OFFICIAL STATEMENT DATED MARCH 5, 2015

Transcription

1 OFFICIAL STATEMENT DATED MARCH 5, 2015 THE DELIVERY OF THE BONDS IS SUBJECT TO THE OPINION OF BOND COUNSEL AS TO THE VALIDITY OF THE BONDS AND THE OPINION OF SPECIAL TAX COUNSEL TO THE EFFECT THAT UNDER EXISTING LAW INTEREST ON THE BONDS IS EXCLUDABLE FROM GROSS INCOME FOR FEDERAL INCOME TAX PURPOSES AND THE BONDS ARE NOT PRIVATE ACTIVITY BONDS. SEE LEGAL MATTERS HEREIN FOR A DISCUSSION OF BOND COUNSEL'S OPINION AND TAX MATTERS TAX EXEMPTION FOR A DISCUSSION OF THE OPINION OF SPECIAL TAX COUNSEL, INCLUDING A DESCRIPTION OF CERTAIN ALTERNATIVE MINIMUM TAX CONSEQUENCES FOR CORPORATIONS. The District will not designate the Bonds as Qualified Tax-Exempt Obligations for Financial Institutions. NEW ISSUE Book Entry Only RATING: Moody s (Underlying)... "Aa3" $18,340,000 MONTGOMERY COUNTY MUNICIPAL UTILITY DISTRICT NO. 46, OF MONTGOMERY COUNTY, TEXAS (A Political Subdivision of the State of Texas located within Montgomery County) UNLIMITED TAX REFUNDING BONDS, SERIES 2015 Interest accrues from: April 1, 2015 Due: March 1, as shown below The $18,340,000 Montgomery County Municipal Utility District No. 46, of Montgomery County, Texas Unlimited Tax Refunding Bonds, Series 2015 (the Bonds ), are obligations solely of Montgomery County Municipal Utility District No. 46, of Montgomery County, Texas (the District ), and are not obligations of the State of Texas, the City of Houston, The Woodlands Township, Montgomery County or any other entity. Principal on the Bonds is scheduled to mature on March 1 as shown below. Interest will accrue from April 1, 2015, and will be payable March 1 and September 1 of each year ( Interest Payment Date ), commencing September 1, Principal of the Bonds at maturity or at prior optional redemption, together with accrued interest on the Bonds, is payable to the registered owner(s) of the Bonds (the Bondholder(s) ) at The Bank of New York Mellon Trust Company, N.A., Dallas, Texas (sometimes hereinafter called the Paying Agent or the Registrar ), upon surrender of the Bonds for payment at maturity or upon prior redemption. Unless otherwise agreed between the Paying Agent and a Bondholder, interest on the Bonds and principal payment upon mandatory redemption of any term bonds, are payable by check or draft of the Paying Agent, dated as of the Interest Payment Date and mailed by the Paying Agent to each Bondholder, as shown on the records of the Registrar on the close of business on the 15th day of the calendar month next preceding each Interest Payment Date (the Record Date ). The Bonds will be issued only in fully registered form in the denomination of $5,000 of principal amount, or any integral multiple thereof. The Bonds scheduled to mature on or after March 1, 2026, are subject to redemption, in whole or, from time to time, in part, prior to their scheduled maturities, on March 1, 2025, or on any date thereafter. Upon redemption, the Bonds will be payable at a price equal to the principal amount of the Bonds or portions thereof so called for redemption, plus accrued interest to the date for redemption. If less than all the Bonds are redeemed at any time, the District shall determine the maturity or maturities and the amounts thereof to be redeemed in integral multiples of $5,000 in principal amount, and if less than all serial Bonds within a maturity are to be redeemed, the Registrar shall select by lot or other customary method of random selection the Bonds within such maturity to be redeemed. The District determines mandatory redemption payment reductions in the event of a partial redemption of a term bond maturity. See THE BONDS - Optional Redemption herein. The Bonds will be registered in the name of Cede & Co., as nominee for The Depository Trust Company, New York, New York ( DTC ), which will act as securities depository for the Bonds. Beneficial owners of the Bonds will not receive physical certificates representing the Bonds, but will receive a credit balance on the books of the nominees of such beneficial owners. So long as Cede & Co. is the registered owner of the Bonds, the principal of and interest on the Bonds will be paid by the Paying Agent directly to DTC, which will, in turn, remit such principal and interest to its participants for subsequent disbursement to the beneficial owners of the Bonds as described herein. See THE BONDS Book-Entry-Only System. PRINCIPAL AMOUNTS, MATURITIES, INTEREST RATES AND INITIAL REOFFERING YIELDS Initial Reoffering Yield (a) Initial Reoffering Yield (a) Due (March 1) Principal Amount* Interest Rate Due (March 1) Principal Amount* Interest Rate 2016 $110, % 0.450% 2024 $ 455, % 2.750% , % 0.950% , % 2.930% , % 1.350% 2026(b) 2,610, % 2.980% , % 1.600% 2027(b) 2,755, % 3.180% , % 1.900% 2028(b) 2,875, % 3.220% , % 2.100% 2029(b) 3,030, % 3.290% , % 2.350% 2030(b) 3,195, % 3.350% , % 2.550% (a) The initial yields and prices are established by and are the sole responsibility of the Underwriters (hereinafter defined) and may subsequently be changed. (b) Subject to optional redemption herein. The Bonds, when issued, will constitute valid and binding obligations of the District and will be payable solely from the proceeds of an annual ad valorem tax, without legal limitation as to rate or amount, levied against taxable property within the District. Neither the State of Texas, the City of Houston, The Woodlands Township, Montgomery County, nor any political subdivision or municipality, other than the District, shall be obligated to pay the principal of or interest on the Bonds. Neither the faith and credit nor the taxing power of the State of Texas, the City of Houston, The Woodlands Township, or Montgomery County, or any other political subdivision or municipality thereof, other than the District, is pledged to the payment of the principal of or interest on or the redemption price of the Bonds. The proceeds of the Bonds, will be applied to refund certain outstanding bonds of the District and to pay certain costs incurred in connection with the issuance of the Bonds in order to achieve gross and net present value savings in the District's annual debt service expense (see PLAN OF FINANCING ). The Bonds are offered when, as and if issued by the District and accepted by the Underwriters, subject to the approval of the Attorney General of Texas and the approval of certain legal matters by Schwartz, Page & Harding, L.L.P., Houston, Texas, Bond Counsel, and Bracewell & Giuliani LLP, Houston, Texas, Special Tax Counsel. Certain legal matters will be passed upon for the Underwriters by Coats, Rose, Yale, Ryman & Lee, P.C., Houston, Texas, Underwriter's Counsel. See LEGAL MATTERS. Delivery of the Bonds is anticipated to be on April 15, SAMCO Capital Markets, Inc. Coastal Securities, Inc.

