LLANO COUNTY MUD #1 ROAD 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

LLANO COUNTY MUD #1 ROAD 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

LLANO COUNTY MUD #1 ROAD 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

LLANO COUNTY MUD #1 ROAD 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

LLANO COUNTY MUD #1 ROAD 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

LLANO COUNTY MUD #1 ROAD 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

LLANO COUNTY MUD #1 ROAD 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

LLANO COUNTY MUD #1 ROAD 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)

LLANO COUNTY MUD #1 ROAD 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

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

LLANO COUNTY MUD #1 Tax Rate Analysis for Bond Issue Estimate of Tax rate required to fund road project $2.6 $ %=.152 Tax AccountCurrent RateNew Rate(.152) V$ O&M Fire Streets & Lights Tax & Debt Total Average Taxable Home Value Llano County Mud 2011 $324,665= increase of $ if Bond proposal adopted

LLANO COUNTY MUD #1 ROAD 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 ) DECISION TO PLACE BOND ISSUE ON NOV BALLOT MADE BY 6/30/2012