CORNERSTONES MUNICIPAL UTILITY DISTRICT

Cornerstones Municipal Utility District

Minutes of Meeting of Board of Directors

January 21, 2008

          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 21, 2008, 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

and being absent:

None

Also present were Kathie Naumow, Recording Secretary, Terry Holland of Myrtle Cruz, Inc., Dusty Lane of Eco-Resources, Inc., Brenda McLaughlin of Bob Leared Interests, Mark Brooks of Young & Brooks, and Doug Knopka of Cinco, LTD.

The meeting was called to order at 7:01 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 December 17, 2007 meeting were approved.

QUESTIONS/COMMENTS FROM THE PUBLIC

          None

TAX ASSESSOR/COLLECTOR'S REPORT

          Brenda McLaughlin of Bob Leared Interests, the District's Tax Assessor/Collector, presented the Tax Assessor/Collector report to the Board.  Taxes Receivable 8/31/2007: $17,217.07, Reserve for Uncollectibles $999.76; Adjustments $0.00.  Original 2007 Tax Levy: $1,158,056.50, Adjustments $70,522.01.  Total Taxes Receivable: $1,244,795.82.  Prior Years Taxes Collected $4,307.38; 2007 Taxes Collected $532,441.03.  Taxes Receivable at 12/31/2007: $708,047.41.  2007 Receivables: Debt Service $404,731.06; Maintenance $291,406.42.  Month of 12/2007: Beginning Cash Balance $76,456.80; Total Receipts $464,304.68, Total Disbursements $58,622.07, Cash Balance at 12/31/2007 $482,139.41.  Total Disbursements for the month of January 2008: $470,808.99, Remaining Cash Balance $11,330.42.  The District is 99.999% collected for 1999, 100.00% collected for 2000, 99.978% collected for 2001 taxes, 99.940% for 2002 taxes, 99.976% for 2003 taxes, 99.945% for 2004, 99.797% for 2005, 99.452% for 2006 and 43.338% for 2007.  Brenda reported the deposit from First American in the amount of $177,000 was deposited after 11/17/07 and when added will put the District at 57.7%.  Brenda will report next month what is left to be certified.  In the next month or two will talk about exemptions.

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

          N/A

OPERATOR'S REPORT

          Dusty Lane of Eco-Resources, Inc., the District's Operator, reported on the Districts operations and facilities, and presented the December 2007 Operations Report.  Total Connections were 1498.  Meter Installations and Inspections for Nov 14 - Dec 13:  New Taps Installed - 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 Dec/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 16,479,000 at Water Plant #1, Total Supplied - 16,479,000, Daily Average - 549,300.  Subsidence Information: Estimated Number of Months Available - 10.06, Permit Months Remaining - 9, Percent of Permitted Production - 52.22.  Water Accountability is at 96.0 for 11/06/07 - 12/05/07 and 100.1 for the Four Month Average.  Total Operations Charges $22,120.32.  Actual work related costs - $14,424.00 for repairs.  Total Current Billing $59,753.06.  Total Aged Receivables $24,178.76.  Total Accounts Receivables $83,931.82.  Facility Checklist Completed: Water Plant #1 12/21/07.  Inspections Completed: Fire Hydrants 06/28/07.  Total Deposits for December 2007 $76,306.61.  Disconnects/Reconnects Income was $303.36. Pull Fees: totals $0.00.  Dusty 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.  No customer requests this month.

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, presented the engineers report.  Marvin informed the Board of new storm water system permit requirements to control pollution going into the storm sewer system.  If we don't apply for waiver the small districts such as Cornerstones will have to initiate a storm water management program.  If the system serves less than 1000 residents you can apply for a waiver.  Cornerstones MUD can apply for Waiver Option #1.  Marvin recommends applying for Waiver Option #1.  After discussion and motion made, seconded and unanimously carried, the Board approved the application for the waiver.

Marvin received another request for agreement on encroachment from Royal Montreal Business Park.  They have revised drawing but have not submitted them yet.  He will wait for final drawing and will bring to next months meeting.  Doug Knopka informed the Board he is working on a couple of sales but not contracts completed at this time.  Reported Royal Montreal utilities are in and pavement started.

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 January 21, 2008 - $1,526,224.36.  Total Debt Service Requirements for 2008: $1,413,182.50.  General Operating: Previous Cash Balance December 17, 2007 - $20,416.94, Total Deposits $106,488.41.  Beginning Cash Balance January 21, 2008 - $97,270.42.  General Operating Funds available January 21, 2008 - $1,912,081.92.  Terry included copies of the Debt Service Calculations for Yield Restriction Report, Cornerstones Energy Report, the Cinco Regional WWTP Improvements Report, Budget for Fiscal Year Ending September 30, 2008, the Investment Report and the Tex Pool Performance sheet.

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.

CALL DIRECTORS ELECTION

          Board Members up for re-election are Tony Garza, John Irwin and Chip Norris.  Mark gave them the forms to complete which are due March 10, 2008.  The election date is May 10, 2008.  The polling location will be the Creekstone Community Association Club House located at 22022 Eagle Meadow Drive, Katy TX 77450.  John Irwin informed the Board Mr. King has volunteered to be the Election Judge.  We will need two volunteers to work on Election Day and one for early voting.

After discussion, upon motion duly made, seconded and unanimously carried, the Board approved to call the election for May 10, 2008 at the Creekstone Community Association Club House, and adopted the attached Order for Election.

RENEW INSURANCE

          The Board received ANCO Insurance quote in the amount of $7,945.00.  Increase of $24.00 for the same coverage as last year.

          After discussion, upon motion duly made, seconded and unanimously carried, the Board approved and accepted the ANCO insurance quote.

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.

CINCO REGIONAL OPERATING COMMITTEE REPORT

Tony Garza reported on the Cinco repairs.  The STP repairs are completed.  Our final payment is $22,000.00.  STP and MUD 81 voted to get proposal to scrap the metal cover over strap press.  There will be some expense due to electrical panel.

AUTHORIZE ANY NECESSARY ACTIONS WITH RESPECT TO GREENBELT TRACTS

          Trees have been trimmed.  John Irwin recommends waiting on the ant treatment in the greenbelt.  

PENDING BUSINESS

         Tony Garza informed the Board he received notice from North Fort Bend Water Authority to start the process to appoint a Director.  There are seven precincts, 1, 2, 3 and 7 are sparsely populated and 4, 5, & 6 are mostly Cinco MUD.  Our current Director is Robert Patton.  Tony would like to nominate Chip Norris by resolution by Feb 15, 2008.  The election is April 30, 2008.  Ballots have been sent out.

After discussion, upon motion duly made, seconded and unanimously carried, the Board adopted the resolution to nominate Chip Norris for Director from Pct. 5.

          Tony attended the AWBD in Dallas and gave an overview of the topics.

          After concluding and there being no further business to come before the Board, the meeting was adjourned at 8:11 p.m.

                                                                                                                                _______________________________

                                                                                                                                Secretary

Attachments:     Bookkeeper's Report

          Order for Election