivery of such Securities by causing
the Direct Participant to transfer the Participant's interest in the Securities, on DTC's records, to the
[Tender/RemarketingJ Agent. The requirement for physical delivery of Securities in connection with a
~ demand for purchaze or a mandatory purchase will be deemed satisfied when the ownership rights in
the Securities are transferred by Direct Participants on DTC's records.] '
°""` 10. DTC may discontinue providing its services az securities depository with respect to the Securities
~ at any time by giving reasonable notice to the Issuer or the Agent. Under such circumstances, in the
event that a successor securities depository is not obtained. Security certificates are required to be
printed and delivered
~ l I. The Issuer may decide to discontinue use of the system of book-entry• transfea through DTC (or
a successor securities depository). In that event, Security certificates will be printed and delivered.
1~. The information in this section concerning DTC and DTC's book-entry system has been obtained
~ from sources that the Issuer believes to be reliable, but the Issuer takes no responsibility for the
accuracy thereof.
t
~.

FEDERAL TAX CERTIFICATE
1. In General.
1.1. The undersigned is the County Judge of Kerr County, Texas (the "Issuer").
1.2. This Certificate is executed for the purpose of establishing the reasonable
expectations of the Issuer as to future events regarding the Issuer's Certificates of Obligation, Series
2005 (the "Certificates"). The Certificates are being issued pursuant to an order of the Issuer (the
"Order") adopted on the date of sale of the Certificates. The Order is incorporated herein by
reference.
1.3. To the best of the undersigned's knowledge, information and belief, the expectations
contained in this Certificate are reasonable.
1.4. The undersigned is an officer ofthe Issuer delegated with the responsibility of issuing
and delivering the Certificates.
1.5. The undersigned is not aware of any facts or circumstances that would cause him to
question the accuracy of the representations made by Southwest Securities, Inc. (the "Underwriter")
'~' in Section 5.1 of this Certificate.
2. The Purpose of the Certificates and Useful Life of Project.
2.1. The Certificates are being issued by the Order to acquire an existing juvenile
detention facility located in the Issuer (the "Project") from the Hill County Juvenile Facility
Corporation and to provide for the payment of costs of issuing the Certificates.
2.2. The Issuer expects that the aggregate useful life of the Project exceeds 20 years from
the date on which the Certificates are issued.
2.3. All earnings, such as interest and dividends, received from the investment of the
,~ proceeds of the Certificates during the period of acquisition of the Project and not used to pay
interest on the Certificates, will be used to pay the costs of the Project, unless required to be rebated
and paid to the United States in accordance with section 148(f) of the Internal Revenue Code of
~,,,, 1986 (the "Code"). The proceeds of the Certificates, together with any investment earnings thereon,
are expected not to exceed the amount necessary for the governmental purpose of the Certificates.
The Issuer expects that no disposition proceeds will arise in connection with the Project or the
,~„ Certificates.


ar
3. Expenditure of Certificate Proceeds and Use of Project.
3.1. The Issuer will incur, either on or within six months after the date of issue of the
Certificates, a binding obligation to acquire the Project with the amount to be paid under such
obligation to be in excess of five percent of the proceeds which are estimated to be used for the cost
of the Project.
3.2. After entering into a binding obligation, acquisition of the Project will proceed
promptly with due diligence.
3.3. All original proceeds derived from the sale of the Certificates to be applied to the
Project and all investment earnings thereon (other than any amounts required to be rebated to the
United States pursuant to section 148(f) of the Code) will be expended for the Project no later than
a date which is three years after the date of issue of the Certificates.
~` 3.4. The Order provides that allocations of proceeds to expenditures for the Project is
expected not to be later than 18 months after the later of the date of the expenditure or the date that
the Project is placed in service, but, in any event, not longer than 60 days after the earlier of five.
years of the date hereof or the date the Certificates are retired.
3.5. The Issuer will not invest the proceeds prior to such expenditure in any guaranteed'.
"~' investment contract or other nonpurpose investment with a substantially guaranteed yield for a
period equal to or greater than four years.
~" 3.6. Other than members of the general public, the Issuer expects that throughout the
lesser of the term of the Certificates, or the useful life of the Project, the only user of the Project will
be the Issuer or the Kerr County Juvenile Board, or the employees and agents of the Issuer or the
Kerr County Juvenile Board. The Kerr County Juvenile Board will be the manager of the Project.
3.7. Except as stated below, the Issuer expects not to sell or otherwise dispose of property
constituting the Project prior to the earlier of the end of such property's useful life or the final
maturity of the Certificates. The Order provides that the Issuer will not sell or otherwise dispose of
the Project unless the Issuer receives anopinion ofnationally-recognized bond counsel that such sale
or other disposition will not adversely affect the tax-exempt status of the Certificates.
3.8. For purposes of Section 3.7 hereof, the Issuer has not included the portion of the
Project comprised of personal property that is disposed in the ordinary course at a price that is
expected to be less than 25 percent of the original purchase price. The Issuer, upon any disposition
of such property, will transfer the receipts from the disposition of such property to the general
,,~ operating fund and expend such receipts within six months for other governmental programs.



4. Interest and Sinking Fund.
4.1. A separate and special Interest and Sinking Fund has been created and established
solely to pay the principal of and interest on the Certificates, with a portion of the Interest and
Sinking Fund constituting a bona fide debt service fund for the Certificates, and money deposited
into the Interest and Sinking Fund for the Certificates will not be invested at a yield higher than the
yield on the Certificates, except during the thirteen month period beginning on the date of each such
deposit of money, and the amounts received from the investment of money in the Interest and
Sinking Fund will not be invested at a yield higher than the yield on the Certificates, except during
the one year period beginning on the date of receipt of such amounts; provided, however, and except
that, if any money so deposited, and any amounts received from the investment thereof, are
accumulated in the Interest and Sinking Fund and remain on hand in the Interest and Sinking Fund
after thirteen months from the date of deposit of any such money or one year after the receipt of any
such amounts from the investment thereof, such money and amounts, to the extent of an aggregate
not exceeding the lesser of five percent of the proceeds of the Certificates or $100,000 will not be
subject to investment yield restrictions, and shall constitute a separate portion of the Interest and
Sinking Fund.
4.2. It is expected that a portion of the Interest and Sinking Fund will be used primarily
to achieve a proper matching of revenues collected for the Certificates and debt service on the
Certificates within each bond year, and it is expected that such portion of the Interest and Sinking
Fund will be depleted once a year on a first-in -first-out basis, except for a possible carryover
amount which will not exceed the greater of one year's earnings on such fund or 1 / 12 of annual debt
service payable from such fund, but any money and amounts which may be accumulated in the
Interest and Sinking Fund, to constitute a debt service reserve fund for the Certificates as described
in Section 4.1, above, shall constitute a separate portion of the Interest and Sinking Fund, and will
not be depleted annually, and will not be subject to yield restrictions; provided that in no event will
such debt service reserve fund portion of the Interest and Sinking Fund ever exceed the lesser of five
percent of the proceeds of the Certificates or $100,000.
Yield.
All of the Certificates have been the subject of a bona fide initial offering to the public
(excluding bond houses, brokers, or similar persons or organizations acting in the capacity of
underwriters or wholesalers) at prices no higher or at yields no lower than that shown on the cover
of the Official Statement. At least 10 percent of the principal amount of each maturity of the
Certificates were sold to the public (excluding such bond houses, brokers or similar persons or
organizations acting in the capacity of underwriters or wholesalers) at an initial offering price or
yield not greater than the price or not lower than the yield shown on the cover of the Official
Statement for such maturity. The Official Statement is included in the transcript for the Certificates
and is incorporated herein by reference.


wr
Invested Sinking_Fund Proceeds, Replacement Proceeds.
6.1. The Issuer has, in addition to the moneys received from the sale of the Certificates,
certain other moneys that are invested in various funds which are pledged for various purposes.
These other funds are not available to accomplish the purposes described in Section 2 of this
Certificate.
6.2. Other than the Interest and Sinking Fund, there are, and will be, no other funds or
accounts established, or to be established, by or on behalf of the Issuer (a) which are reasonably
expected to be used, or to generate earnings to be used, to pay debt service on the Certificates, or
(b) which are reserved or pledged as collateral for payment of debt service on the Certificates and
for which there is reasonable assurance that amounts therein will be available to pay such debt
~r service if the Issuer encounters financial difficulties. Accordingly, there are no other amounts
constituting "gross proceeds" of the Certificates, within the meaning of section 148 of the Code.
7. Other Obli atg ions.
There are no other obligations of the Issuer which (a) are sold at substantially the same time.
~' as the Certificates, i.e., within 15 days of the date of sale of the Certificates, (b) are sold pursuant
to a common plan of financing with the Certificates, and (c) will be payable from the same source
of funds as the Certificates.
8. Federal Tax Audit Responsibilities.
"" The Issuer acknowledges that in the event of an examination by the Internal Revenue Service.
(the "Service") to determine compliance of the Certificates with the provisions of the Code as they
relate to tax-exempt obligations, the Issuer will respond, and will direct its agents and assigns to
respond, in a commercially reasonable manner to any inquiries from the Service in connection with
such an examination. The Issuer understands and agrees that the examination may be subject to
public disclosure under applicable Texas law.
9. Record Retention.
The Issuer has covenanted in the Order that it will comply with the requirements of the Code
relating to the exclusion of the interest on the Certificates under section 103 of the Code. The
Service has determined that certain materials, records and information should be retained by the
issuers oftax-exempt obligations for the purpose of enabling the Service to confirm the exclusion
of the interest on such obligations under section 103 of the Code. ACCORDINGLY, THE
ISSUER SHALL TAKE STEPS TO ENSURE THAT ALL MATERIALS, RECORDS AND
INFORMATION NECESSARY TO CONFIItM THE EXCLUSION OF THE INTEREST ON
THE CERTIFICATES UNDER SECTION 103 OF THE CODE ARE RETAINED FOR THE
PERIOD BEGINNING ON THE ISSUE DATE OF THE CERTIFICATES AND ENDING
THREE YEARS AFTER THE DATE THE CERTIFICATES ARE RETIRED. The Issuer
acknowledges receipt of the letter attached hereto as Exhibit "B" which, in part, discusses specific

.~.
rw
guidance by the Service with respect to the retention of records relating to tax-exempt bond
transactions. The Issuer also acknowledges that the letter does not constitute an opinion of Bond
Counsel as to the proper record retention policy applicable to any specific transaction.
10. Rebate to United States.
~ The Issuer has covenanted in the Ordinance that it will comply with the requirements of the
Code, including section 148(fj of the Code, relating to the required rebate to the United States.
Specifically, the Issuer will take steps to ensure that all earnings on gross proceeds of the
Certificates in excess of the yield on the Certificates required to be rebated to the United States will
be timely paid to the United States. The Issuer acknowledges receipt of the memorandum attached
hereto as Exhibit "A" which discusses regulations promulgated pursuant to section 148(f) of the
Code. This memorandum does not constitute an opinion of Bond Counsel as to the proper federa
tax or accounting treatment of any specific transaction.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.J
..
.~
r_~
DATED: FEB 1 4 2005
xEiut courrrY, TExAs
By:
County Ju ge
[ISSUER'S SIGNATURE PAGE TO FEDERAL TAX CERTIFICATE]

