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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will be transferred to City in full to be applied toward debt service of the District's bonds being assumed by City upon the full purpose annexation of the District. With regard to these funds, District shall i) maintain separate accounts for its debt service fund and for its general fund reflecting the source of these funds; and ii) provide City with a copy of its annual audit as set forth below in Article V. b. District agrees to report the annual debt service tax rate and operations and maintenance tax rate set by the District to the Caldwell County Tax Assessor /Collector, and to do and perform all acts required by law for the tax rates to be effective. Section 4.06 Powers and Functions Retained by the District. After Limited Purpose Annexation of the Limited Purpose Tracts under this Agreement, the District shall continue to be authorized to exercise all powers and functions of the District, and to provide the services authorized by those powers within its boundaries, pursuant to existing law or any amendments or additions thereto. The District's assets, liabilities, indebtedness and obligations will remain the responsibility of the District. ARTICLE V DISTRICT AUDIT: TRANSFER TO CITY OF DISTRICT PROPERTY Section 5.01 District Audit. Once required by the provisions of Subchapter G, Chapter 49, Water Code, District shall conduct an annual audit each year, at its sole expense, to be performed by an independent certified public accountant. The District shall file a copy of each completed audit with City. District shall make its financial records available to City for inspection during normal business hours upon reasonable prior written notice. Section 5.02 Transfer of District Facilities to City. Upon full purpose annexation of District by City, District shall grant to City fee simple title or utility easements (to the extent City does not already hold an easement to such District Facilities) to all real property containing District Facilities then owned by District that are to be transferred to City on the date of conversion to full purpose jurisdiction of District. In addition, any Developers who have constructed District Facilities for the District pursuant to reimbursement agreements with District but for which the District has not yet acquired same shall convey such District Facilities to the City free and clear of any liens, claims or encumbrances. District shall provide for appropriate provisions in any such reimbursement agreements requiring the Developers to make the conveyances required by this Section. The conveyances shall be by appropriate instrument, acceptable in form and substance to the District and the City, and District and the Developers shall perform all acts necessary prior to the effective date of the conversion to accomplish the transfer of title or easement effective on the date of conversion. However, should the transfer of title to all such properties not be accomplished for any reason by the effective date of the full purpose annexation of the District, the District and such Developers shall proceed promptly to conclude the transfer following conversion, for a period not to exceed ninety (90) days, and District shall remain in effect for such purposes.