mental-montgomery co co ser 2010a and b

7/31/2019 Mental-Montgomery Co CO Ser 2010A and B

1/127

HOU:3051425.3

OFFICIAL STATEMENT DATED AUGUST 24, 2010

In the opinion of Bond Counsel, interest on the Series 2010A Certificates is excludable from gross income for federal income tax

purposes under existing law, subject to the matters described under TAX MATTERS herein, and is not includable in the

federal alternative minimum taxable income of individuals or corporations. See TAX MATTERS for a discussion of the opinion

of Bond Counsel and other possible tax consequences of an investment in such Certificates. Interest on the Taxable Series 2010B

Certificates is not excludable from gross income for federal income tax purposes. See TAX MATTERS FOR BUILD AMERICA

BONDS.

NEW ISSUE: BOOK-ENTRY-ONLY Ratings: S&P ...................................................................... AAMoodys .............................................................Aa2

$9,055,000MONTGOMERY COUNTY, TEXAS

Certificates of Obligation, Series 2010A(Mental Health Treatment Facility)

$23,395,000MONTGOMERY COUNTY, TEXAS

Certificates of Obligation,Taxable Series 2010B

(Direct Subsidy Build America Bonds)(Mental Health Treatment Facility)

Dated: September 1, 2010 Due: March 1, as shown on the inside cover page hereof

The $9,055,000 Montgomery County, Texas, Certificates of Obligation, Series 2010A (the Series 2010A Certificates) and the

$23,395,000 Montgomery County, Texas, Certificates of Obligation, Taxable Series 2010B (the Taxable Series 2010BCertificates, together with the Series 2010A Certificates, the Certificates ), are being issued by the Commissioners Court ofMontgomery County (the County) pursuant to the terms of an order adopted by the Commissioners Court of the County. TheCertificates are payable from an annual ad valorem tax levied on all taxable property in the County, within the limits prescribedby law, and by a pledge of a subordinate lien on the net revenues of the Countys park system. See THE CERTIFICATES Source of Payment of the Certificates and TAXING PROCEDURES AND TAX BASE ANALYSIS Tax Rate Limitations.

Interest on the Certificates will accrue from September 1, 2010, and will be payable March 1 and September 1 of each year,commencing March 1, 2011. The Certificates will initially be registered and delivered only to Cede & Co., the nominee of TheDepository Trust Company (DTC) pursuant to the Book-Entry-Only System described herein. Beneficial ownership of theCertificates may be acquired in denominations of $5,000 or integral multiples thereof. No physical delivery of the Certificateswill be made to the beneficial owners thereof. Principal of and interest on the Certificates will be payable by Regions Bank,Houston, Texas (the Paying Agent/Registrar) to Cede & Co., which will make distribution of the amounts so paid to thebeneficial owners of the Certificates. See THE CERTIFICATES - Book-Entry-Only System herein. Interest on theCertificates is payable to the registered owners (initially Cede & Co.) appearing on the registration books of the Paying

Agent/Registrar on the 15th day of the month preceding each interest payment date (the Record Date). See THECERTIFICATES - General.

The Certificates maturing on March 1, 2020 and thereafter are subject to optional redemption by the County in whole, or fromtime to time in part, on March 1, 2019 or any date thereafter at a price of par plus accrued interest to the date of redemption. SeeTHE CERTIFICATES - Optional Redemption. Certain of the Taxable Series 2010B Certificates are subject to mandatoryredemption as describe herein under THE CERTIFICATES Mandatory Redemption. The Taxable Series 2010B Certificatesare also subject to extraordinary optional redemption on any date up to and including March 1, 2019 in whole or in part inprincipal amounts of $5,000 or any integral multiple thereof. See THE CERTIFICATES Extraordinary OptionalRedemption.

See Principal Amounts, Maturities, Interest Rates and Prices on the Inside Cover Page

Proceeds from the sale of the Certificates will be used for (i) the construction of a 100-bed forensic psychiatric hospital located at700 Hilbig Road, Conroe, Texas 77301, and (ii) payment of professional services and payment of the costs of issuance of the

Certificates. See PLAN OF FINANCE Purpose.The Certificates are offered when, as and if issued by the County and accepted by the Underwriters, subject to the approvingopinion of the Attorney General of the State of Texas and the opinion of Andrews Kurth LLP, Houston, Texas, Bond Counsel.Certain legal matters will be passed upon for the County by Andrews Kurth LLP, Houston, Texas, Disclosure Counsel. Certainlegal matters will be passed upon for the Underwriters by Allen Boone Humphries Robinson LLP, Counsel for the Underwriters.It is expected that the Certificates will be delivered through the facilities of DTC on or about September 21, 2010.

WELLS FARGO SECURITIES

FIRSTSOUTHWEST JEFFERIES &COMPANY,INC.

.


2/127

HOU:3051425.3

PRINCIPAL AMOUNTS, MATURITIES, INTEREST RATES AND PRICES

MONTGOMERY COUNTY, TEXAS

$9,055,000Certificates of Obligation, Series 2010A(Mental Health Treatment Facility)

Maturity(a)

(March 1)

Principal

Amount

Interest

Rate

Initial

Yield

(b)

CUSIP(c)Nos.

6136812012 $ 685,000 3.000% 0.530% K462013 705,000 3.000 0.740 K532014 730,000 3.000 0.990 K612015 750,000 3.000 1.440 K792016 780,000 4.000 1.760 K872017 810,000 4.000 2.030 K952018 845,000 4.000 2.220 L292019 875,000 4.000 2.440 L372020 915,000 4.000 2.640 L452021 955,000 5.000 2.810 L522022 1,005,000 5.000 2.950 L60

$23,395,000 Certificates of Obligation, Taxable Series 2010B(Direct Subsidy Build America Bonds)

(Mental Health Treatment Facility)

Maturity(a)(d)(March 1)

PrincipalAmount

InterestRate

InitialYield(b)

CUSIP(c)Nos.

613681

2023 $1,045,000 4.195% 4.195% J972024 1,075,000 4.345 4.345 J712025 1,105,000 4.445 4.445 J89

$6,110,000 Term Certificates Due March 1, 2030(b)(c)(d)(e) Interest Rate 5.20% (Price Par) CUSIP Number 613681K20

$14,060,000 Term Certificates Due March 1, 2039(b)(c)(d)(e) Interest Rate 5.40% (Price Par) CUSIP Number 613681K38

_____________________________(a) The Certificates maturing on March 1, 2020, and thereafter are subject to optional redemption by the County in whole, orfrom time to time in part, on March 1, 2019, or any date thereafter at a price of par plus accrued interest to the date ofredemption. See THE CERTIFICATES - Optional Redemption.

(b) The initial reoffering yields of the Certificates are furnished by the Underwriters (as defined herein) and represent the initialoffering yields to the public, which may be changed by the Underwriters at any time.

(c) CUSIP numbers have been assigned to the Certificates by Standard and Poors CUSIP Service Bureau, A Division of theMcGraw-Hill Companies, Inc., and are included solely for the convenience of the registered owners of the Certificates.Neither the County, the Financial Advisor, nor the Underwriters are responsible for the selection or correctness of theCUSIP numbers set forth herein.

(d) Subject to Extraordinary Optional Redemption as described herein. See THE CERTIFICATES - Extraordinary OptionalRedemption.

(e) Subject to mandatory sinking fund redemption as described herein. See THE CERTIFICATES Mandatory

Redemption.


3/127

HOU:3051425.3

COUNTY OFFICIALS

Elected Officials

Commissioners Court

Alan B. Sadler County JudgeMike Meador Commissioner, Precinct 1Craig Doyal Commissioner, Precinct 2Ernest E. Chance Commissioner, Precinct 3Ed Rinehart Commissioner, Precinct 4

Other Elected and Appointed Officials

Name Position

J. R. Moore, Jr. Tax Assessor CollectorMartha N. Gustavsen County TreasurerPhyllis L. Martin County AuditorDavid Walker County AttorneyMark Turnbull County Clerk

Consultants and Advisors

Auditors.............. ........... .......... ........... .......... ........... ........... . Hereford, Lynch, Sellars, & Kirkham, PC, CPAConroe, Texas

Bond Counsel ................................................................................................................. Andrews Kurth LLPHouston, Texas

Disclosure Counsel......................................................................................................... Andrews Kurth LLPHouston, Texas

Financial Advisor ..................................................................................... RBC Capital Markets CorporationHouston, Texas


4/127

HOU:3051425.3

No dealer, broker, salesman or other person has been authorized by the County or the Underwriters to give anyinformation or to make any representation, other than those contained in this Official Statement, and, if given ormade, such other information or representations must not be relied upon as having been authorized by the County orthe Underwriters.

This Official Statement is not to be used in an offer to sell or the solicitation of an offer to buy in any state in whichsuch offer or solicitation is not authorized or in which the person making such offer or solicitation is not qualified to

do so or to any person to whom it is unlawful to make such offer or solicitation.