2 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 or the Underwriters. 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 state in which such offer or solicitation is not authorized or in which the person making such offer of solicitation is not qualified to do so or to any person to whom it is unlawful to make such offer or solicitation. All of the summaries of the statutes, orders, contracts, records, and engineering and other related reports set forth in the Official Statement are made subject to all of the provisions of such documents. These summaries do not purport to be complete statements of such provisions, and reference is made to such documents, copies of which are available from the District, c/o Schwartz, Page & Harding, L.L.P., 1300 Post Oak Blvd., Suite 1400, Houston, Texas 77056, upon payment of the costs for duplication thereof. This Official Statement contains, in part, estimates, assumptions and matters of opinion which are not intended as statements of fact, and no representation is made as to the correctness of such estimates, assumptions, or matters of opinion, or as to the likelihood that they will be realized. Any information and expressions of opinion herein contained are subject to change without notice, and neither the delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the District or the other matters described herein since the date hereof. However, the District has agreed to keep this Official Statement current by amendment or sticker to reflect material changes in the affairs of the District, and to the extent that information actually comes to its attention, other matters described in the Official Statement until delivery of the Bonds to the Underwriters and thereafter only as specified in GENERAL CONSIDERATIONS - Updating of Official Statement, and CONTINUING DISCLOSURE OF INFORMATION. The Underwriters have provided the following sentence for inclusion in this Official Statement. The Underwriters have reviewed the information in this Official Statement pursuant to its responsibilities to investors under the federal securities laws, but the Underwriters do not guarantee the accuracy or completeness of such information. TABLE OF CONTENTS Page USE OF INFORMATION IN OFFICIAL STATEMENT.. 1 SALE AND DISTRIBUTION OF THE BONDS... 3 Underwriting... 3 Prices and Marketability... 3 Securities Laws... 3 Delivery of Official Statements... 3 RATING... 4 OFFICIAL STATEMENT SUMMARY... 5 SELECTED FINANCIAL INFORMATION... 8 INTRODUCTION... 9 THE BONDS... 9 General... 9 Book-Entry-Only System Use of Certain Terms in Other Sections of this Official Statement Transfer, Exchange and Registration Successor Paying Agent/Registrar Replacement of Bonds Optional Redemption Remaining Outstanding Bonds Source of Payment Page Annexation and Consolidation Authority for Issuance Issuance of Additional Debt PLAN OF FINANCING Use of Proceeds Remaining Outstanding Bonds Escrow Agreement Sources and Uses of Funds Bondholders Remedies and Effects of Bankruptcy No Arbitrage Legal Investment and Eligibility to Secure Public Funds in Texas DISTRICT DEBT General Estimated Overlapping Debt Debt Ratios Debt Service Requirements TAX DATA General Tax Rate Limitation... 22

