Montgomery County Road Bonds Series 2008B

OFFICIAL STATEMENT DATED AUGUST 11, 2008
The delivery of the Bonds is subject to the opinion of Bond Counsel to the effect that, assuming continuing compliance by the County after
the date of such opinion with certain covenants described herein, interest on the Bonds during the Initial Rate Period is excludable from
gross income for federal income tax purposes under existing law and is not includable in the computation of alternative minimum taxable
income for individuals. See TAX MATTERS herein for a discussion of the opinion of Bond Counsel, including the alternative minimum
tax consequences for corporations.
NEW ISSUE: BOOK-ENTRY-ONLY
Ratings: Standard & Poors Ratings Services AA/A-1+

Moodys Investors Service Aa3/VMIG 1
$34,705,000
MONTGOMERY COUNTY, TEXAS
Unlimited Tax Adjustable Rate Road Bonds
Series 2008B
Dated: August 1, 2008
Interest to Accrue from Date of Delivery
Due: March 1, as shown on inside cover page

Initial Rate Period End: September 1, 2009
The $34,705,000 Montgomery County, Texas, Unlimited Tax Adjustable Rate Road Bonds, Series 2008B (the Bonds), are being issued
by the Commissioners Court of Montgomery County, Texas (the County) pursuant to the terms of an order adopted by the
Commissioners Court of the County. The Bonds are initially offered in various Initial Rate Period and bear interest at their respective
Initial Rates as indicated on the inside cover page hereof. See THE BONDS Determination of Interest Rates; Rate Mode Changes.
During the Initial Rate Period, interest on the Bonds will be paid on each March 1 and September 1, commencing September 1, 2008. See
THE BONDS Summary of Certain Provisions of the Bonds. The Bonds are issued only in fully registered form. The Bonds are issued
in denominations of $5,000 of principal amount or any integral multiple thereof.
The definitive Bonds will be initially registered and delivered only to Cede & Co., the nominee of The Depository Trust Company
(DTC) pursuant to the Book-Entry-Only System described herein. No physical delivery of the Bonds will be made to the beneficial
owners thereof. Principal of and interest on the Bonds will be payable by Regions Bank, Houston, Texas, the initial paying agent/registrar
(the Paying Agent/Registrar) to Cede & Co., which will make distribution of the amounts so paid to the participating members of DTC
for subsequent payment to the beneficial owners of the Bonds. See THE BONDS Book-Entry-Only System herein. Interest on the
Bonds during the Initial Rate Period is payable to the registered owners (initially Cede & Co.) appearing on the registration books of the
Paying Agent/Registrar on the business day next preceding each interest payment date. See THE BONDS Record Date.
The Bonds are subject to optional and mandatory redemption prior to maturity, in whole or from time to time in part, as described herein.
See THE BONDS Optional Redemption and Special Mandatory Redemption.
The Bonds are subject to mandatory tender upon on the first Business Day following the final day of the Initial Rate Period, and
Bondholders do not have the right to elect to retain their Bonds. After the Initial Rate Period, the Bonds are further subject to certain
mandatory and optional tender provisions as described herein. See THE BONDS Optional Tender and Tender Provisions. All
tenders are required to be made to the Tender Agent (the Tender Agent), initially Regions Bank, Houston, Texas. Tendered Bonds may
be remarketed and remain outstanding. Bonds tendered for purchase will be paid first from the proceeds of remarketing, if any, and second
from money furnished pursuant to a Standby Bond Purchase Agreement (the Liquidity Agreement) between the County and Bank of
America, N.A. (the Bank). See STANDBY BOND PURCHASE AGREEMENT and APPENDIX E Material Provisions of Standby
Bond Purchase Agreement.
The Liquidity Agreement does not constitute security or credit enhancement for the Bonds, but serves as a source of liquidity to
pay the purchase price of tendered Bonds only. Under certain circumstances, the obligation of the Bank to purchase Bonds may be
terminated without notice. See STANDBY BOND PURCHASE AGREEMENT and APPENDIX E Material Provisions of
Standby Bond Purchase Agreement Events of Default.
See Principal Amounts, Maturities, Interest Rates, and Prices on the Inside Cover Page
The Bonds are payable from an annual ad valorem tax levied on all taxable property in the County, without legal limit as to rate or amount.
See THE BONDS Source of Payment of the Bonds and TAXING PROCEDURES AND TAX BASE ANALYSIS Tax Rate
Limitations. Proceeds from the sale of the Bonds will be used for certain road improvements within the County and payment of the costs
of issuance of the Bonds. See PLAN OF FINANCE Purpose.
The Bonds are offered when, as and if issued by the County and accepted by the Underwriters, subject to the approving opinion of the
Attorney General of the State of Texas and the opinion of Fulbright & Jaworski L.L.P., Houston, Texas, Bond Counsel. Certain legal
matters will be passed upon for the County by Andrews Kurth LLP, Houston, Texas, Disclosure Counsel. Certain legal matters will be
passed upon for the Underwriters by Allen Boone Humphries Robinson LLP, Houston, Texas, Counsel for the Underwriters. It is expected
that the Bonds will be delivered through the facilities of DTC on or about August 18, 2008.
FIRST SOUTHWEST COMPANY

MORGAN STANLEY
HOU:2831731.4
GOLDMAN, SACHS & CO.
PRINCIPAL AMOUNTS, MATURITIES, INTEREST RATES AND PRICES

UNLIMITED TAX ADJUSTABLE RATE ROAD BONDS, SERIES 2008B
(Initial Rate Period Ending September 1, 2009)
$34,705,000 Term Bonds Due March 1, 2032, Interest Rate 3.00%, Price 101.225%, CUSIP 613681 H32(a)(b)(c)(d)
______________________________
(a)
Prior to conversion to a fixed rate, the Bonds are subject to redemption at par, at the option of the County,
as described herein. See THE BONDS Optional Redemption. The Bonds are also subject to
mandatory redemption by lot or other customary random selection method on March 1, 2031, in the
amount of $17,090,000. See THE BONDS Mandatory Redemption.
(b)
The Bonds will initially bear interest at the Initial Rates from the date of delivery for the Initial Rate Period
ending September 1, 2009. Thereafter, the Bonds will bear interest at a Term Rate determined by the
Remarketing Agent; provided, however, that the interest rate mode on the Bonds may be changed from
time to time to (a) a Weekly or Monthly Rate or back to a Term Rate (each an Adjustable Rate) or (b) a
Fixed Rate until maturity (as such terms are defined and described herein). Each Adjustable Rate after the
Initial Rate Period will be determined by the Remarketing Agent, initially First Southwest Company. In
no event will the interest rate borne by the Bonds exceed the lesser of (i) 6% per annum, or (ii) the
maximum net effective interest rate permitted under Chapter 1204, Texas Government Code, as amended.
See THE BONDS Determination of Interest Rates; Rate Mode Changes.
(c)
Initial yield represents the initial reoffering yield to the public to the end of the Initial Rate Period. Such
yields have been established by the Underwriters for public offerings and subsequently may be changed
from time to time in the sole discretion of the Underwriters.
(d)
CUSIP numbers have been assigned to the Bonds by Standard and Poors CUSIP Service Bureau, A
Division of the McGraw-Hill Companies, Inc., and are included solely for the convenience of the
registered owners of the Bonds. Neither the County, the Financial Advisor, nor the Underwriters are
responsible for the selection or correctness of the CUSIP numbers set forth herein.
HOU:2831731.4
COUNTY OFFICIALS
Elected Officials
Commissioners Court
Alan B. Sadler
County Judge
Mike Meador
Commissioner, Precinct 1
Craig Doyal
Ernest E. Chance
Ed Rinehart
Other Elected and Appointed Officials
Name
Position
J. R. Moore, Jr.
Tax Assessor - Collector
Martha N. Gustavsen
County Treasurer
Phyllis L. Martin
County Auditor
David Walker
County Attorney
Consultants and Advisors
Auditors............................................................................... Hereford, Lynch, Sellars, & Kirkham, PC, CPA

Conroe, Texas
Bond Counsel ..................................................................................................... Fulbright & Jaworski L.L.P.
Houston, Texas
Disclosure Counsel......................................................................................................... Andrews Kurth LLP
Houston, Texas
Financial Advisor ..................................................................................... RBC Capital Markets Corporation
Houston, Texas
HOU:2831731.4
No dealer, broker, salesman or other person has been authorized by the County or the Underwriters to give any
information or to make any representation, other than those contained in this Official Statement, and, if given or
made, such other information or representations must not be relied upon as having been authorized by the County or
the 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 which
such 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.
IN CONNECTION WITH THE OFFERING OF THE BONDS, THE UNDERWRITERS MAY OVER-ALLOT OR
EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE BONDS AT
A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
Any information and expressions of opinion herein contained are subject to change without notice, and neither the
delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create any
implication that there has been no change in the affairs of the County or other matters described herein since the date
hereof.
The Underwriters have provided the following sentence for inclusion in this Official Statement. The Underwriters
have reviewed the information in this Official Statement in accordance with, and as part of, their responsibilities to
investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the
Underwriters do not guarantee the accuracy or completeness of such information.
TABLE OF CONTENTS
Page
INTRODUCTION........................................................... 1
SALE AND DISTRIBUTION OF THE BONDS.......... 1
Sale of the Bonds....................................................... 1
Prices and Marketability............................................ 1
Securities Laws.......................................................... 1
Ratings ....................................................................... 2
OFFICIAL STATEMENT SUMMARY ....................... 3
SELECTED FINANCIAL INFORMATION ................ 5
PLAN OF FINANCE...................................................... 6
Purpose ...................................................................... 6
Use of Proceeds ......................................................... 6
THE BONDS................................................................... 6
General....................................................................... 6
Interest Rate Modes................................................... 8
Determination of Interest Rates; Rate Mode
Changes ............................................................... 8
Tender Provisions...................................................... 9
Summary of Certain Provisions of the Bonds ........ 10
Conversion to Fixed Rate........................................ 13
Record Date ............................................................. 13
Optional Redemption .............................................. 13
Mandatory Redemption........................................... 14
Special Mandatory Redemption.............................. 14
Book-Entry-Only System........................................ 14
Source of Payment of the Bonds............................. 16
Paying Agent/Registrar and Tender Agent............. 16
Transfer, Exchange and Registration...................... 16
Amendments............................................................ 17
Defeasance of Bonds............................................... 17
Bondholders Remedies .......................................... 17
Future Borrowing .................................................... 18
THE AGREEMENT ..................................................... 18
Background.............................................................. 18
Reimbursement by TxDOT..................................... 18
ii
HOU:2831731.4
Page
Potential Availability of Funds for Repayment of
the Bonds ........................................................... 19
STANDBY BOND PURCHASE AGREEMENT....... 19
General..................................................................... 19
CERTAIN INFORMATION CONCERNING THE
BANK...................................................................... 19
INVESTMENT AUTHORITY AND INVESTMENT
OBJECTIVES OF THE COUNTY ........................ 20
Legal Investments.................................................... 20
Investment Policies.................................................. 21
DEBT SERVICE REQUIREMENTS .......................... 23
COUNTY DEBT........................................................... 24
General..................................................................... 24
Indebtedness ............................................................ 24
Estimated Overlapping Debt Statement.................. 24
Debt Ratios .............................................................. 26
Other Obligations .................................................... 26
TAXING PROCEDURES AND TAX BASE
ANALYSIS ............................................................. 27
General..................................................................... 27
Property Tax Code and County-Wide Appraisal
District ............................................................... 27
Property Subject to Taxation by the County........... 27
Residential Homestead Exemptions ....................... 28
Freeport Goods and Goods-in-Transit Exemption . 28
Tax Abatement ........................................................ 28
Pollution Control ..................................................... 28
Valuation of Property for Taxation......................... 28
County and Taxpayer Remedies ............................. 29
Levy and Collection of Taxes ................................. 29
Countys Rights in the Event of Tax Delinquencies30
Tax Rate Limitations............................................... 30
Historical Analysis of Tax Collection..................... 31
Delinquent Tax Collection Procedures ................... 32
Tax Rate Distribution .............................................. 32

Analysis of Tax Base............................................... 32
Top Ten Principal Taxpayers.................................. 33
Tax Adequacy.......................................................... 33
SELECTED FINANCIAL DATA................................ 34
Historical Operations of the Countys General
Fund ................................................................... 34
Special Revenue Funds ........................................... 35
Debt Service Funds ................................................. 36
Pension Fund ........................................................... 36
THE COUNTY ............................................................. 37
Administration of the County ................................. 37
Commissioners Court............................................. 37
Consultants .............................................................. 37
TAX MATTERS........................................................... 37
Tax Exemption ........................................................ 37
Tax Accounting Treatment of Premium on Certain
Bonds ................................................................. 38
CONTINUING DISCLOSURE OF INFORMATION 38
Annual Reports........................................................ 39
Material Event Notices............................................ 39
Availability of Information from NRMSIR and

SID..................................................................... 40
Limitations and Amendments ................................. 40
Compliance with Prior Undertakings ..................... 40
OTHER CONSIDERATIONS ..................................... 41
Environmental Regulations..................................... 41
Air Quality............................................................... 41
GENERAL CONSIDERATIONS................................ 41
Sources and Compilation of Information................ 41
Updating of Official Statement ............................... 41
OTHER INFORMATION ............................................ 42
Litigation ................................................................. 42
Registration and Qualification of Bonds for Sale... 42
Legal Investments and Eligibility To Secure Public
Funds in Texas................................................... 42
Legal Opinions ........................................................ 42
Financial Advisor .................................................... 43
Forward-Looking Statements Disclaimer............... 43
Miscellaneous .......................................................... 43
Concluding Statement ............................................. 43
Appendix A - Economic and Demographic Information

Appendix B - Excerpts from Comprehensive Annual Financial Report of Montgomery County, Texas for the
Fiscal Year Ended September 30, 2007
Appendix C - Form of Legal Opinion
Appendix D - Material Provisions of Standby Bond Purchase Agreement
Appendix E - Pass-Through Toll Agreement
iii
HOU:2831731.4
INTRODUCTION
This Official Statement, which includes the Appendices hereto, provides certain information regarding the issuance
of $34,705,000 Montgomery County, Texas, Unlimited Tax Adjustable Rate Road Bonds, Series 2008B (the
Bonds). Capitalized terms used in this Official Statement have the same meanings assigned to such terms in the
order authorizing the issuance of the Bonds (the Bond Order), except as otherwise indicated herein. There follows
in this Official Statement descriptions of the Bonds and certain information regarding the County and its finances.
All descriptions of documents contained herein are only summaries and are qualified in their entirety by reference to
each such document. Copies of such documents may be obtained from the Countys Financial Advisor, RBC Capital
Markets Corporation, Houston, Texas.
This Official Statement contains, in part, estimates, assumptions and matters of opinion which are not intended as
statements of fact, and no representation is made as to the correctness of such estimates, assumptions or matters of
opinion, or as to the likelihood that they will be realized. However, the County has agreed to keep this Official
Statement current by amendment or sticker to reflect material changes in the affairs of the County and to the extent
that information actually comes to its attention, the other matters described in this Official Statement until delivery
of the Bonds 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 BONDS
Sale of the Bonds
First Southwest Company, Morgan Stanley and Goldman, Sachs & Co. (collectively, the Underwriters) have
agreed to purchase the Bonds from the County pursuant to a bond purchase agreement with the County for a price of
$35,026,021.25 (representing the par amount of the Bonds, plus a premium of $425,136.25, and less an
Underwriters discount of $104,115.00). The Underwriters obligation is to purchase all of the Bonds if any are
purchased.
Prices and Marketability
The delivery of the Bonds is conditioned upon the receipt by the County of a certificate executed and delivered by
the Underwriters on or before the date of delivery of the Bonds stating the prices at which a substantial amount of
the Bonds of each maturity have been sold to the public. For this purpose, the term public shall not include any
person who is a bondhouse, broker or similar person acting in the capacity of underwriter or wholesaler. The
County has no control over trading of the Bonds after a bona fide offering of the Bonds is made by the Underwriters
at the yields specified on the inside cover page hereof. Information concerning reoffering yields or prices is the
responsibility of the Underwriters.
The prices and other terms respecting the offering and sale of the Bonds may be changed from time to time by the
Underwriters after the Bonds are released for sale, and the Bonds may be offered and sold at prices other than the
initial offering prices, including sales to dealers who may sell the Bonds into investment accounts. IN
CONNECTION WITH THE OFFERING OF THE BONDS, THE UNDERWRITERS MAY OVER-ALLOT OR
EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE BONDS AT
A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
Securities Laws
No registration statement relating to the Bonds has been filed with the Securities and Exchange Commission under
the Securities Act of 1933, as amended, in reliance upon the exemptions provided therein. The Bonds have not been
registered or qualified under the Securities Act of Texas in reliance upon various exemptions contained therein; nor
have the Bonds been registered or qualified under the securities laws of any other jurisdiction. The County assumes
no responsibility for registration or qualification of the Bonds under the securities laws of any other jurisdiction in
which the Bonds may be offered, sold or otherwise transferred. This disclaimer of responsibility for registration or
qualification for sale or other disposition of the Bonds shall not be construed as an interpretation of any kind with
regard to the availability of any exemption from securities registration or qualification provisions in such other
jurisdictions.
1
HOU:2831731.4
Ratings
In connection with the sale of the Bonds, the County has made application to Moodys Investors Service, Inc.
(Moodys) and Standard & Poors Rating Services, A Division of The McGraw-Hill Companies, Inc. (S&P) for
underlying long term ratings on the Bonds, and the ratings of Aa3 and AA, respectively, will be assigned to the
Bonds. Additionally, the District has applied for short term ratings on the Bonds, and the Bonds will be rated
VMIG 1 by Moodys and A-1+ by S&P, based on the commitment of the Bank pursuant to the Liquidity
Agreement. An explanation of the significance of such ratings may be obtained from Moodys and S&P. The
ratings reflect only the 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 revised
downward 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 the Bonds.
[Remainder of page intentionally left blank]
2
HOU:2831731.4
OFFICIAL STATEMENT SUMMARY

The following material is a summary of certain information contained herein and is qualified in its entirety by the
detailed information and financial statements appearing elsewhere in this Official Statement. The reader should
refer particularly to sections that are indicated for more complete information.
The Issuer ...................................................... Montgomery County, Texas, a political subdivision of the State of
Texas. See THE COUNTY.
The Bonds...................................................... $34,705,000 Montgomery County, Texas, Unlimited Tax Adjustable
Rate Road Bonds, Series 2008B. The Bonds are dated August 1, 2008,
accrue interest from their date of initial delivery and are issued as term
bonds maturing on March 1, 2032. See THE BONDS General.
Payment of Interest........................................ During the Initial Rate Period ending on September 1, 2009, interest on
the Bonds will be paid on each March 1 and September 1, commencing
September 1, 2008. Thereafter, the interest rates on the Bonds may be
adjusted from time to time as described herein. See THE BONDS
Determination of Interest Rates; Rate Mode Changes and Summary
of Certain Provisions of the Bonds.
Optional Redemption..................................... Prior to conversion to a fixed rate, the Bonds are subject to redemption
at par, at the option of the County, as described herein. See THE
BONDS Optional Redemption.
Mandatory Redemption ................................. The Bonds are also subject to mandatory sinking fund redemption by
lot or other customary random selection method on March 1, 2031, in
the amount of 17,090,000.
See THE BONDS Mandatory
Redemption.
Special Mandatory Redemption .................... Under certain circumstances, Bonds held by the Bank may be subject
to special mandatory redemption as described herein. See THE
BONDS Special Mandatory Redemption.
Liquidity Agreement...................................... In order to provide for the payment of the purchase price of tendered
Bonds, the County has entered into the Liquidity Agreement with the
Bank. Subject to the conditions set forth in the Liquidity Agreement,
the Bank has agreed to purchase Bonds which are tendered to the
Tender Agent pursuant to the Bond Order (as defined herein) and are
not remarketed by the Remarketing Agent at a purchase price equal to
the principal amount thereof plus interest accrued thereon to the Tender
Date (the Purchase Price). See STANDBY BOND PURCHASE
AGREEMENT and APPENDIX D Material Provisions of Standby
Bond Purchase Agreement.
Paying Agent and Tender Agent.................... The initial Paying Agent/Registrar and Tender Agent is Regions Bank,
Houston, Texas. See THE BONDS Paying Agent/Registrar
Agreement and Tender Agent.
Source of Payment......................................... Principal of and interest on the Bonds are payable from the proceeds of
a continuing, direct annual ad valorem tax levied, without legal limit as
to rate or amount, against all taxable property in the County. See THE
BONDS Source of Payment of the Bonds and TAXING
PROCEDURES AND TAX BASE ANALYSIS Tax Rate
Limitations.
Authorization of the Bonds............................ The Bonds are being issued pursuant to an order authorizing issuance
of the Bonds adopted by the Montgomery County Commissioners
Court (the Bond Order) and the Texas Constitution and laws of the
State of Texas, including particularly Article III, Section 52 of the
3
HOU:2831731.4
Texas Constitution Chapters 1471, Texas Government Code, as

amended, and an election held in the County on September 10, 2005.
See THE BONDS Source of Payment of the Bonds.
Use of Proceeds ............................................. Proceeds from the sale of the Bonds will be used for certain County
road improvements and to pay the costs of issuance of the Bonds. See
PLAN OF FINANCE Purpose.
Tax Exemption .............................................. In the opinion of Bond Counsel, interest on the Bonds during the Initial
Rate Period is excludable from gross income for federal income tax
purposes under existing law prior to the respective first dates on which
there is a change of interest rate for which an opinion of nationally
recognized bond counsel is required under the Bond Order and is not
included in computing the alternative taxable income of individuals.
See TAX MATTERS Tax Exemption herein, including the
information regarding alternative minimum tax on corporations and the
requirement for an opinion of nationally recognized bond counsel in the
event of certain changes in interest rate modes.
Book-Entry-Only System .............................. The definitive Bonds will be initially registered and delivered only to
Cede & Co., the nominee of DTC pursuant to the Book-Entry-Only
System described herein. Beneficial ownership of the Bonds may be
acquired in denominations of $5,000 or integral multiples thereof. No
physical delivery of the Bonds will be made to the beneficial owners
thereof. See THE BONDS Book-Entry-Only System.
Payment Record............................................. The County has never defaulted on the timely payment of principal of
and interest on any of its outstanding debt.
Ratings........................................................... Moodys Investors Service, Inc. (Underlying) ............................Aa3
Standard & Poors Ratings Services (Underlying) .......................AA
Moodys Investors Service, Inc. (Short-Term) ..................... VMIG 1
Standard & Poors Ratings Services (Short-Term).................... A-1+
4
HOU:2831731.4
SELECTED FINANCIAL INFORMATION

(Unaudited)
2008 Preliminary Taxable Assessed Valuation.................................................................................................. $ 29,248,713,355(a)
(100% of Market Value as of January 1, 2008)
See TAXING PROCEDURES AND TAX BASE ANALYSIS
2007 Certified Taxable Assessed Valuation ...................................................................................................... $ 26,760,697,964(b)
Direct Debt:
Outstanding Direct Debt (as of August 15, 2008) .............................................................................. $
Plus: The Bonds ................................................................................................................................
324,171,529
34,705,000
Total Direct Debt ............................................................................................................................................... $
358,876,529
Estimated Overlapping Debt.............................................................................................................................. $
2,013,697,874
Total Direct and Estimated Overlapping Debt ................................................................................................... $
2,372,574,403
Interest & Sinking Fund Balance (as of June 30, 2008)..................................................................................... $
$11,529,661
Ratio of Direct Debt to..:
2008 Preliminary Taxable Assessed Valuation ($29,248,713,355) ..................

2007 Certified Taxable Assessed Valuation ($26,760,697,964).......................
2007 Estimated Population (412,638) .............................................................. $
1.23%
1.34%
869.71
Ratio of Direct and Estimated

Overlapping Debt to:
2008 Preliminary Taxable Assessed Valuation ($29,248,713,355) ..................
2007 Certified Taxable Assessed Valuation ($26,760,697,964).......................
2007 Estimated Population (412,638) .............................................................. $
8.11%
8.87%
5,749.77
Annual Debt
Service Requirements: Average (2008-2032) ....................................................................................... $
Maximum (2022) ............................................................................................. $
24,331,755
25,593,333
______________________________
(a)
No taxes will be levied on this preliminary value. The value will be certified by the Montgomery County
Appraisal Review Board and taxes will be levied on this certified value. The preliminary value is an estimate of
taxable assessed value and is subject to taxpayer protest.
(b)
Certified by the Montgomery Central Appraisal District (the Appraisal District).
5
HOU:2831731.4
OFFICIAL STATEMENT
Relating to
$34,705,000
UNLIMITED TAX ADJUSTABLE RATE ROAD BONDS
SERIES 2008B
PLAN OF FINANCE
Purpose
The County has entered into a Pass-Through Toll Agreement (the Agreement) with The Texas Department of
Transportation (the TxDOT) relating to the construction of improvements to four existing highways and the
construction and potential operation of a direct connector between two existing highways (collectively, the
Project). A copy of the Agreement is attached hereto as Appendix E. The Agreement provides, among other
things, for certain reimbursements by TxDOT to the County for the construction and operation of each portion of the
Project if such improvements are substantially completed in accordance with the Agreement and are open to the
public. See THE AGREEMENT. Payments from TxDOT to the County under the Agreement are not pledged to
the payment of the Bonds. Proceeds from the sale of the Bonds will be used to finance a portion of the Project and
to pay the costs of issuance of the Bonds.
Use of Proceeds
Sources of Funds
Par Amount
Net Reoffering Premium
Total Sources
$34,705,000.00
425,136.25
$35,130,136.25
Uses of Funds
Deposit to Construction Fund
Underwriters Discount
Costs of Issuance
Total Uses
$34,800,000.00
104,115.00
226,021.25
$35,130,136.25
THE BONDS
General
The following is a description of some of the terms and conditions of the Bonds, and is qualified in its entirety by
reference to the form of the Bonds contained in the Bond Order. A copy of the Bond Order may be obtained upon
request to the County.
During the Initial Rate Period, interest on the Bonds will be paid on each March 1 and September 1, commencing
September 1, 2008. Thereafter, the interest rates on the Bonds may be adjusted from time to time as described
herein. See THE BONDS Determination of Interest Rates; Rate Mode Changes. Interest on the Bonds accrues
from the date of delivery and is payable as described herein. See THE BONDS Summary of Certain Provisions
of the Bonds.
The Bonds will be initially registered and delivered only to The Depository Trust Company, New York, New York
(DTC) in its nominee name of Cede & Co., pursuant to the book-entry system described herein. No physical
delivery of the Bonds will be made to the beneficial owners thereof. Initially, principal of and interest on the Bonds
will be payable by the Paying Agent/Registrar to Cede & Co., as registered owner. DTC will make distribution of
amounts so paid to the participating members of DTC for subsequent payment to the beneficial owners of the Bonds.
See THE BONDS Book-Entry-Only System. Interest on the Bonds during the Initial Rate Period is payable to
the registered owners (initially Cede & Co.) appearing on the registration books of the Paying Agent/Registrar on
the business day next preceding each interest payment date. See THE BONDS Record Date.
6
HOU:2831731.4
In the event the Book-Entry-Only-System is discontinued, the Bonds may be transferred and exchanged on the bond
register kept by the Paying Agent/Registrar upon surrender and reissuance. The Bonds are exchangeable for an equal
principal amount of Bonds of the same maturity in any authorized denomination upon surrender of the Bonds to be
exchanged at the principal payment office of the Paying Agent/Registrar. No service charge will be made for any
transfer, but the County may require payment of a sum sufficient to cover any tax or governmental charge payable in
connection therewith.
Authorized Denominations. The Bonds are issued in denominations of $5,000 and integral multiples thereof;
provided, however that if the Bonds are in the Weekly Rate Period or the Monthly Rate Period, the minimum
denomination will be $100,000.
Calculation of Interest. Interest on the Bonds will be calculated on the basis of a 365-day or 366-day year, as
applicable, for the actual number of days elapsed while the Bonds bear interest at a Weekly Rate or Monthly Rate.
Interest will be calculated on the basis of a 360-day year of twelve 30-day months while the Bonds bear interest at
the Initial Rate or a Term Rate or Fixed Rate.
Interest Payment Methods. While the Bonds bear interest at a Weekly Rate or Monthly Rate, interest will be paid
(a) by check mailed to the registered owners, (b) at the written election of a registered owner delivered to the Paying
Agent/Registrar, by federal funds wire transfer within the continental United States or (c) by such other method
acceptable to the Paying Agent/Registrar requested by and at the risk and expense of the registered owner. While
the Bonds bear interest at the Initial Rate or a Term Rate or Fixed Rate, interest will be paid by check mailed to the
owner of record or by such other method acceptable to the Paying Agent/Registrar requested by and at the risk and
expense of the registered owner.
Interest Payment Dates. Interest on the Bonds will be paid as indicated in the table below under the heading
Summary of Certain Provisions of the Bonds. During the Initial Rate Period, interest on the Bonds will be paid on
each March 1 and September 1, commencing September 1, 2008. While Bonds bear interest at a Weekly Rate or
Monthly Rate, interest will be paid on the first Business Day of each calendar month in an amount equal to the
interest accrued from and including the last Interest Payment Date to and including the day immediately preceding
the next following Interest Payment Date. While Bonds bear interest at the Term Rate, interest will be paid on
March 1 and September 1, commencing on the first such date occurring after the Term Rate Conversion Date.
While the Bonds bear interest at the Fixed Rate, interest will be paid on each March 1 and September 1, beginning
on the first such date occurring after the Fixed Rate Conversion Date.
Tender Agent. Regions Bank, Houston, Texas, will serve as Tender Agent for the Bonds. All notices and
certificates required to be delivered to the Tender Agent shall be delivered to Regions Bank, Houston, Texas, 1717
St. James Place, Suite 500, Houston, Texas 77056 Attn: Corporate Trust Department. In the event that the BookEntry-Only System herein is discontinued and registered Bonds are issued, all notices and Bonds are required to be
delivered to Regions Bank, Houston, Texas, 1717 St. James Place, Suite 500, Houston, Texas 77056 Attn:
Corporate Trust Department..
Remarketing Agent. First Southwest Company has been appointed to serve as the initial remarketing agent (the
Remarketing Agent) for the Bonds. First Southwest Company may be removed as Remarketing Agent at the
Countys discretion and a successor may be appointed in accordance with the Bond Order.
The Remarketing Agreement can terminate its obligation to remarket the Bonds under certain conditions, including:
(i) the Countys failure to comply with the covenants and agreements contained in the Remarketing Agreement or to
comply with its continuing disclosure obligations, (ii) failure to provide notice of redemption for Bonds to be
remarketed, (iii) there has occurred an Event of Default (as such term is defined in the Remarketing Agreement),
(iv) the occurrence of any of the following (as more fully described in the Remarketing Agreement) that would
prevent the remarketing of the Bonds: (A) administrative actions, (B) force majeure, (C) failure of the County to
update required disclosure materials, (D) failure by the Bank to provide liquidity as required, (E) a determination
that the Bonds are taxable under federal law (F) and certain ratings downgrades. For a more complete description of
the obligations of the Remarketing Agent with respect to the remarketing of the Bonds, contact the County Auditors
office or the Countys Financial Advisor, RBC Capital Market Corporation, First City Tower, Suite 1200, 1001
Fannin, Houston, Texas 77002.
7
HOU:2831731.4
Interest Rate Modes

Subsequent to the Initial Rate Period and prior to conversion of the interest rate on the Bonds to a Fixed Rate, the
Bonds may bear interest at an Adjustable Rate effective for periods selected or approved by the County
(Adjustable Rate Periods). The rate of interest to be borne by the Bonds during any particular Rate Period will be
determined by the Remarketing Agent as described below under Determination of Interest Rates; Rate Mode
Changes. The Bonds may bear interest as follows:
Adjustable Rate Modes. The Bonds may bear interest at an Adjustable Rate to be determined by the Remarketing
Agent, in accordance with the Bond Order, or at a Weekly Rate, a Monthly Rate, or a Term Rate as follows:
Weekly Rate. While the Bonds bear interest at a Weekly Rate, the interest rate on the Bonds will be determined
weekly each Wednesday, which rate will be effective for a seven-day period commencing on the immediately
following Thursday; provided, however that upon a conversion from a Weekly Rate to a different Rate Period, the
last Weekly Rate period shall end on the last day prior to such conversion.
Monthly Rate. While the Bonds bear interest at a Monthly Rate, the interest rate on the Bonds will be determined
monthly, on the Business Day immediately preceding the commencement date of the Monthly Rate Period and such
rate will be effective for a one-month period commencing on the first Business Day of a calendar month.
Term Rate. While the Bonds bear interest at a Term Rate, the interest rate will be determined not less than five (5)
Business Days prior to the commencement of each Term Rate Period. Such rate shall be effective for the duration of
the Term Rate Period (one year or more, terminating on a designated September 1 or at the maturity date of the
Bonds).
The interest rate mode selected by the County will remain in effect until changed by the County by notice to the
Paying Agent/Registrar, the Tender Agent and the Remarketing Agent in accordance with the Bond Order. Notice
of changes in interest rate modes will be given as described below. See - Determination of Interest Rates; Rate
Mode Change.
Determination of Interest Rates; Rate Mode Changes
Initial Rates. The Bonds will bear interest at the Initial Rate for the Initial Rate Period, beginning on the date of
initial authentication and delivery thereof and ending on the dates indicated on the inside cover page hereof (the
Initial Rate Period). Interest on the Bonds during the Initial Rate Period will accrue and be payable in the same
manner as Bonds in a Term Rate Period. Following the Initial Rate Period, the Bonds will bear interest at a Term
Rate or Term Rates as determined by the Remarketing Agent, unless the mode is changed prior to conversion to
another Adjustable Rate or a Fixed Rate, in the manner described below.
Rate Mode Changes after Initial Rate Period. While the Bonds bear interest at an Adjustable Rate, the Paying
Agent/Registrar is required to give notice to the registered owners of Bonds of the conversion from one interest rate
mode to another at the times described below in the table under the caption Summary of Certain Provisions of the
Bonds. Each notice of a change between interest rate modes will be sent by first class mail or other customary
method to each registered owners address as it appears in the registration books of the Paying Agent/Registrar and
will state: (a) the proposed Conversion Date and the Rate Period to which the conversion will be made; (b) the dates
by which the Remarketing Agent will determine and the Paying Agent/Registrar will notify the Owners of the
Adjustable Rate for the Adjustable Rate Period commencing on the Conversion Date; (c) in the case of a Fixed Rate
Conversion, the matters required to be stated by the Bond Order in the event of a Fixed Rate Conversion;
(d) whether the Bonds to be converted will be subject to mandatory tender for purchase on the Conversion Date and
the time at which the Bonds are to be tendered for purchase; (e) the date and time by which any notice of a tender or
of an election to retain Bonds must be received; and (f) if appropriate, the matters required to be stated in notices of
election to retain Bonds.
Any conversion (a) from a Weekly Rate Period or Monthly Rate Period to a Term Rate Period; (b) from a Term Rate
Period to a Weekly Rate Period or Monthly Rate Period; (c) from a Term Rate Period of one year to a different
Term Rate Period; (d) from the Initial Rate Period to any Adjustable Rate Period; or (e) from any Adjustable Rate
(including the Initial Rate) to a Fixed Rate will be conditioned on delivery of an opinion of nationally recognized
Bond Counsel to the effect that the conversion will not adversely affect the excludability of interest on the Bonds
from gross income of the owners thereof for federal income tax purposes. Conversion of interest rate modes must
take place only on an interest payment date for the interest rate mode then in effect. While in a Term Rate mode,
Bonds may be converted to a different interest rate mode only at the expiration of a Term Rate Period.
8
HOU:2831731.4
Any registered owner of Bonds who may be unable to take timely action on any notice as described above or
otherwise herein and in the Bond Order should consider whether to make arrangements for another person
to act in his or her stead.
Determination of Interest Rates. During each Rate Period after the Initial Rate Period, the rate of interest on the
Bonds will be the rate that the Remarketing Agent determines, under prevailing market conditions on the date of
such determination, would allow the Remarketing Agent to sell the Bonds at par.
The determination by the Remarketing Agent of the rates to be borne by the Bonds will be conclusive and binding
on the holders of the Bonds, the County, the Paying Agent/Registrar, the Tender Agent, and the Bank. Failure by
the Paying Agent/Registrar to give notice to the Bond Holders, or any defect therein, will not affect the interest rate
borne by the Bonds or the rights of the owners thereof. In the event that the Remarketing Agent fails to determine
the rates for any reason, the rates will continue to be such rate or rates in effect for the then current Interest Rate
Period. In no event will the interest rate borne by the Bonds exceed the lesser of (i) 6% per annum, or (ii) the
maximum net effective interest rate permitted under Chapter 1204, Texas Government Code, as amended.
Notice of Rates. Registered owners will be notified by first-class mail or other customary method of the Adjustable
Rate applicable to the Bonds at the times described below in the table under the subcaption Summary of Certain
Provisions of the Bonds.
Tender Provisions
In order to provide for the payment of the Purchase Price (as defined below) of tendered Bonds, the County has
entered into a Standby Bond Purchase Agreement (the Liquidity Agreement), with Bank of America, N.A. (the
Bank). Subject to the conditions set forth in the Liquidity Agreement, the Bank has agreed to purchase Bonds
which are tendered to the Tender Agent pursuant to the Bond Order and are not remarketed by the Remarketing
Agent at a purchase price equal to the principal amount thereof plus interest accrued thereon to the Tender Date (the
Purchase Price). See STANDBY BOND PURCHASE AGREEMENT and APPENDIX D Material
Provisions of Standby Bond Purchase Agreement.
THE OBLIGATION OF THE BANK TO PURCHASE TENDERED BONDS MAY BE TERMINATED
WITHOUT NOTICE. See APPENDIX D Material Provisions of Standby Bond Purchase Agreement.
Optional Tender. So long as the Bank is obligated to purchase Bonds pursuant to the Liquidity Agreement, while
the Bonds bear interest at a Weekly Rate or a Monthly Rate, the registered owners of the Bonds may tender their
Bonds to the Tender Agent for purchase at the Purchase Price as summarized below in the table under the caption
Summary of Certain Provisions of the Bonds. The Bonds are not subject to optional tender during the Initial Rate
Period.
Payment of the Purchase Price of Bonds to be purchased upon optional tender as described herein will be made by
the Tender Agent at its designated office or by bank wire transfer in immediately available funds.
Interest on any Bond that the registered owner thereof has elected to tender for purchase and that is not tendered on
the tender date, but for which there has been irrevocably deposited with the Tender Agent an amount sufficient to
pay the Purchase Price thereof, will cease to accrue interest on the tender date. The registered owner of such
untendered Bond will not be entitled to any payment other than the Purchase Price for such Bond, and such
untendered Bond will no longer be outstanding or entitled to the benefits of the Bond Order, except for the payment
of the Purchase Price thereof from money held by the Tender Agent for such payment. On the optional tender date,
the Tender Agent is required to authenticate and deliver substitute Bonds in lieu of such untendered Bonds.
Mandatory Tender. The Bonds are required to be tendered on the first Business Day following the final day of the
Initial Rate Period and of each Term Rate Period. Registered owners have no right to retain their Bonds on such
mandatory tender dates.
In addition, the Bonds are required to be tendered on the effective date of any change between interest rate modes,
subject, however, to the right of registered owners to elect to retain their Bonds as described below in the table under
the subcaption Summary of Certain Provisions of the Bonds. Any registered owner electing to retain Bonds will
have no right to tender such Bonds prior to the effective date of the change to a different interest rate mode, and such
election to retain will be irrevocable and binding upon the registered owner and all subsequent registered owners of
such Bonds.
9
HOU:2831731.4
The Bonds are also required to be tendered for purchase to the Tender Agent on the Fixed Rate Conversion Date as
described below under Conversion to Fixed Rate or upon the occurrence of an event of default under the Liquidity
Agreement. Owners of Bonds do not have the right to elect to retain their Bonds on the Fixed Rate Conversion Date
or upon the occurrence of an event of default under the Liquidity Agreement.
So long as the Bank is obligated to purchase Bonds pursuant to the Liquidity Agreement, subsequent to the Initial
Rate Period and at all times prior to conversion to a Fixed Rate while the Bonds bear interest at an Adjustable Rate,
the Bonds will be subject to mandatory purchase at the Purchase Price on the last Business Day prior to (a) the
expiration of the Liquidity Agreement on August 15, 2010, or such other date as set forth in a renewal or extension
thereof or (b) the substitution of a new Bank; provided, however, that the registered owners may elect to retain their
Bonds as described in the next paragraph; and provided further that no such tender and purchase will be required if
prior to the date of the tender notice described in the next paragraph the Liquidity Agreement is renewed or the
Paying Agent/Registrar has received confirmation from Standard & Poors or Moodys to the effect that the ratings
assigned by any of such agencies to the Bonds will not be lowered, suspended or withdrawn as a result of the
substitution of a new Bank. In the event that no mandatory tender is required as provided in the preceding sentence,
the Paying Agent/Registrar must, upon receipt of the written confirmation required from Moodys or S&P, promptly
mail a written notice to the Owners of the Bonds, which notice shall specify (i) the effective date of the Substitute
Liquidity Facility and (ii) the identity of the provider under the Substitute Liquidity Facility.
The Paying Agent/Registrar is required to give notice of mandatory tender to the registered owners of the Bonds that
are subject to mandatory tender as a result of the substitution of a new Bank. Such notice is required to be mailed
not less than 30 calendar days prior to the mandatory tender date. Any registered owner may elect to retain his
Bonds by delivering written notice thereof to the Tender Agent not less than 15 calendar days prior to the mandatory
tender date in accordance with the Bond Order which, among other things, requires that the registered owner state
that he is aware of the fact that after substitution of the Liquidity Agreement that, the rating or ratings assigned to
the Bonds may be lowered, suspended or withdrawn. See - Summary of Certain Provisions of the Bonds.
PURSUANT TO THE TERMS OF THE LIQUIDITY AGREEMENT, UPON THE OCCURRENCE AND
CONTINUATION OF AN EVENT OF TERMINATION UNDER THE LIQUIDITY AGREEMENT, THE
OBLIGATION OF THE BANK TO PURCHASE TENDERED BONDS SHALL AUTOMATICALLY
TERMINATE WITHOUT NOTICE AND OWNERS SHALL NOT THEREAFTER HAVE THE RIGHT TO
TENDER BONDS FOR PURCHASE BY THE TENDER AGENT. See APPENDIX D Material Provisions of
Standby Bond Purchase Agreement.
Payment of the Purchase Price of Bonds to be purchased upon mandatory tender as described herein will be made to
the Tender Agent by the Bank at its designated office or by wire transfer in immediately available funds.
Interest on any Bond that the registered owner has not elected to continue to own after a mandatory tender date and
that is not tendered on the mandatory tender date, but for which there has been irrevocably deposited with the
Tender Agent an amount sufficient to pay the Purchase Price thereof, will cease to accrue interest on the mandatory
tender date. Thereafter, the registered owner of such Bond will not be entitled to any payment other than the
Purchase Price for such Bond from money held by the Tender Agent for such payment, and such Bond will not
otherwise be outstanding or entitled to the benefits of the Bond Order. On the mandatory tender date, the Tender
Agent will authenticate and deliver substitute Bonds in lieu of such untendered Bonds.
Remarketing and Purchase. In the event a Bond Holder exercises its right to optionally tender its Bonds, or if any
Bonds become subject to mandatory tender, the Remarketing Agent is required to use its best efforts to sell such
Bonds at a price equal to 100% of the principal amount thereof plus accrued interest, if any, on the forthcoming
optional or mandatory tender date.
The Purchase Price of Bonds tendered for purchase is required to be paid by the Tender Agent from the following
sources in the order of priority indicated: (a) first, from money derived from the remarketing of such Bonds by the
Remarketing Agent; and (b) second, from money derived from the Liquidity Agreement. If sufficient funds are not
available for the purchase of all tendered Bonds, no purchase will be consummated.
Summary of Certain Provisions of the Bonds
The table below summarizes the following information with respect to Bonds bearing interest at a Weekly, Monthly,
or Term Rate:
1. the dates on which interest will be paid (the Interest Payment Dates),
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HOU:2831731.4
2. the date each interest rate will be determined (the Rate Determination Date),
3. the date each interest rate will become effective (the Effective Date of Rate),
4. the period of time each interest rate will be in effect (the Rate Period),
5. the requirements for notice to registered owners of interest rate adjustments (the Written Notice of Rate),
6. the dates on which registered owners may tender their Bonds for purchase to the Tender Agent and the notice
requirements therefor (the Optional Tender Dates; Owners Notice of Optional Tender),
7. the requirements for physical delivery of tendered Bonds and payment provision therefor (Physical Delivery of
and Payment for Bonds Subject to Optional and Mandatory Tender),
8. the notice requirements in order to change from one interest rate mode to a different interest rate mode (Written
Notice of Rate Mode Change),
9. the date on which Bonds are subject to mandatory tender for purchase in the event of a change from one interest
rate mode to a different interest rate mode (Mandatory Tender Date Upon Rate Mode Change), and
10. the provisions relating to each registered owners right to elect to retain his or her Bonds in the event the Bonds
are subject to mandatory tender as described above (the Owners Election to Retain Bonds Upon Rate Mode
Change upon Conversion).
All times shown are New York City time. A Business Day is defined in the Bond Order to be a day on which
banks located in New York, New York and Houston, Texas are not required or authorized by law or executive order
to close for business and a day on which the New York Stock Exchange is not closed. Any payments required to be
made on any day which is not a Business Day may be made instead on the next succeeding Business Day, and no
interest shall accrue on such payments in the interim.
11
HOU:2831731.4
Weekly Rate*
Monthly Rate*
Term Rate*
Interest Payment Dates
First Business Day of each

calendar month.

calendar month.
Rate Determination Date
By 12:00 Noon Wednesday,

or if Wednesday is not a
Business Day, the Business
Day immediately preceding
the Effective Date of Rate.
Thursday following each Rate
Determination Date; Weekly
Rate effective through
Wednesday of next week.
Monthly Rate determined by

12:00 Noon on Business Day
immediately preceding
Effective Date of Rate.
Written Notice of Rate
Paying Agent/Registrar to
mail owner monthly
confirmation statement within
7 Business Days after Interest
Payment Date.
mail owner notice of Monthly
Rate promptly after Rate
Determination Date.
Optional
Tender
Dates;
Owners Notice of Optional
Tender
On any Business Day not later

than the last day of the
Weekly Rate Period; written
notice to Tender Agent by
owner at or prior to 3:00 p.m.
on any Business Day not less
than 7 days prior to optional
tender date.
To Tender Agent by 5:00 p.m.
on Business Day prior to
designated purchase date;
payment by 2:00 p.m. on
designated purchase date.
Any Interest Payment Date;

written notice to Tender
Agent by owner at or prior to
3:00 p.m. on any Business
Day at least 7 Business Days
prior to optional tender date.