r.r
rw
The undersigned represents that, to the best of the undersigned's knowledge, information and
belief, the representations contained in Section 5.1 of this Federal Tax Certificate are accurate.
SOUTHWEST SECURITIES, INC.
~ 1 i
By:
[UNDERWRITER'S SIGNATURE PAGE TO FEDERAL TAX CERTIFICATE]
a~w
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M
600 CONGRESS AVENUE
1250 ONE AMERICAN CENTER
AUSTIN, TEXAS 78701J248
TELEPHONE: (512) 476.3805
FACSIMILE: (512) 472.0671
LAW OFFICES
c_CALL, PARKHURST & H~
717 NORTH HARWOOD
NINTH FLOOR
DALLAS, TEXAS 76201687
TELEPHONE: (214) 754.9200
FACSIMILE: (214) 754-9250
DRTON L.L.P.
700 N. ST. MARY'S STREET
1525 ONE RIVERWALK PLACE
SAN ANTONIO, TEXAS 78206.3803
TELEPHONE: (210) 225.2800
FACSIMILE: (210) 225-2984
January 1, 1995
ARBITRAGE REBATE REGULATIONS®
The Tax Reform Act of 1986 amended the provisions of the Internal Revenue Code by providing a
newly-enacted section 148(f) of the Internal Revenue Code of 1986 (the "Code"), relating to arbitrage rebate.
This arbitrage rebate requirement generally provides that in order for interest on any issue of obligations to
be excluded from gross income (i.e., tax-exempt) the issuer must rebate to the United States the sum of, (1)
the excess of the amount earned on all "nonpurpose investments" acquired with "gross proceeds" of the issue
over the amount which would have been earned if such investments had been invested at a yield equal to the
'~' yield on the issue, and (2) the earnings on such excess earnings. These rules are substantially similar to the
rules which, prior to the Tax Reform Act of 1986, applied to industrial development bonds and mortgage
revenue bonds.
Section 148(f) of the Code has been amended by several subsequent tax acts, most notably, the
Revenue Reconciliation Acts of 1989 and 1990. These amendments primarily provided a special exception
to rebate for certain construction issues, as discussed under the heading "Exceptions to Rebate."
On June 18, 1993, the U.S. Treasury Department promulgated regulations relating to the
computation of arbitrage rebate and the rebate exceptions. These regulations, which replace the previously-
publishedregulations promulgated on May 15,1989, and on May 18,1992, are effective for bonds issued after
June 30,1993. These newly-promulgated regulations also replace the arbitrage regulations, other than those
relating to rebate, which were published in 1978. This memorandum was prepared by McCall, Parkhurst &
Horton L.L.P. and provides a general discussion of the arbitrage rebate regulations. This memorandum does
not otherwise discuss the general arbitrage regulations, other than as they may incidentally relate to rebate.
This memorandum also does not attempt to provide an exhaustive discussion of the arbitrage rebate
regulations and should not be considered advice with respect to the arbitrage rebate requirements as applied
to any individual or governmental unit or any specific transaction. McCall, Parkhurst & Horton L.L.P. remains
available to provide legal advice to issuers with respect to the provisions of these tax regulations but
recommends that issuers seek competent financial and accounting assistance in calculating the amount of
such issuer's rebate liability under section 148(f) of the Code and in making elections to apply the rebate
exceptions.
In this memorandum the word "bond" is defined to include any bond, note, certificate, financing lease
or other obligation of an issuer.
Effective Dates
The regulations promulgated on June 18, 1993, generally apply to bonds delivered after June 30,
rnr 1993, but, as discussed below, also permit an issuer to elect to apply the newly-promulgated rules to bonds
issued prior to that date. The temporary regulations adopted by the U.S. Treasury Department in 1989 and
1992 incorporated the same effective dates which generally apply for purposes of section 148(f) of the Code.
The statutory provisions of section 148(f) of the Code, other than the exception for construction issues, apply
„~, to all bonds issued after August 15, 1986, (for private activity bonds) and August 31, 1986, (for governmental
public purpose bonds). As such, the previous versions of the rebate regulations generally applied to bonds
~r
Copyright 1993 by Harold T. Flanagan, McCall, Parkhurst & Horton L.L.P. All rights reserved.
+rr
Exhibit "A"


issued between August 1986 and June 30, 1993 (or, with an election, to bonds issued prior to August 15,
1993). The statutory exception to rebate applicable to construction issues generally applies to such issues
	if delivered after December 19, 1989.
'~	The newly-promulgated regulations provide numerous transitional rules for bonds sold priorto July 1,
	1993. Moreover, since, under prior law, rules were previously published with respect to industrial development
	bonds and mortgage revenue bonds, the transitional rules contained in these newly-promulgated regulations
	permit an issuer to elect to apply certain of these rules for computing rebate on pre-1986 bonds. The
""'	regulations provide for numerous elections which would permit an issuer to apply the newly-promulgated rules
	(other than 18-month spending exception) to bonds which were issued prior to July 1, 1993 and remain
	outstanding on June 30, 1993. Due to the complexity of the regulation, it is impossible to discuss in this
	memorandum all circumstances forwhich specific elections are provided. If an issuerwould prefer, in certain
~-	circumstances, to use the newly-promulgated regulations in lieu of the computational method stated under
	prior law (e.g., due to prior redemption) or the previously-published regulations, please contact McCall,
	Parkhurst & Horton L.L.P. for advice as to the availability of such options.
:~r-	Future Value Computation Method
	The regulations employ an actuarial method for computing the rebate amount based on the future
-	value of the investment receipts (i.e., earnings) and payments. The rebate method employs atwo-step
K„	computation to determine the amount of the rebate payment. First, the issuer determines the bond yield..
	Second, the issuer determines the arbitrage rebate amount. The regulations require that the computations
	be made at the end of each five-year period and upon final maturity of the issue (the "computation dates").
	THE FINAL MATURITY DATE WILL ACCELERATE IN CIRCUMSTANCES IN WHICH THE BONDS ARE
„e,	OPTIONALLY REDEEMED PRIOR TO MATURITY. AS SUCH, IF BONDS ARE REFUNDED OR
	OTHERWISE REDEEMED, THE REBATE MAY BE DUE EARLIER THAN INITIALLY PROJECTED. In
	order to accommodate accurate record-keeping and to assure that sufficient amounts will be available for the
	payment of arbitrage rebate liability, however, we recommend that the computations be performed at least
	annually.
	
	Under the future value method, the amount of rebate is determined by compounding the aggregate
	earnings on all the investments from the date of receipt by the issuer to the computation date. Similarly, a
	payment for an investment is future valued from the date that the payment is made to the computation date.
"""'	The receipts and payments are future valued at a discount rate equal to the yield on the bonds. The rebatable
	arbitrage, as of any computation date, is equal to the excess of the (1) future value of all receipts (i.e.,
	earnings) from investments, over (2) the future value of all payments.
+r	The following example is provided in the regulations to illustrate how arbitrage rebate is computed
	under the future value method for affixed-yield bond:
	"On January 1, 1994, City A issues a fixed yield issue and invests all the sale proceeds
„~,	of the issue ($49 million). There are no other gross proceeds. The issue has a yield of
	7.0000 percent peryearcompounded semiannually (computed on a 30 day month/360 day
	year basis). City A receives amounts from the investment and immediately expends them
	for the governmental purpose of the issue as follows:
	Date Amount
	2/1 /1994 $3, 000, 000
	4/1 /1994 5, 000, 000
`"	6/1 /1994 14,000,000
	9/1 /1994 20,000,000
	7/1/1995 10,000,000
City A selects a bond year ending on January 1, and thus the first required computation
date is January 1, 1999. The rebate amount as of this date is computed by determining
the future value of the receipts and the payments for the investment. The compounding
~ interval is each 6-month (or shorter) period and the 30 day month/360 day year basis is
used because these conventions were used to compute yield on the issue. The future
value of these amounts, plus the computation credit, as of January 1, 1999, is:
~+
McCall, Parkhurst & Horton L.L.P. -Page 2


Date	Receipts (Payments)	FY (7.0000 percent)
1/1/1994	($49,000,000)	($69,119,339)
2/1 /1994	3,000,000	4,207,602
4/1 /1994	5,000,000	6,932,715
6/1 /1994	14, 000,000	19,190,277
9/1 /1994	20,000,000	26,947,162
1/1 /1995	(1,000)	(1,317)
7/1 /1995	10,000,000	12,722,793
1/1/1996	(1,000)	(1.229)
Rebate amount (1/01/1999) $878.664"
General Method for Computing Yield on Bonds
1~" In general, the term "yield," with respect to a bond, means the discount rate that when used in
computing the present value of all unconditionally due payments of principal and interest and all of the
payments for a qualified guarantee produces an amount equal to the present value of the issue price of the
bond. For this purpose, the term "issue price" has the same meaning as provided in sections 1273 and 1274
of the Code. That is, if bonds are publicly offered (i.e., sold by the issuer to a bond house, broker or similar
person acting in the capacity of underwriter or wholesaler), the issue price of each bond is determined on the
basis of the initial offering price to the public (not to the aforementioned intermediaries) at which price a
substantial amount of such bond was sold to the public (not to the aforementioned intermediaries). The "issue
,,,~ price" is separately determined for each bond (i.e., maturity) which comprises an issue.
The regulations also provide varying periods for computing yield on the bonds depending on the
method by which the interest payment is determined. Thus, for example, yield on an issue of bonds sold with
variable interest rates (i.e., interest rates which are reset periodically based on changes in market) is
computed separately for each annual period ending on the first anniversary of the delivery date that the issue
is outstanding. In effect, yield on a variable yield issue is determined on each computation date by "looking
back" at the interest payments for such period. The regulations, however, permit an issuer of avariable-yield
issue to elect to compute the yield for annual periods ending on any date in order to permit a matching of such
yield to the expenditure of the proceeds. Any such election must be made in writing, is irrevocable, and must
be made no later than the earlier of (1) the fifth anniversary date, or (2) the final maturity date.
Yield on a fixed interest rate issue (i.e., an issue of bonds the interest rate on which is determined
as of the date of the issue) is computed over the entire term of the issue. Issuers of fixed-yield issues
generally use the yield computed as of the date of issue for all rebate computations. Such yield on fixed-yield
issues generally is recomputed only if (1) the issue is sold at a substantial premium, may be retired within five
years of the date of delivery, and such date is earlier than its scheduled maturity date, or (2) the issue is a
stepped-coupon bond. In such cases, the regulations require the issuer to recompute the yield on such issues
by taking into account the early retirement value of the bonds. Similarly, recomputation occurs in
circumstances in which the issuer or bondholder modify or waive certain terms of, or rights with respect to,
the issue or in sophisticated hedainq transactions. IN SUCH CIRCUMSTANCES. ISSUERS ARE ADVISED
For purposes of determining the principal or redemption payments on a bond, different rules are
~,,, used for fixed-rate and variable-rate bonds. The payment is computed separately on each maturity of bonds
rather than on the issue as a whole. In certain circumstances, the yield on the bond is determined by
assuming that principal on the bond is paid as scheduled and that the bond is retired on the final maturity date
for the stated retirement price. For bonds subject to early redemption or stepped-coupon bonds, described
above, or for bonds subject to mandatory early redemption, the yield is computed assuming the bonds are
paid on the early redemption date for an amount equal to their value.
Section 148 of the Code provides that premiums paid to guarantee the payment of debt service on
bonds are taken into account in computing the yield on the bond. Payments for guarantees are taken into
~"" account by treating such premiums as the payment of interest on the bonds. This treatment, in effect, raises
the yield on the bond, thereby permitting the issuer to recover such fee with excess earnings.
The guarantee must bean unconditional obligation of the guarantor enforceable by the bondholder
for the payment of principal or interest on the bond or the tender price of a tender bond. The guarantee may
be in the form of an insurance policy, surety bond, irrevocable letter or line of credit, or standby purchase
McCall, Parkhurst & Horton L.L.P. -Page 3
+w
r.

