HARRIS-BRAZORIA COUNTIES MUNICIPALUTILITY DISTRICT NO. 509

(Harris and Brazoria Counties, Texas)

PRELIMINARY OFFICIAL STATEMENTDATED: APRIL 18, 2019

$12,000,000UNLIMITED TAX BONDS

SERIES 2019

BIDS DUE: 10:00 A.M., HOUSTON TIME, THURSDAY, MAY 16, 2019BONDS AWARDED: 11:30 A.M., HOUSTON TIME, THURSDAY, MAY 16, 2019

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PRELIMINARY OFFICIAL STATEMENT DATED APRIL 18, 2019IN THE OPINION OF BOND COUNSEL, UNDER EXISTING LAW, INTEREST ON THE BONDS IS EXCLUDABLE FROM GROSS INCOME FOR

FEDERAL INCOME TAX PURPOSES AND INTEREST ON THE BONDS IS NOT SUBJECT TO THE ALTERNATIVE MINIMUM TAX ON INDIVIDUALS. SEE“TAX MATTERS” FOR A DISCUSSION OF BOND COUNSEL’S OPINION.

The Bonds are not “qualified tax-exempt obligations” for financial institutions.

NEW ISSUE - Book-Entry Only Moody’s Investors Service, Inc. (Underlying) . . . . “Baa3”

$12,000,000HARRIS-BRAZORIA COUNTIES MUNICIPAL UTILITY DISTRICT NO. 509

(A Political Subdivision of the State of Texas, located within Harris and Brazoria Counties, Texas)

UNLIMITED TAX BONDS, SERIES 2019

Dated: June 1, 2019 Due: September 1, as shown below

Principal of the above bonds (the “Bonds”) is payable by the paying agent/registrar, initially, The Bank of New York Mellon Trust Company, N. A., currently in Dallas, Texas,or any successor paying agent/registrar (the “Paying Agent,” “Registrar” or Paying Agent/Registrar”). Interest on the Bonds accrues from June 1, 2019, and is payable on March 1, 2020(nine-month interest payment), and on each September 1 and March 1 thereafter until the earlier of maturity or redemption. The Bonds are issued in denominations of $5,000 or any integralmultiple thereof in fully registered form only.

The Bonds will be registered in the name of Cede & Co., as nominee for The Depository Trust Company, New York, New York (“DTC”), which will act as securities depositoryfor the Bonds. Beneficial owners of the Bonds will not receive physical certificates representing the Bonds, but will receive a credit balance on the books of the nominees of such beneficialowners. So long as Cede & Co. is the registered owner of the Bonds, the principal of and interest on the Bonds will be paid by the Paying Agent directly to DTC, which will, in turn,remit such principal and interest to its participants for subsequent disbursement to the beneficial owners of the Bonds as described herein. See “THE BONDS – Book-Entry-Only System.”

MATURITY SCHEDULECUSIP Prefix (a) 413844

Initial InitialPrincipal Maturity Interest Reoffering CUSIP Principal Maturity Interest Reoffering CUSIPAmount (Due September 1) Rate Yield (b) Suffix (a) Amount (Due September 1) Rate Yield (b) Suffix (a)

$290,000 2021 $490,000 2033(c)300,000 2022 510,000 2034(c)315,000 2023 530,000 2035(c)335,000 2024 555,000 2036(c)345,000 2025(c) 585,000 2037(c)360,000 2026(c) 610,000 2038(c)375,000 2027(c) 635,000 2039(c)390,000 2028(c) 660,000 2040(c)405,000 2029(c) 695,000 2041(c)425,000 2030(c) 725,000 2042(c)450,000 2031(c) 755,000 2043(c)470,000 2032(c) 790,000 2044(c)

____________________________(a) CUSIP is a registered trademark of the American Bankers Association. CUSIP data is provided by CUSIP Global Services, managed by S&P Global Market Intelligence on behalf

of the American Bankers Association. CUSIP numbers have been assigned to this issue by the CUSIP Service Bureau and are included solely for the convenience of the ownersof the Bonds. This data is not intended to create a database and does not serve in any way as a substitute for the CUSIP services. Neither the District (hereinafter defined), theFinancial Advisor (hereinafter defined), nor the Underwriter (hereinafter defined) take any responsibility for the accuracy of CUSIP numbers.

(b) Information with respect to the initial reoffering yields of the Bonds is the responsibility of the Underwriter. Initial reoffering yields represent the initial offering price to the publicwhich has been established by the Underwriter for public offerings, and which subsequently may be changed. Accrued interest is to be added to the price.

(c) The Bonds maturing on and after September 1, 2025, are subject to redemption prior to maturity at the option of Harris-Brazoria Counties Municipal Utility District No. 509 (the“District”), as a whole or in part, on September 1, 2024, or any date thereafter, at a price equal to the principal amount thereof plus accrued interest from the most recent interestpayment date to the date fixed for redemption.

If fewer than all of the Bonds are redeemed at any time, the particular maturities and amounts of the Bonds to be redeemed shall be selected by the District in integral multiplesof $5,000 within any one maturity. If fewer than all of the Bonds of any given maturity are to be redeemed at any time, the particular Bonds to be redeemed shall be selected by suchmethod of random selection as determined by the Registrar ( or by DTC in accordance with its procedures while the Bonds are in book-entry-only form). The Registered Owner of anyBond, all or a portion of which as been called for redemption, shall be required to present same to the Registrar for payment of the redemption price on the portion of the Bond so calledfor redemption and the issuance of a new Bond in the principal amount equal to the portion of such Bond not redeemed.

The Bonds constitute the fourth series of unlimited tax bonds issued by the District for the purpose of acquiring and constructing a waterworks, sanitary sewer and storm drainagesystem (the "System") to serve the District. THE BONDS ARE SUBJECT TO SPECIAL INVESTMENT CONSIDERATIONS DESCRIBED HEREIN. SEE "INVESTMENTCONSIDERATIONS." Voters in the District authorized a total of $135,100,000 principal amount of unlimited tax bonds for the purpose of acquiring and constructing the System andrefunding of same, and $12,200,000 principal amount of unlimited tax bonds for recreational facilities and refunding of same. Following the issuance of the Bonds, $101,400,000 principalamount of unlimited tax bonds for the acquisition or construction of the System and refunding of same, and $12,200,000 principal amount of unlimited tax bonds for recreational facilitiesand refunding of same will remain authorized but unissued. See "THE BONDS – Issuance of Additional Debt."

The Bonds, when issued, constitute valid and binding obligations of the District, and are payable from the proceeds of an annual ad valorem tax, without legal limitation as to rateor amount, levied against all taxable property located within the District. See “THE BONDS – Source of Payment.” Neither the State of Texas, the City of Pearland, Texas, Harris County,Texas, Brazoria County, Texas, nor any political subdivision other than the District shall be obligated to pay the principal of and interest on the Bonds. Neither the faith and credit northe taxing power of the State of Texas, the City of Pearland, Texas, Harris County, Texas or Brazoria County, Texas, is pledged to the payment of the principal of and interest on the Bonds.

The Bonds are offered when, as and if issued by the District, subject among other things to the approval of the Attorney General of Texas and of Allen Boone Humphries RobinsonLLP, Houston, Texas, Bond Counsel. Delivery of the Bonds in book-entry form is expected on or about June 25, 2019, at The Bank of New York Mellon Trust Company, N.A., in DallasTexas.

TABLE OF CONTENTS

Page USE OF INFORMATION IN OFFICIAL STATEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4SALE AND DISTRIBUTION OF THE BONDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Award of the Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4Marketability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5Securities Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5Municipal Bond Insurance and Ratings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

BOND INSURANCE RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6OFFICIAL STATEMENT SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19THE BONDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19Book-Entry-Only System . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19Use of Certain Terms in Other Sections of this Official Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21Assignments, Transfers and Exchanges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21Record Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22Redemption Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22Replacement of Registrar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22Authority for Issuance and Payment Record . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22Source of Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23Issuance of Additional Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23No Arbitrage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23Dissolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24Consolidation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24Registered Owners' Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24Bankruptcy Limitation to Registered Owners' Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25Legal Investment and Eligibility to Secure Public Funds in Texas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25Defeasance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26Use and Distribution of Bond Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

INVESTMENT CONSIDERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30Factors Affecting Taxable Values and Tax Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30Maximum Impact on District Tax Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31Tax Collection Limitations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32Registered Owners' Remedies and Bankruptcy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33Future Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33The Effect of the Financial Institutions Act of 1989 on Tax Collections of the District . . . . . . . . . . . . . . 34Competitive Nature of Houston Residential Housing Market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34Continuing Compliance with Certain Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34Marketability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34Changes in Tax Legislation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37Tropical Weather Events; Hurricane Harvey . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 382019 Legislative Session . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38

THE DISTRICT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38Utility Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39Description . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40Management of the District . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41

DEVELOPMENT AND HOME CONSTRUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42DEVELOPERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43

General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43Description of the Developers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44

BUILDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45FUTURE DEVELOPMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45AERIAL PHOTOGRAPH OF A PORTION OF THE DISTRICT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46AERIAL PHOTOGRAPH OF A PORTION OF THE DISTRICT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47PHOTOGRAPHS TAKEN WITHIN THE DISTRICT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48PHOTOGRAPHS TAKEN WITHIN THE DISTRICT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49DISTRICT DEBT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50

Debt Service Requirement Schedule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50Bonded Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51Estimated Direct and Overlapping Debt Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53Debt Ratios . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53

TAX DATA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54Maintenance Tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54Historical Values and Tax Collection History . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54Tax Rate Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55Analysis of Tax Base . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55Principal 2018 Taxpayers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56Tax Exemptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56Additional Penalties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56Tax Rate Calculations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56Estimated Overlapping Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57

TAXING PROCEDURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58Authority to Levy Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58Property Tax Code and County-Wide Appraisal District . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58Reappraisal of Property After Disaster . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59Property Subject to Taxation by the District . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59Tax Abatement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60Valuation of Property for Taxation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60District and Taxpayer Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61Levy and Collection of Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61Rollback of Operation and Maintenance Tax Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61District's Rights in the Event of Tax Delinquencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62

THE SYSTEM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62Regulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62Description . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63Water Supply . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63Wastewater Treatment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63Drainage Improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63100-Year Flood Plain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63

LEGAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64Legal Opinions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64No-Litigation Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64No Material Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64

TAX MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65Tax Accounting Treatment of Original Issue Discount Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66Not Qualified Tax-Exempt Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67

OFFICIAL STATEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67Experts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67Certification as to Official Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67Updating of Official Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67Official Statement “Deemed Final” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68

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CONTINUING DISCLOSURE OF INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68Annual Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68Event Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68Availability of Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69Limitations and Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69Compliance With Prior Undertakings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69

APPENDIX A - LOCATION MAPAPPENDIX B - FINANCIAL REPORT

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USE OF INFORMATION IN OFFICIAL STATEMENT

No dealer, broker, salesman or other person has been authorized to give any information or to make any representationsother than those contained in this Official Statement and, if given or made, such other information or representationsmust not be relied upon as having been authorized by the District.

This Official Statement does not constitute, and is not authorized by the District for use in connection with, an offer tosell or the solicitation of any offer to buy in any state in which such offer or solicitation is not authorized or in whichthe person making such offer or solicitation is not qualified to do so or to any person to whom it is unlawful to make suchoffer or solicitation.

All of the summaries of the statutes, orders, resolutions, contracts, audits, and engineering and other related reports setforth in the Official Statement are made subject to all of the provisions of such documents. These summaries do notpurport to be complete statements of such provisions, and reference is made to such documents, copies of which areavailable from the Financial Advisor.

This Official Statement contains, in part, estimates, assumptions and matters of opinion which are not intended asstatements of fact, and no representation is made as to the correctness of such estimates, assumptions, or matters ofopinion, or that they will be realized. Any information and expressions of opinion herein contained are subject to changewithout notice, and neither the delivery of this Official Statement nor any sale made hereunder shall, under anycircumstances, create any implication that there has been no change in the affairs of the District or other mattersdescribed herein since the date hereof. However, the District has agreed to keep this Official Statement current byamendment or sticker to reflect material changes in the affairs of the District and, to the extent that information actuallycomes to its attention, the other matters described in the Official Statement until delivery of the Bonds to the Underwriter(as hereinafter defined) and thereafter only as described under “OFFICIAL STATEMENT - Updating of OfficialStatement.”

Neither the District nor the Underwriter makes any representations as to the accuracy, completeness, or adequacy of theinformation supplied by The Depository Trust Company for use in this Official Statement.

This Official Statement contains “forward-looking” statements within the meaning of Section 21E of the SecuritiesExchange Act of 1934, as amended, which generally can be identified with words or phrases such as “anticipates,”“believes,” “could,” “estimates,” “expects,” “foresees,” “may,” “predict,” “should,” “will” or other words or phrases ofsimilar import. All statements included in this Official Statement that any person expects or anticipates will, should ormay occur in the future are forward-looking statements. These statements are based on assumptions and analyses madein light of experience and perceptions of historical trends, current conditions and expected future developments as wellas other factors the District believes are appropriate in the circumstances. However, whether actual results anddevelopments conform with expectations and predictions is subject to a number of risks and uncertainties, including,without limitation, the information discussed under “INVESTMENT CONSIDERATIONS” in this Official Statement,as well as additional factors beyond the District’s control. The important investment considerations and assumptionsdescribed under that caption and elsewhere herein could cause actual results to differ materially from those expressedin any forward-looking statement. All of the forward-looking statements made in this Official Statement are qualifiedby these cautionary statements.

SALE AND DISTRIBUTION OF THE BONDS

Award of the Bonds

After requesting competitive bids for the Bonds, the District has accepted the bid resulting in the lowest net interest costto the District, which was tendered by _______________________________________ (referred to herein as the“Underwriter” or the “Initial Purchaser”) to purchase the Bonds bearing the interest rates shown under “MATURITYSCHEDULE” at a price of _______________% of the principal amount thereof plus accrued interest to the date ofdelivery, which resulted in a net effective interest rate of __________%, as calculated pursuant to Chapter 1204, TexasGovernment Code, as amended.

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Marketability

The District has no control over the reoffering yields or prices of the Bonds or over trading of the Bonds in the secondarymarket. Moreover, there is no assurance that a secondary market will be made in the Bonds. If there is a secondarymarket, the difference between the bid and asked prices of the Bonds may be greater than the difference between the bidand asked prices of bonds of comparable maturity and quality issued by more traditional municipal entities, as bondsof such entities are more generally bought, sold or traded in the secondary market.

The prices and other terms respecting the offering and sale of the Bonds may be changed from time to time by theUnderwriter after the Bonds are released for sale, and the Bonds may be offered and sold at prices other than the initialoffering price, including sales to dealers who may sell the Bonds into investment accounts.

IN CONNECTION WITH THE OFFERING OF THE BONDS, THE UNDERWRITER MAY OVER-ALLOT OREFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE BONDS AT ALEVEL 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 United States Securities and ExchangeCommission under the Securities Act of 1933, as amended, in reliance upon exemptions provided thereunder. The Bondshave not been registered or qualified under the Securities Act of Texas in reliance upon various exemptions containedtherein; nor have the Bonds been registered or qualified under the securities acts of any other jurisdictions. The Districtassumes no responsibility for registration or qualification of the Bonds under the securities laws of any jurisdiction inwhich the Bonds may be offered, sold, or otherwise transferred. This disclaimer of responsibility for registration orqualification for sale or other disposition of the Bonds should not be construed as an interpretation of any kind withregard to the availability of any exemption from securities registration or qualification provisions.

Municipal Bond Insurance and Ratings

Applications have been made to Assured Guaranty Municipal Corp (“AGM”), Build America Mutual AssuranceCompany (“BAM”), and Municipal Assurance Corp. (“MAC”) to issue a commitment for municipal bond guarantyinsurance on the Bonds. The purchase of such insurance, if available, and payment of all associated costs, including thepremium charged by the insurer, and fees charged by any rating companies other than Moody’s Investors Service(“Moody’s”), will be at the option and expense of the Underwriter. The Underwriter understands, by submission of itsbid, that the Underwriter is solely responsible for the selection of any insurer and for all negotiations with (i) the insureras to the premium to be paid, and (ii) the insurer and any and all rating companies as to selection of such ratingcompanies, the ratings to be assigned the Bonds as a consequence of the issuance of the municipal bond insurance policy,and the payment of fees in connection with such ratings except the Moody’s rating fees as described below. Moody’shas assigned an underlying rating of “Baa3” to the Bonds. If the Underwriter chooses to purchase municipal bondinsurance on the Bonds, separate rating(s), including a rating by Moody’s, may at the election of the Underwriter beassigned the Bonds based upon the understanding that upon delivery of the Bonds an insurance policy insuring the timelypayment of the principal of and interest on the Bonds will be issued by the insurer. The District will pay the cost of boththe underlying rating of Moody’s and the Moody’s rating associated with the insurance policy issued relating to theBonds, if the latter is elected to be used by the Underwriter. As is stated herein under the caption “LEGAL MATTERS -No Material Adverse Change,” if the Underwriter elects to purchase municipal insurance on the Bonds, the rating of theinsurer’s creditworthiness by any rating agency does not and will not in any manner affect the District’s financialcondition, and thus any change to such rating, including a downgrade thereof, at any time, does not and will notconstitute a change, material or otherwise, in the District’s financial condition, and therefore cannot be a basis fortermination by the Underwriter of its obligations to take up and pay for the Bonds.

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BOND INSURANCE RISK FACTORS

As is stated above under the caption “SALE AND DISTRIBUTION OF THE BONDS - Municipal Bond Insurance andRatings,” applications have been made to insurers to issue a commitment for municipal bond guaranty insurance on theBonds. If the Underwriter purchases such municipal bond guaranty insurance on the Bonds as set forth under suchcaption, in the event of default of the payment of principal of or interest on the Bonds when all or some become due, anyowner of the Bonds shall have a claim under the municipal bond guaranty insurance policy (the “Policy”) for suchpayments.

In the event that an insurer is unable to make payment of principal and interest on the Bonds as such payments becomedue under the Policy, the Bonds are payable solely from the moneys received pursuant to the applicable bond documents. In the event that an insurer becomes obligated to make payments with respect to the Bonds, no assurance is given thatsuch event would not adversely affect the market price of the Bonds or the marketability (liquidity) for the Bonds.

The long-term ratings on the Bonds are dependent in part on the financial strength of any such insurer and its claimspaying ability. An insurer's financial strength and claims paying ability are predicated upon a number of factors whichcould change over time. No assurance is given that the long-term ratings of an insurer and the ratings on bonds insuredby any such insurer, including the Bonds, would not be subject to downgrade. Such event could adversely affect themarket price of the Bonds or the marketability (liquidity) for the Bonds.

The obligations of an insurer are contractual obligations and in an event of default by any such insurer, the remediesavailable may be limited by applicable bankruptcy law or state law related to insolvency of insurance companies.

Neither the District, nor to the knowledge of the District the Underwriter, has made independent investigation into theclaims paying ability of any potential insurer of the Bonds and no assurance or representation regarding the financialstrength or projected financial strength of any potential insurer is made by either the District or the Underwriter. Therefore, when making an investment decision, potential investors should carefully consider the ability of the Districtto pay the principal of and interest on the Bonds and the claims paying ability of any potential insurer, particularly overthe life of the investment. See “SALE AND DISTRIBUTION OF THE BONDS - Municipal Bond Insurance andRatings” above for further information regarding the District’s application for municipal bond guaranty insurance onthe Bonds.

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OFFICIAL STATEMENT SUMMARY

The following summary of certain information contained herein is qualified in its entirety by the detailed informationand financial statements appearing elsewhere in this Official Statement. The reader should refer particularly to sectionsthat are indicated for more complete information.

THE BONDS

The Issuer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Harris-Brazoria Counties Municipal Utility District No. 509(the “District”) is a political subdivision of the State of Texaslocated within Harris and Brazoria Counties, Texas. See“THE DISTRICT - General.”

Description . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $12,000,000 Unlimited Tax Bonds, Series 2019, are datedJune 1, 2019, and mature on September 1 in the years andprincipal amounts shown on the cover page of this OfficialStatement. Interest on the Bonds accrues from June 1, 2019,at the rates shown on the cover hereof, and is payable onMarch 1, 2020 (nine-month interest payment), and on eachSeptember 1 and March 1 thereafter until maturity or priorredemption. The Bonds are issued in fully registered form andwill be issued in denominations of $5,000 of principal amountor integral multiples thereof. The Bonds scheduled to matureon and after September 1, 2025, are subject to redemption, inwhole or in part, prior to their scheduled maturities, onSeptember 1, 2024, or on any date thereafter at the option ofthe District. Upon redemption, the Bonds will be payable ata price equal to the principal amount of the Bonds, or portionsthereof, so called for redemption, plus accrued interest to thedate of redemption. See “THE BONDS.”

Book-Entry-Only System . . . . . . . . . . . . . . . . . . . . The definitive Bonds will be initially registered and deliveredonly to Cede & Co., the nominee of DTC (as defined herein),pursuant to the Book-Entry-Only System described herein. Beneficial ownership of the Bonds may be acquired indenominations of $5,000 or integral multiples thereof. Nophysical delivery of the Bonds will be made to the beneficialowners thereof. Principal of and interest on the Bonds will bepayable by the Paying Agent/Registrar to Cede & Co., whichwill make distribution of the amounts so paid to theparticipating members of DTC for subsequent payment to thebeneficial owners of the Bonds (see “THE BONDS - Book-Entry-Only System”).

Source of Payment . . . . . . . . . . . . . . . . . . . . . . . . . Principal of and interest on the Bonds are payable from theproceeds of an annual ad valorem tax, without legal limitationas to rate or amount, levied upon all taxable property withinthe District. See “THE BONDS - Source of Payment,”“INVESTMENT CONSIDERATIONS - Maximum Impact onDistrict Tax Rates,” and “TAX DATA - Tax RateCalculations.”

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Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . Proceeds of the sale of the Bonds will be used by the Districtto (i) finance the District’s cost of (a) the remaining portion ofclearing and grubbing for Riverstone Ranch at Clear CreekLakes C through F and Sections 5 through 7; (b) force mainserving Riverstone Ranch at Clear Creek; (c) Lake C andportions of Lake D and F serving Riverstone Ranch at ClearCreek, Section 5; (d) lift station and force main servingMassey Lakes Estates; (e) a portion of water distribution,wastewater collection, storm drainage and detention facilitiesto serve Massey Lakes Estates; (f) the remaining portion ofwater distribution, wastewater collection, storm drainage anddetention facilities for Baker’s Landing, Section 1A (g) theremaining portion of underground water distribution,wastewater collection, storm drainage and detention facilitiesserving Afton Lake; (h) a portion of water distribution,wastewater collection and storm drainage facilities to serveRiverstone Ranch at Clear Creek, Section 5; (i) undergroundwater distribution, wastewater collection and storm drainagefacilities to serve Baker’s Landing Sections 1B and 2A; (j)Impact Fees paid to the City of Pearland for 248 connectionsassociated with the City's provision of water supply andwastewater treatment to the District (the “Impact Fees”); (k)engineering, testing and stormwater pollution prevention planfees; (l) Riverstone Ranch Phase 3 Drainage Plan; (m) landacquisition costs for Riverstone Ranch Lake C detention pond;and Massey Lakes Estates lift station and detention pond; and(n) Afton Lake pump station fence and inspection fee; (ii) payinterest on advances made on behalf of the District; and (iii)pay for administrative and issuance costs, legal fees, fiscalagent's fees, a fee to the Texas Commission on EnvironmentalQuality (the “TCEQ” or the “Commission”), engineering fees,and certain financing costs related to the issuance of the BAN(defined below) and the Bonds. The District will also retire its$6,755,000 Bond Anticipation Note, Series 2018 (the “BAN”),including the payment of principal of and interest thereon,with a portion of the proceeds of the sale of the Bonds. TheDistrict utilized the proceeds of the BAN to interim financecertain of the aforementioned facilities that it is financing withthe proceeds of the sale of the Bonds. See “THE BONDS -Use and Distribution of Bond Proceeds.”

Authority for Issuance and Payment Record . . . . . The Bonds are issued pursuant to the authority of an electionheld on November 6, 2007, the Bond Resolution, Article 16,Section 59 of the Texas Constitution, Chapter 8217(hereinafter defined), Chapters 49 and 54, Texas Water Code,as amended, and an Order of the TCEQ. The Bonds are thefourth series of bonds issued by the District. The District haspreviously issued Unlimited Tax Bonds, Series 2015 (the“Series 2015 Bonds”), Unlimited Tax Bonds, Series 2017 (the“Series 2017 Bonds”) and Unlimited Tax Bonds, Series 2018(the “Series 2018 Bonds”) (collectively, the “Prior Bonds”). Before the issuance of the Bonds, the aggregate principalamount of the Prior Bonds that have not been previously

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retired by the District is $21,635,000 (the “OutstandingBonds”). After delivery of the Bonds, the aggregate principalamount of the District’s bonded indebtedness, including theBonds, will be $33,635,000. The District has timely made allpayments of interest on the Prior Bonds when due.

Authorized But Unissued Bonds . . . . . . . . . . . . . . $101,400,000 for waterworks, wastewater, and drainagefacilities (after issuance of the Bonds), and refunding of same,and $12,200,000 for parks and recreational facilities, andrefunding of same. See “THE BONDS - Issuance ofAdditional Debt.” In addition to the components of theSystem (hereinafter defined) and Impact Fees that the Districthas financed with portions of the proceeds of the sale of thePrior Bonds, and is financing with portions of the proceeds ofthe sale of the Bonds (see “THE BONDS - Use andDistribution of Bond Proceeds” and “THE SYSTEM”), theDistrict expects to finance the acquisition or construction ofadditional components of the System and Impact Fees withportions of the proceeds of the sale of bonds, if any, in thefuture, including approximately $9,000,000 of unlimited taxbonds that the District expects to issue in approximately thesecond quarter of 2020. See “INVESTMENT CONSIDER-TIONS - Future Debt.”

Municipal Bond Insurance and Ratings . . . . . . . . . Applications have been made to Assured Guaranty MunicipalCorp (“AGM”), Build America Mutual Assurance Company(“BAM”), and Municipal Assurance Corp. (“MAC”) to issuea commitment for municipal bond guaranty insurance on theBonds. The purchase of such insurance, if available, andpayment of all associated costs, including the premiumcharged by the insurer, and fees charged by any ratingcompanies other than Moody’s Investors Service (“Moody’s”),will be at the option and expense of the Underwriter. TheUnderwriter understands, by submission of its bid, that theUnderwriter is solely responsible for the selection of anyinsurer and for all negotiations with (i) the insurer as to thepremium to be paid, and (ii) the insurer and any and all ratingcompanies as to selection of such rating companies, the ratingsto be assigned the Bonds as a consequence of the issuance ofthe municipal bond insurance policy, and the payment of feesin connection with such ratings except the Moody’s rating feesas described below. Moody’s has assigned an underlyingrating of “Baa3” to the Bonds. If the Underwriter chooses topurchase municipal bond insurance on the Bonds, separaterating(s), including a rating by Moody’s, may at the electionof the Underwriter be assigned the Bonds based upon theunderstanding that upon delivery of the Bonds an insurancepolicy insuring the timely payment of the principal of andinterest on the Bonds will be issued by the insurer. TheDistrict will pay the cost of both the underlying rating ofMoody’s and the Moody’s rating associated with the insurancepolicy issued relating to the Bonds, if the latter is elected to beused by the Underwriter. As is stated herein under the caption

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“LEGAL MATTERS - No Material Adverse Change,” if theUnderwriter elects to purchase municipal insurance on theBonds, the rating of the insurer’s creditworthiness by anyrating agency does not and will not in any manner affect theDistrict’s financial condition, and thus any change to suchrating, including a downgrade thereof, at any time, does notand will not constitute a change, material or otherwise, in theDistrict’s financial condition, and therefore cannot be a basisfor termination by the Underwriter of its obligations to take upand pay for the Bonds.

Bond Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Allen Boone Humphries Robinson LLP, Bond Counsel,Houston, Texas. See “LEGAL MATTERS” and “TAXMATTERS.”

Disclosure Counsel . . . . . . . . . . . . . . . . . . . . . . . . . McCall, Parkhurst & Horton L.L.P., Houston, Texas,Disclosure Counsel to the District.

Not Qualified Tax-Exempt Obligations . . . . . . . . . The Bonds are not “qualified tax-exempt obligations” withinthe meaning of Section 265(b) of the Internal Revenue Codeof 1986, as amended.

THE DISTRICT

Description . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The District, a political subdivision of the State of Texas, wascreated as Harris County Municipal Utility District No. 509 bya special act of the 80th Texas Legislature, effective June 15,2007, now codified as Chapter 8217, Special District LocalLaws Code (“Chapter 8217"). By Order of the TCEQ, datedOctober 9, 2015, the District changed its name to Harris-Brazoria Counties Municipal Utility District No. 509. TheDistrict contains approximately 641.535 acres of land. Approximately 164.33 acres that are contained within theDistrict are located within Brazoria County, Texas, andapproximately 477.21 acres that are contained within theDistrict are located within Harris County, Texas. The Districtis located entirely within the corporate boundaries of the Cityof Pearland, Texas (the “City”). The District consists of fivenon-contiguous tracts. The first tract (approximately 477.21acres) is in the southeastern portion of Harris County, south ofBeltway 8 and east of Old Alvin Road. The second tract(approximately 40.28 acres) is in the northeastern portion ofBrazoria County, west of Manvel Road and south of MagnoliaRoad. The third tract (approximately 12.57 acres) is locatedin the northeastern portion of Brazoria County, east of ManvelRoad and south of Broadway Street. The fourth tract(approximately 84.95 acres) is located east of South MainStreet and south of East Walnut Street. The fifth tract(approximately 26.52 acres) is located west of PearlandParkway and south of Barry Rose Road. The portion of theDistrict that lies within Brazoria County lies within thePearland Independent School District, and the portion of theDistrict that lies within Harris County lies within the Pasadena

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Independent School District. See “THE DISTRICT - General”and - “Description,” and “APPENDIX A - LOCATIONMAP.”

Gehan Homes, Ltd. owns approximately 31.269 acres of landlocated outside the boundaries of the District that is proposedfor annexation. A petition for consent to annex such land intothe District has been filed with the City. The District makesno representation that the annexation will be consummated.

The District obtains water, sewer and drainage service fromthe City. The City and the initial developer of land within theDistrict, SHS Partners, Ltd, on behalf of the District, enteredinto a Utility Agreement dated August 1, 2007, which wasassumed on November 14, 2007, by the District (the “OriginalAgreement”), as amended on July 13, 2015, (the “AmendedUtility Agreement”) (the Original Agreement and Amended Utility Agreement are collectively referred to as the “UtilityAgreement”), to provide a water distribution system, sanitarysewer collection system and a drainage system (the “System”)to serve the area within the District. In consideration of theDistrict acquiring and constructing the System on behalf of theCity, the City agreed, pursuant to the terms and conditions ofthe Utility Agreement, to own and operate the System. Inaddition, the City has agreed to pay to the District the City TaxRebate and the City Utility Rebate (as such terms are definedand rebates are explained in this Official Statement under“THE DISTRICT - Utility Agreement”). Neither the City TaxRebate nor the City Utility Rebate is pledged to the paymentof the Bonds. Pursuant to the Utility Agreement, the Cityprovides water supply and wastewater treatment capacity tothe District in consideration of the payment by the District ofImpact Fees. See “THE SYSTEM.”

Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The rights, powers, privileges, authority and functions of theDistrict are established by Article XVI, Section 59 of theConstitution of the State of Texas, Chapter 8217, and thegeneral laws of the State of Texas pertaining to municipalutility districts, particularly Chapters 49 and 54 of the TexasWater Code, as amended. See “THE DISTRICT - General.”

Development and Home Construction . . . . . . . . . . As of April 15, 2019, the District contained 937 homes,including 117 homes under construction. See "BUILDERS."According to the District's Engineer, underground waterdistribution, wastewater collection, and stormdrainage/detention facilities and street paving have beencompleted to serve 1,145 single-family residential lots locatedin Riverstone Ranch at Clear Creek, Sections 1 through 10,Massey Lakes, Afton Lake, Bakers Landing, Sections 1A, 1B,2A, 2B and 3 (approximately 349.92 total acres). In addition,161 lots on approximately 41.39 acres subdivided asRiverstone Ranch at Clear Creek, Section 12 are currentlyunder development with completion anticipated in

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approximately August 2019, and 48 townhome lots onapproximately 7.58 acres subdivided as Bakers LandingTownhomes are currently under development with completionanticipated in approximately July 2019. Approximately 26.52acres of land located within the District, expected to beutilized for commercial purposes, have been developed as isdescribed below.

The primary developer of the District, Meritage Homes ofTexas, L.L.C. (defined below under the caption"DEVELOPERS"), has completed the development of 925single-family residential lots (approximately 267.25 totalacres) that have been subdivided as Riverstone Ranch at ClearCreek, Sections 1 through 10 and Massey Lakes, and iscurrently developing 161 lots on approximately 41.39 acressubdivided as Riverstone Ranch at Clear Creek, Section 12,with completion expected in approximately August 2019. Meritage Homes owns approximately 116.92 acres ofcurrently undeveloped land located within the District that areavailable for future development, all of which it expects to beutilized for future single-family residential development.