If change to Monthly or
longer rate, Paying
Agent/Registrar to mail
owners notice at least 20 days
prior to Effective Date of Rate
Mode Change.
Effective Date of Rate Mode
Change.
Change to Weekly from
Monthly or longer rate: owner
may elect to retain Bonds
upon written notice delivered
to Tender Agent no later than
3:00 p.m. on Business Day at
least 15 days prior to
None.

mail notice to owners at least
20 days prior to Effective
Date of Rate Mode Change.
Not applicable (Bonds subject

to mandatory tender on first
Business Day following the
final day of the Initial Rate
Period and of each Term Rate
Period no right to retain).
mail notice to owners at least
20 days prior to Effective
Date of Rate Mode Change.

Change.
Change to Monthly from any
mode: owner may elect to
retain Bonds upon written
notice delivered to Tender
Agent no later than 3:00 p.m.
on Business Day at least 15
days prior to Effective Date of
Rate.
None.

Change.
Change to Term from any
mode: owner may elect to
retain Bonds upon written
notice delivered to Tender
Agent no later than 3:00 p.m.
on Business Day at least 15
days prior to Effective Date of
Rate.
None.
Effective Date of Rate; Rate

Period/Rate Period
Physical Delivery of and

Payment of Bonds Subject to
Optional Tender
Physical Delivery of and

Payment of Bonds Subject to
Mandatory Tender
Written Notice of Rate Mode

Change
Mandatory Tender Date upon

Rate Mode Change
Owners Election to Retain
upon Rate Mode Change upon
Conversion
Owners Right to Retain upon

Fixed Rate Conversion
* All times referenced or shown are New York City times.
12
HOU:2831731.4

calendar month; Monthly Rate
effective until first Business
Day of next calendar month.

March 1 and September 1

commencing on the first to
occur.
Term Rate determined by
12:00 Noon not less than 5
days immediately preceding
First calendar day of each
Term Rate Period; Term Rate
effective until designated
September 1 (one or more
whole years).
Conversion to Fixed Rate

The Bond Order provides that the County has the right to convert one or more Stated Maturities of the then
outstanding Bonds to a Fixed Rate or Rates. In determining the Fixed Rates on the Bonds to be converted on the
Fixed Rate Conversion Date, the Remarketing Agent shall determine the rates for such converted Bonds which will
cause such Bonds to have a market value, net of costs of issuance and remarketing fees, equal to the principal
amount of said Bonds.
To exercise its option, the County must deliver to the Paying Agent/Registrar, the Remarketing Agent, the Tender
Agent and the Bank written notice not less than 30 calendar days prior to the Interest Payment Date on which the
Fixed Rate Mode is to become effective (the Fixed Rate Conversion Date). Subject to the following
qualifications, the County will determine the redemption provisions and the serial or term maturity dates which shall
apply to the Bonds following the Fixed Rate Conversion Date and give notice of such terms to the Paying
Agent/Registrar. The maturities will be determined on the basis of providing approximately level debt service
payments on the Bonds. In addition, the County must deliver to the Paying Agent/Registrar prior to the Fixed Rate
Mode Conversion Date an opinion of nationally recognized Bond Counsel to the effect that the conversion to the
Fixed Rate Mode is authorized under the provisions of the Bond Order and will not adversely affect the exclusion of
interest on the Bonds from gross income of the owners thereof for federal income tax purposes.
The Paying Agent/Registrar is required to give notice by mail to all registered owners of the conversion to a Fixed
Rate Mode not less than 15 calendar days prior to the Fixed Rate Conversion Date. Such notice is required to
(a) specify the Fixed Rate Conversion Date and the dates by which the County will determine and the Paying
Agent/Registrar will notify the registered owners of the Fixed Rate and (b) state that the Bonds will be subject to
mandatory tender for purchase on the Fixed Rate Conversion Date without the right of the Owners to retain their
Bonds.
On or before 12:00 noon, New York City time, on the Business Day preceding the Fixed Rate Conversion Date, the
Remarketing Agent will, in consultation with and subject to the approval of the County, determine the Fixed Rate or
Rates and give notice thereof to the Paying Agent/Registrar. The Paying Agent/Registrar will then give notice of
such Fixed Rate or Rates by first class mail to the Tender Agent and the registered owners of the Bonds.
After the Fixed Rate Conversion Date, the registered owners will have no right to tender their Bonds for
purchase.
Record Date
The Record date for registered owners means (i) with respect to Bonds bearing interest at a Weekly or Monthly
Rate, and during the Initial Rate Period, the close of business on the Business Day immediately preceding an Interest
Payment Date, (ii) with respect to Bonds bearing interest at a Term Rate (other than the Initial Rate Period), the
close of business on the 15th calendar day of the month immediately preceding an Interest Payment Date, and (iii)
with respect to Bonds bearing interest at a Fixed Rate, the last Business Day of the month preceding an Interest
Payment Date.
Optional Redemption
Bonds bearing interest at a Weekly Rate or a Monthly Rate are subject to redemption at the option of the County on
any Interest Payment Date, in whole or in part, at a redemption price equal to the principal amount thereof, plus
accrued interest to the redemption date. Bonds bearing interest at the Initial Rate or a Term Rate are subject to
redemption at the option of the County on the last day of the Initial Rate Period or the Term Rate Period, in whole or
in part, at a redemption price equal to the principal amount thereof, plus accrued interest to the redemption date.
After conversion to a Fixed Rate, the Bonds are subject to redemption at the option of the County, in whole or in
part, on the dates and at the redemption prices determined by the County on the Fixed Rate Conversion Date.
The Paying Agent/Registrar is required to cause notice of any redemption of Bonds to be mailed to each registered
owner of Bonds to be redeemed at the respective addresses appearing in the registration books for the Bonds.
Notice of redemption is required to (i) be mailed at least 10 days prior to the redemption date with respect to Bonds
bearing interest at Weekly or Monthly Rates and at least 30 calendar days prior to the redemption date with respect
to Bonds bearing interest at Term Rates or at a Fixed Rate; (ii) identify the Bonds to be redeemed (specifying the
numbers assigned to the Bonds); (iii) specify the redemption date and the redemption price; and (iv) state that (a) on
the redemption date the Bonds called for redemption will be payable at the designated office of the Paying
Agent/Registrar, (b) such redemption will only occur if on the redemption date, funds are available to pay the
13
HOU:2831731.4
redemption price, and (c) on and after the redemption date interest will cease to accrue. If notice of redemption is
given as described above and if due provision for the payment of the redemption price is made, then the Bonds that
are to be redeemed thereby will automatically be deemed to have been redeemed prior to their scheduled maturities,
and will not bear interest after the redemption date, nor will they be regarded as being outstanding except for the
right of the registered owner thereof to receive the redemption price from the Paying Agent/Registrar.
Mandatory Redemption
Bonds maturing on March 1, 2032, are subject to mandatory redemption prior to maturity in the principal amounts
and on the redemption dates set out below, at a price equal to such principal amounts plus accrued interest from the
most recent interest payment date to such redemption dates:
Redemption Date
(March 1)
2031
2032 (Maturity)
Principal
Amount
$17,090,000
17,615,000
Such Bonds to be redeemed shall be selected by lot from and among the Bonds of such maturity then subject to
redemption. The County, at its option, may credit against any mandatory sinking fund redemption requirement
Bonds of the maturity then subject to redemption which have been purchased and canceled by the County or have
been redeemed and theretofore applied as a credit against any mandatory sinking fund redemption requirement.
Special Mandatory Redemption
Pursuant to the Bond Order, under certain circumstances Bonds held by the Bank may be subject to special
mandatory redemption. Such Purchased Bonds shall be redeemed in equal semiannual installments of principal due
and payable on each Amortization Payment Date together with the interest then accrued through the 7th anniversary
of the Amortization Start Date.
Book-Entry-Only System
This section describes how ownership of the Bonds is to be transferred and how the principal of, premium, if any,
and interest on the Bonds are to be paid to and credited by The Depository Trust Company(DTC), New York,
New York, while the Bonds 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 the
Bonds, 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 Bonds), 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 Bonds. The Bonds will be issued as fully-registered securities
registered in the name of Cede & Co. (DTCs partnership nominee) or such other name as may be requested by an
authorized representative of DTC. One fully-registered certificate will be issued for each maturity of the Bonds 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 the
Federal 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 of
1934. 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 DTCs
participants (Direct Participants) deposit with DTC. DTC also facilitates the post-trade settlement among Direct
Participants of sales and other securities transactions in deposited securities, through electronic computerized book
entry transfers and pledges between Direct Participants accounts. This eliminates the need for physical movement
of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks,
14
HOU:2831731.4
trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The
Depository Trust & Clearing Corporation (DTCC). DTCC is the holding company for DTC, National Securities
Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC
is 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 clear
through or maintain a custodial relationship with a Direct Participant, either directly or indirectly (Indirect
Participants). DTC has Standard & Poors highest rating: AAA. The DTC Rules applicable to its Participants are on
file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com
and www.dtc.org.
Purchases of Bonds under the DTC system must be made by or through Direct Participants, which will receive a
credit for the Bonds on DTCs records. The ownership interest of each actual purchaser of each Bond (Beneficial
Owner) is in turn to be recorded on the Direct and Indirect Participants records. Beneficial Owners will not receive
written confirmation from DTC of their purchase.
Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as
well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial
Owner entered into the transaction.
Transfers of ownership interests in the Bonds are to be accomplished by entries made on the books of Direct or
Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates
representing their ownership interests in the Bonds, except in the event that use of the book-entry system for the
Bonds is discontinued.
To facilitate subsequent transfers, all Bonds deposited by Direct Participants with DTC are registered in the name of
DTCs partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of
DTC. The deposit of Bonds with DTC and their registration in the name of Cede & Co., or such other DTC
nominee, do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners
of the Bonds; DTCs records reflect only the identity of the Direct Participants to whose accounts such Bonds are
credited, which may or may not be the Beneficial Owners. The Participants will remain 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 Indirect
Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by
arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time.
Beneficial Owners of Bonds may wish to take certain steps to augment the transmission to them of notices of
significant events with respect to the Bonds, such as redemptions, tenders, defaults, and proposed amendments to the
Bond documents. For example, Beneficial Owners of Bonds may wish to ascertain that the nominee holding the
Bonds for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial
Owners may wish to provide their names and addresses to the Paying Agent/Registrar and request that copies of
notices be provided directly to them.
Redemption notices shall be sent to DTC. If less than all of the Bonds 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 be redeemed.
Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to the Bonds unless
authorized by a Direct Participant in accordance with DTCs Procedures. Under its usual procedures, DTC mails 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 Bonds are credited on the record date
(identified in a listing attached to the Omnibus Proxy).
Principal, premium, if any, redemption proceeds and interest payments on the Bonds will be made to Cede & Co., or
such other nominee as may be requested by an authorized representative of DTC. DTCs practice is to credit Direct
Participants accounts upon DTCs receipt of funds and corresponding detail information from the County or the
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, and
will be the responsibility of such Participant and not of DTC nor its nominee, the Paying Agent/Registrar, or the
County, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of
principal, premium, if any, redemption proceeds and interest payments to Cede & Co. (or such other nominee as
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may be requested by an authorized representative of DTC) is the responsibility of the County or the Paying
Agent/Registrar, disbursement of such payments to Direct Participants will be the responsibility of DTC, and
disbursement 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 Bonds at any time by giving
reasonable notice to the County. Under such circumstances, in the event that a successor securities depository is not
obtained, Bonds 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 successor
securities depository). In that event, Bonds will be printed and delivered in accordance with the Order. In reading
this Official Statement it should be understood that while the Bonds are in the Book-Entry-Only System, references
in other sections of this Official Statement to registered owners should be read to include the person for which the
Participant acquires an interest in the Bonds, but (i) all rights of ownership must be exercised through DTC and the
Book-Entry-Only System, and (ii) except as described above, notices that are to be given 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 Bonds are in the Book-Entry-Only System,
references in other sections of this Official Statement to registered owners should be read to include the person for
which the Participant acquires an interest in the Bonds, but (i) all rights of ownership must be exercised through
DTC and the Book-Entry-Only System, and (ii) except as described above, notices that are to be given 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 guaranteed
as 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 Bonds will be issued to the registered owners
and the Bonds will be subject to transfer, exchange and registration provisions as set forth in the Order and
summarized under Transfer, Exchange and Registration below.
Source of Payment of the Bonds
The Bonds are payable from the proceeds of a continuing, direct annual ad valorem tax levied, without legal limit as
to rate or amount, on all taxable property in the County. The County is authorized to issue county road bonds
pursuant to the Constitution and the laws of the State of Texas, including particularly Article III, Section 52 of the
Texas Constitution and Chapter 1471, Texas Government Code, as amended, and the Order passed by the
Commissioners Court of the County, authorizing the issuance of the Bonds.
The Bonds constitute the fourth and final installment to be issued out of $160,000,000 in bonds authorized at an
election held for that purpose on September 10, 2005 (the Election).
The following table illustrates the unlimited tax bonds authorized, issued and remaining authorized after the sale of
the Bonds:
Amount Authorized
$160,000,000
_______________________
Issued to Date
$125,200,000
The Bonds
$34,800,000*
Authorized but Unissued

$0
* Includes $95,000 of premium generated on the sale of the Bonds and applied against voted authorization.
Paying Agent/Registrar and Tender Agent

Regions Bank, Houston, Texas, will serve as Paying Agent/Registrar and Tender Agent and may resign at any time
and may be replaced in accordance with the Bond Order; provided, however, that any such resignation will not take
effect until a successor is appointed.
Transfer, Exchange and Registration
In the event the Book-Entry-Only System should be discontinued, printed certificates shall be delivered to the
registered owner and thereafter the Bonds may be transferred and exchanged on the registration books of the Paying
Agent/Registrar only upon presentation and surrender to the Paying Agent/Registrar and such transfer or exchange
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shall be without expense or service charge to the registered owner, except for any tax or other governmental charges
required to be paid with respect to such registration, exchange and transfer. Bonds may be assigned by the execution
of an assignment form on the respective Bonds or by other instrument of transfer and assignment acceptable to the
Paying Agent/Registrar. See Book-Entry-Only System herein for a description of the system to be utilized
initially in regard to ownership and transferability of the Bonds.
Amendments
The County may, without the consent of or notice to any Bondholders, from time to time and at any time, amend the
Bond Order in any manner not detrimental to the interests of the Bondholders, including the curing of any
ambiguity, inconsistency, or formal defect or omission herein or the amend the definition of the term Maximum
Interest Rate by increasing the Maximum Interest Rate for Bonds other than Bank Bonds in accordance with the
terms of the Bond Order. In addition, the County may, with the consent of Bondholders holding a majority in
aggregate principal amount of the Bonds then Outstanding, amend, add to, or rescind any of the provisions of the
Bond Order; provided that, without the consent of all Bondholders of Outstanding Bonds, no such amendment,
addition, or rescission shall (1) extend the time or times of payment of the principal of and interest on the Bonds,
reduce the principal amount thereof, the redemption price or the rate of interest thereon, or in any other way modify
the terms of payment of the principal of or interest on the Bonds, (2) give any preference to any Bond over any other
Bond, or (3) reduce the aggregate principal amount of Bonds required to be held by Bondholders for consent to any
such amendment, addition, or rescission.
Defeasance of Bonds
On and after the Conversion of the Bonds to a Fixed Rate, the Bond Order provides that the County may defease the
provisions thereof and discharge its obligation to the registered owners of any or all of the Bonds to pay principal,
interest and redemption premium, if any, thereon in any manner permitted by law, including by depositing with the
Paying Agent/Registrar, or if authorized by Texas law with any national bank having trust powers and having
combined capital and surplus of at least $50 million or with the State Treasurer of the State of Texas either: (i) cash
in an amount equal to the principal amount and redemption premium, if any, of such Bonds plus interest thereon to
the date of maturity or redemption, or (ii) pursuant to an escrow or trust agreement, cash and/or direct obligations of,
or obligations the principal of and interest on which are guaranteed by, or, to the extent permitted by law, secured by
the pledge of direct obligations of, the United States of America, in principal amounts and maturities and bearing
interest at rates sufficient to provide for the timely payment of the principal amount and redemption premium, if
any, of such Bonds plus interest thereon to the date of maturity or redemption; provided, however, that if any of such
Bonds are to be redeemed prior to their respective dates of Stated Maturity, provision must have been made for
giving notice of redemption as provided in the Bond Order. Upon such deposit, such Bonds shall no longer be
regarded to be outstanding or unpaid. Any surplus amounts not required to accomplish such defeasance shall be
returned to the County.
Bondholders Remedies
The Order does not provide for the appointment of a trustee to represent the interests of the Bondholders upon any
failure of the County to perform in accordance with the terms of the Order or upon any other condition and, in the
event of any such failure to perform, the registered owners would be responsible for the initiation and cost of any
legal action to enforce performance of the Order. Furthermore, the Order does not establish specific events of
default with respect to the Bonds and, under State law, there is no right to the acceleration of maturity of the Bonds
upon the failure of the County to observe any covenant under the Order. A registered owner of Bonds could seek a
judgment against the County if a default occurred in the payment of principal of or interest on any such Bonds;
however, such judgment could not be satisfied by execution against any property of the County and a suit for
monetary damages could be vulnerable to the defense of sovereign immunity. A registered owners only practical
remedy, if a default occurs, is a mandamus or mandatory injunction proceeding to compel the County to levy, assess
and collect an annual ad valorem tax sufficient to pay principal of and interest on the Bonds 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 legally imposed ministerial duties necessary for the
performance of a valid contract, and Texas law provides that, following their approval by the Attorney General and
issuance, the Bonds are valid and binding obligations for all purposes according to their terms. However, the
enforcement of any such remedy may be difficult and time consuming and a registered owner could be required to
enforce such remedy on a periodic basis.
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The County is also eligible to seek relief from its creditors under Chapter 9 of the U.S. Bankruptcy Code (Chapter
9). Although Chapter 9 provides for the recognition of a security interest represented by a specifically pledged
source of revenues, the pledge of taxes in support of a general obligation of a bankrupt entity is not specifically
recognized as a security interest under Chapter 9. Chapter 9 also includes an automatic stay provision that would
prohibit, without Bankruptcy Court approval, the prosecution of any other legal action by creditors or Bondholders
of an entity which has sought protection under Chapter 9. Therefore, should the County avail itself of Chapter 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 the
Bankruptcy Code provides for broad discretionary powers of a Bankruptcy Court in administering any proceeding
brought before it. The opinion of Bond Counsel will note that all opinions relative to the enforceability of the Order
and the Bonds are qualified with respect to the customary rights of debtors relative to their creditors, including rights
afforded to creditors under the Bankruptcy Code.
Future Borrowing
Following the issuance of the Bonds, there will remain no voter authorized but unissued road bonds from the
Election.
The Commissioners Court has created the Montgomery County Toll Road Authority (the Authority). The
Authority was created with the intended primary function of oversight of County toll roads. In addition, the
Authority is authorized to and may issue debt in the future for the construction and maintenance of certain toll roads
in the County. Pursuant to its articles of formation and relevant State law, the Authority is able to charge toll
revenues for the payment of its bonds. In addition, the Authority would be able to use tax revenues for the payment
of Authority bonds, but only after the imposition of a tax has been approved by voters in the County. The County
and 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.
The County does anticipate issuing additional ad valorem tax debt in the next 12 months. Depending on the rate of
development within the County, changes in assessed valuation and the amounts, interest rates, maturities and time of
issuance of additional bonds or certificates, increases in the Countys annual ad valorem tax rate may be required to
provide for the payment of the principal of and interest on the Countys outstanding debt, including the Bonds and
any future bonds or certificates of obligation the County may issue.
THE AGREEMENT
Background
The County has entered into a Pass-Through Toll Agreement (the Agreement) with the Texas Department of
Transportation (TxDOT) relating to the construction of improvements to four existing highways and the
construction and potential operation of a direct connector between two existing highways (collectively, the
Project). A copy of the Agreement is attached hereto as Appendix E. Proceeds of the Bonds will be used to
finance a portion of the Project and to pay the costs of issuance of the Bonds.
Reimbursement by TxDOT
Pursuant to Article 11 of the Agreement, TxDOT will reimburse the County for the construction and operation of
each portion of the Project if such improvements are substantially completed in accordance with the Agreement and
open to the public. Reimbursement will be made in annual installments, with the first annual installment to be made
within sixty days of the first anniversary of the date on which the first highway improvement is substantially
complete and open to the public.
Beginning with the first annual installment and continuing until the entire Project is substantially complete and open
to the public, the Agreement provides that TxDOT will reimburse the County by paying an annual amount equal to
$0.07 for each vehicle-mile traveled on the portion of the Project that was substantially complete and open to the
public at any time during the previous year. Once the entire Project is substantially complete and open to the public,
TxDOT will reimburse the County by paying an annual amount equal to $0.07 for each vehicle-mile traveled on the
Project during the previous year. The total amount of monies to be reimbursement by TxDOT is described in more
detail in the Agreement.
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TxDOT will make annual payments directly to the County until the total amount of annual payments pursuant to
Article 11 of the Agreement equals $98 million. Payments in excess of $98 million shall be paid into an escrow
account to be maintained in the name of and under the sole control of TxDOT as part of the state highway fund.
TxDOT and the County will, by mutual written agreement, disburse funds from the escrow account for any highway
improvement that meets the requirements outlined in the Agreement, which may include highway improvements
other than the Project.
Potential Availability of Funds for Repayment of the Bonds
As described above under Reimbursement by TxDOT, as the County completes portions of the Project in
compliance with the terms of the Agreement, the County will be eligible to be reimbursed for its costs up to a
maximum of $174,473,000. However, the Countys expectations are based on information available to the County
on the date hereof and actual results could differ materially from the Countys current projections. See OTHER
INFORMATION Forward Looking Statements Disclaimer. The total amount of monies to be reimbursement by
TxDOT is described in more detail in the Agreement.
The County may, at its discretion, use some portion of TxDOTs payments pursuant to the Agreement to pay debt
service on the Bonds. However, such funds are not pledged to and do not secure the repayment of the Bonds and the
County is under no obligation to use such funds to pay debt service on the Bonds.
Furthermore, the County intends to issue additional bonds to finance the completion of the Project. Some or all of
such additional bonds may be contract revenue bonds secured by a pledge of and payable from some or all of
TxDOT payments described above.
STANDBY BOND PURCHASE AGREEMENT
General
The County covenants in the Bond Order to maintain a Standby Bond Purchase Agreement at all times that the
Bonds remain outstanding, other than after conversion to a Fixed Rate. Pursuant to such covenant the County has
entered into the Liquidity Agreement dated as of August 1, 2008 with the Bank. Certain sections of the Liquidity
Agreement are reproduced in APPENDIX D Material Provisions of Standby Bond Purchase Agreement. The
Bank agrees to purchase tendered Bonds, if any, from time to time, up to and including August 15, 2010, extendible
to later dates, as may be agreed to by the parties. The Banks commitment to make purchases of Bonds is limited as
described in the Liquidity Agreement. Under certain circumstances, the obligation of the Bank to purchase Bonds
may be terminated without notice.
CERTAIN INFORMATION CONCERNING THE BANK
Bank of America, N.A. (the Bank) is a national banking association organized under the laws of the United States,
with its principal executive offices located in Charlotte, North Carolina. The Bank is a wholly-owned indirect
subsidiary of Bank of America Corporation (the Corporation) and is engaged in a general consumer banking,
commercial banking and trust business, offering a wide range of commercial, corporate, international, financial
market, retail and fiduciary banking services. As of June 30, 2008, the Bank had consolidated assets of $1,327
billion, consolidated deposits of $807 billion and stockholders equity of $109 billion based on regulatory
accounting principles.
The Corporation is a bank holding company and a financial holding company, with its principal executive offices
located in Charlotte, North Carolina. Additional information regarding the Corporation is set forth in its Annual
Report on Form 10-K for the fiscal year ended December 31, 2007, together with any subsequent documents it filed
with the Securities and Exchange Commission (the SEC) pursuant to the Securities Exchange Act of 1934, as
amended (the Exchange Act).
Recent Development: On July 1, 2008, the Corporation acquired Countrywide through its merger with a subsidiary
of the Corporation. Under the terms of the agreement, Countrywide shareholders received 0.1822 of a share of Bank
of America Corporation common stock in exchange for one share of Countrywide common stock. As provided by
the merger agreement, 583 million shares of Countrywide common stock were exchanged for 106 million shares of
the Corporations common stock. This represents approximately two percent of the Corporations outstanding
common stock. Countrywide shareholders also received cash of $346 thousand in place of any fractional shares of
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HOU:2831731.4
the Corporations common stock that would have otherwise been issued on July 1, 2008. The $2.0 billion of
Countrywides Series B convertible preferred shares that were previously held by the Corporation were cancelled.
Additional information regarding the foregoing is available from the filings made by the Corporation with the SEC,
which filings can be inspected and copied at the public reference facilities maintained by the SEC at 100 F Street,
N.E., Washington, D.C. 20549, United States, at prescribed rates. In addition, the SEC maintains a website at
http://www.sec.gov, which contains reports, proxy statements and other information regarding registrants that file
such information electronically with the SEC.
The information concerning the Corporation, the Bank and the foregoing merger contained herein is furnished solely
to provide limited introductory information and does not purport to be comprehensive. Such information is qualified
in its entirety by the detailed information appearing in the documents and financial statements referenced herein.
The Letter of Credit has been issued by the Bank. Moodys Investors Service, Inc. (Moodys) currently rates the
Banks long-term debt as Aaa and short-term debt as P-1. The outlook is stable. Standard & Poors currently
rates the Banks long-term debt as AA+ and its short-term debt as A-1+. The outlook is negative. Fitch Ratings,
Inc. (Fitch) currently rates long-term debt of the Bank as AA- and short-term debt as F1+. The outlook is
stable. Further information with respect to such ratings may be obtained from Moodys, Standard & Poors and
Fitch, respectively. No assurances can be given that the current ratings of the Banks instruments will be
maintained.
The Bank will provide copies of the most recent Bank of America Corporation Annual Report on Form 10-K, any
subsequent reports on Form 10-Q, and any required reports on Form 8-K (in each case as filed with the SEC
pursuant to the Exchange Act), and the publicly available portions of the most recent quarterly Call Report of the
Bank delivered to the Comptroller of the Currency, without charge, to each person to whom this document is
delivered, on the written request of such person. Written requests should be directed to:
Bank of America Corporate Communications
100 North Tryon Street, 18th Floor
Charlotte, North Carolina 28255
Attention: Corporate Communications
PAYMENTS OF PRINCIPAL AND INTEREST ON THE BONDS WILL BE MADE FROM DRAWINGS
UNDER THE LETTER OF CREDIT. PAYMENTS OF THE PURCHASE PRICE OF THE BONDS WILL BE
MADE FROM DRAWINGS UNDER THE LETTER OF CREDIT IF REMARKETING PROCEEDS ARE NOT
AVAILABLE. ALTHOUGH THE LETTER OF CREDIT IS A BINDING OBLIGATION OF THE BANK, THE
BONDS ARE NOT DEPOSITS OR OBLIGATIONS OF THE CORPORATION OR ANY OF ITS AFFILIATED
BANKS AND ARE NOT GUARANTEED BY ANY OF THESE ENTITIES. THE BONDS ARE NOT INSURED
BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY
AND ARE SUBJECT TO CERTAIN INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF THE
PRINCIPAL AMOUNT INVESTED.
The delivery hereof shall not create any implication that there has been no change in the affairs of the Corporation or
the Bank since the date hereof, or that the information contained or referred to in this Appendix C is correct as of
any time subsequent to its date.
INVESTMENT AUTHORITY AND INVESTMENT OBJECTIVES OF THE COUNTY
The County invests its investable funds in investments authorized by Texas law in accordance with investment
policies approved by the Commissioners Court of the County. Both state law and the Countys investment policies
are 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 and
instrumentalities, 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) other
obligations, 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 recognized
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investment rating firm not less than A or its equivalent; (6) bonds issued, assumed or guaranteed by the State of
Israel; (7) (a) certificates of deposit and share certificates issued by a depository institution that has its main office or
a branch office in the State of Texas, that are (i) guaranteed or insured by the Federal Deposit Insurance Corporation
or the National Credit Union Share Insurance Fund or their respective successors, or are secured as to principal by
obligations described in clauses (1) through (6) above or in any other manner and amount provided by law for
County 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 obligations
described in clause (1), and are placed through a primary government securities dealer or a financial institution
doing 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 program
is either secured by (a) obligations that are described in clauses (1) through (6) above, (b) irrevocable letters of
credit issued by a state or national bank that is continuously rated by a nationally recognized investment rating firm
at 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 are
pledged to the County, held in the Countys name and deposited at the time the investment is made with the County
or a third party designated by the County; (iii) a loan made under the program is placed through either a primary
government securities dealer or a financial institution doing business in the State; and (iv) the agreement to lend
securities has a term of one year or less, (10) certain bankers acceptances with the remaining term of 270 days or
less, if the short-term obligations of the accepting bank or its parent are rated at least A-1 or P-1 or the equivalent by
at least one nationally recognized credit rating agency, (11) commercial paper with a stated maturity of 270 days or
less 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 credit
issued by a U.S. or state bank, (12) no-load money market mutual funds registered with and regulated by the
Securities and Exchange Commission that have a dollar weighted average stated maturity of 90 days or less and
include in their investment objectives the maintenance of a stable net asset value of $1 for each share, and (13) noload mutual funds registered with the Securities and Exchange Commission that have an average weighted maturity
of less than two years, invest exclusively in obligations described in the this paragraph, and are continuously rated as
to investment quality by at least one nationally recognized investment rating firm of not less than AAA or its
equivalent. In addition, bond proceeds may be invested in guaranteed investment contracts that have a defined
termination date and are secured by obligations, including letters of credit, of the United States or its agencies and
instrumentalities in an amount at least equal to the amount of bond proceeds invested under such contract, other than
the prohibited obligations described in the next succeeding paragraph.
The County may invest in such obligations directly or through government investment pools that invest solely in
such obligations provided that the pools are rated no lower than AAA or AAA-m or an equivalent by at least one
nationally recognized rating service. The County may also contract with an investment management firm registered
under the Investment Advisers Act of 1940 (15 U.S.C. Section 80b-1 et seq.) or with the State Securities Board to
provide for the investment and management of its public funds or other funds under its control for a term up to two
years, but the County retains ultimate responsibility as fiduciary of its assets. In order to renew or extend such a
contract, the County must do so by order, ordinance, or resolution. The County is specifically prohibited from
investing in: (1) obligations whose payment represents the coupon payments on the outstanding principal balance of
the underlying mortgage-backed security collateral and pays no principal; (2) obligations whose payment represents
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) collateralized
mortgage obligations the interest rate of which is determined by an index that adjusts opposite to the changes in a
market index.
Investment Policies
Under Texas law, the County is required to invest its funds under written investment policies that primarily
emphasize safety of principal and liquidity; that address investment diversification, yield, maturity, and the quality
and capability of investment management; and that include a list of authorized investments for County funds, the
maximum allowable stated maturity of any individual investment, the maximum dollar-weighted average maturity
allowed for pooled fund groups and methods to monitor the market price of such authorized investments. All
County funds must be invested consistent with a formally adopted Investment Strategy Statement that specifically
addresses each funds investment. Each Investment Strategy Statement is required to describe its objectives
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concerning: (1) suitability of investment type, (2) preservation and safety of principal, (3) liquidity, (4) marketability
of 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, that
a person of prudence, discretion, and intelligence would exercise in the management of the persons own affairs, not
for speculation, but for investment, considering the probable safety of capital and the probable income to be
derived. 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 to
market value and the ending value for each pooled fund group, (3) the book value and market value of each
separately invested asset at the beginning and end of the reporting period, by the type of asset and fund type, (4) the
maturity date of each separately invested asset having a maturity date, (5) the account or fund or pooled fund group
for which each individual investment was acquired, and (6) the compliance of the investment portfolio as it related
to: (a) adopted investment strategy statements and (b) the provisions of Chapter 2256, Texas Government Code, as
amended. No person may invest County funds without express written authority from the Commissioners Court of
the 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 sell
securities to the County to disclose the relationship and file a statement with the Texas Ethics Commission and the
County, (3) require the registered principal of firms seeking to sell securities to the County to: (a) receive and review
the 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) in
conjunction with its annual financial audit, perform a compliance audit of the management controls on investments
and adherence to the Countys investment policy, (5) restrict reverse repurchase agreements to not more than 90
days and restrict the investment of reverse repurchase agreement funds to no greater than the term of the reverse
repurchase agreement, (6) restrict the investment in non-money market mutual funds in the aggregate to no more
than 15% of the Countys monthly average fund balance, excluding bond proceeds and reserves and other funds held
for debt service, (7) require local government investment pools to conform to the new disclosure, rating, net asset
value, yield calculation, and advisory board requirements and (8) provide specific investment training for the
Treasurer, 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 investment
policy, the following instruments are the only authorized investments for County funds: Time Deposits; Certificates
of Deposit; Money Market Investment Accounts; Negotiable Order of Withdrawal (NOW) Accounts; United States
Treasury 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, Texas
Government Code, as amended; Discount Government Agencies, excluding Federal Home Loan Mortgage
Corporation (Freddie Mac); and, any Public Funds Pool authorized by state law. No funds of the County will be
invested in securities such as reverse repurchase agreements and the County will not trade in options or futures
contracts.
The Countys investment balances on June 30, 2008 were as follows:
U. S. Agency Securities
State Treasurers Investment Pool (TEXPOOL)
Money Market Mutual Fund (ICT)
Money Market Mutual Fund (AIM)
Money Market Mutual Fund (BPIF)
Total Investments
Carrying Amount
$17,896,745
850,869
49,003,722
33,507,127
12,477,067
$113,735,530
22
HOU:2831731.4
Market Value
$17,896,745
850,869
49,003,722
33,507,127
12,477,067
$113,735,530
DEBT SERVICE REQUIREMENTS

The following schedule sets forth the current total debt service requirements of the County plus the debt service
requirements of the Bonds.
Fiscal
Year
9/30
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
Total
Total
Debt
Service
$18,624,748
21,378,761
21,572,786
24,535,336
24,526,620
24,526,289
24,528,011
24,533,421
24,538,253
24,530,519
24,530,316
24,532,670
24,535,485
24,533,435
24,552,183
24,546,305
24,551,230
24,527,674
24,532,427
24,531,359
23,639,738
23,647,763
23,641,625
--$549,596,954
Plus: Adjustable Rate

Road Bonds, Series
Total
2008B
Debt
Principal
Interest
Service
-$37,597 $18,662,345
-- 1,041,150
22,419,911
-- 1,041,150
22,613,936
-- 1,041,150
25,576,486
-- 1,041,150
25,567,770
-- 1,041,150
25,567,439
-- 1,041,150
25,569,161
-- 1,041,150
25,574,571
-- 1,041,150
25,579,403
-- 1,041,150
25,571,669
-- 1,041,150
25,571,466
-- 1,041,150
25,573,820
-- 1,041,150
25,576,635
-- 1,041,150
25,574,585
-- 1,041,150
25,593,333
-- 1,041,150
25,587,455
-- 1,041,150
25,592,380
-- 1,041,150
25,568,824
-- 1,041,150
25,573,577
-- 1,041,150
25,572,509
-- 1,041,150
24,680,888
-- 1,041,150
24,688,913
-- 1,041,150
24,682,775
$17,090,000
748,800
17,874,800
17,615,000
264,225
17,879,225
$34,705,000 $23,991,922 $608,293,876
Average Annual Requirements (2008-2032) ........................................................................