NEITHER THE COUNTY, ITS FINANCIAL ADVISOR NOR THE UNDERWRITERS MAKE ANYREPRESENTATION OR WARRANTY WITH RESPECT TO THE INFORMATION CONTAINED IN THISOFFICIAL STATEMENT REGARDING THE DEPOSITORY TRUST COMPANY (DTC) OR ITS BOOK-ENTRY-ONLY SYSTEM.

THE BONDS ARE EXEMPT FROM REGISTRATION WITH THE SECURITIES AND EXCHANGECOMMISSION AND CONSEQUENTLY HAVE NOT BEEN REGISTERED THEREWITH. THEREGISTRATION, QUALIFICATION, OR EXEMPTION OF THE BONDS IN ACCORDANCE WITHAPPLICABLE SECURITIES LAW PROVISIONS OF THE JURISDICTIONS IN WHICH THESE SECURITIESHAVE BEEN REGISTERED, QUALIFIED, OR EXEMPTED SHOULD NOT BE REGARDED AS ARECOMMENDATION THEREOF.

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT

TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE BONDS AT A LEVELABOVE THAT WHICH MIGHT PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IFCOMMENCED, MAY BE DISCONTINUED AT ANY TIME.

Any information and expressions of opinion herein contained are subject to change without notice, and neither thedelivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create anyimplication that there has been no change in the affairs of the County or other matters described herein since the datehereof.

The Underwriters have provided the following sentence for inclusion in this Official Statement. The Underwritershave reviewed the information in this Official Statement in accordance with, and as part of, their responsibilities toinvestors under the federal securities laws as applied to the facts and circumstances of this transaction, but theUnderwriters do not guarantee the accuracy or completeness of such information.


5/127

3

HOU:3051425.3

TABLE OF CONTENTS

Page Page

INTRODUCTION........................................................... 4SALE AND DISTRIBUTION OF THE

CERTIFICATES....................................................... 4Sale of the Certificates .............................................. 4Prices and Marketability............................................ 4Securities Laws.......................................................... 5Ratings ....................................................................... 5

OFFICIAL STATEMENT SUMMARY ....................... 6SELECTED FINANCIAL INFORMATION ................ 8PLAN OF FINANCE...................................................... 9

Purpose ...................................................................... 9Concurrent County Debt Issuances........................... 9Sources and Uses of Funds ....................................... 9

THE CERTIFICATES.................................................. 10General..................................................................... 10Designation of Taxable Series 2010B Certificates

as Build America Bonds.................................... 10Record Date for Interest Payment........................... 11

Optional Redemption .............................................. 11Mandatory Redemption........................................... 12Extraordinary Optional Redemption....................... 12Book-Entry-Only System........................................ 13Authority for Issuance............................................. 15Source of Payment of the Certificates .................... 15Paying Agent/Registrar ........................................... 15Transfer, Exchange and Registration...................... 16Amendments............................................................ 16Defeasance of Certificates....................................... 16Certificate-holders Remedies................................. 16Future Borrowing.................................................... 17Legal Investments.................................................... 18

Investment Policies.................................................. 19DEBT SERVICE REQUIREMENTS.......................... 21COUNTY DEBT........................................................... 22

General..................................................................... 22Indebtedness ............................................................ 22Estimated Overlapping Debt Statement.................. 23Debt Ratios .............................................................. 25Other Obligations.................................................... 25

TAXING PROCEDURES AND TAX BASEANALYSIS............................................................. 26General..................................................................... 26Property Tax Code and County-Wide Appraisal

District ............................................................... 26Property Subject to Taxation by the County........... 26

Residential Homestead Exemptions ....................... 26Freeport Goods and Goods-in-Transit Exemption . 26Tax Abatement ........................................................ 27Pollution Control ..................................................... 27Valuation of Property for Taxation......................... 27County and Taxpayer Remedies............................. 28

Levy and Collection of Taxes................................. 28Countys Rights in the Event of Tax Delinquencies28Tax Rate Limitations............................................... 29Historical Analysis of Tax Collection..................... 30Delinquent Tax Collection Procedures................... 31Tax Rate Distribution.............................................. 31Analysis of Tax Base............................................... 31Top Ten Principal Taxpayers.................................. 32Tax Adequacy.......................................................... 32

SELECTED FINANCIAL DATA................................ 33Historical Operations of the Countys General

Fund................................................................... 33Special Revenue Funds ........................................... 34Debt Service Funds ................................................. 35Pension Fund ........................................................... 35

THE COUNTY ............................................................. 36Administration of the County ................................. 36Commissioners Court............................................. 36

Consultants .............................................................. 36TAX MATTERS FOR THE SERIES 2010A

CERTIFICATES..................................................... 36Exemption of Interest.............................................. 36Tax Accounting Treatment of Original Issue

Premium............................................................. 37TAX MATTERS FOR SERIES 2010B

CERTIFICATES..................................................... 38General..................................................................... 38

CONTINUING DISCLOSURE OF INFORMATION 39Annual Reports........................................................ 39Material Event Notices............................................ 40Limitations and Amendments ................................. 40

Compliance with Prior Undertakings ..................... 40OTHER CONSIDERATIONS ..................................... 41Environmental Regulations..................................... 41Air Quality............................................................... 41Groundwater Conservation District ........................ 41

GENERAL CONSIDERATIONS................................ 41Sources and Compilation of Information................ 41Updating of Official Statement ............................... 42

OTHER INFORMATION............................................ 42Litigation ................................................................. 42Registration and Qualification of Certificates for

Sale..................................................................... 42Legal Investments and Eligibility To Secure Public

Funds in Texas................................................... 42Legal Opinions ........................................................ 42

Financial Advisor .................................................... 43Forward-Looking Statements Disclaimer............... 43Miscellaneous.......................................................... 43Concluding Statement ............................................. 44

Appendix A - Economic and Demographic InformationAppendix B - Excerpts from Comprehensive Annual Financial Report of Montgomery County, Texas for the

Fiscal Year Ended September 30, 2009Appendix C - Form of Legal Opinions


6/127

4

HOU:3051425.3

INTRODUCTION

This Official Statement, which includes the Appendices hereto, provides certain information regarding the issuanceof $9,055,000 Montgomery County, Texas, Certificates of Obligation, Series 2010A (the Series 2010ACertificates) and the $23,395,000 Montgomery County, Texas, Certificates of Obligation, Taxable Series 2010B(Direct Subsidy Build America Bonds) (the Taxable Series 2010B Certificates, together with the Series 2010ACertificates, the Certificates). Capitalized terms used in this Official Statement have the same meanings assigned

to such terms in the order authorizing the issuance of the Certificates (the Order), except as otherwise indicatedherein. There follows in this Official Statement descriptions of the Certificates and certain information regarding theCounty and its finances. All descriptions of documents contained herein are only summaries and are qualified intheir entirety by reference to each such document. Copies of such documents may be obtained from the CountysFinancial Advisor, RBC Capital Markets Corporation, Houston, Texas.

This Official Statement contains, in part, estimates, assumptions and matters of opinion which are not intended asstatements of fact, and no representation is made as to the correctness of such estimates, assumptions or matters ofopinion, or as to the likelihood that they will be realized. However, the County has agreed to keep this OfficialStatement current by amendment or sticker to reflect material changes in the affairs of the County and to the extentthat information actually comes to its attention, the other matters described in this Official Statement until deliveryof the Certificates to the Underwriters and thereafter only as specified in GENERAL CONSIDERATIONS Updating of Official Statement and CONTINUING DISCLOSURE OF INFORMATION.

SALE AND DISTRIBUTION OF THE CERTIFICATESSale of the Certificates

Wells Fargo Securities, FirstSouthwest, and Jeffries & Company, Inc. (collectively, the Underwriters) have agreedto purchase the Series 2010A Certificates from the County pursuant to a purchase agreement with the County for aprice of $9,956,330.90 (representing the par amount of the Series 2010A Certificates, plus a premium of$957,924.65, and less an Underwriters discount of $56,593.75) plus accrued interest on the Series 2010ACertificates to the date of delivery. The Underwriters obligation is to purchase all of the Series 2010A Certificatesif any are purchased.

The Underwriters have agreed to purchase the Taxable Series 2010B Certificates from the County pursuant to apurchase agreement with the County for a price of $23,219,537.50 (representing the par amount of the Series 2010BCertificates, less an Underwriters discount of $175,462.50) plus accrued interest on the Series 2010B Certificates tothe date of delivery. The Underwriters obligation is to purchase all of the Series 2010B Certificates if any are

purchased.

Wells Fargo Securities is the trade name for certain capital markets and investment banking services of Wells Fargo& Company and its subsidiaries, including Wells Fargo Bank, N.A.

Prices and Marketability

The delivery of the Certificates is conditioned upon the receipt by the County of a certificate executed and deliveredby the Underwriters on or before the date of delivery of the Certificates stating the prices at which a substantialamount of the Certificates of each maturity have been sold to the public. For this purpose, the term public shallnot include any person who is a bondhouse, broker or similar person acting in the capacity of underwriter orwholesaler. The County has no control over trading of the Certificates after a bona fide offering of the Certificatesis made by the Underwriters at the yields specified on the inside cover page hereof. Information concerningreoffering yields or prices is the responsibility of the Underwriters.