3 Historical Tax Collections Tax Rate Distribution Analysis of Tax Base Principal Taxpayers Tax Rate Calculations Estimated Overlapping Taxes TAXING PROCEDURES Property Tax Code and County-Wide Appraisal District Property Subject to Taxation by the District Notice and Hearing Procedures Levy and Collection of Taxes Collection of Delinquent Taxes THE DISTRICT Authority Description Board of Directors Direct Investment Policy Management and Contract Services Special Consultants Related to Issuance of the Bonds THE DEVELOPER Role of the Developer The Developer CURRENT STATUS OF DEVELOPMENT IN THE DISTRICT General Status of Development THE WOODLANDS General The Development Plan and Status of Development THE SYSTEM General Fifth Interim Accounting Water System Lone Star Groundwater Conservation District Waste Disposal System Stormwater Conveyance and Flood Control Facilities INVESTMENT CONSIDERATIONS General Factors Affecting Taxable Values and Tax Payments Registered Owners Remedies Tax Collections and Foreclosure Remedies Future Debt Marketability of the Bonds Bankruptcy Limitation to Registered Owners Rights Continuing Compliance with Certain Covenants Approval of the Bonds LEGAL MATTERS Legal Opinions Legal Review TAX MATTERS Tax Exemption Additional Federal Income Tax Considerations NO MATERIAL ADVERSE CHANGE NO LITIGATION CERTIFICATE CONTINUING DISCLOSURE OF INFORMATION Annual Reports Material Event Notices Availability of Information from MSRB Limitations and Amendments Compliance with Prior Undertakings VERIFICATION OF MATHEMATICAL CALCULATIONS GENERAL CONSIDERATIONS Sources and Compilation of Information Certification as to Official Statement Updating the Official Statement CONCLUDING STATEMENT APPENDIX A - Financial Statements of the District 2

4 Underwriting SALE AND DISTRIBUTION OF THE BONDS SAMCO Capital Markets, Inc. and Coastal Securities, Inc. (referred to herein as the "Underwriters") have agreed to purchase the Bonds from the District for $18,981, (being the par amount of the Bonds, plus a net premium on the Bonds of $772,109.30, and less an underwriter s discount of $130,381.76), plus accrued interest on the Bonds to the date of delivery. The Underwriter s obligation is to purchase all of the Bonds, if any Bonds are purchased. Prices and Marketability The delivery of the Bonds is conditioned upon the receipt by the District of a certificate executed and delivered by the Underwriters on or before the date of delivery of the Bonds stating the prices at which a substantial amount of the Bonds of each maturity have been sold to the public. For this purpose, the term public shall not include any person who is a bond house, broker or similar person acting in the capacity of underwriters or wholesaler. The District has no control over the reoffering or the trading of the Bonds. Information concerning reoffering yields or prices is the responsibility of the Underwriters. The District has no control over the reoffering yields or prices of the Bonds or over trading of the Bonds in the secondary market. Moreover, there is no assurance that a secondary market will be made in the Bonds. If there is a secondary market, the difference between the bid and asked prices of the bonds may be greater than the difference between the bid and asked prices of bonds of comparable maturity and quality issued by more traditional municipal entities, as bonds of such entities are more generally bought, sold or traded in the secondary market. The prices and other terms respecting the offering and sale of the Bonds may be changed from time to time by the Underwriters after the Bonds are released for sale and the Bonds may be offered and sold at prices other than the initial offering price, including sales to dealers who may sell the Bonds into investment accounts. IN CONNECTION WITH THE OFFERING OF THE BONDS, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE BONDS AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. Securities Laws No registration statement relating to the Bonds has been filed with the Securities and Exchange Commission under the Securities Act of 1933, as amended, in reliance upon the exemptions provided thereunder. The Bonds have not been registered or qualified under the Securities Act of Texas in reliance upon various exemptions contained therein; nor have the Bonds been registered or qualified under the securities laws or regulations of any other jurisdiction. The District assumes no responsibility for registration or qualification of the Bonds under the securities laws or regulations of any other jurisdiction in which the Bonds may be offered, sold or otherwise transferred. This disclaimer of responsibility for registration or qualification for sale or other disposition of the Bonds shall not be construed as an interpretation of any kind with regard to the availability of any exemption from securities registration or qualification provisions in such other jurisdictions. Delivery of Official Statements The District shall furnish to the Underwriters (and to each participating underwriter of the Bonds, within the meaning of SEC Rule 15c2-12(a), designated by the Underwriters), within seven (7) business days after the sale date, the aggregate number of Official Statements agreed upon between the District and the Underwriters. The District also shall furnish to the Underwriters a like number of any supplements or amendments approved and authorized for distribution by the District for dissemination to potential underwriters of the Bonds, as well as such additional copies of the Official Statement or any such supplements or amendments as the Underwriters may reasonably request prior to the 90th day after the end of the underwriting period described in SEC Rule 15c2-12(e)(2). The District shall pay the expense of preparing the number of copies of the Official Statement agreed upon between the District and the Underwriters and an equal number of any supplements or amendments issued on or before the delivery date, but the Underwriters shall pay for all other copies of the Official Statement or any supplement or amendment thereto. 3