Maximum Annual Requirement (2022)................................................................................
23
HOU:2831731.4
$24,331,755
$25,593,333
COUNTY DEBT
General
The following tables and calculations relate to the Bonds and to all other debt of the County. The County and
various other political subdivisions of government which overlap all or a portion of the County are empowered to
incur 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
2008 Preliminary Taxable Assessed Valuation ................................................................................ $ 29,248,713,355(a)
2007 Certified Taxable Assessed Valuation ..................................................................................... $ 26,760,697,964(b)
Direct Debt:
Outstanding Direct Debt (as of August 15, 2008) .............................................................. $
Plus: The Bonds ................................................................................................................
324,171,529
34,705,000
Total Direct Debt .............................................................................................................................. $
358,876,529
Interest & Sinking Fund Balance (as of June 30, 2008) ................................................................... $
11,529,661
______________________________
No taxes will be levied on this preliminary value. The value will be certified by the Montgomery County
Appraisal Review Board and taxes will be levied on this certified value. The preliminary value is an estimate of
taxable assessed value and is subject to taxpayer protest.
(b)
Certified by the Montgomery Central Appraisal District (the Appraisal District).
(a)
Estimated Overlapping Debt Statement

Other governmental entities whose boundaries overlap the County have outstanding bonds or other debt payable
from ad valorem taxes levied against property within the County. The following statement of direct and estimated
overlapping 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 County
has not independently verified the accuracy or completeness of such information, and no person is entitled to rely
upon such information as being accurate or complete. Furthermore, certain of the entities listed below may have
issued additional debt since the dates stated in this table, and such entities may have programs requiring the issuance
of substantial amounts of additional debt, the amount of which cannot be determined. Political subdivisions
overlapping with the boundaries of the County are authorized by Texas law to levy and collect ad valorem taxes for
operation, maintenance and/or general revenue purposes in addition to taxes for payment of their debt, and some are
presently levying and collecting such taxes.
Taxing Jurisdiction
Cleveland ISD
Clovercreek MUD
Conroe ISD
Conroe, City of
Corinthian Point MUD #2
E. Montgomery Co MUD #3
East Plantation UD
Far Hills UD
Houston, City of
Gross Debt
5/15/2008
$43,330,884
1,710,000
689,576,942
62,475,000
1,225,000
5,645,000
3,825,000
2,705,000
2,104,426,125
24
HOU:2831731.4
Overlapping
Percent
1.19%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
0.22%
Amount
$515,638
1,710,000
689,576,942
62,475,000
1,225,000
5,645,000
3,825,000
2,705,000
4,629,737
Taxing Jurisdiction
Kings Manor MUD
Lazy River Improvement Dist
Lone Star College System
Magnolia ISD
Magnolia, City of
Montgomery Co DD # 6
Montgomery Co DD # 10
Montgomery Co MUD # 7
Montgomery Co UD # 2
Montgomery WC&ID # 1
Montgomery ISD
Montgomery, City of
New Caney ISD
New Caney MUD
Oak Ridge N, City of
Panorama Village, City of
Point Aquarius MUD
Porter MUD
Rayford Rd MUD
Richards ISD
River Plantation MUD
Roman Forest Cons MUD
Roman Forest PUD # 4
Shenandoah, City of
Southern Montg Co MUD
Splendora ISD
Splendora, City of
Spring Creek UD
Stanley Lake MUD
Gross Debt
5/15/2008
17,310,000
1,075,000
$151,570,000
180,022,543
2,250,000
1,839,990
9,885,000
9,005,000
4,650,805
3,835,000
24,055,000
375,000
19,480,205.60
4,630,000
1,750,000
115,840,000
44,855,000
2,545,740.00
27,635,000
22,350,000
16,235,000
20,375,000
5,830,000
20,460,000
2,820,000
2,690,000
925,000
3,030,000
3,750,000
124,058,535
4,000,000
152,730,458
20,050,000
4,375,000
2,470,000
11,515,000
13,350,000
31,170,000
160,000
785,000
2,025,000
765,000
12,565,000
4,615,000
37,644,997
2,295,000
18,065,000
6,292,000.00
25
HOU:2831731.4
Overlapping
Percent
69.81%
100.00%
23.25%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
14.18%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
Amount
12,084,111
1,075,000
$35,240,025
180,022,543
2,250,000
1,839,990
9,885,000
9,005,000
4,650,805
3,835,000
24,055,000
375,000
19,480,206
4,630,000
1,750,000
115,840,000
44,855,000
2,545,740
27,635,000
22,350,000
16,235,000
20,375,000
5,830,000
20,460,000
2,820,000
2,690,000
925,000
3,030,000
3,750,000
124,058,535
4,000,000
152,730,458
20,050,000
4,375,000
2,470,000
11,515,000
13,350,000
31,170,000
22,688
785,000
2,025,000
765,000
12,565,000
4,615,000
37,644,997
2,295,000
18,065,000
6,292,000
Gross Debt
5/15/2008
260,000
21,350,000
$1,755,000
62,770,000.00
209,205,000
84,279,097
6,315,000
301,000
78,719
Taxing Jurisdiction
Texas National MUD
The Woodlands Metro Ctr ID
The Woodlands MUD # 2
The Woodlands RUD # 1
Tomball ISD
Willis ISD
Willis, City of
Woodbranch Village, City
Woodloch, Town of
Overlapping
Percent
100.00%
100.00%
100.00%
100.00%
8.27%
98.42%
100.00%
100.00%
100.00%
Total Estimated Overlapping Debt

Total Direct Debt (including the Bonds)
Total Direct & Estimated Overlapping Debt
Amount
260,000
21,350,000
$1,755,000
62,770,000
17,301,254
82,947,487
6,315,000
301,000
78,719
$2,013,697,874
358,876,529
$2,372,574,403
Debt Ratios
2008 Preliminary Taxable Assessed Valuation ($29,248,713,355)

2007 Certified Taxable Assessed Valuation ($26,760,697,964)
Per Capita 2008 Estimated Population (412,638)
Direct Debt
1.23%
1.34%
$869.71
Direct and
Estimated
Overlapping
Debt
8.11%
8.87%
$5,749.77
Other Obligations
The County has entered into various lease-purchase agreements for the purchase of heavy road equipment, police
vehicles, animal control vehicles, a community building, and a countywide communication system consisting of
infrastructure and equipment to effectively upgrade towers and radios for all first responders in the County.
Fiscal
Year Ending
General Fund
Special
Revenue Funds
Total
All Funds
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
$8,456
947,974
2,719,390
2,679,992
1,885.496
1,771,416
1,771,416
1,771,416
1,771,416
1,771,416
1,771,416
1,771,416
$496,563
629,391
629,391
531,386
496,563
410,209
-0-0-0-0-0-0-
$505,019
1,577,365
3,348,781
3,211,378
2,382,059
2,181,625
1,771,416
1,771,416
1,771,416
1,771,416
1,771,416
1,771,416
Total
$20,641,220
$3,193,503
$23,834,723
In addition, in September of 2006, the Montgomery County Jail Financing Corporation (the Corporation) was
created by the County to facilitate the construction of a jail facility. The Corporation issued $44.8 million Lease
Revenue Bonds in June of 2007. The jail facility was completed in June of 2008. The County has entered into a
lease-purchase agreement with the Corporation to purchase the jail facility and the County will make such lease
payments in part from anticipated revenues paid to the County under a federal inmate housing contract between the
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HOU:2831731.4
County and the U.S. Marshal Service. The lease payments received by the Corporation will be used to pay debt
service on the Corporations bonds. The lease payments will be paid over a twenty year term as set forth below:
Fiscal Year
Ending
2008
2009
2010
2011
2012
2013-2028
Total
General
Fund
$1,883,755
3,074,923
3,443,480
3,443,480
3,443,480
55,095,686
$70,384,804
TAXING PROCEDURES AND TAX BASE ANALYSIS

General
One of the Countys principal sources of operational revenue and its principal source of funds for debt service
payments is the receipts from ad valorem taxation. See COUNTY DEBT and SELECTED FINANCIAL
DATA. The following is a recapitulation of (a) the Texas Property Tax Code, including methodology, limitations,
remedies and procedures; (b) historical analysis of collection and trends of County tax receipts and provisions for
delinquencies; (c) an analysis of the County tax base, including relative property composition, principal taxpayers
and adequacy of the County tax base to service debt requirements; and, (d) taxation that may add to the County
taxpayers tax costs.
Property Tax Code and County-Wide Appraisal District
The Texas Property Tax Code (the Property Tax Code) specifies the taxing procedures of all political subdivisions
of the State, including the County. Provisions of the Property Tax Code are complex and are not fully summarized
here.
The Property Tax Code requires, among other matters, county-wide appraisal and equalization of taxable property
values and establishes in each county of the State an appraisal district with the responsibility for recording and
appraising property for all taxing units within a county and an appraisal review board with responsibility for
reviewing and equalizing the values established by the appraisal district. The Montgomery Central Appraisal
District (the Appraisal District) has the responsibility for appraising property for all taxing units within
Montgomery County, including the County. Such appraisal values are subject to review, change and approval by
the Montgomery Central Districts Appraisal Review Board (the Appraisal Review Board).
Property Subject to Taxation by the County
Except for certain exemptions provided by Texas law, all real property, tangible personal property held or used for
the production of income, mobile homes and certain categories of intangible personal property with a tax situs in the
County are subject to taxation by the County. Principal categories of exempt property include, but are not limited
to: property owned by the State or its political subdivisions if the property is used for public purposes; property
exempt from ad valorem taxation by federal law; certain household goods, family supplies, and personal effects;
certain goods, wares and merchandise in transit; farm products owned by the producer; certain property of charitable
organizations, youth development associations, religious organizations, and qualified schools; designated historical
sites; and, most individually owned automobiles. In addition, the County may, by its own action, or shall, if required
by voters at an election, exempt residential homesteads of persons sixty-five (65) years or older and of certain
disabled persons to the extent deemed advisable by the Commissioners Court. The County is authorized by statute
to disregard exemptions for the disabled and elderly if granting the exemption would impair the Countys obligation
to pay tax supported debt incurred prior to adoption of the exemption by the County. Furthermore, the County must
grant exemptions to disabled veterans or certain surviving dependents of disabled veterans, but only to the maximum
extent of $12,000 of taxable valuation. Such disabled veterans exemptions resulted in a loss of approximately
$17,217,110 of the 2007 assessed value.
27
HOU:2831731.4
Residential Homestead Exemptions

The Property Tax Code authorizes the governing body of each political subdivision in the State to exempt up to
twenty percent (20%) of the market value of residential homesteads from ad valorem taxation. Where ad valorem
taxes have previously been pledged for the payment of debt, the governing body of a political subdivision may
continue to levy and collect taxes against the exempt value of the homesteads until the debt is discharged, if the
cessation of the levy would impair the obligations of the contract by which the debt was created. The adoption of a
homestead exemption may be considered each year, but must be adopted by May 1. The County, in addition to the
aforementioned mandatory veterans exemption, does give a flat $35,000 reduction to the appraised market value on
residential homesteads of persons 65 years and older. Such homestead exemptions resulted in a loss of
approximately $703,189,982 of the 2007 assessed value. The County does not grant any other exemptions to
residential property.
Freeport Goods and Goods-in-Transit Exemption
Article VIII, Section 1-j of the Texas Constitution provides that goods, wares, merchandise, other tangible property
and ores, other than oil, natural gas and other petroleum products, which have been acquired or brought into the
State for assembling, storing, manufacturing, processing or fabricating and shipped out of the State within 175 days
(freeport goods) are exempt from taxation unless action to tax was taken by the governing body of the political
subdivision prior to April 1, 1990. Decisions to tax may be reversed in the future while decisions to exempt freeport
property are not subject to reversal. Such freeport exemptions resulted in a loss of approximately $220,751,271 of
the 2007 assessed value.
Effective January 1, 2008, a Goods-in-Transit Exemption may apply to certain tangible personal property that is
acquired in or imported into Texas for assembling, storing, manufacturing or fabricating purposes which are
destined to be forwarded to another location in Texas not later than 175 days after acquisition or importation, so
long as the location where said goods are detained is not directly or indirectly owned by the owner of the goods.
The County, prior to January 1, 2008 (or in any year thereafter) may take action to allow taxation of goods-in-transit
in which event the exemption would not be available. On September 10, 2007, the Commissioners Court adopted a
resolution allowing the taxation of goods-in-transit and denying the Goods-in-Transit Exemption.
Tax Abatement
The County and other tax entities may enter into tax abatements by creating tax reinvestment zones to encourage
economic development. Prior to entering into a tax abatement agreement, each entity must adopt guidelines and
criteria for establishing tax abatement, which each entity will follow in granting tax abatement to owners of
property. The tax abatement agreements may exempt from ad valorem taxation by each of the applicable taxing
jurisdictions, including the County, for a period of up to ten (10) years, all or any part of any increase in the assessed
valuation of property covered by the agreement over its assessed valuation in the year in which the agreement is
executed, on the condition that the property owner make specified improvements or repairs to the property in
conformity with the terms of the tax abatement. As of September 30, 2005, each taxing jurisdiction has discretion to
determine terms for its tax abatement agreements without regard to the terms approved by other taxing jurisdictions.
The County currently has entered into 18 tax abatement agreements with various companies covering a total of
$468,613,796 of abated assessed value.
Pollution Control
The Property Code also provides for an exemption from ad valorem taxation for certain pollution control property.
In 2007, the County lost approximately $34,208,591 of assessed value as a result of such exemption.
Valuation of Property for Taxation
Generally, property in the County must be appraised by the Appraisal District at market value as of January 1 of
each year. Once an appraisal roll is prepared and finally approved by the Appraisal Review Board, it is used by the
County in establishing its tax rolls and tax rate. Appraisals under the Property Tax Code are to be based on one
hundred percent (100%) of market value, as such is defined in the Property Tax Code.
The Property Tax Code permits land designated for agricultural use, open space or timberland to be appraised at its
value based on the lands capacity to produce agricultural or timber products rather than at its fair market value. The
Property Tax Code permits under certain circumstances that residential real property inventory held by a person in
the trade or business be valued at the price all such property would bring if sold as a unit to a purchaser who would
28
HOU:2831731.4
continue the business. Landowners wishing to avail themselves of the agricultural use, open space or timberland
designation or residential real property inventory designation must apply for the designation and the appraiser is
required by the Property Tax Code to act on each claimants right to the designation individually. A claimant may
waive the special valuation as to taxation by some political subdivisions while claiming its valuation as to another.
If a claimant receives the agricultural use designation and later loses it by changing the use of the property or selling
it to an unqualified owner, the County can collect taxes based on the new use, including taxes for the previous three
(3) years for agricultural use and taxes for the previous five (5) years for open space land and timberland. The total
loss in value due to grants of agricultural use and open-space land appraisal from the 2007 tax roll was
approximately $1,080,401,517.
The Property Tax Code requires the Appraisal District to implement a plan for periodic reappraisal of property to
update appraisal values. The plan must provide for appraisal of all real property in the Appraisal District at least
once every three (3) years. It is not known what frequency of reappraisal will be utilized by the Appraisal District or
whether reappraisals will be conducted on a zone or county-wide basis. The County does receive yearly a
preliminary estimate of values to be used in its budget process, which provides both the value of new improvements
as well as value of increase of current property. While such yearly estimates of appraised values may serve to
indicate the rate and extent of growth of taxable values within the County, they cannot be used for establishing a tax
rate within the County until such time as the Appraisal District formally by certification includes such values on its
appraisal roll.
County and Taxpayer Remedies
Under certain circumstances taxpayers and taxing units (such as the County) may appeal the orders of the Appraisal
Review Board by filing a petition for review in State district court. In such event, the value of the property in
question will be determined by the court or by a jury if requested by any party. Additionally, taxing units may bring
suit against the Appraisal District to compel compliance with the Property Tax Code.
The Property Tax Code sets forth notice and hearing procedures for certain tax rate increases which could result in
the repeal of certain tax increases. The Property Tax Code also establishes a procedure for notice to property
owners of reappraisals reflecting increased property value, appraisals which are higher than renditions, and
appraisals of property not previously on an appraisal roll.
Levy and Collection of Taxes
The County is responsible for the collection of its taxes, unless it elects to transfer such functions to another
governmental entity. Before the later of September 30 or the 60th day after the date the certified appraisal roll is
received by the County, the rate of taxation is set by the Commissioners Court based upon the valuation of property
within the County as of the preceding January 1 and the amount required to be raised for debt service, maintenance
purposes and authorized contractual obligations.
The Commissioners Court may under certain circumstances be required to advertise and hold a public hearing
within the County on a proposed tax rate before the Commissioners Court can hold a public meeting to vote on the
tax rate. If the tax rate adopted exceeds by more than 8% the rate needed to pay debt service and certain contractual
obligations and to produce, when applied to the property which was on the prior years roll, the prior years total
taxes levied for purposes other than debt service and such contractual obligations (the rollback rate), such excess
portion of the levy may, subject to constitutional restrictions on the impairment of existing obligations, be repealed
at an election within the County held upon petition of 10% of the Countys qualified voters and the tax rate adopted
for the current year be reduced to the rollback rate.
The County is prohibited from adopting a tax rate that exceeds the lower of the rollback tax rate or the effective tax
rate until it has held a public hearing on the proposed tax rate and has otherwise complied with the Property Tax
Code. Reference is made to the Property Tax Code for definitive requirements for the levy and collection of ad
valorem taxes and the calculation of the various defined tax rates.
Taxes are due on receipt of the tax bill, and become delinquent after January 31 of the following year, or on the first
day of the calendar month next following the expiration of twenty-one (21) days after mailing of the tax bills,
whichever occurs later. A delinquent tax account incurs an initial penalty of six percent (6%) of the amount of the
tax and accrues an additional penalty of one percent (1%) per month up to July 1, at which time the total penalty
becomes twelve percent (12%). In addition, delinquent taxes accrue interest at one percent (1%) per month. If the
tax is not paid by July 1, an additional penalty of up to twenty percent (20%) may under certain circumstances be
29
HOU:2831731.4
imposed by the County. The Property Tax Code also makes provision for the split payment of taxes, discounts for
early payments, partial payments of taxes and the postponement of the delinquency date of taxes under certain
circumstances. The County does not permit such payments, except for those property owners who are over the age
of 65 as provided in the Property Tax Code.
Countys Rights in the Event of Tax Delinquencies
Taxes levied by the County are a personal obligation of the owner of the property. On January 1 of each year, a tax
lien attaches to property to secure the payment of all taxes, penalties, and interest ultimately imposed for the year on
the property. The lien exists in favor of the State and each taxing unit, including the County, having power to tax
the property. The Countys tax lien is on a parity with tax liens of such other taxing units (see COUNTY DEBT Estimated Overlapping Debt Statement). A tax lien on real property takes priority over the claim of most creditors
and other holders of liens on the property encumbered by the tax lien, whether or not the debt or lien existed before
the attachment of the tax lien, however, whether a lien of the United States is on a parity with or takes priority over a
tax lien of the County is determined by applicable federal law. Personal property under certain circumstances is
subject to seizure and sale for the payment of delinquent taxes, penalty, and interest.
At any time after taxes on property become delinquent, the County may file suit to foreclose the lien securing
payment of the tax, to enforce personal liability for the tax, or both. In filing a suit to foreclose a tax lien on real
property, the County must join other taxing units that have claims for delinquent taxes against all or part of the same
property. Collection of delinquent taxes may be adversely affected by the amount of taxes owed to other taxing
units, by the effects of market conditions on the foreclosure sale price, by taxpayer redemption right (a taxpayer may
redeem property within six months for non-homestead property and within two years of foreclosure for homestead)
or by bankruptcy proceedings which restrict the collection of taxpayer debts.
Tax Rate Limitations
General Operation; Limited Tax Bonds, Time Warrants and Certificates of Obligation . . . The Texas Constitution
(Article VIII, Section 9) 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 bonds,
warrants, certificates of obligation or other debt issued against such funds. Administratively, the Attorney General
of Texas will not approve limited tax obligations in an amount which produces debt service requirements exceeding
that which can be paid from $0.40 of the foregoing $0.80 maximum tax rate calculated at 90% collection.
Road Bonds . . . Unlimited tax rate authorized for debt service by Article III, Section 52 of the Texas Constitution;
however, total debt cannot exceed 25% of assessed valuation. The Bonds are unlimited tax road bonds.
Road Maintenance (Special Road and Bridge Tax) . . . Tax rate imposed by Article VIII, Section 9 of the Texas
Constitution and by statute as $0.15 per $100 assessed valuation, no part of which may be used for debt service.
The County currently does not levy a tax under this provision.
Farm-To-Market and Flood Control Purposes . . . Tax rate imposed by Article VIII, Section 1-a of the Texas
Constitution and by statute as $0.30 per $100 assessed valuation after the mandatory $3,000 homestead exemption,
no allocation prescribed by statutes between debt service and maintenance. The County currently does not levy a
tax under this provision.
30
HOU:2831731.4
Historical Analysis of Tax Collection

Source: For Tax Years 1997 through 2006, Montgomery County, Texas Comprehensive Annual Financial Report Fiscal Year Ended September 30, 2007. For
Tax Year 2007, unaudited estimates provided by the County. For tax years 1997 thorough and including 1999, includes the South Montgomery County Road
District No. 1, a blended component unit of the County.
Tax
Year
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
Percent of
Total Tax
Collections
to Tax Levy
Percent of
Delinquent
Taxes to
Tax Levy
Fiscal
Year
Ending
9-30
$9,322,345,663
$0.4897
$46,937,541
$45,882,279
97.8%
$1,208,829
$47,091,108
100.3% $6,112,852
13.0%
10,190,624,566
0.4897
50,889,079
49,887,250
98.0
1,247,664
51,134,914
100.5
6,175,378
12.1
11,201,772,490
0.4747
54,051,832
52,810,108
97.7
1,244,737
54,054,845
100.0
6,501,501
12.0
12,536,525,138
0.4747
59,831,094
58,384,869
97.6
1,547,076
59,931,945
100.2
6,232,148
10.4
14,282,028,148
0.4710
67,447,935
65,714,723
97.4
1,608,717
67,323,440
99.8
6,471,525
9.6
16,289,381,371
0.4710
77,043,931
75,232,037
97.6
1,784,876
77,016,913
100.0
6,587,183
8.5
17,592,455,375
0.4828
85,764,910
83,960,577
97.9
1,839,076
85,799,653
100.0
6,109,116
7.1
18,968,230,832
0.4963
94,513,506
92,527,246
97.9
1,856,421
94,383,667
99.9
6,043,917
6.4
20,994,710,745
0.4963
104,074,236
102,113,249
98.1
1,788,843
103,902,092
99.8
5,840,603
5.6
23,371,824,109
0.4913
114,138,148
112,246,578
98.3
1,768,160
114,014,738
99.9
5,578,532
4.9
26,775,178,947(b)
0.4888
129,601,440
126,494,503
97.6(c)
1,568,355
128,062,858
98.8(c)
7,942,542(c)
6.1(c)
______________________________
(a) Taxes levied in any year which are collected from October 1 through June 30 are shown as current collections. Such amounts include collections of
the current levy after February 1, which is the date taxes become legally delinquent.
(b) Value may differ from that shown in the Countys financial statements and elsewhere in this Official Statement due to subsequent adjustments.
(c) Partial year collections through June 30, 2008.
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008(c)
Adjusted
Taxable Assessed
Valuation
Tax Rate
Per $100 of
Assessed
Valuation
Total
Tax Levy
Current Tax
Collections(a)
Percent
of Levy
Collected
31
HOU:2831731.4
Delinquent
Tax
Collections
Total Tax
Collections
Outstanding
Delinquent
Taxes
Delinquent Tax Collection Procedures

In addition to the legal procedures and penalties described under Countys Rights in the Event of Tax
Delinquencies, the County has retained a Delinquent Tax Attorney on a contract basis to file suit to collect
delinquent taxes due the County. The fees due such attorney for acting as Delinquent Tax Attorney are payable
from an additional penalty imposed upon the delinquent taxpayer, not to exceed 20% of the tax due.
Tax Rate Distribution
Tax Years
General Fund
Special Revenue Fund
Debt Service Fund
2007
$0.3630
0.0478
0.0780
$0.4888
2006
2005
2004
2003
$0.3611
0.0478
0.0824
$0.4913
$0.3896
0.0528
0.0566
$0.4963
$0.3822
0.0528
0.0613
$0.4963
$0.3627
0.0523
0.0678
$0.4828
Analysis of Tax Base

- Tax Base Distribution 2007 Tax Roll
2006 Tax Roll

Amount
Type of Property
Residential
Acreage, Lots & Tracts
Farm & Ranch
Industrial & Commercial
Oil, Gas, Minerals
Utilities
Business Personal
Special Inventory
Other Personal
Exempt Property
Total Assessed Value
Less Exemption
Total Taxable Value (a)
$19,950,241,816
2,922,327,857
383,899,379
3,346,553,029
135,565,170
525,050,382
2,500,562,252
60,535,537
210,774,711
1,980,607,759
$32,016,117,892
5,255,419,928
$26,760,697,964
62.31%
9.13%
1.20%
10.45%
0.42%
1.64%
7.81%
0.19%
0.66%
6.19%
100.00%
$16,930,661,134
2,185,624,432
287,024,232
3,103,045,608
135,032,080
482,220,218
2,247,994,744
55,826,720
113,417,667
1,745,455,244
$27,286,302,079
3,914,477,970
$23,371,824,109
%
62.05%
8.01%
1.05%
11.37%
0.49%
1.77%
8.24%
0.20%
0.42%
6.40%
100.00%
2005 Tax Roll

Amount
$15,176,277,621
2,029,779,877
257,711,219
2,851,821,021
110,138,640
473,381,872
1,871,771,994
51,065,288
105,995,862
1,672,373,305
$24,600,316,699
3,613,222,904
$20,987,093,795
%
61.69%
8.25%
1.05%
11.59%
0.45%
1.92%
7.61%
0.21%
0.43%
6.80%
100.00%
______________________________
(a) Represents values initially certified by the Montgomery Central Appraisal District; may have been
subsequently adjusted.
32
HOU:2831731.4
Top Ten Principal Taxpayers

Provided by the Montgomery Central Appraisal District. Certain of the top ten principal taxpayers may own
additional property that is not included in the assessed value figures shown in this table as a result of the way such
property is accounted for on the Appraisal District tax rolls.
Taxpayer
Type of Property
2007
Tax Roll
Gulf States Utilities Company

Wal-Mart Stores, Inc.
The Woodlands Companies
Consolidated Communications of Texas Co.
Columbia Conroe Regional Medical
Center/Kingwood Medical Plaza
Huntsman Petrochemical Corp.
The Woodlands Mall Association
Devon Energy Operating Company
SBC Communications Inc.
McKesson Corporation
CVS/Distribution Center
Total
Electric Utility
Retail
Land Development
Communications/Utility
$176,514,177
159,436,560
121,923,947
84,646,310
$156,313,994
162,253,877
74,704,986
77,863,640
$162,155,189
157,319,212
78,554,652
69,977,630
Medical
Industrial
Retail
Oil/Gas Exploration
Telephone Utility
Manufacturing
Retail Drug Distribution
70,977,120
67,397,526
62,156,387
58,638,020
57,132,520
51,017,953
(a)
$909,840,520
129,463,950
61,142,144
61,042,740
63,607,700
50,705,039
50,989,578
(a)
$888,087,648
116,136,716
65,193,310
58,698,870
47,211,230
51,764,976
(a)
61,185,954
$868,197,739
3.40%
3.80%
4.14%
Percentage of Respective Certified Assessed Valuation
2006
Tax Roll
2005
Tax Roll
______________________________
(a) Not a top ten principal taxpayer in such tax year according to the Montgomery Central Appraisal District.
Tax Adequacy
Average Annual Debt Service Requirements (2008-2032) ...................................................
$0.088 Tax Rate on the 2008 Preliminary Taxable Assessed Valuation @ 95%
collection produces ............................................................................................................
$0.096 Tax Rate on the 2007 Certified Taxable Assessed Valuation @ 95%
Maximum Annual Debt Service Requirement (2022) ...........................................................
$0.093 Tax Rate on the 2008 Preliminary Taxable Assessed Valuation @ 95%
$0.101 Tax Rate on the 2007 Certified Taxable Assessed Valuation @ 95%
33
HOU:2831731.4
$24,331,755
$24,451,924
$24,405,757
$25,593,333
$25,841,238
$25,676,890
SELECTED FINANCIAL DATA

Historical Operations of the Countys General Fund
The following is a condensed statement of revenues and expenditures of the Countys General Fund for the past five
fiscal years. The inclusion of the following table is not intended to imply that any revenues of the County, other
than receipts from ad valorem taxes provided in the Order, are pledged to pay principal and interest on the Bonds.
Fiscal Year Ended September 30,
2005
2007
2006
REVENUES:
Taxes
Licenses and Permits
Fees
Intergovernmental
Charges for Services
Interest
Contract Reimbursements
Inmate Housing
Fines and Forfeitures
Miscellaneous
Total Revenues
$86,721,116
1,363,580
14,529,676
4,052,777
282,712
2,293,789
10,237,033
1,607,241
100,719
1,420,777
122,609,420
$83,559,237
1,381,107
13,595,913
6,132,239
215,307
1,577,838
8,975,993
1,356,977
144,680
1,335,673
118,274,964
EXPENDITURES:
Current:
General Administration
Judicial
Legal Services
Elections
Financial Administration
Public Facilities
Public Safety
Health and Welfare
Conservation
Miscellaneous
Total Expenditures
12,178,369
10,958,487
1,864,419
1,373,213
4,966,523
22,477,341
43,108,422
4,755,954
449,468
2,846,822
104,979,018
Excess/(Deficiency) Revenues Over

Expenditures
OTHER FINANCING
SOURCES (USES)
Transfers In
Transfers Out
Capital Lease Financing
Total Other Financing
Sources (Uses)
Net Changes in Fund Balance
Fund Balance, October 1
Prior Period Adjustment
Fund Balance, September 30
2004
2003
$74,921,693
1,261,058
10,954,243
4,943,706
223,454
842,272
7,898,265
50,430
208,906
1,441,802
102,745,829
$66,469,117
1,204,171
10,089,462
2,080,502
177,528
346,544
7,483,946
118,818
110,109
1,007,959
89,088,156
$60,245,151
1,053,847
9,404,000
2,159,537
36,721
396,254
6,952,378
479,399
118,573
1,075,185
81,921,045
12,140,648
10,554,612
1,802,081
3,144,556
4,751,654
20,439,889
39,835,125
4,972,143
449,853
3,009,024
101,099,585
11,853,571
9,329,190
1,550,243
650,970
4,359,609
15,795,553
37,682,264
4,468,792
400,034
4,519,314
90,609,540
9,483,349
8,580,548
1,442,898
730,253
3,737,425
6,376,545
40,101,489
3,881,998
365,571
7,234,220
81,934,296
10,116,841
8,075,160
1,339,872
562,397
3,520,998
6,093,188
38,055,807
3,441,917
380,843
5,594,822
77,181,845
17,630,402
17,175,379
12,136,289
7,153,860
4,739,200
7,653,868
(21,940,546)
567,596
2,488,663
(12,739,072)
108,758
2,394,165
(10,761,411)
1,264,452
3,976,481
(9,482,449)
-
4,457,449
(8,562,063)
151,948
(13,719,082)
(10,141,651)
(7,102,794)
(5,505,968)
(3,952,666)
3,911,320
16,851,740
$20,763,060
7,033,728
9,818,012
$16,851,740
5,033,495
4,784,517
$9,818,012
1,647,892
3,136,625
$4,784,517
786,534
1,452,802
897,289 (a)
$3,136,625
_______________________________
Source: The Countys audited financial statements.
(a)
Residual equity transfer.
34
HOU:2831731.4
Special Revenue Funds

The Special Revenue Funds are the funding source for annual road and bridge construction and maintenance. The
County is divided into four precincts, each of which is provided with a separate, annual Road and Bridge Fund
Budget. Each precinct Road and Bridge Budget is administered by the County Commissioner elected from that
precinct, subject to approval of the Commissioners Court. The primary sources of revenues for the Special
Revenue Funds include ad valorem taxes and auto registration licenses and grants. The table below summarizes the
revenues and expenditures of the Special Revenue Funds for the past five fiscal years, including the Road and
Bridge Fund, as reported in the Countys Annual Financial Reports. The Special Revenue Funds are not available to
pay debt service on the Bonds.
REVENUES:
Taxes
Fees
Intergovernmental
Interest
Miscellaneous
Total Revenues
EXPENDITURES:
Current Operating
Judicial
Legal Services
Public Safety
Health and Welfare
Culture and Recreation
Conservation
Public Transportation
Revenues Over (Under)
Expenditures
OTHER FINANCING
SOURCES (USES)
Operating Transfers In
Operating Transfers Out
Sources (Uses)
Excess (Deficiency) of Revenues
& Other Sources Over
Expenditures & Other Uses
Fund Balance, October 1
Residual Equity Transfer
Prior Period Adjustment
Fund Balance, September 30
2006
$11,471,034
6,539,568
389,963
12,229,811
1,400,351
159,366
148,852
1,832,655
664,126
34,835,726
$11,279,476
6,324,084
369,937
6,526,440
1,263,797
158,654
129,703
1,865,356
635,722
28,553,169
$10,272,809
5,829,066
291,010
4,809,944
985,150
83,706
127,838
2,129,271
772,139
25,300,933
$9,495,794
6,187,767
265,805
5,700,275
981,489
38,091
103,139
2,311,145
548,841
25,632,346
$8,937,044
5,720,323
300,730
4,887,380
1,089,468
53,984
1,467,762
568,246
23,024,937
115,045
6,221,345
363,820
2,076,202
4,127,271
7,812,017
296,299
17,161,732
38,173,731
(3,338,005)
108,590
6,067,142
311,692
3,932,060
2,024,746
6,948,700
196,349
17,390,668
36,979,947
102,903
5,204,608
270,554
2,308,455
2,510,329
6,102,610
307,650
16,857,418
33,664,527
173,568
5,555,158
269,427
2,195,397
2,544,020
4,473,911
390,282
18,210,470
33,812,233
182,645
4,700,072
220,532
1,559,926
3,148,163
4,390,872
331,317
16,860,588
31,394,115
(8,426,778)
(8,363,594)
(8,179,887)
(8,369,178)
21,890,020
(21,543,946)
3,386,301
3,732,375
12,738,216
(1,080,836)
153,771
11,217,213
(2,381,676)
-
10,476,632
(3,554,081)
581,915
9,187,589
(2,247,227)
-
11,811,151
8,835,537
7,504,466
6,940,362
394,370
5,764,392
$6,158,762
3,384,373
2,380,019
$5,764,392
471,943
1,908,076
$2,380,019
(675,421)
2,583,497
$1,908,076
(1,428,816)
4,744,195
(897,289)
165,407
$2,583,497
__________________________
35
HOU:2831731.4

2005
2007
2004
2003
Debt Service Funds

The Debt Service Funds are the funding source for annual payments of principal and interest on the County's
outstanding debt. The primary source of revenue for the Debt Service Funds is ad valorem taxes. The table below
summarizes the revenues and expenditures of the Debt Service Funds, as reported in the year-end financial
statements for the past five years. The debt service fund for South Montgomery County Road District No. 1 was
included in these statements until 2003, when the outstanding debt of that district was retired.
2007
REVENUES:
Taxes
Interest
Total Revenue
EXPENDITURES:
Debt Service:
Principal Retirement
Interest and Fiscal Charges
Issuance Costs
Total Expenditures
Revenues Over (Under)
Expenditures
OTHER FINANCING
SOURCES (USES)
Operating Transfer In
Proceeds of Refunding Bonds
Premium on Debt Issuance
Payment to Refunded Bond
Escrow Agent
Discount on Debt Issuance
Sources (Uses)
Excess (Deficiency) Revenues
& Other Sources Over
Expenditures & Other Uses
Fund Balances, October 1
Residual Equity Transfer
Fund Balances, September 30
2006