The prices and other terms respecting the offering and sale of the Certificates may be changed from time to time bythe Underwriters after the Certificates are released for sale, and the Certificates may be offered and sold at pricesother than the initial offering prices, including sales to dealers who may sell the Certificates into investmentaccounts. IN CONNECTION WITH THE OFFERING OF THE CERTIFICATES, THE UNDERWRITERS MAYOVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICEOF THE CERTIFICATES AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THEOPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.


7/127

5

HOU:3051425.3

Securities Laws

No registration statement relating to the Certificates has been filed with the Securities and Exchange Commissionunder the Securities Act of 1933, as amended, in reliance upon the exemptions provided thereunder. TheCertificates have not been registered or qualified under the Securities Act of Texas in reliance upon variousexemptions contained therein; nor have the Certificates been registered or qualified under the securities laws of anyother jurisdiction. The County assumes no responsibility for registration or qualification of the Certificates under

the securities laws of any other jurisdiction in which the Certificates may be offered, sold or otherwise transferred.This disclaimer of responsibility for registration or qualification for sale or other disposition of the Certificates shallnot be construed as an interpretation of any kind with regard to the availability of any exemption from securitiesregistration or qualification provisions in such other jurisdictions.

Ratings

In connection with the sale of the Certificates, the County has made application to Moodys Investors Service, Inc.(Moodys) and Standard & Poors Ratings Group, A Division of the McGraw-Hill Companies, Inc. (S&P) forratings on the Certificates, and the ratings of Aa2 and AA, respectively, have been assigned to the Certificates.An explanation of the significance of such ratings may be obtained from Moodys and S&P. The ratings reflect onlythe view of Moodys and S&P, and the County makes no representation as to the appropriateness of such ratings.

There is no assurance that such ratings will continue for any period of time or that they will not be reviseddownward or withdrawn entirely if, in the judgment of Moodys or S&P, circumstances so warrant. Any such

downward revision or withdrawal of any of the ratings may have an adverse effect on the market price of theCertificates.


8/127

6

HOU:3051425.3

OFFICIAL STATEMENT SUMMARY

The following material is a summary of certain information contained herein and is qualified in its entirety by thedetailed information and financial statements appearing elsewhere in this Official Statement. The reader shouldrefer particularly to sections that are indicated for more complete information.

The Issuer ........... .......... ........... ........... ........... Montgomery County, Texas, a political subdivision of the State ofTexas. See THE COUNTY.

The Series 2010A Certificates............ ........... $9,055,000 Montgomery County, Texas Certificates of Obligation,Series 2010A (Mental Health Treatment Facility) (the Series 2010ACertificates) are dated September 1, 2010 and mature March 1 in eachof the years 2012 through 2022 inclusive. See THE CERTIFICATES General.

The Series 2010B Certificates ........... ............ $23,395,000 Montgomery County, Texas Certificates of Obligation,Taxable Series 2010B (Direct Subsidy Build America Bonds) (theTaxable Series 2010B Certificates and together with the Series2010A Certificates, the Certificates) (Mental Health TreatmentFacility) are dated September 1, 2010. The Taxable Series 2010BCertificates include $3,225,000 of serial certificates maturing March 1in each of the years 2023 through 2025 inclusive and $20,170,000 of

term certificates maturing March 1 in 2030 and 2039 (the TermCertificates). See THE CERTIFICATES General

Payment of Interest.............. ........... ............ ... Interest on the Certificates accrues from September 1, 2010, and ispayable March 1, 2011, and each September 1 and March 1 thereafteruntil maturity or upon prior redemption. See THE CERTIFICATES General.

Optional Redemption..................................... The Certificates maturing on March 1, 2020 and thereafter are subjectto optional redemption in whole, or from time to time in part, on March1, 2019, or any date thereafter at the price of par plus accrued interestto the date of redemption. See THE CERTIFICATES OptionalRedemption.

Mandatory Redemption ........... ........... ........... The Term Certificates are subject to mandatory redemption. See THECERTIFICATES - Mandatory Redemption.

Extraordinary Redemption .. .......... ............ ... The Taxable Series 2010B Certificates are subject to extraordinaryoptional redemption on any date up to and including March 1, 2019 inwhole or in part in principal amounts of $5,000 or any integral multiplethereof. See THE CERTIFICATES Extraordinary OptionalRedemption.

Source of Payment.................. ........... ........... . Principal of and interest on the Certificates are payable from theproceeds of a continuing, direct annual ad valorem tax levied, withinthe limits prescribed by law, against all taxable property in the Countyand from the pledge of a subordinate lien on the net revenues of theCountys park system. See THE CERTIFICATES Source ofPayment of the Certificates and TAXING PROCEDURES AND

TAX BASE ANALYSIS Tax Rate Limitations.

Authorization of the Certificates ........... ........ The Certificates are being issued pursuant to an order authorizingissuance of the Certificates adopted by the Montgomery CountyCommissioners Court (the Order) and the Texas Constitution andlaws of the State of Texas, particularly Subchapter C of Chapter 271,Texas Local Government Code, as amended. See THECERTIFICATES Authority for Issuance.


9/127

7

HOU:3051425.3

Use of Proceeds ........... ........... ........... ........... . Proceeds of the sale of the Certificates will be used for (i) theconstruction of a 100-bed forensic psychiatric hospital located at 700Hilbig Road, Conroe, Texas 77301 and (ii) payment of professionalservices and payment of the costs of issuance of the Certificates. SeePLAN OF FINANCE Purpose.

Tax Exemption ........... ........... ........... ........... .. In the opinion of Bond Counsel, interest on the Series 2010A

Certificates is excludable from gross income for federal income taxpurposes under existing law and is not includable in the computation ofalternative minimum taxable income for individuals. See TAXMATTERS herein for a discussion of the opinion of Bond Counsel.Interest to be paid on the Taxable Series 2010B Certificates will beincluded in gross income for federal income tax purposes. See TAXMATTERS FOR BUILD AMERICA BONDS.

Book-Entry-Only System ............ ........... ....... The definitive Certificates will be initially registered and deliveredonly to Cede & Co., the nominee of DTC pursuant to the Book-Entry-Only System described herein. Beneficial ownership of the Certificatesmay be acquired in denominations of $5,000 or integral multiplesthereof. No physical delivery of the Certificates will be made to thebeneficial owners thereof. See THE CERTIFICATES Book-Entry-

Only System.

Payment Record............................................. The County has never defaulted on the timely payment of principal ofand interest on any of its outstanding debt.

Ratings............. ........... ........... ........... ........... .. Moodys Investors Service, Inc. ............... ........... ........... ........... .Aa2Standard & Poors Ratings Services ............................................AA

[The remainder of this page intentionally left blank.]


10/127

8

HOU:3051425.3

SELECTED FINANCIAL INFORMATION

(Unaudited)

2010 Certified Taxable Assessed Valuation $ 32,954,421,238(a)

(100% of Market Value as of January 1, 2010)See TAXING PROCEDURES AND TAX BASE ANALYSIS

2009 Certified Taxable Assessed Valuation $ 32,645,245,355(a)

(100% of Market Value as of January 1, 2009)See TAXING PROCEDURES AND TAX BASE ANALYSIS

Direct Debt:Outstanding Direct Debt (as of July 1, 2010) $ 403,170,000(b)

Plus: Certificates of Obligation, Series 2010A 9,055,000Plus: Certificates of Obligation, Taxable Series 2010B 23,395,000Plus: Pass-Through Toll and Limited Tax Bonds, Series 2010 36,100,000(c)*Plus: Unlimited Tax Refunding Bonds, Series 2010 43,380,000(d)

Less: The Refunded Bonds (43,555,000)

Total Direct Debt $ 471,545,000

Estimated Overlapping Debt $ 2,407,096,989

Total Direct and Estimated Overlapping Debt $ 2,878,641,989

Interest & Sinking Fund Balance (as of July 31, 2010) $ 18,966,408

Ratio of Direct Debt to..: 2010 Certified Taxable Assessed Valuation ($32,954,421,238) 1.432%2009 Certified Taxable Assessed Valuation ($32,645,245,355) 1.445%First Quarter 2010 Estimated Population (451,714) $ 1,043.90

Ratio of Direct and EstimatedOverlapping Debt to: 2010 Certified Taxable Assessed Valuation ($32,954,421,238) 8.736%

2009 Certified Taxable Assessed Valuation ($32,645,245,355) 8.818%First Quarter 2010 Estimated Population (451,714) $ 6,372.71

Estimated Annual DebtService Requirements: Average (2010-2039) $ 25,575,729

Maximum (2019) $ 38,452,596_____________________________* Preliminary, subject to change.(a) Certified by the Montgomery Central Appraisal District (the Appraisal District).(b) Includes the bonds to be refunded by the Countys Unlimited Tax Refunding Bonds, Series 2010.

(c)

Expected to be delivered on October 12, 2010.(d) The Countys Unlimited Tax Refunding Bonds, Series 2010 were sold on July 30, 2010 and are expected tobe delivered on August 31, 2010.