5 RATING Moody s Investors Service ( Moody s) has assigned an underlying credit rating of Aa3 to the Bonds. An explanation of the ratings may be obtained from Moody s, 7 World Trade Center at 250 Greenwich Street, New York, New York Furthermore, a security rating is not a recommendation to buy, sell or hold securities. There is no assurance that such rating will continue for any given period of time or that it will not be revised downward or withdrawn entirely by Moody s, if in their judgment, circumstances so warrant. Any such revisions or withdrawal of the rating may have an adverse effect on the market price of the Bonds. The District will pay the rating fees charged by Moody s Investors Service. The District is not aware of any rating assigned the Bonds other than the rating of Moody's. 4

6 OFFICIAL STATEMENT SUMMARY The following material is a summary of certain information contained herein and is qualified in its entirety by the more detailed information and financial statements appearing elsewhere in this Official Statement. The reader should refer particularly to sections that are indicated for more complete information. GENERAL The Issuer... Montgomery County Municipal Utility District No. 46, of Montgomery County, Texas (the District ), is a political subdivision of the State of Texas, located within Montgomery County, Texas, and contains approximately 4,779 acres. See THE DISTRICT. The Issue... $18,340,000 Montgomery County Municipal Utility District No. 46, of Montgomery County, Texas Unlimited Tax Refunding Bonds, Series 2015, are dated April 1, The Bonds mature on March 1 as shown on the cover page hereof. The Bonds are registered serial bonds in integral multiples of $5,000 within any one maturity. Interest on the Bonds accrues from April 1, 2015, and is payable September 1, 2015, and on each March 1 and September 1 thereafter until maturity or prior redemption. See THE BONDS. Optional Redemption... The Bonds scheduled to mature on or after March 1, 2026, are subject to redemption, in whole or, from time to time, in part, prior to their scheduled maturities, on March 1, 2025, or on any date thereafter, at par plus accrued interest to the date fixed for redemption. If less than all the Bonds are redeemed at any time, the District shall determine the maturities and the amounts thereof to be redeemed in integral multiples of $5,000 in principal amounts, and if less than all of the Bonds within a maturity are to be redeemed, the Registrar shall select by lot or other customary method of random selection the Bonds within such maturity to be redeemed. See THE BONDS Optional Redemption. Use of Proceeds... A portion of the proceeds of the Bonds, will be applied to currently refund $11,865,000 (the Series 2005 Refunded Bonds ) of the District s $33,780,000 Waterworks and Sewer System Unlimited Tax Bonds, Series 2005 (the Series 2005 Bonds ), and $6,560,000 (the Series 2007 Refunded Bonds ) of the District s $8,900,000 Waterworks and Sewer System Unlimited Tax Bonds, Series 2007 (the Series 2007 Bonds ). The Series 2005 Refunded Bonds and the Series 2007 Refunded Bonds, are collectively referred to herein as the Refunded Bonds. The proceeds will also be used to pay certain costs of issuing the Bonds in order to achieve annual gross and net present value savings in the District s annual debt service expense. See PLAN OF FINANCING. Remaining Outstanding Bonds... The District has previously issued thirteen series of bonds for water, wastewater and drainage purposes, aggregating $130,590,000. The District has also issued eight series of bonds to refund a portion of the bond previously issued. Excluding the Refunded Bonds, $74,165,000 principal amount of bonds previously issued will remain outstanding after the issuance of the Bonds (the Remaining Outstanding Bonds. ) See THE BONDS Remaining Outstanding Bonds 5

7 Source of Payment... Principal of and interest on the Bonds are payable form the proceeds of a continuing, direct annual ad valorem tax, without legal limitation as to rate or amount, levied against taxable property located within the District. See THE BONDS Source of Payment. Payment Record... The District has never defaulted on the timely payment of interest on its outstanding bonded indebtedness. See DISTRICT DEBT. Qualified Tax-Exempt Obligations... The District will not designate the Bonds as qualified tax-exempt obligations pursuant to Section 265(b) of the Internal Revenue Code of 1986, as amended. Municipal Bond Rating... Moody s Investors Service Aa3. See RATINGS. Legal Opinions... Schwartz, Page & Harding, L.L.P., Houston, Texas, Bond Counsel and Bracewell & Giuliani LLP, Houston, Texas, Special Tax Counsel. See LEGAL MATTERS. Underwriter s Counsel... Coats, Rose, Yale, Ryman & Lee, P.C., Houston, Texas. Verification Agent... Grant Thornton LLP, Certified Public Accountants. See THE DISTRICT Special Consultants Related to Issuance of the Bonds and VERIFICATION OF MATHEMATICAL CALCULATIONS. THE DISTRICT Description... The District was created by an order of the Texas Water Commission ( TWC ), predecessor to the Texas Commission on Environmental Quality (the TCEQ or Commission ), on March 17, 1981, and operates pursuant to Chapters 49 and 54 of the Texas Water Code, as amended. The District is located entirely within The Woodlands in Montgomery County, Texas, approximately 27 miles north of the central business district of the City of Houston. The District is located within the exclusive extraterritorial jurisdiction of the City of Houston. The District is comprised of four noncontiguous tracts of land located within the Village of Grogan s Mill, the Village of Alden Bridge, the Village of Sterling Ridge and Carlton Woods. The first and second tracts are located in the Village of Alden Bridge and are accessible via Interstate Highway No. 45 and College Park Drive (Texas State Highway 242). The third tract, part of the Village of Sterling Ridge and Carlton Woods, is accessible via Interstate Highway 45 and Woodlands Parkway, and the fourth tract, part of the Village of Grogan s Mill, is accessible via Interstate Highway 45 and Sawdust and Sawmill Roads. The District is comprised of approximately 4,784 acres of land within the 28,000-acre community known as The Woodlands. See THE DISTRICT. Status of Development... As of February 28, 2015, the single-family residential development within the District included 6,314 completed homes, 17 homes under construction, four completed apartment complexes totaling 996 units, nine completed townhome projects totaling 533 units, one completed 86 unit condominium project, one completed 54 unit triplex, one completed 64 unit 8-plex, two completed duplex projects totaling 314 units, and 75 developed but unimproved lots. In addition, nonresidential development within the District consists of two day care 6