D.R. Horton Texas, Ltd. (“D.R. Horton”), the developer ofBakers Landing, has completed the development of BakersLanding, Sections 1A, 1B, 2A, 2B and 3 (191 total lots,approximately 70.1 total acres) and is currently developingBakers Landing Townhomes (40 townhome lots,approximately 7.58 acres) with completion expected inapproximately July 2019. D.R. Horton owns no additionalland within the District.

KSTX Pearland Parkway (“KSTX”) completed thedevelopment of underground water distribution, wastewatercollection and storm drainage/detention facilities to serveapproximately 26.52 acres located within the District,expected to be utilized for commercial purposes, on behalf ofitself and Kroger Texas L.P. Approximately 10.92 of suchacres are now owned by Fairlawn 35 (“Fairlawn”). Theconstruction of above-ground improvements on such land hasnot yet been initiated.

The District cannot represent that the development of any ofsuch commercial property will be consummated, nor whether,or when, the development of any the aforementioned currentlyundeveloped acres might occur.

The City owns approximately 0.15 acres located within theDistrict upon which a sanitary sewer pumping station islocated. Pasadena Independent School District ownsapproximately 26.57 acres of currently undeveloped landwithin the District. The balance of the land located in theDistrict is contained within easements, rights-of-way,detention ponds, or is otherwise not available for futuredevelopment. See "INVESTMENT CONSIDERATIONS -

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Factors Affecting Taxable Values and Tax Payments," "DEVELOPERS," "FUTURE DEVELOPMENT" and “TAXDATA - Principal 2018 Taxpayers.”

Developers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The primary developer of land within the District is MeritageHomes of Texas, L.L.C., an Arizona limited liability company("Meritage Homes"). As is described in this OfficialStatement under the caption "DEVELOPMENT AND HOMECONSTRUCTION,” Meritage Homes has completed thedevelopment of 925 single-family residential lots(approximately 267.25 total acres) that have been subdividedas Riverstone Ranch at Clear Creek, Sections 1 through 10 andMassey Lakes and is currently developing 161 lots onapproximately 41.39 acres subdivided as Riverstone Ranch atClear Creek, Section 12, with completion expected inapproximately August 2019. Meritage Homes ownsapproximately 116.92 acres of currently undeveloped landlocated within the District that are available for futuredevelopment, all of which it expects to be utilized for futuresingle-family residential development. Meritage Homes ofTexas, L.L.C., an Arizona limited liability company, iswholly-owned by Meritage Homes Corporation. MeritageHomes Corporation is a publicly traded corporation whosestock is listed on the New York Stock Exchange under thesymbol MTH. Meritage Homes Corporation is subject to theinformation requirements of the Securities Exchange Act of1934, as amended, and in accordance therewith files reportsand other information with the United States Securities andExchange Commission ("SEC"). Reports, proxy statementsand other information filed by Meritage Homes Corporationcan be inspected at the office of the SEC at Judiciary Plaza,Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549. Copies of such material can be obtained from the PublicReference Section of the SEC at 450 Fifth Street, N.W.,Washington, D.C. 20549, at prescribed rates. Copies of theabove reports, proxy statements and other information mayalso be inspected at the offices of the New York StockExchange, Inc., 20 Broad Street, New York, New York 10005. The SEC maintains a World Wide Web site on the Internet athttp://www.sec.gov that contains reports, proxy informationstatements and other information regarding registrants that fileelectronically with the SEC. Reference to the financialinformation concerning Meritage Homes Corporation isrelevant, among other reasons, to the ability of MeritageHomes to continue to develop land in the District and to paytaxes levied by the District and other taxing entities. Neither Meritage Homes nor Meritage Homes Corporation has madeany commitment to pay debt service on the Bonds, andreference to the financial information of Meritage HomesCorporation in this Official Statement should not be soconstrued. The District has not obtained any representationsfrom Meritage Homes Corporation concerning its publiclyavailable filings or undertaken any review thereof and assumesno responsibility for the information contained therein.

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D.R. Horton Texas, Ltd. (“D.R. Horton”), the developer ofBakers Landing, has completed the development of BakersLanding, Sections 1A, 1B, 2A, 2B and 3 (191 total lots,approximately 70.1 total acres) and is currently developingBakers Landing Townhomes (40 townhome lots,approximately 7.58 acres) with completion expected inapproximately July 2019. D.R. Horton owns no additionalland within the District. D.R. Horton is wholly owned by D.R.Horton, Inc. D.R. Horton, Inc. is a publicly traded corporationwhose stock is listed on the New York Stock Exchange underthe symbol DHI. D.R. Horton, Inc. is subject to theinformation requirements of the Securities Exchange Act of1934, as amended, and in accordance therewith files reportsand other information with the United States Securities andExchange Commission ("SEC"). Reports, proxy statementsand other information filed by D.R. Horton, Inc. can beinspected at the office of the SEC at Judiciary Plaza, Room1024, 450 Fifth Street, N.W., Washington, D.C. 20549. Copies of such material can be obtained from the PublicReference Section of the SEC at 450 Fifth Street, N.W.,Washington, D.C. 20549, at prescribed rates. Copies of theabove reports, proxy statements and other information mayalso be inspected at the offices of the New York StockExchange, Inc., 20 Broad Street, New York, New York 10005. The SEC maintains a World Wide Web site on the Internet athttp://www.sec.gov that contains reports, proxy informationstatements and other information regarding registrants that fileelectronically with the SEC. Reference to the financialinformation concerning D.R. Horton, Inc. is relevant, amongother reasons, to the ability of D.R. Horton to continue todevelop land in the District and to pay taxes levied by theDistrict and other taxing entities. Neither D.R. Horton norD.R. Horton, Inc. has made any commitment to pay debtservice on the Bonds, and reference to the financialinformation of D.R. Horton, Inc. in this Official Statementshould not be so construed. The District has not obtained anyrepresentations from D.R. Horton, Inc. concerning its publiclyavailable filings or undertaken any review thereof and assumesno responsibility for the information contained therein.

KSTX Pearland Parkway (“KSTX”) completed thedevelopment of underground water distribution, wastewatercollection and storm drainage/detention facilities to serveapproximately 26.52 acres located within the District,expected to be utilized for commercial purposes, on behalf ofitself and Kroger Texas L.P. Approximately 10.92 of suchacres are now owned by Fairlawn 35 (“Fairlawn”). Theconstruction of above-ground improvements on such land hasnot yet been initiated.

The District cannot represent that the development of any ofsuch commercial property will be consummated, nor whether,or when, the development of any the aforementioned currentlyundeveloped acres might occur.

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Collective reference is made in this Official Statement to theaforementioned developers as the “Developers.”

Builders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . According to Meritage Homes, it is currently constructinghomes in Riverstone Ranch at Clear Creek which range in sizefrom approximately 1,950 to 4,000 square feet of living areaand in sales price from approximately $250,000 to $370,000.According to Meritage Homes, it is currently constructinghomes in Massey Lakes which range in size fromapproximately 2,200 to 4,000 square feet of living area and insales price from approximately $325,000 to $435,000.

According to D.R. Horton, it is currently constructing homesin Bakers Landing which range in size from approximately1,775 to 3,311 square feet of living area and in sales pricefrom approximately $252,000 to $353,000.

Meritage Homes and D.R. Horton (together, the “Builders”)may change the types, sizes and sales prices of the homeswhich it chooses to construct within the District entirely withintheir discretion, or may suspend home construction activityentirely.

INVESTMENT CONSIDERATIONS

THE BONDS ARE SUBJECT TO SPECIAL INVESTMENT CONSIDERATIONS AS SET FORTH IN THISOFFICIAL STATEMENT. PROSPECTIVE PURCHASERS SHOULD CAREFULLY EXAMINE THE ENTIREOFFICIAL STATEMENT BEFORE MAKING THEIR INVESTMENT DECISIONS, ESPECIALLY THE PORTIONOF THE OFFICIAL STATEMENT ENTITLED “INVESTMENT CONSIDERATIONS.”

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SELECTED FINANCIAL INFORMATION(Unaudited)

2018 Assessed Valuation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $199,397,498(a)(As of January 1, 2018)See “TAX DATA” and “TAXING PROCEDURES”

Estimated Valuation at March 1, 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $300,112,565(b)(As of March 1, 2019)See “TAX DATA” and “TAXING PROCEDURES”

Direct Debt: Outstanding Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 21,635,000The Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,000,000(c)Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 33,635,000

Estimated Overlapping Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 18,584,773

Direct and Estimated Overlapping Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 52,219,773(c)

Direct Debt Ratios: as a percentage of 2018 Assessed Valuation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16.87%: as a percentage of Estimated Valuation at March 1, 2019 . . . . . . . . . . . . . . . . . . . . . . . 11.21%

Direct and Estimated Overlapping Debt Ratios: as a percentage of 2018 Assessed Valuation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26.19%: as a percentage of Estimated Valuation at March 1, 2019 . . . . . . . . . . . . . . . . . . . . . . . 17.40%

Debt Service Fund Balance as of April 18, 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,644,204(d)

General Fund Balance as of April 18, 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 653,582

Average Percentage of Total Tax Collection (2013-2017 Levies) . . . . . . . . . . . . . . . . . . . . . . . . . . 99.96%As of March 31, 2019.

Percentage of Total Tax Collections 2018 Levy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94.92%As of March 31, 2019. In process of collection.

2018 Tax Rate Per $100 of Assessed ValuationDebt Service Tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . $0.67Maintenance Tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.18Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $0.85(e)

City of Pearland Tax Rebate Anticipated to be Received in 2020Based Upon Estimated Valuation at March 1, 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 382,050(e)

Average Annual Debt Service Requirements of the Bonds and the Outstanding Bonds (2020-2044) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,167,604

Maximum Annual Debt Service Requirement of the Bonds andthe Outstanding Bonds (2044) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,253,500

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Tax Rate per $100 of Assessed Valuation Required to Pay Average Annual Debt Service Requirements of the Bonds and the Outstanding Bonds (2020-2044) at 95% Tax CollectionsBased Upon Estimated Valuation at March 1, 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $0.63(c)(e)

Tax Rate per $100 of Assessed Valuation Required to Pay MaximumAnnual Debt Service Requirement of the Bonds (2044) at 95% Tax CollectionsBased Upon Estimated Valuation at March 1, 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $0.66(c)(e)

Number of Single Family Residences (including 117 residences under construction) . . . . . . . . . . . 937as of April 15, 2019

______________________________(a) As of January 1, 2018. All property located in the District is valued on the tax rolls by the Brazoria County

Appraisal District (“BCAD”) and the Harris County Appraisal District (“HCAD”) (together, the “AppraisalDistricts”) at 100% of assessed valuation as of January 1 of each year. The District's tax roll is certified by theBrazoria County Appraisal Review Board and the Harris County Appraisal Review Board (together, the“Appraisal Review Boards”). Such sum includes $54,494,149 certified by BCAD, $141,421,699 certified byHCAD, and certain values which have not been certified by the Harris County Appraisal Review Board, includingthe value of certain properties which has been proposed by HCAD but protested by the owners thereof to HCADand the value of certain properties not under protest but not yet certified. HCAD’s “Estimated Final TaxableValue with Hearing Loss” of such properties is $2,088,952, which total is included in the amount of$199,397,498. HCAD has proposed the valuation of such protested properties to be $2,250,720. HCAD’sestimate of the total taxable value of taxable property not under protest and not yet included on the certifiedappraisal roll is $1,392,698, which total is also included in the amount of $199,397,498. The District is unableto predict the amount of the District’s final 2018 Assessed Valuation. Such final 2018 Assessed Valuation willnot be determined until the valuation of all taxable property located within the District is certified by the AppraisalReview Boards for 2018. See “INVESTMENT CONSIDERATIONS - Factors Affecting Taxable Values and TaxPayments” and “TAXING PROCEDURES.”

(b) Provided by the Appraisal Districts for informational purposes only, this amount is an estimate of the value of alltaxable property located within the District as of March 1, 2019, and includes an estimate of values resulting fromthe construction of taxable improvements from January 1, 2018, through February 28, 2019. The ultimateassessed valuation of such additions to the District's tax roll resulting from development and construction activityfrom January 1, 2018, through December 31, 2018, may vary significantly from this estimate when the AppraisalReview Boards certify the valuation of District property for the purpose of determining the District's 2019 tax roll,which will be based on the valuation of District property as of January 1, 2019. Moreover, the ultimate assessedvaluation of such additions to the District's tax roll resulting from development and construction activity fromJanuary 1, 2019, through February 28, 2019, may vary significantly from this estimate when the Appraisal ReviewBoards certify the valuation of District property for the purpose of determining the District's 2020 tax roll, whichwill be based on the valuation of District property as of January 1, 2020.

(c) See “DISTRICT DEBT.” In addition to the components of the System and Impact Fees that the District hasfinanced with portions of the proceeds of the sale of the Prior Bonds, and is financing with portions of theproceeds of the sale of the Bonds (see “THE BONDS - Use and Distribution of Bond Proceeds” and “THESYSTEM”), the District expects to finance the acquisition or construction of additional components of the Systemand Impact Fees with portions of the proceeds of the sale of bonds, if any, in the future, including approximately$9,000,000 of unlimited tax bonds that the District expects to issue in approximately the second quarter of 2020. See “INVESTMENT CONSIDERATIONS - Future Debt.”

(d) Neither Texas law nor the Bond Resolution requires that the District maintain any particular sum in the DebtService Fund. Such sum gives effect to the payment by the District of its debt service requirements that were dueon March 1, 2019. The District’s remaining debt service payments for 2019, consisting of principal of and intereston the Outstanding Bonds, are due on September 1, 2019, and total $565,568. The District’s initial debt servicepayment on the Bonds, consisting of a nine-month interest payment due thereon, is due on March 1, 2020.

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(e) The District levied a total tax rate of $0.85 per $100 of Assessed Valuation for 2018, consisting of debt andmaintenance tax rates of $0.67 and $0.18 per $100 of Assessed Valuation, respectively. The District lies whollywithin the municipal boundaries of the City of Pearland (the “City”), and all land within the District is subject totaxation by the City. See “TAX DATA - Estimated Overlapping Taxes.” Pursuant to the Utility Agreementbetween the District and the City, the City is obligated to pay annually a sum to the District in the form of a “CityTax Rebate” as defined in the Utility Agreement and described in this Official Statement under the caption “THEDISTRICT - Utility Agreement.” The calculations of tax rates required to pay the Average Annual and MaximumAnnual Debt Service Requirements assume the receipt by the District of a City Tax Rebate of $382,050, theapproximate amount anticipated to be received in 2020 based upon the District's Estimated Valuation at March1, 2019, enumerated above (see “TAX DATA - Tax Rate Calculations”). The District currently intends to applythe City Tax Rebate to payment of the Outstanding Bonds, the Bonds and any additional bonds, debts, orobligations, whether or not on a parity with the Bonds, which may be issued by the District in the future. However, the City Tax Rebate is not pledged to the payment of the Bonds and is subject to modification byagreement of the District and the City. Therefore, there is no assurance that the City Tax Rebate will not bereduced or eliminated in the future. For calculations of the tax rates required to pay the Average Annual andMaximum Annual Debt Service Requirements of the Bonds assuming the receipt of no City Tax Rebate, see“TAX DATA - Tax Rate Calculations.” As is enumerated in this Official Statement under the caption “TAXDATA - Estimated Overlapping Taxes,” the aggregate of the 2018 tax levies of all overlapping taxing units whichlevy taxes upon property located in the District, plus the District’s 2018 tax rate, is $3.548672 per $100 ofAssessed Valuation as to that portion of the District that lies within Brazoria County, and $3.853657 per $100of Assessed Valuation as to that portion of the District that lies within Harris County. Such aggregate levies arehigher than the aggregate tax levies of many municipal utility districts in the Houston metropolitan area, includingthe area of the District, but are within the range of the aggregate levies of many municipal utility districts in theHouston metropolitan area and the area of the District which are in stages of development comparable with theDistrict. See “INVESTMENT CONSIDERATIONS - Factors Affecting Taxable Values and Tax Payments” and“TAXING PROCEDURES.”

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HARRIS-BRAZORIA COUNTIES MUNICIPAL UTILITY DISTRICT NO. 509UNLIMITED TAX BONDS

SERIES 2019

INTRODUCTION

This Official Statement provides certain information with respect to the issuance by Harris-Brazoria Counties MunicipalUtility District No. 509 (the “District”) of its $12,000,000 Unlimited Tax Bonds, Series 2019 (the “Bonds”).

There follow in this Official Statement descriptions of the Bonds, and certain information about the District and itsfinances. All descriptions of documents contained herein are only summaries and are qualified in their entirety byreference to each such document. Copies of such documents may be obtained from the District upon request andpayment of the costs of duplication thereof.

THE BONDS

General

The following is a description of some of the terms and conditions of the Bonds, which description is qualified in itsentirety by reference to the resolution (the “Bond Resolution”) of the Board of Directors of the District (the “Board”)authorizing the issuance of the Bonds. A copy of the Bond Resolution may be obtained from the District upon writtenrequest made to the District's Financial Advisor, Rathmann & Associates, L.P., 8584 Katy Freeway, Suite 250, Houston,Texas 77024.

The Bonds are dated June 1, 2019. Interest accrues from June 1, 2019, at the rates shown on the cover hereof, and ispayable on March 1, 2020 (nine-month interest payment), and on each September 1 and March 1 thereafter until theearlier of stated maturity or redemption. The Bonds are fully registered bonds maturing on September 1 in each of theyears and in the amounts shown under “MATURITY SCHEDULE” on the cover page of this Official Statement. Principal of the Bonds will be payable by the paying agent/registrar, initially, The Bank of New York Mellon TrustCompany, N.A., in Dallas, Texas, (the “Paying Agent,” “Registrar” or “Paying Agent/Registrar”).

The Bonds will be registered in the name of Cede & Co., as nominee for The Depository Trust Company, New York,New York (“DTC”), which will act as securities depository for the Bonds. Beneficial owners of the Bonds will notreceive physical certificates representing the Bonds, but will receive a credit balance on the books of the nominees ofsuch beneficial owners. So long as Cede & Co. is the registered owner of the Bonds, the principal of and interest on theBonds will be paid by the Paying Agent directly to DTC, which will, in turn, remit such principal and interest to itsparticipants for subsequent disbursement to the beneficial owners of the Bonds as described below under “Book-Entry-Only System.”

Book-Entry-Only System

This section describes how ownership of the Bonds is to be transferred and how the principal of and interest on theBonds are to be paid to and credited by The Depository Trust Company, New York, New York, (“DTC”) while the Bondsare registered in its nominee name. The information in this section concerning DTC and the Book-Entry-Only Systemhas been provided by DTC for use in disclosure documents such as this Official Statement. The District and theFinancial Advisor believe the source of such information to be reliable, but neither of the District or the FinancialAdvisor takes any responsibility for the accuracy or completeness thereof.

The District 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 Participants, (2) DTC Participants or others will distribute debt servicepayments paid to DTC or its nominee (as the registered owner of the Bonds), or redemption or other notices, to theBeneficial Owners, or that they will do so on a timely basis, or (3) DTC will serve and act in the manner described inthis 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.

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The Depository Trust Company (“DTC”), New York, NY, will act as securities depository for the Bonds. The Bondswill be issued as fully-registered securities registered in the name of Cede & Co. (DTC’s partnership nominee) or suchother name as may be requested by an authorized representative of DTC. One fully-registered certificate will be issuedfor each maturity of the Bonds, each in the aggregate principal amount of such maturity, and will be deposited with DTC.

DTC, the world’s largest securities depository, is a limited-purpose trust company organized under the New YorkBanking Law, a “banking organization” within the meaning of the New York Banking Law, a member of the FederalReserve 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. DTCholds and provides asset servicing for over 3.5 million issues of U.S. and non-U.S. equity issues, corporate and municipaldebt issues, and money market instruments (from over 100 countries) that DTC’s participants (“Direct Participants”)deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securitiestransactions in deposited securities, through electronic computerized book-entry transfers and pledges between DirectParticipants’ accounts. This eliminates the need for physical movement of securities certificates. Direct Participantsinclude both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certainother 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 ClearingCorporation, 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 DirectParticipant, either directly or indirectly (“Indirect Participants”). DTC has a Standard & Poor’s rating of “AA+.” TheDTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More informationabout DTC can be found at www.dtcc.com.

Purchases of Bonds under the DTC system must be made by or through Direct Participants, which will receive a creditfor the Bonds on DTC's 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 writtenconfirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmationsproviding details of the transaction as well as periodic statements of their holdings, from the Direct or Indirect Participantthrough which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Bonds are tobe accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in Bonds, except in the event thatuse 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 ofDTC’s partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative ofDTC. The deposit of Bonds with DTC and their registration in the name of Cede & Co. or such other DTC nominee donot effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Bonds;DTC’s records reflect only the identity of the Direct Participants to whose accounts such Bonds are credited, which mayor may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping accountof their holdings on behalf of their customers.

Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to IndirectParticipants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangementsamong them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Ownersof Bonds may wish to take certain steps to augment the transmission to them of notices of significant events with respectto 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 toobtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their namesand addresses to the 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 an issue are being redeemed, DTC’spractice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed.

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Payments on the Bonds will be made to Cede & Co., or such other nominee as may be requested by an authorizedrepresentative of DTC. DTC’s practice is to credit Direct Participants’ accounts upon DTC’s receipt of funds andcorresponding detail information from the District or the Paying Agent/Registrar, on payable date in accordance withtheir respective holdings shown on DTC’s records. Payments by Participants to Beneficial Owners will be governedby standing instructions and customary practices, as is the case with securities held for the accounts of customers inbearer form or registered in “street name,” and will be the responsibility of such Participant and not of DTC, the PayingAgent/Registrar, or the District, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is theresponsibility of the District or the Paying Agent/Registrar, disbursement of such payments to Direct Participants willbe the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility ofDirect and Indirect Participants.

DTC may discontinue providing its services as depository with respect to the Bonds at any time by giving reasonablenotice to the District or Paying Agent. Under such circumstances, in the event that a successor depository is notobtained, Bond certificates are required to be printed and delivered.

The District may decide to discontinue use of the system of book-entry transfers through DTC (or a successor securitiesdepository). In that event, Bond certificates will be printed and delivered to DTC.

The information in this section concerning DTC and DTC’s book-entry system has been obtained from sources that theDistrict believes to be reliable, but the District takes no responsibility for the accuracy thereof.

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 whichthe Participant acquires an interest in the Bonds, but (i) all rights of ownership must be exercised through DTC and theBook-Entry-Only System, and, (ii) except as described above, notices that are to be given to registered owners underthe Bond Resolution will be given only to DTC.

Assignments, Transfers and Exchanges

In the event the book-entry-only system is discontinued, the Bonds may be transferred, registered and assigned only onthe registration books of the Registrar, and such registration and transfer shall be without expense or service charge tothe Registered Owner, except for any tax or other governmental charges required to be paid with respect to suchregistration and transfer. A Bond may be assigned by the execution of an assignment form on the Bonds or by otherinstrument of transfer and assignment acceptable to the Registrar. At any time after the date of delivery of the Bonds tothe Initial Purchaser, any Bond may be transferred or exchanged upon its presentment and surrender at the office of theRegistrar, duly endorsed for transfer or accompanied by an assignment duly executed by the Registered Owner. To theextent possible, new Bonds issued in an exchange or transfer of Bonds will be delivered to the Registered Owner orassignee of the owner in not more than three business days after the receipt of the request in proper form to transfer orexchange the Bonds. New Bonds registered and delivered in an exchange or transfer shall be in denominations of $5,000or any integral multiple thereof for any one maturity and for a like aggregate principal amount as the Bond or Bondssurrendered for exchange or transfer. Neither the District nor the Registrar is required (1) to transfer or exchange anyBond during a period beginning at the opening of business on a Record Date (defined below) and ending at the closeof business on the next succeeding interest payment date, or (2) to transfer or exchange any Bond selected for redemptionin whole or in part within thirty (30) calendar days of the redemption date. The District has agreed to replace mutilated,destroyed, lost or stolen Bonds upon surrender of the mutilated Bonds, on receipt of satisfactory evidence of suchdestruction, loss or theft and receipt by the District and the Registrar of security or indemnity to keep them harmless.The District will require payment of taxes, governmental charges and other expenses in connection with any suchreplacement.

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Record Date

The record date for payment of the interest on any regularly scheduled interest payment date is defined as the 15th dayof the month (whether or not a business day) preceding such interest payment date.

Redemption Provisions

Bonds maturing on September 1, 2025, and thereafter shall be subject to redemption and payment at the option of theDistrict, in whole or from time to time in part, on September 1, 2024, or on any date thereafter, at a price equal to theprincipal amount thereof plus accrued interest to the date fixed for redemption. Notice of the exercise of the reservedright of redemption will be given at least thirty (30) days prior to the redemption date by sending such notice by firstclass mail to the Registered Owner of each Bond to be redeemed in whole or in part at the address shown on the bondregister. If fewer than all of the Bonds are redeemed at any time, the particular maturity or maturities and amounts tobe redeemed shall be selected by the District. If fewer than all of the Bonds within a maturity are to be redeemed, theRegistrar shall designate by method of random selection the Bonds within such maturity to be redeemed (or by DTC inaccordance with its procedures while the Bonds are in book-entry-only form). The Registered Owner of any Bond, allor a portion of which has been called for redemption, shall be required to present same to the Registrar for payment ofthe redemption price on the portion of the Bonds so called for redemption and issuance of a new Bond in the principalamount equal to the portion of such Bond not redeemed.

Replacement of Registrar

Provision is made in the Bond Resolution for replacement of the Paying Agent/Registrar. If the Paying Agent/Registraris replaced by the District, the new paying agent/registrar shall act in the same capacity as the previous PayingAgent/Registrar. In order to act as Paying Agent/Registrar for the Bonds, any paying agent/registrar selected by theDistrict shall be a national or state banking institution, organized and doing business under the laws of the United Statesof America or of any State, authorized under such laws to exercise trust powers, and subject to supervision orexamination by federal or state authority.

Authority for Issuance and Payment Record

At an election held within the District on November 6, 2007, voters of the District authorized a total of $135,100,000in bonds for the purpose of acquiring or constructing water, sanitary sewer and drainage facilities (the “System”), andrefunding of same. The Bonds constitute the fourth issuance of bonds from such authorization. The Bonds are issuedby the District pursuant to the terms and provisions of the Bond Resolution; Article XVI, Section 59 of the TexasConstitution; Chapter 8217, Special District Local Laws Code (“Chapter 8217"); Chapters 49 and 54 of the Texas WaterCode, as amended; and an order of the Texas Commission on Environmental Quality (the “TCEQ” or “Commission”).

Before the Bonds can be issued, the Attorney General of Texas must pass upon the legality of certain related matters. The Attorney General of Texas does not guarantee or pass upon the safety of the Bonds as an investment or upon theadequacy of the information contained in this Official Statement.

The District has previously issued Unlimited Tax Bonds, Series 2015 (the “Series 2015 Bonds”), Unlimited Tax Bonds,Series 2017 (the “Series 2017 Bonds”) and Unlimited Tax Bonds, Series 2018 (the “Series 2018 Bonds”) (collectively,the “Prior Bonds”). Before the issuance of the Bonds, the aggregate principal amount of the Prior Bonds that have notbeen previously retired by the District is $21,635,000 (the “Outstanding Bonds”). After delivery of the Bonds, theaggregate principal amount of the District’s bonded indebtedness, including the Bonds, will be $33,635,000.

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Source of Payment

The Bonds, together with the Outstanding Bonds and any additional bonds payable from ad valorem taxes, are payablefrom the proceeds of an annual ad valorem tax, without legal limitation as to rate or amount, levied against all taxableproperty located within the District. In the Bond Resolution, the District covenants to levy a sufficient tax to payprincipal of and interest on the Bonds, with full allowance being made for delinquencies, costs of collection, and PayingAgent/Registrar fees. Such proceeds, after deduction for collection costs, will be placed in the District’s Debt ServiceFund and used solely to pay principal of and interest on the Bonds, and on additional bonds payable from taxes whichmay hereafter be issued, and Paying Agent/Registrar fees.

The Bonds are obligations of the District and are not the obligations of the State of Texas, Brazoria County, HarrisCounty, the City of Pearland, or any entity other than the District.

Issuance of Additional Debt

The District may issue additional bonds with the approval of the TCEQ (other than refunding bonds, which do notrequire TCEQ approval), necessary to provide improvements and facilities consistent with the purposes for which theDistrict was created. The District's voters have authorized the issuance of $135,100,000 unlimited tax bonds forconstruction of the System, and refunding of same, and could authorize additional amounts. Following the issuance ofthe Bonds, $101,400,000 unlimited tax bonds will remain authorized but unissued for construction of the System, andrefunding of same. The District's voters also have authorized $12,200,000 in unlimited tax bonds for parks andrecreational facilities and refunding of same, all of which remains unissued, and could authorize additional amounts. The Bond Resolution imposes no limitation on the amount of additional parity bonds which may be issued by the District(if authorized by the District's voters and approved by the Board and the TCEQ.) In addition to the water distribution,wastewater collection, storm drainage/detention facilities and Impact Fees that the District has financed with portionsof the proceeds of the sale of the Prior Bonds, and is financing with portions of the proceeds of the sale of the Bonds (see“Use and Distribution of Bond Proceeds” below and “THE SYSTEM”), the District expects to finance the acquisitionor construction of additional water distribution, wastewater collection, storm drainage/detention facilities and ImpactFees with portions of the proceeds of the sale of bonds, if any, in the future, including approximately $9,000,000 ofunlimited tax bonds that the District expects to issue in approximately the second quarter of 2020. See “INVESTMENTCONSIDERATIONS - Future Debt.”

Based on present engineering cost estimates and on development plans supplied by the Developers (hereinafter defined),in the opinion of the District's consulting engineer, LJA Engineering, Inc. (the “Engineer”), the $101,400,000 authorizedbut unissued bonds for water, sewer and drainage facilities will be adequate to finance the extension of water, wastewaterand storm drainage/detention facilities and services and Impact Fees paid to the City of Pearland related to the provisionof water supply and wastewater treatment capacity by the City to the District to serve all of the remaining undevelopedportions of the District. See “DEVELOPMENT OF THE DISTRICT,” FUTURE DEVELOPMENT,” and “THESYSTEM.”

The District is authorized by statute to develop parks and recreational facilities, including the issuance of bonds payable from taxes for such purpose. Before the District could issue park bonds payable from taxes, the following actions wouldbe required: (a) approval of the park plan and bonds by the TCEQ; and (b) approval of the bonds by the Attorney Generalof Texas. If the District does issue park bonds, the outstanding principal amount of such bonds may not exceed anamount equal to one percent of the value of the taxable property in the District. On November 6, 2007, the Districtauthorized $12,200,000 in bonds for parks and recreational facilities and refunding of same.

No Arbitrage

The District certifies that based upon all facts and estimates now known or reasonably expected to be in existence onthe date the Bonds are delivered and paid for, the District reasonably expects that the proceeds of the Bonds will not beused in a manner that would cause the Bonds, or any portion of the Bonds, to be “arbitrage bonds” under the InternalRevenue Code of 1986, as amended (the “Code”), and the regulations prescribed thereunder. Furthermore, all officers,employees and agents of the District have been authorized and directed to provide certifications of facts and estimates

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that are material to the reasonable expectations of the District as of the date the Bonds are delivered and paid for. Inparticular, all or any officers of the District are authorized to certify to the facts and circumstances and reasonableexpectations of the District on the date the Bonds are delivered and paid for regarding the amount and use of the proceedsof the Bonds. Moreover, the District covenants that it shall make such use of the proceeds of the Bonds, regulateinvestment of proceeds of the Bonds and take such other and further actions and follow such procedures, including,without limitation, calculating the yield on the Bonds, as may be required so that the Bonds shall not become “arbitragebonds” under the Code and the regulations prescribed from time to time thereunder.

Dissolution

Under existing Texas law, since the District lies wholly within the corporate limits of the City of Pearland, Texas (the“City”), the District may be dissolved by the City, without the District's consent, subject to compliance by the City withvarious requirements of Chapter 43 of the Texas Local Government Code, as amended. The Utility Agreement betweenthe City and the District places certain restrictions on the City’s right to dissolve the District. If the District is dissolved,the City must assume the District's assets and obligations (including the Bonds) and abolish the District within 90 daysof the date of dissolution. Dissolution of the District by the City is a policy-making matter within the discretion of theMayor and City Council of the City; therefore, the District makes no representation that the City will ever dissolve theDistrict and assume its debt. Moreover, no representation is made concerning the ability of the City of Pearland to makedebt service payments should dissolution occur.

Consolidation

The District has the legal authority to consolidate with other districts and, in connection therewith, to provide for theconsolidation of its assets (such as cash and any portion of the System not conveyed to the City), and liabilities (suchas the Bonds), with the assets and liabilities of the district or districts with which it is consolidating. Although noconsolidation is presently contemplated by the District, no representation is made concerning the likelihood ofconsolidation in the future.

Registered Owners' Remedies

Pursuant to Texas law, the Bond Resolution provides that, in the event the District defaults in the payment of theprincipal of or interest on any of the Bonds when due, fails to make payments required by the Bond Resolution into theDebt Service Fund, or defaults in the observance or performance of any of the other covenants, conditions or obligationsset forth in the Bond Resolution, any Registered Owner shall be entitled to seek a writ of mandamus from a court ofcompetent jurisdiction compelling and requiring the District to make such payments or to observe and perform suchcovenants, obligations or conditions. Such right is in addition to other rights the Registered Owners may be providedby the laws of the State of Texas.

