Ord 2014-070/Approving a petition submitted by Metcalfe, Wolfe, Stuart & Williams, LLP on behalf of Walton Texas, LP granting the consent of the City of San Marcos, Texas, to the creation of Cotton Center Municipal Utility District No. 1

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CREATION Section 2.01 Consent to Creation of District. City acknowledges receipt of Primary Owner's request, in accordance with Section 54.016 of the Texas Water Code, for creation of the District that may exercise all powers granted by Chapters 49 and 54 of the Texas Water Code. On the Effective Date of this Agreement, City has approved an ordinance (a form of which is attached as Exhibit "C "), consenting to the inclusion of the Land within the District. City agrees that the Ordinance and this Agreement constitute the City's consent to the creation of the District within its ETJ. No further action will be required on the part of City to evidence its consent; however, City agrees to promptly provide any reasonable additional confirmation of its consent that may be required by Owner or the District if requested to do so. Section 2.02 Division of District. a. City and Owner agree that the District will be divided in accordance with the Enabling Act into separate Sub - Districts comprised of a minimum of 200 and a maximum of 550 acres of land, in no event, will the District and /or a Sub - District comprised of more than 550 acres be allowed to issue bonds unless the City consents and approves such bond issue. Any request for a Sub - District that does not meet the size limitations in subpart (a) above requires the approval of the City Council. The City shall consider a size adjustment request so as to afford the Owner the flexibility to create economically viable district and marketable development. Notwithstanding the limitations established above, the City agrees that the District, initially comprised of 2,358 acres is not subject to these acreage limitations. b. This Agreement specifically grants the City's consent to the Sub - Districts provided that the District has no outstanding bond indebtedness and has not levied an ad valorem tax. The District and any Sub - District created by the division of the District shall provide the City a copy of the Order completing the division and creating the Sub - District. Each resulting Sub-District created by the division of the District shall be bound by the terins of this Agreement. d. Notwithstanding anything to the contrary contained herein, only a Sub - District created in accordance with the parameters of this Section 2.02 shall be able to issue bonds and otherwise operate in accordance with the Enabling Act and state law. Section 2.03 Annexation by the City. The City and Owner agree that the District or Sub - Districts will be annexed in accordance with the terms of the Development Agreement and the Strategic Partnership Agreement. Section 2.04 Annexation by the District; Additional Land. a. The District or a Sub - District may annex the Additional Land without further consent from the City. The City agrees that the Additional Land shall become part of the Project which shall be subject to the terms of this Agreement and the Development Agreement. b. Except as provided in subpart (a) above, the District may not annex any land into its M