2005
2004
2003
$19,111,318
44,437
19,155,755
$11,895,634
159,996
$12,055,630
$11,687,384
318,995
$12,006,379
$12,034,785
62,985
$12,097,770
$10,052,985
57,991
$10,110,976
5,305,000
13,989,627
593,627
19,888,254
3,830,069
8,285,966
12,116,035
3,034,930
8,087,980
618,647
11,741,557
3,237,591
8,831,163
12,068,754
9,700,493
6,169,771
15,870,264
(732,499)
(60,405)
264,822
29,016
(5,759,288)
510,395
41,495,000
940,880
164,474
-
45,850,000
3,772,220
86,064
1,318
6,204,837
-
(41,706,307)
(120,633)
(49,904,606)
-
1,119,335
164,474
(282,386)
87,382
6,204,837
386,836
2,246,764
104,069
2,142,695
(17,564)
2,160,259
116,398
2,043,861
$2,633,600
$2,246,764
$2,142,695
$2,160,259
445,549
1,580,961
17,351
$2,043,861
________________________
Pension Fund
The County provides pension, disability and death benefits for all of its full-time and part time regular employees
through a non traditional, joint contributory, defined benefit plan in the statewide Texas County and District
Retirement System (TCDRS).
Under the State law governing TCDRS, the contribution rate of the County is adopted annually based on an
actuarially determined rate. The contribution rates for the County were 9.12% for the final three months of calendar
2006, and 9.94% for the first nine months of calendar year 2007. For the accounting year ended September 30,
2007, both the pension cost of the TCDRS plan and the Countys actual contributions to the plan were $6,956,597.
The deposit rate payable by employee members was 6.0% for the calendar year 2007. For more information refer to
Note 13 of Appendix B Excerpts from the Comprehensive Annual Financial Report of the County.
36
HOU:2831731.4
THE COUNTY
Administration of the County
The officials having responsibility for the administration of the County are the County Judge and the four County
Commissioners who comprise the Commissioners Court. Among its duties as the governing body of the County,
Commissioners Court approves the Countys budget, determines the Countys tax rates, approves contracts, calls
elections, and determines when to issue bonds or other obligations. Each Commissioner represents one of the four
precincts into which the County is divided and is elected by the voters of such precinct for a four-year term.
The County Judge is the presiding officer of the Commissioners Court and is elected for a four-year term by the
voters of the County. Judge Alan B. Sadler has served as County Judge since 1990.
Other officials having responsibility for the financial administration of the County are the County Tax AssessorCollector, County Treasurer and County Auditor.
The County Tax Assessor/Collector, J. R. Moore, Jr., was appointed County Tax Assessor/Collector in April 1987,
and elected to such post in 1988, 1992, 1996, 2000 and again in 2004 to serve a four-year term. Mr. Moore attended
North Texas State University and the University of Houston, majoring in Political Science/Government. Mr. Moore
received his state certification as a Professional Tax-Assessor Collector in 1991.
The County Treasurer, Martha N. Gustavsen, was elected County Treasurer in 2007 to serve a four-year term. Ms.
Gustavsen has served as County Treasurer since 1987. She attended Alvin Junior College, majoring in Accounting.
The County Auditor, Phyllis L. Martin, was appointed County Auditor on January 1, 2007, after serving as an
assistant county auditor since 2003. Ms. Martin earned a B.B.A. in Accounting and a Masters in Accountancy from
the University of Houston.
Commissioners Court
Commissioner
Alan B. Sadler
Mike Meador
Craig Doyal
Ernest E. Chance
Ed Rinehart
Position
Years
Served
Terms Expire
December 31
County Judge
Commissioner - Precinct 1
16
14
5
21
8
2010
2008
2010
2008
2010
Consultants
Bond Counsel ........................................................................................... Fulbright & Jaworski L.L.P.
Houston, Texas
Financial Advisor ............................................................................RBC Capital Markets Corporation
Houston, Texas
Auditors (Certified Public Accountants) ............................. Hereford, Lynch, Sellars, & Kirkham, PC
Conroe, Texas
Disclosure Counsel................................................................................................Andrews Kurth LLP
Houston, Texas
TAX MATTERS
Tax Exemption
The delivery of the Bonds is subject to the opinion of Bond Counsel to the effect that interest on the Bonds for
federal income tax purposes (1) will be excludable from gross income, as defined in section 61 of the Internal
Revenue Code of 1986, as amended to the date of such opinion (the Code), pursuant to section 103 of the Code
and existing regulations, published rulings, and court decisions, and (2) will not be included in computing the
alternative minimum taxable income of the owners thereof who are individuals or, except as hereinafter described,
corporations. A form of Bond Counsels opinion is reproduced as APPENDIX C. The statute, regulations, rulings,
and court decisions on which such opinion is based are subject to change.
37
HOU:2831731.4
Interest on all tax-exempt obligations, including the Bonds, owned by a corporation will be included in such
corporations adjusted current earnings, for purposes of calculating the alternative minimum taxable income of such
corporation, other than an S corporation, a qualified mutual fund, a real estate investment trust, real estate mortgage
investment conduit, or a financial asset securitization investment trust (FASIT). A corporations alternative
minimum taxable income is the basis on which the alternative minimum tax imposed by Section 55 of the Code will
be computed.
In rendering the foregoing opinions, Bond Counsel will rely upon representations and certifications of the County
made in a certificate dated the date of delivery of the Bonds pertaining to the use, expenditure, and investment of the
proceeds of the Bonds and will assume continuing compliance by the County with the provisions of the Order
subsequent to the issuance of the Bonds. The Order contains covenants by the County with respect to, among other
matters, the use of the proceeds of the Bonds and the facilities financed therewith by persons other than state or local
governmental units, the manner in which the proceeds of the Bonds are to be invested, and the reporting of certain
information to the United States Treasury. Failure to comply with any of these covenants would cause interest on the
Bonds to be includable in the gross income of the owners thereof.
Bond Counsels opinion is not a guarantee of a result, but represents its legal judgment based upon its review of
existing statutes, regulations, published rulings and court decisions and the representations and covenants of the
County described above. No ruling has been sought from the Internal Revenue Service (the Service) with respect
to the matters addressed in the opinion of Bond Counsel, and Bond Counsels opinion is not binding on the Service.
The Service has an ongoing program of auditing the tax-exempt status of the interest on tax-exempt obligations. If
an audit of the Bonds is commenced, under current procedures the Service is likely to treat the County as the
taxpayer, and the Owners would have no right to participate in the audit process. In responding to or defending an
audit of the tax-exempt status of the interest on the Bonds, the County may have different or conflicting interests
from the Owners. Public awareness of any future audit of the Bonds could adversely affect the value and liquidity of
the Bonds during the pendency of the audit, regardless of its ultimate outcome.
Except as described above, Bond Counsel expresses no other opinion with respect to any other federal, state or local
tax consequences under present law, or proposed legislation, resulting from the receipt or accrual of interest on, or
the acquisition or disposition of, the Bonds. Prospective purchasers of the Bonds should be aware that the ownership
of tax-exempt obligations such as the Bonds may result in collateral federal tax consequences to, among others,
financial institutions, life insurance companies, property and casualty insurance companies, certain foreign
corporations doing business in the United States, S corporations with subchapter C earnings and profits, individual
recipients of Social Security or Railroad Retirement benefits, individuals otherwise qualifying for the earned income
tax credit, owners of an interest in a FASIT and taxpayers who may be deemed to have incurred or continued
indebtedness to purchase or carry, or who have paid or incurred certain expenses allocable to, tax-exempt
obligations. Prospective purchasers should consult their own tax advisors as to the applicability of these
consequences to their particular circumstances.
Tax Accounting Treatment of Premium on Certain Bonds
The initial public offering price of the Bonds (the Premium Bonds) is greater than the amount payable on such
Bonds at maturity. An amount equal to the difference between the initial public offering price of a Premium Bond
(assuming that a substantial amount of the Premium Bonds of that maturity are sold to the public at such price) and
the amount payable at maturity constitutes premium to the initial purchaser of such Premium Bonds. The basis for
federal income tax purposes of a Premium Bond in the hands of such initial purchaser must be reduced each year by
the amortizable bond premium, although no federal income tax deduction is allowed as a result of such reduction in
basis for amortizable bond premium. Such reduction in basis will increase the amount of any gain (or decrease the
amount of any loss) to be recognized for federal income tax purposes upon a sale or other taxable disposition of a
Premium Bond. The amount of premium which is amortizable each year by an initial purchaser is determined by
using such purchasers yield to maturity.
Purchasers of the Premium Bonds should consult with their own tax advisors with respect to the determination of
amortizable bond premium on Premium Bonds for federal income tax purposes and with respect to the state and
local tax consequences of owning and disposing of Premium Bonds.
CONTINUING DISCLOSURE OF INFORMATION
In the Order, the County has made the following agreements for the benefit of the holders and beneficial owners of
the Bonds. The County is required to observe the agreements for so long as it remains obligated to advance funds to
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pay the Bonds. Under the agreement, the County will be obligated to provide certain updated financial information
and operating data annually, and timely notice of specified material events, to certain information vendors. This
information will be available to securities brokers and others who subscribe to receive the information from
the vendors.
In order to provide certain continuing disclosure with respect to the Bonds in accordance with Rule 15c2-12 of the
United States Securities and Exchange Commission under the Securities Exchange Act of 1934, as the same may be
amended from time to time (Rule 15c2-12), the County has entered into a Disclosure Dissemination Agent
Agreement (Disclosure Dissemination Agreement) for the benefit of the Holders of the Bonds with Digital
Assurance Certification, L.L.C. (DAC), under which the County has designated DAC as Disclosure Dissemination
Agent.
The Disclosure Dissemination Agent has only the duties specifically set forth in the Disclosure Dissemination
Agreement. The Disclosure Dissemination Agents obligation to deliver the information at the times and with the
contents described in the Disclosure Dissemination Agreement is limited to the extent the County has provided such
information to the Disclosure Dissemination Agent as required by this Disclosure Dissemination Agreement. The
Disclosure Dissemination Agent has no duty with respect to the content of any disclosures or notice made pursuant
to the terms of the Disclosure Dissemination Agreement. The Disclosure Dissemination Agent has no duty or
obligation to review or verify any information in the Annual Report, Audited Financial Statements, notice of Notice
Event or Voluntary Report, or any other information, disclosures or notices provided to it by the County and shall
not be deemed to be acting in any fiduciary capacity for the County, the Holders of the Bonds or any other party.
The Disclosure Dissemination Agent has no responsibility for the Countys failure to report to the Disclosure
Dissemination Agent a Notice Event or a duty to determine the materiality thereof. The Disclosure Dissemination
Agent shall have no duty to determine or liability for failing to determine whether the County has complied with the
Disclosure Dissemination Agreement. The Disclosure Dissemination Agent may conclusively rely upon
certifications of the County at all times..
Annual Reports
The County will annually provide certain updated financial information and operating data to all NRMSIRs and any
SID as defined below. The information to be updated includes all quantitative financial information and operating
data with respect to the County as follows: (i) annual audited financial statements of the County set forth in
APPENDIX B of this Official Statement and (ii) information of the general type included in this Official Statement
under the headings INVESTMENT AUTHORITY AND INVESTMENT OBJECTIVES OF THE COUNTY,
DEBT SERVICE REQUIREMENTS, COUNTY DEBT (except Estimated Overlapping Debt Statement),
TAXING PROCEDURES AND TAX BASE ANALYSIS and SELECTED FINANCIAL DATA. The County
will update and provide this information within six months after the end of each fiscal year. The County will
provide the updated information to each nationally recognized municipal securities information repository
(NRMSIR) and to the Texas Municipal Advisory Council, the state information depository (SID) designated by
the State of Texas and approved by the staff of the SEC.
The County may provide updated information in full text or may incorporate by reference certain other publicly
available documents, as permitted by SEC Rule 15c2-12 (the Rule). The updated information will include audited
financial statements, if the County commissions an audit and it is completed by the required time. If audited
financial statements are not available by the required time, the County will provide unaudited financial statements
by the required time, and will provide audited financial statements when and if the audit report becomes available.
Any such financial statements will be prepared in accordance with the accounting principles described in Appendix
B or such other accounting principles as the County may be required to employ from time to time pursuant to state
law or regulation.
The Countys current fiscal year end is September 30. Accordingly, it must provide updated information by
March 31, 2009 and March 31 of each year thereafter, unless the County changes its fiscal year. If the County
changes its fiscal year, it will notify each NRMSIR and any SID of the change.
Material Event Notices
The County will also provide timely notices of certain events to certain information vendors. The County will
provide notice of any of the following events with respect to the Bonds, if such event is material to a decision to
purchase or sell Bonds: (1) principal and interest payment delinquencies; (2) non-payment related defaults; (3)
unscheduled draws on debt service reserves reflecting financial difficulties; (4) unscheduled draws on credit
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HOU:2831731.4
enhancements reflecting financial difficulties; (5) substitution of credit or liquidity providers, or their failure to
perform; (6) adverse tax opinions or events affecting the tax-exempt status of the Bonds; (7) modifications to rights
of the holder of the Bonds; (8) bond calls; (9) defeasances; (10) release, substitution or sale of property securing
repayment of the Bonds; and (11) rating changes. In addition, the County will provide timely notice of any failure
by the County to provide information, data or financial statements in accordance with its agreement described above
under - Annual Reports. The County will provide each notice described in this paragraph to any SID and to either
each NRMSIR or the Municipal Securities Rulemaking Board (MSRB).
Availability of Information from NRMSIR and SID
The County has agreed to provide the foregoing information only to the NRMSIR and the SID. The information
will be available to holders of Bonds only if the holders comply with the procedures and pay the charges established
by such information vendors or obtain the information through securities brokers who have done so.
The Municipal Advisory Council of Texas has been designated by the State of Texas as a SID and the SEC staff has
determined that it is a qualified SID. The address of the Municipal Advisory Council of Texas is 600 West 8th
Street, P.O. Box 2177, Austin, Texas 78768-2177, and its telephone number is (512) 476-6947. The MAC has also
received SEC approval to operate and has begun to operate, a central post office for information filings made by
municipal issuers, such as the County. A municipal issuer may submit its information filings with the central post
office, which then transmits such information to the NRMSIRs and the appropriate SID for filing. This central post
office can be accessed and utilized at www.disclosureUSA.org (DisclosureUSA). The County may utilize
DisclosureUSA for the filing of information relating to the Bonds.
Limitations and Amendments
The County has agreed to update information and to provide notices of material events only as described above.
The County has not agreed to provide other information that may be relevant or material to a complete presentation
of its financial results of operations, condition or prospects or agreed to update any information that is provided,
except as described above. The County makes no representation or warranty concerning such information or
concerning its usefulness to a decision to invest in or sell Bonds at any future date. The County disclaims any
contractual or tort liability for damages resulting in whole or in part from any breach of its continuing disclosure
agreement or from any statement made pursuant to its agreement, although holders of Bonds may seek a writ of
mandamus to compel the County to comply with its agreement.
The continuing disclosure agreement may be amended by the County from time to time to adapt to changed
circumstances that arise from a change in legal requirements, a change in law or a change in the identity, nature,
status or type of operations of the County, but only if (1) the provisions, as so amended, would have permitted an
underwriter to purchase or sell Bonds in the primary offering of the Bonds in compliance with the Rule, taking into
account any amendments or interpretations of the Rule since such offering as well as such changed circumstances
and (2) either (a) the holders of a majority in aggregate principal amount (or any greater amount required by any
other provision of the Bond Order that authorizes such an amendment) of the outstanding Bonds consent to such
amendment or (b) a person that is unaffiliated with the County (such as nationally recognized bond counsel)
determines that such amendment will not materially impair the interest of the holders and beneficial owners of the
Bonds. The County may also amend or repeal the provisions of its continuing disclosure agreement if the SEC
amends or repeals the applicable provision of the Rule or a court of final jurisdiction enters judgment that such
provisions of the Rule are invalid, but only if and to the extent that the provisions of this sentence would not prevent
an underwriter from lawfully purchasing or selling Bonds in the primary offering of the Bonds. If the County
amends its agreement, it must include with the next financial information and operating data provided in accordance
with its agreement described above under Annual Reports an explanation, in narrative form, of the reasons for the
amendment and of the impact of any change in the type of information and operating data provided.
Compliance with Prior Undertakings
The County has complied in all material respects with its previous continuing disclosure agreements made in
accordance with the Rule, except that the County filed its report due March 31, 2002 on May 9, 2002, filed a notice
of material event (upgrade in rating which occurred in December 2000) on May 9, 2002 and filed a notice of
material event (refunding of certain obligations which occurred on July 20, 2005) on June 16, 2006. The County has
implemented procedures to insure timely filing of future reports.
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OTHER CONSIDERATIONS
Environmental Regulations
The County is subject to the environmental regulations of the State and the United States. These regulations are
subject to change, and the County may be required to expend substantial funds to meet the requirements of such
regulatory authorities.
Air Quality
Air quality control measures required by the United States Environmental Protection Agency (the EPA) and the
Texas Commission on Environmental Quality (TCEQ) may impact new industrial, commercial and residential
development in Houston and adjacent areas. Under the Clean Air Act (CAA) Amendments of 1990, the eightcounty Houston-Galveston area (HGB area) Harris, Galveston, Brazoria, Chambers, Fort Bend, Waller,
Montgomery and Liberty counties was designated by the EPA as a moderate ozone nonattainment area. Such areas
are required to demonstrate progress in reducing ozone concentrations each year until the EPA eight hour ozone
standards are met. Compliance with EPAs 8-hour standard for ozone must be achieved by June 15, 2010 for areas
designated as moderate. However, on June 15, 2007, the Governor requested the EPA to reclassify the HGB area
since attainment by 2010 was impracticable. If this request is granted, the HGB area will be designated a severe
nonattainment area with a new attainment date of June 15, 2019.
To provide for reductions in ozone concentrations, the EPA and the TCEQ have imposed increasingly stringent
limits on sources of air emissions and require any new source of significant air emissions to provide for a net
reduction of air emissions. If the HGB area fails to demonstrate progress in reducing ozone concentrations or fails to
meet EPAs standards, EPA may impose a moratorium on the awarding of federal highway construction grants and
other federal grants for certain public works construction projects, as well as severe emissions offset requirements
on new major sources of air emissions for which construction has not already commenced.
In order to comply with the EPAs standards for the HGB area, the TCEQ has established a state implementation
plan (SIP) setting emission control requirements, some of which regulate the inspection and use of automobiles.
These types of measures could impact how people travel, what distances people are willing to travel, where people
choose to live and work, and what jobs are available in the HGB area. In response to the 8 hour non-attainment
designations, the TCEQ adopted a SIP revision plan on May 23, 2007 that sought to implement additional controls
in order to reduce NOx and VOCs. This means that additional control strategies will need to be implemented in
order to achieve attainment. It is still uncertain as to whether or when the EPA will approve the SIP revision package
and the reclassification request, and it is possible that these additional controls or rejection of the SIP could have a
negative impact on the HGB areas economic growth and development.
GENERAL CONSIDERATIONS
Sources and Compilation of Information
The information contained in this Official Statement has been obtained primarily from the County and from other
sources believed to be reliable. No representation is made as to the accuracy or completeness of the information
derived from sources other than the County. The summaries of the statutes, orders, policies, and other related
documents are included herein subject to all of the provisions of such documents. These summaries do not purport
to be complete statements of such provisions and reference is made to such documents for further information.
Updating of Official Statement
The County will keep the Official Statement current by amendment or sticker to reflect material changes in the
affairs of the County and, to the extent that information comes to its attention, to the other matters described in the
Official Statement, until the delivery of the Bonds to the Underwriters. All changes in the affairs of the County and
other matters described in the Official Statement subsequent to the delivery of the Bonds to the Underwriters and all
information with respect to the resale of the Bonds shall be the responsibility of the Underwriters except as
described herein under CONTINUING DISCLOSURE OF INFORMATION.
This Official Statement was duly authorized and approved by the Commissioners Court of Montgomery County, as
of the date specified on the first page hereof.
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OTHER INFORMATION
Litigation
According to the County, there are currently a number of lawsuits pending against the County, but none of such
actions are expected to result in recovery against the County for an amount outside the applicable insurance policy
limits and County-held reserves. The County believes that none of the currently outstanding lawsuits, if decided
adversely to the County, would have a material adverse effect on the financial condition of the County.
Registration and Qualification of Bonds for Sale
The sale of the Bonds has not been registered under the Federal Securities Act of 1933, as amended, in reliance upon
the exemption provided thereunder by Section 3(a)(2); and the Bonds have not been qualified under the Securities
Act of Texas in reliance upon various exemptions contained therein; nor have the Bonds been qualified under the
securities acts of any jurisdiction. The County assumes no responsibility for qualification of the Bonds under the
securities laws of any jurisdiction in which the Bonds may be sold, assigned, pledged, hypothecated or otherwise
transferred. This disclaimer of responsibility for qualification for sale or other disposition of the Bonds shall not be
construed as an interpretation of any kind with regard to the availability of any exemption from securities
registration provisions.
Legal Investments and Eligibility To Secure Public Funds in Texas
Section 1201.041 of the Public Security Procedures Act (Chapter 1201, Texas Government Code) provides that the
Bonds are negotiable instruments governed by Chapter 8, Texas Business and Commerce Code, and are legal and
authorized investments for insurance companies, fiduciaries, and trustees, and for the sinking funds of municipalities
or other political subdivisions or public agencies of the State of Texas. With respect to investment in the Bonds by
municipalities or other political subdivisions or public agencies of the State of Texas, the Public Funds Investment
Act, Chapter 2256, Texas Government Code, requires that the Bonds be assigned a rating of A or its equivalent as
to investment quality by a national rating agency. See OTHER INFORMATION - Ratings herein. In addition,
various provisions of the Texas Finance Code provide that, subject to a prudent investor standard, the Bonds are
legal investments for state banks, savings banks, trust companies with a capital of one million dollars or more, and
savings and loan associations. The Bonds are eligible to secure deposits of any public funds of the State, its
agencies, and its political subdivisions, and are legal security for those deposits to the extent of their market value.
No review by the County has been made of the laws in other states to determine whether the Bonds are legal
investments for various institutions in those states.
Legal Opinions
The County will furnish a complete transcript of proceedings had incident to the authorization and issuance of the
Bonds, including the unqualified approving legal opinion of the Attorney General of Texas approving the Initial
Bond and to the effect that the Bonds are valid and legally binding obligations of the County, and based upon
examination of such transcript of proceedings, the approving legal opinion of Bond Counsel, to like effect and to the
effect that the interest on the Bonds will be excludable from gross income for federal income tax purposes under
Section 103(a) of the Code, subject to the matters described under TAX MATTERS herein, including the
alternative minimum tax on corporations. Bond Counsel has reviewed the information appearing in this Official
Statement under THE BONDS (except for Book-Entry-Only System, Bondholders Remedies and Future
Borrowing), LEGAL MATTERS, TAX MATTERS, and CONTINUING DISCLOSURE OF
INFORMATION (except Compliance with Prior Undertakings), solely to determine whether such information
fairly summarizes matters of law and the provisions of the documents referred to therein. Bond Counsel has not,
however, independently verified any of the factual information contained in this Official Statement nor has it
conducted an investigation of the affairs of the County for the purpose of passing upon the accuracy or completeness
of this Official Statement. No person or entity is entitled to rely upon Bond Counsels limited participation as an
assumption of responsibility for or an expression of opinion of any kind with regard to the accuracy or completeness
of any information contained herein. The legal fees to be paid to Bond Counsel for services rendered in connection
with the issuance of the Bonds is contingent on the sale and delivery of the Bonds.
The legal opinion of Bond Counsel will accompany the Bonds deposited with DTC or will be printed on the Bonds
in the event of the discontinuance of the Book-Entry-Only System. Certain legal matters will be passed upon for the
County by Andrews Kurth LLP, Houston, Texas, Disclosure Counsel. Certain legal matters will be passed upon for
the Underwriters by Allen Boone Humphries Robinson LLP, Houston, Texas, Counsel to the Underwriters. The
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legal fees to be paid to Disclosure Counsel and Counsel to the Underwriters for services rendered in connection with
the issuance of the Bonds is contingent on the sale and delivery of the Bonds. The legal opinion to be delivered
concurrently with the delivery of the Bonds express the professional judgment of the attorneys rendering the
opinions as to the legal issues explicitly addressed therein. In rendering a legal opinion, the attorney does not
become an insurer or guarantor of that expression of professional judgment, of the transaction opined upon, or of the
future performance of the parties to the transaction. Nor does the rendering of an opinion guarantee the outcome of
any legal dispute that may arise out of the transaction.
Financial Advisor
RBC Capital Markets Corporation is employed as Financial Advisor to the County in connection with the issuance
of the Bonds. The Financial Advisors fee for services rendered with respect to the sale of the Bonds is contingent
upon the issuance and delivery of the Bonds.
Forward-Looking Statements Disclaimer
The statements contained in this Official Statement and in any other information provided by the County that are not
purely historical are forward-looking statements, including statements regarding the Countys expectations, hopes,
intentions, or strategies regarding the future. Readers should not place undue reliance on forward-looking
statements. All forward-looking statements included in this Official Statement are based on information available to
the County on the date hereof, and the County assumes no obligation to update any such forward-looking
statements. The Countys actual results could differ materially from those discussed in such forward-looking
statements. The forward-looking statements included herein are necessarily based on various assumptions and
estimates and are inherently subject to various risks and uncertainties, including risks and uncertainties relating to
the possible invalidity of the underlying assumptions and estimates and possible changes or developments in social,
economic, business, industry, market, legal, and regulatory circumstances and conditions and actions taken or
omitted to be taken by third parties, including customers, suppliers, business partners and competitors, and
legislative, judicial, and other governmental authorities and officials. Assumptions related to the foregoing involve
judgments with respect to, among other things, future economic, competitive, and market conditions and future
business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond the
control of the County. Any of such assumptions could be inaccurate and, therefore, there can be no assurance that
the forward-looking statements included in this Official Statement will prove to be accurate.
Miscellaneous
The financial data and other information contained herein have been obtained from the Countys records, audited
financial statements and other sources which are believed to be reliable. There is no guarantee that any of the
assumptions or estimates contained herein will be realized. All of the summaries of the statutes, documents and
orders contained in this Official Statement are made subject to all of the provisions of such statutes, documents and
orders. These summaries do not purport to be complete statements of such provisions and reference is made to such
documents for further information. Reference is made to original documents in all respects. The Bond Order
authorizing the issuance of the Bonds has also approved the form and content of this Official Statement and any
addenda, supplement or amendment thereto and authorized its further use in the reoffering of the Bonds by the
Underwriters.
Concluding Statement
To the extent that any statements made in this Official Statement involve matters of opinion or estimates, whether or
not expressly stated to be such, they are made as such and not as representations of fact or certainty and no
representation is made that any of these statements have been or will be realized. Information in this Official
Statement has been derived by the County from official and other sources and is believed by the County to be
accurate and reliable. Information other than that obtained from official records of the County has not been
independently confirmed or verified by the County and its accuracy is not guaranteed.
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Neither this Official Statement nor any statement that may have been made orally or in writing is to be
construed as or as part of a contract with the original purchasers or subsequent owners of the Bonds.
/s/ Alan B. Sadler

County Judge
Montgomery County, Texas
ATTEST:
/s/ Mark Turnbull
County Clerk
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APPENDIX A
ECONOMIC AND DEMOGRAPHIC INFORMATION
The following information has been derived from various sources, including Texas Municipal Reports, the South
Montgomery County Woodlands Economic Development Partnership, U.S. Census data, Greater Conroe Economic
Development Council, Conroe Chamber of Commerce, and City and County officials. While such sources are
believed to be reliable, no representation is made as to the accuracy thereof.
- General Montgomery County, Texas (the County), a component of the Houston Metropolitan Area, has an economy based
on mineral production (oil, gas, sand, and gravel), agriculture (horses, ratite bird, cattle, hay, swine, greenhouse
nurseries, and also blueberries and peaches), and lumbering (timber products). The County was created and
organized in 1837 and consists of approximately 1,044 square miles of rolling, densely forested land. Many
residents of the County work in the City of Houston.
According to the U.S. Census Bureau, the County had a population in 1970 of 49,479, in 1980 of 127,722, in 1990
of 182,201, and in 2000 of 293,768, representing an increase of 61.2% from 1990 to 2000.
Cities within the County are Chateau Woods, Conroe, Cut n Shoot, Magnolia, Montgomery, New Caney, Oak
Ridge North, Panorama Village, Patton Village, Pinehurst, Porter, Porter Heights, Roman Forest, Shenandoah,
Splendora, Stagecoach, Willis, Woodbranch Village, Woodloch and the planned residential and business community
called The Woodlands.
School districts within the County are Conroe ISD, Magnolia ISD, Montgomery ISD, New Caney ISD, Splendora
ISD and Willis ISD. The largest school district is Conroe ISD, comprising approximately 333 square miles, located
in south central Montgomery County adjacent to the northern boundary of Harris County, and includes such
communities as the City of Conroe, The Woodlands, Timber Lakes, Cut and Shoot, Woodloch, Chateau Woods, and
Oak Ridge North. Conroe ISD operates 7 senior high schools, 6 junior high schools, 9 intermediate schools, and 26
elementary schools and has a 2007-2008 school year enrollment of approximately 46,500 students. A satellite
campus of North Harris Montgomery County College (the College) is located in Montgomery County.
The County owns and operates the Lone Star Executive Airport which is a full-service facility located four miles
from Conroe. Houstons Intercontinental Airport, located nearby in Harris County, offers international travel for
passengers and cargo.
The following is a list of some of the firms in Montgomery County with a total number of employees in excess of
500. Such industry and employment data was provided by the South Montgomery County Woodlands Economic
Development Partnership, the Greater Conroe Economic Development Council and the Conroe Chamber of
Commerce.
EMPLOYERS OF 500-599
Name
Name
Bearden Wallpapering
Chevron Phillips Chemical Co.
Hughes & Christenson
Inkjet
Lexicon Genetics, inc.
Maersk Sealand
Peet Junior High School

Memorial Hermann, The Woodlands Hospital
Wal-Mart Supercenter
Wiesner Buick GMC Pontiac
Woodlands Resort and Conference Center
EMPLOYERS OF 1,000+
Name
Name
Anadarko Energy Services Corporation

Anadarko Petroleum Corporation
Conroe Regional Medical Center

Hewitt Associates, LLC
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HOU:2831731.4
CITY OF CONROE
The City of Conroe (the City), the county seat of Montgomery County, is located in southeast Texas and is
approximately 35 miles north of Houston. Conroe is serviced by Interstate 45, Texas 75 (north-south), Texas 105
(east-west) and Loop 336 which encircles Greater Conroe. The City is the principal center of commerce in
Montgomery County. The Citys population has increased from 27,610 in 1990 to 36,811 in 2000 representing a
33% growth rate.
In 1973, Lake Conroe was completed, forming a 21,000 acre reservoir which is owned by the San Jacinto River
Authority and the City of Houston. The recreational and development opportunities afforded by the lake have had
economic impact on the Conroe and Montgomery County economies.
THE WOODLANDS
The Woodlands is a community being developed approximately 27-32 miles north of downtown Houston. Located
within a 28,000-acre tract of densely forested land, the community is generally situated adjacent to and west of
Interstate Highway 45, south of FM 1488, and north of Spring Creek, the boundary line between Montgomery and
Harris Counties. Additional acreage, known as The Woodlands Trade Center (Trade Center), is adjacent to and
east of Interstate Highway 45 between Texas State Highway 242 and FM 1488.
The Woodlands is located in a market sector of the greater Houston metropolitan area containing approximately 150
residential developments. Residential developments located in the market sector offer a variety of housing ranging
in price generally from $70,000 to in excess of $2 million. The majority of these subdivisions offer some
recreational facilities (e.g., swimming pools and clubhouses) and a few provide golf and tennis facilities. In some
cases, schools are located within the subdivisions.
Formal opening of The Woodlands occurred in October, 1974. Substantial development, as more fully described
herein, has occurred in the Village of Grogan's Mill, the Village of Panther Creek, the Village of Cochran's
Crossing, the Village of Indian Springs, the Village of Alden Bridge, Carlton Woods, the Village of Sterling Ridge,
and College Park, which are eight of the nine residential villages planned for The Woodlands; parts of the Town
Center, Research Forest, College Park; and the Trade Center. The ninth residential village, Creekside Park, is
undergoing its initial phase of development with lots available in Carlton Woods Creekside Park. These areas
currently have a population of approximately 83,884 people, and 1,511 employers provide employment for
approximately 42,190 people.
ECONOMIC AND GROWTH INDICATORS
U.S. Census of Population (a)
1930
1940
1950
1960
1970
1980
1990
2000
Montgomery County
Number
% Change
14,588
-15.84
23,055
+58.04
24,504
+6.28
26,839
+9.53
49,479
+84.35
127,722
+158.04
182,201
+42.65
293,768
+61.23
City of Conroe, TX
Number
% Change
2,457
+32.24
4,624
+88.20
7,298
+57.83
9,192
+25.95
11,969
+30.21
20,447
+70.83
27,610
+35.03
36,811
+33.32
______________________________
(a)
2000 Census of Population and Housing, U.S. Dept. of Commerce, Bureau of the Census.
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Summary of Montgomery County Building Permit Activity

Fiscal
Year
Commercial
Permits
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
212
219
179
248
273
491
376
395
373
495
437
507
291
300
353
Estimated
Value (000)
$80,822
81,625
61,863
67,209
85,628
159,956
66,170
920,414
194,996
207,333
508,691
242,667
242,817
212,823
279,659
______________________________
Source: Audited Financial Statement Statistical Section.
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Residential
Permits
2,136
2,551
2,645
3,967
3,745
4,902
3,925
3,209
3,419
4,252
5,132
6,062
5,274
6,292
4,951
Estimated
Value (000)
$229,973
228,930
255,858
389,573
411,856
580,483
440,938
483,754
501,635
610,797
774,983
906,083
845,354
1,064,136
923,000
APPENDIX B
EXCERPTS FROM COMPREHENSIVE ANNUAL FINANCIAL REPORT OF

MONTGOMERY COUNTY, TEXAS FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2007
B-1
HOU:2831731.4

COMPREHENSIVE ANNUAL FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED
SEPTEMBER 30, 2007
Prepared by
THE MONTGOMERY COUNTY AUDITOR'S OFFICE
Phyllis L. Martin
County Auditor

Comprehensive Annual Financial Report
Table of Contents
Year Ended September 30, 2007
PAGE
INTRODUCTORY SECTION
County Auditors Letter of Transmittal . . . . . . . . . . . . . . . . . . . . . . . . . . . .
GFOA Certificate of Achievement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Organization Chart . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Directory of Elected and Appointed Officials . . . . . . . . . . . . . . . . . . . . . . .
1
5
6
7
FINANCIAL SECTION
Independent Auditors Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Managements Discussion and Analysis. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Basic Financial Statements:
Government-wide Financial Statements:
Statement of Net Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Statement of Activities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fund Financial Statements:
Balance Sheet Governmental Funds . . . . . . . . . . . . . . . . . . . . . .
Reconciliation of the Balance Sheet of the Governmental
Funds to the Statement of Net Assets.. . . . . . . . . . . . . . . . . . . .
Statement of Revenues, Expenditures, and Changes in
Fund Balances Governmental Funds. . . . . . . . . . . . . . . . . .
Reconciliation of the Statement of Revenues, Expenditures,
and Changes in Fund Balances of the Governmental
Funds to the Statement of Activities . . . . . . . . . . . . . . . . . . . .
Statement of Revenues, Expenditures, and Changes in
Fund Balances Budget (GAAP Basis) and Actual
Major Governmental Funds . . . . . . . . . . . . . . . . . . . . . . . . . .
Statement of Assets and Liabilities Fiduciary Funds. . . . . . . . .
Notes to the Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additional Supplementary Information:
Schedule of Revenues and Other Financing Sources Budget
(GAAP Basis) and Actual General Fund . . . . . . . . . . . . . . . . . .
Schedule of Expenditures and Other Financing Uses Budget
(GAAP Basis) and Actual General Fund . . . . . . . . . . . . . . . . . .
Schedule of Revenues, Expenditures, and Changes in Fund
Balance Budget (GAAP Basis) and Actual Debt Service Fund
Combining and Individual Fund Statements and Schedules:
Combining Balance Sheet Nonmajor Governmental Funds . . . . . .
Combining Statement of Revenues, Expenditures, and Changes
in Fund Balances Nonmajor Governmental Funds. . . . . . . . . .
Combining Balance Sheet Nonmajor Special Revenue Funds. . . .
Combining Statement of Revenues, Expenditures, and Changes
in Fund Balances Nonmajor Special Revenue Funds . . . . . . . .
9
11
EXHIBIT
I
II
28
29
III
30
33
IV
34
37
V
VI
38
42
43
SCHEDULE
A-1
68
A-2
70
A-3
81
B-1
84
B-2
C-1
85
88
C-2
92

Table of Contents
Balance Budget (GAAP Basis) and Actual Attorney
Administration Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance Budget (GAAP Basis) and Actual
Forfeitures Fund. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance Budget (GAAP Basis) and Actual Civic
Center Complex Fund. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance Budget (GAAP Basis) and Actual FEMA
Disaster Grants Fund. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance Budget (GAAP Basis) and Actual Jury Fund. . . . . . .
Balance Budget (GAAP Basis) and Actual Sheriff
Commissary Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance Budget (GAAP Basis) and Actual Memorial
Library Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Community Development Fund. . . . . . . . . . . . . . . . . . . . . . . . . .
Balance Budget (GAAP Basis) and Actual Animal
Shelter Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance Budget (GAAP Basis) and Actual Law
Library Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Historical Commission Fund. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Alternate Dispute Resolution Fund . . . . . . . . . . . . . . . . . . . . . . . .
Balance Budget (GAAP Basis) and Actual Juvenile
Probation Fund. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance Budget (GAAP Basis) and Actual Child
Welfare Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Combining Balance Sheet Nonmajor Capital Project Funds . . . . . . .
ii
SCHEDULE
PAGE
C-3
96
C-4
97
C-5
98
C-6
99
C-7
100
C-8
101
C-9
102
C-10
103
C-11
104
C-12
105
C-13
106
C-14
107
C-15
108
C-16
D-1
109
112

Table of Contents
Combining Statement of Revenues, Expenditures, and
Changes in Fund Balances Nonmajor Capital
Project Funds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Combining Statement of Assets and Liabilities Agency
Funds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Combining Statement of Changes in Assets and Liabilities
Agency Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capital Assets Used in the Operation of Governmental Funds:
Schedule by Source . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Schedule by Function and Activity . . . . . . . . . . . . . . . . . . . . . . . . . . .
Schedule of Changes by Function and Activity . . . . . . . . . . . . . . . . . .
SCHEDULE
PAGE
D-2
114
E-1
118
E-2
119
F-1
F-2
F-3
121
122
124
STATISTICAL SECTION
TABLE
Financial Trends:
Net Assets by Component . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Changes in Net Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Governmental Fund Balances Last Ten Fiscal Years. . . . . . . . . . . . .
Changes in Fund Balances, Governmental Funds Last
Ten Fiscal Years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Revenue Capacity:
Taxable Assessed Value and Actual Value of Property Last
Ten Fiscal Years. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property Tax Rates Direct and Overlapping Governments
Last Ten Fiscal Years. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Principal Taxpayers Current Year and Nine Years Ago . . . . . . . . . .
Property Tax Levies and Collections Last Ten Fiscal Years. . . . . . .
Debt Capacity:
Ratios of Outstanding Debt by Type Last Ten Fiscal Years. . . . . . .
Ratios of Net General Bonded Debt Outstanding Last
Ten Fiscal Years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Legal Debt Margin Last Ten Fiscal Years. . . . . . . . . . . . . . . . . . . . .
Direct and Overlapping Debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pledged-Revenue Coverage Last Ten Fiscal Years. . . . . . . . . . . . . .
Economic and Demographic Indicators:
Demographic and Economic Statistics Last Ten Fiscal Years. . . . . .
Principal Employers Current Year and Nine Years Ago . . . . . . . . . .
Operating Information:
County Employees by Function Last Ten Fiscal Years. . . . . . . . . . .
Operating Indicators by Function Last Ten Fiscal Years . . . . . . . . .
Capital Asset and Infrastructure Statistics by Function
Last Ten Fiscal Years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
iii
I
II
III
129
130
132
IV
134
137
VI
VII
VIII
138
146
147
IX
148
X
XI
XII
XIII
149
150
152
155
XIV
XV
156
157
XVI
XVII
159
160
XVIII
162
iv

Office of the County Auditor
301 North Thompson, Suite 202, Conroe, Texas 77301
P. O. Box 539, Conroe, Texas 77305
Phyllis L. Martin
County Auditor
Peggie Rushing
st
1 Assistant County Auditor
James Robey, Supervisor
Accounts Payable
Carol Stroud, Supervisor
Internal Audit
Krissa Garner, Supervisor
Budget/Financial Reporting
March 18, 2008
The Board of District Judges

The Commissioners Court
Honorable Judges and Commissioners:
The Comprehensive Annual Financial Report of Montgomery County, Texas, for the year ended
September 30, 2007, is submitted herewith. This report was prepared by the County Auditor in
accordance with generally accepted accounting principles as promulgated by the Governmental
Accounting Standards Board, and is in compliance with Chapter 114 Section 025 of the Local
Government Code (Vernons Texas Codes Annotated).
Responsibility for both the accuracy of the presented data and the completeness and fairness of the
presentation, including all disclosures, rests with the County. To provide a reasonable basis for making
this representation, Montgomery County management has established a comprehensive internal control
framework designed both to protect governmental assets from loss, theft, or misuse, and to compile
sufficient reliable information for the preparation of the countys financial statements in conformity with
Generally Accepted Accounting Principles (GAAP). Montgomery Countys comprehensive framework,
because the cost of internal controls should not outweigh their benefits, has been designed to provide
reasonable, rather than absolute, assurance that the financial statements will be free from material
misstatement. We believe the data as presented is accurate in all material aspects; that it is presented in a
manner designed to fairly set forth the financial position and results of operations of Montgomery County
as measured by the financial activity of its various funds; and that all disclosures necessary to enable the
reader to gain the maximum understanding of the Countys financial activity have been included.
Montgomery Countys financial statements have been audited by Hereford, Lynch, Sellars & Kirkham,
P.C., a firm of licensed certified public accountants. The goal of the independent audit was to provide
reasonable assurance that the financial statements of the County for the fiscal year ended September 30,
2007 are free of material misstatement. The independent audit involved examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements; assessing the accounting
principles used and significant estimates made by management; and evaluating the overall financial
presentation. The independent auditor concluded, based on the audit, that there was a reasonable basis for
rendering an unqualified opinion that the financial statements of Montgomery County for the year ended
September 30, 2007 are fairly presented in conformity with GAAP. The independent auditors report is
presented as the first component of the financial section of this report.
The independent audit of the financial statements of Montgomery County was a part of a broader,
federally mandated Single Audit designed to meet the special needs of federal grantor agencies. The
Tele: (936) 539-7820Fax (936) 788-8390Email: pmartin@co.montgomery.tx.us
1
standards governing Single Audit engagements require the independent auditor to report not only on the
fair presentation of the financial statements, but also on the governments internal controls and
compliance with legal requirements. Specific emphasis was placed on internal controls and compliance
with laws and regulations involving the administration of federal awards. This Single Audit Report is
available as a separate report from Montgomery County.
GAAP require that management provide a narrative introduction, overview, and analysis to accompany
the basic financial statements in the form of Managements Discussion and Analysis (MD&A). This
letter of transmittal is designed to compliment MD&A and should be read in conjunction with it.
Montgomery Countys MD&A can be found immediately following the report of the independent
auditors.
Profile of Montgomery County
Montgomery County was created in 1837, and is located on the southern edge of the Big Thicket,
approximately forty miles north of metropolitan Houston. The County provides a full range of services,
including police protection, legal and judicial services, construction and maintenance of roads and
bridges, public health service, and facilities for recreational and cultural use. The County operates a full
service airport as a reliever to nearby Bush Intercontinental Airport. Three major rail lines intersect in the
county seat of Conroe. The North Harris Montgomery Community College District offers both 2- and 4year degree plans in partnership with several universities throughout the state. Scenic Lake Conroe sits
among some 1,090 square miles of rolling hills and grassy meadows to create an atmosphere of rural
America nestled securely beside its urban neighbors.
The County operates as specified under the Constitution of The State of Texas, and in accordance with the
provisions of the State Statutes of Texas, which provide for a Commissioners Court consisting of the
County Judge and four Commissioners, each of whom is elected from four geographical precincts. The
County Judge is elected for a four-year term, and the Commissioners for four-year staggered terms.
The U.S. Census Bureau reported the 1990 population for Montgomery County to be 180,394, and the
year 2000 population to be 293,768. At September 30, 2007 the reported population was 394,517. This
34% growth in eight years was evident in the increased demand for service at the county level.
Montgomery County maintains strict budgetary controls to ensure compliance with legal provisions in the
annual appropriated budget approved by the governing body. Activities of the General Fund, the Special
Revenue Funds, and the Debt Service Fund are included in the annual appropriated budget. Budget to
actual comparisons are provided in this report for all funds for which an annual appropriated budget is
adopted. According to the budget laws of the State of Texas, expenditures may not exceed the amount
appropriated for each fund. The Budget Officer is responsible for compiling and presenting a budget to
Commissioners Court for their consideration and approval, adhering to a calendar established by the
statutes of the State of Texas. In keeping with those statutes, the ad valorem tax levy cannot be
established until the budget is adopted. In Montgomery County, the budget is adopted by September 1 of
each year. Once adopted, it is enforced by the County Auditor, as provided by statute.
Factors Affecting Financial Condition
The information presented in the financial statements of Montgomery County is best understood when it
is considered from the broader perspective of the specific environment within which the County operates.
Local economy- The Countys economy has historically been based on mineral production (oil, gas,
sand, and gravel), agriculture (horses, cattle, greenhouse nurseries), and lumbering (timber products).
Commercial construction has continued to increase as a result of several large shopping centers being
developed along the Interstate 45 corridor. Investments made in Texas highways recently have assisted in
attracting new and diverse businesses to the County. The Woodlands, a planned community in south
Montgomery County, is home to energy, biomedical, and technology businesses, causing continued
growth in the southern part of the County. Evidence of this growth is seen in the inclusion of The

2
Woodlands Land Development, LP near the top of the list of ten principal taxpayers in the County during
2007.
Long-term financial planning- The Commissioners Court continues to be very active in infrastructure
development, specifically road improvements, to help insure economic growth. In the second half of
calendar year 2005, the County executed an agreement with the Texas Department of Transportation that
will facilitate the improvement of five separate state-owned roads in the near future. This pass-thru toll
agreement provides for the County to pledge local funds to improve these roads, with a partial
reimbursement from federal highway funds at a later date. The County pledged $100million of the Series
2006 $160million voter-approved road bonds, as well as an additional $86million of future bonds to
leverage the federal funds for the projects in the hopes of gaining an estimated $230million in
improvements for the citizens of Montgomery County.
As part of this future planning, the Commissioners Court created the Montgomery County Toll Road
Authority (MCTRA) in August 2006. The MCTRA will be charged with the task of collecting tolls
from vehicles traveling on that portion of State Highway 242 which connects with Interstate 45 in
southern Montgomery County. This project will improve one of the specific roads listed in the agreement
with the Texas Department of Transportation, and is expected to be completed in early 2009. Revenues
generated by the authority are anticipated to be used to either retire a portion of the debt related to the
construction or to fund future improvements.
Recognizing the immediate as well as future need for more bed space in the county jail, Commissioners'
Court created the Jail Financing Corporation in September 2006. The primary purpose of the new entity
was to raise the funds necessary to construct an 1,100-bed detention facility adjacent to the existing jail.
The Corporation issued $45million in lease-revenue bonds during 2007, and construction is currently
underway. Upon completion, the facility will be leased to the County by the Corporation to initially
house federal inmates under the terms of an intergovernmental agreement (IGA) with the federal
government. Revenues received from housing the federal inmates will, in turn, be used to retire the
outstanding bonds. The County anticipates "opening up" an estimated 250 beds in the existing jail by
transferring current federal inmates to the new facility.
In an effort to combat the increasing inflationary cost on medical claims and to control utilization of plan
benefits by participants, the County will open an employee/retiree health clinic, which will allow the
County to pay for minor medical services at substantially reduced pricing. The clinic will also be
modeled to offer Health Risk Assessments (HRA) which will allow for identification and education for
the prevention of medical conditions by the employee/retiree population. With proper maintenance of
certain medical conditions, the employer sponsored medical plan will be less apt to incur large claims.
In addition to traditional medical claims, the Clinic will offer immediate medical services for Workers
Compensation injuries. A large percentage of workers compensation claims could be resolved at the clinic
and the employee would be released to back to work. This method of service would allow for a reduction
of workers compensation claim cost and workers compensation indemnity payments for the County.
If all components of the medical clinic are implemented, including a pharmacy, the County should
achieve substantial savings now and in the future.
Cash management policies and practices- The Countys investment function operates within the
guidelines of a written policy as required by the Public Funds Investment Act. An investment committee
comprised of the County Treasurer, Tax Assessor-Collector, District Clerk, and a member of
Commissioners Court oversees the investment activities for the County. The County Auditor and
County Attorney are advisors to the committee. Commissioners Court has designated the County
Treasurer the investment officer for the County.
Specific investment strategies have been identified for each group of funds. Strategies emphasize safety
of principal as well as liquidity. Demand deposits are covered by pledged collateral maintained in joint