In the event of default in the payment of principal of or interest on the Bonds, the Registered Owners may seek a writof mandamus requiring the District to levy adequate taxes to make such payments. Except for the remedy of mandamus,the Bond Resolution does not specifically provide for remedies to a Registered Owner in the event of a District default,nor does it provide for the appointment of a trustee to protect and enforce the interests of the Registered Owners. Thereis no acceleration of maturity of the Bonds in the event of default and, consequently, the remedy of mandamus may haveto be relied upon from year to year. Even if the Registered Owners could obtain a judgment against the District, suchjudgment cannot be enforced by direct levy and execution against the District's property. Further, the Registered Ownerscannot themselves foreclose on the property of the District or sell property within the District in order to pay the principalof or interest on the Bonds. Statutory language authorizing local governments such as the District to sue and be sueddoes not waive the local government’s sovereign immunity from suits for money damages so that in the absence ofwaivers of such immunity by the Texas Legislature, a default by the District in its covenant in the Bond Resolution maynot be reduced to a judgment for money damages. The enforceability of the rights and remedies of the RegisteredOwners may be further limited by a State of Texas statute reasonably required to attain an important public purpose orby laws relating to bankruptcy, reorganization or other similar laws of general application affecting the rights of creditorsof political subdivisions such as the District. For example, a Chapter 9 bankruptcy proceeding by the District could delayor eliminate payment of principal or interest to the Registered Owners. See “Bankruptcy Limitation to RegisteredOwners' Rights” below.

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Bankruptcy Limitation to Registered Owners' Rights

The enforceability of the rights and remedies of the Registered Owners may be limited by laws relating to bankruptcy,reorganization or other similar laws of general application affecting the rights of creditors of political subdivisions suchas the District. Subject to the requirements of Texas law, the District may voluntarily proceed under Chapter 9 of theFederal Bankruptcy Code, 11 U.S.C. 901-946, if the District: (1) is generally authorized to file for federal bankruptcyprotection by State law; (2) is insolvent or unable to meet its debts as they mature; (3) desires to effect a plan to adjustsuch debts; and (4) has either obtained the agreement of or negotiated in good faith with its creditors or is unable tonegotiate with its creditors because negotiation is impracticable. Under Texas law, a municipal utility district such asthe District must obtain the approval of the TCEQ prior to filing for bankruptcy. The TCEQ must investigate the financialcondition of the District and will authorize the District to proceed only if the TCEQ determines that the District has fullyexercised its rights and powers under Texas law and remains unable to meet its debts and other obligations as theymature.

If the District decides in the future to proceed voluntarily under the Federal Bankruptcy Code, the District would developand file a plan for the adjustment of its debts and the Bankruptcy Court would confirm the District's plan if: (1) the plancomplies with the applicable provisions of the Federal Bankruptcy Code; (2) all payments to be made in connection withthe plan are fully disclosed and reasonable; (3) the District is not prohibited by law from taking any action necessary tocarry out the plan; (4) administrative expenses are paid in full; and (5) the plan is in the best interests of creditors andis feasible. If such a plan were confirmed by the bankruptcy court, it could, among other things, affect a RegisteredOwner by reducing or eliminating the amount of indebtedness, deferring or rearranging the debt service schedule,reducing or eliminating the interest rate, modifying or abrogating collateral or security arrangements, substituting (inwhole or in part) other securities, and otherwise compromising and modifying the rights and remedies of such RegisteredOwner's claim against the District.

The District may not be placed into bankruptcy involuntarily.

Legal Investment and Eligibility to Secure Public Funds in Texas

The following is quoted from Section 49.186 of the Texas Water Code, and is applicable to the District:

“(a) All bonds, notes, and other obligations issued by a district shall be legal and authorized investmentsfor all banks, trust companies, building and loan associations, savings and loan associations, insurance companies of allkinds and types, fiduciaries, and trustees, and for all interest and sinking funds and other public funds of the state, andall agencies, subdivisions, and instrumentalities of the state, including all counties, cities, towns, villages, school districts,and all other kinds and types of districts, public agencies, and bodies politic.

“(b) A district's bonds, notes, and other obligations are eligible and lawful security for all deposits of publicfunds of the state, and all agencies, subdivisions, and instrumentalities of the state, including all counties, cities, towns,villages, school districts, and all other kinds and types of districts, public agencies, and bodies politic, to the extent ofthe market value of the bonds, notes, and other obligations when accompanied by any unmatured interest couponsattached to them.”

The Public Funds Collateral Act (Chapter 2257, Texas Government Code) also provides that bonds of the District(including the Bonds) are eligible as collateral for public funds.

No representation is made that the Bonds will be suitable for or acceptable to financial or public entities for investmentor collateral purposes. No representation is made concerning other laws, rules, regulations or investment criteria whichapply to or which might be utilized by any of such persons or entities to limit the acceptability or suitability of the Bondsfor any of the foregoing purposes. Prospective purchasers are urged to carefully evaluate the investment quality of theBonds as to the suitability or acceptability of the Bonds for investment or collateral purposes.

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Defeasance

The Bond Resolution provides that the District may discharge its obligations to the Registered Owners of any or all ofthe Bonds to pay principal, interest and redemption price thereon in any manner permitted by law. Under current Texaslaw, such discharge may be accomplished either (i) by depositing with the Comptroller of Public Accounts of the Stateof Texas a sum of money equal to the principal of, premium, if any, and all interest to accrue on the Bonds to maturityor redemption or (ii) by depositing with any place of payment (paying agent) of the Bonds or other obligations of theDistrict payable from revenues or from ad valorem taxes or both, or with a commercial bank or trust company designatedin the proceedings authorizing such discharge, amounts sufficient to provide for the payment and/or redemption of theBonds; provided that such deposits may be invested and reinvested only in (a) direct non-callable obligations of theUnited States of America, including obligations that are unconditionally guaranteed by the United States of America,(b) non-callable obligations of an agency or instrumentality of the United States, including obligations that areunconditionally guaranteed or insured by the agency or instrumentality and that, on the date the governing body of theDistrict adopts or approves the proceedings authorizing the issuance of refunding bonds, are rated as to investmentquality by a nationally recognized investment rating firm not less than AAA or its equivalent, and (c) non-callableobligations of a state or an agency or a county, municipality, or other political subdivision of a state that have beenrefunded and that, on the date the governing body of the District adopts or approves the proceedings authorizing theissuance of refunding bonds, are rated as to investment quality by a nationally recognized investment rating firm not lessthan AAA or its equivalent. The foregoing obligations may be in book entry form and shall mature and/or bear interestpayable at such times and in such amounts as will be sufficient to provide for the scheduled payment and/or redemptionof the Bonds. If any of such Bonds are to be redeemed prior to their respective dates of maturity, provision must havebeen made for giving notice of redemption as provided in the Bond Resolution.

Upon such deposit as described above, such Bonds shall no longer be regarded as outstanding or unpaid and thereafterthe District will have no further responsibility with respect to amounts available to such paying agent (or other financialinstitution permitted by applicable law) for the payment of such defeased bonds, including any insufficiency thereincaused by the failure of such paying agent (or other financial institution permitted by applicable law) to receive paymentwhen due on the defeasance securities. After firm banking and financial arrangements for the discharge and finalpayment or redemption of the Bonds have been made as described above, all rights of the District to initiate proceedingsto call the Bonds for redemption or take any other action amending the terms of the Bonds are extinguished; provided,however, that the right to call the Bonds for redemption is not extinguished if the District: (i) in the proceedingsproviding for the firm banking and financial arrangements, expressly reserves the right to call the Bonds for redemption;(ii) gives notice of the reservation of that right to the owners of the Bonds immediately following the making of the firmbanking and financial arrangements; and (iii) directs that notice of the reservation be included in any redemption noticesthat it authorizes.

There is no assurance that the current law will not be changed in the future in a manner which would permit investmentsother than those described above to be made with amounts deposited to defease the Bonds. Because the Bond Resolutiondoes not contractually limit such investments, Registered Owners may be deemed to have consented to defeasance withsuch other investments, notwithstanding the fact that such investments may not be of the same investment quality ofthose currently permitted under Texas law.

Use and Distribution of Bond Proceeds

Proceeds of the sale of the Bonds will be used by the District to (i) finance the District’s cost of (a) the remaining portionof clearing and grubbing for Riverstone Ranch at Clear Creek Lakes C through F and Sections 5 through 7; (b) forcemain serving Riverstone Ranch at Clear Creek; (c) Lake C and portions of Lake D and F serving Riverstone Ranch atClear Creek, Section 5; (d) lift station and force main serving Massey Lakes Estates; (e) a portion of water distribution,wastewater collection, storm drainage and detention facilities to serve Massey Lakes Estates; (f) the remaining portionof water distribution, wastewater collection, storm drainage and detention facilities for Baker’s Landing, Section 1A (g)the remaining portion of underground water distribution, wastewater collection, storm drainage and detention facilitiesserving Afton Lake; (h) a portion of water distribution, wastewater collection and storm drainage facilities to serveRiverstone Ranch at Clear Creek, Section 5; (i) underground water distribution, wastewater collection and storm drainage

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facilities to serve Baker’s Landing Sections 1B and 2A; (j) Impact Fees paid to the City of Pearland for 248 connectionsassociated with the City's provision of water supply and wastewater treatment to the District (the “Impact Fees”); (k)engineering, testing and stormwater pollution prevention plan fees; (l) Riverstone Ranch Phase 3 Drainage Plan; (m) landacquisition costs for Riverstone Ranch Lake C detention pond; and Massey Lakes Estates lift station and detention pond;and (n) Afton Lake pump station fence and inspection fee; (ii) pay interest on advances made on behalf of the District;and (iii) pay for administrative and issuance costs, legal fees, fiscal agent's fees, a fee to the TCEQ, engineering fees,and certain financing costs related to the issuance of the BAN (defined below) and the Bonds. The District will alsoretire its $6,755,000 Bond Anticipation Note, Series 2018 (the “BAN”), including the payment of principal of andinterest thereon, with a portion of the proceeds of the sale of the Bonds. The District utilized the proceeds of the BANto interim finance certain of the aforementioned facilities that it is financing with the proceeds of the sale of the Bonds.

Construction Costs District Share

A. Developer Contribution Items (a)

1. Clearing and Grubbing for Riverstone Ranch atClear Creek - Lakes C through F and Sections 5 - 7 $ 311,225

2. Force Main Riverstone Ranch at Clear Creek 127,357

3. Lake “C,” Portions of Lakes “D” and “F” ServingRiverstone Ranch at Clear Creek, Section 5 886,094

4. Riverstone Ranch at Clear Creek, Section 5Water, Wastewater and Drainage 1,785,000

5. Lift Station and Force Main for Massey Lakes Estates 521,163

6. Massey Lakes EstatesWater, Wastewater and Drainage 1,578,541

7. Baker’s Landing, Section 1AWater, Wastewater and Drainage 170,386

8. Baker’s Landing, Section 1BWater, Wastewater and Drainage 335,729

9. Baker’s Landing, Section 2AWater, Wastewater and Drainage 781,721

10. Afton LakeWater, Wastewater and Drainage 21,063

11. Engineering Force Main Riverstone Ranch at Clear Creek 22,675

12. Engineering Lakes “C,” Portion of Lakes “D” and “F” Serving Riverstone Ranch at Clear Creek 165,835

13. Engineering Riverstone Ranch at Clear Creek, Section 5Water, Wastewater and Drainage 297,517

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14. Engineering Lift Station and Force Main ServingMassey Lakes Estates 41,851

15. Engineering Massey Lakes EstatesWater, Wastewater and Drainage 202,092

16. Engineering Baker’s Landing, Section 1BWater, Wastewater and Drainage 71,469

17. Engineering Baker’s Landing, Section 2AWater, Wastewater and Drainage 126,458

18. Testing Force Main Riverstone Ranch at Clear Creek 1,534

19. Testing Lake “C,” Portion of Lakes “D” and “F” ServingRiverstone Ranch at Clear Creek 7,773

20. Testing Riverstone Ranch at Clear Creek, Section 5Water, Wastewater and Drainage 25,981

21. Testing Lift Station and Force Main ServingMassey Lakes Estates 4,780

22. Testing Massey Lakes EstatesWater, Wastewater and Drainage 20,060

23. Testing Baker’s Landing, Section 1BWater, Wastewater and Drainage 11,137

24. Testing Baker’s Landing, Section 2AWater, Wastewater and Drainage 5,495

25. Stormwater Pollution Prevention Plan - Force MainRiverstone Ranch at Clear Creek 1,385

26. Stormwater Pollution Prevention Plan - Lake “C,” Portionof Lakes “D” and “F” Serving Riverstone Ranch atClear Creek 5,758

27. Stormwater Pollution Prevention Plan -Riverstone Ranch at Clear Creek, Section 5Water, Wastewater and Drainage 69,455

28. Stormwater Pollution Prevention Plan -Massey Lakes EstatesWater, Wastewater and Drainage 45,726

29. Stormwater Pollution Prevention Plan -Baker’s Landing, Section 1BWater, Wastewater and Drainage 41,279

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30. Stormwater Pollution Prevention Plan -Baker’s Landing, Section 2AWater, Wastewater and Drainage 27,652

Total Developer Contribution Items $7,714,191

B. District Items

1. Pearland Impact Fees $ 1,209,000

2. Riverstone Ranch Lake “C” Detention PondLand Acquisition Cost 162,845

3. Massey Lakes Estates Lift StationLand Acquisition Cost 1,959

4. Massey Lakes Estates Detention PondLand Acquisition Cost 398,597

5. Riverstone Ranch Phase 3 Drainage Plan 19,110

6. Afton Lake Pump Station Fence 2,200

7. Afton Lake Pearland Inspection Fee 8,608

Total District Contribution Items $ 1,802,319

TOTAL CONSTRUCTION COSTS $ 9,516,510

Non-Construction Costs

1. Legal Fees $ 280,0002. Fiscal Agent Fees 240,0003. Interests Costs

a. Developer Interest (b) 1,047,042b. Bond Anticipation Note Interest 253,313

4. Bond Discount 360,0005. Bond Issuance Expenses 36,7256. Bond Application Report Costs 55,0007. Bond Application Note Issuance Expenses 171,9108. Attorney General’s Fee 9,5009. TCEQ Bond Issuance Fee 30,000

10. Contingency (c) 0

TOTAL NON-CONSTRUCTION COSTS $ 2,483,490

TOTAL BOND ISSUE REQUIREMENT $12,000,000

________________________________(a) The rules of the TCEQ require in certain instances that developers within a district subject to the jurisdiction of

the TCEQ contribute to the construction program of such district an amount of money equal to thirty percent(30%) of the construction costs of certain water, sewer and drainage facilities in that district. The Districtrequested an exemption from such developer participation requirement with respect to certain facilities beingfinanced with portions of the proceeds of the sale of the Bonds on the basis of one of the criteria under TCEQrules for such exemption. The TCEQ granted the request for such exemption in its Order authorizing the Districtto issue the Bonds.

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(b) Represents interest owed on advances that have been made on the District's behalf. The actual amount of interestowed will be calculated at the lesser of (i) the net effective interest rate borne by the Bonds or (ii) the interest rateat which the developer that has made such advances has borrowed funds.

(c) The TCEQ directed that any surplus funds resulting from the sale of bonds at an amount lower than proposed shallbe shown as a contingency line item. The use of these funds is subject to approval by the TCEQ.

In the instance that approved estimated amounts exceed actual costs, the difference comprises a surplus which may beexpended for uses approved by the TCEQ. In the instance that actual costs exceed previously approved estimatedamounts and contingencies, additional TCEQ approval and the issuance of additional bonds may be required. TheEngineer has advised the District that the proceeds of the sale of the Bonds should be sufficient to reimburse theDevelopers for the costs of the above-described facilities. However, the District cannot and does not guarantee thesufficiency of such funds for such purposes.

INVESTMENT CONSIDERATIONS

General

The Bonds, which are obligations solely of the District and not of the State of Texas, Brazoria County, Texas, HarrisCounty, Texas, the City, or any political subdivision or agency other than the District, are secured by the proceeds ofan annual ad valorem tax, without legal limit as to rate or amount, levied upon all taxable property within the District. The ultimate security for payment of the principal of and interest on the Bonds depends upon the District's ability tocollect from the property owners within the District taxes levied against all taxable property located within the District,or, in the event taxes are not collected and foreclosure proceedings are instituted by the District, upon the value of thetaxable property with respect to taxes levied by the District and by other taxing authorities. The District makes norepresentation that over the life of the Bonds the taxable property within the District will maintain a value sufficient tojustify continued payment of taxes by property owners or that there will be a market for any property if the Districtforecloses on property to enforce its tax lien. The potential increase in taxable valuation of District property is directlyrelated to the economics of the residential housing industry, not only due to general economic conditions, but also dueto the particular factors discussed below. Further, the collection of delinquent taxes owed the District, and theenforcement by a Registered Owner of the District's obligation to collect sufficient taxes may be costly and lengthyprocesses. See “THE BONDS - Source of Payment” and - “Registered Owners' Remedies,” and “Tax CollectionLimitations” and “Registered Owners' Remedies and Bankruptcy” below.

Factors Affecting Taxable Values and Tax Payments

Economic Factors: The rate of development of the District is directly related to the vitality of the residentialhousing industry. New residential housing construction can be significantly affected by factors such as interestrates, construction costs, credit availability, energy availability and cost, and consumer demand. Decreasedlevels of home construction activity would restrict the growth of property values in the District. Furtherdeclines in the price of oil could adversely affect job stability, wages and salaries, thereby negatively affectingthe demand for housing and the value of existing homes. Recent changes in federal tax law limiting deductionsfor ad valorem taxes may adversely affect the demand for housing and the prices thereof. Were the District toexperience a significant number of residential foreclosures, the value of all homes within the District could beadversely affected. Although, as is described in this Official Statement under the captions “DEVELOPMENTAND HOME CONSTRUCTION,” “DEVELOPERS” and “BUILDERS” (i) development of 1,145 single-familyresidential lots is complete within the District, (ii) 161 additional single-family residential lots and 48 additionaltownhome lots are currently under construction within the District; and (iii) as of April 15, 2019, the Districtcontained 937 single-family homes (including 117 homes under construction), the District cannot predict thepace or magnitude of any future development or home construction in the District other than that which hasoccurred to date.

National Economy: There has been a downturn in new housing construction in the United States, resultingin a decline in national housing market values. Although, as is described in this Official Statement under thecaptions “DEVELOPMENT AND HOME CONSTRUCTION,” “DEVELOPERS” and “BUILDERS” (i) the

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development of 1,145 single-family residential lots is complete within the District, (ii) 161 additional single-family residential lots and 48 additional townhome lots are currently under construction within the District; and(iii) as of April 15, 2019, the District contained 937 single-family homes (including 117 homes underconstruction), the District cannot predict the pace or magnitude of any future development or home constructionin the District other than that which has occurred to date. The District cannot predict what impact, if any, a downturn in the local housing and financial markets or a continued downturn in the national housing andfinancial markets may have on the Houston market generally and the District specifically, or the maintenanceof assessed values in the District.

Credit Markets and Liquidity in the Financial Markets: Interest rates and the availability of mortgage anddevelopment funding have a direct impact on development and homebuilding activity, particularly short-terminterest rates at which developers are able to obtain financing for development costs and at which homebuildersare able to finance the construction of new homes for sale. Interest rate levels may affect the ability of adeveloper with undeveloped property to undertake and complete development activities within the District andof homebuilders to initiate the construction of new homes for sale. Because of the numerous and changingfactors affecting the availability of funds, particularly liquidity in the national credit markets, the District isunable to assess the future availability of such funds for continued development and/or home constructionwithin the District. In addition, since the District is located approximately 15 miles from the central downtownbusiness district of the City of Houston, the success of development within the District and growth of Districttaxable property values are, to a great extent, a function of the Houston metropolitan and regional economiesand national credit and financial markets. A downturn in the economic conditions of Houston and furtherdecline in real estate and financial markets in the United States could adversely affect development andhomebuilding plans in the District and restrain the growth of the District’s property tax base.

Developer/Builder/Landowner Obligation to the District: The primary developer of land within the Districtis Meritage Homes of Texas, L.L.C. (“ Meritage Homes”). Meritage Homes is currently the District’s largesttaxpayer. Meritage Homes owns property located within the District, the 2018 Assessed Valuation of whichis $8,093,534, or approximately 4.09% of the District’s 2018 tax roll. D.R. Horton Texas, Ltd. (“D.R. Horton”)is currently the District’s second largest taxpayer. D.R. Horton owns property located within the District, the2018 Assessed Valuation of which is $3,671,150, or approximately 1.84% of the District’s 2018 tax roll. Noother taxpayer owns property located within the District the 2018 Assessed Valuation of which exceeds 1.73%of the District’s tax roll. See “DEVELOPMENT AND HOME CONSTRUCTION,” “DEVELOPERS,”“BUILDERS” and “TAX DATA - Principal 2018 Taxpayers.” The ability of Meritage Homes, D.R. Horton,or any other principal taxpayer within the District to make full and timely payments of taxes levied against itsproperty by the District and similar taxing authorities will directly affect the District's ability to meet its debtservice obligations. There is no commitment by or legal requirement of Meritage Homes, D.R. Horton or anyother developer of land located within the District or any other landowner to the District to proceed at anyparticular rate or according to any specified plan with the development of land in the District, or of any of theBuilders or any other home building company to proceed at any particular pace with the construction of homesin the District, and there is no restriction on any landowner's right to sell its land. Therefore, the District canmake no representation about the probability of future development, if any, or the rate of home constructionactivity in the District. See “FUTURE DEVELOPMENT.”

Maximum Impact on District Tax Rates

The value of the land and improvements currently located within the District will be a major determinant of the abilityof the District to collect, and the willingness of District property owners to pay, ad valorem taxes levied by the District. The District's 2018 Assessed Valuation is $199,397,498. The Estimated Valuation at March 1, 2019, of property locatedwithin the District, supplied by the Harris County Appraisal District and the Brazoria County Appraisal District(collectively, the “Appraisal Districts”) is $300,112,565. After issuance of the Bonds, the Maximum Annual DebtService Requirement on the Bonds and the Outstanding Bonds will be $2,253,500 (2044) and the Average Annual DebtService Requirements on the Bonds and the Outstanding Bonds will be $2,167,604 (2020 through 2044, inclusive). Assuming no increase to nor decrease from the Estimated Valuation at March 1, 2019, the issuance of no bonds by theDistrict in addition to the Bonds and the Prior Bonds, and the receipt of a City Tax Rebate from the City equal to$382,050, the approximate amount anticipated to be received by the District from the City in 2019, based upon the

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Estimated Valuation at March 1, 2019 (see “TAX DATA - Tax Rate Calculations”), tax rates of $0.66 and $0.63 per$100 of Assessed Valuation at a 95% tax collection rate would be necessary to pay the Maximum Annual Debt ServiceRequirement and the Average Annual Debt Service Requirements, respectively, on the Bonds and the OutstandingBonds.

The District levied a debt service tax for 2018 of $0.67 per $100 of Assessed Valuation, plus a maintenance tax of $0.18per $100 of Assessed Valuation. As the above calculations indicate, the 2018 debt service rate will be sufficient to paydebt service on the Bonds and the Outstanding Bonds given taxable values in the District at the level of the EstimatedValuation at March 1, 2019, assuming a tax collection rate of 95%, no use of funds on hand, the receipt of a City TaxRebate from the City equal to $382,050, the approximate amount anticipated to be received by the District from the Cityin 2019, and the issuance of no additional bonds by the District. As is illustrated in this Official Statement under thecaption “TAX DATA - Historical Values and Tax Collection History,” as of March 31, 2019, the District has collectedan average of 99.96% of its tax for the period 2013 through 2017, and its 2018 tax levy was 94.92% collected as of suchdate. Moreover, the District's Debt Service Fund balance is $1,644,204 as of April 18, 2019. Although neither Texaslaw nor the Bond Resolution requires that any specific amount be retained in the Debt Service Fund at any time, theDistrict has in the past applied earnings from the investment of monies held in the Debt Service Fund to meet the debtservice requirements of the Prior Bonds. See “APPENDIX B - FINANCIAL REPORT.” Therefore, the Districtanticipates that it will be able to meet the debt service requirements on the Bonds and the Outstanding Bonds withoutincreasing the tax rate for debt service above the debt service rate which the District levied for 2018 - $0.67 per $100of Assessed Valuation. However, the District can make no representation that the taxable property values in the Districtwill increase in the future or will maintain a value sufficient to support the aforementioned tax rate or to justify continuedpayment of taxes by property owners. See “TAXING PROCEDURES” and “INVESTMENT CONSIDERATIONS -Factors Affecting Taxable Values and Tax Payments.” Increases in the District's tax rate to higher levels than the total$0.85 per $100 of Assessed Valuation rate which the District levied for 2018 may have an adverse impact upon futuredevelopment of the District, the ability of the District to collect, and the willingness of owners of property located withinthe District to pay, ad valorem taxes levied by the District.

As is enumerated in this Official Statement under the caption “TAX DATA - Estimated Overlapping Taxes,” theaggregate of the 2018 tax levies of all overlapping taxing units which levy taxes upon property located in the District,plus the District's 2018 rate, is $3.548672 per $100 of Assessed Valuation, as to that portion of the District that lieswithin Brazoria County, and $3.853657 per $100 of Assessed Valuation as to that portion of the District that lies withinHarris County. Such aggregate rates are higher than the aggregate tax levies of many municipal utility districts in theHouston metropolitan area, including the area of the District, but are within the range of the aggregate levies of manymunicipal utility districts in the Houston metropolitan area and the area of the District which are in stages of developmentcomparable with the District.

Assuming the receipt of no City Tax Rebate, tax rates of $0.80 and $0.77 per $100 of Assessed Valuation would benecessary to pay the Maximum Annual Debt Service Requirement and the Average Annual Debt Service Requirements,respectively, of the Bonds and the Outstanding Bonds, assuming a tax collection rate of 95%, no use of funds on hand,the issuance of no additional bonds by the District, and that no growth occurs in the District beyond the level of theEstimated Valuation at March 1, 2019. See “TAXING PROCEDURES”

Tax Collection Limitations

The District's ability to make debt service payments may be adversely affected by its inability to collect ad valorem taxes. Under Texas law, the levy of ad valorem taxes by the District constitutes a lien in favor of the District on a parity withthe liens of all other taxing authorities on the property against which taxes are levied, and such lien may be enforced byjudicial foreclosure. The District's ability to collect ad valorem taxes through such foreclosure may be impaired by (a)cumbersome, time consuming and expensive collection procedures, (b) a bankruptcy court's stay of tax collectionprocedures against a taxpayer, (c) market conditions affecting the marketability of taxable property within the Districtand limitation of the proceeds from a foreclosure sale of such property, (d) adverse effects on the proceeds of aforeclosure sale resulting from a taxpayer's limited right to redeem its foreclosed property as set forth below, or (e)insufficient foreclosure bids to satisfy the tax liens of all taxing authorities which have parity liens on the property. While the District has a lien on taxable property within the District for taxes levied against such property, such lien can

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be foreclosed only in a judicial proceeding. Moreover, the value of the property to be sold for delinquent taxes andthereby the potential sales proceeds available to pay debt service on the Bonds, may be limited by among other factors,the existence of other tax liens on the property, by the current aggregate tax rate being levied against the property, orby the taxpayers' right to redeem residential or agricultural use property within two (2) years of foreclosure and all otherproperty within six (6) months of foreclosure. See “TAXING PROCEDURES.”

Registered Owners' Remedies and Bankruptcy

In the event of default in the payment of principal of or interest on the Bonds, the Registered Owners have a right to seeka writ of mandamus requiring the District to levy adequate taxes each year to make such payments. Except formandamus, the Bond Resolution does not provide for remedies to protect and enforce the interests of the RegisteredOwners. There is no acceleration of maturity of the Bonds in the event of default and, consequently, the remedy ofmandamus may have to be relied upon from year to year. Statutory language authorizing local governments such as theDistrict to sue and be sued does not waive the local government’s sovereign immunity from suits for money damagesso that in the absence of waivers of such immunity by the Texas Legislature, a default by the District in its covenantsin the Bond Resolution may not be reduced to a judgment for money damages. Even if the Registered Owners couldobtain a judgment against the District, such judgment could not be enforced by a direct levy and execution against theDistrict's property. Further, the Registered Owners cannot themselves foreclose on property within the District or sellproperty within the District in order to pay the principal of and interest on the Bonds. Since there is no trust indentureor trustee, the Registered Owners would have to initiate and finance the legal process to enforce their remedies. Theenforceability of the rights and remedies of the Registered Owners may be further limited by a State of Texas statutereasonably required to attain an important public purpose or by laws relating to bankruptcy, reorganization or othersimilar laws of general application affecting the rights of creditors of political subdivisions such as the District. In thisregard, should the District file a petition for protection from creditors under federal bankruptcy laws, a suit seeking theremedy of mandamus would be automatically stayed and could not be pursued unless authorized by a federal bankruptcyjudge. See “THE BONDS - Registered Owners' Remedies.”

Future Debt

The District reserves in the Bond Resolution the right to issue the remaining $101,400,000 in unlimited tax bondsauthorized but unissued for the purpose of acquiring or constructing waterworks, wastewater and drainage facilities andrefunding of same, the $12,200,000 for parks and recreational facilities and refunding of same, and such additional bondsas may hereafter be approved by the voters of the District. All of the remaining bonds described above which haveheretofore been authorized by the voters of the District may be issued by the District from time to time as needed. Theissuance of such $101,400,000 in bonds for waterworks, wastewater and drainage facilities and $12,200,000 for parksand recreational facilities is subject to TCEQ approval. In addition to the components of the System and Impact Feesthat the District has financed with portions of the proceeds of the sale of the Prior Bonds, and is financing with portionsof the proceeds of the sale of the Bonds (see “THE BONDS - Use and Distribution of Bond Proceeds” and “THESYSTEM”), the District expects to finance the acquisition or construction of additional components of the System andImpact Fees with portions of the proceeds of the sale of bonds, if any, in the future, including approximately $9,000,000of unlimited tax bonds that the District expects to issue in approximately the second quarter of 2020.

The District's Engineer currently estimates that the aforementioned $101,400,000 authorized bonds which remainunissued will be adequate to finance the construction of all waterworks, wastewater, and drainage facilities and ImpactFees paid to the City related to the provision of water supply and wastewater treatment to the District by the City toprovide service to all of the currently undeveloped portions of the District. See “Maximum Impact on District TaxRates” above, “THE BONDS,” “DEVELOPMENT AND HOME CONSTRUCTION,” “FUTURE DEVELOPMENT,” and “THE SYSTEM.” If additional bonds are issued in the future and property values have not increasedproportionately, such issuance might increase gross debt/property valuation ratios and thereby adversely affect theinvestment quality or security of the Bonds. See “THE BONDS - Issuance of Additional Debt.”

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The Effect of the Financial Institutions Act of 1989 on Tax Collections of the District

The Financial Institutions Reform, Recovery and Enforcement Act of 1989 (“FIRREA”) contains certain provisionswhich affect the time for protesting property valuations, the fixing of tax liens, and the collection of penalties and intereston delinquent taxes on real property owned by the Federal Deposit Insurance Corporation (“FDIC”) when the FDIC isacting as the conservator or receiver of an insolvent financial institution.

Under FIRREA, real property held by the FDIC is still subject to ad valorem taxation, but such act states (i) that no realproperty of the FDIC shall be subject to foreclosure or sale without the consent of the FDIC and no involuntary liensshall attach to such property, (ii) the FDIC shall not be liable for any penalties, interest, or fines, including those arisingfrom the failure to pay any real or personal property tax when due, and (iii) notwithstanding failure of a person tochallenge an appraisal in accordance with state law, such value shall be determined as of the period for which such taxis imposed.

There has been no definitive judicial determination of the validity of these provisions of FIRREA or how they are to beconstrued and reconciled with respect to conflicting state laws. However, certain federal court decisions have held thatthe FDIC is not liable for statutory penalties and interest authorized by state property tax law, and that, although a lienfor taxes may exist against real property, such lien may not be foreclosed without the consent of the FDIC, and no liensfor penalties, fines, interest, attorney's fees, costs of abstract, and research fees exist against the real property for thefailure of the FDIC or a prior property owner to pay ad valorem taxes when due. It is also not known whether the FDICwill attempt to claim the FIRREA exemptions as to the time for contesting valuations and tax assessments made priorto and after the enactment of FIRREA. Accordingly, to the extent the FIRREA provisions are valid and applicable toany property in the District and to the extent that the FDIC attempts to enforce the same, these provisions may affect thetimeliness of collection of taxes on property, if any, owned by the FDIC in the District and may prevent the collectionof penalties and interest on such taxes.

Competitive Nature of Houston Residential Housing Market

The housing industry in the Houston metropolitan area, including the City of Pearland, is very competitive, and theDistrict can give no assurance that the building programs which are planned by the Builders or any future homebuilder(s) will be continued or completed. The respective competitive positions of the Developers and the Builders andany other developer(s) or home builder(s) which might attempt future development or home building projects in theDistrict in the sale of developed lots or in the construction and sale of single-family residential units are affected by mostof the factors discussed in this section. Such competitive positions are directly related to tax revenues received by theDistrict and the growth and maintenance of taxable values in the District.

Continuing Compliance with Certain Covenants

The Bond Resolution contains covenants by the District intended to preserve the exclusion from gross income of intereston the Bonds. Failure by the District to comply with such covenants on a continuous basis prior to maturity of the Bondscould result in interest on the Bonds becoming taxable retroactively to the date of original issuance. See “TAXMATTERS.”