agreement. Importantly, the guarantor must be legally entitled to full reimbursement for any payment made
on the guarantee either immediately or upon commercially reasonable repayment terms. The guarantor may
not be a co-obligor of the bonds or a user of more than 10 percent of the proceeds of the bonds.
Payments for the guarantee may not exceed a reasonable charge for the transfer of credit risk. This
reasonable charge requirement is not satisfied unless it is reasonably expected that the guarantee will result
in a net present value savings on the bond (i.e., the premium does not exceed the present value of the interest
,~ savings resulting by virtue of the guarantee). If the guarantee is entered into after June 14, 1989, then any
fees charged forthe nonguarantee services must be separately stated or the guarantee fee is not recoverable.
The regulations also treat certain "hedging" transactions in a manner similarto qualified guarantees.
"Hedges" are contracts, e.g., interest rate swaps, futures contracts or options, which are intended to reduce
the risk of interest rate fluctuations. Hedges and other financial derivatives are sophisticated and ever-
evolving financial products with which a memorandum, such as this, can not readily deal. IN SUCH
Earnings on Nonouroose Investments
The arbitrage rebate provisions apply only to the receipts from the investment of "gross proceeds"
in "nonpurpose investments." Forthis purpose, nonpurpose investments are stock, bonds orotherobligations
acquired with the gross proceeds of the bonds for the period prior to the use of the gross proceeds for its
ultimate purpose. For example, investments deposited to construction funds, reserve funds (including surplus
taxes or revenues deposited to sinking funds) or other similar funds are nonpurpose investments. Such
investments include only those which are acquired with "gross proceeds." For this purpose, "gross proceeds"
include original proceeds received from the sale of the bonds, investment earnings from the investment of
such original proceeds, amounts pledged to the payment of debt service on the bonds or amounts actually
used to pay debt service on the bonds. The regulations do not provide sufficient amount of guidance to
include an exhaustive list of "gross proceeds" for this purpose; however, it can be assumed that "gross
proceeds" represent all amounts received from the sale of bonds, amounts earned as a result of such sale
or amounts (including taxes and revenues) which are used to pay, or secure the payment of, debt service for
the bonds. The total amount of "gross proceeds" allocated to a bond generally can not exceed the outstanding
principal amount of the bonds.
The regulations provide generally that an investment is allocated to an issue for the period (1) that
begins on the date gross proceeds are used to acquire the investment, and (2) that ends on the date such
investment ceases to be allocated to the issue. In general, proceeds are allocated to a bond issue until
~w expended for the ultimate purpose for which the bond was issued or for which such proceeds are received
(e.g., construction of abond-financed facility or payment of debt service on the bonds). Deposit of gross
proceeds to the general fund of the issuer (or other fund in which they are commingled with revenues or taxes)
does not alleviate the obligation to compute rebate in most cases. As such, proceeds commingled with the
ir+ general revenues of the issuer are not "freed-up"from the rebate obligation. An exception to this commingling
limitation for bonds, other than private activity bonds, permits "investment earnings" (but not sale proceeds'.
or other types of gross proceeds) to be considered spent when deposited to a commingled fund if those
amounts are reasonably expected to be spent within six months. Other than for these amounts, issuers may
consider segregating investments in order to more easily compute the amount of such arbitrage earnings by
not having to allocate investments.
Special rules are provided for purposes of advance refundings. These rules are too complex to
discuss in this memorandum. Essentially, the rules relating to refundings, however, do not require that
amounts deposited to the escrow fund to defease the prior obligations of the issuer be subject to arbitrage
rebate to the extent that the investments deposited to the escrow fund do not have a yield in excess of the
yield on the bonds. Any loss resulting from the investment of proceeds in an escrow fund below the yield on
the bonds, however, may be recovered by combining those investments with investments deposited to other
~' funds, e.g., reserve or construction funds.
The arbitrage regulations also provide that the investment of bond proceeds in tax-exempt
obligations does not result in arbitrage. The provisions of the Technical and Miscellaneous Revenue Act of
~- 1988, however, amended that rule by providing that investment of bond proceeds in "private activity bonds"
(i.e., bonds subject to the alternative minimum tax under section 57(a)(5) of the Code) are treated as
investments in taxable obligations. As such, earnings from these tax-exempt investments are subject to
rebate.
McCall, Parkhurst & Horton L.L.P. -Page 4
....
r_
+,
Similarly, the investment otgross proceeds in certain tax-exempt mutual funds are treated as a direct
investment in the tax-exempt obligations deposited in such fund. While issuers may invest in such funds for
purposes of avoiding arbitrage rebate, they should be aware that if "private activity bonds" are included in the
fund then a portion of the earnings will be subject to arbitrage rebate. Issuers should be prudent in assuring
that the funds do not contain private activity bonds.
The arbitrage regulations provide a number of instances in which earnings will be imputed to the
nonpurpose investments. Receipts generally will be imputed to investments that do not bear interest at an
arm's-length (i.e., market) interest rate. As such, the regulations adopt a "market price" rule. In effect, this
rule prohibits an issuer from investing bond proceeds in investments at a price which is higher than the market
price of comparable obligations, in order to reduce the yield. Special rules are included for determining the
market price for investment contracts, certificates of deposit and certain U.S. Treasury obligations. For
example, to establish the fair market value of investment contracts a bidding process between three qualified
bidders must be used. The fair market value of certificates of deposit which bear a fixed interest rate and are
subject to an early withdrawal penalty is its purchase price ifthat price is not less than the yield on comparable
U.S. Treasury obligations and is the highest yield available from the institution. In any event, a basic "common
sense" rule-of-thumb that can be used to determine whether a fair market value has been paid is to ask
whether the general funds of the issuerwould be invested at the same yield. An exception to this market price
rule is available for United States Treasury Obligations -State or Local Government Series in which case the
purchase price is always the market price.
Reimbursement and Working Capital
The final regulations provide new rules for purposes ofdetermining whether gross proceeds are used
for working capital and, if so, at what times those proceeds are considered spent. In general, working capital
financings are subject to many of the same rules that have existed since the mid-1970s. For example, the
regulations generally continue the 13-month temporary period. By adopting a "proceeds-spent-last" rule, the
regulations also generally require that an issuer actually incur a deficit (i.e., expenditures must exceed
receipts) for the computation period (which generally corresponds to the issuer's fiscal year). Also, the
regulations continue to permit an operating reserve, but unlike prior regulations the amount of such reserve
may not exceed five percent of the issuer's actual working capital expenditures for the prior fiscal year.
Another change made by the regulations is that the issuer may not finance the operating reserve with
proceeds of atax-exempt obligation.
Importantly, the regulations also adopt rules for determining whether proceeds used to reimburse
an issuer for costs paid prior to the date of issue of the obligation, in fact, are considered spent at the time of
reimbursement. These rules apply to an issuer who uses general revenues for the payment of all or a portion
wr of the costs of a project then uses the proceeds of the bonds to reimburse those general revenues. Failure'
to comply with these rules would result in the proceeds continuing to be subject to federal income tax
restrictions, including rebate.
wr- To qualify for reimbursement, a cost must be described in an expression (e.g., resolution, legislative
authorization) evidencing the issuer's intent to reimburse which is made no later than 60 days after the
payment of the cost. Reimbursement must occur no later than 18 months after the later of (1) the date the
cost is paid or (2) the date the project is placed in service. Except for projects requiring an extended.
;,,a, construction period or small issuers, in no event can a cost be reimbursed more than three years after the cost
is paid.
Reimbursement generally is not permitted for working capital; only capital costs, grants and loans
may be reimbursed. Moreover, certain anti-abuse rules apply to prevent issuers from avoiding the limitations
on refundings. IN CASES INVOLVING WORKING CAPITAL OR REIMBURSEMENT, ISSUERS ARE
ADVISED TO CONTACT McCALL, PARKHURST & NORTON L.L.P. TOADDRESS THE FEDERAL INCOME
TAX CONSEQUENCES OF THE TRANSACTION.
"'~ Rebate Payments
Rebate payments generally are due 60 days after each installment computation date. The interim
computation dates occur each fifth anniversary of the issue date. The final computation date is on the latest
of (1) the date 60 days after the date the issue of bonds is no longer outstanding, (2) the date eight months
after the date of issue for certain short-term obligations (i.e., obligations retired within three years), or (3) the
date the issuer no longer reasonably expects any spending exception, discussed below, to apply to the issue.
On such payment dates, other than the final payment date, an issuer is required to pay 90 percent of the
w, rebatable arbitrage to the United States. On the final payment date, an issuer is required to pay 100 percent
of the remaining rebate liability.
McCall, Parkhurst 8~ Horton L.L.P. -Page 5
~.-
rr
r
	
	Failure to timely pay rebate does not necessarily result in the loss oftax-exemption. Late payments,
	however, are subject to the payment of interest, and unless waived, a penalty of 50 percent (or, in the case
	of private activity bonds, other than qualified 501 (c)(3) bonds,100 percent) of the rebate amount which is due.
;~„	IN SUCH CIRCUMSTANCES, ISSUERS ARE ADVISED TO CONSULT McCALL, PARKHURST & HORTON
	L.L.P. TO ADDRESS THE FEDERAL INCOME TAX CONSEQUENCES OF THESE TRANSACTIONS.
	Rebate payments are refundable. The issuer, however, must establish to the satisfaction of the
	Commissioner of the Internal Revenue Service that the issuer paid an amount in excess ofthe rebate and that
	the recovery of the overpayment on that date would not result in additional rebatable arbitrage. An
	overpayment of less than $5,000 may not be recovered before the final computation date.
	Alternative Penalty Amount
	
	In certain cases, an issuer of a bond the proceeds of which are to be used for construction may elect
	to pay a penalty, in lieu of rebate. The penalty may be elected in circumstances in which the issuer expects'
	to satisfy the two-year spending exception which is more fully described under the heading "Exceptions to
+~	Rebate." The penalty is payable, if at all, within 60 days after the end of each six-month period. This is more
	often than rebate. The election of the alternative penalty amount would subject an issuer, which fails thetwo-
	year spend-out requirements, to the payment of a penalty equal to one and one-half of the excess of the
	amount of proceeds which was required to be spent during that period over the amount which was actually..
~	spent during the period.
	The penalty has characteristics which distinguish it from arbitrage rebate. First, the penalty would
	be payable without regard to whether any arbitrage profit is actually earned. Second, the penalty continues
~,,,,	to accrue until either (1) the appropriate amount is expended or (2) the issuer elects to terminate the penalty.
	To be able to terminate the penalty, the issuer must meet specific requirements and, in some instances, must
	pay an additional penalty equal to three percent of the unexpended proceeds.
~,	Exceptions to Rebate
	The Code and regulations provide certain exceptions to the requirement that the excess investment
	earnings be rebated to the United States.
~	a. Small Issuers. The first exception provides that if an issuer (togetherwith all subordinate issuers)
	during a calendar year does not issue tax-exempt obligations in an aggregate face amount exceeding $5
	million, then the obligations are not subject to rebate. Only issuers with general taxing powers may take
	advantage of this exception. For this purpose, "private activity bonds" neither are afforded the benefit of this
~'*'	exception nor are taken into account for purposes of determining the amount of bonds issued. Subordinate
	issuers are those issuers which derive their authority to issue bonds from the same issuer, e.g., a city and a
	health facilities development corporation, or which are controlled by the same issuer, e.g., a state and the
	board of a public university.
..~r	
	b. Spending Exceptions.
Six-Month Exception. The second exception to the rebate requirement is available to all tax-
, exempt bonds, all of the gross proceeds of which are expended during six months. The six month rule is
available to bonds issued after the effective date of the Tax Reform Act of 1986. See the discussion of
effective dates on page two. For this purpose, proceeds used for the redemption of bonds (other than
proceeds of a refunding bond deposited to an escrow fund to discharge refunded bonds) can not be taken into
„„ account as expended. As such, bonds with excess gross proceeds generally can not satisfy the second
exception unless the amount does not exceed the lesser of five percent or $100,000 and such de minimis
amount must be expended within one year.
Certain gross proceeds are not subject to the spend-out requirement, including amounts deposited
"~` to a bona fide debt service fund, to a reserve fund and amounts which become gross proceeds received from
purpose investments. These amounts themselves, however, may be subject to rebate even though the
originally expended proceeds were not.
"' The Code provides a special rule for tax and revenue anticipation notes (i.e., obligations issued to
pay operating expenses in anticipation of the receipt of taxes and other revenues). Such notes are referred
to as TRANs. To determine the timely expenditure of the proceeds of a TRAN, the computation of the
°cumulative cash flow deficit" is important. If the "cumulative cash flow deficit" (i.e., the point at which the
•w operating expenditures of the issuer on a cumulative basis exceed the revenues of the issuer during the fiscal
year) occurs within the first six months of the date of issue and must be equal to at least 90 percent of the
McCall, Parkhurst 8 Horton L.L.P. -Page 6
,rr

