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 16, 2009, 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.; Dusty Lane of SouthWest Water Company; Brenda McLaughlin of Bob Leared Interests; Marvin Zahradnik of Landev Engineers, Inc.; Mark Brooks of Young & Brooks and Noah Worley of DHK Development, Inc.

The meeting was called to order at 7:03 p.m. and declared open for such business as might come before it.

1. APPROVE MINUTES OF PRIOR MEETINGS;

After discussion, upon motion duly made, seconded and unanimously carried, the Meeting Minutes of the February 16, 2009 meeting were approved.

2. QUESTIONS/COMMENTS FROM THE PUBLIC;

3. RATIFY APPROVAL OF AUDIT;

After discussion, upon motion duly made, seconded and unanimously carried, the Board ratified approval of the audit presented at the February meeting by Greg Sissel of BKD, LLP for FYE 2008.

4. CONSIDER CONSULTANTS' REPORTS, AS NEEDED;

a. 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 8/31/2008: $26,557.41, Reserve for Uncollectable's $999.76; Adjustments $9,887.79. Original 2008 Tax Levy: $1,090,108.87, Adjustments $81,533.44. Total Taxes Receivable: $1,207,087.75. Prior Years Taxes Collected $11,642.89, 2008 Taxes Collected $1,108,738.08. Taxes Receivable at 2/28/2009: $86,706.78. 2008 Receivables: Debt Service $33,107.49; Maintenance $29,796.74. Month of 2/2009: Beginning Cash Balance $489,990.71; Total Receipts $18,672.20, Total Disbursements $446,753.13, Cash Balance at 2/28/2009 $61,909.78. Total Disbursements for the month of March 2009: $19,511.29, Remaining Cash Balance $42,398.49. The District is 99.999% collected for 1999, 100.00% collected for 2000, 99.978% collected for 2001 taxes, 99.940% for 2002 taxes, 99.979% for 2003 taxes, 99.948% for 2004, 99.842% for 2005, 99.706% for 2006, 98.720% for 2007 and 94.631% for 2008. Brenda presented an updated delinquent list from Purdue, Brandon for the Board to review.

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.

b. FINANCIAL ADVISOR,

c. OPERATOR'S REPORT,

Dusty Lane of SouthWest Water Company, the District's Operator, reported on the Districts operations and facilities, and presented the February 2009 Operations Report. Total Connections were 1502. Meter Installations and Inspections for Jan 14 - Feb 13: New Taps Installed - 1; 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 February 2009. TCEQ Chemical Analysis: Metals 12/4/06; Radio-Chemicals 08/11/05; Volatile Organic Chemicals 8/11/05; Minerals 5/18/06; Trihalomethane Gasses (THMs) 8/30/2007 and Halocacetic Acids (HAAs) 8/30/2007. Water Production: Pumped 18,714,000 at Water Plant #1, Total Supplied - 18,714,000, Daily Average - 668,357. Subsidence Information: Estimated Number of Months Available - 16.45, Permit Months Remaining - 7, Percent of Permitted Production - 23.32. Water Accountability is at 94.8 for 01/11/09-02/10/09 and 93.4 for the Four Month Average. Total Operations Charges $30,282.82. Actual work related costs - $18,637.00 for repairs. Total Current Billing $69,055.67. Total Aged Receivables $20,936.28. Total Accounts Receivables $89,991.95. Facility Checklist Completed: Water Plant #1 02/27/09. Inspections Completed: Fire Hydrants 01/15/09. Total Deposits for February 2009 $60,772.37. Disconnects/Reconnects Income: $222.15. Dusty reported on repairs made and presented the Board with a copy of the Cornerstones M.U.D. Delinquent List and the Discharge Monitoring Reports. Everyone has been duly notified of situation and it is being addressed. One customer request received to remove the EMS fee from water bill. Dusty presented a letter to the Board from Southwest Water Company regarding the Clow Fire Hydrant Upper Stem Replacement Program. DMD Consultants Inc. has been hired by Clow Valve Company, manufacturer of the fire hydrants to evaluate and replace the Upper Stems on Clow fire hydrants located within the District. This will be done at no charge to the District.

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

d. ENGINEER'S REPORT,

Marvin Zahradnik of Landev Engineers, Inc., the District's Engineer, presented the engineers report. No new requests for water or sewer. Marvin went by the sink hole and nothing has changed.

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

e. BOOKKEEPER'S REPORT,

Terry Holland of Myrtle Cruz, Inc., the District's Bookkeeper, presented the monthly report. Debt Service Funds available March 16, 2009 - $1,369,527.87. Total Debt Service Requirements for 2009: $1,294,820.00. General Operating: Previous Cash Balance February 16, 2009 - $62,902.33, Total Deposits $74,026.67. Beginning Cash Balance March 16, 2009 - $123,743.62. General Operating Funds available March 16, 2009 - $2,566,345.22. 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, 2009, the Investment Report, the Deposit/Collateral Report by District and the Tex Pool Performance sheet. Discussed Debt Service Balance transfer was made.

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.

5. CONFIRM NO ELIGIBLE FEMA CLAIM FOR HURRICANE IKE;

The Board confirmed there were no eligible claims for Hurricane Ike and authorized letter to be sent to FEMA to remove the District from list.

6. 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.

7. CINCO REGIONAL OPERATING COMMITTEE REPORT;

Dusty Lane of SouthWest Water Company reported no major action required for the traveling bridge at the plant. They have ordered two spare machine wheels and a spare motor. They have also filed an insurance claim. There were no violations as they did not go out of compliance.

8. AUTHORIZE ANY NECESSARY ACTIONS WITH RESPECT TO GREENBELT TRACTS; AND

John Irwin reported the signs in the greenbelt have been repaired by Handyman Service. John Irwin also reported there are some ruts near Cornerstone from a utility truck.

9. PENDING BUSINESS;

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