LLANO COUNTY MUD #1 ROAD PROJECT REVIEW

1. LLANO COUNTY MUD #1ROAD PROJECT REVIEW • PURPOSE • DISCUSS POSSIBILITY OF COMPLETING REMAINING ROAD UPGRADE • PROVIDE FACTS TO INFORM COMMUNITY TO MAKE DECISION ABOUT PROCEEDING TO POTENTIAL BOND ISSUE • VISION FOR FUTURE • OPPORTUNITY TO DREAM ABOUT WHAT OUR COMMUNITY COULD BE • LIKE OTHER DREAMERS (WATER PLANT,SEWER TREATMENT, RETURN WATER), LONG TERM IMPROVEMENTS BENEFIT FUTURE GENERATIONS • PAST LEADERS OF THE COMMUNITY HAVE SERVED TO MAKE BLUE LAKE A PREMIER LAKE COMMUNITY

2. LLANO COUNTY MUD #1ROAD PROJECT REVIEW • HISTORY • STARTED WITH DIRT ROADS IN EARLY 60’S • THE BLUE LAKE COMMUNITY NOT THE DEVELOPER BUILT THE PAVED ROADS IN 1965 • THE ROADS WERE THE PRECURSOR OF FUTURE DEVELOPMENT FOR THE COMMUNITY • AVERAGE PER YEAR $27,368 FOR MAINTENANCE ONLY AND RISING (NO PERMANENT IMPROVEMENT IN INFRASTRUCURE). 47 YEARS OF AGE. • PROBLEMS/NEEDS • REPAIRS ARE TEMPORARY SOLUTION AND REOCURR • ROADS ARE NARROW AND RIGHT OF WAY SHRINKING • PATCHES AND RESEALING BECOMING CONSTANT AND EXPENSIVE • ENTERING AN ECONOMIC PERIOD OF RISING COST AND INFLATION • SAFETY ISSUES IN SOME CASES CAN ONLY BE FIXED THROUGH MAJOR EXPENSE

3. LLANO COUNTY MUD #1ROAD PROJECT REVIEW • RECENT ROAD PROJECT • Recently completed about 1 mile (~6 miles in community) at cost of ~$500k • Funds from accumulated reserves in Streets and Lights account • MUD Board decision based on engineering input on best construction method • Recognition of need for permanent solution versus temporary repair

4. LLANO COUNTY MUD #1ROAD PROJECT REVIEW • Basis for Decision • Primary issue with roads is loss of width from edge deterioration caused by water; width not sufficient for safe traffic flow • Repair and patching is only a temporary fix • Need for culvert work in two locations where heavy rain overran roads; prevented emergency vehicle traffic • Chose location of 1 mile based on most travelled routes and most benefit for community use • Soft construction environment and relatively low asphalt prices

5. LLANO COUNTY MUD #1ROAD PROJECT REVIEW • Construction Technique • Construction engineers considered alternates for construction based on cost and longevity • Final solution used flat concrete curbs to prevent edge deterioration and re-use of existing surface and base to minimize cost (Bomag process) • Cost about 50% of traditional construction • Process video

6. LLANO COUNTY MUD #1ROAD PROJECT REVIEW • Pro/Con Analysis of Alternates • Option 1 Complete total 5 miles • Pros: • Benefit all residents equally • Save/defer maintenance funds (partial offset of tax increase) • Take advantage of soft market (construction and interest) • Upgrade road width to current standards • All community roads are at recommended width for safety concern • Improve community property values • Cons: • Higher tax rate increase than other alternates • Loss of control over future HSB expansion decisions

7. LLANO COUNTY MUD #1ROAD PROJECT REVIEW • How Roads are Paid for and Maintained • Llano County Mud #1 has sole responsibility of the roads. • Required by Texas Law to Maintain Separate Accounts • Appraisals of property responsibility of the Llano Central Appraisal District. • Tax Rate Responsibility of the Llano County MUD #1-Board of Directors • Board maintains a 3 month reserve level on the General Fund and Streets and Lights Fund • Maintenance and Repair paid from same account • Bond funding from additional tax revenue

8. LLANO COUNTY MUD #1ROAD PROJECT REVIEW • Option 2 Do nothing • Pros • No long-term debt • Short-term savings slowly build reserves at historical maintenance levels • If incorporated by City of Horseshoe Bay sometime in future they may or may not upgrade roads to their standard (some cost to homeowners) • Cons • Continue to lose road width from edge deterioration • Safety is a consideration as width narrows • Continue to spend maintenance money on surface and spot edge repair • Risk of increased cost of later project (prices and interest rate)

9. LLANO COUNTY MUD #1ROAD PROJECT PROJECTED COST • 4.7 miles of road remaining • $2.6 million estimated total cost • Includes: • Engineering fee • Financial services fee • Legal fee • Does not include: • Interest • Administration fee

10. LLANO COUNTY MUD #1ROAD PROJECT PROJECTED COST • Financial Advisor • Estimates bonds to be sold @ 4.0-6.0% in early 2013 • Bond to be issued for 28 years to coincide with termination of other long term debt • Bond service date would be 2013-2039 • All marketing and sales of bonds would be performed by Financial Advisor • Fee 2.0% (included in $2.6 million)

11. LLANO COUNTY MUD #1Tax Rate Analysis for Bond Issue • Estimate of Tax rate required to fund road project • $2.6 million@5.0%=.137 • $2.6 million @ 6.0%=.152 • Tax AccountCurrent RateNew Rate(.152) V$ • O&M .1134 .0800 -.0334 • Fire .1000 .1000 -------- • Streets & Lights .0700 .0300 -.0400 • Tax & Debt .0116.1636+.152 • Total .2950 .3736 +.0786 Average Taxable Home Value Llano County Mud 2011 $324,665= increase of $255.00 if Bond proposal adopted

12. LLANO COUNTY MUD #1ROAD PROJECT REVIEW • DECISION PROCESS • CONDUCT STRAWMAN PROCESS • SEND BALLOTS(COLOR CODED) TO ALL BLUE LAKE PROPERTY OWNERS (REGISTERED AND NON REGISTERED VOTERS) • MAIL 5/28 • RETURN 6/11 • PUBLISH RESULTS(WEB AND EMAIL) • DECISION TO PLACE BOND ISSUE ON NOV BALLOT MADE BY 6/30/2012