Marketability

The District has no understanding (other than the initial reoffering yields) with the Underwriter regarding the reofferingyields or prices of the Bonds and has no control over the trading of the Bonds in the secondary market. There is noassurance that a secondary market will be made for the Bonds. If there is a secondary market, the difference betweenthe bid and asked price of the Bonds may be greater than the bid and asked spread of other bonds generally bought, soldor traded in the secondary market. See “SALE AND DISTRIBUTION OF THE BONDS.”

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Environmental Regulations

Wastewater treatment, water supply, storm sewer facilities and construction activities within the District are subject tocomplex environmental laws and regulations at the federal, state and local levels that may require or prohibit certainactivities that affect the environment, such as:

• Requiring permits for construction and operation of water wells, wastewater treatment and other facilities;• Restricting the manner in which wastes are treated and released into the air, water and soils;• Restricting or regulating the use of wetlands or other properties; or• Requiring remedial action to prevent or mitigate pollution.

Sanctions against a municipal utility district or other type of special purpose district for failure to comply withenvironmental laws and regulations may include a variety of civil and criminal enforcement measures, includingassessment of monetary penalties, imposition of remedial requirements and issuance of injunctions to ensure futurecompliance. Environmental laws and compliance with environmental laws and regulations can increase the cost ofplanning, designing, constructing and operating water production and wastewater treatment facilities. Environmentallaws can also inhibit growth and development within the District. Further, changes in regulations occur frequently, andany changes that result in more stringent and costly requirements could materially impact the District.

Air Quality Issues

Air quality control measures required by the United States Environmental Protection Agency (the "EPA") and the TexasCommission on Environmental Quality (the "TCEQ") may impact new industrial, commercial and residentialdevelopment in the Houston area. Under the Clean Air Act ("CAA") Amendments of 1990, the eight-countyHouston-Galveston-Brazoria area ("HGB Area")-Harris, Galveston, Brazoria, Chambers, Fort Bend, Waller,Montgomery and Liberty Counties-has been designated a nonattainment area under three separate federal ozonestandards: the one-hour (124 parts per billion ("ppb")) and eight-hour (84 ppb) standards promulgated by the EPA in1997 (the "1997 Ozone Standards"); the tighter, eight-hour ozone standard of 75 ppb promulgated by the EPA in 2008(the "2008 Ozone Standard"), and the EPA's most-recent promulgation of an even lower, 70 ppb eight-hour ozonestandard in 2015 (the "2015 Ozone Standard"). While the State of Texas has been able to demonstrate steady progressand improvements in air quality in the HGB Area, the HGB Area remains subject to CAA nonattainment requirements. The HGB Area is currently designated as a severe ozone nonattainment area under the 1997 Ozone Standards. Whilethe EPA has revoked the 1997 Ozone Standards, the EPA historically has not formally redesignated nonattainment areasfor a revoked standard. As a result, the HGB Area remained subject to continuing severe nonattainment area"anti-backsliding" requirements, despite the fact that HGB Area air quality has been attaining the 1997 Ozone Standardssince 2014. In late 2015, the EPA approved the TCEQ's "redesignation substitute" for the HGB Area under the revoked1997 Ozone Standards, leaving the HGB Area subject only to the nonattainment area requirements under the 2008 OzoneStandard (and later, the 2015 Ozone Standard).

In February 2018, the U.S. Court of Appeals for the District of Columbia Circuit issued an opinion in South Coast AirQuality Management District v. EPA, 882 F.3d 1138 (D.C. Cir. 2018) vacating the EPA redesignation substitute rulethat provided the basis for the EPA's decision to eliminate the anti-backsliding requirements that had applied in the HGBArea under the 1997 Ozone Standard. The court has not responded to the EPA's April 2018 request for rehearing of thecase. To address the uncertainty created by the South Coast court's ruling, the TCEQ has developed a formal requestthat the HGB Area be redesignated to attainment under the 1997 Ozone Standards. The TCEQ Commissioners approvedpublication of a proposed HGB Area redesignation request under the 1997 Ozone Standards on September 5, 2018.

The HGB Area is currently designated as a "moderate" nonattainment area under the 2008 Ozone Standard, with anattainment deadline of July 20, 2018. If the EPA ultimately determines that the HGB Area has failed to meet theattainment deadline based on the relevant data, the area is subject to reclassification to a nonattainment classificationthat provides for more stringent controls on emissions from the industrial sector. In addition, the EPA may impose amoratorium on the awarding of federal highway construction grants and other federal grants for certain public worksconstruction projects if it finds that an area fails to demonstrate progress in reducing ozone levels.

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The HGB Area is currently designated as a "marginal" nonattainment area under the 2015 Ozone Standard, with anattainment deadline of August 3, 2021. For purposes of the 2015 Ozone Standard, the HGB Area consists of only sixcounties: Brazoria, Chambers, Fort Bend, Galveston, Harris, and Montgomery Counties.

In order to demonstrate progress toward attainment of the EPA's ozone standards, the TCEQ has established a stateimplementation plan ("SIP") for the HGB Area setting emission control requirements, some of which regulate theinspection and use of automobiles. These types of measures could impact how people travel, what distances people arewilling to travel, where people choose to live and work, and what jobs are available in the HGB Area. These SIPrequirements can negatively impact business due to the additional permitting/regulatory constraints that accompany thisdesignation and because of the community stigma associated with a nonattainment designation. It is possible thatadditional controls will be necessary to allow the HGB Area to reach attainment with the ozone standards by the EPA'sattainment deadlines. These additional controls could have a negative impact on the HGB Area's economic growth anddevelopment.

Water Supply & Discharge Issues

Water supply and discharge regulations that municipal utility districts, including the District, may be required to complywith involve: (1) groundwater well permitting and surface water appropriation; (2) public water supply systems; (3)wastewater discharges from treatment facilities; (4) storm water discharges; and (5) wetlands dredge and fill activities.Each of these is addressed below:

Certain governmental entities regulate groundwater usage in the HGB Area. A municipal utility district or other typeof special purpose district that (i) is located within the boundaries of such an entity that regulates groundwater usage,and (ii) relies on local groundwater as a source of water supply, may be subject to requirements and restrictions on thedrilling of water wells and/or the production of groundwater that could affect both the engineering and economicfeasibility of district water supply projects.

Pursuant to the federal Safe Drinking Water Act ("SDWA") and the EPA's National Primary Drinking Water Regulations("NPDWRs"), which are implemented by the TCEQ's Water Supply Division, a municipal utility district's provision ofwater for human consumption is subject to extensive regulation as a public water system. Municipal utility districts mustgenerally provide treated water that meets the primary and secondary drinking water quality standards adopted by theTCEQ, the applicable disinfectant residual and inactivation standards, and the other regulatory action levels establishedunder the agency's rules. The EPA has established NPDWRs for more than ninety (90) contaminants and has identifiedand listed other contaminants which may require national drinking water regulation in the future.

Texas Pollutant Discharge Elimination System ("TPDES") permits set limits on the type and quantity of discharge, inaccordance with state and federal laws and regulations. The TCEQ reissued the TPDES Construction General Permit(TXR150000), with an effective date of March 5, 2018, which is a general permit authorizing the discharge ofstormwater runoff associated with small and large construction sites and certain nonstormwater discharges into surfacewater in the state. It has a 5-year permit term, and is then subject to renewal. Moreover, the Clean Water Act ("CWA")and Texas Water Code require municipal wastewater treatment plants to meet secondary treatment effluent limitationsand more stringent water quality-based limitations and requirements to comply with the Texas water quality standards.Any water quality-based limitations and requirements with which a municipal utility district must comply may have animpact on the municipal utility district's ability to obtain and maintain compliance with TPDES permits.

The District is subject to the TCEQ's General Permit for Phase II (Small) Municipal Separate Storm Sewer Systems (the"MS4 Permit"), which was issued by the TCEQ on January 24, 2019. The MS4 Permit authorizes the discharge ofstormwater to surface water in the state from small municipal separate storm sewer systems. In order to maintain MS4Permit compliance, the District is partnering with the City of Pearland (the "City"), to participate in the City's programto develop, implement, and maintain the required plan (the "MS4 Permit Plan") as well as to install or implement bestmanagement practices to minimize or eliminate unauthorized pollutants that may otherwise be found in stormwaterrunoff. While the District does not have its own independent MS4 Permit Plan, the District has taken all necessary stepsrequired by the City to be included in the City's MS4 Permit Plan in order to obtain MS4 Permit compliance with the

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TCEQ. If at any time in the future the District were required to maintain independent coverage under the MS4 Permit,it is anticipated that the District could incur substantial additional costs to develop and implement its own programnecessary to comply with the MS4 Permit.

In 2015, the EPA and the United States Army Corps of Engineers ("USACE") promulgated a rule known as the CleanWater Rule ("CWR") aimed at redefining "waters of the United States" over which the EPA and USACE havejurisdiction under the CWA. The CWR significantly expands the scope of the federal government's CWA jurisdictionover intrastate water bodies and wetlands. The CWR could have an adverse impact on municipal utility districts,including the District, particularly with respect to jurisdictional wetland determinations, and could increase the size andscope of activities requiring USACE permits. The CWR has been challenged in various jurisdictions, including theSouthern District of Texas, and the litigation challenging the CWR is still pending.

On February 28, 2017, the President signed an executive order ordering the EPA and USACE to modify or rescind theCWR. In response, the EPA and the USACE subsequently released a proposed rule rescinding the CWR, reinstating theregulatory text that existed prior to the adoption of the CWR and proposing the development of a revised definition of"waters of the United States." In June 2018, the EPA and USACE issued a supplemental notice of proposed rulemakingto the 2017 proposed action to repeal the 2015 definition of "waters of the United States" to clarify that the agencies areproposing to permanently repeal the CWR in its entirety and reinstate language in place before the adoption of the CWRwhile developing a revised definition of "waters of the United States." Meanwhile, in January 2018, the EPA and theUSACE finalized a rule extending the effective date of the CWR until 2020 while the agencies finalize actions to repealand replace the CWR. This rule delaying the effective date of the CWR was challenged in court and, on August 16,2018, the U.S. District Court for the District of South Carolina issued a nationwide injunction rendering the ruleextending the effective date of the CWR void, thereby reinstating the CWR in 26 states, including Texas. However, onSeptember 12, 2018, the U.S. District Court for the Southern District of Texas temporarily enjoined the implementationof the CWR in Texas, Louisiana and Mississippi until the case filed by the States of Texas, Louisiana and Mississippiin 2015 is finally resolved.

On December 11, 2018, the EPA and USACE released the proposed replacement definition of "waters of the UnitedStates." The proposed definition outlines six categories of waters that would be considered "waters of the United States,"including traditional navigable waters, tributaries to those waters, certain ditches, certain lakes and ponds, impoundmentsof jurisdictional waters, and wetlands adjacent to jurisdictional waters. The proposed rule also details what are not"waters of the United States," such as features that only contain water during or in response to rainfall (e.g., ephemeralfeatures); groundwater; many ditches, including most roadside or farm ditches; prior converted cropland; stormwatercontrol features; and waste treatment systems. The agencies took comment on the proposal for 60 days after publicationin the Federal Register, which occurred on February 14, 2019. If finalized, the proposed rule would apply nationwide,replacing the patchwork framework for Clean Water Act jurisdiction that has resulted from litigation challenging theCWR.

Due to the pending rulemaking activity and rule challenge litigation, there is significant uncertainty regarding theultimate scope of "waters of the United States" and the extent of EPA and USACE jurisdiction. Depending on the finaloutcome of such proceedings, operations of municipal utility districts, including the District, could potentially be subjectto additional restrictions and requirements, including permitting requirements.

Changes in Tax Legislation

Certain tax legislation, whether currently proposed or proposed in the future, may directly or indirectly reduce oreliminate the benefit of the exclusion of interest on the Bonds from gross income for federal income tax purposes. Anyproposed legislation, whether or not enacted, may also affect the value and liquidity of the Bonds. Prospectivepurchasers of the Bonds should consult with their own tax advisors with respect to any proposed, pending or futurelegislation.

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Tropical Weather Events; Hurricane Harvey

The greater Houston area, including the District, is subject to occasional severe weather events, including tropical stormsand hurricanes. If the District were to sustain damage to its facilities requiring substantial repair or replacement, or ifsubstantial damage were to occur to taxable property within the District as a result of such a weather event, theinvestment security of the Bonds could be adversely affected.

The greater Houston area has experienced three storms exceeding a 0.2% probability (i.e. "500 year flood" events) since2015. The most recent event was Hurricane Harvey, which made landfall along the Texas Gulf Coast on August 26,2017, and brought historic levels of rainfall during the successive four days.

If a future weather event significantly damaged all or part of the improvements within the District, the assessed valueof property within the District could be substantially reduced, which could result in a decrease in tax revenues and/ornecessitate an increase the District’s tax rate. Further, there can be no assurance that a casualty loss to taxable propertywithin the District will be covered by insurance (or that property owners will even carry flood or other casualtyinsurance), that any insurance company will fulfill its obligation to provide insurance proceeds, or that insuranceproceeds will be used to rebuild or repair any damaged improvements within the District. Even if insurance proceedsare available and improvements are rebuilt, there could be a lengthy period in which assessed values within the Districtcould be adversely affected.

As more fully set forth in the sections entitled “THE DISTRICT - Utility Agreement” and “THE SYSTEM - Regulation,”the District constructs for the benefit of and conveyance to the City, the water and wastewater utilities needed to serveland being developed within the boundaries of the District. Upon conveyance of the facilities to the City, the Cityassumes responsibility for the operation and maintenance of the facilities. According to the City, the City’s water supplyand distribution system and wastewater treatment and collection system serving the property within the District’sboundaries did not sustain any material damage from Hurricane Harvey, and there was no interruption of water and sewerservice during or after the storm. Further, according to the District’s engineer, no taxable improvements within theDistrict have been reported to have experienced structural flooding or other material damage.

Specific Flood Type Risks

Ponding, or pluvial, flooding occurs when heavy rainfall creates a flood event independent of an overflowing water body,typically in relatively flat areas. Intense rainfall can exceed the drainage capacity of a drainage system, which may resultin water within the drainage system becoming trapped and diverted onto streets and nearby property until it is able toreach a natural outlet. Ponding can also occur in a flood pool upstream or behind a dam, levee or reservoir.

2019 Legislative Session

The 86th Regular Legislative Session convened on January 8, 2019, and will conclude on May 27, 2019. The TexasLegislature may enact laws that materially change current laws affecting ad valorem tax matters, including rollbackelections for maintenance tax increases, and other matters which could adversely affect the marketability or market valueof the Bonds. In addition, the Governor of Texas may call one or more additional special sessions that may includelegislation affecting property taxes. The District can make no representation regarding any actions the Texas Legislaturemay take or the effect of any such actions.

THE DISTRICT

General

The District, a municipal utility district, was created as Harris County Municipal Utility District No. 509, by House Bill4080 of the 80th Texas Legislature, Regular Session, effective June 15, 2007, now codified as Chapter 8217 SpecialDistrict Local Laws Code (“Chapter 8217"). By Order of the Commission dated October 9, 2015, the District changedits name to Harris-Brazoria Counties Municipal Utility District No. 509. The District operates pursuant to Article XVI,

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Section 59 of the Texas Constitution, Chapter 8217, the provisions of Chapter 49 and Chapter 54 of the Texas WaterCode, as amended, and other general statutes of Texas applicable to municipal utility districts. The District, which liestotally within the corporate limits of the City of Pearland, is subject to the continuing supervisory jurisdiction of theTCEQ.

The District is empowered, among other things, to finance, purchase, construct, operate and maintain all works,improvements, facilities and plants necessary for the supply and distribution of water; the collection, transportation andtreatment of wastewater; the control and diversion of storm water and the provision of parks and recreational facilities. The District may issue bonds and other forms of indebtedness to purchase or construct such facilities. The District mayalso provide solid waste disposal and collection services. The District is also empowered to establish, operate andmaintain fire-fighting facilities, independently or with one or more conservation and reclamation districts, after approvalby the TCEQ and the voters of the District.

The District is required to observe certain requirements of the City, which limit the purposes for which the District maysell bonds to the acquisition, construction, and improvement of waterworks, wastewater, and drainage facilities andcertain park and recreational facilities and the refunding of outstanding debt obligations; limit the net effective interestrate on such bonds and other terms of such bonds; require approval by the City of District construction plans; and permitconnections only to lots and reserves described in a plat that has been approved by the City, and filed in the real propertyrecords of Brazoria and/or Harris Counties, as appropriate. Construction and operation of the District's drainage systemis subject to the regulatory jurisdiction of additional State of Texas and local agencies. See “THE SYSTEM.”

Utility Agreement

The District is located wholly within the corporate limits of the City and obtains water, sewer and drainage service fromthe City. The City and the initial developer of land within the District, SHS Partners, Ltd, on behalf of the District,entered into a Utility Agreement dated August 1, 2007, which was assumed on November 14, 2007, by the District (the“Original Agreement’) and amended on July 13, 2015 (the “Amended Utility Agreement’) (the Original Agreement andAmended Utility Agreement are collectively referred to as the “Utility Agreement”), to provide a water distributionsystem, sanitary sewer collection system and drainage system (the “System”) and certain recreational facilities to servethe District. In consideration of the District acquiring and constructing the System on behalf of the City, the City agreed,pursuant to the terms and conditions of the Utility Agreement, to own and operate the System (other than detentionfacilities, which are owned and operated by the District) and certain recreational facilities. In addition, the City hasagreed to pay to the District a portion of the ad valorem taxes imposed and collected by the City (i) on land andimprovements located within approximately 517.498 acres of the District, and on certain property described in theOriginal Agreement that may be annexed by the District in the future, equal to $0.15 per $100 of Assessed Valuation,and (ii) on land and improvements located within approximately 124.037 acres of the District, which were subsequentlyannexed into the District, and on property which may be annexed into the District in the future that is not covered by theOriginal Agreement, equal to $0.10 per $100 of Assessed Valuation (the “City Tax Rebate”) and to pay the District asum equal to $5 per month per equivalent single-family connection located within the District (the “City Utility Rebate”). Pursuant to the Utility Agreement, the City provides water supply and wastewater treatment to the District inconsideration of the payment by the District of impact fees. The Utility Agreement requires the District to deposit theCity Tax Rebate received by the District from the City into a debt service fund of the District and to apply such fundssolely to the payment of bonds, and other debts, liabilities, and obligations of the District to or for the benefit of anypersons or entities relating to the financing, construction, and acquisition of all or any portion of the facilities constructedor acquired by the District. The Utility Agreement does not require the District to pledge, and the District has notpledged, the City Tax Rebate for payment of bonds, debts, or obligations of the District. Therefore, the City Tax Rebateis subject to modification by agreement of the District and the City.

Pursuant to the Utility Agreement, the tax rebates described above will be incrementally reduced upon the occurrenceof the following: (i) the developers within the District have been fully reimbursed, with interest, in accordance with therules of the TCEQ; (ii) the District has completely financed and constructed 100% of its water distribution, wastewatercollection, and drainage systems, and certain recreational facilities to serve the District; and (iii) the District levies a debtservice tax at a rate that is less than $0.80 per $100 of assessed valuation, provided, however, such $0.10 tax rebate shallnot be decreased until the $0.15 tax rebate described above has been decreased to $0.10 per $100 of assessed valuation,at which time both tax rebates shall decrease at the same rate. Once all the conditions noted above have been met, the

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tax rebate shall be reduced by an amount equal to the decrease in the District debt service tax rate. The tax rebate willbe recalculated annually, and will continue to be reduced to the extent that the District debt service tax rate is decreased.Once the tax rebate is reduced; it shall not thereafter be increased, and any increase in the District debt service tax ratedoes not affect the calculation of the tax rebate.

The obligation of the City to pay the City Utility Rebate, equal to $5 per ESFC, shall terminate upon such time that allthree of the following have occurred: (i) the developers within the District have been fully reimbursed, with interest, inaccordance with the rules of the TCEQ and (ii) the District has completely financed and constructed 100% of its waterdistribution, wastewater collection, and drainage systems, and certain recreational facilities to serve the District, and (iii)the District debt service tax rate decreases to the rate of $0.70 per $100 of assessed valuation

As construction of each phase of the System is certified to be complete in accordance with the final plans andspecifications approved by the City, the District is to transfer such portion of the System with construction drawingsthereof to the City reserving a security interest therein until the bonds issued to acquire and construct the System havebeen retired. Upon transfer, the City has agreed to operate and maintain the System (other than detention facilities whichare owned and operated by the District) at its expense. Under the Utility Agreement, the City has agreed to chargecustomers of the System the same rates charged other similar users within the City, plus the $5.00 per month perequivalent single-family connection charge (the City Utility Rebate) mentioned above. Except for the City UtilityRebate, all revenue from the System, including any charges which the City may impose for connection to the System,belongs exclusively to the City. Neither the City Tax Rebate nor the City Utility Rebate is pledged to the payment ofthe Bonds.

The City, as owner and operator of the System (other than detention facilities, which are owned and operated by theDistrict), has agreed to supply the District with all of its requirements for potable water and wastewater treatment. See“THE SYSTEM.”

Description

The District contains approximately 641.535 acres of land. Approximately 164.33 acres that are contained within theDistrict are located within Brazoria County, Texas, and approximately 477.21 acres that are contained within the Districtare located within Harris County, Texas. The District is located entirely within the corporate boundaries of the City. The District consists of five non-contiguous tracts. The first tract (approximately 477.21 acres) is in the southeasternportion of Harris County, south of Beltway 8 and east of Old Alvin Road. The second tract (approximately 40.28 acres) is in the northeastern portion of Brazoria County, west of Manvel Road and south of Magnolia Road. The third tract(approximately 12.57 acres) is located in the northeastern portion of Brazoria County, east of Manvel Road and southof Broadway Street. The fourth tract (approximately 84.95 acres) is located east of South Main Street and south of EastWalnut Street. The fifth tract (approximately 26.52 acres) is located west of Pearland Parkway and south of Barry RoseRoad. The portion of the District that lies within Brazoria County lies within the Pearland Independent School District,and the portion of the District that lies within Harris County lies within the Pasadena Independent School District. See“APPENDIX A - LOCATION MAP.”

Gehan Homes, Ltd. owns approximately 31.269 acres of land located outside the boundaries of the District that isproposed for annexation. A petition for consent to annex such land into the District has been filed with the City. TheDistrict makes no representation that the annexation will be consummated.

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Management of the District

The District is governed by the Board of Directors, consisting of five directors. The Board of Directors has control overand management supervision of all affairs of the District. Each of the Directors own property in the District. Directorsserve four-year staggered terms, and elections are held within the District in May in even numbered years. The currentmembers and officers of the Board, along with their respective terms of office, are listed below.

Term Expires Name Position in May

Ricardo Rodriguez President 2020

Wesley Christensen Vice President 2022

Josh Rambo Assistant Vice President 2022

Greg Wamhoff Secretary 2022

Janet Farr Assistant Secretary 2020

The District does not have a general manager or any other employee, but has contracted for services, as follows.

Tax Assessor/Collector - The District has engaged Assessments of the Southwest, Inc. as the District's TaxAssessor/Collector. According to Assessments of the Southwest, Inc. it presently serves approximately 200 taxing unitsas tax assessor/collector. The Tax Assessor/Collector applies the District's tax levy to tax rolls prepared by the BrazoriaCounty Appraisal District and the Harris County Appraisal District and bills and collects such levy.

Consulting Engineers - The District has employed the firm of LJA Engineering, Inc., Houston, Texas, asConsulting Engineer in connection with the overall planning activities and the design and construction of the System.

Bookkeeper - The District has engaged Myrtle Cruz, Inc. as the District's Bookkeeper. According to Myrtle Cruz,Inc., it currently serves approximately 350 districts as bookkeeper.

Auditor - As required by the Texas Water Code, the District retains an independent auditor to audit the District'sfinancial statements annually, which annual audit is filed with the TCEQ. The District's auditor for the 2019 fiscal yearis McGrath & Co., PLLC, Certified Public Accountants, Houston, Texas. A copy of the District's audit for the fiscal yearended May 31, 2018, is included as “APPENDIX B” to this Official Statement.

Bond Counsel and General Counsel - Allen Boone Humphries Robinson LLP, Houston, Texas (“Bond Counsel”)serves as Bond Counsel to the District. The fee to be paid Bond Counsel for services rendered in connection with theissuance of the Bonds is based on a percentage of the Bonds actually issued, sold and delivered and, therefore, such feesare contingent upon the sale and delivery of the Bonds. In addition, Allen Boone Humphries Robinson LLP serves asgeneral counsel to the District on matters other than the issuance of bonds.

Disclosure Counsel - McCall, Parkhurst & Horton L.L.P., Houston, Texas, serves as Disclosure Counsel to theDistrict. The fee to be paid Disclosure Counsel for services rendered in connection with the issuance of the Bonds iscontingent on the issuance, sale and delivery of the Bonds.

Financial Advisor - The District has engaged Rathmann & Associates, L.P. as financial advisor (the “FinancialAdvisor”) to the District. The fee paid the Financial Advisor for services rendered in connection with the issuance ofthe Bonds is based on a percentage of the Bonds actually issued and sold. Therefore, the payment of such fee iscontingent upon the sale and delivery of the Bonds. Rathmann & Associates, L.P. is an independent municipal advisorregistered with the United States Securities and Exchange Commission (the “SEC”) and the Municipal Securities

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Rulemaking Board (the “MSRB”). Rathmann & Associates, L.P.’s SEC registration number is 867-00217 and itsMSRB registration number is K0161. Rathmann & Associates, L.P.’s SEC registration Forms MA and MA-1's, whichconstitute Rathmann & Associates, L.P.’s registration filings, may be accessed throughhttp://www.sec.gov/edgar/searchedgar/companysearch.html.

DEVELOPMENT AND HOME CONSTRUCTION

As of April 15, 2019, the District contained 937 homes, including 117 homes under construction. See "BUILDERS."According to the District's Engineer, underground water distribution, wastewater collection, and stormdrainage/detention facilities and street paving have been completed to serve 1,145 single-family residential lots locatedin Riverstone Ranch at Clear Creek, Sections 1 through 10, Massey Lakes, Afton Lake, Bakers Landing, Sections 1A,1B, 2A, 2B and 3 (approximately 349.92 total acres). In addition, 161 lots on approximately 41.39 acres subdividedas Riverstone Ranch at Clear Creek, Section 12 are currently under development with completion anticipated inapproximately August 2019, and 48 townhome lots on approximately 7.58 acres subdivided as Bakers LandingTownhomes are currently under development with completion anticipated in approximately July 2019. Approximately26.52 acres of land located within the District, expected to be utilized for commercial purposes, have been developedas is described below.

The primary developer of the District, Meritage Homes of Texas, L.L.C. (defined below under the caption"DEVELOPERS"), has completed the development of 925 single-family residential lots (approximately 267.25 totalacres) that have been subdivided as Riverstone Ranch at Clear Creek, Sections 1 through 10 and Massey Lakes, andis currently developing 161 lots on approximately 41.39 acres subdivided as Riverstone Ranch at Clear Creek, Section12, with completion expected in approximately August 2019. Meritage Homes owns approximately 116.92 acres ofcurrently undeveloped land located within the District that are available for future development, all of which it expectsto be utilized for future single-family residential development.

D.R. Horton Texas, Ltd. (“D.R. Horton”), the developer of Bakers Landing, has completed the development of BakersLanding, Sections 1A, 1B, 2A, 2B and 3 (191 total lots, approximately 70.1 total acres) and is currently developingBakers Landing Townhomes (40 townhome lots, approximately 7.58 acres) with completion expected in approximatelyJuly 2019. D.R. Horton owns no additional land within the District.

KSTX Pearland Parkway (“KSTX”) completed the development of underground water distribution, wastewatercollection and storm drainage/detention facilities to serve approximately 26.52 acres located within the District,expected to be utilized for commercial purposes, on behalf of itself and Kroger Texas L.P. Approximately 10.92 ofsuch acres are now owned by Fairlawn 35 (“Fairlawn”). The construction of above-ground improvements on such landhas not yet been initiated.

The District cannot represent that the development of any of such commercial property will be consummated, norwhether, or when, the development of any the aforementioned currently undeveloped acres might occur.

The City owns approximately 0.15 acres located within the District upon which a sanitary sewer pumping station islocated. Pasadena Independent School District owns approximately 26.57 acres of currently undeveloped land withinthe District. The balance of the land located in the District is contained within easements, rights-of-way, detentionponds, or is otherwise not available for future development. See "INVESTMENT CONSIDERATIONS - FactorsAffecting Taxable Values and Tax Payments," "DEVELOPERS," "FUTURE DEVELOPMENT" and “TAX DATA -Principal 2018 Taxpayers.”

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Lots Homes Under

Under Construction Completed Subdivision Developed Acres Development Acres Sold* Unsold Sold* Unsold Totals

Riverstone Ranchat Clear Creek

Section 1 59 16.62 0 0 56 3 59Section 2 100 25.16 0 0 100 0 100Section 3 77 19.45 0 0 77 0 77Section 4 55 18.44 0 0 38 4 42Section 5 133 35.66 0 0 132 1 133Section 6 111 37.74 2 7 95 0 104Section 7 48 16.00 5 3 27 0 35Section 8 99 29.81 16 1 39 0 56Section 9 121 29.57 16 1 0 0 17Section 10 40 10.23 0 11 0 1 12Section 12 161 41.39

Massey Lakes 82 28.57 13 0 66 3 82

Afton Lake 29 12.57 0 0 29 0 29

Bakers LandingSection 1A 65 39.78 1 6 58 0 65Section 1B 48 10.41 3 0 45 0 48Section 2A 50 10.80 5 7 36 2 50Section 2B 20 7.74 8 9 0 3 20Section 3 8 1.37 2 1 5 0 8

TOTALS 1,145 349.92 161 41.39 71 46 803 17 937

Bakers Landing Townhomes 48 7.58

__________* Includes homes sold and contracted for sale. Homes under contract for sale are, in some instances, subject to conditions of appraisal,

loan application, approval and inspection. See “BUILDERS.”

DEVELOPERS

General

In general, the activities of a developer in a municipal utility district such as the District include purchasing the landwithin the District, designing the subdivision, designing the utilities and streets to be emplaced in the subdivision,designing any community facilities to be built, defining a marketing program and building schedule, securing necessarygovernmental approvals and permits for development, arranging for the construction of roads and the installation ofutilities (including, in some cases, water, sewer, and drainage facilities pursuant to the rules of the TCEQ, as well as gas,telephone, and electric service) and selling improved lots and commercial reserves to builders, developers, or other thirdparties. In most instances, the developer will be required to pay up to thirty percent (30%) of the cost of emplacingcertain of the water, wastewater and drainage facilities in the municipal utility district pursuant to the rules of the TCEQ. The District requested an exemption from such developer participation requirement with respect to the Prior Bonds andthe Bonds on the basis of one of the criteria under TCEQ rules for such exemption. The TCEQ granted the request forsuch exemption in its Orders authorizing the District to issue the Prior Bonds and the Bonds. The relative success orfailure of a developer to perform such activities in development of the property within a municipal utility district may

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have a profound effect on the security of the unlimited tax bonds issued by a district. A developer is generally underno obligation to a district to develop the property which it owns in a district. Furthermore, there is no restriction on thedeveloper's right to sell any or all of the land which the developer owns within a district. See “FUTUREDEVELOPMENT” below.

Description of the Developers

The primary developer of land within the District is Meritage Homes of Texas, L.L.C., an Arizona limited liabilitycompany ("Meritage Homes"). As is described in this Official Statement under the caption "DEVELOPMENT ANDHOME CONSTRUCTION,” Meritage Homes has completed the development of 925 single-family residential lots(approximately 267.25 total acres) that have been subdivided as Riverstone Ranch at Clear Creek, Sections 1 through10 and Massey Lakes and is currently developing 161 lots on approximately 41.39 acres subdivided as Riverstone Ranchat Clear Creek, Section 12, with completion expected in approximately August 2019. Meritage Homes ownsapproximately 116.92 acres of currently undeveloped land located within the District that are available for futuredevelopment, all of which it expects to be utilized for future single-family residential development. Meritage Homes ofTexas, L.L.C., an Arizona limited liability company, is wholly-owned by Meritage Homes Corporation. Meritage HomesCorporation is a publicly traded corporation whose stock is listed on the New York Stock Exchange under the symbolMTH. Meritage Homes Corporation is subject to the information requirements of the Securities Exchange Act of 1934,as amended, and in accordance therewith files reports and other information with the United States Securities andExchange Commission ("SEC"). Reports, proxy statements and other information filed by Meritage Homes Corporationcan be inspected at the office of the SEC at Judiciary Plaza, Room 1024, 450 Fifth Street, N.W., Washington, D.C.20549. Copies of such material can be obtained from the Public Reference Section of the SEC at 450 Fifth Street, N.W.,Washington, D.C. 20549, at prescribed rates. Copies of the above reports, proxy statements and other information mayalso be inspected at the offices of the New York Stock Exchange, Inc., 20 Broad Street, New York, New York 10005. The SEC maintains a World Wide Web site on the Internet at http://www.sec.gov that contains reports, proxyinformation statements and other information regarding registrants that file electronically with the SEC. Reference tothe financial information concerning Meritage Homes Corporation is relevant, among other reasons, to the ability ofMeritage Homes to continue to develop land in the District and to pay taxes levied by the District and other taxingentities. Neither Meritage Homes nor Meritage Homes Corporation has made any commitment to pay debt service onthe Bonds, and reference to the financial information of Meritage Homes Corporation in this Official Statement shouldnot be so construed. The District has not obtained any representations from Meritage Homes Corporation concerningits publicly available filings or undertaken any review thereof and assumes no responsibility for the informationcontained therein.