w
`~ proceeds of the TRAN, then the notes are deemed to satisfy the exception. This special rule requires,
however, that the deficit actually occur, not that the issuer merely have an expectation that the deficit will
occur. In lieu of the statutory exception for TRANs, the regulations also provide a second exception. Under
this exception, 100 percent of the proceeds must be spent within six months, but before note proceeds can
`~"' be considered spent, all other available amounts of the issuer must be spent first ("proceeds-spent-last" rule).
In determining whether all available amounts are spent, a reasonable working capital reserve equal to five
percent of the prior year's expenditures may be set aside and treated as unavailable.
+a+' 18-Month Exception. The regulations also establish anon-statutory exception to arbitrage rebate
if all of the gross proceeds (including investment earnings) are expended within 18 months after the date of
issue. Under this exception, 15 percent of the gross proceeds must be expended within asix-month spending
period, 60 percent within a 12-month spending period and 100 percent within an 18-month spending period.
The rule permits an issuer to rely on its reasonable expectations for computing investment earnings which are
included as gross proceeds during the first and second spending period. A reasonable retainage not to
exceed five percent of the sale proceeds of the issue is not required to be spent within the 18-month period
but must be expended within 30 months. Rules similar to the six-month exception relate to the definition of
gross proceeds.
Two Year Exception. Bonds issued after December 19, 1989 (i.e., the effective date of the
Omnibus Reconciliation Act of 1989), at least 75 percent of the net proceeds of which are to be used for
construction, may be exempted from rebate if the gross proceeds are spent within two years. Bonds more
than 25 percent of the proceeds of which are used for acquisition or working capital may not take advantage
of this exception. The exception applies only to governmental bonds, qualified 501(c)(3) bonds and private
activity bonds for governmentally-owned airports and docks and wharves. The two-year exception requires
that at least 10 percent of the available construction proceeds must be expended within six months after the
date of issue, 45 percent within 12 months, 75 percent within 18 months and 100 percent within 24 months.'
The term "available construction proceeds" generally means sale proceeds of the bonds together with
investment earnings less amounts deposited to a qualified reserve fund or used to pay costs of issuance.
Under this rule, a reasonable retainage not to exceed five percent need not be spent within 24 months but'
~- must be spent within 36 months.
Thetwo-year rule also provides for numerous elections which must be made not later than the date
of issuance of the bonds. Once made, the elections are irrevocable. Certain elections permit an issuer to
rr- bifurcate bond issues, thereby treating only a portion of the issue as a qualified construction bond; and, permit..
an issuer to disregard earnings from reserve funds for purposes of determining "available construction
proceeds." Another election permits an issuer to pay the alternative penalty amount discussed above in lieu.
of rebate if the issuer ultimately fails to satisfy thetwo-year rule. Issuers should discuss these elections with
~,, their financial advisors prior to issuance of the bonds. Of course, McCall, Parkhurst & Horton L.L.P. remains
available to assist you by providing legal interpretations thereof.
c. Debt Service Funds. Additionally, an exception to the rebate requirement, whether or not any
of the previously discussed exceptions are available, applies for earnings on "bona fide debt service funds."
~•- A "bona fide debt service fund" is one in which the amounts are expended within 13 months of the
accumulation of such amounts by the issuer. In general, most interest and sinking funds (other than any
excess taxes or revenues accumulated therein) satisfy these requirements. For private activity bonds, short
term bonds (i.e., have a term of less than five years) or variable rate bonds, the exclusion is available only if
"'~" the gross earnings in such fund does not exceed $100,000, for the bond year. For other bonds issued after
November 11, 1988, no limitation is applied to the gross earnings on such funds for purposes ofthis exception.
Therefore, subject to the foregoing discussion, the issuer is not required to take such amounts into account
for purposes of the computation.
FOR BONDS ISSUED AFTER THE EFFECTIVE DATE OF THE TAX REFORM ACT OF 1986 WHICH
WERE OUTSTANDING AS OF NOVEMBER 11,1988, OTHER THAN PRIVATE ACTIVITY BONDS, SHORT
TERM BONDS OR VARIABLE RATE BONDS, AONE-TIME ELECTION MAY BE MADE TO EXCLUDE
EARNINGS ON "BONA FIDE DEBT SERVICE FUNDS" WITHOUT REGARD TO THE $100,000,
LIMITATION. THE ELECTION MUST BE MADE IN WRITING (AND MAINTAINED AS PART OF THE
ISSUER'S BOOKS AND RECORDS) NO LATER THAN THE LATER OF MARCH 21,1990, OR THE FIRST
DATE A REBATE PAYMENT IS REQUIRED.
r
Conclusion
McCall, Parkhurst & Horton L.L.P. hopes that this memorandum will prove to be useful as a general.
,, guide to the arbitrage rebate requirements.
McCall, Parkhurst & Horton L.L.P. -Page 7
~.+
wr
Again, this memorandum is not intended as an exhaustive discussion nor as specific advice with
respect to any specific transaction. We advise our clients to seek competent financial and accounting
assistance. Of course, we remain available to provide legal advice regarding all federal income tax matters,
~„ including arbitrage rebate. If you have any questions, please feel free to contact Harold T. Flanagan at
(214) 220-2800.
McCall, Parkhurst & Horton L.L.P. -Page 8
yr+°


Exhibit "B"
LAW OFFICES
M~CALL, PARKHURST 8~ HORTON L.L.P.
600 CONGRESS AVENUE
717 NORTH HARW000
NINTH FLOOR
DALLAS, TEXAS 762011687
TELEPHONE: (214) 754-9200
FACSIMILE: (214) 754-9250
700 N. ST. MARY'S STREET
1525 ONE RIVERWALK PLACE
SAN ANTONIO, TEXAS 78206.3603
1250 ONE AMERICAN CENTER
AUSTIN, TEXAS 78701-3248
TELEPHONE: (512) 47&3805
FACSIMILE: (512) 472-0871
Pat Tinley
County Judge
Kerr County, Texas
700 Main Street
Kerrville, Texas 78028
February 4, 2005
TELEPHONE: (210) 225-2800
FACSIMILE: (210) 225-2984
RE: KERB COUNTY, TEXAS CERTIFICATES OF OBLIGATION, SERIES 2005
Dear Judge Tinley:
As you know, Kerr County, Texas (the "Issuer") will issue the captioned certificates in order to
provide for the acquisition of the project. As a result of that issuance, the federal income tax laws
impose certain restrictions on the investment and expenditure of amounts to be used for the projector
to be deposited to the interest and sinking fund for the captioned certificates. The purpose of this letter
is to set forth, in somewhat less technical language, those provisions of the tax law which require the
timely use of bond proceeds and that investment of these amounts be at a yield which is not higher than
the yield on the captioned certificates. For this purpose, please refer to line 21(e) of the Form 8038-G
included in the transcript of proceedings for the yield on the captioned certificates.
Generally, the federal tax laws provide that, unless excepted, amounts to be used for the project
or to be deposited to the interest and sinking fund must be invested in obligations the combined yield
on which does not exceed the yield on the certificates. Importantly, for purposes of administrative
convenience, the certificates, however, have been structured in such a way as to avoid, for the most part,
this restriction on investment yield. They also contain certain covenants relating to expenditures of
proceeds designed to alert you to unintentional failures to comply with the laws affecting expenditures
of proceeds and dispositions of property.
First, the sale and investment proceeds to be used for the project maybe invested for up to three
years without regard to yield. (Such amounts, however, may be subject to rebate.) Thereafter, they
must be invested at or below the bond yield. Importantly, expenditure of these proceeds must be
~.w accounted in your books and records. Allocations of these expenditures must occur within 18 months
w


of the later of the date paid or the date the project is completed. The foregoing notwithstanding, the
allocation should not occur later than 60 days after the earlier of (1) of five years after the delivery date
of the certificates or (2) the date the certificates are retired unless you obtain an opinion of bond counsel.
Second, the interest and sinking fund is made up of amounts which are received annually for the
payment of current debt service on all the Issuer's outstanding certificates. Any taxes or revenues
«w deposited to the interest and sinking fund which are to be used for the payment of current debt service
on the captioned certificates, or any other outstanding certificates, are not subject to yield restriction.
By definition, current debt service refers only to debt service to be paid within one year of the date of
~'" receipt of these amounts. For the most part, this would be debt service in the current fiscal year. These
amounts deposited to the account for current debt service may be invested without regard to any
constraint imposed by the federal income tax laws.
Third, a portion of the interest and sinking fund is permitted to be invested without regard to
yield restriction as a "minor portion." The "minor portion" exception is available for de minimis
"~ amounts of taxes or revenues deposited to the interest and sinking fund. The maximum amount that may
be invested as part of this account may not exceed the lesser of five percent of the principal amount of
the certificates or $100,000.
Accordingly, you should review the current balance in the interest and sinking fund in order to
determine if such balance exceeds the aggregate amounts discussed above. Additionally, in the future
it is important that you be aware of these restrictions as additional amounts are deposited to the interest
and sinking fund. The amounts in this fund which are subject to yield restriction would only be the
amounts which are in excess of the sum of (1) the current debt service account and (2) the "minor
portion" account. Moreover, to the extent that additional certificates are issued by the Issuer, whether
for new money projects or for refunding, these amounts will change in their proportion.
The Order contains covenants that require the Issuer to comply with the requirements of the
federal tax laws relating to the tax-exempt obligations. The Internal Revenue Service=(the "Service")
has determined that certain materials, records and information should be retained by the issuers of tax-
exempt obligations for the purpose of enabling the Service to confirm the exclusion of the interest on
such obligations under the Internal Revenue Code. Accordingly, the Issuer should retain such
materials, records and information for the period beginning on the issue date of the captioned
certificates and ending three years after the date the captioned certificates are retired. Please dote
this federal tax law standard may vary from state law standards. The material, records and
information required to be retained will generally be contained in the transcript of proceedings for the
captioned certificates, however, the Issuer should collect and retain additional materials, records and
information to ensure the continued compliance with federal tax law requirements. For example, beyond
the transcript of proceedings for the certificates, the Issuer should keep schedules evidencing the
expenditure of certificate proceeds, documents relating to the use of bond-financed property by
governmental and any private parties (e.g., leases and management contracts, if any) and schedules
pertaining to the investment of certificate proceeds. In the event that you have questions relating to
record retention, please contact us.
Finally, you should notice that the ordinance contains a covenant that limits the ability of the
Issuer to sell or otherwise dispose of bond-financed property for compensation. Beginning for


w.r
obligations issued after May 15, 1997 (including certain refunding certificates), or in cases in which an
issuer elects to apply new private activity bond regulations, such sale or disposition causes the creation
of a class of proceeds referred to as "disposition proceeds." Disposition proceeds, like sale proceeds and
investment earnings, are tax-restricted funds. Failure to appropriately account, invest or expend such
disposition proceeds would adversely affect the tax-exempt status of the certificates. In the event that
you anticipate selling property, even in the ordinary course, please contact us.
.~- Obviously, this letter only presents a fundamental discussion of the yield restriction rules as
applied to amounts deposited to the interest and sinking fund. Moreover, this letter does not address the
rebate consequences with respect to the interest and sinking fund and you should review the
~ memorandum attached to the Federal Tax Certificate as Exhibit "A" for this purpose. If you have certain
concerns with respect to the matters discussed in this letter or wish to ask additional questions with
regards to certain limitations imposed, please feel free to contact our firm. Thank you for your
~" consideration and we look forward to our continued relationship.
Very truly yours,
McCALL, PARKHURST & HORTON L.L.P.



LAW OFFICES
McCALL, PARKHURST & NORTON L.L.P
600 CONGRESS AVENUE 717 NORTH HARWOOD 700 N. ST. MARY'S STREET
1250 ONE AMERICAN CENTER NINTH FLOOR 1525 ONE RIVERWALK PLACE
AUSTIN, TEXAS 78701-3248 DALLAS, TEXAS 75201-6587 SAN ANTONIO, TEXAS 78205-3503
TELEPHONE: 512 476-3805 TELEPHONE: 214 754-9200 TELEPHONE: 210 225-2600
FACSIMILE: 512 472-0671 FACSIMILE: 214 754-9250 FACSIMILE: 210 225-2984
May 12, 2005
CERTIFIED MAIL RRR: 7003 2260 0002 4698 6175
Internal Revenue Service Center
Ogden, Utah 84201
Re: Information Reporting -Tax-Exempt Bonds
Kerr County, Texas
Certificates of Obligation, Series 2005
Ladies and Gentlemen:
Pursuant to the requirements of Section 149(e) of the Internal Revenue Code of 1986,
enclosed please find an original and a photocopy of Form 803 8-G which is hereby submitted to you
for the above-captioned bonds issued February 14, 2005.
Please file the original and return the receipted copy of Form 8038-G to the undersigned in
the enclosed self-addressed, postage paid envelope.
Sincerely,
McCALL, PARKHURST & NORTON L.L.P.
~~ ~ ~~~~
Harold T. Flanagan
HTF: ved
;~„ Enclosures
cc: Mr. Noel Valdez

«.
8038_G Information Return for Tax-Exempt Governmental Obligations
"„~ Form - Under Internal Revenue Code section 149(e) OMB No. 15a5-0720
(Rev. November 2000) - See separate Instructions.
oeparmient a the Tn3esury Caution: If the issue price is under 5100,000, use Form 8038-GC.
Internal Revenue Service
~- Qonnrrinn Aurherity If Amended Return, check here - l 1
1	Issuef's name	2 Issuer's ~Pb7~ ~~~~ ~~
	KERR COUNTY, TEXAS	74 6001494
3	Number and street (or P.O. box if mail is not delivered to street address)	Room suite	4 Report number
	700 MAIN STREET		3 O 1
5	City, town, or post office, state, and ZIP code		8 Date of issue
	KERRVII.LE, TEXAS 78028		0 2 -14 - 0 5
7	Name of issue		8 CUSIP number
	CERTIFICATES OF OBLIGATION, SERIES 2005		49235.0 CJO
9	Name and title of officer or legal representative whom the IRS may call for more information	10 Telephone number of ofrlrer a legal representative
	PAT TINLEY, COUNTY JUDGE	( 830 ) 792-2211
•	T e of Issue (check a licable box es) and enter the issue rice) See instructions and attache.. schedule
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1
19	er.
If obligations are TANs or RANs, check box - ^ If obligations are BANS, check box - ^	
20	If obli ations are in the form of a lease or installment sale, check box - ^	
•	Descri lion of Obli ations. Corn late for the entire issue for which this form is b	ein filed.
	
