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 May 21, 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.; Mark Brooks of Young & Brooks; and Noah Worley of DHK Development.

The meeting was called to order at 7:03 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 April 16, 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 $429,951.23. Total Taxes Receivable: $1,344,867.77. Prior years taxes collected $17,644.39, 2006 taxes collected $1,288,485.46. Taxes Receivable at 4/30/2007: $38,737.92. 2006 Receivables: Debt Service $22,693.81; Maintenance $8,194.99. Month of 4/2007: beginning cash balance $43,102.17 total receipts $32,115.38, total disbursements $21,349.01, cash balance at 4/30/2007 $53,868.54. Total Disbursements for the month of May 2007 $29,732.79, remaining cash balance $24,135.75. The District is 99.978% collected for 2001 taxes, 99.940% for 2002 taxes, 99.976% for 2003 taxes, 99.901% for 2004, 99.618% for 2005 and 97.659% for 2006. Brenda will bring a Personal Property list of the small amounts and see about cleaning up past years numbers.

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 April 2007 Operations Report. Total connections were 1494. Meter installations and inspections for Mar. 14 - Apr. 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 4/2007. 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 19,101,000 at Water Plant #1, Total supplied - 19,101,000, Daily Average - 636,700. Subsidence Information: Estimated number of months available - 15.5, Permit months remaining - 8, Percent of permitted production - 20.44. Water Accountability is at 96% Year to Date. Total Operations Charges $15,151.44. Actual work related costs - $7,596.00 for repairs. Total Current Billing $56,785.32. Total Aged Receivables $4,244.36. Total Accounts Receivables $61,029.68. Facility Checklist Completed: Water Plant #1 4/18/07. Inspections Completed: Fire Hydrants on 12/30/2006. Total deposits for April $50,446.72. Disconnects/Reconnects income was $200.00. Provided Discharge Monitoring Report, number exceeded all zero. Reported on repairs made and presented the Board with a copy of the Cornerstones M.U.D. delinquent list. Everyone has been duly notified of situation and it is being addressed. Received two customer requests for billing adjustments due to filling of swimming pool.

Upon motion duly made, seconded and unanimously carried, the Board approved the Operator's report and the Consumers Report and denied customer requests for adjustments.

ENGINEER'S REPORT

Marvin Zahradnik of Landev Engineers, Inc., the District's Engineer, informed the Board that he received plans for the Golden Plaza project by Tjian Development. They were rejected due to missing items they are required to provide. Letter received from Cinco, LTD engineer informing they had made contact with Harris County regarding Royal Montreal. Storm sewer is not required because it was built on old curbs. They are proceeding on that basis and will tie 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 May 21, 2007 - $2,573,988.64. Total Debt Service Requirements for 2007: $1,354,107.50. General Operating: Previous cash balance April 16, 2007 - $32,001.66, total deposits $155,862.58. Beginning cash balance May 21, 2007 - $160,166.64. General Operating Funds available May 21, 2007 - $1,871,365.75. Included a copy of the Budget for fiscal year ending September 30, 2007, the Investment Report and the Tex Pool Performance sheet. Also provided a copy of the Cinco STP Cash Report Summary.

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 NO-OBJECTION LETTER FOR ROYAL MONTRAL AS MASON ROAD

Received request from Doug Knopka of Cinco Ltd. indicating Ft. Bend County wants a letter stating that we have no objection to the plat. Marvin Zahradnik informed the Board that we have capacity and doesn't see any problems. Upon motion duly made, seconded and unanimously carried, the Board authorized Tony to sign the requested letter.

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

N/A - Remove item from agenda

CINCO REGIONAL OPERATING COMMITTEE REPORT

Tony Garza reported on progress of work at plant. Expected completion date is Aug., 2007. Report presented from Cinco STP.

AUTHORIZE ANY NECESSARY ACTIONS WITH RESPECT TO GREENBELT TRACTS

John Irwin talked to Bryan Trepp with Junction Landscape. It is too late in the year to plant anything next to the wall. We will reconsider in July what to plant. Also reported that Junction has made some irrigation repairs in the greenbelt.

PENDING BUSINESS

No pending business to report on.

After concluding and there being no further business to come before the Board, the meeting was adjourned at 7:40 p.m.

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Attachments: Bookkeeper's Report