D.R. Horton Texas, Ltd. (“D.R. Horton”), the developer of Bakers Landing, has completed the development of BakersLanding, Sections 1A, 1B, 2A, 2B and 3 (191 total lots, approximately 70.1 total acres) and is currently developingBakers Landing Townhomes (40 townhome lots, approximately 7.58 acres) with completion expected in approximatelyJuly 2019. D.R. Horton owns no additional land within the District. D.R. Horton is wholly owned by D.R. Horton, Inc.D.R. Horton, Inc. is a publicly traded corporation whose stock is listed on the New York Stock Exchange under thesymbol DHI. D.R. Horton, Inc. is subject to the information requirements of the Securities Exchange Act of 1934, asamended, and in accordance therewith files reports and other information with the United States Securities and ExchangeCommission ("SEC"). Reports, proxy statements and other information filed by D.R. Horton, Inc. can be inspected atthe office of the SEC at Judiciary Plaza, Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549. Copies of suchmaterial can be obtained from the Public Reference Section of the SEC at 450 Fifth Street, N.W., Washington, D.C.20549, at prescribed rates. Copies of the above reports, proxy statements and other information may also be inspectedat the offices of the New York Stock Exchange, Inc., 20 Broad Street, New York, New York 10005. The SEC maintainsa World Wide Web site on the Internet at http://www.sec.gov that contains reports, proxy information statements andother information regarding registrants that file electronically with the SEC. Reference to the financial informationconcerning D.R. Horton, Inc. is relevant, among other reasons, to the ability of D.R. Horton to continue to develop landin the District and to pay taxes levied by the District and other taxing entities. Neither D.R. Horton nor D.R. Horton, Inc.has made any commitment to pay debt service on the Bonds, and reference to the financial information of D.R. Horton,Inc. in this Official Statement should not be so construed. The District has not obtained any representations from D.R.Horton, Inc. concerning its publicly available filings or undertaken any review thereof and assumes no responsibilityfor the information contained therein.

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KSTX Pearland Parkway (“KSTX”) completed the development of underground water distribution, wastewater collectionand storm drainage/detention facilities to serve approximately 26.52 acres located within the District, expected to beutilized for commercial purposes, on behalf of itself and Kroger Texas L.P. Approximately 10.92 of such acres are nowowned by Fairlawn 35 (“Fairlawn”). The construction of above-ground improvements on such land has not yet beeninitiated.

The District cannot represent that the development of any of such commercial property will be consummated, norwhether, or when, the development of any the aforementioned currently undeveloped acres might occur.

Collective reference is made in this Official Statement to the aforementioned developers as the “DEVELOPERS.”

BUILDERS

According to Meritage Homes, it is currently constructing homes in Riverstone Ranch at Clear Creek which range insize from approximately 1,950 to 4,000 square feet of living area and in sales price from approximately $250,000 to$370,000.

According to Meritage Homes, it is currently constructing homes in Massey Lakes which range in size fromapproximately 2,200 to 4,000 square feet of living area and in sales price from approximately $325,000 to $435,000.

According to D.R. Horton, it is currently constructing homes in Bakers Landing which range in size from approximately1,775 to 3,311 square feet of living area and in sales price from approximately $252,000 to $353,000.

Meritage Homes and D.R. Horton (together, the “Builders”) may change the types, sizes and sales prices of the homeswhich it chooses to construct within the District entirely within their discretion, or may suspend home constructionactivity entirely.

FUTURE DEVELOPMENT

As is described above under the caption “DEVELOPMENT AND HOME CONSTRUCTION,” approximately 349.92acres of the total of approximately 641.535 acres of land located within the District have been developed into 1,145single-family residential lots, the development of which is complete, and approximately 26.52 acres have been developedfor commercial purposes. In addition, 161 lots on approximately 41.39 acres subdivided as Riverstone Ranch at ClearCreek, Section 12 are currently under development with completion anticipated in approximately August 2019, and 48townhome lots on approximately 7.58 acres subdivided as Bakers Landing Townhomes are currently under developmentwith completion anticipated in approximately July 2019. Meritage Homes owns approximately 116.92 acres of currentlyundeveloped land located within the District that are available for future development, all of which it expects to beutilized for future single-family residential development. See “INVESTMENT CONSIDERATIONS - Factors AffectingTaxable Values and Tax Payments,” “DEVELOPERS” and “TAX DATA - Principal 2018 Taxpayers.” Since no party,including Meritage Homes or D.R. Horton, is under any obligation to the District to undertake the development of anycurrently undeveloped portion of the District, the District can make no representation as to when, or whether, theundeveloped portions of the District might be developed. If any undeveloped portion of the District is eventuallydeveloped, additions to the water, wastewater and drainage systems required to service such undeveloped acreage andthe payment of Impact Fees to the City related to the provision of water supply and wastewater treatment by the Cityto the District may be financed by future issues of the District's bonds. The District's Engineer currently estimates thatthe $101,400,000 authorized bonds which are currently unissued are adequate to finance the construction of suchfacilities to provide service to all of the undeveloped portions of the District and to pay Impact Fees as described belowunder the caption “THE SYSTEM.” See “INVESTMENT CONSIDERATIONS - Future Debt.” In addition to the waterdistribution, wastewater collection, storm drainage/detention facilities and Impact Fees that the District has financedwith portions of the proceeds of the sale of the Prior Bonds, and is financing with portions of the proceeds of the saleof the Bonds (see “THE BONDS - Use and Distribution of Bond Proceeds” and “THE SYSTEM”), the District expectsto finance the acquisition or construction of additional water distribution, wastewater collection, storm drainage/detentionfacilities and Impact Fees with portions of the proceeds of the sale of bonds, if any, in the future, including approximately$9,000,000 of unlimited tax bonds that the District expects to issue in approximately the second quarter of 2020. See“INVESTMENT CONSIDERATIONS - Future Debt.”

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AERIAL PHOTOGRAPH OF A PORTION OF THE DISTRICT(taken April 2019)

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AERIAL PHOTOGRAPH OF A PORTION OF THE DISTRICT(taken April 2019)

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PHOTOGRAPHS TAKEN WITHIN THE DISTRICT(taken April 2019)

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PHOTOGRAPHS TAKEN WITHIN THE DISTRICT(taken April 2019)

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DISTRICT DEBT

Debt Service Requirement Schedule

The following schedule sets forth the principal and estimated interest requirements of the Bonds.

Year Ending Current Total --------------The Bonds-------------- Total Debt 12-31 Debt Service Principal Interest* Service

2019 $ 1,089,023 $ 1,089,0232020 1,292,565 $ 675,000 1,967,5652021 1,297,505 $ 290,000 540,000 2,127,5052022 1,296,235 300,000 526,950 2,123,1852023 1,293,870 315,000 513,450 2,122,3202024 1,290,170 335,000 499,275 2,124,4452025 1,290,385 345,000 484,200 2,119,5852026 1,301,875 360,000 468,675 2,130,5502027 1,307,119 375,000 452,475 2,134,5942028 1,315,756 390,000 435,600 2,141,3562029 1,323,281 405,000 418,050 2,146,3312030 1,328,986 425,000 399,825 2,153,8112031 1,333,456 450,000 380,700 2,164,1562032 1,340,944 470,000 360,450 2,171,3942033 1,347,194 490,000 339,300 2,176,4942034 1,356,281 510,000 317,250 2,183,5312035 1,363,919 530,000 294,300 2,188,2192036 1,369,838 555,000 270,450 2,195,2882037 1,373,531 585,000 245,475 2,204,0062038 1,380,731 610,000 219,150 2,209,8812039 1,390,438 635,000 191,700 2,217,1382040 1,397,913 660,000 163,125 2,221,0382041 1,403,450 695,000 133,425 2,231,8752042 1,412,075 725,000 102,150 2,239,2252043 1,418,575 755,000 69,525 2,243,1002044 1,427,950 790,000 35,550 2,253,500

$34,743,065 $12,000,000 $8,536,050 $55,279,115

* Interest is estimated at 4.50% per annum for purposes of illustration.

Average Annual Requirements (2020-2044) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,167,604Maximum Annual Requirement (2044) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,253,500

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Bonded Indebtedness

2018 Assessed Valuation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $199,397,498(a)(As of January 1, 2018)See “TAX DATA” and “TAXING PROCEDURES”

Estimated Valuation at March 1, 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $300,112,565(b)(As of March 1, 2019)See “TAX DATA” and “TAXING PROCEDURES”

Direct Debt: Outstanding Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 21,635,000The Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,000,000(c)Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 33,635,000

Estimated Overlapping Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 18,584,773

Direct and Estimated Overlapping Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 52,219,773(c)

Direct Debt Ratios: as a percentage of 2018 Assessed Valuation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16.87%: as a percentage of Estimated Valuation at March 1, 2019 . . . . . . . . . . . . . . . . . . . . . . . 11.21%

Direct and Estimated Overlapping Debt Ratios: as a percentage of 2018 Assessed Valuation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26.19%: as a percentage of Estimated Valuation at March 1, 2019 . . . . . . . . . . . . . . . . . . . . . . . 17.40%

Debt Service Fund Balance as of April 18, 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,644,204(d)

General Fund Balance as of April 18, 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 653,582

Average Percentage of Total Tax Collection (2013-2017 Levies) . . . . . . . . . . . . . . . . . . . . . . . . . . 99.96%As of March 31, 2019.

Percentage of Total Tax Collections 2018 Levy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94.92%As of March 31, 2019. In process of collection.

2018 Tax Rate Per $100 of Assessed ValuationDebt Service Tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . $0.67Maintenance Tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.18Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $0.85(e)

City of Pearland Tax Rebate Anticipated to be Received in 2020Based Upon Estimated Valuation at March 1, 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $382,050(e)

______________________________(a) As of January 1, 2018. All property located in the District is valued on the tax rolls by the Brazoria County

Appraisal District (“BCAD”) and the Harris County Appraisal District (“HCAD”) (together, the “AppraisalDistricts”) at 100% of assessed valuation as of January 1 of each year. The District's tax roll is certified by theBrazoria County Appraisal Review Board and the Harris County Appraisal Review Board (together, the “AppraisalReview Boards”). Such sum includes $54,494,149 certified by BCAD, $141,421,699 certified by HCAD, andcertain values which have not been certified by the Harris County Appraisal Review Board, including the valueof certain properties which has been proposed by HCAD but protested by the owners thereof to HCAD and thevalue of certain properties not under protest but not yet certified. HCAD’s “Estimated Final Taxable Value withHearing Loss” of such properties is $2,088,952, which total is included in the amount of $199,397,498. HCADhas proposed the valuation of such protested properties to be $2,250,720. HCAD’s estimate of the total taxablevalue of taxable property not under protest and not yet included on the certified appraisal roll is $1,392,698, which

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total is also included in the amount of $199,397,498. The District is unable to predict the amount of the District’sfinal 2018 Assessed Valuation. Such final 2018 Assessed Valuation will not be determined until the valuation ofall taxable property located within the District is certified by the Appraisal Review Boards for 2018. See“INVESTMENT CONSIDERATIONS - Factors Affecting Taxable Values and Tax Payments” and “TAXINGPROCEDURES.”

(b) Provided by the Appraisal Districts for informational purposes only, this amount is an estimate of the value of alltaxable property located within the District as of March 1, 2019, and includes an estimate of values resulting fromthe construction of taxable improvements from January 1, 2018, through February 28, 2019. The ultimate assessedvaluation of such additions to the District's tax roll resulting from development and construction activity fromJanuary 1, 2018, through December 31, 2018, may vary significantly from this estimate when the Appraisal ReviewBoards certify the valuation of District property for the purpose of determining the District's 2019 tax roll, whichwill be based on the valuation of District property as of January 1, 2019. Moreover, the ultimate assessed valuationof such additions to the District's tax roll resulting from development and construction activity from January 1,2019, through February 28, 2019, may vary significantly from this estimate when the Appraisal Review Boardscertify the valuation of District property for the purpose of determining the District's 2020 tax roll, which will bebased on the valuation of District property as of January 1, 2020.

(c) In addition to the components of the System and Impact Fees that the District has financed with portions of theproceeds of the sale of the Prior Bonds, and is financing with portions of the proceeds of the sale of the Bonds (see“THE BONDS - Use and Distribution of Bond Proceeds” and “THE SYSTEM”), the District expects to financethe acquisition or construction of additional components of the System and Impact Fees with portions of theproceeds of the sale of bonds, if any, in the future, including approximately $9,000,000 of unlimited tax bonds thatthe District expects to issue in approximately the second quarter of 2020. See “INVESTMENTCONSIDERATIONS - Future Debt.”

(d) Neither Texas law nor the Bond Resolution requires that the District maintain any particular sum in the DebtService Fund. Such sum gives effect to the payment by the District of its debt service requirements that were dueon March 1, 2019. The District’s remaining debt service payments for 2019, consisting of principal of and intereston the Outstanding Bonds, are due on September 1, 2019, and total $565,568. The District’s initial debt servicepayment on the Bonds, consisting of a nine-month interest payment due thereon, is due on March 1, 2020.

(e) The District levied a total tax rate of $0.85 per $100 of Assessed Valuation for 2018, consisting of debt andmaintenance tax rates of $0.67 and $0.18 per $100 of Assessed Valuation, respectively. The District lies whollywithin the municipal boundaries of the City of Pearland (the “City”), and all land within the District is subject totaxation by the City. See “TAX DATA - Estimated Overlapping Taxes.” Pursuant to the Utility Agreementbetween the District and the City, the City is obligated to pay annually a sum to the District in the form of a “CityTax Rebate” as defined in the Utility Agreement and described in this Official Statement under the caption “THEDISTRICT - Utility Agreement.” The calculations of tax rates required to pay the Average Annual and MaximumAnnual Debt Service Requirements assume the receipt by the District of a City Tax Rebate of $382,050, theapproximate amount anticipated to be received in 2020 based upon the District's Estimated Valuation at March 1,2019, enumerated above (see “TAX DATA - Tax Rate Calculations”). The District currently intends to apply theCity Tax Rebate to payment of the Outstanding Bonds, the Bonds and any additional bonds, debts, or obligations,whether or not on a parity with the Bonds, which may be issued by the District in the future. However, the CityTax Rebate is not pledged to the payment of the Bonds and is subject to modification by agreement of the Districtand the City. Therefore, there is no assurance that the City Tax Rebate will not be reduced or eliminated in thefuture. For calculations of the tax rates required to pay the Average Annual and Maximum Annual Debt ServiceRequirements of the Bonds assuming the receipt of no City Tax Rebate, see “TAX DATA - Tax RateCalculations.” As is enumerated in this Official Statement under the caption “TAX DATA - EstimatedOverlapping Taxes,” the aggregate of the 2018 tax levies of all overlapping taxing units which levy taxes uponproperty located in the District, plus the District’s 2018 tax rate, is $3.548672 per $100 of Assessed Valuation asto that portion of the District that lies within Brazoria County, and $3.853657 per $100 of Assessed Valuation asto that portion of the District that lies within Harris County. Such aggregate levies are higher than the aggregatetax levies of many municipal utility districts in the Houston metropolitan area, including the area of the District,but are within the range of the aggregate levies of many municipal utility districts in the Houston metropolitan areaand the area of the District which are in stages of development comparable with the District. See “INVESTMENTCONSIDERATIONS - Factors Affecting Taxable Values and Tax Payments” and “TAXING PROCEDURES.”

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Estimated Direct and Overlapping Debt Statement

Other governmental entities whose boundaries overlap the District have outstanding bonds payable from ad valoremtaxes. The following statement of direct and estimated overlapping ad valorem tax debt was developed from informationcontained in “Texas Municipal Reports,” published by the Municipal Advisory Council of Texas, or other availableinformation. Except for the amount relating to the District, the District has not independently verified the accuracy orcompleteness 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 bonds since the dates stated in this table, andsuch entities may have programs requiring the issuance of substantial amounts of additional bonds, the amount of whichcannot presently be determined. Political subdivisions overlapping the District are authorized by Texas law to levy andcollect ad valorem taxes for operation, maintenance and/or general revenue purposes in addition to taxes for paymentof their debt, and some are presently levying and collecting such taxes.

Debt as of Estimated OverlappingTaxing Jurisdiction April 1, 2019 Percent Amount

Harris County* $2,050,758,022 0.03216% $ 659,430Harris County Department of Education 6,320,000 0.03216 2,032Harris County Flood Control District 83,075,000 0.03216 26,713Port of Houston Authority 593,754,397 0.03216 190,924Harris County Hospital District 57,300,000 0.03216 18,425San Jacinto College District 500,272,707 0.26623 1,331,872Pasadena Independent School District 753,985,000 1.02610 7,736,632City of Pearland 306,065,000 1.81147 5,544,285Brazoria County 69,425,000 0.18455 128,122Pearland Independent School District 429,205,000 0.68646 2,946,338

Total Estimated Overlapping Debt $18,584,773

The District (the Outstanding Bonds and the Bonds) 33,635,000

Total Direct & Estimated Overlapping Debt $52,219,773

* The Harris County Toll Road Authority bonds are considered to be self-supporting, and are not included in thisschedule.

Debt Ratios

% of 2018 % of EstimatedAssessed Valuation atValuation March 1, 2019

Direct Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16.87% 11.21%Direct and Estimated Overlapping Debt . . . . . . . . . . 26.19% 17.40%

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TAX DATA

General

All taxable property within the District is subject to the assessment, levy and collection by the District of an annual advalorem tax without legal limitation as to rate or amount, sufficient to pay principal of and interest on the OutstandingBonds, the Bonds and any future tax-supported bonds that may be issued by the District from time to time. The Boardof Directors of the District has in its Bond Resolution covenanted to assess and levy for each year that all or any partof the Bonds remain outstanding and unpaid a tax ample and sufficient to produce funds to pay the principal of andinterest on the Bonds (see “THE BONDS” and “INVESTMENT CONSIDERATIONS”). The actual rate of such taxis determined annually as a function of the District's tax base, its debt service requirements, and available funds. TheDistrict levied a debt service tax in 2018 of $0.67 per $100 of Assessed Valuation.

Maintenance Tax

The Board of Directors of the District has the statutory authority to levy and collect an annual ad valorem tax formaintenance of the District's improvements, if such maintenance tax is authorized by a vote of the District's electorate. On November 6, 2007, the District voters authorized the levy of such a maintenance tax in an amount not to exceed $1.50per $100 of Assessed Valuation. Such tax is levied in addition to taxes which the District is authorized to levy for payingprincipal of and interest on the Outstanding Bonds, the Bonds and any parity bonds which may be issued in the future. The District levied a maintenance tax in 2018 of $0.18 per $100 of Assessed Valuation.

Historical Values and Tax Collection History

The following statement of tax collections sets forth in condensed form the historical Assessed Valuation and taxcollections of the District. Such summary has been prepared for inclusion herein based upon information obtained fromDistrict records. Reference is made to such records, including the District's annual audited financial statements, for morecomplete information.

% CollectionsAssessed Tax Total Current & Year Ending

Tax Year Valuation Rate (a) Levy Prior Years (b) 9/30

2013 $ 3,139,530 $0.85 $26,686 100.00% 20142014 4,082,541 0.85 39,018 100.00 20152015 21,395,087 0.85 181,858 100.00 20162016 55,741,265 0.85 473,801 99.99 20172017 125,275,180 0.85 1,064,839 99.82 20182018 199,397,498(c) 0.85 1,694,879 94.92(d) 2019

__________(a) Per $100 of Assessed Valuation.(b) Such percentages reflect cumulative total collections for each year from the time each respective annual tax was

levied through March 31, 2019. The amount of tax collected for each levy on a current basis (by September 30of the year following each respective annual levy) is not reflected in this statement.

(c) Such sum includes $54,494,149 certified by BCAD, $141,421,699 certified by HCAD, and certain values whichhave not been certified by the Harris County Appraisal Review Board, including the value of certain propertieswhich has been proposed by HCAD but protested by the owners thereof to HCAD and the value of certainproperties not under protest but not yet certified. HCAD’s “Estimated Final Taxable Value with Hearing Loss”of such properties is $2,088,952, which total is included in the amount of $199,397,498. HCAD has proposedthe valuation of such protested properties to be $2,250,720. HCAD’s estimate of the total taxable value of taxableproperty not under protest and not yet included on the certified appraisal roll is $1,392,698, which total is alsoincluded in the amount of $199,397,498. The District is unable to predict the amount of the District’s final 2018Assessed Valuation. Such final 2018 Assessed Valuation will not be determined until the valuation of all taxableproperty located within the District is certified by the Appraisal Review Boards for 2018.

(d) As of March 31, 2019. In process of collection.

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Tax Rate Distribution

2018 2017 2016 2015 2014

Debt Service $0.67 $0.67 $0.49 $0.00 $0.00Maintenance 0.18 0.18 0.36 0.85 0.85Total $0.85 $0.85 $0.85 $0.85 $0.85

Analysis of Tax Base

The following table illustrates the composition of property located within the District during the past five years.

2018 2017 2016Assessed Assessed Assessed

Type of Property Valuation % Valuation % Valuation %

Land $53,357,205 26.76% $44,439,260 35.47% $21,318,132 38.24%Improvements 146,416,250 73.43 82,592,922 65.93 35,438,117 63.58Personal Property 965,902 0.48 247,589 0.20 84,510 0.15Uncertified 3,481,650 1.75 0 0.00 0 0.00Exemptions (4,823,509) (2.42) (2,004,591) (1.60) (1,099,494) (1.97)Total $199,397,498* 100.00% $125,275,180 100.00% $55,741,265 100.00%

2015 2014Assessed Assessed

Type of Property Valuation % Valuation %

Land $12,778,432 59.73% $4,885,132 119.66%Improvements 9,360,750 43.75 0 0.00Personal Property 51,445 0.24 0 0.00Exemptions (795,540) (3.72) (802,591) (19.66)Total $21,395,087 100.00% $4,082,541 100.00%

__________* Such sum includes $54,494,149 certified by BCAD, $141,421,699 certified by HCAD, and certain values which

have not been certified by the Harris County Appraisal Review Board, including the value of certain propertieswhich has been proposed by HCAD but protested by the owners thereof to HCAD and the value of certainproperties not under protest but not yet certified. HCAD’s “Estimated Final Taxable Value with Hearing Loss”of such properties is $2,088,952, which total is included in the amount of $199,397,498. HCAD has proposedthe valuation of such protested properties to be $2,250,720. HCAD’s estimate of the total taxable value of taxableproperty not under protest and not yet included on the certified appraisal roll is $1,392,698, which total is alsoincluded in the amount of $199,397,498. The District is unable to predict the amount of the District’s final 2018Assessed Valuation. Such final 2018 Assessed Valuation will not be determined until the valuation of all taxableproperty located within the District is certified by the Appraisal Review Boards for 2018.

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Principal 2018 Taxpayers

Based upon information supplied by the District's Tax Assessor/Collector, the following table lists principal Districttaxpayers, type of property owned by such taxpayers, and the assessed valuation of such property as of January 1, 2018. The information reflects the composition of property ownership reflected on the District's 2018 tax roll. See“DEVELOPERS.”

Assessed Valuation % of 2018Taxpayer Type of Property 2018 Tax Roll Tax Roll

Meritage Homes of Texas, L.L.C. Lots and Houses $8,093,534 4.06%D.R. Horton Texas, Ltd. Lots and Houses 3,671,150 1.84Kroger Texas LP Commercial 3,447,920 1.73Fairlawn 35 Commercial 2,421,980 1.21Homeowner Lot and House 447,310 0.22Homeowner Lot and House 432,510 0.22Homeowner Lot and House 431,780 0.22Homeowner Lot and House 428,454 0.21Homeowner Lot and House 426,160 0.21Homeowner Lot and House 420,880 0.21

$20,221,678 10.13%

Tax Exemptions

Certain property in the District may be exempt from taxation by the District. See “TAXING PROCEDURES.” TheDistrict does not exempt any percentage of the market value of any residential homesteads from taxation.

Additional Penalties

The District has contracted with a delinquent tax attorney to collect certain delinquent taxes. In connection with thatcontract, the District can establish an additional penalty of twenty percent (20%) of the tax to defray the costs ofcollection. This 20% penalty applies to taxes that either: (1) become delinquent on or after February 1 of a year, but notlater than May 1 of that year, and that remain delinquent on April 1 (for personal property) and July 1 (for real property)of the year in which they become delinquent or (2) become delinquent on or after June 1, pursuant to the Texas TaxCode.

Tax Rate Calculations

The tax rate calculations set forth below are presented to indicate the tax rates per $100 of Assessed Valuation whichwould be required to meet certain debt service requirements if no growth in the District occurs beyond the EstimatedValuation at March 1, 2019. The calculations also assume collection of 95% of taxes levied, no use of District fundson hand, the receipt of a City Tax Rebate of $382,050, the approximate amount anticipated to be received by the Districtfrom the City in 2020 based upon the District’s Estimated Valuation at March 1, 2019, and the sale of no additionalbonds by the District.

Average Annual Debt Service Requirements (2020-2044) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,167,604

Tax Rate of $0.63 on the Estimated Valuation atMarch 1, 2019 ($300,112,565) produces . . . . . . . . . . . . . . . . . . . . $1,796,174

Estimated City Tax Rebate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 382,050Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,178,224

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Maximum Annual Debt Service Requirement (2044) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,253,500

Tax Rate of $0.66 on the Estimated Valuation atMarch 1, 2019 ($300,112,565) produces . . . . . . . . . . . . . . . . . . . . $1,881,706

Estimated City Tax Rebate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 382,050Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,263,756

The District levied a tax rate of $0.85 per $100 of Assessed Valuation for 2018, $0.67 of which is a debt service tax and$0.18 of which is a maintenance tax. As the above table indicates, the 2018 debt service rate will be sufficient to paydebt service on the Bonds and the Outstanding Bonds given taxable values in the District at the level of the EstimatedValuation at March 1, 2019, assuming a tax collection rate of 95%, no use of funds on hand, the receipt of a City TaxRebate of $382,050, the approximate amount anticipated to be received by the District from the City in 2020, and theissuance of no additional bonds by the District. As is illustrated in this Official Statement under the caption “TAXDATA - Historical Values and Tax Collection History,” as of March 31, 2019, the District has collected an average of99.96% of its tax for the period 2013 through 2017, and its 2018 tax levy was 94.92% collected as of such date. Moreover, the District's Debt Service Fund balance is $1,644,204 as of April 18, 2019. Although neither Texas law northe Bond Resolution requires that any specific amount be retained in the Debt Service Fund at any time, the District hasin the past applied earnings from the investment of monies held in the Debt Service Fund to meet the debt servicerequirements of the Prior Bonds. See “APPENDIX B - FINANCIAL REPORT.” Therefore, the District anticipates thatit will be able to meet the debt service requirements on the Bonds and the Outstanding Bonds without increasing the taxrate for debt service above the debt service rate which the District levied for 2018 - $0.67 per $100 of AssessedValuation. However, the District can make no representation that the taxable property values in the District will increasein the future or will maintain a value sufficient to support the aforementioned tax rate or to justify continued paymentof taxes by property owners. See “TAXING PROCEDURES” and “INVESTMENT CONSIDERATIONS - FactorsAffecting Taxable Values and Tax Payments.” Assuming the receipt of no City Tax Rebate, tax rates of $0.80 and $0.77per $100 of Assessed Valuation would be necessary to pay the Maximum Annual Debt Service Requirements and theAverage Annual Debt Service Requirements, respectively, of the Bonds and the Outstanding Bonds, assuming a taxcollection rate of 95%, no use of funds on hand, the issuance of no additional bonds by the District, and that no growthoccurs in the District beyond the level of the Estimated Valuation at March 1, 2019. See “TAXING PROCEDURES.” In addition to the components of the System and Impact Fees that the District has financed with portions of the proceedsof the sale of the Prior Bonds, and is financing with portions of the proceeds of the sale of the Bonds (see “THE BONDS- Use and Distribution of Bond Proceeds” and “THE SYSTEM”), the District expects to finance additional componentsof the System and Impact Fees with portions of the proceeds of the sale of bonds, if any, in the future, includingapproximately $9,000,000 of unlimited tax bonds that the District expects to issue in approximately the second quarterof 2020. See “INVESTMENT CONSIDERATIONS - Future Debt.” See “INVESTMENT CONSIDERATIONS -Factors Affecting Taxable Values and Tax Payments,” - “Future Debt,” and “TAXING PROCEDURES.”

The City Tax Rebate that the District would receive based upon the Estimated Valuation at March 1, 2019, is estimatedto be approximately $402,158, based upon the requirements of the Utility Agreement between the District and the City(see “THE DISTRICT - Utility Agreement”). However, the valuation that is attributable to development andconstruction activity within the District from January 1, 2019, through February 28, 2019, will produce some City TaxRebate revenue that will be received by the District in 2021, together with any additional City Tax Rebate revenueattributable to additional development and construction activity within the District from March 1, 2019, throughDecember 31, 2019. As such, the amount of City Tax Rebate estimated to be received in 2020, $382,050, is calculatedherein based upon 95% of the amount expected to be received, $402,158, based upon the Estimated Valuation at March1, 2019.

Estimated Overlapping Taxes

Property located within the District is subject to taxation by several taxing authorities in addition to the District. Set forthbelow is a compilation of all 2018 taxes levied upon property located within the District, including the District’s 2018tax rate. Under Texas law, ad valorem taxes levied by each taxing authority other than the District entitled to levy taxesagainst property located within the District create a lien which is on a parity with the tax lien of the District. In additionto the ad valorem taxes required to make the debt service payments on bonded indebtedness of the District and of suchother jurisdictions (see “DISTRICT DEBT - Estimated Direct and Overlapping Debt Statement”), certain taxingjurisdictions are authorized by Texas law to assess, levy and collect ad valorem taxes for operation, maintenance,administrative and/or general revenue purposes.

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BRAZORIA COUNTY OVERLAPPING TAX RATES

Taxing Jurisdiction 2018 Tax Rate/$100

Brazoria County $0.427914Pearland Independent School District 1.415600City of Pearland 0.709158Brazoria Drainage District No. 4 0.146000The District* 0.850000

$3.548672

HARRIS COUNTY OVERLAPPING TAX RATES

Taxing Jurisdiction 2018 Tax Rate/$100

Harris County $0.418580Harris County Department of Education 0.005190Harris County Flood Control District 0.028770Port of Houston Authority 0.011550Harris County Hospital District 0.171080Pasadena Independent School District 1.480000San Jacinto Community College District 0.179329City of Pearland 0.709158The District* 0.850000

$3.853657

______________* The District levied a total tax of $0.85 per $100 of Assessed Valuation for 2018, consisting of a debt service tax of

$0.67 per $100 of Assessed Valuation and a maintenance tax of $0.18 per $100 of Assessed Valuation.

TAXING PROCEDURES

Authority to Levy Taxes

The Board is authorized to levy an annual ad valorem tax, without legal limitation as to rate or amount, on all taxableproperty within the District in sufficient amount to pay the principal of and interest on the Bonds, the Outstanding Bondsand any additional bonds payable from taxes which the District may hereafter issue, see “INVESTMENTCONSIDERATIONS - Future Debt,” and to pay the expenses of assessing and collecting such taxes. The District agreesin the Bond Resolution to levy such a tax from year to year as described more fully above under “THE BONDS - Sourceof Payment.” Under Texas law, the Board is also authorized to levy and collect annual ad valorem taxes for the operationand maintenance of the District and the System and for the payment of certain contractual obligations. See “TAX DATA- Maintenance Tax.”

Property Tax Code and County-Wide Appraisal District

Title I of the Texas Tax Code (the “Property Tax Code”), specifies the taxing procedures of all political subdivisionsof the State of Texas, including the District. Provisions of the Property Tax Code are complex and are not fullysummarized here. The Property Tax Code requires, among other matters, county-wide appraisal and equalization oftaxable property values and establishes in each county of the State an appraisal district with the responsibility forrecording and appraising property for all taxing units within a county and an appraisal review board with responsibilityfor reviewing and equalizing values established by the appraisal district. The Brazoria County Appraisal District andthe Harris County Appraisal District (together, the “Appraisal Districts”) have the responsibility of appraising propertyfor all taxing units within Brazoria and Harris Counties, respectively, including the District. Such appraisal values willbe subject to review and change by the Brazoria County Appraisal Review Board and the Harris County AppraisalReview Board (together, the “Appraisal Review Boards”). The appraisal rolls, as approved by the applicable AppraisalReview Boards, will be used by the District in establishing its tax rolls and tax rate.

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Reappraisal of Property After Disaster

The Texas Tax Code provides that the governing body of a taxing unit located within an area declared to be a disasterarea by the Governor of the State of Texas may authorize reappraisal of all property damaged in the disaster at its marketvalue immediately after the disaster. For reappraised property, the taxes are prorated for the year in which the disasteroccurred. The taxing unit assesses taxes prior to the date the disaster occurred based upon market value as of January1 of that year. Beginning on the date of the disaster and for the remainder of the year, the taxing unit assesses taxes onthe reappraised market value of the property.

