Raymond James Morgan Keegan

Transcription

1 RATING: Moody s A1 See RATING OFFICIAL STATEMENT Dated January 28, 2013 NEW ISSUE BOOK-ENTRY-ONLY In the opinion of Bond Counsel to the Issuer, interest on the Bonds will be excludable from gross income for federal income tax purposes under statutes, regulations, published rulings and court decisions on the date thereof, subject to the matters described under "TAX MATTERS" herein, including the alternative minimum tax on corporations. The District has designated the Bonds as Qualified Tax-Exempt Obligations. See TAX MATTERS - Qualified Tax-Exempt Obligations for Financial Institutions herein. TRAVIS COUNTY EMERGENCY SERVICES DISTRICT NO. 3 (A political subdivision of the State of Texas) $3,030,000 LIMITED TAX REFUNDING BONDS, SERIES 2013 Dated: January 15, 2013 Due: September 1, as shown on inside cover The $3,030,000 Travis County Emergency Services District No. 3 Limited Tax Refunding Bonds, Series 2013 (the Bonds ) are being issued by Travis County Emergency Services District No. 3 (the Issuer or the District ) pursuant to the Constitution and general laws of the State of Texas, particularly Chapter 775 of the Texas Health and Safety Code, as amended, Section 1207, Texas Government Code, as amended and an order (the Order ) to be passed by the Board of Commissioners (the Board of Commissioners ) of the District on January 28, Interest on the Bonds will accrue from the Dated Date, and will be payable March 1 and September 1 of each year, commencing March 1, The District intends to use the book-entry-only system of The Depository Trust Company ( DTC ), but use of such system could be discontinued. The principal of and interest on the Bonds will be payable to Cede & Co., as nominee for DTC, by Wells Fargo Bank, N.A., Dallas, Texas, as the initial Paying Agent/Registrar for the Bonds (the Paying Agent/Registrar ). No physical delivery of the Bonds will be made to the beneficial owners thereof. Such book-entry-only system will affect the method and timing of payment and the method of transfer of the Bonds (see THE BONDS Book Entry Only System ). Source of Payment... The Bonds are payable from and secured by the proceeds of a continuing, direct annual ad valorem tax levied, within the limits prescribed by law, on all taxable property within the Travis County Emergency Services District No.3. The combined annual ad valorem tax rate for maintenance and operations and debt service purposes, including payment of principal of and interest on the Bonds (together with any additional general obligation bonds hereto for or hereafter issued by the District), may not exceed $0.10 per $100 assessed valuation of taxable property in the District. See "THE BONDS - Sources of Payment and Security." Purpose... Proceeds from the sale of the Bonds will be used to: (i) refund portions of the District s outstanding Limited Tax Bonds, Series 2003 and Limited Tax Bonds, Series 2005, and (ii) pay the costs associated with the issuance of the Bonds.. MATURITY SCHEDULES SHOWN ON THE INSIDE COVER The Bonds having stated maturities on and after September 1, 2023, are subject to optional redemption in whole or in any part thereof, in the principal amounts of $5,000 or any integral multiple thereof on September 1, 2022, or any date thereafter, at the par value thereof plus accrued interest to the date fixed for redemption. The Bonds are offered when, as and if issued, and accepted by the Underwriter, subject to the approving opinion of the Attorney General of the State of Texas and the legal opinion of McCall, Parkhurst & Horton L.L.P., Austin, Texas, Bond Counsel. Certain legal matters will be passed upon for the Underwriter by its counsel, Andrews Kurth LLP, Houston, Texas. The Bonds are expected to be available for initial delivery through the services of DTC on or about February 26, Raymond James Morgan Keegan

2 CUSIP Prefix: 89438W (A) MATURITY SCHEDULE TRAVIS COUNTY EMERGENCY SERVICES DISTRICT NO. 3 (A political subdivision of the State of Texas) $3,030,000 Limited Tax Refunding Bonds, Series 2013 $2,865,000 Serial Bonds Maturity Principal Interest Initial CUSIP Date Amount Rate Yield Suffix (A) 9/1/2013 $ 50, % 0.50% BA1 9/1/ , % 0.75% BB9 9/1/ , % 0.98% BC7 9/1/ , % 1.10% BD5 9/1/ , % 1.25% BE3 9/1/ , % 1.35% BF0 9/1/ , % 1.50% BG8 9/1/ , % 1.65% BH6 9/1/ , % 1.95% BJ2 9/1/ , % 2.15% BK9 9/1/ , % 2.30% BL7 $165,000 Term Bonds $165, % Term Bonds due September 1, 2025, Yield 2.50%, CUSIP Suffix BM5 (A) OPTIONAL REDEMPTION The Bonds having stated maturities on and after September 1, 2023, are subject to optional redemption in whole or in any part thereof, in the principal amounts of $5,000 or any integral multiple thereof on September 1, 2022, or any date thereafter, at the par value thereof plus accrued interest to the date fixed for redemption. Additionally, the Term Bonds (defined herein) are subject to mandatory sinking fund redemption (see THE BONDS Redemption ). (A) CUSIP is a registered trademark of the American Bankers Association. CUSIP data herein is provided by CUSIP Global Services, managed by Standard & Poor s Financial Services LLC on behalf of The American Bankers Association. This data is not intended to create a database and does not serve in any way as a substitute for the CUSIP services. None of the District, the Financial Advisor or the Underwriter shall be responsible for the selection or correctness of the CUSIP numbers set forth herein. -ii-

3 DISTRICT OFFICIALS Appointed Officials Board of Commissioners J. Edd New President John Villanacci Vice President Carroll Knight Treasurer/Secretary Gina Starr-Hill Assistant Treasurer Robert L. Taylor Commissioner Command Staff Name Jeffrey Wittig Herb Holloway Jr. Position Fire Chief Business Manager Consultants and Advisors Auditors... John F. Lewis, P.C. Georgetown, Texas Bond Counsel... McCall, Parkhurst & Horton L.L.P. Dallas, Texas Financial Advisor... Wells Nelson and Associates L.L.C. Dallas, Texas -iii-

4 USE OF INFORMATION IN OFFICIAL STATEMENT No dealer, broker, salesman or other person has been authorized to give any information, or to make any representations other than those contained in this Official Statement, and, if given or made, such other information or representations must not be relied upon as having been authorized by the District, the Financial Advisor or the Underwriter. This Official Statement is not to be used in connection with an offer to sell or the solicitation of an offer to buy in any jurisdiction in which such offer or solicitation is not authorized or in which the person making such offer or solicitation is not qualified so to do or to any person to whom it is unlawful to make such offer or solicitation. Any information and expressions of opinion herein contained are subject to change without notice, and neither the delivery of the Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the District or other matters described herein since the date hereof. See CONTINUING DISCLOSURE OF INFORMATION for a description of the undertakings of the District, respectively, to provide certain information on a continuing basis. The cover page contains certain information for general reference only. Investors should read the entire Official Statement, including all schedules and appendices attached hereto, to obtain information essential to making an informed investment decision. This Official Statement includes descriptions and summaries of certain events, matters and documents. Such descriptions and summaries do not purport to be complete and all such descriptions, summaries and references thereto are qualified in their entirety by reference to this Official Statement in its entirety and to each such document, copies of which may be obtained from the Financial Advisor. Any statements made in this Official Statement or in the schedules or appendices hereto involving matters of opinion or estimates, whether or not so expressly stated, are set forth as such and not as representations of fact, and no representation is made that any of such opinions or estimates will be realized. THE BONDS ARE EXEMPT FROM REGISTRATION WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION AND CONSEQUENTLY HAVE NOT BEEN REGISTERED THEREWITH. THE REGISTRATION, QUALIFICATION OR EXEMPTION OF THE BONDS IN ACCORDANCE WITH APPLICABLE SECURITIES LAW PROVISIONS OF THE JURISDICTION IN WHICH THE BONDS HAVE BEEN REGISTERED, QUALIFIED OR EXEMPTED, SHOULD NOT BE REGARDED AS A RECOMMENDATION THEREOF. IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE THE MARKET PRICE OF THE BONDS AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. None of the District, the Financial Advisor, or the Underwriter makes any representation or warranty with respect to the information contained in this Official Statement regarding The Depository Trust Company or its book-entry-only system. The Underwriter has provided the following sentence for inclusion in this Official Statement. The Underwriter has reviewed the information in the Official Statement pursuant to their responsibilities to investors under the federal securities laws, but the Underwriter does not guarantee the accuracy or completeness of such information. The agreements of the District and others related to the Bonds are contained solely in the contracts described herein. Neither this Official Statement nor any other statement made in connection with the offer or sale of the Bonds is to be construed as constituting an agreement with the purchaser of the Bonds. INVESTORS SHOULD READ THE ENTIRE OFFICIAL STATEMENT, INCLUDING ALL SCHEDULES AND APPENDICES ATTACHED HERETO, TO OBTAIN INFORMATION ESSENTIAL TO MAKING AN INFORMED INVESTMENT DECISION. THIS OFFICIAL STATEMENT CONTAINS FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. SUCH STATEMENTS MAY INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS WHICH MAY CAUSE THE ACTUAL RESULTS, PERFORMANCE AND ACHIEVEMENTS TO BE DIFFERENT FROM THE FUTURE RESULTS, PERFORMANCE AND ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. INVESTORS ARE CAUTIONED THAT THE ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE SET FORTH IN THE FORWARD-LOOKING STATEMENTS. -iv-

5 TABLE OF CONTENTS OFFICIAL STATEMENT SUMMARY vi INTRODUCTION 1 PURPOSE AND USE OF PROCEEDS OF THE BONDS 1 Purpose of the Bonds 1 Sources and Uses of the Bonds 1 THE BONDS 2 General 2 Paying Agent/Registrar 2 Refunded Bonds 2 Security and Source of Payment 3 Book-Entry-Only System 4 Registered Owners Remedies 6 DEBT SERVICE REQUIREMENTS 6 Table 1 Pro-Forma Aggregate Debt Service 6 DISTRICT DEBT 7 General 7 Table 2 - Indebtedness 7 Future Borrowing 7 Tax Rate Limitations 7 TAX PROCEDURES 7 Property Tax Code and County-Wide Appraisal District _ 7 Property Subject to Taxation 8 Valuation of Property for Taxation 8 Residential Homestead Exemptions 9 Freeport Goods Exemption 9 Tax Abatement 9 Pollution Control 9 Collections, Penalty and Interest 10 Tax Liens 10 SALES AND USE TAX 10 DISTRICT NET AD VALOREM TAXES 11 Table 3 - District Ad Valorem Tax Rates 11 District Tax Levies and Collection Rates 11 Table 4 District Tax Levies and Collection Rates 11 Table 5 Sales and Use Tax Rate and Collections 11 Table 6 - Principal Taxpayers 12 COUNTY NET AD VALOREM TAX DEBT 12 Payment Record 12 Tax Debt Outstanding 12 Table 7 - Ad Valorem Tax Debt Ratios 12 Estimated County-wide and Overlapping Ad Valorem Tax Debt 12 Table 8 - Estimated Overlapping Debt Statement 13 INVESTMENTS 13 Legal Investments 13 Table 9 - Distribution of District Investable Funds 15 THE DISTRICT 15 Description 15 Deannexation and Annexation: 15 Dissolution of the District: 16 Table 10 - Statement of Revenues, Expenditures, and Changes in General Fund Balance For the Years Ended September 30, 2008 through LEGAL INVESTMENTS IN TEXAS 17 RATINGS 17 LEGAL MATTERS 17 LITIGATION 18 TAX MATTERS 18 Opinion 18 Collateral Federal Income Tax Consequences 19 State, Local and Foreign Taxes 20 Qualified Tax-Exempt Obligations for Financial Institutions 20 Future and Proposed Legislation 20 UNDERWRITER 20 FINANCIAL ADVISOR 21 FINANCIAL STATEMENTS 21 CONTINUING DISCLOSURE OF INFORMATION 21 Annual Reports 21 Notice of Certain Events 22 Availability of Information 22 Limitations and Amendments 22 Compliance with Prior Agreements 23 GENERAL CONSIDERATIONS 23 Sources and Compilation of Information 23 Forward-Looking Statements Disclaimer 23 VERIFICATION OF MATHEMATICAL COMPUTATIONS 23 CONCLUDING STATEMENT 23 SCHEDULE I SCHEDULE OF REFUNDED BONDS APPENDIX A: AUDITED GENERAL PURPOSE FINANCIAL STATEMENTS FOR YEAR ENDED SEPTEMBER 30, A-1 APPENDIX B: FORM OF LEGAL OPINION OF BOND COUNSEL B-1 -v-