[Remainder of page intentionally left blank]


11/127

9

HOU:3051425.3

PRELIMINARYOFFICIAL STATEMENT

Relating to

$9,055,000

MONTGOMERY COUNTY, TEXASCertificates of Obligation, Series 2010A

(Mental Health Treatment Facility)

$23,395,000

MONTGOMERY COUNTY, TEXASCertificates of Obligation,

Taxable Series 2010B(Direct Subsidy Build America Bonds)(Mental Health Treatment Facility)

PLAN OF FINANCE

Purpose

Proceeds from the sale of the $9,055,000 Montgomery County, Texas, Certificates of Obligation, Series 2010A (theSeries 2010A Certificates) and the $23,395,000 Montgomery County, Texas, Certificates of Obligation, TaxableSeries 2010B (Direct Subsidy Build America Bonds) (the Taxable Series 2010B Certificates, together with theSeries 2010A Certificates, the Certificates ) will be used for (i) the construction of a 100-bed forensic psychiatrichospital located at 700 Hilbig Road, Conroe, Texas 77301, and (ii) for payment of professional services and

payment of the costs of issuance of the Certificates.

Concurrent County Debt Issuances

The County expects to issue its $36,100,000* Pass-Through Toll Revenue and Limited Tax Bonds, Series 2010 (thePass-Through Toll Bonds) on October 12, 2010. The Countys $43,380,000 Unlimited Tax Refunding Bonds,Series 2010 (the Refunding Bonds) were sold on July 31, 2010 are expected to be delivered on August 31, 2010.Proceeds from the sale of the Pass-Through Toll Bonds will be used to finance certain road improvements within theCounty and to pay the costs of issuance of the Pass-Through Toll Bonds. Proceeds from the sale of the RefundingBonds will be used to refund certain outstanding obligations of the County (the Refunded Bonds) and to pay thecosts of issuance of the Refunding Bonds. See THE CERTIFICATES Future Borrowing for additionalinformation regarding the Countys future finance plans.

Sources and Uses of Funds

Series 2010A Certificates

Sources of FundsPar Amount $ 9,055,000.00Net Reoffering Discount 957,924.65Accrued Interest 19,616.67

Total Sources $ 10,032,541.32

Uses of FundsDeposit to Construction Fund $ 8,705,000.00Deposit to Capitalized Interest Fund 1,167,562.02Underwriters Discount 56,593.75Costs of Issuance 83,768.88Deposit to Interest and Sinking Fund 19,616.67

Total Uses $ 10,032,541.32


12/127

10

HOU:3051425.3

Taxable Series 2010B Certificates

Sources of FundsPar Amount $ 23,395,000.00Accrued Interest 67,590.21

Total Sources $ 23,462,590.21

Uses of FundsDeposit to Construction Fund $ 23,095,000.00Underwriters Discount 175,462.50Costs of Issuance 124,537.50Deposit to Interest and Sinking Fund 67,590.21

Total Uses $ 23,462,590.21

THE CERTIFICATES

General

The Certificates are dated September 1, 2010, and mature on March 1 in each of the years and in the amounts shownon the inside cover page hereof. The Certificates will bear interest at the respective rates shown on the inside coverpage of this Official Statement, which interest will be computed on the basis of a 360-day year of twelve 30-daymonths, and will be payable on March 1 and September 1 (each an Interest Payment Date), commencing March1, 2011. The definitive Certificates will be issued only in fully registered form in any integral multiple of $5,000 forany one maturity and will be initially registered and delivered only to Cede & Co., the nominee of The DepositoryTrust Company (DTC) pursuant to the Book-Entry-Only System described herein. No physical delivery of theCertificates will be made to the beneficial owners thereof. Principal of and interest on the Certificates will bepayable by Regions Bank, Houston, Texas (the Paying Agent/Registrar) to Cede & Co., which will makedistribution of the amounts so paid to the participating members of DTC for subsequent payment to the beneficialowners of the Certificates. See Book-Entry-Only System herein.

In the event the Book-Entry-Only-System is discontinued, the Certificates may be transferred and exchanged on thebond register kept by the Paying Agent/Registrar upon surrender and reissuance. The Certificates are exchangeable

for an equal principal amount of Certificates of the same maturity in any authorized denomination upon surrender ofthe Certificates to be exchanged at the principal payment office of the Paying Agent/Registrar. No service chargewill be made for any transfer, but the County may require payment of a sum sufficient to cover any tax orgovernmental charge payable in connection therewith.

Designation of Taxable Series 2010B Certificates as Build America Bonds.

The County has designated the Taxable Series 2010B Certificates as Build America Bonds (BABs) under andpursuant to the federal American Recovery and Reinvestment Act of 2009 (the Recovery Act), and in accordancewith the guidance included in the Internal Revenue Services Notice 2009-26, effective as of April 3, 2009, andintends to irrevocably elect to receive directly from the United States Department of the Treasury (the U.S.Treasury) direct subsidy payments equal to 35% of the interest payable by the County on the Obligationsdesignated as BABs contemporaneously with each interest payment date. Under the Stimulus Act, the County isentitled to receive the subsidy payments on application to the U.S. Treasury, if (1) the County uses 100% of theproceeds of the BABs (net of permitted costs of issuance) and investment earnings on such proceeds forcapitalizable expenditures and (2) the County complies with the same conditions regarding use and investment ofproceeds of the BABs as those applicable to obligations the interest on which is excludable from gross income forfederal income tax purposes pursuant to Section 103 of the Internal Revenue Code of 1986 (the Code). See TAXMATTERS FOR BUILD AMERICA BONDS. The County intends to apply and expects to qualify for each federalinterest subsidy payment. The County will deposit the subsidy payments into a special subaccount within the interestand sinking fund for the BABs to be used to reduce the amount of regularly scheduled debt service payments;provided, however, that such subsidy payments will not be pledged as security to pay debt service on the BABs.


13/127

11

HOU:3051425.3

If the County fails to comply with the conditions of the U.S. Treasury for the continued receipt of the subsidypayments throughout the term of the BABs, it may no longer receive the subsidy payments and could be subject to aclaim for return of previously received subsidy payments. The subsidy payments do not constitute a full faith andcredit guarantee of the United States Government, but are required to be paid by the U.S. Treasury under theRecovery Act. No assurances are provided that the County will receive the subsidy payments. The amount of anysubsidy payment is subject to legislative changes by Congress. In addition, subsidy payments may be subject tooffset against certain amounts that may, for unrelated reasons, be owed by the County to an agency of the UnitedStates of America.

Record Date for Interest Payment

The record date (Record Date) for the interest payable on the Certificates on any interest payment date means theclose of business on the fifteenth day of the preceding month.

In the event of a non-payment of interest on a scheduled payment date, and for 30 days thereafter, a new record datefor such interest payment (a Special Record Date) will be established by the Paying Agent/Registrar, if and whenfunds for the payment of such interest have been received from the County. Notice of the Special Record Date andof the scheduled payment date of the past due interest (Special Payment Date, which shall be 15 days after theSpecial Record Date) shall be sent at least five business days prior to the Special Record Date by United States mail,first class postage prepaid, to the address of each holder of a Certificate (Certificate-holder) appearing on theregistration books of the Paying Agent/Registrar at the close of business on the last business day next preceding the

date of mailing of such notice.Optional Redemption

The County reserves the right, at its option, to redeem Certificates having stated maturities on or after March 1, 2020in whole or in part in principal amounts of $5,000 or any integral multiple thereof, on March 1, 2019 or any datethereafter at the par value thereof plus accrued interest to the date of redemption. If less than all of the Certificatesare to be redeemed, the County shall determine the principal amount and maturities to be redeemed and shall directthe Paying Agent/Registrar to select by lot or other customary method that results in a random selection, theCertificates or portions thereof within a maturity, to be redeemed.

Not less than 30 days prior to a redemption date for the Certificates, the County shall cause a notice of redemption tobe sent by United States mail, first class, postage prepaid, to the registered owners of the Certificates to beredeemed, in whole or in part, at the address of the registered owner appearing on the registration books of thePaying Agent/Registrar at the close of business on the business day next preceding the date of mailing such notice.

ANY NOTICE SO MAILED SHALL BE CONCLUSIVELY PRESUMED TO HAVE BEEN DULY GIVEN,WHETHER OR NOT THE REGISTERED OWNER RECEIVES SUCH NOTICE. NOTICE HAVING BEEN SOGIVEN, THE CERTIFICATES CALLED FOR REDEMPTION SHALL BECOME DUE AND PAYABLE ONTHE SPECIFIED REDEMPTION DATE, AND NOTWITHSTANDING THAT ANY CERTIFICATE ORPORTION THEREOF HAS NOT BEEN SURRENDERED FOR PAYMENT, INTEREST ON SUCHCERTIFICATE OR PORTION THEREOF SHALL CEASE TO ACCRUE.