3
safekeeping accounts at Compass Bank. Special attention is paid to timing maturities to be consistent
with construction project draws and regular operating expenditures.
Risk Management - The County retains various levels of risk, and accounts for the associated
expenditures in the General Fund. The portions of risk that are not transferred to third party coverage are
self-funded by the County under formal arrangements. Additional information concerning the Countys
risk management activities is included in the notes to the financial statements.
Pension and other post-employment benefits- The County provides retirement, disability, and death
benefits for all of its full-time regular employees through a nontraditional defined benefit pension plan in
the statewide Texas County and District Retirement System (TCDRS). Detailed information on the
retirement plan and other post-employment benefits can be found in the notes to the financial statements.
Awards and Acknowledgments
At the annual conference of the National Purchasing Institute (NPI), Montgomery County was awarded
an Achievement of Excellence in Procurement for demonstrating extraordinary innovation,
professionalism, productivity, and leadership attributes in the Purchasing Department. This was the fifth
consecutive year that the County has achieved this award.
For only the second time in 10 years, the Board of Trustees of the Conroe Independent School District
honored the Montgomery County Memorial Library System with its Patron Influencing Education (PIE)
Award. The award recognizes the Library Systems commitment and dedication to improving the literacy
skills of the students of the Conroe Independent School District.
The Government Finance Officers Association of the United States and Canada (GFOA) awarded a
Certificate of Achievement for Excellence in Financial Reporting to Montgomery County for its
Comprehensive Annual Financial Report (CAFR) for the fiscal year ended September 30, 2006. This was
the nineteenth consecutive year that the County has achieved this prestigious award. In order to be
awarded a Certificate of Achievement, a government must publish an easily readable and efficiently
organized comprehensive annual financial report. This report must satisfy both generally accepted
accounting principles and applicable legal requirements.
A Certificate of Achievement is valid for a period of one year only. We believe that our current
comprehensive annual financial report continues to meet the Certificate of Achievement Programs
requirements, and we are submitting it to the GFOA to determine its eligibility for another certificate.
The preparation of this report would not have been possible without the efficient and dedicated services of
all County departments. I want to express my appreciation to the entire staff of the Office of County
Auditor for their continued efforts. Krissa Garner, Budget and Financial Reporting Supervisor, and the
Budget and Financial Reporting Section were instrumental in the timely and accurate completion of this
report, and should be commended for their contribution.
I also wish to commend the members of the Commissioners Court for conducting the financial
operations of Montgomery County in a responsible manner, while meeting the increasing demands for
public service.
Respectfully submitted,
Phyllis L. Martin
Montgomery County Auditor
/s
4
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INTERGOVERNMENTAL:
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MONTGOMERY COUNTY, TEXAS ORGANIZATION CHART

DIRECTORY OF OFFICIALS
SEPTEMBER 30, 2007
COMMISSIONERS COURT:
Alan B. Sadler
Mike Meador
Craig Doyal
Ernest E. Chance
Ed Rinehart
County Judge
Commissioner, Precinct #1
DISTRICT COURT:
Fred Edwards
Suzanne Stovall
Cara Wood
Kathleen Hamilton
K. Michael Mayes
Michael McDougal
Barbara G. Adamick
Judge, 9th Judicial District

Judge, 221st Judicial District
District Attorney
District Clerk
COUNTY COURT AT LAW:

Dennis Watson
Luther J. Winfree
Patrice McDonald
Mary Ann Turner
David Walker
Mark Turnbull
Judge, County Court at Law #1

County Attorney
County Clerk
JUSTICE COURT:
Lanny Moriarty
Grady Trey Spikes
Mary E. Connelly
James Metts
Matthew Masden
Justice of Peace, Precinct #1

LAW ENFORCEMENT:
Tommy Gage
Donnie O. Chumley
Gene DeForest
Tim Holifield
Travis L. Bishop
David H. Hill
Sheriff
Constable, Precinct #1
FINANCIAL ADMINISTRATION:
J.R. Moore, Jr.
Martha N. Gustavsen
Phyllis L. Martin
Carolyn Hooper
Julane Tolbert, retired 11/30/2007
Tax Assessor-Collector
County Treasurer
County Auditor*
Purchasing Agent*
Budget Officer*
* Designates appointed official. All others are elected.
MANAGEMENTS DISCUSSION AND ANALYSIS

This discussion and analysis provides readers of the financial statements of Montgomery County, Texas
(the County) with a narrative overview and analysis of the Countys financial activities for the fiscal year
ended September 30, 2007. The intent of this discussion and analysis is to evaluate the current activities,
resulting changes, and currently known facts of the County as a whole. Readers of this discussion and
analysis should consider the information presented here in conjunction with additional information that is
furnished in the accompanying letter of transmittal, which can be found on pages 1-4 of this report. This
discussion should also be read in conjunction with the basic financial statements and the notes to those
financial statements (which immediately follow this discussion). The discussion and analysis includes
comparative data for the prior year.
FINANCIAL HIGHLIGHTS
The assets of the County exceeded its liabilities at the close of the fiscal year by $316,966,768
(net assets). Of this amount, $7,070,714 is restricted for specific purposes. With the presentation
of the investment in capital assets, unrestricted net assets becomes a negative $59,096,992.
Analysis of the negative unrestricted net assets reveals that a large portion of debt was used to
purchase land for road expansion projects that are a joint undertaking with the State. In these
instances of expansion of State-owned roads, the County will report the debt at this time, but not
the asset.
The revenues of the Countys government-wide activities were $241,704,983 and expenses were
$203,300,672.
Rapid growth in the county brought about uncommon infrastructure
contributions, adding to an increase in net assets of $38,404,311.
At September 30, 2007, the Countys governmental funds reported combined ending fund
balances of $148,623,365, a decrease of $700,458 in comparison with the prior year. From the
ending fund balance, $125,357,069 is reserved for specific purposes. Approximately 13% of the
ending balance, $18,798,413, is available for spending at the governments discretion.
At September 30, 2007, unreserved, undesignated fund balance for the General Fund was
$19,451,182, or 18.5% of total General Fund expenditures.
The Countys total net bonded debt increased by $40,429,179 (14.0%) during the current fiscal
year. This increase was brought about by the issuance of $41,495,000 in refunding bonds and
$44,834,989 in lease revenue bonds. The refunding issue contributed to an increase of
outstanding general obligation bonds by $2,481,873, while instrumentally affecting a decrease in
outstanding certificates of obligation by $3,495,000.
OVERVIEW OF THE FINANCIAL STATEMENTS

This discussion and analysis is intended to serve as an introduction to Montgomery Countys basic
financial statements, which are comprised of three components: 1) government-wide financial
statements, 2) fund financial statements, and 3) notes to the financial statements. This report also
contains additional supplementary information to the financial statements themselves.
Government-Wide Financial Statements
The Statement of Net Assets and the Statement of Activities, the two government-wide financial
statements, are designed to provide readers with a broad overview of Montgomery Countys finances,
similar to the financial statements of a private-sector business. Both of these statements are presented
using the full accrual basis of accounting; therefore, revenues are reported when they are earned and
expenses are reported when the goods and services are received, regardless of the timing of cash being
received or disbursed. These statements include capital assets of the County (including infrastructure
added since implementing GASB 34 in fiscal year 2003 and the portion of GASB 34 as it pertains to
retroactive infrastructure reporting) as well as all liabilities (including long-term debt). Additionally,
11
certain eliminations have occurred as prescribed by GASB 34 in regards to interfund activity, payables
and receivables.
The Statement of Net Assets presents information on all of Montgomery Countys assets and liabilities,
with the difference between the two being reported as net assets. This statement is similar to that of the
balance sheet of a private-sector business (with primary sections in a business balance sheet being assets,
liabilities, and equity). The GASB believes that, over time, increases or decreases in the net assets may
serve as a useful indicator of whether the financial position of the County is improving or deteriorating.
The Statement of Activities presents the Countys revenues and expenses for the year, with the difference
between the two resulting in the change in net assets for the fiscal year ended September 30, 2007. All
changes in net assets are reported as soon as the underlying event giving rise to the change occurs,
regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement
for some items that will only result in cash flows in future fiscal periods (e.g., uncollected taxes and
earned but unused vacation leave). Because the statement of activities separates program revenue
(revenue generated by specific programs through fees, fines, forfeitures, charges for services, or grants
received) from general revenue (revenue provided by taxes and other sources not tied to a particular
program), it shows to what extent each function has to rely on general revenues for funding. The
governmental functions of the County include general administration, judicial, legal services, elections,
financial administration, public facilities, public safety, health and welfare, culture and recreation,
conservation, public transportation, miscellaneous, and debt service.
Government-wide financial statements include not only the activities of the County itself (known as the
primary government), but also those of a legally separate component unit: the Montgomery County Jail
Financing Corporation. The County Commissioners Court acts as the Board of Directors for the
component unit whose activities are blended with those of the primary government because they function
as part of the County government.
The government-wide financial statements can be found on pages 28-29 of this report.
Fund Financial Statements
The fund financial statements focus on the Countys most significant funds (major funds) rather than fund
types, or the County as a whole. A fund is a grouping of related accounts that is used to maintain control
over resources that have been segregated for specific activities or objectives. Montgomery County, like
other state and local governments, uses fund accounting to ensure and demonstrate compliance with
finance-related legal requirements. All of the funds of the County can be divided into two categories:
governmental funds and fiduciary funds.
1)
2)
Governmental funds are maintained to account for the governments operating and financing
activities. The measurement focus is on available resources.
Fiduciary funds are used to account for resources that are held by the government as a trustee
or agent for parties outside of the government. The resources of fiduciary funds cannot be
used to support the governments own programs.
Governmental funds are used to account for those functions reported as governmental activities in the
government-wide financial statements. As mentioned earlier, government-wide financial statements are
reported using full accrual accounting; governmental fund financial statements focus on near-term inflows
and outflows of expendable resources, as well as balances of available resources. In other words, revenue
is reported when earned, provided it is collectible within the reporting period or soon enough afterward to
be used to pay liabilities of the current period. Likewise, liabilities are recognized as expenditures only
when payment is due since they must be liquidated with available cash. Such information is useful in
comparing a governments near-term financing requirements to near-term resources available.
12
The focus of governmental funds is narrower than that of the government-wide financial statements;
therefore it is useful to compare the information presented for governmental funds with similar
information presented for governmental activities in the government-wide financial statements. By doing
so, readers should better understand the results and long-term impact of the governments near-term
financing decisions. The user is assisted in this comparison between the two bases of accounting by way
of a reconciliation statement between the governmental fund balance sheet and the government-wide
statement of net assets, as well as a reconciliation statement between the governmental fund statement of
revenues, expenditures, and changes in fund balances and the government-wide statement of activities.
Montgomery County maintained 31 individual governmental funds during the fiscal year ended
September 30, 2007. Information is presented separately in the governmental fund balance sheet and in
the governmental fund statement of revenues, expenditures, and changes in fund balances for the General
Fund, the Road and Bridge Fund, the Debt Service Fund, the Airport Maintenance Special Revenue Fund,
the Capital Project Jail Financing Corporation Fund, the Capital Projects Road Bonds Series 2006A Fund,
and the Capital Projects Road Bonds Series 2006B Fund, all of which are considered to be major funds.
Data from the remaining governmental funds (i.e., nonmajor funds) is combined into a single, aggregated
presentation. Individual fund data for each nonmajor governmental fund is provided in the form of
combining schedules, which are included in the Other Supplementary Information section following the
notes to the financial statements.
Montgomery County utilizes and maintains budgetary controls over its operating funds. Budgetary
controls are used to ensure compliance with legal provisions required under state statute governing the
annual appropriated budget. Budgets for governmental funds are established in accordance with state law
and are adopted at the department level for the General Fund, all Special Revenue Funds, and the Debt
Service Fund using the primary categories of salaries, benefits, supplies, services, and capital outlay. A
budgetary comparison statement is provided in the financial section for the General Fund and the Road
and Bridge Special Revenue Fund. Budgetary comparison schedules for the Debt Service Fund and all
nonmajor special revenue funds are provided as supplementary information. These budgetary
comparisons can be used to demonstrate compliance with the budget both in its original and final forms.
The basic governmental fund financial statements can be found on pages 30-40 of this report.
Fiduciary funds are used to account for resources held for the benefit of parties other than the County
itself. Agency funds are the only fiduciary fund type used by Montgomery County, and they are not
reflected in the government-wide financial statements because the resources of those funds are not
available to support the programs and expenses of the County. The basis of accounting used for fiduciary
funds is the full accrual basis, much like that of the government-wide statements.
The basic fiduciary fund financial statements can be found on page 41 of this report.
Notes to the financial statements provide additional information that is essential to a full understanding
of the data provided in the government-wide and fund financial statements. As such, the notes are an
integral part of the basic financial statements. They focus on the primary governments governmental
activities, major funds, and nonmajor funds in the aggregate.
The notes to the financial statements can be found on pages 43-66 of this report.
Additional supplementary information is comprised of the General Fund final budget versus actual at
the department level, along with the Debt Service Fund final budget versus actual at the function level.
This comparative data can be found on pages 68-81 of this report.
Other supplementary information includes combining financial statements for nonmajor governmental
and fiduciary funds. These funds are totaled by fund type and presented in a single column in the basic
13
financial statements. They are not reported individually, as with major funds, on the governmental fund
financial statements.
Other supplementary information can be found on pages 84-125 of this report.
GOVERNMENT-WIDE FINANCIAL ANALYSIS
As noted earlier, the GASB believes that net assets may serve over time as a useful indicator of a
governments financial position. Montgomery Countys assets exceeded liabilities by $316,966,768 at
September 30, 2007, as shown in the table below. This amount represents an increase through
governmental activities of $38,404,311 from the net assets at September 30, 2006.
Net Assets - Governmental Activities
Current and other assets
FY 2007
FY 2006
$ 205,233,607
$191,661,478
Capital assets
487,246,734
409,573,746
Total assets
692,480,341
601,235,224
347,275,198
303,651,238
Long-term liabilities outstanding

Other liabilities
Total liabilities
Net assets:
Invested in capital assets,
net of related debt
Restricted
19,021,529
375,513,573
322,672,767
368,993,046
314,159,873
7,070,714
6,009,968
(59,096,992)
(41,607,384)
$ 316,966,768
$ 278,562,457
Unrestricted
Total net assets
28,238,375
The Countys total assets of $692,480,341 are largely comprised of investments of $146,326,044, or
21.2%, and capital assets net of accumulated depreciation of $487,246,734, or 70.4%. The capital assets
of the County include land, buildings, improvements other than buildings, equipment, and infrastructure
(roads, bridges, signs, etc.) Capital assets are non-liquid assets that provide services to citizens; as a
result, these assets cannot be utilized to satisfy County obligations.
As in last year, long-term debt of $347,275,198 comprises the largest portion of the Countys total
liabilities of $375,513,573, at 92.5%. Of total long-term liabilities, $10,286,674 is due within one year,
with the remainder of $336,988,524 being due over a period of time greater than one year. A more indepth discussion of long-term debt can be found in the notes to the financial statements.
The Countys assets exceeded its liabilities by $316,966,768 (net assets) on September 30, 2007.
Roughly 2.3%, or $7,070,714, of the Countys net assets represents restricted net assets. These resources
are subject to external restrictions on how they may be used. Restrictions include statutory requirements,
bond covenants, and granting conditions. Of those restricted net assets, $77,208 is restricted for capital
projects and $6,993,506 is restricted for debt service of compensated absences and arbitrage rebate. The
most significant portion ($368,993,046) of the Countys net assets reflects its investment in capital assets,
net of related debt. Although unrestricted net assets is negative for government-wide net assets, it should
be noted that the Countys fund financial statements continue to reflect positive unreserved fund balances.
14
Montgomery Countys governmental activities increased net assets by $38,404,311. The key components
of this increase are as follows:
Governmental Activities
FY 2007
Revenues:
Program revenues:
Fees, fines, forfeitures, and charges for services $
Federal grants and contributions
State grants and contributions
Other grants and contributions
General revenues:
Property taxes
Other taxes
Other general revenues
Total revenues
Expenses:
General administration
Judicial
Legal services
Elections
Financial administration
Public facilities
Public safety
Health and welfare
Culture and recreation
Conservation
Public transportation
Miscellaneous
Debt service interest and fiscal charges
Total expenses
Change in net assets
Net assets - beginning
Net assets - ending
42,109,442
11,964,706
2,761,919
58,884,598
FY 2006
39,591,432
8,743,261
2,509,020
38,682,758
115,740,129
1,381,764
8,862,425
241,704,983
105,410,635
1,142,888
3,743,517
199,823,511
11,780,620
17,042,393
2,233,072
1,466,229
4,981,536
20,208,449
44,725,170
7,637,646
8,460,806
760,370
69,455,834
2,846,822
11,701,725
203,300,672
38,404,311
278,562,457
13,416,534
16,761,386
2,101,795
1,086,378
4,791,906
20,768,370
41,162,610
8,958,511
7,051,403
721,982
58,874,891
3,009,024
10,553,741
189,258,531
10,564,980
267,997,477
316,966,768
278,562,457
The Countys total revenues of $241,704,983 were all from governmental activities. Property tax revenue
accounts for $115,740,129, or 47.9%; program revenues of fees, fines, forfeitures, and charges for
services comprise $42,109,442, or 17.4%; and grants and contributions encompass $73,611,223, or 30.4%
of total government-wide revenues. Exceptional infrastructure donations contribute to an increase of
$20,201,840 in other grants and contributions.
Expenses for the year totaled $203,300,672. The public transportation function accounted for
$69,455,834, or 34.2% of this total. The increase in spending in the public transportation function
continues to be due to the several large road construction projects the County has undertaken. These
projects are primarily for the widening and improvement of State-owned roads, creating inflated
expenditures in the public transportation function, with no offsetting asset capitalization. The public
safety ($44,725,170), public facilities ($20,208,449), and judicial ($17,042,393) functions represent
22.0%, 10.0%, and 8.4% of total government-wide expenditures, respectively. These three functions
show marked interdependent increases. Expenses of the County jail and law enforcement agencies are
reported in the public facilities and public safety functions, respectively. These two functions operate
with the courts, which are housed in the judicial function.
15
The governments ending net assets of $316,966,768 represent an increase of $38,404,311 from the prior
years $278,562,457 in net assets. The Countys change in net assets is summarized by the following
chart:
Change in Net Assets
FY 2007
Governmental funds activity:
Total revenues
$ 183,339,792
Total expenditures
233,438,076
Excess (Deficiency) of revenues over expenditures
(50,098,284)
Capital lease financing
3,953,897
Issuance of certificates of obligation
Issuance of general obligation bonds
86,329,989
Payment to refunded bond escrow agent
(41,706,307)
Premiums on obligations, net
820,247
Net change in fund balance
(700,458)
Government-wide activity:
Difference between current year's capital outlay
expenditures and depreciation expense
20,155,851
Net effect of capital asset sales, donations, trade-ins, etc.
57,517,135
Revenues not reported in funds because they do not
provide current-period financial resources
848,056
Long-term debt not reported in funds because it does
not affect the current period
(37,805,657)
Expenses not reported in the funds because they do not
use current-period financial resources
(1,610,616)
Total change in net assets
$ 38,404,311
FY 2006
$ 161,290,224
193,273,547
(31,983,323)
262,529
26,320,000
111,550,000
3,650,574
109,799,780
(1,710,972)
36,918,174
1,615,112
(135,033,692)
(1,023,422)
$ 10,564,980
This change in net assets begins with the current years differences between governmental revenues and
expenditures ($50,098,284), along with other financing sources and uses ($49,397,826). Differences
between capital assets added during the year and the depreciation related to all capital assets recorded,
along with the effect of various capital assets transactions, such as dispositions and donations
($77,672,986) also affect this change.
Other factors influencing the change in net assets are those revenues and expenses that do not provide or
require the use of current financial resources ($762,650). GASB 34 dictates that the County record an
allowance for accounts that are unlikely to be collected. These allowances for doubtful accounts combine
with items, such as deferrals of long-term balances not being paid in the current year, to constitute further
changes in net assets. Additionally, long-term debt, whether being issued or retired, has an effect on the
change in net assets ($37,805,657). During the fiscal year, the County issued new debt and paid off a
portion of its existing debt. These financings represent further changes in the net assets of the County.
The overall financial position of the County has improved over the last year. As mentioned earlier, there
is an increase in net assets of $38,404,311. Additionally, the increase of $1,944,655 in the combined fund
balance of Montgomery Countys three major operating funds would indicate an improvement in overall
financial position. However, total operating fund balance is neither where management desires nor
intends for it to be. As part of long-range planning, management has pledged to continue increasing the
level of the operating funds fund balances until such time as they represent between 20 and 25 percent of
annual operating costs.
16
The following chart depicts expenses and program revenues for the fiscal year ending September 30, 2007
for governmental activities.
Expenses and Program Revenues - Governmental Activities
Cu
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n
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s
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n
* See note below
* Public safety expenses and revenues have each been decreased by $16million;
public transportation expenses and revenues have each been decreased $44million
for the purpose of a more easily read chart. No other expenses or revenues have
been altered in any way and are accurate as shown.
* See note below
Co
ns
er
va
Pu
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bl
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ic
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ns
po
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D
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$28
$26
$24
$22
$20
$18
$16
$14
$12
$10
$8
$6
$4
$2
$0
Expense
Revenue
Key elements of the analysis of government-wide program revenues and expenses as they relate to each
function reflect the following:
Program revenues of $115,720,665 are comprised in large part (62.4%) of public transportations
revenues of $72,114,894 and public safetys revenues of $16,867,611 (14.6%). The judicial
function makes up 6.9% of program revenues with $8,036,233, the general administration
function covers 6.4% of program revenues with $7,393,470, and the health and welfare function
comprises 5.0% of program revenues with $5,779,700. The expenses of these functions account
for 34.2%, 22.0%, 8.4%, 5.8%, and 3.8%, respectively. As expected, general revenues provided
the required support and coverage in areas where expenses exceeded revenues.
The public transportation function experienced an increase in expenses of $10,580,943 while
realizing an increase in revenues of $25,539,306. The increase in expenses is the result of an
aggressive effort on the part of commissioners to improve and expand roads, many of which are
state-owned, located in the County. These roads, because they are not owned by the County,
cannot be shown as capital assets in the government-wide analysis; this creates a large expense,
with no corresponding asset. The increase in revenues is due in large part to earlier-mentioned
donations of roads in a rapidly expanding county.
The voters of the County expressed their desire for an improved, county-wide library system by
approving $10,000,000 in library construction bonds in fiscal year 2003. As a result, three new
libraries were to be built to satisfy library needs. The George and Cynthia Woods-Mitchell
Library and the Charles B. Stewart West Branch Library opened in fiscal years 2005 and 2006,
respectively. The third library, R. B. Tullis Library, located in the eastern part of the County,
opened late in fiscal year 2007. Increased operations have resulted in an increase of culture and
recreation expense of $1,409,403.
17
The following chart depicts revenues of the governmental activities for the fiscal year ended September
30, 2007.
Revenues by Source - Governmental Activities
Fees, fines, forfeitures, and charges for

services
17.4%
Property taxes
47.9%
Other grants and contributions
24.4%
State grants and contributions

1.1%
Federal grants and contributions
4.9%
Other general revenues
3.7%
Other taxes
0.6%
GOVERNMENTAL FUND FINANCIAL ANALYSIS

Montgomery County uses fund accounting to ensure and demonstrate compliance with finance-related
legal requirements.
Governmental funds are a means of providing information on near-term inflows, outflows, and balances
of usable resources. Such information is useful in assessing Montgomery Countys financing
requirements. In particular, unreserved, undesignated fund balance may serve as a useful measure of a
governments net resources available for spending at the end of the fiscal year.
As of September 30, 2007, the Countys governmental funds reported combined ending unreserved,
undesignated fund balances of $18,798,413, a decrease of $1,697,463 in comparison with the prior year.
This unreserved, undesignated fund balance is available for spending at the Countys discretion. The
remainder of fund balance is reserved or designated to indicate that it is not available for new spending
because it has already been committed. These commitments can be to fund capital projects
($119,067,943), pay debt service ($2,633,600), reflect inventories ($66,617), and reflect prepaid items
($3,588,909). Commitments also come in the form of designations that will fund encumbrances from the
prior year ($4,467,883). On September 30, 2007, the total fund balance of the General Fund (the chief
operating fund of the County) was $20,763,060. Of that amount, $19,451,182 was available for spending
at the Countys discretion, $906,436 was designated for encumbrances, and $405,442 was reserved for
prepaid items.
Total assets in the General Fund amounted to $44,198,471, accounting for 21.0% of total governmental
fund assets. The total assets of other major funds include Road and Bridge Special Revenue Fund
($6,667,046), Debt Service Fund ($4,608,035), Airport Maintenance Special Revenue Fund
($10,604,519) Jail Financing Corporation ($37,130,688), Capital Projects Road Bonds Series 2006A
Fund ($24,549,732), and Capital Projects Road Bonds Series 2006B Fund ($43,260,415). Together, all
major funds account for $171,018,906 (81.2%) of the Countys $210,726,844 in total assets.
18
The fund balance of the Countys General Fund grew by $3,911,320 during the current fiscal year. Key
factors in this growth are as follows:
The Commissioners Court, as part of long-range planning, budgeted a $2,000,000 fund balance
increase.
An increase in the appraised value of real and personal property and a decrease in the balance of
outstanding delinquent taxes boosted ad valorem tax revenues $2,856,514.
Significant increases in fees collected for the County Clerk, District Clerk, Justices of the Peace,
and Constables contributed toward total fee increases of $933,763.
The County has multiple contracts with outside entities for security services through the offices of
the Sheriff and the Constables. Increases in the number of contracts generated larger than
expected reimbursements from these organizations, resulting in an increase to contract
reimbursements of $1,261,040 over the past year.
The Road and Bridge Special Revenue Fund has a total fund balance of $1,221,009 which is reported as
$66,617 reserved for inventory, $758,879 designated for encumbrances and $395,513 unreserved,
undesignated. The unreserved, undesignated portion of the fund balance decreased $3,053,262 during the
current year due to budgeted transfers from the Road and Bridge Special Revenue Fund to various capital
projects funds to help finance road construction contracts that were paid through the capital projects
funds.
The Debt Service Fund has a total fund balance of $2,633,600, all of which is reserved for the repayment
of debt. The net increase of $386,836 is largely due to budgeted transfers of $510,395 that represent the
surplus remaining in several capital project funds after completion of their respective projects.
The Airport Maintenance Special Revenue Fund has a fund balance of $402, which is reported as
$3,183,467 reserved for prepaid items, $987 designated for encumbrances and ($3,184,052) unreserved,
undesignated. This fund showed a balance of $365,129 at September 30, 2006. The decrease in fund
balance during the fiscal year is due to the transfer of funds associated with federal grants into the
appropriate capital project funds.
The issuance of $44,834,989 in lease-revenue bonds required the County to create the Capital Projects
Jail Financing Corporation Fund to account for the bond proceeds. At year-end, the fund balance stood at
$29,243,640, all of which is reserved for completion of the new 1,100 bed jail facility.
The Capital Projects Road Bonds Series 2006A Fund has a fund balance of $21,274,529 at the end of the
fiscal year. The decrease of $13,584,469 is due to the swift progress in road construction projects
throughout the County.
At year end, the $40,108,736 fund balance of the Capital Projects Road Bonds Series 2006B was reserved
for capital projects. The Countys commitment to rapid road expansion and its pioneering
implementation of the State of Texas pass-through toll program brought about a decrease of
$15,857,281 in the fund balance.
GENERAL FUND BUDGETARY HIGHLIGHTS
The published budget of Montgomery County for the fiscal 2007 was prepared on a modified accrual
basis, and includes all elements required by Texas Local Government Code Section 111.063, applicable
to counties of population more than 125,000 that have appointed a County Budget Officer. The original
adopted budget of the General Fund includes revenues of $108,169,908 and expenditures of $97,155,301.
The General Funds final budget, as amended, contains revenues of $119,126,097 and expenditures of
$116,842,460. The following table presents the changes between the original adopted budget and the
final budget for the General Fund as of September 30, 2007.
19
General Fund
Budget Variances
Original Budget
Revenues:
Taxes
Fees
Intergovernmental
Interest
Inmate Housing
Miscellaneous
Total Revenues
Expenditures:
Judicial
Legal Services
Elections
Public Facilities
Public Safety
Health and Welfare
Conservation
Miscellaneous
Total Expenditures
Excess Revenues Over Expenditures
Other Financing Sources/(Uses):
Transfers In
Transfers Out
Total Other Financing Sources/(Uses)
Net Change in Fund Balances
Fund Balance - Beginning
Fund Balance - Ending
84,785,050
1,264,558
11,990,061
118,024
215,000
824,760
5,928,955
2,155,000
175,000
713,500
108,169,908
Final Budget
$
13,880,128
10,847,888
1,641,079
841,167
5,048,122
20,894,378
35,692,417
3,559,401
431,986
4,318,735
97,155,301
11,014,607
27,993,629
16,306,379
11,035,110
1,867,192
1,415,559
5,175,397
22,672,777
45,791,031
4,774,146
454,607
7,350,262
116,842,460
2,283,637
127,282
127,282
11,141,889
16,851,740
$
86,550,188
1,347,901
12,344,178
4,672,354
215,000
831,588
10,312,377
1,687,550
175,000
989,961
119,126,097
Variance with
Original Budget
Positive (Negative)
(2,426,251)
(187,222)
(226,113)
(574,392)
(127,275)
(1,778,399)
(10,098,614)
(1,214,745)
(22,621)
(3,031,527)
(19,687,159)
(8,730,970)
2,265,621
(1,709,248)
567,596
1,123,969
3,407,606
16,851,740
$
20,259,346
1,765,138
83,343
354,117
4,554,330
6,828
4,383,422
(467,450)
276,461
10,956,189
2,138,339
(1,709,248)
567,596
996,687
(7,734,283)
$
(7,734,283)
Final budgeted revenues were higher than originally planned by $10,956,189. The final amended budget
for taxes increased $1,765,138 over the original budget due to an aggressive collection effort, which
resulted in higher than originally expected collections of current and delinquent taxes, along with the
penalties and interest associated with those delinquent taxes. Intergovernmental revenue contained
$4,554,330 more in the final budget than in the original budget. This increase is largely due to the
anticipated receipt of several federal and state grants during the year that were not foreseen at the time the
original budget was adopted. The final budget for contract reimbursements was $4,383,422 more than the
original budget. The increase in the anticipated revenue was primarily due to a $4,860,838 budgeted
contract reimbursement for the Community Supervision and Corrections Departments salary and fringe
benefits. During the original budget process, Commissioners Court does not budget for funds that are
not at the discretion of the County to spend. Since this contract reimbursement is earmarked for specific
purposes, it is not included in the original budget. During the course of the fiscal year, the County entered
into several contracts for law enforcement services with local agencies. These contracts were also
contributing factors to the increase in the budget.
20
The originally unanticipated revenue partially offset the expenditure differences of $19,687,159 between
the original budget and the final amended budget. The general administration function had a final
expenditure budget that is $2,426,251 higher than the original budget. This increase was due in large part
to employee health coverage in the Countys self-insured benefit plan. Estimated reserves are required
for self-insurance programs, which are recorded as they become available. At the time of the original
budget process, these amounts were not readily identifiable.
The public facilities function had a final budget $1,778,399 higher than the original budget. During the
year, the County continued work to replace the Jails damaged roof and began work on the replacement of
the jail cell door control mechanism. At the time of the original budget process, the amount needed to
complete both construction projects was not readily identifiable. Additionally, the cost of utilities for
county buildings is charged to the public facilities function. Higher than anticipated increases in utility
services caused the County to increase the budget throughout the year.
Funds that were originally scheduled in prior fiscal years were not included in the original budget for
fiscal year 2007. This practice reflects the Countys policy of letting encumbrances lapse at year-end and
re-appropriating them in the current year. This policy created increases in the amended budget for
carryovers from the prior year in the general administration, elections, public facilities, health and
welfare, public safety, and miscellaneous functions.
A $10,098,614 increase in the final budget over the original budget for expenditures in the public safety
function was the result of several factors, including encumbrance carryovers as mentioned above.
Included in the public safety function is the Community Supervision and Corrections Department
(CSCD), which is not a County department. However, the County has entered into a contract with the
CSCD that enables those employees to participate in the Countys employee benefit plan. CSCD
reimburses the County 100% of the costs associated with said participation. Management believes
inclusion of 100% reimbursed contracts in the original budget would unnecessarily inflate revenues and
expenditures because the revenues will always be sufficient to cover the expenditures. The County has
elected not to include these amounts in the original, adopted budget each year.
Also contributing to the budgeted variances for the public safety function is the Countys participation in
several contracts with local agencies for law enforcement services. During the course of the fiscal year,
additional interlocal agreements were created with local agencies for the performance of security services.
These additional contracts created increased expenditures for the County, but also created an increase in
the revenue line supporting the associated expenditure.
The health and welfare function had final budgeted expenditures $1,214,745 higher than the original
budget for expenditures. This function includes two grants that are managed by the University of Texas
Medical Branch for the County. Both grants are pass-through in nature, ultimately resulting in a
corresponding revenue for the expense incurred. To prevent any increase in taxes for the constituents of
the County for this grant-funded cost, the expense is not budgeted until the revenue is budgeted, which
was after the original budget process.
An increase in the final budget of $3,031,527 over the original budget in the miscellaneous function was
the result of several factors. During the original budget process, salaries and related benefits are budgeted
in this function for anticipated salary increases throughout the year. As those increases are awarded, the
funds are moved from the miscellaneous function to the function that relates to the position being
increased. However, contributing to increases in the budget for the miscellaneous function are additional
costs for the Countys self-funded benefit plan for the employees medical costs.
The increase of expenditures in the final amended budget over the original budget that was not covered by
the revenues increase was reported as a decrease in the final amended budgeted net change in fund
balances. This amount was reduced by $7,734,283.
21
The following table presents the differences between the final amended budget and actual expenditures
for the General Fund as of September 30, 2007.
General Fund
Budget Variances
Final Budget
Revenues:
Taxes
$ 86,550,188
1,347,901
Fees
12,344,178
Intergovernmental
4,672,354
215,000
Interest
831,588
10,312,377
Inmate Housing
1,687,550
175,000
Miscellaneous
989,961
Total Revenues
119,126,097
Expenditures:
16,306,379
Judicial
11,035,110
Legal Services
1,867,192
Elections
1,415,559
5,175,397
Public Facilities
22,672,777
Public Safety
45,791,031
Health and Welfare
4,774,146
Conservation
454,607
Miscellaneous
7,350,262
Total Expenditures
116,842,460
2,283,637
Other Financing Sources/(Uses):
Transfers In
2,265,621
Transfers Out
(1,709,248)
567,596
Total Other Financing Sources/(Uses)
1,123,969
3,407,606
Fund Balance - Beginning
16,851,740
Fund Balance - Ending
20,259,346
Actual
$
86,721,116
1,363,580
14,529,676
4,052,777
282,712
2,293,789
10,237,033
1,607,241
100,719
1,420,777
122,609,420
Variance with Final

Budget Positive
(Negative)
$
170,928
15,679
2,185,498
(619,577)
67,712
1,462,201
(75,344)
(80,309)
(74,281)
430,816
3,483,323
12,178,369
10,958,487
1,864,419
1,373,213
4,966,523
22,477,341
43,108,422
4,755,954
449,468
2,846,822
104,979,018
17,630,402
4,128,010
76,623
2,773
42,346
208,874
195,436
2,682,609
18,192
5,139
4,503,440
11,863,442
15,346,765
7,653,868
(21,940,546)
567,596
(13,719,082)
3,911,320
16,851,740
5,388,247
(20,231,298)
(14,843,051)
503,714
-
20,763,060
503,714
Actual revenues exceeded budgeted revenues by $3,483,323. Of that amount, $1,462,201 represents
interest earnings. A more favorable investing climate in the market allowed the County to invest idle
funds at a better interest rate than initially forecast. Fee increases approved by the state legislature during
the fiscal year comprise an additional share of the increase ($2,185,498).
Actual expenditures were $11,863,442 lower than final budgeted expenditures.
The general
administration function contributed $4,128,010 toward that amount. The risk management department of
the County is charged with recording costs of various liability and property claims and settlements.
During the fiscal year, costs of those claims were significantly lower than had been anticipated at the time
of the budget process.
All departments in the public safety function of the General Fund expended less than was approved in the
final amended budget by $2,682,609. The addition of 25 new police vehicles in the current fiscal year
allowed the Sheriffs department to save a large amount of funds on repairs of outdated vehicles. In
22
addition, the Sheriffs department received a year-long grant from the Texas Department of
Transportation to combat speeding within the County. The grant allowed the County to be reimbursed for
the extra overtime hours worked by deputies, in turn, incurring lower than anticipated payroll costs.
The miscellaneous function showed actual expenditures less than the final budget by $4,503,440. As
discussed in the original to final budget comparisons, this was due in large part to the funding of
anticipated salary increases. At the time an increase is approved, the funds are transferred to the
appropriate department or function. Therefore, actual expenditures in the miscellaneous function were far
less than originally budgeted.
The actual net change in fund balance was $503,714 greater than anticipated with the final budget. This
is the result of both an increase in actual revenues and a reduction in actual expenditures that included
sufficient amounts to cover transfers to other funds. The Jury Special Revenue Fund, the Memorial
Library Special Revenue Fund and the Airport Maintenance Special Revenue Fund received $4,315,000,
$7,837,000 and $7,226,297 more than shown in the final budget. In all of these funds, the emphasis is on
providing a service. In the case of the Jury Special Revenue Fund, that service is in the form of a court
system. The Memorial Library Special Revenue Funds emphasis is on culture and recreation. The
Airport Maintenance Special Revenue Fund accounts for the County Airport. These funds are not
expected in any year to provide enough revenues to adequately fund their own services. Therefore, it is
anticipated that the General Fund will service the expenditures of those funds every year. Transfers in
and out simply provide a mechanism to move funds from one self-balancing set of accounts (a fund) to
another self-balancing set of accounts.
CAPITAL ASSET AND DEBT ADMINISTRATION
Capital Assets
Montgomery Countys investment in capital assets for its governmental activities as of September 30,
2007 amounted to $487,246,734 (net of accumulated depreciation). This investment in capital assets
includes land, buildings, improvements, equipment, infrastructure that was purchased, completed or
donated since the fiscal year ending September 30, 1981, and construction in progress.
Major capital asset events during the current fiscal year included the following:
Additions to land totaled $2,431,609 and included a purchase of land for the construction of a
new parking garage.
Purchases in the buildings category of $6,122,191 included a new roof at the existing County Jail.
Vehicles, vehicle modifications, and other various equipment items were purchased at a cost of
$2,837,955. To support the Countys commitment to road construction, an asphalt reclaimer was
purchased at a cost of $429,650.
A variety of projects for both new infrastructure construction and for expansion or updating of
existing infrastructure were ongoing during the year. Infrastructure projects begun and completed
in 2007 amounted to $27,484,403.
Montgomery County is the 27th fastest growing county in the United States1. This brisk growth
brings with it a need for vast improvements to a rural infrastructure system. Development
frequently comes with donations in the form of roads. Infrastructure donations for the year
totaled $57,098,774.
Projects that were capitalized from ongoing construction throughout the year, including a library,
totaled $6,166,961. Additional expenditures of $17,756,166 were incurred for construction that
was in progress throughout the year.
Increases in assets were offset by depreciation expense of $34,863,342.
http://ask.census.gov
23

Capital Assets
(net of depreciation)
September 30, 2007
with Comparative Totals for September 30, 2006
Value of Capital Asset Net of
Accumulated Depreciation
FY 2007
FY 2006
Land
$ 10,179,111
$
7,747,501
Buildings
84,902,379
81,235,608
Improvements
4,895,280
2,967,622
Equipment
17,308,832
17,235,427
Infrastructure
354,181,457
296,197,118
Construction in Progress
15,779,675
4,190,470
Total
$487,246,734
$ 409,573,746
Increase
(Decrease)
2,431,610
3,666,771
1,927,658
73,405
57,984,339
11,589,205
77,672,988
The County is committed to several capital projects that have either been completed during the current
fiscal year, or will be completed in the near future. In a continued effort to improve services to citizens in
the form of a Memorial Library System, the County has been constructing a new library facility. By
September 30, 2007, $4,482,559 had been spent on the library in the eastern area of the County. The R.
B. Tullis Library was completed and opened March 30, 2007. The County is in the process of
constructing a community center in the northern part of the County, utilizing Community Development
Block Grant funds from the U.S. Department of Housing and Urban Development.
Efforts to assist constituents in obtaining services in a rapidly growing county come with many
challenges. In 2007, the Commissioners Court has met some of those challenges by building annexes in
the southern and western portions of the County. An annex in the western part of the County holds
offices for the Tax Assessor, a Constable and a Justice of the Peace. In the southern part of the County,
the annex houses the Tax Office, a Justice of the Peace, a Constable and the District Clerk.
To accommodate a growing County workforce, construction of a new administration building and parking
garage began in fiscal year 2007. By September 30, 2007, $476,461 had been spent on the building and
parking garage. These are only preliminary planning and design expenditures and do not include
commitments for construction at this time.
The County has committed to multiple road construction projects in fiscal year 2007. In 2005, the voters
of Montgomery County approved $160,000,000 in road bonds to fund road improvements throughout the
county. These bonds will be issued in phases to fund road construction as the need arises. The remainder
of the authorized road bonds is anticipated to be issued in the second half of fiscal year 2008.
Additional information on the Countys capital assets can be found in Note 7 starting on page 55 of this
report.
Long-Term Debt
At September 30, 2007, Montgomery County had total bonded debt outstanding of $329,113,855
(inclusive of the accreted portion of various capital appreciation bonds).
Commissioners Court
continues to keep maturity dates confined to no more than 22 years. The Countys underlying rating was
upgraded by Moodys Investors Service during current fiscal year to Aa3. The County maintains Aaa
and AAA ratings from Moodys Investors Service, Inc. and Standard and Poors Corporation,
respectively, by purchasing credit enhancement in the form of insurance.
The County issues three types of debt; general obligation bonds are approved by the voters of the County
while lease-revenue bonds and certificates of obligation are approved by Commissioners Court. Of the
24
Countys total debt, $234,277,478 corresponds to general obligation debt, $44,834,989 is in the form of
lease revenue bonds and $46,660,000 represents certificates of obligation. Montgomery Countys total
bonded debt had a net increase of $40,429,179 during 2007. The following table represents the entire
long-term debt of the County at September 30, 2007 on a comparative basis.
Outstanding Long-Term Debt
FY 2007
General obligation bonds
$ 234,277,478
Lease revenue bonds
44,834,989
Certificates of obligation
46,660,000
Accreted interest
3,341,388
Capital Leases
3,452,124
Premiums, net of discounts
7,715,713
Compensated absences
6,855,903
Arbitrage rebate
137,603
Total
$ 347,275,198
FY 2006
$ 231,795,605
50,155,000
6,734,071
1,096,177
7,999,426
5,870,959
$ 303,651,238
Debt activity in 2007 included an issue of $41,495,000 in refunding bonds. This issue refunded six series
of general obligation and certificates of obligation and resulted in an economic gain of $1,257,736. In
addition, the Jail Financing Corporation issued lease revenue bonds in the amount of $44,834,989 to
construct an 1,100 bed detention facility. The County retired $8,697,683 in debt through scheduled
principal payments made during the year.
The County is authorized under Article III, Section 52 of the State Constitution to issue bonds payable
from ad valorem taxes for the construction and maintenance of roads. There is no constitutional or
statutory limit as to rate on bonds issued pursuant to such constitutional provision. However, the amount
of bonds that may be issued is limited to 25% of the assessed valuation of real property in the County.
The current debt limitation for the County is $4,806,316,004, which is significantly in excess of the
Countys outstanding debt obligation, despite the increases in debt issuance during 2007.
Additional information on Montgomery Countys long-term debt can be found in Note 9 beginning on
page 57 of this report.
ECONOMIC FACTORS AND NEXT YEARS BUDGET AND RATES
The unemployment rate for the County is currently 3.9%2, which is an increase from a rate of
3.8% a year ago. This compares favorably to the States average unemployment rate of 4.4%3
and the national average rate of 4.7%4.
Commissioners Court approved allocating $3,710,000 in salary and benefit increases in fiscal
year 2008.
Increased demand for law enforcement services propelled Commissioners Court to increase the
annualized budget in the Sheriffs department by $3,600,000 over the prior fiscal year.
The Commissioners Court granted approval for 64 new positions and 36 position upgrades to
staff various County offices, including two new district courts and one county court at law.
The estimated debt service obligation increased by $1,700,000 in fiscal year 2008 to $20,772,060.
Commissioners Court has made a commitment to increase the Countys fund balance by
$2,000,000 during the next fiscal year, as well as increase the fund balance by at least $2,000,000
The Work Source. http://www.theworksource.org/employer/lmi/unemploymentrates/2007.