(a) Final maturity date	
(b) Issue price	(c) stated redemption
price at maturity	(d) Weighted
average maturity		
(e) YNeld
21	02-15-2010 $ 2 023 155 S 2 000 000 2.993 ears 2.9979
•
.	Uses of Proceeds of Bond Issue mcludin underwriters' discount	
	d for accrued interest
d
P	22	560
22
3	s use
rocee
column (b))
of entire issue (enter amount from line 21
ri
I	23	2 023 155
2	,
.
ce
ssue p
2		
24	3 ,15 5
Proceeds used for bond issuance costs (including underwriters' discount) 24 1		
25	Proceeds used for credit enhancement . 25 -0-		
26	Proceeds allocated to reasonably required reserve or replacement fund 26 -0-		
27	Proceeds used to currently refund prior issues 27 -0-		
28	Proceeds used to advance refund prior issues 28 -0-		
29	Total (add lines 24 through 28)	29	123 155
30	.
Nonrefundin roceeds of the issue subtract line 29 from line 23 and enter amount here .	30	1 900 000
•
.	Descri lion of Refunded Bonds Com late this art on for refundin bonds.	No t A 1 i c a b 1 e
31	Enter the remaining weighted average maturity of the bonds to be currently refunded -	years
32	Enter the remaining weighted average maturity of the bonds to be advance refunded -	years
33	Enter the last date on which the refunded bonds will be called . -	
34	Enter the date(s) the refunded bonds were issued -	
35 Enter the amount of the state volume cap allocated to the issue under section 141(b)(5) 35 -0-
36a Enter the amount of gross proceeds invested or to be invested in a guaranteed investment contract (see instructions) 36a -0-
b Enter the final maturity date of the guaranteed investment contract -
37 Pooled financings: a Proceeds of this issue that are to be used to make loans to other governmental units 37a -0-
b If this issue is a loan made from the proceeds of another tax-exempt issue, check box - ^ and enter the name of the
issuer - and the date of the issue - N/A
38 If the issuer has designated the issue under section 265(b)(3)(B)(~(III) (small issuer exception), check box - ~
39 If the issuer has elected to pay a penalty in lieu of arbitrage rebate, check box - ^
. . . . . . . . . . . . . . . . . . . . . . .
40 If the issuer has identified a had e, check box • - ^
Under penalties of perjury, I declare that I have examined this return and accompanying schedules and statements, and to the best of my knowledge
and belief, they are true, correct, and complete.
Sign
;~. Here
r
02-14-OS
~- Date
For Paperwork Reduction Act Notice, see page 2 of the
.rr
Pat Tinley
County Judge
Type or print name and title
Cat. No. 637735 Form 8038-G (Rev. ii-zooo)
tr
GENERAL CERTIFICATE
THE STATE OF TEXAS §
COUNTY OF KERB §
We, the undersigned, hereby officially certify that we are the County Judge and County Clerk,
respectively, of KEtt1t COUNTY, TEXAS (the "County") and we further certify as follows:
1. This certificate is given for the benefit of the Attorney General of the State of Texas and
all parties interested in the "Kerr County Texas Certificate of Obligations, Series 2005" in the
aggregate principal amount of $2, 000, 000 (the "Certificates"), dated as of January 15, 2005, and
authorized by an order passed by the Commissioners Court of the County on February 4, 2005 and
a subsequent order levying an annual ad valorem tax passed by the Commissioners Court of the
County on February 14, 2005.
2. No litigation of any nature has ever been filed pertaining to, affecting or contesting: (a) the
issuance, delivery, payment, security or validity of the proposed Certificates; (b) the authority of the
officers of the County to issue, execute and deliver the Certificates; or (c) the validity of the corporate
existence, or the current Tax Roll (as defined below), and no litigation is pending pertaining to,
affecting or contesting the boundaries of the County.
3. All meetings of the Commissioners Court of the County at which action was taken in
preparation for or in connection with the issuance of the proposed Certificates occurred at the usual
designated meeting place, being the Kerr County Courthouse.
4. The currently effective ad valorem tax appraisal roll of the County (the "Tax Roll") is the
Tax Roll prepared and approved during the calendar year 2004, being the most recently approved Tax
Roll of the County; that the taxable property in the County has been appraised, assessed, and valued
as required and provided by the Texas Constitution and Property Tax Code (collectively, "Texas
law"); that the Tax Roll for said year has been submitted to the Commissioners Court of the County
as required by Texas law, and has been approved and recorded by the Commissioners Court; and
according to the Tax Roll for said year the net aggregate taxable value of taxable property in the
County (after deducting the amount of all applicable exemptions required or authorized under Texas
law), upon which the annual ad valorem tax of the County has been or will be imposed and levied,
is $2,423,553,240.
"~ 5. Attached hereto as Exhibit A is a true, full and correct schedule and statement of the
aforesaid proposed Certificates, and of all presently outstanding tax bond indebtedness of the County,
and attached hereto as Exhibit B is a combined debt service schedule for all outstanding tax bond
`~ indebtedness of the County.

0

6. Upon approval of the Bonds, the Attorney General of Texas is hereby authorized and
,,,~ directed to date this Certificate concurrently with the date of approval of the Bonds. If any event
should develop pertaining to the Bonds or any other matters covered by this Certificate which would
make any statement herein inaccurate, the undersigned will notify the Attorney General immediately
by telephone and facsimile. With this assurance the Attorney General can rely on the veracity and
currency of this Certificate at the time of the approval of the Bonds unless notified otherwise as
aforesaid.
[The remainder of this page intentionally left blank]
2



SIGNED AND SEALED this ~ day of February, 2005.
~.- ,,
County Judge
Kerr County Texas
C ty Clerk
Kerr County Texas
(County Seal)
[SIGNATURE PAGE TO GENERAL CERTIFICATE]
rr


EXHIBIT A
THE PROPOSED CERTIFICATES:
Certificate of Obligations, Series 2005, dated January 15, 2005, to be outstanding in the
principal amount of $2,000,000, bearing interest and maturing as set forth in the Order authorizing
said Certificates.
"~ ALL PRESENTLY OUTSTANDING TAX INDEBTEDNESS:
Limited Tax General Obligation Bonds, Series 1994, dated February 1, 1994, presently
`~ outstanding in the aggregate principal amount of $3,580,000.
Tax Anticipation Notes, Series 1998, dated December 15, 1998, currently outstanding in the
~ principal amount of $430,000.
Public Property Finance Contractual Obligations, Series 2001, dated September 15, 2001,
currently outstanding in the principal amount of $595,000.


~r
EXHIBIT B
COMBINED DEBT SERVICE SCHEDULE
Focal					Total
Year	Outstaudfa0				Outstanding
Ended	Debt	Certificates of Obligation, Series 2005 ~	Debt
9/	Service	Princi°a1	Interest	Totat	Service
2005	S 1,130,408				$ 1,130,408
2006	682,343	S 370,000	S !02,815	~~~ S 472,815 ~~~	1,155,157
2007	687,357	425,000	48,638	473,638	1,160,994
2008	691,521	440,000	33,500	473,500	1,165,021
2009	529,056	375,000	19,238	394,238	923,294
2010	534,188	390,000	6,338	396,338	930,525
2011	538,256	-	-	-	538,256
2012	541,263	-	-	-	541.263
TOTAL	S 5,33.1,390	S 2,000,000	S 210,527	S 2,210,527	S 6,414,510
«~Includes accrued interost of SS,560.35.

~•r

CLOSING CERTIFICATE
(as required by Paragraph 6(i)(6) of the Certificate Purchase Agreement)
THE STATE OF TEXAS §
COUNTY OF KERR §
We are the County Judge and the County Clerk of KERR COUNTY, TEXAS (the "Issuer"), and
we hereby certify as follows:
,~„ 1. This Certificate is executed and delivered for and on behalf of the Issuer with reference
to the issuance of the "KERR COUNTY, TEXAS CERTIFICATES OF OBLIGATION, SERIES 2005" in the
original aggregate principal amount of $2, 000, 000 (the "Certificates"), as required by and in
,,~, satisfaction of the requirements set forth in paragraph 6(i)(6) of the Certificate Purchase Agreement,
dated February 4, 2005 (the "Purchase Agreement"), by and between the Issuer and the Underwriter
of the Certificates, such Purchase Agreement authorized by an order approved by the Commissioners
„~ Court of the Issuer on February 4, 2005 (such order together with a subsequent order levying an
annual ad valorem tax, approved by the Commissioners Court of the Issuer on February 14, 2005,
referred to herein as the "Order"). Capitalized terms used and not defined in this Certificate shall
,~,,, have the meanings assigned to them in the Purchase Agreement.
2. The representations and warranties of the Issuer contained in the Purchase Agreement are
~„ true and correct in all material respects on and as of the date of Closing as if made on the date of the
Closing.
4. No litigation or proceeding against the Issuer is pending or, to our knowledge, threatened
in any court or administrative body, nor is there a basis for litigation, which would (a) contest the
right of the members or officials of the Issuer to hold and exercise their respective positions, (b)
contest the due organization and valid existence of the Issuer, (c) contest the validity, due
authorization and execution of the Certificates or the Issuer Documents, or (d) attempt to limit,
enjoin or otherwise restrict or prevent the Issuer from functioning and collecting taxes or revenues,
including payments on the Certificates, pursuant to the Order, and other income or the levy or
collection of the taxes pledged or to be pledged to pay the principal of and interest on the
Certificates, or the pledge thereof.
5. The Order has been duly adopted by the Issuer, is in full force and effect, and has not been
modified, amended or repealed.
5. To the best of our knowledge, no event affecting the Issuer has occurred since the date of
the Official Statement which should be disclosed in the Official Statement for the purpose for which
it is to be used or which it is necessary to disclose therein in order to make the statements and
information therein, in light of the circumstances under which made, not misleading in any respect
as of the date of the Closing, and the information contained in the Official Statement is correct in
all material respects and, as of the date of the Official Statement did not, and as of the date of the
Closing does not, contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements made therein, in the light of the
circumstances under which they were made, not misleading.


~.r
EXECUTED this DEB ~ 4 2005
County Judge, Kerr County, Texas
ty Clerk, Kerr County, exas
[EXECUTION PAGE OF THE CLOSING CERTIFICATE ]
r.r

r
r
SIGNATURE IDENTIFICATION AND NO-LITIGATION CERTIFICATE
We, the undersigned County Judge and County Clerk, respectively, of KERR COUNTY,
TEXAS (the "County"), hereby certify as follows:
~• (a) This certificate is executed and delivered with reference to the "Kerr County, Texas
Certificate of Obligations, Series 2005 ", dated January 15, 2005, in the aggregate principal amount
of $2, 000, 000, authorized by an order passed by the Commissioners Court of the County on February
4, 2005, and a subsequent Order passed by the Commissioners Court of the County on February 14,
2005 (the "Certificates").
(b) Each of us signed the Certificates by manually executing or causing facsimiles of our
manual signatures to be printed or lithographed on each of the Certificates, and we hereby adopt said
facsimile signatures as our own, respectively, and declaze that said facsimile signatures constitute
our signatures the same as if we had manually signed each of the Certificates.
(c) The Certificates are substantially in the form, and each of them has been duly
~,. executed and signed in the manner, prescribed in the order authorizing the issuance thereof.
(d) At the time we so executed and signed the Certificates we were, and at the time of
executing this certificate we are, the duly chosen, qualified, and acting officers indicated therein, and
authorized to execute and sign the same.
~ (e) No litigation of any nature has been filed or is now pending or, to our knowledge,
threatened, to restrain or enjoin the issuance or delivery of any of the Certificates, or which would
affect the provision made for their payment or security, or in any manner questioning the proceedings
or authority concerning the issuance of the Certificates, and that so far as we know and believe no
such litigation is threatened.
(f) Neither the corporate existence nor boundaries of the County is being contested; no
litigation has been filed or is now pending or, to our knowledge, threatened, which would affect the
authority of the officers of the County to issue, execute, sign, and deliver any of the Certificates; and
no authority or proceedings for the issuance of any of the Certificates have been repealed, revoked,
or rescinded. Notwithstanding the preceding sentence, the County acknowledges that, while no
litigation has been filed against the County in connection with the outstanding "Lease Revenue
Bonds" (as defined and described in the the recitals set forth in the Order which approved the
issuance of the Certificates), the County, along with certain other County-related entities, will
receive a full and complete written release by the holders of the Lease Revenue Bonds (as defined
in such Order) for any liability, known or unknown, which could be brought by such bondholders
in connection with such Lease Revenue Bonds.
(g) We have caused the official seal of the County to be impressed, or printed, or
lithographed on each of the Certificates; and said seal on each of the Certificates has been duly
adopted as, and is hereby declazed to be, the official seal of the County.