The Paying Agent/Registrar and the County, so long as a Book-Entry-Only System is used for the Certificates, willsend any notice of redemption, notice of proposed amendment to the Order or other notices with respect to theCertificates only to DTC. Any failure by DTC to advise any DTC participant, or of any DTC participant or indirectparticipant to notify the beneficial owner, shall not affect the validity of the redemption of the Certificates called forredemption or any other action premised on any such notice. Redemption of portions of the Certificates by theCounty will reduce the outstanding principal amount of such Certificates held by DTC.


14/127

12

HOU:3051425.3

Mandatory Redemption

The Taxable Series 2010B Certificates maturing in 2030 and 2039 (the, Term Certificates) are subject tomandatory sinking fund redemption and will be redeemed by the County prior to their scheduled maturities onMarch 1 in the years and in the amounts set forth below at a redemption price equal to the principal amountredeemed plus accrued interest to the mandatory redemption date (the Maturity Redemption Date or MandatoryRedemption Dates):

$6,110,000 Term Certificates Maturing on March 1, 2030

Mandatory Redemption Date Principal AmountMarch 1, 2026 $1,140,000March 1, 2027 1,180,000March 1, 2028 1,220,000March 1, 2029 1,265,000March 1, 2030 (Final Maturity) 1,305,000

$14,060,000 Term Certificates Maturing on March 1, 2039

Mandatory Redemption Date Principal Amount

March 1, 2031 $1,350,000March 1, 2032 1,400,000March 1, 2033 1,450,000March 1, 2034 1,505,000March 1, 2035 1,555,000March 1, 2036 1,610,000March 1, 2037 1,670,000March 1, 2038 1,730,000March 1, 2039 (Final Maturity) 1,790,000

The particular Certificates to be mandatorily redeemed will be selected by lot or other customary random selectionmethod. The principal amount of any Term Certificate to be mandatorily redeemed on such Mandatory RedemptionDate will be reduced by the principal amount of such Term Certificate which, by the 45th day prior to suchMandatory Redemption Date, either has been purchased in the open market and delivered or tendered forcancellation by or on behalf of the County to the Paying Agent/Registrar or optionally redeemed and which, in eithercase, has not previously been made the basis for a reduction under this sentence.

Extraordinary Optional Redemption

Up to and including March 1, 2019, the Taxable Series 2010B Certificates are subject to redemption prior tomaturity at the option of the County, in whole or in part, in principal amounts of $5,000 or any integral thereof onany date on or after the occurrence of an Extraordinary Event (defined herein) at a redemption price equal to thegreater of: (a) the issue price of the principal amount of the Taxable Series 2010B Certificates to be redeemed,provided that such amount must be at least equal to the par amount of the Taxable Series 2010B Certificates to beredeemed; and (b) the sum of the present value of the remaining scheduled payments of principal and interest to theearlier of the stated maturity or the optional redemption date (March 1, 2019) of the Taxable Series 2010BCertificates to be redeemed, not including any portion of those payments of interest accrued and unpaid as of theredemption date, discounted to the redemption date on a semi-annual basis, assuming a 360-day year consisting of

twelve 30-day months, at the Treasury Rate, plus 100 basis points, plus, in each case, accrued and unpaid interest tothe redemption date on the Taxable Series 2010B Certificates to be redeemed.

Extraordinary Event means any change to Section 54AA or Section 6431 of the Code (as such Sections wereadded by Section 1531 of the Recovery Act, pertaining to Build America Bonds) pursuant to which the InterestSubsidy Payments in connection with the Taxable Series 2010B Certificates are reduced or eliminated.

The Treasury Rate is, as of any redemption date, the yield to maturity as of such redemption date of United StatesTreasury securities with a constant maturity (as compiled and published in the most recent Federal ReserveStatistical Release H.15 (519) that has become publicly available at least two (2) Business Days prior to the


15/127

13

HOU:3051425.3

redemption date (excluding inflation indexed securities) (or, if such Statistical Release is no longer published, anypublicly available source of similar market data)) most nearly equal to the period from the redemption date to thematurity date of the Bonds to be redeemed; provided, however, that if the period from the redemption date to suchmaturity date is less than one (1) year, the weekly average yield on actually traded United States Treasury securitiesadjusted to a constant maturity of one (1) year will be used.

At the request of the Paying Agent/Registrar, the redemption price of the Taxable Series 2010B Certificates to be

redeemed at the option of the County will be determined by an independent accounting firm, investment bankingfirm or financial advisor retained by the County at the Countys expense to calculate such redemption price. ThePaying Agent/Registrar and the County may conclusively rely on the determination of such redemption price bysuch independent accounting firm, investment banking firm or financial advisor and will not be liable for suchreliance.

Book-Entry-Only System

This section describes how ownership of the Certificates is to be transferred and how the principal of, premium, if

any, and interest on the Certificates are to be paid to and credited by The Depository Trust Company (DTC),

New York, New York, while the Certificates are registered in its nominees name. The information in this section

concerning DTC and the Book-Entry-Only System has been provided by DTC for use in disclosure documents such

as this Official Statement. The County and the Underwriters believe the source of such information to be reliable,

but take no responsibility for the accuracy or completeness thereof.

The County cannot and does not give any assurance that (1) DTC will distribute payments of debt service on theCertificates, or redemption or other notices, to DTC Participant, (2) DTC Participants or others will distribute debt

service payments paid to DTC or its nominee (as the registered owner of the Certificates), or redemption or other

notices, to the Beneficial Owners, or that they will do so on a timely basis, or (3) DTC will serve and act in the

manner described in this Official Statement. The current rules applicable to DTC are on file with the Securities and

Exchange Commission, and the current procedures of DTC to be followed in dealing with DTC Participants are on

file with DTC.

DTC will act initially as securities depository for the Certificates. The Certificates will be issued as fully-registeredsecurities registered in the name of Cede & Co. (DTCs partnership nominee) or such other name as may berequested by an authorized representative of DTC. One fully-registered certificate will be issued for each maturity ofthe Certificates in the aggregate principal amount of such maturity, and will be deposited with DTC.

DTC, the worlds largest securities depository, is a limited-purpose trust company organized under the New York

Banking Law, a banking organization within the meaning of the New York Banking Law, a member of theFederal Reserve System, a clearing corporation within the meaning of the New York Uniform Commercial Code,and a clearing agency registered pursuant to the provisions of Section 17A of the Securities Exchange Act of1934. DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-U.S. equity issues,corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTCsparticipants (Direct Participants) deposit with DTC. DTC also facilitates the post-trade settlement among DirectParticipants of sales and other securities transactions in deposited securities, through electronic computerized bookentry transfers and pledges between Direct Participants accounts. This eliminates the need for physical movementof securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks,trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of TheDepository Trust & Clearing Corporation (DTCC). DTCC is the holding company for DTC, National SecuritiesClearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCCis owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both

U.S. and non-U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clearthrough or maintain a custodial relationship with a Direct Participant, either directly or indirectly (IndirectParticipants). DTC has Standard & Poors highest rating: AAA. The DTC Rules applicable to its Participants are onfile with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.comand www.dtc.org.

Purchases of Certificates under the DTC system must be made by or through Direct Participants, which will receivea credit for the Certificates on DTCs records. The ownership interest of each actual purchaser of each Certificate(Beneficial Owner) is in turn to be recorded on the Direct and Indirect Participants records. Beneficial Ownerswill not receive written confirmation from DTC of their purchase.


16/127

14

HOU:3051425.3

Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, aswell as periodic statements of their holdings, from the Direct or Indirect Participant through which the BeneficialOwner entered into the transaction.

Transfers of ownership interests in the Certificates are to be accomplished by entries made on the books of Direct orIndirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificatesrepresenting their ownership interests in the Certificates, except in the event that use of the book-entry system for

the Certificates is discontinued.

To facilitate subsequent transfers, all Certificates deposited by Direct Participants with DTC are registered in thename of DTCs partnership nominee, Cede & Co., or such other name as may be requested by an authorizedrepresentative of DTC. The deposit of Certificates with DTC and their registration in the name of Cede & Co., orsuch other DTC nominee, do not effect any change in beneficial ownership. DTC has no knowledge of the actualBeneficial Owners of the Certificates; DTCs records reflect only the identity of the Direct Participants to whoseaccounts such Certificates are credited, which may or may not be the Beneficial Owners. The Participants willremain responsible for keeping account of their holdings on behalf of their customers.

Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to IndirectParticipants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed byarrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time.Beneficial Owners of Certificates may wish to take certain steps to augment the transmission to them of notices of

significant events with respect to the Certificates, such as redemptions, tenders, defaults, and proposed amendmentsto the Certificate documents. For example, Beneficial Owners of Certificates may wish to ascertain that the nomineeholding the Certificates for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In thealternative, Beneficial Owners may wish to provide their names and addresses to the Paying Agent/Registrar andrequest that copies of notices be provided directly to them.

Redemption notices shall be sent to DTC. If less than all of the Certificates within a maturity are being redeemed,DTCs practice is to determine by lot the amount of the interest of each Direct Participant in such maturity to beredeemed.

Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to the Certificatesunless authorized by a Direct Participant in accordance with DTCs Procedures. Under its usual procedures, DTCmails an Omnibus Proxy to the County as soon as possible after the record date. The Omnibus Proxy assigns Cede &Co.s consenting or voting rights to those Direct Participants to whose accounts the Certificates are credited on therecord date (identified in a listing attached to the Omnibus Proxy).

Principal, premium, if any, redemption proceeds and interest payments on the Certificates will be made to Cede &Co., or such other nominee as may be requested by an authorized representative of DTC. DTCs practice is to creditDirect Participants accounts upon DTCs receipt of funds and corresponding detail information from the County orthe Paying Agent/Registrar, on payable date in accordance with their respective holdings shown on DTCs records.Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices,as is the case with securities held for the accounts of customers in bearer form or registered in street name, andwill be the responsibility of such Participant and not of DTC nor its nominee, the Paying Agent/Registrar, or theCounty, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment ofprincipal, premium, if any, redemption proceeds and interest payments to Cede & Co. (or such other nominee asmay be requested by an authorized representative of DTC) is the responsibility of the County or the PayingAgent/Registrar, disbursement of such payments to Direct Participants will be the responsibility of DTC, anddisbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect

Participants.DTC may discontinue providing its services as depository with respect to the Certificates at any time by givingreasonable notice to the County. Under such circumstances, in the event that a successor securities depository is notobtained, Certificates are required to be printed and delivered.

The County may decide to discontinue use of the system of book-entry transfers through DTC (or a successorsecurities depository). In that event, Certificates will be printed and delivered in accordance with the Order. Inreading this Official Statement it should be understood that while the Certificates are in the Book-Entry-OnlySystem, references in other sections of this Official Statement to registered owners should be read to include the


17/127

15

HOU:3051425.3

person for which the Participant acquires an interest in the Certificates, but (i) all rights of ownership must beexercised through DTC and the Book-Entry-Only System, and (ii) except as described above, notices that are to begiven to registered owners under the Order will be given only to DTC.

Use of Certain Terms in Other Sections of this Official Statement

In reading this Official Statement it should be understood that while the Certificates are in the Book-Entry-OnlySystem, references in other sections of this Official Statement to registered owners should be read to include theperson for which the Participant acquires an interest in the Certificates, but (i) all rights of ownership must beexercised through DTC and the Book-Entry-Only System, and (ii) except as described above, notices that are to begiven to registered owners under the Order will be given only to DTC.

Information concerning DTC and the Book-Entry-Only System has been obtained from DTC and is not guaranteedas to accuracy or completeness by, and is not to be construed as a representation by, the County or the Underwriters.

Effect of Termination of Book-Entry-Only System

In the event that the Book-Entry-Only System is discontinued printed Certificates will be issued to the registeredowners and the Certificates will be subject to transfer, exchange and registration provisions as set forth in the Orderand summarized under Transfer, Exchange and Registration below.

Authority for Issuance

The Certificates are issued pursuant to the Constitution and the laws of the State of Texas (the State), includingparticularly Subchapter C of Chapter 271, Texas Local Government Code, as amended, and the Order passed by theCommissioners Court of the County, authorizing the issuance of the Certificates.

Source of Payment of the Certificates

The Certificates are payable from the proceeds of a continuing, direct annual ad valorem tax levied, within the limitsprescribed by law, against taxable property located within the County. Article VIII, Section 9 of the TexasConstitution imposes a limit of $0.80 per $100 assessed valuation for all purposes of a countys General Fund,Permanent Improvement Fund, Road and Bridge Fund and Jury Fund including debt service on certain bonds,warrants, certificates of obligation or other debt issued against such funds. Administratively, the Attorney Generalof Texas will not approve limited tax obligations in an amount which produces debt service requirements exceedingthat which can be paid from $0.40 of such $0.80 maximum tax rate calculated at 90% collection. The Certificatesare limited tax obligations payable from this constitutional tax. The issuance of the Certificates will not exceed the

constitutionally authorized taxable rate stated above. See also, TAXING PROCEDURES AND TAX BASEANALYSIS - Tax Rate Limitations.

The Certificates are further payable from a pledge of a subordinate lien on the revenues of the Countys park systemafter payment of all operation and maintenance expenses thereof (the Net Revenues). The lien on such NetRevenues is junior and subordinate in all respects to the pledge of Net Revenues to the payment of any obligation ofthe County heretofore or hereafter issued by the County and designated as having a pledge senior to the pledge ofthe Net Revenues of the Certificates. The County anticipates paying the principal and interest on the Certificatesfrom ad valorem taxes as described above and the County makes no assurances that there will be any Net Revenuesof the park system available to pay debt service on the Certificates. In the Order authorizing the issuance of theCertificates, the County reserves the right to issue additional obligations payable in whole or in part from the NetRevenues.

Paying Agent/Registrar

The initial Paying Agent/Registrar is Regions Bank, Houston, Texas. In the Order, the County retains the right toreplace the Paying Agent/Registrar. The County covenants to maintain and provide a Paying Agent/Registrar at alltimes until the Certificates are duly paid and any successor Paying Agent/Registrar shall be a commercial bank ortrust company organized under the laws of the State or other entity duly qualified and legally authorized to serve asand perform the duties and services of Paying Agent/Registrar for the Certificates. Upon any change in the PayingAgent/Registrar for the Certificates, the County agrees to promptly cause a written notice thereof to be sent to eachregistered owner of the Certificates by United States mail, first class, postage prepaid, which notice shall also givethe address of the new Paying Agent/Registrar.


18/127


19/127

17

HOU:3051425.3

Certificates upon the failure of the County to observe any covenant under the Order. A certificate-holder ofCertificates could seek a judgment against the County if a default occurred in the payment of principal of or intereston any such Certificates; however, such judgment could not be satisfied by execution against any property of theCounty and a suit for monetary damages could be vulnerable to the defense of sovereign immunity. A certificate-holders only practical remedy, if a default occurs, is a mandamus or mandatory injunction proceeding to compel theCounty to levy, assess and collect an annual ad valorem tax sufficient to pay principal of and interest on theCertificates as it becomes due or perform other material terms and covenants contained in the Order. In general,Texas courts have held that a writ of mandamus may be issued to require a public official to perform legallyimposed ministerial duties necessary for the performance of a valid contract, and Texas law provides that, followingtheir approval by the Attorney General and issuance, the Certificates are valid and binding obligations for allpurposes according to their terms. However, the enforcement of any such remedy may be difficult and timeconsuming and a certificate-holder could be required to enforce such remedy on a periodic basis.

The County is also eligible to seek relief from its creditors under Chapter 9 of the U.S. Bankruptcy Code (Chapter9). Although Chapter 9 provides for the recognition of a security interest represented by a specifically pledgedsource of revenues, the pledge of taxes in support of a general obligation of a bankrupt entity is not specificallyrecognized as a security interest under Chapter 9. Chapter 9 also includes an automatic stay provision that wouldprohibit, without Bankruptcy Court approval, the prosecution of any other legal action by creditors or Certificate-holders of an entity which has sought protection under Chapter 9. Therefore, should the County avail itself ofChapter 9 protection from creditors, the ability to enforce would be subject to the approval of the Bankruptcy Court

(which could require that the action be heard in Bankruptcy Court instead of other federal or state court); and theBankruptcy Code provides for broad discretionary powers of a Bankruptcy Court in administering any proceedingbrought before it. The opinion of Bond Counsel will note that all opinions relative to the enforceability of the Orderand the Certificates are qualified with respect to the customary rights of debtors relative to their creditors, includingrights afforded to creditors under the Bankruptcy Code.

Future Borrowing

The County expects to issue its $36,100,000*

Pass-Through Toll Revenue and Limited Tax Bonds, Series 2010 (the

Pass-Through Toll Bonds) on October 12, 2010. The Countys $43,380,000 Unlimited Tax Refunding Bonds,Series 2010 (the Refunding Bonds) were sold on July 31, 2010 are expected to be delivered on August 31, 2010.Proceeds from the sale of the Pass-Through Toll Bonds will be used to finance certain road improvements within theCounty and to pay the costs of issuance of the Pass-Through Toll Bonds. Proceeds from the sale of the RefundingBonds will be used to refund certain outstanding obligations of the County and to pay the costs of issuance of the

Refunding Bonds.The Commissioners Court has created the Montgomery County Toll Road Authority (the Authority). TheAuthority was created with the intended primary function of oversight of County toll roads. In addition, theAuthority is authorized to and may issue debt in the future for the construction and maintenance of certain toll roadsin the County. Pursuant to its articles of formation and relevant State law, the Authority is able to charge tollrevenues for the payment of its bonds. In addition, the Authority would be able to use tax revenues for the paymentof Authority bonds, but only after the imposition of a tax has been approved by voters in the County. The Countyand the Authority currently have no plans to request County voters approve the imposition of such a tax. To date,the Authority has not issued any debt.

Depending on the rate of development within the County, changes in assessed valuation and the amounts, interestrates, maturities and time of issuance of additional bonds or certificates, increases in the Countys annual ad valoremtax rate may be required to provide for the payment of the principal of and interest on the Countys outstanding debt,including the Certificates and any future bonds or certificates of obligation the County may issue.