The Work Source. http://www.theworksource.org/employer/lmi/unemploymentrates/2007.
4
U.S. Department of Labor, Bureau of Labor Statistics. http://data.bls.gov/PDQ/servlet/SurveyOutputServlet.
3
25
in subsequent years. This commitment is intended to provide the County with a strong equity
base.
All of these factors were considered in preparing the Adopted Budget of Montgomery County, Texas for
the fiscal year ending September 30, 2008.
REQUESTS FOR INFORMATION

This financial report is designed to provide a general overview of Montgomery Countys finances for all
those with an interest in the governments finances. Questions concerning any of the information
provided in this report or requests for additional financial information should be addressed to the
Montgomery County Auditor, P. O. Box 539, Conroe, Texas 77305-0539.
26
BASIC FINANCIAL STATEMENTS
27

Statement of Net Assets
September 30, 2007
EXHIBIT I
ASSETS:
Cash
Investments, at Fair Value
Cash, Restricted
Cash, Restricted for Retainage
Receivables:
Taxes (net)
Accounts (net)
Due from Other Governments
Inventory, at Cost
Deferred Charges
Prepaid Items
Capital Assets, net of accumulated depreciation
Land
Buildings
Improvements
Equipment
Infrastructure
Total Assets
LIABILITIES:
Accounts Payable
Retainage Payable
Accrued Interest Payable
Due to Other Governments
Unearned Revenue
Noncurrent Liabilities:
Due within one year
Due in more than one year
Total Liabilities
NET ASSETS:
Invested in Capital Assets, net of related debt
Restricted for:
Capital Projects
Debt Service
Unrestricted
Total Net Assets
See accompanying notes to the financial statements.

28
$
14,126,193
146,326,044
2,787,525
595,395
5,564,961
14,752,485
5,317,250
66,617
12,108,228
3,588,909
10,179,111
84,902,379
4,895,280
17,308,832
354,181,457
15,779,675
692,480,341
22,347,991
1,859,932
1,829,364
1,615,072
586,016
10,286,674
336,988,524
375,513,573
368,993,046
77,208
6,993,506
(59,096,992)
316,966,768

Statement of Activities
EXHIBIT II
Program Revenues
Expenses
Functions/Programs
Primary Government:
Governmental Activities:
Current:
$ 11,780,620
17,042,393
Judicial
2,233,072
Legal Services
1,466,229
Elections
4,981,536
20,208,449
Public Facilities
44,725,170
Public Safety
7,637,646
Health and Welfare
8,460,806
760,370
Conservation
69,455,834
2,846,822
Miscellaneous
Debt Service Interest and
11,701,725
Fiscal Charges
Total Governmental Activities $ 203,300,672
Fees, Fines,
Forfeitures,
Operating
Capital
and Charges Grants and
Grants and
for Services Contributions Contributions
Net (Expense)
Revenue and
Changes in
Net Assets
$ 7,393,470
7,440,711
527,537
1,569
1,459,788
2,607,333
13,167,051
1,266,457
258,398
7,987,128
-
19,850
1,295,310
920
56,031
63,950,184
-
$ (4,387,150)
(9,006,160)
(1,688,539)
(1,073,448)
(3,521,748)
(17,601,116)
(27,857,559)
(1,857,946)
(7,944,862)
(751,992)
2,659,060
(2,846,822)
$ 42,109,442
$8,288,928
$ 65,322,295
(11,701,725)
(87,580,007)
595,522
16,996
371,362
2,405,250
4,512,323
201,515
8,378
177,582
-
General Revenues:
Property Taxes
Other Taxes
Mixed Beverage Taxes
Bingo Taxes
Insurance Reimbursements
Unrestricted Investment Earnings
Gain on Sale of Capital Assets
Total General Revenues
Change in Net Assets
Net Assets - Beginning
Net Assets - Ending
29
115,740,129
152,710
1,073,853
155,201
138,477
8,442,457
281,491
125,984,318
38,404,311
278,562,457
$ 316,966,768

Balance Sheet
Governmental Funds
September 30, 2007
EXHIBIT III
Road
and Bridge
General
ASSETS:
Cash
Cash, Restricted
Cash, Restricted for Retainage
Receivables:
Taxes (net)
Accounts (net)
Due from Other Funds
Due from Other Governments
Inventory, at Cost
Prepaid Items
TOTAL ASSETS
LIABILITIES AND FUND BALANCES:

Liabilities:
Accounts Payable
$
Retainage Payable
Due to Other Funds
Deferred Revenue
Total liabilities
Fund Balances:
Reserved for:
Prepaid Items
Capital Projects
Inventory
Debt Service
Unreserved, designated for encumbrances, reported in :
General Fund
Unreserved, undesignated, reported in:
General Fund
Total Fund Balances
TOTAL LIABILITIES AND
FUND BALANCES
$
30
6,056,532
22,603,737
15,140
4,081,754
1,620,871
5,688,359
3,726,636
405,442
44,198,471
9,178,733
15,140
8,562,822
1,615,072
4,063,644
23,435,411
3,371,509
1,915,983
47,669
541,644
33,714
347,163
342,747
66,617
6,667,046
1,094,648
47,669
3,754,853
548,867
5,446,037
405,442
-
66,617
-
906,436
-
758,879
19,451,182
20,763,060
395,513
1,221,009
44,198,471
6,667,046
Debt
Service
$
491,277
941,563
3,175,195
4,608,035
12,837
1,067,147
894,451
1,974,435
2,633,600
2,633,600
$
4,608,035
Airport
Maintenance
$
135,518
-
Jail
Financing
Corporation
Total
Governmental
Funds
36,985,183
-
$
22,100,731
281,861
787,864
42,472,201
-
$ 3,283,493
20,248,209
2,787,525
250,725
$ 14,126,193
146,326,044
2,787,525
595,395
1,274
7,284,260
3,183,467
$ 10,604,519
145,505
$ 37,130,688
2,163,780
3,360
$24,549,732
350
$ 43,260,415
192,082
11,701,397
1,244,507
$39,707,938
5,564,961
1,993,796
30,360,154
5,317,250
66,617
3,588,909
$ 210,726,844
12,057
10,327,060
265,000
10,604,117
$ 3,922,686
596,684
3,367,678
7,887,048
$ 2,349,719
925,484
3,275,203
$ 3,151,679
3,151,679
$ 2,625,632
274,955
3,280,594
148,368
6,329,549
$ 22,347,991
1,859,932
30,360,154
1,615,072
5,920,330
62,103,479
3,183,467
-
29,243,640
-
21,274,529
-
40,108,736
-
28,441,038
-
3,588,909
119,067,943
66,617
2,633,600
2,801,581
906,436
3,561,447
987
(3,184,052)
402
$ 10,604,519
Road Bonds
Series 2006A
Other
Road Bonds Governmental
Series 2006B
Funds
29,243,640
21,274,529
40,108,736
2,135,770
33,378,389
$ 37,130,688
$24,549,732
$ 43,260,415
$39,707,938
31
19,451,182
(652,769)
148,623,365
$ 210,726,844
32

Reconciliation of the Balance Sheet of the Governmental Funds
to the Statement of Net Assets
Total fund balances - governmental funds (page 31)
148,623,365
Amounts reported for governmental activities in

the statement of net assets are different because:
Bond issuance costs are expenditures in the funds
but are amortized over the life of the bonds in
government-wide statements.
12,108,228
Capital assets used in governmental activities are

not financial resources and therefore are not reported in
the funds. These capital assets (net of accumulated
depreciation) consist of:
Land
Buildings
Improvements
Equipment
Infrastructure
10,179,111
84,902,379
4,895,280
17,308,832
354,181,457
15,779,675
Total Capital Assets
487,246,734
Other long term assets that were not available to

pay for current-period expenditures were deferred in the
funds. These assets consist of fines and fees receivable,
net of allowance.
12,758,689
Property taxes earned that are not available to pay for

current-period expenditures are deferred in the funds.
Some liabilities are not due and payable in the current
period and therefore are not reported in the funds. Those
liabilities consist of:
Interest payable
Bonds and capital leases payable
Arbitrage payable
Total future period liabilities
Net assets of governmental activities
5,334,314
(1,829,364)
(340,281,692)
(137,603)
(6,855,903)
(349,104,562)
$
33
316,966,768

Statement of Revenues, Expenditures, and Changes in Fund Balances
Governmental Funds
EXHIBIT IV
REVENUES:
Taxes
Fees
Intergovernmental
Interest
Inmate Housing
Miscellaneous
TOTAL REVENUES
EXPENDITURES:
Current:
Judicial
Legal Services
Elections
Public Facilities
Public Safety
Health and Welfare
Conservation
Miscellaneous
Capital Projects
Debt Service:
Principal Retirement
Interest and Fiscal Charges
Issuance Costs
TOTAL EXPENDITURES
Excess (Deficiency) Revenues
Over Expenditures
OTHER FINANCING SOURCES/(USES):
Transfers In
Transfers Out
Issuance of Refunding Bonds
Issuance of Lease Revenue Bonds
Premium on Debt Issuance
Payment to Refunded Bond Escrow Agent
Discounts on Debt Issuance
TOTAL OTHER FINANCING
SOURCES/(USES)
Fund Balances at Beginning of Year
FUND BALANCES AT END OF YEAR
General
86,721,116
1,363,580
14,529,676
4,052,777
282,712
2,293,789
10,237,033
1,607,241
100,719
1,420,777
122,609,420
Road
and Bridge
11,471,034
6,412,651
206,741
102,443
1,098,525
487,051
19,778,445
Debt
Service
19,111,318
44,437
19,155,755
12,178,369
10,958,487
1,864,419
1,373,213
4,966,523
22,477,341
43,108,422
4,755,954
449,468
2,846,822
-
296,299
16,807,058
-
104,979,018
17,103,357
17,630,402
2,675,088
7,653,868
(21,940,546)
567,596
-
909,206
(6,511,196)
573,401
-
510,395
41,495,000
940,880
(41,706,307)
(120,633)
(13,719,082)
(5,028,589)
1,119,335
3,911,320
16,851,740
(2,353,501)
3,574,510
386,836
2,246,764
20,763,060

34
1,221,009
5,305,000
13,989,627
593,627
19,888,254
(732,499)
2,633,600
Airport
Maintenance
$
6,067,930
176,673
374
6,244,977
Jail
Financing
Corporation
$
671,285
671,285
Road Bonds
Series 2006A
$
1,522,062
1,522,062
Road Bonds
Series 2006B
$
2,590,005
2,590,005
Other
Governmental
Funds
$
126,917
389,963
6,611,590
1,223,678
1,355,638
148,852
734,130
177,075
10,767,843
Total
Governmental
Funds
$
117,303,468
7,903,148
14,919,639
16,939,038
1,683,063
8,580,033
10,385,885
1,607,241
1,933,374
2,084,903
183,339,792
354,674
-
15,572,634
16,703,310
18,869,334
115,045
6,221,345
363,820
2,076,202
4,127,271
7,812,017
18,548,886
12,293,414
17,179,832
2,228,239
1,373,213
4,966,523
22,477,341
45,184,624
8,883,225
7,812,017
745,767
17,161,732
2,846,822
69,694,164
354,674
690,000
16,262,634
16,703,310
12,909
18,882,243
39,264,586
5,305,000
13,989,627
1,296,536
233,438,076
(15,591,349)
(15,181,248)
(16,292,238)
(28,496,743)
(50,098,284)
5,890,303
7,240,459
(13,495,489)
-
44,834,989
-
2,215,936
(619,157)
-
434,957
-
27,234,749
(3,633,182)
2,812,900
-
46,199,570
(46,199,570)
3,953,897
41,495,000
44,834,989
940,880
(41,706,307)
(120,633)
(6,255,030)
44,834,989
1,596,779
434,957
26,414,467
49,397,826
(364,727)
365,129
29,243,640
-
(13,584,469)
34,858,998
(2,082,276)
35,460,665
(700,458)
149,323,823
402
$ 29,243,640
$ 21,274,529
(15,857,281)
55,966,017
$ 40,108,736
35
33,378,389
148,623,365
36

Reconciliation of the Statement of Revenues, Expenditures,
and Changes in Fund Balances of the Governmental Funds
to the Statement of Activities
Amounts reported for governmental activities in the statement of activities (page 29)
are different because:
Net change in fund balances - total governmental funds (page 35)
(700,458)
Governmental funds report capital outlays as expenditures.

However, in the statement of activities the cost of those assets is
allocated over their estimated useful lives and reported as depreciation
expense. This is the amount by which capital outlays exceeded
depreciation in the current period.
20,155,851
The net effect of various miscellaneous transactions involving

capital assets (i.e., sales, trade-ins, seizures, and donations) is to increase
net assets.
57,517,135
Revenues in the statement of activities that do not provide

current financial resources are not reported as revenues in the funds.
848,056
The issuance of long-term debt (e.g., bonds, leases) provides

current financial resources to governmental funds, while the repayment
of the principal of long-term debt consumes the current financial
resources of governmental funds. Neither transaction, however, has any
effect on net assets. Also, governmental funds report the effect of
issuance costs, premiums, discounts, and similar items when debt is first
issued, whereas these amounts are deferred and amortized in the
statement of activities. This amount is the net effect of these differences
in the treatment of long-term debt and related items.
(37,805,657)
Some expenses reported in the statement of activities do not

require the use of current financial resources and, therefore, are not
reported as expenditures in governmental funds.
Change in net assets of governmental activities (page 29)

37
(1,610,616)
$
38,404,311

Budget (GAAP Basis) and Actual
Major Governmental Funds
EXHIBIT V
Page 1 of 4
General Fund
Variance with
Final Budget
Positive (Negative)
Original
Budget
Final
Budget
Actual
$ 84,785,050
1,264,558
11,990,061
118,024
215,000
824,760
5,928,955
2,155,000
175,000
713,500
108,169,908
$ 86,550,188
1,347,901
12,344,178
4,672,354
215,000
831,588
10,312,377
1,687,550
175,000
989,961
119,126,097
$ 86,721,116
1,363,580
14,529,676
4,052,777
282,712
2,293,789
10,237,033
1,607,241
100,719
1,420,777
122,609,420
EXPENDITURES:
Current:
Judicial
Legal Services
Elections
Public Facilities
Public Safety
Health and Welfare
Conservation
Miscellaneous
TOTAL EXPENDITURES
13,880,128
10,847,888
1,641,079
841,167
5,048,122
20,894,378
35,692,417
3,559,401
431,986
4,318,735
97,155,301
16,306,379
11,035,110
1,867,192
1,415,559
5,175,397
22,672,777
45,791,031
4,774,146
454,607
7,350,262
116,842,460
12,178,369
10,958,487
1,864,419
1,373,213
4,966,523
22,477,341
43,108,422
4,755,954
449,468
2,846,822
104,979,018
4,128,010
76,623
2,773
42,346
208,874
195,436
2,682,609
18,192
5,139
4,503,440
11,863,442
11,014,607
2,283,637
17,630,402
15,346,765
OTHER FINANCING SOURCES/

(USES):
Transfers In
Transfers Out
(USES)
127,282
-
2,265,621
(1,709,248)
567,596
7,653,868
(21,940,546)
567,596
5,388,247
(20,231,298)
-
127,282
1,123,969
(13,719,082)
(14,843,051)
11,141,889
16,851,740
$ 27,993,629
3,407,606
16,851,740
$ 20,259,346
REVENUES:
Taxes
Fees
Intergovernmental
Interest
Inmate Housing
Miscellaneous
TOTAL REVENUES

38
3,911,320
16,851,740
$ 20,763,060
170,928
15,679
2,185,498
(619,577)
67,712
1,462,201
(75,344)
(80,309)
(74,281)
430,816
3,483,323
503,714
503,714

EXHIBIT V
Page 2 of 4
Road and Bridge Fund
Variance with
Final Budget
Positive (Negative)
Original
Budget
Final
Budget
Actual
$ 11,183,750
5,853,700
135,000
55,000
1,150,000
18,377,450
$ 11,183,750
5,853,700
353,880
55,000
1,150,000
374,222
18,970,552
$ 11,471,034
6,412,651
206,741
102,443
1,098,525
487,051
19,778,445
242,287
16,871,181
17,113,468
338,873
19,747,669
20,086,542
296,299
16,807,058
17,103,357
42,574
2,940,611
2,983,185
1,263,982
(1,115,990)
2,675,088
3,791,078

(USES):
Transfers In
Transfers Out
(USES):
186,951
-
909,206
(1,778,255)
573,401
909,206
(6,511,196)
573,401
(4,732,941)
-
186,951
(295,648)
(5,028,589)
(4,732,941)
1,450,933
3,574,510
$ 5,025,443
(1,411,638)
3,574,510
$ 2,162,872
(2,353,501)
3,574,510
$ 1,221,009
(941,863)
(941,863)
REVENUES:
Taxes
Fees
Intergovernmental
Interest
Inmate Housing
Miscellaneous
TOTAL REVENUES
EXPENDITURES:
Current:
Judicial
Legal Services
Elections
Public Facilities
Public Safety
Health and Welfare
Conservation
Miscellaneous
TOTAL EXPENDITURES

39
287,284
558,951
(147,139)
47,443
(51,475)
112,829
807,893

EXHIBIT V
Page 3 of 4
Airport Maintenance Fund
Original
Budget
REVENUES:
Taxes
Fees
Intergovernmental
Interest
Inmate Housing
Miscellaneous
TOTAL REVENUES
EXPENDITURES:
Current:
Judicial
Legal Services
Elections
Public Facilities
Public Safety
Health and Welfare
Conservation
Miscellaneous
TOTAL EXPENDITURES
(USES):
Transfers In
Transfers Out
(USES):
190,000
190,000
Final
Budget
$
1,121,017
190,000
1,311,017
Actual
$
6,067,930
176,673
374
6,244,977
Variance with
Final Budget
Positive (Negative)
$
4,946,913
(13,327)
374
4,933,960
360,239
360,239
375,601
375,601
354,674
354,674
20,927
20,927
(170,239)
935,416
5,890,303
4,954,887
14,162
(1,122,261)
-
7,240,459
(13,495,489)
-
7,226,297
(12,373,228)
-
(1,108,099)
(6,255,030)
(5,146,931)
(170,239)
(172,683)
(364,727)
365,129
365,129
365,129
$ 194,890 $ 192,446 $
402 $
40
(192,044)
(192,044)

EXHIBIT V
Page 4 of 4
Totals
Variance with
Final Budget
Positive (Negative)
Original
Budget
Final
Budget
Actual
$ 95,968,800
7,118,258
11,990,061
253,024
405,000
879,760
5,928,955
2,155,000
1,325,000
713,500
126,737,358
$ 97,733,938
7,201,601
12,344,178
6,147,251
405,000
886,588
10,312,377
1,687,550
1,325,000
1,364,183
139,407,666
$ 98,192,150
7,776,231
14,529,676
10,327,448
459,385
2,396,606
10,237,033
1,607,241
1,199,244
1,907,828
148,632,842
13,880,128
10,847,888
1,641,079
841,167
5,048,122
20,894,378
35,692,417
3,559,401
674,273
17,231,420
4,318,735
114,629,008
16,306,379
11,035,110
1,867,192
1,415,559
5,175,397
22,672,777
45,791,031
4,774,146
793,480
20,123,270
7,350,262
137,304,603
12,178,369
10,958,487
1,864,419
1,373,213
4,966,523
22,477,341
43,108,422
4,755,954
745,767
17,161,732
2,846,822
122,437,049
4,128,010
76,623
2,773
42,346
208,874
195,436
2,682,609
18,192
47,713
2,961,538
4,503,440
14,867,554
12,108,350
2,103,063
26,195,793
24,092,730

(USES):
Transfers In
Transfers Out
(USES)
314,233
-
3,188,989
(4,609,764)
1,140,997
15,803,533
(41,947,231)
1,140,997
12,614,544
(37,337,467)
-
314,233
(279,778)
(25,002,701)
(24,722,923)
REVENUES:
Taxes
Fees
Intergovernmental
Interest
Inmate Housing
Miscellaneous
TOTAL REVENUES
EXPENDITURES:
Current:
Judicial
Legal Services
Elections
Public Facilities
Public Safety
Health and Welfare
Conservation
Miscellaneous
TOTAL EXPENDITURES

12,422,583
20,791,379
$ 33,213,962
41
1,823,285
20,791,379
$ 22,614,664
1,193,092
20,791,379
$ 21,984,471
458,212
574,630
2,185,498
4,180,197
54,385
1,510,018
(75,344)
(80,309)
(125,756)
543,645
9,225,176
(630,193)
(630,193)

Statement of Assets and Liabilities
Fiduciary Funds
September 30, 2007
EXHIBIT VI
Agency Funds
ASSETS:
Cash
Accounts Receivable
10,689,296
1,234,153
7,705
TOTAL ASSETS
11,931,154
LIABILITIES:
Accounts Payable
6,594,927
5,336,227
TOTAL LIABILITIES
11,931,154

42

Notes to the Financial Statements
September 30, 2007
NOTE 1-
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

The financial statements of Montgomery County, Texas have been prepared in conformity with
generally accepted accounting principles (GAAP) as applied to local government units in the United
States of America. The Governmental Accounting Standards Board (GASB) is the accepted standardsetting body for establishing governmental accounting and financial reporting principles. Following
is a summary of the more significant policies.
A) REPORTING ENTITY:
Montgomery County, Texas (the County) was created in 1837. The County is a political
subdivision of the State of Texas. The Commissioners Court, composed of the County Judge
and four Commissioners, governs the County. The following services are provided for the
citizens: public safety, road and bridge construction and maintenance, health and social services,
culture and recreation, public improvements, environmental protection, and administrative
services.
In 1991, GASB issued Statement No. 14, The Financial Reporting Entity, which established
standards for defining and reporting on the financial reporting entity. The discussion that follows
sets forth the guidelines for an entitys inclusion in the Countys financial statements.
The definition of the reporting entity is based primarily on the notion of financial
accountability. The elected officials governing Montgomery County are accountable to their
constituents for their public policy decisions, regardless of whether those decisions are carried out
directly through the operations of the County or by their appointees through the operations of a
separate entity. Therefore, the County is not only financially accountable for the organizations
that make up its legal entity, it is also financially accountable for legally separate organizations if
its officials appoint a voting majority of an organizations governing body and either, it is able to
impose its will on that organization or, there is a potential for the organization to provide specific
financial benefits to, or to impose specific financial burdens on, the County.
Depending upon the significance of the Countys financial and operational relationships with
various separate entities, the organizations are classified as blended or discrete component units,
related organizations, joint ventures, or jointly governed organizations, and the financial
disclosure is treated accordingly.
Blended Component Units- Legally separate entities that either a)have the same governing
body as the governing body of the primary government or b)provide services entirely, or almost
entirely, to the primary government must be reported in the financial statements of the primary
government as blended component units.
Montgomery County Jail Financing Corporation:
The Montgomery County Jail Financing Corporation was created by the Commissioners Court
of the County in September 2006 as a 501(c)2 Title Holding Entity. The Corporations Board of
Directors and Officers are comprised of the members of Commissioners Court. The
Corporations stated purpose is to provide financing for the construction of an 1,100-bed
detention facility, which will subsequently be sold to the County in a lease-purchase transaction.
The Corporations financial transactions have been reported in the Capital Project Funds of the
County.
43

September 30, 2007
Related Organizations- Where the Commissioners Court is responsible for appointing a
majority of the members of a board of another organization, but the Countys accountability does
not extend beyond making such appointments, disclosure is made in the form of the relation
between the County and such organization.
Montgomery County Emergency Service Districts No. 1-14:
The emergency service districts are organized under the statutes of the State of Texas as political
subdivisions of the State to provide protection from fire for life and property. Commissioners
Court appoints a five-member board for each district, and must approve the issuance of any longterm debt for each. Individual boards retain authority to levy taxes and approve or modify annual
appropriation budgets. Inasmuch as each district is required by state law to have audited financial
statements prepared, and because the exercise of authority by Commissioners Court is of a
compliant nature rather than substantive, these entities are not included in the Countys financial
statements.
Montgomery County Housing Authority:
The Montgomery County Housing Authority is organized as a public corporation pursuant to
Chapter 392 of the Statutes of the State of Texas, Local Government Code. Its stated mission is
the development, acquisition, leasing and administration of federally assisted housing programs
under the direction of the U.S. Department of Housing and Urban Development. Commissioners
Court appoints a five-member board for the corporation, but may not remove a member at-will.
There is also no financial interdependence between the corporation and the County. The
corporation issues a separate financial report, which may be obtained from its offices at 1022
McCall Street, Conroe, Texas, 77301.
B) FINANCIAL STATEMENT PRESENTATION, MEASUREMENT FOCUS AND BASIS OF
ACCOUNTING:
Government-wide Statements
Government-wide financial statements consist of the Statement of Net Assets and the Statement
of Activities. These statements report information on all of the non-fiduciary activities of the
primary government and its blended component unit. The effect of inter-fund transfers has been
removed from these statements, but continues to be reflected on the fund statements.
Governmental activities are supported mainly by taxes and intergovernmental revenues.
The Statement of Activities demonstrates the degree to which the direct expenses of a given
function are offset by program revenues. Direct expenses are those that are clearly identifiable
with a specific function. Program revenues include 1) charges to customers or applicants who
purchase, use or directly benefit from goods, services or privileges provided by a given function,
and 2) grants and contributions that are restricted to meeting the operational or capital
requirements of a particular function. Taxes and other items not properly included in program
revenues are reported as general revenues.
The government-wide financial statements are reported using the economic resources
measurement focus and the accrual basis of accounting. Revenues are recorded when earned and
expenses are recorded when a liability is incurred, regardless of the timing of related cash flows.
Property taxes are recognized as revenues in the year for which they are levied. Major revenue
types, which have been accrued, are district and county clerk fees, justice of the peace fines,
revenue from investments, intergovernmental revenue and charges for services. Grants are
recognized as revenue when all applicable eligibility requirements are met.
44

September 30, 2007
Fund-level Statements
Separate fund financial statements are provided for governmental funds and fiduciary funds even
though the latter are excluded from the government-wide financial statements. Major individual
governmental funds are reported in separate columns in the fund financial statements. Non-major
funds are aggregated into a single column in the fund financial statements. Detailed statements
for non-major funds are presented within the Combining and Individual Fund Statements and
Schedules.
Governmental fund level financial statements are reported using current financial resources
measurement focus and the modified accrual basis of accounting. Revenues are recognized as
soon as they are both measurable and available. Revenues are considered available when they are
collectible within the current period or soon enough thereafter to pay liabilities of the current
period. Measurable and available revenues include revenues expected to be received within 60
days after the fiscal year ends. Receivables which are measurable but not collectible within 60
days after the end of the fiscal year are reported as deferred revenue. Property taxes levied prior
to September 30, 2006 that were due October 1, 2006, have been assessed to finance the budget
of the fiscal year ending September 30, 2007. In accordance with the modified accrual basis of
accounting, the balances outstanding at September 30, 2007, and beyond the 60 days after year
end have been reflected as deferred revenue and taxes receivable in the fund financial statements.
Property taxes and interest earned as of September 30 and received within 60 days of year end are
accrued as income in the current period. Expenditures generally are recorded when a liability is
incurred; however, debt service expenditures, claims and judgments, and compensated absences
are recorded only when payment is made.
Fiduciary fund level financial statements include fiduciary funds which are classified into
private purpose trust and agency funds. The County has only agency funds which are used to
account for assets held by the County as an agent for individuals, private organizations, other
governments and other funds. Agency funds do not involve a formal trust agreement. Agency
funds are custodial in nature (assets equal liabilities) and do not involve measurement of results
of operations.
The County reports the following major governmental funds:
The General Fund is the general operating fund of the County and is always classified as a
major fund. The General Fund is used to account for all financial resources except those required
to be accounted for in another fund. Major revenue sources include property taxes, charges for
services, intergovernmental revenues, and investment interest income. Primary expenditures are
for general and financial administration, public safety, judicial operations, health and welfare, and
capital acquisition.
The Road and Bridge Special Revenue Fund is used to account for rehabilitation, repair and
maintenance of the Countys roadways and bridges. The Road and Bridge Fund is financed by a
designated part of the annual property tax levy, as well as certain statutory fees.
The Debt Service Fund is used to account for the receipt and disbursement of funds to retire
debt resulting from the issuance of general obligation bonds and certificates of obligation.
Financing is provided by a specific annual property tax levy, and the investment interest earned
thereon.
45

September 30, 2007
The Airport Maintenance Fund is used to account for operations of the County airport.
Funding is provided by user fees, ad valorem taxes and federal grants as passed through the Texas
Department of Transportation.
The Jail Financing Corporation Fund is used to account for the construction of an 1,100-bed
detention facility. The $44,834,989 in proceeds from the issuance of a lease revenue bond will be
used to construct the new jail facility.
The Capital Projects-Road Bonds, Series 2006A Fund is used to account for countywide road
improvements. The proceeds from the issuance of an additional $47,800,000 in general
obligation bonds were used to finance this fund. A portion of the proceeds will be used to satisfy
the Countys obligation under several agreements with the State of Texas to improve state-owned
roads in the County.
The Capital Projects-Road Bonds, Series 2006B Fund is used to account for an additional
phase of variable rate road construction bonds that were approved in 2005 by the voters of the
County. The $63,750,000 in proceeds will be used to satisfy the Countys obligation under a
pass-through toll agreement with the State of Texas to improve six specific state-owned roads
in the County.
The County reports the following nonmajor governmental funds:
Special revenue funds are used to account for specific revenue sources (other than capital
projects) that are restricted to expenditures for specified purposes. These restrictions exist both
externally (by agreement with other entities or by statute) and internally (by policy of
Commissioners Court).
Capital project funds are used to account for financial resources to be used for the acquisition or
construction of major capital assets and infrastructure. Existing projects include construction of
three new libraries, a courts building, road construction, airport improvements, and various
remodeling plans.
The County reports the following fiduciary funds:
Agency funds are used to account for assets held by the County as custodian for individuals and
other governmental units, such as officials fee accounts, inmate funds, cash bail bonds, and other
similar arrangements.
C) ASSETS, LIABILITIES, AND FUND EQUITY:
1. Cash and Investments
Cash and cash equivalents include amounts in demand deposits as well as bank certificates
with a maturity date within three months of the date acquired by the County.
The County is authorized by the Public Funds Investment Act of 1987 to invest idle funds in
a) obligations of the United States and its agencies or instrumentalities, b) obligations of the
State of Texas, c) obligations of states, agencies, political subdivisions, and municipalities
having a rating of not less than A, and d) fully collateralized direct repurchase agreements.
The County reports its investments as required by GASB Statement No. 31 Accounting and
Financial Reporting for Certain Investments and for External Investment Pools. Investments
with a maturity of less than a year at acquisition are reported at amortized cost. Investments
46

September 30, 2007
in open-end mutual funds are reported at fair value, as determined by the funds current share
prices. This value also approximates cost. Additionally, the Countys investments in the
states public funds investment pool are reported at fair value based on the value per share of
the pools underlying portfolio. Historically, the value per share in this public fund
investment pool has approximated cost; therefore, the Countys investments in this pool are
reported at amortized cost.
2. Receivables
Property taxes are recognized as revenues in the period for which they are levied, regardless
of the lien date. Property taxes for the County are levied based on taxable value on the lien
date of January 1 prior to September 30 of the same year. They become due October 1 of that
same year and delinquent after January 31 of the following year. Accordingly, receivables
and revenues for prior-year levies delinquent at year end are reflected on the governmentwide statement based on the full accrual method of accounting and under the modified
accrual method in the fund statements.
Accounts receivable from other governments include amounts due from grantors in regards to
approved grants for specific programs and reimbursements for services performed by the
County. Program grants are recorded as receivables and revenues at the time all eligibility
requirements have been met and reimbursable costs are incurred.
Reimbursements for services performed are recorded as receivables and revenues when they
become eligible for accrual in the government-wide statements. Included are fines and costs
assessed by court action and billable services for certain contracts.
Receivables are shown net of an allowance for uncollectibles.
3. Inter-fund Transactions
Outstanding balances of lending and borrowing type activities between funds are classified as
due from other funds and due to other funds, respectively, on the fund financial
statements. Inter-fund activity has been eliminated for the government-wide statements.
4. Inventories and Prepaid Items
Inventory is valued at cost using the first-in, first-out (FIFO) method. Inventory in the Road
and Bridge Fund consists of expendable paving materials held for consumption in accordance
with several contracts. The cost is recorded as an expenditure at the time individual
inventory items are consumed.
Certain payments to vendors reflect costs applicable to future accounting periods and
recorded as prepaid items in both government-wide and fund financial statements.
In the fund financial statements, reported inventories and prepaid items are offset by a
reservation of fund balance, which indicates they do not represent available spendable
resources even though they are a component of current assets.
5. Capital Assets
Capital assets, which include land, buildings, improvements, equipment, infrastructure, and
construction in progress, are reported in the government-wide financial statements. By policy
of the Commissioners Court, acquisitions are capitalized when they cost at least $1,000 and
have a useful life in excess of five years. The policy applied to infrastructure acquisitions
47

September 30, 2007
requires a cost of at least $10,000 and a useful life in excess of five years. Infrastructure
assets include county-owned roads, drainage improvements, bridges, signals, and runways.
Capital assets are recorded at historical cost if purchased or constructed. Donated capital
assets are recorded at estimated fair market value on the date of donation.
The costs of normal maintenance and repair that do not add to the value of the asset or
materially extend the assets life are expensed rather than capitalized.
Capital assets, including infrastructure, are depreciated using the straight-line method over
the following estimated useful lives (in years):
Assets
Buildings
Improvements
Equipment
Infrastructure
Years
5-50
10-30
5-15
5-50
6. Payables
Amounts due to suppliers for trade purchases and amounts due to employees for salaries and
benefits are presented on both the government-wide statements and the fund statements as
accounts payable. Amounts due to various contractors for funds previously deducted from
construction draws are presented as retainage payable. Both categories represent current
liabilities.
7. Deferred Revenue
The County records deferred revenue for uncollected taxes, received but unearned grant
revenues and other miscellaneous fee revenues in the fund financial statements. In the
government-wide statements, tax revenues are not deferred, but are recognized in the year of
levy.
8. Long-term Obligations
In the government-wide financial statements, long-term debt and other long-term obligations
are reported as liabilities in the applicable governmental activities. Bond premiums and
discounts, as well as issuance costs, are deferred and amortized over the life of the bonds
using the straight-line method. Bonds payable are reported net of the applicable bond
premium or discount. Bond issuance costs are reported as deferred charges and amortized
over the term of the related debt.
In the fund financial statements, governmental fund types recognize bond premiums and
discounts, as well as bond issuance costs, during the current period. The face amount of debt
issued is reported as other financing sources. Premiums received on debt issuances are
reported as other financing sources while discounts on issuances are reported as other
financing uses. Issuance costs, whether or not withheld from the actual debt proceeds
received, are reported as debt service expenditures.
9. Compensated Absences
A liability for unused vacation and compensatory time for all full-time regular employees is
calculated and reported in the government-wide financial statements. For financial reporting
purposes, the following criteria have been applied in considering the accrual of the liability
associated with compensated absences: a) leave or compensation is attributable to services
48

September 30, 2007
already rendered, and b) leave or compensation is not contingent on a specific event (such as
illness).
GASB Interpretation No. 6 indicates that liabilities for compensated absences should only be
recognized in the fund statements to the extent the liabilities have matured and are payable
out of current available resources. Compensated absences are accrued in the governmentwide statements.
Each full-time regular employee earns ten days of excused leave per year, and from ten to
twenty-five days of vacation time may be earned per year. A maximum of sixty days for
excused leave may be accrued, and for those employees hired prior to September 1987, the
number of days of excused leave accrued at September 30, 1987, may be paid only upon
retirement. A maximum of twenty-five days of vacation may be accrued, and is paid upon
retirement, resignation, or discharge from the County. Compensatory time is earned in
accordance with the provisions of the Fair Labor Standards Act, as it applies to government
employees.
10. Arbitrage Rebate
The Tax Reform Act of 1986 established regulations for the rebate to the federal government
of arbitrage earnings on local government bonds. Issuing governments must calculate any
rebate due and remit the amount due at least every five years. There were no arbitrage rebate
payments made during fiscal year 2007: however, the estimated liability at year-end was
$137,603.
11. Net Assets/Fund Balance (reserved, restricted)
For the government-wide financial statements, restricted net assets represent externally
imposed restrictions by creditors, grantors, contributors or laws or regulations of other
governments. They may also represent restrictions imposed by law through constitutional
provisions or enabling legislation.
For the fund financial statements, reserved fund balances represent those portions of fund
equity not available for appropriation or that are legally segregated for a specific future use.
Fund reservations include debt service, capital projects, prepaid items, and inventories.
Generally, resources that are reserved in the fund financial statements are broader in scope
than resources that are restricted. However, in some instances, there may be some resources
that would be considered restricted in the government-wide financial statements, but not
considered reserved in the fund financial statements.
12. Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to
make estimates and assumptions that affect the reported amounts of assets and liabilities and
the disclosure of contingent assets and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period. Actual results could
differ from those estimates.
49

September 30, 2007
NOTE 2-
RECONCILIATION OF GOVERNMENT-WIDE AND FUND FINANCIAL STATEMENTS:

The governmental fund statement of revenues, expenditures, and changes in fund balances includes a
reconciliation between net changes in fund balances total governmental funds and changes in
net assets of governmental activities as reported in the government-wide statement of activities.
Several of the elements of that reconciliation are more fully explained below.
Governmental funds report capital outlays as expenditures. However, in the statement of activities
the cost of those assets is allocated over their estimated useful lives and reported as depreciation
expense. The details of this difference are as follows:
Capital outlay
Depreciation expense
Net adjustment to increase net changes in fund balancestotal governmental funds to arrive at changes in net assets
of governmental activities
55,019,193
(34,863,342)
20,155,851
The net effect of various miscellaneous transactions involving capital assets (i.e., sales, trade-ins,
seizures, and donations) is to increase net assets. The details of this difference are as follows:
In the statement of activities, only the gain on the sale of capital assets is
reported. However, in the governmental funds, the proceeds from the sale
increase financial resources. Thus, the change in net assets differs from the
change in fund balance by the cost of the capital assets sold.
The acquisition of capital assets by seizure and by donations increase net assets
in the statement of activities, but do not appear in the governmental funds
because they are not financial resources
183,123
57,334,012
Net adjustment to increase net changes in fund balances-total governmental

funds to arrive at changes in net assets of governmental activities
57,517,135
The issuance of long-term debt (e.g., bonds, leases) provides current financial resources to
governmental funds, while the repayment of the principal of long-term debt consumes the current
financial resources of governmental funds. Neither transaction, however, has any effect on net
assets. Also, governmental funds report the effect of issuance costs, premiums, discounts, and similar
items when debt is first issued, whereas these amounts are deferred and amortized in the statement of
activities. The details of this difference are as follows:
Debt issued or incurred:
Issuance of general obligation bonds
Premium on bonds issued, net
Capital lease financing
Issuance Costs for new debt
Payment to Bond Escrow Agent for refunding debt
50
(86,329,989)
(820,247)
(3,953,897)
1,296,536
41,706,307

September 30, 2007
Principal repayments:
General obligation debt
Certificates of obligation debt
Capital leases
6,057,683
2,640,000
1,597,950
Net adjustment to increase net changes in fund balances-total governmental

funds to arrive at changes in net assets of governmental activities
(37,805,657)
Some expenses reported in the statement of activities do not require the use of current financial
resources and, therefore, are not reported as expenditures in governmental funds. The details of
this difference are as follows:
Accrued interest
Amortization of gain on refunding bonds
Amortization of accrued interest on refunding bonds
Amortization of issuance costs
Amortization of bond discounts
Amortization of bond premiums
Reduction of receivable for reimbursement of county expenditures
Net adjustment to decrease net changes in fund balancestotal governmental funds to arrive at changes in net assets
of governmental activities
NOTE 3-
(984,944)
(613,490)
150,705
(475,615)
(542,749)
(9,361)
1,113,321
(248,483)
(1,610,616)
STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY:

A) BUDGETS AND BUDGETARY ACCOUNTING:
The budget law of the State of Texas provides that the amounts budgeted for the current
expenditures from the various funds of the County shall not exceed the balances in said funds
plus the anticipated revenues for the current year for which the budget is made as estimated by
the County Auditor. In addition, the law states that the Commissioners Court may, upon
proper application, transfer an existing budget surplus during the year to a budget of like kind and
fund, but no such transfer shall increase the total of the budget.
The budget is prepared by the Budget Officer and adopted by the Commissioners Court
following departmental budget reviews and a public hearing. A copy of the budget must be filed
with the Clerk of the County Court and made available to the public. The Commissioners Court
must provide for a public hearing on the budget on some date within seven calendar days after the
filing of the budget and prior to its adoption.
The budget is legally adopted by an order of the Commissioners Court on a basis consistent with
generally accepted accounting principles. The legal level of control (as set forth by statute) is
total resources as appropriated to each fund. Any expenditure that alters the total budgeted
amounts of a fund must be approved by Commissioners Court, and the budget amended. The
annual budget is monitored and reported in the financial statements at the function level, as
management believes that this provides for a more thorough disclosure of the Countys
operations. In addition, management files notice of all line item transfers for public record.
51

September 30, 2007
For fiscal year 2007, formal budgets were adopted for the General Fund, the Special Revenue
Funds, and the Debt Service Fund. Formal budgetary integration is not employed for Capital
Project Funds, and legal budgets are not adopted, because budgetary control is achieved through
legally binding construction contracts. All appropriations lapse at fiscal year end with the
exception of grant awards and certain ongoing projects.
The Commissioners Court may approve expenditures as an amendment to the budget to meet an
unusual and unforeseen condition that could not have been included in the original budget
through the use of reasonably diligent thought and attention. Such expenditures would include
the re-appropriation of approved but unexpended amounts for encumbrances, grants, and certain
projects from the previous fiscal year. In fiscal 2007, budget amendments totaling $13,774,958
were approved that met these criteria.
The Commissioners Court may also adopt a supplemental budget for the limited purpose of
spending proceeds that become available for disbursement in a fiscal year, but are not included in
the budget for that budget year. Included in this category are public or private grants or aid
money, revenue from intergovernmental contracts, and proceeds from the issuance of debt. In
fiscal 2007, supplemental appropriations were approved in the amounts of $6,894,424,
$5,888,422, and $3,953,897 for grants received, intergovernmental contracts executed, and
capital leases approved, respectively.
B) EXCESS OF EXPENDITURES OVER APPROPRIATIONS IN INDIVIDUAL FUNDS:
Expenditures exceeded appropriations in four funds during fiscal year 2007. Expenditures in the
Forfeitures, Sheriff Commissary and Alternate Dispute Special Revenue Funds exceeded
appropriations by $245,078, $178,562, and $1,986, respectively. These excesses were absorbed
by unanticipated revenues and transfers from the General Fund, and had an immaterial impact on
fund balances. The $653,766 excess of expenditures over appropriations in the Debt Service
Fund was remedied by transfers from the General Fund, Certificates of Obligation Series 2001
Capital Projects Fund and Road Bonds 2002 Capital Projects Fund.
C) DEFICIT FUND EQUITY:
At September 30, 2007, the Attorney Administration Special Revenue Fund, the Capital ProjectCertificates of Obligation Series 2007 Fund and the Capital Project-Certificates of Obligation
Series 2008 Fund, had deficit fund balances of $4,518, $274,936 and $212,915, respectively.
Management anticipates that future revenues will replenish the Attorney Administration Special
Revenue Fund. The deficit in the Capital Project-Certificates of Obligation Series 2007 Fund and
the Capital Project-Certificates of Obligation Series 2008 Fund will be addressed by issuing the
certificates of obligation in the upcoming fiscal year.
NOTE 4-
DEPOSITS AND INVESTMENTS:

A) DEPOSITS:
Custodial Credit Risk deposits. In the case of deposits, this is the risk that in the event of a
bank failure, the governments deposits may not be returned to it. The County does not have a
policy for custodial credit risk. As of September 30, 2007, the Countys bank balance (collected
funds) was $29,484,418. At that same date, none of the Countys bank balance was exposed to
custodial credit risk since the Countys deposits were insured and collateralized by securities
pledged by the depository and held by third party agents of the County in the Countys name.
52

September 30, 2007
B) INVESTMENTS:
As of September 30, 2007, the County had the following investments:

Investment Type
States Investment Pool (TEXPOOL)
Money Market Mutual Fund (ICT)
Money Market Mutual Fund (BPIF)
Money Market Mutual Fund (AIM)
Repurchase Agreement (provided by
Hypo Public Finance Bank)
Total Investments
Fair
Value
1,353,937
37,811,182
33,654,742
37,755,153
36,985,183
Weighted Average
Maturity (in years)
0.17
0.13
0.03
0.10
0.08
$147,560,197
The County invested idle funds in a) the Government Portfolio of Investors Cash Trust, b) the
Trust for Federal Securities (T-Fund) with BlackRock Provident Institutional Funds, and c) the
Short-Term Investments Trust (STIT) Government and Agency Portfolio with AIM Funds.
These three mutual funds share several characteristics that have a positive effect on the safety of
the Countys funds, including:
SEC registration and regulation,

AAAm rating by Standard and Poors,
Limitations on investments to direct obligations of the US Treasury, US
agencies, and its instrumentalities, and repurchase agreements
collateralized by same,
An average weighted maturity that is less than 90 days (0.25 years), and
A portfolio valuation of net assets that is maintained at $1 per share.
Additionally, funds were invested in the Texas Local Government Investment Pool (TexPool).
This external investment pool was created in conformity with certain acts in the Government
Code of the Texas Civil Statutes. The financial operations of the pool are managed by a thirdparty investment service and oversight is provided by the Comptroller of Public Accounts of the
State of Texas, along with a statewide advisory board. Although TexPool is not SEC-registered,
it adheres to the same standards as money market mutual funds for limitations on its investments,
the length of its average weighted maturity, and the valuation of its net assets.
Proceeds from the issuance of lease revenue bonds by the Montgomery County Jail Financing
Corporation (a blended component unit) were invested in a Flexible Repurchase Agreement with
a guaranteed earnings rate of 5.04%. Hypo Public Finance Bank submitted the rate in response to
the Corporations request for bids. The agreement is collateralized with obligations of the United
States, its agencies and instrumentalities. Collateral is maintained at 104% of the total principal
deposited and accrued interest earned under the agreement. An additional tri-party agreement
was executed whereby the collateral is held by U.S. Bank in the Corporations name. The
repurchase agreement will terminate on the earlier of November 1, 2008 or upon the withdrawal
of all funds.
Custodial credit risk investments. For an investment, this is the risk that, in the event of the
failure of the counterparty, the government will not be able to recover the value of its investments
or collateral securities that are in possession of an outside party. While the County does not have
an investment policy for custodial credit risk, there is no need for such policy because of the
nature of the Countys investments. A third party institution is required to hold the insured,
registered securities underlying the countys investments in a safekeeping account in the
Countys name.
53

September 30, 2007
Interest rate risk In accordance with its written investment policy, the county manages its
exposures to declines in fair value by limiting the maturity of its investments to less than one year
at the time of purchase.
Credit risk. While state statutes allow for additional investments, the Countys formal investment
policy authorizes the County to only invest in the following:
Obligations of the U.S. Treasury and Governmental Agencies,

Time deposits,
Negotiable Order of Withdrawal (NOW) Accounts,
Investment Pools rated AAA or AAAm by at least 1 nationally recognized rating service,
Certificates of Deposit, and
Money Market mutual funds.
As stated above, Standard and Poors has rated the states investment pool and the three mutual
funds AAAm. The Countys investments in Federal National Mortgage Association (FNMA),
Federal Farm Credit Bank (FFCB) and Federal Home Loan Bank (FHLB) were rated AAA by
Standard and Poors.
Concentration of credit risk. The Countys investment policy does not have any provisions
regarding the amount that may be invested in any one issuer. However, the Investment
Committee regularly reviews that saturation for anything in excess of 25%. At September 30,
2007, none of the Countys total direct invested amounts were in Federal National Mortgage
Association, Federal Farm Credit Bank, or Federal Home Loan Bank.
NOTE 5-
PROPERTY TAXES:
The County Tax Assessor-Collector bills and collects property taxes. Revenues are recognized in the
Governmental Funds when levied to the extent that they result in current receivables. Property taxes
are levied (assessed) and payable on October 1. They attach as an enforceable lien on property as of
January 1 of the following year and become delinquent on February 1.
The County is permitted by the Texas State Constitution (Article VIII, Section 9) and statutes to levy
taxes of up to $0.80 per $100 of assessed valuation for general governmental services and the
payment of long-term debt. The combined current tax rate for the year end was $0.4913 per $100,
which means that the County has a tax margin of $0.3087 per $100, and could raise up to
$72,081,398 in additional taxes from the present assessed valuation of $23,349,383,141 before the
limit is reached.
The thirty years property taxes receivable at September 30, 2007, as reported by the Tax AssessorCollector are presented as follows:
Taxes
Receivable
General Fund
Road & Bridge Fund
Debt Service Fund
Total Receivable
$4,165,055
552,698
960,779
$5,678,532
54
Less: Allowance
for Uncollectibles
Net Taxes
Receivable
$ 83,301
11,054
19,216
$113,571
$4,081,754
541,644
941,563
$5,564,961

September 30, 2007
NOTE 6-
DUE FROM OTHER GOVERNMENTS:

Amounts due from other governments arise from funding received from federal and state grants, as
well as interlocal agreements with local governments. At September 30, 2007, the following amounts
were recorded as due to the County:
General Fund
Capital Project Funds
Total Due from Governments
NOTE 7-
Federal
$2,070,327
569,178
$2,639,505
State
$ 690,030
362,205
3,360
$1,055,595
Local
$ 966,279
155,871
500,000
$1,622,150
Total
$3,726,636
1,087,254
503,360
$5,317,250
CAPITAL ASSETS:
A) CHANGES IN CAPITAL ASSETS FOR YEAR ENDED SEPTEMBER 30, 2007:
Land
not being depreciated
Buildings
Improvements
Equipment
Infrastructure
being depreciated
Less accumulated
depreciation for:
Buildings
Improvements
Equipment
Infrastructure
Total Capital Assets, net of
Accumulated depreciation
Beginning
Balance
$
7,747,501
4,190,470
Additions
Deletions
(1)
(1)
Ending
Balance
3,593,105 $ (1,161,495)
18,865,256
(7,276,051)
10,179,111
15,779,675
11,937,971
22,458,361
(8,437,546)
25,958,786
108,822,551
7,011,160
46,767,915
811,222,219
7,148,638
2,782,820
5,246,100
85,676,825
(1,026,447)
(2,408,145)
(1,093,648)
114,944,742
9,793,980
49,605,870
895,805,396
973,823,845
100,854,383
(4,528,240)
1,070,149,988
(27,586,943)
(4,043,538)
(29,532,488)
(515,025,101)
(2,491,519)
(855,162)
(4,616,533)
(26,900,128)
36,099
1,851,983
301,290
(30,042,363)
(4,898,700)
(32,297,038)
(541,623,939)
$ 409,573,746
$ 88,449,402
$(10,776,414)
$ 487,246,734
(1) Amounts representing transfers between categories are included in the columns for both additions and deletions.
55

September 30, 2007
B) DEPRECIATION EXPENSE:
Depreciation expense on capital assets is recorded in the Government-wide financial statements,
but not in the Fund financial statements. For the year ended September 30, 2007, the County
charged depreciation expense to functions/programs as follows:
Governmental activities:
Judicial
Legal Services
Elections
Public Facilities
Public Safety
Health and Welfare
Conservation
Total depreciation expense-governmental activities
1,706,357
101,558
92,662
358,219
25,336
1,468,101
1,724,090
111,486
1,362,631
15,944
27,896,958
$34,863,342
C) CONSTRUCTION COMMITMENTS:
The County has entered into contracts for the construction, renovation, and improvement of real
property. The following projects were in progress at September 30, 2007:
Project
Various Road Projects

Airport Improvement
Park Improvements
Building Remodelings
Ed Chance Annex
Jail Facility
Status
Under construction
Under construction
Planning phase
Underway
Under construction
Under construction
Total
NOTE 8-
Commitment
Paid to Date
136,353,559
8,673,685
13,510,000
5,328,062
3,200,000
44,834,989
$211,900,295
97,110,151
7,556,221
3,030,535
1,161,440
1,178,299
15,572,635
$125,609,281
DISAGGREGATION OF PAYABLE BALANCES:

A) DUE TO OTHER GOVERNMENTS:
The County records certain amounts due to other governments as a result of operating contracts
and overpayment of certain grant funds. At September 30, 2007, the following amounts were due
to other governments:
Fund
General
Local
$1,615,072
Total
$ 1,615,072
B) DEFERRED REVENUES:
The County reports deferred revenues in the governmental funds that consist of two categories:
a) receivables for revenues that are not considered to be available to liquidate liabilities of the
56

September 30, 2007
current period, and b) resources that have been received, but not yet earned. At the end of
September 2007, deferred revenues were presented as follows:
Fund
Property
Taxes
General
Road & Bridge
Debt Service
Other Nonmajor
Total
Unearned
Fees
$ 3,890,996
548,867
894,451
$ 5,334,314
172,648
413,368
$ 586,016
Total Deferred
Revenues
4,063,644
548,867
894,451
413,368
5,920,330
NOTE 9- LONG-TERM DEBT:

General long-term debt consists of general obligation bonds, lease-revenue bonds, certificates of
obligation, the Countys accrued liability for compensated absences and compensatory time, capital
leases, and arbitrage due the federal government. Principal and interest payments on the Countys
bonded debt, in general, are secured by ad valorem property taxes levied on all taxable property
within the County. The lease-revenue bonds are secured by a pledge of future revenues to be earned
under an agreement between the County and the Montgomery County Jail Financing Corporation.
Payments are recorded in the Debt Service Fund.
A) BONDED DEBT:
A summary of the long-term bonded debt, at September 30, 2007 is presented:
Interest
Rate (%)
Issue
Date
GENERAL OBLIGATION BONDS:

Refunding Bonds, Series 1997
5.10-5.60
1997
Permanent Improvement, Series 2000
4.50-5.25
2000
Road Bonds, Series 2002A
4.00-4.50
2002
Refunding Bonds, Series 2002B
3.00-4.50
2002
5.00
2003
Library Bonds, Series 2003B
2.00-4.75
2003
4.00-5.00
2005
Road Bonds Fixed Rate, Series 2006A
3.75-5.00
2006
Road Bonds Adj. Rate, Series 2006B
5.00
2006
4.00-5.50
2007
Lease Revenue Bonds, Series 2007
4.00-5.00
2007
Total Principal
Accretion of Cap Appreciation Bonds:
Refunding, Series 1997
5.10-5.60
1997
TOTAL GENERAL OBLIGATION BONDS PAYABLE
CERTIFICATES OF OBLIGATION:
Series 1997A
4.10-6.00
Series 1998
4.60-6.50
Series 2001
4.65
Series 2003
2.00-4.75
Series 2004
3.00-4.60
Series 2006
3.75-5.00
TOTAL CERTIFICATES OF OBLIGATION
1997
1998
2001
2003
2004
2006
Maturity
Date
Bonds
Outstanding
2017
2020
2022
2011
2026
2026
2020
2027
2030
2026
2026
4,117,478
900,000
6,560,000
1,905,000
12,595,000
9,570,000
45,685,000
47,700,000
63,750,000
41,495,000
44,834,989
279,112,467
2017
3,341,388
$282,453,855
2015
2018
2011
2022
2020
2027
5,370,000
220,000
1,145,000
11,375,000
2,330,000
26,220,000
$ 46,660,000
$329,113,855
TOTAL BONDED DEBT

57

September 30, 2007
All of the Countys outstanding bonded debt is assigned a fixed rate of interest, with the
exception of the Series 2006B Road Bonds. The Series 2006B bonds were issued with a variable
rate of interest, initially set at 5.0%. The initial rate period for these bonds ends in 2008, and at
that time a term rate will be determined by a remarketing agent (currently Goldman, Sachs, and
Co.)
B) CHANGES IN LONG-TERM DEBT:
The following schedule illustrates changes in long-term debt for the year ended September 30,
2007. Reductions to general obligation bonds include an annual accretion reduction of capital
appreciation bonds in the amount of $3,392,683. For each category, management has presented
the portion that will be due within one year.
Governmental Activities:
Bonds payable:
General Obligation
Certificates of obligation
Less deferred amounts:
Issuance discounts
Unamortized premiums
Total bonds payable
Capital leases
Arbitrage Rebate
Total Long-term Liabilities
Beginning
Balance
Additions
Reductions
Ending
Balance
Due
Within
One Year
$ 238,529,676
50,155,000
$86,329,989
-
$(42,405,810)
(3,495,000)
$282,453,855
46,660,000
$2,075,000
2,523,740
(97,852)
8,097,278
296,684,102
1,096,177
5,870,959
$303,651,238
(120,633)
940,880
87,150,236
3,953,897
137,603
5,229,321
$96,471,057
9,361
(1,113,321)
(47,004,770)
(1,597,950)
(4,244,377)
$(52,847,097)
(209,124)
7,924,837
336,829,568
3,452,124
137,603
6,855,903
$347,275,198
(12,711)
532,381
5,118,410
607,833
4,560,431
$10,286,674
At year end, $1,024,250 of special revenue funds compensated absences are included in the above
amounts. The remaining balance ($5,831,653) will be liquidated by the general fund. This
follows the prior year allocation of liability between operating funds.
C) ANNUAL DEBT SERVICE REQUIREMENTS TO MATURITY:
The following table lists the amounts required to amortize bonded debt, by debt type.
Maturity
2008
2009
2010
2011
2012
2013-2017
2018-2022
2023-2027
2028-2030
Total
General Obligation Bonds

Principal
Interest
$ 2,523,740 $ 11,698,562
3,886,529
11,317,854
4,493,661
11,386,791
5,502,607
10,927,114
5,786,620
10,965,182
32,889,321
50,801,076
48,505,000
38,413,322
66,940,000
24,515,166
63,750,000
4,887,500
$234,277,478 $174,912,567
58
Revenue Bonds
Principal
Interest
$
$ 1,883,754
1,076,389
1,998,535
1,501,900
1,941,581
1,569,862
1,873,619
1,640,899
1,802,582
9,387,790
7,829,611
11,712,931
5,504,470
14,613,956
2,603,445
3,331,262
112,218
$ 44,834,989 $ 25,549,815
Certificates of Obligation
Principal
Interest
$ 2,075,000 $ 2,139,763
1,695,000
2,056,750
1,780,000
1,986,788
2,435,000
1,899,001
2,220,000
1,796,126
12,805,000
7,353,503
12,665,000
4,249,864
10,985,000
1,395,375
$ 46,660,000 $ 22,877,170

September 30, 2007
D) ADVANCE REFUNDING:
On March 6, 2007, to take advantage of lower interest rates, the County issued $41,495,000
Limited Tax Refunding Bonds, Series 2007 with interest rates ranging from 4.0 percent to 5.5
percent to advance refund the following bonds:
Series
Certificates of Obligation, Series 1998
Permanent Improvement Bonds, 2000
Unlimited Tax Road Bonds, Series 2002A
Unlimited Tax Road Bonds, Series 2003A
Unlimited Tax Road Bonds, Series 2004
Interest Rate (%)

5.10-5.60
4.50-6.50
4.50-5.25
4.00-4.50
5.00
5.50
Total Refunded
Amount
4,208,127
855,000
60,000
10,470,000
11,405,000
10,205,000
$ 37,203,127
$
E) PRIOR YEAR DEFEASANCE OF DEBT:

In prior years, the County defeased multiple debt issues by creating separate irrevocable trust
funds. New debt was issued and the proceeds were used to purchase U.S. government securities
that were placed in the trust funds. The investments and fixed earnings from the investments are
sufficient to fully service the defeased debt until it is called or matures. For financial reporting
purposes, the debt has been considered defeased and therefore removed from the governmentwide financial statements. As of September 30, 2007, defeased but outstanding debt from prior
year refunding transactions consisted of the following:
Series
Library and Refunding Bonds, Series 1992
Certificates of Obligation, 1996
Certificates of Obligation, 1997A
Permanent Improvement Bonds, Series 2000
Total Defeased but Outstanding
Amount
$
3,000,000
2,500,000
2,490,000
6,835,000
15,130,000
12,300,000
6,960,000
$
49,215,000
The proceeds of this refunding were used to purchase U.S. government securities. Those
securities were deposited in an irrevocable trust with an escrow agent to provide for all future
debt service payments on the prior debt. As a result, that debt is considered to be defeased and
the liability for the old debt has been removed from the Statement of Net Assets.
The County advance refunded the above debt to reduce its total debt service payments over the
next twenty-three years by $1,324,684, and to obtain an economic gain (the difference between
the present value of the debt service payments on the old and new debt) of $1,257,736.
F) FUTURE BORROWING:
In September of 2005, the voters of Montgomery County approved the issuance of $160,000,000
in unlimited tax road bonds to complete those projects that were begun with the Series 2002,
2003, and 2004 road bonds. The first of these issues occurred in July 2006 for $111,550,000, net
of premiums and expenses. The County intends to issue the remaining $47,200,000 of authorized
bonds in May 2008. When these bonds are issued, the County will report the debt with very little
corresponding asset due to the fact that these projects are primarily for the improvement of Stateowned roads.
The County intends to issue approximately $14,000,000 in certificates of obligation in the second
half of fiscal year 2008 to fund construction of a new county administration building, remodel of
59

September 30, 2007
a courts building and improvements to an existing building to accommodate a new employee
medical clinic.
G) CONDUIT DEBT OBLIGATIONS:
Montgomery County Industrial Development Corporation and Harris County Health Facilities
Development Corporation issued bonds to provide financial assistance to private and public
sector entities engaged in activities that are deemed to be in the public interest. These bonds are
obligations of the issuing entities payable solely from the proceeds of the underlying financing
agreements and, in the opinion of legal counsel, do not represent indebtedness or liability to the
issuing entity, to Montgomery County, Texas, to the State of Texas, or to any political
subdivision; therefore, they are not reported as liabilities in the Countys financial statements.
Montgomery County Industrial Development Corporation- The corporation issues industrial
revenue bonds that promote and encourage employment and public welfare. As of September
30, 2007, there were fourteen series of bonds outstanding. The aggregate principal amount
payable for the bonds issued prior to December 15, 1995, could not be determined; however, the
original issues totaled $44,895,000. The bonds will be repaid from sources defined in
underlying financing agreements between the corporation and the entities for whose benefit the
bonds were issued.
Harris County Health Facilities Development Corporation- The corporation issues bonds if
there is a public benefit or purpose that is necessary or convenient for health care, research, or
education. Its activity is included in this disclosure because its bonds have been issued for the
benefit of organizations located in Montgomery County. As of September 30, 2007, there were
thirty-eight (38) series of bonds outstanding with an aggregate principal payable of
$3,158,640,000. The bonds will be repaid from sources defined in the various underlying
financing agreements between the corporation and the entities for whose benefit the bonds were
issued.
H) CAPITAL LEASES:
The County has entered into capital lease agreements for the lease/purchase of certain heavy
road equipment, vehicles, and a building. Equipment with a value of $1,140,997 and a building
with a value of $2,812,900 were acquired during the current fiscal year under capital leases and
recorded in the Capital Assets portion of the government-wide financial statements.
Depreciation expense for these assets is included as part of the depreciation expense detailed in
Note 7. The lease agreements are classified as capital leases because title passes to the County at
the end of the lease term, and are included as leases payable in the Long-Term Debt portion of
the government-wide statements.
The present value of future minimum capital lease payments at September 30, 2007 and the
funds from which they will be paid are as shown below:
Year
Ending
General
Fund
2008
2009
2010
2011
2012
2013
$161,936
161,936
161,936
122,538
114,080
722,426
78,923
$643,503
Total Minimum Lease Payments

Less: amount representing interest
Present value-minimum lease payments
60
Special Revenue
Funds
599,984
599,984
599,985
531,386
496,563
410,209
3,328,111
429,490
2,808,621

September 30, 2007
NOTE 10- INTER-FUND RECEIVABLES, PAYABLES, AND TRANSFERS:
A) DUE FROM/DUE TO OTHER FUNDS:
Activity between funds that represents the current portion of lending/borrowing and inter-fund
charges for goods and services arrangements outstanding at fiscal year end are referred to as
due from/due to other funds. Inter-fund balances are expected to be repaid within one year
from the date of the financial statements, and are routine in nature. The composition of interfund balances as of September 30, 2007 was as follows:
General Fund
Debt Service Fund
Jail Financing Corporation
Cap Project/Road Bonds 2006A
Non-major Governmental Funds
Total
Receivables
$ 5,688,359
347,163
3,175,195
7,284,260
2,163,780
11,701,397
$ 30,360,154
Payables
$ 8,562,822
3,754,853
1,067,147
10,327,060
3,367,678
3,280,594
$ 30,360,154
B) TRANSFERS:
Transfers are used to a) move revenues from the fund that the statute or budget requires to
collect them to the fund that the statute or budget requires to expend them, b) move receipts from
bond refundings and residual balances from capital project funds to the Debt Service Fund to pay
debt obligations, and c) use unrestricted revenues collected in the General Fund to finance
various programs accounted for in other funds in accordance with budgetary authorizations.
Inter-fund transfers for the year ended September 30, 2007 were:
Transfers In
$ 7,653,868
909,206
510,395
7,240,459
2,215,936
434,957
27,234,749
$ 46,199,570
General Fund
Debt Service Fund
Cap Project/Road Bonds 2006A
Cap Project/Road Bonds 2006B
Nonmajor Governmental Funds
Total
Transfers Out
$ 21,940,546
6,511,196
13,495,489
619,157
3,633,182
$ 46,199,570
Although inter-fund activity is reported in the fund financial statements, it has been eliminated in the
government-wide financial statements.
NOTE 11- OPERATING LEASES:
The County is a party to several lease agreements. Significant terms are discussed below:
Automated Flight Service Station- The County leases the Automated Flight Service Station to the
Federal Aviation Administration on an annually renewable lease that currently extends to September
30, 2008. The annual rent of $102,500 is recorded in the General Fund. The Flight Service Station is
recorded as a Capital Asset in the Countys government-wide financial statements at a cost of
$802,428, less accumulated depreciation of $369,117.
61

September 30, 2007
Office Space- The County leases 2,777 square feet of office space at the Montgomery County Annex
Building to the Lone Star Groundwater Conservation District for a period of sixty months with two
six-month extensions. The term of this lease is January 1, 2005 through December 31, 2009. The
annual rent of $7,414 is recorded in the General Fund. The building is recorded as a Capital Asset in
the Countys government-wide financial statements at a cost of $5,167,303, less accumulated
depreciation of $421,582. Following is a schedule of lease payments receivable on office space leases
through the ending dates of the agreements:
Year Ending
September 30,
2008
2009
2010
Total Lease Payments Receivable
7,414
7,414
1,854
$ 16,682
NOTE 12- RISK MANAGEMENT:

A) EMPLOYEE HEALTH BENEFITS:
Effective January, 1989, the County established a partially self-funded trust plan which offers
medical, dental, vision, and life insurance coverage to employees and their dependents. The
County maintains excess loss insurance, which limits annual claims paid from the plan to a
maximum of $150,000 for any individual claim. A third party administrator is employed by the
plan to administer claims. A trustee has been engaged to receive employer and employee
contributions and to disburse payments to the providers of the plan. Costs relating to the plan are
recorded as expenditures in the General Fund. Liabilities are reported when it is probable that a
loss has occurred and the amount of the loss can be reasonably estimated.
The plan is funded to discharge liabilities as they become due. Claims incurred and reported, but
not paid at September 30, 2007, were $420,906. Claims incurred but not reported (IBNR) at
September 30, 2007, are estimated to be $2,984,569. Estimates are not based on actuarial
calculations, but rather on historical trends. Both amounts have been recorded as expenditures in
the General Fund and a liability has been established.
Changes in the health claims liability for the two fiscal years ended September 30, 2007 and
September 30, 2006 are as follows:
2007
Unpaid claims, beginning of year

Incurred claims (including IBNR)
Claim payments
Unpaid claims, end of year
2,350,004
15,766,442
(14,710,971)
$ 3,405,475
2006
2,491,712
13,838,151
(13,979,859)
$ 2,350,004
During the year ended September 30, 2007, the plan received contributions in the amounts of
$16,115,288 and $1,459,062 from the employer and employees, respectively. The contributions
made by employees included contributions by qualified retirees and certain former employees
covered by the provisions of the Consolidated Omnibus Budget Reconciliation Act of 1986
(COBRA). In addition to the claim payments made, the plan also expended $483,164 in
administrative costs and $1,324,744 for reinsurance and insurance premiums.
B) WORKERS COMPENSATION AND EMPLOYERS LIABILITY:
As of January 1, 2003, the County established a partially self-funded program to cover claims by
employees arising from job related injuries. The program offers coverage at the statutorily
required level of $1,000,000 per occurrence. A third party administrator has been engaged by the
62

September 30, 2007
County to administer claims. Excess loss insurance was purchased to limit the claims loss to the
County to no more than $100,000 in 2007.
Costs associated with this program are recorded as expenditures in the General Fund. Liabilities
are recorded when it is probable that a loss has occurred and when an amount can be reasonably
estimated. During the year ended September 30, 2007, the County expended $56,545 for
administrative costs and $220,592 for excess loss insurance premiums.
Changes in the workers compensation liability for the two fiscal years ended September 30, 2007
and September 30, 2006 are as follows:
Unpaid claims, beginning of year
Incurred claims (including IBNR)
Claim payments
Unpaid claims, end of year
2007
2006
$1,218,924
432,669
(547,447)
$1,104,146
$1,231,331
518,710
(531,117)
$1,218,924
C) PROPERTY AND CASUALTY:

The County purchased insurance coverage for certain plant, property, and equipment for the fiscal
year. Deductibles are maintained at $1,000 for each occurrence. The County paid $371,951 in
premiums in fiscal 2007, and recorded the expenditure in the General Fund. Settled claims have
not exceeded commercial coverage in any of the past two fiscal years.
D) GENERAL LIABILITY:
Effective December 1, 2003, the County began participating in an individual public entity risk
pool to transfer certain risks associated with property, casualty, and general liability. Note 15
describes the Countys obligation under liability claims for 2007.
NOTE 13- EMPLOYEE RETIREMENT PLAN:
A) PLAN DESCRIPTION:
The County provides retirement, disability, and death benefits for all of its full-time employees
through a nontraditional defined benefit pension plan in the statewide Texas County and District
Retirement System (TCDRS). The TCDRS Board of Trustees is responsible for the
administration of the statewide agent multiple-employer public employee retirement system
consisting of 573 nontraditional defined benefit pension plans. TCDRS in the aggregate issues a
comprehensive annual financial report (CAFR) on a calendar year basis. The CAFR is available
upon written request from the TCDRS Board of Trustees at P. O. Box 2034, Austin, TX, 78768.
The plan provisions are adopted by the governing body of the County, within the options
available in the Texas state statutes governing TCDRS (TCDRS Act). Members can retire at ages
60 and above with 8 or more years of service, with 30 years regardless of age, or when the sum of
their age and years of service equals 75 or more. Members are vested after 8 years of service, but
must leave their accumulated contributions in the plan to receive any employer-financed benefit.
Members who withdraw their personal contributions in a lump sum are not entitled to any
amounts contributed by the County.
Benefit amounts are determined by the sum of the employees deposits to the plan, with interest,
and employer-financed monetary credits. The level of these monetary credits is adopted by the
Commissioners Court of the County within the actuarial constraints imposed by the TCDRS Act
so that the resulting benefits can be expected to be adequately financed by the employers
commitment to contribute. At retirement, death, or disability, the benefit is calculated by
converting the sum of the employees accumulated deposits and the employer-financed monetary
credits to a monthly annuity using annuity purchase rates prescribed by the TCDRS Act.
63

September 30, 2007
B) FUNDING POLICY:
Montgomery County has elected the annually determined contribution rate (Variable Rate) plan
provisions of the TCDRS Act. The plan is funded by monthly contributions from both employee
members and the employer based on the covered payroll of employee members. Under the
TCDRS Act, the contribution rate of the employer is actuarially determined annually. The
County contributed using the actuarially determined rate of 9.12% for the months of the
accounting year in 2006, and 9.94% for the months of the accounting year in 2007.
The deposit rate payable by the employee members for calendar year 2007 was 6.0% as adopted
by the Commissioners Court. The employee deposit rate and the employer contribution rate may
be changed by the Commissioners Court within the options available in the TCDRS Act.
C) ANNUAL PENSION COST:
For Montgomery Countys accounting year ended September 30, 2007, the pension cost for the
TCDRS plan was $6,956,597, and the actual contributions were $6,956,597.
The annual required contributions were actuarially determined as a percent of the covered payroll
of the participating employees, and were in compliance with GASB Statement No. 27 parameters
based on the actuarial valuations as of December 31, 2004, and December 31, 2005, the basis for
determining the contributions rates for calendar years 2006 and 2007. The December 31, 2006
actuarial valuation is the most recent valuation.
D) ACTUARIAL VALUATION INFORMATION:
Actuarial valuation date
Actuarial cost method
12/31/2004
Entry age
12/31/2005
Entry age
12/31/2006
Entry age
Amortization method
Level percentage
of payroll, open
Level percentage
of payroll, open
Level percentage
of payroll, open
Amortization period
20
20
Asset valuation method
Long-term
appreciation with
adjustment
Actuarial assumptions:
Investment return (1)
Projected salary increase (1)
Inflation
Cost-of-living adjustments
8.00%
5.50%
3.50%
0.00%
Long-term
appreciation with
adjustment
8.00%
5.30%
3.50%
0.00%
15
(2)
SAF : 10-year
smoothed value
ESF(3): Fund value
8.00%
5.30%
3.50%
0.00%
(1)
Includes inflation at the stated rate.

Subdivision Accumulation Fund.
(3)
Employee Savings Fund.
(2)
E) TREND INFORMATION:
Accounting Year
Ended
9/30/05
9/30/06
9/30/07
Annual Pension
Cost (APC)
$ 5,507,595
6,108,857
6,956,597
64
Percentage of
APC Contributed
100.00%
100.00%
100.00%
Net Pension
Obligation
$
0.00
0.00
0.00

September 30, 2007
F) SCHEDULE OF FUNDING PROGRESS FOR THE RETIREMENT PLAN FOR EMPLOYEES

OF MONTGOMERY COUNTY: (Amounts expressed in thousands)
Actuarial
Valuation
Date
Actuarial
Value of
Assets
12/31/04
12/31/05
12/31/06
(a)
$113,133
125,920
142,688
Actuarial
Accrued
Liability
(AAL)
(b)
$132,345
146,067
158,719
Unfunded
AAL
(UAAL)
Funded
Ratio
(b-a)
$19,212
20,147
16,031
(a/b)
85.48%
86.21%
89.90%
Annual
Covered
Payroll(1)
(c)
$55,351
59,274
68,433
UAAL as a
Percentage of
Covered
Payroll
((b-a)/c)
34.71%
33.99%
23.43%
(1)
The annual covered payroll is based on the employee contributions received by TCDRS for the year ended
with the valuation date.
NOTE 14- OTHER POST-EMPLOYMENT BENEFITS:

Effective January 1, 2000, Commissioners Court adopted a plan to pay for health benefit coverage
for qualified retirees. To qualify for inclusion in the coverage, an individual must attain 15
continuous years of full-time employment with the County and be eligible for a retirement annuity
from the Texas County and District Retirement System. The employee can elect to waive health
benefit coverage. The County is under no obligation to provide this benefit, and the decision to do so
is made by the Commissioners Court on a year-to-year basis.
The coverage is the same as that for a full time regular employee, as further disclosed in Note 12-A.
Management funds this benefit on a pay-as-you-go basis, as actuarial estimates are not available.
For the year ended September 30, 2007, 22 employees retired from service with the County.
Fourteen of those retirees met the qualifications stated above. Currently, there are 115 retirees
covered by this benefit. The cost recorded by the County is included in Note 12.
During the year, the County incurred $609,981 in health care claims for retirees and their dependents.
Retiree contributions for 2007 were $112,841, and the County paid the remaining amount of the
claims.
NOTE 15- CONTINGENT LIABILITIES:
A) GENERAL LIABILITY:
For fiscal year 2007, the County participated in a public entity risk pool, to which certain losses
arising from liability claims were transferred. The premium for this coverage, $320,962, was
recorded in the General Fund. In addition, the County expended $24,011 for damages in
connection with twenty-three claims, for which the deductible had not been satisfied.
B) GRANTS:
The County receives various grant moneys that are subject to audit and adjustment by the grantor
agencies. Any disallowed expenditure will become a liability of the County. The amount, if any,
of expenditures that may be disallowed by the grantor cannot be determined at this time, although
the County expects such amounts, if any, to be immaterial.
C) LITIGATION:
The County is a defendant in a number of lawsuits with claims for damages in excess of
$5,000,000. These claims result primarily from assertions by former employees that they were
wrongfully discharged, allegations by jail inmates that their rights were violated while
incarcerated in the County jail, and claims by individuals arising from property damages. The
County paid $44,649 for legal counsel to defend existing claims. The County intends to
65

September 30, 2007
vigorously contest all the cases, and legal counsel is of the opinion that the County will prevail in
all cases which may have a material effect on the financial position of the County.
NOTE 16- NEW ACCOUNTING PRONOUNCEMENTS:
The Governmental Accounting Standards Board (GASB) has recently issued several new statements.
A listing follows of those that apply to the County. These statements will be implemented in
subsequent years, as required by the GASB.
GASB Statement No. 45, Accounting and Financial Reporting by Employers for Postemployment
Benefits Other than Pensions, which establishes standards for the measurement, recognition, and
display of other postemployment benefit expenditures and related liabilities, and note disclosures in
the financial report. This statement will be effective for the County for the fiscal year ending
September 30, 2009.
GASB Statement No. 47, Accounting for Termination Benefits; which establishes accounting
standards for voluntary and involuntary termination benefits. This statement will be effective for the
County for the fiscal year ending September 30, 2009.
GASB Statement No. 49, Accounting and Financial Reporting for Pollution Remediation
Obligations, which establishes accounting and reporting standards for pollution (including
contamination) remediation obligations. This statement will be effective for the County for the fiscal
year ending September 30, 2009.
GASB Statement No. 50, Pension Disclosures an amendment of GASB Statements No. 25 and No.
27, enhances information disclosed in notes to the financial statements or presented as required
supplementary information (RSI) by pension plans and by employers that provide pension plans.
This statement will be effective for the County for the fiscal year ending September 30, 2009.
GASB Statement No. 51, Accounting and Financial Reporting for Intangible Assets, establishes
accounting and reporting standards for intangible assets. This statement will be effective for the
County for the fiscal year ending September 30, 2010.
NOTE 17- SUBSEQUENT EVENTS:
In November 2007, the County issued $9,260,000 in certificates of obligation in order to construct a
parking garage that will accommodate the Countys growing workforce. The bonds were issued at a
rate of 4.46% with a maturity of 20 years.
In November 2007, the Countys Budget Officer retired. At that time, the Commissioners Court saw
fit to formally reorganize the Countys budget function. As required by Local Government Code
111.032 the County Auditor assumed the duties of the budget function.
In December 2007, the Commissioners Court entered into a municipal lease purchase agreement with
Motorola, Incorporated for the acquisition of a regional communications system, complete with
radios for several smaller governmental agencies in the County. The purchase terms included a
$9,911,251 sale price with 3.71% annual financing and a maturity of 10 years.
In February 2008, two national rating agencies saw fit to downgrade the bond ratings associated with
the investment portfolios maintained by one of the Countys bond insurers. The County filed
appropriate subsequent event notices. After conversations with the Countys bond counsel and
disclosure counsel, management is confident that there will be no substantial impact on the Countys
bond ratings.
66
APPENDIX C
FORM OF LEGAL OPINION
C-1
HOU:2831731.4
Fulbright & Jaworski l.l.p.

