CORNERSTONES MUNICIPAL UTILITY DISTRICT

Cornerstones Municipal Utility District

Minutes of Meeting of Board of Directors

January 19, 2004

     The Board of Directors of Cornerstones Municipal Utility District (the “District”) met at 805 Hidden Canyon, Katy, Harris County, Texas at 7:00 p.m. on January 19, 2004, in accordance with the duly posted notice of said meeting, with a quorum of directors present as follows:

          Tony Garza, President

          Gary Hughes, Vice President

           E.C. Norris, Secretary

          John Irwin, Assistant Secretary

           Darryl Box, Investment Officer

And being absent:

     None

Also present were Kathie Naumow - Recording Secretary, Michael Clayton of Myrtle Cruz, Inc., Dusty Lane of Eco-Resources, Inc., Marvin Zahradnik of Landev Engineers, Inc., Mark Brooks of Young & Brooks, Doug Konopka of Cinco, LTD., Patsy Waldrop of BKD, Katy resident Gregg Nady, and district residents Geert Naumow and Gerard Tafallo.

The President called the meeting to order and declared it open for such business as might come before it.

APPROVAL OF MINUTES

     After discussion, upon motion duly made, seconded and unanimously carried, the minutes of the November and December 2003 board meetings were approved as presented.

QUESTIONS/COMMENTS FROM THE PUBLIC

     Creekstone HOA Board members Geert Naumow and Gerard Tafallo made the board aware of the concerns by them and homeowners within the Creekstone subdivision regarding the proposed sale of triangular lot located in the Creekstone subdivision.  Offered the possibility of sharing the cost of maintenance and landscaping.  

TAX ASSESSOR/COLLECTOR'S REPORT

     Bob Leared of Bob Leared Interests, Inc., the District's tax assessor, reported as to the status of District's tax collections.  Taxes Receivable 8/31/2003: $39,272.72, adjustments $1,192.37 total $40,465.09.  Original 2003 Tax Levy: $1,181,410.10, adjustments $59,936.95, total $1,241,347.05.  Total Taxes Receivable: 1,281,812.14.  Prior years taxes collected $6,393.10, 2003 taxes collected $785,369.80, Total $791,762.90.  Taxes Receivable at 12/31/2003: $490,049.24.  2003 Receivables: Debt Service $337,423.17, Maintenance $118,554.09.  Month of December 2003: beginning cash balance $60,734.43, total receipts $702,622.91, total disbursements $46,800.24, cash balance at 12/31/2003 $716,557.10.  Total Disbursements for month of January 2004 $697,935.77, remaining cash balance $18,621.33.  The District is 99.628% collected for 2001 taxes, 99.100% for 2002 taxes and 63.268% for 2003 taxes.  Upon motion duly made, seconded and unanimously carried, the board approved the tax assessor/collector's report and payment of the tax bills presented.

     Upon motion duly made, seconded and unanimously carried, the board approved a donation of $100.00 to Hospice in memory of Mary Leared, in lieu of sending flowers.

OPERATOR'S REPORT

Dusty Lane of Eco-Resources, Inc., the District's operator, reported as to District operations and facilities and presented the December 2003 Operations Report.  Total connections for November 2003 were 1485.  New taps for November - 0; Sewer inspections completed - 0; Builder Inspections completed - 0; Customer Service inspections completed - 0; Net Rental Meter Change - 0. The required 7 samples were taken during 12/2003.  Water production: Pumped 16,485,000 at Water Plant #1, Total supplied - 16,485,000, Daily Average - 531,774.  Subsidence Information: Estimated number of months available - 2.5, Permit months remaining - 0, Percent of permitted production - 82.64.  Water Accountability is at 95% Year to Date.  Total Operations Charges $13,157.26.  Total Current billing  $48,771.62.  Total Aged Receivables $10,026.89.  Total Accounts Receivables $58,789.51.  Facility Checklist completed: Water Plant #1 on 12/18/2003.  Inspections Completed: Fire Hydrants on 11/26/2003.  Total Deposits for November 2003 $56,418.78.  Disconnects/Reconnects income: $200.00.  Pull Fees: $70.00.  Provided Discharge Monitoring Report, number of excursions zero.  Reported on repairs made and also presented the board with a copy of the Cornerstones M.U.D. Delinquent list.   

Upon motion duly made, seconded and unanimously carried, the board approved the operator's report.

ENGINEER'S REPORT

Marvin Zahradnik presented the Engineers Report.  Received request for water & sewer for property located at Chesterwick and Mason Road.  Developer is Komar Investments.  Request is for 10,000 gallons per day for strip center and 2 office buildings.  There is an existing 10 in. sanitary/sewer line adjacent to Mason and a 12 in. water line on the same side.  Scheduled to close on property 1st of February.  Doug Konopka showed building and landscaping plans to the board.

Upon motion duly made, seconded and unanimously carried, the board approved the Engineers report, and authorized attorney Mark W. Brooks to issue the requested utility commitment letter.