8 centers, 130,000 square foot ( sq. ft. ) shopping center, Sterling Ridge Village Center, in the Village of Sterling Ridge and a 100,000 sq. ft. shopping center, Windvale Shopping Center, in the Village of Alden Bridge. To date, 2,945 net acres within the District have been developed with utilities and 1,814 acres have been dedicated as streets, easements and open spaces. It is estimated that of the remaining acreage within the District, 10 acres will be developed and marketed, and 10 acres will be dedicated as public areas. See CURRENT STATUS OF DEVELOPMENT IN THE DISTRICT. Developer... The Woodlands Land Development Company, L.P. (the Developer ) is developing the property within the District. See THE DEVELOPER. INVESTMENT CONSIDERATIONS THE BONDS ARE SUBJECT TO CERTAIN INVESTMENT CONSIDERATIONS. PROSPECTIVE PURCHASERS SHOULD REVIEW THE ENTIRE OFFICIAL STATEMENT BEFORE MAKING AN INVESTMENT DECISION, INCLUDING PARTICULARLY THE SECTION OF THE OFFICIAL STATEMENT ENTITLED "INVESTMENT CONSIDERATIONS." 7

9 SELECTED FINANCIAL INFORMATION (UNAUDITED) 2014 Assessed Valuation... $3,729,619,908 (a) (100% of taxable value as of January 1, 2014) See "TAX DATA" and "TAXING PROCEDURES." Direct Debt: Remaining Outstanding Bonds... $ 74,165,000 (b) The Bonds... 18,340,000 Total... $ 92,505,000 Estimated Overlapping Debt... $195,859,026 (c) Direct and Estimated Overlapping Debt... $288,364,026 Debt Service Fund Balance (as of January 31, 2015)... $ 17,529,740 (d) Operating Fund Balance (as of January 31, 2015)... $ 4,830,893 Capital Projects Fund Balance (as of January 31, 2015)... $ 1,063,230 Direct Debt Ratios: As a percentage of 2014 Assessed Valuation ($3,729,619,908) % Direct and Estimated Overlapping Debt Ratios: As a percentage of 2014 Assessed Valuation ($3,729,619,908) % 2014 Tax Rate (per $100 of assessed valuation) Debt Service... $0.195 Maintenance Total... $0.23 Average Annual Debt Service Requirements of the Bonds and Remaining Outstanding Bonds ( )... $ 8,155,593 Maximum Annual Debt Service Requirements of the Bonds and Remaining Outstanding Bonds (2030)... $ 8,857,975 Tax Rate per $100 of Assessed Valuation Required to Pay Average Annual Debt Service Requirements on the Bonds and Remaining Outstanding Bonds ( ) at 95% Tax Collections Based Upon 2014 Assessed Valuation ($3,729,619,908)... $0.24 Tax Rate per $100 of Assessed Valuation Required to Pay Maximum Annual Debt Service Requirements on the Bonds and Remaining Outstanding Bonds (2030) at 95% Tax Collections Based Upon 2014 Assessed Valuation ($3,729,619,908)... $0.26 (a) (b) (c) (d) Certified by the Mongtomery Central Appraisal District ( MCAD ) Excluding the Refunded Bonds. See DISTRICT DEBT Estimated Overlapping Debt. Neither Texas law nor the Bond Order requires that the District maintain any particular sum in the Debt Service Fund. At the time of the closing, accrued interest on the Bonds from April 1, 2015, to the date of delivery will be deposited to the Debt Service Fund. 8