Property Subject to Taxation by the District

Except for certain exemptions provided by Texas law, all real property, tangible personal property held or used for theproduction of income, mobile homes and certain categories of intangible personal property with a tax situs in the Districtare subject to taxation by the District. Principal categories of exempt property include, but are not limited to: propertyowned by the State of Texas or its political subdivisions if the property is used for public purposes; property exempt fromad 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, youthdevelopment associations, religious organizations, and qualified schools; designated historical sites; and mostindividually-owned automobiles. In addition, the District may by its own action exempt residential homesteads ofpersons 65 years or older and certain disabled persons to the extent deemed advisable by the Board. The District maybe required to offer such an exemption if a majority of voters approve it at an election. The District would be requiredto call such an election upon petition by twenty percent (20%) of the number of qualified voters who voted in thepreceding election. The District is authorized by statute to disregard exemptions for the disabled and elderly if grantingthe exemption would impair the District's obligation to pay tax supported debt incurred prior to adoption of theexemption by the District. Furthermore, the District must grant exemptions to disabled veterans, or certain survivingdependents of disabled veterans, if requested, but only to the maximum extent of between $5,000 and $12,000 of taxablevaluation depending on the disability rating of the veteran. A veteran who receives a disability rating of 100%, and,under certain circumstances, the surviving spouse of such veteran, is entitled to the exemption for the full amount of theresidential homestead. A partially disabled veteran or certain surviving spouses of partially disabled veterans are entitledto an exemption from taxation of a percentage of the appraised value of their residence homestead in an amount equalto the partially disabled veteran’s disability rating if (i) the residence homestead was donated by a charitable organizationat no cost to the disabled veteran or, (ii) the residence was donated by a charitable organization at some cost to thedisabled veteran if such cost is less than or equal to fifty percent (50%) of the total good faith estimate of the marketvalue of the residence as of the date the donation is made. Also, the surviving spouse of (i) a member of the armed forceswho was killed in action, or, (ii) a first responder as defined under Texas law who was killed in or fatally injured in theline of duty, is, subject to certain conditions, entitled to an exemption of the total appraised value of the survivingspouse’s residence homestead, and subject to certain conditions, an exemption up to the same amount may be transferredto a subsequent residence homestead of the surviving spouse.

Residential Homestead Exemptions: The Property Tax Code authorizes the governing body of each politicalsubdivision in the State of Texas to exempt up to twenty percent (20%) of the appraised market value ofresidential homesteads from ad valorem taxation. Where ad valorem taxes have previously been pledged for thepayment of debt, the governing body of a political subdivision may continue to levy and collect taxes against theexempt value of the homesteads until the debt is discharged, if the cessation of the levy would impair theobligations of the contract by which the debt was created. The adoption of a homestead exemption may beconsidered each year, but must be adopted before July 1. See “TAX DATA - Exemptions.”

Freeport Goods Exemption: A “Freeport Exemption” applies to goods, wares, ores, and merchandise other thanoil, gas, and petroleum products (defined as liquid and gaseous materials immediately derived from refiningpetroleum or natural gas), and to aircraft or repair parts used by a certified air carrier acquired in or imported intoTexas which are destined to be forwarded outside of Texas and which are detained in Texas for assembling,storing, manufacturing, processing or fabricating for less than 175 days. Although certain taxing units may take

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official action to tax such property in transit and negate such exemption, the District does not have such an option.A “Goods-in-Transit” Exemption is applicable to the same categories of tangible personal property which arecovered by the Freeport Exemption, if, for tax year 2011 and prior applicable years, such property is acquired inor imported into Texas for assembling, storing, manufacturing, processing, or fabricating purposes and issubsequently forwarded to another location inside or outside of Texas not later than 175 days after acquisitionor importation, and the location where said property is detained during that period is not directly or indirectlyowned or under the control of the property owner. For tax year 2012 and subsequent years, such Goods-in-TransitExemption includes tangible personal property acquired in or imported into Texas for storage purposes only ifsuch property is stored under a contract of bailment by a public warehouse operator at one or more publicwarehouse facilities in Texas that are not in any way owned or controlled by the owner of such property for theaccount of the person who acquired or imported such property. A property owner who receives the Goods-in-Transit Exemption is not eligible to receive the Freeport Exemption for the same property. Local taxing units suchas the District may, by official action and after public hearing, tax goods-in-transit personal property. A taxingunit must exercise its option to tax goods-in-transit property before January 1 of the first tax year in which itproposes to tax the property at the time and in the manner prescribed by applicable law. The District has takenofficial action to allow taxation of all such goods-in-transit personal property for all prior and subsequent years.

Tax Abatement

The City, Harris County and Brazoria County may designate all or part of the District as a reinvestment zone, and theDistrict, Harris County, Brazoria County, and the City, at the option and discretion of each entity, may thereafter enterinto tax abatement agreements with the owners of property within the zone. Prior to entering into a tax abatementagreement, each entity must adopt guidelines and criteria for establishing tax abatement, which each entity will followin granting tax abatements to owners of property. The tax abatement agreements may exempt from ad valorem tax, bythe applicable taxing jurisdictions, including the District, for a period of up to ten years, all or any part of any increasein the assessed valuation of property covered by the agreement over its assessed valuation in the year in which theagreement is executed, on the condition that the property owner make specified improvements or repairs to the propertyin conformity with a comprehensive plan. According to the District's Tax Assessor/Collector, to date, none of the areawithin the District has been designated as a reinvestment zone. Each taxing jurisdiction has discretion to determine termsfor its tax abatement agreements without regard to the terms approved by the other taxing jurisdictions.

Valuation of Property for Taxation

Generally, property in the District must be appraised by the Appraisal Districts at market value as of January 1 of eachyear. Once an appraisal roll is prepared and finally approved by the Appraisal Review Boards, it is used by the Districtin establishing its tax rolls and tax rate. Assessments under the Property Tax Code are to be based on one hundredpercent (100%) of market value, as such is defined in the Property Tax Code. Increases in the appraised value ofresidence homesteads are limited by the Texas Constitution to 10 percent (10%) annually regardless of the market valueof the property.

The Property Tax Code permits land designated for agricultural use, open space or timberland to be appraised at its valuebased on the land's capacity to produce agricultural or timber products rather than at its fair market value. The PropertyTax Code permits under certain circumstances that residential real property inventory held by a person in the trade orbusiness be valued at the price all of such property would bring if sold as a unit to a purchaser who would continue thebusiness. Provisions of the Property Tax Code are complex and are not fully summarized here. Landowners wishing toavail themselves of the agricultural use, open space or timberland designation or residential real property inventorydesignation must apply for the designation and the appraiser is required by the Property Tax Code to act on eachclaimant's right to the designation individually. A claimant may waive the special valuation as to taxation by one politicalsubdivision while claiming it for another. If a claimant receives the agricultural use designation and later loses it bychanging the use of the property or selling it to an unqualified owner, the District can collect taxes based on the new use,including taxes for the previous three years for agricultural use and taxes for the previous five years for open space landand timberland.

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The Property Tax Code requires the Appraisal Districts to implement a plan for periodic reappraisals of property toupdate appraisal values. The plan must provide for appraisal of all real property in the Appraisal Districts at least onceevery three (3) years. It is not known what frequency of reappraisals will be utilized by the Appraisal Districts or whetherreappraisals will be conducted on a zone or county-wide basis. The District, however, at its expense, has the right toobtain from the Appraisal Districts a current estimate of appraised values within the District or an estimate of any newproperty or improvements within the District. While such current estimate of appraised values may serve to indicate therate and extent of growth of taxable values within the District, it cannot be used for establishing a tax rate within theDistrict until such time as the applicable Appraisal District chooses to formally include such values on its appraisal roll.

District and Taxpayer Remedies

Under certain circumstances, taxpayers and taxing units, including the District, may appeal orders of the AppraisalReview Boards by filing a timely petition for review in State district court. In such event, the property value in questionmay be determined by the court, or by a jury, if requested by any party. Additionally, taxing units may bring suit againstthe Appraisal Districts to compel compliance with the Property Tax Code. The Property Tax Code establishes aprocedure for notice to property owners of reappraisals reflecting increased property values, appraisals that are higherthan renditions and appraisals of property not previously on an appraisal roll.

Levy and Collection of Taxes

The District is responsible for the levy and collection of its taxes unless it elects to transfer such functions to anothergovernmental entity. The rate of taxation is set by the Board of Directors, after the legally required notice has been givento owners of property within the District, based upon: a) the valuation of property within the District as of the precedingJanuary 1, and b) the amount required to be raised for debt service, maintenance purposes, and authorized contractualobligations. Taxes are due October 1, or when billed, whichever comes later, and become delinquent if not paid beforeFebruary 1 of the year following the year in which imposed. A delinquent tax incurs a penalty of six percent (6%) ofthe amount of the tax for the first calendar month it is delinquent, plus one percent (1%) for each additional month orportion of a month the tax remains unpaid prior to July 1 of the year in which it becomes delinquent. If the tax is notpaid by July 1 of the year in which it becomes delinquent, the tax incurs a total penalty of twelve percent (12%)regardless of the number of months the tax has been delinquent and incurs an additional penalty for collection costs ofan amount established by the District and a delinquent tax attorney. A delinquent tax on personal property incurs anadditional penalty, in an amount established by the District and a delinquent tax attorney, 60 days after the date the taxesbecome delinquent. The delinquent tax accrues interest at a rate of one percent (1%) for each month or portion of amonth it remains unpaid. The Property Tax Code makes provisions for the split payment of taxes, discounts for earlypayment and the postponement of the delinquency date of taxes under certain circumstances which, at the option of theDistrict, which may be rejected by taxing units. The District's tax collector is required to enter into an installmentpayment agreement with any person who is delinquent on the payment of tax on a residence homestead for payment oftax, penalties and interest, if the person requests an installment agreement and has not entered into an installmentagreement with the collector in the preceding 24 months. The installment agreement must provide for payments to bemade in monthly installments and must extend for a period of at least 12 months and no more than 36 months. Additionally, the owner of a residential homestead property who is (i) sixty-five (65) years of age or older, (ii) disabled,or (iii) a disabled veteran, is entitled by law to pay current taxes on a residential homestead in installments withoutpenalty or to defer the payment of taxes during the time of ownership. In the instance of tax deferral, a tax lien remainson the property and interest continues to accrue during the period of deferral.

Rollback of Operation and Maintenance Tax Rate

The qualified voters of the District have the right to petition for a rollback of the District’s operation and maintenancetax rate only if the total tax bill on the average residence homestead increases by more than eight percent. If a rollbackelection is called and passes, the rollback tax rate is the current year’s debt service and contract tax rates plus 1.08 timesthe previous year’s operation and maintenance tax rate. Thus, debt service and contract tax rates cannot be changed bya rollback election.

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District's Rights in the Event of Tax Delinquencies

Taxes levied by the District are a personal obligation of the owner of the property as of January 1 of the year in whichthe tax is imposed. On January 1 of each year, a tax lien attaches to property to secure the payment of all state and localtaxes, penalties and interest ultimately imposed for the year on the property. The lien exists in favor of each taxing unit,including the District, having the power to tax the property. The District's tax lien is on a parity with the tax liens of othersuch taxing units (see “TAX DATA - Estimated Overlapping Taxes”). A tax lien on real property takes priority overthe claims of most creditors and other holders of liens on the property encumbered by the tax lien, whether or not thedebt or lien existed before the attachment of the tax lien; however, whether a lien of United States is on a parity with ortakes priority over a tax lien of the District is determined by applicable federal law. Personal property, under certaincircumstances, 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 District may file suit to foreclose the lien securing paymentof the tax, to enforce personal liability for the tax, or both. In filing a suit to foreclose a tax lien on real property, theDistrict 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 effectsof market conditions on the foreclosure sale price, by taxpayer redemption rights (a taxpayer may redeem property withinsix (6) months for commercial property and two (2) years for residential and all other types of property after thepurchaser's deed issued at the foreclosure sale is filed in the county records) or by bankruptcy proceedings which restrictthe collection of taxpayer debts.

THE SYSTEM

Regulation

According to the District's Engineer, the System has been designed in conformance with accepted engineering practicesand the requirements of certain governmental agencies having regulatory or supervisory jurisdiction over the constructionand operation of such facilities, including, among others, the TCEQ, the City and Brazoria Drainage District No. 4.

The District is located wholly within the corporate limits of the City of Pearland and obtains water, sewer and drainageservice from the City. The City and the District entered into the Utility Agreement (see “THE DISTRICT - UtilityAgreement”) to provide a water distribution system, sanitary sewer collection system and a drainage system (the“System”) to serve the District. In consideration of the District's acquiring and constructing the System on behalf of theCity, the City agreed, pursuant to the terms and conditions of the Agreement, to own and operate the System (other thandetention facilities, which are owned and operated by the District).

As construction of each phase of the System is certified to be complete in accordance with the final plans andspecifications approved by the City, the District is to transfer such portion of the System (other than detention facilities,which are owned and operated by the District) with construction drawings thereof to the City reserving a security interesttherein until the bonds issued to acquire and construct the System have been retired. Upon transfer, the City has agreedto operate and maintain the System (other than detention facilities, which are owned and operated by the District) at itsexpense. Under the Utility Agreement, as amended, the City has agreed to charge customers of the System the samerates charged other similar users within the City, plus the $5.00 per month equivalent single-family connection charge(the City Utility Rebate). Except for the City Utility Rebate, all revenue from the System, including any charges whichthe City may impose for connection to the System, belongs exclusively to the City.

The City, as owner and operator of the System (other than detention facilities, which are owned and operated by theDistrict), has agreed to supply the District with all of its requirements for potable water and wastewater treatmentcapacity in consideration of the payment of Impact Fees. The City’s current Impact Fee is $6,477 per single-familyresidential connection. The City charges an Impact Fee for commercial connections that varies in amount dependingupon the amount of water usage of each commercial establishment. Operation of the System is subject to regulation by,among others, the United States Environmental Protection Agency and the TCEQ. The total number of equivalent

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single-family connections (“ESFCs”) estimated at this time for the District upon the full development of itsapproximately 641.535 acres is approximately 1,951. The following descriptions are based upon information suppliedby the District's Engineer.

Description

The System presently serves the 1,145 fully developed single-family residential lots located the District that areenumerated in this Official Statement under the caption “DEVELOPMENT AND HOME CONSTRUCTION.” TheDistrict will finance components of the System, Impact Fees and other items with the proceeds of the sale of the Bondsas is enumerated in this Official Statement under the caption “THE BONDS - Use and Distribution of Bond Proceeds.” In addition to the components of the System and Impact Fees that the District has financed with portions of the proceedsof the sale of the Prior Bonds, and is financing with portions of the proceeds of the sale of the Bonds (see “THE BONDS- Use and Distribution of Bond Proceeds”), the District expects to finance the acquisition or construction of additionalcomponents of the System and Impact Fees with portions of the proceeds of the sale of bonds, if any, in the future,including approximately $9,000,000 of unlimited tax bonds that the District expects to issue in approximately the secondquarter of 2020. See “INVESTMENT CONSIDERATIONS - Future Debt.”

Water Supply

The Utility Agreement requires the City to provide the District with potable water. According to the District's Engineer,the City's facilities provide adequate water supply capacity to provide service to all connections in the District developedwith the proceeds of the sale of the Prior Bonds and the Bonds, plus all connections in the District expected to bedeveloped in the future to complete the development of the District, although the District must rely on the City'sobligations to supply the District with water under the terms of the Utility Agreement.

Wastewater Treatment

Pursuant to the Utility Agreement, the City is required to receive and treat all wastewater from the District. Accordingto the District's Engineer, the City's facilities provide adequate wastewater treatment capacity to provide service to allconnections in the District developed with the proceeds of the sale of the Prior Bonds and the Bonds, plus all connectionsin the District expected to be developed in the future to complete the development of the District, although the Districtmust rely on the City's obligations to treat the District's wastewater under the terms of the Utility Agreement.

Drainage Improvements

Storm drainage for the District is provided by an internal drainage network of underground storm drainage lines thatoutfall into detention ponds that ultimately drain into the Barry Rose Ditch, Mary’s Creek, or Clear Creek.

100-Year Flood Plain

The Federal Emergency Management Agency (“FEMA”) Flood Hazard Boundary Maps currently in effect, which coverthe land located in the District, indicate that approximately 42.50 acres of the land within the District are located withinthe current 100-year flood plain as shown on the Flood Insurance Rate Maps for Brazoria County, Texas, andIncorporated Areas dated September 22, 1999, and Flood Insurance Rate Map for Harris County, Texas, andIncorporated Areas. A portion of such land will be filled with excess soil from the excavation of the adjacent streets andthe detention pond to raise it above the 100-year flood plain elevation. A Conditional Letter of Map Revision based onsuch fill will be filed with FEMA to remove the land from the 100-year flood plain designation.

"Flood Insurance Rate Map" or "FIRM" means an official map of a community on which the Federal EmergencyManagement Agency (FEMA) has delineated the appropriate areas of flood hazards. The 1% chance of probableinundation, also known as the 100-year flood plain, is depicted on these maps. The "100-year flood plain" (or 1% chanceof probable inundation) as shown on the FIRM is the estimated geographical area that would be flooded by a rain stormof such intensity to statistically have a one percent chance of occurring in any given year. Generally speaking, homesmust be built above the 100-year flood plain in order to meet local regulatory requirements and to be eligible for federalflood insurance. An engineering or regulatory determination that an area is above the 100-year flood plain is not an

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assurance that homes built in such area will not be flooded, and a number of neighborhoods in the greater Houston areathat are above the 100-year flood plain have flooded multiple times in the last several years. See “INVESTMENTCONSIDERATIONS - Tropical Weather Events; Hurricane Harvey.”

LEGAL MATTERS

Legal Opinions

Delivery of the Bonds will be accompanied by the unqualified approving legal opinion of the Attorney General of Texasas recorded in the Bond Register of the Comptroller of Public Accounts of the State of Texas, to the effect that the Bondsare valid and binding obligations of the District under the Constitution and laws of the State of Texas, and all taxableproperty within the District is subject to the levy of ad valorem taxes to pay the same, without legal limitation as to rateor amount, based upon examination of a transcript of certified proceedings held incident to the issuance and authorizationof the Bonds, and the approving legal opinion of Bond Counsel for the District, to a like effect and to the effect that,under existing law, (i) interest on the Bonds is excludable from gross income for federal tax purposes, and (ii) intereston the Bonds is not subject to the alternative minimum tax on individuals.

Bond Counsel has reviewed the information appearing in this Official Statement under “THE BONDS” (except forinformation under the subheadings “Book-Entry-Only System” and “Use and Distribution of Bond Proceeds”), “THEDISTRICT - Utility Agreement,” “TAXING PROCEDURES,” “LEGAL MATTERS,” “TAX MATTERS” and“CONTINUING DISCLOSURE OF INFORMATION” solely to determine whether such information, insofar as itrelates to matters of law, is true and correct and whether such information fairly summarizes matters of law, theprovisions of the documents referred to therein. Bond Counsel has not, however, independently verified any of thefactual information contained in this Official Statement nor has it conducted an investigation of the affairs of the Districtfor the purpose of passing upon the accuracy or completeness of this Official Statement. No person is entitled to relyupon Bond Counsel's limited participation as an assumption of responsibility for or an expression of opinion of any kindwith regard to the accuracy or completeness of any information contained herein, other than the matters discussedimmediately above.

Allen Boone Humphries Robinson LLP also serves as general counsel to the District on matters other than the issuanceof bonds. The legal fees paid to Bond Counsel for services rendered in connection with the issuance of the Bonds arebased on a percentage of the bonds actually issued, sold and delivered and, therefore, such fees are contingent upon thesale and delivery of the Bonds. Certain legal matters will be passed upon for the District by McCall, Parkhurst & HortonL.L.P., Houston, Texas, as Disclosure Counsel.

The various legal opinions to be delivered concurrently with the delivery of the Bonds express the professional judgmentof 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 the expression of professional judgment, of the transactionopined upon, or of the future performance of the parties to the transaction, nor does the rendering of an opinion guaranteethe outcome of any legal dispute that may arise out of the transaction.

No-Litigation Certificate

The District will furnish the Underwriter a certificate, executed by both the President or Vice President and Secretaryor Assistant Secretary of the Board, and dated as of the date of delivery of the Bonds, that to their knowledge, nolitigation is pending or threatened affecting the validity of the Bonds, or the levy and/or collection of taxes for thepayment thereof, or the organization or boundaries of the District, or the title of the officers thereof to their respectiveoffices.

No Material Adverse Change

The obligations of the Underwriter to take up and pay for the Bonds, and of the District to deliver the Bonds, are subjectto the condition that, up to the time of delivery of and receipt of payment for the Bonds, there shall have been no materialadverse change in the financial condition of the District subsequent to the date of sale from that set forth in the

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Preliminary Official Statement, as it may have been finalized, supplemented or amended through the date of sale. As isstated in this Preliminary Official Statement under the caption “SALE AND DISTRIBUTION OF THE BONDS -Municipal Bond Insurance and Ratings,” if the Underwriter elects to purchase municipal bond insurance on the Bonds,the rating of the insurer’s creditworthiness by any rating agency does not and will not in any manner affect the District’sfinancial condition, and thus any change to such rating, including a downgrade thereof, at any time, does not and willnot constitute a change, material or otherwise, in the District’s financial condition, and therefore cannot be a basis fortermination by the Underwriter of its obligations to take up and pay for the Bonds.

TAX MATTERS

In the opinion of Allen Boone Humphries Robinson LLP, Bond Counsel, under existing law, (i) interest on the Bondsis excludable from gross income for federal income tax purposes, and (ii) interest on the Bonds is not subject to thealternative minimum tax on individuals.

The Internal Revenue Code of 1986, as amended (the “Code”) imposes a number of requirements that must be satisfiedfor interest on state or local obligations, such as the Bonds, to be excludable from gross income for federal income taxpurposes. These requirements include limitations on the use of proceeds and the source of repayment, limitations on theinvestment of proceeds prior to expenditure, a requirement that excess arbitrage earned on the investment of proceedsbe paid periodically to the United States and a requirement that the issuer file an information report with the InternalRevenue Service (the “Service”). The District has covenanted in the Bond Resolution that it will comply with theserequirements.

Bond Counsel's opinion will assume continuing compliance with the covenants of the Bond Resolution pertaining tothose sections of the Code which affect the exclusion from gross income of interest on the Bonds for federal income taxpurposes and, in addition, will rely on representations by the District, the District's Financial Advisor and the Underwriterwith respect to matters solely within the knowledge of the District, the District's Financial Advisor and the Underwriter,respectively, which Bond Counsel has not independently verified. If the District should fail to comply with thecovenants in the Bond Resolution or if the foregoing representations should be determined to be inaccurate orincomplete, interest on the Bonds could become taxable from the date of delivery of the Bonds, regardless of the dateon which the event causing such taxability occurs.

Under the Code, taxpayers are required to report on their returns the amount of tax exempt interest, such as interest onthe Bonds, received or accrued during the year. Payments of interest on tax-exempt obligations such as the Bonds arein many cases required to be reported to the Service. Additionally, backup withholding may apply to any such paymentsto any owner who is not an “exempt recipient” and who fails to provide certain identifying information. Individualsgenerally are not exempt recipients, whereas corporations and certain other entities generally are exempt recipients.Except as stated above, Bond Counsel will express no opinion as to any federal, state or local tax consequences resultingfrom the ownership of, receipt of interest on, or disposition of, the Bonds.

Prospective purchasers of the Bonds should be aware that the ownership of tax exempt obligations may result incollateral federal income tax consequences to financial institutions, life insurance and property and casualty insurancecompanies, certain S corporations with Subchapter C earnings and profits, individual recipients of Social Security orRailroad Retirement benefits, taxpayers who may be deemed to have incurred or continued indebtedness to purchase orcarry tax exempt obligations, taxpayers owning an interest in a FASIT that holds tax-exempt obligations, and individualsotherwise qualifying for the earned income credit. In addition, certain foreign corporations doing business in the UnitedStates may be subject to the “branch profits tax” on their effectively-connected earnings and profits, including tax exemptinterest such as interest on the Bonds. These categories of prospective purchasers should consult their own tax advisorsas to the applicability of these consequences.

Bond Counsel's opinions are based on existing law, which is subject to change. Such opinions are further based on BondCounsel's knowledge of facts as of the date hereof. Bond Counsel assumes no duty to update or supplement its opinionsto reflect any facts or circumstances that may thereafter come to Bond Counsel's attention or to reflect any changes inany law that may thereafter occur or become effective. Moreover, Bond Counsel's opinions are not a guarantee of result

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and are not binding on the Service; rather, such opinions represent Bond Counsel's legal judgment based upon its reviewof existing law and in reliance upon the representations and covenants referenced above that it deems relevant to suchopinions. The Service has an ongoing audit program to determine compliance with rules that relate to whether intereston state or local obligations is includable in gross income for federal income tax purposes. No assurance can be givenwhether or not the Service will commence an audit of the Bonds. If an audit is commenced, in accordance with itscurrent published procedures the Service is likely to treat the District as the taxpayer and the owners of the Bonds maynot have a right to participate in such audit. Public awareness of any future audit of the Bonds could adversely affectthe value and liquidity of the Bonds during the pendency of the audit regardless of the ultimate outcome of the audit.

Tax Accounting Treatment of Original Issue Discount Bonds

The issue price of certain of the Bonds (the “Original Issue Discount Bonds”) may be less than the stated redemptionprice at maturity. In such case, under existing law and based upon the assumptions hereinafter stated (a) The differencebetween (i) the stated amount payable at the maturity of each Original Issue Discount Bond and (ii) the issue price ofsuch Original Issue Discount Bond constitutes original issue discount with respect to such Original Issue Discount Bondin the hands of any owner who has purchased such Original Issue Discount Bond at the initial public offering price inthe initial public offering of the Bonds; and (b) such initial owner is entitled to exclude from gross income (as definedin Section 61 of the Code) an amount of income with respect to such Original Issue Discount Bond equal to that portionof the amount of such original issue discount allocable to the period that such Original Issue Discount Bond continuesto be owned by such owner.

In the event of the redemption, sale or other taxable disposition of such Original Issue Discount Bond prior to statedmaturity, however, the amount realized by such owner in excess of the basis of such Original Issue Discount Bond inthe hands of such owner (adjusted upward by the portion of the original issue discount allocable to the period for whichsuch Bond was held by such initial owner) is includable in gross income. (Because original issue discount is treated asinterest for federal income tax purposes, the discussion regarding interest on the Bonds under the caption “TAXMATTERS” generally applies, except as otherwise provided below, to original issue discount on a Original IssueDiscount Bond held by an owner who purchased such Bond at the initial offering price in the initial public offering ofthe Bonds, and should be considered in connection with the discussion in this portion of the Preliminary OfficialStatement.)

The foregoing is based on the assumptions that (a) the Underwriter has purchased the Bonds for contemporaneous saleto the general public and not for investment purposes, and (b) all of the Original Issue Discount Bonds have been offered,and a substantial amount of each maturity thereof has been sold, to the general public in arm's-length transactions fora cash price (and with no other consideration being included) equal to the initial offering prices thereof stated on thecover page of this Preliminary Official Statement, and (c) the respective initial offering prices of the Original IssueDiscount Bonds to the general public are equal to the fair market value thereof. Neither the District nor Bond Counselwarrants that the Original Issue Discount Bonds will be offered and sold in accordance with such assumptions.

Under existing law, the original issue discount on each Original Issue Discount Bond is accrued daily to the statedmaturity thereof (in amounts calculated as described below for each six-month period ending on the date before thesemiannual anniversary dates of the Bonds and ratably within each such six-month period) and the accrued amount isadded to an initial owner's basis for such Bond for purposes of determining the amount of gain or loss recognized by suchowner upon redemption, sale or other disposition thereof. The amount to be added to basis for each accrual period isequal to (a) the sum of the issue price plus the amount of original issue discount accrued in prior periods multiplied bythe yield to stated maturity (determined on the basis of compounding at the close of each accrual period and properlyadjusted for the length of the accrual period) less (b) the amounts payable as current interest during such accrual periodon such Bond.

The federal income tax consequences of the purchase, ownership, and redemption, sale or other disposition of OriginalIssue Discount Bonds which are not purchased in the initial offering at the initial offering price may be determinedaccording to rules which differ from those described above. All owners of Original Issue Discount Bonds should consulttheir own tax advisors with respect to the determination for federal, state and local income tax purposes of interestaccrued upon redemption, sale or other disposition of such Bonds and with respect to the federal, state, local and foreigntax consequences of the purchase, ownership and redemption, sale or other disposition of such Bonds.

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Not Qualified Tax-Exempt Obligations

The Bonds are not “qualified tax-exempt obligations.”

OFFICIAL STATEMENT

General

The information contained in this Official Statement has been obtained primarily from the District's records, theEngineer, the Developers, the Tax Assessor/Collector and other sources believed to be reliable; however, norepresentation is made by the District as to the accuracy or completeness of the information contained herein, except asdescribed below under “Certification as to Official Statement.” The summaries of the statutes, resolutions andengineering and other related reports set forth herein are included 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 documentsfor further information.

The District’s financial statements for the fiscal year ended May 31, 2018, were audited by McGrath & Co., PLLC, andhave been included herein as “APPENDIX B.”

Experts

The information contained in the Official Statement relating to engineering and to the description of the System, and,in particular, that engineering information included in the sections entitled “THE BONDS - Use and Distribution of BondProceeds,” “THE DISTRICT” and “THE SYSTEM” has been provided by LJA Engineering, Inc. and has been includedherein in reliance upon the authority of said firm as experts in the field of civil engineering.

The information contained in the Official Statement relating to assessed valuations of property generally and, inparticular, that information concerning collection rates and valuations contained in the sections captioned “TAX DATA”and “DISTRICT DEBT” was provided by Assessments of the Southwest, Inc. and the Appraisal Districts. Suchinformation has been included herein in reliance upon Assessments of the Southwest, Inc.’s authority as an expert in thefield of tax collection and the Appraisal Districts’ authority as an expert in the field of tax assessing.

Certification as to Official Statement

The District, acting by and through its Board of Directors in its official capacity and in reliance upon the experts listedabove, hereby certifies, as of the date hereof, that to the best of its knowledge and belief, the information, statements anddescriptions pertaining to the District and its affairs herein contain no untrue statements of a material fact and do not omitto state any material fact necessary to make the statements herein, in light of the circumstances under which they weremade, not misleading. The information, descriptions and statements concerning entities other than the District, includingparticularly other governmental entities, have been obtained from sources believed to be reliable, but the District hasmade no independent investigation or verification of such matters and makes no representation as to the accuracy orcompleteness thereof.

Updating of Official Statement

If, subsequent to the date of the Official Statement, to and including the date the Underwriter is no longer required toprovide an Official Statement to customers who request same pursuant to Rule 15c2-12 of the United States Securitiesand Exchange Commission (the “SEC”), the District learns, or is notified by the Underwriter, of any adverse event whichcauses the Official Statement to be materially misleading, and unless the Underwriter elect to terminate its obligationto purchase the Bonds, the District will promptly prepare and supply to the Underwriter an appropriate amendment orsupplement to the Official Statement satisfactory to the Underwriter; provided, however, that the obligation of theDistrict to so amend or supplement the Official Statement will terminate upon the earlier of (i) 90 days after the “endof the underwriting period” as defined in SEC Rule 15c2-12 or (ii) the date the Official Statement is filed with theMSRB, but in no case less than 25 days after the “end of the underwriting period.”

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Official Statement “Deemed Final”

For purposes of compliance with Rule 15c2-12 of the SEC, this document, as the same may be supplemented or correctedby the District from time to time, may be treated as an “official statement” with respect to the Bonds described herein“deemed final” by the District as of the date hereof (or of any such supplement or correction) except for the omissionof certain information referred to in the succeeding paragraph.

The Official Statement, when further supplemented by adding information specifying the interest rates and certain otherinformation relating to the Bonds, shall constitute a “final official statement” of the District with respect to the Bonds,as that term is defined in Rule 15c2-12.

CONTINUING DISCLOSURE OF INFORMATION

In the Bond Resolution, the District has made the following agreement for the benefit of the holders and beneficialowners of the Bonds. The District is required to observe the agreement for so long as it remains obligated to advancefunds to pay the Bonds. Under the agreement, the District will be obligated to provide certain updated financialinformation and operating data annually, and timely notice of specified events, to the Municipal Securities RulemakingBoard (the “MSRB”) or any successor to its functions as a repository through its Electronic Municipal Market Access(“EMMA”) system.

Annual Reports

The District will provide certain updated financial information and operating data annually to the MSRB. Theinformation to be updated with respect to the District includes all quantitative financial information and operating dataof the general type included in this Official Statement under the headings “DISTRICT DEBT,” “TAX DATA,” and in“APPENDIX B - Financial Report.” The District will update and provide this information within six months after theend of each of its fiscal years ending in and after 2019.

The District may provide updated information in full text or may incorporate by reference certain other publicly availabledocuments, as permitted by SEC Rule 15c2-12. The updated information will include audited financial statements if itcommissions an audit and the audit is completed by the required time. If the audit of such financial statements is notcomplete within such period, then the District shall provide unaudited financial statements for the applicable fiscal yearto the MSRB within such six-month period, and audited financial statements when and if the audit report on suchstatements becomes available. Any such financial statements will be prepared in accordance with the accountingprinciples described in the Bond Resolution or such other accounting principles as the District may be required to employfrom time to time pursuant to state law or regulation.