FEB 1 4 2005
EXECUTED and delivered this
MANUAL SIGNATURES
~ ,'
OFFICIAL TITLES
Pat Tinley, County Judge
Jannett Pieper, County Clerk
Before me, on this day personally appeared the foregoing individuals, known to me to be the
officers whose true and genuine signatures were subscribed to the foregoing instrument in my
presence.
Given under my hand and seal of office this Z ~/ 4 S~
ti
Not ublic
Typed Name
(My Commission Expires )
(Notary Seal)
ate':: ~~ NOEL VALD~Z
ar+ i 'f ~}* NOTARY PUBLIC
N9~~JP ~ State of Texas
'F~~Comm. Exp. 05-17-2006
[SIGNATURE PAGE TO SIGNATURE IDENTIFICATION AND NO-LITIGATION CERTIFICATE]
0


February 4, 2005
~, The Attorney General of Texas
Public Finance Division
300 W. 15 Street, 9`~ Floor
„~, Austin, Texas 78701
RE: $2,000,000 KERB COUNTY, TEXAS CERTIFICATE OF OBLIGATIONS,
SERIES 2005
Ladies and Gentlemen:
It is requested that you examine the above issues of obligations and the proceedings
authorizing their issuance.
We enclose herewith one signed but undated copy of the Signature Identification and No-
Litigation Certificate. Upon approval of the obligations, you are authorized to insert the date of
approval in said Signature Certificate. If any litigation should develop before you have approved the
obligations, we will notify you at once both by telephone and telecopy. With this assurance you can
rely upon the absence of any such litigation at the time you approve the obligations unless we advise
you otherwise.
A$er you have examined the obligations, kindly deliver them to the Office of the
Comptroller of Public Accounts of the State of Texas. The Comptroller has received instructions
"`~ as to disposition of such obligations following their registration.
Sincerely yours,
KERB COUNTY, TEXAS
ounty dge
cc: Comptroller of Public Accounts
~.
,~.
r
February 4, 2005
Texas State Comptroller of Public Accounts
~ Cash and Securities Management Division
Thomas Jefferson Rusk Building
208 East 10th Street, 6th Floor, Room 636
,,, Austin, Texas 78701-2407
Attn: Melissa Mora
RE: $2,000,000 KERB COUNTY, TEXAS CERTIFICATE OF OBLIGATIONS,
SERIES 2005
Ladies and Gentlemen:
The Attorney General will deliver to you the above described issues of obligations. At such
time as you have registered such obligations, this will be your authority to deliver them to an
authorized representative of McCall, Parkhurst & Horton L.L.P., who will deliver said obligations
to the bank of delivery for delivery to the purchasers thereof.
~ At the time you have registered the obligations, please release to an authorized representative
of McCall, Parkhurst & Horton L.L.P., five copies of the Attorney General's opinion and the
Comptroller's Signature Certificate covering said issue of obligations.
Sincerely yours,
KERB COUNTY, TEXAS
0
cc: Attorney General of Texas



		
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		FINAL DELIVERY, SETTLEMENT & CLOSING PROCEDURES
		for
		Kerr County, Texas
err		
		$2,000,000
		Certificates of Obligation, Series 2005
Bonds Dated:
Closing Date:
Closing:
January 15, 2005
Monday, February 14, 2005
he closing on the above-referenced bonds (the "Bonds") will beheld on Monday, February 14, 2005, at 11:00 A.M., CST (th
losing") via teleconference at the offices of McCall, Parkhurst & Horton, L.L.P. 1525 One River Walk Place, San Antoni<
exas 78205, Attn: Tom Spurgeon.
	Those parties expected to participate include:			
	Party	Title/Role	Company	Phone	Fax
	Judge Pat Tinley	County Judge	Kerr County	(830) 792-2212	(830) 792-2218
	Ma. Barbara Nemec	County Treasurer	Kerr County	(830) 792-2275	(830) 792-2277
	Mr. Robert Henderson	Financial Advisor	RBC Dain Rauscher Inc.	(210) 805-1118	(210) 805-1119
	Mr. Dusty Traylor	Financial Advisor	RBC Dain Rauscher Inc.	(210) 805-1117	(210) 805-1119
	Mr. Tom Spurgeon	Bond Counsel	McCall, Parkhurst & Horton L.L.P.	(210) 225-2800	(210) 225-2984
	Mr. Noel Valdez	Bond Counsel	McCall, Parkhurst & Horton L.L.P.	(210) 225-2800	(210) 225-2984
	Mr. Leon Johnson	Underwriter	Southwest Securities	(214) 859-9450	(214) 859-6059
	Ms. Julie Villarreal	Underwriter	Southwest Securities	(214) 859-9460	(214) 859-6059
°~	Mr. Michael Schulman	Underwriter's Counsel	Lock Liddell & Sapp LLP	(214) 740-8612	(214) 756-8612
	Mr. Doug Milner	Eecrow/Paying Agent	Wachovia Bank, N•.A.	(713) 278-4321	(713) 278-4329
	Ms. Karen Hart	Trustee	The Bank of New York Trust Company of Flc	(904) 645-1902	(904) 645-1932
riip			Sources and Uses of Funds		
				Certificates	
				of Obligation	
		Sources of Funds		Series 2005	
ar		Principal Amount of the CIBS		$2,000,000.00	
		Chiginal Issue Premium		23,154.70	
		Accrued Interest		5,560.35	
		Total Sources		$2,028,715.05	
					
		Uses of Funds			
		Deposit to Acquisition Fund		$1,900,000.00	
		Underwriters Discount		$26,000.00	
		Costs of Issuance		97,154.70	
rrr		Deposit to Interest & Sinking Fund		5,560.35	
		Total Uses		$2,028,715.05	

sr~

Kerr County, Texas
Page 2
RECEIPT OF FUNDS
1. On Monday Febntary 14, 2005, Southwest Securities (the "Underwriter") will wire transfer to Wachovia Bank, N.A. (the "Paying Agent")
Houston, Texas, ABA# 053000219, Account Number: 5 0000000 1643 9, FFC: Kerr County, Texas, Certificates of Obligation, Series 2005, Attn.
CT/Branch 4880, the amount listed below. The Underwriter will call the closing room with a Federal Wire Reference Number and time of such
wire as soon as possible on Monday, February 14, 2005.
Proceeds ofthe Bonds
Plus: Accrued Interest of the Bonds
Less: Underwriter's Discount for the Bonds
Total Wire Amount from Underwriter:
DISBURSEMENT OF FUNDS
$ 2,023,154.70
5,560.35
(26,000.00)
$ 2,002,715.05
1. Wachovia Bank, N.A., as the Paying Agent, will wire transfer $1,900,000 to The Bank of New York Trust Company, N.A., as trustee for the'
Hill Country Juvenile Facility Corporation Lease Revenue Bonds, Series 2002 (Kerr County, Texas Juvenile Detention Facilities Project). Such
amount represents the purchase price for the Juvenile Detention Facility being acquired by the Issuer from the Hill Country Juvenile Facilit
Corporation (the "Corporation") and will be disbursed by The Bank of New York in accordance with the provisions of a Consent and Release
Agreement, dated January 27, 2005, among the Issuer, the Corporation, the Ken County Juvenile Boazd, The Bank of New York Trust Company,
and the holders of such Lease Revenue Bonds. Such amount shall be wire transferred to The Bank of New York Trust Company, N.A., ABA#:
Total Deposit to Escrow Account
$ 1,900,000.00
I2. The Paying Agent will wire transfer $5,560.35 representing accrued interest as a deposit to Security State Bank & Trust ,ABA: 114 921 949,
Acct No.: 1119106 Ref: Kerr County, Certificates of Obligation, Series 2005 Interest & Sinking Fund.
Deposit to Interest & Sinking Fund:
5,560.35
3. Wachovia Bank, N.A., Houston,Texas, will retain $400.00 for the payment of fees listed below.
Paying AgenURegistrar Fee:
400.00
4. The Paying Agent will transfer to RBC Dain Rauscher Inc. the amounts listed below representing Financial Advisor Fees & Expenses to U.S.
Bank, Minneapolis, MN, ABA: 091000 022, Account#: 1-602-3009-7208, FFC: 2178-271550 FN00009249.
Financial Advisory Fees and Expenses:
5. The Paying Agent will transfer to McCall, Parkhurst & Horton, L.L.P., San Antonio, Texas the amounts listed below representing Bond Counsel
fees and expenses and Attorney General Fees to Colonial Bank (Wire Transfer Name: Colonial BHAM), ABA 0620-0131-9, Account No:
000000 1 5 29, For Credit To: McCall, Pazkhurst & Horton L.L.P., Operating Account, Reference Number 4099.002.
$ 35,956.25
Bond Counsel and Attorney General Fees
$ 13,250.00
I6. The Paying Agent will wire transfer $47,548.45 representing estimated remaining costs of issuance as a deposit to Security State Bank & Trust,
ABA: 114 921 949, Account No: 1013531, Ref: Kerr County General Operations.
Cost of Issuance Fund and Excess Proceeds 47,548.45
Total Disbursement of Funds 2,002,715.05

I7. Upon direction from the authorized representative of the Issuer, the Paying Agent and Bond Counsel, the Certificates will be released to
Southwest Securities.
8. Upon closing, the authorized representative of the Issuer will immediately return the Good Faith Deposit in its possession to Southwest Securities
via Overnight Mail. Please send to Ms. Zula Turknett, Southwest Securities, 1201 Elm Street, Suite 3500, Dallas, Texas 75270. Telephone (214)
859-9460.

~.
RECEIPT FOR PROCEEDS
The undersigned hereby certifies as follows:
(a) This certificate is executed and delivered with reference to the "Kerr County, Texas
Certificate of Obligations, Series 2005", dated January 15, 2005, in the aggregate principal amount
of $2,000,000 (the "Certificates"), authorized by an order passed by the Commissioners Court of
KERB COUNTY, TExaS (the "County") on February 4, 2005 and by a subsequent Order approved
by the Commissioners Court of the County on February 14, 2005.
(b) The undersigned is the duly chosen, qualified, and acting Treasurer of the Courrty.
(c) The Certificates have been duly delivered to the initial purchasers thereof, namely
SOUTHWEST SECURITIES, INC.
(as representative of the initial purchasers)
(d) The Certificates have been paid for in full by said purchasers concurrently with the
delivery of this Receipt, and the County has received, and hereby acknowledges receipt of, the agreed
purchase price for the Certificates, being X1,997,154.70 (which amount is equal to par, less
Underwriter's discount of $26, 000, plus a net original issue premium of $23,154.70), plus accrued
interest from the dated date to the date of delivery of the Certificates.
EXECUTED and delivered this FEB 1 4 2005
KERR COUNTY, TEXAS
Count Treasurer
~.

uL/11/LUUS 1L:bL i'AAL1U iSUS illy 1tUt3~!('1' t1~1Vllr:1<JU1V IgJUU3/UU5
P.03i05
""' FEB-11-2005 1149 MOODY' S I NUESTORS SERI) I CE
~"` Global Credit Research
New Essue
wr 26 JAN 2005 '
xao~'+a h~rramra ~-~
~"' c un o TX
Ncw laaus: Kerr (o ty fl
~ tIA00DY'S ASSIQNS A3 RATING TO KEFtR COt1NTY CrX] SZ MILLION CERTIFICA'TE3 OF OBLIGATION- SL°RIES
2005 ,.. ,,,. _ ,, .,•;: ~ +~'; ~ ,~a'~ ~ ..,..... ~'
t;,_.'u.~~~Y:iy.;rC. 1. 't~' ' ~~., '!'~:• ~t.t". ~~ °}ti.;.i.i,~~„ ~ .. ~ •'
RATING OFFEG75 CURRBNY !¢2 Mtl.I.ION Y69UE ONLY
County
TX
Moody's RatinS
RATINO
1991lE
Certificates of ObliQatlon, Series 2005 ~
Sale Amount ~,~,~0
Expected Sale Dane 02107106
Raring Desoriptlon General Obligation, umtted Tax
Opinion
NEW YORK, Jan Z6, 2000 ° Moody's Investors Servladoes not-trto ~ Cou ~~s utotending parity or
$Z~OOO,OOD Certifikates of Obltgatlon, Series 2005. Moody' urcheSe the County's juvenile
taol~Y corporation debt. Proceeds firom fife current tale will be used to p
the County`s moderately-sized taut
drrrterrtion fadfdy from bondholder,- Assignment of the A3 rating re~Aects llnancisl
base and healthy economic growth, modest debt burdens typical of Texas oo~a~ ~ occurred for they
reserves. The A3 rating also telces Inca ooneidaration an event of nor+-approp
2005 fiscal year In regards to ttre County juvenile detention teGfity. The wrre~witol,~the C ~~ ey an ad
valorem tax levied, vAthin the IirtitB prescribed by law, on all taxable proPortY
NON APpROPRIAT'ION FOR 2002 LEASE REVENUE BONDS
In fiscal 2002. the H!U country Juvenile Fadrty Corporetion issued $5,1 mUlion in lease revenue bonds to
pure g~ expand the focal juvenile detention facility. The bonds were tecun~d by lease payments tD be
made by Kerr County. The afAciel statement included standard langua9s for lease revenue bands, noting that
the countye obripatian to make lease paymerrte was subject to approprtetion. k did not include any langua0e
indreating tt~et the County intended ~ obilpatron to be limited to revenues gsneraied from the facility or that
the County did not intend to appropriate In the event that iaGilty revenues ware not eutTicient to pay debt
serviw.
Finandal performance of U'te faduty fell short of expectations during fiscal 2004 as a retuk ofa t
funding fmm the Sprta arld daueasing detairraes from other counties. At the a State. Annr~,ral deficits were
were rising significantly due to a change !n ~ ~~ ratios mandabad by the revenues
projected over the lone ~~ making it difficult to continue payments on the bonds from facility