10 INTRODUCTION This Official Statement provides certain information in connection with the issuance by Montgomery County Municipal Utility District No. 46, of Montgomery County, Texas (the District ), of its Unlimited Tax Refunding Bonds, Series 2015 (the Bonds ). The Bonds are issued pursuant to (i) the Bond Order ( Bond Order ) adopted by the Board of Directors of the District, (ii) the Constitution and general laws of the State of Texas, particularly Chapters 49 and 54, Texas Water Code, as amended, and Chapter 1207 Government Code, as amended, (iii) an election held within the District on August 12, 1989, and (iv) Ordinance No of the City of Houston relating to refunding bonds issued by conservation and reclamation districts within the extraterritorial jurisdiction of Houston (the Ordinance ). Certain capitalized terms used in this Official Statement have the same meanings assigned to such terms in the Bond Order, except as otherwise indicated herein. This Official Statement also includes information about the District and certain reports and other statistical data. The summaries and references to all documents, statutes, reports and other instruments referred to herein do not purport to be complete, comprehensive or definitive and each summary and reference is qualified in its entirety by reference to each such document, statute, report or instrument. General THE BONDS The following is a description of some of the terms and conditions of the Bonds, which description is qualified in its entirety by the form of the Bonds contained in the Bond Order. A copy of the Bond Order may be obtained upon request to the District. The $18,340,000 Montgomery County Municipal Utility District No. 46, of Montgomery County, Texas Unlimited Tax Refunding Bonds, Series 2015 (the Bonds ), will mature on March 1 as shown on the cover page hereof and will bear interest from April 1, 2015, at the rates per annum, set forth on the cover page hereof. Except for mandatory redemption payments on term bonds, if any, principal of the Bonds, together with interest due at maturity or upon prior redemption, will be payable at the corporate trust office of The Bank of New York Mellon Trust Company, Dallas, Texas, (the Registrar or Paying Agent ), upon surrender of the Bonds for payment. Interest on the Bonds accrues from April 1, 2015 (or the most recent interest payment date to which interest has been paid or duly provided for) and is payable September 1, 2015, and each March 1 and September 1 (each an Interest Payment Date ) thereafter until maturity or prior redemption. Unless otherwise agreed between the Registrar and the owner(s) of the Bonds ( Bondholder(s) ), interest on the Bonds, other than at maturity or prior redemption, together with mandatory redemption payments, if any, are payable by check and mailed by the Paying Agent on or before the due date to the registered owners shown on the records of the Registrar as of the close of business on the fifteenth (15th) day of the calendar month next preceding such interest payment date (the Record Date ). The Bonds are issued only in fully registered form. The Bonds will be issued in the denomination of $5,000 principal amount, or integral multiples thereof. 9

11 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 credited by The Depository Trust Company ("DTC"), New York, New York, while the Bonds are registered in its nominee s name. The information in this section concerning DTC and the Book-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. The Depository Trust Company ( DTC ), New York NY, will act as securities depository for the securities (the Securities ). The Securities will be issued as fully-registered securities registered in the name of Cede & Co. (DTC s partnership nominee) or such other name as may be required by an authorized representative of DTC. One fully-registered Security certificate will be issued for each of the Securities, each in the aggregate principal amount of such issue, and will be deposited with DTC. If however, the aggregate principal amount of any issue exceeds $500 million, one certificate will be issued with respect to each $500 million of principal amount, and an additional certificate will be issued with respect to any remaining principal amount of such issue. DTC, the world s largest securities depository, is a limited-purpose trust company organized under the New York Banking Law, a banking organization within the meaning of the New York Banking Law, a member of the Federal Reserve System, a clearing corporation within the meaning of the New York Uniform Commercial Code, and a clearing agency registered pursuant to the provisions of Section 17A of the Securities Exchange Act of DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-u.s. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC s participants ( Direct Participants ) deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized bookentry transfers and pledges between Direct Participants accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-u.s. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation ( DTCC ). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-u.s. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ( Indirect Participants ). DTC has a Standard & Poor s rating of AA+. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at Purchases of Securities under the DTC system must be made by or through Direct Participants, which will receive a credit for the Securities on DTC s records. The ownership interest of each actual purchase of each Security ( Beneficial Owner ) is in turn to be recorded on the Direct and Indirect Participants records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Securities are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in Securities, except in the event that use of the book-entry system for the Securities in discontinued. 10