6 OFFICIAL STATEMENT SUMMARY This Official Statement Summary, being part of the Official Statement, is subject in all respects to the more complete information contained therein. The offering of the Bonds to potential investors is made only by means of the entire Official Statement. No person is authorized to detach this Summary Statement from the Official Statement or otherwise to use same without the entire Official Statement. The Issuer... Prior to October 1, 1992, the District operated as a rural fire prevention district (Travis County Rural Fire Prevention District No. 6) under Article III, Section 48-d of the Texas Constitution. On January 18, 1992, the voters of the District approved the formation of an emergency services district under Article III, Section 48-e of the Texas Constitution. On January 18, 1992, the County Commissioners Court of Travis County, State of Texas approved the order to form the Travis County Emergency Services District No. 3. The District was formed on October 1, 1992, and operates under a Board of Directors appointed by the Commissioners Court of Travis County. See THE DISTRICT. The Bonds... The $3,030,000 Travis County Emergency Services District No. 3, Limited Tax Refunding Bonds, Series 2013 (the Bonds ) are dated January 15, 2013 (the Dated Date ) and are being issued in the principal amounts and mature on the dates set forth on the inside cover page hereof. Interest on the Bonds will accrue from the Dated Date and will be payable March 1 and September 1 of each year, commencing March 1, Payment Record... The District has never defaulted in paying the principal of or interest on any of its debt. Ratings... Moody s Investors Services Inc. ( Moody s ) has assigned an underlying, unenhanced rating to the Bonds of A1. See RATINGS. Source of Payment for the Bonds... The Bonds are payable from and secured by the proceeds of a continuing direct annual ad valorem tax levied, within the limits prescribed by law, on all taxable property within the District. The combined annual ad valorem tax rate for maintenance and operations and debt service purposes, including payment of principal of and interest on the Bonds (together with any additional general obligation bonds heretofor or hereafter issued by the District), may not exceed $0.10 per $100 assessed valuation of taxable property in the District. See "THE BONDS Security and Source of Payment." Paying Agent/Registrar... The initial Paying Agent/Registrar for the Bonds is Wells Fargo Bank, N.A., Dallas, Texas. Tax Exemption... In the opinion of Bond Counsel to the Issuer, interest on the Bonds is excludable from gross income for federal income tax purposes under existing law, subject to matters described under TAX MATTERS herein, and is not includable in the alternative minimum taxable income of individuals. See TAX MATTERS for a discussion of the opinion of Bond Counsel, including the alternative minimum tax on corporations. Book-Entry-Only System... The Bonds are initially issuable only to Cede & Co., the nominee of DTC, pursuant to a book-entry-only system. No physical delivery of Bonds will be made to beneficial owners. See THE BONDS Book-Entry-Only System. -vi-

7 OFFICIAL STATEMENT $3,030,000 TRAVIS COUNTY EMERGENCY SERVICES DISTRICT NO. 3 LIMITED TAX REFUNDING BONDS SERIES 2013 INTRODUCTION This Official Statement, including the Schedule and appendices, has been prepared by Travis District Emergency Services District No. 3 (the District ), a political subdivision of the State of Texas, in connection with the offering by the District of its $3,030,000 Limited Tax Refunding Bonds, Series 2013 (the Bonds ). All financial and other information presented in this Official Statement has been provided by the District from its records, except for information expressly attributed to other sources. The presentation of information, including tables of receipts from taxes and other sources, is intended to show recent historic information and is not intended to indicate future or continuing trends in the financial position or other affairs of the District. No representation is made that past experience, as is shown by that financial and other information, will necessarily continue or be repeated in the future (see FORWARD LOOKING STATEMENTS ). There follows in this Official Statement descriptions of the Bonds and the Order (defined herein), and certain other information about the District and its finances. All descriptions of documents contained herein are only summaries and are qualified in their entirety by reference to each such document. Copies of such documents may be obtained by electronic mail or upon payment of reasonable copying, mailing, and handling charges by writing Travis County Emergency Services District No. 3, 4111 Barton Creek Boulevard, Austin, TX 78735, and, during the offering period, from the District s Financial Advisor, Wells Nelson and Associates LLC, Dallas Parkway, Suite 240, Dallas, Texas 75287, or by at sperry@wellsnelson.com. This Official Statement speaks only as of its date, and the information contained herein is subject to change. A copy of the Final Official Statement pertaining to the Bonds will be deposited with the Municipal Securities Rulemaking Board through its Electronic Municipal Market Access (EMMA) system. See CONTINUING DISCLOSURE OF INFORMATION herein for a description of the District s undertaking to provide certain information on a continuing basis. Purpose of the Bonds PURPOSE AND USE OF PROCEEDS OF THE BONDS Proceeds from the sale of the Bonds will be used to: (i) refund portions of the District s outstanding Limited Tax Bonds, Series 2003 and Limited Tax Bonds, Series 2005, and (ii) pay the costs associated with the issuance of the Bonds. See THE BONDS The Refunded Bonds herein. Sources and Uses of the Bonds The proceeds from the sale of the Bonds will be applied approximately as follows: Par Amount of Bonds $3,030, Reoffering Premium 169, Accrued Interest 8, Issuer Contribution 48, Total Sources $3,256, Deposit to Escrow Fund $3,161, Costs of Issuance 58, Total Underwriter's Discount 25, Deposit to Debt Service Fund 10, Total Uses $3,256,

8 THE BONDS General The following is a description of some of the terms and conditions of the Bonds, which description is qualified in its entirety by reference to the order passed by the Commissioners Court of Travis County, Texas authorizing the issuance of the Bonds (the Order ). Copies of the Order may be obtained upon request to the District. Certain terms not defined elsewhere in this Official Statement are defined in the Order. The Bonds are dated January 15, 2013, bear interest calculated on the basis of a 360-day year composed of 12 months of 30 days each, from such date at the stated rates indicated on the inside cover page hereof, which interest is payable March 1, 2013, and each March 1 and September 1 thereafter, until maturity or prior redemption. The definitive Bonds will be initially registered solely in the name of Cede & Co., as nominee of The Depository Trust Company ( DTC ) pursuant to the Book-Entry-Only System described herein. Beneficial ownership of the Bonds may be acquired in denominations of $5,000 or integral multiples thereof. No physical delivery of the Bonds will be made to the beneficial owners thereof. Principal of and interest on the Bonds will be payable by the Paying Agent/Registrar to Cede & Co., which will make distribution of the amounts so paid to the participating members of DTC for subsequent payment to the beneficial owners of the Bonds. See THE BONDS Book-Entry- Only System herein. Paying Agent/Registrar The initial Paying Agent/Registrar for the Bonds shall be Wells Fargo Bank, N.A., Dallas, Texas. At all times while any Bonds are outstanding, the District will provide a legally qualified bank, trust company, financial institution or other duly qualified and legally authorized entity to act as Paying Agent/Registrar for the Bonds. The District reserves the right to change the Paying Agent/Registrar for the Bonds. Promptly upon the appointment of any successor Paying Agent/Registrar, the previous Paying Agent/Registrar shall deliver the Register or a copy thereof to the new Paying Agent/Registrar, and the new Paying Agent/Registrar shall notify each registered owner of Bonds by United States mail, first-class postage prepaid, of the effective date of such change and of the address of the new Paying Agent/Registrar. Refunded Bonds The Refunded Bonds, and interest due thereon, are to be paid on the scheduled redemption date therefor from funds to be deposited with Wells Fargo Bank, N.A., Dallas, Texas (the Escrow Agent ) pursuant to an Escrow and Trust Agreement dated as of January 28, 2013 (the Escrow Agreement ) between the District and the Escrow Agent. The Order provides that the District will deposit certain proceeds of the sale of the Bonds along with other lawfully available funds of the District, if any, with the Escrow Agent in the amount necessary to accomplish the discharge and final payment of the Refunded Bonds. Such funds will be held by the Escrow Agent in an escrow fund (the Escrow Fund ) irrevocably pledged to the payment of principal of and interest on the Refunded Bonds and will be used to purchase certain obligations of the United States of America and obligations of agencies or instrumentalities of the United States, including obligations that are unconditionally guaranteed by the agency or instrumentality, that are noncallable and that were, on the date the Order is to be adopted, rated as to investment quality by a nationally recognized rating firm not less than AAA (the Federal Securities ). Such maturing principal of and interest on the Federal Securities will be available only to pay the debt service requirements on the Refunded Bonds and not the Bonds. Simultaneously with the issuance of the Bonds, the District will give irrevocable instructions to provide notice, to the owners of the Refunded Bonds that the Refunded Bonds will be redeemed prior to stated maturity on which date money will be made available to redeem the Refunded Bonds from funds held under the Escrow Agreement. The issuance of the Bonds will be subject to delivery by Grant Thornton LLP, Minneapolis, Minnesota, certified public accountants (the Accountants ), of a report of the mathematical accuracy of certain computations. The Accountants will verify from the information provided to them the mathematical accuracy as of the date of the closing on the Bonds of (1) the computations contained in the provided schedules to determine that the anticipated receipts from the Federal Securities and cash deposits listed in the schedules provided by Wells Nelson & Associates LLC as financial advisor to the District, to be held in escrow, will be sufficient to pay, when due, the principal and interest requirements of the Refunded Bonds and (2) the computations of yield on both the Federal Securities and the Bonds as contained in the provided schedules which verification will be used by Bond Counsel in its determination that the interest on the Bonds is excludable from the gross income of the holders thereof and for the defeasance of the Refunded Bonds. The Accountants will express no opinion on the assumptions provided to -2-

9 them, nor as to the exemption from taxation of the interest on the Bonds. See VERIFICATION OF MATHEMATICAL COMPUTATIONS herein. By the deposit of the Federal Securities and cash, if any, described below with the Escrow Agent pursuant to the Escrow Agreement, the District will have affected the defeasance of the Refunded Bonds, as applicable pursuant to the terms of the respective District orders authorizing their issuance. It is the opinion of Bond Counsel that, as a result of such defeasance, the Refunded Bonds will no longer be payable from ad valorem taxes but will be payable solely from the principal of and interest on the Federal Securities and cash, if any, on deposit in the Escrow Fund and held for such purpose by the Escrow Agent, and that the Refunded Bonds will be defeased and are not to be included in or considered to be indebtedness of the District for the purpose of a limitation of indebtedness or for any other purpose. See Form of Bond Counsel s Opinion attached hereto as Appendix B. The District has covenanted in the Escrow Agreement to make timely deposits to the Escrow Fund, from lawfully available funds, of any additional amounts required to pay the principal of and interest on the Refunded Bonds if for any reason the cash balance on deposit or scheduled to be on deposit in the Escrow Fund should be insufficient to make such payment. Security and Source of Payment The Bonds are payable both as to principal and interest from an ad valorem tax levied against all taxable property within the District, within the limits prescribed by law. Redemption Optional Redemption. The Bonds having stated maturities on and after September 1, 2023, are subject to optional redemption in whole or in any part thereof, in the principal amounts of $5,000 or any integral multiple thereof on September 1, 2022, or any date thereafter, at the par value thereof plus accrued interest to the date fixed for redemption. Mandatory Sinking Fund Redemption. In addition to the optional redemption provisions described above, the Bonds maturing on September 1, 2025 (the Term Bonds ) are subject to mandatory sinking fund redemption prior to their stated maturity, and will be redeemed by the District, at a redemption price equal to the principal amount thereof plus interest accrued thereon to the redemption date, on the dates and in the principal amounts shown in the following schedule: 2025 Term Bonds Mandatory Redemption Principal Date Amount September 1, ,000 September 1, ,000 * * Final Maturity Approximately forty-five (45) days prior to each mandatory redemption date for the Term Bonds, the Paying Agent/Registrar shall randomly select by lot or other customary method the numbers of the Term Bonds within the applicable Stated Maturity to be redeemed on the next following February 15 from money set aside for that purpose in the Bond Fund (as defined in the Order). Any Term Bonds not selected for prior redemption shall be paid on the date of their Stated Maturity. The principal amount of a Term Bond required to be redeemed pursuant to the operation of such mandatory redemption provisions shall be reduced, at the option of the District, by the principal amount of any Term Bonds of such stated maturity which, at least fifty (50) days prior to the mandatory redemption date (1) shall have been defeased or acquired by the District and delivered to the Paying Agent/Registrar for cancellation, (2) shall have been purchased and canceled by the Paying Agent/Registrar at the request of the District with money in the Bond Fund, or (3) shall have been redeemed pursuant to the optional redemption provisions set forth above and not theretofore credited against a mandatory redemption requirement. Notice of Redemption and DTC Notices Not less than 30 days prior to a redemption date for the Bonds, the District shall cause a notice of redemption to be sent by United States mail, first-class, postage prepaid, to each registered owner of a Bond to be redeemed, in whole or in part, at the address of the registered owner appearing on the registration books of the Paying Agent/Registrar at the close of business on the business day -3-