*Preliminary, subject to change.


20/127

18

HOU:3051425.3

INVESTMENT AUTHORITY AND INVESTMENT OBJECTIVES OF THE COUNTY

The County invests its investable funds in investments authorized by Texas law in accordance with investmentpolicies approved by the Commissioners Court of the County. Both State law and the Countys investment policiesare subject to change from time to time.

Legal Investments

Under State law, the County is authorized to invest in (1) obligations of the United States or its agencies andinstrumentalities, including letters of credit; (2) direct obligations of the State or its agencies and instrumentalities;(3) collateralized mortgage obligations directly issued by a federal agency or instrumentality of the United States,the underlying security for which is guaranteed by an agency or instrumentality of the United States; (4) otherobligations, the principal and interest of which is guaranteed or insured by or backed by the full faith and credit of,the State or the United States or their respective agencies and instrumentalities; (5) obligations of states, agencies,counties, cities, and other political subdivisions of any state rated as to investment quality by a nationally recognizedinvestment rating firm not less than A or its equivalent; (6) bonds issued, assumed or guaranteed by the State ofIsrael; (7) (a) certificates of deposit and share certificates issued by a depository institution that has its main office ora branch office in the State of Texas, that are (i) guaranteed or insured by the Federal Deposit Insurance Corporationor the National Credit Union Share Insurance Fund or their respective successors, or are secured as to principal byobligations described in clauses (1) through (6) above or in any other manner and amount provided by law forCounty deposits, and (b) certificates of deposit or share certificates issued by a depository institution that has its

main office or a branch office in the State of Texas that participate in the Certificate of Account Registry Service;(8) fully collateralized repurchase agreements that have a defined termination date, are fully secured by obligationsdescribed in clause (1), and are placed through a primary government securities dealer or a financial institutiondoing business in the State, (9) securities lending programs if (i) the securities loaned under the program are 100%collateralized, a loan made under the program allows for termination at any time and a loan made under the programis either secured by (a) obligations that are described in clauses (1) through (6) above, (b) irrevocable letters ofcredit issued by a state or national bank that is continuously rated by a nationally recognized investment rating firmat not less than A or its equivalent or (c) cash invested in obligations described in clauses (1) through (6) above,clauses (11) through (13) below, or an authorized investment pool; (ii) securities held as collateral under a loan arepledged to the County, held in the Countys name and deposited at the time the investment is made with the Countyor a third party designated by the County; (iii) a loan made under the program is placed through either a primarygovernment securities dealer or a financial institution doing business in the State; and (iv) the agreement to lendsecurities has a term of one year or less, (10) certain bankers acceptances with the remaining term of 270 days orless, if the short-term obligations of the accepting bank or its parent are rated at least A-1 or P-1 or the equivalent byat least one nationally recognized credit rating agency, (11) commercial paper with a stated maturity of 270 days orless that is rated at least A-1 or P-1 or the equivalent by either (a) two nationally recognized credit rating agencies or(b) one nationally recognized credit rating agency if the paper is fully secured by an irrevocable letter of creditissued by a U.S. or state bank, (12) no-load money market mutual funds registered with and regulated by theSecurities and Exchange Commission that have a dollar weighted average stated maturity of 90 days or less andinclude in their investment objectives the maintenance of a stable net asset value of $1 for each share, and (13) no-load mutual funds registered with the Securities and Exchange Commission that have an average weighted maturityof less than two years, invest exclusively in obligations described in the this paragraph, and are continuously rated asto investment quality by at least one nationally recognized investment rating firm of not less than AAA or itsequivalent. In addition, bond proceeds may be invested in guaranteed investment contracts that have a definedtermination date and are secured by obligations, including letters of credit, of the United States or its agencies andinstrumentalities in an amount at least equal to the amount of bond proceeds invested under such contract, other thanthe prohibited obligations described in the next succeeding paragraph.

The County may invest in such obligations directly or through government investment pools that invest solely insuch obligations provided that the pools are rated no lower than AAA or AAA-m or an equivalent by at least onenationally recognized rating service. The County may also contract with an investment management firm registeredunder the Investment Advisers Act of 1940 (15 U.S.C. Section 80b-1 et seq.) or with the State Securities Board toprovide for the investment and management of its public funds or other funds under its control for a term up to twoyears, but the County retains ultimate responsibility as fiduciary of its assets. In order to renew or extend such acontract, the County must do so by order, ordinance, or resolution. The County is specifically prohibited frominvesting in: (1) obligations whose payment represents the coupon payments on the outstanding principal balance ofthe underlying mortgage-backed security collateral and pays no principal; (2) obligations whose payment represents


21/127

19

HOU:3051425.3

the principal stream of cash flow from the underlying mortgage-backed security and bears no interest; (3)collateralized mortgage obligations that have a stated final maturity of greater than 10 years; and (4) collateralizedmortgage obligations the interest rate of which is determined by an index that adjusts opposite to the changes in amarket index.

Investment Policies

Under Texas law, the County is required to invest its funds under written investment policies that primarilyemphasize safety of principal and liquidity; that address investment diversification, yield, maturity, and the qualityand capability of investment management; and that include a list of authorized investments for County funds, themaximum allowable stated maturity of any individual investment, the maximum dollar-weighted average maturityallowed for pooled fund groups and methods to monitor the market price of such authorized investments. AllCounty funds must be invested consistent with a formally adopted Investment Strategy Statement that specificallyaddresses each funds investment. Each Investment Strategy Statement is required to describe its objectivesconcerning: (1) suitability of investment type, (2) preservation and safety of principal, (3) liquidity, (4) marketabilityof each investment, (5) diversification of the portfolio, and (6) yield.

Under Texas law, County investments must be made with judgment and care, under prevailing circumstances, thata person of prudence, discretion, and intelligence would exercise in the management of the persons own affairs, notfor speculation, but for investment, considering the probable safety of capital and the probable income to bederived. At least quarterly, the investment officers of the County are required to submit an investment report

detailing: (1) the investment position of the County, (2) the beginning market value, any additions and changes tomarket value and the ending value for each pooled fund group, (3) the book value and market value of eachseparately invested asset at the beginning and end of the reporting period, by the type of asset and fund type, (4) thematurity date of each separately invested asset having a maturity date, (5) the account or fund or pooled fund groupfor which each individual investment was acquired, and (6) the compliance of the investment portfolio as it relatedto: (a) adopted investment strategy statements and (b) the provisions of Chapter 2256, Texas Government Code, asamended. No person may invest County funds without express written authority from the Commissioners Court ofthe County.

Under State law, the County is additionally required to: (1) annually review its adopted policies and strategies, (2)require any investment officers with personal business relationships or family relationships with firms seeking to sellsecurities to the County to disclose the relationship and file a statement with the Texas Ethics Commission and theCounty, (3) require the registered principal of firms seeking to sell securities to the County to: (a) receive and reviewthe Countys investment policy, (b) acknowledge that reasonable controls and procedures have been implemented to

preclude imprudent investment activities, and (c) deliver a written statement attesting to these requirements; (4) inconjunction with its annual financial audit, perform a compliance audit of the management controls on investmentsand adherence to the Countys investment policy, (5) restrict reverse repurchase agreements to not more than 90days and restrict the investment of reverse repurchase agreement funds to no greater than the term of the reverserepurchase agreement, (6) restrict the investment in non-money market mutual funds in the aggregate to no morethan 15% of the Countys monthly average fund balance, excluding bond proceeds and reserves and other funds heldfor debt service, (7) require local government investment pools to conform to the new disclosure, rating, net assetvalue, yield calculation, and advisory board requirements and (8) provide specific investment training for theTreasurer, the chief financial officer (if not the Treasurer) and the investment officer.

The County has adopted an investment policy in accordance with State law. Under the current County investmentpolicy, the following instruments are the only authorized investments for County funds: Time Deposits; Certificatesof Deposit; Money Market Investment Accounts; Negotiable Order of Withdrawal (NOW) Accounts; United StatesTreasury Bills; United States Government Securities, as defined in Section 2256.009, Texas Government Code, as

amended; fully collateralized direct repurchase agreements as defined in as defined in Section 2256.011, TexasGovernment Code, as amended; Discount Government Agencies, excluding Federal Home Loan MortgageCorporation (Freddie Mac); and, any Public Funds Pool authorized by State law. No funds of the County will beinvested in securities such as reverse repurchase agreements and the County will not trade in options or futurescontracts.


22/127

20

HOU:3051425.3

The Countys investment balances on May 31, 2010 were as follows:

Carrying Amount Market ValueU. S. Treasuries $10,002,703 $10,002,703State Treasurers Investment Pool (TEXPOOL) 27,962,461 27,962,461Local Government Investment Pool (LONE-STAR) 15,855,514 15,855,514

Local Government Investment Pool (TexSTAR) 21,010,940 21,010,940Money Market Mutual Fund (ICT) 41,803,654 41,803,654Money Market Mutual Fund (AIM) 34,024,726 34,024,726Money Market Mutual Fund (BPIF) 4,924,389 4,924,389

Total Investments $155,584,387 $155,584,387

[The remainder of this page intentionally left blank.]