12 To facilitate subsequent transfers, all Securities 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 Securities with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not affect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Securities; DTC s records reflect only the identity of the Direct Participants to whose accounts such Securities are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of Securities may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Securities, such as redemptions, tenders, defaults, and proposed amendments to the Security documents. For example, Beneficial Owners of Securities may wish to ascertain that the nominee holding the Securities for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of notices be provided directly to them. Redemption notices shall be sent to DTC. If less than all of the Securities within an issue are being redeemed, DTC s practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to Securities unless authorized by a Direct Participant in accordance with DTC s MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to Issue as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co. s consenting or voting rights to those Direct Participants to whose accounts Securities are credited on the record date (identified in a listing attached to the Omnibus Proxy). Redemption proceeds, distributions, and dividend payments on the Securities will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC s practice is to credit Direct Participants accounts upon DTC s receipt of funds and corresponding detail information from Issuer or Agent, on payable date in accordance with their respective holdings shown on DTC s records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in street name, and will be the responsibility of such Participant and not of DTC, Agent or Issuer, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds, distributions and dividend payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of Issuer or Agent, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants. A Beneficial Owner shall give notice to elect to have its Securities purchased or tendered, through its Participant, to Tender/Remarketing Agent, and shall effect delivery of such Securities by causing the Direct Participant to transfer the Participant s interest in the Securities, on DTC s records to Tender/Remarketing Agent. The requirement for physical delivery of Securities in connection with an optional tender or a mandatory purchase will be deemed satisfied when the ownership rights in the Securities are transferred by Direct Participants on DTC s records and followed by a book-entry credit of tendered Securities to Tender/Remarketing Agent s DTC account. DTC may discontinue providing its services as depository with respect to the Securities at any time by giving reasonable notice to Issuer or Agent. Under such circumstances, in the event that a successor depository is not obtained, Security certificates are required to be printed and delivered. Issuer may decide to discontinue use of the system of book-entry-only transfers through DTC (or a successor securities depository). In that event, Security certificates will be printed and delivered to DTC. The information in the section concerning DTC and DTC s book-entry system has been obtained from sources that Issuer believes to be reliable, but Issuer takes no responsibility for the accuracy thereof. 11

13 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 book-entry form, references in other sections of this Official Statement to registered owners should be read to include the person for which the Participant acquires an interest in the Bonds, but (i) all rights of ownership must be exercised through DTC and the book-entry system, and (ii) except as described above, notices that are to be given to registered owners under the Bond Order will be given only to DTC. Transfer, Exchange and Registration In the event the Book-Entry-Only System should be discontinued, the Bonds may be transferred and exchanged on the registration books of the Registrar only upon presentation and surrender thereof to the Registrar at its principal payment office and such transfer or exchange shall be without expenses or service charge to the registered owner, except for any tax or other governmental charges required to be paid with respect to such registration, exchange and transfer. A Bond may be assigned by the execution of an assignment form on the Bonds or by other instrument of transfer and assignment acceptable to the Registrar. A new Bond or Bonds will be delivered by the Registrar, in lieu of the Bonds being transferred or exchanged, at the principal payment office of the Registrar, or sent by the United States mail, first class, postage prepaid, to the new registered owner or his designee. To the extent possible, new Bonds issued in an exchange or transfer of Bonds will be delivered to the registered owner or assignee of the registered owner in not more than three business days after the receipt of the Bonds to be cancelled, and the written instrument of transfer or request for exchange duly executed by the registered owner or his duly authorized agent, in form satisfactory to the Registrar. New Bonds registered and delivered in an exchange or transfer shall be in any integral multiple of $5,000 for any one maturity and for a like aggregate principal amount as the Bond or Bonds surrendered for exchange or transfer. See Book-Entry-Only System herein defined for a description of the system to be utilized initially in regard to ownership and transferability of the Bonds. Successor Paying Agent/Registrar Provision is made in the Bond Order for replacing the Paying Agent/Registrar. If the District replaces the Paying Agent/Registrar, such Paying Agent/Registrar shall, promptly upon the appointment of a successor, deliver the Paying Agent/Registrar's records to the successor Paying Agent/Registrar, and the successor Paying Agent/Registrar shall act in the same capacity as the previous Paying Agent/Registrar. Any successor Paying Agent/Registrar selected by the District shall be a commercial bank; a trust company organized under the laws of the State of Texas; or other entity duly qualified and legally authorized to serve and perform the duties of the Paying Agent/Registrar for the Bonds. Replacement of Bonds The District has agreed to replace mutilated, destroyed, lost or stolen Bonds upon surrender of the mutilated Bonds, receipt of satisfactory evidence of such destruction, loss or theft, and receipt by the District and the Registrar of security or indemnity to hold them harmless. The District or the Registrar may require payment of taxes, governmental charges and other expenses in connection with any such replacement. Optional Redemption The Bonds maturing on or after March 1, 2026, are subject to redemption, at the option of the District, prior to maturity, in whole or, from time to time, in part, on March 1, 2025, or on any date thereafter, at par plus accrued interest to the date fixed for redemption, whether or not all or portions of such Bonds called for redemption have been previously redeemed or discharged. If less than all the Bonds are redeemed at any time, the District shall determine the maturity or maturities and the amounts thereof to be redeemed, in integral multiples of $5,000 in principal amount, and if less than all of the serial Bonds within a maturity are to be redeemed, the Registrar shall select by lot or other customary method of random selection the Bonds within such maturity to be redeemed. The District will select the mandatory redemption payment reductions in the event of a partial redemption of a term bond maturity. The registered owner of any Bond, all or a portion of which has been called for redemption, will be required to present same to the Registrar for payment of the redemption price on the portion of the Bond so called for redemption and for issuance of an exchange Bond in a principal amount equal to the portion of such Bond not so redeemed. 12