10 next preceding the date of mailing such notice. ANY NOTICE OF REDEMPTION SO MAILED SHALL BE CONCLUSIVELY PRESUMED TO HAVE BEEN DULY GIVEN IRRESPECTIVE OF WHETHER RECEIVED BY THE BONDHOLDER, AND, PROVIDED THAT PROVISION FOR PAYMENT OF THE REDEMPTION PRICE IS MADE AND ANY OTHER CONDITIONS TO REDEMPTION ARE SATISFIED, INTEREST ON THE REDEEMED BONDS SHALL CEASE TO ACCRUE FROM AND AFTER SUCH REDEMPTION DATE NOTWITHSTANDING THAT A BOND HAS NOT BEEN PRESENTED FOR PAYMENT. All notices of redemption shall (i) specify the date of redemption for the Bonds, (ii) identify the Bonds to be redeemed and, in the case of a portion of the principal amount to be redeemed, the principal amount thereof to be redeemed, (iii) state the redemption price, (iv) state that the Bonds, or the portion of the principal amount thereof to be redeemed, shall become due and payable on the redemption date specified, and the interest thereon, or on the portion of the principal amount thereof to be redeemed, shall cease to accrue from and after the redemption date, and (v) specify that payment of the redemption price for the Bonds to be redeemed, shall be made at the designated corporate trust office of the Paying Agent/Registrar only upon presentation and surrender thereof by the registered owner. The Paying Agent/Registrar and the District, so long as a Book-Entry-Only System is used for the Bonds, will send any notice of redemption, notice of proposed amendment to the Order or other notices with respect to the Bonds only to DTC. Any failure by DTC to advise any DTC participant, or of any DTC participant or indirect participant to notify the beneficial owner, shall not affect the validity of the redemption of the Bonds called for redemption or any other action premised on any such notice. Redemption of portions of the Bonds by the District will reduce the outstanding principal amount of such Bonds held by DTC. In such event, DTC may implement, through its Book-Entry-Only System, a redemption of such Bonds held for the account of DTC participants in accordance with its rules or other agreements with DTC participants and then DTC participants and indirect participants may implement a redemption of such Bonds from the beneficial owners. Any such selection of Bonds to be redeemed will not be governed by the Order and will not be conducted by the District or the Paying Agent/Registrar. Neither the District nor the Paying Agent/Registrar will have any responsibility to DTC participants, indirect participants or the persons for whom DTC participants act as nominees, with respect to the payments on the Bonds or the providing of notice to DTC participants, indirect participants, or beneficial owners of the selection of portions of the Bonds for redemption. (See "BOOK-ENTRY-ONLY SYSTEM" herein). Book-Entry-Only System This section describes how ownership of the Bonds is to be transferred and how the principal of, premium, if any, and interest on the Bonds are to be paid to and accredited by DTC while the Bonds are registered in its nominee name. The information in this section concerning DTC and the Book-Entry-Only System has been provided by DTC for use in disclosure documents such as this Official Statement. The District believes the source of such information to be reliable, but takes no responsibility for the accuracy or completeness thereof. The District cannot and does not give any assurance that (1) DTC will distribute payments of debt service on the Bonds, or redemption or other notices, to DTC Participants, (2) DTC Participants or others will distribute debt service payments paid to DTC or its nominee (as the registered owner of the Bonds), or redemption or other notices, to the Beneficial Owners, or that they will do so on a timely basis, or (3) DTC will serve and act in the manner described in this Official Statement. The current rules applicable to DTC are on file with the Securities and Exchange Commission, and the current procedures of DTC to be followed in dealing with DTC Participants are on file with DTC. DTC will act as securities depository for the Bonds. The Bonds will be issued as fully-registered securities registered in the name of Cede & Co. (DTC s partnership nominee). One fully registered certificate will be issued for each maturity of the Bonds in the aggregate principal amount of each such maturity and will be deposited with DTC. DTC, the world s largest depository, is a limited-purpose trust company organized under the New York Banking Law, a banking organization within the meaning of the New York Banking Law, a member of the Federal Reserve System, a clearing corporation within the meaning of the New York Uniform Commercial Code, and a clearing agency registered pursuant to the provisions of Section 17A of the Securities Exchange Act of DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-u.s. equity, corporate and municipal debt issues, and money market instrument from over 100 countries that DTC s participants ( Direct Participants ) deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities through electronic computerized book-entry transfers and pledges between Direct Participants accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-u.s. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation ( DTCC ). DTCC, in turn, is owned by a number of Direct Participants of DTC and Members of the National Securities Clearing Corporation, Fixed Income Clearing Corporation, and Emerging Markets Clearing Corporation (NSCC, FICC, and EMCC, also subsidiaries of -4-

11 DTCC), as well as by the New York Stock Exchange, Inc., the American Stock Exchange LLC, and the Financial Industry Regulatory Authority. Access to the DTC system is also available to others such as both U.S. and non-u.s. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ( Indirect Participants ). DTC has a Standard & Poor s rating of AA+. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at Purchases of Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Bonds on DTC s records. The ownership interest of each actual purchaser of each Bond ( Beneficial Owner ) is in turn to be recorded on the Direct and Indirect Participants records. Beneficial Owners will not receive written confirmation from DTC of their purchase, but Beneficial Owners are expected to receive written confirmations providing details of the transactions, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owners entered into the transaction. Transfers of ownership interest in the Bonds are to be accomplished by entries made on the books of Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in the Bonds, except in the event that use of the book-entry system for the Bonds is discontinued. To facilitate subsequent transfers, all Bonds deposited by Direct Participants with DTC are registered in the name of DTC s partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of Bonds with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Bonds; DTC s records reflect only the identity of the Direct Participant to whose account such Bonds are credited, which may or may not be the Beneficial Owners. The Participants will remain responsible for keeping account of their holdings on behalf of their customers. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Redemption notices shall be sent to DTC. If less than all of the Bonds within an issue are being redeemed, DTC s practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed. Neither DTC nor Cede & Co. will consent or vote with respect to the Bonds unless authorized by a Direct Participant in accordance with DTC s procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the District as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co. s consenting or voting rights to those Direct Participants to whose accounts the Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy). Redemption proceeds and principal and interest payments on the Bonds will be made to DTC. DTC s practice is to credit Direct Participants accounts, upon DTC s receipt of funds and corresponding detail information from the District or the Paying Agent/Registrar on payable dates in accordance with their respective holdings shown on DTC s records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as in the case with securities held for the accounts of customers in bearer form or registered in street name, and will be the responsibility of such Participant and not of DTC, the Paying Agent or the District, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds and principal and interest to DTC is the responsibility of the District, disbursement of such payments to Direct Participants shall be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners shall be the responsibility of Direct and Indirect Participants. DTC may discontinue providing its services as securities depository with respect to the Bonds at any time by giving reasonable notice to the District and the Paying Agent/Registrar. Under such circumstances, in the event that a successor securities depository is not obtained, Obligation certificates are required to be printed and delivered. The District may decide to discontinue use of the system of book-entry transfers through DTC (or a successor securities depository). In that event, Bonds will be printed and delivered. Use of Certain Terms in Other Sections of this Official Statement. In reading this Official Statement it should be understood that while the Bonds are in the Book-Entry-Only System, references in other sections of this Official Statement to registered owners should be read to include the person for which the Participant acquires an interest in the Bonds, but (i) all rights of ownership must be exercised through DTC and the Book-Entry-Only System, and (ii) except as described above, notices that are to be given to registered owners under the Order will be given only to DTC. Information concerning DTC and the Book-Entry-Only System has been obtained from DTC and is not guaranteed as to accuracy or completeness by, and is not to be construed as a representation by the District, the Financial Advisor or the Underwriter. -5-

12 Effect of Termination of Book-Entry-Only System. In the event that the Book-Entry-Only System is discontinued by DTC or the use of the Book-Entry-Only System is discontinued by the District, printed Bonds will be issued to the holders and the Bonds will be subject to transfer, exchange and registration provisions as set forth in the Ordinance and summarized under "The Bonds - Transfer, Exchange and Registration" below. Registered Owners Remedies Texas law provides that if the District defaults in the payment of the principal of or interest on any of the Bonds when due, fails to make payments required by the Order into the Debt Service Funds or defaults in the observance or performance of any of the covenants, conditions or obligations set forth in the Order, any registered owner shall be entitled at any time to seek a writ of mandamus from a court of competent jurisdiction compelling and requiring the Commissioners Court to observe and perform any covenant, obligation or condition prescribed by the Order. The Order does not specifically provide for remedies to a registered owner in the event of a District default, nor does it provide for the appointment of a trustee to protect and enforce the interests of the registered owners. There is no provision for acceleration of maturity of the Bonds in the event of default and, consequently, the remedy of mandamus may have to be relied upon from year to year. Although the registered owners could obtain a judgment against the District, such a judgment could not be enforced by direct levy and execution against the District s property. Further, the registered owners cannot themselves foreclose on property within the District or sell property within the District in order to pay the principal of and interest on the Bonds. The enforceability of the rights and remedies of the registered owners may be further limited by laws relating to bankruptcy, reorganization or other similar laws of general application affecting the rights of creditors of political subdivisions, such as the District, and by general principles of equity which permit the exercise of judicial discretion. DEBT SERVICE REQUIREMENTS The following schedule sets forth the actual debt service for the District s outstanding general obligation debt, plus the debt service requirements on the Bonds: Table 1 Pro-Forma Aggregate Debt Service Fiscal Year Ending Outstanding Debt (1) Plus: the Bonds Total Debt Service Requirements September 30 Principal Interest Total Principal Interest Total Principal Interest Total 2013 $ 230,000 $ 14,223 $ 244,223 $ 50,000 $ 48,935 $ 98,935 $ 280,000 $ 63,158 $ 343, ,000 5,600 75, ,000 76, , ,000 82, , ,000 2,800 72, ,000 73, , ,000 75, , ,000 69, , ,000 69, , ,000 63, , ,000 63, , ,000 57, , ,000 57, , ,000 52, , ,000 52, , ,000 43, , ,000 43, , ,000 33, , ,000 33, , ,000 24, , ,000 24, , ,000 15, , ,000 15, , ,000 4,950 89,950 85,000 4,950 89, ,000 2,400 82,400 80,000 2,400 82,400 $ 370,000 $ 22,623 $ 392,623 $ 3,030,000 $ 565,235 $ 3,595,235 $ 3,400,000 $ 587,858 $ 3,987,858 (1) Excludes the Refunded Bonds. -6-

13 DISTRICT DEBT General The following tables and calculations relate to the Bonds and to all other debt of the District. The District and various other political subdivisions of government which overlap all or a portion of the District are empowered to incur debt to be paid from revenues raised or to be raised by taxation against all or a portion of the property within the District. Table 2 - Indebtedness 2012 Assessed Valuation (100% of Actual) (a) $ 2,123,130,701 Less Exemptions (53,590,099) 2012 Net Taxable Assessed Valuation $ 2,069,540,602 Outstanding Debt: $ 370,000 Plus: The Bonds* 3,030,000 Less I&S Fund Balance (As of September 30, 2011) (53,984) Net Debt $ 3,346,016 Ratio of Net Debt to 2012 Net Taxable Valuation 0.16% (a) The appraisal of property within the District is the responsibility of the Travis Central Appraisal District (the Appraisal District ). The Appraisal District is required under the Property Tax Code to assess all property within the Appraisal District on the basis of 100 percent of its appraised value and is prohibited from applying any assessment ratios. The value placed upon property within the Appraisal District is subject to review by the Appraisal Review Board appointed by the Board of Directors of the Appraisal District. The Appraisal District is required to review the value of property within the Appraisal District every three years. The County may require annual review at its own expense, and is entitled to challenge the determination of appraised value of property within the District by petition filed with the Appraisal Review Board. Future Borrowing The District has no authorized but unissued Limited Tax Bonds. However, the District may incur non-voted debts payable from or secured by its collection of ad valorem taxes and other sources of revenue and leases for various purposes. Tax Rate Limitations The Board of Commissioners, in its capacity as the governing body of the District, is authorized to levy an annual ad valorem tax, within the legal limit of $0.10 per $100 of taxable assessed valuation, on all taxable property within the District in an amount sufficient to pay (i) the principal of and interest on the Bonds, (ii) the principal of and interest on any additional bonds payable from taxes previously issued by the District or which the District may hereafter issue, (iii) maintenance and operations expenses of the District and (iv) the expenses of assessing and collecting such taxes. The District agrees in the Bond Order to levy such annual ad valorem tax in an amount sufficient to pay the principal of and interest on the Bonds, within the limits prescribed by law, as described more fully herein under "THE BONDS Security and Source of Payment." Property Tax Code and County-Wide Appraisal District TAX PROCEDURES The Texas Property Tax Code (the Property Tax Code ) specifies the taxing procedures of all political subdivisions of the State of Texas, including the County. Provisions of the Property Tax Code are complex and are not fully summarized here. The Property Tax Code requires, among other matters, county-wide appraisal and equalization of taxable property values. State law requires the appraised value of a residence homestead to be based solely on the property s value as a residence homestead, regardless of whether residential use is considered to be the highest and best use of the property. State law further limits the appraised value of a residence homestead for a tax year to an amount not to exceed the lesser of (1) the property's market value in the most recent tax year in which the market value was determined by the Appraisal District or (2) the sum of (a) 10% of the -7-

