CORNERSTONES MUNICIPAL UTILITY DISTRICT

Cornerstones Municipal Utility District

Minutes of Meeting of Board of Directors

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 March 19, 2007, 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

John Irwin, Secretary

E.C. Norris, Assistant Secretary

Darryl Box, Investment Officer

Also present were Kathie Naumow, Recording Secretary; Terry Holland of Myrtle Cruz, Inc.; Brenda McLaughlin of Bob Leared Interests; Dusty Lane of Eco-Resources, Inc.; Marvin Zahradnik of Landev Engineers, Inc.; and Mark Brooks of Young & Brooks.

The meeting was called to order at 7:00 p.m. and declared open for such business as might come before it.

APPROVE MINUTES OF PRIOR MEETINGS

After discussion, upon motion duly made, seconded and unanimously carried, the Minutes of the February 19, 2007 meeting were approved.

QUESTIONS/COMMENTS FROM THE PUBLIC

TAX ASSESSOR/COLLECTOR'S REPORT

Brenda McLaughlin of Bob Leared Interests, the District's Tax Assessor/Collector, presented the Tax Assessor/Collector report. Taxes Receivable 8/31/2006: $26,036.43, reserve for uncollectables $635.83; adjustments $92.91. Original 2006 Tax Levy: $889,423.03, adjustments $428,542.27. Total Taxes Receivable: $1,343,458.81. Prior years taxes collected $15,452.70, 2006 taxes collected $1,244,183.18. Taxes Receivable at 2/28/2007: $83,822.93. 2006 Receivables: Debt Service $54,207.27; Maintenance $19,574.85. Month of 2/2007: beginning cash balance $491,805.86 total receipts $33,556.44, total disbursements $468,199.64, cash balance at 2/28/2007 $57,162.66. Total Disbursements for the month of March 2007 $38,050.34, remaining cash balance $19,112.32. The District is 99.978% collected for 2001 taxes, 99.940% for 2002 taxes, 99.976% for 2003 taxes, 99.866% for 2004, 99.481% for 2005 and 94.402% for 2006.

After discussion and upon motion duly made, seconded and unanimously carried, the Board approved the Tax Assessor/Collector's Report; and payments of the tax bills presented.

FINANCIAL ADVISOR

OPERATOR'S REPORT

Dusty Lane of Eco-Resources, Inc., the District's Operator, reported as to the Districts operations and facilities, and presented the February 2007 Operations Report. Total connections were 1494. Meter installations and inspections for Jan. 14 - Feb. 13: New taps Installed - 0; Abandoned connections - 0; Sewer inspections completed - 0; Builder inspections completed - 0; Customer Service inspections completed - 0; Net Rental Meter Change - 0. Wastewater Treatment; Permitted Average Daily Flow - 3,000,000GPD. The required 7 samples were taken during 2/2007. TCEQ Chemical Analysis: Metals 12/4/06; Radio-Chemicals 08/11/05; Volatile Organic Chemicals 8/11/05; and Minerals 5/18/06. Water Production: Pumped 13,048,000 at Water Plant #1, Total supplied - 13,048,000, Daily Average - 466,000. Subsidence Information: Estimated number of months available - 21.7, Permit months remaining - 10, Percent of permitted production - 8.44. Water Accountability is at 96% Year to Date. Total Operations Charges $16,999.38. Actual work related costs - $9,189.00 for repairs. Total Current Billing $54,515.01. Total Aged Receivables $8,145.06. Total Accounts Receivables $62,660.07. Facility Checklist completed: Water Plant #1 on 2/09/2007. Inspections Completed: Fire Hydrants on 12/30/2006. Total deposits for February $51,484.80. Disconnects/Reconnects income was $75.00. Provided Discharge Monitoring Report, number exceeded all zero. Reported on repairs made to the Districty's system. Dusty Lane presented the Board with a copy of the Water Quality Pamphlet. The Board will review and decide on approval at next month's meeting.

Upon motion duly made, seconded and unanimously carried, the Board approved the Operator's report.

ENGINEER'S REPORT

Marvin Zahradnik of Landev Engineers, Inc., the District's Engineer, reported no new requests for service. Received the revised drawings from Blake Roberts however corrections are still needed. Mr. Roberts will make corrections and send them back to Marvin Zahradnik. Meeting set up with Doug Knopka and property owner Judwin Properties in Memorial MUD. Drainage study on Storm Sewer along Mason Road needed to see what acreage's would flow into Mason Road.

Upon motion duly made, seconded and unanimously carried, the Board approved the Engineers report.

BOOKKEEPER'S REPORT

Terry Holland of Myrtle Cruz, Inc., the District's Bookkeeper, presented the monthly report. Debt service funds available March 19, 2007 - $2,706,802.56. Total Debt Service Requirements for 2007: $1,354,107.50. General Operating: Previous cash balance February 19, 2007 - $6,034.35, total deposits $69,467.22. Beginning cash balance March 19, 2007 - $63,221.98. General Operating Funds available March 19, 2007 - $1,953,884.81. Included a copy of the Budget for fiscal year ending September 30, 2007, the Investment Report and Tex Pool Performance sheet. Mark Brooks explained tracking Debt Service calculation for yield restrictions.

After discussion, upon motion duly made, seconded and unanimously carried, the Board approved the Bookkeepers report and payment of said bills and ordered checks issued on the appropriate District accounts in payment thereof.

CONDUCT HEARING ON TERMINATION OF WATER AND SEWER 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.

CONSIDER AND POSSIBLY APPROVE COST SHARING AGREEMENT WITH MEMORIAL MUD FOR STORM WATER DRAINAGE FACILITIES

This item was tabled until next month's meeting.

CINCO REGIONAL OPERATING COMMITTEE REPORT

Tony Garza, Board Member, presented the Cinco Regional Engineer's Report and the Payment Report. Cornerstones MUD`s estimated remaining portion on the project is $129,000.00.

AUTHORIZE ANY NECESSARY ACTIONS WITH RESPECT TO GREENBELT TRACTS

Chip Norris, Board Member, reported that the bill for graffiti removal on the brick wall in the Greenbelt was not on the report but the check was issued.

PENDING BUSINESS

Terry Holland reminded the Board that registration for the AWBD conference was open and to get a confirmation number when registering.

After concluding and there being no further business to come before the Board, the meeting was adjourned at 7:43 p.m.

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Attachments: Bookkeeper's Report