14 Remaining Outstanding Bonds The District has previously issued thirteen series of bonds for water, wastewater and drainage purposes, aggregating $130,590,000. The District has also issued eight series of bonds to refund a portion of the bonds previously issued. Excluding the Refunded Bonds, $74,165,000 principal amount of bonds previously issued will remain outstanding after the issuance of the Bonds (the Remaining Outstanding Bonds ). Source of Payment The Remaining Outstanding Bonds and the Bonds are payable from the proceeds of a continuing, direct annual ad valorem tax, levied without legal limitation as to rate or amount, against taxable property located within the District. In the Bond Order, the District covenants to levy a sufficient tax to pay the principal of and interest on the Bonds, with full allowance being made for delinquencies and costs of collection. Collected taxes will be placed in the Debt Service Fund and used to pay principal of and interest on the Bonds, the Remaining Outstanding Bonds, and any additional bonds payable from taxes which may be issued. In addition, the District has contracted to make payments from its water and wastewater revenues to the San Jacinto River Authority to retire bonds issued to construct certain water supply and wastewater treatment facilities serving the District. See THE SYSTEM. Annexation and Consolidation The District lies within the extraterritorial jurisdiction of the City of Houston, Texas (the City ). Under Texas law, a district situated in the extraterritorial jurisdiction of a home-rule city may be annexed in whole, but not in part, by the city without the district's consent, in which case the city must assume the assets, functions and obligations of the district, including the district's outstanding bonds. No representation is made concerning the eventual likelihood of annexation or the ability of the City to make debt service payments should annexation occur. In addition, the District is located entirely within The Woodlands Township, a political subdivision of the State of Texas which overlaps substantially all of The Woodlands. The Township has recently concluded agreements with the City of Houston and the City of Conroe pursuant to which the area of the Township, including the District, may not be annexed for fifty (50) years, and the area of the Township may, on request by the Township, be excluded from the extraterritorial jurisdiction of either or both cities, and may thereafter be incorporated as a municipality or may adopt a new form of local government. In the event of incorporation of the Township, the Township must dissolve the District and assume the assets, obligations and liabilities of the District, including the Bonds. No representation is made concerning the eventual likelihood of incorporation of the Township or the ability of the Township to make debt service payments should incorporation occur. Under Texas law, the District may be consolidated with other municipal utility districts, with the assets and liabilities of the consolidated districts belonging to the consolidated district. No representation is made that the District will ever consolidate with one or more other districts, but the District currently has no plans to do so. Authority for Issuance The District has previously issued thirteen series of bonds of the total voter authorized bonds in the principal amount of $130,590,000 payable in whole or in part from taxes which were authorized at various elections held within the District for purposes of acquiring and constructing a waterworks, sanitary sewer and drainage system to serve the District. In addition, the District has issued eight series of unlimited tax refunding bonds aggregating $83,865,300 which were authorized at an election held on August 12, Following the issuance of the Bonds, $1,730, principal amount of unlimited tax refunding bonds and $9,100,000 principal amount of waterworks and sewer system unlimited tax bonds will remain authorized but unissued. The Bonds are issued pursuant to the Bond Order to be adopted by the Board on the date of the sale of the Bonds; Article XVI, Section 59 of the Texas Constitution; Chapters 49 and 54 of the Texas Water Code, as amended; Chapter 1207, Texas Government Code, as amended; the 1989 election and the Ordinance. 13

15 Issuance of Additional Debt The District may issue bonds necessary to provide those improvements and facilities for which the District was created, with approval of the TCEQ and, in the case of bonds payable from taxes, the District's voters. Following the issuance of the Bonds, $1,730, principal amount of unlimited tax refunding bonds and $9,100,000 principal amount of waterworks and sewer system unlimited tax bonds will remain authorized but unissued. Additional tax or tax and revenue bonds may be voted in the future. The Board is further empowered to borrow money, under limited circumstances, for its lawful corporate purpose and to issue revenue notes, bond anticipation notes, or tax anticipation notes. See INVESTMENT CONSIDERATIONS - Future Debt. The District also is authorized by law to engage in fire-fighting activities, including the issuance of bonds payable from taxes for such purpose. Before the District could issue such bonds, the following actions would be required: (1) authorization of a detailed master plan and bonds for such purpose by the qualified voters in the District; (2) amendment of the existing City ordinance specifying the purposes for which the District may issue bonds; (3) approval of master plan and bonds by the Commission; and (4) approval of bonds by the Attorney General of Texas. The Board has not considered calling an election at this time for such purposes. The District has no information concerning any determination by the City concerning modification of its ordinances. The Bond Order imposes no limitation on the amount of additional bonds that may be issued by the District. Any additional bonds issued by the District may be on parity with the Bonds. [Remainder of Page Intentionally Left Blank] 14