14 property's appraised value in the preceding tax year, plus (b) the property's appraised value the preceding tax year, plus (c) the market value of all new improvements to the property. The Travis County Appraisal District (the Appraisal District ) has the responsibility for appraising property for all taxing units within Travis County, including the District. Such appraisal values are subject to review and change by the Travis County Appraisal Review Board (the Appraisal Review Board ). Property Subject to Taxation Except for certain exemptions provided by Texas law, all real property, tangible personal property held or used for the production of income, mobile homes and certain categories of intangible personal property with a tax situs in the District are subject to taxation by the District. Principal categories of exempt property include, but are not limited to: property owned by the State of Texas or its political subdivisions if the property is used for public purposes; property exempt from ad valorem taxation by federal law; certain household goods, family supplies, and personal effects; certain goods, wares and merchandise in transit; farm products owned by the producer; certain property of charitable organizations, youth development associations, religious organizations, and qualified schools; designated historical sites; and most individually-owned automobiles. In addition, the District may, by its own action, or shall, if required by voters at an election, exempt residential homesteads of persons 65 years or older and of certain disabled persons to the extent deemed advisable by the Board. The District is authorized by statute to disregard exemptions for the disabled and elderly if granting the exemption would impair the District's obligation to pay tax-supported debt incurred prior to adoption of the exemption by the District. The District does not grant any exemptions pursuant to these provisions. Furthermore, the District, if requested, must grant exemptions to disabled veterans or certain surviving dependents of disabled veterans; the exemption applies to either real or personal property with the amount of assessed valuation exempted ranging from $5,000 to a maximum of $12,000. In addition, Section , Texas Health and Safety Code, as amended, provides that, in certain circumstances a business entity is not subject to the District's ad valorem tax if the business entity (1) provides its own fire prevention and fire control services and owns or operates fire-fighting equipment or systems, (2) provides and operates its own equipped industrial ambulance with a licensed driver and provides industrial victim care by an emergency care attendant trained to provide the equivalent of ordinary basic life support, and (3) provides ordinary emergency services for the business entity, and provides the equipment, training, and facilities necessary to safely handle emergencies and protect the business entity and its neighbors in the community. There are no such entities within the District which qualify for this exemption. Valuation of Property for Taxation The Property Tax Code generally requires all taxable property (except property utilized for a qualified agricultural use and timberland) to be appraised at 100% of market value as of January 1 of each year. Residential property that has never been occupied as a residence and is being held for sale is treated as inventory for property tax purposes. The cost of the correction, mitigation or prevention of environmental damage may be considered in establishing the market value of certain property. The appraisal of taxable property for the District (except certain railroad rolling stock and certain intangible property of railroads and certain common carriers, which still is appraised by the State) and all other taxing entities in the District is the responsibility of the Appraisal District. Landowners wishing to avail themselves of the agricultural use, open space or timberland designation or residential real property inventory designation must apply for the designation and the appraiser is required by the Property Tax Code to act on each claimant s right to the designation individually. A claimant may waive the special valuation as to taxation by some political subdivisions while claiming it as to another. If a claimant receives the agricultural use designation and later loses it by changing the use of the property or selling it to an unqualified owner, the District can collect taxes based on the new use, including taxes for the previous three (3) years for agricultural use and taxes for the previous five (5) years for open space land and timberland. The total loss in value due to grants of agricultural use and open-space land appraisal from the 2012 tax roll approximates $69,139,864. The Appraisal District is governed by a five - member board whose members are appointed by vote of the Commissioners Court and the governing bodies of the cities, town, school districts and, upon request, conservation and reclamation districts in the District under a voting system weighted in direct proportion to the amount of taxes imposed by the voting entities. Cumulative voting for Appraisal District Board members is permitted. The Property Tax Code requires the Appraisal District to implement a plan for periodic reappraisal of all taxable property in the District, and reappraisal must be effected at least once every three years. The Appraisal District has established a schedule of reappraisal for different classifications of property to comply with such requirements. The District does receive yearly a preliminary estimate of values to be used in its budget process, which provides both the value of new improvements as well as value of increase of current property. While such yearly estimates of appraised values may serve to indicate the rate and extent of -8-

15 growth of taxable values within the District that cannot be used for establishing a tax rate within the District until such time as the Appraisal District formally by certification includes such values on its appraisal roll. Taxable values determined by the chief appraiser of the Appraisal District are submitted for review and equalization to the Appraisal Review Board appointed by the Appraisal District. Appraisals may be contested before the Appraisal Review Board by taxpayers or, under limited circumstances, the District, and the Appraisal Review Board s Order are appealable to a State district court. In such event, the value of the property in question will be determined by the court or by a jury if requested by any party. Additionally, taxing units may bring suit against the Appraisal District to compel compliance with the Property Tax Code. The Board of Commissioners is required to set its tax rate before the later of September 30 or the 60th day after the certified appraisal roll is received by the County. If the Board of Commissioners does not adopt a tax rate before the required date, the tax rate for the District is the lower of the effective tax rate calculated for the tax year or the tax rate adopted by the District for the preceding tax year. Such rates are based on the assessed values at January 1 of each year, as shown on the tax roll approved by the Appraisal Review Board, which must be used by the District for such purpose. The Property Tax Code imposes certain limitations on tax increases. The Board of Commissioners may under certain circumstances be required to publish notice and hold a public hearing on a proposed tax rate before voting on the tax rate. If the tax rate adopted exceeds by more than 8% the rate needed to pay debt service and certain contractual obligations, and to produce, when applied to the property which was on the prior year s roll, the prior year s taxes levied for purposes other than debt service and such contractual obligations, such excess portion of the levy may be repealed at an election within the District held upon petition of 10% of the qualified voters of the District. See DISTRICT NET AD VALOREM TAXES Table 4 - District Ad Valorem Tax Rates. Residential Homestead Exemptions The Property Tax Code authorizes the governing body of each political subdivision in the State of Texas to exempt up to 20% of the market value of residential homesteads from ad valorem taxation. Where ad valorem taxes have previously been pledged for the payment of debt, the governing body of a political subdivision may continue to levy and collect taxes against the exempt value of the homesteads until the debt is discharged if the cessation of the levy would impair the obligation of the contract by which the debt was created. The adoption of a homestead exemption may be considered each year, but must be adopted by May 1. The District does not grant any of the 20% homestead exemptions. Freeport Goods Exemption Article VIII, Section 1-j of the Texas Constitution provides that goods, wares, merchandise, other tangible property and ores, other than oil, natural gas and other petroleum products, which have been acquired or brought into the state for assembling, storing, manufacturing, processing or fabricating and shipped out of the state within 175 days ( freeport goods ) are exempt from taxation unless action to tax was taken by the governing body of the political subdivision prior to April 1, Decisions to tax may be reversed in the future while decisions to exempt freeport property are not subject to reversal. The District has not taken action to tax freeport goods. Tax Abatement The District and other tax entities may enter into tax abatements by creating tax reinvestment zones to encourage economic development. Prior to entering into a tax abatement agreement, each entity must adopt guidelines and criteria for establishing tax abatement, which each entity will follow in granting tax abatement to owners of property. The tax abatement agreements may exempt from ad valorem taxation by each of the applicable taxing jurisdictions, including the District, for a period of up to ten (10) years, all or any part of any increase in the assessed valuation of property covered by the agreement over its assessed valuation in the year in which the agreement is executed, on the condition that the property owner make specified improvements or repairs to the property in conformity with the terms of the tax abatement agreement. Each taxing jurisdiction has discretion to determine terms for its tax abatement agreements without regard to the terms approved by the other taxing jurisdictions. The District currently has no tax abatements. Pollution Control The Property Code also provides for an exemption from ad valorem taxation for certain pollution control property. In 2012 the District lost $20,515 as a result of such exemption. -9-

16 Collections, Penalty and Interest The County Tax Assessor-Collector is responsible for collection of taxes. The Property Tax Code contains provisions which allow the assessment and collections of District taxes by the Appraisal District or another taxing unit if the Board of Commissioners elects to enter into a contract for that purpose and the County Tax Assessor-Collector approves such contract. The Property Tax Code also provides for assessment and collections of District taxes by the Appraisal District or another taxing unit in the District if that procedure is approved at an election that may be initiated by petition of 10,000 qualified voters of the District. Tax statements are required to be mailed by October 1, or as soon thereafter as practicable, and taxes become delinquent on February 1 of the following year. If tax statements are mailed after January 10, the delinquency date is postponed to the first day of the next month that will provide a period of at least 21 days between the date the statement is mailed and the date taxes become delinquent. So long as the Board of Commissioners or voters of the District have not transferred responsibility for collection of the taxes to another taxing unit or the Appraisal District, the Board of Commissioners may permit payment without penalty or interest of one half of the taxes due from each taxpayer by July 1 if one half of the taxes due for the current year from such taxpayers are paid prior to December 1. Delinquent taxes are subject to a 6% penalty for the first month of delinquency, plus 1% for each month thereafter to July 1 to a maximum penalty of 12% if any taxes are unpaid on July 1. Furthermore, the tax may incur an additional penalty of up to 20% if imposed by the District. Delinquent taxes also accrue interest at the rate of 1% per month during the period they remain outstanding. If the delinquency date is postponed, then the postponed date is the date from which penalty and interest accrues on the delinquent taxes. The District may waive penalties and interest on delinquent taxes if the error or omission of a representative of the District or of the Appraisal District caused the failure to pay the tax before delinquency and if the tax is paid within 21 days after the taxpayer knows or should know of the delinquency. The Property Tax Code also makes provision for the split payment of taxes, discounts for early payment and the postponement of the delinquency date of taxes under certain circumstances. Tax Liens The Property Tax Code provides that on January 1 of each year a tax lien attaches to property to secure the payment of all taxes, penalties and interest ultimately imposed for the year on the property. The lien exists in favor of the State of Texas and each taxing unit, including the District, having power to tax the property. The tax lien on real property has priority over the claims of most creditors and other holders of liens on the property encumbered by the tax lien, whether or not the other debt or lien existed before the attachment of the tax lien, however, whether a lien of the United States is on a parity with or takes priority over a tax lien of the District is determined by applicable federal law. Taxes levied by the District are the personal obligation of the property owner and, under certain circumstances, personal property is subject to seizure and sale for the payment of delinquent taxes, penalty and interest thereon. Except with respect to taxpayers 65 and older, any time after taxes on property become delinquent, the District may file suit to foreclose the lien securing payment of the tax, to enforce personal liability for the tax or both. In filing a suit to foreclose a tax lien on real property, the District must join other taxing units that have claims for delinquent taxes against all or part of the same property. The ability of the District to collect delinquent taxes by foreclosure may be adversely affected by the amount of taxes owed to other taxing units, certain affirmative defenses, adverse market conditions affecting the liquidation of such owned property, taxpayer redemption rights, (a taxpayer may redeem property within six months for non-homestead property and within two years of foreclosure for homestead) or by bankruptcy proceedings which restrict the collection of taxpayer debts. SALES AND USE TAX The District held a sales tax election on February 7, 2004, wherein the District's voters authorized the District to adopt a 2% sales and use tax. The election passed with 285 votes for and 89 against. Effective July 1, 2004, the District is allowed to use revenue collected from such sales and use tax for any purpose that its ad valorem tax revenue may be used, but such revenue is not pledged to secure payment of the Bonds. -10-

17 Table 3 - District Ad Valorem Tax Rates DISTRICT NET AD VALOREM TAXES The following table shows the ad valorem tax rates per $100 of assessed value levied by the District in each of the years 2009 through The tax rates are levied on taxable property assessed at 100% of appraised value. 2012(a) 2011(a) 2010(a) 2009(a) Purpose General Operation $ $ $ $ Limited Tax Bonds Debt Service $ $ $ $ Total Tax Rate $ $ $ $ (a) Taxes are levied in prior calendar year to fund current year budget. District Tax Levies and Collection Rates The table below sets forth a comparison of the ad valorem taxes levied and collected by the District for the tax years 2009 through 2012 (fiscal years 2010 through 2013). Table 4 District Tax Levies and Collection Rates Fiscal Year Ended 9/30 Taxable Assessed Valuation (a) Total Tax Rate Total Tax Levy % Current Collections % Total Collections ,102,362, $2,093, % % ,025,329, ,022, % % ,021,321, ,015, % % ,069,540, ,046,941 (b) (b) (a) Source: Travis County Emergency Services District No. 3 Appraisal District. (b) In process of collection. Table 5 Sales and Use Tax Rate and Collections Fiscal Year Ending Total 30-Sep Rate Collections % $ 1,500, % 1,593, % 1,620, % 1,690,

18 Table 6 - Principal Taxpayers The following table lists the 10 taxpayers with the largest taxable values in the District as of August Taxpayers 2011 Taxable Valuations (a) Percentage of Total Tax Roll Barton Creek Senior Living $62,978, % Barton Creek Resort & Clubs Inc 48,250, % WRPV XI FH Austin LP 32,881, % Stratus Properties 38,844, % Barton Creek Owner LP 29,100, % Mid-America Apartments LP 19,500, % Siegele Stephen H & Julie E 8,866, % Owners Club At Barton Creek L P 7,954, % Goggan Dianne Revocable Trust 5,930, % 1201 Austin Trust The 5,781, % $260,088, % (a) Source: Travis Central Appraisal District. Payment Record COUNTY NET AD VALOREM TAX DEBT The District has never defaulted in the payment of the principal of or the interest on any of its debt. Tax Debt Outstanding The following table shows the total principal amount of the District s outstanding ad valorem tax debt as of September 30, All of the outstanding tax debt is payable from separate taxes levied for debt service. Table 7 - Ad Valorem Tax Debt Ratios Total Debt Outstanding (September 30) Ratio of Debt Outstanding to Net Assessed Valuation Fiscal Period Net Assessed Valuation 2010 $2,102,362,218 $3,770, % ,025,329,778 3,555, % ,021,321,305 3,405, % ,069,540,602 3,120, % Source: Derived from the Statistical Section of the District Comprehensive Annual Financial Reports and the County Tax Office. Estimated County-wide and Overlapping Ad Valorem Tax Debt In addition to the District, 4 municipal utility districts, 1 healthcare district, 1 community college district, 1 county, 1 city, 1 independent school districts are empowered to levy taxes on property within the District. The following statement of direct and estimated overlapping ad valorem tax debt was developed from information contained in Texas Municipal Reports, published by the Municipal Advisory Council of Texas. Except for the amounts relating to the District, the District has not independently verified the accuracy or completeness of such information, and no person is entitled to rely upon such information as being accurate or complete. Furthermore, certain of the entities listed below may have issued additional debt since the dates stated in this table, and such entities may have programs requiring the issuance of substantial amounts of additional debt, the amount of which cannot be determined. Political subdivisions overlapping the District are authorized by Texas law to levy and collect ad valorem taxes for operation, maintenance and/or general revenue purposes in addition to taxes for payment of their debt, and some are presently levying and collecting such taxes. -12-