BOOKKEEPER'S REPORT

Michael Clayton of Myrtle Cruz, Inc., the District's bookkeeper, presented the monthly report.  Debt service funds available January 19, 2004 - $2,840,057.90.  Total Debt Service Requirements for 2004: $1,371,182.50.  Capital projects funds available January 19, 2004 - $360,616.20.  General Operating: Previous cash balance December 15, 2003 - $41,001.43, total deposits $58,433.14, beginning cash balance January 19, 2004 - $56,453.16.  General Operating Funds available January 19, 2004 - $999,636.95.  Included copy of budget for fiscal year ending September 30, 2004, Investment Report and Tex Pool Performance sheet.  Upon motion duly made, seconded and unanimously carried, the board approved the Bookkeepers monthly report.  After discussion, upon motion duly made, seconded and unanimously carried, the board approved said bills and ordered checks issued on the appropriate District accounts in payment thereof.

HEARING ON TERMINATION OF UTILITY SERVICE

The board conducted a hearing on the termination of utility service.  The operator presented a list of delinquent utility accounts that were delinquent by more than 60 days and reported that the customers have been given written notice 10 days prior to this meeting and the opportunity to appear before the board of directors to explain, contest or correct the utility service bill and to show reason why the utility service should not be terminated for nonpayment.  None of the customers on the list were present or have presented any statement on the matter.  After discussion, upon motion duly made, seconded and unanimously carried, the board authorized the operator to terminate utility service to the unpaid accounts in accordance with standard procedures.

AUTHORIZE APPLICATION FOR USE OF SURPLUS FUNDS FOR NEW QUEST SANITARY SEWER RELOCATION

     After discussion, upon motion duly made, seconded, and carried by 4 votes with director Box voting against the motion, the board authorized a surplus funds application to be sent to TCEQ for sanitary sewer relocation.  Upon motion duly made, seconded, and unanimously carried, the board also approved an Agreement Regarding Encroachment for the 24-Hour Fitness project.

CONSIDER AND APPROVE AUDIT

Patsy Waldrop of BKD presented the Independent Accountants 2003 Audit Report.  Upon motion duly made, seconded and unanimously carried, the board approved the auditor's report.

RENEW INSURANCE

Mark Brooks presented ANCO insurance renewal proposals.  Rates are decreasing $1200.00 with a renewal date in March.  After discussion the board decided to stay with ANCO and requested tax assessor bond to be moved and included with renewal policies.  

Upon motion duly made, seconded and unanimously carried, the board approved the ANCO insurance renewal proposals.

CALL DIRECTOR'S ELECTION

Date set for directors election is May 15, 2004 (3rd Saturday in May).  Deadline to get name on the ballot is March 15, 2004.  Tony Garza, Chip Norris and John Irwin are up for renewal election.  Motion made to hold election at Chesterfield Clubhouse.  Upon motion duly made, seconded and unanimously carried, the board approved location for election as the Chesterfield Clubhouse.  The attached Order calling such election was presented and reviewed by the board of directors after which it was duly moved, seconded and unanimously carried that the Order be passed and adopted.  The attorneys were instructed to handle the mechanics of the election, and director Hughes was designated the election coordinator for the Board.

DISCUSS AND AUTHORIZE ANY NECESSARY ACTIONS WITH RESPECT TO REQUEST REGARDING EXTENSION OF SIDEWALKS

     Gregg Nady, a Katy resident, inquired if the MUD board would be interested in contributing to the continuation of sidewalks along Highland Knolls.  Tony Garza will get bids for sidewalk and ramps for next meeting.  Upon motion duly made, seconded and unanimously carried, the board approved request to solicit bids for sidewalks, ramps and curb cuts.

AUTHORIZE ANY NECESSARY ACTIONS WITH RESPECT TO GREENBELT TRACTS OR OTHER DISTRICT LAND

          John Irwin and Tony Garza met with landscaping company.  Received bid in the amount of $10,496.25 to fill in jasmine, replace dead plants, steel edging, mulch all beds and pruning of trees.  Upon motion duly made, seconded and unanimously carried, the board approved $9,773.50.  Trees will be pruned immediately and the rest of the work to be done at appropriate times.  Mark Brooks will send letter to Harris County regarding the sinkhole in the Greenbelt.  

PENDING BUSINESS

     Discussed options for triangular lot in Creekstone subdivision.  Option 1 would be to possible put a 6 to 8 foot sidewalk, jogging track and trees.  Option 2 would include putting in sidewalk and trees and turn the property over to Creekstone HOA for further improvements and maintenance.  Tony Garza and Darryl Box will meet with Creekstone HOA next week at their HOA Meeting.  In the meantime Mark Brooks will look at options for conveyance of property to the Creekstone HOA.

     Cinco plant approved changing electric provider to Entergy Solutions Ltd.  Cornerstone MUD is in favor of the change.

After concluding and there being no further business to come before the board, the meeting was adjourned.

                              _______________________________

                                        Secretary

Attachments:     Bookkeeper's Report

          Order for Election of Directors