23/127


24/127

22

HOU:3051425.3

COUNTY DEBT

General

The following tables and calculations relate to the Certificates and to all other debt of the County. The County andvarious other political subdivisions of government which overlap all or a portion of the County are empowered toincur debt to be paid from revenues raised or to be raised by taxation against all or a portion of the property within

the County.Indebtedness

2010 Certified Taxable Assessed Valuation..................................................................................... $ 32,954,421,238(a)(100% of Market Value as of January 1, 2010)See TAXING PROCEDURES AND TAX BASE ANALYSIS

2009 Certified Taxable Assessed Valuation..................................................................................... $ 32,645,245,355(a)(100% of Market Value as of January 1, 2009)See TAXING PROCEDURES AND TAX BASE ANALYSIS

Direct Debt:Outstanding Direct Debt (as of July 1, 2010) $ 403,170,000(b)

Plus: Certificates of Obligation, Series 2010A 9,055,000Plus: Certificates of Obligation, Taxable Series 2010B 23,395,000Plus: Pass-Through Toll and Limited Tax Bonds, Series 2010 36,100,000(c)*Plus: Unlimited Tax Refunding Bonds, Series 2010 43,380,000(d)*Less: The Refunded Bonds (43,555,000)*

Total Direct Debt $ 471,545,000

Interest & Sinking Fund Balance (as of July 31, 2010).................................................................... $ 18,966,408

______________________________

* Preliminary, subject to change.(a) Certified by the Montgomery Central Appraisal District (the Appraisal District).(b) Includes the bonds to be refunded by the Countys Unlimited Tax Refunding Bonds, Series 2010.(c) Expected to be delivered on October 12, 2010.(d) The Countys Unlimited Tax Refunding Bonds, Series 2010 were sold on July 31, 2010 and are expected to

be delivered on August 31, 2010.


25/127

23

HOU:3051425.3

Estimated Overlapping Debt Statement

Other governmental entities whose boundaries overlap the County have outstanding bonds or other debt payablefrom ad valorem taxes levied against property within the County. The following statement of direct and estimatedoverlapping ad valorem tax debt was developed from information contained in Texas Municipal Reports,published by the Municipal Advisory Council of Texas. Except for the amounts relating to the County, the Countyhas not independently verified the accuracy or completeness of such information, and no person is entitled to relyupon such information as being accurate or complete. Furthermore, certain of the entities listed below may haveissued additional debt since the dates stated in this table, and such entities may have programs requiring the issuanceof substantial amounts of additional debt, the amount of which cannot be determined. Political subdivisionsoverlapping with the boundaries of the County are authorized by Texas law to levy and collect ad valorem taxes foroperation, maintenance and/or general revenue purposes in addition to taxes for payment of their debt, and some arepresently levying and collecting such taxes.

Gross Debt OverlappingTaxing Jurisdiction 5/31/2010 Percent Amount

Cleveland ISD $40,630,884 1.92% $780,113

Cleveland, City of $8,045,000 0.05% 4,023

Clovercreek MUD 1,530,000 100.00% 1,530,000

Conroe ISD 851,325,000 100.00% 851,325,000Conroe, City of 84,055,000 100.00% 84,055,000

Corinthian Point MUD #2 1,000,000 100.00% 1,000,000

E. Montgomery Co MUD #3 7,775,000 100.00% 7,775,000

East Plantation UD 3,500,000 100.00% 3,500,000

Far Hills UD 2,585,000 100.00% 2,585,000

Grand Oaks MUD 1,975,000 100.00% 1,975,000

Harris-Montgomery Co MUD # 386 21,230,000 9.19% 1,951,037

Houston, City of 2,978,575,265 0.21% 6,255,008

Kings Manor MUD 16,910,000 65.17% 11,020,247

Lazy River Improvement Dist 970,000 100.00% 970,000

Lone Star College System 439,290,000 23.35% 102,574,215

Magnolia ISD 171,683,881 100.00% 171,683,881Magnolia, City of 2,130,000 100.00% 2,130,000

Montgomery Co DD # 6 129,990 100.00% 129,990

Montgomery Co DD # 10 9,580,000 100.00% 9,580,000

Montgomery Co MUD # 7 7,350,000 100.00% 7,350,000




Montgomery Co MUD # 24 200,000 100.00% 200,000




Montgomery Co MUD # 46 109,020,000 100.00% 109,020,000Montgomery Co MUD # 47 37,050,000 100.00% 37,050,000









26/127

24

HOU:3051425.3

Gross Debt OverlappingTaxing Jurisdiction 5/31/2010 Percent Amount




Montgomery Co MUD # 99 3,200,000 100.00% 3,200,000Montgomery Co MUD # 107 9,460,000 100.00% 9,460,000


Montgomery Co UD # 2 6,545,000 100.00% 6,545,000

Montgomery Co UD # 3 685,000 100.00% 685,000

Montgomery Co UD # 4 1,565,000 100.00% 1,565,000

Montgomery WC&ID # 1 3,225,000 100.00% 3,225,000

Montgomery ISD 140,684,766 100.00% 140,684,766

Montgomery, City of 3,840,000 100.00% 3,840,000

New Caney ISD 205,705,492 97.43% 200,418,861

New Caney MUD 19,470,000 100.00% 19,470,000

Oak Ridge N, City of 7,645,000 100.00% 7,645,000

Panorama Village, City of 3,795,000 100.00% 3,795,000Point Aquarius MUD 11,205,000 100.00% 11,205,000

Porter MUD 12,535,000 100.00% 12,535,000

Rayford Rd MUD 28,345,000 100.00% 28,345,000

Richards ISD 120,000 26.37% 31,644

River Plantation MUD 205,000 100.00% 205,000

Roman Forest Cons MUD 1,775,000 100.00% 1,775,000

Roman Forest PUD # 4 765,000 100.00% 765,000

Shenandoah, City of 27,520,000 100.00% 27,520,000

Southern Montg Co MUD 10,510,000 100.00% 10,510,000

Splendora ISD 45,376,366 100.00% 45,376,366

Splendora, City of 3,200,000 100.00% 3,200,000

Spring Creek UD 24,415,000 100.00% 24,415,000Stanley Lake MUD 11,150,000 100.00% 11,150,000

Texas National MUD 975,000 100.00% 975,000

The Woodlands Metro Ctr ID 18,785,000 100.00% 18,785,000

The Woodlands MUD # 2 1,075,000 100.00% 1,075,000

The Woodlands RUD # 1 70,135,000 100.00% 70,135,000

Tomball ISD 254,815,000 8.53% 21,735,720

Valley Ranch MUD #1 4,700,000 100.00% 4,700,000

Willis ISD 83,441,426 98.10% 81,856,039

Willis, City of 5,755,000 100.00% 5,755,000

Woodbranch Village, City 133,000 100.00% 133,000

Total Estimated Overlapping Debt $2,407,096,989Montgomery County Direct Debt 471,545,000(a)

Total Direct and Estimated Overlapping Debt $2,878,641,989

______________________________(a) Includes the Certificates, the Pass-Through Toll Bonds, the Refunding Bonds and excludes the Refunded

Bonds.


27/127

25

HOU:3051425.3

Debt Ratios

Direct Debt

Direct andEstimated

OverlappingDebt

2010 Certified Taxable Assessed Valuation ($32,954,421,238) 1.432% 8.736%

2009 Certified Taxable Assessed Valuation ($32,645,245,355) 1.445% 8.818%Per Capita First Quarter 2010 Estimated Population (451,714) $1,043.90 $6,372.71

Other Obligations

The County has entered into various lease-purchase agreements for the purchase of heavy road equipment, policevehicles, animal control vehicles, two community buildings, and a countywide communication system consisting ofinfrastructure and equipment to effectively upgrade towers and radios for all first responders in the County.

Fiscal YearEnding

GeneralFund

SpecialRevenue Funds

TotalAll Funds

2010 $ 26,665 $ 86,354 $ 113,0192011 2,675,429 762,972 3,438,4012012 1,880,933 1,138,358 3,019,2912013 1,771,416 1,052,004 2,823,4202014 1,771,416 482,173 2,253,5892015 1,771,416 386,629 2,158,0452016 1,771,416 386,629 2,158,0452017 1,771,416 386,629 2,158,0452018 1,771,416 386,629 2,158,0452019 1,771,416 386,629 2,158,0452020 -0- 386,629 386,629

Total $16,982,939 $5,841,635 $22,824,574

In addition, in September of 2006, the Montgomery County Jail Financing Corporation (the Corporation) wascreated by the County to facilitate the construction of a jail facility. The Corporation issued $44.8 million LeaseRevenue Bonds in June of 2007. The jail facility was completed in June of 2008. The County has entered into alease-purchase agreement with the Corporation to purchase the jail facility and the County will make such leasepayments in part from anticipated revenues paid to the County under federal inmate housing contracts between theCounty and both the U.S. Marshal Service and Immigration and Customs Enforceme

mental-montgomery co co ser 2010a and b

Documents