19 Table 8 - Estimated Overlapping Debt Statement TAXING BODY Gross Tax Debt Percent Overlapping As of Amount Overlapping Travis County Emergency Services District No. 3 * $3,405, % 9/30/2012 $4,405,000 Austin CCD 89,903, % 9/30/2012 1,429,468 Austin ISD 761,806, % 9/30/ ,815,606 City of Austin 927,131, % 9/30/ ,279 Travis County 614,487, % 9/30/ ,781,339 Travis County Healthcare District 15,070, % 9/30/ ,456 Travis County MUD #3 36,746, % 9/30/ ,746,129 Travis County MUD #5 9,415, % 9/30/2012 9,415,188 Travis County MUD #6 10,346, % 9/30/ ,346,760 Travis County MUD #8 4,592, % 9/30/2012 4,592,528 TOTAL $2,472,905,466 $107,401, Net Assessed Value: $2,069,540,602 Overlapping Debt as a Percentage of Net Assessed Value: 5.19% *Preliminary, subject to change. Includes the Bonds and excludes the Refunded Bonds. INVESTMENTS The District invests its investable funds in investments authorized by Texas law in accordance with written investment policies approved by the Board of Directors of Travis County Emergency Services District No. 3, Texas, a copy of which is available upon request. Both State law and the District s investment policies are subject to change. Legal Investments Current Texas law provides the District with authority to invest in (1) obligations of the United States or its agencies and instrumentalities, (2) direct obligations of the State of Texas or its agencies and instrumentalities, (3) collateralized mortgage obligations directly issued by a federal agency or instrumentality of the United States, the underlying security for which is guaranteed by an agency or instrumentality of the United States, (4) other obligations the principal of and interest on which are unconditionally guaranteed or insured by, or backed by the full faith and credit of, the State of Texas or the United States or their respective agencies and instrumentalities, (5) obligations of states, agencies, counties, cities, and other political subdivisions of any state rated as to investment quality by a nationally recognized investment rating firm not less than A or its equivalent, (6) bonds issued, assumed, or guaranteed by the State of Israel, (7) certificates of deposit and share certificates meeting the requirements of the Public Funds Investment Act (Chapter 2256 of the Texas Government Code, as amended) (the PFIA ) (i) that are issued by an institution that has its main office or a branch office in the State of Texas and are guaranteed or insured by the Federal Deposit Insurance Corporation or the National Credit Union Share Insurance Fund, or are secured as to principal by obligations described in clauses (1) through (6) or in any other manner and amount provided by law for District deposits, or (ii) that are invested by the District through a depository institution that has its main office or a branch office in the State of Texas and otherwise meet the requirements of the PFIA; (8) fully collateralized repurchase agreements that have a defined termination date, are fully secured by a combination of cash and obligations described in clause (1) which are pledged to the District, held in the District s name, and deposited at the time the investment is made with the District or with a third party selected and approved by the District and are placed through a primary government securities dealer, as defined by the Federal Reserve, or a financial institution doing business in the State primary government securities dealer or a financial institution doing business in the State; (9) securities lending programs if (i) the securities loaned under the program are collateralized and a loan made under the program allows for termination at any time and is either secured by (a) obligations that are described in clauses (1) through (6) above, (b) irrevocable letters of credit issued by a state or national bank that is continuously rated by a nationally recognized investment rating firm at not less than A or its equivalent or (c) cash invested in obligations described in clauses (1) through (6) above, clauses (11) through (13) below, or an authorized investment pool; (ii) securities held as collateral under a loan are pledged to the District and held in the District s name; (iii) a loan made under the program is placed through either a primary government securities dealer or a financial institution doing business in the State of Texas; and (iv) the agreement to lend securities has a term of one year or less, (10) certain banker s acceptances with the remaining term of 270 days or less, if the short term obligations of the accepting bank or its parent are rated at least A-1 or P-1 or the equivalent by at least one nationally recognized credit rating agency, (11) commercial paper with a stated maturity of 270 days or less that is rated as least A-1 or P-1 or the equivalent by either (a) two nationally recognized credit rating agencies or (b) one nationally recognized credit rating agency if the paper is fully secured by an irrevocable letter of credit issued -13-

20 by a U. S. or state bank, (12) no-load money market mutual funds registered with and regulated by the Securities and Exchange Commission that have a dollar weighted average stated maturity of 90 days or less and include in their investment objectives the maintenance of a stable net asset value of $1 for each share, and (13) no-load mutual funds registered with the Securities and Exchange Commission that: have an average weighted maturity of less than two years; invest exclusively in obligations described in the preceding clauses; and are continuously rated as to investment quality by at least one nationally recognized investment rating firm of not less than AAA or its equivalent. In addition, bond proceeds may be invested in guaranteed investment contracts that have a defined termination date and are secured by obligations, including letters of credit, of the United States or its agencies and instrumentalities in an amount at least equal to the amount of bond proceeds invested under such contract, other than the prohibited obligations described below. The District may invest in such obligations directly or through government investment pools that invest solely in such obligations provided that the pools are rated no lower than AAA or AAAm or an equivalent by at least one nationally recognized rating service. The District may also contract with an investment management firm registered under the Investment Advisers Act of 1940 (15 U.S.C. Section 80b-1 et seq.) or with the State Securities Board to provide for the investment and management of its public funds or other funds under its control for a term up to two years, but the District retains ultimate responsibility as fiduciary of its assets. In order to renew or extend such a contract, the District must do so by order, ordinance, or resolution. The District is specifically prohibited from investing in: (1) obligations whose payment represents the coupon payments on the outstanding principal balance of the underlying mortgage-backed security collateral and pays no principal; (2) obligations whose payment represents the principal 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 than 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 District is required to invest its funds under written investment policies that primarily emphasize safety of principal and liquidity; that address investment diversification, yield, maturity, and the quality and capability of investment management; and that include a list of authorized investments for District funds, maximum allowable stated maturity of any individual investment and the maximum average dollar-weighted maturity allowed for pooled fund groups, methods to monitor the market price of investments acquired with public funds, a requirement for settlement of all transactions, except investment pool funds and mutual funds, on a delivery versus payment basis, and procedures to monitor rating changes in investments acquired with public funds and the liquidation of such investments consistent with the PFIA. All District funds must be invested consistent with a formally adopted Investment Strategy Statement that specifically addresses each funds investment. Each Investment Strategy Statement will describe its objectives concerning: (1) suitability of investment type, (2) preservation and safety of principal, (3) liquidity, (4) marketability of each investment, (5) diversification of the portfolio and (6) yield. Under Texas law, District investments must be made with judgment and care, under prevailing circumstances, that a person of prudence, discretion and intelligence would exercise in the management of the person s own affairs, not for speculation, but for investment, considering the probable safety of capital and the probable income to be derived. At least quarterly the investment officers of the District shall submit an investment report detailing: (1) the investment position of the District, (2) that all investment officers jointly signed the report, (3) the beginning market value, any additions and changes to market value and the ending value of each pooled fund group, (4) the book value and market value of each separately listed asset at the beginning and end of the reporting period, (5) the maturity date of each separately invested asset, (6) the account or fund or pooled fund group for which each individual investment was acquired, and (7) the compliance of the investment portfolio as it relates to: (a) adopted investment strategy statements and (b) Texas law. No person may invest District funds without express written authority from the District Board of Commissioners. Additional Provisions Under Texas law, the District is additionally required to: (1) annually review its adopted policies and strategies, (2) require any investment officers with personal business relationships or family relationships with firms seeking to sell securities to the District to disclose the relationship and file a statement with the Texas Ethics Commission and the District, (3) require the registered principal of firms seeking to sell securities to the District to: (a) receive and review the District's investment policy, (b) acknowledge that reasonable controls and procedures have been implemented to preclude imprudent investment activities, and (c) deliver a written statement attesting to these requirements; (4) in conjunction with its annual financial audit, perform a compliance audit of the management controls on investments and adherence to the District's investment policy, (5) restrict reverse repurchase agreements to not more than 90 days and restrict the investment of reverse repurchase agreement funds to no greater than the term of the reverse repurchase agreement, (6) restrict the investment in non-money market mutual funds in the aggregate to no more than 15% of the District's monthly average fund balance, excluding bond proceeds and reserves and other funds held for debt service, and prohibit the investment in mutual funds of any portion of bond proceeds, reserves and funds held for debt service, (7) -14-

21 require local government investment pools to conform to the new disclosure, rating, net asset value, yield calculation, and advisory board requirements and (8) provide specific investment training for the Treasurer, the chief financial officer (if not the Treasurer) and investment officers. Current Investments As of October 31, 2012, the book and market value of the District s investment portfolio was $3,621,542. Table 9 - Distribution of District Investable Funds Bank Deposits $ 1,399,510 Bank Certificates of Deposit (1) 2,220,000 Local Government Investment Pool 2,032 TOTAL $ 3,621,542 (1) Bank Certificates of Deposit are collateralized in accordance with the District s investment policy and State Law. Description THE DISTRICT The District was originally created as a rural fire prevention district pursuant to an election on August 10, 1985 and operated pursuant to Chapter 794, Texas Health and Safety Code, as amended, with the authority to levy an ad valorem tax not to exceed $0.03 per $100 assessed valuation and subsequently converted to an emergency services district pursuant to the provisions of Chapter 794, Texas Health and Safety Code, as amended, at an election held on January 18, 1992 and now operates pursuant to Chapter 775, Texas Health and Safety Code, as amended, with the authority to levy an ad valorem tax not to exceed $0.10 per $100 assessed valuation (see also Texas Attorney General Opinion JM-101O). The District provides fire protection and first response emergency medical care to residents and businesses not served by other jurisdictions. The District covers an estimated 50 square miles in southwestern Travis County, Texas, which sit astride US Highway 290 West and State Highway 71 West, approximately 12 miles southwest of the central business district of the City of Austin. The area is roughly bounded by Barton Creek on the north and northwest; the Travis County line on the south and southwest; the Oak Hill business district, the City of Austin, and the Barton Creek Wilderness Park on the east. The District is currently served by 23 full time employees and equipment working out of 2 fire stations. The District contracts with the City of Austin Fire Department to provide dispatch services for the District. The District has entered into automatic aid agreements for fire protection services with the City of Austin. See "THE DISTRICT - Deannexation and Annexation." Deannexation and Annexation: Pursuant to Section of the Texas Health and Safety Code, as amended, if a municipality annexes territory within the District and if the municipality intends to provide emergency services to such territory, the Board is required, upon receipt of notice from the municipality, to immediately deannex the territory from the District and the District shall cease to provide further services to the residents of such deannexed territory. Such deannexation does not diminish or impair the rights of the holders of any outstanding obligations of the District, such as the Bonds, loans and lease-purchase agreements, at the time of deannexation. If a municipality annexes territory in the District, the municipality must compensate the District immediately in an amount equal to the deannexed territory's pro rata share of the District's bonded and other indebtedness, determined by multiplying the District's total indebtedness at the time of the annexation by a fraction the numerator of which is the assessed value of the property to be annexed based on the most recent certified county property tax rolls at the time of annexation and the denominator of which is the total assessed value of the property of the District based on the most recent certified county property tax rolls at the time of annexation. The District shall apply compensation received from a municipality in connection with the deannexation exclusively to the payment or defeasance of the deannexed territory's pro rata share of the District's bonded and other indebtedness. In 2004, the City of Austin annexed two tracts of land within the District. The District's tax base was unaffected by the annexations, as one tract is a property tax-exempt hospital and the other is existing highway right-of-way. -15-