A Registered Limited Liability Partnership
Fulbright Tower
1301 McKinney, Suite 5100
Houston, Texas 77010-3095
www.fulbright.com
telephone:
(713) 651-5151
facsimile:
(713) 651-5246
August 18, 2008
WE HAVE ACTED AS BOND COUNSEL for Montgomery County, Texas, a political

subdivision of the State of Texas (the County), solely for the purpose of rendering our opinion
on the date hereof in connection with the issuance and validity of the $34,705,000 aggregate
principal amount of Montgomery County, Texas, Unlimited Tax Adjustable Rate Road Bonds,
Series 2008B under Texas law and the status of the interest on the Bonds under federal income
tax law.
IN OUR CAPACITY AS BOND COUNSEL, WE HAVE EXAMINED the Constitution
and laws of the State of Texas and federal income tax law; a transcript of certain certified
proceedings of the Commissioners Court of Montgomery County, Texas pertaining to the
issuance of the Bonds, including the Order of the Commissioners Court authorizing issuance of
the Bonds (the Order); and representations concerning the use of proceeds of the Bonds, the
use of other funds of the County, and other material facts within the knowledge and control of
the County, upon which certificates and representations we rely; and certain other customary
documents and instruments authorizing and relating to the issuance of the Bonds, including an
executed Bond. We have not been requested to examine, and have not investigated or verified,
any original proceedings, records, data, or other material, but have relied solely upon certificates
executed by public officials and representatives of the County.
BASED ON SAID EXAMINATION, WE ARE OF THE OPINION THAT the transcript
of proceedings evidences complete legal authority for the issuance of the Bonds in full
compliance with the Constitution and laws of the State of Texas presently in effect; the Bonds
are valid and legally binding obligations of the County in accordance with the terms and
conditions thereof, except to the extent that the enforcement of the rights and remedies of the
holders thereof may be limited by laws relating to bankruptcy, insolvency, reorganization, or
moratorium or other similar laws affecting creditors rights or the exercise of judicial discretion
in accordance with general principles of equity; the Bonds have been authorized and delivered in
accordance with law; and the Bonds are payable from receipts of an annual ad valorem tax
levied, without legal limit as to rate or amount, upon taxable property within the County, which
taxes have been pledged irrevocably to pay the principal of and premium, if any, and interest on
the Bonds.
60096387.2-10505457
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August 18, 2008

Page 2
IT IS FURTHER OUR OPINION, based upon the foregoing, that pursuant to section 103
of the Internal Revenue Code of 1986, as amended to the date hereof (the Code), and existing
regulations, published rulings, and court decisions thereunder, and assuming continuing
compliance with the provisions of the Order, interest on the Bonds during the Initial Rate Periods
(1) will be excludable from the gross income, as defined in section 61 of the Code, of the owners
thereof for federal income tax purposes, and (2) will not be included in computing the alternative
minimum taxable income for federal income tax purposes of the owners thereof who are
individuals or, except as described below, corporations.
WE CALL TO YOUR ATTENTION THAT, with respect to our opinion in clause (2)
above, interest on all tax-exempt obligations, such as the Bonds, owned by a corporation will be
included in such corporations adjusted current earnings for purposes of calculating the
alternative minimum taxable income of such corporation, other than an S corporation, a qualified
mutual fund, a real estate mortgage investment conduit (REMIC), a real estate investment trust
(REIT), or a financial asset securitization investment trust (FASIT). A corporations alternative
minimum taxable income is the basis on which the alternative minimum tax imposed by
section 55 of the Code is computed.
WE EXPRESS NO OPINION herein as to the treatment for federal income tax purposes
of the interest paid the liquidity provider for the Bonds or the effect on the excludability from
gross income for federal income tax purposes of any action taken under the Order which requires
that the County shall have received an opinion of counsel nationally recognized in the field of
municipal finance to the effect that such action will not adversely affect the excludability of the
interest on the Bonds from the gross income, as defined in Section 61 of the Code, of the owners
thereof for federal income tax purposes. The Order provides that prior to taking certain actions,
including converting the interest rate on the Bonds from one rate mode to certain other rate
modes, the Issuer must have received such an opinion.
WE EXPRESS NO OTHER OPINION with respect to any other federal, state, or local
tax consequences under present law or any proposed legislation resulting from the receipt or
accrual of interest on, or the acquisition or disposition of, the Bonds. Ownership of tax-exempt
obligations such as the Bonds may result in collateral federal tax consequences to, among others,
financial institutions, life insurance companies, property and casualty insurance companies,
certain S corporations with subchapter C earnings and profits, certain foreign corporations doing
business in the United States, owners of an interest in a FASIT, individual recipients of Social
Security or Railroad Retirement benefits, individuals otherwise qualifying for the earned income
tax credit, and taxpayers who may be deemed to have incurred or continued indebtedness to
purchase or carry, or who have paid or incurred certain expenses allocable to, tax-exempt
obligations.
60096387.2
August 18, 2008

Page 3
Our opinions are based on existing law, which is subject to change. Such opinions are
further based on our knowledge of facts as of the date hereof. We assume no duty to update or
supplement our opinions to reflect any facts or circumstances that may thereafter come to our
attention or to reflect any changes in any law that may thereafter occur or become effective.
Moreover, our opinions are not a guarantee of result and are not binding on the Internal Revenue
Service; rather, such opinions represent our legal judgment based upon our review of existing
law that we deem relevant to such opinions and in reliance upon the representations and
covenants referenced above.
60096387.2
APPENDIX D
MATERIAL PROVISIONS OF STANDBY BOND PURCHASE AGREEMENT
D-1
HOU:2831731.4
DEFINITIONS
Section 1.01 Definitions. The following capitalized terms have the meanings indicated
below unless the context shall clearly indicate otherwise. Other capitalized terms used in this
Agreement and not defined herein shall have the meaning given those terms in the Order.
Agreement means this Standby Bond Purchase Agreement, as amended or
supplemented from time to time.
Amortization End Date means, with respect to any Liquidity Provider Bond, the
seventh (7th) anniversary of the last day of the Amortization Start Date.
Amortization Payment Date means, with respect to any Liquidity Provider Bonds, each
March 1 and September 1 occurring prior to the related Amortization End Date, commencing
with the first of such semi-annual dates next succeeding the related Amortization Start Date that
is at least sixty-one (61) days after the Bank Purchase Date.
Amortization Start Date means, as to any Liquidity Provider Bonds, the earlier to occur
of (i) the date that is sixty-one (61) days after the Bank Purchase Date for such Bonds if the
Liquidity Provider Bonds purchased on such Bank Purchase Date are still held by the Bank at
such time, (ii) the Stated Expiration Date or (iii) the end of the Bank Purchase Period due to a
Notice of Termination pursuant to Section 7.02(c).
Authorized Officer shall have the meaning assigned to such term in the Order.
Automatic Termination Event means an Event of Default described in Sections 7.01(a),
(f), (h) and (i) hereof.
Available Commitment means, on any day, the sum of the Available Principal
Commitment and the Available Interest Commitment, in each case, as of such day.
Available Interest Commitment means initially $1,788,333.33 constituting interest
calculated on the basis of a 360-day year on the actual number of days elapsed for 185 days on
the initial amount of the Available Principal Commitment based upon the Maximum Interest
Rate and thereafter means such amount adjusted from time to time as follows: (a) downward by
an amount that bears the same proportion to such amount as the amount of any reduction in the
Available Principal Commitment pursuant to clause (a) or (b) of the definition of Available
Principal Commitment bears to the Available Principal Commitment prior to such reduction;
and (b) upward by an amount that bears the same proportion to such amount as the amount of
any increase in the Available Principal Commitment pursuant to clause (c) of the definition of
Available Principal Commitment bears to the Available Principal Commitment prior to such
increase. Any adjustments pursuant to clauses (a) or (b) above shall occur simultaneously with
the event requiring such adjustment.
Available Principal Commitment initially means $34,800,000 and thereafter means
such amount adjusted from time to time as follows: (a) downward by the amount of any
mandatory reduction of the Available Principal Commitment pursuant to Section 2.03;
(b) downward by the principal amount of any Bonds purchased by the Bank pursuant to
HOU:2807386.7
Section 2.01; and (c) upward by the principal amount of any Bonds theretofore purchased by the
Bank pursuant to Section 2.01, which are remarketed (or deemed to be remarketed pursuant to
Section 2.04(c) hereof) by the Remarketing Agent and for which the Bank has received
immediately available funds equal to the principal amount thereof and accrued interest thereon;
provided, however, that the sum of (i) the Available Principal Commitment plus (ii) the
aggregate principal amount of Liquidity Provider Bonds shall never exceed $34,800,000. Any
adjustments pursuant to clauses (a), (b) or (c) above shall occur simultaneously with the event
requiring such adjustment.
Bank means the Bank as defined in the introductory paragraph to this Agreement.
Bank Bondholder means the Bank (but only in its capacity as owner (which as used
herein shall mean beneficial owner if at the relevant time Liquidity Provider Bonds are Book
Entry Bonds) of Liquidity Provider Bonds pursuant to this Agreement) and any other Person to
whom the Bank has sold Liquidity Provider Bonds pursuant to Section 2.04(a).
Bank Purchase Date means a Business Day during the Bank Purchase Period on which
the Bank is required to purchase Bonds pursuant to Section 2.01.
Bank Purchase Period means the period from the Closing Date to and including the
earliest of (a) the Stated Expiration Date then in effect, (b) the date on which no Bonds are
Outstanding, (c) 4:00 p.m. New York time on the Substitution Date; provided however, the Bank
Purchase Period will not expire until the Bank has purchased any Tendered Bonds then-required
to be purchased pursuant to Article IV of the Order, (d) the Business Day immediately
succeeding the date on which all of the Bonds are converted to a rate other than a Covered Rate,
(e) the close of business on the Noticed Termination Date or (f) the close of business on the date
the Available Commitment is reduced to zero or terminated pursuant to Section 2.03 or due to
the occurrence of an Automatic Termination Event.
Bank Rate means, for each day of determination with respect to any Liquidity Provider
Bond, except as otherwise provided in Section 3.01(a) hereof, (i) for the period from and
including the Bank Purchase Date of such Liquidity Provider Bond through and including the
date that is thirty (30) days after the Bank Purchase Date, the lesser of the Base Rate or the
Maximum Interest Rate; (ii) for the period from and including the date that is thirty-one (31)
days after the Bank Purchase Date through and including the date that is sixty (60) days after the
Bank Purchase Date, the lesser of the Base Rate plus 100 basis points or the Maximum Interest
Rate; and (iii) thereafter, the Term Rate; provided that from and after the occurrence of an
Automatic Termination Event or an Automatic Suspension Event, the Bank Rate shall mean the
Default Rate; provided, however, that the Bank Rate shall never exceed the Highest Lawful
Interest Rate as defined herein.
Bank Sale Date has the meaning given such term in Section 2.04(b).
Base Rate means a fluctuating rate of interest per annum equal to the greater of (a) the
Prime Rate plus 2.0% and (b) the Federal Funds Rate plus 3.0%.
Bonds has the meaning assigned to that term in the recitals to this Agreement and shall
include, unless the context otherwise requires, all Liquidity Provider Bonds.
D-2
Book Entry Bonds means the Bonds so long as the book entry system with DTC or any
other securities depository is used for determining beneficial ownership of the Bonds.
Business Day means a day on which (a) banks located in Houston, Texas and in New
York, New York are not required or authorized by law or executive order to close for business
and (b) The New York Stock Exchange is not closed.
Change of Law shall mean the adoption, after the Closing Date, of or change in any
law, rule, regulation, statute, treaty, guideline or directive of any Governmental Authority or the
occurrence of the effective date of any of the foregoing if adopted prior to the Closing Date or
any change after the Closing Date in the application, interpretation, enforcement, or any change
in the compliance with, any guidelines, request or directive from any Governmental Authority
(whether or not having the force of law), or any of the foregoing.
Closing Date means the date on which Bonds are initially issued and delivered by the
County.
Code means the Internal Revenue Code of 1986, as amended from time to time.
Conversion Date shall mean the date the Bonds, as a result of a written direction by the
County to convert the interest rate on the Bonds pursuant to Section 3.04 of the Order, no longer
bear interest at a Covered Rate.
County has the meaning assigned to that term in the introductory paragraph to this
Agreement.
Covered Rate means the Weekly Rate, Monthly Rate or Term Rate.
Custodian means Regions Bank, N.A., or any successor thereto appointed pursuant to
the terms of the Custody Agreement.
Custody Agreement means the Custody Agreement dated as of even date herewith
between the Bank and the Custodian, substantially in the form of Exhibit D hereto, as amended
from time to time.
Default means the occurrence of any event which, with the passage of time, the giving
of notice, or both, would become an Event of Default.
Defaulted Interest means accrued interest payable on a Bond which was not paid when
due under the terms of the Order.
Default Rate means the Base Rate from time to time in effect plus two percent (2.00%);
provided, however, that the Default Rate shall never exceed the Highest Lawful Interest Rate.
The Default Rate shall change as and when the Base Rate changes.
Default Tender means a mandatory tender of the Bonds pursuant to Section 4.04 of
Order as a result of the Banks delivery of a Notice of Termination to the Tender Agent pursuant
to Section 7.02(c).
D-3
Differential Interest Amount means, with respect to any Liquidity Provider Bond, the
excess of (a) interest which has accrued and could actually be paid on such Liquidity Provider
Bond at the Bank Rate, as determined in accordance with Section 3.01, up to but excluding the
Business Day on which such Liquidity Provider Bond is purchased from the Bank Bondholder of
such Liquidity Provider Bond pursuant to Section 2.04(b), less (b) the interest accrued on such
Liquidity Provider Bond received by the Bank Bondholder of such Liquidity Provider Bond as
part of the Sale Price.
Dollars and $ shall mean the lawful currency of the United States of America.
DTC means The Depository Trust Company.
Eligible Bonds means any Bonds bearing interest at a Covered Rate other than Bonds
owned by, for the account of, or on behalf of the County.
Event of Default has the meaning given in Section 7.01.
Excess Interest has the meaning given in Section 3.01(c).
Excess Interest Fee Amount has the meaning given in Section 3.01(c).
Excess Interest Payable has the meaning given in Section 3.10(c).
Extended Bank Purchase Period has the meaning given in Section 8.04.
Facility Fee has the meaning given in Section 2.05.
Federal Funds Rate shall mean the rate determined by the Bank to be its cost of funding
in the over night interbank market in New York, New York. In the case of a Saturday, Sunday or
legal holiday, the Federal Funds Rate shall be determined by the Bank based upon the rate
applicable to the immediately preceding Business Day.
Fiscal Year for any Person means any consecutive 12-month period selected as such
Persons fiscal year.
Fitch means Fitch Ratings, Inc. or its successors or assigns.
Governmental Authority means any U.S. state or local government, any political
subdivision thereof or any other governmental, quasi-governmental, judicial, public or statutory
instrumentality, authority, body, tribunal, agency, bureau, court or entity (including the Federal
Deposit Insurance Corporation or the Federal Reserve Board or any comparable authority), or
any arbitrator with authority under U.S. law to bind any of the parties to this Agreement at law.
Highest Lawful Interest Rate means the greater of (a) fifteen percent (15%) per annum
and (b) the Highest Lawful Rate.
Highest Lawful Rate means the maximum non-usurious rate of interest on the relevant
obligation permitted by applicable law.
D-4
Initial Rate has the meaning assigned to such term in the Order
Insured Bank Interest means Differential Interest Amount and Excess Interest Payable.
Interest Component has the meaning given in Section 2.01.
Interest Payment Date with respect to Bonds which are not Liquidity Provider Bonds,
shall have the meaning assigned in the Order and, with respect to Liquidity Provider Bonds,
means each of the days described in Section 3.03.
Liquidity Provider Bond means each Bond held by a Bank Bondholder.
Materially Adverse Effect means (a) with respect to any Person, a materially adverse
effect upon such Persons business, assets, liabilities, financial condition, results of operations or
business prospects, and (b) with respect to any agreement or obligation, a materially adverse
effect upon the binding nature, validity or enforceability of such agreement or obligation.
Maximum Interest Rate means, with respect to Bonds other than Liquidity Provider
Bonds, 10% per annum or such other higher rate of interest as shall be approved by the County,
but in no event to exceed the Highest Lawful Rate. Regardless of such approval by the County,
no such higher rate of interest shall be effective unless and until the County and the Bank amend
this Liquidity Agreement accordingly.
Monthly Rate shall have the meaning assigned to such term in the Order.
Moodys means Moodys Investors Service, its successors and assigns.
Noticed Termination Date has the meaning given in Section 7.02(c).
Notice of Bank Purchase means, in the case of a purchase of Eligible Bonds by the
Bank pursuant to Section 4.01 the Order, a notice in the form of Exhibit A hereto, and in the case
of a mandatory purchase of Eligible Bonds pursuant to Sections 4.02, 4.03, 4.04, and 4.05 of the
Order, a notice in the form of Exhibit B hereto. Notwithstanding the foregoing, in the event this
Agreement terminates as a result of an Automatic Termination Event, the Bonds shall not be
subject to a mandatory purchase on the date of such termination.
Notice of Termination has the meaning given in Section 7.02(c).
Official Statement means the Official Statement dated August 11, 2008, prepared in
connection with the initial sale and delivery of the Bonds, and any amendment and supplement
thereto.
Order has the meaning assigned to such term in the recitals to this Agreement.
Outstanding shall have the same meaning assigned to such term as in the Order.
Parity Debt means the Bonds and any other bonds of the County secured by the
Pledged Taxes on a parity basis with the Bonds.
D-5
Paying Agent/Registrar shall have the same meaning assigned to such term as in the
Order.
Payment Date means, with respect to any Liquidity Provider Bond, the earliest to occur
of (i) the Amortization End Date, (ii) the Conversion Date, (iii) the date on which no Bonds are
Outstanding, (iv) the date on which an Automatic Termination Event occurs (provided, however,
as to payment of principal and/or interest on a Liquidity Provider Bond, such principal and/or
interest shall be due and payable on the first Business Day of the calendar month next succeeding
the date of such Automatic Termination Event and (v) the effective date of a Substitute Liquidity
Facility.
Payment Office has the meaning given in Section 3.04.
Person means an individual, a corporation, a partnership, a limited liability company,
an association, a trust or any other entity or organization, including a government or a political
subdivision or an agency or instrumentality thereof.
Pledged Taxes means the Countys unlimited ad valorem taxes pledged to the payment
of the principal of and interest on the Bonds.
Prime Rate shall mean, on any given day, the per annum rate of interest established by
the Bank from time to time, as its prime rate or base rate, regardless of whether such rate is
actually charged to any customer of the Bank. Each determination of the Prime Rate shall be
conclusive and binding on the County.
Property means any and all rights, title and interest in and in any and all property,
whether real or personal, tangible (including cash) or intangible, wherever situated and whether
now owned or hereafter acquired.
Purchase Contract means the bond purchase agreement relating to the initial sale and
delivery on the Closing Date of the Bonds by the County to the underwriters of the Bonds.
Purchase Notice has the meaning given such term in Section 2.04(b).
Purchase Price with respect to any Eligible Bond or portion thereof on a Bank Purchase
Date therefor, means the unpaid principal amount thereof plus accrued interest thereon, other
than Defaulted Interest, to but excluding such Bank Purchase Date, in each case without
premium; provided that if the applicable Bank Purchase Date is an Interest Payment Date,
interest payable on such Bond on such Interest Payment Date shall not be taken into account in
the computation of the Purchase Price payable by the purchaser of such Bond and; provided
further that the aggregate amount of Purchase Price constituting the Interest Component shall not
exceed the amount specified in Section 2.01.
Purchaser has the meaning given such term in Section 2.04(b).
Rating Agency means Moodys or S&P.
D-6
Rating Category means one of the generic rating categories of a Rating Agency,
without regard to any refinement or gradation of such rating category by a numerical or other
modifier.
Reimbursement Obligations means obligations and liabilities of the County to the Bank
arising under this Agreement other than the Countys obligations to pay the principal of and
interest on the Liquidity Provider Bonds in accordance with the terms thereof.
Related Documents means this Agreement, the Order and the Bonds, as the same may
be amended or modified from time to time in accordance with their respective terms and the
terms hereof.
Remarketing Agent means First Southwest Company, and its successors and assigns, or
any alternate remarketing agent appointed for the Bonds with the prior written consent of the
Bank.
Remarketing Agreement means the Remarketing Agreement, dated as of August 1,
2008, between the County and the Remarketing Agent, as the same may be modified or
amended, and if the Remarketing Agent has been replaced by a successor remarketing agent, any
similar agreement between the County and such successor remarketing agent.
Sale Price has the meaning given in Section 2.04(b).
S&P means Standard & Poors Rating Services, a division of The McGraw-Hill
Companies, Inc., its successors and assigns.
Special Interest means with respect to any Liquidity Provider Bond and for any fiscal
year of the County, that portion of the interest (if any) on such Liquidity Provider Bonds which
exceeds the interest which accrues thereon at the lesser of (i) the Maximum Lawful Rate and
(ii) 6% annum, calculated on the basis of a year of 360 days and the actual number of days
elapsed.
Stated Expiration Date means the later of (a) 4:00 p.m. New York time on August 15,
2010, or, if such day is not a Business Day, the next succeeding Business Day to such day and
(b) 4:00 p.m. New York time on the last day of any extension of such date pursuant to
Section 8.04 or, if such day is not a Business Day, the next succeeding Business Day to such day.
Substitute Liquidity Facility means a replacement standby bond purchase agreement or
other liquidity facility pursuant to Section 8.04 of the Order.
Substitution Date means the date on which a Substitute Liquidity Facility becomes
effective.
Taxes has the meaning given in Section 2.06.
Tender Agent means the tender agent appointed pursuant to Section 8.02 of the Order.
D-7
Tendered Bonds means, as of any date, Eligible Bonds which are tendered or deemed
tendered for purchase pursuant to Article IV of the Order and which, in any case, the
Remarketing Agent has been unable to remarket.
Term Loan shall have the meaning set forth for such term in Section 3.02 hereof.
Term Rate means the greater of the Base Rate plus 200 basis points or the Maximum
Interest Rate; provided, however, that the Term Rate shall never exceed the Highest Lawful
Interest Rate.
Weekly Rate shall have the meaning assigned to such term in the Order.
***
THE COMMITMENT; FEES
Section 2.01 Commitment to Purchase Bonds; Liquidity Provider Bonds. (a) The Bank
agrees, on the terms and conditions contained in this Agreement, to purchase, at the Purchase
Price, with immediately available funds, Tendered Bonds, for the Banks own account, from
time to time during the Bank Purchase Period. The aggregate principal amount (or portion
thereof) of any Bond purchased by the Bank on any Bank Purchase Date shall be an authorized
denomination applicable to Bonds bearing interest at a Covered Rate and the aggregate principal
amount of all Eligible Bonds purchased on any Bank Purchase Date shall not exceed the
Available Principal Commitment on such date. The aggregate amount of the Purchase Price
comprising interest on the Bonds (the Interest Component) purchased on any Bank Purchase
Date shall not exceed the lesser of (i) the Available Interest Commitment on such date and
(ii) the actual aggregate amount of interest accrued on each such Bond, other than Defaulted
Interest, to but excluding such Bank Purchase Date; provided that if the applicable Bank
Purchase Date is an Interest Payment Date, the amount described in this clause (ii) shall be
reduced by the amount of interest payable on each such Tendered Bond on such Interest Payment
Date.
(a)
Any Eligible Bonds purchased by the Bank pursuant to Section 2.01(a)
shall thereupon constitute Liquidity Provider Bonds and shall, from the date of such purchase
and while they are Liquidity Provider Bonds have all of the characteristics of Liquidity Provider
Bonds as set forth herein and in the Order, and as described below:
(i)
Liquidity Provider Bonds shall bear interest from the Bank
Purchase Date at the applicable Bank Rate as from time to time in effect; provided that from and
after the occurrence of an Automatic Termination Event, Liquidity Provider Bonds shall bear
interest at the Default Rate; provided, further, that at no time shall Liquidity Provider Bonds bear
interest at a rate in excess of the Highest Lawful Interest Rate.
(ii)
All amounts owed to the Bank with respect to Liquidity Provider
Bonds shall be due and payable on the Payment Date if not sooner repaid prior to such date in
accordance with the terms of this Agreement or the Order.
D-8
(iii) Interest on Liquidity Provider Bonds shall be calculated on the

basis of a year of days 365 or 366, as applicable, and the actual number of days elapsed.
***
Section 2.03 Reduction of Commitment.
(a)
Mandatory Reductions of Available Commitment. (a) Upon (i) any
redemption, repayment or other payment of all or any portion of the principal amount of the
Bonds or (ii) the close of business on the Business Day immediately following the Conversion
Date, the aggregate Available Principal Commitment shall automatically be reduced by the
principal amount of the Bonds so redeemed, repaid or otherwise paid or so converted, as the case
may be and the Available Interest Commitment shall also be simultaneously reduced. The
County shall cause written notice of such redemption, repayment or other payment to be
promptly delivered to the Bank, the Paying Agent/Registrar and the Tender Agent.
(b)
Reduction upon Substitution.
The Available Commitment shall
automatically terminate at 4:00 p.m. New York time on the date on which a Substitute Liquidity
Facility has become effective; provided however, the Available Commitment shall not terminate
until the Bank has purchased any Tendered Bonds then-required to be purchased pursuant to the
provisions of the Order.
Section 2.04
Sale of Liquidity Provider Bonds.
(a)
Right to Sell Liquidity Provider Bonds. The Bank expressly reserves the
right to sell, at any time, Liquidity Provider Bonds subject, however, to the express terms of this
Agreement. The Bank agrees that such sales (other than sales made pursuant to Section 2.04(c))
will be made only to institutional investors or other entities or individuals which customarily
purchase commercial paper or tax-exempt securities in large denominations. The Bank agrees to
notify the County, the Tender Agent, the Paying Agent/ Registrar and the Remarketing Agent
promptly of any such sale (other than a sale made pursuant to Section 2.04(c)) and, if such
Liquidity Provider Bond is a Book Entry Bond, specifying the account at DTC to which such
Liquidity Provider Bond is credited; and to notify the transferee in writing that such Bond is no
longer an Eligible Bond so long as it remains a Liquidity Provider Bond and that there may not
be a short-term investment rating assigned to such Bond so long as it remains a Liquidity
Provider Bond. Any Bank Bondholder purchasing a Liquidity Provider Bond from the Bank
shall be deemed to have agreed (i) not to sell such Liquidity Provider Bond to any Person except
the Bank or a Purchaser identified by the Remarketing Agent pursuant to Section 2.04(b) and
(ii) if such Liquidity Provider Bond is a Book Entry Bond, to give all notices in the manner and
by the time required by DTC to exclude such Liquidity Provider Bond from mandatory tenders
of Bonds while it remains a Liquidity Provider Bond. Prior to selling a Liquidity Provider Bond
to a Bank Bondholder, the Bank shall obtain a written acknowledgment from such Bank
Bondholder stating that such Bank Bondholder has no right to tender the Liquidity Provider
Bond except as provided herein.
(b)
Sales by Remarketing Agent. The Bank and each other Bank Bondholder,
by the acceptance by each of a Liquidity Provider Bond, hereby authorize the Remarketing
D-9
Agent to sell Liquidity Provider Bonds purchased pursuant to Section 2.02 on behalf of the Bank
or such Bank Bondholder pursuant to the Order and in accordance with applicable securities law
at a price equal to the principal amount thereof plus unpaid accrued interest thereon to but
excluding the date such Liquidity Provider Bonds are to be sold pursuant to this Section 2.04(b)
at the interest rate to be borne by the Bonds after such sale or, if less, the Bank Rate (the Sale
Price). Prior to 11:00 a.m. New York time on any Business Day on which a Bank Bondholder
holds Liquidity Provider Bonds, unless the Bank has delivered a Notice of Termination, the
Remarketing Agent may deliver a notice (a Purchase Notice) to a Bank Bondholder as
registered on the Bond register and to the Bank, stating that it has located a purchaser (the
Purchaser) for some or all of such Liquidity Provider Bonds and that such Purchaser desires to
purchase on the Business Day following the Business Day on which a Bank Bondholder
receives, prior to 11:00 a.m. New York time, a Purchase Notice (a Bank Sale Date) an
authorized denomination of such Bonds at the Sale Price. If less than all Liquidity Provider
Bonds are remarketed on any date, the Liquidity Provider Bonds having the highest aggregate
amount of Excess Interest payable shall be deemed to be remarketed first. Any sale of a
Liquidity Provider Bond pursuant to this Section 2.04(b) shall be without recourse to the seller
and without representation or warranty of any kind. The Bank agrees to deliver and, by its
acceptance of a Liquidity Provider Bond, each other Bank Bondholder agrees to deliver (but only
upon receipt by the Bank or such other Bank Bondholder of dollars in the amount of the Sale
Price) to the Tender Agent each certificate representing a Liquidity Provider Bond sold by it
pursuant to this Section 2.04(b), including without limitation certificates representing Liquidity
Provider Bonds which are deemed to have been delivered in accordance with the provisions of
the Order (or, in the case of Liquidity Provider Bonds which are Book Entry Bonds, shall cause
the beneficial ownership thereof to be credited to the account of the Remarketing Agent at DTC)
by 9:00 a.m. New York time on the Bank Sale Date against receipt of the Sale Price therefor in
immediately available funds in the Remarketing Agents account or at the Bank Bondholders
address listed in the Bond register, and such Bonds shall thereupon no longer be considered
Liquidity Provider Bonds; provided that, in the event that the Bank Bondholder has not delivered
Liquidity Provider Bonds as provided above and the Sale Price therefor has been deposited in the
Remarketing Agents account as provided above, such Liquidity Provider Bonds shall be deemed
to have been delivered and such Bonds shall no longer be considered Liquidity Provider Bonds.
When Liquidity Provider Bonds are purchased in accordance with this Section 2.04(b), the
Tender Agent shall, upon receipt of such Liquidity Provider Bonds and upon receipt by such
Bank Bondholder of the Sale Price, notify the County that such Bonds are no longer Liquidity
Provider Bonds. Any interest accrued on the Liquidity Provider Bonds shall be paid to the Bank
as provided in Section 3.01.
(c)
Right to Retain Bonds.
(i)
Notwithstanding the foregoing or anything else contained in this
Agreement, the Bank and each other Bank Bondholder shall have the right, by giving prior
written notice to the Remarketing Agent not later than 1:00 p.m. New York time on the Business
Day preceding a Bank Sale Date, to elect not to sell its interest in Liquidity Provider Bonds or
any portion thereof pursuant to Section 2.04(b); provided that in the event such notice is not
timely delivered by a Bank Bondholder, such Bank Bondholder shall be deemed to have
determined to sell such Liquidity Provider Bonds to a Purchaser on the Bank Sale Date (subject
to receipt by it of the funds called for in Section 2.04(b)).
D-10
(ii)
After any sale of Liquidity Provider Bonds by the Remarketing
Agent pursuant to Section 2.04(b) and payment to the applicable Bank Bondholder of the
outstanding principal and interest accrued on the Liquidity Provider Bonds so sold, or any
election by a Bank Bondholder not to sell such Liquidity Provider Bonds or any portion thereof
through the Remarketing Agent pursuant to Section 2.04(c), such Liquidity Provider Bonds so
sold or as to which such election is made shall, from such sale date or upon such election, cease
to bear interest at the Bank Rate and shall bear interest at the rate for Bonds other than Liquidity
Provider Bonds (and the Available Commitment shall be increased in the same amount as would
be the case if said Bonds had been remarketed); provided that if such Liquidity Provider Bonds
are retained by the Bank, Excess Interest (including interest thereon) described in Section 3.01
shall still be included as additional interest on said Bonds. Liquidity Provider Bonds held by the
Bank or such other Bank Bondholder bearing interest at a Covered Rate may be tendered for
purchase by notice from the holder of said Bonds to the Remarketing Agent.
(d)
Payment of Differential and Excess Interest Amounts. Following any sale
of Liquidity Provider Bonds pursuant to Section 2.04(b) or otherwise, or any election to retain
Bonds pursuant to Section 2.04(c), the Bank and each Bank Bondholder shall retain the right to
receive payment from the County of any accrued Differential Interest Amount and any accrued
Excess Interest and interest thereon as provided herein. Subject to Section 3.01(c), any
Differential Interest Amount and any Excess Interest payable on Liquidity Provider Bonds sold
by the Remarketing Agent shall be payable by the County to the Bank on the Bank Sale Date.
(e)
Rights of Bank Bondholders. Upon purchasing Liquidity Provider Bonds,
Bank Bondholders shall be entitled to and, where necessary, shall be deemed to have been
assigned all rights and privileges accorded Bondholders, except to the extent that additional
rights and privileges are provided to Liquidity Provider Bonds pursuant to this Agreement, in
which case the terms of this Agreement shall prevail and govern. Upon purchasing Liquidity
Provider Bonds, Bank Bondholders shall be recognized by the County, the Tender Agent, the
Paying Agent/Registrar and the Remarketing Agent as the true and lawful owners (or, if the
Liquidity Provider Bonds are Book Entry Bonds, beneficial owners) of such Liquidity Provider
Bonds, free from any claims, liens, security interests, equitable interests and other interests of the
County, except as such interests might exist under the terms of such Liquidity Provider Bonds
with respect to all owners (or, if the Liquidity Provider Bonds are Book Entry Bonds, beneficial
owners) of the Bonds.
***
EVENTS OF DEFAULT; REMEDIES
Section 7.01 Events of Default. The occurrence and continuance of each of the
following events shall constitute an Event of Default hereunder:
(f)
any principal or interest due on any Bond is not paid by the County when
due, or
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(g)
any representation or warranty made by the County under or in connection
with this Agreement or any of the Related Documents shall prove to be untrue in any material
respect on the date as of which it was made; or
(h)
nonpayment of any amounts payable under Section 2.05(a) (together with
interest thereon at a rate equal to the Default Rate) within fifteen (15) Business Days after the
County shall receive written notice from the Bank that the same were not paid when due; or
(i)
nonpayment of any other fees, or any other amount when due hereunder
(together with interest thereon at a rate equal to the Default Rate), including non-payment of
Excess Interest and any Differential Interest Amount, if such failure to pay when due shall
continue for fifteen (15) Business Days after written notice thereof from the Bank to the County;
or
(j)
the breach by the County of any of the other terms or provisions of this
Agreement which are not remedied within thirty (30) days after written notice thereof shall have
been received by the County from the Bank; provided, however, that if such breach is curable but
is not cured within such thirty (30) day period but the County commences a cure within such
thirty (30) day period and diligently pursues a cure, such breach shall not constitute an Event of
Default if cured within sixty (60) days following such initial written notice; provided, further
however, that there shall be no 30-day cure period for a failure to observe or perform any
covenant or agreement set forth in or contemplated by Section 5.01(e), (f), (j) or (k); or
(k)
any material provision relating to the payment of principal and interest on
the Bonds under this Agreement or any Related Document shall at any time for any reason cease
to be valid and binding on the County, or shall be declared to be null and void by a court of
competent jurisdiction, or the validity or enforceability thereof shall be contested by the County
or by any Governmental Authority having jurisdiction, or the County, as applicable, shall deny
that it has any or further liability or obligation under any such document; or
(l)
the occurrence of any event of default under the Order; or
(m)
(i) the County shall commence any case, proceeding or other action
(A) under any existing or future law of any jurisdiction, domestic or foreign, relating to
bankruptcy, insolvency, reorganization or relief of debtors, seeking to have an order for relief
entered with respect to it, or seeking to adjudicate it a bankrupt or insolvent, or seeking
reorganization, arrangement, adjustment, winding-up, liquidation, dissolution, composition or
other relief with respect to it or its debts, or (B) seeking appointment of a receiver, trustee,
custodian or other similar official for it or for all or any substantial part of its assets, or the
County shall make a general assignment for the benefit of its creditors; or (ii) there shall be
commenced against the County any case, proceeding or other action of a nature referred to in
clause (i) above which (x) results in an order for such relief or in the appointment of a receiver or
similar official or (y) remains undismissed, undischarged or unbonded for a period of sixty (60)
days; or (iii) there shall be commenced against the County, any case, proceeding or other action
seeking issuance of a warrant of attachment, execution, distraint or similar process against all or
any substantial part of its assets, which results in the entry of an order for any such relief which
shall not have been vacated, discharged, or stayed or bonded pending appeal within sixty (60)
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days from the entry thereof; or (iv) the County shall take any action in furtherance of, or
indicating its consent to, approval of, or acquiescence in, any of the acts set forth in clause (i),
(ii) or (iii) above; or (v) the County shall generally not, or shall be unable to, or so admit in
writing its inability to, pay its debts; or
(n)
the principal and interest due on any parity bonds payable solely from
Pledged Taxes shall not be paid when due (whether by scheduled maturity, required prepayment,
demand or otherwise); or
(o)
the Internal Revenue Service declares the Bonds to be taxable.
Section 7.02 Remedies. If any Event of Default shall have occurred and be continuing,
the following remedies shall be available to the Bank:
(a)
In the case of an Automatic Termination Event, the Available
Commitment and the obligation of the Bank to advance funds for the purchase of Eligible Bonds
shall immediately terminate without notice or demand, and thereafter the Bank shall be under no
obligation to advance funds for the purchase of Bonds. Promptly after the occurrence of an
Automatic Termination Event, the Bank shall give written notice of same to the Paying
Agent/Registrar, the Tender Agent, the County, and the Remarketing Agent; provided, that the
Bank shall incur no liability or responsibility whatsoever by reason of its failure to give such
notice and such failure shall in no way affect the termination of the Banks Available
Commitment and of its obligation to advance funds for the purchase of Bonds pursuant to this
Agreement.
(b)
In the case of an Event of Default specified in Sections 7.01(b), (c), (d),
(e), (g), or (j), the Bank may terminate the Available Commitment and the obligation of the Bank
to advance funds for the purchase of Eligible Bonds by giving written notice (a Notice of
Termination) to the County, the Paying Agent/Registrar, the Tender Agent and the Remarketing
Agent specifying the date on which the Available Commitment and the obligation of the Bank to
advance funds for the purchase of Eligible Bonds shall terminate (the Noticed Termination
Date), which shall be not less than thirty (30) days from the date of receipt of such notice by the
Tender Agent and, on and after the Noticed Termination Date the Bank shall be under no further
obligation to purchase Bonds hereunder other than Bonds which are the subject of the mandatory
tender pursuant to the Order, which the Bank shall be required to purchase on or prior to the
Noticed Termination Date.
(c)
In addition to the rights and remedies set forth in Section 7.02(a) and (b)
upon the occurrence of any Event of Default specified herein, the Bank shall have all the rights
and remedies available to it under this Agreement, the Related Documents or otherwise pursuant
to law or equity; provided, however, that the Bank shall not have the right to terminate its
obligation to purchase Bonds except as expressly provided in Sections 7.02(a) or (b) hereof.
D-13
APPENDIX E
PASS-THROUGH TOLL AGREEMENT
E-1
HOU:2831731.4

Montgomery County Road Bonds Series 2008B

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Montgomery County Road Bonds Series 2008B

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OFFICIAL STATEMENT DATED AUGUST 11, 2008

Ratings: Standard & Poors Ratings Services AA/A-1+

Due: March 1, as shown on inside cover page

FIRST SOUTHWEST COMPANY

GOLDMAN, SACHS & CO.

PRINCIPAL AMOUNTS, MATURITIES, INTEREST RATES AND PRICES

Other Elected and Appointed Officials

Tax Assessor - Collector

Consultants and Advisors

Auditors............................................................................... Hereford, Lynch, Sellars, & Kirkham, PC, CPA

Tax Rate Distribution .............................................. 32

Availability of Information from NRMSIR and

Appendix A - Economic and Demographic Information

OFFICIAL STATEMENT SUMMARY

Texas Constitution Chapters 1471, Texas Government Code, as

SELECTED FINANCIAL INFORMATION

Total Direct Debt ............................................................................................................................................... $

Estimated Overlapping Debt.............................................................................................................................. $

Total Direct and Estimated Overlapping Debt ................................................................................................... $

Interest & Sinking Fund Balance (as of June 30, 2008)..................................................................................... $

Ratio of Direct Debt to..:

2008 Preliminary Taxable Assessed Valuation ($29,248,713,355) ..................

Ratio of Direct and Estimated

Interest Rate Modes

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Interest Payment Dates

First Business Day of each

First Business Day of each

Rate Determination Date

By 12:00 Noon Wednesday,

Monthly Rate determined by

Written Notice of Rate

On any Business Day not later

Any Interest Payment Date;

To Tender Agent by 5:00 p.m.

To Tender Agent by 5:00 p.m.

Not applicable (Bonds subject

Effective Date of Rate Mode

Effective Date of Rate Mode

Effective Date of Rate; Rate

Physical Delivery of and

Physical Delivery of and

Written Notice of Rate Mode

Mandatory Tender Date upon

Owners Right to Retain upon

* All times referenced or shown are New York City times.

First Business Day of each

To Tender Agent by 5:00 p.m.

March 1 and September 1

Conversion to Fixed Rate

Authorized but Unissued

Paying Agent/Registrar and Tender Agent

[Remainder of page intentionally left blank]

DEBT SERVICE REQUIREMENTS

Plus: Adjustable Rate

Average Annual Requirements (2008-2032) ........................................................................

Total Direct Debt .............................................................................................................................. $

Estimated Overlapping Debt Statement

Total Estimated Overlapping Debt

2008 Preliminary Taxable Assessed Valuation ($29,248,713,355)

TAXING PROCEDURES AND TAX BASE ANALYSIS

Residential Homestead Exemptions

[Remainder of page intentionally left blank]

Historical Analysis of Tax Collection