., ., .,, i.,,,na voT t 9.9.R fTX/Rg NO 89281 X003
UL/11/LUU5 1l:5L r'AXLlU tfU5 illy KUBr:K'1;t1L~.'PIllr:KSUN
--' ICE
~., FEB-11-2005 11 ~ 50 MOODY' S I NIJESTORS Sl'RV
l¢J UU4/UU5
P.04i05
.. alone. For fiscal year 2006, the Gvunly elected not to appropriate funds for payment of debt ssrvke an tie
2002 bonds. The Certificates are being issued to allow the County to purchase the facirrlY from bondholders
. at a d'isoount glean that 54.9 million remains outstanding on the 2002 bends.
Moody's recognizes that the county waa within its legal rights when h did not appropriate for its annual lease
paYn'~~~, Nevertheless, we are of the opinion that, when the lease was securttized and offered publidy in
the capital markets, the County effectively indicated a greater willingness to make continued (ease payments
'"" than was required by the minimal legal obligation spelled out m the lease document
The A3 rating resHects our asse~rns+rt of this event of non-appropriation end the concerns It raises about the
County's general wlUinpneas to honor its obligations to Investors_ Ae a result, the rating is lower then it would
~"` have been in tho absence ~ this event. The impact of ttrese conrems on the rating is, however, relativey
modest, retiecUng the strong securli)- underlying the Certificates and the relatively small role that willingness
plays in such a reang. Ws also recognize that such Irrese flnanang is unusual in Texas and that the County
bed other, stronger, aecurltles available at the time the oil®inal tmnds ware issued; as a result, the County's
's' - willingness to malco payments on the 2002 bonds was discernibly weaker than would have been the case
with a similar Issuer In another state.
MODERATE TAX 13A6E GROWTH OVER LONG-TERM
The County is located in central Texas in the Hill Country. 'me population, which gnlw 209/e between the
1990 Census and the 2000 Census, includes a large number of retirees. Wealth levels fi the County equate
tD State levels with a 2000 per capita income of $19,767, or 100961 residential properties cotmprlsing 4196
States. Tax base growth is primarily driven by residential growl
of the total fax bas®. Retell Growth is foNowa'-g the residential growth to service the population needs. Over
~ hat five years, the tau base has grown an ev®rege of 796 annualty and M fiscal 2004, the tax base grew
5.6°x6 to $2.5 billion. Moody's believes the tax base witi continue to folbw historical growth patteme given
current development underway.
LOW DEBT BURDENS
Typical of Texas counties, Kerr County mafitains low debt burdens with 0.396 on a direct basis and 2-1 °~6 on
an overall basis. Payout is rapid with 100°/a paid in ten years. The County has limited plans foerilfiiture sobme
which may Include, in the next three b~e ~ trehe lini lited amountuof debt expected and eemoderate tax
improvements at the airport. Moody's
bass growth should keep the debt burdens low_
HEALTHY FINANCIAL. RESERVES
""' The County has histatoally maintei~dd s m1lQoneoroverr3ti96 ofiGener~F~undl revenueefn faecal 2003, the
years, the fund balance has axes ~
Geneiai Fund balance was $4Zmilfion, or 3996 of t3enerel Fund roComrNss oners passed a re oluotpn to
2004 indicate the fund balance will equal $4..4 mflllon. The County
maintain 25% Of General Fund expenditures in reserves which Moody's bel~s Z %~ m ~a~ ~esn and i
management General Lund operations are supported 53°Yo from prwvver the last three years averaging
18°/6 from tines and fees. Soles tax revenues have experienced 9
5.7% annually. Healthy finandal operations are expected to continue over the Iona-term given historical
~"' General Fund trends and the event of non-appropriation does not appear to signify a weakening of General
Fund fiscal management.
KEY 6TATISTICS:
orw
Population: +46,460
2005 Full Valuation: ~-~ billion
a
2005 full value per cep'>tr+: X65.140
plied debt burden, 0.3°~
rr. Overall debt burden: 2.1%
are
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01/11/1005 11:53 HAX 110 805 1119 ~ R0~ BERT HENDERSON IQ 005/005
---- - 'P.05i05
rtr®• FEB-11-2605 1150 MOODY' S INVESTORS SERVICE .
Payout (10 years):10o%
2003 General Fund balenae; $4.2 milflon 138.4°~ ~ Deneral Fund revenues)
Je-nalysa
}(Jistin Button
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Public Fiftance Group
Meody's Investors t5enrice
~" pwtghl Burns
Backup An>atyst
Public Finance Group
Meody's lnvestore, Service
Cont~Cts
aloumafists: (2721553-0376
Research Cllw>tta: (212) 6F-3-~6fi3
	
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_ _ ........,.~ ,~.,T , ~ . ~e rTxiRx NO 69281 [~ 005
~.~~
~r ATTORNEY GENERAL OF TEXAS
GREG ABBOTT
February 14, 2005
THIS IS TO CERTIFY that Kerr County, Texas (the "Issuer")has submitted
to me Kerr County Texas Certificate of Obligation. Series 2005 (the "Certificate"),
in the principal amount of $2,000,000, for approval. The Certificate is dated
,~ January 15, 2005, numbered T-1, and was authorized by an Order of the Issuer
passed on February 14, 2005.
I have examined the law and such certified proceedings and other papers as I deem
necessary to render this opinion.
+~ As to questions of fact material to my opinion, I have relied upon representations of the
Issuer contained in the certified proceedings and other certifications of public officials furnished to
me without undertaking to verify the same by independent investigation.
I express no opinion relating to the official statement or any other offering material relating
to the Certificate.
Based on my examination, I am of the opinion, as of the date hereof and under existing law,
as follows):
(1) The Certificate has been issued in accordance with law and is a valid and binding
obligation of the Issuer.
(2) The Certificate is payable from the proceeds of an ad valorem tax levied, within the
limits prescribed bylaw, against all taxable property in the Issuer.
Therefore, the Certificate is approved.
of the State of Texas
No. 42936
Book No. 2005A
MAA
wr
PosT OFFICE Boy 12548, AUSTIN, TERAS 78711-2548 •re[.:(512)4G3-2100 www.o.~,c.sT,~Tr..•rx.us
An Equa! Employmrxl Opportanity Fmylayrr •. Priroled oe Retytlyd Puper
t~

OFFICE OF COMPTROLLER
OF THE STATE OF TEXAS
"" I, CAROLE KEETON STRAYHORN, Comptroller of Public Accounts of the
State of Texas, do hereby certify that the attachment is a true and correct copy of the
«. opinion of the Attorney General approving the:
,~ Kerr County, Texas Certificates of Obligation, Series 2005
numbered T-1, of the denomination of $ 2,000,000, dated January 15, 2005, as
authorized by issuer, interest various percent, under and by authority of which said
bonds/certificates were registered electronically in the office of the Comptroller, on
'"" the 14th day of February, 2005, under Registration Number 69553.
Given under my hand and seal of office, at Austin, Texas, the 14th dak of
February, 2005.
~ ~~-
CAROLE KEETON STRAYHORN
Comptroller of Public Accounts
of the State of Texas



OFFICE OF COMPTROLLER
OF THE STATE OF TEXAS
I, Melissa Mora, ~ Bond Clerk ^X Assistant Bond Clerk in the office of the Comptroller of the State
of Texas, do hereby certify that, acting under the direction and authority of the Comptroller on the
~.
14th day of February. 2005, I signed the name of the Comptroller to the certificate of registration
endorsed upon the:
Kerr County Texas Certificates of Obligation. Series 2005,
• numbered ~ dated nua 15 2005, and that in signing the certificate of registration I used the
following signatur „ ~~ ~ ` _ „
IN WITN~~S V 1 REOF I have executesthis if~cate this the 14th day of February. 2005.
I, Carole Keeton Strayhorn, Comptroller of Public Accounts of the State of Texas, certify that
the person who has signed the above certificate was duly designated and appointed by me under
authority vested in me by Chapter 403, Subchapter H, Government Code, with authority to sign my
name to all certificates of registration, and/or cancellation of bonds required by law to be registered
and/or cancelled by me, and was acting as such on the date first mentioned in this certificate, and
that the bonds/certificates described in this certificate have been duly registered in the office of the
Comptroller, under Registration Number 69553.
GIVEN under my hand and seal of office at Austin, Texas, this the 14th da~of February. 2005.
it ~L---
CAROLE KEETON STRAYHORN
Comptroller of Public Accounts
;~„ of the State of Texas

.,.
w
LOCKS LIDDELL & SAPP LLP
A'I'IORNEYS & COUNSL'.LORS
2200 Ross Avt,avt'F (214) 740-8000
S~'r1't2200 Fax: (214) 740-8800
lln~.l.,~s,1'i~~.X~s 75201-6776 ~1cs~r~[~ • Dw.l.ns • IIousrow • NFat~ O~u.rnNS wwwlockeliddcll.com
DIRECT D1AL: 214/740-8612
E-MA1L: mschulman@lockeliddell.com
February 14, 2005
"" Southwest Securities, Inc.
1201 Elm Street, Suite 3500
Dallas, Texas 75270
Re: $2,000,000 Kerr County, Texas Certificates of Obligation, Series 2005
Ladies and Gentlemen:
"~ We have acted as your counsel in connection with the purchase by you on this date from
Kerr County, Texas (the "Issuer") of the Kerr County, Texas Certificates of Obligation, Series
2005 (the "Certificates"), pursuant to the Certificate Purchase Agreement dated February 4, 2005
~ (the "Agreement"), between you and the Issuer. Unless otherwise expressly provided herein,
capitalized terms used herein have the respective meanings assigned to them in the Agreement.
In such capacity, we have examined the originals or copies, certified or otherwise
identified to our satisfaction, of such records, corporate and other, of the Issuer and certificates of
public officials and representatives of the Issuer, and such other documents as we have deemed
necessary or advisable as a basis for the opinions hereinafter expressed. We have not examined
the Certificates and we have relied upon certificates of the Issuer as to the execution thereof. As
to certain other matters, we have relied upon opinions of even date herewith of McCall, Parkhurst
& Horton L.L.P, Bond Counsel. We have reviewed such opinions and believe that they are
satisfactory in form and substance and that you are justified in relying thereon.
Based on the foregoing, we are of the opinion that the offer and sale of the Certificates to
the public is exempt from registration under the Securities Act of 1933, as amended, and the
~w Trust Indenture Act of 1939, as amended, and the Order need not be qualified under the Trust
Indenture Act of 1939, as amended.
aw Because the primary purpose of our professional engagement was not to establish factual
matters and because of the wholly or partially non-legal character of many determinations
involved in the preparation of the Official Statement dated February 4, 2005 (the "Official
•~ Statement"), we have not conducted any independent investigation with regard to the
information set forth in the Official Statement, and we are not passing upon and do not assume
any responsibility for the accuracy, completeness, or fairness of the statements contained in the
Official Statement. We have, however, participated in the preparation of the Official Statement
as counsel to you and have participated in conferences at which the Official Statement was
discussed. On the basis of the foregoing and in reliance thereon and on the certificates, opinions
"'~' and other documents herein mentioned (relying as to materiality to a large extent upon the
•rr DALLAS: 87633.00008:1362763v1