22 Additionally, pursuant to Section , as amended, Texas Health and Safety Code, the District is permitted to transfer territory to another emergency services district or a district created pursuant to Chapter 776, as amended, Texas Health and Safety Code, upon compensation for such pro rata share of any outstanding indebtedness. The District is also authorized, pursuant to Section of the Texas Health and Safety Code, as amended, to annex additional territory within the District upon the filing of a petition by the voters within the area to be annexed and approval of such annexation, at elections held for such purposes, by the voters within the District and by the voters within the area annexed. Dissolution of the District: Subchapter D of Chapter 775 of the Texas Health and Safety Code, as amended, also provides for dissolution of the District under certain circumstances. Upon receipt of a petition signed by at least 10 percent of the registered voters of the District, the Board of Commissioners must hold a hearing regarding dissolution of the District. At the hearing regarding dissolution, the Board of Commissioners may determine whether to grant or deny the petition for dissolution. If the petition is granted, the District must hold an election for such purpose. If the dissolution is approved, the Board of Commissioners continues to control and administer the property, assets and debts of the District until all funds are disposed and all debts, including the Bonds are paid or settled. Table 10 - Statement of Revenues, Expenditures, and Changes in General Fund Balance For the Years Ended September 30, 2008 through /30/2011 9/30/2010 9/30/2009 9/30/2008 Revenues Property taxes $ 2,032,225 $ 2,096,667 $ 2,015,007 $ 1,808,945 Sales tax 1,620,115 1,593,159 1,500,372 1,583,412 Grants and donations 12,340 3, ,168 15,500 Charges for services 169, ,099 - Miscellaneous income 11,793 8, , ,161 Interest income 5,393 6,797 18,929 84,075 Total Revenues 3,851,195 3,904,228 3,834,765 3,669,093 Expenditures Current: General and administrative 270, , ,851 71,838 Public safety 2,804,451 2,585,848 2,653,696 2,712,316 Capital outlay 49, ,114 Debt Service: Principal retirement 102,076 96,077 78,973 85,386 Interest and fees 45,690 49,169 52,472 56,045 Total Expenditures $ 3,271,562 $ 2,979,174 $ 3,046,992 $ 2,983,699 Excess (Deficiency) of Revenues Over Expenditures $ 579,633 $ 925,054 $ 787,773 $ 685,394 Other Financing Sources (Uses) Transfers In Transfers Out (379,991) (368,309) (373,939) (516,632) Total Other Financing Sources (Uses) (379,991) (368,309) (373,939) (516,632) Net Change in Fund Balance 199, , , ,762 Fund Balance, beginning of year 3,020,259 2,463,514 2,049,680 1,880,918 Fund Balance, end of year $ 3,219,901 $ 3,020,259 $ 2,463,514 $ 2,049,

23 LEGAL INVESTMENTS IN TEXAS Section of the Public Security Procedures Act (Chapter 1201, Texas Government Code, as amended) provides that the Bonds are negotiable instruments governed by Chapter 8, Texas Business and Commerce Code, and are legal and authorized investments for insurance companies, fiduciaries, and trustees, and for the sinking funds of municipalities or other political subdivisions or public agencies of the State. With respect to investment in the Bonds by municipalities or other political subdivisions or public agencies of the State, the Public Funds Investment Act, Chapter 2256, Texas Government Code, as amended, requires that the Certificates be assigned a rating of A or its equivalent as to investment quality by a national rating agency. See RATINGS herein. In addition, various provisions of the Texas Finance Code provide that, subject to a prudent investor standard, the Bonds are legal investments for state banks, savings banks, trust companies with at least $1 million of capital, and savings and loan associations. The Bonds are eligible to secure deposits of any public funds of the State, its agencies, and its political subdivisions, and are legal security for those deposits to the extent of their market value. No review by the District has been made of the laws in other states to determine whether the Bonds are legal investments for various institutions in those states. The District makes no representation that the Bonds will be acceptable to public entities to secure their deposits or acceptable to such institutions for investment purposes. The District has made no investigation of other laws, rules, regulations or investment criteria which might apply to any such persons or entities or which might otherwise limit the suitability of the Bonds for any of the foregoing purposes or limit the authority of such persons or entities to purchase or invest in the Bonds for such purposes. RATINGS Moody s Investors Services Inc. ( Moody s ) has assigned a rating to the Bonds of A1, which is the District s underlying rating without regard to credit enhancement. An explanation of the significance of such rating may be obtained from Moody s. The rating reflects only the view of Moody s, and the District makes no representation as to the appropriateness of such rating. The rating is not a recommendation to buy, sell or hold the Bonds, and such rating may be subject to revision or withdrawal at any time by Moody s. Any downward revision or withdrawal of the rating may have an adverse effect on the market price of the Bonds. LEGAL MATTERS The District will furnish to the Underwriter complete transcripts of proceedings incident to the authorization and issuance of the Bonds, including the unqualified approving legal opinion of the Attorney General of the State of Texas to the effect that the Bonds are valid and legally binding obligations of the District, and based upon examination of such transcript of proceedings, the approving legal opinions of Bond Counsel, to a like effect. The form of Bond Counsel s opinion is attached hereto in Appendix B. Except as noted below, Bond Counsel was not requested to participate, and did not take part, in the preparation of the Official Statement, and such firm has not assumed any responsibility with respect thereto or undertaken independently to verify any of the information contained herein except that in its capacity as Bond Counsel, such firm has reviewed the information appearing under captions or subcaptions PURPOSE AND USE OF PROCEEDS OF THE BONDS Purpose of the Bonds, THE BONDS, (except the information under the subcaption Book-Entry-Only System and Registered Owners Remedies"), LEGAL INVESTMENTS IN TEXAS, LEGAL MATTERS, TAX MATTERS and CONTINUING DISCLOSURE OF INFORMATION (except under the subcaption Compliance With Prior Agreements ) and such firm is of the opinion that the information contained under such captions and subcaptions is an accurate and fair description of the laws and legal issues addressed therein and, with respect to the Bonds, such information conforms to the Order. The legal fee to be paid Bond Counsel for services rendered in connection with the issuance of the Bonds is contingent upon the sale and delivery of the Bonds. The legal opinion of Bond Counsel will; accompany the Bonds deposited with DTC or will be printed on the definitive Bonds in the event of the discontinuation of the Book-Entry-Only System. Certain legal matters will be passed upon for the Underwriter by their counsel, Andrews Kurth LLP, Houston, Texas. The various legal opinions to be delivered concurrently with the delivery of the Bonds express the professional judgment of the attorneys rendering the opinions as to the legal issues explicitly addressed therein. In rendering a legal opinion, the attorney does not become an insurer or guarantor of the expression of professional judgment, of the transaction opined upon, or of the future performance of the parties to the transaction. Nor does the rendering of an opinion guarantee the outcome of any legal dispute that may arise out of the transaction. -17-

24 LITIGATION On the date of delivery of the Bonds to the Underwriter, the District will execute and deliver to the Underwriter a certificate to the effect that, except as disclosed herein, no litigation of any nature has been filed or is pending, as of that date, to restrain or enjoin the issuance or delivery of the Bonds or which would affect the provisions made for their payment or security or in any manner question the validity of the Bonds. The District is not a party to any litigation or other proceeding pending or to its knowledge, threatened, in any court, agency or other administrative body (either state or federal) which, if decided adversely to the District, would have a material adverse effect on the financial condition of the District. Opinion TAX MATTERS On the date of initial delivery of the Bonds, McCall, Parkhurst & Horton L.L.P., Austin, Texas, Bond Counsel to the Issuer, will render its opinion that, in accordance with statutes, regulations, published rulings and court decisions existing on the date thereof ("Existing Law"), (1) interest on the Bonds for federal income tax purposes will be excludable from the "gross income" of the holders thereof and (2) the Bonds will not be treated as "specified private activity bonds" the interest on which would be included as an alternative minimum tax preference item under section 57(a)(5) of the Internal Revenue Code of 1986 (the "Code"). Except as stated above, Bond Counsel to the Issuer will express no opinion as to any other federal, state or local tax consequences of the purchase, ownership or disposition of the Bonds. See Appendix B - Form of Legal Opinion of Bond Counsel. In rendering its opinion, Bond Counsel to the Issuer will rely upon (a) certain information and representations of the Issuer, including information and representations contained in the Issuer's federal tax certificate (b) covenants of the Issuer contained in the Bond documents relating to certain matters, including arbitrage and the use of the proceeds of the Bonds and the property financed or refinanced therewith and (c) the verification report prepared by Grant Thornton LLP. Failure by the Issuer to observe the aforementioned representations or covenants could cause the interest on the Bonds to become taxable retroactively to the date of issuance. The Code and the regulations promulgated thereunder contain a number of requirements that must be satisfied subsequent to the issuance of the Bonds in order for interest on the Bonds to be, and to remain, excludable from gross income for federal income tax purposes. Failure to comply with such requirements may cause interest on the Bonds to be included in gross income retroactively to the date of issuance of the Bonds. The opinion of Bond Counsel to the Issuer is conditioned on compliance by the Issuer with such requirements, and Bond Counsel to the Issuer has not been retained to monitor compliance with these requirements subsequent to the issuance of the Bonds. Bond Counsel's opinion represents its legal judgment based upon its review of Existing Law and the reliance on the aforementioned information, representations and covenants. Bond Counsel's opinion is not a guarantee of a result. 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 Existing Law or the interpretation thereof will not be changed in a manner which would adversely affect the tax treatment of the purchase, ownership or disposition of the Bonds. A ruling was not sought from the Internal Revenue Service by the Issuer with respect to the Bonds or the property. No assurances can be given as to whether the Internal Revenue Service will commence an audit of the Bonds, or as to whether the Internal Revenue Service would agree with the opinion of Bond Counsel. If an Internal Revenue Service audit is commenced, under current procedures the Internal Revenue Service is likely to treat the Issuer as the taxpayer and the bondholders may have no right to participate in such procedure. No additional interest will be paid upon any determination of taxability. Federal Income Tax Accounting Treatment of Original Issue Discount The initial public offering price to be paid for one or more maturities of the Bonds may be less than the principal amount thereof or one or more periods for the payment of interest on the Bonds may not be equal to the accrual period or be in excess of one year (the "Original Issue Discount Bonds"). In such event, the difference between (i) the "stated redemption price at maturity" of each Original Issue Discount Bond, and (ii) the initial offering price to the public of such Original Issue Discount Bond would constitute original issue discount. The "stated redemption price at maturity" means the sum of all payments to be made on the bonds less the amount of all periodic interest payments. Periodic interest payments are payments which are made during equal -18-

25 accrual periods (or during any unequal period if it is the initial or final period) and which are made during accrual periods which do not exceed one year. Under Existing Law, any owner who has purchased such Original Issue Discount Bond in the initial public offering is entitled to exclude from gross income (as defined in section 61 of the Code) an amount of income with respect to such Original Issue Discount Bond equal to that portion of the amount of such original issue discount allocable to the accrual period. For a discussion of certain collateral federal tax consequences, see discussion set forth below. In the event of the redemption, sale or other taxable disposition of such Original Issue Discount Bond prior to stated maturity, however, the amount realized by such owner in excess of the basis of such Original Issue Discount Bond in the hands of such owner (adjusted upward by the portion of the original issue discount allocable to the period for which such Original Issue Discount Bond was held by such initial owner) is includable in gross income. Under Existing Law, the original issue discount on each Original Issue Discount Bond is accrued daily to the stated maturity thereof (in amounts calculated as described below for each six-month period ending on the date before the semiannual anniversary dates of the date of the Bonds and ratably within each such six-month period) and the accrued amount is added to an initial owner's basis for such Original Issue Discount Bond for purposes of determining the amount of gain or loss recognized by such owner upon the redemption, sale or other disposition thereof. The amount to be added to basis for each accrual period is equal to (a) the sum of the issue price and the amount of original issue discount accrued in prior periods multiplied by the yield to stated maturity (determined on the basis of compounding at the close of each accrual period and properly adjusted for the length of the accrual period) less (b) the amounts payable as current interest during such accrual period on such Original Issue Discount Bond. The federal income tax consequences of the purchase, ownership, redemption, sale or other disposition of Original Issue Discount Bonds which are not purchased in the initial offering at the initial offering price may be determined according to rules which differ from those described above. All owners of Original Issue Discount Bonds should consult their own tax advisors with respect to the determination for federal, state and local income tax purposes of the treatment of interest accrued upon redemption, sale or other disposition of such Original Issue Discount Bonds and with respect to the federal, state, local and foreign tax consequences of the purchase, ownership, redemption, sale or other disposition of such Original Issue Discount Bonds. Collateral Federal Income Tax Consequences The following discussion is a summary of certain collateral federal income tax consequences resulting from the purchase, ownership or disposition of the Bonds. This discussion is based on existing statutes, regulations, published rulings and court decisions, all of which are subject to change or modification, retroactively. The following discussion is applicable to investors, other than those who are subject to special provisions of the Code, such as financial institutions, property and casualty insurance companies, life insurance companies, individual recipients of Social Security or Railroad Retirement benefits, individuals allowed an earned income credit, certain S corporations with accumulated earnings and profits and excess passive investment income, foreign corporations subject to the branch profits tax and taxpayers who may be deemed to have incurred or continued indebtedness to purchase tax-exempt obligations. THE DISCUSSION CONTAINED HEREIN MAY NOT BE EXHAUSTIVE. INVESTORS, INCLUDING THOSE WHO ARE SUBJECT TO SPECIAL PROVISIONS OF THE CODE, SHOULD CONSULT THEIR OWN TAX ADVISORS AS TO THE TAX TREATMENT WHICH MAY BE ANTICIPATED TO RESULT FROM THE PURCHASE, OWNERSHIP AND DISPOSITION OF TAX-EXEMPT OBLIGATIONS BEFORE DETERMINING WHETHER TO PURCHASE THE BONDS. Interest on the Bonds will be includable as an adjustment for "adjusted current earnings" to calculate the alternative minimum tax imposed on corporations by section 55 of the Code. Under section 6012 of the Code, holders of tax-exempt obligations, such as the Bonds, may be required to disclose interest received or accrued during each taxable year on their returns of federal income taxation. Section 1276 of the Code provides for ordinary income tax treatment of gain recognized upon the disposition of a tax-exempt obligation, such as the Bonds, if such obligation was acquired at a "market discount" and if the fixed maturity of such obligation is equal to, or exceeds, one year from the date of issue. Such treatment applies to "market discount bonds" to the extent such gain does not exceed the accrued market discount of such bonds; although for this purpose, a de minimis amount of market discount is ignored. A "market discount bond" is one which is acquired by the holder at a purchase price which is less than the stated redemption price at maturity or, in the case of a bond issued at an original issue discount, the "revised issue price" (i.e., the issue price plus accrued original issue discount). The "accrued market discount" is the amount which bears the same ratio to the market -19-