The District's current fiscal year end is May 31. Accordingly, it must provide updated information by November 30 ineach year, unless the District changes its fiscal year. If the District changes its fiscal year, it will notify the MSRB ofthe change.

Event Notices

The District will provide timely notices of certain specified events to the MSRB, but in no event will such notices beprovided to the MSRB in excess of ten business days after the occurrence of an event. The District will provide noticeof any of the following events with respect to the Bonds: (1) principal and interest payment delinquencies; (2)non-payment related defaults, if material; (3) unscheduled draws on debt service reserves reflecting financial difficulties;(4) unscheduled draws on credit enhancements reflecting financial difficulties; (5) substitution of credit or liquidityproviders, or their failure to perform; (6) adverse tax opinions, the issuance by the Internal Revenue Service of proposedor final determination of taxability, Notices of Proposed Issue (IRS Form 5701-TEB) or other material notices ordeterminations with respect to the tax status of the Bonds, or other events affecting the tax status of the Bonds; (7)modifications to rights of beneficial owners of the Bonds, if material; (8) bond calls, if material, and tender offers; (9)defeasances; (10) release, substitution, or sale of property securing repayment of the Bonds, if material; (11) ratingchanges; (12) bankruptcy, insolvency, receivership or similar event of the District or other obligated person within the

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meaning of SEC Rule 15c2-12; (13) consummation of a merger, consolidation, or acquisition involving the District orother obligated person within the meaning of SEC Rule 15c2-12 or the sale of all or substantially all of the assets of theDistrict or other obligated person within the meaning of the SEC Rule 15c2-12, other than in the ordinary course ofbusiness, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreementrelating to any such actions, other than pursuant to its terms, if material; (14) appointment of a successor or additionaltrustee or the change of name of a trustee, if material; (15) incurrence of a financial obligation of the District or otherobligated person within the meaning of the Rule, if material, or agreement to covenants, events of default, remedies,priority rights, or other similar terms of a financial obligation of the District or other obligated person within the meaningof the Rule, any of which affect Beneficial Owners of the Bonds, if material; and (16) default, event of acceleration,termination event, modification of terms, or other similar events under the terms of a financial obligation of the Districtor other obligated person within the meaning of the Rule, any of which reflect financial difficulties. The term “material”when used in this paragraph shall have the meaning ascribed to it under federal securities laws. Neither the Bonds northe Bond Resolution makes any provision for debt service reserves or liquidity enhancement. In addition, the Districtwill provide timely notice of any failure by the District to provide financial information, operating data, or financialstatements in accordance with its agreement described above under “Annual Reports.”

Availability of Information

The District has agreed to provide the foregoing information only to the MSRB. Investors will be able to access, withoutcharge from the MSRB, continuing disclosure information filed with the MSRB through its EMMA system atwww.emma.msrb.org.

Limitations and Amendments

The District has agreed to update information and to provide notices of certain specified events only as described above. The District has not agreed to provide other information that may be relevant or material to a complete presentation ofits financial results of operations, condition, or prospects or agreed to update any information that is provided, exceptas described above. The District makes no representation or warranty concerning such information or concerning itsusefulness to a decision to invest in or sell Bonds at any future date. The District disclaims any contractual or tortliability for damages resulting in whole or in part from any breach of its continuing disclosure agreement or from anystatement made pursuant to its agreement, although holders or beneficial owners of Bonds may seek a writ of mandamusto compel the District to comply with its agreement.

The District may amend its continuing disclosure agreement from time to time to adapt to changed circumstances thatarise from a change in legal requirements, a change in law, or a change in the identity, nature, status, or type ofoperations of the District, if but only if the agreement, as amended, would have permitted an underwriter to purchaseor sell Bonds in the offering made hereby in compliance with SEC Rule 15c2-12, taking into account any amendmentsor interpretations of SEC Rule 15c2-12 to the date of such amendment, as well as such changed circumstances, and eitherthe holders of a majority in aggregate principal amount of the outstanding Bonds consent to the amendment or any personunaffiliated with the District (such as nationally recognized bond counsel) determines that the amendment will notmaterially impair the interests of the holders and beneficial owners of the Bonds. The District may amend or repeal theagreement in the Bond Resolution if the SEC amends or repeals the applicable provisions of SEC Rule 15c2-12 or a courtof final jurisdiction determines that such provisions are invalid or unenforceable, but only to the extent that its right todo so would not prevent the Initial Purchaser from lawfully purchasing the Bonds in the initial offering. If the Districtso amends the agreement, it has agreed to include with any financial information or operating data next provided inaccordance with its agreement described above under “Annual Reports” an explanation, in narrative form, of the reasonsfor the amendment and of the impact of any change in the type of financial information and operating data so provided.

Compliance With Prior Undertakings

Since the issuance of its first series of bonds in 2015, the District has complied in all material respects with all continuingdisclosure agreements made by the District in accordance with SEC Rule 15c2-12.

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This Official Statement was approved by the Board of Directors of Harris-Brazoria Counties Municipal Utility DistrictNo. 509 as of the date shown on the first page hereof.

President, Board of DirectorsHarris-Brazoria Counties Municipal Utility District No. 509

ATTEST:

Secretary, Board of DirectorsHarris-Brazoria Counties Municipal Utility District No. 509

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APPENDIX A

LOCATION MAP

APPENDIX B

HARRIS-BRAZORIA COUNTIES MUNICIPAL UTILITY DISTRICT NO. 509

HARRIS AND BRAZORIA COUNTIES, TEXAS

FINANCIAL REPORT

MAY 31, 2018

HARRIS-BRAZORIA COUNTIES MUNICIPAL UTILITY DISTRICT NO. 509

HARRIS AND BRAZORIA COUNTIES, TEXAS

FINANCIAL REPORT

May 31, 2018

Table of Contents

Schedule Page Independent Auditors’ Report 1 Management’s Discussion and Analysis 5 BASIC FINANCIAL STATEMENTS Statement of Net Position and Governmental Funds Balance Sheet 14 Statement of Activities and Governmental Funds Revenues, Expenditures

and Changes in Fund Balances

15 Notes to Basic Financial Statements 17 REQUIRED SUPPLEMENTARY INFORMATION Budgetary Comparison Schedule – General Fund 34 Notes to Required Supplementary Information 35 TEXAS SUPPLEMENTARY INFORMATION Services and Rates TSI-1 38 General Fund Expenditures TSI-2 40 Investments TSI-3 N/A Taxes Levied and Receivable TSI-4 41 Long-Term Debt Service Requirements by Years TSI-5 42 Change in Long-Term Bonded Debt TSI-6 45 Comparative Schedule of Revenues and Expenditures – General Fund TSI-7a 46 Comparative Schedule of Revenues and Expenditures – Debt Service Fund TSI-7b 48 Board Members, Key Personnel and Consultants TSI-8 50

Mark W. McGrath CPA mark@mcgrath-co.com

McGrath & Co., PLLC Certified Public Accountants

P.O. Box 270148 Houston, Texas 77277

Colette M. Garcia CPA colette@mcgrath-co.com

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Independent Auditors’ Report Board of Directors Harris - Brazoria Counties Municipal Utility District No. 509 Harris and Brazoria Counties, Texas We have audited the accompanying financial statements of the governmental activities and each major fund of Harris - Brazoria Counties Municipal Utility District No. 509, as of and for the year ended May 31, 2018, and the related notes to the financial statements, which collectively comprise the basic financial statements as listed in the table of contents. Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor’s Responsibility Our responsibility is to express opinions on these basic financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the basic financial statements are free of material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting principles used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient to provide a basis for our audit opinions.

Board of Directors Harris - Brazoria Counties Municipal Utility District No. 509 Harris and Brazoria Counties, Texas

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Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities and each major fund of Harris - Brazoria Counties Municipal Utility District No. 509, as of May 31, 2018, and the respective changes in financial position thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America. Other-Matters Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis and budgetary comparison information be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the District’s financial statements as a whole. The Texas Supplementary Information is presented for purposes of additional analysis and is not a required part of the basic financial statements. The Texas Supplementary Information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied to the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the financial statements taken as a whole.

Houston, Texas September 20, 2018

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Management’s Discussion and Analysis

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Harris - Brazoria Counties Municipal Utility District No. 509 Management’s Discussion and Analysis May 31, 2018

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Using this Annual Report Within this section of the financial report of Harris - Brazoria Counties Municipal Utility District No. 509 (the “District”), the District’s Board of Directors provides a narrative discussion and analysis of the financial activities of the District for the fiscal year ended May 31, 2018. This analysis should be read in conjunction with the independent auditors’ report and the basic financial statements that follow this section. In addition to this discussion and analysis, this annual report consists of:

The District’s basic financial statements; Notes to the basic financial statements, which provide additional information essential to a full understanding of the data provided in the financial statements; Supplementary information required by the Governmental Accounting Standards Board (GASB) concerning the District’s budget; and Other Texas supplementary information required by the District’s state oversight agency, the Texas Commission on Environmental Quality (TCEQ).

Overview of the Financial Statements The District prepares its basic financial statements using a format that combines fund financial statements and government-wide statements onto one financial statement. The combined statements are the Statement of Net Position and Governmental Funds Balance Sheet and the Statement of Activities and Governmental Funds Revenues, Expenditures and Changes in Fund Balances. Each statement contains an adjustments column which quantifies the differences between the government-wide and fund level statements. Additional details of the adjustments are provided in Note 2 to the basic financial statements. Government-Wide Financial Statements The focus of government-wide financial statements is on the overall financial position and activities of the District, both long-term and short-term. The District’s government-wide financial statements consist of the Statement of Net Position and the Statement of Activities, which are prepared using the accrual basis of accounting. The Statement of Net Position includes all of the District’s assets, deferred outflows of resources, liabilities, and deferred inflows of resources with the residual reported as net position. Over time, changes in net position may provide a useful indicator of whether the financial position of the District as a whole is improving or deteriorating. Accounting standards establish three components of net position. The net investment in capital assets component represents the District’s investments in capital assets, less any outstanding debt or other borrowings used to acquire those assets. Resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities. The restricted component of net position consists of financial resources that are restricted for a specific purpose by enabling legislation or external parties. The unrestricted component of net position represents resources not included in the other components.

Harris - Brazoria Counties Municipal Utility District No. 509 Management’s Discussion and Analysis May 31, 2018

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The Statement of Activities reports how the District’s net position has changed during the fiscal year. All revenues and expenses are included on this statement, regardless of whether cash has been received or paid. Fund Financial Statements The fund financial statements include the Governmental Funds Balance Sheet and the Governmental Funds Revenues, Expenditures and Changes in Fund Balances. The focus of fund financial statements is on specific activities of the District rather than the District as a whole, reported using modified accrual accounting. These statements report on the District’s use of available financial resources and the balances of available financial resources at the end of the year. Except for the General Fund, a specific fund is established to satisfy managerial control over resources or to satisfy finance-related legal requirements established by external parties, governmental statutes or regulations. For further discussion on the government-wide and fund financial statements, please refer to Note 1 in the financial statements. Financial Analysis of the District as a Whole The District’s net position at May 31, 2018, was negative $22,278,773. The District’s net position is negative because the District incurs debt to construct water, sewer and drainage facilities which it conveys to the City of Pearland (“the City”). A comparative summary of the District’s overall financial position, as of May 31, 2018 and 2017, is as follows:

2018 2017Current and other assets 1,861,535$ 1,135,248$ Capital assets 10,185,507 6,164,779

Total assets 12,047,042 7,300,027

Current liabilities 7,902,524 102,747 Long-term liabilities 26,423,291 24,248,508

Total liabilities 34,325,815 24,351,255

Net positionNet investment in capital assets (1,209,985) (733,872) Restricted 1,067,673 434,626 Unrestricted (22,136,461) (16,751,982) Total net position (22,278,773)$ (17,051,228)$

Harris - Brazoria Counties Municipal Utility District No. 509 Management’s Discussion and Analysis May 31, 2018

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The total net position of the District decreased during the current fiscal year by $5,227,545. A comparative summary of the District’s Statement of Activities for the past two years is as follows:

2018 2017Revenues

Property taxes, penalties and interest 1,076,314$ 474,747$ City of Pearland rebates 196,528 98,376 Other 2,605 1,247

Total revenues 1,275,447 574,370

ExpensesOperating and administrative 319,344 263,900Debt interest and fees 394,371 190,387 Developer interest 469,980 Debt issuance costs 181,893 346,747 Depreciation and amortization 86,915 55,176

Total expenses 982,523 1,326,190

Change in net position before other item 292,924 (751,820)

Other itemTransfers to other governments (5,520,469) (7,853,082)

Change in net position (5,227,545) (8,604,902) Net position, beginning of year (17,051,228) (8,446,326) Net position, end of year (22,278,773)$ (17,051,228)$

Financial Analysis of the District’s Funds The District’s combined fund balances, as of May 31, 2018, were $1,744,037, which consists of $435,396 in the General Fund, $1,133,647 in the Debt Service Fund, and $174,994 in the Capital Projects Fund. General Fund A comparative summary of the General Fund’s financial position as of May 31, 2018 and 2017 is as follows:

2018 2017

Total assets 455,780$ 417,340$

Total liabilities 14,436$ 34,038$ Total deferred inflows 5,948 4,879 Total fund balance 435,396 378,423 Total liabilities, deferred inflows and fund balance 455,780$ 417,340$

Harris - Brazoria Counties Municipal Utility District No. 509 Management’s Discussion and Analysis May 31, 2018

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A comparative summary of the General Fund’s activities for the current and prior fiscal year is as follows:

2018 2017Total revenues 235,873$ 220,996$ Total expenditures (178,900) (168,894)Revenues over expenditures 56,973 52,102 Other changes in fund balance 53,044Net change in fund balance 56,973$ 105,146$

The District manages its activities with the objectives of ensuring that expenditures will be adequately covered by revenues each year and that an adequate fund balance is maintained. The District’s primary financial resources in the General Fund are from a property tax levy and City of Pearland utility rebates. Financial resources are influenced by a variety of factors each year:

Property tax revenues are dependent upon assessed values in the District and the maintenance tax rate set by the District. While the District decreased its maintenance tax levy, property tax revenues increased because assessed values in the District increased from the prior year. Utility rebates received from the City of Pearland are based on the number of connections in the District and increases as the number of connections increases.

Debt Service Fund A comparative summary of the Debt Service Fund’s financial position as of May 31, 2018 and 2017 is as follows:

2018 2017

Total assets 1,218,985$ 497,679$

Total liabilities -$ 12,200$ Total deferred inflows 85,338 8,139 Total fund balance 1,133,647 477,340 Total liabilities, deferred inflows and fund balance 1,218,985$ 497,679$

A comparative summary of the Debt Service Fund’s activities for the current and prior fiscal year is as follows:

2018 2017Total revenues 960,708$ 344,050$ Total expenditures (304,401) (170,710) Revenues over expenditures 656,307$ 173,340$

The District’s financial resources in the Debt Service Fund in both the current year and prior year are from property tax revenues and City of Pearland tax rebates. The difference between these financial resources and debt service requirements resulted in an increase in fund balance each year. It is

Harris - Brazoria Counties Municipal Utility District No. 509 Management’s Discussion and Analysis May 31, 2018

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important to note that the District sets its annual debt service tax rate as recommended by its financial advisor, who monitors projected cash flows in the Debt Service Fund to ensure that the District will be able to meet its future debt service requirements. Capital Projects Fund A comparative summary of the Capital Projects Fund’s financial position as of May 31, 2018 and 2017 is as follows:

2018 2017Total assets 186,770$ 220,229$

Total liabilities 11,776$ 5,656$ Total fund balance 174,994 214,573 Total liabilities and fund balance 186,770$ 220,229$

A comparative summary of activities in the Capital Projects Fund for the current and prior fiscal year is as follows:

2018 2017Total revenues 598$ 280$ Total expenditures (7,444,195) (4,638,015) Revenues under expenditures (7,443,597) (4,637,735) Other changes in fund balance 7,404,018 4,698,326Net change in fund balance (39,579)$ 60,591$

The District has had considerable capital asset activity in the last two years, which was financed with proceeds from the issuance of its Series 2017 bond anticipation note in the current year and issuance of its Series 2017 Unlimited Tax Bonds and Series 2016 Bond Anticipation Note in the prior year. General Fund Budgetary Highlights The Board of Directors adopts an annual unappropriated budget for the General Fund prior to the beginning of each fiscal year. The Board did not amend the budget during the fiscal year. Since the District’s budget is primarily a planning tool, actual results varied from the budgeted amounts. Actual net change in fund balance was $16,383 greater than budgeted. The Budgetary Comparison Schedule on page 34 of this report provides variance information per financial statement line item.

Harris - Brazoria Counties Municipal Utility District No. 509 Management’s Discussion and Analysis May 31, 2018

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Capital Assets The District has entered into financing agreements with its developers for the financing of the construction of capital assets within the District. Developers will be reimbursed from proceeds of future bond issues or other lawfully available funds. These developer funded capital assets are recorded on the District’s financial statements upon completion of construction. Capital assets held by the District at May 31, 2018 and 2017 are summarized as follows:

2018 2017Capital assets not being depreciated

Land and improvements 7,382,736$ 4,294,950$

Capital assets being depreciated/amortizedDrainage 1,386,147 1,024,415 Impact fees 1,585,995 927,870

2,972,142 1,952,285 Less accumulated depreciation/amortization

Drainage (60,266) (25,611) Impact fees (109,105) (56,845) Less accumulated amortization (169,371) (82,456)

Subtotal, depreciable capital assets, net 2,802,771 1,869,829

Capital assets, net 10,185,507$ 6,164,779$

Capital asset additions during the current year include the following:

Riverstone Ranch at Clear Creek, Section 6 – remainder of Lake D, E and F detention facilities Riverstone Ranch at Clear Creek Section 8 and 9 – Lake F, Part C detention facilities Riverstone Ranch SF-10 and SF-11 - Lake F, Part D drainage facilities KSTX Pearland Parkway, Kroger detention facilities Land acquisitions for Riverstone Falls Drive, Riverstone Ranch Lake B, Bakers Landing, and Afton Lake detention ponds City of Pearland impact fees

The District and the City of Pearland (the “City”) have entered into an agreement which obligates the District to construct water, wastewater, and storm drainage and recreational facilities to serve the District and, when completed, to convey certain of the facilities to the City for ownership, operation, and maintenance. Detention facilities and certain other capital assets are retained by the District. For the year ended May 31, 2018, capital assets in the amount of $5,520,469 have been completed and recorded as transfers to other governments in the government-wide statements. Additional information is presented in Note 11.

Harris - Brazoria Counties Municipal Utility District No. 509 Management’s Discussion and Analysis May 31, 2018

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Long-Term Debt and Related Liabilities As of May 31, 2018, the District owes $18,204,757 to developers for completed projects and operating advances. As discussed in Note 7, the District has an additional commitment in the amount of $725,371 for projects under construction by the developers. As previously mentioned, the District will owe its developers for these projects upon completion of construction, at which time the capital assets and related liability will be recorded on the District’s financial statements. The District intends to reimburse the developers from proceeds of future bond issues. At May 31, 2018 and 2017, the District had total bonded debt outstanding as shown below:

Series 2018 20172015 3,500,000$ 3,500,000$ 2017 5,000,000 5,000,000

8,500,000$ 8,500,000$

At May 31, 2018, the District had $126,600,000 unlimited tax bonds authorized, but unissued for the purposes of acquiring, constructing and improving the water, sanitary sewer and drainage systems serving the District and the refunding of said bonds, and $12,200,000 for parks and recreational facilities and the refunding of said bonds. During the year, the District issued a $7,660,000 bond anticipation note (BAN) to provide short term financing for the purpose, among others, of reimbursing its developers for construction of facilities serving the District. The District repaid this BAN subsequent to year end with proceeds from the issuance of the Series 2018 Unlimited Tax Bonds. See Note 13 for additional information. Next Year’s Budget In establishing the budget for the next fiscal year, the Board considered various economic factors that may affect the District, most notably projected revenues from property taxes and the projected cost of operating the District. A comparison of next year’s budget to current year actual amounts for the General Fund is as follows:

2018 Actual 2019 BudgetTotal revenues 235,873$ 281,590$ Total expenditures (178,900) (207,418) Revenues over expenditures 56,973 74,172 Beginning fund balance 378,423 435,396 Ending fund balance 435,396$ 509,568$

Property Taxes The District’s property tax base increased approximately $38,996,000 for the 2018 tax year from $125,324,510 to $164,320,726. This increase was primarily due to new construction in the District and increased property values.

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Basic Financial Statements

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Harris - Brazoria Counties Municipal Utility District No. 509Statement of Net Position and Governmental Funds Balance SheetMay 31, 2018

General Fund

Debt Service Fund

Capital Projects

Fund Total AdjustmentsStatement of Net Position

AssetsCash 374,137$ 1,138,254$ 250,744$ 1,763,135$ -$ 1,763,135$ Taxes receivable 3,270 13,670 16,940 16,940Internal balances 68,581 (4,607) (63,974) Due from other governments 5,570 71,668 77,238 77,238Prepaid items 825 825 825Other receivables 3,397 3,397 3,397Capital assets not being depreciated 7,382,736 7,382,736Capital assets, net 2,802,771 2,802,771

Total Assets 455,780$ 1,218,985$ 186,770$ 1,861,535$ 10,185,507 12,047,042

LiabilitiesAccounts payable 14,436$ -$ 11,776$ 26,212$ 26,212Accrued interest payable 151,312 151,312Bond anticipation note payable 7,660,000 7,660,000 Due to developers 18,204,757 18,204,757Long-term debt

Due within one year 65,000 65,000 Due after one year 8,218,534 8,218,534

Total Liabilities 14,436 11,776 26,212 34,299,603 34,325,815

Deferred Inflows of ResourcesDeferred property taxes 3,270 13,670 16,940 (16,940) Deferred City of Pearland rebates 2,678 71,668 74,346 (74,346)

5,948 85,338 91,286 (91,286)

Fund Balance/Net PositionFund BalancesNonspendable 825 825 (825) Restricted 1,133,647 174,994 1,308,641 (1,308,641) Unassigned 434,571 434,571 (434,571)

Total Fund Balances 435,396 1,133,647 174,994 1,744,037 (1,744,037) Total Liabilities, Deferred Inflows of Resources and Fund Balances 455,780$ 1,218,985$ 186,770$ 1,861,535$

Net PositionNet investment in capital assets (1,209,985) (1,209,985) Restricted for debt service 1,067,673 1,067,673 Unrestricted (22,136,461) (22,136,461)

Total Net Position (22,278,773)$ (22,278,773)$

See notes to basic financial statements.

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Harris - Brazoria Counties Municipal Utility District No. 509Statement of Activities and Governmental Funds Revenues, Expenditures and Changes in Fund BalancesFor the Year Ended May 31, 2018

General Fund

Debt Service Fund

Capital Projects

Fund Total AdjustmentsStatement of

ActivitiesRevenuesProperty taxes 205,163$ 859,919$ -$ 1,065,082$ 3,922$ 1,069,004$ Penalties and interest 7,310 7,310 7,310City of Pearland rebates 30,213 91,969 122,182 74,346 196,528Investment earnings 497 1,510 598 2,605 2,605

Total Revenues 235,873 960,708 598 1,197,179 78,268 1,275,447

Expenditures/ExpensesOperating and administrative

Professional fees 136,443 121,722 258,165 258,165Contracted services 18,106 16,537 34,643 34,643Repairs and maintenance 2,978 2,978 2,978Administrative 14,694 1,969 16,663 16,663Other 6,679 216 6,895 6,895

Capital outlay 7,140,364 7,140,364 (7,140,364) Debt service

Interest and fees 285,895 285,895 108,476 394,371Debt issuance costs 181,893 181,893 181,893

Depreciation and amortization 86,915 86,915Total Expenditures/Expenses 178,900 304,401 7,444,195 7,927,496 (6,944,973) 982,523

Revenues Over/(Under) Expenditures/Expenses 56,973 656,307 (7,443,597) (6,730,317) 7,023,241 292,924

Other Financing Sources/(Uses)Proceeds from bond anticipation note 7,660,000 7,660,000 (7,660,000) Repayment of operating advances (255,982) (255,982) 255,982

Other Item Transfers to other governments (5,520,469) (5,520,469)

Net Change in Fund Balances 56,973 656,307 (39,579) 673,701 (673,701) Change in Net Position (5,227,545) (5,227,545)

Fund Balance/Net PositionBeginning of the year 378,423 477,340 214,573 1,070,336 (18,121,564) (17,051,228)End of the year 435,396$ 1,133,647$ 174,994$ 1,744,037$ (24,022,810)$ (22,278,773)$

See notes to basic financial statements.

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Harris - Brazoria Counties Municipal Utility District No. 509 Notes to Basic Financial Statements May 31, 2018

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Note 1 – Summary of Significant Accounting Policies The accounting policies of Harris - Brazoria Counties Municipal Utility District No. 509 (the “District”) conform with accounting principles generally accepted in the United States of America as promulgated by the Governmental Accounting Standards Board. The following is a summary of the most significant policies: Creation The District was created as Harris County Municipal Utility District No. 509 by House Bill No. 4080 of the 80th Texas Legislature, Regular Session dated June 15, 2007, and codified as Chapter 8217, Special District Laws Code (“Chapter 8217”). By order of the Commission dated October 9, 2015, the District changed its name to Harris – Brazoria Counties Municipal Utility District No. 509. The District operates in accordance with Article XVI, Section 59 of the Texas Constitution, Chapter 8217 and the provisions of the Texas Water Code, Chapters 49 and 54. The Board of Directors held its first meeting on August 29, 2007 and the first bonds were sold on December 17, 2015. The District is responsible for providing water, sewer, storm drainage and certain recreational facilities serving the District. As further discussed in Note 11, the District conveys the water, sewer, and certain drainage and recreational facilities to the City of Pearland for ownership, operation and maintenance upon completion of construction. The District has contracted with various consultants to provide services to operate and administer the affairs of the District. The District has no employees, related payroll or pension costs. Reporting Entity The District is a political subdivision of the State of Texas governed by an elected five-member board. The Governmental Accounting Standards Board has established the criteria for determining whether or not an entity is a primary government or a component unit of a primary government. The primary criteria are that it has a separately elected governing body; it is legally separate; and it is fiscally independent of other state and local governments. Under these criteria, the District is considered a primary government and is not a component unit of any other government. Additionally, no other entities meet the criteria for inclusion in the District’s financial statements as component units. Government-Wide and Fund Financial Statements Government-wide financial statements display information about the District as a whole. These statements focus on the sustainability of the District as an entity and the change in aggregate financial position resulting from the activities of the fiscal period. Interfund activity, if any, has been removed from these statements. These aggregated statements consist of the Statement of Net Position and the Statement of Activities.

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Note 1 – Summary of Significant Accounting Policies (continued) Government-Wide and Fund Financial Statements (continued) Fund financial statements display information at the individual fund level. A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for a specific purpose. Each fund is considered to be a separate accounting entity. Most governments typically have many funds; however, governmental financial statements focus on the most important or “major” funds with non-major funds aggregated in a single column. The District has three governmental funds, which are all considered major funds. The following is a description of the various funds used by the District:

The General Fund is used to account for the operations of the District and all other financial transactions not reported in other funds. The principal sources of revenue are property taxes and City of Pearland utility rebates. Expenditures include costs associated with the daily operations of the District. The Debt Service Fund is used to account for the payment of interest and principal on the District’s general long-term debt. The primary source of revenue for debt service is property taxes and City of Pearland tax rebates. Expenditures include costs incurred in assessing and collecting these taxes. The Capital Projects Fund is used to account for the expenditures of bond proceeds for the construction of the District’s water, sewer and drainage facilities.

As a special-purpose government engaged in a single governmental program, the District has opted to combine its government-wide and fund financial statements in a columnar format showing an adjustments column for reconciling items between the two. Measurement Focus and Basis of Accounting The government-wide financial statements use 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 the related cash flows. Property taxes are recognized as revenue in the year for which they are levied. The fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenue is recognized in the accounting period in which it becomes both available and measurable to finance expenditures of the current period. For this purpose, the government considers revenues to be available if they are collected within sixty days of the end of the current fiscal period. Revenues susceptible to accrual include property taxes, City of Pearland rebates, and interest earned on investments. Property taxes receivable at the end of the fiscal year are treated as deferred inflows because they are not considered available to pay liabilities of the current period. Expenditures are recognized in the accounting period in which the liability is incurred, if measurable, except for unmatured interest on long-term debt, which is recognized when due.

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Note 1 – Summary of Significant Accounting Policies (continued) Measurement Focus and Basis of Accounting (continued) Note 2 further details the adjustments from the governmental fund presentation to the government-wide presentation. Use of Restricted Resources When both restricted and unrestricted resources are available for use, the District uses restricted resources first, then unrestricted resources as they are needed. Prepaid Items Certain payments made by the District reflect costs applicable to future accounting periods and are recorded as prepaid items in both the government-wide and fund financial statements. Receivables All receivables are reported at their gross value and, where appropriate, are reduced by the estimated portion that is expected to be uncollectible. Receivables from and payables to external parties are reported separately and are not offset, unless a legal right of offset exists. At May 31, 2018, an allowance for uncollectible accounts was not considered necessary. Interfund Activity During the course of operations, transactions occur between individual funds. This can include internal transfers, payables and receivables. This activity is combined as internal balances and is eliminated in both the government-wide and fund financial statement presentation. Capital Assets Capital assets do not provide financial resources at the fund level, and, therefore, are reported only in the government-wide statements. The District defines capital assets as assets with an initial cost of $5,000 or more and an estimated useful life in excess of one year. Capital assets are recorded at historical cost or estimated historical cost. Donated capital assets are recorded at the estimated fair market value at the date of donation. The District has not capitalized interest incurred during the construction of its capital assets. The costs of normal maintenance and repairs that do not add to the value of the assets or materially extend asset lives are not capitalized.

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Note 1 – Summary of Significant Accounting Policies (continued) Capital Assets (continued) Depreciable capital assets, which primarily consist of drainage facilities and impact fees paid to the City of Pearland, are depreciated or amortized using the straight-line method as follows:

Assets Useful Life Drainage facilities 20-45 years

Impact fees 40 years [max] The District’s detention facilities and drainage channels are considered improvements to land and are non-depreciable. Deferred Inflows and Outflows of Financial Resources A deferred inflow of financial resources is the acquisition of resources in one period that is applicable to a future period, while a deferred outflow of financial resources is the consumption of financial resources in one period that is applicable to a future period. A deferred inflow results from the acquisition of an asset without a corresponding revenue or assumption of a liability. A deferred outflow results from the use of an asset without a corresponding expenditure or reduction of a liability. At the fund level, property taxes and City of Pearland rebates receivable not collected within 60 days of fiscal year end do not meet the availability criteria required for revenue recognition and are recorded as deferred inflows of financial resources. Net Position – Governmental Activities Governmental accounting standards establish the following three components of net position: Net investment in capital assets – represents the District’s investments in capital assets, less any outstanding debt or other borrowings used to acquire those assets. Restricted – consists of financial resources that are restricted for a specific purpose by enabling legislation or external parties. Unrestricted – resources not included in the other components. Fund Balances – Governmental Funds Governmental accounting standards establish the following fund balance classifications: Nonspendable - amounts that cannot be spent either because they are in nonspendable form or because they are legally or contractually required to be maintained intact. The District’s nonspendable fund balance consists of prepaid items.

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Note 1 – Summary of Significant Accounting Policies (continued) Fund Balances – Governmental Funds (continued) Restricted - amounts that can be spent only for specific purposes because of constitutional provisions or enabling legislation or because of constraints that are externally imposed by creditors, grantors, contributors, or the laws or regulations of other governments. The District’s restricted fund balances consist of unspent bond and bond anticipation note proceeds in the Capital Projects Fund and property taxes levied for debt service and City of Pearland tax rebates in the Debt Service Fund. Committed - amounts that can be used only for specific purposes determined by a formal action of the Board of Directors. The Board is the highest level of decision-making authority for the District. Commitments may be established, modified, or rescinded only through ordinances or resolutions approved by the Board. Committed fund balance also incorporates contractual obligations to the extent that existing resources in the fund have been specifically committed for use in satisfying those contractual requirements. The District does not have any committed fund balances. Assigned - amounts that do not meet the criteria to be classified as restricted or committed but that are intended to be used for specific purposes. The District has not adopted a formal policy regarding the assignment of fund balances and does not have any assigned fund balances. Unassigned - all other spendable amounts in the General Fund. When an expenditure is incurred for which committed, assigned, or unassigned fund balances are available, the District considers amounts to have been spent first out of committed funds, then assigned funds, and finally unassigned funds. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and revenues and expenses/expenditures during the period reported. These estimates include, among others, the collectability of receivables; the useful lives and impairment of capital assets; the value of amounts due to developers; the value of capital assets transferred to the City of Pearland and the value of capital assets for which the developers have not been fully reimbursed. Estimates and assumptions are reviewed periodically, and the effects of revisions are reflected in the financial statements in the period they are determined to be necessary. Actual results could differ from the estimates.

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Note 2 – Adjustment from Governmental to Government-wide Basis Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Position

Total fund balances, governmental funds 1,744,037$

Historical cost 10,354,878$ Less accumulated amortization (169,371)

Change due to capital assets 10,185,507

(18,204,757)

Bonds payable, net (8,283,534) Interest payable on bonds (151,312) Bond anticipation note payable (7,660,000)

Change due to long-term debt (16,094,846)

Property taxes and penalties and interest 16,940 City of Pearland rebates 74,346

Change due to property taxes 91,286

Total net position - governmental activities (22,278,773)$

Long-term liabilities are not due and payable in the current period and, therefore, are not reported as liabilities in the governmental funds. The difference consists of:

Amounts due to the District's developers for prefunded construction and operating advances are recorded as a liability in the Statement of Net Position.