,~,,, officials and other representatives of the Issuer), we advise you that no facts have come to our
attention that lead us to believe that the Official Statement (except as to (i) any financial,
forecast, technical and statistical statements and data included in the Official Statement and (ii)
iw the information regarding the DTC and its book-entry system, as to all of which we are not called
upon to express any opinion or belief) contains any untrue statement of a material fact or omits
to state any material fact necessary to make the statement therein, in light of the circumstances
w~ under which they were made, not misleading.
In addition, (a) based upon: (i) our understanding of Rule 15c2-12 of the Securities and
Exchange Commission (the "Rule") (and interpretive guidance published by the Securities and
Exchange Commission relating thereto); (ii) our review of the continuing disclosure undertaking
of the Issuer contained in the Order; and (iii) the inclusion in the Official Statement of a
"" description of the specifics of such undertakings and in reliance on the opinion of Bond Counsel
that the Order has been duly adopted by the Issuer and is a valid and binding obligation of the
Issuer, we advise you that such undertakings provide a suitable basis for you, the Underwriter,
~"' and any other broker, dealer, or municipal securities dealer acting as a Participating Underwriter
(as defined in the Rule) in connection with the offering of the Certificates, to make a reasonable
determination that the Issuer has met the qualifications of paragraph (b)(5)(i) of the Rule.
This opinion is issued to you and for your sole benefit and is issued for the sole purpose
of the transaction specifically referred to herein. No person other than you may rely upon this
opinion without our express written consent. This opinion may not be utilized by you for any
other purpose whatsoever and may not be quoted by you without our express prior written
consent. We assume no obligation to review or supplement this opinion subsequent to its date,
whether by reason of a change in the current laws, by legislative or regulatory action (including,
without limitation, publication by the Securities and Exchange Commission of further
interpretive guidance relating to the Rule), by judicial decision, or by any other action. The
opinions expressed herein are limited to the matters specifically set forth herein, and no other
opinions should be inferred beyond the matters expressly stated.
Respectfully submitted,
~~~~ ~ S~ ~-~-C~P
~,d~

-2-
+r DALLAS: 87633.00008:1362763v1
,~
LAW OFFICES
M~CALL, PARKHURST & HORTON L.L.P.
717 NORTH HARWOOD 700 N. ST MARY'S STREET 600 CONGRESS AVENUE
NINTH FLOOR 1525 ONE RIVERWALK PLACE 12500NEAMERICANCENTER
~W DALLAS, TEXAS 75 20 1-658 7 SAN ANTONIO, TEXAS 78205-3503 AUSTIN, TEXAS 7870 1-32 48
TELEPHONE: 214 754-9200 TELEPHONE. 210 225-2800 TELEPHONE- 512 478-3805
FACSIMILE- 214 754-9250 FACSIMILE: 210 225-2984 FACSIMILE: 512 472-0871
February 14, 2005
~"' KERR COUNTY, TEXAS
CERTIFICATES OF OBLIGATION, SERIES 2005
DATED AS OF JANUARY 15, 2005
~ IN THE AGGREGATE PRINCIPAL AMOUNT OF $2,000,000
AS BOND COUNSEL FOR KERR COUNTY, TEXAS (the "County") in connection with
~I. the issuance of the Certificates of Obligation described above (the "Certificates"), we have examined
into the legality and validity of the Certificates, which bear interest from January 15, 2005, until
maturity at the rates stated in the text of the Certificates, payable on February 15, 2006, and
,,, semiannually on each August 15 and February 15 thereafter, and maturing in serial installments on
February 15 in each of the years 2006 through 2010, inclusive, all in accordance with the terms and
conditions stated in the text of the Certificates. The Certificates are not subject to optional
redemption prior to maturity.
WEHAVEEXAMINED the applicable and pertinent provisions ofthe Constitution and laws
of the State of Texas, and a transcript of certified proceedings of the County, and other pertinent
"" instruments authorizing and relating to the issuance of the Certificates including (i) the order
authorizing the issuance of the Certificates and the subsequent order authorizing and levying an
annual ad valorem tax to secure payment of principal of and interest on the Certificates (collectively,
"'~' the "Order"), (ii) one ofthe executed Certificates (Certificate No. T-1), and (iii) the County's Federal
Tax Certificate of even date herewith.
IT IS OUR OPINION that the Certificates have been authorized, issued and delivered in
accordance with law; that the Certificates constitute valid and legally binding general obligations of
the County in accordance with their terms except as the enforceability thereof may be limited by
,~„ bankruptcy, insolvency, reorganization, moratorium, liquidation and other similar laws now or
hereafter enacted relating to creditors' rights generally; that the County has the legal authority to issue
the Certificates and to repay the Certificates; and that ad valorem taxes sufficient to provide for the
,~,,, payment of the interest on and principal of the Certificates, as such interest comes due, and as such
principal matures, have been levied and ordered to be levied against all taxable property in the
County, and have been pledged for such payment, within the limits prescribed bylaw, all as provided
in the Order.
IT IS FURTHER OUR OPINION, except as discussed below, that the interest on the
Certificates is excludable from the gross income of the owners thereof for federal income tax
~°" purposes under the statutes, regulations, published rulings and court decisions existing on the date
of this opinion. We are further of the opinion that the Certificates are not "specified private activity
bonds" and that, accordingly, interest on the Certificates will not be included as an individual or
~"' corporate alternative minimum tax preference item under section 57(a)(5) of the Internal Revenue
Code of 1986 (the "Code"). In expressing the aforementioned opinions, we have relied on certain
representations, the accuracy of which we have not independently verified, and assume compliance
~.. with certain covenants, regarding the use and investment of the proceeds of the Certificates and the

~+ Kerr County, Texas Certificates of Obligation, Series 2005
February 14, 2005
Page 2
use of the property financed therewith. We call your attention to the fact that if such representations
are determined to be inaccurate or upon a failure by the County to comply with such covenants,
interest on the Certificates may become includable in gross income retroactively to the date of
issuance of the Certificates.
„~„ WE CALL YOURATTENTIONTO THEFACTthatthe interest ontax-exempt obligations,
such as the Certificates, is (a) included in a corporation's alternative minimum taxable income for
purposes of determining the alternative minimum tax imposed on corporations by section 55 of the
Code, (b) subject to the branch profits tax imposed on foreign corporations by section 884 of the
Code, and (c) included in the passive investment income of an S corporation and subject to the tax
imposed by section 1375 of the Code.
"' EXCEPTASSTATEDABOVE, we express no opinion as to any other federal, state or local
tax consequences of acquiring, carrying, owning or disposing of the Certificates.
"" OUR SOLE ENGAGEMENT in connection with the issuance of the Certificates is as Bond
Counsel for the County, and, in that capacity, we have been engaged by the County for the sole
purpose of rendering an opinion with respect to the legality and validity of the Certificates under the
Constitution and laws of the State of Texas, and with respect to the exclusion from gross income of
the interest on the Certificates for federal income tax purposes, and for no other reason or purpose.
The foregoing opinions represent our legal judgment based upon a review of existing legal authorities
,~ that we deem relevant to render such opinions and are not a guarantee of a result. We have not been
requested to investigate or verify, and have not independently investigated or verified, any records,
data, or other material relating to the financial condition or capabilities of the County, or the
~,,, disclosure thereof in connection with the sale of the Certificates, and have not assumed any
responsibility with respect thereto. We express no opinion and make no comment with respect to the
marketability of the Certificates, and we have relied solely on certificates executed by officials of the
County as to the current outstanding indebtedness of, and assessed valuation of taxable property
~` within, the County. Our role in connection with the County's Official Statement prepared for use in
connection with the sale of the Certificates has been limited as described therein.
""~ OUR OPINIONS ARE BASED ON EXISTING LAW, which is subject to change. Such
opinions are further based on our knowledge of facts as of the date hereof. We assume no duty to
update or supplement our opinions to reflect any facts or circumstances that may hereafter come to
~, our attention or to reflect any changes in any law that may hereafter occur or become effective.
Moreover, our opinions are not a guarantee of a result and are not binding on the Internal Revenue
Service (the "Service"); rather, such opinions represent our legal judgment based upon our review
~• of existing law and in reliance upon the representations and covenants referenced above that we deem
relevant to such opinions. The Service has an ongoing audit program to determine compliance with
rules that relate to whether interest on state or local obligations is includable in gross income for
~,,, federal income tax purposes. No assurance can be given whether or not the Service will commence
an audit of the Certificates. If an audit is commenced, in accordance with its current published
procedures the Service is likely to treat the County as the taxpayer. We observe that the County has
„~, covenanted not to take any action, or omit to take any action within its control, that if taken or
omitted, respectively, may result in the treatment of interest on the Certificates as includable in gross
income for federal income tax purposes.
Respectfully,
0
r
717 NORTH HARWOOD
NINTH FLOOR
DALLAS, TEXAS 75 201-658 7
TELEPHONE: 214 754-9200
FACSIMILE. 214 7549250
LAW OFFICES
M~CALL, PARKHURST & NORTON L.L.P.
700 N. ST MARY'S STREET
1525 ONE RIVERWALK PLACE
SAN ANTONIO, TEXAS 78205-3503
TELEPHONE: 210 225-2800
FACSIMILE: 210 225-2984
February 14, 2005
r.r
Kerr County, Texas
700 Main Street
~, Kerrville, Texas 78028
Southwest Securities, Inc.
~,, 1201 Elm Street
Dallas, Texas 75270
600 CONGRESS AVENUE
12500NEAMERICAN CENTER
AUSTIN, TEXAS 7870 1-3 2 48
TELEPHONE'. 512 478-3805
FACSIMILE'S12 472-0871
RE: $2,000,000 KERB COUNTY, TEXAS CERTIFICATES OF OBLIGATION, SERIES 2005
Ladies & Gentlemen:
This opinion is provided to you pursuant to the requirements of Section 6(i)(4) of the
Certificate Purchase Agreement, dated January 19, 2005, between Southwest Securities (the
~"' "Underwriter") and Kerr County, Texas (the "Issuer") relating to the sale by the Issuer to the
Underwriter of $2, 000, 000 Kerr County, Texas Certificates of Obligation, Series 2005 (the
"Obligations"). The Obligations are issued pursuant to two separate Orders (collectively, the "Orders)
'~` adopted by the Commissioners Court of the Issuer on February 4, 2005, and February 14, 2005,
respectively.
.. All references in this opinion to instruments and other defined terms shall mean the
instruments and other terms as defined in the Certificate Purchase Agreement. The opinions expressed
;,,~„ below are qualified to the extent that the enforceability of any provisions in any of the agreements or
documents listed may be subject to and affected by applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting the rights of creditors generally.
We have examined such documents and satisfied ourselves as to such matters as we have
deemed necessary in order to enable us to express the opinions set forth below. As to various
~ questions of fact material to these opinions, we have relied upon representations ofthe Issuer relating
to the Bonds.
Based upon our examination, we are of the opinion, that:


~.
Kerr County, Texas Certificates of Obligation, Series 2005
February 14, 2005
""~ Page 2
1. The Orders have been duly adopted and are in full force and effect.
2. The Obligations are exempted securities within the meaning of Section 3 (a)(2) of the
Securities Act of 1933, as amended, and it is not necessary in connection with the
offer and sale of the Obligations to the public to register the Obligations under the
Securities Act of 1933, as amended, or to qualify the Obligations or the Orders under
"~" the Trust Indenture Act of 1939, as amended.
3. Except as otherwise specified herein, we have not verified, are not passing upon and
do not assume any responsibility for the accuracy, completeness or fairness of the
statements contained in the Official Statement. In our capacity as Bond Counsel for
the Issuer, however, we have reviewed the information contained in the Official
Statement under the captions or subcaptions THE CERTIFICATES" (other than
under the subcaption "Payment Record" as to which we render no opinion)
"REGISTRATION, TRANSFER AND EXCHANGE," "TAX MATTERS,"
"CONTINUING DISCLOSURE OF INFORMATION" (except for the information
under the caption "Compliance with Prior Agreements" as to which we render no
opinion), REGISTRATION AND QUALIFICATION OF CERTIFICATES FOR
SALE," and "LEGAL INVESTMENTS AND ELIGIBILITY TO SECURE PUBLIC
FUNDS IN TEXAS", and we are of the opinion that such information in all material
respects accurately and fairly reflects the provisions ofthe Obligations and the Orders,
accurately describes the information purported to be shown therein, and is correct as
to matters of law.
This letter is furnished to you by us and is solely for your benefit in connection with the
transaction to which reference is made above and may not be used or relied upon by any other person
"'~' for any purposes whatsoever without our prior written consent.
Respectfully submitted,
f~-~---

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