26 discount as the number of days during which the holder holds the obligation bears to the number of days between the acquisition date and the final maturity date. State, Local and Foreign Taxes Investors should consult their own tax advisors concerning the tax implications of the purchase, ownership or disposition of the Bonds under applicable state or local laws. Foreign investors should also consult their own tax advisors regarding the tax consequences unique to investors who are not United States persons. Qualified Tax-Exempt Obligations for Financial Institutions Section 265(a) of the Code provides, in pertinent part, that interest paid or incurred by a taxpayer, including a "financial institution," on indebtedness incurred or continued to purchase or carry tax-exempt obligations is not deductible in determining the taxpayer's taxable income. Section 265(b) of the Code provides an exception to the disallowance of such deduction for any interest expense paid or incurred on indebtedness of a taxpayer that is a "financial institution" allocable to tax-exempt obligations, other than " private activity bonds," that are designated by a "qualified small issuer" as "qualified tax-exempt obligations." A "qualified small issuer" is any governmental issuer (together with any "on-behalf of" and "subordinate" issuers) who issues no more than $10,000,000 of tax-exempt obligations during the calendar year. Section 265(b)(5) of the Code defines the term "financial institution" as any"bank" described in Section 585(a)(2) of the Code, or any person accepting deposits from the public in the ordinary course of such person's trade or business that is subject to federal or state supervision as a financial institution. Notwithstanding the exception to the disallowance of the deduction of interest on indebtedness related to "qualified tax-exempt obligations" provided by Section 265(b) of the Code, Section 291 of the Code provides that the allowable deduction to a "bank," as defined in Section 585(a)(2) of the Code, for interest on indebtedness incurred or continued to purchase "qualified tax-exempt obligations" shall be reduced by twenty-percent (20%) as a "financial institution preference item." The Issuer expects that the Bonds will be designated, or deemed designated as "qualified tax-exempt obligations" within the meaning of section 265(b) of the Code. In furtherance of that designation, the Issuer will covenant to take such action that would assure, or to refrain from such action that would adversely affect, the treatment of the Bonds as "qualified tax-exempt obligations." Potential purchasers should be aware that if the issue price to the public exceeds $10,000,000, there is a reasonable basis to conclude that the payment of a de minimis amount of premium in excess of $10,000,000 is disregarded; however, the Internal Revenue Service could take a contrary view. If the Internal Revenue Service takes the position that the amount of such premium is not disregarded, then such obligations might fail to satisfy the $10,000,000 limitation and the Bonds would not be "qualified tax-exempt obligations." Future and Proposed Legislation Tax legislation, administrative actions taken by tax authorities, or court decisions, whether at the Federal or state level, may adversely affect the tax-exempt status of interest on the Bonds under Federal or state law and could affect the market price or marketability of the Bonds. Any such proposal could limit the value of certain deductions and exclusions, including the exclusion for tax-exempt interest. The likelihood of any such proposal being enacted cannot be predicted. Prospective purchasers of the Bonds should consult their own tax advisors regarding the foregoing matters. UNDERWRITER Raymond James & Associates, Inc. has agreed to purchase the Bonds from the District at a price of $3,174, (being the principal amount of the Bonds, plus a net premium of $169, and less an Underwriter s discount of $25,194.23), plus accrued interest on the Bonds to the date of delivery to the Underwriter. The Underwriter has provided the following sentence for inclusion in the Official Statement. The Underwriter has reviewed the information in this Official Statement pursuant to its responsibilities to investors under the federal securities laws, but the Underwriter does not guarantee the accuracy or completeness of such information. On April 2, 2012, Raymond James Financial, Inc. ( RJF ), the parent company of Raymond James & Associates, Inc. ( Raymond James ), acquired all of the stock of Morgan Keegan & Company, Inc. ( Morgan Keegan ) from Regions Financial Corporation. Morgan Keegan and Raymond James are each registered broker-dealers. Both Morgan Keegan and Raymond James are wholly owned subsidiaries of RJF and, as such, are affiliated broker-dealer companies under the common control of RJF, utilizing the trade name Raymond James Morgan Keegan that appears on the cover of this Preliminary Official Statement. It is anticipated that the businesses of Raymond James and Morgan Keegan will be combined. Raymond James has entered in to a distribution -20-

27 arrangement with Morgan Keegan for the distribution of the Bonds at the original issue prices. Such arrangement generally provides that Raymond James will share a portion of its underwriting compensation or selling concession with Raymond James. Raymond James may also receive compensation for serving as bidding agent in conducting a competitive bid procurement process for the investment of some or all of the Series 2013 Bond proceeds. FINANCIAL ADVISOR Wells Nelson and Associates L.L.C. (the Financial Advisor ) is employed by the District as financial advisor in connection with the issuance of the Bonds and, in such capacity, has assisted the District in the preparation of this Official Statement. The Financial Advisor s fee for services rendered with respect to the sale of the Bonds is contingent upon the issuance and delivery of the Bonds. Although the Financial Advisor has read and participated in the preparation of this Official Statement, it has not independently verified any of the information set forth herein. The information contained in this Official Statement has been obtained primarily from the District s records and from other sources which are believed to be reliable, including financial records of the District and other entities which may be subject to interpretation. No guarantee is made as to the accuracy or completeness of any such information. No person, therefore, is entitled to rely upon the participation of the Financial Advisor as an implicit or explicit expression of opinion as to the completeness and accuracy of the information contained in this Official Statement. FINANCIAL STATEMENTS APPENDIX A to this Official Statement contains the general purpose financial statements of the District for the year ended September 30, These combined financial statements of Travis County Emergency Services District No. 3, Texas as of and for the year ended September 30, 2011 included in this Official Statement have been audited by John F. Lewis, P.C., Certified Public Accountants, independent auditors, as stated in their report included with such financial statements in APPENDIX A. The general purpose financial statements have been prepared in accordance with generally accepted accounting principles and include financial information with respect to several separate legal entities that are not obligated for the payment of the Bonds. Accordingly, financial and statistical information with respect to such separate legal entities is generally not included in this Official Statement. CONTINUING DISCLOSURE OF INFORMATION The offering of the Bonds qualifies for the Rule 15c2-12(d)(2) exemption from Rule 15c2-12(b)(5) regarding the District's continuing disclosure obligations because the District does not currently have outstanding more than $10,000,000 in aggregate principal amount of outstanding debt and no person is committed by contract or other arrangement with respect to payment of the Bonds. Pursuant to the exemption, the District in the Order has made the following agreement for the benefit of the holders and beneficial owners of the Bonds. The District is required to observe the agreement for so long as it remains obligated to advance funds to pay the Bonds. Under the agreement, the District will be obligated to provide certain updated financial information and operating data and timely notice of specified events to the Municipal Securities Rulemaking Board (the MSRB ) through its Electronic Municipal Market Access system ( EMMA ). Annual Reports The District will provide certain updated financial information and operating data which is customarily prepared by the District and is publicly available to the MSRB on an annual basis. Such information currently includes the District's annual financial statements. The District will update and provide this information within six months after the end of each fiscal year. The financial information and operating data to be provided may be set forth in full in one or more documents or may be included by specific reference to any document available to the public on the MSRB s Internet Web site or filed with the United States Securities and Exchange Commission (the SEC ), as permitted by SEC Rule 15c2-12 (the Rule ). The updated information will include audited financial statements, if the District commissions an audit and it is completed by the required time. If audited financial statements are not available by the required time, the District will provide unaudited financial information and operating data of the general type described in the preceding paragraph by the required time and audited financial statements when and if the audit report becomes available. Any such financial statements will be prepared in accordance with the accounting principles described in Appendix A or such other accounting principles as the District may be required to employ from time to time pursuant to State law or regulation. -21-

28 The District's current fiscal year end is September 30. Accordingly, it must provide updated information by the last day of March in the following year, unless the District changes its fiscal year. If the District changes its fiscal year, it will notify the MSRB of the change. Notice of Certain Events The District will also provide timely notice (not in excess of ten (10) business days after the occurrence of the event) of any of the following events with respect to the Bonds: (1) principal and interest payment delinquencies; (2) non-payment related defaults, if material; (3) unscheduled draws on debt service reserves reflecting financial difficulties; (4) unscheduled draws on credit enhancements reflecting financial difficulties; (5) substitution of credit or liquidity providers, or their failure to perform; (6) adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701 TEB) or other material notices or determinations with respect to the tax status of the Bonds, or other material events affecting the tax status of the Bonds; (7) modifications to rights of holders of the Bonds, if material; (8) Obligation calls, if material, and tender offers; (9) defeasances; (10) release, substitution, or sale of property securing repayment of the Bonds, if material; (11) rating changes; (12) bankruptcy, insolvency, receivership, or similar event of the District; (13) the consummation of a merger, consolidation, or acquisition involving the District or the sale of all or substantially all of the assets of the District, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action, or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms, if material; and (14) the appointment of a successor or additional trustee or the change of name of a trustee, if material. For these purposes, any event described in clause (12) in the immediately preceding paragraph is considered to occur when any of the following occur: the appointment of a receiver, fiscal agent, or similar officer for the District in a proceeding under the United States Bankruptcy Code or in any other proceeding under state or federal law in which a court or governmental authority has assumed jurisdiction over substantially all of the assets or business of the District, or if such jurisdiction has been assumed by leaving the existing governing body and officials or officers in possession but subject to the supervision and orders of a court or governmental authority, or the entry of an order confirming a plan of reorganization, arrangement, or liquidation by a court or governmental authority having supervision or jurisdiction over substantially all of the assets or business of the District. The District will also provide timely notice of any failure by the District to provide annual financial information in accordance with their agreement described above under Annual Reports. Availability of Information The District has agreed to provide the foregoing information only to the MSRB. All documents provided by the District to the MSRB described above under Annual Reports and Notice of Certain Events will be in an electronic format and accompanied by identifying information as prescribed by the MSRB. Such information will be available to the general public, without charge, at Limitations and Amendments The District has agreed to update information and to provide notices of certain specified events only as described above. The District has not agreed to provide other information that may be relevant or material to a complete presentation of its financial results of operations, condition or prospects or agreed to update any information that is provided, except as described above. The District makes no representation or warranty concerning such information or concerning its usefulness to a decision to invest in or sell Bonds at any future date. The District disclaims any contractual or tort liability for damages resulting in whole or in part from any breach of its continuing disclosure agreement or from any statement made pursuant to its agreement, although holders and beneficial owners of the Bonds may seek a writ of mandamus to compel the District to comply with its agreement. The District may amend its continuing disclosure agreement to adapt to changed circumstances that arise from a change in legal requirements, a change in law, or a change in the identity, nature, status, or operations of the District but only if the agreement, as amended, would have permitted an underwriter to purchase or sell Bonds in the offering described herein in compliance with the Rule, taking into account any amendments and interpretations of the Rule to the date of such amendment, as well as changed circumstances, and either the holders of a majority in aggregate principal amount of the outstanding Bonds consent or any person unaffiliated with the District (such as a nationally recognized bond counsel) determines that the amendment will not materially impair the interests of the beneficial owners of the Bonds. The District may also amend or repeal the agreement if the SEC amends or repeals the applicable provisions of such rule or a court of final jurisdiction determines that such provisions are invalid but in either case, only to the extent that its right to do so would not prevent an underwriter from lawfully purchasing the Bonds in the offering described herein. If the District so amends the agreement, it has agreed to include with any financial information or operating data next provided in accordance with its agreement described above under Annual Reports an explanation, in -22-