Capital assets used in governmental activities are not financial resources and, therefore, are not reported as assets in governmental funds.

Property taxes, penalties and interest and City of Pearland rebates receivable have been levied and are due, but are not available soon enough to pay current period expenditures and, therefore, are deferred in the funds.

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Note 2 – Adjustment from Governmental to Government-wide Basis (continued) Reconciliation of the Governmental Funds Statement of Revenues, Expenditures andChanges in Fund Balances to the Statement of Activities

673,701$

Property taxes and penalties and interest 3,922$ City of Pearland rebates 74,346

78,268

Capital outlays 7,140,364 Depreciation/amortization expense (86,915) Transfers to other governments (5,520,469)

1,532,980

Bond anticipation note proceeds (7,660,000) Interest expense accrual (108,476)

(7,768,476)

255,982

Change in net position of governmental activities (5,227,545)$

Amounts repaid to the Districts' developers for operating advances use financial resources at the fund level, but reduce the liability in the Statement of Net Position .

The issuance of long-term debt provides current financial resources to governmental funds, while the repayment of principal uses current financial resources. However, neither transaction has any effect on net assets. Other elements of debt financing are reported differently between the fund and government wide statements.

Net change in fund balances - total governmental funds

Governmental funds do not report revenues that are not available to pay current obligations. In contrast, such revenues are reported in the Statement of Activities when earned. The difference is for:

Governmental funds report capital outlays for developer reimbursements and construction costs as expenditures in the funds; however, in the Statement of Activities, impact fees paid to the City of Pearland are capitalized and charged to expense over the remaining life of the contract. Other assets are recorded as transfers to other governments.

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Note 3 – Deposits and Investments Deposit Custodial Credit Risk Custodial credit risk as it applies to deposits (i.e. cash) is the risk that, in the event of the failure of the depository institution, a government will not be able to recover its deposits or will not be able to recover collateral securities. The Public Funds Collateral Act (Chapter 2257, Texas Government Code) requires that all of the District’s deposits with financial institutions be covered by federal depository insurance and, if necessary, pledged collateral held by a third party custodian. The act further specifies the types of securities that can be used as collateral. The District’s written investment policy establishes additional requirements for collateralization of deposits. Investments The District is authorized by the Public Funds Investment Act (Chapter 2256, Texas Government Code) to invest in the following: (1) obligations, including letters of credit, of the United States or its agencies and instrumentalities, including Federal Home Loan Banks, (2) direct obligations of the State of Texas or its agencies and instrumentalities, (3) certain collateralized mortgage obligations, (4) other obligations, which are unconditionally guaranteed or insured by the State of Texas or the United States or its agencies or instrumentalities, including obligations that are fully guaranteed or insured by the Federal Deposit Insurance Corporation or by the explicit full faith and credit of the United States, (5) certain A rated or higher obligations of states and political subdivisions of any state, (6) bonds issued, assumed or guaranteed by the State of Israel, (7) certain insured or collateralized certificates of deposit and share certificates, (8) certain fully collateralized repurchase agreements, (9) bankers’ acceptances with limitations, (10) commercial paper rated A-1 or P-1 or higher and a maturity of 270 days or less, (11) no-load money market mutual funds and no-load mutual funds, with limitations, (12) certain guaranteed investment contracts, (13) certain qualified governmental investment pools and (14) a qualified securities lending program. The District has adopted a written investment policy to establish the principles by which the District’s investment program should be managed. This policy further restricts the types of investments in which the District may invest. Note 4 – Interfund Balances and Transactions Amounts due to/from other funds at May 31, 2018, consist of the following:

Receivable Fund Payable Fund Amounts PurposeGeneral Fund Debt Service Fund 4,607$ Maintenance tax collections not remitted

as of year end.General Fund Capital Projects Fund 63,974 Bond application costs paid by General

Fund.

Amounts reported as internal balances between funds are considered temporary balances and will be paid during the following fiscal year.

Harris - Brazoria Counties Municipal Utility District No. 509 Notes to Basic Financial Statements May 31, 2018

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Note 5 – Capital Assets A summary of changes in capital assets, for the year ended May 31, 2018, is as follows:

Beginning Additions/ EndingBalances Adjustments Balances

Capital assets not being depreciatedLand and improvements 4,294,950$ 3,087,786$ 7,382,736$

Capital assets being depreciated/amortizedDrainage 1,024,415 361,732 1,386,147 Impact fees 927,870 658,125 1,585,995

1,952,285 1,019,857 2,972,142 Less accumulated depreciation/amortization

Drainage (25,611) (34,655) (60,266) Impact fees (56,845) (52,260) (109,105) Less accumulated amortization (82,456) (86,915) (169,371)

Subtotal depreciable capital assets, net 1,869,829 932,942 2,802,771

Capital assets, net 6,164,779$ 4,020,728$ 10,185,507$

Depreciation/amortization expense for the current year was $86,915. Note 6 – Bond Anticipation Note The District uses a bond anticipation note (BAN) to provide short term financing for reimbursements to its developers. Despite its short term nature, a BAN is not recorded as a fund liability, since it will not be repaid from current financial resources and will be repaid through the issuance of long term debt or another BAN. It is, however, recorded as a liability at the government-wide level. On November 28, 2017, the District issued a $7,660,000 BAN with an interest rate of 1.880%, which is due by November 27, 2018. This BAN was repaid subsequent to year end. See Note 13 for additional information. The effect of this transaction on the District’s short term obligations are as follows:

Beginning balance -$ Amounts borrowed 7,660,000 Ending balance 7,660,000$

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Note 7 – Due to Developers The District has entered into financing agreements with its developers for the financing of the construction of water, sewer, drainage, and recreational facilities. Under the agreements, the developers will advance funds for the construction of facilities, and water and wastewater connection charges to serve the District. The developers will be reimbursed from proceeds of future bond issues or other lawfully available funds, subject to approval by TCEQ, as applicable. The District does not record the capital asset and related liability on the government-wide statements until construction of the facilities is complete. The District’s developers have also advanced funds to the District for operating expenses. On September 30, 2014, the District, Brazoria County Municipal District No. 28, Meritage Homes and Beazer Homes entered into a Cost Sharing Agreement for Sanitary Sewer Facilities and Drainage Facilities. The District and Brazoria County Municipal Utility District No. 28 are developing or will develop certain sanitary sewer and drainage facilities that will benefit each other. Developers for each district are financing the costs of these facilities and will be reimbursed from future bond proceeds. Changes in amounts due to developers during the year are as follows:

Due to developers, beginning of year 15,972,991$ Developer reimbursements (7,140,364) Developer funded construction and adjustments 9,628,112 Repayment of operating advances (255,982) Due to developers, end of year 18,204,757$

In addition, the District will owe the developers approximately $725,371, which is included in the following schedule of contractual commitments. The exact amount is not known until approved by the TCEQ and verified by the District’s auditor. As previously noted, these projects will be reported in the government-wide financial statements upon completion of construction.

Contract Amounts RemainingAmount Paid Commitment

Riverstone Ranch at Clear Creek, Section 10 - utilities 314,500$ -$ 314,500$ Baker's Landing, Section 2B - utilities 174,246 174,246 Riverstone Ranch at Clear Creek Lake "F", Lake "G", and 236,625 236,625

Section 11 - clearing and grubbing 725,371$ $ 725,371$

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Note 8 – Long–Term Debt Long-term debt is comprised of the following:

Bonds payable 8,500,000$ Unamortized discounts (216,466)

8,283,534$

Due within one year 65,000$

The District’s bonds payable at May 31, 2018, consists of unlimited tax bonds as follows:

Maturity Date,Serially, Interest

Amounts Original Interest Beginning/ Payment CallSeries Outstanding Issue Rates Ending Dates Dates2015 3,500,000$ 3,500,000$ 2.80% - 4.00% September 1 September 1, September 1,

2018/2044 March 1 20222017 5,000,000 5,000,000 1.75% - 4.00% September 1 September 1, September 1,

2019/2044 March 1 20248,500,000$

Payments of principal and interest on all series of bonds are to be provided from taxes levied on all properties within the District. Investment income realized by the Debt Service Fund from investment of idle funds will be used to pay outstanding bond principal and interest. The District is in compliance with the terms of its bond resolutions. At May 31, 2018, the District had authorized but unissued bonds in the amount of $126,600,000 for water, sewer and drainage facilities, and refunding of same, and $12,200,000 for park and recreational facilities, and refunding of same. The was no change in the District’s long term debt during the current year.

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Note 8 – Long–Term Debt (continued) As of May 31, 2018, annual debt service requirements on bonds outstanding are as follows:

Year Principal Interest Totals2019 65,000$ 310,495$ 375,495$ 2020 165,000 307,801 472,801 2021 175,000 303,985 478,985 2022 185,000 299,695 484,695 2023 195,000 294,878 489,878 2024 200,000 289,470 489,470 2025 215,000 283,353 498,353 2026 225,000 276,530 501,530 2027 235,000 269,097 504,097 2028 245,000 261,023 506,023 2029 260,000 252,306 512,306 2030 270,000 242,953 512,953 2031 285,000 232,909 517,909 2032 295,000 222,128 517,128 2033 310,000 210,703 520,703 2034 330,000 198,494 528,494 2035 345,000 185,494 530,494 2036 360,000 171,784 531,784 2037 380,000 157,259 537,259 2038 395,000 142,047 537,047 2039 415,000 126,147 541,147 2040 435,000 109,300 544,300 2041 460,000 91,400 551,400 2042 475,000 72,700 547,700 2043 500,000 53,200 553,200 2044 525,000 32,700 557,700 2045 555,000 11,100 566,100

8,500,000$ 5,408,947$ 13,908,947$

Note 9 – Property Taxes

On November 6, 2007, the voters of the District authorized the District’s Board of Directors to levy taxes annually for use in financing general operations and maintenance limited to $1.50 per $100 of assessed value. The District’s bond resolutions require that property taxes be levied for use in paying interest and principal on long-term debt and for use in paying the cost of assessing and collecting taxes. Taxes levied to finance debt service requirements on long-term debt are without limitation as to rate or amount.

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Note 9 – Property Taxes (continued) All property values and exempt status, if any, are determined by the Harris County Appraisal District and Brazoria County Appraisal District, as applicable. Assessed values are determined as of January 1 of each year, at which time a tax lien attaches to the related property. Taxes are levied around October/November, are due upon receipt and are delinquent the following February 1. Penalty and interest attach thereafter.

Property taxes are collected based on rates adopted in the year of the levy. The District’s 2018 fiscal year was financed through the 2017 tax levy, pursuant to which the District levied property taxes of $0.85 per $100 of assessed value, of which $0.18 was allocated to maintenance and operations and $0.67 was allocated to debt service. The resulting tax levy was $1,065,258 on the adjusted taxable value of $125,324,510. Property taxes receivable, at May 31, 2018, consisted of the following:

Current year taxes receivable 15,442$ Penalty and interest receivable 1,498Property taxes receivable 16,940$

Note 10 – Transfers to Other Governments In accordance with an agreement between the District and the City of Pearland (the “City”), the District transfers all of its water, sewer, and storm drainage facilities (other than drainage channels and detention ponds) to the City (see Note 11). Accordingly, the District does not record these capital assets in the Statement of Net Position, but instead reports the completed projects as transfers to other governments on the Statement of Activities. For the year ended May 31, 2018, the total amount of projects completed and transferred to the City was $5,520,469. Note 11 – Utility Agreement with the City of Pearland The District assumed the Utility Agreement dated August 1, 2007, between the City of Pearland and the original developer in the District. The Utility Agreement was executed by the developer on behalf of the District. The Utility Agreement provides that the District will construct water distribution lines, wastewater collection systems, drainage and certain recreational facilities to serve the District, and upon completion, the District shall transfer certain of such facilities to the City for ownership, operation and maintenance. The City will provide water and sewer service to users in the District at the same rates charged to similar users within the City. All revenue derived from these charges belongs to the City. In consideration of the City’s provision of water supply and distribution capacity and wastewater collection and treatment capacity, the District pays the City a fee per equivalent single family residential connection (“ESFC”), currently $4,875. This fee may be amended from time to time at the City’s discretion. The utility agreement will remain in effect for 40 years or until the dissolution of the District, whichever comes first.

Harris - Brazoria Counties Municipal Utility District No. 509 Notes to Basic Financial Statements May 31, 2018

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Note 11 – Utility Agreement with the City of Pearland (continued) In consideration of the development of land within the District and the related increase in the taxable value to the City, and as a result of the conveyance of the facilities to the City, the City agrees to annually pay the District a portion of the ad valorem taxes collected by the City on the land and improvements within the District, exclusive of any interest and penalties paid by the taxpayer to the City and exclusive of any collection costs incurred by the City. All annual tax rebate payments received by the District will be deposited in the Debt Service Fund of the District. In addition to tax rebate payment, the City will impose a $5.00 monthly surcharge per equivalent single family connection located within the District and the City will pay such $5.00 per connection to the District monthly. During the current year, the District recognized $163,637 in ad valorem tax rebates and $32,891 in monthly water and sewer utility rebates from the City. Land covered by the Utility Agreement, approximately 643.1 acres, and an additional 40 acre tract that was annexed into the District, receives a tax rebate of $0.15 per $100 of assessed valuation; provided, however, the amount of the tax rebate will be incrementally reduced upon the occurrence of the following: (i) the developer(s) within the District have been fully reimbursed, with interest, in accordance with the rules of the TCEQ; (ii) the District has completely financed and constructed 100% of its water distribution, wastewater collection, and drainage systems, and certain recreational facilities to serve the District; and (iii) the District levies a debt service tax at a rate that is less than $0.80 per $100 of assessed valuation. On July 13, 2015, the District and the City entered into the First Amendment to Utility Agreement, which provides that land annexed into the District, other than the land described in the paragraph above, will receive a tax rebate of $0.10 per $100 of assessed valuation (rather than $0.15 per $100 of assessed valuation). Such rebate shall be reduced upon the occurrence of the following: (i) the developers within the District have been fully reimbursed, with interest, in accordance with the rules of the TCEQ; (ii) the District has completely financed and constructed 100% of its water distribution, wastewater collection, and drainage systems, and certain recreational facilities to serve the District; and (iii) the District levies a debt service tax at a rate that is less than $0.80 per $100 of assessed valuation. Provided, however, such $0.10 tax rebate shall not be decreased until the $0.15 tax rebate described above has been decreased to $0.10 per $100 of assessed valuation, at which time both tax rebates shall decrease at the same rate. Once all the conditions noted above have been met, the tax rebate shall be reduced by an amount equal to the decrease in the District debt service tax rate. The tax rebate will be recalculated annually and will continue to be reduced to the extent that the District debt service tax rate is decreased. Once the tax rebate is reduced; it shall not thereafter be increased, and any increase in the District debt service tax rate does not affect the calculation of the tax rebate. The obligation of the City to make monthly revenue payments, equal to $5 per ESFC, shall terminate upon such time that all three of the following have occurred: (i) the developers within the District have been fully reimbursed, with interest, in accordance with the rules of the TCEQ, (ii) the District has completely financed and constructed 100% of its water distribution, wastewater collection, and drainage systems, and certain recreational facilities to serve the District, and (iii) the District debt service tax decreases to the rate of $0.70 per $100 of assessed valuation.

Harris - Brazoria Counties Municipal Utility District No. 509 Notes to Basic Financial Statements May 31, 2018

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Note 11 – Utility Agreement with the City of Pearland (continued) The City and District recognize and agree that the City may, pursuant to the procedures and provisions and subject to the limitations set forth in the general laws of the State of Texas including, but not limited to, Section 43.074, Texas Local Government Code, abolish and dissolve the District and assume the District Assets and District Obligations upon a vote of not less than two-thirds (2/3) of the entire membership of the City Council to adopt an ordinance to such effect, if the City Council finds: (a) that the District is no longer needed, (b) that the services and functions performed by the District can be served and performed by the City, and (c) that it would be in the best interests of the citizens and property within the District and the City that the District be abolished. Provided however, the City agrees that the District shall not be abolished until such time as the District is fully developed and has sold all bonds necessary to finance the costs of the facilities and has reimbursed developers within the District in accordance with the financing and reimbursement agreements previously entered into by the District. Note 12 – Risk Management The District is exposed to various risks of loss related to torts: theft of, damage to and destruction of assets; errors and omissions; and personal injuries. The risk of loss is covered by commercial insurance. There have been no significant reductions in insurance coverage from the prior year. Settlement amounts have not exceeded insurance coverage for the current year or the three prior years. Note 13 – Subsequent Event On June 26, 2018, the District issued its $13,200,000 Series 2018 Unlimited Tax Bonds at a net effective rate of 3.839555%. Proceeds from the bonds were used to 1) reimburse the District’s developers for, among others, operating advances, the cost of capital assets constructed within the District, land acquisitions, and impact fees paid to the City of Pearland plus interest expense at the net effective interest rate of the bonds; and 2) to repay the $7,660,000 BAN issued during the current fiscal year.

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Required Supplementary Information

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Required Supplementary Information - Budgetary Comparison Schedule - General FundFor the Year Ended May 31, 2018

Original and Final Budget Actual

Variance Positive

(Negative)RevenuesProperty taxes 195,778$ 205,163$ 9,385$ City of Pearland utility rebates 20,000 30,213 10,213 Investment earnings 497 497

Total Revenues 215,778 235,873 20,095

ExpendituresOperating and administrativeProfessional fees 134,000 136,443 (2,443) Contracted services 12,000 18,106 (6,106) Repairs and maintenance 5,000 2,978 2,022 Administrative 20,688 14,694 5,994 Other 3,500 6,679 (3,179)

Total Expenditures 175,188 178,900 (3,712)

Revenues Over Expenditures 40,590 56,973 16,383

Fund BalanceBeginning of the year 378,423 378,423 End of the year 419,013$ 435,396$ 16,383$

Harris - Brazoria Counties Municipal Utility District No. 509

Harris - Brazoria Counties Municipal Utility District No. 509 Notes to Required Supplementary Information May 31, 2018

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Budgets and Budgetary Accounting An annual unappropriated budget is adopted for the General Fund by the District’s Board of Directors. The budget is prepared using the same method of accounting as for financial reporting. There were no amendments to the budget during the year.

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Texas Supplementary Information

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Harris - Brazoria Counties Municipal Utility District No. 509TSI-1. Services and Rates

1. Services provided by the District During the Fiscal Year:Retail Water Wholesale Water Solid Waste / Garbage X DrainageRetail Wastewater Wholesale Wastewater Flood Control IrrigationParks / Recreation Fire Protection Roads SecurityParticipates in joint venture, regional system and/or wastewater service (other than emergency interconnect)

X Other (Specify):

May 31, 2018

Water and sewer services provided by City of Pearland.*

2. Retail Service Providers(You may omit this information if your district does not provide retail services)

a. Retail Rates for a 5/8" meter (or equivalent):

Minimum Charge

Minimum Usage

Flat Rate (Y / N)

Rate per 1,000 Gallons Over

Minimum Usage

Water: toWastewater: to

Surcharge: to

District employs winter averaging for wastewater usage? Yes No

Total charges per 10,000 gallons usage: Water Wastewater

Usage Levels

b. Water and Wastewater Retail Connections:

Meter SizeTotal

ConnectionsActive

Connections ESFC FactorActive ESFC'S

Unmetered x 1.0less than 3/4" x 1.0

1" x 2.51.5" x 5.02" x 8.03" x 15.04" x 25.06" x 50.08" x 80.010" x 115.0

Total Water

Total Wastewater x 1.0

*Pursuant to an agreement between the District and the City of Pearland (the "City"), water, wastewater and stormsewer facilities constructed by the District are conveyed to the City for ownership, operation and maintenance.See accompanying auditor's report.

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Harris - Brazoria Counties Municipal Utility District No. 509TSI-1. Services and Rates

3. Total Water Consumption during the fiscal year (rounded to the nearest thousand):(You may omit this information if your district does not provide water)

Gallons pumped into system: N/A Water Accountability Ratio:(Gallons billed / Gallons pumped)

Gallons billed to customers: N/A

4. Standby Fees (authorized only under TWC Section 49.231):(You may omit this information if your district does not levy standby fees)

Does the District have Debt Service standby fees? Yes No X

If yes, Date of the most recent commission Order:

Does the District have Operation and Maintenance standby fees? Yes No X

If yes, Date of the most recent commission Order:

5. Location of District (required for first audit year or when information changes,otherwise this information may be omitted):

Is the District located entirely within one county? Yes No X

County(ies) in which the District is located:

Is the District located within a city? Entirely X Partly Not at all

City(ies) in which the District is located:

Is the District located within a city's extra territorial jurisdiction (ETJ)?

Entirely Partly Not at all X

ETJs in which the District is located:

Are Board members appointed by an office outside the district? Yes No X

If Yes, by whom?

See accompanying auditors’ report.

May 31, 2018

N/A

Harris County and Brazoria County

City of Pearland

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Harris - Brazoria Counties Municipal Utility District No. 509TSI-2 General Fund ExpendituresFor the Year Ended May 31, 2018

Professional feesLegal 114,008$ Audit 9,000Engineering 13,435

136,443

Contracted servicesBookkeeping 11,456Operator 6,650

18,106

Repairs and maintenance 2,978

AdministrativeDirectors fees 7,800Printing and office supplies 1,292Insurance 3,664Other 1,938

14,694

Other 6,679

Total expenditures 178,900$

Reporting of Utility Services in Accordance with HB 3693:Usage Cost

Electrical N/A N/AWater N/A N/ANatural Gas N/A N/A

See accompanying auditors’ report.

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Harris - Brazoria Counties Municipal Utility District No. 509TSI-4. Taxes Levied and Receivable

Maintenance Taxes

Debt Service Taxes Totals

Taxes Receivable, Beginning of Year 4,879$ 6,642$ 11,521$ Adjustments to Prior Year Tax Levy 1,324 1,801 3,125 Adjusted Receivable 6,203 8,443 14,646

2017 Original Tax Levy 171,901 639,852 811,753 Adjustments 53,683 199,822 253,505

Adjusted Tax Levy 225,584 839,674 1,065,258

Total to be accounted for 231,787 848,117 1,079,904

Tax collections:Current year 222,314 827,502 1,049,816 Prior years 6,203 8,443 14,646

Total Collections 228,517 835,945 1,064,462

Taxes Receivable, End of Year 3,270$ 12,172$ 15,442$

Taxes Receivable, By Year2017 3,270$ 12,172$ 15,442$

2017 2016 2015 2014Property Valuations:

Land 44,397,729$ 21,308,468$ 12,778,432$ 4,885,132$ Improvements 82,612,922 35,438,117 9,360,750 Personal Property 247,589 51,076 51,445 Exemptions (1,933,730) (1,061,801) (795,540) (802,591)

Total Property Valuations 125,324,510$ 55,735,860$ 21,395,087$ 4,082,541$

Tax Rates per $100 Valuation:Maintenance tax rates 0.18$ 0.36$ 0.85$ 0.85$ Debt service tax rates 0.67 0.49

Total Tax Rates per $100 Valuation 0.85$ 0.85$ 0.85$ 0.85$

Adjusted Tax Levy: 1,065,258$ 473,755$ 181,858$ 34,702$

Percentage of Taxes Collectedto Taxes Levied ** 98.55% 100.00% 100.00% 100.00%

* Maximum Maintenance Tax Rate Approved by Voters: $1.50 on November 6, 2007

** Calculated as taxes collected for a tax year divided by taxes levied for that tax year.

See accompanying auditors’ report.

May 31, 2018

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Due During Fiscal Years Ending

Principal Due September 1

Interest Due September 1,

March 1 Total2019 65,000$ 130,427$ 195,427$ 2020 65,000 128,608 193,6082021 70,000 126,717 196,7172022 75,000 124,687 199,6872023 80,000 122,518 202,5182024 80,000 120,197 200,1972025 85,000 117,680 202,6802026 90,000 114,900 204,9002027 95,000 111,834 206,8342028 100,000 108,482 208,4822029 105,000 104,828 209,8282030 110,000 100,890 210,8902031 115,000 96,728 211,7282032 120,000 92,200 212,2002033 125,000 87,300 212,3002034 135,000 82,100 217,1002035 140,000 76,600 216,6002036 145,000 70,900 215,9002037 155,000 64,900 219,9002038 160,000 58,600 218,6002039 170,000 52,000 222,0002040 180,000 45,000 225,0002041 190,000 37,600 227,6002042 195,000 29,900 224,9002043 205,000 21,900 226,9002044 215,000 13,500 228,5002045 230,000 4,600 234,600

3,500,000$ 2,245,596$ 5,745,596$

See accompanying auditors’ report.

Harris - Brazoria Counties Municipal Utility District No. 509TSI-5. Long-Term Debt Service RequirementsSeries 2015--by YearsMay 31, 2018

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Due During Fiscal Years Ending

Principal Due September 1

Interest Due September 1,

March 1 Total2019 -$ 180,068$ 180,068$ 2020 100,000 179,193 279,1932021 105,000 177,268 282,2682022 110,000 175,008 285,0082023 115,000 172,360 287,3602024 120,000 169,273 289,2732025 130,000 165,673 295,6732026 135,000 161,630 296,6302027 140,000 157,263 297,2632028 145,000 152,541 297,5412029 155,000 147,478 302,4782030 160,000 142,063 302,0632031 170,000 136,181 306,1812032 175,000 129,928 304,9282033 185,000 123,403 308,4032034 195,000 116,394 311,3942035 205,000 108,894 313,8942036 215,000 100,884 315,8842037 225,000 92,359 317,3592038 235,000 83,447 318,4472039 245,000 74,147 319,1472040 255,000 64,300 319,3002041 270,000 53,800 323,8002042 280,000 42,800 322,8002043 295,000 31,300 326,3002044 310,000 19,200 329,2002045 325,000 6,500 331,500

5,000,000$ 3,163,351$ 8,163,351$

See accompanying auditors’ report.

Harris - Brazoria Counties Municipal Utility District No. 509TSI-5. Long-Term Debt Service RequirementsSeries 2017--by YearsMay 31, 2018

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Due During Fiscal Years Ending

Principal Due September 1

Interest Due September 1,

March 1 Total2019 65,000$ 310,495$ 375,495$ 2020 165,000 307,801 472,801 2021 175,000 303,985 478,985 2022 185,000 299,695 484,695 2023 195,000 294,878 489,878 2024 200,000 289,470 489,470 2025 215,000 283,353 498,353 2026 225,000 276,530 501,530 2027 235,000 269,097 504,097 2028 245,000 261,023 506,023 2029 260,000 252,306 512,306 2030 270,000 242,953 512,953 2031 285,000 232,909 517,909 2032 295,000 222,128 517,128 2033 310,000 210,703 520,703 2034 330,000 198,494 528,494 2035 345,000 185,494 530,494 2036 360,000 171,784 531,784 2037 380,000 157,259 537,259 2038 395,000 142,047 537,047 2039 415,000 126,147 541,147 2040 435,000 109,300 544,300 2041 460,000 91,400 551,400 2042 475,000 72,700 547,700 2043 500,000 53,200 553,200 2044 525,000 32,700 557,700 2045 555,000 11,100 566,100

8,500,000$ 5,408,947$ 13,908,947$

See accompanying auditors’ report.

Harris - Brazoria Counties Municipal Utility District No. 509TSI-5. Long-Term Debt Service RequirementsAll Bonded Debt Series--by YearsMay 31, 2018

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Harris - Brazoria Counties Municipal Utility District No. 509TSI-6. Change in Long-Term Bonded DebtMay 31, 2018

Series 2015 Series 2017 Totals

Interest rate 2.80% - 4.00% 1.75% - 4.00%Dates interest payable 9/1; 3/1 9/1; 3/1Maturity dates 9/1/18 - 9/1/19 -

9/1/44 9/1/44

Beginning bonds outstanding 3,500,000$ 5,000,000$ 8,500,000$

Bonds retired

Ending bonds outstanding 3,500,000$ 5,000,000$ 8,500,000$

Interest paid during fiscal year 131,338$ 165,062$ 296,400$

Paying agent's name and citySeries 2015 and 2017

Bond Authority:

Water, Sewer and Drainage

and Refunding Bonds

Recreational and Refunding

BondsAmount Authorized by Voters 135,100,000$ 12,200,000$ Amount Issued (8,500,000) Remaining To Be Issued 126,600,000$ 12,200,000$

All bonds are secured with tax revenues. Bonds may also be secured with other revenues in combinationwith taxes.

Debt Service Fund cash and investments balances as of May 31, 2018: 1,138,254$

Average annual debt service payment (principal and interest) for remaining term of all debt: 515,146$

See accompanying auditors’ report.

Bond Issue

The Bank of New York Mellon Trust Company, N.A., Dallas, Texas

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Harris - Brazoria Counties Municipal Utility District No. 509TSI-7a. Comparative Schedule of Revenues and Expenditures - General FundFor the Last Five Fiscal Years

2018 2017 2016 2015 2014**RevenuesProperty taxes 205,163$ 198,225$ 178,973$ 37,849$ 27,102$ Penalties and interest 1,092 530 275 City of Pearland utility rebates 30,213 22,425 11,510 8,666 Miscellaneous 270 Investment earnings 497 346 117

Total Revenues 235,873 220,996 191,692 47,315 27,377

ExpendituresOperating and administrative

Professional fees 136,443 126,758 150,105 159,423 103,521 Contracted services 18,106 11,400 16,616 11,333 7,125 Repairs and maintenance 2,978 10,722 Administrative 14,694 14,202 17,148 14,732 13,152 Other 6,679 5,812 10,667 7,425 260

Total Expenditures 178,900 168,894 194,536 192,913 124,058

Revenues Over/(Under) Expenditures 56,973$ 52,102$ (2,844)$ (145,598)$ (96,681)$

*Percentage is negligible**Unaudited

See accompanying auditors’ report.

Amounts

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Percent of Fund Total Revenues2018 2017 2016 2015 2014**

87% 90% 93% 80% 99% 1% 1% 1%

13% 10% 6% 18% 1%* * *

100% 100% 100% 100% 100%

58% 57% 78% 337% 378%8% 5% 9% 24% 26%1% 5%6% 6% 9% 31% 48%3% 3% 6% 16% 1%

76% 76% 102% 408% 453%

24% 24% (2%) (308%) (353%)

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Harris - Brazoria Counties Municipal Utility District No. 509TSI-7b. Comparative Schedule of Revenues and Expenditures - Debt Service Fund For the Last Three Fiscal Years

2018 2017 2016RevenuesProperty taxes 859,919$ 264,727$ -$ Penalties and interest 7,310 2,751 City of Pearland tax rebates 91,969 75,951 33,327 Investment earnings 1,510 621 189

Total Revenues 960,708 344,050 33,516

ExpendituresTax collection services 18,506 10,875 107 Debt serviceInterest and fees 285,895 159,835 750

Total Expenditures 304,401 170,710 857

Revenues Over Expenditures 656,307$ 173,340$ 32,659$

*Percentage is negligible

See accompanying auditors’ report.

Amounts

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2018 2017 2016

89% 77%1% 1%

10% 22% 99%* * 1%

100% 100% 100%

2% 3% *

30% 46% 2%32% 49% 2%

68% 51% 98%

Percent of Fund Total Revenues

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Complete District Mailing Address:District Business Telephone Number:Submission Date of the most recent District Registration Form(TWC Sections 36.054 and 49.054):Limit on Fees of Office that a Director may receive during a fiscal year:(Set by Board Resolution -- TWC Section 49.0600)

Names:

Term of Office (Elected or

Appointed) or Date Hired

Fees of Office Paid *

Expense Reimburse-

ments Title at Year EndBoard MembersRicardo Rodriguez 5/16 - 5/20 1,500$ 227$ President

Wesley Christensen 5/18 - 5/22 1,650 59 Vice President

Greg Wamhoff 5/18 - 5/22 1,650 249 Secretary

Janet Farr 5/16 - 5/20 1,800 110 Assistant Secretary

Josh Rambo 5/18 - 5/22 1,200 46 Assistant VicePresident

AmountsConsultants PaidAllen Boone Humphries Robinson LLP 2008 Attorney

General legal fees 173,666$ Bond counsel 77,036

Myrtle Cruz, Inc. 2008 13,736 Bookkeeper

Assessments of the Southwest, Inc. 2008 9,483 Tax Collector

Harris County Appraisal District Legislation 5,607 Property Valuation

Brazoria County Appraisal District Legislation 1,101 Property Valuation

Perdue, Brandon, Fielder, Collins 2008 1,194 Delinquent Tax& Mott, LLP Attorney

LJA Engineering, Inc. 2008 29,046 Engineer

McGrath & Co., PLLC Annual 16,500 Auditor

Muncipal District Services, LLC 2017 8,528 Operator

Rathmann & Associates, L.P. 2013 76,600 Financial Advisor

* Fees of Office are the amounts actually paid to a director during the District's fiscal year.

See accompanying auditors’ report.

(713) 860-6400

May 17, 20187,200$

Harris - Brazoria Counties Municipal Utility District No. 509TSI-8. Board Members, Key Personnel and Consultants

3200 Southwest Freeway, Suite 2600, Houston, TX 77027

For the Year Ended May 31, 2018