29 narrative form, of the reason for the amendment and of the impact of any change in the type of financial information and operating data so provided. Compliance with Prior Agreements The District has complied in all material respects with its previous continuing disclosure agreement in accordance with the Rule. Sources and Compilation of Information GENERAL CONSIDERATIONS The information contained in this Official Statement has been obtained primarily from the District and from other sources believed to be reliable. No representation is made as to the accuracy or completeness of the information derived from sources other than the District. The summaries of the statutes, order, policies, and other related documents are included herein subject to all of the provisions of such documents. These summaries do not purport to be complete statements of such provisions and reference is made to such documents for further information. Forward-Looking Statements Disclaimer The statements contained in this Official Statement, and in any other information provided by the District, that are not purely historical, are forward-looking statements, including statements regarding the District's expectations, hopes, intentions, or strategies regarding the future. Readers should not place undue reliance on forward-looking statements. All forward-looking statements included in this Official Statement are based on information available to the District on the date hereof, and the District assumes no obligation to update any such forward-looking statements. The District's actual results could differ materially from those discussed in such forward-looking statements. The forward-looking statements included herein are necessarily based on various assumptions and estimates and are inherently subject to various risks and uncertainties, including risks and uncertainties relating to the possible invalidity of the underlying assumptions and estimates and possible changes or developments in social, economic, business, industry, market, legal, and regulatory circumstances and conditions and actions taken or omitted to be taken by third parties, including customers, suppliers, business partners and competitors, and legislative, judicial, and other governmental authorities and officials. Assumptions related to the foregoing involve judgements with respect to, among other things, future economic, competitive, and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond the control of the District. Any of such assumptions could be inaccurate and, therefore, there can be no assurance that the forward-looking statements included in this Official Statement will prove to be accurate. VERIFICATION OF MATHEMATICAL COMPUTATIONS The arithmetical accuracy of certain computations included in the schedules provided by Wells Nelson & Associates LLC on behalf of the District, was verified by Grant Thornton LLP, Minneapolis, Minnesota, certified public accountants (the Accountants ). Such computations were based solely on assumptions and information supplied by Wells Nelson & Associates LLC on behalf of the District, as financial advisor. The Accountants have restricted their procedures to verifying the arithmetical accuracy of certain computations and have not made any study or evaluation of the assumptions and information on which the computations are based, and accordingly, have not expressed an opinion on the data used, the reasonableness of the assumptions, or the achievability of the forecasted outcome. The Accountants will verify from the information provided to them the mathematical accuracy as of the date of the closing on the Bonds of (i) the computations contained in the provided schedules to determine that the anticipated receipts from the Federal Securities and cash deposits listed in the schedules provided by Wells Nelson & Associates LLC, to be held in the Escrow Fund, will be sufficient to pay, when due, the principal and interest requirements of the Refunded Bonds, and (ii) the computations of yield on both the Federal Securities and the Bonds contained in the provided schedules. The report of the Accountants will be relied upon by Bond Counsel in rendering its opinion with respect to the exclusion of the interest on the Bonds from gross income of the holders and the defeasance of the Refunded Bonds. CONCLUDING STATEMENT To the extent that any statements made in this Official Statement involve matters of opinion or estimates, whether or not expressly stated to be such, they are made as such and not as representations of fact or certainty and no representation is made that any of these statements have been or will be realized. Information in this Official Statement has been derived by the District from official -23-

30 and other sources and is believed by the District to be accurate and reliable. Information other than that obtained from official records of the District has not been independently confirmed or verified by the District and its accuracy is not guaranteed. ATTEST: /s/ J. Edd New President, Board of Commissioners Travis County Emergency Services District No. 3, Texas /s/ Carroll Knight Secretary, Board of Commissioners Travis County Emergency Services District No. 3, Texas -24-

31 SCHEDULE I SCHEDULE OF REFUNDED BONDS LIMITED TAX BONDS, SERIES 2003 Original Original Principal Scheduled Original Original Interest Principal Amount Date for Call Dated Date Maturity Rate Amount Refunded Redemption Price 10/1/2003 9/1/ % $ 170,000 $ 170,000 9/1/ % 10/1/2003 9/1/ % 180, ,000 9/1/ % 10/1/2003 9/1/ % 185, ,000 9/1/ % 10/1/2003 9/1/ % 190, ,000 9/1/ % 10/1/2003 9/1/ % 200, ,000 9/1/ % 10/1/2003 9/1/ % 210, ,000 9/1/ % 10/1/2003 9/1/ % 445, ,000 9/1/ % 10/1/2003 9/1/ % 485, ,000 9/1/ % LIMITED TAX BONDS, SERIES 2005 Original Original Principal Scheduled Original Original Interest Principal Amount Date for Call Dated Date Maturity Rate Amount Refunded Redemption Price 1/15/2005 9/1/ % $ 150,000 $ 150,000 9/1/ % 1/15/2005 9/1/ % 250, ,000 9/1/ % 1/15/2005 9/1/ % 285, ,000 9/1/ % 1/15/2005 9/1/ % 210, ,000 9/1/ % - A-1 -

32 THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK.

33 APPENDIX A AUDITED GENERAL PURPOSE FINANCIAL STATEMENTS FOR YEAR ENDED SEPTEMBER 30, 2011

34 THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK.

35 TRAVIS COUNTY EMERGENCY SERVICES DISTRICT #3 ANNUAL FINANCIAL STATEMENTS WITH OTHER SUPPLEMENTAL INFORMATION AND INDEPENDENT AUDITORS REPORT FOR THE YEAR ENDED SEPTEMBER 30, 2011

36

37 TRAVIS COUNTY EMERGENCY SERVICES DISTRICT #3 TABLE OF CONTENTS Listing of Officials 1 Independent Auditors Report 2-3 Required Supplementary Information: Management s Discussion and Analysis 4-10 Basic Financial Statements: Government-wide Financial Statements: Statement of Net Assets 11 Statement of Activities 12 Fund Financial Statements: Balance Sheet - Governmental Funds 13 Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net Assets 14 Statement of Revenues, Expenditures and Changes in Fund Balance - Governmental Funds 15 Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balance to the Statement of Activities 16 Notes to Financial Statements Required Supplementary Information: Statement of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual - Governmental Funds 31 Other Information: Tax Collection History...32 Statement of Fiduciary Net Assets Statements of Changes in Fiduciary Net Assets...34

38 TRAVIS COUNTY EMERGENCY SERVICES DISTRICT #3 LISTING OF OFFICIALS SEPTEMBER 30, 2011 Board of Commissioners J. Edd New President John Villanacci Vice President Carroll Knight Treasurer/Secretary Gina Starr-Hill Assistant Treasurer Robert L. Taylor Commissioner Command Staff J.J. Wittig Robert Hartigan Madeline Miller Acting Fire Chief District Chief Business / HR Manager -1-

39 JOHN F. LEWIS, P.C. CERTIFIED PUBLIC ACCOUNTANTS 3613 WILLIAMS DRIVE, SUITE 501 LOCAL (512) GEORGETOWN, TX AUSTIN METRO FAX (512) To the Board of Commissioners Travis County Emergency Services District #3 Austin, Texas Independent Auditors Report We have audited the accompanying financial statements of the governmental activities, the aggregate discretely presented component units, and each major fund of Travis County Emergency Services District #3, as of and for the year ended September 30, 2011, which collectively comprise the District s basic financial statements as listed in the table of contents. These financial statements are the responsibility of Travis County Emergency Services District #3 s management. Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free 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 significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinions. In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the aggregate discretely presented component units, and each major fund of the Travis County Emergency Services District #3, as of September 30, 2011, and the respective changes in financial position in conformity with accounting principles generally accepted in the United States of America. Accounting principles generally accepted in the United States of America require that the management s discussion and analysis and budgetary comparison information on pages 4 through 10 and 31 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. -2-

40

41 Required Supplementary Information

42 TRAVIS COUNTY EMERGENCY SERVICES DISTRICT #3 Management s Discussion and Analysis For the Year Ended September 30, 2011 Our discussion and analysis of the financial performance of Travis County Emergency Services District #3, and provides an overview of the District s financial activities for the year ended September 30, Please read it in conjunction with the District s basic financial statements, which begin on page 11 of this report. FINANCIAL HIGHLIGHTS The District s general fund had revenues of $3,851,195 and expenditures of $3,271,562 for the year ended September 30, The District had total net assets of $6,222,087 at September 30, The District s cash and investment balances were $3,362,818 as of September 30, The District s debt obligations consisted of capital leases payable, notes payable, and bonds payable with outstanding amounts of $407,888, $435,415, and $3,555,000, respectively as of September 30, OVERVIEW OF THE FINANCIAL STATEMENTS This discussion and analysis is intended to serve as an introduction to the basic financial statements of Travis County ESD #3. The District s basic financial statements compromise three components: 1) government-wide financial statements; 2) fund financial statements; and 3) notes to the financial statements. This report also contains other supplementary information in addition to the basic financial statements themselves. Government-wide Financial Statements The government-wide financial statements are designed to provide readers with a broad overview of the District s finances in a manner similar to a private-sector business. The statement of net assets presents information on all of the District s assets and liabilities, with the difference between the two reported as net assets. Over time, increases or decreases in net assets may serve as a useful indicator of whether the financial position of the District is improving or declining. The statement of activities presents information showing how the District s net assets changed during the most recent fiscal year. All changes in net assets are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, the accrual basis of accounting is used, which is similar to the accounting used by most private-sector businesses. Some revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods. -4-

43 TRAVIS COUNTY EMERGENCY SERVICES DISTRICT #3 Management s Discussion and Analysis For the Year Ended September 30, 2011 OVERVIEW OF THE FINANCIAL STATEMENTS (Continued) In the Statement of Net Assets, we present the District as one type of fund: Governmental - Most of the District s activities are reported here. The government-wide financial statements are found on pages of this report. REPORTING THE DISTRICT S MOST SIGNIFICANT FUNDS The fund financial statements begin on page 13, and provide detailed information about the most significant funds - not the District as a whole. A fund is a grouping of related accounts that are used to maintain control over resources that have been segregated for specific activities or objectives. The District, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All of the funds of the District are included in one category: governmental funds. Some funds are required to be established by State law and by bond covenants; currently, the only fund required is the general fund. As the District ventures further into securing bonded debt on future endeavors it may be necessary to establish other funds. Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the government-wide financial statements, governmental fund financial statements focus on how money flows into and out of those funds and the balances left at year-end that are available for spending. These funds are reported using an accounting method called modified accrual, which measures cash and all other financial assets that can readily be converted to cash. The governmental fund statements provide a detailed short-term view of the District s general government operations and the services it provides. Governmental fund information helps determine whether there are more or fewer financial resources that can be spent in the near future to finance the District s programs. We describe the relationship (or differences) between governmental activities and governmental funds in the Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net Assets and the Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balance to the Statement of Activities found on pages 14 and 16 of this report. The Notes to Financial Statements provide additional information that is essential for a full understanding of the data provided in the government-wide and fund financial statements. The notes to the financial statements can be found on pages of this report. Each year the District adopts a budget for its General Fund. A budgetary comparison schedule has been provided for the Governmental Funds to demonstrate compliance with this budget. This information can be found on page 31 of this report. -5-

44 TRAVIS COUNTY EMERGENCY SERVICES DISTRICT #3 Management s Discussion and Analysis For the Year Ended September 30, 2011 GOVERNMENT-WIDE FINANCIAL ANALYSIS The District s net assets increased by $292,334 during fiscal year At September 30, 2011, the District s assets exceed liabilities by $6,222,087. The information below presents a summary of the net assets and changes in net assets of governmental activities over the past three years. Details of this information can be found in the Government-wide financial statements on pages of this report. Travis County ESD #3 - Net Assets Governmental Activities Assets: Current and other assets $ 2,667,065 $ 3,163,138 $ 3,422,476 Capital assets, net of accumulated depreciation 7,962,585 7,677,558 7,455,376 Intangible assets, net of accumulated amortization 69,630 64,987 60,346 Total Assets $ 10,699,280 $ 10,905,683 $ 10,938,198 Liabilities: Current and other liabilities $ 575,520 $ 559,627 $ 630,251 Non-current liabilities 4,719,802 4,416,303 4,085,860 Total Liabilities $ 5,295,322 $ 4,975,930 $ 4,716,111 Net Assets: Invested in capital assets, net of related debt $ 2,985,067 $ 2,974,180 $ 3,057,073 Restricted 45,036 45,258 53,984 Unrestricted 2,373,855 2,910,315 3,111,030 Total Net Assets $ 5,403,958 $ 5,929,753 $ 6,222,087 Travis County ESD #3 - Changes in Net Assets Governmental Activities Revenues: Program revenue $ 203,226 $ 198,849 $ 181,669 General revenues: Property taxes 2,017,566 2,105,183 2,040,122 Sales taxes 1,500,372 1,593,159 1,620,115 Interest and other income 134,322 16,076 17,585 Total General Revenues 3,652,260 3,714,418 3,677,822 Total Revenues 3,858,486 3,913,267 3,859,491 Expenses: Fire and Emergency Services 3,392,010 3,387,472 3,567,157 Total Expenses 3,392,010 3,387,472 3,567,157 Increase in Net Assets $ 463,476 $ 525,795 $ 292,334-6-

45 TRAVIS COUNTY EMERGENCY SERVICES DISTRICT #3 Management s Discussion and Analysis For the Year Ended September 30, 2011 GOVERNMENT-WIDE FINANCIAL ANALYSIS (Continued) The District receives the majority of its revenue from property taxes and sales taxes collected by Travis County and remitted to the District. The following graph presents the different sources of revenue recorded by the District during fiscal year Property tax revenues decreased $65,061 or 3.1% from fiscal year The related tax rate held by the District remained unchanged at $0.10/$100. The amount of sales tax collected by the District increased $26,956 or 1.7% from fiscal year The following graph presents a comparison of the amount of property tax and sales tax revenue collected by the District for the years ended September 30, 2009, 2010, and

46 TRAVIS COUNTY EMERGENCY SERVICES DISTRICT #3 Management s Discussion and Analysis For the Year Ended September 30, 2011 FINANCIAL ANALYSIS OF THE DISTRICT S FUNDS As previously noted, the District uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. Total revenues for the District s governmental funds were $3,851,195 while total expenditures were $3,271,562. The excess of revenues over expenditures was $579,633. As of September 30, 2011, the fund balance in the General Fund was $3,219,901, and $53,984 in the Debt Service Fund. Details of this information can be found on pages 13 and 15 of this report. CAPITAL ASSETS AND DEBT ADMINSTRATION Capital Assets As of September 30, 2011, the District had $9,612,773 invested in capital assets, less accumulated depreciation of $2,157,397. The following graph presents a detail of the types of capital assets held by the District at the year ended September 30, In addition to the capital assets listed above, the District had an intangible asset consisting of bond issuance costs in the amount of $60,346, net of accumulated amortization. -8-